ANNUAL REPO R T 2017 - MalaysiaStock.Biz

AN

NUA

L REPORT 2017

ANNUAL REPORT2017

M i s s i o nWe provide a wide range of quality automotive parts to our customers

through an integrated supply chain system.

AN

NUA

L REPORT 2017

ANNUAL REPORT2017

C o v e r r a t i o n a l eNHF has come a long way in its 40 years journey which started out as a trading company back in 1977 to a modernised corporation today. Equipped with advanced manufacturing facilities and extensive distribution network, NHF continues to stay ahead of the game and fulfilling customers’ growing demands. NHF prides itself with a wide range of affordable and quality automotive replacement parts and is on track to realise its vision to be the leading automotive solution provider in Asia.

C O N T E N T SCorporate Information

Letter to Shareholders

Management Discussion and Analysis

Sustainability Statement

Five-Year Group Financial Summary

Calendar of Events 2017

Corporate Governance Overview Statement

Audit Committee Report

Statement on Risk Management and Internal Control

Directors’ Report and Audited Financial Statements

List of Properties

Analysis of Shareholdings

Notice of Annual General Meeting

Proxy Form

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120117123120

Banyan & Casuarina Rooms Ground FloorSime Darby Convention Centre1A Jalan Bukit Kiara 160000 Kuala Lumpur

Friday, 1 June 2018 at 10.00 a.mANNUAL GENERAL MEETING

21ST

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NEW HOONG FATT HOLDINGS BERHAD (425709-K)

CORPORATE INFORMATION

BOARD OF DIRECTORS

KAM FOONG KENG Executive Chairman

CHIN JIT SIN Managing Director

KAM FOONG SIMExecutive Director

WONG YOKE NYEN Independent Non-Executive Director

DANNY NG SIEW L’LEONG Independent Non-Executive Director

DATUK DR. ANIS BIN AHMAD Independent Non-Executive Director

AUDIT COMMITTEE

Wong Yoke Nyen (Chairman)

Datuk Dr. Anis bin Ahmad

NOMINATION COMMITTEE

Datuk Dr. Anis bin Ahmad Wong Yoke Nyen

REMUNERATION COMMITTEE

Datuk Dr. Anis bin Ahmad (Chairman)

Wong Yoke NyenKam Foong Keng

SECRETARY

Wong Youn Kim (MAICSA 7018778)

AUDITORS

BDO (AF: 0206)Chartered Accountants

PRINCIPAL BANKERS

Citibank BerhadHong Leong Bank BerhadIndustrial and Commercial Bank of China (Malaysia) BerhadMalayan Banking BerhadUnited Overseas Bank (Malaysia) Berhad

BUSINESS ADDRESS

Lot 5043Jalan Teratai, Meru41050 Klang, SelangorTel: (603) 3392 6818Fax: (603) 3392 6808 REGISTERED OFFICE

Level 2, Tower 1, Avenue 5Bangsar South City59200 Kuala LumpurTel: (603) 2241 5800Fax: (603) 2282 5022

REGISTRAR

Tricor Investor & Issuing House Services Sdn BhdUnit 32-01, Level 32, Tower AVertical Business SuiteAvenue 3, Bangsar SouthNo. 8, Jalan Kerinchi59200 Kuala LumpurTel: (603) 2783 9299Fax: (603) 2783 9222

STOCK EXCHANGE LISTING

Main Market, Bursa Malaysia Securities Berhad Stock Name: NHFATTStock Code: 7060Sector: Consumer Products

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ANNUAL REPORT 2017

LETTER TO SHAREHOLDERS

DIVIDENDS

of the Group as well as the adherence with the

future expansions. Accordingly, the Board has

(8) sen per ordinary share in respect of FY2017 amounting to RM6,012,528 for the approval of the shareholders at the forthcoming Annual General Meeting (“AGM”) to be convened on 1 June 2018.

tier dividend of three (3) sen per ordinary share which amounted to RM2,254,698 and was paid to the shareholders on 15 December 2017. This brings the total dividend declared and recommended for FY2017 to 11 sen per share, compared to 14 sen in

DEAR VALUED SHAREHOLDERS,

On behalf of the Board of Directors (“the Board”), I am pleased to present the Annual Report and Audited Financial Statements of New Hoong Fatt Holdings Berhad (“NHF”) and

GROUP PERFORMANCE OVERVIEW

With great pleasure, I am reporting that the Group had recorded another all-time high revenue for FY2017.

million in FY2017 from RM231.9 million in the

previous year. The decline in PBT was largely due to the rising raw material costs and the unfavourable foreign currency exchange rate (“forex”) impact, which resulted in an unfavourable combined impact of more than RM27.1 million.

For the third successive year, the Group had been able to grow its revenue across both local and overseas markets. The growth in revenue was achieved through the continual efforts of widening its product range and a successful market expansion strategy.

The Group had continued with its various operational

has embarked on the second phase of the Lean Production System and Kaizen. These improvement projects will continue to be the main drivers in further

moving forward.

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BONUS ISSUE

On 23 March 2018, the Board had announced the proposal for a bonus issue of one (1) new ordinary share for every ten (10) existing ordinary shares in NHF to reward our shareholders for their continuous support and loyalty. The proposed bonus issue will

to enhance the marketability and trading liquidity of its shares on Bursa Malaysia Securities Berhad. The proposal is subject to the approval of the shareholders at the forthcoming AGM to be convened on 1 June 2018.

FUTURE OUTLOOK

The global economy is expected to be stronger in 2018

prices, geopolitical tensions in Middle East and East Asia, further policy rate tightening by the Federal Reserve of USA and other measures of tightening

around the world which may impede further growth in the near to medium term.

Closer to home, growth is expected to be above

namely Malaysia, Indonesia, Thailand, Vietnam and Philippines. On the local front particularly, the Gross Domestic Product growth is expected to reach

in the local automotive industry which saw Total Industry Volume dipping below 600,000 units for two consecutive years (2016 - 2017). The Group remains cautiously optimistic about the aftermarket industry as we continue to heighten our focus in the Malaysian market and other ASEAN markets to drive the growth of the Group.

The Group is constantly keeping abreast with the technology evolution in the automotive industry in order to remain relevant. Taking cognisance of the possibility of lower demand for aftermarket products when automobiles become increasingly autonomous and hence less accident-prone, the Group is

the core business of automotive replacement body parts. Albeit this, we remain positive that the business potential of automotive related products will continue to grow and we will ensure that the Group develops its business strategy to address the evolving business and competitive landscape.

APPRECIATION

40 years was indeed remarkable and I remain upbeat about our long term prospects. The Group has been able to enjoy its success today because of its highly committed people and I would like to express my most heartfelt appreciation to all of our employees for your valued contributions and dedications in delivering another exceptional year for the Group.

To my fellow Board members, I would like to express my deepest gratitude, for your invaluable advice in guiding us towards achieving our business objectives.

I would also like to take this opportunity to express my heartfelt thanks to all our shareholders, customers,

stakeholders for your unwavering support to the Group.

I look forward to your ongoing support in our continuous drive towards growing and building a sustainable business for the Group.

KAM FOONG KENG Executive Chairman

LETTER TO SHAREHOLDERS (continued)

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ANNUAL REPORT 2017

SURAT KEPADA PEMEGANG SAHAM

TINJAUAN PRESTASI KUMPULAN

Saya dengan sukacitanya melaporkan bahawa Kumpulan telah merekodkan satu lagi pencapaian tertinggi dari segi hasil pendapatan untuk TK2017.

Hasil pendapatan Kumpulan telah meningkat sebanyak 8.1% kepada RM250.6 juta pada TK2017 berbanding RM231.9 juta yang direkodkan pada tahun kewangan berakhir 31 Disember 2016 (“TK2016”). Walau bagaimanapun, Keuntungan Sebelum Cukai telah menurun sebanyak 33.7% kepada RM24.4 juta berbanding RM36.8 juta pada tahun sebelumnya. Penurunan ini sebahagian besarnya didorong oleh peningkatan kos bahan mentah serta kesan tidak menggalakkan daripada kadar pertukaran mata wang asing, yang telah menyumbangkan kesan lebih daripada RM27.1 juta.

Untuk tahun ketiga berturut-turut, Kumpulan telah berjaya meningkatkan pendapatannya di kedua-dua pasaran tempatan dan luar negara. Pertumbuhan pendapatan ini telah dipacu oleh usaha berterusan dalam perluasan rangkaian produk dan strategi pengembangan pasaran.

Kumpulan terus menjalankan pelbagai program kecekapan operasi sepanjang tahun ini dan telah memulakan fasa kedua Sistem Pengeluaran Lean

dan Kaizen. Projek-projek penambahbaikan ini akan terus menjadi pemacu utama dalam mengukuhkan lagi daya saing kos Kumpulan pada masa hadapan.

DIVIDEN-DIVIDEN

Lembaga Pengarah yakin tentang teras Kumpulan serta pematuhan kepada polisi Kumpulan untuk memberikan pulangan kepada pemegang saham dan pada masa yang sama memperuntukkan simpanan yang mencukupi untuk menampung pertumbuhan masa depan. Oleh itu, Lembaga Pengarah telah mencadangkan dividen akhir satu peringkat sebanyak lapan (8) sen bagi seunit saham biasa bagi TK2017, yang berjumlah sebanyak RM6,012,528 untuk kelulusan pemegang saham pada Mesyuarat Agung Tahunan yang akan datang, yang akan diadakan pada 1 Jun 2018.

Lembaga Pengarah sebelum ini telah mengisytiharkan dividen interim satu peringkat pertama sebanyak tiga (3) sen bagi seunit saham biasa berjumlah RM2,254,698 yang telah dibayar kepada pemegang saham pada 15 Disember 2017. Ini menjadikan jumlah dividen yang telah diisytiharkan dan dicadangkan untuk TK2017 kepada 11 sen sesaham berbanding 14 sen pada tahun kewangan sebelumnya.

Para Pemegang Saham sekalian,

Bagi pihak Lembaga Pengarah, saya dengan sukacitanya membentangkan Laporan Tahunan dan Penyata Kewangan Beraudit New Hoong Fatt Holdings Berhad (“NHF”) dan anak-anak syarikatnya (“Kumpulan”) bagi tahun kewangan berakhir 31 Disember 2017 (“TK2017”).

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SAHAM BONUS

Pada 23 Mac 2018, Lembaga Pengarah telah mengumumkan cadangan untuk menerbitkan satu (1) saham bonus bagi setiap sepuluh (10) saham sedia ada yang dipegang di NHF sebagai ganjaran kepada pemegang saham kami atas sokongan dan kesetiaan mereka yang berterusan. Saham bonus yang dicadangkan akan meningkatkan asas modal saham NHF dan dijangka dapat meningkatkan kecekapan pasaran dan dagangan sahamnya di Bursa Malaysia Securities Berhad. Cadangan tersebut adalah tertakluk kepada kelulusan pemegang saham pada Mesyurarat Agung Tahunan yang akan diadakan pada 1 Jun 2018.

PANDANGAN MASA HADAPAN

Ekonomi global diunjurkan lebih kukuh pada tahun 2018 dengan kadar pertumbuhan yang diramalkan pada 3.9% meskipun dalam persekitaran harga komoditi yang tidak menentu, ketegangan geopolitik di Timur Tengah dan Asia Timur, kadar polisi yang lebih ketat oleh Rizab Persekutuan Amerika Syarikat dan langkah-langkah pengetatan terma pembiayaan global lain daripada ekonomi-ekonomi utama di seluruh dunia yang boleh menjejaskan pertumbuhan dalam tempoh terdekat dan sederhana.

Pertumbuhan ekonomi di rantau ini pula dijangka melebihi 5% bagi lima (5) negara membangun ASEAN, iaitu Malaysia, Indonesia, Thailand, Vietnam dan Filipina. Pertumbuhan Keluaran Dalam Negara Kasar Malaysia terutamanya dijangka mencapai 5.5% pada tahun 2018, yang dijangka menyokong pertumbuhan industri automotif tempatan yang menyaksikan Jumlah Jualan Industri menyusut di bawah 600,000 unit untuk dua tahun berturut-turut (2016 - 2017). Kumpulan kekal optimistik mengenai industri selepas pasaran dimana kami terus meningkatkan fokus kami di pasaran Malaysia dan pasaran ASEAN lain untuk memacu pertumbuhan Kumpulan.

SURAT KEPADA PEMEGANG SAHAM (sambungan)

Kumpulan sentiasa mengikuti perkembangan teknologi dalam industri automotif untuk kekal relevan. Memandangkan kemungkinan permintaan yang lebih rendah bagi produk selepas pasaran apabila kereta menjadi semakin autonomi, yang akan mengurangkan dedahan kepada kemalangan, Kumpulan sentiasa meneroka peluang untuk mempelbagaikan perniagaannya selain daripada alat-alat ganti automotif. Walau bagaimanapun, kami tetap positif bahawa potensi perniagaan produk berkaitan automotif akan terus berkembang dan kami akan memastikan bahawa Kumpulan terus mengukuhkan strategi perniagaannya sejajar dengan persekitaran perniagaan yang semakin berkembang dan persaingan yang semakin sengit.

PENGHARGAAN

Tahun 2017 menandakan tahun ke-40 sejak penubuhan Kumpulan pada tahun 1977. Kemajuan yang dicapai Kumpulan dalam tempoh 40 tahun yang lalu sememangnya luar biasa dan saya tetap optimis mengenai prospek jangka panjang kami. Kumpulan dapat menikmati kejayaannya hari ini atas sokongan kakitangannya yang sangat komited dan saya ingin mengucapkan setinggi-tinggi penghargaan kepada semua kakitangan kami atas sumbangan dan dedikasi anda dalam mencapai satu lagi tahun yang luar biasa untuk Kumpulan.

Kepada rakan-rakan ahli Lembaga Pengarah, saya ingin merakamkan ucapan terima kasih yang tidak terhingga atas nasihat yang disumbangkan dalam membimbing kami ke arah mencapai matlamat perniagaan kami.

Saya juga ingin mengambil kesempatan ini untuk mengucapkan terima kasih kepada semua pemegang saham, pelanggan, pembekal, rakan niaga, pembiaya dan pihak berkepentingan yang lain atas sokongan teguh anda terhadap Kumpulan.

Saya mengharapkan sokongan berterusan anda dalam usaha berterusan kami ke arah mengembangkan dan membina perniagaan yang mampan untuk Kumpulan.

KAM FOONG KENG Pengerusi Eksekutif

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ANNUAL REPORT 2017

MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW OF THE GROUP’S BUSINESS AND OPERATIONS

New Hoong Fatt Holdings Berhad (“NHF” or “the Company”) is listed on the Main Market of Bursa

established as a trading company in 1977, selling genuine and alternative automotive replacement body parts. Since then, it has grown to become a major distributor in Malaysia and provides automotive parts solutions to the local replacement market.

NHF and its subsidiaries (“NHF Group” or “the Group”) has its headquarters in Klang, Selangor, as well as trading branches in Segambut, Kuala Lumpur and Kota Kinabalu, Sabah, to cater to its extensive distribution channel of more than 1,000 wholesalers and retailers throughout Malaysia.

Having established a strong foothold in the trading and distribution of automotive parts, the Group ventured into the manufacturing of metal and plastic automotive replacement body parts, such as door, hood, fender, trunk lid, bumper, grille, lamp, etc. in 1989. The establishment of these manufacturing plants has led the Group to become the leader in the distribution of alternative automotive replacement

development of moulds and dies have enabled the Group to go beyond Malaysia, exporting to more than 50 countries in Asia, Central and South America, Europe and Africa.

In 2011, the Group expanded its business abroad and incorporated wholly-owned trading subsidiaries in Jakarta, Indonesia and Shanghai, China. The Group took another step towards expanding its overseas business by incorporating a second wholly-owned subsidiary in Indonesia in 2016 with the intention to embark on manufacturing activities.

Some of the parts that the Group manufactures and distributes are depicted in diagram below:

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Manufacturing

replacement parts is carried out through Auto Global Parts Industries Sdn. Bhd. (“AGP”) while the manufacturing of moulds and dies is carried out through MJ Manufacturing Industries Sdn. Bhd. (“MJ”).

acres of land in Meru, Klang, producing more than 2,000 metal items and 1,000 plastic items. These items are marketed and distributed through New Hoong Fatt Auto Supplies Sdn. Bhd. (“NHFAS”) to the local market in Malaysia, as well as exported via Auto Global International Sdn. Bhd. (“AGI”) to more than 50 countries globally primarily in Asia, Middle East, Central and South America, Europe

year to undertake export, marketing and distribution of automotive replacement parts for the overseas markets which was previously carried out by AGP.

MANAGEMENT DISCUSSION AND ANALYSIS (continued)

The Group also manufactures some of its moulds and dies which are used to produce the automotive replacement parts. This activity is carried out through

develop new products and expand the product range to be offered to the customers. On top of that, the Group is able to have more control over the quality, cost and shorten the lead time in producing the moulds.

The Group had invested and will continue to invest heavily in the latest technology and machinery such as stamping machines, plastic injection machines, MIG robots, hemming robots and electro-deposition paint line to enhance its technological and production capabilities over time.

In 2016, the Group had incorporated an overseas subsidiary in Jakarta, Indonesia namely PT. Auto Global Parts Indonesia, with the objective to eventually undertake manufacturing activities in Indonesia, if the business viability is assessed to be positive. The establishment of this subsidiary will be the stepping

to exploit the vast potential of the Indonesian market.

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ANNUAL REPORT 2017

Trading (Local & Export)/ Marketing/ Distribution

out through NHFAS. Besides trading of own-manufactured products, NHFAS also sources and sells a wide range of automotive replacement parts, accessories and service items such as windscreen,

lubricant from other local and overseas suppliers. These products are distributed to more than 1,000 local retail and wholesale spare parts shops throughout Malaysia.

activities towards the end of 2017, AGP will now be focusing solely on manufacturing activities while the trading, marketing and distribution of the products will be undertaken by the following subsidiaries:

subsidiaries, namely PT. NHF Auto Supplies Indonesia (“PT. NHF”) and Ampire Auto Parts (Shanghai) Co. Ltd. (“Ampire”)

in the importing, exporting, distribution and marketing of automotive replacement parts in the local markets in Indonesia and China respectively.

Investment Holding

Some of the Investment Holding companies hold investments in subsidiaries while others hold various landed properties. The landed properties are held by the following subsidiaries and are rented out to sister companies:

REVIEW OF FINANCIAL PERFORMANCE

The Group achieved a remarkable milestone in the

as revenue level soared to RM250.6 million, another all-time high after the RM231.9 million achieved in the

on the back of sales growth across all segments in Malaysia and the overseas markets.

RM36.8 million in FY2016 despite a higher fair value gain on revaluation of investment properties which amounted to RM4.5 million in FY2017 compared to RM0.9 million in FY2016. Two biggest factors which

as follows:

1. Unfavourable impact from foreign currency exchange rate (“forex”) movements by RM13.5

2. Higher cost of sales due to higher cost of raw materials, both steel and plastic resins which contributed to an adverse impact of more than RM13.6 million.

Part of the rising cost of raw materials had been cushioned by higher productivity from the manufacturing processes as well as higher selling prices, which had helped to contain the margin erosion. Moving forward, enhanced strategies and efforts will be channeled into initiatives to further

RM30.0 million in FY2016 to RM20.3 million in FY2017 and earnings per share declined from 39.9 sen in FY2016 to 27.1 sen in FY2017. At the end of

to RM5.68 compared to RM4.95 in FY2016. The

largely due to the revaluation surplus which had been

Equipment and Investment Properties for FY2017. The net assets per share of the Group had increased by RM0.63 as a result of the revaluation exercise carried out in FY2017.


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Capital Expenditures

Capital expenditures incurred in FY2017 amounted

RM38.1 million in FY2016. Included in the amount spent in FY2017 was an amount of RM18.0 million for the purchase of a piece of land in Indonesia for future business expansion, which the Group had earlier made an announcement on Bursa in April 2017. Other than this, the level of capital expenditures was within the normal range of investment for the Group which was focused on the development of moulds and dies for new products as well as investment in new plant and machinery to raise the production capacity and

Assets and Liabilities

Trade Receivables increased from RM44.4 million in FY2016 to RM47.7 million in FY2017, is largely in line with the higher revenue achieved, especially towards the end of the year. There was no notable increase in provision for doubtful debts during the year.

Inventories increased to RM47.9 million in FY2017 compared to RM44.0 million in FY2016, mainly due to higher number of trading products being added to the

was some additional purchase of raw materials, in anticipation of higher future production usage, especially on steel coil.

Trade Payables increased by RM2.9 million to RM12.0 million in FY2017 compared to RM9.1 million in FY2016, mainly due to timing of higher purchases towards the end of the year, mostly on raw materials purchases.

Operational Cash Flow (Net Cash Generated from Operating Activities)

generation from Operating Activities, the total amount generated of RM45.9 million in FY2017 surpassed the RM40.4 million achieved in FY2016, despite a lower PBT in FY2017 and higher working capital requirements in Trade Receivables and Inventories as explained above.

Net Debt

The Group recorded a Net Debt position of RM31.2 million at the end of FY2017, compared with a Net Debt position of RM11.0 million at the end of FY2016. The increase in Net Debt was mainly due to higher working capital requirements during the year in Trade Receivables and Inventories as explained above as well as the amount paid to acquire the piece of land in Indonesia during the year.

Dividends

The Board of Directors is pleased to recommend a

share for FY2017, amounting to RM6,012,528 for approval by the shareholders at the forthcoming Annual General Meeting (“AGM”) on 1 June 2018 and if approved, will be paid on 12 July 2018.


PBT & PAT

Year

(Sen

)

RM

’000

40,000

35,000

27,357

17,900

26,570

36,810

29,990

24,413

20,32819,250

11,974

20,149

30,000

25,000

20,000

2013 2014 2015 2016 2017

15,000

10,000

5,000

EPS

Year

45.0

40.0

35.0

30.0

25.0

20.0

15.0

5.0

10.0

39.9

27.125.6

15.9

26.8

2013 2014 2015 2016 2017

Profit Before Taxation (”PBT”)

Profit After Taxation (”PAT”)Basic Earnings Per Share (”EPS”)

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ANNUAL REPORT 2017

The Board had earlier declared an interim single tier dividend of three (3) sen per ordinary share for FY2017 which amounted to RM2,254,698 and was paid to the shareholders on 15 December 2017. This will bring the total single tier dividend declared and recommended for FY2017 to 11 sen per share, a reduction of three (3) sen per share compared to 14 sen per share for FY2016. This represents a paid-out ratio of almost

The Board has determined that the current level of

operations as well as investment opportunities for future growth.

follows:


Dividend Per Share

Year

(Sen

)

12.0

10.011.0 11.0

14.016.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

2013 2014 2015 2016 2017

PROPOSAL FOR BONUS ISSUE

The Board had earlier announced the proposal for a bonus issue of one (1) new ordinary share for every ten (10) existing ordinary shares in NHF. The proposed

and is expected to enhance the marketability and trading liquidity of its shares on Bursa. This proposal is

AGM on 1 June 2018. OPERATIONS REVIEW

Segmental Business Overview

We wish to highlight that the segmental reporting was changed to align with recent change on the organisational structure announced on 17 October 2017. Operating segment reporting is not separately presented as the Group is principally engaged in the manufacturing and trading of automotive parts and accessories, which are substantially within a single operating segment. For the purpose of resources allocation and performance assessment, the chief

operations of the Group as disclosed in the Statements

By Geographical Segments

The Group will however continue to report the breakdown of revenue by geographical segments. In

a. Malaysia market

The domestic market recorded another growth in FY2017 against the backdrop of slower

RM118.1 million from RM110.5 million in FY2016. The year-on-year growth was delivered through another year of effectively executed sales and marketing/promotional activities and continuous expansion of product range.

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b. ASEAN market

to RM43.0 million compared to RM36.3 million in FY2016, was mainly driven by the growth in Indonesia and Thailand.

The subsidiary in Indonesia, PT. NHF, achieved revenue of RM11.2 million in FY2017, an increase

growth was mainly contributed by the success of its strategy of widening its coverage of the major cities outside of Jakarta as well as expanding its product range.

The Group managed to further grow its biggest

million in FY2017 compared to RM24.7 million in FY2016, largely due to wider range of products.

c. Non-ASEAN market

In FY2017, the non-ASEAN market contributed higher revenue of RM89.5 million, higher by

million recorded in FY2016. In addition, the Group had also successfully penetrated into a new market, Italy in FY2017.

Ampire, the subsidiary in China, achieved revenue of RM8.0 million in FY2017, an increase

mainly contributed by wider regional distribution coverage.

The breakdown of revenue by geographical segments is shown in the graphs below:


Revenue by Geographical SegmentsFY2017

35.7%Non-Asean

17.2%Asean

47.1%Malaysia

Revenue by Geographical SegmentsFY2016

36.7%Non-Asean

15.7%Asean

47.6%Malaysia

SIGNIFICANT CHANGES IN OTHER OPERATING INCOME, COSTS AND EXPENSES

a. Other Operating Income

Total Other Operating Income had decreased to RM17.1 million in FY2017 from RM22.1 million in the previous year primarily due to lower favourable forex differences arising from the intercompany loan and intercompany trade balances between the subsidiaries within the Group. The forex gain was RM0.9 million in FY2017 compared to RM12.6 million in the previous year.

Operating Income was the sale of steel scrap, which was RM9.5 million in FY2017 compared to RM6.2 million in the previous year. The higher sales was mainly due to the higher average steel scrap price in FY2017.

b. Cost of Sales

in FY2016. This was largely due to the increase in the primary raw material costs of steel and plastic resins, which had adversely impacted

million.

Apart from the increase in the primary raw material costs, the increase in depreciation (as further explained below), had also partly contributed to the higher cost of sales.

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ANNUAL REPORT 2017

c. Operating Expenses

The Group recorded higher operating expenses of RM57.3 million in FY2017, an increase of

increase was mainly attributed to the following:

exports by RM1.5 million, in line with the higher volume of export shipments during

bonuses, contribution to provident funds, training expenses, etc. by an amount of

RM1.8 million, arising from the intercompany loan and intercompany trade balances between the subsidiaries within the Group.

To note that “favourable forex differences” (credit balances) is reported under “Other Operating Income” while “unfavourable forex differences” (debit balances) is reported under “Operating Expenses”.

d. Depreciation

During the year, depreciation charges amounted to RM28.8 million was recorded compared to RM27.6 million in the previous year. This higher depreciation charges was the result of:

i. the higher value of leasehold land which

ii. the acquisition of leasehold land in Indonesia

iv. increased investments in plant and machinery.

The investments in moulds and dies, and plant and machinery are necessary for the continuous expansion of product range as well as for the continuous enhancement of productivity and

margin.

e. Finance Cost

RM1.6 million in FY2017 compared to RM1.2

the result of the increase in short-term trade facilities to support the working capital needs of the Group.

On the other hand, the Group also places its temporary surplus funds into tax-exempt money market funds, overnight placements, etc. to earn interest income which will partially offset the

earn interest income of RM0.4 million in FY2017, compared to the RM0.2 million earned in FY2016.

f. Income Taxes

higher Reinvestment Allowance and Investment Tax Allowance. In addition, there was a Real

the fair value gain on revaluation of investment

the timing differences arising from unrealised forex differences and unabsorbed losses by certain subsidiaries of the Group.

g. Impact of adopting MFRSs

The Malaysian Accounting Standards Board had issued several Malaysian Financial Reporting Standards (“MFRSs”) which have been adopted by the Group in 2017.

The following new accounting standards are mandatory for the accounting period beginning on or after 1 January 2018:

i. MFRS 9 Financial Instruments The Group has undertaken an initial review

of its existing contracts and arrangements with customers and concluded that the application of the standard will not have

position.

ii. MFRS 15 Revenue from Contracts with Customers

The Group has initiated an assessment of

business processes and systems. At this stage, no material effects have yet been

iii. MFRS 16 Leases The standard does not currently affect the

Group and will only take effect on 1 January 2019.


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STRATEGIES

Through its Annual Strategic Business Planning session held in FY2017, the key senior and middle management team members the Group had further

to achieve the vision of becoming “The leading automotive parts solutions provider in Asia”. Moving forward, the Group will continue to focus on the execution of the following strategic priorities, categorised into three (3) main thrusts:

1. Continually strengthen and grow the core business

NHF will continue to focus on building the core business - manufacturing and distribution of automotive replacement parts for both local and overseas markets, through the following key initiatives:

a. Driving sales execution excellence program

In the increasingly competitive market, NHF has placed more emphasis to improve its market competitiveness through a more structured sales execution excellence program, covering marketing and promotional activities. NHF also continually improves on its customer-focus approach and emphasise on raising awareness of its products and branding through various sales and marketing campaigns. NHF is aware of the importance of being able to

constantly widening its product portfolio and further strengthening the engagement with its customers through better customer service and series of customer appreciation or incentive programs. Coupled with a highly responsive and competitive pricing strategy and execution mechanisms, NHF believes it is on track to solidify its position as the market leader in the local automotive replacement parts market.

In its efforts to further grow the trading business in Indonesia and China, the Group has also replicated these initiatives to a large extent in the respective local markets. However, the Group reckons it has more work to do in order to strengthen its respective local organisations before similar strategies could be deployed in full force and be able to deliver more successes in the local markets in Indonesia and China. The Group is committed to place more focus to drive this initiative in Indonesia and China moving forward.

b. Expanding export market

Realising the vast potential of the export market to drive future growth, the Group aims to increase the revenue contribution from

consolidated revenue by 2021 from its

remains the most important market for the Group, building from our strong presence in Thailand and Indonesia. The Group also places considerable emphasis on growing its customer base in the overseas markets, particularly countries or continents with large populations such as India and South America. In its attempt to expand coverage of the overseas markets, NHF constantly conducts market research to assess the market viability and growth potential of each of the markets. By diversifying its regional distribution reach, the Group could minimise the risks associated with economic downturn or geopolitical unrest in any given market.

The Group regularly participates in various international automotive exhibitions such as Automechanika in Shanghai. These exhibitions are the ideal platforms for the Group to both establish new business relationships with customers from all around the world as well as to nurture a closer relationship with its existing customers. From the 2017 Automechanika event alone, the Group managed to establish 110 new leads from 39 countries which will hopefully

global expansion. The participations in these exhibitions also allow the Group to acquire

and desirable products, which facilitates the

development.


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ANNUAL REPORT 2017

the relevant government agencies such as Malaysia External Trade Development Corporation (“MATRADE”) will continue to

Mid-Tier Ramp-up Program that will enable the Group to receive tailored support to further enhance its market access and export capabilities.

2. Build competitive edge through cost

In light of the challenging business environment and constant rising costs of doing business, the Group will focus on

across the organisation while improving its productivity, without compromising on the quality of its products.

The Group has embarked on Lean Production System and Kaizen manufacturing to minimise production

Other cost reduction efforts also cover increasing usage of recycled materials, more

optimising warehousing and transportation costs. These initiatives have been widely

placing the Group on a path towards a leaner and more agile organisation. The savings

was facing some issues of labour shortages during the year which consequently caused the delay in the implementation of certain projects. However, the Group is cautiously

would be realised in the near term as certain manufacturing improvement processes would be implemented as labour shortage issues are being resolved.

b. Investment in new machinery and new product development

The Group is determined to strengthen its manufacturing capability for future growth and to meet the increasing demand for its products by consistently investing in new machinery and moulds and dies. Besides investing in new machinery to increase its capacity, the Group also constantly upgrades ageing machinery with newer and

importance to keep up with the fast-changing market demand, NHF has been working on improving the lead time in moulds and dies development to improve the speed to market.

More investments will be channelled into further strengthening its production capability and speeding up its product development in the coming years as NHF looks forward

eventually create its distinctive edge in this aspect. For 2018, the Group had allocated about RM11.0 million to acquire new machinery and upgrading of its production facilities.

c. Leveraging on Information Technology

The Group deploys relevant management information through an integrated information technology system and utilises its in-house Business Intelligence platform to allow key management information to be disseminated to the relevant personnel while maintaining data security. This highly complexed management information provides

behaviours, manufacturing performance

these analysis for effective decision-making and drive further business improvement initiatives.


16


d. Driving Quality Management System

In order to elevate the level of customer satisfaction, the Group has been constantly striving to improve the quality of its products and services. In doing so, the Group is continuously inculcating a culture of placing quality as the utmost priority across the organisation by heavily promoting

The Quality Assurance Department monitors the entire manufacturing process to ensure that only products which have met the highest quality standards are supplied to customers.

the internationally recognised International Organisation for Standardisation (ISO) 9001:2015 Quality Management System

commitment to provide quality products through continuous improvement. All aspects

structure, processes and procedures are monitored and assessed annually to ensure compliance with the quality standards. By following the stringent quality guidelines, NHF provides assurance to its customers with regards to the quality and reliability of its products and services.

3. Human Capital Transformation

Over the last few years, the Group has placed tremendous efforts in strengthening its human capital and laying the foundation for a sustainable business growth. By aligning its human capital transformation initiatives with the long term strategic objectives of the Group, we believe we are placing the Group in a position to sustain its growth and on track to achieve more success in the coming years.

The Group is focused on developing all deserving employees from all levels, with a view to optimising their potential and contribute towards the establishment of a stronger organisation.

All employees in the Executive category are given opportunity to devise an individual development

and aspirations to grow their career with the Group. Once endorsed by the Management, the individual will be given full support and guidance to work towards achieving their career goals.

Coupled with the Succession Planning process that is already in place, the Group has created a clear structure and framework to identify and grow its talent base and providing opportunities to the employees to develop their careers with the Group.

Group has embarked on the journey to upskill all non-executive employees in the production

be able to perform more value-adding jobs. The main objective of this upskilling initiative is to raise the production capability and build a more cost competitive production facility to support the long-term growth of the Group.

The Group aspires to build a sustainable performance culture and has put in place a robust performance management system. The

Performance Indicators (“KPIs”) achievement

competencies and corporate core values). The performance evaluation and discussion processes are carried out twice a year, one for mid-year achievement and another for the

be aligned to the overall Corporate Strategic KPIs, with the intention to align behaviours and expectations between the Management and employees across the organisation. As part of its retention strategies, the Group has further improved its performance-based reward system and reward exceptional performance through a KPI-driven Performance Bonus Scheme.

KEY RISKS FACTORS AND MITIGATING ACTIONS

As a manufacturer and distributor of automotive replacement parts, the Group is exposed to changing risks that may potentially impact its business performance and future prospects. The Group has in place a comprehensive Enterprise Risk Management (“ERM”) framework to proactively identify, assess and mitigate a broad range of current and emerging risks

The detailed explanation of the approach on ERM is covered under the Statement on Risk Management and Internal Control.

Some of the more pronounced risk areas which

goals and objectives together with its approaches in managing these risks are as follows:


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ANNUAL REPORT 2017

1. Competition

NHF faces stiff competition from other manufacturers particularly from Taiwan, China and Thailand. Some of the competitors are more well-established and are equipped with more

of scale, some of the competitors are in a position to offer lower prices for products of comparable quality. The abolishment of import duties arising from various trade pacts such as AFTA have also

locally but also in the affected ASEAN countries.

In order to maintain its position in the market, NHF has been intensifying its efforts to raise

effective promotional and pricing strategies to remain competitive. NHF also constantly reviews its new product development strategy in its attempts to build a wider range of products to be offered to its customers and making sure that it improves further on its speed to market. In addition to its already extensive distribution coverage, NHF continues to expand its customer base both locally and internationally.

prices

The Group is dependent on the sustainable supply of raw materials for the production of its

raw materials used to manufacture its products are steel sheets and plastic resins. As such,

disruptions to the supply of these raw materials will affect its business adversely.

of raw material prices. The Group has managed this impact by reducing the product unit cost through raising the manufacturing productivity and reduction of production wastages and by transferring part of the increase to the customers. The Group has also put in place a proper mechanism to monitor the prices of these raw materials as well as building the alternative sources for these raw material supplies. By proactively managing these risks, the Group will be able to minimise the adverse impacts

sustainability of the Group.


3. Currency risks

machinery, moulds and dies, and imported

denominated in US Dollar. The Group maintains a clear policy to naturally hedge the incoming receipts and outgoing payments of the same currency so as to minimise foreign currency exposure risks.

Foreign currency exchange rate (“forex”)

denominated in foreign currency, especially inter-company balances between the companies domiciled in Malaysia and the overseas subsidiaries in Indonesia and China. The Group

by splitting some of the loans into US Dollar denominated loans to mitigate the impact on the balance sheet items arising from the forex movements.

4. Breakdown of critical machinery and equipment

Frequent breakdowns of critical machinery and

leading to operational losses. Current controls that are in place include monitoring of machinery and equipment performance, as well as comparison against performance standards. Scheduled preventive maintenances are carried out to ensure that all critical machinery and equipment are regularly and timely maintained to reduce breakdown incidents. In addition, the Group ensures that adequate inventory of critical spare parts is kept and be made readily available in the event of machinery breakdown in order to shorten the production downtime due to repair and maintenance.

18


5. Labour shortage

One of the biggest challenges for the Group is the shortage and inconsistent supply of production workers as it has a huge impact on production scheduling and its ability to cope with sales demand. In order to mitigate this issue, the Group has embarked on various projects to automate certain production processes that will help reduce the reliance on manual labour and further raise productivity. The other initiative is to upskill the production workers to be multi-skilled and eventually be able to perform more value-adding roles and ultimately reducing manpower cost per unit of production. This upskilling exercise was initiated in 2017 and will carry on in 2018 until the desired pool of upskilled production workers has been attained.

OUTLOOK FOR 2018

performance in terms of vehicle sales in 2017 with a Total Industry Volume (“TIV”) of 576,635 units compared to 580,085 units registered in 2016 on the back of slower consumer spending. The Malaysian Automotive Association has projected the TIV to

from improved consumer sentiment, strengthening of Ringgit and various new model launches by both local and global automotive marques. However, stringent hire purchase loan approvals, high household debt as well as the rise in new technology and mobility services such as car sharing and e-hailing may dampen the growth of automotive sales.

On the global front, stronger economic growth is expected in 2018 and it augurs well for sales of new cars and related products across the globe. The Group continues to be positive on the growth potential of automotive sales and the aftermarket industry, particularly in the ASEAN region. We have seen the region performed well in recent years, supported by population and economic growth and the trend is expected to continue into the coming years. The Group also sees plenty of room to grow in the non-ASEAN markets, particularly in South America and India. The Group will continue with its expansion plans across the globe and is targeting to grow the

Indonesia continues to be the fastest growing market for the Group and the growing disposable income in

of automotive sales and the aftermarket industry is expected to grow exponentially in the coming years. Indonesia is projected to be the main catalyst for the

6 acres of land in West Java, Indonesia for RM18.0 million. The Group is in the midst of conducting the feasibility study of setting up a manufacturing plant on the piece of land and will come out with a more concrete plan in the perceivable future.

Given the growing demand for passenger cars and

automotive sales of over 20 million units annually, the

in China would remain viable moving forward. As such, the Group will continue to accelerate its efforts to penetrate into more provinces in China to extend its distribution reach. At the same time, the Group will leverage on the sourcing expertise of the local team in Ampire, China to build a wider range of trading

portfolios to be marketed in all existing markets that the Group has a presence in.

Looking ahead, with the vast changes expected from the automotive industry whereby technology such as electric vehicles, collision avoidance system, connected mobility and autonomous vehicles will gradually but surely transform the entire automotive industry ecosystem and almost certainly will bring about relative disruptive changes to the aftermarket industry as well. Therefore, the Group will endeavour to be strategically ready to face the evolutions arising from these technological advances and place itself in a position that will allow it to compete successfully in the new competitive landscape and continue to build sustainable business growth.

CHIN JIT SINManaging Director


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ANNUAL REPORT 2017

SUSTAINABILITY STATEMENT

INTRODUCTION

Sustainability has always been an integral part of the business strategy in NHF. It involves making decisions and taking actions that are in the interests of maximising economic returns while operating business in a socially, ethically and environmentally responsible manner.

This Sustainability Statement covers the main aspects of economic, environmental and social throughout the Group. The Senior Management Team (“SMT”), the initiative leader, had already strategised with key internal and external stakeholders to kick-start the process of identifying and assessing all the key sustainability issues surrounding the operations of the Group. Correspondingly, various sustainability

by the Group to enhance value across all the three aspects of the sustainability framework.

This Sustainability Statement needs to be read in conjunction with the rest of the sections contained in

The formalised Sustainability Working Group (“SWG”) comprises all the members of the SMT, which consists of the Executive Chairman (“EC”), Managing Director

Manager of Manufacturing, General Manager of Overseas Operations and Head of Human Resource. The SWG provides oversight on all matters pertaining to sustainability. The CFO acts as the Head of the

report to the EC and MD who are the Main Sponsors. All sustainability issues and other operational performance issues are deliberated in the monthly SMT meeting, which is chaired by the Executive Chairman. Moving forward, key risks relating to the

into the existing Enterprise Risk Management (“ERM”) framework of the Group. The CFO will provide quarterly and ad-hoc updates as and when necessary to the Audit Committee on all Sustainability issues and its relevant performance metrics (key indicators), on top of the existing ERM issues.

This Sustainability Statement covers the reporting period from 1 January 2017 to 31 December 2017 and has excluded the overseas subsidiaries for the time being due to their relative sizes. However, it is worth noting that the overseas subsidiaries do cover certain aspects of the Sustainability issues in the daily business operations even though they are not in the scope for the current Sustainability reporting of the Group. The Group intends to extend the coverage to include the overseas subsidiaries in the coming years when the overseas operations have grown further to become sizeable entities and the impact of such initiatives would be deemed material enough in the local communities they operate in.

The Group has embarked on the following initiatives under each of the Sustainability aspects and the relevant key indicators for each of the initiatives and the project owners of the initiatives have been summarised in the table below:

Sustainability Initiatives

Initiatives’ Owners

Economic

To create indirect

investing in training and development opportunities for local community to build technical skills and contribute towards raising productivity for the nation

1) Senior General Manager of Manufacturing

2) Head of Human Resource

Environmental

Be environmentally responsible in the consumption of resources and energy


Social

To enhance the workplace health and safety aspects, strengthening the welfare of the employees and providing a Fair and Equitable Work Environment

1) Chief Financial


3) Head of Human Resource

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SUSTAINABILITY STATEMENT (continued)

Environmental

1) O p t i m i s a t i o n of Electricity Consumption

2) Reduction of pace of global climate change through solar power generation (in voltage)

3) P r o d u c t i o n Wastages (Internal Rejects) and usage of recycled materials

4) Optimisation of Water Consumption (in cubic meter) and Waste Water discharged

Both internal stakeholders (SMT and Manufacturing Management Team) and external stakeholders like Department of Environment (“DOE”), Syabas, Tenaga Nasional Berhad (“TNB”)

Minimum 2 times per year with internal stakeholders and will endeavor to meet external stakeholders at least once a year

Social

by age group, by gender across all levels

2) Workplace accidents

3) Road Safety Campaign – number of road accidents and fatality cases

4) Number of staff undergone Safety and Health Training per year

Both internal stakeholders (SMT, Group Safety – Emergency Response Team and Social Welfare Club) and external stakeholders like Fire Department or Bomba, Road Transport Department or JPJ, Road Safety Department or JKJR


Economic

1) Number of graduating Meister students per year and relevant investment in human capital-related costs

2) Number of Apprentice Trained in the Group and relevant investment in human capital-related costs

3) Number of workers trained under YES program and relevant investment in human capital-related costs

Both internal stakeholders (SMT) and external stakeholders like Selangor Human Resources Development Centre (“SHRDC”), the Federation of Malaysian Skills Development Centre (“FMSDC”)


Key Indicators

Engagement with internal/ external stakeholders

Frequency of engagement meeting, formal and informal (per year)

In arriving at the various Sustainability initiatives, the Group has evaluated the overall impact of each of the issues and only issues which carry substantial impact will be reported in this Sustainability Statement, either

evaluate the materiality threshold on a yearly basis and will revise the Sustainability material issues where appropriate, at the end of each year. As reported in the key indicators under each of the Sustainability

initiatives covering Economic and Environmental aspects, the direct cost impacts are deemed material

subject to further review annually. On Social aspect,

impacts but are deemed material to the Group due to the large number of staffs employed by the Group,

December 2017 (“FY2017”).

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ANNUAL REPORT 2017

The Group has been engaging with agencies like SHRDC and FMSDC which have goals of building pool of productive workers and contribute towards becoming a high-income nation with a knowledge-

therefore the Group has been working closely with these agencies to drive this Sustainability agenda.

Engagements with various other external stakeholders like DOE, TNB, Bomba, JPJ, JKJR, etc. were aimed at

building a more sustainable environment and a safer and better workplace for the employees. Through these engagements, the Group will be able to collect information on latest regulations or best practices that will enable the Group to continue developing better processes or practices to strengthen its ability to achieve the Sustainability objectives.

To ensure that the Sustainability issues are embedded into the day-to-day operations, the

will also take into consideration the achievement of the Sustainability performance targets, where relevant. These Sustainability performance targets are aligned towards the overall Corporate Strategic Key Performance Indicators which are derived from the Annual Strategic Business Planning working sessions.

As explained above, the Group plans to further consolidate and combine all of the Sustainability issues into the ERM framework in 2018. All the risk-mitigation actions and improvement initiatives documented in the ERM framework are subject

independent internal auditors of the Group and the status will be updated to the Audit Committee on a quarterly basis.

ECONOMIC

NHF acknowledges the importance of the role of a good corporate citizen and in line with this, the Group has embarked on various initiatives to enhance the socio-economic level of the communities we operate in and do our part in contributing towards raising the productivity for the nation.

shortage of local talents or manpower. In view of this, the Group has invested approximately RM700,000 per year on human capital development and along the way contribute towards building higher productivity for the nation. In this pursuit of strengthening manpower

level, NHF reaches out to a varied group of people from local youths to school leavers and fresh graduates. In doing so, NHF has teamed up with schools, colleges and universities for career talks and career fairs to search for the best talents.

In addition, NHF has been collaborating with accredited training providers such as SHRDC, Max Human Capital, Enter Corridor Training Centre and Auto Prima Training Centre and participates in apprenticeship program to offer job placement and

Apprentices are placed in various departments in

the end of the program, students will receive a ‘Sijil

and Plastic Injection Moulding respectively from the Department of Skills Development (JPK), Ministry of Human Resources.

NHF signed a Memorandum of Understanding (“MoU”) with SHRDC in FY2015 to sponsor sixteen (16) students under the Malaysian Meister in Mechatronics for Manufacturing - Industrial Skills Enhancement Program. In 2016, NHF signed another MoU to sponsor another twenty (20) students under the Malaysian Meister in Precision Machining for Manufacturing - Industrial Skills Enhancement Program for intakes in 2016 and 2017. With the objective to increase the pool of hands-on engineers,

ensure that it has sustainable workforce for future business. Adapted from the German “Meister” (meaning Master Craftsman) program, the Malaysian Meister Program (“MMP”) is a major breakthrough in Technical and Vocational Education and Training (“TVET”) in Malaysia. It represents the future of TVET

workers to become a high-income nation with a knowledge-based economy. The MMP is a 2-year course that offers students the opportunity of fully subsidised study whilst working and gaining valuable industrial experience. At the end of the course, the students will earn the coveted Malaysian Meister

Diploma) from JPK.


22


ENVIRONMENTAL

NHF is totally committed to maintaining good environmental practices. The Group strives to ensure that its operation leaves minimal impact

usage and waste management to preserve the natural environment for the well-being of the future generation. All environmental issues contained in this Sustainability Statement were selected either due to

reaching impact on preserving the environment.

Production Wastage and Recycled Materials

priorities are resource management and reduction of production wastages. As a responsible manufacturer, NHF aims to reduce production wastages by using quality materials and ensuring production processes

its implementation of Lean Production System and

wastages. In the production value-chain, most of the wastages in the form of plastic resin were reused while metal scrap was either reused internally or sold to external parties for recycling purposes. Other solid waste such as oil and chemical drums were being disposed to licensed collectors approved by the DOE.

The Group has been using recycled materials in its

part of the efforts to contribute towards conserving the environment for a better and more sustainable future.

In its effort to reduce electricity consumption, NHF

September 2014 onwards at its premises in Meru, Klang. The Group had replaced in stages all standard bulbs with energy saving Light-Emitting Diodes (LEDs) bulbs throughout its facilities. These bulbs use lesser energy and have higher life expectancy resulting in cost savings and environmental preservation. In addition, employees were encouraged to use air conditioner responsibly as part of their contribution

FY2016, the electricity usage in terms of kilowatts

RM6.8 million in FY2017:


Besides Meister and Apprenticeship programs, in 2016, NHF also signed a MoU with SHRDC to sponsor students under the Youth Enhancement Strategy (“YES”) program. YES program was offered to SPM school leavers to gain work experience and industrial skills from a 3-month on-the-job training at NHF and 3 months classroom training at SHRDC. This program was also offered to existing staffs to upgrade their skills and knowledge whereby they were required to undergo classroom training at SHRDC once a week. Upon completion of the program, the students

Institute, Australia, which is equivalent to SKM Level 2. This program enabled the Group to build a larger

In FY2017, the Group recorded the following number of students enrolled in Apprenticeship Program, Meister Program and YES Program:

Program Number Total of Students Investment FY2017 (RM)

Malaysian Meister in 16 433,210 Mechatronics (completed study in October 2017)

Malaysian Meister in 9 188,591 Precision Machining

Youth Enhancement 2 19,024 Strategy (YES)

Apprenticeship - Plastic 9 10,447 Injection

Apprenticeship - 2 5,353 Mechatronic

Total 38 656,625

The Group believes that with this level of investment in Human Capital Development, which is relatively

towards nation-building and at the same time being able to strengthen our talent pool to better position ourselves for future business growth.

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ANNUAL REPORT 2017

As a responsible manufacturer, the Group ensured that only treated waste water was being discharged from its factory operations to avoid pollution to the surrounding environment and the Group spends around RM150,000 per year to manage waste water. The waste water treatment plant was further upgraded in FY2015 and FY2016 in the electro-deposition paint line, at a cost of RM165,000. The Group collects samples of water discharged from the treatment plant and sends the samples for both internal testing as well as external testing by DOE-approved laboratory.

Gas Emission

Controlling emission of gases from production

maintaining a sustainable environment. The Group engaged a licensed air quality consultant to conduct emissions measurement to ensure conformance to the emission standard regulated by the Environmental Quality (Clean Air) Regulation 1978.

Moving forward, the Group will continue to focus on driving further reduction of production wastages as

segment and will be the main contributor towards building a sustainable environment whilst the business continues to grow.

SOCIAL

The Group is fully committed to enhance the workplace safety and health practices and strengthening the welfare of the employees while ensuring a fair and equitable working environment. On a broader scale, the Group will always endeavor to bring about positive social impacts to the community we operate in. Some of the major initiatives carried out by the Group are reported below.

Safety and Health

to ensure that a comprehensive standard operating procedures and policies that conform to Occupational Safety and Health Act (OSHA) was developed as well as to ensure that the safety and health measures or procedures are followed to minimise all workplace-

drill exercises are also being conducted every year.


Electricity Usage FY2015 FY2016 FY2017

Electricity Voltage (‘000 kw) 16,137 17,504 17,331

Acknowledging the importance of sustainable energy, NHF participated in the Solar Photovoltaic (“PV”) Feed-in Tariff system by TNB in 2013. Through its wholly owned subsidiary, New Hoong Fatt Auto Supplies Sdn Bhd (“NHFAS”), a Renewable Energy Power Purchase Agreement was signed with TNB for the sale and supply of renewable energy by NHFAS to TNB. The concession period was set at 21 years. The Group invested about RM2.0 million in the installation of solar panels on the rooftop

Kuala Lumpur. In 2017, a total of 193,284 kilowatts of energy were generated using this solar PV. As solar PV produces the cleanest type of energy, it helps to reduce the pace of global climate change and reduces dependence on depleting resources to generate electricity. The values of energy generated (voltage and RM value) by solar PV for the past three (3) years were:

Energy generated by Solar PV FY2015 FY2016 FY2017

Voltage (‘000 kw) 206 206 193

Water Consumption

In the manufacturing plants, water is used in the production processes such as paint coating, paint spraying, fabricating and cooling. The Group is fully committed to conserving water for a better environment. As can be seen from the water consumption data below, water consumption had not increased for the past three (3) years, despite higher production volume:

Water Consumption FY2015 FY2016 FY2017

Cubic Meter (‘000 m3) 71 71 72

Water Consumption FY2015 FY2016 FY2017

24


Continuous improvements are being carried out to reduce the number of work-related incidents, injuries or illnesses and promoting a safer and healthier working environment. Relevant trainings are also being conducted on industrial chemical handling and handling of sizeable machineries, equipment and moulds. The Group also conducts thorough examinations on the effects of the usage of new

not jeopardised.

Emergency Response Combined Drills training

Spillage Control teams are also carried out periodically.

with essential facilities in the factory in Klang which is

In addition, NHF also ensures proper handling of hazardous chemical substances by establishing appropriate disposal procedures. Hazardous wastes are stored in proper containers to prevent exposure,

gears and trainings are also provided to employees to avoid workplace accidents due to improper handling of hazardous substances.

Number of workplace accidents had deteriorated slightly to 40 cases in FY2017 compared to 33 cases in FY2016. However, in terms of workdays lost, there

288 days in FY2017 as a consequence of an accident involving an employee who was hospitalised for a long period of time. Excluding this case, the number of lost workdays did not deviate much from previous years. In view of the higher number of workplace accidents, the Group has raised the efforts to educate and train all employees on Safety and Health best practices at the workplace. The Group is fully committed to place stronger emphasis on managing Safety and Health issues at the workplace.

Workplace Accidents FY2015 FY2016 FY2017

No. of Cases 39 33 40

No. of Workdays Lost 142 148 288

Diversity and Inclusion

The Group believes that social diversity brings about a more balanced and effective workplace. The Group is respectful of all employees regardless of their gender, ethnicity, age or nationality and strives to retain diversity at all levels.

NHF has maintained the practice of having at least one-third of female representation on the Board while at other levels within the Group, employees are provided with fair and equal employment opportunities, career progression and pay equity.

As at 31 December 2017, the ratios of women employed by the Group at different levels are summarised below:

Ratio of Women employed FY2016 FY2017

Employee Engagement

engagement through various communication platforms. Through closed-loop feedback and meetings, employees are encouraged to voice out opinions, new ideas or raise any concerns that they may have. “Dialogues with Chairman” is organised yearly to give employees the opportunities to interact

Talent Development

competencies are constantly upgraded and strengthened through adequate training and a structured career development plan. NHF always places strong focus on developing its human capital and encourages its employees to build their own development plan and advance their career with the Group. All employees on Executive level and above have an Individual Development Plan (“IDP”) that is reviewed annually with their superior. A typical IDP

competency level in Leadership and Management Expectations, a set of management competency skills

framework. Technical Competency improvement plan is also built into the IDP with the objective of raising the technical skills of the employees.


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ANNUAL REPORT 2017

Employee Welfare

NHF strives to raise the general welfare of its employees. Apart from providing the standard

entertaining events ranging from employees social gatherings to sports tournaments, family day, annual dinner and festive celebrations. These activities are held to promote closer relationship among the employees, encourage teamwork and promote healthy lifestyles and at the same time nurture leadership skills among the employees who are entrusted with the responsibilities to organise

employees are covered under Personal Accident insurance while certain levels of employees are also provided coverage under Hospital and Surgical insurance as well as travel insurance. Staff discounts are also given to employees for the purchase of the

Blood Donation and Health Checks Campaign

To play our part in contributing back to the local community, NHF had been organising yearly blood donation and health checks campaign to help contribute to the blood bank of Tengku Ampuan Rahimah Hospital, Klang and to raise awareness on the importance of blood donation. Since its inception in 2007, the event had recorded a total of about 1,500 successful blood donors. Free health checks and health talks were offered to the residents of the surrounding community during the campaign which comprised of checks on Body Mass Index (BMI), blood pressure, eye screening, bone scanning and pap smear testing, etc. Agencies such as Bomba, Royal Malaysia Police, JPJ, JKJR, National Anti-Drugs Agency (NADA) and Automobile Association of Malaysia (AAM) were engaged to create awareness on the importance of safety and health among the public. Table below shows the number of successful blood donors over the past three (3) years:


FY2015 FY2016 FY2017

Number of Blood Donors 156 82 152

Road Safety Campaign

Valuing every life, NHF had been promoting road safety awareness among its employees, their family members and the surrounding community. NHF began its road safety campaign in 2010 following the signing of a MoU with JKJR. The objective of this campaign was to boost awareness on positive road habits and

Jalan Teratai, Meru and the surrounding areas. Road

were as follows:

FY2015 FY2016 FY2017

Number of road accident 10 11 15

Fatality cases - - -

After four (4) successive years of campaigning and active engagement with its employees, NHF marked the four-year milestone of zero “road accident-related fatality” among its employees throughout 2014 - 2017.

CONCLUSION

sustainability is one of the key driving factors that positions the Group towards achieving its corporate objectives and stakeholder value creation without compromising on social and environmental needs.

FY2015 FY2016 FY2017

FY2017FY2016FY2015

26


2017 2016 2015 2014 2013

250,606 231,894 207,226 200,596 210,604

24,413 36,810 26,570 17,900 27,357

20,328 29,990 19,250 11,974 20,149

537,195 453,335 397,944 369,332 386,125

55,691 35,213 28,656 19,470 36,051

426,594 372,337 330,047 314,829 313,485

Basic Earnings Per Share 27.05 sen 39.90 sen 25.61 sen 15.93 sen 26.81 sen

Net Assets Per Share RM5.68 RM4.95 RM4.39 RM4.19 RM4.17

Dividend Per Share (Single Tier) 11 sen 14 sen 11 sen 10 sen 12 sen

Market Share Price 2017 2016 2015 2014 2013

- Highest (RM) 4.89 3.24 2.81 2.95 3.09

- Lowest (RM) 3.16 2.60 2.21 2.36 2.30

2016 2015 2014 2013

FIVE–YEAR GROUP FINANCIAL SUMMARY

250,606

24,413

20,328

537,195

55,691

426,594

27.05 sen

RM5.68

11 sen

2017

2017

4.89

3.16

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ANNUAL REPORT 2017

REVENUE (RM’000) PROFIT BEFORE TAXATION (RM’000)

TOTAL ASSETS (RM’000)

BASIC EARNINGS PER SHARE (SEN)

SHAREHOLDERS’ FUND (RM’000)

NET ASSETS PER SHARE (RM)

27,357 17,900 26,570 36,810 24,413

39.90 27.05

210,604 200,596 207,226 231,894 250,606

2013 2014 2015 2016 2013 2014 2015 2016

2013 2014 2015 20162013 2014 2015 2016

2013 2014 2015 2016 2013 2014 2015 2016

2017 2017

20172017

2017 2017

313,485 314,829 330,047 372,337 426,594386,125 369,332 397,944 453,335 537,195

4.17 4.19 4.39 4.95 5.6826.81 15.93 25.61

FIVE–YEAR GROUP FINANCIAL SUMMARY (continued)

28


CALENDAR OF EVENTS 2017

DATE EVENTS

26 February Bowling Tournament

10 - 14 April NHF Health Awareness Week

15 April Participation in 2017 Job Fair for Southeast Asia in Taipei

16 April 11th Annual Blood Donation and Free Health Checks Campaign

19 - 21 May NHF The Edge Sales Conference at Phuket, Thailand

1 June Twentieth (20th) Annual General Meeting

19 July Hari Raya celebration amongst NHF employees

23 September NHF 40th Anniversary Gala Dinner

25 October Industrial visit by MBA students of Universiti Tunku Abdul Rahman and exchange

students from TungHai University, Taiwan

19 November NHFHB Family Day at Wet World Waterpark, Shah Alam

29 November Participation in 2017 Automechanika Shanghai Exhibition

- 2 December

6 - 7 December In-house Fire Fighting and Rescue Training

17 December 2017 Piala Kam Lang Fatt – Inter-divisional Football Tournament

29

ANNUAL REPORT 2017

DIRECTORS’ PROFILE

KAM FOONG KENGAged 54, Female

Executive Chairman

Madam Kam was appointed as Executive Director of the Group on 8 April 1998, and was later appointed as Executive Chairman on 15 May 2008. She also serves as a member of Remuneration Committee. She holds a Bachelor Degree in Business from South Australia Institute of Technology [now known as University of South Australia], Australia.

management and organisation since graduation. As Executive Chairman, she is responsible to oversee the strategic direction, overall performance and business development of the Group, both Malaysian and overseas operations. She ensures that the

mission and vision. Currently, she sits on the Boards of the holding and subsidiaries of the New Hoong Fatt (“NHF”) Group. She does not hold any directorship in other public companies or listed issuers.

Madam Kam is the spouse of Mr Chin Jit Sin, sibling of Ms Kam Foong Sim, both are Directors of the Company, and daughter of Madam Wong Ah Moy @ Wong Yoke Len, a major shareholder of the Company.

other than that which has been disclosed to the Board

statements.

Madam Kam had attended all four Board meetings

CHIN JIT SINAged 56, Male

Managing Director

Mr Chin is the Group Managing Director of NHF. He was appointed as Executive Director on 8 April 1998 and was re-designated as Managing Director on 25 October 2007. As the Group Managing Director, he

a Bachelor of Economics (Hons) Degree (major in Business Administration) from University of Malaya.

Mr Chin was attached to a banking institution prior to joining NHF. His experience covers a variety of

manufacturing and trading. As the Group Managing Director of NHF, he oversees the strategic planning, talent management and operational management of the Group, particularly in operational effectiveness

policies and procedures. Currently, he sits on the Board of the holding and the subsidiaries of the NHF Group.

He is also a director in another public company, namely the Malaysian Automotive Component Parts Manufacturers where he serves as a member of the Executive Committee.

Mr Chin is the spouse of Madam Kam Foong Keng, the Executive Chairman and major shareholder of the Company, and is therefore related to members of her

Group.

Mr Chin had attended all four Board meetings held in

30


DIRECTORS’ PROFILE (continued)

KAM FOONG SIMAged 53, Female

Non-Independent Executive Director

Ms Kam was appointed as Executive Director on 17 May 2001. She holds a Bachelor Degree in Economics (major in Accounting) from University of Adelaide, Australia. She is an accountant by profession and

Australia and the Malaysian Institute of Accountants.

She had several years of experience in accounting

and accounts. Currently, she sits on the Board of the holding and several subsidiaries of the NHF Group. She does not hold any directorship in other public companies or listed issuers.

Ms Kam is the sibling of Madam Kam Foong Keng, a director and major shareholder of the Company, and daughter of Madam Wong Ah Moy @ Wong Yoke Len, who is a major shareholder of the Company.

other than that which has been disclosed to the Board

statements.

Ms Kam had attended all four Board meetings held in

WONG YOKE NYENAged 59, Male

Independent Non-Executive Director

Mr Wong was appointed as Independent Non-Executive Director on 16 May 2008. He also serves as the Chairman of the Audit Committee and a member of the Nomination and Remuneration Committees.

Mr Wong obtained a Bachelor of Arts Degree with Second Class Honours (First Division) after having completed a course in Accountancy from City of London Polytechnic [now known as London Metropolitan University], United Kingdom. He is also a graduate of The Wharton Advance Management Program from the Wharton Business School of the University of Pennsylvania, USA.

In 1981, he started his career in Baker Rooke, a

gained wide experience and exposure in the areas of auditing, accountancy and management consultancy work. In 1983, he joined Aseambankers Malaysia Berhad [now known as Maybank Investment Bank Berhad]. His last position in the company was Executive Vice President cum Head of Corporate Finance Division. He was an Honorary Advisor to the Master Builders Association Malaysia from July 2008 to June 2010. With more than 30 years of

experience, he started WYNCORP Advisory Sdn. Bhd. in 2004, a private company licensed to provide

the Managing Director of WYNCORP Advisory Sdn. Bhd.

Mr Wong holds directorships in four other public listed companies, namely XiDeLang Holdings Ltd., Benalec Holdings Berhad, Focus Lumber Berhad and Sentoria Group Berhad, as well as several private limited companies.

Mr Wong does not have any family relationship with any Director and/or major shareholder of the

Group.

Mr Wong had attended all four Board meetings held

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ANNUAL REPORT 2017

DATUK DR. ANIS BIN AHMADAged 72, Male


Datuk Dr. Anis was appointed as Independent Non-Executive Director on 2 December 2002. He also serves as the Chairman of the Remuneration Committee and a member of the Audit and Nomination Committees.

He holds a Ph.D. in Pharmacology from University of Bath, United Kingdom, a Master of Science in Pharmaceutical Technology from University of London and a Bachelor of Pharmacy from University of Singapore.

Datuk Dr. Anis started his career with the Ministry of Health (“MoH”) in 1968 and served the Malaysian Government in various capacities, namely as Lecturer and Head of Department of Pharmacology in Universiti Kebangsaan Malaysia, Secretary of the Drug Control Authority of MoH, Deputy Director of the Pharmacy Division of MoH and Deputy Director of Health (Pharmacy) for the Department of Health, Johor. He was promoted to Director of National Pharmaceutical Control Bureau (NPCB) of MoH and subsequently to Director of Pharmacy of MoH, where he served until his retirement in 2001.

Currently, Datuk Dr. Anis is the Chairman of the Board of Directors of Y.S.P. Southeast Asia Holding Berhad, and a Director of several private limited companies.

Datuk Dr. Anis does not have any family relationship with any Director and/or major shareholder of the

Group.

Datuk Dr. Anis had attended all four Board meetings

DANNY NG SIEW L’LEONGAged 59, Male


Mr Ng was appointed as Independent Non-Executive Director on 20 April 1998. He also serves as the Chairman of the Nomination Committee and a member of the Audit and Remuneration Committees.

He graduated with a Bachelor Degree in Agribusiness (Hons) majoring in Financial Management from Universiti Pertanian Malaysia [now known as Universiti Putra Malaysia] Malaysia in 1982. He started his

Malayan Banking Corporation Berhad [now known as RHB Bank Berhad] from 1982 to 1994.

He does not hold any directorship in other public companies or listed issuers and only holds directorships in several private limited companies.

Mr Ng does not have any family relationship with any Director and/or major shareholder of the Company.

Mr Ng had attended all four Board meetings held in

DIRECTORS’ PROFILE (continued)

1. All of the Directors of the Company are Malaysians.

32


KEY SENIOR MANAGEMENT’S PROFILE

CHONG CHOON YENGAged 46, Male

Director of several subsidiaries of the NHF Group

in August 2014 and took on additional responsibility of heading the Trading Division in 2016. He was made

Before joining the Group, he was the Executive Director of Finance in Tropicana Corporation Berhad, a property developer listed on Bursa Malaysia Securities Berhad.

Mr Chong holds a professional accountancy

Management Accountants, United Kingdom and is a member of the Malaysian Institute of Accountants.

Mr Chong had previously held the position of Chief

Berhad from 2007 to 2009 and was subsequently

in Hong Kong. He later returned to Malaysia and joined Hong Leong Group in August 2010 holding the positions of General Manager of Finance and Group Financial Controller within the Group. He had also worked in other multinational companies like British American Tobacco (Malaysia) Berhad and Xsys Print Solutions Sdn. Bhd. during the earlier part of his career.

Mr Chong has more than 20 years of experience in

of Accounting and Finance, Treasury, Tax, Strategic Planning, Mergers and Acquisitions as well as Investors Relations.

Mr Chong does not hold any directorship in other public companies or listed issuers.

He does not have any family relationship with any Director and/or major shareholder of the Company.

LOONG KIN LEONGAged 46, Male

Senior General Manager, Manufacturing

Mr Loong joined the Group in December 2013 as General Manager, Manufacturing, overall responsible for the manufacturing operations of the Group. He was promoted to the position of Senior General Manager in 2015 and had assumed additional responsibility of overseeing the exports division.

Mr Loong obtained his Bachelor of Mechanical and Material Engineering Degree from Universiti Kebangsaan Malaysia in 1995 and further graduated with the Masters in Business Administration from University of Surrey, United Kingdom in year 2000.

Mr Loong started his career as a Technical Engineer in the automotive industry in Tan Chong Motor Assemblies assembling Nissan, Peugeot, Audi and Renault vehicles in 1995. He left Tan Chong Motor Assemblies in 2006 to join Wawasan TKH Group and was managing its plastic disposable packaging and mining businesses. He was holding the Senior General Manager position when he left in 2013.

Mr Loong has more than 20 years of experience in manufacturing operations, covering aspects of Production Planning, Machine and Facility Maintenance, Quality Management, Logistics, Procurement, as well as Occupational Health and Safety. Mr Loong does not hold any directorship in other public companies or listed issuers.


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ANNUAL REPORT 2017

KOO SIAW TURKAged 53, Male

General Manager, Overseas Operation

Mr Koo joined the Group in May 2016 as General Manager, Overseas Operation, responsible for the overseas operation in Indonesia and China.

Mr Koo received his Bachelor of Commerce Degree in Accounting from Dalhousie University, Nova Scotia, Canada in 1987, and obtained his CPA

Public Accountants in 1993. He was awarded Master in Business Administration (Distinction) from the University of Keele, Staffordshire, United Kingdom in 2000.

Mr Koo began his career as an auditor in an

[now known as KPMG] in 1987. He joined OYL Group (a member of Hong Leong Group) as an Assistant Accountant in 1993, and was later transferred to take charge of Sales and Marketing in 1995 where he assumed the role of General Manager in 2003.

as VTI Vintage Berhad), a public listed company from 2008 until 2014.

Mr Koo was exposed to various roles in international organisations and public listed companies for more than 25 years. His exposures included those of Sales and Marketing, Manufacturing, Operation and Logistics, Human Resource Management, and Business Development in various industries.

Mr Koo does not hold any directorship in other public companies or listed issuers.


YONG CHEAN LOONGAged 50, Male

General Manager, Finance and Administration

Mr Yong joined the Group in April 2018 as General Manager, Finance and Administration.

Mr Yong obtained the professional accountancy

Chartered Accountants (ACCA) in 1996 and was admitted as a member of Malaysian Institute of Accountants in 1997.

Mr Yong has more than 25 years of working experience

years was in the fast moving consumer goods sector.

He started his career as an Auditor in Ernst & Young from 1991 until 1992 and moved on to assume various managerial positions in Finance departments of EAC Malaysia Sdn. Bhd. and EAC Singapore Pte Ltd between 1992 and 2005, a multinational conglomerate headquartered in Denmark.

Before joining NHF, he was the General Manager, Finance and Administration of DKSH Malaysia Sdn. Bhd., a wholly-owned subsidiary of DKSH Holdings (M) Berhad, a company listed on the Main Board of Bursa Malaysia Securities Berhad.

Mr Yong does not hold any directorship in other public companies or listed issuers.


KEY SENIOR MANAGEMENT’S PROFILE (continued)

1. All of the Key Senior Management of the Group are Malaysians.

2. None of the Key Senior Management of the Group has any conviction for offences within the past

34


CORPORATE GOVERNANCE OVERVIEW STATEMENT

PRINCIPLE A – BOARD LEADERSHIP AND EFFECTIVENESS

I. Board Responsibilities

Practice 1.1 – Board duties and responsibilities

The Board represents and serves the interest of the shareholders. The Board is responsible for the long-term performance of the Group and for overseeing

strategic objectives, ensure that necessary resources are in place for the Company to meet its objectives, as well as to review the performances of the Group and the Management against targets. The Board had delegated to the Managing Director, amongst others, the responsibility for implementing

its day-to-day operations. Strategies and policies, including annual business plan and budget are developed by the Managing Director together with the Management, which are then reviewed, constructively challenged and approved by the Board. The Managing Director is responsible to

plan which is aimed at achieving business growth, developing people and promoting good governance for a sustainable business. The Managing Director ensures implementation of these plans, people engagement as well as prudent management of

Managing Director and the Management keep the

Group as well as the development and performance of key business areas. The Managing Director also responsible to bring material issues and other relevant matters to the attention of the Board.

The Board also ensures the implementation of appropriate risk management and internal control

compliance to safeguard the shareholders interest

mindful of the importance of business sustainability

on the environmental, social and governance aspects are taken into consideration. By integrating environmental and social considerations across its business strategies and activities, the Group ensures the sustainability of its business and thus creates a long-term value for the stakeholders.

In the course of its supervision, the Board acknowledged the importance of ensuring succession is in place to ensure continuity of leadership for a sustainable business and performance. The Group has in place a Succession Planning Policy that sets out potential successor for key positions in the Group

candidates for the positions. This Policy caters for the

its human capital both at the strategic and operational levels. The succession list is regularly reviewed and updated to avoid disruption to business operation and functionality which may be caused by vacancies due to various reasons.

Practice 1.2 - Chairman

The Chairman of the Board is not an independent director but holds an executive position. The Board is of the view that the Chairman is capable to lead the Board based on her entrepreneurial leadership coupled with her many years of extensive experience in the operations of the Group. As one of the pioneer members of the Group, the Chairman is able to provide effective leadership to the Board and guide the vision, strategic direction and business development of the Group, and at the same time be guided by the independent advice and views from the Independent Directors, who offer the necessary checks and balances in the decision-making process of the Board.

The Board of Directors (“Board”) of New Hoong Fatt Holdings Berhad (“NHF” or “the Company”) is committed to uphold the high standards of corporate governance throughout NHF and its subsidiaries (“the Group”) with the ultimate objective of realising long-term shareholder value while taking into account the interest of other stakeholders. This Corporate Governance Overview Statement sets out the extent to which the Company has applied the practices encapsulated in the Principles of the Malaysian Code on Corporate Governance (“MCCG”) except where stated otherwise.

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ANNUAL REPORT 2017

The Chairman plays an instrumental role in providing

roles and responsibilities, ensuring that operations

vision and corporate policies, as well as facilitating the communication and understanding between the Management and the Board.

Recognising that the central issue in a well-governed

members of the Board, the Executive Directors, including the Chairman, do not have majority vote as the Board is composed of equal number of executive directors and independent directors. This composition of the Board is structured to ensure that no individual

decision-making process. The Chairman, whose primary role is to preside over board meetings, has

each agenda, as well as to provide fair opportunity to all directors to participate actively and constructively during the meetings and discussions.

Practice 1.3 – Separation in the roles of Chairman and Managing Director

The roles of Chairman and Managing Director are exercised by different individuals. A clear segregation of their responsibilities and powers is stated and

ensuring an appropriate balance of power and authority, the segregation of roles facilitates an open exchange of views and opinions between the Board and the Management in their deliberation of the business, strategies and key operations of the Group.

Practice 1.4 – Company Secretary

Company Secretary who is responsible to advise and regularly update the Board on good governance, board policies and procedures, administrative matters and corporate compliances.

The Company Secretary also ensures that the Board is kept well informed on any regulatory requirements and update on the developments in the area of corporate governance that affect the duties and responsibilities of the Directors as well as the Company being a public listed company. The Company Secretary advised and circulated relevant guidelines on new and amended statutory and regulatory requirements

Board quarterly on these updates at Board meetings.

Secretary also attends all Board and Board Committee meetings and ensures that the discussions on key deliberations and decisions are properly recorded. The Company Secretary is directly accountable to the Board on all matters in relation to the proper functioning of the Board, maintenance of the corporate documents

decisions, where appropriate.

All Directors have full and unrestricted access to the advice and services of the Company Secretary, whose appointment and removal is a matter of the Board as a whole.

Practice 1.5 – Information and support for Directors

The Board meets on a quarterly basis and at other times as required. Dates of Board meetings for the

that Directors may plan in advance and in order to maximise their attendance. All the Directors had attended all the four (4) Board meetings held during

All Directors had committed their time to the board

Director, in the discharge of his or her duties, had participated actively at the meetings. Board meetings are a platform for exchange of views, with Directors bringing their experience and independent judgment to discuss the issues at hand. During these meetings, the Board discussed, amongst other matters,

risks management, major acquisitions as well as management performance against the corporate targets and budget.

The proceedings of the board meetings in relation to notice, quorum and voting rights are governed by

notice of meetings and the agenda on the business to be conducted at the meetings were circulated to all Directors two (2) weeks before each meeting. The board papers that provided relevant information such as minutes of previous meetings, management

Board meeting so that each Director had ample time to review the papers to enable informed decision making.

CORPORATE GOVERNANCE OVERVIEW STATEMENT (continued)

36


At the Board meetings, the Management was often invited by the Board to present and provide detailed explanation on any agenda. Minutes of meeting were circulated to all Directors for their attention within one (1) month after each meeting to ensure that

decisions of the Board, including whether any director abstained from voting or deliberating on a particular matter.

In between Board meetings, matters requiring

resolutions where relevant information on the subject matter was enclosed. All circular resolutions approved by the Board were tabled for notation at the next Board meeting. During the Board meetings, the Board was

made to Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other relevant authorities.

All the Directors had the rights of access to all relevant

may obtain independent professional advice at the

carry out their duties, subject to prior consultation with the Chairman. To enable them to effectively exercise their duties and responsibilities, Board meetings regularly included sessions on recent key developments in governance and other corporate

Practice 2.1 – Board Charter

In performing its duties, the Board is guided by the Board Charter that sets out amongst others its roles, composition, responsibilities, powers, board committees and board meeting procedures. The key elements of governance principles embedded in the

guide the business strategic initiative of the Group. The Board Charter was reviewed and updated during

website.

The Board has established three (3) Board Committees, namely Audit Committee, Nomination Committee and Remuneration Committee that

authorities to assist the Board in executing its duties and to provide the Board with recommendations and advice. The delegation of authority to the Committees

by empowering each Committee to review, report and make recommendations to the Board on matters relevant to their roles and responsibilities.

Each Committee is governed by its own Terms of Reference (“TOR”) which sets out its functions and duties, composition, rights and meeting procedures. These TORs are reviewed annually in accordance with the needs of the Company and taking into account the changes in the business, governance and legal environment that may have an impact

responsibilities.

Furthermore, the Board has delegated certain authorities to the Management as sets out in the

authorisation covers both capital and operational expenditure, and approvals in the area of procurement,

Nevertheless, the Management reports to the Board

it is within the delegated mandate.

The Board remains collectively responsible for major management decisions such as approval of corporate

remuneration, major acquisitions and disposals,

declaration and recommendation of dividend, new investment, establishment or disposal of subsidiary, entry into a memorandum of understanding as well as approval of corporate policies.

Practice 3.1 - Code of Conduct and Ethics

Good governance at all levels is essential for sustainable development. The Board is committed to establish a corporate culture that promotes ethical conduct throughout the Group and ensures that its business is conducted with integrity, transparency

the Board must at all times act in good faith and in the best interests of the Company and at the same time ensuring that its obligation to shareholders and stakeholders are met.

The Board and all employees are guided by the

regulatory requirements and standards which regulate appropriate conduct and ethics within the Group. The Group has established the following policies and procedures to provide direction and guidance to all Directors, Senior Management, employees and external parties in the discharge of their duties and responsibilities that will be in the best interest of the Group:


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ANNUAL REPORT 2017

(a) Corporate Disclosure and Investor Relations

(e) Human Resource Manuals, Policies, Regulations

(h) Safety, Health and Environment Policy.

The Group has established the Fraud Policy to maintain robust control to prevent and detect fraud.

customers, vendors and other stakeholders to

involved or impacted. All employees are responsible to protect the assets and reputation of the Group and are expected to remain vigilant in detecting and reporting of any fraudulent activities to the established

responsibility to ensure that all reported complaints are promptly investigated and addressed.

Practice 3.2 – Whistle-blowing Policy

The Board is committed to achieving and maintaining high standards with regard to integrity and responsibility. It has established the Whistle-blowing Policy that provide a channel to enable employees and other stakeholders to report any suspected breaches of law or regulations or any illegal acts observed in

non-compliance with regulatory requirements, danger to health, safety or the environment, criminal activity and corruption. It outlines the procedures for reporting a genuine concern on any breach of conduct that are taking place, have taken place or may take place in the future. The Company treats all reports in

protection to anyone who reports such concerns in a good faith. The Whistle-blowing Policy is reviewed

II. Board Composition

Practice 4.1, 4.2 and Step Up 4.3 – Independent Directors

The Board currently consists of six (6) members, comprising the Executive Chairman, Managing Director, an Executive Director, and three (3) Independent Non-Executive Directors.

Based on the annual review of the composition of the Board carried out by the Nomination Committee, the

Executive Directors which is adequate for the scope

The Independent Non-Executive Directors are independent of management and free from any business, relationship or any circumstance that could materially interfere with the exercise of independent judgment or the ability to act in the best interest of

an independent director pursuant to the Main Market Listing Requirements (“MMLR”) of Bursa Securities. Amongst others, their roles are to provide support and advice to the Board to maintain ethical behavior within the Company and to serve as a measure to prevent concentration of power in order to protect the

The Board reviews and assesses the independence of directors annually based on the criteria set by the Nomination Committee. One of the assessment criteria is the ability of the individual director to exercise objectivity in the discharge of his or her responsibilities in the interest of the Company. During

each Board meeting where all Directors declared the nature of their interest in the Company, whether direct or indirect, or any circumstance which may potentially affect their independence. The Board had also carried out independence assessment of its Non-Executive Directors in terms of their relationship and dealings with the Company and the Board is of the view that all the Non-Executive Directors remain independent.

The Board had also considered the independence of all the Independent Directors whose tenure had exceeded nine (9) years, namely Mr Danny Ng Siew

Dr. Anis”) and Mr Wong Yoke Nyen (“Mr Wong”). Mr Ng, Datuk Dr. Anis and Mr Wong had been retained by the shareholders of the Company as Independent Directors at the last annual general meeting (“AGM”) held in 2017.

In their respective assessment, Mr Ng, Datuk Dr.

Board:

of interest and have not entered or expected to enter into any contract or transaction with the


38


(b) They have their own business which is not in the

(c) They sit on the boards of other public and/or

businesses or having the same nature of

(d) They do not assist the Company in any

(e) Datuk Dr. Anis is registered with the Malaysian Pharmaceutical Board and Mr Wong is a member of the Corporate Finance Faculty of the Institute of Chartered Accountants in England and Wales, and each is governed by its own code of ethics and professional conduct.

The Board is of the view that throughout their tenure, the Independent Directors had demonstrated independence in character and judgement and, had always looked out for the best interest of the Company without fear or favour. The Independent Directors had provided independent view based on their experience and knowledge that allow for

business and direction. The Board believes that the length of service on the Board did not impair the objectivity of these Independent Directors. Moreover,

corporate history that will continue to add value to the Board.

Based on the assessment above, the Board is

demonstrated by Mr Ng, Datuk Dr. Anis and Mr Wong and believes that they are able to provide check and balances in the best interest of the Company. Their retention as Independent Directors shall be subject to

They have abstained from any deliberations or voting pertaining to their own independence at the Board level.

The Company currently does not have a policy to limit the tenure of its independent directors to nine (9) years. Nevertheless, pursuant to Practice 4.2 of

approval to retain its Independent Directors who have served in that capacity beyond twelve (12) years, namely Mr Ng and Datuk Dr. Anis through a two-tier voting process at the forthcoming AGM.

Practice 4.4 and 4.6 – Diversity on Board and in Senior Management & Sourcing of Directors

The Board reviews from time to time the composition of the Board and considers new appointment when the need arises. The Nomination Committee is responsible for assessing and making recommendations to the Board on the candidature of directors based on recruitment criteria established by the Board. The Committee has the responsibility

members that demonstrate appropriate qualities and experience that contribute to the effective oversight and stewardship. Appointments of new Directors are undertaken by the Board as a whole after considering the recommendations of the Nomination Committee. Potential candidates may be proposed by any current Board member, shareholder or senior management personnel or by utilising independent

associations. In considering potential candidates for appointment, the Nomination Committee undertakes

experience, personal attributes and the capability to devote the necessary time and commitment to the role.

New directors will undergo the Director Induction Program and continuing education to facilitate

the markets in which it operates, its products and services, as well as understanding of the applicable requirements and governance polices of the Company. All directors are also provided with updates from time to time by the Company Secretary and

responsibilities, as well as on relevant regulations. The Company Secretary ensures all appointments are properly made and all necessary information required by the new directors for the proper discharge

no new Director was appointed.

When considering nomination or re-election of directors, the Nomination Committee also takes into

Besides attending all meetings of the Board and Board Committees on which he or she serves, each

meetings, major company events and to participate in continuing training programs. The proposed date

advance, to enable all directors to be present at the meeting and engage with the shareholders.


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ANNUAL REPORT 2017

In demonstrating commitment and accountability, Directors should notify the Chairman of the Board before accepting other external appointment of directorship, whether in a listed or non-listed company, at least one (1) week before the new appointment. This is to ensure that such simultaneous service

effectively in the Board and the Board Committees he or she serves. Currently, no directors of the Company

listed companies.

Taking cognisance of the values of human capital and talent management in the growth and sustainability of the Group, the Chairman and the Managing Director

of the key Senior Management, as well as to review the succession planning for key management team from time to time. The Chairman and Managing Director shall search for suitable candidates through established channels such as public advertisement or direct approaches being made to individuals who may be suitable or through organisations that may be able to assist in the recruitment process. In selecting the appropriate candidates, the Chairman and

Newly appointed key Senior Management personnel will have to undergo induction training and/or any other programs in the manner as stipulated in the

Practice 4.5 – Gender Diversity

The Board is committed to maintain an appropriate balance in terms of diversity in experience, skills, competence, calibre and gender in order to have balanced, comprehensive and thorough decision makings. The Board consists of members with a broad range of skills, well-rounded experience and

business. The Board ensures that each member has

competence to deal with current and emerging issues of the Group.

The Board acknowledges the importance of gender diversity as an important element of a well-functioning board. According to the Board Charter, at least one-third (1/3) of the Board shall comprise of women and

are female.

shareholders of the Company. Through its Nomination Committee, the Board will continue to review its structure and composition in order to ensure boardroom diversity and balance of power and authority, which are fundamental to an effective Board.

Practice 4.7 – Nomination Committee

The Board has established a Nomination Committee to provide advice and assistance to the Board in matters relating to appointment of new Directors, board composition, training program and performance evaluation on effectiveness of the Board, Board Committees and individual directors. Full details of the

are stated in its TOR which is available on the

The Nomination Committee comprises exclusively of Independent Non-Executive Directors and is chaired by the Senior Independent Director. The Committee meets as and when required, at least once a year.

out, with attendance as follows:

Name of Director No. of Meetings Attended

(Chairman) Datuk Dr. Anis bin Ahmad 1/1 Wong Yoke Nyen 1/1

had carried out the following activities:

(a) assessed the performance of the Board, Board Committees and individual Director, including

(b) assessed the independence of all three (3) Independent Directors whose tenure had

(c) reviewed the performance of retiring Directors and recommended them to the Board for re-

(d) reviewed the position of the Senior Independent Director and recommended the same to the


40


(e) reviewed the size of the Board against the size of the Group and the complexity of the business, to assess the impact and effectiveness of the Board

System and performance assessment of the key

(g) reviewed and updated its TOR pursuant to the

Directors receive appropriate continuous training

(j) reviewed and updated the Succession Planning Policy.

Practice 5.1 – Evaluation for Board, Board Committees and Individual Directors

The Nomination Committee annually performs an assessment of the effectiveness and performance of the Board, Board Committees and individual Directors, in order to verify that the Board is functioning appropriately as a whole. Each Director

Performance Evaluation which covered matters relevant to the Board performance, among other things, contribution to interaction, quality of input, understanding of role and personal developments. An evaluation of each Board Committee was done by assessing the structure, roles and responsibilities, performance of the respective Chairman, as well

assessment was internally facilitated, whereby results of the assessments had been compiled, documented and reported to the Board accordingly, as part of the


Based on the assessment carried out during the

concluded the following:-

(a) The Board was found to be competent and had a dynamic and balanced mix of skills and experience wherein the Directors were able to

making process.(b) The current structure, size and composition of

the Board, which comprises people who possess a wide range of expertise and experience in

specialisations, would enable the Board to lead and manage the Company effectively.

(c) The Directors had discharged their responsibilities in a commendable manner, acted competently, contributed effectively to the Board and demonstrated full commitment to their duties as Directors.

(d) The Board and Board Committees had contributed positively to the Company and its subsidiaries and were operating in an effective manner.

(e) The Board Chairman had performed in an excellent manner and contributed to the Board.

(f) The performances of the Board Committees were found to be effective.

The Board recognises the importance of continuous training to remain abreast of the latest developments in related industry and changes to the regulatory environment. The assessment on individual directors also provided the Board with valuable insights into training and development needs of each Director,

the Board remains informed and relevant. During the

various training programs. Particulars of the seminars and courses attended are as follows:

Name of Directors Date Seminar / Training Course Title

Kam Foong Keng 3 April 2017 The AGM - A Practical Insight and

3 April 2017 Remuneration Committee: Attracting and Retaining the Best Talents

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ANNUAL REPORT 2017

Name of Directors Date Seminar / Training Course Title

Chin Jit Sin 10 January 2017 Sustainability Forum for Directors/CEOs: The Velocity of Global Change & Sustainability - The New Business Model 3 April 2017 The AGM - A Practical Insight and


Kam Foong Sim 3 April 2017 The AGM - A Practical Insight and


24 July 2017 Mastering Companies Act 2016 Requirements for Accountants and Finance Professionals

Workers

Initiative: The Rise of East Asia and

Investors Series: Effective Corporate Strategy in Current Environment

17 April 2017 Preparing for the Structural Shift in Company Law - with the Latest Updates and Developments

Datuk Dr. Anis bin Ahmad 13 February 2017 The AGM - A Practical Insight and

22 February 2017 Corporate Governance: Obligations of Directors from the Listing Requirements Perspective


42


III. Remuneration

Practice 6.1 – Remuneration Policy

On a yearly basis, the Remuneration Committee reviews and recommends to the Board the remuneration packages of the Executive Directors, while the remuneration for the Non-Executive Directors was determined by the Board as a whole. In making its recommendation, the Remuneration Committee considers the principles set out in the Board Remuneration Policy. The Policy, which covers remuneration for the Directors and key Senior Management personnel, was established with the objective to guide the Group in attracting, retaining

on the Board and key Senior Management team.

and the General Manager of Overseas Operations as the key Senior Management personnel.

Remuneration for the Executive Directors was structured to align rewards to individual and the

the Executive Directors for risks and complexities of the duties and responsibilities they assumed. The Remuneration Committee also considered market competitiveness and obtained data for similar roles of other public listed companies in the same industry for comparison. Meanwhile, remuneration for the service of Non-Executive Directors was aligned with market terms, taking into consideration remuneration paid to Non-Executive Directors of other peer companies,

responsibility, market competitiveness as well as the

Based on the Board Remuneration Policy, the Remuneration Committee also reviews the bonus to be granted to the Executive Directors and key Senior Management personnel, taking into account the individual performance against the Key Performance Indicator targets and competency capability in

Management Expectations.

AGM. The affected Directors had abstained from participation in deliberations and decisions regarding their individual remuneration.

Practice 6.2 - Remuneration Committee

The Remuneration Committee was established to assist the Board in developing remuneration policies and procedures that enable the Group to attract,

Management personnel. Full details of the functions and duties of the Remuneration Committee are

website.

The Remuneration Committee comprises mainly of

one (1) meeting was carried out with attendance as follows:

No. of Name of Director Meetings Attended

Datuk Dr. Anis bin Ahmad 1/1 (Chairman)

Wong Yoke Nyen 1/1 Kam Foong Keng 1/1

Committee had carried out the following activities:

(a) reviewed and assessed the performance and the remuneration package of the Executive

(c) reviewed and assessed the performance and the remuneration package of the key Senior

(e) reviewed the Board Remuneration Policy.

Practice 7.1 - Remuneration of Directors

The details of the remuneration of the Directors of the Board (not including directors of the subsidiaries) for


No. ofMeetings Attended

Name of Director r

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ANNUAL REPORT 2017


The Board is of the view that a detail disclosure of

issues. The Company will consider disclosing the remuneration of individual key Senior Management as and when it is deemed appropriate.

Practice 7.2 and 7.3 - Remuneration of Senior Management

The remuneration paid to the key Senior Management

aspects of corporate governance as applicable to

are appropriately served by the vigorous evaluations done.

Salaries and

Emoluments Fees Allowance in Kind Total (RM) (RM) (RM) (RM) (RM)

GROUP Executive Directors Kam Foong Keng 1,194,336 55,000 - 40,253 1,289,589 Chin Jit Sin 1,110,920 55,000 - 26,886 1,192,806 Kam Foong Sim 319,800 5,000 - 8,545 333,345

2,625,056 115,000 - 75,684 2,815,740

Non-Executive Directors

Datuk Dr. Anis bin Ahmad - 63,000 11,000 - 74,000 Wong Yoke Nyen - 63,000 14,000 - 77,000 Grand Total 2,625,056 304,000 36,000 75,684 3,040,740

COMPANY Executive Directors Kam Foong Keng 1,145,774 5,000 - - 1,150,774 Chin Jit Sin 1,104,920 5,000 - - 1,109,920 Kam Foong Sim 319,800 5,000 - - 324,800

2,570,494 15,000 - - 2,585,494

Non-Executive Directors

Datuk Dr. Anis bin Ahmad - 63,000 11,000 - 74,000 Wong Yoke Nyen - 63,000 14,000 - 77,000

Grand Total 2,570,494 204,000 36,000 - 2,810,494

44


PRINCIPLE B – EFFECTIVE AUDIT AND RISK MANAGEMENT

I. Audit Committee

Practice 8.1, 8.4 and 8.5 - Audit Committee

The Audit Committee consists of the following members:

(a) Wong Yoke Nyen (Chairman)

(c) Datuk Dr. Anis bin Ahmad

The Chairman of the Audit Committee is not the Chairman of the Board. The Audit Committee Report is set out separately in this Annual Report. Full details

are stated in its TOR which is available on the

Practice 8.2 and 8.3 - Oversight of External Auditors

In order to ensure that the External Auditors remain

TOR sets out the nature for the provision of non-audit services which can be entered into by the Group with the External Auditors and the procedures to be followed to obtain approval for those services where they are permitted. The Group engaged the External Auditors to perform a non-audit service for the review of the Statement of Risk Management and Internal Control. The Group had also engaged the External

services. The Audit Committee is of the view that the provision of these non-audit services did not impair

The total of audit and non-audit fees incurred for services rendered by the External Auditors and their associates to the Company and the Group are as follows:

Group Company

FY2017 FY2016 FY2017 FY2016 RM RM RM RM

Statutory audit fees 171,330 175,139 26,000 26,000 Non-audit fees 82,078 32,715 22,300 7,300

Total 253,408 207,854 48,300 33,300

Group Company

FY2017 FY2016 FY2017 FY2016RM RM RM RM


Practice 8.2 of the MCCG, the Audit Committee had revised its TOR to include a clause on a minimum cooling-off period of two (2) years before a former key audit partner can be appointed as a member of the Audit Committee.

The Board, through its Audit Committee maintains a formal and transparent relationship with its External Auditors. The Board had delegated the responsibility to the Audit Committee for making recommendations on the appointment, re-appointment or removal of the External Auditors as well as on their remunerations. The Audit Committee ensured that the External Auditors work closely with the Internal Auditors to enhance the effectiveness of the overall audit process. The Audit Committee assessed the performance and effectiveness of the External Auditors annually, considering amongst others, their

quality of service and their independence.

In the course of their audit, the External Auditors highlighted to the Audit Committee matters pertaining

the precence of the Management and Executive Directors, to discuss any issues that may require the attention of the Audit Committee.

The full details of the role of the Audit Committee in relation to the External Auditors is set out in the Audit Committee Report of this Annual Report.

II. Risk Management and Internal Control Framework

Practice 9.1, 9.2 and 9.3 – Board Responsibility on Risk Management and Internal Control

The Board acknowledges its overall responsibility to maintain effective governance, risk management and compliance framework. Supported by the Management and internal audit function, the Board ensures the adequacy and effectiveness of the

practices. The Board is responsible to ensure that the Group complies with all applicable provisions of law and regulations and ensures that appropriate risk management systems are in place throughout the Group. The Audit Committee assists the Board to

risk management and internal control systems.

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ANNUAL REPORT 2017

To facilitate effective monitoring, the Board regularly receives reports from the Management on any business risks related to its business activities that have impacted or likely to impact the Company from achieving of its objectives and strategies.

Compliance relating to risk recognition and

on Risk Management and Internal Control as set out separately in this Annual Report.

Practice 10.1 and 10.2 – Internal Audit function

The Board has established an independent internal audit function that reports directly to the Audit Committee. The internal audit function of the Group is outsourced to an independent internal audit consultant and therefore is independent of the activities it audits. The head of the Internal Auditors is a member of the Institute of Internal Auditors Malaysia and possesses the skills, experience and competency to effectively carry out the internal audit work.

In general, the Internal Auditor provides an independent evaluation on the effectiveness of the risk management and internal control system of the Group based on an agreed scope of work. It also carries out a follow-up review on the issue raised in the preceding internal audit and to ensure that the proposed action plan has been implemented by the Management to mitigate the risk exposure of the Group.

The scope of work covered by the internal audit

activities carried out, including its observations and recommendations, are provided in the Statement on Risk Management and Internal Control and Audit Committee Report of this Annual Report.

PRINCIPLE C – INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLERS

I. Communication with Stakeholders

Practice 11.1 – Communication with Stakeholders

The Company is committed to ensure that timely, accurate and complete information about the Company is provided equally to its shareholders, stakeholders and to the general investing public.

Timely information is critical towards building and

Board is ultimately responsible for ensuring the

communications policy. The Company has in place a Corporate Disclosure and Investor Relations Policy (“CDIR Policy”) which provides guidance to

disclosure requirements, handling of material information, and in dealing with investors, analysts, media and the investing public. The Board delegates the implementation of the CDIR Policy to the

The Group also maintains comprehensive control of all important corporate information and prohibits any

when he or she is in possession of price sensitive information.

The Company strives to promote a better understanding of the Group through investor relation activities. Apart from general meetings, the Company has in place the following initiatives to facilitate effective communication with its shareholders:

(a) the Annual Report, which contains information such as Management Discussion and Analysis,

Audit Committee, Corporate Governance, Sustainability and Risk Management and

(b) various announcements made to Bursa Securities, which include timely release of

with these releases, the Company posts all announcements on its website, and releases announcements to major newspapers and

(c) regular dialogues with analysts and fund managers representing individual and

com.my under Investor Relations section, which houses Board Charter, annual reports, quarterly report announcements, press releases, slide

coverage and other corporate information on NHF. The website also provides Investor Relations contact for shareholders to direct their queries or concerns to.


46


The Board aims to present an accurate and complete

reporting. The Audit Committee is responsible to

systems that are designed to protect the integrity

reviewed by the Audit Committee and approved by the Board prior to its release to Bursa Securities and Securities Commission. Timely release of quarterly

Executive Director to whom concerns of shareholders

queries from shareholders directed to him during the

II. Conduct of General Meetings

Practice 12.1 – Notice of general meeting

General meetings are the important platform for the shareholders to exercise their rights in the Company, either in AGM or Extraordinary General Meetings.

Shareholders are invited to the general meetings through a notice of meeting that specify the venue, day and hour of the meeting, as well as the business of the meeting. The notice of meeting together with the Annual Report is sent to the shareholders at least 28 days prior to the AGM, so as to maximise their

consider the business to be discussed at the meeting. Concurrently, the notice of AGM is advertised in a nationally circulated English daily newspaper. In order to facilitate informed decision by the shareholders, notice of meeting is also accompanied by explanatory notes on the items of business to further explain the nature of business of the meeting.

Practice 12.2 – Attendance of Directors at general meetings

AGM is the main avenue for shareholders to interact directly with the Board and gain insights on

serves as a platform for shareholders to have a full understanding of the Company and the Group.

During the AGM, the Chairman ensures that shareholders are given the opportunity to comment or raise issues and questions either pertaining to issues

strategy or developments. The Chairman plays a vital role in fostering constructive dialogue between the Board and the shareholders. All the members of

Committees are present at the meetings to address queries raised by the shareholders which are relevant

Auditors also attend the AGM and are available to answer questions from the shareholders pertaining to

Practice 12.3 – Voting

In the event that shareholders are unable to attend the AGM in person, they are encouraged to appoint one (1) or up to two (2) proxies to attend and vote in his/her stead. The outcome of the meeting is announced to Bursa Securities on the same day, which is also

The Company conducts a poll voting on each resolution tabled during the general meetings to support shareholders participation. As the number of shareholders of the Company is not large, the Company currently conducts a manual poll voting instead of electronic poll voting. With the poll voting, each shareholder present in person or represented by proxy at the general meeting will be entitled to vote on a one-share, one-vote basis. At least one (1) scrutineer is appointed to validate the votes cast at the meeting.

ADDITIONAL COMPLIANCE INFORMATION

1. Statement of Directors’ Responsibility in respect of the Financial Statements

The Board is committed to ensure the reliability of

give a true and fair view of the state of affairs, and of the results of the operations of the Group

ended. As required by the Companies Act 2016

been prepared in accordance with applicable

policies in Malaysia.


47

ANNUAL REPORT 2017


has applied appropriate accounting policies on a consistent basis and made judgements and estimates that are reasonable and prudent. The

going concern basis.

The Board is responsible for ensuring that proper accounting records are kept which disclose with

Group and of the Company.

The Board is also responsible for taking such reasonable steps to safeguard the assets of the Group and to prevent and detect fraud and other such irregularities.

2. Material Contracts involving Directors and/or Major Shareholders

statements of the Group and of the Company, there was no material contract entered into or subsisting between the Company and/or its subsidiaries involving Directors and/or major

STATEMENT OF COMPLIANCE WITH THE CODE

complied with the majority of the practices of the

safeguarding the interest of the shareholders and other stakeholders, the Board is committed and will continue to strengthen its application of the best practices in corporate governance. This Corporate Governance Overview Statement is made in accordance with the resolution of the Board of Directors dated 27 February 2018.

48


AUDIT COMMITTEE REPORT

1. MEMBERSHIP AND MEETINGS

The Audit Committee (“AC”) of the Company is responsible to assist and advise the Board on

internal and external audit functions, risk management and internal control, compliance with legal and regulatory requirements and corporate governance. The formal role of the AC is set out in its terms of reference (“TOR”), which are available at www.newhoongfatt.com.my.

The AC consists of three (3) members, all of whom are independent non-executive directors. The Chairman of the AC is a member of the Corporate Finance Faculty of the Institute of Chartered Accountants in England and Wales

AC Chairman. The composition of the AC is in compliance with Paragraphs 15.09 and 15.10 of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”).

year, and the attendance of each member at the meetings is set out below.

Composition No. of Meetings of Committee Attended

Wong Yoke Nyen 4/4 Chairman, Independent Non-Executive Director

Independent Non- Executive Director

Datuk Dr. Anis bin Ahmad 4/4 Independent Non- Executive Director

Further information of the members of AC is set

2. TERMS OF REFERENCE OF THE AC

The AC is governed by its TOR that guides the AC

The TOR also sets out the rights of the AC as well as regulates the conduct of the AC and its members.

The AC will review and assess the adequacy of its TOR annually and recommend changes

new practices under the new Malaysian Code of Corporate Governance (“MCCG”) in relation to the composition of AC.

3. REVIEW OF THE AC

Committee (“NC”) had reviewed and evaluated the effectiveness of AC and each of its members, through evaluation forms completed by each AC and NC member. The AC was assessed based on quality and composition, skills and competencies, as well as meeting administration and conduct. Based on the results of the assessment, the NC was of the view that the AC and its members had discharged their functions effectively and had carried out their duties in accordance with its TOR.

4. SUMMARY OF ACTIVITIES

following activities:

4.1 Financial Reporting

statements of the Company and of the Group with the External Auditors.

assessed the reports and discussed with Management to ensure the use of proper

that appropriate accounting policies and

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ANNUAL REPORT 2017

4.2 External Audit

(a) Reviewed the external audit plan, scope and nature of statutory audit of

(b) Reviewed the external audit reports

recommendations and Management

(d) Reviewed and discussed the key

Auditors and determine the materiality of the matters raised. Key audit matter highlighted by the External Auditors was the appropriateness of the measurement of carrying amounts of

(e) Reviewed and approved non-audit services provided by the External Auditors and its associate company in order to safeguard audit objectivity and independence. The non-audit services rendered by the External Auditors and its associate company included tax services and review of Statement of Risk Management and Internal Control.

The AC believed that the independence of the External Auditors was not impaired by the provision of these non-audit services, as the fees paid were

(f) Reviewed and discussed with the External Auditors, the impact of new changes and disclosure requirements arising from the Companies Act 2016 (“CA 2016”) and Malaysian Financial Reporting Standards on the contents

(g) Met twice with the External Auditors without the presence of any executives and senior management except the

Company Secretary. There were no

to the AC and the External Auditors expressed their satisfaction with the working relationship they had with the

(h) At the commencement of the audit, the External Auditors completed an assessment questionnaire to evaluate their independence, including obtaining their assurance that the engagement

personal relationship with the Group that could affect their independence and objectivity. The AC reviewed the

professional independence prior to their

(i) Reviewed the suitability of the External Auditors for re-appointment through a Performance and Independence Checklist, taking into consideration

independence, performance and competence, experience of audit team assigned, provision of non-audit services and audit fees, and made recommendation to the Board

the External Auditors were independent and competent during their tenure

(j) Recommended to the Board for

and

(k) Considered and recommended to the Board for approval, the change and appointment of External Auditors for its overseas subsidiaries in Indonesia.

4.3 Internal Audit

(a) Reviewed the internal audit plan to ensure that the scope of work covers

AUDIT COMMITTEE REPORT (continued)

50


(b) Deliberated on the internal audit reports and reviewed the adequacy of the internal controls of the Group, together with audit issues and recommendations

responses in relation thereto. The AC also enquired the Internal Auditors on any challenges or limitations in the audit

(c) Reviewed the follow-up reports on status of the implementation of action plans by the Management in addressing the areas for improvements as reported

(d) Assessed the performance of the Internal Auditors and considered their re-appointment through a formal evaluation form to assess their independence as well as the effectiveness of the internal audit function in terms of competency and performance of the internal audit team, adequacy of audit practices and their audit fees. Based on the results of the assessment, the AC was of the opinion that the internal audit function was effective and the Internal Auditors were independent and competent during

ensuing year.

4.4 Risk Management

(a) Reviewed on a quarterly basis the enterprise risk management reports of the Group, including Key Risk Indicators

activities were appropriate and relevant

(b) Reviewed the possibility of related party transactions (“RPTs”) and existing recurrent related party transactions (“RRPTs”) including assessment of the nature of transactions, terms and pricing. The AC was of the opinion that the existing RRPTs were transacted based on normal commercial terms and

(c) Assessed the level of risk exposure arising from existing RRPTs and the business environment in which the related parties operate in order to better

(d) Reviewed on quarterly basis RRPTs or

arise within the Group. During the year, the AC had evaluated a transaction between a subsidiary of the Company and a person connected to the Executive Directors for an acquisition of

that the transaction was carried out on normal commercial terms and not detrimental to the interest of the minority shareholders of the Company. The interested directors had abstained from deliberation and voting in approving the transaction. Save for this transaction, there was no other new RPTs or RRPTs

(e) Met with senior management in order to be kept informed of operational matters affecting the Group.

4.5 Corporate Governance

(a) Carried out an annual assessment on the adequacy and effectiveness of the risk management and internal control system of the Group via a documented

(b) Reviewed the AC Report and Statement on Risk Management and Internal Control for inclusion into the Annual Report and ensured that these reports were prepared in accordance with the

(c) Obtained updates and discussed with the Company Secretary on the impact of the new CA 2016, MCCG and new amendments to the MMLR to the Group.

4.6 Others

(a) Deliberated on the proposal for bonus issue.


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ANNUAL REPORT 2017

5. INTERNAL AUDIT FUNCTION

independent of the activities it audits. The Head of the Internal Auditors is a member of Institute of Internal Auditors Malaysia and is competent to conduct the internal audit activities in accordance with the standards and code of ethics set by the body.

business activities, the Internal Auditors report directly to the AC and provide the Committee with independent and objective evaluation on the state of risk management and internal controls of the Group, and the extent of compliance of the

and procedures as well as relevant statutory requirements. In order to carry out their duties

resources and adequate authority from the Company and the Management. In addition, the Internal Auditors also has direct and unrestricted

personnel, which are relevant to the internal audit work and process.

The audit plan and scope of work was carried

the Internal Auditors conducted three (3) internal audit reviews covering the following operations:

(a) Manufacturing processes of the metal and plastic divisions, covering design and development, production, raw material control, shearing, export sales and costing,

(b) Overseas operation in Shanghai, China, covering sales and invoicing, inventory

(c) Trading division in Klang and the branch operation in Kota Kinabalu, Sabah covering

corporate affairs, safety, health and environment and general administration.

From the audits, several areas for improvement

to production delays, stock variance, safety and handling issues, lack of documentation, defect rate and stock level. Recommendations for improvement in these areas were highlighted to the Management for consideration and further actions. The internal audit reports also covered the follow-up review on the status of implementation and action plans as recommended in the earlier reports. The AC had reviewed all the internal audit and follow-up review reports with the Internal Auditors and ensured that the Management had taken appropriate actions within the appropriate timeframe. During each audit presentation, the AC met with the Internal Auditors without the presence of the Management.

Further details of the activities of the internal audit function are set out in the Statement on Risk Management and Internal Control of this Annual Report. The total cost incurred for the internal

amounted to RM67,175 (2016: RM69,896).


52


OBJECTIVE AND BOARD RESPONSIBILITIES

The Board is responsible for maintaining a sound and effective system of risk management and internal

and effectiveness of these systems to support the

business objectives.

To discharge these responsibilities, the Board is

the oversight responsibilities of reviewing the control systems in general and assessing the adequacy and effectiveness of the risk management and internal control practices conducted by the Management.

The Board is supported by the Management in developing, implementing and monitoring sound practices for identifying and managing strategic,

assurance that risk management and internal control practices are implemented and adhered to within the Group.

In view of the limitations that are inherent in any system of internal controls, these systems are designed to

risk appetite rather than eliminate the risks of failure to

the processes can only provide reasonable but not absolute assurance against material misstatement, fraud or loss.

BUSINESS PROCESSES AND RISK MANAGEMENT

Standard Operating Procedures

The fundamental operating documents for all the main work processes which also addresses all critical processes and risks are documented in the Standard Operating Procedures (“SOPs”) for the various business processes. These SOPs describe standard approach to work activities which facilitate the

and standards. In addition, they also serve as quality control in ensuring consistency of practices with the predetermined standards with the objective of reducing corrective actions and unnecessary costs.

compliance of the Group with these SOPs. In doing so,

in the design and implementation of such SOPs and

SOPs are regularly updated for changes in the organisational structure, processes or equipment. The SOPs are maintained in a database by the Quality Assurance Department and communicated to the relevant individuals.

Organisation for Standardisation (“ISO”) 9001:2015

deliver product that meet customer requirements through continual improvement and conformity to international quality standards. The ISO standards further reinforce risk prevention culture within the Group, in which employees are inculcated with the awareness to identify risks in his/her various roles in the organisation, as well as to identify opportunities for continual improvement.

Risk Management

The Group faces a broad range of risks and uncertainties in its day-to-day activities. At the same time, the Group also needs to take certain risks in order to pursue opportunities and achieve its objectives. The Group relies on the Enterprise Risk Management (“ERM”) framework to systematically identify, assess, mitigate and monitor existing and potential risks that are critical to its strategic targets and business plans. The framework encompasses all key areas such as

Information Systems, as well as compliance with relevant laws, regulations, rules and guidelines.

management on a quarterly basis via the ERM reports. The ERM reports are submitted by risk owners to the Management for review with the Managing Director. Risk owners consist of head of departments who are responsible to identify and assess risks, develop and implement controls and action plans to reduce the impact of risks relating to their areas of responsibility through a combination of preventive, detective and corrective measures. At the operational level, head of departments are assisted by process owners who undertake risk assessments within their control areas in order to evaluate the adequacy and effectiveness of the internal control in place and to actively identify potential business risk.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

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ANNUAL REPORT 2017

and likelihood of occurrence. The Management particularly focuses on controllable threats with high impact rating that would be detrimental to its business growth, governance or people, regardless of the

areas and control plans are documented and tracked.

that could result in operational halt and lead to loss of sensitive data. Subsequently, appropriate actions had been established to mitigate this risk.

The Management constantly monitors the existing

Indicators (“KRIs”) and Risk Indicators (“RIs”) for each key business operations. Information such as number

prices, frequency of information system failures and staff attrition rate are some of the indicators being monitored to facilitate early detection of potential risks and to assess the effectiveness of controls that are in place. The KRIs and RIs are updated on a quarterly basis where actual data are measured against the target set for the year.

Risk management is embedded into the day-to-day operations of the Group and the ERM framework is applied across the Group including its overseas

risk levels were recorded in the overseas operations.

Financial Reporting

is responsible to manage the risks associated with

risks emerging from fraud, material misstatement or misuse of assets. Besides adhering to SOPs on accounting practices and reporting, Limits of Authority (“LOA”) manual is used consistently throughout the

limits and authorities for the various key processes. All approvals are documented to ensure that the transactions are properly authorised, recorded and executed in accordance with the stipulated guidelines. The Finance team also maintains rigorous internal policies, procedures and systems to ensure the

facilitate timely, effective and quality decision making.

and accounting. To discharge this responsibility, the

reasonable assurance on the true and fair view of

records are being maintained and appropriate accounting policies are being adopted. The AC also

subsequently recommends to the Board for approval

regulatory bodies and subsequent publication.

The Group has a comprehensive planning and budgeting process where annual budget and revised budget are approved by the Board. The AC reviews

actual performance against the annual budget and internal controls of the Group, and subsequently reports the same to the Board.

Information and Communication Systems

The Group leverages on information and communication technology in promoting effectiveness

ensures that proper records and processes are maintained to generate timely, relevant and reliable information from various sources to support the

The Group utilises comprehensive computer systems to perform its operational functions, which include, inter alia, Enterprise Resource Planning, personnel

reporting. These systems enable the integration of diverse business functions across the Group and facilitate information sharing.

Furthermore, the Group ensures ongoing efforts are put into managing threats and risks inherent to the IT and communication system, whether it is due to human error, natural disasters or cyber-attacks. To minimise business disruptions, the Group has a recovery plan in place for system recovery and restore business activities as a consequence of critical information system failures. Meanwhile, appropriate security measures, including proper authentication and authorisation controls are in place to prohibit unauthorised access to computer programs and databases as well as to ensure authenticity of information.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (continued)

54


Strategic Business Planning

The Group has developed a strategic business plan to enable its employees to better understand the goals and strategic objectives of the Group for the future. This plan guides the Group in terms of

growth as well as anticipate future challenges towards accomplishing its long-term business objectives. The

targets on a quarterly basis and continually evaluates the plan to ensure that they are fully aligned with the current market and economic conditions. Any risks associated with the strategic planning are managed and discussed through quarterly meetings among the various department heads. This plan is communicated and cascaded down to all levels within the Group to ensure that all functions are working in tandem towards achieving the objectives.

The Group places high priority on human resource development in order to create the competitive advantage towards achieving sustainable business

to achieve its business objectives by equipping its employees with appropriate skills set through structured training and development programs.

leadership stability and uninterrupted business in the event of loss of key personnel.

Other Risk Management and Internal Control Activities

Other risk management and internal control

environmental and compliance in nature that are

as follows:

Plan (“BCP”) which outlines business continuity and recovery activities in the events of major

technological crises or other reasons. It

and actions that must be carried out to reduce the impact of such catastrophes and to ensure business continuity with minimal disruption. The

Plan and has been communicated to all relevant individuals.

internal control measures to facilitate monitoring of conduct and operations, by giving guidance

Meanwhile, the Group ensures appropriate segregation of duties and authority limits so that no single individual has complete control over a transaction or process without a proper

of responsibility that hold individual employees accountable for their risk management and internal control responsibilities.

maintains sound principles and values that enforce key work ethics throughout the entire

(Customer Focus, Excellence, Change Ready, Integrity, Perseverance and Respect) help to instil good morale and integrity of the employees and shape the culture within the organisation. These are the set of behaviours and skills that are expected from all employees in carrying out their duties.

Human Resource policies as well as several other policies and procedures established to regulate performances in the organisation. Meanwhile, the Board Charter and the respective

its committees and each individual director in discharging their responsibilities.

responsibilities to detect, report and prevent fraud, corruption or other illegal activities, such as bribery and theft which could adversely affect


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ANNUAL REPORT 2017

procedure for reporting violations related to fraud, misconduct or wrongdoings that may take place within the Group and it is independent of the Management. This policy has been communicated to all stakeholders and employees in which they will be given protection against retaliation should they report any wrongdoings in good faith. The Company has appointed the Senior Independent Director and Chairman of the AC as the persons responsible for receiving reports of any breach of conduct. In the case of employees, they may also report suspected misconduct or unethical behaviour directly to their own supervisors or the Head of Human Resource. Alternatively, employees may also report their concerns to a dedicated independent channel as stated in this Policy.

Relations Policy provide guidelines in handling and disclosing material information to the

dissemination to ensure the accuracy, timeliness and completeness of the material information, and is in compliance with relevant regulatory requirements.

information, any person who is in possession of such information is required to sign a

privy list.

Malaysian Personal Data Protection Act to

environment for all of its employees and will not tolerate on practices that could cause harm to its employees. Therefore, it practises a regular and timely reporting on safety and health incidents and take immediate actions to improve its safety and health performance in the workplace.

objectives. The KPI targets and performance standards are communicated to respective employees, to allow them to monitor and improve their performance.

MONITORING AND REVIEW

The Group is committed to constantly monitor the effectiveness of its risk management and internal

of governance, risk management and internal control practices to ensure the reliability of such practices, compliance with applicable laws and regulations,

assessment also reduces the irregularities in the

consultants, which is independent of the activities it audits.

Internal audit activities cover various operating business units and are determined based on the

risk-based audit review on the audit areas as set out in the audit plan approved by the Board at the recommendation of the AC. The internal audit review provides an objective and independent assessment

system in order to provide reasonable assurance that controls are adequate and effective to mitigate the

assets. The Internal Auditors Report addresses issues and provides recommendations arising from

and progress on the implementation of agreed action plans directly to the AC who subsequently reports to the Board. Details of the internal audit activities are contained in the Audit Committee Report. The Board, through the AC, conducts annual review on the effectiveness of the internal audit function which includes the assessment on the quality of audit review to ensure that the Internal Auditors have

role effectively.

As to the processes and procedures in the ISO manual, they are periodically reviewed and audited by the in-house auditors and external ISO auditors. These audits are carried out to ensure the relevance and effectiveness of the procedures as well as to ensure compliance to the procedures set.


56


Apart from the review done by the Internal Auditors, regular management meetings are carried out

the Group, including internal control matters and risks management. These meetings are attended by the Executive Directors and management team. The meetings also act as the platform for the key management to address operational and management issues through constructive discussions with the aim to resolving these issues.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

As required by Paragraph 15.23 of Bursa

Requirements, the External Auditors have reviewed this Statement on Risk Management and Internal Control, for inclusion in this Annual Report. Their limited assurance review was performed in accordance with Audit and Assurance Practice Guides (AAPG) 3 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. Based on the procedures performed, nothing has come to their attention that caused them to believe that this Statement on Risk Management and Internal Control has not been prepared, in all material respects, in accordance with the disclosures as required by Paragraph 41 and 42 pursuant to the “Statement on Risk Management and Internal Control - Guidelines for Directors of Public Listed Issuers”.

CONCLUSION The Board has appraised the adequacy, effectiveness and integrity of the system of risk management and internal controls framework which have been in

of approval of this statement based on the annual assessment carried out by the Management on the existing internal control systems and processes, control environment and activities against evaluation criteria established. This annual assessment was reviewed by the AC which has been documented and reported to the Board. In addition to the documented annual assessment, the Board had also received assurances from the Managing Director and Chief

and internal control system are operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group. Accordingly, the Board is of the view that the current risk management and internal control systems of the Group are operating adequately and effectively to achieve the business objectives.

This Statement on Risk Management and Internal Control is made in accordance with the Main Market Listing Requirements and the “Statement on Risk Management and Internal Control - Guidelines for Directors of Public Listed Issuers” adopted by Bursa Malaysia Securities Berhad, and with the approval of the Board.

The Board of DirectorsNew Hoong Fatt Holdings Berhad


D I R E C T O R S ’R E P O R T A U D I T E D

F I N A N C I A LS T A T E M E N T S

Directors’ Report

Statement by Directors

Statutory Declaration

Independent Auditors’ Report

Statements of Financial Position

and Other Comprehensive Income

Consolidated Statement of Changes in Equity

Statement of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

58

63

63

64

68

69

70

72

73

75

&

58


DIRECTORS’ REPORT

PRINCIPAL ACTIVITIES

RESULTS

Group Company RM’000 RM’000

DIVIDENDS

RM’000

RESERVES AND PROVISIONS

ISSUE OF SHARES AND DEBENTURES

59

ANNUAL REPORT 2017

DIRECTORS’ REPORT (continued)

OPTIONS GRANTED OVER UNISSUED SHARES

DIRECTORS

DIRECTORS’ INTERESTS

Number of ordinary shares Balance as at Balance as at 1.1.2017 Bought Sold 31.12.2017Shares in the Company Direct interests

Indirect interests

60



DIRECTORS’ INTERESTS (continued)

DIRECTORS’ BENEFITS

DIRECTORS’ REMUNERATION

INDEMNITY AND INSURANCE FOR OFFICERS AND AUDITORS

61

ANNUAL REPORT 2017


OTHER STATUTORY INFORMATION REGARDING THE GROUP AND THE COMPANY

(I) AS AT THE END OF THE FINANCIAL YEAR

(II) FROM THE END OF THE FINANCIAL YEAR TO THE DATE OF THIS REPORT

(III) AS AT THE DATE OF THIS REPORT

62


SUBSIDIARIES

AUDITORS

Kam Foong KengDirector

Chin Jit SinDirector


63

ANNUAL REPORT 2017

Kam Foong Keng Director

Chin Jit SinDirector

STATUTORY DECLARATION

Chong Choon Yeng

Baloo A/L T. Pichai

STATEMENT BY DIRECTORS

64


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF NEW HOONG FATT HOLDINGS BERHAD

Report on the Audit of the Financial Statements

Opinion

Basis for Opinion

Auditors’ Responsibilities for the Audit of the Financial Statements

Independence and Other Ethical Responsibilities

By-Laws (on Professional Ethics, Conduct and Practice)

Code of Ethics for Professional Accountants

Key Audit Matters

Recoverability of trade receivables

65

ANNUAL REPORT 2017

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF NEW HOONG FATT HOLDINGS BERHAD(continued)

Key Audit Matters (continued)

Recoverability of trade receivables (continued)

Audit response

Information Other than the Financial Statements and Auditors’ Report Thereon

Responsibilities of the Directors for the Financial Statements

66



Auditors’ Responsibilities for the Audit of the Financial Statements

67

ANNUAL REPORT 2017

Auditors’ Responsibilities for the Audit of the Financial Statements (continued)

Report on Other Legal and Regulatory Requirements

Other Matters

BDO

Ng Soe Kei


68


STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

Group Company Note 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000ASSETS Non-current assets

381,087 -- 36,467

21,000 -130 -

- 80,095 402,217 116,562 Current assets

47,877 -61,845 13,993

752 -24,504 725

134,978 14,718 TOTAL ASSETS 537,195 131,280 EQUITY AND LIABILITIES Equity attributable to owners of the parent

79,367 79,367347,227 50,410

TOTAL EQUITY 426,594 129,777

LIABILITIES Non-current liabilities

11,184 -189 -

32,733 - 44,106 - Current liabilities

21,504 1,36644,507 -

484 137 66,495 1,503 TOTAL LIABILITIES 110,601 1,503 TOTAL EQUITY AND LIABILITIES 537,195 131,280

69

ANNUAL REPORT 2017

Group Company Note 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000

250,606 9,632

(184,367) -

66,239 9,632

17,120 2,289

(14,979) -

(42,334) (3,926)

(1,633) -

24,413 7,995

(4,085) (519)

20,328 7,476 Other comprehensive income/(loss):

1,608 -

42,859 -

(16) -

44,451 - Total comprehensive income 64,779 7,476

20,328 7,476

64,779 7,476

27.05

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

Non

-dis

trib

utab

le

Dis

trib

utab

le

To

tal

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aila

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are

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f the

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ium

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pare

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M’0

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RM

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R

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R

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00

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R

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00

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Tr

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as

at 3

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016

CONS

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STA

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OF C

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ES IN

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FOR

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L YE

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31

DECE

MBE

R 20

17

NEW

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G F

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00

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R

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00

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R

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75,1

57

4,21

0 60

,983

47

(1

,665

) 23

3,60

5 37

2,33

7 37

2,33

7

-

- -

- -

20,3

28

20,3

28

20,3

28

- -

- -

1,60

8 -

1,60

8 1,

608

- -

- -

- (1

6)

(16)

(1

6)

- -

42,8

59

- -

- 42

,859

42

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To

tal c

ompr

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me

- -

42,8

59

- 1,

608

20,3

12

64,7

79

64,7

79

Tran

sact

ions

with

ow

ners

- -

- -

- (8

,267

) (8

,267

) (8

,267

)

- -

- -

- (2

,255

) (2

,255

) (2

,255

)

- -

- -

- (1

0,52

2)

(10,

522)

(1

0,52

2)

4,21

0 (4

,210

) -

- -

- -

-

Bal

ance

as

at 3

1 D

ecem

ber 2

017

79,3

67

- 10

3,84

2 47

(5

7)

243,

395

426,

594

426,

594

CONS

OLID

ATED

STA

TEM

ENT

OF C

HANG

ES IN

EQU

ITY

FOR

THE

FINA

NCIA

L YE

AR E

NDED

31

DECE

MBE

R 20

17 (c

ontin

ued)

71

AN

NU

AL

REP

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T 20

17

72


Non- distributable Distributable Share Share Retained Total capital premium earnings equity Note RM’000 RM’000 RM’000 RM’000Company

Transactions with owners

Balance as at 31 December 2016

- - 7,476 7,476- - - -

Total comprehensive income - - 7,476 7,476 Transactions with owners

- - (8,267) (8,267)

- - (2,255) (2,255)

- - (10,522) (10,522)

4,210 (4,210) - - Balance as at 31 December 2017 79,367 - 50,410 129,777

STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

73

ANNUAL REPORT 2017

Group Company 2017 2016 2017 2016 Note RM’000 RM’000 RM’000 RM’000CASH FLOWS FROM OPERATING ACTIVITIES

24,413 7,995

- -- -

28,792 - Dividends received - (6,000)

(4,500) -

(221) -431 -

1,633 - Interest income (345) (2,288)

101 -6 -

145 -

(39) -

7,360 10

57,776 (283) Increase in inventories (4,327) - Increase in trade and other receivables (8,581) -

4,110 (132)(1) -

48,977 (415)

(3,037) (382)

activities 45,940 (797)

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

74


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 (continued)

Group Company 2017 2016 2017 2016 Note RM’000 RM’000 RM’000 RM’000CASH FLOWS FROM INVESTING ACTIVITIES Dividends received - 6,000 Interest received 345 2

569 -(56,558) -

- 5,671

activities (55,644) 11,673 CASH FLOWS FROM FINANCING ACTIVITIES Interest paid (1,633) -

(10,522) (10,522)

77,150 -34,208 -21,626 -

(86,720) -(21,799) -

(44) -(2,180) -

(303) -

activities 9,783 (10,522)

79 354

253 (8)

24,172 379

24,504 725

1.

PRO

PER

TY, P

LAN

T A

ND

EQ

UIP

MEN

T

20

17

D

epre

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B

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R

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00

RM

’000

R

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00

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R

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00

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R

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00

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R

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00

Car

ryin

g am

ount

Fr

eeho

ld la

nd

68,0

00

- -

- -

30,7

00

- -

98,7

0059

,499

-

- (1

,823

) -

6,17

7 -

(410

) 63

,443

35,0

79

18,3

25

- (1

,097

) -

9,98

3 -

(3,2

44)

59,0

4639

,301

8,

195

- (7

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) (3

) -

1,36

3 -

41,1

70

2,32

4 42

9 -

(401

) (1

) -

- (3

9)

2,31

23,

298

678

- (4

67)

- -

- -

3,50

983

,433

10

,861

-

(15,

874)

-

- 15

,392

-

93,8

122,

279

616

(348

) (7

47)

- -

- (7

) 1,

793

1,34

8 40

8 -

(697

) (2

) -

- (4

) 1,

053

15,8

78

17,1

26

- -

- -

(16,

755)

-

16,2

49

31

0,43

9 56

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(3

48)

(28,

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(6

) 46

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-

(3,7

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381,

087

NOTE

S TO

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FIN

ANCI

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TATE

MENT

S31

DEC

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R 20

17

75

AN

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17

1.

PRO

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TY, P

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T (c

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A

t 31.

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017

20

17

Acc

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amou

nt

RM

’000

R

M’0

00

RM

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R

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RM

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Free

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land

-

98,7

00

- -

98,7

00-

66,9

47

(3,3

84)

(120

) 63

,443

- 63

,079

(2

,111

) (1

,922

) 59

,046

116,

227

- (7

5,05

7)

- 41

,170

6,80

0 -

(4,4

69)

(19)

2,

312

5,94

7 -

(2,4

38)

- 3,

509

168,

821

- (7

5,00

9)

- 93

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5,67

5 -

(3,9

04)

22

1,79

38,

478

- (7

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) 38

1,

053

16,2

49

- -

- 16

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328,

197

228,

726

(173

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) (2

,001

) 38

1,08

7

NOTE

S TO

THE

FIN

ANCI

AL S

TATE

MENT

S31

DEC

EMBE

R 20

17 (c

ontin

ued)

NEW

HO

ON

G F

ATT

HO

LDIN

GS

BER

HA

D (4

2570

9-K)

76

1.

PRO

PER

TY, P

LAN

T A

ND

EQ

UIP

MEN

T (c

ontin

ued)

20

16

D

epre

ciat

ion

B

alan

ce

char

ge fo

r

B

alan

ce

R

M’0

00

RM

’000

R

M’0

00

RM

’000

R

M’0

00

RM

’000

R

M’0

00

RM

’000

R

M’0

00

Car

ryin

g am

ount

NOTE

S TO

THE

FIN

ANCI

AL S

TATE

MENT

S31

DEC

EMBE

R 20

7 (co

ntinu

ed)

77

AN

NU

AL

REP

OR

T 20

17

NOTE

S TO

THE

FIN

ANCI

AL S

TATE

MENT

S31

DEC

EMBE

R 20

17 (c

ontin

ued)

1.

PRO

PER

TY, P

LAN

T A

ND

EQ

UIP

MEN

T (c

ontin

ued)

A

t 31.

12.2

016

20

16

Acc

umul

ated

Ex

chan

ge

Car

ryin

g

Cos

t Va

luat

ion

depr

ecia

tion

diffe

renc

es

amou

nt

RM

’000

R

M’0

00

RM

’000

R

M’0

00

RM

’000

78

NEW

HO

ON

G F

ATT

HO

LDIN

GS

BER

HA

D (4

2570

9-K)

NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2017 (continued)

79

ANNUAL REPORT 2017

1. PROPERTY, PLANT AND EQUIPMENT (continued)

Group 2017 2016 RM’000 RM’000

72,81245,458

118,270

Level 1 Level 2 Level 3 Total Group RM’000 RM’000 RM’000 RM’000

2017 Freehold land - - 98,700 98,700

- - 59,046 59,046- - 63,443 63,443

- - 221,189 221,189 2016


80


1. PROPERTY, PLANT AND EQUIPMENT (continued)

Group 2017 2016 RM’000 RM’000

56,638(80)

56,558

Leases

Group 2017 2016 RM’000 RM’000

71


81

ANNUAL REPORT 2017

2. INVESTMENTS IN SUBSIDIARIES

Company 2017 2016 RM’000 RM’000

36,467

Interest in equity held by Country of Company Subsidiaries Name of company incorporation 2017 2016 2017 2016 Principal activities

100% -

parts and accessories

100% -


100% -

100% -

100% -

100% -

and dies

100% -

100% - Investment holding

Subsidiary of New Hoong Fatt Auto Supplies Sdn. Bhd.

- 100%

parts and accessories Subsidiary of NHF Ventures Sdn. Bhd.

- 100%


- 95% Indonesia Investment of New Hoong Fatt Industries Sdn. Bhd.

- 5% Indonesia (1)

(2) 2017


82


2. INVESTMENTS IN SUBSIDIARIES (continued)

3. INVESTMENT PROPERTIES

2017 Balance Balance Group as at Fair value as at 1.1.2017 adjustment 31.12.2017 RM’000 RM’000 RM’000 At fair value

16,500 4,500 21,000

2016 Balance Balance Group as at Fair value as at 1.1.2016 adjustment 31.12.2016 RM’000 RM’000 RM’000 At fair value

Investment Property


83

ANNUAL REPORT 2017

3. INVESTMENT PROPERTIES (continued)

Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 2017

- - 18,300 18,300- - 2,700 2,700

- - 21,000 21,000

2016


84


3. INVESTMENT PROPERTIES (continued)

Group 2017 2016 RM’000 RM’000 Insurance 8 Quit rent and assessment 64

4. AVAILABLE-FOR-SALE FINANCIAL ASSET

Group 2017 2016 RM’000 RM’000

130

Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 2017 & 2016


85

ANNUAL REPORT 2017

5. TRADE AND OTHER RECEIVABLES

Group Company 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000 Non-current Other receivables

- 80,095 Current Trade receivables Third parties 48,367 -

(675) - 47,692 - Other receivables and deposits

- -- 13,990

Third parties 5,297 -340 3

5,637 13,993 Loans and receivables 53,329 94,088

8,516 - Total 61,845 94,088


86


5. TRADE AND OTHER RECEIVABLES (continued)

Group Company 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000

36,882 94,08812,371 -

202 -910 -

2,964 - 53,329 94,088

Group 2017 2016 RM’000 RM’000

41,951

4,9336558073

5,741 Past due and impaired 675

48,367


87

ANNUAL REPORT 2017


Individually impaired 2017 2016 Group RM’000 RM’000

675(675)

-

Group 2017 2016 RM’000 RM’000

287(39)431

(4)

675

to maintain strict control over its outstanding receivables via a credit control department to minimise


88



WAEIR Repayable per within 1 - 2 2 - 3 3 - 4 > 5 annum 1 year years years years years Total Company % RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2017

Fixed rates

2.90% 13,990 7,300 7,500 7,600 57,695 94,085

2016 Fixed rates

6. INVENTORIES

Group 2017 2016 RM’000 RM’000

At cost 16,297

4,953 Finished goods 25,845

76 47,171 At net realisable value Finished goods 706 47,877


89

ANNUAL REPORT 2017

6. INVENTORIES (continued)

7. CASH AND BANK BALANCES


24,504 725


12,153 4978,452 1663,365 62

534 - 24,504 725

8. SHARE CAPITAL

Number of Amount ordinary Share shares capital Total Share capital (Issued share capital (issued and and fully Share and share fully paid) paid) premium premium ’000 RM’000 RM’000 RM’000

75,157 75,157 4,210 79,367

- 4,210 (4,210) -

75,157 79,367 - 79,367


90


8. SHARE CAPITAL (continued)

9. RESERVES

Group Company 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000 Non-distributable

- -103,842 -

47 -(57) -

103,832 -

Distributable

243,395 50,410 347,227 50,410


91

ANNUAL REPORT 2017

10. BORROWINGS (INTEREST BEARING)

Group 2017 2016 RM’000 RM’000

Current liabilities Unsecured

22,43014,927

337,117

Term loan - 44,507 Non-current liabilities Unsecured

11,184 55,691

Total borrowings

22,43014,927

3318,301

Term loan - 55,691

44,50711,184

55,691

Group 2017 2016 RM’000 RM’000

22,43033,228

33 55,691


92


10. BORROWINGS (INTEREST BEARING) (continued)

not carried at fair value fair Carrying Group Level 1 Level 2 Level 3 Total value amount 2017 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Financial liabilities

- 17,363 - 17,363 17,363 18,301

WAEIR Repayable per within 1 - 2 2 - 3 3 - 4 > 5 Group annum 1 year years years years years Total 2017 % RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Floating rates

acceptances 3.82% 22,430 - - - - 22,430

Foreign

trade loan 2.56% 14,927 - - - - 14,927

credit 3.17% 7,117 5,084 3,050 3,050 - 18,301


93

ANNUAL REPORT 2017

10. BORROWINGS (INTEREST BEARING) (continued)

WAEIR Repayable per within 1 - 2 2 - 3 3 - 4 > 5 Group annum 1 year years years years years Total 2016 % RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Floating rates

Foreign

Group 2017 2016 RM’000 RM’000

Borrowings

423 / (423)

Foreign Hire Bankers’ currency Revolving Term purchase acceptance trade loan credit loan creditor Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

32,000 2,910 - 303 - 35,213

activities (9,570) 12,409 19,446 (303) (44) 21,938

- (392) (1,145) - (3) (1,540)

- - - - 80 80

22,430 14,927 18,301 - 33 55,691


94


11. HIRE PURCHASE CREDITOR

Group 2017 2016 RM’000 RM’000

33-

33

-

33

33

12. EMPLOYMENT BENEFIT OBLIGATION


95

ANNUAL REPORT 2017

12. EMPLOYMENT BENEFIT OBLIGATION (continued)

Group 2017 2016 RM’000 RM’000

189

Group 2017 2016 RM’000 RM’000

136 Interest cost 9

145 Actuarial gain recorded in other comprehensive income 16

161

Group 2017 2016 RM’000 RM’000

48145

(1) Actuarial gain charged to other comprehensive income 16

(19)

189

Group 2017 2016 Discount rate 7.50%

6%Indonesian Mortality Table

201110% of Mortality rate

5% per annum up to age 20 decreasing linearly to 1% per annum at age 54

55 years old


96


13. DEFERRED TAX LIABILITIES

Group 2017 2016 RM’000 RM’000

28,0184,001

941(245)

696

18

32,733

2017 2016 Unused tax Unused tax losses/Total losses/Total Deferred tax assets of the Group RM’000 RM’000

--

-

2017 2016 Property, Property, plant and plant and equipment/ equipment/ Total Total Deferred tax liabilities of the Group RM’000 RM’000

28,0184,001

69618

32,733


97

ANNUAL REPORT 2017

13. DEFERRED TAX LIABILITIES (continued)

Group 2017 2016 RM’000 RM’000

9,808

14. TRADE AND OTHER PAYABLES

Group Company 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000 Trade payables Third parties 12,024 - Other payables Third parties 2,930 51 Accruals 6,550 1,315 9,480 1,366

21,504 1,366


98


14. TRADE AND OTHER PAYABLES (continued)


19,037 1,366194 -53 -

666 -1,522 -

32 - 21,504 1,366

15. COMMITMENTS

Group 2017 2016 RM’000 RM’000

11,18632,301


99

ANNUAL REPORT 2017

16. CONTINGENT LIABILITIES

Company 2017 2016 RM’000 RM’000

subsidiaries – unsecured 63,196

Insurance Contracts

17. FINANCE COSTS

Group 2017 2016 RM’000 RM’000

1,138129366

-

1,633


100


18. PROFIT BEFORE TAX

Group Company 2017 2016 2017 2016 Note RM’000 RM’000 RM’000 RM’000

- -

115 2656 -3 3- -

28,792 -

431 -101 -

83 -7,360 10

6 -

145 -

671 -3 -

- 6,000

4,500 -

221 -

917 1- -

345 2- 2,286

subsidiaries - 3,632

properties 772 -

39 -10,089 -


101

ANNUAL REPORT 2017

18. PROFIT BEFORE TAX (continued)

19. TAX EXPENSE


3,363 51326 6

3,389 519

941 -(245) -

696 - 4,085 519


102


19. TAX EXPENSE (continued)

Group Company 2017 2016 2017 2016 % % % %

24.0 24.0

(6.2) (18.0)3.5 0.4

7.3 -- -

(10.7) -(0.3) -

17.6 6.4

0.1 0.1(1.0) -

16.7 6.5

Group 2017 2016 RM’000 RM’000

175

Group Before tax Tax effect After tax 2017 RM’000 RM’000 RM’000

1,608 - 1,608


103

ANNUAL REPORT 2017

19. TAX EXPENSE (continued)

Group Before tax Tax effect After tax 2017 RM’000 RM’000 RM’000

46,860 (4,001) 42,859

(16) - (16)

2016

20. EARNINGS PER ORDINARY SHARE

Group 2017 2016

20,328

75,157

27.05


104


21. DIVIDENDS

Group and Company 2017 2016 Single tier Single tier dividend Amount of dividend Amount of per share dividend per share dividend sen RM’000 sen RM’000 Final and special single tier dividends paid 11 8,267 Final dividend paid - - Interim dividend paid 3 2,255 14 10,522

22. EMPLOYEES BENEFITS


38,762 3,3342,918 382

327 3 42,007 3,719


105

ANNUAL REPORT 2017

22. EMPLOYEES BENEFITS (continued)


115 152,625 2,570

2,740 2,585

189 18936 36

225 225

1,788 885

1,788 885

4,753 3,695

23. RELATED PARTY DISCLOSURES


106


23. RELATED PARTY DISCLOSURES (continued)

Identities of related parties Relationship with the Group


15 -53 -

(875) -(308) -

(25) -

- 6,000- 2,286- 3,632


107

ANNUAL REPORT 2017

24. SEGMENT INFORMATION

Non-current Revenue assets Capital expenditure 2017 2016 2017 2016 2017 2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

118,143 352,964 38,18942,951 49,135 18,43489,512 118 15

250,606 402,217 56,638

25. FINANCIAL INSTRUMENTS


108


25. FINANCIAL INSTRUMENTS (continued)


55,691 -189 -

21,504 1,366484 137

Total liabilities 77,868 1,503

(24,504) (725)

53,364 778

426,594 129,77753,364 778

479,958 130,555

11.12% 0.60%

26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES


109

ANNUAL REPORT 2017

26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

RM/USD RM/RMB RM/IDR IDR/USD Total Group RM’000 RM’000 RM’000 RM’000 RM’000

2017 Trade and other receivables 12,371 910 2,964 - 16,245

8,452 3,365 534 - 12,351(33,228) - (33) - (33,261)

(1,522) (194) (53) - (1,769)(1) - 11,734 - 36,510 48,244

(13,927) 15,815 3,412 36,510 41,810 2016

(1)

Group 2017 2016 RM’000 RM’000

529(601)(130)

(1,388)


110


26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

On demand or within One to Over

Group RM’000 RM’000 RM’000 RM’000

Financial liabilities 21,504 - - 21,50444,883 12,047 - 56,930

66,387 12,047 - 78,434

Company Financial liabilities

1,366 - - 1,366

1,366 - - 1,366

On demand or within One to Over

Group RM’000 RM’000 RM’000 RM’000

Financial liabilities

Company Financial liabilities


111

ANNUAL REPORT 2017

27. ADOPTION OF NEW MFRSs AND AMENDMENT TO MFRSs

27.1

Title Effective Date

Recognition of Deferred Tax Assets for Unrealised Losses

Disclosure InitiativeAnnual Improvements to MFRS Standards

2014 - 2016 Cycle

27.2 New MFRSs that have been issued, but only effective for annual periods beginning on or after 1 January 2018

Title Effective Date

Annual Improvements to MFRS Standards 2014 - 2016 Cycle

Revenue from Contracts with Customers

Financial Instruments (IFRS as issued by IASB in July 2014)

Payment Transactions Annual Improvements to MFRS Standards

2014 - 2016 Cycle Foreign Currency Transactions and Advance Consideration

Transfers of Investment PropertyApplying MFRS 9 Financial Instruments with MFRS 4

Insurance Contracts

LeasesUncertainty over Income Tax Treatments

Long-term Interests in Associates and Joint VenturesPrepayment Features with Negative CompensationAnnual Improvements to MFRS Standards

2015 - 2017 Cycle Annual Improvements to MFRS Standards



2015 - 2017 Cycle Insurance Contracts

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture


112


27. ADOPTION OF NEW MFRSs AND AMENDMENTS TO MFRSs (continued)

27.2 New MFRSs that have been issued, but only effective for annual periods beginning on or after 1 January 2018 (continued)

MFRS 9 - Financial Instruments

Financial Instruments Financial Instruments: Recognition and Measurement

MFRS 16 - Leases

Leases Leases Determining whether an Arrangement contains a Lease Operating Leases – Incentives

Evaluating the Substance of Transactions Involving the Legal Form of a Lease


113

ANNUAL REPORT 2017

28. CORPORATE INFORMATION

29. PRINCIPAL ACTIVITIES

30. BASIS OF PREPARATION

114


LIST OF PROPERTIESas at 31 December 2017

Location Description / Existing Use

Industrial land and

Industrial land and

Industrial land

Warehouse

Industrial land and

Industrial land and

Industrial land and

Land Area /Built-Up Area

Tenure /Approximate Age of Building

Date of Last Revaluation or Acquisition

CarryingAmount(RM’000)

115

ANNUAL REPORT 2017

LIST OF PROPERTIESas at 31 December 2017 (continued)

Location Description / Existing Use

land

land

land

industrial land

Industrial land and

Industrial land and




Carrying Amount(RM’000)

116


Location

Kelurahan Kamal

DKI Indonesia

Pasirgombang

Indonesia

Description / Existing Use

Industrial land and

Industrial land and

Industrial land and

industrial land




Carrying Amount(RM’000)

LIST OF PROPERTIESas at 31 December 2017 (continued)

117

ANNUAL REPORT 2017

DISTRIBUTION OF SHAREHOLDINGS (Based on the Record of Depositors)

Size of Shareholdings Shareholders % Shareholdings %

TOTAL

SUBSTANTIAL SHAREHOLDERS’ SHAREHOLDINGS(Based on the Register of Substantial Shareholders)

No. of Shares Held

Name Direct % Indirect %

ANALYSIS OF SHAREHOLDINGS As at 20 March 2018

118


DIRECTORS’ INTERESTS(Based on the Register of Directors’ Shareholdings)

No. of Shares Held

Name Direct % Indirect %

ANALYSIS OF SHAREHOLDINGS As at 20 March 2018 (continued)

119

ANNUAL REPORT 2017

THIRTY (30) LARGEST SHAREHOLDERS (Based on the Record of Depositors)

Name Shareholdings %

TOTAL 60,344,562 80.33

ANALYSIS OF SHAREHOLDINGS As at 20 March 2018 (continued)

120


NOTICE IS HEREBY GIVEN THAT NEW HOONG FATT HOLDINGS BERHAD

A G E N D A

ORDINARY BUSINESS

SPECIAL BUSINESS

PROPOSED BONUS ISSUE OF 7,515,660 NEW ORDINARY SHARES IN THE COMPANY (“SHARES” OR “BONUS SHARES”) ON THE BASIS OF ONE (1) BONUS SHARE FOR EVERY TEN (10) EXISTING SHARES HELD ON AN ENTITLEMENT DATE TO BE DETERMINED AND ANNOUNCED LATER (“PROPOSED BONUS ISSUE”)

OrdinaryResolution 1







NOTICE OF ANNUAL GENERAL MEETING

121

ANNUAL REPORT 2017

PROPOSED BONUS ISSUE OF 7,515,660 NEW ORDINARY SHARES IN THE COMPANY (“SHARES” OR “BONUS SHARES”) ON THE BASIS OF ONE (1) BONUS SHARE FOR EVERY TEN (10) EXISTING SHARES HELD ON AN ENTITLEMENT DATE TO BE DETERMINED AND ANNOUNCED LATER (“PROPOSED BONUS ISSUE”) (continued)

pari passu in all

PROPOSED AUTHORITY UNDER SECTIONS 75 AND 76 OF THE COMPANIES

ACT 2016 FOR THE DIRECTORS TO ALLOT AND ISSUE SHARES

RETENTION OF DATUK DR. ANIS BIN AHMAD AS INDEPENDENT DIRECTOR

RETENTION OF MR DANNY NG SIEW L’LEONG AS INDEPENDENT DIRECTOR




NOTICE OF ANNUAL GENERAL MEETING (continued)

122


RETENTION OF MR WONG YOKE NYEN AS INDEPENDENT DIRECTOR



NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

FURTHER NOTICE IS HEREBY GIVEN THAT

WONG YOUN KIM

Notes:

123

ANNUAL REPORT 2017

EXPLANATORY NOTES

2. Ordinary Resolution 7 - Proposed Bonus Issue

3. Ordinary Resolution 8 – Proposed Authority under Sections 75 and 76 of the Companies Act 2016 for the Directors to allot and issue shares


124


4. Ordinary Resolution 9 – Retention of Datuk Dr. Anis as Independent Director

5. Ordinary Resolution 10 – Retention of Mr Danny Ng Siew L’Leong as Independent Director

6. Ordinary Resolution 11 – Retention of Mr Wong Yoke Nyen as Independent Director

STATEMENT ACCOMPANYING NOTICE OF AGM

Personal data privacy:

By submitting an instrument appointing proxy(ies) and/or representative(s) to attend, speak and vote at the AGM and/or any adjournment thereof, a member of the Company:

(i) consents to the collection, use and disclosure of the member’s personal data by the Company (or its agents) for the purpose of the processing and administration by the Company (or its agents) of proxies and representatives appointed for the AGM (including any adjournment thereof) and the preparation and compilation of the attendance lists, minutes and other documents relating to the AGM (including any adjournment thereof), and in order for the Company (or its agents) to comply with any applicable laws, listing rules, regulations and/or guidelines (collectively, the “Purposes”);

(ii) warrants that where the member discloses the personal data of the member’s proxy(ies) and/or representative(s) to the Company (or its agents), the member has obtained the prior consent of such proxy(ies) and/or representative(s) for the collection, use and disclosure by the Company (or its agents) of the personal data of such proxy(ies) and/or representative(s) for the Purposes; and

(iii) agrees that the member will indemnify the Company in respect of any penalties, liabilities, claims, demands,


PROXY FORM

I/We (full name of shareholder in block letters) and

NRIC No. / Passport No. / Company No (new) (old)

of

(full address) being a member of NEW HOONG FATT HOLDINGS BERHAD, hereby appoint

(full name in block letters & NRIC No. of proxy) or failing him/her,

(full name in block letters & NRIC No. of proxy)

AGENDA FOR AGAINST

Ordinary Resolution 11

Signed this ………….. day of ………………………. 2018

………………………………………………..Signature/Common Seal of Member

No. of Ordinary Shares held

CDS Account No.

Proportion of holdings to be presented by each proxy

Proxy 1 Proxy 2

% %

……

……

……

……

……

……

……

……

……

……

……

……

…..…

.……

….. …

……

……

……

……

……

……

……

……

……

……

……

……

..….…

……

or failing which, the Chairman of The Meeting as my/our proxy to attend and vote for me/us on my/our behalf at the Twenty-First (21st) Annual General Meeting of the Company to be held at Banyan & Casuarina Rooms, Ground Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Friday, 1 June 2018 at 10.00 a.m. or at any adjournment thereof and to vote as indicated below:

Please indicate with an ‘X’ in the spaces provided on how you wish your vote to be cast in respect of the above resolutions. If you do not do so, the proxy may vote or abstain from voting at his/her discretion.

Notes:1. Every member entitled to attend and vote at the meeting is entitled to appoint up to two (2) proxies to attend and vote for him/her. A proxy may

but need not be a member of the Company. If the proxy is not a member, he/she needs not be an advocate, an approved company auditor or a person approved by the Registrar in a particular case. If a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy. There shall be no restriction as to the qualification of the proxy.

2. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991 (“Authorised Nominee”), it may appoint up to two (2) proxies in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

3. Where a member of the Company is an exempt Authorised Nominee which holds ordinary shares in the Company for multiple beneficial owners in one (1) securities account (“Omnibus Account”), there is no limit to the number of proxies which the exempt Authorised Nominee may appoint in respect of each Omnibus Account it holds.

4. Only a depositor whose name appears in the Company’s Record of Depositors as at 25 May 2018 shall be regarded as a member and entitled to attend, participate, speak and vote at this meeting or appoint proxy(ies) to attend and vote on his/her behalf.

5. The Proxy Form must be signed by the appointer or if the appointer is a corporation, either under the seal or under the hand of an officer or attorney duly authorised.

6. The original signed and/or sealed copy of the Proxy Form must be deposited at the Registered Office of the Company at Level 2, Tower 1, Avenue 5, Bangsar South City, 59200 Kuala Lumpur not less than twenty-four (24) hours before the time appointed for taking of the poll at the meeting or any adjournment thereof.

7. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all the resolutions set out in the Notice of the Annual General Meeting will be put to vote by way of poll.

Ordinary Resolution 55 Approval of Benefits Payable up to an aggregate amount of RM70,000 for the Non-Executive Directors from 1 January 2018 until the next AGM

Ordinary Resolution 66 Re-appointment of Messrs BDO as Auditors of the Company and to authorise Directors to fix their remuneration


Approval of a final single tier dividend of 8 sen

Re-election of Mr Chin Jit Sin as Director

Ordinary Resolution 33 Re-election of Mr Danny Ng Siew L’Leong as Director

Ordinary Resolution 44 Approval of Directors’ Fees of RM204,000

Ordinary Resolution 88 Proposed Authority to allot and issue shares pursuant to Sections 75 and 76 of the Companies Act 2016



Retention of Datuk Dr. Anis bin Ahmad as Independent Director

Retention of Mr Danny Ng Siew L’Leong as Independent Director

Ordinary Resolution 1111 Retention of Mr Wong Yoke Nyen as Independent Director

Ordinary Resolution 77 Proposed Bonus Issue of 7,515,660 new ordinary shares on the basis of 1 bonus share for every 10 existing shares

126


THE COMPANY SECRETARYNEW HOONG FATT HOLDINGS BERHAD

(425709-K)

c/o HMC Corporate Services Sdn. Bhd.Level 2, Tower 1, Avenue 5

Bangsar South City59200 Kuala Lumpur

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