Meeting the Challenge

Transcription

1 (Incorporated in Malaysia) Meeting the Challenge Annual Report 2009 Meeting the Challenge The Tangram s dissection puzzle, comprising seven flat shapes of a square, five right triangles and one parallelogram challenges the mind to construct infinite design possibilities using all seven pieces without overlapping. Its analogy represent DRB-HICOM Berhad s ability to reinvent strategies by utilising the values of available resources with innovative boldness, in meeting the challenge of change. By being decisive, the Group will emerge as a resilient, dynamic and sustainably diversified company of choice, in the transition of its services driven operations, with the synergy of automotive & defence, and property competencies. services Our single mindedness and synergistic strength in diversity has been the bedrock of our ability, in transforming and generating profitability beyond services par excellence. automotive Leveraging on our cohesive global partnerships will be decisive in delivering the choices of our products, to the levels of demands and needs of quality discerning customers. property & infrastructure The property market will be defined by developers who possess a distinctive reputation built on outstanding designs, with a foundation of balance and exclusivity in finishings.

2 Meeting the Challenge Annual Report 2009 Definition of the Tangram Originating from ancient China, and adopted by the west, the Tangram set continues to fascinate the world of mathematicians, authors, intellectuals and leaders, due to its engaging, innovative and creative thought provoking puzzle. Its enduring qualities has made it a timeless icon in the annals of history since the early seventeenth century, having a dissection of seven pieces, with the potential for infinite possibilities in constructing geometric forms and shapes.

3 our vision To be Number 1 and continuously excel in all that we do. mission statement To lead in the growth of the Nation in the areas of DRB-HICOM s Core BusinessES. our shared values Excellence Decorum Teamwork Integrity Innovation Quality Transparency

4 002 DRB-Hicom Berhad ( W) Annual Report annual report contents 046 statutory reporting 005 Corporate Profile 006 Group s Five Years Financial Highlights 008 Notice of Annual General Meeting Corporate information 014 Financial Calendar 015 Corporate Information 016 Board of Directors 018 Profile of Directors 024 Management Team 028 Group Corporate Structure 030 Group Corporate Structure by Sector performance review 036 Chairman s Statement 044 Group Managing Director s Review of Operations 046 Automotive Sector 056 Services Sector 064 Property & Infrastructure Sector

5 corporate responsibility 076 Corporate Social Responsibility 078 Our People 080 Caring for the Environment 082 Calendar of Events Corporate governance Statement on Corporate Governance 104 Statement on Internal Control 106 Audit Committee Report 110 Additional Compliance Information 114 Statement of Directors Responsibility financial Statements 116 Financial Statements Other Information 236 Share Movement Chart 237 Analysis of Shareholdings 240 Material Properties of DRB-HICOM Group Proxy Form

6 004 DRB-Hicom Berhad ( W) Annual Report 2009 scenes behind the This company was founded on excellence, teamwork, integrity, innovation and quality and you will find all these qualities in the employees here at DRB-HICOM Berhad. Mimi Aisyah Chye Abdullah Senior Manager, Corporate Planning This job has made it possible for me to balance my family life and a career that I love. Ahmad Syukri Abd. Rahman Assistant Manager, Human Resource DRB-HICOM has offered me many opportunities to grow, both personally and professionally. Fauzila Thani Executive Secretary, Group Chief Financial Officer s Office Everyone is valued and has the chance to put their ideas across. DRB-HICOM is a great company to work for. Khairul Anuar bin Yaakob Despatch Clerk, Corporate Secretarial I have never needed to move to a competitor to better my prospects, without doubt DRB-HICOM put people first. Mohameed Faisal Syed Ibrahim Assistant Manager, Financial Services

7 I would not hesitate to recommend DRB-HICOM to a friend who wants to make a start in the industry. You get the best technical and management skills training here for a long term career. Ismail Hassan Senior Clerk, Corporate Secretarial The company has a great ability to identify people s strengths when placing them into roles. There are always opportunities opening up, and staff are recognised as assets. Fauziah Baba Executive Secretary, Corporate Communications & Investor Relations 005 Some of the things I appreciate most are that we have very high standards, a wonderful team approach and highly skilled professionals. Munirah Osman Executive Secretary, Corporate Secretarial I still get excited about coming to work! I still feel that the Group has a real personal touch despite the size and growth. Norman Shah Coordinator, Corporate Communications & Investor Relations DRB-HICOM is growing rapidly and breaking into new markets. Keeping on top of emerging technology is one of the great challenges. Anuari Abu Executive, Treasury corporate profile DRB-HICOM BERHAD IS ONE OF MALAYSIA S LEADING COMPANIES LISTED ON THE MAIN Market 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 The Group s leadership within this sector is reflected as an integrated automotive company through niche segmentation and continued strategic alliances with renowned global names such as Honda, Mitsubishi, Suzuki, Isuzu and Audi. DRB-HICOM continuously develop new products to penetrate new markets in the passenger, commercial and defence vehicle sectors and seek new alliances to strengthen our base further. Services The rapidly growing service-based industry represents new opportunities for DRB-HICOM. Our interests amongst others include environmental management, vehicle inspection, airport ground handling, insurance and Islamic banking and operations and maintenance of the Tanjung Bin power plant. Property & Infrastructure DRB HICOM is extensively involved in retail, commercial and residential property development, engineering and infrastructure, and has made strong inroads in the construction sector. DRB-HICOM will continue to look for opportunities that will benefit the Group and the country.

8 RM operating revenue 6.1 billion dividend per share basic earnings per share sen sen Group s five years financial highlights RM 000 RM 000 RM 000 RM 000 RM 000 Operating Revenue 4,506,595 3,522,835 2,905,421 4,012,379 6,101,427 Profit/(Loss) Before Taxation 276,702 (196,744) 187, , ,943 Earnings/(Loss) Per Share (sen) (Basic) (20.72) Dividend Per Share^ (sen) Total Assets 8,628,345 8,544,283 8,232,218 9,329,041 21,515,128 operating revenue (RM 000) profit/(loss) before taxation (RM 000) basic earnings/(loss) per share (sen) 4,506,595 3,522,835 2,905,421 4,012, , , , ,101, , (196,744) (20.72)

9 007 RM total assets billion shareholders equity RM 4.16 billion net assets per share RM RM 000 RM 000 RM 000 RM 000 RM 000 Shareholders Equity 2,649,215 2,462,190 2,601,396 2,911,368 4,160,744 Net Assets Per Share (RM) * Total Borrowings 2,720,095 2,624,787 2,255,121 2,229,492 1,505,994 Gearing Ratio (Times) ^ Dividend per share (gross) consists of interim and final dividend declared and proposed for the designated financial year. * Based on enlarged share capital of 1,933,237,051 ordinary shares. total assets (RM 000) shareholders equity (RM 000) net assets per share (RM) 8,628,345 8,544,283 8,232,218 9,329,041 2,649,215 2,462,190 2,601,396 2,911,368 21,515,128 4,160, *

10 008 DRB-Hicom Berhad ( W) Annual Report 2009 notice of annual general meeting NOTICE IS HEREBY GIVEN that the Nineteenth 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, 10 September 2009 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 2009 together with the Reports of Directors and Independent Auditors thereon. (Resolution 1) 2. To approve the declaration of a final gross dividend of 2.5 sen per share, less taxation of 25% for the financial year ended 31 March (Resolution 2) 3. To re-elect the following Directors who retire in accordance with the Company s Articles of Association:- Article 79 YBhg Dato Ibrahim bin Taib (Resolution 3) YBhg Dato Noorrizan binti Shafie (Resolution 4) Article 85 Mr Ooi Teik Huat (Resolution 5) 4. To consider and if thought fit, to pass the following Ordinary Resolution in accordance with Section 129 of the Companies Act, 1965:- THAT YBhg Datuk Haji Abdul Rahman bin Mohd Ramli, retiring pursuant to Section 129 of the Companies Act, 1965, be and is hereby re-appointed a Director of the Company to hold office until the next Annual General Meeting. (Resolution 6) 5. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 7) SPECIAL BUSINESS 6. To consider and if thought fit, to pass the following Ordinary Resolution:- Proposed Shareholders Mandate for Recurrent Related Party Transactions of A Revenue or Trading Nature ( RRPTs ) THAT pursuant to Paragraph of the Bursa Securities Main Market Listing Requirements, 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 19 August 2009, 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 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) (c) 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 forthcoming AGM, the authority is renewed, either unconditionally or subject to conditions; the expiration of the period within which the next AGM is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act, 1965); or 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. (Resolution 8) NOTICE OF DIVIDEND PAYMENT NOTICE IS HEREBY GIVEN that the final gross dividend of 2.5 sen per share, less taxation of 25% in respect of the financial year ended 31 March 2009, if approved by the shareholders at the Annual General Meeting, will be paid on 8 October 2009 to the shareholders whose names appear in the Record of Depositors of the Company at the close of business on 16 September 2009.

11 009 (a) (b) (c) Shares deposited into the depositor s securities account before p.m. on 14 September 2009 in respect of shares exempted from mandatory deposit; Shares transferred into the depositor s securities account before 4.00 p.m. on 16 September 2009 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 A depositor shall qualify for entitlement to the dividend only in respect of:- NOTES:- 1. Proxy a. A member entitled to attend the meeting may appoint not more than two (2) 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. CHAN CHOY LIN (MIA 3930) Company Secretary Shah Alam, Selangor Darul Ehsan 19 August Explanatory Note On Special Business:- Proposed Shareholders Mandate For Recurrent Related Party Transactions ( RRPTs ) (Resolution 8) The Proposed Resolution 8, 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. statement accompanying notice of annual general meeting Names of Directors who are standing for re-election/re-appointment:- Under Article 79 of the Company s Articles of Association YBhg Dato Ibrahim bin Taib YBhg Dato Noorrizan binti Shafie Under Article 85 of the Company s Articles of Association Mr Ooi Teik Huat Under Section 129 of the Companies Act, 1965 YBhg Datuk Haji Abdul Rahman bin Mohd Ramli The details of the abovenamed Directors who are standing for re-election/re-appointment are set out in the Directors Profile (pages 18 to 23 of the Annual Report).

12 010 DRB-Hicom Berhad ( W) Annual Report 2009

13 Creating potential for partnerships Reaching long-term objectives is about staying ahead with the right partnerships, and having the right determination and mindset to make it work.

14 012 DRB-Hicom Berhad ( W) Annual Report 2009 Corporate information

15 014 Financial Calendar 015 Corporate Information 016 Board of Directors 018 Profile of Directors 024 Management Team 028 Group Corporate Structure 030 Group Corporate Structure by Sector 013

16 014 DRB-Hicom Berhad ( W) Annual Report 2009 financial calendar FINANCIAL YEAR END 31 March 2009 ANNOUNCEMENT OF RESULTS First Quarter 29 August 2008 Second Quarter 26 November 2008 Third Quarter 26 February 2009 Fourth Quarter 28 May 2009 PUBLISHED ANNUAL REPORT AND FINANCIAL STATEMENTS 19 August 2009 ANNUAL GENERAL MEETING 10 September 2009 dividend Interim (Special) 10.0 Sen per share Announcement date: 2 September 2008 entitlement date: 15 September 2008 payment date: 26 September 2008 Final Announcement date: 28 May 2009 entitlement date: 16 September 2009 payment date: 8 October 2009

17 015 Directors Dato Syed Mohamad bin Syed Murtaza Chairman/Senior Independent Non-Executive Director Datuk Haji Mohd Khamil bin Jamil Group Managing Director Dato Noorrizan binti Shafie Non-Independent Non-Executive Director Dato Ibrahim bin Taib Non-Independent Non-Executive Director Datuk Haji Abdul Rahman bin Mohd Ramli Independent Non-Executive Director Ong Ie Cheong Independent Non-Executive Director Tan Sri Marzuki bin Mohd Noor Independent Non-Executive Director Ooi Teik Huat Independent Non-Executive Director corporate information as at 24 July 2009 AUDIT COMMITTEE Chairman Datuk Haji Abdul Rahman bin Mohd Ramli Members Dato Noorrizan binti Shafie Ong Ie Cheong Ooi Teik Huat REMUNERATION COMMITTEE Chairman Dato Syed Mohamad bin Syed Murtaza Members Datuk Haji Abdul Rahman bin Mohd Ramli Ong Ie Cheong NOMINATION COMMITTEE Chairman Dato Syed Mohamad bin Syed Murtaza Members Datuk Haji Abdul Rahman bin Mohd Ramli Dato Ibrahim bin Taib SECRETARY Chan Choy Lin (MIA 3930) Tel : (03) Fax : (03) cclin@drb-hicom.com REGISTERED OFFICE Level 5, Wisma DRB-HICOM No. 2, Jalan Usahawan U1/8 Seksyen U1, Shah Alam Selangor Darul Ehsan Tel : (03) Fax : (03) WEBSITE INVESTOR RELATIONS Tel : (03) Fax : (03) invest@drb-hicom.com 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 ask_us@symphony.com.my AUDITORS PricewaterhouseCoopers Chartered Accountants Level 10, 1 Sentral KL Sentral, Jalan Travers Kuala Lumpur Tel : (03) Fax : (03) PRINCIPAL BANKERS CIMB Bank Berhad Malayan Banking Berhad AmBank Berhad RHB Bank Berhad Bank Kerjasama Rakyat Malaysia Berhad Affin Bank Berhad PRINCIPAL SOLICITOR Naqiz & Partners STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad (Listed since 4 September 1992) Stock Code : 1619 AGM HELPDESK Tel : (03) /7695 Fax : (03)

18 016 DRB-Hicom Berhad ( W) Annual Report 2009 from left: board of directors Dato Syed Mohamad bin Syed Murtaza Chairman/Senior Independent Non-Executive Director Datuk Haji Mohd Khamil bin Jamil Group Managing Director Dato Noorrizan binti Shafie Non-Independent Non-Executive Director Dato Ibrahim bin Taib Non-Independent Non-Executive Director

19 017 Datuk Haji Abdul Rahman bin Mohd Ramli Independent Non-Executive Director Ong Ie Cheong Independent Non-Executive Director Tan Sri Marzuki bin Mohd Noor Independent Non-Executive Director Ooi Teik Huat Independent Non-Executive Director

20 018 profile of directors YBhg Dato Syed Mohamad bin Syed Murtaza, a Malaysian, aged 61, was appointed to the Board on 28 October 2005 and was subsequently appointed Chairman on 1 July He is also Chairman of the Remuneration and Nomination Committees. Dato Syed Mohamad has more than 40 years of vast experience in the business, corporate and entrepreneurial exposures. After completing his education at Penang Free School, he then joined Kah Motors and has since been appointed to several key positions in various reputable business and non-business organisations both locally and internationally. He has also served several reputable multinational companies such as Shell Malaysia and was the Chairman of Penang Port Commission. He is well experienced and diversified in various businesses ranging from automotive, manufacturing, exports, trading, properties and oil and gas. Currently, Dato Syed Mohamad is the Managing Director of Amstrong Auto Parts Sdn. Bhd. 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 of International Motorcycle Manufacturers Association. Dato Syed Mohamad is the Chairman of Master-Pack Group Berhad (formerly known as Hunza Consolidation Berhad), HICOM Holdings Berhad, HICOM Berhad and also sits on the boards of Yayasan Bumiputra Pulau Pinang Bhd, Boon Siew Credit Bhd, Tourism Entrepreneur Centre Bhd, PBA Holdings Berhad 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 nine out of ten Board Meetings of the Company held in the financial year ended 31 March Dato Syed Mohamad bin Syed Murtaza Chairman/Senior Independent Non-Executive Director

21 YBhg Datuk Haji Mohd Khamil bin Jamil, a Malaysian, aged 53, was appointed to the Board on 19 July 2005 and became Group Managing Director on 1 March He holds a Bachelor of Laws (Honours) Degree from 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 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 also sits on the boards of Edaran Otomobil Nasional Berhad, HICOM Holdings Berhad, HICOM Berhad, Horsedale Development Berhad, Bank Muamalat Malaysia Berhad and several private limited companies. Datuk Haji Mohd Khamil is a Director and has a 10% shareholding in Etika Strategi Sdn. Bhd., being the holding company of DRB-HICOM Berhad. 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 all ten Board Meetings of the Company held in the financial year ended 31 March Datuk Haji Mohd Khamil bin Jamil Group Managing Director

22 020 profile of directors (Continued) YBhg Dato Noorrizan binti Shafie, a Malaysian, aged 53, 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-Independent Director nominated by the Ministry of Finance. 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 seven out of ten Board Meetings of the Company held in the financial year ended 31 March YBhg Dato Ibrahim bin Taib, a Malaysian, aged 55, 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. Dato 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. He sat on the Board of Kumpulan Wang Amanah Pencen until his resignation on 28 February Dato Ibrahim also sits on the boards of Bandar Eco-Setia Sdn. Bhd., Hartanah Progresif Sdn. Bhd. and Iskandar Investment Berhad. Dato Ibrahim is a Non-Independent 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. Dato Ibrahim attended nine out of ten Board Meetings of the Company held in the financial year ended 31 March Dato Noorrizan binti Shafie Non-Idependent Non-Executive Director

23 YBhg Datuk Haji Abdul Rahman bin Mohd Ramli, a Malaysian, aged 70, was appointed to the Board on 28 October He is the 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. He also sits on the boards of Kuala Lumpur Kepong Berhad. 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 ten Board Meetings of the Company held in the financial year ended 31 March Dato Ibrahim bin Taib Non-Independent Non-Executive Director Datuk Haji Abdul Rahman bin Mohd Ramli Independent Non-Executive Director

24 022 profile of directors (Continued) Mr Ong Ie Cheong, a Malaysian, aged 68, 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 prior to joining the DRB-HICOM Board. Mr Ong also sits on the boards of HICOM Holdings Berhad, HICOM Berhad and several private limited companies of DRB-HICOM Berhad. He has 20,000 ordinary shares (indirect interest) in the Company. 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. Mr Ong attended all ten Board Meetings of the Company held in the financial year ended 31 March YBhg Tan Sri Marzuki bin Mohd Noor, a Malaysian, aged 61, was appointed to the Board on 28 November He holds a B.A. (Honours) from the University of Malaya, Malaysia. Tan Sri Marzuki started 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 at the Embassy of Malaysia in Rome and in Baghdad, 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 is the Chaiman of Edaran Otomobil Nasional Berhad and also sits on the boards of Horsedale Development Berhad, HICOM Holdings 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 ten Board Meetings of the Company held in the financial year ended 31 March Ong Ie Cheong Independent Non-Executive Director

25 Mr Ooi Teik Huat, a Malaysian, aged 49, was appointed to the Board on 1 November He is a member of the Audit Committee. He is a member of Malaysian Institute of Accountants and CPA Australia and holds a Bachelor of Economics degree from Monash University, Australia. Mr Ooi started his career in 1984 with Messrs Hew & Co. (now known as Messrs Mazars), Chartered Accountants, before joining Malaysian International Merchant Bankers Berhad (now known as MIMB Investment Bank Berhad) in Between 1993 and 1996, he was the Head of Corporate Finance at Pengkalen Securities Sdn. Bhd. (now known as PM Securities Sdn. Bhd.). Mr Ooi also sits on the boards of Tradewinds Plantations Berhad, Edaran Otomobil Nasional Berhad, MMC Corporation Berhad, Johor Port Berhad, Tradewinds (M) Berhad, Zelan Berhad and several private limited companies. He is presently a Director of Meridian Solutions Sdn. Bhd. Mr Ooi 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. Mr Ooi attended four out of four Board Meetings of the Company held in the financial year ended 31 March 2009 following his appointment to the Board on 1 November Tan Sri Marzuki bin Mohd Noor Independent Non-Executive Director Ooi Teik Huat Independent Non-Executive Director

26 024 DRB-Hicom Berhad ( W) Annual Report 2009 management team

27 025 from left: Amir Salleh Group Director, Property & Infrastructure Datuk William Chong Wei Yoon Group Director, Assigned Business Lukman bin Ibrahim Group Chief Financial Officer Datuk Haji Mohd Khamil bin Jamil Group Managing Director Abdul Malek bin Abdul Majid Group Director, Human Resource

28 026 DRB-Hicom Berhad ( W) Annual Report 2009 management team (Continued)

29 027 from left: Khalid bin Abdol Rahman Group Director, Corporate & Services Chan Choy Lin, Carol Head, Corporate Secretarial Mohammed Shukor bin Ismail Head, Internal Audit Hamdan bin Ahammu Head, Corporate Communications & Investor Relations Nik Hamdam bin Nik Hassan Group Director, Automotive Dato Haji Salamat bin Wahit Head, Institutional Liaison and Business Development Mohd Aslam bin Farikullah Head, Automotive Component and Engineering

30 028 DRB-Hicom Berhad ( W) Annual Report 2009 Group corporate structure (Operating Companies) as at 31 March 2009 PUSPAKOM Sdn. Bhd. E.I. : 100% Bank Muamalat Malaysia Berhad E.I. : 70% Rangkai Positif Sdn. Bhd. E.I. : 100% 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. E.I. : 100% Multi Automotive Service and Assist Sdn. Bhd. E.I. : 55% Muamalat Invest Sdn. Bhd. E.I. : 70% Muamalat Venture Sdn. Bhd. E.I. : 70% 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% Alam Flora Sdn. Bhd. E.I. : 60.53% HICOM Engineering Sdn. Bhd. E.I. : 100% USF-HICOM (Malaysia) Sdn. Bhd. E.I. : 100% PHN Industry Sdn. Bhd. E.I. : 62.50% HICOM Diecastings Sdn. Bhd. E.I. : 100% HICOM Polymers Industry Sdn. Bhd. E.I. : 100% Desa Puchong Sdn. Bhd. E.I. : 100% Bukit Kledek Development Sdn. Bhd. E.I. : 100% Proton City Development Corporation Sdn. Bhd. E.I. : 60% KL Airport Services Sdn. Bhd. E.I. : 100% Scott & English (Malaysia) Sdn. Bhd. E.I. : 70% HICOM-Teck See Manufacturing Malaysia Sdn. Bhd. E.I. : 51% Oriental Summit Industries Sdn. Bhd. E.I. : 70% Automotive Corporation (Malaysia) Sdn. Bhd. E.I. : 100% KLAS Engineering Services Sdn. Bhd. E.I. : 100% HICOM United Leasing Sdn. Bhd. E.I. : 70% Scott & English Trading (Sarawak) Sdn. Bhd. E.I. : 35.70% HICOM Automotive Plastics (Thailand) Ltd. E.I. : 50.99% Automotive Components Engineering Centre Sdn. Bhd. E.I. : 70% HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd. E.I. : 93% 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% ISUZU HICOM Malaysia Sdn. Bhd. E.I. : 49%

31 029 Sectorial Note AUTOMOTIVE SERVICES PROPERTY & INFRASTRUCTURE INVESTMENT HOLDING JOINTLY CONTROLLED ENTITIES / ASSOCIATED COMPANIES E.I. DRB-HICOM Group s Effective Interest Kindly refer to pages 151 to 161 for the full list of Group companies Honda Malaysia Sdn. Bhd. E.I. : 34% Suzuki Malaysia Automobile Sdn. Bhd. E.I. : 40% Motosikal Dan Enjin Nasional Sdn. Bhd. E.I. : 70% DRB-HICOM Defence Technologies Sdn. Bhd. E.I. : 100% Isuzu Malaysia Sdn. Bhd. E.I. : 49% HICOM-Chevrolet Sdn. Bhd. E.I. : 49% Edaran Modenas Sdn. Bhd. E.I. : 70% Defence Services Sdn. Bhd. E.I. : 100% Edaran Otomobil Nasional Berhad E.I. : 79.05% HICOM Builders Sdn. Bhd. E.I. : 100% Comtrac Sdn. Bhd. E.I. : 70% HICOM Berhad E.I. : 100% SRT-EON Security Services Sdn. Bhd. E.I. : 31.62% Johnson Controls Automotive Holding (M) Sdn. Bhd. E.I. : 23.72% Proton Parts Centre Sdn. Bhd. E.I. : 36.62% EON Properties Sdn. Bhd. E.I. : 79.05% EONMobil Sdn. Bhd. E.I. : 79.05% Mitsubishi Motors Malaysia Sdn. Bhd. E.I. : 37.94% Euromobil Sdn. Bhd. E.I. : 79.05% EON Auto Mart Sdn. Bhd. E.I. : 79.05% Automotive Conversion Engineering Sdn. Bhd. E.I. : 79.05% 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. : 92.46% Corwin Holding Pte. Ltd. E.I. : 83.21% 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% Midea Scott & English Electronics Sdn. Bhd. E.I. : 40% ZF Steerings (Malaysia) Sdn. Bhd. E.I. : 30% TRW Steering and Suspension (Malaysia) Sdn. Bhd. E.I. : 20% Niro Ceramic (M) Sdn. Bhd. E.I. : 23.17% Rebak Island Marina Berhad E.I. : 60%

32 030 DRB-Hicom Berhad ( W) Annual Report 2009 Group corporate structure by sector (Significant Operating Companies) as at 31 March 2009 Automotive % HICOM Diecastings Sdn. Bhd % USF-HICOM (Malaysia) Sdn. Bhd % Automotive Corporation (Malaysia) Sdn. Bhd % HICOM Engineering Sdn. Bhd % DRB-HICOM Auto Solutions Sdn. Bhd % DRB-HICOM Defence Technologies Sdn. Bhd % Defence Services Sdn. Bhd % HICOM Polymers Industry Sdn. Bhd % HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd. (formerly known as Automotive Manufacturers (Malaysia) Sdn. Bhd.) 79.05% Edaran Otomobil Nasional Berhad 79.05% Euromobil 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 Plastics (Thailand) Ltd % Isuzu Malaysia Sdn. Bhd % HICOM-HONDA Manufacturing Malaysia Sdn. Bhd % HICOM-YAMAHA Manufacturing Malaysia Sdn. Bhd % Mitsubishi Motors Malaysia Sdn. Bhd % Proton Parts Centre Sdn. Bhd % ISUZU HICOM Malaysia Sdn. Bhd % HICOM-Chevrolet Sdn. Bhd % Suzuki Malaysia Automobile Sdn. Bhd % Honda Malaysia Sdn. Bhd % ZF Steerings (Malaysia) Sdn. Bhd % Suzuki Motorcycle Malaysia Sdn. Bhd % Johnson Controls Automotive Holding (M) Sdn. Bhd % TRW Steering and Suspension (Malaysia) Sdn. Bhd.

33 Subsidiary Companies Jointly Controlled Entities Associated Companies Note E.I. DRB-HICOM Group s Effective Interest Kindly refer to pages 151 to 161 for the Group companies. 031 services % PUSPAKOM Sdn. Bhd % Rangkai Positif Sdn. Bhd % KL Airport Services Sdn. Bhd % HICOM Facility Management Berhad 70.00% Bank Muamalat Malaysia Berhad 70.00% Scott & English (Malaysia) Sdn. Bhd % Alam Flora Sdn. Bhd % Uni.Asia Life Assurance Berhad 34.73% Uni.Asia General Insurance Berhad 40.00% Midea Scott & English Electronics Sdn. Bhd. (formerly known as Scott & English Electronics Sdn. Bhd.) 31.62% SRT-EON Security Services Sdn. Bhd. Property & Infrastructure % HICOM Builders Sdn. Bhd. (formerly known as Imatex Sdn. Bhd.) % HICOM Berhad % HICOM Properties Sdn. Bhd % HICOM Indungan Sdn. Bhd % Kenyir Splendour Berhad % Bukit Kledek Development Sdn. Bhd % Ladang Kupang Development Sdn. Bhd % Ladang Gadek Development Sdn. Bhd % Desa Puchong Sdn. Bhd % HICOM Megah Sdn. Bhd % Glenmarie Cove Development 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.

34 032 DRB-Hicom Berhad ( W) Annual Report 2009

35 Delivering potential for balance A company s foundation of stability and balance reaffirms its position in being able to deliver profitability and results that will keep it buoyant on a steady driven course.

36 034 DRB-Hicom Berhad ( W) Annual Report 2009 performance review

37 036 Chairman s Statement 044 Group Managing Director s Review of Operations 046 Automotive Sector 056 Services Sector 064 Property & Infrastructure Sector 035

38

39 037 chairman s statement I am pleased to present to you, on behalf of the Board of Directors, the Annual Report of DRB-HICOM Berhad for the financial year ended 31 March The strategic realignment and holdings rationalisation executed through the mandatory general offer for Edaran Otomobil Nasional Berhad and the acquisitions of Bank Muamalat Malaysia Berhad and Rangkai Positif Sdn. Bhd. have increased top-line revenue growth by 52% from RM4.0 billion to RM6.1 billion. The quantum leap we have achieved in the size of the Group sets a new paradigm for growth and has opened up a wide panorama with exciting opportunities for our future. An important part of the structured and objective approach we deploy to assess continued investment choices, is to dispose off non-core businesses: those subsidiaries in which the Group has not been in a position to set the pace and direction. In that category, has been the strategic disposal of the minority stake the Group held in EON Capital Berhad. The divestment, at a premium price of RM9.55 per share, on 23rd June 2008, just before the onset of the global downturn, was voted by The Edge as one of the best corporate deals of the year. The Group s recorded profit before taxation of RM774.9 million as compared to RM376.1 million in the previous financial year includes an extraordinary gain of RM567 million on the disposal of EON Capital Berhad, which has been described as other income in the income statement. An important goal, in the strategic repositioning we have conducted, to create the foundation for sustainable profit, has been to pare down corporate debt. This action has resulted in the Group reducing its gearing ratio from 0.77 to 0.36 times and increasing the return on shareholder s equity from 10% to 16%. GLOBAL AVIATION POTENTIALGROWTH all of us are constantly on the lookout for new opportunities and new markets. we assess each and every opportunity carefully Dato Syed Mohamad bin Syed Murtaza Chairman

40 038 DRB-Hicom Berhad ( W) Annual Report 2009 chairman s statement (Continued) OVERVIEW Malaysia s economic growth fell to 0.1% in the fourth quarter of 2008 and worsened in the first quarter of 2009, shrinking by 6.2%. As the country s exports slumped amid weak global demand, trading conditions for the Group, in all business sectors, weakened last year. Automotive, Services and Property & Infrastructure constitute the three business sectors of the Group. In a change from last year, we are now reporting our defence interests, previously reviewed separately, under the Automotive sector, to reflect the change in the business from short-term commission-based sales to a long-term sustainable special purpose vehicle business. The consolidation of Edaran Otomobil Nasional Berhad s results for the full year has increased our Automotive revenues by 74%. Our Services sector, comprising the financial and non-financial services, which we recognised as a star performer in our last report, felt less of an impact from the recession, and has been strengthened further by recent acquisitions. Our Property & Infrastructure business, sensitive to the consequences of the sub-prime loans prevalent in the United States and the clouded global economic outlook, took a strategic decision, in advance of the decline in demand, to complete and sell most of their developments in the last quarter of environmental friendly vehicles. Interest in hybrid cars is rising and owing to incentives introduced by our Government to encourage usage of green technology vehicles, demand for the Civic Hybrid, distributed by our associate Honda Malaysia Sdn. Bhd., has been encouraging. With the expected decline in vehicle production due to the current global economic uncertainties, the component manufacturing subsidiaries are making an intensive effort to diversify into non-auto segments. Our automotive assembly plant in Pekan, Pahang holds great potential as the nucleus for an automotive hub for the country, and, spurred by Government incentives, will create more employment and drive a multiplier effect into the surrounding economy and further afield. The Government is currently reviewing the National Automotive Policy. We are hopeful that any changes will help improve the competitiveness of local automotive manufacturing companies. The Group s Services sector has proven to be resilient and has made a considerable contribution to operating profits. PUSPAKOM Sdn. Bhd. has a 71 strong branch network to perform inspections twice a year on all 1 million commercial vehicles in the market and carries out another 600,000 inspections on passenger cars before ownership is transferred. The Government has extended the agreement, which requires complete nationwide coverage in both urban and rural areas, for another 15 years. Alam Flora Sdn. Bhd., since 1998, has been signing yearly contracts with individual local authorities to collect and dispose solid waste. The quality of service has improved two-fold, as measured by the company s Floracare system. The company is currently looking forward to signing the concession agreement with the Federal Government, in respect of the privatisation of solid waste management in Kuala Lumpur, Putrajaya, Selangor, Pahang, Kelantan and Terengganu. LADIES AND GENTLEMEN, DRB-HICOM Berhad (DRB-HICOM) s share of the Malaysian Automotive Total Industry Volume (TIV) increased from 17% in calendar year 2007 to 19% in Restrategising their position, Edaran Otomobil Nasional Berhad (EON), a 79.05% subsidiary of the Group, entered into a Memorandum of Understanding with Proton Holdings Berhad (Proton), on 2 May 2008, to rationalise the existing Proton-EON distributorship to further strengthen both entities and the national automobile sector. In connection with this realignment, EON has entered into a Master Dealership Agreement with Proton Edar Sdn. Bhd. on 8 May Governments around the world are taking a prominent role in shaping their automotive industries, seeking to rejuvenate their economies while also encouraging consumers to buy cars that consume less fuel. Contributing to a clean envir onment has become part of auto-makers strategy. Demand appears to be partly stimulated by scrap grants, and incentives to purchase Fixing rear body panels on the sub-assembly line for the Suzuki Swift at HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd. in Pekan, Pahang.

41 039 Scenic landscape at Proton City in Tanjung Malim, Perak where Proton City Development Corporation Sdn. Bhd. is developing an integrated township on 4,000 acres. The room interior of Deluxe Villa bedroom, with a view of the sea, at the Rebak Island Resort, Langkawi. The resort is managed by Taj Hotels, Resorts and Palaces. During the financial year under review, we made two major acquisitions. Bank Muamalat Malaysia Berhad is licensed under the Islamic Banking Act 1983, and principally engaged in all aspects of Islamic banking and the provision of related financial services in accordance with Syariah principles. The subsidiaries of the bank are involved in venture capital and fund management services. Rangkai Positif Sdn. Bhd., the provider of operation and maintenance services to the Tanjung Bin power plant, has a 25 year concession commencing from 25 September The fees are based on a fixed amount plus a variable rate linked to electricity demand by Tenaga Nasional Berhad. Through careful planning and stringent execution of strategies, the Property & Infrastructure subsidiaries were able to complete and sell many property developments before the economic downturn. We have reached the end of a three-year programme of refurbishment of the Group s hospitality assets. The three hotels are now showing significant improvement in year-on-year occupancy rates and the Valley Course of the Glenmarie Golf Club is due to fully reopen in September The property market is cyclical, and we plan, at this time in the cycle, to obtain approvals for proposed projects and explore development opportunities while preparing for the upswing in the economy. Lower interest rates at the start of the recovery will not only contain the cost of construction but also incentivise buyers considering financing to get a foot on the property ladder. ACQUISITIONS AND DISPOSALS On 23 June 2008 the Group completed the disposal of its entire 20.2% equity interest in EON Capital Berhad to Primus Pacific Partners 1 L. P. for a cash consideration of approximately RM1.34 billion. Of the sale proceeds, a major portion was used to repay long-term bank borrowings, including Bithaman Ajil Islamic Debt Securities (BaIDS), helping to reduce the Group s debt. On 22 October 2008, the acquisition of a 70% equity interest in Bank Muamalat Malaysia Berhad (Bank Muamalat) was completed. By buying the controlling stake in Bank Muamal at, the Group is entering into Islamic banking. In most countries with significant Islamic communities, financial institutions that cater to this segment are growing faster than conventional banks because of the strong demand among consumers for products and services that comply with Syariah, the Islamic legal code. The Group s acquisition on 22 October 2008 of a 100% equity interest in Rangkai Positif Sdn. Bhd. (Rangkai Positif) was satisfied by the issuance of new DRB-HICOM ordinary shares. Rangkai Positif provides operation and maintenance services to the Tanjung Bin power plant located in the state of Johor, for a concession period of 25 years. The plant comprises three coal-fired generating units with a total capacity of 2,100 megawatts and sells electricity to Tenaga Nasional Berhad. Pursuant to the Rights Issue undertaken by Alam Flora Sdn. Bhd. (Alam Flora) the Group subscribed for a total of 24 million new ordinary shares of RM1.00 each. The Group s shareholding in Alam Flora increased from 55% to 60.53% in July The forthcoming privatisation under the Solid Waste and Public Cleansing Management Act 2007 will put the concession on a more secure footing.

42 040 DRB-Hicom Berhad ( W) Annual Report 2009 chairman s statement (Continued) On 8 September 2008, the Group completed the acquisition of an additional 15% equity interest in Motosikal Dan Enjin Nasional Sdn. Bhd. (MODENAS) from Khazanah Nasional Berhad for a cash consideration of RM24 million. As a result, the Group s shareholding in MODENAS increased from 55% to 70%. HICOM Properties Sdn. Bhd., a wholly-owned subsidiary of the Group, is acquiring three parcels of freehold land totalling approximately 1,516 acres in Tebrau, Johor Bahru. The purchase consideration will also include the disposal of five plantations, which are not part of our core business, comprising Connemara Estate, Serendah Estate, Bukit Kledek Estate, Ladang Gadek and Ladang Kupang to the vendors. The completion of the proposed acquisition is pending the fulfilment of the conditions precedent stated in the share sale agreement. Our intention is to develop the land, which lies within the Iskandar region, into a niche lifestyle mixed zone, which will generate sustainable cashflow over the mid to long term. FINANCIAL HIGHLIGHTS I am pleased to report that DRB-HICOM Berhad s pre-tax profit increased to RM774.9 million from RM376.1 million for the financial year ended 31 March 2009, inclusive of the exceptional gain registered from the disposal of EON Capital Berhad. Earnings per share have increased from sen to sen. DRB-HICOM is recommending a final gross dividend of 2.5 sen per share for the financial year under review, which together with the interim (special) dividend of sen, less taxation of 25% paid on 26 September 2008, makes a total dividend of sen for the year. CORPORATE GOVERNANCE The Board of Directors of DRB-HICOM fully supports the recommendations of the Malaysian Code on Corporate Governance, which sets out the broad principles and best practices for listed companies, to ensure that good corporate governance is practised, and the Board effectively discharges its responsibilities to safeguard shareholders investments and enhance shareholders value. These structures and processes include the composition of the board, procedures for the appointment of new directors, remuneration for directors, the use of board committees and their mandates and activities. The Board continuously seeks to improve standards of corporate governance practised throughout the Group and is committed to ensuring that all stakeholders interests are protected and value is increased. CORPORATE RESPONSIBILITY DRB-HICOM is developing a Corporate Responsibility (CR) framework to align our social and environmental efforts to the Group s corporate strategy, nature of business and expectations of our key stakeholders. Moving forward, the Group will be looking into measuring and monitoring our CR initiatives across the four dimensions of environment, community, workplace and marketplace, as well as increasing stakeholder engagement to more effectively manage our CR efforts. Our corporate citizenship programmes during the year are mentioned further on in this report. HUMAN RESOURCE DEVELOPMENT Our people are our priority. We are committed to the development of our staff to ensure their career success and to bring about immediate and long-term benefits to the organisation and other stakeholders, and ensure a sustainable future for the Group. We will treat our people with respect, dignity and fairness and endeavour to attract, develop and retain qualified, creative and innovative people. DRB-HICOM Leadership Competencies and talent management goals mandate the structures which will be enhanced to improve the effectiveness of our employees. These include assessing capabilities, staff redeployment and rotation and retraining of workforce to enhance their mobility. Respect and compliance with our values continue to dominate at both the professional and personal level.

43 041 AWARDS AND RECOGNITION During the year under review, the Group continued to receive awards and recognition for manufacturing, brand, governance and outstanding performance for several of its business activities as well as its employee welfare and corporate responsibility programmes. These awards and recognition are detailed in the reports that follow in this annual report. Due credit must be accorded to all our staff and associates for such accolades. OUTLOOK & PROSPECTS Although positive growth is anticipated in the fourth quarter of 2009, Malaysia s economy is expected to shrink by four or five percent this year. Projects to be carried out under the Government s two economic stimulus packages will spur growth but the country s full revival ultimately depends on the recovery of the world economy which is contingent upon economic growth in the United States, Europe and China. The Automotive Distribution sector is expected to remain resilient and prospects for the Services sector, particularly PUSPAKOM and Alam Flora, remain strong due to the innovative strategies being implemented, though earnings from the bank and insurance companies are expected to be affected by the economic slowdown. The Group and its partners are in a strong position to spearhead growth at Bank Muamalat which is operating in the Islamic financial sector, currently a fast growing banking segment. Rangkai Positif, which has a 25- year operations and maintenance contract with the Tanjung Bin power plant, a supplier of electricity to Tenaga Nasional Berhad for the national grid, is expected to contribute handsomely to Group revenue. The Property & Infrastructure division aspires to create innovative designs and is building an exciting and significant pipeline of projects to launch when the economy improves. Despite the present tough and challenging economic situation, the Group will continue to look ahead with cautious optimism and will be on the look out for new businesses. We will be well positioned to perform better when the economic situation improves. Capital expenditure will be trimmed and controls tightened on cash flow. The Group will remain vigilant on costs and risk management and will continue to strive for further improvement in the operating efficiency, resilience and competitiveness of the Group s diversified businesses. ACKNOWLEDGEMENTS On behalf of the Board, I extend a vote of appreciation to the former Chairman, Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail, and former Director, YBhg Dato Mohd Redza Shah Abdul Wahid. In addition, I welcome the new Director, Mr Ooi Teik Huat, to the Board of DRB-HICOM Berhad. I express our gratitude and thanks to our Management and staff who have worked so hard and so diligently to improve the Group s performance. LADIES AND GENTLEMEN I would also like to take this opportunity to thank our business partners, associates, bankers, friends, Government authorities and other stakeholders, for their continued understanding, support, and confidence in the Group. I would like to extend my sincere thanks and appreciation to my fellow Board members for their counsel and support. DRB-HICOM operates in a dynamic and challenging business environment. Given our strength and flexibility to adapt ourselves to the realities of the new marketplace, we are ready to transform challenges into opportunities for new growth. Thank you. DATO SYED MOHAMAD SYED MURTAZA Chairman

44 042 DRB-Hicom Berhad ( W) Annual Report 2009

45 Strategising potential for resilience In challenging times come crucial moments that matters, in becoming decisive, staying resilient and weathering the economic change, to emerge in resurgence.

46

47 045 group managing director s review of operations I am pleased to present a review of operations for the DRB-HICOM Group for the year ended 31 March HICOM was in the vanguard of the nation s foray into heavy industry and the Group has held fast to its original role of nation building. The Group s principal activities are in the Automotive, Services and Property & Infrastructure sectors. In an integrated automotive operation, we manufacture components, and assemble and distribute vehicles, including selling related spares and after-sale services. Our Services sector provides inspection of vehicles, solid waste management, insurance and banking. The Property business is in development and engineering, infrastructure and construction. Operations are carried out mainly in Malaysia. During the financial year under review, the Automotive Distribution sector has carved out a greater share of the automotive vehicle market. The Services sector, which operates concessions granted by the Government among other activities, has performed strongly and has been strengthened by the acquisition of Bank Muamalat Malaysia Berhad, a Syariah compliant bank, and Rangkai Positif Sdn. Bhd. which provides operations and maintenance to the Tanjung Bin power plant. The Property sector has successfully delivered a number of prestigious projects and is on the verge of securing a substantial land bank for future development in the Iskandar region in southern Peninsular Malaysia. VALUE ENHANCEMENT GLOBAL ACCESSIBILITY YBhg Datuk Haji Mohd Khamil bin Jamil Group Managing Director

48 046 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) automotivesector The Group s Automotive sector is involved in the manufacturing of components, and the assembling and distribution of cars, trucks and motorcycles for the passenger, commercial, mass transport and defence automotive markets. Automotive revenue accounted for 65% of the Group s total revenue. Automotive Distribution Total Industry Volume (TIV) increased by 12.5% in 2008 supported by positive consumer sentiment during the first 9 months before an increase in the price of oil made an impact on customers and shifted consumer preferences from expensive to more reasonably priced cars. DRB-HICOM s share of the automotive distributor market in Malaysia, cumulatively through our partnerships with various brands, increased, reaching the No. 2 position, in calendar year We continue to reinforce our partnerships with principal partners i.e. Honda, Isuzu, Suzuki and General Motors which have each invested in joint ventures with the Group to enhance their brand presence in Malaysia. A key performer in the Group is Honda Malaysia Sdn. Bhd. (Honda Malaysia) which sold 32,477 cars in 2008, up 14% compared to Honda Malaysia is a partnership between Honda Motor Co. Ltd. of Japan, which owns 51% of the company, and two Malaysian companies, DRB-HICOM Berhad and Oriental Holdings Berhad, which hold 34% and 15% respectively. Honda Malaysia s manufacturing plant in Pegoh, Melaka assembles the City, Civic, CR-V and Accord models. The imported models are the Stream, Jazz, Odyssey, Civic Type R and the Civic Hybrid. Honda s models are mainly small to medium sized, fuel-efficient and of higher performance, appreciated by customers as good quality but also good value for money. With the recent incentives given by the Government to encourage vehicles with green engines, competitive pricing on the advanced technology Honda Civic Hybrid 1.3 litre is expected to boost sales significantly. The Group s equity interest in Edaran Otomobil Nasional Berhad (EON) is now 79%. EON s sales of 43,909 units accounted for 30.9% of Proton s volume, contributed by the introduction of several new models. At present, EON has 32 nationwide service centres with more than 20 years of experience in servicing mainly Proton cars and Mitsubishi vehicles. EON emphasises its after-sales service performed by trained and skilled technicians.

49

50 048 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) automotivesector Besides Proton, EON also distributes other eminent brands of vehicles, such as Mitsubishi and Audi. Mitsubishi Motors Malaysia Sdn. Bhd. (MMM), the exclusive distributor for Mitsubishi in Malaysia, introduced the Mitsubishi Triton Lite 2.5 and Triton 3.2 pick-ups in the market in June Through these new variants, Triton sales improved from 2,813 units in 2007 to 5,748 in Triton models won awards, the Pick-up Truck of the Year in Autocar Asean s 2008 Car of the Year Awards (Triton Lite) and the NST-Maybank Car Of The Year Award 2008 (Triton 3.2), respectively. In addition to awards for the pick-up range, MMM also received the Small/Medium MPV of the Year award for its Grandis model. The Mitsubishi Lancer Evolution 10 was introduced in August last year, dedicated to the passionate supporters of the Mitsubishi Evo range. Market response to these new models has been encouraging. Audi, the premium marque in the Group s Automotive Distribution sector, is distributed by Euromobil Sdn. Bhd. (Euromobil), a subsidiary of EON Berhad. The year under review witnessed a new generation A model brought into the market followed by a face-lifted A6 model in January Highlighting its premium value, Audi has proven it s winning design with the numerous awards received, such as the Best Executive Car (Audi A4), Best Premium Executive Car (Audi A6) and Super Saloon Car (Audi A8) in the Asian Auto- Bosch Fuel Efficiency Awards 2008, as well as being winner of the Small Luxury Hatchback/Coupe Category (Audi TT) in the Autocar Asean Awards Looking forward to obtaining full distributorship status from Audi AG, Euromobil intends to establish showrooms in downtown Kuala Lumpur, Penang and Johor Bahru, and refurbish the present centre in Glenmarie, in compliance with the latest corporate design and identity of Audi worldwide. As we build Audi into the flagship marque for the Group Automotive sector we expect sales to reach 400 units next year. EON will be further consolidated to focus on growing its presence in the automobile market through these franchise brands. Automotive Corporation (Malaysia) Sdn. Bhd. (ACM) is the sole distributor of Malaysia s national truck, the HICOM Perkasa, and Isuzu s medium-heavy duty truck. ACM is also a dealer for the Isuzu D Max pick-up for Isuzu Malaysia Sdn. Bhd. a major player in the light-duty truck segment. ACM exceeded the 12% growth in the whole segment by increasing its sales by 15% to 4,756 units to maintain a 28.5% market share in For three months in 2008 HICOM Perkasa attained the No.1 position in the market overtaking Daihatsu. In the medium-heavy duty truck segment the Isuzu brand achieved sales of 226 units and captured a 16% share of the market. As we build Audi into the flagship marque for the Group Automotive sector we expect sales to reach 400 units next year. EON will be further consolidated to focus on growing its presence in the automobile market through these franchise brands.

51 The main assembly line for Suzuki cars at the HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd. plant in Pekan, Pahang. 049 DRB-HICOM s share of the automotive distributor market in Malaysia increased, reaching the No.2 position, in calendar year 2008

52 050 DRB-Hicom Berhad ( W) Annual Report 2009 Suzuki Malaysia Automobile Sdn. Bhd. (Suzuki Malaysia) undertakes the import, assembly and marketing of completely knocked down (CKD) and distribution of completely built up (CBU) units of Suzuki motor vehicles, spare parts and accessories. The tie-up with Suzuki Motor Corporation is part of the Group s on-going strategy to partner with globally renowned automotive brands to further entrench DRB-HICOM s position as the country s single largest integrated automotive manufacturer and distributor. Suzuki Malaysia also completed its first year of operations under a new corporate structure. This strategy has achieved an increase in sales from 2,583 units to 5,024 in calendar year 2008, an advance of 94.5%, from a network of 26 dealers. The trim and final assembly line for the Isuzu D-Max at ISUZU HICOM Malaysia Sdn. Bhd. With a network of six 3S (Sales, Service and Spare parts) centres situated in major cities and towns in Peninsular Malaysia, supported by another 40 sales dealers and 60 services and parts stockists, ACM is well poised to support customers` after-sales needs. ACM 3S centres are well equipped with mobile workshops, supported by a 24-hours call centre to handle emergency breakdowns. In recognition of ACM`s achievement as a total commercial vehicle distributor, Frost & Sullivan, an independent international consultant, awarded ACM with the Asean Automotive Award Best Practices Award % of the sales volume was derived from the ever popular Swift 1.5 CKD which has a strong following and is being assembled in the Group Automotive manufacturing plant in Pekan. Other models sold by Suzuki Malaysia are the 2.0L Grand Vitara, the Swift 1.6 Sports sedan and the new SX4 hatch back. In addition to these, the SX4 sedan was launched in July The Suzuki models won various awards during the year reflecting their quality and popularity. The Swift 1.5 CKD with its stylish sporty looks, dynamic performance and high-quality features won the Asian Auto Fuel Efficiency Awards 2008 and the Suzuki Grand Vitara won in the prestigious AutoCar Asean Awards 2008 under small/mid-size SUV category. Lastly, but not least, the SX4 hatchback, an eye catching fusion of dynamism and elegance, won the Stuff Malaysia 2008 Reader s Choice SUV/MPV award. Isuzu Malaysia Sdn. Bhd. registered sales of 5,026 pick-ups, a growth of 76% over The Isuzu D-Max has proven its fuel efficiency, durability and reliability and has a particularly strong franchise in East Malaysia. The awareness of the superior fuel efficiency of Isuzu engines was dramatically raised when Asian Auto Magazine, one of Malaysia s leading automotive magazines, named the Isuzu D-Max 3.0L 4x4 as the winner of the first Asian Auto-Bosch Fuel Efficiency Awards in the pick-up category. Flags flying at HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd. plant in Pekan, Pahang where the Group assembles Mercedes-Benz models on contract assembly basis.

53 051 In the year 2008 Suzuki Malaysia increased its sales by 94.5 % from a network of 26 dealers Motosikal Dan Enjin Nasional Sdn. Bhd. (MODENAS) increased its volume from the previous year s 46,978 units to 60,651 units in 2008, recording a growth of 29%, well ahead of the overall market growth of 12%. Contributing positively towards MODENAS volume and market share were the introduction of new models, the Kriss 120 Sport and a facelift for the Passion. The latest GT128 model, launched into the market in late March 2009, offers an improved safety feature and engine efficiency, coupled with a reasonable price. MODENAS has four service centres in Gurun, Shah Alam, Johor Bharu and Kuantan, and with its network of 200 dealers nationwide is able to facilitate the after-sales service needs of its customers. Despite the current economic climate, MODENAS is looking at a volume of 60,000 units to capture a 15% share of the market in MODENAS received a Gold Medal for Malaysia Manufacturing Excellence Award from Frost Sullivan. MODENAS is now embarking on new strategies to propel growth which include sponsorship of the Akademi Fantasia television show and maximising advertising and promotion to build the brand. The product development programme will ensure a pipeline of new models of good quality and reasonably priced motorcycles. The latest GT128 model, launched by MODENAS in late March 2009, offers an improved safety feature and engine efficiency, coupled with a reasonable price. Into its third year, DRB-HICOM Auto Solutions Sdn. Bhd. (DHAS) saw significant improvement in its operation as an importer and service provider for CBU and CKD vehicles. There has been an increase in Pre-Delivery Inspections (PDI) throughout the year. As a one-stop automotive solution provider, DHAS facilitates the overall process of importing vehicles right to final delivery to dealerships. DHAS has two main centres. The Pekan PDI Centre received its ISO 9001/2000 certification in January 2009 and the Shah Alam PDI Centre, which is the main centre for CBU cars, is applying for ISO 9001/2008 compliance certification. DHAS is committed towards establishing itself as a premium service provider with emphasis on giving customer satisfaction through the implementation of quality standards recognised by the franchise or brand representation within DRB-HICOM. Pre-delivery Inspection of cars for Quality Assurance by DRB-HICOM Auto Solutions Sdn Bhd. in Pekan, Pahang. DRB-HICOM s Defence Technologies Sdn. Bhd. (DEFTECH) is a contractor of land based military vehicles to the Ministry of Defence. The company explores all opportunities as a major local defence player in the industry to secure contracts for the supply, maintenance and refurbishment of land based military vehicles. To operate effectively the company is continuing to form strategic alliances with international manufacturers to enhance DEFTECH s product range and to acquire technology for the assembly, system integration, repair, maintenance, overhaul service, refurbishment and upgrading of vehicles and other products. DEFTECH is maximising the synergistic use of all available facilities within the DRB-HICOM Group and the country for the assembly of vehicles and fabrication of vehicle bodies and expects to keep its order book full.

54 052 DRB-Hicom Berhad ( W) Annual Report 2009 City buses assembled by DRB-HICOM Defence Technologies Sdn. Bhd. (DEFTECH) in Pekan, Pahang. group managing director s review of operations (Continued) automotivesector Presently, DEFTECH has received confirmed orders for 10-metre Metro City Buses for RapidPenang, an overseas sales to the Government of Brunei, comprised of Handalan II trucks and a unit of Mobile Field Kitchen, and Handalan II for the Ministry of Defence. DEFTECH has also participated in a tender for the supply of 12-metre Metro City Buses for RapidKL. DEFTECH s testing circuit, built to NATO standards, at the plant in Pekan, is a proving ground where military vehicles are put through their paces. DEFTECH has been improving its in-house expertise over the years to create an engineering services division with in-depth knowledge of defence equipment and specialised and customised vehicles. The company needs now to build on tools, tooling equipment and machineries to complement the production processes. Continued emphasis on new production processes have provided DEFTECH the competence to handle additional contracts from other customers. Attention will also be given to develop recurring income business in spare parts sales, maintenance repair, overhaul, and refurbishment contracts to effectively leverage our core business. DEFTECH, which leads the Malaysian Defence Industry Council s (MDIC) Automotive Working Group (AWG), is finalising its plan to develop a family of indigenous 8X8 Armoured Wheeled Vehicles. This plan creates an opportunity for the company to become a partner in the customer support network manufacturing and supplying components such as electrical equipment, rubber mouldings, metal fabricated parts, heat and surface treatment, batteries and tyres. Once the plan gets off the ground, it will be the second step undertaken by the Government in realising its self reliance policy following the local assembly of the ADNAN Armoured Infantry Fighting Vehicle. Defence Services Sdn. Bhd. (DSSB), DEFTECH s subsidiary, received the contract to refurbish the Pendekar PT91M Main Battle Tank.

55 053 DEFTECH s subsidiary, Defence Services Sdn. Bhd. (DSSB), received new contracts for the supply of small calibre weapons to defence forces and law enforcement agencies. Two contracts have been secured for the refurbishment of Scorpion and Stormer Armoured Vehicles, and for local services and supply to back-up the delivery of the Pendekar PT91M Main Battle Tank. The refurbishment contract will be completed and delivery will begin from the third quarter of 2009 and ending in September The Main Battle Tank deliveries, which first commenced in August of 2008, are expected to continue in batches and the last batch is expected to be handed over in December DSSB is also expected to maintain and supply spares for the Pendekar Tank and continues to pursue new contracts for military vehicles. Automotive Components & Engineering The component manufacturers comprise metal stamping, automotive plastic moulding, and aluminium and iron casting companies. The assembly companies include the completely knocked down (CKD) vehicle plants in Pekan and Malacca and the motorcycle engine assemblers for Honda, Yamaha, MODENAS and Suzuki. HICOM Diecastings Sdn. Bhd. is a supplier of aluminium diecasting, HICOM Engineering Sdn. Bhd. operates an iron foundry and machining works and HICOM-Teck See Manufacturing Malaysia Sdn. Bhd. is in the automotive plastic injection moulding industry. We have successfully developed the engineering expertise to manufacture and supply automotive components to major international customers which include Toyota, Honda, General Motors, ZF Steerings, TRW, Brose, Volvo, Ford and Nissan and other Original Equipment Manufacturers (OEMs), besides the national carmakers Proton and Perodua. The Group s manufacturing and assembly complex for passenger, commercial and defence vehicles in Pekan, Pahang is the nucleus of a modern automotive hub, in support of the national strategy to form automotive centres. The complex, already an assembler for Mercedes- Benz and Suzuki, has the proven reputation for quality to attract international manufacturers, with their supply chains and logistical networks, to achieve the critical mass and momentum needed to propel Pekan ahead as a serious auto-maker contender for the ASEAN market. The Group will serve as a catalyst towards advancing the automobile industry to add significantly to the economy. PHN Industry Sdn. Bhd. (PHN) produces stamped parts and sub-assembly of metal-based automotive body components, such as the front deck assembly, reinforcement pillar as well as body shell panel. Sales were driven by high demand for the Persona and new Saga from Proton and the Myvi and Viva models from Perodua. PHN is not only a Tier-1 vendor for both the leading national car manufacturers but also Honda Malaysia and Toyota Boshuku UMW. PHN also manufactures small and medium sized dies for the automotive industry. During the year, PHN was recognised by Proton as the Overall Best Vendor and for Best Quality Performance.

56 054 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) automotivesector The trim and final assembly line - fitting of seats, steering, dashboard and carpet - for the Suzuki Swift at HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd. in Pekan, Pahang. HICOM Diecastings Sdn. Bhd. (HDSB), a leading Tier-1 high-pressure aluminium diecast part manufacturer strengthened its position as a supplier in the component market to OEMs locally and abroad. HDSB supplies specialised steering housing components to international Tier-1 companies such as ZF Malaysia, ZF s overseas operations in USA and Germany, TRW Malaysia and Emerson of USA. Diversifying from its automotive base, HDSB is supplying non-auto pump housings for the oil and gas industry, components to the building and construction sectors and for medical equipment, and cylinder blocks for motorcycles. HICOM Engineering Sdn. Bhd. (HESB) manufactures machine precision iron castings and assembles components for automotive and general engineering purposes. Diversification into non-automotive markets bodes well with production of cast shoulder fastener for rail track for Pandrol for the local double tracking projects, which have now been extended from Ipoh to Padang Besar. This has led to the exports of rail components to Italy in 2008 and HESB is aggressively exploring to supply fasteners to other rail track projects overseas. HICOM-Teck See Manufacturing Malaysia Sdn. Bhd. (HTSM) is a Tier-1 automotive plastic parts vendor which manufactures bumper modules, instrument panels and door trim assemblies. HTSM s main customers in Malaysia include Proton, Perodua, Johnson Controls, Honda and Toyota. As a one-stop centre for automotive plastic products, HTSM provides services that include product design and development, testing, injection moulding, assembly and painting. HTSM s wholly owned subsidiary, HICOM Automotive Plastic (Thailand) Ltd., in Rayong, Thailand supplies components such as bumpers, trunk lid handles, instrument panel, door handle and radiator grilles for General Motors, Brose and Ford. HTSM won the Most Improved in Quality and Most Improved in Delivery awards by Proton. Frost & Sullivan also recognised HTSM as the 2008 Automotive Component Manufacturer of the Year (Malaysia). Oriental Summit Industries Sdn. Bhd. (OSI) is involved in stamping, welding, painting and assembly of metal automotive components, specialising in chassis components, front lower arm, rear axle suspension, parking brake lever, seat frames and trim parts. OSI designs, develops and manufactures components such as the front and rear suspension modules and seat frame mechanism for automotive manufacturers. Major customers include Proton, Perodua and Toyota. OSI also offers services in jigs, tools, dies and product design with dies and toolings fabrication. The joint ventures with foreign OEM companies, Continental Automotive Instruments (Malaysia) Sdn. Bhd., TRW Steering & Suspension (Malaysia) Sdn. Bhd. and ZF Steerings (Malaysia) Sdn. Bhd., found the market in Malaysia surprisingly resilient during the year as consumer and business confidence held up. Though their export programmes felt the effects of the global slowdown, prospects have begun to look brighter again in Asia, led by demand from China.

57 055 HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd. (HAMM), formerly known as Automotive Manufacturers (Malaysia) Sdn Bhd, is located at Peramu Industrial Estate. The plant is equipped with excellent infrastructure facilities covering 57 hectares of land in Pekan, Pahang, 45 kilometres south of Kuantan. Operating flexible, multi-model assembly lines, the assembly operation is an important operating centre for the Group and is the catalyst for the Group s manufacturing operations with world class vehicle assemblers such as Mercedes and Suzuki. HAMM has assembled and made on a contract basis the Mercedes-Benz C and E class since 2005, followed by the S class in 2006, making the Group the first assembler of the current S class model in Asia. The Suzuki Swift, LDV Maxus van, and Daewoo natural-gas bus chassis, are also assembled, utilising efficient production standards and exceptional quality control programmes. ISUZU HICOM Malaysia Sdn. Bhd. (IHM), formerly known as Malaysian Truck & Bus Sdn. Bhd., assembles the HICOM Perkasa light duty truck, ISUZU medium and heavy duty truck and the ISUZU D-Max pick-up. Subsequent to the financial and operational restructuring exercise in financial year 2007/2008, which involved an increase in Isuzu s equity participation, IHM has become more lean and focused in its operations. IHM achieved a total sales volume of 14,921 units during the year under review, an improvement of 42% over the previous year. HICOM-HONDA Manufacturing Malaysia Sdn. Bhd. (HICOM-HONDA) delivered 225,500 engines and has maintained its No. 1 position in the market for motorcycles for 6 consecutive years. The company s principal activities are machining, assembling and testing motorcycle engines and components such as crankcase covers, crankcases, cylinders, cylinder heads, crankshafts and camshafts. HICOM- HONDA also exports motorcycle engine components to other Honda motorcycle assembly plants in Vietnam, Indonesia and Philippines. During the financial year under review, HICOM-HONDA has invested quite significantly to cast the first Honda scooter engines ever to be manufactured in Malaysia. Mass production for the Honda Scooter, ICON began in January For future models, new HONDA technology will be used for the cylinder head and crankcase, utilising a simplified design leading to higher engine efficiency. HICOM-YAMAHA Manufacturing Malaysia Sdn. Bhd. (HICOM- YAMAHA) manufactures motorcycle engines for Yamaha, ranging from 105 to 135cc. Other activities include machining and painting of motorcycle engine components, including crankshafts, for Yamaha and Minarelli of Italy. HICOM-YAMAHA is upgrading its assembly line to be more flexible and able to accommodate various model line-ups and will raise capacity to 160,000 units per year while also increasing local content to generate better margins. To meet global challenges and competition, the Group places emphasis on quality, cost and delivery. The component companies with years of experience are accredited to international standards for process, environmental protection and safety such as ISO/TS 16949, ISO and OHSAS These standards, consistent with global requirements, will allow our automotive component manufacturing companies to make headway into the global components market. HICOM-HONDA Manufacturing Malaysia Sdn. Bhd. (HICOM-HONDA) delivered 225,500 engines and has maintained its No. 1 position in the market for 6 consecutive years.

58 056 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) servicessector The Services sector has been strengthened with the acquisition of Bank Muamalat Malaysia Berhad, which is the second full-fledged Islamic bank established in the country, and Rangkai Positif Sdn. Bhd., which provides operations and maintenance services for Tanjung Bin power plant. The long-term growth prospects for the Group Service subsidiaries in concessions, banking and insurance are positive and they will be positioned to be ready to exploit the recovery in the Malaysian economy. The Services sector posted an increase in revenue, from RM1.4 billion to RM1.9 billion, accounting for 32% of the Group s revenue, and has an increasingly important role as a reliable earner, generating 53% of the Group s profit before tax, excluding exceptional items. Key performance indicators and continuous cost cutting measures, to boost productivity and operational efficiency, have helped these subsidiaries achieve recognition in their industries. PUSPAKOM Sdn. Bhd. (PUSPAKOM) is appointed by the Government to provide efficient and accurate computerised vehicle inspection services. Business has grown steadily with inspections breaching the 3 million threshold for the first time, recording a 9% increase over the previous year s volume of 2.8 million. The number of vehicles inspected during the financial year under review reached a total of 3.1 million. All commercial vehicles, in accordance with the Road Transport Act 1987, are required to undergo a mandatory vehicle inspection every six months in order to ensure roadworthiness. Inspection prior to transfer of private vehicle ownership, which became mandatory on 1 July 2007, now accounts for 20% of the total volume of vehicles inspected.

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60 058 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) servicessector Another 6 new branches were established during the year under review bringing the total number of PUSPAKOM branches to 71 nationwide, with a capacity to inspect 5.2 million vehicles annually. PUSPAKOM s two units of fully computerised mobile inspection vehicles carry out inspections in remote rural areas or on-site for fleet operators. Using the new computerised system, a vehicle inspection takes from 15 to 30 minutes. A secure on-line real-time link transfers data to the Road Transport Department. To support an expanded network of branches the number of staff has risen from 886 to 1,096. The award of a second 15-year concession period, 2009 to 2024, gives PUSPAKOM the opportunity to fully attain its vision of being a globally recognised entity in vehicle inspection. In addition to the mandatory inspections set out under the concession agreement, PUSPAKOM conducts inspections for finance companies prior to loan disbursements for the purchase of used vehicles, checks government vehicles and imported completely built-up (CBU) vehicles and undertakes inspections prior to auctions and issuance of insurance coverage. PUSPAKOM also acts as a vehicle valuer to Amanah Raya Berhad, the trustee company wholly owned by Minister of Finance (Incorporated). In a go-to-market strategy to reach end-users and provide them with a convenient service, a door-to-door service has been rolled out, which has also enabled PUSPAKOM to capture additional revenue. Alam Flora Sdn. Bhd. (Alam Flora) is one of the largest private solid waste management companies in South East Asia. The company manages solid waste within the federal territories of Kuala Lumpur and Putrajaya and in the states of Selangor and Pahang, collecting, transporting and disposing more than 2.1 million tonnes of waste annually. The subsidiary employs a workforce of 3,529 staff and has 713 vehicles to facilitate its operations. It also manages 14 landfills, supervises and monitors 750 appointed contractors. The company is in the 12th year of the interim privatisation period and is continuously enhancing its service to the public to meet the stringent demands for sanitation and hygiene. During the year under review, Alam Flora converted the company s administrative vehicles from running on petrol to NGV, attracting a cost saving of 81%, and invested RM24 million in replacement vehicles to prepare for impending privatisation. To address global warming from the emission of CO2, the Fleet Management Department installed an Automatic Vehicle Location System to track and monitor vehicle movements in real time in all operational vehicles which will optimise vehicle movements and minimise the vehicles emissions by optimising time spent on operations. 71 branches nationwide with a capacity to inspect 5.2milion vehicles yearly PUSPAKOM s Headquarters in Wangsa Maju, Kuala Lumpur.

61 059 Drainage cleansing by Alam Flora crew, in Putrajaya. Waste collection in Putrajaya, using state-of-the-art compactors. Alam Flora recognises the importance of waste-to-energy as part of a concerted universal effort for sustainable development. The goal of Alam Flora s Research & Development department (R&D) is to add value and to complement solid waste management and cleansing operations by the development of new technologies, innovative ideas and eventually to create business opportunities. New R&D ideas identified include anaerobic digesters and bio-diesel to be pursued through strategic alliances, and a collaboration with Universiti Kebangsaan Malaysia (UKM) to create a model cradle to grave concept on the UKM campus which could be duplicated to other universities in Malaysia. The Solid Waste and Public Cleansing Management Act 2007 prescribes for all concessionaires to operate under full privatisation. Alam Flora s masterplan is drawn up and will be put into action once the new concession is signed with the Federal Government s Solid Waste Management Corporation. The new National Solid Waste Management Department will set policies, strategies and action plans and conduct enforcement while the new Solid Waste Management Corporation will take over the role of local authorities and supervise the concessionaires. KLAS handled 8,496 flights, 71,930 tonnes of cargo and 1.02 million (1,020,000) meals for the year under review. Moving forward, the company is geared towards expanding the non-concession businesses locally and internationally. With a structured and dynamic set of strategies and directions, the company is confident that it will succeed in its quest to achieve greater success, and recognition as a first class operator, in the industry. KL Airport Services Sdn. Bhd. (KLAS), a wholly owned subsidiary, is a full service provider for airlines at Kuala Lumpur International Airport (KLIA) offering passenger check-in with baggage, cargo handling, in-flight catering, ground handling and engineering services. KLAS also operates at Penang International Airport mainly providing cargo handling services. For the year under review, KLAS has handled 8,496 flights, 71,930 tonnes of cargo and 1,020,000 meals in Kuala Lumpur. In addition 4,368 flights and 39,885 tonnes of cargo were handled in Penang. The company managed to secure eleven new customers during the year: Mahan Air (Iran), Sri Wijaya (Indonesia), Silk Air (Singapore), Tiger Airways (Singapore) at Kota Kinabalu and Kuching, Finnair (Finland), Air Koryo (North Korea), Neptune Air (Malaysia), Air Bagan (Myanmar), KingFisher (India), Best Aviation (Bangladesh), and South East Asian Air (Philippines).

62 060 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) servicessector Conducting Research & Development on in-flight meals at KL Airport Services R&D laboratory at the headquarters in Sepang. After a positive first half in 2008, the credit crisis and world economic recession triggered an accelerating decrease in demand which by December 2008 registered declines of -4.6% for passengers and -22.6% for air cargo. Looking ahead, KLAS is planning to expand its services to Pulau Langkawi, improve capability and enhance services at Kota Kinabalu and Kuching and introduce a VIP Meet and Greet service. We continue to seek new revenue streams, beyond traditional airline related business, by offering total cargo logistic management, passenger loading bridge operation, truck flight, institutional catering, halal logistics and live fish shipments. The overall outlook and prospects of the aviation sector for 2009 are drastically lower than 2008 in view of the global credit crisis and world economic recession. The anticipated reduction is 15% on the number of flights and a 25% drop in cargo volume. Implementation of the ASEAN Open Sky Policy in 2009 combined with lower prospects for premium travel in the aviation industry and further liberalisation of the industry in the region suggests that low cost airlines will have an opportunity to expand into new markets and grow their market share. The Power Division of Scott & English (M) Sdn. Bhd., which is responsible for the sales and marketing of the Cummins franchise, recorded a very strong performance due to the high demand for marine engines during the first three quarters of the financial year. Sales of generators to the palm oil sector continued to perform well throughout the year. With lower demand expected for marine engines next year, emphasis will be placed on the promotion of high horse power diesel engines (3,000hp and above) as well as the hi-tech fuel saving Q series generators to maintain the company s leadership position in both the marine and land generator sectors. The performance of the Industrial Division which handles both the TCM forklifts and Sullair air-compressors franchises has been growing steadily. To counter the overall slow down for equipment demand from the traditional marine, palm oil and industrial sectors, the company has revamped its sales canvassing to the commercial and construction sectors. They have been boosted by implementation of the various stimulus packages recently announced by the Government and have a high demand for both generators and air-compressors. In August 2008 Scott & English Electronics Sdn. Bhd. s equity was re-structured to allow the principal Midea Refrigeration (Hong Kong) Ltd. a majority 51% interest and the management team a 9% share with the Group holding the balance in the company. Midea Scott & English Electronics Sdn. Bhd., as the company is now known, has just completed its third year of distributorship with Midea, a leading brand in the white goods market with a range of air-conditioners, washing machines, freezers and small appliances from China. As a consequence of the free trade agreement signed with China, import duty has been progressively reduced from 20% in 2005 to 5% in 2009, and will be lifted entirely by An advertising and promotions campaign will be intensified in 2009 to gain brand recognition and penetrate the market with Midea s high quality, affordable products. By 2010 with the Midea brand name established and enjoying competitive pricing, free of any import duty, sales volumes are expected to increase significantly. A selection of Midea brand household and electrical appliances distributed by Midea Scott & English Electronics Sdn. Bhd.

63 061 worldwide coverage for bodily injury, disablement or death caused by accident. These new products are part of a concerted effort to meet customer needs with value-for-money propositions. Despite the challenging global economic condition in 2008, the Malaysian insurance industry remained resilient supported by robust motor vehicle sales and strong performance of the non-motor sectors such as medical and health, liability and personal accident. In line with the industry s stronger performance, Uni.Asia General Insurance Berhad (Uni.Asia General) recorded a 18% growth in gross premiums to RM410 million for the year under review as compared to RM350 million in the previous year. Motor insurance remained the main contributor accounting for 72.2% of the business while nonmotor premiums, which includes fire insurance, accounted for 27.8%. Overall, the company registered a lower profit before tax of RM6 million compared to RM24.1 million previously, due to higher claims pay out and low investment returns caused by the deteriorating performance of the stock market. As part of our strategic initiative to increase the value proposition to customers, three innovative products were launched during the year. To complement the Star Series, a 7 benefits in 1 driver and passengers personal accident insurance plan, StarRider was introduced. This plan protects driver and passengers against accidental death, medical expenses reimbursement, ambulance fee, dental or corrective cosmetic surgery and bereavement expenses. Besides this, a highly affordable Maxi PA Scheme has been tailor-made to maximise value and protection to customers at the lowest possible rate of RM18 per month. This scheme allows customers to opt for either the Maxi Rider PA Plan which offers protection against loss of life or permanent dismemberment while driving, riding, boarding or alighting in an insured vehicle, or the Maxi Pro PA Plan which provides 24-hour In 2009, the insurance landscape will continue to be challenging, against the backdrop of inflationary pressures, a slowdown in domestic growth rates and global economic uncertainty. The company, however, is confident about improving its profitability by maintaining its claims ratio and management expenses within acceptable levels. We will reduce the third party motor insurance ratio, underwrite only profitable business segments, and implement stringent claims and prudent investment practices. In addition, the company will manage its business within the requirements of a Risk Based Capital framework (RBC) and focus on its fundamentals increase operational efficiency, improve workforce productivity as well as effectively manage operating costs to drive the company to achieve a better performance and result. Uni.Asia Life Assurance Berhad (Uni.Asia Life) continues to make its presence felt in the industry despite the challenging economic environment at the closing of the financial year. The company successfully sustained its performance in regular premium new business sales with a remarkable 69.6% growth compared to the industry s growth of only 5.4%. The company s bancassurance arm surged to second place with a market share of 24% in regular premium new business sales with a total business volume of RM43 million during the year under review. Bancassurance sales of regular premium grew 126% from RM19 million during the year. Following the successful implementation of various strategic initiatives, the agency business recorded a strong performance by delivering regular premium new business of RM22 million compared to RM16.5 million in the prior year, registering a growth of 34%.

64 062 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) servicessector An aerial view of the Tanjung Bin power plant in Johor for which Rangkai Positif Sdn. Bhd. provide Operations & Maintenance services. The company is implementing the necessary risk processes and ensuring controls are in place to comply with the RBC framework initiated by Bank Negara Malaysia, in line with the company s capital management objectives. The company s bancassurance business will continue to focus on business expansion initiatives while the agency force will be steered toward higher productivity and the recruitment of quality agents while maintaining high quality product portfolios. As a leader in product development, Uni.Asia Life will continue to be innovative and use asset liability management to assess the company s product strategies with the objective of driving growth and profitability in the coming year. Rangkai Positif Sdn. Bhd. (Rangkai Positif) was acquired by the Group in October Rangkai Positif is contracted to provide Operations & Maintenance (O&M) services to the Tanjung Bin power plant for a concession period of 25 years commencing from 28 September The plant comprises three steam-electric coal-fired units, each with a net capacity of 700 MW, coal unloading, storage and handling facilities, a 500/275kV substation and transmission lines connecting the plant to the grid. Pursuant to the O&M Agreement, Rangkai Positif will be paid a monthly fixed and variable operating fee throughout the entire concession period of 25 years commencing from the commercial operation date of the first generating unit. The fixed operating fee is based on the fixed manpower fees, general parts and supplies fees, fixed services fees and management fees. The variable operating fee is based on the pre-agreed variable operating rate and the net electrical output. As the operator of a 2,100 MW power plant generating 10.3% of Peninsular Malaysia s total installed capacity, Rangkai Positif is committed to provide reliable and cost-effective operation and maintenance services with maximum efficiency in accordance with best practices. Bank Muamalat Malaysia Berhad (Bank Muamalat) recorded a modest performance for the financial year attributable to a higher allowance for losses on financing in the wholesale banking division. Bank Muamalat is the second full-fledged Islamic bank to be established in Malaysia and has a total of 46 branches as well as 6 service centres and employs a total of 1,454 employees. This includes a Labuan Offshore branch which caters for non-ringgit financing and offshore banking requirements. As a licensed institution under the Islamic Banking Act 1983, Bank Muamalat s scope and range of businesses are wider than conventional financial institutions. Bank Muamalat has the ability to broaden its reach into non-bank based activities such as asset ownership and to further diversify its earnings via participation as a business partner in ventures such as real estate business based on the Musyarakah-based concept. The bank can also operate in the investment banking industry similar to a universal banking group. In these respects, Bank Muamalat can leverage on its ability to crosssell a variety of joint offerings to its diverse customers.

65 063 Bank Muamalat Headquarters in Jalan Melaka, Kuala Lumpur. Bank Muamalat was the second full-fledged Islamic bank to be established in Malaysia and has a total of 46 branches as well as 6 service centres and employs a total of 1,454 employees. Macro-economic conditions deteriorated over the past year causing a severe disruption in the global markets, especially in the latter half of 2008 and first quarter of The sub-prime crisis in the United States developed into a full-blown financial crisis, with a breakdown in credit and dislocations in the banking system. This has taken a severe toll on the real economy, particularly in the developed world. The year 2008 was an extraordinary period in economic and financial history as global stock markets, as measured by the Morgan Stanley Composite Index, fell by almost 50%. Monetary policies across the globe went into unchartered territory of close to zero interest rates as governments and regulatory authorities worldwide attempted to stabilise the markets, and significantly, several major financial institutions in the developed economies either failed or were financially rescued by their respective national governments. In 2009, central banks around the world have kept interest rates low and governments have pledged to pump more money into their economies through increased expenditure, tax cuts and grants to jump-start local consumer and business spending. Against this grim backdrop, one spark was the sustained development in the domestic banking system in the past year, in particular in Islamic banking, where the share of Islamic banking assets in the total domestic banking sector reached a new high of 17.4% as at end At the same time, Malaysia remains the world s largest sukuk market. With the recent debacle in the US sub-prime market, there is potential for Islamic banking products to reach a broader market. On the Islamic finance front, and specifically for Bank Muamalat, the year ahead will be a consolidation phase, essentially an opportunity to strengthen and redefine our position in an increasingly uncertain economic environment. Nevertheless with every challenge, there is always opportunity. Bank Muamalat offers great banking facilities for all Malaysians.

66 064 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) property& infrastructuresector With commendable foresight of the impending credit crisis and recession in the United States, and a sensitivity towards global economic trends, the Property & Infrastructure subsidiaries and associates made early preparations and plans to complete and sell a variety of commercial and residential developments during the year. The division was therefore positioned to optimise value creation while the economy was still vibrant. The property industry benefited from a host of government incentives including the repeal of real property gains tax, relaxation of Foreign Investment Committee guidelines for foreign buyers and a reduction in stamp duty. Most of the Group s property development operations have now been consolidated into a leaner single team spearheaded by HICOM Properties Sdn. Bhd. (HICOM Properties) which shares best practices across the Group. While there is a lull in activity and demand, the Group will take the opportunity to further rationalise and synergise development operations and plans amongst the property company subsidiaries. We will look at internal opportunities within the Group s sectors to relocate operations to release prime real estate and build, for example, niche commercial and residential developments. Glenhill Saujana, the exclusive residential enclave in the neighbourhood of Saujana, consisting of 40 units of bungalow land and 50 units of semi-detached house, on a 27-acre plot of freehold land, was handed over to buyers and well received. The houses were sold out soon after launch and to date there are only 4 bungalow lots still available. Vacant possession for Glenpark Phase 1, consisting of 100 fully sold linked residential units were successfully delivered and 34 units of shop office at HICOM Glenmarie Industrial Park were completed in March 2009, two months ahead of schedule.

67

68 066 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) property& infrastructuresector The entrance archway to the Glenmarie Golf & Country Club in Glenmarie. The club has two 18-hole golf courses the Garden and Valley courses. Inspired by nature, Glenpark Phase 2 homes are link houses with lot sizes ranging from 20 x 75, 22 x 75 and 24 x 75. Covering 70 acres in TTDI Jaya, Shah Alam, Glenpark Phase 2 consisting of 650 units worth in excess of RM200 million will be launched in phases, over the next 6 to 8 years. A wide range of facilities and amenities are provided including schools, community halls, parks, shops and food courts for the comfort and convenience of the residents. A myriad of hypermarkets including Giant, Tesco, Tesco Extra and tertiary institutions found within the vicinity of Glenpark 2 will further improve the development s attractiveness and marketability. HICOM Properties continues to market HICOM Pegoh Park, a freehold mixed development of about 730 acres comprising industrial, commercial, retail and residential components. Infrastructure and utilities have been completed for the first phase of 200 acres. Sales are expected to gain momentum once the economic outlook improves. The sales team is exploring attractive real estate campaigns such as Build, Lease and Transfer and Design and Construct packages to provide assistance to prospective buyers to help them weather the current economic downturn. Located on 16 acres of hilly freehold land next to Glenmarie Gardens is Glenmarie Heights, which will comprise of 38 luxurious high-end bungalows in a tranquil retreat blending harmoniously with the natural surroundings. The launch is scheduled after the launch of Glenmarie Gardens. Both developments are within close proximity to the Holiday Inn Glenmarie and the Glenmarie Golf & Country Club and these high-end niche products will be packaged with free golf membership at the Club. HICOM Properties has proposed to acquire 1,516 acres of land earmarked for mixed development at Tebrau, Johor. We will be developing a master plan before refining the product offerings and securing the necessary planning approvals. The introduction of a well crafted development plan, innovative concept and creative branding will create the preferred address and establish HICOM Properties as the developer of choice in Johor. The riverfront bungalow lots at Glenmarie Cove capture the splendour of the unique lifestyle to be enjoyed in the natural beauty and tranquility of a low density, gated and guarded riverfront resort, one of the first of its kind in Malaysia. The exclusively designed bungalows and semi-detached residences are built around extensively landscaped broadwalks, parklands and lagoons. The Group is marketing the remaining phases of development by actively participating in local and international property and investment exhibitions and by offering attractive incentives which continue to attract local and a significant number of foreign purchasers. A warm and friendly greeting awaits you by personnel of The Glenmarie Golf & Country Club. The launch of HICOM Properties Glenmarie Gardens has been deferred to the first quarter of 2010 due to the current sluggish property market. Glenmarie Gardens builds on the success of Glenmarie Residences and Glenmarie Court, and will further reinforce the Glenmarie area s appeal as an exclusive, spacious and peaceful residential enclave with first class facilities and infrastructure. Recently completed developments have experienced strong demand in the high-end residential sector with bungalows enjoying appreciation of 25 to 30% in the short term. The project comprises of 70 units of high-end bungalows with attention to aesthetics, functionality and quality finishes on plots ranging up from 8,000 square feet with builtup areas of more than 5,000 square feet, as well as 28 lifestyled villa units facing the Glenmarie Golf & Country Club. The concept features various modern contemporary designs with swimming pools within a garden-themed, guarded and gated enclave on 32 acres of freehold land in the increasingly sought after Glenmarie area. The all new upgraded 18-hole Valley Course promises a great golfing experience.

69 HICOM Properties will continue to explore and develop high-end and mid-range housing projects to cater for both the niche and broader spectrums of the property market. Our established track record on timely delivery, quality finishing and workmanship will provide a platform for HICOM Properties to leverage its position as a significant property player in Malaysia. HICOM Builders Sdn. Bhd. (previously Imatex Sdn. Bhd.) has developed Mutiara Tropicana Phase 1, comprising strategically located residential and commercial units in the exclusive Tropicana area in Selangor, which was sold out and vacant possession delivered to buyers with certificates of completion in July Phase 2 of Mutiara Tropicana is currently being planned and finalised to complement Phase 1 and the surrounding area, and is scheduled to be launched in December HICOM Gamuda Development Sdn. Bhd., a joint venture partnership, has developed Kota Kemuning, since its inception more than a decade ago, into a renowned and successful township. To serve the needs of the thriving community and a growing population, on-going phases of 25 bungalows, 40 townhouses and 49 shop offices were launched during the year, with take up rates of 60%, 100% and 90% respectively. We build spacious bungalows, offering 8,000 square feet of land area

70 068 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) property& infrastructuresector The second Proton Plant will continue to be the main nucleus of growth for the development of Proton City. Proton City Development Corporation Sdn. Bhd., a subsidiary of DRB-HICOM Berhad, has planned Proton City as a sustainable township on 4,000 acres in Tanjung Malim. The integrated township of residential, commercial, industrial and recreational areas, including the main campus of Universiti Pendidikan Sultan Idris (UPSI) designed to accommodate 25,000 students, is under construction. Land has been allocated for vendors of car components and the first phase of 1,537 residential units has been completed and occupied. The completion of an extensive refurbishment and upgrading exercise to the Hotel & Resort assets during the year, in a drive for first class facilities and service which exceed customer expectations, has had the desired effect of improving occupancy, room rates and returns. The Holiday Inn Glenmarie has taken the recession, which curtailed business travel, in its stride, and has exceeded its internal targets and expectations. Following the completion of a comprehensive RM15 million makeover, the hotel s financial performance has strengthened significantly, generating higher revenue and achieving higher average room rates. The Holiday Inn Glenmarie is ideally located away from the hustle of the city centre and closer to the business districts of Shah Alam and Petaling Jaya. Surrounded by acres of green and the Glenmarie Golf & Country Club, and coupled with the added advantage of newly renovated rooms and function rooms, it is the ideal choice for discerning clients for business travel, corporate retreats and family holidays. Glenmarie Golf & Country Club has also invested approximately RM6 million to upgrade and refurbish the club house, its main lobby, golf centre, restaurants and sports facilities with a modern contemporary interior design, completed as scheduled in November The response from the members and public have been very encouraging. Over RM11 million has been spent to refurbish and improve the 18-hole Valley Course to ensure that the standard and quality are consistent with its premier standing as one of the leading golf clubs in Malaysia. DRB-HICOM Berhad, has planned Proton City as a sustainable township on 4,000 acres in Tanjung Malim. The integrated township of residential, commercial, industrial and recreational areas, including the main campus of Universiti Pendidikan Sultan Idris (UPSI) designed to accommodate 25,000 students, is under construction. Rebak Island Resort, managed by Taj Hotels Resorts and Palaces, India s leading and finest luxury hoteliers, has just been awarded five star status on 20 February 2009 by the Ministry of Tourism. The Group has spent over RM35 million to transform Rebak Island Resort and Rebak Island Marina into an exclusive island getaway with 84 luxury air conditioned, timbered chalets and comprehensive international class marina facilities. The resort is focusing on increasing the facilities and services at the wet berths in the marina and also at the yacht hardstand. Lake Kenyir Resort And Spa, a unique holiday destination in Terengganu on the shores of Malaysia s biggest lake, comprises of 135 individual timber chalets of traditional Malay architecture, reflecting the rich cultural heritage of Terengganu but with all the trimmings of a modern resort. With the opening of the Ulik Mayang Spa at the resort in April 2008, guests can enjoy traditional spa treatments and massages. Lake Kenyir is a secluded and unique destination in one of the world s

71 069 oldest and most ecologically diverse rainforests with recreational facilities such as boating and fishing. Visitors can cruise among 340 small islands in the lake, jungle trek to 14 waterfalls, bird watch its extensive hornbill population, fish, explore caves and indulge in a wide variety of water sports, or just luxuriate and rejuvenate in nature s embrace. Tekka Mall, the six-storey shopping plaza located on the verge of Little India on the corner of Serangoon and Sungai roads in Singapore, has been revamped as an Entertainment-Lifestyle mall and rebranded as The Verge with it s adjoining block as Chill@The Verge. The RM25 million refurbishment and upgrading works which started in February 2008 is expected to be completed by the 3rd quarter of 2009 and has been designed to attract a better mix of tenants to improve occupancy and rentals and drive increased traffic. Progress has been encouraging despite the economic challenges faced in Singapore. Global inflationary pressures, which are on the decline as oil and other global commodity prices continue to ease, are likely to see the Malay sian inflation rate slide back to a 2 to 3% range this year which will contain construction costs when the economy revives. While interest rates are low, prospective purchasers will feel encouraged to secure financing for property. The property market will continue to offer good potential and profitability and the future Gross Development Value projected by the Property & Infrastructure sector is substantial. We are moving forward with the necessary development planning and authorities approvals and preparing for the recovery so that we can mobilise quickly to capitalise on our plans. In addition, we are also looking internally at how best to synergise our expertise with the Group s real estate requirements, so we emerge leaner, stronger and more focused, ready to meet tomorrow s challenges.

72 070 DRB-Hicom Berhad ( W) Annual Report 2009 group managing director s review of operations (Continued) The Group s automotive manufacturing Complex in Pekan, Pahang is a major hub for the local assembly of international marques in the South East Asia region. The complex now assembles 17,000 units of vehicles annually for various brands including Mercedes-Benz, Suzuki and Isuzu. This complex houses the manufacturing plants of HICOM Automotive Manufactures Malaysia Sdn. Bhd. (HAMM), ISUZU HICOM Malaysia Sdn. Bhd. (IHSMB), DRB-HICOM Defence Technologies Sdn. Bhd. (DEFTECH), and DRB-HICOM Auto Solutions Sdn. Bhd. (DHAS)

73 071 Outlook The outlook for the Financial Year 2009/10 is challenging, as the slowdown of the global economy will no doubt impact the country s consumer spending on major items such as cars and properties. Under a 5-year Master Dealership Agreement, signed on 8 May 2009, DRB-HICOM Berhad (DRB-HICOM) s subsidiary, Edaran Otomobil Nasional Berhad (EON) s sales and service dealers will migrate to Proton Edar Sdn. Bhd. from 1 July EON s 40 strong branch network will be trimmed to 32 by October 2010 and is targeted to contribute a minimum of 18% of Proton s sales, or about 27,000 cars. EON will continue to focus on the substantial after-sales service market for Proton. The Group s automotive manufacturing centre in Pekan, Pahang is a major hub for the local assembly of international marques in the South East Asia region. The complex now assembles 17,000 units of vehicles annually for various brands including Mercedes-Benz, Suzuki and Isuzu. In these uncertain economic conditions, the Group will be even more vigilant to contain costs and improve operating efficiencies. We will closely monitor the global trends and developments in the industries in which we operate. We will also look for strategic investment opportunities that may arise from these challenging times that will contribute consistent cash flow and provide long-term growth and expansion prospects for the Group. Ultimately, these strategies will strengthen the Group and position us for the eventual economic recovery when it comes. APPRECIATION On behalf of the Board of Directors, we would like to take this opportunity to express our appreciation to all management and personnel within the DRB-HICOM Group who have worked diligently towards achieving our vision and mission. To our valued stakeholders, including shareholders, customers, business associates, partners and the media, thank you for your confidence and support. We wish to also thank the relevant Government regulatory bodies and authorities for their advice and assistance in the smooth running of our operations. I would like to take this opportunity to thank our distinguished members of the Board, who have provided valuable insight and guidance to the Group during the year and to whom we will be turning for their expertise and advice as we chart the way forward. 2008/9 was a year of continued progress for the Group where existing operations were expanded and enhanced, and new initiatives undertaken. The Group is acutely aware of its duty to build on these initiatives and progress to continue to improve the Group s financial and operational performance so that DRB-HICOM can continue to be both a great company and a great investment. As we gear up to meet the challenges in the year ahead we will stay firmly focused on realising our goals to achieve greater success in all our ventures and create value for our stakeholders. VALUES Values form the foundation for everything that happens in our workplace. We have invested the time to pro-actively define our values to best serve the organisation. They are about virtue and high attainment. As a company we value Excellence, Decorum, Teamwork, Integrity, Innovation, Quality and Transparency. They are the ethical foundation for interactions with our employees, customers, suppliers, investors and the public. They form a strategic framework for serving our customers which manifests in firmly valuebased daily decision making and they are an integral element of the Group s vision and mission. Datuk Haji Mohd Khamil bin Jamil Group Managing Director It is this alignment around corporate values which empowers employees to drive forward towards the achievement of their goals and assists us in seizing opportunities to ensure continued growth for the Group ahead of our competitors in today s competitive environment. Our positive values thus contribute to the company s effective day-to-day functioning, as well as its reputation and long-term sustainability.

74 072 DRB-Hicom Berhad ( W) Annual Report 2009

75 Reengineering potential for innovation Innovation is the cutting edge of a company s ability to be pioneering, staying ahead of the competition, and remain significantly relevant in a globally competitive world.

76 074 DRB-Hicom Berhad ( W) Annual Report 2009 Corporate responsibility

77 076 Corporate Social Responsibility 078 Our People 080 Caring for the Environment 082 Calendar of Events 075

78 076 DRB-Hicom Berhad ( W) Annual Report 2009 corporate social responsibility The Group has a long tradition of fairness, accountability and working with, and giving back, to the communities it operates within. The key beneficiaries within the social dimension of the Group s Corporate Social Responsibility (CSR) programme are our people, the local communities and also the general public. Continual contributions and support to these stakeholders signify the essence of the Group s corporate citizenship awareness. The Group places emphasis on the social, environmental and financial aspects, triple bottom line accounting, of a service delivery system towards the goal of having a positive impact on society while achieving business success. DRB-HICOM is developing a new Corporate Responsibility (CR) framework to align our social and environmental efforts to the Group s corporate strategy, nature of business and expectations of our key stakeholders. An assessment of current CR initiatives and practices across the Group is being undertaken to understand the portfolio of CR initiatives and assess its alignment to the desired CR framework. Moving forward, the Group will be looking into measuring and monitoring our CR initiatives across the four CR dimensions of environment, community, workplace and marketplace, as well as increasing stakeholder engagement to more effectively manage our CR efforts. When urgent needs arise, the Group has offered immediate assistance and contributions to those in hardship and deprivation. During the financial year under review, fulfilling its social obligations as a caring corporation, the Group donated RM 1 million to the National Humanitarian fund for Gaza, to aid Palestinians affected by the war in Gaza. The Holiday Inn Glenmarie Kuala Lumpur recognises the importance of being involved with the community and makes every effort to contribute to the needy. In December 2008, the Holiday Inn Glenmarie Kuala Lumpur, with its sister hotel Crowne Plaza Mutiara Kuala Lumpur, organised aid and co-opted a volunteer team to help Bukit Antarabangsa landslide victims and furnished the hotels function rooms with beds to house the homeless. Meal packs for breakfast, lunch and dinner were supplied to the rescue workers at the landslide site to fortify them for their arduous labour. Together with the Malaysian Association of Hotels and the Chef Association of Malaysia, the hotel held a charity event in aid of the Paediatric Intensive Care Unit (PICU) of University Malaya Medical Centre, Kuala Lumpur, to raise funds to take care of critically ill children, especially those from an economically disadvantaged background. The funds collected were donated to purchase life saving equipment and subsidise medical costs. September is the holy month of Ramadhan when Muslims from all walks of life take the opportunity to extend the spirit of sharing and giving to the less fortunate. Over 16,200 DRB-HICOM employees received Ramadhan gifts, including dates from Yayasan Al-Bukhary. A number of Majlis Berbuka Puasa, also known as iftar, visits to orphanages, as well as old folks homes, were held in this holy month including a special iftar for DRB-HICOM Berhad employees and family members held at the Holiday Inn Glenmarie Kuala Lumpur. More than 450 employees and family members, together with orphans from Rumah Kasih Harmoni and Rumah Amal Belaian Kasih enjoyed the event, with all the children receiving duit raya. Special guests from Persatuan Ibu Tunggal WAFIY Kuala Lumpur and Selangor were presented with duit raya as well as hampers, at an iftar especially organised by DRB-HICOM and held at Muzium Kesenian Islam, Kuala Lumpur, attended by more than 200 guests from various ministries and members of the media.

79 077 A Semesra Jalinan Kasih visit to Rumah Ehsan home for critically ill senior citizens and the abandoned, in Kuala Kubu Bahru, was made by members of Senior Management, their wives and staff. The home received a practical supply of water dispenser machines, biscuits, adult diapers, shirts, blouses, kain batik (batik sarong), kain pelikat and other daily necessities much needed by the patients. Towards the end of Ramadhan, a visit to Rumah Siraman Kaseh in Rawang was held delighting the 46 children with the opportunity to select a baju kurung and baju melayu from a variety of colours and designs. Donations and visits were also made by staff from the subsidiaries across the country to the Rumah Amal Limpahan Kasih, Puchong, Rumah Kebajikan Yayasan Rahah, Pekan, Rumah Pendidikan Khas Titian Murni, Pekan, Rumah Anak-Anak Yatim, Sungai Petani, Rumah Budi Yan and Rumah Tunas Harapan, Telok Ketapang and Kuala Terengganu orphanages. DRB-HICOM s subsidiary company, EON, has worked closely with the Road Safety Department to support the Road Safety Plan Initiative An edutainment programme, the Kids Street Smart Safety Programme (KISS), launched by EON in August 2008, raised children s awareness of road safety. KISS highlights 3 key messages on road safety, that is to stay safe on foot, on wheels, and on the road, with the tagline Think, Stop, Look, Listen & Live. EON has toured schools in the Klang Valley with the KISS programme while reaching out to kids nationwide through the interactive Bandar EON online game on EON s website. MODENAS, another subsidiary of DRB-HICOM, has also established a close relationship with Road Safety Department at the national and state levels to promote road safety to all Malaysians and during the year mounted 3 road safety campaigns relating to motorcycle riders to promote safe, defensive riding. MODENAS continues to offer a training ground for students from public and private colleges. sixteen students graduated from the training programme last year. Six programmes at MODENAS covered the safety belt, front and back, the correct way of wearing a helmet, the use of a safety vest and Emergency Response Team training and convoying. PUSPAKOM is a contributor to the Sponsor Helmet Save A Life campaign to reduce fatalities among motorcyclists in the country and the Galakkan Pemakaian Topi Keledar di Luar Bandar to encourage the use of helmets among riders in rural areas. The first Chinese Primary School In Kota Kemuning, SJK (C) Chung Hua, was opened in a landmark ceremony signifying a milestone for the maturity and success of the township. A sum of RM5 million was donated towards the construction and development of the school, which consisted of two buildings, each of 4-storeys, sufficient to house 36 classrooms as well as a headmaster s and teachers room. Providing the Kota Kemuning community the convenience of a school within their close vicinity to serve the township s growing population exemplifies HICOM-Gamuda s commitment to serve the needs of the thriving community, ever since the inception of the township more than a decade ago. Other schools that were given financial assistance were Sekolah Kebangsaan Sungai Pasir, Sungai Petani for their sports activities and Sekolah Akademi Islam Haji Abdullah Subuh, Kota Kuala Muda, Kedah for construction of a surau. The Group supports the Malaysian Armed Forces by providing 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 to gain a good education in these fields, and to help provide skilled manpower for the country s needs. We embrace the responsibility for the impact of our activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, our businesses proactively promote the public interest by encouraging community growth and development. Essentially, what CSR means to the Group, is the deliberate inclusion of public interest into our corporate decision making, and the honouring of a triple bottom line: People, Planet, Profit. During the financial year under review, fulfilling its social obligations as a caring corporation, the Group donated RM 1 million to the National Humanitarian fund for Gaza, To AID Palestinians affected by the war in Gaza.

80 078 DRB-Hicom Berhad ( W) Annual Report 2009 our people The financial year under review posed some challenges in managing the workforce as the global downturn began to impact Malaysia. The overriding objectives have been to maintain full employment wherever possible and increase the productivity and efficiency of the entire organisation while managing costs discerningly. Economic contingency management planning through dialogue and discourse with the CEOs and Senior Management, in relation to a variety of possible business scenarios, provided forward planning so that we were ready to adapt to the changing economic cycle. The contingency plans adopted under the proposition of business sustainability under a compressed environment were a prudent approach, consistent with the Group s agile response to economic realities. The acquisition by the Group of Bank Muamalat, an Islamic bank, and Rangkai Positif, provider of operation and maintenance services to the Tanjung Bin power plant, introduced further diversity to our human resource skill sets. The expansion of the Group s enterprise entailed the consolidation of strategic needs and the identification of new challenges impacting talent and resource planning as we sought to address the different customer and stakeholder bases. Group headcount now stands 23,000 strong. We continue to enjoy a cordial working partnership with the unions and several Collective Agreements were renewed, on mutually acceptable terms, with both the subsidiaries and unions recognising the respective interests affecting the parties under the current economic environment. We will continue to strengthen liaison with representatives of the various unions so as to achieve the objective of gaining the maximum amount of co -operation from the employees in the interests of all stakeholders. The Group promotes its affirmative stand on discipline and ethical conduct. Respect and alignment with our values continue to dominate at both the professional and personal level. The Code of Ethics & Business Practice and Whistleblowing Policy, together with a Declaration of Assets provide a governance advantage by managing risks pre-emptively. The identification of DRB-HICOM Leadership Competencies has mandated necessary steps to be taken to train talent to the next level, and to add buffered resources, so that the agility of the organisation is minimally affected through changing times. Structures to enhance the effectiveness of employees include assessing capabilities, staff redeployment and rotation, and retraining staff to enhance their mobility. The changes, effected first at Management level, are being rolled out through the executive ranks to create a succession framework that blends internal promotions with imported external talent, and identifies the next generation of business leaders. The Group promotes its affirmative stand on discipline and ethical conduct. Respect and alignment with our values continue to dominate at both the professional and personal level. A second batch of Associate Executives (Management Trainees) with cumulative grade point averages above 3.00 were recruited as part of a plan, initiated in the prior year, to enrich the talent stream. After familiarisation training for 5 weeks, these young talents were placed at both functional areas as well as business units as part of their rotational development. In addition to developmental assignments, cross-function work and project management, we continue to rely on supervisory coaching and external programmes to enhance professional and personal growth.

81 079 The compressed environment necessitated a review of our capacity and capability, not only from a strategic angle, but also with a view to realising a more prudent yet flexible approach to the manpower complement. Compensation was reviewed in order to attract, develop and retain talent. We also recognise that critical positions need to be strengthened with the right developmental exposure to assure continuity of management, capital and resource, and indeed, those key positions are the bulwark of the Group s productivity. Key performance indicators continue to measure our operations management system, accentuate the organisational management process and realign our sense of purpose. The quantifiable metrics built-in, also help to increase the engagement of our people on mission critical tasks and strategies. Our conviction on the philosophy of performance based rewards though needs to be tempered with the realities of the economy s trajectory and market demand. The Group sees a business prospect in the field of education as a whole and will explore the potential by building on the reputation and success of Akademi Saga, our vocational school for auto technicians and mechanics. Steps will be taken to upgrade the syllabus and facility to stream qualified intake into the Group s Automotive sector, and in the national interest, into the wider automotive industry. During the financial year under review, processes were reviewed to ensure the Group s subsidiaries conformed to relevant Occupational, Safety, Health & Environmental (OSHE) related legal standards with competent personnel available at the operational level. It is our intention to build a strong safety culture amongst the workforce. As reinforcement to this commitment, continuous OSHE audits, inspections and training workshops were carried out to identify and fill gaps. Currently, 11 Group companies have successfully attained the ISO MS 14001, and/or OHSAS 18001, certifications.

82 080 DRB-Hicom Berhad ( W) Annual Report 2009 caring for the environment The Group is actively promoting the protection of the environment. All company sites, wherever they are located, will be managed in a way that allows the setting of clear environmental targets and the regular monitoring of environmental performance and measuring the same against these targets. The way that human beings live and thrive involves interacting with our environment. We depend on the natural world for our very survival. We use water from rivers to drink, we grow our food using the soil, we catch fish in the sea, we use timber from the forests to build our homes. All human economic activity uses natural resources. We rely on our natural environment for our standard of living. Everything we do has some impact on our natural environment. We therefore have to take care that, we do not cause too much stress on our environment by our actions and instead make a commitment to live in harmony with nature. The Group has instituted an awareness programme for all employees on how to control wastage and deliver our commitment towards cost reduction and electricity conservation and has invited feedback and innovation while monitoring progress. Caring for the environment is more than an occasional activity. It takes continuous effort and commitment to conserve the world around us. DRB-HICOM s associate company, Honda Malaysia, has raised the level of environmental consciousness and built understanding on environmental conservation and extinction through an online game contest and its Sumatran Rhino roadshows. Targeted at primary school children and young adults, the Nature Quest online game contest aims to strengthen awareness and create understanding of the importance of environmental conservation, working towards realising a dream of a greener world. Honda Malaysia, together with WWF-Malaysia, has initiated and committed to a five year project to save the Sumatran rhinos, the nation s most endangered animal. Honda Malaysia has pledged a contribution of RM5 million to WWF- Malaysia to further strengthen Sumatran rhino conservation efforts. Talks on the environment and the Sumatran rhino have reached nearly 6,000 students in 28 schools in Malaysia since The rhino school talks have been conducted in Klang Valley, Penang and Johor Bahru and the next round will be held in Malacca. The Save our Sumatran Rhino campaign is entering its fourth year of project as Honda Malaysia raises awareness and educates future generations on the importance of preventing extinction by caring for the environment. All the subsidiaries have taken a proactive approach in a Group sponsored Save the Environment campaign by adopting a Reduce, Reuse, Recycle (3R) programme. Paper consumption has been reduced by utilising recycled paper, printing internal memos and documents on the reverse blank side of used paper, duplex printing and segregating waste paper for recycling by having separate bins in offices. The energy conservation programme reflected in ISO s key performance indicators starts by identifying energy consumption per year and studying methods to reduce electricity such as by switching off lights and office equipment over lunch and at night. The industrial operations have reduced the usage of cotton and leather gloves by imposing a strict control on distribution on an exchange basis only. All used packaging items (cardboard, carton boxes, plastic, wooden pallets, metal frames and paper) are collected and sold to the recycling contractor. Transportation has been optimised to maximise the number of deliveries per trip per day. The coolant from machining processes is reused after undergoing treatment, contributing to the reduction of coolant usage from 0.01 litre per unit in 2007 to litre per unit in The standard B effluent discharge water from waste coolant treatment units is reused for cleaning mops and machine parts. Electricity usage too has been cut by reducing air leaks from machines, changing to energy saving fluorescent lights, installing transparent roofs and walls to let in light, a reduction of forklift operating hours and replacing air conditioning units with ceiling fans in canteens. PUSPAKOM s efficient and accurate computerised vehicle inspection system, available at 60 branches and prepared to inspect 4 million vehicles annually, is playing an important role in minimising the amount of pollution from cars, trucks and buses in the country. The density of particles in diesel engine emissions are gauged through free acceleration tests and the volume of hydrocarbon and carbon monoxide gases in petrol engines are measured through an idling test. DRB-HICOM s subsidiary Alam Flora, the waste management services provider, takes a leading role in environmental protection, promoting the 3R programme. The community is central to all 3R activities. Children and students are another focus group of the company and recycling campaigns have been carried out in schools and communities to inculcate the recycling habit. Awareness programmes have also been carried out via annual environment themed competitions, essay writing and colouring contests for both national and vernacular primary schools. The number of entries for these competitions have been increasing over the years which goes to show that more schools are giving special attention to environmental education. Between 2006 and 2008, Alam Flora has carried out a total of 478 recycling awareness programmes in schools and private institutions. In year 2008, Alam Flora has collected approximately 7,000 tonnes

83 081 of recyclable items and waste papers (66%) contributed the highest percentage as compared to the other recyclable items such as plastic (18%), scrap metals (15%) and others (1%). A joint venture project with the Ministry of Housing and Local Government to publish awareness materials on recycling and solid waste management in the form of books and VCDs, cost RM1.5 million. Alam Flora s Research & Development department is developing hi-tech environmental products. These projects will innovate and promote potential waste treatment technologies which are compatible with local waste characteristics. They will be based on sound scientific principles which are technically and operationally proven to produce commercially accepted products. Organic waste can be converted into compost or to high end, bio-fertiliser. The wet nature of organic waste in Malaysia is a challenge. A specific waste treatment technology that can process organic waste without a complex pre-treatment methodology to prepare the waste for further processing is preferred. Alam Flora is currently collaborating with the International Bio-Recovery Corporation of Canada, through its local agent, to develop an Enhanced Autogenous Thermophilic Aerobic Digestion (EATAD) plant to process organic waste into bio-fertiliser. Waste in Malaysia also contains a significant composition of plastic scraps. As an alternative, and rather than selling the scrap to recyclers, Alam Flora will collaborate with Alphakat GmBh of Germany, through its local agent, to develop a Waste-to-Diesel plant utilising a Catalytic De-Polymerisation Process. As an environmental management company which is committed to the enhancement of environment, Alam Flora has actively participated in landfill rehabilitation and closure projects. To ensure the viability of the projects, Alam Flora has teamed up with Bionersis SA of France to provide the technology and expertise in landfill gas extraction and its potential conversion to energy for commercially viable landfills in Malaysia. The expertise of Bionersis SA in Clean Development Mechanisms (CDM) will be tapped to obtain funding and generate revenue from international carbon trading under the ambit of United Nations Frameworks for Climate Change (UNFCC) Committee. Holiday Inn Glenmarie Kuala Lumpur has also successfully attained Benchmarked Bronze status in October 2008 under the globally recognised Green Globe Benchmarking Certification and Performance Improvement System, which helps international organisations attain sustainability. The hotel pledges to maintain the highest environmental standards and commits to meet benchmark expectations in energy and water consumption, waste production and community relations. The implementation of an integrated environmental sustainability policy is the mark of a responsible hotel that employs internationally accepted best practices that benefit guests and are kind to the environment. The Rebak Island Resort has a very strong view relating to the preservation of the environment. Throughout 2008 the resort has organised co-operative clean-up campaigns once a month in the area surrounding the hotel and Port Langkasuka jetty as part of a 3R programme. Under an energy conservation programme, the hotel has introduced compact fluorescent lights in a majority of the resort s function areas and has become a member of the Green Globe. Five hotel rooms have been converted into green rooms as a way to reduce the use of ozone depleting gases, which are found mostly in refrigerators. In these rooms we have taken out the mini-bars and have designed energy saving layouts. The Group s strategic positioning on energy saving and environmental protection has set the goal of providing innovative solutions to the upcoming challenges. This is why the Group is undertaking to review all processes to reduce waste, promote recycling, manage natural resources, and limit emissions into the air. The Group is actively promoting the protection of the environment. All company sites, wherever they are located, will be managed in a way that allows the setting of clear environmental targets and the regular monitoring of environmental performance and measuring the same against these targets. The subsidiaries will strive to raise their main environmental performance standards even if that means going beyond the requirements of local legislation, so that we can make a positive contribution to a green world.

84 082 DRB-Hicom Berhad ( W) Annual Report 2009 calendar of events 11 April 2008 DRB-HICOM & MIDEA SIGNING CEREMONY HICOM Holdings Berhad (HICOM) entered into a partnership with Midea Refrigeration Ltd. (Midea) to establish Scott & English Electronics Sdn. Bhd. (SEE) with Eastern Trinity Sdn Bhd. 21 April 2008 DEFENCE SERVICES ASIA EXHIBITION 2008 DEFTECH participated for the sixth time in the Defence Services Asia exhibition, which was held at Putra World Trade Centre (PWTC), Kuala Lumpur from 21st to 24th April May 2008 EUROPEAN AUTOMOTIVE COMPONENTS EXPO 2008 DRB-HICOM Automotive Components companies set a milestone by being the only Malaysian exhibitor at the European Automotive Components Expo 2008, in Stuttgart, Germany from 6th to 8th May May 2008 ALAM FLORA GOTONG-ROYONG BERSAMA YB DATO SARAVANAN, KG BARU. Alam Flora initiated a gotong-royong with the residents of Kampung Pindah of Kampung Baru, Kuala Lumpur. The Kampung Pindah gotong-royong was launched by the Deputy Minister of Federal Territory Datuk M. Saravanan. Also present was DRB-HICOM Berhad Group Managing Director Datuk Haji Mohd Khamil bin Jamil.

85 May 2008 MIDEA CHINA FACTORY VISIT Midea Scott & English Electronics Sdn. Bhd., the Malaysian distributor for Midea, a leading manufacturer in the white goods market for air-conditioners and home appliances, invited the Malaysian media on a brand familiarisation tour of a Midea Refridgeration Ltd. factory in China. 20 june 2008 CEO S APPRECIATION NIGHT An appreciation night for the Group s CEOs was held at the Windows of KL, Crowne Plaza Kuala Lumpur in a very relaxed atmosphere. Cowboy Nite was selected as the theme for this year s event and everyone geared up in their best cowboy or cowgirl outfit for an evening of good entertainment. 20 june 2008 AUDI NEW A4 LAUNCH DRB-HICOM Berhad s automotive manufacturing complex in Pekan, Pahang, can be a site for the local assembly of Audi cars in the Southeast Asian region. The launch of the new A4 1.8T has rejuvenated Euromobil s strategy to elevate Audi to the same rank as the two other leading German marques in the local premium car segment. 26 june 2008 ASEAN AUTOMOTIVE AWARD - HICOM-TECK SEE (M) SDN. BHD. HICOM-Teck See (M) Sdn. Bhd. was proud to receive the Automotive Component Manufacturer of the Year 2008 Frost & Sullivan ASEAN Automotive Award.

86 084 DRB-Hicom Berhad ( W) Annual Report 2009 calendar of events (Continued) 30 june 2008 EON EGM Edaran Otomobil Nasional Berhad (EON) held an Extraordinary General Meeting (EGM) at the Glenmarie Ballroom, Holiday Inn Glenmarie Kuala Lumpur, Shah Alam, Selangor to seek shareholders approval on the proposed voluntary withdrawal of EON from the official list of the Main Board of Bursa Malaysia Securities Berhad (Proposed De-Listing). 20 July 2008 THE 7 th PACIFIC INTERNATIONAL ENTREPRENEUR AWARD 08 ALAM FLORA Alam Flora was honoured with Excellence Leadership and Excellence Service Quality awards at the 7th Pacific International Entrepreneur Awards 2008 which was held at the Palace of Golden Horses, Kuala Lumpur. 24 July 2008 THE OFFICIAL LAUNCH OF SUZUKI SX4 Suzuki Malaysia Automobile Sdn. Bhd. launched their latest model, the Suzuki SX4 Sedan, which is imported fully built-up from Japan August 2008 MODENAS YUZY PACHI RACING TEAM at BATU KAWAN The Modenas Yuzy Pachi Racing Team were in the hunt for top honours 2008 at the PETRONAS Sprinta AAM Malaysian Cub Prix Championship at the Batu Kawan circuit on 1st and 2nd August 2008.

87 August 2008 MODENAS LAUNCHes NEW MOTORCYCLE VARIANTS New variants of the Passion 125 and Kriss 120 motorcycles launched by Motosikal and Enjin Nasional Sdn. Bhd. (MODENAS), a DRB-HICOM Berhad s subsidiary, contributed to a rise in sales to 85,000 units of motorcycles for the year under review. 12 August 2008 KLAS AIRLINES APPRECIATION AWARDS DINNER Kuala Lumpur Airport Services Sdn. Bhd. (KLAS) organised an Airlines Appreciation Awards Dinner to show its heartfelt appreciation to the airline clients who have supported the company over the last 10 years. The fun-packed night included an exhilarating performance from a 3-piece Jazz band and lucky draws with grand prize holiday packages. 21 August 2008 Souq Al-bukhary doa selamat ceremony This Majlis Doa Selamat held at the Commercial Centre, Alor Setar, Kedah was attended by over 600 people. 12 September 2008 DPM and DRB-Hicom staff mesra ramadhan ceremony, pekan, Pahang More than 1,300 employees in Pekan, Pahang together with their family members were gathered at Masjid At-Takwa for an iftar organised by DRB-HICOM Berhad. The event was graced by Y.A.B Dato Sri Mohd Najib bin Tun Abdul Razak, the then Deputy Prime Minister of Malaysia, and Y.Bhg. Datin Sri Rosmah Mansor and also the Management of DRB-HICOM.

88 086 DRB-Hicom Berhad ( W) Annual Report 2009 calendar of events (Continued) 12 September 2008 Sinar Ramadhan visit, PEKAN A visit to Pusat Pemulihan Dalam Komuniti (PDK) Titian Murni in Pekan, Pahang was arranged to meet and get to know the inmates. All the 46 house inmates were presented with hampers and duit raya by YBhg Datin Azian Abdul Talib and Puan Mumtazah Jaafar. The visit was a follow-up after the delivery of physiotherapy equipment sponsored by DRB-HICOM last year. 15 September 2008 DRB-HICOM breaking of fast with corporate clients An iftar especially organised for DRB-HICOM s corporate clients was held in Muzium Kesenian Islam, Kuala Lumpur. More than 200 guests from various Ministries, Corporate Clients and members of the media were invited. 16 September 2008 semesra jalinan kasih visit, rumah ehsan kkb A visit to a home for critically ill senior citizens and the abandoned, Rumah Ehsan in Kuala Kubu Bahru, and a Semesra Jalinan Kasih event, were attended by members of the Senior Management, their wives and staff. 19 September 2008 DRB-HICOM employees breaking of fast with families and orphans A special iftar for DRB-HICOM Berhad s employees and their families was held at Holiday Inn Glenmarie Kuala Lumpur. More than 450 employees and family members together with orphans from Rumah Kasih Harmoni and Rumah Amal Belaian Kasih enjoyed the event while the children received duit raya from the Management.

89 September 2008 CHARITY HOME VISIT-SIRAMAN KASEH HOME Wives of the Senior Management members and staff, in support of the community, visited Rumah Siraman Kaseh in Rawang bringing with them new outfits, goodie bags and duit raya as gifts for the children. 23 September 2008 DRB-HICOM AGM/EGM DRB-HICOM Berhad held its 18th AGM and EGM at the Glenmarie Ballroom, Holiday Inn Glenmarie Kuala Lumpur. In addition to accepting DRB-HICOM Berhad s audited financial statements for the year ended 31st March 2008, the AGM also approved a motion to reelect YBhg Datuk Haji Abdul Rahman bin Mohd Ramli, Y.Bgh Dato Syed Mohamad bin Syed Murtaza and Mr Ong Ie Cheong as directors. 17 october 2008 DRB-HICOM HARI RAYA OPEN HOUSE The spirit of the Eid celebration was in the air as more than 1,200 guests, corporate clients and media friends thronged the ballroom at the Istana Hotel. Joining the festive occasion were children and single mothers from Asrama Damai in Kuang, who where presented with duit raya. 21 october 2008 HAJJ GUIDE BOOK CONTRIBUTION Joining Tabung Haji s Corporate Member Programme, the company made a contribution towards the publication of a special book that serves as a guide for Hajj pilgrims.

90 088 DRB-Hicom Berhad ( W) Annual Report 2009 calendar of events (Continued) 31 october 2008 PUSPAKOM CUSTOMERS APPRECIATION NITE Customers support and commitment towards ensuring their vehicles safety, in line with Puspakom s main business objective, was recognised at a dinner held especially for them. Also present at the dinner was the then Transport Deputy Minister YB Datuk Seri Panglima Haji Lajim bin Haji Ukin who presented awards to the deserving recipients. 13 November 2008 INTRADE 08 EXPO DRB-HICOM Automotive Components companies and MODENAS collaborated to explore business opportunities at this tradeshow. Launched by the then International Trade & Industry Minister, YB Tan Sri Dato Muhyiddin bin Mohd Yassin, the exhibition attracted more than 4,500 visitors. 18 November 2008 AKASHI KIKAI & OSI SEALS AGREEMENT In line with OSI s objective of increasing sales and enhancing its status as a quality manufacturer of lower arms and rear axles, Akashi Kikai of Japan has agreed to be a Technical Assistant, as a continuation of the D18D Perodua Project december 2008 CINTAI MALAYSIA 2009 expo Officiated by the then Prime Minister of Malaysia, Y.A.B. Dato Seri Abdullah Haji Ahmad Badawi, the company participated in the Cintai Malaysia 2009 Expo recognised as the largest trade and consumer fair, which showcased a variety of newly launched products and services.

91 december 2008 ALAM FLORA & UKM SIGN AGREEMENT Alam Flora Sdn Bhd. entered into a joint collaboration with Universiti Kebangsaan Malaysia (UKM) to organise programmes on Research & Development on solid waste management, which will lead to developing a fully integrated solid waste management eco-campus, by sharing theoretical and practical information through seminars, training programmes and discussions. 18 december 2008 STAFF CHILDREN EDUCATION VISIT TO PROTON PLANT The DRB-HICOM Sports Club took 25 staff s children on an educational visit to the PROTON Tanjung Malim Plant. There, they were given a first hand look at the process of assembling cars and manufacturing parts. 15 January 2009 LAUNCH OF UOB CASHAssure United Overseas Bank (Malaysia) Berhad (UOB), a business partner of Uni.Asia Life recently launched CASHAssure, an endowment plan that provides a guaranteed annual cash return of 8% - making it the highest in the market January 2009 BUY MALAYSIA CAMPAIGN ROADSHOW 2009 HICOM Properties Sdn. Bhd. participated in a 5-day roadshow held from 16th to 20th January 2009 at Mydin Mall USJ in conjuction with the campaign Buy Malaysia which was officiated by Y.A.B. Prime Minister of Malaysia.

92 090 DRB-Hicom Berhad ( W) Annual Report 2009 calendar of events (Continued) 31 January 2009 IN THE NAME OF HUMANITY Fulfilling its social obligations as a caring corporation, the Group donated RM1 million to the National Humanitarian Fund for Gaza, which will go towards aiding Palestinians affected by the war in Gaza. 14 February 2009 A MEDIA FRIENDLY BOWLING TOURNAMENT DRB-HICOM s inaugural Media Bowling Tournament was held on 14th February 2009 at Sunway Megalane, Sunway Pyramid as part of the Group s efforts to strengthen ties with the media and thanking them for their support. 27 February 2009 FOREIGN VISITorS TO ALAM FLORA Alam Flora Sdn. Bhd. hosted accomplished environmentalists from Australia, Mr Greg S. J. Gornall, Managing Partner of MGB Environmental Consultants Pty Ltd and Mr Harry Wilson, Managing Director, SMS Municipal Services Pty Ltd, on 23rd February 2009 to discuss best practices on waste management. 28 February 2009 MOU BETWEEN HICOM AUTOMOTIVE MANUFACTURERS (M) Sdn Bhd (HAMM) and UNIVERSITY OF MALAYSIA PAHANG An MOU was signed between HICOM Automotive Manufacturers (M) Sdn. Bhd. (HAMM) and Pahang University of Malaysia (UMP) on 28th February 2009 covering Academic Studies, Research and Development, Human Capital Development, and other related activities.

93 March 2009 EXPLORING NEW HORIZONS with MATRADE To explore new markets and partnerships, DRB-HICOM Berhad and the Malaysia External Trade Development (MATRADE) co-organised a presentation on the opportunities within the Group for selected Ambassadors and Consul Generals from South Asia, East Asia, the Middle East and Africa on 3rd March 2009, in MATRADE Hall. 04 March 2009 MAIS VISITS DRB-HICOM Representatives from Majlis Agama Islam Selangor (MAIS) paid a visit to DRB-HICOM on 4th March 2009 and were briefed on the Group s products and services. 11 March 2009 FLEET KEYS HANDOVER TO RISDA & IWK HICOM Perkasa national trucks have been well accepted by both individual and fleet customers. Ceremonies were held to hand over fleet keys to RISDA Fleet Sdn. Bhd. and Indah Water Konsortium Sdn Bhd. 23 March 2009 LAUNCH OF GT 128 BY MODENAS Motosikal dan Enjin Nasional (Modenas), a DRB-HICOM unit, launched the 130cc Modenas GT 128, a sporty, fuel efficient model in four colours, with a host of attractive features, to the Malaysian market on March 23rd 2009.

94 092 DRB-Hicom Berhad ( W) Annual Report 2009

95 Pursuing potential for growth Diversity in strength provides the doors that will unlock opportunities for growth and networks for expansion, which is paramount to industries that look beyond its shores.

96 094 DRB-Hicom Berhad ( W) Annual Report 2009 CORPORATE GOVERNANCE 095 Statement on Corporate Governance 104 Statement on Internal Control 106 Audit Committee Report 110 Additional Compliance Information 114 Statement of Directors Responsibility

97 095 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 protecting and enhancing 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 1.1 Duties and Responsibilities of the Board The Board has the overall responsibility in leading and determining the Group s overall strategic direction as well as development and control of the Group. The Board approves the Group s Annual Management Plan and the overall strategic direction on a yearly basis. The Board retains full and effective control of the Group by reviewing Management s performance against the Annual Management Plan periodically 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. To ensure the achievement of the Group s overall strategic direction and Annual Management Plan, yearly Key Performance Indicators ( KPIs ) have been formulated for the Group Managing Director and these KPIs are cascaded down to the respective Chief Executive Officers/Chief Operating Officers and other Management team members of the Group. The KPIs track the implementation of the Group s strategic goals approved by the Board for each financial year. In addition, to ensure an optimum structure for efficient decision-making, the Boards of the Company and all Group Companies, approved a framework on Limits of Authority ( LOA ). Such LOA expressly set out the matters which are reserved for Board approval, as well as matters which the Board may delegate to Board Committees, the Group Managing Director and Management. The Management s responsibilities and authorities are defined in the LOA. The LOA is reviewed as and when required. The Directors continue to observe the Company Directors Code of Ethics established by the Companies Commission of Malaysia in carrying out their fiduciary duties and responsibilities. This would ensure that high ethical standards are upheld, and that the interests of stakeholders are always taken into consideration. The Directors are required to declare their direct and indirect interests in the Company and related companies. It is also the Directors responsibility to declare to the Board whether they and any person(s) connected to them have any potential or actual conflict of interest in any transaction or in any contract or proposed contract with the Company or any of its related companies. Any Director who has an interest in any related party transaction shall abstain from Board deliberation and voting and shall ensure that he and any person(s) connected to him will also abstain from voting on the resolution before them. 1.2 Composition and Balance The current Board has eight (8) members, comprising seven (7) Non-Executive Directors (including the Chairman) of whom five (5) are independent as defined by the Bursa Securities Main Market Listing Requirements ( Bursa Securities Listing Requirements ). There were two (2) Executive Directors, but one resigned on 1 November Hence, the Board more than fulfils the prescribed requirements for one-third of the membership of the Board to be Independent Board Members. The Nomination Committee, pursuant to its recent annual review, is satisfied that the size and composition of the Board is appropriate and well balanced to fairly reflect the interests of major and minority shareholders. The Nomination Committee is also satisfied that all members of the Board are suitably qualified in view of their respective qualifications and experience which provide the Board with a good mix of industryspecific knowledge and broad business sense and commercial experience. This balance enables the Board to provide clear and effective leadership to the Group and bring information and independent judgement to many aspects of the Group s strategy and performance so as to ensure that the highest standards of professionalism, conduct, transparency and integrity are maintained by the Group.

98 096 DRB-Hicom Berhad ( W) Annual Report 2009 statement on corporate governance (Continued) The five (5) Independent Directors in effect represent the interest of minority shareholders of the Company by virtue of their roles and responsibilities as Independent Directors. They play an important and pivotal role in corporate accountability, which is reflected by their memberships of and attendances at the various Board Committees. None of the Independent Directors participate in the daily management of the Group to ensure that they are free from any relationship which could interfere with the exercise of independent judgement in the best interests of the Company and of the minority shareholders. The Independent Non-Executive Chairman, YBhg Dato Syed Mohamad bin Syed Murtaza, is the Company s Senior Independent Non-Executive Director responsible for providing clarifications to the shareholders at the Company s general meetings. 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 18 to 23. No individual or group of individuals dominates the Board s decision-making as the Independent Directors play an important role in providing independent views and opinions by objectively participating in the proceedings and decision-making process of the Board. The Board discharges its duties effectively and takes into account the interests of all stakeholders. 1.3 Roles and Responsibilities of the Chairman and the Group Managing Director The Chairman who was appointed on 1 July 2009, has not held any executive capacity in the Group. The roles of the Independent Non-Executive Chairman and the Group Managing Director are distinct and separate so as to ensure that there is a balance of power and authority. The Chairman is responsible for ensuring Board effectiveness and conduct. He encourages a healthy debate on issues raised at meetings, and gives opportunity to Directors who wish to speak on the motions, either for or against them. The Group Managing Director has overall responsibility for the management of the operating units, organisational effectiveness and the implementation of Board policies, decisions and strategies. 1.4 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 corporate strategies as well as the structure and management of the Group. All existing Directors have completed the Mandatory Accreditation Programme and are also encouraged to attend continuous education programmes and seminars to keep abreast with latest developments in the marketplace and to further enhance their business acumen and professionalism in discharging their duties to the Group. Seminars and conferences attended by Directors during the financial year ended 31 March 2009 include the following:- New Developments on the Companies (Amendment) Act 2007, Revised Malaysian Code and Corporate Governance and Revised FRSs The Companies (Amendment) Bill 2007 Effective Chairmanship Investor Relations A necessity, Not a Choice Annual MAICSA Conference nd International CEOs Conference 2008 Management of Anti-Fraud Programmes and Control (Guidance to Prevent and Deter Fraud) Latest Emerging Issues for Public Companies Public Sector Governance & Internal Control of the Board & Investment Panel of the EPF How Leaders Go Wrong Risk Governance Progressive Business Strategies Conference Food and Energy Security & Stemming the Tide of the Global Financial Crisis Apart from attending various conferences and seminars organised by external/internal organisers during the financial year, the Directors also continuously received 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 Board, through its delegation to the Nomination Committee, has implemented the process for an annual effectiveness assessment of the Board of Directors, Board Committees and the contribution of each Director to the effectiveness of the Board. The objective is to improve the Board s effectiveness by identifying gaps, maximising strengths and addressing weaknesses. The Chairman of the Nomination Committee oversees the overall evaluation process whereby self-assessment methodologies are used and issues for assessment are presented in customised questionnaires.

99 Re-Appointment and Re-Election of Board members Pursuant to Section 129 (2) of the Companies Act, 1965, Directors who are over the age of seventy (70) years shall retire at every annual general meeting and may offer themselves for re-appointment to hold office until the next annual general meeting. In accordance with the Company s Articles of Association, any new Director so appointed should hold office only until the next annual general meeting and should then be eligible for re-election. The Articles also provide that all Directors shall retire from office by rotation once every three years but shall be eligible for re-election. The Nomination Committee reviews and assesses annually the proposed re-appointment and re-election of existing Directors who are seeking re-appointment and re-election at the annual general meeting of the Company. The Nomination Committee will, upon its review and assessment, submit its recommendation on the proposed re-appointment and re-election of Directors to the Board for approval, before tabling such proposals to the shareholders at the annual general meeting. The re-appointment and re-election of Directors provide shareholders an opportunity to reassess the composition of the Board. 1.6 Board Meetings and Supply of Information to the Board To ensure that the Group is managed effectively, the Board meetings for the ensuing financial year are scheduled in advance before the end of each calendar year so as to enable Directors to plan ahead and fit the year s Board meetings into their own schedules. The Board meets at least once every quarter and additional meetings are convened between the scheduled meetings as Special Board Meetings as and when necessary to consider matters or business issues that require decision by the Board. To assist the Board in effective control of the Group, the Board meetings are governed by a structured formal agenda and schedule of matters arising for approval or notation with sufficient time given for deliberations. The key matters reserved for approval by the Board are the Group s strategic and Annual Management Plan, quarterly financial results, audited financial statements, significant expenditures, significant acquisitions and disposals, appointment of Directors/Board Committee members, remuneration for Directors (excluding fees), declaration of interim dividends, related party transactions, major restructuring and such other relevant matters affecting the Group s operations. The Directors are supplied in a timely manner with information in a form and of a quality as appropriate for their perusal in advance of the date of the Board meeting. In addition to financial information, other information deemed suitable such as risk management updates, 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, whether independent or otherwise, have direct and unrestricted access to Management, and the advice and services of the Company Secretary and may seek professional advice at the Group s expense, if required. Professional advisers, consultants, auditors and solicitors appointed by the Company to advise on corporate proposals to be undertaken by the Company, would be invited to attend Board meetings to render their advice and opinion, and also to clarify any issues raised by the Directors relating to any relevant business tabled for the Board s consideration. During the financial year ended 31 March 2009, the Board met a total of ten (10) times. All Directors attended more than half of the meetings held during the financial year/ since appointment in compliance with Bursa Securities Listing Requirements. Details of the attendances of Directors at the Board Meetings are disclosed below:- Meetings Attended during FINANCIAL year Dato Syed Mohamad bin Syed Murtaza 9/10 Datuk Haji Mohd Khamil bin Jamil 10/10 Dato Noorrizan binti Shafie 7/10 Dato Ibrahim bin Taib 9/10 Datuk Haji Abdul Rahman bin Mohd Ramli 7/10 Tan Sri Marzuki bin Mohd Noor 10/10 Ong Ie Cheong 10/10 Ooi Teik Huat (appointed ) 4/4

100 098 DRB-Hicom Berhad ( W) Annual Report 2009 statement on corporate governance (Continued) 1.7 Board Committees To ensure the effective discharge of its fiduciary duties, the Board has delegated specific responsibilities to the respective Committees of the Board. The functions and terms of reference of Board Committees, as well as the levels of authority delegated by the Board to these Committees, are clearly set out by the Board. The Chairman of the respective Board Committees will report to the Board, the outcome of Board Committee meetings and the Board also reviews the minutes of the Board Committee Meetings. The Board retains full responsibility for the direction and control of the Group. The Board Committees in the Company are as follows:- i. Audit Committee The composition of members and meetings attended, terms of reference and functions of the Audit Committee are described in the Audit Committee report set out on pages 106 to 109. The Audit Committee meets not less than four (4) times a year. The Nomination 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 contribution of their members; d. Review Management s recommendations on appointments or promotions of senior management personnel; e. Ensure an appropriate succession planning 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 ii. Nomination Committee The composition of the Nomination Committee is as follows:- g. Recommend continuous appropriate training programmes for Directors. Dato Syed Mohamad bin Syed Murtaza (Chairman/Senior Independent Non-Executive Director) Datuk Haji Abdul Rahman bin Mohd Ramli (Independent Non-Executive Director) Dato Ibrahim bin Taib (Non-Independent Non-Executive Director) iii. During the financial year ended 31 March 2009, a total of three (3) meetings were held by the Nomination Committee and the members registered full attendance at all meetings except the Chairman who was appointed on 1 July Remuneration Committee The composition of the Remuneration Committee is as follows:- Dato Syed Mohamad bin Syed Murtaza (Chairman/Senior Independent Non-Executive Director) Datuk Haji Abdul Rahman bin Mohd Ramli (Independent Non-Executive Director) Ong Ie Cheong (Independent Non-Executive Director)

101 099 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; and 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 KPIs 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 2009, a total of two (2) meetings were held by the Remuneration Committee and the members registered full attendance at all meetings. 1.8 Other Committees In relation to matters pertaining to the management and performance of the Group and its business including the operational aspects and strategic development of the Group, the Board has delegated certain responsibilities to the Group Managing Director, who is supported by a Management Committee ( MANCO ). The MANCO, comprising the Group Managing Director as Chairman, the Group Chief Financial Officer and certain key senior management members, is responsible for formulating Company and Group policies for recommendation to the Board for consideration and implementing key policy decisions of the Board. Management have also established a Group Risk Management Committee ( RMC ) to assist the Board in identifying principal risks affecting the Group and to ensure that appropriate systems are in place to mitigate such risks so as to safeguard shareholders investments and group assets. The RMC is chaired by the Group Managing Director and comprises representatives from the respective business divisions. The Board through the RMC oversees the risk management activities of the Group. The RMC formulates relevant proposals on risk management policies and risk measurement parameters across the Group and makes the appropriate recommendations to the Board for its approval. The RMC is responsible for ensuring that the risk management framework in the Group operates effectively based on the policies approved by the Board and reports on a regular basis to the Board on the key risks, controls to mitigate the risk and action plans. Further details on the RMC are set out in the section on Risk Management in the Statement on Internal Control. The minutes of the MANCO and RMC meetings are submitted to the Board for notation. 1.9 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 to run the Group successfully. In the case of Executive Directors, remunerations are structured so as to link rewards to corporate and individual KPIs. 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. The Executive Directors abstain from deliberation and voting on decisions in respect of their own remuneration. The remuneration (excluding fees) of Non-Executive Directors is to be decided by the Board as a whole.

102 100 DRB-Hicom Berhad ( W) Annual Report 2009 statement on corporate governance (Continued) Details of Directors remuneration for the financial year ended 31 March 2009, 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 Directors:- GROUP Fees 985, ,840 Attendance, other allowances & benefits 1,466,182 1,352,723 Salaries, bonuses, allowances and other benefits 5,087,453 6,641,400 Total 7,539,107 8,852,963 Executive Directors:- Directors Non- Remuneration* Executive Executive Total RM50,001 RM100, RM100,001 RM150, RM300,001 RM350, RM350,001 RM400, RM600,001 RM650, RM1,400,001 RM1,450, RM3,650,001 RM3,700, Total ** * Remuneration paid to the Directors of the Company include fees, salaries, other emoluments including bonus, EPF contributions, attendance & other allowances and benefits-in-kind. ** Includes one Executive Director who has resigned during the financial year and two Non-Executive Directors during and after the financial year. The disclosure of Directors remuneration is made in accordance with Appendix 9C, Part A, Item 11 of the Bursa Securities Listing Requirements. 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 of its Directors by bands is sufficient to meet the objective of the Code. a. Directors Fees In 2006, the Company obtained a shareholders approval via an 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 by the Company does not need shareholders approval provided that the amount does not exceed RM800,000 per annum. All Non-Executive Directors are paid meeting allowances 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 salary inclusive of statutory employer contributions to the Employees Provident Fund for the Group Managing Director is 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. Salary is reviewed annually by the Remuneration Committee. The adoption of the KPIs commenced during the financial year ended 31 March 2007, as part of the overall governance to enhance performance management, financial performance and shareholders value of the Company. Following this, the KPIs were formulated based on two main segments ie. Corporate/Financial and Priorities. For the Group Managing Director and the Management Team, there was greater emphasis on sustainability of growth, underpinned by the relevant financial factors. The performance based bonuses are strictly tied to the achievement of their KPIs. The bonus formula is designed to promote additional effort and initiatives beyond the KPI targets. 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.

103 101 c. Benefits-In-Kind Other customary benefits, such as use of company car, driver and handphone expenses/allowance were made available to the Chairman and Group Managing Director as appropriate. d. Terms and Conditions of Employment The Group Managing Director is 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 on regular basis through timely release of financial results on a quarterly basis, press releases and announcements to Bursa Malaysia which provide an overview of the Group s performance and operations for investment decision making, through accessible channels. In addition, the Company initiates dialogues with its shareholders and stakeholders as and when required. Media coverage on the Group is initiated at regular intervals to provide wider publicity and improve the understanding of the Group s business. 2.2 General Meetings General Meetings are the principal forum for dialogue with shareholders. The Annual General Meeting and Extraordinary General Meeting(s) provide opportunity for interaction amongst shareholders, Directors and management. The Company sends out the Notice of the Annual General Meeting and annual reports to shareholders at least twenty-one (21) days before the date of the meeting. Items of special business included in the notice of the meeting are accompanied by an explanatory statement to facilitate full understanding and evaluation of the issues involved. Circulars to Shareholders together with the Notices of Extraordinary General Meeting are sent out to shareholders at least fourteen (14) days before the date of the meeting. Besides the usual agenda for the Annual General Meeting, the Board presents a comprehensive review of the progress and business performance of the Group as contained in the Annual Report and provides opportunities for shareholders to raise questions pertaining to the business activities of the Group. The Board of Directors, Senior Management and relevant advisers are available to provide responses to questions raised and give clarifications to the shareholders during these meetings. 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. YBhg Dato Syed Mohamad bin Syed Murtaza Chairman/Senior Independent Non-Executive Director ii. iii. iv. Telephone number : (03) Facsimile number : (03) cclin@drb-hicom.com YBhg Datuk Haji Mohd Khamil bin Jamil Group Managing Director Telephone number : (03) Facsimile number : (03) dmkj@drb-hicom.com Encik Hamdan bin Ahammu Head, Corporate Communication & Investor Relations Telephone number : (03) Facsimile number : (03) hamdan@drb-hicom.com Ms Chan Choy Lin, Carol Head, Corporate Secretarial Telephone number : (03) Facsimile number : (03) cclin@drb-hicom.com

104 102 DRB-Hicom Berhad ( W) Annual Report 2009 statement on corporate governance (Continued) 3. 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 Board is assisted by the Audit Committee in scrutinizing the financial statements and information for disclosure to ensure accuracy, adequacy and completeness. The Statement of Responsibility by Directors in respect of the preparation of the annual audited financial statements of DRB-HICOM and DRB-HICOM Group is set out on page 114 of this Annual Report. 3.2 Internal Control The Board has overall responsibility for maintaining a system of internal controls that provides reasonable assurance of effective and efficient operations, and compliance with laws and regulations, as well as with internal procedures and guidelines. The effectiveness of the system of internal controls of the Group is reviewed by the Audit Committee periodically during its quarterly meetings. The review covers the Group s financial, accounting and reporting policies and practices, reports of the internal and external auditors and the adequacy of the system of internal controls to safeguard the shareholders interests and Group s assets. The Group Internal Audit Division monitors compliance with policies and the effectiveness of internal control structures across the Group, whilst legal and regulatory compliance are the responsibilities of the Legal Affairs and Corporate Secretarial/Corporate Planning Divisions respectively. The officers responsible are as follows:- i. Encik Mohammed Shukor bin Ismail Head, Internal Audit Encik Mohammed Shukor is an accountant by profession. He also holds a Master Degree in Business Administration and is a Certified Internal Auditor. He has 20 years experience in auditing and accounting. ii. Encik Khalid bin Abdol Rahman Group Director, Corporate & Services Encik Khalid holds a Master Degree in Business Administration and has more than 20 years experience in corporate planning and corporate finance. iii. iv. Ms Chan Choy Lin, Carol Head, Corporate Secretarial Ms Chan is an accountant by profession. She has more than 20 years working experience in auditing, secretarial and accounting. Cik Noraishah binti Mohd Radzi Senior Manager, Legal Affairs Cik Noraishah holds a Master in Comparative Laws and LLB from Universiti Islam Antarabangsa. She has 14 years working experience in various roles in private practice, legal adviser, human resource and procurement. The Group s Statement on Internal Control, which provides an overview of the state of internal controls within the Group, is set out on pages 104 to 105 of this Annual Report. 3.3 Related Party Transactions All related party transactions are reviewed by the Audit Committee to ensure compliance with Bursa Securities Listing Requirements and the appropriateness of such transactions before recommending to the Board for its approval. With regard to recurrent related party transactions ( RRPTs ), the Board has established and adopted the appropriate procedures to ensure such transactions will be negotiated and agreed at an 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 Shareholders mandate in respect of RRPTs is obtained at the annual general meeting of the Company on a yearly basis prior to entering of such transactions. The breakdown of the aggregate value of RRPTs transacted during the financial year ended 31 March 2009 is disclosed on page 111 of the Annual Report in line with the disclosure and threshold requirements of Bursa Securities Listing Requirements. Other significant related party transactions are set out under the Notes to the Financial Statements on pages 217 to 219 of this Annual Report. The list of non-recurrent related party transactions completed during the financial year ended 31 March 2009 pursuant to chapter of Bursa Securities Listing Requirements are as follows:- a) On 7 August 2008, Scott & English Electronics Holdings Sdn Bhd, effectively a 70% indirect subsidiary company of the Group, completed the disposal of 9% equity interest in Scott & English Electronics Sdn Bhd to Eastern Trinity Sdn Bhd for a total cash consideration of RM1.08 million.

105 103 b) On 8 September 2008, the Company completed the acquisition of an additional 15% equity interest in Motosikal dan Enjin Nasional Sdn Bhd from Khazanah Nasional Berhad for a total cash consideration of RM24 million. c) On 22 October 2008, the Company completed the acquisition of 100% equity interest in Rangkai Positif Sdn Bhd from Tan Sri Datuk Seri Syed Mokhtar Shah bin Syed Nor for a total consideration of RM292,146,596 via the issuance of 376,963,350 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share. d) On 22 October 2008, the Company completed the acquisition of 70% equity interest in Bank Muamalat Malaysia Berhad from Bukhary Capital Sdn Bhd for a total consideration of RM425,216,666 satisfied via the issuance of 548,666,666 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share. 3.4 Relationship With External Auditors The Audit Committee meets with the internal and external auditors at least twice a year to discuss any issues arising from their audits without the presence of the executive Directors and Management. The Audit Committee also meets with the external auditors whenever it deems necessary. The external auditors also highlight to the Audit Committee and Board of Directors on matters that require Board s attention together with the recommended corrective actions thereof. The Management is held responsible for ensuring that all these corrective actions are undertaken within an appropriate time frame. of the Company and their fees on annual basis to ensure that the independence of the external auditors is not compromised. For the audit of the financial statements of DRB-HICOM and its subsidiaries for the financial year ended 31 March 2009, PricewaterhouseCoopers have confirmed their independence in accordance with the firm s requirements and with the provisions of the By-Laws on Professional Independence of the Malaysian Institute of Accountants. The Board had approved the above statement in accordance with a resolution of the Board of Directors dated 17 July Signed on behalf of the Board of Directors YBHG DATO SYED MOHAMAD BIN SYED MURTAZA Chairman The role of the Audit Committee in relation to the external auditors may be found in the Report of the Audit Committee set out at pages 106 to 109. The Group has always maintained a close and transparent relationship with its external auditors in seeking professional advice and ensuring compliance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities. The Audit Committee also reviews the proposed re-appointment of the external auditors

106 104 DRB-Hicom Berhad ( W) Annual Report 2009 statement on Internal Control The Board of Directors (Board) is committed towards maintaining a sound system of internal control and risk management processes within the Group to ensure good corporate governance. The Board acknowledges that the Group s internal control system and risk management practices should be effective and responsive to be able to support the Group to meet its objectives and operate in a dynamic business environment. The Board confirms that there is a continuous process of reviewing the adequacy and integrity of the Group s system of internal control and risk management practices. Notwithstanding the continuous process of reviewing that have been established, the Board recognises that the Group s system of internal control can only provide reasonable but not absolute assurance against material misstatement or loss and that the Group s risk management process is designed to manage the risks within an acceptable level rather than to eliminate the risks. Internal Control Processes The key elements of internal control processes established within the Group are reflected as follows:- Organisational Structure There is clear segregation of duties, authority and accountability embedded within the organizational structure of the Group. The Board, in carrying out its responsibilities, is assisted by the Board Committees namely the Audit, Nomination and Remuneration Committees, and the Management Committee and Risk Management Committee. Audit Committee The Audit Committee (AC) reviews the reports of the internal and external auditors on adequacy and integrity of the Group s systems of internal control and the financial results. All the five members of the AC are Non-Executive Directors, four of whom, including the AC Chairman, are independent Non-Executive Directors. Please refer to page 106 to 109 on the summary report on the activities of the AC. Internal Audit Function The business processes and conducts of the operating entities within the Group are regularly and systematically reviewed by the Group Internal Audit Division (GIAD) to evaluate the adequacy and effectiveness of the financial and operational controls. However, this did not include Group companies (financial institutions) governed by the Banking and Financial Institutions Act, 1989 or regulated by Bank Negara Malaysia as the reviews are undertaken by the AC and internal audit function of the respective financial institutions. The GIAD reported to the Audit Committee and addressed to the Management all the audit observations noted in the course of their review and followed up and monitored on the status of actions taken by the operating entities in addressing the audit observations. Policies and Procedures Policies and procedures encompassing among others the Financial Authority Limits, Human Resource, Procurement, Risk Management, Management Control and Internal Control Framework, Code of Ethics and Business Practice, and the Whistleblower and Anti Fraud Policies are established to provide sufficient guidance and direction for proper management, governance and conduct of the business and operation within the Group. Performance Management In order to nurture the quality and competencies of employees, continuing education, training and development programs are emphasized to enable employees to discharge their duties effectively. Progressively, employees performances are measured according to the sets of key performance indicators aligned to their functions as assigned to them in which they are expected to accomplish.

107 105 The Management oversees performance of the operating entities, within which business planning and budgetary exercise are established annually and actual performance are monitored periodically against set targets. Communication and Information Timely communication of relevant information such as the Group s achievement and changes with regard to corporate and organizational structure and policies and procedures enabling employees to focus on and to perform their responsibilities effectively. Risk Management Accountability for Risk Management Risk Management is regarded by the Board of Directors to be 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. They also have the responsibility for managing risks and internal controls associated with the operations and ensuring compliance with applicable laws and regulations. The ultimate responsibility for the effective management of risk rests with the Board that controls and manages risk through the Risk Management Committee. The 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. Risk Management Committee The Risk Management Committee (RMC) has been established and the Board entrusts the RMC with the overall responsibility for overseeing the Risk Management Policy (Policy) and the risk management activities of DRB-HICOM and approving appropriate risk management procedures and measurement methodologies across the organization. The RMC has a broad mandate to ensure the effective implementation of the objectives outlined in the Policy and compliance with them throughout DRB-HICOM Group. The RMC is responsible for periodically reporting higher risk exposures to the Board. Risk Management Policy The Board delegates to the Group Managing Director (GMD) who is also the Chairman of the RMC the responsibility for ensuring effective implementation and maintenance of the Policy. The detailed line accountability for risk management is fully aligned with DRB-HICOM s management structure. Accordingly, approvals, responsibilities and accountabilities applicable to the identification, evaluation, management and reporting of DRB-HICOM s risks are attributed to the GMD and Heads of the respective subsidiaries and corporate divisions. The main underlying principles of the Policy are:- Providing a framework and organizational structure for the management of risks that DRB- HICOM assumes in its activities; Defining risk management roles and responsibilities within the organization and outlining procedures to mitigate risks; Ensuring consistent and acceptable management of risk throughout the business; Defining a reporting framework to ensure the communication of necessary risk management information to senior management and personnel engaged in risk management activities; Remaining flexible to accommodate the changing risk management needs of the organization while maintaining control of the overall risk position; Detailing the approved methods for risk assessment; and Providing a system to accommodate the central accumulation of risk data. Risk Reporting The Group s risk management framework provides for regular review and reporting. The reports which include an assessment of the degree of risk, mitigating actions in place and proposed action plans for further controls are submitted to the RMC and subsequently to the Board for review and endorsement. The key elements of the process are:- Presentation of summary key risks to the Board on a half yearly basis. Review and reporting of key risks by subsidiaries and corporate divisions to the RMC on a quarterly basis. Review and reporting of key risks by Risk Management Committee of the subsidiary companies to its respective Board of Directors on a quarterly basis. Conclusion The Board is of the view that the system of internal control for the financial year under review and risk management processes of the Group is sound and adequate to provide reasonable assurance to safeguard shareholders investments, Group s assets and other stakeholders interests. There was no major internal control weakness identified that may result in any material loss or uncertainty that would require disclosure in this annual report. This statement has been approved by the Board of Directors at its meeting on 17 July 2009.

108 DRB-Hicom Berhad ( W) 106 Annual Report 2009 audit committee Report The Board of Directors is pleased to present the Report of the Audit Committee (AC) for the financial year (FY) ended 31 March COMPOSITION OF AC MEMBERS AND MEETINGS ATTENDED In line with the requirements of the Malaysian Code on Corporate Governance (MCCG) all five members of the AC are Non-Executive Directors, four of whom, including the AC Chairman, are independent Non-Executive Directors. The AC Chairman, YBhg Datuk Haji Abdul Rahman Mohd Ramli and Mr Ooi Teik Huat, are members of the Malaysian Institute of Accountants (MIA) thereby complying with paragraph 15.10(1)(c)(i) of the Listing Requirements. The composition of the AC as well as attendance at meetings is set out below: Director Status of Attendance Directorship YBhg Datuk Haji Abdul Rahman Mohd Ramli Independent 7 out of 7 Chairman of the Committee Non-Executive Director YBhg Dato Noorrizan Shafie Non-Independent 7 out of 7 Non-Executive Director YBhg Dato Syed Mohamad Syed Murtaza Independent 7 out of 7 (resigned w.e.f. 17 July 2009) Non-Executive Director Mr Ong Ie Cheong Independent 6 out of 7 Non-Executive Director Mr Ooi Teik Huat Independent 3 out of 3 (appointed w.e.f. 1 November 2008) Non-Executive Director The quorum for all seven meetings held during FY 2008/09, as highlighted by the attendance of the AC members in the table above was fulfilled. The Group Managing Director (GMD) together with the Group Chief Financial Officer (GCFO) and the former Executive Director/Group Chief Operating Officer were invited to brief the AC on the Group s financial performance and relevant corporate matters and to attend to any queries raised by the AC. The Head of Group Internal Audit Division (GIAD) attended all AC meetings and presented the internal audit reports to the AC. The External Auditors also attended AC meetings to present the audit scope and plan, and the auditors report on the annual audited financial statements. The AC convened two meetings with the External Auditors in FY 2008/09, without the presence of the Senior Management or Head of GIAD. The AC also met with the Head of GIAD without the presence of the Senior Management. Issues discussed and deliberated during the AC meetings were recorded and the minutes were tabled at the subsequent Board Meeting. The AC also conveyed any matters of significant concern raised by the internal and external auditors to the Board. 2.0 TERMS OF REFERENCE OF THE AUDIT COMMITTEE The AC shall be established to assist the Board in fulfilling its oversight responsibilities. The AC 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. 2.1 Composition The following requirements are to be fulfilled by the Board in the appointment of the AC from among its members:- a. the AC must be composed of no fewer than three (3) members, the majority of whom must be Independent Non-Executive Directors; b. the Chairman of the AC shall be appointed by the Board from among the Independent Non-Executive Directors and at least one member of the AC 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 1967.

109 107 Alternate Directors shall not be appointed as a member of the AC; and subject to any regulatory disqualification, members of the AC shall not be removed except by the Board. In the event of any vacancy in the AC, 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 AC and each of its members at least once every three (3) years. 2.2 Meetings and Attendance The quorum for all meetings of the AC shall not be 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 GMD, GCFO and Head of GIAD shall, by invitation, attend the meetings. b. The external auditors are normally invited to attend meetings as and when necessary. c. The AC shall meet separately with the internal and external auditors at least twice a year without the attendance of the management. d. The Company Secretary shall be the Secretary of the AC and shall provide the necessary administrative and secretarial services for the effective functioning of the AC. The draft minutes shall be circulated to the AC members for comment and the signed minutes shall be tabled at the subsequent Board Meeting. 2.3 Authority The Board has empowered the AC to:- a. investigate any activity within the scope of the AC s duties and its terms of reference and shall have full and unrestricted access to any information and document relevant to the AC 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; 2.4 Responsibilities and Duties The functions of the AC have been expanded to include the matters specified in the Malaysian Code on Corporate Governance as follows:- a. 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. b. 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. c. Internal Audit In respect of the internal audit function:- i. to review the adequacy of the scope, functions and resources of the GIAD and to assess whether it has the necessary authority to carry out its responsibilities with regards to the annual audit plan; ii. iii. iv. d. External Audit 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; to review any appraisal or assessment of the performance of the Head of GIAD as well as approve the appointment or termination of senior staff members of the GIAD; to discuss any issues from the audits, with the Head of GIAD separately without the presence of management. With regards to external auditors:- i. to review and consider the appointment, resignation, or termination of external auditors and their audit fee; e. make recommendations for improvements of operating performance and management control arising from internal and external audit recommendations. ii. 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;

110 108 DRB-Hicom Berhad ( W) Annual Report 2009 audit committee report (Continued) iii. iv. 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; 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 3. SUMMARY OF ACTIVITIES The following activities were carried out by the AC during the FY 2008/09 in accordance to the terms of reference of the AC:- a) the AC reviewed the Audit Plan on 25 November 2008 with the External Auditors encompassing their audit scope and proposed fees for the statutory audit and the review of the Statement on Internal Control for FY 2008/09; b) the AC reviewed and approved the GIAD s Annual Internal Audit Plan for FY 2009/10 at the AC meeting on 25 February The AC also reviewed the internal audit reports presented by GIAD at each AC meeting with respect to audit resources, activities, findings and adequacy of management responses and action in handling the audit issues reported. compliance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and other legal requirements. v. to convene meeting at least twice a year on any issues from the audits, with the external auditors separately without the presence of management; vi. to review the external auditor s management letter and management s response. e. Other Responsibilities i. to instruct the external and internal auditors that the AC expects to be advised if there are any areas that require their special attention including major findings of internal investigations and management s response; ii. iii. iv. to review any related party transactions that may arise within the company or Group in complying with the Listing Requirements; to review any allocation of share options pursuant to the Employees Share Option Scheme (ESOS) granted to employees in the Group; to consider and examine any other matters as the AC considers appropriate or as authorised by the Board of Directors. c) the AC reviewed the unaudited quarterly financial results of the Group for FY 2008/09 during the financial year. The AC also reviewed the annual audited financial statements of the Group and company for FY 2008/09 at its meeting on 16 July 2009, before recommending the same to the Board for approval; d) the AC reviewed the Statement on Internal Control and Statement on Corporate Governance prior to inclusion in the Company s Annual Report; e) the AC deliberated with the external auditors the results of audit of the Financial Statements and their Report on Examination and the responses by the management at its meeting; f) the AC 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; g) the AC reviewed the Group s procedures in respect of recording recurrent related party transactions (RRPTs) and the 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; h) the AC members attended relevant mandatory accreditation and continuing education programmes during the financial year under review.

111 INTERNAL AUDIT FUNCTION 4.1 The GIAD is primarily responsible to provide reasonable assurance to the AC on the adequacy and effectiveness of the risk, control and governance framework of the Group by undertaking regular and systematic reviews of the system of internal control of the companies and operating units within the Group. However, those Group companies (financial institutions) governed by the Banking and Financial Institutions Act, 1989 or regulated by Bank Negara Malaysia are under the purview of the AC and internal audit function of the respective financial institutions. The Head of GIAD, who reports directly to the AC, is assisted by 5 internal audit managers and 15 other internal auditors bringing the staff resources to During the financial year, GIAD executed a total of 89 audit engagements that comprised scheduled and ad-hoc audit engagements covering the automotive manufacturing and distribution, property development and construction, and services sectors. All findings resulting from the audits were reported to the AC. The management of the operating units audited were accountable to ensure proper handling of the audit issues and implementation of their action plans within the time frame specified. Actions taken by the operating units audited were followed up by GIAD and the status updated in the subsequent audits. 4.3 All of the internal audit activities in the financial year under review were undertaken by the GIAD. None of the components of the internal audit function were outsourced to external service providers. The total cost incurred for the internal audit function in FY 2008/09 was in the region of RM2.1 million covering manpower, travelling and training costs. 4.4 ISO 9001:2000 certification is adopted by GIAD as part of its continuous quality management system. Following the assessment by the independent certification body in July 2008, the ISO 9001:2000 certification on GIAD was renewed for a second term expiring on 31 December Besides the ISO 9001:2000 program, GIAD is also subject to an external quality assessment review by a qualified independent assessor once every five years as required by the International Standards for the Professional Practice of Internal Auditing. In this regard, GIAD conforms to the International Standards for the Professional Practice of Internal Auditing.

112 DRB-Hicom Berhad ( W) 110 Annual Report 2009 additional compliance Information 1. UTILISATION OF PROCEEDS The RM1.0 billion Islamic Securities as approved by the Securities Commission vide letter dated 23 June 2005 have been fully redeemed and cancelled in July During the financial year, there was no financing raised by the Company which required the approval of Securities Commission. 2. SHARE BUYBACKS During the financial year, there were no share buybacks by the Company. 3. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES 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. 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.

113 RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE By a Resolution of the Annual General Meeting of the Company held on 23 September 2008, 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 24 September 2008 to 10 September 2009 between the Company or its subsidiary companies and related parties, the latter being based on estimates. As required, below is a listing of the said transactions by a related company that are more than RM42 million as having been actually entered into during the financial year ended 31 March 2009:- Actual Transacted Values (RM 000) FROM 1 April 2008 to No. Transacting Parties Interested Parties Nature OF Transaction 31 March 2009 RANGKAI POSITIF SDN. BHD. 1. Tanjung Bin Power Sdn. Bhd. Major shareholders Provision of operations and maintenance services 104,888 Etika Strategi Sdn. Bhd. ( O&M ), ash sales and demurrage payment by Rangkai Tan Sri Dato Seri Syed Mokhtar Shah bin Syed Nor Positif Sdn. Bhd. to Tanjung Bin Power Sdn. Bhd. Director Datuk Haji Mohd Khamil bin Jamil 2. Teknik Janakuasa Sdn. Bhd. Major shareholders Rangkai Positif Sdn. Bhd. in turn subcontracted the 64,186 Etika Strategi Sdn. Bhd. O&M services to Teknik Janakuasa Sdn. Bhd. Tan Sri Dato Seri Syed Mokhtar Shah bin Syed Nor Director Datuk Haji Mohd Khamil bin Jamil 169,074

114 112 DRB-Hicom Berhad ( W) Annual Report 2009 additional compliance information (Continued) 8. Material Contracts Save as disclosed below, there are no material contracts entered into by DRB-HICOM Berhad ( DRB-HICOM ) or its subsidiary companies involving Directors and Major Shareholders interests still subsisting at the end of the financial year ended on 31 March 2009 or, if not subsisting, entered into since the end of the previous financial year pursuant to Paragraph 21, Part A, Appendix 9C of the Listing Requirements:- No. TYPE Date Contracting Parties Purchase Consideration and Mode of Satisfaction 1. Sale and Purchase of 11 October 2007 DRB-HICOM and Tan Sri Dato Seri Syed Acquisition of two (2) ordinary shares of RM1.00 each representing 100% Shares Agreement Mokhtar Shah bin Syed Nor* equity interest in Rangkai Positif Sdn. Bhd. for a purchase consideration of RM720,000,000 to be satisfied by the issuance of 376,963,350 new ordinary shares of RM1.00 each in DRB-HICOM at an issue price of RM1.91 per new DRB-HICOM share. The acquisition was completed on 22 October Sale and Purchase Agreement 24 April 2008 DRB-HICOM and Bukhary Capital Sdn. Bhd. Acquisition of 70% equity interest in Bank Muamalat Malaysia Berhad ( Bukhary Capital )* ( BMMB ) for a purchase consideration of RM1,069,900,000 to be satisfied by the issuance of 548,666,666 new ordinary shares of RM1.00 each in DRB-HICOM at an issue price of RM1.95 per new DRB-HICOM share. The acquisition was completed on 22 October Share Sale Agreement 5 August 2008 DRB-HICOM and Khazanah Nasional Berhad Acquisition of an additional 15% equity interest in Motosikal Dan Enjin ( KNB )** Nasional Sdn. Bhd. from KNB for a cash consideration of RM24 million. The acquisition was completed on 8 September Relationships between the Directors or Major Shareholders and the Contracting Parties * a) Tan Sri Dato Seri Syed Mokhtar Shah bin Syed Nor holds indirect equity interest of 55.92% in DRB-HICOM through Etika Strategi Sdn. Bhd. ( Etika ). b) Tan Sri Dato Seri Syed Mokhtar Shah bin Syed Nor holds indirect equity interest of 99% in Bukhary Capital through ALBUKHARY Corporation Sdn. Bhd. c) Datuk Haji Mohd Khamil bin Jamil is the Group Managing Director of DRB-HICOM. He is also a Director and shareholder of Etika and Bukhary Capital and is a person connected to Tan Sri Dato Seri Syed Mokhtar Shah bin Syed Nor. ** KNB holds the remaining 30% equity interest in BMMB. As at 24 July 2009, KNB also holds 5.39% equity interest in DRB-HICOM.

115 Sanctions and/or Penalties There are no significant penalty(ies) imposed by any regulatory authorities on any of the companies 10. STATEMENT ON REVALUATION POLICY 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 2009 are as follows:- RM 000 PricewaterhouseCoopers 175 PricewaterhouseCoopers Taxation Services Sdn. Bhd. 900 PricewaterhouseCoopers Advisory Services Sdn. Bhd ,219

116 DRB-Hicom Berhad ( W) 114 Annual Report 2009 statement of Directors Responsibility in respect of the preparation of the Financial Statements for the financial year ended 31 March 2009 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, modified by the accounting policies as set out in the Bank Negara Malaysia Guidelines and Shariah principles for a banking subsidiary company of the Group. The Directors consider that in preparing the financial statements for the financial year ended 31 March 2009 set out on pages 116 to 230, 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 17 July 2009.

117 115 financial statements 116 Directors Report 122 Income Statements 123 Balance Sheets 125 Statements of Changes in Equity 128 Cash Flow Statements 132 Notes to the Financial Statements 231 Statement by Directors 232 Statutory Declaration 233 Independent Auditors Report

118 116 DRB-Hicom Berhad ( W) Annual Report 2009 Directors Report 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, services (including banking business), 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 have been no significant changes in these activities during the financial year except for the Group s acquisitions of Rangkai Positif Sdn. Bhd. and Bank Muamalat Malaysia Berhad, and the disposal of its equity interest in EON Capital Berhad as disclosed in Note 54 (a), (f) and (g) to the financial statements. FINANCIAL RESULTS Group RM 000 Company RM 000 Net profit for the financial year 725,381 85,806 Attributable to: Equity holders of the Company 660,507 85,806 Minority interest 64, ,381 85,806 DIVIDENDS Dividends paid/payable by the Company since 31 March 2008 were as follows: RM 000 In respect of the financial year ended 31 March 2008: Final gross dividend of 3.5 sen per share, less taxation of 25%, paid on 28 October ,450 In respect of the financial year ended 31 March 2009: Interim (special) gross dividend of sen per share, less taxation of 25%, paid on 26 September ,761 Total dividends paid 127,211 The Directors now recommend the payment of a final gross dividend of 2.5 sen per share, less taxation of 25%, amounting to RM36,248,195 in respect of the financial year ended 31 March 2009, subject to the approval of shareholders at the forthcoming Annual General Meeting of the Company.

119 117 ISSUE OF SHARES On 22 October 2008, the Company s issued and paid-up share capital increased from RM1,007,607,035 to RM1,719,600,594 by way of issuance of 925,630,016 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share, pursuant to the acquisitions of Rangkai Positif Sdn. Bhd. and Bank Muamalat Malaysia Berhad. The fair value of the issued shares is measured at the closing market price of DRB-HICOM Berhad s shares at the date of issuance of shares. The issuance cost for the shares issued has been deducted from the total fair value of the shares. The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company except that the shares issued for the acquisitions of Rangkai Positif Sdn. Bhd. and Bank Muamalat Malaysia Berhad did not rank for interim (special) dividend declared in respect of financial year ended 31 March RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the financial year are disclosed in the financial statements. SIGNIFICANT EVENTS (a) On 23 June 2008, HICOM Holdings Berhad, effectively a 100% owned subsidiary company of the Group, completed the disposal of its entire 20.2% equity interest in EON Capital Berhad to Primus Pacific Partners 1 L.P. for a cash consideration of approximately RM1.35 billion. As a result, EON Capital Berhad ceased to be an associated company of the Group. The gain arising from the disposal amounted to approximately RM567 million. (b) (c) Pursuant to the Rights Issue undertaken by Alam Flora Sdn. Bhd. ( AFSB ), the Group subscribed for a total of 24 million new ordinary shares of RM1.00 each. The Group s shareholding in AFSB increased from 55% to 60.53% in July On 7 August 2008, Scott & English Electronics Holdings Sdn. Bhd. ( SEEH ), effectively a 70% indirect subsidiary company of the Group, completed the disposal of its entire 100% equity interest in Scott & English Electronics Sdn. Bhd. ( SEE ) for a total cash consideration of RM6.58 million to the following parties: Midea Refrigeration (Hong Kong) Ltd. 51%; HICOM Holdings Berhad 40%; and Eastern Trinity Sdn. Bhd. 9%. As a result, SEE ceased to be a 70% indirect subsidiary company of the Group and became a 40% indirect associated company of the Group. On 17 October 2008, SEE changed its name to Midea Scott & English Electronics Sdn. Bhd. (d) (e) (f) (g) On 8 September 2008, the Company completed the acquisition of an additional 15% equity interest in Motosikal Dan Enjin Nasional Sdn. Bhd. ( MODENAS ) from Khazanah Nasional Berhad for a cash consideration of RM24 million. As a result, the Group s shareholding in MODENAS increased from 55% to 70%. On 18 September 2008, HICOM Holdings Berhad acquired an additional 9.03% equity interest in PHN Industry Sdn. Bhd. ( PHN ) from Nagoya Oak Industries Co. Ltd. for a cash consideration of RM8.13 million. As a result, the Group s equity interest in PHN increased from 53.47% to 62.5%. On 22 October 2008, the Company completed the acquisition of the entire equity interest in Rangkai Positif Sdn. Bhd. ( RP ) for RM292,146,596 via the issuance of 376,963,350 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share. As a result, RP became a wholly-owned subsidiary company of the Group. On 22 October 2008, the Company acquired a 70% equity interest in Bank Muamalat Malaysia Berhad ( BMMB ) for RM425,216,666 satisfied via the issuance of 548,666,666 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share. As a result, BMMB became a 70% subsidiary company of the Group.

120 118 DRB-Hicom Berhad ( W) Annual Report 2009 directors report (Continued) SIGNIFICANT EVENTS (Continued) (h) HICOM Properties Sdn. Bhd. ( HPSB ), a wholly-owned subsidiary company of the Group had, on 30 December 2008, entered into a Share Sale and Purchase Agreement ( SSA ) with Dato Haji Ahmad bin Abdullah and Mohd Nazree bin Abu Kassim, collectively known as the Vendors, to acquire the entire equity interest of 1,000,000 ordinary shares of RM1.00 each respectively ( Sale Shares ) in both Benua Kurnia Sdn. Bhd. ( BKSB ) and Neraca Prisma Sdn. Bhd. ( NPSB ) for a total purchase consideration of RM million ( Proposed Acquisition ). BKSB and NPSB own three (3) parcels of freehold land encompassing an area of approximately 1, acres identified as PTD HS(D) , PTD HS(D) and PTD HS(D) , Mukim of Tebrau, Daerah Johor Bahru, Negeri Johor Darul Ta zim. The purchase consideration of the Sale Shares will be satisfied in the following manner: (i) (ii) (iii) Disposal of five (5) DRB-HICOM Group s plantation lands comprising Connemara Estate, Serendah Estate, Bukit Kledek Estate, Ladang Gadek and Ladang Kupang at RM million; Issuance of a bank guarantee amounting to RM million in favour of Danaharta to substitute the existing bank guarantees obtained by BKSB and NPSB; and Cash payment of RM million. The Proposed Acquisition is pending the fulfilment of the conditions precedent stated in the SSA. DIRECTORS The Directors who have held office during the period since the date of the last report are as follows: Dato Syed Mohamad bin Syed Murtaza (Chairman, with effect from 1 July 2009) Datuk Haji Mohd Khamil bin Jamil (Group Managing Director) Dato Noorrizan binti Shafie Dato Ibrahim bin Taib Datuk Haji Abdul Rahman bin Mohd Ramli Tan Sri Marzuki bin Mohd Noor Ong Ie Cheong Ooi Teik Huat (Appointed on 1 November 2008) Y.A.M. Tan Sri Dato Seri Syed Anwar Jamalullail (Resigned on 1 July 2009) Dato Haji Mohd Redza Shah bin Abdul Wahid (Resigned on 31 October 2008)

121 119 DIRECTORS INTERESTS According to the Register of Directors Shareholdings, particulars of deemed interests of Directors who held office at the end of the financial year in shares of the Company and in its related corporations were as follows: Number of ordinary shares of RM1.00 each As at As at 1 April 2008 Acquired Disposed 31 March 2009 The Company Indirect* Ong Ie Cheong 20,000 20,000 Number of ordinary shares of RM1.00 each As at As at 22 October 2008** Acquired Disposed 31 March 2009 Holding Company Direct Datuk Haji Mohd Khamil bin Jamil 30,000 30,000 * Interest of Spouse/ Child of the Director. ** The effective date on which Etika Strategi Sdn. Bhd. became the holding company. Other than as disclosed above, according to the Register of Directors Shareholdings, none of the Directors in office at the end of the financial year held any interest in shares in the Company or its related corporations 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.

122 120 DRB-Hicom Berhad ( W) Annual Report 2009 directors report (Continued) REMUNERATION COMMITTEE The Remuneration Committee establishes and recommends the remuneration structure and policy for the Directors and Key Management Officers whereupon such recommendations are made to the Board of Directors for approval. The Remuneration Committee consists of the following Directors: Dato Syed Mohamad bin Syed Murtaza Datuk Haji Abdul Rahman bin Mohd Ramli Ong Ie Cheong (Chairman / Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director) 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.

123 121 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 except for the gain on disposal of investment in an associated company as disclosed in the income statement; 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. HOLDING COMPANY The Directors regard Etika Strategi Sdn. Bhd., a company incorporated in Malaysia, as the holding company with effect from 22 October AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. In accordance with a resolution of the Board of Directors dated 17 July DATO SYED MOHAMAD BIN SYED MURTAZA Chairman DATUK HAJI MOHD KHAMIL BIN JAMIL Group Managing Director

124 122 DRB-Hicom Berhad ( W) Annual Report 2009 INCOME STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009 Group Company Note Restated RM 000 RM 000 RM 000 RM 000 Revenue 4 6,101,427 4,012, , ,388 Cost of sales 5 (b) (5,201,320) (3,367,178) Gross profit 900, , , ,388 Other income gain on disposal of investment in associated companies 567,481 13,991 12,470 others 149, ,347 5,870 35,825 Selling and distribution costs (141,848) (126,899) Administrative expenses (519,111) (436,980) (24,577) (27,854) Other expenses (219,359) (104,604) (46,224) (16,761) Finance costs 8 (95,655) (119,976) (43,327) (55,678) Share of results of jointly controlled entities (net of tax) 18 63,246 43,481 Share of results of associated companies (net of tax) 19 70, ,512 Profit before taxation 5 (a) 774, , , ,390 Taxation 9 (49,562) (24,344) (37,411) (19,398) Net profit for the financial year 725, ,729 85, ,992 Attributable to: Equity holders of the Company 660, ,395 Minority interest 64,874 59, , ,729 Gross dividends per share (sen) Earnings per share (sen) Basic 11 (a) The notes set out on pages 132 to 230 form an integral part of the financial statements.

125 123 BALANCE SHEETS AS AT 31 MARCH 2009 Group Company Note Restated RM 000 RM 000 RM 000 RM 000 ASSETS Non-current assets Property, plant and equipment 12 1,836,061 1,713,953 2,107 2,830 Prepaid lease properties 13 74,511 77,025 Investment properties , , , ,752 Biological assets 15 19,743 Land held for property development 16 (b) 249, ,304 Subsidiary companies 17 Investments 4,155,886 3,058,329 Amounts due 946,283 1,462,281 Jointly controlled entities , ,695 9,800 9,800 Associated companies , ,967 71,803 76,863 Other investments 20 (ii) & (iii) 879, ,802 Intangible assets ,674 23,036 Deferred tax assets ,865 99,510 Banking related assets Investments: Held-to-maturity 20 (a) 28,346 Investments: Available-for-sale 20 (b) 2,638,068 Investments: Held-for-trading 20 (c) 10,228 Financing of customers 23 4,677,422 Statutory deposits with Bank Negara Malaysia 24 72,871 12,181,637 4,404,321 5,341,043 4,772,855 CURRENT ASSETS Non-current assets held for sale , ,393 Inventories , ,351 Property development costs 16 (a) 180, ,439 Trade and other receivables 27 1,304,033 1,167,949 92, ,407 Tax recoverable 152,151 55,677 17,435 11,893 Marketable securities , ,197 11,700 38,781 Short term deposits ,119 1,377,079 38,234 84,126 Cash and bank balances , ,635 4,016 3,078 Banking related assets Cash and short-term funds 31 3,569,105 Investments: Held-to-maturity 20 (a) 2,545 Investments: Available-for-sale 20 (b) 663,385 Financing of customers 23 1,111,031 9,333,491 4,924, , ,285 TOTAL ASSETS 21,515,128 9,329,041 5,504,742 5,018,140

126 124 DRB-Hicom Berhad ( W) Annual Report 2009 balance sheets as at 31 March 2009 (Continued) Group Company Note Restated RM 000 RM 000 RM 000 RM 000 EQUITY AND LIABILITIES Share capital 32 1,719,601 1,007,607 1,719,601 1,007,607 Reserves 2,441,143 1,903,761 2,942,236 2,983,641 Equity attributable to equity holders of the Company 4,160,744 2,911,368 4,661,837 3,991,248 Minority interest 1,192, ,777 TOTAL EQUITY 5,352,760 3,871,145 4,661,837 3,991,248 NON-CURRENT LIABILITIES Life assurance fund 33 1,252,965 1,247,903 Deferred income 34 74,940 74,310 Long term borrowings ,357 1,488,042 96, ,741 Provision for liabilities and charges ,421 Deferred tax liabilities 22 35,653 61,866 2, Banking related liabilities Deposits from customers 37 2,323,244 CURRENT LIABILITIES 4,617,989 2,880,542 98, ,443 Liabilities relating to non-current assets held for sale 25 18,418 General and life insurance funds , ,435 Trade and other payables 39 1,527,352 1,416, ,535 99,449 Provision for liabilities and charges 36 10,005 5,749 Bank borrowings 40 Bank overdrafts 25,525 25,010 Others 588, , , ,000 Current tax liabilities 6,161 Banking related liabilities Deposits from customers 37 8,295,458 Deposits and placements of banks and other financial institutions ,815 Bills and acceptances payables 538,901 11,544,379 2,577, , ,449 TOTAL LIABILITIES 16,162,368 5,457, ,905 1,026,892 TOTAL EQUITY AND LIABILITIES 21,515,128 9,329,041 5,504,742 5,018,140 The notes set out on pages 132 to 230 form an integral part of the financial statements.

127 125 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Issued and Non-distributable Equity Fully paid CuRRENCY ATTRIButable to ORDINARY Share Merger Translation OTHER Equity holders SHARES Premium Reserve Differences RESERVES Retained of the Minority Note (Note 32) (Note 42) (Note 43) (Note 44) (Note 44) Earnings Company Interest Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM At 1 April ,007,607 20, ,016 5, , ,261 2,886, ,976 3,828,053 Prior year adjustments ,291 25,291 17,801 43,092 As restated 1,007,607 20, ,016 5, , ,552 2,911, ,777 3,871,145 Share of an associated company s reserves (475) (475) (475) Transfer of associated companies reserves (4,560) 4,560 Release of statutory reserves on disposal of an associated company 48 (ii) (a) (113,635) 113,635 Currency translation differences of subsidiary companies 1,155 (1,165) (10) (10) Share of subsidiary companies other reserves 1,538 3,033 4,571 3,982 8,553 Subscription of shares in subsidiary companies 162, ,035 Acquisition of additional interests in subsidiary companies 47 (i) (b) & (c) (60,350) (60,350) Acquisition of a subsidiary company 47 (i) (e) 171, ,077 Disposal of a subsidiary company 48 (i) (7,000) 7,000 Net gain/(loss) not recognised in the income statement 1,155 (124,132) 127,063 4, , ,830 Issue of ordinary shares for acquisitions of subsidiary companies (net of issuance cost) 32 & , , ,994 Net profit for the financial year 660, ,507 64, ,381 Dividends paid to minority interest (109,379) (109,379) Final dividend in respect of financial year ended 31 March (26,450) (26,450) (26,450) Interim (special) dividend in respect of financial year ended 31 March (100,761) (100,761) (100,761) At 31 March ,719,601 20, ,016 6,305 29,210 1,473,911 4,160,744 1,192,016 5,352,760

128 126 DRB-Hicom Berhad ( W) Annual Report 2009 consolidated statement of changes in equity (Continued) Non-distributable Equity Issued and ATTRIButable Fully paid Currency to equity ORDINARY Share Merger Translation OTHER HOLDERS SHARES Premium Reserve Differences RESERVES Retained of the Minority Note (Note 32) (Note 42) (Note 43) (Note 44) (Note 44) Earnings Company Interest Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM At 1 April ,007,607 20, ,016 4, , ,620 2,601, ,678 3,339,074 Prior year adjustments ,682 24,682 17,026 41,708 As restated 1,007,607 20, ,016 4, , ,302 2,626, ,704 3,380,782 Share of an associated company reserves 12,048 (7,518) 4,530 4,530 Currency translation differences of subsidiary companies 634 3,604 4,238 (1,723) 2,515 Acquisition of additional shares in a subsidiary company 47 (iii) (a) (9,448) (9,448) Acquisition of a subsidiary company 47 (iii) (b) 13,700 13, , ,957 Disposal of subsidiary companies 48 (iii) (b), (c) & (d) 34,469 34,469 Net gain/(loss) not recognised in the income statement ,748 (3,914) 22, , ,023 Transfer to other reserves 7,658 (7,658) Net profit for the financial year (restated) 292, ,395 59, ,729 Dividends paid to minority interest (28,816) (28,816) Final dividend in respect of financial year ended 31 March (18,389) (18,389) (18,389) Interim dividend in respect of financial year ended 31 March (11,184) (11,184) (11,184) At 31 March ,007,607 20, ,016 5, , ,552 2,911, ,777 3,871,145 The notes set out on pages 132 to 230 form an integral part of the financial statements.

129 127 COMPANY STATEMENT OF CHANGES IN EQUITY Issued AND Fully paid Non-distributable Distributable ORDINARY Share Merger Retained SHARES Premium Reserve Earnings Note (Note 32) (Note 42) (Note 43) (Note 46) Total RM 000 RM 000 RM 000 RM 000 RM At 1 April ,007,607 20,701 2,318, ,619 3,991,248 Issue of ordinary shares for acquisitions of subsidiary companies (net of issuance cost) 32 & , ,994 Net profit for the financial year 85,806 85,806 Final dividend in respect of the financial year ended 31 March (26,450) (26,450) Interim (special) dividend in respect of the financial year ended 31 March (100,761) (100,761) At 31 March ,719,601 20,701 2,318, ,214 4,661, At 1 April ,007,607 20,701 2,318, ,200 3,895,829 Net profit for the financial year 124, ,992 Final dividend in respect of the financial year ended 31 March (18,389) (18,389) Interim dividend in respect of the financial year ended 31 March (11,184) (11,184) At 31 March ,007,607 20,701 2,318, ,619 3,991,248 The notes set out on pages 132 to 230 form an integral part of the financial statements.

130 128 DRB-Hicom Berhad ( W) Annual Report 2009 cash flow statements For the financial year ended 31 march 2009 Group Company Restated RM 000 RM 000 RM 000 RM 000 CASH FLOWS FROM OPERATING ACTIVITIES Net profit for the financial year 725, ,729 85, ,992 Adjustments for non-cash items: Allowance for marketable securities and investments (net) 47,927 13,286 27,081 Amortisation of biological assets intangible assets 8,934 7,643 prepaid lease properties 1,512 1,388 Depreciation of property, plant and equipment 135, , Doubtful debts (net of write backs) 31,351 36,910 4,980 5,194 Finance costs 95, ,976 43,327 55,678 Impairment losses of investments 2,139 5,198 5,000 land held for property development 21,103 non-current assets held for sale 5,795 property, plant and equipment 14,678 37,783 Intangible assets written off 1,160 Inventories written off/down (net of write backs) 36,557 12,324 Loss/(gain) on disposal/write off of property, plant and equipment 2,217 7,261 (16) (58) Loss/(gain) on disposal of investments 9,949 (13,559) Loss/(gain) on fair value adjustment of investment properties 38,200 (6,060) 7,588 5,567 Net foreign exchange differences 8,859 (4,411) (1,368) Prepaid lease properties written off 1,011 Project expenditure written off 1,377 1,377 Provision for/(write back of) liabilities and charges (net) 5,460 (4,837) Taxation 49,562 24,344 37,411 19,398 Dividend income (gross) (4,321) (8,569) (183,538) (145,298) Excess of fair value of net assets acquired over purchase consideration (28,007) (173,178) Gain on disposal of investment properties (55) Gain on disposal of shares in: subsidiary companies (470) (20,369) (23,852) a jointly controlled entity (83) associated companies (567,481) (13,991) (12,470) Gain arising from accretion of interest in a subsidiary company (1,965) Gain on waiver of payables/borrowings (4,142) (9,879) (4,021) (5,317) Interest income (53,961) (43,285) (37,748) (46,919) Share of results of jointly controlled entities (net of tax) (63,246) (43,481) Share of results of associated companies (net of tax) (70,529) (112,512) Cash inflow/(outflow) before working capital changes 449, ,454 (12,109) (18,981)

131 129 Group Company Note Restated RM 000 RM 000 RM 000 RM 000 CASH FLOWS FROM OPERATING ACTIVITIES (Continued) Amounts due (to)/from customers on contracts (7,276) 9,000 General and life insurance funds (94) 262,254 Inter-company balances 76,549 (50,048) 4,321 (20,329) Inventories 47,269 (24,850) Property development costs (3,633) (1,488) Trade and other receivables (62,749) (192,741) 1,368 (1,175) Trade and other payables (84,351) 315,875 12,394 (48,743) Financing of customers 133,026 Statutory deposits with Bank Negara Malaysia 234,300 Deposits with customers (1,239,927) Deposits and placements of banks and other financial institutions (126,096) Bills and acceptance payables (91,778) Net cash (used in)/generated from operations (675,414) 612,456 5,974 (89,228) Interest received 57,469 78,247 20,033 29,658 Dividends received 116, , , ,338 Finance cost paid (117,781) (125,717) (40,879) (54,117) Taxation paid, net of refunds (60,504) (5,622) 22,111 Provision for liabilities and charges paid (8,776) (10,490) Net cash (outflow)/inflow from operating activities (688,034) 697, ,382 24,762 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of other investments by insurance subsidiary companies (531,522) (939,623) Acquisition of additional shares in subsidiary companies (32,344) (26,096) (379,384) Additional investment in an associated company (653) Cost incurred on land held for property development (6,977) (16,536) Expenditure on biological assets (234) Expenditure on prepaid lease properties (1,046) Expenditure on investment properties (14,769) (523) Net cash inflow from acquisitions of subsidiary companies 47 4,267,713 75,450 Net cash inflow/(outflow) from disposal of subsidiary companies 48 3,782 (2,388) 23,748 Proceeds from disposal of a jointly controlled entity and associated companies 48 1,353,401 14,074 14,000

132 130 DRB-Hicom Berhad ( W) Annual Report 2009 cash flow statements for the financial year ended 31 March 2009 (Continued) Group Company CASH FLOWS FROM INVESTING ACTIVITIES (Continued) Restated RM 000 RM 000 RM 000 RM 000 Proceeds from disposal/maturity of other investments by insurance subsidiary companies 410, ,013 Acquisition of investments by a banking subsidiary company (734,189) Proceeds from disposal of investments by a banking subsidiary company 255,708 Proceeds from disposal of property, plant and equipment/investment properties 4,765 15, Purchase of property, plant and equipment (160,675) (125,437) (337) (258) Share issue costs paid (5,370) Subscription of shares by minority interest in subsidiary companies 164,000 Net cash inflow/(outflow) from investing activities 4,979,508 (340,264) (385,056) 37,812 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from/(repayment of) loans to subsidiary/associated companies (net) 1,031,404 (118,525) Dividends paid to minority interest (109,379) (28,816) Dividends paid to shareholders (127,211) (36,929) (127,211) (36,929) Maturity of fixed deposits held as security/maintained as sinking fund (3,861) 113, ,436 Proceeds from bank borrowings 975,646 1,165, , ,063 Repayment of borrowings (1,968,815) (1,191,288) (794,373) (75,000) Net cash (outflow)/inflow from financing activities (1,233,620) 21, ,720 (5,955) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 3,057, ,884 (44,954) 56,619 Effects of foreign currency translation CASH AND CASH OF EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 1,541,334 1,162,222 87,204 30,585 CASH AND CASH OF EQUIVALENTS AT END OF THE FINANCIAL YEAR 4,599,213 1,541,334 42,250 87,204

133 131 Group Company Note Restated 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 892,119 1,377,079 38,234 84,126 Cash and bank balances 173, ,635 4,016 3,078 Cash and short term funds of a banking subsidiary 3,569,105 Bank overdrafts (25,525) (25,010) 4,609,291 1,545,704 42,250 87,204 Less: Fixed deposits held as security/sinking fund 29 (b) (10,078) (6,217) Add: Cash and cash equivalents attributable to a disposal group held for sale 1,847 4,599,213 1,541,334 42,250 87,204 (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 (b) 22,099 22,633 (ii) Acquisition of an investment property via settlement of a debt 83,000 (iii) Acquisitions of subsidiary companies via issuance of shares 717, ,364 The notes set out on pages 132 to 230 form an integral part of the financial statements.

134 132 DRB-Hicom Berhad ( W) Annual Report 2009 NOTES TO THE FINANCIAL STATEMENTS 31 MARCH PRINCIPAL ACTIVITIES The Company is an investment holding company with investments in the automotive, services (including banking business), 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 have been no significant changes in these activities during the financial year except for the Group s acquisitions of Rangkai Positif Sdn. Bhd. and Bank Muamalat Malaysia Berhad, and the disposal of its equity interest in EON Capital Berhad as disclosed in Note 54 (a), (f) and (g) to the financial statements. The Directors regard Etika Strategi Sdn. Bhd., a company incorporated in Malaysia, as the holding company with effect from 22 October The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Bursa Malaysia Securities Berhad. 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, modified by the accounting policies set out in the Bank Negara Malaysia Guidelines and Shariah principles for a banking subsidiary company of the Group. These significant modifications are set out in Notes 2.8 (ii), 2.18, 2.31 and 2.32 to the financial statements. 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 provisions of the Companies Act, 1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, modified by the accounting policies set out in the Bank Negara Malaysia Guidelines and Shariah principles for a banking subsidiary, 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. There are no areas involving a higher degree of judgment or complexity, or areas where estimates and assumptions are significant to the financial statements other than as disclosed in Note 53 to the financial statements. 2.2 Changes in accounting policies and effects arising from adoption of revised FRSs The accounting policies and methods of computation adopted during the financial year are consistent with those adopted for the annual audited financial statements for the financial year ended 31 March 2008 except for the following new and revised FRSs issued by the MASB that are effective in the current financial year beginning 1 April 2008.

135 133 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Changes in accounting policies and effects arising from adoption of revised FRSs (Continued) 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) (ii) Applicable and adopted by the Group FRS 107 Cash Flows Statements FRS 111 Construction Contracts FRS 112 Income Taxes FRS 118 Revenue Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates FRS 134 Interim Financial Reporting FRS 137 Provisions, Contingent Liabilities and Contingent Assets Not applicable to the Group FRS 120 Accounting for Government Grants and Disclosure of Government Assistance IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities IC Interpretation 2 Members Shares in Co-operative Entities and Similar Instruments IC Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds IC Interpretation 6 Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment IC Interpretation 7 Applying the Restatement Approach under FRS Financial Reporting in Hyperinflationary Economics IC Interpretation 8 Scope of FRS 2 The adoption of the new and revised FRSs did not have a significant financial impact on the Group and did not result in substantial changes to the Group s accounting policies other than the effect of the following FRS as described below: FRS 112: Income Taxes The amendment to FRS 112 now allows for the recognition of reinvestment allowances ( RA ), investment tax allowances ( ITA ) and other allowances in excess of capital allowances as deferred tax assets. The adoption of the revised FRS 112 has resulted in the Group changing its accounting policy to recognise deferred tax assets on available RA and ITA, to the extent that it is probable that future taxable profit will be available against which the available RA and ITA can be utilised. This change in accounting policy has been accounted for retrospectively and effects of these changes are shown as prior year adjustments as follows:

136 134 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Changes in accounting policies and effects arising from adoption of revised FRSs (Continued) Effect on ADOPTION of As previously Amendments to STATED FRS 112 As restated RM 000 RM 000 RM 000 Consolidated balance sheet As at 31 March 2008 Deferred tax assets 56,418 43,092 99,510 Minority interest 941,976 17, ,777 Reserves 1,878,470 25,291 1,903,761 Consolidated income statement Financial year ended 31 March 2008 Taxation 25,728 (1,384) 24,344 Minority interest 58, ,334 Net profit attributable to equity holders of the Company 291, ,395 Consolidated statement of changes in equity As at 1 April 2007 Minority interest 737,678 17, ,704 Reserves 1,593,789 24,682 1,618, 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 applicable to the Group but not yet effective and have not been early adopted FRS 139 Financial Instruments: Recognition and Measurement (effective for the Group s financial year beginning on 1 April 2010). This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. The Group will apply this standard when effective. The Group has applied the transitional provision in FRS 139 which exempts entities from disclosing the possible impact arising from the initial application of this standard on the financial statements of the Group. FRS 8 Operating Segments (effective for Group s financial year beginning on 1 April 2010). FRS 8 replaces FRS Segment Reporting and it requires an entity to report financial and descriptive information about its operating segments on the same basis as those reported internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

137 135 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.3 Impact of new MASB pronouncements (Continued) (i) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective and have not been early adopted (Continued) FRS 4 Insurance Contracts (effective for Group s financial year beginning on 1 April 2010). This standard allows an entity to address insurance contracts (including reinsurance contracts) that it issues, reinsurance contracts that it holds and financial instruments that it issues with a discretionary participation feature. FRS 7 Financial Instruments: Disclosures (effective for Group s financial year beginning on 1 April 2010). This new standard requires disclosures of information relating to the significance of financial instruments on an entity s financial position and performance and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the reporting date and how the entity manages those risks. The impact of applying FRS 7 on these financial statements upon its first adoption is not disclosed by virtue of exemption provided under paragraph 44AB of this standard. FRS 123 Borrowing Costs (effective for Group s financial year beginning on 1 April 2010). This standard supersedes FRS and requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. Amendments to FRS 127 Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective for Group s financial year beginning on 1 April 2010). The amendment removes the definition of the cost method and replaces it with a requirement to recognise dividends as income in the separate financial statements of the investor when its right to receive the dividends are established. IC Interpretation 9 Reassessment of Embedded Derivatives (effective for Group s financial year beginning on 1 April 2010). It requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first become a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract in which case reassessment is required. IC Interpretation 10 Interim Financial Reporting and Impairment (effective for Group s financial year beginning on 1 April 2010). This new interpretation does not allow an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost to be reversed at a subsequent balance sheet date. IC Interpretation 13 Customer Loyalty Programmes (effective for Group s financial year beginning on 1 April 2010). This new interpretation clarifies that where goods or services are sold together with a customer loyalty incentive, the arrangement is a multiple-element arrangement and the revenue in respect of the consideration receivable from the customer is allocated between the components of the arrangement using fair values. IC Interpretation 14 FRS 119 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective for Group s financial year beginning on 1 April 2010). This new interpretation provides guidance on assessing the limit in FRS 119 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement.

138 136 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 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 applicable to the Group but not yet effective and are not relevant to the Group IC Interpretation 11 FRS 2 Group and Treasury Share Transactions Amendments to FRS 2 Share-based Payment Vesting Conditions and Cancellations Amendments to FRS 1 First-time Adoption of Financial Reporting Standards: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate 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 company 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 company and 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 company 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.

139 137 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 company nor a jointly controlled entity. Significant influence is the power to participate in the financial and operating policy decisions of the associated company 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 non current 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 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 and/or revenue account. (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.

140 138 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.8 Investments (Continued) Other investments (Continued) (ii) Investments held by a banking subsidiary company (a) Investments held-for-trading Investments are classified as held-for-trading if they are acquired principally for the purpose of benefiting from actual or expected short-term price movement or to lock in arbitrage profits. The investments held-for-trading will be stated at fair value and any gain or loss arising from a change in their values and derecognition of these investments are recognised in the income statements. (b) (c) Investments available-for-sale Investments available-for-sale are financial assets that are not classified as held-for-trading or held-to-maturity. The investments available-for-sale are measured at fair value or at amortised cost (less impairment losses) if the fair value cannot be reliably measured. Any gain or loss arising from a change in fair value are recognised directly in equity through the statement of changes in equity, until the financial asset is sold, collected, disposed of or impaired, at which time the cumulative gain or loss previously recognised in equity will be transferred to the income statement. Investments held-to-maturity Investments held-to-maturity are financial assets with fixed or determinable payments and fixed maturity that the banking subsidiary company have the positive intent and ability to hold to maturity. The investments held-to-maturity are measured at accreted/amortised cost based on effective yield method. Amortisation of premium, accretion of discount and impairment as well as gain or loss arising from derecognition of investments held-to-maturity are recognised in the income statement. The estimated fair values for investments held-for-trading and investments available-for-sale are based on quoted and observable market prices at the balance sheet date. Where such quoted and observable market prices are not available, fair value is estimated using pricing models or discounted cash flow techniques. Where discounted cash flow technique is used, the estimated future cash flows are discounted based on current market rates for similar instruments at the balance sheet date. (iii) 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 values 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.

141 139 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.10 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 up 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 represents 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. 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. The estimated useful lives in years are as follows: Buildings, golf course and improvements Plant and machinery Motor vehicles Office equipment Furniture and fittings 3 98 years 5 30 years 3 10 years 3 10 years 3 20 years Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each balance sheet date Prepaid lease properties Leasehold land that normally has a finite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted as prepaid lease properties that are amortised over the lease term in accordance with the pattern of benefits provided. Short term leases are below 50 years and long term leases are above 50 years.

142 140 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.14 Goodwill Goodwill represents the excess of the cost of acquisition of subsidiary companies, 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 subsidiary companies 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 company 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 Intangible assets other than goodwill (i) Plant and assembly licenses and expenses incurred for development of products 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. (ii) Computer software Costs that are directly associated with identifiable and unique software products which have probable benefits exceeding the cost beyond one year are recognised as intangible assets. Expenditure which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital movement and added to the original cost of the software. Costs associated with maintaining computer software programmes are recognised as an expense when incurred. Costs include employee costs incurred as a result of developing software and an appropriate portion of relevant overheads. Computer software costs recognised as intangible assets are carried at cost and are amortised on a straight line basis over their estimated useful lives of 1 5 years. (iii) (iv) Concession for the operation and maintenance of a power plant Concession for the operation and maintenance of a power plant, is recognised as an intangible asset. The concession is carried at cost and amortised on a straight line basis over the remaining concession period of approximately 23 years. Core deposits of a banking subsidiary company Core deposits are carried at cost and amortised on a straight line basis over a period of 5 years. 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.

143 141 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.16 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 asset 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. 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 Inventories 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.

144 142 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.18 Receivables Other than financing of customers in relation to a banking subsidiary company as stated below, 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. Financing of customers of a banking subsidiary company are stated after deducting allowance for possible losses. Specific allowances are made for impaired financing, which have been individually reviewed and specifically identified as substandard, doubtful or bad. A general allowance based on a percentage of the financing portfolio is also made. These percentages are reviewed annually in light of past experiences and prevailing circumstances and an adjustment is made to the overall general allowances, if necessary. Any uncollectible financing or portion of a financing classified as bad is written off after taking into consideration the realisable value of collateral, if any, when in the judgement of the directors, there is no prospect of recovery. Specific allowance provided for impaired financing on the following basis which is in compliance with the Bank Negara Malaysia/GP3: (i) (ii) (iii) assigning twenty percent (20%) for non-performing financing which are more than 3 months-in-arrears; assigning fifty percent (50%) for non-performing financing in arrears of 6 months; and assigning a hundred percent (100%) for non-performing financing in arrears of 9 months and above. Additional allowances for impaired financing are provided when the recoverable amount is lower than the net book value of financing (outstanding amount of financing, net of specific allowances) and long outstanding non-performing financing on the following basis: (i) (ii) assigning fifty percent (50%) of the force sale value of the properties held as collateral for non-performing financing which are outstanding for more than 5 years but less than 7 years; and no value will be assigned for the collateral of non-performing financing which are outstanding for 7 years and above. Any allowance made during the year is charged to the income statement 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.

145 143 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.20 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 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) (iii) Share issue costs Incremental external costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Dividends to shareholders of the Company Dividends on ordinary shares are recognised as liabilities when declared before the balance sheet date. Dividends 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 Borrowings (i) Classification Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings. (ii) Capitalisation of borrowing cost Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use. Borrowing costs incurred to finance property development activities and construction contracts are accounted for in a similar manner. All other borrowing costs are expensed.

146 144 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.23 Provisions (i) (ii) (iii) 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. 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. Provision for claims in relation to a general insurance subsidiary company 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 professional actuary. (iv) Provision for claims in relation to a life insurance subsidiary company 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 accounted 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: (a) (b) 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 businesses are in respect of net cancellation of units and are recognised as surrender.

147 145 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.24 Employee benefits (i) (ii) 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. 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. 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. 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) (iii) (iv) 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; 1/8 th method for all other classes of overseas inward business with a deduction of 20% for acquisition costs; and time appointment method for policies with insurance periods other than 12 months. 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.

148 146 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.26 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 and related regulations 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 financial 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 and the investment-linked funds. 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. 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 is 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 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. 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.

149 147 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.28 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) Solid waste management Revenue from management services, solid waste disposal and tipping fees is recognised upon performance of services less discounts. (b) (c) (d) Vehicle inspection income Income from inspection of vehicles is recognised upon the rendering of inspection services. Ground handling services Revenue from ground handling, inflight catering and cargo handling is recognised upon performance of services less discounts. Premium income of a general insurance subsidiary company 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.

150 148 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.29 Revenue recognition (Continued) (ii) Rendering of services (Continued) (e) Operation and maintenance of a power plant Revenue from operation and maintenance is recognised upon performance of services less discounts. (f) Fee and other income recognition for a banking subsidiary company Financing arrangement, management and participation fees, underwriting commissions and brokerage fees are recognised as income based on contractual arrangements. Guarantee fee is recognised as income upon issuance of the guarantee. Fees from advisory and corporate finance activities are recognised net of service taxes and discounts on completion of each stage of the assignment. (iii) Others (a) Income from financing of a banking subsidiary company Income from financing of customers is recognised based on the constant rate of return method. Income includes the amortisation of premium and accretion of discount. Income from investments is recognised on an effective yield basis. Where a customer s financing account is classified as non-performing, income is suspended until it is realised on a cash basis. Financing income recognised prior to the non-performing classification is treated as uncollectible, thus an additional amount of specific allowance is made. Customers accounts are classified as non-performing where repayments are in arrears for more than three months from the first day of default for financing; and three months from the first day of default for trade bills, bankers acceptances, trust receipts and other instruments of similar nature. (b) 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.

151 149 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.31 Banking related liabilities Deposits from customers, deposits and placement of banks and financial institutions are stated at placement values. Bills and acceptances payables represent the banking subsidiary company s own bills and acceptances rediscounted and outstanding in the market 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 asset 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. All derivatives financial instruments relating to a banking subsidiary company including profit rate and foreign currency swaps are measured at fair value and are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gain or loss arising from a change in the fair value of the derivatives is recognised in the income statement unless they are part of a hedging relationship which qualifies for hedge accounting where the gain or loss is recognised as follows: (i) (ii) Fair value hedge Where a derivative financial instrument hedges the changes in fair value of a recognised asset or liability, any gain or loss on the hedging instrument is recognised in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognised in the income statement. Cash flow hedge Gains and losses on the hedging instrument, to the extent that the hedge is effective, are deferred in a separate component of equity. The ineffective part of any gain or loss is recognised in the income statement. The deferred gains and losses are released to the income statement in the periods when the hedged item affects the income statement. 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.

152 150 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.32 Financial Instruments (Continued) Fair Value Estimation 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 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.

153 151 3 COMPANIES IN THE GROUP The principal activities of the companies in the Group and the effective interest of the Group as at 31 March 2009 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 PUSPAKOM Sdn. Bhd. ( PUSPAKOM ) Inspection of commercial vehicles for roadworthiness 31 March DRB-HICOM Defence Technologies Sdn. Bhd Manufacture, supply, maintenance marketing, refurbishment or retrofitting 31 March of military and commercial vehicles, equipment and spare parts * DRB-HICOM Auto Solutions Sdn. Bhd Vehicle importation, vehicle predelivery inspection and value added 31 March services for provision of logistics and related services to vehicles $ * Rangkai Positif Sdn. Bhd Operations and maintenance services of a power plant 31 March $ * Bank Muamalat Malaysia Berhad Islamic banking business and related financial services 31 March $ Motosikal Dan Enjin Nasional Sdn. Bhd. ( MODENAS ) Manufacture, assemble and distribute motorcycles, related spare parts 31 March and accessories * Hicomobil Sdn. Bhd Dormant 31 March Intrakota Komposit Sdn. Bhd Dormant 31 March DRB-HICOM Export Corporation Sdn. Bhd Dormant 31 March (accretion via increase in equity interest held in MODENAS) Subsidiary company of DRB-HICOM Defence Technologies Sdn. Bhd.: Defence Services Sdn. Bhd Specialised defence engineering works including refurbishment, 31 March upgrading and upgrading of armoured vehicles

154 152 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % SUBSIDIARY COMPANIES (Continued) 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 Subsidiary companies of Uni.Asia Capital Sdn. Bhd.: Uni.Asia Life Assurance Berhad Underwriting of life insurance business including investment-linked business 31 March Uni.Asia General Insurance Berhad Underwriting of all classes of general insurance business 31 March Subsidiary companies of PUSPAKOM: Puspakom Teknik Sdn. Bhd Supply and maintenance of automobile associated equipment 31 March Flora Areana Sdn. Bhd Investment holding 31 March Subsidiary company of Flora Areana Sdn. Bhd.: Multi Automotive Service and Assist Sdn. Bhd Membership recruitment, providing vehicle assistance and supply 31 March of auto related products and services Subsidiary company of MODENAS: Edaran Modenas Sdn. Bhd Distribution of motorcycles, related spare parts and accessories and 31 March servicing of motorcycles Subsidiary companies of Bank Muamalat Malaysia Berhad: $ * Muamalat Venture Sdn. Bhd Islamic venture capital 31 March $ * Muamalat Invest Sdn. Bhd Provision of fund management services 31 March $ * Muamalat Nominees (Tempatan) Sdn. Bhd Dormant 31 March $ * Muamalat Nominees (Asing) Sdn. Bhd Dormant 31 March

155 153 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % SUBSIDIARY COMPANIES (Continued) Subsidiary companies of HICOM Holdings Berhad: HICOM Berhad Management of projects, rental of properties and investment holding 31 March HICOM Diecastings Sdn. Bhd Manufacturing and supplying diecast parts for motorcycles, automobiles 31 March and other applications * HICOM Engineering Sdn. Bhd Manufacturing casted and machined parts and components 31 March USF-HICOM Holdings Sdn. Bhd Investment holding 31 March Automotive Corporation Holdings Sdn. Bhd Investment holding 31 March HICOM Builders Sdn. Bhd Property investment and development, civil engineering and building 31 March (formerly known as Imatex Sdn. Bhd.) construction Desa Puchong Sdn. Bhd Cultivation of oil palm and property development 31 March * NSE Development Sdn. Bhd Cultivation and marketing of oil palm 31 March * Bukit Kledek Development Sdn. Bhd Cultivation and marketing of rubber and oil palm 31 March KL Airport Services Sdn. Bhd Superintendent of airport s operation systems and provision of 31 March related ground handling, inflight catering, cargo handling and warehousing space services * HICOM Polymers Industry Sdn. Bhd Distribution of automotive and industrial after-market products 31 March HICOM Technical and Engineering Services Sdn. Bhd Dormant 31 March HICOM Vertex Sdn. Bhd Dormant 31 March HICOM Dewan Development Sdn. Bhd Dormant 31 March Edaran Otomobil Nasional Berhad ( EON ) Marketing of Proton motor vehicles, related spare parts and servicing 31 March of vehicles

156 154 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % SUBSIDIARY COMPANIES (Continued) Subsidiary companies of HICOM Holdings Berhad: (Continued) * Scott & English (Malaysia) Sdn. Bhd Importation, distribution and servicing of industrial, marine, engineering 31 March products * Comtrac Sdn. Bhd Construction works and the provision of projects and development 31 March management services * Oriental Summit Industries Sdn. Bhd Contract manufacturing of motorcycle and automobile parts 31 March and components * Scott & English Electronics Holdings Sdn. Bhd Investment holding 31 March $ PHN Industry Sdn. Bhd Manufacturing stamped metal parts, sub-assembly of automotive 31 March components for the motor industry and design and manufacture of dies $ Alam Flora Sdn. Bhd Management of integrated solid waste 31 March Proton City Development Corporation Sdn. Bhd Property development, civil and building construction 31 March HICOM-Teck See Manufacturing Malaysia Sdn. Bhd Manufacture and sale of thermo plastic and thermo setting products 31 March HICOM Petro-Pipes Sdn. Bhd Dormant 31 March 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 investment 31 March * HICOM Megah Sdn. Bhd Investment holding 31 March * Glenmarie Cove Development Sdn. Bhd Investment holding and property development 31 March

157 155 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % SUBSIDIARY COMPANIES (Continued) Subsidiary company of HICOM-Teck See Manufacturing Malaysia Sdn. * HICOM Automotive Plastics (Thailand) Ltd Manufacture of plastic injected parts and plastic injection moulds 31 March for automotive industry Subsidiary company of USF-HICOM Holdings Sdn. Bhd.: * USF-HICOM (Malaysia) Sdn. Bhd Sale of motor vehicles and their related spare parts and accessories 31 March Subsidiary company of Automotive Corporation Holdings Sdn. Bhd.: * Automotive Corporation (Malaysia) Sdn. Bhd Sale of motor vehicles and their related spare parts and accessories 31 March Subsidiary company of USF-HICOM (Malaysia) Sdn. Bhd.: * HICOM Premier Malaysia Sdn. Bhd Dormant 31 March (formerly known as Directional (Malaysia) Sdn. Bhd.) Subsidiary company of HICOM Premier Malaysia Sdn. Bhd.: * Euro Truck & Bus (Malaysia) Sdn. Bhd Dormant 31 March Subsidiary company of KL Airport Services Sdn. Bhd.: KLAS Engineering Services Sdn. Bhd Provision of aircraft maintenance, engineering and custom forwarding 31 March agent services Subsidiary company of HICOM Builders Sdn. Bhd.: Imatex Management Services Sdn. Bhd Provision of management services 31 March Subsidiary companies of Automotive Corporation (Malaysia) Sdn. Bhd.: * Auto Prominence (M) Sdn. Bhd Dormant 31 March * Stagwell Sdn. Bhd Dormant 31 March HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd Assembly of motor vehicles and other road transport vehicles 31 March (formerly known as Automotive Manufacturers (Malaysia) Sdn. Bhd.)

158 156 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % SUBSIDIARY COMPANIES (Continued) Subsidiary companies of EON: EON Properties Sdn. Bhd Investment and management of properties 31 March Automotive Conversion Engineering Sdn. Bhd Conversion and modification of motor vehicles and distribution of 31 March car accessories Euromobil Sdn. Bhd Sale of motor vehicles and related spare parts and servicing of vehicles 31 March EONMobil Sdn. Bhd Sale of motor vehicles 31 March EON Auto Mart Sdn. Bhd Sale of motor vehicles 31 March EON Trading Sdn. Bhd Dormant 31 March EON Resorts Sdn. Bhd Dormant 31 March EON Technologies Sdn. Bhd Dormant 31 March Corporate Galaxy Sdn. Bhd Dormant 31 March Liku Nostalgia Sdn. Bhd Dormant 31 March Subsidiary company of EON Trading Sdn. Bhd.: EON Inovasi Sdn. Bhd Dormant 31 March Subsidiary company of EON Technologies Sdn. Bhd.: EON Network Systems Sdn. Bhd Dormant 31 March Subsidiary companies of Scott & English (Malaysia) Sdn. Bhd.: * HICOM United Leasing Sdn. Bhd Sales, servicing and rental of machinery and equipment 31 March * Scott & English Trading (Sarawak) Sdn. Bhd Trading of heavy machinery and equipment, spare parts and 31 March electrical appliances ^ * Myanmar Scott & English Company Limited Dormant 31 March + * Scott & English (Cambodia) Limited Dormant 31 March (under voluntary liquidation)

159 157 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % SUBSIDIARY COMPANIES (Continued) Subsidiary companies of Oriental Summit Industries Sdn. Bhd.: * Automotive Components Engineering Centre Sdn. Bhd Contract design and manufacturing of dies and jigs for automobile industry 31 March * OSI Manufacturing Sdn. Bhd Dormant 31 March 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 building works, manufacturing, 31 March supply and installation of precast component and provision of upgrading and renovation works Comtrac Development Sdn. Bhd Dormant 31 March (formerly known as HICOM-TNB Properties Sdn. Bhd.) * 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 Property management 31 March 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 * Jubli Premis Sdn. Bhd Dormant 31 March * Puncak Permai Sdn. Bhd Investment holding 31 March

160 158 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % SUBSIDIARY COMPANIES (Continued) Subsidiary company of HICOM Megah Sdn. Bhd.: # * Corwin Holding Pte. Ltd Owner and operator of shopping mall 31 March 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 golf resort 31 March Subsidiary company of Horsedale Development Berhad: * Kesturi Hektar 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 (under voluntary liquidation) Subsidiary companies of Intrakota Komposit Sdn. Bhd.: S.J. Kenderaan Sdn. Bhd Dormant 31 March Mega Komposit Auto Sdn. Bhd Dormant 31 March Gemilang Komposit Auto Sdn. Bhd Dormant 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

161 159 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % JOINTLY CONTROLLED ENTITIES Jointly controlled entity of DRB-HICOM Berhad: * Isuzu Malaysia Sdn. Bhd Importation, assembly and distribution of motor vehicles, 31 December components and parts Jointly controlled entities of HICOM Holdings Berhad: * HICOM-HONDA Manufacturing Malaysia Sdn. Bhd Manufacture and assemble motorcycle engines and components 31 March * MBM Alam Flora W.L.L Provision of waste management clearing services 31 December * HICOM-YAMAHA Manufacturing Malaysia Sdn. Bhd Manufacture and assembly of motorcycle engines and parts 31 March Jointly controlled entities of EON: * Mitsubishi Motors Malaysia Sdn. Bhd Distribution of motor vehicles, vehicle components, spare parts 31 March and accessories Proton Parts Centre Sdn. Bhd Warehousing and distribution of motor vehicles, spare parts and accessories 31 March Jointly controlled entity of Horsedale Development Berhad: * HICOM-Gamuda Development Sdn. Bhd Housing and property development and rental of properties 31 March 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)

162 160 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 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: * HICOM-Chevrolet Sdn. Bhd Distributor for motor vehicles 31 December Suzuki Malaysia Automobile Sdn. Bhd Assembly and sale of motor vehicles, accessories and components 31 March Honda Malaysia Sdn. Bhd Assembly, manufacture and sale of motor vehicles, accessories and 31 March components * Marak Unggul Sdn. Bhd Dormant 31 December Associated companies of HICOM Holdings Berhad: * ISUZU HICOM Malaysia Sdn. Bhd Manufacturing, assembly and sale of commercial vehicles 31 March * Continental Automotive Instruments Malaysia Sdn. Bhd Manufacture and sale of instrument panels/clusters, speedometers, 31 December (disposed on 20 April 2009) sensors, transducers and senders for the transportation industry * ZF Steerings (Malaysia) Sdn. Bhd Manufacture and assembly of mechanical and power rack and 31 December pinion steering systems * Suzuki Motorcycle Malaysia Sdn. Bhd Investment holding and manufacture, assembly and distribution of 31 December motorcycles and parts $ * Niro Ceramic (M) Sdn. Bhd Manufacturing and trading of ceramic tiles 31 December * TRW Steering & Suspension (Malaysia) Sdn. Bhd Manufacturing and sale of automobile tierods, tierod ends and 31 December suspension ball joints, stabilizer links, steering linkages and power steering gear $ * Midea Scott & English Electronics Sdn. Bhd Trading in consumer electrical and electronics household products 31 December (formerly known as Scott & English Electronics Sdn. Bhd.) EON Capital Berhad Investment holding company, provision of banking and related 31 December (disposed on 23 June 2008) financial services, stockbroking, nominee and custodian services

163 161 3 COMPANIES IN THE GROUP (Continued) Effective EquITY Financial Name of Company Interest Principal Activities Year End % % ASSOCIATED COMPANIES (Continued) Associated companies of EON: $Y& Proton Cars (Europe) Limited Dormant 31 March (dissolved on 22 December 2008) * SRT-EON Security Services Sdn. Bhd Provision of security services 30 June Johnson Controls Automotive Holding (M) Sdn. Bhd Manufacturing of car seats, seat paddings, steering wheels, and other 30 September car interior parts, investment holding and property letting $ The changes in the effective equity interest in these companies in the Group are as disclosed in Notes 47, 48 and 54. * These companies in the Group are audited by other firms of auditors other than PricewaterhouseCoopers, Malaysia and its member firms of PricewaterhouseCoopers International Limited. & 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. Y The country of incorporation is United Kingdom. Entities classified as non-current assets held for sale. All the other companies are incorporated in Malaysia.

164 162 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 4 REVENUE Group Company RM 000 RM 000 RM 000 RM 000 Sale of goods 3,991,310 2,302,674 Rendering of services 1,225,573 1,076,643 Insurance business 399, ,074 Banking 318,836 Construction contracts 16,457 29,417 Sale of land and development properties 149, ,571 Dividends (gross) 183, ,298 Rental income 12,001 8,232 Interest income from subsidiary companies 35,936 42,858 6,101,427 4,012, , ,388 5 PROFIT BEFORE TAXATION (a) Profit before taxation is arrived at after charging/(crediting) the following: Group Company RM 000 RM 000 RM 000 RM 000 Allowance for marketable securities and investments (net) 47,927 13,286 27,081 Amortisation of biological assets intangible assets 8,934 7,643 prepaid lease properties 1,512 1,388 Auditors remuneration current year 1,782 1, prior year 10 (158) 5 Depreciation of property, plant and equipment (Note 12) 135, , Directors emoluments (Note 6) 7,539 8, Doubtful debts (net of write backs) 31,351 36,910 4,980 5,194 Impairment losses of investment in a subsidiary company 5,000 investment in an associated company 5,198 land held for property development 21,103 non-current assets held for sale 5,795 property, plant and equipment 14,678 37,783 investments: available-for-sale 2,139

165 163 5 PROFIT BEFORE TAXATION (Continued) (a) Profit before taxation is arrived at after charging/(crediting) the following: (Continued) Group Company RM 000 RM 000 RM 000 RM 000 Intangible assets written off 1,160 Inventories written off/down (net of write backs) 36,557 12,324 Loss/(gain) on fair value adjustment of investment properties (Note 14) 38,200 (6,060) 7,588 5,567 Loss/(gain) on disposal of investments 9,949 (13,559) Net foreign exchange differences 8,859 (4,411) (1,368) Property, plant and equipment written off 3,173 6,117 Prepaid lease properties written off 1,011 Project expenditure written off 1,377 1,377 Rental of plant and machinery and equipment 13,083 9,188 Rental of premises 26,293 15,677 Replanting expenditure for biological assets 930 1,286 Staff costs (Note 7) 579, ,900 Provision for/(write back of) liabilities and charges, net 5,460 (4,837) Dividend income (gross) quoted (2,990) (2,907) unquoted (1,331) (5,662) (183,538) (145,298) Excess of fair value of net assets acquired over purchase consideration (28,007) (173,178) Gain on disposal of shares in subsidiary companies (470) (20,369) (23,852) a jointly controlled entity (83) associated companies (567,481) (13,991) (12,470) Gain arising from accretion of interest in a subsidiary company (1,965) (Gain)/loss on disposal of investment properties (55) property, plant and equipment (956) 1,144 (16) (58) Gain on waiver of payables/borrowings (4,142) (9,879) (4,021) (5,317) Interest income on short term deposits (53,961) (43,285) (1,812) (4,061) subsidiary companies (35,936) (42,858) Rental income of premises (20,842) (14,583) (12,001) (8,232) Rental income of plant and machinery and equipment (830) (815)

166 164 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 5 PROFIT BEFORE TAXATION (Continued) (b) Cost of sales Group RM 000 RM 000 Cost of inventories 3,646,395 2,034,710 Cost of services rendered 962, ,504 Cost of insurance business 361, ,685 Cost of banking 131,625 Cost of contract and property development 99, ,279 5,201,320 3,367,178 6 DIRECTORS EMOLUMENTS Group Company RM 000 RM 000 RM 000 RM 000 Non-executive Directors: fees allowances and other benefits 1,466 1, Executive Directors: salaries, bonuses, allowances and other benefits current year 4,576 5,083 prior year 906 defined contribution plan current year prior year 109 7,539 8,

167 165 7 STAFF COSTS Group RM 000 RM 000 Salaries, wages, bonuses, allowances and other benefits 524, ,794 Defined contribution plan 53,900 48,431 Termination benefits 1,438 2, , ,900 8 FINANCE COSTS Group Company RM 000 RM 000 RM 000 RM 000 Interest expense on borrowings 93, ,150 43,327 55,678 Hire purchase and finance lease charges 2,530 1,826 95, ,976 43,327 55,678 9 TAXATION Group Company Restated RM 000 RM 000 RM 000 RM 000 Arising in Malaysia: Current taxation 51,439 35,039 36,638 23,578 Deferred taxation (Note 22) 8,261 3,550 1,668 (353) Outside Malaysia: Current taxation ,730 38,628 38,306 23,225 Arising in Malaysia: Over provision of current taxation in respect of prior financial years (10,168) (14,284) (895) (3,827) Total taxation charge 49,562 24,344 37,411 19,398

168 166 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 9 TAXATION (Continued) The explanation of the relationship between taxation charge and profit before taxation is as follows: Group Company Restated RM 000 RM 000 RM 000 RM 000 Numerical reconciliation of effective tax expense Profit before taxation 774, , , ,390 Tax calculated at the Malaysian tax rate of 25% (2008: 26%) 193,736 97,779 30,804 37,541 Tax effects of: share of results of jointly controlled entities (19,417) (6,367) share of results of associated companies (24,038) (30,702) expenses not deductible for tax purposes 63,805 77,457 12,106 4,431 income not subject to tax (160,416) (54,379) (4,604) (18,747) tax losses not recognised 8,377 9,229 differences in tax rates for small and medium enterprises (1,036) different tax rates 4,580 (1,644) utilisation of previously unrecognised tax losses (1,517) (39,005) temporary differences not recognised (5,380) (12,704) Over provision of current taxation in respect of prior financial years (10,168) (14,284) (895) (3,827) Taxation charge 49,562 24,344 37,411 19,398 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 Restated RM 000 RM 000 Unabsorbed tax losses 1,154,610 1,124,664 Unutilised capital allowances 250, ,455 Unutilised investment tax allowances 42,287 42,287 Unutilised reinvestment allowances 126, ,939

169 DIVIDENDS Dividends paid, declared and proposed are as follows: Group and company RM 000 RM 000 Dividend paid In respect of the financial year ended 31 March 2008: Final gross dividend of 3.5 sen (2007: Final dividend of 2.5 sen) per share, less taxation of 25% (2007: 27%) 26,450 18,389 In respect of the financial year ended 31 March 2009: Interim (special) gross dividend of sen (2008: 1.5 sen) per share, less taxation of 25% (2008: 26%) 100,761 11,184 At the forthcoming Annual General Meeting of the Company, a final gross dividend in respect of the financial year ended 31 March 2009 of 2.5 sen (2008: 3.5 sen) per share less taxation of 25% (2008: 25%), amounting to RM36,248,195 (2008: RM26,449,685) will be proposed for shareholders approval. These financial statements do not reflect this final dividend which will be paid in the financial year ending 31 March 2010 when approved by shareholders. 11 EARNINGS PER SHARE (a) Basic The basic earnings per share is calculated by dividing the Group s net profit attributable to equity holders of the Company by the weighted average number of shares in issue during the financial year. Group RM 000 RM 000 Net profit attributable to equity holders of the Company (RM 000) 660, ,395 Weighted average number of ordinary shares in issue ( 000) 1,393,286 1,007,607 Basic earnings per share (sen) (b) Fully diluted The impact of the fully diluted earnings per share in respect of Loan Stocks 2002/2008 is not reflected as it is anti-dilutive.

170 168 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 12 property, plant and equipment Buildings, GOLF course Furniture Capital Freehold and Plant and Motor Office and work-in- GROUP NOTE LAND IMPROVEMENTS MACHINERY VEHICLES Equipment fittings progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Net book value at 1 April , , ,975 21,901 97,965 44,494 61,656 1,709,084 Acquisition of subsidiary companies , ,680 22, ,307 Disposal of subsidiary companies 48 (561) (23,172) (2,056) (5,008) (376) (31,173) Additions 11,633 66,903 10,428 21,789 8,494 43, ,689 Disposals (475) (2,226) (2,211) (1,344) (147) (980) (7,383) Written off 5 (1,772) (1,129) (108) (250) (1,618) (1,240) (6,117) Depreciation charge 5 (30,966) (61,796) (4,817) (28,626) (8,552) (134,757) Impairment losses 5 (15,000) (3,894) (18,033) (855) (1) (37,783) Currency translation differences Reclassification (8,610) 3,933 90, ,970 (15,153) (75,001) Reclassification from intangible assets 21 1,804 1,804 Reclassification of non-current assets held for sale 8,016 5,649 (124) (96) (3) 13,442 Transfers to investment properties 14 (12,015) (121,455) (133,470) Transfers to property development activities on an inter-company disposal 16 (a) (52,777) (14,223) (67,000) Transfers to land held for property development on an inter-company disposal 16 (b) (2,999) (11,473) (14,472) Net book value at 31 March , , ,810 23,074 87,555 27,139 29,681 1,713,953 Acquisition of subsidiary companies 47 30,000 68, ,499 16, ,030 Additions 4,788 15,896 41,404 4,103 20,663 5,668 90, ,860 Disposals (4) (645) (2,429) (102) (194) (3,374) Written off 5 (677) (278) (108) (153) (79) (1,878) (3,173) Depreciation charge 5 (29,070) (63,452) (5,422) (27,821) (10,011) (135,776) Impairment losses 5 (13,512) (1,142) (13) (11) (14,678) Currency translation differences (203) (538) (1,107) (21) (1) (1,870) Reclassification (840) (31,179) 80,353 (2) 2, (51,587) Reclassification from intangible assets Reclassification of non-current assets held for sale 25 (45,897) (510) (135) (194) (30) (22) (46,788) Transfers from investment properties 14 11,733 11,733 Transfers from property development activities 16 (a) 5,998 5,998 Net book value at 31 March , , ,808 19,484 95,235 39,258 66,554 1,836,061

171 property, plant and equipment (Continued) Buildings, GOLF course Furniture Capital Freehold and Plant and Motor Office and work-in- GROUP LAND IMPROVEMENTS MACHINERY VEHICLES Equipment fittings progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 NET BOOK VALUE AT 31 MARCH 2009 Cost 312,872 1,554,312 1,321,521 49, , ,848 66,554 3,946,851 Accumulated depreciation (441,710) (958,528) (30,066) (345,357) (160,586) (1,936,247) Accumulated impairment losses (15,000) (146,752) (11,185) (1,602) (4) (174,543) Net book value 297, , ,808 19,484 95,235 39,258 66,554 1,836,061 NET BOOK VALUE AT 31 MARCH 2008 Cost 325,024 1,457,878 1,323,806 59, , ,108 29,786 3,693,581 Accumulated depreciation (382,725) (1,003,314) (35,961) (293,656) (87,958) (1,803,614) Accumulated impairment losses (15,000) (135,483) (23,682) (1,733) (11) (105) (176,014) Net book value 310, , ,810 23,074 87,555 27,139 29,681 1,713,953 Furniture Capital Plant and Motor Office and work-in- COMPANY NOTE MACHINERY VEHICLES Equipment fittings progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Net book value at 1 April ,227 Additions 2, ,257 Disposals (182) (182) Depreciation charge 5 (207) (110) (80) (75) (472) Net book value at 31 March , ,830 Additions Disposals (20) (20) Transfers to a subsidiary company (38) (556) (594) Depreciation charge 5 (200) (95) (75) (76) (446) Net book value at 31 March , ,107

172 170 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 12 property, plant and equipment (Continued) Furniture Capital Plant and Motor Office and work-in- COMPANY MACHINERY VEHICLES Equipment fittings progress Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 NET BOOK VALUE AT 31 MARCH 2009 Cost 12, ,410 Accumulated depreciation (10,554) (341) (824) (584) (12,303) Net book value 1, ,107 NET BOOK VALUE AT 31 MARCH 2008 Cost 12, ,798 Accumulated depreciation (10,354) (357) (748) (509) (11,968) Net book value 1, ,830 (a) Certain property, plant and equipment of the Group with a net book value of RM356,131,000 (2008: RM321,431,000) have been charged as security for bank borrowings (Notes 35 and 40). (b) 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: Hire purchase and finance lease RM 000 RM 000 Additions during the financial year: Motor vehicles 490 Plant and machinery 19,074 21,890 Office equipment 253 Capital work-in-progress 3,025 Net book value at financial year end: Motor vehicles 1,772 2,339 Plant and machinery 45,248 40,607 Office equipment 738 1,497 Capital work-in-progress 3,025 (c) The title deeds to the freehold land of certain subsidiary companies amounting to RM15,355,000 (2008: RM20,673,000) are in the process of being registered in the names of the subsidiary companies.

173 PREPAID LEASE PROPERTIES Short term Long term LEASEHOLD LEASEHOLD LAND LAND Total RM 000 RM 000 RM 000 Group Net book value At 1 April ,641 64,445 68,086 Acquisition of a subsidiary company (Note 47) 5,894 6,193 12,087 Additions 1,046 1,046 Amortisation charge (214) (1,174) (1,388) Transfers to investment properties (Note 14) (3,021) (3,021) Transfers from non-current assets held for sale At 31 March ,536 67,489 77,025 Acquisition of a subsidiary company (Note 47) Amortisation charge (313) (1,199) (1,512) Written off (1,011) (1,011) Transfers from investment properties (Note 14) Transfers to non-current assets held for sale (Note 25) (17) (597) (614) At 31 March ,387 65,124 74,511 Net book value at 31 March 2009 Cost 11,237 74,406 85,643 Accumulated amortisation (1,850) (9,282) (11,132) Net book value 9,387 65,124 74,511 Net book value at 31 March 2008 Cost 11,069 71,858 82,927 Accumulated amortisation (1,533) (4,369) (5,902) Net book value 9,536 67,489 77,025 (a) Certain prepaid lease properties of the Group with net book value of RM22,985,000 (2008: RM23,343,000) have been charged as security for bank borrowings (Notes 35 and 40). (b) The title deeds to the leasehold land of certain subsidiary companies amounting to RM13,982,000 (2008: RM14,236,000) are in the process of being registered in the names of the subsidiary companies.

174 172 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 14 INVESTMENT PROPERTIES Group Company RM 000 RM 000 RM 000 RM 000 At 1 April 609, , ,752 85,319 Additions 18, ,000 Disposals (380) Acquisition of a subsidiary company (Note 47) 4,260 Currency translation differences 8,324 5,325 Transfers (to)/from property, plant and equipment (Note 12) (11,733) 133,470 Transfers (to)/from prepaid lease properties (Note 13) (358) 3,021 Transfers to land held for property development on an inter-company disposal (Note 16 (b)) (10,245) Transfers from non-current assets held for sale 383 Changes in fair value during the financial year (Note 5) (38,200) 6,060 (7,588) (5,567) At 31 March 585, , , ,752 The disclosure on income and expenses of investment properties are as below: Rental income 22,107 20,616 12,001 8,232 Direct operating expenses from investment properties that generated rental income during the financial year 10,688 9, Direct operating expenses from investment properties that did not generate rental income during the financial year 1,441 1,117 (a) (b) 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 RM33,880,000 (2008: RM32,000,000) are in the process of being transferred to an insurance subsidiary company. (c) Certain investment properties of the Group with carrying value of RM443,971,000 (2008: RM468,129,000) have been charged as security for bank borrowings (Notes 35 and 40).

175 BIOLOGICAL ASSETS Group Net book value RM 000 RM 000 At 1 April 19,743 19,616 New planting expenditure 234 Amortisation charge (80) (107) Transfers to non-current assets held for sale (Note 25) (19,663) At 31 March 19, PROPERTY DEVELOPMENT ACTIVITIES (a) Property development costs Group RM 000 RM 000 At cost At 1 April Land 136, ,062 Development costs 659,176 1,131,421 Less: Accumulated costs charged to income statement (594,849) (1,285,446) 200, ,037 Less: Completed developments in previous years Land (9,898) (205,263) Development costs (63,481) (586,443) Accumulated costs charged to income statement 73, ,706 Add: Costs incurred during the financial year Land Development costs 35, ,437 35, ,269 Transfers from land held for property development (Note 16 (b)) 2,442 23,882 Less: Costs recognised as an expense in income statement during the financial year (31,926) (115,781) Transfers (to)/from property, plant and equipment (Note 12) (5,998) 67,000 Transfers to inventories (20,330) (1,968) At 31 March 180, ,439

176 174 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 16 PROPERTY DEVELOPMENT ACTIVITIES (Continued) (a) Property development costs (Continued) Group RM 000 RM 000 At end of the financial year Land 125, ,112 Development costs 628, ,176 Less: Accumulated costs charged to income statement (573,866) (594,849) 180, ,439 (b) Land held for property development Group RM 000 RM 000 At cost At 1 April Land 196, ,752 Development costs 133, , , ,933 Add: Costs incurred during the financial year Development costs 6,978 16, , ,469 Transfers to non-current assets held for sale (Note 25) (63,319) Transfers from property, plant and equipment (Note 12) 14,472 Transfers from investment properties on an inter-company disposal (Note 14) 10,245 Transfers to property development costs (Note 16 (a)) (2,442) (23,882) Impairment losses (Note 5) (21,103) At 31 March 249, ,304 At end of the financial year Land 132, ,221 Development costs 138, ,083 Accumulated impairment losses (21,103) 249, ,304

177 PROPERTY DEVELOPMENT ACTIVITIES (Continued) Included in property development costs and land held for property development is interest on borrowings capitalised for the financial year amounting to RM5,342,000 (2008: RM3,889,000). Land amounting to RM123,897,000 (2008: RM280,172,000) belonging to subsidiary companies, included in property development costs and land held for property development, have been charged as security for bank borrowings (Notes 35 and 40). The title deeds to the freehold land of a subsidiary company amounting to RM NIL (2008: RM68,949,000) are in the process of being registered in the name of the subsidiary company. 17 SUBSIDIARY COMPANIES Company RM 000 RM 000 Unquoted shares, at cost 4,204,563 3,112,574 Less: Accumulated impairment losses (48,677) (54,245) 4,155,886 3,058,329 Amounts due from subsidiary companies (non-trade) 1,172,251 1,683,466 Less: Allowance for doubtful debts (225,968) (221,185) 946,283 1,462,281 The details of the subsidiary companies are listed in Note 3 to the financial statements. The amounts due from subsidiary companies are unsecured and have no fixed terms of repayment. Interest is charged at 4.00% to 6.40% (2008: 5.86% to 9.00%) per annum on RM731,160,000 (2008: RM605,490,000) of the outstanding amounts. The fair value of the amounts due from subsidiary companies is RM929,118,000 (2008: RM1,423,215,000).

178 176 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 18 JOINTLY CONTROLLED ENTITIES Group Company RM 000 RM 000 RM 000 RM 000 Share of net assets 334, ,695 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 is as follows: Group RM 000 RM 000 Non-current assets 106, ,093 Current assets 363, ,322 Non-current liabilities (33,745) (32,711) Current liabilities (101,808) (118,009) Share of net assets 334, ,695 Revenue 808, ,259 Expenses (725,865) (344,411) Profit before taxation 82,663 49,848 Taxation (19,417) (6,367) Net profit 63,246 43,481 (a) Capital commitments for property, plant and equipment contracted 337 3,127 not contracted 6,215 3,773 6,552 6,900 (b) There are no contingencies relating to jointly controlled entities.

179 ASSOCIATED COMPANIES Group Company RM 000 RM 000 RM 000 RM 000 Share of net assets 417, ,967 Unquoted shares, at cost 71,803 76,863 The details of the associated companies are listed in Note 3 to the financial statements. The Group s share of the assets, liabilities, revenue and expenses of the associated companies is as follows: Group RM 000 RM 000 Non-current assets 209, ,882 Current assets 502, ,561 Non-current liabilities (26,421) (28,823) Current liabilities (268,144) (264,653) Share of net assets 417, ,967 Revenue 1,675,337 1,736,770 Expenses (1,580,770) (1,593,556) Profit before taxation 94, ,214 Taxation (24,038) (30,702) Net profit 70, ,512 (a) Capital commitments for property, plant and equipment contracted 1,271 1,262 not contracted 16,079 57,010 17,350 58,272 (b) (c) There are no contingencies relating to associated companies. The accumulated share of losses that have not been recognised by the Group amounted to RM11,859,000 (2008: RM11,859,000).

180 178 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 20 OTHER INVESTMENTS Group RM 000 RM 000 (i) Held by a banking subsidiary company (a) Investments: Held-to-maturity At amortised cost Corporate bonds, at cost 32,952 Accumulated impairment loss (2,061) Total held-to-maturity investments 30,891 Non-current 28,346 Current 2,545 30,891 (b) Investments: Available-for-sale At fair value Quoted securities: Malaysian government investment certificates 857,450 Cagamas bonds 100,507 Khazanah bonds 182,813 Islamic private debt securities 1,977,744 Sukuk 172,870 Negotiable instrument of deposit certificates 5,964 3,297,348 Unquoted securities: Shares 4,105 Total available-for-sale investments 3,301,453 Non-current 2,638,068 Current 663,385 3,301,453 (c) Investments: Held-for-trading At fair value Malaysian government investment certificates 10,228

181 OTHER INVESTMENTS (Continued) Group RM 000 RM 000 (ii) Held by insurance subsidiary companies (a) Quoted securities: Malaysian Government Securities, at cost 125, ,741 Amortisation of premiums (517) (1,485) 124, ,256 (b) Unquoted securities: Corporate debt securities, at cost 704, ,007 Accretion of discounts net of amortisation of premiums 9,137 8,901 Less: Allowance for diminution in value (4,765) (2,539) 708, ,369 (c) Unquoted shares, at cost 2,374 2,558 Less: Allowance for diminution in value (176) (176) 2,198 2,382 Sub-total 835, ,007 (iii) Held by other Group companies (a) Quoted securities: Quoted shares in Malaysia, at cost 1,688 1,889 Less: Allowance for diminution in value (985) (585) 703 1,304 (b) Subordinated bonds 6,000 6,000 Less: Allowance for diminution in value (6,000) (3,017) 2,983

182 180 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 20 OTHER INVESTMENTS (Continued) Group RM 000 RM 000 (iii) Held by other Group companies (Continued) (c) Unquoted securities: Unquoted shares, at cost 48,239 49,487 Less: Allowance for diminution in value (4,974) (4,979) 43,265 44,508 Sub-total 43,968 48,795 Total (excluding other investments held by a banking subsidiary company) 879, ,802 (a) The carrying amounts of other investments at balance sheet date approximated their fair values except for the following: Carrying Fair Carrying Fair amount value amount value RM 000 RM 000 RM 000 RM 000 Group Malaysian Government Securities 124, , , ,256 Corporate debt securities, unquoted 708, , , , , , , ,060 (b) The carrying amounts of unquoted shares at balance sheet date approximated their fair values.

183 intangible assets Operation Licences/ AND Product MAINTENANCE Core Computer development Goodwill concession deposits software expenditure Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group 2009 At 1 April , ,362 23,036 Acquisition of subsidiary companies (Note 47) 28, ,932 61, ,442 Additions 1, ,276 Amortisation charge (Note 5) (3,001) (5,100) (93) (740) (8,934) Reclassification to property, plant and equipment (Note 12) (146) (146) At 31 March , ,931 56,300 1, ,674 Cost 49, ,932 61,400 1,454 3, ,477 Accumulated amortisation (3,001) (5,100) (237) (2,465) (10,803) Carrying amount 49, ,931 56,300 1, ,674

184 182 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 21 intangible assets (Continued) Licences/ Product Computer development Goodwill software expenditure Total RM 000 RM 000 RM 000 RM 000 Group 2008 At 1 April ,665 5,050 9,715 Acquisition of additional investment in a subsidiary company (Note 47) 16,648 16,648 Acquisition of a subsidiary company (Note 47) 6,000 6,000 Additions 910 3,340 4,250 Disposal of subsidiary companies (Note 48) (623) (2,347) (2,970) Amortisation charge (Note 5) (214) (7,429) (7,643) Reclassification to property, plant and equipment (Note 12) 288 (2,092) (1,804) Written off (Note 5) (1,160) (1,160) At 31 March , ,362 23,036 Cost 21, ,627 25,478 Accumulated amortisation (177) (2,265) (2,442) Carrying amount 21, ,362 23,036 The carrying amount of goodwill was allocated to two of the Group s cash generating units (CGUs), namely defence services (RM4,665,000), airport ground handling services (RM16,648,000) and a provisional allocation was made to a banking business (RM28,110,000) as described below. The recoverable amounts of the two CGUs were determined based on value-in-use calculations. These calculations used pre-tax cash flow projections based on approved financial budgets. Cash flows beyond the budgeted period were extrapolated using estimated terminal growth rates. Based on this, the recoverable amount of goodwill exceeded its carrying value. Following the acquisition of 70% equity interest in Bank Muamalat Malaysia Berhad ( BMMB ), which thus became a subsidiary company of DRB-HICOM Group, the initial accounting for BMMB s business combination involves identifying and determining the fair values to be assigned to BMMB s identifiable assets, liabilities and contingent liabilities and the cost of the combination. As the initial accounting for this business combination can be determined only provisionally as at the end of the current financial year as the fair values to be assigned to BMMB s identifiable assets, liabilities and contingent liabilities can be determined only provisionally, the BMMB s business combination has been accounted for using these provisional values and the initial accounting has resulted in a goodwill on consolidation amounting to approximately RM28,110,000. The Group shall recognise any adjustments to these provisional values upon completing the initial accounting within twelve months of the acquisition date.

185 DEFERRED TAXATION Group Company RM 000 RM 000 RM 000 RM 000 At 1 April (5,448) 2,630 (702) (1,055) Prior year adjustments (Note 2.2) 43,092 41,708 As restated 37,644 44,338 (702) (1,055) Acquisition of subsidiary companies (Note 47) 50,904 (8,078) Disposal of subsidiary companies (Note 48) (542) Movement in life assurance fund (7,075) 5,476 Transfers to income statement (Note 9) Investments 2,572 (1,348) Property, plant and equipment (13,816) 4,837 (1,668) 353 Property development expenditure 7,735 Provisions 1,204 (2,687) Receivables 3,035 1,573 Tax losses (9,031) (5,910) Unearned premium reserve 40 (15) (8,261) (3,550) (1,668) 353 At 31 March 73,212 37,644 (2,370) (702) Group Company RM 000 RM 000 RM 000 RM 000 Subject to income tax Deferred tax assets (before offsetting) Property, plant and equipment 94,877 84,567 3,136 3,643 Investments 15,703 7,622 Provisions 12,208 4,498 Receivables 29,680 7,149 Unearned premium reserve 35 Tax losses 16,313 25, , ,035 3,136 3,643 Offsetting (59,951) (29,525) (3,136) (3,643) Deferred tax assets (after offsetting) 108,865 99,510

186 184 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 22 DEFERRED TAXATION (Continued) Group Company RM 000 RM 000 RM 000 RM 000 Subject to income tax Deferred tax liabilities (before offsetting) Property, plant and equipment (92,972) (78,607) (5,506) (4,345) Investments (918) (2,347) Property development expenditure (7,735) Provisions (1,711) Receivables (3) (2,697) Unearned premium reserve (5) (95,604) (91,391) (5,506) (4,345) Offsetting 59,951 29,525 3,136 3,643 Deferred tax liabilities (after offsetting) (35,653) (61,866) (2,370) (702) Presented after appropriate offsetting as follows: Deferred tax assets 108,865 99,510 Deferred tax liabilities (35,653) (61,866) (2,370) (702) 73,212 37,644 (2,370) (702)

187 FINANCING OF CUSTOMERS Group RM 000 RM 000 Cash line 448,309 Term financing Home financing 4,000,029 Syndicated financing 209,671 Hire purchase receivables 1,472,203 Leasing receivables 140,035 Other term financing 2,374,811 Trust receipts 154,593 Claims on customers under acceptance credits 742,273 Staff financing 97,413 Revolving credits 609,742 Less: Unearned income Less: Financing sold to Cagamas Less: Allowance for bad and doubtful financing General Specific 10,249,079 (3,487,551) 6,761,528 (397,626) 6,363,902 (210,279) (365,170) Total net financing, advances and other financing 5,788,453 Non current 4,677,422 Current 1,111,031 5,788,453 Fair values 6,983,135 The fair values of financing of customers are estimated based on expected future cash flows of contractual instalments payments, discounted at applicable and prevailing rates at balance sheet date offered for similar facilities to new borrowers with similar credit profiles. In respect of non-performing financing, the fair values are deemed to approximate the carrying values, which are net of specific allowance for bad and doubtful financing.

188 186 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 24 STATUTORY DEPOSITS WITH BANK NEGARA MALAYSIA (a) (b) The statutory deposits are maintained with Bank Negara Malaysia in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958 (revised 1994), the amounts of which are determined at set percentages of total eligible liabilities. The carrying amounts as at balance sheet date approximated their fair values. 25 NON-CURRENT ASSETS HELD FOR SALE Group RM 000 RM 000 Property, plant and equipment (Note 12) 46, Prepaid lease properties (Note 13) 614 Biological assets (Note 15) 19,663 Land held for property development (Note 16 (b)) 63,319 Associated company 10, ,318 Assets related to a disposal group held for sale 17, , ,393 Liabilities related to a disposal group held for sale (18,418) 140, ,975 The above is relating to the proposed disposals as disclosed in Notes 54 (h) and 55 (c).

189 INVENTORIES Group RM 000 RM 000 Raw materials 49,621 47,349 Work-in-progress 68,640 50,057 Finished goods 487, ,637 Goods-in-transit 12,129 43,732 Consumables 28,882 37,766 Completed units of unsold properties 34,887 17, , ,351 Certain inventories of subsidiary companies amounting to RM10,439,000 (2008: RM12,033,000) have been pledged as security for bank borrowings (Notes 35 and 40). 27 TRADE AND OTHER RECEIVABLES Group Company RM 000 RM 000 RM 000 RM 000 Trade receivables 896, ,464 62,418 62,418 Less: Allowance for doubtful debts (103,212) (74,541) (9,198) (9,000) 793, ,923 53,220 53,418 Other receivables 285, ,426 2,055 3,457 Less: Allowance for doubtful debts (31,005) (29,211) (1,936) (559) 254, , ,898 Amounts due from subsidiary companies 37,774 25,464 Less: Allowance for doubtful debts (149) (149) 37,625 25,315

190 188 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 27 TRADE AND OTHER RECEIVABLES (Continued) Group Company RM 000 RM 000 RM 000 RM 000 Accrued billings 402 1,971 Amounts due from customers on contracts (Note 45) Deposits 161,883 23, Prepayments 11,403 11, Amounts due from related parties 9,183 6,118 Amounts due from jointly controlled entities 11,623 7, Amounts due from associated companies 60,407 89, , , ,811 1,350 25,776 1,304,033 1,167,949 92, ,407 The currency exposure profile of trade and other receivables is as follows: Ringgit Malaysia 1,286,392 1,136,244 92, ,407 US Dollar 12,734 16,382 Thai Baht 2,653 7,499 Others 2,254 7,824 1,304,033 1,167,949 92, ,407 (a) (b) (c) (d) (e) The Group s and the Company s normal trade credit terms range from 30 to 60 days (2008: 30 to 60 days). Other credit terms are assessed and approved on a case by case basis. Included in trade receivables of the Group and the Company is an amount of RM53,220,000 (2008: RM53,220,000) owing by the Government in respect of Electrified Double Track Project. Included in other receivables for the Group is an amount of RM29,835,000 (2008: RM27,680,000) in respect of reimbursement of certain operating expenditure of a subsidiary company due from the Ministry of Finance. Included in deposits is an amount of RM141,771,000 relating to the deposit paid for the proposed acquisitions as disclosed in Note 54 (h). 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.

191 MARKETABLE SECURITIES Group Company RM 000 RM 000 RM 000 RM 000 Lower of cost and market value Shares, warrants and other instruments quoted in Malaysia 413, ,782 outside Malaysia 49,549 44,415 11,700 38, , ,197 11,700 38, Short term Deposits (a) Short term deposits consist of deposits with licensed banks. The currency exposure profile of short term deposits is as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 892,119 1,372,833 38,234 84,126 Singapore Dollar 3,787 Thai Baht ,119 1,377,079 38,234 84,126 (b) (c) Certain deposits with licensed banks of the Group amounting to RM10,078,000 (2008: RM6,217,000) have been pledged as security for banking facilities. Included in short term deposits is the maintenance reserve account of approximately RM30,886,000 (2008: RM NIL) maintained by a subsidiary company performing operations and maintenance services to a power plant, pursuant to the Operations and Maintenance Agreement.

192 190 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 29 Short term Deposits (Continued) (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 bank (e) Deposits of the Group and Company have an average maturity period of 132 (2008: 266) and 12 (2008: 15) days respectively. 30 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 RM13,024,000 (2008: RM42,124,000). (c) The currency exposure profile of cash and bank balances is as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 158, ,412 4,016 3,078 US Dollar 11, Singapore Dollar 1,923 2,038 Others 1,132 1, , ,635 4,016 3,078

193 CASH AND SHORT-TERM FUNDS OF A BANKING SUBSIDIARY COMPANY Group RM 000 RM 000 Cash and balances with banks and other financial institutions 128,869 Money at call and interbank placements with remaining maturities not exceeding one month 3,440,236 3,569,105 (a) The currency exposure profile of the cash and short-term funds of a banking subsidiary company is as follows: Group RM 000 RM 000 Ringgit Malaysia 3,374,787 US Dollar 115,969 Euro Dollar 73,871 Others 4,478 3,569,105 (b) The weighted average effective annual interest rates of cash and short-term funds of a banking subsidiary at the end of the financial year are as follows and the average maturity period is not exceeding one month: Group % % Cash and short-term funds 3.00

194 192 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 32 SHARE CAPITAL Group and Company Number of Nominal Number of Nominal Shares Value Shares Value 000 RM RM 000 Authorised: Ordinary shares of RM1.00 each 2,000,000 2,000,000 2,000,000 2,000,000 Issued and fully paid: Ordinary shares: At 1 April 1,007,607 1,007,607 1,007,607 1,007,607 Issued (Note 47) 925, ,994 At 31 March 1,933,237 1,719,601 1,007,607 1,007,607 The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company except that the shares issued for the acquisitions of Rangkai Positif Sdn. Bhd. and Bank Muamalat Malaysia Berhad did not rank for interim (special) dividend declared in respect of financial year ended 31 March LIFE ASSURANCE FUND Based on the actuarial valuation of the Life Assurance Fund made up to 31 March 2009, the actuary was satisfied that the assets available in the Life Assurance Fund are sufficient to meet its long term liabilities to policyholders. Group RM 000 RM 000 Actuarial liabilities At 1 April 1,171,774 1,025,081 Add: Increase in policy reserves 11, ,725 Bonus allocated to participating policyholders, including interim bonus from normal surplus 20,444 20,524 Less: Interim bonus (591) (556) At 31 March 1,202,643 1,171,774

195 LIFE ASSURANCE FUND (Continued) Group RM 000 RM 000 Unallocated surplus At 1 April 76,129 62,695 Less/Add: (Deficit)/surplus arising during the financial year (2,363) 38,958 Less: Bonus allocated to participating policyholders, including interim bonus from normal surplus (20,444) (20,524) Transfer to income statement (3,000) (5,000) At 31 March 50,322 76,129 Life policyholders fund as at end of financial year: Actuarial liabilities 1,202,643 1,171,774 Unallocated surplus 50,322 76,129 1,252,965 1,247, 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.

196 194 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 35 LONG TERM borrowings Group Company RM 000 RM 000 RM 000 RM 000 Secured Hire purchase and finance lease liabilities 37,268 36,544 Portion repayable within 12 months included under bank borrowings (Note 40) (13,915) (10,526) 23,353 26,018 Long term loans 452, ,624 Portion repayable within 12 months included under bank borrowings (Note 40) (63,144) (79,933) 389, ,691 Long term loans under Islamic financing 263, ,888 96, ,741 Portion repayable within 12 months included under bank borrowings (Note 40) (34,054) (18,699) 229, ,189 96, ,741 Unsecured Long term loans under Islamic financing 250,000 Long term loans 60,000 61,923 Portion repayable within 12 months included under bank borrowings (Note 40) (60,000) (1,923) 60,000 Loan Stocks 2002/ ,078 Portion repayable within 12 months included under bank borrowings (Note 40) (101,078) Deferred liability 38,144 38, ,357 1,488,042 96, ,741

197 LONG TERM borrowings (Continued) (a) The hire purchase and finance lease liabilities are secured against the respective assets acquired. The long term loans are secured against certain freehold and leasehold lands under property, plant and equipment, prepaid lease properties, investment properties and property development costs (Notes 12, 13, 14 and 16). (b) The long term loans under Islamic financing relates to Subordinated Bonds under the Shariah principle of Bai Bithaman Ajil of a banking subsidiary company. The Bonds are under a 10 non-callable 5 basis feature, with a profit rate of 6.25% per annum payable semi-annually. Under the 10 non-callable 5 basis feature, the banking subsidiary company has the option to redeem the Bonds on the fifth anniversary or any semi-annual date thereafter. Should the banking subsidiary company decide not to exercise its option to redeem the Bonds, the holders of the Bonds will be entitled to an annual incremental step-up profit rate from the beginning of the 6 th year to the final maturity date. (c) 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 loans under Islamic financing Loan Stocks 2002/ (d) The currency exposure profile of the long term borrowings is as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 710,785 1,269,432 96, ,741 Singapore Dollar 219, , ,357 1,488,042 96, ,741

198 196 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 35 LONG TERM borrowings (Continued) (e) Hire purchase and finance lease liabilities Group Minimum hire purchase and finance lease payments: RM 000 RM 000 not later than 1 year 16,616 12,097 later than 1 year and not later than 2 years 11,910 11,086 later than 2 years and not later than 3 years 8,196 8,123 later than 3 years and not later than 4 years 5,979 5,820 later than 4 years and not later than 5 years 456 3,319 later than 5 years ,167 41,190 Future finance charges on hire purchase and finance lease (5,899) (4,646) Present value of hire purchase and finance lease liabilities 37,268 36,544 Representing hire purchase and finance lease liabilities: non-current 23,353 26,018 current (included in Note 40) 13,915 10,526 37,268 36,544 (f) (g) (h) On 20 May 2008, Gadek (Malaysia) Berhad, a wholly-owned subsidiary company of the Company made a full cash redemption of the remaining RM76,476,000 nominal value of Redeemable Exchangeable Unsecured Loan Stock ( REULS ) 2002/2008 and accrued interest thereon amounting to a total of RM101,078,000. In July 2008, the Group made a full repayment of the outstanding Bai Bithaman Ajil Islamic Debt Securities ( BaIDS ) and Murabahah Commercial Papers/Murabahah Medium Term Notes ( CP/MTN ). The deferred liability is in respect of amounts owing of RM38,144,000 (2008: RM38,144,000) by a solid waste subsidiary company to local municipalities in relation to the transfer of certain units of movables assets from these municipalities to the subsidiary company.

199 LONG TERM borrowings (Continued) (i) 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 2009 Fixed rate (Fair value risk) Hire purchase and finance lease liabilities 23,353 9,690 7,670 5, Long term loans (secured and unsecured) 92,382 33,275 44,526 3,240 3,240 8,101 Long term loans under Islamic financing 479,789 46,612 48,158 52,858 25, , ,524 89, ,354 61,692 28, ,148 Floating rate (Cash flow risk) Long term loans (secured and unsecured) 296,689 38,584 21,273 15, ,245 12, , , ,627 77, , , Fixed rate (Fair value risk) Hire purchase and finance lease liabilities 26,018 9,820 7,351 5,569 3,271 7 Long term loans (secured and unsecured) 297, ,606 50,392 60,583 19,960 55,109 Long term loans under Islamic financing 710, ,885 17,669 17,304 25,014 1,034, ,311 75,412 83,456 48,245 55,116 Floating rate (Cash flow risk) Long term loans (secured and unsecured) 271,041 24,446 23,967 8,043 4, ,910 Long term loans under Islamic financing 144, , , ,763 23,967 8,043 4, ,910 1,449, ,074 99,379 91,499 52, ,026

200 198 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 35 LONG TERM borrowings (Continued) (i) 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 Company 2009 Fixed rate (Fair value risk) Long term loan under Islamic financing 96,000 12,000 12,000 12,000 12,000 48, Fixed rate (Fair value risk) Long term loan under Islamic financing 669, ,324 35,100 Floating rate (Cash flow risk) Long term loan under Islamic financing 144, , , , ,324 35,100 (j) Fair value Fair values of fixed rate long term borrowings and deferred liability are as follows: Carrying Fair Carrying Fair AMOuNT VALue amount VALue RM 000 RM 000 RM 000 RM 000 GROUP Deferred liability 38,144 36,139 38,144 36,801 Hire purchase and finance lease liabilities 23,353 31,826 26,018 31,402 Long term loans (secured and unsecured) 92,382 91, , ,634 Long term loans under Islamic financing 479, , , , , ,311 1,072,684 1,126,385 The fair values of loan term loans under Islamic financing relates to Subordinated Funds under the Shariah principle of Bai Bithaman Ajil of a banking subsidiary company and are estimated by discounting the expected future cash flows using the applicable prevailing interest rates for borrowings with similar risks profiles.

201 provision for liabilities and charges Sales Warranty returns Total RM 000 RM 000 RM 000 Group 2009 At 1 April 13, ,170 Currency translation differences (19) (19) Charge 10,027 1,247 11,274 Utilised (8,583) (193) (8,776) Unused amounts reversed (4,859) (955) (5,814) At 31 March 10, ,835 Non-current Current 9, ,005 10, ,835 Voluntary Sales separation Warranty returns scheme Total RM 000 RM 000 RM 000 RM 000 Group 2008 At 1 April 23, ,625 Acquisition of a subsidiary company (Note 47) 11,951 11,951 Disposal of a subsidiary company (Note 48) (6,232) (428) (6,660) Currency translation differences 9 9 Charge 11,369 1,686 13,055 Transfer to non-current assets held for sale (428) (428) Utilised (10,080) (264) (146) (10,490) Unused amounts reversed (16,911) (981) (17,892) At 31 March 13, ,170 Non-current 8,421 8,421 Current 5, ,749 13, ,170

202 200 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 37 DEPOSITS FROM CUSTOMERS OF A BANKING SUBSIDIARY COMPANY Group RM 000 RM 000 Non-Mudharabah Fund Demand deposits 2,742,645 Saving deposits 577,937 Negotiable Islamic debts certificates 1,154,933 Others 21,665 4,497,180 Mudharabah Fund General investment deposits 5,116,846 Special general investment deposits 1,004,676 6,121,522 10,618,702 Non-current 2,323,244 Current 8,295,458 10,618,702 (a) (b) The fair value of deposits from customers are estimated to approximate their carrying amounts as the profit rates are determined at the end of their holding periods based on the actual profits generated from the assets invested. The currency exposure profile of the deposits from customers of a banking subsidiary company is as follows: Group RM 000 RM 000 Ringgit Malaysia 10,122,418 US Dollar 496,284 10,618,702

203 DEPOSITS FROM CUSTOMERS OF A BANKING SUBSIDIARY COMPANY (Continued) (c) The maturity period of the deposits from customers of a banking subsidiary company is as follows: Group RM 000 RM 000 not later than 6 months 7,791,999 later than 6 months and not later than 1 year 503,459 later than 1 year and not later than 5 years 2,323,244 10,618, GENERAL AND LIFE insurance funds Group RM 000 RM 000 Outstanding claims: Provision for outstanding claims 350, ,768 Recoverable from reinsurers (74,284) (48,753) Net outstanding claims 276, ,015 Unearned premium reserves 157, , , ,435

204 202 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 39 trade and other payables Group Company RM 000 RM 000 RM 000 RM 000 Trade payables 613, ,448 73,747 78,597 Other payables and accruals 701, ,242 5,963 10,656 Progress billings 19,008 16,987 Amounts due to customers on contracts (Note 45) 2,262 6,361 Amounts due to related parties 98,315 48,093 Amounts due to subsidiary companies 509,825 10,196 Amounts due to jointly controlled entities 24,275 22,314 Amounts due to associated companies 68,037 17,552 1,527,352 1,416, ,535 99,449 (a) The currency exposure profile of trade and other payables is as follows: Ringgit Malaysia 1,445,918 1,286, ,535 99,449 Singapore Dollar 39,187 33,107 Japanese Yen 19,077 85,930 Thai Baht 6,221 6,403 US Dollar 9,250 3,301 Others 7,699 1,330 1,527,352 1,416, ,535 99,449 (b) (c) (d) The Group s and the Company s normal trade payables terms range from 30 to 90 days (2008: 30 to 90 days). Included in amounts due to subsidiary companies are interest bearing loans amounting to RM503,210,000 (2008: RM NIL). Interest is charged at 4.00% (2008: NIL) 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.

205 BANK BORROWINGS Group Company RM 000 RM 000 RM 000 RM 000 (i) Bank overdrafts secured 16,102 13,802 unsecured 9,423 11,208 25,525 25,010 (ii) Other bank borrowings Secured Bankers acceptances 34,165 27,978 Revolving credits 3,000 4,000 Short term loans 151,395 Hire purchase and finance lease liabilities portion repayable within 12 months (Note 35) 13,915 10,526 Long term loans portion repayable within 12 months (Note 35) 63,144 79,933 Long term loans under Islamic financing portion repayable within 12 months (Note 35) 34,054 18,699 Unsecured Bankers acceptances 179, ,337 Revolving credits 196, , , ,000 Short term loans 4,017 7,693 Long term loans portion repayable within 12 months (Note 35) 60,000 1,923 Loan Stocks 2002/2008 portion repayable within 12 months (Note 35) 101, , , , , , , , ,000

206 204 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 40 BANK BORROWINGS (Continued) (a) The currency exposure profile of bank overdrafts and other bank borrowings is as follows: Group Company RM 000 RM 000 RM 000 RM 000 Ringgit Malaysia 604, , , ,000 Thai Baht 4,017 9,616 Singapore Dollar 4, , , , ,000 (b) (c) The secured bank overdrafts, bankers acceptances, letters of credit, revolving credits, and short term loans are secured by way of fixed and floating charges over certain property, plant and equipment, prepaid lease properties, investment properties and inventories (Notes 12, 13, 14 and 26). 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 credits Short term loans

207 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS Group RM 000 RM 000 Non-Mudharabah Bank Negara Malaysia 16,362 Licensed banks 36,503 Licensed Islamic banks 72, ,815 The above are denominated in Ringgit Malaysia and the average maturity period is not exceeding six months. 42 SHARE PREMIUM Group and COmpany RM 000 RM 000 At 1 April/31 March 20,701 20, 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.

208 206 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 44 currency TRANSLATION DIFFERENCES AND OTHER RESERVES Group RM 000 RM 000 Non-distributable Capital redemption reserve arising from redemption of preference shares 2,156 2,156 Share of associated companies statutory reserve 4, ,085 Share of subsidiary companies statutory reserve 1,538 Asset revaluation reserve on step up acquisition of subsidiary companies 21,101 21,101 Currency translation differences 6,305 5,150 Capital reserves arising from bonus issue 7,000 35, ,492 Group RM 000 RM 000 At 1 April 158, ,452 Share of subsidiary company s statutory reserve 1,538 Currency translation differences of subsidiary companies 1, Share of an associated company s reserve (475) 548 Transfer of associated companies statutory reserve (4,560) 11,500 Release of statutory reserves on disposal of an associated company (113,635) Disposal of a subsidiary company (7,000) Asset revaluation reserve on step up acquisition of a subsidiary company 13,700 Others 7,658 At 31 March 35, ,492

209 construction contracts Group RM 000 RM 000 Aggregate contract costs incurred 131, ,883 Recognised profits less losses 19,829 22,037 Less: Progress billings 151, ,920 (152,425) (189,226) (1,292) (6,306) Analysed as follows: Amounts due from customers on contracts (Note 27) Amounts due to customers on contracts (Note 39) (2,262) (6,361) (1,292) (6,306) 46 retained earnings As at 31 March 2009, the Company has sufficient Section 108 tax credits (which expires on 31 December 2013) to pay RM298,179,000 (2008: RM425,616,000) of the retained earnings of the Company as franked dividends. In addition, the Company has tax exempt income of RM153,742,000 (2008: RM135,342,000) as at 31 March 2009, available to frank as tax exempt dividends. 47 SUMMARY OF EFFECTS OF ACQUISITION OF COMPANIES 2009 (i) Subsidiary companies (a) (b) (c) Pursuant to the Rights Issue undertaken by Alam Flora Sdn. Bhd. ( AFSB ), the Group subscribed for a total of 24 million new ordinary shares of RM1.00 each in AFSB. As a result, the Group s shareholding in AFSB increased from 55% to 60.53% in July On 8 September 2008, the Company completed the acquisition of an additional 15% equity interest in Motosikal Dan Enjin Nasional Sdn. Bhd. ( MODENAS ) from Khazanah Nasional Berhad for a cash consideration of RM24 million. As a result, the Group s shareholding in MODENAS increased from 55% to 70%. On 18 September 2008, HICOM Holdings Berhad acquired an additional 9.03% equity interest in PHN Industry Sdn. Bhd. ( PHN ) from Nagoya Oak Industries Co. Ltd. for a cash consideration of RM8.13 million. As a result, the Group s equity interest in PHN increased from 53.47% to 62.5%.

210 208 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 47 SUMMARY OF EFFECTS OF ACQUISITION OF COMPANIES (Continued) 2009 (Continued) (i) Subsidiary companies (Continued) (d) On 23 September 2008, the shareholders of the Company approved the proposed acquisition of 100% equity interest in Rangkai Positif Sdn. Bhd. ( RP ) for a purchase consideration of RM720,000,000 to be satisfied entirely by the issuance of 376,963,350 new ordinary shares of RM1.00 each in DRB-HICOM at an implied value of RM1.91 per share. On 22 October 2008, the Company completed the acquisition of the entire equity interest in RP for RM292,146,596 via the issuance of 376,963,350 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share. As a result, RP became a wholly-owned subsidiary company of the Group. The acquisition of RP has been accounted for as a purchase of asset and the excess of fair value of purchase cost over the estimated net assets acquired have been classified as a concession asset within intangible assets in the consolidated balance sheet. Details of the operation and maintenance concession arising from the acquisition are as follows: Issue of ordinary shares at fair value (net of issuance cost of RM2,159,000) 289,988 Add: expenses directly attributable to the acquisition, paid in cash 4,616 Purchase consideration 294,604 Fair value of net assets acquired (129,672) Intangible assets operation and maintenance concession recognised 164,932 RM 000 Carrying value RM 000 Fair VALue RM 000 Property, plant and equipment Other investments Trade and other receivables 34,770 34,770 Tax recoverable 83,988 83,988 Cash and bank balances 43,944 43,944 Trade and other payables (33,110) (33,110) Deferred tax liabilities (13) (13) Net assets acquired 129, ,672

211 SUMMARY OF EFFECTS OF ACQUISITION OF COMPANIES (Continued) 2009 (Continued) (i) Subsidiary companies (Continued) (d) Details of cash flow arising from the acquisition are as follows: Purchase consideration, settled in cash 4,616 Cash and cash equivalents arising from subsidiary company acquired (43,944) Cash inflow on acquisition of subsidiary company (39,328) RM 000 (e) On 23 September 2008, the shareholders of the Company approved the proposed acquisition of 70% equity interest in Bank Muamalat Malaysia Berhad ( BMMB ) for a purchase consideration of RM1,069,900,000 to be satisfied entirely by the issuance of 548,666,666 new ordinary shares of RM1.00 each in DRB-HICOM at an implied value of RM1.95 per share. On 22 October 2008, the Company completed the acquisition of 70% equity interest in BMMB for RM425,216,666 via the issuance of 548,666,666 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share. As a result, BMMB became a 70% subsidiary company of the Group. As part of the conditions precedent to the completion of the acquisition of BMMB, Bank Negara Malaysia requires the Company to divest a 30% equity interest in its investment in BMMB within one year from 22 October The Company is in the process of identifying the potential strategic partners. The Group carried out a Purchase Price Allocation exercise upon completion of the acquisition of BMMB, which involves identifying and determining the fair value to be assigned to the identifiable asset, liabilities and contingent liabilities of the acquired entity. Details of the goodwill arising from the acquisition are as follows: Issue of ordinary shares at fair value (net of issuance cost of RM3,211,000) 422,006 Add: Expenses directly attributable to the acquisition, paid in cash 5,284 Purchase consideration 427,290 Fair value of net assets acquired (399,180) Goodwill 28,110 RM 000

212 210 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 47 SUMMARY OF EFFECTS OF ACQUISITION OF COMPANIES (Continued) 2009 (Continued) (i) Subsidiary companies (Continued) (e) Details of net assets acquired are as follows: Carrying value RM 000 Fair VALue RM 000 Property, plant and equipment 43, ,966 Prepaid lease properties Intangible assets 1,219 61,400 Deferred tax assets 46,917 50,917 Trade and other receivables 104, ,275 Banking related assets Investments: Held-to-maturity 30,891 30,891 Investments: Available-for-sale 2,891,066 2,828,466 Investments: Held-for-trading 5,062 5,062 Financing of customers 6,148,110 5,932,710 Statutory deposits with Bank Negara Malaysia 307, ,171 Cash and short-term funds 4,233,669 4,233,669 Trade and other payables (120,316) (120,316) Banking related liabilities Deposits from customers (11,858,629) (11,858,629) Deposits and placements of banks and other financial institutions (251,911) (251,911) Bills and acceptances payables (630,679) (630,679) Bank borrowings (250,000) (250,000) Minority interest (210,323) (171,077) Net assets acquired 490, ,180 Details of cash flow arising from the acquisition are as follows: Purchase consideration, settled in cash 5,284 Cash and cash equivalents arising from subsidiary company acquired (4,233,669) Cash inflow on acquisition of subsidiary company (4,228,385) RM 000

213 SUMMARY OF EFFECTS OF ACQUISITION OF COMPANIES (Continued) 2009 (Continued) (i) Subsidiary companies (Continued) (e) The initial accounting for this business combination has been determined provisionally and will be completed within a period of one year from the date of acquisition as allowed under FRS 3 Business Combinations. The initial accounting for this business combination will be completed upon the finalisation of the following valuations: (i) (ii) (iii) Core deposits; Investments; and Financing of customers. The provisional goodwill is attributable to the acquired banking license, customer base and economies of scale expected from combining the operations of the Group and BMMB, which cannot be separately recognised as an intangible asset. BMMB contributed revenue of RM318,836,000 and profit after taxation of RM47,840,000 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 profit after taxation contributed to the Group would have been RM779,206,000 and RM55,888,000 respectively. These amounts have been calculated using the Group s accounting policies and by adjusting the results of the subsidiary company to reflect the additional depreciation/amortisation that would have been charged assuming the fair value adjustments had applied from 1 April 2008, together with the consequential tax effects. The total net cash inflow on acquisitions of subsidiary companies as above (items (d) and (e)) are RM4,267,713,000. (ii) Associated company On 31 December 2008, HICOM Holdings Berhad ( HHB ) converted its Convertible Redeemable Loan Stock of RM163,374 into 127,635 new ordinary shares of RM1.00 each at the conversion price of RM1.28 in Niro Ceramic (M) Sdn. Bhd. ( Niro Ceramic ). As a result, HHB s shareholding in Niro Ceramic reduced from 24.50% to 23.17% (iii) Subsidiary companies (a) On 28 August 2007, HICOM Holdings Berhad, completed the acquisition of the remaining 40% equity stake in KL Airport Services Sdn. Bhd. ( KLAS ) from Mofaz Aerospace Holdings Sdn. Bhd. for a cash consideration of RM26 million. As a result, KLAS became a wholly-owned subsidiary company of the Group. The above transaction relates to the increase in equity ownership of an existing subsidiary company, which has reflected through the reduction in minority interests in the consolidated statement of changes in equity. Goodwill amounting to RM16,648,000 arose from this transaction. (b) The Group had acquired an additional 123,877,330 Edaran Otomobil Nasional Berhad s ( EON ) shares of RM1.00 each during the period from November 2007 to January 2008 under various corporate exercises. As a result, the Group increased its equity stake from 29.31% to 79.05%. Consequently, EON ceased to be an associated company and became a subsidiary company of the Group. EON contributed revenue of RM664,199,000 and profit after taxation of RM21,429,000 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 profit after taxation contributed to the Group would have been RM2,322,322,000 and RM66,305,000 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/amortisation that would have been charged assuming the fair value adjustments had applied from 1 April 2007, together with the consequential tax effects.

214 212 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 47 SUMMARY OF EFFECTS OF ACQUISITION OF COMPANIES (Continued) 2008 (Continued) (iii) Subsidiary companies (Continued) (b) Details of the provisional purchase price allocation arising from the acquisition are as follows: Carrying value RM 000 Fair VALue RM 000 Property, plant and equipment 223, ,307 Prepaid lease properties 10,941 12,087 Investment properties 4,231 4,260 Intangible assets 6,000 Jointly controlled entities 100, ,764 Associated companies 49,756 49,756 Other investments 4,418 5,585 Deferred tax assets 6,407 6,407 Non-current assets held for sale 13,469 14,324 Inventories 181, ,507 Trade and other receivables 133, ,188 Cash and bank balances 338, ,118 Trade and other payables (216,159) (216,159) Provision for liabilities and charges (11,951) (11,951) Bank borrowings (553) (553) Deferred tax liabilities (8,517) (14,485) Minority interest (173,762) (182,942) Net assets acquired 655, ,213 Excess of fair value of net assets over purchase consideration (173,178) Asset revaluation reserve on step up acquisition (13,700) Investment in an associated company (243,667) Purchase consideration 262,668 Cash and cash equivalents arising from subsidiary companies acquired (338,118) Cash inflow on acquisition of subsidiary companies (75,450) During the financial year, the purchase price allocation was completed resulting in no significant adjustments to the financial statements of the Group.

215 SUMMARY OF EFFECTS OF ACQUISITION OF COMPANIES (Continued) 2008 (Continued) (iv) Associated company On 28 August 2007, the Company entered into a Joint Venture and Shareholders Agreement ( JVSA ) with General Motors Asia Pacific Holding Co. L.L.C. ( GMAP ), a wholly-owned subsidiary of General Motors Corporation ( GMC ), to establish a NEWCO to market, distribute and manufacture GMC s and its affiliates automobiles, parts and accessories in Malaysia as well as to export to other countries. NEWCO was incorporated on 19 October 2007 under the name of HICOM-Chevrolet Sdn. Bhd. ( HICOM-Chevrolet ) and the Company and GMAP shall hold a 49% and 51% equity interest in HICOM-Chevrolet respectively. The approval from Foreign Investment Committee was obtained on 26 November On 28 March 2008, HICOM-Chevrolet has allotted and issued 5,199,999 and 4,999,999 new ordinary shares of RM1.00 each to GMAP and DRB-HICOM respectively. As a result, HICOM-Chevrolet became a 49% associated company of the Group. 48 SUMMARY OF EFFECTS OF DISPOSAL OF COMPANIES 2009 (i) Subsidiary company On 7 August 2008, Scott & English Electronics Holdings Sdn. Bhd. ( SEEH ), effectively a 70% indirect subsidiary company of the Group, completed the disposal of its entire 100% equity interest in Scott & English Electronics Sdn. Bhd. ( SEE ) for a total cash consideration of RM6.58 million to the following parties: Midea Refrigeration (Hong Kong) Ltd. 51%; HICOM Holdings Berhad 40%; and Eastern Trinity Sdn. Bhd. 9%. As a result, SEE ceased to be a 70% indirect subsidiary company of the Group and became a 40% indirect associated company of the Group. On 17 October 2008, SEE changed its name to Midea Scott & English Electronics Sdn. Bhd. The effect of the disposal of the subsidiary company as above, up to the date of disposal on the results of the Group is shown below: Revenue 10,815 RM 000 Profit after taxation (315)

216 214 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 48 SUMMARY OF EFFECTS OF DISPOSAL OF COMPANIES (Continued) 2009 (Continued) (i) Subsidiary company (Continued) The effect of the disposals of the subsidiary company on the financial position of the Group is shown below: Property, plant and equipment 598 Inventories 10,399 Trade and other receivables 7,833 Cash and bank balances 667 Trade and other payables (973) Provision for liabilities and charges (503) Bank overdrafts (515) Bank borrowings (11,396) Net assets disposed 6,110 Gain on disposal 470 Total disposal proceeds 6,580 Less: Reclassification of the subsidiary company as an associated company (2,646) Less: Cash and bank balances of the subsidiary company disposed (667) Add: Bank overdraft of the subsidiary company disposed 515 Net cash inflow on disposal 3,782 RM 000 (ii) Associated companies (a) On 23 June 2008, HICOM Holdings Berhad, effectively a 100% owned subsidiary company of the Group, completed the disposal of its entire 20.2% equity interest in EON Capital Berhad to Primus Pacific Partners 1 L.P. for a cash consideration of approximately RM1.35 billion. As a result, EON Capital Berhad ceased to be an associated company of the Group. The gain arising from the disposal amounted to approximately RM567 million. (b) On 22 December 2008, Proton Cars (Europe) Limited ( PCE ), a 44.4% associated company of Edaran Otomobil Nasional Berhad, was dissolved. As a result, PCE ceased to be an associated company of the Group.

217 SUMMARY OF EFFECTS OF DISPOSAL OF COMPANIES (Continued) 2008 (iii) Subsidiary companies (a) On 15 August 2007, PT Modenas Putra Motor Indonesia, an indirect subsidiary of DRB-HICOM Berhad, was dissolved. The dissolution of the subsidiary company did not have a material impact to the Group. (b) (c) (d) On 17 October 2007, the Company completed the disposal of a 31% equity stake in ISUZU HICOM Malaysia Sdn. Bhd. ( IHMSB ) (formerly known as Malaysian Truck & Bus Sdn. Bhd.) to Isuzu Motors Asia Limited, Singapore for a cash consideration of RM23,748,000. As a result, IHMSB ceased to be a subsidiary company and became a 49% associated company of the Group. On 26 March 2008, Suzuki Motor Corporation ( SMC ) and Itochu Corporation ( Itochu ) subscribed for a total of 14,000,000 and 7,000,000 new ordinary shares of RM1.00 each respectively in Suzuki Malaysia Automobile Sdn. Bhd. ( SMA ), representing 40% and 20% equity stakes in SMA. As a result, SMA ceased to be a wholly owned subsidiary and became a 40% associated company of the Group. On 31 March 2008, the Company and HICOM Holdings Berhad, effectively a wholly-owned subsidiary company of the Group, disposed of DRB-HICOM Information Technologies Sdn. Bhd., HICOM Communications Sdn. Bhd. and HICOM Network Services Sdn. Bhd. to Synergycentric Sdn. Bhd. for a total cash consideration of RM500,000. As a result, the above disposed subsidiary companies (including HICOM Teleservices Sdn. Bhd. and PT HICOM BMS) ceased to be wholly-owned subsidiary companies of the Group. The effect of the disposal of the subsidiary companies under items (b), (c) and (d) above, up to the date of disposal on the results of the Group is shown below: Revenue 325,201 RM 000 Profit after taxation 20,442

218 216 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 48 SUMMARY OF EFFECTS OF DISPOSAL OF COMPANIES (Continued) 2008 (Continued) (iii) Subsidiary companies (Continued) The effect of the disposals of the subsidiary companies on the financial position of the Group is shown below: (Continued) RM 000 Property, plant and equipment 31,173 Intangible assets 2,970 Deferred tax assets 542 Inventories 74,133 Trade and other receivables 33,784 Fixed deposits, cash and bank balances 26,333 Trade and other payables (98,629) Provision for liabilities and charges (6,660) Bank borrowings (5,223) Minority interest 34,469 Net assets disposed 92,892 Gain on disposal 20,369 Carrying values as associated companies (89,013) Total disposal proceeds 24,248 Less: Incidental costs of disposal (303) Less: Fixed deposits, cash and bank balances of subsidiary companies disposed (26,333) Net cash outflow on disposal (2,388) (iv) Jointly controlled entities (a) On 11 April 2007, Comtrac Businessworld Sdn. Bhd. (in members voluntary winding up), effectively a 35% indirect dormant jointly controlled entity of DRB-HICOM Berhad was placed under voluntary winding-up. (b) (c) On 19 April 2007, Comtrac-Concrete Constructions Sdn. Bhd. (in members voluntary winding up), effectively a 34.30% indirect dormant jointly controlled entity of DRB-HICOM Berhad was placed under voluntary winding-up. On 1 July 2007, HICOM Holdings Berhad completed the disposal of its entire 33.33% equity stake in Model Building Maintenance Dallah Alam Flora Waste Management Services L.L.C. ( MBMD ) for a cash consideration of RM83,000. As a result, MBMD ceased to be a jointly controlled entity of the Group. The gain arising from the disposal of jointly controlled entities amounted to RM83,000.

219 SUMMARY OF EFFECTS OF DISPOSAL OF COMPANIES (Continued) 2008 (Continued) (v) Associated companies (a) On 26 June 2007, DRB-HICOM Berhad completed the disposal of its entire 20% equity stake in Gerbang Perdana Sdn. Bhd. ( GPSB ) for a cash consideration of RM14 million. As a result, GPSB ceased to be an associated company of the Group. (b) On 31 March 2008, HICOM Holdings Berhad disposed of its 20% equity stake in Navi & Map Sdn. Bhd. ( Navi & Map ) for a cash consideration of RM1.00. As a result, Navi & Map ceased to be an associated company of the Group. The gain arising from the disposal of associated companies amounted to RM13,991, 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. Category of related party Relationship Subsidiary companies List of group companies in Note 3 Jointly controlled entities List of group companies in Note 3 Associated companies List of group companies in Note 3 Significant related parties Pelabuhan Tanjung Pelepas Sdn. Bhd. MMC-Gamuda Joint Venture Sdn. Bhd. Tradewinds International Insurance Brokers Sdn. Bhd. Tanjung Bin Power Sdn. Bhd. Teknik Janakuasa Sdn. Bhd. Benua Perdana Sdn. Bhd. Prai Power Sdn. Bhd. Malakoff Corporation Berhad Significant related parties Kawasaki Heavy Industries Ltd. Sojitz Group TS Lear Automotive (M) Sdn. Bhd. Teck See Plastic Sdn. Bhd. Compounding & Colouring Sdn. Bhd. United Overseas Bank (Malaysia) Bhd Hebat Abadi Sdn. Bhd. PJBUMI Waste Management Sdn. Bhd. Key management Companies under a common substantial shareholder Corporate shareholders of subsidiary companies Personnel having authority and responsibility for planning, directing and controlling the activities of the entity

220 218 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 49 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (Continued) Group Company RM 000 RM 000 RM 000 RM 000 (a) (b) (c) (d) (e) (f) (g) Sale of goods/services to: Jointly controlled entities 33,058 19,663 Associated companies 85,904 54,592 Related parties 140,695 16,538 Purchase of goods/services from: Jointly controlled entities 408,479 13,728 Associated companies 340,612 82,583 Related parties 142, ,807 Interest income: Subsidiary companies 34,989 42,858 Dividend income: Subsidiary companies 144, ,178 Associated companies 39,530 23,120 Inter-company loan to: Subsidiary companies Disbursement 117, ,280 Repayment 149,891 46,070 Associated companies Repayment 23,914 23,914 Inter company loan from: Subsidiary companies Proceeds 1,109,807 Repayment 135,000 62,315 Related parties Proceeds 19,600 2,482 Bankers acceptances: Related parties Proceeds 27,648 Repayment 24,733

221 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (Continued) Group Company RM 000 RM 000 RM 000 RM 000 (h) (i) (j) Letter of credits: Related parties Proceeds 50,345 Repayment 40,540 Key management compensation: Salaries, bonuses, allowances and other benefits current year 6,353 5,781 prior year 906 Defined contribution plan current year prior year 109 Year end balances with banking facilities: Related parties Revolving credits 125,361 Bank guarantee 125,000 Bonds 229,608 Short term deposits 58,851 Apart from the above, the balances outstanding with related parties in respect of the above transactions are disclosed in Notes 17, 27 and 39 to the financial statements.

222 220 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 50 CAPITAL AND OTHER COMMITMENTS (a) Non-banking Group RM 000 RM 000 (i) Authorised capital expenditure not provided for in the financial statements contracted for 72,516 74,316 not contracted for 134, , , ,819 Analysed as follows: Property, plant and equipment 207, ,521 Intangible assets , ,819 (ii) Lease commitments: Commitments under non-cancellable operating leases repayable within 1 year 13,269 9,059 repayable within 2 to 5 years 29,067 14,969 42,336 24,028 (iii) Commitments for forward foreign exchange contracts 75,203 15,458

223 CAPITAL AND OTHER COMMITMENTS (Continued) (a) Non-banking (Continued) The currency exposure profile and the expiry period for the forward foreign exchange contracts is as follows: Group 2009 Equivalent AMOunt in Contractual Ringgit AMOunts Malaysia ( 000) ( 000) Average contractual rate Expiry dates Japanese Yen 728,592 27, = RM April to 24 August 2009 Thai Baht 5, Baht 100 = RM April to 25 May 2009 US Dollar 11,857 42,045 usd1 = RM April 2009 to 31 January 2010 Euro Dollar 959 4,688 Euro 1 = RM April to 15 July 2009 Group 2008 Equivalent AMOunt in Contractual Ringgit AMOunts Malaysia ( 000) ( 000) Average contractual rate Expiry dates Japanese Yen 356,487 10, = RM April to 2 May 2008 Thai Baht 7, Baht 100 = RM August 2008 US Dollar 1,242 4,029 USD1 = RM May 2008 The net unrecognised losses/(gains) on open contracts which hedge anticipated future foreign currency transactions amounted to RM1,997,000 (2008: RM830,000). These are deferred until the related sales and purchases are transacted, at which time they are included in the measurement of such transactions.

224 222 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 50 CAPITAL AND OTHER COMMITMENTS (Continued) (b) Banking (i) The value of contracts of financial instruments of a banking subsidiary company with off-balance sheet risk, traded in the ordinary course of business, classified by remaining year to maturity or next repricing date (whichever is earlier), are as follows: Principal < 1 >1 3 >3 6 >6 12 Items Amount month months months months RM 000 RM 000 RM 000 RM 000 RM 000 Foreign Exchange Forwards 406,914 11,402 28,052 9, ,721 Swaps 688, , , ,185 Total 1,095, , ,637 9, ,906 Foreign exchange related contracts are subject to market risk and credit risk. (ii) Risk weighted exposures of a banking subsidiary company are as follows: As at 31 March 2009 Credit Risk Principal equivalent weighted AMOunt amount amount RM 000 RM 000 RM 000 Direct credit substitutes 7,844 7,844 8,040 Trade-related contingencies 75,271 15,054 10,437 Transaction related contingencies 1,819, , ,888 Obligations under an on-going underwriting agreement 77,000 38,500 7,700 Housing financing sold directly and indirectly to Cagamas with recourse 397, ,625 79,525 Credit extension commitment - Maturity exceeding one year 1,156, , ,557 Foreign exchange related contracts 1,904,461 28,364 24,302 Profit related contracts 100, Other commitments 989,350 6,527,716 1,975, ,469

225 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 163, ,751 (b) Performance bonds and guarantees given to third parties 167,800 23,053 2,452 2, GROUP SEGMENT REPORTING The Group principally operates in Malaysia in the following main industry segments: Industry segment Automotive Property and construction Concession services Insurance services Other services Banking Description Manufacturing, assembly, pre-delivery inspection, distribution and sale of motor vehicles, motorcycles and special purpose vehicles including sale of related spares and services. Property holding and development and construction works. Vehicle inspection, solid waste management, airport ground handling business and operations and maintenance services of a power plant. General and life insurance services. Trading in engineering products and facility management services. Islamic banking and related financial services.

226 224 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 52 GROUP SEGMENT REPORTING (Continued) (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, prepaid lease properties, biological assets, investment properties, inventories, receivables, property development costs, land held for property development, other investments, marketable securities, banking related assets, cash and bank balances and exclude interest bearing short term deposits, taxation assets and investments in jointly controlled entities and associated companies and non-current assets held for sale. Segment liabilities comprise mainly of payables, banking related liabilities and exclude items such as interest bearing borrowings, taxation liabilities and liabilities relating to non-current assets held for sale. Unallocated liabilities consist of accruals on corporate operating and administrative expenses. Capital expenditure comprises additions to property, plant and equipment, prepaid lease properties, investment properties, biological assets, intangible assets, land held for property developments and property development activities. (b) Secondary reporting format geographical segment 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 Property & Concession Insurance Other Investment Automotive Construction Services Services Services Banking Holding Group RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Financial year ended 31 March 2009 Revenue Total revenue 4,029, , , , , ,234 24,929 6,192,008 Inter-segment revenue (37,694) (13,800) (2,296) (5,963) (5,501) (398) (24,929) (90,581) External revenue 3,991, , , , , ,836 6,101,427 Segment results (17,217) (160,671) 79,310 (27,886) 35,212 90, , ,289 Unallocated expenses (27,908) Interest income 53,961 Gain on disposal of investments in associated companies 567,481 Finance cost (95,655) Share of results of jointly controlled entities (net of tax) 40,607 22,639 63,246 Share of results of associated companies (net of tax) 67,106 3,856 (433) 70,529 Profit before taxation 774,943 Taxation (49,562) Net profit for the financial year 725,381

227 GROUP SEGMENT REPORTING (Continued) Primary reporting format business segment (Continued) Property & Concession Insurance Other Investment Automotive Construction Services Services Services Banking Holding Group RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Financial year ended 31 March 2009 Other information Segment assets 2,094,329 1,470, ,495 1,528, ,638 13,066, ,254 19,469,915 Interest bearing short term deposits 892,119 Taxation assets 261,016 Jointly controlled entities 185, , ,083 Associated companies 382,243 27,354 7, ,321 Non-current assets held for sale 10, , ,674 Total assets 21,515,128 Segment liabilities 707, , ,783 1,798,173 81,556 11,367,287 12,665 14,613,970 Interest bearing borrowings 1,505,994 Taxation liabilities 35,551 Unallocated liabilities 6,853 Total liabilities 16,162,368 Capital expenditure 105,541 36,245 38,731 3,782 4,366 9,640 1, ,444 Depreciation and amortisation 82,177 9,231 30,723 5,181 4,917 10,690 3, ,302 Impairment loss 19,832 60, ,525 82,086

228 226 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 52 GROUP SEGMENT REPORTING (Continued) Primary reporting format business segment (Continued) Property & Concession Insurance Other Investment Automotive Construction Services Services Services Holding Group RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Financial year ended 31 March 2008 Revenue Total revenue 2,316, , , , ,657 17,240 4,071,887 Inter-segment revenue (14,306) (11,386) (524) (5,639) (10,413) (17,240) (59,508) External revenue 2,302, , , , ,244 4,012,379 Segment results (30,257) 33,247 61,390 6,896 30, , ,539 Unallocated expenses (41,768) Interest income 43,285 Finance cost (119,976) Share of results of jointly controlled entities (net of tax) 24,465 19,016 43,481 Share of results of associated companies (net of tax) 66, , ,512 Profit before taxation 376,073 Taxation (24,344) Net profit for the financial year 351,729 Other information Segment assets 2,157,420 1,721, ,948 1,331, , ,409 6,251,720 Interest bearing short term deposits 1,377,079 Taxation assets 155,187 Jointly controlled entities 180, , ,695 Associated companies 366,550 24, ,967 Non-current assets held for sale , ,393 Total assets 9,329,041 Segment liabilities 747, , ,303 1,646, , ,831 3,135,480 Interest bearing borrowings 2,229,492 Taxation liabilities 68,027 Unallocated liabilities 6,479 Liabilities relating to non-current assets held for sale 18,418 18,418 Total liabilities 5,457,896 Capital expenditure 87,742 15,917 35,313 2,856 7,464 6, ,586 Depreciation and amortisation 87,631 13,090 30,745 5,113 4,921 2, ,895 Impairment loss 25,335 12, ,783

229 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) (ii) Deferred tax assets Deferred tax assets are recognised for all unabsorbed tax losses, unutilised capital allowances, unutilised investment tax allowances and unutilised reinvestment allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised based on the likely timing and level of future taxable profits together with future tax planning strategies. 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 is 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 36. (iv) (v) (vi) 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. 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 RM14,678,000 (2008: RM37,783,000) was recognised during the financial year. Deferred liability Deferred liability consists of amount due to municipalities from solid waste management business. The Group has disclosed the amounts due to municipalities of RM38,144,000 (2008: RM38,144,000) as non-current liabilities in the financial statements. The Concession Agreement and the Supplemental Concession Takeover Agreement have yet to be finalised. The Concession Agreement is currently being reviewed whilst the Supplemental Concession Takeover Agreement is currently being drafted.

230 228 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 53 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued) (vii) Fair value estimate of investments of a banking subsidiary company Where the quoted and observable market prices of certain investments are not available, fair value is estimated using pricing models or discounted cash flow techniques. The usage of these models and techniques require the banking subsidiary company of the Group to make certain estimates and assumptions, including but not limited to estimated future cash flows and discount rates. (viii) Allowance for losses on advances and financing of a banking subsidiary company Specific allowances are made for doubtful debts which have been individually reviewed and specifically identified as substandard, bad or doubtful. The individual assessment of financing may include making estimates and judgments about the counterparty s financial position, fair value of the underlying collaterals and future recoverable cash flows in workout/restructuring arrangements. 54 SIGNIFICANT EVENTS (a) On 23 June 2008, HICOM Holdings Berhad, effectively a 100% owned subsidiary company of the Group, completed the disposal of its entire 20.2% equity interest in EON Capital Berhad to Primus Pacific Partners 1 L.P. for a cash consideration of approximately RM1.35 billion. As a result, EON Capital Berhad ceased to be an associated company of the Group. The gain arising from the disposal amounted to approximately RM567 million. (b) (c) Pursuant to the Rights Issue undertaken by Alam Flora Sdn. Bhd. ( AFSB ), the Group subscribed for a total of 24 million new ordinary shares of RM1.00 each. The Group s shareholding in AFSB increased from 55% to 60.53% in July On 7 August 2008, Scott & English Electronics Holdings Sdn. Bhd. ( SEEH ), effectively a 70% indirect subsidiary company of the Group, completed the disposal of its entire 100% equity interest in Scott & English Electronics Sdn. Bhd. ( SEE ) for a total cash consideration of RM6.58 million to the following parties: Midea Refrigeration (Hong Kong) Ltd. 51%; HICOM Holdings Berhad 40%; and Eastern Trinity Sdn. Bhd. 9%. As a result, SEE ceased to be a 70% indirect subsidiary company of the Group and became a 40% indirect associated company of the Group. On 17 October 2008, SEE changed its name to Midea Scott & English Electronics Sdn. Bhd. (d) (e) (f) (g) On 8 September 2008, the Company completed the acquisition of an additional 15% equity interest in Motosikal Dan Enjin Nasional Sdn. Bhd. ( MODENAS ) from Khazanah Nasional Berhad for a cash consideration of RM24 million. As a result, the Group s shareholding in MODENAS increased from 55% to 70%. On 18 September 2008, HICOM Holdings Berhad acquired an additional 9.03% equity interest in PHN Industry Sdn. Bhd. ( PHN ) from Nagoya Oak Industries Co. Ltd. for a cash consideration of RM8.13 million. As a result, the Group s equity interest in PHN increased from 53.47% to 62.5%. On 22 October 2008, the Company completed the acquisition of the entire equity interest in Rangkai Positif Sdn. Bhd. ( RP ) for RM292,146,596 via the issuance of 376,963,350 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share. As a result, RP became a wholly-owned subsidiary company of the Group. On 22 October 2008, the Company acquired a 70% equity interest in Bank Muamalat Malaysia Berhad ( BMMB ) for RM425,216,666 satisfied via the issuance of 548,666,666 new ordinary shares of RM1.00 each at a fair value of RM0.775 per share. As a result, BMMB became a 70% subsidiary company of the Group.

231 SIGNIFICANT EVENTS (Continued) (h) HICOM Properties Sdn. Bhd. ( HPSB ), a wholly-owned subsidiary company of the Group had, on 30 December 2008, entered into a Share Sale and Purchase Agreement ( SSA ) with Dato Haji Ahmad bin Abdullah and Mohd Nazree bin Abu Kassim, collectively known as the Vendors, to acquire the entire equity interest of 1,000,000 ordinary shares of RM1.00 each respectively ( Sale Shares ) in both Benua Kurnia Sdn. Bhd. ( BKSB ) and Neraca Prisma Sdn. Bhd. ( NPSB ) for a total purchase consideration of RM million ( Proposed Acquisition ). BKSB and NPSB own three (3) parcels of freehold land encompassing an area of approximately 1, acres identified as PTD HS(D) , PTD HS(D) and PTD HS(D) , Mukim of Tebrau, Daerah Johor Bahru, Negeri Johor Darul Ta zim. The purchase consideration of the Sale Shares will be satisfied in the following manner: (i) (ii) (iii) Disposal of five (5) DRB-HICOM Group s plantation lands comprising Connemara Estate, Serendah Estate, Bukit Kledek Estate, Ladang Gadek and Ladang Kupang at RM million; Issuance of a bank guarantee amounting to RM million in favour of Danaharta to substitute the existing bank guarantees obtained by BKSB and NPSB; and Cash payment of RM million. The Proposed Acquisition is pending the fulfilment of the conditions precedent stated in the SSA. 55 SUBSEQUENT EVENTS (a) On 10 April 2009, Comtrac Sdn. Bhd., effectively a 70% indirect subsidiary company of the Group, has acquired the remaining 40% equity stake in HICOM-TNB Properties Sdn. Bhd. ( HICOM-TNB ) for a cash consideration of RM1. As a result, HICOM-TNB became a 70% indirect subsidiary company of the Group. On 30 April 2009, HICOM-TNB has changed its name to Comtrac Development Sdn. Bhd. (b) (c) On 5 June 2009, Comtrac Sdn. Bhd. has acquired the entire 100% equity stake in Stagwell Sdn. Bhd. ( Stagwell ) from a wholly-owned subsidiary company of the Group, Automotive Corporation (Malaysia) Sdn. Bhd. via an internal reorganisation for a cash consideration of RM1,500. As a result, the Group s shareholding in Stagwell diluted from 100% to 70%. HICOM Holdings Berhad, had on 13 March 2009, signed the Share Sale and Purchase Agreement with Continental Automotive GmbH to dispose of its entire 33.33% equity interest or 3,000,000 ordinary shares of RM1.00 each in Continental Automotive Instruments Malaysia Sdn. Bhd. for a total cash consideration of RM10,290,000. The disposal was completed on 20 April 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, operational and profit rate risks. (i) (ii) 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. 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.

232 230 DRB-Hicom Berhad ( W) Annual Report 2009 notes to the financial statements 31 March 2009 (Continued) 56 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) (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) (v) (vi) (vii) 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. 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, rate of return, foreign exchange and equity markets. The Group regularly reviews these risks and takes proactive measures to mitigate the potential impact of such risks. 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. Operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The Group manages risks strategically through the risk committees. (viii) Profit rate risk The banking subsidiary company of the Group is exposed to the risk associated with the effects of fluctuations in the prevailing levels of profit rate on the financial position and cash flows of its portfolio. The fluctuations in profit rate can be influenced by changes in interest rates that affect the value of financial instruments under its portfolio. Profit rate risk is monitored and managed by the Risk Management Department to protect the income from operations. 57 APPROVAL OF FINANCIAL STATEMENTS The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 17 July 2009.

233 231 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965 We, Dato Syed Mohamad bin Syed Murtaza 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 122 to 230 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 2009 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 with the provisions of the Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, modified by the accounting policies set out in the Bank Negara Malaysia Guidelines and Shariah principles for a banking subsidiary company of the Group. In accordance with a resolution of the Board of Directors dated 17 July DATO SYED MOHAMAD BIN SYED MURTAZA Chairman DATUK HAJI MOHD KHAMIL BIN JAMIL Group Managing Director

234 232 DRB-Hicom Berhad ( W) Annual Report 2009 STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965 I, Lukman bin Ibrahim, the officer primarily responsible for the financial management of DRB-HICOM Berhad, do solemnly and sincerely declare that the financial statements set out on pages 122 to 230 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, LUKMAN BIN IBRAHIM Subscribed and solemnly declared by the abovenamed Lukman bin Ibrahim at Shah Alam in Malaysia on 17 July Before me, Commissioner for Oaths

235 233 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF DRB-HICOM BERHAD (Incorporated in Malaysia) ( W) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of DRB-HICOM Berhad, which comprise the balance sheets as at 31 March 2009 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 122 to 230. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, modified by the accounting policies set out in the Bank Negara Malaysia Guidelines and Shariah principles for a banking subsidiary company of the Group. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities, modified by the accounting policies set out in the Bank Negara Malaysia Guidelines and Shariah principles for a banking subsidiary company of the Group, so as to give a true and fair view of the financial position of the Group and of the Company as of 31 March 2009 and of their financial performance and cash flows for the financial year then ended. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) (b) (c) (d) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the auditors reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 3 to the financial statements. We are satisfied that the financial statements of the subsidiaries 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 financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

236 234 DRB-Hicom Berhad ( W) Annual Report 2009 independent auditors report to the members of DRB-HICOM BERHAD (Incorporated in Malaysia) ( W) (Continued) OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No AF: 1146) Chartered Accountants MOHAMMAD FAIZ BIN MOHAMMAD AZMI (No.2025/03/10(J)) Chartered Accountant Kuala Lumpur 17 July 2009

237 235 Other Information 236 Share Movement Chart 237 Analysis of Shareholdings 240 Material Properties of DRB-HICOM Group Form of Proxy