th Annual General Meeting of TAN CHONG MOTOR HOLDINGS BERHAD 44 will be held at Pacific Ballroom, Level 2, Seri Pacific Hotel Kuala Lumpur, Jalan Putra, 50350 Kuala Lumpur, Malaysia on Wednesday, 25 May 2016 at 3.00 p.m. CONTENTS Corporate Information 02 Business Divisions 03 Report of the Board of Directors 05 Eight-Year Financial Highlights 09 Profile of Directors 11 Corporate Social Responsibility Report 14 Corporate Governance Statement 17 Risk Management and 26 Internal Control Statement Other Statements and Disclosures 28 Audit Committee Report 29 Daily Share Prices & Volume Traded on 32 Bursa Malaysia Securities Berhad Financial Statements 33 Ten Largest Properties of the Group 139 Analysis of Shareholding 140 Notice of Annual General Meeting 143 Form of Proxy Enclosed Personal Data Protection Notice Enclosed CORPORATE INFORMATION DIRECTORS DATO’ TAN HENG CHEW DATO’ SEOW THIAM FATT HO WAI MING President Independent Non-Executive Director Chief Financial Officer DATO’ NG MANN CHEONG SIEW KAH TOONG Senior Independent Non-Executive Director Independent Non-Executive Director DATO’ HAJI KAMARUDDIN DATO’ KHOR SWEE WAH @ ABAS BIN NORDIN @ KOH BEE LENG Independent Non-Executive Director Executive Vice President AUDIT COMMITTEE COMPANY SECRETARIES AUDITORS Dato’ Seow Thiam Fatt (Chairman) Ho Wai Ming KPMG Dato’ Ng Mann Cheong Chang Pie Hoon Dato’ Haji Kamaruddin @ Abas bin Nordin Siew Kah Toong NOMINATING COMMITTEE REGISTERED ADDRESS LISTING Dato’ Ng Mann Cheong (Chairman) +BMBO4VMUBO"[MBO4IBI Main Market of Bursa Malaysia Dato’ Haji Kamaruddin ,VBMB-VNQVS Securities Berhad @ Abas bin Nordin 5FMFQIPOF -JTUFEPO'FCSVBSZ Dato’ Seow Thiam Fatt 'BDTJNJMF Siew Kah Toong 8FCTJUF XXXUBODIPOHHSPVQDPN &NBJM UDNI!UBODIPOHHSPVQDPN BOARD RISK MANAGEMENT REGISTRARS COMMITTEE Tricor Investor & Issuing House Siew Kah Toong (Chairman) Services Sdn Bhd ) Dato’ Ng Mann Cheong 6OJU -FWFM 5PXFS" Dato’ Haji Kamaruddin 7FSUJDBM#VTJOFTT4VJUF @ Abas bin Nordin "WFOVF #BOHTBS4PVUI Dato’ Seow Thiam Fatt /P +BMBO,FSJODIJ Dato’ Tan Heng Chew ,VBMB-VNQVS 5FMFQIPOF 'BDTJNJMF &NBJM JTFORVJSZ!NZUSJDPSHMPCBMDPN TAN CHONG MOTOR HOLDINGS BERHAD 2 Annual Report 2015 BUSINESS DIVISIONS 1 ASSEMBLY t Motor Vehicles 2 SALES AND DISTRIBUTION t1BTTFOHFS$BST t-JHIU$PNNFSDJBM7FIJDMFT t5SVDLT t#VTFT 3 AFTER-SALES SERVICES t4QBSF1BSUT t8PSLTIPQ 4 FINANCIAL SERVICES t)JSF1VSDIBTF t-FBTJOH t*OTVSBODF"HFODZ t.POFZ-FOEJOH 5 PROPERTY t*OWFTUNFOU 3 TAN CHONG MOTOR HOLDINGS BERHAD Annual Report 2015 NISSAN NAVARA We’ve been building strong, dependable pickups longer than you’ve been driving them. And at every turn, we’ve ridden the edge of innovation to deliver what you want. Where a heritage of performance meets premium ride comfort, innovative technologies and sleek modern styling. Taking you from a day on the job straight to a night on the town without missing a beat. The All-New Navara. Performance. Innovation. Endurance. TAN CHONG MOTOR HOLDINGS BERHAD 4 Annual Report 2015 REPORT OF THE BOARD OF DIRECTORS We believe the challenges we faced and the improvement efforts Dear Shareholders, made to overcome such challenges will forge a stronger management team to take the Group to the next phase of growth. As Tan Chong Motor Group entered the financial Despite the challenging business environments, Tan Chong Motor year 2015, we continue to face strong headwinds Group has delivered a healthy Profit Before Tax (“PBT”) of RM115 due to the challenging macro-economic forces million for the financial year 2015. confronting Malaysia. In 2015, the Malaysian Ringgit continued to slide. The uncertainties of the economic environment have dampened REVIEW OF FINANCIAL PERFORMANCE consumers’ confidence and drove the consumer sentiments index further down. Banks had tightened lending requirements. We also saw the REVENUE PROFIT BEFORE TAX after-effects of the implementation of the Goods and Services Tax (GST) on 1 April 2015 on the market Million Million and consumers’ buying behaviour. Domestic RM5,717 RM115 consumers’ enthusiasms were chilled by a myriad of uncertainties and hazy economic prospects as the frontal impact of higher cost of living hit home. NET PROFIT NET ASSETS PER SHARE We also witnessed a very competitive business landscape due to intensified efforts to sustain RM70 Million RM4.28 market position. The US Federal Reserve interest rate hike and For the financial year ended 31 December 2015, the Group recorded sliding commodity prices, especially crude oil a revenue of RM5,717 million (2014: RM4,761 million) with profit prices, are some of the key factors resulting in a before tax of RM115 million (2014: RM171 million) and net profit of weaker Malaysian Ringgit against major currencies RM70 million (2014: RM120 million). Earnings per share for the year such as US Dollar, Japanese Yen and Euro Dollar. stands at 11.47 sen compared to 16.22 sen in FY 2014. These have contributed to higher overall costs of Despite the tougher business environment, the operating business for the Group. performance of the Group has sustained for FY 2015 and 2014 as the previous years’ results included a positive adjustment from the At the regional level, the reverberations of the slow- one-off write-back of additional import duty provision for Nissan down in China’s economic momentum have also Vietnam Co. Ltd. of RM56.27 million. been felt in the domestic and regional markets and shaken investors’ confidence. Further across Although Tan Chong Motor Group has taken every effort to mitigate the oceans, the recovery of US economy has the foreign exchange costs of imported materials, the volatile and gained traction in the second half of 2015 while the unfavourable foreign exchange rates have taken its toll on the profit margins. Nonetheless, Group’s revenue improved on the back of European Union states’ path to economic recovery sustained domestic sales momentum and overseas contribution. remains fragile tempered with geopolitical and security concerns. The financial position of the Group remains healthy with shareholders’ funds at RM2,796 million (2014 : RM2,755 million), cash and At the Asean level, recent political and economic cash equivalents of RM166 million (2014 : RM342 million) and net developments in Myanmar and Vietnam augurs gearing ratio of 0.47 (2014 : 0.34) times of shareholders’ funds as at 31 December 2015. Net assets per share increased to RM4.28 well for these two countries to be the future engines (2014 : RM4.22). The Group undertook a revaluation exercise on its of growth for Indo-China region. Tan Chong Motor investment properties to reflect their current market value. This has Group’s investments and expansion into the region resulted in a net gain on revaluation of RM6.0 million for FY 2015. is timely and well-placed to harvest the fruit of its investments. Inventories stood at RM1,645 million (up 9% from FY 2014). A substantial portion of the inventories comprises CKD vehicle packs for Nissan vehicles. 5 TAN CHONG MOTOR HOLDINGS BERHAD Annual Report 2015 REPORT OF THE BOARD OF DIRECTORS DIVIDENDS continued to garner strong following among car buyers in Malaysia. The strong contenders from Nissan were made up of The Board recommended the payment of a final single tier the refreshed Nissan Almera which still enjoys good reception dividend of 6% (2014: single tier 6%) for shareholders’ approval amongst customers in the B-segment; the fresh faced all new at the forthcoming Annual General Meeting. Combined with Nissan X-Trail and Nissan Navara NP300 launched in 2015 the interim single tier dividend of 4% (2014: interim single tier enhanced the Nissan models line-up offered to our customers dividend of 6%) paid on 30 September 2015, the total net and to ride on the increasing popularity of sports utility vehicles dividend for the year is 5.0 sen per share (2014: 6.0 sen per (SUV) and 4-wheel drive vehicles in the domestic market. share). The total net dividends paid and payable for FY 2015 These new models were well received by car buyers. will be RM32.6 million (2014: RM39.2 million). The premium brand Infiniti saw sustained demand from this In line with the lower profitability recorded by the Group in FY niche market segment offering premium motoring experience 2015 and to retain sufficient funds to finance future business to customers who enjoy the finer things in life. The Infiniti expansion, slightly lower dividends were recommended in marque was further enhanced with the launch of the premium FY 2015 compared to previous year. In recommending SUV Infiniti QX80 and Q70, its flagship performance luxury dividend payment to shareholders, the Board has to balance sedan. The models line-up of Infiniti cars offered in Malaysia the Group’s financial performance with the need to provide covers both the premium passenger vehicles and Cross-overs/ sustainable returns to shareholders. SUVs categories. REVIEW OF OPERATING PERFORMANCE REVENUE (RM’million) 6,000 4,000 2,000 The Renault brand offering improved with the new models launch such as Renault Captur and Renault Clio GT Line. The Group has taken steps to enhance the profile of Renault brand by refreshing the models line-up offered to attract discerning 2011 2012 2013 2014 2015 car buyers and offering improved ownership experience such as the Renault Fluence 5 years manufacturer’s warranty, the Vehicles Assembly, Manufacturing, Distribution & After- first in the Malaysian automotive sector. Sales Services (automotive) MUV Division, the certified pre-owned vehicles distribution The sales of new motor vehicles in Malaysia or Total Industry division, has begun to gain traction and is expanding to Volume (TIV) in 2015 recorded a marginal high of 666,674 units complement the value chain in the automotive business of Tan of vehicles, representing an increase of 0.03% from 2014. Chong Motor Group. MUV (pronounced as “move”) offers a [source: Malaysian Automotive Association (MAA)]. On the variety of quality pre-owned vehicles such as three guarantees whole, the automotive industry was generally flat in 2015 in an (no major accidents, flood contamination and non-tempered exceptionally competitive market.