Hatching For The Future

Transcription

1 nnual Report 2012 Hatching For The Future

2 Ritma Prestasi Sdn. Bhd. ( U) Lot 21 & 23, Jalan TPP 5/13, Seksyen 5, Taman Industri Puchong, Puchong, Selangor. Tel: / Fax: Website:

3 ontents 4 Corporate Information 5 Group Corporate Structure 6 Profile Of The Board Of Directors 11 Chairman s Statement 13 Corporate Governance Statement 22 Statement Of Internal Control 24 Audit Committee s Report 29 Financial Statements 95 Top 10 Properties Owned By Teo Seng Capital Berhad And Its Subsidiaries 96 Shareholdings Statistic 98 Notice Of Sixth Annual General Meeting 102 Appendix I - Proposed Amendments to the Articles of Association of the Company Proxy Form

4 Fifth Annual General Meeting held at Riverview Hotel on 15 September 2011 Ritma partnered with Lohmann and Innovad exhibited at Livestock Asia Expo and Forum held at Kuala Lumpur Convention Centre from 4 October 2011 to 6 October 2011 Ritma Prestasi Sdn Bhd ( Ritma ) office opening at Puchong on 3 November 2011 Two (2) days in-house training seminar Malaysian Corporate Tax Workshop held at Teo Seng Capital Berhad s corporate office on 22 September 2011 and 23 September Ritma Pet World 2011 road show held in Midvalley Exhibition Centre from 2 June 2011 to 4 June 2011.

5 Livestock Asia Expo and Forum held at Kuala Lumpur Convention Centre from 4 October 2011 to 6 October Teo Seng Third (3rd) Anniversary Dinner and Dance held at new central packing station 1 on 29 October 2011 Ritma CAP new product advocate launch in Equatorial Hotel, Bangi on 24 August 2011 Teo Seng Chinese New Year dinner at SY Restaurant, Batu Pahat on 28 January Ritma Dogathon 2011 road show held at UPM on 2 October Corporate Social Responsibility Programme at Buddhist Tzu-Chi Merits Society Batu Pahat on 4 December 2011.

6 Corporate Information BOARD OF DIRECTORS Lau Jui Peng Non-Executive Chairman Nam Yok San Managing Director Na Yok Chee Executive Director Tan Sri Lau Tuang Nguang Non-Executive Director SECRETARIES Lim Meng Bin (LS ) Wong Wai Foong (MAICSA ) Dato Zainal Bin Hassan Non-Executive Director Lau Joo Han Non-Executive Director REGISTERED OFFICE , Jalan Abdullah Muar Johor Darul Takzim Tel : Fax : Loh Wee Ching Non-Executive Director Choong Keen Shian Independent Non-Executive Director Frederick Ng Yong Chiang Independent Non-Executive Director Dato Koh Koh Kim Toon Independent Non-Executive Director AUDITORS Crowe Horwath (AF 1018) 8, Jalan Pesta 1/1 Taman Tun Dr Ismail 1 Jalan Bakri Muar Johor Darul Takzim HEAD OFFICE Lot PTD 25740, Batu 4 Jalan Air Hitam Yong Peng Johor Darul Takzim Tel : Fax : AUDIT COMMITTEE Choong Keen Shian Committee Chairman Lau Jui Peng Committee Member Frederick Ng Yong Chiang Committee Member PRINCIPAL BANKERS OCBC Bank (Malaysia) Bhd Bangkok Bank Berhad AmBank (M) Berhad Hong Leong Bank Berhad CORPORATE WEBSITE REGISTRAR Tricor Investor Services Sdn. Bhd. Level 17, The Gardens North Tower Mid Valley City Lingkaran Syed Putra Kuala Lumpur Tel : Fax : Dato Koh Koh Kim Toon Committee Member STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad Main Market Date Of Listing 29 October 2008

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8 Profile Of The Board Of Directors Mr. Lau Jui Peng, Malaysian, aged 41, was appointed as the Non-Executive Chairman of the Company on 19 June He is one of the representatives of Leong Hup Holdings Sdn. Bhd. ( LHH ) on the Board of Directors of the Company. He is the Chairman of Nomination Committee, Chairman of Remuneration Committee and a member of Audit Committee of the Company. Mr. Lau obtained a Bachelor of Science in Business Administration majoring in marketing from Hawaii Pacific University, United States of America in Upon his graduation, Mr. Lau worked in a brief stint as an Assistant Manager in a supermarket before joining the LHH group of companies. Since then, Mr. Lau has been appointed as the Deputy Chief Executive Officer of Leong Hup Poultry Farm Sdn. Bhd., where he is in charge of the production processes and administration. Mr. Lau is also involved in the production processes and administration of Leong Hup (G.P.S) Farm Sdn. Bhd. Mr. Lau was invited to the Board of Leong Hup Poultry Farm Sdn. Bhd. on 24 December 2004 and subsequently to the Board of Leong Hup (G.P.S) Farm Sdn. Bhd. on 21 March Besides these two companies, he also sits on the Board of several other subsidiaries of the Company, LHH and Emivest Sdn. Bhd. Mr. Lau s knowledge and experience in the production processes and management of poultry companies is further augmented by his attendance of several supervisory and management seminars on poultry farm operations and management conducted both locally and overseas. Mr. Lau is the nephew of Tan Sri Lau Tuang Nguang who is the Non-Executive Director of the Company. Except for certain related party transactions of revenue nature which are necessary for day to day operation of the Company and its subsidiaries and for which he is deemed to be interested, there are no other business arrangements with the Company in which he has personal interest. Mr. Lau has no conviction of any offences within the past ten (10) years. Mr. Lau had attended all of the five (5) Board of Directors Meetings held in the financial year ended 31 March Mr. Nam Yok San, Malaysian, aged 56, was appointed as the Managing Director of the Company on 19 June With nearly thirty (30) over years of experience in poultry farming, of which the past fifteen (15) years had been focused on the layer farming business, Mr. Nam in his capacity as the Managing Director of Teo Seng Farming Sdn. Bhd. ( TSF ) is responsible to oversee the overall operations and directions of the Group within the layer farming industry. Mr. Nam was involved in the family business of rearing broiler chickens since it began in 1978, and was one of the founding partners of TSF when it was incorporated on 22 December In 1992, under Mr. Nam s stewardship, the TSF Group undertook a strategic change in business direction by shifting its focus from rearing broiler chickens to layer farming. Since then, with his leadership and guidance, the TSF Group had become one of the largest egg producers in the country. From 1994 to 2008, Mr. Nam served as the Managing Director of Teo Seng Paper Products Sdn. Bhd. ( TSPP ) overseeing the overall operations and ensuring that the Company performs its function as another integral limb of the integrated layer farming model which has been adopted for the TSF Group. He has also been appointed as Executive Director in Teo Seng Feedmill Sdn. Bhd. ( TSFM ) since With his vast experience in the industry and his contribution to our Group, Mr. Nam is an invaluable asset of our Group. He also sits on the Board of several other private limited companies in Malaysia and Singapore. Mr. Nam is a sibling of Mr. Na Yok Chee who is the Executive Director of the Company. Except for certain related party transactions of revenue nature which are necessary for day to day operation of the Company and its subsidiaries and for which he is deemed to be interested, there are no other business arrangements with the Company in which he has personal interest. Mr. Nam has no conviction of any offences within the past ten (10) years. Mr. Nam had attended four (4) of the five (5) Board of Directors Meetings held in the financial year ended 31 March

9 Profile Of The Board Of Directors Mr. Na Yok Chee, Malaysian, aged 55, was appointed as the Executive Director of the Company on 19 June Like Mr. Nam Yok San, Mr. Na has been involved in the family poultry business since 1978 and has played an instrumental role in its transformation from being a broiler chicken business into one of the largest layer farming groups in the country. With the experience and knowledge that he has gained in the operations and management of our Group for nearly thirty (30) over years, Mr. Na is primarily responsible to monitor the operation and performance of the brooding, pullet and layer farms of our Group, as well as overseeing any investment and expansion initiatives, including the designing, construction and supervision of all farm buildings. He currently performs these duties for our Group in his capacity as an Executive Director of TSF, a position he has held since 1983, when he was one of the founding partners of the company. Apart from this, he is also an Executive Director in Teo Seng Feedmill Sdn. Bhd. ( TSFM ) and Success Century Sdn. Bhd., which he has held since 2000 and 2008 respectively. Apart from this, he also sits on the Board of several other private limited companies. Mr. Na is a sibling of Mr. Nam Yok San who is the Managing Director of the Company. Except for certain related party transactions of revenue nature which are necessary for day to day operation of the Company and its subsidiaries and for which he is deemed to be interested, there are no other business arrangements with the Company in which he has personal interest. Mr. Na has no conviction of any offences within the past ten (10) years. Mr. Na had attended four (4) of the five (5) Board of Directors Meetings held in the financial year ended 31 March Tan Sri Lau Tuang Nguang, Malaysian, aged 53, was appointed as Non-Executive Director of the Company on 19 November 2009, is one of the representatives of Leong Hup Holdings Sdn. Bhd. ( LHH ) on the Board of Directors of the Company. Tan Sri Lau has more than thirty (30) years of experience in the livestock industry. Tan Sri Lau was appointed on 15 August 1990 as the Executive Director of LHH, a company formerly listed on the Main Market of Bursa Malaysia Securities Berhad. He also sits on the Board of PT Malindo Feedmill Tbk, a company listed on Jakarta Stock Exchange and also appointed to the Board of various private limited companies in Malaysia and overseas. In the year of 2004, he was one of the panel advisors of Ministry of Agriculture and Agro based Industry, a project initiated by the Government for the development of the agriculture industry in the country. Tan Sri Lau is the uncle to Mr. Lau Jui Peng and Mr. Lau Joo Han who are the Directors of the company. Except for certain related party transactions of revenue nature which are necessary for day to day operation of the company and its subsidiaries and for which Tan Sri Lau is deemed to be interested, there are no other business arrangements with the Company in which he has personal interest. Tan Sri Lau has no conviction of any offences within the past ten (10) years. Tan Sri Lau had attended all of the five (5) Board of Directors Meetings held in the financial year ended 31 March

10 Profile Of The Board Of Directors Dato Zainal Bin Hassan, Malaysian, aged 67, was appointed as the Non-Independent Non-Executive Director of the Company on 19 November 2009, is the representative of Koperasi Permodalan Felda Malaysia Berhad on the Board of Directors of the Company. Dato Zainal is the Chairman of few cooperatives in district level, Deputy Chairman to Koperasi Serbausaha Makmur Berhad and member of the Board of Directors of Koperasi Permodalan Felda Malaysia Berhad ( KPF ) at national level since the inception of the KPF in the year With his past experience as the Pahang State Assembly Member from the year 1982 to 1999, Dato Zainal involved in various committees in Pahang State Level and was also the Committee Chairman of Jawatankuasa Kira-Kira Wang Kerajaan Negeri (PAC) prior to his appointment as the EXCO Kerajaan Negeri Pahang in the year Dato Zainal also sits on the Board of Pertubuhan Peladang Negeri Pahang and also holding the position as Internal Auditor to Pertubuhan Peladang Kebangsaan (NAFAS). Dato Zainal s other directorships in the public companies are Felda Holdings Berhad and Koperasi Permodalan Felda Malaysia Berhad. Dato Zainal does not have any family relationship with any Director/ major shareholder of the Company. Except for certain related party transactions of revenue nature which are necessary for day to day operation of the Company and its subsidiaries and for which he is deemed to be interested, there are no other business arrangements with the Company in which he has personal interest. Dato Zainal has no conviction of any offences within the past ten (10) years. Dato Zainal had attended all of the five (5) Board of Directors Meetings held in the financial year ended 31 March Dato Koh Koh Kim Toon, Malaysian, aged 59, was appointed as the Independent Non-Executive Director of the Company on 19 November He was appointed as a member of Audit Committee of the Company on 13 April Dato' Koh Koh Kim Toon has more than twenty five (25) years experience and expertise in the furniture industry. He sits on the Board of Emivest Sdn. Bhd. and several private limited companies. Besides that, he is the President of Chung Hwa High School, Muar, Johor since Presently, he is actively involved in local as well as overseas investments. Dato Koh does not have any family relationship with any Director/ major shareholder of the Company. He does not have any conflict of interest with the Company. Dato Koh has no conviction of any offences within the past ten (10) years. Dato Koh had attended three (3) of the five (5) Board of Directors Meetings held in the financial year ended 31 March Mr. Lau Joo Han, Malaysian, aged 37, was appointed as the Non-Executive Director of the Company on 19 June 2008, is one of the representatives of Leong Hup Holdings Sdn. Bhd. ( LHH ) on the Board of Directors of the Company. He is a member of Remuneration Committee of the Company. 8 Mr. Lau obtained a Degree of International Trade from Victoria University, Melbourne, Australia in He currently is the Director and Deputy Chief Executive Officer of Ayam A1 Food Corporation Sdn. Bhd., a wholly-owned subsidiary of LHH. Besides his roles in Ayam A1 Food Corporation Sdn. Bhd., Mr. Lau is also extensively involved in the broiler production processes and administration of Leong Hup Contract Farming Sdn. Bhd. and Leong Hup Broiler Farm Sdn. Bhd. Apart from the experience garnered from his responsibilities, Mr. Lau has been constantly attending various seminars conducted locally and overseas in order to keep abreast of the latest trends and technologies in the poultry industry. He was invited to the Board of Leong Hup Broiler Farm Sdn. Bhd. on 10 October 2005, Teo Seng Farming Sdn. Bhd. ( TSF ) on 2 January 2009 and also to the Board of several other subsidiaries of LHH and Emivest Sdn. Bhd. Mr. Lau is the nephew of Tan Sri Lau Tuang Nguang who is the Non-Executive Director of the Company. Except for certain related party transactions of revenue nature which are necessary for day to day operation of the Company and its subsidiaries and for which he is deemed to be interested, there are no other business arrangements with the Company in which he has personal interest. Mr. Lau has no conviction of any offences within the past ten (10) years. Mr. Lau had attended four (4) of the five (5) Board of Directors Meetings held in the financial year ended 31 March 2012.

11 Profile Of The Board Of Directors Mr. Loh Wee Ching, Malaysian, aged 43, was appointed as the Non-Executive Director of the Company on 19 June Mr. Loh joined Teo Seng Farming Sdn. Bhd. ( TSF ) in 1994 as Sales Manager and he was promoted as the Senior Marketing Manager in Prior to joining the Group, he was a Marketing Executive in Telic Corporation Sdn. Bhd., a diversified company which is also involved in the poultry business. His past experience of more than fifteen (15) years in marketing and good customer contacts has enabled him to contribute significantly to the Group s marketing strategies. With his assertive marketing skills and excellent customer relationship, he also plays a major role in providing on-the-job training to the marketing team of the subsidiaries of the Company. Mr. Loh does not have any family relationship with any Director/ major shareholders of the Company. He does not have any conflict of interest with the Company. Mr. Loh has no conviction of any offences within the past ten (10) years. Mr. Loh had attended all of the five (5) Board of Directors Meetings held in the financial year ended 31 March Mr. Choong Keen Shian, Malaysian, aged 55, was appointed as the Independent Non-Executive Director of the Company on 19 June He is the Chairman of Audit Committee, a member of the Remuneration Committee and a member of Nomination Committee of the Company. He graduated with a Bachelor of Science (Hon) degree from University of Malaya in He worked for more than ten (10) years in the finance and banking industry initially with OCBC Finance Bhd and later with The Pacific Bank Bhd (now known as Malayan Banking Berhad) from 1981 to During his tenure in the financial industry, he was involved in the credit and credit control management. He joined a property development company, Arena Eksklusif Sdn. Bhd. in 1991 and was involved in project administration. Currently, he is the finance manager of Atlas Edible Ice Sdn. Bhd., a member of The Atlas Ice Group of Company, which is engaged in a wide array of business activities such as oil palm and rubber plantation, tube and block ice manufacturing and investment holdings in Malaysia, Singapore and Indonesia. He is also the director of several other private limited companies within The Atlas Ice Group and several other private limited companies which are involved in the retailing of lighting accessories and lamps. Mr. Choong does not have any family relationship with any Director/ major shareholder of the Company. He does not have any conflict of interest with the Company. Mr. Choong has no conviction of any offences within the past ten (10) years. Mr. Choong had attended four (4) of the five (5) Board of Directors Meetings held in the financial year ended 31 March Mr. Frederick Ng Yong Chiang, Malaysian, aged 47, was appointed as the Independent Non-Executive Director of the Company on 19 June He is a member of both the Audit Committee and Nomination Committee of the Company. He has completed the professional course in accountancy and thereafter being accepted as Associate member of the Chartered Institute of Management Accountants, United Kingdom and also a member of the Malaysian Institute of Accountants since Mr. Frederick Ng has previously worked for Hong Leong Industries Berhad as Project Executive in He joined Tan Chong Group of Companies in 1992 as the Administration and Accounting Manager of the Group s Papua New Guinea operations. In 1993, he joined The Atlas Ice Group of Companies. He is a Non-Executive Director of The Atlas Ice Company Berhad, the holding company and is in charge of the ice manufacturing companies of the Group in Penang, Kedah and Perlis. He also sits on the Board of several other private limited companies which are involved in the fast moving consumer goods business. On 30 May 2011, Mr. Frederick Ng joined the Board and Audit Committee of LHH. Mr. Frederick Ng does not have any family relationship with any Director/ major shareholder of the Company. He does not have any conflict of interest with the Company. Mr. Frederick Ng has no conviction of any offences within the past ten (10) years. Mr. Frederick Ng had attended four (4) of the five (5) Board of Directors Meetings held in the financial year ended 31 March

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13 Chairman s Statement Teo Seng Capital Berhad Teo Seng Capital Berhad ( Teo Seng ) Group continuously creates the reputation through prestigious developments in various aspects. Fully cognizant the importance of our achievements, we deploy strategies effectively; an open mind and a deep perspective are needed to strategize the next move. Lau Jui Peng Chairman Dear Shareholders, On behalf of Teo Seng Capital Berhad and its team members, thank you for investing in our business and vision to be a successful and quality egg producer in the market. It is my honor to present you the Annual Report and Audited Financial Statements of the Group for the financial year ended 31st March FINANCIAL HIGHLIGHT For the year ended 31st March 2012, total sales reached RM267.3 million, representing an increase of 28.8% as compared to RM207.5 million a year earlier. Despite the growth in turnover, pretax earnings declined by 8.2% to RM24.5 million from RM26.7 million in the preceding year. As noted above, the decline in operating earnings was largely driven by higher commodity cost that plagued our industry throughout the entire fiscal year. The combination of higher raw material cost and increase in tax expense resulting from expiry of reinvestment allowance period for one of the subsidiaries had caused the decline in net earnings of the group. GEARING I proudly announce that with the effort of the management, we manage to maintain a healthy gearing ratio at 0.58 times and increase the net tangible asset value per share to RM0.57. OPERATIONS REVIEW Despite the tough challenge we faced, as I have said before, we remain committed to minimizing operational expenses, maintaining good product quality and growing profitable sales. We will continue to uphold our business model and upgrade our facilities to meet our consumer s preferences and needs. On the development front, the Group had built a new Central Packing Station ( CPS ) plant to accommodate two units of new egg grading machines purchased from Holland. The new CPS plant was catered to handle approximately 340,000 eggs per hour with improved hygiene features such as dirt and blood detection system. On 22 April 2011, Teo Seng Farming Sdn Bhd, a wholly owned subsidiary of the Company has entered into a Sale and Purchase Agreement to acquire 150,002 ordinary shares of RM1.00 each in Forever Best Supply Sdn Bhd ( Forever ) for a total cash consideration of RM1,076,483. Upon completion of the acquisition, Forever become a 60% owned indirect subsidiary of the Company. On 19 January 2012, The Company received a notice of the unconditional take-over offer from RHB Investment Bank Berhad on behalf of Emerging Glory Sdn Bhd ( EGSB ) to acquire all of the remaining ordinary shares of RM0.20 each at a cash offer price of RM0.65 per ordinary share. The closing date of the Offer was on 09 March 2012, which EGSB received the acceptance of 5.43% in respect of the Offer. DIVIDEND During the current financial year, the final single-tier dividend of 7% amounting to RM2.8million in respect of the preceding financial year ended 31 March 2011 was fully paid on 23 November The Board has recommended a proposed final single-tier dividend of 8.75% amounting to RM3.5million in respect of the financial year ended 31 March The dividend is subject to the approval of the shareholders at the Sixth Annual General Meeting. It is in line with the Group s policy that a reasonable dividend shall be payout to shareholders and reserving adequate funds for future investment and business growth. 11

14 Chairman s Statement PROSPECTS I understand that we are operating in a very competitive industry and consumers have more brand options than ever before. We are and must always be focused on strengthening and expanding our core business, and to further invest in related business to enhance long-term earnings and maintain well-capitalized balance sheet. I would like to highlight that we are in progress on working out the blue-print of the biogas project initiated in year 2011 with various biogas consultant from Europe. The objective is to minimize the electricity usage, reduce the emission of Carbon Dioxide to the air and enhance better odor management for the community. Transforming is exactly what we are doing now. Throughout the year, we had commenced research and invested in fermentation of organic fertilizer by using chicken manure to enhance lucrative yield from the raw material. The operation is expected to be initiated in the second half of year Aquaculture was a new business segment incubated since August The project was started with rearing two kinds of fresh water fish, Red Tilapia and Marble Goby. The preliminary result is expected to be evaluated during the harvest of first batch of Red Tilapia in the fourth quarter of year APPRECIATION I would like to thank our shareholders for their continued support and investment in our company. We have achieved another terrific year of strong growth and further enhanced brand recognition of our products. Nevertheless, I would like to address my appreciation to our loyal customers, strategic partners and government authorities for their un-doubtful support and trust in our Group. Lastly, I wish to acknowledge and express my deepest gratitude to our 900 employees our family members, which include the board members for their hard work and dedication to the continuing success of the company. We have come a long way, and I applaud each and every one of our family members for what they have done to get us to where we are today. But, there is still room for improvement and that is where we are headed in fiscal 2012, together we hatch for the future. 12

15 Corporate Governance Statement Teo Seng Capital Berhad The Board of Teo Seng Capital Berhad ( Teo Seng ) recognises the importance of adopting high standards of corporate governance throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and financial performance of the Group. As such, the Board strives to adopt the substance behind corporate governance prescriptions and not merely the form. The Board is therefore committed to the maintenance of high standards of corporate governance by supporting and implementing the prescriptions of the principles and best practices set out in the Malaysian Code on Corporate Governance ( the Code ). Steps taken by the Group to apply the principles and best practices of Corporate Governance as contained in the Code are set out below: THE BOARD OF DIRECTORS Board Composition, Board Balance and Board Responsibilities The Company is led and managed by an experienced and dynamic Board. It has a balanced Board composition with members who are specialised in relevant fields such as poultry farming, financing, business administration, corporate planning, development and marketing which is vital for the strategies success of the Group. The Board plays a pivotal role in the stewardship of the Group and ultimately enhancing shareholders value. Presently, the Board consists ten (10) members comprising one (1) Non-Executive Chairman, one (1) Managing Director, one (1) Executive Director, four (4) Non-Executive Directors and three (3) Independent Non-Executive Directors, in compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, which require that one third (1/3) of the Board members are Independent Non-Executive Directors. The profile of each Director is presented on page 6 to page 9 of this Annual Report. The Board is ensured of a balanced view at all Board deliberations largely due to the presence of its Non-Executive Directors who are independent from management of the Company. The Independent Directors are also free from any business or other relationships that could materially interfere with the exercise of their independent judgment. The composition reflects a balance of Executive Directors and Non-Executive Directors such that no individual or small group of individual can dominate the Board's decision making. Together with the Managing Director who has intimate knowledge of the Company's business, the Board comprises of individuals who are committed to business integrity and professionalism in all its activities. As part of its commitment, the Board supports the highest standards of corporate governance and the development of best practices for the Company. The Board retains full and effective overall control of the Company. This includes responsibility for determining the Company's overall strategic direction, formulation of policies and overseeing resources, investments and businesses of the Group. The Board conducts at least four (4) meetings in each financial year. Additional meetings are held as and when required. Details of Board members' attendance at Board Meeting for the financial year ended 31 March 2012 were as follows:- Name of Director Designation Attendance Mr. Lau Jui Peng Non-Executive Chairman 5/5 Mr. Nam Yok San Managing Director 4/5 Mr. Na Yok Chee Executive Director 4/5 Tan Sri Lau Tuang Nguang Non-Executive Director 5/5 Dato Zainal Bin Hassan Non-Executive Director 5/5 13

16 Corporate Governance Statement Name of Director Designation Attendance Dato Koh Koh Kim Toon Independent Non-Executive Director 3/5 Mr. Lau Joo Han Non-Executive Director 4/5 Mr. Loh Wee Ching Non-Executive Director 5/5 Mr. Choong Keen Shian Independent Non-Executive Director 4/5 Mr. Frederick Ng Yong Chiang Independent Non-Executive Director 4/5 Scheduled Board meetings are structured with a pre-set agenda. Board members are provided with updates on operational, financial and corporate issues as well as minutes of meetings of the various Board Committees prior to the meetings to enable Directors to obtain further explanations/clarifications if necessary, in order to ensure the effectiveness of the proceeding of the meetings. In additional to the quarterly Board reports, the Board makes public releases through Bursa Malaysia Securities Berhad and kept informed of the various requirements and updates issued by the various regulatory authorities. The Board has unrestricted access to all information within the Company and the advices and services of the Company Secretaries. The Directors may obtain independent professional advice in furtherance of their duties whenever necessary at the Company's expense. Re-election of the Directors In accordance with the Company's Articles of Association, one-third (1/3) of the Directors, including the Managing Director, shall retire from office, at least once in every three (3) years. Retiring directors can offer themselves for re-election. Any director appointed by the Board during the financial year is to retire at the next Annual General Meeting ( AGM ) held following their appointments. Directors over seventy (70) years of age retire at every AGM and may submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, Directors' Remuneration The details of Directors' Remuneration payable to the Directors of the Company for the financial year ended 31 March 2012 are as follows: Salaries & Other Fee Emoluments Total Category (RM) (RM) (RM) Executive Director 0 557, ,663 Non-Executive Director 240, , ,000 Total 240, , ,663 Number of Directors Executive Non-Executive Range of Remuneration Director Director Total Below RM50, RM100,001 to RM150, RM250,001 to RM300, Total

17 Corporate Governance Statement Directors Training In compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Directors are mindful that they shall receive appropriate training which may be required from time to time to keep them abreast with the current developments of the industry as well as the new statutory and regulatory requirements. All the Directors have completed the Mandatory Accreditation Programme ( MAP ) as specified by Bursa Malaysia Securities Berhad. The Directors will continue to receive appropriate training or education to fulfill the Main Market Listing Requirements in the next financial year. During the financial year ended 31 March 2012, the Directors attended internal briefings by the Company Secretary on amendments to the Listing Requirements, rules and regulations of relevant authorities and updates on Financial Reporting Standard by the Group Accountant. Respective Directors have participated in certain seminar, training programmes during the financial year ended 31 March 2012 which include:- Accounting & Fair Value for Financial instruments Seminar 2011 held on 7 July 2011 Risks of Trading in China and Control held on 21 July 2011 Malaysian Corporate Tax held on 22 September 2011 and 23 September 2011 MIA-AFA Conference 2011 held on 2 November 2011 and 3 November 2011 BOARD COMMITTEES The Board has established the following Board Committees to assist the Board in executing its responsibilities. The Chairman of the respective committees will report to the Board on the matters considered and submit recommendations for the Board's Approval. Audit Committee The composition and terms of reference of this Committee together with its report are presented on page 24 to page 27 in the Audit Committee's Report. Nomination Committee The Nomination Committee is primarily responsible for the proposing of new nominees for the Board and for assessing the performance of the members of the Board on an on-going basis. The committee comprises Mr. Lau Jui Peng (Chairman/Non-Executive Director), Mr. Choong Keen Shian (Member/ Independent Non-Executive Director) and Mr. Frederick Ng Yong Chiang (Member/ Independent Non-Executive Director). The duties and responsibilities of the Nomination Committee are as follows: i. recommend to the Board of Directors, candidates for directorships to be filled by the shareholders or the Board of Directors. In making its recommendations, the Nomination Committee should consider the candidates :- 1. skills, knowledge, expertise and experience; 2. professionalism; 3. integrity; and 4. in the case of candidates for the position of Independent Non-Executive Directors, the Committee should also evaluate the candidate s ability to discharge such responsibilities/functions as expected from Independent Non-Executive Directors; ii. consider, in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and, within the bounds of practicability, by any other senior executive or any director or shareholder; iii. recommend to the Board of Directors, directors to fill the seats on Board committees; iv. assess annually the effectiveness of the Board as a whole, the committees of the Board and the contribution of each existing individual director and thereafter, recommend its findings to the Board of Directors; v. review annually the required mix of skills and experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board and thereafter, recommend its findings to the Board; and vi. apply the process as determined by the Board of Directors, for assessing the effectiveness of the Board as a whole, the committees of the Board, and for assessing the contribution of each individual Director, including Independent Non-Executive Directors, as well as the Chief Executive Officer where all assessments and evaluations carried out by the Committee in the discharge of all its functions should be properly documented. 15

18 Corporate Governance Statement Structures and Procedures The Committee should meet regularly, with due notice of issues to be discussed and should record its conclusion in discharging its duties and responsibilities. The Committee should disclose the number of committee meetings held in a year and the details of attendance of each individual member in respect of meetings held. The quorum shall be 2 members with majority of Independent Directors. The Committee should have a formal schedule of matters specifically reserved to it for decision to ensure that the direction and control of the Committee is firmly in its hands. The Committee should be entitled to the services of a secretary who must ensure that all appointments are properly made, that all necessary information is obtained from Board of Directors, both the Company s own records and for the purposes of meeting statutory requirements, as well as obligations arising from the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and/or other regulatory authorities. Access to Advice In furtherance to their duties as the Committee s members of the Company, there should be an agreed procedure for the members, whether as a full Committee or in their individual capacity, to take independent professional advice at the Company s expense, if necessary. Remuneration Committee The Remuneration Committee is primarily responsible for the development and review of the remuneration policy and packages for the Board members. The remuneration policy aims to attract and retain Directors necessary for proper governance and the smooth running of the Company. The Committee comprises Mr. Lau Jui Peng (Chairman/Non-Executive Director), Mr. Lau Joo Han (Member/Non-Executive Director) and Mr. Choong Keen Shian (Member/Independent Non-Executive Director). The duties and responsibility of the Committee are as follows: i) The Committee shall recommend to the Board of Directors, the remuneration of the Executive Directors in all its forms, drawing from outside advice as necessary and the Executive Directors shall play no part in decisions on their own remuneration. ii) Determination of remuneration packages of Non-Executive Directors, including Non-Executive Chairman, should be determined by the Board of Directors as a whole and the individuals concerned should abstain from discussing their own remuneration. Structures and Procedures The Committee should meet regularly, with due notice of issues to be discussed and should record its conclusion in discharging its duties and responsibilities. The Committee should disclose the number of committee meetings held in a year and the details of attendance of each individual member in respect of meetings held. The quorum shall be 2 members with majority of Non-Executive Directors. The Committee should have a formal schedule of matters specifically reserved to it for decision to ensure that the direction and control of the Committee is firmly in its hands. The Committee should be entitled to the services of a secretary. 16

19 Corporate Governance Statement Access to Advice In furtherance to their duties as the Committee s members of the Company, there should be an agreed procedure for the members, whether as a full Committee or in their individual capacity, to take independent professional advice at the Company s expense, if necessary. ACCOUNTABILITY AND AUDIT Financial Reporting In making of announcements for quarterly and annual financial statements to Bursa Malaysia Securities Berhad and Shareholders, the Board of Directors have responsibility and endeavored to present a balanced and understandable assessment of the Group's financial positions and prospects. The Audit Committee assists the Board to ensure the accuracy and adequacy of the information announced. Internal Control The Board is committed to maintain a sound system of the internal control in the Group to safeguard Shareholders' investments and the Company's assets. Accordingly, the directors are obliged to ensure that the internal control system are existed and practiced within the Group. The Audit Committee assists the Board in fulfilling this obligation by reviewing the effectiveness and adequacy of the system. The following key reporting systems and procedures that have been in place within the Group: 1) Regular and comprehensive information provided to management covering financial and cashflow performance. 2) Regular visits to operating units by members of the Board and senior management. 3) Regular internal audit visits, which monitor compliance with procedures and assess the integrity of financial information. 4) Defined delegation of responsibility to the Board of Directors and Management of the Group including authorisation level for all aspects of the business. Further details relating to the review on internal control system are set out under Statement of Internal Control on page 22 and page 23 of the Annual Report. Relationship with Auditors The Company has always maintained an appropriate and transparent relationship with its Auditors in seeking professional advice and ensuring compliance with the applicable approved accounting standards in Malaysia. The Board and Audit Committee will be meeting the external Auditors at least once a year. The external Auditors fill an essential role for Shareholders by enhancing the reliability of the Company's financial statements and giving assurance of that reliability to users of these financial statements. INVESTOR RELATIONS AND SHAREHOLDERS COMMUNICATION The Group recognises the need to inform the shareholders of all significant developments concerning the Group on a timely basis with strict adherence to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Shareholders and investors are kept informed of all major developments within the Group by way of announcements via the Bursa LINK, the Company s Annual Reports, website and other circulars to shareholders with an overview of the Teo Seng Group s financial and operational performance. The Company always maintains transparency in business activities and to continuously keep the shareholders and the public well informed on the Company s activities. 17

20 Corporate Governance Statement Annual General Meeting The Annual General Meeting is the principal forum for dialogue and interaction with shareholders. At the Annual General Meeting, the Board also provides opportunities for shareholders to raise questions pertaining to the business activities of the Group. The Chairman and where appropriate, the Executive Director will respond to shareholders questions during the meeting. Shareholders who are unable to attend are allowed to appoint proxies to attend and vote on their behalf. Directors and external auditors are available to provide explanations on queries raised during the meetings as well as to discuss with Shareholders, invited attendees and members of the press. For re-election of Directors, the Board will ensure that full information is disclosed through the notice of meeting regarding directors who are retiring and who are willing to serve if re-elected. Each item of special business included in the notice of the meeting will be accompanied by an explanatory statement for the proposed resolution to facilitate full understanding and evaluation of issues involved. COMPLIANCE WITH THE CODE The Board strives to ensure that the Company complies with the Principles and Best Practices of the Code. The Board will endeavour to improve and enhance the procedures from time to time. The Group has complied with the Best Practice of the Code. CORPORATE SOCIAL RESPONSIBILITY Our Group believes the improvement in the conditions surrounding our stakeholders, employees, society and the environment is vital to the growth of the Group. Our corporate social responsibility covers the following keys areas:- Employee welfare and development Company provided training to the employees. The training comprises both technical and soft skills. For the financial year ended 31 March 2012, there was a two days in-house training seminar Malaysian Corporate Tax Workshop held at Teo Seng Capital Berhad s corporate office on 22 September 2011 and 23 September Apart from training, employees are also provided with medical and healthcare insurance, adequate and compensation programs which commensurate with their rank and level of employments. Further, the Group acknowledges the needs to provide a healthy and balanced lifestyle to its employees. In this aspect, various initiatives, such as annual dinner and social events were organised by our major subsidiary throughout the year. Through these programmes, we aim to attract and maintain various talents in our Company. Occupational health and safety The Group is committed to provide and ensure a safe and healthy environment at all times. It continues to implement various ongoing health and safety programmes to educate employee on various aspects of safety practices. As Teo Seng Group recognise the importance of the greenery, our employees are working in an environment that is close to the mother of nature. The Group will continue to emphasise on the importance of health and safety at the work place. Providing Opportunities for Re-employment of Retirees Company provides re-employment opportunities for employees or people who have passed their retirement age and who wish to continue working. 18

21 Corporate Governance Statement Teo Seng Capital Berhad Community During the financial year, we had donated cash to a diverse range of worthy causes, including educational institutions and organisations. We gave financial support to 1MCA Medical Foundation for their partial contribution for medical treatment cost involving facilities not available at government hospitals. As part of our Company s effort to give back to the community, in this financial year, we had our Corporate Social Responsibility Programme at Buddhist Tzu-Chi Merits Society Batu Pahat on 4 December In order to take part in resource recovery programme, our employees divided into teams and stationed in different locations to assist in segregating all the items into different categories such as papers, plastics, clothes, aluminium, glasses, shoes, bags, electronic devices and etc. The funds collected from this programme would be used as charity purposes. Papers Recycle We fully recognise the preservation of nature and the global ecosystem is vital for the happiness and survival of the humanity into the future. We gathered the waste papers such as old magazines, old newspapers and used carton boxes for Teo Seng Paper Products Sdn. Bhd., a wholly owned subsidiary of Teo Seng Capital Berhad to manufacture and market the environmental friendly paper egg trays. DIRECTORS' REPONSIBILITIES STATEMENT The Directors are responsible to ensure that financial statements are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia. In preparation of financial statements for the year ended 31 March 2012, the Directors are also responsible for the adoption of suitable accounting policies and their consistent use in the financial statements supported where necessary by reasonable and prudent judgments. OTHER INFORMATION Share Buybacks The Company did not engage in any share buyback arrangement during the financial year ended 31 March Depository Receipt Programme ( DRP ) The Company did not sponsor any DRP during the financial year ended 31 March Profit Guarantee During the financial year, there was no profit guarantee given by the Company. Options, Warrants or Convertible Securities The Company has not issued any options, warrants or convertible securities during the financial year ended 31 March Sanctions and/or Penalties There were no major sanctions and/or penalties imposed on the Company or its subsidiaries, Directors or management by the relevant regulatory bodies during the financial year. Non-Audit Fees The amount of non-audit fees paid to the external auditors is RM3,450 for the financial year ended 31 March Variation in Results No variances of more than 10% between the audited results for the financial year ended 31 March 2012 and the unaudited results previously announced. 19

22 Corporate Governance Statement Material Contracts There were no material contracts entered into or subsisting between the Company and its subsidiaries involving directors' and major shareholders' interest during the financial year ended 31 March 2012 other than those disclosed below :- Success Century Sdn. Bhd. ( A) ( SCSB ), a wholly-owned subsidiary of the Company had entered into a Memorandum of Understanding ( MOU ) with the following persons on 10 January 2012 to acquire a piece of freehold land held under Plot F of Lot 70, Mukim of Tj. Sembrong, District of Batu Pahat, Johor measuring in area approximately acres for a total cash consideration of RM1,876, (Ringgit Malaysia One Million Eight Hundred Seventy Six Thousand Four Hundred Thirty only):- 1. Mr. Lim Meng Bin, a Director of SCSB; and 2. Mr. Ng Eng Leng, Director of various subsidiaries of the Company. Recurrent Related Party Transactions of a Revenue Nature The details of the recurrent related party transactions of revenue or trading in nature undertaken by the Company during the financial period are disclosed in Note 32 to the financial statements. Revaluation Policy The Group s revaluation policy on landed properties are stated in Note 4 to the financial statements. Utilisation of Proceeds No proceeds were raised by the Company from any corporate proposals during the financial year ended 31 March

23

24 Statement Of Internal Control RESPONSIBILITIES The Board acknowledges its responsibility for Group's system of internal control and for reviewing its effectiveness whilst the role of the management is to implement the Board's policies on risk management and control effectiveness. Due to limitation inherent in any internal control system, internal control in Teo Seng Capital Berhad is designed to manage rather than eliminate the risk of failure to achieve the overall business objectives. It is noted that internal controls can only provide reasonable but not absolute assurance against material misstatement or loss regarding: (a) the safeguarding of Group's assets against unauthorised use or disposition; and (b) the maintenance of proper accounting records and the reliability of financial information used within the business or for publication. The Board confirms that there is a continuous process for identifying, evaluating and managing the significant risks faced by the Group which was put in place in the current financial year under review. The process is regularly reviewed by the Board and is in accordance with the guideline as contained in the publication- Statement on Internal Control: Guideline for Directors of Public Listed Companies. KEY PROCESSES The process of governing the effectiveness and integrity of the system of the internal controls is carried throughout the various areas as follows: Internal Audit Department The Internal Auditor in charge of this department reports to the Audit Committee and performed a scheduled reviews of operations and compliance with policies and procedures to assess effectiveness of internal controls. The Audit Committee reviews and scrutinises reports issued by the Internal Audit Department and conducts its own assessment on the adequacy of Internal Audit Department's scope of work and resources annually. The Internal Audit Department submits the findings and recommendations to improve the internal controls to the Audit Committee for review, response and implementation of corrective actions, which would enhance the internal control aspects of the relevant areas under review. Other Key Areas of Internal Control The following are other key areas of the Group's internal control system:- The Board reviews quarterly reports from Management on the key operating performance, legal, environmental and regulatory matters. Financial performance is deliberated at the Management Committee and also tabled to the Board on a quarterly basis. Limits of Authority provide a sound framework of authority and accountability within the organisation and to facilitate quality and timely corporate decision making at the appropriate level in the organisation's hierarchy. Internal control procedures are documented in comprehensive standard operating procedures manuals with established guidelines on business planning, capital expenditures, financial operations, performance reporting, human resource and health, safety and environment. There were no material internal control failures nor have any of the reported weaknesses resulted in material losses or contingencies during the financial year. 22

25 Statement Of Internal Control RISK MANAGEMENT FRAMEWORK The professionalism and competency of staff are enhanced through a proper planned training, development programmes and also a stringent recruitment process. A performance appraisal system of staff is in place, with established targets and accountability and is reviewed on an annual basis. Action plans are prepared to ensure that staff obtains required skills to execute their responsibilities. The Group has its own Code of Conducts for Officers and Staffs issued upon joining. Staffs are required to strictly adhere to the Code in performing their duties. The Audit Committee has also been assigned the duty of reviewing and monitoring the effectiveness of the Group's system of internal control. It receives reports from the internal auditor, inclusive of risk management reports in order to report to the Board on significant changes in the business and the external environment which affect key risks. The external auditors have reviewed the Statement of Internal Control pursuant to Paragraph of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and have reported to the Board that it appropriately reflects the processes that the Board has adopted in reviewing the adequacy and integrity of the system of internal controls. 23

26 Audit Committee s Report The members of the Audit Committee as at the date of this report are as follows: Chairman Choong Keen Shian Independent Non-Executive Director Members Lau Jui Peng Frederick Ng Yong Chiang Dato Koh Koh Kim Toon Non-Executive Chairman Independent Non-Executive Director Independent Non-Executive Director TERMS OF REFERENCE Composition of the Audit Committee The Audit Committee shall be appointed by the Board from amongst their numbers, which fulfils the following requirements:- (1) The Audit Committee must be composed of no fewer than 3 members. In the event of any vacancy in the Audit Committee resulting in the non-compliance of the above, the Company must fill the vacancy within 3 months. (2) All the Audit Committee members must be financially literate, with at least one member:- (i) must be a member of the Malaysian Institute of Accountants; or (ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years' working experience and: (a) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or (b) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act 1967; or (iii) fulfils such other requirements as prescribed or approved by the Exchange. (3) No alternate director shall be appointed as a member of the Audit Committee. (4) The member of the Audit Committee shall elect a Chairman from among themselves who shall be an Independent Director. The Chairman of the Audit Committee should engage on a continuous basis with senior management, the head of internal audit and the external auditors in order to be kept informed of matters affecting the company. All members of the Audit Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company. The Board must review the term of office and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether the Audit Committee has carried out its duties in accordance with its terms of reference. Secretary of the Audit Committee The Company Secretaries of the Company shall be the Secretaries of the Audit Committee. Duties and Responsibilities of the Audit Committee The following are the main duties and responsibilities of the Audit Committee collectively: (1) Review the following and report the same to the Board of the Company: (i) (ii) (iii) (iv) (v) with the external auditors, the audit plan; with the external auditors, his evaluation of the system of internal controls; with the external auditors, his audit report; the assistance given by the employees of the Company to the external auditors and the internal auditors; the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; 24

27 Audit Committee s Report (vi) the internal audit programme, processes, the 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; (vii) the quarterly results and year end financial statements, prior to the approval by the Board, focusing particularly on: (a) changes in or implementation of major accounting policy changes; (b) significant and unusual events; and (c) compliance with accounting standards and other legal requirements; (viii) any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity; (ix) any letter of resignation from the external auditors and any questions of resignation or dismissal; and (x) whether there is reason (supported by grounds) to believe that the Company's external auditor is not suitable for re-appointment; (2) Oversee the Company s internal control structure to ensure operational effectiveness and efficiency, reduce risk of inaccurate financial reporting, protect the Company s assets from misappropriation and encourage legal and regulatory compliance; (3) Assist the Board in identifying the principal risks in the achievement of the Company s objectives and ensuring the implementation of appropriate systems to manage these risks; (4) Recommend to the Board on the appointment and re-appointment of the external auditors and their audit fee, after taking into consideration the independence and objectivity of the external auditors and the cost effectiveness of the audit; (5) Discuss with the external auditors before the audit commences the nature and scope of the audit and ensure co-ordination where more than one audit firm is involved; (6) Discuss problems and reservations arising from the audits and any matter the auditors may wish to discuss in the absence of the management where necessary; (7) Review the external auditor s management letter and management s response therein; (8) In relation to the internal audit function:- (i) review the adequacy of the scope, functions and resources of the internal audit function, and that it has the necessary authority to carry out its work; (ii) review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function; (iii) review any appraisal or assessment of the performance of members of the internal audit function; (iv) approve any appointment or termination of senior staff members of the internal audit function; and (v) take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. (9) Consider the major findings of internal investigations and management s response; and (10) Consider other matters as defined by the Board. 25

28 Audit Committee s Report Rights of the Audit Committee In carrying out its duties and responsibilities, the Audit Committee will: (1) have the authority to investigate any matter within its terms of reference; (2) have the resources which are required to perform its duties; (3) have full and unrestricted access to any information pertaining to the Company; (4) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; (5) be able to obtain independent professional or other advice and to invite outsiders with relevant experience and expertise to attend the Audit Committee meetings (if required) and to brief the Audit Committee; and (6) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary. Conduct of Meetings (1) The Audit Committee will meet at least four (4) times in each financial year although additional meetings may be called at any time, at the discretion of the Chairman of the Audit Committee. (2) The quorum shall consist of a majority of Independent committee members and shall not be less than two. (3) Recommendations to the Audit Committee are submitted to the Board for approval. (4) The Company Secretaries shall be in attendance at each Audit Committee meeting and record the proceedings of the meeting thereat. (5) Minutes of each meeting shall be kept as part of the statutory record of the Company upon confirmation by the Board and a copy shall be distributed to each member of the Audit Committee. (6) The Managing Director and other appropriate officer may be invited to attend where their presence are considered appropriate as determined by the Audit Committee Chairman. (7) The internal auditors and/or external auditors have the right to appear and be heard at any meeting of the Audit Committee and are recommended to attend each Audit Committee meeting. (8) Upon the request of the internal auditors and/or external auditors, the Audit Committee Chairman shall also convene a meeting of the Audit Committee to consider any matter the auditor(s) believes should be brought to the attention of the Board or the shareholders. (9) The Audit Committee must be able to convene meetings with external auditors without the presence of the executive board members and management at least twice a year and whenever deemed necessary. (10) Where the Audit Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Audit Committee must promptly report such matter to Bursa Malaysia Securities Berhad. (11) The attendance of any particular Audit Committee meeting by other directors and employees of the Company shall be at the Audit Committee s invitation and discretion and must be specific to the relevant meeting. 26

29 Audit Committee s Report Attendance at Meetings Details of the attendance of the Committee members for the financial year ended 31 March 2012 are as follows: Name of member Number of meetings attended Choong Keen Shian 4/5 Lau Jui Peng 5/5 Frederick Ng Yong Chiang 4/5 Dato Koh Koh Kim Toon 3/5 The Financial Controller, Group Accountant and/or internal auditors shall attend the meetings upon invitation by the Chairman of the Committee. However, at least once a year a Committee shall meet the external auditors. Summary of Activities during the Financial Year The main activities undertaken by the Committee were as follows: Reviewed the external auditors scope of work and the audit plans for the year prior to the commencement of audit. Reviewed the internal audit department s resources requirements, programme and plan for the financial year under review. Reviewed the internal audit reports, which highlighted the risk issues, recommendations and management s response. Reviewed the audited financial statements of the Group prior to submission to the Board for their consideration and approval. The review was to ensure that the audited financial statements were drawn up in accordance with applicable approved accounting standards for entities other than private entities issued by the Malaysian Accounting Standards Board ( MASB ) and the provisions of the Companies Act, Reviewed the Group s compliance in particular the quarterly and year end financial statements with the Main Market Listing Requirements of the Bursa Malaysia Securities Berhad, MASB and other relevant legal and regulatory requirements. Reviewed the quarterly unaudited financial results announcements before recommending them for the Board s approval. The review and discussions were conducted with the Financial Controller and Group Accountant. Internal audit function The Company has outsourced its internal audit function to its intermediate holding company, which is tasked with the aim of providing assurance to the Audit Committee and the Board on the adequacy and effectiveness of the internal control systems and risk management in the Company. The cost of RM47,049 was incurred for the internal audit function for the year ended 31 March This function also acts as a source to assist the Audit Committee and the Board to strengthen and improve current management and operating style in pursuit of best practices. 27

30

31 Financial tatements 30 Directors' Report 35 Statement by Directors 35 Statutory Declaration 36 Independent Auditors' Report 38 Statements of Financial Position 39 Statements of Comprehensive Income 40 Statements of Changes in Equity 41 Statements of Cash Flows 43 Notes to the Financial Statements

32 Directors Report The directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 March PRINCIPAL ACTIVITIES The Company is principally engaged in the business of investment holding and provision of management services. The principal activities of the subsidiaries are set out in Note 7 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. RESULTS Group RM Company RM Profit after tax for the financial year 17,137,136 6,297,824 Attributable to : Owners of the Company 17,262,160 6,297,824 Non-controlling interests (125,024) - 17,137,136 6,297,824 In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature. DIVIDENDS Dividend paid or declared by the Company since the end of the previous financial year were as follows : A final single tier dividend of 7.00% equivalent to 1.40 sen per ordinary share approximately of RM 2,800,000 which was proposed in respect of the financial year ended 31 March 2011 and dealt with in the previous directors report, was declared on 27 July 2011 and subsequently paid on 23 November The payment was made to the shareholders whose name appeared in the Company s Records of Depositors on 1 November The Board of Directors proposed a final single tier dividend of 8.75% equivalent to 1.75 sen per ordinary share approximately of RM 3,500,000 in respect of the financial year ended 31 March The dividend is subject to the approval of shareholders at the forthcoming Annual General Meeting of the Company and has not been included as a liability in the financial statements. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits for the financial year ending 31 March RESERVES AND PROVISIONS There was no material transfers to or from reserves and provisions during the financial year save as disclosed in the financial statements. ISSUES OF SHARES AND DEBENTURES There was no issue of shares and debentures during the financial year. 30

33 Directors Report OPTIONS GRANTED OVER UNISSUED SHARES No options have been granted by the Company to any person to take up any unissued shares of the Company during the financial year. HOLDING COMPANIES The Company is a subsidiary of Advantage Valuations Sdn. Bhd., a company incorporated in Malaysia. The intermediate holding company is Leong Hup Holdings Berhad, a company incorporated in Malaysia. With effect from 12 April 2012, the directors regard Emerging Glory Sdn. Bhd. as its ultimate holding company. Prior to that, the directors regarded Leong Hup Management Sdn. Bhd., a company incorporated in Malaysia, as its ultimate holding company. DIRECTORS The directors who served since the date of last report are : Tan Sri Lau Tuang Nguang Lau Jui Peng Lau Joo Han Nam Yok San Na Yok Chee Loh Wee Ching Choong Keen Shian Frederick Ng Yong Chiang Dato Koh Koh Kim Toon Dato Zainal Bin Hassan DIRECTORS INTERESTS According to the register of directors shareholdings, the interests of directors holding office at the end of the financial year in shares in the Company and its related corporations during the financial year are as follows : The Company Number Of Ordinary Shares Of RM0.20 Each Balance At Balance At Bought Sold Tan Sri Lau Tuang Nguang - Indirect 212,800 10,850,900-11,063,700 Nam Yok San - Indirect 102,254, ,254,001 Na Yok Chee - Direct 1, ,450 - Indirect 102,246, ,246,001 31

34 Directors Report DIRECTORS INTERESTS (cont d) Immediate Holding Company Advantage Valuations Sdn. Bhd. Number Of Ordinary Shares Of RM1.00 Each Balance At Balance At Bought Sold Tan Sri Lau Tuang Nguang - Direct Nam Yok San - Indirect 4, ,900 Na Yok Chee - Indirect 4, ,900 Intermediate Holding Company Leong Hup Holdings Berhad Number Of Ordinary Shares Of RM1.00 Each Balance At Balance At Bought Sold Tan Sri Lau Tuang Nguang - Direct 13, ,800 (187,800) 191,000 - Indirect 178, ,800 (178,000) 187,800 Lau Jui Peng - Direct 93,700 - (63,100) 30,600 Lau Joo Han - Direct 45,000 - (25,000) 20,000 Other than as disclosed above, none of the directors in office at the end of the financial year had any other interest in the shares of the Company, or its related corporations during the financial year. DIRECTORS BENEFITS Since the end of the previous financial year, none of the directors has received or become entitled to receive any benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors as disclosed in Note 22(a) to 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 save as disclosed in Note 32(b) to the financial statements. During and at the end of the financial year, no arrangements subsisted to which the Company was a party, whereby the 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. 32

35 Directors Report OTHER STATUTORY INFORMATION (a) Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps : (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and have satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts ; and (ii) to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances : (i) which would render the amount written off for bad debts or the additional allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent ; or (ii) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading ; or (iii) which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate ; or (iv) not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. (c) At the date of this report, there does not exist : (i) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year and which secures the liabilities of any other person ; or (ii) any contingent liability in respect of the Group and of the Company which has arisen since the end of the financial year. (d) In the opinion of the directors : (i) 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 will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due ; and (ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR The significant event during the financial year are disclosed in Note 34 to the financial statements. SIGNIFICANT EVENTS OCCURRING AFTER THE REPORTING PERIOD The significant events occurring after the reporting period are disclosed in Note 35 to the financial statements. 33

36 Directors Report AUDITORS The auditors, Messrs. Crowe Horwath, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors : LAU JUI PENG Director NAM YOK SAN Director Muar, Johor Darul Takzim Date : 26 July

37 Statement By Directors Teo Seng Capital Berhad We, the undersigned, being two of the directors of Teo Seng Capital Berhad, do hereby state that, in the opinion of the directors, the financial statements set out on pages 38 to 93 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 March 2012 and of their results and cash flows for the financial year ended on that date. The supplementary information set out in Note 37, which is not part of the financial statements, is prepared in all material respects, in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad. Signed on behalf of the Board in accordance with a resolution of the directors : LAU JUI PENG Director NAM YOK SAN Director Muar, Johor Darul Takzim Date : 26 July 2012 Statutory Declaration I, NAM YOK SAN, the director primarily responsible for the financial management of Teo Seng Capital Berhad, do solemnly and sincerely declare that the financial statements and supplementary information set out on pages 38 to 94 are to the best of my knowledge and belief, correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by the abovenamed NAM YOK SAN at Muar in the state of Johor Darul Takzim on 26 July 2012 Before me Commissioner for Oaths NAM YOK SAN 35

38 Independent Auditors Report To The Members Of Teo Seng Capital Berhad REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Teo Seng Capital Berhad, which comprise the statements of financial position at 31 March 2012 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 38 to 93. Directors Responsibility For The Financial Statements The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company at 31 March 2012 and of their financial performance and cash flows for the financial year then ended. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following : (a) (b) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the auditors reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 7 to the financial statements. 36

39 Independent Auditors Report To The Members Of Teo Seng Capital Berhad (c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. (d) The auditors reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act. The supplementary information set out in Note 37 on page 94 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Crowe Horwath Firm No.: AF 1018 Chartered Accountants Ng Kim Kiat Approval No: 2074/10/12 (J) Chartered Accountant Muar, Johor Darul Takzim Date : 26 July

40 Statements Of Financial Position At 31 March 2012 Group Company Note RM RM RM RM ASSETS Non-Current Assets Property, plant and equipment 5 125,181, ,162, , ,412 Investment property 6 468, , Investment in subsidiaries ,798,407 66,798,407 Other investments 8 6,040 5, ,655, ,643,736 68,537,439 67,460,819 Current Assets Inventories 10 34,720,030 30,884, Trade and other receivables 11 31,514,573 25,019,176 5,374,335 1,271,733 Deposits, bank and cash balances 12 21,126,551 22,891, , ,813 Dividend receivable ,000-87,361,154 78,794,879 6,240,599 2,197,546 TOTAL ASSETS 213,016, ,438,615 74,778,038 69,658,365 EQUITY AND LIABILITIES Equity Attributable To Owners Of The Company Share capital 13 40,000,000 40,000,000 40,000,000 40,000,000 Reserves 14 74,002,585 59,557,919 23,805,256 20,307,432 TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY 114,002,585 99,557,919 63,805,256 60,307,432 NON-CONTROLLING INTERESTS 174, TOTAL EQUITY 114,177,029 99,557,919 63,805,256 60,307,432 Non-Current Liabilities Bank borrowings 15 3,454,274 3,846, Hire purchase payables 16 7,102,307 3,961, Deferred tax liabilities 17 9,380,104 8,729, ,936,685 16,537, Current Liabilities Trade and other payables 18 23,050,326 18,804,964 10,972,782 9,350,933 Derivative liabilities Bank borrowings 15 48,410,155 43,830, Hire purchase payables 16 7,303,380 4,378, Tax payable 139, , ,902,861 67,343,636 10,972,782 9,350,933 TOTAL LIABILITIES 98,839,546 83,880,696 10,972,782 9,350,933 TOTAL EQUITY AND LIABILITIES 213,016, ,438,615 74,778,038 69,658,365 The annexed notes form an integral part of these financial statements. 38

41 Statements Of Comprehensive Income For The Financial Year Ended 31 March 2012 Teo Seng Capital Berhad Group Company Note RM RM RM RM REVENUE ,287, ,490,392 8,682,500 6,460,000 INVESTMENT REVENUE ,450 84,654 63,814 33,891 OTHER INCOME 1,884,572 1,388,836 17,399 - CHANGES IN INVENTORIES 3,741,799 2,612, PURCHASE OF TRADING MERCHANDISE, RAW MATERIALS, LIVESTOCKS AND POULTRY FEEDS (179,429,581) (130,122,631) - - STAFF COSTS 23 (27,937,295) (21,299,621) (994,985) (823,945) DEPRECIATION (9,051,058) (7,413,714) (80,801) - FINANCE COSTS 24 (3,296,452) (2,315,058) (336,302) - OTHER EXPENSES (28,821,204) (23,699,117) (1,084,255) (710,095) PROFIT BEFORE TAX 25 24,521,220 26,726,609 6,267,370 4,959,851 TAX EXPENSE 26 (7,384,084) (4,620,960) 30,454 (993,870) PROFIT AFTER TAX 17,137,136 22,105,649 6,297,824 3,965,981 OTHER COMPREHENSIVE INCOME, NET OF TAX - Fair value changes of available-for-sale financial assets 960 1, Foreign currency translation (18,454) (14,566) - - (17,494) (12,796) - - TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 17,119,642 22,092,853 6,297,824 3,965,981 PROFIT AFTER TAX ATTRIBUTABLE TO : Owners of the Company 17,262,160 22,105,649 6,297,824 3,965,981 Non-Controlling Interests (125,024) ,137,136 22,105,649 6,297,824 3,965,981 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO : Owners of the Company 17,244,666 22,092,853 6,297,824 3,965,981 Non-Controlling Interests (125,024) ,119,642 22,092,853 6,297,824 3,965,981 EARNINGS PER ORDINARY SHARE (SEN) Basic The annexed notes form an integral part of these financial statements. 39

42 Statements Of Changes In Equity For The Financial Year Ended 31 March 2012 Group Attributable to Owners of The Company _ Non-Distributable Distributable Foreign Attributable Exchange Reverse To Owners Non- Share Share Fair Value Translation Acquisition Revaluation Retained Of The Controlling Note Capital Premium Reserve Reserve Reserve Reserve Profits Company Interests Total Equity RM RM RM RM RM RM RM RM RM RM At 1 April ,000,000 8,010, (26,078,000) 4,031,856 54,900,097 80,865,066-80,865,066 Profit after tax for the financial year ,105,649 22,105,649-22,105,649 Other comprehensive income for the financial year, net of tax : - Fair value changes of available-for-sale financial assets - - 1, ,770-1,770 - Foreign currency translation (14,566) (14,566) - (14,566) Total comprehensive - - 1,770 (14,566) ,105,649 22,092,853-22,092,853 income/(expenses) for the financial year Contributions by and distributions to owners of the Company : - Dividends : - by the Company (3,400,000) (3,400,000) - (3,400,000) At 31 March 2011 / 1 April ,000,000 8,010,827 2,056 (14,566) (26,078,000) 4,031,856 73,605,746 99,557,919-99,557,919 Profit after tax for the financial year ,262,160 17,262,160 (125,024) 17,137,136 Other comprehensive income for the financial year, net of tax : - Fair value changes of available-for-sale financial assets Foreign currency translation (18,454) (18,454) - (18,454) Total comprehensive income/(expenses) for the financial year (18,454) ,262,160 17,244,666 (125,024) 17,119,642 Contributions by and distributions to owners of the Company : - Acquisition of subsidiaries , ,468 - Dividends - by the Company (2,800,000) (2,800,000) - (2,800,000) At 31 March ,000,000 8,010,827 3,016 (33,020) (26,078,000) 4,031,856 88,067, ,002, , ,177,029 Company Attributable to Owners of The Company Non- Distributable Distributable Share Share Retained Note Capital Premium Profits Total Equity RM RM RM RM At 1 April ,000,000 8,010,827 11,730,624 59,741,451 Profit after tax/total comprehensive income for the financial year - - 3,965,981 3,965, Contributions by and distributions to owners of the Company : - Dividends (3,400,000) (3,400,000) At 31 March ,000,000 8,010,827 12,296,605 60,307,432 Profit after tax/total comprehensive income for the financial year - - 6,297,824 6,297,824 Contributions by and distributions to owners of the Company : - Dividends (2,800,000) (2,800,000) At 31 March ,000,000 8,010,827 15,794,429 63,805,256

43 Statements Of Cash Flows For The Financial Year Ended 31 March 2012 Teo Seng Capital Berhad Group Company RM RM RM RM CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 24,521,220 26,726,609 6,267,370 4,959,851 Adjustments for : Depreciation - property, plant and equipment 9,043,282 7,409,826 80,801 - Depreciation - investment property 7,776 3, Dividend income (280) (193) (8,322,500) (6,100,000) Fair value gain on derivatives (948) (26,006) - - Gain on disposal of property, plant and equipment (502,180) (25,000) - - Goodwill on consolidation written off 627,279 4,170, Impairment losses on trade receivables 214, , Inventories written off 30, , Property, plant and equipment written off 78, Reversal of allowance for slow moving inventories (4,104) Reversal of impairment losses on trade receivables (162,667) (77,603) - - Unrealised gain on foreign exchange (57,014) (166,184) - - Interest expenses 3,296,452 2,315, ,302 - Interest income (142,450) (84,654) (63,814) (33,891) OPERATING PROFIT/(LOSS) BEFORE WORKING CAPITAL CHANGES 36,949,770 40,614,536 (1,701,841) (1,174,040) Changes In Working Capital Inventories (3,712,145) (2,806,013) (3,815,715) - Trade and other receivables (4,714,979) (4,864,572) - (662,380) Trade and other payables 2,072,596 (2,780,300) 1,621,849 4,506,732 CASH GENERATED FROM/(ABSORBED INTO) OPERATIONS 30,595,242 30,163,651 (3,895,707) 2,670,312 Interest paid (3,296,452) (2,315,058) (336,302) - Interest received 142,450 84,654 63,814 33,891 Tax paid (7,285,629) (4,873,511) (256,433) (33,687) NET CASH FROM/(USED IN) OPERATING ACTIVITIES 20,155,611 23,059,736 (4,424,628) 2,670,516 CARRIED FORWARD 20,155,611 23,059,736 (4,424,628) 2,670,516 The annexed notes form an integral part of these financial statements. 41

44 Statements Of Cash Flows For The Financial Year Ended 31 March 2012 Group Company Note RM RM RM RM BROUGHT FORWARD 20,155,611 23,059,736 (4,424,628) 2,670,516 CASH FLOWS FROM INVESTING ACTIVITIES Dividend received ,822,500 4,875,000 Acquisition of subsidiaries, net of cash and cash equivalents acquired 28 (704,393) 341,137 - (240,005) Subscription of additional shares in subsidiaries - - (1,000,000) (3,000,000) Proceeds from disposal of property, plant and equipment 1,272,721 25, Purchase of property, plant and equipment 5(f) (16,269,132) (15,423,796) (157,421) (501,232) NET CASH (USED IN)/FROM INVESTING ACTIVITIES (15,700,524) (15,057,466) 6,665,079 1,133,763 CASH FLOWS FROM FINANCING ACTIVITIES Net decrease/(increase) in fixed deposits pledged 276,289 (19,288) - - Net movements in bankers' acceptances 5,663,000 12,826, Proceeds from term loans - 3,000, Repayment of term loans (1,493,823) (1,179,938) - - Repayment of hire purchase payables (6,715,403) (3,936,154) - - Dividends paid (2,800,000) (3,400,000) (2,800,000) (3,400,000) NET CASH (USED IN)/FROM FINANCING ACTIVITIES (5,069,937) 7,290,620 (2,800,000) (3,400,000) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (614,850) 15,292,890 (559,549) 404,279 EFFECT OF EXCHANGE DIFFERENCES (151,703) 103, CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 20,107,324 4,711, , ,534 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 30 19,340,771 20,107, , , The annexed notes form an integral part of these financial statements.

45 Notes To The Financial Statements For The Financial Year Ended 31 March 2012 Teo Seng Capital Berhad 1. GENERAL INFORMATION The Company is a public company limited by shares and is incorporated under the Companies Act, 1965 in Malaysia. The domicile of the Company is Malaysia and is listed on the Main Market of the Bursa Malaysia Securities Berhad. The registered office and principal place of business are as follows : Registered office : , Jalan Abdullah Muar Johor Darul Takzim Principal place of business : Lot PTD 25740, Batu 4 Jalan Air Hitam Yong Peng Johor Darul Takzim The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors dated 26 July PRINCIPAL ACTIVITIES The Company is principally engaged in the business of investment holding and provision of management services. The principal activities of the subsidiaries are set out in Note 7. There have been no significant changes in the nature of these principal activities during the financial year. 3. HOLDING COMPANIES The Company is a subsidiary of Advantage Valuations Sdn. Bhd., a company incorporated in Malaysia. The intermediate holding company is Leong Hup Holdings Berhad, a company incorporated in Malaysia. With effect from 12 April 2012, the directors regard Emerging Glory Sdn. Bhd. as its ultimate holding company. Prior to that, the directors regarded Leong Hup Management Sdn. Bhd., a company incorporated in Malaysia, as its ultimate holding company. 4. ACCOUNTING POLICIES AND STANDARDS 4.1 Basis of Preparation of Financial Statements (a) The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards ( FRSs ) and the Companies Act, 1965 in Malaysia. At the beginning of the current financial year, the Group and the Company have adopted new FRSs which are mandatory for financial period beginning on or after 1 April 2011 as disclosed in Note 4.3. (b) (c) The financial statements of the Group and of the Company have been prepared under the historical cost convention, unless otherwise indicated in the summary of significant accounting policies. The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 43

46 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.1 Basis of Preparation of Financial Statements (cont d) (c) In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in Note Summary of Significant Accounting Policies (a) Subsidiaries and basis of consolidation (i) Subsidiaries Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. 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. In the Company s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised in profit or loss. (ii) Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 March Subsidiaries are consolidated from the date on which control is transferred to the Group up to the effective date on which control ceases, as appropriate. Intragroup transactions, balances, income and expenses are eliminated on consolidation. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group. Non-controlling interests are presented within equity in the consolidated statement of financial position, separately from the Company s shareholders equity, and are separately disclosed in the consolidated statement of comprehensive income. Transactions with non-controlling interests are accounted for as transactions with owners and are recognised directly in equity. Profit or loss and each component of other comprehensive income are attributed to the owners of the parent 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. All changes in the parent s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of consideration paid or received is recognised directly in equity and attributed to owners of the parent. Upon loss of control of a subsidiary, the profit or loss on disposal is calculated as the difference between :- (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest in the former subsidiary ; and 44 (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the former subsidiary and any non-controlling interests.

47 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (a) Subsidiaries and basis of consolidation (cont d) (ii) Basis of consolidation (cont d) Amounts previously recognised in other comprehensive income in relation to the former subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained profits) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 127. Business combinations from 1 April 2011 onwards Acquisitions of businesses are accounted for using the acquisition method. Under the acquisition method, the consideration transferred for acquisition of a subsidiary is the fair value of the assets transferred, liabilities incurred and the equity interests issued by the Group at the acquisition date. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs, other than the costs to issue debt or equity securities, are recognised in profit or loss when incurred. In a business combination achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss. Non-controlling interests in the acquiree may be initially measured either at fair value or at the non-controlling interests proportionate share of the fair value of the acquiree s identifiable net assets at the date of acquisition. The choice of measurement basis is made on a transaction-by-transaction basis. The Group has applied the FRS 3 (Revised) in accounting for business combinations from 1 April 2011 onwards. The change in accounting policy has been applied prospectively in accordance with the transitional provisions provided by the standard. Business combinations before 1 April 2011 All subsidiaries are consolidated using the purchase method. At the date of acquisition, the fair values of the subsidiaries net assets are determined and these values are reflected in the consolidated financial statements. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. Non-controlling interests are initially measured at their share of the fair values of the identifiable assets and liabilities of the acquiree as at the date of acquisition. (b) Goodwill Goodwill is measured at cost less accumulated impairment losses, if any. The carrying amount of goodwill is reviewed for impairment annually. The impairment value of goodwill is recognised immediately in profit or loss. An impairment loss recognised for goodwill is not reversed in a subsequent period. 45

48 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (b) Goodwill (cont d) Business combinations from 1 April 2011 onwards Under the acquisition method, any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interests recognised and the fair value of the Group s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree s identifiable assets and liabilities at the date of acquisition is recorded as goodwill. Where the latter amount exceeds the former, after reassessment, the excess represents a bargain purchase gain and is recognised as a gain in profit or loss. Business combinations before 1 April 2011 Under the purchase method, goodwill represents the excess of the fair value of the purchase consideration over the Group s share of the fair values of the identifiable assets, liabilities and contingent liabilities of the subsidiaries at the date of acquisition. If, after reassessment, the Group s interest in the fair values of the identifiable net assets of the subsidiaries exceeds the cost of the business combinations, the excess is recognised as income immediately in profit or loss. (c) Property, plant and equipment and depreciation Items of property, plant and equipment are stated at cost or valuation less any accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct labour. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item, if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognsied in profit or loss as incurred. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Freehold land, farm and poultry buildings are stated at cost or revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. For freehold land and factory buildings, revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the reporting date. 46

49 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (c) Property, plant and equipment and depreciation (cont d) Surpluses arising on revaluation are recognised in other comprehensive income and accumulated in equity under the revaluation reserve. Any deficit arising from revaluation is charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for the same property, plant and equipment. In all other cases, a decrease in carrying amount is charged to profit or loss. Subsequent to revaluation, any addition is stated at cost whilst disposal is stated at cost or valuation as appropriate. Freehold land is not depreciated whilst capital work-in-progress are not depreciated until they are completed and put into use. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Other property, plant and equipment are depreciated on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful lives. Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal annual rates of depreciation used are as follows : Farm and poultry buildings 2% - 20% Factory buildings 1% - 2% Fish pond and equipment 2% - 10% Plant and machinery 5% - 20% Egg layer conveyor and cages system 5% Motor vehicles, electrical installation, furniture, fittings, equipment, renovation and hostel 2% % The residual values, useful lives and depreciation method are reviewed at the end of each reporting period to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. The carrying amounts of property, plant and equipment are reviewed for impairment when events or changes circumstances indicate that the carrying amounts may not be recoverable. The policy for the recognition and measurement of impairment losses is in accordance with Note 4.2(f)(ii). An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. The difference between the net disposal proceeds, if any, and the carrying amount is recognised in profit or loss and the unutilised portion of the revaluation surplus on that item, if any, is transferred directly to retained profits. (d) (e) Assets under hire purchase Assets acquired under hire purchase are capitalised in the financial statements and are depreciated in accordance with the policy set out in Note 4.2(c) above. Each hire purchase payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. Finance charges are recognised in profit or loss over the period of the respective hire purchase agreements. Investment property Investment property is property held either to earn rental income or for capital appreciation or for both. Initially, investment property is measured at cost including transaction costs, less accumulated depreciation and impairment losses, consistent with the accounting policy for property, plant and equipment. 47

50 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (e) Investment property (cont d) Investment property is derecognised when they have either disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year in which they arise. The annual depreciation rate for building is 1.62% calculated on the straight-line basis based on the remaining lease period. The residual values and depreciation method of investment property are reviewed at the end of reporting period, with the effect of any changes in estimates accounted for prospectively. (f) Impairment (i) Impairment of financial assets All financial assets (other than those categorised at fair value through profit or loss), are assessed at the end of each reporting period whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. For an equity instrument, a significant or prolonged decline in the fair value below its cost is considered to be objective evidence of impairment. An impairment loss in respect of held-to-maturity investments and loans and receivables financial assets is recognised in profit or loss and is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate. An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the fair value reserve. In addition, the cumulative loss recognised in other comprehensive income and accumulated in equity under fair value reserve, is reclassified from equity to profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of available-for-sale equity instruments, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss made is recognised in other comprehensive income. (ii) Impairment of non-financial assets The carrying amounts of assets, other than those to which FRS 136 Impairment of Assets does not apply, are reviewed at the end of each reporting period for impairment when there is an indication that the assets might be impaired. Impairment is measured by comparing the carrying amounts of the assets with their recoverable amounts. The recoverable amount of the assets is the higher of the assets fair value less costs to sell and their value-in-use, which is measured by reference to discounted future cash flow. 48

51 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (f) Impairment (cont d) (ii) Impairment of non-financial assets (cont d) An impairment loss is recognised in profit or loss immediately unless the asset is carried at its revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to the extent of a previously recognised revaluation surplus for the same asset. In respect of assets other than goodwill, and when there is a change in the estimates used to determine the recoverable amount, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in profit or loss immediately, unless the asset is carried at its revalued amount. A reversal of an impairment loss on a revalued asset is credited to other comprehensive income. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense in the statements of comprehensive income, a reversal of that impairment loss is recognised as income in the statements of comprehensive income. (g) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average or first-in-first-out bases, as applicable. Layer, pullet and fishes inventories are stated at cost (determined on weighted average method) adjusted for amortisation (calculated based on their economic lives less net realisable value). Costs of layer, pullet and fishes inventories comprise the original purchase price plus growing cost, which include costs of raw materials, direct labour and a proportion of farm overheads. Costs of eggs include costs of raw materials, direct labour and an appropriate proportion of farm overheads. Costs of egg trays and work-in-progress comprise the costs of raw materials, direct labour and a proportion of factory overheads. Costs of poultry feeds, trading merchandise, raw materials (determined on first-in-first-out method), consumable supplies and medication (determined on weighted average method), comprise the original purchase price plus the costs incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price in the ordinary course of business less selling and distribution costs and all other estimated costs to completion. Where necessary, due allowance is made for all damaged, obsolete and slow moving items. The Group writes down its obsolete or slow moving inventories based on assessment of the condition and the future demand for the inventories. These inventories are written down when events or changes in circumstances indicate that the carrying amounts may not be recovered. (h) Financial instruments Financial instruments are recognised in the statements of financial position when the Group has become a party to the contractual provisions of the instruments. 49

52 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (h) Financial instruments (cont d) Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously. A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Financial instruments recognised in the statements of financial position are disclosed in the individual policy statement associated with each item. (i) Financial assets On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate. Financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss when the financial asset is either held for trading or is designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges. Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. Dividend income from this category of financial assets is recognised in profit or loss when the Group s right to receive payment is established. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the management has the positive intention and ability to hold to maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment loss, with revenue recognised on an effective yield basis. Loans and receivables financial assets Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables financial assets. Loans and receivables financial assets are measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. 50

53 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (h) Financial instruments (cont d) (i) Financial assets (cont d) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated in this category or are not classified in any of the other categories. After initial recognition, available-for-sale financial assets are remeasured to their fair values at the end of each reporting period. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the fair value reserve, with the exception of impairment losses. On derecognition, the cumulative gain or loss previously accumulated in the fair value reserve is reclassified from equity into profit or loss. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group s right to receive payments is established. Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less accumulated impairment losses, if any. (ii) Financial liabilities All financial liabilities are initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method other than those categorised as fair value through profit or loss. Fair value through profit or loss category comprises financial liabilities that are either held for trading or are designated to eliminate or significantly reduce a measurement or recognition inconsistency that would otherwise arise. Derivatives are also classified as held for trading unless they are designated as hedges. (iii) Equity instruments Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds. Dividends on ordinary shares are recognised as liabilities when approved for appropriation. (iv) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specific debtor fails to make payment when due. Financial guarantee contracts are recognised initially as liabilities at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee or, when there is no specific contractual period, recognised in profit or loss upon discharge of the guarantee. If the debtor fails to make payment relating to a financial guarantee contract when it is due and the Company, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period and the amount initially recognised less cumulative amortisation. 51

54 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (i) Borrowing costs Borrowing costs, directly attributable to the acquisition and construction of property, plant and equipment are capitalised as part of the cost of those assets, until such time as the assets are ready for their intended use or sale. Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted. All other borrowing costs are recognised in profit or loss as expenses in the period in which they incurred. (j) Income tax Income tax for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted or substantively enacted at the end of the reporting period. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over the business combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The carrying amounts of deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred tax assets to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the end of the reporting period. 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 income taxes relate to the same taxation authority. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transactions either in other comprehensive income or directly in equity and deferred tax arising from a business combination is included in the resulting goodwill or excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over the business combination costs. 52

55 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (k) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, deposits pledged with financial institutions, 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. (l) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of returns and trade discounts after eliminating sales within the Group. (i) Sale of goods Revenue is recognised when the following conditions are satisfied : the Group has transferred to the buyer the significant risks and rewards of ownership of the goods ; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold ; the amount of revenue can be measured reliably ; it is probable that the economic benefits associated with the transactions will flow to the entity ; and the cost incurred or to be incurred in respect of the transaction can be measured reliably. (ii) Dividend income Dividend income is recognised when the shareholder s right to receive payment is established. (iii) Interest income Interest income is recognised on a time proportion basis that reflects the effective yield on the asset. (iv) Rental income Rental income is recognised on accrual basis unless collectability is in doubt, in which case the recognition of such income is suspended. Subsequent to suspension, income is recognised on the receipt basis until all arrears have been paid. (m) Employee benefits (i) Short-term benefits Wages, salaries, paid annual leave, paid sick leave, bonuses, social security costs and non-monetary benefits are recognised as expenses in the profit or loss in the period in which the associated services are rendered by employees of the Group. (ii) Defined contribution plans As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund ( EPF ). Some of the Group s foreign subsidiaries make contributions to their respective countries statutory pension schemes. Such contributions are recognised as an expense in the profit or loss in the period to which they relate. Once the contributions have been paid, the Group has no further liability in respect of the defined contribution plans. 53

56 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (n) Related parties A party is related to an entity if : (i) directly, or indirectly through one or more intermediaries, the party : controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries) ; has an interest in the entity that gives it significant influence over the entity ; or has joint control over the entity. (ii) the party is an associate of the entity ; (iii) the party is a joint venture in which the entity is a venturer ; (iv) the party is a member of the key management personnel of the entity or its parent ; (v) the party is a close member of the family of any individual referred to in (i) or (iv) ; (vi) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v) ; or (vii) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity. Close members of the family of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity. (o) Functional and foreign currencies (i) Functional and presentation currency The individual financial statements of each entity in the Group are presented in the currency of the primary economic environment in which the entity operates, which is the functional currency. The consolidated financial statements are presented in Ringgit Malaysia ( RM ), which is the Company s functional and presentation currency. (ii) Transactions and balances Transactions in foreign currencies are converted into the respective functional currencies on initial recognition, using the exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities at the end of the reporting period are translated at the rates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. All exchange differences are recognised in profit or loss. 54

57 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.2 Summary of Significant Accounting Policies (cont d) (o) Functional and foreign currencies (cont d) (iii) Foreign operations Assets and liabilities of foreign operations are translated to RM at the rates of exchange ruling at the end of the reporting period. Revenues and expenses of foreign operations are translated at exchange rates ruling at the dates of the transactions. All exchange differences arising from translation are taken directly to other comprehensive income and accumulated in equity under the translation reserve. On the disposal of a foreign operation, the cumulative amount recognised in other comprehensive income relating to that particular foreign operation is reclassified from equity to profit or loss. Goodwill and fair value adjustments arising from the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the end of the reporting period. (p) Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group s other components. An operating segment s operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. 4.3 During the current financial year, the Group has adopted the following new accounting standards and interpretations (including the consequential amendments) : FRSs and IC Interpretations (including the Consequential Amendments) FRS 1 (Revised) FRS 3 (Revised) FRS 127 (Revised) : First-time Adoption of Financial Reporting Standards : Business Combinations : Consolidated and Separate Financial Statements Amendments to FRS 1 (Revised) Amendments to FRS 1 (Revised) Amendments to FRS 2 Amendments to FRS 2 Amendments to FRS 5 Amendments to FRS 7 Amendments to FRS 138 : Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters : Additional Exemptions for First-time Adopters : Scope of FRS 2 and FRS 3 (Revised) : Group Cash-settled Share-based Payment Transactions : Plan to Sell the Controlling Interest in a Subsidiary : Improving Disclosures about Financial Instruments : Consequential Amendments Arising from FRS 3 (Revised) IC Interpretation 4 IC Interpretation 12 IC Interpretation 16 IC Interpretation 17 IC Interpretation 18 Amendments to IC Interpretation 9 Annual Improvements to FRSs (2010) : Determining Whether An Arrangement Contains a Lease : Service Concession Arrangements : Hedges of a Net Investment in a Foreign Operation : Distributions of Non-cash Assets to Owners : Transfers of Assets from Customers : Scope of IC Interpretation 9 and FRS 3 (Revised) 55

58 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.3 The adoption of the above accounting standards and interpretations (including the consequential amendments) did not have any material impact on the Group s financial statements, other than the following : (a) FRS 3 (Revised) introduces significant changes to the accounting for business combinations, both at the acquisition date and post acquisition, and requires greater use of fair values. In addition, all transaction costs, other than share and debt issue costs, will be expensed as incurred. This revised standard was applied to the acquisition of a subsidiary during the current financial year of which acquisition-related costs of RM 4,139 have been recognised in the consolidated statement of comprehensive income. The Group has applied FRS 3 (Revised) prospectively. Accordingly, business combinations entered into prior to 1 April 2011 have not been adjusted to comply with this revised standard. (b) FRS 127 (Revised) requires accounting for changes in ownership interests by the Group in a subsidiary, whilst maintaining control, to be recognised as an equity transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in profit or loss. The revised standard also requires all losses attributable to the non-controlling interests to be absorbed by the non-controlling interests instead of by the parent. The Group has applied FRS 127 (Revised) prospectively during the current financial year with no financial impact on the financial statements of the Group but may impact the accounting of its future transactions or arrangements. (c) Amendments to FRS 7 expand the disclosure requirements in respect of fair value measurements and liquidity risk. In particular, the amendments require additional disclosure of fair value measurements by level of a fair value measurement hierarchy, as shown in Note Comparatives are not presented by virtue of the exemption given in the amendments. (d) Annual Improvements to FRSs (2010) contain amendments to 11 accounting standards that result in accounting changes for presentation, recognition or measurement purposes. The amendments to FRS 101 (Revised) clarify that an entity may choose to present the analysis of the items of other comprehensive income either in the statements of changes in equity or in the notes to the financial statements. The Group has chosen to present the items of other comprehensive income in the statements of changes in equity. 4.4 The Group has not applied in advance the following accounting standards and interpretations (including the consequential amendments) that have been issued by the Malaysian Accounting Standards Board ( MASB ) but are not yet effective for the current financial year : FRSs and IC Interpretations (including the Consequential Amendments) Effective date 56 FRS 9 : Financial Instruments 1 January 2015 FRS 10 : Consolidated Financial Statements 1 January 2013 FRS 11 : Joint Arrangements 1 January 2013 FRS 12 : Disclosure of Interests in Other Entities 1 January 2013 FRS 13 : Fair Value Measurement 1 January 2013 FRS 119 (Revised) : Employee Benefits 1 January 2013 FRS 124 (Revised) : Related Party Disclosures 1 January 2012

59 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.4 FRSs and IC Interpretations (including the Consequential Amendments) Effective date FRS 127 (2011) : Separate Financial Statements 1 January 2013 FRS 128 (2011) : Investments in Associates and Joint Ventures 1 January 2013 Amendments to FRS 1 : Severe Hyperinflation and Removal of 1 January 2012 (Revised) Fixed Dates for First-time Adopters Amendments to FRS 1 : Government Loans 1 January 2013 (Revised) Amendments to FRS 7 : Disclosures Transfers of Financial Assets 1 January 2012 Amendments to FRS 7 : Disclosures Offsetting Financial Assets 1 January 2013 and Financial Liabilities Amendments to FRS 9 : Mandatory Effective Date of FRS 9 and 1 January 2015 Transition Disclosures Amendments to FRS 101 : Presentation of Items of Other Comprehensive Income 1 July 2012 (Revised) Amendments to FRS 112 : Recovery of Underlying Assets 1 January 2012 Amendments to FRS 132 : Offsetting Financial Assets and Financial Liabilities 1 January 2014 IC Interpretation 15 : Agreements for the Construction of Real Estate Withdrawn on 19 November 2011 IC Interpretation 19 : Extinguishing Financial Liabilities with Equity Instruments 1 July 2011 IC Interpretation 20 : Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 Amendments to : Prepayments of a Minimum Funding Requirement 1 July 2011 IC Interpretation 14 The above accounting standards and interpretations (including the consequential amendments) are not relevant to the Group's operations except as follows : (a) FRS 9 replaces the parts of FRS 139 that relate to the classification and measurement of financial instruments. FRS 9 divides all financial assets into 2 categories those measured at amortised cost and those measured at fair value based on the entity s business model for managing its financial assets and the contractual cash flow characteristics of the instruments. For financial liabilities, the standard retains most of the FRS 139 requirement. An entity choosing to measure a financial liability at fair value will present the portion of the change in its fair value due to changes in the entity s own credit risk in other comprehensive income rather than within profit or loss. Accordingly, there will be no material financial impact on the financial statements of the Group upon its initial application but may impact its future disclosures. (b) FRS 10 replaces the consolidation guidance in FRS 127 and IC Interpretation 121. Under FRS 10, there is only one basis for consolidation, which is control. Extensive guidance has been provided in the standard to assist in the determination of control. Accordingly, there will be no material financial impact on the financial statements of the Group upon its initial application but may impact its future disclosures. 57

60 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.4 (c) FRS 12 is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. FRS 12 is a disclosure standard and the disclosure requirements in this standard are more extensive than those in the current standards. Accordingly, there will be no financial impact on the financial statements of the Group upon its initial application but may impact its future disclosures. (d) FRS 13 defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements. The scope of FRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other FRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in FRS 13 are more extensive than those required in the current standards and therefore there will be no financial impact on the financial statements of the Group upon its initial application but may impact its future disclosures. (e) The amendments to FRS 7 intend to provide greater transparency around risk exposures of transactions when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period. Accordingly, there will be no financial impact on the financial statements of the Group upon its initial application but may impact its future disclosures. (f) The amendments to FRS 101 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. In addition, items presented in other comprehensive income section are to be grouped based on whether they are potentially re-classifiable to profit or loss subsequently i.e. those that might be reclassified and those that will not be reclassified. Income tax on items of other comprehensive income is required to be allocated on the same basis. Accordingly, there will be no financial impact on the financial statements of the Group upon its initial application but may impact its future disclosures. 4.5 Malaysian Financial Reporting Standards (MFRSs) On 19 November 2011, MASB issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards ( MFRSs ) that are equivalent to International Financial Reporting Standards. The MFRSs are to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 (Agriculture) and IC Interpretation 15 (Agreement for Construction of Real Estate), including its parent, significant investor and venturer (herein called Transitioning Entities ). On 30 June 2012, MASB announced that the Transitioning Entities are allowed to defer the adoption of the MFRSs to annual periods beginning on or after 1 January 2014 after which the MFRSs will become mandatory. The Group falls within the definition of Transitioning Entities and has opted to prepare its first MFRSs financial statements for the financial year ending 31 March In representing its first MFRSs financial statements, the Group will quantify the financial effects of the differences between the current FRSs and MFRSs. The Group has commenced transitioning its accounting policies and financial reporting from the current FRSs to MFRSs. However, the Group has not completed its quantification of the financial effects of the differences between FRSs and MFRSs due to the ongoing assessment by the management. The majority of the adjustments required on transition will be made, retrospectively, against opening retained profits. The Group expects to be in a position to fully comply with the requirements of MFRSs for the financial year ending 31 March

61 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.6 Critical Accounting Estimates and Judgements Estimates and judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group s accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, income and expenses are discussed below : (a) Depreciation of property, plant and equipment The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial factors which could change significantly as a result of technical innovations and competitors actions in response to the market conditions. The Group anticipates that the residual values of its property, plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (b) Income tax There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions, in the year in which such determination is made. (c) Impairment of non-financial assets When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows. (d) Write-down of inventories Non-livestocks Reviews are made periodically by management on damaged, obsolete and slow moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories. (e) Classification between investment property and owner-occupied properties The Group determines whether a property qualifies as an investment property, and has developed a criteria in making that judgement. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group considers whether a property generates cash flows largely independent of the other assets held by the Group. 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. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions could not be sold separately, the property is 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. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property. 59

62 Notes To The Financial Statements For The Financial Year Ended 31 March ACCOUNTING POLICIES AND STANDARDS (cont d) 4.6 Critical Accounting Estimates and Judgements (Cont d) (f) (g) Impairment of trade and other receivables An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management specifically reviews its loans and receivables financial assets and analyses historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in the customer payment terms when making a judgement to evaluate the adequacy of the allowance for impairment losses. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. If the expectation is different from the estimation, such difference will impact the carrying amount of receivables. Revaluation of properties Certain properties of the Group are reported at valuation which is based on valuations performed by independent professional valuers. The independent professional valuers have exercised judgement in determining discount rates, estimates of future cash flows, capitalisation rate, terminal year value, market freehold rental and other factors used in the valuation process. Also, judgement has been applied in estimating prices for less readily observable external parameters. Other factors such as model assumptions, market dislocations and unexpected correlations can also materially affect these estimates and the resulting valuation estimates. (h) (i) Impairment of available-for-sale financial assets The Group reviews its available-for-sale financial assets at the end of each reporting period to assess whether they are impaired. The Group also records impairment loss on available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is significant or prolonged requires judgement. In making this judgement, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fair value of an investment is less than its cost. Fair value estimates for certain financial assets and liabilities The Group carries certain financial assets and liabilities at fair value, which requires extensive use of accounting estimates and judgement. While significant components of fair value measurement were determined using verifiable objective evidence, the amount of changes in fair value would differ if the Group uses different valuation methodologies. Any changes in fair value of these assets and liabilities would affect profit and/or equity. 60

63 Notes To The Financial Statements For The Financial Year Ended 31 March PROPERTY, PLANT AND EQUIPMENT Group At 31 March 2012 * Freehold land, farm and poultry buildings *Leasehold land, freehold land and factory buildings Plant and machinery Fish pond and equipment Egg layer conveyor and cages system Motor vehicles, electrical installation, furniture, fittings, equipment, renovation Capital workin-progress and hostel RM RM RM RM RM RM RM RM Total At cost / valuation At 1 April ,647,601 13,446,482 32,295,751-28,869,268 22,718,739 2,289, ,267,002 Additions 3,671, , ,286 4,165,371 5,198,852 15,226,062 29,150,040 Disposals (638,175) (541,007) - (1,179,182) Write off (1,061,957) (187,687) - (1,249,644) Acquisition of subsidiaries - 1,130, , ,647-2,249,632 Reclassification 6,022,260-7,783, ,325 1,103, ,035 (15,919,962) - Foreign exchange difference ,008-11,008 At 31 March ,702,766 14,577,107 41,195, ,611 33,076,082 28,676,587 1,595, ,248,856 Representing : At valuation - 10,512, ,512,166 At cost 71,702,766 4,064,941 41,195, ,611 33,076,082 28,676,587 1,595, ,736,690 71,702,766 14,577,107 41,195, ,611 33,076,082 28,676,587 1,595, ,248,856 Less : Accumulated Depreciation At 1 April ,580, ,630 17,067,022-10,395,782 12,776,738-58,104,458 Charge for the financial year 2,208, ,329 2,195,898-1,549,756 2,916,956-9,043,282 Disposals (408,641) - (408,641) Write off (1,021,155) (150,223) - (1,171,378) Acquisition of subsidiaries - 21, , , ,382 Reclassification (621) - 21, (20,549) - - Foreign exchange difference ,708-3,708 At 31 March ,788, ,438 19,412,069-10,924,383 15,464,913-66,067,811 Representing : At valuation - 325, ,650 At cost 19,788, ,788 19,412,069-10,924,383 15,464,913-65,742,161 19,788, ,438 19,412,069-10,924,383 15,464,913-66,067,811 Carrying amount At 31 March ,914,758 14,098,669 21,783, ,611 22,151,699 13,211,674 1,595, ,181,045 Representing : At valuation - 10,186, ,186,516 At cost 51,914,758 3,912,153 21,783, ,611 22,151,699 13,211,674 1,595, ,994,529 51,914,758 14,098,669 21,783, ,611 22,151,699 13,211,674 1,595, ,181,045 61

64 Notes To The Financial Statements For The Financial Year Ended 31 March PROPERTY, PLANT AND EQUIPMENT (cont d) * The freehold land, leasehold land, farm and poultry buildings and factory buildings of the Group consists of : Freehold land, farm and poultry buildings Leasehold land, freehold land and factory buildings Farm and Freehold poultry Freehold Leasehold Factory land buildings Total land land buildings Total RM RM RM RM RM RM RM At cost / valuation At 1 April ,712,992 46,934,609 62,647,601 4,343,530 1,878,243 7,224,709 13,446,482 Additions 2,567,722 1,103,358 3,671, Disposal (638,175) - (638,175) Acquisition of subsidiaries , ,025 1,130,625 Reclassification - 6,022,260 6,022, At 31 March ,642,539 54,060,227 71,702,766 4,548,130 1,878,243 8,150,734 14,577,107 Representing : At valuation ,343,530-6,168,636 10,512,166 At cost 17,642,539 54,060,227 71,702, ,600 1,878,243 1,982,098 4,064,941 17,642,539 54,060,227 71,702,766 4,548,130 1,878,243 8,150,734 14,577,107 Less : Accumulated depreciation At 1 April ,580,286 17,580,286-45, , ,630 Charge for the financial year - 2,208,343 2,208,343-20, , ,329 Acquisition of subsidiaries ,479 21,479 Reclassification - (621) (621) At 31 March ,788,008 19,788,008-66, , ,438 Representing : At valuation , ,650 At cost - 19,788,008 19,788,008-66,653 86, ,788-19,788,008 19,788,008-66, , ,438 Carrying amount At 31 March ,642,539 34,272,219 51,914,758 4,548,130 1,811,590 7,738,949 14,098,669 Representing : At valuation ,343,530-5,842,986 10,186,516 At cost 17,642,539 34,272,219 51,914, ,600 1,811,590 1,895,963 3,912,153 17,642,539 34,272,219 51,914,758 4,548,130 1,811,590 7,738,949 14,098,669 62

65 Notes To The Financial Statements For The Financial Year Ended 31 March 2012 Teo Seng Capital Berhad 5. PROPERTY, PLANT AND EQUIPMENT (cont d) Group At 31 March 2011 * Freehold land, farm and poultry buildings * Leasehold land, freehold land and factory buildings Plant and machinery Egg layer conveyor and cages system Motor vehicles, electrical installation, furniture, fittings, equipment, renovation Capital workin-progress and hostel Total RM RM RM RM RM RM RM At cost / valuation At 1 April ,762,469 12,429,509 29,880,087 24,105,256 18,357,653 3,274, ,809,821 Additions 4,149,998 56,400 1,178,260 2,633,524 3,511,987 7,815,915 19,346,084 Disposals (99,745) - (99,745) Transfer to investment property (Note 6) (480,000) (480,000) Acquisition of a subsidiary , ,173 Reclassification 3,735, ,573 1,237,404 2,130, ,002 (8,321,601) - Foreign exchange difference ,669-9,669 At 31 March ,647,601 13,446,482 32,295,751 28,869,268 22,718,739 2,289, ,267,002 Representing : At valuation - 10,512, ,512,166 At cost 62,647,601 2,934,316 32,295,751 28,869,268 22,718,739 2,289, ,754,836 62,647,601 13,446,482 32,295,751 28,869,268 22,718,739 2,289, ,267,002 Less : Accumulated Depreciation At 1 April ,604, ,388 15,064,056 9,115,002 10,756,056-50,676,798 Charge for the financial year 1,975, ,242 2,002,966 1,280,780 2,002,848-7,409,826 Disposals (99,745) - (99,745) Acquisition of a subsidiary , ,134 Foreign exchange difference ,445-2,445 At 31 March ,580, ,630 17,067,022 10,395,782 12,776,738-58,104,458 Representing : At valuation - 219, ,790 At cost 17,580,286 64,840 17,067,022 10,395,782 12,776,738-57,884,668 17,580, ,630 17,067,022 10,395,782 12,776,738-58,104,458 Carrying amount At 31 March ,067,315 13,161,852 15,228,729 18,473,486 9,942,001 2,289, ,162,544 Representing : At valuation - 10,292, ,292,376 At cost 45,067,315 2,869,476 15,228,729 18,473,486 9,942,001 2,289,161 93,870,168 45,067,315 13,161,852 15,228,729 18,473,486 9,942,001 2,289, ,162,544 63

66 Notes To The Financial Statements For The Financial Year Ended 31 March PROPERTY, PLANT AND EQUIPMENT (cont d) * The freehold land, leasehold land, farm and poultry buildings and factory buildings of the Group consists of : Freehold land, farm and poultry buildings Leasehold land, freehold land and factory buildings Farm and Freehold poultry Freehold Leasehold Factory land buildings Total land land buildings Total RM RM RM RM RM RM RM At cost / valuation At 1 April ,214,712 42,547,757 54,762,469 4,343,530 1,878,243 6,207,736 12,429,509 Additions 3,498, ,718 4,149, ,400 56,400 Reclassification - 3,735,134 3,735, , ,573 At 31 March ,712,992 46,934,609 62,647,601 4,343,530 1,878,243 7,224,709 13,446,482 Representing : At valuation ,343,530-6,168,636 10,512,166 At cost 15,712,992 46,934,609 62,647,601-1,878,243 1,056,073 2,934,316 15,712,992 46,934,609 62,647,601 4,343,530 1,878,243 7,224,709 13,446,482 Less : Accumulated depreciation At 1 April ,604,296 15,604,296-23, , ,388 Charge for the financial year - 1,975,990 1,975,990-22, , ,242 At 31 March ,580,286 17,580,286-45, , ,630 Representing : At valuation , ,790 At cost - 17,580,286 17,580,286-45,997 18,843 64,840-17,580,286 17,580,286-45, , ,630 Carrying amount At 31 March ,712,992 29,354,323 45,067,315 4,343,530 1,832,246 6,986,076 13,161,852 Representing : At valuation ,343,530-5,948,846 10,292,376 At cost 15,712,992 29,354,323 45,067,315-1,832,246 1,037,230 2,869,476 15,712,992 29,354,323 45,067,315 4,343,530 1,832,246 6,986,076 13,161,852 64

67 Notes To The Financial Statements For The Financial Year Ended 31 March PROPERTY, PLANT AND EQUIPMENT (cont d) Company At 31 March 2012 Capital Office work-in equipment -progress Total RM RM RM At cost At 1 April , ,412 Additions 157, ,421 Reclassification 662,412 (662,412) - At 31 March , ,833 Less : Accumulated depreciation At 1 April Charge for the financial year 80,801-80,801 At 31 March ,801-80,801 Carrying amount At 31 March , ,032 Company At 31 March 2011 Capital work-in -progress RM At cost At 1 April ,582 Additions 184,830 At 31 March ,412 Less : Accumulated depreciation At 1 April Charge for the financial year - At 31 March Carrying amount At 31 March ,412 (a) The freehold land and factory buildings of certain subsidiaries were last revalued by the directors on 31 March 2009 based on a valuation carried out by an independent firm of professional valuers. The valuation was based on market value using comparison and cost methods of valuation. 65

68 Notes To The Financial Statements For The Financial Year Ended 31 March PROPERTY, PLANT AND EQUIPMENT (cont d) (b) Had the Group s revalued property, plant and equipment been carried under the cost model, the carrying amount would have been as follows : Group RM RM Carrying Amount Freehold land 1,483,205 1,483,205 Factory buildings 4,331,652 4,406,098 5,814,857 5,889,303 (c) Certain property, plant and equipment of certain subsidiaries with carrying amount of RM 9,254,323 (2011 : RM 21,889,303) are charged against banking facilities (Note 15(a)). (d) The following property, plant and equipment are subject to hire purchase instalment plans (Note 16) : Group RM RM Carrying Amount Plant and machinery 8,134,335 4,063,419 Egg layer conveyor and cages system 11,845,500 8,088,201 Motor vehicles 5,047,186 3,758,999 Capital work-in-progress 319, ,400 25,346,585 16,036,019 (e) Motor vehicles with carrying amount of RM 162,942 (2011 : RM 161,333) are held in trust and registered under third party s name. (f) Purchase of property, plant and equipment are as follows : Group Company RM RM RM RM Aggregate cost of property, plant and equipment acquired 29,150,040 19,346, , ,830 Finance via hire purchase (12,441,345) (4,032,315) - - Unpaid balance included under sundry payables (Note 18(d)) (1,729,064) (1,298,582) - - Cash paid in respect of acquisition in previous financial year 1,289,501 1,408, ,402 Cash paid during the financial year 16,269,132 15,423, , ,232 66

69 Notes To The Financial Statements For The Financial Year Ended 31 March INVESTMENT PROPERTY Group RM RM At Cost At 1 April 480,000 - Transfer from property, plant and equipment (Note 5) - 480,000 At 31 March 480, ,000 Less : Accumulated Depreciation At 1 April 3,888 - Charge for the financial year 7,776 3,888 At 31 March 11,664 3,888 Carrying Amount 468, ,112 Included in the above is : Leasehold shophouse 468, , INVESTMENT IN SUBSIDIARIES Company RM RM Unquoted shares, at cost - in Malaysia 67,558,402 66,558,402 - outside Malaysia 240, ,005 67,798,407 66,798,407 The details of the subsidiaries are shown as below : Country of Percentage of Name of company incorporation Principal activities ownership Teo Seng Farming Malaysia Investment holding and poultry 100% 100% Sdn. Bhd. farming. Teo Seng Feedmill Malaysia Manufacturing and marketing 100% 100% Sdn. Bhd. of animal feeds. Success Century Malaysia Poultry farming. 100% 100% Sdn. Bhd. Ritma Prestasi Sdn. Bhd. Malaysia Distribution of pet food, 100% 100% medicine and other animal health related products. 67

70 Notes To The Financial Statements For The Financial Year Ended 31 March INVESTMENT IN SUBSIDIARIES (cont d) The details of the subsidiaries are shown as below : (cont d) Country of Percentage of Name of company incorporation Principal activities ownership Teo Seng Paper Products Malaysia Manufacturing and marketing 100% 100% Sdn. Bhd. of egg trays. Liberal Energy Sdn. Bhd. Malaysia General trading and generation 100% 100% of energy by establishment of bio gas plants *Premium Egg Products Singapore Wholesaler, importers, exporters 100% 100% Pte. Ltd. of daily products. Subsidiary of Teo Seng Farming Sdn. Bhd. Forever Best Supply Malaysia To carry on business in organic fertiliser, allied 60% - Sdn. Bhd. products of fertiliser, products of fertiliser of chemical processing and transportation. Subsidiary of Teo Seng Feedmill Sdn. Bhd. Laskar Fertiliser Malaysia Dormant 100% - Sdn. Bhd. (Formerly known as Laskar Perikanan Sdn. Bhd.) Subsidiary of Ritma Prestasi Sdn. Bhd. B-Tech Aquaculture Malaysia General trading and aquaculture, 100% 100% Sdn. Bhd. livestock and poultry activities. * Audited by firm other than Crowe Horwath (a) The Company subscribed to the following subsidiaries, new ordinary shares of RM 1.00 at par for cash : RM RM Teo Seng Feedmill Sdn. Bhd. - 2,000,000 Ritma Prestasi Sdn. Bhd. 1,000,000 1,000,000 1,000,000 3,000, (b) (c) On 22 April 2011, Teo Seng Farming Sdn. Bhd. ( TSF ), a wholly-owned subsidiary of the Company, entered into a Sale and Purchase of Shares Agreement to acquire 150,002 ordinary shares of RM 1.00 each in Forever Best Supply Sdn. Bhd. ( Forever ) representing 60% of the issued and paid-up capital of Forever for a total cash consideration of RM 1,076,483. As such, Forever became a 60% owned indirect subsidiary of the Company. On 27 May 2011, Teo Seng Feedmill Sdn. Bhd. ( TSFM ), a wholly-owned subsidiary of the Company, acquired the entire equity interest comprising of two (2) ordinary shares of RM 1.00 each in Laskar Fertiliser Sdn. Bhd. (formerly known as Laskar Perikanan Sdn. Bhd.) ( Laskar ) for a total cash consideration of RM 2.

71 Notes To The Financial Statements For The Financial Year Ended 31 March INVESTMENT IN SUBSIDIARIES (cont d) (d) On 26 April 2012, TSFM disposed of 100% equity interest in Laskar to Forever for a total cash consideration of RM 2. As such, Laskar became a wholly-owned subsidiary of Forever. 8. OTHER INVESTMENTS Group RM RM Quoted shares in Malaysia - at fair value 6,040 5,080 Market value of quoted shares in Malaysia 6,040 5, GOODWILL ON CONSOLIDATION Group RM RM At 1 April - 3,084,411 Goodwill arising from acquisition of subsidiaries 627,279 1,086, ,279 4,170,652 Write-off (627,279) (4,170,652) At 31 March INVENTORIES Group RM RM At Cost Layers 15,377,944 15,932,378 Pullets 5,210,632 3,925,358 Fishes 19,003 - Raw materials 5,139,587 3,846,644 Trading merchandise 6,149,783 4,667,091 Poultry feeds 747, ,026 Egg trays 326, ,069 Eggs 700, ,567 Medication 533, ,624 Consumable supplies 419, ,125 Work-in-progress 123, ,013 Others - 201,665 34,748,925 30,917,560 Less : Allowance for slow moving inventories (28,895) (32,999) 34,720,030 30,884,561 None of the inventories is carried at net realisable value. 69

72 Notes To The Financial Statements For The Financial Year Ended 31 March TRADE AND OTHER RECEIVABLES Group Company RM RM RM RM Trade receivables Amount due from related companies 2,227,374 1,434, Amount due from related parties 3,004,101 1,418, Other trade receivables 19,525,680 16,983, ,757,155 19,836, Less : Allowance for impairment losses (648,173) (680,895) ,108,982 19,155, Other Receivables Amount due from subsidiaries - - 4,827,451 1,011,767 Deposits 2,411,975 1,911, Prepayments 1,283,641 1,734,697 3,267 3,236 Tax recoverable 2,418,938 1,992, , ,730 Sundry receivables 1,291, , ,405,591 5,863,670 5,374,335 1,271,733 31,514,573 25,019,176 5,374,335 1,271,733 Allowance for impairment losses : At 1 April (680,895) (583,157) - - Acquisition of subsidiaries (35,960) Additions during the financial year (214,682) (175,341) - - Write off 120, Reversal of allowances no longer required 162,667 77, At 31 March (648,173) (680,895) - - (a) The Group s normal trade terms range from cash term to 150 days (2011 : cash term to 150 days) from the date of invoices. Other credit terms are assessed and approved on a case-by-case basis. (b) The amount due from subsidiaries are unsecured, interest free and repayable on demand except for the advances of RM 2,149,718 (2011 : RM 581,763) which bear interest at 3.4% (2011 : 3.2%) per annum at the end of the reporting period. 12. DEPOSITS, BANK AND CASH BALANCES Group Company RM RM RM RM Bank and cash balances 19,769,355 20,786, , ,234 Fixed deposits placed with licensed banks 1,357,196 2,104, ,579 21,126,551 22,891, , ,813 70

73 Notes To The Financial Statements For The Financial Year Ended 31 March DEPOSITS, BANK AND CASH BALANCES (cont d) (a) Fixed deposits placed with licensed banks of the Group of RM 1,238,846 (2011 : RM 1,515,135) are pledged against banking facilities (Note 15(a)). (b) The average effective interest rate of fixed deposits placed with licensed banks of the Group and of the Company at the end of the reporting period are 2.7% (2011 : 2.5%) and NIL (2011 : 2.3%) per annum respectively. (c) The maturity period of fixed deposits placed with licensed banks of the Group and of the Company at the end of the reporting period are 30 to 365 days (2011 : 30 to 365 days) and NIL (2011 : 90 days) respectively. 13. SHARE CAPITAL Group And Company Number of Number of Shares RM Shares RM Authorised : Ordinary shares of RM 0.20 each 250,000,000 50,000, ,000,000 50,000,000 Issued and fully paid : Ordinary shares of RM 0.20 each 200,000,000 40,000, ,000,000 40,000, RESERVES Group Company RM RM RM RM Non-distributable Fair value reserve 3,016 2, Foreign exchange translation reserve (33,020) (14,566) - - Revaluation reserve 4,031,856 4,031, Reverse acquisition reserve (26,078,000) (26,078,000) - - Share premium 8,010,827 8,010,827 8,010,827 8,010,827 (14,065,321) (14,047,827) 8,010,827 8,010,827 Distributable Retained profits 88,067,906 73,605,746 15,794,429 12,296,605 74,002,585 59,557,919 23,805,256 20,307,432 (a) (b) Fair value reserve The fair value reserve represents the cumulative fair value changes (net of tax, where applicable) of available-for-sale financial assets until they are disposed of or impaired. Foreign exchange translation reserve The foreign exchange translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign subsidiary and is not distributable by way of dividends. 71

74 Notes To The Financial Statements For The Financial Year Ended 31 March RESERVES (cont d) (c) Revaluation reserve The revaluation reserve represent the surpluses arising from the revaluation of certain property, plant and equipment, net of deferred tax effect. (d) Share premium Share premium of the Group and of the Company arose from allotment of ordinary shares at premium net of share issue expenses. (e) Retained profits Retained profits are those available for distribution by way of dividends. Finance Act 2007 (Act 683) introduced a single tier company income tax system with effect from the Year of Assessment Under this system, tax on a company s profit is a final tax, and dividends paid are exempted from tax in the hands of the shareholders. Unlike the previous imputation system, the recipient of the dividend would no longer be able to claim any tax credit. Companies without Section 108 tax credit balance will automatically move to a single tier tax system on 1 January BANK BORROWINGS Group RM RM Current Secured - Bank overdrafts 546, ,277 - Bankers' acceptances 9,500,000 15,744,000 - Term loans 839, ,185 Unsecured - Bank overdrafts - 697,406 - Bankers' acceptances 37,524,000 25,617,000 - Term loans - 279,326 48,410,155 43,830,194 Non-current Secured - Term loans 3,454,274 3,846,291 51,864,429 47,676,485 Total Bank Borrowings Secured - Bank overdrafts 546, ,277 - Bankers' acceptances 9,500,000 15,744,000 - Term loans 4,293,495 4,767,476 Unsecured - Bank overdrafts - 697,406 - Bankers' acceptances 37,524,000 25,617,000 - Term loans - 279,326 51,864,429 47,676,485 72

75 Notes To The Financial Statements For The Financial Year Ended 31 March 2012 Teo Seng Capital Berhad 15. BANK BORROWINGS (cont d) (a) (b) (c) The secured bank borrowings of the Group are secured by the following : (i) Certain property, plant and equipment of certain subsidiaries (Note 5(c)) ; (ii) Fixed deposits placed with licensed banks of certain subsidiaries (Note 12(a)) ; (iii) Negative pledge on a subsidiary s assets ; and (iv) Guaranteed by the intermediate holding company and the Company. The unsecured bank borrowings of the Group are as follows : (i) Guaranteed by the intermediate holding company and the Company ; and (ii) Negative pledge on a subsidiary s assets. The average effective interest rate (% per annum) at the end of the reporting period for bank borrowings were as follows : Group % % Bank overdrafts Bankers' acceptances Term loans (d) The term loans are repayable by 60 to 84 monthly instalments (2011 : 60 to 84 monthly instalments). At the end of the reporting period, they are repayable as follows : Group RM RM Current Not later than one year 839,221 1,200,511 Non-Current Later than one year and not later than two years 808, ,660 Later than two years and not later than five years 2,161,631 2,467,196 Later than five years 483, ,435 3,454,274 3,846,291 4,293,495 5,046, HIRE PURCHASE PAYABLES Group RM RM Minimum hire purchase payments : Not later than one year 7,951,766 4,921,715 Later than one year and not later than two years 5,729,928 3,226,133 Later than two years and not later than five years 1,963,816 1,093,450 15,645,510 9,241,298 Less : Future finance charges (1,239,823) (901,543) Present value of hire purchase payables 14,405,687 8,339,755 The net hire purchase payables are repayable as follow : Current Not later than one year 7,303,380 4,378,494 Non-current Later than one year and not later than two years 5,299,930 2,941,645 Later than two years and not later than five years 1,802,377 1,019,616 7,102,307 3,961,261 14,405,687 8,339,755 73

76 Notes To The Financial Statements For The Financial Year Ended 31 March HIRE PURCHASE PAYABLES (cont d) (a) The hire purchase payables of the Group of RM 9,835,593 and RM 480,350 (2011 : RM 4,642,714 and RM 1,312,376) are guaranteed by the Company and intermediate holding company respectively. (b) The effective interest rates of hire purchase payables are ranging from 3.8% to 7.5% (2011 : 3.2% to 7.5%) per annum. 17. DEFERRED TAX LIABILITIES (a) Recognised deferred tax liabilities (i) Group RM RM Movements of deferred tax liabilities At 1 April 8,729,508 8,130,508 Acquisition of subsidiaries 3,442 48,000 Recognised in profit or loss 583, ,740 Foreign exchange differences - (740) Under/(Over)provision in prior years 63,258 (7,000) At 31 March 9,380,104 8,729,508 (ii) Components of deferred tax liabilities Revaluation surplus of properties 1,016,000 1,126,000 Excess of capital allowances over corresponding book depreciation 9,433,104 8,447,508 Unused tax losses (236,000) (173,000) Unabsorbed capital allowances (730,000) (593,000) Other temporary differences (103,000) (78,000) 9,380,104 8,729,508 (b) Unrecognised deferred tax assets Deferred tax assets not recognised in the financial statements for the following items under the liability method : Group RM RM Unused tax losses 1,054, ,000 Unabsorbed capital allowances 615, ,000 1,669, ,000 The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items as it is not probable that future taxable profits of the subsidiaries will be available against which the deductible temporary differences can be utilised. 74

77 Notes To The Financial Statements For The Financial Year Ended 31 March TRADE AND OTHER PAYABLES Group Company RM RM RM RM Trade payables Amount due to related companies 1,737,264 1,409, Amount due to related parties 1,370, , Other trade payables 11,869,163 9,854, ,977,340 11,838, Other payables Amount due to a director of a subsidiary 149, Amount due to intermediate holding company 73,008 6,559 67, Amount due to immediate holding company 199, , , ,997 Amount due to a subsidiary ,557,474 9,050,104 Amount due to related company 414 1,467, Amount due to related parties 382, , Accruals 2,349,046 1,805, ,335 89,230 Sundry payables 4,919,022 3,306,372 2,763 11,589 8,072,986 6,966,275 10,972,782 9,350,933 23,050,326 18,804,964 10,972,782 9,350,933 (a) The normal trade terms granted to the Group range from cash term to 90 days (2011 : cash term to 90 days) from the date of invoices. (b) The non-trade amounts due to a director of a subsidiary, intermediate holding company, immediate holding company, related company and related parties are unsecured, interest free and repayable on demand. (c) The amount due to a subsidiary is unsecured, interest free and repayable on demand except for the advances of RM 9,646,172 (2011 : RM Nil) which bears interest at 3.4% (2011 : Nil) per annum at the end of the reporting period. (d) Included in sundry payables of the Group is an amount of RM 1,729,064 (2011 : RM 1,298,582) payable for the purchase of property, plant and equipment (Note 5(f)). 19. DERIVATIVE LIABILITIES Group Contract/ Contract/ notional Derivative notional Derivative amount liabilities amount liabilities RM RM RM RM Forward foreign exchange contract , (a) (b) Forward foreign exchange contracts are used to hedge the Group s purchases denominated in United States Dollar ( USD ) for which firm commitments existed at the end of the reporting period. For financial year 2011, the settlement dates on forward foreign exchange contracts is 4 days after the end of the reporting period. The Group does not apply hedge accounting. The Group has recognised a gain of RM 948 (2011 : RM 26,006) arising from fair value changes of derivative liabilities. The fair value changes are attributable to changes in foreign exchange spot and forward rate. The method and assumptions applied in determining the fair value of derivative are disclosed in Note 36.4(v). 75

78 Notes To The Financial Statements For The Financial Year Ended 31 March REVENUE Revenue of the Group and of the Company comprises the following amounts : Group Company RM RM RM RM Sale of goods 267,287, ,490, Dividend income from : Subsidiaries - - 8,322,500 6,100,000 Other investments Management fee , , ,287, ,490,392 8,682,500 6,460, INVESTMENT REVENUE Group Company RM RM RM RM Interest income from : Fixed deposits 68,139 83,874 18,785 13,580 Advance to subsidiaries ,029 20,311 Others 74, ,450 84,654 63,814 33, DIRECTORS REMUNERATION (a) The details of remuneration receivable by directors of the Group and of the Company during the financial year are as follows : Group Company RM RM RM RM Executive directors of the Company Salaries and other emoluments 2,487,900 2,443, , ,000 Pension costs - defined contribution plan 179, ,645 72,600 66,900 Social security costs 2,125 2,302 1,063 1,151 2,669,980 2,611, , , Non-executive directors of the Company Fee 240, , , ,000 Salaries and other emoluments 1,106,776 1,847, , ,000 Pension costs - defined contribution plan 66,969 62, Social security costs 1,240 1, ,414,985 2,151, , ,000 4,084,965 4,763, , ,051 Executive directors of the subsidiaries Salaries and other emoluments 4,197,358 4,170, Pension costs - defined contribution plan 389, , Social security costs 4,553 3, ,591,851 4,521,

79 Notes To The Financial Statements For The Financial Year Ended 31 March DIRECTORS REMUNERATION (cont d) Group Company RM RM RM RM Non-executive directors of the subsidiaries Fee 72,000 72, Salaries and other emoluments 769, , , , ,432,851 5,262, ,517,816 10,025, , ,051 Analysed as follow : Total executive directors' remuneration 7,261,831 7,133, , ,051 Total non-executive directors' remuneration 2,255,985 2,892, , ,000 9,517,816 10,025, , ,051 (b) Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and of the Company whether directly or indirectly. (c) The number of directors of the Company whose total remuneration of the Group during the financial year in bands of RM 150,000 is analysed as below : Number of Director Executive directors : RM 1,050,001 - RM 1,200,000-1 RM 1,200,001 - RM 1,350, RM 1,350,001 - RM 1,500, Non-executive directors : RM 1 - RM 150, RM 150,001 - RM 300, RM 300,001 - RM 450, RM 450,001 - RM 600, RM 1,050,001 - RM 1,200, STAFF COSTS Group Company RM RM RM RM Executive directors' remuneration (Note 22) 7,261,831 7,133, , ,051 Other staff costs : Salaries and other emoluments 17,997,652 12,190, , ,345 Pension costs - defined contribution plan 1,244,944 1,081,786 34,887 30,558 Social security costs 113,408 95,153 2,479 2,416 Other staff related expenses 1,319, ,798 24,636 22,575 20,675,464 14,166, , ,894 Total staff costs 27,937,295 21,299, , ,945 77

80 Notes To The Financial Statements For The Financial Year Ended 31 March FINANCE COSTS Group Company RM RM RM RM Interest on : Bank overdrafts 69, , Bankers' acceptances 2,193,440 1,491, Hire purchase 742, , Term loans 286, , Advance from a subsidiary ,302 - Others 4,600 5, ,296,452 2,315, , PROFIT BEFORE TAX Group Company RM RM RM RM This is arrived at after charging : Auditors' remuneration : Statutory audit : - current 95,332 72,908 16,000 12,000 - (over)provision in prior years (2,072) Non-statutory audit 102, ,888 - Depreciation : - property, plant and equipment 9,043,282 7,409,826 80, investment property 7,776 3, Goodwill on consolidation written off 627,279 4,170, Impairment losses on trade receivables 214, , Incorporation fee 1, Inventories written off 30, , Land rental - 6, Property, plant and equipment written off 78, Rental of hostel 12,300 8, Rental of machinery and vehicle 3,000 3, Rental of premises 239,061 79, And crediting : Fair value gain on derivatives (948) (26,006) - - Gain on disposal of property, plant and equipment (502,180) (25,000) - - Insurance compensation (5,454) (60,000) - - Rental income (35,760) (18,173) - - Reversal of allowance for slow moving inventories (4,104) Reversal of impairment losses on trade receivables (162,667) (77,603) - - Realised gain on foreign exchange (801,581) (799,480) (17,399) - Unrealised gain on foreign exchange (57,014) (166,184)

81 Notes To The Financial Statements For The Financial Year Ended 31 March 2012 Teo Seng Capital Berhad 26. TAX EXPENSE Group Company RM RM RM RM (a) Components of tax expense Current tax expense : - Malaysian income tax 6,652,000 4,286,000 22,000 1,032,000 - Under/(Over)provision in prior years 84,930 (216,780) (52,454) (38,130) 6,736,930 4,069,220 (30,454) 993,870 Deferred tax expense : - Relating to origination of temporary differences 583, , Under/(Over)provision in prior years 63,258 (7,000) - - 7,384,084 4,620,960 (30,454) 993,870 (b) Reconciliation of effective tax rate Profit before tax 24,521,220 26,726,609 6,267,370 4,959,851 Tax at Malaysian statutory income tax rate of 25% 6,130,000 6,682,000 1,567,000 1,240,000 Differential in tax rates 59,000 (19,500) - - Tax effect of non-taxable income (112,000) (700) (1,806,000) (300,000) Tax effect of non-deductible expenses 1,888, , ,000 92,000 Effect of tax incentive (905,000) (2,207,000) - - Deferred tax assets not recognised during the financial year 175,000 (88,360) - - Under/(Over)provision in prior years : - current tax expense 84,930 (216,780) (52,454) (38,130) - deferred tax expense 63,258 (7,000) - - 7,384,084 4,620,960 (30,454) 993,870 (c) Subject to the agreement of the Inland Revenue Board, at 31 March, the Group has unutilised reinvestment allowances of approximately RM 2,100,000 (2011 : RM 2,100,000) available for offsetting against future taxable profits. 27. EARNINGS PER ORDINARY SHARE (a) Basic earnings per ordinary share Basic earnings per ordinary share is calculated based on profit for the financial year attributable to owners of the Company divided by the weighted average number of ordinary shares in issue during the financial year. Group RM RM Profit attributable to owners of the Company 17,262,160 22,105,649 Group Units Units (b) Number of ordinary shares in issue at 1 April 200,000, ,000,000 Weighted average number of ordinary shares in issue 200,000, ,000,000 Basic earnings per ordinary share (sen) Diluted earnings per ordinary share There is no dilutive potential ordinary shares in issue at the end of the reporting period. 79

82 Notes To The Financial Statements For The Financial Year Ended 31 March ACQUISITION OF SUBSIDIARIES During the financial year, the Group acquired 60% equity interest in Forever Best Supply Sdn. Bhd. ( Forever ) and entire equity interest in Laskar Fertiliser Sdn. Bhd. (formerly known as Laskar Perikanan Sdn. Bhd.) ( Laskar ). The fair values of the identifiable assets and liabilities of Forever and Laskar as at the date of acquisition were : Carrying Amount RM Property, plant and equipment 1,753,250 Trade and other receivables 1,270,593 Inventories 149,676 Cash and cash equivalents 372,092 Trade and other payables (1,712,989) Deferred tax liabilities (3,442) Term loans (740,516) Hire purchase payables (339,990) Net identifiable assets and liabilities 748,674 Less : Non-controlling interests (299,468) Add : Goodwill on acquisition 627,279 Total purchase consideration 1,076,485 Less : Cash and cash equivalents of subsidiaries acquired (372,092) Net cash inflow for acquisition of subsidiaries 704,393 The non-controlling interest are measured at the non-controlling interests proportionate share of the fair value of the acquiree s identifiable net assets at the date of acquisition. The acquired subsidiaries have contributed the following results to the Group : RM Revenue 4,344,840 Loss after tax (320,862) 80

83 Notes To The Financial Statements For The Financial Year Ended 31 March DIVIDENDS Group And Company RM RM In respect of the financial year ended 31 March 2010 Final single tier dividend of 4.25% on 200,000,000 ordinary shares of RM 0.20 each - 1,700,000 In respect of the financial year ended 31 March 2011 Interim single tier dividend of 4.25% on 200,000,000 ordinary shares of RM 0.20 each - 1,700,000 Final single tier dividend of 7.00% on 200,000,000 ordinary shares of RM 0.20 each 2,800,000-2,800,000 3,400,000 The Board of Directors proposed a final single tier dividend of 8.75% equivalent to 1.75 sen per ordinary share approximately of RM 3,500,000 in respect of the financial year ended 31 March The dividend is subject to the approval of shareholders at the forthcoming Annual General Meeting of the Company and has not been included as a liability in the financial statements. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained profits for the financial year ending 31 March CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the statements of cash flows comprise the following amounts : Group Company RM RM RM RM Deposits, bank and cash balances 21,126,551 22,891, , ,813 Less : Bank overdrafts (546,934) (1,268,683) ,579,617 21,622, , ,813 Less : Non-cash and cash equivalents Fixed deposits pledged to banks as collateral (1,238,846) (1,515,135) ,340,771 20,107, , , CAPITAL COMMITMENTS At 31 March, the Group had the following capital commitments in respect of property, plant and equipment : Group RM RM Contracted but not provided for 5,613,000 11,833,000 Approved but not contracted for 1,475,000 1,134,000 81

84 Notes To The Financial Statements For The Financial Year Ended 31 March RELATED PARTY DISCLOSURES (a) Identities of related parties The Group has related party relationships with the entities within the same group of companies. (b) In addition to the information detailed elsewhere in the financial statements, the Group and the Company carried out the following significant transactions with the related parties during the financial year : Group Company RM RM RM RM Intermediate holding company - IT service payable 9,278 9, Secretarial fee 7,680 6, Internal audit fee 102, ,888 - Subsidiaries - Dividend income received/receivable - - (8,322,500) (6,100,000) - Interest income - - (45,029) (20,311) - Interest expense , Management fee - - (360,000) (360,000) Other related companies - Sale of goods (7,251,450) (18,336,179) Purchase of goods 7,228,677 5,817, Laboratory charges 60,707 49, Transport charges - 1, Upkeep of equipment Related parties - with companies where Lau Brothers # are directors/shareholders - Sale of goods (11,035,107) (5,059,457) Purchase of goods 11,010,174 11,594, Professional fee - 4, with company where spouse of Mr. Nam Yok San is a director - Transport charges 3,910,285 2,798, Purchase of property, plant and equipment - 18, with company where a director of a subsidiary Mr. Tan Chau King is a director - Sale of goods (240,317) Transport charges received (11,257) with Mr. Nam Hiok Yong, director of subsidiaries - Proceeds from disposal of property, plant and equipment (40,000) # Lau Brothers are Dato Lau Bong Wong, Lau Chia Nguang, Datuk Lau Chir Nguan, Dato Lau Eng Guang, Lau Hai Nguan and Tan Sri Lau Tuang Nguang collectively. 82

85 Notes To The Financial Statements For The Financial Year Ended 31 March RELATED PARTY DISCLOSURES (cont d) (c) Information regarding outstanding balances arising from related party transactions at 31 March 2012 are disclosed in Note 11 and Note 18. (d) Compensation of key management personnel The compensation of key management personnel who are the executive directors of the Group and of the Company are detailed in Note 22(a). Group Company RM RM RM RM Salaries and other emoluments 6,685,258 6,614, , ,000 Pension costs - defined contribution plan 569, ,475 72,600 66,900 Social security costs 6,678 6,286 1,063 1,151 7,261,831 7,133, , , OPERATING SEGMENTS For management purposes, the Group is organised into business units based on their products and services provided. The Group is organised into 3 main business segments as follows : (i) Investment holding. (ii) Trading of pet food, medicine and other related products. (iii) Poultry farming. The Management assesses the performance of the operating segments based on operating profit or loss which is measured differently from those disclosed in the consolidated financial statements. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to operating segments. Assets, liabilities and expenses which are common and cannot be meaningfully allocated to the operating segments are presented under unallocated items. Unallocated items comprise mainly investments and related income, loans and borrowings and related expenses, corporate assets (primarily the Company s headquarters) and head office expenses. Inter-segment sales comprise sale of layers, eggs, animal feeds and egg trays under poultry farming based on agreed terms between the companies in the Group. 83

86 Notes To The Financial Statements For The Financial Year Ended 31 March OPERATING SEGMENTS (cont d) Business Segments Trading of pet food, medicine and Investment other related Poultry holding products farming Others Eliminations Consolidated RM RM RM RM RM RM Group - 31 March 2012 Revenue - External sales - 69,035, ,252, ,287,989 - Inter-segment sales 8,682,500 8,727, ,395,168 - (322,805,508) - Total revenue 8,682,500 77,763, ,647,363 - (322,805,508) 267,287,989 Segment results 6,539,858 27,909,962 5,514,435 58,069 (12,295,256) 27,727,068 Unallocated corporate expenses (51,846) Investment revenue 142,450 Finance costs (3,296,452) Profit before tax 24,521,220 Tax expense (7,384,084) Profit after tax 17,137,136 Segment assets 74,234, ,893,396 31,383,206 - (158,610,774) 203,900,250 Unallocated corporate assets 5,334,151 Income producing assets 1,363,236 Tax recoverable 2,418,938 Consolidated total assets 213,016,575 Segment liabilities 10,972,782 84,979,321 16,028,807 - (84,897,674) 27,083,236 Unallocated corporate liabilities 5,347,194 Borrowings 66,270,116 Tax payable 139,000 Consolidated total liabilities 98,839,546 Other information Capital expenditure 157,421 28,637,434 1,190,748 1,726,297 (2,561,260) 29,150,040 Depreciation 80,801 8,494, , ,051,058 Non-cash items (other than depreciation) - (873,916) 105,685 9, , ,770 84

87 Notes To The Financial Statements For The Financial Year Ended 31 March OPERATING SEGMENTS (cont d) Business Segments (cont d) Trading of pet food, medicine and Investment other related Poultry holding products farming Others Eliminations Consolidated RM RM RM RM RM RM Group - 31 March 2011 Revenue - External sales - 28,590, ,899, ,490,392 - Inter-segment sales 6,460,000 7,881, ,179,123 - (224,520,663) - Total revenue 6,460,000 36,472, ,078,927 - (224,520,663) 207,490,392 Segment results 4,925,960 5,030,667 29,691,974 - (10,671,198) 28,977,403 Unallocated corporate expenses (20,390) Investment revenue 84,654 Finance costs (2,315,058) Profit before tax 26,726,609 Tax expense (4,620,960) Profit after tax 22,105,649 Segment assets 68,991,056 23,135, ,662,514 - (138,776,685) 176,012,201 Unallocated corporate assets 3,324,284 Income producing assets 2,109,865 Tax recoverable 1,992,265 Consolidated total assets 183,438,615 Segment liabilities 9,350,933 9,474,324 75,908,166 - (70,541,555) 24,191,868 Unallocated corporate liabilities 3,343,552 Borrowings 56,016,240 Tax payable 329,036 Consolidated total liabilities 83,880,696 Other information Capital expenditure 184, ,253 15,972,342 3,127,659 (800,000) 19,346,084 Depreciation - 269,274 7,135,372-9,068 7,413,714 Non-cash items (other than depreciation) - 262,912 (154,501) - 4,135,591 4,244,002 85

88 Notes To The Financial Statements For The Financial Year Ended 31 March OPERATING SEGMENTS (cont d) Geographical Information Revenue Non-Current Assets RM RM RM RM Malaysia 206,143, ,340, ,732, ,881,111 Singapore 60,731,857 57,898, , ,625 Others 412,362 1,251, ,287, ,490, ,655, ,643,736 Major Customers There were no revenue from one single customer that contributed to more than 10% of the Group s revenue. 34. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR On 10 January 2012, Success Century Sdn. Bhd., a wholly-owned subsidiary of the Company, entered into a Memorandum of Understanding ( MOU ) with directors of subsidiaries, Mr. Lim Meng Bin and Mr. Ng Eng Leng to acquire a piece of vacant freehold land held under Plot F of Lot 70, Mukim of Tj. Sembrong, District of Batu Pahat, Johor for a total cash consideration of RM 1,876,430. As of the report date, there is no material development on the MOU. 35. SIGNIFICANT EVENTS OCCURRING AFTER THE REPORTING PERIOD (a) On 14 May 2012, Liberal Energy Sdn. Bhd., a wholly-owned subsidiary of the Company, entered into the following Sale and Purchase Agreements ( SPAs ) : (i) A SPA with a director of the Company, Mr. Na Yok Chee to acquire a freehold land held under EMR 2191 (now known as GM3365), Lot 3236, Mukim of Tanjong Sembrong, District of Batu Pahat, Johor for a total cash consideration of RM 172,550. (ii) A SPA with a director of subsidiaries, Mr. Nam Hiok Yong to acquire a freehold land held under EMR 2192 (now known as GM3366), Lot 3239, Mukim of Tanjong Sembrong, District of Batu Pahat, Johor for a total cash consideration of RM 337,850. The above acquisitions were completed on 12 July (b) On 14 May 2012, the Company entered into a Share Sale Agreement with Mr. Ng Cheng Nam and directors of the Company and its subsidiaries, Mr. Na Hap Cheng, Mr. Nam Yok San, Mr. Na Yok Chee, Mr. Nam Hiok Yong, Mr. Lim Meng Bin, Mr. Ng Eng Leng and Mr. Loh Wee Cheng to acquire entire equity interests, comprising 95,000 ordinary shares of RM 1.00 each in Pioneer Prosperity Sdn. Bhd. ( Pioneer ) for a total cash consideration of RM 376,200. ( Proposed Acquisition ). The Proposed Acquisition was completed on 12 July Upon the completion of the Proposed Acquisition, Pioneer became a wholly-owned subsidiary of the Company. 86

89 Notes To The Financial Statements For The Financial Year Ended 31 March FINANCIAL INSTRUMENTS The Group s activities are exposed to a variety of market risks (including foreign currency risk, interest rate risk and equity price risk), credit risk and liquidity risk. The Group s overall financial risk management policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group s financial performance Financial Risk Management Policies The Group s policies in respect of the major areas of treasury activity are as follows : (a) Market risk (i) Foreign currency risk The Group is exposed to foreign currency risk on transactions and balances that are denominated in currencies other than Ringgit Malaysia. The currencies giving rise to this risk are primarily Singapore Dollar and United States Dollar. Foreign currency risk is monitored closely on an ongoing basis to ensure that the net exposure is at an acceptable level. On occasion, the Group enters into forward foreign exchange contracts to hedge against its foreign currency risk. The Group s exposure to foreign currency is as follows : Singapore United States Ringgit Dollar Dollar Others Malaysia Total RM RM RM RM RM Group Financial assets Other investments ,040 6,040 Trade and other receivables 3,407, ,976-21,485,710 25,400,019 Deposits, bank and cash balances 5,952,895 2,267 23,761 15,147,628 21,126,551 9,360, ,243 23,761 36,639,378 46,532,610 Financial liabilities Trade and other payables (697,571) (1,642,574) - (20,710,181) (23,050,326) Bank borrowings (51,864,429) (51,864,429) Hire purchase payables (334,396) - - (14,071,291) (14,405,687) (1,031,967) (1,642,574) - (86,645,901) (89,320,442) Net financial assets/(liabilities) 8,328,261 (1,133,331) 23,761 (50,006,523) (42,787,832) Less : Net financial (assets)/ liabilities denominated in the respective entities functional currencies (7,220,720) ,006,523 42,785,803 Currency exposure 1,107,541 (1,133,331) 23,761 - (2,029) 87

90 Notes To The Financial Statements For The Financial Year Ended 31 March FINANCIAL INSTRUMENTS (cont d) 36.1 Financial Risk Management Policies (cont d) (a) Market risk (cont d) (i) Foreign currency risk (cont d) Singapore United States Ringgit Dollar Dollar Others Malaysia Total RM RM RM RM RM Group Financial assets Other investments ,080 5,080 Trade and other receivables 6,705, ,674,759 19,381,006 Deposits, bank and cash balances 4,885,441 2,510 19,105 17,984,086 22,891,142 11,591,264 2,934 19,105 30,663,925 42,277,228 Financial liabilities Trade and other payables (1,943,835) (2,644,913) (17,500) (14,198,716) (18,804,964) Bank borrowings (47,676,485) (47,676,485) Hire purchase payables (253,749) - - (8,086,006) (8,339,755) (2,197,584) (2,644,913) (17,500) (69,961,207) (74,821,204) Net financial assets/(liabilities) 9,393,680 (2,641,979) 1,605 (39,297,282) (32,543,976) Less : Net financial (assets)/ liabilities denominated in the respective entities functional currencies (1,280,213) ,297,282 38,017,069 Forward foreign exchange contracts (contracted notional principal) - 309, ,326 Currency exposure 8,113,467 (2,332,653) 1,605-5,782,419 Foreign currency risk sensitivity analysis The following table details the sensitivity analysis to a reasonably possible change in the foreign currencies at the end of the reporting period, with all other variables held constant : Group Increase/ Increase/ (Decrease) (Decrease) RM RM 88 Effects on profit after tax Singapore Dollar - strengthened by 5% 41, ,255 - weakened by 5% (41,533) (304,255) United States Dollar - strengthened by 5% (42,500) (87,474) - weakened by 5% 42,500 87,474

91 Notes To The Financial Statements For The Financial Year Ended 31 March FINANCIAL INSTRUMENTS (cont d) 36.1 Financial Risk Management Policies (cont d) (a) Market risk (cont d) (ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group s exposure to interest rate risk arises mainly from interest-bearing financial assets and liabilities. The Group s policy is to obtain the most favourable interest rates available. Any surplus funds of the Group will be placed with licensed financial institutions to generate interest income. Information relating to the Group s exposure to the interest rate risk of the financial liabilities is disclosed in Note 36.1(c). Interest rate risk sensitivity analysis A 50 basis points increase/decrease in the interest rate at the end of the reporting period would have immaterial impact on the profit or loss. This assumes that all other variables remain constant. (iii) Equity price risk The Group s principal exposure to equity price risk arises mainly from changes in quoted investment prices. The Group manages its exposure to equity price risk by maintaining a portfolio of equities with different risk profiles. Equity price risk sensitivity analysis A 50 basis points increase/decrease in the equity price risk at the end of the reporting period would have immaterial impact on the profit or loss. This assumes that all other variables remain constant. (b) Credit risk The Group s exposure to credit risk, or the risk of counterparties defaulting, arises mainly from trade and other receivables. 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 quoted investments, deposits, bank and cash balances and derivatives), the Group minimises credit risk by dealing exclusively with high credit rating counterparties. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade and other receivables as appropriate. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. Impairment is estimated by management based on prior experience and the current economic environment. The Company s exposure to credit risk arises from unsecured financial guarantee provided to licensed institutions for credit facilities granted to its subsidiaries. The Company monitors on an ongoing basis the results of the subsidiaries and repayments made by the subsidiaries. Credit risk concentration profile At the end of the reporting period, there were no significant concentrations of credit risk other than the trade amounts due from related companies and related parties of RM 5,231,475 (2011 : RM 2,852,544). 89

92 Notes To The Financial Statements For The Financial Year Ended 31 March FINANCIAL INSTRUMENTS (cont d) 36.1 Financial Risk Management Policies (cont d) (b) Credit risk (cont d) Exposure to credit risk At the end of the reporting period, the Group s maximum exposure to credit risk is represented by : (i) The carrying amount of each class of financial assets recognised in the statements of financial position. (ii) A nominal amount of RM 63,100,000 (2011 : RM 44,800,000) relating to financial guarantee provided by the Company to licensed institutions for credit facilities granted to its subsidiaries. The exposure of credit risk for Group s trade receivables by geographical region is as follows : Group RM RM Malaysia 20,218,284 12,449,259 Singapore 3,383,722 6,705,823 Others 506, ,108,982 19,155,506 Ageing analysis The ageing analysis of the Group s trade receivables at the end of the reporting period is as follows : Gross Individual Carrying amount impairment amount RM RM RM Group Not past due 22,200,870-22,200,870 Past due : - less than 3 months 1,787,317 (21,737) 1,765,580-3 to 6 months 133,332 (19,906) 113,426 - over 6 months 635,636 (606,530) 29,106 24,757,155 (648,173) 24,108,982 Group Not past due 17,032,336-17,032,336 Past due : - less than 3 months 1,531,426 (963) 1,530,463-3 to 6 months 500,865 (34,658) 466,207 - over 6 months 771,774 (645,274) 126,500 19,836,401 (680,895) 19,155,506 At the end of the reporting period, trade receivables that are individually impaired were those in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancement. 90

93 Notes To The Financial Statements For The Financial Year Ended 31 March FINANCIAL INSTRUMENTS (cont d) 36.1 Financial Risk Management Policies (cont d) (b) Credit risk (cont d) Trade receivables that are past due but not impaired The Group believes that no impairment allowance is necessary in respect of these trade receivables. They are substantially companies with good collection track record and no recent history of default. Trade receivables that are neither past due nor impaired A significant portion of trade receivables that are neither past due nor impaired are regular customers that have been transacting with the Group. The Group use ageing analysis to monitor the credit quality of the trade receivables. Any receivables having significant balances past due or more than 150 days, which are deemed to have higher credit risks, are monitored individually. (c) Liquidity risk Liquidity risk arises mainly from general funding and business activities. The Group practises prudent risk management by maintaining sufficient cash balances and the availability of funding through certain committed credit facilities. The following table sets out the maturity profile of the financial liabilities at the end of the reporting period based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on the rates at the end of the reporting period) : Average Contractual effective Carrying undiscounted interest rate amount cash flows Within 1 year 1-5 years Over 5 years % RM RM RM RM RM Group Trade and other payables - 23,050,326 23,050,326 23,050, Bank borrowings - Bank overdrafts , , , Bankers' acceptances ,024,000 47,024,000 47,024, Term loans 6.7 4,293,495 4,539, ,219 3,108, ,657 Hire purchase payables 3.8 to ,405,687 15,645,510 7,951,766 7,693,744-89,320,442 90,806,091 79,520,245 10,802, ,657 Group Trade and other payables - 18,804,964 18,804,964 18,804, Bank borrowings - Bank overdrafts 7.7 1,268,683 1,268,683 1,268, Bankers' acceptances ,361,000 41,361,000 41,361, Term loans 5.7 5,046,802 5,308,220 1,359,818 3,444, ,000 Hire purchase payables 3.2 to 7.5 8,339,755 9,241,298 4,921,715 4,319,583-74,821,204 75,984,165 67,716,180 7,763, ,000 91

94 Notes To The Financial Statements For The Financial Year Ended 31 March FINANCIAL INSTRUMENTS (cont d) 36.1 Financial Risk Management Policies (cont d) (c) Liquidity risk (cont d) Contractual Carrying undiscounted amount cash flows Within 1 year RM RM RM Company Trade and other payables 10,972,782 10,972,782 10,972,782 Company Trade and other payables 9,350,933 9,350,933 9,350, Capital Risk Management The Group manages its capital to ensure that entities within the Group will be able to maintain an optimal capital structure so as to support their businesses and maximise shareholders value. The Group manages its capital based on gearing ratio. The Group s strategies are unchanged from the previous financial year. The gearing ratio is calculated as total borrowings divided by total equity. The gearing ratio of the Group as at the end of the reporting period was as follows : Group RM RM Hire purchase payables 14,405,687 8,339,755 Bank borrowings 51,864,429 47,676,485 Total borrowings 66,270,116 56,016,240 Total equity 114,177,029 99,557,919 Gearing ratio Under the requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required to maintain a consolidated shareholders equity (total equity attributable to owners of the Company) equal to or not less than the 25% of the issued and paid-up share capital (excluding treasury shares) and such shareholder s equity is not less than RM 40 million. The Company has complied with this requirement Classification Of Financial Instruments Group Company RM RM RM RM 92 Financial assets Available-for-sale financial assets Other investment, at fair value 6,040 5, Loans and receivables financial assets Trade and other receivables 25,400,019 19,381,006 4,827,451 1,011,767 Deposits, bank and cash balances 21,126,551 22,891, , ,813 46,526,570 42,272,148 5,193,715 1,937,580

95 Notes To The Financial Statements For The Financial Year Ended 31 March FINANCIAL INSTRUMENTS (cont d) 36.3 Classification Of Financial Instruments (cont d) Group Company RM RM RM RM Financial liabilities Fair value through profit or loss Derivative liabilities Other financial liabilities Trade and other payables 23,050,326 18,804,964 10,972,782 9,350,933 Bank borrowings 51,864,429 47,676, Hire purchase payables 14,405,687 8,339, ,320,442 74,821,204 10,972,782 9,350, Fair Values of Financial Instruments The carrying amounts of the financial assets and financial liabilities reported in the financial statements approximated their fair values based on the methods summarised as follows : (i) The carrying amounts of cash and cash equivalents, receivables, payables and short-term bank borrowings approximately their fair values due to the relatively short-term maturity of the financial instruments. (ii) The fair value of quoted investments is estimated based on their quoted market prices as at the end of the reporting period. (iii) The carrying amounts of hire purchase payables are reasonably approximate their fair values due to insignificant impact of discounting. (iv) The carrying amounts of the term loans approximated their fair values as these instruments bear interest at variable rates. (v) The fair value of forward foreign exchange contracts is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate Fair Value Hierarchy The fair values of the financial assets and liabilities are analysed into level 1 to 3 as follows : Level 1 : Fair value measurements derive from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 : Level 3 : Fair value measurements derive from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. Fair value measurements derive from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The Group has carried its other investments of RM 6,040 at their fair values. These financial asset belong to level 1 of the fair value hierarchy. 93

96 Notes To The Financial Statements For The Financial Year Ended 31 March SUPPLEMENTARY INFORMATION DISCLOSURE OF REALISED AND UNREALISED PROFITS/LOSSES The breakdown of the retained profits of the Group and of the Company at the end of the reporting period into realised and unrealised profits are presented in accordance with the directive issued by Bursa Malaysia Securities Berhad and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants, as follows : Group Company RM RM RM RM Total retained profits : - realised 118,781,052 98,310,212 15,794,429 12,296,605 - unrealised (9,323,090) (8,895,692) ,457,962 89,414,520 15,794,429 12,296,605 Less : Consolidation adjustments (21,390,056) (15,808,774) - - At 31 March 88,067,906 73,605,746 15,794,429 12,296,605 94

97 Top 10 Properties Owned By Teo Seng Capital Berhad And Its Subsidiaries (Pursuant to Appendix 9C Part A(25) of Main Market Listing Requirements) Teo Seng Capital Berhad LIST OF PROPERTY NO LOCATION DESCRIPTION TENURE LAND AREA AGE OF BUILDING (YEARS) NET BOOK VALUE (RM'000) DATE OF ACQUISITION/ REVALUATION 1. Lot 83, 89, 90 PTD Jalan Kg Kangkar Baru Daerah Batu Pahat, Johor Layer Farm 9 Freehold 48.05A 6 5,566 *May GM 455 Lot 4163 GM 456 Lot 4164 GM 1242 Lot 834 HS(D) Lot PTD 3547 All in Mukim Cha ah Bahru Daerah Batu Pahat, Johor Layer Farm 1 Layer Farm 1B Freehold Freehold 15.78A 13A 3 3 5,551 *Oct-07 *Oct-07 *Oct-07 Oct HS(M) 9808 PTD Mukim Tanjong Sembrong, Tempat Yong Peng A.Hitam Road Daerah Batu Pahat, Johor Feedmill Plant Freehold 4.20A 11 5,162 *Mar HS(M) 9807 PTD Mukim Tanjong Sembrong, Tempat Yong Peng A.Hitam Road Daerah Batu Pahat, Johor Central Packing Station 2 and Corporate Office Building Freehold 4.19A 5 4 4,868 *Mar-09 Sep Lot 7087, 7088, 7090 GM418 Lot156 Mukim Tanjong Sembrong Batu 5, Jalan Air Hitam Daerah Batu Pahat Johor Layer Farm 8 Freehold Freehold 16.40A 7.249A 7 2 4,769 *May-08 Sep GM 503 Lot 3660 GRN Lot 3667 HS (M) 12 MLO 201 GM 873 Lot 3830 All in Mukim Chaah Bahru Daerah Batu Pahat, Johor Layer Farm 5 Layer Farm 5B Freehold Freehold 20.97A 5.687A 3.450A ,964 *Jun-95 *Jun-95 Apr-10 Apr HS(M) 9806 PTD Mukim Tanjong Sembrong Tempat Batu 65 1/2 Jalan Ayer Hitam Daerah Batu Pahat, Johor. Paper Egg Tray Plant Freehold 4.73A 17 3,736 *Mar GM 3759 Lot 194 Mukim Tanjong Sembrong Batu 3, Jalan Muar Daerah Batu Pahat, Johor Layer Farm 10 Freehold 11.26A 3 2,884 Apr Lot 21 & 23 Jalan TPP 5/13, Seksyen 5 Taman Perindustrian Puchong Selangor Darul Ehsan Office cum Factory building Leasehold (Expiring on ) 1,560 Sq. meter 10 2,623 Jan GM1083 Lot 62 GRN Lot 3530 GRN Lot 3531 GRN Lot 3532 All in Mukim Cha'ah Bahru Daerah Batu Pahat, Johor Layer Farm 7 Freehold 22.84A 15 2,425 Nov-94 Nov-94 May-95 May-95 *Date of Revaluation. 95

98 Shareholdings Statistic As At 18July 2012 Authorised Capital : RM50,000, divided into 250,000,000 ordinary shares of RM0.20 each Issued and Paid-up Capital : RM40,000, divided into 200,000,000 ordinary shares of RM0.20 each Class of Shares : Ordinary shares of RM0.20 each Voting Shares : One vote per ordinary share ANALYSIS BY SIZE SHAREHOLDINGS Size of No of No of Shareholdings Shareholders % Shares % Less than to 1, , ,001 to 10, , ,001 to 100, ,017, ,001 to 9,999, ,847, ,000,000 and above ,096, Total ,000, THIRTY LARGEST SHAREHOLDERS Name No of Shares % 96 1 Advantage Valuations Sdn. Bhd. 102,246, Koperasi Permodalan Felda Malaysia Berhad 40,000, RHB Nominees (Tempatan) Sdn Bhd 10,850, Pledged Securities Account for Emerging Glory Sdn. Bhd. (EGSB-FAD) 4 Lau Joo Kiang 3,941, EB Nominees (Tempatan) Sendirian Berhad 2,500, Pledged Securities Account for Amnah Binti Ibrahim (SFC) 6 Kendo Trading Pte Ltd 2,000, Lee Say Group Pte Ltd 2,000, Chee Kim Hoon 1,800, Lau Joo Kiang 1,500, JF Apex Nominees (Tempatan) Sdn Bhd 1,474, Pledged Securities Account for Teo Kwee Hock (Margin) 11 Low Eng Guan 1,446, Lau Joo Yong 1,335, Leong Hup Holdings Berhad 1,284, Tan Hang Phoo 1,082, F.E Venture Sdn Bhd 1,000, Tong Seh Industries Supply Sdn. Berhad 1,000, Teo Sek Ching 971, Khoo Liong Hoo 950, Affin Nominees (Tempatan) Sdn. Bhd. 915, Pledged Securities Account for Goh Kim Kooi 20 Lau Joo Kiang 800, Tai Fook Hee 800, Alliancegroup Nominees (Tempatan) Sdn. Bhd. 787, Pledged Securities Account for Low Wee Kiat ( ) 23 Low Chiew Boey 605, Citigroup Nominees (Tempatan) Sdn. Bhd. 590, Pledged Securities Account for Ye Ye Kim Onn (471503) 25 Tan Chiou Huey 570, Chen Wei Kuen 500,

99 Shareholdings Statistic As At 18July 2012 THIRTY LARGEST SHAREHOLDERS (cont d) Name No of Shares % 27 JF Apex Nominees (Tempatan) Sdn. Bhd. 500, Pledged Securities Account for Teo Siew Lai (Margin) 28 Ong Eu Loon Irene 500, TA Nominees (Tempatan) Sdn. Bhd. 500, Pledged Securities Account for Bong Yam Keng 30 Lau Joo Kien Brian 457, Total 184,908, SUBSTANTIAL SHAREHOLDERS As per Register of Substantial Shareholders No of Shares Held Shareholders Direct % Indirect % Advantage Valuations Sdn. Bhd. 102,246, Leong Hup Holdings Berhad 1,284, ,246, Unigold Capital Sdn. Bhd ,246, Emerging Glory Sdn Bhd 10,850, ,730, Dato Lau Bong Wong ,581, Lau Chia Nguang ,581, Dato Lau Eng Guang ,581, Tan Sri Lau Tuang Nguang ,794,538 3& CW Lau & Sons Sdn Bhd ,581, Lau Joo Hong 119,581, Lau Jui Peng 119,581, Lau Joo Heng 119,581, Na Hap Cheng 60, ,259,001 5& Nam Yok San ,254,001 5& Na Yok Chee 1,450 Negligible 102,246, Koperasi Permodalan Felda Berhad 40,000, DIRECTORS' INTEREST As per Register of Directors' Shareholdings No of Shares Held Directors Direct % Indirect % Lau Jui Peng ,581, Nam Yok San ,254,001 5& Na Hok Chee 1,450 Negligible 102,246, Tan Sri Lau Tuang Nguang ,794,538 3& Dato Zainal Bin Hassan Dato Koh Koh Kim Toon Lau Joo Han Loh Wee Ching Choong Keen Shian Frederick Ng Yong Chiang Notes: 1. Deemed interested by virtue of its/his interest in Advantage Valuations Sdn. Bhd. and/or subsidiaries pursuant to Section 6A(4) of the Companies Act, 1965 ( the Act. ). 2. Deemed interested by virtue of its interest in Leong Hup Holdings Berhad pursuant to Section 6A(4) of the Act. 3. Deemed interested by virtue of their interest in Emerging Glory Sdn. Bhd. pursuant to Section 6A(4) of the Act. 4. Deemed interested by virtue of their interest in CW Lau & Sons Sdn. Bhd. pursuant to Section 6A(4) of the Act. 5. Deemed interested by virtue of their interest in Unigold Capital Sdn. Bhd. pursuant to Section 6A(4) of the Act. 6. Deemed interested by virtue of his indirect equity interest in Teo Seng Capital Berhad via his spouse and/or children. 97

100 Notice Of Sixth Annual General Meeting NOTICE IS HEREBY GIVEN that the Sixth Annual General Meeting of the Company will be held at Jasmine A & B Conference Room, Fourth Floor, Riverview Hotel, 29 Jalan Bentayan, Muar, Johor on Thursday, 20 September 2012 at noon to transact the following businesses: AGENDA AS ORDINARY BUSINESS 1. To receive the Audited Financial Statements of the Company and of the Group and the Reports of the Directors and the Auditors thereon for the financial year ended 31 March 2012; (Please refer Explanatory Note 1) 2. To approve the payment of final dividend of 8.75%, in respect of the financial year ended 31 March 2012 under the single-tier systems; [Resolution 1] 3. To approve Directors' fees for the financial year ended 31 March 2012; [Resolution 2] 4. To re-elect the following Directors who retire pursuant to Article 103 of the Company s Articles of Association:- 4.1 Mr Lau Jui Peng 4.2 Mr Nam Yok San 4.3 Mr Na Yok Chee [Resolution 3] [Resolution 4] [Resolution 5] 5. To re-appoint Messrs. Crowe Horwath as auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. [Resolution 6] AS SPECIAL BUSINESS To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions:- 6. PROPOSED ISSUANCE OF NEW ORDINARY SHARES OF RM0.20 EACH PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965 [Resolution 7] (Please refer Explanatory Note 2) "THAT subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant regulatory authorities, the Directors be and are hereby empowered pursuant to Section 132D of the Companies Act, 1965, to issue new ordinary shares of RM0.20 each in the Company from time to time and upon such terms and conditions to such persons and for such purposes as the Directors may deem fit PROVIDED THAT the aggregate number of new ordinary shares to be issued pursuant to this resolution does not exceed ten per centum (10%) of the total issued share capital of the Company and that such authority shall unless revoked or varied by an ordinary resolution by the shareholders of the Company in general meeting commence upon the passing of this resolution until the conclusion of the next annual general meeting of the Company AND THAT the Directors are further authorised to do all such things and upon such terms and conditions as the Directors may deem fit and expedient in the best interest of the Company to give effect to the issuance of new ordinary shares under this resolution including making such applications to Bursa Malaysia Securities Berhad for the listing of and quotation for the new ordinary shares to be issued pursuant to this resolution." 98

101 Notice Of Sixth Annual General Meeting 7. PROPOSED SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE [Resolution 8] (Please refer Explanatory Note 3) "THAT, subject to the provisions of the Listing Requirements of Bursa Malaysia Securities Berhad, the Company and/or its subsidiary companies ( the Group ) be and are hereby authorised to enter into and give effect to the recurrent related party transactions of a revenue or trading nature with the related party as set out in Part B Section 2 of the Circular to Shareholders dated 29 August 2012 ( the Related Party ) provided that such transactions and/or arrangements are:- (a) (b) (c) necessary for the day-to-day operations; undertaken in the ordinary course of business and at arm s length basis and on normal commercial terms which are not more favourable to the Related Party than those generally available to the public; and are not prejudicial to the minority shareholders of the Company ( the Shareholders Mandate ) AND THAT such approval, shall continue to be in force until:- (a) (b) (c) the conclusion of the next Annual General Meeting ("AGM") of the Company following this AGM at which the Shareholders Mandate is passed, at which time it will lapse, unless by a resolution passed at such AGM whereby the authority is renewed; or the expiration of the period within the next AGM of the Company after that date is required to be held pursuant to Section 143(1) of the Companies Act, 1965 ("Act") (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by a resolution passed by the shareholders of the Company in a general meeting; whichever is earlier; AND THAT the Directors of the Company be and are hereby authorised to complete and 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 Shareholders Mandate. 8. PROPOSED RENEWAL OF AUTHORISATION TO ENABLE TEO SENG CAPITAL BERHAD TO PURCHASE UP TO 10% OF THE ISSUED AND PAID-UP ORDINARY SHARE CAPITAL OF THE COMPANY [Resolution 9] (Please refer Explanatory Note 4) THAT, subject always to the compliance with all applicable laws, guidelines, rules and regulations and the approval of all relevant authorities, the Company be and is hereby authorised to purchase such amount of ordinary shares of RM0.20 each in the Company as may be determined by the Directors of the Company from time to time through Bursa Malaysia Securities Berhad upon such terms and conditions as the Directors may deem fit and expedient in the interest of the Company provided that:- (i) (ii) (iii) the aggregate number of shares purchased does not exceed ten per centum (10%) of the total issued and paid-up share capital of the Company as quoted on Bursa Malaysia Securities Berhad as at the point of purchase; the maximum fund to be allocated by the Company for the purpose of purchasing the shares shall be backed by an equivalent amount of retained profits and share premium; and the Directors of the Company may decide either to retain the shares purchased as treasury shares or cancel the shares or retain part of the shares so purchased as treasury shares and cancel the remainder or to resell the shares or distribute the shares as dividends. 99

102 Notice Of Sixth Annual General Meeting THAT the authority conferred by this resolution will commence after the passing of this ordinary resolution and will continue to be in force until:- (i) (ii) (iii) the conclusion of the next Annual General Meeting ( AGM ) at which time it shall lapse unless by ordinary resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions; or the expiration of the period within which the next AGM after that date is required by law to be held; or revoked or varied by ordinary resolution passed by the shareholders of the Company in a general meeting; whichever occurs first. AND THAT authority be and is hereby given unconditionally and generally to the Directors of the Company to take all such steps as are necessary or expedient (including without limitation, the opening and maintaining of central depository account(s) under the Securities Industry (Central Depositories) Act 1991 of Malaysia, and the entering into all other agreements, arrangements and guarantee with any party or parties) to implement, finalise and give full effect to the aforesaid purchase with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities and with the fullest power to do all such acts and things thereafter (including without limitation, the cancellation or retention as treasury shares of all or any part of the purchased shares or to resell the shares or distribute the shares as dividends) in accordance with the requirements and/or guidelines of Main Market Listing Requirements of Bursa Malaysia Securities Berhad and all other relevant governmental and/or regulatory authorities." 9. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THE COMPANY [Special Resolution 1] (Please refer Explanatory Note 5) THAT the proposed amendments to the Articles of Association of the Company as contained in Appendix I annexed to the Annual Report be and are hereby approved. 10. To transact any other business that may be transacted at an annual general meeting of which due notice shall have been given in accordance with the Company's Articles of Association and the Companies Act, NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS ALSO HEREBY GIVEN THAT the final dividend of 8.75%, in respect of the financial year ended 31 March 2012 under the single-tier systems, if approved by the shareholders at the Sixth Annual General Meeting, will be paid on 19 November The entitlement date for the dividend payment is on 5 November A depositor shall qualify for entitlement to the dividend only in respect of:- (a) (b) Shares transferred into the Depositor s Securities Account before 4.00 p.m. on 5 November 2012 in respect of transfers; and Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. 100 By order of the Board, LIM MENG BIN (LS ) WONG WAI FOONG (MAICSA ) Secretaries Yong Peng 29 August 2012

103 Notice Of Sixth Annual General Meeting Teo Seng Capital Berhad Notes:- (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) For the purpose of determining a member who shall be entitled to attend and vote at the Sixth Annual General Meeting, the Company shall be requesting the Record of Depositors as at 13 September Only a depositor whose name appears on the Record of Depositors as at 13 September 2012 shall be entitled to attend and vote at the said meeting as well as for appointment of proxy(ies) to attend and vote on his/her stead. A member entitled to attend and vote at this meeting is entitled to appoint a proxy/(proxies or attorney) or authorised representative to attend and vote in its stead. A proxy may but need not be a member of the Company and need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. Where a member appoints two (2) proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholding to be represented by each proxy. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for the multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. Where the exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies. The instrument appointing a proxy or the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the registered office of the Company at , Jalan Abdullah, Muar, Johor, not less than forty-eight (48) hours before the time for holding the meeting i.e. before noon, 18 September 2012 or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than twenty-four (24) hours before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid. If the appointer is a corporation, this form shall be executed under its common seal or under the hand of its officer or attorney duly authorised. If this Proxy Form is signed under the hands of an officer duly authorised, it should be accompanied by a statement reading signed as authorised officer under Authorisation Document which is still in force, no notice of revocation having been received. If this Proxy Form is signed under the attorney duly appointed under a power of attorney, it should be accompanied by a statement reading signed under Power of Attorney which is still in force, no notice of revocation having been received. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed in the Proxy Form. EXPLANATORY NOTES 1. Item 1 of the Agenda This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting. 2. Item 6 of the Agenda The proposed resolution 7 is the renewal of the mandate obtained from the members at the last Annual General Meeting and if passed, will give the Directors authority to issue new ordinary shares up to an amount not exceeding 10% of the issued share capital of the Company for such purposes as the Directors would consider to be in the best interest of the Company. This would avoid any delay and cost involved in convening a general meeting to specifically approve such an issue of shares. This authority will commence from the date of this Annual General Meeting and, unless earlier revoked or varied by the shareholders of the Company at a subsequent general meeting, expire at the next annual general meeting. The previous mandate was not utilised and accordingly no proceeds were raised. The purpose of this general mandate is for possible fund raising exercises including but not limited to further placement of shares for purpose of funding current and/or future investment projects, working capital, repayment of borrowings and/or acquisitions Item 7 of the Agenda The proposed resolution 8, if passed, will allow the Group to continue to enter into recurrent related party transactions made on an arm s length basis and on normal commercial terms and which are not prejudicial to the interests of the minority shareholders. Please refer to Part B of the Circular to Shareholders dated 29 August 2012 for further information. Item 8 of the Agenda The proposed resolution 9, if passed, will allow the Company to purchase its own shares up to 10% of the total issued and paid-up capital of the Company by utilising the funds allocated which shall not exceed the earnings and/or share premium of the Company. Please refer to Part A of the Circular to Shareholders dated 29 August 2012 for further information. Item 9 of the Agenda The proposed Special Resolution 1 is to comply with the recent amendments to the Listing Requirements of Bursa Malaysia Securities Berhad. 101

104 APPENDIX I Proposed Amendments To The Articles Of Association Of The Company THAT the existing articles in the Articles of Association be amended by substituting with the proposed articles as set out below: Article No. EXISTING ARTICLES PROPOSED ARTICLES Rationale(s) 2 New provision Share Issuance Scheme means a scheme involving a new issuance of shares to the employees. Pursuant to Para of the Listing Requirements 4 Subject to the Act and to the conditions restrictions and limitations expressed in these Articles, the directors may allot, grant options over or otherwise dispose of the unissued share capital of the Company to such persons, at such time and on such terms as they think proper, PROVIDED ALWAYS THAT:- Subject to the Act and to the conditions restrictions and limitations expressed in these Articles, the directors may allot, grant options over or otherwise dispose of the unissued share capital of the Company to such persons, at such time and on such terms as they think proper, PROVIDED ALWAYS THAT:- Pursuant to Para of the Listing Requirements (a) no shares shall be issued at a discount except in compliance with the provision of the Act; (a) no shares shall be issued at a discount except in compliance with the provision of the Act; (b) no shares shall be issued which will shall have the effect of transferring a controlling interest in the Company without prior approval of the members in general meeting; (b) no shares shall be issued which will shall have the effect of transferring a controlling interest in the Company without prior approval of the members in general meeting; (c) in the case of shares other than ordinary shares, no special rights shall be attached until the same have been expressed in these Articles; (c) in the case of shares other than ordinary shares, no special rights shall be attached until the same have been expressed in these Articles; (d) every issuance of shares or options to employees and/or directors under the Employee Share Option Scheme, shall be approved by the members in general meeting and such approval shall specifically detail the amount of shares or options to be issued to such director; (d) every issuance of shares or options to employees and/or directors under the Share Issuance Scheme, shall be approved by the members in general meeting and such approval shall specifically detail the amount of shares or options to be issued to such director; (e) except in the case of an issue of securities on a pro rata basis to shareholders, the Company must ensure that it or any of its subsidiaries shall not issue shares or other convertible securities to the following persons unless shareholders in general meeting have approved of the specific allotment to be made to such persons:- (e) except in the case of an issue of securities on a pro rata basis to shareholders, the Company must ensure that it or any of its subsidiaries shall not issue shares or other convertible securities to the following persons unless shareholders in general meeting have approved of the specific allotment to be made to such persons:- 102

105 APPENDIX I Proposed Amendments To The Articles Of Association Of The Company Teo Seng Capital Berhad Article No. EXISTING ARTICLES PROPOSED ARTICLES Rationale(s) a director, major shareholder or Chief Executive Officer of the Company or its holding company; or a person connected with such a director, major shareholder or Chief Executive Officer; - - a director, major shareholder or Chief Executive Officer of the Company or its holding company; or a person connected with such a director, major shareholder or Chief Executive Officer; (f) except in the case of an issue of securities on a pro rata basis to shareholders and subject to Article 4(e), the Company must ensure that its subsidiary shall not issue shares or other convertible securities to a director, major shareholder or chief executive officer of its subsidiary or the holding company of the said subsidiary (other than the Company or a holding company of the Company) or a person connected with such director, major shareholder or chief executive officer unless the following are complied with:- (a) prior approval of the Board of the Company must be obtained for the specific allotment to such persons; (b) the Board of the Company must ensure that the allotment is fair and reasonable to the Company and in the best interests of the Company; and (c) an immediate announcement of the specific allotment to such persons must be made. (f) except in the case of an issue of securities on a pro rata basis to shareholders and subject to Article 4(e), the Company must ensure that its subsidiary shall not issue shares or other convertible securities to a director, major shareholder or chief executive officer of its subsidiary or the holding company of the said subsidiary (other than the Company or a holding company of the Company) or a person connected with such director, major shareholder or chief executive officer unless the following are complied with:- (a) prior approval of the Board of the Company must be obtained for the specific allotment to such persons; (b) the Board of the Company must ensure that the allotment is fair and reasonable to the Company and in the best interests of the Company; and (c) an immediate announcement of the specific allotment to such persons must be made. 103

106 APPENDIX I Proposed Amendments To The Articles Of Association Of The Company Article No. EXISTING ARTICLES PROPOSED ARTICLES Rationale(s) 68 A meeting of the Company called for the passing of a special resolution and an annual general meeting shall be called by twenty-one (21) days notice in writing at the least. Any other meetings of the Company shall be called by fourteen (14) days notice in writing at the least specifying the place, day and hour of the meeting and, in the case of special business shall also specify the general nature of that business and shall be accompanied by a statement regarding the effect of any proposed resolution in respect of such special business. Notice of every such meeting shall be given by advertisement in at least one daily national newspaper and in writing to the Exchange on which the Company is listed. A meeting of the Company called for the passing of a special resolution and an annual general meeting shall be called by twenty-one (21) days notice in writing at the least. Any other meetings of the Company shall be called by fourteen (14) days notice in writing at the least specifying the place, day and hour of the meeting. The notices shall also include the date of the Record of Depositors, as at the latest date which is reasonably practical and in any event shall not be less than three (3) market days before the meeting for the purpose of determining whether a depositor shall be regarded as a Member entitled to attend, speak and vote at the meeting. In the case of special business, the notice shall also specify the general nature of that business and shall be accompanied by a statement regarding the effect of any proposed resolution in respect of such special business. Notice of every such meeting shall be given by advertisement in at least one daily national newspaper and in writing to the Exchange on which the Company is listed. To be consistent with Para 9.19(6) of the Listing Requirements 70 Every notice calling a general meeting shall appear with reasonable prominence in every such notice a statement that a member entitled to attend and vote is entitled to appoint one or more proxy to attend and vote instead of him and that the proxy need not be a member of the Company. Where a member of the Company is an authorised nominee as defined under the Depositories Act, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Where a member appoint two (2) or more proxies to attend the same meeting, the member shall specify the proportion of his shareholdings to be represented by each proxy. Every notice calling a general meeting shall appear with reasonable prominence in every such notice a statement that a member entitled to attend and vote is entitled to appoint not more than two (2) proxies to attend and vote instead of him. Where a member of the Company is an authorised nominee as defined under the Depositories Act, it may appoint at least one proxy but not more than two (2) proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. To limit the appointment of proxies to not more than two (2) for each member. 104

107 APPENDIX I Proposed Amendments To The Articles Of Association Of The Company Teo Seng Capital Berhad Article No. EXISTING ARTICLES PROPOSED ARTICLES Rationale(s) 70(A) New Provision Where a Member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. Pursuant to Para of the Listing Requirements An exempt authorised nominee refers to an authorised nominee defined under the Securities Industry (Central Depositories) Act 1991 ( SICDA ) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. 70(B) New Provision Where a Member or the authorised nominee appoints two (2) proxies, or where an exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies. To reflect S149(1)(d) of the Companies Act, 1965, which states that unless otherwise provided in the articles, where a member appoints two (2) proxies, the appointment shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy. 105

108 APPENDIX I Proposed Amendments To The Articles Of Association Of The Company Article No. EXISTING ARTICLES PROPOSED ARTICLES Rationale(s) 96 The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under the corporation s seal or under the hand of an officer or attorney duly authorised. The directors may, but shall not be bound to require evidence of the authority of any such attorney or officer. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(b) of the Act shall not apply to the Company. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. Where a member of the Company is an authorised nominee as defined under the Depositories Act, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under the corporation s seal or under the hand of an officer or attorney duly authorised. The directors may, but shall not be bound to require evidence of the authority of any such attorney or officer. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provisions of Section 149(1)(b) of the Act shall not apply to the Company. There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at a meeting of the Company shall have the same rights as the Member to speak at a meeting. The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll. Where a member of the Company is an authorised nominee as defined under the Depositories Act, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Pursuant to the Para. 7.21A of the Listing Requirements where it accords proxies the same rights as members to speak at the general meeting. 106

109 Proxy Form CDS Account No. of Authorised Nominee# #applicable to shares held through nominee account I/We NRIC No. of being a member(s) of TEO SENG CAPITAL BERHAD (Company No.: T) hereby appoint NRIC No. of or failing him/her, NRIC No. of or failing him/her, the Chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the Sixth Annual General Meeting of the Company to be held at Jasmine A & B Conference Room, Fourth Floor, Riverview Hotel, 29 Jalan Bentayan, Muar, Johor on Thursday, 20 September 2012 at noon and at any adjournment thereof. The proxy is to vote in the manner indicated below, with an X in the appropriate spaces. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion. Item Agenda 1. To receive the Audited Financial Statements for the financial year ended 31 March 2012 and the Reports of Directors and Auditors thereon Ordinary Resolutions Resolution FOR AGAINST To approve the payment of final dividend of 8.75%, in respect of the financial year ended 31 March 2012 under single-tier systems. 1 To approve Directors' fees for the financial year ended 31 March To re-elect Mr Lau Jui Peng who retires as a Director of the Company pursuant to Article 103 of the Company s Articles of Association. 2 3 To re-elect Mr Nam Yok San who retires as a Director of the Company pursuant to Article 103 of the Company s Articles of Association. 4 To re-elect Mr Na Yok Chee who retires as a Director of the Company pursuant to Article 103 of the Company s Articles of Association. 5 To re-appoint Messrs. Crowe Horwath as auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. 6 Authority to Issue Shares. Proposed Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature. 7 8 Proposed Renewal of Authorisation to enable Teo Seng Capital Berhad to Purchase up to 10% of the 9 Issued and Paid-up Ordinary Share Capital of the Company. Special Resolution Resolution FOR AGAINST 9. Proposed Amendments to the Articles of Association of the Company. 1 Signed this day of 2012 Signature of Member/Common Seal Number of shares held: Date: Seal For appointment of two proxies, percentage of shareholdings to be represented by the proxies : No of shares Percentage Proxy 1 % Proxy 2 % 100 % NOTES:- (i) (ii) (iii) (iv) (v) (vi) (vii) A member entitled to attend and vote at this meeting is entitled to appoint a proxy/(proxies or attorney) or authorised representative to attend and vote in its stead. A proxy may but need not be a member of the Company and need not be an advocate, an approved company auditor or a person approved by the Registrar of Companies. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. Where a member appoints two (2) proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholding to be represented by each proxy. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for the multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. Where the exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be specified in the instrument appointing the proxies. The instrument appointing a proxy or the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the registered office of the Company at , Jalan Abdullah, Muar, Johor, not less than forty-eight (48) hours before the time for holding the meeting i.e. before noon, 18 September 2012 or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than twenty-four (24) hours before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid. If the appointer is a corporation, this form shall be executed under its common seal or under the hand of its officer or attorney duly authorised. If this Proxy Form is signed under the hands of an officer duly authorised, it should be accompanied by a statement reading signed as authorised officer under Authorisation Document which is still in force, no notice of revocation having been received. If this Proxy Form is signed under the attorney duly appointed under a power of attorney, it should be accompanied by a statement reading signed under Power of Attorney which is still in force, no notice of revocation having been received. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed in this Proxy Form.

110 Please fold along this line (1) Postage The Company Secretary TEO SENG CAPITAL BERHAD (Company No T) (Incorporated in Malaysia) , Jalan Abdullah Muar Johor Please fold along this line (2)

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112 Lot PTD 25740, Batu 4, Jalan Air Hitam, Yong Peng, Johor Darul Takzim, Malaysia. Tel : Fax : tscb@teoseng.com.my