annual report 2017 - milux · 2 milux corporation berhad (313619-w) notice of twenty-third annual...

No. 31, Lorong Jala 14/KS10, Off Jalan Telok Gong,42000 Pelabuhan Klang, Selangor Darul Ehsan

Tel: 1800 88 MILUX (64589)Fax: 03 - 3134 1193

www.milux.com.my

Quality,Safety, Reliability.

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ANNUAL REPORT 2017

1

ANNUAL REPORT 2017

CONTENTSNOTICE OF ANNUAL GENERAL MEETING

MANAGEMENT DISCUSSION AND ANALYSIS

CORPORATE INFORMATION

2

7

5

20

31

129

28 30

DIRECTORS’ PROFILE

CORPORATE GOVERNANCEOVERVIEW STATEMENT

LIST OF GROUP PROPERTIES

PROFILE OF SENIOR MANAGEMENT

5-YEAR GROUP FINANCIAL HIGHLIGHTS

CORPORATE STRUCTURE

6

51

130

5954 60

61

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

ANALYSIS OF SHAREHOLDINGS

ADDITIONAL COMPLIANCE INFORMATION

AUDIT AND RISK COMMITTEE REPORT

DIRECTORS’ RESPONSIBILITY STATEMENT

FINANCIAL STATEMENTS

PROXY FORM

SUSTAINABILITYSTATEMENT

11

2

MILUX CORPORATION BERHAD (313619-W)

NOTICE OF TWENTY-THIRD ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Twenty-Third (“23rd”) Annual General Meeting (“AGM”) of the Company will be held at Greens III, Sports Wing, Tropicana Golf & Country Resort, Jalan Kelab Tropicana, 47410 Petaling Jaya, Selangor Darul Ehsan on Thursday, 7 June 2018 at 2:30 p.m. or at any adjournment thereof for the following purposes:-

AGENDA

As Ordinary Business

1. To receive theAudited Financial Statements for the financial year ended 31December 2017together with the Reports of the Directors and the Auditors thereon.

2. To re-elect the following Directors who retire in accordance with Article 80 of the Articles of Association of the Company:-

(a) Mr. Koh Pee Seng; (b) Dato’ Mohamed Salleh Bin Bajuri; and (c) Tuan Haji Mohd Anuar Bin Haji Mohd Hanadzlah. 3. To re-appoint CAS Malaysia PLT as Auditors of the Company until the conclusion of the next

AnnualGeneralMeetingandtoauthorisetheDirectorstofixtheirremuneration.

As Special Business Toconsiderand,ifthoughtfit,withorwithoutanymodification,topassthefollowingResolutions:- 4. ORDINARY RESOLUTION NO. 1 - PAYMENT OF DIRECTORS’ FEES

“THAT the Directors’ Fees amounting to RM165,000/- (Ringgit Malaysia: One Hundred and Sixty-FiveThousandonly)forthefinancialyearended31December2017,beandareherebyapprovedfor payment.”

5. ORDINARY RESOLUTION NO. 2- PAYMENT OF BENEFITS PAYABLE TO THE DIRECTORS UNDER SECTION 230 OF THE

COMPANIES ACT 2016

“THATthebenefitspayabletotheDirectorsuptoanamountofRM54,849/-(RinggitMalaysia:Fifty-Four Thousand Eight Hundred and Forty-Nine only) for the period from 1 July 2018 to 30 June2019,i.e.thenextAnnualGeneralMeetingoftheCompanybeandareherebyapprovedforpayment.”

6. ORDINARY RESOLUTION NO. 3 - AUTHORITY TO ISSUE SHARES PURSUANT TO THE COMPANIES ACT 2016

“THAT subject always to the Companies Act 2016 (“the Act”), the Articles of Association of the Company and the approvals from Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other relevant governmental and/or regulatory authorities, the Directors be and are hereby empowered pursuant to the Act, to issue and allot shares in the capital of the Company from time to time at such price and upon such terms and conditions, for such purposes and to such personorpersonswhomsoevertheDirectorsmayintheirabsolutediscretiondeemfitprovidedalways that the aggregate number of shares issued pursuant to this resolution does not exceed ten percent (10%) of the total number of issued shares of the Company for the time being;

AND THAT the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Securities;

AND FURTHER THAT such authority shall commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next Annual General Meeting of the Company.”

(refer to Note 7)

(Resolution 1) (Resolution 2)(Resolution 3)

(Resolution 4)

(Resolution 5)

(Resolution 6)

(Resolution 7)

3

ANNUAL REPORT 2017

NOTICE OF TWENTY-THIRD ANNUAL GENERAL MEETING (cont’d)

7. To transact any other business of which due notice shall have been given in accordance with the Companies Act 2016.

By Order of the Board CHUA SIEW CHUAN(MAICSA0777689)CHENG CHIA PING (MAICSA 1032514)Company Secretaries

Kuala LumpurDated: 27 April 2018

Notes:-

(A) Information for Shareholders/Proxies

1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 31 May 2018 (“General Meeting Record of Depositors”) shall be eligible to attend the Meeting.

2. A member entitled to attend and vote at the Meeting is entitled to appoint more than one (1) proxy to attend and vote in his stead (subject always to a maximum of two (2) proxies at each meeting). Where a member appoints more thanone(1)proxy,theappointmentshallbeinvalidunlesshespecifiestheproportionsofhisshareholdingstoberepresented by each proxy.

3. A proxy may but does not need to be a member of the Company and notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of the memberattheMeeting.Thereshallbenorestrictionastothequalificationoftheproxy.Aproxyappointedtoattendand vote at the Meeting shall have the same rights as the member to speak at the Meeting.

4. In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under thehandofitsofficerorattorneydulyauthorised.

5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiplebeneficialownersinonesecuritiesaccount(“omnibusaccount”),thereisnolimittothenumberofproxieswhich the exempt authorised nominee may appoint in respect of each omnibus account it holds.

6. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or notariallycertifiedcopyofthatpowerorauthoritymustbedepositedattheCompany’sRegisteredOfficeatLevel7,MenaraMilenium,JalanDamanlela,PusatBandarDamansara,DamansaraHeights,50490KualaLumpurnotlessthanforty-eight (48) hours before the time for holding the Meeting or any adjournment thereof.

(B) Audited Financial Statements for the financial year ended 31 December 2017

7. This Agenda item is meant for discussion only, as the provision of Section 340(1)(a) of the Companies Act 2016 does not require a formal approval for the Audited Financial Statements from the shareholders. Therefore, this Agenda item is not put forward for voting.

(C) Re-election of Directors

8. Article 80 of the Articles of Association (“AA”) of the Company states that one-third (1/3) of the Directors shall retire fromofficeandshallbeeligibleforre-electionateachAGM.AllDirectorsshallretirefromofficeatleastonceineachthree (3) years but shall be eligible for re-election.

In determining the eligibility of the Directors to stand for re-election at the forthcoming 23rd AGM, the Nomination and Remuneration Committee (“NRC”) has considered the following:-

(i) Directors’ self-assessment and Peer assessment survey;(ii) Evaluation on the effectiveness of the Board as a Whole and Committees of the Board; and(iii) For Independent Non-Executive Directors (“INEDs”) only, the level of independence demonstrated by the INEDs

and their ability to act in the best interest of the Company.

The Board approved the NRC’s recommendation for the retiring Directors pursuant to Article 80 of the AA of the Company. All the retiring Directors have consented to their re-election, and abstained from deliberation as well as decision on their own eligibility to stand for re-election at the relevant NRC and Board meetings, where applicable.

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(D) Re-appointment of Auditors

9. TheAuditandRiskCommittee(“ARC”) have assessed the suitability and independence of the External Auditors and recommendedthere-appointmentofCASMalaysiaPLTasExternalAuditorsoftheCompanyforthefinancialyearending 31 December 2018. The Board has in turn reviewed the recommendation of the ARC and recommended the same be tabled to the shareholders for approval at the forthcoming 23rd AGM of the Company under Resolution 4.

Explanatory Notes to Special Business:

(E) Authority to Issue Shares pursuant to the Companies Act 2016

10. The Company wishes to renew the mandate on the authority to issue shares pursuant to the Companies Act 2016 at the 23rd AGM of the Company (hereinafter referred to as the “General Mandate”).

The Company had been granted a general mandate by its shareholders at the Twenty-Second Annual General Meeting of the Company held on 1 June 2017 (hereinafter referred to as the “Previous Mandate”).

The Previous Mandate granted by the shareholders had not been utilised and therefore no proceed has been raised pursuant to the Previous Mandate.

The purpose to seek the General Mandate is to enable the Directors of the Company to issue and allot shares at any time to such persons in their absolute discretion without convening a general meeting as it would be both time and cost-consuming to organise a general meeting solely for such issuance and allotment of shares. This authority unless revoked or varied by the Company in a general meeting, will expire at the next Annual General Meeting. The proceeds raised from theGeneralMandatewill provide flexibility to the Company for any possible fund raising activities,including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions.

(F) Payment of Directors’ Fees

11. TheProposedDirectors’Feesforthefinancialyearended31December2017wasRM165,000/-(2016:RM160,000/-).

(G) Payment of Benefits Payable

12. UnderResolution6,thebenefitspayabletotheDirectorshasbeenreviewedbytheNRCandtheBoardofDirectorsoftheCompany,whichrecognisesthatthebenefitspayableisinthebestinterestoftheCompany.Thebenefitsconcerncomprisedofmeetingallowancesandotherbenefitsonly.

NOTICE OF TWENTY-THIRD ANNUAL GENERAL MEETING (cont’d)

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ANNUAL REPORT 2017

CORPORATE INFORMATION

BOARD OF DIRECTORS

Haji Mohd Anuar Bin Haji Mohd HanadzlahIndependent Non-Executive Chairman

Koh Pee SengGroup Managing Director

Ng Tek CheExecutive Director

Tan Chee HowExecutive Director

Ho Pui Hold Independent Non-Executive Director

Ang Joo SengIndependent Non-Executive Director

Chua Seong SengNon-Independent Non-Executive Director

Dato’ Mohamed Salleh Bin BajuriNon-Independent Non-Executive Director

AUDIT AND RISK COMMITTEE

Ho Pui Hold - ChairmanIndependent Non-Executive Director(re-designated w.e.f. 1 January 2018)

Haji Mohd Anuar Bin Haji Mohd Hanadzlah Independent Non-Executive Chairman(re-designated w.e.f. 1 January 2018)


NOMINATION AND REMUNERATION COMMITTEE

Haji Mohd Anuar Bin Haji Mohd Hanadzlah - ChairmanIndependent Non-Executive Chairman


Ho Pui Hold Independent Non-Executive Director

COMPANY SECRETARIES

Chua Siew Chuan (MAICSA 0777689)Cheng Chia Ping (MAICSA 1032514)

REGISTERED OFFICE

Level 7, Menara Milenium,Jalan Damanlela,Pusat Bandar Damansara,Damansara Heights,50490KualaLumpurTel : 03–20849000Fax : 03–20949940

PRINCIPAL PLACE OF BUSINESS

No. 31, Lorong Jala 14/KS10, Off Jalan Telok Gong, 42000 Pelabuhan Klang, Selangor Darul Ehsan Tel : 03 – 3134 1254Fax : 03–31341193

SHARE REGISTRAR

Symphony Share Registrars Sdn BhdLevel 6, Symphony House,Pusat Dagangan Dana 1,Jalan PJU 1A/46,47301 Petaling Jaya,Selangor Darul Ehsan.Tel : 03–78490777Fax : 03 – 7841 8151

BANKERS

AmBank (M) BerhadMalayan Banking BerhadUnited Overseas Bank (Malaysia) BerhadCIMB Bank Berhad

AUDITORS

CASMalaysiaPLT(LLP0009918-LCA)&(AF:1476)Chartered Accountants B-5-1, IOI Boulevard,Jalan Kenari 5,Bandar Puchong Jaya,47170 Puchong,Selangor Darul EhsanTel : 03 – 8075 2300Fax : 03 – 8082 6611

STOCK EXCHANGE LISTING

Main MarketBursa Malaysia Securities Berhad

Stock Code :7935Stock Name : Milux

CORPORATE WEBSITE

www.milux.com.my

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MILUX CORPORATION BERHAD

Holding Company

T.H. Hin Sdn. Bhd.dealer in gas cookers, electrical household appliances and their related products

T.H. Hin Home Tech Sdn. Bhd.manufacturing of gas cookers, electrical household appliances and their related products

Brightyield Sdn Bhdmanufacturing of gas cooker component parts and their related products

Enamel Products Sdn. Bhd.manufacturing of enamel products.

Milux Sales & Service Sdn. Bhd.dealer in gas cookers, electrical household appliances and their related products

Eurobay Industries Sdn. Bhd.manufacturing and supplying of home electrical appliances

Milux International Sdn BhdInvestment holding

Pansprint Consolidated Sdn. Bhd. Inactive

Andersen’s of Denmark (M) Sdn. Bhd. Dissolved w.e.f 19 January 2018

Milux GreenTech Resources Sdn. Bhd.Inactive

Milux Properties Sdn. Bhd. Investment holding

Milux Home Appliances (India) Private LimitedCeased operation

Milux Industry (Zhong Shan) Co. Ltd. Ceased operation

Phoenix Pentagon Sdn BhdJoint Venture CompanyProject management and advisory services

100% 100%

100%

100%

100%

100%

100%

100%

60%

100%

99%

100%

100%

CORPORATE STRUCTURE

60%

7

ANNUAL REPORT 2017

Overview of the Group’s business and operation

Our Group is principally involved in the manufacturing of gas appliances, assembly of instant water heaters and gas regulators and the trading of gas and electrical home appliances. Our operations are carried out at four (4) locations of whichtwo(2)arelocatedinPrai,Penang,one(1)inKlang,SelangorDarulEhsanandasalesofficeinJohorBahru,JohorDarul Takzim.

The Group had in September 2016 subscribed for 60% shares in a joint-venture company for the purpose of providing project management services in relation to a project which entails the development of residential property on a piece of land known as Pentagon Genting Highlands. This joint-venture when materializes will add a new business segment to its current operation.

Our Group’s vision is to be a market leader in the manufacturing and distribution of gas cookers and home electrical appliances through a continuous process of product innovation, stringent quality standards, competitive pricing strategy and excellent customer service.

Manufacturing segment

The Group’s manufacturing segment acts as an Original Equipment Manufacturer (“OEM”) of gas appliances for both local and overseas customers. Among its products are gas cookers, cooker hobs and cooker hoods. In addition to being an OEM, it also manufactures gas cookers, cooker hobs and cooker hoods under the Group’s MILUX brand which are distributed by the Group’s trading division. The operation is carried out at the Group’s own factories in Prai, Penang. 62% (2016 – 60%) of the output from this segment was for the export market with the remaining 38% (2016 – 40%) for the local market. The keyexportcountriesandtheirrespectivecontributiontorevenueforfinancialyear2017areVietnam(39%),SaudiArabia(15%),Singapore(14%),Thailand(12%),Indonesia(9%)andSriLanka(4%).OtherexportdestinationsincludePhilippines,Cambodia, Hong Kong, Kuwait, Nepal, Mauritius, Oman and United Emirates.

For the year under review, the Group’s manufacturing segment continue to contribute positively to the Group’s results. This segment contributed RM38.06 million to the Group’s revenue compared to RM37.33 million in the preceding year. Of this,RM24.06millionwerefromexportsalescomparedtoRM23.49millionintheprecedingyear.Themarginalincreaseinexport sales was mainly due to higher demand from its customer in Indonesia. Local OEM sales increased marginally to RM14.00millionfromRM13.84millionintheprecedingyear.ItcontributedProfitbeforeTax(“PBT”)ofRM0.86milliontotheGroup compared to RM3.72 million in the preceding year. The sharp drop in PBT was due to escalating raw material costs whichresultedincompressionofgrossprofitmargin.ThestrengtheningRinggitinparticularatthelaterpartofthefinancialyear has resulted in foreign exchange losses compared to gains in the preceding year. The year ahead will be challenging for this segment as it continues to face pricing pressure and high costs of doing business in the form of wages and costs associated with compliance and business regulations.

Nevertheless, this segment will continue to strive to ensure all resources, in particular, manufacturing and human resources areefficientlyutilizedtoincreaseproductivity.Wewillcontinuetoinvestinourstaffbysendingthemforvarioustrainingsto upgrade their skills. To enable the segment to remain competitive, we will be conscious of the need for cost containment without jeopardizing the need to maintain our high product quality. We will continue to ensure timely delivery of our products and constantly improve our after sales service as expected of us by our customers.

Trading segment

TheGroup’stradingsegment ishoused intwo(2)rentedofficescumwarehouse inKlang,SelangorDarulEhsanandisinvolved in the distribution of gas and home electrical appliances to the local market under the MILUX and MILLE brand. Among the gas products distributed are cast iron stoves, gas canisters, gas cookers, gas cooker hobs, gas rice cookers and gas regulators. The home electrical appliances are segmented into small electrical appliances, fans and water heaters. The small electrical appliances include among others, cooker hood, electric oven, blender, multi cooker, food steamer, thermo pot, stand mixer, induction cooker, food processor, rice cooker, hair dryer and iron while fans include ceiling fan, table fan, stand fan, wall fan and industrial fan. During the year this segment expanded the product range to include portable air conditioner, air cooler and coffee maker amongst others.

Thegasproduct is themajor contributor to this segment’s revenueat 42% (2016–49%) followedbyhomeelectricalapplianceat39%(2016-26%),fanat16%(2016-22%)andwaterheaterat3%(2016-3%).

For the year under review, this segment contributed RM41.63 million to Group revenue compared to RM35.10 million in the preceding year, an increase of 18.6%. The growth in revenue was made possible with an increase in product range and models.NewmodelsandproductsintroducedduringtheyearcontributedRM5.91milliontothissegment’srevenue.Thissegment managed to reduce its Loss before tax (“LBT”) to RM0.42 million from RM0.77 million in the preceding year.

MANAGEMENT DISCUSSION AND ANALYSIS

8


Trading segment (cont’d)

Going forward, the main focus of this segment is to ensure that its product range and mix remain competitive both in design, quality and pricing to meet market requirement which is very important if the segment is to remain relevant in this competitive business. It will work towards building up and solidifying its relationships with chain store and hypermarkets as it currently relies mainly on a network of independent dealers throughout Peninsula and East Malaysia to retail its products. The management team in this segment will continue to explore the feasibility of exporting the MILUX brand of gas and electrical appliances to regional countries.

Assembly segment

The Group’s assembly segment is involved in the assembly of gas regulator and instant water heater which are wholly distributed by the Group’s trading segment. The instant water heaters are assembled in the Group’s factory in Prai, Penang while the gas regulators are assembled in Klang, Selangor Darul Ehsan. This segment had registered losses in the past years due to lack of economy of scale. Arising from actions taken to downsize its operation to a more sustainable level in the previous year, the water heater assembly operation returned to profitability in the financial year under review.However, the gas regulator assembly operation remain loss making and continuous action is still being implemented to turnaround thisassemblyoperation.For thecurrentfinancialyear this segment registeredaLBTofRM0.51millioncompared to a LBT of RM3.34 million in the preceding year. The preceding year’s LBT was due mainly to impairment made for inventories, equipment and machineries amounting to RM2.07 million and writing down of goodwill on consolidation of the subsidiary involved in the assembly operation amounting to RM0.56 million. Going forward, the management will consider the possibility of assembling certain basic electrical products which the Group distributes to capitalize on the existing infrastructure, failing which the activities of this segment will be curtailed further.

Project management segment

On 7 September 2016, the Group completed the subscription of 60% of the shares in a joint-venture company for the purpose of providing project management services in relation to a project which entails the development of residential property on a piece of land known as Pentagon Genting Highlands. This new business segment which the Group had diversified intohasnotgeneratedany revenue todate. This segmentwhichwasexpected togenerate revenue in thethirdquarteroffinancial year2017hasbeendeferreddue tochangeofdevelopmentdesignand the samehadbeenre-submitted to the relevantAuthorities forapproval.TheLBT for this jointventure for thefinancialyearunder reviewamounted to RM6,000.00.

Segment “Others”

This segment consists most notably of the Company which is an investment holding company providing management services to its subsidiaries. It also includes dormant companies in the Group with no operating revenue. This segment registeredaLBTofRM0.54millioncomparedtoRM0.59million intheprecedingyear.The lossesaremainlyattributedto compliance cost incurred by the Company to meet statutory and listing requirements. Costs incurred for the dormant companies are restricted to those required to comply with statutory requirements.

Review of Financial results and financial condition

TheGroup’srevenueforfinancialyear2017ofRM79.69millionrecordedanincreaseofRM7.25millionor10.0%overtheprecedingyear’sRM72.44million.Theimprovedrevenueinthecurrentfinancialyearunderreviewarosemainlyfromhigherlocal sales by the trading segment of RM6.52 million while manufacturing segment’s revenue increased by RM0.73 million.TheGroup recordedaLBTofRM0.61million in thecurrentfinancial yearcompared toaLBTofRM1.54million in thepreceding year. The LBT was arrived at after charging foreign exchange loss of RM0.68 million, slow moving and obsolete inventories written down of RM0.45 million and impairment loss of trade receivables of RM0.46 million. For the preceding year, the LBT was arrived at after charging slow moving and obsolete inventories written down for the assembly segment totaling RM2.01 million and write off of goodwill on consolidation arising from the winding down of the activity of a subsidiary in the assembly segment amounting to RM 0.56 million.

MANAGEMENT DISCUSSION AND ANALYSIS (cont’d)

9

ANNUAL REPORT 2017

Review of Financial results and financial condition (cont’d)

Administrativeexpenses increasedbyRM0.50millionor5.3% toRM9.98millionduring theyear compared toRM9.48millionintheprecedingyear.MeanwhilesellinganddistributionexpensesincreasedtoRM5.99millionfromRM4.15million,an increase of 44.3%. This was mainly due to higher advertising and promotion expenses incurred during the year. The increase in advertising and promotion expenses was mainly incurred for billboards at strategic locations to enhance the Group’s MILUX brand and also sign boards and display racks and shelves for the trading segment’s dealers.

Finance costs increased by RM0.26 million to RM0.50 million from RM0.24 million in the preceding year. The increase was due to the utilization of overdraft facilities to meet the trading segment’s increased working capital requirement.

Tradereceivablesasatyearendincreasedby5.76%toRM19.65millionfromRM18.58millionasattheendofthepreviousfinancialyear.Thisisinlinewithrevenuegrowthof10.0%comparedtothepreviousfinancialyear.

InventoriesasatyearendamountedtoRM22.91millioncomparedtoRM21.68millionasatendofthepreviousfinancialyear. The increase in inventories is due to higher inventories held by the trading segment as a result of wider product range and is in line with the segment’s revenue growth.

TheGroup’sCashandbankbalancesdecreasedby10.4%toRM3.91millionfromRM4.37millionwhileFixeddepositswithlicensedbankswaslowerbyRM0.85millionasattheendofthefinancialyearcomparedwiththatasatendofprecedingfinancialyear.TheGroup’scashwasprimarilyutilizedtofundtheincreaseintradereceivablesandstockintradeasaresultof the trading segment’s higher sales.

Trade payables increased by 6.0% to RM6.68 million from RM6.30 million primarily due to increased purchases of stock in tradeforthetradingsegment.Otherpayables,accrualsanddepositsreceiveddecreasedtoRM1.94millionfromRM2.44million as at the end of the preceding year.

The Group’s borrowings increased by RM1.68 million or 30.7% to RM7.15 million from RM5.47 million mainly due to utilization of bank facilities to fund the Group’s working capital requirement while there was a net increase of Hire Purchase payables of RM0.30 million due to facilities drawdown to purchase motor vehicles use by the trading segment after sales service department.

The Group’s gearing ratio (total group borrowings over total group equity) stood at 0.16 times as at 31 December 2017 compared to 0.12 times as at end of preceding year.

Anticipated or known risks

The Group relies on a single customer for the sale of its OEM gas appliances which amounted to 27.7% of Group’s revenue (2016–29.4%).Thereisariskthatthissinglecustomermaynotcontinuetopurchasethegroup’sproducts.However,thissingle customer has been our customer for the past 10 years. The Group’s manufacturing segment had been taking pro-active measures to expand its OEM customers while the trading segment is poised to see increase sales with an expanded range of products.

The Group also takes cognizance of potential currency volatility which could pose a major challenge to both its manufacturing andtradingsegments.Thetradingsegmenthasthelargestexposuretoexchangeratefluctuationasitsstockintradeareimported.However,theGroup’sexposuretoexchangeratefluctuationismitigatedbythemanufacturingsegment’sexportsales. Where appropriate, the Group will mitigate this further through hedging activities.

Looking ahead

Demand for the Group’s products are expected to remain steady despite the expected headwinds both internally and externally.

The Group’s manufacturing operation will see another challenging year ahead due to rising material costs and increasing cost of doing business in particular wages. Stiff competition has kept a lid on the ability to pass the increased costs to its buyers. The strengthening Ringgit (RM) vis-à-vis the United States Dollar (USD) will be another factor that can affect this segment’sprofitabilityduetoitsexportrevenuebeingdenominatedinUSD.


10


Looking ahead (cont’d)

MeanwhilethetradingoperationisexpectedtobenefitfromthestrengtheningofRMvis-à-visUSDasasubstantialamountof its stock in trade are imported and are denominated in USD. To sustain its growth, the Group will continue to serve its existingcustomersbetterbymaintainingahighstandardofqualityforitsproductscomplementedbyanefficientaftersalesservice.TheGroupwillcontinuetofocusonrealizingoperationalefficienciestoensurethatitwillremaincompetitiveinahighlycompetitiveindustry.Failuretodosowillhaveanegativeimpactonitssalesand,hencetheGroup’sfinancialperformance.

Dividend policy

TheGrouphadnotpaiddividendsforthelastfive(5)yearsduetopoorfinancialperformanceandhenceadividendpayoutpolicy has not been established.

KOH PEE SENGGroup Managing Director27 March 2018


11

ANNUAL REPORT 2017

SUSTAINABILITY STATEMENT

1 About This Statement

The Group is proud to present our inaugural sustainability statement that shows how Milux Corporation Berhad and its subsidiaries (“the Group”) manage sustainability risks related to our business operation. Understanding our sustainability risks and opportunities helps us to operate in a responsible and sustainable manner.

This statement has been prepared in accordance with the Bursa Malaysia Securities Berhad’s Sustainability Reporting Guide. The format adopted is in line with the recommended Global Reporting Initiatives (GRI) 4.0 Sustainability Reporting Guidelines.

1.1 Statement Scope and Boundary

Forourfirstyearofreporting,wehavechosentwoofourmajorrevenuecontributors,whicharethetradingandmanufacturing division of Milux brand gas and electrical appliances. Our manufacturing facility is located in Prai, Penang.

This report has been prepared for the reporting period between 1st January 2017 to 31st December 2017. 2 Sustainability Strategy

We strive to achieve sustainable success by ensuring a balance between strong financial ground, corporatesocial responsibility and environmental awareness. Sustainability is embedded into the Group’s business model by operationalising our sustainability strategy that focuses on the four main areas encompassing the Economic, Environmental and Social aspects of our business operations.

Marketplace

Workplace

Environment

Community

Creating a positive economic impact to the local economy

Nurturing our employees and developing their skill sets and competency level

Protecting the environment by minimising our environmental impact

Contributing our effort and resources to the local community

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3 Sustainability Governance

Our commitment to sustainability requires a formal sustainability governance structure that will sustain the sustainabilitystrategyinlongterm.Indefiningourpathtowardssustainability,werecognisetheneedforarobustand dedicated sustainability governance structure that will ensure our sustainability initiatives and performance are implemented and monitored throughout the Group.

To this end, we are in the midst of formalising a single-tier governance structure where the Head of the Sustainability Committee reports directly to the Board of Directors.

The responsibility of the Board of Directors is to review the sustainability strategy, action plans and initiatives and ensure the implementation of sustainability strategy across the Group. The day-to-day management of sustainability-related initiatives comes under the purview of the Sustainability Committee which is made up of members from key departments. They are responsible to implement, monitor and report the outcome of the sustainability initiatives to the Board of Directors on a periodical basis.

Board of Directors

SustainabilityCommittee

Purchasing

Human Resources Service

MarketingFinance

Production Quality Control

Sales

Led by: ChiefFinancialOfficer

SUSTAINABILITY STATEMENT (cont’d)

13

ANNUAL REPORT 2017

4 Engaging with Our Stakeholders

The Group aims to create a shared value with our internal and external stakeholders. We understand the importance of engaging our stakeholders regularly. Through systematic stakeholder engagement methods, we are able to understand their issues of interest and address them in an appropriate manner. Stakeholder engagement aids in our decision making, helping us continuously improve and make progress in our sustainability journey.

Investors

Issues of Interest Methods of Engagement

• Group financial performance• High financial return• Global business strategy• Sustainable and stable distribution

income

• Annual general meetings• Annual reports• Quarterly interim financial

statements

Consumers(End-users)

• Best practice in product pricing• Licensed manufacturing• Product quality• Prompt after-sales service• Efficient complaints resolution

• Press releases• Road shows• Pricing of product to commensurate

with product quality• Prompt after-sales service• Prompt response to calls for service

Consumers(Dealers)

• Efficient complaints resolution• Customer-company relationship

management• Safety and security• Timely product delivery• Consistent and quality product delivery

• Regular client meetings through sales team

• Feedback channel through sales team• Community and networking events• Direct access of the logistic team with

our customers during the delivery process to ensure prompt delivery process

RegulatoryAgencies

• Governance compliance• Labour practices• Occupational safety and health• Environmental management and

compliance

• Inspection by local authority• Annual report• General meetings between management and regulators• Direct meetings

Suppliers

• Transparent procurement practices• Payment schedule• Pricing of services• Timely delivery of ordered materials/products by vendors

• Evaluation and performance reviews

• Contract negotiation• Vendor registration

LocalCommunities

• Social issues• Impact of business operations

• Community engagement• CSR programmes

IndustryPeers

• Best practice in the industry• Utilising current technology and

systems

• Collaboration programmes• Sharing of the best pratices

between companies


14


5 Materiality Assessment

Materiality assessment helps us identify and prioritise our material sustainability matters that bring impact to our business operation and stakeholders. It is important for the Group to address the material sustainability matters with regards to the Economic, Environment and Social aspects that are embedded in our value chain.

TheGroup’sSustainabilityCommitteehasidentified18sustainabilitymaterialmattersbasedontheirunderstandingof the Group’s stakeholders’ concerns as well as factors that impact the Group’s business operation. The sustainability matters were then prioritised based on a weighted ranking method and graphically presented in the materiality matrix below.

The relationship between the material sustainability issues and the stakeholders is presented in the table below. The correspondingGRIIndicatorisalsoprovidedforthe18materialissuesidentified.

Material Sustainability Matters

A Regulatory Compliance

B Financial Performance

C Manufacturing Materials

D Product Quality Management

E Product Safety

F Employee Wellbeing

G Protecting Labour Rights

H Training and Development

I Talent Retention

J Corporate Governance and Transparency

Stakeholder(s) Impacted

Shareholders and Investors, Regulatory Agencies, Suppliers, Employees and Customers

Shareholders and Investors, Regulatory Agencies, and Customers

Regulatory Agencies and Local Communities

Suppliers and Customers

Suppliers and Customers

Employees

Employees and Regulatory Agencies

Employees

Employees

Shareholders and Investors, Regulatory Agencies, and Customers

Applicable GRI Indicator(s)

Compliance

GRI General Standard Disclosure

Materials

Product Service and Labelling


Diversity and Equal Opportunity

Child Labour and Forced or Compulsory Labour

Training and Education

Diversity and Equal Opportunity



15

ANNUAL REPORT 2017

Material Sustainability Matters

K Customer Satisfaction

L Occupational Health and Safety

M Contribution to Society

N Investor Relations

O Energy Consumption

P Waste Management

Q Supply Chain Management

R Water Consumption

Stakeholder(s) Impacted

Customers

Employees and Regulatory Agencies

Local Communities

Shareholders and Investors



Suppliers


Applicable GRI Indicator(s)


Occupational Health and Safety

Local Communities


Energy

WasteandEffluence


Water

6 Marketplace

We are committed to achieving economic sustainability and delivering sustainable growth to our shareholders. The Group aims to maintain a good standard of corporate governance to build good reputation in the marketplace.

6.1 Financial Performance

TheGroupachievedarevenueofRM79.69millionandrecordedalossbeforeinterestandtax(EBIT)ofRM0.11million from its operations for the financial year ended 31December 2017. A detailed analysis of our keyoperational risks and mitigating controls is disclosed in the Management Discussion and Analysis section of this Annual Report.

6.2 Corporate Governance and Transparency

We uphold the highest level of integrity and ethical conduct in the workplace. The Board have formalised Milux’s Code of Ethics and Conduct (“the Code”). Both the Board and Management and staff of Milux Group are guided by this Code. The Code encompasses guiding principles to show respect in the workplace, integrity in the marketplace, ethics in business relationships and effective communication between management and the rest of the employees. The Whistle Blowing guidance is embedded into the Code to show the Group’s stand against bribery and corruption.

We adopt leading administrative practices in our policies as stated below, helping us to reach the highest levels of transparency and governance in all sectors. We adhere to the principles and recommendations set by the Malaysian Code on Corporate Governance.

Policies to Uphold Corporate Governance

Milux’s Code of Ethics and ConductBoard of Directors’ CharterCorporate Disclosure Policy

Shareholders’ Communication Policy


16


6.3 Preferential to Source Locally

It is the Group’s policy to source all materials from local suppliers with cost consideration, subject to material availability. We prefer to procure from local suppliers to support local businesses. By sourcing locally, the Group is able to improve the local economy.

6.4 Product Quality Management The Group places high importance on product quality to increase customer satisfaction and loyalty, and to

contribute to sustainable revenue and profitability. All products have undergone quality control to ensurecustomersreceiveproductsfreefromdefectsandhavebeenmanufacturedtotheexpecteddesignspecifications.Asanendorsementthatourmanufacturedproductsmeetthedesignspecifications,wehaveobtainedqualitycontrolcertificationsofourgasandelectricalproducts.ThesecertificationsareequivalenttotheinternationalstandardQualityManagementSystemISO9001:2005.

Product Certifications

Certificate of Approval (Import/Manufacture) byEnergy Commission

Consignment Batch for Imported Electrical and Electronics Products by SIRIM QAS International Sdn. Bhd.

Product Certification License Pressure Regulator forLiquefiedPetroleumGas

Product Certification License for Electric StationaryInstantaneous Water Heaters

ISO9001:2005

Subsidiary Certified

Milux Sales & Service Sdn. Bhd. and T.H.Hin Home Tech Sdn Bhd

Milux Sales & Service Sdn. Bhd. and T.H.Hin Home Tech Sdn Bhd

Brightyield Sdn. Bhd.

Eurobay Industries Sdn. Bhd.

Brightyield Sdn. Bhd., Eurobay Industries Sdn Bhd and T.H. Hin Home Tech Sdn Bhd

7 Workplace

Ouremployeesareimportantastheyareourlargeststakeholderandcontributesignificantlytothesuccessofourbusiness operations. The Group is committed to creating a positive working culture and environment to nurture, retain and develop talent. As manufacturing is our largest business division, the occupational safety and health of our workforce is a priority.

7.1 Occupational Health and Safety As a Group, we comply with the relevant occupational safety and health regulations under the Occupational

SafetyandHealthAct1994aswellastheFactoriesandMachineriesAct,1967.

The Group’s Safety, Health and Environment Committee established for the manufacturing plant is headed by theGeneralManager.He isassistedbySafetyOfficerandcommitteememberswhoareresponsible for theimplementation and monitoring of health and safety programmes. They are also tasked with investigating any accidents or incidents that occur at the workplace and to put in place remedial measures to prevent such events from occurring in the future. For the reporting period, we are proud to announce that we have maintained zero-incidents at the workplace.


17

ANNUAL REPORT 2017

7.2 Training and Development In the ever-changing world of markets and technologies in the electrical and electronic sector, it is important

to train our employees to be abreast with the latest development. We are committed to providing a working environment that drives our employees to enhance their skills and knowledge in the industry. Job rotations are put in place for our employees where we periodically transfer our employees to various departments within the Group to ensure they gain exposure in different parts of our business while expanding their skill sets.

We are committed to investing in training and development programmes, both internal and external to enhance employees’ skill set, product knowledge and competency levels to improve their work performance. Training programmes that we have carried out over the reporting period are listed below.

Types of Training

Health, Safety and Environmental Training

Human Resources Management Training

Quality Training

Professional and Legal Training

Training Programmes

1. Occupational Safety and Health Best Practices Workshop2. Fire Safety Seminar3. 9thOccupationalSafety&HealthConference20174. Schedule Waste Management and Implementation5. EnvironmentalQualityAct(1974)Legislation

1. What Every HR Practitioner Should Know2. Training Grants and Claims Seminar3. Hired and Fired

1. QualityManagementSystem9001:2015Workshop2. Current Development and New Services In Product

Certification&InspectionServices

1. Taxfiling2. GST Training Improvement3. Rising Up to the Challenges of Sustainability Reporting

7.3 Employee Distribution

We embrace diversity in the workforce and do not condone any form of discrimination based on gender, age or race. We hire employees based on merit system and their capabilities to perform their job.

20%

80%

FemaleMale

FemaleMale

Employee Breakdown by Gender

Management Executive Non-Executive

628

141

20 231


18


As a Group, our workforce has a male to female ratio of 80:20. However, when we breakdown the gender of employee according to their employment category, it is shown that the non-executive category is male-dominated due to the nature of the work. The gender composition is quite balanced for management and executive category,

3%

22%

75%

36%

15%

49%

Management

Executive

Non-Executive

< 30 years old

30 - 50 years old

> 50 years old

Employee Breakdown by Category

Employee Breakdown by Age

The non-executive employees make-up the highest percentage in the employee distribution (75%) followed by executive level (22%) and management level (3%).

The age demographics of our Group, shows a diverse and well-distributed age group of workforce. As at 31st December2017,36%ofouremployeesareagedbelow30,while49%belongtotheagegroupof30to50yearsold,followed by 15% that are aged more than 50. We believe that the diversity of age at work fosters a wider knowledge base by having employees of various age group and experience.

8 Environment

As an electrical and gas appliances manufacturing and trading company, we aim to focus on environmental stewardship by promoting sustainable manufacturing practices and energy conservation. We are committed to protecting the environment by reducing our environmental footprint.

8.1 Reducing Our Energy Consumption

We reduce our carbon footprint by reducing our direct carbon emission from energy consumption. We monitor the energy consumption at our manufacturing facility in Prai, Penang and identify measures to conserve energy. The graph below shows the energy consumption of our Prai manufacturing facility during the reporting period.


19

ANNUAL REPORT 2017

Energy Consumption (kWh)

41130

48113

58097

44080

48340

44880

50940

51320

45000

49750

50190

46610Dec-17

Nov-17

Oct-17

Sep-17

Aug-17

Jul-17

Jun-17

May-17

Apr-17

Mar-17

Feb-17

Jan-17

As green consumerism is now on the rise, customers are looking to purchase products and services that are environmentally-friendly. To cater to this new generation of customers, we have invested in the design andmanufacture of energy-efficient electrical appliances.Our energy-efficientmodels save our customer’selectricity bills and reduce their energy consumption without compromising the product’s features. By reducing energy consumption, greenhouse gas emissions are also reduced over the lifespan of the product. Some of our successfulenergy-savingmodelsincludeceilingfan(MCF-S3668),standmixer(MSM-9512)andthegascooker(MSS-8122R).

8.2 Managing Our Waste Responsibly

Improper waste disposal can lead to illegal dumping at unauthorized locations giving rise to environmental and public health issues. We are responsible to ensure that our non-hazardous wastes are collected by licensed contractors that dispose these wastes at approved disposal sites. Hazardous wastes also known as scheduled wastes, regulated by the Department of Environment, are removed offsite via contractors licensed by the department. Scheduled wastes generated from our manufacturing operations include spent hydraulic oil and thinner are either sent for recycling or disposed at licensed facilities. We record and maintain an inventory of the scheduled wastes generated as required under the Environmental Quality (Scheduled Waste) Regulations, 2005.

9 Community

As a responsible corporation, we understand our responsibility to the local community and aim to continuously contribute its efforts and resources to give them a helping hand.

9.1 Contribution to Society

During the Hong Pong Charity Run 2.0 organised by Eng Choon Hong Pong Tan Association of Malaysia on 18th June 2017, the Group has donated 20 units of dry iron, and 1 unit each of rice cooker, thermos pot and food chopper as lucky draw prize for the participants. As a token of appreciation to retired civil servants who contributed to our country we have donated RM300 each to Persatuan Amal Dan Kebajikan Keluarga Warisan Polis DiRaja Malaysia and Persatuan Rekreasi Dan Amal Bekas Kastam Dan Imigresen Malaysia.

We have also contributed 20 units of tables and stand fans to Persatuan Penganut Dewa Sei Ling and handheld vacuum cleaner, electric microwave oven and electric thermos pot to Tan Ancestral Temple in FY2017.


20


DIRECTORS’ PROFILE

Haji Mohd Anuar Bin Haji Mohd Hanadzlah, 60Independent Non-Executive ChairmanMalaysian, Male

Date of appointment as Director :

23 June 2015

Length of service as director since appointment (as at 27 April 2018) :

2 years 10 months

Board Committee(s) served on :

• Member of Audit and Risk Committee• Chairman of Nomination and Remuneration Committee

Academic/ Professional Qualification(s) :

• Graduated in Accounting from MARA Institute of Technology (now known as Universiti Teknologi MARA)

Present Directorship(s)

(i) Other Public Listed Companies :

• Inix Technologies Holdings Berhad • MQ Technology Berhad

(ii) Public Companies :

Nil

Working experience :

TuanHajiMohdAnuarstartedhiscareerasanauditorin1982withAzmanWong Salleh & Co. for 3 years. Since then he has worked in a number of companiesnamely,MafiraHoldingsSdnBhd,IpohasAssistantAccountant,Permodalan Perak Bhd., Ipoh as Assistant Manager, PT. Wapoga Mutiara Industries, Indonesia as Branch Manager and Precision Logging Ltd., Papua New Guinea as Accountant. In all these companies he was assigned to variousdepartmentsandfieldssuchasaccounts,finance,sales,marketing,wholesale, trading, personnel, administration, mining, sawmilling, plywood and woodworking factory.

Tuan Haji is also presently an Independent Non-Executive Chairman of MQ Technology Berhad and an Executive Director in Inix Technologies Holdings Berhad.

Tuan Haji has been re-designated from Chairman of Audit and Risk Committee to Member of the Audit and Risk Committee with effect from 1 January 2018. Tuan Haji is also the Chairman of Nomination and Risk Committee.

Time committed :

Tuan Haji Mohd Anuar attended all the 5 Board Meetings.

21

ANNUAL REPORT 2017

Koh Pee Seng, 67Group Managing DirectorMalaysian, Male


27 April 2006


12 years 0 month


Nil


• Master in Business Administration (Asian Institute of Management)• Bachelor of Science from Monash University in Australia



Nil


Nil


Mr. Koh was appointed as the Group Managing Director on 20 April 2012. He was initially appointed as Independent Non-Executive Director of the Company on 27 April 2006 and was subsequently re-designated as Executive Director on 30 October 2007.

HejoinedHellerFactoring(S)Ltdin1977whereheworkedfor5yearsbeforehe left his position of Manager for General Manager in Matang Factoring SdnBhdin1983.

He joined Arab-Malaysian Merchant Bank Berhad in December 1984 asGeneral Manager and then moved to Arab-Malaysian Finance Berhad in 1987whereheheldthepositionofSeniorGeneralManager.InMarch1992,he ventured into stock broking industry as Deputy Chief Executive of JB SecuritiesSdnBhd till 1994.Presently,he sitson theBoardofnumerousprivate limited companies which are involved primarily in the business of property development, agrobusiness and sport and leisure activities. Mr. Kohwas responsible for the financial aspects of the numerous propertydevelopmentprojectssuchasfinancialplanning,projectfinancing,budget,forecastandcashflowsoftheproject.

Time committed :

Mr. Koh attended all the 5 Board Meetings.

DIRECTORS’ PROFILE (cont’d)

22


Tan Chee How, 37Executive DirectorMalaysian, Male


30 May 2013


4 years 11 months


Nil


• Bachelor’s Degree in Marketing and Management from Curtin University, Perth Australia

• CharteredInstituteofMarketingCertificate• ABE Diploma from Sunway College Present Directorship(s)


Nil


Nil


Mr. Tan was appointed as Non-Independent Non-Executive Director on 30 May 2013 and subsequently on 12 October 2016, Mr. Tan was re-designated as an Executive Director.

Upon graduating in 2002, Mr. Tan joined Chin Huat Trading Sdn Bhd as a Sales & Marketing Executive and was promoted to Assistant General Managerin2007.InFebruary2009,hejoinedT.H.HinSdnBhd,asubsidiaryof the Company, as a Sales & Marketing Executive and was promoted to General Affairs Manager, Service & Logistics in January 2010. In June 2010, Mr. Tan was transferred to Euro Uno Sales & Service Sdn Bhd, now known as Milux Sales & Service Sdn Bhd, another subsidiary of the Company, as General Manager, Sales. In November 2011, he was redesignated to General Manager, Operations to oversee the running of the Company’s subsidiaries namely, T.H. Hin Sdn Bhd, Milux Sales & Service Sdn Bhd, Brightyield Sdn Bhd and Eurobay Industries Sdn Bhd.

Mr. Tan currently sits on the Board of the Company’s subsidiaries. In addition, he also sits on the Board of several other family owned private limited companies.

Time committed :

Mr. Tan attended all the 5 Board Meetings.


23

ANNUAL REPORT 2017

Ng Tek Che, 62Executive DirectorMalaysian, Male


25 August 2016


1 year 8 months


Nil


• Honorary Doctorate from Burkes University• Master Degree in Business Administration from Charles Sturt University• Diploma in Mechanical and Automotive Engineering from Tunku

Abdul Rahman College



Nil


Nil


Mr. Ng Tek Che is presently the Chairman of Prime Oleochemical Industries Sdn Bhd. He started his career as a Design Engineer with a M&E Consulting firm in 1980. In 1981, he joined a Brunei based engineering companyspecialising in air-conditioning system. He gained his operational industrial experience during his employment with this company and was largely involved in project tendering, management and supervision of on-going projects. He returned to Malaysia and joined Entech Engineering Sdn. Bhd. as a Sales Engineer of HVAC controls and George Kent (M) Berhad as a ProjectSalesEngineerin1983and1985respectively.

In 1986, Mr. Ng founded Metronic Engineering Sdn Bhd (MESB), anengineeringservicescompanyspecialisinginthefieldofIntelligentBuildingManagement System (IBMS) and Integrated Security Management System (ISMS). Over the years, he took MESB from a small company into one of the key players in IBMS and ISMS industry. He successfully took the company public and listing on the MESDAQ Market of Bursa Malaysia Securities Berhad in 2004 under the holding company, Metronic Global Berhad (MGB) and he was appointed as the Group Managing Director of MGB. Under his leadership, MGB grew and expanded rapidly and was subsequently transferred to the Main Market of Bursa Malaysia in 2007. He resigned as the Group Managing Director of MGB in November 2012 to pursue other business interest.

Time committed :

Mr. Ng attended all the 5 Board Meetings.


24


Ho Pui Hold, 35Independent Non-Executive DirectorMalaysian, Male


25 August 2016


1 year 8 months


• Chairman of Audit and Risk Committee• Member of Nomination and Remuneration Committee


• FellowshipoftheAssociationofCharteredCertifiedAccountants (FCCA)• Member of the Malaysian Institute of Accountants (MIA)• Member of the ASEAN Chartered Professional Accountant (ACPA)



• HB Global Limited • Aturmaju Resources Berhad • MalaysiaPacificCorporationBerhad


Nil


Mr. Ho was appointed as Independent Non-Executive Director of the Company on 25 August 2016.

Mr. Ho is presently a director of Weng Heng Loong Engineering Sdn. Bhd. He has accumulated more than 12 years of working experience in the accounting, auditing and banking industry. During the period of 2006 to 2009, heworked as SeniorAudit Associate inMessrs, Ernst& Young,responsible for auditing of public listed companies and privately owned companiesofthefirm.Thereafter,hejoinedAmbank(M)Berhad-Corporateand Institutional Banking as Senior Executive and promoted to Assistant Managerduringtheperiodfrom2009to2011.

Mr. Ho has been re-designated from a member of the Audit and Risk Committee to the Chairman of the Audit and Risk Committee with effect from 1 January 2018. He is also a member of the Nomination and Remuneration Committee.

Time committed :

Mr. Ho attended all the 5 Board Meetings.


25

ANNUAL REPORT 2017

Dato’ Mohamed Salleh Bin Bajuri, 67Non-Independent Non-Executive DirectorMalaysian, Male


19May2005


12 years 11 months


Nil


• Chartered Accountant from Ireland • Member of Malaysian Institute of Accountants (MIA)



• Eden Inc. Berhad • Sam Engineering & Equipment (M) Berhad


• CRSC Holdings Berhad Group


Dato’SallehwasappointedasIndependentNon-ExecutiveDirectoron19May 2005. He was re-designated as a Non-Independent Non-Executive Director and ExecutiveDirector on 29December 2005 and 1 September2006 respectively. Subsequently on 25 August 2016, Dato’ Salleh was re-designated from Executive Director to Non-Independent Non-Executive Director.

HecamebacktoMalaysia in1979,and joinedPeatMarwick&Co.as itsSenior Auditor. He then joined Mayban Finance Bhd. as a Manager and in 1982,waspromotedtoGeneralManager.HewaslatersecondedtoMalayanBankingBhdandpromotedtoGeneralManagerin1988,apositionhehelduntil1992. Between 1982 & 1987, Dato’ Salleh was the Alternate Chairman of theAssociation of Finance Companies in Malaysia (AFCM) and was Chairman ofAFCMCommittees for Education and Public Relations. From1997 to1999,hewasaDirectorofAmanahSahamSabahBerhadandwasoneofthe trustees for Yayasan Kebajikan SDARA and also Tabung Melayu Pontian Sdn. Bhd. He was also the Chairman of Agrobank Berhad (formerly known as Bank Pertanian Malaysia Berhad) from 2008 to 2010.

In 1992, Dato’ Salleh took over JB Securities Sdn. Bhd., a stock brokingfirminJohor.HewastheManagingDirectorofJBSecuritiesfrom1992to1995.Hethen,in1995joinedCRSCGroupofCompanieswhichisinvolvedin property development and he is presently the Deputy Chairman of the company.

Time committed :

Dato’ Salleh attended all the 5 Board Meetings.


26


Ang Joo Seng, 60Independent Non-Executive DirectorMalaysian, Male


2 August 2010


7 years 8 months


• Member of Audit and Risk Committee• Member of Nomination and Remuneration Committee


• Sijil Pelajaran Malaysia



Nil


Nil


Mr. Ang has vast experience in the business of trading of various merchandising items in Sarawak and Peninsular Malaysia. Currently, he is more actively involved in the business of fertilizer distribution in Malaysia and China (mainly in the area of phosphate, which is one of three main ingredients in Fertilizer compounding) via Destinasi Emas Sdn. Bhd.

He currently sits on the Board of several private limited companies.

Time committed :

Mr. Ang attended 3 out of the 5 Board Meetings.


27

ANNUAL REPORT 2017


Chua Seong Seng, 56Non-Independent Non-Executive DirectorMalaysian, Male


23 June 2015


2 years 10 months


Nil


• BA Economics Present Directorship(s)


Nil


Nil


Mr. Chua is an Economist and has more than 20 years of experience in corporatefinancespecialisinginpropertydevelopment.Hehasextensiveexperience in structuring property and plantation corporate transactions particularlyinfinancingandmarketingincludingreversetake-overofpubliclisted company via asset injection and swapping of public listed shares with on-going business.

He also owns a registered real estate agency and property consultancy firmwhich has been in operation for the last 29 years. The firm is oneof the pioneers in the real estate industry in Malaysia and a participating memberoftheMalaysiaMySecondHome(MM2H)programme.Thefirmhas expanded its operations to service a truly global audience, with clientele from the Europe, South East Asia and Middle East.

He is presently the CEO of RGF Land Sdn Bhd and embarked in various property developments in Malaysia.

Time committed :

Mr. Chua attended 4 out of the 5 Board Meetings.

Notes:-

(1) Family relationship None of the Directors have family relationship with any Director/major shareholder of the Company.

(2) ConflictofInterests Otherthanpermittedrelatedpartytransactions,noneoftheDirectorshaveanyconflictofinterestswiththeCompany.

(3) Convictionofoffences NoneoftheDirectorshavebeenconvictedofanyoffencewithinthepastfive(5)yearsotherthantrafficoffences(ifany).

(4) Public sanction or penalty imposed by relevant regulatory bodies None of the Directors have any particulars of any public sanction or penalty imposed on them by the relevant regulatory bodies

duringthefinancialyear.

28


Koh Pee Seng, 67Group Managing DirectorMalaysian, Male

Mr. Koh was appointed as the Group Managing Director on 20 April 2012. He was initially appointed as Independent Non-Executive Director of the Company on 27 April 2006 and was subsequently re-designated as Executive Director on 30 October 2007.

HisprofileislistedintheProfileofDirectorssetoutinthisAnnualReport.

Tan Chee How, 37Executive DirectorMalaysian, Male

Mr. Tan has been re-designated from Non-Independent Non-Executive Director to Executive Director on 12 October 2016.


Ng Tek Che, 62Executive DirectorMalaysian, Male

Mr. Ng Tek Che was appointed as the Executive Director of the Company on 25 August 2016.


Wong Wai Keong, 58ChiefFinancialOfficerMalaysian, Male

Mr. Wong is an Associate Member of the Chartered Institute of Management Accountant and also a member of Malaysian Institute of Accountants.

Mr.WongstartedhiscareerinthefinancialservicesindustryasaCreditandMarketingofficer/BranchManagerinArabMalaysianCreditBerhadfrom1982to1989.In1989,hejoinedSogelease(Malaysia)BerhadasanAssistantManager.HelefthispositionasSeniorManagerinSogelease(Malaysia)Berhadin1993tojoinArtwrightMarketingSdn.BhdasHeadof Finance and was subsequently appointed General Manager, Finance of Artwright Holdings Berhad. He left Artwright Holdings Berhad in 2000 to pursue his own business. He joined Milux Corporation Berhad as General Manager, Finance andAdministrationin2006andwasredesignatedasChiefFinancialOfficerin2008.

PROFILE OF SENIOR MANAGEMENT

29

ANNUAL REPORT 2017

PROFILE OF SENIOR MANAGEMENT (cont’d)

Lim Hock Seng, 54General Manager, T.H. Hin Home Tech Sdn. Bhd. & Enamel Products Sdn. BhdMalaysian, Male

Mr. Lim who completed his Standard 5 education has more than 30 years of experience in the manufacturing of gas appliances. He started his career in T.H. Hin Home Tech Sdn. Bhd. (“HomeTech”), a wholly owned subsidiary of the Company in1984asaStorecumDeliverypersonnel.In1986,hewastransferredtotheProductionDepartmentasanoperatorandwaspromotedtothepositionofProductionSupervisorin1988.In1996,Mr.LimwastransferedtotheProjectDepartmentasaProjectcumQualityControlExecutiveandwasappointedasaSeniorProjectExecutivein1999.Hewasredesignatedas Head of Project Department in 2001 and was appointed Project Assistant Manager in 2005 and became the Acting Head of Research & Development in the same year. He was appointed to his current position in 2006.

Notes:-

Save as disclosed above, none of the Senior Management has:-

(a) Any other directorship in public companies and listed issuers;

(b) any family relationship with any Director/major shareholder of the Company;

(c) anyconflictofinterestswiththeCompany;

(d) been convictedof anyoffenceswithin thepast five (5) years other than trafficoffences (if any) and anypublicsanctionorpenaltyimposedbytherelevantregulatorybodiesduringthefinancialyear.

30


2017 2016 2015 2014 2013 RM ‘ 000 RM ‘ 000 RM ‘ 000 RM ‘ 000 RM ‘ 000 (16 months) Revenue 79,695 72,438 69,889 57,012 79,742 Profit/(Loss)BeforeIncomeTax (616) (1,540) 1,587 (3,824) (8,987) Profit/(Loss)ForTheYear (839) (2,665) 323 (4,051) (9,426) Net Earnings/(Loss) Per Share (sen) (1.54) (4.90) 0.59 (7.56) (19.24) Net Assets Per Share (RM) 0.82 0.83 0.88 0.88 0.94 Shareholders’ Funds 44,551 45,386 48,051 47,726 46,682 Total Assets 60,765 60,308 60,479 56,903 58,197 Total Liabilities 16,214 14,922 12,428 9,177 11,514 Gross Dividend Per Ordinary Share (sen) - - - - -

5 - YEAR GROUP FINANCIAL HIGHLIGHTS

REVENUERM’000

TOTAL ASSETSRM’000

0

20

40

60

80

100

120

0

20

40

60

80

100

120

2016 2017201520142013 2016 2017201520142013

72,4

38

79,6

95

60,3

08

60,7

65

69,8

89

57,0

12

79,

742

60,4

79

58,

197

56,

903

31

ANNUAL REPORT 2017

The Board of Directors (“Board”) of Milux Corporation Berhad (“Milux” or “the Company”) is committed to ensure high standard of corporate governance practices are implemented and maintained throughout the Company and its subsidiaries (“the Group”). The Board believes that a robust corporate governance framework is a cornerstone of a successful and sustainable company as well as is a fundamental part of discharging its responsibilities to safeguard the long term interest of its shareholders and other stakeholders.

This statement also serves to comply with Paragraph 15.25 of the Main Market Listing Requirements (“Main LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and is to be read together with the Corporate Governance Report (“CG Report”) as published in the Company’s website at www.milux.com.my/investor-relations.

PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS

I. Board Responsibilities

(1) Clear Functions of the Board and Management

The Board has established, amongst others, a formal schedule of matters reserved for the Board and those delegated to Management.

The Board has established a Board Charter on 25 February 2014 to provide guidance and clarity for Directors and Management with regard to the roles of the Board, the Board Committees as well as those of Management. The Board Charter has been reviewed and updated on 27 March 2018 to be in line with the recent changes in Malaysian Code on Corporate Governance (“MCCG”).

The formal schedule of matters reserved for the Board has been duly stipulated in the Board Charter and is available for viewing on the Company’s corporate website at www.milux.com.my.

(2) Roles and Responsibilities of the Board

The Board is responsible for the overall corporate governance, strategic direction and corporate goals and therefore monitors the achievement of these goals. The Board provides effective leadership and manages overall control of the Group’s affairs through the discharge of the following principal duties and responsibilities:-

• Reviewing and adopting a strategic plan for the Company/Group;• Overseeing the conduct of the Company/Group’s business;• Identification of principal risks and implementation of appropriate internal controls and mitigation

measures;• Succession Planning;• Overseeing the development and implementation of a shareholder communications policy for the

company; and• Reviewing the adequacy and the integrity of the Group’s internal control systems and management

information systems.

(3) Separation of Position of the Chairman and Group Managing Director

The position of the Chairman of the Board and Group Managing Director (“Group MD”) are held by different individuals. Tuan Haji Mohd Anuar Bin Haji Mohd Hanadzlah (“Tuan Haji Anuar”) is the Independent Non-Executive Chairman while Mr. Koh Pee Seng (“Mr. Koh”) is the Group MD.

The Board Charter has outlined the role of the Chairman as well as the role of the Group MD to ensure accountability and division of responsibilities.

(a) Chairman of the Board

The Chairman is responsible in providing leadership for the Board to ensure that all Directors receive sufficientandrelevantinformationonfinancialandnon-financialmatterstoenablethemtoparticipateactively in Board decisions. The key roles and responsibilities of the Chairman as set out in the Board Charter of the Company include:-

• To provide leadership to the Board, without limiting the principle of collective responsibility for Board decisions.

CORPORATE GOVERNANCE OVERVIEW STATEMENT

32


PRINCIPLE A: BOARD LEADERSHIP AND EFFECTIVENESS (cont’d)

I. Board Responsibilities (cont’d)

(3) Separation of Position of the Chairman and Group Managing Director (cont’d)

(a) Chairman of the Board (cont’d)

• To chair meetings of the Board in a manner that will encourage constructive discussion and effective contribution from each Director.

• To review the minutes of meetings of the Board before meetings, to ensure that such minutes accurately reflect theBoard’s deliberations, andmatters arising from theminutes andonwhichfurther action is required have been addressed.

• To initiate the establishment of Board Committees and ensuring that they achieve their objectives.

• To promote high levels of corporate governance.

The Chairman acts as an informal link between the Board and Management.

The Chairman is expected to be kept informed by the Management of all important matters and make himself available to the Management, to be part of the control mechanism in ensuring that the Management’s decisions are properly considered and to give assistance and advice when needed.

(b) Group MD

The Board will link the Company’s governance and management functions through the Group MD whom is accountable to the Board for the achievement of the Company Goals and the observance of the Management limitations.

(4) Company Secretaries

The appointment and removal of the Company Secretaries are matters for the Board. All Directors have access to the advice and services of the Company Secretaries, who are responsible for ensuring that board procedures are followed and that applicable rules and regulations are complied with. Also, the Company Secretaries ensure that the deliberations at the Board meetings are well captured and minuted.

Both the Company Secretaries are members of the Malaysian Institute of Chartered Secretaries and Administrators (“MAICSA”)andarequalifiedtoactascompanysecretaryunderSection235(2)oftheCompaniesAct2016.

ThebriefprofileoftheCompanySecretariesareasfollows:-

(a) Ms. Chua Siew Chuan, FCIS

Ms.ChuahasbeenelectedasaFellowMemberoftheMAICSAsince1997.Shehasmorethan37yearsof experience in handling corporate secretarial matters, with working knowledge of many industries and government services.

Ms. Chua is a Chartered Secretary by profession. She is the Managing Director (“MD”) of Securities Services (Holdings) Sdn. Bhd., a prominent corporate secretarial service provider in Malaysia. Ms. Chua is also the named company secretary for a number of public listed companies, public companies and private limited companies.

Ms. Chua has been appointed as Company Secretary to the Group with effect from 3 October 2011.

CORPORATE GOVERNANCE OVERVIEW STATEMENT (cont’d)

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(4) Company Secretaries (cont’d)

(b) Mr. Cheng Chia Ping, ACIS

Mr. Cheng has been elected as an Associate Member of the MAICSA since 2012. He has more than 10 years of experience in handling corporate secretarial matters, with working knowledge of many industries andnon-profitorganisations.

Mr. Cheng is a Chartered Secretary by profession. He is a Manager (Corporate Secretarial) of Securities Services (Holdings) Sdn. Bhd., a prominent corporate secretarial service provider in Malaysia. Mr. Cheng is also the named company secretary for a number of public listed companies, public companies and private limited companies.

Mr.ChenghasbeenappointedasCompanySecretarytotheGroupwitheffectfrom29October2012.

(5) Access to Information and Advice

The Board meeting is held at least quarterly, and more frequently as and when business or operational needs arise. At the Board Meeting in November, the Company Secretaries will prepare and table an Annual Meeting Schedule,essentiallyacompilationofalistofpossibledatesforthenextfinancialyear.TheBoardwillreviewandagrees on the possible meeting dates proposed, prior to approving the Annual Meeting Schedule for adoption.

All Board members are supplied with information on a timely manner, where possible. The agenda of the Board Meeting is set in consultation with the Chairman and Group MD. Apart from the ad-hoc meetings, due notice of at least seven (7) days is given to the Directors. This will allow the Directors to plan ahead and to maximise their participation.

Board papers are circulated at least three (3) days prior to Board meetings and the materials provide, amongst others,financialandcorporateinformation,significantfinancialandcorporateissues,theGroup’sperformanceand any management proposals which require the approval of the Board. Technology and Information Technology are effectively used in Board Meetings and communications with the Board. The Company’s Articles of Association has been previously amended to enable the Directors to participate in meetings by audio or video conference.

All Directors have access to the advice and services of the Company Secretaries in addition to others members

of the Management in furtherance of their duties.

Protocol for seeking external professional advice

Where appropriate, the Directors may collectively or individually consult advisers and/or to obtain independent professionaladviceattheCompany’sexpenseonspecificissuestoenabletheBoardtomakewell-informeddecisions in discharging their duties on the matters being deliberated.

For the financial year ended 31 December 2017 and up to the date of this Statement, the Company hasengaged an outsourced Information Technology (“IT”) company, EBC Computers Sdn. Bhd. to undertake regular maintenance of Head Quarter’s IT system and to provide IT support to staff who have issues with their personal computers and to ensure adequate security measures are taken to mitigate the cyber security risk of the Company.

As the designated contact person, Tuan Haji Anuar has also been accorded the right to seek advice from externalprofessionalsonaspecificsubjectmatter raisedtohimby theshareholders,at theexpenseof theCompany, if so required.


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(6) Board Charter

The Company has adopted a Board Charter which governs how the Board conducts its affairs. The Board Charter sets out the composition, role, responsibilities, structure and processes of the Board. The objectives of this Board Charter are to ensure that all Board members acting on behalf of the Company are aware of their duties and responsibilities as Board members and the various legislations and regulations affecting their conduct and that the principles and practices of good corporate governance are applied in all their dealings in respect, and on behalf of, the Company.

In view of the recent amendments of the Main LR of Bursa Securities and MCCG, the Board Charter has been revised and updated by the Board on 27 March 2018.

An updated copy of the Board Charter is available at the Company’s corporate website at www.milux.com.my.

(7) Code of Ethics and Conduct

The Board has adopted a Code of Ethics and Conduct (“the Code”) which sets forth the values, expectations and standards of business ethics and conduct to guide the Board, the Management and employees of the Group. The Code is adopted to maintain the highest level of integrity and ethical conduct of the Board, Management and employees of Milux Group.

The Code is established to promote a corporate culture which engenders ethical conduct that permeates throughout the Company and Group.

Whistle Blowing

TheGroup’sWhistleBlowingpracticeshavebeenencapsulated in theCode. It isaspecificmeansbywhichanemployee/officerorstakeholdercanreportordisclosethroughestablishedchannels,concernsaboutanyviolations of the Code, unethical behaviour, malpractices, illegal acts or failure to comply with regulatory requirements that is taking place / has taken place / may take place in the future.

Handling of Reported Allegation(s)

The Audit and Risk Committee (“ARC”) is responsible for the interpretation and supervision of the enforcement of this Whistle Blowing procedure. The action to be taken by the Group in response to a report of concern will depend on the nature of the concern. The ARC shall receive information on each report of concern and ensure that follow-up actions be taken accordingly.

Designated contact person

As indicated in the Board Charter, the office of Senior Independent Non-Executive Director (“SINED”) has beenidentifiedasthedesignatedcontactpointtowhomconcernmayberaised,includingbutnotlimitedtoconsultation and direct communication with Shareholders on areas that cannot be resolved through the normal channels of contact with the Company, at the expense of the Company.

In view of there is no SINED in the Company, Tuan Haji Anuar, the Independent Non-Executive Chairman of the Company has been appointed as the new designated contact person.

Communication and Feedback Channels

Report(s) can be made in verbal or in writing in the following manners:-

• By Letter – to be forwarded in a sealed envelope to the below mentioned designated person and labelled with a legend “To be opened by the Independent Non-Executive Chairman only”; or


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(7) Code of Ethics and Conduct (cont’d)

Communication and Feedback Channels (cont’d)

• By Email – to be forwarded vide secure email to the below mentioned designated person with the heading of “For the eyes of the Independent Non-Executive Chairman only”.

Forthefinancialyearended31December2017anduptothedateofthisStatement,theCompanyhasnot received any report from any party.

In view of the recent amendments of the Main LR of Bursa Securities and MCCG, the Code has been revised and updated by the Board on 27 March 2018.

An updated copy of the Code is available at the Company’s corporate website at www.milux.com.my.

(8) Promote Sustainability

As a good corporate citizen, the Board views the commitment to sustainability and Environmental, Social and Governance (“ESG”) performance as part of its broader responsibility to clients, shareholders and the communities in which it operates.

II. Board Composition

(1) Board Composition and Balance

TheBoardconsistsofeight(8)memberscomprisingthree(3)ExecutiveDirectorsandfive(5)Non-ExecutiveDirectors. Of the five (5) Non-Executive Directors, three (3) are independent and therefore the prescribedrequirementforonethird(1/3)ofthemembershipoftheBoardtobeindependentBoardmembersisfulfilled.This independent element brings an objective and independent judgement to the decision-making process of theBoard.ThebiographicaldetailsoftheBoardmembersaresetoutintheDirectors’ProfileofthisAnnualReport.


Formatters relating tofinancial reporting;unethicalor illegal conduct;employment-relatedconcerns; or of any other nature, one can report directly to the following designated person:-

Independent Non-Executive Chairman

Tuan Haji Mohd Anuar Bin Haji Mohd Hanadzlah Postal Address:-

c/o Milux Corporation BerhadNo. 31, Lorong Jala 14/KS10Off Jalan Telok Gong42000 Pelabuhan KlangSelangor Darul Ehsan Email Address:[email protected]

Contact No:-03-3134 1254

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II. Board Composition (cont’d)

(1) Board Composition and Balance (cont’d)

Tuan Haji Anuar as Independent Non-Executive Chairman of the Board has also adhered to the recommendation of MCCG.

The Board structure ensures that no individual or group of individuals dominates the Board’s decision-making process. The composition of the Board provides an effective blend of entrepreneurship, business and professional expertiseingeneralmanagement,finance,corporateaffairsandtechnicalareasoftheindustryinwhichtheGroup operates. The individuality and vast experience of the Directors in arriving at collective decisions at board level will ensure impartiality.

(2) Tenure of Independent Directors

The MCCG recommended that the tenure of an Independent Director should not exceed a cumulative terms of nine(9)years.Uponcompletionofthenine(9)years’terms,anIndependentDirectormaycontinuetoserveonthe Board subject to the director’s re-designations as a non-independent director.

In the event the Independent Director was to remain designated as an Independent Non-Executive Director, theBoardshallfirstlytoprovidejustification,upontherecommendationoftheNominationandRemunerationCommittee (“NRC”) and thereafter to obtain the relevant Shareholders’ approval.

If the Board continues to retain the Independent Director after the twelfth (12) years, annual shareholders’ approval must be sought through a two-tier voting process to retain the said director as an independent director (subject to the Articles of Association of the Company be amended to provide the same).

TheBoardnotedtherewerenoIndependentDirectorswhosetenureexceedsacumulativetermofnine(9)yearsin the Company thus far.

(3) Annual Assessment of Independence of Directors

TheBoardsubscribesmainlytotheconceptof independence intandemwiththedefinitionof IndependentDirector in Paragraph 1.01 of the Main LR of Bursa Securities through the assistance of the NRC.

The Board noted that Letters of Declaration has been executed by the following Independent Non-Executive Directors (“INEDs”) of theCompany, confirming their independencepursuant to relevantMain LRofBursaSecurities as well as the MCCG and that they have undertaken to inform the Company immediately should there be any change which could interfere with the exercise of their independent judgement or ability to act in the best interest of the Company:-

• Tuan Haji Anuar; • Mr. Ang Joo Seng; and• Mr. Ho Pui Hold.

Based on the outcome of the Directors’ self-assessment and peer assessment evaluation; the evaluation on the effectiveness of the Board as a whole, as well as the additional assessment on the independence of the INEDs, theBoardissatisfiedwiththelevelofindependencedemonstratedbytheINEDsandtheirabilitytoactinthebest interest of the Company.

The Board considers that its INEDs provide an objective and independent views on various issues dealt with at the Board and Board Committee level. All INEDs are independent of management and free from any relationship. TheBoardisoftheviewthatthecurrentcompositionofINEDsfairlyreflectstheinterestofminorityshareholdersin the Company through the Board representation.


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(4) Senior Independent Non-Executive Director (“SINED”)

The position of SINED was vacant at present since the resignation of the former SINED of the Company in August 2016. As outlined in the Board Charter, the responsibilities of SINED are as follows:-

• to serve as a designated contact person for consultation and direct communication with shareholders on areas that cannot be resolved through the normal channels of contact with the Company, at the expense of the Company.

• to seek assistance from the Group MD or Executive Directors and/or any senior Management of the

Company, if so required, to resolve the issues raised by the shareholders to him.

• toseekadvicefromexternalprofessionalsonaspecificsubjectmatterraisedtohimbytheShareholders,at the expense of the Company, if so required.

• to report to the Board on any pertinent issues raised by the Shareholders that warrants the Board’s attention and/or further action.

• to ensure all INEDs have an opportunity to provide input on the agenda and advise the Chairman on the quality, quantity and timeliness of the information submitted by Management that is necessary or appropriate for the INEDs to perform their duties effectively;

• to serve as Chair of the NRC pursuant to Recommendation of MCCG.

(5) Board Committees

TheBoardhasputinplacethefollowingBoardCommitteestoassistincarryingoutitsfiduciaryduties:-

• Audit and Risk Committee (“ARC”); and• NRC.

All of these Board Committees have written terms of reference (“TOR”) clearly outlining their objectives, duties andpowers.ThefinaldecisionsonallmattersaredeterminedbytheBoardasawhole.

(6) ARC

ThemembershipoftheARCandasummaryofitsactivitiesduringthefinancialyear,includinganevaluationof the independent audit process, are set out in the ARC Report of this Annual Report. In line with the recent amendments in the Main LR of Bursa Securities and MCCG, the TOR of the ARC has been revised and updated by the Board on 27 March 2018.

An updated copy of the TOR of the ARC is available at the Company’s corporate website at www.milux.com.my.


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(7) NRC

The NRC comprises exclusively of the following INEDs:- Number of NRC Meetings attended / held in theName Designation Directorship financial year under review

Tuan Haji Anuar Chairman Independent Non-Executive Chairman 3/3Ang Joo Seng Member Independent Non-Executive Director 1/3Ho Pui Hold Member Independent Non-Executive Director 3/3

TheNRCmetthree(3)timesduringthefinancialyearunderreview.

The NRC is governed by its TOR and its principal objectives are:-

• to assist the Board of Directors in their responsibilities in nominating and selecting new nominees to the Board of Directors and to assess the Directors of the Company on an on-going basis; and

• to assist the Board of Directors in their responsibilities in assessing the remuneration packages of the executive and non-executive directors.

In line with the recent amendments in the Main LR of Bursa Securities and MCCG, the TOR of the NRC has been revised and updated by the Board on 27 March 2018.

An updated copy of the TOR of the NRC is available at the Company’s corporate website at www.milux.com.my.

(a) Activities undertaken during the financial year

Forthefinancialyearended31December2017,theNRChasundertakenthefollowingactivities:-

(i) Conducted the Peer-to-Peer Performance Evaluation in accordance with the following three (3) major criteria:-• Contribution to Board Meeting(s);• Quality of input; • Understanding of role; andArising from the peer-to-peer review, reviewed the contribution of each Director.

(ii) Conducted the Effectiveness of the Board Evaluation to assess the effectiveness of the Board and the Board Committees;

(iii) Reviewed the Independency of the Independent Directors;

(iv) Reviewed and recommended to the Board, the re-election of the Directors who will be retiring at the forthcoming Annual General Meeting (“AGM”) of the Company; and

(v) ReviewedtheremunerationpackagesoftheGroupMDandExecutiveDirectorsforthefinancialyearended 31 December 2017;


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(7) NRC (cont’d)

(b) Develop, maintain and review criteria for recruitment and annual assessment of Directors

(i) Appointment of the Board and Re-election of Directors Appointment of the Board

The policies and procedures for recruitment and appointment of Directors are set out in the Board Charter.

Pursuant to the TOR of NRC, the NRC is tasked to identify and select potential new candidate and to make recommendations to the Board for the appointment as a Director of the Company.

As part of its evaluation procedures, representative(s) of the NRC will conduct an informal interview with the potential candidate(s) before it make any recommendation.

Re-election of Directors

Article 80 of the Articles of Association of the Company state that one-third (1/3) of the Directors shallretirefromofficeandshallbeeligibleforre-electionateachAGM.AllDirectorsshallretirefromofficeat leastonceineachthree(3)yearsbutshallbeeligibleforre-election.Assuch,pursuantto Article 80, the following Directors are to retire at the forthcoming Twenty-Third AGM of the Company (hereinafter referred to as “the Retiring Directors”):-

• Mr. Koh; • Dato’ Mohamed Salleh Bin Bajuri (“Dato’ Salleh”); and• Tuan Haji Anuar.

For Mr. Koh, the NRC has conducted the following assessment based on the criteria as prescribed by the Main LR of Bursa Securities:-

• Character;• Experience;• Integrity and professionalism; and• Time commitment to discharge his roles.

The NRC further considered the following additional criteria:-

• Results obtained from the Peer-to-Peer Assessment Evaluation; and• Supply of relevant and timely information to the Board.

For Tuan Haji Anuar and Dato’ Salleh, the NRC has conducted the following assessment based on the criteria as prescribed by the Main LR of Bursa Securities:-

• Mix of skills;• Character;• Experience;• Integrity;• Competence; and • Time commitment to discharge their roles.


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(7) NRC (cont’d)

(b) Develop, maintain and review criteria for recruitment and annual assessment of Directors (cont’d)

(i) Appointment of the Board and Re-election of Directors (cont’d)

For Tuan Haji Anuar, he has been subjected to further assessment by the NRC as follows:-

• Satisfactory Test of Independence under the Main LR of Bursa Securities;• Independence from members of the Board and Management; • Free from any business relationship and/or other relationship which could interfere with the

exercise of independent judgement; and• Whether he has exercised his independent judgement and opinions in the Board and Board

Committees Meetings.

Uponreview,theNRCwassatisfiedwiththeperformanceoftheRetiringDirectors.TheBoardhasthenconcurred the same and resolved that Mr. Koh, Dato’ Salleh and Tuan Haji Anuar be recommended to the shareholders for approval at the forthcoming Twenty-Third AGM.

(c) Annual Assessment of the Board and Board Committees

The NRC conducted the following assessments annually:-

(i) Directors’ self-assessment and Peer assessment evaluation

In conducting the evaluation, the following main criteria were adopted by the NRC:-

(i) Contribution to interaction;(ii) Quality of Input; and(iii) Understanding of Role.

Basedontheevaluationconductedforthefinancialyearended31December2017,theNRCwassatisfiedwiththeperformanceoftheindividualmemberofBoard.

(ii) Evaluation on the effectiveness of the Board as a Whole and Board Committees

Basedontheevaluationconductedforthefinancialyearended31December2017,theNRCwassatisfiedwiththeperformanceoftheBoardasawholeaswellastheBoardCommittees.

(d) Gender Diversity

The Board does not have any formal gender diversity policy. Notwithstanding that, gender diversity has been adopted by the NRC as one of the criteria to be considered during the NRC’s assessment for potential candidate(s) for Board seat.

At present, the Board does not have any women Directors. The Board is putting its efforts in getting suitable women who could meet the objective criteria, merit and with due regard for diversity in skills, experience, age and cultural background to join the Board.

(e) Ethnicity Diversity

At present, the Board comprises two (2) Malay Directors and six (6) Chinese Directors.


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(7) NRC (cont’d)

(f) Age Diversity

The general age profile of themajority of the Directors were between fifties to sixties years of age.Notwithstanding that, Mr. Tan Chee How, the Executive Director, is 37 years of age, and Mr. Ho Pui Hold, an Independent Non-Executive Director, is 35 years of age, which underlies the Board’s commitment to introducing age diversity at the Board level appointment.

TheBoardbelievesthattheDirectorswithyoungerageprofilewillbeabletoprovideadifferentperspectiveand bring vibrancy to the Group’s strategy making process.

(8) Time Commitment

TheBoardrequiresitsmemberstodevotesufficienttimetotheworkingsoftheBoard,toeffectivelydischargetheir duties as Directors of the Company, and to use their best endeavours to attend meetings.

Forthefinancialyearended31December2017,theBoardhadconvenedatotaloffive(5)BoardMeetingsforthepurposesofdeliberatingontheCompany’squarterlyfinancialresultsattheendofeveryquarteranddiscussing important matters which demanded immediate attention and decision-making. During the Board Meetings, the Board reviewed the operation and performance of the Company and other strategic issues that might affect the Company’s business. Relevant staff were invited to attend some of the Board Meetings to providetheBoardwiththeirviewsandclarificationsonissuesraisedbytheDirectors.

The attendance recordof eachDirector at BoardofDirectors’Meetings during the last financial year is asfollows:-

Directors Attendance % of Attendance

Tuan Haji Mohd Anuar Bin Haji Mohd Hanadzlah 5 out of 5 100Koh Pee Seng 5 out of 5 100Ng Tek Che 5 out of 5 100Tan Chee How 5 out of 5 100Ho Pui Hold 5 out of 5 100Dato’ Mohamed Salleh Bin Bajuri 5 out of 5 100Ang Joo Seng 3 out of 5 60Chua Seong Seng 4 out of 5 80

The Board will also meet on an ad-hoc basis to deliberate urgent issues and matters that require expeditious Board direction or approval. In the intervals between Board meetings, any matters requiring urgent Board decisions and/or approval are sought via circular resolutions which supported with all the relevant information and explanations required for an informed decision to be made.

Board Protocol on Time Commitment

Asageneralrule,theDirectorsareexpectedtodevotesufficienttimeandattentiontotheaffairsoftheCompany.

The Board has in place the following protocols:-


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(8) Time Commitment (cont’d)

Board Protocol on Time Commitment (cont’d)

(a) Board appointment in other companies

AnyDirectoris,whileholdingoffice,atlibertytoacceptotherBoardappointment(s)inothercompaniessolongastheappointmentisnotinconflictwiththeCompany’sbusinessanddoesnotaffectthedischargeof his duty as a Director of the Company.

Prior the acceptance of new Board appointment(s) in other companies, the Directors should notify the Chairman of the Board and/or the Company Secretary in writing.

For the financial year ended 31December 2017 and up to the date of this Statement, theCompanySecretarieshasreceivedtwosuchnotificationsfromanIndependentNon-ExecutiveDirectoronhisnewappointment in other companies.

(b) Restriction on Directorship in other listed companies

NoneoftheDirectorshavemorethanfive(5)directorshipsinlistedissuers. (c) Annual Meeting Schedule

In facilitating the schedule of the Directors, the Company Secretaries will prepare and circulate in advance anannualmeetingschedule,whichincludesalltheproposedmeetingdatesforthewholefinancialyearofthe Board and the Board Committee Meetings, as well as the AGM. Upon the concurrence by all the Board members,theannualmeetingschedulewillbeadoptedfortheapplicablefinancialyear.

(d) Time commitment from Directors for meetings, circular resolutions and updates/ briefings

Board members are expected to achieve at least 50% attendance of total Board Meetings in any applicable financialyearwithappropriateleaveofabsencebenotifiedtotheChairmanoftheBoardand/orCompanySecretaries, where applicable.

Wherepossible,theCompanySecretarieswillinformtheDirectorsonanyupdates/briefingsreceivedfromany authority(ies) or training providers, to enable the Directors to keep abreast on the latest development/ updates on relevant topic of interest.

(e) Provision of business or professional services by the Directors

AnyDirectormayactbyhimselforhisfirminhisprofessionalcapacityfortheCompany,andheorhisfirmshallbeentitledtoremunerationforprofessionalservicesasifhewerenotaDirector,providedthatnothinghereincontainedshallauthoriseaDirectororhisfirmtoactasAuditoroftheCompany[Article102 of the Company’s Articles of Association and Board Charter].

(9) Trainings

The Board acknowledges the importance of continuous education and training to equip themselves for the effective discharge of its duties. New appointees to the Board undergo a familiarisation programme, which includes visits to the Group’s business operations and meetings with key management to facilitate their understanding of the Group’s operations and businesses.

All members of the Board have attended the Mandatory Accreditation Programme prescribed by Bursa Securities.ThedetailsofthetrainingsattendedbytheDirectorsduringthefinancialyeararedisclosedintheCorporate Governance Report which is available at www.milux.com.my.


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(9) Trainings (cont’d)

Training Needs 2018 The training needs of the Directors have been formalised and adopted as part of the assessment on the

Effectiveness of the Board as Whole. The NRC usually conducts such assessment at the NRC Meeting at the beginningofafinancialyearinordertodeterminetheareasthatwillbeststrengthentheDirectorscontributionto the Board.

III. Remuneration

(1) Directors’ Remuneration

Presently the Company does not have a formalised remuneration policies and procedures for Directors and Senior Management.

The objectives of the Group on Directors’ remuneration are to attract and retain Directors of the calibre needed to manage the Group successfully. In the case of the Group MD and Executive Directors, the component parts of their remuneration are structured to link rewards to corporate and individual performances. For Non-Executive Directors,theirlevelofremunerationreflectstheexperience,expertiseandlevelofresponsibilitiesundertakenby the particular Non-Executive Director concerned.

ThedetailsoftheremunerationforDirectorsforthefinancialyearended31December2017areasfollows:

Summary of total remuneration of Directors for Financial Year 2017

Benefit- Other Fee Salary EPF In-Kind Emoluments Total (RM) (RM) (RM) (RM) (RM) (RM)

COMPANY Executive Director KohPeeSeng - 390,600 26,226 - 50,456 467,282

Subtotal - 390,600 26,226 - 50,456 467,282

Non-Executive Directors Haji Mohd Anuar Bin Haji Mohd Hanadzlah 45,000 - - - 7,750 52,750 Ho Pui Hold 30,000 - - - 7,750 37,750 Dato’ Mohamed Salleh Bin Bajuri 30,000 - - - 3,750 33,750 Ang Joo Seng 30,000 - - - 4,250 34,250 Chua Seong Seng 30,000 - - - 3,000 33,000

Subtotal 165,000 - - - 26,500 191,500

TOTAL 165,000 390,600 26,226 - 76,956 658,782


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III. Remuneration (cont’d)

(1) Directors’ Remuneration (cont’d) Benefit- Other Fee Salary EPF In-Kind Emoluments Total (RM) (RM) (RM) (RM) (RM) (RM)

GROUP Executive Directors KohPeeSeng - 390,600 26,226 23,950 50,456 491,232 Dato’MohamedSallehBinBajuri - - 960 - 16,000 16,960 (refer to Note 2 below) TanCheeHow - 207,900 27,999 11,100 24,750 271,749 Ng Tek Che - 180,000 10,800 - 60,000 250,800

Subtotal - 778,500 65,985 35,050 151,206 1,030,741

Non-Executive Directors Haji Mohd Anuar Bin Haji Mohd Hanadzlah 45,000 - - - 7,750 52,750 Ho Pui Hold 30,000 - - - 7,750 37,750 Dato’ Mohamed Salleh Bin Bajuri 30,000 - - - 3,750 33,750 Ang Joo Seng 30,000 - - - 4,250 34,250 Chua Seong Seng 30,000 - - - 3,000 33,000

Subtotal 165,000 - - - 26,500 191,500

TOTAL 165,000 778,500 65,985 35,050 177,706 1,222,241

Notes: (1) Other emoluments consists of bonus and/or travelling allowance.(2) Dato’ Mohamed Salleh Bin Bajuri has been re-designated from Executive Director to Non-Independent

Non-Executive Director w.e.f. 25 August 2016. His other emoluments include bonus paid in year 2017 of RM16,000/- paid by a subsidiary of the Company for his role as Executive Director in year 2016.

Group MD and Executive Directors

The NRC reviews annually the performance of the Group MD and the Executive Directors and submits recommendationtotheBoardonspecificadjustmentinremunerationand/orrewardpaymentthatreflecttheircontributionsforthefinancialyear.Uponreview,theBoardhasinturnadoptedtheNRC’srecommendation.TheGroup MD and the Executive Directors have abstained from the deliberation and voting on the agenda item in relation to their individual remuneration.

Directors Fees

The Board as a whole determines the remuneration of the Non-Executive Directors.

Only the Non-Executive Directors are entitled to Directors’ Fees. The Directors Fees are at RM30,000/- per Director per annum. The Chairman of the Board, ARC and NRC received an additional of RM5,000/- per annum.

Forthefinancialyearended31December2017,atotalDirectors’FeesofRM165,000/-havebeenrecommendedto the shareholders for approval at the forthcoming Twenty-Third Annual General Meeting of the Company.


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III. Remuneration (cont’d)

(1) Directors’ Remuneration (cont’d)

Directors Benefits Payable

AsrequiredunderSection230(1)oftheCompaniesAct2016,anybenefitspayabletotheDirectorsmustbedisclosed and to obtain the approval of the shareholders.

Inviewthereof,theBoardhasestimatedthequantumofthebenefitspayabletotheDirectorsfortheperiodfrom1July2018to30June2019,i.e.thenextAnnualGeneralMeetingoftheCompanyamountedtoRM54,849/-.Thesebenefitscomprisedofmeetingallowancesandotherbenefitsonly.

(2) Key Senior Management Remuneration

In accordance with Practice 7.3 of the MCCG, a band of the remuneration for the top two key senior management (excludingtheGroupManagingDirectorandtheExecutiveDirectorsoftheCompany)duringthefinancialyearended 31 December 2017 are as follows:-

Remuneration Range (RM) Top Two Senior Management

350,001 – 400,000 1300,001 – 350,000 1

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT

I. Audit and Risk Committee (“ARC”)

The composition and details of activities carried out by the ARC during the year are set out in the ARC Report of this Annual Report.

FINANCIAL REPORTING

(1) Compliance with Applicable Financial Reporting Standards

TheCompany’sauditedfinancialstatementsarepreparedinaccordancewiththerequirementsoftheapplicableapproved accounting standards in Malaysia and the provisions of the Companies Act 2016 (“Act”).

TheARCassisttheBoardtooverseethefinancialreportingprocessandthequalityofitsfinancialreportingbyreviewing the information to be disclosed, to ensure completeness, accuracy and adequacy prior to endorsing the same to the Board for release to Bursa Securities.

The Board ensures that shareholders are presented with a clear, balanced, meaningful assessment of the Company’sfinancialperformanceandprospectsthroughtheissuanceoftheauditedfinancialstatementsandquarterlyannouncementsoffinancialresultsonatimelybasisandincompliancewiththeapplicablefinancialreporting standards.

(2) Assessment of Suitability and Independence of External Auditors

For thefinancial yearended31December2017, theARChasassessed thesuitabilityand independenceofexternal auditors vide an annual assessment of the suitability and independence of the external auditors. The requirement for such assessment has also been encapsulated in the Board Charter by the Board.


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PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT (Cont’d)

I. Audit and Risk Committee (“ARC”) (Cont’d)

(2) Assessment of Suitability and Independence of External Auditors (cont’d)

In its assessment, the ARC considered, inter alia, the following factors:-

For “Suitability” of External Auditors:-

• The External Auditors have the adequate resources, skills, knowledge and experience to perform their duties with professional competence and due care in accordance with approved professional auditing standards and applicable regulatory and legal requirements;

• To the knowledge of the ARC, the External Auditors do not have any record of disciplinary actions taken against them for unprofessional conduct by the Malaysian Institute of Accountants (“MIA”) which has not been reversed by the Disciplinary Board of MIA;

• TheexternalauditfirmhasthegeographicalcoveragerequiredtoaudittheCompany;• TheexternalauditfirmadvisestheARConsignificant issuesandnewdevelopmentspertainingtorisk

management,corporategovernance,financialreportingstandardsandinternalcontrolsonatimelybasis;• TheexternalauditfirmconsistentlymeetsthedeadlinessetbytheCompany;• Thelevelofqualitycontrolproceduresintheexternalauditfirm,includingtheauditreviewprocedures;

and• TheexternalauditscopeisadequatetocoverthekeyfinancialandoperationalrisksoftheCompany.

For “Independence” of the External Auditors:-

• Theengagementpartnerhasnot served foracontinuousperiodofmore thanfive (5)yearswith theCompany;

• TheARCreceiveswrittenassurancefromtheexternalauditorsconfirmingthattheyare,andhavebeen,independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements;

• Tenure of the current auditor.

The ARC noted that the existing External Auditors of the Company were appointed during the Twenty-Second Annual General Meeting held on 1 June 2017.

Uponcompletionofitsassessment,theARCwassatisfiedwithCASMalaysiaPLT’stechnicalcompetencyandauditindependenceduringthefinancialyear.

The Terms of Reference of the ARC has been amended on 27 March 2018 to be in line with the recent changes in the MCCG.

None of the members of the Board were former key audit partners and notwithstanding that in order to uphold the utmost independence, the Board has no intention to appoint any former key audit partner as a member of the Board.

II. Risk Management and Internal Control Framework

(1) Sound Framework to Manage Risks

TheBoardaffirmsthe importanceofmaintainingasoundsystemof internalcontrolsandriskmanagementpractices to good corporate governance. The ARC has been entrusted by the Board to ensure effectiveness of the Group’s internal control systems. The activities of the outsourced Internal Auditors are reported regularly to the ARC which provides the Board with the required assurance in relation to the adequacy and integrity of the Group’s internal control systems. It acknowledges its overall responsibility in this area and also the need to review its effectiveness regularly.


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ANNUAL REPORT 2017

PRINCIPLE B: EFFECTIVE AUDIT AND RISK MANAGEMENT (Cont’d)

II. Risk Management and Internal Control Framework (Cont’d)

(1) Sound Framework to Manage Risks (cont’d)

The Statement on Risk Management and Internal Control of the Group as set out in this Annual Report provides an overview of the state of risk management and internal controls within the Group.

(2) Internal Audit Function

The outsourced Internal Auditors communicate regularly with and report directly to the ARC. The outsourced InternalAuditors’representativemetupfour(4)timeswiththeARCforthefinancialyearended31December2017.

The Internal Audit Review of the Company’s operations encompasses an independent assessment of the Company’s compliance with its internal controls and makes recommendations for improvement.

Forthefinancialyearended31December2017,theARChasassessedtheperformanceofinternalauditorsvidean annual assessment of the suitability of the internal auditors.

In its assessment, the ARC considered, inter alia, the following factors:-

• Understanding;• Charter and structure;• Skills and experiences;• Communication; and• Performance;

Uponcompletionofitsassessment,theARCwassatisfiedwiththeoutsourcedInternalAuditor,PKFAdvisorySdn.Bhd.’stechnicalcompetencyandauditindependenceduringthefinancialyearunderreview.

PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

I. Communication with Stakeholders (1) Corporate Disclosure Policy

The Company is committed to ensuring that communications to the investing public regarding the business, operations and financial performance of the Company are accurate, timely, factual, informative, consistent,broadlydisseminatedandwherenecessary,informationfiledwithregulatorsisinaccordancewithapplicablelegal and regulatory requirements.

In line with that, the Board has adopted a Corporate Disclosure Policy to develop and maintain an established framework for making corporate disclosures.

The Directors of the Company, the Company Secretaries, all employees of the Company and its subsidiaries are obliged to observe the provisions of Corporate Disclosure Policy. Nonetheless, this Policy does not cover the following:-

(i) material information that is already in the public domain;(ii) material information that is not generated or owned by the Company;(iii) material information that summarises, realigns or is computed from material information that already in

the public domain.

This policy has been updated on 27 March 2018 and is available for viewing on the Company’s corporate website at www.milux.com.my.


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PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS (cont’d)

I. Communication with Stakeholders (cont’d)

(2) Leverage on Information Technology for Effective Dissemination of Information

The Company’s corporate website provides all relevant information on the Company and is accessible by the public. It includes the announcements made by the Company and annual reports. The Board discloses to the public all material information necessary for informed investment and takes reasonable steps to ensure that all shareholders enjoy equal access to such information.

The Company’s corporate website is accessible at www.milux.com.my.

(3) Shareholders’ Communication Policy

The Company recognises the value of transparent, consistent and coherent communications with investment communityconsistentwithcommercialconfidentialityandregulatoryconsiderations.

In line with that, the Board has adopted a Shareholders’ Communication Policy to ensure that all shareholders have ready and timely access to all publicly available information of the Company, to fairly and accurately represent the Company so that investors and potential investors can make properly informed investment decisions and others can have a balanced understanding of the Company and its objectives.

The Board has adopted the following measures with regards to communication with the Company’s shareholders:-

(i) Announcements to Bursa Securities

Material information, updates and periodic financial reports are published on a timely basis throughannouncements to Bursa Securities.

ShareholdersandInvestorscanobtaintheCompany’slatestannouncementssuchasquarterlyfinancialresults in the dedicated website of Bursa Securities at www.bursamalaysia.com.

(ii) Corporate Website

A corporate website (www.milux.com.my) is maintained and the said website contains relevant information for the shareholders, potential investors, suppliers and the general public.

(iii) Annual Reports

The Company’s Annual Reports to the shareholders remain the central means of communicating to the shareholders,amongstothers,theCompany’soperations,activitiesandperformanceforthepastfinancialyear end as well as the status of compliance with applicable rules and regulations.

(iv) AGMs/General Meetings

The AGM/General Meetings which are used as the main forum of dialogue for shareholders to raise any issues pertaining to the Company.


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ANNUAL REPORT 2017

PRINCIPLE C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS (cont’d)

I. Communication with Stakeholders (cont’d)

(3) Shareholders’ Communication Policy (cont’d)

(v) Designated Contact Persons

Any enquiry regarding investor relations from the shareholders may be conveyed to the following designated senior management personnel, the information of which has also been published on the Company’s Corporate Website:-

(I) Mr. Tan Chee How, Executive Director Email address: [email protected];

(II) Mr. Ng Tek Che, Executive Director Email address: [email protected];

(III) Mr. Wong Wai Keong,ChiefFinancialOfficer Email address: [email protected]

TelephoneNo.:180088MILUX(64589) FacsimileNo:03–31341193

II. Conduct of General Meetings

(1) Shareholders’ Participation at General Meetings

The Company communicates regularly with shareholders and investors through annual reports, quarterly financialreportsandvariousannouncementsmadeviaBursaLINKastheBoardacknowledgestheimportanceof accurate and timely dissemination of information to its shareholders, potential investors and the public in general.

The AGM provides an opportunity for the shareholders to seek and clarify any issues pertaining to the Group

and to have a better understanding of the Group’s activities and performance. Both individuals and institutional shareholders are encouraged to meet and communicate with the Board at the AGM and to vote on all resolutions. The Board is always available to meet members of the press after the AGM. All Directors were present at the Twenty-Second AGM of the Company held on 1 June 2017 to engage with the shareholders personally and proactively.

The notice of AGM together with the Annual Report is despatched to shareholders at least twenty-eight (28)

days prior to themeeting date. Sufficient notice period is given to the shareholders in order for them toschedule their time to attend the Company’s AGM.

(2) Poll Voting

In linewithParagraph8.29Aof theMain LRofBursaSecuritieson the requirement forpoll voting for anyresolution set out in the notice of general meetings, during the Twenty-Second AGM held last year, electronic voting was used to facilitate the voting process for resolutions tabled. An independent scrutineer was also appointed to scrutinise the polling process.


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KEY FOCUS AREAS AND FUTURE PRIORITIES

Lookingaheadtofinancialyearending2018and2019,theBoardanditsrespectivecommitteeswill:-

• Focus on major strategic issues to ensure sustainability and growth; • Continue to monitor succession planning for the senior leadership team, to ensure a healthy pipeline of talent is

available for future senior executive management;• Consider other variety of approaches and independent sources to identify suitable candidate for appointment of

Directors, should the need arise; and• Continue to review the balance, experience and skills of the Board.

CONCLUSION

TheBoardissatisfiedthatforthefinancialyearended31December2017,itcompliessubstantiallywiththeprinciplesandrecommendations of the MCCG.

This Corporate Governance Overview Statement is made in accordance with a resolution of the Board of Directors dated 27 March 2018.


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ANNUAL REPORT 2017


INTRODUCTION

This Statement on Risk Management and Internal Control by the Board on the Group is made in pursuant to Paragraph 15.26(b) of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and in accordance with the practices and guidance relating to risk management and internal controls provided in the Malaysian Code on Corporate Governance as well as the Statement on Risk Management and Internal Control: Guideline for Directors of Listed Issuers (“SRMICG”).

BOARD RESPONSIBILITY

The Board of Directors of Milux Corporation Berhad (“the Board”) recognizes the importance of maintaining a sound risk management and internal control system as well as reviewing its adequacy and effectiveness to ensure good corporate governance. The Board, whilst acknowledging its responsibility, recognizes that the risk management and internal control system is designed to manage, rather than eliminate, the risks that may impede the achievement of the Group’s business goals and objectives. Therefore, the system can only provide reasonable, but not absolute assurance, against the occurrence of any material misstatement, fraud or losses.

InviewoftheearlierfinancialconstraintfacedbytheGroup,theBoardhaselevatedandmergedtheRiskManagementCommittee with the Audit Committee. As such, the Audit and Risk Committee (“ARC”) assumes the oversight on risk management matters. The Board, through the ARC ensures that the risk management and internal control practices are adequately implemented in Milux Group and ensures that measures are undertaken by Management for improvement and/orrectification.

RISK MANAGEMENT FRAMEWORK

TheGrouphas inplaceprocesses for the identification,evaluation, reporting, treatment,monitoringand reviewof themajor strategic, business and operation risks within the Group with the assurance provided by the outsourced Internal Audit function(PKFAdvisorySdnBhd).Theprocesshasbeeninplaceforthefinancialyearunderreviewanduptotheapprovalof this statement for inclusion in the annual report.

The key aspects of the risk management framework are:

RiskIdentificationandCategorisation

Risk Treatment, Control and Responses

Risk AssessmentAssurance and Execution Of Internal Audit Plan

Risk Ownership and ResponsesReporting and Monitoring

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• Generally,theBoardisaccountablefortheGroup’soverallriskprofileandhasdelegatedtheoversightoftheriskmanagement function to theARCcomprising three (3) IndependentNon-ExecutiveDirectors.Therewerefive (5)meetings held for year 2017 with ARC members’ attendance as follows:

Members AttendanceMr. Ho Pui Hold 5 out of 5Tuan Haji Mohd Anuar Bin Haji Mohd Hanadzlah 5 out of 5Mr. Ang Joo Seng 3 out of 5

• The ARC noted that the risk management and internal control practices are adequately implemented in the Group and effective in its execution. In addition, the ARC ensures the policies and framework in place are able to manage the riskstowhichtheGroupisexposed,especiallyinareasofhighriskconcentrationidentified,i.e.successionplanningrisks and credit (default) risks.

• The likelihood of occurrence and magnitude of the impact of such risks are determined on an established risk matrix table based on the risk management assessment performed in November 2017. The assessment was performed by PKF AdvisorySdnBhdtofacilitateasystematicandconsistentidentificationofsignificantbusinessrisksandresponsibilitiesformanagingtheserisk;andfacilitateanobjectiveassessmentofkeycontrolstomanagetheidentifiedrisk.

• AllrecordofinformationaboutidentifiedriskswascapturedinaRiskRegisterthatwastabledtotheARC.Eventually,arisk-basedinternalauditplanforyear2018/2019wasproposedandapprovedbytheARCforcommencement.

• To enhance the cyber risk and IT security and as recommended by the ARC, the IT needs were outsourced to a third party for them to undertake regular maintenance and provide support to the operations. Maintenance work for both hardware and software items were performed once every fortnight with a request-based online support. The companyhasalsoinstalledspecificfirewalltoprotecttheoverallITSystem.

KEY INTERNAL CONTROL PROCESSES

The Group has an established internal control structure and is committed to maintaining the structure to ensure effective control over the Group’s business operations and to safeguard the value and security of the Group’s assets. There is a clearlydefinedoperatingstructurewithlinesofresponsibilitiesanddelegationofauthorityinplacetoassisttheBoardinmaintaining a proper control environment, supported by the following activities:

• Organization Structure

The organization structure outlines the authority, responsibility, segregation of duties and accountability. The Limit of Authority is reviewed when deemed necessary.

• Policies and Procedures

Clearly documented internal procedures set out in the Group Policies and Procedures Manuals regulating the Human Resource, Sales, Approval Authority Limits, Accounts and Store functions. It provides a common, clear understanding and consistent practice of policies and procedures across the Group to effectively support the Group’s operations. These procedures are updated when deemed necessary.

• Code of Ethics and Conduct

The Board has adopted a Code of Ethics and Conduct (“the Code”) which sets forth the values, expectations and standards of business ethics and conduct to guide the Board, the Management and employees of the Group. The Code is adopted to maintain the highest level of integrity and ethical conduct of the Board, Management and employees of Milux Group.

A summary copy of this code is available at the Company’s corporate website at www.milux.com.my.

• Management Information System

The Group recognizes the importance of information and communication technologies to promote effective and efficientbusinessoperationsaswellastimelyandaccuratecommunicationstoenhancethebusinessinterestsoftheGroup.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL(cont’d)

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ANNUAL REPORT 2017

• Internal Audit

TheGrouphasoutsourced its regular internal audit activities toan internal auditfirm toassess theadequacyofinternalcontrol,integrityoffinancialinformationprovidedandtheextentofcompliancewithestablishedprocedures.Focusingitsreviewandauditonthesekeyareas,theinternalauditprovidesindependentassuranceontheefficiencyandeffectivenessoftheinternalcontrolsystemimplementedbymanagement.TheinternalauditfirmreportstotheARConaquarterlybasisbypresentingtheinternalauditreports(includingmanagement’sresponsestoauditfindingsand recommendations) at meetings of the ARC.

• Audit and Risk Committee

Members of the ARC comprise independent non-executive directors who provide direction and oversight over the internalauditfunctionandenhanceitsindependence.TheARCmeetseachquartertoreviewinternalauditfindings,discuss risk management issues and ensure that weaknesses and issues highlighted are appropriately addressed by the management.

• Planning, monitoring and reporting

Annual budget is approved by the Board. Monitoring of quarterly Group’s actual results against budget are prepared and reported to the Board on a quarterly basis. These reports are reviewed and explanations obtained for variances before the Quarterly Results are approved for release to Bursa Securities for the public’s information.

The Group has in place adequate processes to monitor, trace and identify Related Party Transactions (“RPT”) whereby

it is a permanent agenda in the quarterly ARC Meeting where the list of RPT and quantum are stated.

• Control Environment

The Board is not aware of any significantweaknesses in internal control that can causematerial financial lossesduringthefinancialyearunderreview.Theabovecontrolarrangementsbeinginplaceprovidereasonableassuranceto the Board that the structure of control is appropriate to the Group’s operations and that risks are managed to an acceptable level throughout the Group’s diverse businesses. Such arrangements, however, do not eliminate the possibility of human error or deliberate circumvention of control procedures by employees or others. The Group will continue to take measures to strengthen the internal control and risk management system.

REVIEW OF THIS STATEMENT BY THE EXTERNAL AUDITORS

As required by Paragraph 15.23 of the MMLR, the external auditors have reviewed the Statement for the inclusion in the AnnualReportoftheCompanyforthefinancialyearended31December2017.Basedonthereview,theexternalauditorshave reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the risk management and internal control system within the Group.

BOARD ASSESSMENT

The Board has received assurances from the Group Managing Director, the Executive Directors and the Chief Financial OfficerthattheGroup’sriskmanagementandinternalcontrolsystemisoperatingadequatelyandeffectively,inallmaterialaspects. The Board maintains oversight of its interests in associate companies through representations on the respective Boardsoftheassociatecompaniesandthereceiptofquarterlyfinancialreportsthereon.ThisallowstheGroup’sintereststo be served. While the Board does not regularly review the risk management and internal control system of its associate companies as it does not have direct control over their operations, these representations also provide the Board with information to assess the performance of the Group’s investments. The Board is of the view that the risk management and internalcontrolsystemoftheGroupfortheyearunderreviewanduptothedateofissuanceofthefinancialstatementsisadequate and effective.

This Statement is made in accordance with the resolution of the Board of Directors passed on 27 March 2018.


(cont’d)

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TheAuditandRiskCommitteeispleasedtopresentthereportoftheAuditandRiskCommitteeforthefinancialyearended31 December 2017 (“FYE 2017”). The Board has approved this report by a resolution dated 27 March 2018.

Constitution

The Audit and Risk Committee (“ARC” or “the Committee”) of Milux Corporation Berhad (“Milux”) has been established since11March1997.

Composition

The Committee comprises of three (3) members, which consist of all Independent Directors. This meet the requirements ofParagraph15.09(1)(a)and(b)oftheMainMarketListingRequirements(“Main LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”).

The Chairman of ARC is Mr. Ho Pui Hold, an Independent Non-Executive Director (“INED”), therefore the requirement of Paragraph 15.10 of the Main LR of Bursa Securities has been complied with.

Meetings

TheCommitteeheldatotaloffive(5)meetingsduringtheFYE2017.

ThedetailsofattendanceoftheCommitteeMeetingsduringthefinancialyearwereasbelow:-

Number of meetings attended / held in the financial year Members under review %

Ho Pui Hold – Chairman 5/5 100Independent Non-Executive Director(re-designated from Member to Chairman of ARC w.e.f. 1 January 2018) Tuan Haji Mohd Anuar Bin Haji Mohd Hanadzlah - Member 5/5 100Independent Non-Executive Chairman(re-designated from Chairman to Member of ARC w.e.f. 1 January 2018) Ang Joo Seng – Member 3/5 60Independent Non-Executive Director

Mr.HoPuiHold,isafellowmemberoftheAssociationofCharteredCertifiedAccountants(FCCA),memberoftheMalaysianInstitute of Accountants (“MIA”) and a member of the ASEAN Chartered Professional Accountant (ACPA). Meanwhile, Tuan Haji Mohd Anuar Bin Haji Hanadzlah graduated with an Accounting degree from MARA Institute of Technology (now known as Universiti Teknologi MARA). In view thereof, the Company has well exceeded the minimum requirement as set forth underParagraph15.09(1)(c)oftheMainLRofBursaSecurities.

FortheFYE2017,theARCheldfive(5)meetingsasfollow:-

Private session with External Auditors without ExecutiveNo. ARC Meeting Date of Meeting Board members and Management

(1) (1/2017)ARCMeeting 23February2017 √(2) (2/2017) ARC Meeting 28 March 2017 (3) (3/2017) ARC Meeting 23 May 2017 (4) (4/2017)ARCMeeting 22August2017 √(5) (5/2017) ARC Meeting 21 November 2017

AUDIT AND RISK COMMITTEE REPORT

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ANNUAL REPORT 2017

The External Auditors are encouraged to raise with the Committee any matters they considered important to bring to the Committee’s attention. For FYE 2017, two (2) meetings were held with the External Auditors without the presence of the Executive Board members and Management. The lead audit engagement partner of the External Auditors attended all two (2) Committee meetings held in FYE 2017, where one (1) meeting was attended by the existing External Auditors, i.e. CAS Malaysia PLT while the other one (1) meeting was attended by the former External Auditors i.e. Messrs. Sekhar & Tan whom did not sought for re-appointment at the Twenty-Second Annual General Meeting held on 1 June 2017.

TheCommitteeChairmanalso sought informationon the communicationflowbetween theExternalAuditors and theManagement which is necessary to allow unrestricted access to information for the External Auditors to effectively perform their duties. For FYE2017, the ExternalAuditors confirmed to theARC that therewereneither restrictivenornon-co-operative behaviour exhibited by the Management during the course of their audit.

Notices of ARC meetings were distributed to the Committee at least seven (7) days before the meeting while the Meeting Papers were disseminated to the Committee at least three (3) days in advance prior to the meeting to enable the Committee Members to peruse and provide their feedbacks/comments at the meeting.

AlldeliberationsduringtheCommitteemeetingsweredulyminuted.MinutesofARCmeetingsweretabledforconfirmationat every succeeding ARC meeting.

The Committee Chairman presented the Committee’s recommendations together with the respective rationale to the Boardforapprovaloftheannualauditedfinancialstatementsandtheunauditedquarterlyfinancialresults.Asandwhennecessary,theCommitteeChairmanwouldconveytotheBoardmattersofsignificantconcernraisedbytheInternaland/orExternalAuditors.AteveryARCmeetingsince3May2016,theCommitteealsoreviewedthesignificantmattershighlightedincluding financial reporting issues, significant judgements made by Management, significant and unusual events ortransactions, and how these matters were addressed at those ARC meeting.

Terms of Reference

In view of the recent amendments of the Main LR of Bursa Securities and Malaysian Code on Corporate Governance (“MCCG”), the Terms of Reference (“TOR”) of the ARC has been reviewed and revised by the ARC to be in line with these changes and the same has been recommended to the Board for adoption. Accordingly, the revised TOR of the ARC was approved by the Board of Directors on 27 March 2018.

The updated TOR of the ARC is available on the Company’s website at www.milux.com.my.

Summary of Works undertaken by the ARC

Duringthefinancialperiodunderreview,theworksundertakenbytheCommitteeincludedthedischargedofthefollowingfive(5)mainoversightroles:-

(a) Financial Reporting

(i) Reviewed the Audited Financial Statements of the Group before recommending them for the Board’s approval.

(ii) Reviewed the quarterly financial results to ensure compliancewith theMain LR of Bursa Securities beforerecommending them for Board’s approval.

(iii) Reviewed the related party transactions entered into by the Company and the Group on a quarterly basis.

(iv) Reviewed,ifany,thesignificantassumptionsmadeinpreparingthefinancialstatements,includingaccountingestimatesthathavebeenidentifiedashavinghighestimationuncertainty.ThefollowingsignificantmattersinrelationtothepreparationofunauditedquarterlyfinancialresultswereidentifiedbytheARCforFYE2017:-

• Impairment of Asset;• Impairment of Trade Receivables;• Inventory obsolescence;• Provision against the carrying amount of an investment; and• Fair value accounting estimates.

AUDIT AND RISK COMMITTEE REPORT (cont’d)

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(b) Corporate Reporting

(i) Reviewed the draft Annual Report of the Company before recommending for the Board’s approval.

(ii) Reviewed the ARC Report and Statement on Risk Management and Internal Control before recommending the same for the Board’s approval and inclusion in the Company’s Annual Report.

(c) External Audit

(i) Reviewed the Audit Planning Memorandum with CAS Malaysia PLT, the external auditors.

(ii) Receivedwrittenassurance fromCASMalaysiaPLTconfirming that theywere,andhavebeen, independentthroughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.

(iii) Reviewed and assessed the performance, suitability and independence of the external auditors for FYE 2017 before making any recommendation for re-appointment to the Board.

(iv) Reviewed the audit and non-audit fees payable to the external auditors for FYE 2017 to ensure the level of non-audit services rendered by the external auditors would not impair their independence.

(v) Received updates on the Malaysian Financial Reporting Standards by the representative of CAS Malaysia PLT.

(vi) Metanddiscussedwiththeexternalauditorstwo(2)timesduringthefinancialyearwithoutthepresenceoftheManagement of the Company.

(d) Internal Audit

(i) ReviewedtheInternalAuditPlanforyear2018and2019tabledbytheoutsourcedInternalAuditserviceprovider,namely PKF Advisory Sdn. Bhd. (“PKF”) and agreed on the timing and frequency of the proposed audit areas.

(ii) Reviewed the Internal Audit Reports tabled by PKF at the quarterly Committee Meetings to ensure that all recommendations and corrective actions were taken by Management based on the audit findings andrecommendations.

(iii) Reviewed the Internal Audit Charter.

(iv) Conducted an Internal Audit Assessment to review the adequacy of the scope, functions, competency and resources of the internal audit function to ensure that it has the necessary authority to carry out its work and to perform its function effectively in accordance with relevant professional standards.

(e) Risk Management

(i) Reviewed the effectiveness of the Company’s internal audit function in the context of the Company’s overall risk management system vide the Internal Audit Assessment.

(ii) Assessed Milux Group’s business strategies and plans from a risk-based perspectives. (iii) Systematicidentificationofsignificantbusinessrisksandobjectiveassessmentofkeycontrolstomanagethe

identifiedrisks,withtheassistanceofoutsourcedinternalauditserviceprovider.


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ANNUAL REPORT 2017

Internal Audit

(1) Internal Audit Function

Internal Auditing is an independent objective assurance and consulting activity that is guided by a philosophy of adding value to improve the operations of Milux Corporation Berhad and its subsidiaries (“Milux” or “the Group”). It assists Milux in accomplishing Milux’s vision and mission by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of the Company’s risk management, control, and governance processes.

The Group has appointed PKF, the internal audit service provider to carry out the internal audit function. The outsourced Internal Auditors report directly to the Committee, providing the Board with a reasonable assurance of adequacy of the scope, functions and resources of the Internal Audit function. The purpose of the Internal Audit function is to provide the Board, through the Committee, assurance of the effectiveness of the system of internal control in the Group.

The InternalAudit function is independent andperforms audit assignmentswith impartiality, proficiency anddueprofessional care.

(2) Internal audit activities:-

(a) Audit Conducted for FYE 2017

For FYE 2017, PKF has conducted the following audits:-

Audit activities Audit entity/ area

Review of inventory and logistics management • Milux Sales and Service Sdn. Bhd. (“MSS”) • Brightyield Sdn. Bhd. (“Brightyield”)

Review of production and quality control function • T.H. Hin Home Tech Sdn. Bhd. (“Home Tech”) • Eurobay Industries Sdn. Bhd. (“Eurobay”) • MSS • Brightyield.

Review of Procurement and Payment function • MSS • Brightyield Review of Risk Register • Milux Group of Companies

(b) Adoption of Internal Audit Plan for year 2018 and 2019

AttheARCMeetingheldon21November2017,PKFpresentedtheInternalAuditPlanforyear2018and2019as follows and the ARC has agreed to the proposed timing and auditable areas:-

Audit Areas Date

Review of Inventory Management and Fixed Asset Management February 2018Review of Human Resources and Payroll Management (Penang branch) May 2018Review of Sales and Accounts Receivables August 2018Follow up Report November 2018ReviewofInventoryManagement February2019ReviewofProductionandQualityControl(Penangbranch) May2019ReviewofProcurementandPaymentManagement August2019HumanResourcesandPayrollManagement(HeadQuarter) November2019


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(c) Internal Audit Review and assurance

During the Internal Auditors course of audit, PKF has reviewed compliance with policies, procedures and standards, relevant external rules and regulations, as well as assessed the adequacy and effectiveness of the Group’s system of internal control and recommended appropriate actions to be taken where necessary.

The internalauditsperformedmet theobjectiveofhighlighting to theCommittee theauditfindingswhichrequired follow-up actions by the Management, any outstanding audit issues which required corrective actions to be taken to ensure an adequate and effective internal control system within the Group, as well as any weaknesses in the Group’s internal control system. It ensured that those weaknesses were appropriately addressed and that recommendations from the Internal Audit Reports and corrective actions on reported weaknesses were taken appropriately within the required timeframe by the Management.

(d) Internal Audit Charter

The Committee has adopted an Internal Audit Charter in order to formalise the remit of the Internal Audit function and the process to review the adequacy of scope, functions, competency, and resources of the internal audit function.

The Internal Audit Charter comprises the following items:-

(i) Role; (ii) Professionalism; (iii) Authority; (iv) Organisation; (v) Independence and Objectivity; (vi) Responsibility; (vii) Internal Audit Plan;(viii) Reporting and Monitoring;(ix) Periodic Assessment;(x) Oversight Functions of the ARC in relation to Internal Audit Functions; and(xi) Review of Internal Audit Charter.

The Internal Audit Charter has been reviewed and revised by the ARC on 27 March 2018 and is available for viewing on the Company’s website at www.milux.com.my.

(e) Internal Audit Function Review

On a yearly basis, the ARC would conduct an Internal Audit function review in order to assess the adequacy and performance of the Internal Audit Function and its comprehensive coverage of the Group’s activities (“IA Review”).

The IA Review has been conducted by the ARC on 26 February 2018. The Committee has conducted the IA Review based on the following criteria:-

• Understanding;• Charter and Structure;• Skills and experiences;• Communication; and• Performance.

Uponreview,theCommitteewassatisfiedwiththeperformanceandtheconductofPKF.

(3) Total costs incurred for FYE 2017

The total fees incurred for the outsourced internal audit function of the Group for the FYE 2017 amounted to RM59,200/-(FYE2016:RM59,200/-)


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ANNUAL REPORT 2017

The information disclosed below is in compliance with Bursa Securities’ Main Market Listing Requirements.

1. Utilisation of Proceeds

Duringthefinancialyear,noproceedswereraisedbytheCompanyfromanycorporateproposal.

2. Audit and Non-Audit Fees

Forthefinancialyearended31December2017,CASMalaysiaPLT,theExternalAuditorshasrenderedauditandnon-audit services to the Company and the Group. A breakdown of fees payable are listed as below for information:-

Group Company (RM) (RM)

Audit services rendered 102,500.00 16,500.00

Non-audit services rendered - for review of Statement on Risk Management and Internal Control 3,000.00 3,000.00 - -

Total 105,500.00 19,500.00

3. Material Contracts

There were no material contracts entered into by the Company or its subsidiaries which involve directors and major shareholders,eitherstillsubsistingattheendofthefinancialyearended31December2017orenteredintosincetheendofthepreviousfinancialyear.

4. Recurrent Related Party Transactions of a Revenue Nature

Duringthefinancialyearunderreview,theGrouphasnotenteredintoanyrecurrentrelatedpartytransactionsofarevenue or trading nature.

5. Internal Audit Function

The internal audit function was outsourced and the fees incurred for the internal audit function in respect of the financialyearunderreviewwasRM59,200.00.

ADDITIONAL COMPLIANCE INFORMATION

60


This statement is prepared as required by the Main LR of Bursa Securities.

The Directors are required to prepare annual financial statements which are in accordance with applicable approvedaccounting standards; to give a true and fair view of the state of affairs of the Group and the Company as at the end of the financialyear;andoftheirresultsandtheircashflowsforthatyearthenended.

TheDirectorsconsider that inpreparing thefinancial statementsof theGroupandtheCompany for thefinancialyearended 31 December 2017,

• the Group and the Company have adopted appropriate accounting policies and applied them consistently;• reasonable and prudent judgements and estimates were made; • all applicable approved accounting standards in Malaysia, including but not limited to Malaysian Financial Reporting

Standards and International Financial Reporting Standards have been followed; and• preparedthefinancialstatementsonagoingconcernbasis.

The Directors are responsible for ensuring that the Company maintains accounting records that disclose with reasonable accuracy thefinancial positionof theGroupand theCompany,whichwould enable them toensure that thefinancialstatements comply with the provisions of the Companies Act 2016.

The Directors have general responsibilities for taking such steps that are reasonably available to them to safeguard the assets of the Group, and to prevent and detect fraud and other irregularities.

This Directors’ Responsibility Statement is made in accordance with a resolution of the Board of Directors passed on 27 March 2018.

DIRECTORS’ RESPONSIBILITY STATEMENTIN RELATION TO PREPARATION OF FINANCIAL STATEMENT

61

ANNUAL REPORT 2017

FINANCIAL STATEMENTSDIRECTORS’ REPORT

INDEPENDENT AUDITORS’ REPORT

STATEMENTS OF CASH FLOWS

STATEMENT BY DIRECTORS

62

67

75

6666

71

77

72

73

STATEMENTS OF FINANCIAL POSITION

NOTES TO THE FINANCIAL STATEMENTS

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

STATEMENTS OF CHANGES IN EQUITY

STATUTORY DECLARATION

62


The directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2017. PRINCIPAL ACTIVITIES The principal activities of the Company are that of an investment holding company and the provision of management services. The principal activities of the subsidiary companies are disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. FINANCIAL RESULTS Group Company 2017 2017 RM RM Loss for the financial year (835,122) (551,985)

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature. RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the financial year except as disclosed in the financial statements. DIVIDENDS No dividend has been paid or declared during the financial year. The directors do not recommend that a dividend to be paid in respect of the current financial year. SHARES AND DEBENTURES There were no changes in the issued and paid up capital of the Company during the financial year. There were no debentures issued during the financial year. OPTIONS GRANTED OVER UNISSUED SHARES No options were granted to any person to take up unissued shares of the Company during the financial year.

DIRECTORS’ REPORT

63

ANNUAL REPORT 2017

DIRECTORS The directors of the Company in office since the date of the last report and at the date of this report are: Haji Mohd Anuar Bin Haji Mohd Hanadzlah Koh Pee Seng Tan Chee How Ng Tek CheHo Pui Hold Dato’ Mohamed Salleh Bin Bajuri Ang Joo Seng Chua Seong Seng DIRECTORS’ INTERESTS According to the register of Directors’ shareholdings, the interests of directors in office at the end of the financial year in the ordinary shares of the Company during the financial year were as follows: Number of ordinary shares As at As at Shareholdings in the name of directors 01.01.2017 Acquired Sold 31.12.2017 Direct interest Koh Pee Seng 588,950 296,900 - 885,850 Tan Chee How 1,980,570 - - 1,980,570 Dato’ Mohamed Salleh Bin Bajuri 2,507,166 - - 2,507,166 Ang Joo Seng 100 - - 100 Chua Seong Seng 1,320,000 - - 1,320,000 Indirect interest Koh Pee Seng * 2,530,600 124,500 (130,000) 2,525,100 Dato’ Mohamed Salleh Bin Bajuri ** 1,400,000 - - 1,400,000 Ang Joo Seng # 100 - - 100 Chua Seong Seng ^ 7,500,000 - - 7,500,000 * Deemed interested by virtue of his spouse, Madam Ang Cheng Ean’s shareholdings, his sons, Mr. Koh Chit Khoon’s

and Mr. Koh Chit Soon’s shareholdings, and his daughter, Ms. Koh Lay Chin’s shareholdings.

** Deemed interested by virtue of his spouse, Datin Paridah Binti Mohd Nor’s shareholdings, and the shareholdings of his daughters, Irda Suriana Binti Mohamed Salleh, Irda Nurhidayah Binti Mohamed Salleh and Irda Nuralia Binti Mohamed Salleh.

# Deemed interested by virtue of his spouse, Madam Lee Siew Bee’s shareholdings.

^ Deemed interested by virtue of his shareholdings in RGF Land Sdn. Bhd. pursuant to Section 8(4) of the Companies

Act 2016. By virtue of their interest in the shares of the Company, the above directors are also deemed to have interests in the shares of the subsidiary companies to the extent the directors have their interests. Other than disclosed above, the other directors in office at the end of the financial year did not have any interest in the shares of the Company or its related corporations during the financial year.

DIRECTORS’ REPORT (Cont’d)

64


DIRECTORS’ REMUNERATIONS The details of the directors’ remuneration paid or payable to the directors of the Group and of the Company during the financial year are disclosed in Note 25 to the financial statements. The details of the other benefits otherwise than in cash received or receivable from the Group and the Company by the directors of the Group and of the Company during the financial year are disclosed in Note 25 to the financial statements.

No payment has been paid to or payable to any third party in respect of the services provided to the Group and the Company by the directors of the Group and of the Company during the financial year. INDEMNIFYING DIRECTORS, OFFICERS OR AUDITORS No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been the director, officer or auditor of the Company. DIRECTORS’ BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any body corporate. Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by the directors shown in the financial statements or the fixed salary of a full-time employee of the Company as shown in Note 25 to the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest. OTHER STATUTORY INFORMATION Before the financial statements of the Group and of the Company were prepared, the directors took reasonable steps: (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision

for doubtful debts and have satisfied themselves that no known bad debts had been written off and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to be realised at their book values in the ordinary course of business including the value of current assets as shown in the accounting records of the Group and of the Company had been written down to an amount which the current assets might be expected so to realise.

At the date of this report, the directors are not aware of any circumstances: (i) which would render it necessary to write off for any bad debts or the amount of the provision for doubtful debts

inadequate to any substantial extent in respect of the financial statements of the Group and of the Company; or

(ii) which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading; or

(iii) which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or

(iv) not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading.


65

ANNUAL REPORT 2017

OTHER STATUTORY INFORMATION (Cont’d)

At the date of this report, there does not exist: (i) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which

secures the liabilities of any other person; or

(ii) any contingent liability in respect of the Group and of the Company which has arisen since the end of the financial year.

No contingent or other liability has become enforceable, or is likely to become enforceable, within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet its obligations as and when they fall due. In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group and of the Company for the financial year in which this report is made. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR Significant event during the financial year is disclosed in Note 33 to the financial statements. AUDITORS The auditors, CAS Malaysia PLT, Chartered Accountants have indicated their willingness to continue in office. The auditors’ remuneration is disclosed in Note 25 to the financial statements. Signed on behalf of the Board of Directors in accordance with a resolution of the directors dated 27 March 2018. ............................................................................ KOH PEE SENG Director ............................................................................ TAN CHEE HOW Director


66


We, Koh Pee Seng and Tan Chee How, being the directors of MILUX CORPORATION BERHAD, do hereby state that, in the opinion of the directors, the accompanying financial statements as set out on pages 71 to 128 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 2016 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2017 and of their financial performance and cash flows for the financial year then ended. Signed on behalf of the Board of Directors in accordance with a resolution of the directors dated 27 March 2018.

KOH PEE SENG TAN CHEE HOW Director Director

STATUTORY DECLARATION Pursuant to Section 251(1)(b) of the Companies Act, 2016

I, KOH PEE SENG, being the director primarily responsible for the accounting records and financial management of MILUX CORPORATION BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 71 to 128 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by KOH PEE SENG at Puchong in the state of Selangor Darul Ehsan on 27 March 2018 KOH PEE SENG Before me, KHOR HAN GHEE Commissioner for Oath

STATEMENT BY DIRECTORS Pursuant to Section 251(2) of the Companies Act, 2016

67

ANNUAL REPORT 2017

Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Milux Corporation Berhad, which comprise the statements of financial position as at 31 December 2017 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 71 to 128. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 December 2017, and of their financial performance and their cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. Basis for Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(a) Inventories valuation The risk

Inventories are significant to the Group as these represent approximately 38% of the total assets. The key associated risk is the existence and the valuation of the inventories. Management judgement is required in determining an appropriate costing basis and also in determining provision for inventory obsolescence. The Group’s manufacturing segment uses standard costing in measuring its finished goods, which includes an element of estimation in the allocation of overhead costs. Judgement is also required in determining the accuracy of provisions for slow moving and obsolescence and in making an assessment of its adequacy, involving determination of appropriate provision percentage based on the level of forecast sales. Reviews are made periodically by management on damaged, obsolete and slow moving inventories.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF MILUX CORPORATION BERHAD

(Company No.: 313619-W) (Incorporated in Malaysia)

68


Report on the Audit of the Financial Statements (Cont’d) Key Audit Matters (Cont’d) (a) Inventories valuation (Cont’d)

Our response Our audit procedures included: i) obtaining an understanding of: - the Group’s inventory management process; - how the Group identifies and assesses inventory write-downs; and - how the Group makes the accounting estimates for inventory write-downs.

ii) reviewing the consistency of the application of management’s methodology in determining and estimating the provision from year to year;

iii) attending year end stock count to observe the stock count procedures and identify damaged and obsolete

inventories;

iv) checking samples of individual stock items for appropriateness of allocation and calculation of direct attributable costs; and to the invoice value;

v) reviewing and testing the net realisable value of inventories on sampling basis;

vi) making inquiries of management pertaining to their plans to clear the slow moving and obsolete inventories;

and

vii) evaluating the reasonableness and adequacy of the inventories write-downs.

(b) Impairment of loans and receivables The risk Trade receivables are significant to the Group as these represent approximately 32% of the total assets. The key

associated risk is the recoverability of the invoiced trade receivables as the recoverability of trade receivables required management judgment and estimation in determining the adequacy of the impairment loss associated with each individual trade receivables.

Our response Our audit procedures included: i) reviewing the receivables aging analysis and testing the reliability thereof; ii) evaluating subsequent year end receipts and recoverability of outstanding trade receivables; iii) making inquiries of management pertaining to the recoverability of significant and overdue debts; and

iv) evaluating the basis and evidence used by management for the impairment test and adequacy of allowance for impairment made.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF MILUX CORPORATION BERHAD (Company No.: 313619-W) (Incorporated in Malaysia) (Cont’d)

69

ANNUAL REPORT 2017

Report on the Audit of the Financial Statements (Cont’d)

Key Audit Matters (Cont’d) Information other than the Financial Statements and Auditors’ Report Thereon The directors of the Company are responsible for the other information. The other information comprises the information included in the annual report, which we obtained prior to the date of this auditors’ report, but does not include the financial statements of the Group and of the Company and our auditors’ report thereon. Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Statements The directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related

disclosures made by the directors.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF MILUX CORPORATION BERHAD

(Company No.: 313619-W) (Incorporated in Malaysia) (Cont’d)

70


Report on the Audit of the Financial Statements (Cont’d)

Auditors’ Responsibilities for the Audit of the Financial Statements (Cont’d)

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not acted as auditors, are disclosed in Note 7 to the financial statements.

Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

.................................................................................... ....................................................................................CAS MALAYSIA PLT CHEN VOON HANN [No. (LLP0009918-LCA) & (AF 1476)] [No. 2453/07/19(J)] Chartered Accountants Chartered Accountant Puchong Date: 27 March 2018

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MILUX CORPORATION BERHAD (Company No.: 313619-W) (Incorporated in Malaysia) (Cont’d)

71

ANNUAL REPORT 2017

Group Company Note 2017 2016 2017 2016 RM RM RM RM ASSETS EMPLOYED NON-CURRENT ASSETS Property, plant and equipment 5 7,564,383 7,940,847 1,203 1,373 Investment properties 6 348,320 361,279 - - Investment in subsidiary companies 7 - - 5,990,203 6,032,708 Investment in a joint venture 8 243,194 248,621 - - Other investments 9 49,346 44,183 13,525 9,476 Intangible assets 10 221,652 221,652 - -

8,426,895 8,816,582 6,004,931 6,043,557 CURRENT ASSETS Inventories 11 22,911,604 21,675,481 - - Trade receivables 12 19,652,543 18,582,041 - - Other receivables, deposits and prepayments 13 2,439,775 2,496,231 3,260 16,787 Amount due from subsidiary companies 14 - - 1,226,649 1,313,739 Tax recoverable 132,340 223,956 10,916 32,244 Fixed deposits with licensed banks 15 3,288,449 4,136,506 559,394 543,156 Cash and bank balances 3,913,643 4,376,768 33,484 106,469 52,338,354 51,490,983 1,833,703 2,012,395 TOTAL ASSETS 60,765,249 60,307,565 7,838,634 8,055,952 EQUITY AND LIABILITIES EQUITY Share capital 16 54,411,294 54,411,294 54,411,294 54,411,294 Share premium 16 1,173,085 1,173,085 1,173,085 1,173,085 Fair value adjustment reserve 16 5,726 1,676 5,726 1,676 Accumulated losses 17 (11,039,265) (10,199,999) (49,272,733) (48,720,748) Total equity attributable to owners of the Company 44,550,840 45,386,056 6,317,372 6,865,307 Non-controlling interest 1 1 - - TOTAL EQUITY 44,550,841 45,386,057 6,317,372 6,865,307 NON-CURRENT LIABILITIES Loan and borrowings 18 978,525 791,610 - - Deferred taxation 19 121,526 277,000 - -

1,100,051 1,068,610 - -

CURRENT LIABILITIES Trade payables 20 6,678,009 6,297,648 - - Other payables, accruals and deposits received 20 1,939,467 2,443,619 220,495 243,025 Amount due to subsidiary companies 21 - - 1,300,767 947,620 Amount due to a joint venture 21 424 424 - - Provision 22 210,564 174,652 - - Loan and borrowings 18 6,171,671 4,681,926 - - Provision for taxation 114,222 254,629 - -

15,114,357 13,852,898 1,521,262 1,190,645 TOTAL LIABILITIES 16,214,408 14,921,508 1,521,262 1,190,645 TOTAL EQUITY AND LIABILITIES 60,765,249 60,307,565 7,838,634 8,055,952

STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2017

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

72


Group Company Note 2017 2016 2017 2016 RM RM RM RM Revenue 23 79,694,560 72,437,571 601,988 601,800 Cost of sales (63,447,901) (59,358,536) - - GROSS PROFIT 16,246,659 13,079,035 601,988 601,800 Other operating income 852,551 1,092,797 311,211 179,246 Selling and distribution expenses (5,992,649) (4,151,460) - - Administrative expenses (9,982,146) (9,475,038) (1,097,507) (1,115,919)Other operating expenses (1,230,115) (1,843,758) (367,677) (1,459,835)Finance costs 24 (504,490) (237,931) - - Share of loss from a joint venture 8 (5,427) (3,379) - - LOSS BEFORE TAXATION 25 (615,617) (1,539,734) (551,985) (1,794,708)Taxation 26 (223,649) (1,124,786) - - LOSS AFTER TAXATION (839,266) (2,664,520) (551,985) (1,794,708)Other comprehensive income/(expense) for the financial year, net of tax: Item that may be reclassified subsequently to profit or loss: Gain/(loss) on fair value changes of available-for-sale financial assets 4,050 (355) 4,050 (355) TOTAL COMPREHENSIVE EXPENSE FOR THE FINANCIAL YEAR (835,216) (2,664,875) (547,935) (1,795,063) LOSS AFTER TAXATION ATTRIBUTABLE TO: Equity holders of the Company (839,266) (2,664,520) TOTAL COMPREHENSIVE EXPENSE ATTRIBUTABLE TO: Equity holders of the Company (835,216) (2,664,875) Loss per share attributable to equity holders of the Company (sen) 27 (1.54) (4.90)

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


73

ANNUAL REPORT 2017

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STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 (Cont’d)

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75

ANNUAL REPORT 2017

STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

Group Company Note 2017 2016 2017 2016 RM RM RM RM CASH FLOWS FROM OPERATING ACTIVITIES Loss before taxation (615,617) (1,539,734) (551,985) (1,794,708)Adjustments for: Depreciation Property, plant and equipment 5 1,244,068 1,300,935 170 170 Investment properties 6 12,959 12,959 - - Dividend income 23 (388) (200) (388) (200) Gain on disposal of property, plant and equipment 25 (212,959) (167,097) - - Impairment loss Amount due from subsidiary companies 14 - - 325,172 69,766 Goodwill on consolidation 10 - 560,531 - - Investment in subsidiaries 7 - - 42,505 1,390,069 Property, plant and equipment 5 - 321,867 - - Trade receivables 12 464,146 423,787 - - Interest expenses 24 504,490 237,931 - - Interest income 25 (148,904) (164,696) (16,238) (16,473) Loss on disposal of property, plant and equipment 25 4,055 4,813 - - Property, plant and equipment written off 25 2,331 234,680 - - Provision for warranty 22 210,564 180,763 - - Reversal of impairment loss on Trade receivables 12 (242,157) (145,160) - - Amount due from subsidiary companies 14 - - (287,769) (162,772) Reversal of provision for warranty 22 (130,736) (152,634) - - Share of loss from a joint venture 8 5,427 3,379 - - Slow moving and obsolete inventories written down 11 454,075 2,006,178 - - Slow moving and obsolete inventories written back 11 (271,684) (511,343) - - Unrealised gain on foreign exchange 25 (33,048) (442,307) - - Unrealised loss on foreign exchange 25 265,674 70,389 - - Operating profit/(loss) before working capital changes 1,512,296 2,235,041 (488,533) (514,148)Increase in inventories (1,418,514) (1,071,676) - - (Increase)/decrease in receivables (1,452,250) (3,640,522) 13,527 14,483 (Decrease) /Increase in payables (84,848) 829,707 (22,530) (109,231) Cash used in operations (1,443,316) (1,647,450) (497,536) (608,896)Interest paid (223,936) (10,009) - - Income tax refund 266,055 72,922 21,328 32,000 Income tax paid (693,968) (1,473,987) - (24,002)Warranty paid 22 (43,916) (37,677) - - Net cash used in operating activities (2,139,081) (3,096,201) (476,208) (600,898)


76


Group Company Note 2017 2016 2017 2016 RM RM RM RM CASH FLOWS FROM INVESTING ACTIVITIES Change in fixed deposits with maturity of more than 3 months 879,791 2,137,733 - - Interest received 25 148,904 189,851 16,238 16,473 Investment in a joint venture - (251,998) - - Dividends received 23 388 200 388 200 (Purchase)/disposal of other investments (1,113) (992) 1 - Purchase of property, plant and equipment 5 (307,328) (866,753) - - Proceeds from disposal of property, plant and equipment 237,197 239,150 - - Net cash generated from investing activities 957,839 1,447,191 16,627 16,673 CASH FLOWS FROM FINANCING ACTIVITIES Interest paid (280,554) (227,922) - - Drawdown of multi currency trade loan 205,048 - - - Net changes in bankers’ acceptance (172,000) (7,000) - - Repayment of finance lease liabilities (287,880) (295,542) - - Advance from subsidiary companies - - 402,834 677,054 Advance from a joint venture - 424 - - Net cash (used in)/generated from financing activities (535,386) (530,040) 402,834 677,054 Net (decrease)/increase in cash and cash equivalents (1,716,628) (2,179,050) (56,747) 92,829 Effect of exchange rate fluctuations on cash held (58,011) 22,302 - - Cash and cash equivalents as at beginning of the financial year 4,100,183 6,256,931 649,625 556,796 Cash and cash equivalents as at end of the financial year 2,325,544 4,100,183 592,878 649,625 Cash and cash equivalents comprise of: Fixed deposits with licensed banks 3,288,449 4,136,506 559,394 543,156 Cash and bank balances 3,913,643 4,376,768 33,484 106,469

7,202,092 8,513,274 592,878 649,625 Fixed deposits with maturity of more than 3 months (2,195,291) (3,075,082) - - Bank overdraft (2,681,257) (1,338,009) - -

2,325,544 4,100,183 592,878 649,625

STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 (Cont’d)


77

ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017

1. GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The Company’s registered office is located at Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur, Wilayah Persekutuan. The principal place of business of the Company is located at No. 31, Lorong Jala 14/KS10, Off Jalan Telok Gong, 42000 Pelabuhan Klang, Selangor Darul Ehsan. The consolidated financial statements of the Company as at and for the financial year ended 31 December 2017 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in joint venture. The financial statements of the Company as at and for the financial year ended 31 December 2017 do not include other entities. The principal activities of the Company are that of an investment holding company and the provision of management services.

The principal activities of the subsidiary companies are disclosed in Note 7 to the financial statements. There have been no significant changes in the nature of these principal activities during the financial year. The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 27 March 2018.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS 2.1 Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and the requirements of the Companies Act, 2016 (“CA 2016”) in Malaysia. The accounting policies adopted by the Group and the Company are consistent with those adopted in the previous year.

2.2 Adoption of Amendments to MFRSs and Annual Improvements

At the beginning of the financial year, the Group and the Company adopted the following Amendments to MFRSs and Annual Improvements which are mandatory for the financial periods beginning on or after 1 January 2017:

Amendments to MFRS 107 Disclosure Initiative Amendments to MFRS 112 Recognition of Deferred Tax Assets for Unrealised Losses Annual Improvements to MFRS Standards 2014–2016 Cycle

The adoption of the above pronouncements did not have any impact on the financial statements of the Group and of the Company.

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 (cont’d)

78


2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Cont’d)

2.3 Standards issued but not yet effective The Group and the Company have not adopted the following Standards, Amendments and Annual Improvements that have been issued but are not yet effective by the Malaysian Accounting Standards Board(“MASB”).

Effective for financial periods beginning on or after 1 January 2018 Amendments to MFRS 2 Classification and Measurement of Share-based Payment Transactions MFRS 7 Financial Instruments: Disclosures MFRS 9 Financial Instruments (IFRS 9 as issued by International Accounting Standards Board (“IASB”) in July 2014) MFRS 15 Revenue from Contracts with Customers MFRS 15 Clarifications to MFRS 15 Amendments to MFRS 140 Transfers of Investment Property IC Interpretation 22 Foreign Currency Transactions and Advance Consideration Annual Improvements to MFRS Standards 2014–2016 Cycle Effective for financial periods beginning on or after 1 January 2019 MFRS 16 Leases IC Interpretation 23 Uncertainty over Income Tax Treatments Amendments to MFRS 9 Prepayment Features with Negative Compensation Amendments to MFRS119 Plan Amendment, Curtailment or Settlement Amendments to MFRS 128 Long-term Interests in Associates and Joint Ventures Annual Improvements to MFRS Standards 2015–2017 Cycle Effective for financial periods beginning on or after 1 January 2021 MFRS 17 Insurance Contracts Effective date to be determined by Malaysian Accounting Standards Board

Amendments to MFRS 10 and MFRS 128 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The Group and the Company will adopt the above mentioned standards, amendments or interpretations, if applicable, when they become effective in respective financial periods. The Directors do not expect any material impact to the financial statements of the above pronouncements other than the three Standards described below:

2.3.1 MFRS 15 Revenue from Contracts with Customers

MFRS 15 Revenue from Contracts with Customers was issued in September 2014 and established a five-step model that will apply to recognition of revenue arising from contracts with customers. Under this Standard, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principle of this Standard is to provide a more structured approach to measuring and recognising revenue. This Standard is applicable to all entities and will supersede all current revenue recognition requirements under MFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted. Based on the assessment, the Group and the Company do not expect the application of MFRS 15 to have a significant impact on its financial statements.

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 (cont’d)

79

ANNUAL REPORT 2017

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS (Cont’d)

2.3 Standards issued but not yet effective(Cont’d) 2.3.2 MFRS 9 Financial Instruments

In November 2014, the MASB issued the final version of MFRS 9 Financial Instruments, replacing MFRS 139. This Standard makes changes to the requirements for classification and measurement, impairment and hedge accounting. The adoption of this Standard will have an effect on the classification and measurement of the Group’s and of the Company’s financial assets, but no impact on the classification and measurement of the Group’s and of the Company’s financial liabilities. MFRS 9 Financial Instruments also requires impairment assessments to be based on an expected loss model, replacing the MFRS 139 incurred loss model. Finally, MFRS 9 Financial Instruments aligns hedge accounting more closely with risk management, establishes a more principle-based approach to hedge accounting and addresses inconsistencies and weaknesses in the previous model. This Standard will come into effect on or after 1 January 2018 with early adoption permitted. Retrospective application is required, but comparative information is not compulsory. Based on the assessment, the Group and the Company do not expect the application of MFRS 9 to have a significant impact on its financial statements.

2.3.3 MFRS 16 Leases MFRS 16 will replace the existing standard on Leases, MFRS 117 when it becomes effective.

Currently under MFRS 117, a lease is classified either as a finance lease or an operating lease based on the extent to which risks and rewards incidental to ownership of the leased asset lie with the lessor or the lessee. A lessee recognises the asset and liability arising from a finance lease but not an operating lease. MFRS 16 eliminates the distinction between finance leases and operating leases for lessees. Under the new standard, a lessee is required to recognise the assets and liabilities in respect of all leases, except for short-term leases of 12 months or less and leases of low value assets. At the commencement of a lease, a lessee recognises a right-of-use asset and a corresponding lease liability. The lessee will be required to separately recognise the depreciation on the right-of-use asset and interest expense on the lease liability. Lessor accounting remained substantially unchanged from the current accounting under MFRS 117.

The Group and the Company are currently assessing the impact of adopting MFRS 16. 2.4 Basis of measurement

The financial statements of the Group and of the Company have been prepared on the historical cost basis except as disclosed in the financial statements.

2.5 Functional and presentation currency

These financial statements are presented in Ringgit Malaysia(“RM”), which is the Group’s and the Company’s functional currency. All financial information are presented in RM, unless otherwise stated.


80


3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2017. The financial statements of the Company’s subsidiaries are prepared for the same reporting date as the Company, using consistent accounting policies to like transactions and events in similar circumstances. Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and de-consolidated from the date that control ceases. All intercompany balances, income and expenses and unrealized gain or loss transactions between Group and subsidiary Companies are eliminated. A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction. If the Group losses control over a subsidiary, it:

- Derecognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts; - Derecognises the carrying amount of any non-controlling interest in the former subsidiary; - Derecognises the cumulative foreign exchange translation differences recorded in equity; - Recognises the fair value of the consideration received; - Recognises the fair value of any investment retained in the former subsidiary; - Recognises any surplus or deficit in the profit or loss; and - Reclassifies the parent’s share of components previously recognised in other comprehensive income (“OCI”) to profit or loss or retained earnings, if required in accordance with other MFRSs. All of the above will be accounted for from the date when control is lost. The accounting policies for business combination and goodwill are disclosed in Note 3.3.

Non-controlling interests(“NCI”) represent the portion of profit or loss and net assets in subsidiaries not owned, directly and indirectly by the Company. NCI are presented separately in the consolidated statements of profit or loss and other comprehensive income and within equity in the consolidated statement of financial position, but separate from parent shareholders’ equity. Total comprehensive income is allocated against the interest of NCI, even if this results in a deficit balance. Acquisition of NCI are accounted for using the parent entity extension method, whereby the difference between the consideration and the fair value of the share of the net assets acquired is recognized in equity.

3.2 Investment in subsidiaries

Subsidiaries are entities over which the Company has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company has such power over another entity. In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3.7 below. On disposal of such investments, the difference between the net disposal proceeds and their carrying amounts is recognised in profit or loss.


81

ANNUAL REPORT 2017

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 3.3 Business combination and goodwill

Business combinations involving entities under common control are accounted for by applying the pooling of interest method. The assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company. Any difference between the consideration paid and the share capital of the “acquired” entity is reflected within equity as merger reserve. The statement of profit or loss and other comprehensive income reflects the results of the combining entities for the full year, irrespective of when the combination takes place. Comparatives are presented as if the entities have always been combined since the date the entities had come under common control. All other business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at fair value on the date of acquisition and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, any previously held equity interest is remeasured at fair value on the date of acquisition and any resulting gain or loss is recognised in profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of MFRS 139 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value recognised in either profit or loss or as a change to OCI. If the contingent consideration is not within the scope of MFRS 139, it is measured in accordance with the appropriate MFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. The policy for the recognition and measurement of impairment losses is in accordance with Note 3.7. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.


82


3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

3.4 Investment in joint venture

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, where the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.

It involves the establishment of a corporation, partnership or other entity in which each venturer has an interest. The entity operates in the same way as other entities, except that a contractual arrangement between the venturers establishes joint control over the economic activity of the entity. Investment in joint venture is accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Company’s share of net assets of the joint venture since the acquisition date.

The financial statements of the joint venture is prepared as of the same reporting date as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value, then recognises the loss in profit or loss. In the Company’s separate financial statements, investments in joint ventures are stated at cost less impairment losses. The policy for the recognition and measurement of impairment losses is in accordance with Note 3.7. On disposal of such investments, the difference between the net disposal proceeds and their carrying amounts is recognised in profit or loss.

3.5 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost also includes borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are charged to the profit or loss during the financial year in which they are incurred. When an asset’s carrying amount is increased as a result of a revaluation, the increase is recognised in other comprehensive income as a revaluation surplus reserve. When the asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognised in profit or loss. However, the decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus reserve of that asset.


83

ANNUAL REPORT 2017


3.5 Property, plant and equipment (Cont’d)

Depreciation on the property, plant and equipment is calculated so as to write off the cost or valuation of the assets to their residual values on a straight line basis over the expected useful lives of the assets, summarised as follows:

Leasehold land Over the period of lease Buildings 2 - 10% Plant, machinery and moulds 10 - 20% Furniture, fittings, office equipment and renovations 10 - 50% Motor vehicles 10 - 20% Depreciation of an asset begins when it is ready for its intended use. Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each reporting date.

At each reporting date, the Group and the Company assess whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 3.7 on impairment of non-financial assets. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in the profit or loss. On disposal of revalued assets, amounts in the revaluation reserve relating to those assets are transferred to retained earnings.

3.6 Investment properties

Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment properties are initially measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the investment property. Subsequent to the initial recognition, investment properties are carried at cost less accumulated depreciation and impairment losses. Depreciation is charged to profit and loss on a straight-line basis over the estimated useful lives of the investment properties of 50 years. The useful lives and residual values of the investment properties are reassessed annually. Investment property is derecognised when either it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property is recognised in profit or loss in the year of retirement or disposal. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment up to the date of change in use.


84



3.7 Impairment of non-financial assets

The Group and the Company assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group and the Company make an estimate of the asset’s recoverable amount. For goodwill, property, plant and equipment that are not yet available for use, the recoverable amount is estimated at each financial year end or more frequently when indicators of impairment are identified. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows(cash-generating units(“CGU”)). In assessing value in use, the estimated future cash flows expected to be generated by the assets are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only when there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of that asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.

3.8 Intangible asset Research expenditure is recognised as an expense when it is incurred.

Development expenditure is recognised as an expense except that expenditure incurred on development projects relating to the design and testing of new or improved products or process are recognised as intangible assets if, and only if an entity can demonstrate all of the following:-

(i) its ability to measure reliably the expenditure attributable to the assets under development; (ii) the product or process is technically and commercially feasible; (iii) its future economic benefits are probable; (iv) its ability to use or sell the developed asset; and (v) the availability of adequate technical, financial and other resources to complete the assets under development.

Capitalised development expenditures are measured at cost less accumulated amortisation and impairment losses, if any. Development expenditure initially recognised as an expense is not recognised as assets in the subsequent period. Development expenditures are amortised on a straight-line basis over its useful life. Impairment is assessed whenever there is an indication of impairment and the amortisation period and method are also reviewed at the end of each reporting period. See accounting policy Note 3.7 on impairment of non-financial assets.


85

ANNUAL REPORT 2017

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 3.9 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on the weighted average basis. Cost of raw materials comprises the cost of purchase plus the cost of bringing the inventories to their present location and condition. Cost of finished goods and work-in-progress includes raw materials, direct labour and appropriate proportion of production overheads. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

3.10 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, demand deposits, and short term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value with original maturities of three months or less, and are used by the Group and the Company in management of their short term funding requirements. These also include bank overdrafts that form an integral part of the Group’s cash management.

3.11 Financial assets

Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. A financial asset is recognised initially, at its fair value plus, in the case of a financial instrument not at Fair Value Through Profit or Loss (“FVTPL”), transaction costs that are directly attributable to the acquisition or issue of the financial asset. The Group and the Company determine the classification of financial assets upon initial recognition. The categories include financial assets at FVTPL, loans and receivables, Held-To-Maturity (“HTM”) investments and Available-For-Sale (“AFS”) financial assets.

3.11.1 Financial assets at FVTPL

Financial assets are classified as financial assets at FVTPL if they are held for trading or are designated as such upon initial recognition. Financial assets are classified as held for trading if they are acquired principally for sale in the near term or are derivatives that do not meet the hedge accounting criteria (including separated embedded derivatives). Subsequent to initial recognition, financial assets at FVTPL are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at FVTPL do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at FVTPL are recognised separately in profit or loss as part of other income or other losses. Financial assets at FVTPL could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current, whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date. The Group and the Company do not have any financial assets at FVTPL at the current and previous financial year end.


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3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 3.11 Financial assets (Cont’d)

3.11.2 HTM investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Group and the Company has the positive intention and ability to hold them to maturity. After initial measurement, held to maturity investments are measured at amortised cost using the Effective Interest Rate (“EIR”), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss as finance costs. The Group and the Company do not have any HTM investments at the current and previous financial year end.

3.11.3 Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss through the amortisation process and when the loans and receivables are impaired or derecognised. Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the financial year end, these are classified as non-current.

3.11.4 AFS financial assets

AFS financial assets are financial assets that are designated as such or are not classified in any of the three preceding categories. After initial recognition, AFS financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an AFS equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established. The Group’s and the Company’s AFS financial assets comprise investment in unit trust fund and quoted shares. AFS financial assets which are not expected to be realised within 12 months after the financial year end are classified as non-current assets.

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.


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ANNUAL REPORT 2017

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 3.12 Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default, significant delay in payments or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

3.12.1 Financial assets carried at amortised cost

For financial assets carried at amortised cost, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or economic conditions that correlate with default on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

3.12.2 AFS financial assets

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market. If an AFS financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation or accretion) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Impairment losses on AFS equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For AFS debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss.


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3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 3.13 Share capital

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

3.14 Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Financial liabilities are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

The measurement of financial liabilities depends on their classification as described below: 3.14.1 Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by MFRS 139. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in MFRS 139 are satisfied. The Group and the Company do not have any financial liabilities at FVTPL in the current and previous financial year end.

3.14.2 Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Fair value arising from financial guarantee contracts are classified as deferred income and is amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is adjusted to the obligation amount and accounted for as a provision.

3.14.3 Other financial liabilities

Other financial liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.


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ANNUAL REPORT 2017

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 3.14 Financial liabilities (Cont’d) A financial liability is derecognised when the obligation under the liability is extinguished.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original financial liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

3.15 Leases 3.15.1 Finance lease

Leases in terms of which the Group and the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Leasehold land which in substance is a finance lease is classified as property, plant and equipment.

3.15.2 Operating lease

Leases, where the Group and the Company do not assume substantially all the risks and rewards of ownership are classified as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the statements of financial position. Property interest held under an operating lease, which is held to earn rental income or for capital appreciation or both, is classified as investment property and measured using fair value model. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease.

3.16 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred with any difference between the initial fair value and proceeds (net of transaction costs) being charged to profit or loss at initial recognition. In subsequent periods, borrowings are stated at amortised cost using the effective interest method with the difference between the initial fair value and the redemption value is recognised in the profit or loss over the period of the borrowings. Profit, interest, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability is reported within finance cost in the profit or loss. Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defer settlement of the liability for at least 12 months after the financial position date. Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed.


90



3.16 Borrowings (Cont’d)

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

3.17 Income tax 3.17.1 Current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

3.17.2 Deferred tax

Deferred tax is provided using the liability method on temporary differences at the financial year end between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except for the deferred tax liability that arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred tax assets are recognised for all deductible temporary differences, unutilised tax losses and unused tax credits, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unutilised tax losses and unused tax credits can be utilised except where the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred tax assets are reviewed at each financial year end and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilised. Unrecognised deferred tax assets are reassessed at each financial year end and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the financial year end. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.


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ANNUAL REPORT 2017

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 3.18 Provisions

Provisions are recognised when the Group and the Company have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably. Provisions are reviewed at each financial year end adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

3.19 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the Company and the revenue can be reliably measured. Revenue is measure at the fair value of consideration received or receivable.

3.19.1 Sale of goods and services

Revenue from sales of goods is recognised when the significant risks and rewards of ownerships of the goods have been transferred to the buyer. Revenue is measured at the fair value of the consideration received or receivable, net of discounts and taxes applicable to the revenue.

3.19.2 Management fees

Management fee is recognised on an accrual basis when service is rendered.

3.19.3 Dividend income

Dividend income is recognised when the shareholders’ rights to receive payment is established.

3.19.4 Interest income

Interest income is recognised as it accrues, taking into account the principal outstanding and the effective rate over period of maturity.

3.19.5 Rental income

Rental income is recognised on a straight-line basis over the term of the tenancy agreement subject to revision of rental rate.

3.20 Employee benefits

3.20.1 Short term employee benefits

Wages, salaries, social security contributions, paid annual leave, paid sick leave, bonuses and non-monetary benefits are recognised as expense in the financial year in which the associated services are rendered by employees of the Group and the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.


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3.20 Employee benefits (Cont’d)

3.20.2 Defined contribution plans

Defined contribution plans are post-employment benefits plans under which the Group and the Company pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial year. The contributions are charged as an expense in the financial year in which the employees render their services. As required by law, the Group and the Company make such contributions to the Employees Provident Fund(“EPF”).

3.21 Contingencies

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the Statements of Financial Position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. Contingent liabilities and assets are not recognised in the statements of financial position of the Group and of the Company in the current and previous financial year end.

3.22 Foreign currency 3.22.1 Functional and presentation currency

The financial statements of the Group and of the Company are measured using the currency of the primary economic environment in which the Group and the Company operate (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is also the Group’s and the Company’s functional currency.

3.22.2 Foreign currency transactions

Transactions in currencies other than the Group’s and the Company’s functional currency (“foreign currencies”) are recorded in the functional currency using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are translated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity.

3.23 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Additional disclosures on each of these segments are disclosed in Note 30, including the factors used to identify the reportable segments and the measurement basis of segment information.


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ANNUAL REPORT 2017

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 3.24 Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group and the Company. The fair value of an asset or a liability is measured using the assumptions that market participants act in their economic best interest when pricing the asset or liability. The Group and the Company use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group and the Company determine whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the financial year end.

3.25 Related parties A party is related to an entity if:- (i) directly, or indirectly through one or more intermediaries, the party:- - controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries); - has an interest in the entity that gives it significant influence over the entity; or - has joint control over the entity; (ii) the party is an associated of the entity; (iii) the party is a joint venture in which the entity is a venturer; (iv) the party is a member of the key management personnel of the entity or its parent; (v) the party is a closed member of the family of any individual referred to in (i) or (iv); (vi) the party is an entity that is controlled, joint controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or (vii) the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity.

Close members of the family of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with entity.

3.26 Earnings per ordinary share The Group presents basic and diluted earnings per share data for its ordinary shares (“EPS”).

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.


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4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Group’s and the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reporting amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods.

4.1 Judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, there were no critical judgements made by management on the amounts recognised in the consolidated financial statements.

4.2 Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

4.2.1 Depreciation

The costs of property, plant and equipment and investment properties are depreciated on a straight-line basis over the asset’s estimated economic useful lives. Management estimates the useful lives of these property, plant and equipment and investment properties to be within a range of 2 to 60 years. These are common life expectancies applied in this industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets and therefore future depreciation charges could be revised. The carrying amounts of the Group’s and the Company’s property, plant and equipment and investment properties at the reporting date are disclosed in Note 5 and Note 6 to the financial statements.

4.2.2 Write down for obsolete or slow moving inventories

The Group writes down its obsolete or slow moving inventories based on assessment of their estimated net selling price. Inventories are written down when events or changes in circumstances indicate that the carrying amounts could not be recovered. Reviews are made periodically by management to evaluate the adequacy of the write down for obsolete or slow moving inventories. Where expectations differ from the original estimates, the differences would impact the carrying amount of inventories.

4.2.3 Deferred tax assets

Deferred tax assets are recognised for all unused tax losses, unabsorbed capital allowances and other deductible temporary differences to the extent that it is probable that future taxable profits would be available against which the tax losses, capital allowances and other deductible temporary differences could be utilised. Significant management judgement is required to determine the amount of deferred tax assets that could be recognised, based on the likely timing and extent of future taxable profits together with future tax planning strategies. Total carrying value of unrecognised tax losses, unabsorbed capital allowances and other taxable temporary differences of the Group and the Company are disclosed in Note 19.

4.2.4 Income taxes

There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group and the Company recognised tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the year in which such determination is made.


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ANNUAL REPORT 2017

4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (Cont’d)

4.2 Key sources of estimation uncertainty (Cont’d)

4.2.5 Impairment of trade and other receivables

The Group makes impairment of receivables based on an assessment of the recoverability of receivables. Impairment is applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management specifically analyses historical bad debt, customer concentration, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of impairment of receivables. Where expectations differ from the original estimates, the differences would impact the carrying amount of receivables.

4.2.6 Impairment of non-financial assets

When recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows.

4.2.7 Provision for warranty

The Company has applied judgement in determining the provision for warranty for product sold under warranty terms based on past experience. The provision is computed based on a pre-determined percentage on annual sales of the products and is retained for a period of one year.

4.2.8 Classification between investment properties and owner-occupied properties

The Group determines whether a property qualified as an investment property, and has developed a criteria in making that judgement. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group considers whether a property generates cash flows largely independent of the other assets held by the Group. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portion could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portion could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.

4.2.9 Impairment of goodwill

The Group and the Company perform an annual assessment of the carrying value of its goodwill against the recoverable amount of the cash-generating units (“CGUs”) to which the goodwill have been allocated. The measurement of the recoverable amount of CGUs are determined based on the value-in-use method, incorporating the present value of estimated future cash flows expected to arise from the respective CGU’s ongoing operations. Management judgement is used in the determination of the assumptions made, particularly the cash flow projections, discount rates and the growth rates used. The estimation of pre-tax cash flows is sensitive to the periods for which the forecasts are available and to assumptions regarding the long-term sustainable cash flows, and reflect management’s view of future performance.

4.2.10 Classification of leasehold land

The classification of leasehold land as a finance lease or an operating lease requires the use of judgement in determining the extent to which risks and rewards incidental to its ownership lie. Despite the fact that there will be no transfer of ownership by the end of the lease term and that the lease term does not constitute the major part of the indefinite economic life of the land, management considered that the present value of the minimum lease payments approximated to the fair value of the land at the inception of the lease. Accordingly, management judged that the Group has acquired substantially all the risks and rewards incidental to the ownership of the land through a finance lease.

“


96


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,988

3

,075

,571

1

0,21

7,68

3

2,2

50,8

36

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97,9

39

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621,

017

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s: A

ccum

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pairm

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as

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2,9

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13

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30,7

67

976

,503

1

,391

,953

7

,564

,383


97

ANNUAL REPORT 2017

5.

PRO

PERT

Y, P

LAN

T A

ND

EQ

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tions

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2016

RM

R

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RM

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ss o

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Bal

ance

as

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2016

2

,163

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6

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,684

1

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s at

31

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6

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3

21,8

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car

ryin

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B

alan

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31

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r 201

6

1,2

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37

3,0

94,5

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1,6

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896

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1

,108

,991

7

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,847


98


5. PROPERTY, PLANT AND EQUIPMENT (Cont’d) Company Furniture, fittings and office equipment 2017 RM At cost Balance as at beginning and end of the financial year 1,699

Less: Accumulated depreciation Balance as at 1 January 2017 326 Charge for the financial year 170

Balance as at 31 December 2017 496 Net carrying amount Balance as at end of the financial year 1,203

2016 At cost Balance as at beginning and end of the financial year 1,699

Less: Accumulated depreciation Balance as at 1 January 2016 156 Charge for the financial year 170

Balance as at 31 December 2016 326 Net carrying amount Balance as at end of the financial year 1,373 Group The carrying amount of the property, plant and equipment under finance lease of the Group are as follows: 2017 2016 RM RM Motor vehicles 1,356,339 1,053,430


99

ANNUAL REPORT 2017

5. PROPERTY, PLANT AND EQUIPMENT (Cont’d)

Group(Cont’d)

The Group has pledged the following property, plant and equipment to licensed banks to secure banking facilities granted to a subsidiary company as referred to in Note 18:

2017 2016 RM RM

Net carrying amount Short term leasehold land 688,372 716,279 Buildings 2,562,398 2,660,496 Revaluation of land and buildings

The short term leasehold land and certain buildings were revalued by the directors on 31 August 1994 based on valuation carried out by independent professional valuers on the open market basis. The properties have not been revalued since they were first revalued. In previous years, as permitted under the transitional provisions of IAS 16 (Revised): Property, Plant and Equipment, these assets continue to be stated at their 1994 valuation less accumulated depreciation. Upon transition to MFRS, the Group elected to measure its property, plant and equipment under the cost model under MFRS 116: Property, Plant and Equipment. At 1 September 2011 (date of transition to MFRS), the Group uses the previous revaluation at or before the date of transition as deemed cost. The revaluation surplus was transferred to retained profits on date of transition to MFRS.

Purchase of property, plant and equipment 2017 2016 RM RM Cost of property, plant and equipment purchased 898,228 1,880,595 Amount financed through loan and borrowing 590,900 1,013,842

Cash disbursed for purchase of property, plant and equipment 307,328 866,753 6. INVESTMENT PROPERTIES Group 2017 2016 RM RM Freehold building, at cost Balance as at beginning and end of the financial year 609,040 609,040

Less: Accumulated depreciation Balance as at beginning of the financial year 247,761 234,802 Charge for the financial year 12,959 12,959 Balance as at end of the financial year 260,720 247,761 Net carrying amount Balance as at end of the financial year 348,320 361,279


100


6. INVESTMENT PROPERTIES (Cont’d)

The following are recognised in profit or loss in respect of investment properties:

2017 2016 RM RM

Rental income 24,000 24,000 Direct operating expenses Income generating investment properties 11,741 11,346 Non-income generating investment properties 5,162 3,183

The fair value of the investment properties was estimated at RM1,035,000 (2016: RM951,000) based on the directors’ estimate by comparing the Group’s investment properties with similar properties that were listed for sale within the same locality. The fair value of investment property is within level 3 of the fair value hierarchy. The directors estimated fair values of the leasehold buildings by taking into account sales price of comparable properties in close proximity adjusted for the differences in key attributes such as property size. The most significant input into this valuation approach is price per square foot of comparable properties which was derived from limited market activity for comparable properties as at the reporting date. At the reporting date, the carrying amount of the Group’s investment properties amounting to RM36,111 (2016: RM38,889) has been pledged to a licensed financial institution for banking facilities granted to a subsidiary company as referred to in Note 18 to the financial statements.

7. INVESTMENT IN SUBSIDIARY COMPANIES Company 2017 2016 RM RM Unquoted shares, at cost Balance as at beginning and end of the financial year 34,847,827 34,847,827

Less: Accumulated impairment Balance as at beginning of the financial year 28,815,119 27,425,050 Impairment losses recognised during the financial year 42,505 1,390,069 Balance as at end of the financial year 28,857,624 28,815,119 Net carrying amount Balance as at end of the financial year 5,990,203 6,032,708


101

ANNUAL REPORT 2017

7. INVESTMENT IN SUBSIDIARY COMPANIES (Cont’d)

The subsidiary companies, which are incorporated in Malaysia, are as follows:-

Effective equity interestName of subsidiaries 2017 2016 Principal activities

T.H. Hin Sdn. Bhd. 100% 100% Dealer in gas cookers, electrical household appliances and their related products T.H. Hin Home Tech Sdn. Bhd. 100% 100% Manufacturing of gas cookers, electrical household appliances and their related products Brightyield Sdn. Bhd. 100% 100% Manufacturing of gas cookers component parts and their related products Enamel Products Sdn. Bhd. 100% 100% Manufacturing of enamel products Milux Sales & Service Sdn. Bhd. 100% 100% Dealer in gas cookers/electrical household appliances and their related products Eurobay Industries Sdn. Bhd. 100% 100% Manufacturing and supplying of home electrical appliances Milux International Sdn. Bhd. 100% 100% Investment holding Milux Properties Sdn. Bhd. 100% 100% Investment holding Pansprint Consolidated Sdn. Bhd. 100% 100% Inactive Milux Greentech Resources Sdn. Bhd. 100% 100% Inactive Andersen’s of Denmark (M) Sdn. Bhd. *^ 60% 60% In the process of members’ voluntary winding up The subsidiary companies, which are incorporated outside Malaysia, are as follows:-

Milux Home Appliances (India) 99% 99% Ceased operation Private Limited #^ Subsidiary company of T. H. Hin Sdn. Bhd. Milux Industry (Zhong Shan) Co. Ltd. #^ 100% 100% Ceased operation

* Not audited upon commencement of the members’ voluntary winding up process. Consolidated based on management accounts. This subsidiary does not form a material part of the consolidated financial statements.

# Not audited as the subsidiaries had ceased and discontinued operation prior to 1 September 2011. Consolidated based on management accounts where all the assets had been written off and all the liabilities had been settled.

^ Not audited by CAS Malaysia PLT

During the financial year, the management performed an impairment test on the investment in certain subsidiaries as these subsidiaries have been persistently making losses. An impairment loss of RM42,505 (2016: RM1,390,069) was recognised for the financial year to write down the cost of investment in these subsidiaries to their recoverable amount. The recoverable amount of investment in these subsidiaries has been determined based on their net assets.


102


8. INVESTMENT IN A JOINT VENTURE Group 2017 2016 RM RM Unquoted shares, at cost Balance as at beginning and end of the financial year 252,000 252,000

Less: Share of post-acquisition loss Balance as at beginning of the financial year 3,379 - Share of loss during the financial year 5,427 3,379 Balance as at end of the financial year 8,806 3,379 Net carrying amount Balance as at beginning and end of the financial year 243,194 248,621 The details of the joint venture company, which is incorporated in Malaysia, is as follow:

Effective equity interestName of joint venture 2017 2016 Principal activities

Phoenix Pentagon Sdn. Bhd. 60% 60% To provide project management and advisory services. The Group’s share of assets, liabilities, income and expenses is as follows: 2017 2016 RM RM Assets and liabilities

Total assets 244,544 250,803 Total liabilities (1,350) (2,182)

243,194 248,621 Financial results Operating expenses (5,427) (3,379) Loss for the financial year (5,427) (3,379)


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ANNUAL REPORT 2017

9. OTHER INVESTMENTS Group Company 2017 2016 2017 2016 RM RM RM RM Available-for-sale financial assets At market value Unit trust fund 35,821 34,707 - - Quoted shares in Malaysia 13,525 9,476 13,525 9,476

49,346 44,183 13,525 9,476

The average effective interest rates of the deposit placement with an unit trust fund management company is 3.05% (2016: 3.20%) and is readily convertible to cash with insignificant risk of changes in value.

10. INTANGIBLE ASSETS Group Develop Goodwill on -ment consolidation expenditure Total RM RM RM 2017

At cost Balance as at beginning and end of the financial year 1,963,029 876,465 2,839,494

Less: Accumulated amortisation Balance as at beginning and end of the financial year 421,047 876,465 1,297,512

Less: Accumulated impairment Balance as at beginning of the financial year 1,320,330 - 1,320,330 Impairment losses recognised during the financial year - - - Balance as at end of the financial year 1,320,330 - 1,320,330 Net carrying amount Balance as at end of the financial year 221,652 - 221,652 2016 At cost Balance as at beginning and end of the financial year 1,963,029 876,465 2,839,494

Less: Accumulated amortisation Balance as at beginning and end of the financial year 421,047 876,465 1,297,512

Less: Accumulated impairment Balance as at beginning of the financial year 759,799 - 759,799 Impairment losses recognised during the financial year 560,531 - 560,531 Balance as at end of the financial year 1,320,330 - 1,320,330 Net carrying amount Balance as at end of the financial year 221,652 - 221,652


104


10. INTANGIBLE ASSETS (Cont’d) Goodwill on consolidation

The Group considers each subsidiary as a single CGU and the carrying amount of goodwill is allocated to the respective subsidiaries. The recoverable amounts of a CGU is determined based on the value-in-use calculation. The value-in-use calculation is determined using discounted cash flow projection discounted at rates which reflects risks relating to the relevant CGU. The discount rate applied to the cash flows projections is based on the cost of borrowings of the Group throughout the calculation period. The growth rate used is consistent with the projected growth rate of the CGU’s industry and economy. The management carried out an annual review of the recoverable amounts of its goodwill at each financial year. The impairment loss provided was attributable to the subsidiaries that were suffering significant loss in current and previous year. The Group believes that any reasonable possible change in the above key assumptions applied are not likely to materially cause the recoverable amounts to be lower than their carrying amounts.

11. INVENTORIES Group 2017 2016 RM RM At cost Raw materials 5,170,263 5,061,640 Work-in-progress 375,836 558,627 Finished goods 14,733,615 13,080,198 Good in transit 1,417,004 1,574,458 Consumables 118,444 94,322 21,815,162 20,369,245 At net realisable value Raw materials 776,585 993,013 Finished goods 319,076 308,295 Consumables 781 4,928 1,096,442 1,306,236 22,911,604 21,675,481 Recognised in profit or loss Inventories recognized as cost of sales 61,903,461 54,346,694 Slow moving and obsolete inventories written down 454,075 2,006,178 Slow moving and obsolete inventories written back* 271,684 511,343 Slow moving and obsolete inventories written down and written back are included in cost of sales.

* During the financial year, the Group managed to rework and sell some of the slow-moving inventories which have been written down in previous financial years. As a result, the inventories written down had been reversed during the financial year.


105

ANNUAL REPORT 2017

12. TRADE RECEIVABLES 2017 2016 RM RM Trade receivables - gross 20,759,625 19,471,865 Less: Allowance for impairment losses (1,107,082) (889,824) Trade receivables - net 19,652,543 18,582,041

Group Movement in the allowance for impairment losses

The allowance account in respect of the trade receivables are used to record impairment losses. The creation and release of allowance for impaired receivables have been included in ‘other operating expenses’ in the profit or loss. Unless the Group is satisfied that recovery of the amount is possible, then the amount considered irrecoverable is written off against the receivable directly.

The movement in the allowance for impairment losses of trade receivables during the financial year are as follows: 2017 2016 RM RM Balance as at beginning of the financial year 889,824 611,197 Impairment losses recognised during the financial year 464,146 423,787 Allowance for impairment losses written off (4,731) - Reversal of allowance for impairment losses (242,157) (145,160)

Balance as at end of the financial year 1,107,082 889,824

The allowance for impairment losses of trade receivables are those trade receivables that are individually impaired. These trade receivables are in significant difficulties and have defaulted on payments. They are not secured by any collateral or credit enhancement. Based on the Group’s historical collection experience, the amounts of trade receivables presented on the statements of financial position represent the amount exposed to credit risk. The management believes that no additional credit risk beyond the amounts provided for collection losses is inherent in the net trade receivables.

The ageing analysis of the Group’s trade receivables are as follow: 2017 2016 RM RM Neither past due nor impaired 13,854,296 13,019,809 Past due 1 - 30 days 4,366,398 3,727,132 Past due 31 - 60 days 834,376 988,540 Past due 61 - 90 days 257,052 493,706 Past due more than 90 days 1,447,503 1,242,678 6,905,329 6,452,056 20,759,625 19,471,865 Receivables past due and impaired (1,107,082) (889,824) 19,652,543 18,582,041


106


12. TRADE RECEIVABLES (Cont’d) Group Receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired relate to customers for whom there are no default and considered to be creditworthy and able to settle their debts. None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

Receivables that are past due but not impaired

As at 31 December 2017, the Group has trade receivables amounting to RM5,798,247 (2016: RM5,562,232) that are past due at the reporting date but not impaired. Trade receivables that are past due but not impaired relate to customers that have no expectation of default based on historical dealings with the Group. Based on past experience and no adverse information to date, the Directors of the Group are of the opinion that no allowance for impairment is necessary in respect of these balances as there has not been a significant change in the credit quality and the balances are still considered to be fully recoverable. The maximum exposure of credit risk at the reporting date is the carrying value of receivables mentioned above. The Group does not hold any collateral as security. The Group’s normal trade credit term range from 30 to 120 days (2016: 30 to 120 days). Other credit terms are assessed and approved on a case by case basis.

13. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS Group Company 2017 2016 2017 2016 RM RM RM RM Other receivables 1,723,310 1,431,378 - - Deposits 138,004 246,575 1,000 1,000 Prepayments 538,984 771,405 2,260 15,787 Interest receivables 39,477 46,873 - -

2,439,775 2,496,231 3,260 16,787

14. AMOUNT DUE FROM SUBSIDIARY COMPANIES Company 2017 2016 RM RM Amount due from subsidiary companies 34,178,512 34,228,199 Less: Allowance for impairment losses (32,951,863) (32,914,460)

Amount due from subsidiary companies - net 1,226,649 1,313,739


107

ANNUAL REPORT 2017

14. AMOUNT DUE FROM SUBSIDIARY COMPANIES (Cont’d) Company

The amount due from subsidiary companies represented non-trade transactions which are unsecured, interest free and repayable on demand. The movement in the allowance for impairment losses of amount due from subsidiary companies during the financial year are as follows:

2017 2016 RM RM Balance as at beginning of the financial year 32,914,460 33,007,466 Impairment losses recognised during the financial year 325,172 69,766 Reversal of allowance for impairment losses (287,769) (162,772)

Balance as at end of the financial year 32,951,863 32,914,460

15. FIXED DEPOSITS WITH LICENSED BANKS Group Company 2017 2016 2017 2016 RM RM RM RM Fixed deposits With maturity of 1 to 3 months 1,093,158 1,061,424 559,394 543,156 With maturity of more than 3 months 2,195,291 3,075,082 - -

3,288,449 4,136,506 559,394 543,156

The effective interest rates and maturity period of the fixed deposits with licensed banks at the reporting date are as follows:

Group 2017 2016 RM RM Effective interest rates 2.55% - 3.10% 2.70% - 3.30% Maturity period one month to one year one month to one year

Company 2017 2016 RM RM

Effective interest rates 2.95% 2.95% Maturity period one month one month


108


16. CAPITAL AND RESERVES Group and Company 2017 2016 2017 2016 Number of shares RM RM Authorised: Balance as at beginning and end of the financial year - 500,000,000 - 500,000,000 Issued and fully paid: Balance as at beginning and end of the financial year 54,411,294 54,411,294 54,411,294 54,411,294

Pursuant to Section 74 of the Companies Act 2016, all shares issued before or upon commencement of the Act shall have no par or nominal value.

Share premium

The share premium arose from the issuance of ordinary share above its par value of RM1 per ordinary share net of share issuance expenses and is non-distributable by way of dividends. Companies Act 2016 (“CA 2016”) has come into effect on 31 January 2017. Following the enforcement of CA 2016, the share premium account shall be merged with the Company’s share capital. Notwithstanding that, Section 618 of CA 2016 provides a transitional period of twenty four (24) months to utilise the amounts in the share premium account. Therefore, the Company has not consolidated the share premium into share capital until the expiry of the transitional period.

Fair value adjustment reserve

The fair value adjustment reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognised or impaired.

17. ACCUMULATED LOSSES The Group and the Company are in an accumulated losses position as at reporting date. 18. LOAN AND BORROWINGS Group 2017 2016 RM RM Current liabilities Secured Bank overdraft 2,681,257 1,338,009 Bankers’ acceptance 2,960,000 3,132,000 Multi currency trade loan 202,392 - Finance lease liabilities 328,022 211,917 6,171,671 4,681,926


109

ANNUAL REPORT 2017

18. LOAN AND BORROWINGS (Cont’d) Group (Cont’d) 2017 2016 RM RM Non-current liabilities Secured Finance lease liabilities 978,525 791,610

978,525 791,610 Total borrowings Secured Bank overdraft 2,681,257 1,338,009 Bankers’ acceptance 2,960,000 3,132,000 Multi currency trade loan 202,392 - Finance lease liabilities 1,306,547 1,003,527

7,150,196 5,473,536 Rates of interest charged per annum: 2017 2016 % % Bank overdraft BLR + 2.00 BLR + 2.00 Bankers’ acceptance 6.38 - 6.49 6.37 - 6.47 Multi currency trade loan 3.64 - Finance lease liabilities 3.96 - 7.06 4.57 - 7.06

Group (a) Bankers’ acceptance and bank overdraft The bankers’ acceptances and bank overdraft are secured by the following: (i) facilities agreement; (ii) a first legal charge over certain land and buildings of subsidiaries as disclosed in Note 5 and Note 6 to the financial statements; (iii) pledged of fixed deposits on lien as disclosed in Note 15 to the financial statements; and (iv) corporate guarantee by the Company. (b) Multi currency trade loan Multi currency trade loan is secured by the following: (i) facilities agreement; and (ii) corporate guarantee by the Company.


110


18. LOAN AND BORROWINGS (Cont’d) Group (Cont’d)

(c) Finance lease liabilities 2017 2016 RM RM Minimum lease payment - Not later than one year 386,022 259,178 - Later than one year and not later than five years 1,049,559 866,396 1,435,581 1,125,574 Future finance charges on finance lease (129,034) (122,047)

Present value of finance lease liabilities 1,306,547 1,003,527 Present value of finance lease is analysed as follows: Current liabilities - Not later than one year 328,022 211,917 Non-current liabilities - Later than one year and not later than five years 978,525 791,610 1,306,547 1,003,527

19. DEFERRED TAXATION Group Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority. The following amounts, determined after appropriate offsetting, are shown in the statements of financial position.

2017 2016 RM RM Deferred tax assets, net (282,508) (439,800) Deferred tax liabilities, net 404,034 716,800

121,526 277,000 The following are the movements of deferred tax liabilities: 2017 2016 RM RM Balance as at beginning of the financial year 277,000 7,500 Recognised in profit or loss (Note 26) (155,474) 269,500

Balance as at end of the financial year 121,526 277,000


111

ANNUAL REPORT 2017

19. DEFERRED TAXATION (Cont’d) Group (Cont’d) Recognised deferred tax assets and liabilities(Cont’d)

The components of the deferred tax liabilities at the end of the financial year comprise tax effects of: 2017 2016 RM RM Deferred tax assets Other deductible temporary differences - 220,500 Provisions 218,946 219,300 Unrealised foreign exchange loss 63,562 -

Deferred tax assets (before offsetting) 282,508 439,800 Offsetting (282.508) (439,800) Deferred tax assets (after offsetting) - - Deferred tax liabilities Excess of capital allowances over corresponding depreciation 404,034 616,000 Unrealised foreign exchange gain - 100,800 Deferred tax liabilities (before offsetting) 404,034 716,800 Offsetting (282,508) (439,800)

Deferred tax liabilities (after offsetting) 121,526 277,000

Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Group Company 2017 2016 2017 2016 RM RM RM RM Unabsorbed capital allowances and unutilised tax losses 41,326,885 40,344,000 1,008,001 847,600 Other temporary differences 3,525,464 19,966,013 188,163 205,600

44,852,349 60,310,013 1,196,164 1,053,200 Unrecognised deferred tax assets at 24% (2016: 24%) 10,764,564 14,474,403 287,079 252,768

The unabsorbed capital allowances and unutilised tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the Group and the Company can utilise the benefits. The unabsorbed capital allowances and unutilised tax losses are subject to the agreement of the tax authorities.


112


20. TRADE AND OTHER PAYABLES Group Company 2017 2016 2017 2016 RM RM RM RM Trade payables 6,678,009 6,297,648 - - Add: Other payables 1,077,588 798,256 6,861 5,527 Accruals 838,703 1,621,390 213,634 237,498 Deposits received 23,176 23,973 - - 1,939,467 2,443,619 220,495 243,025 Total financial liabilities carrying at amortised costs 8,617,476 8,741,267 220,495 243,025

The trade payables are non-interest bearing and the normal trade credit terms received by the Group range from 30 to 90 days (2016: 30 to 90 days).

21. AMOUNT DUE TO SUBSIDIARY COMPANIES AND A JOINT VENTURE

The amount due to subsidiary companies and a joint venture represented non-trade transactions which are unsecured, interest free and repayable on demand.

22. PROVISION Group 2017 2016 RM RM Provision for warranty

Balance as at beginning of the financial year 174,652 184,200 Charge for the financial year 210,564 180,763 Utilised during the financial year (43,916) (37,677) Reversal of provision (130,736) (152,634)

Balance as at end of the financial year 210,564 174,652

23. REVENUE Group Company 2017 2016 2017 2016 RM RM RM RM Sales of goods 79,694,172 72,437,371 - - Dividend income 388 200 388 200 Management fee income - - 601,600 601,600

79,694,560 72,437,571 601,988 601,800


113

ANNUAL REPORT 2017

24. FINANCE COSTS Group 2017 2016 RM RM Interest expenses on Finance lease liabilities 64,532 17,549 Bank overdraft 223,936 10,009 Multi currency trade loan 62 - Bankers’ acceptance 215,960 210,373

504,490 237,931

25. LOSS BEFORE TAXATION Group Company 2017 2016 2017 2016 RM RM RM RM Loss before taxation is arrived at: after charging Auditors’ remuneration: Statutory audit 101,000 109,200 16,500 16,500 Underprovision in previous financial year 10,300 11,300 3,500 1,500 Non-statutory audit 3,000 - 3,000 - Deposits written off 59,840 - - - Depreciation: Property, plant and equipment 1,244,068 1,300,935 170 170 Investment properties 12,959 12,959 - - Directors’ remuneration: Fees 165,000 160,000 165,000 160,000 Salaries and other benefits 956,206 909,750 467,556 487,750 Employee’s provident fund 65,985 56,462 26,226 22,320 Social security costs 1,421 5,306 - - Impairment loss: Amount due from subsidiary companies - - 325,172 69,766 Goodwill on consolidation - 560,531 - - Investment in subsidiaries - - 42,505 1,390,069 Property, plant and equipment - 321,867 - - Trade receivables 464,146 423,787 - - Interest expenses 504,490 237,931 - - Loss on disposal of property, plant and equipment 4,055 4,813 - - Property, plant and equipment written off 2,331 234,680 - - Provision for warranty 210,564 180,763 - - Rental of: Office equipment 18,070 13,852 - - Plant and machinery 37,840 50,340 - - Premises 869,767 656,489 - - Loss on foreign exchange: Realised 414,080 246,357 - - Unrealised 265,674 70,389 - - Slow moving and obsolete inventories written down 454,075 2,006,178 - - Staff costs: Salaries and other benefits 6,363,361 5,874,528 141,780 130,812 Employee’s provident fund 706,229 600,544 19,896 14,734 Social security costs 62,370 55,403 2,583 2,199


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25. LOSS BEFORE TAXATION (Cont’d) Group Company 2017 2016 2017 2016 RM RM RM RM after crediting Gain on disposal of property, plant and equipment 212,959 167,097 - - Gain on foreign exchange: Realised 85,612 - - - Unrealised 33,048 442,307 - - Interest income 148,904 164,696 16,238 16,473 Reversal of provision for warranty 130,736 152,634 - - Rental income 24,000 24,000 - - Reversal of impairment loss on: Trade receivables 242,157 145,160 - - Amount due from a subsidiary company - - 287,769 162,772 Slow moving and obsolete inventories written back 271,684 511,343 - -

The estimated monetary value of benefits-in-kind received by the directors of the Group amounted to RM35,050 (2016: RM32,568).

26. TAXATION Group Company 2017 2016 2017 2016 RM RM RM RM Current Provision for current financial year 527,338 822,821 - - Underprovision in previous financial year 13,043 17,165 - - 540,381 839,986 - - Deferred taxation (Note 19) Recognised in the income statement 944 269,100 - - (Over)/underprovision in previous financial year (156,418) 400 - - (155,474) 269,500 - - Real property gain tax (161,258) 15,300 - - Tax expenses for current financial year 223,649 1,124,786 - -

Domestic current income tax is calculated at the statutory tax rate of 24% (2016: 24%) of the estimated assessable profit for the year.


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26. TAXATION (Cont’d)

The reconciliation of income tax expense applicable to the loss before taxation at the statutory tax rate to income tax expense at the effective tax rate of the Group and of the Company is as follows:

Group Company 2017 2016 2017 2016 RM RM RM RM Loss before taxation (615,617) (1,539,734) (551,985) (1,794,708) Tax at the statutory tax rate of 24% (2016: 24%) (147,748) (369,536) (132,476) (430,730) Non-deductible expenses 618,959 1,254,731 144,854 405,391 Non-taxable income (169,474) (68,568) (69,158) (39,113) Double deduction for tax purpose - (48,449) - - Deferred tax assets not recognised during the financial year 339,817 328,781 56,780 64,452 Utilisation of previously unrecognised deferred tax assets (113,272) (5,038) - - Real property gain tax (161,258) 15,300 - - Underprovision of taxation in previous financial year 13,043 17,165 - - (Over)/underprovision of deferred taxation in previous financial year (156,418) 400 - -

Tax expenses for the current financial year 223,649 1,124,786 - -

27. LOSS PER SHARE (a) Basic loss per ordinary share

The calculation of basic loss per ordinary share at 31 December 2017 is based on the loss attributable to ordinary shareholders and divided by weighted average number of ordinary shares outstanding, calculated as follows:

Group 2017 2016 Loss attributable to ordinary shareholders (RM) (839,266) (2,664,520) Weighted average number of ordinary shares 54,411,294 54,411,294 Basic loss per ordinary share attributable to equity holders of the Company (sen) (1.54) (4.90) (b) Diluted loss per ordinary share

The Group does not have any potential dilutive ordinary shares, thus, diluted loss per ordinary share is not presented.


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28. RELATED PARTY DISCLOSURES

(a) In addition to the information detailed elsewhere in the financial statements, the Group and the Company carried out the following transactions with its related parties during the financial year:

Group Company 2017 2016 2017 2016 RM RM RM RM Subsidiary companies Management fee - - 601,600 601,600 Other related parties Rental expenses paid to a company in which a director has substantial interest 684,000 360,000 - - Salaries paid to persons connected to certain directors 107,573 81,448 - -

(b) The key management personnel comprised all the directors of the Group and of the Company whose remuneration during the year are disclosed in Note 25.

The directors of the Group and of the Company are of the opinion that the related party transactions have been entered into the normal course of business on an arm’s length basis and have established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.

29. CONTINGENCIES Group (a) Contingent asset

On 26 January 2015, a subsidiary, Pansprint Consolidated Sdn. Bhd. [“PCSB”] had received a letter from Fong Kah Heng Trading [“FKH”] which stated that PCSB agreed to appoint FKH as a sub-contractor to extract, remove, transport and process iron ore deposits pursuant to a sub-contract mining agreement dated 22 February 2012. FKH claimed that they had completed the mining works and purportedly issued two bills dated 15 April 2013 and 27 June 2013 for the sum of RM324,495.60. On 13 February 2015, PCSB replied vide letter denying receipt of the bills and knowledge of such claims and further requested to be provided with further and better particulars of the alleged claims for verification purpose. On 25 July 2016, PCSB had been served with a Writ of Summon and Statement of Claim [“hereinafter referred to as “Writ of Summon”] in relation to a claim for the sum of RM324,495.60 together with interest at the rate of 5% per annum on the judgement sum calculated from the date of the Writ of Summon until full settlement filed by FKH. However, PCSB was against the said claim on the basis, amongst others, that the said contract had expired even before such supply, services and works were alleged to have been done by FKH. The description of work was also not within the scope of the said contract and no instructions had ever been given for such alleged supply, services and works. Further the alleged bills had never been sent to PCSB and the said bills were not even given to PCSB for verification despite request made to FKH for the same. FKH had subsequently filed a reply basically denying PCSB’s defense. The solicitor of PCSB had been instructed to prepare and submit the Defendants’ defense on 17 August 2016. The case was initially heard at the Kuantan Sessions Court but subsequently transferred to the Shah Alam Sessions Court. The said case is fixed for management and mediation on 27 April 2017. During the financial year, PCSB won the legal case against FKH following Court’s decision on 29 December 2017 and was awarded RM13,374 being scale cost payable by FKH to PCSB pursuant to a sealed Court Order dated 12 February 2018 received from Shah Alam Sessions Court. PCSB will recognise this amount as other income upon receipt of such amount from FKH.


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29. CONTINGENCIES (Cont’d) Group(Cont’d)

(b) Contingent liabilities 2017 2016 RM RM Unsecured Bank guarantee issued to third parties 85,000 85,000

Company Contingent liabilities 2017 2016 RM RM Unsecured (Note 18) Guaranteed banking facilities granted to subsidiary companies 6,279,346 4,510,009

30. SEGMENT INFORMATION

The Board of Directors is the Group’s chief operating decision maker. For management purposes, the segment information is presented in respect of the Group’s business segments. The primary format, business segment, is based on the Group’s management and internal reporting structure. Segment revenues, expenses and result included transfers between segments. The prices charged on intersegment transactions are at an arm’s length and not materially different for similar goods to parties outside of the economic entity. These transfers are eliminated on consolidation. Segment assets and liabilities include items directly attribute to a segment as well as those that can be allocated on a reasonable basis.

(a) Geographical segments

Segmental reporting by geographical regions has only been prepared for revenue as the Group’s assets are located in Malaysia. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

Group 2017 2016 RM RM Revenue Malaysia 55,384,594 48,709,183 Asian countries 24,309,966 23,728,388

79,694,560 72,437,571


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30. SEGMENT INFORMATION

(b) Business segments The Group comprises the following main business segments: Home appliance - Manufacturer and dealer in household appliances and their related products. Others - Investment holding and provision of management services. Segment revenue, loss before taxation and the assets employed are as follows: Group Home Total appliances Others operations Elimination Total RM RM RM RM RM 2017

Revenue External revenue 79,694,172 388 79,694,560 - 79,694,560 Inter-segment revenue 3,955,093 601,600 4,556,693 (4,556,693) -

Total revenue 83,649,265 601,988 84,251,253 (4,556,693) 79,694,560 Results Segment results 952,296 (640,316) 311,980 (572,011) (260,031) Finance income 132,665 16,239 148,904 - 148,904 Finance costs (504,490) - (504,490) - (504,490)

Loss before taxation 580,471 (624,077) (43,606) (572,011) (615,617) Income tax expenses (221,000) (2,649) (223,649) - (223,649)

Loss after taxation 359,471 (626,726) (267,255) (572,011) (839,266) Assets Segment assets 64,460,888 8,512,691 72,973,579 (19,785.956) 53,187,623 Investment in a joint venture - 234,389 234,389 8,805 243,194 Tax recoverable 121,123 11,217 132,340 - 132,340 Fixed deposits with licensed banks 2,729,055 559,394 3,288,449 - 3,288,449 Cash and bank balances 3,848,171 35,472 3,883,643 30,000 3,913,643

Total assets 71,159,237 9,353,163 80,512,400 (19,747,151) 60,765,249 Liabilities Segment liabilities 91,339,643 2,496,546 93,836,189 (85,007,725) 8,828,464 Tax payable 114,222 - 114,222 - 114,222 Deferred tax liabilities 121,526 - 121,526 - 121,526 Borrowings 7,150,196 - 7,150,196 - 7,150,196

Total liabilities 98,725,587 2,496,546 101,222,133 (85,007,725) 16,214,408


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30. SEGMENT INFORMATION(continued) Group Home Total appliances Others operations Elimination Total RM RM RM RM RM 2017

Other information Capital expenditure 898,228 - 898,228 - 898,228 Depreciation 1,246,676 10,351 1,257,027 - 1,257,027 Impairment loss: Investment in subsidiaries - 42,505 42,505 (42,505) - Trade receivables 464,146 - 464,146 - 464,146 Share of loss from a joint venture - 5,427 5,427 - 5,427 Slow moving and obsolete inventories written down 454,075 - 454,075 - 454,075 Slow moving and obsolete inventories written back 271,684 - 271,684 - 271,684 Realised foreign exchange loss 414,080 - 414,080 - 414,080 Unrealised foreign exchange loss 265,674 - 265,674 - 265,674 2016 Revenue External revenue 72,437,371 200 72,437,571 - 72,437,571 Inter-segment revenue 5,984,319 601,600 6,585,919 (6,585,919) -

Total revenue 78,421,690 601,800 79,023,490 (6,585,919) 72,437,571 Results Segment results (5,308,374) (3,029,863) (8,338,237) 6,871,738 (1,466,499) Finance income 148,223 16,473 164,696 - 164,696 Finance costs (237,931) - (237,931) - (237,931)

Loss before taxation (5,398,082) (3,013,390) (8,411,472) 6,871,738 (1,539,734) Income tax expenses (1,121,240) (3,546) (1,124,786) - (1,124,786)

Loss after taxation (6,519,322) (3,016,936) (9,536,258) 6,871,738 (2,664,520) Assets Segment assets 62,062,671 8,678,046 70,740,717 (19,419,003) 51,321,714 Investment in a joint venture - 248,621 248,621 - 248,621 Tax recoverable 191,512 32,444 223,956 - 223,956 Fixed deposits with licensed banks 3,593,350 543,156 4,136,506 - 4,136,506 Cash and bank balances 4,152,358 137,704 4,290,062 86,706 4,376,768

Total assets 69,999,891 9,639,971 79,639,862 (19,332,297) 60,307,565 Liabilities Segment liabilities 91,920,550 2,151,873 94,072,423 (85,156,080) 8,916,343 Tax payable 254,629 - 254,629 - 254,629 Deferred tax liabilities 277,000 - 277,000 - 277,000 Borrowings 5,473,536 - 5,473,536 - 5,473,536

Total liabilities 97,925,715 2,151,873 100,077,588 (85,156,080) 14,921,508


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30. SEGMENT INFORMATION (Cont’d) Group Home Total appliances Others operations Elimination Total RM RM RM RM RM 2016

Other information Capital expenditure 1,880,595 - 1,880,595 - 1,880,595 Depreciation 1,303,543 10,351 1,313,894 - 1,313,894 Impairment loss: Investment in subsidiaries - 1,390,069 1,390,069 (1,390,069) - Goodwill on consolidation - 560,531 560,531 - 560,531 Property, plant and equipment 321,867 - 321,867 - 321,867 Trade receivables 423,787 - 423,787 - 423,787 Share of loss from a joint venture - 3,379 3,379 - 3,379 Slow moving and obsolete inventories written down 2,006,178 - 2,006,178 - 2,006,178 Slow moving and obsolete inventories written back 511,343 - 511,343 - 511,343 Unrealised foreign exchange gain 442,092 215 442,307 - 442,307

(c) Major customer

During the financial year, major customer with revenue equal to or more than 10% of Group revenue are as follows:

Group 2017 2016 RM RM

All common control companies of Customer A 22,110,278 21,267,036

31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s and the Company’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s and the Company’s businesses whilst managing its risks. The main areas of the financial risks faced by the Group and the Company and the policy in respect of the major areas of treasury activity are set out as follows:

31.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and of the Company’s financial instruments will fluctuate because of the changes in market interest rates. The Group’s and the Company’s exposure to interest rate risk relates to interest-bearing financial assets and liabilities. Interest-bearing financial assets includes fixed deposits with licensed banks. Interest-bearing liabilities includes bank overdraft, finance lease liabilities, multi currency trade loan and bankers’ acceptance. The bank overdraft and multi currency trade loan at floating rates expose the Group to cash flow interest rate risk whilst finance lease liabilities and bankers’ acceptance at fixed rates expose the Group to fair value interest rate risk.


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31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont’d) 31.1 Interest rate risk (Cont’d)

The interest rates per annum on the financial liabilities are disclosed in Note 18.

The Group adopts a strategy of mixing fixed and floating rate borrowing to minimise exposure to interest rate risk. The Company also reviews its debt portfolio to ensure favourable rates are obtained. Sensitivity analysis for interest rate risk If the interest rate had been 100 basis point higher/lower and all other variables held constant, the Group’s loss before taxation would increase/decrease by approximately RM29,000 (2016: RM14,000) as a result of exposure to floating rate borrowings.

31.2 Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk mainly arises from its receivables below. For bank balances, the Group and the Company minimises credit risk by dealing exclusively with reputable financial institution.

(a) Trade receivables

Credit risk is minimised by monitoring the financial standing of the debtors on an ongoing concern basis. The Group has significant exposure to several customers and as such a concentration of credit risks. At the reporting date, approximately 33% (2016: 37%) of the Group’s trade receivables were due from one (1) (2016: 1) major customer. The maximum exposure to credit risk is disclosed in Note 12 to the financial statements, representing the carrying amount of the trade receivables recognised on the statement of financial position.

(b) Advances to subsidiaries

The Company provides unsecured advances to its subsidiaries and monitors the results of the subsidiaries regularly. The maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position. As at 31 December 2017, the Company had made sufficient allowance for impairment loss on advances to its subsidiaries. The Company does not specifically monitor the ageing of the advances to its subsidiaries.

(c) Financial guarantees

The Company provides unsecured financial guarantees to financial institutions in respect of banking facilities granted to certain subsidiaries and the default is remote. The maximum exposure to credit risk is disclosed in Note 29 and Note 31.4 to the financial statements, representing the outstanding banking facilities of the subsidiaries as at the reporting date.

31.3 Foreign currency risk

The Group and the Company are not significantly exposed to foreign currency risk as the majority of the Group’s and of the Company’s transactions, assets and liabilities are denominated in Ringgit Malaysia. The currencies giving rise to this risk are primarily United States Dollar (“USD”) and Euro Dollar (“EURO”). Foreign currency exposures in transactional currencies other than functional currencies are kept to an acceptable level. The Group has not entered into any derivative financial instruments such as forward foreign exchange contracts.


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31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont’d) 31.3 Foreign currency risk (Cont’d)

The net unhedged financial assets/(liabilities) of the Group at year end that are not denominated in Ringgit Malaysia are as follows:

Group

USD EURO Others Total RM RM RM RM 2017

Cash and bank balances 925,500 1,632 10,973 938,105 Trade and other receivables 6,393,798 - - 6,393,798 Trade and other payables (3,706,975) - - (3,706,975) Loan and borrowings (202,392) - - (202,392)

3,409,931 1,632 10,973 3,422,536 2016

Cash and bank balances 289,294 1,718 7,893 298,905 Trade and other receivables 8,156,627 - - 8,156,627 Trade and other payables (3,305,125) (24,746) - (3,329,871)

5,140,796 (23,028) 7,893 5,125,661

Sensitivity analysis for foreign currency risk

If the above foreign currencies had strengthen/weakened by 10 percent and all other variables held constant, the Company’s loss before taxation would increase/decrease by approximately RM342,000 (2016: RM513,000).

31.4 Liquidity and cash flow risk

Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group and the Company manages liquidity risk by maintaining sufficient cash. In addition, the Group and the Company maintains bank facilities such as working capital lines deemed adequate by the management to ensure it will have sufficient liquidity to meet its liabilities when they fall due.


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31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont’d) 31.4 Liquidity and cash flow risk (Cont’d)

The following table sets out the maturity profile of the financial liabilities as at the end of the reporting period based on contractual undiscounted cash flows (including interest payments computed using contractual rates). The effective interest rates of these financial liabilities are disclosed in the respective notes to the financial statements.

Group Later than 1 year but not Not later later than More than Total than 1 year 5 years 5 years RM RM RM RM 2017

Trade payables, other payables, accruals and deposits received 8,617,476 - - 8,617,476 Amount due to a joint venture 424 - - 424 Loan and borrowings 6,229,671 1,049,559 - 7,279,230 Financial guarantee contracts 85,000 - - 85,000 14,932,571 1,049,559 - 15,982,130 2016 Trade payables, other payables, accruals and deposits received 8,741,267 - - 8,741,267 Amount due to a joint venture 424 - - 424 Loan and borrowings 4,729,187 866,396 - 5,595,583 Financial guarantee contracts 85,000 - - 85,000

13,555,878 866,396 - 14,422,274 Company 2017 Other payables and accruals 220,495 - - 220,495 Amount due to subsidiary companies 1,300,767 - - 1,300,767 Financial guarantee contracts 6,279,346 - - 6,279,346 7,800,608 - - 7,800,608 2016 Other payables and accruals 243,025 - - 243,025 Amount due to subsidiary companies 947,620 - - 947,620 Financial guarantee contracts 4,510,009 - - 4,510,009

5,700,654 - - 5,700,654


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31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont’d)

31.5 Classification of financial instruments Group Company 2017 2016 2017 2016 RM RM RM RM Financial assets Available-for-sale Other investments 49,346 44,183 13,525 9,476 Loans and receivables Trade receivables 19,652,543 18,582,041 - - Other receivables and deposit 1,900,791 1,724,826 1,000 1,000 Amount due from subsidiary companies - - 1,226,649 1,313,739 Fixed deposits with licensed banks 3,288,449 4,136,506 559,394 543,156 Cash and bank balances 3,913,643 4,376,768 33,484 106,469 28,755,426 28,820,141 1,820,527 1,964,364 28,804,772 28,864,324 1,834,052 1,973,840 Financial liabilities Amortised costs Trade payables 6,678,009 6,297,648 - - Other payables, accruals and deposits received 1,939,467 2,443,619 220,495 243,025 Amount due to subsidiary companies - - 1,300,767 947,620 Amount due to a joint venture 424 424 - - Loan and borrowings 7,150,196 5,473,536 - -

15,768,096 14,215,227 1,521,262 1,190,645 31.6 Fair value of financial instruments

The carrying amounts of cash and cash equivalents, short term receivables and payables approximate fair values due to the relatively short term nature of these financial instruments.

The table below analyses financial instruments that are carried at fair value. Financial instruments that are carried at fair value Level 1 Level 2 Level 3 Total RM RM RM RM Group

Financial asset Other investments 2017 49,346 - - 49,346 2016 44,183 - - 44,183 Company

Financial asset Other investments 2017 13,525 - - 13,525 2016 9,476 - - 9,476


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31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont’d) 31.6 Fair value of financial instruments(Cont’d)

Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

Level 1 Level 2 Level 3 Total RM RM RM RM Group Financial liabilities Loan and borrowings 2017 - - 7,150,196 7,150,196 2016 - - 5,473,536 5,473,536 Amount due to a joint venture 2017 - - 424 424 2016 - - 424 424 Company Financial asset Amount due from subsidiary companies 2017 - - 1,226,649 1,226,649 2016 - - 1,313,739 1,313,739 Financial liability Amount due to subsidiary companies 2017 - - 1,300,767 1,300,767 2016 - - 947,620 947,620 Policy on transfer between levels

The fair value of an asset or liability to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer. Level 1 fair value Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical financial assets or liabilities that the entity can access at the measurement date. Level 2 fair value Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial assets or liabilities, either directly or indirectly.

Transfer between Level 1 and Level 2 fair values

There has been no transfer between Level 1 and 2 fair values during the financial year (2016: no transfer in either directions).

Level 3 fair value Level 3 fair value is estimated using unobservable inputs for the financial assets or liabilities.


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31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont’d) 31.6 Fair value of financial instruments(Cont’d) Amount due from/(to) subsidiary companies, amount due to joint venture, loan and borrowings

The fair value of these financial instruments which is determine for disclosure purposes, are estimated by discounting expected future cash flows at market increment lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date.

The interest rates used to discount estimated cash flows, when applicable, are as follows: 2017 2016 % %

Bank overdraft BLR + 2.00 BLR + 2.00 Bankers’ acceptance 6.38 - 6.49 6.37 - 6.47 Trade loan 3.64 - Finance lease liabilities 3.96 - 7.06 4.57 - 7.06

The responsibility for managing the above risks is vested in the directors. 32. CAPITAL MANAGEMENT

The primary objective of the Group’s and of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group and the Company manage the capital structure and makes adjustments to it, in light of changes in economic conditions. No changes were made in the objectives, policies or processes during the financial year ended 31 December 2017. The Group and the Company monitors capital using a net debt equity ratio, which is net debts divided by total capital. The Group’s and the Company’s net debts include total liabilities less total income tax payable, deferred tax liabilities and cash and cash equivalents. Total capital comprises share capital and reserves attributable to equity holders of the Group and of the Company. The Group and the Company are not subject to externally imposed capital requirements.

Group Company 2017 2016 2017 2016 RM RM RM RM Net debt 10,971,859 8,951,687 928,384 541,020 Total equity 44,550,840 45,386,056 6,317,372 6,865,307 Net debt against equity ratio 0.25 0.20 0.15 0.08


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33. SIGNIFICANT EVENT DURING THE FINANCIAL YEAR

On 21 February 2013, Tenaga Nasional Berhad [“TNB”] informed a subsidiary company, Enamel Products Sdn. Bhd. [“EPSB”] that the electricity reading meter in EPSB’s premises showed elements of tampering and was unable to function properly in recording the actual usage of electricity and demanded that a sum of RM848,432.72 [“Sum Demanded”] representing the loss between the period of 12 May 2008 to 29 May 2012 to be paid. On 6 September 2013, TNB demanded a further sum of RM28,382.11 [“Further Sum Demanded”] representing the loss between the period of 1 November 2012 and 20 February 2013 to be paid. EPSB had replied to TNB rebutting both allegations and proposed to resolve the matter. After several meetings, EPSB received a letter from TNB’s solicitors which demanded a Revised Sum Demanded of RM793,358.71 [“Revised Sum Demanded”]. This is the maximum exposure should EPSB be found liable to pay the full outstanding amount. The Revised Sum Demanded of RM793,358.71 and Further Sum Demanded of RM28,382.11 were recognised as accrued electricity charges in previous year. In respect of Further Sum Demanded, TNB served a Writ of Summons and Statement of Claim on 13 January 2016 to EPSB as a Defendant and notified that a suit had been fixed for case management in Bukit Mertajam Magistrate Court. Subsequently, EPSB reached an out-of-court settlement with TNB and the Further Sum Demanded had been paid by EPSB. Thereafter, TNB had withdrawn the suit on 29 January 2016. In respect of Revised Sum Demanded, EPSB had written to TNB on 18 August 2016, to request for a discount and payment to be made by instalments. However, this had been rejected by TNB. Thus, the matter had been submitted to the Butterworth Magistrate Court and the case management was held on 4 April 2017. On 7 June 2017, EPSB was served with a Court order by Butterworth Sessions Court being final judgement for the legal proceedings. EPSB was awarded a 15% discount on Revised Sum Demanded of RM793,358.71 upon acceptance by TNB. The final Revised Sum of RM674,354.90 was payable to TNB through twelve monthly instalments amounting to RM56,196.24 each commencing from 15 June 2017 and ending 15 May 2018. As at 31 December 2017, EPSB has partially fulfilled the obligation by making seven instalments to TNB.

34. COMPARATIVE FIGURES

The presentation and classification of items in current year’s financial statements are consistent with the previous financial year and the following comparative figures which have been restated to conform with current year’s presentation and to reflect approximately the nature of the transactions:

Group As previously As stated Adjustment restated RM RM RM Trade and other receivables 20,306,867 (20,306,867) - Prepayments 771,405 (771,405) - Trade receivables - 18,582,041 18,582,041 Other receivables, deposits and prepayments - 2,496,231 2,496,231 Trade and other payables 8,741,691 (8,741,691) - Trade payable - 6,297,648 6,297,648 Other payables, accruals and deposits received - 2,443,619 2,443,619 Amount due to a joint venture - 424 424


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34. COMPARATIVE FIGURES (Cont’d) Company As previously As stated Adjustment restated RM RM RM Trade and other receivables 1,314,739 (1,314,739) - Prepayments 15,787 (15,787) - Other receivables, deposits and prepayments - 16,787 16,787 Amount due from subsidiary companies - 1,313,739 1,313,739 Trade and other payables 1,190,645 (1,190,645) - Other payables, accruals and deposits received - 243,025 243,025 Amount due to subsidiary companies - 947,620 947,620

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LIST OF GROUP PROPERTIES

Net Book Approximate Value as at Approximate age of 31.12.2017 Year ofLocation Description size building Tenure Existing use RM’ 000 acquisition

T.H.Hin Home Tech Sdn Bhd Plot 100(I), MK 1, 2-storey factory Land: 26 years Leasehold Office cum 1,882 1990Tingkat Perusahaan 2A, building/office 86,017 sq ft (60 years Factory Prai Industrial Complex Built-up: expiring 13600 Prai, Penang 4,125 sq ft 15/12/2042)

3-storey factory Built-up: 23 years Leasehold Factory cum 1,369 1993 building adjoining 39,644 sq ft (60 years warehouse to above factory expiring 15/12/2042)

Block C 4-1, 4-2, 4-3, Apartments 4-4 & 4-5 Mukim 6, C4-1 65 sq metre 19 years Freehold Worker’s - 1999District of Seberang C4-2 64 sq metre 19 years Freehold hostel - 1999Perai Tengah, C4-3 64 sq metre 19 years Freehold - 1999Penang C4-4 64 sq metre 19 years Freehold - 1999 C4-5 64 sq metre 19 years Freehold - 1999

T.H.Hin Sdn. Bhd. Lot 5.31, 4th Floor, one unit office lot 345 sq ft 37 years Freehold Vacant / for sale 36 1981Imbi Plaza, Jalan Imbi Kuala Lumpur

Brightyield Sdn Bhd Apartment Sri Semarak Low cost flats Jalan Semarak 3A, A4-10 650 sq. ft 18 years Freehold Vacant 46 2008Section BB7 C4-8 650 sq. ft 18 years Bandar Bukit Beruntung, D4-15 650 sq. ft 18 years 48300 Rawang D4-16 650 sq. ft 18 years E4-9 650 sq. ft 18 years

Milux International Sdn Bhd BG-1,Ground Floor, 1 unit of Shoplot 1,128 sq ft 29 years Leasehold Let out/For sale 164 1990Jalan 2/57b, Segambut (99 years 51200 Kuala Lumpur expiring 19-01-2077) B1-4, First Floor 1 unit of Shoplot 1,296 sq ft 29 years Leasehold Let out/For sale 148 1990Jalan 2/57b, Segambut (99 years 51200 Kuala Lumpur expiring 19-01-2077)

Enamel Products Sdn Bhd 2605 Tingkat 2-storey factory Land: 25 years Leasehold Office cum 868 2003Perusahaan 6, cum office 43,560 sq ft (60 years factory Prai Industrial Estate Built-up: expiring 13600 Prai, Penang 15,240 sq ft 23 Jan 2045)

130


ANALYSIS OF SHAREHOLDINGSAS AT 30 MARCH 2018

ISSUED SHARE CAPITAL

Total number of Issued Shares : 54,411,294 ordinary sharesVoting right : One (1) vote per ordinary share

DISTRIBUTION OF SHAREHOLDINGS No. of No. ofSize of Shareholdings Shareholders % Shares %

Less than 100 136 15.58 1,794 0.00100 – 1,000 182 20.85 106,450 0.201,001 – 10,000 408 46.73 1,338,090 2.4610,001 – 100,000 96 11.00 2,772,400 5.09100,001 – 2,720,564 (*) 49 5.61 36,428,560 66.95 2,720,565 and above (**) 2 0.23 13,764,000 25.30

TOTAL 873 100.00 54,411,294 100.00

Remark: * Less than 5% of Issued Shares ** 5% and above of Issued Shares

DIRECTORS’ SHAREHOLDINGS

The Directors’ shareholdings based on the Register of Directors’ Shareholdings of the Company as at 30 March 2018 are as follows:-

Direct Interest Indirect Interest No. of No. ofName of Directors shares % shares %

Haji Mohd Anuar Bin Haji Mohd Hanadzlah - - - -Koh Pee Seng 885,850 1.63 2,552,000(1) 4.69Tan Chee How 1,980,570 3.64 - -Ng Tek Che - - - -Dato’ Mohamed Salleh Bin Bajuri 2,507,166 4.61 1,400,000(2) 2.57Ang Joo Seng 100 # 100(3) #Chua Seong Seng 1,320,000 2.43 7,500,000(4) 13.78Ho Pui Hold - - - -

Notes:# Negligible(1) Deemed interested by virtue of his spouse, Madam Ang Cheng Ean’s shareholdings, his sons, Mr. Koh Chit Khoon’s

and Mr. Koh Chit Soon’s shareholdings, and his daughter, Ms. Koh Lay Chin’s shareholdings. (2) Deemed interested by virtue of his spouse, Datin Paridah Binti Mohd Nor’s shareholdings, and the shareholdings

of his daughters, Irda Suriana Binti Mohamed Salleh, Irda Nurhidayah Binti Mohamed Salleh and Irda Nuralia Binti Mohamed Salleh.

(3) Deemed interested by virtue of his spouse, Madam Lee Siew Bee’s shareholdings.(4) Deemed interested by virtue of his shareholdings in RGF Land Sdn. Bhd. pursuant to Section 8(4) of the Companies

Act 2016.

131

ANNUAL REPORT 2017

ANALYSIS OF SHAREHOLDINGSAS AT 30 MARCH 2018 (Cont’d)

SUBSTANTIAL SHAREHOLDERS

The substantial shareholders’ shareholdings based on the Register of Substantial Shareholders of the Company as at 30 March 2018 are as follows:-

Direct Interest Indirect Interest No. of No. ofName shares % shares %

RGF Land Sdn. Bhd. 7,500,000 13.78 - -Chua Seong Seng 1,320,000 2.43 7,500,000(1) 13.78Low Tuan Lee - - 7,500,000(1) 13.78Dinamik Hartaniaga Sdn. Bhd. 6,264,000 11.51 - -Lim Kooi How 2,822,196 5.18 - -Dato’ Mohamed Salleh Bin Bajuri 2,507,166 4.61 1,400,000(2) 2.57Koh Pee Seng 885,850 1.63 2,552,000(3) 4.69

Notes:(1) Deemed interested by virtue of their shareholdings in RGF Land Sdn. Bhd. pursuant to Section 8(4) of the Companies

Act 2016.(2) Deemed interested by virtue of his spouse, Datin Paridah Binti Mohd Nor’s shareholdings, and the shareholdings

of his daughters, Irda Suriana Binti Mohamed Salleh, Irda Nurhidayah Binti Mohamed Salleh and Irda Nuralia Binti Mohamed Salleh.

(3) Deemed interested by virtue of his spouse, Madam Ang Cheng Ean’s shareholdings, his sons, Mr. Koh Chit Khoon’s and Mr. Koh Chit Soon’s shareholdings, and his daughter, Ms. Koh Lay Chin’s shareholdings.

THIRTY (30) LARGEST SECURITIES ACCOUNT HOLDERS AS AT 30 MARCH 2018

No. Shareholders Number of Shares %

1. RGF Land Sdn. Bhd. 7,500,000 13.782. Dinamik Hartaniaga Sdn. Bhd. 6,264,000 11.513. Maybank Securities Nominees (Tempatan) Sdn. Bhd. 2,600,950 4.78 - Pledged Securities Account for Tan Chee Meng (REM 166) 4. Lim Kooi How 2,505,196 4.605. Affin Hwang Nominees (Tempatan) Sdn. Bhd. 2,180,200 4.01 - Pledged Securities Account for Ang Joo Kang (ANG1380C) 6. Tan Chee How 1,980,570 3.647. UOB Kay Hian Nominees (Asing) Sdn. Bhd. 1,700,000 3.12 - Exempt AN for UOB Kay Hian (Hong Kong) Limited (A/C Clients) 8. Yew Siew Eng 1,642,200 3.029. Fu HaiYan 1,496,000 2.7510. Affin Hwang Nominees (Tempatan) Sdn. Bhd. 1,325,000 2.44 - Pledged Securities Account for Tee Kim Tee @ Tee Ching Tee (M09) 11. Tan Chee Siang 1,320,380 2.4312. Chua Seong Seng 1,320,000 2.4313. AMSEC Nominees (Tempatan) Sdn. Bhd. 1,231,500 2.26 - Pledged Securities Account for Koh Chit Soon 14. AMSEC Nominees (Tempatan) Sdn. Bhd. 1,105,300 2.03 - Pledged Securities Account for Koh Chit Soon 15. Maybank Securities Nominees (Tempatan) Sdn. Bhd 1,006,666 1.85 - Pledged Securities Account for Mohamed Salleh Bin Bajuri 16. Affin Hwang Nominees (Tempatan) Sdn. Bhd. 1,000,000 1.84 - Pledged Securities Account for Phuar Kong Seng (PHU0238C)

132


ANALYSIS OF SHAREHOLDINGS (cont’d)AS AT 30 MARCH 2018

THIRTY (30) LARGEST SECURITIES ACCOUNT HOLDERS AS AT 30 MARCH 2018 (Cont’d)

No. Shareholders Number of Shares %

17. Maybank Nominees (Tempatan) Sdn. Bhd. 1,000,000 1.84 - Pledged Securities Account for Mohamed Salleh Bin Bajuri (514012002193) 18. Paridah Binti Mohd Nor 1,000,000 1.8419. AMSEC Nominees (Tempatan) Sdn. Bhd. 885,000 1.63 - Pledged Securities Account for Koh Pee Seng 20. Affin Hwang Nominees (Tempatan) Sdn. Bhd. 812,600 1.49 - Pledged Securities Account for Ang Thing Chet (ANG1529M) 21. Affin Hwang Nominees (Tempatan) Sdn. Bhd. 779,735 1.43 - Pledged Securities Account for Ang Chee Ho (ANG1506C) 22. Lee Chee Kiang 706,000 1.3023. Vivatsurakit Mr. Tossavorn 700,000 1.2924. Lau Kim San 647,500 1.1925. Chan Weng Kong 600,000 1.1026. Wan Kin Kee 590,700 1.0927. Goh Ling Yau 500,000 0.9228. Mohamed Salleh Bin Bajuri 500,000 0.9229. Ng Li Teng 500,000 0.9230. Lim Aun Ghee 473,900 0.87

TOTAL 45,873,397 84.32

Proxy Form eW/I*

(Full Name In Capital Letters)



NRIC No./Company No.

of (Full Address)

being a *Member/Member(s) of MILUX CORPORATION BERHAD, hereby appoint

or failing * him/her,

of

(Full Address)

NRIC No.

NRIC No.

of (Full Address)

The proportion of *my/our holdings to be represented by *my/our proxy(ies) are as follows:-First Proxy %

%Second Proxy100 %

No. of Shares Held CDS Account No.

No. Resolution For Against

2. (a)

2. (b) (Resolution 1)

* Strike out whichever not applicable.

Signed this day of Signature of Member/Common Seal of Shareholder

(Incorporated in Malaysia) (313619-W)

or failing *him/her, the *CHAIRMAN OF THE MEETING, as *my/our proxy to attend and vote for *me/us and on *my/our behalf at the Twenty-Third Annual General Meeting of the Company to be held at Greens III, Sports Wing, Tropicana Golf & Country Resort, Jalan Kelab Tropicana, 47410 Petaling Jaya, Selangor Darul Ehsan on Thursday, 7 June 2018 at 2:30 p.m. and at any adjournment thereof.

Please indicate with an “X” in the spaces provided below how you wish your votes to be casted. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion.

To re-elect Dato' Mohamed Salleh Bin Bajuri in accordance with Article 80 of the Company’s Articles of Association.

To re-elect Mr. Koh Pee Seng in accordance with Article 80 of the Company’s Articles of Association.

(Resolution 2)2. (c) To re-elect Tuan Haji Mohd Anuar Bin Haji Mohd Hanadzlah in accordance with Article 80 of the

Company’s Articles of Association. (Resolution 3)

3 To re-appoint CAS Malaysia PLT as Auditors of the Company until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration.

5. As Special Business:-Ordinary Resolution No. 2- To approve the payment of benefits payable to the Directors under Section 230 of the

Companies Act 2016.

(Resolution 4)

(Resolution 5)

(Resolution 6)

6. As Special Business:-Ordinary Resolution No. 3- Authority to Issue Shares Pursuant to the Companies Act 2016. (Resolution 7)

(A) Information for Shareholders/ Proxies

1. In respect of deposited securities, only members whose names appear in the Record of Depositors on 31 May 2018 (“General Meeting Record of Depositors”) shall be eligible to attend the Meeting. 2. A member entitled to attend and vote at the Meeting is entitled to appoint more than one (1) proxy to attend and vote in his stead (subject always to a maximum of two (2) proxies at each meeting). Where a member appoints more than one (1) proxy,

the appointment shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy.3. A proxy may but does not need to be a member of the Company and notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of the member at the Meeting.

There shall be no restriction as to the qualification of the proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting.4. In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under the hand of its officer or attorney duly authorised.5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt

authorised nominee may appoint in respect of each omnibus account it holds.6. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or notarially certified copy of that power or authority must be deposited at the Company’s Registered Office at Level 7, Menara Milenium,

Jalan Damanlela, Pusat Bandar Damansara, Damansara Heights, 50490 Kuala Lumpur not less than forty-eight (48) hours before the time for holding the Meeting or any adjournment thereof.

(B) Audited Financial Statements for the financial year ended 31 December 2017

7. This Agenda item is meant for discussion only, as the provision of Section 340(1)(a) of the Companies Act 2016 does not require a formal approval for the Audited Financial Statements from the shareholders. Therefore, this Agenda item is not put forward for voting.

4. As Special Business:-Ordinary Resolution No. 1- To approve the payment of Directors’ Fees for the financial year ended 31 December 2017.

The Company Secretary


PleaseAffix

Stamp

Level 7, Menara Milenium,Jalan Damanlela,Pusat Bandar Damansara,Damansara Heights,50490 Kuala Lumpur.Malaysia.

No. 31, Lorong Jala 14/KS10, Off Jalan Telok Gong,42000 Pelabuhan Klang, Selangor Darul Ehsan

Tel: 1800 88 MILUX (64589)Fax: 03 - 3134 1193

www.milux.com.my

Quality,Safety, Reliability.

MILU

X CO

RPO

RA

TION

BER

HA

D (313619-W

)A

NN

UA

L REPO

RT 2017

ANNUAL REPORT 2017

annual report 2017 - milux · 2 milux corporation berhad (313619-w) notice of twenty-third annual...

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