Heineken Malaysia AR Design

progressing towards sustainable performance ANNUAL REPORT 2017

Annual Report 2017

progressing towards sustainable performance ANNUAL REPORT 2017

WE ARE We build true human connections and break down barriers, because we believe great moments of shared experiences are the best in life.

We are inspired by consumers to brew the best beers and extend that same passion to all of our brands, products and activities.

We are proud of our family history and Dutch heritage and derive from them our entrepreneurial spirit that takes us to every corner of the world.

We are brand builders. The HeinekenÂŽ brand defines and unites us while our many local, regional and global brands make our portfolio diverse and unique.

People are at the heart of our company. We see our strength in trust, diversity and progress.

We stand by our values: passion for quality, enjoyment of life, respect for people and for the planet.

We always advocate for responsible consumption. We are committed to our communities and strive to consistently improve the impact we make on the planet.

We work with our customers and partners to grow together and seek to win with integrity and fairness.

And we are convinced that by staying true to these commitments, we create value for our shareholders.

WE ARE HEINEKEN.

ABOUT THIS REPORT

In FY16, we stepped into a new era as Heineken Malaysia Berhad, building on a strong track record of more than 50 years in Malaysia. In this new era, sustainability is at the core of our business, where people and the planet are key priorities on our agenda whilst delivering long-term value for our shareholders.

We are proud to present this combined report, which merges our Annual Report and Sustainability Report into a single publication, demonstrating our commitment to integrate sustainability into all areas of our business, with the goal of Brewing a Better World.

The Heineken Malaysia Berhad Annual Report 2016 has been prepared in accordance with Bursa Malaysia Main Market Listing Requirements. This FY16 report covers a cumulative period of 18 months, from 1 July 2015 to 31 December 2016, as we aligned ourselves with the HEINEKEN Group financial year which ends on 31 December.

As part of our efforts in delivering sustainable value, we have printed this publication using FSC-mix paper, which is environmentally friendly.

Scan this QR code to find more information online at www.heinekenmalaysia.com

1. ABOUT US 04 Sustainability From Barley to Bar 06 People • Planet • Performance 08 Corporate Information 09 Board of Directors 17 Management Team

CONTENTS 22

Chairman Statement

Sustainability From Barley to Bar

2. our strategic review 22 Chairman’s Statement 25 Management Discussion & Analysis

3. BREWING A BETTER WORLD 30 Brewing a Better World

4. OUR OPERATIONAL REVIEW 45 Supply Chain Highlights 48 Human Resources Highlights 52 Corporate Responsibility Highlights 58 IT Highlights 60 Financial Highlights 62 Commercial Highlights

5. GROWING BRANDS 64 Heineken® 66 Tiger 68 Guinness 70

Portfolio Brands 73 Innovation

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Trade Marketing Highlights

6. HOW WE ARE GOVERNED 77

Statement on Corporate Governance

93 Audit Committee Report 96 Statement on Risk Management & Internal Control

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Brewing a Better World

7. OUR NUMBERS

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102 Financial Highlights 103 Analysis of Group Revenue

Supply Chain Highlights

104 Financial Statements

8. OTHERS 155 Properties Owned by The Group 156 Other Information 157 Analysis of Stockholdings 160 Notice of 52nd Annual General Meeting

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Corporate Responsibility Highlights

163 Notice of 53rd Annual General Meeting

Appendix A - Notice of 52nd Annual General Meeting

Appendix B - Verification of Environmental Performance Reporting

GRI G4 Index

Forms of Proxy

Group Directory

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Heineken Event

Progressing towards sustainable Performance HEINEKEN Malaysia strives to prove that sustainability is not simply the latest buzzword, but is actually good for business, by ensuring that in the long term, our performance is strong and growing, while our impact on the environment and the community in which we operate is both significant and positive. The HEINEKEN bottle setting against the brand images represents all the efforts we are taking - and the progress we are making - towards our quest for sustainable performance for the future.

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Annual Report 2017

sustainability from barley to bar We Pursue An Increasingly Holistic Approach To Sustainability.

Our Strategy Focuses On The Entire Value Chain ‘From Barley To Bar’.

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AGRICULTURE

HEINEKEN Malaysia is committed to only importing the highest quality raw materials from Europe and Australia. From the researching of seeds, farming to harvesting, processes are subjected to strict supervision by HEINEKEN. Only the best malted barley and hops are selected and imported from HEINEKEN preapproved suppliers.

EMPLOYEES

HEINEKEN Malaysia employs 547 people. They enjoy benefits and rewards – pay, training, healthcare, career opportunities. The HEINEKEN Employees and Human Rights Policy supports and guides us all to act according to our core values. The HEINEKEN Code of Business Conduct provides guidance so that every employee knows what is expected of them.

BREWING

Brewing beer is a craft. Strict safety standards are adhered to.

HEINEKEN Malaysia and our Master Brewers are committed to improve energy and water efficiency and switching to more environmentally friendly energy sources where feasible.

PACKAGING

Our beer is served in bottles, cans and kegs. We are constantly looking to innovate, finding ways to optimise the production of our packaging materials, such as light- weighting and increasing the recycling and re-use rate.

Heineken Malaysia Berhad

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sustainability from barley to bar

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DISTRIBUTION

The movement of our products across the local market is carefully managed. We optimise distribution by effectively managing our distribution networks. Health and Safety Policies are in place to ensure a safe working environment.

CONSUMERS

Through our portfolio of premium and mainstream brands, we continue to innovate to bring consumers enjoyment with new products and creative drinking experiences. At the same time, we campaign strongly to reinforce responsible consumption under our Drink Sensibly banner.

CUSTOMERS

Thousands of retailers, bars, restaurants and clubs serve a selection of our brands. We promote awareness on responsible serving and sensible drinking to ensure our products are consumed responsibly.

COMMUNITIES

We are committed to making a positive impact where we work, live and sell our products. Investing in programmes geared to protect our natural water resources and education led initiatives. We work closely with local communities, NGOs and key government stakeholders to this outcome.

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Annual Report 2017

PEOPLE • PLANET • PERFORMANCE PEOPLE

547

COMMUNICATIONS Employee Climate Survey HEINEKEN Speak Up Policy

NUMBER OF EMPLOYEES GENDER DIVERSITY

42%

Female Senior Managers

HEALTH & SAFETY HEINEKEN Life Saving Rules

CULTURAL DIVERSITY – NATIONALITIES

21,000

training hours with an investment of over RM1.5 million

TALENT DEVELOPMENT Short Term Assignments abroad Asia Pacific Graduate Programme

performance

OPERATING CASH (POST-CAPEX)

2.6%

RM488 million

REVENUE

4.9%

RM2.8 billion

PROFIT BEFORE TAX

11.1%

RM549 million

Heineken Malaysia Berhad

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At Heineken Malaysia, We Believe In The Long-Term Sustainability Of Our Business And In Creating Value For Our Key Stakeholders. We Believe That Business Growth And Sustainability Go Hand In Hand, With Our Focus On People, Planet And Performance.

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planet

RM1.6 million

5 NEW COMMUNITIES

on growing communities through the GAB FOUNDATION

engaged in the SUNGAI PENCHALA W.A.T.E.R PROJECT

5.3%

Reduction in CO2 Emissions vs 2015

215,000

consumers engaged through Drink Sensibly social media campaigns

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4.7 %

Reduction in Water Usage vs 2015

Green Refrigerators purchased

outlets partnered to promote Drink Sensibly tips

Invested 30% of Heineken® brand’s media budget on a responsible consumption campaign at the Formula 1® Petronas Malaysia Grand Prix

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Annual Report 2017

CORPORATE INFORMATION DIRECTORS Dato’ Sri Idris Jala (Chairman) Hans Essaadi (Managing Director) Martin Giles Manen Datin Ngiam Pick Ngoh, Linda Frans Erik Eusman Choo Tay Sian, Kenneth Yong Weng Hong

SECRETARY

SHARE REGISTRAR

PRINCIPAL BANKERS

Ng Sow Hoong (MAICSA 7027552) Tel : 603-7861 4537 Email : rachel.ng@heineken.com

Tricor Investor & Issuing House Services Sdn Bhd Unit 32-01, Level 32, Tower A Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur, Malaysia

Citibank Berhad BNP Paribas Malaysia Berhad Standard Chartered Bank Malaysia Berhad HSBC Bank Malaysia Berhad

REGISTERED OFFICE Sungei Way Brewery Lot 1135, Batu 9, Jalan Klang Lama 46000 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : 603-7861 4688 Fax : 603-7861 4602 Emai : general.enquiry@heineken.com Website : www.heinekenmalaysia.com AUDITORS KPMG PLT Chartered Accountants Level 10, KPMG Tower 8 First Avenue, Bandar Utama 47800 Petaling Jaya Selangor Darul Ehsan, Malaysia Tel : 603-7721 3388 Fax : 603-7721 3399

Tricor Customer Service Centre Unit G-3, Ground Floor Vertical Podium Avenue 3, Bangsar South No. 8 Jalan Kerinchi 59200 Kuala Lumpur, Malaysia Tel : 603-2783 9299 Fax : 603-2783 9222 Email : is.enquiry@my.tricorglobal.com

STOCK EXCHANGE LISTING Listed on the Main Market of Bursa Malaysia Stock short name : HEIM Stock number : 3255

Heineken Malaysia Berhad

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BOARD OF DIRECTORS

From left to right:

FRANS ERIK EUSMAN Non-Independent Non-Executive Director

DATO’ SRI IDRIS JALA Independent NonExecutive Director

MARTIN GILES MANEN Senior Independent Non-Executive Director

HANS ESSAADI Managing Director

DATIN NGIAM PICK NGOH, LINDA Independent NonExecutive Director

CHOO TAY SIAN, KENNETH Non-Independent Non-Executive Director

YONG WENG HONG Non-Independent Non-Executive Director

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Annual Report 2017

DIRECTORS’ PROFILES

Dato’ sri idris jala Date of Appointment : 1 January 2017

Malaysian Age 58 Male

Independent No-Executive Director Chairman

Master’s Degree In Industrial Relations, University Of Warwick Bachelor’s Degree In Development Studies And Management, University Sains Malaysia

Dato’ Sri Idris Jala is President and Chief Executive Delivery Unit (PEMANDU) Associates, and Advisor to the Prime Minister of Malaysia on the National Transformation Programme. He was also the Minister in the Prime Minister’s Department from 2009 to 2015, completing the two terms of Senatorship.

Dato’ Sri Idris Jala is a renowned transformation guru in turning around companies’ performance through his big fast results methodology and transformational strategies that are innovative, rigorous and relevant to today’s demands.

He has continuously delivered sustainable socio economic reforms which, in 2014, saw Bloomberg place him among the top 10 most. Under his leadership, PEMANDU was also named by NESTA, UK and Bloomberg Philanthropies as one of the top 20 most innovative Government agencies in the world. Today, Dato’ Sri Idris Jala travels around the world assisting governments deliver their very own transformation journeys.

In addition, Dato’ Sri Idris Jala is an Expert Resource Speaker at the Harvard Health Leaders’ Ministerial Forum and a Visiting Fellow of Practice at the Oxford Blavatnik School of Government. He also served on the Advisory panel for the World Economic Forum on New Economic Growth and also on the Advisory Panel of World Bank.

Prior to his Government stint, Dato’ Sri Idris Jala was Managing Director/CEO at Malaysia Airlines (MAS) for three years.

He was brought on board to turn around the airline which was in crisis due to a prolonged bout. Before MAS, he spent 23 years at TShell, rising up the ranks to hold senior positions including Vice President, Shell Retail International and Vice President Business Development Consultancy, based in UK. This included successful business turnarounds in Malaysia and Sri Lanka.

In view of his contribution to society, Dato’ Sri Idris of Malaysia and various State Governments of Malaysia. He was conferred the ‘First Order’ medal by the Italian Government.

Dato’ Sri Idris Jala also serves on the Board of Malaysia Petroleum Resources Corporation, Johor Petroleum Development Corporation Berhad and Talent Corporation Malaysia Berhad.

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DIRECTORS’ PROFILES

hans essaadi

Date of Appointment : 1 March 2013

Dutch Age 51 Male

Managing Director

Bachelor’s Degree In Finance, Hotelschool, The Hague

Dato’ Sri Idris Jala is President and Chief Executive Delivery Unit (PEMANDU) Associates, and Advisor to the Prime Minister of Malaysia on the National Transformation Programme. He was also the Minister in the Prime Minister’s Department from 2009 to 2015, completing the two terms of Senatorship.

Dato’ Sri Idris Jala is a renowned transformation guru in turning around companies’ performance through his big fast results methodology and transformational strategies that are innovative, rigorous and relevant to today’s demands. He has continuously delivered sustainable socio economic reforms which, in 2014, saw Bloomberg place him among the top 10 most. Under his leadership, PEMANDU was also named by NESTA, UK and Bloomberg Philanthropies as one of the top 20 most innovative Government agencies in the world. Today, Dato’ Sri Idris Jala travels around the world assisting governments deliver their very own transformation journeys.

In addition, Dato’ Sri Idris Jala is an Expert Resource Speaker at the Harvard Health Leaders’ Ministerial Forum and a Visiting Fellow of Practice at the Oxford Blavatnik School of Government. He also served on the Advisory panel for the World Economic Forum on New Economic Growth and also on the Advisory Panel of World Bank.

Prior to his Government stint, Dato’ Sri Idris Jala was Managing Director/CEO at Malaysia Airlines (MAS) for three years.

He was brought on board to turn around the airline which was in crisis due to a prolonged bout. Before MAS, he spent 23 years at TShell, rising up the ranks to hold senior positions including Vice President, Shell Retail International and Vice President Business Development Consultancy, based in UK. This included successful business turnarounds in Malaysia and Sri Lanka.

In view of his contribution to society, Dato’ Sri Idris of Malaysia and various State Governments of Malaysia. He was conferred the ‘First Order’ medal by the Italian Government.

Dato’ Sri Idris Jala also serves on the Board of Malaysia Petroleum Resources Corporation, Johor Petroleum Development Corporation Berhad and Talent Corporation Malaysia Berhad.

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Annual Report 2017

MANAGEMENT TEAM PROFILES

HANS ESSAADI Appointment Date : 1 March 2013

Dutch, Male BACHELOR’S DEGREE IN FINANCE, HOTELSCHOOL, THE HAGUE

TEO HONG KENG

Singaporean, Male

Appointment Date : 1 March 2013

CHARTERED ACCOUNTANT, SINGAPORE BACHELOR OF ACCOUNTANCY, NANYANG TECHNOLOGICAL UNIVERSITY, SINGAPORE

MANAGING DIRECTOR

FINANCE DIRECTOR

WORKING EXPERIENCE

WORKING EXPERIENCE

Within the HEINEKEN Group: • Managing Director, HEINEKEN Malaysia, since March 2013

Within the HEINEKEN Group: • Over 15 years experience serving in various finance roles

• General Manager, Sirocco (joint venture between HEINEKEN and Emirates in Heineken Region – Africa and Middle East) (2008 - 2012)

• Previous roles include Head of Finance of Cambodia Brewery Limited, and Finance Manager and Management Accountant of Tiger Export Pte Ltd

• General Manager, Brau Union International, Vienna, Austria (2005 - 2008)

• Most recent role before joining HEINEKEN Malaysia was as Finance Director in Asia Pacific Breweries (Singapore) Pte Ltd

• Country Manager of HEINEKEN Puerto Rico (2003 2005) • Held various roles within HEINEKEN Group, including Senior Brand Manager with Vrumona, Heineken Export Manager, Sales Manager with HEINEKEN Germany and Sales Representative with HEINEKEN Netherlands (1991 - 2002)

Previous experience: • Honeywell Singapore Pte Ltd - Business Analyst • BNP Paribas Merchant Bank Asia Ltd - Assistant Regional Management Accountant

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MANAGEMENT TEAM PROFILES

ANDREW WOON KEAN LEONG Appointment Date : 1 March 2013 sales DIRECTOR

Malaysian, Male BACHELOR OF INFORMATION TECHNOLOGY (HONS), UNIVERSITY UTARA MALAYSIA

MAUD MEIJBOOM VAN WEL Appointment Date : 1 March 2013

Dutch, Female MASTER OF SCIENCE IN ECONOMICS, RIJKS UNIVERSITEIT GRONINGEN, THE NETHERLANDS

marketing DIRECTOR

WORKING EXPERIENCE

WORKING EXPERIENCE

Within the HEINEKEN Group: • Managing Director, HEINEKEN Malaysia, since March 2013

Within the HEINEKEN Group: • Over 15 years experience serving in various finance roles

• General Manager, Sirocco (joint venture between HEINEKEN and Emirates in Heineken Region – Africa and Middle East) (2008 - 2012)

• Previous roles include Head of Finance of Cambodia Brewery Limited, and Finance Manager and Management Accountant of Tiger Export Pte Ltd

• General Manager, Brau Union International, Vienna, Austria (2005 - 2008)

• Most recent role before joining HEINEKEN Malaysia was as Finance Director in Asia Pacific Breweries (Singapore) Pte Ltd

• Country Manager of HEINEKEN Puerto Rico (2003 2005) •

Held various roles within HEINEKEN Group, including Senior Brand Manager with Vrumona, Heineken Export Manager, Sales Manager with HEINEKEN Germany and Sales Representative with HEINEKEN Netherlands (1991 - 2002)

Previous experience: • Honeywell Singapore Pte Ltd - Business Analyst • BNP Paribas Merchant Bank Asia Ltd - Assistant Regional Management Accountant

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Annual Report 2017

chairman’s statement

DATO’ SRI IDRIS JALA Chairman

Heineken Malaysia Berhad

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chairman’s statement

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our strategic review

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I consider it a privilege to be part of Heineken Malaysia Berhad (HEINEKEN Malaysia), a strong and well-governed company within an iconic global organisation. HEINEKEN has a rich heritage of over 150 years, stellar track record and presence in more than 170 countries across the globe, and in Malaysia, we build on more than 50 years of growing together with the nation.

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HEINEKEN Malaysia’s transformation journey in the new era will feature sustainability at the core of our business.

Many ask me why the brewery industry, and I ask them back, “Why not?” The Dutch connection is strong. I had a stint with Shell, an Anglo-Dutch company for 23 years. It is nice to be coming back into the ‘circle’ once again in a different portfolio.

This latest assignment adds variety, having come from different areas like oil and gas, aviation, and government transformation. It is a fun industry, premised on connecting people over great drinks, good times and awesome experiences, yet one that advocates moderation and responsible consumption.

Who would not want to be part of that?

I joined HEINEKEN Malaysia on the cusp of exciting times. I have come to be known as a ‘transformative man’, and it seems very apt that my appointment comes at a time when the Company has transformed from Guinness Anchor Berhad to HEINEKEN Malaysia.

People • Planet • Performance HEINEKEN Malaysia’s transformation journey in the new era will feature sustainability at the core of our business.

Ultimately, we focus on creating long-term value for our shareholders by operating sustainably in a responsible manner.

We stand by our values – passion for quality, enjoyment of life, respect for people and for the planet.

On a personal note, these are matters close to my heart, and I am glad that HEINEKEN has these values engrained into its DNA as well. We know from experience that when we take care of our people, consumers, business partners and communities, as well as the sustainability impact we create through our business, the financial yield will naturally follow suit.

Vendors and suppliers are part of our family and we support better business and work processes towards making their work more. we rolled out Project Breakout, a mega IT-engineered project which has transformed the way we do business with increased new Route-to-Market process.

People are the heartbeat of our organisation, and HEINEKEN Malaysia invests in training and development for our team. We can cross postings or staff exchange for career development with our integration into HEINEKEN’s global network. The safety of our employees is our number one priority, thus, we rolled out 100% induction on HEINEKEN’s Life Savings Rules (LSR) module towards achieving a zero-accident workplace.

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MANAGEMENT DISCUSSION & ANALYSIS

HANS ESSAADI Managing Director

Heineken Malaysia Berhad

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On 7 October 2015, Heineken N.V.’s acquisition of the remaining stake held by Diageo PLC in our principal shareholder, GAPL Pte Ltd, propelled us to a new chapter in our ongoing journey building on a strong track record of more than 50 years in Malaysia. The Company was incorporated on 24 January 1964 and listed on the Main Market of Bursa Malaysia since 1965. The Sungei Way Brewery in Petaling Jaya, Selangor has been in operation since 1965.

Entering a New Era On 21 April 2016, to align with HEINEKEN’s corporate identity, we changed the Company’s name from Guinness Anchor Berhad to Heineken Malaysia Berhad while maintaining our shareholding structure with 51% held by GAPL Pte Ltd, a wholly owned subsidiary of Heineken N.V and 49% by the general public. We celebrated this momentous occasion with over 1,000 stakeholders comprising business partners, media, and employees.

On behalf of the Board and Management Team, I would like to express our sincere appreciation for the continued trust and loyalty of our shareholders, employees, business partners, and consumers, whose support along the journey enabled a smooth transition with no disruption to the business.

The operating environment continued to be challenging. In FY16, we navigated a market landscape characterised by the following observations: • Global geo-political uncertainties, rising oil prices, and a tightening domestic economy flanked by currency volality and the rising cost of living continued to pressure consumer sentiment; • As consumers seek better value for money (in quality or price), this translated into growth for our Premium and Value segments; HEINEKEN Malaysia Poised for Greater Growth My previous assignments have been to transform and turn-around organisations into I helm an establishment that is already on solid ground, with commendable results year- on-year, a remarkable feat led by Hans and his team.

We achieved solid results despite a persistently challenging environment marked by a tough economic climate.

Adding on the sectoral elements with increase in excise duty rates, regulatory tightening, ongoing contraband

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RM1.62 billion

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Navigating a Challenging Market Landscape

profit AFTER tax

+11.1% RM207 million

TOTAL ASSETS

+2.6% RM779 million

NET dividend

125 sen net dividend per 50 sen stock unit

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+4.9%

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REVENUE

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performance review

our strategic review

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In summary, FY16 was a solid year for HEINEKEN Malaysia that showcased our business resilience, with strong fundamentals and sound commercial strategy.

This has enabled us to improve our market position despite a challenging environment.

At HEINEKEN Malaysia, we are committed to make sustainability a paramount focus of our business, with respect for people and the planet being a core value for us.

Alongside this, we will continue to prioritise new innovations and optimise process and system improvements, to create sustained value for our shareholders.

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MANAGEMENT DISCUSSION & ANALYSIS

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Annual Report 2017

BREWING A BETTER WORLD Brewing a Better World (BaBW) is HEINEKEN's global strategy to creating long term sustainable value. Our goal is to make sustainability a business imperative rather than something that lies outside the Company's day-to-day operations – mitigating the impact of environmental and social risks while looking at ways to create genuine economic opportunities and value across the board for HEINEKEN Malaysia, our key stakeholders and the local community.

Scope Under BaBW, there are six focus areas where we believe we can make significant and meaningful differences. We are pleased to share that we are making good progress in our 2016 milestones and working towards fulfilling our BaBW commitments for 2020.

Heineken Malaysia Berhad

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OUR VALUE CHAIN

FOCUS AREAS

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SAFETY REPORTING

BUSINESS CONTROL AND TAXATION TRACKING

Accident Reporting & Investigation Software (ARISO)

Company Information Logistic (CIL)

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ENVIRONMENTAL REPORTING

GLOBAL SUSTAINABILITY MEASUREMENT SYSTEM FOR BaBW AREAS

Business Comparison System (BCS)

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We aim to report our sustainability performance annually as a way to communicate and be accountable to our valued stakeholders.

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Our sustainability strategy is aligned with the HEINEKEN approach and is customised towards the needs of our market. At the global level, this covers the entire value chain ‘From Barley to Bar’. At HEINEKEN Malaysia, the value chain starts from the brewing process and ends with the consumers.

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HEINEKEN Malaysia’s Value Chain

Green Gauge Reporting System

SUSTAINABILITY GOVERNANCE Currently, sustainbility efforts are led by our Management Team members and are reported to our Board of Directors on a quaterly basis. We are in the process of formalising a Board elected committee and will disclose the structure in our next report.

Reliability, Completeness and Methodology We aim to improve our sustainability milestones by constantly seeking feedback from our stakeholders, refining our internal controls and extracting meaningful data from our systems as outlined above.

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Annual Report 2017

SPOTLIGHT ON PROGRESSIVE POLICIES, SYSTEMS & PRACTICES 1 2

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Water is a key ingredient in our products. Our consumption is in the form of raw materials used to produce our products and extends to packaging and the cleaning process. This is why we are focusing on minimising our water footprint throughout our value chain.

We have embarked on various including the reduction of our bottle washer nozzle that reduced our consumption from 9.0m3/hr to 4.5m3/hr.

PROTECTING WATER RESOURCES

Wastewater Treatment Our wastewater is treated to ensure that no harmful substance is released from our brewery. Utilising a process called anaerobic treatment, a biochemical reaction takes place in the absence of oxygen resulting in organic carbon being converted into carbon dioxide, methane and biomass. The second method utilises an aerobic treatment where oxygen is associated in biological reactions and results in organic carbon being converted to carbon dioxide and biomass. Our processes warrant our wastewater quality is compliant and as prescribed by the Department of Environment, Malaysia.

We have set ambitious water and CO2 emission reduction targets across our value chain. Our policies, systems and practices govern the way we conduct our business and paves the pathway to achieve our goals by 2020.

HEINEKEN Utilities Benchmark Our pursuit of preserving natural resources is practised by all operating companies under HEINEKEN. With the HEINEKEN Utilities benchmarking model, we are able to identify the optimal level of energy and water for breweries to operate in. Thus, enabling us to stay true to our ambitions of preserving our natura.

Promoting Environment Stability Under HeiRule 6 of our HEINEKEN Rules, we continuously seek to improve the environmental footprint of our products, services and other business activities. It is this commitment towards being environmentally responsible in every aspect of our business that will help us achieve our global ambition to be the world’s greenest brewer by 2020. We will get closer to this goal by continuously working to reduce our natural resource consumption and carbon emissions. We will focus on avoiding and reducing waste and pollution because we understand the key to sustainability begins with us.

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SUPPLY CHAIN HIGHLIGHTS

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ACTIONED THROUGH THE FOLLOWING KEY PILLARS

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Safety and compliance

Service and performance

Cost awareness & control OUR PRIORITIES ARE MAINTAINED, WHERE WE

In FY16, we achieved the following: • Maintained excellent levels of product quality against HEINEKEN Global Standards • Enhanced safety standards through the adoption of HEINEKEN Life Saving Rules (LSR) • Improved environmental performance with reductions in water, electricity and thermal consumptions, contributing to a reduction of CO2 emissions.

• IT processes that standardised our procurement systems with HEINEKEN Global

Supply Chain and Sustainability Sustainability is a key strategic pillar which helped us make a that best practices are applied across our operations. This enables business and our stakeholders.

Protecting Water Resources

Quality in everything

Ensure we have the right stock in the right place with the right quality

Mindset that can be improved

Drive down total cost per hectoliter

Enable flexible supply chain solutions through innovation

Water security is an increasing concern for our nation and people. Responsibility to safeguard it for the future. We made it a priority to use this shared resource responsibly. As a Company, we ensured that we reduce the use of water year-onyear through innovation and change of behaviours. Since 2014, we have reduced our water consumption by 15.5%.

our operational review

We wanted to uplift the performance of our Supply Chain operations by involving all our Supply Chain employees to drive engagement and involvement.

The theme is embedded throughout the entire process in maintaining our commitment to deliver great drinks consistently each and every time. Our team focused on operational excellence, productivity and consistency in product quality.

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MAKING A DIFFERENCE DELIVERING PERFORMANCE THROUGH OUR PEOPLE

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Annual Report 2017

CORPORATE RESPONSIBILITY HIGHLIGHTS

Onsed quid quam hiliqui te ratus adis quat vid ma velent, ipit volendu

Onsed quid quam hiliqui te ratus adis quat vid

Onsed quid quam hiliqui te

Asupply chain conference was held with in conjunction with the launch of ‘Making a Difference‘ with the participation of all supply chain employees at Cameron Highlands in April 2016.

HIGHLIGHTS

Proactive engagement with the government on industry issues

Reached out to 4 million people through various campaigns since 2010

Invested approximately RM4 million in our responsible consumption agenda since 2010

Engaged with over 40,000 Malaysians, 85 local businesses and communities as well as 215 educational institutions since 2007

Regulatory Stakeholder Engagement As a key player operating in a highly regulated environment, HEINEKEN Malaysia continues to engage closely with the Government, serving as a voice on the ground by providing sound and fair council to the relevant authorities and stakeholders. Below are some key highlights of our ongoing stakeholder engagements with the Government in 2016.

Heineken Malaysia Berhad

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Reached out to more than 7.9million consumers

DS Truism

Engaged more than 450,000 consumers

In FY16, we launched the DS Truism campaign in collaboration with Pestle & Mortar, a well known local bespoke t-shirt label. They designed a series of t-shirts for us with DS puns printed on them that were given away as part of a creative digital campaign to encourage the public to become DS advocates. From a social media perspective the campaign reached out to 1.7 million.

DS Festive - ‘The Gift of Safety‘

Partnered with 60 outlets to educate consumers

In the fourth quarter of 2016, to reinforce the ‘Don’t Drink and Drive’ message and to encourage party goers to stay safe during the year discounted rides to revelers in the Klang Valley for the month of December and into the New Year. Awareness for the campaign was built with creative Facebook ads with an estimated reach of 500,000 directly via our DS Facebook page.

Collaboration with Trade Outlets

Offered 3,000 discounted rides to revelers Close to RM4 million invested into Drink Sensibly to date

We continued our mission to educate consumers on responsible consumption by partnering with 60 outlets to embed DS messages in their restrooms. DS ‘Girl Tips’ and ‘Bro Tips’ were placed prominently behind cubicle doors and DS decals adorned mirrors to reinforce the message of moderation, responsibility and safety.

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We continued to drive Drink Sensibly (DS), one of our key Corporate Responsibility initiatives. The programme champions responsible choices through creative marketing campaigns to build a sensible drinking culture and make moderation a key part of life and enjoyment. We want consumers to enjoy our brands and strongly encourage responsible consumption.

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Advocating Responsible Consumption

our operational review

DRINK SENSIBLY 2014 - 2016 MILESTONES

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CORPORATE RESPONSIBILITY HIGHLIGHTS

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Annual Report 2017

World’s No. 1 International Premium Beer Brand

Global beer partner 1st time sponsor Overtook competitor’s top-of-mind recall

SHAPE YOUR CITY Limited Edition Heineken® bottles and cans

RENOWNED FOR ITS PROGRESSIVE AND INNOVATIVE PERSONALITY

Increased volume by 6.5% Reach of 2 million (2x vs target)

Built on core values of: Open Mindedness Cosmopolitan Inventiveness Wittiness

Heineken® is enjoyed in

192 10,000 fans nationwide Sold out shows in Penang, Johor and KL 24,000 bottles of Heineken enjoyed over 3 nights

COUNTRIES SINCE 1873

Heineken Malaysia Berhad

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This year, Heineken® took the grand stand at the iconic Formula 1®, with the 2016 Formula 1® Petronas Malaysia Grand Prix sponsorship. Fans and invited guests enjoyed the experience of the premier motorsport to the fullest from the comfort of Heineken’s Corporate Suite, with perfectly served Heineken Extra Cold. The Heineken Experience Team from Amsterdam, together with Malaysia’s own Heineken World’s Best Bartender 2016 showcased the brand’s trademark hospitality, while pouring perfect pints of Heineken® throughout the weekend.

Continuing their Cities series, Heineken® expanded the theme in 2016 to Shape Your City. The intent of the global campaign was to inspire city dwellers to express their creativity and show how simple actions can transform their urban landscape to make it more exciting for everyone. Local design shapers were brought together from all over Malaysia to collaborate and create a space that is designed to disrupt our social habits. Using the idea of the bar as a central collective hub, their challenge was to create an environment that would inspire conversations and forge new connections amongst Heineken® consumers. In Kuala Lumpur, consumers experienced a back alley converted into a bar at Plaza Batai whilst in Hin Bus Depot Art Centre Penang, a decommissioned barn structure and car park area was brought to life with bright and symphonic functional installations.

To accompany the Shape Your City campaign, Heineken® released a specially-designed, limited edition Cities series of Heineken® bottles and cans. Featuring the pulse of the city as the core of its design, each bottle represented one of six global cities - Amsterdam, Rio de Janeiro, Seoul, Madrid, Sydney and Kuala Lumpur - while the cans featured three global cities - Amsterdam, Rio de Janeiro and Kuala Lumpur.

Live Your Music Presents: The Takeover is designed to intensify and enrich the way our music fans experience and interact with music. It uses the collective passion for experiencing music as its foundation to craft shareable and memorable moments.

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Catering to well-heeled and widely-travelled consumers, Heineken® always pushes the bar with their signature events.

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HEINEKEN – PROGRESSIVE EXPERIENCES, SAME HIGH QUALITY SERVE THROUGH THE YEARS

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WORLD’S NO. 1 INTERNATIONAL PREMIUM BEER BRAND

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Annual Report 2017

World’ acclaimed asian lager DELIGHTING FANS With Its Refreshing and Full-Bodied Flavour Across More Than 70 Countries

Multiple AwardWinning Asian Lager with over 50 International Awards and Accolades to-date

MALAYSIA’S LEADING BEER BRAND

RM4 million PR value 30 million impressions online +5% Claimed Consumption +4% Brand Awareness +3% Brand Affinity

RM1.2 million PR value 12 million impressions online

770,000

reactions on social media

delighting fans since

1932

With Its Refreshing and Full-Bodied Flavour Across More Than 70 Countries

Heineken Malaysia Berhad

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growing brands

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uncaging the asian tiger

Roaring since 1932, Tiger is a champion of diversity, pride and courage of Asia today. Brewed in the heart of Asia and raised on the streets, it continues to bring together and connect diverse people, palettes and passion in food, music and creative culture.

FY16 was no different with a host of cutting-edge campaigns to uncage the Tiger within.

Tiger Jams Launched in 2016, this epic jam session brought emerging artists together in a mega celebration of music and arts. Through Tiger Jams, one budding Malaysian artist has been propelled to collaborate with well-known international artist Chvrches, at the end of the four-month long campaign. Tiger Jams Centrestage, an audio visual adventure, hosted during the campaign provided the perfect platform for upcoming talents in the region to channel the energy and dynamism of Asia’s streets onto stage. The campaign was a success, attracting 4,000 attendees, while clocking in RM4 million in PR value, 30 million impressions online. Claimed consumption jumped 5%, while brand awareness rose 4% with 3% brand affinity increase coming out from Tiger Jams.

Tiger STREATS The world’s first ‘street food meets fine dining’ culinary collaboration, Tiger STREATS was the perfect showcase of Tiger Beer’s power to connect people from different walks of life to share a meal over a street food table. The unique culinary mash-

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Annual Report 2017

portfolio brands DOUBLE REFRESHMENT Combines The Crisp And Easy-Drinking Taste Of Tiger Beer With The Zesty Flavour Of Natural Lemon Juice

Ale The Cream Of Irish Ales The No.1 Selling Ale In Malaysia The Red Velvety Ale That Is Savoured The World Over The Perfectly Crafted Pint With Irish Origins Dating Back To 1710; A Journey That Is Worth It

The No. 1 German Wheat Beer Brewed According To The Strictest And Oldest Regulations Of Brewing Set Out In ‘The German Purity Law’ – Only The Purest Water, Malted Wheat And Barley, Hops And Yeast Can Be Used In The Brewing Process One Of The Official Beers At The World- Famous Oktoberfest, Held In Munich Every Year

The Real Shandy An All-Time Chinese New Year Favourite Appeals To Drinkers Preferring A Lighter Option With Its Refreshing Buzz And Unique Blend Of Beer Mixed With Fizzy Lemonade At <0.5% Alcohol

A Nutritious Malt Drink Contains All The Goodness Of Malt, Including A High Concentration Of B Vitamins (B1, B3 And B6) The Preferred Non-Alcoholic Beverage

Heineken Malaysia Berhad

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growing brands

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innovation

Creating New Experiences

Everyone loves to try something new from brands they have a strong affinity with. Our line-up of innovative products grew in FY16 with four new line extensions, showcasing our flair with innovation and creativity that keeps close to our consumers’ feedback.

In tune with its brand character that constantly pushes boundaries of innovation, Tiger debuted a new variant, Tiger White, just two years after the launch of the European-styled Tiger Radler. A new breed of beer, the introduction of the wheat beer variant proves once again that Tiger does not rest on its laurels and constantly pushes the boundaries of innovation, to create fresh accessible and exciting brews for its consumers.

The new variant was introduced first in Malaysia, ahead of the global roll-out in FY16, underscoring Tiger’s market leadership in the country. Brewed locally, the all-new cloudy variant with an Alcohol by Volume of 5% and its subtle spicy hints of clove, coriander and orange peel, resonates with the market trend for wheat beer.

To prove the newly launched wheat beer’s philosophy – ‘It all starts with white’, hundreds of consumers were presented with a screening of ‘Coaster’, the world’s first short film made from beer coasters. The project screened on 19 December 2015 was led by local talents, director, Cho We Jun and screenwriter, Lim Benji who were also mentored by ‘Everest’ director, Baltasar Kormákur. Prior to the screening, up to 5,000 plain white coasters were distributed across the nation between October to November 2015, serving as a blank canvas for creative minds to contribute their ideas, illustrations and storyboard for the film.

In April 2016, Tiger White returned with a twist featuring an online contest which surprised consumers with an unexpected experience with prizes ranging from an all-you-can-eat fiesta prepared by your very own private chef to a dining in the dark session, a sensational movie night and even a luxurious overnight jungle retreat for the winner and a friend.

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INNOVATION The smooth taste of DRAUGHT BEER

REFRESHING LAGER with a smooth blend of aromatic hops

THE FIRST DRAUGHT BEER from Anchor in the world

NOW FRESH IN A BOTTLE A refreshing lager with a smooth blend of aromatic hops, brewed perfectly into each bottle of Anchor Smooth Draught Anchor Smooth Draught is a new Anchor variant introduced in FY16 that carries the characteristics of a draught beer. This new variant will compliment Anchor Smooth, the fastest growing brand within HEINEKEN Malaysiaâ&#x20AC;&#x2122;s portfolio of brands, last year boasting strong double digit growth.

MALAYSIA, THE FIRST COUNTRY in Asia to introduce this variant

Refreshing apple cider, SWEETNESS from the apples combined with REFRESHING bite of dark fruit, with subtle blackcurrant notes

Introduced a digital film with 500,000 VIEWS to date

The New Strongbow Apple Ciders Dark Fruit Strongbow Dark Fruit is a bright new addition to the Strongbow Apple Ciders range which comprises of Gold Apple, Elderflower and Honey variants. They were launched in FY15 to provide Strongbow fans with more choices to cater to their different taste palettes.

As a treat to our loyal Malaysian cider fans, they were the first in Asia to savour the new refreshing variant in FY16. Strongbow Dark Fruit is a refreshing apple cider, with a wonderful transparent burgundy colour, combined with the sweetness of apples, a refreshing bite of dark fruit and subtle blackcurrant notes at 4.5% alcohol content.

Heineken Malaysia Berhad

OUR NUMBERS 102 Financial Highlights 103 Analysis of Group Revenue Financial Statements 104 Directorsâ&#x20AC;&#x2122; Report 108 Statements of Financial Position 109 Statements of Profit or Loss and

Other Comprehensive Income 110 111 113 150

Statements of Changes in Equity Statements of Cash Flows Notes to the Financial Statements Statement by Directors and Statutory Declaration 151 Independent Auditorsâ&#x20AC;&#x2122; Report

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Annual Report 2017

directors’ report The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial period ended 31 December 2016.

PRINCIPAL ACTIVITIES The Company is principally engaged in the production, packaging, marketing and distribution of beverages, primarily alcoholic, whilst the principal activities of the subsidiaries are as stated in Note 5 to the financial statements. There has been no significant change in the nature of these activities during the financial period.

CHANGE OF NAME On 15 March 2016, the Board of Directors of the Company announced that the Company proposed to change its name from “Guinness Anchor Berhad” to “Heineken Malaysia Berhad” (“change of name”). The change of name is to reflect the corporate identity and branding of the Company and its relationship with the Heineken Group of Companies. The change of name was approved by the Company’s shareholders at the Extraordinary General Meeting on 20 April 2016. The change of name took effect from 21 April 2016, the date of the Certificate of Incorporation on Change of Name issued by the Companies Commission of Malaysia to the Company.

CHANGE OF FINANCIAL YEAR END On 25 November 2015, the Company announced that the Board of Directors approved the change of the Company’s financial year end from 30 June to 31 December. This is to coincide with the financial year of Heineken N.V., the ultimate holding corporation, and to comply with Section 168(1) of the Companies Act, 1965. The current audited financial statements of the Company are for a period of eighteen (18) months, made up from 1 July 2015 to 31 December 2016. Thereafter, the subsequent financial years of the Company shall end on 31 December. The change of financial year end shall apply to the Company and its subsidiaries.

RESULTS

Group Company RM’000 RM’000

Profit for the period attributable to: Owners of the Company

427,260

455,330

RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the financial period under review, except as disclosed in the financial statements.

DIVIDENDS Since the end of the previous financial year, the Company paid: i) a final ordinary dividend of 51 sen per 50 sen stock unit under the single tier tax system totalling RM154,069,980 in respect of the financial year ended 30 June 2015 on 31 December 2015; ii) an interim ordinary dividend of 20 sen per 50 sen stock unit under the single tier tax system totalling RM60,419,600 in respect of the financial period ended 31 December 2016 on 15 April 2016; iii) a special dividend of 30 sen per 50 sen stock unit under the single tier tax system totalling RM90,629,400 in respect of the financial period ended 31 December 2016 on 15 April 2016; and

Heineken Malaysia Berhad

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STATEMENTS OF FINANCIAL POSITION

192,717 33,310 14,344 512

Total non-current assets

287,176

279,903

247,135

240,883

Inventories 8 Current tax assets Receivables, deposits and prepayments 7 Cash and bank balances

61,892 12,551 447,977 4,045

49,049 15,138 296,269 52,294

30,210 11,636 131,607 3,995

22,755 8,760 43,999 51,157

Total current assets

526,465

412,750

177,448

126,671

Total assets

813,641

692,653

424,583

367,554

Equity Share capital 9 Retained earnings

151,049 241,506

151,049 225,099

151,049 106,372

151,049 61,895

Total equity attributable to owners of the Company

392,555

376,148

257,421

212,944

- 38,481

50,000 48,498

- 38,481

50,000 37,382

38,481

98,498

38,481

87,382

Borrowings 10 Trade and other payables 11 Current tax liabilities

74,000 292,279 16,326

25,000 193,007 -

74,000 54,681 -

25,000 42,228 -

Total current liabilities

382,605

218,007

128,681

67,228

Total liabilities

421,086

316,505

167,162

154,610

Total equity and liabilities

813,641

692,653

424,583

367,554

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Total non-current liabilities

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198,236 33,505 14,344 - 1,050

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219,581 33,317 - - 27,005

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221,687 33,509 - 10,371 21,609

Liabilities Borrowings Deferred tax liabilities

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our numbers

Assets Property, plant and equipment Intangible assets Investments in subsidiaries Deferred tax assets Other receivables and prepayments

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Group Company

Note 31.12.2016 30.6.2015 31.12.2016 30.6.2015 RM’000 RM’000 RM’000 RM’000

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AS AT 31 DECEMBER 2016

WWW.HEINEKENMALAYSIA.COM HEINEKEN MALAYSIA BERHAD (5350-X) (formerly known as Guinness Anchor Berhad) Sungei Way Brewery Lot 1135, Batu 9, Jalan Klang Lama 46000 Petaling Jaya Selangor Darul Ehsan, Malaysia TEL 603-7861 4688 FAX 603-7861 4602

WWW.HEINEKENMALAYSIA.COM