45th AGM Annual General Meeting of TAN CHONG MOTOR HOLDINGS BERHAD will be held at Pacific Ballroom Level 2, Seri Pacific Hotel Kuala Lumpur, Jalan Putra, 50350 Kuala Lumpur, Malaysia on 25 MAY 2017 (THURSDAY) at 10.30 a.m. TABLE OF CONTENTS 03 Corporate Information 50 Audit Committee Report 04 Business Divisions 54 Additional Compliance Information 06 Report of the Board of Directors 55 Daily Share Prices & Volume Traded on Bursa Malaysia 10 Management Discussion and Securities Berhad Analysis 56 Statement on Directors’ 18 Eight-Year Financial Highlights Responsibility for Preparing 20 Profile of Directors the Annual Financial Statements 24 Profile of Key Senior 57 Financial Statements Management 170 Ten Largest Properties of the Group 28 Corporate Social Responsibility 171 Analysis of Shareholdings Report 174 Notice of Annual General Meeting 35 Corporate Governance Statement Enclosed Form of Proxy 47 Risk Management and Internal Enclosed Personal Data Protection Notice Control Statement CORPORATE INFORMATION DIRECTORS DATO’ TAN HENG CHEW SIEW KAH TOONG President Independent Non-Executive Director DATO’ NG MANN CHEONG DATO’ KHOR SWEE WAH Senior Independent Non-Executive Director @ KOH BEE LENG Group Senior Executive Vice President DATO’ HAJI KAMARUDDIN @ ABAS BIN NORDIN HO WAI MING Independent Non-Executive Director Chief Financial Officer DATO’ SEOW THIAM FATT LEE MIN ON Independent Non-Executive Director Independent Non-Executive Director AUDIT COMMITTEE REGISTERED ADDRESS Dato’ Seow Thiam Fatt (Chairman) 62-68 Jalan Sultan Azlan Shah Dato’ Ng Mann Cheong 51200 Kuala Lumpur Dato’ Haji Kamaruddin @ Abas bin Nordin Wilayah Persekutuan Siew Kah Toong Malaysia Lee Min On Telephone : +603 4047 8888 Facsimile : +603 4047 8636 Website : www.tanchonggroup.com NOMINATING COMMITTEE E-mail : [email protected] Dato’ Ng Mann Cheong (Chairman) Dato’ Haji Kamaruddin @ Abas bin Nordin REGISTRARS Dato’ Seow Thiam Fatt Siew Kah Toong Tricor Investor & Issuing House Lee Min On Services Sdn Bhd (11324-H) Unit 32-01, Level 32, Tower A Vertical Business Suite BOARD RISK MANAGEMENT Avenue 3, Bangsar South AND SUSTAINABILITY COMMITTEE No. 8, Jalan Kerinchi 59200 Kuala Lumpur Siew Kah Toong (Chairman) Wilayah Persekutuan Dato’ Ng Mann Cheong Malaysia Dato’ Haji Kamaruddin @ Abas bin Nordin Telephone : +603 2783 9299 Dato’ Seow Thiam Fatt Facsimile : +603 2783 9222 Dato’ Tan Heng Chew E-mail : [email protected] Lee Min On AUDITORS COMPANY SECRETARIES KPMG PLT Ho Wai Ming Chang Pie Hoon LISTING Main Market of Bursa Malaysia Securities Berhad (Listed on 4 February 1974) 3 TAN CHONG MOTOR HOLDINGS BERHAD Annual Report 2016 BUSINESS DIVISIONS ASSEMBLY AND MANUFACTURING t.PUPS7FIJDMFT SALES AND DISTRIBUTION t1BTTFOHFS$BST t-JHIU$PNNFSDJBM7FIJDMFT t5SVDLT t#VTFT AFTER-SALES SERVICES t4QBSF1BSUT t8PSLTIPQ FINANCIAL SERVICES t)JSF1VSDIBTF t-FBTJOH t*OTVSBODF"HFODZ t.POFZ-FOEJOH PROPERTY t*OWFTUNFOU TAN CHONG MOTOR HOLDINGS BERHAD 4 Annual Report 2016 TEANA NISMO A challenger of status quo and segment revolutionizer, the new Nissan Teana fitted with NISMO Performance Package is the perfect representation of luxury with a sporty edge. Every journey becomes a true reflection of performance as it functions as beautifully as it appears, making a striking impression wherever it goes. TAN CHONG MOTOR HOLDINGS BERHAD Annual Report 2016 REPORT OF THE BOARD OF DIRECTORS DEAR SHAREHOLDERS, ON BEHALF OF THE BOARD OF DIRECTORS, WE ARE PLEASED TO PRESENT TAN CHONG MOTOR HOLDINGS BERHAD (“TCMH”) GROUP’S ANNUAL REPORT FOR FINANCIAL YEAR 2016. The financial year (“FY”) 2016 was dominated by challenging FINANCIAL PERFORMANCE OVERVIEW economic and geopolitical developments that weigh on the business landscape in Malaysia and across the region. The TCMH Group financial performance was affected by the economy was bogged down by lingering unresolved issues challenging business environment. TCMH Group revenue such as a weaker Malaysian Ringgit in a volatile foreign was RM5.5 billion in FY2016 (2015: RM5.7 billion) with loss exchange market. Consumer sentiment was also sluggish. before tax of RM43 million (2015: profit before tax RM115 The weaker Malaysian Ringgit have increased the costs of million). The impact to the bottom line was mainly due to business and thereby putting more pressure on the profit unfavourable foreign exchange costs. margins. TCMH’s financial performance in FY2016 was inevitably affected by these factors. Nevertheless, the Group has taken actions to mitigate the foreign exchange costs impact and embarked on Productivity and cost improvement programmes have been efforts to improve the position during the year. The Group enhanced to further improve productivity and instil a stronger continued with programmes to improve efficiencies and cost awareness culture across the Group. TCMH Group is cost effectiveness throughout the organisation to ensure ever mindful of the need to continue to build and strengthen financial sustainability. the foundation for a sustainable and resilient organisation. The Group has maintained robust financial position with shareholders’ funds of RM2.87 billion with net asset per share of RM4.40 for the year ended 31 December 2016. TAN CHONG MOTOR HOLDINGS BERHADBERHAD 6 AnnualAnnual ReportReport 2016 REPORT OF THE BOARD OF DIRECTORS DIVIDENDS TCMH Group has embarked on activities to improve sales, distribution and after-sales services network to ensure our The Board recommended the payment of a final single tier businesses maintain their competitive edge in the automotive dividend of 1 sen per share (2015: single tier dividend 3 sen sector. We continue to enhance and develop our facilities per share) for shareholders’ approval at the forthcoming which have resulted in a pioneer 4S showroom and nineteen Annual General Meeting. Combined with the interim single 3S showrooms throughout Malaysia. We believe this new tier dividend of 1 sen per share (2015: interim single tier generation of showrooms and after-sales services centres dividend 2 sen per share) paid on 29 September 2016, the will be able to enhance our customers total ownership total net dividend for the year is 2 sen per share (2015: 5 experience and establish life-long customers’ relationship. sen per share). The total net dividends paid and payable for FY2016 will be RM13 million (2015: RM32.6 million). Although the commercial vehicles division has been affected by the current economic climate as businesses consolidate The lower dividend is reflective of the overall performance of their commercial vehicles purchases in a post-GST the Group in a tougher business and economic climate during environment, it has managed to continue to hold its ground FY2016. in the bus and trucks sectors. TCMH Group’s Commercial Vehicles Division has a 6.2% of the market share. BUSINESS PERFORMANCE OVERVIEW Vehicles Assembly, Manufacturing, Distribution & After- sales Services (automotive) The Malaysian automotive industry hit a speed bump and sales of new vehicles contracted from the high of 666,677 units in FY2015 to 580,124 in FY2016 [source: Malaysian Automotive Association (“MAA”) Market Review for 2016 and Outlook for 2017 Report]. This represents a 13% decline in new vehicles sold. This is the first deceleration in the annual growth trend that the automotive industry experienced since 2009. The automotive industry was softer despite a market racked with competitive offers. Consumers were also more cautious to take on further financial commitments in an uncertain market. TCMH Group’s investments in Cambodia, Laos, Vietnam Sales efforts have been intensified and more on-the-ground and Myanmar continue to hold encouraging prospects sales and marketing activities have been activated to reach with tremendous growth opportunity. The automotive out to the target market segments. sector in Vietnam continues with robust growth driven by a buoyant economy in 2016. The Group’s assembly plant in In spite of the challenging automotive market, Nissan vehicles Danang, Vietnam saw the roll-out of the locally assembled has maintained its top three position in the non-national car new Nissan X-Trail in the last quarter of FY2016. This has market segment in 2016 with a market share of 7%. The improved the assembly plant’s capacity utilization. The core offerings from Nissan remained the perennial favourite Nissan models distributed in Vietnam consist of models B-segment Nissan Almera and popular sports utility vehicle, such as Nissan Sunny, Nissan X-Trail, Teana and NP300 Nissan X-Trail and pick-up truck, Nissan Navara NP300. Navara. TCMH Group has developed a second overseas automotive assembly plant in Myanmar. This is among the The premium brand Infiniti targets a niche market segment first automotive assembly plant in Myanmar and aimed at offering premium motoring experience to customers. The penetrating the automotive sector there. The Myanmar plant Infiniti marque sales units are encouraging although it has has been planned as a two-phase approach which entails not been spared by a weaker market. having an initial basic assembly plant to commence local production and sales activities to sustain the operations in The Group has taken steps to enhance the profile of the Myanmar. This Myanmar assembly plant has commenced Renault brand by refreshing the models line-up offered to production and allows the Group to strengthen its foothold attract discerning car buyers. The sales of Renault vehicles to embark onto the next phase. These strategic investments for the past few years have been improving as the