TABLE OF CONTENTS

(97092-W) www.ffhb.com.my ANNUAL REPORT 2017

TABLE OF CONTENTS 2 Notice of Annual General Meeting 8 Corporate Information 9 Audit and Risk Management Committee Report 11 Corporate Governance Statement and Other Additional Compliance Information 21 Corporate Responsibility Statement 22 Statement on Risk Management and Internal Control 23 Profile of Key Senior Management 25 Corporate Structure 26 Management Discussion and Analysis 30 Directors Report 36 Statements of Financial Position 38 Statements of Comprehensive Income 39 Statements of Changes In Equity 41 Statements of Cash Flows 44 116 Supplementary Information on the Disclosure of Realised and Unrealised Profits or Losses 117 Statement By Directors 117 Statutory Declaration 118 Independent Auditors Report 123 Shareholders Statistics 125 RCPS holders Statistics 127 List of Properties

2 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Thirty-Fourth Annual General Meeting of Federal Furniture Holdings (M) Berhad will be held at Level P1, Menara Choy Fook On, No. 1B, Jalan Yong Shook Lin, 46050 Petaling Jaya, Selangor Darul Ehsan on Thursday, 7 December 2017 at 3:00 p.m. for the following purposes:- AGENDA 1. To receive the Audited Financial Statements for the financial period from 1 January 2016 to 30 June 2017 together with the Reports of the Directors and the Auditors thereon. Please refer to Explanatory Note (1) 2. To approve the payment of Directors fees of 331,500/- for the financial period from 1 January 2016 to 30 June 2017. (Resolution 1) 3. To approve the payment of Directors fees of 240,000/- for the financial year ending 30 June 2018. (Resolution 2) 4. To approve the payment of Directors benefit payable to the Directors of up to an amount of 25,000/- for the period from 31 January 2017 until the next Annual General Meeting of the Company to be held in year 2018. (Resolution 3) 5. To re-appoint the following Directors of the Company:- (a) (b) (c) Dato Dr. Choy Fook On Datin Tan Geok Foong Tuan Haji Hussein Bin Hamzah (Resolution 4) (Resolution 5) (Resolution 6) 6. To re-elect Datuk Choy Wai Ceong who retires by rotation pursuant to Article 98 of the Company s Articles of Association. (Resolution 7) 7. To re-appoint Messrs. Baker Tilly Monteiro Heng as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration. (Resolution 8) As Special Business:- To consider and, if thought fit, to pass the following ordinary resolutions:- 8. Ordinary Resolution 1 - Authority to issue shares pursuant to the Companies Act 2016 THAT subject always to the Companies Act 2016 ( the Act ), the Articles of Association of the Company and the approvals from Bursa Malaysia Securities Berhad ( Bursa Securities ) and any other relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered pursuant to the Act, to issue and allot shares in the capital of the Company from time to time at such price and upon such terms and conditions, for such purposes and to such person or persons whomsoever the Directors may in their absolute discretion deem fit provided always that the aggregate number of shares issued pursuant to this resolution does not exceed ten percent (10%) of the total number of issued shares of the Company for the time being; AND THAT the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Securities; AND FURTHER THAT such authority shall commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next Annual General Meeting of the Company. (Resolution 9)

ANNUAL REPORT 2017 3 3 Notice OF Annual General Meeting 9. Ordinary Resolution 2 - Continuing In Office As Independent Non-Executive Director THAT authority be and is hereby given to Tuan Haji Hussein Bin Hamzah who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, to continue to act as an Independent Non-Executive Director of the Company and to hold office until the conclusion of the next Annual General Meeting of the Company. (Resolution 10) 10. Ordinary Resolution 3 - Proposed Renewal of Existing Shareholders Mandate for Recurrent Related Party Transactions of a Revenue and/or Trading Nature ( Proposed Renewal of Existing Shareholders Mandate ) THAT subject to Bursa Malaysia Securities Berhad Main Market Listing Requirements, approval be and is hereby given for the Proposed Renewal of Existing Shareholders Mandate for the Company to enter into and to give effect to the category of the recurrent transactions of a revenue and/or trading nature from time to time with the Related Party as specified in Section 2.3 of the Circular/Statement to Shareholders dated 31 October 2017, provided that such transactions are:- (i) (ii) (iii) (iv) recurrent transactions of a revenue or trading nature; necessary for the Company s day-to-day operations; carried out in the ordinary course of business on normal commercial terms which are not more favourable to the Related Parties than those generally available to the public; and not to the detriment of minority shareholders, AND THAT such authority shall commence upon the passing of this resolution and shall continue to be in force until:- (i) (ii) (iii) the conclusion of the next Annual General Meeting of the Company following the general meeting at which such mandate was passed, at which time it will lapse, unless by a resolution passed at the next Annual General Meeting, the authority is renewed; the expiration of the period within which the next Annual General Meeting after that date it is required to be held pursuant to Section 340(2) of the Companies Act 2016 (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Companies Act 2016); or revoked or varied by resolution passed by the shareholders in a general meeting; whichever is the earlier; AND THAT the Board of Directors of the Company be and are hereby authorised to do all acts, deeds, things as they may deemed fit, necessary, expedient and/or appropriate in order to implement the Proposed Renewal of Existing Shareholders Mandate with full power to assent to all or any conditions, variations, modifications and/or amendments in any manner as may be required or permitted under any relevant authorities or otherwise and to deal with all matters relating thereto and to take all such steps and to execute, sign and deliver for and on behalf of the Company, all such documents, agreements, arrangements and/or undertakings, with any party or parties and to carry out any other matters as may be required to implement, finalise and complete, and give full effect to the Proposed Renewal of Existing Shareholders Mandate in the best interest of the Company. (Resolution 11)

4 Notice OF Annual General Meeting 11. Ordinary Resolution 4 - Proposed New Shareholders Mandate for Recurrent Related Party Transactions of a Revenue and/or Trading Nature ( Proposed New Shareholders Mandate ) THAT subject to the provisions of the Bursa Malaysia Securities Berhad Main Market Listing Requirements, approval be and is hereby given to the Company and its subsidiaries ( FFHB Group ) to enter into and to give effect to the category of the recurrent transactions of a revenue or trading nature from time to time with the Related Party as specified in Section 2.3 of the Circular/Statement to Shareholders dated 31 October 2017, provided that such transactions are:- (i) (ii) (iii) (iv) recurrent transactions of a revenue or trading nature; necessary for the Company s day-to-day operations; carried out in the ordinary course of business on normal commercial terms which are not more favourable to the Related Parties than those generally available to the public; and not to the detriment of minority shareholders, AND THAT such authority shall commence upon the passing of this resolution and shall continue to be in force until:- (i) (ii) (iii) the conclusion of the next Annual General Meeting of the Company following the general meeting at which such mandate was passed, at which time it will lapse, unless by a resolution passed at the next Annual General Meeting, the authority is renewed; the expiration of the period within which the next Annual General Meeting after that date it is required to be held pursuant to Section 340(2) of the Companies Act 2016 (but shall not extend to such extension as may be allowed pursuant to Section 340(4) of the Companies Act 2016); or revoked or varied by resolution passed by the shareholders in a general meeting; whichever is the earlier; AND THAT the Board of Directors of the Company be and are hereby authorised to do all acts, deeds, things as they may deemed fit, necessary, expedient and/ or appropriate in order to implement the Proposed New Shareholders Mandate with full power to assent to all or any conditions, variations, modifications and/or amendments in any manner as may be required or permitted under any relevant authorities or otherwise and to deal with all matters relating thereto and to take all such steps and to execute, sign and deliver for and on behalf of the Company, all such documents, agreements, arrangements and/or undertakings, with any party or parties and to carry out any other matters as may be required to implement, finalise and complete, and give full effect to the Proposed New Shareholders Mandate in the best interest of the Company. (Resolution 12)

ANNUAL REPORT 2017 5 5 Notice OF Annual General Meeting 12. Ordinary Resolution 5 - Proposed Renewal of Authority for Share Buy Back of up to 10% Of the Total Number of Issued Shares of the Company THAT subject to the compliance with Section 127 of the Companies Act 2016 and all other applicable laws, rules and regulations, approval be and is hereby given to the Company, to purchase such amount of ordinary shares in the Company as may be determined by the Directors of the Company from time to time through Bursa Malaysia Securities Berhad ( Bursa Securities ) as the Directors may deem fit and expedient in the interest of the Company provided that the aggregate number of shares to be purchased and held pursuant to this resolution does not exceed 10% of the existing total number of issued shares in the ordinary share capital of the Company including the shares previously purchased and retained as Treasury Shares (if any) and the maximum funds to be allocated by the Company for the purpose of purchasing its own shares shall not exceed the total retained profits of the Company, upon such terms and conditions as set out in the Statement to Shareholders. THAT such authority shall commence immediately upon the passing of this Ordinary Resolution and until the conclusion of the next Annual General Meeting ( AGM ) of the Company or the expiry of the period within which the next AGM is required by law to be held unless revoked or varied by Ordinary Resolution in the general meeting of the Company but so as not to prejudice the completion of a purchase made before such expiry date, in any event in accordance with the provisions of Bursa Securities Main Market Listing Requirements and any other relevant authorities. THAT authority be and is hereby given to the Directors of the Company to decide in their absolute discretion to retain the ordinary shares in the Company so purchased by the Company as Treasury Shares and/or to cancel them and/or to resell them and/or to distribute them as share dividends in such manner as may be permitted and prescribed by the provisions of the Bursa Securities Main Market Listing Requirements and any other relevant authorities. AND THAT authority be and is hereby given to the Directors of the Company to take all such steps as are necessary to enter into any agreements, arrangements and guarantees with any party or parties to implement, finalise and give full effect to the aforesaid with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities and to do all such acts and things as the Directors may deem fit and expedient in the interests of the Company. (Resolution 13) 13. To transact any other business for which due notice has been given. By Order of the Board Chua Siew Chuan (MAICSA 0777689) Mak Chooi Peng (MAICSA 7017931) Company Secretaries Selangor Darul Ehsan 31 October 2017

6 Notice OF Annual General Meeting Explanatory Notes:- 1. Item 1 of the Agenda This Agenda item is meant for discussion only as the provision of Section 340(1)(a) of the Companies Act 2016 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting. 2. Authority to issue shares pursuant to the Companies Act 2016 The proposed adoption of Ordinary Resolution 1 is for the purpose of seeking a renewal for the general mandate to empower the Directors of the Company pursuant to the Companies Act 2016, from the date of the above Meeting, to issue and allot ordinary shares of not more than ten per centum (10%) from the unissued share capital of the Company for such purposes as the Directors of the Company consider would be in the interest of the Company. This authority will, unless revoked or varied at a General Meeting, expire at the conclusion of the next Annual General Meeting of the Company. This authority will provide flexibility and enable the Directors to take swift action for allotment of shares for any possible fund raising activities, including but not limited to further placement of shares for purpose of funding future investment project(s), working capital and/or acquisition(s) and to avoid delay and cost in convening general meetings to approve such issue of shares. As at the date of this Notice, no new shares in the Company were issued under the provision of the general mandate granted to the Directors at the Thirty-Third Annual General Meeting held on 27 May 2016, which will lapse at the conclusion of the Thirty-Fourth Annual General Meeting. 3. Continuing in office as an Independent Non-Executive Director The Nomination Committee of the Company and the Board of Directors of the Company had assessed the independence of Tuan Haji Hussein Bin Hamzah, who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, and with his consent, had recommended for him to continue to act as an Independent Non-Executive Director of the Company based on the following justifications:- (a) (b) (c) (d) he fulfilled the criteria of the definition of Independent Director as stated in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and had expressed his willingness to continue in office as an Independent Non-Executive Directors of the Company; his vast experience would enable him to provide the Board with a diverse set of experience, expertise and independent judgement to better manage and run the Group; he has served the Company as an Independent Director for a cumulative term of more than nine (9) years during which he had acted in good faith and in the best interests of the Company, exercising his independent judgement during deliberations and decision making during the Company s meetings and was familiar with the Company s business operations; and Tuan Haji Hussein Bin Hamzah has proven to be a reliable Independent Director with his professionalism aptitude and outlook of business perspective, devoted sufficient time and attention to his professional obligations for informed and balance decision making and had also exercised due care during his tenure in the best interests of the Company and the shareholders.

ANNUAL REPORT 2017 7 7 Notice OF Annual General Meeting Explanatory Notes:- (Continued) 4. Proposed Renewal of Existing Shareholder Mandate and Proposed New Shareholders Mandate for Recurrent Related Party Transactions of a Revenue and/or Trading Nature The proposed adoption of the Ordinary Resolutions 3 and 4 will enable the Company and its affiliated companies to enter into any of the recurrent related party transactions of a revenue and/or trading nature which are necessary for the Company s day-to-day operations, subject to the transactions being in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company. Please refer to the Circular/ Statement to Shareholders dated 31 October 2017 for more information. 5. Proposed Renewal of Authority for Share Buy-Back of up to 10% of the Total Number of Issued Share of the Company Notes: The proposed adoption of the above Ordinary Resolution, if passed, will empower the Directors to purchase the Company s shares up to ten percent (10%) of the total number of issued shares of the Company by utilising the retained profits of the Company. This authority will, unless revoked or varied by the shareholders of the Company in general meeting, expire at the conclusion of the next Annual General Meeting. 1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 29 November 2017 ( General Meeting Record of Depositors ) shall be eligible to attend the Meeting. 2. A member entitled to attend and vote at this Meeting is entitled to appoint any person as his proxy to attend and vote instead of him. A proxy appointed to attend and vote at this Meeting shall have the same rights as the member to speak at the Meeting. 3. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportions of his shareholdings 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 for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds with ordinary shares of the Company standing to the credit of the said securities account. 5. Where a member of the Company is an authorised nominee as defined in the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 6. If a corporation is a member of the Company, it may vote by any person authorised by resolution of its directors or other governing body to act as its representative at any meeting in accordance with Article 67 of the Company s Articles of Association. 7. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or if such appointor be a corporation, under its common seal or under the hand of an officer or attorney of the corporation duly authorised, and shall be deposited at the registered office or at such other place as is specified for that purpose in the notice convening the meeting, not less than forty-eight (48) hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote or in the case of a poll, not less than twenty-four (24) hours before the time appointed for the taking of the poll, and in default, the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expiration of twelve (12) months from the date named in it as the date of its execution.

8 CORPORATE INFOATION BOARD OF DIRECTORS Dato Dr. Choy Fook On (Non-Independent Non-Executive Chairman) Dato Choy Wai Hin (Managing Director) Datin Tan Geok Foong (Executive Director) Datuk Choy Wai Ceong (Executive Director) Tuan Haji Hussein Bin Hamzah (Independent Non-Executive Director) Mohd. Arif Bin Mastol (Independent Non-Executive Director) Dato Dr. Hj. Abdul Rasid Bin Ab Malik (Independent Non-Executive Director) AUDIT AND RISK MANAGEMENT COMMITTEE Mohd. Arif Bin Mastol (Chairman) Tuan Haji Hussein Bin Hamzah Dato Dr. Choy Fook On NOMINATION COMMITTEE Tuan Haji Hussein Bin Hamzah (Chairman) Mohd. Arif Bin Mastol Dato Dr. Choy Fook On REMUNERATION COMMITTEE Tuan Haji Hussein Bin Hamzah (Chairman) Mohd. Arif Bin Mastol Dato Dr. Choy Fook On SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia Tel: 603-7849 0777 Fax: 603-7841 8151/8152 AUDITORS Baker Tilly Monteiro Heng Chartered Accountants Baker Tilly MH Tower Level 10, Tower 1 Avenue 5, Bangsar South City 59200 Kuala Lumpur, Malaysia Tel: 603-2297 1000 Fax: 603-2282 9980 COMPANY SECRETARIES Chua Siew Chuan (MAICSA 0777689) Mak Chooi Peng (MAICSA 7017931) REGISTERED OFFICE / PRINCIPAL PLACE OF BUSINESS Level P1, Menara Choy Fook On No. 1B, Jalan Yong Shook Lin, Section 7, 46050 Petaling Jaya, Selangor Darul Ehsan, Malaysia Tel: 603-7955 9937 Fax: 603-7956 2812 Website: http://www.ffhb.com.my PRINCIPAL BANKERS Malayan Banking Berhad SOLICITORS Kandiah Partnership Raslan Loong Surend Zeffree & Partners STOCK EXCHANGE Main Market of Bursa Malaysia Securities Berhad STOCK CODE AND STOCK NAME STOCK CODE: 8605 STOCK NAME: FFHB

ANNUAL REPORT 2017 9 9 AUDIT AND RISK MANAGEMENT COMMITTEE REPORT The Audit and Risk Management Committee ( the Committee ) comprises wholly of three (3) non-executive directors, a majority of whom are independent directors. The Chairman of the Committee is a qualified accountant and a member of the Malaysian Institute of Accountants. During the financial period from 1 January 2016 to 30 June 2017, there were seven (7) meetings held and details of attendance of each Committee member who held office during the financial period from 1 January 2016 to 30 June 2017are as follows:- Name of Directors No. of meetings attended Mohd. Arif Bin Mastol 7/7 Tuan Haji Hussein bin Hamzah 7/7 Dato Dr. Choy Fook On 6/7 The role of the Committee is to oversee the Company s financial reporting process, corporate governance process and provide the Board with assurance of the quality and reliability of financial information used by the Board and of the financial information issued publicly by the Company. The Committee assumes the following fundamental responsibilities in the Company:- assessing the risks and control environment; overseeing financial reporting; evaluating the internal and external audit processes; and reviewing conflict of interest situations and related party transactions. The Terms of Reference of the Committee and the names of members are available at the Company s website at www.ffhb.com.my. 1. SUMMARY OF ACTIVITIES During the financial period from 1 January 2016 to 30 June 2017, the activities carried out by the Committee are as follows: Reviewed and recommended all the unaudited quarterly reports on consolidated financial results during the financial period from 1 January 2016 to 30 June 2017 for Board of Directors consideration and approval. Reviewed and recommended the reports and the audited financial statements for the financial period from 1 January 2016 to 30 June 2017 of the Company prior to tabling to the Board of Directors approval. Reviewed the Audit Planning Memorandum of the external auditors in respect of the audit for the financial statements of the Company and the Group for the financial period from 1 January 2016 to 30 June 2017 including the audit fees and made recommendations to the Board on their appointment and remuneration. Reviewed and approved the internal audit program and reports prepared by the Internal Audit Department. Oversee the internal audit function. Met with the external auditors without the presence of the management.

10 Audit and Risk Management Committee Report 1. SUMMARY OF ACTIVITIES (Continued) During the financial period from 1 January 2016 to 30 June 2017, the activities carried out by the Committee are as follows: (Continued) Reviewed all related party transactions of the Company and the Group on a quarterly basis. Reviewed and recommended the Risk Management Framework and Related Party Transaction Policy for Board of Directors consideration and approval; and Reviewed the Audit and Risk Management Committee Report and Statement on Risk Management and Internal Control before recommending for Board s approval for the purpose of inclusion in the Annual Report. 2. INTERNAL AUDIT FUNCTION The internal audit function is carried out by the Internal Audit Department that reports directly to the Committee. During the financial period from1 January 2016 to 30 June 2017, the Internal Audit Department conducted three internal audits: Company Federal Furniture Lifestyle Sdn Bhd Federal Furniture Industries Sdn Bhd Area of audit Cash Receipts at Showroom Plant, Machinery and Equipment Issued by Factory to Various Project Sites Federal Furniture 1982 (M) Sdn Bhd Warehouse and Store Operation: Return of Rejected Goods Delivered The cost incurred by the Company in connection with the internal audit function for the financial period from 1 January 2016 to 30 June 2017 amounted to 74,316.

ANNUAL REPORT 2017 11 11 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION STATEMENT OF CORPORATE GOVERNANCE The Board of Directors of Federal Furniture Holdings (M) Berhad ( FFHB or the Company ) recognises the importance of adopting a good corporate governance and is taking steps to continuously evaluate and improve management practices and systems to enhance the standard of corporate governance applied by the Group. In doing so, the Board has taken guidance from the Malaysian Code on Corporate Governance 2012 issued in March 2012 ( MCCG 2012 ). The Board is pleased to report on the manner which outlines the main corporate governance applied within the Group to the extent of compliance with best practices, pursuant to paragraph 15.25 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Main LR ). Roles and Responsibilities of Board The Board has overall responsibility for the performance and conduct of the Company and the Group. The role of the Board is to provide strategic guidance to the Company and effective oversight of its Management for the benefits of shareholders and other stakeholders. Day to day management is delegated to the Executive Directors and Management under the steward of the Managing Director. The Independent Non-Executive Directors are involved in various Board committees and provide an independent assessment and objective views on management proposal. The Board has assumed the following duties and responsibilities in discharging its fiduciary and leadership functions:- (a) (b) (c) (d) (e) to review, evaluate, adopt, approve and monitor corporate performance, strategic plans and policies of the Company and its subsidiaries (the Group ); to comply with ethical standards, principal risks and internal control system appropriate for the size and complexity of the business; to oversee the Group s adherence to high standards of conduct or ethics and corporate behavior, including the Code of Ethics for Directors and monitor the conduct of business, financial performance of the Group; to review and adopt budgets and financial results of the Group and comply with applicable financial reporting standards and integrity and adequacy of financial information disclosure; and ensure the Company has appropriate corporate governance structures in place including standards of ethical behavior and promoting a culture of corporate responsibility. Board Charter The Board Charter is established to provide guidance and clarity on the Board s roles and responsibilities as well as the powers between the Board and the Management as well as the different committees established by Board. The Board will periodically review the Board Charter to ensure it remains consistent with the Board s objectives and responsibilities and any new regulations that may have an impact on the discharge of the Board s responsibilities. The Board Charter is available at the Company s website at www.ffhb.com.my. The Board has established a formal schedule of matters reserved to the Board for its deliberation and decision in order to enhance the delineation of roles between the Board and the Management, as well as to ensure the direction and control of the Group s operations.

12 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION Directors Code of Conduct and Ethics The Company has adopted a Code of Conduct & Ethics ( the Code ) based on the code of conduct expected of Directors of companies as set out in the Company Director s Code of Ethics established by the Companies Commission of Malaysia, and implemented appropriate internal systems to support, promote and ensure the compliance of the Code, which sets out among others, the standard of business conduct and ethical behavior for Directors and employees in the performance and exercise of their responsibilities as Directors and employees respectively of the Company or when representing the Company. The Board will periodically review and reassess the adequacy of the Code and make such amendments to the Code as the Board may deem appropriate. Promote Sustainability The Board is mindful of the important of business sustainability and ensures that there is a plan for promoting sustainability embedded in the development of the Group s strategies, taking into account the environmental, social, culture and governance aspects of business operations. These strategies seek to meet the expectation of stakeholders such as customers, shareholders, regulators, bankers, and the communities in which the Group operates. The corporate social responsibility statement is set out in this Annual Report. Board Composition and Balance The current Board comprises seven (7) Directors, out of which, one (1) Non-Independent Non-Executive Chairman, one (1) Managing Director, two (2) Executive Directors and three (3) Independent Non-Executive Directors, thus, fulfilling the requirement of at least one-third of the Board comprises independent directors. The profiles of the Directors are available at the Company s website at www.ffhb.com.my. The Board is satisfied that having regard to the nature, complexity and scale of the existing business, the interests of the minority shareholders are adequately represented and protected with the current composition of the Board. The Board recognises that independent directors bring independent and objective judgment to the Board and play a critical role in any situation where a conflict of interest may arise. The Board has assessed the independence of the Independent Non-Executive Directors, who constitute one third (1/3) of the Board, and are satisfied that they have provided objective and independent judgment at Board deliberations. The positions of Chairman and Managing Director are held by different individuals and the Chairman is a Non-Executive Director whose role is to lead the Board in meetings. Although the Chairman is not an Independent Director and the Board does not comprise a majority of Independent Directors, the Board is satisfied that the Independent Directors have the skills and experience to exert their independent judgment to bear on issues of strategy, performance and resources including standards of ethics and conduct. Company Secretaries The Board is satisfied with the performance and support rendered by the Company Secretaries in the discharge of their duties. The Company Secretaries play an advisory role to the Board in relation to the Company s constitution, Board s policies and procedures and compliance with the relevant regulatory requirements, codes or guidance and legislations. The Company Secretaries support the Board in managing the Company s governance model, ensuring it is effective and relevant. The Company Secretaries also ensure that deliberations at the Board meetings are well captured and minuted. Board Meetings The Board meets at least four (4) times in each financial year and will hold additional meetings if the situation requires. Sufficient notices were given to the Board prior to each meeting. At each meeting, the Board will consider: - an operational report from the Managing Director; a report on the financial performance; specific proposals for capital expenditure and acquisitions, if any; major issues and business opportunities for the Company; and approve the Interim Financial Reports for announcement to relevant authorities.

ANNUAL REPORT 2017 13 13 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION Board Meetings (Continued) During the financial period from 1 January 2016 to 30 June 2017, there were seven (7) Board meetings held and details of attendance by Directors who held office during that financial period are as follows:- Name of Directors No. of meetings attended Dato Dr. Choy Fook On 6/7 Dato Choy Wai Hin 6/7 Datin Tan Geok Foong 5/7 Datuk Choy Wai Ceong 6/7 Tuan Haji Hussein Bin Hamzah 7/7 Mohd. Arif Bin Mastol 7/7 Dato Dr. Hj. Abdul Rasid bin Ab. Malik 7/7 All the Directors complied with the minimum 50% attendance requirements in respect of the Board Meetings held during the financial period from 1 January 2016 to 30 June 2017 as stipulated under Paragraph 15.05 of the Main Market Listing Requirements of Bursa Securities. The Company Secretaries record minutes of meetings and conclusion by the Board in the discharge of their duties and responsibilities. Supply of and Access to Information The Directors have full and unrestricted access to all information pertaining to the Group s affairs. All Directors receive relevant board papers in sufficient time prior to the meeting to ensure that the Directors are given sufficient time to read and understand the Board papers and seek any clarification that they may need from Management or to consult the Company Secretaries or independent advisers before the Board Meetings, if necessary. The board papers include reports on the performance of key operating units, Group s financial, operating and corporate development. All Directors have access to the advice and services of the Company Secretaries and the advice of such other independent professional as may be deemed necessary at the Company s expense in furtherance of their duties. Nomination Committee The Nomination Committee comprises exclusively of three (3) Non-Executive Directors, a majority of whom are independent. The Chairman of the Nomination Committee is the Senior Independent Director. The role of the Nomination Committee is to ensure that the members of the Board reflect a broad range of experience, skills and knowledge required to successfully direct and supervise the Group s business activities as well as to ensure a proper balance between Executive Directors and Independent Non-Executive Directors. The Terms of Reference of the Nomination Committee and the names of members are available at the Company s website at www.ffhb.com.my.

14 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION Summary of Activities of the Nomination Committee A summary of the activities undertaken by the Nomination Committee in the discharge of its duty for the financial period from 1 January 2016 to 30 June 2017 are as follows:- 1. Re-election, re-appointment and retention of Directors at the forthcoming Annual General Meeting; 2. Reviewed the Terms of Reference of the Nomination Committee; 3. Annual Board Assessment; 4. Annual Audit Committee Assessment; and 5. Develop the following criteria amongst others to assess the Independence of the Independent Directors:- the Independent Directors fulfil the definition of an independent Director as set out under Paragraph 1.01 of Main Market Listing Requirements of Bursa Securities. the Independent Directors are able to exercise independent judgement and act in the best interest of the Company. there must be no potential conflict of interest that the Independent Directors could have with the Company as they had not entered into any contract or transaction with the Company and/or its subsidiaries within the scope and meaning as set forth under Paragraph 5 of Practice Note 13 of the Main Market Listing Requirements of Bursa Securities. the Independent Directors have not developed, established or maintained any significant personal or social relationship, whether direct or indirect, with the Non-Executive Chairman and Executive Directors, major shareholders or management of the Company (including their family members) other than normal engagements and interactions on a professional level consistent with their duties expected of them to carry out their duties as an Independent Director. the Independent Directors do not derive any remuneration and benefits apart from Directors fees and meeting allowances. Appointment of Directors The Nomination Committee is tasked to oversee the selection process and assessment of the performance of the Directors for the Board with the objective of securing the best composition to meet the diverse objectives of the Company. The review process by the Nomination Committee and the Board on an annual basis is based on the competencies, commitment, contribution and performance of the candidates/board members as well as the required mix of skills, experiences, and other qualities of the Directors to ensure that the Board continues to function effectively and efficiently. With respect to nomination and election process of new Directors, the responsibilities of the Nomination Committee shall include:- Gathering the nomination and selection of Directors for members of the Board. Reviewing the competencies, commitment, contribution and performance of the candidates/board members and the required mix of skills, experiences and gender and other qualities of the Directors. Making recommendations to the Board on candidates for appointment. Facilitate the relevant orientation and training programme for the new Board member.

ANNUAL REPORT 2017 15 15 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION Appointment of Directors (Continued) In the selection process, the Nomination Committee and the Board does not set any target on race, religion or gender diversity but endeavor to include any member who will improve the Board s overall compositional balance. All newly appointed Directors will go through a Board induction, followed by a series of the necessary training programmes, including Mandatory Accreditation Programme mandated by Bursa Securities. Re-election In accordance to the Article 98 of the Company s Articles of Association, all Directors, including the Managing Director, shall retire from office once at least in each three-year period but shall be eligible for re-election. Additionally, where the Managing Director is appointed for a fixed term that term shall not exceed three years. Upon the recommendation of the Nomination Committee and the Board of the Company, the Director due for retirement by rotation pursuant to Article 98 of the Articles of Association at the forthcoming AGM is Datuk Choy Wai Ceong and the Directors, Dato Dr. Choy Fook On, Datin Tan Geok Foong and Tuan Haji Hussein Bin Hamzah are subject to reappointment. All the retiring Directors being eligible, had offered themselves for re-election and re-appointment. The profiles of the retiring Directors seeking re-election and re-appointment are set on Profile of Directors section at the Company s website at www.ffhb.com.my. Gender, Ethnicity and Age Diversity The Board takes cognizance of gender diversity in the boardroom as recommended by the MCCG 2012 to promote the representation of women in the composition of the Board. Presently, there is one (1) female director on the Board of the Company. The Board does not have any gender, ethnicity and age diversity policies and targets or set any measures to meet any target. Nevertheless, the Group is an equal opportunity employer and all appointments and employments are based strictly on merits and are not driven by any gender, ethnicity or age bias. The Board will consider establishing a policy formalizing its approach to boardroom diversity to ensure that women candidates are sought as part of its recruitment exercise for the future. Remuneration Committee The Remuneration Committee comprises wholly of Non-Executive Directors, and is tasked with ensuring that the remuneration package is competitive to attract and retain the Executive Directors. The Remuneration Committee has a policy to review, assess and recommend to the Board, the remuneration packages of the Executive Directors. The Executive Directors play no part in making the decisions on their own remuneration. The remuneration packages of Non-Executive Directors are determined by the Board as a whole with the individuals concerned abstaining from discussion on their own remuneration. The Terms of Reference of the Remuneration Committee and the names of members are available at the Company s website at www.ffhb.com.my.

16 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION Directors Remuneration The Directors remuneration scheme is linked to service seniority, experience, scope of responsibilities and performance. Details of Directors remuneration for the financial period from 1 January 2016 to 30 June 2017 are as follows: Company Executive Non-Executive Fees 130,500 201,000 Salaries and other emoluments 2,089,800 493,400 Group Executive Non-Executive Fees 130,500 201,000 Salaries and other emoluments 2,926,440 493,400 The number of Directors of the Company whose total remuneration during the year fall within the following bands is as follows: Company Range of Remuneration/Directors Fee Per Annum No. of Directors (Executive) No. of Directors (Non-Executive) Less than 50,000 1 50,001 100,000 2 400,001 450,000 500,001 550,000 1 1 700,001 750,000 1 950,001 1,000,000 1 Group Range of Remuneration/Directors Fee Per Annum No. of Directors (Executive) No. of Directors (Non-Executive) Less than 50,000 1 50,001 100,000 2 151,001 200,000 200,001 250,000 1 250,001 300,000 1 300,001 350,000 1 500,001 550,000 1 1 700,001 750,000 1 950,001 1,000,000 1 Details of remuneration of each Director is not disclosed as the Board is of the view that the above disclosure by banding adequately achieve the remuneration disclosure objective.

ANNUAL REPORT 2017 17 17 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION Annual Assessment of the Board A formal performance assessment of the Board, Board Committees and individual Directors enables the Board to assess its performance and identify areas for improvement. Such a formal assessment was conducted for the financial period from 1 January 2016 to 30 June 2017, and was guided by the Corporate Governance Guide Towards Boardroom Excellence taking into consideration the following key elements for assessment: appropriate size, composition, independence, mix of skills and experience within the Board and the Board Committees; clear definition of the Board and Board Committees roles and responsibilities; effectiveness of the Board and Board Committees in carrying out their roles and responsibilities as stipulated in the Board Charter and/ or Terms of Reference; sufficiency and relevance of knowledge and expertise of individual Directors in their respective capacity as members of the Board and Board Committees; and directors character, experience, competency, integrity, and time commitment to effectively discharge their roles as Directors, including willingness to devote time in performing their roles, apart from attending Board meetings. Annual Assessment of Independence The Board assessed the independence of the Independent Non-Executive Directors taking into account the individual Director s ability to exercise independent judgement at all times and their contribution to the effective functioning of the Board. All Non-Executive Directors are independent of management and free from any relationship. The Board is of the view that the current composition of independent directors fairly reflects the interest of minority shareholders in the Company through the Board representation. The Board is satisfied with the level of independence demonstrated by all the Independent Non-Executive Directors and their ability to act in best interest of the Company. Tenure of Independent Directors The Nomination Committee and the Board of the Company had recommended that Tuan Haji Hussein Bin Hamzah, who had served on the Board of the Company for a cumulative term of more than nine (9) years, be granted the authority to continue to serve as an Independent Non-Executive Directors of the Company and to hold office until the conclusion of the next Annual General Meeting of the Company. The recommendation was on the grounds that he remains objective and independent in expressing his views and when participating in deliberations and decision making of the Board and Board committees. The Board believes that Tuan Haji Hussein Bin Hamzah has the integrity and ability to discharge his responsibilities as an independent director and bring valuable insight to the Company s business gained over the years with the Company. Separation of Chairman and Managing Director ( MD ) The Board recognises the importance of having a clear and segregated power and responsibilities between the Chairman of the Board and the MD to ensure a balance of power and authority. The Chairman is responsible for ensuring the integrity and effectiveness of the governance process of the Board while the MD holds the primary executive responsibility for the Group s business performance and manages the Group in accordance with the strategic and policies approved by the Board, leading Executive Directors in making and implementing the day-to-day decisions on the business operations. At present, the Company does not have a Chief Executive Officer but the MD to assist in the turnaround of the Company. The current arrangement is to provide strong leadership with the ability to marshal the Board s priorities objectively while keeping a lean Board composition.

18 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION Directors Training All the Directors have attended and successfully completed the Bursa Securities Mandatory Accreditation Program ( MAP ) and are encouraged to attend training program from time to time to keep abreast with the relevant development in laws and regulations as well as the business development. During the financial period from 1 January 2016 to 30 June 2017, the Company had origanised an in house training with the topic of Update on Companies Act 2016. The Directors had attended the following training, briefing and workshop programmes:- Directors Seminars/ Briefing /Workshop attended Dato Dr. Choy Fook On Update on Companies Act 2016 Datin Tan Geok Foong Update on Companies Act 2016 Dato Choy Wai Hin Update on Companies Act 2016 Datuk Choy Wai Ceong Update on Companies Act 2016 Tuan Haji Hussein Bin Hamzah Update on Companies Act 2016 Mohd. Arif Bin Mastol Update on Companies Act 2016 Although Dato Dr. Hj. Abdul Rasid bin Ab. Malik was not able to attend any structured training programme during the financial period under review due to work commitments, he has not failed to gain updates through briefings by the Company Secretaries, Internal Auditors and External Auditors during the quarterly meetings, communications with other Directors, as well as daily work exposures. In addition, the company secretaries and the external auditors update the Board on a regular basis the respective changes and amendments to regulatory requirements and laws and accounting standards to help Directors keep abreast of such developments. The Board concluded that the Directors of the Company should be more proactive in participating in various continuing education programmes in the coming financial year ending 30 June 2018. SHAREHOLDERS The Board believes in maintaining an effective communication policy that encourages feedback and comments from shareholders during the Annual General Meeting. Each item of special business included in the notice is accompanied by full explanation of the effects of a proposed resolution. In case of re-election of Directors, the relevant particulars relating to the Directors are stated to assist shareholders in making an informed decision. Communication with shareholders and the general public is also maintained through various announcements released to Bursa Securities including the mandatory announcement of interim financial reports. The Notice of Annual General Meeting is circulated to shareholders at least twenty-one (21) days before the date of the meeting to enable them to go through the Annual Report and papers supporting the resolutions proposed. All resolutions tabled at general meetings are voted by way of poll and voting procedures are briefed to the shareholders present at the commencement of each general meeting. The Company has also maintained a website for shareholders and the public to access inter-alia corporate information, financial statements, and announcements released to Bursa Securities. The Board has designated Tuan Haji Hussein Bin Hamzah as the Senior Independent Non-Executive Director to receive, examine and respond to shareholders enquiries and the general public.

ANNUAL REPORT 2017 19 19 CORPORATE GOVERNANCE STATEMENT AND OTHER ADDITIONAL COMPLIANCE INFOATION ACCOUNTABILITY AND AUDIT Financial Reporting The Board endeavours to present a balanced and understandable assessment of the Group s position and prospects when releasing the annual financial statements and quarterly interim reports on consolidated results. The Board has responsibilities to ensure that the annual financial statements are prepared in accordance with the Companies Act 2016 and applicable financial reporting standards for listed entities in Malaysia. All financial reports are reviewed by the Audit and Risk Management Committee before approval by the Board. One of the members of the Audit and Risk Management Committee is a qualified accountant and a member of the Malaysian Institute of Accountants. The responsibility of the Audit and Risk Management Committee in relation to the financial reporting is detailed in the Audit and Risk Management Committee Report. Internal Control The Board acknowledges its overall responsibility for maintaining a sound system of internal control to safeguard shareholders investment and the Group s assets. An integral part of this system of internal control is the establishment of an internal audit department that is independent of the activities they audit and is able to exercise due professional care. Further elaboration on this can be found on the Statement on Risk Management and Internal Control in this Annual Report. Relationship with External Auditors The duties of the Audit and Risk Management Committee include keeping under review the scope and results of the external audit and its effectiveness and the independence and objectivity of the auditors. The external auditors have unrestricted assess to the Audit and Risk Management Committee and the findings of the external auditors are reported to the Audit and Risk Management Committee at least twice a year. The Audit and Risk Management Committee will meet the External Auditors at least once a year without the presence of the Executive Directors and Management. This allows the Audit and Risk Management Committee and the External Auditors the exchange of free and honest views and opinions in matters related to External Auditors audit and findings. Internal Audit Function The Directors acknowledged their responsibility in managing a reasonable sound system of internal controls covers financial, operational and compliance and risk management. The principal aim of the system of internal controls is the management of financial and business risks that are significant to the fulfilment of the Company s business objectives, which is to enhance the value of shareholders investment and safeguarding the Group s assets. The Group has an internal audit department to provide the Board and management with the desired level of assurance that the governance, risk management and internal control system are adequate and effective in mitigating organizational risks to achieve the Group s corporate objectives. The internal audit department reports to the Audit and Risk Management Committee ( Committee ) and one of the agenda of each Committee meeting is to receive and review the Internal Audit report. More information on the Internal Audit function can be found on the Audit and Risk Management Committee Report in this Annual Report. Corporate Disclosure Policies and Procedures The Board acknowledges the importance of timely and accurate dissemination of material information equally to all stakeholders and avoid selective disclosure of information to specific groups or individuals. The Board also observes the disclosure requirements under the Main Market Listing Requirement, statues and the Corporate Disclosure Guide issued by Bursa Securities. Leverage on Information Technology for Effective Dissemination of Information The Company maintains a website where shareholders and the general public can access the latest information and announcements made to Bursa Securities. The website contains information on the core business activities of the Group, the members of the Board, corporate information, and an investors section on financial results, Bursa announcements and contact person.