REPUTABLE PREMIUM QUALITY. Annual Report 2016

Transcription

1 Annual Report 2016

2 Reputable Premium Quality Ever since 1934, Teo Guan Lee Corporation Berhad has evolved from a small enterprise dealing in general merchandise to a major group of distributing and licensing company owning branded apparels in major departmental stores in Malaysia. We focus to strengthen the fabric of the relationship between our company and customers. We are conservative in our principles and achievements yet we are still enthusiastically seeking for improvement on our services, innovative design, and workforce development as well as sustaining our customers across nationwide. Our years of experience have made us competent across our country. Hence, our timely and consistency in quality and services made us a reputable name in the apparel industry. contents 02 notice of annual general meeting 07 CORPORATE INFOATION 08 FINANCIAL HIGHLIGHTS 09 board of directors and directors profile 11 chairman s statement 13 statement on corporate governance 20 statement on risk management and internal control 79 list of properties held by group 22 Audit committee report 80 analysis of shareholdings 24 financial statements enclosed proxy form

3 Notice of annual general meeting NOTICE IS HEREBY GIVEN that the Twenty-Third Annual General Meeting of the Company will be held at the Conference Room of Teo Guan Lee Corporation Berhad, Plot 28 Lorong Perusahaan Maju 4, Prai Industrial Estate, Prai, Pulau Pinang on Monday, 28 November 2016 at noon for the following purposes:- A G E N D A 1. To receive the Audited Financial Statements of the Company for the financial year ended 30 June 2016 together with the Reports of the Directors and of the Auditors thereon. Please refer to Note A As Ordinary Business 2. To declare a final single tier dividend of 7.5 sen per share for the financial year ended 30 June Ordinary Resolution 1 3. To re-elect Mr Toh Choon Keat retiring under the provision of Article 98 of the Articles of Association of the Company, and who, being eligible, has offered himself for re-election. Ordinary Resolution 2 4. To re-appoint Messrs Peter Chong & Co. as Auditors of the Company and to authorise the Board of Directors to fix their remuneration. Ordinary Resolution 3 As Special Business To consider and if thought fit, to pass with or without modifications the following resolutions: 5. To approve the payment of Directors fees of 49,000 for the financial year ended 30 June To approve the payment of Directors fees of 61,000 for the financial year ending 30 June Ordinary Resolution 4 Ordinary Resolution 5 7. Continuing in office as Independent Non-Executive Director THAT authority be and is hereby given to Dato Mustapha Bin Abdul Hamid who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years to continue to act as an Independent Non-Executive Director of the Company. Ordinary Resolution 6 8. Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature 2 TEO GUAN LEE CORPORATION BERHAD ( A) THAT subject always to the provisions of the Companies Act, 1965 ( the Act ), the Memorandum and Articles of Association of the Company, the Bursa Malaysia Securities Berhad Main Market Listing Requirements or other regulatory authorities, approval be and is hereby given to the Company and/or its subsidiaries to enter into recurrent related party transactions with the corporations as set out in Clause 2.2 of the Circular to Shareholders dated 28 October 2016 ( the Circular ), which are necessary for the day to day operations and are carried out in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those generally available to the public and not detrimental to the minority shareholders as set out in the Circular ( Mandate ). THAT the Directors be empowered to do all such acts and things considered necessary or expedient to give full effect to the Mandate with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments as may be imposed by the relevant authorities.

4 Notice of annual general meeting (Cont d) As Special Business (Cont d) 8. Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (Cont d) THAT such Mandate shall commence upon passing this ordinary resolution and to be in force until: (a) (b) (c) the conclusion of the next Annual General Meeting ( AGM ) of the Company at which time the authority shall lapse unless the authority is renewed by a resolution passed at the meeting; the expiration of the period within which the next AGM after that date it is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or revoked or varied by ordinary resolution of the shareholders of the Company at a general meeting; whichever is earlier. And THAT the Directors of the Company be and are hereby authorised to complete and to do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the transactions contemplated and/or authorised by this ordinary resolution. Ordinary Resolution 7 9. Authority to Issue Shares THAT pursuant to Section 132D of the Companies Act, 1965, the Articles of Association of the Company and approvals from Bursa Malaysia Securities Berhad ( Bursa Securities ) and other relevant governmental/regulatory authorities where such authority shall be necessary, the Board of Directors be and is hereby authorised to issue and allot shares in the Company from time to time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Board of Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued shall not exceed ten per centum (10%) of the issued and paid-up share capital (excluding treasury shares) of the Company for the time being, and that the Board of Directors be and is also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Securities. Ordinary Resolution Proposed Amendments to the Articles of Association THAT the proposed amendments to the Articles of Association of the Company as contained in the Appendix I attached to the Annual Report 2016 be hereby approved. Special Resolution 11. To transact any other business of which due notice shall have been given in accordance with the Companies Act, By Order of the Board CHEW SIEW CHENG (MAICSA ) GUNN CHIT GEOK (MAICSA ) Secretaries Date : 28 October 2016 Penang ANNUAL REPORT

5 Notice of annual general meeting (Cont d) Note A This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders and hence is not put forward for voting. Notes: 1. Mr Chan Wah Chong who retire in accordance with Article 98 of the Articles of Association of the Company, has notified the Company that he does not wish to seek for re-election and accordingly will retire at the conclusion of the Twenty-Third Annual General Meeting ( AGM ). The Board of Directors of the Company has on 29 August 2016 announced the decision of Mr Chan Wah Chong to retire in accordance with Article 98 of the Articles of Association of the Company at the forthcoming AGM. 2. A member entitled to attend and vote is entitled to appoint not more than two (2) proxies to attend and vote instead of him. 3. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy. 4. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositors) Act 1991, it may appoint not more than two (2) proxies in respect of each securities account it holds in ordinary shares of the Company standing to the credit of the said securities account. 5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. 6. The instrument appointing a proxy or proxies shall be in writing, executed by or on behalf of the appointor. In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under the hand of its officer or attorney duly authorised. 7. The instrument appointing a proxy or proxies must be deposited at the Company s Registered Office at Plot 28, Lorong Perusahaan Maju 4, Prai Industrial Estate, Prai, Pulau Pinang at least 24 hours before the time for holding the Meeting or any adjournments thereof. 8. Only members registered in the Record of Depositors as at 21 November 2016 shall be eligible to attend the meeting or appoint a proxy to attend and vote on his behalf. Explanatory Notes on Special Business 4 TEO GUAN LEE CORPORATION BERHAD ( A) (i) (ii) (iii) Directors Fees This proposed Ordinary Resolutions 4, if passed, will authorise the payment of Directors fees amounting to 49,000. This proposed Ordinary Resolutions 5, if passed, will authorise the payment of Directors fees amounting to 61,000 for the financial year ending 30 June Continuing in office as Independent Non-Executive Directors The Nomination Committee had assessed the independence of Dato Mustapha Bin Abdul Hamid, who has served on the Board as Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years and the Board has recommended that the approval of the shareholders be sought to re-appoint Dato Mustapha Bin Abdul Hamid as Independent Non-Executive Director as he possess the following attributes necessary in discharging his roles and functions as Independent Non-Executive Director of the Company: (1) Has met the independence guidelines as set out in Chapter 1 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements; (2) Has over 20 years of experience in Corporate and Marketing industry which is very relevant and important for the ; (3) Has carried out his fiduciary duties in the interest of the Company and minority shareholders; and (4) The always maintains a cordial and independent relationships with him. Proposed Renewal of Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature This proposed Ordinary Resolution 7, if passed, will authorise the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature. This Authority will, unless revoked or varied by the shareholders of the Company in general meeting, will expire at the conclusion of the next Annual General Meeting of the Company. Please refer to the Circular to Shareholders dated 28 October 2016 for more information.

6 Notice of annual general meeting (Cont d) Explanatory Notes on Special Business (Cont d) (iv) Authority to Issue Shares This general mandate for issue of shares ( the Mandate ) was sought for in the preceding year and the Board did not carry out the Mandate since the Annual General Meeting ( AGM ) of the Company until the latest practicable date before the printing of this Annual Report. The Mandate will expire on 28 November A renewal of this authority is being sought at the Twenty-Third AGM. (v) The Mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to placing of shares, for the purpose of funding further investment project(s), working capital and/or acquisition. This proposed Ordinary Resolution 8, if passed, will empower the Directors of the Company to issue and allot shares in the Company up to an amount not exceeding 10% of the total issued capital (excluding treasury shares) of the Company for the time being for such purposes as the Directors consider would be in the best interest of the Company. This Authority will, unless revoked or varied by the Company in general meeting, will expire at the next AGM of the Company. Special Resolution Proposed Amendments to the Articles of Association The Special Resolution, if passed, will give the Directors of the Company authority to amend the Company s Articles of Association to be aligned with the amendments to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING 1) Pursuant to Paragraph 8.27(2) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements There are no individuals who are standing for election as Directors (excluding Directors standing for re-election) at this forthcoming Annual General Meeting. 2) General Mandate for Issues of Securities (Pursuant to Paragraph 6.03(3) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements) This general mandate for issue of shares ( the Mandate ) was sought for in the preceding year and the Board did not carry out the Mandate since the Annual General Meeting ( AGM ) of the Company until the latest practicable date before the printing of this Annual Report. The Mandate will expire on 28 November A renewal of this authority is being sought at the Twenty-Third Annual General Meeting. The Mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to placing of shares, for the purpose of funding further investment project(s), working capital and/or acquisition. NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS HEREBY GIVEN that a final single tier dividend of 7.5 sen per share, if approved, will be paid on 15 December 2016 to Depositors registered in the Record of Depositors at the close of business on 1 December A Depositor shall qualify for entitlement to the Dividend in respect of: a) shares transferred into the Depositor s Securities Account before 4.00 p.m. on 1 December 2016 in respect of transfers; b) shares bought on the Bursa Malaysia Securities Berhad ( Bursa Securities ) on a cum entitlement basis according to the rules of Bursa Securities. By Order of the Board CHEW SIEW CHENG (MAICSA ) GUNN CHIT GEOK (MAICSA ) Secretaries ANNUAL REPORT 2016 Date : 28 October 2016 Penang 5

7 Notice of annual general meeting (Cont d) 6 TEO GUAN LEE CORPORATION BERHAD ( A) APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION ARTICLE EXISTING PROVISION AMENDED PROVISION 162 The Directors shall from time to time in accordance with Section 169 of the Act, cause to be prepared and laid before the Company in general meeting such profit and loss accounts, balance sheets and report as are referred to in the section. The interval between the close of a financial year of the Company and the issue of the annual audited accounts, the directors and auditors reports shall not exceed four (4) months. A copy of each such documents shall not less than twenty-one (21) days (or such other shorter period as may be agreed by all members entitled to attend and vote at the meeting) before the date of the meeting, be sent to every member of, and to every holder of debentures of the Company under the provisions of the Act or of these Articles. The requisite number of copies of each such document as may be required by the Exchange shall at the same time be likewise sent to the Exchange provided that this Article shall not require a copy of these documents to be sent to any person of whose address the Company is not aware but any member to whom a copy of these documents has not been sent shall be entitled to receive a copy free of charge on application at the Office. The Directors shall from time to time in accordance with Section 169 of the Act, cause to be prepared and laid before the Company in general meeting such profit and loss accounts, balance sheets and report as are referred to in the section. The interval between the close of a financial year of the Company and the issue of the annual audited accounts, the directors and auditors reports shall not exceed four (4) months. A copy of each such documents shall not less than twentyone (21) days (or such other shorter period as may be agreed by all members entitled to attend and vote at the meeting) before the date of the meeting, be sent to every member of, and to every holder of debentures of the Company under the provisions of the Act or of these Articles. The requisite number of copies of each such document as may be required by the Exchange shall at the same time be likewise sent to the Exchange provided that this Article shall not require a copy of these documents to be sent to any person of whose address the Company is not aware but any member to whom a copy of these documents has not been sent shall be entitled to receive a copy free of charge on application at the Office.

8 Corporate information CHAIAN GROUP MANAGING DIRECTOR DIRECTORS Dato Mustapha Bin Abdul Hamid Toh Kian Beng Chan Wah Chong Lee Kean Cheong Toh Choon Keat Toh Choon Guan COMPANY SECRETARIES Gunn Chit Geok (MAICSA ) Chew Siew Cheng (MAICSA ) AUDIT COMMITTEE Chan Wah Chong Chairman (Independent Non-Executive Director) Dato Mustapha Bin Abdul Hamid Member (Independent Non-Executive Director) Lee Kean Cheong Member (Independent Non-Executive Director) NOMINATION COMMITTEE Dato Mustapha Bin Abdul Hamid Chairman (Independent Non-Executive Director) Chan Wah Chong Member (Independent Non-Executive Director) Lee Kean Cheong Member (Independent Non-Executive Director) REMUNERATION COMMITTEE Dato Mustapha Bin Abdul Hamid Chairman (Independent Non-Executive Director) Chan Wah Chong Member (Independent Non-Executive Director) Toh Kian Beng Member (Executive Director) AUDITORS SHARE REGISTRAR Peter Chong & Co. Chartered Accountants 19 th Floor, Gurney Tower 18 Persiaran Gurney Penang PRINCIPAL BANKERS Malayan Banking Berhad Public Bank Berhad REGISTERED OFFICE Plot 28 Lorong Perusahaan Maju 4 Prai Industrial Estate Prai Pulau Pinang Tel : Fax : Tricor Investor & Issuing House Services Sdn. Bhd. (Company No H) Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi Kuala Lumpur Tel : Fax : STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad ANNUAL REPORT

9 Financial highlights 5 Years Financial Highlights Revenue ( 000) 106, , , , ,309 Profit before tax ( 000) 10,246 11,156 10,814 6,288 7,107 Profit after tax ( 000) 7,371 8,153 7,842 4,377 5,359 EPS (sen) Net asset per share () Revenue ( 000) EPS (sen) , , , , , , , profit before tax ( 000) net asset per share (rm) , TEO GUAN LEE CORPORATION BERHAD ( A) 50, ,000 50,000 10,246 11,156 10,814 6,288 7, profit after tax ( 000) 7,371 8,153 7,842 4,377 5,

10 board of directors and directors profile DATO MUSTAPHA BIN ABDUL HAMID 64 years of age, Malaysian, Male Independent and Non-Executive Director, Member of Audit Committee, Chairman of Nomination and Remuneration Committee Dato Mustapha Bin Abdul Hamid was appointed to the Board as an Independent and Non-Executive Director on 14 January 1994 and a member of the Audit Committee on 25 March He obtained a Bachelor of Social Science (Honours) degree from University Sains Malaysia and a diploma in Public Management from the National Institute of Public Administration (INTAN). Prior to venturing into the private sector, Dato Mustapha was the Principal Assistant Director in the Prime Minister s Department. He is also an independent Non-Executive Director of Berjaya Food Berhad and Lii Hen Industries Bhd. He has no family relationship with any Director and/or major shareholder of Teo Guan Lee Corporation Berhad. toh KIAN BENG 54 years of age, Malaysian, Female Non-Independent and Executive Director, Managing Director, Member of Remuneration Committee Toh Kian Beng was appointed to the Board on 1 December She graduated with a Bachelor of Commerce degree from University of New South Wales, Australia in 1983 and joined a local accounting firm for one and a half years. She is a member of Malaysian Institute of Accountants (MIA) and Certified Practising Accountant (CPA), Australia. She joined Teo Guan Lee in 1985 and is responsible for the overall administrative, financial, planning and management of the. She is also involved in identifying new business ventures as well as the development and further expansion of the. She has family relationship with other major shareholders of Teo Guan Lee Corporation Berhad. CHAN WAH CHONG 52 years of age, Malaysian, Male Independent and Non-Executive Director, Chairman of Audit Committee, Member of Nomination and Remuneration Committee Chan Wah Chong was appointed to the Board and Chairman of Audit Committee on 10 August He started his career in accountancy with Ernst & Young, an international accounting firm for 6 years before joining a local medium size audit firm as a senior staff for a year. He then joined a local pharmaceutical manufacturing concern as Corporate Finance Manager which he left after one and half years to join a startup medical trading Company as its Finance Director. He is a member of Malaysia Association of Certified Public Accountant since He is presently running his own corporate advisory company. He sits on the Board of SLP Resources Berhad and Lii Hen Industries Bhd. He has no family relationship with any Director and/or major shareholders of Teo Guan Lee Corporation Berhad. LEE KEAN CHEONG 49 years of age, Malaysian, Male Independent and Non-Executive Director, Member of Audit Committee, Member of Nomination Committee Lee Kean Cheong was appointed to the Board on 16 January He graduated with a Master of Commerce (Management Accounting) from University of New South Wales, Australia and a Bachelor of Commerce from Murdoch University, Australia. He is a member of Malaysian Institute of Accountants (MIA) and Certified Practising Accountant (CPA), Australia and The Institute of Internal Auditors Malaysia. He was attached to Ernst & Young until April 1994 before joining Southern Steel Berhad as an Accountant and later became Section Head of Internal Audit for the. In 1998, he joined a multinational company, Varironix (M) Sdn. Bhd. as Finance Manager and subsequently Senior Manager in Currently he is the Vice President of Chrysalis, a venture capital management company. He sits on the Board of Petrol One Resources Berhad and D.B.E Gurney Resources Berhad. ANNUAL REPORT 2016 He has no family relationship with other major shareholders of Teo Guan Lee Corporation Berhad. 9

11 board of directors and directors profile (cont d) TOH CHOON KEAT 51 years of age, Malaysian, Male Non-Independent and Executive Director Toh Choon Keat was appointed to the Board on 6 February He joined Teo Guan Lee (KL) in 1991 and currently is the General Manager of Teo Guan Lee (KL) Sdn. Bhd. and subsidiaries. He graduated from Wichita State University, US with a Bachelor of Business degree (Major in Marketing) in He is responsible for the day to day operations of Teo Guan Lee (KL) of Companies, identifying new business ventures and expansion of the. He has family relationship with other major shareholders of Teo Guan Lee Corporation Berhad. TOH CHOON GUAN 48 years of age, Malaysian, Male Non-Independent and Executive Director Toh Choon Guan was appointed to the Board on 6 February He joined Teo Guan Lee (Penang) Sdn. Bhd. in 1996 and currently is the General Manager of Teo Guan Lee (Penang) Sdn. Bhd. and the Penang based subsidiaries. He graduated with a Bachelor of Engineering degree from University of New South Wales, Australia in 1991 and has 5 years of working experience as a consulting engineer before joining the. He is fully in charge of marketing and merchandising functions and contributes to identify new business opportunities for the. He has family relationship with other major shareholders of Teo Guan Lee Corporation Berhad. 10 TEO GUAN LEE CORPORATION BERHAD ( A) Note: The above Directors do not have any conflict of interest with the Company and have not been convicted of any offence in the past ten (10) years other than traffic offences, if any.

12 chairman s statement On behalf of the Board of Directors, I am pleased to present to you the Annual Report and Audited Financial Statements of Teo Guan Lee Corporation Berhad for the financial year ended 30 June Financial Review For the financial year under review, the achieved a revenue of Million, a slight decrease of 1.3 Million over last year s revenue of Million. However despite the slight decline in revenue, the posted a profit before tax of 7.11 Million, an increase of 0.82 Million from the profit before tax of 6.29 Million achieved in the year before. The improvement in performance for the current financial year is a result of our dedicated and continuous efforts to improve our gross margins by improving the sourcing of our products, leveraging on our bulk ordering, simplifying our procurement process and various measures to bring down our cost of goods and control our inventory levels. Although the weakening of the Malaysian Ringgit which plunged from 3.60 to the USD in May 2015 to a low of 4.45 had somewhat impacted our cost of goods but our anticipation of the volatility of the exchange rate by hedging and better procurement process allowed us to price our products competitively. Other measures undertaken include better merchandise mix with better value buys, well-controlled purchases and better sell off of our products have enabled our brands to be able to maintain good margins and reasonably healthy stock levels. The manged to bring down the inventory level to Million from Million last year, a reduction of Million or 30%. Slow moving stocks of 1.60 Million have been written down. Review of Operations The year under review saw the full impact of the Goods & Services Tax (GST) whereby consumer demand weakened across all retail sectors. Although this weak sentiment has impacted our performance, we are glad that we managed to record a reasonable performance albeit a slight decline in revenue. Our house brands, Kiki-Lala children wear and footwear and Cuddles managed to improve our performance for the year under review. Capitalising on our improved performance on our baby division, we will be putting more focus on building more outlets and expand our merchandise mix and range for Cuddles, Kiki-Lala Baby and Tom & Jerry baby. Our new characters licensing signed last year have been launched early this year and will see the full range of apparels in our consignment stores in the coming year and we expect the new characters to contribute a reasonable performance to our revenue. In line with the new movie launch Trolls we have also geared up our merchandise for the launch and hopefully capture good response in November As at to date, we have a total of 527 consignment outlets and 12 boutiques. We will continue to focus to grow with our business partners to open new consignment outlets at strategic locations. Our retail boutiques continue to make losses this financial year and we are re-strategizing with an additional label Mirth of apparels exclusive to these boutiques to spearhead the performance with different merchandise. Our manufacturing outfit, JC Garments (M) Sdn Bhd is still in the process of winding up and our other manufacturing outfit, Syarikat Perniagaan Bingel Sdn Bhd continue to make losses in view of high overheads and thin margins. We will take measures to improve the gross margins and tighten costs to stay competitive. ANNUAL REPORT

13 chairman s statement (cont d) 12 TEO GUAN LEE CORPORATION BERHAD ( A) Future Outlook Going forward, we are expecting further challenges in the macroeconomic outlook next year. While volatility in the international financial markets has subsided, markets remain vulnerable to setbacks and changes in sentiments. The market as a whole is expected to remain cautious although the market as a whole have adjusted to the higher post GST prices. Consumer spending and domestic consumption is expected to remain weak. Nevertheless, we remain optimistic in the country s overall economy and will continue to look out for opportunities to grow our revenue, strengthen our foothold in the retail market and improve our earnings. In consideration of the prevailing market conditions and barring any unforeseen circumstances, the expects to remain profitable in the next financial year. Dividend The Board is always committed to build a sustainable business and to create value for our shareholders as well as to reward them with dividends. The Company paid a final single tier dividend of 7.5 sen per share amounting to 3,055,665 on 16 December For the current financial year, the Board is pleased to recommend a final single tier dividend 7.5 sen per share amounting to 3,055,665 subject to the approval of the shareholders at the forthcoming Annual General Meeting. Acknowledgements On behalf of the Board, I wish to express my sincere appreciation and gratitude to the management and staff for their hard work, dedication and commitment that they have contributed to the. I would also like to thank our Independent and Non-Executive Director, Mr Chan Wah Chong who would not be seeking re-appointment at the coming Annual General Meeting. Mr Chan has served us for 17 years. He has contributed in depth knowledge and leadership during his tenure with us and on behalf of the Board and Management, I would like to put on record our appreciation for his advise and counsel. The rest of our Board members will endeavour to carry out our duties to continue to steer TGL group to the next level. Thank you. DATO MUSTAPHA BIN ABDUL HAMID CHAIAN 28 September 2016

14 Statement on corporate governance The Board of Directors of Teo Guan Lee Corporation Berhad ( the Board ) acknowledges good corporate governance as a matter of high importance and remains a fundamental part of the s culture. The Board is responsible for the corporate governance of the, undertaken with due regard to all of the s stakeholders and its role within the community. The Board is fully committed to adopt and practice to its best endeavours the Malaysian Code of Corporate Governance 2012 ( Code ) issued by the Securities Commission Malaysia. This disclosure statement below sets out the manner in which the Company has applied the principles of the Code and the extent of compliance with Best Practices advocated therein pursuant to the Listing Requirements. BOARD OF DIRECTORS The Charter and Directors Code of Ethics The Board has adopted a Board Charter on 28 August The Directors Code of Ethics are included in the Charter which can be accessible through the Company s website at The Board The Board is responsible, amongst others, for establishing and communicating the strategic directions and corporate values of the Company, and supervising its affairs to ensure its success within a framework of acceptable risks and effective control and in compliance with the relevant laws, regulations and guidelines. It reviews management performance and ensures that the necessary financial and human resources are available to meet the Company s objectives. Further to this, the Board has delegated specific responsibilities to Board Committees as well as various sub-committees to assist the Board in the running of the Company. The functions and terms of reference of the Board Committees as well as the authority delegated by the Board have been clearly defined. There are three (3) Board Committees namely the Audit Committee, Nomination Committee and Remuneration Committee. These Committees will deliberate and discuss issues within their terms of reference and report to the Board with their recommendations. However, the ultimate responsibility for decision making lies with the Board. Board Balance The Board currently comprises six (6) members, one Independent Non-Executive Chairman, two Independent Non- Executive Directors and three Non-Independent Executive Directors. Together, the Directors with a good mix bring wide business, regulatory, industry, marketing and financial experience to complement to lead the Company. All Board members participate fully in decisions on key issues involving the Company. The Executive Directors are responsible for implementing the policies and decisions of the Board and managing the Company s day to day operations. Together with the Independent Non-Executive Chairman and the Independent Non-Executive Directors, the Board ensures that strategies are fully discussed and examined taking into account the long term interests of the various stakeholders including shareholders, employees, customers, suppliers and the various communities in which the Company conduct its business. There is clear division of responsibilities between the Independent Non-Executive Chairman and Managing Director to ensure that there is balance of power and authority as both positions are held by separate members of the Board. The Independent Non-Executive Chairman is responsible for the orderly conduct and working of the Board and for ensuring that members have access to relevant information on a timely manner, whilst the Managing Director is responsible for overseeing the day to day management of the Company s business operations and implementation of Board decisions. Board structure and procedures The Board delegates certain responsibilities to Board Committees, each with defined terms of reference and responsibilities. The Board receives reports of the Board Committees proceedings and deliberations. Where committees have no authority to make decisions on matters reserved for the Board, the Board Committees recommendations would be highlighted for the Board of Directors approval. Board meeting and supply of Information The Board is scheduled to meet at least four (4) times a year at quarterly intervals, with additional meetings to be convened whenever required between the scheduled meetings. Agenda and Board papers containing information relevant to the business will be circulated to the Board prior to the Board meetings so as to give the Directors time to consider and deliberate on the issues to be raised for informed decision making and proper judgement. ANNUAL REPORT

15 Statement on corporate governance (cont d) BOARD OF DIRECTORS (Cont d) Board meeting and supply of Information (Cont d) There were five (5) Board meetings held during the year ended 30 June The attendance of each Director at the Board meeting was as follows: Dato Toh Peng Hoe 3/3 Toh Ping Hai 3/3 Toh Peng Hua 3/3 Dato Mustapha Bin Abdul Hamid 5/5 Toh Kian Beng 5/5 Chan Wah Chong 5/5 Lee Kean Cheong 4/5 Toh Choon Keat 5/5 Toh Choon Guan 5/5 All Directors will have access and services of the Company Secretary. The Board may also seek independent professional advice in furtherance of their duties, whenever they deem necessary, at the expense of the Company. In order to ensure that the Board can devote sufficient time to the Company, Directors are to inform the Chairman before acceptance of new appointments. The Board is satisfied with the level of the time commitment contributed by the Directors in discharging their roles and responsibilities as Directors of the Company. NOMINATION COMMITTEE The Nomination Committee comprises three (3) members: Dato Mustapha Bin Abdul Hamid Chan Wah Chong Lee Kean Cheong Independent & Non-Executive Chairman Independent & Non-Executive Director Independent & Non-Executive Director TES OF REFERENCE Objective In accordance with the Malaysian Code on Corporate Governance, the Nomination Committee is set up to provide recommendations to the Board of Directors ( Board ) on the candidates for all directorships of Teo Guan Lee Corporation Berhad ( TGL ) to be filled by the shareholders or the Board. Final decision on the appointment of any directors of TGL shall be made by the Board. The Nomination Committee shall be responsible in ensuring the appropriate Board balance and size, and that the Board has a required mix of responsibilities, skills and experience. An annual review of the mix of skills, experience and other core competencies of the Board shall be made by the Nomination Committee. 14 TEO GUAN LEE CORPORATION BERHAD ( A) Size and Composition The Nomination Committee shall comprise wholly of Non-Executive Directors, the majority of whom are independent. The members of the Nomination Committee shall elect a Chairman from amongst any of its members. Meetings The Nomination Committee shall meet as and when is necessary. The quorum for any meetings shall be two (2) members subject to any laws, guidelines or rules that may be imposed by Bursa Malaysia Securities Berhad and/or any other relevant authority(ies). Secretaries The Company Secretaries shall act as Secretaries to the Nomination Committee and shall be responsible for keeping minutes of meetings of the Nomination Committee and circulating them to the Nomination Committee members. Duties and Responsibilities 1) To review regularly the Board structure, size and composition and make recommendations to the Board with regard to any adjustments thereof and/or the appointment of Directors as the Nomination Committee deems necessary. 2) To consider, in makings its recommendations, candidates for directorships proposed by the Board or shareholders of TGL as well as make recommendations to put in place the plans for succession.

16 Statement on corporate governance (cont d) NOMINATION COMMITTEE (Cont d) TES OF REFERENCE (Cont d) Duties and Responsibilities (Cont d) 3) To assist the Board to review the required mix of skills and experience and other qualities including core competencies which Non-Executive Directors should bring to the Board and to assess the effectiveness of the Board, any other committees of the Board and the contributions of each individual Director of TGL based on the process and procedures laid out by the Board. 4) To recommend to the Board for continuation or discontinuation in service of Directors as an Executive Director or Non-Executive Director. 5) To recommend Directors who are retiring by rotation to be put forward for re-election. 6) To recommend to the Board, the Directors to fill the seats on any committees of the Board. 7) To recommend to the Board the employment of the services of such advisers as it deems necessary to fulfill the Board s responsibilities. 8) To carry out other responsibilities, functions or assignments as may be defined by the Board from time to time. 9) To review the term of office and performance of the Audit Committee and each of its members annually. The Nomination Committee met once during the financial year ended 30 June 2016 to carry out its function as set out in the terms of reference. Gender Diversity Policy The Board does not have a specific policy on setting targets for the number of women representatives on the Board. Although there is no formal gender diversity policy, the Company is committed to provide fair and equal opportunities and nurturing diversity within the Company. The evaluation of suitability of candidates is based on the candidate s competency, character, integrity and experience in meeting the requirements of the Company. The Company has one female woman representative on board since 1 December The Board does not have any gender and ethnicity diversity policies and targets or set any measures to meet any target. Nevertheless, the is an equal opportunity employer and all appointments and employments are based strictly on merits and are not driven by any gender, ethnicity or age bias. Annual Assessment During the financial year under review, the Nomination Committee had reviewed and assessed the mix of skills and experiences of the Board including the core competencies of the Board of Directors. Based on the assessment, the Nomination Committee was satisfied with the existing Board composition and was of the view that all Directors and Board Committees had discharged their responsibilities in a commendable manner and paragraph 2.20A of the Main Listing Requirements is complied with. All assessments carried out by the Nomination Committee in the discharge of all its functions were properly documented. Re-election of Directors Any director appointed during the year is required under Article 105 of the Company s Articles of Association to retire and seek re-election by shareholders at the following Annual General Meeting ( AGM ) immediately after their appointment. The articles also require that one third of the Directors including the Managing Director, to retire by rotation and seek reelection at each AGM and that each director shall submit himself for re-election every 3 years. Directors over the age of seventy (70) are required to submit themselves for re-appointment annually in accordance to Section 129(6) of the Companies Act, Reinforce Independence Annual Assessment of Independence The Board assesses the independence of Independent Non-Executive Directors annually and takes into account the individual Director s ability to exercise independent judgement to board deliberations and effective functioning of the Board. The Nominating Committee is satisfied that the Independent Director, Dato Mustapha Bin Abdul Hamid who has served on the Board for a cumulative term of more than nine (9) years still maintain his independent status despite his long service extended to the Company and will seek shareholders approval in the coming Annual General Meeting to retain him as Independent Director. ANNUAL REPORT

17 Statement on corporate governance (cont d) NOMINATION COMMITTEE (Cont d) Directors Training All the Directors have completed the Mandatory Accreditation Programme as specified by Bursa Securities. The Directors are aware of the importance of continuous training to update themselves and to further enhance their skills, knowledge and better equip themselves to effectively discharge their fiduciary duties. The Directors have during the financial year ended 30 June 2016 evaluated their own training needs on a continuous basis and attended the following training, conferences and seminars: 1. Toh Kian Beng Corporate Governance Statement Reporting Workshop by Bursa Malaysia Running a Successful Agency in Market Liberalisation by MSIG Forex Hedging Seminar by Maybank 2. Toh Choon Keat Analysis of Corporate Governance Disclosure in Annual Report Family Business Succession by Chinese Chamber of Commerce Ringgit: What Next? by Chinese Chamber of Commerce 3. Toh Choon Guan Corporate Governance Statement Reporting Workshop by Bursa Malaysia The Importance of Business Trust by Teochew Merchant Association Introduction to Doing Business with WECHAT 4. Dato Mustapha Bin Abdul Hamid CG Breakfast Series: How to Maximise Internal Audit by Bursa Malaysia Future of Auditors Reporting-The Game Changer for Boardroom by Bursa Malaysia Analysis of Corporate Governance Disclosure in Annual Report 5. Chan Wah Chong Understanding MPERS by MICPA Evening Talk on Current & Upcoming Accounting Issues for Directors by MICPA The Essensce of Independence by Bursa Malaysia & ICLIF Analysis GST Audit file by MIA 6. Lee Kean Cheong Nominating Committee Programme- Part 2 Effective Board Evaluation 2016 Budget Seminar Summary of Activities for the financial year During the financial year under review, the activities of the Nomination Committee include the following: (i) (ii) reviewed and recommended to the Board the re-election of Directors who retired in accordance with the Articles of Association; reviewed and assessed the required mix of skills, experience and other qualities of the Board, as a whole, the Board Committees and the contribution of each individual Directors; 16 TEO GUAN LEE CORPORATION BERHAD ( A) (iii) (iv) reviewed and recommended to the Board for re-appointment of Director who has served as an Independent Non- Executive Director of the Company for a cumulative term of more than nine years and to seek shareholders approval at the forthcoming AGM by giving strong justification on the re-appointment; and assessed the independence of Independent Directors. REMUNERATION COMMITTEE The Remuneration Committee comprises of the following: Dato Mustapha Bin Abdul Hamid Independent & Non-Executive Chairman Chan Wah Chong Independent & Non-Executive Director Toh Kian Beng Executive Director (Appointed on 29/8/2016) TES OF REFERENCE Objective In accordance with the Malaysian Code on Corporate Governance, the Remuneration Committee is set up to provide recommendations to the Board of Directors ( Board ) on the remuneration of the Executive Directors in all its forms such that the component parts of remuneration are structured to link rewards to corporate and individual performance.

18 Statement on corporate governance (cont d) REMUNERATION COMMITTEE (Cont d) TES OF REFERENCE (Cont d) Objective (Cont d) Executive Directors should play no part in decisions on their remuneration while the remuneration of the Non-Executive Directors should be a matter for the Board as a whole to determine. The individuals concerned should abstain from discussion of and voting on their own remuneration. Size and Composition The Remuneration Committee shall consist wholly or mainly of Non-Executive Directors. The members of the Remuneration Committee shall elect a Chairman from amongst its members who shall be a Non-Executive Director. Meetings The Remuneration Committee shall meet as and when is necessary. The quorum for any meetings shall be two (2) Non- Executive Directors subject to any laws, guidelines or rules that may be imposed by Bursa Malaysia Securities Berhad and/ or any other relevant authority(ies). Secretaries The Company Secretaries shall act as Secretaries of the Remuneration Committee and shall be responsible for keeping minutes of meetings of the Remuneration Committee and circulating them to the Remuneration Committee members. Duties and Responsibilities 1) To determine and recommend to the Board the framework or broad policy for the remuneration, in all forms, of the Executive Directors and/or any other persons as the Remuneration Committee is designated to consider by the Board, drawing from outside advice as necessary. 2) To determine and recommend to the Board any performance related pay schemes for the Executive Directors and/ or any other persons as the Remuneration Committee is designated to consider by the Board. 3) To determine the policy for and scope of service agreements for the Executive and Non-Executive Directors, termination payment and compensation commitments. 4) To produce any required reports as may be required from time to time. 5) To recommend to the Board the appointment of the services of such advisers or consultants as it deems necessary to fulfil its responsibilities 6) To carry out other responsibilities, functions or assignments as may be defined by the Board from time to time. The Remuneration Committee met two (2) times during the financial year ended 30 June Directors Remuneration The aggregate remuneration of the Directors of the Company is as follows: Salary,Bonus & Allowances Gratuity Fees Statutory Contribution Total Executive 982,000 1,188, ,960 2,333,960 Non-Executive 49,000 49,000 2,382,960 The Directors remuneration are received on a group basis except for Directors fees which are received at the Company level. The number of Directors of the Company who served during the financial year and whose total remuneration from the following within the respective bands are as follows: Executive Non-Executive 1 50, , , , , , , , , ,001 and above ANNUAL REPORT

19 Statement on corporate governance (cont d) AUDIT COMMITTEE The composition and terms of reference of the Audit Committee are presented in Audit Committee Report. The Audit Committee also acts as a forum for discussion of internal control and risk management assessment issues. The activities carried out by the Audit Committee during the year are set out under the Audit Committee Report on page 22 to 23 of the Annual Report. RELATIONS WITH SHAREHOLDERS AND INVESTORS The Company recognizes the importance of keeping shareholders and investors informed of the s business corporate developments. Such information is disseminated via the Company s Annual Report, circulars to shareholders, quarterly financial results and various announcements made from time to time. The Annual General Meeting ( AGM ) remains the principal forum for dialogue with shareholders. POLL VOTING The recent amendments to the Listing Requirements requires listed issuers that any resolution set out in the notice of any general meeting or notice of resolution is voted by poll. The poll voting process will be conducted by a poll administrator and verified by an independent scrutineer. Therefore all the resolutions to be passed at the forthcoming Twenty Third Annual General Meeting will be voted by poll and the poll results will be announced by the Company via Bursalink on the same day. ACCOUNTABILITY AND AUDIT Financial Reporting The Board aim to provide a balanced and meaningful assessment of the s financial performance and prospects primarily through the Annual Report and quarterly financial statements. The Board takes due care and reasonable steps to ensure that the financial reporting are in compliance with the applicable approved Accounting Standards before announcing to shareholders and the general public. The Audit Committee will assist the Board in scrutinizing the information disclosed so as to ensure its reasonableness and adequacy. Internal Control The Board acknowledges that it is responsible for maintaining a sound system of internal controls which provides reasonable assessment of effective and efficient operations, internal financial controls and compliance with laws and regulations as well as with internal procedures and guidelines. An overview of the state of internal control within the is set out in the Statement on Risk Management and Internal Control on page 20 to 21 of this Annual Report. 18 TEO GUAN LEE CORPORATION BERHAD ( A) Relationship with Auditors The Company has always maintained a formal and transparent relationship with the Auditors in seeking professional advice and ensuring compliance with accounting standards. Meetings are held with the external auditors twice a year to discuss the audit plan and findings leading to the finalization of the financial statements. DIRECTORS RESPONSIBILITY STATEMENT IN FINANCIAL REPORTING The Board is satisfied that for the year ended 30 June 2016, the financial statements presented gives a true and fair view of the state of affairs, results and cash flow of the and the Company. In presenting the financial statements, the has adopted the appropriate accounting policies and applied them consistently and prudently. The Directors have made sure that all relevant approved accounting standards and the requirements of the Companies Act, 1965 were followed in the preparation of these financial statements.

20 Statement on corporate governance (cont d) ADDITIONAL INFOATION a) Utilisation of proceeds from corporate proposal No proceeds were raised by the Company from any corporate proposal. b) Share Buy-back The Company does not have a share buy-back programme in place. c) Options, Warrants or Convertible Securities There was no share options or convertible securities issued to any parties during the financial year. d) American Depository Receipt ( ADR ) or Global Depository Receipt { GDR } programmes sponsored The Company did not sponsor any ADR or GDR programmes. e) Imposition of Sanctions /Penalties There were no sanctions and/or penalties imposed on the Company or its subsidiaries, Directors or management by the relevant regulatory bodies. f) Audit and Non-Audit Fees The total audit fees paid to the external auditors for the Company and the were 13,000 and 102,300 respectively. The total non-audit fees paid by the to a company affiliated to the external auditors for the financial year ended 30 June 2016 was 15,900. g) Variation in Results There was no material variance between the unaudited profit after tax announced and the audited profit after tax for the financial year ended 30 June h) Profit Guarantee There was no profit guarantee given by the Company. i) Material Contracts During the financial year, there were no material contracts with the Company and its subsidiaries involving Directors and major shareholders other than those disclosed in the Directors Report and Notes to the Financial Statements. j) Recurrent Related Party Transactions The recurrent related party transactions were set out in Note 26 of the Financial Statements and were in the ordinary course of business and were carried out on terms not more favourable to the related party than those generally available to the public. k) Corporate Responsibility Statement The Board will uphold best practices in Corporate Governance as a basic doctrine to achieving long term business sustainability. The is firm in implementing and executing strategies in achieving its goals and thus enhance shareholders value and protect the interest of all stakeholders. The will continue to nurture and improve its human resource capital through trainings and education and to foster safe and harmonious work place for all employees. The also acknowledged its responsibility to the community where it operates. As such, the has supported several charitable organizations and community fund raising activities during the financial year and pledge to continue helping the underprivileged in future. During the year under review, the made some contributions both in cash and in kind to Tong Sim Senior Citizens Care Centre in Kuala Lumpur, Home for the Infirm and Little Sisters of the Poor in Penang. This statement on Corporate Governance was approved in accordance with the resolution of the Board on 28 September ANNUAL REPORT

21 Statement on risk management and internal control The Malaysian Code on Corporate Governance 2012 ( MCCG 2012 ) requires public listed companies to maintain a sound system of risk management and internal control to safeguard shareholder s investment and company s assets. Under the provisions of the Bursa Malaysia Securities Bhd Main Market Listing Requirements, paragraph 15.26(b) Directors of Public Listed companies are required to produce a statement on the state of the company s internal control in their Annual Report. The Board is pleased to provide the following statement which outlines the nature and scope of risk management and internal control of the during the financial year under review. RESPONSIBILITY The Board recognises the importance of a sound system of internal controls and risk management framework to good corporate governance. The Board acknowledges its overall responsibilities for the s systems of internal control and risk management, as well as reviewing the adequacy and integrity of the s internal control system. The Board s responsibility in relation to the systems of internal control encompasses all subsidiaries of the. However, as there are inherent limitations in any system of internal control, such system of internal control put into effect by management can only manage but not eliminate all risks that may impede the achievement of the s business objectives. Therefore, the internal control system can only provide reasonable but not absolute assurance against material misstatements, errors or losses. RISK MANAGEMENT FRAMEWORK The Board has taken necessary measures to ensure the existence of an on-going process to manage and mitigate the significant risks faced by the. The adopts a risk based management approach and rely on the Senior Management utilizing their existing skills as the basis to assume ownership and accountability for risks at their respective levels and to develop risk awareness among all employees through effective communication, timely dissemination of s policies, guidelines and procedures, new legislation and financial reporting compliances. KEY ELEMENTS OF RISK MANAGEMENT AND INTERNAL CONTROL Key elements that have been established to review and evaluate the effectiveness and adequacy of the Risk Management and Internal Control system include: ORGANISATION STRUCTURE The has instituted an organization structure with defined lines of accountability and delegated authority. Board s committees are given the terms of reference to discharge their respective responsibilities. The Senior Management is delegated with authority to perform all aspects of business related to the. AUDIT COMMITTEE 20 TEO GUAN LEE CORPORATION BERHAD ( A) The Board has delegated the responsibility for reviewing the adequacy and integrity of the internal control system to the Audit Committee. In turn, the Audit Committee assesses the adequacy and integrity of the systems of internal controls through independent reviews conducted on reports it receives from management, internal audit function and external auditors. Our has currently outsourced the internal auditing function to an external party to provide an independent supervision and oversight of our internal control system. The outsourced internal auditor reviews our internal control system based on a risk-based approach internal audit strategy according to an annual audit plan adopted by the Audit Committee. In addition, the management conducted in house internal audit on some of its processes and functions based on recommendations by the outsourced internal auditors. The external auditors provide assurance in the form of their annual statutory audit of the financial statements of the. Any areas for improvement identified during the course of the statutory audit are brought to the attention of the Audit Committee through management letters or are articulated at the Audit Committee meetings. SENIOR MANAGEMENT In the process for identifying, evaluating, monitoring and managing the significant risk affecting the objectives of the, the Board relies on the direct participation of the Senior Management. Management meetings are held at the strategic, operational and finance level to review the financial and operational reports in order to monitor the performance of the. These meetings and reports present the ideal platform for identification of the s risk of each business units and timely implementation of controls to manage risks. The Senior Management updates the Board of any significant matters which require the Board s attention.

22 Statement on risk management and internal control (Cont d) FINANCIAL REPORTING SYSTEMS The Board entrusts the daily running of the operations to the Managing Director and Executive Director and the management team. Monthly meetings are held to discuss and review significant changes in the business and the external environment which affect the risks faced by the. Comprehensive information are provided including financial performance and monthly monitoring of results against budgets with major variances being followed up and proposed actions to be taken. The Managing Director and Executive Directors will discuss and deliberate strategic issues facing the business at the quarterly Board Meeting and report on any significant matters arising. CODE OF CONDUCT All employees of the play an important role in establishing, monitoring and enhancing the reputation of the. A code of conduct has been formalized and available in the Human Resource department and put in the Company s website. All employees are required to display the highest level of professionalism in all aspects of their work and comply with the Code of Conduct and all applicable laws, regulations and policies of the. WHISTLE BLOWING POLICY The Board has formalized a whistle blowing policy which is available on the company s website provides a channel for parties to provide information on frauds, wrong doing and non-compliance of regulations and procedures by employees. INTERNAL AUDIT The Board through the Audit Committee, Senior Management and Internal Auditors reviews the internal control system on an on-going basis whereas External Auditors performs the review of the internal control system on an annual basis. The internal audit adopts a risk based approach in developing its audit plan which address the core business processes of the based on their risk profile. Internal Auditors will carry out audits based on audit plan presented and approved by the Audit Committee. The Internal Auditors continue to independently and objectively monitor compliance with regards to policies and procedures and the effectiveness of the internal control systems. Significance findings and recommendations for improvement are highlighted to management and the Audit Committee. The management is responsible for ensuring that corrective actions were implemented accordingly. CONCLUSION In accordance with the assessment of the s systems of internal control, the Board is of the view that the risks undertaken by the were within tolerable levels in the context of the business environment the operates in. During the year under review, a number of improvements to internal controls were identified and addressed. Nothing has come to the attention of the Board which could result in any material losses, contingencies or uncertainties that would require separate disclosure. The Board has received assurances from the Senior Management that the s risk management and internal control system is operating adequately and effectively in all material aspects. REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS The External Auditors have reviewed the statement on Risk Management and Internal Control for inclusion in the Annual Report for the year ended 30 June Based on their review, the External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process that the Board has adopted in the review of the adequacy and integrity of risk management and internal control of the. This statement is made in accordance with the resolution of the Board of Directors dated 28 September ANNUAL REPORT

23 AUdit committee report Members of the Audit Committee The Audit Committee currently comprises entirely of Independent Non-Executive Directors as follows: a) Chan Wah Chong Chairman (Independent Non-Executive Director) b) Dato Mustapha Bin Abdul Hamid Member (Independent Non-Executive Director) c) Lee Kean Cheong Member (Independent Non-Executive Director) Terms of Reference Composition The Committee shall be appointed by the Board from amongst the Directors of the Company and shall consist of not less than 3 members. A quorum shall be 2 members. The Committee Members shall not be: a) Executive Directors of the Company or any related corporation; b) A spouse, parent, brother, sister, son or adopted son, daughter or adopted daughter of an Executive Director of the Company or of any related corporation; or c) Any person having a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgement in carrying out the functions of the Audit Committee. The members of the Committee shall select a Chairman from among their members who is not an Executive Director or employee of the Company or any related corporation. If a member of the Committee resigns, dies or for any other reason ceases to be a member with the result that the number of members reduced below 3, the Board of Directors shall, within 3 months of that event, appoint such number of new members as may be required to make up the minimum number of 3 members. Authority The Committee is authorised by the Board to investigate any activity within its Terms of Reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee. The Committee is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary. Functions The functions of the Committee shall be: 22 TEO GUAN LEE CORPORATION BERHAD ( A) a) to consider and recommend the nomination of a person or persons as auditors together with such other functions as may be agreed to by the Audit Committee and the Board of Directors; b) to discuss with the external Auditors on their audit plan including the assistance given by the employees of the Company to the external Auditors; c) to assess annually the suitability and independence of internal auditors; d) to review the quarterly and year-end financial statements of the Company, focusing particularly on: i) any changes in or implementation of accounting policies and practices; ii) significant adjustments arising from the audit and any significant and unusual events; and iii) compliance with accounting standards and other legal requirements. e) to consider any related party transaction and conflict of interest situation that may arise within the Company or the including any transaction, procedure or course of conduct that raises questions of management integrity; f) to review the major risk area of the ; g) to discuss problems and reservations arising from the interim and final audits, and any matter the auditors may wish to discuss (in the absence of management where necessary); h) to review evaluation by the External Auditors on the System of Internal Controls, the External Auditors management letter and management s response; i) to review the adequacy of the scope, functions, competency and resources of the internal audit function and that it has the necessary authority to carry out its work; j) to review the internal audit programme, processes, results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function; and k) to consider the major findings of internal investigations and management s response.

24 AUdit committee report (cont d) Attendance at Meetings The Audit Committee may require the attendance of any management staff from the Finance/Accounts Department or other Departments deemed necessary together with a representative or representatives from the External Auditors. Other Board members shall also have the right of attendance. However, at least twice a year the Committee shall meet with the External Auditors without executive Board members present. The Company Secretary shall be the Secretary of the Committee. The Secretary shall circulate the minutes of meetings of the Audit Committee to all members of the Board. Summary of the work for the year During the financial year ended 30 June 2016, the Audit Committee met seven (7) times and attendance of each Director is as follows: Attended Chan Wah Chong 7/7 Dato Mustapha Bin Abdul Hamid 7/7 Lee Kean Cheong 6/7 During the year, the work of the Audit Committee included: 1. Reviewing the annual and quarterly financial result announcements; 2. Reviewing external auditors report in addition to credit and accounting issues arising from audit and updates of new developments on accounting standards under the new MFRS (Malaysian Financial Reporting Standards); 3. Reviewing audit strategy and plan with external auditors; 4. Reviewing the Internal Audit Report, circular on related party transactions and Statements of Risk Management and Internal Control and Corporate Governance; 5. Reviewing the scope, function, resources and competency of internal audit function; and 6. Reviewing the re-appointment of external auditors and internal auditors for the ensuing year. The Audit Committee is of the opinion that it has discharged its duties in accordance with the terms of reference as established above during the financial year. Internal Audit Function The Company has appointed KFF Advisory Sdn. Bhd., an independent accounting firm ( the Internal Auditors ) to provide outsourced internal audit function for the to assist the Audit Committee in discharging its duties and responsibilities. The Internal Auditors report directly to the Audit Committee. The main role of the internal audit is to review the effectiveness of the s system of internal control. For the year under review, the internal auditors conducted the following activities: a) Review of the GST compliance of the. The objective is to assess the s practice in compliance with the GST Act 20l4. Recommendations and findings are immediately carried out and rectified. In addition, the also conducted internal audits of some of its operating units and processes using its internal staff. Summary of activities done during the year included the following: a) Periodic conduct of physical count at consignment outlets by independent sales personnels and verifications against stock records maintained. b) Investigation into material variances of stock count and physical records and the objective is to minimise any stock losses and identify major losses as soon as possible. The total fees and costs incurred for the financial year 30 June 2016 for internal audit functions amounted to 43,500. This Report is made in accordance with the resolution of the Board of Directors dated 28 September ANNUAL REPORT

25 TEO GUAN LEE CORPORATION BERHAD ( A) Directors report statement by directors Statutory Declaration Independent Auditors Report Consolidated Statement of Financial Position Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Statement of Financial Position Statement of Profit or Loss and Other Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Supplementary Information Disclose Pursuant to Bursa Malaysia Securities Berhad Listing Requirements FINANCIAL CONTENTS

26 Directors Report The Directors have pleasure in presenting their report together with the audited financial statements of the and of the Company. PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding and provision of management services. The principal activities of its subsidiary companies are as disclosed in Note 8 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. FINANCIAL RESULTS Company Profit for the financial year attributable to: Owners of the Company 5,454,723 3,160,962 Non-controlling interest (95,849) 5,358,874 3,160,962 DIVIDENDS The dividends declared, paid and payable by the Company since the previous financial year were as follows: In respect of the financial year ended 30 June 2015 Final single tier dividend of 7.5 sen per share, declared on 26 November 2015 and paid on 16 December ,055,665 The Directors proposed a final single tier dividend of 7.5 sen per share amounting to 3,055,665 in respect of the financial year ended 30 June The proposed dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements. ISSUE OF SHARES AND DEBENTURES The Company has not issued any new shares or debentures during the financial year. SHARE OPTIONS No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company. No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As at the end of the financial year, there were no unissued shares of the Company under options. ANNUAL REPORT

27 Directors Report (Cont d) DIRECTORS IN OFFICE The Directors who have held office since the date of the last report are: Dato Mustapha bin Abdul Hamid Toh Kian Beng Chan Wah Chong Lee Kean Cheong Toh Choon Keat Toh Choon Guan Dato Toh Peng Hoe (Resigned on 26 November 2015) Toh Ping Hai (Resigned on 26 November 2015) Toh Peng Hua (Resigned on 26 November 2015) In accordance with the Article 98 of the Company s Articles Association, Mr. Toh Choon Keat retires by rotation, and being eligible, offers himself for re-election. In accordance with the Article 98 as of the Company s Articles Association, Mr. Chan Wah Chong retires by rotation, and has expressed his intention not to seek re-election. DIRECTORS BENEFITS Since the end of the previous financial year, no Director has received or become entitled to receive any benefit (other than Directors remuneration as disclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest other than any deemed benefits arising from related party transactions as disclosed in Note 26 to the financial statements. During and at the end of the financial year, no arrangements subsisted to which the Company or a related corporation was a party, whereby Directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. DIRECTORS INTERESTS According to the register of Directors shareholdings, the interests of Directors in office at the end of the financial year in shares of the Company and its related corporations were as follows: Shareholdings in the Company Number of Ordinary Shares of 1.00 each Balance as at Bought Sold Balance as at TEO GUAN LEE CORPORATION BERHAD ( A) Indirect interest Toh Kian Beng 28,123,259 28,123,259 Toh Choon Keat 28,100,659 28,100,659 Toh Choon Guan 27,207,659 27,207,659 By virtue of their interest in shares of the Company, Messrs. Toh Kian Beng, Toh Choon Keat and Toh Choon Guan are deemed to be interested in shares of all subsidiary companies to the extent the Company has an interest. None of the other Directors in office at the end of the financial year held or dealt in shares and share options in the Company or its related corporations during the financial year.

28 Directors Report (Cont d) OTHER STATUTORY INFOATION Before the statements of financial position and statements of profit or loss and other comprehensive income of the and of the Company were made out, the Directors took reasonable steps: a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for impairment, and have satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for impairment; and b) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their values as shown in the accounting records of the and the Company have been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: a) which would render the amount written off for bad debts or the amount of the allowance for impairment in the financial statements of the and of the Company inadequate to any substantial extent; or b) which would render the values attributed to the current assets in the financial statements of the 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 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 and of the Company misleading. At the date of this report, there does not exist: a) any charge on the assets of the and of the Company which has arisen since the end of the financial year to secure the liability of any other person; or b) any contingent liability of the 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 and of the Company to meet its obligations as and when they fall due. In the opinion of the Directors, a) the results of the s and the Company s operations during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature; and b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of operations of the and of the Company for the financial year in which this report is made. AUDITORS The auditors, Messrs. Peter Chong & Co., Chartered Accountants, have indicated their willingness to accept re-appointment. Signed on behalf of the Board in accordance with a resolution of the Directors Toh Kian Beng Director Georgetown, Penang Toh CHOON GUAN Director ANNUAL REPORT 2016 Dated: 28 September

29 Statement by directors pursuant to Section 169(15) of the Companies Act, 1965 We, Toh KIAN BENG and Toh CHOON GUAN, two of the Directors of TEO GUAN LEE CORPORATION BERHAD state that, in the opinion of the Directors, the financial statements set out on pages 31 to 77 are drawn up in accordance with the Malaysian Financial Reporting Standards, International Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the and of the Company as at 30 June 2016 and of their financial performance and cash flows of the and of the Company for the financial year ended on that date. The information set out in Note 33 to the financial statements have been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Signed on behalf of the Board in accordance with a resolution of the Directors Toh Kian Beng Director Toh CHOON GUAN Director Georgetown, Penang Dated: 28 September 2016 Statutory declaration pursuant to Section 169(16) of the Companies Act, 1965 I, Toh Kian Beng (NRIC No.: ), being the Director primarily responsible for the financial management of TEO GUAN LEE CORPORATION BERHAD, do solemnly and sincerely declare that, to the best of my knowledge and belief, the financial statements set out on pages 31 to 77 and the supplementary disclosure on page 78 are correct. And I make this solemn declaration, conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, TEO GUAN LEE CORPORATION BERHAD ( A) Subscribed and solemnly declared by ) the abovenamed TOH KIAN BENG ) at Georgetown in the State of ) Penang on 28 September 2016 ) Before me Haji MOHAMED YUSOFF BIN MOHD. IBRAHIM (No. :P156) Commissioner for Oaths Toh Kian Beng

30 Independent auditors report to the members of Teo Guan Lee Corporation Berhad Company No: A Incorporated in Malaysia Report on the financial statements We have audited the financial statements of TEO GUAN LEE CORPORATION BERHAD, which comprise the statements of financial position as at 30 June 2016 of the and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the 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 31 to 77. Directors responsibilities for the financial statements The Directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company s preparation 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 Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial positions of the and of the Company as at 30 June 2016 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 the following: (a) (b) (c) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the and we have received satisfactory information and explanations required by us for those purposes. Our audit reports on the financial statements of the subsidiary companies did not contain any qualification or any adverse comment made under Section 174(3) of the Act. ANNUAL REPORT

31 Independent auditors report to the members of Teo Guan Lee Corporation Berhad (CONT D) Company No: A Incorporated in Malaysia 30 TEO GUAN LEE CORPORATION BERHAD ( A) Other reporting responsibilities The supplementary information set out in Note 33 on page 78 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Peter Chong & Co. No. AF 0165 Chartered Accountants Peter Chong Ton Nen No. 394/03/18 (J/PH) Chartered Accountant Georgetown, Penang Dated: 28 September 2016

32 consolidated statement of financial position as at 30 June Note ASSETS Non-current assets Property, plant and equipment 6 3,259,786 3,704,433 Investment properties 7 21,964,039 22,593,439 Investments 9 1,981,205 2,453,235 Deferred tax assets ,000 95,000 27,338,030 28,846,107 Current assets Inventories 11 33,430,071 47,716,406 Receivables 12 36,939,067 30,756,635 Tax assets , ,902 Financial assets at fair value through profit or loss - Investment management funds 14 8,600,882 2,662,929 Deposit, cash and bank balances 15 1,903,313 2,400,470 81,117,977 83,683,342 Investment in subsidiary companies, held for distribution 8(ii) 2,006,349 83,124,326 83,683,342 TOTAL ASSETS 110,462, ,529,449 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 16 40,742,200 40,742,200 Reserves 17 40,158,111 38,231,083 80,900,311 78,973,283 Non-controlling interest 978,804 1,074,653 TOTAL EQUITY 81,879,115 80,047,936 Non-current liability Deferred tax liabilities 10 1,891,503 1,954,038 Current liabilities Payables 18 25,433,876 28,006,790 Borrowings ,000 2,124,995 Tax liabilities , ,690 Financial liability at fair value through profit or loss - Derivative financial instruments 14 29,619 26,691,738 30,527,475 TOTAL LIABILITIES 28,583,241 32,481,513 ANNUAL REPORT 2016 TOTAL EQUITY AND LIABILITIES 110,462, ,529,449 The attached notes form an integral part of these financial statements. 31

33 consolidated statement of profit or loss and other comprehensive income Note REVENUE ,309, ,607,786 COST OF SALES 20 (59,564,777) (62,903,578) GROSS PROFIT 40,744,392 38,704,208 OTHER OPERATING INCOME 654, ,902 SELLING AND DISTRIBUTION COSTS (23,632,182) (23,647,267) ADMINISTRATION EXPENSES (10,463,429) (9,036,888) OPERATING PROFIT 21 7,303,684 6,532,955 FINANCE COSTS 23 (196,439) (245,094) PROFIT BEFORE TAXATION 7,107,245 6,287,861 TAXATION 13 (1,748,371) (1,911,110) PROFIT FOR THE FINANCIAL YEAR 5,358,874 4,376,751 OTHER COMPREHENSIVE (EXPENSE)/ INCOME FOR THE FINANCIAL YEAR Item that may be reclassified subsequently to profit or loss - Fair value of available-for-sale financial assets: - (Losses)/ gains arising during the year (472,030) 506,149 Item that may not be reclassified subsequently to profit or loss - Effect on change in tax rate 77,857 (472,030) 584,006 TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 4,886,844 4,960, TEO GUAN LEE CORPORATION BERHAD ( A) PROFIT ATTRIBUTABLE TO: OWNERS OF THE COMPANY 5,454,723 4,433,914 NON-CONTROLLING INTEREST (95,849) (57,163) 5,358,874 4,376,751 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: OWNERS OF THE COMPANY 4,982,693 5,017,920 NON-CONTROLLING INTEREST (95,849) (57,163) 4,886,844 4,960,757 EARNINGS PER SHARE (SEN) -Basic The attached notes form an integral part of these financial statements.

34 consolidated statement of changes in equity Share capital Attributable to owners of the Company Fair value reserve Retained profits Total Noncontrolling interest Total equity Note As at 1 July ,742, ,246 35,979,582 77,011,028 1,131,816 78,142,844 Dividends 25 (3,055,665) (3,055,665) (3,055,665) Profit for the financial year 4,433,914 4,433,914 (57,163) 4,376,751 Other comprehensive income - Fair value changes on available-for-sale financial assets 506, , ,149 - Effect on change in tax rate 77,857 77,857 77,857 Total comprehensive income 506,149 4,511,771 5,017,920 (57,163) 4,960,757 As at 30 June 2015/ 1 July ,742, ,395 37,435,688 78,973,283 1,074,653 80,047,936 Dividends 25 (3,055,665) (3,055,665) (3,055,665) Profit for the financial year 5,454,723 5,454,723 (95,849) 5,358,874 Other comprehensive expense - Fair value changes on available-for-sale financial assets (472,030) (472,030) (472,030) Total comprehensive income (472,030) 5,454,723 4,982,693 (95,849) 4,886,844 As at 30 June ,742, ,365 39,834,746 80,900, ,804 81,879,115 The attached notes form an integral part of these financial statements. ANNUAL REPORT

35 consolidated statement of cash flows Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 7,107,245 6,287,861 Adjustments for: Bad debts written off 803 Depreciation of property, plant and equipment 1,439,619 1,467,610 Depreciation of investment properties 629, ,269 Distribution from investment management funds (302,073) Dividend income (84,995) (136,422) Gain on disposal of available-for-sale financial assets (6,032) Gain on disposal of property, plant and equipment (94,043) (41,999) Impairment on debts 656 Interest expenses 167, ,632 Interest income (137,012) (120,038) Inventories written down to net realisable value 1,599,916 Inventories written off 2,592,552 Property, plant and equipment written off 10,777 Unrealised loss on derivative financial instruments 29,619 Unrealised loss on foreign exchange 73, ,068 Operating profit before working capital changes 10,429,119 11,156,081 Inventories 12,686,419 11,613,846 Receivables (8,193,602) (4,902,605) Payables (2,637,898) (6,930,287) Cash generated from operations 12,284,038 10,937,035 Dividend paid (3,055,665) (3,055,665) Interest received 19, ,739 Interest paid (167,503) (219,632) Tax refunded , ,472 Tax paid 13 (2,167,331) (2,625,640) Net cash generated from operating activties 7,162,121 5,261,309 CASH FLOWS FROM INVESTING ACTIVITIES 34 TEO GUAN LEE CORPORATION BERHAD ( A) Net cash outflow upon de-consolidation of subsidiary company 27 (422) Additional placement for investment management fund (5,820,000) (836,000) Distribution from investment management funds 302,073 Dividend received 84, ,422 Purchase of property, plant and equipment 6(ii) (953,113) (1,222,362) Proceeds from disposal of property, plant and equipment 102,184 42,000 Proceeds from disposal of available-for-sale financial assets 24,300 Net cash used in investing activities (6,284,283) (1,855,640) CASH FLOWS FROM FINANCING ACTIVITIES Movement in short term borrowings (865,000) (3,775,481) Repayment of hire purchase obligations (67,317) (57,969) Net cash used in financing activities (932,317) (3,833,450) NET DECREASE IN CASH AND CASH EQUIVALENTS (54,479) (427,781) CASH AND CASH EQUIVALENTS BROUGHT FORWARD 1,957,792 2,385,573 CASH AND CASH EQUIVALENTS CARRIED FORWARD 28 1,903,313 1,957,792 The above consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements.

36 statement of financial position as at 30 June Note ASSETS Non-current asset Investment in subsidiary companies 8(i) 27,788,134 27,788,134 Current assets Receivables 12 18,342,462 16,225,497 Tax assets Cash and bank balances ,344,309 16,226,863 TOTAL ASSETS 46,132,443 44,014,997 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 16 40,742,200 40,742,200 Reserves 17 3,305,032 3,199,735 TOTAL EQUITY 44,047,232 43,941,935 Current liability Payables 18 2,085,211 73,062 TOTAL LIABILITY 2,085,211 73,062 TOTAL EQUITY AND LIABILITIES 46,132,443 44,014,997 ANNUAL REPORT 2016 The attached notes form an integral part of these financial statements. 35

37 statement of profit or loss and other comprehensive income Note REVENUE 20 3,300,000 2,080,000 ADMINISTRATION EXPENSES (138,548) (139,041) OPERATING PROFIT 21 3,161,452 1,940,959 FINANCE COST 23 (490) (650) PROFIT BEFORE TAXATION 3,160,962 1,940,309 TAXATION 13 PROFIT FOR THE FINANCIAL YEAR 3,160,962 1,940,309 OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO OWNERS OF THE COMPANY 3,160,962 1,940, TEO GUAN LEE CORPORATION BERHAD ( A) The attached notes form an integral part of these financial statements.

38 statement of changes in equity Attributable to owners of the Company Share capital Retained profits Total Note As at 1 July ,742,200 4,315,091 45,057,291 Dividends 25 (3,055,665) (3,055,665) Total comprehensive income 1,940,309 1,940,309 As at 30 June/ 1 July ,742,200 3,199,735 43,941,935 Dividends 25 (3,055,665) (3,055,665) Total comprehensive income 3,160,962 3,160,962 As at 30 June ,742,200 3,305,032 44,047,232 ANNUAL REPORT

39 statement of cash flows Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation 3,160,962 1,940,309 Adjustment for: Dividend income (3,300,000) (2,080,000) Operating loss before working capital changes (139,038) (139,691) Receivables 3,150 Payables 8,459 14,470 Cash used in operations (130,579) (122,071) Tax refunded 13 22,761 Dividend paid (3,055,665) (3,055,665) Net cash used in operating activities (3,186,244) (3,154,975) CASH FLOWS FROM INVESTING ACTIVITIES Dividend received 2,080,000 3,500,000 Net repayment from/ (advances to) subsidiary companies 1,106,725 (350,243) Net cash generated from investing activities 3,186,725 3,149,757 NET INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS 481 (5,218) CASH AND CASH EQUIVALENTS BROUGHT FORWARD 444 5,662 CASH AND CASH EQUIVALENTS CARRIED FORWARD TEO GUAN LEE CORPORATION BERHAD ( A) The above statement of cash flows is to be read in conjunction with the notes to the financial statements.

40 notes to the financial statements 1. GENERAL INFOATION The principal activities of the Company are investment holding and provision of management services. The principal activities of its subsidiary companies are as disclosed in Note 8 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. The Company is a public limited liability company, incorporated and domiciled in Malaysia, listed on Main Market, Bursa Malaysia Securities Berhad. The address of the registered office and the principal place of business of the Company is at Plot 28, Lorong Perusahaan Maju 4, Prai Industrial Estate, Prai, Pulau Pinang. The Board has authorised the issuance of the financial statements on 28 September FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The is exposed to a variety of financial risks, including interest rate risk, credit risk, liquidity and cash flow risks and market risks. The s overall risk management objective is to ensure that adequate resources are available to meet the operating requirements and to develop the s businesses whilst managing the associated risks. The does not trade in financial instruments or engage in speculative transactions. Interest rate risk The is exposed to interest rate risk mainly from its borrowings. The mitigates its exposure to interest rate fluctuations by borrowing at both fixed and floating rates of interest. Other than those disclosed in the financial statements, the s effective yields from deposits, cash and bank balances range from 2.60% (2015: 2.40% to 2.60%) per annum. The interest rate risk is monitored on an on-going basis and the endeavours to keep the exposure at an acceptable level. The considers interest rate risk exposure for its deposits as minimal as they are short term in nature and are not held for speculative purposes. The s exposure to interest rate risk is minimal. Credit risk The trades only with recognised and creditworthy third parties with an appropriate credit history. At reporting date, the maximum exposure for the was represented by the carrying amount of the financial assets. Information regarding the credit risk concentration of financial assets is disclosed in Note 12. For cash and bank balances, the minimises credit risk by dealing exclusively with reputable financial institutions. Liquidity and cash flow risk Liquidity risk is the risk that the is unable to service its cash obligations in the future. Cash flow risk is the risk that future cash flows associated with a financial instrument will fluctuate. In the case of a floating rate debt instrument, such fluctuations will result in a change in the effective interest rate of the financial instrument, usually without a corresponding change in its fair value. The liquidity of the is dependent upon future cash flows generated from operations and the availability of funding sufficient for all refinancing, repayment and funding needs. The practices prudent liquidity risk management by maintaining sufficient cash and committed credit facilities to meet the s operating and financial requirements for foreseeable future. The s exposure to liquidity risk arising from mismatches of financial assets and liabilities is minimal. ANNUAL REPORT

41 notes to the financial statements (Cont d) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont d) Market risks (i) Foreign currency risk The is exposed to foreign currency risk on assets and liabilities that are denominated in currencies other than the functional currency of the transacting entity. Foreign currency risk is monitored closely and managed to an acceptable level. Forward foreign exchange contracts were entered into as hedges for purchases denominated in foreign currency and to limit the exposure to potential changes in foreign exchange rates with respect to the s foreign currency denominated financial assets and financial liabilities. The net carrying amounts of financial assets and financial liabilities stated at currencies other than the functional currency are as follows: Financial assets Available-for-sale assets, in Hong Kong Dollar ( HKD ) 1,772,340 2,241,591 Financial liabilities Payables, in United States Dollar ( USD ) 7,591,402 13,416,326 Derivative financial instruments, in USD 5,527,436 Sensitivity analysis 13,118,838 13,416,326 5% and 10% (2015: 10% and 15%) weakening of the Malaysian Ringgit ( ) against the US Dollar ( USD ) and Hong Kong Dollar ( HKD ) at the end of the reporting period would have decreased profit after tax and equity by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. Decrease in profit after tax Decrease in equity Effect of change in foreign currency against 40 TEO GUAN LEE CORPORATION BERHAD ( A) Weakened by 5% 102,565 15,081 - Weakened by 10% 182,622 7, Weakened by 10% 1,341, ,159 - Weakened by 15% 2,012, ,239 Conversely, a strengthening of against the USD and HKD at the end of the reporting period would have the equal but opposite effect on the above currency to the amounts shown above assuming that all other variables remained constant.

42 notes to the financial statements (Cont d) 2. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont d) Market risks (Cont d) (ii) Equity price risk The is exposed to equity price risk arising from its investment in quoted equity instruments. These instruments are classified as available-for-sale financial assets. The s exposure to equity price risk based on carrying amounts as at the end of the reporting period was: Available-for-sale financial assets 1,981,205 2,453,235 A 10 percentage increase in equity price at the end of the reporting period would have increased equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant Increase Increase on equity 10% 198, ,323 A 10 percentage decrease in equity price at the end of the reporting period would have had an equal but opposite effect on the above amounts assuming that all other variables remained constant. 3. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The financial statements of the and the Company have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards ( IFRSs ) and the requirements of the Companies Act, 1965 in Malaysia. The financial statements are presented in Ringgit Malaysia ( ), which is the Company s functional currency, unless otherwise indicated. (b) Basis of consolidation Subsidiary companies are entities over which the has the ability to control the financial and operating policies so as to obtain benefits from their activities. Control is achieved when the is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the has such power over another entity. The consolidated financial statements comprise the financial statements of the Company and its subsidiary companies as at the reporting date. The financial statements of the subsidiary companies are prepared for at the same reporting date as the Company. Financial statements of subsidiary companies are consolidated using the following method of accounting: (i) Predecessor method of accounting Financial statements of certain subsidiary companies are consolidated using the predecessor method of accounting in accordance with Malaysian Accounting Standard No. 2 Accounting for Acquisitions and Mergers prevailing at that time, except for certain subsidiary companies as disclosed in Note 8 which is consolidated using the purchase method of accounting. Under the predecessor method of accounting, the results of subsidiary companies are presented as if the merger had been effected throughout the current and previous years. ANNUAL REPORT

43 notes to the financial statements (Cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (b) Basis of consolidation (Cont d) (i) Predecessor method of accounting (Cont d) The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit difference is classified as equity and regarded as a reserve. Any resulting debit difference is adjusted against reserve. Any share premium, capital redemption reserve and any other reserves which are attributable to the share capital of the merged enterprises, to the extent that they have not been capitalised by a debit difference, are reclassified and presented as movement in other reserves. The has taken advantage of the exemption provided by MFRS 1 to not restate business combinations that occurred before the date of transition to MFRS i.e. 1 July Accordingly, business combinations entered into prior to the transition date have not been restated. (ii) Purchase method of accounting Under the purchase method of accounting, a subsidiary company is fully consolidated from the date on which control is transferred to the and de-consolidated from the date that control ceases. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the date of acquisition, irrespective of the extent of any noncontrolling interest. The excess of the cost of acquisition over the fair value of the s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit or loss. In preparing consolidated financial statements, intra-group balances and transactions and the resulting unrealised profits are eliminated on consolidation. Unrealised losses are eliminated on consolidation and the relevant assets are assessed for impairment. Uniform accounting policies are adopted in the consolidated financial statements for transactions and events in similar circumstances. The gain or loss on disposal of a subsidiary company, which is the difference between the net disposal proceeds and the s share of its net assets as at the date of disposal, including the cumulative amount of any exchange differences that relate to the subsidiary company, is recognised in the profit or loss. (iii) Non-controlling interests 42 TEO GUAN LEE CORPORATION BERHAD ( A) Non-controlling interests are presented within equity in the consolidated statement of financial position, separately from the equity attributable to owners of the Company. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. At the end of each reporting period, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests share of subsequent changes in equity. Transactions with non-controlling interests that do not result in loss in control are accounted as equity transactions that is, as transactions with the owners in their capacity as owners. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired is deducted from equity. For disposals to noncontrolling interests, differences between any proceeds received and the relevant share of non-controlling interest are also recognised in equity.

44 notes to the financial statements (Cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (c) Property, plant and equipment and depreciation All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred. Subsequent to recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and any accumulated impairment losses. Freehold land has an unlimited useful life and therefore is not depreciated. Other property, plant and equipment are depreciated on a straight line basis to write off the cost of assets to their residual values over the following estimated useful lives: Number of years Leasehold land 60 Buildings 50 Factory buildings 50 Leasehold apartments 50 Plant and machinery 10 Motor vehicles 5 Furniture and fittings 3-10 Office equipment 3-10 Land held on long lease is held on a lease with an unexpired period of 50 years or more. A lease of less than 50 years is described as a short lease. The residual value and useful life of an asset is reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and future periods are adjusted. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognised in the profit or loss. Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. (d) Investment properties Investment property is a property which is held either to earn rental income or for capital appreciation or both. Investment properties are stated at cost/ deemed cost less accumulated depreciation and any accumulated impairment losses. Investment properties are depreciated on the straight-line basis over its estimated useful lives: Number of years Freehold buildings Leasehold apartments 50 Leasehold land 99 Leasehold buildings 50 Freehold land has an unlimited useful life therefore is not depreciated. Land held on long lease is held on a lease with an unexpired period of 50 years or more. A lease of less than 50 years is described as a short lease. The residual values, useful lives and depreciation methods are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits of investment properties. ANNUAL REPORT

45 notes to the financial statements (Cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (d) Investment properties (Cont d) Investment properties are derecognised when it is permanently withdrawn from use and no further economic benefit is expected from its disposal or when they have been disposed. Any gains or losses on the retirement or disposal of an investment property are recognised in the profit or loss in the financial year in which they arise. (e) Investments In the Company s separate financial statements, investments in subsidiary companies and other non-current investments are shown at cost/ deemed cost less accumulated impairment, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. Refer Note 3(h) on impairment of assets. On disposal of such investment, the difference between the net disposal proceeds and its carrying amount is included in the profit or loss. (f) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. The cost of raw material comprises the original cost of purchase plus the cost of bringing the inventories to their intended location and condition. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and an appropriate proportion of production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less cost of completion and selling expenses. (g) Financial instruments (i) Financial assets Financial assets are recognised in the statements of financial position when, and only when, the becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in the other comprehensive income is recognised in the profit or loss. 44 TEO GUAN LEE CORPORATION BERHAD ( A) The classifies its financial assets in the following categories: loans and receivables and availablefor-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss comprise financial assets that are held for trading (i.e. financial assets acquired principally for the purpose of resale in the near term), derivatives (both freestanding and embedded) and financial assets that were specifically designated into this classification upon initial recognition. Subsequent to initial recognition, financial assets classified as at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in the fair value of financial assets classified as at fair value through profit or loss are recognised in profit or loss. Net gains or losses on financial assets classified as at fair value through profit or loss exclude foreign exchange gains and losses, interest and dividend income. Such income is recognised separately in profit or loss as components of other income or other operating losses. However derivatives that are linked to and must be settled by delivery of unquoted equity instruments that do not have a quoted market price in an active market are recognised at cost.

46 notes to the financial statements (Cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (g) Financial instruments (Cont d) (i) Financial assets (Cont d) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Loans and receivables are classified as current assets, except for those having a maturity date later than 12 months after the reporting date which are classified as non-current. Available-for-sale financial assets Financial assets classified as available-for-sale comprise non-derivative financial assets that are designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Subsequent to initial recognition, financial assets classified as available-for-sale are measured at fair value. Any gains or losses arising from changes in the fair value of financial assets classified as availablefor-sale are recognised directly in other comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognised, at which time the cumulative gains or losses previously recognised in other comprehensive income shall be reclassified from equity to profit or loss as a reclassification adjustment. Dividends on available-for-sale equity instruments are recognised in profit or loss when the s right to receive payment is established. (ii) Financial liabilities Financial liabilities are recognised when the becomes a party to the contractual agreements of the instrument. All interest related charges are recognised as an expense in finance costs in the profit or loss. Financial liabilities are derecognised if the s obligations specified in the contract expire or are discharged or cancelled. Borrowings are recognised initially at fair value of proceeds received less attributable transaction costs, if any. Borrowings are subsequently stated at amortised cost which is the initial fair value less any principal repayments. Any difference between the proceeds (net of transaction costs) and the redemption value is taken to the profit or loss over the period of the borrowings using the effective interest method. The interest expense is chargeable on the amortised cost over the period of the borrowings using the effective interest method. Gains and losses are recognised in the profit or loss when the liabilities are derecognised as well as through the amortisation process. Borrowings which are due to be settled within 12 months after the reporting date are included in current liabilities in the statement of financial position even though the original terms were for a period longer than 12 months and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting date. Borrowings to be settled within the s normal operating cycle are considered as current. Other borrowings due to be settled more than 12 months after the reporting date are included in non-current liabilities in the statement of financial position. Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost, using the effective interest method. ANNUAL REPORT

47 notes to the financial statements (Cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (g) Financial instruments (Cont d) (iii) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor fails to make payment when due. Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contracts when it is due to the and the Company, as the issuer is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation. (iv) Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Changes in fair value of financial instruments are recognised in the profit or loss. (v) Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Ordinary shares are classified as equity. Dividends on ordinary shares are accounted for in shareholders equity as an appropriation of retained earnings and accrued as a liability in the financial year in which the obligation to pay is established. (h) Impairment of assets The and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired and recognised the impairment loss when such evidence exists. (i) Financial assets Financial assets carried at amortised cost An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account. Impairment losses are reversed in subsequent periods when an increase in the asset s recoverable amount can be related objectively to an event occurring after the impairment was recognised to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in the profit or loss. 46 TEO GUAN LEE CORPORATION BERHAD ( A) Available-for-sale financial assets The collectively considers factors such as significant or prolonged declines in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market as objective evidence that available-for-sale financial assets are impaired. If any such objective evidence exists, an amount comprising the difference between the financial asset s cost (net of any principal payment and amortisation) and current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Instead, any increase in the fair value subsequent to the impairment loss is recognised in other comprehensive income. Assets carried at cost If there is objective evidence that an impairment loss on a financial asset carried at cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

48 notes to the financial statements (Cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (h) Impairment of assets (Cont d) (ii) Non-financial assets The carrying amounts of the s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated to determine the amount of impairment loss. An asset s recoverable amount is the higher of an asset s or Cash-Generating Unit s ( CGU ) fair value less costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. An impairment loss is recognised in the profit or loss in the period in which it arises. An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. (i) Taxation and deferred taxation Income tax on the results for the financial year comprises current and deferred tax. Current tax is the expected amount of income tax payable in respect of the taxable profits for the financial year and is measured using the tax rates at the reporting date. Deferred taxation liabilities and assets are provided using the liability method in respect of all temporary differences between the carrying amount of an asset or liability in the statement of financial position and its tax base including unused tax losses and capital allowances. Deferred tax liabilities and assets are measured at the tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. The carrying amount of a deferred tax asset is reviewed at each reporting date. If it is no longer probable that sufficient future taxable profit will be available to allow the benefit of part or the entire deferred tax asset to be utilised, the carrying amount of the deferred tax asset will be reduced accordingly. When it becomes probable that sufficient future taxable profit will be available, such reductions will be reversed. (j) Foreign currency transactions In preparing the financial statements of the individual entities, transactions in currencies other than the entity s functional currency are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are translated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not translated. (k) Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the profit or loss for the period. Exchange differences arising on the retranslation of nonmonetary items carried at fair value are included in the profit or loss for the period except for the differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income. Exchange differences arising from such non-monetary items are also recognised directly in other comprehensive income. Provisions A provision is recognised when the or the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. ANNUAL REPORT

49 notes to the financial statements (Cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (l) Revenue recognition Revenue from sale of goods is measured at the fair value of the consideration received and receivable, net of discounts allowed and returns and is recognised in the profit or loss when the risk and rewards of ownership have been transferred to the buyer and it is probable that the economic benefits associated with the transactions will flow to the companies in the. Rental income is recognised on an accrual basis in accordance with the substance of the relevant agreements unless collectability is in doubt. Dividend income is recognised when the right to receive payment has been established. Interest income is recognised on an accrual basis (taking into account the effective yield on the assets) unless collectability is in doubt. (m) Employee benefits Short term employee benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leaves are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leaves are recognised when the absences occur. Defined contribution plans As required by law, companies in Malaysia make contributions for local employees to the state pension scheme, the Employees Provident Fund ( EPF ). Such contributions are recognised as an expense in the profit or loss as incurred. (n) Borrowing costs Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use. Borrowing costs incurred to finance property development activities and construction contracts are accounted for in a similar manner. All other borrowing costs are expensed. (o) Segment reporting Segment revenue and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of property, plant and equipment (net of accumulated depreciation, where applicable), investment properties, available-for-sale financial assets, inventories, receivables, fixed deposits with licensed banks, repurchase agreement and cash and bank balances. 48 TEO GUAN LEE CORPORATION BERHAD ( A) (p) Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets do not include income tax assets, whilst segment liabilities do not include income tax liabilities and borrowings from financial institutions. Segment revenue, expenses and results include transfers between segments. The prices charged on intersegment transactions are based on agreed terms and prices. These transfers are eliminated on consolidation. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank overdrafts and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

50 notes to the financial statements (Cont d) 3. SIGNIFICANT ACCOUNTING POLICIES (Cont d) (q) Contingent liabilities and contingent assets The does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstance where there is a liability that cannot be recognised because it cannot be measured reliably. A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the. The does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain. (r) Non-current assets (or disposal groups) held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary. Immediately before classifications as held-for-sale, the measurement of the non-current assets (or all the assets and liabilities in a disposal group) is brought up-to-date in accordance with applicable MFRSs. Then, on initial classifications as held for sale, non-current assets or disposal groups (other than investment properties, deferred tax assets, employee benefits assets, financial assets and inventories) are measured in accordance with MFRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in the profit or loss. (s) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using a valuation technique. The measurement assumes that the transaction takes place either in the principal market or in the absence of a principal market, in the most advantageous market. For non-financial asset, the fair value measurement takes into account a market s participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. For financial reporting purposes, the fair value measurements are analysed into level 1 to level 3 as follows: Level 1 : Level 2 : Level 3 : Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the can access at the measurement date; Inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and Inputs are unobservable inputs for the asset or liability. The transfer of fair value between levels is determined as of the date of the event or change in circumstances that caused the transfer. ANNUAL REPORT

51 notes to the financial statements (Cont d) 4. MALAYSIAN FINANCIAL REPORTING STANDARDS ( MFRSs ) AND AMENDMENTS TO MFRSs New and revised MFRSs and Amendments to MFRSs which have been issued but not yet effective and relevant to the and the Company: MFRSs and Amendments to MFRSs Effective dates MFRS 9 Financial Instruments 1 January 2018 MFRS 15 Revenue from Contracts with Customers 1 January 2018 MFRS 16 Leases 1 January 2019 Amendments to MFRS 7 Financial Instruments: Disclosures (Annual Improvements 1 January 2016 to MFRSs Cycle) Amendments to MFRS 10, Investment Entities: Applying the Consolidation Exception 1 January 2016 MFRS 12 and MFRS 128 Amendments to MFRS 101 Disclosure Initiative 1 January 2016 Amendments to MFRS 107 Disclosure Initiative 1 January 2017 Amendments to MFRS 112 Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017 Amendments to MFRS 116 Clarification of Acceptable Methods of Depreciation 1 January 2016 and MFRS 138 and Amortisation Amendment to MFRS 119 Employee Benefits (Annual Improvements 1 January 2016 to MFRSs Cycle) Amendments to MFRS 127 Equity Method in Separate Financial Statements 1 January 2016 Amendments to MFRS 134 Interim Financial Reporting (Annual Improvements to MFRSs Cycle) 1 January 2016 It is anticipated that the adoption of the abovementioned Standards will not have significant impact on the financial statements of the and the Company. 5. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the financial statements involved making certain estimates, judgements and assumptions concerning the future. They affect the accounting policies applied, amount of assets, liabilities, income and expenses reported and disclosures made. They are assessed on an on-going basis and are based on experience and other relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Changes in these estimates and assumptions by the management may have an effect on the balances as reported in the financial statements. Significant accounting estimates and judgements, where used, have been disclosed in the relevant notes to the financial statements. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Classification between investment properties and property, plant and equipment 50 TEO GUAN LEE CORPORATION BERHAD ( A) The determines whether a property qualifies as an investment property based on criteria developed by the. An investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the will consider whether a property generates cash flows largely independent of the other assets held by the in making its assessment. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions can be sold separately (or leased out separately under a finance lease), the will account for the portions separately. If the portions cannot be sold separately, the property will be recognised as an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Properties that are occupied by the companies in the are accounted for as owner-occupied rather than as investment property at the level.

52 notes to the financial statements (Cont d) 5. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (Cont d) (ii) Depreciation of investment properties The deemed cost of investment properties is depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these investment properties to be 30 years to 44 years. The carrying amount of the s investment properties at 30 June 2016 was as disclosed in Note 7. The estimated useful lives of investment properties are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear and legal or other limits on the use of the relevant assets. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the investment properties would increase the recorded expenses and decrease the non-current assets. (iii) Depreciation of property, plant and equipment The cost of property, plant and equipment is depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these property, plant and equipment to be 10 years. The carrying amount of the Company s property, plant and equipment at 30 June 2016 was as disclosed in Note 6. Changes in the expected level of usage could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (iv) Inventories written down to net realisable value The writes down its obsolete or slow moving inventories based on assessment of their estimated net selling price. Inventories are written down when events or changes in circumstances indicates that the carrying amount could not be recovered. Management specifically analyses sales trend and current economic trends when making this judgement to evaluate the adequacy of the write down for obsolete or slow moving inventories. Where expectations differ from the original estimates, the differences would impact the carrying amount of inventories. (v) Inventories written off The reviews the inventory age listing on a periodic basis. This review involves comparison of the carrying value of the aged inventory items with the respective net realisable value. The purpose is to ascertain whether a write-off is required in the financial statements for any obsolete and/ or slow moving items. In addition, the conducts physical counts on their inventories on a periodic basis in order to determine whether any write-off is required. (vi) Impairment of debts Impairment is made for doubtful accounts for estimated losses resulting from the subsequent inability of customers to make required payments. If the financial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment may be required in future periods. The management specifically analyses accounts receivables and historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the impairment losses. (vii) Income taxes Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. (viii) Deferred tax assets Deferred tax assets are recognised for all unused tax losses and capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. ANNUAL REPORT

53 notes to the financial statements (Cont d) 52 TEO GUAN LEE CORPORATION BERHAD ( A) 6. PROPERTY, PLANT AND EQUIPMENT Freehold land Short term leasehold land Buildings Factory buildings Leasehold apartments Plant and machinery Motor vehicles Furniture and fittings Office equipment Total Cost As at 1 July , ,252 1,594, , , ,744 2,808,995 6,958,361 2,737,615 15,846,017 Additions 1, , ,630 78,802 1,222,362 Disposals (141,800) (141,800) Written off (124,821) (5,491) (362,544) (492,856) Transfer to investment properties (Note 7) (1,154,757) (177,304) (1,332,061) As at 30 June/ 1 July , , , , ,523 2,893,525 7,868,500 2,453,873 15,101,662 Additions 199, ,725 5,425 1,003,113 Disposals (5,737) (295,702) (10,745) (312,184) Written off (2,050) (2,050) As at 30 June , , , , ,736 2,797,786 8,655,480 2,459,298 15,790,541

54 notes to the financial statements (Cont d) 6. PROPERTY, PLANT AND EQUIPMENT (Cont d) Freehold land Short term leasehold land Buildings Factory buildings Leasehold apartments Plant and machinery Motor vehicles Furniture and fittings Office equipment Total Accumulated depreciation As at 1 July , ,637 84,794 81, ,191 1,657,758 5,640,489 2,461,035 11,007,651 Depreciation charged 7,479 10,385 7,806 23, , , ,632 1,467,610 Disposals (141,799) (141,799) Written off (120,033) (3,850) (358,196) (482,079) Transfer to investment properties (Note 7) (372,595) (81,559) (454,154) As at 30 June/ 1 July , ,427 92, ,873 1,940,539 6,520,652 2,212,471 11,397,229 Depreciation charged 7,479 10,385 7,806 22, , ,759 58,543 1,439,619 Disposals (4,164) (295,701) (4,178) (304,043) Written off (2,050) (2,050) As at 30 June , , , ,643 2,093,501 7,400,233 2,271,014 12,530,755 Net carrying amounts As at 30 June , , , ,720 29, ,285 1,255, ,284 3,259,786 As at 30 June , , , ,526 53, ,986 1,347, ,402 3,704,433 (i) Included in the net carrying amounts of the property, plant and equipment is motor vehicle held under hire purchase instalment plan amounted to Nil (2015: 60,690). (ii) Included in the additions of property, plant and equipment is an amount financed by hire purchase amounted to 50,000 (2015: Nil). It has been fully settled during the financial year. ANNUAL REPORT

55 notes to the financial statements (Cont d) 7. INVESTMENT PROPERTIES Freehold land and buildings Leasehold apartments Leasehold land and buildings Total At deemed cost/ cost As at 1 July ,317, ,900 14,369,300 23,993,300 Transfer from property, plant and equipment (Note 6) 782,162 95, ,907 As at 30 June 2015/ 30 June ,099, ,645 14,369,300 24,871,207 Accumulated depreciation As at 1 July ,514 18, ,571 1,523,499 Depreciation charged 260,427 17, , ,269 As at 30 June/ 1 July ,941 36,283 1,276,544 2,277,768 Depreciation charged 260,427 13, , ,400 As at 30 June ,225,368 50,058 1,631,742 2,907,168 Net carrying amounts As at 30 June at deemed cost 8,142, ,934 12,737,558 21,144,404 - at cost 730,982 88, ,635 8,873, ,587 12,737,558 21,964,039 As at 30 June at deemed cost 8,377, ,163 13,092,756 21,744,668 - at cost 756,572 92, ,771 9,134, ,362 13,092,756 22,593,439 (i) Investment properties consist of the following: 54 TEO GUAN LEE CORPORATION BERHAD ( A) Freehold land and buildings Leasehold apartments Leasehold land and buildings Total At fair value As at 30 June ,304,220 1,023,000 18,621,750 31,948,970 As at 30 June ,304,220 1,023,000 18,621,750 31,948,970

56 notes to the financial statements (Cont d) 7. INVESTMENT PROPERTIES (Cont d) (i) Investment properties consist of the following: (Cont d) Investment properties represent: (a) (b) (c) (d) (e) (f) (g) Six (6) units of freehold shop lots located in Kompleks Bukit Jambul, Penang; One (1) unit of freehold shop lot located at Bandar Penas, Penang; Two (2) units of freehold shop lots located at Bandar Sungai Long, Selangor; One (1) unit of freehold shophouse located at Taman Jelita, Selangor; Four (4) units of leasehold apartments located at Taman Shamelin Perkasa, Kuala Lumpur; Two (2) plots of leasehold industrial land with office building located at Taman Shamelin Perkasa, Kuala Lumpur; and Eight (8) units of leasehold shop lots located in Prangin Mall, Penang. The fair value measurement of investment properties are disclosed in Note 31. (ii) Net carrying amount of investment properties for which titles have yet to be issued by the relevant authorities: Freehold land and buildings 6,073,799 6,276,260 Leasehold apartments 366,362 Leasehold land and buildings 6,221,827 6,404,821 12,295,626 13,047,443 (iii) The rental income and operating expenses related to the investment properties are as follows: Rental income 2,036,831 1,942,474 Direct operating expenses of revenue-generating investment properties (289,496) (304,253) 8. INVESTMENT IN SUBSIDIARY COMPANIES (i) Company Unquoted shares, at deemed cost 27,788,134 27,788,134 ANNUAL REPORT

57 notes to the financial statements (Cont d) 8. INVESTMENT IN SUBSIDIARY COMPANIES (Cont d) All the subsidiary companies were incorporated in Malaysia. The subsidiary companies are as follows: Subsidiary companies of the Company Gross equity interest % % Principal activities Teo Guan Lee (K.L.) Sdn. Bhd Investment holding, wholesaler and retailer of garments and related accessories Teo Guan Lee (Penang) Sdn. Bhd Wholesaler and retailer of garments and related accessories, and investment holding P.P.A.C. (M) Sdn. Bhd Wholesaler of garments and investment holding Galeri Megah Sdn Property investment Affluent Lifestyle Sdn Distributor of baby and children apparels Digitaland (M) Sdn Investment holding Syarikat Perniagaan Bingel (M) Sdn. Contemporary Symphony Sdn Manufacturer of all kinds of clothes and garments Distributor and retailer of apparels Subsidiary companies of Teo Guan Lee (K.L.) Sdn. Bhd. JC Garments (M) Sdn. Bhd. (Note 8(ii)) Teo Guan Lee Properties (K.L.) Sdn. Bhd Members voluntary winding up Property investment Character Network Sdn. Bhd Distributor of baby and children apparels Puppy Winks Marketing Sdn Distributor of baby wear, accessories and toiletries 56 TEO GUAN LEE CORPORATION BERHAD (ii) The financial statements of these subsidiary companies were consolidated using the purchase method of accounting. Investment in subsidiary companies, held for distribution Unquoted shares, carrying amount of de-consolidated subsidiary company 2,006,349 The financial statements of JC Garments (M) Sdn. Bhd. has not been consolidated as this subsidiary company has filed with Companies Commission of Malaysia for members voluntary winding-up ( winding-up ) pursuant to Section 254(1)(b) of the Companies Act, 1965 on 1 February 2016.

58 notes to the financial statements (Cont d) 9. INVESTMENTS Available-for-sale financial assets At fair value Investment in quoted shares - in Malaysia 146, ,344 - outside Malaysia 1,835,044 2,296,891 Total 1,981,205 2,453,235 Market value Investment in quoted shares - in Malaysia 146, ,344 - outside Malaysia 1,835,044 2,296,891 Total 1,981,205 2,453,235 The currency exposure profile of the investments is as follows: Ringgit Malaysia 146, ,344 Hong Kong Dollar 1,772,340 2,241,591 US Dollar 62,704 55,300 1,981,205 2,453, DEFERRED TAXATION Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated statement of financial position: Net deferred tax liabilities as at 1 July (1,859,038) (2,056,154) Recognised in profit or loss (Note 13) - Current 87, ,918 - Non-current 13,000 5, , ,259 Recognised in other comprehensive income - Effect on change in tax rate 77,857 Net deferred tax liabilities as at 30 June (1,758,503) (1,859,038) ANNUAL REPORT

59 notes to the financial statements (Cont d) 10. DEFERRED TAXATION (Cont d) Presented after appropriate offsetting as follows: Deferred tax assets 133,000 95,000 Deferred tax liabilities (1,891,503) (1,954,038) Deferred tax assets Temporary differences on property, plant and equipment Deferred tax liabilites Temporary differences on Revaluation of property Property, prior to plant adopting and deemed cost equipment accounting (1,758,503) (1,859,038) Grand Total total As at 1 July ,000 (19,630) (2,081,524) (2,101,154) (2,056,154) Recognised in profit or loss 50,000 (21,370) 90,629 69, ,259 Recognised in other comprehensive income 77,857 77,857 77,857 As at 30 June/ 1 July ,000 (41,000) (1,913,038) (1,954,038) (1,859,038) Recognised in profit or loss 38,000 19,000 43,535 62, ,535 As at 30 June ,000 (22,000) (1,869,503) (1,891,503) (1,758,503) 11. INVENTORIES TEO GUAN LEE CORPORATION BERHAD ( A) Raw materials 923,210 1,076,834 Work in progress 220, ,708 Finished goods 32,286,042 46,486,864 The following has been charged during the financial year: 33,430,071 47,716, Recognised in profit or loss - Cost of inventories recognised as cost of sales 54,916,443 57,486,729 - Inventories written down to net realisable value 1,599,916 - Inventories written off 2,592,552

60 notes to the financial statements (Cont d) 12. RECEIVABLES Company Trade receivables 35,377,030 28,778,149 Less: Impairment on debts As at 1 July (23,796) (23,796) Additions (656) Written off 7,897 As at 30 June (16,555) (23,796) 35,360,475 28,754,353 Other receivables 471, ,205 Due from subsidiary companies, non-trade - interest free 15,042,462 14,145,497 Deposits and prepayments 1,107,069 1,113,077 Dividend receivables 3,300,000 2,080,000 36,939,067 30,756,635 18,342,462 16,225,497 (i) Included in receivables of the are balances with the following related parties: Rental deposits TGL Packaging Sdn. Bhd. 200, ,000 TGL Industries Sdn. Bhd. 150, ,000 Bidang Cendana Sdn. Bhd. 27,795 85,400 The related party relationships with the above parties are as disclosed in Note 26. (ii) (iii) (iv) The s normal trade receivables credit periods range from 30 to 90 days (2015: 30 to 90 days). Other credit terms are assessed and approved on a case-by-case basis. The amount due from subsidiary companies is unsecured, interest-free and repayable upon demand. As at the reporting date, the is exposed to a significant concentration of credit risk whereby a substantial balance of the total trade receivables is due from three (3) (2015: three (3)) major customers, representing approximately 58% (2015: 51%) of the total trade receivables of the. ANNUAL REPORT

61 notes to the financial statements (Cont d) 12. RECEIVABLES (Cont d) (v) The ageing analysis of the s trade receivables is as follows: Neither past due nor impaired 33,508,027 25,672,289 Past due but not impaired - 1 to 30 days 860,358 1,355, to 60 days 148, , to 90 days 290, , days and above but less than 1 year 487, ,201 - more than 1 year 65,334 6,571 1,852,448 3,082,064 Impaired 16,555 23,796 35,377,030 28,778,149 Receivables that are past due but not impaired The does not hold any collateral in respect of the receivables and there are no disputes on these outstanding receivables. Receivables that are impaired Trade receivables that are determined to be impaired at the reporting date relate to those receivables who have defaulted on payments and the management is of the opinion that the recoverability is in doubt. These receivables are not secured by any collateral or credit enhancements. 13. TAXATION Company TEO GUAN LEE CORPORATION BERHAD ( A) Net tax (liabilities)/ assets as at 1 July (248,788) (727,587) ,683 Taxation charge for the financial year: Malaysian taxation - Based on results for the financial year (1,913,605) (2,093,186) - Adjustment in respect of prior year 64,699 62,817 De-consolidation of subsidiary company (3,713) Payment made during the financial year 2,167,331 2,625,640 Tax refunded (249,523) (116,472) (22,761) Net tax (liabilities)/ assets as at 30 June (183,599) (248,788) Disclosed as: Tax assets 244, , Tax liabilities (428,243) (395,690) (183,599) (248,788)

62 notes to the financial statements (Cont d) 13. TAXATION (Cont d) Company Taxation expenses comprise: Current - Malaysian taxation 1,913,605 2,093,186 - Deferred taxation (Note 10) (87,535) (113,918) Non-current - Malaysian taxation (64,699) (62,817) - Deferred taxation (Note 10) (13,000) (5,341) Reconciliation of tax expenses with accounting profit: 1,748,371 1,911,110 Company Profit before taxation 7,107 6,288 3,161 1,940 Tax at the current income tax rate at 24% (2015: 25%) 1,706 1, Tax effects in respect of: - Depreciation of non-qualifying property, plant and equipment and investment properties Non-allowable expenses Non-taxable income (69) (24) (792) (520) - Crystallisation of deferred tax liabilities on revaluation surplus (44) (50) - Double deduction of certain expenses (2) (2) Effect of change in tax rate 3 Deferred tax assets not recognised Utilisation of deferred tax assets not recognised in prior year (64) (2) Over provision in prior years - Income tax (65) (63) - Deferred tax (13) (5) 1,748 1,911 (i) The Malaysian statutory tax rate is reduced to 24% (2015: 25%) effective year of assessment (ii) Included in the utilisation of deferred tax assets not recognised in prior year is tax savings arising from the utilisation of unused business losses brought forward during the financial year amounted to approximately 59,000 (2015: Nil). ANNUAL REPORT

63 notes to the financial statements (Cont d) 14. FINANCIAL ASSETS/ (LIABILITIES) AT FAIR VALUE THROUGH PROFIT OR LOSS (i) Investment management fund Current Investment management fund 8,600,882 2,662,929 Investment management fund represents fund placed with licensed fund managers. The portfolio of securities managed by the fund managers comprise of money market funds and corporate bonds which are not subject to significant changes in value. Interest of investment management funds range from 3.28% to 3.78% (2015: 2.38% to 3.60%) per annum. (ii) Derivative financial instruments Non-hedging derivatives: Current Contract amount for: Forward currency contract - Contract value 5,527,436 - Fair value 5,497,817 - Liabilities (29,619) The uses forward currency contracts to manage some of the transaction exposure. These contracts are not designated as cash flow or fair value hedges and are entered into for periods consistent with currency transaction exposure and fair value changes exposure. Such derivatives do not qualify for hedge accounting. Forward currency contracts are used to hedge the s purchases denominated in USD for which firm commitments existed at the reporting date. The notional principal amount of the outstanding forward currency contract as at 30 June 2016 is USD1,245,519 (2015: USDNil). The effective period for the forward currency contracts are from July 2015 to July 2016 (2015: Nil), at contractual rates ranging from to (2015: Nil). 62 TEO GUAN LEE CORPORATION BERHAD ( A) During the financial year, the recognised a loss of 78,276 (2015: Nil) arising from fair value changes of derivative liabilities. The fair value changes are attributable to changes in foreign exchange spot and forward rate. The method and assumptions applied in determining the fair values of derivatives are disclosed in Note 31.

64 notes to the financial statements (Cont d) 15. DEPOSIT, CASH AND BANK BALANCES Company Repurchase agreement ( REPO ) 603,000 1,721,000 Cash and bank balances 1,300, , ,903,313 2,400, The interest rate of repurchase agreement of the is 2.60% (2015: 2.60%) per annum and has a maturity period of one day (2015: one day). 16. SHARE CAPITAL Number of Number of shares shares / Company Authorised Ordinary shares of 1 each 100,000, ,000, ,000, ,000,000 Issued and fully paid Ordinary shares of 1 each 40,742,200 40,742,200 40,742,200 40,742,200 Capital management The primary objective of the s capital management is to ensure that entities of the are able to continue as going concerns while maximising the return to shareholders. The reviews the capital structure on an annual basis and the Directors consider the cost of capital and the risk associated with the capital. The manages its capital structure and makes adjustments to address changes in the economic environment, regulatory requirements and risk characteristics in the business operations of the. These initiatives include dividend payments and other adjustments in light of economic conditions. The monitors capital using a liabilities-to-equity ratio, which is total liabilities divided by total equity. Total liabilities represent non-current liabilities and current liabilities of the. Equity represents equity attributable to the owners of the Company Total liabilities 28,583,241 32,481,513 Total equity 81,879,115 80,047,936 Total liabilities-to-equity ratio 35% 41% There are no changes made on the capital management, policies and procedures of the and the Company during the financial year. ANNUAL REPORT

65 notes to the financial statements (Cont d) 17. RESERVES Company Non-distributable Fair value reserve 323, ,395 Retained profits 4,655,132 4,643,295 Distributable Retained profits 35,179,614 32,792,393 3,305,032 3,199,735 40,158,111 38,231,083 3,305,032 3,199,735 Fair value reserve Fair value changes arising from the fluctuation of available-for-sale financial assets prices in the stock market at the reporting date are recorded in the fair value reserve. Retained profits Distributable The Company will be able to distribute dividends out of its distributable retained profits as at 30 June 2016 under the single tier tax system. Non-distributable The non-distributable retained profits consist of the surplus on the fair valuation over cost arising on the s investment properties. 18. PAYABLES Company Trade payables 18,241,043 25,094,903 Other payables 1,361,412 1,299,566 18,321 12,062 Accruals 3,820,907 1,612,321 63,200 61,000 Due to subsidiary company 2,003,690 Due to de-consolidated subsidiary 2,010,514 25,433,876 28,006,790 2,085,211 73, TEO GUAN LEE CORPORATION BERHAD ( A) (i) The currency exposure profile of the trade payables is as follows: Ringgit Malaysia 10,649,641 11,678,577 US Dollars 7,591,402 13,416,326 18,241,043 25,094,903

66 notes to the financial statements (Cont d) 18. PAYABLES (Cont d) (ii) Included in payables of the are balances with the following related parties: Trade payables - TGL Packaging Sdn. Bhd. 2,410 2,398 - Perniagaan Sulam Kim Bin (M) Sdn. Bhd. 33, ,433 The related party relationships with the above parties are as disclosed in Note 26. (iii) (iv) The normal trade credit periods granted to the range from 30 to 90 days (2015: 30 to 90 days) or such other periods as negotiated with the suppliers. The amount due to Directors is unsecured, interest-free and repayable upon demand. 19. BORROWINGS Current Secured Bank overdrafts 442,678 Hire purchase obligations 17, ,995 Unsecured Bankers acceptance 800,000 1,665, ,000 1,665,000 Total 800,000 2,124,995 (i) Interests charged are as follows: - bank overdrafts 8.60% (2015: 8.60%) per annum. - bankers acceptance 3.88% to 5.71% (2015: 3.54% to 5.71%) per annum. (ii) The implicit interest rates of the hire purchase obligations range from 4.92% to 5.77% (2015: 4.92% to 5.77%) per annum. (iii) Outstanding hire purchase obligations: Minimum lease payment - not later than 1 year 17,684 Less: Unexpired finance charges (367) 17,317 ANNUAL REPORT 2016 Present value of hire purchase obligations: - not later than 1 year 17,317 65

67 notes to the financial statements (Cont d) 20. REVENUE AND COST OF SALES Company Revenue Sale of goods 98,189,639 99,593,457 Rental income 2,036,831 1,942,474 Dividend income 82,699 71,855 3,300,000 2,080, ,309, ,607,786 3,300,000 2,080,000 Cost of sales Purchases of inventories 40,630,108 43,280,331 Incidental cost to purchases 4,648,334 5,416,849 Changes to inventories 14,286,335 14,206,398 59,564,777 62,903, OPERATING PROFIT The following items have been charged/ (credited) in arriving at operating profit: Company TEO GUAN LEE CORPORATION BERHAD ( A) Auditors remuneration - Current year 102, ,800 13,000 12,000 - Under provision in prior year 2,200 5,900 1,000 1,000 - Other services 15,900 18,410 Bad debts written off 803 Depreciation of property, plant and equipment 1,439,619 1,467,610 Depreciation of investment properties 629, ,269 Distribution from investment management funds (302,073) Dividend income (2,296) (64,567) Directors remuneration (Note 22) 2,613,992 1,357,659 49,000 49,000 Gain on disposal of property, plant and equipment (94,043) (41,999) Gain on disposal of available -for-sale financial assets (6,032) Impairment on debts 656 Interest income (137,012) (120,038) Loss on foreign exchange - Realised 356,967 10,519 - Unrealised 73, ,068 Inventories written down to net realisable value 1,599,916 Inventories written off 2,592,552 Property, plant and equipment written off 10,777 Rental of premises 2,106,515 2,172,082 Rental income (82,800) (80,100)

68 notes to the financial statements (Cont d) 21. OPERATING PROFIT (Cont d) The following items have been charged/ (credited) in arriving at operating profit: (Cont d) Company Staff costs - Salaries, wages and allowances 19,760,725 18,775,112 - Employees Provident Fund 1,960,063 1,925,381 - Other employee benefits 502, ,707 Unrealised loss on derivative financial instruments 29, DIRECTORS REMUNERATION Company Directors of the Company Present Directors - Fees 49,000 49,000 49,000 49,000 - Salary, bonus and allowance 784,000 1,008,500 - Employees Provident Fund 148, , ,960 1,203,875 49,000 49,000 Directors of the Company Past Directors - Salary, bonus and allowance 198,000 - Employees Provident Fund 15,000 - Gratuity 1,188,000 1,401,000 Other Directors of subsidiary companies - Salary, bonus and allowance 193, ,960 - Employees Provident Fund 29,952 13,824 - Commission 7,500 25, , ,784 Total 2,613,992 1,357,659 49,000 49,000 ANNUAL REPORT

69 notes to the financial statements (Cont d) 22. DIRECTORS REMUNERATION (Cont d) Directors of the Company Executive Non-Executive Executive Non-Executive Directors fees 49,000 49,000 Directors emoluments - Salaries 870, ,000 - Bonus 112,000 39,500 - Employees Provident Fund 163, ,375 - Gratuity 1,188,000 Company Directors of the Company 2,333,960 49,000 1,154,875 49,000 Directors fees 49,000 49,000 The estimated monetary value of other benefits not included in the above received by the Directors of the Company was 19,500 (2015: 84,580). Directors remunerations were received or receivable by the following Directors: Directors of the Company Present Directors - Dato Mustapha bin Abdul Hamid - Toh Kian Beng - Chan Wah Chong - Lee Kean Cheong - Toh Choon Keat - Toh Choon Guan Past Directors - Dato Toh Peng Hoe - Toh Ping Hai - Toh Peng Hua 68 TEO GUAN LEE CORPORATION BERHAD ( A) Other Directors of subsidiary companies - Kee Lik Kang - Kee Leck Seok - Toh See Wooi

70 notes to the financial statements (Cont d) 23. FINANCE COSTS Company Interests on: - bank overdrafts 23,277 17,983 - bankers acceptance 143, ,224 - hire purchase 1,061 2, , ,632 Bank charges 28,936 25, , , EARNINGS PER SHARE (i) Basic Earnings Per Share The basic earnings per share of the is calculated based on the profit attributable to owners of the Company divided by the weighted average number of ordinary shares in issue as follows: Profit attributable to owners of the Company 5,454,723 4,433,914 Number of shares Number of ordinary shares in issue 40,742,200 40,742,200 Sen Sen Basic earnings per share (ii) Diluted Earnings Per Share During the current and previous financial years, there were no shares in issuance which would have a dilutive effect on the earnings per share of the. 25. DIVIDENDS / Company In respect of the financial year ended 30 June 2015 Final single tier dividend of 7.5 sen per share, declared on 26 November 2015 and paid on 16 December ,055,665 ANNUAL REPORT

71 notes to the financial statements (Cont d) 25. DIVIDENDS (Cont d) / Company In respect of the financial year ended 30 June 2014 Final single tier dividend of 7.5 sen per share, declared on 3 December 2014 and paid on 17 December ,055,665 3,055,665 3,055,665 The Directors proposed a final single tier dividend of 7.5 sen per share amounting to 3,055,665 in respect of the financial year ended 30 June The proposed dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting. 26. SIGNIFICANT RELATED PARTY DISCLOSURES In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are the other significant related party disclosures: (a) Related party relationships The Directors who are major shareholders and close members of their families and any companies where they have a significant influence are considered as related parties. Related parties are those whereby one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. The Company has related party relationships with the following: (i) Subsidiary companies as disclosed in Note 8. (ii) A substantial shareholder of the Company: Teo Guan Lee Holdings Sendirian Berhad, in which Dato Toh Peng Hoe, Toh Ping Hai, Toh Peng Hua and Toh Kian Beng are also Directors and have financial interest. (iii) Shareholders of Teo Guan Lee Holdings Sendirian Berhad: Toh Peng Hoe Holdings Sdn. Bhd., in which Dato Toh Peng Hoe, Toh Kian Beng, Toh Choon Keat, Toh Choon Guan and Toh Choon Neng have financial interest, where Dato Toh Peng Hoe and Toh Kian Beng are also Directors. Toh Ping Hai Holdings Sdn. Bhd., in which Toh Ping Hai has financial interest, and is also a Director. 70 TEO GUAN LEE CORPORATION BERHAD ( A) (iv) (v) (vi) Toh Peng Hua Holdings Sdn. Bhd., in which Toh Peng Hua and Toh See Wooi have financial interest, where Toh Peng Hua is also a Director. Wholly owned subsidiary companies of Teo Guan Lee Holdings Sendirian Berhad: Teo Guan Lee Realty Sdn. Bhd. TGL Packaging Sdn. Bhd. TGL Industries Sdn. Bhd. Perniagaan Sulam Kim Bin (M) Sdn. Bhd., in which the Director of a subsidiary company, Kee Lik Kang, is a Director and has financial interest. Ideal Structure Sdn. Bhd., in which the Directors of the Company, Dato Toh Peng Hoe, Toh Ping Hai, Toh Peng Hua and Toh Kian Beng, are Directors and have financial interest. (vii) Melodi Ragam Sdn. Bhd., in which the Directors of the Company, Dato Toh Peng Hoe, Toh Kian Beng and Toh Choon Guan are Directors and have financial interest.

72 notes to the financial statements (Cont d) 26. SIGNIFICANT RELATED PARTY DISCLOSURES (Cont d) (a) Related party relationships (Cont d) (viii) Bidang Cendana Sdn. Bhd., in which the Directors of the Company, Dato Toh Peng Hoe, Toh Peng Hua, Toh Ping Hai and Toh Kian Beng, are Directors and have financial interest. (ix) Persons connected to Directors: Toh Choon Neng, son of Dato Toh Peng Hoe. Toh See Wooi, son of Toh Peng Hua. (b) Significant related party transactions In the normal course of business, the and the Company undertake on agreed terms and prices, the following significant transactions with its related parties: Company Purchase of goods from - Perniagaan Sulam Kim Bin (M) Sdn. Bhd. 59, ,390 - TGL Packaging Sdn. Bhd. 3,705 3,832 Rental paid to - TGL Industries Sdn. Bhd. 600, ,000 - TGL Packaging Sdn. Bhd. 604, ,800 - Bidang Cendana Sdn. Bhd. 130,768 87,181 Repayments from - Teo Guan Lee (Penang) Sdn. Bhd. 131,060 1,386,257 - Teo Guan Lee (K.L.) Sdn. Bhd. 3,055,665 Advances to - Teo Guan Lee (Penang) Sdn. Bhd. 1,240,000 1,736,500 - Teo Guan Lee (K.L.) Sdn. Bhd. 840,000 Dividend receivable/ received from - Teo Guan Lee (Penang) Sdn. Bhd. 500, ,000 - Galeri Megah Sdn. Bhd 750, ,000 - Teo Guan Lee (K.L.) Sdn. Bhd. 1,800, ,000 - Affluent Lifestyle Sdn. Bhd. 250, ,000 Dividend paid to - Teo Guan Lee Holdings Sdn. Bhd. 1,132,704 1,132,704 1,132,704 1,132,704 - Toh Peng Hoe Holdings Sdn. Bhd. 428, , , ,962 - Ideal Structure Sdn. Bhd. 381, , , ,594 - Melodi Ragam Sdn. Bhd. 97,314 97,314 97,314 97,314 - Directors of the Company 9,480 9,480 9,480 9,480 Information regarding outstanding balances arising from related party transactions as at 30 June 2016 and 30 June 2015 are disclosed in Notes 12 and 18. ANNUAL REPORT

73 notes to the financial statements (Cont d) 26. SIGNIFICANT RELATED PARTY DISCLOSURES (Cont d) (c) Compensation of key management personnel The key management s remuneration includes fees, salary, bonus, allowances and other benefits computed based on the costs incurred by the and the Company. The and the Company define its Directors as key management and their compensations are as stated in Note DE-CONSOLIDATION AND MEMBERS VOLUNTARY WINDING UP OF SUBSIDIARY COMPANY The financial statements of JC Garments (M) Sdn. Bhd. has not been consolidated as this subsidiary company has filed with Companies Commission of Malaysia for members voluntary winding-up ( winding-up ) pursuant to Section 254(1)(b) of the Companies Act, 1965 on 1 February The statement of financial position of de-consolidated subsidiary company as at 30 June 2016 are as follows: Receivables 2,010,514 Tax asset 3,713 Cash balances 422 Payables (8,300) Net assets 2,006,349 Cash and cash equivalents for de-consolidation of subsidiary company (422) Net cash outflow upon de-consolidation of subsidiary company (422) The analysis of the results of the de-consolidated subsidiary company is as follows: Revenue Administrative expenses Loss for the financial year (11,078) (11,078) 28. CASH AND CASH EQUIVALENTS 72 TEO GUAN LEE CORPORATION BERHAD ( A) Company Represented by: Deposit, cash and bank balances (Note 15) 1,903,313 2,400, Bank overdrafts (Note 19) (442,678) 1,903,313 1,957,

74 notes to the financial statements (Cont d) 29. CONTINGENT LIABILITIES Company Unsecured Corporate guarantee to banks for banking facilities granted to certain subsidiary companies - Facilities approved 29,475,000 31,745,000 - Amount utilised 800,000 2,107, COMMITMENTS (i) Lease commitment As at the end of the financial year, non-cancellable long-term operating lease commitments pertaining to the in respect of rental of premises are as follows: Not later than 1 year 545, ,937 - Later than 1 year and not later than 5 years 273, , ,184 1,417,049 (ii) Capital commitment Capital commitment at the end of the financial year is as follows: Contracted but not provided for - Capital expenditure in relation to property, plant and equipment 168, FAIR VALUE MEASUREMENT Fair value information The carrying amounts of the financial assets and liabilities of the and the Company classified as current assets and current liabilities as at 30 June 2016 and 30 June 2015 approximate their fair values due to the relatively short term maturity of these financial instruments. The method and assumptions used to determine the fair value of other financial assets and liabilities are as follows: (a) (b) (c) The fair value of long-term borrowings is estimated based on the current rates available for borrowings with a similar maturity profile. The carrying amount of the long-term borrowings at reporting date approximated their fair value. The fair values of quoted investments are their quoted market prices at the end of the financial year. The fair value of investment management funds is the estimated amounts that the would expect to receive by disposal of the investment at the reporting date. ANNUAL REPORT

75 notes to the financial statements (Cont d) 31. FAIR VALUE MEASUREMENT (Cont d) Fair value information (Cont d) (d) (e) The fair value of derivative financial instruments is the estimated amounts that the would expect to pay to terminate the instrument at the reporting date. The provides corporate guarantees to banks and financial companies for credit facilities extended to certain subsidiary companies. The fair value of such corporate guarantees is not expected to be material as the probability of the subsidiary companies defaulting on the credit lines is remote. The following table provides the fair value measurement hierarchy of the s assets and liabilities carried at fair value Fair value of assets and liabilities carried at fair value Carrying Level 1 Level 2 Level 3 Total amount Financial assets: Investment in quoted shares 1,981,205 1,981,205 1,981,205 Investment management fund (Note 14 (i)) 8,600,882 8,600,882 8,600,882 Financial liabilities: Derivative financial instruments: Forward currency contract (Note 14 (ii)) (29,619) (29,619) (29,619) 2015 Financial assets: Investment in quoted shares 2,453,235 2,453,235 2,453,235 Investment management fund (Note 14 (i)) 2,662,929 2,662,929 2,662,929 The following table provides the fair value measurement hierarchy of the s assets not carried at fair value for which fair value is disclosed, together with their fair values and carrying amounts shown in the consolidated statement of financial position. 74 TEO GUAN LEE CORPORATION BERHAD ( A) 2016 Fair value of assets not carried at fair value Carrying Level 1 Level 2 Level 3 Total amount Assets Investment properties 31,948,970 31,948,970 21,964, Assets Investment properties 31,948,970 31,948,970 22,593,439 There were no transfers between Level 1, Level 2 and Level 3 fair value measurements during the financial year ended 30 June 2016 and 30 June 2015.

76 notes to the financial statements (Cont d) 31. FAIR VALUE MEASUREMENT (Cont d) Valuation processes applied by the for Level 3 fair value The fair value of investment properties of the are based on the Directors valuations and assessments of their fair value based on recent available transacted price in the market at similar location and valuation estimate performed by a chartered valuation surveyor, registered valuer, estate agent and property consultant, P. Rajaselvam, on 20 August It was subsequently reviewed and adjusted based on the following assumptions: (a) (b) The application of investment method valuation technique; and The current occupancy rate and market rental yield of 3.9% to 10.6% (2015: 3.9% to 10.6%) per annum. Sensitivity to changes in assumptions If the rental per annum were to reduce by 10% while all other variables were held constant, the fair value of investment properties would have decreased by aggregate amount of 3,200,000 (2015: 3,200,000) against the s fair value on investment properties of 31,948,970 (2015: 31,948,970). 32. SEGMENTAL ANALYSIS The s operating businesses are classified according to the following business segments:- (i) (ii) Apparels - manufacturing, marketing and distribution of garments and its related accessories Investment holding - property and equity investment analysis by business segments: Investment Apparels holding Elimination Consolidated 2016 Revenue Revenue from external customer 98,189,639 2,119, ,309,169 Inter-segment revenue 4,200 (4,200) 98,189,639 2,123,730 (4,200) 100,309,169 Result Segmental result 5,795,583 1,176,822 6,972,405 Unallocated corporate expenses (139,038) 6,833,367 Distribution from investment management funds 302,073 Interest expense (167,503) Interest income 137,012 Dividend income 2,296 Profit before taxation 7,107,245 Taxation (1,748,371) Profit for the financial year 5,358,874 Other information Assets Segment assets 89,913,181 24,733,167 (4,561,636) 110,084,712 Unallocated assets 377,644 ANNUAL REPORT 2016 Total assets 110,462,356 75

77 notes to the financial statements (Cont d) 32. SEGMENTAL ANALYSIS (Cont d) analysis by business segments: (Cont d) Investment Apparels holding Elimination Consolidated 2016 Other information (Cont d) Liabilities Segment liabilities 23,814,800 6,211,448 (4,562,753) 25,463,495 Borrowings 800,000 Unallocated liabilities 2,319,746 Total liabilities 28,583,241 Capital expenditure 1,003,113 1,003,113 Non-cash items Depreciation of investment properties 629, ,400 Depreciation of property, plant and equipment 1,425,758 13,861 1,439,619 Gain on disposal of property, plant and equipment (94,043) (94,043) Impairment on debts Inventories written down to net realisable value 1,599,916 1,599,916 Unrealised loss on derivative financial instruments 29,619 29,619 Unrealised loss on foreign exchange 73,284 73, Revenue Revenue from external customer 99,593,457 2,014, ,607,786 Inter-segment revenue 5,400 (5,400) 99,593,457 2,019,729 (5,400) 101,607, TEO GUAN LEE CORPORATION BERHAD ( A) Result Segmental result 5,554, ,152 6,462,578 Unallocated corporate expenses (139,690) 6,322,888 Interest expense (219,632) Interest income 120,038 Dividend income 64,567 Profit before taxation 6,287,861 Taxation (1,911,110) Profit for the financial year 4,376,751

78 notes to the financial statements (Cont d) 32. SEGMENTAL ANALYSIS (Cont d) analysis by business segments: (Cont d) Investment Apparels holding Elimination Consolidated 2015 Other information Assets Segment assets 91,716,938 25,823,312 (5,252,703) 112,287,547 Unallocated assets 241,902 Total assets 112,529,449 Liabilities Segment liabilities 26,689,535 6,569,958 (5,252,703) 28,006,790 Borrowings 2,124,995 Unallocated liabilities 2,349,728 Total liabilities 32,481,513 Capital expenditure 1,222,362 1,222,362 Non-cash items Bad debts written off Depreciation of investment properties 754, ,269 Depreciation of property, plant and equipment 1,453,748 13,862 1,467,610 Gain on disposal of available -for-sale financial assets (6,032) (6,032) Inventories written off 2,592,552 2,592,552 Property, plant and equipment - Gain on disposal (41,999) (41,999) - Written off 10,777 10,777 Unrealised loss on foreign exchange 127, ,068 Segment revenue and segment results include transfers between business segments. Such transfers are accounted for at agreed terms and prices amongst the related companies. The s business activities were predominantly carried out in Malaysia and therefore, information by geographical segment is not presented. ANNUAL REPORT

79 notes to the financial statements (Cont d) 78 TEO GUAN LEE CORPORATION BERHAD ( A) 33. SUPPLEMENTARY INFOATION DISCLOSED PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS The following analysis of realised and unrealised retained earnings of the and of the Company as at 30 June 2016 and 30 June 2015 is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad ( Bursa Malaysia ) dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. The retained profits as at reporting date are analysed as follows: Total retained profits of Teo Guan Lee Corporation Berhad and its subsidiaries: - Realised 38,883,030 36,792,451 - Unrealised 4,663,230 4,516,227 43,546,260 41,308,678 Consolidation adjustments (3,711,514) (3,872,990) 39,834,746 37,435,688 Company Total retained profits of Teo Guan Lee Corporation Berhad: - Realised 3,305,032 3,199,735

80 LIST OF PROPERTIES HELD BY THE GROUP LOCATION DESCRIPTION TENURE EXISTING USE APPROX. LAND BUILT UP AREA (SQ. FT.) DATE OF ACQUISITION NBV/FAIR VALUE AS AT 30 JUNE 2016 Lot 252 & 253 Sec 211 Bandar Kajang and located at 1 Jalan Jelita Satu Taman Jelita, Kajang Selangor Darul Ehsan Freehold/ 25 Years Four Storey Office 3,649 / 13,971 19/10/91 730,982 Lot E7 & E8, Mukim of Kuala Lumpur and Ampang and located at Phase 3 Taman Shamelin Perkasa 3-1/2 Miles, Jalan Cheras Kuala Lumpur 99 Years Leasehold Expiring in 2082/ 21 Years Two Storey Office and Warehouse 29,375 / 26,000 21/1/92 6,515,731 Units 3-4-9, , and , Jalan 3/91 Taman Shamelin Perkasa Kuala Lumpur 99 Years Leasehold Expiring in 2082/ 22 Years Apartments N/A / 4,092 29/4/91 352,587 Berjaya Star City Lot A & Lot No. 339 & 145 Sec 52, Town of Kuala Lumpur Freehold/ 13 Years Condominium Unit N/A / 1,070 5/10/ , HS (D) P.T. No Mukim Cheras, Daerah Hulu Langat, State of Selangor Lot No. K46 and K47 Bandar Sungai Long Freehold 10 Years 3 Storey Shop Office 2800 / /8/05 2,069,114 HS (M) No. 9985, Pt No (7173) Mukim Ampang District of Ulu Langat State of Selangor 36, A, B, Jalan Bunga Tanjung 8, Taman Putra Kuala Lumpur 99 Years Leasehold Expiring in 2081/ 21 Years Three Storey Factory and Hostel NA / 4,200 16/12/95 383,998 HS (M) No. 9986, Pt No (7174) Mukim Ampang District of Ulu Langat State of Selangor 38, A, B, Jalan Bunga Tanjung 8, Taman Putra Kuala Lumpur 99 Years Leasehold Expiring in 2081/ 22 Years Three Storey Factory and Office NA / 4,200 12/1/94 324,832 Kompleks Bukit Jambul Lot G-K05, G-K06, G-K07, G-K08, 1-35, 1-36, Penang Prangin Mall, Komtar 2-01,2-02, 2-07, 2-08, 2-09, 2-80, 2-81, 2-82 Penang Freehold/ 19 Years 99 Years Leasehold Expiring in 2096/ 16 Years Retail Shop-Lot NA / 4,968 24/10/95 4,626,514 Retail Shop-Lot NA / 6,456 23/5/96 6,221,825 ANNUAL REPORT 2016 Bandar Penas, Butterworth G-57 Freehold 19 Years Retail Shop-Lot NA / 3,377 22/5/96 1,447,285 79

81 ANALYSIS OF SHAREHOLDINGS as at 27 September 2016 SHARE CAPITAL Authorised : 100,000,000 Issued and Fully paid-up : 40,742,200 Class of Shares : Ordinary Shares of 1.00 each Voting Right : One voting right for one ordinary share DISTRIBUTION OF SHAREHOLDERS Holdings No. of Holders % Total Holdings % , , ,001 10, ,601, , , ,941, ,001 2,037,109* ,245, ,037,110 and above** ,910, Total 1, ,742, * less than 5% of issued shares ** 5% and above of issued shares THIRTY LARGEST SECURITIES ACCOUNT HOLDERS Name Shareholdings % 80 TEO GUAN LEE CORPORATION BERHAD ( A) 1. Teo Guan Lee Holdings Sendirian Berhad 15,102, Toh Peng Hoe Holdings Sendirian Berhad 5,719, Ideal Structure Sdn. Bhd. 5,087, Melodi Ragam Sdn. Bhd. 1,297, Chew Jing Khai 915, Lay Yeo Lay Peng 893, Toh Zhen Wei 840, Lau Soo Hiang 742, Loh Chuy Boy 468, Ting Tziat Lee 402, Khor Sim Ngee 400, Wong Teck Mee 399, Sin Len Moi 366, Wong Chai Hwang 363, Loh Kin Heng 318, Wong Shak On 293, Syarikat Rimba Timur (RT) Sdn. Bhd. 220, Lim Lee Lim Keat Ee 204, AMSEC Nominees (Tempatan) Sdn. Bhd. 172, [Pledged securities account for Wong Teck Mee] 20. UOB Kay Hian Nominees (Tempatan) Sdn. Bhd. 163, [Exempt AN for UOB Kay Hian Pte Ltd (A/C Clients)] 21. Toh Choon Meng 159, Ching Gek Lee 144, JF Apex Nominees (Tempatan) Sdn. Bhd. 128, [Pledged securities account for Oh Boo Teck] 24. Gek Lee Enterprise Sdn. Bhd. 120, Loo Chee Seng 120, Toh Siam Cheng 112, Yew Lai Kheng 99,

82 ANALYSIS OF SHAREHOLDINGS (Cont d) as at 27 September 2016 THIRTY LARGEST SECURITIES ACCOUNT HOLDERS (Cont d) Name Shareholdings % 28. Toh Choon Neng 80, Toh Hong Kheng 76, Oh Boo Teck 76, Total 35,487, SUBSTANTIAL SHAREHOLDERS Name Shareholdings % Direct Indirect Direct Indirect 1. Toh Peng Hoe Holdings Sendirian Berhad 5,719,500 21,488,159 (1) Toh Ping Hai Holdings Sendirian Berhad 8,000 20,190,641 (2) Toh Peng Hua Holdings Sendirian Berhad 20,190,641 (2) Lau Soo Hiang 742,102 27,207,659 (3) Toh Choon Guan 27,207,659 (3) Toh Choon Keat 27,207,659 (3) Toh Choon Neng 80,200 27,207,659 (3) Dato Toh Peng Hoe 27,207,659 (3) Toh Ping Hai 75,200 20,198,641 (4) Toh Peng Hua 51,200 20,190,641 (2) Toh Kian Beng 27,207,659 (3) Lim Lee Lim Keat Ee 220,800 20,198,641 (4) Tea Mooi Teh Yan Kwee 57,800 20,190,641 (5) Toh Choon Meng 159,600 27,207,659 (3) Teo Guan Lee Holdings 15,102, Sendirian Berhad ( TGLH ) 16. Ideal Structure Sdn. Bhd. ( IS ) 5,087, Notes: (1) Deemed interested through TGLH, IS and Melodi Ragam Sdn. Bhd. ( MR ) (2) Deemed interested through TGLH and IS (3) Deemed interested through TGLH, Toh Peng Hoe Holdings Sendirian Berhad, IS and MR (4) Deemed interested through TGLH, Toh Ping Hai Holdings Sendirian Berhad and IS (5) Deemed interested through TGLH and Toh Peng Hua Holdings Sendirian Berhad and IS ANNUAL REPORT