o M r O d i B u i l Annual Report 2007

Transcription

1 t n m u e m o M r O u B u i l d i n g Annual Report 2007

2 ... the mechanics of motion... Contents statutory reporting Corporate Information Performance Review Corporate Responsibility Corporate Governance Financial Statements Other Information 01 Corporate Profile 02 Group s Six Year Financial Highlights 04 Notice of Annual General Meeting 08 Financial Calendar 09 Corporate Information 10 Board of Directors 12 Profile of Directors 18 Management Team 20 Group Corporate Structure 22 Group Corporate Structure by Sector 26 Chairman s Statement 31 Group Managing Director s Review of Operations 33 - Automotive sector 38 - Services sector 41 - Property & Infrastructure 45 - Defense sector 50 Corporate Social Responsiblity 51 Human Resource 52 Caring for the Environment 53 Calendar of Events 60 Statement on Corporate Governance 67 Statement on Internal Control 69 Audit Committee Report 74 Additional Compliance Information 77 Statement of Director s Responsibility 78 Financial Statements 192 Share Movement Chart 193 Analysis of Shareholdings 196 Material Properties of DRB-HICOM Group Form of Proxy Our Vision To be Number 1 and continuously excel in all that we do. Our Mission To lead in the growth of the Nation in the areas of DRB-HICOM s Core Business. Our Shared Values Excellence Teamwork Integrity Innovation Transparency Designed with a wheel mounted to spin against the resistance of change in its orientation, the gyroscope s principle mechanism enables the device to maintain a consistent balance without loss of control in its continual rotation. The analogy demonstrate DRB-HICOM s consistent direction in building the momentum to evolve, remaining focused on harnessing its diversity of experience and expertise in seizing the potential of available resources, and forging the motion of new partnerships and global opportunities that awaits ahead. Cover Rationale

3 ... today, and everyday, in Building our Momentum Corporate Profile DRB-HICOM Berhad is one of Malaysia s leading companies listed on the Main Board of Bursa Malaysia Securities Berhad, playing an integral role in the nation s road to industrialisation. We are diversified yet focused, and have interests in key sectors of the economy mainly:- Automotive Services Property & Infrastructure Defence The Group s leadership within this sector is reflected through niche segmentation and continued strategic alliances with renowned global names such as General Motors, Honda, Suzuki, Isuzu, Kawasaki, Mahindra and TATA. We continuously develop new business potentials and seek new alliances to strengthen our base further. The rapidly growing servicebased industry represents new opportunities for DRB HICOM. Our interests amongst others include Information Technology (IT), solid waste management, financial services, vehicle inspection, cargo handling and leisure. DRB HICOM is extensively involved in retail, commercial and residential property development, and has made strong inroads in the construction sector. DRB Hicom currently provides a variety of defence related work to the Malaysian Armed Forces as well as pursuing other opportunities. DRB-HICOM will continue to look for opportunities that will benefit the Group and the country.

4 02 Group s Six Years Financial Highlights 2007 # RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Share Capital 1,007, , , , , ,483 Retained Earnings 537, , , , , ,887 Shareholders Equity 2,601,396 2,462,190 2,649,215 2,519,157 2,342,215 2,284,864 Minority Interests 737, , , , , ,053 Long Term and Deferred Liabilities 1,665,941 1,954,593 1,528,838 1,570,175 1,776, ,875 Current Assets 3,285,430 3,550,898 3,662,619 3,894,377 3,617,962 3,421,604 Current Liabilities 2,069,778 2,577,671 3,119,525 3,446,474 3,482,756 4,662,384 Net Current Assets/(Liabilities) 1,215, , , , ,206 (1,240,780) Property, Plant and Equipment/Investment Properties 2,243,997 2,069,053 2,392,425 2,451,156 2,644,313 2,691,844 Investments 2,535,399 2,659,409 2,453,050 2,204,705 2,038,373 2,008,411 Total Assets 8,232,218 8,544,283 8,628,345 8,652,375 8,459,356 8,280,727 Operating Revenue 2,905,421 3,522,835 4,506,595 4,500,255 4,898,043 4,329,289 Profit/(Loss) Before Taxation 187,131 (196,744) 276, , , ,108 Profit/(Loss) After Taxation 156,531 (146,574) 198, , , ,749 Net Profit/(Loss) Attributable to Equity Holders of the Company 95,073 (204,975) 141, , , ,112 Dividend Less Taxation 21,801 21,307 17,688 14,081 13,866 13,156 Net Assets Per Share (RM) Debt/Equity Ratio (Times) Return on Shareholders Equity (%) 3.7 (8.3) Earnings/(Loss) Per Share (sen) (Basic) 9.47 (20.72) # Certain figures have been restated to conform to the requirements of new/revised Financial Reporting Standards.

5 We build VALUE 03 Shareholders Equity Net Assets Per Share Basic Earnings/(Loss) Per Share (RM 000) (RM) (sen) ,284, ,342, ,519, ,649, ,462, ,601, (20.72) Operating Revenue Profit/(Loss) Before Taxation Total Assets (RM 000) (RM 000) (RM 000) ,329, ,898, ,500, ,506, ,522, ,905, , , , , (196,744) , ,280, ,459, ,652, ,628, ,544, ,232,291

6 04 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Seventeenth Annual General Meeting of DRB- HICOM Berhad ( the Company ) will be held at the Glenmarie Ballroom, Holiday Inn Glenmarie Kuala Lumpur, No. 1, Jalan Usahawan U1/8, Seksyen U1, Shah Alam, Selangor Darul Ehsan on Thursday, 20 September 2007 at a.m. for the following purposes:- ORDINARY BUSINESS 1. To receive and adopt the Audited Financial Statements for the financial year ended 31 March 2007 together with the Reports of Directors and Auditors thereon. Resolution 1 2. To approve the declaration of a final gross dividend of 2.5 sen per share less income tax of 27% for the financial year ended 31 March Resolution 2 3. To re-elect the following Directors who retire in accordance with t h e C o m p a n y s A r t i c l e s o f Association:- Under Article 80 (i) Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail Resolution 3 (ii) Datuk Haji Mohd Khamil bin Jamil Resolution 4 Under Article 86 (i) Tan Sri Marzuki bin Mohd Noor Resolution 5 (ii) Mohd Redza Shah bin Abdul Wahid Resolution 6 (iii) Dato Noorrizan binti Shafie Resolution 7 4. T o r e - a p p o i n t M e s s r s P r i c e w a t e r h o u s e C o o p e r s a s Auditors of the Company and to authorise the Directors to fix their remuneration. Resolution 8 SPECIAL BUSINESS 5. To consider and if thought fit, to pass the following Ordinary Resolution:- P r o p o s e d S h a r e h o l d e r s Mandate For Recurrent Related Party Transactions Of A Revenue Or Trading Nature ( RRPTs ) (Resolution 9) THAT pursuant to Paragraph of the Listing Requirements of Bursa Securities, the Proposed Mandate be and is hereby granted in respect of the existing and new RRPTs (all defined terms shall bear the meaning set out in the Circular to Shareholders of DRB-HICOM Berhad dated 29 August 2007, hereinafter referred to as the Circular ), namely to allow the recurrent related party transactions of a revenue or trading nature, which are necessary for the day-to-day operations of the DRB-HICOM Group, to be entered into by relevant companies in the DRB-HICOM Group in the ordinary course of business, at anytime during the Mandate Period, provided that such transactions are entered into at arm s length basis and on normal commercial terms which are not more favourable to the related parties than those generally available to the public, and are not to the detriment of the minority shareholders of the Company, the particulars of such RRPTs are set out in Section 2.2 of Part A of the Circular AND THAT the authority conferred by this resolution shall commence immediately upon the passing of this Ordinary Resolution and shall continue to be effective and in force until:- (a) (b) the conclusion of the next annual general meeting of the Company ( AGM ) (following the general meeting at which the Proposed Mandate is passed), at which time it shall lapse unless by an ordinary resolution passed at the Eighteenth AGM, the authority is renewed, either unconditionally or subject to conditions; the expiration of the period within which the Eighteenth AGM is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act, 1965); or

7 05 (c) revoked or varied by resolution passed by the shareholders of the Company in general meeting, whichever is earlier, AND THAT the Directors of the Company or any one of them be authorised to complete and do all such acts, deeds and things (including without limitation, to execute such documents as may be required to give effect to the RRPTs) in such manner as they may deem expedient or necessary in connection with this Ordinary Resolution. 6. To consider and if thought fit, to pass the following Special Resolution:- Proposed Amendments to the Articles of Association of the Company (Resolution 10) NOTICE OF DIVIDEND PAYMENT NOTICE IS HEREBY GIVEN that the final gross dividend of 2.5 sen per share less income tax of 27% in respect of the financial year ended 31 March 2007, if approved by the shareholders at the Annual General Meeting, will be paid on 18 October 2007 to the shareholders whose names appear in the Record of Depositors of the Company at the close of business on 25 September A depositor shall qualify for entitlement to the dividend only in respect of:- (a) (b) (c) Shares deposited into the depositor s securities account before p.m. on 21 September 2007 in respect of shares exempted from mandatory deposit; Shares transferred into the depositor s securities account before 4.00 p.m. on 25 September 2007 in respect of transfers; and Shares bought on Bursa Malaysia Securities Berhad on a cum-entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. By Order of the Board CHAN CHOY LIN (MIA 3930) Company Secretary Shah Alam, Selangor Darul Ehsan 29 August 2007 THAT the Proposed Amendments to the Articles of Association of the Company as set out in Part B, Appendix I of the Circular to Shareholders dated 29 August 2007, be and are hereby approved.

8 06 Notice of Annual General Meeting NOTES:- 1. Proxy (a) A member entitled to attend the meeting may appoint a proxy or proxies who may but need not be a member of the Company. (b) The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised in writing. (c) The instrument appointing a proxy together with the power of attorney or other authority, if any, under which it is signed or a certified copy thereof, shall be deposited at the Share Registrar s Office, Symphony Share Registrars Sdn Bhd, Level 26, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, Kuala Lumpur not less than forty-eight (48) hours before the time set for holding this meeting. 2. Explanatory notes on special business:- (a) Proposed Shareholders Mandate For Recurrent Related Party Transactions ( RRPTs ) (Resolution 9) The Proposed Resolution 9, if passed, will enable the Company and/or its subsidiaries to enter into Recurrent Related Party Transactions of a revenue or trading nature which are necessary for the Group s day-to-day operations. This authority unless revoked or varied at a general meeting will expire at the next Annual General Meeting. (b) Proposed Amendments to Articles of Association of the Company (Resolution 10) The Proposed Resolution 10, if passed, will update the Articles of Association of the Company to be consistent with the current provisions of the Listing Requirements of Bursa Malaysia Securities Berhad and to provide clarity to the provisions of certain existing Articles as well as to reflect the current market practice. Further information on the Proposed Shareholders Mandate and Proposed Amendments to the Articles of Association are set out in the Circular to Shareholders dated 29 August 2007 accompanying the Company s.

9 Corporate Information 08 Financial Calendar 09 Corporate Information 10 Board of Directors 12 Profile of Directors 18 Management Team 20 Group Corporate Structure 22 Group Corporate Structure by Sector

10 08 Financial Calendar FINANCIAL YEAR END 31 MARCH 2007 ANNOUNCEMENT OF RESULTS First Quarter 29 August 2006 Second Quarter 28 November 2006 Third Quarter 23 February 2007 Fourth Quarter 30 May 2007 PUBLISHED ANNUAL REPORT AND FINANCIAL STATEMENTS 29 August 2007 ANNUAL GENERAL MEETING 20 September 2007 DIVIDENDS Interim Final Announcement Date 23 February May 2007 Entitlement Date 14 March September 2007 Payment Date 13 April October 2007

11 Corporate Information as at 24 July Directors Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail Chairman/Senior Independent Non-Executive Director Datuk Haji Mohd Khamil bin Jamil Group Managing Director AUDIT COMMITTEE Chairman Datuk Haji Abdul Rahman bin Mohd Ramli Members Dato Syed Mohamad bin Syed Murtaza Dato Noorrizan binti Shafie Ong Ie Cheong REGISTRAR Symphony Share Registrars Sdn Bhd Level 26, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur Tel : (03) Fax : (03) /31 Mohd Redza Shah bin Abdul Wahid Executive Director/Group Chief Operating Officer Tan Sri Ab. Rahman bin Omar Non-Independent Executive Director/ Executive Advisor-Automotive Dato Noorrizan binti Shafie Non-Independent Non-Executive Director Ibrahim bin Taib Non-Independent Non-Executive Director Datuk Haji Abdul Rahman bin Mohd Ramli Independent Non-Executive Director Dato Syed Mohamad bin Syed Murtaza Independent Non-Executive Director Ong Ie Cheong Independent Non-Executive Director Tan Sri Marzuki bin Mohd Noor Independent Non-Executive Director REMUNERATION COMMITTEE Chairman Dato Syed Mohamad bin Syed Murtaza Members Datuk Haji Abdul Rahman bin Mohd Ramli Ong Ie Cheong Datuk Haji Mohd Khamil bin Jamil (ex-officio) NOMINATION COMMITTEE Chairman Y. A. M. Tan Sri Dato Seri Syed Anwar Jamalullail Members Datuk Haji Abdul Rahman bin Mohd Ramli Ibrahim bin Taib SECRETARY Chan Choy Lin (MIA 3930) REGISTERED OFFICE Level 5, Wisma DRB-HICOM No. 2, Jalan Usahawan U1/8 Seksyen U1, Shah Alam Selangor Darul Ehsan Tel : (03) Fax : (03) AUDITORS PricewaterhouseCoopers Chartered Accountants 11 th Floor, Wisma Sime Darby Jalan Raja Laut Kuala Lumpur Tel : (03) Fax : (03) BANKS Affin Bank Berhad AmBank Berhad CIMB Bank Berhad Malayan Banking Berhad RHB Bank Berhad PRINCIPAL SOLICITORS Hisham Sobri & Kadir Shahrizat Rashid & Lee STOCK EXCHANGE LISTING Main Board of Bursa Malaysia Securities Berhad (Listed since 4 September 1992) Stock Code : 1619

12 10 Board of Directors Mohd Redza Shah bin ABdul wahid Executive Director/ Group Chief Operating Officer Datuk Haji Mohd Khamil bin Jamil Group Managing Director Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail Chairman / Senior Independent Non-Executive Director tan sri ab. rahman bin omar Non-Independant Executive Director/ Executive Advisor-Automotive

13 We build teamwork 11 Ibrahim bin Taib Non-Independent Non-Executive Director Dato Syed Mohamad bin Syed Murtaza Independent Non-Executive Director Dato Noorrizan binti Shafie Non-Independent Non-Executive Director Ong Ie Cheong Independent Non-Executive Director datuk haji abdul rahman bin mohd ramli Independent Non-Executive Director Tan Sri Marzuki BIN Mohd noor Independent Non-Executive Director

14 12 Profile of Directors Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail Chairman/Senior Independent Non-Executive Director Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail, a Malaysian, aged 55, was appointed Chairman when he joined the Board on 28 October He is also Chairman of the Nomination Committee. He is a Chartered Accountant and Certified Practising Accountant. He holds a Bachelor of Arts (Accounting) Degree from Macquarie University, Sydney, Australia. Tan Sri Dato Seri Syed Anwar started his career as a financial accountant with Malaysia Airlines System Berhad in 1975, then joined Price Waterhouse (Australia) as Senior Auditor in years later he joined D & C Nomura Merchant Bank Berhad as Manager, Investment. In 1985, he joined Amanah Merchant Bank Berhad as Manager, Corporate Finance. After pursuing his own business from 1989 to October 1998, he joined Amanah Capital Partners Berhad as Group Managing Director, resigning on 1 March He served as the Chairman of Malaysian Resources Corporation Berhad and Media Prima Berhad until his resignation on 12 January 2005 and 12 March 2005 respectively. Tan Sri Dato Seri Syed Anwar is also the Chairman of EON Capital Berhad, HICOM Holdings Berhad, HICOM Berhad and Cahya Mata Sarawak Berhad, and also sits on the boards of Nestle (Malaysia) Berhad, Maxis Communication Berhad and several private limited companies. He is Chairman of the Investment Panel of Lembaga Tabung Haji. Tan Sri Dato Seri Syed Anwar does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Tan Sri Dato Seri Syed Anwar attended all eight Board Meetings of the Company held in the financial year ended 31 March 2007.

15 13 Datuk Haji Mohd Khamil bin Jamil Group Managing Director Y.Bhg. Datuk Haji Mohd Khamil bin Jamil, a Malaysian, aged 51, was appointed to the Board on 19 July 2005 and became Group Managing Director on 1 March He is also a member of the Remuneration Committee (ex-officio). He holds a Bachelor of Laws (Honours) Degree from the University of London and is a Barrister-at- Law at Gray s Inn, England and was called to the English Bar in Datuk Haji Mohd Khamil had his first executive career with Bank Bumiputra Malaysia Berhad (BBMB) from August 1980 until December He was called to the Malaysian Bar in September 1990 and was a practicing partner of several legal firms before venturing into business in Datuk Haji Mohd Khamil is a Director and has a 10% shareholding in Etika Strategi Sdn Bhd, a substantial shareholder of the Company. Datuk Haji Mohd Khamil does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Datuk Haji Mohd Khamil attended seven out of eight Board Meetings of the Company held in the financial year ended 31 March Datuk Haji Mohd Khamil also sits on the boards of Edaran Otomobil Nasional Berhad, HICOM Holdings Berhad, HICOM Berhad, Horsedale Development Berhad and several private limited companies.

16 14 Mohd Redza Shah bin Abdul Wahid Executive Director/Group Chief Operating Officer Profile of Directors Mohd Redza Shah bin Abdul Wahid, a Malaysian, aged 44, was appointed as Executive Director on 28 November He has been the Group Chief Operating Officer since 1 March He holds a Bachelor of Science in Economics in Industry and Trade (Honours) from London School of Economics, University of London. He also holds a Master of Science of Economics in International Banking and Finance from University of Wales, Cardiff. He is an Associate Chartered Accountant (ACA) and member of the Institute of Chartered Accountants in England and Wales (ICAEW). Prior to joining DRB-HICOM, he was the Group Chief Executive Officer of Tradewinds Corporation Berhad from 2002 to November 2005 and Acting Chief Executive Officer of Tradewinds (M) Berhad from 2004 to He has also served several other companies such as Silterra Malaysia Sdn Bhd, Khazanah Nasional Berhad, Arab Malaysia Corporation Berhad and Touche Ross & Co., London. Mohd Redza also sits on the boards of Edaran Otomobil Nasional Berhad, HICOM Holdings Berhad, Horsedale Development Berhad and several private limited companies. He does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Mohd Redza attended all three Board Meetings of the Company held in the financial year ended 31 March 2007 following his appointment to the Board on 28 November Tan Sri Ab. Rahman bin Omar Non-Independent Executive Director/ Executive Advisor-Automotive Y.Bhg. Tan Sri Ab. Rahman bin Omar, a Malaysian, aged 60, was appointed as Executive Director on 16 December He is also Executive Advisor to the Automotive Division. He holds a Bachelor of Economics (Honours) Degree from the University of Malaya, Malaysia. From 1970 to 1973, Tan Sri Ab. Rahman served in the Administration & Diplomatic Service of the various Government Departments i.e. the Statistics Department, the Ministry of Commerce & Industry and the Ministry of Primary Industry before opting out of civil service. He was with Pineapple Cannery Malaysia Sdn Bhd from December 1973 to April 1980, and with Perusahaan Sadur Timah Malaysia Berhad from May 1980 to July He was Managing Director of Perusahaan Otomobil Kedua Sdn Bhd from 1996 to April Tan Sri Ab. Rahman is the Chairman of Edaran Otomobil Nasional Berhad, Perusahaan Sadur Timah Malaysia Berhad and Chemical Company of Malaysia Berhad, and also sits on the boards of Wah Seong Corporation Berhad, HICOM Holdings Berhad, Horsedale Development Berhad and several private limited companies. Tan Sri Ab. Rahman does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Tan Sri Ab. Rahman attended all eight Board Meetings of the Company held in the financial year ended 31 March 2007.

17 Y.Bhg. Dato Noorrizan binti Shafie, a Malaysian, aged 51, was appointed to the Board on 28 November She is a member of the Audit Committee. She holds a Bachelor of Economics (Honours) Degree and Master of Business Administration from the National University of Malaysia (UKM). Dato Noorrizan is currently the Under Secretary, Monitoring and Control Division, Treasury, Ministry of Finance. She started her career in the Civil Service in 1981 and has served in various positions with Economic Planning Unit, Prime Minister s Department, Public Services Department and Ministry of Finance. Dato Noorrizan also sits on the board of HICOM Holdings Berhad. Dato Noorrizan is a Non-Executive Director nominated by the Ministry of Finance representing Khazanah Nasional Berhad, a substantial shareholder of the Company. She does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. She has had no convictions for offences within the past ten years. Dato Noorrizan attended two out of three Board Meetings of the Company held in the financial year ended 31 March 2007 following her appointment to the Board on 28 November We build CHARACTER 15 Dato Noorrizan binti Shafie Non-Independent Non-Executive Director Encik Ibrahim bin Taib, a Malaysian, aged 52, was appointed to the Board on 18 March He is a member of the Nomination Committee. He holds a Bachelor of Laws (Honours) Degree from the University of Malaya, Malaysia and a Master of Laws (LLM) from University of London. Ibrahim started his career in Judicial Legal Service in 1978 as a Magistrate in the Magistrate Court, Jalan Duta, Kuala Lumpur. Thereafter, he was transferred to Magistrate Court, Segamat. In 1982, he was a Legal Advisor with the Road Transport Department. Later in 1986, he was posted to the Ministry of Human Resources as a Legal Advisor. In October 1989, he was attached to the Attorney-General Chambers as a Deputy Public Prosecutor for Selangor. In 1992, he served as a Judge in the Session Court, Kota Bharu. In July 1992, he was posted to Employees Provident Fund Board and currently holds the position of Deputy Chief Executive Officer. Ibrahim also sits on the boards of Bandar Eco- Setia Sdn Bhd, Hartanah Progresif Sdn Bhd and Kumpulan Wang Amanah Pencen. Ibrahim is a Non-Executive Director nominated by the Company s substantial shareholder, the Employees Provident Fund Board. He does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Ibrahim attended all eight Board Meetings of the Company held in the financial year ended 31 March Ibrahim bin Taib Non-Independent Non-Executive Director

18 16 Datuk Haji Abdul Rahman bin Mohd Ramli Independent Non-Executive Director Profile of Directors Y.Bhg. Datuk Haji Abdul Rahman bin Mohd Ramli, a Malaysian, aged 68, was appointed to the Board on 28 October He is Chairman of the Audit Committee and member of the Remuneration and Nomination Committees. He is a member of the Institute of Chartered Accountants in Australia (ACA), the Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of Accountants (MIA). Datuk Haji Abdul Rahman was General Manager of United Asian Bank Berhad, Group Managing Director of Pernas Sime Darby Sdn Bhd, Group Chief Executive of Golden Hope Plantations Berhad and Chairman of Johore Tenggara Oil Palm Berhad prior to joining the DRB-HICOM Board. Datuk Haji Abdul Rahman is the Chairman of Horsedale Development Berhad and Kenyir Splendour Berhad, and also sits on the boards of Malayan Banking Berhad, Maybank International (L) Ltd., Maybank International Trust (Labuan) Berhad, Maybank (PNG) Ltd, Kuala Lumpur Kepong Berhad, Malaysia Nasional Insurance Berhad and Takaful Nasional Sdn Bhd. Datuk Haji Abdul Rahman does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Datuk Haji Abdul Rahman attended seven out of eight Board Meetings of the Company held in the financial year ended 31 March Dato Syed Mohamad bin Syed Murtaza Independent Non-Executive Director Y.Bhg. Dato Syed Mohamad bin Syed Murtaza, a Malaysian, aged 59, was appointed to the Board on 28 October He is also Chairman of the Remuneration Committee and a member of the Audit Committee. Dato Syed Mohamad has over 35 years of vast experience in business industries. He completed his high school certificate at Penang Free School. He then joined Kah Motors and has since been appointed to key positions in various organisations. He has gained wide experience whilst holding various positions in companies such as Shell Malaysia, Penang Port Commission, etc. Currently, Dato Syed Mohamad is the Managing Director of Amstrong Auto Parts Sdn Bhd and Amstrong Cycle Parts (Sdn) Berhad. He also heads Penang Tourists Centre Bhd, MITTAS Bhd, Motorcycle, Scooter Assembly & Distributor Association of Malaysia and Usains Group of Companies. He is the president of The Federation of Asian Motorcycle Industries and Steering Committee International Motorcycle Manufacturers Association. Dato Syed Mohamad is the Chairman of Hunza Consolidation Berhad and sits on the boards of Universiti Sains Malaysia, Yayasan Bumiputra Pulau Pinang Bhd, Boon Siew Credit Bhd, Tourism Entrepreneur Centre Bhd and several private limited companies. In addition, he has held many other appointments at state and national levels. Dato Syed Mohamad does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Dato Syed Mohamad attended all eight Board Meetings of the Company held in the financial year ended 31 March 2007.

19 Mr Ong Ie Cheong, a Malaysian, aged 66, was appointed to the Board on 28 October He is also a member of the Audit and Remuneration Committees. He holds a Bachelor of Science Degree from the University of Malaya, Malaysia. Mr Ong was the Executive Chairman of PPB Group Bhd, Managing Director of Central Sugars Refinery Sdn Bhd and a Board member of PPB Oil Palms Berhad and Tradewinds (M) Berhad. He also sits on the board of HICOM Holdings Berhad, HICOM Berhad and several private limited companies. Mr Ong does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Ong Ie Cheong attended seven out of eight Board Meetings of the Company held in the financial year ended 31 March Y. Bhg. Tan Sri Marzuki bin Mohd Noor, a Malaysian, aged 59, was appointed to the Board on 28 November He holds a B.A. (Honours) from the University of Malaya, Malaysia. He commenced his career in the Administrative and Diplomatic Service of Malaysia in 1972 and retired from the service in August From 1972 to 1988, he has served as Second/First Secretary to the Embassy of Malaysia in Rome, Baghdad in Iraq, Assistant High Commissioner in Chennai, India, Commissioner in Hong Kong and later as Minister-Counsellor/Minister in Brussels, Belgium in In 1990, Tan Sri Marzuki was appointed as Deputy Director General ASEAN I, Ministry of Foreign Affairs Malaysia and later in 1992 as Ambassador of Malaysia to Argentina with concurrent accreditation to Paraguay and Uruguay. In 1996 he was appointed as High Commissioner of Malaysia to India (concurrently accredited as Ambassador to Nepal). He was also the Ambassador of Malaysia to Japan from 1999 to July 2006 before his retirement. Tan Sri Marzuki also sits on the board of Horsedale Development Berhad and several private limited companies. Tan Sri Marzuki does not have any family relationship with any other Director and/or major shareholder of the Company and has no conflict of interest with the Company. He has had no convictions for offences within the past ten years. Tan Sri Marzuki attended all three Board Meetings of the Company held in the financial year ended 31 March 2007 following his appointment to the Board on 28 November Ong Ie Cheong Independent Non-Executive Director Tan Sri Marzuki bin Mohd Noor Independent Non-Executive Director

20 1 Datuk Haji Mohd Khamil bin Jamil Group Managing Director 18 Management Team 2 Tan Sri Ab. Rahman bin Omar Executive Advisor, Automotive 3 Datuk Abu Samah bin Bachik Advisor, Services Companies 4 Abdul Malek bin Abdul Majid Group Director, Human Resource & Administration 5 Datuk William Chong Wei Yoon Group Director, Assigned Business 6 Mohd Paudzi bin Abdullah Head, Automotive Component & Engineering 7 Nik Hamdam bin Nik Hassan Head, Automotive Distribution 8 Benedict Ho Kok Keong Head, Business Development

21 9 mohd Redza Shah bin Abdul Wahid Group Chief Operating Officer 10 Nik Najihah binti Nik Wan Acting Head, Legal Affairs 11 Chan Choy Lin, Carol Principal Company Secretary 12 raja Shahrul Azman bin Raja Omar Head, Public Affairs & Investor Relations 13 Amir bin Salleh Group Director, Property 14 Lim Teck Gam Head, Group Procurement 15 Mohammed Shukor bin Ismail Acting Head, Internal Audit - EIP 16 Dato Ir. Zahri bin Abd Ghani Head, Infrastructure & Contract 17 Khalid bin Abdol Rahman Head, Corporate Planning We build performance

22 20 Group Corporate Structure (Operating Companies) as at 31 March 2007 Pusat Pemeriksaan Kenderaan Berkomputer Sdn. Bhd. E.I. : 100% Motosikal Dan Enjin Nasional Sdn. Bhd. E.I. : 55% Malaysian Truck & Bus Sdn. Bhd. E.I. : 80% DRB-HICOM Information Technologies Sdn. Bhd. E.I. : 90% DRB-HICOM Auto Solutions Sdn. Bhd. E.I. 100% Gadek (Malaysia) Berhad E.I. 100% Puspakom Teknik Sdn. Bhd. E.I. : 100% Flora Areana Sdn. Bhd. Equity : 100% Multi Automotive Service and Assist Sdn. Bhd. Equity : 55% Edaran Modenas Sdn. Bhd. E.I. : 55% Uni.Asia Capital Sdn. Bhd. E.I. : 51% Uni.Asia Life Assurance Berhad E.I. : 51% Uni.Asia General Insurance Berhad E.I. : 34.73% Mega Consolidated Sdn. Bhd. E.I. 100% HICOM Holdings Berhad E.I. 100% Ladang Gadek Development Sdn. Bhd. E.I. : 100% Ladang Kupang Development Sdn. Bhd. E.I. : 100% HICOM Diecastings Sdn. Bhd. E.I. : 100% HICOM Engineering Sdn. Bhd. E.I. : 100% Desa Puchong Sdn. Bhd. E.I. : 100% HICOM Network Services Sdn. Bhd. E.I. : 100% NSE Development Sdn. Bhd. E.I. : 100% Bukit Kledek Development Sdn. Bhd. E.I. : 100% Proton City Development Corporation Sdn. Bhd. E.I. : 60% Alam Flora Sdn. Bhd. E.I. : 55% PHN Industry Sdn. Bhd. E.I. : 53.47% Scott & English Electronics Holdings Sdn. Bhd. E.I. : 70% HICOM Communications Sdn. Bhd. E.I. : 100% HICOM Teck-See Manufacturing Malaysia Sdn. Bhd. E.I. : 51% KL Airport Services Sdn. Bhd. E.I. : 60% Oriental Summit Industries Sdn. Bhd. E.I. : 70% Scott & English Electronics Sdn. Bhd. E.I. : 70% HICOM Teleservices Sdn. Bhd. E.I. : 100% HICOM Automotive Plastic (Thailand) Ltd. E.I. : 50.99% KLAS Engineering Services Sdn. Bhd. E.I. : 60% Automotive Components Engineering Centre Sdn. Bhd. E.I. : 70% Edaran Otomobil Nasional Berhad E.I. : 29.31% EON Capital Berhad E.I. : 20.20% HICOM-HONDA Manufacturing Malaysia Sdn. Bhd. E.I. : 48% HICOM-YAMAHA Manufacturing Malaysia Sdn. Bhd. E.I. : 45% SUZUKI Motorcycle Malaysia Sdn Bhd E.I. : 29% Siemens VDO Instruments MY Sdn. Bhd. E.I. : 33.33% ZF Steerings (Malaysia) Sdn. Bhd. E.I. : 30% TRW Steering & Suspension (Malaysia) Sdn. Bhd. E.I. : 20% Niro Ceramic (M) Sdn. Bhd. E.I. : 24.50% Navi & Map Sdn. Bhd. E.I. : 20%

23 We build foundations 21 Suzuki Malaysia Automobile Sdn. Bhd. E.I. : 100% Hicomobil Sdn. Bhd. E.I. : 100% Honda Malaysia Sdn. Bhd. E.I. : 34% Isuzu Malaysia Sdn. Bhd. E.I. : 49% Imatex Sdn. Bhd. E.I. : 100% DRB-HICOM Defence Technologies Sdn. Bhd. E.I. : 100% Imatex Management Services Sdn. Bhd. E.I. : 100% Defence Services Sdn. Bhd. E.I. : 100% USF-HICOM (Malaysia) Sdn. Bhd. E.I. : 100% Automotive Corporation (Malaysia) Sdn. Bhd. E.I. : 100% Scott & English (Malaysia) Sdn. Bhd. E.I. : 70% Comtrac Sdn. Bhd. E.I. : 70% HICOM Berhad E.I. : 100% Directional (Malaysia) Sdn. Bhd. E.I. : 100% Auto Prominence (M) Sdn. Bhd. E.I. : 100% Automotive Manufacturers (Malaysia) Sdn. Bhd. E.I. : 93% HICOM United Leasing Sdn. Bhd. E.I. : 70% Scott & English (Cambodia) Ltd. E.I. : 70% Myanmar Scott & English Company Ltd. E.I. : 70% Scott & English Trading (Sarawak) Sdn. Bhd. E.I. : 35.70% Comtrac Trading Sdn. Bhd. E.I. : 70% Comtrac Builders Sdn. Bhd. E.I. : 67.90% Comtrac Glenview Sdn. Bhd. E.I. : 35.70% Glenmarie Cove Development Sdn. Bhd. E.I. : 89.50% HICOM Megah Sdn. Bhd. E.I. : 74.63% Corwin Holding Pte. Ltd. E.I. : 67.17% HICOM Properties Sdn. Bhd. E.I. : 100% Kenyir Splendour Berhad E.I. : 100% HICOM Facility Management Berhad E.I. : 100% HICOM Indungan Sdn. Bhd. E.I. : 100% Horsedale Development Berhad E.I. : 70.60% HICOM-Gamuda Development Sdn. Bhd. E.I. : 35.30% Sectorial Automotive Services Rebak Island Marina Berhad E.I. : 60% Property & Construction Investment Holding Note E.I. DRB - HICOM Group s Effective Interest

24 22 Group Corporate Structure by Sector as at 31 March 2007 automotive % HICOM Diecastings Sdn. Bhd % USF-HICOM (Malaysia) Sdn. Bhd % Automotive Corporation (Malaysia) Sdn. Bhd % Directional (Malaysia) Sdn. Bhd % HICOM Engineering Sdn. Bhd % DRB-HICOM Auto Solutions Sdn. Bhd % HICOMOBIL Sdn. Bhd % Suzuki Malaysia Automobile Sdn. Bhd % Automotive Manufacturers (Malaysia) Sdn. Bhd % Malaysian Truck & Bus Sdn. Bhd % Oriental Summit Industries Sdn. Bhd % Automotive Components Engineering Centre Sdn. Bhd % Motosikal Dan Enjin Nasional Sdn. Bhd % Edaran Modenas Sdn. Bhd % PHN Industry Sdn. Bhd % HICOM-Teck See Manufacturing Malaysia Sdn. Bhd % HICOM Automotive Plastic (Thailand) Ltd % Isuzu Malaysia Sdn. Bhd % HICOM-HONDA Manufacturing Malaysia Sdn. Bhd % HICOM-YAMAHA Manufacturing Malaysia Sdn. Bhd % Honda Malaysia Sdn. Bhd % Siemens VDO Instruments MY Sdn. Bhd % ZF Steerings (Malaysia) Sdn. Bhd % Edaran Otomobil Nasional Bhd % Suzuki Motorcycle Malaysia Sdn. Bhd % TRW Steering and Suspension (Malaysia) Sdn. Bhd % Navi & Map Sdn. Bhd. services % Pusat Pemeriksaan Kenderaan Berkomputer Sdn. Bhd % HICOM Communications Sdn. Bhd % HICOM Teleservices Sdn. Bhd % HICOM Network Services Sdn. Bhd % DRB-HICOM Information Technologies Sdn. Bhd % Scott & English (Malaysia) Sdn. Bhd % Scott & English Electronics Sdn. Bhd % KL Airport Services Sdn. Bhd % Alam Flora Sdn. Bhd % Uni.Asia Life Assurance Berhad 34.73% Uni.Asia General Insurance Berhad 20.20% EON Capital Berhad

25 23 Property & Infrastructure % Imatex Sdn. Bhd % HICOM Berhad % HICOM Properties Sdn. Bhd % HICOM Indungan Sdn. Bhd % Kenyir Splendour Berhad % Bukit Kledek Development Sdn. Bhd % NSE Development Sdn. Bhd % Ladang Kupang Development Sdn. Bhd % Ladang Gadek Development Sdn. Bhd % Desa Puchong Sdn. Bhd % Glenmarie Cove Development Sdn. Bhd % HICOM Megah Sdn. Bhd % Horsedale Development Berhad 70.00% Comtrac Sdn. Bhd % Proton City Development Corporation Sdn. Bhd % Rebak Island Marina Berhad 35.30% HICOM-Gamuda Development Sdn. Bhd % Niro Ceramic (M) Sdn. Bhd. Defence % DRB-HICOM Defence Technologies Sdn. Bhd % Defence Services Sdn. Bhd. Subsidiary Companies Jointly Controlled Entities Associated Companies

26 Performance Review 39 % 43 %

27 25 13 % 5 % 26 Chairman s Statement 31 Group Managing Director s Review of Operations 33 Automotive Sector 38 Services Sector 41 Property & Infrastructure 45 Defence Sector

28 26 Chairman s Statement We build the FUTURE The future will bring a whole new driving experience. Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail Chairman

29 27 Dear Shareholders, It is my privilege to present, on behalf of the Board of Directors, the Annual Report of DRB-HICOM Berhad for the financial year ended 31 March The year under review has seen the Group facing and overcoming many challenges prevalent throughout the year, and I am confident of the Group s prospects in the coming financial year. Overview The Group has moved swiftly to capitalise on opportunities offered and to improve operating efficiency, including through the continued application of cost reduction measures. The Group is pro-actively finding solutions to the challenges posed by globalisation and is pursuing avenues and opportunities to enhance its business platform by focusing on good prospects within our core business sectors. In overcoming the challenges the Group faced during the year, we successfully engaged our strategic foreign partners, by allowing these principals to become the majority shareholders in some of our former subsidiary companies. This was done to ensure the long term participation and commitment of the principals and to assist the companies to compete in the market by leveraging our partner s experience in the global market. Ladies and gentlemen, There was a significant downturn in the automotive industry in Total Industry Volume of vehicle sales fell by 10.9 percent in 2006 as compared to 2005, from 551,042 units to 490,768 units. The non-national car segment, in which the Group is involved experienced a drop of 16.8 percent from the previous year, while the national car segment contracted by 10.2 percent. This was caused by the slower second hand car market, tighter credit controls by financial institutions and much lower trade in value for cars when consumers sought to buy new cars. The challenging environment that characterised the automotive industry in the year under review subsequent to the introduction of the National Automotive Policy (NAP) was a motivating factor for the Group s automotive sector. To seize the opportunities offered by the NAP, DRB- HICOM has begun to place more emphasis on assembling Completely-Knocked-Down (CKD) versions for the various vehicle makes and models in our stable. February 2007 saw the launch of the robotic arm assembly line for the Suzuki Swift CKD at the Automotive Manufacturers Malaysia plant in Pekan, and we look forward to assembling other CKD models at our facilities there. We are aggressively pursuing vehicle assembly deals for our Group companies and have been successful in streamlining our product line by placing more importance on our better selling models. In addition, the Group has been diligently pursuing opportunities to penetrate the global auto components market, and has achieved a degree of success with component orders received from other parts of Asia as well as Europe and North America. The Group will build on these successes to make the DRB-HICOM Group a recognised player in the worldwide auto components market. The Group s automotive division remained our largest revenue generator, bringing in more than RM1.277 billion in revenue and accounting for 44% of the Group s total revenue.

30 28 Chairman s Statement The Group s Services sector turned in a strong performance. The Group s subsidiary companies PUSPAKOM and KLAS secured long term concession agreements with the government and with Malaysian Airports Berhad respectively. This will assist in ensuring the continued contribution of the companies to the Group s revenue into the foreseeable future. The future for Alam Flora Sdn Bhd is also looking bright, as the newly approved Solid Waste Management Bill clears the way for the signing of a concession agreement with the Federal Government. Our financial services sector, represented by EON Capital Berhad and the Uni.Asia Group also improved the Group s profitability. The Sector accounted for 42.7% of the Group s total revenue for the financial year under review. D R B - H I C O M s P r o p e r t y & Infrastructure sector performed admirably during the financial year under review. The Group s premier property developments such as Glenmarie Cove are actively marketed to foreigners as part of the Malaysia My Second Home programme and these properties continue to receive warm interest from our overseas neighbours. Glenmarie Residences, a premier luxury development featuring exclusive living and excellent facilities was fully sold out within a very short time. With tourism development being one of the key thrusts of the Ninth Malaysia Plan, the Group will continue to promote its resort properties such as the Taj Rebak Island Resort and Lake Kenyir Resort & Spa as a destination of choice for both domestic and overseas tourism, especially eco-tourism. DEFTECH maintained its position as the country s leading supplier of land based defence vehicles and produced the first Made-in-Malaysia armoured vehicle, the AV4. The company is marketing the AV4 to selected markets overseas. DEFTECH also expanded into the civilian transport sector and successfully completed orders for several hundred buses for Rapid KL and other public transport companies. The Group is optimistic that more orders will be forthcoming as improving urban transportation under the Ninth Malaysia Plan calls for an increase in the number of buses available to the public. The Group has largely been able to cope with the changes and challenges imposed by the shifting landscape of the nation s auto industry due to our strength and diverse business interests. These have allowed us to utilise the existing synergy within the Group to withstand the adjustment in the auto industry and emerge stronger and more competitive than before. Financial Highlights In 2006/2007, the Group has been able to streamline our existing businesses, divest non-core business entities and strengthening our core subsidiary companies. As a result, the Group achieved a profit before tax of RM187.1 million for the financial year ended 31 March 2007, on the back of RM2.9 billion in revenue. DRB- HICOM is recommending a final gross dividend of 2.5 sen per share for the financial year under review together with an initial dividend of 1 sen. Key Initiatives The Group continues to strengthen and consolidate its four core sectors and implement various operating efficiency improvements and shared services and initiatives while increasing collaboration with our foreign partners to leverage on their expertise. Functions such as Group procurement were centralised to ensure volume-based savings for the Group and its subsidiary companies. Financial services for the Group were centralised in the Financial Services and Treasury Division, allowing for savings in manpower and an increase in operating efficiency. To give the staff a stronger feeling of belonging to the Group, the DRB-HICOM Sports Carnival 2007 was organised in June The three day sports and family carnival, which was held at the International Islamic University campus brought together staff from all of the Group s companies and gave them a chance to interact and compete with one another in the spirit of friendship and camaraderie.

31 29 Human Resources Development Change management pervaded the financial year. In support of this key initiative, due emphasis was given to communication, dialogues and employees engagement. Having a feedback survey and suggestion s c h e m e i m p l e m e n t e d f u r t h e r increased the employee value proposition. In shaping our future, the Company adopted a different set of Vision, Mission and Values that would refocus the organisation towards clear, achievable and inspiring goals. Critical to these efforts were the harmonisation of employment terms and the imposition of higher governance values as seen through a revised set of ethical standards, business practices and personal asset transparency. An emphasis was placed on ensuring all the Group s senior personnel hold an increased accountability and understanding of their roles. This was managed by introducing Key Performance Indicators (KPIs) to their work functions. In addition, succession planning and the importance of pulling the best young talent into the company was stressed in the Management Trainee Programme, where promising young candidates were brought into the company and given exposure to key aspects of the Group s operations. Commendable employee relations culminated in 8 collective agreements being concluded to full satisfaction. Environmental management and safety initiatives were further given due importance with several companies obtaining the OSHAS and ISO certifications. Refinements to procedures, policies and limits of authority further improved the stewardship function. Corporate Social Responsibility The Group continues to be supportive of the developmental programmes that shape the Malaysian youth, as evidenced by the launch of the DRB- HICOM DEFTECH Scholarships on 15 September 2006 and the signing of a Memorandum of Understanding b e t w e e n t h e G r o u p a n d t h e Community College Department of the Ministry of Higher Education in February These programmes provide opportunities for deserving students to further their studies in fields that the Group is involved in. These programmes are part of our way of answering the Government s call for private companies to play their part in helping Malaysian youths become contributors to the economy. In addition, the Group has given the opportunity to a number of fresh university graduates to experience working life as management trainees, giving them valuable working experience and helping to improve their value in the job market, in accordance to the Government s request to private companies. DRB-HICOM was also involved in relief efforts for the victims of the floods in Johor in January and February The Group sent relief supplies such as rice, mattresses, baby formula and other daily needs to several villages in the state. The relief programme continued throughout early Outlook and Prospects D R B - H I C O M h a s s u c c e s s f u l l y overcome the challenges faced during the year under review, and has emerged leaner, stronger and more efficient than before. The coming financial years will bring new challenges, but the Group will stay focused and will continue its efforts to reward its shareholders with the best possible returns for their investments. With the improvement in the Asian business climate as evidenced by the rising indices of almost all of the region s major bourses, the Group is optimistic that the coming year will bring about significant opportunities that will improve our position within the local market. With some of the restructuring plans for our subsidiaries set to accelerate in the coming financial year, we look forward to having an even more efficient organisation, fully committed to pursuing viable opportunities in the local and global markets. Over the long term, the Group is well placed in its core sectors as it continues to maintain a stable of products that are both desirable and marketable. The Group

32 30 Chairman s Statement is confident of maintaining its client base and expanding into new market segments. The Malaysian Gross Domestic Product, GDP, is projected to grow by 6% in 2007, up from 5.9% in 2006, driven by sustained global growth and resilient local demand. Growth will be stronger in the second half of the year, fuelled in part by early implementation of Ninth Malaysia Plan projects. The Average Lending Rate remained close to historical lows at 6.57% at the end of 2006, and continued to support economic activities. The continuation of this trend in 2007 will increase consumer spending and will have a spill-over effect on the Group s companies as well. T h e G r o u p s c o m p a n i e s w i l l strategically manoeuvre to take advantage of the opportunities inherent in an expanding economy. This positive growth is expected to fuel strong performances especially in the Group s service related companies in KLAS was awarded a 50 year concession with Malaysia Airports Holdings Berhad, while the approval of the Solid Waste Management Bill in early July 2007 will benefit our subsidiary, Alam Flora Sdn Bhd. PUSPAKOM has been awarded an extension of its concession agreement, in addition to which the Government agreed to a revision of PUSPAKOM s rates and increased its scope of service to include presale inspection of previously owned private motor vehicles. Acknowledgements The Board of DRB-HICOM has experienced a year of stability after the changes in the previous financial year, and I would like to thank the Management team, led by Datuk Haji Mohd Khamil bin Jamil for a year that brought achievements to the Group. I would also like to acknowledge the contribution of Dato Hajjah Safiah binti Basrah, who has left us after rendering many valued services to the Group. I would like to also take the opportunity to welcome aboard Mohd Redza Shah bin Abdul Wahid, Dato Noorizan binti Shafie and Tan Sri Marzuki bin Mohd Nor as new Board Members. The mix of new personnel and stable membership means that we have a Board of Directors that is fully capable of leading the Group into the future. I fully expect that their blend of passion, experience, business acumen and dynamism will see the Group taking strong strides in our chosen fields and lead the Group into a new period of enhanced prosperity and opportunities. Ladies and Gentlemen, On behalf of the Board, I would like to thank the employees of the DRB- HICOM Group, as they are the major core around which all our successes are built. Their commitment, loyalty and passion is our driving strength as we embark on new ventures in the coming years and with their united efforts, we will carry the DRB- HICOM name to greater heights. Last, but definitely not least, I would like to voice my appreciation to our shareholders, valued customers, bankers, business associates and the various Government Authorities for their continued support and faith in the Group. Our number one priority is to see this faith rewarded with the best returns, the best products, the best partnerships and a full and total commitment to seeing the Group forge ahead in our chosen fields into the foreseeable future. Thank you. Y.A.M. TAN SRI DATO SERI SYED ANWAR JAMALULLAIL Chairman

33 Group Managing Director s Review of Operations 31 We build quality We are driving quality and productivity even further. Datuk Haji Mohd Khamil bin Jamil Group Managing Director

34 32 Group Managing Director s Review of Operations Overview This past financial year has been one of both successes and challenges for the DRB-HICOM Group. I am pleased to submit to you a comprehensive overview of the Group s operations for the financial year ended 31 March During the financial year under review, the Group s new Management continued to strengthen its position as a leading business organisation and to bring new and exciting business opportunities. The introduction of the National Automotive Policy (NAP) in March 2006 resulted in both challenges and opportunities for the Group s Automotive Division. However, the Services and Property & Infrastructure Divisions have played a significant role in cushioning the effect of the changes in business climate of the automotive sector on the Group. In total, the Group recorded a Profit Before Tax of RM187.1 million on the back of total revenue of RM2.9 billion. During the financial year under review, the Group s main thrusts were aimed at consolidating our existing businesses, streamlining our operations and maximising s t a f f e f f i c i e n c y t h r o u g h i n n o v a t i v e programmes and training. In addition, we divested some of our non-core and nonperforming business interests to further strengthen the Group s overall financial standing. The Management was able to return the Group to profitability after a incurring a loss due to the one time write off of certain Group assets and impairment charges on some non-core properties in the previous financial year. This was attributed to the efforts of the Group s leadership in strengthening our fundamentals, trimming excesses and building the platforms required for future growth. This strengthening of our human capital is a fundamental requirement for success, and I am confident that we will perform to the highest levels.

35 Automotive Sector In building engineering expertise and excellence, we are building the future of strategic global growth and partnerships DRB-HICOM Berhad 33

36 34 Automotive Sector We build innovation Auto Distribution During the financial year under review, the Group s Automotive Division faced and overcame several challenges. With the National Automotive Policy s promotion of Completely-Knocked Down (CKD) models and the Group s previous direction of importing Completely- B u i l t - U p ( C B U ) v e h i c l e s, t h e Group s Management directed the Automotive Division to minimise the impact of the softening demand for CBU vehicles. The overall softening market for passenger vehicles led to a 10.9 percent contraction in vehicle sales during the year. Sales of Honda passenger vehicles rose 0.2 percent in the year ended 31 December 2006 as compared to the previous year. This is indicative of overall customer faith in the brand, as well as the launch of the new Honda Civic sedan, which enjoyed an increase of 101% in sales volume. The Honda City remained one of the market leaders in the non-national economy sedan segment. The Honda assembly facility in Pegoh, Melaka, was instrumental in maintaining the high volume of sales. The plant, one of only four Honda Constant Velocity Joint (CVJ) manufacturing facilities in the world, continued to export its products to countries around the world, including Thailand, Pakistan, Turkey and the United Kingdom. The Group remains one of the leading commercial vehicle distributors with a 30% market share in the light duty truck category through our subsidiary, Automotive Corporation Malaysia Sdn. Bhd. (ACM), which distributes Isuzu light, medium and heavy trucks. The Group s companies have begun seizing the opportunities afforded by the NAP to introduce CKD models of some of the popular car brands. Following the popularity of the Suzuki

37 Automotive Sector DRB-HICOM Berhad 35 Swift CBU model in the previous year, the Group decided to initiate a programme to assemble the Suzuki Swift locally. During the year under review, a robotic welding line was set up at the Group s automotive assembly complex in Pekan, Pahang. This initial CKD project is an indication of the direction taken by the Group s companies to maximise the benefits under the NAP. Complementing the move towards producing more CKD models at the Group s assembly facilities is the increased involvement of its foreign partners in the Group s subsidiary companies. Global automotive leader General Motors Corporation signed a Memorandum of Understanding to form a distribution joint venture company with DRB-HICOM, where they will be able to use their product expertise and market leading experience to drive the joint venture company to a higher level of performance. Isuzu Motor Corporation of Japan has also become more directly involved in operations at the Group s Malaysian Truck & Bus Sdn Bhd facility in Pekan, Pahang by taking majority stake of 51%. The Group expects to pursue and seal more strategic alliances with our foreign partners throughout the course of this financial year. Obtaining the long term commitment of our foreign partners is a key initiative for the Group, as it will assist the Group s companies to compete in a global market. While these new developments are taking place, the Group remains committed to bringing in a wide range of segment leading models for its consumers. These products, including the well received Mitsubishi Triton, Isuzu D-Max, Audi A-series sedans, Chevrolet compact and sedan cars, Volkswagen vehicles and other models from the Group s subsidiary and associated companies continue to compete actively for market share within their respective segments. Automotive Components In meeting the challenges of the decline total industry volume (TIV) of motor vehicles in 2006, the Group s automotive component companies increased their efforts to diversify their product range, including expanding the customer base to nonnational cars and foreign Original Equipment Manufacturers (OEMs) as well as intensifying research and development (R&D) efforts to produce new components for different market segments local and abroad. Most of our automotive component companies are accredited to international standards for process, environment and safety, namely ISO/TS 16949, ISO and OHSAS and this serves as a strong basis for the automotive component companies to compete in the global market. HICOM Diecastings Sdn. Bhd. (HDSB), a leading Tier-1 high-pressure aluminum diecast part manufacturer, had strengthen its position as suppiler in the global component market. With its diversified customer base of auto and non-auto OEMs locally and abroad, HDSB supplies specialised steering housing components to international Tier-1 companies such as ZF Malaysia, ZF s overseas operations (USA and Germany) and TRW Malaysia. In the upcoming year, sales will be expanded with its new export business to supply components to Emerson of USA and ZF-Steering s overseas operations.

38 Automotive Sector 36 Apart from being directed to the global export market, automotive component companies are also diversifying into non-auto component market. HICOM Engineering Sdn. Bhd. (HESB) for example, had ventured into the supplying of iron shoulder casts to a world-renowned Railway Fastening System supplier, Pandrol from UK. Through Pandrol, HESB was entrusted to develop and supply the cast shoulder component for Keretapi Tanah Melayu Berhad (KTMB) for the North South double-track railway project where the first delivery will take place in September Moving forward, HESB is aggressively exploring avenues to supply this railway track component to other railway track projects overseas and export of automotive crankshaft. HICOM-Teck See Manufacturing Malaysia Sdn. Bhd. (HTSM), is a Tier 1 automotive plastic parts vendor whose main products include bumper modules, instrument panel modules and door trim assembly. HTSM main customers in Malaysia include Proton, Perodua, Johnson Controls, Honda and Toyota. Through HTSM s fully-owned subsidiary, HICOM Automotive Plastic (Thailand) Ltd in Rayong, Thailand, HTSM has been supplying components such as bumpers, trunk lid handles and radiator grilles for General Motors and Ford in Thailand. HTSM charted another milestone in February 2007, when they started mass production of door handles for export to Brose, a Tier 1 company in Germany and has secured an annual volume of 750,000 sets. This has provided HTSM with a strong testimonial and a solid platform to expand their business at the global level. Oriental Summit Industries Sdn. Bhd. (OSI) is a leader in providing stamping, welding, painting and assembly of metal components. As a Tier 1 manufacturer of metal-based products, OSI s main customers include Proton, Perodua, Toyota and Volvo. Moving forward, OSI is working closely on a potential business contract with a Tier 1 company in Germany. It is expected that OSI s excellent standards of manufacturing will pave the way for new businesses abroad.

39 Automotive Sector DRB-HICOM Berhad 37 PHN Industry Sdn. Bhd. (PHN), another Tier-1 manufacturer and supplier of metal-based components, has diversified into manufacturing of stamping dies. PHN s main customers include Proton, Perodua, Honda and Toyota. During the year under review, PHN had secured new parts from these companies which include supply of modular components. In the forthcoming year, sales will be augmented with new exports of dies to overseas market as well as supply of body parts for the replacement market (REM). During the period under review the motorcycle engine companies remained favourable where both Hicom-Honda Manufacturing Malaysia Sdn. Bhd. (HHMM) and HICOM- Yamaha Manufacturing Malaysia Sdn. Bhd. (HYMM) achieved strong sales on the back of the good sales performance by Honda and Yamaha motorcycles in the domestic market. H i c o m - H o n d a M a n u f a c t u r i n g Malaysia Sdn. Bhd. (HHMM), which manufactures engines for Honda motorcycles enhanced its positioning for regional and global growth as a Tier 1 supplier to Honda motorcycle a s s e m b l y c o m p a n i e s. H H M M sustained its exports of engine components to regional Honda assemblers in Vietnam, Indonesia and Philippines. HICOM-Yamaha Manufacturing M a l a y s i a S d n. B h d. ( H Y M M ) experienced encouraging sales due to the upsurge of Yamaha motorcycle sales in 2006 and increased exports of engine components to Motori Minarelli from Italy. HYMM charted another milestone when the trial run of HYMM s newly developed engine for the new Yamaha motorcycle 135LC was completed successfully in January Mass production of the new engine started in April 2007 and this will potentially provide HYMM a solid platform to move forward. The performance of other joint ventures with European companies Siemens VDO Instruments MY Sdn Bhd, ZF Steerings (Malaysia) Sdn Bhd and TRW Steering & Suspension (Malaysia) Sdn Bhd was encouraging as their customer base expanded internationally to counter the drop in local automotive TIV. In addition, exports to parent companies in Europe increased in 2006, driving growth further and countering a drop in domestic sales.

40 Services Sector By providing solutions to urban needs and demands, we are building value in the maintenance of public services

41 Services Sector DRB-HICOM Berhad 39 The Group s Services Sector performed strongly in the financial year under review, which helped to buffer the downturn in the Automotive Sector. In general, the Group s subsidiaries in the sector showed an increase in revenues and profits during the year under review, and the outlook for the sector remains strong for the foreseeable future. The sector accounted for 42.7% of the Group s revenue and the outlook for the sector remains strong in this financial year. The Group remains committed to assisting Government agencies by providing services through its subsidiary companies that hold concession agreements. The privatisation of motor vehicle inspections to Pusat Pemeriksaan Kenderaan Berkomputer Sdn Bhd, PUSPAKOM, also allowed the company to make a significant contribution to the Group s revenue. In the financial year ending 31 March 2007, PUSPAKOM inspected a total of 2.43 million commercial and private vehicles nationwide. The continued growth in the commercial vehicle sector saw the company s revenues increase despite the lower number of private vehicle inspections during the period under review. PUSPAKOM maintains its commitment to a high level of service, with most of its branches already having received MS ISO9001:2000 certification. The company added 4 branches during this financial year, making it a total of 64 branches nationwide. PUSPAKOM is the recognised outsource agency for 16 banks and finance companies to verify vehicle status and roadworthiness prior to loan disbursement. The company is also accredited by Amanah Raya Berhad (ARB) to inspect and conduct vehicle valuations for ARB. With the new concession for the mandatory inspection of second-hand vehicles prior to transfer of ownership, the company expects the number of vehicle inspections to increase to 2.7 million in this financial year. The Group serves over 6 million customers through its subsidiary, Alam Flora Sdn Bhd, which is the largest manager of domestic solid waste in the country. Alam Flora, in its 10th year of operations in providing solid waste management services to 24 local authorities in the Federal Territories of Kuala Lumpur and Putrajaya, Selangor and Pahang, handles more than 6,000 tonnes of waste daily, keeping the environment clean for all Malaysians. The company s revenue and profit before tax registered modest increases in the financial year under review. The approval of the Solid Waste Management Bill in early July 2007 is projected to provide significant improvements in the company s cash flow and revenue. With these improvements, the company will be able to implement some of its long awaited service improvements and demonstrate the Group s commitment to improving the quality of life for Malaysians. The company maintains ISO9001:2000 in nine of its Service Areas, whereas the ISO14001:2004 certification has been awarded to two Service Areas. Based on current restructuring and the merger of the QA, Safety & Health and Environmental departments, all related processes will be integrated and streamlined according to world class practices in realising the company s vision of being the Number 1 Solid Waste Management Company in the country. We build partnership

42 40 Services Sector Both Uni.Asia General Insurance Berhad and Uni.Asia Life Assurance B e r h a d m a n a g e d t o i n c r e a s e premium contributions due to the introduction of innovative new products such as Uni.Asia s AutoStar comprehensive motor insurance policy and investment opportunities in Asia s leading capital markets. Uni.Asia Life recorded an increase in Regular Premiums of 12.84%, which was significantly better than the industry average of 3.08%. Uni.Asia Life s investment linked funds recorded significant growth in the financial year under review with its Uni Aggressive Fund recording a growth of 47.82% and its Uni Strategic Fund recording a return of 47.74%, both of which were significantly higher than the increase in the KLCI during the same period. The company expects to enjoy the same strong showing in this financial year through the implementation of several broad strategies that include multi-bank partnerships, continued recruitment of new agents and crossselling of products within the Group of companies. The Group s financial services business, represented by EON Capital Berhad, opened 4 new branches in 2006 and 3 new branches in the first quarter of With customer service a top priority, the bank introduced Electronic Banking Centres at many of its branches and launched its Internet Banking services in To increase the scope of services offered, EONCAP Islamic Bank Berhad and MIMB Investment Bank (formerly known as Malaysian International Merchant Bankers Berhad) were brought into the Group s fold, enabling the Group to increase its standing in the Islamic and Merchant banking sectors. Scott & English (Malaysia) Sdn Bhd s Power Division continued its strong performance in the sales of marine engines and generator sets, as well as increased sales of spare parts and after sales services. A similar strengthening in the Industrial Division, which sells mainly TCM Forklift trucks and Sullair compressors, mirrored this increase. Both these products showed an increase in market share and increased contribution to the company s overall revenue. The Group s entry into the consumer electrical product market has seen the introduction of two of China s leading electronic item brands into the local market. The Group s subsidiary, Scott & English Electronics Sdn Bhd secured distributorship of two of China s leading electronics brands, namely TCL and Midea. TCL is the world s largest manufacturer of Cathode Ray Tube televisions. Midea s air conditioners and small appliances are making steady inroads into the market, due to a good mix of awareness building and competitive pricing. The principal of the Midea brand has agreed to strengthen their advertising and promotions campaign in the coming year, which will see the brand being increasingly competitive in the market for the new financial year.

43 Property & Infrastructure We are building the foundational blueprint of tomorrow s communal sanctuary and sowing the seeds of landscape tranquility DRB-HICOM Berhad 41

44 42 Property & Infrastructure The Group s third core sector also performed well in financial year 2006/2007. The Group s property companies were heavily involved in development projects, with all our residential and commercial properties showing excellent sales figures. The Property Division contributed 13.4% of the Group s revenue, up from 4.6% the previous year. Of particular note, Glenmarie Residences, a joint development by the Group s subsidiary companies HICOM Properties and Horsedale Development Berhad was completely sold out during the year under review. The niche development, which comprises 75 bungalow lots on a 20 acres site fronting the Holiday Inn Glenmarie and Glenmarie Golf & Country Club is the type of prestigious development that is the hallmark of the Group. Similarly, Glenhill Saujana, a project offering 50 semidetached homes and 40 bungalow lots surrounded by two international class golf courses was also completed in the financial year under review. A gated community located in a low density residential enclave on the border of Glenmarie and Saujana, Glenhill Saujana represents the epitome of exclusive and relaxed living. We build communities Another development that embodies this approach is the prestigious Glenmarie Cove riverfront development in Klang. A total of 96 semi-detached houses in Precinct 1 of this development were handed over to the proud owners in December 2006 while the remaining 45 units were handed over to their owners later in the financial year. This exclusive gated community features

45 Property & Infrastructure DRB-HICOM Berhad 43 shop offices, recreational facilities, jetties and a special environment that emphasises the beauty of its natural surroundings. Riverfront living offers access to water sports and other water related recreational activities to the residents of this luxurious development, thereby ensuring market reception to the property was good. One of the benefits of developing this type of property is the possibility of attracting foreigners, and the Group is playing its part in the Malaysia, My Second Home campaign by marketing these properties overseas as well as locally. We have received a healthy response to these efforts, with citizens of more than 12 nations buying properties in Glenmarie Cove. The Group will continue to market its luxury properties on the international market in the firm belief that we will receive strong sales to our foreign friends and partners. Although some of our best-selling d e v e l o p m e n t s i n v o l v e l u x u r y properties, the Group s Property Division is also actively involved in the development of commercial and medium cost properties. The Glenmarie Accentra development on Persiaran Kerjaya in Shah Alam, comprising 30 units of 3-storey shop offices was well received by the public as all units were sold out soon after the launch. Apart from that, Phase I of Glenpark, which comprises 100 units of link houses will soon be completed in TTDI Jaya, and these have already been almost completely sold out. The Group s commitment to providing its clients with a high standard of customer satisfaction extends to its resort properties, where the recently rebuilt and refurbished Rebak Island Marina boasts the only fully equipped marina in Malaysia that facilitates the maintenance of sailing yachts. This is complimented by the recently refurbished Rebak Island Resort, a Taj Hotel which features 84 luxury air conditioned, timbered chalets and is a haven for nature lovers and water sports enthusiasts alike. It s unique sister resort, the Lake Kenyir Resort and Spa, located on the shores of Malaysia s biggest lake, has also

46 44 Property & Infrastructure recently completed a refurbishment programme. This resort is situated in one of the world s oldest rain forests and provides 136 air-conditioned chalets as well as a host of facilities and eco-tourism activities for relaxed holidaymakers, nature lovers and water sports enthusiasts. For golf enthusiasts, the Glenmarie Golf and Country Club, located next to the Holiday Inn Glenmaries provides world class golfing and other recreational facilities, and continues to attract players from around the country and the region. Service standards at this facility are of the highest level and we are confident that this course will remain in demand as one of the country s premier golf venues into the foreseeable future. Holiday Inn Glenmarie, the Group s recently refurbished resort in the city, offers 260 rooms with stunning golf course views and modern amenities for business and leisure travellers. Together with its upgraded banqueting facilities and the world class sporting facilities via the adjacent Glenmarie Golf and Country Club, the Holiday Inn Glenmarie offers the most demanding traveller a range of relaxing experiences. With the encouraging response by consumers towards the Group s property developments, the Group is exploiting opportunities to further enhance its revenue in this sector. The Group also holds 2, hectares of land in its land banks. This land is divided into five estates, namely Ladang Kupang and Ladang Gadek managed by Taiko Plantations Sdn Bhd. Ladang Bukit Keledek and Ladang Connemara managed by Boustead Advisory and Consultancy Sdn Bhd and Ladang Serendah, which is directly managed by the Group. Ladang Connemara has the most potential for future development, although the remaining estates have a potential for development. The estates are well managed and the current good commodity prices have seen the estates generate a healthy profit. Where advised by the managing agents, the Group has arranged for the estates to be replanted with the latest planting material, replacing older strains of oil palm and rubber trees with this higher yielding alternative.

47 Defence Sector Building a nation s armoury is a testament of its ability in building dependability and confidence to its territorial perimeters DRB-HICOM Berhad 45

48 Defence Sector 46 We build dependability The fourth core sector for the Group is its defence sector. DRB-HICOM Defence Technologies Sdn Bhd, better known as DEFTECH, completed delivery of 86 units of HICOM Handalan trucks to the Fire Department and a number of specialist vehicles to the Royal Malaysian Police and other specialised services. The company also ventured into the commercial vehicle assembly field to diversify its product assembly capability and increase its portfolio in the local commercial vehicle segment. With its expertise in assembling large military vehicles, the company was swift to complete a contract to assemble 100 Volvo buses for Syarikat Prasarana Negara Bhd (SPNB) for use by Rapid KL. This first contract has led to several other contracts being awarded to the company. Despite a greater emphasis on the assembly of commercial vehicle, DEFTECH continues to be one of the country s leading providers of services relating to land based military vehicles. The Group expects to compete actively for the procurement of defence contracts under the 9th Malaysia Plan. During the year under review that DEFTECH unveiled the first ever Malaysian made armoured vehicle at the Defence Services Asia 2006 exhibition. This vehicle, the AV4 was launched by Y.A.B Prime Minister and opens a new chapter in DEFTECH s history. The vehicle is currently being evaluated by both local and foreign security forces with a view to purchase it for their countries. DEFTECH also moved to strengthen its position in the nation s defence sector, and continues to be involved in engineering work such as the total maintenance refurbishment, overhaul, upgrading and research and development work for armoured v e h i c l e s a n d a r m a m e n t s. T h e company will continue to strengthen its capabilities and assets with a view to becoming the nation s pre-eminent supplier of defence related services.

49 Defence Sector DRB-HICOM Berhad 47 CONCLUSION Overall, the financial year under review was a successful one for the Group, with the Group achieving a PBT of RM187.1 million, as opposed to the one time loss of RM134 million in the previous year. The Group s companies faced increased competition and opportunities due to the introduction of the NAP and have successfully taken steps to capitalise on the opportunities offered. The Group s Services and Property & Infrastructure Divisions w e r e s u c c e s s f u l w i t h i n t h e i r business sectors, making the year profitable for both the Group and its shareholders. DRB-HICOM Berhad has worked hard to take advantage of the opportunities offered by the 9 th Malaysia Plan, and has recently seen advancement in the fortunes of some of our service companies with long privatisation agreements with the Federal Government. The Services and Property & Infrastructure Sectors will remain strong and key contributors to the Group in the future and developments in these sectors will enable the Group to strengthen its footing in the local business market.

50 48 Defence Sector We h a v e c o n t i n u e d t o b u i l d partnerships overseas and the hard work put into building these relationships has borne fruit, especially in some of the automotive companies. We will continue to build these partnerships to benefit our shareholders and I am confident that even better times are ahead for the Group. We look forward to the next financial year with confidence in the strength of our staff and the continued strategic management of our assets and the belief that they will both grow to meet any challenges that lie ahead. ACKNOWLEDGEMENTS On behalf of the Management, I would like to take this opportunity to thank all DRB-HICOM staff for their contributions, dedication and support, without which none of our achievements would have been possible. To all our stakeholders who have stood by us and maintained their faith in the Group, I assure you that your commitment and perseverance will be rewarded as we move forward in this current financial year. I would also like to extend my thanks to the Members of the Board for their advice and guidance. As we move forward and work to make DRB-HICOM stronger and better, let us all remember that we are a family and strive to ensure that the whole DRB-HICOM family is able to enjoy the best possible success, as the success of one of us is the success of all of us. Datuk Haji Mohd Khamil bin Jamil Group Managing Director Thank you.

51 Corporate Responsiblity Corporate Social Responsibilty 51 Human Resource 52 Caring for the Environment 53 Calendar of Events

52 50 Corporate Social Responsiblity As a responsible corporate citizen, DRB-HICOM believes in giving back to the community in many ways. We organise our Corporate Social Responsibility (CSR) programmes to both foster goodwill and trust in the Group, as well as to provide for the needs of the less fortunate and those affected by natural disasters. In addition, the Group, through the DRB- HICOM Sports Club, looks after the welfare of its staff members through a programme of providing assistance in case of emergency and distress. The Group manages both long-term CSR programmes and short term/ one time donation programmes. Long-term programmes provide the Group with a tangible outreach programme to organisations that provide critical services to the needy. Short-term programmes or one-time donations meet the needs of individuals and organisations whose needs are transitory, or are used for one off events. During the floods that affected Johor at the end of 2006 and early 2007, DRB-HICOM mobilised its team and sent several lorry loads of basic necessities such as mattresses, stoves, shoes, school uniforms, disposable diapers and foodstuff to the victims in several villages in the state. Our team also provided transport for medical teams from Pantai Medical Centre to travel to the affected villages to deliver free medical assistance. The Group also provided mattresses to victims of the floods in Shah Alam earlier in Among our programmes are our outreach programme to orphanages, which includes hosting orphans for dinners during the festive season. The Group believes that by fostering the care of the young and less fortunate, we are making a contribution to their future and enabling them to hope for better things. As a further commitment to Malaysian youth, the Group also took part in the NST School Sponsorship Programme, sponsoring newspapers and dictionaries for 17 schools. The Group supports the Malaysian A r m e d F o r c e s b y p r o v i d i n g scholarships to the children of armed forces personnel through its subsidiary, DEFTECH. These scholarships, to study automotive, mechanical, electrical and manufacturing engineering, as well as accountancy, business management and law, will help the recipients gain a good education in these fields, and help provide skilled manpower for the country s needs. DRB-HICOM also assisted Lembaga Tabung Haji in its medical care programme by providing funds for the purchase of an ambulance to assist our pilgrims during the Haj period. In addition, the Group has cooperative efforts with several notable charity foundations, providing funding for these worthy organisations. The Group s management team are firm believers in the Triple Bottom Line, where profit is not the only motivator for our activities. As responsible corporate citizens, the Group and its subsidiaries must continue to play our part in fostering and nurturing Malaysians who require our assistace. We will continue to play our part in safeguarding the well being of our DRB-HICOM family members and of those who need us into the future.

53 Human Resource 51 In repositioning forward, a new set of vision, mission and values was established. This facilitated the communication of performance goals and organisational values. The realisation was made more complete with the implementation of key performance indicators for the senior management personnel, the communication of a revised Code of Ethics and Business Practice and the introduction of greater personal asset transparency for the managerial staff. The formulation of these criteria is primary to the organisational talent building and succession planning. The leaner structure that was in place resulted in a majority of the staff taking on expanded responsibilities such that it enhanced on-the-job development and strengthened their skills and talents. This augured well with the formulation of several leadership competencies to address the diverse nature and situations of the Group s business. The lighter structure allowed the organisation to blend in external talents selectively. To improve personal linkages in the change effort, direct communication from Management, briefings with staff and dialogues with key personnel were actively practised. This was further complemented by staff activities, in-house development programmes and an employee survey. Many of the inputs received are considered relevant and value-adding employee propositions. A review of the contracts of service to harmonise practice and the outsourcing of several administrative processes were relevant to the attainment of greater productivity and cost efficiency. Policies and procedures were streamlined to support the changes implemented. The organisation responded to the call of nation building by providing opportunities to fresh graduates to be trained and considered for direct employment. Scholarships were extended through another Group company to enable deserving children of government servants to pursue tertiary studies at local institutions. The establishment of the Staff Welfare Fund is a further endorsement of the organisation s caring attitude. Relationship management with the unions and the 27,000 staff across the Group was sustained in an enriching manner. Several collective agreements w e r e f a v o u r a b l y c o n c l u d e d. Environment and workplace safety continued to be a priority pursuit between the Corporate Office and the Group companies.

54 52 Caring for the Environment At DRB-HICOM, we believe that the environment should be taken into account in all our programmes. With the impacts of climate change becoming more noticeable, we believe that everyone must play their part in preserving the environment while going about their daily lives. We do our best to integrate environmentally friendly measures in our Property & Infrastructure, as well as our Services Sector programmes. Anyone who walks through our premier development projects such as Glenmarie Residences or Glenmarie Cove will be struck by the amount of greenery on the sidewalks and in the gardens of the homes. We have placed palm trees and quick growing evergreens along major pathways, and our developments include parks and green lungs to keep the air fresh and clear. In addition, construction waste from these development projects is disposed of correctly, and not dumped anywhere that can cause damage to the environment. The Group s resorts and recreational facilities echo this green theme, and were all built to maximise environmental preservation and to protect the natural beauty of their surroundings. The Taj Rebak Island Resort, which sits on the privately owned Rebak Island, off Langkawi is a haven for bird life. Pied and Black Hornbills can be found in the trees around the chalets, and the clear waters of the marina teem with fish of all kinds. Similarly, the Lake Kenyir Resort and Spa takes full advantage of its pristine surroundings, which include the world s oldest rain forest, and is a haven for nature lovers. Glenmarie Golf and Country Club also typifies this environmental philosophy, with the course and clubhouse shaded by evergreen trees and flowering shrubs. Small herons and a variety of other birds are readily visible on the greens. The Group s subsidiaries also operate a large fleet of heavy vehicles, particularly companies such as Alam Flora. Wherever possible, these companies also t ake steps to minimise their environmental footprint by maximising route efficiency to burn less fuel, by purchasing new vehicles with EURO 2 or higher specification engines that produce less pollution and many other programmes that minimise pollution. While a certain level of environmental impact is inevitable, programmes such as installing leachate collection tanks on all compactor trucks to minimise leachate spillage on roads do help lower the environmental impact of operations. Additionally, vehicle inspections carried out at PUSPAKOM help reduce the incidence of pollution from motor vehicles as the inspections can detect high levels of engine pollution and the vehicle owner/operator can be advised to do something about it. PUSPAKOM inspections also ensure that engines and vehicles are in good shape, thus minimising oil leaks and other phenomena associated with poorly maintained vehicle bodies and engines. Apart from the operational aspects of environment protection, the Group, through Alam Flora, has embarked on the production of environmental awareness material, with the cooperation of the Ministry of Housing and Local Government. These items, in the form of educational VCDs for school children, businesses and the public, as well as activity books for kindergarten and primary school have almost been completed, and will be distributed during the current financial year. Ta k e n t o g e t h e r, t h e G r o u p s contribution to the environment goes hand in hand with our operations, and this is something that the Group s management is keen to encourage and maintain.

55 Calendar of Events 53 6 July 2006 Unveiling of the new stylish Honda Accord with enhanced features by Honda Malaysia Sdn Bhd. 26 April 2006 Launch of DEFTECH AV4 by Y.A.B. Dato Sri Mohd Najib Tun Razak, Deputy Prime Minister and Minister of Defence at DSA Exhibition, Subang. 1 August July 2006 Official launching of the Aduan Sampah? Adulah Alam Flora Campaign by Y.A.B. Dato Seri Dr. M o h a m a d K h i r To y o, Menteri Besar Selangor. Official Signing Ceremony of SPEKS Sistem Pendaftaran E l e k t r o n i k K e n d e r a a n B e r S e p a d u b e t w e e n HICOM Teleservices and 22 companies for online new vehicle registration; witnessed by Y.Bhg Datuk Emran Kadir, Director General, Road Transport Department.

56 54 Calendar of Events 15 August 2006 First Roll out of (CKD) SsyangYong Rexton II from AMM Plant in Pekan, Pahang in the presence of Y.A.B. Dato Sri Mohd Najib Tun Razak, Deputy Prime Minister of Malaysia. MODENAS 10 th Anniversary Dinner together with the launch of MODENAS latest motorcycle the MODENAS X-cite 130cc by Y.B. Dato Seri Rafidah Aziz, Minister of International Trade & Industry of Malaysia. 11 September September 2006 Official launch of DRB-HICOM DEFTECH Scholarship by Y.A.B. Dato Sri Mohd Najib Tun Razak, Deputy Prime Minister of Malaysia. 18 September 2006 Signing of MoU between General Motors Corporation & DRB-HICOM Berhad.

57 55 21 September 2006 DRB-HICOM Berhad 16 th Annual General Meeting. 6 October 2006 DRB-HICOM organised a breaking of fast dinner with orphans at Holiday Inn Glenmarie Hotel. Donations were handed to PEYAKIN and HALUAN Orphanages. 13 October 2006 P U S PA K O M o r g a n i s e d Kempen Keselamatan Jalanraya Sempena Hari Deepavali & Hari Raya Aidilfitri. The campaign was launched by Y.B. Datuk Douglas Uggah Embas, Deputy Minister of Transportation. 17 October 2006 DRB-HICOM organised a breaking of fast dinner with the Malaysian Armed Forces. Among the guests included dignitaries from the Ministry of Defence.

58 56 Calendar of Events 5 10 November 2006 DRB-HICOM and its subsidiary Scott & English Electronics Sdn Bhd organised media visit to the TCL and Midea plants in China which included 11 members of the media and a representative from SIRIM. Handing over of Mock Key for 1 unit Ambulance (worth RM170,000.00) to Lembaga Tabung Haji 8 November November 2006 DRB-HICOM Sports Club Hari Raya & Deepavali Open House lunch. DRB-HICOM Hari Raya & Deepavali Open House was held at Wisma DRB-HICOM. Underprivileged children from PEYAKIN & KUANG Orphanages were invited to celebrate together with other dignitaries and guests. 15 November 2006

59 57 14 December 2006 Official launch of exclusive Glenmarie Cove Residences at Telok Gong by HRH the Sultan of Selangor; accompanied by Y.A.B. Dato Seri Mohamad Khir Toyo, Menteri Besar Selangor. 6 January 2007 DRB-HICOM Berhad contributed packets of rice, food items, school uniforms and other essential daily needs to the affected flood victims in Pagoh, Johor. Receiving on behalf of the victims is the Royal Parton for the Southern Red Crescent Society, Y.A.M. Raja Zarith Sofiah binti Al-Marhum Sultan Idris Shah. 22 January 2007 Maal Hijrah 1428 celebration. 12 February 2007 Launch of CKD Robotic Assembly Lines for Suzuki Swift 1.5L at AMM Plant, Pekan, Pahang.

60 58 Calendar of Events 7 March 2007 D R B - H I C O M B e r h a d organised the Chief E x e c u t i v e O f f i c e r s B u s i n e s s F o r u m officiated by Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail, Chairman of DRB-HICOM. The forum was attended by Y.B. Dato Sri Mohd Effendi Nawawi as guest of honour. DRB-HICOM involved in Emergency Medicine Conference and Exhibition 2007 that was officiated by Y.B. Datuk Seri Chua Soi Lek, Minister of Health at PWTC. 12 March 2007 Visit by Y.A.B. the Menteri Besar of Pahang and Y.A.B. the Menteri Besar of Trengganu to DEFTECH s plant in Pekan. 19 March 2007

61 Corporate Governance Statement on Corporate Governance 67 Statement on Internal Control 69 Audit Committee Report 74 Additional Compliance Information 77 Statement of Directors Responsibility

62 60 Statement on Corporate Governance Corporate Governance sets out the framework and process by which companies, through their Board of Directors and Management, regulate their business activities. It balances sound and safe business operations with compliance of the relevant laws and regulations. The Board of Directors of DRB-HICOM is committed to ensuring that the highest standards of Corporate Governance are practised throughout the Group as a fundamental part of its responsibilities in managing the business and affairs of the Group and to protect and enhance shareholders value and financial performance. The Board is pleased to set out below the manner in which the Company has applied the principles set out in the Malaysian Code on Corporate Governance ( the Code ) and the extent to which the Company has complied in all material respects with the best practices of the Code during the financial year ended 31 March BOARD OF DIRECTORS The Board has the overall responsibility for determining the Group s overall strategic direction as well as development and control of the Group. It reviews management performance and ensures that the necessary financial and human resources are available to meet the Group s objectives. The Board is responsible for succession planning, including appointing and fixing the remuneration of and, where appropriate, replacing senior management. The Board is also responsible for identifying principal risks and ensuring the implementation of appropriate systems to manage these risks; developing and implementing an investor relations programme; and reviewing the adequacy and integrity of the Group s system of internal controls. 1.1 Composition and Balance The current Board has ten (10) members, comprising seven (7) Non-Executive Directors (including the Chairman) of whom five (5) are independent. There are three (3) Executive Directors. Hence, the Board fulfils the prescribed requirements for one-third of the membership of the Board to be Independent Board Members. The composition of the Board, including Non-Executive Directors and Independent Directors, provides the Board with a good mix of industry-specific knowledge and broad business sense and commercial experience. This balance enables the Board to provide clear and effective leadership to the Group and to bring informed and independent judgement to many aspects of the Group s strategies and performances so as to ensure that the highest standards of professionalism, conduct, transparency and integrity are maintained by the Group. The Independent Directors play a pivotal role in corporate accountability, which is reflected in their memberships of and attendances at the various Board Committees. None of the Non-Executive Directors participate in the daily management of the Group. The Directors are well experienced in their respective fields and together provide an effective blend of entrepreneurship, business and professional expertise. A brief profile of each Director is presented on pages 12 to 17. No individual or group of individuals dominates the Board s decision-making. The roles of the Chairman and the Group Managing Director are clearly defined so as to ensure that there is a balance of power and authority. The Chairman is responsible for ensuring Board effectiveness and conduct whilst the Group Managing Director has overall responsibility for the management of the operating units, organisational effectiveness and the implementation of Board policies and decisions. In addition, the Group Managing Director also functions as the intermediary between the Board and Management.

63 Appointments and Training There is a formal and transparent procedure for the appointment of new Directors to the Company and the Group, with the Nomination Committee evaluating and making recommendations to the Board. Following the appointment of new Directors to the Board, the Nomination Committee will ensure that an induction programme is arranged, including visits to the Group s significant businesses and meetings with senior management as appropriate, to enable them to get a full understanding of the nature of the businesses, current issues within the Group and the corporate strategies as well as the structure and management of the Group. All Directors have attended the Mandatory Accreditation Programme prescribed by Bursa Malaysia Securities Berhad (Bursa Malaysia). All Directors are also encouraged to attend continuous education programmes and seminars to keep abreast with developments in the marketplace. Apart from attending various conferences and seminars organised by external organisers during the financial year, the Directors also continuously receive briefings and updates on regulatory, industry and legal developments, including information on the Group s businesses and operations, risk management activities and other initiatives undertaken by Management. The Principal Company Secretary facilitates the annual effectiveness assessment of the Board of Directors and Committees. The objective is to improve the Board s effectiveness by identifying gaps, maximising strengths and addressing weaknesses. The Chairman of the Board oversees the overall evaluation process whereby selfassessment methodologies are used and issues for assessment are presented in customised questionnaires. 1.3 Re-Election In accordance with the Company s Articles of Association, all Directors who are appointed by the Board are subject to re-election by shareholders at the first Annual General Meeting after their appointment. The Articles also provide that all Directors shall retire from office once in every three years but shall be eligible for reelection. At each Annual General Meeting one third of the remaining Directors are to offer themselves for re-election. 1.4 Supply of Information and Board Meetings All Directors, whether independent or otherwise, have the same right of access to all information within the Group and the duty to make further enquiries whenever deemed necessary in furtherance of their duties. The Board is supplied in a timely manner with information in a form and of a quality as appropriate to enable it to discharge its duties. In addition to financial information, other information deemed suitable such as customer satisfaction, product and service quality, market share and market trends, manpower and human resource and environmental issues are also provided. Prior to Board Meetings, all Directors will receive the agenda and a set of Board Papers containing information relevant to the matters to be deliberated at the meetings. All Directors have access to Management, the advice and services of the Company Secretary and may seek professional advice at the Group s expense, if required. The Board meets at least once every quarter with additional meetings convened between the scheduled meetings as Special Board Meetings as and when necessary. During the year ended 31 March 2007, the Board met a total of eight

64 62 Statement on Corporate Governance (8) times. During the Board Meetings, the Chairmen of the various Committees provide summary reports of meetings including matters requiring the full Board s deliberation and approval. All Directors attended more than half of the meetings held during the financial year or held after their appointment in compliance with the Listing Requirements of Bursa Malaysia. Details of the attendances of Directors at the board meetings are disclosed in their respective personal profiles set out on pages 12 to Board Committees To ensure the effective discharge of its fiduciary duties, the Board has delegated specific responsibilities to the respective Committees of the Board. Board Committees members are thus able to deliberate in greater detail and examine the issues within their terms of reference as set out by the Board. The Company has three (3) principal Board Committees:- i. Audit Committee The composition and terms of reference of this Committee together with its Report are presented on pages 69 to 73. The Committee meets at least once a year, and is responsible to:- a. Evaluate and recommend to the Board, candidates for directorships of the Company and the Group; b. Recommend to the Board, directors to fill the seats on Board Committees; c. Evaluate the effectiveness of the Board and Board Committees (including its size and composition) and of their members; d. Review Management s recommendation on appointments or promotions of senior management personnel; e. Ensure an appropriate framework and plan for Board and Management succession for the Group; f. Ensure the interests of the minority shareholders are fairly reflected on the Board; and g. Recommend continuous appropriate training programmes for Directors. ii. Nomination Committee The Nomination Committee consists of the following Non-Executive Directors, the majority of whom are independent:- Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail (Chairman) Datuk Haji Abdul Rahman bin Mohd Ramli Ibrahim bin Taib During the financial year ended 31 March 2007, the Nomination Committee met a total of four (4) times. iii. Remuneration Committee The Remuneration Committee consists of the following Directors, the majority of whom are Independent Non- Executive Directors:-

65 63 Dato Syed Mohamad bin Syed Murtaza (Chairman) Datuk Haji Abdul Rahman bin Mohd Ramli Ong Ie Cheong Datuk Haji Mohd Khamil bin Jamil (ex-officio) The Committee meets at least once a year, and is responsible to:- a. Establish and recommend the remuneration structure and policy for Executive Directors and senior management; the terms of employment or contract of employment/service, any benefit, pension or incentive scheme entitlement; other bonuses, fees and expenses; and any compensation payable on the termination of the service contract by the Company and/or the Group and to review for changes to the policy, as necessary; b. Ensure that a strong link is maintained between the level of remuneration and individual performance against agreed targets with the performance-related elements of remuneration forming a significant proportion of the total remuneration package of Executive Directors and senior management; c. Review and recommend the entire individual remuneration packages for each of the Executive Directors and senior management personnel; d. Review with the Group Managing Director and the Executive Directors, their goals and objectives and to assess their performance against these objectives as well as their contribution to the corporate strategy; and e. Review and recommend to the Board any employees share option scheme. During the financial year ended 31 March 2007, the Remuneration Committee met a total of two (2) times. 1.6 Directors Remuneration The objectives of the Group s policy on Directors remuneration is to ensure that the Group attracts and retains Directors of the calibre and integrity needed to run the Group successfully. In the case of Executive Directors, remunerations are structured so as to link rewards to corporate and individual performances. In the case of Non- Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the particular Non-Executive Director concerned. The Remuneration Committee is responsible for setting the policy framework and for making recommendations to the Board on all elements of the remuneration and other terms of employment of the Executive Directors and senior management. Executive Directors will abstain from the deliberation and voting on decisions in respect of their own remuneration. The remuneration of Non-Executive Directors is to be decided by the Board as a whole, except for Directors fees which shall be a fixed sum determined by the Company in general meeting.

66 64 Statement on Corporate Governance Non-Executive Directors:- Group Fees 627, ,464 Attendance & other allowances 1,141, ,146 Benefits-in-kind 80,000 6,964 executive Directors:- Salaries, allowances and other emoluments* 2,940,931 11,970,384 Benefits-in-kind 216, ,090 Total 5,006,481 13,598,048 * Included in the Executive Directors salaries, allowances and other emoluments are bonus and employer s contribution to retirement benefits of RM889,190 (2006: RM Nil) and RM218,281 (2006: RM553,378) respectively. Included in 2006 is retirement benefit of RM7.5 million paid to a past director. Directors Remuneration * Details of Directors remuneration for the financial year ended 31 March 2007, distinguishing between Executive and Non-Executive Directors in aggregate, with categorization into appropriate components and the number of Directors whose remuneration fell into each successive band of RM50,000, are set out below:- Non- Executive Executive Total Less than RM50,000 _ 2 2 RM50,001 RM100, RM350,001 RM400, RM500,001 RM550, RM850,001 RM900, RM900,001 RM950, RM1,350,001 RM1,400, Total ** * Remuneration paid to the Directors of the Company include fees, salary, other emoluments including bonus, EPF contributions, attendance & other allowances and benefits-in-kind. ** Included one Non-Excutive Director who has resigned during the financial year. The disclosure of Directors remuneration is made in accordance with Appendix 9C, Part A, Item 10 of the Listing Requirements of Bursa Malaysia. The Code recommends disclosure of details of the remuneration of each Director. However, the Board is of the view that the disclosure of the remuneration by bands of its Directors is sufficient to meet the objective of the Code. a. Directors Fees In 2006, the Company obtained a shareholders approval via ordinary resolution for the payment of Directors fees not exceeding RM800,000 for each financial year effective 31 March 2006 onwards based on the recommendation of the Board. Hence, yearly payment of fees to the Non-Executive Directors do not need shareholders approval provided that the amount does not exceed RM800,000 per annum. All Non-Executive Directors are paid meeting allowances

67 65 as determined by the Board to reimburse them for expenses incurred for attendance at Board/Board Committee meetings and shareholders meetings, which is inclusive of travelling and accommodation. b. Salaries, Bonuses and Allowances The basic salaries inclusive of statutory employer contributions to the Employees Provident Fund for the Group Managing Director and the Executive Directors are determined by the Board, taking into account the performance of the individual, the consumer price index and information from independent sources on the rates of salary for similar positions in a selected group of comparable companies. Salaries are reviewed annually by the Remuneration Committee. The Board has endorsed the adoption of Key Performance Indicators (KPIs) as part of the overall governance to enhance the management of performance for the Company. Following this, KPIs were formulated for the Group Managing Director, Executive Director/ Group Chief Operating Officer and other Management team members. The performance-based bonuses paid to these personnel are strictly tied to the attainment of their KPIs and overall achievements. Performance assessments of these personnel together with the rewards due were rigorously undertaken at the Management and Remuneration Committee levels with the Board making the final determination pursuant to the recommendations of the Committee. c. Benefits-In-Kind Other customary benefits, such as car, driver, allowances, etc. were made available to the Chairman, Group Managing Director and Executive Directors as appropriate. d. Terms and Conditions of Employment The Group Managing Director and the Executive Directors are employed on terms and conditions as approved by the Board. 2. SHAREHOLDERS AND INVESTORS 2.1 Dialogue between the Company and Investors The Board values dialogue with investors and appreciates the keen interest of shareholders and investors in the Group s performance. The Board acknowledges the need for shareholders to be informed of all material business matters affecting the Group. The Company communicates with its shareholders and stakeholders regularly through the timely release of financial results on a quarterly basis, press releases and announcements to Bursa Malaysia which provide shareholders with an overview of the Group s performance and operations. In addition, the Company initiates dialogues with its shareholders as and when required. 2.2 The Annual General Meeting The Annual General Meeting is the principal forum for dialogue with shareholders. Notice of the Annual General Meeting and annual reports are sent out to shareholders at least twenty-one (21) days before the date of the meeting. Besides the usual agenda for the Annual General Meeting, the Board presents the progress and performance of the business as contained in the Annual Report and provides opportunities for shareholders to raise questions pertaining to the business activities of the Group. All Directors are available to provide responses to questions from the shareholders during these meetings.

68 66 Statement on Corporate Governance Items of special business included in the notice of the meeting are to be accompanied by an explanatory statement to facilitate full understanding and evaluation of the issues involved. The Group maintains a website at which can be conveniently accessed by the shareholders and the general public. The Group s website is updated from time to time to provide the latest and comprehensive information about the Group, including press releases and quarterly announcements of the Group results. Any queries or concerns regarding the Group may be conveyed to the following persons:- i. Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail, Chariman/`Senior Independent Non-Executive Director ii. iii. Telephone number : Facsimile number : Y.Bhg. Datuk Haji Mohd Khamil bin Jamil, Group Managing Director Telephone number : Facsimile number : Y.M. Raja Shahrul Azman bin Raja Omar, Head of Public Affairs & Investor Relations Division, for investor relations matters Telephone number : Facsimile number : ACCOUNTABILITY AND AUDIT 3.1 Financial Reporting The Directors have a responsibility to present a true and fair assessment of the Group s position and prospects in the quarterly reports to Bursa Malaysia and the Annual Report to shareholders. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy, adequacy and completeness. 3.2 Internal Control The Group s Statement on Internal Control furnished on pages 67 to 68 provides an overview of the state of internal controls within the Group. 3.3 Relationship with the Auditors The role of the Audit Committee in relation to the External Auditors may be found in the Report of the Audit Committee set out on pages 69 to 73. The Group has always maintained a close and transparent relationship with its auditors in seeking professional advice and ensuring compliance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities. This statement is made in accordance with a resolution of the Board of Directors dated 18 July Signed on behalf of the Board of Directors iv. Ms Chan Choy Lin, Company Secretary, for shareholders enquiries Telephone number : Facsimile number : Y.A.M. TAN SRI DATO SERI SYED ANWAR JAMALULLAIL Chairman

69 Statement on Internal Controll 67 Responsibility The Board of Directors of DRB-HICOM Berhad in complying with paragraph 15.27(b) of the Bursa Listing Requirements and the Malaysian Code on Corporate Governance acknowledge that a sound system of internal control needs to be maintained and they need to continually review its adequacy and integrity. In discharging their stewardship responsibilities, procedures on internal controls in accordance with the guidelines for directors, the Statement on Internal Control: Guidance for Directors of Public Listed Companies have been established. These procedures are intended to provide an ongoing process for identifying, evaluating and managing the significant risks encountered by the Group. The Board Statement on Internal Control in complying with the said paragraph is as set out below. Control Structure and Environment The key processes established by the Directors of the Group within the control environment are summarized as follows:- Organisation structure In executing the Board s responsibilities, a number of Board committees have been established with clearly defined terms of reference, details of which are set out in the Statement on Corporate Governance. These are the Audit, Nomination and Remuneration Committees. Management has been delegated the responsibility to implement the daily business strategies. Segregation of roles and responsibilities, lines of accountability and levels of authority are clearly set out in the organisation structure. Audit Committee The Audit Committee, comprising non-executive directors, the majority of whom are independent, reviews the Group s accounting and reporting policies and practices, reports of the internal and external auditors and the adequacy of the system of internal control. In addition, the Audit Committee also monitors and reviews the activities of the Group Internal Audit Division ( GIAD ). The activities of the Board Audit Committee are further set out on pages 69 to 73. Internal Audit The GIAD in accordance with the approved annual audit plan continues to carry out regular and systematic reviews of the business processes of the operating entities within the Group. However, this does not include companies governed by the Banking and Financial Institutions Act, 1989 or regulated by Bank Negara Malaysia and a material associated company. The Group s interests are served through representations on the boards of these respective companies. The Audit Committee and the Board are provided with reasonable assurance that the system of internal control is adequate and that the Group s governance and risk management processes are effective. At a minimum, in the quarterly meetings, the Audit Committee deliberates on the findings and recommendations for improvement by the internal auditors on the state of the internal control system. Code of Ethics and Business Practice Ethics and values are both essential and central to policies and performance and therefore, need to be effectively managed. The Code of Ethics and Business Practice (COEBP), issued by Group Management, provides guidance for sound governance and healthy employment lifestyle and the promotion of an ethical culture.

70 68 Statement on Internal Controll Whistleblower and Anti-Fraud Policies In line with the Group Management s emphasis on instilling positive work values, integrity and transparency, the Whistleblower and Anti-Fraud Policies were recommended by the Group Management and approved by the Board. Policies and Procedures Policies and procedures of the Group and Divisional or Operating Unit such as financial limits of delegated authority and relevant operational procedures are documented, clearly defined and reviewed regularly and updated when required. Employee Competency The quality and abilities of employees are emphasized through continuing education and training and development to ensure they are competent in discharging their duties effectively. Risk Management The Board of Directors recognizes that risk management is an integral part of the Group s business operations. Management is responsible for creating risk awareness and for building the necessary knowledge for risk management. The ultimate responsibility for the effective management of risk rests with the Board that controls and manages risk through the Group Risk Management Committee. The Group Risk Management Committee ensures leadership, direction and coordination of the group-wide application of risk management that includes identifying the key risks, assessing the potential impact and likelihood of those risks occurring, control effectiveness and adopting the appropriate action plans to reduce those risks to the desired level. The respective Risk Management Committees of the subsidiary companies, on a quarterly basis, update and report to the board of directors detailed primary risk registers together with their mitigation plans. The Group Risk Management Committee which oversees the overall risk management of the Group and reports to the Board the respective management action plans to mitigate the key risks faced by all operating units within the Group is chaired by the Group Managing Director. Conclusion Overall, the Board is satisfied with the adequacy and effectiveness of the system of internal control and risk management practices of the Group. To the best of the Board s knowledge, none of these control shortcomings and weaknesses have resulted in any material losses, contingencies or uncertainties that would require disclosure in the annual report. This statement has been approved by the Board of Directors at its meeting on 18 July 2007.

71 Audit Committee Report 69 The Board of Directors is pleased to present the Report of the Audit Committee ( Committee ) for the financial year ended 31 March COMPOSITION OF MEMBERS AND MEETINGS ATTENDED The Committee members and details of their attendance at committee meetings during the financial year are set out below:- Name Status of Meetings Directorship Attended Datuk Haji Abdul Rahman Independent 7 out of 7 bin Mohd Ramli, Non-Executive Chairman of the Committee Director Dato Syed Mohamad Independent 6 out of 7 bin Syed Murtaza Non-Executive Director Mr Ong Ie Cheong Independent 7 out of 7 Non-Executive Director Dato Hjh Safiah Basrah Non-Independent 5 out of 7 (Resigned on 22/9/2006) Non-Executive Director Dato Noorrizan Shafie Non-Independent 2 out of 7 (Appointed on 28/11/2006) Non-Executive Director The Chairman is a member of the Malaysia Institute of Accountants (MIA). During the financial year under review, the Committee held 7 meetings, with the Group Managing Director, together with the Executive Director/Group Chief Operating Officer, the Group Chief Financial Officer, and also the Head of Internal Audit attending, by invitation, all the convened meetings. On appropriate occasions, representatives from the external auditors and relevant management staff also attended the meetings. The minutes of the Audit Committee Meetings were circulated to all members of the Audit Committee by the Company Secretary who acts as the secretary to the Audit Committee and was present at all Audit Committee Meetings. The Committee s report was presented to the Board of Directors at the board meeting and significant issues were discussed therein. TERMS OF REFERENCE OF THE COMMITTEE 1. Constitution The Audit Committee shall be established to assist the Board in fulfilling its oversight responsibilities. The Committee shall review and ensure that the process of assessing internal controls and governance, including operational and financial controls, business ethics and compliance are properly managed and monitored. 2. Composition The following requirements are to be fulfilled by the Board in the appointment of the Audit Committee from among its members:- a. the Committee must be composed of no fewer than three (3) members, the majority of whom must be Independent Non-Executive Directors;

72 70 Audit Committee Report b. the Chairman of the Committee shall be appointed by the Board from among the Independent Non-Executive Directors and at least one member of the Committee:- must be a member of the Malaysian Institute of Accountants or must have at least three (3) years working experience and; i. must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or ii. must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act Alternate Directors shall not be appointed as a member of the Committee; and subject to any regulatory disqualification, members of the Committee shall not be removed except by the Board. In the event of any vacancy in the Committee, the Board shall within three (3) months fill the same so as to comply with all regulatory requirements. In any event the Board shall review the term of office and performance of the Committee and each of its members at least once every three (3) years. 3. Meetings and Attendance The quorum for all meetings of the Committee shall be not less than three (3), a majority of whom shall be Independent Non- Executive Directors. The Chairman shall chair all meetings and in his absence, another Independent Non-Executive Director shall chair it. a. Meetings shall be held not less than four (4) times a year and the Head of Group Internal Audit, Group Managing Director and Executive Director/Group Chief Operating Officer shall, by invitation, attend the meetings. b. The external auditors are normally invited to attend meetings as and when necessary. c. The Committee shall meet separately with the internal and external auditors at least once a year without the attendance of the management. d. The Company Secretary shall be the Secretary of the Committee and shall provide the necessary administrative and secretarial services for the effective functioning of the Committee. The draft minutes shall be circulated to the Committee members for comment and the signed minutes shall be tabled at the subsequent Board Meeting. 4. Authority The Board has empowered the Audit Committee to:- a. investigate any activity within the scope of the Committee s duties and its terms of reference and shall have full and unrestricted access to any information and document relevant to the Committee s activities; b. obtain independent legal or other professional advice as necessary; c. communicate directly with the external auditors, internal auditors and all employees of the Group; d. have adequate resources to perform its duties as set out in its terms of reference; e. make recommendations for improvements of operating performance and management control arising from internal and external audit recommendations.

73 71 5. Responsibilities and Duties The functions of the Audit Committee have been expanded to include the matters specified in the Code of Corporate Governance as follows:- Risk Management and Internal Control Ensure that management has in place an adequate system of risk management and internal control to safeguard the shareholders interests and Company s assets. Financial Reporting Review the annual and quarterly financial results of the Group focusing on, among others, financial disclosures, changes in accounting policies and practices and compliance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities. Related Party Transactions Review any related party transactions that may arise within the Company or Group for compliance with Bursa Securities Listing Requirements. Employee Share Option Scheme Review the allocation of share options granted to eligible employees in the Group. Internal Audit In respect of the internal audit function:- a. to review the adequacy of the scope, functions and resources of the Group Internal Audit Division ( GIAD ) and that it has the necessary authority to carry out its work; b. to review internal audit programme and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendations of the GIAD; c. to review any appraisal or assessment of the performance of the members of the internal audit function; and d. to approve any appointment or termination of senior staff members of the GIAD External Audit With regards to external auditors:- a. to consider the appointment, resignation, or termination of external auditors and their audit fee; b. to discuss with the external auditors, prior to the commencement of audit, the nature and scope of audit and to ensure co-ordination where more than one audit firm is involved; c. to review with external auditors, the audit plan, their evaluation of the systems of internal accounting controls, their audit report and the assistance given by the Company s officers to the external auditors; d. to review the quarterly and year-end annual financial statements before submission to the Board and announcements to the Bursa Malaysia Securities Berhad, focusing particularly on:- any changes in accounting policies and practices; significant adjustments arising from the audit; the going concern assumption; and compliance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and other legal requirements.

74 72 Audit Committee Report e. to discuss at least once a year any issues from the audits, with internal and the external auditors separately without the presence of management; f. to review the external auditor s management letter and management s response; Other Responsibilities a. to instruct the external and internal auditors that the Committee expects to be advised if there are any areas that require its special attention including major findings of internal investigations and management s response; b. to consider and examine any other matters as the Committee considers appropriate or as authorised by the Board of Directors. SUMMARY OF ACTIVITIES OF THE COMMITTEE The Committee plays the role of the governance body that is charged with overseeing the Group s audit and internal control. The main responsibility of the Committee therefore is to assist the Board to implement and support the oversight function for the Group in accordance with the terms of reference of the Audit Committee. Listed below is the summary of activities of the committee carried out during the financial year ended 31 March 2007:- Financial Results Reviewed the unaudited quarterly financial results of the Group before recommending to the Board for approval. Reviewed the audited annual financial statements of the Group and Company prior to submission to the Board of Directors for consideration and approval prior to submitting the results to Bursa Malaysia Securities Berhad ( Bursa Securities ). Ensured Group s compliance with the Bursa Securities Listing Requirements, MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, provisions of the Companies Act 1965 and other legal and regulatory requirements. Reviewed the Audit Committee Report, Statement on Internal Control and Statement on Corporate Governance prior to inclusion in the Company s Annual Report. External Audit Reviewed the Audit Plan with the External Auditors prior to the commencement of the audit for the financial year. Reviewed with the External Auditors their Internal Control Memorandum and management s responses. Evaluated the performance of the External Auditors and made recommendations to the Board of Directors on their reappointment and fees. Reviewed the independence and objectivity of the External Auditors and the services provided, including non-audit services. Met with the External Auditors once during the financial year without the presence of any executive board member or management. Internal Audit Reviewed and approved the annual internal audit plan and programmes for the financial year to ensure the scope of audit adequately and comprehensively covered the activities of the Group. Reviewed the performance of the GIAD and the competencies of staff within the internal audit activity to execute the plan as well as the audit programs used in the effective discharge of its professional responsibilities.

75 73 Reviewed the adequacy of the scope, functions and resources of the internal audit function. Reviewed audit reports of all assignments carried out for the financial year and appraised the adequacy and effectiveness of management responses in resolving the audit issues reported. Reviewed the results of ad-hoc special reviews undertaken by the internal auditors and the actions taken relating to these assignments. Reviewed the adequacy of the terms of reference of the Internal Audit Charter. Met with the Head of Internal Audit once during the financial year without the presence of any executive board member or management. Recommended to the Board improvement opportunities in internal control, financial and operational procedures and risk management. Related Party Transactions Reviewed related party transactions (RPTs) for compliance with Bursa Securities Listing Requirements and the appropriateness of such transactions before recommending to the Board for its approval. INTERNAL AUDIT FUNCTION The GIAD, being an independent function, is primarily responsible in undertaking regular and systematic reviews of the system of internal control of companies within the Group through effective planning, risk focused audits, progressive reporting and monitoring in order to provide reasonable assurance to the Committee that the system is operating effectively. However, those companies governed by the Banking and Financial Institutions Act, 1989 or regulated by Bank Negara Malaysia and a material associated company are excluded. The GIAD aims to add value to the Group by promoting a sound control environment that is well managed. The GIAD continues to maintain its quality assurance and continual improvement program through the ISO 9001:2000 Quality Management System. During the financial year the GIAD also engaged the services of an independent third party assessor to conduct an external quality assessment of its activities. As required by the Audit Charter, the Head of GIAD reports directly to the Chairman of the Committee. During the financial year, the result of work accomplished by GIAD, including scheduled, follow-up and special assignments covering the Automotive Manufacturing and Distribution, Property Development and Construction, Services and Defence segments were reported to the Committee. Reviewed the Group s procedures in respect of recording recurrent related party transactions (RRPTs) and propriety of proposed related party transactions to ensure that they were not more favorable to the related parties than those generally available to the public and were not detrimental to minority shareholders.

76 74 Additional Compliance Information 1. UTILISATION OF PROCEEDS Description Actual utilisation A approved as at 31 utilisation March 2007 Balance RM million RM million RM million Comments Issuance of up to RM850.0 million Islamic Securities as follows:- The Securities Commission had, vide their letter dated 23 June 2005 approved the utilisation of proceeds. (i) Bai Bithaman Ajil Islamic The BaIDS and RM50 million from the Underwritten Debt Securities ( BaIDS ) Murabahah CP/MTN have been utilised to fully redeem Gadek (Malayisa) Berhad s loan stocks i.e. Redeemable (ii) Underwritten Murabahah Secured Loan Stocks (RSLS) and Redeemable Exchangeable Commercial Papers ( CP )/ Secured Loan Stocks (RESLS). Medium Term Notes ( MTN ) (iii) Murabahah CP/MTN RM107 million has been utilised for working capital purposes and repayment towards DRB-HICOM Berhad s short term banking facilities. 1, SHARE BUYBACKS During the financial year, there were no share buybacks by the Company. 3. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES During the financial year ended 31 March 2007, a total of 3,328,100 ordinary shares were issued by the Company by virtue of the exercise of the options under the Employees Share Option Scheme ( ESOS ) as disclosed in page 81 of the financial statements. The ESOS had expired as of 9 April Saved as disclosed above, the Company has not issued any options, warrants or convertible securities during the financial year. 4. AMERICAN DEPOSITORY RECEIPT ( ADR ) OR GLOBAL DEPOSITORY RECEIPT ( GDR ) During the financial year, the Company did not sponsor any ADR or GDR programme.

77 75 5. VARIATION IN RESULTS The Company did not release or announce any profit estimate, forecast or projection during the financial year under review. 6. PROFIT GUARANTEE During the financial year, there was no profit guarantee issued by the Company. 7. RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE By Resolution of the Extraordinary General Meeting of the Company held on 21 September 2006, a mandate was granted by the shareholders for recurrent related party transactions of a revenue or trading nature, to be entered into during the period 22 September 2006 to 20 September 2007 between the Company or its subsidiaries and related parties, the latter being based on estimates. As required, below is a listing of the said transactions by related company that are more than RM26 million as having been actually entered into during the financial year ended 31 March 2007:- Actual Transacted Values (RM 000) Nature of from 1 April 2006 to No. Transacting Parties Interested Parties Transaction 31 March 2007 COMTRAC SDN. BHD 1. Glenmarie Cove Development Sdn. Bhd. Director and major shareholder Construction works 31,625 - Ng Tet Min Project management cost 2,354 - Ng Teik Hin MOTOSIKAL DAN ENJIN NASIONAL SDN. BHD. 1. Kawasaki Heavy Industries Ltd. Major shareholder Provision of technical support, 33,028 - Kawasaki Heavy Industries Ltd. technology transfer, supply of CKD components and payment of royalties 2. Sojitz Corporation Major shareholder Purchase of CKD Parts 2,420 - Sojitz Corporation 33,979 35,448

78 76 Additional Compliance Information 8. Material Contracts There was no material contract entered into by the Company or its subsidiaries involving Directors and Major Shareholders interests still subsisting at the end of the financial year ended 31 March 2007 except for the following (pursuant to Paragraph 21, Part A, Appendix 9C of the Listing Requirements):- purchase Consideration and Mode of Type Date Contracting Parties Satisfaction 1. Agreement For The 1 June 2006 HICOM Facility Management Berhad and RM 21,180, by cash Surrender of Memberships Horsedale Development Berhad (The transaction has since been completed) 2. Agreement For The 1 June 2006 Vistamurni Sdn. Bhd. and Horsedale RM 8,820, by cash Surrender of Memberships Development Berhad (The transaction has since been completed) Relationships between the Directors or Major Shareholders and the Contracting Parties Mr. Rin Nan Lun is a Director and Substantial Shareholder in Vistamurni Sdn. Bhd.. He is also a Director and having an effective interest in shareholding of Horsedale Development Berhad. 9. Sanctions and/or Penalties There was no significant penalty/ies imposed by any regulatory authorities on any of the companies in DRB-HICOM Group. 10. STATEMENT ON REVALUATION POLICIY The Group does not have any revaluation policy. 11. NON-AUDIT FEES The amount of non-audit fees paid/payable to the external auditors and their affiliated companies by the Group for the financial year ended 31 March 2007 are as follows:- RM 000 PricewaterhouseCoopers 160 PricewaterhouseCoopers Taxation Services Sdn. Bhd

79 Statement of Directors Responsibility in respect of the preparation of the Financial Statements for the financial year ended 31 March The Directors are required by the Companies Act, 1965 ( the Act ) to ensure that the financial statements prepared for each financial year give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year and of the results and cash flows of the Group and the Company for the financial year. As required by the Act and the Listing Requirements of Bursa Malaysia Securities Berhad, the financial statements have been prepared in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Act. The Directors consider that in preparing the financial statements for the financial year ended 31 March 2007 set out on pages 79 to 187, the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates and ensured that all applicable approved accounting standards have been followed. The Directors have ensured that the accounting records to be kept by the Group and the Company have been properly kept in accordance with the provisions of the Act, which disclose with reasonable accuracy the financial position of the Group and of the Company. This Statement is made in accordance with a resolution of the Board of Directors dated 18 July 2007.

80 Financial Statements 79 Directors Report 85 Consolidated Income Statements 86 Company Income Statements 87 Balance Sheets 89 Consolidated Statement of Changes in Equity 91 Company Statement of Changes in Equity 92 Cash Flow Statements 96 Notes to the Financial Statements 188 Statement by Directors 189 Statutory Declaration 190 Report of the Auditors

81 Directors Report 79 The Directors of DRB-HICOM Berhad have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 March PRINCIPAL ACTIVITIES The Company is an investment holding company with investments in the automotive (including defence), services and property and construction segments. The principal activities of the subsidiary companies, jointly controlled entities and associated companies are described in Note 3 to the financial statements. There has been no significant change in these activities during the financial year. FINANCIAL RESULTS Group RM 000 Company RM 000 Net profit for the financial year 156, ,241 Attributable to: Equity holders of the Company 95, ,241 Minority interest 61, , ,241 DIVIDENDS Dividends paid/payable by the Company since 31 March 2006 were as follows: RM 000 In respect of the financial year ended 31 March 2006: First and final dividend of 2.0 sen gross per share, less taxation of 28% for the financial year ended 31 March 2006, paid on 18 October 2006: in respect of ordinary shares in issue as at 31 March ,397 in respect of ordinary shares issued after 31 March 2006 but before book closure date of dividend entitlement 48 14,445 In respect of the financial year ended 31 March 2007: Interim dividend of 1.0 sen gross per share, less taxation of 27%, paid on 13 April ,356 Total dividends paid/payable 21,801

82 80 Directors Report DIVIDENDS (Continued) The Directors recommend the payment of a final gross dividend of 2.5 sen per share, less taxation of 27%, amounting to RM18,388,828 in respect of the financial year ended 31 March 2007, subject to the approval of shareholders at the forthcoming Annual General Meeting of the Company. RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the financial year are disclosed in the financial statements. SIGNIFICANT SUBSEQUENT EVENTS (a) On 17 April 2007, the Company entered into a Share Sale Agreement with Merong Mahawangsa Sdn. Bhd. for the proposed disposal of its entire 20% equity interest in Gerbang Perdana Sdn. Bhd. ( Gerbang Perdana ) for a total cash consideration of RM14 million. On 26 June 2007, the proposed disposal was completed and as a result, Gerbang Perdana ceased to be an associated company of the Group. (b) (c) (d) On 8 June 2007, HICOM Indungan Sdn. Bhd., effectively a wholly-owned subsidiary of the Company entered into a Sale and Purchase Agreement with EON Properties Sdn. Bhd., a wholly-owned subsidiary of Edaran Otomobil Nasional Berhad to acquire approximately acres of the freehold land held under title No. HS (D) , Lot No. PT470, Bandar Glenmarie, District of Petaling, Selangor for a total cash consideration of RM67 million. The proposed transaction is subject to approval from the relevant authorities. On 19 June 2007, the Company and its effective 100% owned subsidiary, HICOM Holdings Berhad, entered into a Joint Venture Agreement ( JVA ) with Isuzu Motors Limited, Japan ( Isuzu ) in respect of the parties equity participation in Malaysian Truck & Bus Sdn. Bhd. ( MTB ) and to regulate their relationship in the conduct and affairs of MTB. Currently, the Group and Isuzu hold 80% and 20% equity interest in MTB respectively. Upon restructuring of the equity holding, MTB s name will be changed to Isuzu HICOM Malaysia Sdn. Bhd. and the Group and Isuzu will hold 49% and 51% equity interest in MTB respectively. As a result, MTB will become an associated company of the Group. The proposed JVA, including the disposal of a 31% equity stake by the Group, is subject to approval from the relevant authorities. As announced to Bursa Malaysia on 13 July 2007 by the Company, the Board of Directors of the Company has received an offer on the same date from Motivasi Asia Sdn. Bhd. ( Motivasi Asia ) to sell its entire shareholding in Rangkai Positif Sdn. Bhd. ( Rangkai Positif ) to the Company for RM720 million to be satisfied by the issuance of new ordinary shares of RM1.00 each in the Company to be issued based on the indicative issue price of RM1.91 per new ordinary share, subject to the terms and conditions of the Offer. The indicative issue price is based on the five day weighted average as at 12 July 2007 of RM1.91 per new ordinary share. The principal activity of Rangkai Positif is to provide operation and maintenance services to the Tanjung Bin Power Plant ( Plant ) located in the state of Johor based on a concession period of 25 years from 28 September The Plant comprises three coal-fired generating units with a total capacity of 2,100 megawatts and sells electricity to Tenaga Nasional Berhad.

83 81 SIGNIFICANT SUBSEQUENT EVENTS (Continued) The Board of Directors has recommended that the Company accepts the Offer subject to the following: Advice by the relevant advisers of the Company that the Offer will be deemed in the best interest of the Company; and The purchase consideration of RM720 million will be deemed fair and appropriate based on the appraisal by an independent valuer to be appointed by the Company. Upon satisfaction of the above conditions, the Company will enter into a definitive Share Sale Agreement with Motivasi Asia, which shall be subject to the approvals of the relevant authorities and shareholders of the Company. ISSUE OF SHARES During the financial year, the Company s issued and paid-up share capital increased from RM999,771,729 to RM1,007,607,035 by way of issue of 7,835,306 new ordinary shares of RM1.00 each, pursuant to following: (i) (ii) Exercise of 3,328,100 share options under the Employees Share Option Scheme ( ESOS ), at option prices ranging from RM1.00 to RM1.69 per share. Exchange of RM6,771,750 nominal value of Redeemable Exchangeable Unsecured Loan Stock ( REULS ) plus accrued interest of RM1,521,509 of Gadek (Malaysia) Berhad, a wholly-owned subsidiary company into 4,507,206 new ordinary shares of the Company, at an issue price of RM1.84 per share. The new shares rank pari passu in all respects with the existing shares of the Company including entitlement to the final dividend proposed for the financial year ended 31 March EMPLOYEES SHARE OPTION SCHEME The DRB-HICOM Berhad Employees Share Option Scheme ( ESOS ) expired on 9 April During the financial year ended 31 March 2007, a total of 3,328,100 ordinary shares were issued by virtue of the exercise of the options at prices ranging from RM1.00 to RM1.69 per share. As at the expiry date of 9 April 2006, there were 26,037,100 options not exercised and have therefore, lapsed.

84 82 Directors Report DIRECTORS The Directors who have held office during the period since the date of the last report are as follows: Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail (Chairman) Datuk Haji Mohd Khamil bin Jamil (Group Managing Director) Mohd Redza Shah bin Abdul Wahid (Executive Director/Group Chief Operating Officer) (Appointed on 28 November 2006) Noorrizan binti Shafie (Appointed on 28 November 2006) Ibrahim bin Taib Tan Sri Ab. Rahman bin Omar Datuk Haji Abdul Rahman bin Mohd Ramli Dato Syed Mohamad bin Syed Murtaza Ong Ie Cheong Tan Sri Marzuki bin Mohd Noor (Appointed on 28 November 2006) Dato Hajjah Safiah bt Basrah (Resigned on 27 September 2006) DIRECTORS INTERESTS None of the Directors in office at the end of the financial year held any interests in the shares of the Company or its related companies during the financial year. DIRECTORS Benefits During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than emoluments disclosed in Note 6 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

85 83 STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS Before the income statements and balance sheets were made out, the Directors took reasonable steps: (a) (b) to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and had satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: (a) (b) (c) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group or of the Company to meet their obligations as and when they fall due. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Group and of the Company which has arisen since the end of the financial year. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

86 84 Directors Report STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (Continued) In the opinion of the Directors, other than as disclosed in the financial statements,: (a) (b) the results of the Group s and of the Company s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to substantially affect the results of the operations of the Group or of the Company for the financial year in which this report is made. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. In accordance with a resolution of the Board of Directors dated 18 July Y.A.M. TAN SRI DATO SERI SYED ANWAR JAMALULLAIL Chairman DATUK HAJI MOHD KHAMIL BIN JAMIL Group Managing Director

87 Consolidated Income Statements for the financial year ended 31 March Note Restated RM 000 RM 000 Revenue 4 2,905,421 3,522,835 Cost of sales (2,347,396) (3,108,615) Gross profit 558, ,220 Other income 346, ,392 Selling and distribution costs (92,990) (107,231) Administrative expenses (378,753) (447,753) Other expenses (90,222) (239,216) Finance cost 8 (143,688) (130,789) Share of results of jointly controlled entities (net of tax) 27,844 26,547 Associated companies share of results (net of tax) 91, ,086 impairment loss of investment (131,000) (39,536) 134,086 Profit/(loss) before taxation 5 187,131 (196,744) Taxation 9 (30,600) 50,170 Net profit/(loss) for the financial year 156,531 (146,574) Attributable to: Equity holders of the Company 95,073 (204,975) Minority interest 61,458 58, ,531 (146,574) Gross dividends per share (sen) Earnings/(loss) per share (sen) Basic 11 (a) 9.47 (20.72) Fully diluted 11 (b) 9.47 (20.69) The notes to the accounts on pages 96 to 187 form an integral part of the financial statements.

88 86 Company Income Statements for the financial year ended 31 March 2007 Note RM 000 RM 000 Revenue 4 155,822 18,922 Cost of sales (15,562) Gross profit 155,822 3,360 Other income 251,879 33,074 Administrative expenses (22,821) (37,331) Other expenses (19,183) (37,810) Finance cost 8 (58,404) (42,102) Profit/(loss) before taxation 5 307,293 (80,809) Taxation 9 (40,052) 776 Net profit/(loss) for the financial year 267,241 (80,033) The notes to the accounts on pages 96 to 187 form an integral part of the financial statements.

89 Balance Sheets as at 31 March ASSETS NON CURRENT ASSETS Group Company Note Restated RM 000 RM 000 RM 000 RM 000 Property, plant and equipment 12 1,777,170 2,069,053 1,227 76,889 Investment properties ,827 85,319 Biological assets 14 19,616 21,851 Land held for property development 15 (b) 311, ,237 Subsidiary companies 16 Investments 3,077,329 3,067,329 Amounts due 1,431,370 1,199,014 Jointly controlled entities , ,166 9,800 9,800 Associated companies 18 1,339,434 1,446,280 57,803 59,325 Other investments , ,805 Intangible assets 20 9,715 3,341 Deferred tax assets 21 71,662 75,652 1,534 CURRENT ASSETS 4,946,788 4,993,385 4,662,848 4,413,891 Assets held for sale 22 6,044 1,603 Inventories , ,606 Property development costs 15 (a) 110, ,215 Trade and other receivables ,982 1,269, , ,310 Tax recoverable 104,501 99,534 24,796 32,189 Marketable securities , ,158 38,781 17,255 Short term deposits 26 1,180,099 1,061, , ,911 Cash and bank balances , ,147 1,298 2,084 3,285,430 3,550, , ,749 TOTAL ASSETS 8,232,218 8,544,283 5,022,951 5,072,640

90 88 Balance Sheets as at 31 March 2007 (Continued) EQUITY AND LIABILITIES Group Company Note Restated RM 000 RM 000 RM 000 RM 000 Share capital 28 1,007, ,772 1,007, ,772 Reserves 1,593,789 1,462,418 2,888,222 2,631,153 Equity attributable to equity holders of the parent 2,601,396 2,462,190 3,895,829 3,630,925 Minority interests 737, ,780 TOTAL EQUITY 3,339,074 3,126,970 3,895,829 3,630,925 NON CURRENT LIABILITIES Life assurance fund 29 1,087, ,786 Deferred income 30 69,478 75,263 Long term borrowings 31 1,595,962 1,896, , ,832 Sinking fund Deferred tax liabilities 21 69,032 57,259 1,055 CURRENT LIABILITIES 2,823,366 2,839, , ,832 General and life insurance funds , ,054 Trade and other payables ,227 1,399, , ,883 Provision for liabilities and charges 35 24,625 48,241 Bank borrowings 36 Bank overdrafts 27,079 59,811 Others 658, ,743 99,000 99,000 Current tax liabilities 26,017 14,471 Dividend payable 7,356 7,356 2,069,778 2,577, , ,883 TOTAL LIABILITIES 4,893,144 5,417,313 1,127,122 1,441,715 TOTAL EQUITY AND LIABILITIES 8,232,218 8,544,283 5,022,951 5,072,640 The notes to the accounts on pages 96 to 187 form an integral part of the financial statements.

91 Consolidated Statement of Changes in Equity for the financial year ended 31 March Issued and fully paid ordinary shares of RM1.00 equity each Non-distributable Distributable attributable Currency to equity Share Merger Translation Other Retained holders Nominal Premium Reserve Differences Reserves Earnings of the Minority Note Value (Note 37) (Note 38) (Note 39) (Note 39) (Note 41) Company Interests Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 April ,772 16, ,016 2, , ,626 2,443, ,780 3,108,463 Prior year adjustments 2.2 (vi) 6,146 (6,428) 18,789 18,507 18,507 As restated 999,772 16, ,016 9,075 97, ,415 2,462, ,780 3,126,970 Fair value adjustments on investment properties 2.2 (v) 41,602 41,602 5,984 47,586 Deferred tax in relation to fair value adjustments 1,311 1,311 1,311 Share of an associated company s reserves (716) (716) (716) Currency translation differences of subsidiary companies (3,843) 4, ,180 Share of subsidiary companies reserves 10,998 10, ,091 Acquisition of additional shares in a subsidiary company 42 (9,330) (9,330) Acquisition of subsidiary companies 42 53,469 53,469 Disposal of subsidiary companies 43 (315) (315) Dividends paid to minority interests (38,739) (38,739) Net gains not recognised in the income statement (4,559) 10,998 4,745 11,184 5,456 16,640 Transfer to other reserves 39 11,725 (11,725) Issue of ordinary shares 28/37 7,835 4,002 11,837 11,837 Net profit for the financial year 95,073 95,073 61, ,531 Final dividend in respect of financial year ended 31 March (14,445) (14,445) (14,445) Interim dividend in respect of financial year ended 31 March (7,356) (7,356) (7,356) At 31 March ,007,607 20, ,016 4, , ,620 2,601, ,678 3,339,074

92 90 Consolidated Statement of Changes in Equity for the financial year ended 31 March 2006 (Continued) 2006 Issued and fully paid ordinary shares of RM1.00 equity each Non-distributable Distributable attributable Currency to equity Share Merger Translation Other Retained holders Nominal Premium Reserve Differences Reserves Earnings of the Minority Note Value (Note 37) (Note 38) (Note 39) (Note 39) (Note 41) Company Interests Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 1 April ,670 6, ,016 6, , ,274 2,649, ,157 3,321,372 Prior year adjustments 2.2 (vi) 19,501 19,501 19,501 As restated 985,670 6, ,016 6, , ,775 2,668, ,157 3,340,873 Share of an associated company s reserves (316) (316) (316) Currency translation differences of subsidiary companies (3,744) (3,744) (6,385) (10,129) Share of subsidiary companies reserves (1,218) (1,218) Disposal of a subsidiary company (271) (271) Redemption of preference shares held by minority interests (2,160) (2,160) Transfer of capital reserves arising from the expiry of warrants (20,383) 20,383 Dividend paid to minority interests (55,744) (55,744) Net losses not recognised in the income statement (4,060) (20,383) 20,383 (4,060) (65,778) (69,838) Transfer to other reserves 39 6,146 8,315 (14,461) Issue of ordinary shares 28/37 14,102 9,714 23,816 23,816 Net loss for the financial year (204,975) (204,975) 58,401 (146,574) Final dividend in respect of financial year ended 31 March (21,307) (21,307) (21,307) At 31 March ,772 16, ,016 9,075 97, ,415 2,462, ,780 3,126,970 The notes to the accounts on pages 96 to 187 form an integral part of the financial statements.

93 Company Statement of Changes in Equity for the financial year ended 31 March Issued and fully paid ordinary shares of RM1.00 each Non-distributable Distributable Other Retained Nominal Share Merger reserves earnings Note value (Note 37) (Note 38) (Note 39) (Note 41) Total RM 000 RM 000 RM 000 RM 000 RM 000 RM At 1 April ,772 16,699 2,318, ,133 3,630,925 Fair value adjustments on investment properties 2.2 (v) 7,627 7,627 As restated 999,772 16,699 2,318, ,760 3,638,552 Issue of ordinary shares 28/37 7,835 4,002 11,837 Net profit for the financial year 267, ,241 Final dividend in respect of the financial year ended 31 March (14,445) (14,445) Interim dividend in respect of the financial year ended 31 March (7,356) (7,356) At 31 March ,007,607 20,701 2,318, ,200 3,895, At 1 April ,670 6,985 2,318,321 20, ,090 3,708,449 Net gain not recognised in income statement: Transfer of capital reserves arising from the expiry of warrants (20,383) 20,383 Issue of ordinary shares 28/37 14,102 9,714 23,816 Net loss for the financial year (80,033) (80,033) Final dividend in respect of the financial year ended 31 March (21,307) (21,307) At 31 March ,772 16,699 2,318, ,133 3,630,925 The notes to the accounts on pages 96 to 187 form an integral part of the financial statements.

94 92 Cash Flow Statements for the financial year ended 31 March 2007 CASH FLOWS FROM OPERATING ACTIVITIES Group Company Restated RM 000 RM 000 RM 000 RM 000 Net profit/(loss) for the financial year 156,531 (146,574) 267,241 (80,033) Adjustments for non-cash items: Doubtful debts 26,769 (6,913) 19,183 2,170 Amortisation of intangible assets 1, Biological assets written off 2,340 Depreciation of property, plant and equipment 133, , ,747 Finance cost 143, ,789 58,404 42,102 Impairment losses of investments and property, plant and equipment 169, ,138 14,568 Inventories written off/down (net of write back) 98,753 20, Disposal/write off of property, plant and equipment 6,786 (29,529) (1,018) 3,199 Preliminary project expenses written off 19,202 19,202 Provision for liabilities and charges (net of write back) 7,034 30,334 Taxation 30,600 (50,170) 40,052 (776) Accretion, allowance/(writeback of) marketable securities and other investments (26,835) 2,600 (21,525) 3,832 Discount on redemption of Loan Stocks 2002/2008 (661) (12,803) Dividend income (gross) (7,406) (6,624) (148,112) (145,005) Gain on disposal of shares in: subsidiary companies (28,786) (185) a jointly controlled entity (20) associated companies (16,743) (57) other investments (15,475) Gain on fair value adjustment of investment properties (20,478) Gain on waiver of borrowings (excludes waiver of bank overdraft amounting to RM13,009,000) (118,374) (93,939) Interest income (38,846) (37,936) (48,936) (32,342) Excess of fair value of net assets over purchase consideration (2,749) Net unrealised foreign exchange differences (12,367) (21,401) Share of results of jointly controlled entities (net of tax) (27,844) (26,547) Share of results of associated companies (net of tax) (91,464) (134,086) Cash inflow/(outflow) before working capital changes 368,527 70,671 71,716 (165,926) Inventories 40,097 (200,625) Property development costs 19,295 20,697 Trade and other receivables 396, , ,568 57,111 General and life insurance funds 323, ,484

95 93 CASH FLOWS FROM OPERATING ACTIVITIES (Continued) Group Company Note Restated RM 000 RM 000 RM 000 RM 000 Trade and other payables (394,670) 20,073 (161,911) 46,374 Amounts due from/(to) customers on contracts (4,112) 43,332 35,750 Intercompany balances (33,960) 3,547 (154,234) (45,840) Net cash generated from/(used in) operations 715, , ,139 (72,531) Interest received 38,028 32,331 28,110 12,278 Dividends received 95, ,554 55, ,411 Taxation paid, net of refunds (31,906) (43,135) Finance cost paid (123,219) (168,976) (50,574) (13,306) Net cash inflow from operating activities 693, , ,109 51,852 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from redemption of shares of a jointly controlled entity 3,000 Net cash inflow from disposal of subsidiary companies 43 3,697 3,449 Proceeds from disposal of a jointly controlled entity and associated companies 43 23, Proceeds from disposal/maturity of other investments by insurance subsidiary companies 557, ,241 Acquisition of other investments by insurance subsidiary companies (707,133) (538,290) Acquisition of shares in: a subsidiary company (7,790) (1,000) a jointly controlled entity (3,485) (2,450) an associated company (2,000) Proceeds from disposal of property, plant and equipment 9,069 56,957 1, Expenditure on biological assets (105) Purchase of property, plant and equipment (101,046) (122,720) (2) (690) Net cash outflow from acquisition of subsidiary companies 42 (934) Cost incurred on land held for property development (13,800) (20,417) Net cash (outflow)/inflow from investing activities (233,889) (279,935) 689 (2,148)

96 94 Cash Flow Statements for the financial year ended 31 March 2007 CASH FLOWS FROM FINANCING ACTIVITIES Group Company Restated RM 000 RM 000 RM 000 RM 000 Proceeds from issuance of ordinary shares 3,544 2,762 3,544 2,762 Proceeds from bank borrowings 360,013 1,711,747 83, ,850 Advances/(repayment of) loans to/ (from) subsidiary companies (58,606) (596,201) Dividends paid to minority interests (38,739) (55,744) Dividends paid to shareholders (14,445) (21,307) (14,445) (21,307) Fixed deposits held as security/ maintained as sinking fund (61,175) (5,474) (67,100) (6,264) Redemption of preference shares held by minority interests (2,160) Repayment of borrowings (596,942) (1,773,953) (150,000) (185,455) Net cash outflow from financing activities (347,744) (144,129) (202,872) (1,615) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 112,065 (116,981) (27,074) 48,089 Effects of foreign currency translation 3 (1,949) CASH AND CASH OF EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 1,050,154 1,169,084 57,659 9,570 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 1,162,222 1,050,154 30,585 57,659

97 95 Group Company Restated Note RM 000 RM 000 RM 000 RM 000 (a) Cash and cash equivalents at end of the financial year comprise the following: Short term deposits 1,180,099 1,061, , ,911 Cash and bank balances 128, ,147 1,298 2,084 Bank overdrafts (27,079) (59,811) 1,281,584 1,108, , ,995 Less: Fixed deposits held as security/sinking fund 26 (a) & (b) (119,362) (58,187) (112,436) (45,336) 1,162,222 1,050,154 30,585 57,659 (b) Non-cash transactions The principal non cash transactions during the financial year comprise the following: (i) Acquisition of property, plant and equipment by means of hire purchase and finance lease 12 (c) 13,126 9,636 (ii) Conversion of REULS plus accrued interest of a wholly-owned subsidiary company into ordinary shares of the Company 31 (c) 8,293 11,442 (iii) Share swap of investment in a former jointly controlled entity for an investment in an associated company 43 (ii) (a) 10,150 The notes to the accounts on pages 96 to 187 form an integral part of the financial statements.

98 96 Notes to the Financial Statements 31 March PRINCIPAL ACTIVITIES The Company is an investment holding company with investments in the automotive (including defence), services and property and construction segments. The principal activities of the subsidiary companies, jointly controlled entities and associated companies are described in Note 3 to the financial statements. There has been no significant change in these activities during the financial year. The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Bursa Saham Kuala Lumpur. The address of the registered office and principal place of business of the Company is Level 5, Wisma DRB-HICOM, No. 2, Jalan Usahawan U1/8, Seksyen U1, Shah Alam, Selangor Darul Ehsan, Malaysia. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies, unless otherwise stated below, have been used consistently in dealing with items which are considered material in relation to the financial statements: 2.1 Basis of preparation The financial statements comply with the provisions of the Companies Act, 1965 and Financial Reporting Standards ( FRSs ), the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities. The financial statements of the Group and of the Company are prepared under the historical cost convention except for those that are disclosed in this summary of significant accounting policies. The preparation of financial statements in conformity with the Financial Reporting Standards requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. The new accounting standards, amendments to published standards and IC Interpretations to existing standards issued by MASB and effective for the current financial year are as follows: (i) Applicable and adopted by the Group FRS 3 Business Combinations FRS 5 Non-Current Assets Held for Sale and Discontinued Operations FRS 101 Presentation of Financial Statements FRS 102 Inventories FRS 108 Accounting Policies, Changes in Estimates and Errors FRS 110 Events after the Balance Sheet Date FRS 116 Property, Plant and Equipment

99 97 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.1 Basis of preparation (Continued) (i) Applicable and adopted by the Group (Continued) FRS 121 The Effects of Changes in Foreign Exchange Rates FRS 127 Consolidated and Separate Financial Statements FRS 128 Investments in Associates FRS 131 Interests in Joint Ventures FRS 132 Financial Instruments: Disclosure and Presentation FRS 133 Earnings Per Share FRS 136 Impairment of Assets FRS 138 Intangible Assets FRS 140 Investment Property IC 112 Consolidation Special Purpose Entities IC 113 Jointly Controlled Entities Non-Monetary Contributions by Venturers IC 115 Operating Leases Incentives IC 121 Income Taxes Recovery of Revalued Non-Depreciable Assets IC 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease IC 129 Disclosure Service Concession Arrangements IC 132 Intangible Assets Web Site Costs (ii) Not applicable to the Group FRS 1 First-time Adoption of Financial Reporting Standards FRS 2 Share-based Payment Amendments to FRS Employee Benefits Actuarial Gains and Losses, Group Plans and Disclosures in relation to the asset ceiling test IC 107 Introduction of the Euro IC 110 Government Assistance No Specific Relation to Operating Activities IC 125 Income Taxes Changes in the Tax Status of an Entity or its Shareholders IC 131 Revenue Barter Transactions Involving Advertising Services 2.2 Changes in accounting policies and effects arising from adoption of new and revised FRSs The impact of adoption of new and revised FRSs are as follows: (i) FRS 3: Business Combinations The adoption of this new standard has resulted in the Group ceasing the write off of goodwill against reserves. Goodwill will now be carried at cost less accumulated impairment on the balance sheet and is now tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate that it might be impaired. Under FRS 3, the excess of fair value of net assets over purchase consideration is now recognised immediately in the income statement. Prior to 1 April 2006, the excess of fair value of net assets over purchase consideration was taken to reserves.

100 98 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Changes in accounting policies and effects arising from adoption of new and revised FRSs (Continued) (ii) FRS 5: Non-current Assets Held for Sale and Discontinued Operations The adoption of FRS 5 has affected the reclassification of certain assets which have now been reclassified as Assets held for sale upon meeting certain criterias where the carrying amount will be recovered principally through a sale transaction rather than through continuing use, and which are stated at the lower of their carrying amount and fair value less costs to sell. The Group has utilised the transitional provision of FRS 5 that allows the classification of assets held for sale on the balance sheet as at the previous financial year end, 31 March 2006, where the criterias for recognition have been met. (iii) FRS 101: Presentation of Financial Statements The adoption of the revised FRS 101 has affected the presentation of minority interests, share of after-tax results of associated and jointly controlled entities and other disclosures. In the consolidated balance sheet, minority interests are now presented within total equity. In the consolidated income statement, minority interests are presented as an allocation of the net profit or loss for the financial year. A similar requirement is also applicable to the statement of changes in equity. FRS 101 also requires disclosure, on the face of the statement of changes in equity, total recognised income and expenses for the period, showing separately the amounts attributable to equity holders of the parent and to minority interests. The share of results in associated companies and jointly controlled entities are now disclosed net of tax and minority interests in the consolidated income statement. Under FRS 101, plantation development expenditure, previously included within property, plant and equipment, is now presented as biological assets in a separate asset category on the balance sheet. (iv) FRS 128: Investments in Associates and FRS 131: Interests in Joint Ventures The adoption of FRS 128 and FRS 131 has resulted in a change in accounting policy, whereby the share of results of the associated companies and jointly controlled entities are based on the financial statements as of the same date as the financial statements of the Group. In the prior years, the share of results were taken from the latest financial statements of the associated companies and jointly controlled entities concerned made up to the end of their respective financial years. (v) FRS 140: Investment Property FRS 140 defines an investment property as a property held for long-term rental yield and/or for capital appreciation and, that is not occupied by the companies in the Group. The adoption of FRS 140 has resulted in a change in the accounting policy for investment properties, as well as the reclassification of certain properties previously recognised as property, plant and equipment and other investments to investment properties within non-current assets. The Group has adopted the fair value model to measure its investment properties. Gains or losses arising from changes in the fair values of investment properties are recognised in the income statement. Where an item is reclassified to investment property upon initial adoption of FRS 140, any difference between the carrying amount of the item and its fair value arising on the date of initial adoption is recognised as an adjustment to the opening retained earnings without restatement of comparatives.

101 99 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Changes in accounting policies and effects arising from adoption of new and revised FRSs (Continued) (vi) The effect to the Group s comparative figures on adoption of the above FRSs is as follows: Effect on Effect on Effect on A as previously adoption of adoption of adoption of stated FRS 101 FRS 128 FRS 131 As restated RM 000 RM 000 RM 000 RM 000 RM 000 Balance sheet As at 31 March 2006 Property, plant and equipment 2,090,904 (21,851) 2,069,053 Biological assets 21,851 21,851 Jointly controlled entities 303,745 (579) 303,166 Associated companies 1,427,194 19,086 1,446,280 Reserves 1,443,911 19,086 (579) 1,462,418 As at 1 April 2005 Retained earnings 629,274 20,100 (599) 648,775 Income statement Financial year ended 31 March 2006 Share of results of jointly controlled entities (net of tax) 38,784 (12,257) 20 26,547 Share of results of associated companies (net of tax) 184,585 (49,485) (1,014) 134,086 Taxation (11,572) 61,742 50,170 Net loss attributable to equity holders of the parent (203,981) (1,014) 20 (204,975) (vii) The impact to the Group s income statement for the financial year ended 31 March 2007 is as follows: Total RM 000 Other income 23,227 Share of results of jointly controlled entities (net of tax) 720 Share of results of associated companies (net of tax) (6,217) Net profit attributable to equity holders of the Company 17,730

102 100 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.3 Impact of new MASB pronouncements The Group has not adopted the following FRSs that are not mandatory for the current financial year. (i) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted The new standards that are applicable for the Group s financial year beginning on or after 1 April 2007 or later years are as follows: FRS 117: Leases (effective for accounting periods beginning on or after 1 October 2006). This standard requires the classification of leasehold land as prepaid lease payments. The Group will apply this standard from financial year beginning 1 April FRS 124: Related Party Disclosures (effective for accounting periods beginning on or after 1 October 2006). This standard requires the identification of related parties and some other related party disclosures. The Group will apply this standard from financial year beginning 1 April FRS 139: Financial Instruments: Recognition and Measurement (effective date yet to be determined by MASB). This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. The Group will apply this standard when effective. Amendments to FRS 112: Income Taxes (effective for accounting periods beginning on or after 1 July 2007). This amendment was issued on 15 June 2007 and now allows for the recognition of reinvestment allowances and investment tax credits as deferred tax assets. The Group s unutilised reinvestment allowances and utilised investment tax allowances carried forward as at 31 March 2007 amounted to RM195,703,000 and RM288,467,000 respectively for which no deferred tax effects has been recognised in the financial statements. The Group will be assessing whether the criteria for recognition has been met, which include the assessment of the nature of these allowances, estimations of future taxable income and choice of accounting policy. The Group will apply this amendment from the financial year beginning 1 April Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates Net Investment in a Foreign Operations (effective for accounting periods beginning on or after 1 July 2007). This amendment requires exchange differences on monetary items that form part of the net investment in a foreign operation to be recognised in equity instead of in profit or loss regardless of the currency in which these items are denominated in. The Group will be assessing the impact of this amendment and will apply this amendment from financial year beginning 1 April (ii) Standards, amendments to published standards and interpretations to existing standards that are not relevant for the Group s operations FRS 6: Exploration for and Evaluation of Mineral Resources (effective for accounting periods beginning on or after 1 January 2007). Amendment to FRS : Employee Benefits Actuarial Gains and Losses, Group Plans and Disclosures (effective for accounting periods beginning on or after 1 January 2007).

103 101 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.3 Impact of new MASB pronouncements (Continued) (ii) Standards, amendments to published standards and interpretations to existing standards that are not relevant for the Group s operations (Continued) IC Interpretation 2: Members Shares in Co-operative Entities and Similar Instruments (effective for accounting periods beginning on or after 1 July 2007). IC Interpretation 5: Rights to Interests arising from Decommission, Restoration and Environmental Rehabilitation Funds (effective for accounting periods beginning on or after 1 July 2007). IC Interpretation 6: Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment (effective for accounting periods beginning on or after 1 July 2007). IC Interpretation 7: Applying the Restatement Approach under FRS Financial Reporting in Hyperinflationary Economies (effective for accounting periods beginning on or after 1 July 2007). IC Interpretation 8: Scope of FRS 2 (effective for accounting periods beginning on or after 1 July 2007). Amendment to FRS : Cash Flow Statements (effective for accounting periods beginning on or after 1 July 2007). Amendment to FRS : Construction Contracts (effective for accounting periods beginning on or after 1 July 2007). Amendment to FRS : Revenue (effective for accounting periods beginning on or after 1 July 2007). Amendment to FRS : Employee Benefits (effective for accounting periods beginning on or after 1 January 2006). Amendment to FRS : Accounting for Government Grants and Disclosure of Government Assistance (effective for accounting periods beginning on or after 1 July 2007). Amendment to FRS : Accounting and Reporting by Retirement Benefit Plans (effective for accounting periods beginning on or after 1 January 2006). Amendment to FRS : Financial Reporting in Hyperinflationary Economies (effective for accounting periods beginning on or after 1 January 2006). Amendment to FRS : Interim Financial Reporting (effective for accounting periods beginning on or after 1 July 2007). Amendment to FRS : Provisions, Contingent Liabilities and Contingent Assets (effective for accounting periods beginning on or after 1 July 2007).

104 102 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.4 Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiary companies made up to the end of the financial year. Subsidiary companies are those companies in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The Group s subsidiary companies are listed in Note 3 to the financial statements. All the subsidiary companies are consolidated using the purchase method of accounting where the results of subsidiary companies acquired or disposed of during the financial year are included from the date on which control is transferred to the Group and are no longer consolidated from the date on which the control ceases. At the date of acquisition, the fair values of the subsidiary companies identifiable assets acquired and liabilities and contingent liabilities assumed are determined and these values are reflected in the consolidated financial statements. The cost of an acquisition is measured as fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group s share of its net assets including the cumulative amount of any currency exchange differences that relate to the subsidiary is recognised in the consolidated income statement. The total assets and liabilities of subsidiary companies are included in the Group s balance sheet and the interests of minority shareholders in the net assets are stated separately. All significant inter-company transactions, balances and unrealised gains on transactions are eliminated on consolidation and unrealised losses on transactions are also eliminated unless cost cannot be recovered. 2.5 Minority interests Minority interests represent the portion of profit or loss and net assets in subsidiary companies not held by the Group. Minority interests are initially measured at the minorities share of fair values of the identifiable assets and liabilities of the acquiree at the date of acquisition. The Group applies a policy of treating acquisition/disposal of shares from/to minority interests as transactions with parties external to the Group. Gains and losses resulting from disposal of shares in subsidiary companies to minority interests are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired. 2.6 Jointly controlled entities A jointly controlled entity is an enterprise which is neither a subsidiary nor an associated company of the Group but over which there is a contractually agreed sharing of control by the Group with one or more parties over the strategic operating, investing and financial policy decisions. The decisions require the unanimous consent of the parties sharing control. The Group s share of results of jointly controlled entities is included in the consolidated income statement using the equity method of accounting. In the consolidated balance sheet, the Group s interest in jointly controlled entities is stated at cost plus the Group s share of post acquisition retained profits and reserves less impairments. Where necessary, adjustments are made to the financial statements of jointly controlled entities to ensure consistency of accounting policies with those of the Group. The Group s jointly controlled entities are listed in Note 3 to the financial statements.

105 103 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.7 Associated companies An associated company is a company in which the Group is in a position to exercise significant influence in its management but which is does not control and is neither a subsidiary nor a jointly controlled entity. Significant influence is the power to participate in the financial and operating policy decisions of the associate but not control over those policies. The Group s share of results of associated companies is included in the consolidated income statement using the equity method of accounting. The share of the results of the associated company will not be taken into the Group s income statement when the carrying value of the investment in an associated company reaches zero unless the Group has incurred obligations or guaranteed obligations in respect of the associated company. In the consolidated balance sheet, the Group s interest in associated companies is stated at cost plus the Group s share of post acquisition retained profits and reserves less impairment. Where necessary, adjustments are made to the financial statements of associated companies to ensure consistency of accounting policies with those of the Group. The Group s associated companies are listed in Note 3 to the financial statements. 2.8 Investments Subsidiary companies, jointly controlled entities and associated companies Investments in subsidiary companies, jointly controlled entities and associated companies are stated at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. Marketable securities Quoted investments are stated at the lower of cost and market value determined on an aggregate portfolio basis by category of investments, except that if diminution in value of a particular investment is not regarded as temporary, a write-down to average median market value is made against the value of that investment. Market value is determined by reference to the stock exchange closing price at the balance sheet date. Other investments (i) Investments held by insurance subsidiary companies (a) Investments in Malaysian Government Securities, Cagamas Papers and other unquoted approved debt securities as specified by Bank Negara Malaysia, are stated at cost, adjusted for the amortisation of premiums or the accretion of discounts calculated on a constant yield basis over the period from the date of purchase to maturity date except where there is an indication of impairment, the investment is written-down to its net realisable value. The amortisation of premiums and accretion of discounts are recognised in the income statement. (b) Unquoted investments are stated at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the income statement in the period in which the decline is identified.

106 104 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.8 Investments (Continued) Other investments (Continued) (ii) Others Other investments are shown at cost and an allowance for diminution in value is made, where in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the income statement in the period in which the decline is identified. On disposal of investments, the difference between the net disposal proceeds and its carrying amount is charged or credited to the income statement. 2.9 Investment Properties Investment properties comprise land and buildings that are held for long term rental yield and/or for capital appreciation and that are not occupied by the companies in the Group. Investment properties are stated at fair value, representing open-market value determined annually by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. Gains or losses arising from changes in the fair values of investment properties are recognised in the income statement. On disposal of an investment property, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amount is recognised in the income statement in the period of the retirement or disposal Non-current assets held for sale Non-current assets are classified as held for sale and stated at the lower of carrying amount and fair value less cost to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary Biological assets Biological assets comprise new planting expenditure incurred from land clearing to the point of harvesting. This expenditure is capitalised and is not amortised, unless a different crop is planted on the existing land area, in which case the amount is written off in the year when the different crop is planted. Where the cost of new planting is incurred on leasehold land which has an unexercised period shorter than the crop s economic life, the cost is amortised over the remaining period of the lease on a straight line basis. Replanting expenditure, which represent cost incurred in replanting old planted areas, is charged to income statement in the year in which it is incurred Property, plant and equipment and depreciation Freehold land is not depreciated as it has an infinite life. Depreciation on assets under construction commences when the assets are ready for their intended use. All other property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Interest costs on specific and identifiable borrowings used to finance the acquisition of property, plant and equipment are capitalised and carried forward as part of property, plant and equipment. Capitalisation of borrowing costs ceases when assets are ready for their intended use.

107 105 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.12 Property, plant and equipment and depreciation (Continued) Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are recognised in the income statement. Where an indication of impairment exists, the carrying amount of the property, plant and equipment is assessed and written down immediately to its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. At each balance sheet date, the Group assesses whether there is any indication of impairment. Leasehold land is amortised on a straight line basis over the periods of the respective leases which range from 28 to 914 years. Other property, plant and equipment are depreciated on a straight line basis to write off the cost of the assets to their residual values over their estimated useful lives. The estimated useful lives in years are as follows: Buildings, golf course and improvements Plant and machinery Motor vehicles Office equipment Furniture and fittings 4 98 years 5 30 years 3 10 years 3 10 years 3 10 years Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each balance sheet date. The Group revised the residual values and useful lives of certain property, plant and equipment at the balance sheet date. The revision was accounted for as change in accounting estimate and as a result, the depreciation charge for current and future years will reduce by RM41,063, Goodwill Goodwill represents the excess of the cost of acquisition of subsidiaries, jointly controlled entities and associated companies over the fair value of the Group s share of the identifiable net assets at the time of acquisition. Goodwill on acquisitions of subsidiaries is included in the balance sheet as intangible assets. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Goodwill arising on the acquisition of subsidiary companies is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose. The Group allocates goodwill to each business segment in which it operates. Goodwill on acquisitions of jointly controlled entities and associated companies is included in investment in jointly controlled entities and associated companies respectively. Such goodwill is tested for impairment as part of the overall balance.

108 106 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.14 Intangible assets other than goodwill Intangible assets comprise plant and assembly licences and expenses incurred for development of products, are considered to have finite useful lives, and are amortised equally over the period of their expected benefit or charged to income statement in the financial year in which the related plant or product is abandoned or considered to be of no value. Where an indication of impairment exists, the carrying amount of the intangible assets is assessed and written down immediately to its recoverable amount. Preliminary and pre-operating expenses are written off to the income statement in the financial year in which they are incurred Property development activities (i) Land held for property development Land held for property development consist of land on which no significant development work has been undertaken or where development activities are not expected to be completed within the normal operating cycle. Such land is classified as non current assets and is stated at cost less accumulated impairment losses. Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, conversion fees and other relevant levies. Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. Land held for property development is transferred to property development costs (within current assets) when development work is to be undertaken and is expected to be completed within the normal operating cycle. On disposal of land held for property development, the difference between the net disposal proceeds and its carrying amount is charged or credited to the income statement. (ii) Property development costs Where the outcome of a development can be reliably estimated, property development revenue and expenditure are recognised using the percentage of completion method. The percentage of completion is measured by reference to the development costs incurred to date in proportion to the estimated total costs for the property development. Where the outcome of a development activity cannot be reliably estimated, property development revenue is recognised only to the extent of costs incurred that is probable will be recoverable. Property development costs on development units sold are recognised as an expense when incurred. Irrespective of whether the outcome of a property development activity can be estimated reliably, when it is probable that total property development costs will exceed total property development revenue, the expected loss is recognised as an expense immediately.

109 107 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.15 Property development activities (Continued) (ii) 2.16 Inventories Property development costs (Continued) Property development costs not recognised as an expense is recognised as an asset and are stated at lower of cost and net realisable value. Where revenue recognised in the income statement exceeds billings to purchasers, the balance is shown as accrued billings under receivables (within current assets). Where billings to purchasers exceed revenue recognised, the balance is shown as progress billings under payables (within current liabilities). Revenue and profit from completed properties is recognised in accordance with the terms of the sale and purchase agreements. Interest on borrowings incurred on property development costs is capitalised. Capitalisation of borrowing costs ceases upon completion of property development activities. Inventories are stated at the lower of cost and net realisable value. (i) (ii) Raw materials, work-in-progress, finished goods and consumables Raw materials and consumables are stated at cost. Work-in-progress and finished goods represent raw materials, direct labours, direct charges and allocated process costs, where necessary. Cost is principally determined on a first-in, first-out basis. Inventories of unsold properties The cost of unsold properties comprises cost associated with the acquisition of land, direct costs and an appropriate allocation of allocated costs attributable to property development activities. Net realisable value is the estimated selling price in the ordinary course of business less the costs of completion and selling expenses Receivables Receivables are carried at anticipated realisable value. An estimate is made for doubtful receivables based on a review of all outstanding amounts at the financial year end. Bad debts are written off in the financial year in which they are identified Cash and cash equivalents For the purposes of the cash flow statements, cash and cash equivalents consist of cash in hand, bank balances, demand deposits, bank overdrafts and short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

110 108 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.19 Income taxes Income tax on the profit or loss for the financial year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial year and is measured using the tax rates that have been enacted at the balance sheet date. Deferred tax is provided for in full, using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities for tax purposes and their carrying amounts in the financial statements. Deferred tax is not recognised if the temporary difference arises from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax assets are recognised to the extent that is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is recognised on temporary differences arising on investments in subsidiary companies, jointly controlled entities and associated companies except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantially enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill Share capital (i) Classification Ordinary shares are classified as equity. (ii) Dividends to shareholders of the Company Dividends on ordinary shares are recognised as liabilities when declared before the balance sheet date. A dividend proposed after the balance sheet date, but before the financial statements are authorised for issue, is not recognised as a liability at the balance sheet date. Upon the dividend becoming payable, it will be accounted for as a liability Provisions (i) Warranty and sales returns A provision is made for the estimated liability on all products still under warranty and provision for sales returns is made for estimated returns of goods as at the balance sheet date. These provisions are arrived at based on service and sales returns historical data. (ii) Restructuring, mutual separation schemes and voluntary separation scheme costs Restructuring, mutual separation scheme and voluntary separation scheme provisions mainly comprise employee termination costs and other related costs and are recognised in the financial year in which the Group becomes legally or constructively committed to payment.

111 109 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.22 Employee benefits (i) Short term employee benefits Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group and Company. (ii) Defined contribution plan A defined contribution plan is a pension plan under which the Group and Company pay fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods. The Group s and Company s contributions to the defined contribution plan are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group and Company have no further payment obligations. (iii) Termination benefits Termination benefits are payable to an entitled employee whenever the employment has to be terminated before the normal retirement date or when the employee accepts mutual/voluntary separation in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy General insurance underwriting results The general insurance underwriting results are determined for each class of business after taking into account reinsurances, commissions, unearned premiums and claims incurred. Premium income Premium income is recognised in a financial year in respect of risks assumed during that particular financial year. Premiums from direct business are recognised during the financial year upon the issuance of insurance policies. Premiums in respect of risks incepted for which policies have not been issued as of the balance sheet date are accrued at that date. Inward treaty reinsurance premiums are recognised on the basis of periodic advices received from ceding insurers. Outward reinsurance premiums are recognised in the same accounting period as the original policy to which the reinsurance relates. Unearned premium reserves Unearned premium reserves ( UPR ) represent the portion of the net premiums of insurance policies written that relate to the unexpired periods of the policies at the end of the financial year.

112 110 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.23 General insurance underwriting results (Continued) Unearned premium reserves (Continued) In determining the UPR at the balance sheet date, the method that most accurately reflects the actual unearned premium is used, as follows: (i) (ii) 25% method for marine cargo, aviation cargo and transit; 1 / 24 th method for all other classes of Malaysian general policies reduced by the percentage of accounted gross direct business commissions to the corresponding premiums, not exceeding limits specified by Bank Negara Malaysia; (iii) 1 / 8 th method for all other classes of overseas inward business with a deduction of 20% for acquisition costs; and (iv) time appointment method for policies with insurance periods other than 12 months. Provision for claims A liability for outstanding claims is recognised in respect of both direct insurance and inward reinsurance. The amount of outstanding claims is the best estimate of the expenditure required together with related expenses less recoveries to settle the present obligation at the balance sheet date. Provision is also made for the cost of claims, together with related expenses, incurred but not reported at the balance sheet date, based on an actuarial valuation by an independent qualified actuary. Acquisition costs The cost of acquiring and renewing insurance policies, net of income derived from ceding reinsurance premiums, are recognised as incurred and allocated to the periods in which they give rise to income Life insurance underwriting results The surplus transferable from the life insurance fund to the income statement is based on the surplus determined by an annual actuarial valuation of the long term liabilities to policyholders, made in accordance with the provisions of the Insurance Act, 1996 by the appointed actuary. In the event the actuarial valuation indicates that a transfer is required from the shareholders fund, the transfer from the income statement to the life insurance fund is made in the year of the actuarial valuation. In the consolidated financial statements, all life insurance underwriting results are reflected through movements in the life assurance fund. Premium income Premium income includes premium recognised in the life fund. Premium income of the life fund is recognised as soon as the amount of the premium can be reliably measured. First premium is recognised from inception date and subsequent premium is recognised when it is due.

113 111 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.24 Life insurance underwriting results (Continued) Premium income (Continued) At the end of the financial year, all due premiums are accounted for to the extent that they can be reliably measured. Outward reinsurance premiums are recognised in the same accounting period as the original policies to which the reinsurance relates. Premium income of the investment-linked funds are in respect of the net creation of units which represents premiums paid by policyholders as payment for a new contract or subsequent payments to increase the amount of that contract. Net creation of units is recognised on a receipt basis. Commission and agency expenses Commission and agency expenses, which are costs directly incurred in securing premium on insurance policies, net of income derived from reinsurers in the course of ceding of premium to reinsurers, are charged to the life insurance revenue account in the financial year in which they are incurred. Provision for claims Claims and settlement costs that are incurred during the financial year are recognised when a claimable event occurs and/or the insurer is notified. Recoveries on reinsurance claims are accountable for in the same financial year as the original claims are recognised. Claims and provisions for claims arising on life insurance policies including settlement costs, less reinsurance recoveries, are accounted for using the case basis method and for this purpose, the benefits payable under a life insurance policy are recognised as follows: (i) (ii) maturity or other policy benefit payments due on specified dates are treated as claims payable on the due dates; and death, surrender and other benefits without due dates are treated as claims payable, on the date of receipt of intimation of death of the assured or occurrence of contingency covered. The benefits payable under investment-linked business are in respect of net cancellation of units and are recognised as surrender Construction contracts When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised over the period of the contract as revenue and expenses respectively. The Group uses the percentage of completion method to determine the appropriate amount of revenue and costs to be recognised in a given period; the percentage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total costs. When it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

114 112 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.25 Construction contracts (Continued) When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable and contract costs are recognised as expenses when incurred. The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against the progress billings periodically. Where costs incurred and recognised profit (less recognised losses) exceeds progress billings, the balance is shown as amounts due from customers on construction contracts under current assets. Where progress billings exceed costs incurred plus recognised profit (less recognised losses), the balance is shown as amounts due to customers on construction contracts under current liabilities Assets under lease arrangements (i) Finance leases Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases. Assets acquired under finance lease arrangements are included in property, plant and equipment and the capital element of the leasing commitments is shown under borrowings. The lease rentals are treated as consisting of capital and interest element. The capital element is applied to reduce the outstanding obligations and the interest element is charged to income statement so as to give a constant periodic rate of interest on the outstanding liability at the end of each accounting period. Assets acquired under finance lease are depreciated over the useful lives of equivalent owned assets or its lease term, if shorter. (ii) Operating leases Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rental payments on operating leases are charged to the income statement in the financial year they become payable. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place Revenue recognition Other than revenue recognition policies mentioned elsewhere in the summary of significant accounting policies, set out below are other significant revenue recognition policies used by the Group: (i) (ii) Sale of goods Sales are recognised upon delivery of goods, net of sales tax, returns, discounts and allowances. Rendering of services (a) Club membership fees Annual licence fees disclosed as deferred income are recognised on a straight line basis over the duration of the membership.

115 113 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.27 Revenue recognition (Continued) (ii) Rendering of services (Continued) (b) Solid waste management Revenue from management services, solid waste disposal and tipping fees are recognised upon performance of services less discounts. (c) (d) Vehicle inspection income Income from inspection of vehicles are recognised upon the rendering of inspection services. Ground handling services Revenue from ground handling, inflight catering and cargo handling are recognised upon performance of services less discounts. (iii) Dividend income Dividends are recognised when the Group s right to receive payment is established Foreign currency translation Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency ). The financial statements are presented in Ringgit Malaysia ( RM ), which is the Company s functional and presentation currency. Transactions in foreign currencies during the financial year are converted into functional currency at the rates of exchange ruling on the transaction dates. Monetary assets and liabilities in foreign currency are translated into Ringgit Malaysia at rates of exchange approximating those ruling on the balance sheet date. Exchange gains and losses are dealt with in the income statement. The assets and liabilities of foreign subsidiary companies that have a functional currency other than RM are translated into Ringgit Malaysia at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at average exchange rates. Exchange differences are recognised in the statement of changes in equity as currency translation reserves. On disposal of foreign subsidiary companies, such translation differences are recognised in the income statement as part of the gain or loss on disposal.

116 114 Notes to the Financial Statements 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.29 Financial Instruments Description A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial assets from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A financial liability is any liability that is a contractual obligation to deliver cash or other financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. Financial Instruments Recognised on the Balance Sheet The particular recognition and measurement method for financial instruments recognised on the balance sheet is disclosed in the individual policy statements associated with each item. Financial Instruments Not Recognised on the Balance Sheet Exchange gains and losses arising on forward foreign exchange contracts entered into as hedges of anticipated future transactions are deferred until the date of such transactions, at which time they are included in the measurement of such transactions. Fair Value Estimation for Disclosure Purposes The fair value of publicly traded financial instruments is based on quoted market prices at the balance sheet date. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date. In assessing the fair value of non-traded financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Techniques such as estimated discounted value of future cash flows, are used to determine fair value. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments. The carrying value of financial assets and liabilities of the Group at the balance sheet date approximated their fair value except as disclosed in the relevant notes to the financial statements. The carrying values for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values.

117 115 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.30 Segment reporting Segment reporting is presented for enhanced assessment of the Group s risks and returns. Business segments provide products or services that are subject to risk and returns that are different from those of other business segments. Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expense, assets and liabilities are determined before intragroup balances and intragroup transactions are eliminated as part of the consolidation process, except to the extent that such intragroup balances and transactions are between group enterprises within a single segment Contingent liabilities and contingent assets The Group does not recognise a contingent liability but disclosed its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstance where there is a liability that cannot be recognised because it cannot be measured reliably. A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain. In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed are measured initially at their fair value at the acquisition date.

118 116 Notes to the Financial Statements 31 March COMPANIES IN THE GROUP The principal activities of the companies in the Group and the effective interest of the Group as at 31 March 2007 therein are shown below: effective Equity Financial Name of Company Interest Principal Activities Year End % % SUBSIDIARY COMPANIES Subsidiary companies of DRB-HICOM Berhad: Gadek (Malaysia) Berhad Investment holding 31 March HICOM Holdings Berhad Investment holding 31 March Pusat Pemeriksaan Kenderaan Inspection of commercial vehicles for roadworthiness 31 March Berkomputer Sdn. Bhd. ( PUSPAKOM ) Imatex Sdn. Bhd. (formerly known as Imatex Berhad) Property investment and development, 31 March civil engineering and building construction DRB-HICOM Defence Technologies Sdn. Bhd Manufacture, supply, maintenance and marketing 31 March of military vehicles * Hicomobil Sdn. Bhd Distribution of motor vehicles 31 March Suzuki Malaysia Automobile Sdn. Bhd Distribution of motor vehicles 31 March * DRB-HICOM Information Technologies Sdn. Bhd Research and development, trading of computer 31 March hardware and software and provision of related consultancy services Malaysian Truck & Bus Sdn. Bhd Manufacture, assembly and sale of 31 March commercial vehicles DRB-HICOM Export Corporation Sdn. Bhd Dormant 31 March Intrakota Komposit Sdn. Bhd Dormant 31 March Motosikal Dan Enjin Nasional Manufacture, assembly and distribute motorcycles 31 March Sdn. Bhd. ( MODENAS ) and related spare parts and accessories * DRB-HICOM Auto Solutions Sdn. Bhd Vehicle importation, vehicle pre-delivery inspection and value added services for provision 31 March of logistics and vehicles. Subsidiary company of DRB-HICOM Defence Technologies Sdn. Bhd.: Defence Services Sdn. Bhd Engineering services including total refurbishment, 31 March (formerly known as MMC Defence Sdn. Bhd.) upgrading and research and development work for armoured vehicles.

119 117 3 COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Subsidiary companies of Gadek (Malaysia) Berhad: Mega Consolidated Sdn. Bhd Investment holding 31 March * Ladang Gadek Development Sdn. Bhd Cultivation and marketing of oil palm 31 March * Ladang Kupang Development Sdn. Bhd Cultivation and marketing of rubber and oil palm 31 March Uni.Asia Capital Sdn. Bhd Investment holding 31 March Perspec Prime (Malaysia) Sdn. Bhd Construction work and project management 31 March (disposed on 15 December 2006) Subsidiary companies of Perspec Prime (Malaysia) Sdn. Bhd.: Spegabina Sdn. Bhd Construction of infrastructure and housing projects 31 March The One Mix Sdn. Bhd Production and supply of ready-mixed concrete 31 March Subsidiary companies of Uni. Asia Capital Sdn. Bhd.: Uni.Asia Life Assurance Berhad Underwriting of life insurance business 31 March Uni.Asia General Insurance Berhad Underwriting of general insurance business 31 March Subsidiary company of Uni. Asia General Insurance Berhad: #* Seains Pte. Ltd. (dissolved on 26 August 2006) Dormant 31 March Subsidiary companies of HICOM Holdings Berhad: HICOM Berhad Management of projects, rental of properties 31 March and investment holding HICOM Diecastings Sdn. Bhd Manufacturing and supplying diecast parts for 31 March motorcycles, automobiles and other applications * HICOM Engineering Sdn. Bhd Manufacturing casted and machined parts 31 March and components HICOM Communications Sdn. Bhd Supply, installation and management of 31 March telecommunications and information technology products and systems

120 118 Notes to the Financial Statements 31 March COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Subsidiary companies of HICOM Holdings Berhad: (Continued) USF-HICOM Holdings Sdn. Bhd Investment holding 31 March Automotive Corporation Holdings Sdn. Bhd Investment holding 31 March Desa Puchong Sdn. Bhd Cultivation of oil palm 31 March HICOM Network Services Sdn. Bhd Provision of electronic communication, 31 March telecommunication and data processing services HICOM Technical and Dormant 31 March Engineering Services Sdn. Bhd. * Equality Services Sdn. Bhd Dormant 31 March HICOM Dewan Development Sdn. Bhd Dormant 31 March * NSE Development Sdn. Bhd Cultivation and marketing of rubber and oil palm 31 March * Bukit Kledek Development Sdn. Bhd Cultivation and marketing of rubber and oil palm 31 March HICOM Vertex Sdn. Bhd Dormant 31 March * Scott & English Electronics Holdings Sdn. Bhd Investment holding 31 March * Scott & English (Malaysia) Sdn. Bhd Importation, distribution and servicing of industrial, 31 March construction, engineering and automotive products * Comtrac Sdn. Bhd Construction works and the provision of 31 March projects and development management services * Oriental Summit Industries Sdn. Bhd Contract manufacturing of motorcycles and automobile 31 March parts and components Proton City Development Corporation Sdn. Bhd Property development, civil and building construction 31 March KL Airport Services Sdn. Bhd Superintendant of airport s operation systems and 31 March provision of related ground handling, inflight catering, cargo handling and warehousing space services Alam Flora Sdn. Bhd Management of integrated solid waste 31 March PHN Industry Sdn. Bhd Manufacturing stamped metal parts, sub-assembly 31 March (deemed subsidiary from 31 January 2007) of automotive components for the motor industry and design and manufacture of dies HICOM Petro-Pipes Sdn. Bhd Dormant 31 March HICOM-Teck See Manufacturing Manufacture and sale of thermo plastic and thermo 31 March Malaysia Sdn. Bhd. setting products

121 119 3 COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Subsidiary companies of HICOM Berhad: * HICOM Properties Sdn. Bhd Investment holding 31 March * Connemara Development Sdn. Bhd Dormant 31 March * HB Property Development Sdn. Bhd Property holding 31 March * Glenmarie Cove Development Sdn. Bhd Property development 31 March HICOM Megah Sdn. Bhd Investment holding 31 March HICOM-Selangor Marine Management Sdn. Bhd Dormant 31 March (dissolved on 12 January 2007) Subsidiary companies of HICOM Communications Sdn. Bhd.: HICOM Teleservices Sdn. Bhd Provision of value-added telecommunication services 31 March related to voice, facsimile, data interactive communications and multimedia and software systems and application development /* PT HICOM BMS Dormant 31 March Subsidiary company of HICOM-Teck See Manufacturing Malaysia Sdn. HICOM Automotive Plastic (Thailand) Ltd Manufacture of plastic injected parts for 31 March automotive industry Subsidiary company of USF-HICOM Holdings Sdn. Bhd.: * USF-HICOM (Malaysia) Sdn. Bhd Sale of motor vehicles and their related spare 31 March parts and accessories Subsidiary company of Automotive Corporation Holdings Sdn. Bhd.: * Automotive Corporation (Malaysia) Sdn. Bhd Sale of motor vehicles and their related spares 31 March and accessories

122 120 Notes to the Financial Statements 31 March COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Subsidiary company of USF-HICOM (Malaysia) Sdn. Bhd.: * Directional (Malaysia) Sdn. Bhd Distribution of motor vehicles and their related 31 March spare parts and accessories and workshop servicing Subsidiary company of Directional (Malaysia) Sdn. Bhd.: * Euro Truck & Bus (Malaysia) Sdn. Bhd Dormant 31 March Subsidiary companies of HICOM Technical and Engineering Services Sdn. Bhd.: HICOM Ventures Sdn. Bhd Dormant 31 March HICOM Environmental Sdn. Bhd Dormant 31 March Subsidiary company of Scott & English Electronics Holdings Sdn. Bhd.: * Scott & English Electronics Sdn. Bhd Trading in consumer electronic products and 31 March domestic appliances. Subsidiary companies of Scott & English (Malaysia) Sdn. Bhd.: * HICOM United Leasing Sdn. Bhd Sale, servicing and rental of machinery and equipment 31 March +* Scott & English (Cambodia) Ltd Trading in spare parts and heavy equipment 31 March ^* Myanmar Scott & English Company Ltd Trading and servicing of machinery 31 March * Scott & English Trading (Sarawak) Sdn. Bhd Trading of heavy machinery and equipment, spare parts 31 March and electrical appliances Subsidiary companies of Comtrac Sdn. Bhd.: * Comtrac Trading Sdn. Bhd Trading of construction materials 31 March * Isti-Emas Sdn. Bhd Dormant 31 March * Comtrac Premises Sdn. Bhd Dormant 31 March * Comtrac Builders Sdn. Bhd Supply, installation and construction of precast 31 March (formerly known as Comtrac Precast Sdn. Bhd.) building works, manufacturing, supply and installation of precast component and provision of upgrading and renovation works * Ciri-Alam Bina Sdn. Bhd. (disposed on 30 March 2007) Dormant 31 March

123 121 3 COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Subsidiary companies of Comtrac Sdn. Bhd.: (Continued) HICOM-TNB Properties Sdn. Bhd Dormant 31 March * Comtrac-Sabkar Development Sdn. Bhd Construction works and property development 31 March * Comtrac Glenview Sdn. Bhd Investment holding and property development 31 March Subsidiary company of Comtrac Glenview Sdn. Bhd.: * Glenview Management Corporation Sdn. Bhd Dormant 31 March Subsidiary companies of Oriental Summit Industries Sdn. Bhd.: * Automotive Components Engineering Design and manufacturing of dies and moulds for 31 March Centre Sdn. Bhd. automotive industry * OSI Manufacturing Sdn. Bhd Dormant 31 March Subsidiary company of KL Airport Services Sdn. Bhd.: KLAS Engineering Services Sdn. Bhd Provision of aircraft maintenance and 31 March engineering services Subsidiary companies of HICOM Properties Sdn. Bhd.: * HICOM Indungan Sdn. Bhd Property development 31 March * Kenyir Splendour Berhad Resort management 31 March HICOM Facility Management Berhad Provision of facility management services 31 March * Puncak Permai Sdn. Bhd Investment holding 31 March * Jubli Premis Sdn. Bhd Dormant 31 March (formerly known as HICOM Menang Properties Sdn. Bhd.)

124 122 Notes to the Financial Statements 31 March COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Subsidiary company of HICOM Megah Sdn. Bhd.: #& Corwin Holding Pte. Ltd Owner and operator of shopping mall 31 March Subsidiary companies of Automotive Corporation (Malaysia) Sdn. Bhd.: * Auto Prominence (M) Sdn. Bhd Sale of motor vehicles and their related accessories 31 March * Stagwell Sdn. Bhd Dormant 31 March Automotive Manufacturers (Malaysia) Sdn. Bhd Assembly of motor vehicles and other road 31 March transport vehicles Subsidiary companies of HICOM Indungan Sdn. Bhd.: * Rebak Island Marina Berhad Operation of a marina resort and property holding 31 March * HICOM Tan & Tan Sdn. Bhd Dormant 31 March Subsidiary company of puncak Permai Sdn. Bhd.: * Horsedale Development Berhad Property development, management of hotel and 31 March golf resort Subsidiary company of Horsedale Development Berhad: * Kesturi Hektar Sdn. Bhd Dormant 31 March Subsidiary companies of PUSPAKOM: Puspakom Teknik Sdn. Bhd Supply and maintenance of automobile 31 March associated equipment Flora Areana Sdn. Bhd Investment holding 31 March

125 123 3 COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Subsidiary company of Flora Areana Sdn. Bhd.: Multi Automotive Service and Assist Sdn. Bhd Membership recruitment, providing vehicle assistance 31 March and supply of auto related products and services Subsidiary company of Imatex Sdn. Bhd.: Imatex Management Services Sdn. Bhd Provision of management services 31 March Subsidiary companies of MODENAS: Edaran Modenas Sdn. Bhd Distribution of motorcycles, related spare parts 31 March and accessories and servicing of motorcycles /* PT Modenas Putra Motor Indonesia Dormant 31 March Subsidiary companies of Intrakota Komposit Sdn. Bhd.: S.J. Kenderaan Sdn. Bhd Dormant 31 March Mega Komposit Auto Sdn. Bhd Selling of motor vehicles and car accessories 31 March Gemilang Komposit Auto Sdn. Bhd Selling of motor vehicles and car accessories 31 March Syarikat Pengangkutan Malaysia Sendirian Berhad Dormant 31 March Intrakota Consolidated Berhad Dormant 31 March S.J. Binateknik Sdn. Bhd Dormant 31 March Toong Fong Omnibus Company Sendirian Berhad Dormant 31 March JOINTLY CONTROLLED ENTITIES Jointly controlled entity of DRB-HICOM Berhad: * Isuzu Malaysia Sdn. Bhd Distribution of motor vehicles, components 31 December and parts

126 124 Notes to the Financial Statements 31 March COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Jointly controlled entities of HICOM Holdings Berhad: * HICOM-HONDA Manufacturing Malaysia Sdn. Bhd Manufacture and assemble of Honda motorcycle 31 March engines and components * MBM Alam Flora W.L.L Provision of waste management clearing services 31 December * HICOM-YAMAHA Manufacturing Malaysia Sdn. Bhd Manufacture and assemble of Yamaha 31 March motorcycle engines and parts * HICOM-SUZUKI Manufacturing Malaysia Sdn. Bhd Manufacturing and assembling of motorcycle engines 31 December (swapped for investment in Suzuki Motorcycle Malaysia Sdn. Bhd.) PHN Industry Sdn. Bhd Manufacturing stamped metal parts, sub-assembly 31 March (deemed subsidiary from 31 January 2007) of automotive components and design and manufacture of dies * Model Building Maintenance Dallah Provision of waste management clearing services 31 December Alam Flora Waste Management Services L.L.C. Jointly controlled entity of HICOM Properties Sdn. Bhd.: Sucasa Sdn. Bhd. (disposed on 28 February 2007) Management of hotel and service apartments 31 January Jointly controlled entities of Comtrac Sdn. Bhd.: * Comtrac Businessworld Sdn. Bhd Dormant 31 March (under voluntary liquidation) * Comtrac-Concrete Constructions Sdn. Bhd Dormant 31 March (under voluntary liquidation) Jointly controlled entity of Horsedale Development Berhad: * HICOM-Gamuda Development Sdn. Bhd Housing and property development and rental 31 March of properties

127 125 3 COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % ASSOCIATED COMPANIES: Associated companies of DRB-HICOM Berhad: Honda Malaysia Sdn. Bhd Assembly, manufacture and sale of motor vehicles, accessories and components 31 March * Marak Unggul Sdn. Bhd Dormant 31 December * Gerbang Perdana Sdn. Bhd Civil construction 31 December Associated companies of HICOM Holdings Berhad: * Siemens VDO Instruments MY Sdn. Bhd Manufacturing and sale of instrument panels/clusters, 30 September speedometers, tachometer and aircore movement for the transportation industry * ZF Steerings (Malaysia) Sdn. Bhd Manufacturing and assembling of mechanical 31 December and power rack and pinion steering systems Edaran Otomobil Nasional Berhad Sale of motor vehicles, related spare parts and 31 December services of vehicles * Boustead Heah Joo Seang Sdn. Bhd Cultivation and processing of oil palm 31 December (disposed on 29 March 2007) * Niro Ceramic (M) Sdn. Bhd Manufacturing and trading of ceramic tiles 31 December * Navi & Map Sdn. Bhd Producing, manufacturing, importing, marketing 31 March and selling maps, car navigator system and related products and services EON Capital Berhad Investment holding company, provision of banking 31 December and related financial services, stockbroking, nominee and custodian services * TRW Steering & Suspension (Malaysia) Sdn. Bhd Manufacturing and sale of automobile tierods, 31 December tierod ends and suspension ball joints, stabilizer links, steering linkages and power steering gear * Suzuki Motorcycle Malaysia Sdn. Bhd Manufacture, assembly and distribution of 31 December (acquired via swap of investment motorcycles and parts in HICOM-Suzuki Manufacturing Malaysia Sdn. Bhd.)

128 126 Notes to the Financial Statements 31 March COMPANIES IN THE GROUP (Continued) effective Equity Financial Name of Company Interest Principal Activities Year End % % Associated company of Comtrac Sdn. Bhd.: * Comtrac-Concrete Constructions JV Sdn. Bhd Dormant 31 March (dissolved on 28 May 2006) Associated company of Intrakota Komposit Sdn. Bhd.: * Airport Coach Sdn. Bhd Provision of bus transportation services 31 December (disposed on 3 April 2006) * These companies in the Group are audited by other firms of auditors other than PricewaterhouseCoopers, Malaysia. & These companies in the Group are audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia. # The country of incorporation is Singapore. + The country of incorporation is Cambodia. The country of incorporation is Myanmar. The country of incorporation is Thailand. The country of incorporation is Bahrain. / The country of incorporation is Indonesia. The country of incorporation is United Arab Emirates. Entities classified as assets held for sale. All the other companies are incorporated in Malaysia.

129 127 4 REVENUE Group Company RM 000 RM 000 RM 000 RM 000 Sale of goods 1,413,178 2,245,066 Rendering of services 820, ,755 7,710 7,860 Construction contracts 75,184 (92,685) (133,943) Insurance business 313, ,064 Sale of land and development properties 283, ,635 Dividends (gross) 148, ,005 2,905,421 3,522, ,822 18,922 The reversal of revenue of the Group and the Company in the previous financial year arose from the re-estimation of contract revenue in respect of the Electrified Double Track Project. 5 PROFIT/(LOSS) before taxation Profit/(loss) before taxation is arrived at after charging/(crediting) the following: Group Company RM 000 RM 000 RM 000 RM 000 Allowance for/(writeback of) doubtful debts 26,769 (6,913) 19,183 2,170 Amortisation of intangible assets 1, Auditors remuneration 1,786 1, Biological assets written off 2,340 Depreciation of property, plant and equipment 133, , ,747 Directors emoluments (Note 6) 4,865 13, Impairment loss of property, plant and equipment 38, ,138 Impairment loss of investments in subsidiary companies 14,568 Impairment loss of investment in an associated company 131,000 Inventories written off/down (net of write back) 98,753 20, Loss/(gain) on disposal of property, plant and equipment 2,831 (36,340) (1,018) (422)

130 128 Notes to the Financial Statements 31 March PROFIT/(LOSS) before taxation (Continued) Group Company RM 000 RM 000 RM 000 RM 000 Management fees paid to a company in which certain past Directors had a significant financial interest 4,559 Preliminary project expenses written off 19,202 19,202 Property, plant and equipment written off 3,955 6,811 3,621 Provision for liabilities and charges (net of writeback) 7,034 30,334 Rental of plant and machinery and equipment 9,302 6,703 Rental of premises 10,474 5,844 Replanting expenditure for biological assets 1, Staff costs (Note 7) 479, ,075 6,052 Discount on redemption of Loan Stocks 2002/2008 (661) (12,803) Dividend income (gross), quoted in Malaysia (7,406) (6,624) (148,112) (145,005) Gain on disposal of shares in subsidiary companies (28,786) (185) Gain on disposal of shares in a jointly controlled entity (20) Gain on disposal of shares in associated companies (16,743) (57) Gain on fair value adjustment of investment properties (20,478) Gain on waiver of borrowings (131,383) (93,939) Net foreign exchange differences (15,981) (24,459) Interest income short term deposits (38,846) (34,599) (4,191) (1,901) subsidiary companies (44,745) (30,441) others (3,337) Interest waiver on redemption of Loan Stocks 2002/2008 (619) (10,939) Excess of fair value of net assets over purchase consideration (2,749) Accretion, allowance/(writeback of) marketable securities and other investments (26,835) 2,600 (21,525) 3,832 Contract and property development costs of the Group and of the Company recognised as an expense amounted to RM179,099,000 (2006: RM180,326,000) and RM NIL (2006: RM15,562,000) respectively. Cost of inventories (including inventories written down) and services (including insurance services) of the Group recognised as an expense amounted to RM2,168,297,000 (2006: RM2,928,289,000).

131 129 6 DIRECTORS EMOLUMENTS Group Company RM 000 RM 000 RM 000 RM 000 Non-executive Directors: fees: current Directors past Directors allowances and other benefits (current Directors) 1, Executive Directors: salaries, bonuses, allowances and other benefits: current Directors 2, past Directors 11, defined contribution retirement plan: current Directors past Directors ,865 13, The estimated monetary value of other benefits provided to current Directors of the Company amounted to RM142,000 (2006: RM26,000). 7 STAFF COSTS Group Company RM 000 RM 000 RM 000 RM 000 Salaries, wages, bonuses, allowances and other benefits 430, ,676 5,426 Defined contribution retirement plan 45,124 41, Termination benefits 3,173 22, , ,075 6,052

132 130 Notes to the Financial Statements 31 March FINANCE COST Group Company RM 000 RM 000 RM 000 RM 000 Interest expense on borrowings 141, ,549 58,404 42,102 Hire purchase and finance lease charges 1, , ,789 58,404 42,102 9 TAXATION Group Company RM 000 RM 000 RM 000 RM 000 Arising in Malaysia: Current taxation 37,158 7,387 40,429 Deferred taxation (Note 21) (899) (43,964) (377) (776) Outside Malaysia: Current taxation ,285 (36,551) 40,052 (776) Arising in Malaysia: Over provision of current taxation in respect of prior financial years (5,685) (13,619) Total taxation charge 30,600 (50,170) 40,052 (776)

133 131 9 TAXATION (Continued) The explanation of the relationship between tax expense and profit/(loss) before taxation is as follows: Numerical reconciliation of effective tax expense Group Company RM 000 RM 000 RM 000 RM 000 Profit/(loss) before taxation 187,131 (196,744) 307,293 (80,809) Tax calculated at the Malaysian tax rate of 27% (2006: 28%) 50,525 (55,088) 82,969 (22,626) Tax effects of: share of results of jointly controlled entities (8,991) (12,226) share of results of associated companies (34,261) (47,871) expenses not deductible for tax purposes 72, ,295 5,546 14,535 income not subject to tax (72,165) (83,120) (38,545) (6,315) tax losses not recognised 20,346 11,395 different in tax rates for small and medium enterprises (646) (1,544) different tax rates 3,992 4,426 utilisation of previously unrecognised tax losses (10,555) (30,912) (9,541) temporary differences not recognised 15,652 (4,906) (377) 13,630 Over provision of current taxation in respect of prior financial years (5,685) (13,619) Tax expense 30,600 (50,170) 40,052 (776) Unabsorbed tax losses, unutilised capital allowances, unutilised investment tax allowances and unutilised reinvestment allowances of the Group which are available for set-off against future chargeable income for which the tax effects have not been recognised in the financial statements are shown below: Group RM 000 RM 000 Unabsorbed tax losses 1,258,566 1,222,303 Unutilised capital allowances 413, ,620 Unutilised investment tax allowances 288, ,105 Unutilised reinvestment allowances 195, ,124

134 132 Notes to the Financial Statements 31 March DIVIDENDS Dividends paid, declared and proposed are as follows: Group and Company RM 000 RM 000 (a) Dividend paid First and final dividend of 2.0 sen (2005: 3.0 sen) gross per share, less taxation of 28% (2005: 28%) in respect of the financial year ended 31 March ,397 21,290 Adjustment in respect of ordinary shares issued after 31 March but before book closure date for dividend entitlement ,445 21,307 (b) Dividend declared In respect of the financial year ended 31 March 2007: Interim dividend of 1.0 sen (2006: NIL) gross per share, less taxation of 27% (2006: NIL) 7,356 At the forthcoming Annual General Meeting of the Company, a final gross dividend in respect of the financial year ended 31 March 2007 of 2.5 sen (2006: 2.0 sen) per share less taxation of 27% (2006: 28%), amounting to RM18,388,828 (2006: RM14,396,713) will be proposed for shareholders approval. These financial statements do not reflect this final dividend which will be accrued as a liability in the financial year ending 31 March 2008 when approved by shareholders.

135 EARNINGS/(LOSS) PER SHARE (a) Basic The basic earnings/(loss) per share is calculated by dividing the Group s net profit/(loss) attributable to shareholders by the weighted average number of shares in issue during the financial year. Group Net profit/(loss) attributable to shareholders (RM 000) 95,073 (204,975) Weighted average number of ordinary shares in issue ( 000) 1,003, ,143 Basic earnings/(loss) per share (sen) 9.47 (20.72) (b) Fully diluted For the diluted earnings/(loss) per share calculation, the weighted average number of shares in issue is adjusted for dilutive potential shares in respect of share options pursuant to ESOS. The ESOS expired on 9 April Group Net profit/(loss) attributable to shareholders (RM 000) 95,073 (204,975) Weighted average number of ordinary shares in issue ( 000) 1,003, ,143 Adjustment for share options ( 000) 1,342 1,003, ,485 Diluted earnings/(loss) per share (sen) 9.47 (20.69) The impact of the fully diluted earnings per share in respect of Loan Stocks 2002/2008 is not reflected as it is anti-dilutive.

136 134 Notes to the Financial Statements 31 March PROPERTY, PLANT AND EQUIPMENT Buildings, Long Short golf Furniture Capital Freehold leasehold leasehold course and Plant and Motor Office and work Note land land land improvements machinery vehicles equipment fittings in-progress Total GROUP RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Net book value at 1 April , ,376 1,414 1,228, ,714 26, ,832 29,307 60,789 2,370,574 Additions 1,046 3,665 18,747 27,831 12,212 29,499 11,974 27, ,356 Disposals (7,536) (4,234) (684) (4,849) (673) (823) (1,818) (20,617) Written off (1,128) (2,201) (39) (1,909) (1,518) (16) (6,811) Depreciation charge (4,320) (55) (39,563) (79,927) (10,280) (38,527) (9,558) (182,230) Impairment losses (48,007) (103,999) (5,003) (17) (112) (157,138) Currency translation differences 38 (2,734) (943) (16) (5) (208) (13) (3,881) Reclassifications 1,793 5,039 (28) 6,422 48, (6,925) 104 (55,087) Transfer to land held for property development 15(b) (63,200) (63,200) Net book value at 31 March , ,483 1,331 1,103, ,292 24, ,977 29,473 31,250 2,069,053 Transfer to investment properties (17,912) (181,121) (133,628) (6,644) (15,081) (494) (354,880) Transfer from other investments 5,139 3,761 8,900 Acquisition of subsidiary companies 42 24,000 3,698 22,437 34, ,045 24, ,754 Disposal of subsidiary companies 43 (25) (27) (112) (339) (503) Additions 238 2,290 10,759 45,780 7,165 14,844 2,844 35, ,031

137 PROPERTY, PLANT AND EQUIPMENT (Continued) Buildings, Long Short golf Furniture Capital Freehold leasehold leasehold course and Plant and Motor Office and work Note land land land improvements machinery vehicles equipment fittings in-progress Total GROUP RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Disposals (306) (397) (6,548) (4,307) (228) (114) (11,900) Written off (252) (2,489) (858) (31) (102) (223) (3,955) Depreciation charge (2,425) (55) (30,481) (57,016) (5,515) (29,035) (9,017) (133,544) Impairment losses (18,184) (19,564) (639) (1) (105) (38,493) Currency translation differences ,146 (2) (580) (5) 1,284 Reclassification 524 (524) 13,714 7, (14) (21,546) Reclassification of assets held for sale 22 (81) (81) Transfer to land held for property development 15(b) (2,266) (2,266) Transfer to other receivables (75) (7,155) (7,230) Net book value at 31 March ,025 87,135 1, , ,975 21,901 97,965 44,494 61,656 1,777,170 NET BOOK VALUE AT 31 MARCH 2007 Cost 270,025 98,931 2,062 1,438, ,236 52, , ,720 61,761 3,380,148 Accumulated depreciation (11,796) (786) (336,590) (687,711) (31,042) (296,036) (81,225) (1,445,186) Accumulated impairment losses (132,378) (24,550) (758) (1) (105) (157,792) Net book value 270,025 87,135 1, , ,975 21,901 97,965 44,494 61,656 1,777,170 NET BOOK VALUE AT 31 MARCH 2006 Cost 258, ,685 2,062 1,577, ,296 69, , ,455 31,250 3,760,908 Accumulated depreciation (21,195) (731) (359,157) (718,001) (45,044) (301,404) (78,981) (1,524,513) Accumulated impairment losses (48,007) (114,202) (5,003) (17) (112) (1) (167,342) Net book value 258, ,483 1,331 1,103, ,292 24, ,977 29,473 31,250 2,069,053

138 136 Notes to the Financial Statements 31 March PROPERTY, PLANT AND EQUIPMENT (Continued) Long Buildings leasehold and Plant and Motor Office Furniture Note land improvements machinery vehicles equipment and fittings Total COMPANY RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Net book value at 1 April ,983 69,752 1,030 2,926 3,079 1,917 84,687 Additions 2, ,140 Disposals (500) (70) (570) Written off (740) (32) (1,705) (1,144) (3,621) Depreciation charge (107) (2,707) (1,014) (1,531) (1,072) (316) (6,747) Net book value at 31 March ,421 66, , ,889 Transfer to investment properties 13 (8,421) (66,305) (74,726) Additions Disposals (704) (704) Depreciation charge (9) (200) (83) (74) (366) Reclassification of assets held for sale 22 (81) - (81) Net book value at 31 March ,227 NET BOOK VALUE AT 31 MARCH 2007 Cost 10, ,755 Accumulated depreciation (10,147) (279) (668) (434) (11,528) Net book value ,227 NET BOOK VALUE AT 31 MARCH 2006 Cost 9,127 81,529 10,154 7, ,466 Accumulated depreciation (706) (15,224) (10,138) (5,564) (585) (360) (32,577) Net book value 8,421 66, , ,889

139 PROPERTY, PLANT AND EQUIPMENT (Continued) (a) Certain property, plant and equipment of the Group with net book value of RM395,011,000 (2006: RM680,983,000) have been charged as security for bank borrowings (Notes 31 and 36). (b) (c) Certain freehold and leasehold lands of the Group at a net book value of RM45,755,000 (2006: RM45,884,000) have been lodged by way of private caveat and memorandum of deposits for long term borrowings (Note 31). The details of motor vehicles, plant and machinery, and office equipment acquired under hire purchase and finance lease agreements of the Group are as follows: Additions during the financial year: Hire Purchase and Finance Lease RM 000 RM 000 Motor vehicles Plant and machinery 12,751 6,350 Office equipment 2,715 Net book value at financial year end: Motor vehicles 4,787 4,008 Plant and machinery 20,732 10,450 Office equipment 1,750 2,256 (d) The title deeds to the freehold and leasehold land of certain subsidiary companies amounting to RM94,448,000 (2006: RM89,377,000) are in the process of being registered in the names of the subsidiary companies.

140 138 Notes to the Financial Statements 31 March INVESTMENT PROPERTIES Net book value Group Company RM 000 RM 000 RM 000 RM 000 At 1 April Effects of adoption of FRS 140: Transfer from property, plant and equipment (Note 12) 354,880 74,726 Transfer from other investments 39,151 Fair value adjustments on investment properties 55,118 10, ,149 85,319 Transfer to assets held for sale (Note 22) (2,800) Changes in fair value during the financial year 20,478 At 31 March 466,827 85,319 The disclosure on income and expenses of investment properties are as below: Rental income 13,672 7,710 Direct operating expenses from investment properties that generated rental income during the financial year 6, Direct operating expenses from investment properties that did not generate rental income during the financial year 608 (a) (b) (c) The fair value of the properties of the Group and the Company were based on valuations by independent professional qualified valuers. Valuations for the properties were based on current prices in an active market. The titles to certain properties included in investment properties with a carrying value of RM27,405,000 (2006: RM NIL) are in the process of being transferred to an insurance subsidiary company. Certain investment properties of the Group with carrying value of RM321,933,000 (2006: RM NIL) have been charged as security for bank borrowings (Notes 31 and 36).

141 BIOLOGICAL ASSETS Net book value Group Company RM 000 RM 000 RM 000 RM 000 At 1 April, as restated 21,851 21,851 New planting expenditure 105 Write off on replanting of new crop (2,340) At 31 March 19,616 21,851 Certain freehold and leasehold lands of the Group at a net book value of RM8,793,000 (2006: RM11,028,000) have been lodged by way of private caveat and memorandum of deposits for long term borrowings (Note 31). 15 PROPERTY DEVELOPMENT ACTIVITIES (a) Property development costs Group Company RM 000 RM 000 RM 000 RM 000 At cost At 1 April Land 263, ,756 Development costs 993, ,538 Less: Accumulated costs charged to income statement (1,146,794) (721,327) 110, ,967 Add : Costs incurred during the financial year Land 60 Development costs 126, , , ,412 Transfer from land held for property development 38,370 24,043 Less: Costs recognised as expense in income statement during the financial year (144,450) (128,454) Transfer to inventories (20,461) (1,786) At 31 March 110, ,215

142 140 Notes to the Financial Statements 31 March PROPERTY DEVELOPMENT ACTIVITIES (Continued) (a) Property development costs (Continued) At end of the financial year Group Company RM 000 RM 000 RM 000 RM 000 Land 264, ,542 Development costs 1,131, ,467 Less: Accumulated costs charged to income statement (1,285,446) (1,146,794) 110, ,215 (b) Land held for property development At 1 April Group Company RM 000 RM 000 RM 000 RM 000 Land 185, ,176 Development costs 148, , , ,355 Add: Costs incurred during the financial year Land 1,801 Development costs 13,800 18, , ,772 Disposal of land (4,692) Transfer from property, plant and equipment (Note 12) 2,266 63,200 Transfer to property development costs (38,370) (24,043) At 31 March 311, ,237 At end of the financial year Land 187, ,485 Development costs 124, , , ,237

143 PROPERTY DEVELOPMENT ACTIVITIES (Continued) Included in property development costs is interest on borrowings capitalised for the financial year amounting to RM4,666,000 (2006: RM4,153,000). Land amounting to RM56,019,000 (2006: RM56,244,000) belonging to subsidiary companies, included in property development costs and land held for property development have been charged as security for bank borrowings (Notes 31 and 36). Certain freehold land of the Group amounting to RM35,146,000 (2006: RM35,146,000) has been lodged by way of private caveat and memorandum of deposits for long term borrowings (Note 31). The title deeds to the freehold land of a subsidiary company amounting to RM63,200,000 (2006: RM63,200,000) are in the process of being registered in the name of the subsidiary company. 16 SUBSIDIARY COMPANIES Company RM 000 RM 000 Unquoted shares, at cost 3,175,574 3,165,574 Less: Accumulated impairment losses (98,245) (98,245) 3,077,329 3,067,329 Amounts due from subsidiary companies (non trade) 1,646,422 1,414,066 Less: Allowance for doubtful debts (215,052) (215,052) 1,431,370 1,199,014 The details of the subsidiary companies are listed in Note 3 to the financial statements. The amounts due from subsidiary companies are unsecured, have no fixed terms of repayment and are not repayable within the next 12 months. Interest is charged at 5.88% to 9.00% (2006: 6.15% to 9.00%) on RM667,661,000 of the amounts due (2006: RM615,570,000). The carrying amount of the amount due from subsidiary companies are fair valued at RM1,542,316,000 (2006: RM1,327,762,000).

144 142 Notes to the Financial Statements 31 March JOINTLY CONTROLLED ENTITIES Group Company RM 000 RM 000 RM 000 RM 000 Share of net assets 228, ,166 Unquoted shares, at cost 9,800 9,800 The details of the jointly controlled entities, all of which are unquoted, are listed in Note 3 to the financial statements. The Group s share of the assets, liabilities, revenue and expenses of the jointly controlled entities are as follows: Group RM 000 RM 000 Non current assets 81, ,261 Current assets 238, ,128 Non current liabilities (28,139) (54,338) Current liabilities (63,538) (114,885) Share of net assets 228, ,166 Group RM 000 RM 000 Revenue 365, ,255 Expenses (328,738) (376,482) Profit before taxation 36,835 38,773 Taxation (8,991) (12,226) Net profit 27,844 26,547 (a) Capital commitments for property, plant and equipment contracted 971 5,174 not contracted 2,774 15,879 3,745 21,053 (b) There are no contingencies relating to jointly controlled entities.

145 ASSOCIATED COMPANIES Group Company RM 000 RM 000 RM 000 RM 000 Share of net assets 1,339,434 1,446,280 Unquoted shares, at cost 57,803 59,325 Quoted shares, at cost 1,071,443 1,071,443 Quoted shares, at market value 1,155,515 1,033,884 The details of the associated companies are listed in Note 3 to the financial statements. The sale proceeds of the quoted shares in associated companies have been assigned in relation to the long term loan under Islamic financing (Note 31). The Group s share of the assets, liabilities, revenue and expenses of the associated companies are as follows: Group RM 000 RM 000 Non current assets 627, ,616 Current assets 8,548,722 7,710,402 Non current liabilities (13,823) (23,706) Current liabilities (7,692,403) (6,896,032) 1,470,434 1,446,280 Less: Accumulated impairment losses (131,000) Share of net assets 1,339,434 1,446,280

146 144 Notes to the Financial Statements 31 March ASSOCIATED COMPANIES (Continued) The Group s share of the assets, liabilities, revenue and expenses of the associated companies are as follows: Group RM 000 RM 000 Revenue 1,678,666 2,069,675 Expenses (1,552,941) (1,887,718) Profit before taxation 125, ,957 Taxation (34,261) (47,871) Net profit 91, ,086 (a) (i) Capital commitments for property, plant and equipment contracted 2,063 12,901 not contracted 23,519 25,525 25,582 38,426 (ii) Capital commitments for investments contracted 5,326 (b) There are no contingencies relating to associated companies. (c) The Group s share of losses of associated companies that have not been recognised for the current financial year amounted to RM1,876,000 (2006: RM13,320,000). The accumulated share of losses that have not been recognised amounted to RM20,224,000 (2006: RM18,348,000).

147 OTHER INVESTMENTS Group Company RM 000 RM 000 RM 000 RM 000 (i) Held by insurance subsidiary companies Investment properties: Freehold land and buildings: at cost 11,178 Leasehold land and buildings: at cost 38,681 Quoted securities: 49,859 Malaysian Government Securities, at cost 135, ,484 Amortisation of premiums (3,955) (2,320) 131, ,164 Cagamas papers, at cost 5,028 Amortisation of premiums (16) 5,012 Quoted shares in Malaysia, at cost 36,890 Less: Allowance for diminution in value 36,890 Quoted shares outside Malaysia, at cost 6,002 Corporate debts securities quoted in Malaysia, at cost 8,365 Accretion of discounts net of amortisation of premiums 395 8,760

148 146 Notes to the Financial Statements 31 March OTHER INVESTMENTS (Continued) Group Company RM 000 RM 000 RM 000 RM 000 (i) Held by insurance subsidiary companies (Continued) Unquoted securities: Corporate debt securities, at cost 532, ,153 Accretion of discounts net of amortisation of premiums 7,053 4,607 Less: Allowance for diminution in value (2,261) (1,064) 536, ,696 Unquoted shares, at cost 2,374 2,374 Less: Allowance for diminution in value (154) (154) 2,220 2,220 Sub-total 670, ,603 (ii) Held by other Group companies Investment properties: Freehold land and buildings: at cost 97 Leasehold land and buildings: at cost 4,168 4,265 Quoted shares in Malaysia, at cost 2,814 3,605 Less: Allowance for diminution in value (133) (1,847) 2,681 1,758 Subordinated bonds 6,201 6,201

149 OTHER INVESTMENTS (Continued) Group Company RM 000 RM 000 RM 000 RM 000 (ii) Held by other Group companies (Continued) Unquoted securities: Unquoted shares, at cost 45,888 46,818 Less: Allowance for diminution in value (3,179) (2,840) 42,709 43,978 Sub-total 51,591 56,202 Total 722, ,805 (a) The carrying amounts of other investments at balance sheet date approximate their fair values except for the following: Group Group Carrying Fair Carrying Fair amount value amount value RM 000 RM 000 RM 000 RM 000 Malaysian Government Securities 131, , , ,038 Cagamas papers 5,012 5,012 Quoted shares 2,681 8,117 44,650 52,998 Subordinated bonds 6,201 5,763 6,201 5,753 Corporate debt securities, quoted 8,760 10,000 Corporate debt securities, unquoted 536, , , , , , , ,308 (b) (c) It is not practicable to determine the fair value of unquoted shares which have a carrying value of RM44,929,000 (2006: RM46,198,000). However, the investments are periodically tested for impairment as and when necessary, the carrying amounts are written down accordingly. At balance sheet date, Group s share of total net assets was RM76,312,000 (2006: RM77,480,000). Group s share of total profit after tax for the financial year was RM9,102,000 (2006: RM8,331,000). The investment properties have been reclassified upon adoption of FRS140: Investment Property or transferred to property, plant and equipment (Notes 12 and 13).

150 148 Notes to the Financial Statements 31 March INTANGIBLE ASSETS Group 2007 product development Goodwill expenditure Total RM 000 RM 000 RM 000 At 1 April 3,341 3,341 Acquisition of a subsidiary company (Note 42) 4,665 4,665 Incurred 2,796 2,796 Amortisation (1,037) (1,037) Written off (50) (50) At 31 March 4,665 5,050 9,715 Cost 4,665 10,930 15,595 Accumulated amortisation (5,880) (5,880) Carrying amount 4,665 5,050 9, At 1 April 2,504 2,504 Incurred 1,529 1,529 Amortisation (692) (692) At 31 March 3,341 3,341 Cost 8,969 8,969 Accumulated amortisation (5,628) (5,628) Carrying amount 3,341 3,341 The carrying amount of goodwill was allocated to one of the Group s cash generating units ( CGUs ), namely defence and related services. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on approved financial budgets. Cash flows beyond the budgeted period are extrapolated using the estimated growth rates. Based on this calculation, the recoverable amount of goodwill exceeded its carrying value.

151 DEFERRED TAXATION Group Company RM 000 RM 000 RM 000 RM 000 At 1 April 18,393 (25,571) 1, Effects of adoption of FRS 140 (7,532) (2,966) Waiver of deferred tax in respect of Real Property Gain Tax arising from fair value changes on freehold land 1,311 Acquisition of subsidiary companies (Note 42) (10,441) Transfer to income statement (Note 9) Investments (2,347) 4,540 Intangibles 350 Payables Property, plant and equipment (7,740) 27, Property development expenditure (7,735) Provisions 3,025 (545) Receivables 3,329 Tax losses 5,249 20,516 Unearned premium reserve (620) (1,080) , At 31 March 2,630 18,393 (1,055) 1,534 Subject to income tax Deferred tax assets (before offsetting) Property, plant and equipment 41,969 47,699 4,889 4,410 Investments 5,346 6,585 Provisions 6,353 9,703 Payables 1,225 1,311 Receivables 4,571 Tax losses 41,222 35, , ,271 4,889 4,410 Offsetting (29,024) (25,619) (4,889) (2,876) Deferred tax assets (after offsetting) 71,662 75,652 1,534

152 150 Notes to the Financial Statements 31 March DEFERRED TAXATION (Continued) Group Company RM 000 RM 000 RM 000 RM 000 Subject to income tax Deferred tax liabilites (before offsetting) Property, plant and equipment (86,409) (66,436) (5,944) (2,876) Investment (2,037) (929) Payables (89) Provisions (325) Property development expenditure (7,735) (7,735) Receivables (1,242) Unearned premium reserve (633) (13) (98,056) (75,527) (5,944) (2,876) Offsetting 29,024 25,619 4,889 2,876 Deferred tax liabilities (after offsetting) (69,032) (49,908) (1,055) Subject to capital gains tax Deferred tax liabilities Property, plant and equipment (7,351) Presented after appropriate offsetting as follows: Deferred tax assets 71,662 75,652 1,534 Deferred tax liabilities (69,032) (57,259) (1,055) 2,630 18,393 (1,055) 1,534

153 ASSETS HELD FOR SALE Group Company RM 000 RM 000 RM 000 RM 000 Property, plant and equipment (Note 12) Associated company 1,522 Other investments 3,163 Investment property (Note 13) 2,800 6,044 1,603 Jointly controlled entities and an associated company were classified as assets held for sale as at the end of the financial year (Note 3). 23 INVENTORIES Group Company RM 000 RM 000 RM 000 RM 000 Raw materials 75,094 87,389 Work-in-progress 110, ,340 Finished goods 355, ,709 Consumables 57,444 33,083 Completed units of unsold properties 21,091 2, , ,606 Certain inventories of subsidiary companies amounting to RM17,452,000 (2006: RM15,452,000) have been pledged as security for bank borrowings (Note 36).

154 152 Notes to the Financial Statements 31 March TRADE AND OTHER RECEIVABLES Group Company RM 000 RM 000 RM 000 RM 000 Trade receivables 698,210 1,089,040 62, ,285 Less: Allowance for doubtful debts (61,721) (60,652) (9,000) 636,489 1,028,388 53, ,285 Other receivables 168, , ,020 Less: Allowance for doubtful debts (7,647) (7,234) (2) (10) 160, , ,010 Amounts due from subsidiary companies 97,297 86,195 Less: Allowance for doubtful debts (149) (25,145) 97,148 61,050 Accrued billings 41,874 16,890 Amounts due from customers on contracts (Note 40) 6,999 14,184 Advances to contractors on contracts (Note 40) 2,932 Deposits 13,939 15, Prepayments 13,842 13, Amounts due from jointly controlled entities 2,005 3, Amounts due from associated companies 15,054 2, ,713 69, ,982 1,269, , ,310 The currency exposure profile of trade receivables is as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 621,808 1,019,348 53, ,285 US Dollar 7,418 3,860 Others 7,263 5, ,489 1,028,388 53, ,285

155 TRADE AND OTHER RECEIVABLES (Continued) (a) The Group s and the Company s normal trade credit terms range from 30 to 60 days (2006: 30 to 60 days). Other credit terms are assessed and approved on a case by case basis. (b) (c) (d) (e) Included in trade receivables of the Group and the Company is an amount of RM53,220,000 (2006: RM425,000,000) owing by the Government in respect of Electrified Double Track Project. Included in other receivables for the Group is an amount of RM22,000,000 (2006: RM34,000,000) in respect of reimbursement of certain operating expenditure of a subsidiary company due from the Ministry of Finance. Included in amounts due from subsidiary companies are interest bearing loans amounting to RM83,107,000 (2006: RM58,063,000). Interest is charged at 5.00% to 6.84% (2006: 5.00% to 6.11%) per annum on the interest bearing loans. The loans are unsecured and have no fixed terms of repayment. All other amounts due from subsidiary companies, jointly controlled entities and associated companies are non-interest bearing, unsecured and have no fixed terms of repayment. 25 MARKETABLE SECURITIES Lower of cost and market value Group Company RM 000 RM 000 RM 000 RM 000 Shares and warrants quoted in Malaysia 201, ,903 Shares quoted outside Malaysia 43,854 17,255 38,781 17,255 Market value 245, ,158 38,781 17,255 Shares and warrants quoted in Malaysia 216, ,903 Shares quoted outside Malaysia 44,540 17,255 39,467 17, , ,158 39,467 17,255

156 154 Notes to the Financial Statements 31 March SHORT TERM DEPOSITS Group Company RM 000 RM 000 RM 000 RM 000 Deposits with licensed financial institutions: Banks 1,116, , ,723 46,894 Finance companies 63,853 68,567 Discount houses 207,649 54,017 1,180,099 1,061, , ,911 (a) (b) (c) Certain deposits with licensed banks of the Group amounting to RM6,926,000 (2006: RM12,851,000) have been pledged as security for banking facilities. Included in the deposits of the Group and of the Company is an amount of RM112,436,000 (2006: RM45,336,000) maintained as a sinking fund for the performance bond in respect of the Electrified Double Track Project. The performance bond expired on 16 June The currency exposure profile of short term deposits is as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 1,171,354 1,049, , ,911 Singapore Dollar 8,600 11,098 Thai Baht 145 1,180,099 1,061, , ,911 (d) The weighted average effective annual interest rates of short term deposits at the end of the financial year are as follows: Group Company % % % % Deposits with licensed financial institutions: Banks Finance companies Discount houses (e) Deposits of the Group and Company have an average maturity period of 268 (2006: 154) and 44 (2006: 46) days respectively.

157 CASH AND BANK BALANCES (a) Bank balances are deposits held at call with banks and are non-interest bearing. (b) Included in cash and bank balances of the Group are bank accounts maintained pursuant to the Housing Developers (Control & Licensing) Act 1966, amounting to RM37,527,000 (2006: RM15,467,000). (c) The currency exposure profile of cash and bank balances are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 125, ,293 1,298 2,084 Singapore Dollar 1,779 2,159 Others 1,670 1, , ,147 1,298 2, SHARE CAPITAL Authorised: Group and Company No. of Nominal No. of Nominal Shares Value Shares Value RM 000 RM 000 RM 000 RM 000 Ordinary shares of RM1.00 each 2,000,000 2,000,000 2,000,000 2,000,000 Issued and fully paid: Ordinary shares of RM1.00 each: At 1 April Issued 999, , , ,670 7,835 7,835 14,102 14,102 At 31 March 1,007,607 1,007, , ,772

158 156 Notes to the Financial Statements 31 March SHARE CAPITAL (Continued) (a) During the financial year, the Company s issued and paid-up share capital increased from RM999,771,729 to RM1,007,607,035 by way of issue of 7,835,306 new ordinary shares of RM1.00 each, pursuant to following: (i) (ii) Exercise of 3,328,100 share options under the Employees Share Option Scheme ( ESOS ), at option prices ranging from RM1.00 to RM1.69 per share. Exchange of RM6,771,750 nominal value of Redeemable Exchangeable Unsecured Loan Stock ( REULS ) plus accrued interest of RM1,521,509 of Gadek (Malaysia) Berhad, a wholly-owned subsidiary company into 4,507,206 new ordinary shares of the Company, at an issue price of RM1.84 per share. The new shares rank pari passu in all respects with the existing shares of the Company including entitlement to the final dividend proposed for the financial year ended 31 March (b) (c) The DRB-HICOM Berhad Employees Share Option Scheme ( ESOS ) came into effect on 10 April 2001 for a period of 5 years. The ESOS expired on 9 April As at the expiry date of 9 April 2006, there were 26,037,100 options not exercised and have therefore, lapsed. Details relating to share options exercised and conversion of REULS are as follows: 2007 Exercise Number of ordinary shares issued during Fair value price the financial year ended exercise date RM RM 31 March 2007 April ,328,100 December ,507,206 7,835,306 Ordinary share capital at par (RM 000) 7,835 Share premium (RM 000) 4,002 11,837 Issue of ordinary shares on conversion of REULS of a subsidiary company (RM 000) (8,293) Proceeds received on exercise of share options (RM 000) 3,544 Fair value at exercise date of shares issued (RM 000) 5,355

159 SHARE CAPITAL (Continued) (c) Details relating to share options exercised and conversion of REULS are as follows: (Continued) 2006 exercise Number of ordinary shares issued during Fair value price the financial year ended exercise date RM RM 31 March 2006 April ,000 May ,000 June ,500 July ,000 August ,000 September ,000 October ,000 November ,000 December ,701,282 January ,000 February ,000 March ,272,000 14,101,782 Ordinary share capital at par (RM 000) 14,102 Share premium (RM 000) 9,714 23,816 Issue of ordinary shares on conversion of REULS of a subsidiary company (RM 000) (21,054) Proceeds received on exercise of share options and warrants (RM 000) 2,762 Fair value at exercise date of shares issued (RM 000) 19,290

160 158 Notes to the Financial Statements 31 March LIFE ASSURANCE FUND Based on the actuarial valuation of the Life Assurance Fund made up to 31 March 2007, the actuary was satisfied that the assets available in the Life Assurance Fund are sufficient to meet its long term liabilities to policyholders. 30 DEFERRED INCOME This represents club membership licence fees received in advance by a subsidiary company, net of amounts recognised as income in the financial statements. 31 LONG TERM BORROWINGS Secured Group Company RM 000 RM 000 RM 000 RM 000 Hire purchase and finance lease liabilities 23,159 25,775 Portion repayable within 12 months included under borrowings (Note 36) (7,419) (13,998) 15,740 11,777 Long term loans 633, ,136 Portion repayable within 12 months included under borrowings (Note 36) (158,946) (174,624) 474, ,512 Long term loan under Islamic financing 849, , , ,832 Portion repayable within 12 months (Note 36) (4,094) 845, , , ,832

161 LONG TERM BORROWINGS (Continued) Unsecured Group Company RM 000 RM 000 RM 000 RM 000 Long term loans 85, ,504 Portion repayable within 12 months included under borrowings (Note 36) (1,872) (5,171) 83, ,333 Loan Stocks 2002/ , ,779 Deferred liability 26,456 26,456 1,595,962 1,896, , ,832 (a) (b) The hire purchase and finance lease liabilities are secured against the respective assets acquired. The long term loans are secured against certain freehold land under property, plant and equipment and property development (Notes 12 and 15). The weighted average effective annual interest rates at the end of the financial year are as follows: Group Company % % % % Hire purchase and finance lease liabilities Long term loans (secured and unsecured) Long term loan under Islamic financing Loan Stocks 2002/

162 160 Notes to the Financial Statements 31 March LONG TERM BORROWINGS (Continued) (c) On 20 November 2002, a subsidiary company issued RM871,934,000 Loan Stocks 2002/2008 ( Loan Stocks ) to its lenders, pursuant to the debt restructuring agreement signed on 9 January The Loan Stocks carry a coupon rate of 2% per annum with a yield to maturity of 7%. On 30 May 2006, the subsidiary company made a partial cash redemption of RM2,926,000 million nominal value of REULS 2002/2008, net of discount of RM661,000. On 5 December 2006, certain holders of REULS had exercised their exchange rights as per an Exchange Option and Purchase Agreement whereby RM6,771,750 nominal value of REULS plus accrued interest amounting to RM1,521,509 had been converted into 4,507,206 ordinary shares of the Company. The outstanding Loan Stocks are as follows: Group RM 000 RM 000 Redeemable exchangeable unsecured loan stocks (REULS) 119, ,544 Accrued finance cost 30,265 23, , ,779 (d) In the previous financial year, the Company had obtained a long term loan under Islamic financing comprising RM680,000,000 nominal value of Bai Bithaman Aji Islamic Debt Securities ( BAIDs ) and RM320,000,000 million nominal value of Murabahah Commercial Papers/Medium Term Notes ( CP/MTN ) for the redemption of RSLS/RESLS, repayment of borrowings of the Company and for working capital purposes. The long term loan under Islamic financing has been obtained by way of assignment of sale proceeds of certain of the Group s land held for property, plant and equipment, biological assets and property development and quoted shares in associated companies (Notes 12, 14, 15 and 18). The amounts outstanding are as follows: Group and Company Group and Company Nominal Carrying Nominal Carrying value value value value RM 000 RM 000 RM 000 RM 000 (i) BAIDs 680, , , ,990 (ii) CP/MTN 157, , , , , ,850 Accrued finance cost 27,998 13, , ,832

163 LONG TERM BORROWINGS (Continued) (e) The deferred liability is in respect of amounts owing of RM26,456,000 (2006: RM26,456,000) by a solid waste subsidiary company to local municipalities in relation to the transfer of 818 units of movables assets from these municipalities to the subsidiary company. (f) The currency exposure profile of the long term borrowings are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 1,361,567 1,491, , ,832 Singapore Dollar 210, ,457 Japanese Yen 22, ,528 Thai Baht 1,871 3,504 1,595,962 1,896, , ,832 (g) Hire purchase and finance lease liabilities Minimum hire purchase and finance lease payments: Group Company RM 000 RM 000 RM 000 RM 000 not later than 1 year 8,810 14,899 later than 1 year and not later than 2 years 7,665 5,566 later than 2 years and not later than 3 years 5,815 4,039 later than 3 years and not later than 4 years 2,911 2,714 later than 4 years and not later than 5 years later than 5 years ,105 28,125 Future finance charges on hire purchase and finance lease (2,946) (2,350) Present value of hire purchase and finance lease liabilities 23,159 25,775 Representing hire purchase and finance lease liabilities: current (included in Note 36) 7,419 13,998 non current 15,740 11,777 23,159 25,775

164 162 Notes to the Financial Statements 31 March LONG TERM BORROWINGS (Continued) (h) The exposure of long term borrowings, excluding deferred liability to interest rate risk is as follows: Maturity profile Carrying amount 1 2 years 2 3 years 3 4 years 4 5 years > 5 years RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group 2007 Fixed rate (Fair value risk) Hire purchase and finance lease liabilities 15,740 6,388 5,709 2, Long term loan (secured and unsecured) 60,000 60,000 Long term loan under Islamic financing 690,212 8,188 8, ,891 16,378 24,567 Loan Stocks 2002/ , , , ,027 73, ,649 17,244 24,586 Floating rate (Cash flow risk) Long term loan (secured and unsecured) 498, ,283 90,872 62,592 13, ,707 Long term loan under Islamic financing 155, , , ,552 90,872 62,592 13, ,707 1,569, , , ,241 30, , Fixed rate (Fair value risk) Hire purchase and finance lease liabilities 11,777 4,838 3,668 2, Long term loan (secured and unsecured) 251,528 61,200 1,200 1,200 1, ,728 Long term loan under Islamic financing 599, ,795 Loan Stocks 2002/ , ,779 1,015, ,817 4,868 4, , ,762

165 LONG TERM BORROWINGS (Continued) (h) The exposure of long term borrowings, excluding deferred liability to interest rate risk is as follows: (Continued) Maturity profile Carrying amount 1 2 years 2 3 years 3 4 years 4 5 years > 5 years RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group 2006 Floating rate (Cash flow risk) Long term loan (secured and unsecured) 635, , ,941 78,301 55, ,883 Long term loan under Islamic financing 219, , , , ,941 78,301 55, ,883 1,870, , ,809 82, , ,645 Company 2007 Fixed rate (Fair value risk) Long term loan under Islamic financing 616, ,513 Floating rate (Cash flow risk) Long term loan under Islamic financing 155, , , , , Fixed rate (Fair value risk) Long term loan under Islamic financing 599, ,795 Floating rate (Cash flow risk) Long term loan under Islamic financing 219, , , , ,795

166 164 Notes to the Financial Statements 31 March LONG TERM BORROWINGS (Continued) (i) Fair value Fair values of fixed rate long term borrowings, excluding deferred liability, are as follows: Group Group Carrying Fair Carrying Fair amount value amount value RM 000 RM 000 RM 000 RM 000 Hire purchase and finance lease liabilities 15,740 15,676 11,777 11,769 Long term loans (secured and unsecured) 60,000 61, , ,829 Long term loan under Islamic financing 690, , , ,955 Loan Stocks 2002/ , , , , , ,324 1,015,879 1,047,332 Deferred liability It is not practicable to determine the fair value of amounts owing to local municipalities by a solid waste subsidiary company as the obligation to pay for these amounts will only crystallise upon the finalisation of the National Privatisation Concession Agreement. However, the Directors are of the opinion that the fair value will not be materially different from the carrying value. 32 SINKING FUND Group Company RM 000 RM 000 RM 000 RM 000 At 1 April Charge Utilised (52) (370) At 31 March The sinking fund of subsidiary companies were established pursuant to the trust deeds dated 23 March 1993 and 7 September 1999 respectively for the purpose of covering the cost of periodic major repairs, replacement of the golf course and building maintenance managed by the subsidiary companies.

167 GENERAL AND LIFE INSURANCE FUNDS Outstanding claims: Group Company RM 000 RM 000 RM 000 RM 000 Provision for outstanding claims 261, ,577 Recoverable from reinsurers (52,131) (2,016) Net outstanding claims 209, ,561 Unearned premium reserves 121, , , , TRADE AND OTHER PAYABLES Group Company RM 000 RM 000 RM 000 RM 000 Trade payables 620,297 1,009,386 89, ,179 Other payables and accruals 348, ,879 72,113 15,582 Progress billings 20,610 29,992 Amounts due to customers on contracts (Note 40) 4,305 38,861 Amounts due to subsidiary companies 86,102 96,122 Amounts due to jointly controlled entities 350 2,752 Amounts due to associated companies 1,527 7, ,227 1,399, , ,883 (a) The currency exposure profile of trade payables is as follows: Ringgit Malaysia 537, ,360 89, ,179 Japanese Yen 70,208 61,095 Thai Baht 7, US Dollar 2, Euro 1,674 1,131 Singapore Dollar Others ,297 1,009,386 89, ,179

168 166 Notes to the Financial Statements 31 March TRADE AND OTHER PAYABLES (Continued) (b) The Group s and the Company s normal trade payables terms range from 30 to 90 days (2006: 30 to 90 days). (c) (d) Included in amounts due to subsidiary companies are interest bearing loans amounting to RM51,682,000 (2006: RM56,355,000) and non-interest bearing loans amounting to RM7,634,000 (2006: RM7,634,000). Interest is charged at 5.00% to 6.14% (2006: 4.65% to 5.00%) per annum on the interest bearing loans. The loans are unsecured and have no fixed terms of repayment. All other amounts due to subsidiary companies, jointly controlled entities and associated companies are non-interest bearing, unsecured and have no fixed terms of repayment. 35 PROVISION FOR LIABILITIES AND CHARGES Voluntary Sales separation Warranty returns scheme Total RM 000 RM 000 RM 000 RM 000 Group 2007 At 1 April 25, ,000 48,241 Acquisition of a subsidiary company (Note 42) Currency translation differences Charge 6, ,034 Utilised (8,712) (794) (21,854) (31,360) At 31 March 23, ,625 Voluntary Sales separation Restructuring Warranty returns scheme costs Total RM 000 RM 000 RM 000 RM 000 RM 000 Group 2006 At 1 April 24,849 1,158 11,444 37,451 Charge/(writeback) 8,805 (471) 22,000 30,334 Utilised (8,036) (64) (11,444) (19,544) At 31 March 25, ,000 48,241

169 BANK BORROWINGS Group Company RM 000 RM 000 RM 000 RM 000 (i) Bank overdrafts secured 11,612 11,111 unsecured 15,467 48,700 27,079 59,811 (ii) Other bank borrowings Secured Bankers acceptances 16,184 37,408 Revolving credit 3,000 5,750 Short term loans 1,240 3,974 Hire purchase and finance lease liabilities portion repayable within 12 months (Note 31) 7,419 13,998 Long term loans portion repayable within 12 months (Note 31) 158, ,624 Long term loans under Islamic financing portion repayable within 12 months (Note 31) 4,094 Unsecured Bankers acceptances 187, ,232 Revolving credit 160, ,300 99,000 99,000 Short term loans 117,265 2,286 Long term loans portion repayable within 12 months (Note 31) 1,872 5, , ,743 99,000 99, , ,554 99,000 99,000

170 168 Notes to the Financial Statements 31 March BANK BORROWINGS (Continued) (a) The currency exposure profile of bank overdrafts and other bank borrowings are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 613, ,753 99,000 99,000 Japanese Yen 62,626 1,200 Singapore Dollar 4,599 4,599 Others 4,462 4, , ,554 99,000 99,000 (b) (c) The secured bank overdrafts, bankers acceptances, letters of credit, trust receipts, revolving credit, and short term loans are secured by way of fixed and floating charges over certain property, plant and equipment and certain inventories (Notes 12 and 23). The weighted average effective annual interest rates of the bank overdrafts and other bank borrowings at the end of the financial year are as follows: Group Company % % % % Bank overdrafts Bankers acceptances Revolving credit Short term loans SHARE PREMIUM Group and Company RM 000 RM 000 At 1 April 16,699 6,985 Arising from issue of shares (Note 28) 4,002 9,714 At 31 March 20,701 16,699

171 MERGER RESERVE Group Company RM 000 RM 000 RM 000 RM 000 At 1 April / 31 March 911, ,016 2,318,321 2,318,321 Pursuant to Section 60(4)(a) of the Companies Act, 1965, the premiums on the shares issued by the Company as consideration for the acquisitions of certain subsidiary companies in the financial year ended 31 March 2001 are not recorded as share premium. The difference between the issue price and the nominal value of shares issued is classified as merger reserve. 39 CURRENCY TRANSLATION DIFFERENCES AND OTHER RESERVES Non-distributable Group Company RM 000 RM 000 RM 000 RM 000 Capital reserves arising from bonus issue 7,000 7,000 Capital redemption reserve arising from redemption of preference shares 2,696 2,696 Share of associated companies statutory reserve 102,839 87,517 Asset revaluation reserve on step up acquisition of a subsidiary company 7,401 Currency translation differences 4,516 9, , ,288 At 1 April 106, ,270 20,383 Share of associated companies statutory reserve 11,725 14,743 Reversal of revaluation reserve of investment properties (282) Asset revaluation reserve on step up acquisition of a subsidiary company 7,401 Transfer of capital reserves arising from the expiry of warrants (20,383) (20,383) Share of an associated company s reserve (716) (316) Currency translation differences of subsidiary companies (3,843) (3,744) Others 3,597 At 31 March 124, ,288

172 170 Notes to the Financial Statements 31 March CURRENCY TRANSLATION DIFFERENCES AND OTHER RESERVES (Continued) (a) The Group s share of an associated company s statutory reserve is maintained in compliance with Section 36 of the Banking and Financial Institutions Act, (b) The warrants represent the proceeds received from the rights issue of 65,751,251 new warrants in the Company at RM0.31 per warrant which was implemented in the financial year ended 31 March The warrants expired on 9 July CONSTRUCTION CONTRACTS Group Company RM 000 RM 000 RM 000 RM 000 Aggregate contract costs incurred 136, ,861 Recognised profits less losses 19,865 51, , ,243 Less: Progress billings (153,407) (1,009,920) 2,694 (24,677) Analysed as follows: Group Company RM 000 RM 000 RM 000 RM 000 Amounts due from customers on contracts (Note 24) 6,999 14,184 Amounts due to customers on contracts (Note 34) (4,305) (38,861) 2,694 (24,677) Advances to contractors on contracts (Note 24) 2,932 Retention on contracts 4,199

173 RETAINED EARNINGS Subject to the agreement of the Inland Revenue Board, the Company has sufficient tax credit balance under Section 108(6) of the Income Tax Act, 1967 to frank to approximately RM241,288,000 of its retained earnings as at 31 March 2007 if paid out as dividends. The Company also has tax exempt income amounting to RM101,222,000 available for distribution as tax exempt dividends to shareholders. The extent of retained earnings not covered as at 31 March 2007, which is subject to additional taxation if franked as dividends, amounts to RM206,690, SUMMARY OF EFFECT OF ACQUISITION OF COMPANIES 2007 (i) Subsidiary companies (a) On 17 April 2006, Motosikal Dan Enjin Nasional Sdn. Bhd., a 55% direct subsidiary of DRB-HICOM Berhad acquired an additional 150 ordinary shares of Rp1,000,000 each in its subsidiary company, PT Modenas Putra Motor Indonesia and increased its stake from 58% to 76.75%. (b) (c) On 28 June 2006, HICOM Properties Sdn. Bhd., effectively a wholly-owned subsidiary of DRB-HICOM Berhad completed the acquisition of the remaining 49% equity stake in HICOM Menang Properties Sdn. Bhd. ( HMPSB ) consisting of 4,900,000 ordinary shares of RM1.00 each from Menang Properties Sdn. Bhd. for a total consideration of RM7,595,000. As a result, HMPSB became a wholly-owned subsidiary of the Group. On 21 August 2006, HMPSB changed its name to Jubli Premis Sdn. Bhd. On 19 September 2006, HICOM Holdings Berhad completed the acquisition of the remaining 49% equity stake in HICOM Vertex Sdn. Bhd. ( HVSB ) consisting of 490 ordinary shares of RM1.00 each for a total cash consideration of RM1.00. As a result, HVSB became a wholly-owned subsidiary of the Group. (d) On 12 October 2006, DRB-HICOM Defence Technologies Sdn. Bhd., a wholly-owned subsidiary of the Company completed the acquisition of 70% equity stake in MMC Defence Sdn. Bhd. ( MMCD ) consisting of 3,218,600 ordinary shares of RM1.00 each from Idaman Kencana Sdn. Bhd. Subsequently, the acquisition of the remaining 30% equity interest consisting of 1,379,400 ordinary shares of RM1.00 each from MMC Engineering Group Berhad was completed on 11 January As a result, MMCD became a wholly-owned subsidiary company of the Group. On 12 January 2007, MMCD changed its name to Defence Services Sdn. Bhd. (e) On 31 January 2007, HICOM Holdings Berhad acquired an additional 1,645,162 ordinary shares of RM1.00 each representing a 10.97% equity stake in PHN Industry Sdn. Bhd. ( PHN ), a jointly controlled entity, from Nagoya Oak Industries Co. Ltd. for a total cash consideration of RM9,870,972. As a result of the acquisition, the Group s equity interest in PHN has increased from 42.5% to 53.47%, resulting in PHN becoming a subsidiary company of the Group. The acquired companies as described in (d) and (e) above contributed revenue of RM21,165,000 and profit after taxation of RM720,000 to the Group for the period from the date of acquisition to 31 March Had the acquisition taken effect at the beginning of the financial year, the revenue and loss after taxation contributed to the Group would have been RM118,160,000 and RM3,110,000 respectively. These amounts have been calculated using the Group s accounting policies and by adjusting the results of the subsidiary companies to reflect the additional depreciation that would have been charged assuming the fair value adjustments had applied from 1 April 2006, together with the consequential tax effects. Items (a), (b) and (c) relate to the increase in equity ownership of existing subsidiary companies, which are reflected through the movement in minority interests in the Statement of Changes in Equity. There was no goodwill arising from these acquisition.

174 172 Notes to the Financial Statements 31 March SUMMARY OF EFFECT OF ACQUISITION OF COMPANIES (Continued) 2007 (Continued) (i) Subsidiary companies (Continued) Details of net assets acquired, goodwill arising and cash flow of the Group arising from the acquisitions are as follows: A acquiree s carrying value RM 000 Fair value RM 000 Property, plant and equipment 113, ,754 Other investments Inventories 7,845 6,849 Trade and other receivables 26,181 26,263 Cash and bank balances 21,865 21,865 Trade and other payables (36,979) (36,979) Bank borrowings (24,676) (24,676) Deferred liabilities (8,979) (8,979) Minority interests (53,469) (53,469) Net assets acquired 45,187 62,696 Goodwill on acquisition 4,665 Excess of fair value of net assets over purchase consideration (2,749) Asset revaluation reserve on step up acquisition (7,401) Investment in a jointly controlled entity (41,253) Purchase consideration 15,958 Cash and cash equivalents arising from subsidiary companies acquired (15,024) Cash outflow on acquisition of subsidiary companies (i) A jointly controlled entity On 27 April 2005, HICOM Holdings Berhad ( HHB ), a wholly-owned subsidiary of the Company, acquired a 33.33% equity interest in Model Building Maintenance Dallah Alam Flora Waste Management Services L.L.C. ( MBM Dallah Alam Flora LLC ), a company incorporated in United Arab Emirates. As a result, MBM Dallah Alam Flora LLC became a jointly controlled entity of the Group. (ii) An associated company On 14 November 2005, the Company acquired a 20% equity interest in an associated company, Navi & Map Sdn. Bhd. As a result, Navi & Map Sdn. Bhd. became an associated company of the Group.

175 SUMMARY OF EFFECT OF DISPOSAL OF COMPANIES 2007 (i) Subsidiary companies (a) On 26 August 2006, Seains Pte. Ltd., a wholly-owned subsidiary of Uni.Asia General Insurance Berhad which is in turn a 68.09% indirect subsidiary of DRB-HICOM Berhad, was dissolved pursuant to Section 308 (5) of the Companies Act (Cap 50), Singapore. (b) On 15 December 2006, Gadek (Malaysia) Berhad, effectively a wholly-owned subsidiary of DRB-HICOM Berhad completed the disposal of its 70% equity stake comprising 3,500,000 ordinary shares of RM1.00 each in Perspec Prime (Malaysia) Sdn. Bhd. ( PPSB ). As a result, PPSB ceased to be a subsidiary company of the Group. (c) (d) On 12 January 2007, HICOM-Selangor Marine Management Sdn. Bhd., 51% subsidiary of HICOM Berhad which is in turn an indirect subsidiary of DRB-HICOM Berhad, was dissolved pursuant to Section 272 (5) of the Companies Act On 30 March 2007, Comtrac Sdn. Bhd., a 70% owned subsidiary of the Group completed the disposal of its entire 80% equity stake comprising 80,000 ordinary shares of RM1.00 each in Ciri-Alam Bina Sdn. Bhd. ( CAB ) for a cash consideration of RM80,000. As a result, CAB ceased to be a subsidiary company of the Group. The effect of the disposal of the subsidiary companies under items (b) and (d), up to the date of disposal on the results of the Group is shown below: RM 000 Revenue 9,065 Loss after taxation (2,669) The effect of the disposals of the subsidiary companies on the financial position of the Group is shown below: RM 000 Property, plant and equipment 503 Jointly controlled entities 13 Inventories 2,995 Trade and other receivables 49,392 Cash and bank balances 582 Trade and other payables (73,878) Bank borrowings (3,799) Minority interests (315) Net liabilities disposed (24,507) Gain on disposal 28,786 Total disposal proceeds 4,279 Less: Cash and bank balances of subsidiary companies disposed (582) Net cash inflow on disposal 3,697 The disposals of the subsidiary companies under items (a) and (c) above did not have a material impact to the Group.

176 174 Notes to the Financial Statements 31 March SUMMARY OF EFFECT OF DISPOSAL OF COMPANIES (Continued) 2007 (Continued) (ii) Jointly controlled entities (a) On 22 December 2006, HICOM Holdings Berhad ( HHB ) completed the disposal of its entire 45% equity stake consisting of 5,400,000 ordinary shares of RM1.00 each in HICOM-Suzuki Manufacturing Malaysia Sdn. Bhd. ( HSMM ), for partial cash consideration of RM3,954,835 and 10,150,000 ordinary shares of RM1.00 each representing 29% equity stake in Suzuki Motorcycle Malaysia Sdn. Bhd. ( SMM ). As a result, HSMM became a wholly-owned subsidiary of SMM and ceased to be a jointly controlled entity of HHB, while SMM became an associated company of the Group. (b) On 28 February 2007, HICOM Properties Sdn. Bhd. completed the disposal of its entire 30% equity interest comprising of 6,486,720 ordinary shares of RM1.00 each in Sucasa Sdn. Bhd. ( Sucasa ) for a cash consideration of RM15.9 million. As a result, Sucasa ceased to be a jointly controlled entity of the Group. The gain arising from the disposal of jointly controlled entities amounted to RM20,000. (iii) Associated companies (a) On 3 April 2006, Intrakota Komposit Sdn. Bhd. which is a 70% direct subsidiary of DRB-HICOM Berhad completed the disposal of its entire 36.5% equity stake in Airport Coach Sdn. Bhd. ( ACSB ) to K.R. Travel & Tours Sdn. Bhd. for a total consideration of RM93,075. As a result, ACSB ceased to be an associated company of the Group. (b) On 29 March 2007, HICOM Holdings Berhad completed the disposal of its entire 25% equity stake comprising 2,296,000 ordinary shares of RM1.00 each in Boustead Heah Joo Seang Sdn. Bhd. ( BHJS ) for a cash consideration of RM42,500,000. As a result, BHJS ceased to be an associated company of the Group (i) The gain arising from the disposal of associated companies amounted to RM16,743,000. A subsidiary company On 27 January 2006, Gadek (Malaysia) Berhad ( Gadek ), a wholly-owned subsidiary of the Group disposed of its entire 50% equity interest in SKVE Holdings Sdn. Bhd. ( SKVE Holdings ) (formerly known as Gadek-Perspec Consortium Sdn. Bhd.). Similarly, on the same day, Perspec Prime (Malaysia) Sdn. Bhd. ( Perspec ) a 70% subsidiary of the Group disposed of a 10% equity interest in SKVE Holdings. On 15 February 2006, Perspec disposed of its remaining 40% equity interest in SKVE Holdings to a director and substantial shareholder of Perspec. As a result, SKVE Holdings ceased to be a subsidiary of the Group.

177 SUMMARY OF EFFECT OF DISPOSAL OF COMPANIES (Continued) 2006 (Continued) (i) A subsidiary company (Continued) The effect of the disposal of the subsidiary company on the results of the Group is shown below: RM 000 Other income 193 Profit after taxation 168 The effect of the disposals of the subsidiary company on the financial position of the Group is shown below: RM 000 Trade and other receivables 26,504 Cash and bank balances 269 Trade and other payables (22,969) Minority interests (271) Net assets disposed 3,533 Gain on disposal 185 Total disposal proceeds 3,718 Less: Cash and bank balances of subsidiary company disposed (269) Net cash inflow on disposal 3,449 The above mentioned disposal has no effect on the Company s financial statements as the disposals were undertaken by the Company s subsidiary companies. (ii) An associated company On 5 October 2005, Uni.Asia General Insurance Berhad which is a 68.09% indirect subsidiary of the Group, disposed of its 30% associated company, South East Asia Insurance (B) Sdn. Bhd. ( SEAB ) for RM330,000. As a result, SEAB ceased to be an associated company of the Group. The gain arising from the disposal amounted to RM57,000.

178 176 Notes to the Financial Statements 31 March SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions which were carried out on terms and conditions attainable in transactions with unrelated parties. Related parties Bank Muamalat Malaysia Berhad Tradewinds International Insurance Brokers Sdn. Bhd. EON Bank Berhad Siemens VDO Instruments MY Sdn. Bhd. Isuzu Malaysia Sdn. Bhd. Auto Pacific Star Sdn. Bhd. Global World Trade Sdn. Bhd. Relationship A company with a common substantial shareholder. A company with a common substantial shareholder. A wholly-owned subsidiary of an associated company of the Group. Associated company of the Group. Jointly controlled entity of the Group. A company in which a past Director has significant financial interest. A company in which a past Director has significant financial interest. Sale of goods to: Group RM 000 RM 000 Auto Pacific Star Sdn. Bhd. 14,700 Purchase of goods and services from: Isuzu Malaysia Sdn. Bhd. 22,801 * Siemens VDO Instruments MY Sdn. Bhd. 10,953 24,666 Tradewinds International Insurance Brokers Sdn. Bhd. 14,116 * Auto Pacific Star Sdn. Bhd. 262,360 Global World Trade Sdn. Bhd. 226,840

179 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (Continued) Banking transactions with: Bank Muamalat Malaysia Berhad Group RM 000 RM 000 (i) Documentary credit (Murabahah): 19,265 (ii) Bankers acceptance (Al-Murabahah): Proceeds 22,500 46,664 Repayment (19,210) (7,249) Amount due 3,290 39,415 (iii) Letter of credits: Proceeds 15,443 36,647 Repayment (4,314) (36,647) Amount due 11,129 (iv) Revolving credits: Proceeds 41,208 Repayment (11,208) Amount due 30,000 EON Bank Berhad (i) Term Loan: Repayment (6,041) (1,446) Amount due 20,168 25,211 * Transactions are not disclosed as the amounts are not significant The outstanding year end balances of related party transactions with jointly controlled entity and associated companies of the Group are disclosed in Notes 24 and 34 to the financial statements.

180 178 Notes to the Financial Statements 31 March SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (Continued) The outstanding year end balances for related party transactions with the related parties described above in which a company with a common substantial shareholder are as below: Group RM 000 RM 000 Amounts due to related parties 3, In the previous financial year, the outstanding year end balances for related party transactions with the related parties in which certain past Directors have significant financial interests are as below: Group 2006 RM 000 Amounts due from related parties 20,989 Amounts due to related parties 17, CAPITAL AND OTHER COMMITMENTS Group Company RM 000 RM 000 RM 000 RM 000 (i) Authorised capital expenditure not provided for in the financial statements contracted 114,897 28,230 not contracted for 115,667 72, , ,290 Analysed as follows: Property, plant and equipment 162, ,290 Land held for property development 67,000 Biological assets , ,290

181 CAPITAL AND OTHER COMMITMENTS (Continued) Group Company RM 000 RM 000 RM 000 RM 000 (ii) Lease commitments: Commitments under non-cancellable operating leases: repayable within 1 year 6,762 1,459 repayable within 2 to 5 years 2,155 2,257 repayable more than 5 years 550 8,917 4,266 (iii) Commitments for forward foreign exchange contracts 37,153 42,155 The currency exposure profile and the expiry period for the forward foreign exchange contracts are as follows: Group 2007 equivalent Contractual amount in average amounts Ringgit Malaysia contractual expiry dates ( 000) ( 000) rate Japanese Yen 1,223,608 36, = RM April 2007 to 25 June 2007 Thai Baht 6, Baht 100 = RM June 2007 US Dollar USD1 = RM August 2007 Group 2006 equivalent Contractual amount in average amounts Ringgit Malaysia contractual expiry dates ( 000) ( 000) rate Japanese Yen 1,327,296 42, = RM April 2006 to 28 August 2006 The net unrecognised losses on open contracts which hedge anticipated future foreign currency transactions amounted to RM153,000 (2006: RM119,000). These net exchange gains and losses are deferred until the related sales and purchases are transacted, at which time they are included in the measurement of such transactions.

182 180 Notes to the Financial Statements 31 March CONTINGENT LIABILITIES (UNSECURED) Except as disclosed below, there are no contingencies as at the balance sheet date. Group Company RM 000 RM 000 RM 000 RM 000 (a) Guarantees given to financial institutions in respect of facilities granted to subsidiary companies 278, ,608 (b) Performance bonds and guarantees given to third parties 8,217 8,435 2,016 2, GROUP SEGMENT REPORTING The Group principally operates in Malaysia in the following main industry segments: Industry segment Automotive Property and construction Services Description Manufacturing, assembly and sale of motor and military vehicles including sale of related spares and services. Property holding and development and construction work. Vehicle inspection, solid waste management, telecommunication services, banking and related financial services. (a) Primary reporting format business segment Inter-segment revenue comprises revenue to other business segments carried out on an arm s length basis. Segment results represent segment revenue less segment expenses. Unallocated expenses represent corporate operating and administrative expenses. Segment assets consist primarily of property, plant and equipment, inventories, receivables, property development costs, land held for property development, short term and other investments and cash and bank balances and exclude interest bearing short term deposits, taxation assets and investments in jointly controlled entities and associated companies. Segment liabilities comprise mainly of payables and exclude items such as interest bearing borrowings and taxation. Unallocated liabilities consist of accruals on corporate operating and administrative expenses. Capital expenditure comprises additions to property, plant and equipment, investment properties, biological assets and land held for property developments.

183 GROUP SEGMENT REPORTING (Continued) (b) Secondary reporting format geographical segments The Group s secondary format by geographical location, is not shown as the activities of the Group are predominantly in Malaysia and the overseas segment does not contribute to more than 10% of the consolidated revenue and assets. Primary reporting format business segment Financial year ended 31 March 2007 Revenue property & Investment automotive Construction Services Holding Group RM 000 RM 000 RM 000 RM 000 RM 000 Total revenue 1,616, ,099 1,252,115 19,071 3,337,367 Inter-segment revenue (338,630) (62,030) (12,215) (19,071) (431,946) External revenue 1,277, ,069 1,239,900 2,905,421 Segment results (152,983) 204,540 94, , ,812 Unallocated expenses (30,147) Interest income 38,846 Finance cost (143,688) Share of results of jointly controlled entities (net of tax) 9,309 22,397 (3,862) 27,844 Associated companies Share of results (net of tax) 52,433 4,080 34,951 91,464 Allowance for impairment of investment (131,000) (131,000) Profit before taxation 187,131 Taxation (30,600) Net profit for the financial year 156,531

184 182 Notes to the Financial Statements 31 March GROUP SEGMENT REPORTING (Continued) Primary reporting format business segment (Continued) P property & Investment automotive Construction Services Holding Group RM 000 RM 000 RM 000 RM 000 RM 000 Financial year ended 31 March 2007 Other information Segment assets 1,785,418 1,500,126 1,817, ,200 5,302,378 Interest bearing short term deposits 1,180,099 Taxation assets 176,163 Jointly controlled entities 62, , ,100 Associated companies 563,988 18, ,663 1,339,434 Assets held for sales 2,881 3,163 6,044 Total assets 8,232,218 Segment liabilities 390, ,068 1,723, ,896 2,536,147 Interest bearing borrowings 2,255,121 Taxation liabilities 95,049 Unallocated liabilities 6,827 Total liabilities 4,893,144 Capital expenditure 66,226 25,499 23,999 3, ,031 Depreciation and amortisation 79,791 12,604 38,136 3, ,544 Impairment loss on property, plant and equipment 37, ,493 Gain on waiver of borrowings 131, ,383

185 GROUP SEGMENT REPORTING (Continued) Primary reporting format business segment (Continued) property & Investment automotive Construction Services Holding Group RM 000 RM 000 RM 000 RM 000 RM 000 Financial year ended 31 March 2006 Revenue Total revenue 2,280, ,882 1,316,827 40,378 3,867,962 Inter-segment revenue (226,377) (68,210) (16,637) (33,903) (345,127) External revenue 2,054, ,672 1,300,190 6,475 3,522,835 Segment results (4,259) (283,647) 101,667 2,844 (183,395) Unallocated expenses (81,129) Interest income 37,936 Finance cost (130,789) Share of results of jointly controlled entities (net of tax) 9,293 20,968 (3,714) 26,547 Share of results of associated companies (net of tax) 71,117 2,194 60, ,086 Loss before taxation (196,744) Taxation 50,170 Net loss for the financial year (146,574) Other information Segment assets 1,772,772 1,823,670 1,813, ,297 5,558,646 Interest bearing short term deposits 1,061,005 Taxation assets 175,186 Jointly controlled entities 122, ,943 15, ,166 Associated companies 667,887 40, ,935 1,446,280 Total assets 8,544,283

186 184 Notes to the Financial Statements 31 March GROUP SEGMENT REPORTING (Continued) Primary reporting format business segment (Continued) property & Investment automotive Construction Services Holding Group RM 000 RM 000 RM 000 RM 000 RM 000 Financial year ended 31 March 2006 Other information (Continued) Segment liabilities 443, ,048 1,490,236 18,452 2,718,296 Interest bearing borrowings 2,624,787 Taxation liabilities 71,730 Unallocated liabilities 2,500 Total liabilities 5,417,313 Capital expenditure 77,208 13,928 38,381 2, ,356 Depreciation and amortisation 102,868 26,417 47,639 5, ,230 Impairment loss on property, plant and equipment 5, , , CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Group s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. (i) Deferred tax assets The Group has recognised deferred tax assets amounting to RM42,822,000 relating to certain subsidiary companies which had incurred losses in either the current or preceding year and whose utilisation is dependent on future taxable profits. The deferred tax assets were determined by assessing the future financial performances of these subsidiary companies based on the current and expected operating environment.

187 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued) (ii) Estimate of fair value of investment properties The Group estimates the fair values of its investment properties using current prices in an active market. The principal assumptions underlying these valuations are those relating to rentals, market yields, maintenance requirements and capitalisation rates and current prices of similar properties or property prices in less active markets adjusted accordingly. Independent professional valuation are obtained as a basis for these estimates. (iii) Provision for product warranties Certain subsidiary companies make provisions for product warranties based on an assessment of historical experience and industry average for defective productions. The identification of defect liability requires the use of judgment and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of the provision for product warranties and will be charged to income statement as defective works and product warranty expenses in the period such an estimate has been changed. The carrying amounts of provision for product warranties of defective works are disclosed in Note 35. (iv) Construction contracts and property development activities The Group recognises revenue based on percentage of completion method. The stage of completion is measured by reference to the costs incurred to date to the estimated total costs. Judgment is required in determining the stage of completion, the extent of the costs incurred, the estimated total revenue (other than fixed price contracts) and costs, as well as the recoverability of the receivables. In making the judgment, the Group relied on past experience and work of specialists. (v) Investment in an associated company The Group tests an associated company for impairment based on certain impairment indicators that were noted. The recoverable amount was determined based on its value in use using the assumptions of terminal value growth rate, discount factor and dividend per share. Arising from the above, an impairment loss of RM131 million was recognised in the consolidated income statement. A reduction in 10% of any of the above assumptions will result in an increase in impairment provision of RM4.8 million, RM14.5 million and RM17 million respectively. (vi) Impairment of property, plant and equipment The Group tests property, plant and equipment for impairment if there are any indicators of impairment. The recoverable amounts were determined based on value in use or fair value less costs to sell, where appropriate. Based on these calculations, an impairment charge of RM38,493,000 was recognised during the financial year.

188 186 Notes to the Financial Statements 31 March SIGNIFICANT SUBSEQUENT EVENTS (a) On 17 April 2007, the Company entered into a Share Sale Agreement with Merong Mahawangsa Sdn. Bhd. for the proposed disposal of its entire 20% equity interest in Gerbang Perdana Sdn. Bhd. ( Gerbang Perdana ) for a total cash consideration of RM14 million. On 26 June 2007, the proposed disposal was completed and as a result, Gerbang Perdana ceased to be an associated company of the Group. (b) (c) (d) On 8 June 2007, HICOM Indungan Sdn. Bhd., effectively a wholly-owned subsidiary of the Company entered into a Sale and Purchase Agreement with EON Properties Sdn. Bhd., a wholly-owned subsidiary of Edaran Otomobil Nasional Berhad, to acquire approximately acres of the freehold land held under title No. HS (D) , Lot No. PT470, Bandar Glenmarie, District of Petaling, Selangor for a total cash consideration of RM67 million. The proposed acquisition is subject to approval from the relevant authorities. On 19 June 2007, the Company and its effective 100% owned subsidiary, HICOM Holdings Berhad, entered into a Joint Venture Agreement ( JVA ) with Isuzu Motors Limited, Japan ( Isuzu ) in respect of the parties equity participation in Malaysian Truck & Bus Sdn. Bhd. ( MTB ) which is an effectively and to regulate their relationship in the conduct and affairs of MTB. Currently, the Group and Isuzu hold 80% and 20% equity interest in MTB respectively. Upon restructuring of the equity holding, MTB s name will be changed to Isuzu HICOM Malaysia Sdn. Bhd. and the Group and Isuzu will hold 49% and 51% equity interest in MTB respectively. As a result, MTB will become an associated company of the Group. The proposed JVA, including the disposal of a 31% equity stake by the Group, is subject to approval from the relevant authorities. As announced to Bursa Malaysia on 13 July 2007 by the Company, the Board of Directors of the Company has received an offer on the same date from Motivasi Asia Sdn. Bhd. ( Motivasi Asia ) to sell its entire shareholding in Rangkai Positif Sdn. Bhd. ( Rangkai Positif ) to the Company for RM720 million to be satisfied by the issuance of new ordinary shares of RM1.00 each in the Company to be issued based on the indicative issue price of RM1.91 per new ordinary share, subject to the terms and conditions of the Offer. The indicative issue price is based on the five day weighted average as at 12 July 2007 of RM1.91 per new ordinary share. The principal activity of Rangkai Positif is to provide operation and maintenance services to the Tanjung Bin Power Plant ( Plant ) located in the state of Johor based on a concession period of 25 years from 28 September The Plant comprises three coal-fired generating units with a total capacity of 2,100 megawatts and sells electricity to Tenaga Nasional Berhad. The Board of Directors has recommended that the Company accepts the Offer subject to the following: Advice by the relevant advisers of the Company that the Offer will be deemed in the best interest of the Company; and The purchase consideration of RM720 million will be deemed fair and appropriate based on the appraisal by an independent valuer to be appointed by the Company. Upon satisfaction of the above conditions, the Company will enter into a definitive Share Sale Agreement with Motivasi Asia, which shall be subject to the approvals of the relevant authorities and shareholders of the Company. 50 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group s overall financial risk management objective is to ensure that the Group creates value for its shareholders. The Group s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group s businesses whilst managing its interest rate, foreign currency exchange, credit, liquidity and cash flow, market, insurance and pricing risks.

189 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) (i) Interest rate risk The Group s primary interest rate risk relates to interest-bearing borrowings and investments in marketable securities and other interest-bearing financial instruments. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowing instruments. The Group s exposure to risk that the value of a financial instrument will fluctuate due to changes in market interest rates is provided in the respective notes to financial statement. (ii) Foreign currency exchange risk The Group is exposed to currency risk as a result of the foreign currency transactions entered into in currencies other than its functional currency. Foreign exchange exposures in transactional currencies other than its functional currency of the operating entities are kept to an acceptable level. Material foreign currencies transaction exposures are hedged, mainly with forward foreign exchange contracts. (iii) Credit risk Credit risk is the potential loss arising from customers or counterparties failing to meet their financial contractual obligations. The Group seeks to control credit risk by ensuring its customers or counterparties have sound financial standing and credit history. The Group has no significant concentration of credit risk due to its diverse customer base. (iv) Liquidity and cash flow risk The Group manages its debt maturity profile, operating cash flows and availability of funding so as to ensure that all repayment and funding requirements are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. Due to the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed credit lines available. (v) Market risk Market risk is the potential loss which can arise for positions held by the Group due to adverse changes in the level of market prices or price-influencing parameters in the financial markets. The adverse changes can occur in interest rate, foreign exchange and equity markets. The Group regularly reviews these risks and takes proactive measures to mitigate the potential impact of such risks. (vi) Insurance and pricing risks The principal activity of a life insurance subsidiary company is to provide insurance protection against risks such as mortality, morbidity, disability and personal accidents. The mortality and morbidity risks are managed through risk assessment before a policy is underwritten. The maximum underwriting exposure is limited through exclusion, cover limits and reinsurance arrangements. The pricing risk relates to the risk of inadequacy of premium. Re-pricing of product is conducted at regular interval of two (2) years or shorter, if required. Experience studies are conducted to determine realistic assumptions. Stress tests and bonus reserve valuations are done by the appointed actuary to assess the solvency position. 51 APPROVAL OF FINANCIAL STATEMENTS The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 18 July 2007.

190 188 Statement by Directors Pursuant to Section 169(15) of the Companies Act, 1965 We, Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail and Datuk Haji Mohd Khamil bin Jamil, two of the Directors of DRB-HICOM Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 85 to 187 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 March 2007 and of the results and the cash flows of the Group and of the Company for the financial year ended on that date in accordance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, In accordance with a resolution of the Board of Directors dated 18 July Y.A.M. TAN SRI DATO SERI SYED ANWAR JAMALULLAIL Chairman DATUK HAJI MOHD KHAMIL BIN JAMIL Group Managing Director

191 Statutory Declaration Pursuant to Section 169(16) of the Companies Act, I, Mohd Redza Shah bin Abdul Wahid, the Director primarily responsible for the financial management of DRB-HICOM Berhad, do solemnly and sincerely declare that the financial statements set out on pages 85 to 187 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, MOHD REDZA SHAH BIN ABDUL WAHID Subscribed and solemnly declared by the abovenamed Mohd Redza Shah bin Abdul Wahid at Shah Alam in Malaysia on 18 July Before me, Tengku Mohd Hashim bin Tengku Mohamed Commissioner for Oaths

192 190 Report of the Auditors to the Members of Drb-hicom Berhad We have audited the financial statements set out on pages 85 to 187. These financial statements are the responsibility of the Company s Directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume the responsibility to any other person for the content of this report. We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been prepared in accordance with the provisions of the Companies Act 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities so as to give a true and fair view of: (i) (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and the state of affairs of the Group and Company as at 31 March 2007, and of the results and cash flows of the Group and Company for the financial year ended on that date; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. The names of the subsidiary companies of which we have not acted as auditors are indicated in Note 3 to the financial statements. We have considered the financial statements of these subsidiary companies and the auditors reports thereon. We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors reports on the financial statements of the subsidiary companies were not subject to any qualification and did not include any comment made under subsection 3 of Section 174 of the Act. PRICEWATERHOUSECOOPERS (No AF: 1146) Chartered Accountants MOHD ANWAR BIN YAHYA [1656/10/08(J/PH)] Partner of The Firm KUALA LUMPUR 18 July 2007

193 Other Information 192 Share Movement Chart 193 Analysis of Shareholdings 196 Material Properties of DRB-HICOM Group Form of Proxy

194 192 Share Movement Chart during the financial year ended 31 March 2007 Share Prices and Trading Volume on the Bursa Malaysia Securities Berhad Volume (million) Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mac Volume (million) High (RM) Low (RM) 0.00 Price (RM)

195 Analysis of Shareholdings as at 24 July Class of Securities Authorised Share Capital Issued and Fully Paid-up Capital Voting Rights Number of Shareholders : 50,678 : Ordinary shares of RM1.00 each : RM2,000,000, : RM1,007,607, : Every member of the Company present in person or by proxy shall have one vote on a show of hands, and in the case of poll, shall have one vote for every share of which he is the holder. Distribution of Shareholders Number of % of Size of Shareholdings Shareholders Shareholders Total Holdings % Holdings , ,000 24, ,623, ,001 10,000 22, ,589, , ,000 3, ,194, ,001 50,380,350(*) ,434, ,380,351 And Above(**) ,755, Total 50, ,007,607, Remarks : * Less than 5% of issued shares ** 5% and above of issued shares Thirty Largest Registered Shareholders Name Number of Shares % Shares 1. Etika Strategi Sdn Bhd 155,431, Employees Provident Fund Board 129,199, Khazanah Nasional Berhad 104,124, Permodalan Nasional Berhad 40,275, Citigroup Nominees (Tempatan) Sdn Bhd 35,387, CMS Dresdner Asset Management Sdn Bhd for Employees Provident Fund 6. Amanah Raya Nominees (Tempatan) Sdn Bhd 26,464, Skim Amanah Saham Bumiputera

196 194 Analysis of Shareholdings as at 24 July 2007 THIRTY LARGEST REGISTERED SHAREHOLDERS (Continued) Name Number of Shares % Shares 7. HSBC Nominees (Tempatan) Sdn Bhd 13,000, HSBC (M) Trustee Bhd for CMS Premier Fund (4959) 8. Cartaban Nominees (Asing) Sdn Bhd 1,815, State Street Australia Fund UAJB for Unifund (HTSG as Trustee) 9. AMMB Nominees (Tempatan) Sdn Bhd 11,600, CMS Dresdner Asset Management Sdn Bhd for Tenaga Nasional Berhad Retirement Benefit Trust Fund (CMS-TNB) 10. Amanah Raya Nominees (Tempatan) Sdn Bhd 11,092, Amanah Saham Wawasan Tai Tak Estates Sdn Bhd 10,952, Malaysia Nominees (Tempatan) Sendirian Berhad 9,011, MIDF Amanah Asset Management Berhad for Amanah Millenia Fund Berhad (JM730) 13. Citaria Sdn Bhd 8,873, Cartaban Nominees (Asing) Sdn Bhd 8,214, Investors Bank and Trust Company for Shares Inc. 15. Citigroup Nominees (Asing) Sdn Bhd 7,715, CBNY for DEA Emerging Markets Fund 16. M & A Nominee (Asing) Sdn Bhd 7,641, Exempt An for UOB Kay Hian Pte Ltd (A/C Clients) 17. Citigroup Nominees (Asing) Sdn Bhd 7,500, UBS AG Singapore for Creon Investments Limited 18. Universal Trustee (Malaysia) Berhad 7,161, AMB Unit Trust Fund 19. HSBC Nominees (Asing) Sdn Bhd 6,878, Exempt An for Morgan Stanley & Co. International PLC 20. HDM Nominees (Asing) Sdn Bhd 6,531, UOB Kay Hian Pte Ltd for Zenith Securities Pte Ltd 21. HDM Nominees (Tempatan) Sdn Bhd 6,327, Pledged Securities Account for Lim See Boon (MO9) 22. Lembaga Tabung Angkatan Tentera 6,137, HDM Nominees (Asing) Sdn Bhd 5,997, Exempt An for UOB Kay Hian (Hong Kong) Limited (Clients) 24. Cartaban Nominees (Tempatan) Sdn Bhd 4,723, MIDF Amanah Asset Nominees (Tempatan) Sdn Bhd for Employees Provident Fund Board (JF404)

197 195 THIRTY LARGEST REGISTERED SHAREHOLDERS (Continued) Name Number of Shares % Shares 25. HSBC Nominees (Asing) Sdn Bhd 4,593, TNTC for Government of Singapore Investment Corporation Pte Ltd 26. Mayban Nominees (Tempatan) Sdn Bhd 4,154, Mayban Investment Management Sdn Bhd for Kumpulan Wang Simpanan Pekerja (N ) 27. M & A Nominee (Asing ) Sdn Bhd 4,136, UOB Kay Hian Private Limited for Monconcept Investments Pte Ltd 28. HSBC Nominees (Asing) Sdn Bhd 4,106, BBH And Co. Boston for Vanguard Emerging Markets Stock Indexfund 29. Pacific & Orient Insurance Co Berhad 4,000, Cartaban Nominees (Tempatan) Sdn Bhd 3,848, Exempt An for MIDF Amanah Nominees (Tempatan) Sdn Bhd (Account 1) SUBSTANTIAL SHAREHOLDERS (HOLDING 5% OR MORE IN THE SHARE CAPITAL (per Register of Substantial Shareholders) Direct Indirect Total P percentage No. of No. of of Issued Name Shares Held Percentage Shares Held Percentage Capital Etika Strategi Sdn Bhd 155,431, Employees Provident Fund Board 176,086, Khazanah Nasional Berhad 104,124, Tan Sri Dato Syed Mokhtar Shah Syed Nor 155,431,725 a Note:- a. By virtue of his deemed interest in the shares through Etika Strategi Sdn Bhd in accordance with Section 6A of the Companies Act, Directors Interests in the Company and Related Corporations None of the Directors in office as at 24 July 2007 held any interest in shares in the Company or in its related corporations.

198 196 Material Properties of Drb-hicom Group as at 31 March 2007 approx. Net book Description/ age of A approx. value as at Location existing use building Tenure area 31 March 2007 RM 000 Parcel A & Parcel B, Lots 629pt, 628pt and 974pt Retail and car park complex 4 years Leasehold 6,332 sq.m 321, , 44-1pt, 631pt, 630pt, 633pt, 632pt, 637pt, 636pt, expiring in year pt, 634pt, 639pt, 638pt, 975pt, 22-4pt, 22-3pt 641pt, 640pt, 643pt, 642pt, 645pt, 644pt, 647pt 22-1pt and 18-1pt of TS 16 Republic of Singapore HS (D) 18712, PT 5689, HS (D) 18713, PT 5690 Industrial land with office and 11 years Freehold 650,360 sq.m 165,733 Mukim Gurun, Daerah Kuala Muda, Kedah Darul Aman factory building Southern Support Zone, KL International Airport Head Office, Cargo Complex, 9 years Leasehold 50 years 55,985 sq.m 144, Sepang, Selangor Darul Ehsan Workshop and Inflight Catering expiring in year 2048 PT 464, 465, 467, 468 and 772, Glenmarie Estate Golf and Country Club 15 years Freehold 1,429,633 sq.m 131,591 Mukim Damansara, Selangor Darul Ehsan HS(D) PT 1734-PT2069, HS(D) 6821 PT 76 Land held for commercial, _ Freehold 2,606,066 sq.m 94,790 HS(D) 6822 PT 77, HS(D) 6823 PT 78, HS(D) 6824 PT 79 residential and industrial Kawasan Perindustrian Pegoh, Mukim Pegoh development Daerah Alor Gajah, Melaka Bandar Bersejarah Lot 77170, Lot 77174, Lot Land held for residential and commercial _ Freehold 996,053 sq.m 88,880 Mukim and District of Klang, Selangor Darul Ehsan development over 2km river view frontage HS (D) 305, PT1580, Mukim of Pekan Land with factory and office block 23 years Leasehold 66 years 106,447 sq.m 84,247 Pahang Darul Makmur - assembly plant expiring in year 2043 Kawasan Perindustrian, Peramu Jaya Factory and office building 10 years Leasehold 66 years 101,582 sq.m 83,000 P.O. Box 6, Pekan, Pahang Darul Makmur expiring in year 2062 Connemara Estate, Lots 35, 1252, 1365 and 1463 Agriculture land (matured oil palm) _ Freehold 6,264,782 sq.m 63,200 Mukim of Beranang, Daerah Ulu Langat, Selangor Darul Ehsan Lot 1A, HICOM Glenmarie Industrial Park Industrial land and HICOM 12 years Freehold 52,796 sq.m 60,174 Mukim Damansara, Daerah Petaling Corporate Office Selangor Darul Ehsan

199 Form of Proxy Seventeenth Annual General Meeting Number of Shares held CDS Account No. I/We NRIC/Company No. (FULL NAME IN BLOCK LETTERS) of (FULL address) being a Member/Members of DRB-HICOM BERHAD, hereby appoint (FULL NAME IN BLOCK LETTERS) of (FULL address) RESOLUTIONS FOR AGAINST To receive and adopt the Audited Financial Statements Resolution 1 To approve the declaration of a final gross dividend Resolution 2 To re-elect Director Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail Resolution 3 To re-elect Director Datuk Haji Mohd Khamil bin Jamil Resolution 4 To re-elect Director Tan Sri Marzuki bin Mohd Noor Resolution 5 To re-elect Director Mohd Redza Shah bin Abdul Wahid Resolution 6 To re-elect Director Dato Noorrizan binti Shafie Resolution 7 To re-appoint Messrs PricewaterhouseCoopers as Auditors Resolution 8 To approve the Proposed Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature Resolution 9 To approve the Proposed Amendments to the Articles of Association of the Company Resolution 10 The proxy is to vote in the manner indicated above with an X in the appropriate spaces. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion. Dated this day of 2007 or failing him/her, the Chairman of the Meeting as my/our proxy to attend and vote for me/us on my/our behalf, at the Seventeenth Annual General Meeting of the Company, to be held at the Glenmarie Ballroom, Holiday Inn Glenmarie Kuala Lumpur, No. 1, Jalan Usahawan U1/8, Seksyen U1, Shah Alam, Selangor Darul Ehsan on Thursday, 20 September 2007 at a.m. and at any adjournment thereof, as indicated below:- Signature(s)/ Company Seal Notes:- 1. A member entitled to attend the meeting may appoint a proxy or proxies who may but need not be a member of the Company. 2. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised in writing. 3. The instrument appointing a proxy together with the power of attorney or other authority, if any, under which it is signed or a certified copy thereof, shall be deposited at the Share Registrar s Office, Symphony Share Registrars Sdn Bhd, Level 26, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, Kuala Lumpur not less than forty-eight (48) hours before the time set for holding this meeting.

200 SYMPHONY SHARE REGISTRARS SDN BHD ( D) Registrar for DRB-HICOM Berhad Level 26, Menara Multi-Purpose, Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur STAMP

201