Cover Rationale. Bountiful Harvest Takes Teamwork... Statement on Risk Management and Internal Control 36

Transcription

1

2 Cover Rationale Bountiful Harvest Takes Teamwork... As there is strength in numbers and great teamwork can accomplish the seemingly impossible Contents Notice of Annual General Meeting 2 Management Discussion and Analysis 6 Five Year Group Financial Highlights 11 Sustainability Statement 12 Corporate Information 15 Profile of Directors 16 Profile of Key Senior Management 19 Corporate Governance Statement 20 Additional Compliance Information 32 Audit Committee Report 33 Statement on Risk Management and Internal Control 36 Financial Statements Directors Report 42 Statement by Directors 47 Statutory Declaration 47 Independent Auditors Report 48 Statements of Financial Position 52 Statements of Profit or Loss and Other Comprehensive Income 54 Statements of Changes in Equity 55 Statements of Cash Flows 57 Notes to the Financial Statements 60 List of Group s Properties 106 Statement of Shareholdings 108 Form of Proxy Annual Report

3 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the 2017 Annual General Meeting ( AGM ) of the Company will be held at Royal China Grand Ballroom & Banquet, No. 8, Level 6, Coliseum Square, Jalan Sultan Nazrin Shah, Ipoh, Perak Darul Ridzuan, Malaysia on Friday, 16 June 2017 at 11.30a.m. for the following purposes: AGENDA As ORDINARY BUSINESS: 1. To receive the Audited Financial Statements for the financial year ended 31 December 2016, together with the Directors and Auditors Reports thereon. 2. To approve the payment of a final dividend of 6 sen per share and special dividend of 3 sen per share under the single tier system in respect of the financial year ended 31 December To approve the payment of Directors fee of RM208,000 in respect of the financial year ended 31 December To approve the payment of Directors benefits to Non-Executive Directors up to an amount of RM61,700 from 1 January 2017 until the next AGM of the Company. 5. To re-elect the following Directors retiring by rotation in accordance with Article 101 of the Company s Articles of Association: 5.1 Soon Cheng Boon 5.2 Puan Sri Shahrizan Binti Abdullah 5.3 Ng Poh Tat 6. To re-appoint BDO as Auditors of the Company for the financial year ending 31 December 2017 and to authorise the Directors to fix their remuneration. ORDINARY RESOLUTION (Please refer to Note 2) As SPECIAL BUSINESS: 7. To consider and, if thought fit, pass the following resolutions: 7.1 RETENTION OF INDEPENDENT NON-EXECUTIVE DIRECTOR 8 That, Khoo Choon Yam, who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years be retained, to continue to act as an Independent Non-Executive Director of the Company. 7.2 PROPOSED RENEWAL OF SHARE BUY BACK AUTHORITY 9 That, subject to compliance with all applicable laws, regulations and guidelines, authority be and is hereby given to the Directors of the Company to purchase (Proposed Share Buy Back) ordinary shares in the Company up to the limit of 3,000,000 shares inclusive of those shares already purchased and retained in treasury, which as at 31 March 2017 amounted to 961,925 shares, through Bursa Malaysia Securities Berhad, representing two point seven three percent (2.73%) of the Company s total issued and paid-up share capital as at 31 March 2017 of 109,903,000 shares; That an amount of RM6,500,000 be allocated for the Proposed Share Buy Back out of the total of the audited retained earnings as at 31 December 2016, so that the total consideration of shares purchased and held as treasury shares or cancelled at any time do not exceed RM6,500,000. The retained earnings of the Company based on the audited financial statements for the financial year ended 31 December 2016 is RM174,403,898; That the Directors may resolve to immediately cancel the shares so purchased, and/or retain them as treasury shares and/or re-sell and/or cancel them and that an announcement will be made to Bursa Malaysia Securities Berhad on the Directors intention for the proposed treatment of shares bought back and the rationale of the alternatives chosen and if available, information as to the percentage or number of shares purchased which are to be retained and/or cancelled; and 2 Annual Report 2016

4 Notice of Annual General Meeting (cont d) 7. To consider and, if thought fit, pass the following resolutions: (cont d) 7.2 PROPOSED RENEWAL OF SHARE BUY BACK AUTHORITY (cont d) That the Directors be and are hereby empowered to take all such steps as are necessary to give full effect to the Proposed Share Buy Back with full powers to assent to any conditions, modifications, variations and/or amendments (if any) as may be imposed by the relevant authorities AND THAT such authority shall commence upon the passing of this Ordinary Resolution and shalll expire at the conclusion of the next Annual General Meeting of the Company unless renewed by Ordinary Resolution passed at that meeting; or at the expiration of the period within which the next Annual General Meeting is required by law to be held; or earlier revoked or varied by Ordinary Resolution of the shareholders of the Company in General Meeting, whichever occurs first. 8. To transact any other business of which due notice shall have been given in accordance with the Companies Act, FURTHER NOTICE IS HEREBY GIVEN THAT only members whose names appear on the Record of Depositors as at 9 June 2017 shall be entitled to attend the AGM or appoint proxies in his/her stead or in the case of a corporation, a duly authorised representative to attend and to vote in his/her stead. Ipoh, Perak Darul Ridzuan, Malaysia 28 April 2017 By Order of the Board CHAN YOKE YIN CHAN EOI LENG Company Secretaries NOTES: 1. PROXY A member entitled to attend and vote at the Meeting is entitled to appoint one (1) or two (2) proxies to attend and vote instead of him. A proxy need not be a member of the Company. Where a member appoints two (2) proxies, the appointments shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy. Where a member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company in an 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 but the proportion of holdings to be represented by each proxy must be specified. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or if the appointer is a corporation, either under the corporation s seal or under the hand of an officer or attorney duly authorised. The instrument appointing a proxy must be deposited at the Registered Office of the Company, 55A, Medan Ipoh 1A, Medan Ipoh Bistari, Ipoh, Perak Darul Ridzuan, Malaysia not less than 48 hours before the time appointed for holding the Meeting. Faxed or ed copies are not acceptable. 2. AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2016 Agenda 1 is meant for discussion only as Section 340(1) of the Companies Act, 2016 only requires the Audited Financial Statements to be laid before the Company at the AGM and not shareholders approval. Hence, Agenda 1 will not be put forward for polling. 3. FINAL DIVIDEND Section 131 of the Companies Act, 2016 states that a company may only make a distribution to the shareholders out of profits of the Company available if the Company is solvent. The Board of Directors having considered the available profits has decided to recommend the proposed dividend for the shareholders approval. The Board of Directors is satisfied that the Company will be solvent as it will be able to pay its debts as and when the debts become due within twelve (12) months immediately after the distribution is made. Annual Report

5 Notice of Annual General Meeting (cont d) NOTES: (cont d) 4. DIRECTORS FEES AND BENEFITS Section 230(1) of the Companies Act, 2016 provides amongst others, that fees of the directors and any benefits payable to directors of a listed company and its subsidiaries shall be approved at a general meeting. Pursuant thereto, shareholders approval is sought for these payments in two (2) separate resolutions as follows: Resolution 2: Payment of Directors fees in respect of the financial year ended 31 December 2016 Resolution 3: Payment of Directors benefits for the financial year ending 31 December 2017 and until the next AGM The fees for the Non-Executive Directors had been increased for the financial year ended 31 December Based on the Remuneration Committee s recommendation, the Board decided that the Directors fee in respect of the financial year ended 31 December 2016 shall remain unchanged. The Directors benefits payable to the Non-Executive Directors for the period from 1 January 2017 until the next AGM of the Company are calculated based on the current composition of the Board and Board Committees and the number of meetings scheduled for the Board and Board Committees. 5. RE-ELECTION OF DIRECTORS Soon Cheng Boon, Puan Sri Shahrizan Binti Abdullah and Ng Poh Tat are standing for re-election as Directors of the Company and being eligible have offered themselves for re-election at this 2017 AGM. The Board has via the Nominating Committee conducted an assessment on the effectiveness and contributions of the said retiring Directors including their skills, experience, competency and commitment, and has recommended for them to be re-elected to the Board. The profile of the retiring Directors is set out in the Profile of Directors on pages 16 to 18 of the Annual Report RE-APPOINTMENT OF AUDITORS The Audit Committee ( AC ) has carried out an assessment of the suitability and independence of the external auditors, BDO and was satisfied with the suitability of BDO based on the quality of audit, performance, competency and sufficiency of resources the external audit team provided to the Group. The AC in its assessment also found BDO to be sufficiently objective and independent. The Board therefore approved the AC s recommendation that the re-appointment of BDO as external auditors of the Company be put forward for the shareholders approval at the 2017 AGM. 7. RETENTION OF INDEPENDENT NON-EXECUTIVE DIRECTOR The Ordinary Resolution proposed under item 7.1, if passed, will allow Khoo Choon Yam to continue to act as Independent Non- Executive Director of the Company. Khoo Choon Yam was appointed as an Independent Non-Executive Director of the Company on 27 December 2001, and has therefore served the Company for fifteen (15) years. The Malaysian Code on Corporate Governance 2012 provides that the tenure of an independent director should not exceed a cumulative term of nine (9) years. However, Khoo Choon Yam fulfilled the independence requirement as stipulated in paragraph 1.01 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements as he is independent from management and free from any business or other relationship which could interfere with his independent judgment or ability to act objectively. As a long-serving Director, Khoo Choon Yam possesses insight and knowledge of the Company s business and affairs. Khoo Choon Yam also has the relevant experience, expertise, skills and competencies in serving the Board and remains objective in expressing his views and participating in deliberations and decision making of the Board and Board Committees and thus would be able to function as a check and balance. The Board, therefore, considers Khoo Choon Yam to be independent and believes that Khoo Choon Yam should be retained as an Independent Non-Executive Director. 8. PROPOSED RENEWAL OF SHARE BUY BACK AUTHORITY The Ordinary Resolution proposed under item 7.2, if passed, will empower the Directors to purchase the Company s shares through Bursa Malaysia Securities Berhad up to 2.73% of the issued and paid-up share capital of the Company. Details of the Proposed Share Buy Back is set out in the Circular to Shareholders of the Company, which is sent out together with the Company s 2016 Annual Report. 4 Annual Report 2016

6 Rgn No : Q TOGETHER WE ACHIEVE MORE Annual Report

7 Management Discussion and Analysis We focus on improving cost efficiencies, strengthening productivity and enhancing quality and delivery of our products to weather the headwinds faced Business and Operations The Company is principally engaged in the manufacturing and sales of flat-based steel products from Hot Rolled and Cold Rolled coils, as well as providing processing services such as shearing and slitting of steel products. Its subsidiaries are primarily involved in the: a) Trading of hardware and construction materials; and b) Manufacturing of stainless steel pipes as well as trading of hardware. The Group is an established player in its market, where the Group s products are sold principally through its network of dealers in Peninsular Malaysia, Sabah, Sarawak and Singapore (export market). The Group s products are mostly sold domestically (95%) where exports merely contribute 5% to the Group s revenue. Currently, the Group has 7 main tube making production lines (located in Pengkalan, Ipoh), producing mainly welded steel pipes for oil and gas, water transmission, structural applications and construction industry as well as for general usage purposes. The total installed capacity per annum is approximately 200,000 metric tonne. Objectives and Strategies The vision of the Group is to be one of the nation s premier manufacturers, suppliers and service centre of steel products. The Group s long term objective is to remain resilient and sustainable in its core business competency, while delivering sustainable shareholder value to all stakeholders. The strategies employed by the Group to meet its long term objective include continual cost efficiency improvements, strengthening productivity, enhancing quality and delivery of our products. 6 Annual Report 2016

8 Management Discussion and Analysis (cont d) Review of Financial Results For the financial year ended 2016, the Group achieved a total revenue of RM369.6 million, which declined by 20% as compared to RM461.2 million recorded in the previous financial year, mainly attributed to slower market demand and aggressive competition affecting both the trading and manufacturing segments. Gross profit margin, however, improved significantly from 7% in 2015 to 14% in 2016 on the back of higher average selling prices and better pricing of raw materials procured overseas, offsetting lower metric tonne sales volume. Higher Other Income of RM6.8 million was mainly contributed by interest income from repo/fixed deposits placements (RM2.4 million), realised foreign exchange gains from forward contracts (RM2.2 million), as well as gain on disposal of other investments from surplus cash reserves (RM0.4 million). Administrative and Selling operating expenses decreased by 11% or RM3.1 million, attributed to cost control measures implemented in Finance costs recorded a significant reduction as a result of prudent financial management and careful raw materials acquisition. Consequently, the Group s profit before taxation for the financial year ended 2016 soared to RM33.3 million as compared to RM5.5 million recorded for the financial year ended Financial Position The Group had adopted the best business practice in past years to ensure all investments made are within the business objectives and limitations. Our financial position as at 31 December 2016 is as follows: 1. Assets: a. Property, plant and equipment The increase in Property, plant and equipment was predominantly due to the acquisition of a piece of land amounting to RM15 million in Sabah. The land was acquired for the purpose of expanding our business operations in East Malaysia accordingly. b. Inventories There was a decline in inventories to RM133 million from RM151 million at the end of the previous financial year. This was mainly due to the Group s prudent inventory management practice of stocking lesser inventory in view of weaker economic sentiments and cautious buying trend of our dealers. c. Trade receivables Trade receivables reduced by 13% to RM98 million as compared to RM113 million in the previous financial year. This was primarily due to healthy collection of receivables and duly reflects the lower sales trend for the year. d. Cash and bank balances The Group s cash and bank balances rose significantly to RM93 million from RM34 million as a result of prudent financial and cost management as well as healthy collection of trade receivables. Annual Report

9 Management Discussion and Analysis (cont d) The Group continues to explore opportunities for continued growth and capital expansion to add value to shareholders Financial Position (cont d) 2. Liabilities: Trade and other payables The Group s trade and other payables increased by 20% from RM10 million in the previous financial year to RM12 million in the current financial year. This was mainly due to the increase in accrued expenditures towards the financial year end and advance payments for raw materials ordered. The Group remains prudent in maintaining a sound financial position whereby total yield accumulated during these years are translated in our strong net tangible assets, low gearing ratio, net assets position and healthy cash reserves of the Group, further underlining the strengths reflecting the business going-concern capabilities which enables the execution of our strategic objectives in creating value over the coming years. The Group continues to explore opportunities for continued growth and capital expansion to add value to shareholders. However, due to the rising concerns from the fragile global and domestic economic environment, coupled with the weak Ringgit performance, the Group has adopted a cautious approach until there are some visible signs of stability. This is to ensure that capital expansion projects embarked on are feasible and provides reasonable returns both to the Group and its shareholders. 8 Annual Report 2016

10 Management Discussion and Analysis (cont d) Review of Operating Activities The revenue of the Group can be further analysed as follows: Trading Manufacturing Total RM 000 RM 000 RM Total revenue 242, , ,563 Inter-segment sales (7,592) (31,346) (38,938) Revenue from external customers 234, , , Total revenue 296, , ,434 Inter-segment sales (14,904) (31,324) (46,228) Revenue from external customers 281, , ,206 Decrease (46,524) (45,057) (91,581) Decrease -17% -25% -20% For the financial year ended 2016, the trading segment contributed 64%, while the manufacturing segment contributed 36% to the Group s revenue. Both segments experienced reduced revenue, mainly due to weaker market demand. A major risk that cropped up during the year was the operational cessation of our main local raw materials supplier, i.e. Megasteel Sdn Bhd. To mitigate this risk, the Group proactively established relationships with overseas suppliers (especially those with prior credible dealings before Megasteel Sdn Bhd came into the market) resulting in the regular importation of steel coils from various overseas sources to ensure operational sustainability. We are also constantly on the lookout for other viable sources of supply to build up a pool of reliable suppliers to cater to our material requirements to minimize supply disruption in times of market turbulence. Towards this end, we have successfully built up our inventory to a sizable level. Due to the competitive international market, the importation of raw materials has also given us a better competitive edge in terms of pricing and we hope that this will open up new overseas market opportunities for the Group moving forward. Economic and Industry Outlook For the year 2016, Malaysia experienced some strong headwinds, both internally and externally, largely attributed to lower global oil prices, currency turbulence and volatility in financial markets. Coupled with the slowdown in economic growth of advanced economies and the impact from China s economy rebalancing and chronic over-production capacities, it is envisaged that developing nations will have to brace themselves to weather challenging times ahead. The Malaysian economy is expected to grow by a moderate 4.4% in 2017, taking into account the stabilisation of commodity prices and ongoing implementation of infrastructure projects. Annual Report

11 Management Discussion and Analysis (cont d) Economic and Industry Outlook (cont d) With regards to the global steel outlook, in the interim, international steel prices are expected to rise higher driven mainly by the price rally in China. The said upward trend is primarily due to speculation in the futures market and China s ongoing governmental steel reforms focusing on cutting excess capacity by forcing the closure of many inefficient steel mills and coal mines, while clamping down on mills that do not comply with environmental standards. However, we believe that the current high prices have reached its ceiling and room for increment would be rather limited, with some moderation expected by the end of the second quarter The domestic market on the other hand, is expected to remain challenging with intense competition where the domestic market is getting smaller, volatile steel prices and higher business costs. Though the stronger steel prices have helped to improve margins, demand for steel consumption remains soft as steel dealer s exercise a cautious stand for stocking up due to the uncertain economic environment as many projects are being held back. Demand for steel products and building materials would be driven primarily by the steady implementation of private construction projects as well as governmental infrastructure projects under the 11th Malaysian Plan. The Government s efforts to stabilise the supply and pricing equilibrium of steel products via trade measures will continue to play a crucial role in ensuring a level playing field for local steel players. Future Plans To weather the uncertain and challenging economic environment and emerge as a resilient and sustainable organisation, the Group will focus on the following key areas: i. Enhance quality of our products; ii. Strengthen productivity; iii. Employ cost effective procurement strategies and inventory management; iv. Engage in strategies that improve cost efficiencies throughout the whole value chain of the business; and v. Deepen market penetration. Dividend Your Board is pleased to recommend a final single tier dividend of 6 sen per ordinary share and a special single tier dividend of 3 sen per ordinary share for the financial year ended 31 December The steady implementation of private construction projects and government infrastructure projects under the 11 th Malaysia Plan would drive demand for our products 10 Annual Report 2016

12 Five Year Group Financial Highlights Revenue (RM Million) NTA Per Share (RM) Profit Before Taxation (RM Million) Profit After Taxation (RM Million) Earnings Per Share (Sen) Dividend Cover (Times) Borrowings (RM Million) Shareholders Equity (RM Million) Revenue Net Tangible Assets Per Share RM (Million) RM Year Year Profit Before Taxation Profit After Taxation RM (Million) RM (Million) Year Year Earnings Per Share Dividend Cover Sen Times Year Year Borrowings Shareholders Equity RM (Million) RM (Million) Year Year Annual Report

13 Sustainability Statement The Group acknowledges that its operations impact the marketplace, environment, stakeholders (which includes consumers and employees) and the communities in the areas we operate in. As such, we strive towards achieving a positive impact in the above mentioned areas through our effective and efficient sustainable business strategies to optimise value to our stakeholders. Towards this end, we have undertaken various activities to reflect our commitment to this responsibility. Through stakeholder engagement and carrying out a materiality assessment, the Group has defined its sustainability reporting framework and identified four key focus areas, namely - production, health and safety, logistics and distribution, marketing and management policies which encompasses sustainability dimensions covering the marketplace, workplace, environment and community. The inputs garnered for material assessment of sustainability issues were from the external environment (macro-economic outlook, regulators and government policies, suppliers, customers and shareholders) and internal environment (Board of Directors, Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Head of departments and employees). The Group is committed to adopt the best practices for a responsible business conduct taking into account the enhancement of shareholders values, maximisation of profits and sustainability of environmental resources. In this regard, the primary initiatives undertaken covering the various key focus areas of our business are as follows: Marketplace The Group recognises that the operating environment for the steel industry has changed bringing with it new risks and opportunities. With this, the Group s long-term business strategy with sustainability embedded in it would remain the driver to help it steer through an ever-changing market. Some of the challenges that are currently on our list include aspects relating to: Customers and products To be competitive in delivering high quality deliverables to attract new and demanding customers, as well as ensuring customer satisfaction, certification is a crucial requirement. This is supported by having obtained international ISO standards where they are diligently complied with throughout our production processes and operations as well as the application of established quality practices and policies. During the year, our Quality Management System was converted to the latest ISO 9001 : 2015 edition and is certified by Intertek Certification International. We also obtained new product certification license issued by Ikram QA Services Sdn. Bhd. for MS863 and BSEN 10255, as well as successfully registered all our certified products with Construction Industry Development Board (CIDB) in compliance with Schedule 4 of the Lembaga Pembangunan Industri Pembinaan Malaysia Act 1994 (Act 520). The new certifications provide further assurance on the quality of our products, while meeting stringent requirements especially for the usage of Government projects. Our other product certifications are from American Petroleum Institute (API), TUV Rheinland and IKRAM QA Services. With these certifications, the Group is committed to continuously take steps to comply with product requirements and improve the effectiveness of its Quality Management System while ensuring quality deliverables to customers. Production efficiency The continuous search for new efficient and modern production equipment, tools and methods has become a norm for the Group. This way the manufacturing operations manage to keep in line with other major steelmaking corporations in the market. The keyword is eco-efficiency: to manufacture steel using minimal amounts of raw materials and energy, as well as reducing as much as possible the generation of waste and greenhouse gases, which is the goal of our steel plants. We have also implemented preventive planned maintenance for our main machines to avoid unexpected breakdowns and minimise downtime. 12 Annual Report 2016

14 Sustainability Statement (cont d) Marketplace (cont d) Logistics and distribution We are constantly striving to improve on our logistics management and distribution chain. Through our concerted efforts, we have managed to minimise many of the distribution issues faced by our operations. We have also adopted several ongoing pro-active measures to enhance our distribution efficiency, which include: - Emphasizing quality towards our products and ensuring they are adequately protected during the handling process by using appropriate bearing strips or wooden planks, correct product positioning or handling methods, nesting or banding in the loading process; - Directly cut down the delivery time of our products to customers in the Klang Valley through our warehouse in Kapar, Selangor. Since stocking up most of the common and popular products in Kapar, customers have found it much easier to obtain their desired products without much logistic issues. This can be done via own collection by customers or delivery from this warehouse with shorter delivery time and costs. This has enhanced the product delivery of our products to customers; and - Close supervision to ensure adherence to the established procedures which led to better warehouse management, greater improvement on traceability and reduction in errors on deliveries. We will continue to engage closely with all stakeholders to ensure that our logistic and distribution performances are among the industry s leading standards. Workplace The Group understands that its employees are its most valuable asset organisation wide. Our hiring practices are based on capability and suitability and there is no discrimination in our hiring policies. The wellbeing of our employees remains a priority as their strength and contributions are the Group s results. Competitive benefits The Group s benefit packages are structured to reward and retain employees, which focuses on areas such as their health, money and career advancement. Benefits provided to our employees includes: - Medical, hospitalisation and personal accident coverage; - Annual leave; - Company trips; - Team building event; - Sports club event and social gatherings; - Corporate T-shirts (to help enhance the sense of belonging and company branding); and - Long service staff award in recognition for their loyalty and contribution to the Group. Training and development The Group invests on the continued development of its people. This is done in alignment with business priorities to equip employees with the required skills, knowledge and experience to successfully carry out their tasks as well as advance in the Group horizontally or vertically. Heads of department together with Human Resource will analyse and determine the training/grooming needs of employees regularly to help narrow competency gaps. Such continuous training provides the business with multi-skilled employees who are committed and dedicated to their job and to the organisation. Succession planning To ensure a continuous stream of qualified and competent employees who are ready to fill up critical positions should the need arise, the organisation implemented succession planning as part of risk management. We have identified the factors that contribute to this risk to be arising from old age (60 years and above), health of incumbent and job opportunities to incumbents from external sources. We have therefore come up with strategies to mitigate this risk which includes: (i) short term strategies such as the second person in line to ensure smooth running of day-to-day operations with major decisions/approvals made by Management whenever required, other Head of departments who have the knowledge, skill and experience to execute additional function, deploy appropriate consultant to carrry out the task; and Annual Report

15 Sustainability Statement (cont d) Workplace (cont d) Succession planning (cont d) (ii) long term strategies such as grooming the second person in line to succeed the incumbent, new recruitment, engage specialist or consultant on a longer term project basis. During the year, the Group executed part of its succession planning for its main factory site with new appointments and promotions to ensure sustainable manufacturing operations. Health and safety Our commitment to operate responsibly ensures that we create and maintain a safe and healthy workplace for our employees. This is reflected in the establishment of the Occupational Safety and Health Committee which comprises representatives from several levels of the organisations and are guided by the Occupational Safety and Health Act 1994, Occupational Safety and Health Manual (which contains all the standards, safety work procedures and standard documentations used) as well as other regulations. This committee, together with the Safety and Health Officer is responsible for understanding and supporting Safety and Health Policies ensuring that: - Safety and Health policies and any relevant regulations and standards are complied with; - Employee and contractors always conduct their activities responsibly. We assist them with this through education and trainings; - Safety and Health Inspections are carried out to measure and assess progress; - Promotion of the safety and health programs throughout the organisation; - Safety and Health programmer conduct the daily check and walk around to carry out the safety and health awareness; - Performance and the corrective actions are regularly communicated to management and employees; and - Accident cases in the factory are prevented and eliminated with the effective corrective and preventive actions. Environment The Group recognises the importance of good environmental management/preservation practices in minimizing operational impact to the environment. In view of this, our daily operation employs the following practices: recycling of scraps/waste materials; effective production shift scheduling which in turn reduces unnecessary energy consumption and pollution; reducing production wastage throughout the operations by implementing an effective production planning, control and monitoring process; practicing a paperless environment by website utilisation to promote products and services as well as embarking on modernisation and automation projects; and to reduce carbon footprint by internal inspection for road worthiness of lorries. Community Being a caring corporate organisation, we carried out various Corporate Social Responsibility activities during the year which included amongst other activities: extended financial donations to non-profit oganisations that provides assistance and support to spastic children and that provided palliative care to those with a life-threatening illness where cure is no longer possible and comfort and symptom control are the main aims; and provided donations to institution that care for orphans, handicapped and disabled. On-going community activities include the provision of internships and providing financial support to schools as well as foundations for their various needs. 14 Annual Report 2016

16 Corporate Information BOARD OF DIRECTORS Group Executive Chairman/Chief Executive Officer Executive Director Executive Director Executive Director Executive Director Senior Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director EXECUTIVE COMMITTEE Executive Committee Chairman Executive Committee Member Executive Committee Member AUDIT COMMITTEE Audit Committee Chairman Audit Committee Member Audit Committee Member NOMINATING COMMITTEE Nominating Committee Chairman Nominating Committee Member Nominating Committee Member REMUNERATION COMMITTEE Remuneration Committee Chairman Remuneration Committee Member Remuneration Committee Member Remuneration Committee Member SECRETARIES REGISTERED OFFICE PRINCIPAL PLACE OF BUSINESS WEBSITE AND ADDRESS REGISTRAR PRINCIPAL BANKERS AUDITORS STOCK EXCHANGE LISTING Soon Cheng Hai Soon Cheng Boon Soon Hean Hooi Lee Sieng Vincent Lee Ng Poh Tat Khoo Choon Yam Puan Sri Shahrizan Binti Abdullah Lim Chee Hoong Soon Cheng Hai Soon Cheng Boon Soon Hean Hooi Lim Chee Hoong Khoo Choon Yam Ng Poh Tat Ng Poh Tat Lim Chee Hoong Khoo Choon Yam Khoo Choon Yam Soon Cheng Hai Lim Chee Hoong Ng Poh Tat Chan Yoke Yin (MAICSA ) Chan Eoi Leng (MAICSA ) 55A, Medan Ipoh 1A, Medan Ipoh Bistari, Ipoh, Perak Darul Ridzuan, Malaysia. Tel: Fax: Wisma Soon Teik Aun, Jalan Bendahara, Ipoh, Perak Darul Ridzuan, Malaysia. Tel: Fax: Homepage: Address: enquiries@choobee.com.my Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan, Malaysia. Tel: Fax: HSBC Bank Malaysia Berhad Hong Leong Bank Berhad United Overseas Bank (Malaysia) Berhad BDO (AF: 0206) Chartered Accountants Level 8, Menara CenTARa, 360, Jalan Tuanku Abdul Rahman, Kuala Lumpur, Malaysia. Main Market of Bursa Malaysia Securities Berhad Annual Report

17 Profile of Directors Soon Cheng Hai Executive Director, Group Executive Chairman and Chief Executive Officer Male Aged 54, Malaysian Soon Cheng Hai was appointed to the Board on 10 April He is also the Chairman of the Executive Committee and is a member of the Remuneration Committee. He received his higher education in Japan and graduated with a Diploma in Business Management from Sangyo Noritsu College, Japan. Soon Cheng Hai has substantially worked within the Group for more than 20 years in the various core processes such as management of the supply chain, marketing, product development and manufacturing management. Based on a successful performance record, he was promoted to the position of Group Deputy Managing Director in 1992 and subsequently promoted to Group Managing Director ( GMD ) in He was re-designated to Chief Executive Officer ( CEO ) and appointed as Group Executive Chairman on 21 February During the financial year ended 31 December 2016, he attended all five (5) Board meetings held. Soon Cheng Boon and Soon Hean Hooi are his brothers while Lee Sieng Vincent Lee is his brother-in-law. He is a director and shareholder in Choo Bee Holdings Sdn. Bhd. and Soon Lian Huat Holdings Sdn. Berhad, major shareholders of the Company. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. Soon Cheng Boon Executive Director Male Aged 52, Malaysian Soon Cheng Boon was appointed to the Board on 19 September He joined Choo Bee Hardwares Sdn. Berhad in 1982 and is currently serving as the Group Business Manager. He is also a member of the Executive Committee. Soon Cheng Boon underwent training overseas as well as locally. He has extensive experience in the field of sales and marketing management. He is responsible for the overall business development and formulation of all marketing plans and policies for the Group. During the financial year ended 31 December 2016, he attended four (4) out of the five (5) Board meetings held. Soon Cheng Hai and Soon Hean Hooi are his brothers while Lee Sieng Vincent Lee is his brother-in-law. He is a director and shareholder in Choo Bee Holdings Sdn. Bhd. and Soon Lian Huat Holdings Sdn. Berhad, major shareholders of the Company. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. Soon Hean Hooi Executive Director Male Aged 46, Malaysian Soon Hean Hooi was appointed to the Board on 1 November He joined Choo Bee Metal Industries Berhad in August 1993 as Group Maintenance Engineer and was later promoted to Assistant Group Factory Manager in He is also a member of the Executive Committee. He received his early secondary education in Melbourne, Australia at Saint Kevin College and subsequently graduated with an Associate Diploma in Mechanical Engineering from the Royal Melbourne Institute of Technology in June Upon graduation, Soon Hean Hooi has since worked within the Group on various aspects of factory operations management and technical advancements. During the financial year ended 31 December 2016, he attended three (3) out of the five (5) Board meetings held. Soon Cheng Hai and Soon Cheng Boon are his brothers while Lee Sieng Vincent Lee is his brother-in-law. He is a director and shareholder in Choo Bee Holdings Sdn. Bhd. and Soon Lian Huat Holdings Sdn. Berhad, major shareholders of the Company. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. 16 Annual Report 2016

18 Profile of Directors (cont d) Lee Sieng Vincent Lee Executive Director Male Aged 54, Malaysian Lee Sieng Vincent Lee was appointed to the Board on 25 September He joined Choo Bee Metal Industries Berhad in 1989 as a Sales Executive and is currently serving as the Assistant Group Business Manager. He obtained his Bachelor of Science degree from the University of Dublin, Ireland majoring in Management in July After graduation, he joined City-Link Express (M) Sdn. Bhd. as an executive prior to joining Choo Bee Metal Industries Berhad. During the financial year ended 31 December 2016, he attended all five (5) Board meetings held. Soon Cheng Hai, Soon Cheng Boon and Soon Hean Hooi are his brothers-in-law. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. Ng Poh Tat Senior Independent Non-Executive Director Male Aged 67, Malaysian Ng Poh Tat was appointed to the Board on 15 August 2008 and promoted to Senior Independent Non-Executive Director on 24 June Apart from being the Chairman of the Nominating Committee, he is also a member of the Audit Committee and Remuneration Committee. He was admitted by the High Court of Malaya, Ipoh and enrolled as an advocate and solicitor in February In 1991, he set up his own firm under the partnership of Messrs. Ng Poh Tat & Co in Ipoh. He is also a legal advisor of Perak Chinese Chamber of Commerce and Industry. During the financial year ended 31 December 2016, he attended all five (5) Board meetings held. Ng Poh Tat does not have any family relationship with any other Director and/or major shareholders of the Company. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. Khoo Choon Yam Independent Non-Executive Director Male Aged 64, Malaysian Khoo Choon Yam was appointed to the Board on 27 December He graduated from Osaka Industrial University, Japan in 1976 with a Bachelor degree in Engineering. Apart from being the Chairman of the Remuneration Committee, he is also a member of the Audit Committee and Nominating Committee. After graduation, Khoo Choon Yam was trained in Kubota Ltd, Japan prior to his joining Tractors Malaysia Berhad as a Mechanical Engineer in In 1982, he joined Pilecon Engineering Berhad as an engineer in charge of the construction equipment department. Subsequently in 1992, he was transferred to E&E Equipment Sdn. Bhd., a wholly owned subsidiary of Pilecon Engineering Berhad as an Executive Director. In 1999, he ventured into his own business dealing in construction equipment. He is also a director of several private limited companies. During the financial year ended 31 December 2016, he attended all five (5) Board meetings held. Khoo Choon Yam does not have any family relationship with any other Director and/or major shareholders of the Company. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. Annual Report

19 Profile of Directors (cont d) Puan Sri Shahrizan Binti Abdullah Independent Non-Executive Director Female Aged 66, Malaysian Puan Sri Shahrizan Binti Abdullah was appointed to the Board on 12 June 2004 as a Non-Independent Director, and was subsequently re-designated to Independent Director status on 23 May 2014 after she ceased to act as a nominee/ representative of a deemed substantial shareholder. She is not a member of any committee established by the Board. She holds a Bachelor of Economics degree from University of Malaya. She started her career as an Advisory Services Executive with Majlis Amanah Rakyat Malaysia after graduation. In 1975, she joined South East Asia Development Corporation as an Investment Analyst and in 1978, became a Financial Analyst with Amanah Chase Merchant Bank. She then held the position of Senior Corporate Services Manager in Permodalan Nasional Berhad from 1979 to She was the chairperson of MIDF Amanah Asset Management Berhad until she resigned on 21 February Apart from the above, she also holds directorships in other companies which are not listed on Bursa Malaysia Securities Berhad. During the financial year ended 31 December 2016, she attended all five (5) Board meetings held. Puan Sri Shahrizan Binti Abdullah does not have any family relationship with any other Director and/or major shareholders of the Company. She has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. Lim Chee Hoong Independent Non-Executive Director Male Aged 56, Malaysian Lim Chee Hoong was appointed to the Board on 1 July He is a qualified Certified Public Accountant (CPA) and Certified Financial Planner (CFP). He is a member of the Malaysian Institute of Certified Public Accountants (MICPA), the Malaysian Institute of Accountants (MIA) and the Chartered Tax Institute of Malaysia (CTIM). Apart from being the Chairman of the Audit Committee, he is also a member of the Remuneration Committee and Nominating Committee. Lim Chee Hoong started his career in 1981 as an auditor with Messrs. Coopers & Lybrand, then with Messrs. KassimChan. During his audit tenure (totalling over 10 years), he acquired vast experiences in audit, tax consultancy, secretarial, corporate listing exercises and insolvency. His work experience covered financial institutions, stock broking, manufacturing, trading, property development and constructions. He then moved to the commercial sector and has more than 7 years commercial experience as Group Company Secretary and Group Financial Controller during which he was attached to manufacturing, property development and constructions, and hospitality corporations. In 1997, he started his own accountancy practice and is currently a partner in CHI-LLTC, a medium sized Chartered Accountants Firm in Malaysia. He is also an Independent Non-Executive Director of PRG Holdings Bhd which is listed on Bursa Malaysia Securities Berhad. During the financial year ended 31 December 2016, he attended all five (5) Board meetings held. Lim Chee Hoong does not have any family relationship with any other Director and/or major shareholders of the Company. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. 18 Annual Report 2016

20 Profile of Key Senior Management Tan Han Leong Chief Financial Officer Male Aged 40, Malaysian Tan Han Leong was appointed as Chief Financial Officer on 21 February He holds a Bachelor of Business degree (majoring in Accounting) from Edith Cowan University, Australia. He is also a qualified Chartered Accountant (CA) and Certified Practicing Accountant (CPA). He is a member of the Institute of Chartered Accountants in England and Wales (ICAEW), Certified Practicing Accountants Australia (CPA Australia) and Malaysian Institute of Accountants (MIA). He started his career in 1998 as an auditor, then tax consultant with Messrs. Ernst & Young until During this period, he had wide clientele and work exposure in audit and tax consultancy covering both private and listed companies notably in Fast Moving Consumer Goods (FMCG), manufacturing, property development, oil and gas as well as trading sectors respectively. He then moved to the commercial sector and gained 7 years of commercial experience in various finance roles. Prior to joining Choo Bee Metal Industries Berhad in 2012, he was in a regional management role with a multinational company, i.e Hewlett Packard until During this period, his main responsibilities included providing business and financial support to Business Directors and Finance Directors in Australia/New Zealand and several other Asian countries. He was also responsible for the financial management involving the supervision of the company s finance and treasury functions. Soon Cheng Hai, Soon Cheng Boon and Soon Hean Hooi are his brothers-in-law. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. Loh Chee Chyuen Group Factory Manager Male Aged 60, Malaysian Loh Chee Chyuen was appointed as Group Factory Manager in July He is a certified First Class Marine Engineer and graduated from Ungku Omar Polytechnic in He obtained his certificate of competency as a Marine Engineer from the Ministry of Transport Malaysia. He is a member of the Institute of Certified Engineers Malaysia (ICEM) and is also a member of the Institute Kelautan Malaysia. He started his career in 1980 as a cadet engineer with Malaysian International Shipping Corporation (MISC) and served as a Chief Engineer in 1986 on board the company s sea going vessels. Subsequently, in 1990 he was seconded to be a Marine Superintendent in the head office of MISC. As a Marine Superintendent, he performed technical audit on the company s fleet of vessels and reported on non-compliances and made the necessary recommendations to the Director of Fleet Operations. He resigned from MISC in 1992 and joined the Group as its Group Factory Manager. Loh Chee Chyuen does not have any family relationship with any of the Directors or major shareholders of the Company. He has no conflict of interest with the Company, has no conviction for offences within the past 5 years nor public sanction or penalty imposed by the relevant regulatory bodies during the financial year. Annual Report

21 Corporate Governance Statement The Board of Directors ( the Board ) is committed to ensure that the highest standards of corporate governance are practised throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholder value and the financial performance of the Group. Set out below is a statement on how the Group has applied the principles and extent of compliance with the recommendations as set out in the Malaysian Code on Corporate Governance ( MCCG ) BOARD OF DIRECTORS Composition, Board Balance and Independence of Directors The Group is led by an effective Board with wide and varied technical, financial and commercial experience. The Board currently consists of eight (8) members comprising four (4) Executive Directors and four (4) Independent Non-Executive Directors. This complies with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Listing Requirements ) to have at least one third (1/3) of the Board consisting of independent directors. The Board is appropriately balanced to reflect the interests of substantial shareholders. As such, the Board is satisfied that the current Board composition fairly represents and protects the interests of the minority shareholders in the Company. The four (4) Independent Non-Executive Directors are of caliber to carry sufficient weight in Board s decisions. The Independent Non-Executive Directors play a key role in providing unbiased views and impartiality to the Board s deliberation and decision making process. In addition, the Independent Non-Executive Directors ensure that matters and issues brought to the Board are given due consideration, fully discussed and examined, taking into account the interest of all stakeholders in the Group. The assessment on independence of the Directors based on the provisions of the Listing Requirements covers a series of objective tests and is carried out before the appointment of the Independent Non-Executive Directors. Furthermore, the Board with assistance from the Nominating Committee will undertake to carry out annual assessment of the effectiveness of the Independent Non-Executive Directors and consider whether the Independent Non-Executive Directors can continue to bring independent and objective judgement to the Board deliberations. Any Director who considers that he has or may have a conflict of interest or a material personal interest or a direct or indirect interest or relationship that could reasonably be considered to influence in a material way the Director s decisions in any matter concerning the Company, is required to immediately disclose to the Board. A brief description of the background of each Director is presented in the Profile of Directors. The Nominating Committee reviews the composition of the Board and Board Committees annually. In determining candidates for appointment to the Board and Board Committees, various factors are considered, including the time commitment of the Board and Board Committee members in discharging their role and responsibilities through attendance at their respective meetings, their performance and contribution, possession of the attributes, capabilities and qualifications considered necessary or desirable for service and demonstration of independence, integrity and impartiality in decisionmaking. The Group has complied with the principles and recommendations of the MCCG 2012 except for the following on reinforcing independence: Recommendation 3.2 The tenure of independent director should not exceed a cumulative term of nine (9) years. Upon completion of nine (9) years, an independent director may continue to serve on the board subject to the director s re-designation as a non-independent director. The Group assesses the independence of the Directors (on an annual basis) in accordance with the criteria stipulated in paragraph 1.01 of the Listing Requirements, which states that a director needs to be independent from management and free from any business or other relationship which could interfere with his independent judgment or ability to act objectively and in the best interest of the Company. Other criterias assessed includes relevant experience, expertise, skills and competencies. All Independent Non-Executive Directors do not participate in the day-to-day management of the Group and do not engage in any business dealings or other relationship with the Group. This is to ensure that they are capable of exercising judgment objectively whilst acting in the best interest of the Group, its stakeholders and shareholders, including minority shareholders. To enhance accountability, the Board has specific functions reserved for the Board and those delegated to Management. 20 Annual Report 2016

22 Corporate Governance Statement (cont d) BOARD OF DIRECTORS (cont d) Composition, Board Balance and Independence of Directors (cont d) The Nominating Committee and the Board have determined upon their annual assessment that Khoo Choon Yam, who has served on the Board for fifteen (15) years remain objective and independent in expressing his views and participating in deliberations and decision making of the Board and Board Committees. The Board is of the view that tenure should not form part of the independence assessment criteria, as it believes that the ability of a Director to serve effectively is dependent on his calibre, qualifications, experience and personal qualities, in particular, integrity and objectivity. The Board also agreed that there are significant advantages to be gained from long-serving Directors who possess insight and knowledge of the Company s business and affairs. The Board obtained the shareholders approval at the previous Annual General Meeting ( AGM ) to retain Khoo Choon Yam as an Independent Non- Executive Director, and will be doing the same in the coming AGM in year 2017 with the following justifications: He fulfilled the criteria under definition for independent director as stated in the Listing Requirements of Bursa Securities; and hence, would be able to provide an element of objectivity and independent judgment to the Board; His wide experience in business management and other related areas enables him to provide the Board and Remuneration Committee with pertinent expertise, skills and competence; and He has been with the Company since 2001 and therefore understands the Company s business operations which enabled him to contribute actively and effectively during deliberations or discussions at Board and Remuneration Committee meetings. Recommendation 3.4 The positions of chairman and chief executive officer should be held by different individuals, and the chairman must be a non-executive member of the board. The Chairman and Chief Executive Officer of the Company is currently being held by the same person, i.e. Soon Cheng Hai. He was appointed as Group Executive Chairman by the Board on 21 February The Board is aware that convergence of the two roles is not in compliance with best practice but takes into consideration Soon Cheng Hai s vast experience, knowledge and proven track record in managing the businesses of the Group and the time he has spent in fulfilling all his responsibilities. As such, the Board believes that the convergence of both Chairman and CEO role as well as being in executive capacity helps provide stability to the Group due to his established leadership and oversight capabilities. Recommendation 3.5 The board must comprise a majority of independent directors where the chairman of the board is not an independent director. The Board does not comprise a majority of independent directors as only four (4) out of the eight (8) directors are independent. The independent directors are not employees and do not participate in the day-to-day management of the business and operations of the Group. However, they bring an external perspective, constructively challenge the Management, review the performance of Management in meeting approved goals and objectives and monitor the risk profile of the Group. Therefore, it is sufficient to provide the necessary checks and balances on the decision making process of the Board. Board Gender Diversity The Board has no immediate plan to implement a gender diversity policy or target as the Board views that any new appointment to the Board shall be based on the candidate s capability, skills, experience, core competencies and integrity regardless of gender and ethnicity. However, female representation in the Board will be considered when vacancies arise and suitable candidates are identified. Currently, we have a female member sitting on the Board. Roles and Responsibilities of the Board The Board is responsible for oversight and overall management of the Group. To ensure the effective discharge of its functions and responsibilities, the Board delegates the day-to-day management of the Group s business to the Management. This is further supported by the Group s Summary of Authority Limits ( SAL ), which clearly sets out relevant matters reserved for the Board s approval as well as those which the Board may delegate to the Board Committees, the CEO and Management. Annual Report

23 Corporate Governance Statement (cont d) BOARD OF DIRECTORS (cont d) Roles and Responsibilities of the Board (cont d) Key matters which are reserved for the Board s approval are as follows: Approval of strategic plans for the Company The Board plays a role in the development of the Company s strategy. At the beginning of the year (annual basis), the Management presents to the Board its recommended strategy and proposed business plans for the year. At this session, the Board reviews and deliberates upon both Management s and its own perspectives, as well as challenges Management s views and assumptions, to deliver the best outcomes. In furtherance of this, the Board then reviews and approves the annual targets for the year which is then used as a key performance indicator. The strategy planning process for 2016 was held during the board meeting held on 26 February 2016, where the Management presented the proposed 2016 business plan and targets for the Board s review and discussion. The 2016 business plan was approved by the Board at this meeting. Overseeing the conduct of the Company s business The CEO is responsible for the day-to-day management of the business and operations of the Group. He is supported by the Executive Committee, heads of operating units as well as other operating committees established such as the Credit Committee, Safety and Health Committee, Quality Management System Committee and Corporate Disclosure Committee. The Board also delegates and confers some of its authorities and discretion to the Executive Directors as well as relevant Board Committees. The Board Committees are entrusted by the Board with specific responsibilities to oversee the Group s affairs, with authority to act on behalf of the Board in accordance with their respective Terms of Reference ( TOR ). Any key issues and decisions arising from the Board Committees will be reported and tabled to the Board for approval, if required. The Management s performance under the leadership of the CEO is assessed on a quarterly basis by the Board and includes a comprehensive summary of the Group s operating drivers and financial performance. The Board is also kept informed of key strategic initiatives, significant operational issues and the Group s performance based on the approved targets set. The relevant members of the Executive Committee and Chief Financial Officer were in attendance at Board meetings to support the CEO in presenting the updates on the progress of business targets and achievements to date, and to provide clarification on the challenges and issues raised by the Board. Identifying principal risks and ensuring the implementation of appropriate internal controls to manage them/reviewing the adequacy and integrity of the management information and internal control system of the Group through the Risk Management team, the Board oversees the risk management framework of the Group. The Risk Management team advises the Audit Committee and the Board on areas of high risk and the adequacy of compliance and control procedures throughout the Group. Details of the Risk Management team, the Group s risk management framework and Internal Control system are set out in the Statement on Internal Control and Risk Management of this Annual Report. Succession planning The Board, through the Nominating Committee is responsible for ensuring that there is a proper succession planning in place for the Directors, CEO and key Group Management. The Nominating Committee is responsible for reviewing candidates for directorship as well as key management positions, which includes determining the remuneration for these appointments. In this respect, the Nominating Committee considers new appointments of Directors and key management positions to ensure all candidates appointed to these positions are of sufficient calibre. For this purpose, the factors considered by the Nominating Committee include the suitability of the shortlisted candidates based on their profiles, professional achievements and personality assessments. The Nominating Committee also conducts interviews with shortlisted candidates to validate the assessment of the individuals. Overseeing the development and implementation of a shareholders communication policy The Group believes in building investor confidence through good Corporate Governance practices. As such, Investor Relations ( IR ) activities are carried out in accordance with its Shareholders Communication Policy (available on its website). The roles and responsibilities for the Group Executive Chairman and the CEO have been defined in the Board Charter to ensure there is balance of power and authority. The Board has identified Ng Poh Tat as the Senior Independent Non-Executive Director, to whom any concerns of shareholders and other stakeholders may be conveyed to. 22 Annual Report 2016

24 Corporate Governance Statement (cont d) BOARD OF DIRECTORS (cont d) Formalised Ethical Standards through Code of Conduct The Group s Code of Conduct for Directors and employees governs the standards of ethics and good conduct expected of Directors and employees, respectively. The Code of Conduct includes principles relating to fair dealings, confidentiality of information, conflict of interest, compliance with laws and regulations and sexual harassment. In addition, the Company s Whistleblowing Policy and Procedures ( WPP ), which is available on its website, seek to foster an environment where integrity and ethical behaviour are maintained and any illegal or improper action and/or wrongdoing in the Company may be exposed. The Audit Committee is responsible for overseeing the implementation of the WPP for the Group s management, and all whistle-blowing reports are addressed to the Audit Committee Chairman. The CEO is responsible for overseeing the implementation of the WPP for the Group s employees, where the CEO would address all whistle-blower reports made by employees or external parties as prescribed under the WPP. Strategies Promoting Sustainability The Board views the commitment to sustainability as part of its broader responsibility to shareholders covering the marketplace, workplace, environment and communities in which it operates. The Company s Sustainability Statement for the financial year under review are disclosed in pages 12 to 14 of this Annual Report. Access to Information and Advice The Directors are at liberty to seek independent professional advice on matters relating to the fulfillment of their roles and responsibilities. The Directors can also seek advice from Management on issues pertaining to their respective jurisdictions as well as request for information or updates on matters relating to the Company s business operations. The Directors may also interact directly with, or request further explanation, information or updates on any aspect of the Group s operations or business concerns from the Management. The cost of procuring these professional services will be borne by the Company. Board meeting documents and other relevant Group information/policies/procedures/processes are usually compiled in hard copy to Directors five (5) business days in advance prior to board meetings to enable sufficient preparation for deliberation and decision making. Qualified and Competent Company Secretary The Company Secretary plays an advisory role to the Board in relation to the Company s constitution, Board policies and procedures and compliance with the relevant regulatory requirements, codes or guidance and legislations. The Company Secretary supports the Board in ensuring relevance and effectiveness in its Corporate Governance practices. The Company Secretary also attends and ensures that all Board meetings are properly convened and minuted, while accurate and proper records of the proceedings and resolutions passed are taken and maintained in the statutory register at the registered office of the Company. The Directors are regularly updated by the Company Secretary on new statutory as well as regulatory requirements relating to the duties and responsibilities of Directors. All Directors have unrestricted access to timely and accurate information and access to the advice and services of the Company Secretary who is responsible for ensuring that Board procedures are followed. Board Charter The Board Charter clearly sets out the roles and responsibilities of the Board and Board Committees and also the processes and procedures for convening their meetings. It serves as a reference and primary induction literature providing prospective and existing Board members and Management insight into the fiduciary and leadership functions of the Directors. The concise Board Charter is publicly available on the corporate The Board Charter is reviewed annually to ensure it complies with legislations and best practices, and remains relevant and effective in light of the Board s objectives. Annual Report

25 Corporate Governance Statement (cont d) BOARD OF DIRECTORS (cont d) Supply of Information All Directors review a quarterly Board report prior to the Board meeting. This enables the Directors to obtain further explanations, where necessary, in order to be briefed properly before the meeting. The Board report includes, among others, the following details: Quarterly financial results Annual audited financial statements Operational report Corporate plans, major issues and opportunities for the Group Changes to management and control structure of the Group Policies and procedures Reports to Shareholders and public announcements Updates to regulatory requirements Recruitment or Appointment of Directors For the recruitment or appointment of new Directors, the Nominating Committee has its own review criteria that needs to be met before making recommendations to the Board. These include the review of skills, experience and strength in the qualities necessary for the discharge of responsibilities in an effective and competent manner. Apart from these, to ensure that Directors have sufficient time to fulfil their roles and responsibilities effectively, the Nominating Committee considers the number of directorships held in other PLC s when determining candidates for recommendation to the Board. In view of this, potential candidates are not allowed to hold directorships in more than five PLCs (as prescribed in Paragraph of the Listing Requirements). Other factors considered by the Committee include the candidates ability to satisfy the test of independence taking into account the candidate s character, integrity and professionalism. Diversity of the Board s composition is also important to facilitate optimal decision-making by harnessing different insights and perspectives. Re-appointment and Re-election of Directors In accordance with the Articles of Association of the Company, all Directors who are appointed by the Board are subject to election at the first opportunity after their appointment and at least one third ( ) of the remaining Directors are subject to re-election by rotation at each Annual General Meeting. The Articles of Association also provide that all Directors shall retire at least once in three (3) years. The Nominating Committee reviews the composition of the Board annually and makes recommendations to the Board when considered necessary to ensure the Board comprises an appropriate mix of skills and experience. Proposals for the re-appointment of Directors are recommended by the Nominating Committee to the Board for decision prior to the shareholders approval at the Annual General Meeting. Annual Assessment The Nominating Committee carries out the Board, Board Committees and Director s assessment exercise annually. The effectiveness of the Board is assessed in the areas of Board diversity, composition and governance, decision-making and Boardroom activities, as well as in terms of each Director s skills and expertise. The respective Board Committees are assessed through the appointed Committee s Chairman to ascertain whether their functions and duties are effectively discharged in accordance with their respective Terms of Reference. The effectiveness of the Board Committees are also assessed in terms of composition and governance, meeting administration and conduct, skills, competencies, roles and responsibilities. The Directors are assessed in relation to the skills, experience, contribution and other qualities they bring to the Board. Additionally, the ability of each individual Director and Board Committee member to exercise independent judgement and demonstrate objectivity and clarity of thought on issues during deliberations at meetings, offer practical advice to the Board and/or Board Committee discussions are also taken into consideration. 24 Annual Report 2016

26 Corporate Governance Statement (cont d) BOARD OF DIRECTORS (cont d) Directors Remuneration The Company has adopted the principle recommended by MCCG 2012 whereby the level of remuneration of the Directors is sufficient to attract and retain the Directors needed to manage the Group successfully. In the case of Executive Directors, their remuneration is linked to their level of responsibilities, experience, contribution, individual as well as Group performance. For the Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by them. The Remuneration Committee carries out the annual review of the overall remuneration policy for Directors and key Group Management. The Remuneration Committee ensures that the Company s remuneration policy remains supportive of its corporate objectives and is aligned with the interest of shareholders, and that the remuneration packages of Directors and key Group Management are sufficiently attractive to attract and to retain persons of high caliber. The details of the Directors remuneration for the financial year ended 31 December 2016 are as follows: Directors Remuneration Executive Directors Non-Executive Directors RM 000 RM 000 Group Fee Salaries and EPF 2,723 - Bonus 1,234 - Allowances - 53 Benefits-in-kind 85 - Company Fee Salaries and EPF 2,723 - Bonus 1,234 - Allowances - 53 Benefits-in-kind 85 - Number of Directors Directors Remuneration Executive Directors Non-Executive Directors RM Group Below 50, , , , , ,200,001 1,250, ,350,001 1,400, ,400,001 1,450, Company Below 50, , , , , ,200,001 1,250, ,350,001 1,400, ,400,001 1,450, In the interest of confidentiality, individual remuneration of each Director has not been disclosed. The Board is of the view that the band disclosure method as set out in the Listing Requirements and adopted by the Board has adequately addressed the transparency and accountability aspects of Corporate Governance in respect of the Directors remuneration. During the year, apart from Ng Poh Tat who rendered legal services to the Group amounting to RM1,679.00, none of the remaining Directors rendered any services to the Group that incurs separate remuneration. Annual Report

27 Corporate Governance Statement (cont d) BOARD OF DIRECTORS (cont d) Board Meetings The Board normally holds meetings every quarter and will hold additional meetings as the occasion requires. The Board has a formal schedule of matters reserved to it for decision, including the approval of annual and quarterly results, major capital expenditures and the review of business operations and performance of the Group. Five (5) Board Meetings were held during the financial year ended 31 December The details of attendance for each Director at the Board Meetings are as follows: Name of Directors No. of meetings attended Soon Cheng Hai - Group Executive Chairman / Chief Executive Officer / Executive Director 5 out of 5 Soon Cheng Boon - Executive Director 4 out of 5 Soon Hean Hooi - Executive Director 3 out of 5 Lee Sieng Vincent Lee - Executive Director 5 out of 5 Ng Poh Tat - Senior Independent Non-Executive Director 5 out of 5 Khoo Choon Yam - Independent Non-Executive Director 5 out of 5 Puan Sri Shahrizan Binti Abdullah - Independent Non-Executive Director 5 out of 5 Lim Chee Hoong - Independent Non-Executive Director 5 out of 5 All Directors have adequately complied with the minimum requirements on attendance at Board meetings as stipulated in the Listing Requirements (minimum 50% attendance). Directors Training Directors training is an on-going process as Directors recognise the need to continually develop and refresh their knowledge and skills, and to update themselves on developments in the steel industry and business landscape both domestically and internationally. The Board s policy requires each Director to attend at least one (1) training session annually. The Board assesses each member s training requirements based on the feedback from members of the Board. The Nominating Committee will then analyse the training needs of each Director and delegate the task of sourcing for the appropriate training, according to the Director s needs, to the Human Resource Department of the Group. Directors are also personally responsible for their own training needs and should they come across any suitable training, they will notify the Human Resource Department to make arrangements accordingly. During the financial year 2016, the members of the Board had attained training on areas relevant to their duties and responsibilities as Directors by attending external seminars/talks as well as internally facilitated sessions and through reading materials. Seminars and training programmes attended by Directors for the financial year ended 31 December 2016 are as follows: New Auditor s Report - Sharing the UK Experience,13 January 2016 (attended by Mr. Lim Chee Hoong) Audit Quality Enhancement Programe for SMPs 2016, 27 & 28 January 2016 (attended by Mr. Lim Chee Hoong) Capital Market Director programme (CMDP) - Module 2A, 22 February 2016 (attended by Pn. Sri Shahrizan Binti Abdullah) Perak Tax Forum 2016, 11 March 2016 (attended by Mr. Lim Chee Hoong) Malaysian Private Entities Reporting Standards (MPERS) - An Overview and Practical Approach, 23 & 24 March 2016 (attended by Mr. Lim Chee Hoong) Products for structural steel application (BS EN 10219:2006, ASTM A-500:2013, AS 1163:2009, JIS G 3350), 26 March 2016 (attended by Mr. Soon Cheng Hai, Mr. Soon Cheng Boon, Mr. Soon Hean Hooi and Mr. Vincent Lee) Statutory/Regulatory requirement, Product/System licences & Certification body, 16 April 2016 (attended by Mr. Soon Cheng Hai, Mr. Soon Cheng Boon, Mr. Soon Hean Hooi and Mr. Vincent Lee) Production Process, Product Testing & Product Common defects, 7 May 2016 (attended by Mr. Soon Cheng Hai, Mr. Soon Cheng Boon, Mr. Soon Hean Hooi and Mr. Vincent Lee) 26 Annual Report 2016

28 Corporate Governance Statement (cont d) BOARD OF DIRECTORS (cont d) Directors Training (cont d) MPERS Is Here: Are You Really Ready?, 19 May 2016 (attended by Mr. Lim Chee Hoong) Products for liquid, water & sewerage application (API 5L: 2013, JIS G 3452: 2014, SPAN TS 21827; Part 2: 2013, BS EN 10255: 2004), 28 May 2016 (attended by Mr. Soon Cheng Hai, Mr. Soon Cheng Boon, Mr. Soon Hean Hooi and Mr. Vincent Lee) MFRS and MPERS Financial Reporting - The Tax Impact, 8 & 9 June 2016 (attended by Mr. Lim Chee Hoong) Best Practices for Sustainability Reporting - What A Company Director Needs To Know, 23 June 2016 (attended by Mr. Lim Chee Hoong) Pipes for General Purposes, Commercial Quality Pipes & Manufacturer s Standards, 25 June 2016 (attended by Mr. Soon Cheng Hai, Mr. Soon Cheng Boon, Mr. Soon Hean Hooi and Mr. Vincent Lee) Companies Bill 2015, Ease of Doing Business = Cost Saving?, 29 June 2016 (attended by Mr. Lim Chee Hoong) Quality Management System (Related Documents from Sales Dept), 23 July 2016 (attended by Mr. Soon Cheng Hai, Mr. Soon Cheng Boon, Mr. Soon Hean Hooi and Mr. Vincent Lee) Ipoh Networking Session, 3 August 2016 (attended by Mr. Lim Chee Hoong) New Auditor Reporting Model : Lessons and Insights for Investors, 6 October 2016 (attended by Mr. Khoo Choon Yam) Managing Your Tax Affairs in the Current Economic Environment, 1 November 2016 (attended by Mr. Khoo Choon Yam) Seminar Percukaian Kebangsaan 2016, 3 November 2016 (attended by Mr. Lim Chee Hoong) Talk on financial technology for Directors and Senior Management, 7 November 2016 (attended by Pn. Sri Shahrizan Binti Abdullah) Anti-corruption & integrity, the foundation of company sustainability, 8 December 2016 (attended by Mr. Ng Poh Tat) Tax Incentives for Exporters, 19 December 2016 (attended by Mr. Lim Chee Hoong) New Public Rulings in 2016, 20 December 2016 (attended by Mr. Lim Chee Hoong) The Directors will continue to undergo training and other relevant programmes to further enhance their skills and knowledge where relevant. COMMITTEES ESTABLISHED BY THE BOARD The Board has delegated certain functions to the Committees it established to assist with the execution of its responsibilities to the Group. The Committees operate under clearly defined terms of reference and are consistent with the recommendations of the MCCG The functions and Terms of Reference of the Committees, as well as authority delegated by the Board to these Committees, are reviewed from time to time to ensure that they remain relevant and are up-to-date. The Chairman of the respective Committees report to the Board the outcome of deliberations of the Committee meetings. 1. Executive Committee The Executive Committee was established on 24 November 2001 and its members consist of: Soon Cheng Hai Soon Cheng Boon Soon Hean Hooi (the CEO as Chairman of the Committee) (Executive Director) (Executive Director) The Executive Committee meets quarterly to review the financial and sales performance, operational matters, risk management and audit issues. The respective heads of operating units are invited to attend the Executive Committee meetings as and when required. The Non-Executive Directors are not represented in the Executive Committee. However, minutes of Executive Committee meetings are distributed to all Directors prior to the Board Meetings. Queries from the Non-Executive Directors are discussed at the Board meetings. Annual Report

29 Corporate Governance Statement (cont d) COMMITTEES ESTABLISHED BY THE BOARD (cont d) 2. Audit Committee The Audit Committee was established on 6 July 1994 and comprises exclusively Independent Non-Executive Directors The Audit Committee provides a forum for effective communication between the Board, internal auditors and the external auditors and meets every quarter or when necessary. Quarterly and annual financial statements are reviewed by the Audit Committee prior to Board s approval. The Audit Committee also reviews the effectiveness of systems of internal control and risk management practices, as well as the efficiency and effectiveness of the external and internal audit functions. Other detailed information on the Audit Committee is presented in the Audit Committee Report. 3. Nominating Committee The Nominating Committee was established on 24 November The terms of reference of the Nominating Committee include the following: recommend to the Board, candidates for all directorship to be filled in the Board and Board Committees; consider, in making its recommendations, candidates for directorships proposed by the CEO to the Board and Board Committees; evaluate the criterias of candidates appointed to the Board and Board Committees; review the composition of the Board and Board Committees annually; recommend to the Board, Directors to fill the seats on Board Committees; assist the Board to annually review its required mix of skills and experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board; assess and recommend to the Board whether to retain Directors upon exceeding the cumulative term of nine (9) years; carry out annually, the process implemented by the Board for assessing the effectiveness of the Board as a whole, the Board Committees and for assessing the contribution of each individual director; review the term of office and performance of the Audit Committee and each of its members annually to determine whether the Audit Committee and its members have carried out their duties in accordance with the terms of reference; ensure the adequacy of trainings attended by the directors meet the Company s policy of requiring each director to attend at least 1 training annually; ensure orientation of new directors are properly conducted; and ensure there is proper succession planning for the Directors, CEO and key Group Management. The members of the Nominating Committee during the financial year, composed wholly of Independent Non-Executive Directors, are as follows: Name of member Ng Poh Tat Khoo Choon Yam Lim Chee Hoong - Senior Independent Non-Executive Director (Chairman) - Independent Non-Executive Director - Independent Non-Executive Director The Nominating Committee meets when necessary. One (1) meeting was held during the financial year ended 31 December The Nominating Committee upon its annual assessment carried out for financial year ended 31 December 2016 was satisfied that: the size and composition of the Board is sufficient with appropriate mix of knowledge, wide and varied technical, financial and commercial experience; the Board has been able to discharge its duties professionally and effectively; all the Directors continue to uphold the highest governance standards in their conduct and that of the Board; all the Members of the Board are well qualified to hold their positions as Directors in view of their respective academic and professional qualifications, depth of knowledge, skills and experience and their personal qualities; 28 Annual Report 2016

30 Corporate Governance Statement (cont d) COMMITTEES ESTABLISHED BY THE BOARD (cont d) 3. Nominating Committee (cont d) The Nominating Committee upon its annual assessment carried out for financial year ended 31 December 2016 was satisfied that: (cont d) the Independent Non-Executive Directors comply with the definition of Independent Non-Executive Director as defined in the Listing Requirements; Khoo Choon Yam is demonstrably independent, and his length of service on the Board of fifteen (15) years does not in any way interfere with his exercise of objective judgement or his ability to act in the best interests of the Company. His re-election as Independent Non-Executive Director was approved by Shareholders at the previous Annual General Meeting on 24 June 2016; and the Directors are able to devote sufficient time commitment to their roles and responsibilities as Directors of the Company, as they hold not more than five (5) directorships in public listed companies. 4. Remuneration Committee The Remuneration Committee was established on 24 November The terms of reference of the Remuneration Committee includes the following: to recommend to the Board, the remuneration of the Executive Directors in all its forms; to recommend to the Board, the Directors fees to be paid to each of the Non-Executive Directors; and to review the remuneration for Key Group Management and staff, with inputs and feedback from the CEO and Nominating Committee. Remuneration policies are developed to ensure that the remuneration given to the Directors, Key Group Management and staff are fair and commensurate to their level of contributions and are appropriate to attract, retain and motivate them. The members of the Remuneration Committee during the year, composed mainly of Independent Non-Executive Directors, are as follows: Name of member Khoo Choon Yam Ng Poh Tat Lim Chee Hoong Soon Cheng Hai - Independent Non-Executive Director (Chairman) - Senior Independent Non-Executive Director - Independent Non-Executive Director - Executive Director, Group Executive Chairman and Chief Executive Officer The Remuneration Committee meets when necessary. One (1) meeting was held during the financial year ended 31 December ACCOUNTABILITY AND AUDIT Financial Reporting In presenting the annual financial statements and quarterly financial statements to shareholders, the Directors aim to present a balanced, clear and understandable assessment of the Group s position and prospects. The Audit Committee assists the Board in reviewing information to be disclosed to ensure accuracy, adequacy and quality of reporting for the Group s annual and quarterly financial statements. It also reviews the appropriateness of the Group s accounting policies and the changes to these policies as well as ensures these financial statements comply and are prepared in accordance to applicable Malaysian Financial Reporting Standards ( MFRS ) and other regulatory/statutory requirements. Additionally, the Chief Financial Officer ( CFO ) presents to the Audit Committee and the Board details of revenues and expenditures in the form of tables for review of quarter-to-quarter and year-to-date financial performances. The Management Discussion and Analysis of this Annual Report provides additional analysis and commentary on the Group s financial performance. Annual Report

31 Corporate Governance Statement (cont d) ACCOUNTABILITY AND AUDIT (cont d) Financial Reporting (cont d) In reviewing the quarterly and yearly financial statements by the Audit Committee, the CFO also provides assurance to the Audit Committee that appropriate accounting policies had been adopted and applied consistently, that the going concern basis has been applied in the Condensed Consolidated Financial Statements and that prudent judgements and reasonable estimates had been made in accordance with the requirements set out in the MFRS. Assessment of Suitability and Independence of External Auditors The Audit Committee is responsible for the annual assessment of the competency and independence of the external auditors. In its assessment, the Audit Committee considers several factors, which includes the caliber, reputation and resources of the firm, staff experience and professionalism, audit scope, communication, independence and the level of non-audit services to be rendered. Having assessed their performance, the Audit Committee will recommend their reappointment to the Board, upon which the shareholders approval will be sought at the Annual General Meeting. The external auditors are required to declare their independence annually to the Audit Committee as specified by the By- Laws issued by the Malaysian Institute of Accountants. The external auditors have provided the declaration in their annual audit plan presented to the Audit Committee of the Company. Corporate Disclosure Policy The Group is committed to provide accurate, timely, consistent and fair disclosure of corporate information to enable informed and orderly market decisions as well as compliance with the Listing Requirements and Corporate Governance Guide issued by Bursa Malaysia Securities Berhad. This is facilitated by the Corporate Disclosure Committee and our Corporate Disclosure Policy which sets out the policies and procedures for all level of employees, including the CEO. The policy also serves as a guide to enhance awareness among employees of corporate disclosure requirements. Clear roles and responsibilities of Directors, management and employees are provided together with levels of authority, to be accorded to designated person(s), spokespersons and committees in the handling and disclosure of material information. Persons responsible for preparing the disclosure will conduct due diligence and proper verification, as well as coordinate the efficient disclosure of material information to the investing public. The policy also covers confidentiality to ensure that confidential information is handled properly by Directors, employees and relevant parties to avoid leakage and improper use of such information. The Board is mindful that information which is expected to be material must be announced immediately. Leverage on Information Technology for Effective Dissemination of Information The Company s website includes a Corporate section which provides all relevant information on the Company and is accessible publicly. Investor Relations function is further supported by the Investors and Media Information section of our website, and includes announcements made by Bursa Malaysia, changes in shareholding, listing circulars, annual reports and circulars to shareholders. Statement of Directors Responsibilities The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which have been made out in accordance with the applicable approved accounting standards in Malaysia and give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of the results and cash flows of the Group and of the Company for that year. In preparing the financial statements for the financial year ended 31 December 2016, the Directors have: Adopted appropriate accounting policies and applied them consistently Made judgements and estimates that are prudent and reasonable Ensured applicable accounting standards have been followed Prepared the financial statements on the going concern basis The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group and of the Company which enable them to ensure that the financial statements comply with the Companies Act, 1965 and applicable financial reporting standards in Malaysia. The Directors are also responsible for safeguarding the assets of the Company. 30 Annual Report 2016

32 Corporate Governance Statement (cont d) ACCOUNTABILITY AND AUDIT (cont d) Relationship with the Auditors The Company has established transparent and appropriate relationships with the Company s auditors through the Audit Committee. The role of the Audit Committee in relation to both the external and internal auditors is described in the Audit Committee Report. RISK MANAGEMENT AND INTERNAL CONTROL The Board has established a sound risk management and internal control framework to manage risks and to safeguard shareholders investment and the Company s assets, as presented in the Statement on Risk Management and Internal Control. RELATIONS WITH SHAREHOLDERS AND INVESTORS Dialogue between Company and Investors The Board recognises the importance of shareholder communication as it is a key component to upholding the principles and best practices of corporate governance for the Group. The Company views that timely dissemination of information is important, therefore such communication is done through various disclosures and announcements to Bursa Malaysia Securities Berhad, the annual report and circular to shareholders. The financial results of the Company and the Group and other corporate announcements are accessible via the Bursa Malaysia Securities Berhad s website and the Company s website at General corporate information and product information are also available at the Company s website. During the financial year under review, the Company has been involved in investor relations activities to keep shareholders duly informed on the performance of the Company. There were telephone communications with local fund managers and analysts to provide insights on the operations, financial performance and latest developments in the Group. The Company appreciates feedback from their valued shareholders and in this regard, investor relations aim to serve as a channel for shareholders to provide such feedback and views on the Company s performance and direction. Annual General Meeting The Annual General Meeting ( AGM ) serves as an ideal opportunity for dialogue and interaction with both institutional and individual shareholders. The Company dispatches Notice of its AGM to shareholders well in advance of the 21 days requirement stipulated in the Companies Act and Main Market Listing Requirements ( MMLR ). The additional time allows shareholders to make the necessary arrangements to attend and participate in person or by proxy or by corporate representative at the AGM. During the meeting, shareholders are given the opportunity to enquire and comment on matters relating to the Group s business in addition to the Company s financial statements and other items for adoption at the meeting. All the Directors, Management and the External Auditors were in attendance to respond to shareholders queries. In line with the MMLR, all resolutions set out in the notice of AGM will be voted by poll and a scrutineer will be appointed to validate the votes cast. Poll voting more accurately and fairly reflects shareholders views as every vote is recognized thus enforce greater shareholder rights. Annual Report

33 Additional Compliance Information UTILISATION OF PROCEEDS The Company did not raise funds through any corporate proposal during the financial year. AUDIT FEES Group Company RM 000 RM 000 Audit fees payable to the external auditors for the financial year NON-AUDIT FEES Group Company RM 000 RM 000 Non-audit fees payable to the external auditors for the financial year 6 6 VARIATION IN RESULTS There is no material variance between the audited results for the financial year ended 31 December 2016 and unaudited results previously announced for the financial quarter ended 31 December PROFIT GUARANTEE There were no profit guarantees given by the Company during the financial year. MATERIAL LITIGATIONS There were no other material litigations faced by the Group. MATERIAL CONTRACTS Other than as disclosed in Note 20 to the financial statements, there were no material contracts entered into by the Company during the financial year. RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE ( RRPT ) The information on RRPT for the financial year is presented in the Audited Financial Statements in this Annual Report. COMPANIES ACT, 2016 The Companies Act, 2016 ( New Act ) was enacted to replace the Companies Act, 1965, with the objectives to create a legal and regulatory structure that will facilitate business, and promote accountability as well as protection of corporate directors and shareholders, taking into consideration the interest of other stakeholders. The New Act was passed on 4 April 2016 by the Dewan Rakyat (House of Representative) and gazetted on 15 September On 26 January 2017, the Minister of Domestic Trade, Co-operatives and Consumerism announced that the date on which the New Act comes into operation, except Section 241 and Division 8 of Part III of the New Act, would be 31 January Amongst the key changes introduced in the New Act which will affect the financial statements of the Group and of the Company upon the commencement of the New Act on 31 January 2017 are: (i) removal of the authorised share capital; (ii) shares of the Company will cease to have par or nominal value; and (iii) the share premium account will become part of the Company s share capital. The adoption of the New Act is not expected to have any financial impact on the Group and of the Company for the current financial year as any accounting implications will only be applied prospectively, if applicable, and the effect of adoption mainly will be on disclosures to the annual report and financial statements for the financial year ending 31 December Annual Report 2016

34 Audit Committee Report TERMS OF REFERENCE Compositions and Meetings The Audit Committee comprises three (3) members, all of whom are Independent Non-Executive Directors and are appointed by the Board. The Chairman of the Audit Committee, Lim Chee Hoong meets the requirement of paragraph (c)(i) of the Main Market Listing Requirements as he is a member of the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Acountants (MICPA). During the financial year ended 31 December 2016, the Audit Committee convened five (5) meetings. The members of the Audit Committee, and their attendance at the meetings, were as follows: Name of Member No. of Meetings Attended Lim Chee Hoong - Independent Non-Executive Director (Chairman) 5 out of 5 Ng Poh Tat - Senior Independent Non-Executive Director 5 out of 5 Khoo Choon Yam - Independent Non-Executive Director 5 out of 5 The Chief Executive Officer and Chief Financial Officer were invited to all Audit Committee meetings to facilitate direct communication as well as to provide clarification on financial/audit issues and the Group s operations respectively. The Chief Risk Officer and outsourced Internal Audit Director also attended all Audit Committee meetings to table the respective Risk Assessment and Internal Audit reports. The Group s external auditors were in attendance at two (2) meetings during the financial year. Discussions between the Audit Committee and the external auditors were held in two (2) of the said meetings without the presence of any Group Executives. At these meetings, the Audit Committee enquired about Management s co-operation with the External Auditors, their sharing of information and the proficiency and adequacy of resources in financial reporting functions, particularly in relation to the applicable Financial Reporting Standards. The Audit Committee Chairman also permitted the External Auditors to contact him at any time that they became aware of incidents or matters in the course of their audits or reviews that needed his attention or that of the Audit Committee or Board. Other Board members and employees may attend any particular meeting only when their attendance are requested by the Audit Committee. The Company Secretary acts as the Secretary of the Audit Committee. Minutes of each Audit Committee meeting were recorded and tabled for confirmation at the following meeting and subsequently presented to the Board for notation. In 2016, the Audit Committee Chairman presented the Board with the Audit Committee s recommendations to approve the quarterly and annual financial statements. The Audit Committee Chairman also conveyed to the Board matters of significant concern as and when raised by the External Auditors or Internal Auditors. The Nominating Committee reviews the terms of office of the Audit Committee members and assesses the performance of the Audit Committee and its members through an annual effectiveness evaluation. The Nominating Committee is satisfied that the Audit Committee and its members discharged their functions, duties and responsibilities in accordance with the Audit Committee s Terms of Reference, supporting the Board in ensuring the Group upholds appropriate corporate governance standards. SUMMARY OF WORK OF AUDIT COMMITTEE In line with the terms of reference of the Audit Committee, the following works were carried out by the Audit Committee during the financial year ended 31 December 2016 in the discharge of its duties and responsibilities: a. External Audit reviewed the Audit Planning Memorandum, which includes reporting responsibilities and deliverables, audit approach, scope and audit and non-audit fees for the statutory audits of the Group accounts for the financial year ended 31 December 2016 with the external auditors prior to recommending to the Board for approval; reviewed and discussed the results of their audit report and management letter together with Management s response to their findings; reviewed the annual audited financial statements of the Group to ensure compliance with the Companies Act, 1965, Main Market Listing Requirements, applicable accounting standards and other legal and regulatory requirements, prior to submission to the Board for consideration and approval; Annual Report

35 Audit Committee Report (cont d) SUMMARY OF WORK OF AUDIT COMMITTEE (cont d) a. External Audit (cont d) carried out an annual assessment of the performance of the External Auditors, including assessment of their suitability and independence in performing their obligations, which is performed via a formal evaluation form with criterias set by the Audit Committee. Assessment criteria includes the caliber, reputation and resources of the firm, staff experience and qualification, audit scope, communication, ability to perform work within the Group s timeline and the level of non-audit services to be rendered. The Audit Committee will also engage the CFO for his feedback as part of the assessment process. With regards to the assessment of the external auditor s independence, the Board s external auditor independence policy requires that the engagement audit partner who is responsible for the financial statements of the Group be subject to a five-year rotation with a five-year cooling-off period. Being satisfied with the external auditor s performance, technical competency and audit independence as per the auditor independence policy, the Audit Committee then recommended to the Board for approval of the reappointment of BDO as External Auditors for the financial year ending The Board at its meeting held on 18 March 2016 approved the Audit Committee s recommendation to reappoint BDO for the financial year ending 2016 and was approved by the shareholders during the AGM held on 24 June 2016; and had private meetings with the External Auditors in 2016 without the presence of the CEO, Management and Internal Auditors. The purpose of such meetings were to enquire about Management s cooperation with the External Auditors, their sharing of information and the proficiency and adequacy of resources in financial reporting functions, particularly in relation to the compliance with applicable MFRSs as well as other areas of concern that is needed to be escalated to the Board and Management for their further consideration and action. The external auditors provided assurance that they were and had been independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements, including the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants. b. Internal Audit reviewed the results of the Internal Auditors independent assessment of the risks identified, evaluated and managed by risk owners which are detailed in the Risk Assessment Report which is prepared by the Internal Auditors on quarterly basis; reviewed the Internal Audit ( IA ) reports presented on quarterly basis during the financial year under review, where these reports were prepared based on the audit activities conducted according to the approved Internal Audit Plan. The CEO and Chief Risk Officer facilitated the review process by providing clarification to the Audit Committee on any specific issues raised in the IA Reports including the Management s response to the audit findings. The IA reports highlighted the significance of the audit issues raised and recommendations by the Internal Auditors. The IA reports also provided status updates on the implementation of management action plans on the audit findings reported in the IA reports presented to the Audit Committee; reviewed the corrective actions taken on the audit findings to ensure that actions have been taken in a timely and effective manner. The Audit Committee was satisfied with the Internal Auditors performance for financial year ending 31 December 2016 covering the business processes / audit areas as detailed in the Statement on Risk Management and Internal Control; and carried out an annual review of the performance of the Internal Auditors, including assessment of their suitability and independence in performing their obligations, which is performed via a formal evaluation form. In its assessment, the Audit Committee considered several factors, which includes the caliber, reputation and resources of the firm, staff experience and professionalism and audit scope. The Internal Auditors provided written assurance on 17 February 2017 to the Audit Committee that in accordance with the terms of all relevant professional and regulatory requirements, they had been independent throughout the audit engagement for Annual Report 2016

36 Audit Committee Report (cont d) SUMMARY OF ACTIVITIES OF AUDIT COMMITTEE (cont d) c. Risk Management reviewed the results of the Internal Auditors independent assessment of the risks identified, evaluated and managed by risk owners which are detailed in the Risk Assessment Report which is prepared by the Internal Auditors on quarterly basis; reviewed the risk profiles of the Group, including action plan and strategies to address these risks identified; and reviewed the risk policy and risk appetite of the Group and recommended to the Board for approval and inclusion in the Statement on Risk Management and Internal Control. d. Financial Reporting reviewed the unaudited quarterly reports and ensured they were prepared in accordance with the Malaysian Financial Reporting Standard (MFRS) 134 : Interim Financial Reporting and paragraph 9.22 of the Main Market Listing Requirements before recommending to the Board for approval; and deliberated on significant matters highlighted including financial reporting issues, significant judgements made by management, and how these matters are addressed. e. Related Party Transactions reviewed the related party transactions to ensure they are transacted within the limits prescribed under the MMLR and also conflict of interest situations which arose within the Group during the year. f. Annual Report reviewed the Statement on Risk Management and Internal Control and recommended to the Board for approval and inclusion in the Annual Report; and presented the Audit Committee Report to the Board for approval and inclusion in the Annual Report. INTERNAL AUDIT FUNCTION The Internal Audit Function of the Group is outsourced to a professional internal audit service provider firm which undertakes independent, objective and systematic reviews of the risk management, internal controls system and corporate governance. The outsourced internal auditors reports directly to the Audit Committee and assists the Board in reviewing the adequacy and integrity of the internal control systems to manage risks exposures over key processes within the Group. The functions and responsibilities of the Internal Audit Function are embodied in the Internal Audit Charter. The costs incurred by the Group in relation to the Internal Audit Function for the financial year ended 31 December 2016 amounted to approximately RM53,600. During the financial year ended 31 December 2016, the following works were carried out by the Internal Audit Function: reviewed and assessed the adequacy and integrity of internal control systems of the Group covering the business processes / audit areas as detailed in the Statement on Risk Management and Internal Control; attended Audit Committee meetings to table the Internal Audit Report on findings of assessment on internal control system, highlighted the risks and implications, and recommended improvements to the Management on weaknesses found; reviewed and reported on the follow-up status of previous audit findings taken by the Management; and performed independent risk assessment on risks identified, evaluated and managed by the respective heads of departments which are being documented in the Risk Management Forms and presented the Risk Assessment Report to the Audit Committee. The Internal Audit Plan for 2016 was covered under the two-year audit plan reviewed and approved by the Audit Committee in previous year. Annual Report

37 Statement on Risk Management and Internal Control INTRODUCTION The Board of Directors ( the Board ) is pleased to present our Group s Statement on Risk Management and Internal Control for the financial year ended 31 December This Statement which outlines the Group s risk management and internal control system is made in compliance with paragraph 15.26(b) of the Main Market Listing Requirements and is guided by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers issued by Bursa Malaysia Securities Berhad. RESPONSIBILITY The Board acknowledges its overall responsibility in reviewing the effectiveness and adequacy of the risk management and internal control system. The Risk Management team which comprise the Chief Executive Officer, Chief Risk Officer and respective Heads of Department, are responsible for implementing the processes for identifying, evaluating, monitoring and reporting of risks and internal control as well as taking the appropriate and timely corrective actions. At each of the Executive Committee meeting in 2016, the Risk Assessment and Internal Audit Reports were presented by the Internal Auditors to the Executive Committee for deliberation. The Internal Auditors provided their independent assessment on the adequacy and effectiveness of the controls in place on risk issues raised by the Management Team and also audit findings based on their risk-based audits. The Chief Risk Officer also provided an Enterprise Risk Management Report to the Executive Committee and Audit Committee and discussed on action plans and strategies to mitigate the risks. The minutes of the Executive Committee and Audit Committee meetings which record the risk management and internal control issues identified by the Risk Management team, the action plans to mitigate, monitor and manage the risks, the timeline set, the progress and status of the action plans taken are presented to the Board. The Board ensures that the Group s key areas of risk are managed within an acceptable risks profile. The system of risk management and internal control is designed to identify, assess, respond and manage risks within tolerable ranges, rather than eliminating all risks to achieve the Group s objectives. Therefore, this system can only provide reasonable and not absolute assurance against material misstatement or loss and fraud or breach of regulations. The Board is of the view that the system of risk management and internal control is in place for the financial year ended 31 December 2016 under review and up to the date of approval of this Statement, and is sound and sufficient to safeguard shareholders investment, the interests of customers, regulators, employees and other stakeholders, and the Group s assets. The Board has received assurance from the Chief Executive Officer and the Chief Financial Officer that the Group s risk management and internal control system is operating effectively and adequately, in all material aspects. The Board confirms that the Risk Management Team has taken appropriate remedial action in the event that there is any significant weaknesses identified from the risk management and internal control system. RISK MANAGEMENT POLICY The Board recognises that its primary responsibility is to ensure the long term viability of the Group. One of our key tasks is to understand the principal risks of all aspects of the business that the Group is engaged in, as all significant business decisions require the incurrence of risks. Our Choo Bee Enterprise Risk Management policy, therefore, is to achieve a proper balance between risks incurred and potential returns to shareholders and stakeholders. RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK The key elements of the Group s risk management and internal control framework are: (a) Risk governance; (b) Risk appetite; (c) Risk management; and (d) Key internal control processes. 36 Annual Report 2016

38 Statement on Risk Management and Internal Control (cont d) RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (cont d) Risk Governance The Board, through the Audit and Executive Committee, maintains an oversight responsibility for risks within the Group. Both the committees are supported by the Internal Audit Function as detailed below. Appropriate action is taken by Risk Management Team to implement decisions made by the Committees. Under the purview of the Chief Executive Officer, the respective heads of department of the Group, i.e. risk owners are responsible to implement their own control processes, to identify and manage their risks within the system of risk management and internal control. The Chief Risk Officer is involved in assisting the Chief Executive Officer to drive the risk management process and review the risks identified, internal controls in place and risks ratings assigned by respective risk owners to ensure reflective of the business structure and control environment in the Group. Risk Appetite The Group s risk appetite defines the amount and types of risks that the Group is able and willing to accept in pursuit of its business objectives. It also reflects the level of risk tolerance and limits set to govern, manage and control the Group s risk taking activities. The risk appetite statement of the Group is as follows: The Choo Bee Group shall remain focused in its strategic direction to become one of the nation s premier manufacturer, supplier and service center of steel products. In its pursuit for growth in business and formulating of strategies, the Group recognises the need to consider associated risk exposure by continuously reviewing its risk profiles, reinforce its prudent risk management practices and risk tolerance, uphold its corporate governance culture and practices. This is also to ensure regulatory compliance and to preserve its reputation in the market. For capital management purposes, the Group monitors capital using the gearing ratio. The Group shall maintain a low gearing ratio of below 15% to safeguard the operations as a going concern in order to provide fair returns for shareholders and benefits for other stakeholders as well as to maintain the optimal capital structure. Risk Management The Group has established an on-going risk management process for identifying, evaluating and managing the significant risks faced by the Group in its achievement of objectives and strategies. a) Process for Identifying Risk The Risk Management Team will identify the risks which affect the business or operations in meeting the objectives of the Group and the root causes of the risks. Based on a risk rating guideline which is reviewed and approved by the Audit Committee on yearly basis, the risks will be asessed on their impact and likelihood of occurrence as well as the current control effectiveness based on past history, knowledge of the existing controls in place and understanding of the risk aspects or problems faced during operation. All these will be recorded in the Risk Management Form ( RMF ). The RMF will be submitted to Internal Auditors for their independent assessment to ensure that the risks and controls were correctly recorded and in practice as such. b) Process for Evaluating Risk The risk rating guideline provides a basis for determining the rating of the residual audit risks, whether it is low, moderate or high. This takes into account the raw risks rating which is based on the impact and significance assessment and the control effectivenes rating as follows: Raw risk rating Control Effectiveness Rating High Moderate Low Low Low Low Moderate Moderate Low Moderate High High Low Moderate High If the risk is assessed to be moderate or high, then there is a need to come up with a mitigation plan. Annual Report

39 Statement on Risk Management and Internal Control (cont d) RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (cont d) Risk Management (cont d) c) Process for Managing Risk The risks identified within the Group are managed by the Risk Management Team, the progress of the action plans to mitigate the risks are monitored and reported by the Internal Auditors and Chief Risk Officer to the Executive Committee and Audit Committee. A Risk Register is maintained by the Chief Risk Officer to record all risks by department so that review can be performed regularly and status of the action plans can be monitored and updated. The Risk Register is communicated to the Risk Management Team on quarterly basis via s. The Group Risk Profiles with strategies to address these risks are continually reviewed, updated and reported to the Audit Committee by the Chief Risk Officer on a quarterly basis. The key risk management processes for the main risk areas of the Group are as follows: Risk Areas Business / Operational Risks (including Supply Risk, Human Resource Risk, Information Technology Risk, Production Risk, Quality Assurance Risk and Administration Risk) Inventory Management Risk Credit Risk Financial Risk Risk Management Processes Day-to-day management of operational risks through an effective system of internal controls and monitoring measures. Maintain the Quality Management System in compliance with international quality standard ISO 9001 : Review of economic conditions and implications to business operations. Implementation of controls in inventory handling, movement and documentation. Review and awareness of market information, price trend and changing business environment in making purchases and sales decisions as well as managing inventory levels. Implementation of policies and procedures on invoicing, opening of new accounts of customers, overdue debts, doubtful debts, cash receipts and collections as well as credit controls. Clearly defined authorities of Credit Committee in credit approving process. Check and review processes in documents submitted to Finance Department and financial reports. Implementation of applicable financial reporting standards and keeping abreast with new changes to ensure compliance. Review and enhancement of existing accounting procedures manual. 38 Annual Report 2016

40 Statement on Risk Management and Internal Control (cont d) RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (cont d) Key Internal Control Processes The Group maintains a strong control structure whereby internal control is embedded in its business processes. The Group s internal control system comprises the following key processes: 1. Control Environment a) Organisation Structure, Authorisation Procedures and Segregation of Duties The Group maintains a structured line of reporting which includes definition of responsibilities and delegation of authority which are defined in the Organisation Charts and the Group s Summary of Authority Limits which reflects the authority and authorisation limit of the Board, Executive Committee, Management and other key officers. There are segregation of duties over verification, authorisation and reconciliation processes to reduce the scope of errors and mitigate the risk of fraud in the organisation. b) Active Involvement by Executive Directors The Executive Directors are actively involved in the running of the business and operations and they report to the Board on significant changes in the business and external environment, if any which affect the operations of the Group. c) Board Committees Board Committees such as Executive Committee, Audit Committee, Nominating Committee and Remuneration Committee are established with clearly defined Terms of Reference ( TOR ) outlining their functions and duties delegated by the Board. The Board Committees assist the Board to review the effectiveness of the ongoing monitoring processes on risk and control matters for areas within their scope of work. The TOR are reviewed regularly and updated when there are changes. d) Policies and Procedures Operational policies and procedures form an integral part of the internal control system to safeguard the Group s assets against material losses. These include standard operating practices, memorandum, manuals and handbooks which are updated, reviewed and revised periodically to meet changing business and operational requirements and statutory reporting needs. e) External Certification The effectiveness of the system of internal control is also reviewed in our Quality Management System (ISO 9001:2015). Regular review and periodic audits are conducted internally as well as by external auditors from accredited certification bodies. Results of these audits are reported to the Management. 2. Information and Communication Appropriate internal and external communication processes have been established. Information critical to the achievement of the Group s business objectives are communicated through established reporting lines during the various meetings held and documentation such as operational guidelines, policies and procedures and in the form of reports, memorandum, staff and customer satisfaction surveys etc. Matters that require the Board and Management s attention are highlighted for review, deliberation and decision on a timely basis. 3. Review, Monitoring and Reporting Scheduled operational and management meetings are held to discuss and review the business plans, financial and operational performances of the Group. All the meetings held are minuted to record the issues highlighted and discussed, action required and decisions made by the Management. The Board is updated on the Group s performance at the scheduled quarterly meetings. The Chief Financial Officer provides assurance to the Board through the Audit Committee that appropriate accounting policies have been adopted and applied consistently, and that adequate processes and controls are in place for effective and appropriate financial reporting and disclosures under the Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards ( IFRS ) and Bursa Malaysia Securities Berhad Main Market Listing Requirements ( MMLR ). Annual Report

41 Statement on Risk Management and Internal Control (cont d) RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (cont d) Key Internal Control Processes (cont d) 3. Review, Monitoring and Reporting (cont d) There is also close review and monitoring on the significant assets of the Group by the Management such as Trade Receivables and Inventories. During the monthly Group Sales Meeting, review is performed on highlighted customers long overdue debts, debts more than credit limit allowed and customers with credit limit more than guarantee amount, temporary accounts opened for customers, customers without guarantee amount owing more than the set threshold and debts of customers under same management group or are related. This is to ensure that the customers debts are effectively monitored and to mitigate credit default risk. There are also full inventory counts conducted to all the locations of the Group at each financial year end and scheduled special inventory counts throughout the year to identify any inventory variances for adjustments in system. This is to ensure that our inventory balances are accurate and values are reflective in our financial statement. The results of all the inventory counts performed and inventory variances, if any are reported to the Management. 4. Internal Audit Function The Group outsourced its Internal Audit Function to an independent professional internal audit service provider firm to review the adequacy and integrity of the internal control system of the Group. The Internal Audit function reports to the Audit Committee and is guided by an approved Internal Audit Charter. The Internal Audit Function, performed review on key processes within the Group according to the Internal Audit Plan which have been approved by the Audit Committee and assessed the effectiveness of the internal control system, based on their procedures. They will also ensure compliance to the relevant accounting policies and financial reporting standards relating to their auditable areas. Their audit report which highlights material non-compliance or weaknesses, risks and implications, and management responses will be presented at the Executive Committee and Audit Committee Meetings. The Management is responsible for ensuring that corrective actions are taken within the stipulated time frame. Subsequent review on the implementation of corrective actions taken for previous audit findings will also be performed by the Internal Audit Function and reported to the Audit Committee. The Internal Audit Function also performed independent assessment of the risks identified, evaluated and managed by risk owners. Such assessment provides guidance in determining the risk-based audit plan and scope of work as well as preparation of audit programme for a more effective audit to be conducted. The Internal Audit plan which is prepared based on areas of higher risk exposure has been approved by the Audit Committee. The business processes / audit areas covered for the financial year ended 31 December 2016 were as follows: Quarter 1 Audit Areas Inventory Management (Pengkalan factory) Purchasing of raw materials Audit Scope Receipt of raw materials or finished goods Issuance of raw materials to production Transfer from production to finished goods warehouse Issuance from finished goods warehouse to customer Periodic inventory count Inventory adjustments (stock variances, stocks issued for own use, downgrades, goods return, goods exchange) Warehouse transfers Inventory aging Ordering of steel coils Receiving of steel coils Payment to suppliers Monitoring completion of sales contract 40 Annual Report 2016

42 Statement on Risk Management and Internal Control (cont d) RISK MANAGEMENT AND INTERNAL CONTROL FRAMEWORK (cont d) Key Internal Control Processes (cont d) 4. Internal Audit Function (cont d) Quarter 2 Audit Areas Property, Plant and Equipment (PPE) Investment Properties Costing Audit Scope Addition, disposals, transfers and write-off of PPE Capital work-in-progress PPE Register Impairment of PPE Depreciation charges of PPE Estimated useful lives and residual values of PPE Insurance coverage on PPE Sighting of physical PPE and land titles Ownership of investment properties Impairment of investment properties Costing updates and calculations Valuation of inventories Slow-moving inventories and write downs to net realizable value Correction of moving average unit cost (MAUC) on stock items 3 Human Resource Recruitment (local and foreign staff) Resignation Overtime and allowances Staff attendance Leave management Payroll processing Payment to statutory authorities Performance appraisal Staff disciplinary action Foreign workers work permits 4 Maintenance Plant maintenance policies and procedures Preventive maintenance schedule planning Monitoring of preventive and repair maintenance work Hiring of competent plant maintenance personnel Control and safekeeping of spare parts and consumables Control of plant maintenance resources Certification of cranes and air compressors REVIEW OF THE STATEMENT As required by Paragraph of the Bursa Malaysia Securities Berhad Main Market Listing Requirements, the external auditors have reviewed this Statement on Risk Management and Internal Control, and reported to the Board that nothing has come to their attention that causes them to believe that the Statement on Risk Management and Internal Control intended to be included in the annual report for the FYE 2016 has not been prepared, in all material aspects, in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, nor is the Statement on Risk Management and Internal Control factually inaccurate. Their limited assurance review was performed in accordance with the Recommended Practice Guide ( RPG ) 5 [Revised 2015] issued by the Malaysian Institute of Accountants which does not require the external auditors to form an opinion on the adequacy and effectiveness of the risk management and internal control systems of the Group. Annual Report

43 Directors Report The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The Company is principally engaged in the processing of steel coils into steel products, fabrication of steel products and trading of hardware products. The principal activities of the subsidiaries are disclosed in Note 8 to the financial statements. There have been no significant changes in the nature of the principal activities of the Company and its subsidiaries during the financial year. RESULTS Group RM 000 Company RM 000 Profit for the financial year 24,713 16,583 Attributable to: Owners of the parent 24,713 16,583 DIVIDENDS Dividends paid, declared or proposed since the end of the previous financial year were as follows: RM 000 In respect of financial year ended 31 December 2015: A final single tier dividend of 4 sen per ordinary share, paid on 19 August ,358 The Directors recommend a final single tier dividend of 6 sen per ordinary share, amounting to RM6,536,465 and a special single tier dividend of 3 sen per ordinary share, amounting to RM3,268,232 in respect of the financial year ended 31 December 2016 for shareholders approval at the forthcoming Annual General Meeting. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year. ISSUE OF SHARES AND DEBENTURES The Company did not issue any new shares or debentures during the financial year. TREASURY SHARES The shareholders of the Company, by an ordinary resolution passed at the Annual General Meeting held on 24 June 2016, renewed the approval for the Company to repurchase its own shares. Further relevant details are disclosed in Note 15 to the financial statements. 42 Annual Report 2016

44 Directors Report (cont d) OPTIONS GRANTED OVER UNISSUED SHARES No options were granted to any person to take up unissued ordinary shares of the Company during the financial year. DIRECTORS The Directors who have held office since the date of the last report are: Soon Cheng Hai Soon Cheng Boon Soon Hean Hooi Lee Sieng Vincent Lee Puan Sri Shahrizan Binti Abdullah Khoo Choon Yam Ng Poh Tat Lim Chee Hoong DIRECTORS INTERESTS The Directors holding office at the end of the financial year and their beneficial interests in the ordinary shares of the Company and of its related corporations during the financial year ended 31 December 2016 as recorded in the Register of Directors Shareholding kept by the Company under Section 134 of the Companies Act, 1965 in Malaysia were as follows: Shares in the Company --- Number of ordinary shares of RM1.00 each --- Balance Balance as at as at Bought Sold Direct interest Soon Cheng Hai 1,459, ,459,000 Soon Cheng Boon 1,433,000 - (12,000) 1,421,000 Soon Hean Hooi 1,559, ,559,049 Lee Sieng Vincent Lee 588, ,900 Puan Sri Shahrizan Binti Abdullah 47, ,840 Deemed interests by virtue of shares held by companies in which the Directors have interests Soon Cheng Hai 57,745, ,745,000 Soon Cheng Boon 57,745, ,745,000 Soon Hean Hooi 57,745, ,745,000 Deemed interests by virtue of shares held by immediate family members of the Directors Soon Cheng Boon # 15, ,600 Lee Sieng Vincent Lee # 469,858 - (291,658) 178,200 Shares in the ultimate holding company, Soon Lian Huat Holdings Sdn. Berhad Direct interests Soon Cheng Hai 226, ,667 Soon Cheng Boon 226, ,667 Soon Hean Hooi 226, ,666 Annual Report

45 Directors Report (cont d) DIRECTORS INTERESTS (cont d) The Directors holding office at the end of the financial year and their beneficial interests in the ordinary shares of the Company and of its related corporations during the financial year ended 31 December 2016 as recorded in the Register of Directors Shareholding kept by the Company under Section 134 of the Companies Act, 1965 in Malaysia were as follows: (cont d) Shares in related company, Choo Bee Holdings Sdn. Bhd. --- Number of ordinary shares of RM1.00 each --- Balance Balance as at as at Bought Sold Direct interests Soon Cheng Hai 161, ,829 Soon Cheng Boon 161, ,829 Soon Hean Hooi 161, ,832 Deemed interests by virtue of shares held by companies in which the Directors have interest Soon Cheng Hai 1,973, ,973,900 Soon Cheng Boon 1,973, ,973,900 Soon Hean Hooi 1,973, ,973,900 # Deemed interests through children s and/or spouse s shareholdings pursuant to Section 134(12)(c) of the Companies Act, 1965 in Malaysia. By virtue of their interests in the ordinary shares of the Company and of its ultimate holding company, Mr. Soon Cheng Hai, Mr. Soon Cheng Boon and Mr. Soon Hean Hooi are also deemed to be interested in the ordinary shares of all the subsidiaries to the extent that the Company and the holding company have interests. None of the other Directors holding office at the end of the financial year have any interest in the ordinary shares in the Company and of its related corporations during the financial year. DIRECTORS BENEFITS Since the end of the previous financial year, none of the Directors have received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors as shown 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 the following: (i) (ii) remuneration received by certain Directors as Directors/Executives of the ultimate holding company and its subsidiaries; and deemed benefits arising from related party transactions as disclosed in Note 32 to the financial statements. There were no arrangements during and at the end of the financial year, to which the Company is a party, which had the object of enabling the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. 44 Annual Report 2016

46 Directors Report (cont d) OTHER STATUTORY INFORMATION REGARDING THE GROUP AND THE COMPANY (I) AS AT THE END OF THE FINANCIAL YEAR (a) Before the statements of profit or loss and other comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and to ensure that any current assets other than debts, which were unlikely to realise their book values in the ordinary course of business had been written down to their estimated realisable values. (b) In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature. (II) FROM THE END OF THE FINANCIAL YEAR TO THE DATE OF THIS REPORT (c) The Directors are not aware of any circumstances: (i) (ii) (iii) which would render the amounts written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any material extent; which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; and which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. (d) In the opinion of the Directors: (i) (ii) there has not arisen any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made; and no contingent or other liability has become enforceable or is likely to become enforceable, within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due. (III) AS AT THE DATE OF THIS REPORT (e) (f) (g) There are no charges on the assets of the Group and of the Company which have arisen since the end of the financial year to secure the liabilities of any other person. There are no contingent liabilities of the Group and of the Company which have arisen since the end of the financial year. The Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading. Annual Report

47 Directors Report (cont d) SIGNIFICANT EVENT SUBSEQUENT TO THE END OF THE REPORTING PERIOD Significant event subsequent to the end of the reporting period is disclosed in Note 35 to the financial statements. ULTIMATE HOLDING COMPANY The Directors regard Soon Lian Huat Holdings Sdn. Berhad, a company incorporated in Malaysia as the holding and ultimate holding company. AUDITORS The auditors, BDO, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors Soon Cheng Hai Soon Cheng Boon Director Director Ipoh 24 March Annual Report 2016

48 Statement by Directors In the opinion of the Directors, the financial statements set out on pages 52 to 104 have been drawn up in accordance with 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 Group and of the Company as at 31 December 2016 and of the financial performance and cash flows of the Group and of the Company for the financial year then ended. In the opinion of the Directors, the information set out in Note 37 to the financial statements on page 105 has been compiled in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad. On behalf of the Board, Soon Cheng Hai Soon Cheng Boon Director Director Ipoh 24 March 2017 Statutory Declaration I, Tan Han Leong, being the officer primarily responsible for the financial management of Choo Bee Metal Industries Berhad, do solemnly and sincerely declare that the financial statements set out on pages 52 to 105 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly ) declared by the abovenamed at ) Kuala Lumpur this ) 24 March 2017 ) Tan Han Leong Before me: Commissioner for Oaths Baloo A/L T. Pichai Annual Report

49 Independent Auditors Report to the members of Choo Bee Metal Industries Berhad Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Choo Bee Metal Industries Berhad, which comprise the statements of financial position as at 31 December 2016 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 52 to 104. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2016, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing ( ISAs ). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Carrying amount of inventories at lower of cost and net realisable value As at 31 December 2016, inventories of the Group, which were generally steel products, were RM132.5 million. Details of the inventories have been disclosed in Note 10 to the financial statements. We have focused on the audit risk that the carrying amount of inventories may not be stated at the lower of cost and net realisable value. Writing down of inventories to net realisable value is mainly based on management estimates, which have been derived from estimates of selling prices that are subject to price volatility of steel, and if not accounted for properly, may lead to the valuation of inventories being misstated. Audit response Our audit procedures included the following: (a) (b) (c) (d) obtained an understanding of the process implemented by management over the determination of lower of cost and net realisable value used in the valuation of inventories; evaluated the historical net realisable values of key inventory items determined by management against the movements of world composite steel prices; analysed inventories turnover period by comparing that to the assessment of management on the identification of slow moving inventories; and assessed the appropriateness of inventories written down and written back by verifying selling prices subsequent to the end of the reporting period. 48 Annual Report 2016

50 Independent Auditors Report to the members of Choo Bee Metal Industries Berhad (cont d) Information Other than the Financial Statements and Auditors Report Thereon The Directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements of the Group and of the Company and our auditors report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the Group s and the Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s and the Company s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. Annual Report

51 Independent Auditors Report to the members of Choo Bee Metal Industries Berhad (cont d) Auditors Responsibilities for the Audit of the Financial Statements (cont d) As part of an audit in accordance with approved standards on auditing in Malaysia and ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (cont d) Conclude on the appropriateness of the Directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s or the Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 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 subsidiaries have been properly kept in accordance with the provisions of the Act. We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. Our audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act. 50 Annual Report 2016

52 Independent Auditors Report to the members of Choo Bee Metal Industries Berhad (cont d) Other Reporting Responsibilities The supplementary information set out in Note 37 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. BDO AF: 0206 Chartered Accountants Lum Chiew Mun 3039/04/17 (J) Chartered Accountant Kuala Lumpur 24 March 2017 Annual Report

53 Statements of Financial Position as at 31 December 2016 ASSETS Group Company Note RM 000 RM 000 RM 000 RM 000 Non-current assets Property, plant and equipment 5 146, , , ,286 Investment properties 6 1,779 1, Prepaid lease payments for land 7 2,687 2,823 2,583 2,648 Investments in subsidiaries ,673 26,673 Goodwill on consolidation Current assets 150, , , ,607 Inventories , ,797 76,079 83,620 Trade and other receivables , ,704 60,472 69,001 Derivative assets Other investments 13-10, Current tax assets Cash and bank balances 14 92,980 34,014 40,503 2, , , , ,528 TOTAL ASSETS 478, , , ,135 EQUITY AND LIABILITIES Equity attributable to the owners of the parent Share capital , , , ,903 Treasury shares 15 (1,462) (1,459) (1,462) (1,459) Reserves , , , ,944 TOTAL EQUITY 451, , , ,388 The accompanying notes form an integral part of the financial statements. 52 Annual Report 2016

54 Statements of Financial Position as at 31 December 2016 (cont d) LIABILITIES Group Company Note RM 000 RM 000 RM 000 RM 000 Non-current liabilities Deferred tax liabilities 17 12,614 12,980 12,448 12,493 Current liabilities Trade and other payables 18 11,954 9,654 5,699 3,115 Derivative liabilities Current tax liabilities 2, , Borrowings 19-2, ,384 11,793 7,735 3,254 TOTAL LIABILITIES 26,998 24,773 20,183 15,747 TOTAL EQUITY AND LIABILITIES 478, , , ,135 The accompanying notes form an integral part of the financial statements. Annual Report

55 Statements of Profit or Loss and Other Comprehensive Income for the financial year ended 31 December 2016 Group Company Note RM 000 RM 000 RM 000 RM 000 Revenue , , , ,257 Cost of sales 23 (317,611) (430,188) (147,133) (207,078) Gross profit 52,014 31,018 19,737 10,179 Other income 24 6,825 3,740 11,934 7,254 Administrative expenses (12,217) (12,964) (5,906) (6,869) Selling and distribution expenses (13,337) (15,663) (4,852) (6,550) Finance costs 27 (8) (630) (14) (889) Profit before taxation 28 33,277 5,501 20,899 3,125 Taxation 29 (8,564) 429 (4,316) 2,306 Profit after taxation 24,713 5,930 16,583 5,431 Other comprehensive income, net of tax Total comprehensive income 24,713 5,930 16,583 5,431 Profit attributable to: Owners of the parent 24,713 5,930 16,583 5,431 Total comprehensive income attributable to: Owners of the parent 24,713 5,930 16,583 5,431 Earnings per share attributable to equity holders of the Company (sen) Basic The accompanying notes form an integral part of the financial statements. 54 Annual Report 2016

56 Statements of Changes in Equity for the financial year ended 31 December 2016 [ Non-distributable ] Distributable Share Treasury Share General Retained Total Group capital shares premium reserve earnings equity Note RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Balance as at 1 January ,903 (1,459) 17,765 1, , ,473 Profit for the financial year ,713 24,713 Other comprehensive income, net of tax Total comprehensive income ,713 24,713 Transactions with owners Purchase of treasury shares 15(b) - (3) (3) Dividend (4,358) (4,358) Total transactions with owners - (3) - - (4,358) (4,361) Balance as at 31 December ,903 (1,462) 17,765 1, , ,825 Balance as at 1 January ,903 (1,455) 17,765 1, , ,083 Profit for the financial year ,930 5,930 Other comprehensive income, net of tax Total comprehensive income ,930 5,930 Transactions with owners Purchase of treasury shares 15(b) - (4) (4) Dividend (6,536) (6,536) Total transactions with owners - (4) - - (6,536) (6,540) Balance as at 31 December ,903 (1,459) 17,765 1, , ,473 The accompanying notes form an integral part of the financial statements. Annual Report

57 Statements of Changes in Equity for the financial year ended 31 December 2016 (cont d) [ Non-distributable ] Distributable Share Treasury Share Retained Total Company capital shares premium earnings equity Note RM 000 RM 000 RM 000 RM 000 RM 000 Balance as at 1 January ,903 (1,459) 17, , ,388 Profit for the financial year ,583 16,583 Other comprehensive income, net of tax Total comprehensive income ,583 16,583 Transactions with owners Purchase of treasury shares 15(b) - (3) - - (3) Dividend (4,358) (4,358) Total transactions with owners - (3) - (4,358) (4,361) Balance as at 31 December ,903 (1,462) 17, , ,610 Balance as at 1 January ,903 (1,455) 17, , ,497 Profit for the financial year ,431 5,431 Other comprehensive income, net of tax Total comprehensive income ,431 5,431 Transactions with owners Purchase of treasury shares 15(b) - (4) - - (4) Dividend (6,536) (6,536) Total transactions with owners - (4) - (6,536) (6,540) Balance as at 31 December ,903 (1,459) 17, , ,388 The accompanying notes form an integral part of the financial statements. 56 Annual Report 2016

58 Statements of Cash Flows for the financial year ended 31 December 2016 CASH FLOWS FROM OPERATING ACTIVITIES Group Company Note RM 000 RM 000 RM 000 RM 000 Profit before taxation 33,277 5,501 20,899 3,125 Adjustments for: Amortisation of prepaid lease payments for land Bad debt written off Bad debt recovered (5) (21) - - Depreciation of property, plant and equipment 5 6,864 6,877 6,007 5,959 Dividends income received from subsidiaries - - (5,740) (3,165) Fair value adjustments on: - investment properties other investments 37 (37) derivative financial instruments 12 (2) (325) (4) (325) (Gain)/Loss on disposal of: - other investments (411) - (142) - - property, plant and equipment 471 (160) 150 (107) Impairment losses on: - property, plant and equipment trade and other receivables 11 1, trade and other receivables no longer required 11 (194) (227) - - Interest expense Interest income on overdue accounts (483) (527) (112) (123) Interest income (2,394) (287) (1,456) (71) Inventories written (back)/down 10 (3,417) 2,247 (2,348) 1,217 Property, plant and equipment written off Unrealised (gain)/loss on foreign exchange transactions (818) 1,576 (737) 1,801 Operating profit before changes in working capital 34,654 16,265 17,046 9,273 Changes in working capital Inventories 21,711 31,591 9,889 11,752 Trade and other receivables 17,211 40,765 10,805 26,449 Trade and other payables 2,298 (1,861) 2,591 (433) Cash flows from operations - carried forward 75,874 86,760 40,331 47,041 The accompanying notes form an integral part of the financial statements. Annual Report

59 Statements of Cash Flows for the financial year ended 31 December 2016 (cont d) Group Company Note RM 000 RM 000 RM 000 RM 000 Cash flows from operations brought forward 75,874 86,760 40,331 47,041 Interest received Tax refunded - 6,568-5,827 Tax paid (6,255) (3,619) (2,482) (545) Net cash flows from operating activities 70,102 90,236 37,961 52,446 CASH FLOWS FROM INVESTING ACTIVITIES Dividends received from subsidiaries - - 5,740 3,165 Increase in deposits pledged to a licensed bank (6) (7) (5) (5) Interest received 2, , Purchase of: - property, plant and equipment 5 (18,605) (4,994) (1,620) (2,860) - other investments (17,589) (10,000) (7,858) - Proceeds from disposal of: - property, plant and equipment 298 1, ,181 - other investments 28,000-8,000 - Repayments to subsidiaries - - (2,484) (23,767) Net cash flows used (in)/from investing activities (5,508) (13,474) 3,352 (22,215) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid 31 (4,358) (6,536) (4,358) (6,536) Interest paid 27 (8) (630) (14) (889) Purchase of treasury shares 15(b) (3) (4) (3) (4) Short term borrowings - Repayments (5,700) (158,576) (3,700) (85,893) - Drawdowns 3, ,161 3,700 63,464 Net cash flows used in financing activities (6,369) (51,585) (4,375) (29,858) The accompanying notes form an integral part of the financial statements. 58 Annual Report 2016

60 Statements of Cash Flows for the financial year ended 31 December 2016 (cont d) Group Company Note RM 000 RM 000 RM 000 RM 000 Net increase in cash and cash equivalents 58,225 25,177 36, Effect of exchange rate changes on cash and cash equivalents 735 (1,556) 653 (1,570) Cash and cash equivalents at beginning of financial year 33,829 10,208 2,745 3,942 Cash and cash equivalents at end of financial year 14 92,789 33,829 40,336 2,745 The accompanying notes form an integral part of the financial statements. Annual Report

61 Notes to the Financial Statements 31 December CORPORATE INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at 55A, Medan Ipoh 1A, Medan Ipoh Bistari, Ipoh, Perak Darul Ridzuan. The principal place of business of the Company is located at Wisma Soon Teik Aun, Jalan Bendahara, Ipoh, Perak Darul Ridzuan. The holding and ultimate holding company of the Company is Soon Lian Huat Holdings Sdn. Berhad, which is incorporated in Malaysia. The consolidated financial statements for the financial year ended 31 December 2016 comprise the Company and its subsidiaries. These financial statements are presented in Ringgit Malaysia ( RM ), which is also the Company s functional currency. All financial information presented in RM has been rounded to the nearest thousand (RM 000), unless otherwise stated. The financial statements were authorised for issue in accordance with a resolution by the Board of Directors on 24 March PRINCIPAL ACTIVITIES The Company is principally engaged in the processing of steel coils into steel products, fabrication of steel products and trading of hardware products. The principal activities of the subsidiaries are disclosed in Note 8 to the financial statements. There have been no significant changes in the nature of these principal activities of the Company and its subsidiaries during the financial year. 3. BASIS OF PREPARATION The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards ( MFRSs ), International Financial Reporting Standards ( IFRSs ) and the provisions of the Companies Act, 1965 in Malaysia. However, Note 37 to the financial statements set out on page 105 has been 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 ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. The financial statements of the Group and of the Company have been prepared under the historical cost convention except as otherwise stated in the financial statements. The accounting policies adopted are consistent with those of the previous financial year except for the effects of adoption of new MFRSs during the financial year. The new MFRSs and Amendments to MFRSs adopted during the financial year are set out in Note 36.1 to the financial statements. 4. OPERATING SEGMENTS The Group has arrived at two reportable operating segments that are based on information reported internally to the Management and the Board of Directors. The reportable segments are summarised as follows: (i) Trading Dealing in hardware and construction materials (ii) Manufacturing Processing of steel coils into steel products and fabrication of steel products 60 Annual Report 2016

62 Notes to the Financial Statements 31 December 2016 (cont d) 4. OPERATING SEGMENTS (cont d) The Group evaluates performance on the basis of profit or loss from operations before tax not including non-recurring losses, such as goodwill impairment. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to operating segments. Inter-segment revenue is priced along the similar lines as sales to external customers and is eliminated in the consolidated financial statements. These policies have been applied consistently throughout the current and previous financial years. Segment assets exclude deferred tax assets, derivative assets, cash and bank balances, assets used primarily for corporate purposes and items that cannot be reasonably allocated to individual segments. Segment liabilities exclude deferred tax liabilities and derivative liabilities. Even though loans and borrowings arise from financing activities rather than operating activities, they are allocated to the segments based on relevant factors (e.g. funding requirement). Details are provided in the reconciliations from segment assets and liabilities to the position of the Group. Group Trading Manufacturing Total 2016 RM 000 RM 000 RM 000 Revenue Total revenue 242, , ,563 Inter-segment sales (7,592) (31,346) (38,938) Revenue from external customers 234, , ,625 Depreciation of property, plant and equipment (857) (6,007) (6,864) Amortisation of prepaid lease payments for land (41) (95) (136) Segment profit before income tax 19,176 20,845 40,021 Other material non-cash items: Bad debt written off (362) (7) (369) Fair value adjustments on: - derivative financial instruments 2-2 Impairment losses on: - property, plant and equipment - (161) (161) - trade receivables (1,043) - (1,043) Impairment loss on trade receivables no longer required Loss on disposal of property, plant and equipment (321) (150) (471) Gain on disposal of other investments Inventories written back 1,014 2,403 3,417 Additions to non-current assets other than financial instruments and deferred tax assets (16,989) (1,616) (18,605) Segment assets 146, , ,042 Segment liabilities 6,658 7,645 14,303 Annual Report

63 Notes to the Financial Statements 31 December 2016 (cont d) 4. OPERATING SEGMENTS (cont d) Group Trading Manufacturing Total 2015 RM 000 RM 000 RM 000 Revenue Total revenue 296, , ,434 Inter-segment sales (14,904) (31,324) (46,228) Revenue from external customers 281, , ,206 Depreciation of property, plant and equipment (696) (6,181) (6,877) Amortisation of prepaid lease payments for land (44) (92) (136) Segment profit before income tax 6,255 3,884 10,139 Other material non-cash items : Impairment losses on property, plant and equipment - (788) (788) Impairment loss on trade receivables no longer required Fair value adjustments on: - derivative financial instruments investment properties (91) - (91) Gain on disposal of property, plant and equipment Inventories written down (1,003) (1,244) (2,247) Additions to non-current assets other than financial instruments and deferred tax assets (2,156) (2,838) (4,994) Segment assets 152, , ,416 Segment liabilities 8,608 3,124 11,732 (a) Reconciliations Reconciliations of reportable segment revenues, profit or loss, assets and liabilities to the Group s corresponding amounts are as follows: Revenue RM 000 RM 000 Total revenue for reportable segments 408, ,434 Elimination of inter-segment revenues (38,938) (46,228) Revenue of the Group per consolidated statement of profit or loss and other comprehensive income 369, , Annual Report 2016

64 Notes to the Financial Statements 31 December 2016 (cont d) 4. OPERATING SEGMENTS (cont d) (a) Reconciliations (cont d) Reconciliations of reportable segment revenues, profit or loss, assets and liabilities to the Group s corresponding amounts are as follows: (cont d) RM 000 RM 000 Profit for the financial year Total profit or loss for reportable segments 40,021 10,139 Elimination of inter-segment profit (6,736) (4,008) Finance costs (8) (630) Profit before taxation 33,277 5,501 Taxation (8,564) 429 Profit for the financial year 24,713 5,930 Assets Total assets for reportable segments 384, ,416 Investment properties 1,779 1,779 Other investments - 10,037 Derivative assets 22 - Cash and bank balances 92,980 34,014 Assets of the Group per consolidated statement of financial position 478, ,246 Liabilities Total liabilities for reportable segments 14,303 11,732 Derivative liabilities Deferred tax liabilities 12,614 12,980 Liabilities of the Group per consolidated statement of financial position 26,998 24,773 (b) Geographical information The analysis of the Group s segment revenue from external customers by geographical area based on the region in which the customer is located is as follows: Group RM 000 RM 000 Malaysia 350, ,326 Asia, other than Malaysia 19,131 27,880 Total revenue 369, ,206 Information on the carrying amount of segment assets by geographical market and cost to acquire property, plant and equipment by location of assets has not been disclosed as the Group operates principally in Malaysia. Major customers There are no major customers with revenue equal or more than ten percent (10%) of the Group revenue. As such, information on major customers is not presented. Annual Report

65 64 Annual Report PROPERTY, PLANT AND EQUIPMENT Balance Balance Group as at Reclassi- as at Additions Disposals Depreciation Written off Impairment fications RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Carrying amount Freehold land 10, ,846 Long term leasehold land 1,516 15,349 - (164) ,701 Buildings 57, (1,321) ,439 Plant and machinery 56, (6) (4,456) (7) (161) 72 52,037 Electrical installation 2, (209) ,908 Furniture, fittings, equipment and vehicles 5,747 1,857 (763) (706) (5) - - 6,130 Renovation (8) Construction-in-progress (836) ,646 18,605 (769) (6,864) (12) (161) - 146,445 Accumulated depreciation Carrying Cost and impairment amount RM 000 RM 000 RM 000 Freehold land 10,846-10,846 Long term leasehold land 17,367 (666) 16,701 Buildings 69,898 (12,459) 57,439 Plant and machinery 126,820 (74,783) 52,037 Electrical installation 5,931 (3,023) 2,908 Furniture, fittings, equipment and vehicles 12,050 (5,920) 6,130 Renovation 931 (930) 1 Construction-in-progress Notes to the Financial Statements 31 December 2016 (cont d) 244,226 (97,781) 146,445

66 5. PROPERTY, PLANT AND EQUIPMENT (cont d) Balance Balance Group as at Reclassi- as at Additions Disposals Depreciation Written off Impairment fications RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Carrying amount Freehold land 10, ,846 Long term leasehold land 1, (25) ,516 Buildings 44, (1,269) ,984 57,995 Plant and machinery 61,537 1,035 (965) (4,699) - (788) ,560 Electrical installation 2, (193) ,515 Furniture, fittings, equipment and vehicles 5,186 1,019 (115) (691) (3) ,747 Renovation Construction-in-progress 13,756 2, (15,783) ,400 4,994 (1,080) (6,877) (3) (788) - 135,646 Accumulated depreciation Carrying Cost and impairment amount RM 000 RM 000 RM 000 Freehold land 10,846-10,846 Long term leasehold land 2,018 (502) 1,516 Buildings 69,133 (11,138) 57,995 Plant and machinery 126,732 (70,172) 56,560 Electrical installation 5,329 (2,814) 2,515 Furniture, fittings, equipment and vehicles 11,516 (5,769) 5,747 Renovation 922 (922) - Construction-in-progress Notes to the Financial Statements 31 December 2016 (cont d) Annual Report ,963 (91,317) 135,646

67 66 Annual Report PROPERTY, PLANT AND EQUIPMENT (cont d) Balance Balance Company as at Reclassi- as at Additions Disposals Depreciation Written off Impairment fications RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Carrying amount Freehold land 10, ,469 Long term leasehold land (11) Buildings 48, (1,084) ,328 Plant and machinery 53, (6) (4,294) - (161) 72 49,484 Electrical installation 2, (197) ,755 Furniture, fittings, equipment and vehicles 3, (267) (415) (4) - - 3,375 Renovation (6) Construction-in-progress (836) ,286 1,620 (273) (6,007) (4) (161) - 114,461 Accumulated depreciation Carrying Cost and impairment amount RM 000 RM 000 RM 000 Freehold land 10,469-10,469 Long term leasehold land 1,037 (378) 659 Buildings 57,306 (9,978) 47,328 Plant and machinery 109,962 (60,478) 49,484 Electrical installation 5,535 (2,780) 2,755 Furniture, fittings, equipment and vehicles 7,205 (3,830) 3,375 Renovation 931 (923) 8 Construction-in-progress Notes to the Financial Statements 31 December 2016 (cont d) 192,828 (78,367) 114,461

68 5. PROPERTY, PLANT AND EQUIPMENT (cont d) Balance Balance Company as at Reclassi- as at Additions Disposals Depreciation Written off Impairment fications RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Carrying amount Freehold land 10, ,463 Long term leasehold land (11) Buildings 35, (1,052) ,374 48,232 Plant and machinery 58, (963) (4,290) - (7) ,840 Electrical installation 2, (177) ,350 Furniture, fittings, equipment and vehicles 2, (111) (423) (1) ,259 Renovation (6) Construction-in-progress 12,915 1, (14,118) ,467 2,860 (1,074) (5,959) (1) (7) - 119,286 Accumulated depreciation Carrying Cost and impairment amount RM 000 RM 000 RM 000 Freehold land 10,463-10,463 Long term leasehold land 1,037 (367) 670 Buildings 57,126 (8,894) 48,232 Plant and machinery 109,867 (56,027) 53,840 Electrical installation 4,933 (2,583) 2,350 Furniture, fittings, equipment and vehicles 6,902 (3,643) 3,259 Renovation 922 (917) 5 Construction-in-progress Notes to the Financial Statements 31 December 2016 (cont d) Annual Report ,717 (72,431) 119,286

69 Notes to the Financial Statements 31 December 2016 (cont d) 5. PROPERTY, PLANT AND EQUIPMENT (cont d) (a) (b) All items of property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the asset. After initial recognition, property, plant and equipment are stated at cost less any accumulated depreciation and any accumulated impairment losses. Depreciation is calculated to write off the cost or valuation of the assets to their residual values on a straight line basis over their estimated useful lives. The principal depreciation period and rates are as follows: Buildings 1% - 2% Long term leasehold land years Plant and machinery 2% - 20% Electrical installation 5% Furniture, fittings, equipment and vehicles 5% - 20% Renovation 20% Freehold land has an unlimited useful life and is not depreciated. Construction-in-progress represents machinery under installation and renovation in progress and is stated at cost. Construction-in-progress is not depreciated until such time when the asset is available for use. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets and therefore future depreciation charges could be revised. (c) Impairment assessment The Group assesses impairment of assets whenever the events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than the recoverable amount. Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-inuse. (d) (e) (f) (g) The Group has assessed and classified land use rights (i.e. long term leasehold land) of the Group as finance leases based on the extent to which risks and rewards incidental to ownership of the land resides with the Group arising from the lease term. Consequently, the Group has classified the unamortised upfront payment for land use rights (i.e. long term leasehold land) as finance leases in accordance with MFRS 117 Leases. During the financial year, the Group and the Company have recognised an impairment loss of RM161,000 and RM161,000 (2015: RM788,000 and RM7,000) respectively on property, plant and equipment, which have been decommissioned and no longer in use. The title of a piece of leasehold land with a carrying amount of RM1,052,000 (2015: RM1,066,000) is still in the process of being transferred by the Company to its subsidiary. Included in the buildings is a leasehold condominium with a carrying amount of RM545,000 (2015: RM557,000) for which strata titles to the building have yet to be issued by the relevant authority to the Company. 68 Annual Report 2016

70 Notes to the Financial Statements 31 December 2016 (cont d) 6. INVESTMENT PROPERTIES Balance Balance as at Fair value as at adjustments Group RM 000 RM 000 RM 000 Carrying amount Freehold land and buildings 1,406-1,406 Leasehold land and building ,779-1,779 Balance Balance as at Fair value as at adjustments Group RM 000 RM 000 RM 000 Carrying amount Freehold land and buildings 1,500 (94) 1,406 Leasehold land and building ,870 (91) 1,779 (a) (b) Investment properties are initially measured at cost, which includes transaction costs. After initial recognition, investment properties are stated at fair value. Investment properties at Level 3 fair values were recommended by the Directors as at the end of reporting period based on indicative market values from the valuation exercise carried out by independent property valuers in January The valuations were made based on comparison method that makes reference to recent sales of similar properties in the vicinity on a price per square foot basis. The price per square foot of the properties adopted, which were significant inputs, ranged from RM80 to RM210. Any changes in the price per square foot will result in a reasonable change in the fair value of the investment properties. The fair value measurements of the investment properties are based on the highest and best use which does not differ from their actual use. The investment properties of the Group are used to generate rental income. (c) (d) The leasehold land and building has a remaining lease period of 63 years (2015: 64 years). Direct operating expenses arising from investment properties generating rental income during the financial year are as follows: Group RM 000 RM 000 Insurance 1 1 Quit rent and assessment 4 4 Annual Report

71 Notes to the Financial Statements 31 December 2016 (cont d) 7. PREPAID LEASE PAYMENTS FOR LAND Amortisation Balance charge for Balance as at the financial as at year Group RM 000 RM 000 RM 000 Carrying amount Short term leasehold land 2,823 (136) 2,687 [ At ] Accumulated Carrying Cost amortisation amount Group RM 000 RM 000 RM 000 Short term leasehold land 4,758 (2,071) 2,687 Amortisation Balance charge for Balance as at the financial as at year Group RM 000 RM 000 RM 000 Carrying amount Short term leasehold land 2,959 (136) 2,823 [ At ] Accumulated Carrying Cost amortisation amount Group RM 000 RM 000 RM 000 Short term leasehold land 4,758 (1,935) 2,823 Amortisation Balance charge for Balance as at the financial as at year Company RM 000 RM 000 RM 000 Carrying amount Short term leasehold land 2,648 (65) 2,583 [ At ] Accumulated Carrying Cost amortisation amount Company RM 000 RM 000 RM 000 Short term leasehold land 3,856 (1,273) 2, Annual Report 2016

72 Notes to the Financial Statements 31 December 2016 (cont d) 7. PREPAID LEASE PAYMENTS FOR LAND (cont d) Amortisation Balance charge for Balance as at the financial as at year Company RM 000 RM 000 RM 000 Carrying amount Short term leasehold land 2,713 (65) 2,648 [ At ] Accumulated Carrying Cost amortisation amount Company RM 000 RM 000 RM 000 Short term leasehold land 3,856 (1,208) 2,648 Prepaid lease payments for land of the Group and of the Company comprise short term leasehold land with remaining tenure of years (2015: years) and years (2015: years) respectively. Due to the fact that there will be no transfer of ownership by the end of the lease term and that the lease term does not constitute the major part of the indefinite economic life of the land and that the present value of the minimum lease payments do not form substantially all of the fair value of the land at the inception of the lease, management had determined that the short term leasehold land lease does not transfer substantially all the risks and rewards to the Group and hence it is classified as operating lease. 8. INVESTMENTS IN SUBSIDIARIES Company RM 000 RM 000 Unquoted shares, at cost 26,673 26,673 (a) Investments in subsidiaries are measured at cost. Non-controlling interests are measured at the proportionate share of net assets of subsidiaries, unless another measurement basis is required by MFRSs. Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows: Effective interest in equity Name of company % % Principal activities Choo Bee Hardwares Sdn. Berhad Dealer in hardware and construction materials Taik Bee Hardware Sdn. Bhd Fabrication and manufacturing of pipes and trading of hardware Annual Report

73 Notes to the Financial Statements 31 December 2016 (cont d) 8. INVESTMENTS IN SUBSIDIARIES (cont d) (a) Investments in subsidiaries are measured at cost. Non-controlling interests are measured at the proportionate share of net assets of subsidiaries, unless another measurement basis is required by MFRSs. (cont d) Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows: (cont d) Effective interest in equity Name of company % % Principal activities Subsidiaries of Choo Bee Hardwares Sdn. Berhad Choo Bee Hardware (Sabah) Dealer in hardware and construction Sdn. Bhd. materials Choo Bee Hardware (Sel) Sdn. Bhd Dormant Subsidiary of Taik Bee Hardware Sdn. Bhd. Pan Asian Management Consultants Dormant Sdn. Bhd. # # The indirect subsidiary was dissolved during the financial year, which resulted in a gain of RM205,000 to the Group during the financial year. 9. GOODWILL ON CONSOLIDATION Group RM 000 RM 000 Goodwill on consolidation Less: Impairment loss (87) (87) - - (a) (b) Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. Impairment assessment For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group s cash-generating units that are expected to benefit from the synergies of the combination. Goodwill is tested for impairment annually and at other times when such indicators exist. This requires an estimation of the recoverable amount of the CGU to which goodwill is allocated. In the previous financial years, an impairment loss on goodwill on consolidation of RM87,000 related to a subsidiary, Taik Bee Hardware Sdn. Bhd., was recognised due to its declining trading business operations. 72 Annual Report 2016

74 Notes to the Financial Statements 31 December 2016 (cont d) 10. INVENTORIES Group Company RM 000 RM 000 RM 000 RM 000 At cost Raw materials and consumables 53,024 37,769 52,236 36,964 Trading goods 51,381 51, Manufactured goods 22,266 28,830 22,038 28, , ,733 74,369 65,615 At net realisable value Raw materials and consumables , ,674 Trading goods 3,160 14, Manufactured goods 2,185 8,268 1,223 7,296 5,832 33,064 1,710 18, , ,797 76,079 83,620 (a) Inventories are stated at the lower of cost and net realisable value. The cost of raw materials is determined on a weighted average basis and comprises original cost of purchase plus the cost of bringing the inventories to their present location and condition. The cost of manufactured inventories includes the cost of raw materials, direct labour, other direct costs and a proportion of production overheads based on normal operating capacity of the production facilities. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. The Group writes down obsolete or slow moving inventories based on assessment of their estimated net selling price. Management exercise judgement in evaluating circumstances which may indicate that carrying amounts could not be recovered and in assessing the adequacy of the write down for obsolete or slow moving inventories. (b) (c) (d) During the financial year, inventories for the Group and for the Company recognised as cost of sales amounted to RM303,499,000 (2015: RM414,384,000) and RM133,422,000 (2015: RM192,726,000) respectively. Included in the cost of sales are net write back of inventories recognised for the Group and the Company during the financial year amounted to RM3,417,000 (2015: RM2,247,000 net write down) and RM2,348,000 (2015: RM1,217,000 net write down) respectively. Information on financial risks of inventories, namely market price risk is disclosed in Note 34 to the financial statements. Annual Report

75 Notes to the Financial Statements 31 December 2016 (cont d) 11. TRADE AND OTHER RECEIVABLES Group Company RM 000 RM 000 RM 000 RM 000 Trade receivables - Third parties 99, ,314 43,370 51,358 - Subsidiaries - - 8,026 8,962 99, ,314 51,396 60,320 Less: Impairment losses - Third parties (1,077) (228) (285) - 98, ,086 51,111 60,320 Amounts owing by subsidiaries - - 7,302 4,826 Other receivables 3,160 4,167 1,589 2,426 Deposits 432 2, ,238 3,592 7,083 9,160 8,490 3,592 7,083 9,160 8,490 Loans and receivables 101, ,169 60,271 68,810 Prepayments , ,704 60,472 69,001 (a) (b) Trade and other receivables (excluding prepayments) are classified as loans and receivables, and measured at amortised cost using the effective interest method. The Group s and the Company s normal trade credit terms range from 7 to 60 days (2015: 7 to 60 days). Interest on overdue trade balances are charged at a rate of 14.4% (2015: 14.4%) per annum. They are recognised at their original invoice amounts, which represent their fair values on initial recognition. (c) Non-trade amounts owing by subsidiaries represent advances, which are unsecured and bear interest at 3.75% (2015: 3.75%) per annum and receivable upon demand in cash and cash equivalents. (d) The currency exposure profile of receivables are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 95, ,790 53,502 64,431 Singapore Dollar 6,769 4,379 6,769 4, , ,169 60,271 68, Annual Report 2016

76 Notes to the Financial Statements 31 December 2016 (cont d) 11. TRADE AND OTHER RECEIVABLES (cont d) (e) The ageing analysis of trade receivables of the Group and the Company are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Neither past due nor impaired 80,492 88,428 44,117 48,990 Past due, not impaired 1 to 30 days 13,877 17,815 6,349 9, to 60 days 1,694 2, to 90 days 2,173 4, to 120 days More than 121 days ,744 24,658 6,994 11,330 Impaired 1, , ,314 51,396 60,320 Receivables that are neither past due nor impaired The credit quality of trade receivables that are neither past due nor impaired as at the end of reporting period were assessed by reference to external credit ratings as follows: Group Company RM 000 RM 000 RM 000 RM 000 Counter party without external credit ratings - Group A 4,446 6, Group B 76,046 81,711 44,076 48,263 Total unimpaired trade receivables 80,492 88,428 44,117 48,990 Group A refers to new customers (less than 12 months). Group B refers to existing customers (more than 12 months) with no defaults in the past. None of the Group s and the Company s trade receivables that are neither past due nor impaired have been renegotiated during the financial year. Receivables that are past due but not impaired The Group and the Company have trade receivables amounting to RM17,744,000 (2015: RM24,658,000) and RM6,994,000 (2015: RM11,330,000) respectively that are past due at the end of the reporting period but not impaired. Trade receivables of the Group that are past due but not impaired are unsecured in nature. The Group closely monitors the financial standing of these counter parties on an ongoing basis to ensure that the Group is exposed to minimal credit risk. Annual Report

77 Notes to the Financial Statements 31 December 2016 (cont d) 11. TRADE AND OTHER RECEIVABLES (cont d) (e) The ageing analysis of trade receivables of the Group and the Company are as follows: (cont d) Trade receivables of the Group and the Company that are impaired at the end of the reporting period are as follows: Group Company Individually impaired Individually impaired RM 000 RM 000 RM 000 RM 000 Trade receivables, gross 1, Less: Impairment loss (1,077) (228) (285) The reconciliation of movements in the impairment loss is as follows: Group Company RM 000 RM 000 RM 000 RM 000 Trade receivables At 1 January Charge for the financial year 1, Impairment loss no longer required (194) (227) - - At 31 December 1, Trade receivables that are individually determined to be impaired at the end of the reporting period relate to those debtors that exhibit significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. Management specifically analyses historical bad debt, customer concentration, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of impairment of receivables. Where expectations differ from the original estimates, the differences will impact the carrying amount of receivables. (f) Information on financial risks of trade and other receivables is disclosed in Note 34 to the financial statements. 76 Annual Report 2016

78 Notes to the Financial Statements 31 December 2016 (cont d) 12. DERIVATIVE ASSETS/(LIABILITIES) Group Contract/ Contract/ Notional Notional amount Assets Liabilities amount Assets Liabilities RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Forward currency contracts 21, (81) 11,423 * (61) Company Forward currency contracts 17, (79) 8,486 - (61) * Derivative assets in the previous year were not presented as the amounts were below RM1,000. (a) (b) (c) The Group and the Company use 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 Group s and the Company s purchases denominated in USD and sales denominated in SGD for which firm commitments existed at the reporting date, extending to June During the financial year, the Group and the Company recognised a gain of RM2,000 (2015: gain of RM325,000) and RM4,000 (2015: gain of RM325,000) respectively arising from fair value changes of derivatives. The fair value changes are attributable to changes in foreign exchange spot and forward rates. The method and assumptions applied in determining the fair values of derivatives are disclosed in Note 33 to the financial statements. 13. OTHER INVESTMENTS Group RM 000 RM 000 Financial assets at fair value through profit or loss - Quoted investment in Malaysia - 10,037 (a) (b) Regular way purchase or sale of financial assets is recognised using trade date accounting. Information on the fair value hierarchy is disclosed in Note 33 to the financial statements. Annual Report

79 Notes to the Financial Statements 31 December 2016 (cont d) 14. CASH AND BANK BALANCES Group Company RM 000 RM 000 RM 000 RM 000 Cash and bank balances 22,698 21,602 5,306 2,745 Deposits with licensed banks 70,282 12,412 35, ,980 34,014 40,503 2,907 (a) Cash and bank balances are classified as loans and receivables, and measured at amortised cost using the effective interest method. (b) Deposits placed with licensed banks of the Group, with a carrying amount of RM70,282,000 (2015: RM12,412,000) are subject to fixed weighted average effective interest rates of 3.18% (2015: 2.71%). (c) Deposits placed with licensed banks of the Company, with a carrying amount of RM35,197,000 (2015: RM162,000) are subject to fixed weighted average effective interest rates of 3.76% (2015: 3.25%). (d) Included in deposits with licensed banks of the Group and Company are amounts of RM191,000 (2015: RM185,000) and RM167,000 (2015: RM162,000) pledged to licensed banks as securities for banking facilities granted to the Group and the Company respectively. (e) For the purpose of statements of cash flows, cash and cash equivalents comprise the following as at the end of reporting period: Group Company RM 000 RM 000 RM 000 RM 000 Cash and bank balances 22,698 21,602 5,306 2,745 Deposits with licensed banks 70,282 12,412 35, ,980 34,014 40,503 2,907 Less: Deposits pledged to a licensed bank (191) (185) (167) (162) 92,789 33,829 40,336 2,745 (f) The currency exposure profile of cash and bank balances are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 85,719 32,836 35,942 1,807 United States Dollar 6, , Singapore Dollar ,980 34,014 40,503 2,907 (g) Information on financial risks of cash and bank balances is disclosed in Note 34 to the financial statements. 78 Annual Report 2016

80 Notes to the Financial Statements 31 December 2016 (cont d) 15. SHARE CAPITAL AND TREASURY SHARES (a) Share capital Group and Company Number Number of shares of shares 000 RM RM 000 Ordinary shares of RM1.00 each: Authorised 500, , , ,000 Issued and fully paid 109, , , ,903 The owners of the parent (except treasury shares) are entitled to receive dividends as and when declared by the Company and are entitled to one vote per ordinary share at meetings of the Company. All ordinary shares rank pari passu with regard to the Company s residual assets. (b) Treasury shares The shareholders of the Company, by an ordinary resolution passed at the Annual General Meeting ( AGM ) held on 24 June 2016, renewed the approval for the Company to repurchase its own shares. The Directors of the Company are committed to enhancing the value of the Company to its shareholders and believe that the repurchase plan can be applied in the best interests of the Group and of the Company. Details of the shares repurchased and held as treasury shares of the Group and of the Company are as follows: Highest Lowest Average price paid price paid price paid Total Month per share per share per share consideration RM RM RM RM 000 As at 1 January ,459 February August As at 31 December ,462 3 During the financial year, the Company repurchased a total of 2,000 (2015: 2,000) of its issued shares from the open market for a total cost of RM3,000 (2015: RM4,000), including transaction costs of RM90 (2015: RM87). The average price paid for the shares repurchased during the financial year was RM1.48 (2015: RM1.58) per share. The repurchase transactions were financed by internally generated funds. The shares repurchased are being held as treasury shares in accordance with the requirements of Section 67A of the Companies Act, As at 31 December 2016, 961,925 (2015: 959,925) out of the total of 109,903,000 (2015: 109,903,000) issued and fully paid ordinary shares are held as treasury shares by the Company. The number of ordinary shares of RM1.00 each in issue and fully paid as at 31 December 2016 after excluding the treasury shares is 108,941,075 (2015: 108,943,075). The mandate given by the shareholders will expire at the forthcoming AGM and an ordinary resolution will be tabled at the AGM for shareholders to grant a fresh mandate for another year. None of the treasury shares held were resold or cancelled during the financial year. Treasury shares have no rights to voting, dividends or participation in other distribution. Annual Report

81 Notes to the Financial Statements 31 December 2016 (cont d) 16. RESERVES Group Company RM 000 RM 000 RM 000 RM 000 Non-distributable Share premium 17,765 17,765 17,765 17,765 General reserve 1,186 1, ,951 18,951 17,765 17,765 Distributable Retained earnings 324, , , , , , , ,944 General reserve The general reserve of the Group arose from the capitalisation of bonus issuance undertaken by certain subsidiaries in the previous years. 17. DEFERRED TAX (a) The deferred tax assets and liabilities are made up of the following: Group Company RM 000 RM 000 RM 000 RM 000 At 1 January 12,980 10,409 12,493 9,876 Transfer to profit or loss (Note 29) (366) 2,571 (45) 2,617 At 31 December 12,614 12,980 12,448 12,493 (b) The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows: Deferred tax liabilities of the Group Property, plant and equipment Others Offsetting Total RM 000 RM 000 RM 000 RM 000 At 1 January ,387 - (407) 12,980 Recognised in profit or loss (592) (366) At 31 December ,795 - (181) 12,614 At 1 January ,839 1 (3,431) 10,409 Recognised in profit or loss (452) (1) 3,024 2,571 At 31 December ,387 - (407) 12, Annual Report 2016

82 Notes to the Financial Statements 31 December 2016 (cont d) 17. DEFERRED TAX (cont d) (b) The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows: (cont d) Deferred tax assets of the Group Unabsorbed capital Reinvestment allowances allowance Others Offsetting Total RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January (407) - Recognised in profit or loss 19 - (245) At 31 December (181) - At 1 January ,408 - (3,431) - Recognised in profit or loss (5) (3,408) 389 3,024 - At 31 December (407) - Deferred tax liabilities of the Company Property, plant and equipment Offsetting Total RM 000 RM 000 RM 000 At 1 January ,967 (474) 12,493 Recognised in profit or loss (560) 515 (45) At 31 December , ,448 At 1 January ,293 (3,417) 9,876 Recognised in profit or loss (326) 2,943 2,617 At 31 December ,967 (474) 12,493 Deferred tax assets of the Company Unabsorbed capital Reinvestment allowances allowance Others Offsetting Total RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January (474) - Recognised in profit or loss (17) - (498) At 31 December (41) 41 - At 1 January ,408 6 (3,417) - Recognised in profit or loss 14 (3,408) 451 2,943 - At 31 December (474) - Annual Report

83 Notes to the Financial Statements 31 December 2016 (cont d) 17. DEFERRED TAX (cont d) (c) The amounts of temporary differences for which no deferred tax assets have been recognised in the statement of financial position is as follows: Group RM 000 RM 000 Unutilised tax losses 1,238 1,216 Deferred tax assets of a subsidiary has not been recognised in respect of these items as it is not probable that taxable profits of the subsidiaries would be available against which the deductible temporary differences could be utilised. The deductible temporary differences do not expire under the current tax legislation. 18. TRADE AND OTHER PAYABLES Group Company RM 000 RM 000 RM 000 RM 000 Trade payables 4,812 4,307 1,298 - Amount owing to a subsidiary Other payables 1,764 2,056 1,255 1,189 Accruals and deposits 5,378 3,291 3,141 1,913 7,142 5,347 4,401 3,115 11,954 9,654 5,699 3,115 (a) (b) Trade and other payables are classified as other financial liabilities, and measured at amortised cost using the effective interest method. Trade and other payables are non-interest bearing and the normal credit term granted to the Group and to the Company ranged from 14 to 120 days (2015: 14 to 120 days). (c) Amount owing to a subsidiary represents advances, which are unsecured and bear interest at 3.75% (2015: 3.75%) per annum and payable upon demand in cash and cash equivalents. (d) (e) All the trade and other payables of the Group and the Company are denominated in RM. Information on financial risks of trade and other payables are disclosed in Note 34 to the financial statements. 82 Annual Report 2016

84 Notes to the Financial Statements 31 December 2016 (cont d) 19. BORROWINGS Group Company RM 000 RM 000 RM 000 RM 000 Unsecured Trust receipts - 2, (a) (b) (c) (d) Borrowings are classified as other financial liabilities, and measured at amortised cost using the effective interest method. In the previous financial year, the Group s credit facilities were secured by negative pledges over the assets of the respective subsidiaries and guaranteed by the Company. Borrowings of the Group are denominated in RM. Information on financial risk of borrowings is disclosed in Note 34 to the financial statements. 20. COMMITMENTS (a) Operating lease commitments (i) The Group as lessee The Group has entered into a non-cancellable operating lease agreement for the use of a building. The lease has a life of approximately three (3) years with renewal options included in the contract. There are no restrictions placed upon the Group by entering into the lease. The future aggregate minimum lease payments under non-cancellable operating lease contracted for as at the reporting date but not recognised as liabilities are as follows: Future minimum rental payments: Group Company RM 000 RM 000 RM 000 RM 000 Not later than 1 year Later than 1 year and not later than 5 years 520 1, ,083 1,412 2,303 1,083 1,767 (ii) The Group as lessor The Group has entered into cancellable operating lease agreements on its investment properties. The lessees are required to give a two-month notice for the termination of those agreements. Annual Report

85 Notes to the Financial Statements 31 December 2016 (cont d) 20. COMMITMENTS (cont d) (b) Capital commitments Capital expenditure Property, plant and equipment Group Company RM 000 RM 000 RM 000 RM 000 Contracted but not provided for , Approved but not contracted for 1,200 1, ,600 14, CONTINGENT LIABILITIES Group and Company RM 000 RM 000 Corporate guarantees given to financial institutions in respect of credit facilities granted to subsidiaries - Limit of guarantee 78,750 84,400 Corporate guarantee given to third party suppliers in respect of sale of goods to a subsidiary 3,000 3,000 The fair value of such financial corporate guarantees is negligible as the likelihood of the Group defaulting on the financial facilities and repayment to third party suppliers is not probable. 22. REVENUE Group Company RM 000 RM 000 RM 000 RM 000 Trading sales 234, , ,238 Manufacturing sales 134, , , , , , , ,257 Sale of goods Revenue from sale of goods is recognised when significant risks and rewards of ownership of the goods has been transferred to the customer and where the Group does not have continuing managerial involvement over the goods, which coincides with delivery of goods and services and acceptance by customers. 84 Annual Report 2016

86 Notes to the Financial Statements 31 December 2016 (cont d) 23. COST OF SALES Group Company RM 000 RM 000 RM 000 RM 000 Inventories sold 317, , , , OTHER INCOME Group Company Note RM 000 RM 000 RM 000 RM 000 Bad debts recovered Gain on disposal of: - property, plant and equipment other investments Fair value adjustments on: - derivative financial instruments other investments Dividend income received from subsidiaries - - 5,740 3,165 Gain on dissolution of an indirect subsidiary Impairment loss no longer required on trade receivables Interest income on: - overdue accounts short term deposits 1, fixed deposits 1, , advances to subsidiaries Realised gain on foreign exchange transactions 2,197 1,795 2,050 1,794 Rental income ,668 1,668 Unrealised gain on foreign exchange transactions Others ,825 3,740 11,934 7,254 (a) Dividend income Dividend income is recognised when the right to receive payment is established. (b) Interest income Interest income is recognised as it accrues, using the effective interest method. (c) Rental income Rental income is accounted for on a straight line basis over the lease term of an ongoing lease. Annual Report

87 Notes to the Financial Statements 31 December 2016 (cont d) 25. DIRECTORS REMUNERATION Group Company RM 000 RM 000 RM 000 RM 000 Executive Directors: Fees Other emoluments: - current year 3,888 2,903 1,979 1,345 - (over)/under-provision in prior years (31) ,857 3,229 1,979 1,669 3,983 3,355 2,059 1,749 Non-executive Directors: Fees Other emoluments ,205 3,572 2,240 1,928 Included in Directors other emoluments are contributions made by the Group and by the Company to the Employees Provident Fund of RM629,000 (2015: RM544,000) and RM321,000 (2015: RM281,000) respectively. Directors remuneration of the Group also includes remuneration for the Directors of subsidiaries as follows: Group RM 000 RM 000 Fees 4 4 Other emoluments The estimated monetary value of benefits-in-kind received and receivable by Executive Directors otherwise than in cash from the Group and the Company amounted to RM99,000 (2015: RM86,000) and RM85,000 (2015: RM72,000) respectively. 26. EMPLOYEE SALARIES AND BENEFITS EXPENSES (EXCLUDING DIRECTORS REMUNERATION) Group Company RM 000 RM 000 RM 000 RM 000 Wages, salaries and bonuses 10,844 10,963 5,688 5,870 Contribution to defined contribution plan 1,079 1, Social security contributions Other employee benefits ,954 13,084 6,850 7, Annual Report 2016

88 Notes to the Financial Statements 31 December 2016 (cont d) 27. FINANCE COSTS Group Company RM 000 RM 000 RM 000 RM 000 Interest expenses on: - bankers acceptances trade loan trust receipts advances from subsidiaries PROFIT BEFORE TAXATION Profit before taxation is stated at after charging: Group Company Note RM 000 RM 000 RM 000 RM 000 Auditors remuneration - current year other services Amortisation of prepaid lease payments for land Bad debt written off Depreciation of property, plant and equipment 5 6,864 6,877 6,007 5,959 Directors remuneration - fees emoluments other than fees 3,949 3,316 2,032 1,720 Fair value adjustments on: - investment properties other investments Impairment losses on: - trade receivables 11 1, property, plant and equipment Loss on disposal of: - property, plant and equipment Professional fees paid to a firm of which a Director is a member Property, plant and equipment written off Realised loss on foreign exchange transactions Rental expenses of: - leasehold land and premises office premise Unrealised loss on foreign exchange transactions - 1,576-1,801 Annual Report

89 Notes to the Financial Statements 31 December 2016 (cont d) 29. TAXATION Group Company RM 000 RM 000 RM 000 RM 000 Current tax: Current tax expense based on profit for the financial year 8,933 2,602 4, (Over)/Under-provision in prior years (3) (5,602) 88 (5,450) 8,930 (3,000) 4,361 (4,923) Deferred tax (Note 17): Relating to origination and reversal of temporary differences (328) (452) (45) (424) (Over)/Under-provision in prior years (38) 3,023-3,041 (366) 2,571 (45) 2,617 8,564 (429) 4,316 (2,306) Malaysian income tax is calculated at the statutory tax rate of 24% (2015: 25%) of the estimated taxable profits for the fiscal year. The numerical reconciliations between the tax expense and the product of accounting profit multiplied by the applicable tax rate of the Group and Company are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Profit before taxation 33,277 5,501 20,899 3,125 Taxation at applicable statutory tax rate at 24% (2015: 25%) 7,986 1,375 5, Tax effects in respect of: Non-allowable expenses 3,650 1, Non-taxable income (3,036) (592) (1,033) (882) Utilisation of previously unrecognised deferred tax assets - (56) - - Deferred tax assets not recognised Increase in deferred taxes as a result of reduction in tax rate ,605 2,150 4, (Over)/Under-provision in prior years - current tax (3) (5,602) 88 (5,450) - deferred tax (38) 3,023-3,041 8,564 (429) 4,316 (2,306) 88 Annual Report 2016

90 Notes to the Financial Statements 31 December 2016 (cont d) 30. EARNINGS PER SHARE (a) Basic earnings per ordinary share Basic earnings per ordinary share for the financial year is calculated by dividing the profit for the financial year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding (adjusted for treasury shares) during the financial year. Group RM 000 RM 000 Profit attributable to equity holders of the parent 24,713 5, Number of ordinary shares in issue as at 1 January 109, ,903 Shares repurchased and held as treasury shares as at 1 January (960) (958) 108, ,945 Effect of shares repurchased (2) (2) Adjusted weighted average number of ordinary shares applicable to basic earnings per ordinary share 108, ,943 Basic earnings per ordinary share (sen) (b) Diluted earnings per ordinary share There are no potential dilutive ordinary shares during the financial year. Accordingly, the diluted earnings per ordinary share is not presented. 31. DIVIDENDS Group and Company Dividend Amount Dividend Amount per share of dividend per share of dividend Sen RM 000 Sen RM 000 In respect of the financial year ended 31 December 2015 Final single tier dividend , In respect of the financial year ended 31 December 2014 Final single tier dividend , , ,536 Annual Report

91 Notes to the Financial Statements 31 December 2016 (cont d) 31. DIVIDENDS (cont d) A final single tier dividend of 6 sen per ordinary share, amounting to RM6,536,465 and a special single tier dividend of 3 sen per ordinary share, amounting to RM3,268,232 in respect of the financial year ended 31 December 2016 has been recommended by the Directors subsequent to the reporting period for shareholders approval at the forthcoming Annual General Meeting. The financial statements for the current financial year do not reflect this proposed dividend. This dividend, if approved by shareholders, will be accounted for as an appropriation of retained earnings in the financial year ending 31 December RELATED PARTY DISCLOSURES (a) Identities of related parties Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties could be individuals or other entities. The Company has controlling related party relationship with its direct and indirect subsidiaries and its ultimate holding company. The related parties and their relationship with the Group are as follows: Names of related parties Austcorp Manufacturing Sdn. Bhd. Ng Poh Tat & Co. Relationship A subsidiary of the ultimate holding company, Soon Lian Huat Holdings Sdn. Berhad. A firm in which Ng Poh Tat is a partner. (b) In addition to the transactions and balances detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year: Group Company RM 000 RM 000 RM 000 RM 000 Related parties Trade sales - Austcorp Manufacturing Sdn. Bhd Legal fees - Ng Poh Tat & Co Subsidiaries Trade sales ,363 35,233 Rental income received - - 1,668 1,668 Net dividend received - - 5,740 3,165 Net interest received/(paid) on advances (514) Trade purchases - - (181) (260) Purchase of property, plant nd equipment (11) Sale of property, plant and equipment Ultimate holding company Rental of land and building - Soon Lian Huat Holdings Sdn. Berhad The related party transactions described above were carried out on negotiated terms and conditions and mutually agreed with the related parties. 90 Annual Report 2016

92 Notes to the Financial Statements 31 December 2016 (cont d) 32. RELATED PARTY DISCLOSURES (cont d) (c) Compensation of key management personnel Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity, directly and indirectly, including any Director (whether executive or otherwise) of the Group and the Company. The remuneration of Executive Directors and other members of key management personnel of the Group and of the Company during the financial year are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Short term employee benefits 4,519 3,848 2,319 2,010 Post-employment benefits ,243 4,472 2,679 2,324 The estimated monetary value of benefits-in-kind received and receivable by Executive Directors and the key management personnel otherwise than in cash from the Group and the Company amounted to RM120,000 (2015: RM109,000) and RM103,000 (2015: RM92,000) respectively. 33. FINANCIAL INSTRUMENTS (a) Capital management The primary objective of the Group s capital management is to ensure that entities of the Group would be able to continue as going concerns whilst maximising return to shareholders through the optimisation of the debt and equity ratios. The overall strategy of the Group remains unchanged from that in the previous financial year. The Group manages its capital structure and makes adjustments to it in response to changes in economic conditions. In order to maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the financial years ended 31 December 2016 and 31 December The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debts. The Group includes within net debt, loans and borrowings, trade and other payables, less cash and bank balances. Capital includes equity attributable to the equity holders of the Group less the fair value adjustment reserve. Annual Report

93 Notes to the Financial Statements 31 December 2016 (cont d) 33. FINANCIAL INSTRUMENTS (cont d) (a) Capital management (cont d) Group Company RM 000 RM 000 RM 000 RM 000 Borrowings - 2, Trade and other payables 11,954 9,654 5,699 3,115 11,954 11,654 5,699 3,115 Less: Cash and bank balances (92,980) (34,014) (40,503) (2,907) Net (equity)/debts (81,026) (22,360) (34,804) 208 Total capital 451, , , ,388 Net (equity)/debts (81,026) (22,360) (34,804) , , , ,596 Gearing ratio * * * <1% Pursuant to the requirements of Practice Note No. 17/2005 of the Bursa Malaysia Securities, the Group is required to maintain a consolidated shareholders equity equal to or not less than the 25% of the issued and paid-up capital (excluding treasury shares) and such shareholders equity is not less than RM40.0 million. The Company has complied with this requirement during the financial year ended 31 December * Gearing ratio is not presented as the Group and the Company are in net cash position as at reporting date. (b) Financial instruments Fair value Loans and through receivables profit or loss Total Group RM 000 RM 000 RM December 2016 Financial assets Derivative assets Trade and other receivables, net of prepayments 101, ,828 Cash and bank balances 92,980-92, , , Annual Report 2016

94 Notes to the Financial Statements 31 December 2016 (cont d) 33. FINANCIAL INSTRUMENTS (cont d) (b) Financial instruments (cont d) Other Fair value financial through liabilities profit or loss Total Group RM 000 RM 000 RM December 2016 Financial liabilities Trade and other payables 11,954-11,954 Derivative liabilities , ,035 Fair value Loans and through receivables profit or loss Total Company RM 000 RM 000 RM December 2016 Financial assets Derivative assets Trade and other receivables, net of prepayments 60,271-60,271 Cash and bank balances 40,503-40, , ,796 Other Fair value financial through liabilities profit or loss Total RM 000 RM 000 RM 000 Financial liabilities Trade and other payables 5,699-5,699 Derivative liabilities , ,778 Fair value Loans and through receivables profit or loss Total Group RM 000 RM 000 RM December 2015 Financial assets Other investments - 10,037 10,037 Trade and other receivables, net of prepayments 120, ,169 Cash and bank balances 34,014-34, ,183 10, ,220 Annual Report

95 Notes to the Financial Statements 31 December 2016 (cont d) 33. FINANCIAL INSTRUMENTS (cont d) (b) Financial instruments (cont d) Other Fair value financial through liabilities profit or loss Total Group RM 000 RM 000 RM December 2015 Financial liabilities Trade and other payables 9,654-9,654 Derivative liabilities Borrowings 2,000-2,000 11, ,715 Loans and receivables Total Company RM 000 RM December 2015 Financial assets Trade and other receivables, net of prepayments 68,810 68,810 Cash and bank balances 2,907 2,907 71,717 71,717 Other Fair value financial through liabilities profit or loss Total RM 000 RM 000 RM 000 Financial liabilities Trade and other payables 3,115-3,115 Derivative liabilities , ,176 (c) Methods and assumptions used to estimate fair value The fair values of financial assets and financial liabilities are determined as follows: i. Financial instruments that are not carried at fair value and whose carrying amounts are a reasonable approximation of fair value The carrying amounts of financial assets and liabilities, such as trade and other receivables, trade and other payables and borrowings, are reasonable approximation of fair value, either due to their shortterm nature or that they are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period. 94 Annual Report 2016

96 Notes to the Financial Statements 31 December 2016 (cont d) 33. FINANCIAL INSTRUMENTS (cont d) (c) Methods and assumptions used to estimate fair value (cont d) ii. Quoted investments The fair value of quoted investments in Malaysia is determined by reference to the exchange quoted market exit prices at the close of the business on the end of the reporting period. iii. Derivatives The fair value of a forward foreign exchange contract is the amount that would be payable or receivable upon termination of the outstanding position arising and is determined by reference to the difference between the contracted rate and the forward exchange rate as at the end of the reporting period applied to a contract of similar amount and maturity profile. iv. Financial guarantee The Group and the Company provide corporate guarantees to financial institutions for banking facilities given to subsidiaries and corporate guarantees given to third party suppliers in respect of sales of goods to a subsidiary and letter of credit taken by the subsidiary. The fair value of such financial corporate guarantees is negligible as the likelihood of the Group defaulting on the financial facilities and repayments to the third party suppliers is not probable. (d) Fair value hierarchy Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Derivatives The fair value of forward exchange contracts is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on Government bonds). Level 3 fair value measurements are those derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs). The following tables set-out the financial instruments carried at fair value is disclosed, together with their fair values and carrying amounts showed in the statement of financial position. Carrying Group and Company Level 1 Level 2 Level 3 Total amount RM 000 RM 000 RM 000 RM 000 RM 000 Assets measured at fair value At 31 December 2016 Derivative assets - Forward contracts At 31 December Other investments 10, ,037 10,037 Annual Report

97 Notes to the Financial Statements 31 December 2016 (cont d) 33. FINANCIAL INSTRUMENTS (cont d) (d) Fair value hierarchy (cont d) Carrying Group Level 1 Level 2 Level 3 Total amount RM 000 RM 000 RM 000 RM 000 RM 000 Liabilities measured at fair value At 31 December 2016 Derivative liabilities - Forward contracts At 31 December 2015 Derivative liabilities - Forward contracts Carrying Company Level 1 Level 2 Level 3 Total amount RM 000 RM 000 RM 000 RM 000 RM 000 Liabilities measured at fair value At 31 December 2016 Derivative liabilities - Forward contracts At 31 December 2015 Derivative liabilities - Forward contracts There were no transfers between Level 1, Level 2 and Level 3 fair value measurements during the financial years ended 31 December 2016 and 31 December (e) The following table shows the sensitivity analysis for the Level 2 fair value measurements. Group RM 000 RM 000 Profit after tax Foreign currency rate - Increase by 10% (2015: 10%) (4) (5) - Decrease by 10% (2015: 10%) 4 5 Company RM 000 RM 000 Profit after tax Foreign currency rate - Increase by 10% (2015: 10%) (4) (5) - Decrease by 10% (2015: 10%) Annual Report 2016

98 Notes to the Financial Statements 31 December 2016 (cont d) 34. FINANCIAL RISK MANAGEMENT OBJECTIVE The Group and the Company are exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Chief Financial Officer and Credit Committee. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial years, the Group s policy that no derivatives shall be undertaken except for the use as hedging instruments, where appropriate. The Group and the Company do not apply hedge accounting. The following sections provide details regarding the Group s and the Company s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. (i) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group s and the Company s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including cash and bank balances and derivatives), the Group and the Company minimise credit risk by dealing exclusively with high credit standing counterparties. The Group s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group s exposure to bad debts is not significant. For transactions that do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of the Head of Credit Committee. Exposure to credit risk At the end of the reporting period, the Group s and the Company s maximum exposure to credit risk is represented by the carrying amount of each of the financial assets recognised in the statements of financial position, including derivatives with positive fair values. Information regarding credit enhancements for trade and other receivables is disclosed in Note 11 to the financial statements. Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the country of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group s trade receivables at the end of the reporting period are as follows: Group RM 000 % of total RM 000 % of total By country Malaysia 91,468 93% 108,707 96% Asia, other than Malaysia 6,768 7% 4,379 4% 98, % 113, % Annual Report

99 Notes to the Financial Statements 31 December 2016 (cont d) 34. FINANCIAL RISK MANAGEMENT OBJECTIVE (cont d) (i) Credit risk (cont d) Credit risk concentration profile (cont d) At the end of reporting period, approximately: (i) 11% (2015: 13%) and 21% (2015: 30%) of the Group s and the Company s trade receivables respectively were due from five major customers who are hardware trading and construction companies located in Malaysia. (ii) 16% (2015: 20%) of the Company s receivables were balances with subsidiaries. Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 11 to the financial statements. Deposits with banks and other financial institutions, that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 11 to the financial statements. (ii) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group s and the Company s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group s and the Company s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. The Group s and the Company s liquidity risk management policy is that to maintain sufficient liquid financial assets and stand-by credit facilities with five different banks. The table below summarises the maturity profile of the Group s and the Company s liabilities at the reporting date based on contractual undiscounted repayment obligations. Group On demand or within one year RM 000 RM 000 Financial liabilities Trade and other payables 11,954 9,654 Borrowings - 2,000 Derivative liabilities Total undiscounted financial liabilities 12,035 11,715 Company Financial liabilities Trade and other payables 5,699 3,115 Derivative liabilities Total undiscounted financial liabilities 5,778 3, Annual Report 2016

100 Notes to the Financial Statements 31 December 2016 (cont d) 34. FINANCIAL RISK MANAGEMENT OBJECTIVE (cont d) (iii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group s and the Company s financial instruments will fluctuate because of changes in market interest rates. The Group s exposure to changes in interest rates relates primarily to the Group s interest bearing debt obligations and deposits with banks. The Group finances its operations by a mixture of internal funds, bank and other borrowings. The Group regularly reviews the interest rate profile of borrowings against prevailing and anticipated market rates. The repayment and maturity profiles of borrowings are structured after taking into consideration the cash inflows expected to be generated from the underlying assets or operations and the economic life of the assets or operations being financed. The Group s policy is to borrow both on the fixed and floating rate basis. The objective for the mix between fixed and floating rate borrowings is set to reduce the impact of an upward change in interest rates while enabling benefits to be enjoyed if interest rates fall. The information on maturity dates and interest rates of financial assets and liabilities are disclosed in their respective notes. The Group s deposits are placed at fixed rates and management endeavours to obtain the best rate available in the market. Sensitivity analysis for interest rate risk The following table demonstrates the sensitivity of the Group s and the Company s profit net of tax to a reasonably possible change in RM interest rate, with all other variables held constant. Group RM 000 RM 000 Profit after tax - Increase by 30 (2015: 30) basis points - (5) - Decrease by 30 (2015: 30) basis points - 5 The sensitivity for the Group and the Company is lower in 2016 than in 2015 because of decrease in outstanding borrowings of the Group and Company during the financial year. The assumed movement in basis points for interest rate sensitivity analysis is based on current observable market environment. No sensitivity was presented in 2016 as there were no outstanding floating instruments as at 31 December Annual Report

101 Notes to the Financial Statements 31 December 2016 (cont d) 34. FINANCIAL RISK MANAGEMENT OBJECTIVE (cont d) (iii) Interest rate risk (cont d) Sensitivity analysis for interest rate risk (cont d) The following tables set out the carrying amounts, the weighted average effective interest rates as at the end of the reporting period and the remaining maturities of the financial instruments of the Group and of the Company that are exposed to the interest rate risk: Weighted average effective More interest Within 1-5 than rate 1 year years 5 years Total Group Note % RM 000 RM 000 RM 000 RM 000 At 31 December 2016 Fixed rate instruments Deposits with licensed banks , ,282 At 31 December 2015 Fixed rate instruments Deposits with licensed banks , ,412 Floating rate instruments Borrowings (2,000) - - (2,000) Company At 31 December 2016 Fixed rate instruments Amount owing by subsidiaries , ,302 Deposits with licensed banks , ,197 Amount owing to a subsidiary (5) - - (5) At 31 December 2015 Fixed rate instruments Amount owing by subsidiaries , ,826 Deposits with licensed banks Amount owing to a subsidiary (13) - - (13) (iv) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Transactional currency exposures mainly arise from transactions that are denominated in currencies other than functional currencies of the operating entities. 100 Annual Report 2016

102 Notes to the Financial Statements 31 December 2016 (cont d) 34. FINANCIAL RISK MANAGEMENT OBJECTIVE (cont d) (iv) Foreign currency risk (cont d) The Group and the Company also hold cash and bank balances denominated in foreign currencies for working capital purposes. At the end of the reporting period, such foreign currency balances amounted to RM7,261,000 (2015: RM1,178,000) and RM4,561,000 (2015: RM1,100,000) for the Group and the Company respectively. The Group s transactional currency exposures mainly arise from transactions entered into by subsidiaries in currencies other than their functional currencies. The Group enters into forward foreign currency contracts for its foreign currency exposures and the management monitors these exposures on an ongoing basis. During the financial year, the Group entered into forward foreign currency contracts to manage exposures to currency risk of its trade receivables and trade payables which are denominated in currencies other than the functional currency of the Group and the Company. The notional amount and maturity date of the forward foreign currency contracts outstanding as at 31 December 2016 are as follows: Contract amount in foreign currency RM 000 Maturities Group Currency 000 equivalent within 31 December 2016 Forward contracts used to hedge trade receivables SGD 2,210 6,777 Six months Forward contracts used to hedge trade payables USD 3,208 14,374 Two months Company 31 December 2016 Forward contracts used to hedge trade receivables SGD 2,210 6,777 Six months Forward contracts used to hedge trade payables USD 2,500 11,196 Two months Group 31 December 2015 Forward contracts used to hedge trade receivables SGD 2,800 8,486 Twelve months Forward contracts used to hedge trade payables USD 683 2,937 One month Company 31 December 2015 Forward contracts used to hedge trade receivables SGD 2,800 8,486 Twelve months Annual Report

103 Notes to the Financial Statements 31 December 2016 (cont d) 34. FINANCIAL RISK MANAGEMENT OBJECTIVE (cont d) (iv) Foreign currency risk (cont d) Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Group s and the Company s profit net of tax to a reasonably possible change in the USD, and SGD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant. Group RM 000 RM 000 Profit after tax USD/RM - strengthened 10% (2015: 10%) weakened 10% (2015: 10%) (489) (20) SGD/RM - strengthened 10% (2015: 10%) weakened 10% (2015: 10%) (578) (397) Company RM 000 RM 000 Profit after tax USD/RM - strengthened 10% (2015: 10%) weakened 10% (2015: 10%) (283) (14) SGD/RM - strengthened 10% (2015: 10%) weakened 10% (2015: 10%) (514) (397) (v) Market price risk Market risk is the risk that the fair value of future cash flows of the Group s financial instruments would fluctuate because of changes in market prices (other than interest or exchange rates). The Group s and the Company s principal exposure to market risk arises mainly from the changes in steel raw materials and finished goods prices. Both raw materials and finished goods are classified as current assets and the Group and the Company manage the sale of finished goods and procurement of its raw materials to optimise return on realisation of its inventories. Sensitivity analysis on world composite steel prices The following table demonstrates the sensitivity of the Group s and the Company s profit net of tax to a reasonably possible change in world composite steel prices, with all other variables held constant. Group Note RM 000 RM 000 Profit after tax - Increase by 10% (2015: 10%) 10(a) 24,859 34,731 - Decrease by 10% (2015: 10%) 10(a) (24,859) (34,731) Company Note RM 000 RM 000 Profit after tax - Increase by 10% (2015: 10%) 10(a) 9,792 10,076 - Decrease by 10% (2015: 10%) 10(a) (9,792) (10,076) 102 Annual Report 2016

104 Notes to the Financial Statements 31 December 2016 (cont d) 35. SIGNIFICANT EVENT SUBSEQUENT TO THE END OF THE REPORTING PERIOD The Companies Act, 2016 (New Act) was enacted to replace the Companies Act, 1965 and was passed by Parliament on 4 April The New Act was subsequently gazetted on 15 September On 26 January 2017, the Minister of Domestic Trade, Co-operatives and Consumerism announced that the effective date of the New Act, except for Section 241 and Division 8 of Part III of the New Act, to be 31 January Amongst the key changes introduced in the New Act, which will affect the financial statements of the Group and of the Company would include the removal of the authorised share capital, replacement of no par value shares in place of par or nominal value shares, and the treatment of share premium and capital redemption reserves. The adoption of the New Act does not have any financial impact on the Group and the Company for the financial year ended 31 December 2016 as any accounting implications will only be applied prospectively, if applicable, and the effect of adoption mainly will be on the disclosures to the annual report and financial statements of the Group and of the Company for the financial year ending 31 December ADOPTION OF NEW MFRSs AND AMENDMENTS TO MFRSs 36.1 New MFRSs adopted during the financial year On 1 January 2016, the Group and the Company adopted the following Standards that are mandatory for annual financial periods beginning on or after 1 January Title Effective Date MFRS 14 Regulatory Deferral Accounts 1 January 2016 Amendments to MFRS 10, MFRS 12, MFRS 128 Investment Entities: Applying the Consolidation Exception 1 January 2016 Amendments to MFRS 11 Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 Amendments to MFRS 101 Disclosure Initiative 1 January 2016 Amendments to MFRS 116 and MFRS 138 Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to MFRS 116 and MFRS 141 Agriculture: Bearer Plants 1 January 2016 Amendments to MFRS 127 Equity Method in Separate Financial Statements 1 January 2016 Amendments to MFRSs Annual Improvements to MFRSs Cycle 1 January 2016 There is no material impact upon the adoption of these Standard and Amendments during the financial year, other than the adoption of Amendments to MFRS 101 Disclosure Initiative, which resulted in the following: (a) Grouping together supporting information for items presented in the statements of financial position, statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows within the notes to the financial statements. (b) Disclosures of only significant accounting policies comprising the measurement bases used in preparing the financial statements and other accounting policies that are relevant to the financial statements. Annual Report

105 Notes to the Financial Statements 31 December 2016 (cont d) 36. ADOPTION OF NEW MFRSs AND AMENDMENTS TO MFRSs (cont d) 36.2 New MFRSs that have been issued, but only effective for annual periods beginning on or after 1 January 2017 The Standards that are issued but not yet effective up to the date of issuance of financial statements of the Group and of the Company are disclosed below. The Group and the Company intend to adopt these Standards, if applicable, when they become effective. Title Effective Date Amendments to MFRS 12 Annual Improvements to MFRS Standards Cycle 1 January 2017 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 1 Annual Improvements to MFRS Standards Cycle 1 January 2018 MFRS 9 Financial Instruments (IFRS 9 as issued by IASB in July 2014) 1 January 2018 MFRS 15 Revenue from Contracts with Customers 1 January 2018 Clarifications to MFRS 15 1 January 2018 Amendments to MFRS 2 Classification and Measurement of Share-based Payment Transactions 1 January 2018 Amendments to MFRS 128 Annual Improvements to MFRS Standards Cycle 1 January 2018 Amendments to MFRS 140 Transfers of Investment Property 1 January 2018 IC Interpretation 22 Foreign Currency Transactions and Advance Consideration 1 January 2018 Amendments to MFRS 4 Applying MFRS 9 Financial Instruments with See MFRS 4 MFRS 4 Insurance Contracts Paragraphs 46 and 48 MFRS 16 Leases 1 January 2019 Amendments to MFRS 10 and MFRS 128 Sale or Contribution of Assets between an Investor and its Associates or Joint Venture Deferred The Group and the Company are in the process of assessing the impact of implementing these Standards, since the effects would only be observable for future financial years. 104 Annual Report 2016

106 Notes to the Financial Statements 31 December 2016 (cont d) 37. SUPPLEMENTARY INFORMATION ON REALISED AND UNREALISED PROFITS OR LOSSES The retained earnings as at the end of the reporting period may be analysed as follows: Group Company RM 000 RM 000 RM 000 RM 000 Total retained earnings of the Company and its subsidiaries: - Realised 327, , , ,487 - Unrealised 15,602 13,538 13,185 10, , , , ,179 Less: Consolidation adjustments (19,102) (18,700) - - Total retained earnings 324, , , ,179 Annual Report

107 List of Group s Properties as at 31 December 2016 LOCATION YEAR OF DESCRIPTION AREA TENURE AGE OF NET BOOK ACQUISITION/ BUILDING VALUE USAGE REVALUATION (YEARS) RM Choo Bee Metal Industries Berhad 1) Lot *1981 Tasek Industrial land with 4.25 acres Leasehold 45 2,104,420 Factory District of Factory single-storey 99 years Kinta, Perak factory expiring on Darul Ridzuan ) PT Pengkalan Industrial land with 74,157 sq.mtr Leasehold ,327,060 Factory Kawasan Factory single-storey 60 years Perusahaan factory expiring on Pengkalan 1, Perak Darul Ridzuan PT Pengkalan Industrial land with 9,682 sq.mtr Leasehold Kawasan Factory single-storey 60 years Perusahaan factory expiring on Pengkalan 1, Perak Darul acres (in total) Ridzuan 3) PT *2010 Kapar Industrial land with 37,885 sq.mtr Freehold 7 28,609,625 Warehouse Mukim of Kapar, Warehouse single-storey (9.36 acres) District of Klang, warehouse State of Selangor 4) Lot Laman Baiduri Condominium 1, sq. ft. Leasehold 6 545,010 Staff use Mukim Damansara, Condominium 99 years Daerah Petaling, expiring on Selangor ,586,115 *The freehold land was revalued partially in 2010 where area occupied by warehouse. Choo Bee Hardwares Sdn. Berhad 1) Lots and 1972 Kuan Woh Land with no Lot Long-term N/A ) 22970, Mukim of Yuen specific zoning; has 131,499 sq.ft. leasehold ) Ulu Kinta, Warehouse a steel portal frame- 999 years ) District of Ulu work building used expiring on ) 3,162,308 Warehouse Kinta, Perak Darul as a warehouse on ) Ridzuan Lot and a Lot ) single-storey detached 117,886.5 sq.ft. ) house which is owner ) occupied on Lot ) 2) Lot P.T Commercial land 1,540 sq.ft. Leasehold ,200 Let out Lot No with two-storey 99 years Mukim of Ulu shophouse expiring on Kinta, District of Kinta, Perak Darul Ridzuan (619 & 619A Jalan Tasek, Taman Seri Tasek, Ipoh) 3) Lots 5592S and 1981 Jalan Commercial land Lot 5592S Freehold 36 ) 5593S,Town of Bendahara with three-storey 1,916.6 sq.ft. ) Ipoh, District of Old Office shophouse ) 250,827 Office Kinta, Perak Lot 5593S Freehold 36 ) Darul Ridzuan 1,829.5 sq.ft. ) (No.46 and 48 ) Lebuh Raya ) Bendahara, Ipoh) ) 106 Annual Report 2016

108 List of Group s Properties as at 31 December 2016 (cont d) LOCATION YEAR OF DESCRIPTION AREA TENURE AGE OF NET BOOK ACQUISITION/ BUILDING VALUE USAGE REVALUATION (YEARS) RM Choo Bee Hardwares Sdn. Berhad (cont d) 4) Lot 5594S Town 1981 Jalan Commercial land 1,829.5 sq.ft. Freehold 36 51,063 Office of Ipoh, District Bendahara with three-storey of Kinta, Perak Old Office shophouse Darul Ridzuan (No.44 Lebuh Raya Bendahara, Ipoh) 5) Lots 2874S and 2015 Jalan Commercial land Lot 2874S Freehold 55 ) 2875S, Town Bendahara with double-storey 2,400 sq. ft. ) of Ipoh, District Old Office shophouse ) 1,406,220 Let out of Kinta, Perak Lot 2875S Freehold 55 ) Darul Ridzuan 1,742 sq.ft. ) (No.42 and 44 ) Jalan Bendahara, ) Ipoh) ) 6) Lot 5595S 1962 HQ Carpark Commercial land 1,829.5 sq.ft. Freehold N/A 12,500 Car Park Town of Ipoh with a temporary District of shed constructed on Kinta, Perak the land for cars and Darul Ridzuan motorcycles 7) Lot and 1993 Stockyard Commercial land Lot Freehold N/A ) Lot 6969 Mukim 4,356 sq.ft. ) of Kinta, Perak ) 67,027 Stockyard Darul Ridzuan Lot 6969 Freehold N/A ) 20, sq.ft. ) 8) Lot 41013, 2011 Kapar One and a half storey 121 sq. mtr Freehold 6 143,379 Staff use Mukim Kapar, Hostel terrace house 1, sq.ft. District of Klang, No. 20 Jalan Sungai State of Selangor Kapar Indah 10C, Taman Sg. Kapar Indah, Klang 9) Lot 13A/13B, 2016 Sabah Industrial lot Lot 13A Leasehold 17 15,513,142 Warehouse Industrial Zone, Warehouse leasehold 99 years hectars 99 years Jalan 4 KKIP Timur, effective 1/1/2000 to (6.224 acres) expiring on KKIP, Tuaran, 31/12/ Sabah Lot 13B hectares (4.485 acres) 20,979,666 Choo Bee Hardware (Sabah) Sdn. Bhd. 1) Country Lease No 2007 Sabah Industrial land with 2.95 acres Leasehold 20 6,701,887 Warehouse KM 25, Warehouse single-storey factory 99 years Jalan Tuaran expiring on District of Tuaran Sabah 6,701,887 Taik Bee Hardware Sdn. Bhd. 1) P.T HS(D) 2011 Menglembu Industrial land with 2.30 acres Leasehold 25 2,431,291 Factory Ka 6233/82 Factory single-storey 60 years Mukim Ulu Kinta factory expiring on Perak Darul Ridzuan 2,431,291 Grand total 90,698,959 Annual Report

109 Statement of Shareholdings as at 31 March 2017 Total Number of Shares Issued : 108,941,075 (Excluding 961,925 Treasury Shares) Class of Shares : Ordinary shares Voting Rights : One vote per ordinary share DISTRIBUTION OF SHAREHOLDINGS No. of % of No. of % of Range of Shareholdings Holders Holders Shares Issued Capital Less than , , , ,001 10,000 2, ,072, , , ,463, ,001 5,447,052 (*) ,702, ,447,053 and above (**) ,498, TOTAL 3, ,941, Note: * - Less than 5% of issued holdings ** - 5% and above of issued holdings THIRTY LARGEST REGISTERED HOLDERS AS AT % of Issued Name of Holder Holdings Capital 1. Choo Bee Holdings Sdn. Bhd. 44,942, Soon Lian Huat Holdings Sdn. Berhad 12,802, Lembaga Tabung Haji 7,753, DB (Malaysia) Nominee (Asing) Sdn. Bhd. - Deutsche Bank AG Singapore for Yeoman 3-Rights Value Asia Fund 5,150, AmanahRaya Trustees Berhad - Amanah Saham Bumiputera 1,700, Soon Hean Hooi 1,425, Soon Cheng Hai 1,325, Soon Cheng Boon 1,287, CIMB Group Nominees (Asing) Sdn. Bhd. Exempt AN for DBS Bank Ltd (SFS) 1,256, Teo Tin Lun 1,125, Yeo Lee Hong Betty 1,101, Soon Siew Leh 780, Affin Hwang Nominees (Asing) Sdn. Bhd. - DBS Vickers Secs (S) Pte Ltd for Lim Mee Hwa 625, Chuah Chew Hing 625, Lee Sieng Vincent Lee 588, Soon Siew Hoon 580, Soon Ah Soon Lian Huat 467, Tan Peng Soon 404, Maybank Nominees (Tempatan) Sdn. Bhd. - Pledged Securities Account for Law Teck Peng 404, Soon Lian Lim 384, Annual Report 2016

110 Statement of Shareholdings as at 31 March 2017 (cont d) THIRTY LARGEST REGISTERED HOLDERS AS AT (cont d) % of Issued Name of Holder Holdings Capital 21. CIMSEC Nominees (Asing) Sdn. Bhd. Exempt AN for CIMB Securities (Singapore) Pte Ltd 340, Tan Peng Nam 312, Tan Peng Sum 312, Then Yoon Yin 260, Tan Chew Ee 247, Tan Goh Mee 236, Yeoh Phek Leng 236, Malaysia Nominees (Tempatan) Sendirian Berhad - Pledged Securities Account for Soon Lian Lim 233, Quah Eng Sim 218, Su Ming Yaw 208, TOTAL 87,333, SUBSTANTIAL SHAREHOLDERS AS AT According to the Register of Substantial Shareholders required to be kept under Section 144 of the Companies Act, 2016, the following are the substantial shareholders of the Company: Direct Deemed Total Name of Interest Interest Interest Substantial Shareholder (A) % (B) % (A+B) % Choo Bee Holdings Sdn. Bhd. 44,942, ,942, Lembaga Tabung Haji 7,753, ,753, Estate of Soon Ah Soon Lian Huat 467, ,152, ,619, Soon Lian Huat Holdings Sdn. Berhad 12,802, ,942, ,745, Soon Cheng Hai 1,325, ,745, ,070, Soon Cheng Boon 1,287, ,760, ,047, Soon Hean Hooi 1,425, ,745, ,170, Lim Mee Hwa 625, ,375, ,000, Yeo Seng Chong - - 6,000, ,000, Annual Report

111 Statement of Shareholdings as at 31 March 2017 (cont d) DIRECTORS INTEREST AS AT According to the Register of Directors Shareholdings required to be kept under Section 59 of the Companies Act, 2016 the Directors interests in the ordinary shares capital of the Company and its subsidiary companies are as follows: Shares in the Company Direct Deemed Total Interest Interest Interest Name of Director (A) % (B) % (A+B) % Soon Cheng Hai 1,325, ,745, ,070, Soon Cheng Boon 1,287, ,760, ,047, Soon Hean Hooi 1,425, ,745, ,170, Lee Sieng Vincent Lee 588, , ,179, Khoo Choon Yam Puan Sri Shahrizan Binti Abdullah 47, , Ng Poh Tat Lim Chee Hoong Shares in the holding company, Soon Lian Huat Holdings Sdn. Berhad Direct Deemed Total Interest Interest Interest Name of Director (A) % (B) % (A+B) % Soon Cheng Hai 226, , Soon Cheng Boon 226, , Soon Hean Hooi 226, , Shares in related company, Choo Bee Holdings Sdn. Bhd. Direct Deemed Total Interest Interest Interest Name of Director (A) % (B) % (A+B) % Soon Cheng Hai 161, ,973, ,135, Soon Cheng Boon 161, ,973, ,135, Soon Hean Hooi 161, ,973, ,135, By virtue of their interests in the Company and in the holding company, Soon Cheng Hai, Soon Cheng Boon and Soon Hean Hooi are also deemed to have an interest in shares of all the subsidiaries to the extent that the Company and the holding company have interests. Other than as disclosed above, none of the other Directors had any interest in shares in the Company or its related companies. 110 Annual Report 2016

112 Form of Proxy No. of shares held CDS A/C No. Telephone No. I/We, (FULL NAME IN BLOCK CAPITALS) NRIC No./Company No. of (FULL ADDRESS) being a member of Choo Bee Metal Industries Berhad hereby appoint the following person(s): Name of proxy & NRIC No. No. of shares % or failing him/her or failing him/her, the Chairman of the Meeting as my/our proxy, to vote for me/us and on my/our behalf at the 2017 Annual General Meeting of the Company to be held on 16 June 2017 and at any adjournment thereof in the manner indicated below in respect of the following Resolutions: Ordinary Business Ordinary Resolution For Against The payment of a Final & Special Dividend 1 The payment of Directors fee 2 The payment of Non-Executive Directors benefits 3 The re-election of Directors: - Soon Cheng Boon 4 - Puan Sri Shahrizan Binti Abdullah 5 - Ng Poh Tat 6 The re-appointment of BDO as Auditors and authority to Directors 7 to fix their remuneration Special Business Retention of Independent Non-Executive Director 8 Proposed Renewal of Share Buy Back Authority 9 Please indicate with (4) and ( ) how you wish your vote to be cast. If you do not indicate how you wish your proxy to vote on any resolution, the proxy shall vote as he thinks fit, or at his discretion, abstain from voting. Date: Signature of Shareholder NOTES: 1. Only members whose names appear on the Record of Depositors as at 9 June 2017 shall be entitled to attend the Annual General Meeting or appoint proxies in his/her stead or in the case of a corporation, a duly authorised representative to attend and to vote in his/her stead. 2. A member entitled to attend and vote at the Meeting is entitled to appoint one (1) or two (2) proxies to attend and vote instead of him. A proxy need not be a member of the Company. 3. Where a member appoints two (2) proxies, the appointments shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy. 4. Where a member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company in an 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 but the proportion of holdings to be represented by each proxy must be specified. 5. The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or if the appointer is a corporation, either under the corporation s seal or under the hand of an officer or attorney duly authorised. 6. The instrument appointing a proxy must be deposited at the Registered Office of the Company, 55A, Medan Ipoh 1A, Medan Ipoh Bistari, Ipoh, Perak Darul Ridzuan, Malaysia not less than 48 hours before the time appointed for holding the Meeting. Faxed or ed copies are not acceptable.

113 Please fold here 80 SEN STAMP (Within Malaysia) To The Company Secretary CHOO BEE METAL INDUSTRIES BERHAD (10587-A) 55A, Medan Ipoh 1A, Medan Ipoh Bistari, Ipoh, Perak Darul Ridzuan, Malaysia. Please fold here

114