ANNUAL REPORT. 01 Corporate Information. 03 Directors Profile. 06 Key Management. 07 Corporate Structure. 08 Financial Highlights

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2 / CONTENTS 01 Corporate Information 03 Directors Profile 20 ANNUAL REPORT Key Management 07 Corporate Structure 08 Financial Highlights 09 Chairman s Statement 11 Products 18 Audit Committee Report 21 Statement and Corporate Governance 32 Statement on Risk Management and Internal Control 35 Financial Statements 107 List of Properties Owned by the Group 108 Analysis of Shareholdings 110 Analysis of Warrantholdings 112 Notice of Annual General Meeting 121 Proxy Form

3 01 CORPORATE INFORMATION CORPORATE INFORMATION BOARD OF DIRECTORS Tan Sri Dato Azizan Bin Husain Chairman, Independent Non-Executive Director Lim Choo Hong CEO/Group Managing Director Non-Independent Executive Director Lim Soo Kong (Lim Soo Chong) Non-Independent Non-Executive Director Dato Bahar Bin Ahmad Non-Independent Non-Executive Director Kok Sau Chun Non-Independent Non-Executive Director Dr Teh Chee Ghee Independent Non-Executive Director Margaret Chak Lee Hung Non-Independent Non-Executive Director AUDIT COMMITTEE Tan Sri Dato Azizan Bin Husain Chairman, Independent Non-Executive Director Lim Soo Kong (Lim Soo Chong) Member, Non-Independent Non-Executive Director Dr Teh Chee Ghee Member, Independent Non-Executive Director NOMINATION COMMITTEE Dato Bahar Bin Ahmad Chairman, Non-Independent Non-Executive Director Tan Sri Dato Azizan Bin Husain Member, Independent Non-Executive Director Dr Teh Chee Ghee Member, Independent Non-Executive Director REMUNERATION COMMITTEE Lim Soo Kong (Lim Soo Chong) Chairman, Non-Independent Non-Executive Director Lim Choo Hong Member, CEO/Group Managing Director Non-Independent Executive Director Dr Teh Chee Ghee Member, Independent Non-Executive Director COMPANY SECRETARIES Chin Mee Foon Tai Yit Chan Chan Su San REGISTERED OFFICE Lot 6.05, Level 6, KPMG Tower, 8, First Avenue, Bandar Utama, Petaling Jaya, Selangor Darul Ehsan Tel: (03) Fax: (03) REGISTRARS Tricor Investor and Issuing House Services Sdn. Bhd. Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, Kuala Lumpur Tel: (03) Fax: (03) AUDITORS KPMG PLT (converted from a conventional partnership, KPMG, on 27 December 2016) Level 10, KPMG Tower, 8, First Avenue, Bandar Utama, Petaling Jaya, Selangor Darul Ehsan Tel: (03) Fax: (03) PRINCIPAL BANKERS AmBank (M) Berhad CIMB Islamic Bank Berhad OCBC Bank (Malaysia) Berhad HSBC Bank Malaysia Berhad STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad

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5 DIRECTORS PROFILE 03 Tan Sri Dato Azizan Bin Husain, Malaysian (Male) Tan Sri Dato Azizan Bin Husain, 72, is an Independent Non-Executive Director and Chairman of Fiamma Holdings Berhad. He was appointed to the Board of Fiamma Holdings Berhad on 17 June He graduated from University of Malaya, Kuala Lumpur with a Bachelor of Arts (Honours) in 1967 and Diploma in Public Administrations in He also holds a Master degree in Urban and Regional Planning from the University of Colorado, United States of America. He started his career in the Ministry of Agriculture before being posted to the Prime Minister s Department where he held the posts of Assistant Secretary, Centre for Development Studies and Principal Assistant Director, Economic Planning Unit and later as Sabah State Director of Development. On 1 February 1987, he assumed the post of Deputy Secretary-General to the Ministry of Land and Regional Development. After two and half years, he returned to the Prime Minister s Department as the Deputy Director-General (Sectoral) Economic Planning Unit. In late 1991, he was posted to the Ministry of Finance where he held the posts of Director, Public Sector Companies Monitoring Division and then as Deputy Secretary General (Operations). On 1 January 1996, he was appointed as the Secretary-General, Ministry of Defence until 28 February He also sits on the Board of Oriental Food Industries Holdings Berhad and the Tai Thong Group and CIMB Insurance Brokers Sdn. Bhd. Tan Sri Dato Azizan is the Chairman of the Audit Committee and a member of the Nomination Committee. He also served as the Chairman of the Nomination Committee until 4 October He is the Senior Independent Director of Fiamma Holdings Berhad. He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. He attended all the four board meetings held during the financial year ended 30 September Lim Choo Hong, Malaysian (Male) Mr Lim Choo Hong, 59, is a Non-Independent Executive Director and the Chief Executive Officer/Group Managing Director of Fiamma Holdings Berhad. He is a founder member of the Fiamma Holdings Berhad Group and was appointed to the Board of Fiamma Holdings Berhad on 16 August He is a businessman and entrepreneur and he has more than 35 years of business experience dealing in home appliances. He also has more than 20 years of experience in property development. Prior to his involvement in the Fiamma Holdings Berhad Group in 1979, he was involved in the retail business in Singapore. Mr Lim Choo Hong is a member of the Remuneration Committee. He also sits on the Board of some of the subsidiary companies of the Group. He is a shareholder of Casa Holdings Limited (a company listed on Singapore Exchange Limited) which is a major shareholder of Fiamma Holdings Berhad. He is the spouse of Madam Kok Sau Chun. He attended all the four board meetings held during the financial year ended 30 September 2016.

6 04 DIRECTORS PROFILE Dato Bahar Bin Ahmad, Malaysian (Male) Dato Bahar Bin Ahmad, 67, is a Non-Independent Non-Executive Director of Fiamma Holdings Berhad. He was appointed to the Board of Fiamma Holdings Berhad as an Executive Director on 14 April He was redesignated as Non-Executive Director on 1 April He graduated from University of Malaya, Kuala Lumpur with a Bachelor of Arts (Honours) in He served the Malaysian Government in the Malaysian Administrative and Diplomatic Service from April 1973 to December 1996 in various capacities, among others; Assistant Director of International Trade Division of Ministry of Trade and Industry (from 1973 to 1977); Assistant Trade Commissioner, Malaysia Trade Office in New York, United States of America (from 1977 to 1979); Trade Commissioner, Malaysia Trade Office, Manila, Philippines (from 1979 to 1981); Trade Commissioner, Malaysian Trade Commission, London, United Kingdom (from 1981 to 1986); Principal Assistant Director, International Trade Division, Ministry of International Trade and Industry (from 1986 to 1991) and Senior Trade Commissioner/Minister Counselor Malaysian High Commission, London, United Kingdom, and was admitted to the Court of St James as a Diplomat (from 1991 to 1996). Currently, he also sits on the Board of Kenyir Splendour Berhad, Rebak Island Marina Berhad, Horsedale Development Berhad and several private limited companies. Dato Bahar is the Chairman of the Nomination Committee and was appointed to the position on 4 October He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. He attended all the four board meetings held during the financial year ended 30 September Lim Soo Kong (Lim Soo Chong), Singaporean (Male) Mr Lim Soo Kong (Lim Soo Chong), 70, is a Non-Independent Non-Executive Director of Fiamma Holdings Berhad. He is a founder member of the Fiamma Holdings Berhad Group and was appointed to the Board of Fiamma Holdings Berhad on 16 August He is a graduate in Mechanical Engineering from the Singapore Polytechnic. He is a businessman and entrepreneur and has more than 35 years of experience dealing in home appliances, granite, tiles, engineering, cables and trucks. He has more than 20 years of experience in property development. Mr Lim Soo Kong is the Chairman of the Remuneration Committee and a member of the Audit Committee. He also served as a member of the Nomination Committee up to 4 October He also sits on the Board of some of the subsidiary companies of the Group. He is a director and shareholder of Casa Holdings Limited, (a company listed on Singapore Exchange Limited), which is a major shareholder of Fiamma Holdings Berhad. He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. He attended three of the four board meetings held during the financial year ended 30 September Kok Sau Chun, Malaysian (Female) Madam Kok Sau Chun, 57, is a Non-Independent Non-Executive Director of Fiamma Holdings Berhad. She was appointed to the Board of Fiamma Holdings Berhad on 30 March She has held various administrative positions prior to her appointment. Madam Kok Sau Chun is the spouse of Mr Lim Choo Hong. She also sits on the Board of several subsidiary companies of the Group. She attended all the four board meetings held during the financial year ended 30 September 2016.

7 DIRECTORS PROFILE 05 Dr Teh Chee Ghee, Malaysian (Male) Dr Teh Chee Ghee, 50, is an Independent Non-Executive Director of Fiamma Holdings Berhad. He was appointed to the Board of Fiamma Holdings Berhad on 4 July He is currently a Senior Lecturer in the Department of Accounting and Finance, School of Business, Monash University Malaysia ( MUM ). He holds a Doctor of Philosophy degree in Credit Management, a Master of Business Administration degree and an Honours Degree in Accounting, all from University of Malaya. He is a Council Member of the Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants. He is a fellow member of the Association of Chartered Certified Accountants ( ACCA ), United Kingdom and the Chartered Tax Institute of Malaysia. Dr Teh commenced his career in 1990 in Arthur Andersen-HRM (Management Services) Sdn. Bhd. as an Associate Consultant. He also served in the audit and business advisory division of Arthur Andersen & Co. between the years 1990 to He joined CWS Hygiene Sdn. Bhd. ( CWS") as the Finance & Administration Manager in 1994 and when the Zuellig Group acquired CWS in 1995, he was appointed the Regional Financial Controller of Gold Coin Feedmills (M) Sdn. Bhd. He joined Engtex Sdn. Bhd. as the Group Financial Controller in 1996 and was the Personal Assistant to the Group Managing Director and Company Secretary of Engtex Group Berhad between September 2002 and May He served TH Group Berhad from June 2006 to October 2010 as the Personal Assistant to the Group Managing Director. He was also the Acting Chief Operating Officer of NCI Hospital (now known as Nilai Medical Centre, owned by Asiaprise Biotech Sdn. Bhd., a wholly-owned subsidiary of TH Group Berhad) from February 2010 to October He was the General Manager - Strategic Planning and Operations of TSH Resources Berhad from October 2010 to October He joined Monash University Malaysia ( MUM ) in October He is also the Coordinator - Finance under the Accounting and Finance discipline, School of Business, MUM. In January 2014, Dr Teh was appointed as the Head of Research of the Socio-Economic Research Centre ( SERC ) on a retainer basis under MUM s pay-outside work arrangement. SERC Sdn. Bhd. is an independent think-tank initiated by the Associated Chinese Chambers of Commerce and Industry of Malaysia ( ACCCIM ). Dr Teh also serves as an Independent Non-Executive Director in Engtex Group Berhad and Cybertowers Berhad. Dr Teh is a member of the Audit Committee, Nomination and Remuneration Committee. He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. He attended all the four board meetings held during the financial year ended 30 September Margaret Chak Lee Hung, Malaysian (Female) Ms Margaret Chak Lee Hung, 44, is a Non-Independent Non-Executive Director of Fiamma Holdings Berhad. She was appointed to the Board of Fiamma Holdings Berhad on 28 February She is the Group Financial Controller and Company Secretary of Casa Holdings Limited ( Casa ), a company listed on Singapore Exchange Limited, and is responsible for all aspects of financial management, accounting and company secretarial functions of the Casa Group. She joined Casa in October 2005 and has more than 18 years of experience in financial management and accounting. She holds a Bachelor of Economics (major in Accountancy) Degree from Macquarie University, Sydney and is a member of the Institute of Singapore Chartered Accountants. She does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. She attended all the four board meetings held during the financial year ended 30 September Other Information a. Conflict of Interest The Company has entered into recurrent related party transactions with parties in which the directors of the Company, namely Lim Choo Hong and Lim Soo Kong (Lim Soo Chong) ( LSK ) have direct and/or indirect interest. Kok Sau Chun is interested in the recurrent related party transactions by virtue of being spouse to Lim Choo Hong. Margaret Chak Lee Hung is deemed to be a person connected to LSK as she is accustomed to act in accordance with the directions and instruction of LSK. Therefore, Margaret Chak Lee Hung is deemed interested in the recurrent related party transactions. Save for the above mentioned disclosure, none of the other directors have any conflict of interest with the Company. b. Conviction of Offences None of the Directors have any conviction for offences within the past 5 years other than traffic offences, if any and has not been imposed of any public sanction or penalty by relevant regulatory bodies during the financial year.

8 06 KEY MANAGEMENT Chin Mee Foon, Malaysian (Female) Ms Chin Mee Foon, 62 is the Chief Finance Officer and Company Secretary of Fiamma Holdings Berhad ( Fiamma ). She is a fellow member of the Association of Chartered Certified Accountants and a member of the Malaysian Institute of Accountants. She is also an associate member of the Institute of Chartered Secretaries and Administrators. She joined Fiamma Group as an Accountant on 3 July 1989 and was promoted to Finance and Administration Manager of the Fiamma Group on 1 January 1992 and to the position of Chief Finance Officer on 1 April She was appointed as Company Secretary of Fiamma on 30 March She is overall responsible for the financial management, secretarial, tax and corporate functions of the Fiamma Group. Prior to joining Fiamma, Ms Chin was with Ernst & Young, from 1984 to 1989 where she was involved in both tax compliance and advisory work. She was an Assistant Tax Manager in Ernst & Young when she left in June Ms Chin is an Independent Non-Executive Director of Engtex Group Berhad ( Engtex ), a company listed on the Main Market of the Bursa Malaysia Securities Berhad and she also serves as a member of the Audit Committee, Nomination Committee and Remuneration Committee of Engtex. She does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. Ching Wooi Kong, Malaysian (Male) Mr Ching Wooi Kong, 57 is currently the Managing Director of Fiamma Trading Sdn. Bhd. ( FTSB ). He sits on the Board of some of the subsidiary companies of Fiamma. He has more than 25 years of working experience in the home appliances and sanitary ware industry. He is responsible for business and product development and the management of the Marketing and Sales department of FTSB. He is also responsible for all aspects of strategic planning for the Rubine and Haustern brands of home appliances. His brand portfolio also includes the agency brand of Whirlpool (USA). Mr Ching joined the Fiamma Group on 2 January 1990 as a Project Executive and was promoted to Assistant Project Manager on 1 January 1993 and Project Manager on 1 January He became the General Manager of FTSB on 1 January 1995 and assumed his current position of Managing Director on 1 April Mr Ching is also the Managing Director of Kingston Medical Supplies Pte. Ltd. and Kinsmedic Sdn. Bhd., which are involved in the distribution of healthcare and medical equipment and is responsible for business and product development and management of the Marketing and Sales department and strategic planning for the product brands of these two companies. He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. Chew Leng Huat, Malaysian (Male) Mr Chew Leng Huat, 53 is the Managing Director of Fimaco Sdn. Bhd. ( FCSB ). He has more than 25 years of working experience in the home appliances industry. He is responsible for business and product development and the management of the Marketing and Sales department of Fimaco. He is also responsible for all aspects of strategic planning for the Faber, MEC and Tuscani home grown brands of home appliances. His brand portfolios also include the agency brands of Braun (Germany), Oral B (Germany), Speed Queen (USA) and Nissei (Japan). Mr Chew joined the Fiamma Group on 1 September 1989 as a Sales Representative. He became the Area Sales Manager of FCSB on 1 March He was promoted to the position of National Sales Manager on 1 August 1994, Sales and Marketing Manager on 1 November 1998 and General Manager on 1 October He assumed the current position of Managing Director on 15 May He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. Ling Kean Hong, Malaysian (Male) Mr Ling Kean Hong, 49, is the Managing Director of Fiamma Sdn. Bhd. ( FSB ). He has more than 20 years of working experience in the home appliances industry. He is responsible for business and product development and the management of the Marketing and Sales department of FSB. He is also responsible for all aspects of strategic planning for the ELBA brand of home appliances. Mr Ling joined the Fiamma Group on 1 April 1994 as a Sales Representative. He became the Area Sales Manager of FSB on 1 October He was promoted to the position of Regional Sales Manager on 1 May 1999, Sales & Marketing Manager on 1 March 2004 and General Manager on 1 April He assumed the current position of Managing Director on 1 April He does not have any family relationship with any director and/or major shareholder of Fiamma Holdings Berhad. Other information a. Conflict of interest The Company has entered into related party transactions with parties in which Mr Ching Wooi Kong has direct and/or indirect interest. Save for this, there are no other conflict of interest with the Company. b. Conviction of Offences None of the Key Management has any conviction for offences within the past 5 years other than traffic offences, if any and has not been imposed of any public sanction or penalty by relevant regulatory bodies during the financial year.

9 CORPORATE STRUCTURE as at 31 December Fiamma Holdings Berhad (88716-W) 100% Oaksvilla Sdn. Bhd. FHB Management Sdn. Bhd. 100% 100% Uniphoenix Jaya Sdn. Bhd. Fimaco Sdn. Bhd. 100% Fiamma Logistics Sdn. Bhd. 100% 100% Active Edge Sdn. Bhd. Ebac Home Sdn. Bhd. 100% Exact Quality Sdn. Bhd. 100% 100% Fiamma Land Sdn. Bhd. Ebac Home Pte. Ltd. 100% Ebac Kitchen Sdn. Bhd.* 99.9% 100% Affluent Crafts Sdn. Bhd. 100% Fiamma Development Sdn. Bhd. Fiamma Sdn. Bhd. 100% Kinsmedic Sdn. Bhd. 100% Kingston Medical Supplies (Pte.) Ltd. 70% Beaulogy Sdn. Bhd. 100% 100% Fiamma Properties Sdn. Bhd. Haustern Sdn. Bhd. 100% Fiamma Trading Sdn. Bhd. 70% 100% Enex Sdn. Bhd. 100% Itatech Sdn. Bhd. * In Members Voluntary Liquidation

10 08 FINANCIAL HIGHLIGHTS Profit for the Financial Year Attributable to Owners of the Company (RM'000) Basic Earnings per share (sen) Net Assets per share (RM) , , * * , * * , * * , * * FIVE YEAR GROUP FINANCIAL SUMMARY RM 000 RM 000 RM 000 RM 000 RM 000 RESULTS Revenue 258, , , , ,813 Operating profit before depreciation, finance cost, foreign exchange gain/losses and tax 44,710 53,816 68,285 82,870 43,911 Profit before taxation 39,828 50,146 63,182 75,415 34,134 Profit for the financial year attributable to owners of the Company 26,919 34,694 41,396 56,538 23,217 EQUITY AND ASSETS Share capital 136, , , , ,951 Total equity attributable to owners of the Company 260, , , , ,775 Total assets 361, , , , ,659 Cash and bank balances and deposits with financial institutions 43,897 91, ,709 92,210 87,638 FINANCIAL STATISTICS Basic earnings per share (sen) 7.20* 8.79* 10.16* 13.75* 4.57 Gross dividend per share (sen) 2.33* 2.67* 3.00* 2.50* 1.50 Dividend pay-out 9,193 10,873 12,355 12,660 7,781 # Net assets per share (RM) 0.67* 0.71* 0.78* 0.90* 0.82 * Adjusted for 2:1 share split and 1:2 bonus issue # Proposed final dividend

11 CHAIRMAN S STATEMENT 09 On behalf of the Board of Directors of Fiamma Holdings Berhad, I take pleasure in presenting to you the Annual Report and Audited Financial Statements of the Group and Company for the financial year ended 30 September FINANCIAL RESULTS For the financial year under review, the Group recorded revenue of RM million compared to RM million achieved in the previous financial year. This is mainly due to lower contribution from the trading and services and property development segments. The Group recorded a lower profit before taxation ( PBT ) of RM million for the current financial year compared to RM million recorded in the previous financial year. The lower PBT was attributable to the lower revenue achieved for the current financial year. In addition, PBT for the previous financial year included RM million attributable to the increase in fair value of investment properties compared to RM4.428 million in the current financial year. DIVIDENDS The Board is recommending a final single tier dividend of 1.5 sen per ordinary share for the financial year ended 30 September 2016 which is subject to shareholders approval at the forthcoming Annual General Meeting. CORPORATE DEVELOPMENT Share Split and Bonus Issue During the financial year, the Company undertook the Share Split and Bonus Issue exercise involving the subdivision of 177,353,129 ordinary shares of RM1.00 each in the Company into 354,706,258 ordinary shares of RM0.50 each ( Subdivided Shares ) and Bonus Issue of 175,196,429 new Subdivided Shares ( Bonus Shares ) to be credited as fully-paid, on the basis of one (1) Bonus Share for every two (2) Subdivided Shares held. The issued and paid-up share capital after the Share Split and Bonus Issue as at 30 September 2016 is RM264,951, comprising 529,902,687 new ordinary shares of RM0.50 each in the Company (including 8,800,000 treasury shares). Employees Share Option Scheme ( ESOS ) At an extraordinary general meeting held on 23 February 2016, the Company s shareholders approved the establishment of an ESOS of not more than 15% of the issued and paid up share capital of the Company to the eligible employees and Directors of the Group. The ESOS was launched on 12 May REVIEW OF OPERATIONS Trading and services The trading and services segment remained the main contributor to the Group s revenue for the financial year ended 30 September 2016, accounting for 95.9% of the Group s revenue. The segment recorded net revenue of RM million for the current financial year compared to RM million recorded in the previous financial year, representing a decrease of 10.0%. Consequently, this segment recorded a lower PBT of RM million against RM million recorded in the previous financial year, representing a decrease of 26.9%. Property development The property development segment contributed 2.3% of the Group s revenue for the financial year ended 30 September The segment recorded net revenue of RM6.601 million as compared to RM million recorded in the previous financial year representing a decrease of 77.0%. Consequently, this segment recorded a loss before taxation of RM3.491 million against PBT of RM3.078 million for the previous financial year. The revenue and PBT contribution in the previous financial year was derived mainly from the Group s commercial development in Jalan Tuanku Abdul Rahman, Kuala Lumpur, which was completed in March Investment holding and property investment The investment holding and property investment segment contributed 1.8% of the Group s revenue during the current financial year. The segment recorded revenue of RM5.029 million compared to RM2.233 million recorded in the previous financial year. The revenue is mainly derived from letting of investment properties at Wisma Fiamma in Bandar Menjalara and Menara Centara in Jalan Tuanku Abdul Rahman, both in Kuala Lumpur. This segment recorded a PBT of RM4.893 million against PBT of RM million for the previous financial year. The lower PBT was attributable to higher finance cost incurred during the current financial year. In addition, included in PBT for the previous financial was an increase in fair value of investment properties.

12 10 CHAIRMAN S STATEMENT CORPORATE SOCIAL RESPONSIBILITY The Board recognises the importance of sustainability and its increasing impact on the business and is committed to creating a culture of sustainability within the Group and the community with an emphasis on integrating the Environmental, Social and Governance ( ESG ) considerations in decision making. The Group has established a Sustainability Policy, and the Group will set long term and short term targets for its sustainability efforts in order to achieve the right balance between the needs of the wider community, the requirements of shareholders and stakeholders and economic success. PROSPECTS The Malaysian economy is expected to expand by 4 to 4.5% in Domestic demand, particularly private sector activity will continue to be the key driver of growth. Private consumption is expected to remain supported by wage and employment growth, with additional impetus coming from announced Government measures to increase disposable income. Investment activity will continue to be anchored by the on-going implementation of infrastructure projects and capital spending in the manufacturing and services sectors. Overall, while domestic conditions remain resilient, uncertainties in the external environment may pose downside risks to Malaysia s growth prospects. (Source: Economic and Financial Developments in Malaysia in the Third Quarter of 2016, Bank Negara Malaysia) With the above outlook, Fiamma expects the performance for the coming financial year to remain challenging. Trading and services Fiamma will remain focused on its distribution business and continue to build on its effective supply chain system and proven core competencies to remain a market leader for its products. It will continue to invest in brand building and promotional activities to strengthen and expand its distribution network in Malaysia for its various brands of home appliances, sanitary ware products, home furniture and medical devices and health care products. Fiamma will continue to source for new products and business opportunities that are in synergy with the Group s products and activities. The relocation and centralisation of the warehouse in Bandar Menjalara to a new and larger capacity warehouse in Bukit Raja Industrial Hub, Klang under Phase 1 and Phase 2 were completed in October 2015 and June 2016 respectively. This will further improve the operation and cost efficiency of the Group for the coming financial year as all the Group s logistic operations are now under one roof. The new integrated logistics warehouse will also be able to generate a recurring income stream for the Group from the provision of storage space and logistic services to third party customers, as well as cater for future expansion of the Group. Property development For the property development segment, the on-going development of double-storey terrace houses and double-storey shops in Kota Tinggi, Johor and the development of service apartments and retail space (Vida Heights) in Johor Bahru will contribute to the Group s revenue and profit for the financial year The redevelopment of the warehouse land in Bandar Menjalara, Kuala Lumpur into service apartments (East Menjalara) has commenced construction in July 2016 and this project will contribute to the Group s revenue and profit in the coming financial years commencing from financial year The proposed new commercial development in Jalan Yap Kwan Seng and the proposed new mixed development in Jalan Sungai Besi, both in Kuala Lumpur are expected to contribute to the Group s future income stream once the proposed developments are launched and sold. Investment holding and property investment The investment holding and property investment segment will continue to contribute to the Group s revenue from the letting of rental space from its investment properties at Wisma Fiamma in Bandar Menjalara and Menara Centara in Jalan Tuanku Abdul Rahman, both in Kuala Lumpur. ACKNOWLEDGEMENT On behalf of the Board and the Company, I would like to express our appreciation to our valued shareholders, dealers, suppliers, bankers, business associates and regulatory authorities for their confidence and continued support for the Group. I would also like to say a big thank you to my fellow board members, our dedicated management team and all employees who have contributed to the results of the Group through their continued support, loyalty, commitment, and hard work. TAN SRI DATO AZIZAN BIN HUSAIN Chairman

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20 18 AUDIT COMMITTEE REPORT The Board of Directors ( Board ) of Fiamma Holdings Berhad ( Fiamma or the Company ) is pleased to present the report on the Audit Committee for the financial year ended 30 September COMPOSITION AND ATTENDANCE The Audit Committee was established in The Audit Committee met four times during the financial year: on 25 November 2015, 23 February 2016, 25 May 2016 and 25 August During the financial year, the Audit Committee comprises the following members: Members Tan Sri Dato Azizan bin Husain Chairman, Independent Non-Executive Director Lim Soo Kong (Lim Soo Chong) Non-Independent Non-Executive Director Dr Teh Chee Ghee Independent Non-Executive Director No. of Meetings Attended The Audit Committee comprises all non-executive directors and at least two or two-thirds of its members are independent directors. Dr Teh Chee Ghee is a fellow member of the Association of Chartered Certified Accountants (ACCA) and a member of the Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants. The Audit Committee therefore meets the requirements of Paragraphs 15.09(1) (b) and (c) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. 2. ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE The Audit Committee is responsible for assisting the Board in fulfilling its statutory and fiduciary responsibilities of monitoring the Fiamma Group s management of its financial risk processes, accounting and financial reporting practices, ensuring the efficacy of the Group s system of internal control and in maintaining oversight of both the internal and external audit functions. A detailed terms of reference of the Audit Committee has been drawn up and approved by the Board and this is available online in the Investor Relations section of the Company s website at The terms of reference of the Audit Committee is reviewed once every two years. Any revision or amendment shall first be presented to the Board for its approval. Upon the Board s approval, the said revision or amendment shall form part of this terms of reference and this terms of reference shall be considered duly revised or amended. The terms of reference of the Audit Committee was last reviewed on 23 November REVIEW OF THE PERFORMANCE OF THE AUDIT COMMITTEE The Board through its Nominating Committee performs an annual review and assessment of the term of office and performance of the Audit Committee to assess the Audit Committee s effectiveness in carrying out its duties as set out in the terms of reference. The Board is satisfied that the Audit Committee has effectively discharged its duties in accordance with the terms of reference for the financial year under review. 4. RETIREMENT AND RESIGNATION In the event of any vacancy in the Audit Committee resulting in the non-compliance with requirements on composition of the Audit Committee and the election of an independent chairman of the Audit Committee, the vacancy must be filled within 3 months of that event.

21 AUDIT COMMITTEE REPORT SUMMARY OF WORK DURING THE FINANCIAL YEAR The Audit Committee has met its responsibilities in discharging its functions and duties for the financial year and in assisting the Board in fulfilling its statutory and fiduciary responsibilities of monitoring the Fiamma Group s management of its financial risk processes, accounting and financial reporting practices, ensuring the efficacy of the Group s system of internal control and in maintaining oversight of both the internal and external audit functions. The work undertaken by the Audit Committee during the financial year ended 30 September 2016 included: 5.1 Reviewed the unaudited quarterly financial results for recommendation to the Board for approval before release to Bursa Malaysia Securities Berhad ( Bursa Securities ) and the Securities Commission Malaysia; 5.2 Reviewed the consolidated audited financial statements of the Company and the Group and ensuring that the financial statements comply with the Financial Reporting Standards before recommending to the Board for approval; 5.3 Reviewed the external auditors scope of work and audit plan for the financial year, prior to the commencement of audit work; 5.4 Reviewed with the external auditors, the audit findings and the audit report including management s response; 5.5 Reviewed the quarterly internal audit reports and discussed the findings of the internal auditor and the corrective actions taken by the risk owners; 5.6 Reviewed and discussed with the internal auditor in detail, the internal audit plan for the financial year before recommending to the Board for approval; 5.7 Reviewed the Group s key operational and business risks areas and the Group s risk management policies in place to address and minimise these risks; 5.8 Reviewed the annual budget of the Group tabled by the management for the financial year ended 30 September 2016 and reviewed the actual performance against the Budget on a quarterly basis; 5.9 Reviewed the quarterly report on the related party transactions entered into by the Group and the Company; 5.10 Reviewed the Circular to Shareholders in connection with recurrent related party transactions of a revenue or trading nature; 5.11 Reviewed the Analysis of Corporate Governance Disclosures done for the Annual Reports 2013 to 2014 conducted by Bursa Securities and reviewed the Corporate Governance Disclosures scores of Fiamma as evaluated by Bursa Securities; 5.12 Reviewed and recommended to the Board the following for approval and inclusion in the Company s Annual Report; Audit Committee Report; Statement on Risk Management and Internal Control; and Statement on Corporate Governance; and 5.13 Met with external auditors (without the presence of executive board members) on 25 November 2015 to discuss audit findings for the financial year ended 30 September 2015 and on 25 August 2016 to discuss audit planning for the financial year ended 30 September 2016.

22 20 AUDIT COMMITTEE REPORT 6. SUITABILITY AND INDEPENDENCE OF EXTERNAL AUDITORS The Audit Committee takes into consideration the suitability and independence of the external auditors in recommending the suitability for re-appointment at the forthcoming Annual General Meeting of the Company. They assess among others, the adequacy of their experience and resources and the experience of the audit engagement partners. The Malaysian Institute of Accountants has regulated that there should be a mandatory rotation of the key audit partner after a period of not more than five years. Currently, the external auditor rotates the audit partner responsible for the engagement every five years which is aimed at enhancing auditors independence. 7. INTERNAL AUDIT FUNCTION The Group has an in-house internal audit function. The internal audit function is considered an integral part of the assurance framework and its primary mission is to provide assurance on the adequacy and effectiveness of the risk, control and governance framework of the Company and Group. The internal audit function is independent of the activities and operations of the Group. The Group s internal audit function adopts a risk-based approach to the implementation and monitoring of the effectiveness of the Group s internal control systems. This monitoring process will form the basis for continually improving the risk management process of the Group in meeting its overall goals. The main role of the internal audit function is to assist the Audit Committee and the Board in monitoring and managing risks and internal controls of all the companies in the Group by undertaking regular and systematic reviews of the system of internal control so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively in the Group. The total cost incurred in managing the internal audit function in financial year 2016 was RM190, TRAINING The training and seminars attended by the members of the Audit Committee during the year are disclosed in the Statement on Corporate Governance on page 28 of the Annual Report. This report is made in accordance with a resolution of the Board of Directors dated 23 November 2016.

23 STATEMENT ON CORPORATE GOVERNANCE 21 The Board of Directors ( Board ) of Fiamma Holdings Berhad ( Fiamma ) recognises the importance of adopting high standards of corporate governance in order to safeguard shareholders interest and to enhance shareholders value. As such, the Board of Fiamma strives to promote a strong culture of transparency, accountability, integrity as well as corporate performance within the Group and to ensure that the relevant principles and recommendations of the Malaysian Code on Corporate Governance 2012 ( MCCG 2012 or the Code ) are applied throughout the Company and its subsidiaries. The Board is pleased to present below, a statement on the application of the principles and the extent to which the Company has complied with the recommendations in the Code throughout the financial year ended 30 September 2016 except where it is stated otherwise. 1. ESTABLISH CLEAR ROLES AND RESPONSIBILITIES a) Functions of the Board and Management The Board is overall responsible for corporate governance, strategic direction, establishing corporate goals and monitoring the achievement of these goals in order to foster long term success of the Group. The Board delegates the responsibility of implementing the Group s strategies, business plans, policies and decisions to the Management which is led by the Chief Executive Officer/Group Managing Director ( CEO/GMD ). b) Principal Responsibilities of the Board The Board comprises members with extensive experience in the Group s business as well as qualified individuals and professionals. The Board assumes the following responsibilities: Reviewing and adopting the Group s strategic plan. Overseeing the conduct of the Group s businesses. Identifying principal risks and ensuring the implementation of an appropriate internal control and risk management system to manage the risks. Overseeing the succession planning of key management. Overseeing the development and implementation of a shareholder communications policy. Reviewing the adequacy and integrity of the Group s management information and internal control systems. Ensuring that the Company adheres to high standards of ethics and corporate behaviour. c) Board Charter The Board had on 27 November 2012 formally adopted the Board Charter which is established to promote high standards of corporate governance and is designed to provide guidance and clarity for Directors and management with regard to the role of the Board and its committees. The Board Charter forms an integral part of each Director s duties and responsibilities. The Board Charter is reviewed once every two years and was last reviewed on 23 November The Board Charter is available on the Company s corporate website at d) Code of Conduct and Code of Ethics The Board is mindful of its role to establish a corporate culture which inculcates ethical conduct that permeates throughout the Group. Accordingly, the Board had formalised a Code of Conduct (for Directors, Management and Staff) and a Code of Ethics for Directors. The Code of Conduct and the Code of Ethics for Directors are available on the Company s corporate website. e) Whistleblowing Policy The Company has in place a whistleblowing policy to inculcate the culture of good business ethics and governance within the Group and provides employees with an accessible avenue to disclose any improper conduct or any action that is or could be harmful to the reputation of the Group and/or compromise the interest of stakeholders.

24 22 STATEMENT ON CORPORATE GOVERNANCE This policy covers improprieties or irregularities in matters of financial reporting, suspected fraud or criminal offences, unlawful activities such as corruption or blackmail, misuse or misappropriation of the Group s funds or assets, failure to comply with legal or regulatory requirements, breach of confidentiality, breaches of any group policies, sexual harassment and deliberate concealment of any or a combination of the above matters. This policy addresses the Group s commitment to integrity and ethical behaviour by helping to foster and maintain an environment where employees can act appropriately without fear of retaliation. The Whistleblowing Policy is available on the Company s corporate website. f) Sustainability Policy The Board recognises the importance of sustainability and its increasing impact to the business and is committed to understanding and implementing sustainable practices. The Group had formalised the Sustainability Policy and the Group will set long term and short term targets for its sustainability efforts in order to achieve the right balance between the needs of the wider community, the requirements of shareholders and stakeholders and economic success. The Group acknowledges its corporate social responsibility in the community and has, and will continue to support worthy causes. The Group practises equal opportunity for all employees and the selection criteria for appointment or promotion will be based on skills, experience and knowledge, regardless of gender, ethnicity and age, subject to the current retirement age of sixty years. The Sustainability Policy is available on the Company s corporate website. g) Access to Information and Advice All Directors have full access to information concerning the Company and the Group. The Directors are provided with the relevant agenda and a set of Board papers in sufficient time prior to every Board meeting to enable them to obtain further information and explanation, where necessary, in order to be adequately informed before the meeting. The Board papers circulated include quarterly financial reports and annual financial statements, minutes of meetings of all committees of the Board, report on recurrent related party transactions, Directors and substantial shareholders share dealings, updates from all regulatory authorities, internal and external audit reports and the annual budget. All matters requiring the Board s approvals are also circulated prior to the Board Meetings and, during Board Meetings these matters are duly discussed and deliberated with senior management and advisers where necessary, before decisions are made. The Directors have access to members of the senior management team, the advice and services of the Company Secretaries and the external auditors as well as to independent professional advisers, to enable them to discharge their responsibilities. h) Company Secretary The Board is supported by a qualified Company Secretary whose key role is to provide unhindered advice and services to the Directors as and when the need arises, to enhance the effective functioning of the Board to ensure regulatory compliance. The Company Secretary advises the Board on their obligations matters relating to corporate governance, compliance with the Listing Requirements and related regulations, maintenance of statutory records and preparation and conduct of the Board, Board Committees and General Meetings, review of the contents of circulars and the Annual Report. The appointment and removal of the Company Secretary is a matter reserved for the Board. 2. STRENGTHENING BOARD COMPOSITION The Board is assisted by the Board Committees in carrying out its duties and responsibilities. The following Board Committees have been established to assist the Board in the selection and retention of board members. a) Nomination Committee The Nomination Committee ( NC ) was established in May 2001 and comprises exclusively of Non-Executive Directors. The NC met twice during the financial year. The members of the NC who served during the financial year were: No. of Meetings Attended Tan Sri Dato Azizan Bin Husain Non Executive Director Independent (Chairman) 2 Mr Lim Soo Kong (Lim Soo Chong) Non Executive Director Non-Independent 1 Dr Teh Chee Ghee Non Executive Director Independent 2

25 STATEMENT ON CORPORATE GOVERNANCE 23 The Board has also identified Tan Sri Dato Azizan bin Husain as the Senior Independent Director of Fiamma to whom concerns may be conveyed. The main duties of the NC are to: Recommend new appointment/re-election of Directors to the Board. Recommend appointment of members to Board Committees. Review the Board structure, size and composition. Evaluate the performance and effectiveness of the Board, the Audit Committee and Board Committees and individual Directors and to determine their training needs. Review of Board s succession plans of key personnel within the Group. Facilitate board induction and training programme for newly appointed Directors. The detailed terms of reference of the NC is available at the Company s corporate website. The NC carried out the following activities, amongst others, during the financial year: Reviewed its terms of reference for approval by the Board. Reviewed the composition of the Board and the Board Committees in terms of its balanced mix of skills, experience and expertise. Reviewed the attendance of Directors in respect of attending meetings of the Board and its Committees. Reviewed and assessed the effectiveness of the Audit Committee in carrying out its duties as set out in the terms of reference. Reviewed the composition of the NC and making recommendation to the Board to appoint Dato Bahar bin Ahmad as a member as well as the Chairman of the NC. Subsequent to the Board s approval and with effect from 4 October 2016, the members of the NC comprises the following: Dato Bahar Bin Ahmad Tan Sri Dato Azizan Bin Husain Dr Teh Chee Ghee Non Executive Director Non Independent (Chairman) Non Executive Director Independent Non Executive Director Independent b) Appointment, Re-election and Assessment of Directors The Board has entrusted the NC to assess the suitability of candidates for new appointment and re-election to the Board. A Directors Assessment Policy had been adopted by the Board which provides guidelines on the assessment criteria of the Chairman, CEO/GMD, Executive Directors, Independent Directors and Board Committees. The appointment of a new member to the Board is only made after assessment and recommendations by the NC. In considering candidates as potential Directors, the NC will take into account the following criteria: Skills, knowledge, expertise and experience in the Group s core business. Time, commitment, character, professionalism and integrity. Diversity in age, gender, ethnicity and ability to contribute to the Board. Number of directorships in companies outside the Group. In accordance with Article 89 of the Company s Articles of Association, all Directors appointed by the Board are subject to re-election by the shareholders at the first Annual General Meeting ( AGM ) after their appointment. One-third of the existing remaining Directors including the CEO/GMD are required to submit themselves for re-election by rotation at least once every three years at each AGM. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129(2) of the Companies Act, Shareholders are provided with sufficient time and information in the Annual Report, such as individual

26 24 STATEMENT ON CORPORATE GOVERNANCE Director s personal profile, Board meeting attendance and shareholdings in the Company, in order to promote well-informed decision making by the Company s shareholders. The Board is aware of the importance of boardroom diversity including diversity in ethnicity, gender and age. However, the Board is of the view that the selection criteria of a Director, based on effective blend of competencies, skills, experience and knowledge should remain a priority. The Board has established a Director s Assessment Policy which sets out the criteria to be used in the assessment of Directors. This includes Strategic, Ethical and Value-driven, Competency and Capability and Commitment. The independent director is subject to independence and tenure of service criteria. The NC has conducted by way of formal assessments during the financial year, the effectiveness of the Board, its Committees and individual Directors, and is satisfied with the current composition of the Board and its Committees in respect of their balanced mix of skills, experience and expertise, as well as individual Director s personal attributes and contribution to the Board after taking into consideration the assessments done by each Director who assesses the performance of the Board members as a whole and individually. The results of the performance assessments have been documented. c) Remuneration Committee The Remuneration Committee ( RC ) was established in May 2001 and comprises a majority of Non-Executive directors, which is in accordance with its terms of reference which requires all or majority of its members to be Non-Executive directors. The RC met once during the financial year. The members of the RC who served during the financial year were: Mr Lim Soo Kong (Lim Soo Chong) Mr Lim Choo Hong Dr Teh Chee Ghee Non-Executive Director Non-Independent (Chairman) CEO/Group Managing Director Non-Executive Director Independent The RC recommends to the Board the remuneration framework and remuneration package of the Executive Directors. The remuneration components include fixed salary, bonus, fees and other benefits and allowances. The level of remuneration reflects the experience and level of responsibilities undertaken by the Executive Directors. The fixed salary is determined according to the scope of the duty and responsibilities, corporate and individual performance and current market rate within the industry. The bonus is granted to reflect the Executive Directors performance as well as group results. Other allowances and benefits in kind include meeting allowance and benefits in kind include use of motor vehicle, petrol and driver. The determination of the fees of the Non-Executive Directors is decided by the Board as a whole. The fixed fees for members of the Board of Directors is determined based to on par with the rest of the market, the extent of the duty and responsibilities on the Board and Board committees and the fees are reviewed once every three years. The RC met during the financial year to review the basis and quantum of the Executive Directors remuneration package for financial year 2016 and to recommend to the Board for approval.