UNI.ASIA GENERAL INSURANCE BERHAD (Incorporated in Malaysia)

Transcription

1 FINANCIAL STATEMENTS 31 MARCH A6/ra

2 FINANCIAL STATEMENTS 31 MARCH 2006 CONTENTS PAGE DIRECTORS REPORT 1-19 FINANCIAL STATEMENTS BALANCE SHEETS 20 INCOME STATEMENTS 21 GENERAL INSURANCE REVENUE ACCOUNT STATEMENT OF CHANGES IN EQUITY 24 CASH FLOW STATEMENTS NOTES TO THE FINANCIAL STATEMENTS STATEMENT BY DIRECTORS 63 STATUTORY DECLARATION 63 AUDITORS REPORT 64

3 DIRECTORS' REPORT The Directors are pleased to submit their report to the members together with the audited financial statements of the Company for the year ended 31 March PRINCIPAL ACTIVITIES The Company is principally engaged in the underwriting of all classes of general insurance business. There have been no significant changes in the nature of these activities during the year. FINANCIAL RESULTS RM 000 Net profit for the year 41,593 DIVIDENDS The dividends paid or declared by the Company since 31 March 2005 were as follows: RM 000 In respect of the year ended 31 March 2005, as shown in the Directors report of that year, a final tax exempt gross dividend of 15 sen per share, paid on 1 August ,600 In respect of the year ended 31 March 2006, an interim gross dividend of 10 sen per share, less income tax at 28%, paid on 1 December ,200 The Directors now recommend the payment of final gross dividend of 15 sen per share, less income tax 28%, amounting to RM10,800,000, in respect of the year ended 31 March 2006, which is subject to the approval of the members at the forthcoming Annual General Meeting of the Company. 1

4 DIRECTORS' REPORT (CONTINUED) RESERVES AND PROVISIONS All material transfers to or from reserves or provisions during the year are disclosed in the notes to the financial statements. PROVISION FOR OUTSTANDING CLAIMS Before the income statement and balance sheet of the Company were made out, the Directors took reasonable steps to ascertain that there was adequate provision for incurred claims, including Incurred But Not Reported ("IBNR") claims. BAD AND DOUBTFUL DEBTS Before the income statement and balance sheet of the Company were made out, the Directors took reasonable steps 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 satisfied themselves that all known bad debts had been written off and adequate allowance had been made for doubtful debts. At the date of this report, the Directors are not aware of any circumstances that would render the amounts written off for bad debts or the amounts of the allowance for doubtful debts in the financial statements of the Company inadequate to any substantial extent. CURRENT ASSETS Before the income statement and balance sheet of the Company were made out, the Directors took reasonable steps to ascertain that any current assets which were unlikely to realise in the ordinary course of business, their values as shown in the accounting records of the Company have been written down to an amount which they might be expected to realise. At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Company misleading. VALUATION METHODS At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Company misleading or inappropriate. 2

5 DIRECTORS' REPORT (CONTINUED) CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist: (a) (b) any charge on the assets of the Company that has arisen since the end of the year which secures the liabilities of any other person, or any contingent liability in respect of the Company that has arisen since the end of the year. No contingent or other liability of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the year which, in the opinion of the Directors, will or may affect the ability of the Company to meet their obligations as and when they fall due. For the purpose of this paragraph, contingent or other liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Company. CHANGE OF CIRCUMSTANCES 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 of the Company, that would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Company for the year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Company for the year in which this report is made. SHARE CAPITAL There were no new shares issued by the Company during the year. 3

6 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE Compliance with Bank Negara Malaysia JPI/GPI 25: Prudential Framework of Corporate Governance of Insurers The Company is prescribing to the requirements of, and adopts management practices that are consistent with the principles of Bank Negara Malaysia (BNM) Guideline JPI/GPI 25 Prudential Framework of Corporate Governance for Insurers. Board Responsibilities The Board of Directors (Board) is committed in ensuring that the highest standards of governance are being maintained. This is achieved through compliance with the Insurance Act 1996, Insurance Regulations 1996 and BNM Guidelines JPI/GPI 25 and other directives. The Company strives to adopt other best practices on corporate governance. Among others, the responsibilities of the Board include: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) To select and appoint senior executive officers who are qualified and competent to administer the insurance business effectively and soundly. To safeguard the integrity and credibility of the Company. To establish an Audit Committee comprising a number of Independent Non-Executive Directors. To set up an Internal Audit Department (IAD), with qualified internal audit personnel. To effectively supervise the affairs of the Company to ensure sound management. To adopt and follow sound policies and objectives which have been fully deliberated. To act honestly for the benefit of the Company and to avoid self-serving practices and conflicts of interest. To be regularly informed of the condition of business and management policies of the Company. To observe all laws, rules and regulations as part of statutory duties. To ensure that Company has a beneficial influence on the national economy. 4

7 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Board Activities There is a balance mix in the Board membership with wide ranging skills and experience that comprises eight directors i.e. six Non-Executive Directors, one Managing Director and one Independent Non-Executive Director. No individual or group of individuals is able to dominate the Board s decision-making process. In addition, the Directors do not hold directorships in excess of the prescribed maximum limit. During the financial year, the Board met six times and all Directors complied with the 75% minimum attendance requirement at such meeting. Details of attendance of each Board member at meetings held during the year are as follows: Number of Board Meetings Members Status of directorship Held Attended Dato Maznah Abdul Jalil* Non-Executive Director 6 5 David Chan Mun Wai** Non-Executive Director 6 6 Dato Mohd. Nor Mohamad Non-Executive Director 6 5 Lawrence Pereira Non-Executive Director 6 6 Datuk Abdul Shukor Hassan Non-Executive Director 6 6 George Isac Pereire Independent Non-Executive Director 6 6 Chan Kok Seong Non-Executive Director 6 6 Hashim Harun Managing Director/Chief Executive Officer 6 6 * Chairman ** Deputy Chairman The Board has delegated specific responsibilities to seven Board Committees as follows: (i) (ii) (iii) (iv) (v) (vi) (vii) Audit Committee Nomination Committee Remuneration Committee Risks Management Committee Executive Committee Claims and Underwriting Committee Investment Committee The above committees have the authority to examine pertinent issues and report back to the Board with their recommendations. The ultimate responsibilities for the final decision on all matters lie with the Board. Directors Remuneration Package Details of the nature and amount of each major element of the remuneration for each Director during the period are as follows: 5

8 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Directors Remuneration Package Chairman of the Board 40,000 Chairman of Committees 35,000 Members of Committees 30,000 Meeting Allowance for Non-Executive Directors Chairman of Board/Committee 700 Members of Board/Committee 600 Re-election In accordance with the Company s Memorandum and Articles of Association ( M&A ), all Directors who are appointed by the Board are subjected to election by shareholders at the first opportunity after their appointment. The M&A also provide at least one third of the remaining Directors are to be re-elected by rotation at each Annual General Meeting at least once every three years. The applications for reappointment of Directors are sent to BNM no later than 3 months from the expiry date as set out in BNM Circular JPI 21/2003 on Perlantikan Pengarah/Ketua Pegawai Eksekutif oleh Pemegang Lesen/Pengawal Penanggung Insurans. Directors Training Directors are encouraged to attend continuous education programmes and seminars to keep abreast with developments in the industry. The Company has established a written policy for induction and education programmes for Directors in line with the corporate governance standard requirements. Board of Directors Policy In the spirit of Principle 4 of BNM JPI/GPI 25 Prudential Framework of Corporate Governance for Insurers and the training requirements as propounded in BNM JPI: 13/2003 Corporate Governance Standard, IAD has prepared and updated the Board of Directors Policy to provide the Directors with overview information of the insurance industry in general and Uni.Asia General Insurance Berhad specifically together with a comprehensive list of other information. It will be the main reference material on the Malaysia insurance industry and UAGIB operations as a whole for the newly appointed as well as the current Directors. RM 6

9 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Directors Responsibility Statement The Directors are required by the Companies Act 1965 to prepare financial statements in accordance with the applicable approved accounting standards on the state of affairs of the Company, the results and the cashflows of the Company for the financial year. In preparing the financial statements, the Directors have: (a) (b) (c) (d) Selected suitable accounting policies and applied them constantly; Made judgement and estimates that are reasonable and prudent; Ensured that all applicable accounting standards have been followed; and Prepared financial statements on the going concern basis as the Directors have a reasonable expectation, having made inquiries that the Company have adequate resources to continue in operational existence for the foreseeable future. The Directors have the responsibility for ensuring that the Company keeps accounting records that disclose with reasonable accuracy their financial position and which enable them to ensure that the financial statements comply with the Companies Act The Directors have the overall responsibilities for taking reasonable steps to safeguarding the assets of the Company, and to prevent and detect fraud and other irregularities. Annual General Meeting ( AGM ) At each AGM, the Board presents the progress and performance of the business and encourages shareholders to participate in the question and answer session. The Chief Executive Officer / Managing Director and, where appropriate, the Chairman of the Audit, Nomination, Remuneration, Risk Management, Executive, Claims and Underwriting and Investment Committees are available to respond to shareholders questions during the meeting. Financial Reporting In presenting the annual financial statements, the Directors aim to present a balanced and understandable assessment of the Company s position and prospects. Material Contracts No material contracts (not being contracts entered into the ordinary course of business) have been entered into by the Company involving Directors and substantial shareholders interests, either still subsisting at the end of the financial year or entered into since the end of the previous financial year. 7

10 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Public Accountability As a custodian of public funds, the Company s dealings with the public are always conducted fairly, honestly and professionally. Internal Control and Enterprise Risk Management The Board affirms its overall responsibility on the system of internal control within the Company. The objective of the system of internal control is to enable the Company to achieve its corporate objectives. The system is designed to ensure effective and efficient operations, financial reporting and compliance with the relevant laws and regulations. It is primarily the Board responsibility to determine the strategies and policies for risk and control, whilst the Management is responsible for the effectiveness of the design and operation of risk management and control processes. The process for the identification and evaluation of significant risks is through the adoption of the Enterprise Risk Management (ERM) framework and policy. The process is undertaken throughout the year. The Risk Management Committee of the Board (RMCB) will oversee senior management s activities in managing the key risk areas and ensure that the risk management framework and processes are in place and functioning effectively. The implementation of the ERM is delegated to the Chief Executive Officer (CEO) and supported by the Risk Management Committee of the Management (RMCM). The RMCM will assist the CEO in formulating appropriate procedures (including assessment methodologies, tools and techniques) and review the application of risk management practices. The RMCM will regularly report back the assessment on governance and risk management to the RMCB. The IAD is also actively involved in the audit of ERM based on auditees risk profile. Through riskbased audit approach, it provides the Board with an independent assurance on the adequacy and integrity of the internal control system and risk management framework. It also assesses the existing risk treatment adequacy and its effectiveness in minimising the risks to an acceptable level. The IAD also incorporate as part of its audit work, the detection of fraud risk and anti-money laundering activities. The identifying, evaluating and managing of risks faced by the Company are an on-going process that encompasses the following areas: (a) Underwriting The Company exercises control over underwriting exposures covering both risks accepted and reinsured. Exposure limits are reviewed as and when necessary. (b) Financial Control Procedures Detailed controls are laid down in the procedural manuals of each operating unit. 8

11 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) (c) Financial Position Yearly business plans and budgets are submitted to the Board for their approval at the beginning of each financial year. As part of regular performance monitoring, the financial reports are submitted to the Board for their review at every Board Meetings. These reports cover all key operational areas and provide a sound basis for the Board to assess the Company s financial performance and to identify potential problems faced by the Company. (d) Investment The terms of reference of the Investment Committee and the Head of Investment Department, the investment policies and guidelines and the investment decision making structure and process are clearly defined in the Investment Department s manual. The performance of investment funds and the equity exposure reports are amongst the reports submitted to the Investment Committee for review at their regular meetings. The investment limits are monitored continuously to ensure compliance with the specification of admitted assets pursuant to Section 46(2) of the Insurance Act, (e) Information System The IT Steering Committee, whose members are represented by the Senior Management of the Company, the Head of IT and IAD, is responsible for identifying the IT needs of the Company in line with the requirements of BNM s Guidelines on Management of IT Environment (GPIS 1). (f) Claims The Company exercises control over the processing and payments of claims. The allocations of provisions are annually reviewed. (g) Internal Audit The IAD reports directly to the Audit Committee ( AC ) and its findings and recommendations are communicated to the AC via internal audit reports. The reports are issued within one and half months from completion of the audits and tabled to the AC periodically. In addition, the AC reviews the annual audit plan and follow-up actions on various audit observations. The AC Chairman provides written reports to the Board on the deliberation of the AC on a regular basis. A copy of the report is extended to the affected management personnel and the members of the AC. In line with BNM circular JP 3/2/99 requirement, the audit reports are also submitted to BNM. 9

12 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) Board Committees There are seven Board Committees namely Audit, Nomination, Remuneration, Risks Management, Executive, Claims & Underwriting, and Investment. Details of each Board Committees are as follows: A The Audit Committee The primary objective of the Committee is to assist Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process and the monitoring of compliance with relevant laws and regulations. This Committee comprises the following members and details of attendance of each member at meeting held during the year ended 31 March 2006 are as follows: Number of Meetings Members Status of directorship Held Attended George Isac Pereire* Independent Non-Executive Director 5 5 Dato Mohd. Nor Mohamad Non-Executive Director 5 5 Chan Kok Seong Non-Executive Director 5 5 * Chairman During the year, the Committee had fulfilled its obligations as required under its terms of reference. The following is a summary of the main responsibility of the Committee: (a) (b) (c) (d) (e) (f) (g) (h) (i) Ensure the IAD is distinct and has appropriate status within the Company and ensure an effective organisation of the internal audit function. Review and approve the audit plan, audit charter and budget. Review the scope of internal audit procedures including appropriateness of risk management methodology employed by the IAD and ensures compliance with the internal auditing standards. Ensure being adequately informed and understand the risks and implications of internal audit findings and recommendations and that it is resolved effectively and in a timely manner. Ensure on on-going basis that the IAD has adequate and competent resources as well as necessary training for the staff to performs audit works and also there is a programme of continuing education and training. Review and assess various relationships between external auditor and the Company and the fees paid to them. Review the annual audit plan, financial statements and audit reports with the external auditor. Review the Chairman s statement, interim financial report and preliminary announcements. Submit the AC annual report and its activities to BNM pursuant to Principle 18 of JPI/GPI

13 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) All activities carried out by the Audit Committee have been reported to Bank Negara Malaysia in compliance with JPI/GPI 25 requirements. B The Nomination Committee The primary objective of the Committee is to establish a documented, formal and transparent procedure for the appointment of new Directors, CEO and key Senior Officers. It is also a process of reviewing the balance and assesses the effectiveness of each of the individual Directors, the Board as a whole and the various Committees of the Board, the CEO and the key Senior Officers. This Committee comprises the following members and details of attendance of each member at meeting held during the year ended 31 March 2006 are as follows: Number of Meetings Members Status of directorship Held Attended George Isac Pereire* Independent Non-Executive Director 3 3 Dato Maznah Abdul Jalil Non-Executive Director 3 3 David Chan Mun Wai Non-Executive Director 3 3 Dato Mohd. Nor Mohamad Non-Executive Director 3 3 Datuk Abdul Shukor Hassan Non-Executive Director 3 3 * Chairman During the year, the Committee had fulfilled its obligations as required under its terms of reference. The following is a summary of the main responsibility of the Committee: (a) (b) (c) (d) (e) (f) (g) (h) To establish minimum requirements for the Board and the CEO to perform their responsibilities effectively; Review annually and overall composition of the Board in terms of appropriate size and skills, the balance between Non-Executive Directors, Executive Director and Independent Non-Executive Directors; Recommend and assess the elected or re-elected nominees for directorship, the various Board committees membership as well as nominees for the CEO and key Senior Officer s position. This includes assessing Directors and CEO proposed for reappointment, before an application for approval is submitted to BNM; Establish a mechanism for formal assessment and assessing the effectiveness of the Board as a whole, the contribution by each Director to the effectiveness of the Board, the contribution of the Board s various committees, the performance of CEO and key Senior Officers; Recommend to the Board on removal of a Director, the CEO or any key Senior Officers if it is clearly proven that the he/she is ineffective, errant or negligent in discharging his/her responsibilities; Ensure all Directors undergo appropriate induction programmes and receive continuous training; Oversee appointment, management succession planning and performance evaluation of key Senior Officers. Detail out items to be published in the Company s Annual Report relating to the activities of the Committee. 11

14 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) C The Remuneration Committee The primary objectives of the Committee is to establish a documented, formal and transparent procedure for developing a remuneration policy for Directors, CEO and key Senior Officers and ensuring that their compensation is competitive and consistent with the Company s culture, objectives and strategy. This Committee comprises the following members and details of attendance of each member at meeting held during the year ended 31 March 2006 are as follows: Number of Meetings Members Status of directorship Held Attended George Isac Pereire* Independent Non-Executive Director 2 2 Dato Maznah Abdul Jalil Non-Executive Director 2 2 Lawrence Pereira Non-Executive Director 2 2 Datuk Abdul Shukor Hassan Non-Executive Director 2 2 * Chairman During the year, the Committee had fulfilled its obligations as required under its terms of reference. The following is a summary of the main responsibility of the Committee: (a) Recommend a framework of remuneration for Directors, CEO and key Senior Officers. The remuneration policy shall: Be documented and approved by the full Board and any changes thereto should be subjected to the endorsement of the full Board; Reflect the experience and level of responsibility borne by Individual Directors, the CEO and key Senior Officers; Be sufficient to attract and retain Directors, CEO and key Senior Officers of calibre needed to manage the company successfully; Be balanced against the need to ensure that the fund of the company is not used to subsidise excessive remuneration packages. (b) Recommend specific remuneration packages for Directors, CEO and key Senior Officers. The remuneration packages shall: Be based on an objective consideration and approved by the full Board; Take due consideration of the assessments of the nominating committee of the effectiveness and contribution of the Director, CEO or key Senior Officers concerned; Not be decided by the exercise of sole discretion of any one individual or restricted group of individuals; and Be competitive and is consistent with the company s culture, objective and strategy. 12

15 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) C The Remuneration Committee (continued) (c) (d) (e) (f) Ensure the remuneration packages for Executive Directors shall be structured to link rewards to corporate and individual performances to encourage high performance standards. The rewards-to-performance linkages shall not create incentives for irresponsible behaviour and insider excesses. Ensure the remuneration packages for Non-Executive Directors and Independent Directors shall be linked to their level of responsibilities undertaken and contribution to the effective functioning of the Board. Review and recommend the human resources policies and guidelines including compensation and benefits structure for Board s approval. Detail out items to be published in the Company s Annual Report relating to the activities of the Committee. D Risk Management Committee The primary objective of the Committee is to establish a documented, formal and transparent procedure to provide opportunities for focusing on improving the quality of governance and risk management in the Company. This Committee comprises the following members and details of attendance of each member at meeting held during the year ended 31 March 2006 are as follows: Number of Meetings Members Status of directorship Held Attended George Isac Pereire* Independent Non-Executive Director 5 5 David Chan Mun Wai Non-Executive Director 5 5 Dato Mohd. Nor Mohamad Non-Executive Director 5 5 Datuk Abdul Shukor Hassan Non-Executive Director 5 5 * Chairman During the year, the Committee had fulfilled its obligations as required under its terms of reference. The following is a summary of the main responsibility of the Committee: (a) (b) (c) (d) (e) Review and recommend risk management strategies, policies and risk tolerance for the Board s approval; Review and assess the adequacy of risk management policies and framework for identifying, measuring, monitoring and controlling risks as well as the extent to which these are operating effectively; Ensure adequate infrastructure, resources and systems are in place for an effective risk management; Ensure the risk management induction, training and education programmes, targeted appropriately for all levels of staff, are established and implemented; Review the management s periodic reports on risk exposure, risk portfolio composition and risk management activities. 13

16 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) E The Executive Committee The objectives of the Committee are: To ensure that the broad policies and basic objectives of the Company as set out by the Board are carried out by the Management. To assist the Board in overseeing the operations of the Company. The Committee meets on a monthly basis to review matters relevant to the operations of the Company, empowered by the Board with relevant authority for effective and efficient decision-making. The minutes of Committee were circulated to all members of the Committee and to the Chairman of the Board and made available on request to other members of the Board. The Committee comprises the following members and details of attendance of each member at meeting held during the year ended 31 March 2006 are as follows: Number of Meetings Members Status of directorship Held Attended Dato Maznah Abdul Jalil* Non-Executive Director George Isac Pereire** Independent Non-Executive director Chan Kok Seong Non-Executive Director Hashim Harun Managing Director/Chief Executive Officer * Chairman ** Resigned on 26 th January 2006 During the year, the Committee had fulfilled its obligations as required under its terms of reference. The following is a summary of the main responsibility of the Committee: (a) (b) (c) (d) (e) (f) (g) (h) (i) Monitor that the Company practices are in strict compliance with laws and regulatory requirements. Review and monitor on regular basis the operation, solvency position and financial performance of the Company. Review and recommend for approval by the Board on financial, underwriting and claims policies, guidelines and controls. Review and recommend to the Board, proposals by management on matters related to annual budget, business/corporate plans, financial accounts and management information system. Monitor the profitability and performance of the Company and its group, and where necessary to call for management s appropriate action. Being informed and consulted in respect of any matter of significant importance for ramification. Exercise the financial and administration authority limit, underwriting authority limit and claims approval mandate. Recommend to the Board the payment and approval of interim and final dividends. Any matters that may be delegated by the Board from time to time. 14

17 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) F The Claims and Underwriting Committee The Committee is responsible to assist the Board and Management in the effective discharge of its strategic responsibilities and accountabilities in the areas of claims and underwriting of the Company. The Committee reports to the Board of the results, observations and recommendations arising from the review of the above for deliberation and formalisation by the Board. In discharging its duties, the Committee provides professional directions to the state of affairs of the Company where it is heading in the areas of claims and underwriting. This Committee comprises the following members and details of attendance of each member at meeting held during the year ended 31 March 2006 are as follows: Number of Meetings Members Status of directorship Held Attended Lawrence Pereira* Non-Executive Director David Chan Mun Wai Non-Executive Director Datuk Abdul Shukor Hassan Non-Executive Director Hashim Harun Managing Director/Chief Executive Officer * Chairman G The Investment Committee The Committee is empowered by the Board to assist the Board and Management in the effective discharge of its strategic responsibilities and accountabilities in the areas of investment of the Company. The Committee reports to the Board the results, observations and recommendations for deliberation and formalisation by the Board pertaining to the investment activities of the Company. This Committee comprises the following members and details of attendance of each member at meeting held during the year ended 31 March 2006 are as follows: Number of Meetings Members Status of directorship Held Attended Dato Maznah Abdul Jalil* Non-Executive Director George Isac Pereire** Independent Non-Executive Director 11 9 Chan Kok Seong Non-Executive Director Hashim Harun Managing Director/Chief Executive Officer Habshah Mohamed GM, Finance & Administration * Chairman ** Resigned on 26 th January

18 DIRECTORS' REPORT (CONTINUED) CORPORATE GOVERNANCE (CONTINUED) G The Investment Committee (continued) During the year, the Committee had fulfilled its obligations as required under its terms of reference. The following is a summary of the main responsibility of the Committee: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) Report to the Board on the results, observations and recommendation every quarter for deliberation and formalisation by the Board. Review and recommend for approval of the Administrative Guideline on investment to Board. Establish investment strategy and obtain approval from the Board and regularly review the changing market and economic conditions. Assist and advise the Board in the setting of investment objectives, targets and on overall assets allocation. Setting up management control procedures and monitoring these procedures. Setting short-term variations from the long-terms targets set by the Board and communicating these to the Head of Investment. Review sectoral allocation as recommended by the Head of Investment. Review approved securities and money market instruments recommended by the Head of Investment and setting investment criteria. Monitoring the investment portfolio to ensure conformity with overall objectives and statutory requirements. Review and decide on critical investment issues as and when the need arises. All investment risks must be recognised, systematically identified, prioritised according to their significance and implications, and manage as best as possible. Set the authorisation limits and draw up the reporting requirements. Nominate and reviews authorise dealers, fund managers and custodian account when the need arises. 16

19 DIRECTORS' REPORT (CONTINUED) DIRECTORS The Directors who have held office during the period since the date of the last report are: Dato Maznah Abdul Jalil Dato Mohd. Nor Mohamad Lawrence Pereira Datuk Abdul Shukor Hassan George Isac Pereire Hashim Harun Chan Kok Seong David Chan Mun Wai In accordance with the Company s Article of Association, Lawrence Pereira, Datuk Abdul Shukor Hassan and George Isac Pereire retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. DIRECTORS INTERESTS According to the register of Directors' shareholdings, the interests of Directors in office at the end of the year in shares in the Company and in shares and options over shares in its related corporations were as follows: In the Company Number of Ordinary Shares of RM1.00 each As at As at Acquired Disposed Direct: George Isac Pereire 2,052, ,052,381 Indirect: Lawrence Pereira* 9,850, ,850,000 Datuk Abdul Shukor Hassan** 10,003, ,003,175 In DRB-HICOM Berhad (Ultimate Holding Company) Direct: Dato' Maznah Abdul Jalil 500, , , ,500 Dato Mohd. Nor Mohamad 72,000 14,000-86,000 George Isac Pereire 74, ,000 Chan Kok Seong 5, ,000 17

20 DIRECTORS' REPORT (CONTINUED) DIRECTORS INTERESTS (CONTINUED) In DRB-HICOM Berhad (Ultimate Holding Company) Options over Ordinary Shares of RM1.00 each As at As at Offered Exercised Dato Maznah Abdul Jalil 104, ,000 - Dato Mohd. Nor Mohamad 14,000-14,000 - * Deemed interest by virtue of his interest in the shares of Emaco Sdn Bhd in accordance with Section 6A(4) of the Companies Act, ** Deemed interest by virtue of his interest in the shares of Salinah Enterprise Sdn Bhd in accordance with Section 6A(4) of the Companies Act, None of the other Directors in office at the end of the year held any interests in the shares and/or options over shares in the Company or in its related corporations during the year. DIRECTORS' BENEFITS During and at the end of the year, no arrangements subsisted to which the Company is a party, 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, other than the options over shares granted by its ultimate holding company, DRB-HICOM Berhad, to certain Directors of the Company pursuant to DRB-HICOM Berhad s Employees Share Option Scheme. Since the end of the previous year, no Director of the Company has received or become entitled to receive any benefit (other than Directors remuneration and benefits provided to Directors disclosed in Note 17 to the financial statements) by reason of a contract made by the Company or a related corporation with a 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, except for any deemed benefits that may accrue to a Director by virtue of normal trade transactions between the Company and companies in which the Director has significant equity interest. 18

21 DIRECTORS' REPORT (CONTINUED) IMMEDIATE HOLDING COMPANY AND ULTIMATE HOLDING COMPANY The immediate holding company is Uni.Asia Capital Sdn. Bhd. The Directors regard DRB-HICOM Berhad as the ultimate holding company of the Company. Both companies are incorporated in Malaysia. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. In accordance with a resolution of the Board of Directors dated 31 May DATO' MAZNAH ABDUL JALIL DIRECTOR DAVID CHAN MUN WAI DIRECTOR Kuala Lumpur 19

22 BALANCE SHEET AS AT 31 MARCH 2006 ASSETS Note RM 000 RM 000 Property, plant and equipment 3 56,425 53,213 Investments 4 490, ,656 Loans 5 1, Amount due from immediate holding company Subsidiary companies 6-86 Deferred tax assets 8 3,760 7,018 Receivables 9 43,838 37,362 Cash and bank balances 3,510 5,497 Total assets 599, ,785 LIABILITIES Provision for outstanding claims , ,933 Payables 11 30,207 31,727 Post employment benefit obligations 12 1,181 1,070 Current tax liabilities 5,079 8, , ,248 Unearned premium reserves , ,729 Total liabilities 390, ,977 SHAREHOLDERS EQUITY Share capital , ,000 Reserves ,716 85, , ,808 Total liabilities and shareholders equity 599, ,785 The accompanying notes form an integral part of these financial statements. 20

23 INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2006 Note RM 000 RM 000 Operating revenue , ,651 Shareholders fund: Management expenses 17 (2,202) (1,069) Other operating expense - net 19 (11) (1) (2,213) (1,070) Surplus transferred from Revenue Account 63,491 60,094 Profit before taxation 61,278 59,024 Taxation 20 (19,685) (9,762) Net profit for the year 41,593 49,262 Earnings per share (sen) The accompanying notes form an integral part of these financial statements. 21

24 GENERAL INSURANCE REVENUE ACCOUNT FOR THE YEAR ENDED 31 MARCH 2006 Marine, Aviation Misce- Note Fire Motor & Transit llaneous Total RM'000 RM'000 RM'000 RM'000 RM'000 Gross premium 45, ,944 8,974 28, ,654 Reinsurance (20,730) (15,207) (7,014) (9,599) (52,550) Net premium 24, ,737 1,960 18, ,104 (Increase)/decrease in unearned premium reserves 13 (1,236) (15,934) 273 (866) (17,763) Earned premium 23, ,803 2,233 17, ,341 Net claims incurred 23 (7,966) (143,822) (891) (12,063) (164,742) Net commission (1,929) (23,284) (6) (2,325) (27,544) Underwriting surplus before management expenses 13,647 80,697 1,336 3,375 99,055 Management expenses 17 (55,400) Underwriting surplus 43,655 Investment income 18 19,732 Other operating income - net Surplus transferred to Income Statement 63,491 The accompanying notes form an integral part of these financial statements. 22

25 GENERAL INSURANCE REVENUE ACCOUNT FOR THE YEAR ENDED 31 MARCH 2005 Marine, Aviation Misce- Note Fire Motor & Transit llaneous Total RM'000 RM'000 RM'000 RM'000 RM'000 Gross premium 37, ,476 9,838 37, ,040 Reinsurance (21,105) (14,969) (6,947) (19,219) (62,240) Net premium 16, ,507 2,891 18, ,800 Decrease/(increase) in unearned premium reserves (7,881) (115) 2,375 (4,759) Earned premium 17, ,626 2,776 20, ,041 Net claims incurred 23 (5,062) (133,951) (1,206) (7,877) (148,096) Net commission (2,521) (16,847) (150) (1,512) (21,030) Underwriting surplus before management expenses 9,663 62,828 1,420 11,004 84,915 Management expenses 17 (47,944) Underwriting surplus 36,971 Investment income 18 18,611 Other operating income - net 19 4,512 Surplus transferred to Income Statement 60,094 The accompanying notes form an integral part of these financial statements. 23

26 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2006 Issued and fully paid ordinary shares Nonof RM1 each distributable Distributable Asset Number Nominal revaluation Retained Note of shares value reserve earnings Total 000 RM'000 RM'000 RM'000 RM 000 At 1 April , ,000 2,486 83, ,808 Surplus on revaluation of properties - - 2,937-2,937 Transferred to deferred tax - - (822) - (822) Net profit for the year ,593 41,593 Dividends: 22 - final for year ended 31 March (13,600) (13,600) - interim for year ended 31 March (7,200) (7,200) At 31 March , ,000 4, , ,716 At 1 April , ,000 2,677 62, ,671 Realisation of revaluation surplus net of tax of investment property, plant and equipment on disposal - - (191) Reversal of deferred tax liabilities on revaluation surplus of property, plant and equipment upon disposal Net gain not recognised in income statement - - (191) Net profit for the year ,262 49,262 Dividends: 22 - final for year ended 31 March (22,000) (22,000) - interim for year ended 31 March (7,200) (7,200) At 31 March , ,000 2,486 83, ,808 The accompanying notes form an integral part of these financial statements. 24

27 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2006 CASH FLOWS FROM OPERATING ACTIVITIES Note RM 000 RM 000 Net profit for the year 41,593 49,262 Adjustments for non-cash items 24 19,988 (9,007) 61,581 40,255 Increase in loans (130) (358) Decrease in fixed and call deposits 31,666 6,784 Purchase of investments (140,883) (147,839) Proceeds from disposal of investments 71, ,811 Proceeds from maturity of investments 10,000 40,000 Interest income received 17,767 15,261 Dividend income received 2,040 1,179 Other investment income received (54) 304 Post employment benefit obligations - (5,436) (Increase)/decrease in amount due to holding company (3) 1 (Increase)/decrease in trade receivables (3,506) 15,350 Decrease in trade payables (70) (7,718) Decrease in provision for outstanding claims (7,502) (30,637) Decrease/(increase) in other receivables 34 (725) Decrease in other payables (1,449) (578) Cash generated from operations 40,580 46,654 Tax paid (20,688) (17,373) Net cash inflow from operating activities 19,892 29,281 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (1,709) (3,057) Proceeds from disposal of property, plant and equipment 40 1,705 Proceeds from disposal of associated company Proceeds from disposal of subsidiary companies Net cash outflow from investing activities (1,079) (1,352) The accompanying notes form an integral part of these financial statements. 25

28 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2006 (CONTINUED) CASH FLOWS FROM FINANCING ACTIVITIES Note RM 000 RM 000 Dividends paid (20,800) (29,200) Net cash outflow from financing activities 25 (20,800) (29,200) NET DECREASE IN CASH AND CASH EQUIVALENTS 25 (1,987) (1,271) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 25 5,497 6,768 CASH AND CASH EQUIVALENTS AT END OF YEAR 25 3,510 5,497 The accompanying notes form an integral part of these financial statements. 26

29 NOTES TO THE FINANCIAL STATEMENTS 31 MARCH PRINCIPAL ACTIVITIES AND GENERAL INFORMATION The Company is principally engaged in the underwriting of all classes of general insurance business. The principal activities of the subsidiary companies and an associated company are disclosed in Note 6 and 7, respectively to the financial statements. There have been no significant changes in the nature of these activities during the year. The Company is a public limited liability company incorporated and domiciled in Malayisa. The registered office and principal place of business of the Company is located at 9th Floor, Menara Uni.Asia, 1008 Jalan Sultan Ismail, Kuala Lumpur, Malaysia. The immediate holding company is Uni.Asia Capital Sdn. Bhd. The Directors regard DRB-HICOM Berhad as the ultimate holding company of the Company. Both companies are incorporated in Malaysia. The number of employees as at the end of the year in the Company was 760 (2005: 770). The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 31 May SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. (a) Basis of preparation The financial statements of the Company are prepared under the historical cost convention modified by the revaluation of certain land and buildings included in property, plant and equipment and investment properties, and comply with Malaysian Accounting Standards Board ( MASB ) approved accounting standards in Malaysia, the provisions of the Companies Act, 1965, the Insurance Act, 1996 and relevant Guidelines and Circulars issued by Bank Negara Malaysia ( BNM ) in all material aspects. The preparation of the financial statements in conformity with the provisions of the Companies Act, 1965 and MASB approved accounting standards in Malaysia requires the use of estimates and assumptions that affect the reported amount 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 year. Although these estimates are based on the Directors best knowledge of current events and actions, actual results may differ from estimates. 27

30 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Basis of consolidation Consolidated financial statements have not been prepared as all of the Company s subsidiary companies were placed under voluntary liquidation which have impaired the Company s ability to exercise its control over the financial and operating policies of the subsidiary companies so as to obtain benefit from the subsidiary companies activities, as permitted under FRS 122 (formerly known as MASB 11) - Consolidated Financial Statements and Investments in Subsidiaries. The financial statements of the subsidiary companies as disclosed in Note 6 that have not been consolidated are annexed as required by the Ninth Schedule of the Companies Act, (c) Subsidiary companies Subsidiary companies are those companies in which the Company has power to exercise control over the financial and operating policies so as to obtain benefits from their activities. Investments in subsidiary companies are stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 2(g) on impairment of assets. (d) Property, plant and equipment Property, plant and equipment are stated at cost or valuation, less accumulated depreciation and accumulated impairment losses. Freehold and leasehold land and buildings are stated at Directors valuation based upon the latest independent valuation on the open market value basis by professional valuers after approval by the relevant government authorities, with subsequent additions stated at cost. These properties are revalued at regular intervals of at least once in every three years by independent professional valuers with additional valuation in the intervening years where market conditions indicate that the carrying values of the revalued assets differ materially from market values. Surpluses arising from revaluation of these properties are credited directly to an asset revaluation reserve account. Surpluses arising from revaluation of these properties are credited to the revenue account and/or income statement to the extent that they offset any previously recorded deficits on that same asset. Deficits arising from revaluation of these properties are charged against the asset revaluation reserve account to the extent of a previous surplus held in that account for that same asset. In all other cases, deficits arising from revaluation of these properties are recognised as an expense in the revenue account and/or income statement. 28

31 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Property, plant and equipment (Continued) Freehold land is not depreciated. Depreciation is provided on a straight line basis so as to write off the cost of the other property, plant and equipment over the estimated useful lives of the assets. The annual depreciation rates used are: Freehold buildings 2% Long term leasehold land and buildings 2% Motor vehicles 20% Office equipment, furniture and fittings 5% to 10% Office renovation 10% Computer equipment 20% At each balance sheet date, the Company assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 2(g) on impairment of assets. Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are credited or charged to the income statement and/or revenue account. On disposal of revalued assets, the revaluation surplus relating to those assets is transferred to retained earnings. Repairs and maintenance are charged to the revenue account and/or income statement during the year in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Company. Major renovations are depreciated over the remaining useful life of the related assets. (e) Investments properties Investment properties are stated at Directors' valuation based upon the latest independent valuation on the open market value basis by professional valuers after approval by the relevant government authorities, with subsequent additions stated at cost. These properties are revalued at regular intervals of at least once in every three years by independent professional valuers with additional valuation in the intervening years where market conditions indicate that the carrying values of the revalued assets differ materially from market values. Surpluses arising from revaluation of investment properties are credited directly to an asset revaluation reserve account. Surpluses arising from revaluation of investment properties are credited to the revenue account and/or income statement only to the extent that they offset any previously recorded deficits on that same asset. Deficits arising from revaluation of investment properties are charged against the asset revaluation reserve account to the extent of a previous surplus held in that account for that same asset. In all other cases, deficits arising from revaluation of these properties are recognised as an expense in the revenue account and/or income statement. 29