CORPORATE INFORMATION

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5 CORPORATE INFORMATION BOARD OF DIRECTORS Lau Jui Peng Non-Executive Chairman Nam Yok San Managing Director Na Yok Chee Executive Director SECRETARIES Lim Meng Bin (LS ) Wong Wei Fong (MAICSA ) REGISTERED OFFICE , Jalan Abdullah Muar Johor Darul Takzim Tel : Fax : Lau Joo Han Non-Executive Director Loh Wee Ching Non-Executive Director Choong Keen Shian Independent Non-Executive Director Frederick Ng Yong Chiang Independent Non-Executive Director AUDIT COMMITTEE Choong Keen Shian Committee Chairman Lau Jui Peng Committee Member Frederick Ng Yong Chiang Committee Member AUDITORS Deloitte KassimChan (AF0080) No. 21, Jalan Tun Abdul Razak Susur 1/ Johor Bahru Johor Darul Takzim PRINCIPAL BANKERS OCBC Bank (Malaysia) Bhd Malayan Banking Berhad CIMB Bank Berhad United Overseas Bank (Malaysia) Berhad EON Bank Berhad HEAD OFFICE Lot PTD 25740, Batu 4, Jalan Air Hitam, Yong Peng, Johor Darul Takzim Tel : Fax : REGISTRAR PFA Registration Services Sdn Bhd (19234-W) Level 17, The Gardens North Tower Mid Valley City Lingkaran Syed Putra Kuala Lumpur Tel : Fax : STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad Main Market 4 ANNUAL REPORT 2009

6 GROUP CORPORATE STRUCTURE SUCCESS CENTURY SDN BHD (100%) TEO SENG FARMING SDN BHD (100%) TEO SENG CAPITAL BERHAD TEO SENG FEEDMILL SDN BHD (100%) RITMA PRESTASI SDN BHD (100%) TEO SENG PAPER PRODUCTS SDN BHD (100%) ANNUAL REPORT

7 PROFILE OF THE BOARD OF DIRECTORS Mr. Lau Jui Peng, Malaysian, aged 38, was appointed as the Non-Executive Chairman of the Company on 19 June He is one of the representatives of Leong Hup Holdings Berhad ( 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 Berhad. Mr. Lau s knowledge and experience in the production and 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 a sibling of Mr. Lau Joo Hong and Mr. Lau Joo Heng who are indirect substantial shareholders of the Company by virtue of their indirect interest in CW Lau & Sons Sdn. Bhd. 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 10 years. Mr. Lau attended two (2) of the three (3) Board of Directors Meetings held in the financial year ended 31 March Mr. Nam Yok San, Malaysian, aged 53, was appointed as the Managing Director of the Company on 19 June With nearly thirty (30) years of experience in poultry farming, of which the past fourteen (14) years has 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 1983, having been appointed as the Managing Director; a post which he still holds today. 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 has become one of the largest egg producers in the country. Apart from the duties in TSF, Mr. Nam has also been the Managing Director of Teo Seng Paper Products Sdn. Bhd. ( TSPP ) from 1994 to 2008, where he is responsible for 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 was also 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. 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 10 years. Mr. Nam attended all of the three (3) Board of Directors Meetings held in the financial year ended 31 March ANNUAL REPORT 2009

8 Mr. Na Yok Chee, Malaysian, aged 52, was appointed as the Executive Director of the Company on 19 June Like Mr. Nam Yok San, Mr. Na has also 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 over nearly thirty (30) 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 and 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. 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 10 years. Mr. Na attended all of the three (3) Board of Directors Meetings held in the financial year ended 31 March Mr. Lau Joo Han, Malaysian, aged 34, was appointed as the Non-Executive Director of the Company on 19 June 2008, is also one of the representatives of LHH on the Board of Directors of the Company. He is a member of Remuneration Committee of the Company. 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 had also attended 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, TSF on 2 January 2009 and also to the Board of several other subsidiaries of LHH and Emivest Berhad. Mr. Lau does not have any family relationship with any Director/ major shareholders 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 10 years. Mr. Lau attended all of the three (3) Board of Directors Meetings held in the financial year ended 31 March ANNUAL REPORT

9 Mr. Loh Wee Ching, Malaysian, aged 40, was appointed as the Non-Executive Director of the Company on 19 June Mr. Loh joined 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 ten (10) 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 Teo Seng Capital Berhad. 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 10 years. Mr. Loh attended all of the three (3) Board of Directors Meetings held in the financial year ended 31 March Mr. Choong Keen Shian, Malaysian, aged 52, 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 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 Bhd) 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 shareholders 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 10 years. Mr. Choong attended all of the three (3) Board of Directors Meetings held in the financial year ended 31 March Mr. Frederick Ng Yong Chiang, Malaysian, aged 44, 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 the 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. Mr. Frederick Ng 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. Frederick Ng has no conviction of any offences within the past 10 years. Mr. Frederick Ng attended all of the three (3) Board of Directors Meetings held in the financial year ended 31 March ANNUAL REPORT 2009

10 TEO SENG Teo Seng is one of the country s largest chicken egg producers, with all of its farms located in the state of Johor producing more than 1.7 million eggs daily. Being the second largest egg producer in Peninsular Malaysia, it captures approximately 7% of egg market. ANNUAL REPORT

11 It has been a very eventful year for Teo Seng one that will certainly be recorded in the annals of the Group s history with pride. Our successful listing on Bursa Malaysia Securities Berhad is not only to be perceived as a culmination of our past endeavours, but also a symbol of the immense potentials of what the future holds. Lau Jui Peng chairman CHAIRMAN S STATEMENT On behalf of the Board of Directors of Teo Seng Capital Berhad ( Teo Seng ), I am pleased to present to you the Annual Report and Audited Financial Statements of the group for the financial year ended 31 March FINANCIAL REVIEW The year under review was exciting, challenging and full of uncertainties. We witnessed a severe global financial crisis affecting the local and international economies. The rise of oil price to historic level and subsequently plummeted has created an element of uncertainty in the overall industry. Given the challenging business environment, Teo Seng Group s performance over the review period remains satisfactory. The Group recorded revenue of RM181.3 million and generated profit after tax of RM12.6 million. This is attributable to strong sales performance and higher productivity of our Group s business year under review. After strict adherence to our measures to be cost effective and the various strategies to improve our export sales that were put in place a year ago, the Group recorded a turnover of RM181.3 million for the year under review which represented an increase of 14% over the previous year s turnover of RM159.3 million. At the same time, the Group registered a pre-tax profit and after tax of RM14.4 million and RM12.6 million respectively. Gearing During the year, there were positive results due to the Board s effort to reduce the gearing position of the Group. Gearing Ratio was reduced to 0.66 times in 2009 from 1.03 times in the previous year. Financial Review Summary Most importantly, the Board further opines that the Group s overall financial performance is healthy as this is achieved against the background of an increasingly challenging operating environment and the need for constant investment to sustain long term results. 10 ANNUAL REPORT 2009

12 OPERATIONS REVIEW To counter the rising cost of production, particularly in regard to poultry feed, the Group has instituted various measures to be cost effective and improve farming technical efficiency in order to be more competitive. The Bio-Security System has been implemented in our farming operations. This stringent system together with the All-In-All-Out System already being practiced has enabled the Group to manage and expand its commercial layer operations with greater efficiency and higher productivity. The continued adoption and implementation of modern farming system by the Group had resulted in efficient use of raw materials and inventories that led to substantial savings for the Group. Aware of the uncertainties that we are facing, the Group initiated several key corporate strategies to improve and focus on sustainable performance in delivering value to our shareholders. These moves will bear long term positive implications for the Group s mission and will ultimately enhance our earnings prospects. CORPORATE EXERCISE Teo Seng Farming Sdn. Bhd. ( TSF ) Acquisition On 19 March 2007 the Company entered into a share purchase agreement with the shareholders of TSF to acquire 5,366,000 TSF shares representing the entire equity interest in TSF for a purchase consideration of RM32,277,900, which was fully satisfied by the issuance of 161,389,500 new Teo Seng shares at an issue price of RM0.20 per share. The TSF Acquisition was completed on 18 June Re-organisation Upon the exercise of an option granted to the Company by pursuant to an option agreement dated 19 March 2007, Teo Seng had on 18 June 2008 entered into a share acquisition agreement with TSF to acquire: I. 1,500,000 ordinary shares of RM1.00 each in Teo Seng Paper Products Sdn Bhd representing the entire equity interest therein for a consideration of RM4,162,951; II. III. 1,000,000 ordinary shares of RM1.00 each in Teo Seng Feedmill Sdn Bhd representing the entire equity interest therein for a consideration of RM7,432,985; and 100,000 ordinary shares of RM1.00 each in Ritma Prestasi Sdn Bhd representing the entire equity interest therein for a consideration of RM1,150,564. The re-organisation was completed on 19 June 2008 and the aggregate purchase consideration equivalent to RM12,746,500. The public issue of 38,610,000 new ordinary shares of RM0.20 each were issued at an issue price of RM0.45 per ordinary share pursuant to the listing of and quotation for the entire enlarged issued and paid up share capital of the Company on the Second Board of Bursa Malaysia Securities Berhad on 29 October ANNUAL REPORT

13 Success Century Sdn. Bhd. ( SCSB ) Acquisition Referring to the general announcement dated 31 October 2008 and the Prospectus dated 26 September 2008, Teo Seng has allocated a total of RM7.5 million from the gross proceeds raised from the Public Issue for the cash acquisition of 500,000 ordinary shares of RM1.00 each in SCSB, representing 100% equity interest. The acquisition of SCSB was completed on 31 October DIVIDEND During the financial year, an interim single tier tax exempt dividend of 3.75% amounting to RM1.5 million in respect of ordinary shares was fully paid on 12 January In recognition of the strong performance of the Group, the Board has recommended a final tax exempt dividend of 4.25% amounting to RM1.7 million, in respect of the financial year ended 31 March 2009 subject to the approval of the shareholders at the forthcoming Third Annual General Meeting. It is the policy of the Group that a reasonable balance dividend payment and setting aside funds for future investment and business growth be practiced. PROSPECTS Given the following, the Group maintains a positive outlook towards continuous growth and securing better results and performance for the coming year and fairly optimistic that chicken egg being the cheapest among the protein food will continue to remain popular as evidenced by the increased revenue for the year under review. In Malaysia, poultry farming is one of the most successful livestock industry segments, with an annual production of 1,035,000 tonnes of chicken/duck meat and billion chicken/duck eggs for domestic consumption as well as for export. Going forward, the operating environment for the industry is expected to remain challenging, but we are closely monitoring the global trends and developments in the food industry and continue to review and develop effective strategies for business growth and expansion. The strength of the Group has enabled us to deliver a strong financial performance. Moving forward, we continue to focus on improving the performance of all our businesses through our commitment to consistently delivering superior and efficient farming productivity, customer service, our expertise in margin management and our drive for further productivity savings and synergies. APPRECIATION My appreciation goes to the Board, management and employees of the Group for their conscientious effort, commitment and dedication. With your persistence and diligence towards delivering quality and excellence at all times, the Group was successfully listed on the Second Board of Bursa Malaysia Securities Berhad on 29 October With this listing status, the Company is well positioned for stronger growth, both locally and internationally, as we move forward to embrace the future. To our shareholders, we thank you for your unwavering loyalty and wholehearted support; and we look forward to your continuing support. Finally, I wish to express my sincere gratitude to all our valued customers, suppliers, bankers, government authorities for their support and confidence in our Group. 12 ANNUAL REPORT 2009

14 CORPORATE GOVERNANCE STATEMENT 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 seven (7) members comprising the Non-Executive Chairman & Managing Director, one (1) Executive Director, two (2) Non-Executive Directors and two (2) Independent Non-Executive Directors, in compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, which require that a third (1/3) of the board members to be independent non-executive directors. The profile of each Director is presented on page 6 to 8 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 the 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 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. ANNUAL REPORT

15 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 2009 are as follows:- Name of Director Designation Attendance Mr. Lau Jui Peng Non-Executive Chairman 2/3 Mr. Nam Yok San Managing Director 3/3 Mr. Na Yok Chee Executive Director 3/3 Mr. Lau Joo Han Non-Executive Director 3/3 Mr. Loh Wee Ching Non-Executive Director 3/3 Mr. Choong Keen Shian Independent Non-Executive Director 3/3 Mr. Frederick Ng Yong Chiang Independent Non-Executive Director 3/3 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 advice 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. 14 ANNUAL REPORT 2009

16 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 shall 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 and its subsidiaries for the financial year ended 31 March 2009 are as follows: Salaries & Other Fee Emoluments Total Category (RM 000) (RM 000) (RM 000) Executive Director 0 1,731 1,731 Non-Executive Director Total 42 1,743 1,785 Number of Directors Executive Non-Executive Range of Remuneration Director Director Total Up to RM50, RM200,001 to RM250, RM250,001 to RM300, RM400,001 to RM450, RM600,001 to RM650, Total ANNUAL REPORT

17 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. As the admission to the official list and the listing of and quotation of the entire issued and paid up share capital of the company on the Second Board of Bursa Malaysia Securities Berhad was successfully done on 29 October 2008, the Directors had completed the Mandatory Accreditation Programme in November and December 2008 as specified by Bursa Malaysia Securities Berhad. During the financial year, the Directors attended internal conference briefings by the Company Secretary on amendments to the Listing Requirements, rules and regulations of other relevent authorities and updated on Financial Reporting Standard by the Group Accountant. The Directors will continue to receive appropriate training or education to fulfil the Main Market Listing Requirements in the next financial year. 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 25 to 28 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 the Board of Directors, candidates for all 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 nomination 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; 16 ANNUAL REPORT 2009

18 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. 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 responsibility 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). ANNUAL REPORT

19 Duties and responsibility of the Remuneration Committee are as follows: 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. 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. 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 is 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. 18 ANNUAL REPORT 2009

20 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 authorization 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 23 and 24 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. 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. ANNUAL REPORT

21 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 The company provided training to the employees. The training comprises both technical and soft skills. Apart from training, employees are also provided with medical and healthcare insurance and 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. 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. The Group will continue to emphasise on the importance of safety and health at the work place. Community During the financial year, we have donated cash to a diverse range of worthy causes, including educational institution. Providing Opportunities for Re-employment of Retirees The company provides re-employment opportunities for employees or people who have passed their retirement age of 55 and who wish to continue working. DIRECTORS' REPOSIBILITIES 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 2009, the Directors are also responsible for the adoption of suitable accounting policies and its consistent use in the financial statements supported where necessary by reasonable and prudent judgments. 20 ANNUAL REPORT 2009

22 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 were 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 RM301, for the financial year ended 31 March 2009 for the purpose of acting as Reporting Accountant for the listing exercise of the Company on the Second Board of Bursa Malaysia Securities Berhad. Variation in Results No variances of more than 10% between the audited results for the financial year ended 31 March 2009 and the unaudited results previously announced. 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 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 20 to the financial statements. Revaluation Policy The Group s revaluation policy on landed properties are stated in Note 3 to the financial statements. ANNUAL REPORT

23 Utilisation Of Proceeds As at the end of financial year ended 31 March 2009, the utilization of the proceeds from the public issue totaling RM million was as follows: Timeframe for Proposed Utilisation Balance utilization from the Utilisation as at the Date of Listing reporting date RM 000 RM 000 RM 000 Acquisition of Success Century Sdn Bhd ( SCSB ) Within 24 months 7,500 ** 7,500 - Repayment of SCSB bank borrowings Within 24 months 6,210 6,210 Working Capital Within 24 months 1,865 1,865 # 158 Estimating listing expenses Within 24 months 1,800 1,642 # (158) 17,375 17,217 - ** The amount of RM500,000 being part of the acquisition price of SCSB was initially set aside as security deposit for the profit guarantee given by the vendor. As the vendor has achieved the profit guarantee, the security deposit was released on 26 May # The unutilized balance of listing expenses was used as working capital. 22 ANNUAL REPORT 2009

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) (b) the safeguarding of Group's assets against unauthorised use or disposition; and 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 Board of 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 Board of Audit Committee for review, response and implementation of corrective actions, which will enhance the internal control aspects of the relevant areas under review. Other Key Areas of Internal Control The followings 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. ANNUAL REPORT

25 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 any of the reported weaknesses resulted in material losses or contingencies during the financial year. RISK MANAGEMENT FRAMEWORK The professionalism and competency of staff are enhanced through a proper planned training, development programme 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 Company 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. 24 ANNUAL REPORT 2009

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 Members Lau Jui Peng Frederick Ng Yong Chiang Independent Non-Executive Director Non-Executive Chairman 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) (ii) (iii) must be a member of the Malaysian Institute of Accountants; or if he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years' 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 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 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. ANNUAL REPORT

27 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) (vi) (vii) (viii) (ix) (x) 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; 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; 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; 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; any letter of resignation from the external auditors and any questions of resignation or dismissal; and 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; 26 ANNUAL REPORT 2009

28 (iv) (v) approve any appointment or termination of senior staff members of the internal audit function; and 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. 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. ANNUAL REPORT

29 (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. Attendance at Meetings Details of the attendance of the Committee members for the financial year ended 31 March 2009 are as follows: Name of member Number of meetings attended Choong Keen Shian 3/3 Lau Jui Peng 2/3 Frederick Ng Yong Chiang 3/3 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. As the internal audit was performed prior to the listing of the Company as part of its scope of work for intermediate holding company, no internal audit fee was incurred in respect of the current year. 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. 28 ANNUAL REPORT 2009

30 FINANCIAL STATEMENTS Directors report Independent auditors report Income statements 38 Balance sheets Statements of changes in equity Cash flow statements Notes to the financial statements Statement by directors 90 Declaration by the director primarily responsible for the financial management of the Company 90

31 DIRECTORS' REPORT The directors of TEO SENG CAPITAL BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended March 31, PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. The principal activities of the subsidiary companies are as stated in Note 14 to the Financial Statements. There have been no significant changes in the nature of the principal activities of the Company and of its subsidiary companies during the financial year. SIGNIFICANT EVENTS DURING THE YEAR There are no significant events other than those mentioned in Note 33 to the Financial Statements. RESULTS OF OPERATIONS The results of operations of the Group and of the Company for the financial year are as follows: The Group RM The Company RM Profit before tax 14,417,914 4,531,420 Income tax expense (1,799,627) (1,147,898) Profit for the year 12,618,287 3,383,522 In the opinion of the directors, the results of 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 An interim dividend of 0.75 sen per ordinary share, tax exempt, amounting to RM1,500,000 was declared on November 25, 2008 and paid on January 12, 2009, in respect of the current financial year. The directors propose a final cash dividend of 0.85 sen per ordinary share, tax exempt, amounting to RM1,700,000 in respect of the current financial year. The proposed final dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and has not been included as a liability in the financial statements. Upon approval by the shareholders, the cash dividend payment will be accounted for in equity as an appropriation of retained earnings during the financial year ending March 31, ANNUAL REPORT 2009

32 RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements. ISSUE OF SHARES AND DEBENTURES As approved by the shareholders at the Extraordinary General Meeting held on June 9, 2008, the Company increased its: i. authorised share capital from RM100,000 consisting of 500,000 ordinary shares of RM0.20 each to RM50,000,000, consisting of 250,000,000 ordinary shares of RM0.20 each by way of creation of an additional 249,500,000 ordinary shares of RM0.20 each; and ii. issued and paid up ordinary share capital from RM100 to RM40,000,000 by way of the issuance of 199,999,500 ordinary shares of RM0.20 each by way of: a. issue of 161,389,500 new ordinary shares of RM0.20 each at par pursuant to the acquisition of Teo Seng Farming Sdn. Bhd.; and b. public issue of 38,610,000 new ordinary shares of RM0.20 each at an issue price of RM0.45 each. The resulting premium arising from the public issue of shares mentioned above of RM9,652,500 has been credited to the share premium account. On October 29, 2008, the entire issued and paid-up share capital of the Company of 200,000,000 ordinary shares of RM0.20 each were listed on the Second Board of Bursa Malaysia Securities Berhad. The new ordinary shares issued rank pari passu with the then existing ordinary shares of the Company. The Company has not issued any debentures during the financial year. SHARE OPTIONS No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company. No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As of the end of the financial year, there were no unissued shares of the Company under options. OTHER STATUTORY INFORMATION Before the income statements and the balance sheets of the Group and of the Company were made out, the directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and have satisfied themselves that there was no bad debts to be written off and that adequate allowance has been made for doubtful debts; and ANNUAL REPORT

33 (b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business have been written down to their estimated realisable values. As of the date of this report, the directors are not aware of any circumstances: (a) which would require the writing off of bad debts or render the amount of allowance for doubtful debts inadequate to any substantial extent in the financial statements of the Group and of the Company; or (b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or (c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or (d) not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading. As of the date of this report, there does not exist: (a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year and secures the liability of any other person; or (b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent or other liability has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the directors, 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 operations of the Group and of the Company for the financial year in which this report is made. 32 ANNUAL REPORT 2009

34 DIRECTORS The following directors served on the Board of the Company since the date of the last report: Mr. Lau Jui Peng (appointed on ) Mr. Lau Joo Han (appointed on ) Mr. Nam Yok San (appointed on ) Mr. Na Yok Chee (appointed on ) Mr. Loh Wee Ching (appointed on ) Mr. Choong Keen Shian (appointed on ) Mr. Frederick Ng Yong Chiang (appointed on ) Mr. Koh Chee Siang (resigned on ) Ms. Tan Ching Ching (resigned on ) DIRECTORS' INTERESTS The shareholdings in the Company and in related companies of those who were directors as of the end of the financial year, as recorded in the Register of Directors' Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, are as follows: Shares in the Company No. of ordinary shares of RM0.20 each Balance as of or date of Balance as appointment Bought Sold of Direct interest Lau Jui Peng - 80,000-80,000 Lau Joo Han - 100, ,000 Nam Yok San - 951, ,450 Na Yok Chee - 951, ,450 Loh Wee Ching - 170, ,000 Indirect interest Nam Yok San - 8,000-8,000 Shares in the immediate holding company, Advantage Valuations Sdn. Bhd. No. of ordinary shares of RM1 each Balance as of or date of Balance as appointment Bought Sold of Direct interest Nam Yok San Na Yok Chee ANNUAL REPORT

35 Shares in the immediate holding company, Advantage Valuations Sdn. Bhd. No. of redeemable convertible preference shares of RM0.01 each Balance as of or date of Balance as appointment Bought Redeemed of Direct interest Nam Yok San 1,889,898 - (296,055) 1,593,843 Na Yok Chee 1,889,898 - (296,055) 1,593,843 Shares in intermediate holding company, Leong Hup Holdings Berhad No. of ordinary shares of RM1 each Balance as of or date of Balance as appointment Bought Sold of Direct interest Lau Jui Peng 26, ,700 (5,100) 330,700 Lau Joo Han 90,000 - (35,000) 55,000 None of the other directors in office as of the end of the financial year, held shares or had beneficial interest in the shares of the Company or its related companies during the financial year. DIRECTORS' BENEFITS Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive any benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by directors as disclosed in the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for certain directors who received remuneration from subsidiary companies as directors and/or executives of the subsidiary companies and except for any benefits which may be deemed to have arisen by virtue of the transactions mentioned in Note 20 to the Financial Statements. During and as of the end of the financial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. 34 ANNUAL REPORT 2009

36 HOLDING COMPANIES The Company is a subsidiary company of Advantage Valuations Sdn. Bhd., a company incorporated in Malaysia. The intermediate holding company is Leong Hup Holdings Berhad, a company incorporated in Malaysia and listed on the Main Board of Bursa Malaysia Securities Berhad. The directors regard Leong Hup Management Sdn. Bhd., a company incorporated in Malaysia, as the ultimate holding company. AUDITORS The auditors, Messrs. Deloitte KassimChan, have indicated their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors, LAU JUI PENG NAM YOK SAN Johor Bahru July 15, 2009 ANNUAL REPORT

37 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF TEO SENG CAPITAL BERHAD (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of Teo Seng Capital Berhad, which comprise the balance sheets of the Group and of the Company as of March 31, 2009 and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 38 to 89. Directors Responsibility for the Financial Statements The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with the Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion to you, 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 towards any other person for the contents of this report. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 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 the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 36 ANNUAL REPORT 2009

38 DELOITTE KASSIMCHAN Opinion In our opinion, the financial statements have been properly drawn up in accordance with the Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of March 31, 2009 and of their financial performance and cash flows for the 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 that: (a) in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiary companies of which we have acted as auditors, have been properly kept in accordance with the provisions of the Act; (b) we have considered the accounts and auditors report of the subsidiary companies, of which we have not acted as auditors, as mentioned in Note 14 to the Financial Statements, being accounts that have been included in the financial statements of the Group; (c) we are satisfied that the accounts of the subsidiary companies that have been consolidated with the financial statements of the Company 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 as required by us for these purposes; and (d) the auditors report on the accounts of the subsidiary companies were not subject to any qualification and did not include any comment made under sub-section (3) of Section 174 of the Act. DELOITTE KASSIMCHAN AF 0080 Chartered Accountants TAN BOON HOE Partner 1836/07/09(J) Chartered Accountant Johor Bahru July 15, 2009 ANNUAL REPORT

39 INCOME STATEMENTS FOR THE YEAR ENDED MARCH 31, 2009 The Group The Company Note RM RM RM RM Revenue 5 181,341, ,343,487 4,650,000 - Investment revenue 6 85, ,447 23,662 - Other operating income 7 450, , Purchase of trading merchandise (12,792,337) (11,119,195) - - Changes in inventories of finished goods and work-in-progress 84,822 2,469, Livestocks and poultry feeds used (24,748,292) (33,019,833) - - Raw materials and consumables used (95,562,865) (77,423,553) - - Directors remuneration 8 (1,785,177) (1,015,264) (54,000) - Staff costs 7 (11,209,594) (8,851,340) - - Depreciation of property, plant and equipment 13 (5,384,878) (4,525,532) - - Amortisation of prepaid lease payments (4,463) Finance costs 9 (2,614,634) (2,465,573) - - Other operating expenses 7 (13,442,694) (8,993,176) (88,242) (5,074) Profit (Loss) before tax 14,417,914 14,875,520 4,531,420 (5,074) Income tax expense 11 (1,799,627) (2,343,109) (1,147,898) - Profit (Loss) for the year 12,618,287 12,532,411 3,383,522 (5,074) Attributable to: Equity holders of the Company 12,618,287 12,532,411 3,383,522 (5,074) Earnings per ordinary share (sen) Basic/Diluted The accompanying Notes form an integral part of the Financial Statements 38 ANNUAL REPORT 2009

40 BALANCE SHEETS AS OF MARCH 31, 2009 ASSETS The Group The Company Note RM RM RM RM Non-current Assets Property, plant and equipment 13 80,482,160 57,438, Investment in subsidiary companies ,524,400 - Other investments 15 3,024 3, Prepaid lease payments 16 1,873, Goodwill on consolidation 17 3,084,411 1,696, Total Non-current Assets 85,443,375 59,137,456 53,524,400 - Current Assets Inventories 18 28,135,244 22,582, Trade receivables 19&20 10,241,666 15,320, Other receivables, deposits and prepaid expenses 19 1,296,825 1,333, Tax recoverable 436,688 55, Amount owing by immediate holding company 20 5,118 5,101 5,118 - Amount owing by subsidiary companies ,890,126 - Amount owing by related companies , , Dividend receivable - - 1,875,000 - Cash and bank balances 21 10,117,098 12,328, , Total Current Assets 51,060,392 52,181,576 9,457, TOTAL ASSETS 136,503, ,319,032 62,981, EQUITY AND LIABILITIES Capital and Reserves Share capital 22 40,000,000 5,366,000 40,000, Reserves 23 29,077,278 36,860,164 9,885,316 (9,033) Total Equity 69,077,278 42,226,164 49,885,316 (8,933) ANNUAL REPORT

41 BALANCE SHEETS AS OF MARCH 31, 2009 (Cont d) The Group The Company Note(s) RM RM RM RM Non-current Liabilities Amount owing to intermediate holding company 20-4,211, Hire-purchase payables - non-current portion 24 3,618,643 3,137, Bank borrowings - non-current portion 25 3,251,051 3,737, Deferred tax liabilities 26 7,268,508 6,304, Total Non-current Liabilities 14,138,202 17,390, Current Liabilities Trade payables 20&27 7,395,880 11,994, Other payables and accrued expenses 20&27 5,727,856 2,844, ,259 3,815 Amount owing to a director ,218 Amount owing to intermediate holding company ,879 4, Amount owing to a subsidiary company ,545,442 - Amount owing to related companies ,969 1,013, Dividend payable - 2,704, Hire-purchase payables 24 2,728,883 1,721, Bank borrowings 25 36,326,922 30,784, Tax liabilities 72, ,385 22,898 - Total Current Liabilities 53,288,287 51,701,917 13,096,599 9,033 Total Liabilities 67,426,489 69,092,868 13,096,599 9,033 TOTAL EQUITY AND LIABILITIES 136,503, ,319,032 62,981, The accompanying Notes form an integral part of the Financial Statements. 40 ANNUAL REPORT 2009

42 STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED MARCH 31, 2009 The Group Non-distributable Distributable Reserves Reserve Asset Share Share Revaluation Retained Total Capital Premium Reserve Earnings Equity Note RM RM RM RM RM Balance as of April 1, ,366, ,000 3,980,856 22,023,361 32,204,217 Income recognised directly into equity, reversal of deferred tax liabilities from changes in tax rate , ,000 Profit for the year ,532,411 12,532,411 Total recognised income and expense ,000 12,532,411 12,726,411 Dividend (2,704,464) (2,704,464) Balance as of March 31, ,366, ,000 4,174,856 31,851,308 42,226,164 The Group Non-distributable Reserves Distributable Reserves Asset Reserve Share Share Acquisition Revaluation Retained Total Capital Premium Reserve Reserve Earnings Equity Note RM RM RM RM RM RM Balance as of April 1, ,366, ,000-4,174,856 31,851,308 42,226,164 Profit for the year, representing total recognised income and expense ,618,287 12,618,287 Adjustment arising from reserve acquisition 22 26,912,000 (834,000) (26,078,000) Issue of shares 22 7,722,000 9,652, ,374,500 Share issues expenses written off 22 - (1,641,673) (1,641,673) Dividends (1,500,000) (1,500,000) Balance as of March 31, ,000,000 8,010,827 (26,078,000) 4,174,856 42,969,595 69,077,278 ANNUAL REPORT

43 STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED MARCH 31, 2009 (Cont d) Non-distributable Retained Reserve Earnings/ Share Share (Accumulated Total Capital Premium Losses) Equity Note RM RM RM RM The Company Balance as of April 1, (3,959) (3,859) Loss for the year, representing total recognised income and expense - - (5,074) (5,074) Balance as of March 31, (9,033) (8,933) Balance as of April 1, (9,033) (8,933) Profit for the year, representing total recognised income and expense - - 3,383,522 3,383,522 Issue of shares 22 39,999,900 9,652,500-49,652,400 Shares issue expenses written off 22 - (1,641,673) - (1,641,673) Dividend (1,500,000) (1,500,000) Balance as of March 31, ,000,000 8,010,827 1,874,489 49,885,316 The accompanying Notes form an integral part of the Financial Statements. 42 ANNUAL REPORT 2009

44 CASH FLOW STATEMENTS FOR THE YEAR ENDED MARCH 31, 2009 CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES The Group The Company Note RM RM RM RM Profit (Loss) for the year 12,618,287 12,532,411 3,383,522 (5,074) Adjustments for: Income tax expense recognised in profit or loss 1,799,627 2,343,109 1,147,898 - Depreciation of property, plant and equipment 5,384,878 4,525, Finance costs 2,614,634 2,465, Allowance for doubtful debts 209,417 17, Allowance for slow moving inventories 150, Property, plant and equipment written off 5, Amortisation of prepaid lease payments 4, Dividend income (83) (137) (4,500,000) - Allowance for doubtful debts no longer required (9,000) Unrealised gain on foreign exchange (66,378) (163,121) - - Interest income (85,255) (146,447) (23,662) - Loss (Gain) on disposal of property, plant and equipment (133,000) 41, Bad debt written off - 53, ,493,465 21,669,602 7,758 (5,074) Movements In Working Capital (Increase) Decrease in: Inventories (2,292,263) (6,150,371) - - Trade receivables 6,113,305 (2,827,780) - - Other receivables, deposits and prepaid expenses 1,132,859 69, Amount owing by related companies (271,963) (353,504) - - ANNUAL REPORT

45 CASH FLOW STATEMENTS FOR THE YEAR ENDED MARCH 31, 2009 (Cont d) Increase (Decrease) in: The Group The Company Note RM RM RM RM Trade payables (11,959,092) 3,435, Other payables and accrued expenses (6,444,937) (914,054) 24,444 (144) Amount owing to a director (7,036) - (5,218) 5,218 Amount owing to related companies (83,092) 164, Net Cash From Operations 8,681,246 15,093,488 26,984 - Income tax refunded 111, Finance costs paid (2,614,634) (2,465,573) - - Income tax paid (2,952,240) (2,735,425) - - Net Cash From Operating Activities 3,225,824 9,892,490 26,984 - CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment 133,000 67, Interest income 85, ,447 23,662 - Dividend received ,500,000 - Acquisition of subsidiary companies 14 (5,436,886) - (7,000,000) - Additions to: Prepaid lease payments (1,878,243) Property, plant and equipment 30a (8,634,790) (5,806,478) - - Increase in: Amount owing by immediate holding company (17) (612) (5,118) - Amount owing by subsidiary companies - - (6,890,126) - Subscription of additional shares in subsidiary company - - (1,000,000) - Net Cash Used In Investing Activities (15,731,598) (5,592,806) (13,371,582) - 44 ANNUAL REPORT 2009

46 CASH FLOW STATEMENTS FOR THE YEAR ENDED MARCH 31, 2009 (Cont d) CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES The Group The Company Note RM RM RM RM Issue of shares 17,374,500-17,374,500 - Increase in short-term bank borrowings 7,718,000 6,554, Decrease (Increase) in fixed deposits pledged to banks 2,057,049 (471,567) - - Proceeds from term loans 2,000, Repayments of term loan (3,146,783) (2,240,898) - - Share issue expenses (1,641,673) - (1,641,673) - Repayments of hire-purchase payables (2,329,112) (1,305,251) - - Decrease in: Amount owing to intermediate holding company (4,109,570) (632,708) - - Amount owing to a subsidiary company - - (201,058) - Dividend paid (4,204,464) - (1,500,000) - Net Cash From Financing Activities 13,717,947 1,903,576 14,031,769 - NET INCREASE IN CASH AND CASH EQUIVALENTS 1,212,173 6,203, ,171 - CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,470,196 (858,113) Effect of exchange differences 149, , ,619,418 (733,064) CASH AND CASH EQUIVALENTS AT END OF YEAR 30b 6,831,591 5,470, , The accompanying Notes form an integral part of the Financial Statements. ANNUAL REPORT

47 NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Second Board of Bursa Malaysia Securities Berhad. The principal activity of the Company is investment holding. The principal activities of the subsidiary companies are as stated in Note 14. There have been no significant changes in the nature of the principal activities of the Company and of its subsidiary companies during the financial year. The registered office and principal place of business of the Company is located at Lot PTD 25740, Batu 4, Jalan Air Hitam, Yong Peng, Johor. The financial statements of the Group and of the Company were authorised by the Board of Directors for issuance in accordance with a resolution of the directors on July 15, BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Group and of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and the Financial Reporting Standards ( FRS ) in Malaysia. FRS 3 Business Combination As mentioned in Note 33, the Company acquired 100% of the issued and fully paid-up capital of Teo Seng Farming Sdn. Bhd. for a purchase consideration of RM32,277,900 satisfied by the issuance of 161,389,500 new ordinary shares of RM0.20 each in the Company at an issue price of RM0.20 per share. Upon the completion of the acquisition of Teo Seng Farming Sdn. Bhd., the Company became the legal parent company of Teo Seng Farming Sdn. Bhd. Due to the relative values of the companies, the former Teo Seng Farming Sdn. Bhd. s shareholders became the majority shareholders through the issue of 161,389,500 new ordinary shares of RM0.20 each, controlling about 100% of the share capital of the Company. Further, the Company s continuing operations and executive management are those of Teo Seng Farming Sdn. Bhd. Accordingly, the substance of the business combination is that Teo Seng Farming Sdn. Bhd. acquired the Company in a reverse acquisition. FRS 3 Business Combination requires the consolidated financial statements to be issued under the name of the legal parent company, although they are a continuation of the financial statements of the legal subsidiary. In order to comply with FRS 3, the following have been reflected in the consolidated financial statements: (i) the assets and liabilities of the Company and Teo Seng Farming Sdn. Bhd. have been recognised at their book values immediately prior to the reverse acquisition; 46 ANNUAL REPORT 2009

48 (ii) the retained earnings and other equity balances recognised in the consolidated financial statements are those of Teo Seng Farming Sdn. Bhd. immediately before the business combination; (iii) the amount recognised as issued equity instruments in the consolidated financial statements is the sum of: a) the issued and paid-up share capital of Teo Seng Farming Sdn. Bhd. immediately before the reverse acquisition; and b) the cost of achieving the combination; (iv) the equity structure appearing in these consolidated financial statements after the reverse acquisition reflects the equity structure of the Company; and (v) the comparative information presented in these consolidated financial statements is that of Teo Seng Farming Sdn. Bhd. In the current financial year, the Group and the Company have adopted all the revised FRS, amendment to FRS and IC Interpretations ( IC Int. ) issued by Malaysian Accounting Standards Board ( MASB ) that are relevant to their operations and effective for annual periods beginning on or after April 1, 2008 as follows: FRS 107 Cash Flow Statements FRS 112 Income Taxes FRS 118 Revenue FRS 121 Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates Net investment in a foreign operation FRS 134 Interim Financial Reporting FRS 137 Provisions, Contingent Liabilities and Contingent Assets IC Int. 8 Scope of FRS 2 The adoption of these revised FRS and IC Int. have no material effect on the financial statements of the Group and of the Company. Standards and Interpretations in issue but not yet effective At the date of authorisation of issue of these financial statements, the following FRS and IC Int. were in issue but not yet effective: FRS 1 FRS 2 FRS 4 FRS 7 FRS 8 FRS 123 FRS 127 FRS 139 IC Int. 9 IC Int. 10 IC Int. 11 IC Int. 13 IC Int. 14 First-time Adoption of Financial Reporting Standards (Amendments relating to cost of an investment in a subsidiary, jointly controlled entity or associate) Share-based Payment (Amendments relating to vesting conditions and cancellations) Insurance Contracts Financial Instruments: Disclosures Operating Segments Borrowing Costs (Revised) Consolidated and Separate Financial Statements (Amendments relating to cost of an investment in a subsidiary, jointly controlled entity or associate) Financial Instruments: Recognition and Measurement Reassessment of Embedded Derivatives Interim Financial Reporting and Impairment FRS 2 - Group and Treasury Share Transactions Customer Loyalty Programmes FRS The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction ANNUAL REPORT

49 Consequential amendments were also made to various FRS as a result of these new FRS. Except for FRS 8 which is effective for annual financial statements for periods beginning on or after July 1, 2009, these new FRS and IC Int. are effective for annual periods beginning on or after January 1, FRS 2, FRS 4, IC Int. 11, IC Int. 13 and IC Int. 14 are not expected to be relevant to the operations of the Group and the Company. The directors anticipate that the other FRS, amendments to FRS and IC Int. will be adopted in the annual financial statements of the Group and of the Company for the year commencing April 1, 2010 and that the adoption of these new/revised FRS, amendments to FRS and IC Int. will have no material impact on the financial statements of the Group and of the Company in the period of initial application except for the following: FRS 7 Financial Instruments: Disclosures FRS 7 and the consequential amendment to FRS 101 Presentation of Financial Statements require disclosure of information about the significance of financial instruments for the Group s and the Company s financial position and performance, the nature and extent of risks arising from financial instruments, and the objectives, policies and processes for managing capital. FRS 8 Operating Segments FRS 8, which replaces FRS Segment Reporting, requires the identification of operating segments based on internal reports that are regularly reviewed by the Group s chief operating decision maker in order to allocate resources to the segments and to assess their performance. Currently, the Group identifies two sets of segments (business and geographical) using a risks-and-rewards approach, with the Group s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. As a result, following the adoption of FRS 8, the identification of the Group s reportable segments may change. FRS 123 Borrowing Costs (Revised) FRS 123 (Revised) eliminates the option available under the previous version of FRS 123 to recognise all borrowing costs immediately as an expense. An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. FRS 139 Financial Instruments: Recognition and Measurement FRS 139 establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. By virtue of the exemption in paragraph 103AB of FRS 139, the impact on the financial statements upon first adoption of this standard as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors is not disclosed. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Group and of the Company have been prepared under the historical-cost convention unless otherwise indicated in the accounting policy stated below. 48 ANNUAL REPORT 2009

50 Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiary companies). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiary companies acquired or disposed of during the year are included in the consolidated profit or loss from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiary companies to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Business Combinations The acquisition of subsidiary companies is accounted for using the purchase method. The cost of the business combination is measured as 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. The acquiree s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with FRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. Investment in Subsidiary Companies A subsidiary company is an entity over which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from its activities. Subsidiary companies are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. Investments in subsidiary companies which are eliminated on consolidation are stated at cost less impairment, if any, in the Company s separate financial statements. Goodwill on Consolidation Goodwill arising on the acquisition of a subsidiary company represents the excess of the cost of acquisition over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary company recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. ANNUAL REPORT

51 For the purpose of impairment testing, goodwill is allocated to each of the Group s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in subsequent period. On disposal of a subsidiary company, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 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. 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 transaction will flow to the entity; and the cost incurred or to be incurred in respect of the transaction can be measured reliably. Dividend income Dividend income represents gross dividends from quoted and unquoted investments and is recognised when the shareholder s right to receive payment is established. Interest income Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will be accrued to the Group. Other income Other income is recognised on an accrual basis. Borrowing Costs Borrowing costs are recognised in the income statement in the period in which they are incurred. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 50 ANNUAL REPORT 2009

52 Assets held under finance leases are initially recognised as assets of the Group at their fair values at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss. Contingent rentals are recognised as expenses in the periods in which they are incurred. Operating lease payments are recognised as an expense on straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from leased asset are consumed. Prepaid Lease Payments Leases of land with title not expected to pass to the lessee by the end of the lease term is treated as operating lease as land normally has an indefinite economic life. The upfront payments made for the leasehold land represents prepaid land lease payments and are amortised on a straight-line basis over the lease term. Foreign Currencies The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (the functional currency ). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Ringgit Malaysia which is the functional currency of the Company and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency (i.e. foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. ANNUAL REPORT

53 Employee Benefits i. Short-term employee benefits Wages, salaries, paid annual leaves, bonuses and social contributions are recognised in the period in which the associated services are rendered by employees of the Group and of the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. ii. Defined contribution plans The Group and the Company make statutory contributions to approved provident funds and the contributions are charged to profit or loss for the period. The approved provident funds are defined contribution plans. Such contributions are recognised as an expense in profit or loss as incurred. Once the contributions have been paid, there are no further payment obligations. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date. Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all deductible temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will be available against which those deductible temporary differences, unused tax losses and unused tax credits can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The tax effects of the unutilised reinvestment allowances are recognised only upon actual realisation. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiary companies, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 52 ANNUAL REPORT 2009

54 Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. 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 they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining the excess of the acquirer s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities over the cost of the business combination. Property, Plant and Equipment Freehold land, farm and poultry buildings, and freehold land and factory buildings are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The freehold land, and farm and poultry buildings have not been revalued since they were first revalued in 1993 as the directors have not adopted a policy of regular revaluation of these assets. As permitted under the transitional provision when MASB first adopted IAS 16, Property, Plant and Equipment, these assets continued to be stated at their 1993 valuation less accumulated depreciation and 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 balance sheet date. Any revaluation increase arising on the revaluation of such land and buildings is credited to the property revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged to profit or loss. A decrease in carrying amount arising on the revaluation of such land and buildings is charged to profit or loss to the extent that it exceeds the balance, if any, held in the property revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is charged to profit or loss. On subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the property revaluation reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained earnings except when the asset is derecognised. Other property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Freehold land and capital work-in-progress are not depreciated. All other property, plant and equipment are depreciated on a straight line method to their residual values at rates based on the estimated useful lives of the various assets. ANNUAL REPORT

55 The annual depreciation rates are as follows: Farm and poultry buildings 2.0% - 5.0% Factory buildings 1.0% % Plant and machinery 5.0% % Egg layer conveyor and cages system 5.0% Motor vehicles, electrical installation, furniture, fittings, equipment and renovation 5.0% % Hostel 2.0% Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. The estimated useful lives, residual values and depreciation method of property, plant and equipment are reviewed at each year end, with the effect of any changes in estimates accounted for prospectively. The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Other Investments Investments in quoted shares are stated at cost less allowance for diminution in value of investment to recognise any decline, other than a temporary decline, in the value of the investments. Impairment of Assets (Excluding Goodwill) At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 54 ANNUAL REPORT 2009

56 Inventories Inventories are valued at the lower of cost and net realisable value. Layer and pullet inventories are stated at cost (determined on weighted-average method) adjusted for amortisation (calculated based on their economic egg-laying lives less net realisable value). Costs of layer and pullet inventories comprise the original purchase price plus growing costs 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 farm 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. Receivables Receivables are stated at the nominal value as reduced by the appropriate allowances for estimated irrecoverable amounts. Allowance for doubtful debts is made based on estimates of possible losses which may arise from non-collection of certain receivable accounts. Payables Payables are stated at the nominal value of the consideration to be paid in the future for goods and services received. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that the Group will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. Provisions are measured at the directors best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where the effect of time value of money is material, the amount of the provision is determined by discounting expected future cash flows, using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the liability. At each balance sheet date, provisions are reviewed by the directors and adjusted to reflect the current best estimate. Provision is reversed if it is no longer probable that the Group will be required to settle the obligation. Borrowings All borrowings are initially recognised at the nominal value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing borrowings are subsequently measured at amortised cost using the effective interest method. Financial Instruments Financial instruments are contracts that give rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. ANNUAL REPORT

57 A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. Debts and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual arrangement. Equity instruments are recorded at the proceeds received net of direct issue costs. Cash Flow Statements The Group and the Company adopt the indirect method in the preparation of the cash flow statements. Cash and cash equivalents comprise cash and bank balances, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value, against which bank overdrafts, if any, is deducted. Contingent Liabilities A contingent liability is disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote. 4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The 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 if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical Accounting Estimates and Assumptions The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. i. Estimated impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation are based on the discounted net cash projections covering a 5 years period and a discount rate of 9.22% (2008: 6.49%) reflecting the weighted average cost of capital. The directors believe that an average 10% (2008: 9%) per annum growth rate is reasonable for cash projections purposes. 56 ANNUAL REPORT 2009

58 ii. Allowance for doubtful debts The Group recognises an allowance for doubtful debts when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant judgment is required in the assessment of the recoverability of receivables, which have a financial impact on the amount of allowance for doubtful debts recognised. 5. REVENUE The Group The Company RM RM RM RM Sales of goods 181,341, ,343, Dividend income from: Other investments Subsidiary companies - - 4,500,000 - Management fee , ,341, ,343,487 4,650, INVESTMENT REVENUE The Group The Company RM RM RM RM Interest income from: Fixed deposits 84, ,447 10,201 - Amount owing from a subsidiary company ,461 - Others , ,447 23,662 - ANNUAL REPORT

59 7. OTHER OPERATING INCOME (EXPENSES) AND STAFF COSTS Included in other operating income (expenses) are the following: The Group The Company RM RM RM RM Gain (Loss) on disposal of property, plant and equipment 133,000 (41,941) - - Allowance for doubtful debts no longer required 9, Property, plant and equipment written off (5,875) Rental on: Hostel (8,200) (5,400) - - Premises (74,760) (85,725) - - Audit fee: Statutory audit: Current year (74,000) (43,000) (15,000) (800) Underprovision in prior year (5,000) (9,900) - - Special audit: Underprovision in prior year (33,000) Allowance for slow moving inventories (150,000) Allowance for doubtful debts (209,417) (17,019) - - Gain (Loss) on foreign exchange: Unrealised 66, , Realised (280,834) 48, Bad debt written off - (53,772) - - Staff costs includes salaries, bonuses, contributions to Employees Provident Fund ( EPF ) and all other staff related expenses. Included in staff costs of the Group is EPF contributions of RM737,940 (2008: RM632,687). 58 ANNUAL REPORT 2009

60 8. DIRECTORS REMUNERATION The Group The Company RM RM RM RM Executive directors: Fee Other emoluments 1,574, , EPF contributions 156, , ,731,177 1,015, Non-executive directors: Fee 42,000-42,000 - Other emoluments 12,000-12,000-54,000-54,000-1,785,177 1,015,264 54,000 - 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 either directly or indirectly. The remunerations of key management personnel of the Group and of the Company, which include executive directors and non-executive directors, certain members of senior management and heads of major subsidiary companies of the Group, are as follows: The Group The Company RM RM RM RM Directors remuneration 1,785,177 1,015,264 54,000 - Key management personnel: Salaries and other emoluments 2,356,044 1,111, EPF contributions 242, , ,599,002 1,239, ,384,179 2,255,061 54,000 - ANNUAL REPORT

61 9. FINANCE COSTS The Group RM RM Interest on: Bankers acceptance 1,722,930 1,202,657 Hire-purchase 310, ,884 Long-term loans 283, ,951 Bank overdrafts 186, ,627 Advance from intermediate holding company 111, ,454 2,614,634 2,465, SEGMENT REPORTING Business segments For management purposes, the Group is organised into the following operating divisions: - Investment holdings - Trading of pet food, medicine and other related products - Poultry farming (includes manufacturing, marketing and trading of animal feeds and egg trays) Inter-segment sales are charged at cost plus a percentage profit mark-up. 60 ANNUAL REPORT 2009

62 The Group 2009 Trading of pet food, medicine and other Investment related Poultry holdings products farming Eliminations Consolidated RM RM RM RM RM Revenue External sales - 14,461, ,880, ,341,785 Inter-segment sales 4,650,000 3,572,795 - (8,222,795) - Total revenue 4,650,000 18,034, ,880,041 (8,222,795) 181,341,785 Results Segment results 4,507,758 1,460,692 23,086,601 (12,107,758) 16,947,293 Finance costs (2,614,634) Investment revenue 85,255 Profit before tax 14,417,914 Income tax expense (1,799,627) Profit for the year 12,618,287 Trading of pet food, medicine and other Investment related Poultry holdings products farming Eliminations Consolidated RM RM RM RM RM Other information Capital additions - 939,499 12,490,871-13,430,370 Prepaid lease payment additions - 1,878, ,878,243 Depreciation - 101,129 5,283,749-5,384,878 Amortisation of prepaid lease payments - 4, ,463 Non-cash expenses other than depreciation and amortisation - 163, , ,292 Assets Segment assets 60,606,915 11,375, ,906,838 (97,887,391) 133,001,730 Income producing assets 3,065,349 Tax recoverable 436,688 Total 136,503,767 Liabilities Segment liabilities 13,073,701 3,589,237 44,106,519 (46,609,873) 14,159,584 Borrowings 45,925,499 Tax liabilities 7,341,406 Total 67,426,489 ANNUAL REPORT

63 The Group 2008 Trading of pet food, medicine and other Investment related Poultry holdings products farming Eliminations Consolidated RM RM RM RM RM Revenue External sales - 10,956, ,386, ,343,487 Inter-segment sales - 2,774,449 - (2,774,449) - Total revenue - 13,731, ,386,507 (2,774,449) 159,343,487 Results Segment results - 2,418,530 14,845,082 (68,966) 17,194,646 Finance costs (2,465,573) Investment revenue 146,447 Profit before tax 14,875,520 Income tax expense (2,343,109) Profit for the year 12,532,411 Trading of pet food, medicine and other Investment related Poultry holdings products farming Eliminations Consolidated RM RM RM RM RM Other information Capital additions - 105,846 7,666,884-7,772,730 Depreciation - 64,484 4,461,048-4,525,532 Non-cash expenses other than depreciation and amortisation , ,682 Assets Segment assets - 6,537, ,104, ,641,378 Income producing assets 4,622,398 Tax recoverable 55,256 Total 111,319,032 Liabilities Segment liabilities - 1,930,249 16,631,563-18,561,812 Borrowings 43,592,936 Tax liabilities 6,938,120 Total 69,092, ANNUAL REPORT 2009

64 Geographical Segments The Group s operations are located in Malaysia. The following is an analysis of the Group s sales by geographical market, irrespective of the origin of the goods: Sales revenue by geographical market RM RM Malaysia 153,603, ,862,046 Singapore 27,116,758 19,750,600 Hong Kong - 1,110,129 Others 621, , ,341, ,343, INCOME TAX EXPENSE The Group The Company RM RM RM RM Current tax expense: Current year (2,031,398) (2,696,173) (1,147,898) - Over(Under)provision in prior years (51,456) 79, (2,082,854) (2,616,433) (1,147,898) - Deferred tax (Note 26): Relating to origination and reversal of temporary differences (114,773) (179,824) - - Relating to changes in tax rate - 247, Overprovision in prior years 398, , , , (1,799,627) (2,343,109) (1,147,898) - The corporate income tax rate is 26% for the year of assessment 2008 and 25% for the year of assessment ANNUAL REPORT

65 A numerical reconciliation of income tax expense at the applicable income tax rate to income tax expense at the effective income tax rate is as follows: The Group The Company RM RM RM RM Profit (Loss) before tax 14,417,914 14,875,520 4,531,420 (5,074) Tax at the applicable tax rate of 25% (2008: 26%) (3,604,000) (3,868,000) (1,133,000) 1,000 Tax effects of : Expenses that are not deductible in determining taxable profit (545,648) (339,997) (14,898) (1,000) Income that are not taxable in determining taxable profit 60, , Deferred tax assets not recognised (50,000) Reversal of deferred tax assets not recognised in prior year 283, Utilisation of reinvestment allowances 1,710,000 1,216, Changes in tax rate - 247, Over(Under)provision in prior years: Current tax (51,456) 79, Deferred tax 398, , Tax expense for the year (1,799,627) (2,343,109) (1,147,898) - As of March 31, 2009, the Group has unutilised reinvestment allowances of about RM9,797,000 (2008: RM12,370,000), subject to the agreement by the Inland Revenue Board, which are available for offset against future taxable profits. 64 ANNUAL REPORT 2009

66 12. EARNINGS PER ORDINARY SHARE Basic earnings per share is calculated by dividing consolidated profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year. Basic RM RM Profit for the year attributable to equity holders of the Company 12,618,287 12,532, Units Units* Number of ordinary shares in issue as of April Effect of: Share issue for the acquisition of a subsidiary company 161,389, ,389,500 Public issue 16,290,247 - Weighted average number of ordinary share for the purposes of basic earnings per share 177,680, ,389,500 Basic earnings per share (sen) Diluted The basic and diluted earnings per share are the same as the Company has no dilutive potential ordinary shares. * The number of shares in issue for the Group in 2008 is calculated based on the number of ordinary shares issued by the legal parent to the owners of the legal subsidiary in the reverse acquisition in accordance with FRS 3 Business Combination. ANNUAL REPORT

67 13. PROPERTY, PLANT AND EQUIPMENT Motor vehicles, electrical installation, Freehold furniture, land, Freehold Egg layer fittings, farm and land and conveyor equipment Capital poultry factory Plant and and cages and work-inbuildings* buildings* machinery system renovation Hostel progress Total The Group RM RM RM RM RM RM RM RM Cost/Valuation: Balance as of April 1, ,408,373 10,666,083 22,680,581 12,294,268 10,794,538 7,900 1,441,429 89,293,172 Additions 1,367, ,200 1,061, ,799 1,332,805-3,461,466 7,772,730 Disposals - - (220,450) - (52,800) - - (273,250) Reclassifications 233,350-3,038, ,158 - (3,462,228) - Balance as of March 31, ,009,212 10,786,283 26,560,822 12,723,067 12,264,701 7,900 1,440,667 96,792,652 Acquisition of subsidiary company 8,945, ,552 5,509,249 1,116,173-68,926 16,056,294 Additions 1,526, ,022 1,611,969 1,785,088 2,729,657-4,961,448 13,430,370 Disposals/ Written off (4,200) - (7,997) - (451,578) - - (463,775) Reclassifications 3,385, , ,099 - (4,040,745) - Revaluation - (1,090,140) (1,090,140) Balance as of March 31, ,862,081 10,512,165 28,786,503 20,017,404 16,109,052 7,900 2,430, ,725, ANNUAL REPORT 2009

68 Accumulated Depreciation: Motor vehicles, electrical installation, Freehold furniture, land, Freehold Egg layer fittings, farm and land and conveyor equipment Capital poultry factory Plant and and cages and work-inbuildings* buildings* machinery system renovation Hostel progress Total RM RM RM RM RM RM RM RM Balance as of April 1, ,032, ,933 9,840,752 5,951,897 7,332, ,992,588 Charge for the year 1,211, ,975 1,577, , , ,525,532 Disposals - - (126,468) - (37,141) - - (163,609) Balance as of March 31, ,244, ,908 11,292,011 6,582,690 8,274, ,354,511 Acquisition of subsidiary company 187, , , , ,051,892 Charge for the year 1,399, ,232 1,772, ,642 1,310, ,384,878 Disposals/ Written off (1,852) - (4,527) - (451,521) - - (457,900) Revaluation - (1,090,140) (1,090,140) Balance as of March 31, ,828,660-13,161,359 7,997,576 9,254, ,243,241 Net Book Value: Balance as of March 31, ,765,136 9,825,375 15,268,811 6,140,377 3,990,694 7,081 1,440,667 57,438,141 Balance as of March 31, ,033,421 10,512,165 15,625,144 12,019,828 6,854,383 6,923 2,430,296 80,482,160 ANNUAL REPORT

69 * The freehold land, farm and poultry buildings and factory buildings of the Group consists of: Freehold land, farm and poultry buildings Freehold land and factory buildings Farm and Freehold land Factory buildings Freehold poultry land buildings At 2004 At 2009 At 2004 At 2009 At cost At cost Total valuation valuation At cost valuation valuation Total RM RM RM RM RM RM RM RM RM Cost/Valuation: Balance as of April 1, ,016,779 27,391,594 31,408,373 4,343, ,315 6,163,238-10,666,083 Additions 1,000, ,696 1,367, , ,200 Reclassifications - 233, , Balance as of March 31, ,017,572 27,991,640 33,009,212 4,343, ,515 6,163,238-10,786,283 Acquisition of subsidiary company 2,758,500 6,186,894 8,945, Additions 799, ,430 1,526, , ,022 Disposals - (4,200) (4,200) Reclassifications 23,800 3,361,689 3,385, Revaluation (4,343,530) 4,343,530 (1,095,537) (6,163,238) 6,168,635 (1,090,140) Balance as of March 31, ,599,628 38,262,453 46,862,081-4,343, ,168,635 10,512, ANNUAL REPORT 2009

70 Freehold land, farm and poultry buildings Freehold land and factory buildings Farm and Freehold land Factory buildings Freehold poultry land buildings At 2004 At 2009 At 2004 At 2009 At cost At cost Total valuation valuation At cost valuation valuation Total RM RM RM RM RM RM RM RM RM Accumulated Depreciation: Balance as of April 1, ,032,927 11,032, , ,933 Charge for the year - 1,211,149 1,211, , , ,975 Balance as of March 31, ,244,076 12,244, , , ,908 Acquisition of subsidiary company - 187, , Additions - 1,399,291 1,399, , , ,232 Disposals - (1,852) (1,852) Reclassifications (14,525) (1,075,615) - (1,090,140) Balance as of March 31, ,828,660 13,828, Net Book Value: Balance as of March 31, ,017,572 15,747,564 20,765,136 4,343, ,603 5,209,242-9,825,375 Balance as of March 31, ,599,628 24,433,793 33,033,421-4,343, ,168,635 10,512,165 ANNUAL REPORT

71 As of balance sheet date, the net book value of property, plant and equipment under hire purchase of the Group in respect of which instalments are still outstanding amounted to RM9,397,118 (2008: RM7,256,071). The revaluation of the freehold land, and farm and poultry buildings of a subsidiary company in 1993 were based upon valuations carried out by an independent firm of professional valuers using open market value basis. The freehold land and factory buildings of certain subsidiary companies were revalued by the directors as of March 31, 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. There was no surplus arising from the valuation carried out as of March 31, Certain property, plant and equipment of certain subsidiary companies with carrying value amounting to RM18,523,797 (2008: RM16,415,750) are charged or pledged to local banks as security for credit facilities granted as disclosed under Note 25. The historical costs of freehold land, farm and poultry buildings and factory buildings which were revalued are as follows: The Group RM RM At cost: Freehold land and farm and poultry buildings 1,627,307 1,627,307 Freehold land and factory buildings 5,953,774 5,663,198 7,581,081 7,290,505 Accumulated depreciation: Farm and poultry buildings (1,155,996) (1,091,774) Factory buildings (907,239) (807,150) (2,063,235) (1,898,924) Net book value 5,517,846 5,391, INVESTMENT IN SUBSIDIARY COMPANIES The Company RM RM Unquoted shares, at cost 53,524, ANNUAL REPORT 2009

72 The subsidiary companies (all incorporated in Malaysia) are as follows: Percentage of Ownership Name of Companies % % Principal Activities Teo Seng Farming Sdn. Bhd Investment holdings and poultry farming Teo Seng Paper Products Sdn. Bhd Manufacturing and trading of egg trays Teo Seng Feedmill Sdn. Bhd Manufacturing and marketing of animal feeds Ritma Prestasi Sdn. Bhd.* Distribution of pet food, medicine and other related products Success Century Sdn. Bhd.* Poultry farming *Audited by another firm of auditors. As mentioned in Note 33, during the financial year, the Company acquired 100% of the issued and fully paid-up capital of Teo Seng Farming Sdn. Bhd. for a purchase consideration of RM32,277,900 satisfied by the issuance of 161,389,500 new ordinary shares of RM0.20 each in the Company at an issue price of RM0.20 per share. As mentioned in Note 3, the substance of the business combination is that Teo Seng Farming Sdn. Bhd. acquired the Company in a reverse acquisition. The cost of this business combination was determined in accordance with FRS 3 Business Combination on the basis of the fair value of the Company as of June 18, 2008 and the number of new shares that Teo Seng Farming Sdn. Bhd. would have to issue to the shareholders of the Company to provide the same percentage ownership interest of the combined entity. The fair value of the Company amounted to a net liability of RM9,639 as of June 18, As the shareholders of Teo Seng Farming Sdn. Bhd., got an interest in the combined entity of about 100%, Teo Seng Farming Sdn. Bhd. would not have to issue any share to the shareholders of the Company. Thus, the cost of business combination is nil. ANNUAL REPORT

73 The assets and liabilities arising from the reverse acquisition were as follow: Unaudited June 18, 2008 RM Net assets acquired: Other receivables and prepaid expenses 649,349 Other payables and accrued expenses (651,952) Amount owing to a director (7,036) Share of net assets acquired (9,639) Add: Goodwill on consolidation 9,639 Total purchase consideration - On October 31, 2008, the Group acquired 100% of the issued share capital of Success Century Sdn. Bhd. for cash consideration of RM7.5 million. This transaction has been accounted for using the purchase method of accounting. The fair value of the net assets acquired, and the goodwill arising, are as follows: RM Net assets acquired: Property, plant and equipment 15,004,402 Inventories 3,410,386 Trade receivables 1,234,448 Other receivables and prepaid expenses 446,733 Tax recoverable 183,985 Cash and bank balances 1,563,114 Trade payables (7,277,236) Other payables and accrued expenses (6,361,390) Hire-purchase payable (835,923) Deferred tax liabilities (1,247,000) 6,121,519 Goodwill on consolidation 1,378,481 Total consideration satisfied by cash 7,500,000 Less: Amount outstanding included in other payables (500,000) Cash consideration paid 7,000,000 Cash and cash equivalents acquired (1,563,114) Net cash outflow arising on acquisition 5,436,886 The goodwill arising on the acquisition of Success Century Sdn. Bhd. is attributable to the anticipated future operating synergies from the combination. Success Century Sdn. Bhd. contributed RM1,358,721 to the Group s profit after tax for the period between the date of acquisition and the balance sheet date. 72 ANNUAL REPORT 2009

74 15. OTHER INVESTMENTS The Group RM RM Shares quoted in Malaysia, at cost 3,024 3,024 Market value of quoted shares in Malaysia 2,160 2, PREPAID LEASE PAYMENTS The Group RM RM Cost: At beginning of year - - Additions 1,878,243 - At end of year 1,878,243 - Accumulated Amortisation: At beginning of year - - Charge for the year 4,463 - At end of year 4,463 - Carrying Amount 1,873,780 - The unexpired portion of the said leasehold land as of March 31, 2009 is 92 years. The said leasehold land has also been charged to a licensed bank for banking facilities granted to a subsidiary company as disclosed in Note GOODWILL ON CONSOLIDATION The Group RM RM At beginning of year 1,696,291 1,696,291 Goodwill arising from: Acquisition of a subsidiary company 1,378,481 - Reverse acquisition of the Company by Teo Seng Farming Sdn. Bhd. 9,639 - At end of year 3,084,411 1,696,291 ANNUAL REPORT

75 Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units that are expected to benefit from that business combination. The carrying amount of goodwill had been allocated as follows: The Group RM RM Trading of pet food, medicine and other related products 1,696,291 1,696,291 Poultry farming 1,378,481 - Investment holdings 9,639-3,084,411 1,696, INVENTORIES The Group RM RM Layers 13,748,006 10,688,387 Pullets 5,016,798 2,763,805 Raw materials 3,935,123 4,566,438 Trading merchandise 3,507,530 2,707,821 Poultry feeds 538, ,533 Egg trays 430, ,169 Eggs 411, ,010 Medication 257, ,904 Consumable supplies 231, ,668 Work-in-progress 207, ,860 28,285,244 22,582,595 Less: Allowance for slow moving inventories (150,000) - 28,135,244 22,582,595 The cost of inventories sold of the Group during the financial year is RM146,855,317 (2008: RM133,592,056). 19. TRADE RECEIVABLES, OTHER RECEIVABLES, DEPOSITS AND PREPAID EXPENSES Trade receivables consist of: The Group RM RM Gross amount 10,665,849 15,552,896 Less: Allowance for doubtful debts (424,183) (231,956) 10,241,666 15,320, ANNUAL REPORT 2009

76 Other receivables, deposits and prepaid expenses consist of: The Group RM RM Other receivables 203, ,631 Refundable deposits 271, ,344 Prepaid expenses 822, ,627 1,296,825 1,333,602 The foreign currency exposure profile of trade receivables is as follows: The Group RM RM Singapore Dollar 985, ,185 United States Dollar 19,198 29,111 Trade receivables comprise amounts receivable for the sales of goods. Other receivables comprise mainly advances to employees and receivable from sales of manure. The credit periods granted by the Group on sale of goods range from 7 to 150 days (2008: 7 to 150 days). 20. HOLDING COMPANIES AND RELATED PARTIES TRANSACTIONS The Company is a subsidiary company of Advantage Valuations Sdn. Bhd., a company incorporated in Malaysia. The intermediate holding company is Leong Hup Holdings Berhad, a company incorporated in Malaysia and listed on the Main Board of Bursa Malaysia Securities Berhad. The directors regard Leong Hup Management Sdn. Bhd., a company incorporated in Malaysia, as the ultimate holding company. The amount owing to intermediate holding company arose mainly from advances which are unsecured, interest-free and repayable on demand except for an amount of RM4,211,038 in 2008 shown under non-current liabilities which bears interest at rate of 3.17% per annum. The amount owing by immediate holding company arose mainly from advances which are unsecured, interest-free and repayable on demand. The amount owing by (to) related companies arose mainly from trade transactions with credit periods ranging from 7 to 60 days (2008: 7 to 60 days). The amount owing by subsidiary companies arose mainly from management fee and advances which are unsecured, interest-free and repayable on demand except for an advance of RM1,107,446 in 2009 which bears interest ranging from 2.5% to 3.5% per annum. The amount owing to a subsidiary company arose mainly from the acquisition of shares of indirect subsidiaries from a direct subsidiary as mentioned in Note 33. The amount owing is unsecured, interest-free and repayable on demand. ANNUAL REPORT

77 The amount owing to a director represents interest-free advances which are unsecured, interest free and repayable on demand. Other than as disclosed elsewhere in the financial statements, the related parties are namely Gymtech Feedmill (Malacca) Sdn. Bhd., Ideal Multifeed (Malaysia) Sdn. Berhad, Sri Medan Duck Farm Sdn. Bhd., Ladang Ternakan Maju Sdn. Bhd., Kylen Enterprise Sdn. Bhd., Teratai Agriculture Sdn. Bhd. and Gan, Lau & Associates in which Lau Brothers are directors and/ or shareholders, Mujur Cekap Sdn. Bhd. in which the spouse of Mr. Nam Yok San is a director and Poly-Yarn Marketing Sdn. Bhd., which is a subsidiary company of Poly-Yarn Industries Sdn. Bhd., an associated company of Leong Hup Management Sdn. Bhd. The Lau Brothers are Lau Chun Yuen, Dato Lau Bong Wong, Lau Chia Nguang, Datuk Lau Chir Nguan, Dato Lau Eng Guang, Lau Hai Nguan and Tan Sri Lau Tuang Nguang. The outstanding balances with related parties are as follows: The Group The Company RM RM RM RM Trade receivables 627, , Trade payables 121,766 3,655, Other payables 284, , During the financial year, significant related parties transactions are as follows: The Group The Company RM RM RM RM Intermediate holding company Leong Hup Holdings Berhad Interest expense 111, , IT service payable 13,880 14, Immediate holding company Advantage Valuations Sdn. Bhd. Management fee payable - 5, Subsidiary companies Acquisition of subsidiary companies (Note 33) ,746,500 - Dividend income received/receivable - - 4,500,000 - Management fee received ,000 - Interest income received , ANNUAL REPORT 2009

78 The Group The Company RM RM RM RM Other related companies Purchases of goods 4,121,811 3,640, Sales of goods 2,719,442 1,650, Purchase of leasehold land 1,785, Purchase of property, plant and equipment 765, Rental expense 50,000 60, Laboratory service payable 22,759 28, Transport charges paid 2, Security service fee payable - 8, Related parties With companies where Lau Brothers are directors / shareholders Purchases of goods 46,548,235 18,632, Sales of goods 3,710,426 1,858, Professional services paid 116, Transport charges paid 21, Management fee payable - 90, Spouse of Mr. Nam Yok San is a director of Mujur Cekap Sdn. Bhd. Transport charges paid 2,361,013 1,751, CASH AND BANK BALANCES The Group The Company RM RM RM RM Fixed deposits with licensed banks 3,062,325 4,619, ,000 - Cash on hand and at banks 7,054,773 7,708, , ,117,098 12,328, , ANNUAL REPORT

79 The average effective interest rates are as follows: The Group The Company % % % % Fixed deposits The average maturities of deposits as of the end of the financial year are as follows: The Group The Company Days Days Days Days Fixed deposits The fixed deposits of Group amounting to RM2,562,325 (2008: RM4,619,374) have been pledged to licensed banks as securities for bank facilities granted to the Company as disclosed in Note SHARE CAPITAL The Company No. of shares No. of shares of RM0.20 of RM each each RM RM Authorised: At beginning of year 500, , , ,000 Created during the year 249,500,000-49,900,000 - At end of year 250,000, ,000 50,000, , ANNUAL REPORT 2009

80 The Group No. of No. of ordinary ordinary shares shares RM RM RM RM Issued and fully paid: At beginning of year Ordinary shares of RM1 each 5,366,000 5,366,000 5,366,000 5,366,000 Adjustment arising from reverse acquisition*: Issued equity instruments of the Company prior to the acquisition Ordinary shares of RM0.20 each New ordinary shares of RM0.20 each issued by the Company pursuant to the acquisition of Teo Seng Farming Sdn. Bhd. 161,389,500-32,277,900 - Reversal of Teo Seng Farming Sdn. Bhd. s shares pursuant to reverse acquisition (5,366,000) - (5,366,000) - Adjustment taken to other reserve (Note 23) 156,024,000-26,912,000 - Public issue of of ordinary shares of RM0.20 each 38,610,000-7,722,000 - At end of year 200,000,000 5,366,000 40,000,000 5,366,000 ANNUAL REPORT

81 The Company No. of No. of ordinary ordinary shares of shares of RM0.20 each RM0.20 each RM RM Issued and fully paid: At beginning of year Issued during the year Allotment in exchange of shares in subsidiary company 161,389,500-32,277,900 - Public issue 38,610,000-7,722,000 - At end of year 200,000, ,000, * Upon the completion of the acquisition of Teo Seng Farming Sdn. Bhd., the Company became the legal parent company of Teo Seng Farming Sdn. Bhd. Due to the relative values of the Companies, the former Teo Seng Farming Sdn. Bhd. s shareholders became the majority shareholders through the issue of 161,389,500 new ordinary shares of RM0.20 each, controlling about 100% of the share capital of the Company at this time. Further, the Company s continuing operations and executive management are those of Teo Seng Farming Sdn. Bhd. Accordingly, the substance of the business combination is that Teo Seng Farming Sdn. Bhd. acquired the Company in a reverse acquisition. In accordance with FRS 3, the amount recognised as issued equity instruments in the consolidated financial statements are determined by adding to the issued equity of Teo Seng Farming Sdn. Bhd. immediately before the business combination the cost of the combination. However, the equity structure appearing in the consolidated financial statements (i.e. the number and type of equity instruments issued) shall reflect the equity structure of the Company, including the equity instruments issued by the Company to effect the combination. As approved by the shareholders at the Extraordinary General Meeting held on June 9, 2008, the Company increased its: i. authorised share capital from RM100,000 consisting of 500,000 ordinary shares of RM0.20 each to RM50,000,000, consisting of 250,000,000 ordinary shares of RM0.20 each by way of creation of an additional 249,500,000 ordinary shares of RM0.20 each; and ii. issued and paid up ordinary share capital from RM100 to RM40,000,000 by way of the issuance of 199,999,500 ordinary shares of RM0.20 each by way of: a. issue of 161,389,500 new ordinary shares of RM0.20 each at par pursuant to the acquisition of Teo Seng Farming Sdn. Bhd.; and b. public issue of 38,610,000 new ordinary shares of RM0.20 each at an issue price of RM0.45 each. 80 ANNUAL REPORT 2009

82 The resulting premium arising from the public issue of shares mentioned above of RM9,652,500 has been credited to the share premium account. On October 29, 2008, the entire issued and paid-up share capital of the Company of 200,000,000 ordinary shares of RM0.20 each were listed on the Second Board of Bursa Malaysia Securities Berhad. The new ordinary shares issued rank pari passu with the then existing ordinary shares of the Company. 23. RESERVES The Group The Company RM RM RM RM Non-distributable reserves: Share premium 8,010, ,000 8,010,827 - Assets revaluation 4,174,856 4,174, Reverse acquisition reserve (26,078,000) Distributable reserve: Retained earnings (Accumulated losses) 42,969,595 31,851,308 1,874,489 (9,033) 29,077,278 36,860,164 9,885,316 (9,033) Share premium Share premium of the Group and of the Company arose from allotment of ordinary shares at premium net of share issue expenses. Assets revaluation reserve The revaluation reserve is used to record increase or decrease in revaluation of noncurrent assets, as described in the accounting policies. Retained earnings Distributable reserves are those available for distribution by way of dividends. In accordance with the Finance Act, 2007, the single tier income tax system became effective 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 January 1, ANNUAL REPORT

83 24. HIRE-PURCHASE PAYABLES The Group RM RM Total outstanding 7,260,316 5,617,188 Less: Interest-in-suspense outstanding (912,790) (757,586) Principal outstanding 6,347,526 4,859,602 Less: Amount due within 12 months (shown under current liabilities) (2,728,883) (1,721,866) Non-current portion 3,618,643 3,137,736 The non-current portion is repayable as follows: The Group RM RM Later than one year and not later than two years 1,849,784 1,377,390 Later than two years and not later than five years 1,768,859 1,760,346 3,618,643 3,137,736 It is the Group s policy to acquire certain of its property, plant and equipment under hire-purchase arrangements. The average term for hire-purchase is about 1 to 5 years (2008: 1 to 5 years). For the financial year ended March 31, 2009, the effective borrowing rates of the Group range from 4.16% to 8.1% (2008: 4.16% to 7.78%) per annum. Interest rates are fixed at the inception of the hire-purchase arrangements. The Group s hire-purchase payables are secured by the financial institutions charge over the assets under hire-purchase. Certain hire-purchase payables of the Group are guaranteed by the intermediate holding company. 82 ANNUAL REPORT 2009

84 25. BANK BORROWINGS The Group RM RM Secured: Bank overdrafts 723, ,240 Term loans: Term loan I 581,187 1,323,520 Term loan II - 1,286,000 Term loan III - 300,000 Term loan IV 346, ,866 Term loan V 328, ,330 Term loan VI 1,978,573 - Bankers acceptance 26,771,000 19,603,000 Unsecured: Bank overdrafts - 1,473,482 Term loan VII 1,699,541 2,316,858 Bankers acceptance 7,150,000 6,600,000 39,577,973 34,522,296 Less: Amount due within 12 months (shown under current liabilities) (36,326,922) (30,784,854) Non-current portion 3,251,051 3,737,442 The non-current portion of the long-term loans is repayable as follows: The Group RM RM Later than one year and not later than two years 1,170,086 1,939,479 Later than two years and not later than five years 2,080,965 1,797,963 3,251,051 3,737,442 The average effective interest rates are as follows: The Group % % Bank overdrafts Term loans Bankers acceptance ANNUAL REPORT

85 The term loans are repayable on the following terms: Amount (RM) Total number of per instalment Commencement monthly instalments (all interest inclusive) of instalment Term loan I 36 67,178 January 2007 Term loan II 48 42,000 October 2006 Term loan III 36 28,000 March 2006 Term loan IV 60 9,359 August 2007 Term loan V 60 9,116 August 2007 Term loan VI 84 29,218 March 2009 Term loan VII 60 64,502 September 2006 The bankers acceptance of the Group as of March 31, 2009 are repayable within April 2009 to July The secured borrowings are secured by freehold land, building and plant and machinery of the subsidiary companies, fixed deposits of the Company and certain subsidiary companies, a debenture on present and future fixed and floating assets of the certain subsidiary companies and are guaranteed by the intermediate holding company. The unsecured borrowings are guaranteed by the Company and the intermediate holding company and are covered by negative pledges on certain subsidiary companies assets. 26. DEFERRED TAX LIABILITIES The Group RM RM At beginning of year 6,304,735 6,772,059 Acquisition of subsidiary company 1,247,000 - Transfer to income statements (Note 11) (283,227) (273,324) Transfer to equity - (194,000) At end of year 7,268,508 6,304,735 The net deferred tax liabilities of the Group is in respect of the following: The Group Deferred Tax Liabilities(Assets) RM RM Tax effects of temporary differences arising from: Property, plant and equipment 7,167,508 5,502,735 Trade receivables (103,000) (62,000) Trade payables (16,000) - Unabsorbed tax capital allowances (202,000) - Revaluation surplus on buildings 422, ,000 Net Deferred Tax Liabilities 7,268,508 6,304, ANNUAL REPORT 2009

86 27. TRADE PAYABLES, OTHER PAYABLES AND ACCRUED EXPENSES Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs. The credit periods granted to the Group for trade purchases range from 30 to 90 days (2008: 30 to 90 days). Other payables and accrued expenses consist of: The Group The Company RM RM RM RM Other payables 3,795,862 1,626, ,656 - Accrued expenses 1,931,994 1,218,069 25,603 3,815 5,727,856 2,844, ,259 3,815 The foreign currency exposure profile of trade payables is as follows: The Group RM RM United States Dollar 2,696,757 1,947,751 Singapore Dollar 297,386 97, DIVIDEND The Group The Company RM RM RM RM Interim tax exempt dividend: 0.75 sen per ordinary share (2008: sen per ordinary share) 1,500,000 2,704,464 1,500,000 - Net dividend per share (sen) The directors propose a final cash dividend of 0.85 sen per ordinary share, tax exempt, amounting to RM1,700,000 in respect of the current financial year. The proposed final dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and has not been included as a liability in the financial statements. Upon approval by the shareholders, the cash dividend payment will be accounted for in equity as an appropriation of retained earnings during the financial year ending March 31, FINANCIAL INSTRUMENTS Financial Risk Management Objectives and Policies The operations of the Group and of the Company are subject to a variety of financial risks, including foreign currency risk, interest rate risk, market risk, credit risk, liquidity risk and cash flow risk. The Group and the Company have taken measures to minimise the Group s and the Company s exposure to risks and/or costs associated with the financing, investing and operating activities of the Group and of the Company. ANNUAL REPORT

87 Foreign currency risk The Group is exposed to foreign currency risk as a result of transactions denominated in foreign currencies arising from normal operating activities. The directors are of the opinion that the exposure to foreign currency risk is insignificant. Interest rate risk The Group s exposure to changes in interest rate risk relates primarily to the Group s fixed deposits with licensed banks and financing through bank borrowings and hire-purchase payables. To manage the risk, the Group ensures that it obtains borrowings at the most competitive rates. The fixed deposits are placed with reputable banks. The Group does not use derivative financial instruments to hedge its risk. Market risk The Group manages its exposure to fluctuation in the prices of key raw materials used in the operations by ensuring a large number of suppliers so as to limit high concentration of risk in a particular supplier. Credit risk The Group is exposed to credit risk mainly from trade and other receivables, cash and bank balances and intercompany indebtedness. The Group extends credit to its customers based upon careful evaluation of the customer s financial condition and credit history. The Group also ensures a large number of customers so as to limit high credit concentration in a customer or customers from a particular market. Management believes that the Group s exposure on credit risk of bank balances is limited as they are placed with credit worthy financial institutions. Liquidity risk The Group practises prudent liquidity risk management to minimise the mismatch of financial assets and liabilities and to maintain sufficient credit facilities for contingent funding requirement of working capital. Cash flow risk The Group reviews its cash flow position regularly to manage its exposure to fluctuations in future cash flows associated with its monetary financial instruments. Financial Assets and Liabilities The Group s principal financial assets are cash and bank balances, trade and other receivables and inter-company indebtedness. Significant financial liabilities of the Group are trade and other payables, inter-company indebtedness, hire-purchase payables and bank borrowings. 86 ANNUAL REPORT 2009

88 The accounting policies applicable to financial assets and liabilities are as disclosed in Note 3. Fair Values The estimated fair values of the Group s financial instruments as of March 31, 2009 are as follows: Cash and cash equivalents, trade and other receivables, inter-companies indebtedness, trade and other payables and short-term borrowings The fair values of these financial instruments approximate their carrying amounts due to the short-term maturities of these instruments. Other investment The market value of quoted shares as of balance sheet date approximates the fair value. Hire-purchase payables, term loans and amount owing to intermediate holding company The fair value of hire-purchase payables, term loans and amount owing to intermediate holding company are estimated using discounted cash flow analysis based on current borrowing rates for similar types of borrowing arrangements, which approximate their carrying amounts. Contingent liabilities The fair value of contingent liabilities is nil as the possibility of outflow of resources is remote. 30. CASH FLOW STATEMENTS a. Additions to property, plant and equipment During the financial year, property, plant and equipment were acquired by the following means: The Group RM RM Cash payments 8,634,790 5,806,478 Amount financed under hire-purchase 2,981,113 1,393,953 Outstanding in other payables 1,814, ,299 13,430,370 7,772,730 ANNUAL REPORT

89 b. Cash and cash equivalents consist of the following: The Group The Company RM RM RM RM Cash and bank balances 7,054,773 7,708, , Fixed deposits with licensed banks 3,062,325 4,619, ,000 - Bank overdrafts (723,182) (2,238,722) - - 9,393,916 10,089, , Less: Fixed deposits pledged to banks (2,562,325) (4,619,374) - - 6,831,591 5,470, , CONTINGENT LIABILITY As of March 31, 2009, the Company is contingently liable for the following: The Company RM RM Unsecured: Corporate guarantees given to a licensed bank for credit facilities granted to subsidiary companies 7,901, CAPITAL COMMITMENTS As of March 31, 2009, the Group has the following capital expenditure in respect of: The Group RM RM Capital expenditure: Contracted but not provided for 2,980, ,000 Approved but not contracted for 3,282,000 1,000, ANNUAL REPORT 2009

90 33. SIGNIFICANT EVENTS DURING THE YEAR The entire issued and paid up share capital of the Company was officially listed on the Second Board of Bursa Malaysia Securities Berhad on October 29, The transactions in conjunction with and as an integral part of the listing of and quotation for the entire issued and paid up share capital of the Company are as follows: i. Pursuant to the share purchase agreement entered into between the Company and the shareholders of Teo Seng Farming Sdn. Bhd. ( TSF ) and the option agreement entered into between the Company and TSF, on March 19, 2007: a. the Company had acquired the entire equity interest in TSF for a purchase consideration of RM32,277,900, which was fully satisfied by the issuance of 161,389,500 shares of the Company at an issue price of RM0.20 per share. The acquisition was completed on June 18, 2008 and TSF and Advantage Valuations Sdn. Bhd. became the subsidiary company and immediate holding company respectively; and b. the Company had on June 18, 2008 entered into a share acquisition agreement with TSF to acquire the entire equity interest in Teo Seng Paper Products Sdn. Bhd. ( TSPP ), Teo Seng Feedmill Sdn. Bhd. ( TSFM ) and Ritma Prestasi Sdn. Bhd. ( Ritma ) for the aggregate purchase consideration equivalent to RM12,746,500 which was accounted for as an amount owing to TSF. These acquisitions were completed on June 19, 2008, and TSPP, TSFM, and Ritma became the subsidiary companies of the Company; and ii. The public issue of 38,610,000 ordinary shares at an issue price of RM0.45 per share. 34. COMPARATIVE FIGURES As mentioned in Note 3, under the reverse acquisition, the comparative figures in the consolidated financial statements are presented to reflect those of Teo Seng Farming Sdn. Bhd. and its subsidiary companies. ANNUAL REPORT

91 TEO SENG CAPITAL BERHAD (Incorporated in Malaysia) STATEMENT BY DIRECTORS The directors of TEO SENG CAPITAL BERHAD state that, in their opinion, the accompanying balance sheets and the related statements of income, cash flows and changes in equity are drawn up in accordance with the provisions of the Companies Act, 1965 and the Financial Reporting Standards in Malaysia so as to give a true and fair view of the state of affairs of the Group and of the Company as of March 31, 2009 and of the results of the businesses and cash flows of the Group and of the Company for the year ended on that date. Signed in accordance with a resolution of the Directors, LAU JUI PENG NAM YOK SAN Johor Bahru July 15, 2009 DECLARATION BY THE DIRECTOR PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT OF THE COMPANY I, NAM YOK SAN, the director primarily responsible for the financial management of TEO SENG CAPITAL BERHAD do solemnly and sincerely declare that the accompanying balance sheets and the related statements of income, cash flows and changes in equity are, in my opinion, 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 ) JOHOR BAHRU in the State of ) JOHOR on July 15, 2009 ) Before me, COMMISSIONER FOR OATHS 90 ANNUAL REPORT 2009

92 TOP 10 PROPERTIES OWNED BY TEO SENG CAPITAL BERHAD AND ITS SUBSIDIARIES (Pursuant to Appendix 9C Part A (25) of Main Market Listing Requirements) LIST OF PROPERTY, PLANT AND EQUIPMENT No. OfficeLocation Description Tenure Land Age of Net Book Date of Area Building Value Acquisition / (Years) (RM 000) Revaluation 1 Lot 83, 89, 90 Layer Farm 9 Freehold 48.05A 3 5,433 * May-08 PTD Jalan Kg. Kangkar Baru Daerah Batu Pahat, Johor. 2 HS(M) 9807 PTD Central Freehold 4.19A 2 5,099 * Feb-04 Mukim Tanjong Sembrong, Packaging Tempat Yong Peng Station 2 and A.Hitam Road Corporate 1 Sep-94 Daerah Batu Pahat, Johor Office Building 3 HS(M) 9808 PTD Feedmill Freehold 4.20A 8 4,450 * Feb-04 Mukim Tanjong Sembrong, Plant Tempat Yong Peng A.Hitam Road Daerah Batu Pahat, Johor 4 HS(M) 9806 PTD Paper Egg Freehold 4.73A 14 3,776 * Feb-04 Mukim Tanjong Sembrong, Tray Plant Tempat Batu 65 1/2 Jalan Ayer Hitam Daerah Batu Pahat, Johor. 5 Lot 7087, 7088, 7090 Layer Farm 8 Freehold 16.40A 4 3,483 * May-08 Jalan Air Hitam Kg. Hj Ghaffar Daerah Batu Pahat, Johor. *Date of Revaluation. ANNUAL REPORT

93 LIST OF PROPERTY, PLANT AND EQUIPMENT No. Location Description Tenure Land Age of Net Book Date of Area Building Value Acquisition / (Years) (RM 000) Revaluation 6 GM 1083 Lot 62 Layer Farm 7 Freehold 22.84A 12 3,053 Nov-94 GRN Lot 3530 Nov-94 GRN Lot 3531 May-95 GRN Lot 3532 May-95 All in Mukim Cha'ah Bahru Daerah Batu Pahat, Johor. 7 GRN Lot 5512 Layer Farm 3 Freehold 10.36A 15 1,493 Feb-93 GRN Lot 7850 Central Freehold 5.69A 15 1,295 Jun-93 All in Mukim Tanjong Packaging Sembrong Station 1 Daerah Batu Pahat, Johor. 8 Lot 21 & 23 Office cum Leasehold 1, ,677 Jan-09 Jalan TPP 5/13 factory (Expiring sq. Seksyen 5 building on meter Taman Perindustrian Puchong ) Selangor Darul Ehsan 9 GM 3018 Lot 478 Layer Farm 6 Freehold 17.38A 13 2,070 May-94 GM 3020 Lot 481 Both in Mukim Tanjong Sembrong Tempat Jalan Paloh Daerah Batu Pahat, Johor. 10 GM 503 Lot 3660 Layer Farm 5 Freehold 20.97A 13 1,761 Feb-95 GRN Lot 3667 May-94 All in Mukim Cha'ah Bahru, Daerah Batu Pahat, Johor. 92 ANNUAL REPORT 2009

94 SHAREHOLDINGS STATISTIC AS AT 22 JULY 2009 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 Rights : One vote per ordinary share ANALYSIS BY SIZE SHAREHOLDINGS Size of Shareholdings No. of shareholders % No. of Shares % Less than to 1, , ,001 to 10, ,690, ,001 to 100, ,641, ,001 to 9,999, ,341, ,000,000 and above ,246, Total 1, ,000, THIRTY LARGEST SHAREHOLDERS No. Name No. of Shares % 1 Advantage Valuations Sdn. Bhd. 102,246, HDM Nominees (Tempatan) Sdn. Bhd. 37,000, Advantage Valuations Sdn. Bhd. 3 Dr Aidawani Binti Abd Latif 5,113, Amnah Binti Ibrahim 5,072, Leong Hup Holdings Berhad 3,784, Amnah Binti Ibrahim 2,207, Kendo Trading Pte Ltd 2,000, Lee Say Sugar Factory (Pte) Ltd 2,000, Ladang Ternakan Maju Sdn. Bhd. 1,808, Ma amor Bin Osman 1,584, Tan Sri Lau Tuang Nguang 1,210, F.E. Venture Sdn. Bhd. 1,000, Tong Seh Industries Supply Sdn. Berhad 1,000, Na Yok Chee 951, Nam Yok San 951, Ma amor Bin Osman 918, Na Hap Cheng 871, Lau Joo Yong 859, Nam Hiok Joo 671, Nam Hiok Yong 571, Dr Aidawani Binti Abd Latif 560, Lau Hai Nguan 510, Lau Joo Pern 510, ANNUAL REPORT

95 THIRTY LARGEST SHAREHOLDERS (cont d) No. Name No. of Shares % 24 Goh Cha Goh Hui Siang 500, Lee Sie Chong 500, TA Nominees (Tempatan) Sdn Bhd 500, Pledged Securities Account for Bong Yam Keng 27 Nam Hiok Yok 420, Lee Gee Lian 400, Chia Seong Pow 391, PM Nominees (Tempatan) Sdn Bhd 390, Pledged Securities Account for Mohamad Ridza Bin Mohamad Shapien Total 176,503, SUBSTANTIAL SHAREHOLDERS As per Register of Substantial Shareholdings No of Shares Held Shareholders Direct % Indirect % Advantage Valuations Sdn Bhd 139,246, Leong Hup Holdings Berhad 3,784, ,446, Leong Hup Management Sdn Bhd ,230, CW Lau & Sons Sdn Bhd ,230, Lau Joo Hong 170, ,230, Lau Jui Peng 250, ,230, Lau Joo Heng 170, ,230, DIRECTORS INTEREST As per Register of Directors Shareholdings No of Shares Held Directors Direct % Indirect % Lau Jui Peng 250, ,230, Nam Yok San 951, ,000 5 Negligible Lau Joo Han 200, Na Yok Chee 951, Loh Wee Ching 170, Choong Keen Shian Frederick Ng Yong Chiang Notes : 1. Deemed interested by virtue of its interest in Advantage Valuations Sdn. Bhd. and subsidiaries pursuant to Section 6A of the Companies Act, 1965 ( the Act ). 2. Deemed interested by virtue of its interest in Leong Hup Holdings Berhad pursuant to Section 6A of the Act. 3. Deemed interested by virtue of its interest in Leong Hup Management Sdn. Bhd. pursuant to Section 6A of the Act. 4. Deemed interested by virtue of their interest in CW Lau & Sons Sdn. Bhd. pursuant to Section 6A of the Act. 5. Deemed interested by virtue of his indirect equity interest in Teo Seng Capital Berhad via his children. 94 ANNUAL REPORT 2009

96 NOTICE OF THIRD ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Third Annual General Meeting of the Company will be held at Conference Room, Fourth Floor, Riverview Hotel, 29, Jalan Bentayan, Muar, Johor Darul Takzim on Wednesday, 9 September 2009 at a.m. 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 2009 ; (Please refer Explanatory Note 1) 2. To approve the payment of final tax exempt dividend of 4.25%, in respect of the financial year ended 31 March 2009 ; [Resolution 1] 3. To approve Directors' fees for the financial year ended 31 March 2009 ; [Resolution 2] 4. To re-elect the following Directors who retire pursuant to Article 103 of the Company s Articles of Association : 4.1 Lau Jui Peng 4.2 Nam Yok San [Resolution 3] [Resolution 4] 5. To appoint the Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. Notice of Nomination from a shareholder pursuant to Section 172(11) of the Companies Act, 1965, a copy of which is annexed hereto and marked Annexure A has been received by the Company for the nomination of Messrs. Horwath, who have given their consent to act, for appointment as Auditors and of the intention to propose the following Ordinary Resolution: [Resolution 5] (Please refer Explanatory Note 2) THAT Messrs. Horwath (AF 1018) be hereby appointed as Auditors of the Company in place of the retiring Auditors, Messrs. Deloitte KassimChan (AF 0080) and to hold office until the conclusion of the next Annual General Meeting AND THAT authority be and is hereby given to the Directors to determine their remuneration. ANNUAL REPORT

97 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 6] (Please refer Explanatory Note 3) "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." 7. PROPOSED SHAREHOLDERS RATIFICATION FOR THE RECURRENT RELATED PARTY TRANSACTION OF A REVENUE OR TRADING NATURE [Resolution 7] (Please refer Explanatory Note 4) "THAT all the recurrent related party transactions entered into by the Company and its subsidiaries with the related parties, as set out in Section 2 of the Circular to Shareholders dated 18 August 2009, from the listing date of the Company, 29 October 2008, up to the date of the Third Annual General Meeting, which were undertaken in the ordinary course of business, on arms length basis, on normal commercial terms which were not more favorable to the related party than those generally available to the public and were not detrimental to the minority shareholders of the Company, be hereby approved and ratified. 96 ANNUAL REPORT 2009

98 AND THAT all the actions taken and the execution of all necessary documents by the Directors of the Company as they had considered expedient or deemed fit in the interest of the Company, be hereby approved and ratified. 8. PROPOSED RENEWAL OF SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE [Resolution 8] (Please refer Explanatory Note 5) THAT subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be hereby given to the Company and/or its subsidiary companies to enter into recurrent related party transactions of a revenue or trading nature as set out in Section 2 of the Circular to Shareholders dated 18 August 2009, provided that such transactions are necessary for the day-to-day operations; and undertaken in the ordinary course of business, on arms length basis, on normal commercial terms which are not more favorable to the related party than those generally available to the public and are not detrimental to the minority shareholders of the Company ( the Shareholders Mandate ). THAT such approval shall continue to be in force until:- (a) 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 the authority is renewed by a resolution passed at the next AGM; (b) the expiration of the period within which the next AGM after that date is required to be held pursuant to Section 143(1) of the Companies Act, 1965 ( the Act ) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or (c) is revoked or varied by resolution passed by shareholders in a general meeting, whichever is earlier; AND THAT the Directors of the Company be 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. ANNUAL REPORT

99 9. 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 tax exempt dividend of 4.25% in respect of the financial year ended 31 March 2009, if approved by the shareholders at the Third Annual General Meeting, will be paid on 8 October The entitlement date for the dividend payment is 15 September (a) Shares transferred into the Depositor s Securities Account before 4.00 p.m. on 15 September 2009 in respect of transfers; and (b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to Rules of Bursa Malaysia Securities Berhad. By order of the Board, LIM MENG BIN (LS ) WONG WEI FONG (MAICSA ) Secretaries Yong Peng 18 August 2009 A depositor shall qualify for entitlement to the dividend only in respect of:- Notes:- (i) (ii) (iii) 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 Company 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. 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 a.m., 7 September 2009 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. 98 ANNUAL REPORT 2009

100 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 5 of the Agenda If the proposed Ordinary Resolution 5 on the change of auditors from the existing auditors, Messrs. Deloitte KassimChan to Messrs. Horwath does not carry at the AGM, the retiring auditors who had indicated their willingness to act as the Company's auditors shall continue to act as the auditors of the Company for the next financial year ending 31 March Item 6 of the Agenda The proposed resolution 6 is a new mandate 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. 4. Item 7 of the Agenda The proposed resolution 7, if passed, will ratify all recurrent related party transactions of a revenue of trading nature pursuant to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, from the listing of the Company on 29 October 2008 up till the date of the Third Annual General Meeting. Please refer to the Circular to Shareholders dated 18 August 2009 for further information. 5. Item 8 of the Agenda The proposed resolution 8, if passed, will allow the Company to enter into recurrent related party transactions of a revenue or trading nature pursuant to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Please refer to the Circular to Shareholders dated 18 August 2009 for further information. STATEMENT ACCOMPANYING NOTICE OF THIRD ANNUAL GENERAL MEETING Further details of the Directors who are standing for re-election, namely Mr. Lau Jui Peng and Mr. Nam Yok San, are as per the Profile of Directors stated in page 6 and Directors Interest in page 94 of this Annual Report. ANNUAL REPORT

101 ANNEXURE A - NOTICE OF NOMINATION OF NEW AUDITOR 100 ANNUAL REPORT 2009

102 PROXY FORM I/We (Full Name in Capital Letters) NRIC No. of (Full Address) being a member(s) of TEO SENG CAPITAL BERHAD (Company No.: T) hereby appoint (Full Name in Capital Letters) NRIC No. of or failing him/her of (Full Name in Capital Letters) (Full Address) (Full Address) NRIC No. 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 Third Annual General Meeting of the Company to be held at Conference Room, Fourth Floor, Riverview Hotel, 29, Jalan Bentayan, Muar, Johor Darul Takzim on Wednesday, 9 September 2009 at a.m. 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 2009 and the Reports of Directors and Auditors thereon. 2. To approve the payment of final tax exempt dividend of 4.25%, in respect 1 of the financial year ended 31 March 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 3 pursuant to Article 103 of the Company s Articles of Association. 4.2 To re-elect Mr. Nam Yok San who retires as a Director of the Company 4 pursuant to Article 103 of the Company s Articles of Association. 5. To appoint Messrs. Horwath as Auditors of the Company for the ensuing 5 year and to authorise the Directors to fix their remuneration. 6. Authority to Issue Shares Proposed shareholders' ratification for the recurrent related party 7 transaction of a revenue or trading nature. 8. Proposed renewal of shareholders mandate for recurrent related party 8 transactions of a revenue or trading nature. Resolution FOR AGAINST Signed this day of Number of shares held:- CDS account no.:- Notes:- (i) (ii) (iii) Signature Shareholder or Common Seal 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. 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 a.m., 7 September 2009 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.

103 Please fold along this line (1) Postage The Company Secretary TEO SENG CAPITAL BERHAD ( T) (Incorporated in Malaysia) , Jalan Abdullah, Muar, Johor Darul Takzim, Malaysia. Please fold along this line (2)

104