Management s Discussion & Analysis. Sustainability Statement. Corporate Governance Overview Statement

Transcription

1 REFINING SUSTAINABILITY Annual Report 2018

2 REFINING SUSTAINABILITY Years of experience and knowledge since the foundation of Teo Guan Lee Corporation Berhad in 1934, the Company has built up a solid foundation to continue towards a brighter future. Since listed on Bursa Malaysia in October 1994, Teo Guan Lee Corporation Berhad has been striving to strengthen its position in the market through refining its brand image as well as seeking for innovative breakthroughs in its products. As a tree that will continue to grow and yield seasonal outcomes, the Company is endeavoured to take upon challenges and further improve its market position. CONTENTS 2 Notice of Annual General Meeting 12 Management s Discussion & Analysis 25 Audit Committee Report 6 Notice of Dividend Entitlement and Payment 14 Sustainability Statement 28 Financial Statements 7 Corporate Information 15 Corporate Governance Overview Statement 95 List of Properties Held by Group 8 Financial Highlights 21 Directors Responsibility Statement In Financial Reporting 96 Analysis of Shareholdings 9 Board of Directors and Key Senior Management Profile 22 Statement on Risk Management and Internal Control Proxy Form

3 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Twenty-Fifth Annual General Meeting of the Company will be held at the Conference Room of Teo Guan Lee Corporation Berhad, Plot 28 Lorong Perusahaan Maju 4, Prai Industrial Estate, Prai, Pulau Pinang on Wednesday, 28 November 2018 at noon for the following purposes: A G E N D A 1. To receive the Audited Financial Statements of the Company for the financial year ended 30 June 2018 together with the Reports of the Directors and of the Auditors thereon. Please refer to Note A As Ordinary Business 2. To declare a final single tier dividend of 5 sen per share for the financial year ended 30 June Ordinary Resolution 1 3. To re-elect the following Directors retiring under the provision of Article 98 of the Articles of Association of the Company, and who, being eligible, have offered themselves for re-election:- a) Ms Toh Kian Beng Ordinary Resolution 2 b) Mr Toh Choon Guan Ordinary Resolution 3 4. To re-appoint Messrs Peter Chong & Co. as Auditors of the Company and to authorise the Board of Directors to fix their remuneration. Ordinary Resolution 4 As Special Business To consider and if thought fit, to pass with or without modifications the following resolutions: 5. To approve the payment of Directors fees of 45,000 for the financial year ending 30 June Ordinary Resolution 5 6. Continuing in office as Independent Non-Executive Directors (i) (ii) THAT authority be and is hereby given to Dato Mustapha Bin Abdul Hamid who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years to continue to act as an Independent Non-Executive Director of the Company. Ordinary Resolution 6 THAT authority be and is hereby given to Mr Lee Kean Cheong who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years to continue to act as an Independent Non-Executive Director of the Company. Ordinary Resolution 7 7. Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature THAT subject always to the provisions of the Companies Act 2016 ( the Act ), the Memorandum and Articles of Association of the Company, the Bursa Malaysia Securities Berhad Main Market Listing Requirements or other regulatory authorities, approval be and is hereby given to the Company and/or its subsidiaries to enter into recurrent related party transactions with the corporations as set out in Section 2.2 of the Circular to Shareholders dated 29 October 2018 ( the Circular ), which are necessary for the day to day operations and are carried out in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those generally available to the public and not detrimental to the minority shareholders as set out in the Circular ( Mandate ). 2 TEO GUAN LEE CORPORATION BERHAD ( A)

4 NOTICE OF ANNUAL GENERAL MEETING (Cont d) As Special Business (Cont d) 7. Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (Cont d) THAT the Directors be empowered to do all such acts and things considered necessary or expedient to give full effect to the Mandate with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments as may be imposed by the relevant authorities. THAT such Mandate shall commence upon passing this ordinary resolution and to be in force until: (a) the conclusion of the next Annual General Meeting ( AGM ) of the Company at which time the authority shall lapse unless the authority is renewed by a resolution passed at the meeting; (b) the expiration of the period within which the next AGM after that date it is required to be held pursuant to Section 340(2) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Act); or (c) revoked or varied by ordinary resolution of the shareholders of the Company at a general meeting; whichever is earlier. And THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. Ordinary Resolution 8 8. Approval for issuance of new ordinary shares pursuant to Sections 75 and 76 of the Companies Act 2016 THAT subject to the Companies Act 2016, the Articles of Association of the Company and approvals from Bursa Malaysia Securities Berhad ( Bursa Securities ) and other relevant governmental/regulatory authorities where such authority shall be necessary, the Board of Directors be and is hereby empowered pursuant to Sections 75 and 76 of the Companies Act 2016 to issue and allot new shares in the Company from time to time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Board of Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued shall not exceed ten per centum (10%) of the total number of issued shares (excluding treasury shares, if any) of the Company for the time being and THAT the Board of Directors be and is also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Securities. Ordinary Resolution 9 9. To transact any other business of which due notice shall have been given in accordance with the Companies Act By Order of the Board CHEW SIEW CHENG (MAICSA ) LIM CHOO TAN (LS ) Secretaries Date: 29 October 2018 Penang ANNUAL REPORT

5 NOTICE OF ANNUAL GENERAL MEETING (Cont d) Note A This Agenda item is meant for discussion only as the provision of Sections 248(2) and 340(1)(a) of the Companies Act 2016 does not require a formal approval of the shareholders and hence is not put forward for voting. Notes: 1. A member of the Company entitled to attend and vote is entitled to appoint not more than two (2) proxies to attend, participate, speak and vote instead of him. 2. A proxy may but need not be a member of the Company. 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 authorised nominee as defined under the Securities Industry (Central Depositors) Act 1991, it may appoint not more than two (2) proxies in respect of each securities account it holds in ordinary shares of the Company standing to the credit of the said securities account. 4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) 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 instrument appointing a proxy or proxies shall be in writing, executed by or on behalf of the appointor. In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under the hand of its officer or attorney duly authorised. 6. The instrument appointing a proxy or proxies must be deposited at the Company s Registered Office at Plot 28, Lorong Perusahaan Maju 4, Prai Industrial Estate, Prai, Pulau Pinang at least 48 hours before the time for holding the Meeting or any adjournments thereof. 7. Only members registered in the Record of Depositors as at 22 November 2018 shall be eligible to attend the meeting or appoint a proxy to attend and vote on his behalf. Explanatory Notes on Special Business (i) Directors Fees This proposed Ordinary Resolutions 5 if passed, will authorise the payment of Directors fees amounting to 45,000 for the financial year ending 30 June (ii) Continuing in office as Independent Non-Executive Directors The Nomination Committee had assessed the independence of Dato Mustapha Bin Abdul Hamid and Mr Lee Kean Cheong, who have served on the Board as Independent Non-Executive Directors of the Company for a cumulative term of more than nine (9) years and the Board has recommended that the approval of the shareholders be sought to re-appoint Dato Mustapha Bin Abdul Hamid and Mr Lee Kean Cheong as Independent Non-Executive Directors as both of them possess the following aptitudes necessary in discharging their roles and functions as Independent Non-Executive Directors of the Company: (1) Have met the independence guidelines as set out in Chapter 1 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements; (2) Have vast experience in Corporate, Marketing and Accounting industries which is very relevant and important for the Group; (3) Have carried out their fiduciary duties in the interest of the Company and minority shareholders; and (4) The Group always maintains a cordial and independent relationships with them. Meanwhile, as recommended by the Malaysian Code on Corporate Governance 2017 ( MCCG 2017 ), the Board will be seeking shareholders approval through a two-tier voting process at the Twenty-Fifth Annual General Meeting to retain Dato Mustapha Bin Abdul Hamid as an Independent Non-Executive Director as his tenure has exceeded 12 years. 4 TEO GUAN LEE CORPORATION BERHAD ( A)

6 NOTICE OF ANNUAL GENERAL MEETING (Cont d) Explanatory Notes on Special Business (Cont d) (iii) Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature This proposed Ordinary Resolution 8, if passed, will authorise the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature. This Authority will, unless revoked or varied by the shareholders of the Company in general meeting, will expire at the conclusion of the next Annual General Meeting of the Company. Please refer to the Circular to Shareholders dated 29 October 2018 for more information. (iv) Approval for issuance of new ordinary shares This general mandate for issuance of shares ( the Mandate ) was sought for in the preceding year and the Board did not carry out the Mandate since the last Annual General Meeting of the Company until the latest practicable date before the printing of this Annual Report. As the Mandate will expire on 28 November 2018, the Board is desirous of seeking a fresh mandate at the Twenty-Fifth Annual General Meeting. The Mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to placing of shares, for the purpose of funding further investment project(s), working capital and/or acquisition. This proposed Ordinary Resolution 9, if passed, will empower the Directors of the Company to issue and allot shares in the Company up to an amount not exceeding 10% of the total number of issued shares (excluding treasury shares, if any) of the Company for the time being for such purposes as the Directors consider would be in the best interest of the Company. This Authority will, unless revoked or varied by the Company in general meeting, will expire at the next AGM of the Company. STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING 1) Pursuant to Paragraph 8.27(2) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements There are no individuals who are standing for election as Directors (excluding Directors standing for re-election) at this forthcoming Annual General Meeting. 2) General Mandate for Issues of Securities (Pursuant to Paragraph 6.03(3) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements) This general mandate for issue of shares ( the Mandate ) was sought for in the preceding year and the Board did not carry out the Mandate since the last Annual General Meeting of the Company until the latest practicable date before the printing of this Annual Report. As the Mandate will expire on 28 November 2018, the Board is desirous of seeking a fresh mandate at the Twenty-Fifth Annual General Meeting. The Mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to placing of shares, for the purpose of funding further investment project(s), working capital and/or acquisition. ANNUAL REPORT

7 NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS HEREBY GIVEN that a final single tier dividend of 5 sen per share for the financial year ended 30 June 2018, if approved, will be paid on 20 December 2018 to Depositors registered in the Record of Depositors at the close of business on 4 December A Depositor shall qualify for entitlement to the Dividend in respect of: a) shares transferred into the Depositor s Securities Account before 4.00 p.m. on 4 December 2018 in respect of transfers; b) shares bought on the Bursa Malaysia Securities Berhad ( Bursa Securities ) on a cum entitlement basis according to the rules of Bursa Securities. By Order of the Board CHEW SIEW CHENG (MAICSA ) LIM CHOO TAN (LS ) Secretaries Date: 29 October 2018 Penang 6 TEO GUAN LEE CORPORATION BERHAD ( A)

8 CORPORATE INFOATION CHAIAN Dato Mustapha Bin Abdul Hamid GROUP MANAGING DIRECTOR Toh Kian Beng DIRECTORS Lee Kean Cheong Toh Choon Keat Toh Choon Guan Chin Yoong Mun COMPANY SECRETARIES Chew Siew Cheng (MAICSA ) Lim Choo Tan (LS ) AUDIT COMMITTEE Lee Kean Cheong Chairman (Independent Non-Executive Director) Dato Mustapha Bin Abdul Hamid Member (Independent Non-Executive Director) Chin Yoong Mun Member (Independent Non-Executive Director) NOMINATION COMMITTEE Dato Mustapha Bin Abdul Hamid Chairman (Independent Non-Executive Director) Lee Kean Cheong Member (Independent Non-Executive Director) Chin Yoong Mun Member (Independent Non-Executive Director) REMUNERATION COMMITTEE Dato Mustapha Bin Abdul Hamid Chairman (Independent Non-Executive Director) Lee Kean Cheong Member (Independent Non-Executive Director) Chin Yoong Mun Member (Independent Non-Executive Director) AUDITORS Peter Chong & Co. Chartered Accountants PRINCIPAL BANKERS CIMB Bank Berhad Malayan Banking Berhad Public Bank Berhad RHB Bank Berhad REGISTERED OFFICE Plot 28 Lorong Perusahaan Maju 4 Prai Industrial Estate Prai Pulau Pinang Tel: Fax: SHARE REGISTRAR Tricor Investor & Issuing House Services Sdn. Bhd. (Company No H) Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi Kuala Lumpur Tel: Fax: STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad ANNUAL REPORT

9 FINANCIAL HIGHLIGHTS 5 Years Financial Highlights Revenue ( 000) 104, , ,309 92,599 88,896 Profit before tax ( 000) 10,814 6,288 7,107 6,049 6,291 Profit after tax ( 000) 7,842 4,377 5,359 4,551 4,781 EPS (sen) Net asset per share () Gross Dividend (sen) Revenue ( 000) EPS (sen) 100, , , , ,309 92,599 88, profit before tax ( 000) 10,000 5,000 10,814 6,288 7,107 6,049 6, profit after tax ( 000) 10,000 5,000 7,842 4,377 5, , , net asset per share (rm) TEO GUAN LEE CORPORATION BERHAD ( A)

10 BOARD OF DIRECTORS AND KEY SENIOR MANAGEMENT PROFILE DATO MUSTAPHA BIN ABDUL HAMID 66 years of age, Malaysian,Male Independent and Non-Executive Director, Member of Audit Committee, Chairman of Nomination and Remuneration Committee Dato Mustapha Bin Abdul Hamid was appointed to the Board as an Independent and Non-Executive Director on 14 January 1994 and a member of the Audit Committee on 25 March He was re-designated as the Senior Independent Non-Executive Director on 28 May He obtained a Bachelor of Social Science (Honours) degree from University Sains Malaysia and a diploma in Public Management from the National Institute of Public Administration (INTAN). Prior to venturing into the private sector, Dato Mustapha was the Principal Assistant Director in the Prime Minister s Department. He is also an independent Non-Executive Director of Berjaya Food Berhad and Lii Hen Industries Bhd. He has no family relationship with any Director and/or major shareholder of Teo Guan Lee Corporation Berhad. TOH KIAN BENG 56 years of age, Malaysian, Female Non-Independent and Executive Director, Managing Director/Key Senior Management Toh Kian Beng was appointed to the Board on 1 December She graduated with a Bachelor of Commerce degree from University of New South Wales, Australia in 1983 and joined a local accounting firm for one and a half years. She is a member of Malaysian Institute of Accountants (MIA) and Certified Practising Accountant (CPA), Australia. She joined Teo Guan Lee Group in 1985 and is responsible for the overall administrative, financial, planning and management of the Group. She is also involved in identifying new business ventures as well as the development and further expansion of the Group. She has family relationships with other Directors and major shareholders of Teo Guan Lee Corporation Berhad. LEE KEAN CHEONG 51 years of age, Malaysian, Male Independent and Non-Executive Director, Chairman of Audit Committee, Member of Nomination and Remuneration Committees Lee Kean Cheong was appointed to the Board as an Independent Non-Executive Director on 16 January He graduated with a Master of Commerce (Management Accounting) from University of New South Wales, Australia and a Bachelor of Commerce from Murdoch University, Australia. He is a member of Malaysian Institute of Accountants (MIA) and Certified Practising Accountant (CPA), Australia. He started his career with Ernst & Young, and later moved to commercial sector in the main board of public listed company and a multinational corporation. Lee has more than 20 years experiences of commerce and finance, having previously held various leadership roles from within senior managerial positions. Currently he is the partner of accounting and management consultancy firm and Independent Non-Executive Director of Petrol One Resources Berhad and Pentamaster Corporation Bhd, both listed on the Main Market of Bursa Malaysia Securities Berhad. He has no family relationship with any Director and/or major shareholders of Teo Guan Lee Corporation Berhad. ANNUAL REPORT

11 BOARD OF DIRECTORS AND KEY SENIOR MANAGEMENT PROFILE (Cont d) TOH CHOON KEAT 53 years of age, Malaysian, Male Non-Independent and Executive Director/Key Senior Management Toh Choon Keat was appointed to the Board on 6 February He joined Teo Guan Lee (KL) in 1991 and currently in charge of Teo Guan Lee (KL) Sdn. Bhd. and subsidiaries. He graduated from Wichita State University, US with a Bachelor of Business degree (Major in Marketing) in He is responsible for the day to day operations of Teo Guan Lee (KL) Group of Companies, identifying new business ventures and expansion of the Group. He has family relationships with other Directors and major shareholders of Teo Guan Lee Corporation Berhad. TOH CHOON GUAN 50 years of age, Malaysian, Male Non-Independent and Executive Director/Key Senior Management Toh Choon Guan was appointed to the Board on 6 February He joined Teo Guan Lee (Penang) Sdn. Bhd. in 1996 and currently is the General Manager of Teo Guan Lee (Penang) Sdn. Bhd. and the Penang based subsidiaries. He graduated with a Bachelor of Engineering degree from University of New South Wales, Australia in 1991 and has 5 years of working experience as a consulting engineer before joining the Group. He is fully in charge of marketing and merchandising functions and contributes to identify new business opportunities for the Group. He has family relationships with other Directors and major shareholders of Teo Guan Lee Corporation Berhad. CHIN YOONG MUN 51 years of age, Malaysian, Male Independent and Non-Executive Director, Member of Audit Committee, Member of Nomination and Remuneration Committee Chin Yoong Mun was appointed to the Board on 16 February He is a Chartered Accountant practicing in his own Public Practice firm. He graduated from the Association of Chartered Certified Accountant (UK) in He started his career in accountancy with Messrs. Wong Liu & Partners, an audit firm in Penang from 1988 to 1990 and a second tenure between1993 to 1998 before embarking to Messrs HB Tiong & Partners in In the following year he was admitted as partner of the firm. After spending 12 years,he proceeded to set up his own audit firm Messrs YM Chin and Associates (AF ) in July His practice includes the provision of audit, risk management, tax and consultancy services to various companies engaged in manufacturing, trading, construction, property and development, retail, investment holding and others in accordance with the provisions of the Companies Act Mr Chin has been a member of the Malaysia Institute of Accountant (MIA) since He is an approved company auditor under Sekyen 8 of Companies Act 1965, Approved Tax Agent under Section 153(3) of Income Tax He has no family relationship with any Director and/or major shareholders of Teo Guan Lee Corporation Berhad. 10 TEO GUAN LEE CORPORATION BERHAD ( A)

12 BOARD OF DIRECTORS AND KEY SENIOR MANAGEMENT PROFILE (Cont d) KEY SENIOR MANAGEMENT TOH SEE WOOI 47 years of age, Malaysian, Male General Manager/Key Senior Management Toh See Wooi joined Teo Guan Lee (KL) Sdn. Bhd. in 1996 and was promoted to the position of General Manager of Teo Guan Lee (KL) Sdn.Bhd and its subsidiaries in July He graduated from Wichita State University, US with a Bachelor of Business degree Major in Marketing in He is fully in charge of all marketing and merchandising functions for TGL (KL) Sdn. Bhd. Group and contributes to identify new business opportunities for the Group. He has family relationships with other Directors and major shareholders of Teo Guan Lee Corporation Berhad. Note: The above Directors/Key Senior Management do not have any conflict of interest with the Company and have not been convicted of any offences other than traffic offences (if any) in the past five (5) years. ANNUAL REPORT

13 MANAGEMENT S DISCUSSION & ANALYSIS Business Overview Teo Guan Lee Corporation Berhad (TGL or The Group) is a company incorporated and based in Malaysia that has been listed under the Consumer Products and Services Sector with subsector of Personal Goods on the Main Market of Bursa Malaysia Securities since Being an investment holding company, TGL is involved in 2 business segments namely manufacturing, marketing and distribution of garments and its related accessories and property and equity investment holding. Departmental stores and shopping malls in Malaysia continue to operate in a very tough operating environment. Overall consumer business has come under pressure due to a general weakness in domestic retail spending, over supply of retail space, lower tourist arrivals, changing consumer preferences and behaviour and intense competition from both local and foreign brands and e-commerce. On the other hand, although there is a slowdown in the property sector due to oversupply of retail space, the property and equity investment division has remained fairly stable. Financial Review The Group recorded a revenue of 88.9 Million representing a decrease of 3.7 Million over 92.6 Million in the previous year. The lower revenue was due to lower sales generated in the existing consignment outlets and some closure of nonperforming outlets. Despite the drop in revenue, the Group s profit before tax for year ended 30 June 2018 recorded a slight increase of 0.24 Million from 6.05 Million to 6.29 Million. The increase in profit before tax is due to an improvement in gross margin from 40.5% to 41.2% and the result of 5.6% drop in selling and distribution expenses from Million to Million. The better gross margins is due to the continuous efforts to source for competitive pricing despite a strong US dollar and negotiated better trade terms with our suppliers. The Group s basic earnings per share (EPS) was sen as compared to sen in the previous financial year. In financial year ended 30 June 2018, the Group s total assets grew from 113 Million to 114 Million and total liabilities decreased from 29.1 Million to Million. Bank borrowings increased from 4.87 Million to 8.71 Million due to utilisation of trade facilities but the Group s financial position remain strong with the increase of financial assets at fair value through profit or loss increase from to Million to Million. As at 30 June 2018, the shareholders funds grew by 3% from 83 Million to Million and the net assets per share stood at Segmental Review The Group is principally engaged in the operation of manufacturing, retailing and distribution of baby & children apparels and accessories and sport and casual wear. Garment Division The Baby & Children division remained as the Group s biggest revenue contributor. Total revenue for the year for garment division including retail and manufacturing was Million a drop of 3.73 Million or 4.1% from Million. For the year ended 30 June 2018, the Group has a total of 522 consignment outlets, a drop of 12 outlets from 534 consignment counters last year. Some non performing outlets were closed during the financial year. As for the outright sales division, there was an improvement of sales from 8.4 Million to 9.6 Million due to better product offerings to the hypermarkets. The drop in sales was due to the shortfall of sales in the 1 st quarter ended 30 September 2017 and although the subsequent 3 quarters registered improved performance over the similar period, it was insufficient to cover the shortfall in the 1 st quarter. 12 TEO GUAN LEE CORPORATION BERHAD ( A)

14 MANAGEMENT S DISCUSSION & ANALYSIS (Cont d) Garment Division (Cont d) With the closure of non performing outlets and better control over the operating expenses and better gross margins, the garment division registered a better net profit after tax of 4.66 Million as compared to 4.4 Million in the previous financial year. Inventory level stands at Million down from 30.2 Million as the Group wrote off inventory amounting to 2.26 Million in order to ensure a healthy inventory level. Retail Boutiques The Group has decided to close down all the boutiques as despite the numerous efforts to introduce new line of products and promotional activities, the performance remain very weak. All the 9 outlets were closed during the year and the remaining one to be closed in December Manufacturing Garment manufacturing will continue to face upward pressure on margins due to the increasing material costs, labour costs, and difficulty in raising selling prices in the weak and competitive environment. Syarikat Perniagaan Bingel Sdn Bhd registered a drop in turnover from 6.9 Million to 6.49 Million and registered a slight improvement in profit from 24,086 to 37,063. Property & Equity Investment Property investment has remained fairly stable despite the slowdown in the property market due to oversupply especially shopping malls and office spaces. As the Group s property are all located in fairly stable and mature markets, the division generated a revenue of 2.03 Million and a profit of 1.13 Million. The equity investment division on the other hand registered a loss of 194,065 compared to a profit of 618,584 in the previous year. The investments in quoted shares have also registered a decrease in value from 2.6 Million to 2.43 Million. Dividends The Board is always committed to build a sustainable business and to create value for our shareholders as well as to reward them with dividends. The Company paid a final single tier dividend of 5 sen per share amounting to 2,037,110 on 14 December The Board of Directors proposed a final single tier dividend of 5 sen per share (FYE 2017: 5 sen) for the financial year ended 30 June The proposed dividend is subject to approval by the shareholders at the forth coming Annual General Meeting. Forward Looking Statement The change of government following the GE14 has resulted in short term uncertainty. The new government will implement several changes and policies which may have both positive and negative impact on our industry. In spite of uncertainties in the near future, the Group strongly believes that Malaysia s overall economic outlook remains resilient. The new leadership s commitment towards curbing inflation and lowering costs of living and increasing minimum wages may impact consumer sentiments positively. A higher disposable income will augur well for the retail industry. Moving forward, the Group is conscious and vigilant of developments that may impact our business and our industry as a whole. We will continue to expand whenever good opportunities arises and confident that the Group s business will remain stable and profitable. The Management and Discussion Analysis statement was approved in accordance with resolutions of the Board on 3 October ANNUAL REPORT

15 Sustainability Statement Teo Guan Lee Corporation Berhad (TGL or The Group) is committed towards embracing sustainability as we believe that we are able to enhance value for all shareholders and stakeholders in a meaningful way by adopting sustainability practices. The Group has identified 4 material sustainability matters as Indirect Economic Impact, Workplace Best Practices, Community Enrichment and Waste Management. 1. Indirect Economic Impact Teo Guan Lee Corporation Berhad, whose principal business of supplying baby and children apparels throughout Malaysia has an indirect economic impact within the region where we operate from. The products are sourced from both abroad and local of which many of the local apparel manufacturers are small and medium enterprise and some family owned contract manufacturers. This contributes to the growth of small contract manufacturers and cottage industries. 2. Workplace Best Practices TGL adopts workplace best practices in order to attract, train and retain the right talents. The Company strongly believe that cultivating the right mind set and skills are vital to achieving the Company s strategic goals as an organisation. The Company although do not have a fixed gender diversity policy, the Company s percentage of employees are reflective of the national demographics. The Group s human resources policies adhere to fair labour practices. There is equal job opportunity for every employee irrespective of their race, religion, cultural background or gender. Employees are the most valuable asset of a Company and the Group consistently conducts on the job training to enhance sales and technical competencies, supervisory leadership skills in order to develop a competent workforce. The Group strives to maintain a safe and healthy working environment for all employees. The office environment are equipped with proper safety equipment which are regularly checked and preventive measures like fire evacuation exercises and safety training conducted to create awareness among employees. 3. Community Enrichment As a socially responsible organisation, TGL continues to contribute positively towards enriching the lives of people within the communities where we operate. The Board of Directors, management and employees are committed to serve both the needs of the community and the requirements of shareholders, stakeholders and performance of the Group. During the year under review, the Company donated 1000 pairs of school shoes and 1000 pieces of clothing to the underpriviledged school children. The Company together with the employees also donated food stuff and basic necessities to old folks home from proceeds received from recycling waste paper and cartons. 4. Waste Management The Group is conscious of how our operations impact the environment. The Group has put in place a recycling programme to manage office waste. We streamline our operational processes with the aim of reducing office waste such as used paper materials, used plastic bottles, used glass bottles and cans, plastic bags and wrappings are regularly disposed to an established recycle company. In an effort to protect the environment and reduce energy usage, we switch to efficient LED lights where possible and switch off lights and air conditioning during lunch break. The Board of Directors will continue to review and develop new policies and procedures pertaining to sustainability and implement various initiatives in a timely manner where relevant so that the Company will be able to grow to be a recognized and sustainable organisation. 14 TEO GUAN LEE CORPORATION BERHAD ( A)

16 CORPORATE GOVERNANCE OVERVIEW STATEMENT OVERVIEW STATEMENT The New Malaysian Code on Corporate Governance (MCCG) was introduced by the Securities Commission Malaysia on 26 April 2017 superseding the Malaysian Code on Corporate Governance 2012, a set of best practices to strengthen corporate culture anchored on accountability and transparency. The Board of Directors ( Board ) of Teo Guan Lee Corporation Berhad (the Company ) recognises the importance of implementing high standards of corporate governance in the Company for the purposes of safeguarding the interest of its stakeholders and assets of the Group and is committed to uphold the high standards of corporate governance in conducting the affairs of the Company and the subsidiaries. This Statement provides an overview of the Company s application of the Principles set out in the MCCG for the financial year under review and up to the date of this Statement. The details on how the Company has applied each Practice as set out in the MCCG are disclosed in the Corporate Governance Report, which is available for viewing on the Company s website at PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS I. BOARD RESPONSIBILITIES The Directors are collectively responsible to the Company s shareholders for the long-term success of the Group for its overall strategic direction, its values and its governance. They are led by experienced and knowledgeable Board members who provide the Company with the core competencies and the leadership necessary for the Group to meet its business objectives and goals. The role and responsibilities of the Board are clearly set out in the Board Charter, which is available on the Company s website at The Board Charter is periodically reviewed and updated in tandem with changes to regulatory requirements, with final approval by the Board. The Board Charter was last updated on August The Board has delegated specific responsibilities to its Committees, namely the Audit Committee, Nomination Committee and Remuneration Committee ( Board Committees ). The Board Committees are entrusted with the responsibility to oversee specific aspects of the Company s affairs in accordance with their respective terms of reference as approved by the Board and to report to the Board with their findings and recommendations. However the ultimate responsibility for decision making lies with the Board. The demarcation of roles and responsibilities of the Board of Directors are as follows: 1. The Non Executive Chairman of the Board leads the Board in ensuring the effective conduct of the Board; sets the Board agenda and ensures that Board members receive complete and accurate information in a timely manner; leads the pace in Board meetings and discussion; encourages active participation of all Board members and allows dissenting views to be freely expressed. 2. The role of day-to-day management of the Group s business development and operations, including implementation of policies and decisions of the Board, is helmed by the Group Managing Director and assisted by the fellow Executive Directors. The Board believes that such division of power and responsibilities helps ensure balance in that no one person in the Board has unfettered powers to make any major decisions for the Company unilaterally. To enhance accountability, the Board has established clear functions reserved for itself and those delegated to Management. 3. Independent Non Executive Directors provide unbiased and independent judgement in ensuring that strategies proposed by the Management are fully deliberated, challenged and examined objectively, taking into perspective of interest of shareholders and other stakeholders. The Board has also developed a Code of Conduct and Ethics which essentially sets out the standards of conduct expected from employees of the Group and all other affected personnel. This Code is augmented by a Whistleblowing Programme that serves as an avenue for raising concerns related to possible breach of business conduct, non-compliance with laws and regulatory requirements as well as other malpractices. The Board members have full access to the Company Secretary, who is a qualified professional, to provide advisory services to the Board, particularly on corporate governance issues and compliance with the relevant policies and procedures, laws and regulatory requirements. ANNUAL REPORT

17 CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (Cont d) I. BOARD RESPONSIBILITIES (Cont d) Board and Board Committee Meetings For the financial year under review, the Board convened five Board meetings, seven Audit Committee meetings, two Nomination Committee meeting and two Remuneration Committee meeting and attendances of Directors are as follows: Name Board Audit Committee Nomination Committee Remuneration Committee Dato Mustapha Bin Abdul Hamid 5/5 7/7 2/2 2/2 Toh Kian Beng 5/5 1/1 (Resigned as member on 28/5/18) Toh Choon Keat 4/5 Toh Choon Guan 5/5 Lee Kean Cheong 5/5 7/7 2/2 2/2 Chin Yoong Mun 5/5 7/7 1/1 2/2 (Appointed as member on 28/08/17) Total number of meetings for FY As stipulated in the Board Charter, the Directors are required to devote sufficient time to carry out their responsibilities. Each Director is expected to commit time as and when required to discharge the relevant duties and responsibilities, besides attending meetings of the Board or Board Committees. Continuous Professional Development The Board acknowledges the importance of continuous education and training programmes for its members to enable effective discharge of its responsibilities and to be apprised of changes to regulatory requirements and the impact such regulatory requirements have on the Group and the Directors. The Company Secretary would often circulate the relevant guidelines on statutory and regulatory requirements from time to time for the Board s reference. All Directors have completed the Mandatory Accreditation Programme as required by the Listing Requirements of Bursa. During the financial year under review, the trainings attended by the Directors included briefings, seminars, workshops and conferences conducted by the relevant regulatory authorities and professional bodies. Details of the training programmed attended/participated by the Directors are as follows: Dato Mustapha Bin Abdul Hamid - Fraud Management Risk Workshop on 13 July Breakfast Talk Leading in a Volatile, Uncertain, Complex, Ambiguous (VUCA) World on 13 October OIC-Asia-Africa Trade and Economic Forum on 17 September MSSG Reporting and CG Guide on 2 March 2018 Toh Kian Beng - Directors Disclosure Obligations under the Listing Requirements by Bursa on 6 September Maybank Economic Outlook 2018 on 25 January Corporate Governance Briefing Sessions: MSSG Reporting & CG Guide on 16 March TEO GUAN LEE CORPORATION BERHAD ( A)

18 CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (Cont d) I. BOARD RESPONSIBILITIES (Cont d) Continuous Professional Development Lee Kean Cheong - Capital Market Conference 2017 on 18 July Case Study Workshop for Independent Directors Rethinking-Independent Directors: A New Frontier on 9 November GST & Budget 2018 Talk with Dr Choong Kwai Fatt on 11 November Budget Seminar on 12 December Navigating the Malaysian Market 2018 on 3 March Corporate Governance Briefing Sessions: MSSG Reporting & CG Guide on 16 March 2018 Toh Choon Keat - The Breakfast talk-leading a Volatile, Uncertain, Complex, Ambiguous (VUCA) World on 13 October The CG Breakfast Series For Directors-Leading The Brain on 5 December Global Retail Conference on 25 to 27 October 2017 Toh Choon Guan - Directors Disclosure Obligations under the Listing Requirements by Bursa on 6 September Maybank Economic Outlook 2018 on 25 January 2018 Chin Yoong Mun - Malaysian Tax Conference 2018 on 17 and 18 April 2018 II. BOARD COMPOSITION The Board currently consists of 6 members, comprising three (3) Executive Directors and three (3) Independent Non- Executive Directors. The composition of the Board is in compliance with the requirements as set out in the Main Market Listing Requirements ( Listing Requirements ) of Bursa Malaysia Securities Berhad ( Bursa ) and MCCG The Nomination Committee ( NC ) is entrusted to assess the structure, size and composition of the Board, identifying and recommending suitable candidates for Board membership and also to assess annually the performance of the Directors, Board and Board Committees, succession plans and training courses for Directors. The Board has the ultimate responsibility of delivering the final decision on the appointment. This process ensures that the Board membership accurately reflects the long-term strategic direction and needs of the Company. Based on the annual assessment conducted during the financial year under review, the NC was satisfied with the existing Board composition and concluded that each Director has the requisite competence and capability to serve on the Board and had sufficiently demonstrated their commitment to the Group in terms of time and participation during the year under review, and recommended to the Board for the re-election of the retiring Directors at the Company s forthcoming Annual General Meeting ( AGM ). The re-election of Directors is also done in accordance to the Company s Articles of Association, whereby at least one-third (1/3) of the Directors shall retire by rotation at each AGM and that all Directors shall retire once every three (3) years. All assessments and evaluations carried by the NC in discharge of its functions were fully documented. There are two (2) Independent Non-Executive Directors whose term has exceeded a cumulative term of 9 years. Dato Mustapha Bin Abdul Hamid, the Independent Non-Executive Chairman has served more than 12 years and will seek shareholders approval through a 2 tier voting process. Mr Lee Kean Cheong, Independent Non-Executive Director who has served more than 9 years will seek shareholders approval for re-appointment. The NC has conducted an assessment of the independence of Independent Directors for the financial year 2018 based on the criteria on independence adopted by the Board. Following the recommendation of the NC, the Board is of the opinion that the independence of the existing of Independent Directors remain unimpaired and their judgement over business dealings of the Company had not been influenced by the interest of the other Directors or substantial shareholders. ANNUAL REPORT

19 CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (Cont d) II. BOARD COMPOSITION (Cont d) The Board has a female Director on Board although the Company does not have a specific gender diversity policy and is always mindful of the importance of diversity in the Board to effectively manage the Company s business. The Board and the NC strictly apply meritocracy, evaluate suitability of candidates based on the candidates competency, character, time availability, time commitment, knowledge, experience and other qualities in meeting the needs of the Group. The Board constantly advocates fair and equal participation and opportunity for all individuals of the right calibre. A summary of key activities undertaken by the NC in discharging its duties during the financial year under review include, among others: - Assessed and appraised the performance and effectiveness of the Board, Board Committees and individual Directors based on set criteria approved by the Board, such as factors pertaining to the structure, operations, Director s roles and responsibilities and Chairman s roles and responsibilities; - Reviewed and recommended to the Board regarding re-election of Directors; - Reviewed trainings attended by the Directors; - Reviewed Board diversity and succession planning; - Reviewed competencies, independence and time commitment of Directors; and - Reviewed Nomination Committee s Terms of Reference III. REMUNERATION The Board has established a Remuneration Committee ( RC ) to implement the policies and procedures on matters relating to the remuneration of Directors and Senior Management and making recommendations on the same to the Board for approval. The Board has adopted the said policies and procedures to determine the remuneration of Directors and Senior Management to align with business strategy and long-term objectives of the Company. The Executive Directors are paid salaries, allowance and performance-based bonus. The remuneration is set based on performance, qualifications and experience of the Directors. The salary level for Executive Directors takes into account the nature of the role, performance of the business and the individual and market positioning. The remuneration for Non-Executive Directors comprises of fees. The Board ensures that the remuneration for Non- Executive Directors do not conflict with their obligation to bring objectively and independent judgement on matters discussed at Board meetings. The respective Directors are required to abstain from deliberation and voting on their own remuneration at Board meetings. The aggregate fees and remuneration of Directors received/receivable from the Company and on Group basis for the financial year ended 30 June 2018 is as follows: Fees Salary, Bonuses & Allowances EPF Total Dato Mustapha Bin Abdul Hamid 21, ,000 Toh Kian Beng - 350,000 66, ,500 Lee Kean Cheong 16, ,000 Toh Choon Keat - 329,000 62, ,510 Toh Choon Guan - 315,000 59, ,850 Chin Yoong Mun 8, ,000 45, , ,860 1,227,860 Fees received by Non-Executive Directors are from the Company and remuneration received by Executive Directors are from the Group. 18 TEO GUAN LEE CORPORATION BERHAD ( A)

20 CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont d) PRINCIPLE A - BOARD LEADERSHIP AND EFFECTIVENESS (Cont d) III. REMUNERATION (Cont d) Disclosure on Key Senior Management s remuneration for the financial year ended 30 June 2018 is as follows: Name Item Range Toh See Wooi Salary, Bonuses & EPF 200, ,000 PRINCIPLE B - EFFECTIVE AUDIT AND RISK MANAGEMENT I. AUDIT COMMITTEE The Audit Committee which comprises of 3 members, all of whom are Non-Executive Independent Directors is established to assist the Board to discharge its duties on financial reporting, auditing, risk management and internal controls. The composition of the Audit Committee, including its roles and responsibilities as well as a summary of its activities carried out for the financial year ended 30 June 2018, are set out in the Audit Committee Report of this Annual Report. One of the key responsibilities of the Audit Committee in its specific terms of reference is to ensure that the financial statements of the Group and Company comply with applicable accounting standards in Malaysia and provisions of the Companies Act Such financial statements comprise the quarterly financial report announced to Bursa and the annual statutory financial statements. In line with the new Code of Corporate Governance, the Audit Committee has adopted a policy that requires a former key audit partner to observe a cooling-off period of at least two (2) years before being appointed as a member of the Audit Committee. II. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK The Board has overall responsibility for maintaining a sound system of risk management and internal control of the Group that provides reasonable assurance on the effective and efficient conduct of business operations, compliance with laws and regulations as well as internal procedures and guidelines. The Audit Committee assists the Board in reviewing the adequacy and operating effectiveness of the system of risk management and internal control in the Group. The Audit Committee does this via the deployment of an independent outsourced internal audit function that conducts internal audit based on an internal audit plan approved by the Audit Committee. Findings raised from internal audit are presented directly to the Audit Committee, including the remedial measures and action plans agreed by Management to address the matters so highlighted. For more details of the Internal Audit function, refer to the Statement on Risk Management and Internal Control which is included in the Annual Report as well as the Corporate Governance Report that is made available on the Company s website at The Audit Committee is also responsible to oversee the risk management framework and policies while the Senior Management is tasked to manage business risks, including creating and maintaining an effective process to identify, evaluate, control, report and manage risk. Details of the Group s Risk Management framework, activities carried out for the financial year under review and reporting processes are set out in the Statement of Risk Management and Internal Control included in this Annual Report. PRINCIPLE C - INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS I. COMMUNICATION WITH STAKEHOLDERS The Board recognizes the importance of being transparent and accountable to the Company s stakeholders and acknowledges that continuous communications and timely dissemination of information between the Company and stakeholders would facilitate mutual understanding of each other s objectives and expectations. Such information is communicated through various disclosures and announcements, including quarterly and annual financial results, which provide investors with up-to-date financial information of the Group. All these announcements and other information about the Group are available on the Company s website at which shareholders, investors and public may access. PRINCIPLE C - INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS ANNUAL REPORT

21 CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont d) (Cont d) II. CONDUCT OF GENERAL MEETINGS The Annual General Meetings ( AGM ) which is the principal forum for shareholder dialogue, allows shareholders to review the Group s performance via the Company s Annual Report and pose questions to the Board for clarification. During the AGM, shareholders participated in deliberating resolutions being proposed or on the Group s operations in general. The Directors and Senior Management are present to respond to all questions raised and provided clarification as required by the shareholders. In compliance with Practice 12.1 of the MCCG, the Company gives its shareholders at least 28 days notice prior to the AGM. The Company s 25 th AGM is scheduled on 28 November 2018 and notice of the 25 th AGM will be sent to shareholders on 29 October 2018 which is not less than 28 days prior to the 25 th AGM. The Company have conducted poll voting for all resolutions set out in the notice of 24 th AGM that was held on 27 November 2017 of which an independent scrutineer was appointed to validate the votes. The results were announced by the Company to Bursa on the same day. ADDITIONAL COMPLIANCE INFOATION DISCLOSURES a) Audit and Non-Audit Fees The total audit fees paid to the external auditors for the financial year ended 30 June 2018 for the Company and the Group were 15,000 and 106,800 respectively. The total non-audit fees paid by the Company and the Group to a company affiliated to the external auditors for the financial year ended 30 June 2018 were 5,000 and 15,700. b) Material Contracts During the financial year, there were no material contracts with the Company and its subsidiaries involving Directors and major shareholders other than those disclosed in the Directors Report and Notes to the Financial Statements. c) Recurrent Related Party Transactions The recurrent related party transactions were set out in Note 26 of the Financial Statements and were in the ordinary course of business and were carried out on terms not more favourable to the related party than those generally available to the public. d) Utilisation of Proceeds No proceeds were raised by the Company from any corporate proposal during the financial year. COMPLIANCE STATEMENT The Board is satisfied that for the financial year ended 30 June 2018, the Company has in all material aspects satisfactory complies with the principles and recommendations of the Code except for the departures set out in the Corporate Governance Report. The Corporate Governance Overview Statement has been made in accordance with resolutions of the Board on 3 October The Directors are required by the Act, to prepare the financial statements for each financial year which have been made out in 20 TEO GUAN LEE CORPORATION BERHAD ( A)

22 DIRECTORS RESPONSIBILITY STATEMENT IN FINANCIAL REPORTING accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards, the requirements of the Act in Malaysia, and the LR The Board is satisfied that for the year ended 30 June 2018,the financial statements presented gives a true and fair view of the state of affairs, results and cash flows of the Group and the Company. In presenting the financial statements of the Group, the Directors have: - Adopted appropriate accounting policies and applied them consistently; - Made judgements and estimates that are reasonable and prudent; and - Prepared the financial statements on a going concern basis as the Directors have a reasonable expectation, having made enquiries, that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. The Directors have ensured that all relevant approved accounting standards and the requirements of the Act were followed in the preparation of these financial statements. The Directors have overall responsibilities for taking such steps as are reasonably open to them to safequard the assets of the Group, to prevent and detect fraud and other irregularities. ANNUAL REPORT

23 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL The Malaysian Code on Corporate Governance 2017 ( MCCG 2017 ) requires public listed companies to maintain a sound system of risk management and internal control to safeguard shareholder s investment and company s assets. Under the provisions of the Bursa Malaysia Securities Bhd Main Market Listing Requirements, paragraph 15.26(b) Directors of Public Listed companies are required to produce a statement on the state of the company s internal control in their Annual Report. The Board is pleased to provide the following statement which outlines the nature and scope of risk management and internal control of the Group during the financial year under review. RESPONSIBILITY The Board recognises the importance of a sound system of internal controls and risk management framework to good corporate governance. The Board acknowledges its overall responsibilities for the Group s systems of internal control and risk management, as well as reviewing the adequacy and integrity of the Group s internal control system. The Board s responsibility in relation to the systems of internal control encompasses all subsidiaries of the Group. However, as there are inherent limitations in any system of internal control, such system of internal control put into effect by management can only manage but not eliminate all risks that may impede the achievement of the Group s business objectives. Therefore, the internal control system can only provide reasonable but not absolute assurance against material misstatements, errors or losses. RISK MANAGEMENT FRAMEWORK The Board has taken necessary measures to ensure the existence of an on-going process to manage and mitigate the significant risks faced by the Group. The Group adopts a risk based management approach and rely on the Senior Management utilizing their existing skills as the basis to assume ownership and accountability for risks at their respective levels and to develop risk awareness among all employees through effective communication, timely dissemination of Group s policies, guidelines and procedures, new legislation and financial reporting compliances. KEY ELEMENTS OF RISK MANAGEMENT AND INTERNAL CONTROL Key elements that have been established to review and evaluate the effectiveness and adequacy of the Risk Management and Internal Control system include: ORGANISATION STRUCTURE The Group has instituted an organization structure with defined lines of accountability and delegated authority. Board s committees are given the terms of reference to discharge their respective responsibilities. The Senior Management is delegated with authority to perform all aspects of business related to the Group. AUDIT COMMITTEE The Board has delegated the responsibility for reviewing the adequacy and integrity of the internal control system to the Audit Committee. In turn, the Audit Committee assesses the adequacy and integrity of the systems of internal controls through independent reviews conducted on reports it receives from management, internal audit function and external auditors. Our Group has currently outsourced the internal auditing function to an external party to provide an independent supervision and oversight of our internal control system. The outsourced internal auditor reviews our internal control system based on a risk-based approach internal audit strategy according to an annual audit plan adopted by the Audit Committee. In addition, the management conducted in house internal audit on some of its processes and functions based on recommendations by the outsourced internal auditors. The external auditors provide assurance in the form of their annual statutory audit of the financial statements of the Group. Any areas for improvement identified during the course of the statutory audit are brought to the attention of the Audit Committee through management letters or are articulated at the Audit Committee meetings. 22 TEO GUAN LEE CORPORATION BERHAD ( A)

24 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (Cont d) SENIOR MANAGEMENT In the process for identifying, evaluating, monitoring and managing the significant risk affecting the objectives of the Group, the Board relies on the direct participation of the Senior Management. Management meetings are held at the strategic, operational and finance level to review the financial and operational reports in order to monitor the performance of the Group. These meetings and reports present the ideal platform for identification of the Group s risk of each business units and timely implementation of controls to manage risks. The Senior Management updates the Board of any significant matters which require the Board s attention. FINANCIAL REPORTING SYSTEMS The Board entrusts the daily running of the operations to the Managing Director and Executive Director and the management team. Monthly meetings are held to discuss and review significant changes in the business and the external environment which affect the risks faced by the Group. Comprehensive information are provided including financial performance and monthly monitoring of results against budgets with major variances being followed up and proposed actions to be taken. The Managing Director and Executive Directors will discuss and deliberate strategic issues facing the business at the quarterly Board Meeting and report on any significant matters arising. CODE OF CONDUCT All employees of the Group play an important role in establishing, monitoring and enhancing the reputation of the Group. A code of conduct has been formalized and available in the Human Resource department and put in the Company s website. All employees are required to display the highest level of professionalism in all aspects of their work and comply with the Code of Conduct and all applicable laws, regulations and policies of the Group. WHISTLE BLOWING POLICY The Board has formalised a whistle blowing policy which is available on the company s website provides a channel for parties to provide information on frauds, wrong doing and non-compliance of regulations and procedures by employees. INTERNAL AUDIT The Board through the Audit Committee, Senior Management and Internal Auditors reviews the internal control system on an on-going basis. The internal audit adopts a risk based approach in developing its audit plan which address the core business processes of the Group based on their risk profile. Internal Auditors will carry out audits based on audit plan presented and approved by the Audit Committee. The Internal Auditors continue to independently and objectively monitor compliance with regards to policies and procedures and the effectiveness of the internal control systems. Significant findings and recommendations for improvement are highlighted to management and the Audit Committee. The management is responsible for ensuring that corrective actions were implemented accordingly. ANNUAL REPORT

25 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (Cont d) CONCLUSION In accordance with the assessment of the Group s systems of internal control, the Board is of the view that the risks undertaken by the Group were within tolerable levels in the context of the business environment the Group operates in. During the year under review, a number of improvements to internal controls were identified and addressed. Nothing has come to the attention of the Board which could result in any material losses, contingencies or uncertainties that would require separate disclosure. The Board has received assurances from the Senior Management that the Group s risk management and internal control system is operating adequately and effectively in all material aspects. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS The External Auditors have reviewed the Statement on Risk Management and Internal Control for inclusion in the Annual Report for the year ended 30 June Based on their review, the External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process that the Board has adopted in the review of the adequacy and integrity of risk management and internal control of the Group. This statement is made in accordance with the resolution of the Board of Directors dated 3 October TEO GUAN LEE CORPORATION BERHAD ( A)

26 AUDIT COMMITTEE REPORT Members of the Audit Committee The Audit Committee currently comprises entirely of Independent Non-Executive Directors as follows: a) Lee Kean Cheong Chairman (Independent Non-Executive Director) b) Dato Mustapha Bin Abdul Hamid Member (Independent Non-Executive Director) c) Chin Yoong Mun Member (Independent Non-Executive Director) Terms of Reference Composition The Committee shall be appointed by the Board from amongst the Directors of the Company and shall consist of not less than 3 members of whom all must be Non-Executive Directors with a majority of them being independent directors. A quorum shall be 2 members. The Committee Members shall not be: a) Executive Directors of the Company or any related corporation; b) A spouse, parent, brother, sister, son or adopted son, daughter or adopted daughter of an Executive Director of the Company or of any related corporation; or c) Any person having a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgement in carrying out the functions of the Audit Committee. All members shall be financially literate and at least 1 member of the Committee must be a member of the Malaysian Institute of Accountants, or if he is not a member of Malaysian Institute of Accountants, must have at least 3 years working experience and either have passed the examination specified in Part I of the First Schedule of the Accountants Act 1967, or a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act 1967 or fulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad. The members of the Committee shall select a Chairman from among their members who is not an Executive Director or employee of the Company or any related corporation. The Chairman of the Audit Committee shall be an independent director and must not be the chairman of the Board. If a member of the Committee resigns, dies or for any other reason ceases to be a member with the result that the number of members reduced below 3, the Board of Directors shall, within 3 months of that event, appoint such number of new members as may be required to make up the minimum number of 3 members. No alternate director should be appointed as a member of the Committee Authority The Committee is authorised by the Board to investigate any activity within its Terms of Reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee. The Committee is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary. ANNUAL REPORT

27 AUDIT COMMITTEE REPORT (Cont d) Functions The functions of the Committee shall be: a) to consider and recommend the nomination of a person or persons as auditors together with such other functions as may be agreed to by the Audit Committee and the Board of Directors; b) to discuss with the external Auditors on their audit plan including the assistance given by the employees of the Company to the external Auditors; c) to assess annually the suitability and independence of internal auditors and external audit firm; d) to review the quarterly and year-end financial statements of the Company, focusing particularly on: i) any changes in or implementation of accounting policies and practices; ii) significant adjustments arising from the audit and any significant and unusual events; and iii) compliance with accounting standards and other legal requirements. e) to consider any related party transaction and conflict of interest situation that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity; f) to review the major risk area of the Group; g) to discuss problems and reservations arising from the interim and final audits, and any matter the auditors may wish to discuss (in the absence of management where necessary); h) to review evaluation by the External Auditors on the System of Internal Controls, the External Auditors management letter and management s response; i) to 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; j) to review the internal audit programme, processes, results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function; k) to consider the major findings of internal investigations and management s response; l) to establish policy that requires a former key audit partner to observe a cooling-off period of at least two years before appointed as a member of the Audit Committee; m) to review the financial reporting process, detention of financial irregularities, to ascertain that the financial statements are consistent with operational information; and n) to assess and recommend on among others the appointment and removal, scope of work, performance evaluation and budget for the internal audit function. Attendance at Meetings The Audit Committee may require the attendance of any management staff from the Finance/Accounts Department or other Departments deemed necessary together with a representative or representatives from the External Auditors. Other Board members shall also have the right of attendance. However, at least twice a year the Committee shall meet with the External Auditors without executive Board members present. The Company Secretary shall be the Secretary of the Committee. The Secretary shall circulate the minutes of meetings of the Audit Committee to all members of the Board. 26 TEO GUAN LEE CORPORATION BERHAD ( A)

28 AUDIT COMMITTEE REPORT (Cont d) Summary of the work for the year During the financial year ended 30 June 2018, the Audit Committee met seven (7) times and attendance of each Director is as follows: Attended Lee Kean Cheong 7/7 Dato Mustapha Bin Abdul Hamid 7/7 Chin Yoong Mun 7/7 During the year, the activities of the Audit Committee included: 1. Reviewing the annual and quarterly financial result announcements; 2. Reviewing external auditors report in addition to credit and accounting issues arising from audit and updates of new developments on accounting standards under the new MFRS (Malaysian Financial Reporting Standards); 3. Reviewing audit strategy and plan with external auditors; 4. Reviewing the Internal Audit Report, circular on related party transactions and Statements of Risk Management and Internal Control and Corporate Governance; 5. Reviewing the scope, function, resources and competency of internal audit function; 6. Reviewing the re-appointment of external auditors and internal auditors for the ensuing year; and 7 Reviewed Terms of Reference of the Audit Committee The Audit Committee is of the opinion that it has discharged its duties in accordance with the terms of reference as established during the financial year. Internal Audit Function The Company has appointed KFF Advisory Sdn. Bhd.,an independent accounting firm ( the Internal Auditor ) to provide outsourced internal audit function for the Group to assist the Audit Committee in discharging its duties and responsibilities. The Internal Auditors report directly to the Audit Committee. Summary of internal audit activities conducted during the year include the following: Review of internal control procedures related to accounts payable, bank accounts and banking arrangements and financial information and quarterly reporting for major subsidiaries of the Group. Periodic conduct of physical stock count at outlets by sales supervisors and personnel, and verifications against stock reports maintained. Investigation into material variances of stock count and physical records and the objective is to minimise any stock losses and identify major losses as soon as possible. The total fees and costs incurred for the financial year 30 June 2018 for internal audit functions amounted to 20,000. This Report is made in accordance with the resolution of the Board of Directors dated 3 October ANNUAL REPORT

29 FINANCIAL STATEMENTS 29 Directors Report 39 Consolidated Statement of Profit or Loss and Other Comprehensive Income 45 Statement of Changes in Equity 33 Statement by Directors 40 Consolidated Statement of Changes in Equity 46 Statement of Cash Flows 33 Statutory Declaration 41 Consolidated Statement of Cash Flows 47 Notes to the Financial Statements 34 Independent Auditors Report 43 Statement of Financial Position 38 Consolidated Statement of Financial Position 44 Statement of Profit or Loss and Other Comprehensive Income

30 DIRECTORS REPORT The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 30 June PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding and provision of management services. There have been no significant changes in the nature of these principal activities during the financial year. SUBSIDIARY COMPANIES The details of the subsidiary companies and their business activities are disclosed in Note 7 to the financial statements. The auditors report on the financial statements of the subsidiary companies did not contain any qualification. There have been no significant changes in the nature of the subsidiary companies principal activities during the financial year. FINANCIAL RESULTS Group Company Profit for the financial year attributable to: Owners of the Company 4,764,098 2,301,012 Non-controlling interest 17,420 - DIVIDENDS The dividends declared, paid and payable by the Company since the previous financial year were as follows: 4,781,518 2,301,012 In respect of the financial year ended 30 June 2017 Final single tier dividend of 5 sen per share, declared on 27 November 2017 and paid on 14 December ,037,110 The Directors proposed a final single tier dividend of 5 sen per share amounting to 2,037,110 in respect of the financial year ended 30 June The proposed dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year. ISSUE OF SHARES AND DEBENTURES The Company has not issued any new shares or debentures during the financial year. SHARE OPTIONS No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company. No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As at the end of the financial year, there were no unissued shares of the Company under options. ANNUAL REPORT

31 DIRECTORS REPORT (Cont d) DIRECTORS IN OFFICE The Directors who have held office since the date of the last report are: Dato Mustapha Bin Abdul Hamid Toh Kian Beng* Lee Kean Cheong Toh Choon Keat* Toh Choon Guan* Chin Yoong Mun In accordance with the Company s Constitution, Ms. Toh Kian Beng and Mr. Toh Choon Guan retire by rotation, and being eligible, offer themselves for re-election. *Directors of the Company and subsidiary companies The Directors who served on the subsidiary companies of the Company since the date of last report, not including those directors listed above are: Toh See Wooi Kee Lik Kang Kee Leck Seok DIRECTORS BENEFITS Since the end of the previous financial year, no Director has received or become entitled to receive any benefit (other than Directors remuneration as disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than any deemed benefits arising from related party transactions as disclosed in Note 26 to the financial statements. During and at the end of the financial year, no arrangements subsisted to which the Company or a related corporation was a party, whereby Directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. DIRECTORS INTERESTS According to the register of Directors shareholdings, the interests of Directors in office at the end of the financial year in shares of the Company and its related corporations were as follows: Number of Ordinary Shares Balance as Balance as at Bought Sold at Shareholdings in the Company Indirect interest Toh Kian Beng 28,123, ,123,259 Toh Choon Keat 28,100, ,100,659 Toh Choon Guan 27,207, ,207,659 By virtue of their interest in shares of the Company, Messrs. Toh Kian Beng, Toh Choon Keat and Toh Choon Guan are deemed to be interested in shares of all subsidiary companies to the extent the Company has an interest. None of the other Directors in office at the end of the financial year held or dealt in shares and share options in the Company or its related corporations during the financial year. 30 TEO GUAN LEE CORPORATION BERHAD ( A)

32 DIRECTORS REPORT (Cont d) OTHER STATUTORY INFOATION Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps: a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for impairment, and have satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for impairment; and b) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their values as shown in the accounting records of the Group and the Company have been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: a) which would render the amount written off for bad debts or the amount of the allowance for impairment in the financial statements of the Group and of the Company inadequate to any substantial extent; or b) which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading; or c) 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; or d) not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading. At the date of this report, there does not exist: a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year to secure the liability of any other person; or b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet its obligations as and when they fall due. In the opinion of the Directors, a) the results of the Group s and the Company s operations during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature; and b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of operations of the Group and of the Company for the financial year in which this report is made. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR On 19 September 2017, the wholly-owned subsidiary company, Teo Guan Lee Properties (K.L.) Sdn. Bhd. entered into Sale and Purchase Agreements ( SPA ) to acquire 9 units of leasehold condominium, located in Cheras, Federal Territory of Kuala Lumpur, for a total consideration of 5,787,000. The project is expected to be completed within 48 months of the SPA date. INDEMNITIES TO DIRECTORS OR OFFICERS There has been no indemnity given to or insurance effected for any director or officer of the Group and of the Company during the financial year. ANNUAL REPORT

33 DIRECTORS REPORT (Cont d) AUDITORS Auditors remuneration is set out in Note 21 to the financial statements. No payment has been made to indemnify auditors during or since the financial year. The auditors, Messrs. Peter Chong & Co., Chartered Accountants, have indicated their willingness to accept re-appointment. Signed on behalf of the Board in accordance with a resolution of the Directors... Toh Kian Beng Director... Toh CHOON GUAN Director Georgetown, Penang Dated: 3 October TEO GUAN LEE CORPORATION BERHAD ( A)

34 statement by directors Pursuant to Section 251(2) of the Companies Act 2016 The Directors of TEO GUAN LEE CORPORATION BERHAD state that, in the opinion of the Directors, the financial statements set out on pages 38 to 94 are drawn up in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 June 2018 and of their financial performance and cash flows of the Group and of the Company for the financial year ended on that date. Signed on behalf of the Board in accordance with a resolution of the Directors. Toh Kian Beng Director. TOH CHOON GUAN Director Georgetown, Penang Dated: 3 October 2018 STATUTORY DECLARATION Pursuant to Section 251(1)(b) of the Companies Act 2016 I, Toh Kian Beng (NRIC No.: ), being the Director primarily responsible for the financial management of TEO GUAN LEE CORPORATION BERHAD, do solemnly and sincerely declare that, to the best of my knowledge and belief, the financial statements set out on pages 38 to 94 are correct. And I make this solemn declaration, conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by ) the abovenamed TOH KIAN BENG ) at Georgetown in the State of ). Penang on 3 October 2018 ) TOH KIAN BENG Before me Commissioner for Oaths Haji Mohamed Yusoff Bin Mohd. Ibrahim (NO. P156) ANNUAL REPORT

35 INDEPENDENT AUDITORS REPort to the members of Teo Guan Lee Corporation Berhad (Company No: A) (Incorporated in Malaysia) Report on the Audit of the Financial Statements Opinion We have audited the financial statements of TEO GUAN LEE CORPORATION BERHAD, which comprise the statements of financial position as at 30 June 2018 of the Group and of the Company, and the statements of profit or 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 notes to the financial statements, including a summary of significant accounting policies, as set out on pages 38 to 94. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 30 June 2018, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 1) Inventories Physical verification and valuation Refer to Note 2(f) - Significant accounting policy: Inventories, Note 4(iv) Significant accounting estimates and judgements: Inventories written down to net realisable value; and Note 10 - Inventories. Background: The inventories of the Group amounted to 25,531,441, represents 22.3% of the total assets. This is carried at the lower of cost and net realisable value. The inventories mainly consist of goods placed in warehouses and on consignment counters in third parties display premises. The business of the fashion industry is volatile with constant change in consumer demand in taste and trend. The verification of its existence and valuation of the inventories held, management s accountability and compliance with its internal control over the inventories, are key audit matters. Our response: - Assessed the effectiveness and adequacy of the Group s internal control on inventories. - Attended inventory counts at selected consignment counters and warehouses to observe and test checked certain items of the counts performed by the Group. We compared our stock count results with the result of the counts by the Group s personnel responsible for the count. - Test checked the compilation of the inventory, ensuring that inventories have been properly compiled and recorded in the inventory listing. In addition, we also test checked to ensure loss items and damaged items noted during inventory count have been removed from the compilation of the inventory listing. - Test checked the inventories to ensure the costs plus other direct costs have been properly recorded and consistently applied. - Ascertained compliance of inventories valued at the lower of cost and net realisable value by comparing the cost of inventories to their subsequent selling prices. - Assessed the appropriateness of inventories written down by observing the saleability of the inventories. We compared the subsequent selling price of these items to the marked down selling price by the management. This is to ensure these inventories were able to be sold at these marked-down price. 34 TEO GUAN LEE CORPORATION BERHAD ( A)

36 INDEPENDENT AUDITORS REPort to the members of Teo Guan Lee Corporation Berhad (Cont d) (Company No: A) (Incorporated in Malaysia) Key Audit Matters (Cont d) 2) Recoverability of trade receivables Refer to Note 2(g) - Significant accounting policy: Financial Instruments and Note 11 - Receivables. Background: The trade receivables of the Group amounted to 39,218,149 and it constituted approximately 34.3% of the total assets of the Group. We determined this to be key audit matter due to the significant value of the trade receivables. Our response: Our procedures included, amongst others:- - Assessed the effectiveness and adequacy of the Group s internal control on trade receivables. - Compared receivables turnover days to the previous year and/or to industry data to assess reasonableness. - Performed receivables circularisation over selected samples of year-end trade receivables and performed alternative procedures for any exceptions and non-replies to the receivables confirmation. - Assessment of the management s control over recording and monitoring of credit risk for each individual receivables. - Reviewed subsequent collections from circularised samples of trade receivables to ensure payments received in accordance to the agreed credit terms. Information Other than the Financial Statements and Auditors Report Thereon The Directors of the Company are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the financial statements of the Group and of the Company and our auditors report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group s and the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ANNUAL REPORT

37 INDEPENDENT AUDITORS REPort to the members of Teo Guan Lee Corporation Berhad (Cont d) (Company No: A) (Incorporated in Malaysia) Key Audit Matters (Cont d) Auditors Responsibilities for the Audit of the Financial Statements (Cont d) - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and the Company s internal control. - Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. - Conclude on the appropriateness of the Directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s or the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation. - Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 36 TEO GUAN LEE CORPORATION BERHAD ( A)

38 INDEPENDENT AUDITORS REPort to the members of Teo Guan Lee Corporation Berhad (Cont d) (Company No: A) (Incorporated in Malaysia) Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Peter Chong & Co. No. AF 0165 Chartered Accountants Chong Ton Peter Chong No /03/2020 J Chartered Accountant Georgetown, Penang Dated: 3 October 2018 ANNUAL REPORT

39 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June Note ASSETS Non-current assets Property, plant and equipment 5 1,813,873 2,352,597 Investment properties 6 21,226,067 21,334,638 Investments 8 2,428,716 2,599,789 Deferred tax assets 9 253, ,000 Total non-current assets 25,721,656 26,459,024 Current assets Inventories 10 25,531,441 30,215,835 Receivables 11 40,769,572 39,975,640 Tax assets 12 36, ,015 Financial assets at fair value through profit or loss - Investment management funds 13 20,839,082 14,782,979 Deposit, cash and bank balances 14 1,354,192 1,487,367 Total current assets 88,530,660 86,668,836 TOTAL ASSETS 114,252, ,127,860 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 15 40,742,200 40,742,200 Reserves 16 44,835,444 42,261,032 85,577,644 83,003,232 Non-controlling interest 17 1,007, ,124 TOTAL EQUITY 86,585,188 83,993,356 Non-current liability Deferred tax liabilities 9 1,767,578 1,859,356 Current liabilities Payables 18 16,732,601 22,142,277 Borrowings 19 8,711,834 4,877,584 Tax liabilities , ,287 Total current liabilities 25,899,550 27,275,148 TOTAL LIABILITIES 27,667,128 29,134,504 TOTAL EQUITY AND LIABILITIES 114,252, ,127,860 The attached notes form an integral part of these financial statements. 38 TEO GUAN LEE CORPORATION BERHAD ( A)

40 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 June Note REVENUE 20 88,896,664 92,599,266 COST OF SALES 20 (52,281,021) (55,073,788) GROSS PROFIT 36,615,643 37,525,478 OTHER OPERATING INCOME 1,097,767 1,130,112 SELLING AND DISTRIBUTION COSTS (21,865,708) (23,172,526) ADMINISTRATIVE EXPENSES (9,273,036) (9,326,762) OPERATING PROFIT 21 6,574,666 6,156,302 FINANCE COSTS 23 (282,705) (107,057) PROFIT BEFORE TAXATION 6,291,961 6,049,245 TAXATION 12 (1,510,443) (1,497,923) PROFIT FOR THE FINANCIAL YEAR 4,781,518 4,551,322 OTHER COMPREHENSIVE (EXPENSES)/INCOME FOR THE FINANCIAL YEAR Items that may be reclassified subsequently to profit or loss - Fair value of available-for-sale financial assets: (i) (Losses)/gains arising during the year (194,065) 618,584 (ii) Reclassification adjustments for gains on disposal included in profit or loss (41,145) - (i) Reclassification adjustment included in the profit or loss 82,634 - (152,576) 618,584 TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 4,628,942 5,169,906 PROFIT ATTRIBUTABLE TO: OWNERS OF THE COMPANY 4,764,098 4,540,002 NON-CONTROLLING INTEREST 17,420 11,320 4,781,518 4,551,322 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: OWNERS OF THE COMPANY 4,611,522 5,158,586 NON-CONTROLLING INTEREST 17,420 11,320 4,628,942 5,169,906 EARNINGS PER SHARE (SEN) - Basic The attached notes form an integral part of these financial statements. ANNUAL REPORT

41 CONSOLIDATED STATEMENT OF changes in equity for the financial year ended 30 June 2018 Share capital Attributable to owners of the Company Fair value reserve Retained profits Total Noncontrolling interest Total equity Note As at 1 July ,742, ,365 39,834,746 80,900, ,804 81,879,115 Profit for the financial year - - 4,540,002 4,540,002 11,320 4,551,322 Other comprehensive income - Fair value changes on available-for-sale financial assets - 618, , ,584 Total comprehensive income - 618,584 4,540,002 5,158,586 11,320 5,169,906 Transaction with owners of the Company: - Dividends (3,055,665) (3,055,665) - (3,055,665) As at 30 June ,742, ,949 41,319,083 83,003, ,124 83,993,356 As at 1 July ,742, ,949 41,319,083 83,003, ,124 83,993,356 Profit for the financial year - - 4,764,098 4,764,098 17,420 4,781,518 Other comprehensive income - Fair value changes on available-for-sale financial assets - (152,576) - (152,576) - (152,576) Total comprehensive income - (152,576) 4,764,098 4,611,522 17,420 4,628,942 Transaction with owners of the Company: - Dividends (2,037,110) (2,037,110) - (2,037,110) As at 30 June ,742, ,373 44,046,071 85,577,644 1,007,544 86,585,188 The attached notes form an integral part of these financial statements. 40 TEO GUAN LEE CORPORATION BERHAD ( A)

42 CONSOLIDATED STATEMENT OF Cash flows for the financial year ended 30 June Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 6,291,961 6,049,245 Adjustments for: Bad debts written off 2,943 5,373 Depreciation of property, plant and equipment 961,571 1,317,903 Depreciation of investment properties 629, ,401 Distribution from investment management funds (761,642) (591,633) Dividend income (112,668) (82,773) Fair value gain on investment management funds (23,607) - Gain on disposal of available-for-sale financial assets (40,533) - Gain on disposal of property, plant and equipment (5,000) - Interest expenses 265,212 83,637 Interest income (23,521) (27,164) Inventories written down to net realisable value 2,261,636 2,325,314 Impairment loss for available-for-sale financial assets 82,634 - Loss on winding up of a subsidiary company - 4,095 Property, plant and equipment written off Reversal of impairment on debts (3,931) - Unrealised loss/(gain) on foreign exchange 115,132 (203,530) Operating profit before working capital changes 9,640,151 9,509,868 Inventories 2,422, ,922 Receivables (792,944) (3,041,946) Derivative financial instruments - (29,619) Payables (5,524,808) (3,088,069) Cash generated from operations 5,745,157 4,239,156 The above consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements. ANNUAL REPORT

43 CONSOLIDATED STATEMENT OF Cash flows for the financial year ended 30 June 2018 (Cont d) Note Cash generated from operations 5,745,157 4,239,156 Dividend paid (2,037,110) (3,055,665) Interest received 23,521 27,164 Interest paid (265,212) (83,637) Tax refunded , ,566 Tax paid 12 (1,504,748) (1,815,963) Net cash generated from/(used in) operating activities 2,153,605 (577,379) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from voluntary winding up of a subsidiary company 27-2,002,254 Additional placement for investment management funds (6,172,326) (6,160,000) Proceeds from distribution of investment management funds 541, ,536 Dividend received 89,465 82,773 Payment for investment properties (520,830) - Purchase of available-for-sale financial assets (102,982) - Purchase of property, plant and equipment (423,410) (410,714) Proceeds from disposal of available-for-sale financial assets 102,581 - Proceeds from disposal of property, plant and equipment 5,000 - Redemption of investment management funds 360,000 - Net cash used in investing activities (6,121,030) (3,916,151) CASH FLOWS FROM FINANCING ACTIVITY Movement in short term borrowings 4,167,361 3,626,309 Net cash generated from financing activity 4,167,361 3,626,309 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 199,936 (867,221) CASH AND CASH EQUIVALENTS BROUGHT FORWARD 1,036,092 1,903,313 CASH AND CASH EQUIVALENTS CARRIED FORWARD 28 1,236,028 1,036,092 The above consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements. 42 TEO GUAN LEE CORPORATION BERHAD ( A)

44 Statement of financial position as at 30 June Note ASSETS Non-current asset Investment in subsidiary companies 7 27,788,134 27,788,134 Current assets Receivables 11 13,394,318 18,471,148 Tax asset Financial assets at fair value through profit or loss - Investment management funds 13 5,298,726 - Deposit, cash and bank balances 14 2, Total current assets 18,696,888 18,472,279 TOTAL ASSETS 46,485,022 46,260,413 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 15 40,742,200 40,742,200 Reserves 16 2,454,317 2,190,415 TOTAL EQUITY 43,196,517 42,932,615 Current liability Payables 18 3,288,505 3,327,798 TOTAL LIABILITY 3,288,505 3,327,798 TOTAL EQUITY AND LIABILITIES 46,485,022 46,260,413 The attached notes form an integral part of these financial statements. ANNUAL REPORT

45 statement of profit or loss and other comprehensive income for the financial year ended 30 June Note REVENUE 20 2,400,000 2,100,000 OTHER OPERATING INCOME 55,971 - ADMINISTRATIVE EXPENSES (154,259) (158,277) OPERATING PROFIT 21 2,301,712 1,941,723 FINANCE COSTS 23 (700) (675) PROFIT BEFORE TAXATION 2,301,012 1,941,048 TAXATION PROFIT FOR THE FINANCIAL YEAR 2,301,012 1,941,048 OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR - - TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO OWNERS OF THE COMPANY 2,301,012 1,941,048 The attached notes form an integral part of these financial statements. 44 TEO GUAN LEE CORPORATION BERHAD ( A)

46 statement of changes in equity for the financial year ended in 30 June 2018 Attributable to owners of the Company Share capital Retained profits Total Note As at 1 July ,742,200 3,305,032 44,047,232 Total comprehensive income: Profit for the financial year - 1,941,048 1,941,048 Transaction with owners of the Company: - Dividends 25 - (3,055,665) (3,055,665) As at 30 June/1 July ,742,200 2,190,415 42,932,615 Total comprehensive income: Profit for the financial year - 2,301,012 2,301,012 Transaction with owners of the Company: - Dividends 25 - (2,037,110) (2,037,110) As at 30 June ,742,200 2,454,317 43,196,517 The attached notes form an integral part of these financial statements. ANNUAL REPORT

47 statement of cash FLOWS for the financial year ended in 30 June Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 2,301,012 1,941,048 Adjustments for: Dividend income (2,400,000) (2,100,000) Distribution from investment management funds (55,971) - Operating loss before working capital changes (154,959) (158,952) Payables (39,293) (13,078) Cash used in operations (194,252) (172,030) Dividend paid (2,037,110) (3,055,665) Net cash used in operating activities (2,231,362) (3,227,695) CASH FLOWS FROM INVESTING ACTIVITIES Dividend received 2,100,000 3,300,000 Net repayment from/(advances to) subsidiary companies 5,376,830 (73,021) Proceeds from distribution of investment management funds 55,971 - Purchase of investment management funds (5,298,726) - Net cash generated from investing activities 2,234,075 3,226,979 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,713 (716) CASH AND CASH EQUIVALENTS BROUGHT FORWARD CASH AND CASH EQUIVALENTS CARRIED FORWARD 28 2, The attached notes form an integral part of these financial statements. 46 TEO GUAN LEE CORPORATION BERHAD ( A)

48 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June GENERAL INFOATION The principal activities of the Company are investment holding and provision of management services. The principal activities of its subsidiary companies are as disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. The Company is a public limited liability company, incorporated and domiciled in Malaysia, listed on Main Market, Bursa Malaysia Securities Berhad. The address of the registered office and the principal place of business of the Company is at Plot 28, Lorong Perusahaan Maju 4, Prai Industrial Estate, Prai, Pulau Pinang. The Board has authorised the issuance of the financial statements on 3 October SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The financial statements of the Group and the Company have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards ( IFRSs ) and the requirements of the Companies Act 2016 in Malaysia. The financial statements have been prepared under historical cost basis except as disclosed in the accounting policies. The financial statements are presented in Ringgit Malaysia ( ), which is the Company s functional currency, unless otherwise indicated. (b) Basis of consolidation Subsidiary companies are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity. The consolidated financial statements comprise the financial statements of the Company and its subsidiary companies as at the reporting date. The financial statements of the subsidiary companies are prepared for at the same reporting date as the Company. Financial statements of subsidiary companies are consolidated using the following method of accounting: (i) Predecessor method of accounting Financial statements of certain subsidiary companies are consolidated using the predecessor method of accounting in accordance with Malaysian Accounting Standard No. 2 Accounting for Acquisitions and Mergers prevailing at that time, except for certain subsidiary companies as disclosed in Note 7 which is consolidated using the purchase method of accounting. Under the predecessor method of accounting, the results of subsidiary companies are presented as if the merger had been effected throughout the current and previous years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit difference is classified as equity and regarded as a reserve. ANNUAL REPORT

49 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (b) Basis of consolidation (Cont d) (i) Predecessor method of accounting (Cont d) Any resulting debit difference is adjusted against reserve. Any share premium, capital redemption reserve and any other reserves which are attributable to the share capital of the merged enterprises, to the extent that they have not been capitalised by a debit difference, are reclassified and presented as movement in other reserves. The Group has taken advantage of the exemption provided by MFRS 1 to not restate business combinations that occurred before the date of transition to MFRS i.e. 1 July Accordingly, business combinations entered into prior to the transition date have not been restated. (ii) Purchase method of accounting Under the purchase method of accounting, a subsidiary company is fully consolidated from the date on which control is transferred to the Group and de-consolidated from the date that control ceases. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the date of acquisition, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit or loss. In preparing consolidated financial statements, intra-group balances and transactions and the resulting unrealised profits are eliminated on consolidation. Unrealised losses are eliminated on consolidation and the relevant assets are assessed for impairment. Uniform accounting policies are adopted in the consolidated financial statements for transactions and events in similar circumstances. The gain or loss on disposal of a subsidiary is the difference between the net disposal proceeds and the Group s share of its net assets as at the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary. This amount is recognised in the consolidated profit or loss in the year of disposal. (iii) Non-controlling interests Non-controlling interests are presented within equity in the consolidated statement of financial position, separately from the equity attributable to owners of the Company. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. At the end of each reporting period, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests share of subsequent changes in equity. Transactions with non-controlling interests that do not result in loss in control are accounted as equity transactions that is, as transactions with the owners in their capacity as owners. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired is deducted from equity. For disposals to non-controlling interests, differences between any proceeds received and the relevant share of non-controlling interest are also recognised in equity. 48 TEO GUAN LEE CORPORATION BERHAD ( A)

50 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (c) Property, plant and equipment and depreciation All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred. Subsequent to recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and any accumulated impairment losses. Freehold land has an unlimited useful life and therefore is not depreciated. Other property, plant and equipment are depreciated on a straight line basis to write off the cost of assets to their residual values over the following estimated useful lives: Number of years Leasehold land 60 Buildings 50 Factory buildings 50 Plant and machinery 10 Motor vehicles 5 Furniture and fittings 3-10 Office equipment 3-10 Land held on long lease is held on a lease with an unexpired period of 50 years or more. A lease of less than 50 years is described as a short lease. The residual value and useful life of an asset is reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and future periods are adjusted. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognised in the profit or loss. Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. (d) Investment properties Investment property is a property which is held either to earn rental income or for capital appreciation or both. Investment properties are stated at cost/ deemed cost less accumulated depreciation and any accumulated impairment losses. The land and buildings of the Group were valued based on a valuation performed by a chartered valuation surveyor, registered valuer, estate agent and property consultant, P. Rajaselvam, on 20 August The Directors have not adopted a policy of regular revaluations of such assets and no later valuation has been recorded. Upon the adoption of MFRS 1: First-Time Adoption of Malaysian Financial Reporting Standards, the Group elected to measure these assets at the date of transition to MFRSs at its fair value and use that fair value as its deemed cost at the date. ANNUAL REPORT

51 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (d) Investment properties (Cont d) Investment properties are depreciated on the straight-line basis over its estimated useful lives: Number of years Freehold buildings Leasehold apartments 50 Leasehold land 99 Leasehold buildings 50 Freehold land has an unlimited useful life therefore is not depreciated. Work-in-progress is not depreciated until the assets are ready for their intended use. Land held on long lease is held on a lease with an unexpired period of 50 years or more. A lease of less than 50 years is described as a short lease. The residual values, useful lives and depreciation methods are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits of investment properties. Investment properties are derecognised when it is permanently withdrawn from use and no further economic benefit is expected from its disposal or when they have been disposed. Any gains or losses on the retirement or disposal of an investment property are recognised in the profit or loss in the financial year in which they arise. Transfers are made to or from investment properties only when there is a change in use. All transfers do not change the carrying amount of the property reclassified. (e) Investments In the Company s separate financial statements, investments in subsidiary companies and other non-current investments are shown at cost/ deemed cost less accumulated impairment, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. Refer Note 2(h)(ii) on impairment of non-financial assets. On disposal of such investment, the difference between the net disposal proceeds and its carrying amount is included in the profit or loss. (f) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of raw material comprises the original cost of purchase plus the cost of bringing the inventories to their intended location and condition. The cost of finished goods and workin-progress comprises raw materials, direct labour, other direct costs and an appropriate proportion of production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less cost of completion and selling expenses. 50 TEO GUAN LEE CORPORATION BERHAD ( A)

52 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (g) Financial instruments (i) Financial assets Financial assets are recognised in the statements of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. A financial asset is derecognised where the contractual right to receive cash flows from the asset 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 the other comprehensive income is recognised in the profit or loss. The Group classifies its financial assets in the following categories: fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition. (a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss comprise financial assets that are held for trading (i.e. financial assets acquired principally for the purpose of resale in the near term), derivatives (both freestanding and embedded) and financial assets that were specifically designated into this classification upon initial recognition. Subsequent to initial recognition, financial assets classified as at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in the fair value of financial assets classified as at fair value through profit or loss are recognised in profit or loss. Net gains or losses on financial assets classified as at fair value through profit or loss exclude foreign exchange gains and losses, interest and dividend income. Such income is recognised separately in profit or loss as components of other income or other operating losses. However derivatives that are linked to and must be settled by delivery of unquoted equity instruments that do not have a quoted market price in an active market are recognised at cost. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. 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. Loans and receivables are classified as current assets, except for those having a maturity date later than 12 months after the reporting date which are classified as non-current. (c) Available-for-sale financial assets Financial assets classified as available-for-sale comprise non-derivative financial assets that are designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Subsequent to initial recognition, financial assets classified as available-for-sale are measured at fair value. Any gains or losses arising from changes in the fair value of financial assets classified as availablefor-sale are recognised directly in other comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognised, at which time the cumulative gains or losses previously recognised in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group s right to receive payment is established. ANNUAL REPORT

53 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (g) Financial instruments (Cont d) (ii) Financial liabilities Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest related charges are recognised as an expense in finance costs in the profit or loss. Financial liabilities are derecognised if the Group s obligations specified in the contract expire or are discharged or cancelled. Borrowings are recognised initially at fair value of proceeds received less attributable transaction costs, if any. Borrowings are subsequently stated at amortised cost which is the initial fair value less any principal repayments. Any difference between the proceeds (net of transaction costs) and the redemption value is taken to the profit or loss over the period of the borrowings using the effective interest method. The interest expense is chargeable on the amortised cost over the period of the borrowings using the effective interest method. Gains and losses are recognised in the profit or loss when the liabilities are derecognised as well as through the amortisation process. Borrowings which are due to be settled within 12 months after the reporting date are included in current liabilities in the statement of financial position even though the original terms were for a period longer than 12 months and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting date. Borrowings to be settled within the Group s normal operating cycle are considered as current. Other borrowings due to be settled more than 12 months after the reporting date are included in non-current liabilities in the statement of financial position. Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost, using the effective interest method. (iii) Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Changes in fair value of financial instruments are recognised in the profit or loss. (iv) Financial guarantee contracts Financial guarantee contracts are contracts that require the Group or Company to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with MFRS 137 Provisions, contingent liabilities and contingent assets and the amount initially recognised less cumulative amortisation, where appropriate. The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. (v) Equity instruments Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided. 52 TEO GUAN LEE CORPORATION BERHAD ( A)

54 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (h) Impairment of assets The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired and recognised the impairment loss when such evidence exists. (i) Financial assets Financial assets carried at amortised cost An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account. Impairment losses are reversed in subsequent periods when an increase in the asset s recoverable amount can be related objectively to an event occurring after the impairment was recognised to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the profit or loss. Available-for-sale financial assets The Group collectively considers factors such as significant or prolonged declines in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market as objective evidence that available-for-sale financial assets are impaired. If any such objective evidence exists, an amount comprising the difference between the financial asset s cost (net of any principal payment and amortisation) and current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Instead, any increase in the fair value subsequent to the impairment loss is recognised in other comprehensive income. Assets carried at cost If there is objective evidence that an impairment loss on a financial asset carried at cost has been incurred, the amount of the loss 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. Such impairment losses are not reversed in subsequent periods. (ii) Non-financial assets The carrying amounts of the Group s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated to determine the amount of impairment loss. An asset s recoverable amount is the higher of an asset s or Cash-Generating Unit s ( CGU ) fair value less costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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 loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. ANNUAL REPORT

55 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (i) Taxation and deferred taxation Income tax on the results for the financial year comprises current and deferred tax. Current tax is the expected amount of income tax payable in respect of the taxable profits for the financial year and is measured using the tax rates at the reporting date. Deferred tax liabilities and assets are provided using the liability method in respect of all temporary differences between the carrying amount of an asset or liability in the statement of financial position and its tax base including unused tax losses and capital allowances. Deferred tax liabilities and assets are measured at the tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. The carrying amount of a deferred tax asset is reviewed at each reporting date. If it is no longer probable that sufficient future taxable profit will be available to allow the benefit of part or the entire deferred tax asset to be utilised, the carrying amount of the deferred tax asset will be reduced accordingly. When it becomes probable that sufficient future taxable profit will be available, such reductions will be reversed. (j) Foreign currency transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are translated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the profit or loss for the period except for the differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income. Exchange differences arising from such non-monetary items are also recognised directly in other comprehensive income. (k) Provisions A provision is recognised when the Group or the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. (l) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates, trade discounts and other similar allowances. Revenue from sale of goods is recognised when the following conditions are satisfied: (i) the Group has transferred to the customer the significant risks and rewards of ownership of the goods; (ii) the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (iii) the amount of revenue can be measured reliably; (iv) it is probable that the economic benefits associated with the transaction will flow to the Group; and (v) the costs incurred or to be incurred in respect of the transaction can be measured reliably. 54 TEO GUAN LEE CORPORATION BERHAD ( A)

56 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (l) Revenue recognition (Cont d) Other revenues earned are recognised on the following bases: (i) Interest income is recognised on an accrual basis (taking into account the effective yield on the assets) unless collectability is in doubt. (ii) Rental income is recognised on an accrual basis in accordance with the substance of the relevant agreement unless collectability is in doubt. (iii) Distribution of investment management fund is recognised when the right to receive payment has been established. (iv) Dividend income is recognised when the right to receive payment has been established. (v) Commission income is measured at the fair value of the consideration receivable and is recognised in the profit or loss when it is probable that the economic benefits associated with the transaction will flow to the Group. (m) Employee benefits Short term employee benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leaves 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 leaves are recognised when the absences occur. Defined contribution plans As required by law, companies in Malaysia make contributions for local employees to the state pension scheme, the Employees Provident Fund ( EPF ). Such contributions are recognised as an expense in the profit or loss as incurred. (n) Borrowing costs Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use. Borrowing costs incurred to finance property development activities and construction contracts are accounted for in a similar manner. All other borrowing costs are expensed. (o) Contingent liabilities and contingent assets The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstances where there is a liability that cannot be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts. A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain. (p) Segment reporting Operating segments are defined as components of the Group that: (i) (ii) Engage in business activities from which it could earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group); Whose operating results are regularly reviewed by the chief operating decision maker of the Group in making decisions about resources to be allocated to the segment and assessing its performance; and (iii) For which discrete financial information is available. ANNUAL REPORT

57 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (p) Segment reporting (Cont d) An operating segment may engage in business activities for which it has yet to earn revenues. The Group reports separately information about each operating segment that meets any of the following quantitative thresholds: (i) (ii) Its reported revenue, including both sales to external customers and intersegment sales or transfers, is ten percent (10%) or more of the combined revenue, internal and external, of all operating segments. The absolute amount of its reported profit or loss is ten percent (10%) or more of the greater, in absolute amount of: (a) The combined reported profit of all operating segments that did not report a loss; and (b) The combined reported loss of all operating segments that reported a loss. (iii) Its assets are ten percent (10%) or more of the combined assets of all operating segments. Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if the management believes that information about the segment would be useful to users of the financial statements. Total external revenue reported by operating segments shall constitute at least seventy-five percent (75%) of the revenue of the Group. Operating segments identified as reportable segments in the current financial year in accordance with the quantitative thresholds would result in a restatement of prior period segment data for comparative purposes. The Group evaluates performance on the basis of profit or loss from operations before tax not including non-recurring losses, such as goodwill impairment. Inter-segment revenue is priced along the same lines as sales to external customers and is eliminated in the consolidated financial statements. These policies have been applied consistently throughout the current and previous financial years. Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities and unallocated liabilities. Even though loans and borrowings arise from financing activities rather than operating activities, they are allocated to the segments based on relevant factors (e.g. funding requirements). (q) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank overdrafts and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 56 TEO GUAN LEE CORPORATION BERHAD ( A)

58 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 2. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (r) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using a valuation technique. The measurement assumes that the transaction takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market s participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. For financial reporting purposes, the fair value measurements are analysed into level 1 to level 3 as follows: Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date; Level 2: Inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3: Inputs are unobservable inputs for the asset or liability. The transfer of fair value between levels is determined as of the date of the event or change in circumstances that caused the transfer. 3. MALAYSIAN FINANCIAL REPORTING STANDARDS ( MFRSs ), AMENDMENTS TO MFRSs, ISSUES COMMITTEE INTERPRETATIONS ( IC INTERPRETATIONs ) AND AMENDMENTS TO IC INTERPRETATIONs New and revised MFRSs, Amendments to MFRSs, IC Interpretations and Amendments to IC Interpretations which have been issued but not yet effective and relevant to the Group and the Company: Effective dates MFRS 9 Financial Instruments 1 January 2018 MFRS 15 Revenue from Contracts with Customers 1 January 2018 MFRS 16 Leases 1 January 2019 Amendments to MFRS 3 Business Combinations (Annual Improvements to MFRS 1 January 2019 Standards Cycle) Amendments to MFRS 3 Business Combinations 1 January 2020 Amendments to MFRS 9 Prepayment Features with Negative Compensation 1 January 2019 Amendments to MFRS 101 Presentation of Financial Statements 1 January 2020 Amendments to MFRS 108 Accounting Policies, Changes in Accounting Estimates and 1 January 2020 Errors Amendments to MFRS 112 Income Taxes (Annual Improvements to MFRS Standards 1 January Cycle) Amendments to MFRS 119 Employee Benefits (Plan Amendment, Curtailment or 1 January 2019 Settlement) Amendments to MFRS 123 Borrowing Costs (Annual Improvements to MFRS Standards 1 January Cycle) Amendments to MFRS 137 Provisions, Contingent Liabilities and Contingent Assets 1 January 2020 Amendments to MFRS 140 Transfers of Investment Property 1 January 2018 IC Interpretation 22 Foreign Currency Transactions and Advance Consideration 1 January 2018 IC Interpretation 23 Uncertainty over Income Tax Treatments 1 January 2019 Amendment to IC Interpretation 19 Extinguishing Financial Liabilities with Equity 1 January 2020 Amendment to IC Interpretation 22 Foreign Currency Transactions and Advance Consideration 1 January 2020 It is anticipated that the adoption of the abovementioned Standards and Interpretations will not have significant impact on the financial statements of the Group and the Company. ANNUAL REPORT

59 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 4. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the financial statements involved making certain estimates, judgements and assumptions concerning the future. They affect the accounting policies applied, amount of assets, liabilities, income and expenses reported and disclosures made. They are assessed on an on-going basis and are based on experience and other relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Changes in these estimates and assumptions by the management may have an effect on the balances as reported in the financial statements. Significant accounting estimates and judgements, where used, have been disclosed in the relevant notes to the financial statements. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Classification between investment properties and property, plant and equipment The Group determines whether a property qualifies as an investment property based on criteria developed by the Group. An investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group will consider whether a property generates cash flows largely independent of the other assets held by the Group in making its assessment. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. When the portions cannot be sold separately, the property will be recognised as an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Properties that are occupied by the companies in the Group are accounted for as owner-occupied rather than as investment property at the Group level. (ii) Depreciation of investment properties The deemed cost of investment properties is depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these investment properties to be 35 years to 99 years. The carrying amount of the Group s investment properties at 30 June 2018 is disclosed in Note 6. The estimated useful lives of investment properties are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear and legal or other limits on the use of the relevant assets. The amounts 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 investment properties would increase the recorded expenses and decrease the non-current assets. (iii) Depreciation of property, plant and equipment The cost of property, plant and equipment is depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these property, plant and equipment to be within 3 to 60 years. The carrying amount of the Group s property, plant and equipment at 30 June 2018 is disclosed in Note 5. Changes in the expected level of usage could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (iv) Inventories written down to net realisable value The Group writes down its slow moving inventories based on assessment of their estimated net selling price. Inventories are written down when events or changes in circumstances indicates that the carrying amount could not be recovered. Management specifically analyses sales trend and current economic trends when making this judgement to evaluate the adequacy of the write down for slow moving inventories. Where expectations differ from the original estimates, the differences would impact the carrying amount of inventories. The carrying amount of the Group s inventories is disclosed in Note 10. (v) 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. The Group recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. 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 tax provisions in the period in which such determination is made. Details of income taxes are disclosed in Note TEO GUAN LEE CORPORATION BERHAD ( A)

60 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 5. PROPERTY, PLANT AND EQUIPMENT Freehold land Short term leasehold land Buildings Factory buildings Plant and machinery Motor vehicles Furniture and fittings Office equipment Total Group Cost As at 1 July , , , , ,736 2,797,786 8,655,480 2,459,298 15,790,541 Additions , ,162 6, ,714 Written off (625,138) (49,298) (674,436) As at 30 June/1 July , , , , ,543 2,797,786 8,416,504 2,416,745 15,526,819 Additions ,273 86, ,992 10, ,410 Disposals (35,000) - - (35,000) Written off (2,250) (2,250) As at 30 June , , , , ,566 2,848,846 8,734,496 2,426,830 15,912,979 ANNUAL REPORT

61 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 5. PROPERTY, PLANT AND EQUIPMENT (Cont d) Freehold land Short term leasehold land Buildings Factory buildings Plant and machinery Motor vehicles Furniture and fittings Office equipment Total Group Accumulated depreciation As at 1 July , , , ,643 2,093,501 7,400,233 2,271,014 12,530,755 Depreciation charged - 7,479 10,385 7,806 22, , ,692 51,946 1,317,903 Written off (625,138) (49,298) (674,436) As at 30 June/1 July , , , ,531 2,464,208 7,621,787 2,273,662 13,174,222 Depreciation charged - 7,479 10,385 7,806 21, , ,977 34, ,571 Disposals (35,000) - - (35,000) Written off (1,687) (1,687) As at 30 June , , , ,368 2,670,159 8,260,764 2,308,111 14,099,106 Group Net carrying amounts As at 30 June , , , ,108 11, , , ,719 1,813,873 As at 30 June , , , ,914 24, , , ,083 2,352, TEO GUAN LEE CORPORATION BERHAD ( A)

62 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 6. INVESTMENT PROPERTIES Freehold land and buildings Leasehold apartments Leasehold land and buildings Work-inprogress Total Group At deemed cost/cost As at 1 July 2016/1 July ,099, ,645 14,369,300-24,871,207 Additions , ,830 As at 30 June ,099, ,645 14,369, ,830 25,392,037 Accumulated depreciation As at 1 July ,225,368 50,058 1,631,742-2,907,168 Depreciation charged 260,427 13, , ,401 As at 30 June/1 July ,485,795 63,834 1,986,940-3,536,569 Depreciation charged 260,427 13, , ,401 As at 30 June ,746,222 77,610 2,342,138-4,165,970 Net carrying amounts As at 30 June at deemed cost 7,673, ,474 12,027,162-19,943,874 - at cost 679,802 81, ,830 1,282,193 8,353, ,035 12,027, ,830 21,226,067 As at 30 June at deemed cost 7,908, ,704 12,382,360-20,544,139 - at cost 705,392 85, ,499 8,613, ,811 12,382,360-21,334,638 ANNUAL REPORT

63 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 6. INVESTMENT PROPERTIES (Cont d) (i) Investment properties consist of the following: Freehold land and buildings Leasehold apartments Leasehold land and buildings Work-inprogress Total Group At fair value As at 30 June ,037,220 1,023,000 18,621,750-31,681,970 As at 30 June ,037,220 1,023,000 18,621,750-31,681,970 Investment properties represent: (a) Six (6) units of freehold shop lots located in Kompleks Bukit Jambul, Penang; (b) One (1) unit of freehold shop lot located at Bandar Penas, Penang; (c) Two (2) units of freehold shop lots located at Bandar Sungai Long, Selangor; (d) One (1) unit of freehold shophouse located at Taman Jelita, Selangor; (e) Four (4) units of leasehold apartments located at Taman Shamelin Perkasa, Kuala Lumpur; (f) Two (2) plots of leasehold industrial land with office building located at Taman Shamelin Perkasa, Kuala Lumpur; (g) Eight (8) units of leasehold shop lots located in Prangin Mall, Penang; and (h) Nine (9) units of leasehold condominium, located in Cheras, Federal Territory of Kuala Lumpur which are under construction. The fair value measurement of investment properties are disclosed in Note 31(d). The fair value of the work-inprogress cannot be measured reliably due to properties still under construction. (ii) Net carrying amount of investment properties for which title deeds have yet to be issued by the relevant authorities: Group Freehold land and buildings 5,668,880 5,871,340 Leasehold land and buildings 5,855,836 6,038,831 11,524,716 11,910,171 (iii) The rental income and operating expenses related to the investment properties are as follows: Group Rental income 1,941,401 1,930,375 Direct operating expenses of revenue-generating investment properties (291,701) (278,954) 62 TEO GUAN LEE CORPORATION BERHAD ( A)

64 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 7. INVESTMENT IN SUBSIDIARY COMPANIES Company Unquoted shares, at deemed cost 27,788,134 27,788,134 All the subsidiary companies were incorporated in Malaysia. The subsidiary companies are as follows: Gross equity interest Subsidiary companies of the Company % % Principal activities Teo Guan Lee (K.L.) Sdn. Bhd Investment holding, wholesaler and retailer of garments and related accessories Teo Guan Lee (Penang) Sdn. Bhd Wholesaler and retailer of garments and related accessories, and investment holding P.P.A.C. (M) Sdn. Bhd Wholesaler of garments and investment holding Galeri Megah Sdn Property investment Affluent Lifestyle Sdn Distributor of baby and children apparels Digitaland (M) Sdn Investment holding Syarikat Perniagaan Bingel (M) Sdn Manufacturer of all kinds of clothes and garments Contemporary Symphony Sdn Distributor and retailer of apparels Teo Guan Lee Properties (K.L.) Sdn. Bhd Property investment Character Network Sdn. Bhd Distributor of baby and children apparels Puppy Winks Marketing Sdn Distributor of baby wear, accessories and The financial statements of these subsidiary companies were consolidated using the purchase method of accounting. ANNUAL REPORT

65 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 8. INVESTMENTS Group Available-for-sale financial assets At fair value Investment in quoted shares - in Malaysia 164, ,142 - outside Malaysia 2,264,148 2,366,647 Total 2,428,716 2,599,789 Market value Investment in quoted shares - in Malaysia 164, ,142 - outside Malaysia 2,264,148 2,366,647 Total 2,428,716 2,599,789 The currency exposure profile of the investments is as follows: Group Ringgit Malaysia 164, ,142 Hong Kong Dollar 2,179,592 2,266,970 US Dollar 84,556 99,677 2,428,716 2,599, TEO GUAN LEE CORPORATION BERHAD ( A)

66 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 9. DEFERRED TAXATION Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated statement of financial position: Group Net deferred tax liabilities as at 1 July (1,687,356) (1,758,503) Recognised in profit or loss (Note 12) - Current 128,120 60,147 - Non-current 44,658 11, ,778 71,147 Net deferred tax liabilities as at 30 June (1,514,578) (1,687,356) Group Presented after appropriate offsetting as follows: Deferred tax assets 253, ,000 Deferred tax liabilities (1,767,578) (1,859,356) (1,514,578) (1,687,356) Deferred tax assets Temporary differences on property, plantand equipment Deferred tax liabilites Temporary differences on Property, plant and equipment Revaluation of property prior to adopting deemed cost accounting Grand Total total Group As at 1 July ,000 (22,000) (1,869,503) (1,891,503) (1,758,503) Recognised in profit or loss 39,000 (11,000) 43,147 32,147 71,147 As at 30 June/1 July ,000 (33,000) (1,826,356) (1,859,356) (1,687,356) Recognised in profit or loss 81,000 33,000 58,778 91, ,778 As at 30 June ,000 - (1,767,578) (1,767,578) (1,514,578) ANNUAL REPORT

67 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 9. DEFERRED TAXATION (Cont d) The potential deferred tax assets that have not been recognised are as follows: Group Temporary differences arising from - property, plant and equipment (64,000) (65,000) - unused capital allowances - 40,000 - unused tax losses 669, ,000 - unconsumed leaves 4,000 3, , ,000 Potential deferred tax assets not recognised calculated at 24% 146, ,000 Deferred tax assets of the companies in the Group are only recognised to the extent where it is probable that future taxable profit will be available against which deductible temporary differences can be utilised. The balance of the deferred tax assets have not been recognised as it is not probable that sufficient future taxable profits will be available to offset against the unrecognised deferred tax assets. 10. INVENTORIES Group At cost - Raw materials 690,052 1,129,801 - Work-in-progress 166, ,962 - Finished goods 22,808,259 26,701,004 23,664,577 28,034,767 At fair value less cost to sell - Finished goods 1,866,864 2,181,068 25,531,441 30,215,835 Group Recognised in profit or loss and included in cost of sales: - Inventories recognised as expenses 44,888,274 46,273,301 - Inventories written down to net realisable value 2,261,636 2,325, TEO GUAN LEE CORPORATION BERHAD ( A)

68 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 11. RECEIVABLES Group Company Trade receivables 39,218,969 38,304, Less: Impairment on debts As at 1 July (16,555) (16,555) - - Reversal 3, Written off 11, As at 30 June (820) (16,555) ,218,149 38,288, Other receivables 796, , Due from subsidiary companies - non-trade ,994,318 16,371,148 Deposits and prepayments 754,775 1,069, Dividend receivables - - 2,400,000 2,100,000 40,769,572 39,975,640 13,394,318 18,471,148 (i) Included in receivables of the Group are balances with the following related parties: Group Rental deposits TGL Packaging Sdn. Bhd. 200, ,000 TGL Industries Sdn. Bhd. 150, ,000 Bidang Cendana Sdn. Bhd. 2,000 27,795 The related party relationships and transactions with the above parties are as disclosed in Note 26. (ii) As at the reporting date, the Group is exposed to a significant concentration of credit risk whereby a substantial balance of the total trade receivables is due from three (3) (2017: three (3)) major customers, representing approximately 63% (2017: 62%) of the total trade receivables of the Group. (iii) The Group s normal trade receivables credit periods range from 30 to 90 days (2017: 30 to 90 days). Other credit terms are assessed and approved on a case-by-case basis. (iv) The amount due from subsidiary companies are unsecured, interest-free and repayable upon demand. The related party transactions are disclosed in Note 26. ANNUAL REPORT

69 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 11. RECEIVABLES (Cont d) (v) The ageing analysis of the Group s trade receivables is as follows: Neither past due nor impaired 35,931,452 36,161,649 Past due but not impaired - 1 to 30 days 2,312, , to 60 days 335, , to 90 days 324, , days and above but less than 1 year 312, ,588 - more than 1 year 824 8,950 3,286,697 2,126,374 Impaired ,555 (vi) The Group does not hold any collateral or other credit enhancement over the balances. 39,218,969 38,304,578 None of the Group s trade receivables that are neither past due nor impaired have been renegotiated during the financial year. Receivables that are past due but not impaired Included in trade receivables that are past due but not impaired is unsecured in nature. The Group considers the outstanding amounts are still recoverable and there has not been a significant change in credit quality. The Group does not hold any collateral or other credit enhancement over their balances. Management periodically monitors the balances and is in the opinion that current allowance is adequate. Receivables that are impaired Trade receivables that are individually determined to be impaired at the reporting date relate to those receivables who have defaulted on payments and the management is of the opinion that the recoverability is in doubt. These receivables are not secured by any collateral or credit enhancements. 68 TEO GUAN LEE CORPORATION BERHAD ( A)

70 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 12. TAXATION Group Company Net tax (liabilities)/assets as at 1 July (48,272) (183,599) Taxation charge for the financial year: Malaysian taxation - Based on results for the financial year (1,670,077) (1,613,899) Adjustment in respect of prior year (13,144) 44, Payment made during the financial year 1,504,748 1,815, Tax refunded (191,997) (111,566) - - Net tax (liabilities)/assets as at 30 June (418,742) (48,272) Disclosed as: Tax assets 36, , Tax liabilities (455,115) (255,287) - - (418,742) (48,272) Taxation expenses comprise: Current - Malaysian taxation 1,670,077 1,613, Deferred taxation (Note 9) (128,120) (60,147) - - Non-current - Malaysian taxation 13,144 (44,829) Deferred taxation (Note 9) (44,658) (11,000) - - 1,510,443 1,497, ANNUAL REPORT

71 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 12. TAXATION (Cont d) Reconciliation of tax expenses with accounting profit: Group Company Profit before taxation 6,292 6,049 2,301 1,941 Tax at the current income tax rate at 24% 1,510 1, Tax effects in respect of: - Depreciation of non-qualifying property, plant and equipment and investment properties Non-allowable expenses Non-taxable income (229) (191) (589) (504) - Crystallisation of deferred tax liabilities on revaluation surplus (51) (43) Double deduction of certain expenses (2) (2) - - Tax saving arising from lower tax rate under Budget (9) - - Deferred tax assets not recognised Utilisation of deferred tax assets not recognised in prior year (14) (12) - - Under/(over) provision in prior years - Malaysian taxation 13 (45) Deferred taxation (45) (11) - - 1,510 1, (i) Included in the utilisation of deferred tax assets not recognised in prior year is tax savings arising from the utilisation of unused business losses brought forward during the financial year amounted to approximately 14,000 (2017: 12,000). (ii) The Budget 2017 announced on 21 October 2016, proposed that the incremental portion of chargeable income compared to the immediate preceding year of assessment enjoys a reduced income tax rate as follows with effect from years of assessment 2017 and Following these changes, the applicable tax rates to be used for the measurement of any applicable deferred tax will be at the below expected rates: Percentage of increase in chargeable income as compared to the immediate preceding year of assessment Percentage point of reduction in tax rate Tax rate after reduction % Less than 5% Nil 24 5% % % % % % % and above TEO GUAN LEE CORPORATION BERHAD ( A)

72 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 13. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Group Company Current Investment management funds 20,839,082 14,782,979 5,298,726 - Investment management funds represent funds placed with licensed fund managers. The portfolio of securities managed by the fund managers comprise of money market funds and corporate bonds which are not subject to significant changes in value. Interests of investment management funds range from 3.58% to 3.65% (2017: 2.52% to 3.58%) per annum. The Group is exposed to a significant concentration risk arising from the investment management funds whereby 100% (2017: 100%) of the total investment management funds of the Group is placed in two (2) (2017: two (2)) financial institutions. 14. DEPOSIT, CASH AND BANK BALANCES Group Company Repurchase agreement ( REPO ) 210, , Cash and bank balances 1,144,192 1,147,367 2, ,354,192 1,487,367 2, The interest rate of repurchase agreement of the Group range from 2.50% to 2.55% (2017: 2.35%) per annum and has a maturity period of one day (2017: one day). 15. SHARE CAPITAL Number Number of shares of shares Group/Company Issued and fully paid Ordinary shares with no par value At 30 June 40,742,200 40,742,200 40,742,200 40,742,200 ANNUAL REPORT

73 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 15. SHARE CAPITAL (Cont d) Capital management The primary objective of the Group s capital management is to ensure that entities of the Group are able to continue as going concerns while maximising the return to shareholders. The Group reviews the capital structure on an annual basis and the Directors consider the cost of capital and the risk associated with the capital. The Group manages its capital structure and makes adjustments to address changes in the economic environment, regulatory requirements and risk characteristics in the business operations of the Group. These initiatives include dividend payments and other adjustments in light of economic conditions. The Group monitors capital using a liabilities-to-equity ratio, which is total liabilities divided by total equity. The liabilitiesto-equity ratio as at 30 June 2018 and 30 June 2017 were as follows: Group Total liabilities 27,667,128 29,134,504 Equity attributable to the owners of the Company 85,577,644 83,003,232 Total liabilities-to-equity ratio 32% 35% There are no changes made on the capital management, policies and procedures of the Group and the Company during the financial year. 16. RESERVES Group Company Non-distributable Fair value reserve 789, , Retained profits 5,099,763 5,018, Distributable Retained profits 38,946,308 36,300,573 2,454,317 2,190,415 44,835,444 42,261,032 2,454,317 2,190,415 Fair value reserve Fair value reserve arises from the change in value of available-for-sale financial assets market prices at the reporting date against the date of the opening period. Retained profits Distributable The Company will be able to distribute dividends out of its entire retained profits as at 30 June 2018 under the single tier tax system. Non-distributable The non-distributable retained profits mainly arise from the surplus on the fair valuation over cost arising on the Group s investment properties. 72 TEO GUAN LEE CORPORATION BERHAD ( A)

74 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 17. NON-CONTROLLING INTERESTS The Group s subsidiary company, Syarikat Perniagaan Bingel (M) Sdn. Berhad s non-controlling interests ( NCI ) is as follows: NCI percentage of ownership interest and voting interest 47% 47% Carrying amount of NCI 1,007, ,124 Profit allocated to NCI 17,420 11,320 The summarised financial statements before intra-group elimination of the Group s subsidiary company that have material NCI is as follows: As at 30 June Non-current assets 769, ,648 Current assets 3,619,428 4,396,342 Current liabilities (2,245,129) (3,105,347) 2,143,706 2,106,643 Year ended 30 June Revenue 6,487,384 6,908,183 Profit for the year 37,063 24,086 Cash flow from operating activities 403,972 (591,681) Cash flow from investing activities (12,333) (21,963) Cash flow from financing activities (42,000) 135,000 Net increase/(decrease) in cash and cash equivalents 349,639 (478,644) ANNUAL REPORT

75 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 18. PAYABLES Group Company Trade payables 13,137,115 18,225, Other payables 788,381 1,524,170 13,750 14,443 Accruals 2,807,105 2,392,309 15,400 54,000 Due to a subsidiary company - non-trade - - 3,259,355 3,259,355 16,732,601 22,142,277 3,288,505 3,327,798 (i) The currency exposure profile of the trade payables is as follows: Group Ringgit Malaysia 7,825,433 10,020,929 US Dollars 5,311,682 8,204,869 13,137,115 18,225,798 (ii) Included in payables of the Group are balances with the following related party: Group Trade payables - Perniagaan Sulam Kim Bin (M) Sdn. Bhd. 13,749 13,155 The related party relationships and transactions with the above party are as disclosed in Note 26. (iii) The normal trade credit periods granted to the Group range from 30 to 90 days (2017: 30 to 90 days) or such other periods as negotiated with the suppliers. (iv) The amount due to a subsidiary company is unsecured, interest-free and repayable upon demand. The related party transactions are disclosed in Note TEO GUAN LEE CORPORATION BERHAD ( A)

76 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 19. BORROWINGS Group Unsecured, current Bank overdrafts (Note 28) 118, ,275 Bankers acceptance 8,593,670 4,426,309 8,711,834 4,877,584 (i) Interests charged are as follows: - bank overdrafts 8.65% (2017: 8.60%) per annum. - bankers acceptance 3.76% to 5.68% (2017: 3.76% to 5.57%) per annum. 20. REVENUE AND COST OF SALES Group Company Revenue Sale of goods 86,865,854 90,586, Rental income 1,941,401 1,930, Dividend income 89,409 82,740 2,400,000 2,100,000 88,896,664 92,599,266 2,400,000 2,100,000 Cost of sales Purchases of inventories 42,465,516 45,384, Incidental cost to purchases 5,131,111 6,475, Changes to inventories 4,684,394 3,214, ,281,021 55,073, ANNUAL REPORT

77 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 21. OPERATING PROFIT The following items have been charged/(credited) in arriving at operating profit: Group Company Auditors remuneration - Current year 106, ,800 15,000 13,000 - Under provision in prior year 5,700 6,200 2, Other services 15,700 16,100 5,000 5,000 Bad debts written off 2,943 5, Commission income (19,369) (21,716) - - Depreciation of property, plant and equipment 961,571 1,317, Depreciation of investment properties 629, , Distribution from investment management funds (761,642) (591,633) (55,971) - Dividend income (23,259) (33) - - Directors remuneration (Note 22) 1,590,090 1,563,250 45,000 61,000 Fair value gain on investment management funds (23,607) Gain on disposal of available-for-sale financial assets (40,533) Gain on disposal of property, plant and equipment (5,000) (Gain)/loss on foreign exchange - Realised (4,062) (90,831) Unrealised 115,132 (203,530) - - Impairment loss on available-for-sale financial assets 82, Interest income (23,521) (27,164) - - Inventories written down to net realisable value 2,261,636 2,325, Loss on winding up of a subsidiary company (Note 27) - 4, Property, plant and equipment written off Rental income (82,800) (78,071) - - Reversal of impairment on debts (3,931) Staff costs - Salaries, wages and allowance 19,265,424 20,184, Employees Provident Fund 2,033,911 2,020, Other employee benefits 578, , TEO GUAN LEE CORPORATION BERHAD ( A)

78 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 22. DIRECTORS REMUNERATION Group Company Directors of the Company - Fees 45,000 61,000 45,000 61,000 - Salary, bonus and allowance 994, , Employees Provident Fund 188, , ,227,860 1,208,160 45,000 61,000 Other Directors of subsidiary companies - Salary, bonus and allowance 305, , Employees Provident Fund 51,230 50, Commission 6,000 6, , , Total 1,590,090 1,563,250 45,000 61,000 Executive Non- Executive Executive Non- Executive Group Directors of the Company Directors fees - 45,000-61,000 Directors emoluments - Salaries 827, , Bonus 167, , Employees Provident Fund 188, ,160-1,182,860 45,000 1,147,160 61,000 Company Directors of the Company Directors fees - 45,000-61,000 The estimated monetary value of other benefits not included in the above received by the Directors of the Company was 20,000 (2017: 16,000). Directors remunerations were received or receivable by the following Directors: Directors of the Company - Dato Mustapha Bin Abdul Hamid - Toh Kian Beng - Lee Kean Cheong - Toh Choon Keat - Toh Choon Guan - Chin Yoong Mun ANNUAL REPORT

79 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 22. DIRECTORS REMUNERATION (Cont d) Directors remunerations were received or receivable by the following Directors: (Cont d) Other Directors of subsidiary companies - Toh See Wooi - Kee Lik Kang - Kee Leck Seok 23. FINANCE COSTS Group Company Interests on: - bank overdrafts 27,078 17, bankers acceptance 238,134 66, ,212 83, Bank charges 17,493 23, , , EARNINGS PER SHARE (i) Basic Earnings Per Share The basic earnings per share of the Group is calculated based on the profit attributable to owners of the Company divided by the weighted average number of ordinary shares in issue as follows: Group Profit attributable to owners of the Company 4,764,098 4,540,002 Number of shares Number of ordinary shares in issue 40,742,200 40,742,200 Sen Sen Basic earnings per share (ii) Diluted Earnings Per Share During the current and previous financial years, there were no shares in issuance which would have a dilutive effect on the earnings per share of the Group. 78 TEO GUAN LEE CORPORATION BERHAD ( A)

80 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 25. DIVIDENDS Group/Company In respect of the financial year ended 30 June 2017 Final single tier dividend of 5 sen per share, declared on 27 November 2017 and paid on 14 December ,037,110 - In respect of the financial year ended 30 June 2016 Final single tier dividend of 7.5 sen per share, declared on 28 November 2016 and paid on 15 December ,055,665 2,037,110 3,055,665 The Directors proposed a final single tier dividend of 5 sen per share amounting to 2,037,110 in respect of the financial year ended 30 June The proposed dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting. 26. SIGNIFICANT RELATED PARTY DISCLOSURES In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are the other significant related party disclosures:- (a) Related party relationships The Directors who are major shareholders and close members of their families and any companies where they have a significant influence are considered as related parties. Related parties are those whereby one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. The Company has related party relationships with the following: (i) Subsidiary companies as disclosed in Note 7. (ii) A substantial shareholder of the Company: Teo Guan Lee Holdings Sendirian Berhad, in which Toh Kian Beng is a Director and has financial interest. (iii) Shareholders of Teo Guan Lee Holdings Sendirian Berhad: Toh Peng Hoe Holdings Sdn. Bhd., in which, Toh Kian Beng, Toh Choon Keat, and Toh Choon Guan have financial interest, where Toh Kian Beng is a Director. Toh Peng Hua Holdings Sdn. Bhd., in which Toh See Wooi has financial interest. (iv) Wholly owned subsidiary companies of Teo Guan Lee Holdings Sendirian Berhad: Teo Guan Lee Realty Sdn. Bhd. TGL Packaging Sdn. Bhd. TGL Industries Sdn. Bhd. In which Toh Kian Beng and Toh Choon Guan are also Directors of the above companies. (v) Perniagaan Sulam Kim Bin (M) Sdn. Bhd., in which the Director of a subsidiary company, Kee Lik Kang, is a Director and has financial interest. (vi) Ideal Structure Sdn. Bhd., in which the Director of the Company, Toh Kian Beng is a Director and has financial interest. ANNUAL REPORT

81 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 26. SIGNIFICANT RELATED PARTY DISCLOSURES (Cont d) (a) Related party relationships (Cont d) (vii) Melodi Ragam Sdn. Bhd., in which the Directors of the Company, Toh Kian Beng and Toh Choon Guan are Directors and have financial interest. (viii) Bidang Cendana Sdn. Bhd., in which the Director of the Company, Toh Kian Beng is a Director and has financial interest. (b) Significant related party transactions In the normal course of business, the Group and the Company undertake on agreed terms and prices, the following significant transactions with its related parties: Group Company Purchase of goods from - Perniagaan Sulam Kim Bin (M) Sdn. Bhd. 53,271 66, Rental paid to - TGL Industries Sdn. Bhd. 600, , TGL Packaging Sdn. Bhd. 602, , Bidang Cendana Sdn. Bhd. 108, , Repayments from - Teo Guan Lee (Penang) Sdn. Bhd ,260, ,314 - Teo Guan Lee (K.L.) Sdn. Bhd ,037,110 3,055,665 - Affluent Lifestyle Sdn. Bhd , P.P.A.C. (M) Sdn. Bhd ,000, Galeri Megah Sdn. Bhd ,000 - Advances to - Teo Guan Lee (Penang) Sdn. Bhd ,500,000 - Teo Guan Lee (K.L.) Sdn. Bhd ,800,000 Dividend receivable/received from - Teo Guan Lee (K.L.) Sdn. Bhd ,400,000 2,100,000 Dividend paid to - Teo Guan Lee Holdings Sdn. Bhd. 755,136 1,132, ,136 1,132,704 - Toh Peng Hoe Holdings Sdn. Bhd. 285, , , ,962 - Ideal Structure Sdn. Bhd. 254, , , ,594 - Melodi Ragam Sdn. Bhd. 64,876 97,314 64,876 97,314 - Directors of the Company 6,320 9,480 6,320 9,480 Information regarding outstanding balances arising from related party transactions as at 30 June 2018 and 30 June 2017 are disclosed in Notes 11 and TEO GUAN LEE CORPORATION BERHAD ( A)

82 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 26. SIGNIFICANT RELATED PARTY DISCLOSURES (Cont d) (c) Compensation of key management personnel The key management s remuneration includes fees, salary, bonus, allowances and other benefits computed based on the costs incurred by the Group and the Company. The Group and the Company define its Directors as key management and their compensations are as stated in Note MEMBERS VOLUNTARY WINDING UP OF SUBSIDIARY COMPANY The Company through its subsidiary company, Teo Guan Lee (K.L.) Sdn. Bhd., has completed the members voluntary winding up of its sub-subsidiary company, JC Garments (M) Sdn. Bhd. pursuant to Section 254(1)(b) of the Companies Act, The net proceed has been returned to the investee company during the last financial year The fair value of assets and liabilities at the date of dissolution are as follows: Fair value of assets and liabilities 2,006,349 Loss on winding-up a subsidiary company (4,095) Proceeds from winding up a subsidiary company 2,002, CASH AND CASH EQUIVALENTS Group Company Represented by: Deposit, cash and bank balances (Note 14) 1,354,192 1,487,367 2, Bank overdrafts (Note 19) (118,164) (451,275) - - 1,236,028 1,036,092 2, FINANCIAL GUARANTEE Unsecured The Company has provided corporate guarantees totalling 24,200,000 (2017: 24,700,000) to certain licensed banks for banking facilities granted to its subsidiary companies. As at 30 June 2018, the amount utilised under the corporate guarantee is 8,711,834 (2017: 4,877,583). The Directors are of the view that the chances of the licensed banks call on the corporate guarantee are remote. Please refer to accounting policy Note 2(g)(iv). ANNUAL REPORT

83 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 30. COMMITMENTS (i) As at the end of the financial year, non-cancellable long-term operating lease commitments pertaining to the Group in respect of rental of premises are as follows: Group Lease commitment - Not later than 1 year 40, ,523 - Later than 1 year and not later than 5 years - 42,939 40, ,462 (ii) Capital commitment at the end of the financial year is as follows: Group Capital commitment - Approved and contracted for investment properties 4,629,600 - Other than the above, the Group has no other capital commitment as at the end of the financial year. 82 TEO GUAN LEE CORPORATION BERHAD ( A)

84 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 31. FINANCIAL INSTRUMENTS (a) Categories of financial instruments The table below provides an analysis of financial instruments categorised as follows: (i) (ii) Loans and receivables ( L&R ) Fair value through profit or loss ( FVTPL ) - Held for trading ( HFT ) (iii) Financial liabilities measured at amortised cost ( FL ) (iv) Available-for-sale financial assets ( AFS ) Carrying amount L&R/ (FL) FVTPL - HFT AFS Group 2018 Financial assets Investments 2,428, ,428,716 Investment management funds 20,839,082-20,839,082 - Receivables 40,769,572 40,769, Deposit, cash and bank balances 1,354,192 1,354, ,391,562 42,123,764 20,839,082 2,428,716 Financial liabilities Borrowings (8,711,834) (8,711,834) - - Payables (16,732,601) (16,732,601) - - (25,444,435) (25,444,435) - - Group 2017 Financial assets Investments 2,599, ,599,789 Investment management funds 14,782,979-14,782,979 - Receivables 39,975,640 39,975, Deposit, cash and bank balances 1,487,367 1,487, ,845,775 41,463,007 14,782,979 2,599,789 Financial liabilities Borrowings (4,877,584) (4,877,584) - - Payables (22,142,277) (22,142,277) - - (27,019,861) (27,019,861) - - ANNUAL REPORT

85 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 31. FINANCIAL INSTRUMENTS (Cont d) (a) Categories of financial instruments (Cont d) Carrying amount L&R/ (FL) FVTPL - HFT AFS Company 2018 Financial assets Receivables 13,394,318 13,394, Investment management funds 5,298,726-5,298,726 - Deposit, cash and bank balances 2,922 2, ,695,966 13,397,240 5,298,726 - Financial liability Payables (3,288,505) (3,288,505) - - Company 2017 Financial assets Receivables 18,471,148 18,471, Deposit, cash and bank balances ,471,357 18,471, Financial liability Payables (3,327,798) (3,327,798) - - (b) Net (losses)/gains arising from financial instruments Group Net (losses)/gains on: Fair value through profit or loss: - Held for trading - 29,619 Available-for-sale financial assets - Recognised in other comprehensive income (152,576) 618,584 - Recognised in profit or loss (42,101) - (194,677) 648, TEO GUAN LEE CORPORATION BERHAD ( A)

86 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 31. FINANCIAL INSTRUMENTS (Cont d) (c) Financial risk management The Group is exposed to a variety of financial risks, including market risk, credit risk, liquidity risk and cash flow risks. The Group s overall risk management objective is to ensure the Group creates value for its shareholders whilst minimising the potential adverse effects on the performance of the Group. The Group does not trade in financial instruments or engage in speculative transactions. (i) Market risk Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates, and other prices that will affect the Group s financial position or cash flows. Interest rate risk The Group is exposed to interest rate risk mainly from borrowings and investment management funds. The investments in financial assets are short term in nature and mostly represented by investment management funds to yield better returns as compared to cash at banks. The Group mitigates its exposure to interest rate fluctuations by borrowing at both fixed and floating rates of interest. The interest rate risk is monitored on an on-going basis and the Group endeavours to keep the exposure at an acceptable level. The Group considers interest rate risk exposure for its deposits as minimal as they are short term in nature and are not held for speculative purposes. A change of 50 basis points in interest rates at the reporting date would result in the profit after tax of the Group and of the Company to be higher/lower by 71,090 (2017: 55,380) and by 26,494 (2017: Nil), respectively. This analysis assumes that all other variables remain constant. Foreign currency risk The Group is exposed to foreign currency risk on assets and liabilities that are denominated in currencies other than the functional currency of the transacting entity. Foreign currency risk is monitored closely and managed to an acceptable level. Forward foreign exchange contracts were entered into as hedges for purchases denominated in foreign currency and to limit the exposure to potential changes in foreign exchange rates with respect to the Group s foreign currency denominated financial assets and financial liabilities. The net carrying amounts of financial assets and financial liabilities stated at currencies other than the functional currency are as follows: Group Financial assets Available-for-sale assets - in Hong Kong Dollar ( HKD ) 2,179,592 2,266,970 - in United States Dollar ( USD ) 84,556 99,677 2,264,148 2,366,647 Financial liabilities Payables, in United States Dollar ( USD ) 5,311,682 8,204,869 A 5% and 10% (2017: 5% and 10 %) weakening of the Malaysian Ringgit ( ) against the US Dollar ( USD ) and Hong Kong Dollar ( HKD ) at the end of the reporting period would have decreased profit after tax and equity by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. ANNUAL REPORT

87 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 31. FINANCIAL INSTRUMENTS (Cont d) (c) Financial risk management (Cont d) (i) Market risk (Cont d) Foreign currency risk (Cont d) Decrease in profit after tax Decrease in equity Effect of change in foreign currency against Weakened by 5% 186,087 73,972 - Weakened by 10% 372, , Weakened by 5% 308, ,935 - Weakened by 10% 617, ,870 Conversely, a strengthening of against the USD and HKD at the end of the reporting period would have the equal but opposite effect on the above currency to the amounts shown above assuming that all other variables remained constant. Equity price risk The Group is exposed to equity price risk arising from its investment in quoted equity instruments. These instruments are classified as available-for-sale financial assets. The Group s exposure to equity price risk based on carrying amounts as at the end of the reporting period was: Available-for-sale financial assets 2,428,716 2,599,789 Net exposure in the statement of financial position 2,428,716 2,599,789 A 10% (2017: 10%) increase in equity price at the end of the reporting period would have increased equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant Increase Increase on equity 10% 242, ,979 A 10% (2017: 10%) decrease in equity price at the end of the reporting period would have had an equal but opposite effect on the above amounts assuming that all other variables remained constant. The Group monitors the foreign currency fluctuation and equity price closely to ensure the risk is managed at an acceptable level. 86 TEO GUAN LEE CORPORATION BERHAD ( A)

88 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 31. FINANCIAL INSTRUMENTS (Cont d) (c) Financial risk management (Cont d) (ii) Credit risk Credit risk is the risk of financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group and the Company are exposed to credit risk mainly from trade receivables, amount due from subsidiary companies, investment management fund, deposits, cash and bank balances and financial guarantee. The Group manages its exposure to credit risk by the application of credit approvals, credit limits and monitoring procedures on an ongoing basis. For other financial assets (including investment management fund, cash and bank balances and derivatives), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. At the end of the reporting period, the maximum exposure to credit risk is represented by the carrying amounts in the statement of financial position. Trade receivables In respect of trade receivables, the Group trades only with recognised and creditworthy third parties. In addition, receivable balances are monitored on an ongoing basis and policies and procedures are in place to ensure that the Group s exposure to bad debts is kept to a minimum. Information regarding trade receivables that are neither past due nor impaired and concentration of risk are disclosed in Note 11. Amount due from subsidiary companies The credit risk arising from amount due from subsidiary companies is managed on a group basis by the management of the Company to ensure that risk of losses incurred by the Company due to non-repayment by subsidiary companies are minimal. At the end of the reporting period, there was no indication that the balances due from subsidiary companies are not recoverable. Investment management funds Investment management funds represent fund placed with licensed fund managers. The portfolio of securities managed by the fund managers comprise of money market funds and corporate bonds which are not subject to significant changes in value. In view of the sound credit rating of counterparties, the management does not expect any counterparty to fail to meet its obligations. Information regarding the concentration risk of investment management funds is disclosed in Note 13. Deposits, cash and bank balances In respect of cash and cash equivalents, the Group s and the Company s policy are to place surplus cash with licensed banks in Malaysia. The likelihood of default by licensed banks is remote based on their high credit ratings. Financial guarantee The Company provides unsecured financial guarantee to banks in respect of banking facilities granted to subsidiary companies. The Company monitors on an ongoing basis the results of the subsidiary companies and the repayment made by the subsidiary companies. As at the reporting date, there is no indication that the subsidiary companies would default on repayment. The financial guarantees have not been recognised since the fair value on initial recognition is not material. ANNUAL REPORT

89 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 31. FINANCIAL INSTRUMENTS (Cont d) (c) Financial risk management (Cont d) (iii) Liquidity risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all operating, investing and financing needs are met. In liquidity risk management strategy, the Group measures and forecasts its cash commitments and maintains a level of cash and cash equivalents deemed adequate to finance the Group s activities. The table below summarises the maturity profile of the Group s and the Company s financial liabilities as at the end of the reporting period based on undiscounted contractual payments: Carrying Contractual Contractual Amount interest rate cash flows Under 1 year % Group 2018 Borrowing 8,711, ,711,834 8,711,834 Payables 16,732,601-16,732,601 16,732,601 25,444,435 25,444,435 25,444, Borrowings 4,877, ,877,584 4,877,584 Payables 22,142,277-22,142,277 22,142,277 27,019,861 27,019,861 27,019,861 Company 2018 Payables 3,288,505-3,288,505 3,288,505 Financial guarantee contracts - - 8,711,834 8,711,834 3,288,505 12,000,339 12,000, Payables 3,327,798 3,327,798 3,327,798 Financial guarantee contracts - - 4,877,583 4,877,583 3,327,798 8,205,381 8,205,381 (iv) Cash flow risk The Group actively manages its operating cash flow to ensure all commitments and funding needs are met. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. 88 TEO GUAN LEE CORPORATION BERHAD ( A)

90 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 31. FINANCIAL INSTRUMENTS (Cont d) (d) Fair value information The carrying amounts of the financial assets and liabilities of the Group and the Company classified as current assets and current liabilities as at 30 June 2018 and 30 June 2017 approximate their fair values due to the relatively short term maturity of these financial instruments. The method and assumptions used to determine the fair value of other financial assets and liabilities are as follows: (i) The fair values of quoted investments are their quoted market prices at the end of the financial year. (ii) The fair value of investment management funds is the estimated amounts that the Group would expect to receive by disposal of the investment at the reporting date. (iii) The Group provides corporate guarantees to licensed banks for credit facilities extended to certain subsidiary companies. The fair value of such corporate guarantees is not expected to be material as the probability of the subsidiary companies defaulting on the credit lines is remote. The following table provides the fair value measurement hierarchy of the Group s assets carried at fair value. Fair value of assets carried at fair value Carrying Level 1 Level 2 Level 3 Total amount Group 2018 Financial assets: Investment in quoted shares (Note 8) 2,428, ,428,716 2,428,716 Investment management funds (Note 13) - 20,839,082-20,839,082 20,839, Financial assets: Investment in quoted shares (Note 8) 2,599, ,599,789 2,599,789 Investment management funds (Note 13) - 14,782,979-14,782,979 14,782,979 Company 2018 Financial assets: Investment management funds (Note 13) - 5,298,726-5,298,726 5,298, Financial assets: Investment management funds (Note 13) ANNUAL REPORT

91 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 31. FINANCIAL INSTRUMENTS (Cont d) (d) Fair value information (Cont d) The following table provides the fair value measurement hierarchy of the Group s assets not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the consolidated statement of financial position. Fair value of assets carried at fair value Carrying Level 1 Level 2 Level 3 Total amount Group 2018 Assets Investment properties (Note 6) ,681,970 31,681,970 21,226, Assets Investment properties (Note 6) ,681,970 31,681,970 21,334,638 There were no transfers between fair value measurements hierarchy during the financial year ended 30 June 2018 and 30 June Valuation processes applied by the Group for Level 3 fair value The fair value were derived from the consideration of the following factors: (a) Indicative valuation on certain properties provided by a chartered valuation surveyor, registered valuer, estate agent and property consultant, K.T. Appraisers on 3 August 2017; (b) (c) Directors valuation and assessment based on recent available transacted price in the market at similar locations; The application of investment method valuation technique; and (d) The current occupancy rate and market rental yield of 4.28% to 10.97% (2017: 3.27% to 10.6%) per annum. Sensitivity to changes in the assumptions applied With regards to the assessment of the fair value of investment properties, the management believes that no reasonably possible movements in any of the above key assumptions would cause the fair value of the investment property to vary significantly from the fair value disclosure. 32. SEGMENTAL INFOATION The Group s operating businesses are classified according to the following business segments: (i) (ii) Apparels - manufacturing, marketing and distribution of garments and its related accessories Investment holding - property and equity investment 90 TEO GUAN LEE CORPORATION BERHAD ( A)

92 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 32. SEGMENTAL INFOATION (Cont d) Group analysis by business segments: Investment Apparels holding Elimination Consolidated 2018 Revenue Revenue from external customer 86,865,854 2,030,810-88,896,664 Inter-segment revenue - 37,100 (37,100) - 86,865,854 2,067,910 (37,100) 88,896,664 Result Segmental result 4,664,200 1,131,331-5,795,531 Unallocated corporate expenses (46,780) 5,748,751 Interest expense (265,212) Distribution from investment management funds 761,642 Interest income 23,521 Dividend income 23,259 Profit before taxation 6,291,961 Taxation (1,510,443) Profit for the financial year 4,781, Other information Assets Segment assets 93,904,606 24,356,847 (4,298,510) 113,962,943 Unallocated assets 289,373 Total assets 114,252,316 Liabilities Segment liabilities 15,838,131 5,192,980 (4,298,510) 16,732,601 Borrowings 8,711,834 Unallocated liabilities 2,222,693 Total liabilities 27,667,128 ANNUAL REPORT

93 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 32. SEGMENTAL INFOATION (Cont d) Group analysis by business segments: (Cont d) Investment Apparels holding Elimination Consolidated 2018 Other information Capital expenditure 423, ,410 Non-cash items Bad debts written off 2, ,943 Depreciation of investment properties - 629, ,401 Depreciation of property, plant and equipment 947,710 13, ,571 Fair value gain on investment management funds (23,607) - - (23,607) Gain on disposal of available-for-sale financial assets (40,533) - - (40,533) Gain on disposal of property, plant and equipment (5,000) - - (5,000) Impairment loss for available-for-sale financial assets 82, ,634 Inventories written down to net realisable value 2,261, ,261,636 Property, plant and equipment written off Reversal of impairment on debts (3,931) - - (3,931) Unrealised loss on foreign exchange 115, , TEO GUAN LEE CORPORATION BERHAD ( A)

94 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 32. SEGMENTAL INFOATION (Cont d) Group analysis by business segments: (Cont d) Investment Apparels holding Elimination Consolidated 2017 Revenue Revenue from external customer 90,586,151 2,013,115-92,599,266 Inter-segment revenue - 36,000 (36,000) - 90,586,151 2,049,115 (36,000) 92,599,266 Result Segmental result 4,405,673 1,139,671-5,545,344 Unallocated corporate expenses (27,197) 5,518,147 Interest expense (83,637) Loss on winding up a subsidiary company (4,095) Distribution from investment management funds 591,633 Interest income 27,164 Dividend income 33 Profit before taxation 6,049,245 Taxation (1,497,923) Profit for the financial year 4,551, Other information Assets Segment assets 92,640,394 24,664,666 (4,556,215) 112,748,845 Unallocated assets 379,015 Total assets 113,127,860 Liabilities Segment liabilities 20,505,589 6,192,903 (4,556,215) 22,142,277 Borrowings 4,877,584 Unallocated liabilities 2,114,643 Total liabilities 29,134,504 ANNUAL REPORT

95 NOTES TO FINANCIAL STATEMENTS for the financial year ended in 30 June 2018 (Cont d) 32. SEGMENTAL INFOATION (Cont d) Group analysis by business segments: (Cont d) Investment Apparels holding Elimination Consolidated 2017 Other information Capital expenditure 410, ,714 Non-cash items Bad debts written off 5, ,373 Depreciation of investment properties - 629, ,401 Depreciation of property, plant and equipment 1,304,042 13,861-1,317,903 Inventories written down to net realisable value 2,325, ,325,314 Loss on winding up of a subsidiary company 4, ,095 Unrealised gain on foreign exchange (203,530) - - (203,530) Segment revenue and segment results include transfers between business segments. Such transfers are accounted for at agreed terms and prices amongst the related companies. The Group s business activities were predominantly carried out in Malaysia and therefore, information by geographical segment is not presented. The following are major customers with revenue equal or more than 10% of the Group s total revenue: Revenue Segment Percentage 000 Percentage 000 % % Customer #1 Apparels 21 18, ,027 Customer #2 Apparels 18 16, ,664 Customer #3 Apparels 16 14, , , ,223 Others 45 39, ,376 Total , , SIGNIFICANT EVENT DURING THE FINANCIAL YEAR On 19 September 2017, the wholly-owned subsidiary company, Teo Guan Lee Properties (K.L.) Sdn. Bhd. entered into Sale and Purchase Agreements ( SPA ) to acquire 9 units of leasehold condominium, located in Cheras, Federal Territory of Kuala Lumpur, for a total consideration of 5,787,000. The project is expected to be completed within 48 months of the SPA date. 94 TEO GUAN LEE CORPORATION BERHAD ( A)

96 LIST OF PROPERTIES HELD BY THE GROUP LOCATION & DESCRIPTION TENURE EXISTING USE APPROX. LAND/BUILT UP AREA (SQ. FT.) DATE OF ACQUISITION NBV/FAIR VALUE AS AT 30 JUNE 2018 Lot 252 & 253 Sec 211 Bandar Kajang and located at 1 Jalan Jelita Satu, Taman Jelita, Kajang, Selangor Darul Ehsan Freehold/ 27 Years Four Storey Office 3,649/ 13,971 19/10/91 679,802 Lot E7 & E8, Mukim of Kuala Lumpur and Ampang and located at Phase 3 Taman Shamelin Perkasa, 3-1/2 Miles, Jalan Cheras, Kuala Lumpur 99 Years Leasehold Expiring in 2082/ 23 Years Two Storey Office and Warehouse 29,375/ 26,000 21/1/92 6,171,326 Units 3-4-9, , and , Jalan 3/91 Taman Shamelin Perkasa, Kuala Lumpur 99 Years Leasehold Expiring in 2082/ 24 Years Apartments N/A/4,092 29/4/91 325,034 Berjaya Star City Lot A & Lot No. 339 & 145 Sec 52, Town of Kuala Lumpur Freehold/ 15 Years Condominium Unit N/A/1,070 5/10/95 353,281 HS (D) P.T. No Mukim Cheras, Daerah Hulu Langat, State of Selangor Lot No. K46 and K47 Bandar Sungai Long Freehold 12 Years 3 Storey Shop Office 2,800/ 8,900 18/8/05 2,004,359 HS (M) No. 9985, Pt No (7173) Mukim Ampang, District of Ulu Langat, State of Selangor 36, A, B, Jalan Bunga Tanjung 8, Taman Putra Kuala Lumpur 99 Years Leasehold Expiring in 2081/ 23 Years Three Storey Factory and Hostel NA/4,200 16/12/95 367,567 HS (M) No. 9986, Pt No (7174) Mukim Ampang District of Ulu Langat, State of Selangor 38, A, B, Jalan Bunga Tanjung 8, Taman Putra Kuala Lumpur 99 Years Leasehold Expiring in 2081/ 24 Years Three Storey Factory and Office NA/4,200 12/1/94 310,696 Kompleks Bukit Jambul Lot G-K05, G-K06, G-K07, G-K08, 1-35, 1-36, Penang Freehold/ 21 Years Retail Shop-Lot NA/4,968 24/10/95 4,318,079 Prangin Mall, Komtar 2-01,2-02, 2-07, 2-08, 2-09, 2-80, 2-81, 2-82 Penang 99 Years Leasehold Expiring in 2096/ 18 Years Retail Shop-Lot NA/6,456 23/5/96 5,855,836 Bandar Penas, Butterworth G-57 Freehold 21 Years Retail Shop-Lot NA/3,377 22/5/96 1,350,799 Riana South Condominium Persiaran Alam Damai Cheras Work in progress ,830 ANNUAL REPORT

97 ANALYSIS OF SHAREHOLDINGS as at 3 October 2018 SHARE CAPITAL Issued Share Capital : 40,742,200 comprising 40,742,200 ordinary shares Class of Shares : Ordinary Shares Voting Right : One voting right for one ordinary share DISTRIBUTION OF SHAREHOLDERS Holdings No. of Holders % Total Holdings % , , ,001-10, ,510, , , ,989, ,001 2,037,109* ,288, ,037,110 and above** ,910, Total ,742, * less than 5% of issued shares ** 5% and above of issued shares THIRTY LARGEST SECURITIES ACCOUNT HOLDERS Name Shareholdings % 1. Teo Guan Lee Holdings Sendirian Berhad 15,102, Toh Peng Hoe Holdings Sendirian Berhad 5,719, Ideal Structure Sdn. Bhd. 5,087, Melodi Ragam Sdn. Bhd. 1,297, Chew Jing Khai 915, Lay Yeo Lay Peng 893, Toh Zhen Wei 840, Loh Chuy Boy 832, Lau Soo Hiang 766, Ting Tziat Lee 402, Khor Sim Ngee 400, Wong Teck Mee 387, Sin Len Moi 366, Loh Kin Heng 328, Wong Shak On 230, Syarikat Rimba Timur (RT) Sdn. Bhd. 220, JF Apex Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Oh Boo Teck (Margin) 208, Toh Ping Hai 204, AMSEC Nominees (Tempatan) Sdn. Bhd. Pledged securities account for Wong Teck Mee 177, UOB Kay Hian Nominees (Tempatan) Sdn. Bhd. Exempt AN for UOB Kay Hian Pte Ltd (A/C Clients) 163, TEO GUAN LEE CORPORATION BERHAD ( A)

98 ANALYSIS OF SHAREHOLDINGS as at 3 October 2018 (Cont d) THIRTY LARGEST SECURITIES ACCOUNT HOLDERS (Cont d) Name Shareholdings % 21. Toh Choon Meng 159, Ching Gek Lee 144, Gek Lee Enterprise Sdn. Bhd. 120, Loo Chee Seng 120, Toh Siam Cheng 112, Yew Lai Kheng 99, Toh Choon Neng 80, Toh Hong Kheng 76, Toh Peng Chooi 75, Toh Ping Hai 75, Total 35,605, SUBSTANTIAL SHAREHOLDERS Name Shareholdings % Direct Indirect Direct Indirect 1. Toh Peng Hoe Holdings Sendirian Berhad 5,719,500 21,488,159 (1) Toh Ping Hai Holdings Sendirian Berhad 8,000 20,190,641 (2) Toh Peng Hua Holdings Sendirian Berhad - 20,190,641 (2) Lau Soo Hiang 766,102 27,207,659 (3) Toh Choon Guan - 27,207,659 (3) Toh Choon Keat - 27,207,659 (3) Toh Choon Neng 80,200 27,207,659 (3) Dato Toh Peng Hoe - 27,207,659 (3) Toh Ping Hai 280,000 20,198,641 (4) Toh Peng Hua 51,200 20,190,641 (2) Toh Kian Beng - 27,207,659 (3) Estate of Lim Lee Lim Keat Ee, Deceased 16,000 20,198,641 (4) Tea Mooi Teh Yan Kwee 57,800 20,190,641 (5) Toh Choon Meng 159,600 27,207,659 (3) Teo Guan Lee Holdings Sendirian Berhad ( TGLH ) 15,102, Ideal Structure Sdn. Bhd. ( IS ) 5,087, Notes: (1) Deemed interested through TGLH, IS and Melodi Ragam Sdn. Bhd. ( MR ) (2) Deemed interested through TGLH and IS (3) Deemed interested through TGLH, Toh Peng Hoe Holdings Sendirian Berhad, IS and MR (4) Deemed interested through TGLH, Toh Ping Hai Holdings Sendirian Berhad and IS (5) Deemed interested through TGLH and Toh Peng Hua Holdings Sendirian Berhad and IS ANNUAL REPORT

99 ANALYSIS OF SHAREHOLDINGS as at 3 October 2018 (Cont d) DIRECTORS SHAREHOLDINGS Name Direct No. of shares held % Indirect No. of shares held % 1. Toh Kian Beng ,123,259 ^ Dato Mustapha Bin Abdul Hamid Lee Kean Cheong Chin Yoong Mun Toh Choon Keat ,100,659 ^^ Toh Choon Guan ,207,659 # Notes: ^ Deemed interested through TGLH (15,102,723 ordinary shares), Toh Peng Hoe Holdings Sendirian Berhad (5,719,500 ordinary shares), IS (5,087,918 ordinary shares) and MR (1,297,518 ordinary shares); Chew Jing Khai (915,600 ordinary shares) by virtue of Section 59(11)(c) of Companies Act 2016 ( the Act ). ^^ Deemed interested through TGLH (15,102,723 ordinary shares), Toh Peng Hoe Holdings Sendirian Berhad (5,719,500 ordinary shares), IS (5,087,918 ordinary shares) and MR (1,297,518 ordinary shares); Lay Yeo Lay Peng (893,000 ordinary shares) by virtue of Section 59(11)(c) of the Act. # Deemed interested through TGLH (15,102,723 ordinary shares), Toh Peng Hoe Holdings Sendirian Berhad (5,719,500 ordinary shares), IS (5,087,918 ordinary shares) and MR (1,297,518 ordinary shares). 98 TEO GUAN LEE CORPORATION BERHAD ( A)

100 PROXY FO TEO GUAN LEE CORPORATION BERHAD (Company No: A) (Incorporated in Malaysia) I/We,...Tel:... (FULL NAME IN BLOCK LETTERS, NRIC NO./COMPANY NO. AND TELEPHONE NO.) of... (ADDRESS) being a member/members of TEO GUAN LEE CORPORATION BERHAD hereby appoint (FULL NAME IN BLOCK LETTERS AND NRIC NO./PASSPORT NO.) of... (ADDRESS) or failing him/her (FULL NAME IN BLOCK LETTERS AND NRIC NO./PASSPORT NO.) of (ADDRESS) or failing him/her, the Chairman of the Meeting as my/our proxy, to vote in my/our name(s) and on my/our behalf at the Twenty-Fifth Annual General Meeting of the Company to be held at the Conference Room of Teo Guan Lee Corporation Berhad, Plot 28 Lorong Perusahaan Maju 4, Prai Industrial Estate, Prai, Pulau Pinang on Wednesday, 28 November 2018 at noon and at any adjournment thereof for/against the resolutions to be proposed thereat. I/We hereby indicate with an X in the spaces provided how I/we wish my/our vote(s) to be cast. (Unless otherwise instructed, the proxy may vote as he thinks fit) Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3 Ordinary Resolution 4 Ordinary Resolution 5 Ordinary Resolution 6 Ordinary Resolution 7 Ordinary Resolution 8 Ordinary Resolution 9 Declaration of a final single tier dividend of 5 sen per share Re-election of Ms Toh Kian Beng Re-election of Mr Toh Choon Guan Re-appointment of Messrs Peter Chong & Co. as Auditors of the Company and to authorise the Board of Directors to fix their remuneration Approval of Directors fees of 45,000 Continuing in office for Dato Mustapha Bin Abdul Hamid as an Independent Non-Executive Director Continuing in office for Mr Lee Kean Cheong as an Independent Non- Executive Director Renewal of shareholders mandate for recurrent related party transactions of a revenue or trading nature Approval for issuance of new ordinary shares For Against Dated this day of 2018 Number of shares held Signature / Common Seal of Shareholder For appointment of two proxies, number of shares and percentage of shareholdings to be represented by the proxies:- No. of shares Percentage Proxy 1 % Proxy 2 % Notes : 1. A member of the Company entitled to attend and vote is entitled to appoint not more than two (2) proxies to attend, participate, speak and vote instead of him. 2. A proxy may but need not be a member of the Company. 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 authorised nominee as defined under the Securities Industry (Central Depositors) Act 1991, it may appoint not more than two (2) proxies in respect of each securities account it holds in ordinary shares of the Company standing to the credit of the said securities account. 4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) 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 instrument appointing a proxy or proxies shall be in writing, executed by or on behalf of the appointor. In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under the hand of its officer or attorney duly authorised. 6. The instrument appointing a proxy or proxies must be deposited at the Company s Registered Office at Plot 28, Lorong Perusahaan Maju 4, Prai Industrial Estate, Prai, Pulau Pinang at least 48 hours before the time for holding the Meeting or any adjournments thereof. 7. Those Proxy Forms which are indicated with a in the spaces provided to show how the votes are to be cast will also be accepted. 8. Only members registered in the Record of Depositors as at 22 November 2018 shall be eligible to attend the meeting or appoint a proxy to attend and vote on his behalf.

101 fold along this line STAMP TEO GUAN LEE CORPORATION BERHAD Plot 28, Lorong Perusahaan Maju 4 Prai Industrial Estate, Prai Pulau Pinang, Malaysia ( A) fold along this line

102 TEO GUAN LEE CORPORATION BERHAD ( A) Plot 28, Lorong Perusahaan Maju 4 Prai Industrial Estate, Prai, Penang, Malaysia.