Annual Reports and Related Documents::

STAYING THE COURSE

LY CORPORATION	ANNUAL REPORT 2020
LIMITED

CONTENTS

01 CORPORATE PROFILE

02 MESSAGE TO SHAREHOLDERS

04 FINANCIAL REVIEW

06 GROUP STRUCTURE

07 AWARDS & ACCREDITATIONS

08 CORPORATE SOCIAL RESPONSIBILITY

09 BOARD OF DIRECTORS

1. KEY MANAGEMENT
2. CORPORATE INFORMATION
3. CORPORATE GOVERNANCE REPORT

41 DISCLOSURE OF INFORMATION ON DIRECTORS SEEKING RE-ELECTION

47 FINANCIAL CONTENTS

108 STATISTICS OF SHAREHOLDINGS

110 NOTICE OF ANNUAL GENERAL MEETING

PROXY FORM

This annual report has been prepared by the LY Corporation Limited (the "Company") and its contents have been reviewed by Xandar Capital Pte. Ltd. (the "Sponsor") for compliance with the SGX-ST Listing Manual Section B: Rules of Catalist.

This annual report has not been examined or approved by the SGX- ST and the SGX-ST assumes no responsibility for the contents of this annual report, including the accuracy, completeness or correctness of any of the information, statements or opinions made or reports contained in this annual report.

The contact person for the Sponsor is Ms. Pauline Sim, Head of Corporate Finance, at 3 Shenton Way, #24-02, Singapore 068805, telephone [phone].

Staying the Course

Despite the uncertainties and disruptions brought on by the COVID-19 pandemic, the Group remains steadfast in ourcore business and is steadily moving forward to pursue business growth with our expanded product range.

Vision

We aspire to be a world-class wooden bedroom furniture manufacturer providing quality products for all dream homes globally.

Mission

We aim to be a world-class provider of QUALITY wooden bedroom furniture at competitive prices for our customers. We build win-win partnerships across our value chain, so that all our stakeholders will be successful together.

ANNUAL REPORT 2020 LY CORPORATION LIMITED 01

CORPORATE PROFILE

LY Corporation Limited and its subsidiaries (collectively the "Group") is one of Malaysia's leading manufacturers and exporters of wooden bedroom furniture. With an established track record of more than 40 years in the furniture industry, the Group is an established original design manufacturer ("ODM") principally engaged in the design and manufacturing of custom wooden bedroom furniture, and the manufacturing of custom wooden bedroom furniture which may be tailored to customers' specifications and requirements on an original equipment manufacturer ("OEM") basis.

In January 2019, the Group entered into original brand manufacturing via the acquisition of the assets of Cubo Sdn Bhd, which manufactures and markets furniture under the EZBO and CUBO brands.

The Group currently operates from 26 factories and warehouses, occupying a combined built-up area of approximately 1.9 million sq ft. Our products are sold mainly to overseas dealers such as furniture wholesalers and retailers who generally resell our products to end-users through their respective retail networks and domestic customers who are primarily third party agents who typically export and resell our products outside Malaysia, such as to the U.S.

LY Corporation Limited was listed on Catalist of Singapore Exchange Securities Trading Limited on 31 January 2018.

02 LY CORPORATION LIMITED ANNUAL REPORT 2020

MESSAGE TO SHAREHOLDERS

Looking ahead, in light of the persisting uncertainties brought on by the ever-evolvingCOVID-19 pandemic

as well as the worldwide container shortage problem, we will continue to adapt to the new normal and monitor our operations closely. As vaccines are progressively rolled out and the eventual normalisation of the container shortage problem, we are cautiously optimistic that market conditions in the USA will gradually improve in the coming year, and we will continue

to pursue business growth with our expanded product range.

Dear Shareholders,

2020 was an unprecedented year with the outbreak of COVID-19 and its pervasive impact causing great uncertainties to the global economy, as well as disruption to businesses worldwide. The escalating tensions between the United States of America ("USA") and China over trade and national security also contributed to further volatility and uncertainties. Nonetheless, we remained steadfast and delivered a steady performance overall.

THE YEAR IN REVIEW

Despite the challenging business environment, the Group's net profit attributable to the Company's shareholders rose 56.5% to RM4.8 million in FY2020. Revenue dropped slightly by 3.0% to RM238.6 million mainly due to a decrease in the number of 40-ft containers ("containers") sold, from 4,866 containers in FY2019 to 4,298 containers in FY2020. The lower volume of containers sold during the year was mainly due to the temporary closure of the Group's operations in March 2020 to comply with the Movement Control Order imposed by the Malaysian Government as part of efforts to contain the spread of COVID-19. Additionally, most of our major customers in the USA only progressively resumed their operations in the second half of FY2020 with the gradual lifting of lockdowns that were imposed by the USA government in the early months of FY2020 to curb the spread of COVID-19. Since the last quarter of 2020, there has also been a shortage of containers, which has impeded the delivery of finished goods to our customers in the USA.

However, this drop was partially offset by an increase in average selling price per container, from RM51,000 in FY2019 to RM56,000 in FY2020, as a result of a different product mix sold during the year.

Furthermore, the global shortage of containers has not only affected the delivery of finished goods to our customers in the USA but also caused delays in the import of raw materials, which in turn has also

disrupted our production schedules. We expect the global container shortage to continue for at least the next few months.

Nevertheless, we persevered through these challenges and continued to steadily move forward with our expansion plan. We made significant progress in our efforts to diversify our revenue stream into the manufacturing of millworks products - new wooden products line which are categorised as building materials. Since the shipment of the first container of millworks products in January 2020, we have received recurring orders from our customer throughout the year.

We have also seen encouraging results from our expansion into the original brand manufacturing ("OBM") business, with the EZBO easy-to-assemble,multi-functional and space-saving furniture line. With the COVID-19 pandemic accelerating the global shift to e-commerce, there has been a rise in demand for easy-to-assemble products as customers increasingly shop for furniture online. Due to this trend and spurred by our marketing efforts, there has been increased demand for EZBO products, especially from customers in Japan and South Korea.

As we pursue business growth, we also strive to build a responsible business by embracing green initiatives. As part of LY's efforts to drive sustainability performance, we improved the Group's energy efficiency by investing RM7.5 million in the installation of solar panels with capacity of up to 2.8 megawatts, at some of our factories in Batu Pahat during the year. This will enable us to reduce the environmental impact of our business operations, as well as bring about operational cost savings.

THE WAY AHEAD

Looking ahead, in light of the persisting uncertainties brought on by the ever-evolvingCOVID-19 pandemic as well as the worldwide container shortage problem, we will continue to adapt to the new normal and monitor our operations closely. As vaccines are

ANNUAL REPORT 2020 LY CORPORATION LIMITED 03

MESSAGE TO SHAREHOLDERS

progressively rolled out and the eventual normalisation of the container shortage problem, we are cautiously optimistic that market conditions in the USA will gradually improve in the coming year, and we will continue to pursue business growth with our expanded product range.

As we anticipate the demand for the millworks products to continue to grow, we plan to further increase production capacity by refurbishing an existing warehouse and factory and building an additional production line dedicated for the manufacturing of millworks products, which we aim to complete by end of 2021.

Moving forward, we are also looking to expand our ODM (Original Design Manufacturing) product offerings to include kitchen cabinets. During the year, we completed the refurbishment of one of our existing factories and built a production line for kitchen cabinets. We had initially intended to commence production of the kitchen cabinets in the third quarter of 2020 but had to delay our plans due to the disruptions brought on by the pandemic, as well as the container shortage problem. We are optimistic that we will be able to commence production and sales for the kitchen cabinets by end of 2021. We intend to tap into our existing distribution network to market the kitchen cabinets.

As for the OBM business, our main markets will remain Japan and South Korea, in which we intend to intensify our marketing efforts to gain more customers. We will also continue to grow our OBM business by entering the USA market through our existing distribution network, as well as exploring new markets in the Asia Pacific region.

In January 2021, our operations were temporarily disrupted due to an outbreak of COVID-19 amongst our workers, which resulted in majority of our workers placed under quarantine. Our operations returned to normalcy by 23 January 2021, when most of our workers were permitted by the Ministry of Health of Malaysia to resume work. We remain committed to providing a safe and healthy workplace environment for the well-being of our employees. The Group will continue to observe all preventive measures as recommended by the Ministry of Health of Malaysia and has implemented

safety precautions across our operations, such as safe distancing measures, mandatory wearing of face masks, thorough sanitisation and disinfection of factory premises and hostel areas, as well as daily monitoring of our workers' health conditions.

DIVIDEND

For FY2020, the Board of Directors ("Board") has recommended a first and final dividend of 0.1297 Singapore cent per ordinary share, which is subject to shareholders' approval at the upcoming Annual General Meeting. This represents a dividend payout of 40.0% of our net profit attributable to the Company's shareholders.

APPRECIATION

On behalf of the Board, we would like to extend our deepest gratitude to our business partners, customers, and stakeholders, for their trust and confidence in us during these difficult times. We would also like to thank our management team and employees, for their hard work and dedication to the Group, and our fellow Board members for their valuable insights and counsel. Finally, we would also like to thank our shareholders for their continued support in our Group.

We will continue to steadily forge ahead amidst challenges and position the Group for long-term success.

Tan Kwee Chai

Executive Chairman

Tan Yong Chuan

Executive Director and Chief Executive Officer