ANNUAL REPORT 2017

TIME-tested
 The majestic Banyan tree has been chosen to represent the core values of
DRB-HICOM Berhad (“DRB-HICOM”). Well-known for its commanding
presence and certainly resilience, the oldest Banyan in India has been
recorded to be over 200 years old. The tree is also known for its strength and
ability to reproduce aerial roots that finds its way down to strengthen its core. This
reflects DRB-HICOM’s key characteristics of consistently adding value through
diversifying its activities, branching out into new revenue sources while at the same
time strengthening its core.

Just like the Banyan tree, DRB-HICOM has withstood challenges and is time-tested.
The tree’s rich historical value bodes well with the Group’s business practice
which has persisted over 107 years. Like the strong branches of the Banyan,
DRB-HICOM is strengthened by over 80 operating companies, which employ an
estimated 60,000 talents; cultivating opportunities especially in its core business industries.
The creative concept is adapted throughout this annual report.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 1

Highlights Perspective
4 Notice of Annual General Meeting 96 Chairman’s Foreword
9 Statement Accompanying the 100 Management Discussion and Analysis (MD&A)
Notice of Annual General Meeting
110 Automotive Sector
124 Services and Education Sector

Corporate 130 Property, Asset and Construction Sector

Disclosure
12
14
Vision and Mission
Corporate Profile
Key Initiatives
134 Human Capital Development
18 Calendar of Events
140 Sustainability Report
26 Financial Calendar
27 Corporate Information
28 Group Corporate Structure
Financial
CONTENT

30 Investor Relations

Statements
Performance 162 Directors’ Report
168 Statements of Comprehensive Income
Review 170 Consolidated Statement of Financial Position
36 Group 5 Years Financial Highlights 172 Company Statement of Financial Position
173 Consolidated Statement of Changes in Equity

Leadership 176 Company Statement of Changes in Equity

177 Statements of Cash Flows
40 Profile of Directors
182 Notes to the Financial Statements
46 Profile of Key Senior Management
351 Supplementary Information on the Breakdown
48 Profile of Key Senior Management of
of Realised and Unrealised Profits
Principal Subsidiaries
352 Statement by Directors
50 Board of Management
352 Statutory Declaration
52 Management Team
353 Independent Auditors’ Report

Accountability
56 Statement on
Corporate Governance
RELATED
73 Directors’ Statement on Risk
Management and Internal Control
Information
364 Analysis of Shareholdings
79 Audit Committee Report
368 Share Performance Chart
84 Additional Compliance Information
369 Material Properties of DRB-HICOM Group
86 Statement of Directors’
Form of Proxy
Responsibility
87 Risk Management
 DRB-HICOM BERHAD
2 ANNUAL REPORT 2017

ALLOWING THE RIGHT AMOUNT

OF LIGHT to SHINE THROUGH,
CAPTURES OUR BEST
ACHIEVEMENTS
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 3

highlights
 DRB-HICOM BERHAD
4 ANNUAL REPORT 2017

NOTICE OF ANNUAL

NOTICE IS HEREBY GIVEN THAT the Twenty-Seventh Annual General Meeting (“27th AGM”) of DRB-HICOM Berhad (“the Company”) will be held
at Glenmarie Ballroom, Holiday Inn Kuala Lumpur Glenmarie, No. 1, Jalan Usahawan U1/8, Seksyen U1, 40250 Shah Alam, Selangor Darul
Ehsan on Wednesday, 30 August 2017 at 9.00 a.m. for the purpose of transacting the following businesses:

ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 31 March 2017 together with the Reports of the Directors and
Auditors thereon. (Please refer to Note 1)

2. To approve the declaration of a single tier first and final dividend of 1.0 sen per share in respect of the financial year ended
31 March 2017. (Resolution 1)

3. To re-elect the following Directors who retire by rotation in accordance with Article 79 of the Company’s Constitution and who being
eligible, offered themselves for re-election:

(i) YBhg Dato’ Ibrahim bin Taib (Resolution 2)

(ii) YBhg Datuk Ooi Teik Huat. (Resolution 3)

4. To re-elect YBhg Datuk Idris bin Abdullah, who retires in accordance with Article 85 of the Company’s Constitution and who being
eligible, offered himself for re-election. (Resolution 4)

5. To approve the payment of Directors’ fees of RM744,570 to the Non-Executive Directors in respect of the financial year ended
31 March 2017. (Resolution 5)

6. To approve the payment of Directors’ fees to the Non-Executive Directors for an amount of up to RM959,000 from 1 April 2017 until
the conclusion of the next Annual General Meeting of the Company. (Resolution 6)

7. To approve the payment of benefits (excluding Directors’ fees) to the Non-Executive Directors for an amount of up to RM2,800,000
from 31 January 2017 until the conclusion of the next Annual General Meeting of the Company. (Resolution 7)

8. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending 31 March 2018 and to authorise the Board
of Directors to fix their remuneration. (Resolution 8)
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 5

SPECIAL BUSINESS

To consider and if thought fit, to pass the following Ordinary Resolution, with or without any modifications:

9. Continuation in office as Independent Non-Executive Director

“THAT subject to the passing of Resolution 3, approval be and is hereby given to YBhg Datuk Ooi Teik Huat, who will reach the nine (9)
years tenure as an Independent Non-Executive Director on 1 November 2017, to continue to act as the Senior Independent
Non-Executive Director of the Company until the conclusion of the next Annual General Meeting in accordance with the Malaysian Code
on Corporate Governance.” (Resolution 9)

10. To transact any other business of which due notice shall have been given in accordance with the Companies Act 2016 and the
Company’s Constitution.

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT the single tier first and final dividend of 1.0 sen per share in respect of the financial year ended
31 March 2017, if approved by the shareholders at the 27th AGM, will be paid on 3 October 2017 to the shareholders whose names appear in
the Record of Depositors of the Company at the close of business on 12 September 2017.

A depositor shall qualify for entitlement to the dividend only in respect of:

(a) shares deposited into the depositor’s securities account before 12.30 p.m. on 8 September 2017 in respect of shares which are
exempted from mandatory deposit;

(b) shares transferred into the depositor’s securities account before 4.00 p.m. on 12 September 2017 in respect of ordinary transfers; and

(c) 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

DATO’ CAROL CHAN CHOY LIN (MIA 3930)

Company Secretary

Shah Alam, Selangor Darul Ehsan

31 July 2017
 DRB-HICOM BERHAD
6 ANNUAL REPORT 2017
NOTES:
1. Audited Financial Statements
This agenda item is meant for discussion only as the provision of
Section 340(1)(a) of the Companies Act 2016 (“Act”) does not require
the Audited Financial Statements to be formally approved by the
shareholders. Hence, this item is not put forward for voting. Malaysia
2. Re-election of Directors
Article 79 of the Company’s Constitution provides that at the
Annual General Meeting (“AGM”) of the Company, one-third (1/3) or the
number nearest to one-third (1/3) of the Directors for the time
being, shall retire from office so that all the Directors shall retire
from office once at least in every three (3) years. Article 80 provides
that a retiring Director shall be eligible for re-election.
Article 85 of the Company’s Constitution provides that any Director
appointed during the year shall hold office only until the next AGM,
and shall then be eligible for re-election.
The Directors who are subject to re-election at the 27th AGM of the
Company are as follows:
 
(a) Article 79 - Retirement by rotation
(i) YBhg Dato’ Ibrahim bin Taib
(ii) YBhg Datuk Ooi Teik Huat
(b) Article 85 – Retirement by casual vacancy
YBhg Datuk Idris bin Abdullah (Appointed on 1 January 2017)
All Directors standing for re-election as Directors and being eligible,
have offered themselves for re-election at the 27th AGM of the
Company.
The Board through the Nomination and Remuneration Committee
(“NRC”) had considered the eligibility and suitability of the Directors
who are subject to re-election in accordance with Articles 79 and
85 of the Company’s Constitution. The Board is of the opinion
that the Directors meet the criteria of character, skill, experience,
integrity, competence and time commitment to effectively discharge
their roles as Directors and has recommended for the shareholders’
approval, the re-election of the said Directors at the 27th AGM of the
Company.
In addition, the NRC had assessed and the Board had endorsed that
the Independent Directors who are seeking for re-election at the
27th AGM of the Company comply with the independence criteria
prescribed in the Main Market Listing Requirements of Bursa
Securities Berhad and that they have remained
independent in exercising their objective judgement in carrying out
their duties as Independent Directors.
3. Directors’ fees and benefits
With the enforcement of the Act effective 31 January 2017,
Section 230(1)(b) of the Act provides that the fees of the directors
and any benefits payable to the directors of a listed company and its
subsidiaries shall be approved at a general meeting. Accordingly, the
Company is seeking the shareholders’ approval at the 27th AGM on the
following resolutions:
(a) Resolution 5 - Payment of Directors’ fees to Non-Executive
Directors (“NEDs”) in respect of the financial year ended (“FYE”)
31 March 2017 (12 months)
The total Directors’ fees of RM744,570 (12 months) is inclusive
of the annual fees to the NEDs as members of the Board and
Board Committees as well as the pro-rated fees to the former
and newly appointed NEDs of the Company for FYE 31 March
2017.
The annual Directors’ fees structure for FYE 31 March 2017 has
remained unchanged as per the preceding FYE 31 March 2016
as follows:
(b) Resolution 6 - Payment of Directors’ fees to NEDs from 1 April
2017 until the conclusion of the next AGM of the Company to
be held by September 2018 pursuant to the Act (18 months)
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 7

The proposed Directors’ fees for an estimated amount of up In determining the estimated total amount of benefits
to RM959,000 to the NEDs from 1 April 2017 until the conclusion payable to the NEDs of the Company, the Board had
of the next AGM of the Company (18 months) is based on considered various factors including the number of
the existing fees structure as shown in Item 3(a) above. scheduled meetings for the Board, Board Committees,
The Board also took into consideration the potential increase Board of subsidiary and general meetings as well as the
in the required number of Board members in compliance with number of NEDs involved in these meetings. The Board
the recommendation of the Malaysian Code on Corporate also took into consideration the potential increase in the
Governance (“MCCG”) which stipulates that for large companies, required number of Board members in compliance with
the Board should comprise a majority of independent directors. the MCCG.

(c) Resolution 7 - Payment of benefits to NEDs from 31 January The proposed Resolutions 6 and 7, if passed, will give authority to
2017 until the conclusion of the next AGM of the Company to the Company to pay the Directors’ fees and benefits on a quarterly/
be held by September 2018 pursuant to the Act (20 months) monthly basis and/or as and when incurred based on the present
Directors’ fees and benefits structure, since the NEDs have discharged
The Directors’ benefits (excluding Directors’ fees) payable to the their responsibilities and rendered their services to the Company and
NEDs by the Company and its subsidiaries for an estimated its subsidiaries throughout the period.
amount of up to RM2,800,000 for the 20 months
comprise the following: 4. Continuation in office as Independent
Non-Executive Director

Practice 4.2 of the MCCG provides that shareholders’ approval can

be sought in the event that the Company intends for an independent
director who has served in that capacity for more than nine (9) years,
to continue to act as Independent Director of the Company.

The Board is recommending to the shareholders for YBhg Datuk Ooi

Teik Huat, who will reach the nine (9) years tenure as an Independent
Non-Executive Director on 1 November 2017, to continue to act as
the Senior Independent Non-Executive Director of the Company. The
Board through the NRC had assessed and endorsed that YBhg Datuk
Ooi Teik Huat be retained as the Senior Independent Non-Executive
Director of the Company as he has continued to display high level of
integrity and is objective in his judgement and decision making in the
The Group Managing Director does not receive any best interest of the Company, shareholders and stakeholders and is
Directors’ benefits. The monthly allowance and leave able to express unbiased views without any influence. The detailed
passage accorded to the Non-Executive Chairman is for his justifications of the Board for making such recommendation are set
role and responsibilities as the Advisor of DRB-HICOM and out in the Annual Report 2017 of the Company.
its key group companies in all matters concerning the
interests and business of the Group, including overall 5. Re-appointment of Auditors
stakeholder management particularly the governmental
and regulatory authorities and customers. The Board through the Audit Committee had assessed the suitability
and independence of the external auditors, Messrs Ernst & Young
(“EY”) and the Board is satisfied that EY is suitably qualified for
re-appointment as Auditors of the Company and recommended
 DRB-HICOM BERHAD
8 ANNUAL REPORT 2017
the same for the shareholders’ approval at the 27th AGM of the
Company.
6. 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) Where a member of the Company is an authorised nominee,
as defined under the Securities Industry (Central Depositories)
Act 1991, it may appoint not more than two (2) proxies in
respect of each securities account it holds to which ordinary
shares in the Company are credited.
(c) For an exempt authorised nominee which holds ordinary
shares in the Company for multiple beneficial owners in one (1)
securities account (omnibus account), there is no limit to the
number of proxies which the exempt authorised nominee may
appoint in respect of each omnibus account it holds.
(d) 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.
7. General Meeting Record of Depositors
For the purpose of determining a member who shall be entitled to attend the 27th AGM, the Company shall be requesting Bursa Malaysia
Depository Sdn. Bhd. to issue a General Meeting Record of Depositors as at 23 August 2017. Only a depositor whose name appears therein
shall be entitled to attend the 27th AGM or appoint a proxy(ies) to attend and vote on such depositor’s behalf.
(e) Where a member/an authorised nominee/an exempt
authorised nominee appoints proxies, the proportion of
shareholdings to be represented by each proxy must be
specified in the instrument appointing the proxies. If the form
of proxy is returned without an indication as to how the proxy
shall vote on any particular matter, the proxy may exercise
his/her discretion as to whether to vote on such matter and if so,
how.
(f) A proxy appointed to attend and vote at the meeting shall have
the same rights as the member to speak at the meeting. The
lodging of a form of proxy does not preclude a member from
attending and voting in person at the meeting should the
member subsequently decide to do so.
(g) 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 office of the
Share Registrar, Symphony Share Registrars Sdn. Bhd., Level 6,
Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46,
47301 Petaling Jaya, Selangor Darul Ehsan (Tel: 03-7849 0777)
not less than forty-eight (48) hours before the time set for
holding this meeting or adjourned meeting, or in the case of a
poll, not less than twenty-four (24) hours before the time
appointed for the taking of a poll, and in default the instrument
of proxy shall not be treated as valid.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 9

(Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad)

No notice in writing has been received by the Company nominating any candidate for election as Director at the 27th AGM of the Company.
The Directors who are due for retirement and seeking for re-election pursuant to the Company’s Constitution are as set out in the Notice of
27th AGM.
 DRB-HICOM BERHAD
10 ANNUAL REPORT 2017

The true strength of an

organisation is MEASURED by its
experience and inner workings
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 11

disclosure
CORPORATE
 DRB-HICOM BERHAD
12 ANNUAL REPORT 2017

To be number 1 and to continuously

excel in all that we do

To lead in the growth of the nation

in the areas of DRB-HICOM’s core
businesses
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 13
 DRB-HICOM BERHAD
14 ANNUAL REPORT 2017

CORPORATE
profile

A Brief History major achievements was the development of the National Car
Project via Perusahaan Otomobil Nasional Sdn. Bhd. (“PROTON”).
Other strategic projects included manufacturing of non-national
HICOM Holdings Berhad (“HHB”) traces its beginnings back to 1910
motorcycles, general purpose engines, foundry works and
when it was initially incorporated as an investment holding company;
machining, diecasting, industrial estates including golf resort
The New Serendah Rubber Company Limited (“TNSRC”), involved
development and even cement production.
primarily in cultivating rubber and palm oil in four estates:
Serendah and Connemara estates in Selangor, Bukit Keledek estate
In 1991, its name was changed to HICOM Berhad. At that time, it
in Negeri Sembilan and Asahi estate in Johor. In December 1993, the
was 95.8% owned by the Malaysian Government with the remaining
company changed its name to HICOM Holdings Berhad (“HHB”) and
shares held by HICOM’s employees via the Employees’ Share Option
acquired the entire issued and paid-up share capital of HICOM Berhad
Scheme.
(from the Ministry of Finance) and its employees via a corporate
restructuring exercise.
Diversified Resources Berhad (“DRB”) was initially incorporated on
28 August 1990 as a private limited company under the name of
HICOM Berhad (“HICOM”) itself was incorporated on 27 November
Peerless Assets Sdn. Bhd. On 3 August 1991, it changed its name to
1980 under the name of The Heavy Industries Corporation of
Peerless Assets Berhad upon its conversion into a public company,
Malaysia Berhad – and it was established as an investment holding
and then again DRB on 19 September 1991. In September 1992,
company principally engaged in the identification, initiation, planning,
DRB acquired Imatex Berhad and Automotive Corporation
implementation and management of projects in the field of heavy
(Malaysia) Sdn. Bhd. via a share exchange exercise. On
industries. Since its inception, HICOM has been instrumental in
4 September 1992, DRB was listed on the main board of KLSE.
leading the nation’s drive towards industrialisation. Among its

DRB merged with HICOM in 1996, following a series of restructuring
and rationalisation exercise of several companies within the Group.
The newly structured company formed a diversified group with
interests ranging from the assembly, manufacturing and distribution
of motor vehicles, trading in spare parts to property development.
DRB-HICOM assumed its present name on 11 May 2000.
DRB-HICOM Today
Today, we are one of the largest conglomerates in Malaysia with a
market capitalisation of RM2.707 billion, and an estimated 60,000
employees globally, engaged principally in the Automotive, Services
& Education, and Property businesses.
DRB-HICOM (“or the Group”) has experienced extensive growth since
the millennial merger to become the only corporation in the country
involved in the entire automotive value ecosystem, as well as the
only organisation nationwide that provides end-to-end logistics
DRB-HICOM BERHAD
ANNUAL REPORT 2017 15
services, Islamic banking, vehicle inspection, waste management
and automotive industry-related tertiary education as well as
vocational training. In the property market, it has built a strong
reputation for quality developments under the Glenmarie brand.
DRB-HICOM’s automotive expertise lies in manufacturing,
assembly, inspection, distribution, sales and after-sales service
for private and commercial vehicles, motorcycles, defence vehicles
and also customised vehicles such as buses, police vehicles and
garbage compactors. In 2010, the Group added car rental and leasing
services into its portfolio under the internationally acclaimed car
rental brand, Avis.
The Group owns the national car brand, PROTON, which has
undergone a turnaround resulting in the recent entry of Zhejiang
Geely Holding Group Co., Ltd. (“Geely Holding”), a leading global
automotive manufacturer based in China, as its strategic foreign
partner. A Definitive Agreement was signed on 23 June 2017 for
Geely Holding to take 49.9% equity in PROTON Holdings Berhad.
PROTON has manufacturing plants in Shah Alam, Selangor and
Tanjung Malim, Perak with production capacities of 230,000 and
200,000 vehicles per annum respectively. They also own one
of the biggest sheet-metal stamping plants in Southeast Asia,
located at the Glenmarie industrial zone. In addition, the Group owns
a world-class manufacturing and assembly complex in Pekan,
Pahang with a production capacity of 100,000 vehicles a year, where
several Mercedes-Benz and Volkswagen models are assembled.
DRB-HICOM also manufactures and assembles motorcycles at
its plant in Gurun, Kedah, under the national motorcycle brand
MODENAS.
 DRB-HICOM BERHAD
16 ANNUAL REPORT 2017

Supporting its own assembly and manufacturing lines as well In November 2013, DRB-HICOM acquired Composites Technology
as those of other local and international car manufacturers are Research Malaysia Sdn. Bhd. (“CTRM”) from the Ministry of
12 Tier one vendors that produce original equipment Finance Incorporated, which marked DRB-HICOM’s entry into
manufacturer (“OEM”) parts. Together, these vendors ensure the the aerospace manufacturing industry. The company has
Group’s ability to cater to any complex precision-engineering needs. established itself as a centre of excellence for composite
aerostructures, supplying top global aerospace companies and
DRB-HICOM has 13 companies under its banner that aircraft manufacturers including Airbus and Boeing. CTRM is the
assemble/manufacture and distribute various local and only company in Asia with 12 autoclaves housed under a single
foreign-manufactured motorcycles, cars and speciality vehicles, plant, located in Batu Berendam, Melaka. Together with six other
and provide after-sales service, as well as offering logistics and subsidiaries, CTRM’s expertise spans the commercial and military
leasing services. Among the marques that are assembled and aerospace-and-non-aerospace, general aviation and defence
subsequently distributed are Honda, Mitsubishi and Isuzu. The Group industries.
is also an authorised dealer for, among others, Audi, Volkswagen,
Mitsubishi and Isuzu; and has exclusive distributorship rights DRB-HICOM’s logistics business comprises Pos Malaysia Berhad
in Malaysia for Tata vehicles and Jeep suburban utility (“Pos Malaysia”) Group which, apart from Pos Malaysia, includes
vehicles (“SUVs”). Pos Aviation Sdn. Bhd. (formerly known as KL Airport
Services Sdn. Bhd.), Pos Logistics Berhad (formerly known as
The Group has made a name for itself in the defence sector Konsortium Logistik Berhad) and Pos Asia Cargo Express Sdn.
through DRB-HICOM Defence Technologies Sdn. Bhd. (“DEFTECH”), Bhd. (formerly known as DRB-HICOM Asia Cargo Express Sdn.
which has set the bar in designing, developing, manufacturing Bhd.); as well as DRB-HICOM Auto Solutions Sdn. Bhd. (“DHAS”).
and supplying armoured and logistics vehicles for domestic and Through these two groups of companies, the Group boasts a
foreign military and homeland security use, in addition to providing total of 1.78 million square feet of warehousing capacity and two
customised vehicles for hospitals, and other commercial Boeing 737-400 freighters for cargo transport. The Group’s
transportation vehicles. consolidation of its logistics operations under Pos Malaysia
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 17

The Group’s Education division caters specifically to the human

capital needs of the automotive industry, primarily through
DRB-HICOM University of Automotive Malaysia (“DRB-HICOM
U”) located in Pekan, and Akademi Saga, in Shah Alam, Selangor.
DRB-HICOM U, now in its seventh year, is the only university in ASEAN
to offer home-grown Bachelor’s, Master’s and Doctoral programmes
relating to the automotive ecosystem, in addition to business and
management courses such as finance and accounting. In vocational
training, Akademi Saga was established in 1991 to support the
needs of PROTON and other players in the automotive sector with
a full range of diplomas, certificates and short courses related to
automotive mechanics.

In the property market, DRB-HICOM is not only a trusted name in

the development of residential, commercial, industrial, hospitality
(excluding DHAS) serves to enhance synergies, allowing and integrated township projects, but is also involved in asset
DRB-HICOM to increase its presence in the ever-growing management, construction and the hospitality and leisure business.
e-Commerce sector.
Glenmarie Properties Sdn. Bhd. is well-known for its
Solid waste management services are provided by Alam lifestyle-oriented homes and other iconic developments carrying
Flora Sdn. Bhd., the country’s leading environmental the Glenmarie name in Shah Alam and Klang, Selangor, as well
management company, currently serving 13 local authorities. as Mount Austin, in Johor. It was the first to develop the riverside
Dedicated to helping communities manage and reduce waste gated resort-styled residential development, Glenmarie Cove in
with minimal environmental impact, its subsidiary DRB-HICOM Selangor; and the first to present an integrated recreational resort
Environmental Services Sdn. Bhd. (“DHES”) provides integrated marina, the Vivanta by Taj in Langkawi. Another property arm,
facilities management (“FM”) focusing on efficient energy and Proton City Development Corporation Sdn. Bhd., is responsible
water consumption in buildings, as well as recycling efforts. for bringing to life Proton City, a 4,000-acre township in Mualim,
Perak, located near the PROTON plant in Tanjung Malim.
Vehicles inspection is carried out by PUSPAKOM Sdn. Bhd., the
sole commercial vehicle inspection company in Malaysia. In The Group also owns 51% of Media City Ventures Sdn. Bhd.
addition to its core business that falls under a concession with (“MCVSB”), which has been awarded a 23-year government concession
the Government, PUSPAKOM has expanded its service offerings to set up new broadcasting facilities and infrastructure on
to include Hire Purchase Inspection (“HPI”) and Voluntary Vehicle Angkasapuri’s 15.72-acre premises. Through its fully-owned
Inspection (“VVI”). subsidiary Northern Gateway Sdn. Bhd., DRB-HICOM has
entered into a Concession Agreement with the Government for
Bank Muamalat Malaysia Berhad completes the Services portfolio, the development of the Integrated Immigration Custom,
with the provision of Islamic banking products and services Quarantine and Security (“ICQS”) complex in Bukit Kayu
to the community regardless of race or religious beliefs. Hitam, Kedah.
Established in 1999 from the merger of Bank Bumiputra Malaysia
Berhad, Bank of Commerce Berhad and BBMB Kewangan, it has Hospitality and leisure assets managed by the Group include
the distinction of being the second full-fledged Islamic bank in the Holiday Inn Kuala Lumpur Glenmarie, Vivanta by Taj in
Malaysia. Bank Muamalat operates 62 branches across the country. Langkawi, and the Glenmarie Golf and Country Club, in Shah Alam.
 DRB-HICOM BERHAD
18 ANNUAL REPORT 2017
CALENDAR OF
events
2016 – 2017
APRIL 2016
18 – 21
DEFENCE SERVICES ASIA (“DSA”) 2016
DRB-HICOM Defence Technologies Sdn. Bhd. (“DEFTECH”)
participated in the DSA 2016 which provided an opportunity
to showcase its range of products and services. At the event,
YAB Dato’ Sri Mohd Najib bin Tun Haji Abdul Razak, Prime
Minister of Malaysia officiated the naming of the 4x4 High
Mobility Armoured Vehicle, LIPANBARA. In another separate
function, DEFTECH also signed four agreements valued at
more than RM191 million which was witnessed by YB Datuk
Seri Hishammuddin Tun Hussein, the Minister of Defence.
21
LAUNCH OF VOLKSWAGEN SEMENYIH
HICOM Auto Sdn. Bhd. marked another milestone with the
launch of its very own 3S centre in Semenyih. With a built-up
area of 34,030 square feet covering two floors, the 3S centre
features a showroom that is able to fit eight Volkswagen cars,
and a customer lounge. The well-equipped service centre has a
total of 11 service bays. The launch was officiated by YBhg Dato’
Abdul Harith Abdullah, Chief Operating Officer, Automotive
Distribution and Manufacturing & Engineering, DRB-HICOM
Berhad and Mr Armin Keller, Managing Director of Volkswagen
Group Malaysia.
23
MAJLIS ANUGERAH KECEMERLANGAN PT3, SPM & STPM
2015
For the 8th year, an event was held to recognise children of Warga
DRB-HICOM who had excelled in the 2015 national examinations.
Every year, the number of recipients has increased and during
the ceremony, a total of 286 well-deserving students with
a minimum of 7 A’s for PT3, 7 A’s for SPM and 3 A’s for STPM
received the award.
MAY 2016
24
SIGNING OF MEMORANDUM OF UNDERSTANDING (“MOU”)
WITH KEMENTERIAN BELIA DAN SUKAN (“KBS”)
Two of DRB-HICOM subsidiaries, KL Airport Services Sdn. Bhd.
and Composites Technology Research Malaysia Sdn. Bhd. signed
an MoU with KBS to provide industrial training placement for
Institut Kemahiran Belia Negara (“IKBN”) students. The ceremony
was graced by YB Khairy Jamaluddin, Minister of Youth and
Sports.

JUNE 2016
14
PROTON UNVEILS THE NEW PERDANA
The unveiling marks PROTON’s re-entry into the D-segment
market with the 2.0 and 2.4 variants, featuring a sophisticated
yet sporty executive sedan. The new Perdana was unveiled by
YAB Dato’ Sri Mohd Najib bin Tun Hj Abdul Razak, Prime Minister
of Malaysia, accompanied by YBhg Dato’ Sri Syed Faisal Albar,
Chairman of PROTON and YBhg Dato’ Ahmad Fuaad Kenali, Chief
Executive Officer of PROTON.
16
BUBUR LAMBUK FOR THE COMMUNITY
Sahabat DRB-HICOM ushered in the holy month of Ramadhan,
cooking 10 large pots of Bubur Lambuk. The volunteers worked
together to complete the dish by the afternoon and packed it
for distribution to more than 3,000 Warga DRB-HICOM and
neighbouring communities in Glenmarie and Shah Alam.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 19
18 –19
RAYA AUTOFEST
The DRB-HICOM Autofest returned with a festivities twist; with
the Raya Autofest edition. Exclusive deals were offered on brand
new and pre-loved cars. More than 5,000 visitors joined in the
fun and exciting programmes. Participating brands included,
PROTON, Lotus, Jeep, Audi, Honda, Volkswagen, Mitsubishi,
Tata, Isuzu and MODENAS.
25
IFTAR WARGA DRB-HICOM
DRB-HICOM held its annual Iftar at Holiday Inn Kuala Lumpur
Glenmarie, gathering more than 1,000 Warga DRB-HICOM and
their family members. The attendees enjoyed the feast served
and were all smiles during the much awaited Duit Raya handover
ceremony for the children.
 DRB-HICOM BERHAD
20 ANNUAL REPORT 2017
JULY 2016
20
AIDILFITRI WITH WARGA AL-FIKRAH
Festivities are about sharing the merriment and Aidilfitri was
made more meaningful when Sahabat DRB-HICOM spent their
day with the golden citizens of Pusat Jagaan Al-Fikrah in Kajang.
The residents were fed and entertained by the volunteers. At the
event, DRB-HICOM also handed a contribution to cover the daily
operations of the home.
26
PATIENT BEDS FOR HAJ PILGRIMAGE
As a participant of the Sahabat Tabung Haji corporate
volunteerism programme, DRB-HICOM contributed 25 patient
beds for usage during the Haj Pilgrimage 1437H. The contribution
was handed over to YAB Dato’ Sri Mohd Najib bin Tun Haji Abdul
Razak, Prime Minister of Malaysia.
AUGUST 2016
6
MANGROVE RESTORATION PROGRAMME
A total of 39 Sahabat DRB-HICOM volunteers went back to
nature at the Mangrove Restoration Programme held at
Kuala Selangor National Park. The programme was organised
to raise awareness on environmental issues and instil a love for
nature among our Warga. It also signifies our small step towards
minimising our carbon footprint and provides an avenue for
our Warga DRB-HICOM to learn more about Malaysia’s coastal
environment and its flora and fauna. Over 350 saplings were
planted along the coastline of Kuala Selangor National Park
which is managed by the Malaysian Nature Society.
17
DRB-HICOM UNIVERSITY INKS AN MOU WITH UNIVERSITY OF
MASSACHUSETTS DARMOUTH
The signing of an MoU between both parties allows cooperation
and opportunities on Academic Programme for Student
Exchange and Research Programmes. The signing was witnessed
by YBhg Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil bin
Jamil, Chairman of DRB-HICOM Berhad.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 21

23
PROTON UNVEILS THE SECOND GENERATION PERSONA
The unveiling was graced by YB Dato’ Sri Mustapa Mohamed,
Minister of International Trade and Industry. The first Persona
was introduced in 2007, the all-new 2nd Generation Persona
is powered by a more efficient 1.6L VVT engine and is the first
PROTON car that is supported by ECO Drive Assist.
28
PROTON UNVEILS ITS THIRD GENERATION SAGA
First introduced in 1985, the people’s car, Proton Saga has
evolved into a modern, contemporary and exciting new look in
2016. The event was graced by YB Khairy Jamaluddin, Minister of
Youth and Sports.

SEPTEMBER 2016

29
DRB-HICOM 26TH ANNUAL GENERAL MEETING &
EXTRAORDINARY GENERAL MEETING
14 The 26th Annual General Meeting and Extraordinary General
Meeting was held at the Holiday Inn Kuala Lumpur Glenmarie.
DRB-HICOM AND PROTON PRESENTS CARS TO MALAYSIAN
The meeting was attended by a total of 1,700 shareholders.
OLYMPIC MEDALLISTS OF RIO 2016
In appreciation of the achievements recorded by the Malaysian
Olympic team, DRB-HICOM and PROTON presented eight cars
to the nation’s heroes who won Olympic medals for the country.
The event was graced by YB Khairy Jamaluddin, accompanied
by Chef-de-Mission of the Malaysian Olympic Contingent,
YBhg Tan Sri Mohamed Al-Amin Abdul Majid.
 DRB-HICOM BERHAD
22 ANNUAL REPORT 2017
OCTOBER 2016
17
DRB-HICOM PRESENTS UMRAH PACKAGES TO MALAYSIAN
PARALYMPIC MEDALLISTS OF RIO 2016
DRB-HICOM presented Umrah Packages for the medallists
and their parents. Gold medallists Mohamad Ridzuan Mohd Puzi,
Muhammad Ziyad Zolkefli and Abdul Latif Romly; and bronze
medallist Siti Noor Radiah Ismail were present to receive their
rewards.
NOVEMBER 2016
7 25
DEEPAVALI CELEBRATION AT SJKT LADANG GLENMARIE
Once again, the merriment of festivities were shared and this
time with 70 students of SJKT Ladang Glenmarie. The students
were entertained by our Sahabat DRB-HICOM volunteers and
enjoyed balloon sculpting, face painting and many more activities
that were organised. An array of vegetarian buffet spread was
catered for the event.
24
PROTON WRAPS UP 2016 WITH LAUNCH OF ERTIGA
Proton Ertiga is the fourth and final model launched by PROTON
for the year and was launched by YBhg Brig. Gen. (K) Tan Sri Dato’
Sri (Dr) Haji Mohd Khamil bin Jamil, Chairman of DRB-HICOM
Berhad. Ertiga is the first model introduced though PROTON’s
collaboration with Suzuki Motor Corporation Japan.
MODENAS LAUNCHES THREE NEW MODELS
MODENAS marked a significant milestone with the introduction
of the all-new Modenas Karisma and Elegan 250 scooters and
KYMCO Downtown 250i. The Karisma and Elegan were fruits
of the partnership between Modenas and KYMCO. They were
launched by YBhg Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd
Khamil bin Jamil, Chairman of DRB-HICOM Berhad.

DECEMBER 2016
6 23
BACK-TO-SCHOOL PROGRAMME
DRB-HICOM provided some financial aid to 169 children of
Warga DRB-HICOM whose parents’ earned less than RM3,000 a
month. In addition, DRB-HICOM also provided 90 students from
the neighbouring SJKT Glenmarie with financial aid for the 2017
school year.
21
BANK MUAMALAT INKS MOA WITH DRB-HICOM UNIVERSITY
The signing of the Memorandum of Agreement between both
parties is to jointly develop an Executive Leadership Programme
(“ELP”) for Warga Bank Muamalat. The ELP combines DRB-HICOM
University’s postgraduate studies with leadership training to
produce well-rounded executives, ready to assume leadership
positions within Bank Muamalat.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 23
HANDING OVER OF VEHICLES TO PUSAT JAGAAN AL-FIKRAH
PROTON handed over an Exora while DRB-HICOM Commercial
Vehicle (“DHCV”) handed over a Tata Xenon to Pusat Jagaan
Al-Fikrah in Kajang. YBhg Dato’ Mohd Radzaif Mohamed, Deputy
Chief Executive Officer of PROTON and Encik Shamsuddin
Hj Ishak, Head Sales Operations of DHCV handed the vehicles to
Tuan Haji Azmi Mohd Zain, Chairman of Pusat Jagaan Al-Fikrah.
JANUARY 2017
14 – 15
DRB-HICOM AUTOFEST
The new year was celebrated with the 6th edition of DRB-HICOM
Autofest. Discounts of up to RM150,000 for new vehicles were
offered, and visitors stood a chance to win a car in the lucky draw.
 DRB-HICOM BERHAD
24 ANNUAL REPORT 2017
FEBRUARY 2017
6 15
CHINESE NEW YEAR CELEBRATION WITH CHILDREN OF PUSAT
PENJAGAAN KANAK-KANAK TERENCAT AKAL MELAKA
Celebration of the lunar year was made more meaningful when
our Sahabat DRB-HICOM volunteers visited the home and spent
some time entertaining the children. A total of 52 special children,
some as young as nine years old were given attention by Sahabat
volunteers. In addition, DRB-HICOM contributed some financial
aid for the centre. Mr R Farimanalan @ David, Chairman of the
home received the cheque from Encik Shamsuddin Mohamed
Yusof, Group Chief Operating Officer, Composites Technology
Research Malaysia Sdn. Bhd. (“CTRM”).
17
POS MALAYSIA LAUNCHES DIGICERT NEW HEAD OFFICE AND
POS LAJU CYBERJAYA
The new Pos Laju Cyberjaya outlet and Digicert Head Office were
officiated by YB Dato’ Jailani Johari, Deputy Minister, Ministry of
Communication and Multimedia.
MARCH 2017
PRESENTATION OF CERTIFICATES TO DRB-HICOM EMERGENCY
ASSISTANCE TEAM (“DHEAT”)
DRB-HICOM launched its very own DHEAT team and handed over
certificates to the 19 deserving members of the DHEAT team
certified by Jabatan Bomba dan Penyelamat Shah Alam. At the
event, DHEAT team demonstrated a few rappelling techniques.
YBhg Tuan Azmel Kamaruddin, Ketua Balai, Balai Bomba dan
Penyelamat Shah Alam attended the event.
25
DRB-HICOM UNIVERSITY OF AUTOMOTIVE MALAYSIA
4TH CONVOCATION
The convocation was graced by Ke Bawah Duli Yang Maha Mulia
Pemangku Raja Pahang, Tengku Mahkota Abdullah Al-Haj Ibni Sultan
Haji Ahmad Shah Al-Musta’in Billah. At the ceremony, a total of 440
scrolls were presented to graduates of DRB-HICOM University.
This page has been intentionally left blank.
 DRB-HICOM BERHAD
26 ANNUAL REPORT 2017

FINANCIAL
calendar
for the financial year ended 31 March 2017

Announcement of Unaudited
Consolidated Results
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
ended ended ended ended
30 June 2016 30 September 2016 31 December 2016 31 March 2017

30 2016 29 28 2017 30 2017

AUGUST NOVEMBER FEBRUARY MAY
2016

Dividend
First and Final
Single tier dividend of 1.0 sen per share
Notice Entitlement Payment
Date
312017 Date
12 Date
03 2017
JULY SEPTEMBER OCTOBER
2017

Twenty-Seventh Notice Meeting

312017 30 2017
Annual General Date JULY Date AUGUST
Meeting
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 27

DRB-HICOM BERHAD
ANNUAL REPORT 2017 x

CORPORATE
as at 30 June 2017

as at 30 June 2017

Brigadier General (K) Tan Sri Dato’ Sri Datuk Ooi Teik Huat Dato’ Ibrahim bin Taib
(Dr) Haji Mohd Khamil bin Jamil Senior Independent Non-Executive Director Independent Non-Executive Director
Chairman
Non-Independent Non-Executive Director Dato’ Siti Fatimah binti Daud Datuk Idris bin Abdullah
Non-Independent Non-Executive Director Independent Non-Executive Director
Dato’ Sri Syed Faisal Albar bin
Syed A.R. Albar
Group Managing Director

Audit Committee Nomination and Board Risk and

Remuneration Committee Sustainability Committee
Chairman Chairman Chairman
Datuk Ooi Teik Huat Brigadier General (K) Tan Sri Dato’ Sri (Dr) Datuk Idris bin Abdullah
Haji Mohd Khamil bin Jamil
Members Members
Dato’ Ibrahim bin Taib Members Datuk Ooi Teik Huat
Datuk Idris bin Abdullah Datuk Ooi Teik Huat Dato’ Siti Fatimah binti Daud
Datuk Idris bin Abdullah

Company Secretary Investor Relations Principal Bankers

Dato’ Carol Chan Choy Lin (MIA 3930) Norli binti Dollah Bank Muamalat Malaysia Berhad
Manager, Investor Relations Malayan Banking Berhad
Tel : (03) 2052 7695 RHB Bank Berhad
Fax : (03) 2052 7696 Tel : (03) 2052 8194/8942 CIMB Bank Berhad
E-mail : cclin@drb-hicom.com Fax : (03) 2052 8228 AmBank (M) Berhad
E-mail : invest@drb-hicom.com

Registered Office Share Registrar Principal Solicitors

Level 5, Wisma DRB-HICOM Symphony Share Registrars Sdn. Bhd. Naqiz & Partners
No. 2, Jalan Usahawan U1/8 (Company No: 378993-D) Hisham, Sobri & Kadir
Seksyen U1, 40150 Shah Alam Kadir Andri & Partners
Selangor Darul Ehsan, Malaysia Level 6, Symphony House
Pusat Dagangan Dana 1 Stock Exchange Listing
Tel : (03) 2052 8000 Jalan PJU 1A/46, 47301 Petaling Jaya
Fax : (03) 2052 8099 Selangor Darul Ehsan, Malaysia Listed on Main Market of
Bursa Malaysia Securities Berhad
Company Website Tel : (03) 7849 0777 Listing Date : 4 September 1992
Fax : (03) 7841 8151/52 Stock Name : DRBHCOM
www.drb-hicom.com E-mail : ssr.helpdesk@symphony.com.my Stock Code : 1619

Internal Audit Auditors AGM Helpdesk

Abdul Jamil bin Johari Ernst & Young (AF 0039) Tel : (03) 2052 8936/7695
Head, Group Internal Audit Chartered Accountants
Level 23A, Menara Milenium
Tel : (03) 2052 8962 Jalan Damanlela
Fax : (03) 2052 8959 Pusat Bandar Damansara
E-mail : jamil@drb-hicom.com 50490 Kuala Lumpur, Malaysia

Tel : (03) 7495 8000

Fax : (03) 2095 5332
 DRB-HICOM BERHAD
28 ANNUAL REPORT 2017

GROUP CORPORATE
structure
(operating companies) as at 31 March 2017

Pos Malaysia HICOM University Bank Muamalat PUSPAKOM Motosikal Dan Enjin HICOM Holdings DRB-HICOM Auto DRB-HICOM Defence Honda Malaysia Isuzu Malaysia
Berhad College Sdn. Bhd. Malaysia Berhad Sdn. Bhd. Nasional Sdn. Bhd. Berhad Solutions Sdn. Bhd. Technologies Sdn. Bhd. Sdn. Bhd.
Sdn. Bhd.
E.I. : 53.50% E.I. : 100% E.I. : 70% E.I. : 100% E.I. : 81% E.I. : 100% E.I. : 100% E.I. : 34% E.I. : 48.42%
E.I. : 100%

Datapos (M) Pos Digicert Muamalat Muamalat Edaran Modenas

Sdn. Bhd. Sdn. Bhd. Invest Sdn. Bhd. Venture Sdn. Bhd. Sdn. Bhd. Defence Services Composites
Sdn. Bhd. Technology
E.I. : 53.50% E.I. : 53.50% E.I. : 70% E.I. : 70% E.I. : 81% Research Malaysia
E.I. : 100% Sdn. Bhd.

E.I. : 96.87%

PSH Express Pos Aviation Pos Ar-Rahnu Suzuki Motorcycle ISUZU HICOM HICOM-YAMAHA CTRM Testing Unmanned Systems CTRM Aero CTRM Systems CTRM Aviation
Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Malaysia Sdn. Bhd. Malaysia Sdn. Bhd. Manufacturing Laboratory Technology Composites Integration Sdn. Bhd.
Malaysia Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd.
E.I. : 53.50% E.I. : 53.50% E.I. : 53.50% E.I. : 29% E.I. : 49% E.I. : 96.87%
E.I. : 45% E.I. : 96.87% E.I. : 96.87% E.I. : 96.87% E.I. : 96.87%

Pos Asia Cargo Pos Aviation Pos Logistics Alam Flora HICOM Automotive Edaran Otomobil DRB-HICOM HICOM Polymers HICOM Automotive HICOM-Teck See
Express Sdn. Bhd. Engineering Berhad Sdn. Bhd. Manufacturers Nasional Berhad Commercial Vehicles Industry Diecastings Corporation Manufacturing
Services Sdn. Bhd. (Malaysia) Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. (Malaysia) Sdn. Bhd. Malaysia Sdn. Bhd.
E.I. : 53.50% E.I. : 53.50% E.I. : 97.37% E.I. : 100%
E.I. : 53.50% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 51%

Diperdana Kontena KP Asia Cougar Logistics Westport Distripark DRB-HICOM HICOM Auto Euromobil DRB-HICOM EZ-Drive HICOM HBPO Isuzu Service Center
Sdn. Bhd. Auto Logistics (Malaysia) Sdn. Bhd. (M) Sdn. Bhd. Environmental Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd.
Sdn. Bhd. Services Sdn. Bhd.
E.I. : 53.50% E.I. : 53.50% E.I. : 53.50% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 60% E.I. : 73.69%
E.I. : 53.50% E.I. : 97.37%

Malaysian Shipping Aman Freight PNSL Berhad KP Distribution SRT-EON Security Mitsubishi Motors EON Auto Mart DRB-HICOM Leasing
Agencies Sdn. Bhd. (Malaysia) Sdn. Bhd. Services Sdn. Bhd. Services Sdn. Bhd. Malaysia Sdn. Bhd. Sdn. Bhd.
E.I. : 53.50% Sdn. Bhd.
E.I. : 53.50% E.I. : 53.50% E.I. : 53.50% E.I. : 40% E.I. : 100% E.I. : 100%
E.I. : 48%

Konsortium Logistik PNSL Risk Parcel Tankers

(Sabah) Sdn. Bhd. Management Malaysia Sdn. Bhd.
Sdn. Bhd.
E.I. : 53.50% E.I. : 27.29%
E.I. : 53.50%
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 29

Sectorial

Automotive

Services

Property, Asset & Construction

Investment Holding

Joint Ventures

Kindly refer to pages 212 to 236 for the full

Associated Companies
listing of Group Companies.

Note :
E.I. DRB-HICOM Group’s Effective Interest

Media City Ventures Northern Gateway PROTON Holdings

Sdn. Bhd. Infrastructure Berhad
Sdn. Bhd.
E.I. : 51% E.I. : 100%
E.I. : 100%

Media City Proton Exedy (Malaysia) Marutech Elastomer Proton Marketing Perusahan Otomobil Proton Lotus Advance
Development Properties Sdn. Bhd. Industries Sdn. Bhd. Sdn. Bhd. Nasional Sdn. Bhd. Tanjung Malim Technologies
Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd.
E.I. : 45% E.I. : 25% E.I. : 100% E.I. : 100%
E.I. : 51% E.I. : 100% E.I. : 100% E.I. : 100%

Proton Cars Proton Parts Centre Proton Edar Proton Motors Miyazu Lotus Group Symphony
Australia Sdn. Bhd. Sdn. Bhd. (Thailand) (Malaysia) International Lotus Limited
Pty. Limited Company Limited Sdn. Bhd. Limited
E.I. : 100% E.I. : 100% E.I. : 100%
E.I. : 100% E.I. : 100% E.I. : 66% E.I. : 100%

PHN Industry Proton City HICOM Berhad Glenmarie EON Properties Proton Commerce Lotus Cars Malaysia Group Lotus Beijing Lotus
Sdn. Bhd. Development Development Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Plc Cars Sales
Corporation E.I. : 100% (Pahang) Sdn. Bhd. Co., Ltd.
E.I. : 100% Sdn. Bhd. E.I. : 100% E.I. : 50% E.I. : 100% E.I. : 100%
E.I. : 100% E.I. : 100%
E.I. : 100%

Oriental Summit DRB-HICOM Dekad Kaliber Glenmarie Glenmarie Cove PT Proton Edar Automotive Lotus Lotus Lightweight Lotus Cars
Industries Sdn. Bhd. Mechatronics Sdn. Bhd. Properties Development Indonesia Conversion Holdings Inc. Structures Limited Limited
Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Engineering
E.I. : 100% E.I. : 100% E.I. : 100% Sdn. Bhd. E.I. : 100% E.I. : 100% E.I. : 100%
E.I. : 100% E.I. : 100% E.I. : 100%
E.I. : 100%

Faurecia HICOM HICOM Indungan Puncak Permai Benua Kurnia Neraca Prisma Lotus Engineering Lotus Cars USA Inc. Lotus Engineering
Emissions Control Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Inc. Limited
Technologies (M) E.I. : 100%
Sdn. Bhd. E.I. : 100% E.I. : 58% E.I. : 100% E.I. : 100% E.I. : 100% E.I. : 100%

E.I. : 35%

Rebak Island Marina Horsedale

Berhad Development
Berhad
E.I. : 100%
E.I. : 70.60%

HICOM-Gamuda
Development
Sdn. Bhd.

E.I. : 35.30%
 DRB-HICOM BERHAD
30 ANNUAL REPORT 2017

INVESTOR
relations
FY2016/17 had been a challenging year for the DRB-HICOM Group. Global policies and political
uncertainties, downward commodity prices, unprecedented hike in the exchange rate and
weakened domestic consumer spending amid subdued economic growth had undeniably
impacted our businesses. Despite these challenges, the Group continued to expand and
enhance our portfolio, especially in the sphere of logistics and aviation operations. As part of
our commitment to strengthen our relationship with the investment community, through our
Investor Relations (“IR”) Department championed by Senior Management, the Group continued
to enhance our engagements to keep the investment community informed on our business
developments, challenges and strategies going forward.

SHAREHOLDER BASE

DRB-HICOM’s diversified shareholder base consists of

government agencies, corporate, institutional and private/
retail shareholders. As at 31 March 2017, it had a total
of 38,964 shareholders, with Etika Strategi Sdn. Bhd. and
Lembaga Tabung Haji holding the highest equity at 55.9%
and 5%, respectively. Foreign shareholding registered at
8.8%.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 31

SHARE PERFORMANCE

For FY2016/17, DRB-HICOM share price traded in line with FBM KLCI performance on the back of feeble economic condition. The share price
was closed at RM1.40 on 31 March 2017 with total turnover of RM1,542.8 million and 1,855.8 million shares exchanged hands in FY2016/17
compared to a total turnover of RM619.0 million with 474.3 million shares traded in FY2015/16. The surge in volume traded was mainly
derived from the escalating interest in the Group’s businesses despite the challenging economic outlook.

DRB-HICOM Share Price Performance VS. FBM KLCI FY2017

(RM) (Index)
1.6 1800

1.4
1750

1.2

1700
1

0.8 1650

0.6
1600

0.4
1550
0.2 DRB-HICOM
FBM KLCI

0 1500

Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17

Share Price and Volume Traded

5 Years Trading Volume &
(RM) (millions)
Highest - Lowest Share Price (Intra-day)
3.5 2,500

3
2,000
2.5

1,500
2

1.5
1,000

1
500
0.5

0 0
FY2012/13 FY2013/14 FY2014/15 FY2015/16 FY2016/17

Volume Traded (millions) Share Price (RM) Highest Share Price (RM) Lowest

FY2012/13 FY2013/14 FY2014/15 FY2015/16 FY2016/17

Share Price (RM) Highest 2.79 2.96 2.58 2.00 1.55

Share Price (RM) Lowest 2.27 2.38 1.36 0.94 0.78

Year Close (RM) 2.53 2.47 1.97 1.02 1.40

 DRB-HICOM BERHAD
32 ANNUAL REPORT 2017

INVESTORS ENGAGEMENT

Various methods were adopted in IR’s efforts to ensure continuity in engaging the investment community which included:

Investors Meetings visits were organised to provide better understanding especially on

There was growing demand for updates on the Group’s quarterly
financial performance, as well as overall corporate and strategic
development from the investment community. The Group had
engaged with more than 100 analysts, fund managers, institutional
investors (existing and potential) through one-on-one or group
meetings, teleconferences, as well as invites to product launches.
Through these engagements, the investment community had
garnered better understanding on DRB-HICOM’s businesses.
PROTON’s turnaround plans, recent developments, challenges and
strategies moving forward.
Quarterly Financial Announcement
DRB-HICOM announced its performance results on a quarterly
basis. Respective quarter financial performance results were made
available on the Group’s website following the disclosure made to
Bursa Malaysia:

Plant Visits
We conducted a couple of visits to the PROTON Centre of Excellence
in Shah Alam for bondholders which included corporate briefings,
tours to the Medium Volume Factory (“MVF”) plant, the Virtual Reality
studio, the passive safety testing lab and we concluded the visits
with PROTON and Lotus cars test drives at the tracks, enabling them
to experience the new and improved quality of PROTON cars. The

DRB-HICOM’s 26th Annual General Meeting and Extraordinary General Meeting

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 33

Annual General Meeting andExtraordinary RETURN TO SHAREHOLDERS

General Meeting
DRB-HICOM’s 26th Annual General Meeting (“AGM”) and
We reiterate our dividend commitment through the dividend policy
Extraordinary General Meeting (“EGM”) were held on 29 September
statement as approved by the Board of Directors as follows:
2016 at the Holiday Inn Kuala Lumpur Glenmarie. Both AGM and
EGM provided avenues for shareholders to enquire the Board of
“It is the Group’s intention to create value for shareholders
Directors and Senior Management on business-related queries.
through a sustainable dividend policy. In line with this, the Board
The results of all resolutions were presented to those who were in
acknowledges the importance of rewarding shareholders with a
attendance and the outcome of the AGM and EGM was announced
stable dividend and to sustainably grow dividend over time.
on the same day via Bursa Malaysia.

Considering the Group is currently undertaking major investments,

Credit Rating
the dividend payout target will be between 20% and 30% of the
Malaysian Rating Corporation Berhad (“MARC”) in September 2016
operational net profit. The dividend policy shall be reviewed by
rated A+IS for DRB-HICOM’s Islamic Medium-Term Notes (“IMTN”)
the Board periodically. In determining the annual dividend level,
Programme of up to RM1.8 billion and A-IS for Perpetual Sukuk
the Board will take into consideration the availability of cash,
Musharakah Programme (“Perpetual Sukuk”) of up to RM2.0 billion
retained earnings, operating cash flow requirements, business
with “Stable” overall outlook in view of our credit profile and metrics
prospect, future capital expenditure, investment plan and financing
supported by moderately diversified earning streams amidst the
requirements. The Board will ensure a good balance sheet
challenging economic condition.
management with gearing kept at manageable level.”

Webpage
In line with the Group’s diligent efforts to make available
Capital Market Feedback
up-to-date information on our business and performance to
DRB-HICOM recognises that feedback from the investment
all market participants, our latest quarterly financial results,
community is vital to meeting the information needs and improving
announcements and disclosure are posted on our corporate
relationships. As such, any constructive feedback and ideas can be
website at www.drb-hicom.com as per Bursa Malaysia
directed to the IR Department at invest@drb-hicom.com.
requirements. Our website also contains annual reports, press
releases and historical corporate and financial information for easy
accessibility.
 DRB-HICOM BERHAD
34 ANNUAL REPORT 2017

Growth and diversity

are the cornerstones
of success
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 35

PERFORMANCE
review
 DRB-HICOM BERHAD
36 ANNUAL REPORT 2017

GROUP 5 YEARS
financial highlights

Operating Revenue (Loss)/Profit Before Taxation

Financial Year Ended

Financial Year Ended

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 37

Basic and Diluted (Loss)/Earnings Per Share Total Assets

Financial Year Ended

Financial Year Ended

Total Equity Net Assets Per Share

Financial Year Ended

Financial Year Ended

Gross Gearing Ratio

Financial Year Ended

 DRB-HICOM BERHAD
38 ANNUAL REPORT 2017

Strong management
lays the groundwork
for great success
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 39

leadership
 DRB-HICOM BERHAD
40 ANNUAL REPORT 2017

PROFILE OF
directors
BRIGADIER GENERAL (K) Brig. Gen. (K) Tan Sri Dato’ Sri (Dr)
Haji Mohd Khamil bin Jamil holds a
TAN SRI DATO’ SRI (DR) HAJI Bachelor of Laws (Honours) Degree
MOHD KHAMIL BIN JAMIL from the University of London and was
Chairman/Non-Independent Non-Executive Director conferred an Honorary Doctorate in
Chairman of Nomination and Remuneration Committee Mechanical Engineering by Universiti
Date of Appointment Date of Last Re-election Pertahanan Nasional Malaysia in
19 July 2005
(Non-Independent Non-Executive Director)
29 September 2016
October 2015. He is a Barrister-at-Law
Nationality/Age/Gender
1 March 2006 Malaysian/61 years/Male at Gray’s Inn, England, and was called
(Group Managing Director)
1 March 2016 to the English Bar in 1983.
(Non-Independent Non-Executive Chairman)
He began his executive career at Bank Bumiputra Malaysia
Berhad in August 1980, where he served until December 1989.
He was called to the Malaysian Bar in September 1990, following
which he became a practising partner of several legal firms
before venturing into business in 2001.

He is an Honorary Brigadier General of the Malaysian Territorial

Army and a Chartered Fellow of the Chartered Institute of Logistics
and Transport, United Kingdom. He was also awarded the Justice
of Peace by His Excellency Yang Di-Pertua Negeri Melaka in 2012.

His current directorships in other public companies within the

DRB-HICOM Berhad Group include being the Chairman of Pos
Malaysia Berhad (listed entity), HICOM Holdings Berhad, HICOM
Berhad and several private limited companies.

He is a Director of Etika Strategi Sdn. Bhd., the holding company

of DRB-HICOM Berhad, in which he has a 10% shareholding.

Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil does not
have any family relationship with any Director and/or major
shareholder of the Company and has no conflict of interest with
the Company. He has had no conviction for any offence within
the past five (5) years and has not been imposed any public
sanction or penalty by the relevant regulatory bodies during the
financial year ended 31 March 2017.

Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil attended
all seven (7) Board meetings of the Company held during the
financial year ended 31 March 2017.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 41

Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar is DATO’ SRI SYED FAISAL
a member of the Malaysian Institute of Certified
Public Accountants (“MICPA”) and American ALBAR BIN SYED A.R. ALBAR
Institute of Certified Public Accountants (“AICPA”). Group Managing Director
He holds a Bachelor of Arts (Accountancy) Degree
from Barat College of DePaul University, Lake Date of Appointment Date of Last Re-election
Forest, USA and AICPA Professional Certification 4 January 2016 29 September 2016
from University of IIIinois, Urbana Champaign, (Group Chief Executive Officer) Nationality/Age/Gender
1 March 2016
USA. He had attended the Advanced Programme (Group Managing Director) Malaysian/52 years/Male
at Harvard Business School, Boston, USA and he
was also a Council Member of MICPA from 2010
to 2013.
Prior to joining DRB-HICOM Berhad, he was the Chief Executive Officer (“CEO”)
of Malakoff Corporation Berhad from 1 July 2014 to December 2015. He was
appointed as CEO of Gas Malaysia Berhad (“GMB”) from January 2014 to June
2014 and also an Executive Director of Pos Logistics Berhad (formerly known
as Konsortium Logistik Berhad) (“PLB”) for a short span of time assisting Ekuiti
Nasional Berhad, the majority owner of PLB, in its disposal of that business.

From 2011 to 2014, Dato’ Sri Syed Faisal served on various boards in
a non-executive capacity. He was on the Board of Malaysia Airports
Holdings Berhad as a nominee Director for Khazanah Nasional Berhad
and was also a Director of Hong Leong Bank Berhad. Within this period,
he also sat on the Board of Kwasa Land Sdn. Bhd.; a wholly-owned
subsidiary of Employees Provident Fund, that was tasked to develop a
township on the parcel of land previously owned by Rubber Research
Institute in Sungai Buloh, Selangor. As part of his effort to contribute to
society, he served on the Board of Yayasan Kelana Ehsan, a public trust
entity that provides funds for charitable activities with the intention to
improve the livelihood of the residents in the State of Selangor.

Dato’ Sri Syed Faisal’s career spans across various executive positions.
Apart from GMB and PLB, from 2008 to 2011, he was the Group
Managing Director of Pos Malaysia Berhad (“Pos Malaysia”), which was
a Government Linked Company by virtue of the 32% shareholding held
by Khazanah then. During his time at Pos Malaysia, he was also the
Chairman of ASEAN Postal Business Union where postal organisations
of each of the ASEAN countries are members. Prior to his stint at Pos
Malaysia, Dato’ Sri Syed Faisal was appointed in 2003 as CEO of The
New Straits Times Press (Malaysia) Berhad (“NSTP”), a position which
he held until 2008. He started his career by spending almost a decade
with PricewaterhouseCoopers Kuala Lumpur since 1991. He had also
served Pricewaterhouse, San Francisco, California in 1995 before
returning to Kuala Lumpur in 1997 and subsequently joined NSTP in
May 2000 as its Chief Financial Officer.

His current directorships in other public companies within the

DRB-HICOM Berhad Group include being the Chairman of Proton
Holdings Berhad, PLB, Edaran Otomobil Nasional Berhad and
Horsedale Development Berhad as well as Director of Pos Malaysia
(listed entity), HICOM Holdings Berhad, HICOM Berhad and several
private limited companies.

Dato’ Sri Syed Faisal does not have any family relationship with any
Director and/or major shareholder of the Company and has no conflict
of interest with the Company. He has had no conviction for any offence
within the past five (5) years and has not been imposed any public
sanction or penalty by the relevant regulatory bodies during the
financial year ended 31 March 2017.

Dato’ Sri Syed Faisal attended all seven (7) Board meetings of the
Company held during the financial year ended 31 March 2017.
 DRB-HICOM BERHAD
42 ANNUAL REPORT 2017

DATUK OOI TEIK HUAT Datuk Ooi Teik Huat is a member of

Senior Independent Non-Executive Director the Malaysian Institute of Accountants
Chairman of Audit Committee and CPA Australia. He holds a Bachelor
Member of Nomination and Remuneration Committee of Economics Degree from Monash
Member of Board Risk and Sustainability Committee
University, Australia.
Date of Appointment Date of Last Re-election
1 November 2008 9 September 2015 He started his career with Messrs Hew & Co, Chartered Accountants,
(Independent Non-Executive Director) before joining Malaysian International Merchant Bankers Berhad.
Nationality/Age/Gender He subsequently joined Pengkalen Securities Sdn. Bhd. as Head of
1 January 2017 Malaysian/57 years/Male Corporate Finance, before leaving to set up Meridian Solutions Sdn.
(Senior Independent Non-Executive Director)
Bhd. where he is presently a Director.

He sits on the Boards of several public listed companies namely; Gas

Malaysia Berhad, Malakoff Corporation Berhad, MMC Corporation
Berhad and Zelan Berhad. He also sits on the Boards of Johor Port
Berhad, Mardec Berhad, Padiberas Nasional Berhad, Tradewinds
Corporation Berhad, Tradewinds (M) Berhad, Tradewinds Plantation
Berhad and several private limited companies.

Datuk Ooi does not have any family relationship with any Director and/
or major shareholder of the Company and has no conflict of interest
with the Company. He has had no conviction for any offence within
the past five (5) years and has not been imposed any public sanction
or penalty by the relevant regulatory bodies during the financial year
ended 31 March 2017.

Datuk Ooi attended all seven (7) Board meetings of the Company held
during the financial year ended 31 March 2017.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 43

Dato’ Siti Fatimah binti Daud holds a DATO’ SITI FATIMAH

Bachelor of Arts (Honours) from the
University of Malaya. She is currently BINTI DAUD
Non-Independent Non-Executive Director
the Under Secretary, Remuneration Member of Board Risk and Sustainability Committee
Policy and Management Division,
Ministry of Finance. Dato’ Siti Fatimah Date of Appointment
1 April 2016
Date of Last Re-election
29 September 2016
started her career in the Civil Service Nationality/Age/Gender
in 1983 and has served in various Malaysian/57 years/Female

positions with the Ministry of Health,

Ministry of Education and Ministry of
Finance.
She is a Non-Independent Non-Executive Director nominated
by the Minister of Finance Incorporated. Dato’ Siti Fatimah sits
on the Board of HICOM Holdings Berhad and she does not hold
directorship in any other public listed company.

Dato’ Siti Fatimah does not have any family relationship with
any Director and/or major shareholder of the Company and
has no conflict of interest with the Company. She has had no
conviction for any offence within the past five (5) years and has
not been imposed any public sanction or penalty by the relevant
regulatory bodies during the financial year ended 31 March 2017.

Dato’ Siti Fatimah attended six (6) out of seven (7) Board meetings
of the Company held during the financial year ended 31 March
2017.
 DRB-HICOM BERHAD
44 ANNUAL REPORT 2017

DATO’ IBRAHIM BIN TAIB
Independent Non-Executive Director
Member of Audit Committee
Date of Appointment Date of Last Re-election
18 March 2004 30 September 2014
(Non-Independent Non-Executive Director) Nationality/Age/Gender
30 May 2017 Malaysian/63 years/Male
(Independent Non-Executive Director)
Dato’ Ibrahim bin Taib holds a Bachelor
of Laws (Honours) Degree from the
University of Malaya and a Master of
Laws from the University of London.
He started his career in the judicial service in 1978 as a Magistrate
in the Magistrate Court, Jalan Duta, Kuala Lumpur. Thereafter, he
was transferred to the Magistrate Court in Segamat, Johor. In 1982,
he became a Legal Advisor with the Road Transport Department
and continued in the same role in the Ministry of Human Resources
in 1986.

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 Sessions Court, Kota Bharu. In July
1992, he was posted to the Employees Provident Fund (“EPF”). He
retired as the Deputy Chief Executive Officer (Operations) of EPF
on 4 October 2014 but remains as the nominee Director of EPF in
DRB-HICOM Berhad until 26 May 2017.

Dato’ Ibrahim does not hold directorship in any other public or

public listed company.

Dato’ Ibrahim does not have any family relationship with any
Director and/or major shareholder of the Company and has no
conflict of interest with the Company. He has had no conviction for
any offence within the past five (5) years and has not been imposed
any public sanction or penalty by the relevant regulatory bodies
during the financial year ended 31 March 2017.

Dato’ Ibrahim attended all seven (7) Board meetings of the

Company held during the financial year ended 31 March 2017.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 45

Datuk Idris bin Abdullah holds a LLB. DATUK IDRIS BIN ABDULLAH
(Honours) Degree from the University Independent Non-Executive Director
of Malaya. Chairman of Board Risk and Sustainability Committee
Member of Audit Committee
He started his career in 1981 in Sibu, Sarawak and was admitted Member of Nomination and Remuneration Committee
to the Roll of Advocates of the High Court of Malaya in Sabah and
Sarawak in 1982.
Date of Appointment Nationality/Age/Gender
1 January 2017 Malaysian/60 years/Male
He has been with Messrs. Idris & Company Advocates, Kuching,
Sarawak since 1985 and is currently its Senior Partner. Datuk Idris was
appointed as a Commission Member of the Companies Commission
of Malaysia from 2007 to 2014. He was also a Commission Member
of the Malaysian Communications and Multimedia Commission from
2011 to 2015.

He is currently a board member of Malakoff Corporation Berhad

(listed entity) and NCB Holdings Berhad.

Datuk Idris does not have any family relationship with any Director
and/or major shareholder of the Company and has no conflict of
interest with the Company. He has had no conviction for any offence
within the past five (5) years and has not been imposed any public
sanction or penalty by the relevant regulatory bodies during the
financial year ended 31 March 2017.

During the financial year ended 31 March 2017, Datuk Idris attended
all the two (2) Board meetings of the Company held subsequent to
his appointment as Director of the Company on 1 January 2017.
 DRB-HICOM BERHAD
46 ANNUAL REPORT 2017
PROFILE OF KEY SENIOR
management
Datuk Mohamed Razeek bin Md Hussain
Chief Operating Officer - Services, Education & Defence
Datuk Mohamed Razeek bin Md Hussain,
a Malaysian, male, aged 59, was appointed
as Chief Operating Officer of DRB-HICOM
Berhad on 1 September 2012.
He holds a Bachelor Degree in Science, Civil
Engineering from Polytechnic of the South
Bank, United Kingdom. He was awarded a
Professional Certification in Management
Development by Harvard Business School in
1995.
Datuk Mohamed Razeek began his career
as an engineering consultant with a firm in
London in the late 1970s. Upon returning to
Kuala Lumpur in the 1980s, he joined a local
engineering consulting firm and was involved
in the construction of the UBN Towers, a
development by Peremba-Kuok Brothers.
In 1985, he joined Sime UEP Berhad before
moving on to Land & General Group of
Companies in 1991. His achievements at
Land & General saw his appointment as an
Executive Director of Land & General Berhad
in 1999. He later joined Eastern & Oriental
Property Development Berhad as a Project
Director in September 2003 prior to joining
Dato’ Abdul Harith bin Abdullah
Chief Operating Officer - Automotive Distribution
and Manufacturing & Engineering
Dato’ Abdul Harith bin Abdullah, a Malaysian,
male, aged 54, joined DRB-HICOM Berhad
in August 1995 and was appointed as Chief
Operating Officer of DRB-HICOM Berhad on
1 April 2016.
Dato’ Abdul Harith, a graduate in Arts
and Design majoring in Industrial Design
Engineering (“IDE”) from University
Technology MARA (“UiTM”) in 1985, pursued
a postgraduate degree in Automotive Design
at the Royal College of Art in London, UK
in 1990 where he earned a Master Degree
(MDES. RCA) in Vehicle Design. During his
Masters studies, he received the Wilkins
Campbell Chavant Clay Automotive Modelling
Award at the Royal Albert Hall of London.
Prior to his assignment in DRB-HICOM
Corporate Office as the Chief Operating
Officer of Automotive Distribution and
Manufacturing & Engineering, he has
Damac Properties in Dubai as Senior Vice
President from August 2008 to June 2009.
Datuk Mohamed Razeek joined Malaysian
Resources Corporation Berhad as Chief
Operating Officer in June 2009 and was
promoted to the post of Chief Executive
Officer on 1 December 2009. He is
currently Chief Operating Officer for the
Services, Education & Defence Sector of
DRB-HICOM Berhad.
Datuk Mohamed Razeek sits on the Board
of Pos Malaysia Berhad (listed entity),
Pos Logistics Berhad (formerly known as
Konsortium Logistik Berhad) and several
private limited companies within the
DRB-HICOM Group.
Datuk Mohamed Razeek does not have any
family relationship with any Director and/or
major shareholder of the Company and has
no conflict of interest with the Company. He
has had no conviction for any offence within
the past five (5) years and has not been
imposed any public sanction or penalty by
the relevant regulatory bodies during the
financial year ended 31 March 2017.
led several companies under the Group,
namely PROTON Holdings Berhad,
Automotive Corporation (Malaysia) Sdn. Bhd.,
Motosikal Dan Enjin Nasional Sdn. Bhd.,
DRB-HICOM Defence Technologies Sdn. Bhd.
Dato’ Abdul Harith sits on the Board of
Edaran Otomobil Nasional Berhad and
several private limited companies within the
DRB-HICOM Group. He does not hold any
directorship in any listed company.
Dato’ Abdul Harith does not have any family
relationship with any Director and/or major
shareholder of the Company and has no
conflict of interest with the Company. He
has had no conviction for any offence
within the past five (5) years and has not
been imposed any public sanction or penalty
by the relevant regulatory bodies during the
financial year ended 31 March 2017.

Shaharul Farez bin Hassan
Chief Operating Officer - Properties, Corporate Planning and Strategy
Shaharul Farez bin Hassan, a Malaysian, male,
aged 47, was appointed as Chief Operating
Officer of DRB-HICOM Berhad on 15 July 2016.
Shaharul Farez holds a Master in Business
Administration from Massachusetts Institute
of Technology, United States of America
and a Bachelor of Science in Economics
and Accounting (Honors) from University of
Bristol, United Kingdom.
He was formerly the Executive Vice President,
Corporate of Malakoff Corporation Berhad
and Group Chief Executive Officer of
Tradewinds Corporation Berhad, a property
development, leisure and hospitality outfit.
Shaharul Farez’s extensive experience in
major organisations will benefit the Group in
many ways.
Dato’ Carol Chan Choy Lin
Group Director - Corporate Affairs / Principal Company Secretary
Dato’ Carol Chan Choy Lin, a Malaysian,
female, aged 59, was appointed as Principal
Company Secretary of DRB-HICOM Berhad
on 2 February 2006. Dato’ Carol Chan is a
member of the Malaysian Institute of Certified
Public Accountants and the Malaysian
Institute of Accountants.
She began her career as an auditor and left
KPMG in 1984 to join the corporate sector.
She has extensive experience in the field
of auditing, accounting, finance, treasury,
corporate finance and corporate secretarial
in several public listed companies prior to
joining DRB-HICOM Berhad.
Dato’ Carol Chan was subsequently
appointed to her current position to oversee
the Group’s corporate secretarial and legal
affairs matters.
Amalanathan Thomas
Group Director - Financial Services
Amalanathan Thomas, a Malaysian, male,
aged 58, joined DRB-HICOM Berhad since
1983 and was appointed as Group Director
in January 2016. He was later appointed as
Principal Officer of DRB-HICOM Berhad on
April 2016.
Amalanathan holds a Master of Business
Administration from University of Malaya
and earned Professional Qualification in
Accounting and Taxation. His experience
spans over 25 years in the field of finance,
accounting and taxation. His extensive
knowledge of the Group’s businesses and the
relevant industry puts him in the forefront
of numerous acquisitions, divestments and
debt restructurings carried out in the Group.
Currently, as the Group Director, Financial
Services Division, he oversees the Group’s
accounting, reporting, and taxation matters.
He is a member of the Malaysian Institute of
DRB-HICOM BERHAD
ANNUAL REPORT 2017 47
Shaharul Farez sits on the Board of Gadek
(Malaysia) Berhad, HICOM Holdings Berhad,
Horsedale Development Berhad, Danau
Permai Resort Berhad, Rebak Island Marina
Berhad and several private limited companies
within the DRB-HICOM Group. He does not
hold any directorship in any listed company.
Shaharul Farez does not have any family
relationship with any Director and/or major
shareholder of the Company and has no
conflict of interest with the Company. He has
had no conviction for any offence within the
past five (5) years and has not been imposed
any public sanction or penalty by the relevant
regulatory bodies during the financial year
ended 31 March 2017.
Dato’ Carol Chan sits on the Board of Edaran
Otomobil Nasional Berhad (alternate to YBhg
Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar),
Horsedale Development Berhad, Danau
Permai Resort Berhad, Labuan Reinsurance
(L) Ltd., and several private limited companies
within the DRB-HICOM Group. She does not
hold any directorship in any listed company.
Dato’ Carol Chan does not have any family
relationship with any Director and/or major
shareholder of the Company and has no
conflict of interest with the Company. She has
had no conviction for any offence within the
past five (5) years and has not been imposed
any public sanction or penalty by the relevant
regulatory bodies during the financial year
ended 31 March 2017.
Accountants, an Associate Member of both the
Chartered Tax Institute of Malaysia, Institute
of Internal Auditors Malaysia and a member
of Malaysian Institute of Management.
Amalanathan sits on the Board of Composites
Technology Research Malaysia Sdn. Bhd.,
DRB-HICOM Environmental Services Sdn.
Bhd., Edaran Otomobil Nasional Berhad,
Gadek (Malaysia) Berhad and several private
limited companies within the DRB-HICOM
Group. He does not hold any directorship in
any listed company.
Amalanathan does not have any family
relationship with any Director and/or major
shareholder of the company and has no
conflict of interest with the Company. He has
had no conviction for any offence within the
past five (5) years, and has not been imposed
any public sanction or penalty by the relevant
regulatory bodies during the financial year
ended 31 March 2017.
 DRB-HICOM BERHAD
48 ANNUAL REPORT 2017
PROFILE OF KEY SENIOR
management of
principal subsidiaries
Dato’ Ahmad Fuaad bin Mohd Kenali
Chief Executive Officer - PROTON Holdings Berhad (PROTON)
Dato’ Ahmad Fuaad bin Mohd Kenali, a
Malaysian, male, aged 47, joined DRB-HICOM
Berhad as Chief Financial Officer on 15 August
2013 and was subsequently appointed to his
current position as Chief Executive Officer of
PROTON on 1 April 2016.
Dato’ Ahmad Fuaad has more than 23 years
of accounting, audit and finance experience
under his belt, after obtaining a BTEC
National Diploma in Business and Finance
from Brighton College of Technology, and a
Bachelor of Science (Hons.) in Computerised
Accountancy from the University of East
Anglia, both in the United Kingdom (“UK”).
He is a Fellow of the Association of Chartered
Certified Accountants, UK, Member of
the Malaysian Institute of Accountants
and Member of the Malaysian Institute of
Certified Public Accountants. He has also
attended a Senior Management Development
Programme organised by the Harvard
Business School Alumni Club of Malaysia.
Dato’ Ahmad Fuaad worked with Arthur
Andersen in the early part of his career, in
both Assurance and Corporate Finance, then
served as an Executive Director of Finance of
Petaling Garden Berhad, and subsequently as
an Executive Director/Partner in the Audit &
*CEO of PROTON reports directly to Group Managing Director
Business Advisory Services Division of Ernst &
Young.
He held various roles in the DRB-HICOM
Group including as Group Finance &
Corporate Chief Operating Officer and
Group Chief Financial Officer. He also sat
on the Boards of several companies under
the stable such as Horsedale Development
Berhad, Pos Logistics Berhad (formerly
known as Konsortium Logistik Berhad) Pos
Malaysia Berhad and PROTON, prior to being
made its CEO. Before joining DRB-HICOM in
2013, he was the Chief Financial Officer of
Astro Malaysia Holdings Berhad.
Dato’ Ahmad Fuaad continues to serve as a
Director of PROTON. He does not hold any
directorship in any listed company.
Dato’ Ahmad Fuaad does not have any family
relationship with any Director and/or major
shareholder of the Company and has no
conflict of interest with the Company. He
has had no conviction for any offence within
the past five (5) years and has not been
imposed any public sanction or penalty by
the relevant regulatory bodies during the
financial year ended 31 March 2017.

Dato’ Mohd Shukrie bin Mohd Salleh
Group Chief Executive Officer - Pos Malaysia Berhad (Pos Malaysia)
Dato’ Mohd Shukrie bin Mohd Salleh, a
Malaysian, male, aged 43, was appointed as
Group Chief Executive Officer of Pos Malaysia
on 1 November 2015.
Dato’ Mohd Shukrie holds a Bachelor of
Business Studies from University of North
London, United Kingdom in 1996. He is a
Chartered Accountant with the Chartered
Institute of Management Accountants and
the Malaysian Institute of Accountants.
He began his career with Public Bank
Securities Sdn. Bhd. and thereafter joined
United Overseas Bank Berhad. He has had
a wide-ranging career enriched by diverse
experiences in consumer and corporate
banking, corporate finance and advisory,
mergers and acquisitions, financial services,
risk management, human resources and
procurement.
He joined DRB-HICOM in August 2005,
where he assumed several leadership roles
including that of Principal Controller, Chief
Financial Officer, Chief Operating Officer and
Chief Executive Officer in various companies
within the Group. He was the Group Chief
Executive Officer of Pos Aviation Sdn. Bhd.
(formerly known as KL Airport Services
Sdn. Bhd.) (“Pos Aviation”), before the
DRB-HICOM BERHAD
ANNUAL REPORT 2017 49
acquisition of Pos Aviation by Pos Malaysia on
15 September 2016.
On 1 July 2011, he joined Pos Malaysia as
Group Chief Operating Officer and was
thereafter re-designated as Covering Group
Chief Executive Officer on 1 February 2013.
Prior to his appointment as Group Chief
Executive Officer of Pos Malaysia on 1
November 2015, he was the Chief Executive
Officer of Pos Logistics Berhad (formerly
known as Konsortium Logistik Berhad) (“Pos
Logistics”).
Dato’ Mohd Shukrie sits on the Board of Pos
Logistics, PNSL Berhad and several private
limited companies within Pos Malaysia
Group. He does not hold any directorship in
any listed company.
Dato’ Mohd Shukrie does not have any
family relationship with any Director
and/or major shareholder of the Company
and has no conflict of interest with
the Company. He has had no conviction
for any offence within the past five (5)
years and has not been imposed any public
sanction or penalty by the relevant regulatory
bodies during the financial year ended
31 March 2017.
 DRB-HICOM BERHAD
50 ANNUAL REPORT 2017

BOARD OF
management

Dato’ Sri Syed Faisal Albar

Bin Syed A.R. Albar

Group Managing Director

Datuk Mohamed RazeekMd Hussain Dato’ Abdul Harith Abdullah

Chief Operating Officer - Services, Education & Defence Chief Operating Officer - Automotive Distribution a
 nd
Manufacturing & Engineering
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 51

Shaharul Farez Hassan Dato’ Carol Chan Choy Lin

Chief Operating Officer - Properties, C
 orporate Planning Group Director - Corporate Affairs / P
 rincipal Company
& Strategy Secretary

Amalanathan Thomas Aminah Othman

Group Director - Financial Services (Ex-officio) Group Director – Treasury (Ex-officio)

Muhammad Rizal Md Zain Mahmood Abdul Razak

Head - Group Human Capital (Ex-officio) Head – Group Strategic Communications (Ex-officio)
 DRB-HICOM BERHAD
52 ANNUAL REPORT 2017

MANAGEMENT
team

Dato’ Sri Syed Faisal Albar

Bin Syed A.R. Albar
Group Managing Director

Datuk Mohamed Razeek M  d Dato’ Abdul Harith Abdullah Shaharul Farez Hassan Dato’ Carol Chan Choy Lin
Hussain Chief Operating Officer - Chief Operating Officer - Group Director - Corporate Affairs
Chief Operating Officer - Services, Automotive Distribution and Properties, Corporate Planning & / Principal Company Secretary
Education & Defence Manufacturing & Engineering Strategy

Dato’ Khalid Abdol Rahman Dato’ Mohamed Hazlan Bin Amalanathan Thomas Aminah Othman
Group Director – Corporate Mohamed Hussain Group Director - Financial Services Group Director – Treasury
Planning & Business Development Group Director - Education
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 53

Muhammad Rizal Md Zain Mahmood Abdul Razak Mimi Aisyah Chye Abdullah Rohime Shafie
Head - Group Human Capital Head – Group Strategic Head - Corporate Planning Head - Automotive
Communications / CEO - EON Berhad

Loo Hon Kok Abdul Jamil Johari Cheah Chee Kong Simon Cham Kim Fatt
Head - Property Head - Group Internal Audit Head - Risk Management Head - Group Information
Technology

Ainol Azmil Abu Bakar Norkiah Othman Shafiq Stephen Abdullah Haji Rosli Mohd Hussain
Head – Manufacturing & Head - Group Procurement Head - Group Safety, Health & Head - Outreach Unit
Engineering Environment
 DRB-HICOM BERHAD
54 ANNUAL REPORT 2017

good fruit is a sign

of a great TREE
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 55

accountability
 DRB-HICOM BERHAD
56 ANNUAL REPORT 2017
STATEMENT ON
corporate
governance
The Board of Directors (“Board”) and Management of DRB-HICOM
Berhad (“DRB-HICOM” or “the Company”) are committed in ensuring
that the highest standards of corporate governance are practised
throughout the Company and its subsidiaries (“Group”) as a
fundamental part of its responsibilities in managing the businesses
and affairs of the Group, protecting and enhancing stakeholders’
values as well as financial performance while promoting the
highest standards of integrity, transparency and accountability. The
Company abides strictly by the governing laws and regulations of the
jurisdictions where it operates and observes the applicable guidelines
and rules issued by the relevant regulatory authorities.
The Company has adopted and complied with the Malaysian Code on
Corporate Governance 2012 (“MCCG 2012”), by observing the specific
principles and recommendations on structures and process which
companies should adopt in making good corporate governance an
integral part of their business dealings.
The Board is pleased to present this statement which sets out the
manner in which the Company has applied the principles and
recommendations as set out in the MCCG 2012 and the extent of its
compliance with the principles, during the financial year ended 31
March 2017.
1. BOARD OF DIRECTORS
1.1 Duties and Responsibilities of the Board
The Board has the following six (6) specific responsibilities, which
facilitate the discharge of the Board’s responsibilities in the best
interest of the Company:
i. Adopting and reviewing the strategic plan for the
Company
The Board has the overall responsibility in leading and determining
the Group’s overall strategic plan and direction as well as development
and control of the Group without neglecting the shareholders’
interest. The strategic plan of the Group includes oversight on risks,
strategies, marketing and financial aspects of the business.
The Board approves and adopts the Group’s Annual Management
Plan (“AMP”) inclusive of the overall strategic direction on a yearly
basis and for the ensuing year. The Group adopted a structured
approach in the preparation of the AMP for the companies in the
Group with guidance and consultation from the Corporate Office.
The AMPs prepared by the operating companies were reviewed
and challenged by the representatives from the Corporate Office
during the Challenge meetings before the AMPs were finalised and
presented to the Boards of the respective Group companies and the
Board of the Company for consideration and approval.
The AMP of the Group and the Company for the financial year ended
31 March 2017 (“AMP 2017”) was approved by the Board during the
Board meeting held on 30 March 2016. During the presentation
of the AMP 2017 of the Group at the Board meeting, the Board
discussed the economic landscape and the possible impact on the
Group’s future performance, the business plan, the projections in the
AMP, the key challenges and issues faced by the Group, the proposed
restructuring activities for the subsidiaries as well as the strategies to
be implemented to improve the performance of the non-performing
companies in the Group.
The Board also reviewed and approved the corporate key performance
indicators (“KPIs”) used to track the Groups’ performance against
the targets. These would ensure the financial performance and the
businesses of the Group are properly managed and the shareholders’
values are safeguarded.
To ensure the achievement of the Group’s overall strategic direction
and the AMP, yearly KPIs have been formulated for the Group
Managing Director (“GMD”) and these KPIs are cascaded down to the
leadership team and other Management team members at Corporate
Office as well as the Chief Executive Officers/Chief Operating Officers
of the subsidiary companies.
The Board recognises the importance of business sustainability in
conducting the Group’s businesses taking into consideration the
impact on our main stakeholders namely; customers, shareholders,
employees, business partners, vendors, suppliers, social community
and the environment at large. The Board reviews the sustainability
aspects of the strategic direction to ensure the Group achieves the
targets in line with the fast changing business landscape. Details of
sustainable activities that were undertaken by the Group are disclosed
in the ‘Sustainability Report’ contained in this Annual Report.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 57

In addition, the Board reviews the Company’s funding requirements Management staff, related party transactions, significant business
and treasury matters on a continuous basis including the approval of decisions and other relevant matters affecting the Group’s operations
financial arrangements. and business.

ii. Overseeing the conduct of the The Board meets at least once every quarter and as and when
Company’s business to evaluate whether the required to discuss on the businesses conducted by the Group.
business is being properly managed and During the Board meetings held in the financial year under review,
sustained
the GMD presented detailed progress reports on the business

The Board provides entrepreneurial leadership and specifies the operations and development plan of the Group by sectors/

parameters within which Management decisions are to be made. companies, financial performance for the period compared to the

High integrity practice is adopted by all the Board members to AMP and the corresponding period last year as well as updates on

avoid improper use of information, conflict of interest, secret the key strategic activities, key corporate exercises, significant events

profit, contract with the Company and any other corrupt activities. of the Group and achievements of the Company.

In discharging its responsibilities, the Board has established the During the Board meetings, the Directors also discussed matters

appropriate internal control systems to support, promote and ensure arising from the minutes of previous Board meeting until the matters

compliance with the laws and regulations governing the Company. were duly resolved, strategy implementation by the Management

This includes taking into account the Company’s continuing viability and reports of the various Board Committees.

as an enterprise, its financial position, its cognisance of risks and

The Directors have actively participated in the Board meetings of the
mitigating factors as well as values which embrace ethical conduct
Company by asking pertinent questions as well as providing ideas
and creation of sustainable value.
and suggestions to the proposals presented by the Management.

The Board retains full and effective control of the Group by reviewing
the Management’s performance against the AMP periodically and iii. Identifying principal risks and ensuring the
implementation of appropriate systems to
ensuring that the necessary financial and human resources are manage these risks
available to meet the Group’s objectives.
The Board is responsible in reviewing principal risks, establishing
To ensure an optimum structure for efficient and effective decision-
appropriate controls and action items to ensure that the obligations
making, the Boards of the Group, approved a framework on Limits
to the shareholders and other stakeholders are met. The Board is
of Authority (“LOA”) to reflect the flows of authority and functions
also responsible to oversee sustainability related risks and ensure
of the GMD and Management. The LOA defines the type and limits
that sustainability is integrated within the key business areas and
of authority designated to specified positions of responsibility.
ensuring the collective achievement of the sustainability goals across
It also specifies a formal schedule of matters reserved for the
the organisation.
Board’s deliberation and approval. This is to ensure that there
are clear functions of the Board and the Management within the The above functions of the Board are delegated to the Board Risk and
Group. The LOA is reviewed as and when required according to Sustainability Committee (“BRSC”), which is supported by the Group
the circumstances and operational requirements of the Group. Risk Management Committee (“Group RMC”) headed by the GMD.

Among the key matters reserved for approval by the Board are the The Board through the BRSC oversees the risk management activities
business strategy, AMP, interim and annual financial statements, and processes of the Group. The BRSC also oversees the formulation of
investment activities, significant acquisitions and disposals, relevant risk management policies and risk measurement parameters
major restructuring and reorganisation, funding arrangements, across the Group and makes the appropriate recommendations to
expenditures above certain prescribed limits, interim dividend the Board for its approval. The BRSC is responsible for ensuring that
and declaration of final dividend, appointment of Directors/Board the risk management framework in the Group operates effectively
Committee members, remuneration for GMD and certain Senior based on the policies approved by the Board.
 DRB-HICOM BERHAD
58 ANNUAL REPORT 2017
The Group RMC reviews and presents the identified key risks to the
BRSC on a quarterly basis prior to submission to the Board. During
the BRSC meetings held in the financial year ended 31 March 2017,
the BRSC discussed the Group’s risk report, top key risks of the major
subsidiaries, outlook of the various business sectors, concerns of the
Group and matters arising therefrom.
On a quarterly basis, the Board reviewed and discussed the report
on Enterprise Risk Management which encompassed the Group’s Top
Key Risks and the recommendations from the BRSC.
Salient features of the risk management methodologies are disclosed
in the report on ‘Risk Management’ contained in this Annual Report.
iv. Succession planning, including appointing,
training, fixing the remuneration and where
appropriate, replacing Senior Management of the
Company
In determining the succession planning for Board members, the
Board is guided by the recommendations of the MCCG 2012 and
the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia
Securities Berhad (“Bursa Malaysia”) which stipulates that each
Director should have the character, experience, integrity, competence
and time to effectively discharge his/her role as a Director, taking
into account the future needs and way forward for the Company.
The Nomination and Remuneration Committee (“NRC”) has been
entrusted with the responsibility to review candidates for appointment
to the Board, Board Committees and Senior Management for
Grade 11 and above to ensure that all candidates appointed to
these positions are of sufficient calibre. In this respect, the factors
considered by the NRC include the candidates’ profiles, achievements,
personalities and suitability for the respective positions. The NRC also
has the responsibility to determine the remuneration of the GMD
and other Senior Management personnel from Grade 11 and above.
The succession planning for Senior Management Grade 11 and
above is deliberated by the NRC which then makes the necessary
recommendations to the Board for consideration and approval.
The succession planning for other Senior Management positions is
facilitated through a structured process led by the Group Human
Capital and endorsed by the GMD. The Group Human Capital
tables the updates/reports on succession planning for review and
discussion by the NRC annually before endorsement by the Board.
A Group Talent Management Programme has been introduced
to ensure adequacy of talent for business continuity of the Group.
Potential talents are identified by the Group Human Capital through
a series of selection and assessment processes. All identified talents
and potential successors for key positions in the Group will undergo
a structured talent development programme, which includes
mentoring and coaching.
During the financial year ended 31 March 2017, the Board in
overseeing the succession planning of the Company had considered
and approved a number of changes to the directorate of the Company
and its subsidiaries as well as the appointment and promotions of
Senior Management of the Company.
Details of the activities undertaken by NRC for the financial year
ended 31 March 2017 are set out on page 67 to 68 of this Annual
Report.
v. Developing and implementing an Investor
Relations programme or shareholder
communications policy for the Company
The Board recognises the importance of maintaining transparency
and accountability to the shareholders and all other stakeholders.
The Group Investor Relations (“IR”) had been entrusted with the
responsibility to handle IR and communications with the shareholders.
The key IR initiatives undertaken by the Company during the financial
year under review are set out in the report on ‘IR’ contained in this
Annual Report.
The Group maintains a website at www.drb-hicom.com (“the
website”) which can be conveniently accessed by the shareholders
and the general public to increase the effectiveness and timeliness
of information dissemination. On the website, there is a section
dedicated on IR that support the Company’s communication with
the investment community. The website is updated from time to
time as to provide the latest information about the Group, which
encompassed amongst others, corporate information, corporate
responsibility activities, annual reports, press releases, financial
results of the Group and announcements to Bursa Malaysia.
The Company had established a Corporate Disclosure Policy which
is in line with the Corporate Disclosure Guide issued by Bursa
Malaysia. The Corporate Disclosure Policy of the Company provides
guidance to the Board, Management, Officers and employees of the
Company on disclosure requirements and practices in particular
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 59

on the preparation and submission of timely, true and fair financial
disclosures and material announcements to Bursa Malaysia. This
would enhance the Company’s compliance, accountability and timely
disclosures to all the shareholders and stakeholders. The Corporate
Disclosure Policy of the Company is available on the website of the
Company.
vi. Reviewing the adequacy and integrity of
the Company’s internal control systems and
management information systems, including
systems for compliance with applicable laws,
regulations, rules, directives and guidelines
The Group’s Statement on Risk Management and Internal Control,
which provides an overview of the state of internal controls within
the Group, is contained in this Annual Report.
1.2 Board Charter
The Company had established a Board Charter which clearly sets out
the Board’s functions, duties and responsibilities, including division of
responsibilities between the Board, the different Board Committees,
the Chairman and the GMD. It is a source of reference and primary
induction literature, providing insights to prospective Board members
and Senior Management.

The Board has the overall responsibility to maintain an internal control The Board Charter adopts principles of good governance and is

system that provides reasonable assurance on the effectiveness and designed to maximise the Company’s compliance with the best

efficiency of operations, conformance with laws and regulations, as practice requirements. The Board Charter is reviewed as and when

well as with internal procedures and guidelines.
The effectiveness of the internal control system of the Group is
reviewed by the Audit Committee (“AC”) periodically during its quarterly
meetings. The review covers the Group’s financial, accounting and
necessary to ensure it remains consistent with the Board’s objectives
and responsibilities, and all the relevant standards of corporate
governance.
The Board Charter is available on the website of the Company. It was

reporting policies and practices as well as the adequacy of the reviewed and amended during the year in line with the regulatory

internal control system to safeguard the shareholders’ interests and changes. The Board Charter was last reviewed by the Board on

the Group’s assets. 22 June 2017.

The Group Internal Audit Division (“GIAD”) monitors the conformance

1.3 Composition and Balance
to the policies and procedures as well as the effectiveness of internal
During the financial year ended 31 March 2017 and up to the date of
control systems across the Group, whilst legal and regulatory
this Statement, the changes to the directorate of the Company were
compliance are the responsibilities of the Legal Affairs Department,
as follows:
Corporate Secretarial and Corporate Planning Divisions. The GIAD will
present its Audit Reports to the AC on a quarterly basis highlighting
Name of Directors Changes
any breach of internal controls and other areas of weaknesses
together with the recommendations to mitigate and rectify the issues Dato’ Siti Fatimah binti Daud Appointed on 1 April 2016
Non-Independent Non-Executive
highlighted. Director
Dato’ Abdul Rahman bin Ahmad Appointed on 16 May
During the financial year under review, the AC and the Board reviewed Independent Non-Executive 2016 and retired on 29
the report on the internal control matters of the Group highlighted Director September 2016, the date
of the last AGM, as he did
by the external auditor and discussed the recommendations for not seek for re-election
improvements in controls and procedures of the Group. In addition, Datuk Haji Abdul Rahman bin Retired on 29 September
Mohd Ramli 2016, the date of the
the AC and the Board also reviewed the summary of the overall
Independent Non-Executive last AGM, as he did not
assessment done by the external auditor on the quality of the Director seek for re-election
financial reporting performed by the management of the Group Tan Sri Marzuki bin Mohd Noor Resigned on 1 January 2017
companies covering the submission of management accounts, draft Senior Independent Non-Executive
Director
financial statements, quality of reconciliations, assessment of internal
Ong Ie Cheong Resigned on 1 January 2017
controls, timeliness of audit confirmation replies and the adequacy of
Independent Non-Executive
tax provision during the period of audit. Director
 DRB-HICOM BERHAD
60 ANNUAL REPORT 2017
Name of Directors Changes
Datuk Idris bin Abdullah Appointed on 1 January 2017
Independent Non-Executive
Director
Dato’ Ibrahim bin Taib Redesignated from Non-
Independent Non-Executive Independent Non-Executive
Director Director to Independent
Non-Executive Director on
30 May 2017 following his
cessation as a nominee
Director and representative
of the Employees Provident
Fund
The current Board consists of six (6) members, namely, one (1)
Executive Director, two (2) Non-Independent Non-Executive Directors
(including the Chairman) and three (3) Independent Non-Executive
Directors. The appoinment of YBhg Brig. Gen. (K) Tan Sri Dato Sri (Dr)
Haji Mohd Khamil bin Jamil, the former GMD of the Company, as the
Non-Independence Non-Executive Chairman of the Company was in
view of his proven track record in managing and transforming the
DRB-HICOM Group.
The Company has complied with the minimum compliance level
set under the MMLR which requires one-third of the membership
of the Board to be Independent Board members. The Board takes
cognisance of the practices set out in the new Malaysian Code on
Corporate Governance released in April 2017, which stipulates
that for large companies, the Board should comprise a majority of
independent directors. Currently, the Independent Directors make
up 50% of the Board membership. The Board will continue to source
for suitable candidates for appointment as additional Independent
Directors of the Company.
The composition, experience and balance of skills of the Board are
reviewed annually to ensure that the mix of skills and experience is
appropriate to meet the needs of the Group.
The Board members with their diverse academic qualifications,
background, skills, experiences and professional expertise enable the
Board to provide clear and effective leadership to the Group as well
as sharing experiences and ideas and make independent judgement
to many aspects of the Group’s strategy and performance so as to
enhance the Board’s decision making capabilities and ensuring that
the highest standards of professionalism, conduct, transparency and
integrity are maintained by the Group. A brief profile of each Director
is contained in this Annual Report.
No individual or group of individuals dominates the Board’s decision
making. The Independent Directors play an important and pivotal
role in corporate accountability and they represent the interest of
minority shareholders of the Company. The Independent Directors
are responsible for bringing independent and objective judgement
and providing balanced views and opinions to the Board’s decision
making. This is reflected by their memberships and attendances at
the various Board Committees of the Company.
None of the Independent Directors participate in the daily
management of the Group. Hence, they are free from any business
or other relationships which could interfere with the exercise of
independent judgement in the best interests of the Company and of
the minority shareholders.
The Company adopts the tenure limit of nine-year for Independent
Directors, as recommended under the MCCG 2012. The nine-year
tenure can either be based on a consecutive service of nine (9)
years or a cumulative service of nine (9) years with intervals. Upon
completion of the nine (9) years, an Independent Director may
continue to serve on the Board subject to the Director’s re-designation
as a Non-Independent Director. The Board, based on the assessment
by the NRC, may seek shareholders’ approval in a general meeting to
retain the Independent Director who has reached the tenure limit to
continue as Independent Director with justification.
1.4 Board Diversity
The Board values diversity as a factor in selecting candidates to
serve on the Board and believes that the diversity which exists in
its composition provides significant benefits to the Board and the
Company.
The Board considers that diversity includes differences that relate to
gender, age, ethnicity, skills, knowledge, qualification and experience.
The Board will continue to focus on diversity as it has in recent
years, to ensure that there is an appropriate mix of diversity, skills,
experience and expertise represented on the Board.
The Board recognises that gender diversity is of importance to
boardroom diversity. Nevertheless, the normal selection criteria
based on an effective blend of competencies, skills, characteristics,
extensive experience and knowledge to strengthen the Board will
remain a priority. As such, the Company does not set any specific target
for female Directors in the Board composition. Notwithstanding this,
the Board will continue to encourage and support for more women
participation on the Board, as and when vacancies and circumstances
permit.
During the financial year under review, YBhg Dato’ Siti Fatimah binti
Daud, a nominee Director of the Minister of Finance Incorporated,
was appointed to the Board on 1 April 2016.

1.5 Senior Independent Non-Executive
Director
On 1 January 2017, YBhg Datuk Ooi Teik Huat was appointed as
the Senior Independent Non-Executive Director of the Company, to
whom concerns may be conveyed by shareholders and stakeholders,
to replace YBhg Tan Sri Marzuki bin Mohd Noor, the former Senior
Independent Non-Executive Director of the Company.
The appointment of YBhg Datuk Ooi Teik Huat was primarily due to
his seniority, long service as an Independent Director on the Board,
deep knowledge of the businesses of the Group as well as his strong
leadership qualities.
1.6 Roles and Responsibilities of the
Chairman and the GMD
The Chairman of the Company represents the Board to the
shareholders. He is responsible for ensuring the integrity and
effectiveness of the governance process of the Board and will
consult with the Board promptly over any matter that gives him
cause for major concern. In addition, he is responsible for providing
clarifications to the shareholders at the Company’s general meetings
and ensuring Board effectiveness and proper conduct.
The Chairman will act as a facilitator at Board meetings and ensure that
no Board member, whether executive or non-executive, dominates
the discussion and that appropriate discussion takes place and
relevant opinions among the Board members are forthcoming. The
Chairman 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.
Concurrently, the GMD has the overall responsibility for
management of the operating units, organisational effectiveness
and implementation of Board policies, decisions and strategies. He
reports to the Board and is responsible for communicating matters
and issues relating to the Group’s business affairs to the Board.
The segregation between the duties of the Chairman and GMD
ensures appropriate balance of role, responsibility and accountability
at the Board level. Their roles and responsibilities are set out in the
Board Charter which is available on the website of the Company.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 61
1.7 Directors’ Time Commitment
All Directors are expected to allocate sufficient time and attention to
perform their duties and responsibilities effectively. The Directors are
also required to notify the Chairman before accepting any new Board
appointment.
A Non-Executive Director of the Company is expected to devote
sufficient time to attend all Board and Board Committee meetings,
general meetings, trainings/seminars for Directors, site visits and
other activities which are relevant for the effective discharge of his/
her responsibilities as a Director of the Company.
All Directors of the Company have confirmed that their other
directorships in public listed companies do not exceed the maximum
five (5) directorships permitted by the MMLR. The Directors are
required to notify the Company in a timely manner of any changes to
their list of directorships in public and private companies.
1.8 Appointment
There is a formal and transparent procedure for the appointment
of new Directors to the Company and the Group, the primary
responsibility of which has been delegated to the NRC to ensure that
any decisions made are in the best interest of the Company.
The nomination and election of the Board members involves certain
process. The Board will seek recommendation/referral from the
existing Directors to source and nominate suitable candidates for
appointment as Directors to fill the Board vacancies or to complement
the existing Board. When candidates are identified, NRC will evaluate
the suitability of the candidates based on the criteria set and make
the necessary recommendation to the Board for approval. The Board
will then make the final decision on the appointment of Director.
The NRC’s assessment criteria of the candidates includes, but not
limited to, consideration of the relevant knowledge and diversity of
backgrounds, professional qualifications, skills, experience, personal
qualities and perspectives that would complement the existing
Board as well as the time commitment and other directorships
in public listed companies. The NRC also considers the gender
diversity when reviewing the gender proportion of the Directors
during the assessment. In the case of a candidate for the position
of an Independent Director, the NRC would consider the candidate’s
ability to discharge such responsibilities/functions as expected of an
Independent Director.
 DRB-HICOM BERHAD
62 ANNUAL REPORT 2017

Subsequent to the appointment of new Directors to the Board, the
Company will arrange for an induction programme for the new
Directors, including visits to the Group’s significant businesses and
meetings with the Senior Management, to enable the new Directors
to get a full understanding of the nature of the businesses, the
current issues within the Group and corporate strategies as well as
the structure and management of the Group.
Apart from attending the various conferences, seminars and training
programmes organised by the external/internal organisers, the
Directors also visit the key operating units of the Group, if necessary.
The Directors also continuously receive briefings and updates on
regulatory, industry and legal developments, including information
on the Group’s businesses and operations, risk management activities
and other initiatives undertaken by the Management.

Following the evaluations by the NRC which were based on a set
of assessment criteria, the Board on the recommendation of the
NRC approved the appointment of YBhg Datuk Idris bin Abdullah
as an Independent Director of the Company on 1 January 2017 to
complement the Board composition.
The particulars of the seminars, conferences and training programmes
attended by the Directors, save for the Directors who had retired
or resigned during the financial year ended 31 March 2017, are as
summarised below:
Directors Trainings Attended

YBhg Datuk Idris bin Abdullah attended the induction programme Brigadier General (K) Tan • Sustainability Reporting
Sri Dato’ Sri (Dr) Haji Mohd • Industry Workshop on Logistics and
organised by the Company to assist him to familiarise with the
Khamil bin Jamil e-Commerce
matters relating to the Company’s business activities, the strategic
• Enhanced Auditor’s Report Standards
directions and policies, the regulatory environment in which the • Companies Act 2016
Group operates, the Company’s corporate governance practices and
Dato’ Sri Syed Faisal Albar bin • Trans-Pacific Partnership Agreement
others.
Syed A.R. Albar Briefing Session
• Sustainability Reporting
1.9 Training • Enhanced Auditor’s Report Standards
• Companies Act 2016
The NRC has been entrusted by the Board to evaluate the training
needs of the Directors including provision of continuous trainings for Dato’ Ibrahim bin Taib • Sustainability Reporting
• Enhanced Auditor’s Report Standards
all Directors of the Company.
• Related Party Transaction - Their
implications to the Board of Directors,
All existing Directors, including the newly appointed Director, have
Audit Committee and Management
completed the Mandatory Accreditation Programme prescribed • Companies Act 2016
by Bursa Malaysia. The Directors are encouraged to attend the
Datuk Ooi Teik Huat • How to Build or Burn Trust in an
continuous education programmes and seminars held from time to
Organisation - A Conversation with
time to keep themselves abreast with the latest developments in the Andrew Fastor
marketplace as well as to further enhance their business acumen and • Sustainability Reporting
• Competition Law Talk
professionalism in discharging their duties to the Group.
• Enhanced Auditor’s Report Standards
• Financial Outlook 2017
In addition, the Directors may request at the expense of the
• Audit Committee Leadership Track
Company to attend additional relevant training courses based on • Companies Act 2016 and its
their individual needs as a Director or member of Board Committees implications to directors
• Companies Act 2016
on which they serve. A dedicated training budget for the Directors’
• Global Transformation Forum
continuing training is provided each year to ensure that the Directors
are well equipped with the relevant skills and knowledge to meet the
Dato’ Siti Fatimah binti Daud • Directors’ Duties, Business Ethics and
challenges ahead. (Appointed on 1 April 2016) Governance
• Mandatory Accreditation Programme
The Company Secretary keeps a complete record of the trainings • Sustainability Reporting
attended by the Directors and from time to time, the Company • Enhanced Auditor’s Report Standards
• Companies Act 2016
Secretary will forward relevant training brochures to the Directors for
their consideration.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 63

Directors Trainings Attended good mix of governmental and industry-specific knowledge, broad

Datuk Idris bin Abdullah • Evolution of Enterprise Risk business sense and commercial experience. These include business,
(Appointed on 1 January 2017) Management Models corporate and entrepreneurial sectors, legal, finance, accounting
• Companies Act 2016 and its
and economics. The overall performance of the Board and Board
implications to directors
Committees for the financial year ended 31 March 2017 was rated
The NRC had assessed and reviewed the list of training programmes consistently good.
attended by the Directors during the financial year ended 31 March
2017. The NRC was satisfied that the trainings attended by the 1.11 Re-election of Board members
Directors were appropriate and adequate to enhance the Directors’ In accordance with the Company’s Constitution, all Directors shall
skills and knowledge in discharging their duties as Directors. retire from office by rotation once every three (3) years but shall
be eligible for re-election. The Constitution also provides that any
The NRC will, on a continuing basis, evaluate the training needs of
Director appointed during the year should hold office only until the
the Directors, particularly those relating to new laws and regulations
next Annual General Meeting (“AGM”) and should then be eligible for
including the essential practices for effective corporate governance,
re-election. The GMD also ranks for re-election by rotation.
to enable the Directors to continue to participate actively in Board
deliberations and decision making. The NRC reviews and assesses annually the Directors who are seeking
for re-election at the AGM of the Company. The NRC will, upon its
1.10 Board Effectiveness
review and assessment, submit its recommendation on the proposed
The Board, through its delegation to the NRC, had implemented the re-election of Directors to the Board for approval, before tabling
process for an annual effectiveness assessment of the Board, Board such proposals to the shareholders at the AGM. The re-election of
Committees and the contribution of each Director to the effectiveness Directors provide the shareholders an opportunity to re-assess the
of the Board. The objective is to improve the Board’s effectiveness by composition of the Board.
identifying gaps, maximising strengths and addressing weaknesses.
If the retiring Directors are Independent Directors, the NRC and the
The NRC assesses the performance of the Board, Board Committees Board would also take into consideration the annual assessment on
and the contribution of each Director annually using the self- independence carried out on the Independent Directors based on the
assessment methodology. Customised questionnaires are sent to the criteria of independence prescribed under the MMLR.
Directors for completion and the areas of evaluation cover the Board/
Board Committee size, composition and effectiveness, information The Board through the NRC and having considered the eligibility

management, accountability, communication with management, and suitability of the Directors who are subject to re-election in

performance in discharging the duties, time allocation, quality of accordance to the Company’s Constitution, is of the opinion that YBhg

information and decision making. The Board also assesses the Board Dato’ Ibrahim bin Taib, YBhg Datuk Ooi Teik Huat and YBhg Datuk Idris

Committees’ performances through their regular reports to the bin Abdullah meet the criteria of character, skill, experience, integrity,

Board on their activities. For evaluation of individual Directors, the competence and time commitment to effectively discharge their roles

areas of assessment are on fit and proper standing, contribution, as Directors and recommend their re-election for the shareholders’

performance, corporate integrity, commitment, capability and others. approval at the 27th AGM of the Company.

The Company Secretary will collate the results of the appraisals In addition, the NRC had assessed and the Board had endorsed
received from the Directors for submission to the Chairman of the that all the Independent Directors including those who are seeking
NRC who oversees the overall evaluation process. for re-election at the 27th AGM of the Company comply with the
independence criteria as prescribed in the MMLR and have remained
The NRC, pursuant to its recent annual review and assessment,
independent in exercising their judgement and in carrying out their
is satisfied that the size and composition of the Board and Board
duties as Independent Directors. All the Independent Directors
Committees are appropriate and well balanced to fairly reflect the
have also provided the NRC with written confirmations on their
interests of major and minority shareholders of the Company. The
independence during the annual assessment exercise conducted for
NRC is also satisfied that all members of the Board are suitably
the financial year ended 31 March 2017.
qualified in view of their respective competency, character, integrity,
qualifications and experience which provide the Board with a
 DRB-HICOM BERHAD
64 ANNUAL REPORT 2017

1.12 Directors’ Code of Ethics
The Directors continue to observe the Directors’ Code of Ethics
established by the Company in carrying out their fiduciary duties and
responsibilities. It sets out the principles that the Directors need to
observe particularly in respect of conflict of interest and guidelines
on acceptance of gifts. This is to ensure that high ethical standards
are upheld, and that the interests of stakeholders are always taken
into consideration. The Directors’ Code of Ethics is set out in the
Board Charter of the Company which is available on the website of
the Company.
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/she and any
person(s) connected to him/her will also abstain from voting on the
resolution before them.
and fit the year’s Board meetings into their own schedules. The
Board meets at least four (4) times a year, once every quarter and
additional meetings are convened between the scheduled meetings
as and when necessary where any direction or decisions are required
expeditiously from the Board. To assist the Board in managing 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.
All Directors will receive the agenda and a set of Board Papers
containing information relevant to the matters to be deliberated at
the meetings at least 5 working days prior to the Board meetings.
This is to accord sufficient time for the Directors to review the Board
Papers and if required, seek clarification and explanation from the
Management or the Company Secretary.
At the Board meeting, the Chairman encourages the Board
members to have constructive, open and healthy debates to
ensure that decisions are made unanimously or by consensus after
due discussions by the Directors. The Board is able to arrive at a
considered decision with the information and clarification provided
by the Management and professional advisors.

The Company has put in place appropriate controls to ensure

All Directors, whether independent or otherwise, have direct and
the systematic identification of potential conflicts of interest and
unrestricted access to the Management and may seek professional
procedures between the Directors and the operation of the Group so
advice at the Group’s expense, if required, for effective discharge
as to manage such conflict of interest and procedures, if arises.
of their duties. The Directors may request further information or
updates on any aspects of the Company’s operations or business
The Directors and Senior Management are also informed of the
from the Management. Professional advisers, consultants, auditors
closed periods periodically in accordance with the relevant provisions
and solicitors appointed by the Company to advise on corporate
of the MMLR. The purpose is to remind the Directors and Senior
proposals to be undertaken by the Company, are invited to attend
Management not to deal in securities of the Company as long as they
Board meetings to render their advice and opinion as well as to clarify
are in possession of price-sensitive information.
on any issues raised by the Directors on the matters tabled for the
1.13 Board Meetings and Supply of Information Board’s consideration.
to the Board
During the financial year ended 31 March 2017, seven (7) Board
The Directors are expected to attend all meetings of the Board and
meetings were held and the Directors’ attendances at the Board
the Committees on which they serve and devote sufficient time to
meetings are as follows:
perform their duties as Directors of the Company.

To ensure that the Group is managed effectively, the Board meetings

for the ensuing calendar year are scheduled in advance before the
end of each calendar year so as to enable the Directors to plan ahead

Directors Attendance
Brigadier General (K) Tan Sri Dato’ Sri (Dr)
Haji Mohd Khamil bin Jamil
Dato’ Sri Syed Faisal Albar bin Syed A.R.
Albar
Dato’ Ibrahim bin Taib
Datuk Ooi Teik Huat
Dato’ Siti Fatimah binti Daud
(Appointed on 1 April 2016)
Datuk Idris bin Abdullah
(Appointed on 1 January 2017)
Dato’ Abdul Rahman bin Ahmad
(Appointed on 16 May 2016 and retired on 29 September 2016)
Datuk Haji Abdul Rahman bin Mohd Ramli
(Retired on 29 September 2016)
Tan Sri Marzuki bin Mohd Noor
(Resigned on 1 January 2017)
Ong le Cheong
(Resigned on 1 January 2017)
All current Directors have more than adequately complied with
the minimum requirement on attendance at Board meetings as
stipulated in the MMLR (minimum 50% attendance).
1.14 Company Secretary
The Company Secretary of DRB-HICOM, who is a member of the
Malaysian Institute of Accountants and Malaysian Institute of Certified
Public Accountants, is experienced, competent and qualified to act
as Company Secretary under Section 235 of the Companies Act 2016
(“Act”). The appointment and removal of the Company Secretary is a
matter for the Board as a whole. All Board members have separate
and independent access to the advice and services of the Company
Secretary to facilitate the discharge of their duties.
The Company Secretary is responsible to the Board for ensuring
that Board policies and procedures are complied with and advising
the Board, particularly with regard to the Company’s Constitution,
governance matters as well as compliance with the applicable laws,
rules and regulations. In addition, the Company Secretary also
updates the Board regularly on amendments to the MMLR, circulars
from Bursa Malaysia and matters relating to statutory obligations and
directives issued by the regulatory authorities from time to time.
The Company Secretary attends all Board and Board Committee
meetings and ensures that there is a quorum for all the meetings.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 65
She is also responsible for ensuring that all the meetings are
convened in accordance with the Board procedures and relevant
7/7
terms of references.
7/7 The decisions made by the Board at the Board meetings are conveyed
to the respective Management for their immediate actions through
7/7
action lists issued by the Company Secretary within five (5) working
7/7
days after each Board meeting.
6/7
The minutes of the meetings are prepared to include amongst
others, pertinent issues, substance of enquiries and responses,
2/2
recommendations and decisions made by the Directors. The minutes
of the meetings are properly kept in line with the relevant statutory
3/3
requirements of the Act.
3/3 During the financial year under review, the Company Secretary
attended the relevant professional trainings to keep herself abreast
4/5 with the changes in the rules and regulations as well as to update her
skills and knowledge for the effective discharge of her duties.
4/5
1.15 Board Committees
To ensure the effective discharge of its fiduciary duties, the Board has
delegated specific responsibilities to the respective Committees of the
Board but retains full responsibility for the direction and control of
the Group. All the Board Committees, have written terms of reference
which state clearly their functions and responsibilities. The Board
reviews the functions and terms of reference of Board Committees
from time to time to ensure that they are relevant and updated in
line with the provisions of the MCCG 2012 and other related policies
or regulatory requirements.
The Chairmen of the respective Board Committees report to the
Board on the outcome of Board Committee meetings which require
the Board’s attention and direction and the Board also reviews the
minutes of the Board Committee meetings.
The Board has established three (3) Board Committees namely,
Audit Committee, Board Risk and Sustainability Committee as well
as Nomination and Remuneration Committee. Details of the Board
Committees of the Company and the attendances at the Board
Committees’ meetings held during the financial year ended 31 March
2017 are as follows:
 DRB-HICOM BERHAD
66 ANNUAL REPORT 2017

i. Audit Committee (“AC”)

The AC comprises the following Independent Non-Executive Directors and their attendances at the AC meetings held in the financial year
ended 31 March 2017 are as follows:

Members Attendance

Datuk Ooi Teik Huat (Chairman) 5/5

(Re-designated as Chairman on 29 September 2016)

Dato’ Ibrahim bin Taib 1/1

(Appointed as member on 1 January 2017)

Datuk Idris bin Abdullah 1/1

(Appointed as member on 1 January 2017)

Datuk Haji Abdul Rahman bin Mohd Ramli 3/3

(Ceased as member and Chairman on 29 September 2016)

Tan Sri Marzuki bin Mohd Noor 4/4

(Ceased as member on 1 January 2017)

Ong le Cheong 4/4

(Ceased as member on 1 January 2017)

The AC meets not less than four (4) times a year and twice with the internal and external auditors without the presence of the Management.
The Terms of Reference and functions of the AC are set out in the Board Charter which is available on the website of the Company.

ii. Nomination and Remuneration Committee (“NRC”)

The NRC comprises the Non-Independent Non-Executive Chairman and two (2) Independent Non-Executive Directors and their attendances
at the NRC meetings held in the financial year ended 31 March 2017 are as follows:

Members Attendance

Brigadier General (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil bin Jamil (Chairman) 1/1

Datuk Ooi Teik Huat Not Applicable*

(Appointed as member on 1 January 2017)

Datuk Idris bin Abdullah Not Applicable*

(Appointed as member on 1 January 2017)

Tan Sri Marzuki bin Mohd Noor 1/1

(Ceased as member on 1 January 2017)

Ong le Cheong 1/1

(Ceased as member on 1 January 2017)

* No NRC meeting was convened from 1 January 2017 to 31 March 2017.


The MCCG 2012 recommends that the Senior Independent Director
of the Company be appointed as Chairman of NRC. The Board
having considered the MCCG 2012’s recommendation and after due
consideration, decided to appoint YBhg Brigadier General (K) Tan Sri
Dato’ Sri (Dr) Haji Mohd Khamil bin Jamil as Chairman of NRC primarily
in view of his deep knowledge of the Group’s businesses with cross
functional and multidisciplinary expertise which can enhance his role
as the Chairman of NRC.
Although the Company combines both its Nomination and
Remuneration Committees as one (1) committee called NRC, the
NRC reviews and considers matters related to nomination and
remuneration separately. There are separate board papers on
nomination and remuneration matters that were tabled, discussed
and deliberated at the NRC meetings.
The Terms of Reference and functions of the NRC are set out in the
Board Charter of the Company which is available on the website of
the Company.
Among the activities undertaken by the NRC during the financial year
ended 31 March 2017 were as follows:
a) Considered and recommended the appointment of new
Directors for the Company and its key subsidiary and associated
companies;
b) Considered and recommended the Directors who were eligible
for re-election and re-appointment at the 26th AGM as well as
the Independent Directors whose terms of office had exceeded
nine (9) years to be retained as Independent Directors pursuant
to the MCCG 2012;
c) Reviewed the structure, size, balance and composition of the
Board and its Committees;
d) Conducted the annual assessment on the effectiveness of the
Board and its Committees as well as the contribution of each
Director;
e) Reviewed the terms of office and performance of AC and each of
its members;
f) Conducted the annual assessment of the independence of the
Independent Directors;
DRB-HICOM BERHAD
ANNUAL REPORT 2017 67
g) Reviewed the training programmes attended by the Directors to
ensure all Directors received appropriate continuous training;
h) Recommended revision to the Terms of Reference of NRC to be
in line with the amendments to the MMLR;
i) Evaluated the KPIs achievements of the GMD and Senior
Management personnel of Grade 11 and above for the financial
year ended 31 March 2016 and recommended their performance
bonuses;
j) Considered and recommended the annual increment for the
GMD and Senior Management personnel of Grade 11 and above
for the financial year ended 31 March 2017; and
k) Considered and recommended the appointment of a Senior
Management at Grade 12 to head the Properties, Corporate
Planning and Strategy Division.
In line with Paragraph 2.20A of the MMLR, the NRC also assessed the
principal officer responsible for overseeing the Group’s accounting/
reporting and taxation and found that he possesses the required
skills, knowledge, competency and experience to continue to
discharge his role efficiently.
In assessing the retention of YBhg Datuk Ooi Teik Huat who will reach
the nine (9) years tenure as an Independent Director on 1 November
2017, the NRC and the Board are of the view that he has continued
to remain objective and independent-minded in his participation
in the deliberations and decision making of the Board and Board
Committees. He has constantly sought clarifications and challenged
the Management when necessary as well as expressed unbiased
views without any influence and is objective in his scrutiny.
Moreover, the Board believes that length of time is not the sole
determinant of his credibility and effectiveness as Independent
Director since it does not in any way affect or interfere with his
exercise of independent judgment and ability to act in the best
interests of the Company and the Group.
The NRC and the Board are confident that he will continue to discharge
his duties diligently, independently and objectively notwithstanding
his tenure on the Board based on the following reasons:
 DRB-HICOM BERHAD
68 ANNUAL REPORT 2017
a) He fulfils the criteria as Independent Director as defined in the
MMLR and is able to bring independent and objective judgement
to the Board;
b) His vast experiences in the various industries and finance related
field enable him to provide the Board with a diverse set of
experience, expertise, skills and competence;
c) He has in-depth knowledge of the Company’s business
operations including the issues and concerns of the Group
which allows him to participate actively and contribute positively
during deliberations or discussions at both the Board and its
Committees meetings;
d) He has devoted sufficient time and effort in attending all the
Board and Board Committees meetings for informed and
balanced decision making; and
e) He exercises due care as an Independent Director of the Company
in carrying out his professional and fiduciary duties in the
interests of the Company, shareholders as well as stakeholders.
The Board on the recommendation of the NRC agreed to seek the
shareholders’ approval at the 27th AGM to retain YBhg Datuk Ooi
Teik Huat who will reach the nine (9) years tenure as an Independent
Non-Executive Director on 1 November 2017 to continue to act as the
Senior Independent Non-Executive Director of the Company.
All the assessments and evaluations carried out by the NRC are
properly documented.
iii. Board Risk and Sustainability Committee (“BRSC”)
The BRSC comprises the following Independent Non-Executive
Directors and their attendances at the BRSC meetings held in the
financial year ended 31 March 2017 are as follows:
Members Attendance
Datuk Ooi Teik Huat 4/4
Datuk Idris bin Abdullah (Chairman) 1/1
(Appointed as Chairman on 1 January 2017)
Dato’ Siti Fatimah binti Daud 0/1*
(Appointed as member on 1 January 2017)
Datuk Haji Abdul Rahman bin Mohd Ramli 2/2
(Ceased as member on 29 September 2016)
Tan Sri Marzuki bin Mohd Noor 3/3
(Ceased as member and Chairman on 1 January 2017)
Ong le Cheong 1/1
(Appointed as member on 29 September 2016 and ceased as
member on 1 January 2017)
* Dato’ Siti Fatimah binti Daud was absent for the meeting due to medical leave.
The Terms of Reference of the BRSC are set out in the Board Charter
of the Company which is available on the website of the Company.
1.16 Other Committees
In addition to the Board Committees, the Company has established
at Management level two (2) other main Committees namely, Board
of Management and Group Risk Management Committee headed by
the GMD to assist the Board in fulfilling its responsibilities.
i. Board of Management (“BoM”)
The Board has delegated certain responsibilities to the GMD, who is
supported by the BoM. The meetings of BoM are held every fortnightly
or as and when necessary, with proper agenda to deliberate on the
key matters relating to the Group’s businesses, key operating issues,
finances, manpower and other strategic matters including proposals/
projects based on the LOA of the Group, before submission to the
Board for consideration and approval.
The BoM is also responsible for formulating the Company and Group
policies for recommendation to the Board for consideration as well as
implementing key policy decisions of the Board. The minutes of the
meetings are submitted to the Board for notation.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 69

number of Directors whose remuneration fell into each successive

ii. Group Risk Management Committee (“Group RMC”)
band of RM50,000, are set out below:

The Management has established a Group RMC to assist the BRSC

Group Company
in identifying principal risks affecting the Group and ensuring that
(RM) (RM)
appropriate systems are in place and effective actions are taken to
mitigate as well as eliminate such risks to safeguard the shareholders’ Non-Executive Directors:

investments and the Group assets. The Group RMC is chaired by the
- Fees 904,707 744,570
- Attendance, other allowances and benefits
GMD and comprise of representatives from the respective sectors 2,043,160 169,500
and divisions. Executive Director:
- Salaries, bonuses, allowances and other benefits 3,970,834 -
The Board through the BRSC oversees the risk management and Total 6,918,701 914,070
sustainability activities of the Group. The Group RMC formulates
proposals on risk management and sustainability policies including
Group Company
the respective measurement parameters across the Group and
*Directors’
makes appropriate recommendations to the Board for its approval Remuneration **Non- **Non-
Executive Executive Executive Executive
upon endorsement by the BRSC. The BRSC is responsible for ensuring
that the risk management and sustainability framework in the Group
Below RM50,000 - 1 - 2
operates effectively based on the policies approved by the Board.
The Group RMC reviews and presents the identified key risks and
RM50,001 - RM100,000 - 1 - 1
action plans to mitigate the risks to the BRSC for endorsement before
submission to the Board for approval. RM100,001 - RM150,000 - 2 - 4

1.17 Directors’ Remuneration RM150,001 - RM 200,000 - 1 - 2

The objectives of the Group’s policy on Directors’ remuneration are RM200,001 - RM 250,000 - 1 - -

to ensure that the Group attracts and retains Directors of calibre

RM250,001 - RM 300,000 - 1 - -
and integrity to manage the Group successfully. In the case of the
GMD, the overall remuneration is structured so as to link rewards to RM350,001 - RM400,000 - 1 - -
corporate and individual KPIs. Non-Executive Directors (“NEDs”) will
RM1,550,001 - RM1,600,000 - 1 - -
be paid a basic fee as ordinary remuneration and they will also be
paid a sum based on their responsibilities in Board Committees and RM3,950,001 – RM4,000,000 1 - - -
for their attendances at meetings.
* Remuneration paid to the Directors of the Company includes fees, salaries and other
emoluments namely; bonuses, Employees Provident Fund contributions, attendance and other
The NRC is responsible for setting the policy framework and for
allowances and benefits-in-kind, where applicable.
making recommendations to the Board on all elements of the ** Included the Non-Executive Directors who retired and resigned during the financial year.

remuneration and other terms of employment of the GMD and

The disclosure of Directors’ remuneration is made in accordance with
Senior Management.
Appendix 9C, Part A, Item 11 of the MMLR.

The GMD shall abstain from deliberation and voting on decisions in

i. Directors’ Fees
respect of his own remuneration. The remuneration (excluding fees)
of NEDs is decided by the Board as a whole.
The fees paid to the NEDs of the Company for the financial year

Details of Directors’ remuneration for the financial year ended ended 31 March 2017 is lower at RM744,570 compared to RM750,750

31 March 2017, distinguishing between Executive and NEDs in for the financial year ended 31 March 2016. The lower amount of fees

aggregate, with categorisation into appropriate components, and the paid to the NEDs was due to retirement and resignation of Directors
during the financial year ended 31 March 2017.
 DRB-HICOM BERHAD
70 ANNUAL REPORT 2017

The annual Directors’ fee structure for the financial year ended 31 these personnel together with rewards due are rigorously undertaken
March 2017 has remained unchanged compared to the preceding at the Management and NRC levels with the Board making the final
financial year ended 31 March 2016 as follows: determination pursuant to the recommendations of the NRC.

Board AC NRC BRSC iv. Remuneration of Key Senior Management Personnel

(RM) (RM) (RM) (RM)

Chairman 140,000 17,000 10,000 10,000 The NRC as well as the Board ensure that the remuneration packages
of Key Senior Management Personnel are sufficiently attractive
Each Member 90,000 12,000 8,000 8,000
to retain persons of high calibre in tandem with their respective
contributions for the year. This would ensure that the Group’s

ii. Meeting Allowance remuneration packages remain competitive and are in line with
the Group’s corporate objectives to safeguard the interest of the

All NEDs are also paid meeting allowances as determined by the shareholders.

Board to reimburse them for expenses incurred for attendance at

Board/Board Committee meetings and shareholders’ meetings,
which is inclusive of travelling and accommodation.
The meeting allowance for AC is fixed at RM3,000 per member per
meeting while the meeting allowances for the Board and other Board
Committees as well as general meetings are fixed at RM1,500 per
Director per meeting.
v. Benefits
Other benefits, such as use of company car, driver, handphone
expenses/allowance, medical benefits and leave passage were
made available to the Chairman, GMD and Senior Management as
appropriate.

vi. Terms and Conditions of Employment

iii. Remuneration of the GMD

The GMD is employed on the terms and conditions as approved by

The basic salary inclusive of statutory employer contributions to the
the Board.
Employees Provident Fund for the GMD is determined and approved
by the Board, taking into account the performance of the GMD, the 2. SHAREHOLDERS AND INVESTORS
consumer price index and information from independent sources
on the rates of salary for similar positions in a selected group of 2.1 Dialogue between the Company and
comparable companies. Investors

The adoption of the KPIs was part of the overall governance to
enhance the performance management, financial performance and
shareholders’ value of the Company. The KPIs were formulated based
on two (2) main segments namely; Corporate/Financial and Priorities.
For the GMD and the Senior Management, greater emphasis was
placed on sustainability of growth which was 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
The Board values dialogue with investors and appreciates the keen
interests 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.
In line with the Company’s Corporate Disclosure Policy, the Company
is fully committed in maintaining transparency and accountability to
all its shareholders and stakeholders through consistent disclosures
of relevant and comprehensive information on timely manner to all
investors including the minority shareholders. This is to ensure that
all the Company’s shareholders are treated equitably and the rights
of all investors, including minority shareholders are protected.

The Company communicates with its shareholders and stakeholders
on regular basis through timely releases 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
The Company supports the principle of encouraging shareholders’
participation and voting at general meetings of the Company which
are the principal forum for dialogue with the shareholders. It also
provides opportunities for interaction amongst the shareholders,
Directors and Management.
The Company sends out the notices convening general meetings
to all shareholders at least fourteen (14) days before the date of
the meeting or at least twenty-one (21) days before the date of the
meeting where any special resolution is to be proposed or where
it is an AGM. Items of special business included in the Notice of
AGM are accompanied by an explanatory statement to facilitate full
understanding and evaluation of the issues involved.
All Directors attend the general meetings of the Company, unless
unforeseen circumstances prevent them from attending these
meetings. In order to promote participation by members/proxies/
corporate representatives at general meetings of the Company,
before the commencement of the general meetings, the Chairman
will brief the members, proxies and corporate representatives who
attend the meetings of their rights to speak and vote on the resolutions
set out in the Notice of General Meetings. At every AGM, helpdesks
are set up as a contact point for the shareholders’ enquiries.
For AGM of the Company, the proceedings normally commence
with a presentation by the GMD on the progress and business
performance of the Group followed by the agenda of AGM. The
presentation is supported by visual illustrations of key points and key
financial figures to facilitate the shareholders’ understanding. During
the AGM, shareholders are given the opportunity to raise questions
on all affairs of the Company. The Board, Senior Management and
relevant advisers are available to provide responses and clarifications
to the questions raised by the shareholders. The Chairman and
the GMD/Senior Management will provide the appropriate responses
DRB-HICOM BERHAD
ANNUAL REPORT 2017 71
to the questions raised by the shareholders at the AGM provided the
questions are related to the business activities of the Group. Replies
to the questions raised by the Minority Shareholder Watchdog Group
prior to the AGM are shared with all shareholders during the AGM.
The voting on resolutions at general meetings are conducted by way
of poll in line with the MMLR. The polling process is conducted upon
completion of the deliberations of all items set out in the notices of
general meetings.
2.3 Senior Personnel
Any queries or concerns regarding the Group may be conveyed to the
following designated senior personnel of the Company:
i. YBhg Datuk Ooi Teik Huat
Senior Independent Non-Executive Director
Tel: (03) 2078 0003 ; Fax: (03) 2032 3128
E-mail: meridiansol@outlook.com
ii. YBhg Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar
Group Managing Director
Tel: (03) 2052 7772 ; Fax: (03) 2052 7752
E-mail: syed.faisal@drb-hicom.com
iii. YBhg Dato’ Carol Chan Choy Lin
Group Director, Corporate Affairs/Company Secretary
Tel: (03) 2052 7695 ; Fax: (03) 2052 7696
E-mail: cclin@drb-hicom.com
3. ACCOUNTABILITY AND AUDIT
3.1 Financial Reporting
Pursuant to the MMLR, the Directors are responsible to present a true
and fair assessment of the Group’s position and prospects through
the quarterly reports, issuance of annual audited financial statements
and corporate announcements on significant developments affecting
the Group.
This would ensure that shareholders are provided with a balanced
and meaningful evaluation of the Group’s performance. The Board
is assisted by the AC in scrutinising 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 contained in this Annual
Report.
 DRB-HICOM BERHAD
72 ANNUAL REPORT 2017

3.2 Related Party Transactions (“RPTs”) and The Board through the AC had assessed the suitability and

Recurrent Related Party Transactions independence of EY and is satisfied that there is no conflict of interest

(“RRPTs”) and EY is suitably qualified for re-appointment as Auditors of the

Company. The Board agreed to recommend for the shareholders’
The Group has established and adopted the appropriate procedures
approval at the 27th AGM of the Company, the proposed
to ensure that RPTs and RRPTs are entered into at an arm’s length
re-appointment of EY as the external auditor of the Company for the
basis, and on normal commercial terms which are not more
financial year ending 31 March 2018.
favourable to the related parties than those generally available to the
public, and are not to the detriment of the minority shareholders of
3.4 Approval by the Board
the Company.
The Board had approved the above statement in accordance with a
All RPTs and RRPTs of the Group are reviewed by the AC resolution of the Board dated 10 July 2017.
before submission to the Board for consideration. Details of all
announcements pertaining to RPTs and RRPTs are available on the
website of the Company and Bursa Malaysia Berhad.

3.3 Relationship with External Auditor

The role of the AC in relation to the external auditor is found in the

Report of the Audit Committee contained in this Annual Report. The
Group has always maintained a close and transparent relationship
with its external auditor in seeking professional advice and ensuring
compliance with Financial Reporting Standards, MMLR and MASB
Approved Accounting Standards in Malaysia for Entities other than
Private Entities.

The AC meets with the external auditor at least twice a year to

discuss any issues arising from their audits without the presence of
the Management. The external auditor also highlights to the AC and
the Board on matters that require the AC’s or the 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.

The AC reviews the proposed re-appointment of the external auditor

of the Company and the audit fees on annual basis to ensure that the
independence of the external auditor is not compromised.

For the audit of the financial statements of DRB-HICOM and its

subsidiaries for the financial year ended 31 March 2017, the external
auditor of the Group, Messrs Ernst & Young (“EY”) have provided
written confirmation of their team independence when presenting
the audit planning memorandum as well as upon completion of
the audit in accordance with the firm’s requirements and with the
provisions of the By-Laws on Professional Independence of the
Malaysian Institute of Accountants.

DIRECTORS’ STATEMENT
on risk management
and internal control
In line with Paragraph 15.26(b) of the Bursa Malaysia Securities
Berhad’s Main Market Listing Requirements (“MMLR”), the Board of
Directors of a listed issuer is required to include in its Company’s
Annual Report a statement about the state of internal control of
the listed issuer as a Group. The Malaysian Code on Corporate
Governance 2012 (“MCCG 2012”) under Principle 6 states that the
Board should establish a sound risk management framework and
internal control system.
BOARD RESPONSIBILITY
The Board of Directors (“Board”) of DRB-HICOM Berhad is responsible
for the adequacy and effectiveness of the Group’s risk management
and internal control system. The Board affirms its commitment
towards ensuring and maintaining a sound internal control system
which encompasses good governance, risk management and control
processes within the Group. In light of the above, the Board confirms
that there is a proper risk management assurance process in place
to identify, evaluate and manage significant risks impacting the
Group’s achievement of its corporate objectives. The Board also
acknowledges the presence of a sound system of internal control
in safeguarding shareholders’ investments, the Group’s assets and
other stakeholders’ interests as well as ensuring compliance with
applicable laws and regulations.
It is recognised that the Group’s system of internal control can
only provide reasonable but not absolute assurance against any
occurrence of material misstatement or loss, and that the risk
management process is designed to manage or mitigate risks that
hinder the Group from achieving its goals and objectives.
MANAGEMENT RESPONSIBILITY
The Management assists the Board in the implementation of the
Board’s policies and procedures on risk and control by identifying,
assessing, monitoring and reporting risks and internal control, as
well as taking proper actions to address the risks. Management has
further assured the Board that the Group’s risk management and
internal control systems are operating adequately and effectively in
all material aspects.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 73
REVIEW OF RISK MANAGEMENT AND
INTERNAL CONTROL EFFECTIVENESS
To evaluate the effectiveness of the risk oversight and internal
control system within the Group, the Board has taken into account
the significant risks that impact the achievement of the Groups’
objectives and strategies.
In assessing the effectiveness of the risk management and internal
control systems to manage these risks, the Board via its Board Risk
and Sustainability Committee and Audit Committee perform the
following activities:
a) Board Risk And Sustainability Committee (“BRSC”)
• Ensuring effective oversight, implementation and compliance of
the objectives outlined in the Group’s Risk Management Policy;
• Establishing strategic content in ensuring the risk management
strategies are complete and sustainability efforts are
aligned with long-term business strategies; taking into account
the environment in which the Group operates and the
requirements of all stakeholders and the Board;
• Ensuring that a short and long-term risk management
strategy, framework and methodology have been implemented
and consistently applied across the Group;
• Reviewing the risk management strategy for identifying,
monitoring and managing significant business risks across
the Group and consider the effectiveness of internal controls
for identified potential material risk;
• Performing oversight function on sustainability initiatives
by ensuring the effective management of significant and
material economic, environment and social (EES) risks impacting
the principal businesses of the Group;
• Embedding risk management and sustainability capabilities
into all core business processes and ensuring that the culture of
the organisation reflects the risk consciousness of the Board;
 DRB-HICOM BERHAD
74 ANNUAL REPORT 2017
• Ensuring sustainability is integrated within key business
strategies towards the collective achievement
sustainability goals across the Group;
• Providing a consolidated risk and assurance reporting
structure to the Board to support the statement relating
to risk management and internal control in the Group’s
Annual Report;
• Ensuring alignment and coordination of risk, assurance and
sustainability activities across the Group;
• Identifying opportunities to reap potential business benefits
through the enhancement of risk management and
sustainability capabilities; and
• Ensuring the effective preparation of sustainability
disclosure statements and reports as prescribed by Bursa
Malaysia Securities Berhad (“Bursa Malaysia”).
b) Audit Committee
• Ensuring the adequacy of communication and reporting of
annual and quarterly financial results of the Group
particularly on changes in accounting policies, significant
adjustments arising from audits, going concern assumptions
and compliance with the Malaysian Financial Reporting
Standards, International Financial Reporting Standards,
Companies Act 2016 and legal requirements;
• Reviewing the activities of the external auditor, mainly on
the auditor’s appointment and audit fees, auditor’s
independence and objectivity, scope of audit, external
auditor’s report to the Audit Committee and management’s
responses and key audit matters in Auditors’ Report;
• Assessing the activities of the internal audit function, mainly
on the adequacy and achievement of the annual audit plan
and the Group Internal Audit Division’s
performance, sufficiency and competency
resources;
• Reviewing reports issued by GIAD, including special audits
of frauds or major internal control breakdown, and ensuring
that appropriate actions are taken by Management based
of on GIAD’s recommendations in providing solutions for
improvements to the system of internal control and
ensuring that the said recommendations are implemented
expeditiously; and
• Maintaining a transparent relationship with the external
auditor and solicit professional advice to ensure reporting
standards are complied with.
INTERNAL CONTROL
The key components of internal control as subscribed by the Group
can be categorised as follows:
1) Control Environment
Board Committees
The Board acknowledges that ensuring sound governance
requires effective interaction among the Board, Management,
internal and external auditors. The Board, in ensuring effective
discharge of its responsibilities, is assisted by the Board
Committees, namely the Audit Committee, Nomination
and Remuneration Committee as well as the BRSC. Each of the
Committees has clearly defined terms of reference.
Audit Committee
The Audit Committee (“AC”), comprising of one (1) Senior
Independent Non-Executive Director and two (2) Independent
Non-Executive Directors provides an oversight of the internal
and external audit processes as well as reviews the reports of
the auditor on the adequacy and integrity of the system of
internal control and the financial statements of the Group.
The AC reviews the engagement of the external auditor, their
scope, and approach in the conduct of the audit examination.
The AC also reviews the activities and results of the audit
conducted by GIAD and where needed recommends
(“GIAD”) appropriate actions to strengthen control.
of audit
The AC meets with the external auditor at least twice a year
without the presence of the Management. The AC, consisting
of members with a wide range of knowledge, expertise and
experience, has unrestricted access to internal and external
auditors and all employees within the Group.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 75

Please refer to page 79 to 82 of this Annual Report for the Audit 2) Enterprise Risk Management Assurance
Committee Report.
The Group has in place an Enterprise Risk Management
Organisational Structure & Reporting Line Framework in accordance with the principles and guidelines
There is a formal organisation structure with clear lines of outlined under the Committee of Sponsoring Organisation
reporting and responsibility to ensure proper segregation of of the Treadway Commission’s Enterprise Risk Management
duties, assignment of authority and accountability within the Integrated Framework (COSO) and the International
Group. Organisation for Standardisation’s Risk Management Principles
and Guidelines (ISO 31000:2009) to provide a consistent
Vision, Mission And Shared Values approach towards facilitating an adequate risk assurance
The Management has established vision and mission process in assessing risks by all employees within the Group.
statements, and shared values to steer and provide direction to
employees towards achieving the goals and objectives of the The Risk Management process is adopted from the ISO
Group. 31000:2009 framework as depicted below:

Ethics And Business Practice

The Group’s Code of Ethics and Business Practice, which is
communicated to employees, outlines the standards of
behaviours and ethics that are expected from employees.
Additionally, all permanent employees of executive grade and
above are required to declare their assets to the Group
Managing Director on a periodic basis and to disclose any
instances of conflicts of interest.
 DRB-HICOM BERHAD
76 ANNUAL REPORT 2017

In this respect, the Group Risk Management Division has
established and deployed an enterprise risk management
solution to all operating companies and corporate divisions
to facilitate the effective identification, assessment,
quantification, monitoring, mitigating and management of key
risks under the Group.
The Group continuously communicates and engages with
stakeholders to identify possible risk in addition to the events
and circumstances that could affect the achievement of the
objectives which includes the realisation of the opportunities.
A combination of qualitative and quantitative methods are used
by the Management to assess and evaluate the risk identified
from 2 perspectives – risk likelihood and impact parameters.
Management will then decide, in consultation with Group Risk
Management Division, on the risk treatment options for
subsequent implementation.
The risk management and control systems are subject to
continuous review and improvement to ensure that they are
sufficiently capable of responding to changes in the risk profiles
and remain aligned with the Group’s business strategy.
Notwithstanding the above, the Group Risk Management
Division also seeks to build a strong risk management culture
by promoting awareness, ownership and accountability of
risks. With that being said, individual risk, controls, and
management action plan owners are required to provide
quarterly assurance to Management and the BRSC regarding
the status of review as well as the adequacy and reasonableness
of actions put in place to mitigate key material risks faced by all
operating companies and corporate divisions under the Group.
3) Control Activities
Policies And Procedures
The Group has established policies and procedures to govern
the various group processes. This would ensure consistency
in practice whilst providing guidance and direction for proper
management and governance of the operations and business
activities within the Group.
Among the key policies and procedures in place are Human
Capital, Information Technology, Communication, Procurement,
Foreign Exchange, Risk Management, Code of Ethics and
Business Practices, Management Control and Internal Control
Framework, Whistle Blower, Anti-Fraud and Corporate
Disclosure Policy. Policies and procedures are also subject to
periodic review, revision, validation and approval.
The Group has also established the Limits of Authority (“LOA”)
to provide a framework of authority and accountability within
the organisation. The LOA sets the limit and authorisation for
strategic, capital and operational expenditure. It is regularly
updated and approved by the respective Boards to reflect
changing business needs in addressing operational deficiencies.
Risk Management Policy
The Group has put in place a formal and structured Risk
Management Policy developed in accordance with the principles
and guidelines outlined under the Committee of Sponsoring
Organisation of the Treadway Commission’s Enterprise Risk
Management Integrated Framework (COSO) and the
International Organisation for Standardisation’s Risk
Management Principles and Guidelines (ISO 31000:2009).

The digital risk assurance sign-off module resides within a risk The policy defines the risk management governance and
management solution, namely the Q-Radar System, embedded structure, processes, accountabilities and responsibilities
within the enterprise risk management process of the Group. throughout the Group.
The assurance template within the module is accessible for
sign-off by all operating companies on a quarterly basis. Whistle Blower Policy
The Whistle Blower Policy (“Policy”) outlines the Group’s
Additional information on the Group’s Risk Management commitment towards enabling employees and other
process is provided on page 87 to 93 of the Annual Report. stakeholders to raise concerns in a responsible manner

regarding any wrongdoings or malpractices without being
subject to victimisation or discriminatory treatment, and to
have such concerns properly investigated. The Policy promotes
a culture of honesty, openness and transparency within the
Group.
The Group encourages its employees to make any disclosure
openly and honestly. All disclosures made under the Policy will
be dealt with in strict confidence. It will be the task of GIAD
or any other assigned investigating party to assess, investigate
and report on the complaints or concerns raised.
The Policy and its disclosure procedure are accessible to the
public for reference on the Company’s website at
www.drb-hicom.com. Complaints or reports under this Policy
can also be made through the Whistle Blower Hotline.
Business Planning And Budgetary
The Group manages performance of the operating units,
within which business strategies, planning and budgetary
exercises are established annually and actual performance is
monitored and assessed periodically against set targets.
4) Information And Communication
Pertinent information such as the Group’s achievements,
changes with regard to corporate and organisational structure
as well as policies and procedures are identified, captured, and
communicated in a proper and timely manner. This would
enable employees to focus and perform their responsibilities
effectively.
In addition, all Heads of Business Sectors, Operating Units and
Corporate Divisions participate in business dialogue
programmes with Senior Management of the Group to discuss
strategies and challenges faced towards achieving the business
goals and objectives.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 77
5) Monitoring
Internal Audit Function
The business processes and conduct of the operating units
within the Group are continuously assessed by GIAD in the
context of adequacy and effectiveness of the financial,
operational controls and risk management. GIAD reports to
the Audit Committee and communicates to Management on
audit observations noted in the course of their review and
performs monitoring on the status of actions taken by the
operating units.
Please refer to page 82 to 83 of this Annual Report on the
summary of audit works performed by GIAD.
Moreover, members of the Management under the various
Corporate Head Office functions, such as procurement
and information technology, also undertake periodical review
of the compliance and adequacy of the control systems as well
as procedures of the Group’s companies and operating units.
Performance Management
Continuous education, training and development programmes
are emphasised in order to nurture quality and competent
employees.
Employees’ performances are measured according to the set
of key performance indicators (KPI) aligned to their functions as
assigned to them and which they are expected to accomplish.
ASSURANCE TO THE BOARD
The Statement on Risk Management and Internal Control has been
prepared in compliance with the MMLR and the Statement on Risk
Management and Internal Control – Guidance for Directors of Listed
Issuer 2012. In making the above assurance, the Group Managing
Director and the Group Director, Financial Services acknowledged
that the risk management and internal control systems are operating
adequately and effectively in all material aspects based on the risk
management and internal control systems of the Group.
 DRB-HICOM BERHAD
78 ANNUAL REPORT 2017

STATE OF ADEQUACY AND EFFECTIVENESS

OF THE GROUP’S RISK MANAGEMENT AND
INTERNAL CONTROL SYSTEMS

For the financial year under review and up to date of the approval
of this Statement on Risk Management and Internal Control, after
taking into consideration the assurance from the Group Managing
Director and Group Director, Financial Services, the Board is of the
opinion that the system of internal control and risk management
processes are adequate and sound to provide reasonable assurance
in safeguarding shareholders’ investments, the Group’s assets
and other stakeholders’ interests as well as in addressing key risks
impacting the business operations of DRB-HICOM Berhad. 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.

REVIEW OF THIS STATEMENT

Pursuant to Paragraph 15.23 of the MMLR, this Statement has been

reviewed by the external auditor, Messrs. Ernst & Young, for inclusion
in the Annual Report of the Group for the financial year ended
31 March 2017. They have reported to the Board that nothing
has come to their attention that causes them to believe that this
Statement is inconsistent with their understanding of the processes
adopted by the Board in reviewing the adequacy and integrity of the
Group’s systems of risk management and internal control.

This Statement on Risk Management and Internal Control is made in

accordance with the resolution of the Board dated 10 July 2017.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 79

AUDIT COMMITTEE
report
The Board of Directors (“Board”) of DRB-HICOM Berhad is pleased During the AC Meetings, the Management of the Company was
to present the Audit Committee Report for the financial year ended invited to brief the AC on the Group’s financial performance and
31 March 2017. relevant corporate matters as well as to address any queries raised by
the AC. The Management of the Group Internal Audit Division (“GIAD”)
1. COMPOSITION AND ATTENDANCE AT MEETINGS attended all AC meetings and presented the internal audit reports to
the AC. Other than the results and reports of internal audits, GIAD
1.1 Composition also presented the summary of audit activities, internal audit plan as
well as audit staff strength. The external auditor was also invited to
The composition of the Audit Committee (“AC”) members during the attend the AC meetings to present the audit scope and plan as well as
financial year (“FY”) under review up to the date of this report is as the Auditors’ Report on the audited financial statements.
follows:-
All issues discussed and deliberated during the AC meetings were
recorded in the minutes of each meeting by the Company Secretary
who is also the secretary to the AC. Any matters of significant concern
raised by the internal and external auditors were duly conveyed by
the AC to the Board.

2. TERMS OF REFERENCE OF AUDIT COMMITTEE

The Terms of Reference (“TOR”) establishes the authority, duties

and responsibilities of the AC. The TOR has been incorporated in
the Board Charter which is available on the Company’s website at
www.drb-hicom.com. The TOR of the AC was reviewed and revised
during the year to reflect the changes in line with the recent
amendments to the MMLR.

3. SUMMARY OF WORKS PERFORMED BY

THE AUDIT COMMITTEE
The AC Chairman, YBhg Datuk Ooi Teik Huat is a member of the
Malaysian Institute of Accountants (“MIA”). Hence, the Company has The key works carried out by the AC during the financial year ended
fulfilled the requirement under Paragraph 15.09(1)(c)(i) of the Main 31 March 2017 comprised of the following:
Market Listing Requirements (“MMLR”) of Bursa Malaysia.
3.1 Financial Reporting
1.2 Attendance
In overseeing the Group’s financial reporting, the AC had reviewed
There were five (5) AC meetings held during the year ended 31 March the unaudited quarterly and annual financial results. The
2017. The AC members and their attendance records are outlined in chronological details of the reviews conducted are as follows:
the Statement of Corporate Governance (“CG Statement”).
 DRB-HICOM BERHAD
80 ANNUAL REPORT 2017

(a) The AC reviewed the fourth quarter unaudited financial results

3.3 External Audit
for the FY2015/16 at its meeting held on 25 May 2016.

(a) The AC deliberated with the external auditor the results of the
(b) The AC reviewed the annual audited financial statements of
audit of the annual audited financial statements for the financial
DRB-HICOM Group and Company for the FY2015/16 together
year ended 31 March 2016 and the Report to the Audit
with the Statement of Directors’ Responsibility and took note of
Committee as well as the management responses at its meeting
the Report to Audit Committee from the external auditor,
held on 29 June 2016.
Messrs. Ernst & Young at its meeting held on 29 June 2016.

(b) The AC reviewed and approved the Annual Audit Plan for
(c) The unaudited quarterly financial results for the first quarter,
financial year ended 31 March 2017 with the external auditor
second and third quarter for the FY2016/17 were reviewed at
inclusive of the terms of engagement and scope of work for the
the AC meetings held on 29 August 2016, 28 November 2016
statutory audit at its meeting held on 27 February 2017.
and 27 February 2017 respectively.
During the meeting, the external auditor affirmed that Messrs.
Ernst & Young and all members of its engagement team have
This includes the review on the announcements of the financial
maintained their independence in accordance with the
results to Bursa Malaysia prior to recommending to the Board for
provisions of the By-Laws on Professional Ethics, Conduct and
approval. The review was conducted to ensure that the financial
Practice of the MIA.
reporting and disclosure were in compliance with:

The AC also obtained written assurance from the external

• Provisions of the Companies Act 2016;
auditor confirming their independence throughout their term of
• MMLR of Bursa Malaysia;
engagement for the financial year under review.
• Applicable approved accounting standards in Malaysia; and
• Other legal and regulatory requirements.
(c) The AC was briefed by the external auditor on the inclusion of
Key Audit Matters in the new format for the Auditors’ Report in
The AC review also focused on any changes to accounting policies,
its meeting held on 29 August 2016 and 27 February 2017.
practices and significant audit adjustments. The review and
discussion by the AC were carried out together with the Group
(d) The AC reviewed the terms of engagement for the external
Managing Director (“GMD”) and the Group Director, Financial
auditor in respect of the review of the Director’s Statement on
Services.
Risk Management and Internal Control for the financial
year ended 31 March 2017 during its meeting held on
3.2 Risks and Controls
27 February 2017.

The AC evaluated the overall adequacy and effectiveness of the

(e) The AC reviewed the proposed re-appointment of the external
system of internal controls through review of the work performed
auditor for the Company and recommended the
by both internal and external auditors as well as discussions with
re-appointment and fees for the Board’s approval.
the Management. The AC also reviewed the Statement on Risk
Messrs. Ernst & Young which have been the Company’s external
Management and Internal Control as well as Statement on Corporate
auditor since 2011 was recommended for re-appointment for
Governance and Report on Risk Management prior to inclusion in the
the ensuing year. The financial year ended 31 March 2017
Company’s Annual Report. The AC in its meeting held on 29 June 2016
marked the first year for the engagement partner,
reviewed and recommended the Statement on Risk Management
Mr. NS Lingam who will be rotated in 2022 in accordance with
and Internal Control together with the Statement on Corporate
the provisions of the By-Laws on Professional Ethics, Conduct
Governance and Report on Risk Management for publication in the
and Practice of the MIA.
2016 Annual Report of the Company to the Board for approval.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 81

(f) The AC reviewed the non-audit services provided by the

3.5 Related Party Transactions (“RPTs”) and
external auditor. During the year under review, the Company
Recurrent Related Party Transactions (“RRPTs”)
engaged the external auditor for several non-audit works
involving taxation, quarterly reviews and others. Details of
The AC reviewed the RPTs and RRPTs of the Group to ensure
non-audit fees incurred by the Company for the financial year
compliance with the MMLR and that they were not more favourable
ended 31 March 2017 are stated in the Additional Compliance
to the related parties than those generally available to the public and
Information of this Annual Report.
were not detrimental to minority shareholders. The AC had reviewed
the RRPTs at all five (5) meetings held during the financial year ended
(g) The AC held biannual meetings with the external auditors
31 March 2017.
without the Management’s presence on two (2) separate
occasions on 29 June 2016 and on 27 February 2017.
3.6 Others

3.4 Internal Audit

The AC members attended relevant and continuing education
programmes during the financial year under review as to acquire
(a) The AC reviewed and approved the GIAD’s Annual Internal Audit
better insight to the related businesses and operations. The details
Plan and ensured that the principal risks, key entities and
of the trainings attended by the AC members are stated in the CG
functions were adequately identified and covered in the plan.
Statement as contained in this Annual Report.
The AC approved the FY2017/18 Internal Audit Plan at its
meeting on 27 February 2017.
4. STATEMENT ON INTERNAL AUDIT FUNCTION

(b) The AC reviewed the internal audit reports presented by GIAD at

4.1 Roles and Responsibilities
each AC meeting held throughout the financial year ended
31 March 2017. This includes review on GIAD’s activities with
The GIAD is an integral part of the assurance structure of the Group.
respect to:
The Division’s primary responsibility is to provide an independent and
reasonable assurance on the adequacy, integrity and effectiveness of
• Status of audit activities as compared to the approved
the Group’s overall system of internal control, risk management and
Annual Audit Plan;
governance process. However, those Group companies which are
• Results of the scheduled, follow-up, investigative and
listed or regulated by Bank Negara Malaysia through Islamic Financial
special audits;
Services Act 2013 are under the purview of the AC and internal audit
• Adequacy of the Management’s responsiveness to the
functions of the respective companies.
audit findings and recommendations;
• Status of the Internal Audit’s Quality Assurance and
The Head of GIAD reports directly to the AC on a functional basis
Improvement Programme; and
and to the GMD administratively. The Head of GIAD periodically
• Adequacy of the audit resources, training and development
reports to the AC on the activities performed as well as the key
of the staff within GIAD.
control issues noted by the internal auditors. The purpose, authority
and responsibility of GIAD are reflected in the Internal Audit Charter,
(c) The AC at its meeting on 29 June 2016 also reviewed and
which was approved by the AC.
recommended the Audit Committee Report to the Board for
approval prior to inclusion in the 2016 Annual Report of the
In order to maintain its independence and objectivity, GIAD has no
Company.
operational responsibility and authority over the activities it audits. In
determining the adequacy of audit scope and coverage, GIAD applies
(d) The AC held two (2) private meetings with the Head of GIAD to
a comprehensive audit planning of the Group’s auditable entities and
review and discuss on the key internal controls and internal
functions by performing risk analysis and ensuring adequate
audit related matters, on 29 June 2016 and 27 February 2017.
resources in performing the audit.
 DRB-HICOM BERHAD
82 ANNUAL REPORT 2017

4.2 Audit Resources 4.3 Audit Works

The total staff strength in GIAD as at 31 March 2017 stood at 40 staff GIAD adopts a risk-based approach as part of its audit planning and
which includes the staff from the internal audit function of PROTON execution focusing on significant identified risks and effectiveness of
Holdings Berhad as summarised below:- the controls in mitigating the risks. In performing the audit
engagements, GIAD is guided by the Institute of Internal Auditors’
International Professional Practices Framework (IPPF) which
includes the Definition of Internal Auditing, the Code of Ethics, and the
International Standards for the Professional Practice of Internal
Auditing.

GIAD is also guided by the internal policies, procedures as well as the

The AC approves the GIAD’s annual audit plan, financial budget
and manpower requirements so as to ensure that the function is
adequately resourced with competent and proficient internal
auditors.
During the financial year ended 31 March 2017, a total of
RM5.01 million was incurred as part of the resource allocation for
the Group’s internal audit function, covering mainly manpower and
incidental costs such as travelling and training as summarised below:
Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organisations of the Treadway Commission (COSO) and
Control Objectives for Information and Related Technology (COBIT).
Activities of the internal audit function include review of the
adequacy and effectiveness of internal controls and risk
management, compliance with applicable laws and regulations,
reliability and integrity of information and adequacy of safeguarding
of assets.
During the financial year ended 31 March 2017, GIAD executed a total
of 185 audits which comprised scheduled and ad-hoc engagements
inclusive of special audits. The audits conducted covered a wide
range of units and its related branch operations under DRB-HICOM
Berhad and PROTON Holdings Berhad Group. Amongst the key
areas covered for the financial year under review were:

• Procurement;
• Inventory Management;
• Business Operations;
GIAD also invested in various training programmes to maintain • Contract Management;
and enhance the desired competency level of the Group’s internal • Project Management;
auditors. The training programme, comprising in-house and • Human Resource Management;
externally sourced training, focuses on functional and developmental • Financial Management;
needs of the internal auditors. • Asset Management;
• Management Information System; and
• Safety, Health & Security.

None of the components of the internal audit function were

outsourced to external service providers.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 83

All findings from the internal audit reviews were reported to the AC,
Senior Management and the relevant Management of the operating
units.

The respective Management of the audited operating units is

accountable to ensure proper handling of the audit issues and
implementation of their action plans within the time-frame specified.
Actions taken by the audited operating units were followed up by
GIAD and the status updated in the subsequent audits.

4.4 Quality Management System

The GIAD continues to maintain its Quality Assurance and

Improvement Programme covering its internal audit processes
through the ISO 9001:2008 Quality Management System, which is
subject to an in-house quality audit and external annual surveillance
assessment by a certification body.
 DRB-HICOM BERHAD
84 ANNUAL REPORT 2017

ADDITIONAL COMPLIANCE
information
(Pursuant to the Main Market Listing Requirements of
Bursa Malaysia Securities Berhad (“MMLR”))

UTILISATION OF PROCEEDS

There were no proceeds raised by the Company from any corporate proposal during the financial year ended 31 March 2017.

RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING IN NATURE

(“RRPTs”)

The Company did not seek for the shareholders’ mandate on the RRPTs of the Group at the last Annual General Meeting.

Save as disclosed below, none of the RRPTs entered into by the Group during the financial year ended 31 March 2017 exceeded the thresholds
prescribed under Chapter 10.09 of the MMLR which required announcement to be made to Bursa Malaysia Securities Berhad (“Bursa Malaysia”)
and/or shareholders’ approval.

The Company had on the following dates released announcements to Bursa Malaysia on the RRPTs entered between Motosikal Dan Enjin
Nasional Sdn. Bhd. (“MODENAS”), a 81% owned subsidiary of the Company and Kawasaki Heavy Industries Ltd. (“KHI”), a 19% shareholder of
MODENAS, as the aggregate RRPTs as shown below had exceeded the 1% threshold prescribed under the MMLR:

Announcement Date Period of RRPTs Aggregate RRPTs (RM)

13 September 2016 1 April 2016 - 31 August 2016 81,476,792.62
18 January 2017 1 September 2016 - 31 December 2016 68,948,694.36
25 May 2017 1 January 2017 - 30 April 2017 76,373,063.23

MATERIAL CONTRACTS INVOLVING
DIRECTORS’ AND MAJOR SHAREHOLDERS’
INTEREST
The particulars of material contracts entered into between the
Company and its subsidiaries involving the Directors’ and major
shareholders’ interest which are still subsisting as at 31 March 2017
or, if not then subsisting, entered into since the end of the previous
financial year are as follows:
(i) Land Status Swap Agreement (“Agreement”) between Rebak
Island Marina Berhad (“Rebak”) and Northern Gateway Free
Zone Sdn. Bhd. (“NGFZ”) dated 21 December 2011 (“Proposed
Land Status Swap”) for a cash consideration of RM76 million.
The parties agreed to change the designation of 333 acres
of freehold land owned by Rebak from Malay Reserve (“MR”)
to non-MR by swapping with the non-MR status of 350 acres
of freehold land owned by NGFZ subject to the conditions
imposed by Kedah State Government.
Save as disclosed below, none of the directors, major
shareholders of Rebak and/or the Company and/or persons
connected with them has any interest, direct or indirect, in the
Proposed Land Status Swap.
Encik Ahmed Kamil P M Mustafa Kamal (“AKMK”) holds 1
preference share in NGFZ and is a director in Northern Gateway
Sdn. Bhd. (“NGSB”) and Benua Bayu Sdn. Bhd. (“BBSB”) which
are the holding company and intermediate holding company
of NGFZ respectively. AKMK was a shareholder in HICOM
Power Sdn. Bhd. (“HPSB”) prior to the completion of acquisition
of HPSB by the Company on 30 October 2008. AKMK then held
1 ordinary share of RM1.00 each in HPSB in trust for YBhg Tan
Sri Dato’ Seri Syed Mokhtar Shah Bin Syed Noh (“TSSM”), being
the other shareholder in HPSB. As such, AKMK is deemed a
person connected to TSSM.
TSSM, an indirect major shareholder of the Company through
his major shareholding in Etika Strategi Sdn. Bhd. (“ESSB”), the
holding company, was deemed interested in the Proposed
Land Status Swap.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 85
YBhg Brig. Gen. (K) Tan Sri Dato’ Sri (Dr) Haji Mohd Khamil
bin Jamil (“TSMKJ”), the Non-Independent Non-Executive
Chairman of the Company holds 10% equity interest in ESSB
is a person connected to TSSM and deemed interested in the
Proposed Land Status Swap.
(ii) A share sale agreement between HICOM Berhad (“HB”) and
MRCB Engineering Sdn. Bhd. (“MESB”) dated 17 February 2017
for the acquisition of 510,000 ordinary shares in Dekad Kaliber
Sdn. Bhd. (“DKSB”) representing 51% equity interest in DKSB
from MESB (“Sale Shares”) for a total cash consideration of
RM7 million (“DKSB Acquisition”).
The DKSB Acquisition was completed on 17 February 2017.
Save as disclosed below, none of the other directors, major
shareholders and/or persons connected with a director or
major shareholder of the Company has any interest, direct or
indirect in DKSB Acquisition.
As at 27 January 2017, Employees Provident Fund (“EPF”)
holds 34% equity interest in Malaysian Resources Corporation
Berhad (“MRCB”), the holding company of MESB. As at
6 February 2017, EPF owns 5.27% equity interest in the
Company. As such, EPF is deemed interested in the DKSB
Acquisition.
AUDIT AND NON-AUDIT FEES
(i) The amount of audit fees paid or payable to the external
auditors, Messrs Ernst & Young (“EY”), and their affiliated
companies for the services rendered to the Group and the
Company for the financial year ended 31 March 2017
amounted to RM5.06 million and RM0.30 million respectively.
(ii) The amount of non-audit fees paid or payable to the external
auditors, EY, and their affiliated companies for the services
rendered to the Group and the Company for the financial
year ended 31 March 2017 amounted to RM2.94 million and
RM0.92 million respectively.
 DRB-HICOM BERHAD
86 ANNUAL REPORT 2017

STATEMENT OF
directors’
responsibility
in respect of the preparation of the Financial
Statements for the financial year ended 31 March 2017

The Directors are required by the Companies Act 2016 (“the Act”) to ensure that the financial statements prepared for each financial
year give a true and fair view of the financial position of the Group and of the Company as at the end of the financial year and of the
financial performance and cash flows of the Group and of the Company for the year then ended. As required by the Act and the Listing
Requirements of Bursa Malaysia Securities Berhad, the financial statements have been prepared in accordance with Financial Reporting
Standards in Malaysia and the provisions of the Act.

The Directors consider that in preparing the financial statements for the financial year ended 31 March 2017 set out on pages 168 to 350,
the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and
estimates and ensured that all applicable approved accounting standards have been followed.

The Directors have ensured that the accounting records 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 on behalf of the Board in accordance with a resolution of the Directors dated 10 July 2017.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 87

RISK
management
OVERVIEW

Today’s organisations are faced with a myriad of challenges that presents increased uncertainties to their business environment on a global
scale. These uncertainties create risks that significantly impacts business performance and growth. As such, the impetus for organisations to
subscribe to robust and resilient risk management practices becomes even more pertinent to manage the negative repercussions brought on
by these uncertainties. In meeting these challenges, DRB-HICOM Berhad continues to develop and institute new improvement initiatives in
its risk management methodologies to drive and embed a holistic risk culture and value creation into the mind-set of business entities, thus
ensuring the sustained achievement of its business and strategic objectives. The Board of DRB-HICOM Berhad remains committed to ensure
the continual effectiveness in implementing risk management and internal control systems across the Group to achieve operational excellence
without compromise to its core values. In realising this endeavour, the Group continues to adopt an enterprise-wide risk management process
comprising the following key components:
 DRB-HICOM BERHAD
88 ANNUAL REPORT 2017
RISK GOVERNANCE
In advocating good risk governance towards optimising long
term stakeholder returns, the Group continues to enhance its
oversight capabilities in assessing uncertainties impacting the
business environment, from changes in regulatory and financial
requirements, to technological advancements and data security
concerns, increasing global competition as well as on issues relating
to human capital resourcing, development and retention.
To ensure continued sustainability and performance across all
Business Sectors and Operating Units, the Group has adopted
prudent, responsible and transparent governance, risk and
compliance approaches to warrant continued resilience and agility
in undertaking existing and new business initiatives.
In this respect, the Group has put in place a formal and
structured Risk Management Policy developed in accordance
with the principles and guidelines outlined under the Committee
of Sponsoring Organisation of the Treadway Commission’s
Enterprise Risk Management Integrated Framework
and the International Organisation for Standardisation’s Risk
Management Principles and Guidelines (ISO 31000:2009). The policy
defines risk management governance and structure, processes,
accountabilities and responsibilities throughout the organisation.
The inculcation of a robust risk culture and understanding across
the Group is crucial. It links the organisation’s corporate objectives
and goals to its primary risks, controls and action plans to allow
for a comprehensive and effective assessment of events that have
adverse impacts on the Group’s core businesses.
The main underlying principles of the Group’s Risk Management
Policy are:
• Providing a policy and organisational structure for the
management of risks that DRB-HICOM assumes in its activities;
• Defining risk management roles and responsibilities within
the organisation and outlining control procedures to mitigate
risks;
• Ensuring consistent and acceptable management of risk
throughout the business;
• Defining a reporting framework to ensure
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 organisation 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.
BOARD RISK AND SUSTAINABILITY
COMMITTEE
The Board Risk and Sustainability Committee (“BRSC”), acting
on behalf of the Board of Directors of DRB-HICOM Berhad, has a
broad mandate to ensure the effective oversight, implementation
and compliance of the objectives outlined in the Group Risk
Management Policy of DRB-HICOM Berhad, as well Sustainability
Reporting Guidelines prescribed by Bursa Malaysia. The members of
the BRSC comprise three (3) Independent Non-Executive Directors,
with the Group Managing Director; Chief Operating Officer, Services,
(2004)
Education & Defence Sector; Chief Operating Officer, Automotive
Distribution and Manufacturing & Engineering Sector; Chief
Operating Officer, Properties, Corporate Planning and Strategy;
Group Director, Financial Services Division, Group Director, Treasury
Division; Head, Group Internal Audit Division and Head, Group Risk
Management Department attending as invitees to the Committee.
RISK MANAGEMENT COMMITTEE
The BRSC of DRB-HICOM Berhad delegates to the Risk Management
Committee (“RMC”) the responsibility for creating a risk-aware culture
and building the necessary knowledge for risk management at every
level of management. The RMC shall also be responsible for ensuring
the effective implementation of the Group Risk Management Policy,
and the management of risks and controls associated with group
operations as well as compliance to applicable laws and regulations.
The RMC is responsible for periodic reporting of key risk exposures
to the BRSC. The composition of the RMC comprises the Group
Managing Director, Chief Operating Officers of the Business Sectors,
Group Directors of Corporate Divisions together with Heads of the
effective relevant Divisions as invitees.

SUSTAINABILITY COMMITTEE
Likewise, the BRSC of DRB-HICOM Berhad delegates to the
Sustainability Steering Committee (“SSC”) the responsibility for
creating a sustainability-aware culture and inculcating the necessary
sustainability-related knowledge at every level of management. The
SSC shall be responsible for ensuring the effective implementation
of sustainability initiatives across Group operations, as well as
compliance to sustainability requirements imposed by Bursa
Malaysia.
The composition of the SSC comprises the Group Director of Financial
Services Division, Head of Group Strategic Communications Division
and Head of Group Risk Management Department with Heads of the
relevant Divisions as invitees.
DRB-HICOM BERHAD’S THREE LINES OF
DEFENCE
In providing assurance on the effective implementation of the
Enterprise Risk Management program, the Group adopts the “Three
Lines of Defence” model based on the recommendation of the
European Confederation of Institutes of Internal Auditing (ECIIA)
to safeguard the business interest of the Group against adverse
impacts of material risks as illustrated below:
DRB-HICOM BERHAD
ANNUAL REPORT 2017 89
1st Line of Defence: Sector and Business Units
Each Sector (and each operating company therein) are ultimately
responsible for managing the key risks associated with its business
and investments. All material and significant risks shall be identified,
assessed, analysed, treated, monitored and reported in accordance
with the Group Risk Management Policy outlined above. Each sector
and operating companies have risk coordinators as liaison officer to
assist risk owners in scheduling internal risk briefings and liaising with
Group Risk Management Department in day-to-day management of
risks.
2nd Line of Defence: Group Risk Management
Department
Group Risk Management Department facilitates and monitors the
implementation of effective risk management practices throughout
the Group. Key practices include regular and periodic risk review and
assessment to Divisions within the Corporate Office, Business Sectors
and the Operating Units to facilitate operational management of risks
including identification of known and emerging issues or concerns
and shifts in the organisation’s implicit risk exposure and appetite.
In addition, Group Risk Management Department provide assistance
towards improving the awareness of risk management practices as
well as to inculcate positive risk culture within each of the prescribed
entities across the Group.
3rd Line of Defence: Group Internal Audit Division
Group Internal Audit Division is responsible in providing independent
assurance through a systematic approach to evaluate and improve
the effectiveness of risk management, control and governance
processes throughout the entire organisation
ENTERPRISE RISK ASSESSMENT
Key risks of the Group, at Business Sectors, Operating Units and
Corporate Divisions that could lead to a negative or possible
departure or deviation from the key performance indicators are
presented in descending order of significance; and are critically
assessed, validated and managed in accordance to the main
categories set out below:
 DRB-HICOM BERHAD
90 ANNUAL REPORT 2017
Business and Strategic Risks
Business and strategic risks arises from uncertainties impacting the
execution of strategic initiatives deployed based on long and short
term policy decisions. These decisions are made in accordance with
the business direction of the Group in enhancing performance and
growth within the domestic, regional and global markets.
In this respect, the Group maintains its continued vigilance over
evolving political, social, business and economic landscapes to
ensure that changes are promptly identified, assessed and managed
to preserve the uninterrupted implementation of those strategies
associated with the Group’s business objectives.
Industry Risks
Industry risks arise from uncertainties impacting industry
performance caused by the imposition of revised fiscal and trade
policies. With the Group’s core business concentrated on the
automotive sector, policy changes will bring about significant impact
to the Group’s overall performance and operational sustainability
in the form of increased competition, advancements in innovation
and technology, shifts in customer preference and volatility in
commodities and currency pricing.
In mitigating these risks, the Group has undertaken various
initiatives, comprising amongst others, securing new business
opportunities with global OEMs, embarking on non-automotive and
aerospace business diversification programmes, securing additional
defence contracts as well as growing the e-fulfilment, concession
and education businesses.
Reputation Risks
The Group acknowledges the impact of reputation risks towards
eroding image and brand visibility. Reputational damage caused by
negative media and publicity over the Group’s business practices,
conduct or financial condition will adversely impair stakeholders
confidence, resulting in costly litigation and decline in customer
base, business and revenue.
The Group manages its reputation risks through regular engagement
and communication sessions with key stakeholders to disseminate
relevant information regarding the conduct of the Group’s activities.
Compliance checks and audits are carried out periodically to enforce
the implementation of the Group’s Code of Ethics & Conduct and
Whistle Blowing Policy to curb incidences of fraud across all business
sectors and operating units.
To further offset risks to the Group’s reputation, ongoing enhancement
towards the brand and image of the Group is performed through
various Corporate Responsibility (CR) programmes organised by
Group Strategic Communications Division. Details of these initiatives
are noted on page 157 in the Annual Report.
Notwithstanding the above, risk assessment is similarly carried
out for new business initiatives undertaken by the Group. The
assessment report, comprising identified risks and mitigation plans,
forms part of the investment proposal paper reported to the Board
of Management, chaired by the Group Managing Director, for
deliberation and approval.
Financial Risks
Uncertainties arising from FOREX and interest rate volatilities cannot
be underestimated. In dealing with this risk, DRB-HICOM Berhad
continues to implement its Group Foreign Exchange (FOREX) Policy
which stipulates distinct measures in utilising appropriate hedging
instruments to assess manage and minimise foreign currency losses.
The Policy is consistently reviewed and updated to reflect changing
financial requirements and it is deployed to all business sectors and
operating units within the Group for effective implementation.
Notwithstanding the above, the Group is equally mindful of changes
in interest rate movements that will adversely affect revenue and
profit contribution, particularly from the automotive and property
markets. In this respect, appropriate detection mechanisms
have been put in place to monitor and alert Management of such
changes so that prompt measures can be initiated and acted upon
expediently.
Funding represents another key risk to the Group due to the
extensive amount of capital required to finance new acquisitions
and to mobilise existing and new projects. Concern in this area rests
primarily on our ability to secure the requisite financing due to the
imposition of single customer limit, breach of funding covenants set
by financial institutions and down grade of ratings by credit agencies
arising from our increased financial commitments to the banks.

The Group manages its funding risks by maintaining an optimal
capital structure through detailed monitoring of financing and
cashflow plans established by business sectors and operating units.
Constant engagement is carried out between Group Financial
Services & Treasury Division, together with the business units and
financial institutions to track the status of financing, which comprise,
amongst others, the issuance of corporate medium term notes and
bonds, as well as drawdowns on syndicated loans and club deals.
The Group constantly seeks out new funding arrangements to
further boost its financial capabilities towards driving new project
initiatives in line with its long-term strategic business plan.
Organisational Risks
The Group is acutely aware of risks impacting its human capital
management programmes. These risks, comprising attrition of
talents, competencies and capabilities concerns, skills shortages,
fragmented succession planning to mission and operational
critical positions and less than optimal consequence management,
threatens the sustainability and continued performance of business
sectors and operating companies within the Group.
The Group’s approach in managing human capital risks is through
the execution of manpower rationalisation initiatives, followed by
talent review and profiling sessions, inclusive of job mapping and
level restructuring programmes. These programmes define and
align the job accountabilities and responsibilities towards meeting
the strategic goals and objectives of the Group.
In addition to the above, on-going programmes, such as, talent
attraction through local, regional and international career fairs and
roadshows, workshops and clinics on skills profiling and knowledge
development trainings as well as coordinated employee retention
reviews with business sector representatives, are constantly and
consistently carried out by Group Human Capital Division to provide
a more holistic approach towards managing human capital within
the Group.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 91
Project & Investment Risks
Risks relating to projects and investments for new business initiatives
are critically identified, assessed, analysed and incorporated into
proposal papers for deliberation by the Management of DRB-HICOM
Berhad prior to approval.
These endeavours are critical in ensuring proper and adequate
safeguards are in place to address and mitigate potential risks that
may derail the eventual execution and realisation of investment
objectives. The mitigation plans to manage the identified risks are
then incorporated into the delivery value chain and closely monitored
throughout the project or investment life-cycle.
The Group manages its Project & Investment risk through the risk
assessment carried out for new business initiatives undertaken
by the Group. The assessment report, comprising identified risks
and mitigation plans, forms part of the investment proposal
paper reported to the Board of Management (formerly known as
Management Committee), chaired by the Group Managing Director,
for deliberation and approval.
Cyber Security Risks
Cyber security risks affects all organisations through unauthorised
system intrusion and data breach resulting in operational
disruptions, breach and loss of critical data, financial loss and
tarnished reputation.
In mitigating cyber security risks, the Group has taken a balanced
approach in implementing key action items encompassing four
elements, namely, security threat assessment, enforcement of IT
security policies, enforcement of critical data backup mechanism
and application systems performance tracking. The Group has
emplaced the appropriate measures to manage internal and external
malicious threats via scheduled data and systems checking coupled
with planned IT security audit.
In addition to the above, a Group-wide Disaster Recovery Programme
(DRP) has been deployed to facilitate immediate system resumption
and data recovery of critical applications.
 DRB-HICOM BERHAD
92 ANNUAL REPORT 2017

RISK MITIGATION & MEASUREMENT

Risk Initiatives
The Group continues to expand and enhance on its risk management
initiatives through risk review and validation sessions held across
all Business Sectors, Operating Units and Corporate Divisions
on a quarterly basis. These sessions are aimed at assessing the
effectiveness and relevance of controls and management action
plans implemented to mitigate the occurrence and severity of
documented key risks. Action plans for all key risks are further
assessed to ensure the timeliness of execution and are kept within
resource limits.

Risk Appetite
The risk appetite defines the value and type of risks that the Group
is prepared to accept in pursuit of its strategic business objectives. It
stipulates the level of tolerance and limits established to govern and
manage the Group’s risk taking activities.
The Group’s risk appetite serves as a benchmark for all Business
Sectors, Operating Units and Corporate Divisions to develop risk
tolerances and limits in accordance to their specific business/
operational requirements and objectives. Monitoring of key risk
exposures are then performed through the analysis of the risk
tolerances set against monthly business and performance trends
at the respective Business Sectors, Operating Units and Corporate
Divisions.
Business Risk Clusters
DRB-HICOM Group Risk Management Department continuously
introduces new and effective approaches in strengthening and
enhancing the risk intelligence process through the establishment
of business risk clusters. The risk clustering methodology provides
a more holistic perspective towards providing a spectrum of key risk
areas to be managed as illustrated in Diagram 1.0.
Key objectives to the risk clustering approach are:
• Providing a clear and direct linkage between risk and reward
measurement by reconciling business objectives against
identified key risks;
• Prioritising key risks to be managed through data analytics that
provides quantified exposure values;
• Monitoring and assessing the adequacy, timeliness and
effectiveness of action plans in managing pertinent key business
risks;
• Anticipating future events/emerging risks via trend analysis;
• Performing statistical data analysis for better-informed decision
making processes;
• Managing risks and assessing the relevancy of the risk
appetites in tandem with changes to business environment and
regulations;
• Nurturing and instilling concerted efforts in managing risks
within specific business sectors; and
• Fostering proactive risk management and risk awareness across
the Group.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 93

TRAINING & DEVELOPMENT

The Group continues to enhance its risk management capabilities across all Business Sectors, Operating Units and Corporate Divisions. Risk
review and validation sessions, awareness programmes and discussion forums are facilitated and conducted by Group Risk Management
Department on a quarterly basis to ensure continued effectiveness in implementation of the risk management processes.

ENTERPRISE RISK REPORTING

The Group’s Enterprise Risk Management Process provides for regular review and reporting. Such reports include an assessment on the
significance of existing and emerging key risks impacting the Group’s businesses as well as an evaluation of the effectiveness of controls and
action plans put in place for additional controls. The key elements of the reporting process are shown in the below graph:

MOVING FORWARD

DRB-HICOM Berhad is committed in implementing key initiatives towards embedding strategic risk management thinking as a business
culture across all Business Sectors, Operating Units and Corporate Divisions within the Group.
 DRB-HICOM BERHAD
94 ANNUAL REPORT 2017
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 95
 DRB-HICOM BERHAD
96 ANNUAL REPORT 2017

CHAIRMAN’S
foreword

The emphasis we place on

corporate governance is
driven not merely to satisfy
regulatory requirements,
but more because we believe
strongly it is the right way
to run our business.
Dear Shareholders,

Our financial year ended 31 March 2017 was without doubt challenging, given a softening of the local
economy in reflection of continued global uncertainties. Malaysia’s gross development product (“GDP”)
for the calendar year 2016 came in at 4.2%, lower than the 5.0% achieved in 2015. Although still relatively
robust compared to the global GDP of 3.4%, it was one of the lowest we have seen in the country in
recent years. This environment impacted the performance of domestic businesses, DRB-HICOM Berhad
(“DRB-HICOM” or “the Group”) notwithstanding.

Despite the challenging backdrop, the Group managed to achieve encouraging results, reducing our
pre-tax loss to RM222.18 million, against a loss of RM822.13 million in the previous financial year. Credit
for our results goes to the concerted efforts by all businesses within the Group to enhance efficiencies and
reduce costs, complemented by Group-wide strategies in terms of business focus and direction.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 97

Chairman/Non-Independent Non-Executive Director

Chairman of Nomination and Remuneration Committee

Brigadier General (K) Tan Sri Dato’ Sri

(Dr) Haji Mohd Khamil bin Jamil
 DRB-HICOM BERHAD
98 ANNUAL REPORT 2017
Greater Business Diversification
We have continued to place emphasis on building our Services
division to create a better balance with our Automotive and Property
divisions. A key development towards this end was to consolidate
our logistics businesses into Pos Malaysia Berhad (“Pos Malaysia”),
resulting in an increased equity interest in the company from 32.21%
to 53.5%, and establishing Pos Malaysia as a subsidiary company
of DRB-HICOM. This not only allows us to consolidate the revenue
and profit of Pos Malaysia, but also to centre our efforts to catalyse
the e-Commerce fulfilment and logistics services development on
the national postal services provider so as to be able to provide
end-to-end fulfilment and logistics services for e-Commerce
marketplace clients in Malaysia and the region.
Logistics and e-Commerce hold great potential for further
growth, and we intend to enhance our capabilities in this sector.
In the process, we would also be supporting the Government’s
agenda of transforming Malaysia into a regional logistics hub.
Focus on logistics is integral to the Group’s new 5-Year Plan which
was launched at the beginning of the financial year under review.
The plan was developed by management and discussed intensively
with the Board before being rolled out. Having worked closely
with management to fine-tune this plan, we feel confident of the
direction DRB-HICOM is taking, and would like to commend our
leadership for their foresight in charting the changes necessary
in order to remain relevant and competitive in an increasingly
demanding environment.
Our Unique Strengths
There is a need to be nimble and to adapt readily towards the
rapidly-changing landscape in which we operate. This in general is
not easy for large corporations, yet it is one of our strengths here at
DRB-HICOM – one that supports and is supported by our business
diversity.
Another key strength are the relationships we have built over the
years with our vendors, suppliers as well as our employees; all of
whom have been instrumental to our business successes. Given
the size of the Group, and the range of businesses we are in, we
currently work with approximately 500,000 vendors, suppliers,
contractors and dealers, and we are equally committed to their
growth as we are to our own sustainability.
Our employees remain our greatest strength – not just our
management, but every one of the estimated 60,000 individuals
who make up DRB-HICOM. We are pleased to see the average
age of our management decrease over the years, as it reflects an
increasingly dynamic and energetic leadership who are more in tune
with the needs and expectations of a market driven by millennials.
At the same time, we are heartened by a noticeably enhanced level
of engagement between management and employees, which goes
a long way towards forging a greater sense of unity and maintaining
high levels of motivation in a Group as large as ours.
In order to bring out the best in our people, we place emphasis on
their professional development. This, in turn, supports our own
succession plans, enabling us to nurture a steady pipeline of talent
to fill key positions within the Group. I am also pleased to share that
about 30% of these positions are taken up by women; underlining
our belief in gender equality.
Corporate Governance
In line with our commitment to maintain the highest level of
corporate governance, we also seek to create a Board that is
diverse, not just in terms of gender but also in the experience, skills
and knowledge that our members are able to contribute. With the
departure of 4 Board members during the year under review, we are
looking to further enhance our diversity by appointing individuals
with expertise in businesses we are focusing on more intently such
as logistics, e-Commerce and property, while also reinforcing our
female representation.
We strive continuously to meet all relevant best practices in
governance, especially those promulgated by Bursa Malaysia
Berhad, Securities Commission Malaysia and the Minority
Shareholder Watchdog Group. Many initiatives have been
implemented as a result of recent changes in guidelines; for
example, the practice of poll voting which we adopted at our last
annual and extraordinary general meetings, administered by our
registrar with our external auditors as arbitrators.

We have also been commended by the regulators for posting
the minutes of our meetings on our corporate website, along
with other information that is pertinent to our shareholders and
other stakeholders such as our quarterly and annual financial
results, annual reports, media releases and Bursa Malaysia
announcements.
The emphasis we place on corporate governance is driven not
merely to satisfy regulatory requirements, but more because we
believe strongly it is the right way to run our business. Quality,
“There is a need to be nimble and to adapt readily
towards the rapidly-changing landscape in which
we operate. This in general is not easy for large
corporations, yet it is one of our strengths here
at DRB-HICOM. ”
transparency and integrity – which represent some of our
core corporate values – have served to enrich our stakeholder
relationships over the years.
Acknowledgements
I would like to acknowledge our business partners for the
commitment they have shown in working with us and sharing
our vision to deliver the best to our customers. To our vendors,
suppliers, contractors and dealers, thank you for supporting us by
delivering the goods and services that we require. To our financiers
and shareholders, we are indebted to your investments and will
continue to enhance our business to honour our commitments
to you. We would also like to express our appreciation to the
Government and its regulatory bodies for the support they
DRB-HICOM BERHAD
ANNUAL REPORT 2017 99
have provided by nurturing a healthy environment for economic
development in the country.
In addition, I would like to express my gratitude to colleagues
on the Board for their commitment and wise counsel in guiding
DRB-HICOM, especially during these challenging times. A
note of special thanks goes to YBhg Tan Sri Marzuki bin Mohd
Noor, YBhg Datuk Haji Abdul Rahman bin Mohd Ramli, YBhg
Dato’ Abdul Rahman bin Ahmad and Mr Ong Ie Chong for their
contributions during their tenures on the Board. I would also like
to extend a warm welcome to YBhg Datuk Idris bin Abdullah @
Das Murthy, who was appointed as an Independent and
Non-Executive Director on 1 January 2017 and YBhg Dato’ Siti
Fatimah binti Daud, who was appointed as a Non-Independent
Non-Executive Director on 1 April 2016.
On behalf of the Board, I would like to express our heartfelt
appreciation to the management for their perspicuity in shaping the
right strategies to overcome the current economic downturn, and
position the Group strategically to venture into fast-growing sectors
to secure our sustainability. Finally, together with management, we
would like to thank all our employees for their hard work without
which we would not be where we are today – one of the biggest
and most diversified corporations in Malaysia, a time-tested
organisation that will continue in our quest to contribute to the
development of the nation, and its people.
 DRB-HICOM BERHAD
100 ANNUAL REPORT 2017

MANAGEMENT DISCUSSION
and analysis

Despite the tough operating

environment, DRB-HICOM maintained
our revenue at RM12.1 billion,
which was only marginally less
than the RM12.2 billion achieved in the
previous financial year.

The financial year ended 31 March 2017 (FY2016/17) was

marked by a continued slowdown in the local economy in which
prolonged low oil prices exacerbated pressure on the Ringgit
which continued to depreciate against major currencies. This
contributed to an increased cost in doing business for most
local corporations, DRB-HICOM Berhad (“DRB-HICOM” or “the
Group”) included. Along with a soft economic landscape and
stringent loan requirements, consumer sentiment was also
dampened.

For us at DRB-HICOM, the 13% drop in total industry volume

(“TIV”) of vehicles sold in the country from 666,677 units in
calendar year 2015 to 580,124 units in 2016 was particularly
challenging as it reverberated across the retail arms of our
Automotive business, resulting in lower revenue from sales.
We also felt the effects of an economic downturn in intensified
competition in almost all sectors.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 101

Group Managing Director

Dato’ Sri Syed Faisal Albar

Bin Syed A.R. Albar
 DRB-HICOM BERHAD
102 ANNUAL REPORT 2017
Within this scenario, we were fortunate that the Group has been
actively diversifying our business over the years. While our Automotive
division, particularly the retail segment, was impacted by the
economic environment, there were still pockets of growth within our
extensive Automotive and Manufacturing & Engineering value chain,
such as in Honda Malaysia and Composites Technology Research
Malaysia Sdn. Bhd. (“CTRM”) which manufactures components
for the aerospace and aviation industries. More encouragingly,
companies within our Services sector too, performed well.
We felt validated in our strategy of building our logistics portfolio
and rationalising the companies under Pos Malaysia, given their
results. This year, we increased our equity holding in Pos Malaysia
from 32.2% to 53.5%, thus provided greater control over the national
postal services provider which we intend to transform into a regional
logistics supply chain solution provider. Globally, the logistics market,
valued at USD8.2 billion in 2015, is expected to almost double to
USD15.5 billion by 2023, growing at a CAGR of 7.5% from 2015 to
2024. In Malaysia itself, the transportation and storage sub-sector
alone is expected to contribute to 4.3% (RM50.8 billion) of our gross
domestic product (“GDP”) by 2020 from 3.6% currently.
In the financial year under review, we have seen the beginnings of
what we can expect to be an explosion in e-Commerce. For the first
time ever in Pos Malaysia’s history, the courier business surpassed
the traditional mail business in terms of revenue. There is, without
doubt, great potential for growth in logistics and we intend to venture
more extensively into this market through Pos Malaysia. We felt
more vindicated as our instincts and belief in Pos Malaysia’s business
have been proven right by the financial fraternity evidenced by the
upsurge of Pos Malaysia share price from RM2.78 at the time of
the announcement of the exercise to inject logistics assets into Pos
Malaysia, to now hovering consistently at above the RM5.00 mark.
Within the waste management segment, Alam Flora Sdn. Bhd.
(“Alam Flora”) is gaining ground by expanding its concession
operations. Discussions with relevant authorities are at an
advanced stage, and we hope to be able to announce some
positive news in this regard in the near future. Meanwhile the
non-concession arm, DRB-HICOM Environmental Services Sdn. Bhd.
(“DHES”), continued to expand through the provision of integrated
facilities management (“IFM”) and ‘green’ services such as recycling.
Within the Automotive division itself, there is scope to diversify
the production lines of our manufacturing & engineering (“M&E”)
companies into non-automotive components for the aerospace,
electronics and industrial sectors. Most of our M&E companies have
already initiated this process, which will be intensified in the
coming years. We are also building our leasing business by targeting
more corporate and Government-based clients.
An extremely positive development during the year was finalising a
Foreign Strategic Partner (“FSP”) for PROTON Holdings Berhad
(“PROTON”). After an intense period of analysing and negotiating with
potential partners, we were able to come to a mutually beneficial
agreement with Zhejiang Geely Holding Group Co., Ltd. (“Geely
Holding”) for the Chinese car group to subscribe for 49.9% equity in
PROTON. The deal will enable PROTON to tap into Geely Holding’s
vast range of platforms and powertrains, and access its markets for
export purposes. Meanwhile, the FSP will leverage PROTON’s
state-of-the-art plant to build a presence in the right-hand drive
market of the Southeast Asian market.
The deal also marked the Group’s exit from the sports car segment
as it included the disposal of 100% equity in Lotus. This was to allow
PROTON to focus on strengthening our forte in sales and distribution
of passenger cars locally and internationally, which we believe marks
a turning point in PROTON’s transformation and sets the national car
manufacturer on the right path towards both domestic and export
growth.
Partnerships such as that with Geely Holding continue to be
important to DRB-HICOM. We are pleased to share that during the
year we forged a number of new strategic partnerships that will
go a long way towards further strengthening the operations of our
subsidiary companies, and hence the Group’s performance.
Motosikal dan Enjin Nasional Sdn. Bhd. (“MODENAS”), for example,
has entered into collaboration with Taiwan-based KYMCO resulting
in the development of two new scooter models and exclusive
distributorship for KYMCO brands in Malaysia. It had also
collaborated with BAJAJ Auto Ltd. (“BAL”) to penetrate the street
bike segment, through the introduction of three new bikes into the
market. We believe in enhancing MODENAS’ product lines and
offering greater choice to Malaysian consumers.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 103

Pos Malaysia, too, entered into a number of partnerships to further
build its logistics capabilities. This year, it has signed an agreement
with Tigers Global Logistics Sdn. Bhd. on leveraging its end-to-end
e-fulfilment solutions for cross-border e-Commerce activities. In
addition, it has entered into an arrangement with Lazada
(Malaysia) Sdn. Bhd. to establish an e-Commerce Regional
Distribution Centre in Sepang, Selangor.
f. Reduce focus or exit from unprofitable lines of business;
and
g. Right-size businesses and resources.
The process of business rationalisation has begun, with the
disposal of three companies, with one deregistered while several
others have been merged for greater operational synergies.

GROUP STRATEGY Based on this plan, we have outlined key targets for FY2017/18 and
the coming years.
In the financial year under review, the Group embarked on a new
five-year plan that will guide our growth till FY2020/21. The plan is FY2017/18 Next Financial Years
based on seven key strategies, namely:
• Execute the PROTON • Enhance PROTON’s market
a. Defend our market position by strengthening our core Turnaround Plan. position post-Turnaround
competencies and developing a stronger competitive Plan.
advantage; • Defend market position by
strengthening core • Establish mature in-house
b. Establish entry into future growth segments at optimal competencies and R&D and product
investment levels; stronger competitive development capabilities
advantage. in Automotive.
c. Identify and pursue Strategic Partnerships that can
provide access to products/services, markets, technologies • Achieve delivery • Expand in Concessions
and expertise; excellence in existing and secure greater scope
contracts and in Government contracts.
d. Ensure successful execution with high quality, concessions.
cost-effective and quick delivery; • Grow in logistics,
• Build fundamentals in e-Commerce
e. Rationalise and consolidate organisational structures high growth / high and digital offerings /
for effective cost management; potential industries disruptors.
such as logistics,
aerospace, aviation, • Grow in aerospace,
automotive leasing, aviation and defence
education. technologies.
• Undertake portfolio • Expansion presence
rationalisation and reduce regionally and globally.
presence in automotive
retail, construction.

These Key Strategies will be supported and enabled by several Key

Foundations that include:

(i) Sound financial management;

(ii) Strategic insights and decision-making (e.g. analytics and

business intelligence capabilities);

(iii) Operational, process and cost management excellence;

(iv) Strong innovation practice;

(v) Enhanced Group synergies; and

Alam Flora continues to provide exemplary services to residents of its (vi) Strategic human capital framework and talent management
concessession areas plans.
 DRB-HICOM BERHAD
104 ANNUAL REPORT 2017

FINANCIAL REVIEW The Property, Asset and Construction (“PAC”) division achieved a 45.4%
increase in revenue from RM293.8 million in FY2015/16 to RM427.3

Despite the tough operating environment, DRB-HICOM maintained million, mainly from the sale of Corwin Holding, Neraca Prisma and

our revenue at RM12.1 billion, which was only marginally less than Puncak Permai and construction projects being undertaken by our

the RM12.2 billion achieved in the previous financial year. Significant new concession companies, Northern Gateway Infrastructure and

contributors to our revenue were Pos Malaysia, which became a Media City Development. Profit came in at RM506.9 million, due to

subsidiary during the year under review, and the disposal of our disposal of Corwin Holding.

entire 90% equity in Corwin Holding Pte. Ltd. (“Corwin Holding”)

in Singapore in November 2016, by our subsidiary HICOM Megah
Sdn. Bhd.

At the same time, the Group greatly reduced our pre-tax loss for
the year ended 31 March 2017 to RM222.2 million, compared to
RM822.1 million the previous year. Profit was boosted by a number
of factors, namely the gain on disposal of Corwin Holding; one-off
exceptional loss on the re-measurement of previously held equity
interest in Pos Malaysia; lower losses at PROTON and a higher
contribution from the Services division.

Liquidity Management
The Group has taken appropriate and reasonable measures in
ensuring the liquidity exposure is being managed efficiently and
economically. For the previous financial year, the exposure on
currency fluctuations has been minimised by timely hedging in line
with the DRB-HICOM Group Foreign Exchange Policy. The planned OPERATIONAL REVIEW
capital expenditure (“Capex”) that supports the strategic initiatives
will be funded via internal and external sources of funding. Automotive Sector

Segmental Performance The automotive market in general in 2016 was challenging, as a

The Automotive division recorded RM8.1 billion in revenue as
compared to RM9.4 billion in FY2015/16. The 13.8% drop in revenue
was due mainly to reduced sales of motor vehicles and a lower
percentage of completion of the AV8 defence project by reason of
the reduced allocation of fund by the government being undertaken
by DRB-HICOM Defence Technologies Sdn. Bhd. (“DEFTECH”) for the
Ministry of Defence.
The Services division recorded a 41.4% increase in revenue from
RM2.5 billion in FY2015/16 to RM3.6 billion. This was mainly the result
of recognising revenue of Pos Malaysia, which became a subsidiary
company on 13 September 2016. The division’s profit
RM389.9 million was also on account of contribution from
Pos Malaysia.
result of a sluggish economy and weak consumer sentiment.
Tightening of approvals for hire purchase loans by banks added
to a tough environment, with only 52% of loans approved in 2016
as compared to 56% in 2015. These factors combined led to a
reduction in sales, as reflected in the 13% drop in TIV to 580,124.
In contrast, and serving to prop up the flagging automotive sector,
the regional aerospace industry continued to grow, driven
by increasing affordability of air travel as well as expanding
middle classes in the region.
Strategy
of • Strengthen our manufacturing capabilities via strategic
partnerships with foreign players to capitalise on their
expertise as well as research and development competencies
in order to launch new models that meet current market
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 105

appetite. MODENAS, for example, has launched new models This was sealed with the signing of a Heads of Agreement
from its new partnership with leading Taiwanese and the Definitive Agreement with Geely Holdings on 24 May
motorcycle manufacturer, KYMCO; and is collaborating with 2017 and 23 June 2017 respectively, which will see the Chinese
Indian manufacturer BAL. carmaker subscribing for 49.9% equity in PROTON.

• Rationalisation of the division by focusing on growth sectors Despite the challenges, we are happy to note that in FY2017
such as aerospace, and on the manufacture of industrial and PROTON initiated a bold move to strengthen its presence
other components. The aviation industry in the region continues despite the industry slowdown by following through diligently
to grow, driven in part by increasing popularity of low-cost its turnaround plan. PROTON launched four new models,
carriers. This is placing demand for more aircrafts, hence namely the Perdana, Persona, Saga and Ertiga, as well as the
also for components, creating business opportunities for CTRM. roll-out of ‘Customer-First’ initiatives and implementation of
an operational turnaround, which helped elevate PROTON
• Better cost management through the introduction of shared brands, garner better customer confidence in PROTON cars
services for automotive retail companies as a cost reduction and increase awareness of safety features in PROTON cars.
initiative; minimal stock holding, internal reorganisation and
tender reviews; and concerted efforts to create lean and Amongst the more notable ‘Customer-First’ programmes were
efficient operations Group-wide. ‘MyProton’ mobile application software, 27 sales and services
outlets which are open seven days a week, the PROTON-PETRONAS
Building Key Automotive Brands co-branded engine oil, price reduction of PROTON genuine
Honda, which enjoys excellent brand value in the domestic spare parts and active social media engagement. Concurrently,
market – it is currently the second most popular brand in upstream operational improvement activities have been
Malaysia – continued to perform well, seeing a 4% increase implemented through a collaboration programme with Malaysia
in number of units sold. During the year, it launched the Automotive Institute (“MAI”).
All-New Civic and a facelifted Accord both of which performed
well, contributing to an increase in market share from 14.2% in PROTON also made headway in its export programme by sending
2015 to 15.8%. the first batch of left-hand drive Proton Preve to Chile; launching
of the Proton Iriz, Proton Persona and Proton Saga in Brunei;
In the motorcycle sector, MODENAS launched two models in followed by the Proton Iriz in Indonesia.
collaboration with KYMCO – MODENAS Karisma (125cc) and
MODENAS Elegan (250cc). It was also appointed as a distributor of
KYMCO Downtown 250i and plans to expand into their 300cc
and 400cc models in the near future.

Response for these new launches has been good, and we are now
having to ramp up the pipeline of supply to meet an increasing
backlog of orders.

Turnaround of PROTON
PROTON embarked on a turnaround programme in
2016 to develop the right products for the right market
to arrest its sales decline. The programme encompasses
entering into an equity partnership with Foreign Strategic
Partner (“FSP”) with a renowned automobile company.

MODENAS is charting new growth areas through collaborations with key global
brands such as KYMCO and BAJAJ
 DRB-HICOM BERHAD
106 ANNUAL REPORT 2017
Our interest in the aviation logistics and aviation services continue to grow and contribute to our performance
Strengthening our Aerospace Capabilities
In order to meet the increasing demand for aircraft components, we
are investing more into CTRM. Following an initial injection of RM130
million in the company in 2013, we have pumped in another RM100
million to increase its manufacturing capacity. During the year under
review, Building 5 of the CTRM complex in Melaka was completed. We
are now in the midst of constructing Building 6, which will be ready
by the end of the year.
Focus on Leasing
Leasing is another area we are focusing on to diversify the
Automotive division. Although capital intensive, we believe the
long-term returns of the business warrants our investment. We
have an edge over other retail leasing companies with AVIS in our
portfolio. The business was previously managed by two companies -
DRB-HICOM Leasing Sdn. Bhd. (“DLSB”) which held the brand
MyLease; and DRB-HICOM EZ-DRIVE Sdn. Bhd. (“EZ-DRIVE”) which
held the AVIS franchise. To consolidate the business, we undertook
an exercise that saw EZ-DRIVE acquiring 100% equity in DLSB. The
rationalisation was completed on 31 March 2017.
Diversification of Manufacturing
Supporting further diversification, companies that make up our
Manufacturing and Engineering sector have started broadening their
production lines to include metallic parts for the aerospace industry,
as well as furniture components for steelcase by Oriental Summit
Industries Sdn. Bhd. (“OSI”), air and water filters components by PHN
Industry Sdn. Bhd. (“PHN”), etc.
Key Risks & Their Mitigation
Low sales due to market condition
- Enhanced focus on sales and after-sales service quality to
maintain a high level of customer satisfaction;
- Focus on non-automotive business such as manufacturing
for the aerospace and industrial sectors, as well as furniture;
and
- Strengthening our R&D function and engineering capability to
support the diversification of manufacturing companies into
new product lines.
Depreciation of the Ringgit increasing costs
- Added focus on operational efficiency and cost management
in every company under the division’s portfolio.
Cash Management
- Ensure sufficient cash to sustain our business. Added focus
on the management of account receivables and payables to
ensure healthy cash flow.
Going Forward
Although we expect the automotive sector in general in 2017 to
be flat, we will be launching a number of new models to leverage
existing pockets of demand, especially for motorcycles. Sales
in the first quarter of the calendar year has been better than the
previous year, with a 29% increase in volume. At the same time,
we will continue with our rationalisation programme, and focus on
building certain brands with potential while letting go of others.
We will also forge ahead with efforts to diversify the manufacturing
sector to cater for new growth areas.

Services Sector
The Services division – comprising our logistics businesses
(Pos Malaysia and DHAS), concessionaires (PUSPAKOM and Alam
Flora) and Others (Bank Muamalat and HICOM University College
Sdn. Bhd.) – provides a good balance to the Automotive and Property
divisions as most of the businesses within the grouping offer basic
or essential services which are less affected by the local economic
downturn. The concession businesses, however, are restricted to a
degree by concession agreements (“CAs”) with the Government which
determine rates that can be charged to customers, and this could be
challenging in an environment in which costs are escalating.
Strategy
• Build the Logistics businesses within this division to be able to
provide end-to-end services and leverage on the anticipated
growth of the industry, driven in part by escalating use of
e-Commerce and its need for fulfilment and logistics to deliver
goods;
• Increase efficiencies and expand the scope of services of our
concessionaires, PUSPAKOM and Alam Flora, as well as diversify
their operations in order to derive additional income to
compensate for narrowing margins; and
• Further grow our banking business and tertiary educational
offerings at Bank Muamalat and DRB-HICOM University of
Automotive Malaysia.
Consolidation of Logistics Businesses Under Pos Malaysia
As part of efforts to consolidate our logistics business, during the
financial year under review KL Airport Services Sdn. Bhd. now known
as Pos Aviation Sdn. Bhd. (“Pos Aviation”) was subsumed under
Pos Malaysia, enabling the latter to provide a complete range of
logistics service, including first mile, fulfilment and last mile services.
Prior to the financial year, Pos Aviation had acquired Konsortium
Logistik Berhad (“KLB”) now known as Pos Logistics Berhad
(“Pos Logistics”) which provides land logistics services; and then
DRB-HICOM Asia Cargo Express Sdn. Bhd. now known as Pos
Asia Cargo Express Sdn. Bhd. (“Pos ACE”), which operates two
aircrafts to deliver postal and courier items between Peninsular
DRB-HICOM BERHAD
ANNUAL REPORT 2017 107
and East Malaysia. Plans are in the pipeline to extend the service
regionally, and to include destinations such as Saigon, Macau and
Manila into the network.
Digitalisation of vehicle inspection
Greater efficiencies are being created at PUSPAKOM via digitalisation.
Inspection is now carried out entirely by automation, so there is
no room for human error. Data is transmitted directly from the
machinery to the results sheet, greatly enhancing accuracy and
reducing the time taken to produce a report. In addition, we are
encouraging online bookings in order to optimise the number of
inspections carried out per day by reducing the number of missed
appointments, as bookings have to be pre-paid. The service is also
convenient for customers who have ready access to the available
slots at different PUSPAKOM branches on its corporate website. The
service is due to be rolled out in 2017.
Diversification into Green Services
Alam Flora is diversifying its core business of waste collection and
disposal through its subsidiary, DRB-HICOM Environmental Services
Sdn. Bhd. (“DHES”). DHES provides integrated facilities management
(“IFM”) for buildings, and is also involved in recycling. Under IFM, it
works closely with building owners to better manage their energy and
water consumption. Various energy-saving systems are offered with
attractive funding mechanisms. For recycling, it has set up a number
of collection centres in Kuala Lumpur and Putrajaya, where the
local communities – including industrialists – are being encouraged
to dispose their recyclables. DHES is also investing in machinery to
separate garbage at landfills to recover waste that is recyclable thus
prolonging the shelf life of landfills.
Faster route to an education degree
We continue to broaden the scope of offerings at DRB-HICOM
University of Automotive Malaysia (“DRB-HICOM U”), and in
FY2016/17 introduced a new and shorter route to completing a
degree. During the year, the university received the approval for
12 new programmes, in addition to the existing 24 programmes.
The university offers diploma to degree programme for both the
Business and Engineering programmes with duration of 5.5 years.
Alternatively, one can enrol in the one-year foundation programme
and continue into the degree of choice which will take four years,
including the foundation programme. This would attract even more
students to the university, both locally and internationally.
 DRB-HICOM BERHAD
108 ANNUAL REPORT 2017

Key Risks & Their Mitigation Property Sector

Adverse volatility in foreign exchange rate
- Effective contract negotiation, legal drafting and instrument
selection to minimise significant international transaction
risks.
The financial year under review saw the property market continue
to be plagued by negative sentiment driven by a weak Ringgit and
stringent lending policies by banks. It was reported that of the
total number of applications made for loans, only about 40% were

- Vigilant trend monitoring and enhancing operational approved, as compared to about 60% in the last few years. Even
efficiency. within the residential segment, which performed better overall than
the commercial, retail and industrial sub-sectors, most key players
Intensifying Competition
deferred the launch of high-end developments and focused instead
- Continuous development and innovation of products to on the mid-tier segment.
remain relevant and value-adding in the market place.

- Capitalise and expand existing winning flagships. Strategy

Escalation of cost of doing business
- Optimising initiatives through continuous improvement of
process flow and right-sizing on resources.
- Prudent financial management with effective cost-cutting
measures.
In response to the market environment, our property development
arm, Glenmarie Properties Sdn. Bhd. (“GPSB”), concentrated on
disposing off existing stocks and launching the more affordable
segments of ongoing developments, namely Glenmarie Johor in
Kota Iskandar, Johor; Glenmarie Cove in Klang, Selangor; and
Proton City in Tanjung Malim, Perak.

Moving Forward
Key Highlights
We will continue to grow the Services division in line with efforts
Two key highlights of the year were the successful disposal of
to create a more balanced portfolio of businesses Group-wide.
Corwin Holding of Singapore as well as healthy sales of our affordable
As observed in this year’s financial results, Services provides a
range of products in Glenmarie Johor Phase 1B. The launch
hedge against fluctuations in the performance of the Automotive
of the 102 units of double-storey terrace houses registered a
and Property divisions, which are more directly impacted by
take-up of 68% within three months of its launch on
the prevailing economic climate.
22 October 2016.

Logistics and e-Commerce are two areas that command the

Key Emerging Risks & Their Mitigation
greatest focus currently, and various plans have been outlined
to further grow our capabilities in these areas. Key Risks Mitigation Actions

These include the development of Kuala Lumpur International

• Low economic growth and • Deferred launches of higher-
Airport (“KLIA”) into a transshipment hub. Already, we are the continuous loan tightening by end products
financiers
gateway for parcels into the country, and the average of
• Sales concentrated on
about 250,000 parcels handled a day far exceeds the 150,000 • Further dampening of existing stocks and launches
parcels-a-day capacity of our sorting centre in Shah Alam.
consumer sentiment due to of affordable products
job insecurity, and minimal
We are therefore building another parcel sorting centre in salary increment that do not
KLIA. The location for this purpose has been identified and commensurate with inflation
construction will soon commence, with completion targeted • Increased cost of living
for Q2 2018. To further enhance our transshipment offerings,
• Low level of confidence among
we are looking to collaborate with similar entities in other foreign investors
countries to be able to mutually benefit from each other’s last mile
• Over-supply, especially of
services. high-end condominiums in city
centres
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 109

Despite the negative sentiment in the property market, the Glenmarie brand continues to perform admirably

Moving Forward
The year 2017 looks set to continue to be challenging for the property market. While the Government has made provisions in its Budget
for an increase in housing loan entitlement for civil servants as well as for the availability of more affordable housing, these cater primarily
to first-time home buyers occupying the lower end of the market. Of greater significance for most developers, the increase in stamp duty
from 3% to 4% for property valued at more than RM1 million effective from 2018 will further dampen the market going forward.

Given early indications of the unfolding landscape, we will maintain our strategy of rolling out affordably priced products for the
immediate term in areas such as Glenmarie Puchong, Proton City, Glenmarie Johor and Glenmarie Cove. While keeping to an
affordable bracket, however, we intend to differentiate our developments from others by providing added value so as to be
‘a notch above’ similar products offered by competitors.

At the same time, we will reinforce our prestige and image by ensuring the best quality in all our products and leveraging the exclusivity
of our developments in Glenmarie Shah Alam.

A new roll-out plan will be activated to meet immediate and more medium-term demand, focused on attaining sustainable
volume in Glenmarie Shah Alam, Glenmarie Puchong, Proton City and Glenmarie Cove.
 DRB-HICOM BERHAD
110 ANNUAL REPORT 2017

AUTOMOTIVE
sector
DRB-HICOM, through our companies, is involved in the entire automotive
ecosystem – from the import of Completely Built-Up (“CBU”) vehicles and
Semi Knocked-Down (“SKD”) as well as Completely Knocked-Down (“CKD”)
kits to the assembly, manufacture, distribution, sales and after sales of
motorcycles, cars, trucks, buses and speciality vehicles, including defence
vehicles. This ecosystem is complete by us being categorised as Tier-1
vendors equipped with world-class facilities to supply Original Equipment
Manufacturers (“OEMs”) parts to globally renowned names in the
automotive and aerospace sectors. We are also involved in short- and
long-term leasing and rental services.

AUTOMOTIVE DISTRIBUTION

Within this division are 13 companies that together assemble, manufacture and distribute international and local motorcycles, cars and
speciality vehicles, and provide after-sales service to customers. DRB-HICOM was ranked no. 2 in the Malaysia automotive market with
32.2% market share from all brands distributed in Malaysia. DRB-HICOM Berhad, through our subsidiary and associated companies
Isuzu Malaysia, Mitsubishi Motor and DRB-HICOM Commercial Vehicles contributed 18,568 units or 28% of total commercial vehicles
volume in 2016 (65,579 units), positioning us as the second largest among 20 active commercial vehicle distributors in Malaysia.

PROTON launched 4 new models in FY2017 as it tries to increase market share

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 111

Automotive Corporation (Malaysia) Sdn. Bhd. (“ACM”)

ACM is an authorised dealer of Isuzu trucks, pick-ups and SUVs.

The brand is ranked No. 1 in the country for light and medium
heavy-duty trucks, and No. 2 for pick-ups and SUVs.

The company’s focus on customers in niche industries such as waste

management and logistics, contributed to a 41% increase in sales
of medium heavy-duty trucks. The higher incentives for the sales
team also contributed to the increase. Total sales, however,
was affected by the economic slowdown, and reduced by
14% year-on-year to 1,208 units.

ACM expects competition to intensify in the current financial year

along with a prolonged economic slowdown and weak consumer
as well as business sentiment, exacerbated by stricter loan
approvals. Amid this environment, the company will strive to win
more market share by launching light-duty trucks (“ELF”) with
improved fuel efficiency and enhanced safety features, as well as a
new D-Max Single Cab 3.0L, boasting the highest horsepower
in the single cab category.

ACM will also intensify its focus on replacing old vehicles in the
waste management sector and supplying the needs of a growing
Established marques continue to trust our Group with their models, including
logistics sector.
German giant Mercedes-Benz

DRB-HICOM Auto Solutions Sdn. Bhd. (“DHAS”)
DHAS provides end-to-end logistics solutions for the automotive
industry, which encompasses the import of CBU vehicles and SKD
as well as CKD kits, forwarding and clearance, vehicle yard
management, pre-delivery inspection (“PDI”) and final delivery
to dealer networks. Such services are extended to a number of
major marques including PROTON, Lotus, Jeep, Audi, Volkswagen,
Honda, Mitsubishi, Isuzu, Tata, Suzuki and MODENAS.
Both revenue and profit for the financial year grew due to increased
sales of Volkswagen CKD and new business from Proton Ertiga CKD
kits.
Moving forward, DHAS has outlined key challenges faced by the
company and formulated appropriate strategies to manage these
areas of concern. Key among the initiatives to be undertaken
is to collaborate with OEM partners such that marques being
imported are delivered as CKD units as opposed to CBU units to
avoid high import taxes thus enjoying more competitive market
prices. It also seeks to increase its funding facilities with existing
and potential financiers.
DHAS is confident of an encouraging performance in FY 2017/18
given various developments within our Automotive division.
MODENAS’ recent agreements with international partners to
distribute and develop new models, for example, will require the
import of CKD kits. The partnership between Geely Holding and
PROTON presents the need for efficient yard management, which
will see an increase of services relating to import and export.
Similarly, the introduction of other new models by various
companies under the Group will see enhanced demand for
a range of services offered by DHAS.
 DRB-HICOM BERHAD
112 ANNUAL REPORT 2017
DRB-HICOM Commercial Vehicles Sdn. Bhd. (“DHCV”)
DHCV is the exclusive assembler and distributor of Tata
commercial vehicles – pick-ups, trucks and prime movers
(CBU) – in Malaysia.
The company sold a total of 571 units in 2016, of which 496 units
were Tata Xenon Single Cab 4x2 Pick-up trucks with special
fabricated customised box body, purchased by Pos Malaysia.
The year’s performance had bolstered Tata’s ranking within
the segment from 29 in 2015 to 10 in 2016.
Various strategies were implemented to boost sales which
includes, identifying the most competitively priced Tata models
with the right specifications for the Malaysian market, while
developing specialised body applications for Tata Ultra and
Xenon pick-ups to cater for business needs. To enhance dealers’
performance, various training programmes were held while
supporting dealers’ roadshows. Efforts were also made to increase
Tata brand awareness through targeted marketing and public
relations activities. Additionally, the team focused on building better
relationships with bankers and credit companies to inspire greater
confidence in financing the Tata brand.
Moving forward, DHCV is expanding its network of sales and service
centres, targeting eight 3S and 15 2S centres by end of March 2018.
This will be complemented by an intensified sales force recruitment
initiative, followed by training to enhance the team’s competencies.
There are also plans to establish a CKD/SKD assembly line for
Ultra trucks, Xenon pick-ups and Super Ace small pick-ups as this
is imperative to overcome CBU constraints and enhance price
competitiveness of our products.
Edaran Otomobil Nasional Berhad (“EON”)
EON is the exclusive distributor of Jeep in Malaysia. Through its
100% owned subsidiaries, EON Group also sells Mitsubishi,
Volkswagen and Audi vehicles, spare parts and accessories.
In addition, it is involved in the vehicle leasing business
targeting retail, corporate and government customers.
During the year, EON underwent an internal reorganisation
and restructuring to drive greater operational efficiency. Under
the reorganisation, it entered into a share sale agreement (“SSA”)
with DRB-HICOM EZ-DRIVE Sdn. Bhd. (“EZ-DRIVE”) to dispose of its
100% stake in DRB-HICOM Leasing Sdn. Bhd. (“DLSB”). The
exercise means that DLSB is now a wholly-owned subsidiary
of EZ-DRIVE which will spearhead the Group’s vehicle rental
and leasing business. EON also disposed of Multi Automotive
Service and Assist Sdn. Bhd. (“MASA”), its call centre business,
to be able to focus on its core businesses.
For greater operational efficiencies, the Finance, Procurement and
Human Resources functions of all subsidiaries under the company
will now be centralised under EON.
The year saw a total sales of 3,147 units for the EON Group and
after-sales throughput of 76,872 units.
The business plan is part of a clearly outlined five-year journey
which involves diversifying EON Group’s business to include the
diversification into other auto related businesses.
EON Auto Mart Sdn. Bhd. (“EAM”)
EAM is the largest Mitsubishi Motors Malaysia (“MMM”) dealer with
10 sales and service outlets nationwide and accounting for 22% of
the Mitsubishi market in the country.
During the year, EAM achieved total sales of 1,866 units of
Mitsubishi models, and recorded a 15% increase in throughput
to its after-sales centres which received 4,605 units. To further
build its fleet sales, the capabilities of the sales team were enhanced
with targeted MMM 3 Diamond Training. Meanwhile, after-sales
services were boosted by enabling three more outlets – in Bayan Lepas,
Kota Kinabalu and Johor Bahru – offering body and paint services.
In October 2017, EAM will be introducing the Outlander CKD,
which is expected to increase sales to various government
agencies as well as attract a larger number of higher
income customers. At the same time, the company will build
on its strategy of driving fleet sales while looking to grow its
after-sales revenue and profitability through greater expansion
of the body and paint services.
EAM will also upgrade more branches for enhanced visibility,
targeting the Tawau and Melaka branches in 2017. These efforts will
be supported by more efficient use of human capital and enhanced
processes for greater cost efficiencies.

Euromobil Sdn. Bhd. (“Euromobil”)
Euromobil is the largest Audi dealer in Malaysia with five dealerships
in Damansara, Kuala Lumpur, Klang Valley, Johor Bahru and Penang.
Currently, 11 models of Audi are being imported into the country,
all as CBU units, distinguishing Audi from other imported
marques in Malaysia.
Euromobil’s sales picked up with the launch of the long-anticipated
Audi A4 in the middle of FY 2016/17. Together with launches of the
Audi Q2, Audi A5 Sportback and Audi Q5, as well as extension of the
Audi A4 range, the company expects demand to continue to grow
into the current financial year.
Supporting its sales performance, Euromobil’s after-sales department
has also shown tremendous improvement in terms of technical
competence, process quality as well as field monitoring and fault
elimination. This has been the result of conscientious efforts to
upskill its employees, 51% of whom hold relevant industry
certification. Subsequent to Euromobil’s commendable
improvement, Malaysia was announced as the
improved market globally by Audi AG in terms of service.
HICOM Auto Sdn. Bhd. (“HASB”)
As an authorised Volkswagen dealer, HASB has had to contend
with stalled growth of models being marketed under the marque
in Malaysia along with dampened consumer confidence in the
brand. In response, as of 1 September 2016, Volkswagen Passenger
Car Malaysia (“VPCM”) has embarked on a programme to regain
consumers’ trust and ‘create experience’, with some positive results.
HASB retained 9% market share among the 16 authorised
Volkswagen dealers nationwide. On the network development
side, a new 3S centre in Semenyih became operational in
January 2016, while another 3S centre started operations in
Seremban in December 2016, enhancing HASB’s ability
serve Volkswagen owners in the Klang Valley and Negeri Sembilan.
Meanwhile, as part of a rationalisation exercise, the Cheras outlet
was closed in February 2017 and the company’s headquarters was
moved to Semenyih in April 2017 for greater cost savings and leaner
operations.
With renewed market confidence in Volkswagen and a new product
line-up inclusive of the new Passat and Tiguan, HASB expects to see
DRB-HICOM BERHAD
ANNUAL REPORT 2017 113
14% growth in sales volume while maintaining its 9% market share in
FY 2017/18. At the same time, the increase in workshop capacity in
both locations will support an anticipated 20% growth in throughput.
DRB-HICOM EZ-DRIVE Sdn. Bhd. (“EZ-DRIVE”) & DRB-HICOM
Leasing Sdn. Bhd. (“DLSB”)
EZ-DRIVE and DLSB provide leasing and rental services, with the
former holding the AVIS franchise and the latter managing the
MyLease brand. AVIS Malaysia is ranked a Top 3 car rental brand in
Malaysia and commands 25% of the market. Both companies provide
short- and long-term lease while EZ-DRIVE also provides short-term
rental.
During the year under review, EZ-DRIVE acquired 100% equity in
DLSB from EON Berhad for enhanced capital structure and financing
viability. Following the corporate restructuring, completed on
31 March 2017, EZ-DRIVE will undertake future expansion while
DLSB will continue to service existing contracts.
most EZ-DRIVE aims to become the preferred brand for rental and
leasing in Malaysia, by building AVIS brand equity and promoting
brand loyalty via new strategic corporate partnerships with, for
example, AEON, Maybank, Citibank, Sports Direct Malaysia, etc.
During the financial year, it opened another two stations, at Senai
Airport in Johor Bahru and Miri Airport, to increase its total network
of stations nationwide to 12. Besides providing vehicle leasing
services to the retail and corporate sectors, EZ-DRIVE is making its
presence felt in the government sector, supplying non-saloon cars
until an existing concession agreement with another party expires in
2018.
Spurred mainly by substantial growth in the leasing business, the
fleet size of EZ-DRIVE and DLSB increased from 2,850 in FY 2016/17
to 3,065 in FY 2017/18.
to
EZ-DRIVE aims to continue to grow both its leasing and retail
businesses leveraging existing relationships among corporate
customers, adding value to customers via the AVIS Corporate
Partnership Programme, and engaging in constant tactical campaigns
for the retail market. Having identified potential for leasing/renting
heavy commercial vehicles, it will focus on this area targeting port
operators in particular in the current and coming years.
 DRB-HICOM BERHAD
114 ANNUAL REPORT 2017

customer convenience. The company also went live with Honda’s

Global SAP system – for unified accounting – on 1 April 2016.

Honda Malaysia will continue to introduce new CKD MMC and FMC
models as well as hybrid variants, and enhance Honda ownership
with the provision of quality service, high availability of spare parts
and lower cost of ownership.

Honda was the best non-national brand in Malaysia in 2016

Honda Malaysia Sdn. Bhd. (“Honda Malaysia”)

Honda Malaysia assembles and markets Honda models in Malaysia. It

has a manufacturing plant with a capacity of 100,000 cars per annum
(Line 1 & Line 2) in Pegoh, Melaka, and 88 sales as well as after sales
outlets throughout the country.

Despite the challenging market in 2016, the company recorded a

four percent increase in sales to 99,351 units, maintaining its No. 1
position in the non-national car segment for the second consecutive
year and achieving the No.1 position in overall TIV for the first time The D-Max Pick-up Truck has a 15% share of the segment
in Malaysia.

Isuzu Malaysia Sdn. Bhd. (“Isuzu Malaysia”)

In 2016, the company launched two new models – the All-New Civic
and New Accord – which set new benchmarks with their driveability,
design, safety and advanced features. Both models achieved the
highest sales figures in their respective classes.
In early January 2017, the All-New BR-V was introduced to the market,
completing Honda’s line-up of utility vehicles. The model offers
a unique combination of an SUV body and the space of an MPV to
revitalise the seven-seater segment. Its launch was followed by the
fourth generation New City offering C-segment advanced features
with class-leading spaciousness and comfort, at B-segment price.
These launches helped increase revenue by eight percent, with
the Honda City leading in terms of contribution followed by the
revolutionised HRV.
Isuzu Malaysia markets and distributes Isuzu commercial vehicles,
namely light-duty ELF trucks, medium-duty FORWARD trucks and
heavy-duty GIGA trucks, GIGA Prime Movers and D-Max pick-up
trucks; as well as sport utility vehicles (“SUVs”).
In 2016, Isuzu further entrenched its position as the leading truck
brand in Malaysia for the third consecutive year, garnering 36% of
the total commercial vehicles market with sales of 6,037 commercial
vehicles. It was also the fifth year running that the Isuzu ELF was
the best-selling light-duty truck in the country. This was supported
by the launch of a new model variant in March 2017. Meanwhile,
sales of 6,480 units of the Isuzu D-Max led to 15% share of the
pick-up segment. A new variant of the D-Max Limited Edition was also
launched in May 2016.

Operationally, RM125 million was invested in upgrading the Honda Overall, Isuzu’s brand in the commercial vehicle sector in Malaysia
plant and expanding its warehouse. To facilitate the replacement of inched up from seventh position in 2015 to sixth in 2016.
parts that were recalled, replacement centres were set up at various
locations while mobile units travelled across the country for added

MMM will introduce the CKD versions of the very popular Outlander in the near
future
Mitsubishi Motors Malaysia Sdn. Bhd. (“MMM”)
MMM is the exclusive distributor of Mitsubishi Motors vehicles in
Malaysia. The company commands 1.6% of the local market and
was ranked first in JD Power Asia Pacific Sales Satisfaction
Index (“SSI”) and third in the Customer Service Index (“CSI”) in 2016.
It has 59 showrooms (of which 49 are 3S Centres) and 56
service outlets throughout Malaysia, with six showrooms in
Sarawak and seven in Sabah.
During the financial year, MMM launched two new models. In
June 2016, it introduced the ASX Orange Edition. This was followed
by the launch in September 2016 of the New Triton with MIVEC
Turbo Diesel Engine, the first pick-up truck to offer an aluminium
diesel engine. It comes in six variants, to meet the needs of a
wider range of customers. Further building its product line-up,
in March 2017, MMM introduced an enhanced, more luxurious
Outlander SUV.
The year also saw MMM celebrate a key milestone when, in
July 2016, its vehicle sales in Malaysia hit the 100,000 units mark.
Top contributors were the Mitsubishi Triton 4x4 pick-up truck,
ASX Compact SUV and Lancer sedan. Triton sales were boosted
by concerted efforts to enhance fleet sales, and sales in East
Malaysia. Various initiatives were also undertaken to spur sales
of the ASX, inclusive of the launch of a Special Action Model.
In FY2017/18, MMM will focus on its pick-up and SUV segments.
Sales of pick-up trucks has been stable at 8% since 2012 while the
SUV segment has enjoyed significant growth, expanding from
2.5% in 2009 to 11% in 2016. The market can also look forward to
the introduction of the Outlander 2.0L and 2.4L CKD in the
third quarter of FY2017/18.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 115
Motosikal dan Enjin Nasional Sdn. Bhd. (“MODENAS”)
MODENAS is Malaysia’s homegrown motorcycle brand Manufacturing
and assembly of the two-wheelers take place in its plant in Gurun,
Kedah.
The motorcycle market shrank by 0.1% in the calendar year with sales
of 465,168 units, as opposed to 465,483 units in 2015. MODENAS
itself achieved sales of 39,725 units in FY 2016/17, making up eight
percent of the market.
Despite the soft market, MODENAS collaborated with key global
player KYMCO to launch two new models in the third quarter of
the financial year – MODENAS Karisma 125 and MODENAS Elegan
250. The company was also awarded KYMCO distributorship for
Malaysia effective from November 2016. Through the distributorship,
MODENAS’ subsidiary, Edaran Modenas Sdn. Bhd. (“EMOS”) launched
the KYMCO Downtown 250i.
The year also saw MODENAS enter into another strategic
partnership with BAJAJ Auto Limited (“BAL”) to develop street bikes,
and a few models are expected to be launched in FY 2017/18.
The collaboration, which will assist MODENAS in the areas of
research and development as well as manufacturing, is part of a
transformation programme that seeks to position MODENAS as the
No. 1 motorcycle brand in the country by 2020.
Along with further expansion of its motorcycle line-up, MODENAS
expects to gain significant market share in FY 2017/18 and
years to come.
The Kriss MR2 was launched in November 2016 and received tremendous response
 DRB-HICOM BERHAD
116 ANNUAL REPORT 2017

PROTON Holdings Berhad (“PROTON”)

PROTON is Malaysia’s largest car manufacturer and the only full-fledged OEM car manufacturer in Southeast Asia, where it has a presence in
addition to operations in Australasia, the Middle East and the United Kingdom.

In 2016, the Company initiated a turnaround plan focused on increasing sales by developing the right products for the right market, while
right-sizing and ensuring a high level of competency among its workforce and finalising a strategic partnership with a renowned automobile
company. Working conscientiously on this plan, several early wins were achieved.

In terms of product development, FY 2016/17 witnessed the launch of four new model variants, namely the Perdana, Persona, Saga and Ertiga,
which were well received and contributed to total sales of 72,440 cars in 2016. Besides their significant contribution to the sales improvement
in the year, the models have been awarded with independent recognition for respective values and propositions offered to the market,
summarised as follows:

Independent Body Award Model

CarSifu Editor’s Choice Best Local Design of The Year New Proton Perdana 2.4 Premium
Award 2016
Best Compact Car of The Year New Proton Persona 1.6 CVT Premium

ASEAN NCAP Grand Prix Most Affordable 5-Star ASEAN NCAP Proton Iriz
Award 2016 Car in Malaysia

The Rising Star Award Car Proton Saga

Most Affordable 5-star ASEAN NCAP Proton Preve

Car in Thailand

Malaysia Car of The Year Value-For-Money New Proton Saga

2016
Most Improved Model in Fuel Efficiency New Proton Persona

ASEAN Car of The Year 2016 Budget Car of The Year Proton Iriz

Malaysia Automotive Malaysia’s First Compact MPV EEV New Proton Ertiga
Institute (“MAI”) (energy-efficient vehicle)

Malaysian Institute of Road 5-star ASEAN NCAP New Proton Persona

Safety (“MIROS”)
4-star ASEAN NCAP • New Proton Saga
• New Proton Ertiga

Supporting the product line expansion, PROTON also rolled out a “Customer-First” initiative which included instilling a customer-centric
mind-set among employees, launch of a MyProton mobile application (“app”), expansion of sales and service outlets (which are open seven
days a week), and introduction of a PROTON-PETRONAS co-branded engine oil for enhanced performance of PROTON cars.

YBhg Dato’ Mohd Radzaif Mohamed, (left) and YBhg Dato’ Ahmad Fuaad Kenali at the launch of the Ertiga in November 2016
MyProton enables users to interact directly with PROTON, especially
in scheduling their PROTON car service, making appointments to test
drive PROTON models, and to access information related to model
specifications, part price, service history, network location and
vehicle-related assistance. Customers can also check their service
history from the app. There is also a loan calculator for purchase
of new PROTON cars, as well as updates on current promotions
and events. Independently, PROTON embarked on more active
engagement with the public on social media.
The Group also placed significantly greater emphasis on its export
programme, with notable results. On 28 May 2016, the first batch of
left-hand drive Proton Preve was launched in Chile. Nearer to home,
PROTON strengthened its presence in Brunei with the launch of
Proton Iriz on 1 October 2016, and Proton Persona and Proton Saga
on 27 January 2017. Following this, the Proton Iriz was launched in
Indonesia on 18 February 2017.
During the year, PROTON obtained a RM1.25 billion soft loan
from the Government to help clear its dues to vendors. At the
same time, it is committed to engaging a foreign strategic partner
(“FSP”), an impetus towards attaining sustainable growth by
enhancing its technology, productivity, sales and customers
confidence. Due diligence and negotiations with shortlisted bidders
DRB-HICOM BERHAD
ANNUAL REPORT 2017 117
were carried out, followed with the announcement on 25 May
2017 of the appointment of Zhejiang Geely Holding Group Co., Ltd.
(“Geely Holding”), China’s leading automotive manufacturer, as
its strategic partner. Geely manages a number of brands,
among which includes Emgrand Volvo, London Taxi and Lynk & Co.
Under the binding Heads of Agreement signed on 24 May 2017, Geely
will acquire a 49.9% equity interest in PROTON and 51% of PROTON’s
shareholding in the sports car manufacturer Lotus Group International
Limited (“LGIL”) based in Norfolk, United Kingdom, the remaining 49%
of LGIL will be purchased by Etika Automobile Sdn. Bhd. Geely will
take the lead in production, sales and marketing of new models while
PROTON will be responsible for distribution of the brand in Malaysia.
Part of the agreement will see Geely leverage PROTON’s currently
underutilised production facility in Tanjung Malim as its global hub
for the manufacture of all its right-hand cars, including Volvo.
Securing a leading global automotive manufacturer as its strategic
partner is definitely a shot in the arm for PROTON, and the company
expects its fortune to turn positive in the near future.
 DRB-HICOM BERHAD
118 ANNUAL REPORT 2017

DEFENCE
The Defence sector features two key players that are leaders in
their respective fields. DRB-HICOM Defence Technologies Sdn. Bhd.
is a partner to the Malaysian Armed Forces, supplying its needs
for specialised military and security vehicles while also catering to
foreign military players. Composites Technology Research Malaysia
Sdn. Bhd., meanwhile, has an extensive network of customers
among whom include global names in aerospace such as Boeing,
Airbus and UTAS.
DRB-HICOM Defence Technologies Sdn. Bhd. (“DEFTECH”)
DEFTECH is a defence industry specialist with particular strength
in the land combat segment. The Company is involved primarily
in the design, development and production of military, specialised
and commercial vehicles, as well as the maintenance, repair and
overhaul (“MRO”) of vehicles used in the defence and aerospace
sectors.
institutions for certain mega projects, while leveraging the smart
partnership platform for grants and export subsidies.
Crystal-balling into the future, DEFTECH is gearing all possible
efforts in enhancing its delivery commitment of current contractual
obligations. Concurrently, DEFTECH continues to maintain its
leverage with existing customers and potential customers with
a view of securing new supply and maintenance contracts crucially
needed to ensure the business survivability and continuity of
DEFTECH as a going concern. Our intelligence preparation of the
business environment, focusing on both keeping abreast with
customers’ long-term procurement programmes and providing the
much needed commercial input therein, continue unabated, while
our strategic partnership with established defence and security
OEMs and suppliers through business collaboration shall be closely
synchronised thereto.

It is currently serving a long-term contract to manufacture and

supply 259 units of AV8 in 12 different variants to the
Malaysian Armed Forces. Once all the units are supplied, by
2021, DEFTECH aims to provide MRO services for the minimum
25 years that the AV8 will be in service with the army. Periodic
upgrades for the Open Information Combat System (“OICS”) at
the heart of the AV8 will be undertaken by CTRM SI, a fully-owned
subsidiary.

In response to the current economic downturn, the Government

has temporarily postponed certain segments of its projects. This
has motivated DEFTECH to diversify its product and service
offerings. Among various strategic initiatives, it is taking its MRO
services to the region; and intensifying its focus on the civil/
commercial market. As an example of the latter, it is undertaking
a marketing blitz for aero-composite repair work for airlines.
Within the defence sector, it will build its core competencies and
collaborate with industry partners concentrating on niche work,
while also collaborating with the Royal Malaysian Police Cooperative
Limited on specific tenders released by the Ministry of Home
Affairs.

Operationally, it has embarked on various cost-saving measures

that have resulted in a leaner, more efficient organisation that
is better positioned to obtain private funding from financial DEFTECH will diversify its product and service offerings to respond to the prevailing
economic climate
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 119

Composites Technology Research Malaysia Sdn. Bhd. A320/A321 single aisle programme due to the unfavourable
(“CTRM”) foreign exchange environment.

CTRM represents about 20% of the domestic aerospace market

As part of its portfolio diversification programme, the year under
and contributes to about 36% of total employment in the
review saw CTRM Composites Engineering, a subsidiary, develop
Malaysian aerospace manufacturing industry. Along with a
two new products: a composite truck body for commercial
growing aerospace industry globally, it has secured approximately
vehicles and a composite aircraft seat. A 3m truck body was
RM11.9 billion in aero-structure manufacturing until year 2030.
delivered to ACM while a prototype for Pos Malaysia is still
Currently, Airbus Commercial and Defence contributes to almost
being developed jointly with DHCV. The aircraft seat is
66% of CTRM’s revenue while Boeing makes up 26% and Others 8%.
being undertaken with Aerospace Malaysia Innovation Centre
(“AMIC”) and external design house Air-go from Singapore.
A key business development during the year was signing a
Memorandum of Agreement (“MOA”) with UTAS in May 2016 to
Another key development was CTRM Testing Laboratory Sdn. Bhd.
produce six aircraft sets for the GTF E2, a new work programme.
(“CTRM TL”) receiving preliminary approval for Airbus Independent
Not Referent laboratory status. The lab is currently accredited
Revenue for the financial year increased due to the delivery of
with ISO 17025 with 28 testing scopes and NADCAP AC7122
a larger volume of aircraft parts to customers, especially for the
Non-Metallic Material Testing (“NMMT”) with 29 testing scopes.
A350 J-Nose & REFF, A350 IBF/OBF, A350 ACR and C-Sr &
It is gearing up for Airbus Independent Laboratory certification
MRJ programmes. However, the increase in revenue from these
by year 2019. CTRM TL also plans to diversify its capabilities
programmes was partially offset by lower revenue from the
into metallic testing and failure analysis for multiple sectors
including construction, energy, oil and gas, automotive and
locomotive.

To cater for business growth, CTRM has been investing in

equipment and facilities. CTRM is a single facility having the
most numbers of Autoclaves in the world. During the year,
various equipment were acquired while Building 4 was extended
and further expansion for Building 6 has commenced. Balancing
its capital expenditure, the Company also implemented various
cost-saving initiatives resulting in savings of more than
RM15 million.

As a result of quality performance, CTRM was the sole recipient

of an Honorable Mention at the annual Airbus SQIP Day in
Toulouse, France.

CTRM aspires to become the No.1 aerospace and non-aerospace

composite manufacturer in the region, boasting the largest
sub-assembly with Tier 1 capabilities. This hinges on five key
initiatives, namely:

1) business expansion – involving the development of new parts

and products with intensified production capabilities,
introduction of metallic part work to reduce imports, and attaining
Airbus Independent Laboratory status;
 DRB-HICOM BERHAD
120 ANNUAL REPORT 2017
2) enhanced manufacturing capacity – approximately RM100 million
has been invested in Building 6 to meet single aisle, A320
and A350 requirements;
3) enhancing operational excellence via improved overall factory
efficiency and overall equipment efficiency (“OEE”);
4)
engineering and technology development with the
introduction of advanced equipment and machines; and
5) people development through enhanced talent management.
MANUFACTURING AND ENGINEERING
Companies within this sector focus on the assembly of imported
vehicles and the manufacture of components for the automotive
and non-automotive sectors. Most of these companies are
recognised Tier-1 manufacturers that are capable of technological
precision and sophistication required of top OEMs and other
engineering concerns globally.
HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd.
(“HA”)
In FY 2016/17, HA assembled a total of 13,015 units of premium
Mercedes-Benz C, E ,S-Class and GLC as well as Volkswagen Passat,
Jetta, Vento and Tiguan at its plant in Peramu Industrial Estate,
Pekan. Besides that, HA also assembled Actros and Fuso Light- and
Heavy-Duty trucks.
As part of the modernisation and expansion programme, RM230
million was invested to build a New Paint Shop (“NPS”) which will be
fully equipped by June 2017. It is a state of the art NPS with 360 o
rotation conveyor (1st in ASEAN) and specifically designed to cater
to aluminium body painting. The NPS will increase the painting
capacity from 25,000 units/year to 50,000 units/year.
HICOM HBPO Sdn. Bhd. (“HHBPO”)
HHBPO is involved in the design, development and assembly of front
end modules (“FEM”) and related components for automotive OEMs.
It has three plants for three different lines of FEM assembly – in
Pekan, Pahang for Volkswagen; Tanjung Malim, Perak for Proton; and
Kulim, Kedah for BMW.
A winning factor of the Company, incorporated in September
2012, is the ability to tap into the technological expertise of its
German-based strategic partner, HBPO GmbH, in its product design
and development.
The financial year under review saw a significant 112% increase
in revenue year-on-year, due to BMW FEM sales volume and
new sales recognised for Proton FEM and FEM for two new
Volkswagen models, i.e. the Passat B8 and Tiguan. In turn, this
led to growth in profit before tax from RM12,000 to RM583,000
year-on-year. The Company’s profit after tax was its highest to date.
Moving on, HHBPO seeks to expand its service offerings to other
prominent marques such as Mercedes, Audi, Honda and Mazda.
It is also collaborating with its joint venture partner to diversify
its product offerings to include Air Guide Shutters and Centre
Console Modules. At the same time, it is making concerted efforts
to upgrade its current ISO 9001:2008 quality management
certification to IATF 19649. The process is expected to be completed
by June 2017.
HICOM-HONDA Manufacturing Malaysia Sdn. Bhd.
(“HHMM”)
HHMM manufactures and assembles engines and components for
Honda 100cc to 125cc motorcycles. Honda motorcycles currently
occupy second spot in the local market, after Yamaha, with total sales
for the year totaling 102,819, or 22% of the market.
HHMM itself manufactured 78,462 engines, which fell short of
targets due to winding down of HHMM and sales only up to
Feb’17. As a result of its pending liquidation, HHMM made a loss
for the year – due to retrenchment costs, impairments and
provisions for slow-moving stocks. Otherwise, it would have
made a healthy profit of RM1.1 million.
HICOM Diecastings Sdn. Bhd. (“HDSB”)
HDSB is widely recognised as a leading casting supplier in the
region, specialising in engine room components for cover
cylinder heads, cover timing chains, oil pumps, water pump
covers, fuel pipe delivery, steering housing and bracketry.
It also offers value-adding processes which encompass casting,
machining and assembly.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 121

A strategic business transformation programme was initiated and
is currently undergoing to achieve a higher level of manufacturing
efficiency and profitability.
The Company is supported by technical assistant collaborations
with renowned technology providers Ryobi Ltd. of Japan and
DongSeo Machine and Tools from Korea, while also benefiting
from Japanese casting technical expertise.
While building its core competencies, the Company also expanded
its business by embarking on export market development
in automotive and non-automotive sectors to
sustainability.
HICOM-Teck See Manufacturing Malaysia Sdn. Bhd.
(“HTS”)
market with mobile garbage bins, plastic road barriers as well as
plastic road hoardings in FY2016/17.
Moving forward, HTS will continue to strive for excellence in both
the automotive and non-automotive industries, and looks to
expand into the manufacture of aerospace components in
order to create greater business synergies.
HICOM-YAMAHA Manufacturing Malaysia Sdn. Bhd.
(“HYMM”)
HYMM is involved in the manufacture and assembly of Yamaha
ensure its motorcycle engines and parts. Increased sales during the year
under review led to growth in both revenue and profit before tax
from FY2015/16 levels. This was contributed in part by continued
dominance of Yamaha in the local motorcycle market, where it
accounts for 40% of total sales.

HTS is a one-stop centre for the design and development

Notwithstanding Yamaha’s popularity, HYMM continued to
of plastic products as well as product injection moulding,
reinforce initiatives to manage its material costs and enhance
module assembly, painting and chroming. It manufactures
productivity as well as quality, delivery and cost via programmes
exterior and interior parts such as cockpits, bumpers, door
modules and chrome parts. such as Total Productive Maintenance (“TPM”), which hinges on the
5S system. Via 5S, activities are undertaken to create a more

The economic slowdown was particularly harsh on HTS’ Thai conducive work environment.

operations, with low demand leading to closure of its plant

in Rayong. However, its bottomline was compensated by its Theoretical Value Production (“TVP”), was introduced in the Head

better performance in Malaysia. Thanks to the higher sales to Cylinder machining line in December 2016, and will be rolled out
in the other production and assembly lines in 2017. Through TVP,
Proton, mainly for its new models, HTS recorded a 38.5%
personnel are trained to identify losses and implement initiatives
increase in revenue to RM337.5 million. Higher revenue
for improvement.
combined with cost savings, meanwhile, resulted in a healthy
profit before tax of RM6.6 million.

Operationally, HTS continued to enhance its productivity and

efficiency, leading to various recognition from clients, as well as
new project awards.

FY2017/18 kicks off by supplying grille assy front bumpers for

Honda New Jazz in April 2017, followed by Honda City Emblem
in July. Starting from August 2017, HTS will supply cockpits,
bumpers and other parts for Mitsubishi Outlander, followed
by bumper and other parts for Perodua New Myvi in October 2017.

As part of a business diversification programme, the Company is

focused on non-automotive sales, and successfully supplied the
 DRB-HICOM BERHAD
122 ANNUAL REPORT 2017

forward purchased JPY and THB whenever exchange rates

improved.

Moving forward, IHM intends to introduce more models under

the ISUZU marque with newly improved safety features. This,
along with its cost saving activities, is expected to sustain
its profitability in FY 2017/18.

Oriental Summit Industries Sdn. Bhd. (“OSI”)

OSI is one of the largest chassis manufacturers in the country, with

three plants in Shah Alam (which also serves as its headquarters),
Tanjung Malim and Pekan.

The year also saw HYMM embark on a systematic organisational Despite project delays and cancellations by customers during
transformation. A dedicated team has been put together to the year, OSI increased its revenue and profit before tax
improve operations internally and expand the business externally. marginally by both expanding and diversifying its business. Within
This will include inorganic expansion in order to remain relevant the automotive sector, it acquired new business from PROTON
and profitable. for Proton Ertiga, as well as from Honda and Volvo. It is producing
tailgates, door hinges and base comp battery sets for the new
Throughout the changes, the Company continued to comply Honda Bold Runabout Vehicle (“BRV”) and Compact Recreational
fully with ISO 9001, ISO 14001 and OSHA 18001 Quality Vehicle (“CRV”). Meanwhile, Volvo has awarded OSI the contract
Management Systems, ensuring process effectiveness and to manufacture front axle, rear axle and corner modules for the
efficiency. S90 luxury sedan.

ISUZU HICOM Malaysia Sdn. Bhd. (“IHM”)

In the non-automotive sector, the company provided dolleys for

IHM manufactures ISUZU commercial vehicles including the ISUZU Pos Aviation and racking for HTS and PHN . To date, the Company has

N-Series light-duty trucks, F-Series medium- to heavy-duty trucks managed to increase its non-auto business to 15.3% out of its total

and D-Max pick-up trucks. revenue.

Isuzu is currently the leader in the truck segment of the A key strategy during the year has been to enhance the quality

commercial vehicle market, with about 40% market share, a of products while maintaining costs at an optimum level via

position IHM aims to maintain despite the low-growth and increased automation, high level of machine performance,

highly competitive environment. In response to competition, enhanced skills and knowledge of personnel and process

it continues to introduce new models and variants of ISUZU improvements. Much emphasis was also placed on achieving zero

light-duty, medium-duty, heavy-duty and pick-up trucks in a defects via Supplier Quality Management (“SQM”) and the

timely manner, while enhancing safety, quality, delivery and cost implementation of new standards.

parameters.
Effective 1 February 2017, OSI has been acquired by PHN in an

FY2016/17 was also challenging due to increased material costs effort to consolidate common manufacturing activities undertaken

led by a weakening of the Ringgit against major currencies such by both companies, namely metal stamping, welding and

as the Japanese Yen (“JPY”) and Thai Baht (“THB”). To manage sub-assembly of metal components. Along with this rationalisation,

this, IHM closely monitors foreign exchange movements and OSI expects to be able to extend its footprint in dies and

jigs fabrication. In addition, OSI plans to build its capacity to
fabricate and supply racking to all manufacturing and engineering
companies and other customers.
Key to business expansion will be to keep enhancing its customer
satisfaction, not only from quality products but also quality
service. Much emphasis will also be placed on recruiting and retaining
quality talent.
PHN Industry Sdn. Bhd. (“PHN”)
PHN is the leading automotive components manufacturer in Malaysia.
It is a Tier-1 supplier of body structure modules for major OEMs such
as PROTON, PERODUA and Honda, specialising in metal stamping,
components assembly, roll forming and dies manufacturing.
The financial year was encouraging for PHN due to increased sales
from the Honda and PROTON businesses, as well as contribution
from OSI. The Honda business was driven mainly by demand
for Honda Civic, start of production of New City in May 2016 and
BR-V in November 2016. PROTON sales were driven by the new
Proton Persona and Proton Saga models.
The PHN plant in Pagoh started operations in April 2016
DRB-HICOM BERHAD
ANNUAL REPORT 2017 123
Operationally, PHN reinforced its leadership via an organisational
restructuring that encompassed research and development (“R&D”),
new business strategy and enhanced customer focus.
As part of its new strategy, PHN is expanding its automotive
customer base while also venturing into non-automotive businesses,
leveraging its expertise in the manufacture of metal components
to supply aerospace, industrial and consumer products. This has
enabled PHN to secure three new contracts with CTRM, Camfil and
Ficosa Taichang, adding RM3 million to its order book.
FY2017/18 looks bright for PHN, especially with the acquisition
of OSI, which will contribute positively to its revenue and enable
the Company to expand its core business elevating PHN as a unique
company with full body in white (“BIW”) and chassis capabilities
in automotive manufacturing. PHN’s capabilities have been further
diversified by the establishment of its subsidiary, DRB-HICOM
Mechatronics Sdn. Bhd. (“DHMSB”), which specialises in the
automotive electrical and electronics segment.
 DRB-HICOM BERHAD
124 ANNUAL REPORT 2017

SERVICES AND
education sector

DRB-HICOM’s Services & Education division comprises three main

businesses, namely postal & logistics, concessions and others. The
postal & logistics segment is made up of a number of companies under
Pos Malaysia, and is being developed to support the government’s vision
of transforming the country into a regional logistics hub. Under
concessions, we provide vehicle inspection as well as waste management
and green environmental services. Others include our banking and
educational arms.

POSTAL AND LOGISTICS On the back of this strong revenue growth, as well as better resources
management, more disciplined cost management and focus on
Pos Malaysia Berhad (“Pos Malaysia”) protecting product profit margins, Pos Malaysia’s profit before
tax (“PBT”) increased to RM131.4 million as compared to RM92.5
Pos Malaysia is the national postal services provider which, under the million in FY2015/16.
DRB-HICOM Group, is being transformed into a logistics hub offering
end-to-end services through its own delivery network of about 700 During the financial year, Pos Malaysia implemented an Optimisation
post offices and 100 Pos Laju outlets as well as the first and last mile of Pos Mel and Pos Laju Operations (“OPPO”), in which a targeted
capabilities of its subsidiaries. portion of courier items are delivered by postmen. OPPO is expected
to improve postmen’s productivity while addressing the manpower
Pos Malaysia completed its acquisition of Pos Aviation needs of the fast-growing courier business. Subsequent to
in mid-September 2016 via the issuance of new shares to the acquisition of the Pos Aviation group, Pos Malaysia has also
DRB-HICOM. Accordingly, Pos Malaysia is now 53.5% owned by expended much time and effort to integrate its operations with
DRB-HICOM and Pos Aviation is a wholly-owned subsidiary those of Pos Aviation. The process involves the harmonisation
company of Pos Malaysia. Through Pos Aviation, it has under of policies and procedures of the two groups, as well as integration of
its portfolio, Pos Logistics and Pos ACE. This effectively bestows financial reporting systems and optimisation of resources to enable
on Pos Malaysia the full range of warehousing, haulage, Pos Malaysia to function seamlessly in supporting customer needs.
courier and customs clearance capabilities to cater for
both domestic and regional logistics businesses. The Government’s efforts to promote Malaysia as an e-Commerce
hub with the establishment of the Digital Free Trade Zone (“DFTZ”)
Financially, the continuous decline in volume of traditional mail augurs well for Pos Malaysia in its quest to become the premiere
was more than compensated for by the increase in e-Commerce e-Commerce fulfilment and logistics player in the region. To leverage
deliveries, resulting in strong revenue growth of the courier opportunities for e-Commerce as well as to build its postal services,
business. For the first time ever, revenue from the courier business, Pos Malaysia has launched a five-year transformation plan called
registered at RM684.6 million, surpassed that of traditional mail, at SCORE 2.0 that has 19 strategic initiatives.
RM619.7 million. Together with revenue from Pos Aviation group,
totalling RM327.6 million, Pos Malaysia’s revenue for FY2016/17
reached a record of RM2.1 billion.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 125

Broadly, the objectives of SCORE 2.0 are: the country: KL International Airport (“KLIA”), KL International
Airport 2 (“KLIA2”), Sultan Abdul Aziz Shah Airport (Subang),
• To improve its return on investment as well as productivity of
physical assets; Bayan Lepas International Airport (Penang), Sultan Azlan Shah
Airport (Ipoh), Kota Kinabalu International Airport, Kuching
• To enhance its e-Commerce fulfilment and logistics capabilities;
International Airport and Langkawi International Airport.
• To accelerate the introduction of new income streams
leveraging on the Group’s postal infrastructure;
In FY2016/17, the Company secured 13 new airline customers
• To introduce new and innovative solutions catering to the including Qatar Airways, Thai Airways, Jeju Air, Thai Smile Airways
needs of the digital generation; and and Himalaya Airlines. With these additions, it ended the

• To expand the capabilities of its talent using technology to financial year with 34 international airlines in its portfolio.
better serve customers. In total, Pos Aviation handled 11,460 flights in KLIA and
3,249 flights in KLIA2 in 2016, marking a growth of 10.5% and
Pos Aviation Sdn. Bhd. (“Pos Aviation”) 10.8%, respectively, from the numbers in 2015.

Pos Aviation provides total supply chain management throughout

At the same time, it managed a total of 220,202 tonnes of cargo
Malaysia through its own ground handling capabilities as well as the
in Kuala Lumpur and 29,046 tonnes in Penang, marking
land logistics capabilities of Pos Logistics acquired in December 2013;
year-on-year increases of 30.8% and 19.5% respectively. AME services
and the aviation logistics of Pos ACE, acquired in January 2015.
were provided to 26,567 flights in KLIA as compared to 23,478 flights
in 2015. Meanwhile, a total of 3,218,460 meals were delivered to 15
Pos Logistics has comprehensive logistics, haulage, freight
airlines customer in 2016, 14.4% more than the 2,813,834 meals in
forwarding, distribution and warehousing capabilities while
2015.
Pos ACE leases two B737-400F aircrafts that provide postal
charter services between East and West Malaysia, and
Various initiatives were undertaken to further enhance its services
plans to expand its operations to other countries within ASEAN.
across the board, key among which were to refurbish and/or
replace ageing equipment and to better manage its resources
Pos Aviation’s core business is in ground handling, cargo handling,
and services through more strategic use of IT.
aircraft maintenance and engineering (“AME”), and inflight catering.
Ground handling services are provided at seven airports in
Cargo handling, for example, was boosted by automation of
the warehouse racking system, and deployment of a new
cargo handling system. Meanwhile, for better customer
management, Pos Aviation is establishing a Cargo Customer
Service unit and strengthening its customer relationships with
Key Account Management. To improve the quality of its
catering service, Pos Aviation is looking to separate the production
of business class and economy class meals, with the former to
be undertaken at the Pos Aviation inflight catering facility,
and the latter in Shah Alam.

In the immediate term, both passenger and cargo traffic are

expected to increase, with the growth in cargo being particularly
significant. To fully leverage on the anticipated growth, Pos Aviation
is investing about RM150 million into the redevelopment of the
former Low-Cost Carrier Terminal (“LCCT”) in Sepang into an
international logistics hub.
 DRB-HICOM BERHAD
126 ANNUAL REPORT 2017

In the longer term, development of the DFTZ at KLIA Aeropolis is • Establishing container depots in Port Klang, Kuantan and
set to further boost e-Commerce in the country, enabling Prai to support haulage operations. As at March 2017, the
SMEs and other enterprises to enjoy the perks of the world’s three depots were serving 15 shipping liners; and
first special trade zone for e-Commerce. DFTZ will facilitate
• Launch of direct e-Commerce shipments from China into
customs clearance while providing warehousing and logistics
Malaysia beginning June 2016.
facilities for production clearance and export. Being the most
strategically located among ASEAN countries and having the best These business breakthroughs contributed to Pos Logistics
administrative capabilities vis-a-vis customs clearance, Malaysia achieving a total revenue of RM35.9 million in FY2016/17.
is well-positioned to become an international trade hub, with
Pos Aviation gaining from the movement of products.

Pos Logistics Berhad (“Pos Logistics”)

Pos Logistics is part of the Pos Aviation group. On 15 September

2016, when Pos Aviation was acquired by Pos Malaysia, Konsortium
KLB is now known as Pos Logistics, and has a new transformation plan in place
Logistik Berhad was rebranded as Pos Logistics Berhad.

Following its integration into the Pos Malaysia Group, Pos Logistics Moving on, the Company is making headway with other
established five commercial units, namely Supply Chain Services, strategic initiatives it had outlined earlier, such as the Roll-On Roll-
Automotive Logistics, Project Logistics, e-Commerce Logistics and Off Vessels, Lead Logistics Provider (“LLP”) for Shah Alam and
Specialised Logistics. The objective was to streamline its operational Non-Vessel Operating Common Carrier (“NVOCC”). Spurring
activities and strengthen its commercial capabilities. further growth, as of FY2017/18, it has launched a new five-
year Transformation Plan that focuses on the following strategic
During the year, Pos Logistics continued to focus on a three-year initiatives:
transformation programme embarked on in March 2014 to increase
its revenue. Various strategic initiatives were introduced. Notable • Project Logistics for Infrastructure and Oil & Gas;
successes from this transformation programme during the financial • e-Commerce Hub and e-Fulfilment;
year under review include: • Specialised Logistics;
• Automotive After-Sales Spare Parts Logistics; and
• A 10-year Contract of Affreightment (“COA”) from TNB Fuel
• Pos Malaysia Freight Forwarding Sdn. Bhd.
Services Sdn. Bhd. (“TNBF”) worth USD194 million for the
carriage of bulk coal. As of March 2017, Pos Logistics
Already, Pos Logistics is working with agents and provincial
had completed eight voyages carrying nearly 700 tonnes of coal;
governments in China to establish a stronger footprint in the
e-Commerce segment, with the aim of capturing first mile logistics
• A three-year contract from Petronas Refinery Petrochemicals
fulfilment opportunities.
for the Provision of Freight Forwarding and Associated Services
for PETRONAS’ Refinery and Petrochemical Integrated
Meanwhile, it is working towards fully integrating its systems,
Development (“RAPID”) project in Pengerang, Johor. The contract,
operations, processes, policies and human resources with those of
worth USD52 million, was effective as of April 2016;
the Pos Malaysia group.
• Opening of more branches in Sabah and Sarawak ending
the financial year with seven branches in East Malaysia;

CONCESSIONAIRES
Alam Flora Sdn. Bhd. (“Alam Flora”)
Alam Flora provides solid waste and public cleansing services
under concessions with the Government in Kuala Lumpur, Putrajaya
and Pahang; as well as non-concession integrated waste and
facilities management services, and 3R activities through its
subsidiary DRB-HICOM Environmental Services Sdn. Bhd. (“DHES”).
Its current 22-year concession agreement will commence on
1 September 2011 and will last until 31 August 2033.
Along with the expansion of its non-concession business, Alam Flora
recorded an increase in both revenue and profit for FY2016/17.
Total revenue for the year amounted to RM746.07 million,
2.6% more than the RM727.32 million recorded in FY2015/16.
Profit before zakat and taxation (“PBZT”), meanwhile,
RM94.38 million, 4% higher than that achieved in the previous
financial year.
To ensure continuous growth, Alam Flora has developed a 5-year
roadmap for the concession business, with the following focus:
1. To secure solid waste management and public cleansing
services in Kelantan and Terengganu;
2. To further reduce its operating costs and implement best
waste management practices such as Deep Collection System
and Stationary Compactor; and
3. To introduce waste recovery and waste management facilities
thus help reduce the Government’s landfill management
costs. Potential projects include the use of incinerators to
reduce landfill waste, and waste water treatment to
recycle water.
DHES, set up in October 2013, to carry out Alam Flora’s
non-concession businesses, has further expanded its activities
to include building cleaning, landscaping, solid waste facilities
management, integrated facility management, recycling
the collection of scrap material and end-of-life vehicles (“ELV”).
DRB-HICOM BERHAD
ANNUAL REPORT 2017 127
Its 5-year roadmap involves diversifying into:
1. waste management with the use of incinerators;
2. material recovery facilities and electronic waste; and
3. green and renewable energy such as the conversion of
plastics to fuel and the management of waste water.
PUSPAKOM Sdn. Bhd. (“PUSPAKOM”)
PUSPAKOM undertakes all mandatory inspections of commercial
and public vehicles in Malaysia under a concession with the
Government. It also offers inspection services for hire-purchase
financing, ownership transfer and insurance purposes as part
of its non-concession business.
was
FY2016/17 was challenging for the Company due to the soft
economy, which led to a 13% contraction in total industry
volume (“TIV”) from 666,667 in the calendar year 2015 to 580,124
in 2016, and therefore reduced income from hire-purchase
inspections. This was further compounded by a less frequent
mandatory inspection requirement for taxis, and increased costs.
In the face of these challenges, PUSPAKOM enhanced the coverage
and accessibility of its Premier Mobile Services through the
acquisition of new premier mobile vans and various promotions. It
also invested RM7.42 million in inspection equipment and system
improvement, branch relocations and facilities enhancement with
the objective of further improving its service delivery, hence customer
satisfaction. This strategic capital expenditure was balanced by cost
control measures which contributed to a total of RM10.71 million in
operational cost savings and RM3.11 million in capital expenditure
savings.
As a result of its efforts, revenue from the Premier Mobile Service
increased by 16%, contributing to a 6% growth in total net
revenue in FY2016/17 to RM141.4 million from RM133.3 million
and in FY2015/16. Together with the savings achieved, its PBZT
grew by a significant 314% from RM3.5 million in FY2015/16
to RM14.5 million.
 DRB-HICOM BERHAD
128 ANNUAL REPORT 2017
PUSPAKOM’s ongoing expansion is driven by three
strategies, namely to grow its non-concession and ancillary
businesses; enhance its brand image and perception; and further
improve its service delivery. In terms of image, it seeks to educate
the public on the importance of ensuring vehicles
roadworthy. Meanwhile various initiatives are being undertaken
to create greater customer comfort and convenience thus
elevating their level of satisfaction with PUSPAKOM’s service.
Going into FY2017/18, PUSPAKOM expects to maintain its concession
business revenue unless there are more mandatory inspections, for
example for vehicles used in e-Hailing services (such as Uber and
GrabCar), or there is a revision in inspection rates. It will therefore
focus more on growing its non-concession businesses such as the
Premier Mobile Service, Hire Purchase Inspection and Voluntary
Vehicle Inspection with strategic marketing and promotions. At the
same time, there are plans to launch a one-stop centre for insurance
sales & renewal and road tax renewal while optimising the potential
of rental from its office space.
Malaysia’s second Islamic bank posted improved performance in the year
under review
OTHER SERVICES
Bank Muamalat Malaysia Berhad (“Bank Muamalat”)
Bank Muamalat is a full-fledged Islamic financial institution
licensed by Bank Negara Malaysia under the Islamic Financial
Services Act 2013. It operates 63 branches nationwide, and
ranks eighth in terms of total assets among its Islamic peers.
In the current soft economic environment, the Bank has been
focusing on increased efficiencies and enhanced service delivery
main in order to maintain its competitive edge. Much emphasis is being
placed on digitalisation of its processes and systems while the
Bank continues to expand its product offerings to be the preferred
investment solutions provider to an increasing range of customer
are segments. These initiatives are complemented by excellent service
delivery at every touch point, supported by a more motivated
staff force who are driven by attractive reward schemes.
Its growth strategies contributed to a 1.2% increase in revenue
year-on-year to RM1.2 billion for the year ended March 2017.
Total net income also improved, from RM533.0 million in
the preceding year to RM546.9 million.
The increase in total net income was driven mainly by stable
growth in financing income, of RM60.1 million, in tandem with
an expansion in gross financing that stood at RM15.2 billion
against RM14.8 billion as at year ended March 2016. For
FY2016/17, the Bank recorded a PBT of RM170.5 million,
marking a 2.0% increase from the previous financial year.
Meanwhile, the Bank’s total deposits grew to RM19.9 billion
from RM19.6 billion in FY2015/16, supported by business
and individual depositors. Its key capital ratios remained at
healthy levels, with core capital ratio at 14.4% and total risk
weighted capital ratio at 16.7%, which was among the highest in
the industry.
Moving forward, the banking sector is expected to record modest
growth as a result of higher credit cost, intense competition for
deposits and limited growth in fee-based income. Within this
scenario, Bank Muamalat believes the Islamic banking industry
will continue to expand along with robust demand for its
financial services and especially its investment solutions.
While exploring opportunities for growth, Bank Muamalat is
putting in place the appropriate processes to ensure compliance
with regulatory requirements on parameters such as liquidity and
the FRS 9 accounting standard, which will be effective as of
January 2018.
Under its new business plan, Bank Muamalat will continue to
enhance its customer experience with greater convenience and
value-added services. Among its top priorities will be expansion
of its wealth management and Bancatakaful services as well as
sustained efforts on the Ar-Rahnu business.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 129

DRB-HICOM University will expand its course offerings to increase enrolment

HICOM University College Sdn. Bhd. (“HICOM University Along with efforts to increase the intake at DRB-HICOM U
College) and to strengthen its brand awareness in the education
market, student numbers have been increasing every year. With
HICOM University College owns and manages DRB-HICOM University 929 students in FY2016/17 compared to 908 students in
of Automotive Malaysia (“DRB-HICOM U”) in Pekan, Pahang and the previous year, revenue for FY2016/17 increased by
Akademi Saga, a vocational training institution, in Shah Alam, RM5.04 million.
Selangor.

Going forward, DRB-HICOM U aims to increase its enrolment

DRB-HICOM U, formerly the International College of Automotive to reach its capacity of 5,000 students within the next five
Malaysia (“ICAM”), received full-fledged university status on years by expanding its programme offerings and strengthening
20 October 2015, and was officially launched as a university on its reputation and relevance. Among others, it seeks to
21 February 2016. Its objective is to produce highly skilled develop flagship programmes such as a Masters in
graduates in technology, engineering, business and management, Business Administration, while focusing on applied research
with knowledge geared specifically to the automotive industry. and dual degree programmes. DRB-HICOM U is also committed
Supplementing their theoretical knowledge, students gain to become a pioneer of the 2U2I programme, in which students
practical experience through hands-on training and internship spend two years at university and two years in industrial training.
in DRB-HICOM companies to enhance their future employability.

Akademi Saga, meanwhile, has 203 students and offers five

During the financial year, DRB-HICOM U offered 24 programmes programmes that are between Level 2 and Level 4 of the Sijil
comprising two Foundation programmes, nine homegrown Kemahiran Malaysia. All the programmes are registered under
Diploma programmes, nine Bachelor programmes including three Jabatan Pembangunan Kemahiran of the Ministry of Human
in collaboration with Liverpool John Moores University, Malaysia Resources.
Multimedia University, and University Malaysia Pahang, two Master
programmes and two PhD programmes. All these programmes are
accredited by the Malaysian Qualifications Agency (“MQA”).
 DRB-HICOM BERHAD
130 ANNUAL REPORT 2017

PROPERTY, ASSET AND

construction sector

DRB-HICOM provides integrated real estate solutions through our

property development, asset management, construction, hospitality
and leisure businesses. We are currently developing a GDV of
RM5 billion worth of real estate in Johor, Selangor, Perak and Melaka.
We also manage a golf club and two leading hotels, and are involved
in concessions for the construction of an integrated Immigration
Custom, Quarantine and Security (“ICQS”) complex as well as the
re-development of RTM’s Angkasapuri, the Media City project.

PROPERTY Proton City Development Corporation Sdn. Bhd. (“PCDC”)

PCDC is the developer of Proton City, a 4,000-acre township in

Glenmarie Properties Sdn. Bhd. (“GPSB”)
Tanjung Malim, Perak, comprising residential, commercial,
institutional as well as industrial parcels surrounded by seven
GPSB represents the Group’s flagship property development arm,
lakes, a state-of-the-art Proton Plant and Universiti Pendidikan
responsible for all developments bearing the Glenmarie trademark.
Sultan Idris. Recreation and playground facilities have been
During the financial year under review, it was involved in the following
planned at Embayu Lake complete with a 1.8km jogging track
ongoing projects:
to ensure healthy and holistic living.

Glenmarie Johor – Located within the regional hub of

In July 2016, PCDC completed 104 units of Tulips cluster homes.
Kota Iskandar, this development marks the first chapter of
Meanwhile, Jasmine Residences @ Proton City, featuring
taking the exclusive Glenmarie address to the south. Glenmarie
luxurious bungalows, and Maple @ Proton City, a collection of
Johor represents a guarded community with a linear garden
exclusive double-storey semi-detached houses, are under
concept of generous green spaces surrounding a residential
construction and due for completion in the early second-half
neighbourhood. Homes within the enclave feature modern
of 2017.
designs, further accentuated by their strategic location close to
facilities and amenities, as well as excellent connectivity to major
highways.
ASSET AND FACILITY MANAGEMENT

Glenmarie Golf & Country Club (“GGCC”)

Glenmarie Cove - This project in Klang, Selangor has the
distinction of being the country’s first low-density, gated and GGCC in Glenmarie, Shah Alam, Selangor regularly hosts
guarded riverfront development built around extensively significant golfing tournaments including the Defence Services
landscaped parklands and lagoons in a resort-style setting. Asia 2016 VIP Golf and Shaaban Husin Charity Golf. Since its recent
Currently, Phases 3 and 4 are being planned to increase the upgrade, GGCC represents itself as one of the most prestigious
mix of products from superlink, cluster and semi-detached golf courses and club houses in the country. Revenue from
houses to bungalows. membership and events was registered at RM22.6 million for the
financial year under review.

Holiday Inn Kuala Lumpur Glenmarie (“HIKLG”)
The calendar year 2016 was challenging for the tourism and hospitality
industry in Malaysia, and contributed to HIKLG recording lower guest
arrivals during FY2016/17. The business and leisure resort-styled
hotel in Shah Alam, Selangor achieved an average occupancy rate
of 58.9% throughout the financial year with revenue totaling RM25.1
million.
Vivanta Rebak Island Resort Langkawi
Vivanta Rebak Island Langkawi by TAJ (formerly known as Rebak
Island Resort) is our luxury resort under the globally renowned TAJ
brand. Offering the unbeatable lure of staying on a private island,
the five-star resort continues to attract an ever-increasing number of
guests. Its healthy occupancy rate of 69% for the year contributed to
revenue of RM24.4 million.
CONCESSIONS
Media City Development Sdn. Bhd. (“MCDSB”)
In December 2015, DRB-HICOM Berhad acquired 51% equity in Media
City Ventures Sdn. Bhd. (“MCVSB”), the parent company of MCDSB.
MCDSB holds a 23-year concession from the Government and
is tasked with redeveloping the existing Angkasapuri Complex
(Phase 1) and developing a new commercial development (Phase 2)
to create the Media City campus.
Once completed, Media City will make available the latest
broadcasting technology infrastructure to develop a comprehensive
digital TV network. It will also modernise the RTM broadcasting
systems in line with the current latest technology. In addition to this,
Media City will help support the National Creative Industry Policy and
DRB-HICOM BERHAD
ANNUAL REPORT 2017 131
be the catalyst for the national broadcasting expansion initiative to
achieve international class standards similar with the Media City in
Dubai, Sydney, Singapore and Manchester.
The total cost of development under Phase 1 is estimated at
RM860 million, and is targeted to be completed in stages from
December 2017 to December 2019.
Northern Gateway Infrastructure Sdn. Bhd. (“NGISB”)
On 30 December 2011, NGISB entered into the Concession
Agreement with the Government of Malaysia for the development
of the Immigration, Custom, Quarantine and Security (“ICQS”)
Complex located in Bukit Kayu Hitam, Kedah, to replace the existing
Immigration Complex. During the concession period, NGISB shall
undertake the planning, design, development, construction and asset
management services.
The ICQS has the advantage of being situated at one of the
four major authorised points of entry at the northern border of
Peninsular Malaysia. It is also strategically located just 0.6km from
the Malaysia-Thailand border and approximately 55km from
Alor Setar, Kedah. It covers an area of 73.8 acres where
12 main buildings are to be constructed and subsequently utilised
as operation and administration offices.
The RM425 million project is divided into 2 phases; Phase 1
which is to be completed by 1st September 2017 followed by
Phase 2 on 31st December 2018.
Some of the notable infrastructures that shall be offered by the
ICQS complex upon its completion by the end of 2018 are
the provision of 20 lanes of light vehicles checkpoints and
a 4-storey car park. The complex will also be equipped with the
latest ICT equipment, comprising various wireless systems
and modern security networks.
 DRB-HICOM BERHAD
132 ANNUAL REPORT 2017

IN ORDER to grow and

expand our capabilities,
we must branch out
and explore new areas
of opportunities.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 133

initiatives
KEY
 DRB-HICOM BERHAD
134 ANNUAL REPORT 2017

HUMAN CAPITAL
development

1.0 CODE OF ETHICS AND

BUSINESS PRACTICE

DRB-HICOM is committed to maintaining the highest standard

of conduct at the workplace. Towards this end, employees are
guided by the Code of Ethics and Business Practice (“COEBP”)
adopted in 2006.

The comprehensive code outlines behaviour expected within

the Company, as well as with customers, principals, vendors,
dealers, suppliers, contractors and other external parties. It
ensures our business engagements are fair and professional,
and undertaken in full compliance with all relevant laws and
regulations.

COEBP is integral to our Terms and Conditions of Service,

detailing the responsibilities and accountabilities of employees
at all levels, as well as that of principals, vendors, dealers and
suppliers/contractors. It illustrates the Company’s shared
values covering elements of Integrity, Decorum, Innovation,
Excellence, Transparency, Teamwork and Quality.

To ensure all parties adhere to the COEBP, the Company

provides a dedicated channel for whistle-blowing on any
violation of the COEBP with strictest confidence guaranteed.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 135

2.0 TALENT MANAGEMENT & CREATION

OF A HIGH-PERFORMANCE
WORKFORCE

At DRB-HICOM, talent management is aligned with our

organisational strategies, needs and goals, ensuring we have the
right people with the right skill set, focused on the right initiatives
to drive our business and accelerate outcomes.

In 2016, through a People Capability Roadmap (“PCR”) Exercise, DRB-HICOM Managerial Development Programme (MDP) - Batch 1
we reviewed and clearly defined our behavioural and leadership
competencies and criteria across all functional areas, and 2.2 DRB-HICOM Management Trainee Programme
identified specific developmental plans for each competency. This for Subsidiaries (“DMTPs”)
exercise was geared towards:
• Creating a competent workforce with the right set of In 2015, we introduced the DRB-HICOM Management Trainee
competencies, values, and leadership qualities that will enable Programme (“DMTP”); a fast-track programme for freshly recruited
them to perform their best graduates aimed at accelerating their career progression in the
• Closing competency gaps and driving business growth Group. A first batch of ten fresh graduates were placed into the
programme.

2.1 Middle Management Development Plan

In 2016, as part of efforts to promote Group synergies, Group
Human Capital (“GHC”) collaborated with our subsidiaries to
As part of our continuous initiatives to enable our employees develop a second batch of young talents through the DRB-HICOM
to realise their true potential, we embarked on a Managerial Management Trainee Programme (Subsidiary), or DMTPs. Through
Development Programme (“MDP”) in 2016, focusing on our this programme, we aim to assist our subsidiaries in hiring and
Managers and Assistant Managers. The structured programme was developing young, dynamic and ambitious graduates. These new
designed to create leaders with the right value systems to drive a recruits will receive functional and managerial skills in preparation
high-performance organisation. It benefits participants by for key positions in our subsidiaries.
providing:
• The right skills and exposure to be more effective in
managing others
• The relevant tools and knowledge to ensure that each action
supports the Group’s strategies
• An overview of the organisation’s expectations of their
individual roles

Currently, 32 employees across the Group are attending the one-

DRB-HICOM Management Trainee Programme (DMTPs) - Batch 2
year programme.
 DRB-HICOM BERHAD
136 ANNUAL REPORT 2017

2.3 Capstone Project as Part of Talent

Development Programme

All DRB-HICOM Talent Development Programmes incorporate a

Capstone Project. This is a unique assignment requiring participants
to collaborate and resolve actual workplace-related problems, or
capitalise on new opportunities to grow the business, or undertake a
combination of both. Through the Capstone Project , participants are
given the opportunity to integrate their formal and informal learning
experiences to enhance the Group’s business performance.

Each Capstone Project is first reviewed and approved by the Talent

Assessment Committee (“TAC”), which then ensures participants are
guided to ensure its successful implementation.

To date, a total of 23 Capstone Projects have been completed by our

talent pool at all levels.

Capstone Projects Meeting

2.4 Finance Professional Development Plan

(“FPDP”)

The Finance Professional Development Plan (“FPDP”) produces

financially-trained professionals who can lead, innovate and add
value to the organisation. It engages participants in a holistic learning
and development approach focusing on knowledge, skills, experience
and aspirations. All FPDP participants undergo the Association of
Chartered Certified Accountants (“ACCA”) or Malaysian Institute
Certified Public Accountants (“MICPA”) programme. Currently, 14
employees are undertaking the FPDP.

Capstone Projects by DMTP (Batch 1 & Batch 2)

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 137

2.5 Culture of Knowledge Sharing

In 2016, we embarked on numerous knowledge sharing initiatives to

ensure we capture the experience and knowledge of employees and
share this across the Group. We also invited subject matter experts
from relevant industries to share their knowledge and experience
with our employees. In addition to supplementing our organisational
knowledge, these initiative enable us to strengthen the network of
business leaders within the DRB-HICOM Group of Companies as well
as to reinforce our links with industry leaders.

Two key knowledge sharing sessions were organised in 2016:

• DRB-HICOM Leading Transformation Forum – in collaboration
with The iA Group and IBM Malaysia
Leadership Development Programme, Speaking Engagement by Global Speakers
• Leadership Development Programme, Speaking Engagement by
Global Speakers – in collaboration with Group HR of the MMC
Group
3.0 TALENT ACQUISITION
Talent Acquisition continues to evolve, focusing more on
communicating and amplifying the value of our brand to potential
employees. To reinforce our employer branding, we have been more
proactive in terms of:
1. Understanding the employment acquisition process from the
candidate’s point of view;
2. Providing a consistent and transparent end-to-end process for a
positive candidate experience;
3. Maintaining clear communications and responding to
candidates promptly;
4. Gathering feedback from candidates on their experience with
DRB-HICOM; and
5. Initiating and improving processes and services as per
candidates’ responses.

We encourage internal mobility within the Group to meet our

own organisational needs, as well as to enhance the professional
development of our talent who benefit from exposure to different
business sectors and industries. Mobility serves further to boost
employees’ morale, enhances their job engagement and enhances
their career development. It contributes towards the retention of
good talent, reducing the turnover rate within the Group.

DRB-HICOM Leading Transformation Forum

 DRB-HICOM BERHAD
138 ANNUAL REPORT 2017

4.0 EMPLOYEE ENGAGEMENT

In today’s dynamic business environment, employees are our most

valuable asset. To maintain a competitive edge, we aim to attract
the crème-de-la-crème by creating a positive impression of our work
culture, and subsequently retain our talents by offering attractive
career prospects that keep them motivated and committed to
achieving our organisational goals.

In line with the Group Human Capital’s aspiration for DRB-HICOM to

become an Employer of Choice, various employee development and
engagement programmes have been put in place.

In 2016 the Employee Relation (“ER”) unit organised talks on

Autism and Special Needs Children, and Prostate and Cervical
Cancer awareness. It also organised a PinkTober Day campaign to
promote breast cancer awareness within the Group. In addition,
Women’s International Day was celebrated by conducting interactive
programmes and talk sessions on Stress Management, Personal
Grooming, Family Planning Counselling, Dietetic Counselling, Blood
Sugar Testing, Skin Analysis and a Quit Smoking campaign.

For greater convenience of employees, ER also arranged for the

POS-On-Wheels (“POW”) service at our headquarters in Glenmarie,
Shah Alam. Employees are able to carry out a range of transactions
normally conducted at a post office, from buying stamps and posting
letters, parcels and registered mail, to paying bills and student loans
as well as delivering PosLaju items, purchasing or cashing postal
orders or money orders at the POW truck. They can even purchase
insurance and invest in the Amanah Saham unit trust.

5.0 LEARNING & DEVELOPMENT
@theAcademy was established to provide learning
solutions to enhance Organisational Learning (“OL”)
efforts throughout the Group. Skill gaps within the Group,
are identified by the management of @theAcademy which
helps them design suitable programmes to address these
gaps through a Level 3 Training Evaluation to ensure the
effectiveness of the designed programmes.
We have in place, a well-designed platform for the continuous
learning and professional development of all employees.
Penyelesaian Masalah Inovatif - PCR (2), 22 May 2017
By enabling our people to realise their potential, we are able to
nurture a high-performance culture and organisational growth
which, in turn, serve as building blocks for the Company to realise
our vision and mission.
In FY 2016/17, a total of 53,195 employees participated in
3,581 training programmes, 58% of which focused on building
competencies in driving for excellence, customer focus and
innovation. A total of RM16.3 million was spent on training, of which
RM4.8 million (or 29.4%) was channelled towards non-executive
training.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 139
During the calendar year, there was a substantial increase in the
take-up of programmes conducted by OL, with 91% programmes as
compared to 79% in FY 2015/16. The increase was due to effective
reviews of the types of training programmes carried out. There was
also a decrease in the number of programmes postponed from
30% to 11%, and zero programme cancellations, as in FY 2015/16.
Throughout FY 2016/17, the learning centre conducted 94 courses
for 47 companies focused on personal, functional, leadership and
business acumen development.
PUSPAKOM Retreat, 23 February 2017
@theAcademy also provided in-house consultancy to operating
companies within the Group focusing on how they could improve the
soft skills of their employees. There were 41 in-house consultancy
programmes conducted in FY2016/17. A total of 140 staff completed
their Pembangunan Sumber Manusia Berhad, Train the Trainers
Programme (“PSMB TTT”) conducted as at 2016/17. @theAcademy
also conducted a personalised TTT programme called the Budaya
Kerja Cemerlang in three sessionst for CTRM in 2016/17. A total of
75 participants were certified through the programme. The aim was
to develop more competent working teams and enhance service
standards across our businesses.
 DRB-HICOM BERHAD
140 ANNUAL REPORT 2017

SUSTAINABILITY
report

In line with the amendments to the

Main Market Listing Requirements
on sustainability reporting, issued
by Bursa Malaysia Securities Berhad
in October 2015, DRB-HICOM Berhad
is proud to present our inaugural
Sustainability Report.

Reporting Period
1 January 2016 – 31 December 2016, unless specified.

Coverage
The scope of reporting encompasses business sectors from
Automotive, Services & Education, Property, Asset & Construction
and Group Corporate Support Services. Group Corporate Support
Services refers to the Group corporate divisions such as Group
Financial Services, Group Strategic Communications, Group Internal
Audit and more.

References and Guidelines

Global Reporting Initiative (“GRI’) G4 Sustainability

Reporting Guidelines

Bursa Malaysia’s Sustainability Reporting Guide

A full disclosure of the GRI Content Index is available for reference

under the sustainability section of our corporate website at
www.drb-hicom.com.

1. Message from Group Managing
Director on DRB-HICOM’s Sustainability
Performance and Endeavours
As a business, our aim is to contribute positive returns for the
benefit of our shareholders and stakeholders. However, as we
seek to generate profits, we acknowledge the need to adopt
sustainable initiatives in terms of protecting and preserving the
environment ensuring positive social impacts; whilst ensuring
Malaysia grows as a country as a result of our activities.
DRB-HICOM, in carrying out its business practices, must ensure that it
adopts sustainability-centric activities to complement its endeavours
towards protecting and conserving the resources that it utilises in its
business operations.
Our commitment is that we will abide by globally-accepted
sustainable practices in the course of doing business. It is through
these practices that we will be able to build confidence amongst our
stakeholders, which include our employees, our stakeholders and
our customers.
This is not going to be achieved overnight but the fact is, we are
taking steps to ensure that we employ sustainable practices across
the Group. Eventually, we aim for DRB-HICOM to be recognised as an
environmentally-friendly and sustainable brand.
Across our Group, there are already initiatives employed to improve
sustainability. We are proud of these initiatives especially when
innovation and technology forms the basis of the efforts. Throughout
the Sustainability Report, we would present the various sustainability
initiatives embarked on by the Group throughout the reporting
period which have positively impacted various stakeholders.
We are a large and diversified group, and that alone presents some
challenges. One of it is ensuring that the sustainability value is
cascaded down across the Group, and the other is collecting data and
information across the various facets of our businesses.
This report is a culmination of the effort to streamline the initiatives
of the Group towards sustainability. It requires a Group-wide effort
to look at the way we conduct our business, measure these efforts,
determine the gaps and more importantly, identify and adopt
measures to close these gaps.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 141
Over time, we will enhance our sustainability indicators through the
adoption of various initiatives. The conversion of waste to energy is
one area where we hope we can excel in. Alam Flora is after all in the
business of waste collection, and we have a duty to find ways on how
we can convert the tonnes of waste that is produced by Malaysians
daily into energy, or even into renewable alternatives through
recycling.
2. Sustainability Strategy
DRB-HICOM is dedicated to protecting the environment, reducing the
rate of accidents, promoting healthy living and developing human
resource capability across the Group. The Group is establishing its
sustainability strategies to create regional trust and credibility.
Our Group-wide strategy plan between 2017 and 2021 includes a
total of three key targets. The priorities and principles shown below
will govern the entire business practices and operations of the Group
within its key four sectors: (1) Automotive, (2) Services & Education,
(3) Property, Assets & Construction, and (4) Group Corporate Support
Services. These strategic targets are;
Environment – Reduction of energy consumption and waste
generation by 8%;
Safety and Health - Reduction of total number of incidents
by 8%; and
Capacity Building – Hiring competent safety and
environmental personnel and provide training for such
personnel.
We believe commitment and meeting these targets is essential for
DRB-HICOM to achieve higher standards of sustainability.
Our Group Safety, Health and Environment (“SHE”) Division has
developed a database system called Integrated Reporting
Occupational Safety, Health & Environment, or commonly known as
IROSHE. It allows data collection and dissemination of information to
the related SHE persons-in-charge and Head of Companies
throughout the Group. Further to that, all information is reported to
the Senior Management of DRB-HICOM on a quarterly basis.
 DRB-HICOM BERHAD
142 ANNUAL REPORT 2017

3. Corporate Governance on Sustainability

DRB-HICOM’s sustainability committee intends to set a strong foundation for the rigorous and innovative integration of sustainability
principles across the Group.

The Board Risk and Sustainability Committee (“BRSC”) oversees the risk management and sustainability functions to ensure efforts are aligned
to the Group’s long term business and environment strategy. Sustainability Steering Committee (“SSC”) recommends the direction that aligns
the sustainability targets to the overall goals of DRB-HICOM and prioritises key sustainability matters. Further, the Sustainability Working
Committee (SWC) functions as a gatekeeper on all sustainability related information and performs assessments on sustainability related
programmes.

Throughout this process, BRSC seeks to inform and inspire the DRB-HICOM community regarding sustainable development as a business tool
as well as a powerful opportunity to positively impact the Group.

Shown below is the Group’s Sustainability Reporting Organisational Chart.

Chart 1 : Sustainability Reporting Organisational Chart

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 143

4. Stakeholder Engagement

DRB-HICOM’s success is a direct result of strategic planning and maintaining a long-term bona fide relationship with its stakeholders.
DRB-HICOM evaluates its key business sectors and its supply chain, to understand how they affect the Group’s stakeholders and the industry
as a whole.

As one of Malaysia’s leading conglomerates, DRB-HICOM believes in keeping a long-term committed engagement and transparent
communication with its stakeholders. This focus on stakeholder engagement creates a synergistic opportunity for the Group to enter into
global marketplace and expand beyond the nation’s borders. Table 1 displays the Group’s stakeholders with their key sustainability-related
topics and forms of engagement occurring throughout the year.

Table 1: Stakeholder Groups, Key Topics and Forms of Engagement

 DRB-HICOM BERHAD
144 ANNUAL REPORT 2017

5. Materiality Assessment

Materiality in the context of sustainability involves taking account of DRB-HICOM’s Economic, Environmental and Social (“EES”) impact
assessments and the corresponding decisions of its stakeholders. The Group’s sustainability strategy focuses primarily on the critical
materiality issues of its business operations.

DRB-HICOM uses the Global Reporting Initiative (“GRI”) G4 indicators, as listed below, to highlight the materiality issues that have a significant
impact on its business and stakeholders.

• Energy Consumption and Reduction (EN3 & EN6);

• Greenhouse Gas (GHG) Emissions (EN15 & EN19);
• Waste Management (EN23 & EN31);
• Workforce Diversity and Equal Opportunity (LA1, LA12, LA13 & EC5);
• Occupational Health and Safety (LA5 & LA6);
• Training and Education (LA9 & LA10);
• Human Rights (HR2, HR5, HR6);
• Community Relation and Contribution (SO1); and
• Anti-Corruption (SO4).

The materiality assessment process enables DRB-HICOM to chart out its sustainability matters thereby presenting a possibility for better
business strategic performance in the short, medium and long term. The issues were prioritised based on a qualitative review of their
significance to DRB-HICOM, and their importance to the stakeholders.

The materiality matrix below is a visual representation of the indicators in order of priority. This is a result of an extensive review and
engagement from key internal stakeholders, including Senior Management conducted by an independent sustainability consultant.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 145

6. Safety, Health and Environment (“SHE”) at the Workplace

6.1. SHE Policy and Organisation Chart

Safety, health and environment are DRB-HICOM’s core values. The Group makes it a priority to meet both internal and external compliance
requirements and the expectations of the regulators, especially in matters relating to safety, health and environment. Effort is taken on the
part of the organisation to uphold its safety, health and environment commitments and practices and to ensure no compromise is made in
executing the same. To date, there are more than 150 SHE practitioners in the Group. The Safety, Health and Environment (“SHE”) Council is
headed by the Group Managing Director with active participation from Senior Management of the Group. The Group SHE acts as secretariat
to the council.

Chart 2 : Key Principles of Safety, Health and Environment (“SHE”) at DRB-HICOM

The Group’s SHE policy focuses on four key principles: Compliance, Prevention of Pollution, Communication and Continuous Improvement.
Compliance ensures that the organisation adheres to all legislative and regulatory requirements, code of conduct, and best practices.
Prevention of Pollution identifies and implements green practices in the workplace to minimise and prevent pollution. Communication is an
effective tool the Group uses to disseminate the SHE policy and to engage with all stakeholders within DRB-HICOM companies. The fourth
principle, Continual Improvement reduces the potential hazards, risks and impact to the environment and to health and safety.

6.2. Sectoral Breakdown of Occupational Incidents

Chart 3 below depicts the Group’s incident rate across four sectors - Automotive, Services & Education, Property, Asset & Construction and
Group Corporate Support Services - from January to June 2016 and from July to December 2016, respectively.

Chart 3 : Occupational Incidents by Sector

 DRB-HICOM BERHAD
146 ANNUAL REPORT 2017

As at December 2016, the Services & Education sector registered the

highest incident rate at 73% while the Automotive sector had the
second highest incident rate of 21%, followed by Property, Asset &
Construction with 6.5%. No incident was reported by Group Corporate
Support Services throughout the reporting period.

6.3 Emergency Preparedness and Response

The Group established DRB-HICOM Emergency Assistance Team

(“D-HEAT”) as part of its emergency response plan. The idea of
establishing the team was mooted by the Chairman of DRB-HICOM in
the wake of floods in Pahang and Kelantan in the last quarter of 2014.

D-HEAT has undergone various training under the supervision of

Jabatan Bomba dan Penyelamat Shah Alam Seksyen 15, specifically
by Special Tactical Operation and Rescue Team of Malaysia (STORM)
and Multi-Skill Team (MUST). The list of training includes high angle
rope rescue, emergency rescue medical services, dark smoke gallery
with Self Contained Breathing Apparatus (SCBA) and Offensive Indoor
Fire Fighting.

By arranging training with Jabatan Bomba dan Penyelamat Malaysia,

DRB-HICOM seeks to comply with national standards on fire safety.
Furthermore, it instils the need for personal and organisational
accountability for health and safety across all companies within the
Group.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 147

Case 1:

Safety and Environmental Success Story of

POS Malaysia

Safety and Environmental Success Story

As a responsible corporate citizen, POS Malaysia has taken primary

responsibility in implementing several continuous activities to increase
health and safety awareness among employees and workforce as
well as provide training to them. Below are the continuous activities
provided by POS Malaysia:

1. Programme for “Pergi Balik Kerja dengan Selamat” with

PERKESO Bentong for advocating the importance of on-the-road
safety ;

2. Vehicle checking for lorries in Kuantan;

3. Lectures on health and road safety for motorcyclists in Sabah;

4. Workshops for safety and health in Small Medium Industries in

Sibu, Sarawak ;

5. First Aid programmes organised by Red Crescent Club in

Kuching, Sarawak; and

6. Health Awareness programmes organised by Integrated Green

Medical Centre.

Furthermore, POS Malaysia promotes road safety by providing

safety training videos, coordinating monthly Occupational Safety
and Health (“OSH”) campaigns, setting up a road safety task force for
the management of vehicle drivers, reviewing the training module
and safety briefings.

POS Malaysia also collaborated with the Department of Occupational

Safety and Health (“DOSH”) to produce the Guidelines on OSH in
the Courier Services Industry. This Guideline provides information
and recommendations on the management of OSH in this
industry in compliance with the Occupational Safety and Health
Act 1994, Act 514.
 DRB-HICOM BERHAD
148 ANNUAL REPORT 2017

Case 2:

SHE Improvement Activities and

Programmes of CTRM

CTRM Safety and Health (SHE) Improvement

Activities and Programmes

CTRM has implemented several SHE improvement activities and
programmes, which includes:

Training for working at height;

Exhibition and talk for employees’ benefit and compensation;

Blood donation drives;

Safety handling of chemicals by National Institute of

Occupational Safety and Health (“NIOSH”);

Training for unsafe acts and workplace conditions by

Department of Occupational Safety and Health (“DOSH”);

Training for respirator fit test and hearing protection by 3M; and

Exhibition and talk for unsafe acts and conditions on the road by
Jabatan Keselamatan Jalan Raya (“JKJR”).

Furthermore, an in-house clinic was set up for the benefit of CTRM

employees. This allows CTRM to provide faster on-site medical
treatment, reduces cost of out-patient treatment and increases staff
productivity.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 149

7. Environment

7.1. Environmental Policy and Management

DRB-HICOM has been proactive and committed to protecting and improving the environment surrounding the Group’s operations.
Sustainable green practices have been embedded within its operations to ensure that business is profitable for the shareholders as well
as have a minimal impact on the environment. Several policies are in place to fortify and strengthen the protection of the environment
in all aspects of its operations. They include the Safety, Health, & Environment (“SHE”) Policy and Enterprise Risk Management Policy.

We are committed to achieve a better environment and are guided by the following regulations:

Environment Quality Act 1974;

Factories and Machinery Act 1967;
Road Transport Act 1987;
Local Government Act 1976;
Street, Drainage and Building Act 1974; and
Fire Services Act 1988

DRB-HICOM’s Enterprise Risk Management (“ERM”) plays a significant role in identifying environmental risks in order to reduce the
environmental impacts from the company’s operations. The environmental risks were measured and prioritised using the
Risk Assessment Matrix with regard to significance and probability of occurrence of the risk. Risk assessment coupled with risk indicators allows
effective measurement and tracking of strategic controls as well as action plans identified in the corporate risk register.

7.2. Energy Consumption and Greenhouse Gas Emission

The total energy consumption of DRB-HICOM Group of Companies in 2016 was 384 million kWh, equivalent to 284,544 tonnes CO2.
Chart 4 shows the breakdown of total energy consumed (kWh) based on various sectors, which was collected nationwide covering all
subsidiaries of the Group.

Property, Asset &

Construction
3%

Automotive Services and

76% Education
20%

Group Corporate
Support Services
1%
As at 31 December 2016

Chart 4 : Percentage Distribution of Energy Consumption (kWh)

 DRB-HICOM BERHAD
150 ANNUAL REPORT 2017

The Automotive industry involves equipment and facilities that are energy intensive. The energy consumption of PROTON itself took up 47.2%
of the total energy usage. To mitigate the high energy usage, the PROTON Green Initiatives was established in FY2016 with the objective of
reducing the utility costs for PROTON plants and offices.

Several initiatives have been implemented and are underway in the four main PROTON manufacturing plants. Thus far, the PROTON Green
Initiatives programme has achieved a total electricity bill reduction of RM 10 million in FY2016 and further reduction of RM 5.9 million between
April to December 2016.

Table 2 shows the list of initiatives and achievements attained from the four manufacturing plants of PROTON.

Table 2: Initiatives towards Excellent Cost Savings, Energy Savings and CO2 Reduction

No. Manufacturing Plant On-Going Initiatives Achievements

1 Perusahaan
Otomobil Nasional
Sdn Bhd (PONSB)
Improvement of compressed air operation’s efficiency and Energy saving of 2,465,764 kWh
energy conservation Cost saving of RM 715,000
The compressed air pressure was reduced from 7 bar to 6.3 bar Greenhouse Gas emission
Optimisation of painting shop operation reduction of 1,793 tonnes CO2
Improvement of lighting and air-conditioner operation Energy saving of 1,398 kWh
temperature and hours per car
Awareness campaign (Setup of banner, bunting and signage
across the plants)

2 PROTON Tanjung
Malim Sdn. Bhd.
(PTMSB)
Rectification of compressed air leakages Energy saving of 11,384,816 kWh
During no-production weekend, only utilise 1 compressor Cost saving of RM 3.3 million
instead of 2 units Greenhouse Gas emission
The compressed air pressure was reduced from 7 bar to 6 bar reduction of 8,277 tonnes CO2
The replacement of vortex coolers with force convection fan Energy saving of 1,505 kWh
system for control panels for more useful and efficient heat per car
transfer
Awareness campaign (Setup of banner, bunting and signage
across the plants)

3 PROTON Casting Reschedule of furnace operation and sequencing for Energy saving of 3,471,017 kWh
Plant Maximum Demand charges savings Cost saving of RM 1.46 million
The compressed air supply pressure was reduced from 7 bar Greenhouse Gas emission
to 6.3 bar reduction of 2,523 tonnes CO2
Optimisation of chiller operation schedule Energy saving of 2,546 kWh per
Replacement of metal halide to Light Emitting Diode (LED) tonnes
bulbs for energy saving and reduction of maintenance costs
Awareness campaign (Setup of banner, bunting and signage
across the plants)

4 PROTON Centre of
Excellence (COE)
Optimisation of chiller operation schedule and operation of Energy saving of 1,287,185 kWh
only 1 chiller during weekends Cost saving of RM 469,000
Limitation of number of Air Handling Unit (AHU) operations Greenhouse Gas emission
during weekend and optimisation of indoor temperature reduction of 936 tonnes CO2
operation at 24 ⁰C
A switch of Tariff (C2->C1) and the application of Off Peak
Tariff Rider (OPTR) for Maximum Demand charges savings.
Awareness campaign (Setup of banner, bunting and signage
across the plants)
As at 31 December 2016

DRB-HICOM recognises the risk of climate change and the contribution of the automotive sector towards the emission of greenhouse gases
(GHGs). The Group has implemented various initiatives to reduce its contribution to GHG emissions. The Government of Malaysia is signatory
to the Kyoto Protocol and the GHG reduction initiatives undertaken by the Group are in line with the requirements of the protocol.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 151

7.3.3. Separation @ Source by Alam Flora

7.3. Waste Management
In 2015 and 2016, a total of 940,828 and 882,906 tonnes of waste
7.3.1. Overview of Alam Flora were collected by Alam Flora, respectively. Separation @ Source
(S@S) is a programme established under the enforcement of Act 672
Alam Flora is the country’s leading waste management company and Federalisation of Solid Waste Management. Its objective is to
offers diverse quality services related to the environment including encourage households to separate recyclables and non-recyclables.
integrated facility management, waste management and recycling. It
presently handles more than 2,500 tonnes of solid waste daily. In the
area of recycling, Alam Flora manages 135 tonnes of scrap per day,
equivalent to 42,000 tonnes annually.

7.3.2. Buy Back Centre

The first Buy Back Centre (BBC) in Kuala Lumpur was officially
launched on 11 May 2016. It functions as a one-stop centre to buy
back used items from the public at market price and at the same time
spreading the awareness of recycling. Among the materials that were
collected by BBC are mixed papers and bottles, UHT packaging, iron
cans and scrap, aluminium cans, computers, and used cooking oil.

Chart 5 shows the total waste collected and managed by

Alam Flora together with the types of waste collected via S@S during
the reporting period from April 2016 till December 2016 for Kuala
Lumpur, Putrajaya, and Pahang.

To date, Alam Flora operates in 8 BBCs around Kuala Lumpur and

Putrajaya which have collected a total of 560 metric tonnes since the
first BBC was established.
 DRB-HICOM BERHAD
152 ANNUAL REPORT 2017
Chart 5 : Total Waste Collected and Processed in 2015 and 2016
8. Human Capital Development
8.1. Group Policy and Governance
DRB-HICOM strongly endorses the collective bargaining system
to ensure a mutually beneficial economic and social relationship
between the employers of the Group and trade unions. The
collective agreement helps to clarify the rights and responsibilities
of the Company and its employees, to achieve success for both the
Company and its employees.
Total Union Members in DRB-HICOM Group 25,230
Total Number of Unions 30
Total Companies in DRB-HICOM with Unions 26
As at 31 December 2016
The Whistle Blower policy outlines its commitment towards enabling
employees and other stakeholders to confidently raise concerns
regarding any wrongdoing or malpractice without fear of reprisal.
This policy promotes a culture of honesty, ethical behaviour, good
corporate governance and transparency within the Group and
ensures there is no discrimination or harassment.
Corruption is unacceptable to the organisation and the Group strictly
forbids bribes to be offered or accepted by any party. DRB-HICOM
introduced a Code of Ethics and Business Practice as a policy and
this was communicated clearly to all its employees. This serves as
guidelines for employees on how to conduct business in a
professional manner at all times and to engage with stakeholders
in a transparent, appropriate and fair manner. The Code covers
pertinent issues including tardiness, honesty, integrity and
relationship between employees and stakeholders.
Team-building sessions and induction programmes continuously
highlight the importance of Integrity, Decorum, Innovation,
Excellence, Transparency, Teamwork and Quality. The “No Gift
Policy” in DRB-HICOM prohibits employees from receiving gifts from
external parties. This practice exhibits and upholds the values of
dignity, integrity, and professionalism in all its business dealings.
DRB-HICOM also engages with the Malaysian Anti-Corruption
Commission (MACC) to mitigate corruption across the Group.
8.2. Human Capital of the Group
Standing as one of Malaysia’s leading conglomerates, DRB-HICOM
believes in the strength, commitment and quality of its 58,110
employee workforce. With regard to the Malaysian Labour Law,
DRB-HICOM complies with the Minimum Wages Order, 2016 and takes
a strong stance against child and forced labour and other improper
labour practices, in accordance with the Malaysian Employment
Act 1955.
The Group strongly practices and values diversity and inclusiveness
where all employees are treated fairly regardless of gender and racial
diversity.
Chart 6 shows DRB-HICOM workforce distribution in all business
sectors.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 153

Chart 6 : DRB-HICOM Workforce Distribution

Chart 6.1 : DRB-HICOM Workforce Distribution by Sectors as at 31 December 2016

Workforce Breakdown
by Age Group

Chart 6.2 : DRB-HICOM Workforce Distribution by Age Group as at 31 December 2016

 DRB-HICOM BERHAD
154 ANNUAL REPORT 2017
DRB-HICOM has a comparatively young workforce with 41% of total
workforce below the age of 30 and 30% between the ages of 31 to 40.
We believe in nurturing young top talents within the Group and at the
same time ensuring a sustainable talent pool for our future business
growth.
 
8.3. Gender Diversity
As at 31 December 2016
Chart 7 : Gender Equality in DRB-HICOM
We encourage equal opportunity for all employees without any
gender or racial discrimination. The Group values diversity and
inclusiveness and employees are treated with respect regardless of
gender and racial diversity. From Chart 7 above, female employees
comprises 15% and 26% in upper and middle management
respectively while female workforce in the lower management roles
stood at 41%. However, as the nature and work scope in the
non-executive roles are mostly labour intensive, they are mostly
occupied by male employees.
Group Human Capital acknowledges the contribution brought on
by the female employees in DRB-HICOM by organising various
activities in conjunction with International Women’s Day on an
annual basis. One of the campaigns conducted was Pinktober Day on
26 October 2016 in conjunction with the Breast Cancer Awareness
Month. Group Human Capital collaborated with Pink Ribbon Deeds
(PRIDE) Foundation to raise awareness on breast cancer through
talks by certified medical practitioners. On Pinktober Day, employees
were also urged to show their support by wearing pink attire and pink
ribbons.
Other activities held during the reporting period include health
and wellness care talk, seminar on child autism and special needs
awareness for children.
8.4. Special Needs Staff under DRB-HICOM
As at 31 December 2016
At present, DRB-HICOM employs a total of 91 employees with
special needs throughout our Group. With special needs employees
and other stakeholders in mind, dedicated car parks and ramp
facilities have been provided at all entry points in most of the
buildings where DRB-HICOM businesses operate in.
This makes it more convenient for employees and stakeholders with
special needs. Accessible-friendly toilets are also built on each floor
to accommodate employees who are physically challenged.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 155

8.5. Talent and Competency Building

The Group has a comprehensive talent development programme with the aim to create talent pools at all levels. The initiative consists of a
series of programmes starting from Management Trainee Programme for fresh graduates up until the top level Leadership Development
Programme which aims to groom DRB-HICOM’s future leaders. Chart 8 below shows the various talent programmes devised by Group
Human Capital across the Group.

Chart 8 : DRB-HICOM Talent Development Programme

Please refer to page 135 for the results of the programmes conducted in this financial year.
 DRB-HICOM BERHAD
156 ANNUAL REPORT 2017

As at 31 December 2016

The employees’ career development programme is important for both employees and the future of DRB-HICOM. In FY2017, we have invested
RM16.8 million in training and education and this amount enabled us to provide more than 1 million quality training hours. This translates to
an average of 17 training hours per employee. The goal is to help them become better workers and to equip them with the skills they need
to manage themselves and their teams.

Investment in Training Total Staff Training

and Development Hours

FY2016 RM 12.6 Million 1,195,496

FY2017 RM 16.8 Million 1,023,606

As at 31 December 2016

9.
Local Community Engagement and Social Contributions
Umrah Packages for Paralympic Medal Winners
DRB-HICOM sponsored the Malaysian Paralympians with a 12
days Umrah Package as recognition for their performance at Rio
Paralympics 2016. The 23 member group consists of the Paralympians
and their family members, media and accompanying officers from
MSN.
Developing Skills for the Underprivileged
DRB-HICOM initiated the Heart Project, a programme aimed at
developing the skills of underprivileged children with the objective of
nurturing the nation’s youth in creating a better future for students
through education. Underprivileged children were offered
scholarships to Akademi Saga, a vocational training academy to equip
these youths with employable skills. DRB-HICOM also sponsored
four SBJK students with full scholarships in Automotive Workshop
Practices & Engine Cooling System Rectification Work at the Akademi
Saga. It is a 12-month course in automotive training which focuses
on nurturing future technicians by providing them with essential
technical skills.
DRB-HICOM BERHAD
ANNUAL REPORT 2017 157
Safety and Health Campaign
A Safety and Health campaign was organised for Warga to conduct
free dental screening, internal body toxicity analysis, spine and
joint analysis, bone density check, heart diseases and back pain
consultation in the two day event. The National Blood Centre and
133 volunteers from DRB-HICOM Berhad together with neighbouring
subsidiary companies registered for the blood donation and managed
to collect 54.85 pints of blood for the public.
Road Safety Campaign and Vehicles Inspections
PUSPAKOM collaborated with the Road Safety Department on Road
Safety Campaigns in conjunction with the festive season to share
information with the local communities on the importance of road
safety. PUSPAKOM also offered free voluntary vehicle inspection to
private vehicle owners prior to Hari Raya Aidilfitri, having successfully
inspected a total of 1,383 vehicles in 2016.
 DRB-HICOM BERHAD
158 ANNUAL REPORT 2017

Sahabat DRB-HICOM Qiamullail Bersama Mualaf

Sahabat DRB-HICOM is our very own volunteer programme,
organised to instil the spirit of volunteerism amongst our staff to
improve the life of those in need. These volunteer programmes not
only reflect positively on the Group, it also provides an avenue for our
staff to develop new skills and improve socialisation by helping those
in need via social work in various communities.
The programme is to instil the spirit of togetherness and forge
better relationships amongst our Warga and the Mualaf community
and bring us closer to Allah SWT in the spirit of the holy month of
Ramadhan.

In 2016, 171 sahabat DRB-HICOM contributed 1,768 volunteering

hours in programmes such as Bubur Lambuk Sahabat DRB-HICOM,
Ziarah Ramadan, Aidilfitri bersama Al-Fikrah, Deepavali Celebration,
Chinese New Year Celebration, Ziarah Ramadan and many more.

DRB-HICOM Back To School Programme

The Back to School Programme celebrates its second anniversary
this year, continuing its objective to provide financial aid for selected
Warga DRB-HICOM and schools for the upcoming school term.
For year 2016/17, 68 Warga (with income below RM3,000) with a
minimum of two schooling children were selected to receive the aid,
which amounted to 169 students. On top of that, 70 children from
Ziarah Ramadhan SJKT Glenmarie also received the aid.
This programme is part of Program Harapan which was first
organised in 2013. The programme includes a shopping trip and buka
puasa event with less fortunate children. The tradition continues
this year as we visited 40 Asnaf families in Pekan and Selangor and
provided assistance in the form of groceries and cash. The recipients
are nominated by the Lembaga Zakat Selangor and Majlis Ugama
Islam Pahang.
This page has been intentionally left blank.
 DRB-HICOM BERHAD
162 ANNUAL REPORT 2017

DIRECTORS’ REPORT
DIRECTORS' REPORT

The Directors of DRB-HICOM Berhad hereby submit their report together with the audited financial
statements of the Group and of the Company for the financial year ended 31 March 2017.

PRINCIPAL ACTIVITIES

The Company is an investment holding company with investments in the automotive (including defence and
composite manufacturing), services (including integrated logistics, banking and postal businesses) and
property, asset and construction segments. There was no significant change in these activities during the
financial year.

Information relating to the subsidiary companies, joint ventures and associated companies are described in
Note 3 to the financial statements.

FINANCIAL RESULTS

Group Company
RM’000 RM’000

Net (loss)/profit for the financial year (260,402) 356,519

Attributable to:
Owners of the Company (454,401) 276,864
Holders of Perpetual Sukuk 79,655 79,655
Holders of Redeemable Convertible Cumulative Preference Shares 40,685 -
Non-controlling interest 73,659 -
(260,402) 356,519

DIVIDENDS

Dividends paid and proposed by the Company since 31 March 2016 was as follows:

RM’000
In respect of the financial year ended 31 March 2016:
Single tier first and final dividend of 2.0 sen per share, paid on 1 November 2016 38,665

The Directors recommend the payment of a single tier first and final dividend of 1.0 sen per share amounting
to RM19,332,371 in respect of the financial year ended 31 March 2017, subject to the approval of
shareholders at the forthcoming Annual General Meeting of the Company.

RESERVES AND PROVISIONS

All material transfers to or from reserves and provisions during the financial year are disclosed in the
financial statements.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 163

DIRECTORS' REPORT (Continued)

SIGNIFICANT AND SUBSEQUENT EVENTS

The details of significant and subsequent events are as disclosed in Notes 57 and 58 to the financial
statements.

DIRECTORS OF THE COMPANY

The Directors of the Company who have held office during the period since the beginning of the financial
year to the date of this report are:

Brig. Gen. (K) Tan Sri Dato’ Sri (Dr.) Haji Mohd (Chairman)
Khamil bin Jamil
Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar (Group Managing Director)
Datuk Ooi Teik Huat
Dato’ Ibrahim bin Taib
Dato’ Siti Fatimah binti Daud (Appointed on 1 April 2016)
Datuk Idris bin Abdullah @ Das Murthy (Appointed on 1 January 2017)
Dato’ Abdul Rahman bin Ahmad* (Appointed on 16 May 2016 and retired on
29 September 2016)
Datuk Haji Abdul Rahman bin Mohd Ramli* (Retired on 29 September 2016)
Ong Ie Cheong (Resigned on 1 January 2017)
Tan Sri Marzuki bin Mohd Noor (Resigned on 1 January 2017)

* The Directors did not seek for re-election at the Annual General Meeting on 29 September 2016.

DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, particulars of interests of Directors of the Company 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

As at As at
1 April 2016 Acquired Disposed 31 March 2017

Holding Company
Etika Strategi Sdn. Bhd.

Direct interest
Brig. Gen. (K) Tan Sri Dato’ Sri
(Dr.) Haji Mohd Khamil bin
Jamil 30,000 - - 30,000

Other than as disclosed above, according to the Register of Directors’ Shareholdings, none of the other
Directors of the Company 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.
 DRB-HICOM BERHAD
164 ANNUAL REPORT 2017

DIRECTORS’ REPORT (Continued)

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangement 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 7 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.

DIRECTORS’ INDEMNITY

Directors’ liability insurance is in place to protect the Directors of the Company against potential costs and
liabilities arising from claims brought against the Directors.

DIRECTORS OF THE SUBSIDIARY COMPANIES

The following is a list of Directors of the subsidiary companies who have held office during the period since
the beginning of the financial year to the date of this report:

Brig. Gen. (K) Tan Sri Dato’ Sri (Dr.) Haji Mohd Tengku Dato’ Seri Hasmuddin bin Tengku Othman
Khamil bin Jamil
Dato’ Sri Syed Faisal Albar bin Syed A.R. Albar Tan Sri Dato’ Dr Mohd Munir bin Abdul Majid
Datuk Mohamed Razeek bin Md Hussain Tan Sri Dato’ Seri Mohd Zahidi bin Haji Zainuddin
Maricar
Dato’ Abdul Harith bin Abdullah Gen. Tan Sri Dato’ Sri Roslan bin Saad
Dato’ Khalid bin Abdol Rahman Dato’ Sri Che Khalib bin Mohamad Noh
Dato’ Chan Choy Lin Dato’ Azmi bin Abdullah
Dato’ Haji Mohd Redza Shah bin Abdul Wahid Dato’ Haji Kamil Khalid Ariff
Dato’ Ahmad Fuaad bin Mohd Kenali Dato’ Mohamad bin Saif @ Saib
Dato’ Md Radzaif bin Mohamed Dato’ Haji Mohd Izani bin Ghani
Dato’ Haji Mohd Zain bin Haji Hassan Dato’ Wong Lum Kong
Dato’ Mohd Shukrie bin Mohd Salleh* Dato’ Lim Tiong Boon
Dato’ Bahar bin Ahmad Dato’ Hilmi bin Mohd Noor
Dato’ Haji Amril bin Samsudin Dato’ Eshah binti Meor Suleiman*
Dato’ Azlan bin Shahrim* Dato’ Ibrahim Mahaludin bin Puteh*
Amalanathan Thomas Dato’ Abdul Hamid bin Sh Mohamed*
Aminah binti Othman Dato’ Sri Dr. Mohmad Isa bin Hussain*
Hamizan bin Osman Dato’ Zainudin bin Che Din
Rohime bin Shafie Dato’ Sri Solah bin Mat Hassan
Ainol Azmil bin Abu Bakar Dato’ Dr. Adnan bin Alias
Mohammed Shukor bin Ismail Datuk Kamarudin bin Md Ali
Mohd Aslam Khan bin Farikullah Datuk Puteh Rukiah binti Abd Majid*
Mohd Khalid bin Yusof Datuk Lee Chin Yong
Shuhaida binti Nun Dr. Azura binti Othman
Muhammad Noor bin Abd Aziz @ Hashim* Dr. Hans Eggenberger
PeerMohamed bin Ibramsha Lim How Ghee
Azman Hanafi bin Abdullah Rin Nan Lun
Fakihah binti Azahari Rin Nan Yoong
Mohamad Fazly bin Hassan Ho Chun Foh
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 165

DIRECTORS’ REPORT (Continued)

DIRECTORS OF THE SUBSIDIARY COMPANIES (Continued)

The following is a list of Directors of the subsidiary companies who have held office during the period since
the beginning of the financial year to the date of this report: (Continued)

Koon Chee Wah Kamil Ahmad Merican

Tung Kok Sing Ng Kong Chin
Chai Lai Sim Tang Hon Shan
Ain bin Saim David Chan Mun Wai
Vipin Kumar Agrawal Lim Hwa Yu*
Muhammad Aris bin Anuar Tay Inn Meng
Matsuo Hirokazu Hasnul bin Haniff*
Shoichi Araya Martin Erdmann Schuler
Gerhard Meier David Castell Arenillas
Chong Hock Lye Richard Hill
Adi Asri bin Baharom Jonathan Garwood
Syed Alwi bin Mohamed Sultan Michael Boore
Nor Azizan bin Tarja @ Tarjo* Christopher Michael Adams
Elias bin Effendy*
Wong Yoke Kow (Alternate Director to Dato’ Wong Lum Kong)
Dato’ Siti Fatimah binti Daud (Appointed on 1 April 2016)
Yohan bin Mokhtar (Appointed on 1 April 2016)
Naoki Kawaguchi (Appointed on 12 April 2016)
Shaharul Farez bin Hassan (Appointed on 25 July 2016)
Norahmadi bin Sulong (Appointed on 1 August 2016)
Varsha Chandukar (Appointed on 30 August 2016)
Amran bin Mohd Tomin (Appointed on 17 November 2016)
Loo Hon Kok (Appointed on 21 November 2016)
Azwan bin Sulaiman (Appointed on 21 November 2016)
Ahmad Suhaimi bin Endut (Alternate Director to Dato’ Sri (Appointed on 7 December 2016)
Dr. Mohmad Isa bin Hussain)*
Datuk Idris bin Abdullah @ Das Murthy (Appointed on 1 January 2017)
Toshihide Saito (Alternate Director to Shoichi Araya) (Appointed on 1 January 2017)
Ghazali bin Haji Darman (Appointed on 4 January 2017)
Abd Aziz bin Miskon (Appointed on 13 January 2017)
Mazatul ‘Aini Shahar binti Abdul Malek Shahar (Appointed on 21 February 2017)
Abdul Rashid bin Musa (Appointed on 21 February 2017)
Takeshi Mishina (Appointed on 20 March 2017)
Dato’ Mohd Fuad bin Abd Latiff (Appointed on 1 July 2017)
Yoshitaka Tamura (Resigned on 1 April 2016)
Bahaman bin Kamaruzzaman (Resigned on 2 April 2016)
Dato’ Hisham bin Othman (Resigned on 15 April 2016)
Che Akhma bin Ismail (Resigned on 24 June 2016)
Norzahid bin Mohd Zahudi (Resigned on 24 June 2016)
Tan Hui Sheng (Resigned on 30 June 2016)
Nasharuddin bin Zaini (Alternate Director to Datuk (Resigned on 25 July 2016)
Mohamed Razeek bin Md Hussain Maricar)
Sharifatul Hanizah binti Said Ali (Resigned on 1 August 2016)
Datuk Ir Kamarulzaman bin Haji Zainal (Resigned on 15 August 2016)
Kaye Amies (Resigned on 30 August 2016)
Osamu Fujimoto (Resigned on 1 September 2016)
Datuk Haji Abdul Rahman bin Mohd Ramli (Resigned on 29 September 2016)
Brian John Collier (Resigned on 30 September 2016)
Abdul Jabar bin Abdul Majid (Resigned on 12 October 2016)
Suzana binti Mohd Drus (Resigned on 31 December 2016)
 DRB-HICOM BERHAD
166 ANNUAL REPORT 2017

DIRECTORS’ REPORT (Continued)

DIRECTORS OF THE SUBSIDIARY COMPANIES (Continued)

The following is a list of Directors of the subsidiary companies who have held office during the period since
the beginning of the financial year to the date of this report: (Continued)

Tan Sri Marzuki bin Mohd Noor (Resigned on 1 January 2017)

Ong Ie Cheong (Resigned on 1 January 2017)
Yukihiro Kakishima (Resigned on 1 January 2017)
Azhar bin Ahmad (Resigned on 13 January 2017)
Mashitah binti Osman (Resigned on 14 February 2017)
Zul Bahari bin Abu Bakar (Resigned on 17 February 2017)
Hwang Chee Leong (Resigned on 17 February 2017)
Wong Teng Joo (Resigned on 17 February 2017)
Syed Mohamad Jamil bin Syed Ahmad (Resigned on 28 February 2017)
Yoshihiro Yamazaki (Resigned on 20 March 2017)
Dato’ Syed Mohamad bin Syed Murtaza (Resigned on 6 April 2017)
Mohd Rani Hisham bin Samsudin (Resigned on 25 April 2017)
Choo Chun Kui (Resigned on 8 May 2017)

* By virtue of Pos Malaysia Berhad became a subsidiary company of the Group.

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the statements of comprehensive income and statements of financial position were made out, the
Directors took reasonable steps:

(a) 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

(b) to ensure that any current assets which were unlikely to realise their values as shown in the
accounting records of the Group and of the Company in the ordinary course of business 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) which would render the amounts written off for bad debts or the amounts of the allowance for
doubtful debts made in the financial statements of the Group and of the Company inadequate to any
substantial extent;

(b) which would render the values attributed to current assets in the financial statements of the Group
and of the Company misleading; and

(c) which have arisen which would 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
12 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.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 167

DIRECTORS’ REPORT (Continued)

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (Continued)

At the date of this report, there does not exist:

(a) 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

(b) 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 of the Group and of the Company which would render any amount stated in
the financial statements misleading.

In the opinion of the Directors, other than as disclosed in the financial statements:

(a) the results of the Group’s and of the Company’s operations during the financial year were not
substantially affected by any item, transaction or event of a material and unusual nature; and

(b) 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.

AUDITORS

The auditors’ remuneration are disclosed in Note 6 to the financial statements.

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 10 July 2017.

BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
Chairman

DATO’ SRI SYED FAISAL ALBAR BIN SYED A.R. ALBAR

Group Managing Director
 DRB-HICOM BERHAD
168 ANNUAL REPORT 2017

STATEMENTS OF COMPREHENSIVE INCOME

STATEMENTSFor The Financial Year
OF COMPREHENSIVE Ended
INCOME 31THE
FOR March 2017 YEAR ENDED 31 MARCH 2017
FINANCIAL

Group Company
2017 2016 2017 2016
(Restated)
Note RM’000 RM’000 RM’000 RM’000

Revenue 4 12,058,334 12,172,941 897,315 399,434

Cost of sales 5 (10,556,030) (11,001,547) - -
Gross profit 1,502,304 1,171,394 897,315 399,434
Other income
- gain on disposals of subsidiary
companies (net) 52(i) 398,257 - - -
- others 439,248 469,483 15,437 8,207
Selling and distribution costs (343,907) (378,761) - -
Administrative expenses (1,404,943) (1,601,500) (32,154) (52,028)
Other expenses
- loss on re-measurement of the
previously held equity interest in
an associated company at its
acquisition-date fair value 6 (130,221) - - -
- others (561,499) (327,717) (363,074) (590,972)
Finance costs 9 (370,905) (382,094) (158,708) (151,215)
Share of results of joint ventures (net
of tax) 19(d) 9,575 22,059 - -
Share of results of associated
companies (net of tax) 20(h) 239,907 205,006 - -
(Loss)/profit before taxation 6 (222,184) (822,130) 358,816 (386,574)
Taxation 10 (38,218) (49,491) (2,297) (2,698)
Net (loss)/profit for the financial year (260,402) (871,621) 356,519 (389,272)

Other comprehensive (loss)/income

Items that will not be reclassified
subsequently to profit or loss:
Net gain/(loss) on valuation of post-
employment benefit obligations 4,376 (5,478) - -
Fair value adjustment on investment
properties - 528 - -
Items that will be reclassified
subsequently to profit or loss:
Net (loss)/gain on fair value
changes of investment securities:
available-for-sale (11,560) 10,804 - -
Currency translation differences of
foreign subsidiary companies (3,644) 54,857 - -

Sub-total carried forward (10,828) 60,711 - -

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 169

STATEMENTS
STATEMENTSOFOFCOMPREHENSIVE
COMPREHENSIVEINCOME
INCOMEFOR
FORTHE
THEFINANCIAL
FINANCIALYEAR
YEARENDED
ENDED3131MARCH
MARCH2017
2017
(Continued)
(Continued)

Group
Group Company
Company
2017
2017 2016
2016 2017
2017 2016
2016
(Restated)
(Restated)
Note
Note RM’000
RM’000 RM’000
RM’000 RM’000
RM’000 RM’000
RM’000

Other
Othercomprehensive
comprehensive (loss)/income
(loss)/income
(Continued)
(Continued)
Sub-total
Sub-totalbrought forward
brought forward (10,828)
(10,828) 60,711
60,711 - - - -
Reclassification
Reclassificationadjustments:
adjustments:
Transfer of reserve
Transfer of reserve ofof
aa foreign subsidiary
foreign subsidiary
company
company toto
profit oror
profit loss
lossupon
upondisposal
disposal (37,387)
(37,387) - - - - - -
Transfer of reserve of an associated
Transfer of reserve of an associated
company
company toto
profit oror
profit loss
lossupon
upondisposal
disposal - - (4,604)
(4,604) - - - -
Other
Othercomprehensive
comprehensive (loss)/income
(loss)/income forfor
the
the
financial year
financial year(net ofof
(net tax)
tax) (48,215)
(48,215) 56,107
56,107 - - - -

Total
Totalcomprehensive
comprehensive(loss)/income
(loss)/incomeforfor
the
the
financial
financialyear
year (308,617)
(308,617) (815,514)
(815,514) 356,519
356,519 (389,272)
(389,272)

Net
Net(loss)/profit
(loss)/profitforfor
the
thefinancial
financialyear
year
attributable
attributableto:to:
Owners
Ownersofof the
theCompany
Company (454,401)
(454,401) (992,763)
(992,763) 276,864
276,864 (466,137)
(466,137)
Holders
Holdersofof
Perpetual
PerpetualSukuk
Sukuk 79,655
79,655 76,865
76,865 79,655
79,655 76,865
76,865
Holders
HoldersofofRedeemable
RedeemableConvertible
Convertible
Cumulative
CumulativePreference
PreferenceShares
Shares 40,685
40,685 - - - - - -
Non-controlling
Non-controllinginterest
interest 73,659
73,659 44,277
44,277 - - - -
(260,402)
(260,402) (871,621)
(871,621) 356,519
356,519 (389,272)
(389,272)

Total
Totalcomprehensive
comprehensive (loss)/income forfor
(loss)/income the
the
financial
financialyear attributable
year attributableto:to:
Owners
Ownersofof the
theCompany
Company (500,127)
(500,127) (941,273)
(941,273) 276,864
276,864 (466,137)
(466,137)
Holders
Holdersofof
Perpetual
PerpetualSukuk
Sukuk 79,655
79,655 76,865
76,865 79,655
79,655 76,865
76,865
Holders
HoldersofofRedeemable
RedeemableConvertible
Convertible
Cumulative
CumulativePreference
PreferenceShares
Shares 40,685
40,685 - - - - - -
Non-controlling
Non-controllinginterest
interest 71,170
71,170 48,894
48,894 - - - -
(308,617)
(308,617) (815,514)
(815,514) 356,519
356,519 (389,272)
(389,272)

Basic
Basicand
anddiluted loss
diluted lossper
pershare
share(sen)
(sen) 1212 (23.50)
(23.50) (51.35)
(51.35)

The notes
The
The setset
notes
notes out on
setout pages
outon 182
onpages
pages toto350
2121 to189form
189form an
form integral
anan part
integral ofofthe
part
integral part ofthefinancial
the statements.
financial statements.
financial statements.
 DRB-HICOM BERHAD
170 ANNUAL REPORT 2017

CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017
As At 31 March 2017
2017 2016
(Restated)
Note RM’000 RM’000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 13 6,352,474 5,708,050
Concession assets 14 217,152 227,051
Prepaid lease properties 15 50,813 52,024
Investment properties 16 246,889 617,955
Land held for property development 17(a) 1,182,226 985,141
Joint ventures 19 413,826 451,023
Associated companies 20 756,543 1,364,616
Intangible assets 21 1,812,523 1,680,322
Deferred tax assets 22 147,192 91,719
Investment securities: financial assets at fair value through
profit or loss 23(a)
- Banking 197,208 186,355
Investment securities: available-for-sale 23(b)
- Banking 5,040,929 5,058,434
- Non-banking 46,153 46,203
Investment securities: held-to-maturity 23(c)
- Banking 142,168 140,607
Trade and other receivables 29 264,144 104,589
Other assets 24 516 441
Banking related assets
- Financing of customers 25 10,772,103 10,600,485
- Statutory deposit with Bank Negara Malaysia 26 698,636 703,261
28,341,495 28,018,276

CURRENT ASSETS
Assets held for sale 27 4,500 10,819
Inventories 28 2,285,452 1,760,627
Property development costs 17(b) 140,186 284,145
Trade and other receivables 29 3,859,027 4,274,409
Tax recoverable 198,533 243,000
Investment securities: financial assets at fair value through
profit or loss 23(a)
- Non-banking 175 -
Investment securities: available-for-sale 23(b)
- Banking 1,090,487 641,732
Banking related assets
- Cash and short-term funds 32 1,049,925 1,069,101
- Financing of customers 25 3,939,713 3,726,891
Short term deposits 30 1,332,531 1,420,553
Cash and bank balances 31 1,544,331 550,999
Derivative assets 33 61,494 40,951
15,506,354 14,023,227

TOTAL ASSETS 43,847,849 42,041,503

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 171

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017 (Continued)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017 (Continued)
2017 2016
(Restated)
2017 2016
Note RM’000 RM’000
(Restated)
EQUITY AND LIABILITIES Note RM’000 RM’000
EQUITY
EQUITY AND LIABILITIES
Share capital
EQUITY 34 1,740,302 1,719,601
Reserves
Share capital 34 4,333,727
1,740,302 4,822,624
1,719,601
Equity attributable to Owners of the Company
Reserves 6,074,029
4,333,727 6,542,225
4,822,624
Perpetual
Equity Sukuk to Owners of the Company
attributable 35 1,051,839
6,074,029 1,051,859
6,542,225
Redeemable
Perpetual SukukConvertible Cumulative Preference Shares 36
35 1,289,550
1,051,839 1,051,859 -
Non-controlling
Redeemable interestCumulative Preference Shares
Convertible 36 1,723,097
1,289,550 908,359
-
TOTAL EQUITYinterest
Non-controlling 10,138,515 8,502,443
1,723,097 908,359
TOTAL EQUITY 10,138,515 8,502,443
NON-CURRENT LIABILITIES
Deferred income
NON-CURRENT LIABILITIES 37 151,621 119,690
Long
Deferredterm borrowings
income 38
37 4,105,407
151,621 4,303,493
119,690
Provision
Long for liabilities and charges
term borrowings 39
38 90,556
4,105,407 125,204
4,303,493
Provision
Provision forforliabilities
concession and assets
charges 40
39 138,809
90,556 103,841
125,204
Post-employment benefit
Provision for concession assets obligations 41
40 37,741
138,809 44,033
103,841
Deferred tax liabilities
Post-employment benefit obligations 22
41 129,375
37,741 66,335
44,033
Bankingtax
Deferred related liabilities
liabilities 22 129,375 66,335
- Deposits
Banking related from customers
liabilities 42 418,615 66,987
5,072,124
418,615 4,829,583
- Deposits from customers 42 66,987
CURRENT LIABILITIES 5,072,124 4,829,583
DeferredLIABILITIES
CURRENT income 37 48,410 64,570
Trade and
Deferred income other payables 43
37 6,420,456
48,410 6,155,527
64,570
Provision
Trade for liabilities
and other payables and charges 39
43 274,993
6,420,456 283,792
6,155,527
Provision for liabilities and assets
Provision for concession charges 40
39 6,146
274,993 25,214
283,792
Post-employment benefit
Provision for concession assets obligations 41
40 495
6,146 477
25,214
Bank borrowingsbenefit obligations
Post-employment 4144 495 477
Bank- Bank overdrafts
borrowings 44 6,511 21,462
- -Bank
Othersoverdrafts 2,186,391
6,511 2,546,305
21,462
Tax payable
- Others 78,815
2,186,391 15,514
2,546,305
Banking
Tax payable related liabilities 78,815 15,514
- Deposits
Banking related from customers
liabilities 42 18,979,279 19,026,668
- Deposits and placements of banks and other financial
- Deposits from customers 42 18,979,279
561,654 19,026,668
institutions 45 442,252
- Deposits and placements of banks and other financial
- Bills and acceptances payable
institutions 46
45 9,196
561,654 29,350
442,252
Derivative
- Bills and liabilities
acceptances payable 33
46 64,864
9,196 98,346
29,350
28,637,210 28,709,477
Derivative liabilities 33 64,864 98,346
TOTAL LIABILITIES 28,637,210
33,709,334 28,709,477
33,539,060
TOTAL LIABILITIES 33,709,334 33,539,060
TOTAL EQUITY AND LIABILITIES 43,847,849 42,041,503
TOTAL EQUITY AND LIABILITIES 43,847,849 42,041,503

The notes set out on pages 182 to 350 form an integral part of the financial statements.

The notes set out on pages 21 to 189 form an integral part of the financial statements.
 DRB-HICOM BERHAD
172 ANNUAL REPORT 2017

COMPANY STATEMENT OF
FINANCIAL POSITION
As At 31 March
COMPANY STATEMENT 2017 POSITION AS AT 31 MARCH 2017
OF FINANCIAL

2017 2016
Note RM’000 RM’000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 13 120 371
Investment properties 16 130,654 136,355
Subsidiary companies 18 8,393,610 8,118,732
Joint ventures 19 4,686 4,686
Associated companies 20 61,170 676,440
8,590,240 8,936,584

CURRENT ASSETS
Trade and other receivables 29 1,223,107 1,146,431
Short term deposits 30 223,771 239,534
Cash and bank balances 31 33,707 11,909
1,480,585 1,397,874
TOTAL ASSETS 10,070,825 10,334,458

EQUITY AND LIABILITIES

EQUITY
Share capital 34 1,740,302 1,719,601
Reserves 3,921,988 3,704,490
Equity attributable to Owners of the Company 5,662,290 5,424,091
Perpetual Sukuk 35 1,051,839 1,051,859
TOTAL EQUITY 6,714,129 6,475,950

NON-CURRENT LIABILITIES
Long term borrowings 38 1,538,388 1,405,632
Deferred tax liabilities 22 647 1,278
1,539,035 1,406,910

CURRENT LIABILITIES
Trade and other payables 43 1,569,910 1,741,705
Bank borrowings - Others 44 245,631 708,694
Tax payable 2,120 1,199
1,817,661 2,451,598

TOTAL LIABILITIES 3,356,696 3,858,508

TOTAL EQUITY AND LIABILITIES 10,070,825 10,334,458

The notes set out on pages 182 to 350 form an integral part of the financial statements.
 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For The Financial Year Ended 31 March 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017

Redeemable
Non-distributable
Convertible
Cumulative
Equity Preference
Share Merger Currency Available- Other attributable to Perpetual Shares Non-
Capital Share Reserve Translation for-sale Reserves Retained Owners of the Sukuk (“RCCPS”) controlling
(Note 34) Premium (Note 47) Differences Reserve (Note 48) Earnings Company (Note 35) (Note 36) Interest Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2017
At 1 April 2016 1,719,601 20,701 1,000,039 (43,631) 6,749 367,638 3,471,991 6,543,088 1,051,859 - 908,342 8,503,289
Prior year’s adjustments 51(i)(f) - - - - - - (863) (863) - - 17 (846)
As restated 1,719,601 20,701 1,000,039 (43,631) 6,749 367,638 3,471,128 6,542,225 1,051,859 - 908,359 8,502,443
Transfer of share premium
on 31 January 2017 20,701 (20,701) - - - - - - - - - -
Net (loss)/profit for the
financial year - - - - - - (454,401) (454,401) 79,655 40,685 73,659 (260,402)
Other comprehensive
(loss)/income for the
financial year, net of tax - - - (42,291) (8,107) 4,672 - (45,726) - - (2,489) (48,215)
Total comprehensive
(loss)/income for the
financial year - - - (42,291) (8,107) 4,672 (454,401) (500,127) 79,655 40,685 71,170 (308,617)
Transactions with Owners
Net issuance of RCCPS - - - - - - - - - 1,248,865 - 1,248,865
Distribution to holders of
Perpetual Sukuk - - - - - - - - (79,675) - - (79,675)
Disposals of subsidiary
companies 52(i) - - (1,965) - - - 1,965 - - - (27,185) (27,185)
Sub-total carried forward 1,740,302 - 998,074 (85,922) (1,358) 372,310 3,018,692 6,042,098 1,051,839 1,289,550 952,344 9,335,831
DRB-HICOM BERHAD
ANNUAL REPORT 2017
173
 174
DRB-HICOM BERHAD
ANNUAL REPORT 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017 (Continued)

Non-distributable Redeemable
Convertible
Cumulative
Equity Preference
Share Merger Currency Available- Other attributable to Perpetual Shares Non-
Capital Share Reserve Translation for-sale Reserves Retained Owners of the Sukuk (“RCCPS”) controlling
(Note 34) Premium (Note 47) Differences Reserve (Note 48) Earnings Company (Note 35) (Note 36) Interest Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2017 (Continued)
Sub-total brought forward 1,740,302 - 998,074 (85,922) (1,358) 372,310 3,018,692 6,042,098 1,051,839 1,289,550 952,344 9,335,831
Effect on deconsolidation of
subsidiary companies
under creditors’ voluntary
winding up - - 214,201 - - 660 (215,456) (595) - - (13,849) (14,444)
Effect of changes in
shareholding/assets in
subsidiary companies - - - 1,591 - 81,072 (11,472) 71,191 - - 299,820 371,011
Effect of change of an
associated company to a
subsidiary company - - - - - (368) 368 - - - 507,426 507,426
Transfer of subsidiary
companies’ reserves - - - - - 46,457 (46,457) - - - - -
Dividend paid to non-
controlling interest - - - - - - - - - - (22,644) (22,644)
First and final dividend in
respect of financial year
ended 31 March 2016 11 - - - - - - (38,665) (38,665) - - - (38,665)

At 31 March 2017 1,740,302 - 1,212,275 (84,331) (1,358) 500,131 2,707,010 6,074,029 1,051,839 1,289,550 1,723,097 10,138,515
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017 (Continued)

Non-distributable
Equity
Share Merger Currency Available- Other attributable to Perpetual Non-
Capital Share Reserve Translation for-sale Reserves Retained Owners of the Sukuk controlling
(Note 34) Premium (Note 47) Differences Reserve (Note 48) Earnings Company (Note 35) Interest Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
2016 (Restated)
At 1 April 2015 1,719,601 20,701 1,000,039 (92,529) (814) 324,688 4,598,808 7,570,494 822,291 959,290 9,352,075

Net (loss)/profit for the financial

year - - - - - - (992,763) (992,763) 76,865 44,277 (871,621)
Other comprehensive
income/(loss) for the financial
year, net of tax - - - 48,898 7,563 (4,971) - 51,490 - 4,617 56,107

Total comprehensive income/(loss)

for the financial year - - - 48,898 7,563 (4,971) (992,763) (941,273) 76,865 48,894 (815,514)

Transactions with Owners

Net issuance of Perpetual Sukuk - - - - - - - - 223,841 - 223,841

Distribution to holders of Perpetual
Sukuk - - - - - - - - (71,138) - (71,138)
Acquisition of a subsidiary company 51(iii) - - - - - - - - - (3,031) (3,031)
Capital repayment to non-controlling
interest of a subsidiary company - - - - - - - - - (86,460) (86,460)
Transfer of a subsidiary company’s
reserves - - - - - 47,921 (47,921) - - - -
Dividend paid to non-controlling
interest - - - - - - - - - (10,334) (10,334)
Final dividend in respect of
financial year ended 31 March
2015 11 - - - - - - (86,996) (86,996) - - (86,996)

At 31 March 2016 1,719,601 20,701 1,000,039 (43,631) 6,749 367,638 3,471,128 6,542,225 1,051,859 908,359 8,502,443

The notes set out on pages 182 to 350 form an integral part of the financial statements.

The notes set out on pages 21 to 189 form an integral part of the financial statements.
DRB-HICOM BERHAD
ANNUAL REPORT 2017
175
 176

COMPANY STATEMENT OF CHANGES IN EQUITY

For The Financial Year Ended 31 March 2017
DRB-HICOM BERHAD
ANNUAL REPORT 2017

COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017

Non-distributable Distributable Equity

Retained attributable to Perpetual
Share Capital Share Merger Reserve Earnings Owners of the Sukuk
(Note 34) Premium (Note 47) (Note 50) Company (Note 35) Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2017
At 1 April 2016 1,719,601 20,701 2,318,321 1,365,468 5,424,091 1,051,859 6,475,950
Transfer of share premium on 31 January 2017 20,701 (20,701) - - - - -
Net profit for the financial year representing total comprehensive income
for the financial year - - - 276,864 276,864 79,655 356,519
Transactions with Owners
Distribution to holders of Perpetual Sukuk - - - - - (79,675) (79,675)
First and final dividend in respect of financial year ended 31 March 2016 11 - - - (38,665) (38,665) - (38,665)

At 31 March 2017 1,740,302 - 2,318,321 1,603,667 5,662,290 1,051,839 6,714,129

2016
At 1 April 2015 1,719,601 20,701 2,318,321 1,918,601 5,977,224 822,291 6,799,515
Net (loss)/profit for the financial year representing total comprehensive
(loss)/income for the financial year - - - (466,137) (466,137) 76,865 (389,272)
Transactions with Owners
Net issuance of Perpetual Sukuk - - - - - 223,841 223,841
Distribution to holders of Perpetual Sukuk - - - - - (71,138) (71,138)
Final dividend in respect of financial year ended 31 March 2015 11 - - - (86,996) (86,996) - (86,996)

At 31 March 2016 1,719,601 20,701 2,318,321 1,365,468 5,424,091 1,051,859 6,475,950

The notes set out on pages 182 to 350 form an integral part of the financial statements.

The notes set out on pages 21 to 189 form an integral part of the financial statements.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 177

STATEMENTS OF CASH FLOWS

For The Financial Year Ended 31 March 2017

STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017

Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING

ACTIVITIES

Net (loss)/profit for the financial year (260,402) (871,621) 356,519 (389,272)
Adjustments for non-cash items:
Allowance for financing of customers 75,778 68,165 - -
Allowance for doubtful debts (net of write backs):
- trade and other receivables 55 24,006 18 -
- project development receivables - 120,500 - -
Amortisation of:
- concession assets 11,819 12,182 - -
- intangible assets 231,386 178,579 - -
- prepaid lease properties 1,393 1,388 - -
Depreciation of property, plant and equipment 667,640 544,742 251 252
Finance costs 370,905 382,094 158,708 151,215
Financing written off 1,689 18,321 - -
Impairment loss of (net):
- intangible assets 55,593 81,473 - -
- investment in subsidiary companies - - 360,154 581,000
- investment in an associated company - - 2,900 530
- investment securities: available-for-sale 16,899 22,825 - -
- property, plant and equipment 8,049 4,355 - -
Inventories written off/down (net of write backs) 17,730 29,659 - -
Loss on re-measurement of the previously
held equity interest in an associated
company at its acquisition-date fair value 130,221 - - -
Provision for concession assets 34,967 31,941 - -
Provision for liabilities and charges (net) 61,218 284,105 - -
Taxation 38,218 49,491 2,297 2,698
Unrealised foreign exchange differences (net) 81,915 (32,996) - -
Write off of:
- intangible assets 71,348 - - -
- property, plant and equipment 3,729 2,805 - -
Amortisation of deferred income (79,125) (59,361) - -
Dividend income:
- subsidiary companies - - (695,159) (182,600)
- joint venture - - (797) (468)
- associated companies - - (110,296) (152,713)
- other investment (1,328) - - -
Sub-total carried forward 1,539,697 892,653 74,595 10,642
 DRB-HICOM BERHAD
178 ANNUAL REPORT 2017

STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017
(Continued)

Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000
CASH FLOWS FROM OPERATING
ACTIVITIES (Continued)

Sub-total brought forward 1,539,697 892,653 74,595 10,642

(Gain)/loss on fair value adjustments of:
- investment properties (15,647) (15,420) (6,416) 8,134
- investment securities: financial assets at
fair value through profit or loss (4,812) - - -
Interest income on:
- short term deposits (57,375) (53,126) (8,207) (6,749)
- subsidiary companies - - (76,970) (50,161)
Marked to market (gain)/loss on derivatives (net) (54,025) 75,519 - -
Net gain on disposals of:
- assets held for sale (4,213) (12,267) - -
- investment properties (68) - (500) -
- investment securities: available-for-sale (17,983) (10,250) - -
- investment securities: financial assets at
fair value through profit or loss (907) (617) - -
- property, plant and equipment (52,339) (9,290) - -
- subsidiary companies (398,257) - - -
Share of results of joint ventures (net of tax) (9,575) (22,059) - -
Share of results of associated companies
(net of tax) (239,907) (205,006) - -

Cash inflow/(outflow) before working

capital changes 684,589 640,137 (17,498) (38,134)
Amounts due from customers on contracts 786,893 (561,652) - -
Amounts due to customers on contracts 120,342 (10) - -
Inter-company balances 4,937 (72,916) 34,569 70,492
Inventories (553,065) 574,849 - -
Property development costs (94,022) (226,723) - -
Trade and other receivables 64,782 602,071 (450) 7,168
Trade and other payables (543,480) 103,324 (8,294) 69,635
Financing of customers (479,812) (1,149,462) - -
Statutory deposit with Bank Negara
Malaysia 4,625 54,460 - -
Deposits from customers 304,239 171,631 - -
Deposits and placements of banks and
other financial institutions 119,402 33,416 - -
Bills and acceptances payable (20,154) (38,373) - -
Sub-total carried forward 399,276 130,752 8,327 109,161
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 179

STATEMENTS
STATEMENTS OF
OF CASH
CASH FLOWS
FLOWS FOR
FOR THE
THE FINANCIAL
FINANCIAL YEAR
YEAR ENDED
ENDED 31
31 MARCH
MARCH 2017
2017
(Continued)
(Continued)

Group
Group Company
Company
2017
2017 2016
2016 2017
2017 2016
2016
(Restated)
(Restated)
RM’000
RM’000 RM’000
RM’000 RM’000
RM’000 RM’000
RM’000

CASH
CASH FLOWS
FLOWS FROM
FROM OPERATING
OPERATING
ACTIVITIES
ACTIVITIES (Continued)
(Continued)

Sub-total
Sub-total brought
brought forward
forward 399,276
399,276 130,752
130,752 8,327
8,327 109,161
109,161
Interest
Interest received
received 57,102
57,102 51,024
51,024 8,930
8,930 6,268
6,268
Dividends
Dividends received
received from:
from:
-- subsidiary
subsidiary companies
companies -- -- 695,159
695,159 182,600
182,600
-- joint
joint ventures
ventures 39,281
39,281 18,556
18,556 797
797 468
468
-- associated
associated companies
companies 134,557
134,557 167,061
167,061 110,296
110,296 152,713
152,713
-- other
other investment
investment 1,328
1,328 -- -- --
Finance
Finance costs
costs paid
paid (355,518)
(355,518) (378,804)
(378,804) (150,844)
(150,844) (145,521)
(145,521)
Taxation
Taxation refunds/(paid),
refunds/(paid), net
net 49,133
49,133 (42,512)
(42,512) (339)
(339) 41,071
41,071
Provision
Provision for
for liabilities
liabilities and
and charges
charges paid
paid (153,201)
(153,201) (83,927)
(83,927) -- --
Deferred
Deferred income
income received
received 95,873
95,873 53,151
53,151 -- --
Post-employment
Post-employmentbenefit
benefitobligations
obligations paid
paid (14,880)
(14,880) (12,502)
(12,502) -- --
Provision
Provision for
for concession
concession assets
assets paid
paid (20,987)
(20,987) (3,599)
(3,599) -- --
Net
Net cash
cash inflow/(outflow)
inflow/(outflow) from
from operating
operating
activities
activities 231,964
231,964 (100,800)
(100,800) 672,326
672,326 346,760
346,760

CASH
CASH FLOWS
FLOWS FROM
FROM INVESTING
INVESTING
ACTIVITIES
ACTIVITIES

Acquisitions
Acquisitions of
of investment
investment securities
securities by
by aa
banking subsidiary
banking subsidiary company
company (8,931,887)
(8,931,887) (6,561,266)
(6,561,266) -- --
Acquisition/subscription
Acquisition/subscription of
of additional
additional shares
shares
in
in aa subsidiary
subsidiary company
company (46)
(46) -- -- (2,056)
(2,056)
Additional
Additional cost
cost incurred
incurred for
for land
land held
held for
for
property
property development
development -- (657)
(657) -- --
Additional/new
Additional/newinvestment
investment in
in aa joint
joint venture/
venture/
an associated
an associated company
company (32,252)
(32,252) (70,752)
(70,752) -- --
Capital
Capital repayment
repayment to to non-controlling
non-controlling
interest of
interest of aa subsidiary
subsidiary company
company -- (86,460)
(86,460) -- --
Capital
Capital repayment
repayment by
by an
an associated
associated
company
company 7,200
7,200 -- 7,200
7,200 --
Maturity
Maturity of
of investment
investment securities
securities 84,206
84,206 -- -- --
Movement
Movement in in fixed
fixed deposits
deposits placement
placement with
with
maturity profile
maturity profile more
more than
than 33 months
months 25,154
25,154 (11,091)
(11,091) 10,570
10,570 (972)
(972)
Net
Net cash
cash inflow/(outflow)
inflow/(outflow) from
from acquisitions
acquisitions
of subsidiary
of subsidiarycompanies
companies 607,037
607,037 (102,627)
(102,627) -- (19,568)
(19,568)
Net
Net cash
cash inflow
inflowfrom
from disposals
disposals of
of subsidiary
subsidiary
companies
companies 496,623
496,623 -- -- --
Sub-total
Sub-total carried
carried forward
forward (7,743,965)
(7,743,965) (6,832,853)
(6,832,853) 17,770
17,770 (22,596)
(22,596)
 DRB-HICOM BERHAD
180 ANNUAL REPORT 2017

STATEMENTS
STATEMENTS OF
OF CASH
CASH FLOWS
FLOWS FOR
FOR THE
THE FINANCIAL
FINANCIAL YEAR
YEAR ENDED
ENDED 31
31 MARCH
MARCH 2017
2017
(Continued)
(Continued)

Group
Group Company
Company
2017
2017 2016
2016 2017
2017 2016
2016
(Restated)
(Restated)
RM’000
RM’000 RM’000
RM’000 RM’000
RM’000 RM’000
RM’000
CASH
CASH FLOWS
FLOWS FROM
FROM INVESTING
INVESTING
ACTIVITIES (Continued)
ACTIVITIES (Continued)

Sub-total
Sub-total brought
brought forward
forward (7,743,965)
(7,743,965) (6,832,853)
(6,832,853) 17,770
17,770 (22,596)
(22,596)
Net
Net cash
cash outflow
outflow from
from deconsolidation
deconsolidation of
of
subsidiary
subsidiary companies
companies (53)
(53) -- -- --
Proceeds
Proceeds from
from disposals
disposals of
of investment
investment
securities by
securities by aa banking
banking subsidiary
subsidiary
company
company 7,944,507
7,944,507 6,800,089
6,800,089 -- --
Proceeds
Proceeds from
from disposals
disposals ofof property,
property, plant
plant
and equipment/investment
and equipment/investment
properties/intangible assets/other
properties/intangible assets/other
assets/assets held
assets/assets held for
for sale
sale 91,728
91,728 91,821
91,821 11,300
11,300 --
Purchases
Purchases of
of property,
property, plant
plant and
and
equipment/prepaid
equipment/prepaid lease
lease
properties/investment
properties/investment
properties/intangible
properties/intangible assets
assets (818,735)
(818,735) (1,108,504)
(1,108,504) (41)
(41) (173)
(173)
Redemptions
Redemptions of
of investment
investment securities
securities by
by aa
banking subsidiary
banking subsidiary company
company 578,718
578,718 473,000
473,000 -- --
Redemption
Redemption of
of preference
preference shares
shares by
by aa joint
joint
venture
venture 5,000
5,000 5,000
5,000 -- --
Net
Net cash
cash inflow/(outflow)
inflow/(outflow) from
from investing
investing
activities
activities 57,200
57,200 (571,447)
(571,447) 29,029
29,029 (22,769)
(22,769)

CASH
CASH FLOWS
FLOWS FROM
FROM FINANCING
FINANCING
ACTIVITIES
ACTIVITIES
Bank
Bank balances
balances in
in Escrow
Escrow account
account arising
arising
from
from Redeemable
Redeemable Convertible
Convertible Cumulative
Cumulative
Preference Shares
Preference Shares (“RCCPS”)
(“RCCPS”) (3,019)
(3,019) -- -- --
Dividends
Dividends paid
paid to
to non-controlling
non-controlling interest
interest (22,644)
(22,644) (10,334)
(10,334) -- --
Dividends
Dividends paid
paid to
to shareholders
shareholders (38,665)
(38,665) (115,995)
(115,995) (38,665)
(38,665) (115,995)
(115,995)
Distribution
Distribution paid
paid to
to holders
holders of
of Perpetual
Perpetual
Sukuk
Sukuk (79,675)
(79,675) (71,138)
(71,138) (79,675)
(79,675) (71,138)
(71,138)
Movement
Movement inin fixed
fixed deposits
deposits held
held as
as
security/sinking
security/sinking fund
fund 187,893
187,893 39,646
39,646 -- --
Net
Net proceeds
proceeds from
from issuance
issuance of
of RCCPS
RCCPS 1,248,865
1,248,865 -- -- --
Net
Net proceeds
proceeds from
from issuance
issuance of
of Perpetual
Perpetual
Sukuk
Sukuk -- 223,841
223,841 -- 223,841
223,841
Proceeds
Proceeds from
from bank
bank borrowings
borrowings 5,229,103
5,229,103 4,799,928
4,799,928 330,000
330,000 86,500
86,500
Repayment
Repayment ofof borrowings/hire
borrowings/hire purchase
purchase
and
and finance
finance leases
leases (5,732,849)
(5,732,849) (4,833,443)
(4,833,443) (658,037)
(658,037) (621,023)
(621,023)
Loans
Loans from
from subsidiary
subsidiary companies
companies (net
(net of
of
repayment)
repayment) -- -- (238,373)
(238,373) 38,163
38,163
Net
Net cash
cash inflow/(outflow)
inflow/(outflow) from
from financing
financing
activities
activities 789,009
789,009 32,505
32,505 (684,750)
(684,750) (459,652)
(459,652)
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 181

STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2017
(Continued)

Group Company
2017 2016 2017 2016
(Restated)
Note RM’000 RM’000 RM’000 RM’000
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 1,078,173 (639,742) 16,605 (135,661)
Effects of foreign currency translation (270) 19,838 - -
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE FINANCIAL
YEAR 1,945,062 2,564,966 240,331 375,992

CASH AND CASH EQUIVALENTS

AT END OF THE FINANCIAL YEAR 3,022,965 1,945,062 256,936 240,331

(a) Cash and cash equivalents at end of

the financial year comprise the
following:
Short term deposits 1,332,531 1,420,553 223,771 239,534
Cash and bank balances 1,544,331 550,999 33,707 11,909
Cash and short-term funds of a
banking subsidiary company 1,049,925 1,069,101 - -
Bank overdrafts (6,511) (21,462) - -

3,920,276 3,019,191 257,478 251,443

Less: Fixed deposits held as
security/sinking fund 30(b) (830,665) (1,018,558) - -
Less: Fixed deposits with maturity
profile more than 3 months 30(a) (11,242) (36,396) (542) (11,112)
Less: Bank balance in respect of
Automotive Development Fund (19,817) (19,175) - -
Less: Bank balances in Escrow account
arising from RCCPS (3,019) - - -
Less: Collections held by a postal
subsidiary company on behalf of
third parties (32,568) - - -

3,022,965 1,945,062 256,936 240,331

(b) Non-cash transactions:

The principal non-cash transactions
during the financial year comprise the
following:
(i) Acquisitions of property, plant and
equipment/intangible
assets/investment properties by
means of hire purchase, finance
lease and payable 53,918 41,748 - -

The notes set out on pages 182 to 350 form an integral part of the financial statements.
The notes set out on pages 21 to 189 form an integral part of the financial statements.
 DRB-HICOM BERHAD
182 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS

31 March 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

1 CORPORATE INFORMATION

The Company is an investment holding company with investments in the automotive (including
defence and composite manufacturing), services (including integrated logistics, banking and
postal businesses) and property, asset and construction segments. There was no significant
change in these activities during the financial year.

The principal activities of the subsidiary companies, joint ventures and associated companies
are described in Note 3.

The Directors regard Etika Strategi Sdn. Bhd., a company incorporated in Malaysia, as the
holding company.

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, 40150 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 2016 and
Financial Reporting Standards (“FRSs”) in Malaysia.

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 2016 and FRSs in Malaysia, 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
year. Actual results could differ from those estimates. There are no areas involving a
higher degree of judgement or complexity, or areas where estimates and assumptions
are significant to the financial statements other than as disclosed in Note 56.

The comparatives for 31 March 2016 have been restated with adjustments arising from
the completion of the purchase price allocation exercise as disclosed in Note 51(i)(f).
Certain other comparatives have been reclassified to be consistent with current year’s
presentation.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 183

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.2 Changes in accounting policies and effects arising from adoption of new/revised
and amendments to FRSs

(i) Changes in accounting policies and effects for the current financial year

The new/revised accounting standards and amendments to published

standards issued by Malaysian Accounting Standards Board (“MASB”) that are
applicable to the Group and the Company and effective for the current financial
year are as follows:

FRS 14 Regulatory Deferral Accounts

Amendments to FRS 11 Accounting for Acquisitions of
Interest in Joint Operations
Amendments to FRS 10, FRS 12 Investment Entities: Applying the
and FRS 128 Consolidation Exception
Amendments to FRS 101 Disclosure Initiative
Amendments to FRS 116 and FRS Clarification of Acceptable Methods
138 of Depreciation and Amortisation
Amendments to FRS 127 Equity Method in Separate
Financial Statements
Annual Improvements to FRSs 2012 – 2014 Cycle

The adoption of the above standards and amendments did not result in material
impact to the financial statements of the Group and of the Company.

(ii) Adoption of Malaysian Financial Reporting Standards Framework (“MFRS”)

On 28 October 2015, MASB has announced to defer the effective date for
transitioning entities to apply the MFRS Framework to annual periods beginning
on or after 1 January 2018. Therefore, the Group as a transitioning entity will
have to adopt the MFRS Framework for annual periods beginning on or after 1
January 2018.

2.3 Impact of new MASB pronouncements

The Group and the Company have not adopted the following published new/amended
standards that are applicable to the Group and the Company beginning on or after 1 April
2017.

FRS 9 Financial Instruments

Amendments to FRS 107 Disclosure Initiative
Amendments to FRS 112 Recognition of Deferred Tax Assets for
Unrealised Losses
Amendments to FRS 140 Transfers of Investment Property
Annual Improvements to FRSs 2014 – 2016 Cycle

The Group and the Company are currently assessing the impact of the adoption and
application of the above new/amended standards.
 DRB-HICOM BERHAD
184 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.4 Basis of consolidation

The consolidated financial statements include the financial statements of the Company
and its subsidiary companies made up to the end of the financial year. Consistent
accounting policies are applied to like transactions and events in similar circumstances.

Subsidiary companies are those companies in which the Group has the following policies:

(i) Control exists when the Group has existing rights that give it the current ability to
the activities
direct the activities that
that significantly
significantly affect
affectinvestee’s
investee’s returns,
returns, the the Group
Group is is
exposed, or has rights, to variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity.

(ii) Potential voting rights are considered when assessing control only when such
rights are substantive.

(iii) The Group considers it has de facto power over an investee when, despite not
having the majority of voting rights, it has the current ability to direct the activities
of the investee that significantly affect the investee’s return.

The Group's subsidiary companies are listed in Note 3.

All the subsidiary companies are consolidated using the purchase method of accounting
where the results of subsidiary companies acquired or disposed off 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
fair values
valuesofofthe
the subsidiary
subsidiary companies’
companies’ identifiable
identifiable assets
assets acquired
acquired and liabilities
and liabilities and and
contingent liabilities assumed are determined and these values are reflected in the
consolidated financial statements. The cost of an acquisition is measured at fair value of
assets given, equity instruments issued and liabilities incurred or assumed at the date of
exchange. Acquisition-related costs are expensed.

The total assets and liabilities of subsidiary companies are included in the consolidated
statement of financial position and the interests of non-controlling shareholders in the net
assets are stated separately. Losses within a subsidiary company are attributed to the
non-controlling interest even if that results in a deficit balance. All significant inter-
company transactions, balances and unrealised gains on transactions are eliminated on
consolidation and unrealised losses on transactions are also eliminated after considering
impairment indicators, only to the extent that cost can be recovered.

Changes in
Changes in the
theGroup’s
Group’sowne rshipinterests
ownership interestsin in subsidiary
subsidiary companies
companies thatthat do not
do not result
result in
in the
the Group
Group losinglosing
controlcontrol
over theover the subsidiary
subsidiary companies companies are accounted
are accounted for as equityfor as equity
transactions.
The carrying amounts
transactions. of the
The carrying Group’sofinterests
amounts and the
the Group’s non-controlling
interests a nd interest are adjusted
the non-controlling
to reflectare
interest the adjusted
changes to
in reflect
their relative interestsinintheir
the changes the subsidiary companies.
relative interests The
in the resulting
subsidiary
difference
companies. is recognised directly
The resulting in equityisand
difference attributed to
recognised Ownersinofequity
directly the Company.
and attributed to
Owners of the Company.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 185

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.4 Basis of consolidation (Continued)

When the Group loses control of a subsidiary company, it derecognises the related
assets (including goodwill), liabilities, non-controlling interest and other components of
equity, while any resultant gain or loss is recognised in profit or loss. 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 profit or
loss. The subsidiary company’s cumulative gain or loss which has been recognised in
other comprehensive income and accumulated in equity are reclassified to profit or loss
or where applicable, transferred directly to retained earnings. The fair value of any
investment retained in the former subsidiary company at the date that control is lost is
regarded as the cost on initial recognition of the investment.

2.5 Non-controlling interest

Non-controlling interest represents the portion of profit or loss and net assets in
subsidiary companies not held by the Group and are presented separately in statements
of comprehensive income of the Group and within equity in the consolidated statement of
financial position separately from parent shareholders’ equity. Non-controlling interest is
initially measured at the non-controlling interest’s 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 non-

controlling interest as transactions with owners. Gains and losses resulting from disposal
of shares in subsidiary companies to non-controlling interest are recognised in equity. For
purchases from non-controlling interest, the difference between any consideration paid
and the relevant share of the carrying value of net assets of the subsidiary acquired is
recognised as equity.

2.6 Joint ventures and associated companies

A joint venture 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.

An associated company is a company in which the Group is in a position to exercise

significant influence in its Management but which is not control and is neither a subsidiary
company nor a joint venture. 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 considerations made in determining joint control or significant influence are similar to
those necessary to determine control over subsidiary companies. The Group’s share of
results of joint ventures and associated companies are included in the consolidated
statement of comprehensive income using the equity method of accounting.
 DRB-HICOM BERHAD
186 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.6 Joint ventures and associated companies (Continued)

On acquisition of an investment in joint venture and associated company, any excess of

the cost of investment over the Group’s share of the net fair value of the identifiable
assets and liabilities of the joint venture and the associated company is recognised as
goodwill and included in the carrying amount of the investment. Any excess of the
Group’s share of the net fair value of the identifiable assets and liabilities of the joint
venture and the associated company over the cost of investment is excluded from the
carrying amount of the investment and is instead included as income in the determination
of the Group’s share of the joint venture’s and the associated company’s profit or loss for
the period in which the investment is acquired.

In the consolidated statement of financial position, the Group’s interest in joint ventures
and associated companies is stated at cost plus the Group’s share of post-acquisition
retained profits and reserves less impairment. Any change in other comprehensive
income (“OCI”) of those investees is presented as part of the Group’s OCI. In addition,
when there has been a change recognised directly in the equity of the joint venture or
associated company, the Group recognises its share of any changes, when applicable, in
the statement of changes in equity.

The share of the results of the joint venture and the associated company will not be taken
into the Group’s statement of comprehensive income when the carrying value of the
investment in joint venture and associated company reaches zero unless the Group has
incurred obligations or guaranteed obligations in respect of the joint venture and the
associated company.

Profits and losses resulting from transactions between the Group and its joint venture and
associated company are recognised in the Group’s financial statements only to the extent
of unrelated investors’ interests in the joint venture and associated company. Unrealised
losses are eliminated unless the transaction provides evidence of an impairment of the
asset transferred.

The financial statements of the joint ventures and the associated companies used in the
preparation of the consolidated financial statements are prepared for the same reporting
date as the Group. When the reporting dates of the joint ventures and the associated
companies are different from the Group, the joint venture and the associated company
are required to prepare additional financial statements as of the same date as that of the
Group for consolidation purpose. Where necessary, adjustments are made to the
financial statements of joint ventures and associated companies to ensure consistency of
accounting policies with those of the Group.

The Group’s joint ventures and associated companies are listed in Note 3.

2.7 Investments in subsidiary companies, joint ventures and associated companies

Investments in subsidiary companies, joint ventures 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.

On disposal of investments, the difference between the net disposal proceeds and its
carrying amount is charged or credited to profit or loss.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 187

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.8 Financial assets

Financial assets are recognised in the statements of financial position when, and only
when, the Group and the Company become a party to the contractual provisions of the
financial instruments.

When financial assets are recognised initially, they are measured at fair value, plus in the
case of financial assets not at fair value through profit or loss, directly attributable
transaction costs.

The Group and the Company determine the classification of their financial assets at the
initial recognition, and the categories include financial assets at fair value through profit or
loss, loans and receivables, held-to-maturity investments and available-for-sale financial
assets.

(i) Financial assets at fair value through profit or loss

Financial assets are classified as financial assets at fair value through profit or
loss if they are held for trading or are designated as such upon initial recognition.
Financial assets held for trading are derivatives (including separated embedded
derivatives unless they are designated as effective hedging instruments as
defined by FRS 139) or financial assets acquired principally for the purpose of
selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or

loss are measured at fair value. Any gains or losses arising from changes in fair
value are recognised in profit or loss. Net gains or net losses on financial assets
at fair value through profit or loss do not include exchange differences, interest
and dividend income. Exchange differences, interest and dividend income on
financial assets at fair value through profit or loss are recognised separately in
profit or loss as part of other losses or other income.

Financial assets at fair value through profit or loss could be presented as current
or non-current. Financial assets that are held primarily for trading purposes are
presented as current whereas financial assets that are not held primarily for
trading purposes are presented as current or non-current based on the
settlement date.

(ii) Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an
active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at

amortised cost using the effective interest method, less impairment. Gains and
losses are recognised in profit or loss when the loans and receivables are
derecognised or impaired, and through the amortisation process.

Loans and receivables are classified as non-current assets, except for those
having maturity within 12 months after the reporting date which are classified as
current.
 DRB-HICOM BERHAD
188 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.8 Financial assets (Continued)

(iii) Held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturity are
classified as held-to-maturity when the Group has the positive intention and
ability to hold the investment to maturity.

Subsequent to initial recognition, held-to-maturity investments are measured at

amortised cost using the effective interest method, less impairment. Gains and
losses are recognised in profit or loss when the held-to-maturity investments are
derecognised or impaired, and through the amortisation process.

Held-to-maturity investments are classified as non-current assets, except for

those having maturity within 12 months after the reporting date which are
classified as current.

(iv) Available-for-sale financial assets

Available-for-sale financial assets include equity instruments and debt securities

that are designated as available-for-sale or are not classified in any of the three
preceding categories.

After initial recognition, available-for-sale financial assets are subsequently

measured at fair value. Any gains or losses from changes in fair value of the
financial asset are recognised in other comprehensive income, except that
impairment losses, foreign exchange gains and losses on monetary instruments
and interest calculated using the effective interest method are recognised in profit
or loss. The cumulative gain or loss previously recognised in other
comprehensive income is reclassified from equity to profit or loss as a
reclassification adjustment when the financial asset is derecognised. Interest
income calculated using the effective interest method is recognised in profit or
loss. Dividends on an available-for-sale equity instrument are recognised in profit
or loss when the Group’s and the Company's right to receive payment is
established.

Investments in equity instruments which fair value cannot be reliably measured

are measured at cost less impairment loss.

Available-for-sale financial assets are classified as non-current assets unless

they are expected to be realised within 12 months after the reporting date.

A financial asset is derecognised where the contractual right to receive cash flows from
the asset has expired. On derecognition of a financial asset in its entirety, the difference
between the carrying amount and the sum of the consideration received and any
cumulative gain or loss that had been recognised in other comprehensive income is
recognised in profit or loss.

Regular way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the period generally established by regulation or convention in
the marketplace concerned. All regular way purchases and sales of financial assets are
recognised or derecognised on the trade date i.e., the date that the Group and the
Company commit to purchase or sell the asset.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 189

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.9 Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any
objective evidence that a financial asset is impaired.

(i) Trade and other receivables and other financial assets carried at amortised
cost

To determine whether there is objective evidence that an impairment loss on

financial assets has been incurred, the Group and the Company consider factors
such as the probability of insolvency or significant financial difficulties of the
debtor and default or significant delay in payments. For certain categories of
financial assets, such as trade receivables, assets that are assessed not to be
impaired individually are subsequently assessed for impairment on a collective
basis based on similar risk characteristics.

Objective evidence of impairment for a portfolio of receivables could include the

Group’s and the Company's past experience of collecting payments, an increase
in the number of delayed payments in the portfolio past the average credit period
and observable changes in national or local economic conditions that correlate
with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the
difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the financial asset’s original effective
interest rate. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables, where the
carrying amount is reduced through the use of an allowance account. When a
trade receivable becomes uncollectible, it is written off against the allowance
account.

If in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed to the
extent that the carrying amount of the asset does not exceed its amortised cost at
the reversal date. The amount of reversal is recognised in profit or loss.

(ii) Unquoted equity securities at cost

If there is objective evidence (such as significant adverse changes in the

business environment where the issuer operates, probability of insolvency or
significant financial difficulties of the issuer) that an impairment loss on financial
assets carried at cost has been incurred, the amount of the loss is measured as
the difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the current market rate of return for a
similar financial asset. Such impairment losses are not reversed in subsequent
periods.
 DRB-HICOM BERHAD
190 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.9 Impairment of financial assets (Continued)

(iii) Available-for-sale financial assets

Significant or prolonged decline in fair value below cost, significant financial

difficulties of the issuer or obligor, and the disappearance of an active trading
market are considerations to determine whether there is objective evidence that
investment securities classified as available-for-sale financial assets are
impaired.

If an available-for-sale financial asset is impaired, an amount comprising the

difference between its cost (net of any principal payment and amortisation) and
its current fair value, less any impairment loss previously recognised in profit or
loss, is transferred from equity to profit or loss.

Impairment losses on available-for-sale equity investments are not reversed in

profit or loss in the subsequent periods. Increase in fair value, if any, subsequent
to impairment loss is recognised in other comprehensive income.

For available-for-sale debt investments, impairment losses are subsequently

reversed in profit or loss if an increase in the fair value of the investment can be
objectively related to an event occurring after the recognition of the impairment
loss in profit or loss.

(iv) Impairment of financing

The banking subsidiary company assesses at each reporting date whether there
is any objective evidence that a financing is impaired. Financing of banking
subsidiary company is classified as impaired when they fulfil either of the
following criteria:

(a) principal or profit or both are past due for 3 months or more;

(b) where financing in arrears for less than 3 months, the financing exhibit
indications of credit deterioration and weaknesses, whether or not
impairment loss has been provided for; or

(c) rescheduling and/or restructuring of credit, and where an impaired

financing has been rescheduled or restructured, the financing will
continue to be classified as impaired until repayments based on the
revised and/or restructured terms have been observed continuously for a
period of 6 months.

Impairment Process – Individual Assessment

The banking subsidiary company assesses if objective evidence of impairment

exists for financing and receivables, which are deemed to be individually
significant.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 191

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.9 Impairment of financial assets (Continued)

(iv) Impairment of financing (Continued)

Impairment Process – Individual Assessment (Continued)

If there is objective evidence that an impairment loss has been incurred, the
amount of the loss is measured as the difference between the financing’s
carrying amount and the present value of estimated future cash flows
discounted at the financing’s original effective profit rate. The carrying amount
of the financing is reduced through the use of an allowance account and the
amount of the loss is recognised in the profit or loss.

Impairment Process – Collective Assessment

Financings which are not individually significant and financings that have been
individually assessed with no evidence of impairment loss are grouped together
for collective impairment assessment. These financings are grouped within
similar credit risk characteristics for collective assessment, whereby data from the
financing portfolio (such as, credit quality, levels of arrears, credit utilisation,
financing to collateral ratios, etc.), concentration of risks, and economic data are
taken into consideration.

Future cash flows in a group of financing that are collectively evaluated for
impairment are estimated based on the historical loss experience of the banking
subsidiary company. Historical loss experience is adjusted on the basis of current
observable data to reflect the effects of current conditions that did not affect the
period on which the historical loss experience is based, and to remove the effects
of conditions in the historical period that do not currently exist.

2.10 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount presented in the
statements of financial position when there is a legally enforceable right to offset the
recognised amount and there is an intention to settle on a net basis, or realise the
receivables and settle the payables simultaneously.

2.11 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.
Assets under construction/development for future use as investment property are also
classified in this category. Investment properties are initially measured at cost, including
transaction cost. Subsequent to initial recognition, investment properties are stated at fair
value, representing open-market values determined annually by independent qualified
valuer. 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 included in profit or loss in
the year in which they arise.
 DRB-HICOM BERHAD
192 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.11 Investment properties (Continued)

A property interest under an operating lease is classified and accounted for as

investment property on a property-by-property basis when the Group and the Company
hold it to earn rentals or for capital appreciation or both. Any such property interest under
an operating lease classified as an investment property is carried at fair value.

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 statement of financial position). The difference between the net
disposal proceeds and the carrying amount is recognised in profit or loss in the period of
the retirement or disposal.

Transfers are made to or from investment property only when there is a change in use.
For a transfer from investment property to owner-occupied property, the deemed cost for
subsequent accounting is the fair value at the date of change in use. For a transfer from
owner-occupied property to investment property, the property is accounted for in
accordance with the accounting policy for property, plant and equipment set out in Note
2.14 up to the date of change in use.

2.12 Assets held for sale

Assets are classified as held for sale and stated at the lower of carrying amount and fair
value less costs 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.

A non-current asset is not depreciated or amortised while it is classified as held for sale
or while it is part of a disposal group classified as held for sale. Interest and other
expenses attributable to the liabilities of a disposal group classified as held for sale are
continued to be recognised.

Assets and liabilities classified as held for sale are presented separately as current items
in the statement of financial position.

2.13 Other assets

Other assets represent transferable corporate memberships in golf and country clubs.
The golf membership acquired is measured initially at cost. Following initial recognition, it
is measured at cost less any accumulated impairment losses. Gain or loss arising from
disposal of the golf membership is measured as the difference between the net disposal
proceeds and the carrying amount and is recognised in profit or loss. The policy for the
recognition and measurement of impairment losses is in accordance with Note 2.22.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 193

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.14 Property, plant and equipment and depreciation

Freehold land is not depreciated as it has an infinite life. Depreciation on capital work-in-
progress 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 Company 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 profit or loss during the financial year in
which they are incurred.

An item of property, plant and equipment is derecognised upon disposal or when no

future economic benefits are expected from its use or disposal. Gains and losses on
disposals are determined by comparing net disposal proceeds with carrying amounts and
are recognised in profit or loss.

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 reporting date, the Group and the Company assess whether there is any
indication of impairment. The policy for the recognition and measurement of impairment
losses is in accordance with Note 2.22.

The estimated useful lives in years are as follows:

Leasehold land 16 - 910 years

Buildings, golf course and improvements 2 - 59 years
Plant and machinery 2 - 30 years
Motor vehicles 3 - 10 years
Office equipment 2 - 10 years
Furniture and fittings 2 - 10 years

Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at
each reporting date.

2.15 Concession assets

Concession assets arise from the right to charge users of the public services and are
amortised over the period of 22 years under the Service Concession Agreement.

Subsequent costs and expenditures related to infrastructure and equipment arising from
the commitments to the concession contracts or that increase future revenue is
recognised as additions to the concession assets and are stated at cost. All other
repairs and maintenance expenses that are routine in nature, are charged to profit or
loss during the financial year in which they are incurred.
 DRB-HICOM BERHAD
194 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.16 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, if the risks
and rewards of the ownership are not substantially transferred to the Group. 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 50
years and above at the date of initial recognition.

2.17 Goodwill

Goodwill represents the excess of the cost of acquisition of subsidiary companies, joint
ventures 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 consolidated statement of financial position 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 profit or loss.

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 joint ventures and associated companies is included in

investment in joint ventures and associated companies respectively. Such goodwill is
tested for impairment as part of the overall carrying amount.

2.18 Intangible assets other than goodwill

Intangible assets acquired separately are measured initially at cost. Following initial
recognition, intangible assets are measured at cost less any accumulated amortisation
and accumulated impairment losses.

(i) Computer software

Costs that are directly associated with identifiable and unique software products
which have probable benefits exceeding the cost beyond 1 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.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 195

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.18 Intangible assets other than goodwill (Continued)

(i) Computer software (Continued)

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 3 -
10 years.

(ii) Research and development cost

Expenditure in connection with research activities (research expenditure) is

recognised as an expense when incurred. Costs incurred on development
projects (relating to the design and testing of new or improved products) are
recognised as intangible assets when the following criteria for recognition are
fulfilled:

(a) It is technically feasible to complete the intangible assets so that it will

be available for use or sale;

(b) Management’s intention to complete the intangible asset for use or sale;

(c) There is an ability to use or sell the intangible asset;

(d) It can be demonstrated that the intangible asset will generate probable
future economic benefits;

(e) Adequate technical, financial and other resources to complete the

development and to use or sell the intangible asset are available; and

(f) The expenditure attributable to the intangible asset during its

development can be reliably measured.

Development costs previously recognised as an expense are not recognised as

an asset in subsequent periods. Development expenses capitalised include
costs incurred in the development from the date it first meets the recognition
criteria and up to the completion of the development project and
commencement of commercial production. Capitalised development cost is
stated at cost less accumulated amortisation and accumulated impairment
losses, if any. Amortisation of development cost is based on straight line basis
over its useful life, which ranges between 5 - 7 years for vehicles and 10 years
for mechanical parts.
 DRB-HICOM BERHAD
196 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.18 Intangible assets other than goodwill (Continued)

(iii) Acquired intangible assets

These intangible assets comprise dealership network and brand name arising
from the acquisition of PROTON.

(a) Dealership network

Dealership network, which is separately identifiable, is stated at cost

and amortised on a straight line basis over a period of 7 years.

(b) Brand name

Brand name, which is separately identifiable with infinite useful life, is

tested annually for impairment and stated at cost less accumulated
impairment losses. Impairment losses on brand name are not reversed.

The useful lives of the brands are estimated to be indefinite as

Management believes there is no foreseeable limit to the period over
which the brands are expected to generate net cash inflows to the
Group based on the current market share of the brands.

Where an indication of impairment exists, the carrying amount of the intangible assets is
assessed and written down immediately to its recoverable amount. The policy for the
recognition and measurement of impairment losses is in accordance with Note 2.22.

Preliminary and pre-operating expenses are written off to profit or loss in the financial
year in which they are incurred.

2.19 Property development activities

(i) Land held for property development

Land held for property development consists 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. The policy for the recognition and measurement of
impairment losses is in accordance with Note 2.22.

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 profit or
loss.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 197

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.19 Property development activities (Continued)

(ii) Property development costs

Property development costs comprise all costs that are directly attributable to
development activities or that can be allocated on a reasonable basis to such
activities.

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 the lower of cost and net realisable value. Where
revenue recognised in profit or loss 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).

2.20 Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost is defined as all costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and conditions. Costs of purchase
comprise the purchase price, import duties and other taxes (so far as not recoverable
from the taxation authorities), transport and handling costs and other directly
attributable costs.

(i) 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 or weighted average basis depending on the nature of
inventories.
 DRB-HICOM BERHAD
198 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.20 Inventories (Continued)

(ii) 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.

2.21 Cash and cash equivalents

For the purposes of the statements of cash flows, cash and cash equivalents consist of
cash in hand, bank balances, demand deposits, bank overdrafts and short term highly
liquid investments with a maturity of three months or less from the date of placement
that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.

2.22 Impairment of non-financial assets

The Group and the Company assess, at each reporting date, whether there is an
indication that an asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the Group and the Company estimate the
asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s
or cash-generating unit’s (“CGU”) fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups
of assets. When the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. In determining fair value
less costs of disposal, recent market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation model is used. These
calculations are corroborated by valuation multiples, quoted share prices for publicly
traded companies or other available fair value indicators.

For assets excluding goodwill, an assessment is made at each reporting date to

determine whether there is an indication that previously recognised impairment losses
no longer exist or have decreased. If such indication exists, the Group and the
Company estimate the asset’s or CGU’s recoverable amount. Impairment losses
recognised in respect of a CGU or groups of CGUs are allocated first to reduce the
carrying amount of any goodwill allocated to those units or groups of units and then, to
reduce the carrying amount of the other assets in the unit or groups of units on a pro-
rata basis. Impairment losses are recognised in profit or loss. A previously recognised
impairment loss is reversed only if there has been a change in the assumptions used to
determine the asset’s recoverable amount since the last impairment loss was
recognised. The reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for the asset
in prior years. Such reversal is recognised in profit or loss unless the asset is carried at
a revalued amount, in which case, the reversal is treated as a revaluation increase.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 199

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.23 Income taxes

Income tax on the profit or loss for the financial year comprises current and deferred
tax.

(i) Current 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 reporting date. Current taxes are recognised in profit
or loss except to the extent that the tax relates to items recognised outside
profit or loss, either in other comprehensive income or directly in equity.

(ii) Deferred tax

Deferred tax is provided for in full, using the liability method on temporary
differences at the reporting 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 goodwill, 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.

The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and
are recognised to the extent that it 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 reporting date. Deferred
tax is recognised in profit or loss, 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.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable
right exists to set off current tax assets against current tax liabilities and the
deferred taxes relate to the same taxable entity and the same taxation
authority.
 DRB-HICOM BERHAD
200 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.24 Share capital

(i) Classification

An equity instrument is any contract that evidences a residual interest in the

assets of the Group and of the Company after deducting all of its liabilities.
Ordinary shares are classified as equity.

(ii) 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.

(iii) Dividends to shareholders of the Company

Dividends on ordinary shares are recognised as liabilities when declared before

the reporting date. Dividends proposed after the reporting date, but before the
financial statements are authorised for issue, is not recognised as a liability at
the reporting date. Upon the dividend becoming payable, it will be accounted for
as a liability.

2.25 Borrowings

(i) Classification

Borrowings are measured at fair value net of transaction costs initially and
subsequently, at amortised cost using the effective interest method. Any
difference between the proceeds (net of transaction costs) and the redemption
value is recognised in profit or loss over the repayment period of the
borrowings.

(ii) Capitalisation of borrowing costs

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 recognised in profit or loss in the period they are incurred.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 201

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.26 Financial liabilities

Financial liabilities are classified according to the substance of the contractual

arrangements entered into and the definitions of a financial liability.

Financial liabilities are recognised in the statement of financial position when, and only
when, the Group and the Company become a party to the contractual provisions of the
financial instrument. Financial liabilities are classified as either financial liabilities at fair
value through profit or loss or other financial liabilities.

(i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities
held for trading and financial liabilities designated upon initial recognition as at
fair value through profit or loss.

Financial liabilities held for trading include derivatives entered into by the Group
and the Company that do not meet the hedge accounting criteria. Derivative
liabilities are initially measured at fair value and subsequently stated at fair
value, with any resulting gains or losses recognised in profit or loss. Net gains
or losses on derivatives include exchange differences.

(ii) Other financial liabilities

The Group’s and the Company's other financial liabilities include trade and
other payables, loans and borrowings, deposits from customers, deposits and
placements of banks and financial institutions, bills and acceptances payable
and other liabilities.

Trade and other payables are recognised initially at fair value plus directly
attributable transaction costs and subsequently measured at amortised cost
using the effective interest method.

Loans and borrowings are recognised at fair value net of transaction costs
initially and subsequently, at amortised cost using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months after
the reporting date.

Deposits from customers, deposits and placements of banks and financial

institutions are stated at placement values.

Bills and acceptances payable represent the banking subsidiary company’s own
bills and acceptances rediscounted and outstanding in the market.

For other financial liabilities, gains and losses are recognised in profit or loss
when the liabilities are derecognised, and through the amortisation process.

A financial liability is derecognised when the obligation under the liability is extinguished.
When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective carrying
amounts is recognised in profit or loss.
 DRB-HICOM BERHAD
202 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.27 Financial guarantee contract

A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to
make payment when due.

Financial guarantee contracts are recognised initially as a liability at fair value, net of
transaction costs. Subsequent to initial recognition, financial guarantee contracts are
recognised as income in profit or loss over the period of the guarantee. If the debtor fails
to make payment relating to financial guarantee contract when it is due and the
Company, as the issuer, is required to reimburse the holder for the associated loss, the
liability is measured at the higher of the best estimate of the expenditure required to
settle the present obligation at the reporting date and the amount initially recognised
less cumulative amortisation.

2.28 Provisions

(i) Warranty and sales returns

A provision is made for the estimated liability on all products under warranty
and provision for sales returns is made for estimated returns of goods as at the
reporting date. These provisions are arrived at based on the historical data of
service and sales returns.

(ii) Restructuring, mutual separation schemes and voluntary separation

scheme costs

Restructuring, mutual separation scheme and voluntary separation scheme

provisions mainly comprise employee termination costs and other related costs
and are recognised in the financial year in which the Group becomes legally or
constructively committed to such payment.

(iii) Concession assets

A provision is recognised based on the contractual obligations that it must fulfil

as a condition of its license to maintain the infrastructure to a specified standard
and to restore the infrastructure when the infrastructure has deteriorated below
specific condition as stated under the Service Concession Agreement.

(iv) Claims from suppliers

In the normal course of business, the Group may receive claims based on
contractual terms or deemed constructive obligations arising from non-
contractual actions. The Management assesses these claims based on legal
advice on such contractual terms, past constructive actions or business
relationship continuity, where deemed necessary, and recognises these claims in
the financial statements of the Group.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 203

DRB-HICOM BERHAD
(203430-W)
NOTES TO THE
(Incorporated inFINANCIAL
Malaysia) STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.29
2.27 Grants guarantee contract
Financial

AGrants are guarantee

financial recognisedcontract
at their is
faira values
contract where there is reasonable
that requires the issuer to assurance that the
make specified
grant will be
payments to received
reimburseand theallholder
conditions
for a attached will be
loss it incurs met. a specified debtor fails to
because
make payment when due.
(i) Grants relating to assets are included in the liabilities as deferred income and are
Financialamortised
guarantee to contracts
profit or loss
are over the expected
recognised initially useful life of the
as a liability relevant
at fair net ofby
value,asset
equal
transaction annual
costs. instalmenttoorinitial
Subsequent by deducting
recognition,thefinancial
grants in arriving at
guarantee the carrying
contracts are
recognisedamount of the asset.
as income in profit or loss over the period of the guarantee. If the debtor fails
to make payment relating to financial guarantee contract when it is due and the
(ii)
Company, Grants relating
as the issuer,toisincome
requiredaretorecognised
reimburse the immediately
holder forthrough profit or loss,
the associated loss on
the a
systematic
liability is measuredbasisat theover the ofperiods
higher thatestimate
the best the related
of thecosts, for which
expenditure they to
required are
intended to compensate, are expensed or to be deducted
settle the present obligation at the reporting date and the amount initially recognised in reporting related
expenses.
less cumulative amortisation.

2.28 (iii) Income grants are grants other than the above grants and recognised in the
Provisions
statements of comprehensive income where there is a reasonable assurance that
(i) the grant will
Warranty and besales
received and the Group will comply with all attached conditions.
returns

2.30 Employee benefits is made for the estimated liability on all products under warranty
A provision
and provision for sales returns is made for estimated returns of goods as at the
(i) Short termdate.
reporting employee
These benefits
provisions are arrived at based on the historical data of
service and sales returns.
Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary
(ii) benefits are accrued
Restructuring, in theseparation
mutual period in which the associated
schemes services are
and voluntary rendered
separation
by employees
scheme costsof the Group.

(ii) Defined contribution

Restructuring, mutual plan
separation scheme and voluntary separation scheme
provisions mainly comprise employee termination costs and other related costs
A defined
and contribution
are recognised in plan is a pension
the financial plan
year in under
which thewhich
Groupthe Group pays
becomes legallyfixed
or
contributions
constructivelyinto a separate
committed entitypayment.
to such (a fund) and will have no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient assets
(iii) to pay all employees
Concession assets benefits relating to employee service in the current and prior
periods.
A provision is recognised based on the contractual obligations that it must fulfil
The
as aGroup’s contributions
condition of its licensetotothe definedthe
maintain contribution plantoare
infrastructure charged to
a specified profit or
standard
loss in the period to which they relate. Once the contributions have been
and to restore the infrastructure when the infrastructure has deteriorated below paid, the
Group has no further payment obligations.
specific condition as stated under the Service Concession Agreement.

(iii)
(iv) Termination
Claims from benefits
suppliers

Termination
In the normalbenefits
course are payable the
of business, to an entitled
Group employee
may receive whenever
claims based the
on
employment terms
contractual has to be
or terminated
deemed before the normal
constructive retirement
obligations date orfrom
arising whennon-
the
employee accepts
contractual actions.mutual/voluntary
The Management separation
assesses in these
exchange for based
claims these on
benefits.
legal
The Group recognises termination benefits when it is demonstrably
advice on such contractual terms, past constructive actions or business committed to
either terminate the employment of current employees according to
relationship continuity, where deemed necessary, and recognises these claims in a detailed
formal
the plan without
financial possibility
statements of theof withdrawal or to provide termination benefits as a
Group.
result of an offer made to encourage voluntary redundancy.
 DRB-HICOM BERHAD
204 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.30 Employee benefits (Continued)

(iv) Post-employment benefits - Defined benefit plan

Certain companies in the Group operate defined benefit plans for their eligible
employees.

The defined benefit obligation is calculated using the project unit credit method,
determined by independent actuaries are charged to the statement of
comprehensive income so as to spread the cost of pensions over the average
remaining service lives of the related employees participating in the defined
benefit plan. Assumptions were made in relation to the expected rate of salary
increases and annual discount rate.

The liability in respect of a defined benefit plan is the present value of the
defined benefit obligations at the consolidated statement of financial position
less the fair value of plan assets, together with adjustments for actuarial
gains/losses and past service. The Group determines the present value of the
defined benefit obligations with sufficient regularity such that the amounts
recognised in the financial statements do not differ materially from the amounts
that would be determined at the reporting date.

When the calculation results in a potential asset for the Group, the recognised
asset is limited to the present value of economic benefits available in the form
of any future refunds from the plan or reductions in future contributions to the
plan. To calculate the present value of economic benefits, consideration is
given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit obligations, which comprise

actuarial gains and losses, the return on plan assets (excluding interest) and
the effect of the changes in asset ceiling (excluding interest), are recognised
immediately in other comprehensive income. The Group determines the net
interest income or expense on the net defined obligations for the period by
applying the discount rate used to measure the defined benefit obligations at
the beginning of the annual period, taking into account any changes in the net
defined benefit obligations during the period as a result of contributions and
benefit payments.

Net interest income or expense and other expenses relating to defined benefit
plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the
resulting change in benefit that relates to past service or the gain or loss on
curtailment is recognised immediately in profit or loss. The Group recognises
gains and losses on the settlement of a defined benefit plan when the
settlement occurs.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 205

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.31 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.

Contract revenue comprises the initial amount of revenue agreed in the contract and
variations in contract work, claims and incentive payments to the extent that it is
probable that they will result in revenue and they are capable of being reliably
measured.

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.

2.32 Assets under lease arrangements

(i) Finance leases

Leases of property, plant and equipment, assets under concession contracts

and intangible assets where the Group assumes substantially all the benefits
and risks of ownership are classified as finance leases. Assets acquired under
finance lease arrangements are capitalised at the commencement of the lease
at the inception date fair value of the leased property or, if lower, at the present
value of the minimum lease payments. 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 profit
or loss 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 or amortised over the useful lives of equivalent owned
assets or its lease term, if shorter.
 DRB-HICOM BERHAD
206 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.32 Assets under lease arrangements (Continued)

(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 profit or loss in the
financial year they become payable, on a straight line basis over the lease term.

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.

2.33 Revenue and other income recognition

Revenue and other income are recognised to the extent that it is probable that the
economic benefits will flow to the Group and the Company and the revenue and other
income can be reliably measured. Revenue and other income are measured at the fair
value of consideration received or receivables. Other than revenue and other income
recognition policies mentioned elsewhere in the summary of significant accounting
policies, set out below are other significant revenue and other income recognition
policies used by the Group and the Company:

(i) Sale of goods

Sales are recognised upon delivery of goods, net of sales tax, returns, discounts
and allowances and upon transfer of significant risks and rewards of ownership
of the goods to the customers.

(ii) 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) Vehicle inspection income

Income from inspection of vehicles is recognised upon the rendering of

inspection services.

(c) Ground handling services

Revenue from ground handling, in-flight catering and cargo handling is

recognised upon performance of services less discounts.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 207

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.33 Revenue and other income recognition (Continued)

(ii) Rendering of services (Continued)

(d) Vehicle leasing income

Operating lease income is recognised on a straight line basis over the

period of lease agreement.

(e) Fee income from an aircraft leasing company

Fee income is recognised upon rendering of services and customers’

acceptances.

(f) Financing income and fee recognition from a banking subsidiary

company

Profit income from financing is recorded using the effective profit rate,
which is the rate that exactly discounts the estimated future cash
payments or receipts through the expected life of the financing or a
shorter period, where appropriate, to the net carrying amount of the
financing. The calculation takes into account all contractual terms of the
financing (for example, repayment options) and includes any fees or
incremental costs that are directly attributable to the instrument and are
an integral part of the effective profit rate, but not future credit losses.

For impaired financing where the value of the financing has been written
down as a result of an impairment loss, financing income continues to
be recognised using the effective profit rate, to the extent that it is
probable that the profit can be recovered.

Financing arrangement, management and participation fees,

underwriting commissions, guarantee fees, and brokerage fees are
recognised as income based on accrual on time apportionment method.
Fees from advisory and corporate finance activities are recognised net
of service taxes and discounts on completion of each stage of the
assignment.
 DRB-HICOM BERHAD
208 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.33 Revenue and other income recognition (Continued)

(ii) Rendering of services (Continued)

(g) Provision of postal and integrated logistics services

 Postal and related services

Income from mail, courier services, remittances and agency

services and other services (sale and purchase of gold) are
recognised upon performance of services.

 Shipping agency fees

Income is recognised on completion of shipping operation.

 Transportation related income

Income from transportation of goods is recognised upon delivery of

goods at the receiving point.

 Warehousing and distribution income

Income from the provisions of handling and related activities is

recognised upon the performance of services.

 Haulage income

Income from haulage and related activities is recognised upon

performance of services, net of discounts.

(h) Fees

Tuition fees for both academic programmes and short courses are
recognised over the duration of courses. Registration and enrolment
fees are recognised upon commencement of the courses.

(iii) Construction contracts

Revenue from construction contracts are accounted for by the stage of

completion method as described in Note 2.31.

(iv) Sale of land and development properties

Revenue recognition for sale of land and development properties are described
in Note 2.19.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 209

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.33 Revenue and other income recognition (Continued)

(v) Others

(a) Dividend income

Dividends are recognised when the right to receive payment is

established.

(b) Interest income

Interest income is recognised using effective interest method.

(c) Rental income

Rental income is accrued on a straight line basis over the operating

lease term.

2.34 Foreign currency translation

(i) Functional and presentation currency

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 consolidated financial
statements are presented in Ringgit Malaysia (“RM”), which is the Company’s
functional and presentation currency.

(ii) Foreign currency transactions

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 RM at
rates of exchange approximating those ruling on the reporting date. Non-
monetary items denominated in foreign currencies that are measured at
historical cost are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items denominated in foreign currencies
measured at fair value are translated using the exchange date when fair value
was determined.

Exchange differences arising on the settlement of monetary items or on

translating monetary items at the reporting date are recognised in profit or loss
except for exchange differences arising on monetary items that form part of the
Group’s net investment in foreign operations, which are recognised initially in
other comprehensive income and accumulated under foreign currency
translation reserve in equity. The foreign currency translation reserve is
reclassified from equity to profit or loss of the Group on disposal of the foreign
operations.
 DRB-HICOM BERHAD
210 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.34 Foreign currency translation (Continued)

(iii) Foreign subsidiary companies

The assets and liabilities of foreign subsidiary companies that have a functional
currency other than RM (including any goodwill arising on the acquisition of a
foreign operation and any fair value adjustments to the carrying amounts of
assets and liabilities arising on the acquisition) are translated into RM at the rate
of exchange ruling at the reporting date. Income and expenses are translated at
exchange rates at the date of transactions. Exchange differences arise on
translation are taken directly to other comprehensive income.

On disposal of foreign subsidiary companies, such translation differences are

recognised in profit or loss as part of the gain or loss on disposal.

2.35 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.

2.36 Contingent liabilities and contingent assets

The Group does not recognise a contingent liability but discloses 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 subsidiary companies by the Group under a business combination,

the contingent liabilities assumed are measured initially at their fair value at the
acquisition date.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 211

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.37 Fair value measurements

Except for lease transactions, the fair value of an asset or a liability is determined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The measurement
assumes that the transaction to sell the asset or transfer the liability takes place either in
the principal market or in the absence of a principal market, in the most advantageous
market.

For non-financial asset, the fair value measurement takes into account a market
participant’s ability to generate economic benefits by using the asset in its highest and
best use or by selling it to another market participant that would use the asset in its
highest and best use.

The Group measures fair values using the following fair value hierarchy that reflects the
significance of the inputs used in making the measurements:

(i) Level 1: Quoted market price (unadjusted) in an active market for an identical
instrument.

(ii) Level 2: Valuation techniques based on observable inputs, either directly

(i.e., as prices) or indirectly (i.e., derived from prices). This category
includes instruments valued using: quoted market prices in active
markets for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or other
than valuation techniques where all significant inputs are directly or
indirectly observable from market data.

(iii) Level 3: Valuation techniques using significant unobservable inputs. This

category includes all instruments where the valuation technique
includes inputs not based on observable data and the unobservable
inputs have a significant effect on the instrument’s valuation. This
category includes instruments that are valued based on quoted
prices for similar instruments where significant unobservable
adjustments or assumptions are required to reflect differences
between the instruments.

The Group and the Company recognise transfers between levels of the fair value
hierarchy as of the date of the event or change in circumstances that caused the
transfers.
 DRB-HICOM BERHAD
212 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

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 2017 therein are shown below:

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES

Subsidiary companies of
DRB-HICOM Berhad:

HICOM Holdings Berhad 100.00 100.00 Investment holding 31 March

Gadek (Malaysia) Berhad 100.00 100.00 Investment holding 31 March

@ PROTON Holdings Berhad 100.00 100.00 Investment holding 31 March
(“PROTON”)

DRB-HICOM Northern Gateway 100.00 100.00 Investment holding 31 March

Sdn. Bhd.

DRB-HICOM Auto Solutions 100.00 100.00 Vehicle importation, logistics, 31 March

Sdn. Bhd. vehicle pre-delivery
inspection, value added
services and the sale of
vehicles

DRB-HICOM Defence 100.00 100.00 Manufacturing, assembly, 31 March

Technologies Sdn. Bhd.
k DRB-HICOM SPV (Labuan)
Limited
supply, maintenance,
marketing, refurbishment or
retrofitting of military and
commercial vehicles,
equipment and spare parts
100.00 100.00 Special purpose vehicle for 31 March
funding

HICOM University College Sdn. 100.00 100.00 Higher educational and 31 March
Bhd. vocational training programme

PUSPAKOM Sdn. Bhd. 100.00 100.00 Inspection of commercial 31 March

(“PUSPAKOM”) vehicles for roadworthiness
and the inspection of other
vehicles

Motosikal Dan Enjin Nasional 81.00 81.00 Manufacturing, assembly and 31 March
Sdn. Bhd. (“MODENAS”) distribution of motorcycles,
related spare parts and
accessories
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 213

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
DRB-HICOM Berhad:
(Continued)

Bank Muamalat Malaysia Berhad 70.00 70.00 Islamic banking business and 31 March
related financial services

@
* $ Pos Malaysia Berhad 53.50 32.21 Provision of postal and related 31 March
services

Media City Ventures Sdn. Bhd. 51.00 51.00 Investment holding 31 March

* HICOM Trucks Sdn. Bhd. 100.00 100.00 Dormant 31 March

*$ HICOM Power Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under members’ voluntary
liquidation)

*$ DRB-HICOM Export 75.50 75.50 Dormant 31 March

Corporation Sdn. Bhd.
(under members’ voluntary
liquidation)

*$ Intrakota Komposit Sdn. Bhd. 70.00 70.00 Dormant 31 March

(under creditors’ voluntary
liquidation)

Subsidiary companies of
HICOM Holdings Berhad:

* Automotive Corporation Holdings 100.00 100.00 Investment holding 31 March

Sdn. Bhd.

* USF-HICOM Holdings Sdn. Bhd. 100.00 100.00 Investment holding 31 March

@ Edaran Otomobil Nasional 100.00 100.00 Investment holding and 31 March

Berhad (“EON”) distributor and retailer of Jeep
and other motor vehicles and
its related spare parts
including servicing of motor
vehicles

* Comtrac Sdn. Bhd. 100.00 100.00 Provision of construction 31 March

services
 DRB-HICOM BERHAD
214 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
HICOM Holdings Berhad:
(Continued)

Glenmarie Development 100.00 100.00 Building and leasing property 31 March

(Pahang) Sdn. Bhd.

Glenmarie Puchong Sdn. Bhd. 100.00 100.00 Property development 31 March

@ HICOM Automotive 100.00 100.00 Manufacturing and assembly 31 March

Manufacturers (Malaysia) Sdn. of motor vehicles and other
Bhd. road transport vehicles

HICOM Berhad 100.00 100.00 Management of projects, rental 31 March

of properties and investment
holding

HICOM Diecastings Sdn. Bhd. 100.00 100.00 Manufacturing and supply of 31 March
diecast parts for motorcycles,
automobiles and other
applications

HICOM Polymers Industry Sdn. 100.00 100.00 Trading of mobile receptacles 31 March
Bhd.

PHN Industry Sdn. Bhd.
100.00 100.00 Manufacturing stamped metal 31 March
parts, sub-assembly of
automotive components for the
motor industry and design and
manufacturing of dies

Proton City Development 100.00 100.00 Property development 31 March

Corporation Sdn. Bhd.

Alam Flora Sdn. Bhd. 97.37 97.37 Management of integrated 31 March

solid waste

Scott & English (Malaysia) 70.00 70.00 Investment holding 31 March

Sdn. Bhd.

HICOM-Teck See Manufacturing 51.00 51.00 Manufacturing and sale of 31 March

Malaysia Sdn. Bhd. thermo plastic and thermo
setting products
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 215

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
HICOM Holdings Berhad:
(Continued)

* HICOM Engineering Sdn. Bhd. 100.00 100.00 Dormant 31 March

* HICOM Petro-Pipes Sdn. Bhd. 100.00 100.00 Dormant 31 March

*$ Bukit Kledek Development Sdn. 100.00 100.00 Dormant 31 March

Bhd.
(under creditors’ voluntary
liquidation)

*$ HICOM Technical and 100.00 100.00 Dormant 31 March

Engineering Services Sdn. Bhd.
(under members’ voluntary
liquidation)

*$ NSE Development Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under creditors’ voluntary
liquidation)

* $ Scott & English Electronics - 70.00 Dormant 31 March

Holdings Sdn. Bhd.

Subsidiary companies of
Gadek (Malaysia) Berhad:

Mega Consolidated Sdn. Bhd. 100.00 100.00 Dormant 31 March

* Uni.Asia Capital Sdn. Bhd. 51.00 51.00 Dormant 31 March

*$ Ladang Gadek Development 100.00 100.00 Dormant 31 March

Sdn. Bhd.
(under members’ voluntary
liquidation)

*$ Ladang Kupang Development 100.00 100.00 Dormant 31 March

Sdn. Bhd.
(under members’ voluntary
liquidation)
 DRB-HICOM BERHAD
216 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
PROTON:

Lotus Advance Technologies 100.00 100.00 Investment holding 31 March

Sdn. Bhd.

Proton Hartanah Sdn. Bhd. 100.00 100.00 Investment holding 31 March

Proton Marketing Sdn. Bhd. 100.00 100.00 Investment holding 31 March

Perusahaan Otomobil Nasional 100.00 100.00 Manufacturing, assembly and 31 March

Sdn. Bhd. sale of motor vehicles and
related products

Proton Tanjung Malim Sdn. Bhd. 100.00 100.00 Assembly of motor vehicles 31 March
and related products

Subsidiary companies of
Lotus Advance Technologies
Sdn. Bhd.:

c Lotus Group International Limited 100.00 100.00 Investment holding 31 March

*d Symphony Lotus Limited 100.00 100.00 Investment holding 31 March

Miyazu (Malaysia) Sdn. Bhd. 66.00 66.00 Development, manufacturing 31 March

and sale of products and
services relating to dies,
moulds, jigs and stamping
activities
$ Proton Engineering Research 100.00 100.00 Dormant 31 March
Technology Sdn. Bhd.
(under creditors’ voluntary
liquidation)

Subsidiary company of Lotus

Group International Limited:
c Group Lotus Plc 100.00 100.00 Investment holding 31 March
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 217

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
Group Lotus Plc:

j Lotus Holdings Inc. 100.00 100.00 Investment holding 31 March

c Lotus Cars Limited 100.00 100.00 Manufacturing of motor 31 March

vehicles and engineering
consultancy services

c Lotus Body Engineering Limited 100.00 100.00 Dormant 31 March

c Lotus Motorsport Limited 100.00 100.00 Dormant 31 March

Subsidiary companies of Lotus

Cars Limited:

*g• Lotus Engineering Co., Ltd. 100.00 100.00 Engineering consultancy 31 December
(Shanghai) services
c Lotus Engineering Limited 100.00 100.00 Engineering consultancy 31 March
services

c Lotus Youngman UK Automotive 100.00 100.00 Dormant 31 March

Company Limited

Subsidiary companies of Lotus

Holdings Inc.:

j Lotus Cars USA Inc. 100.00 100.00 Sale and servicing of motor 31 March
vehicles

j Lotus Engineering Inc. 100.00 100.00 Engineering consultancy 31 March

services

Subsidiary company of Lotus

Body Engineering Limited:

c Lotus Lightweight Structures 100.00 100.00 Investment holding 31 March

Holdings Limited
 DRB-HICOM BERHAD
218 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary company of Lotus

Engineering Limited:

Lotus Engineering Malaysia Sdn. 100.00 100.00 Dormant 31 March

Bhd.

Subsidiary company of Lotus

Lightweight Structures
Holdings Limited:
c Lotus Lightweight Structures 100.00 100.00 Manufacturing of 31 March
Limited automotive components

Subsidiary company of
Symphony Lotus Limited:

g
• Beijing Lotus Cars Sales Co., Ltd. 100.00 100.00 Importation and distribution 31 December
of motor vehicles and
related spare parts

Subsidiary company of Proton

Hartanah Sdn. Bhd.:

Proton Properties Sdn. Bhd. 100.00 100.00 Property development and 31 March
related activities

Subsidiary companies of Proton

Marketing Sdn. Bhd.:

c Proton Cars (UK) Limited 100.00 100.00 Distribution of motor 31 March

vehicles
a Proton Cars Australia Pty. Limited 100.00 100.00 Importation and distribution 31 March
of motor vehicles and
related spare parts

Proton Edar Sdn. Bhd. 100.00 100.00 Sale of motor vehicles, 31 March
related spare parts and
accessories

i Proton Motors (Thailand) Company 100.00 100.00 Importation and distribution 31 March
Limited of motor vehicles and
related spare parts
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 219

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of Proton

Marketing Sdn. Bhd.:
(Continued)

Proton Parts Centre Sdn. Bhd. 100.00 100.00 Trading of motor vehicle 31 March
components, spare parts
and accessories
$
HICOM-Potenza Sports Cars Sdn. 100.00 100.00 Dormant 31 March
Bhd.
(under members’ voluntary
liquidation)

* f$ Proton Motor Pars Co. 100.00 100.00 Dormant 31 March

(Private Joint Stock)
(under members’ voluntary
liquidation)

Subsidiary company of Proton

Cars Australia Pty. Limited:

a$ Lotus Cars Australia Pty. Limited - 100.00 Dormant 31 March

Subsidiary companies of Proton

Edar Sdn. Bhd.:

Automotive Conversion Engineering 100.00 100.00 Conversion and 31 March

Sdn. Bhd. modification of motor
vehicles and distribution of
car accessories

EON Properties Sdn. Bhd. 100.00 100.00 Investment and 31 March

management of properties

Lotus Cars Malaysia Sdn. Bhd. 100.00 100.00 Sale of motor vehicles, 31 March
related spare parts and
accessories
e PT Proton Edar Indonesia 100.00 100.00 Sale of motor vehicles, 31 March
related spare parts and
accessories

h Proton Singapore Pte. Limited 100.00 100.00 Dormant 31 March

 DRB-HICOM BERHAD
220 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
Perusahaan Otomobil Nasional
Sdn. Bhd.:
b Proton Automobiles (China) Limited 100.00 100.00 Dormant 31 March

e PT Proton Cikarang Indonesia 100.00 100.00 Dormant 31 March

(under members’ voluntary
liquidation)

Subsidiary company of
DRB-HICOM Northern Gateway
Sdn. Bhd.:

Northern Gateway Infrastructure 100.00 100.00 Construction of 31 March

Sdn. Bhd. infrastructure works

Subsidiary companies of DRB-

HICOM Defence Technologies
Sdn. Bhd.:

Defence Services Sdn. Bhd. 100.00 100.00 Specialised defence 31 March

engineering works
including refurbishment,
upgrading of armoured
vehicles and supply of
spare parts
@
* Composites Technology Research 96.87 96.87 Investment holding and 31 March
Malaysia Sdn. Bhd. development and
production of aircraft
composites components

Subsidiary companies of
Composites Technology
Research Malaysia Sdn. Bhd.:

* CTRM Aero Composites Sdn. Bhd. 96.87 96.87 Manufacturing of 31 March

aerospace and non-
aerospace composite
components

* CTRM Aviation Sdn. Bhd. 96.87 96.87 Aircraft composites repair, 31 March
engineering and
maintenance services
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 221

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
Composites Technology
Research Malaysia Sdn. Bhd.:
(Continued)

* CTRM Systems Integration Sdn.
Bhd.
96.87 96.87 Design, research and 31 March
development of aircraft
avionic and the production
and marketing of market
mission systems equipment
and services

* CTRM Testing Laboratory Sdn. 96.87 96.87 Composites laboratory 31 March

Bhd. testing services

*$ Unmanned Systems Technology 96.87 49.40 Design, research and 31 March

Sdn. Bhd. development, production
and marketing of
unmanned aircraft systems

* Aerotech Design Malaysia Sdn. 96.87 96.87 Dormant 31 March

Bhd.

* CTRM Composites Engineering 96.87 96.87 Dormant 31 March

Sdn. Bhd.

*$ CTRM Excelnet Engineering 84.08 84.08 Dormant 31 March

Sdn. Bhd.
(under members’ voluntary
liquidation)

Subsidiary companies of
PUSPAKOM:

Flora Areana Sdn. Bhd. 100.00 100.00 Dormant 31 March

Puspakom Teknik Sdn. Bhd. 100.00 100.00 Dormant 31 March

Subsidiary company of
MODENAS:

Edaran Modenas Sdn. Bhd. 81.00 81.00 Distribution of motorcycles, 31 March

related spare parts and
accessories and servicing
of motorcycles
 DRB-HICOM BERHAD
222 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
Bank Muamalat Malaysia
Berhad:

Muamalat Invest Sdn. Bhd. 70.00 70.00 Provision of Islamic fund 31 March
management services

Muamalat Venture Sdn. Bhd. 70.00 70.00 Islamic venture capital 31 March

Muamalat Nominees (Asing) Sdn. 70.00 70.00 Dormant 31 March

Bhd.

Muamalat Nominees (Tempatan) 70.00 70.00 Dormant 31 March

Sdn. Bhd.

Subsidiary companies of Pos

Malaysia Berhad:

*$ Pos Malaysia & Services Holdings 53.50 32.21 Investment holding 31 March
Berhad

*$ PSH Capital Partners Sdn. Bhd. 53.50 32.21 Investment holding 31 March

*$ PSH Venture Capital Sdn. Bhd. 53.50 32.21 Investment holding 31 March

*$ Datapos (M) Sdn. Bhd. 53.50 32.21 Printing and insertion of 31 March
documents for mailing

*$ Pos Digicert Sdn. Bhd. 53.50 32.21 Licensed digital certification 31 March
(formerly known as Digicert Sdn. authority
Bhd.)
*$ Pos Ar-Rahnu Sdn. Bhd. 53.50 32.21 Ar-Rahnu (Islamic pawn 31 March
broking)

*$ Pos Aviation Sdn. Bhd. 53.50 100.00 Provision of ground 31 March

(formerly known as KL Airport handling, in-flight catering,
Services Sdn. Bhd.) cargo handling,
warehousing space and
supply chain management
including custom
forwarding agent services

*$ Effivation Sdn. Bhd. 53.50 32.21 Property investment 31 March

*$ PMB Properties Sdn. Bhd. 53.50 32.21 Property investment 31 March

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 223

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of Pos

Malaysia Berhad: (Continued)

*$ PSH Properties Sdn. Bhd. 53.50 32.21 Property investment 31 March

*$ Poslaju (M) Sdn. Bhd. 53.50 32.21 Dormant 31 March

*$ Pos Takaful Agency Sdn. Bhd. 53.50 32.21 Dormant 31 March

*$ PSH Allied Berhad 53.50 32.21 Dormant 31 March

Subsidiary company of Pos

Malaysia & Services Holdings
Berhad:

* b$ PSH Investment Holding (BVI) Ltd. 53.50 32.21 Dormant 31 March

Subsidiary company of PSH

Capital Partners Sdn. Bhd.:
$
* Prestige Future Sdn. Bhd. 53.50 32.21 Dormant 31 March

Subsidiary company of PSH

Venture Capital Sdn. Bhd.:

*$ PSH Express Sdn. Bhd. 53.50 32.21 Air courier services and 31 March
fulfilment business

Subsidiary company of PSH

Properties Sdn. Bhd.:

*$ Real Riviera Sdn. Bhd. 53.50 32.21 Property investment 31 March

Subsidiary companies of Pos

Aviation Sdn. Bhd.:

*$ Pos Asia Cargo Express Sdn. Bhd. 53.50 100.00 Provision of air cargo 31 March
(formerly known as DRB-HICOM transport
Asia Cargo Express Sdn. Bhd.)

*$ Pos Aviation Engineering Services 53.50 100.00 Provision of aircraft 31 March

Sdn. Bhd. maintenance and
(formerly known as KLAS engineering services
Engineering Services Sdn. Bhd.)
 DRB-HICOM BERHAD
224 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of Pos

Aviation Sdn. Bhd.: (Continued)

*$ Pos Logistics Berhad 53.50 100.00 Provision of total logistics 31 March

(formerly known as Konsortium services and inventory
Logistik Berhad) solutions

Subsidiary company of Pos Asia

Cargo Express Sdn. Bhd.:

*k$ Gading Sari Aviation Services Ltd. 53.50 100.00 Provision of aircraft leasing 31 March
services

Subsidiary companies of Pos

Logistics Berhad:

*$ Aman Freight (Malaysia) Sdn. Bhd. 53.50 100.00 Freight and forwarding and 31 March
other related services

*$ Cougar Logistics (Malaysia) Sdn. 53.50 100.00 Freight and forwarding, 31 March
Bhd. warehousing and other
related services

*$ Diperdana Kontena Sdn. Bhd. 53.50 100.00 Leasing of vehicles and 31 March
mechanical equipment

*$ KP Asia Auto Logistics Sdn. Bhd. 53.50 100.00 Warehousing and inventory 31 March
solutions, forwarding,
shipping and transport
agent

*$ KP Distribution Services Sdn. Bhd. 53.50 100.00 Distribution services 31 March

*$ Malaysian Shipping Agencies Sdn. 53.50 100.00 Shipping agency services, 31 March
Bhd. freight and forwarding and
other related services

*$ Pengangkutan Aspacs Sdn. Bhd. 53.50 100.00 Agent for freight, 31 March
forwarding and other
related services

*$ PNSL Berhad 53.50 100.00 Shipping agency and 31 March

chartering services

*$ Westport Distripark (M) Sdn. Bhd. 53.50 100.00 Business of a distribution 31 March
park
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 225

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of Pos

Logistics Berhad: (Continued)

*$ Asia Pacific Freight System Sdn. 53.50 100.00 Dormant 31 March

Bhd.

*$ Diperdana Selatan Sdn. Bhd. 53.50 100.00 Dormant 31 March

*$ Diperdana Terminal Services Sdn. 53.50 100.00 Dormant 31 March

Bhd.

*$ Diperdana Utara Sdn. Bhd. 53.50 100.00 Dormant 31 March

*$ Kaypi Logistics Depot Sdn. Bhd. 53.50 100.00 Dormant 31 March

*$ Kaypi Southern Terminal Sdn. Bhd. 53.50 100.00 Dormant 31 March

*$ North Terminal Sdn. Bhd. 53.50 100.00 Dormant 31 March

* i$# K.P.B. Sadao I.C.D. Company 53.50 100.00 Dormant 31 March

Limited

Subsidiary companies of Aman

Freight (Malaysia) Sdn. Bhd.:

*$ Aman Freight Services Sdn. Bhd. 53.50 100.00 Dormant 31 March

*$ Maya Perkasa (M) Sdn. Bhd. 53.50 100.00 Dormant 31 March

Subsidiary companies of
Malaysian Shipping Agencies
Sdn. Bhd.:

*$ Konsortium Logistik (Sabah) Sdn. 53.50 100.00 Forwarding and related 31 March
Bhd. services

*$ Konsortium Logistik (Sarawak) 53.50 100.00 Dormant 31 March

Sdn. Bhd.

Subsidiary companies of PNSL

Berhad:

*$ PNSL Risk Management Sdn. Bhd. 53.50 100.00 Insurance agency service 31 March

*$ Parcel Tankers Malaysia Sdn. Bhd. 27.29 51.00 Sea chartering services 31 March
 DRB-HICOM BERHAD
226 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary company of Media

City Ventures Sdn. Bhd.:

Media City Holdings Sdn. Bhd. 51.00 51.00 Investment holding 31 March

Subsidiary company of Media

City Holdings Sdn. Bhd.:

Media City Development Sdn. Bhd. 51.00 51.00 Construction, operation and 31 March
maintenance of
infrastructure and
broadcast system

Subsidiary companies of
Intrakota Komposit Sdn. Bhd.:

*$ Gemilang Komposit Auto Sdn. Bhd. 70.00 70.00 Dormant 31 March

(under members’ voluntary
liquidation)

*$ Intrakota Consolidated Berhad 47.34 47.34 Dormant 31 March

(under creditors’ voluntary
liquidation)

*$ Mega Komposit Auto Sdn. Bhd. 70.00 70.00 Dormant 31 March

(under members’ voluntary
liquidation)

*$ S.J. Binateknik Sdn. Bhd. 42.00 42.00 Dormant 31 March

(under creditors’ voluntary
liquidation)

*$ S.J. Kenderaan Sdn. Bhd. 70.00 70.00 Dormant 31 March

(under creditors’ voluntary
liquidation)

*$ Syarikat Pengangkutan 69.99 69.99 Dormant 31 March

Malaysia Sendirian Berhad
(under members’ voluntary
liquidation)

Subsidiary company of USF-

HICOM Holdings Sdn. Bhd.:

* DRB-HICOM Commercial Vehicles 100.00 100.00 Sale of motor vehicles and 31 March
Sdn. Bhd. related spare parts and
accessories
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 227

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)
Subsidiary company of
DRB-HICOM Commercial
Vehicles Sdn. Bhd.:

*$ HICOM Premier Malaysia Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under creditors’ voluntary
liquidation)

Subsidiary company of
HICOM Premier Malaysia Sdn.
Bhd.:

*$ Euro Truck & Bus (Malaysia) Sdn. 100.00 100.00 Dormant 31 March
Bhd.
(under creditors’ voluntary
liquidation)

Subsidiary company of
Automotive Corporation
Holdings Sdn. Bhd.:

* Automotive Corporation 100.00 100.00 Dealers of motor vehicles, 31 March

(Malaysia) Sdn. Bhd. related spare parts,
accessories and related
services

Subsidiary company of Scott &

English (Malaysia) Sdn. Bhd.:
$
HICOM United Leasing Sdn. Bhd. 70.00 70.00 Dormant 31 March
(under members’ voluntary
liquidation)

Subsidiary companies of
Comtrac Sdn. Bhd.:

* Comtrac Builders Sdn. Bhd. 100.00 100.00 Dormant 31 March

* Isti-Emas Sdn. Bhd. 100.00 100.00 Dormant 31 March

* Comtrac Glenview Sdn. Bhd. 51.00 51.00 Dormant 31 March

*$ Comtrac Development Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under members’ voluntary
liquidation)
 DRB-HICOM BERHAD
228 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
Comtrac Sdn. Bhd.:
(Continued)

*$ Comtrac Premises Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under members’ voluntary
liquidation)

*$ Comtrac Trading Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under creditors’ voluntary
liquidation)

*$ Comtrac-Sabkar 51.00 51.00 Dormant 31 March

Development Sdn. Bhd.
(under members’ voluntary
liquidation)

Subsidiary company of Comtrac

Glenview Sdn. Bhd.:

*$ Glenview Management 51.00 51.00 Dormant 31 March

Corporation Sdn. Bhd.
(under creditors’ voluntary
liquidation)

Subsidiary companies of EON:

DRB-HICOM EZ-Drive Sdn. Bhd. 100.00 100.00 Provision of car rental, 31 March
leasing of passenger and
commercial vehicles

EON Auto Mart Sdn. Bhd. 100.00 100.00 Sale of motor vehicles and 31 March
related spare parts and
servicing of vehicles

Euromobil Sdn. Bhd. 100.00 100.00 Sale of motor vehicles and 31 March
related spare parts and
servicing of vehicles

HICOM Auto Sdn. Bhd.
$ Multi Automotive Service and
Assist Sdn. Bhd.
100.00 100.00 Sale of motor vehicles and 31 March
related spare parts and
servicing of vehicles
- 100.00 Provision of emergency 31 March
roadside vehicle assistance
and supply of auto related
products and services
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 229

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of EON:

(Continued)

$ EONMobil Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under creditors’ voluntary
liquidation)

$ EON Technologies Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under creditors’ voluntary
liquidation)

$ EON Trading Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under members’ voluntary
liquidation)

Subsidiary company of DRB-

HICOM EZ-Drive Sdn. Bhd.:

$ DRB-HICOM Leasing Sdn. Bhd. 100.00 100.00 Provision of leasing of 31 March

passenger and commercial
vehicles

Subsidiary companies of HICOM

Berhad:

$ Dekad Kaliber Sdn. Bhd. 100.00 49.00 Provision of engineering 31 March

and construction services

Glenmarie Cove Development Sdn. 100.00 100.00 Property development 31 March

Bhd.

Glenmarie Properties Sdn. Bhd. 100.00 100.00 Investment holding and 31 March
provision of management
services

HB Property Development Sdn. 100.00 100.00 Property investment 31 March

Bhd.

* HICOM Builders Sdn. Bhd. 100.00 100.00 Civil engineering and 31 March
building construction
 DRB-HICOM BERHAD
230 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary companies of
Glenmarie Properties Sdn.
Bhd.:

Benua Kurnia Sdn. Bhd. 100.00 100.00 Property development 31 March

HICOM Indungan Sdn. Bhd. 100.00 100.00 Property development 31 March

Neraca Prisma Sdn. Bhd. 100.00 100.00 Property development 31 March

* HICOM Vertex Sdn. Bhd. 100.00 100.00 Property holding 31 March

Puncak Permai Sdn. Bhd. 58.00 58.00 Investment holding 31 March

* Kenyir Splendour Berhad 100.00 100.00 Dormant 31 March

*$ HICOM Megah Sdn. Bhd. 100.00 100.00 Investment holding 31 March

(under members’ voluntary
liquidation)

*$ Glenmarie Asset Management Sdn. 100.00 100.00 Dormant 31 March

Bhd.
(under members’ voluntary
liquidation)

$ Jubli Premis Sdn. Bhd. 100.00 100.00 Dormant 31 March

(under members’ voluntary
liquidation)

Subsidiary companies of HICOM

Indungan Sdn. Bhd.:

* Rebak Island Marina Berhad 100.00 100.00 Operation of a marina 31 March

resort and property
development

HICOM Tan & Tan Sdn. Bhd. 50.00 50.00 Dormant 31 March

Subsidiary company of Puncak

Permai Sdn. Bhd.:

Horsedale Development Berhad 70.60 70.60 Property development, 31 March

management of hotel and
golf resort
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 231

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary company of
Horsedale Development
Berhad:

Kesturi Hektar Sdn. Bhd. 70.60 70.60 Dormant 31 March

Subsidiary company of HICOM

Megah Sdn. Bhd.:

* h$ Corwin Holding Pte. Ltd. - 90.00 Owner and operator of a 31 March

shopping mall

Subsidiary company of HICOM

Builders Sdn. Bhd.:

*$ Imatex Management Services 100.00 100.00 Dormant 31 March

Sdn. Bhd.
(under creditors’ voluntary
liquidation)

Subsidiary company of HICOM

Polymers Industry Sdn. Bhd.:

HICOM HBPO Sdn. Bhd. 60.00 60.00 Assembly, manufacturing 31 March

and sale of front end
modules and related
components

Subsidiary companies of PHN

Industry Sdn. Bhd.:

DRB-HICOM Mechatronics Sdn. 100.00 100.00 Manufacturing, assembling 31 March

Bhd. and trading of automotive
electrical & electronics
components

$ Oriental Summit Industries Sdn. 100.00 100.00 Contract manufacturing of 31 March

Bhd. motorcycle and automobile
parts and components
 DRB-HICOM BERHAD
232 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
SUBSIDIARY COMPANIES
(Continued)

Subsidiary company of Oriental

Summit Industries Sdn. Bhd.:

$ Automotive Components 100.00 100.00 Dormant 31 March

Engineering Centre Sdn. Bhd.

Subsidiary company of Alam

Flora Sdn. Bhd.:

DRB-HICOM Environmental 97.37 97.37 Provision of integrated solid 31 March

Services Sdn. Bhd. waste collection, recycling
and integrated facility
management

Subsidiary company of
HICOM-Teck See Manufacturing
Malaysia Sdn. Bhd.:

*i HICOM Automotive Plastics 50.99 50.99 Manufacturing of plastic 31 March

(Thailand) Limited injected parts for
automotive industry

JOINT VENTURES

Joint ventures of
DRB-HICOM Berhad:

*$ Isuzu Service Center Sdn. Bhd. 73.69 - Provision of after sales 31 March
services, sale of spare
parts and automobile
workshop

Isuzu Malaysia Sdn. Bhd. 48.42 48.42 Importation, assembly and 31 March
distribution of motor
vehicles, components and
parts
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 233

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
JOINT VENTURES (Continued)

Joint ventures of
HICOM Holdings Berhad:

HICOM-HONDA Manufacturing 48.00 48.00 Dormant 31 March

Malaysia Sdn. Bhd.

HICOM-YAMAHA 45.00 45.00 Manufacturing and 31 March

Manufacturing Malaysia Sdn. Bhd. assembly of motorcycle
engines and parts

Joint ventures of PROTON:

*g Goldstar LOTUS Automobile Co., 50.00 50.00 Research, development 31 December

Ltd. and manufacture of
automobile key
components

Exedy (Malaysia) Sdn. Bhd. 45.00 45.00 Manufacturing of car 31 December

manual clutches, springs
and related parts

Joint venture of Group Lotus

Plc:

*c Lotus Finance Limited 49.90 49.90 Provision of motor vehicles 31 December

financing

Joint venture of Proton Edar

Sdn. Bhd.:

* Proton Commerce Sdn. Bhd. 50.00 50.00 Providing hire purchase or 31 March
leasing facilities in respect
of the purchase or use of
PROTON and other
vehicles

Joint venture of EON:

* Mitsubishi Motors Malaysia Sdn. 48.00 48.00 Importation, assembly, 31 March

Bhd. distribution and trading of
motor vehicles,
components, spare parts
and accessories
 DRB-HICOM BERHAD
234 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
JOINT VENTURES (Continued)

Joint venture of
Horsedale Development
Berhad:

HICOM-Gamuda 35.30 35.30 Housing and property 31 March

Development Sdn. Bhd. development and rental of
properties

ASSOCIATED COMPANIES

Associated companies of
DRB-HICOM Berhad:

* Honda Malaysia Sdn. Bhd. 34.00 34.00 Investment holding, 31 March

assembly, manufacturing
and sale of motor vehicles,
accessories and
components, trading of
imported motor vehicles
and related spare parts

$ Suzuki Malaysia Automobile Sdn. 40.00 40.00 Dormant 31 March

Bhd.
(Under members’ voluntary
liquidation)

Marak Unggul Sdn. Bhd. 29.99 29.99 Dormant 31 December

Associated companies of
HICOM Holdings Berhad:

ISUZU HICOM Malaysia Sdn. Bhd. 49.00 49.00 Manufacturing, assembly 31 March
and sale of commercial
vehicles

* Suzuki Motorcycle Malaysia 29.00 29.00 Investment holding and 31 March

Sdn. Bhd. manufacturing, assembly
and distribution of
motorcycles and parts
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 235

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

Effective Equity Financial

Name of Company Interest Principal Activities Year End
2017 2016
% %
ASSOCIATED COMPANIES
(Continued)

Associated company of
PROTON:

* Marutech Elastomer Industries 25.00 25.00 Manufacturing of 31 March

Sdn. Bhd. automotive parts

Associated company of Proton

Cars (UK) Limited:

*c Proton Finance Limited 49.99 49.99 Provision of dealer and 31 December

customer financing

Associated company of Proton

Automobiles (China) Limited:

*g Goldstar Proton Automobiles Co., 49.00 49.00 Dormant 31 December

Limited

Associated companies of
Pos Malaysia Berhad:

*$ CEN Sdn. Bhd. 22.74 13.69 Investment holding 31 December

*$ Elpos Print Sdn. Bhd. 21.40 12.88 General printing business 31 December
and is one of the suppliers
of the Group providing
printing services

Associated company of EON:

* SRT-EON Security Services Sdn. 40.00 40.00 Provision of security 30 June

Bhd. services

Associated company of Oriental

Summit Industries Sdn. Bhd.:

$ Faurecia HICOM Emissions Control 35.00 35.00 Manufacturing, assembling, 31 December

Technologies (M) Sdn. Bhd. delivering and selling of
cold end and hot end
emissions control systems
components
 DRB-HICOM BERHAD
236 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

3 COMPANIES IN THE GROUP (Continued)

@ All shares in these companies have been charged for bank borrowings as disclosed in Notes 38
and 44.

* These companies in the Group are audited by other firms of auditors other than Ernst & Young,
Malaysia and member firms of Ernst & Young Global.

$ The changes in the effective equity interest/reclassification of these companies in the Group are as
disclosed in Notes 51 and 52.

# Inclusive of the effective beneficial interest of 27.28% (2016: 51%) held in trust.

• Due to the local statutory regulation’s requirement, the financial year end of those subsidiary
companies incorporated in People’s Republic of China is different from the Group’s financial year
end.

a The country of incorporation is Australia.

b The country of incorporation is British Virgin Islands.

c The country of incorporation is England.

d The country of incorporation is Hong Kong.

e The country of incorporation is Indonesia.

f The country of incorporation is Iran.

g The country of incorporation is People’s Republic of China.

h The country of incorporation is Singapore.

i The country of incorporation is Thailand.

j The country of incorporation is United States of America.

k The place of incorporation is Federal Territory of Labuan.

All the other companies are incorporated in Malaysia.

As mutually agreed by respective shareholders, the financial year end of certain joint ventures and
associated companies do not coincide with the Group.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 237

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

4 REVENUE
4 REVENUE

Group Company
Group Company
2017 2016 2017 2016
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
RM’000 RM’000 RM’000 RM’000
Sale of goods 6,998,058 7,491,492 - -
Sale of goods 6,998,058 7,491,492 - -
Rendering of services 2,769,293 1,750,230 - -
Rendering of services 2,769,293 1,750,230 - -
Construction contracts 972,746 1,559,233 - -
Construction contracts 972,746 1,559,233 - -
Banking 1,204,160 1,202,488 - -
Banking 1,204,160 1,202,488 - -
Sale of land and development
Sale of land and development
properties 114,077 169,498 - -
properties 114,077 169,498 - -
Dividend income from subsidiary
Dividend income from subsidiary
companies, a joint venture and
companies, a joint venture and
associated companies - - 806,252 335,781
associated companies - - 806,252 335,781
Interest income from subsidiary
Interest income from subsidiary
companies - - 76,970 50,161
companies - - 76,970 50,161
Rental income from subsidiary
Rental income from subsidiary
companies and an associated
companies and an associated
company - - 14,093 13,492
company - - 14,093 13,492
12,058,334 12,172,941 897,315 399,434
12,058,334 12,172,941 897,315 399,434

5 COST OF SALES
5 COST OF SALES

Group
Group
2017 2016
2017 2016
RM’000 RM’000
RM’000 RM’000
Cost of inventories 6,789,849 7,470,088
Cost of inventories 6,789,849 7,470,088
Cost of services rendered 2,248,693 1,384,232
Cost of services rendered 2,248,693 1,384,232
Cost of construction contracts and sale of land and development
Cost of construction contracts and sale of land and development
properties 871,253 1,515,748
properties 871,253 1,515,748
Cost of banking 646,235 631,479
Cost of banking 646,235 631,479
10,556,030 11,001,547
10,556,030 11,001,547
 DRB-HICOM BERHAD
238 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS – 31 MARCH 2017

6 (LOSS)/PROFIT BEFORE TAXATION

(Loss)/profit before taxation is arrived at after charging/(crediting) the following:

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000

Allowance for financing of

customers (net) 25 75,778 68,165 - -
Allowance for doubtful
debts (net of write
backs):
- trade and other
receivables 55 24,006 18 -
- project development
receivables - 120,500 - -
Amortisation of:
- concession assets 14 11,819 12,182 - -
- intangible assets 21 231,386 178,579 - -
- prepaid lease
properties 15 1,393 1,388 - -
Auditors’ remuneration 6,546 6,911 300 270
Depreciation of property,
plant and equipment 13 667,640 544,742 251 252
Directors’ emoluments 7 6,599 10,579 915 925
Finance costs: 9
- bank borrowings 348,309 367,897 108,117 133,015
- subsidiary companies - - 46,815 13,953
- other finance charges 11,503 10,369 1,110 2,486
- unwinding of discount 11,093 3,828 2,666 1,761
Financing written off 1,689 18,321 - -
Impairment loss of (net):
- intangible assets 21 55,593 81,473 - -
- investment in
subsidiary companies - - 360,154 581,000
- investment in an
associated company - - 2,900 530
- investment securities:
available-for-sale 16,899 22,825 - -
- property, plant and
equipment 13 8,049 4,355 - -
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 239

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

6 (LOSS)/PROFIT BEFORE TAXATION (Continued)

(Loss)/profit before taxation is arrived at after charging/(crediting) the following: (Continued)

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000

Inventories written
off/down (net of write
backs) 17,730 29,659 - -
Loss on re-measurement
of the previously held
equity interest in an
associated company at
its acquisition-date fair
value 130,221 - - -
Provision for concession
assets 34,967 31,941 - -
Provision for liabilities and
charges (net) 39 61,218 284,105 - -
Realised foreign exchange
differences (net) 31,483 (13,181) - -
Rental of plant and
machinery and equipment 44,836 95,867 - -
Rental of premises 122,591 114,074 - -
Research and
development expenditure:
- write off of intangible
assets 21 71,348 - - -
- others 27,501 21,481 - -
Staff costs 8 2,215,979 1,782,349 - -
Unrealised foreign
exchange differences
(net) 81,915 (32,996) - -
Write off of property, plant
and equipment 13 3,729 2,805 - -
Amortisation of deferred
income 37 (79,125) (59,361) - -
Dividend income:
- subsidiary companies - - (695,159) (182,600)
- joint venture - - (797) (468)
- associated companies - - (110,296) (152,713)
- other investment (1,328) - - -
 DRB-HICOM BERHAD
240 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

6 (LOSS)/PROFIT BEFORE TAXATION (Continued)

(Loss)/profit before taxation is arrived at after charging/(crediting) the following: (Continued)

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000

(Gain)/loss on fair value

adjustments of:
- investment properties 16 (15,647) (15,420) (6,416) 8,134
- investment securities:
financial assets at fair
value through profit or
loss (4,812) - - -
Interest income on:
- short term deposits (57,375) (53,126) (8,207) (6,749)
- subsidiary companies - - (76,970) (50,161)
Marked to market
(gain)/loss on derivatives
(net) 33(b) (54,025) 75,519 - -
Net gain on disposals of:
- assets held for sale (4,213) (12,267) - -
- investment properties (68) - (500) -
- investment securities:
available-for-sale (17,983) (10,250) - -
- investment securities:
financial assets at fair
value through profit or
loss (907) (617) - -
- property, plant and
equipment (52,339) (9,290) - -
- subsidiary companies 52(i) (398,257) - - -
Rental income (29,064) (43,936) (14,093) (13,492)
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 241

NOTES TO THE FINANCIAL STATEMENTS – 31 MARCH 2017

7 DIRECTORS’ EMOLUMENTS

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Non-executive Directors:
- fees 905 919 745 751
- allowances and other benefits 1,858 1,297 170 174
Executive Directors:
- salaries, bonuses, fees,
allowances and other benefits 3,429 7,918 - -
- defined contribution plan 407 445 - -
6,599 10,579 915 925

The estimated value of benefits-in-kind received by Directors amounted to RM320,176 (2016:

RM126,658).

8 STAFF COSTS

Group
2017 2016
Note RM’000 RM’000

Salaries, wages, bonuses, allowances and other benefits 1,953,792 1,593,360

Defined contribution plan 248,641 171,330
Defined benefit plan 41(d) 13,546 17,659
2,215,979 1,782,349

9 FINANCE COSTS

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

Interest expense on
borrowings 356,757 374,438 154,932 146,968
Hire purchase and finance
lease charges 2,492 2,921 - -
Total interest expense 359,249 377,359 154,932 146,968
 DRB-HICOM BERHAD
242 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

9 FINANCE COSTS (Continued)

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000

Less: Interest expense

capitalised in
- property, plant
and equipment 13(c) (9,568) (6,136) - -
- intangible assets 21(d) (964) (1,138) - -
- property
development
costs 17(d) (408) (2,188) - -
(10,940) (9,462) - -
Recognised in profit or
loss 348,309 367,897 154,932 146,968
Other finance charges 11,503 10,369 1,110 2,486
Unwinding of discount 11,093 3,828 2,666 1,761
370,905 382,094 158,708 151,215

10 TAXATION

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
Statement of
Comprehensive Income:
Current taxation
- Malaysian tax 66,648 29,566 4,981 4,060
- Foreign tax 1,229 (70) - -
- (Over)/under provision
in respect of prior
financial year (4,737) 16,509 (2,053) (540)
63,140 46,005 2,928 3,520

Deferred taxation 22
- Current year (34,594) 37,991 (631) (822)
- Under/(over) provision
in respect of prior
financial year 9,672 (34,505) - -
(24,922) 3,486 (631) (822)

Total taxation charge 38,218 49,491 2,297 2,698

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 243

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

10 TAXATION (Continued)

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
Statement of
Comprehensive Income:
(Continued)
Deferred taxation related
to other comprehensive
income 22 (3,660) 3,412 - -

Income tax is calculated at the statutory tax rate of 24% (2016: 24%) of the estimate assessable
profit for the year.

The explanation of the relationship between taxation charge and (loss)/profit before taxation is as
follows:

Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000
Numerical reconciliation of
effective taxation charge
(Loss)/profit before
taxation (222,184) (822,130) 358,816 (386,574)

Tax calculated at the

Malaysian tax rate of
24% (2016: 24%) (53,324) (197,311) 86,116 (92,778)
Tax effects of:
- different tax rates 2,453 9,060 - -
- expenses not deductible
for tax purposes 150,817 112,556 111,734 176,603
- income not subject to tax (233,840) (105,202) (193,500) (80,587)
- tax allowances not recognised 91,749 105,179 - -
- tax losses not recognised 167,691 212,195 - -
- temporary differences
not recognised 8,637 5,278 - -
- utilisation of previously
unrecognised tax allowances (7,121) (3,293) - -
Sub-total carried forward 127,062 138,462 4,350 3,238
 DRB-HICOM BERHAD
244 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

10 TAXATION (Continued)

The explanation of the relationship between taxation charge and (loss)/profit before taxation is as
follows: (Continued)

Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000
Numerical reconciliation of
effective taxation charge
(Continued)

Tax effects of: (Continued)

Sub-total brought forward 127,062 138,462 4,350 3,238
- utilisation of previously
unrecognised temporary
differences (3,020) (2,650) - -
- share of results of joint ventures (9,152) (8,733) - -
- share of results of associated
companies (81,607) (59,592) - -
(Over)/under provision of current
taxation in respect of prior
financial year (4,737) 16,509 (2,053) (540)
Under/(over) provision of deferred
taxation in respect of prior
financial year 9,672 (34,505) - -

Taxation charge 38,218 49,491 2,297 2,698

Unabsorbed tax losses, unutilised capital allowances, unutilised reinvestment allowances,

unutilised investment tax allowances and other deductible temporary differences of the Group
which are available for set-off against future taxable profit for which the tax effects have not been
recognised in the financial statements are shown below:

Group
2017 2016
RM’000 RM’000

Unabsorbed tax losses 4,819,117 4,127,578

Unutilised capital allowances 2,936,050 2,580,945
Unutilised reinvestment allowances 2,278,045 2,268,489
Unutilised investment tax allowances 34,731 -
Other deductible temporary differences 186,595 190,123
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 245

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

11 DIVIDENDS

Dividends paid and proposed are as follows:

Group and Company

2017 2016
RM’000 RM’000
In respect of the financial year ended 31 March 2016:
Single tier first and final dividend of 2.0 sen per share, paid on 1
November 2016 (2015: Single tier final dividend of 4.5 sen per
share) 38,665 86,996

The Directors recommend the payment of a single tier first and final dividend of 1.0 sen per share
amounting to RM19,332,371 in respect of the financial year ended 31 March 2017, subject to the
approval of shareholders at the forthcoming Annual General Meeting of the Company.

12 LOSS PER SHARE

The basic and diluted loss per share is calculated by dividing the Group's net loss attributable to
Owners of the Company by the number of shares in issue during the financial year.

Group
2017 2016
(Restated)

Net loss attributable to Owners of the Company (RM’000) (454,401) (992,763)

Number of ordinary shares in issue (’000) 1,933,237 1,933,237

Basic and diluted loss per share (sen) (23.50) (51.35)

 246
DRB-HICOM BERHAD
ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

13 PROPERTY, PLANT AND EQUIPMENT

Buildings,
golf course Furniture Capital
Freehold Leasehold and Plant and Motor Office and work-in-
land land improvements machinery vehicles equipment fittings progress Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
2017
At 1 April 2016 1,121,039 116,572 2,103,072 1,372,610 275,988 217,973 52,391 448,405 5,708,050
Acquisitions of subsidiary
companies 51(i) 4,208 171,631 212,851 63,240 49,682 97,882 11,236 42,807 653,537
Disposals of subsidiary companies 52(i) - - (55) - - (133) (24) - (212)
Additions - 1,650 38,433 59,701 57,699 199,885 16,054 195,082 568,504
Disposals (3,886) (530) (7,453) (14,392) (13,957) (3,001) (1,555) (323) (45,097)
Written off 6 - - (1,989) (345) (580) (292) (198) (325) (3,729)
Depreciation 6 - (8,164) (128,510) (313,079) (69,990) (121,538) (26,359) - (667,640)
(Impairment losses)/reversal of
impairment 6 - (22) (3,333) (862) (14) 24 (121) (3,721) (8,049)
Currency translation differences 3,764 961 7,213 (4,034) 88 2,654 (273) (757) 9,616
Reclassification - 4,070 76,489 181,216 - - - (261,775) -
Transfer from investment properties 16 - 10,800 1,670 - - - - - 12,470
Sub-total carried forward 1,125,125 296,968 2,298,388 1,344,055 298,916 393,454 51,151 419,393 6,227,450
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

13 PROPERTY, PLANT AND EQUIPMENT (Continued)

Buildings,
golf course Furniture Capital
Freehold Leasehold and Plant and Motor Office and work-in-
land land improvements machinery vehicles equipment fittings progress Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
2017 (Continued)
Sub-total brought forward 1,125,125 296,968 2,298,388 1,344,055 298,916 393,454 51,151 419,393 6,227,450
Transfer (to)/from intangible assets 21 - - - - - (2,030) - 55,391 53,361
Transfer from inventories - - - 5,410 36,471 - - - 41,881
Transfer from assets held for sale 580 3,600 3,320 - - - - - 7,500
Transfer from land held for property
development 17(a) 6,500 - - - - - - - 6,500
Transfer from property development
costs 17(b) 15,782 - - - - - - - 15,782
At 31 March 2017 1,147,987 300,568 2,301,708 1,349,465 335,387 391,424 51,151 474,784 6,352,474

Cost 1,164,862 546,057 4,327,748 7,017,019 808,859 1,911,834 342,393 500,162 16,618,934
Accumulated depreciation - (244,873) (1,825,588) (5,340,837) (468,850) (1,518,984) (290,106) - (9,689,238)
Accumulated impairment losses (16,875) (616) (200,452) (326,717) (4,622) (1,426) (1,136) (25,378) (577,222)
Net book value 1,147,987 300,568 2,301,708 1,349,465 335,387 391,424 51,151 474,784 6,352,474
DRB-HICOM BERHAD
ANNUAL REPORT 2017
247
 248
DRB-HICOM BERHAD
ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

13 PROPERTY, PLANT AND EQUIPMENT (Continued)

Buildings,
golf course Furniture Capital
Freehold Leasehold and Plant and Motor Office and work-in-
land land improvements machinery vehicles equipment fittings progress Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
2016
At 1 April 2015 1,112,435 118,967 2,082,722 1,352,195 261,814 335,418 46,101 253,302 5,562,954
Acquisitions of subsidiary companies 51(iii) - - 908 - - 4 88 - 1,000
Additions - 663 54,795 61,346 78,953 48,290 8,827 454,732 707,606
Disposals - - (554) (5,494) (15,268) (2,284) (2,493) - (26,093)
Written off 6 - - (167) (2,308) (42) (195) (79) (14) (2,805)
Depreciation 6 - (3,058) (102,156) (271,812) (52,544) (95,430) (19,742) - (544,742)
Impairment losses 6 - - (2,963) (896) (422) (68) (6) - (4,355)
Currency translation differences 8 - 4,917 546 3,110 1,992 489 1,120 12,182
Reclassification - - 66,309 239,033 - (63,813) 19,206 (260,735) -
Transfer to investment properties 16 - - (1,295) - - - - - (1,295)
Transfer to intangible assets 21 - - - - - (5,941) - - (5,941)
Transfer from inventories - - - - 387 - - - 387
Transfer from assets held for sale 4,429 - - - - - - - 4,429
Sub-total carried forward 1,116,872 116,572 2,102,516 1,372,610 275,988 217,973 52,391 448,405 5,703,327
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

13 PROPERTY, PLANT AND EQUIPMENT (Continued)

Buildings,
golf course Furniture Capital
Freehold Leasehold and Plant and Motor Office and work-in-
land land improvements machinery vehicles equipment fittings progress Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
GROUP
2016 (Continued)
Sub-total brought forward 1,116,872 116,572 2,102,516 1,372,610 275,988 217,973 52,391 448,405 5,703,327
Transfer from land held for property
development 17(a) 4,167 - - - - - - - 4,167
Adjustments (a) - - 556 - - - - - 556
At 31 March 2016 1,121,039 116,572 2,103,072 1,372,610 275,988 217,973 52,391 448,405 5,708,050

Cost 1,137,914 144,650 3,862,102 7,085,623 526,053 1,292,036 301,969 448,405 14,798,752
Accumulated depreciation - (27,494) (1,588,925) (5,385,743) (248,138) (1,072,490) (248,565) - (8,571,355)
Accumulated impairment losses (16,875) (584) (170,105) (327,270) (1,927) (1,573) (1,013) - (519,347)
Net book value 1,121,039 116,572 2,103,072 1,372,610 275,988 217,973 52,391 448,405 5,708,050

(a) The adjustments were related to gain on fair value adjustment arising upon the transfer of property, plant and equipment to investment properties in a subsidiary company.
DRB-HICOM BERHAD
ANNUAL REPORT 2017
249
 DRB-HICOM BERHAD
250 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

13 PROPERTY, PLANT AND EQUIPMENT (Continued)

Furniture
Plant and Motor Office and
machinery vehicles equipment fittings Total
Note RM’000 RM’000 RM’000 RM’000 RM’000
COMPANY
2017
At 1 April 2016 200 9 150 12 371
Depreciation 6 (200) - (42) (9) (251)
At 31 March 2017 - 9 108 3 120

Cost 12,154 525 393 42 13,114

Accumulated depreciation (12,154) (516) (285) (39) (12,994)
Net book value - 9 108 3 120

2016
At 1 April 2015 400 9 194 20 623
Depreciation 6 (200) - (44) (8) (252)
At 31 March 2016 200 9 150 12 371

Cost 12,154 525 393 42 13,114

Accumulated depreciation (11,954) (516) (243) (30) (12,743)
Net book value 200 9 150 12 371

(b) Certain property, plant and equipment of the Group with a net book value of
RM1,950,134,000 (2016: RM1,846,659,000) have been charged as security for bank
borrowings (Notes 38 and 44).

(c) During the financial year, the borrowing costs capitalised for the purpose of construction of
plants and buildings amounted to RM9,568,000 (2016: RM6,136,000) at the interest rates
range from 5.74% to 6.46% (2016: 6.17% to 6.70%) per annum.

(d) The title deeds for certain landed properties of a subsidiary company with net carrying value
amounting to RM1,440,000 (2016: Nil) have yet to be issued in the name of the subsidiary
company as at 31 March 2017 by the relevant authorities.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 251

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

13 PROPERTY, PLANT AND EQUIPMENT (Continued)

(e) The leasehold land of the Group includes leasehold land of a postal subsidiary company
with a lease period of 60 years commencing from 1 January 1992. The cost capitalised of
RM208,435,000 is in respect of the lease for the first 30 years as stipulated in the agreement
signed between the postal subsidiary company and the Government. The cost in respect of
the remaining 30 year lease period is subject to the agreement with the authorities, no later
than 31 December 2021, and thereafter will be recognised accordingly.

(f) The details of motor vehicles, plant and machinery, and office equipment acquired under
hire purchase and finance lease agreements included under property, plant and equipment
of the Group are as follows:

Group
2017 2016
RM’000 RM’000
Additions during the financial year:
- Plant and machinery 1,093 485
- Motor vehicles 2,611 20,573
- Office equipment - 1,905
3,704 22,963

Net book value at financial year end:

- Plant and machinery 26,577 36,172
- Motor vehicles 25,274 24,216
- Office equipment - 1,377
51,851 61,765

14 CONCESSION ASSETS

Group
2017 2016
Note RM’000 RM’000

At beginning of the financial year 227,051 230,651

Effect of changes in estimates 40 1,920 8,582
Amortisation 6 (11,819) (12,182)
At end of the financial year 217,152 227,051

Cost 280,219 278,299

Accumulated amortisation (63,067) (51,248)
Net book value 217,152 227,051
 DRB-HICOM BERHAD
252 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

14 CONCESSION ASSETS (Continued)

(a) Certain concession assets of the Group with a net book value of RM197,937,000 (2016:
RM216,892,000) have been charged as security for bank borrowings (Notes 38 and 44).

(b) The details of concession assets of the Group acquired under hire purchase and finance
lease agreements are as follows:

Group
2017 2016
RM’000 RM’000
Net book value at financial year end 19,215 10,159

15 PREPAID LEASE PROPERTIES

Short Long
term term
leasehold leasehold
land land Total
Note RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 8,334 43,690 52,024
Additions - 182 182
Amortisation 6 (582) (811) (1,393)
At 31 March 2017 7,752 43,061 50,813

Cost 9,588 46,523 56,111

Accumulated amortisation (1,836) (3,462) (5,298)
Net book value 7,752 43,061 50,813

2016
At 1 April 2015 8,916 44,496 53,412
Amortisation 6 (582) (806) (1,388)
At 31 March 2016 8,334 43,690 52,024

Cost 9,588 46,341 55,929

Accumulated amortisation (1,254) (2,651) (3,905)
Net book value 8,334 43,690 52,024

Certain prepaid lease properties of the Group with net book value of RM2,644,000 (2016:
RM5,740,000) have been charged as security for bank borrowings (Notes 38 and 44).
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 253

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

16 INVESTMENT PROPERTIES

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000

At fair value
At beginning of the
financial year 617,955 560,325 136,355 144,316
Acquisitions of subsidiary
companies 51(i) 31,100 - - -
Disposals of subsidiary
companies 52(i) (427,812) - - -
Additions 4,428 22,991 41 173
Adjustment - - (1,358) -
Disposals (627) - (10,800) -
Changes in fair value 6 15,647 15,420 6,416 (8,134)
Currency translation
differences 21,952 28,736 - -
Transfer from property
development cost 17(b) 1,216 - - -
Transfer (to)/from property,
plant and equipment 13 (12,470) 1,295 - -
Transfer to assets held for
sale 27 (4,500) (10,812) - -
At end of the financial year 246,889 617,955 130,654 136,355

The disclosures on income and

expenses of investment
properties are as below:

Rental income 22,998 34,509 14,093 13,492

Direct operating expenses

from investment
properties that generated
rental income during the
financial year 8,100 11,916 1,806 960

Direct operating expenses

from investment
properties that did not
generate rental income
during the financial year 636 519 - -
 DRB-HICOM BERHAD
254 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

16 INVESTMENT PROPERTIES (Continued)

(a) Certain investment properties of the Group and of the Company with carrying value of
RM60,252,000 (2016: RM454,495,000) and RM111,154,000 (2016: RM106,055,000)
respectively have been charged as security for bank borrowings (Notes 38 and 44).

(b) The fair value measurement of the investment properties is disclosed in Note 59.

17 PROPERTY DEVELOPMENT ACTIVITIES

(a) Land held for property development

Group
2017 2016
Note RM’000 RM’000
At cost
At beginning of the financial year
Land 712,840 510,092
Development costs 272,301 217,994
985,141 728,086
Add: Costs incurred during the financial year
- Land - 148,875
- Development costs 52,095 27,183
52,095 176,058
Transfer from property development costs 17(b)
- Land 17,708 54,645
- Development costs 133,782 30,519
151,490 85,164
Transfer to property, plant and equipment 13
- Land (6,133) (772)
- Development costs (367) (3,395)
(6,500) (4,167)
At end of the financial year 1,182,226 985,141

At end of the financial year

Land 724,415 712,840
Development costs 457,811 272,301
1,182,226 985,141
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 255

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

17 PROPERTY DEVELOPMENT ACTIVITIES (Continued)

(b) Property development costs

Group
2017 2016
Note RM’000 RM’000
At cost
At beginning of the financial year
Land 89,984 149,472
Development costs 461,718 435,320
Accumulated costs charged to profit or loss (267,557) (264,097)
284,145 320,695

Less: Completed developments in previous

years
- Land (1,120) (5,225)
- Development costs (43,318) (97,920)
- Accumulated costs charged to profit
or loss 44,438 103,145
- -
Add: Costs incurred during the financial year
- Land - 657
- Development costs 138,067 161,437
138,067 162,094
Transfer to land held for property
development 17(a)
- Land (17,708) (54,645)
- Development costs (133,782) (30,519)
(151,490) (85,164)

Transfer to inventories
- Land (2,448) (275)
- Development costs (14,650) (6,600)
(17,098) (6,875)

Transfer to investment properties 16

- Land (432) -
- Development costs (784) -
(1,216) -

Transfer to property, plant and equipment 13

- Land (15,241) -
- Development costs (541) -
(15,782) -
 DRB-HICOM BERHAD
256 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

17 PROPERTY DEVELOPMENT ACTIVITIES (Continued)

(b) Property development costs (Continued)

Group
2017 2016
RM’000 RM’000

Less: Costs recognised as expense in profit

or loss during the financial year (96,440) (106,605)
At end of the financial year 140,186 284,145

At end of the financial year

Land 53,035 89,984
Development costs 406,710 461,718
Accumulated costs charged to profit or loss (319,559) (267,557)
140,186 284,145

(c) Certain land held for property development and property development costs of the Group
with carrying value of RM496,325,000 (2016: RM378,404,000) have been charged as
security for bank borrowings (Notes 38 and 44).

(d) During the financial year, the borrowing costs capitalised in property development costs
amounting to RM408,000 (2016: RM2,188,000) at the interest rates range from 5.00% to
8.37% (2016: 5.70% to 8.14%) per annum.

18 SUBSIDIARY COMPANIES

Company
2017 2016
Note RM’000 RM’000

Unquoted shares, at cost 8,778,271 8,748,409

Quoted shares, at cost (d) 605,170 -
Less: Accumulated impairment losses (989,831) (629,677)
Total 8,393,610 8,118,732

(a) The details of the subsidiary companies are listed in Note 3.

(b) As part of conditions precedent to the acquisition of 70% equity in Bank Muamalat Malaysia
Berhad (“BMMB”), Bank Negara Malaysia requires the Company to reduce its investment in
BMMB to 40%. The Company is considering various options to address this matter.

(c) Certain shares of subsidiary companies with carrying value of RM2,819,324,000 (2016:
RM2,549,308,000) have been charged as security for bank borrowings (Notes 38 and 44).
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 257

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

18 SUBSIDIARY COMPANIES (Continued)

(d) It is in respect of investment in a former associated company, which now has become a
subsidiary company, following the completion of acquisition on 13 September 2016 as set
out in Note 51(i)(b).

(e) The Group’s subsidiary companies that have material non-controlling interest (“NCI”), based
on effective equity interest are as follows:

Effective equity interest held by NCI

2017 2016
Pos Malaysia Berhad 46.50% -
Bank Muamalat Malaysia Berhad 30.00% 30.00%
Horsedale Development Berhad 29.40% 29.40%
 258
DRB-HICOM BERHAD
ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

18 SUBSIDIARY COMPANIES (Continued)

(e) The Group’s subsidiary companies that have material NCI, based on effective equity interest are as follows: (Continued)

Bank Muamalat Horsedale

Malaysia Pos Malaysia Development
Berhad Berhad Berhad Others Total
RM’000 RM’000 RM’000 RM’000 RM’000
2017
Carrying value of NCI 656,079 807,167 91,288 168,563 1,723,097
Net profit for the financial year
attributable to NCI 41,214 11,451 1,552 19,442 73,659

2016 (Restated)
Carrying value of NCI 617,046 - 103,852 187,461 908,359
Net profit/(loss) for the financial year
attributable to NCI 40,145 - 8,026 (3,894) 44,277
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

18 SUBSIDIARY COMPANIES (Continued)

(f) The summarised financial information (before inter-company eliminations) of these subsidiary companies that have material NCI, not adjusted
for the ownership interest held by the Group, are as follows:

Bank Muamalat Horsedale

Malaysia Pos Malaysia Development
Berhad Berhad Berhad
RM’000 RM’000 RM’000
As at 31 March 2017
Non-current assets 17,140,492 1,609,397 296,518
Current assets 6,385,850 1,655,092 160,747
Non-current liabilities (1,191,608) (90,705) (85,804)
Current liabilities (20,173,819) (1,235,093) (64,658)
Net assets 2,160,915 1,938,691 306,803

Financial year ended 31 March 2017

Revenue 1,221,765 1,271,271 57,283
Net profit for the financial year 140,565 45,387 5,249

Cash flows generated from operating activities 82,959 177,515 21,531

Cash flows (used in)/generated from investing activities (438,496) 8,788 4,572
Cash flows generated from/(used in) financing activities 336,361 (39,229) (50,967)
Net (decrease)/increase in cash and cash equivalents (19,176) 147,074 (24,864)

Dividends paid to NCI - - 14,636

The financial result and cash flows of Pos Malaysia Berhad is for the period from October 2016 to March 2017.
DRB-HICOM BERHAD
ANNUAL REPORT 2017
259
 260
DRB-HICOM BERHAD
ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

18 SUBSIDIARY COMPANIES (Continued)

(f) The summarised financial information (before inter-company eliminations) of these subsidiary companies that have material NCI, not adjusted
for the ownership interest held by the Group, are as follows: (Continued)

Bank Muamalat Horsedale

Malaysia Development
Berhad Berhad
RM’000 RM’000
As at 31 March 2016
Non-current assets 16,903,084 283,517
Current assets 5,743,777 210,204
Non-current liabilities (495,601) (83,979)
Current liabilities (20,152,776) (59,480)
Net assets 1,998,484 350,262

Financial year ended 31 March 2016

Revenue 1,212,694 124,486
Net profit for the financial year 134,456 27,366

Cash flows (used in)/generated from operating activities (801,589) 31,832

Cash flows generated from investing activities 664,346 4,178
Cash flows used in financing activities (20,600) (10,244)
Net (decrease)/increase in cash and cash equivalents (157,843) 25,766

Dividends paid to NCI - 2,933

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 261

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

19 JOINT VENTURES

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

Share of net assets 413,826 451,023 - -

Unquoted shares, at cost - - 4,686 4,686

(a) The details of the joint ventures, all of which are unquoted, are listed in Note 3.

(b) None of the Group’s joint ventures are material individually or in aggregate to the financial
position, financial performance and cash flows of the Group.

(c) The summarised financial information of the joint ventures, not adjusted for the proportion of
ownership interest held by the Group, are as follows:

2017 2016
RM’000 RM’000

Non-current assets 1,746,867 1,830,742

Current assets 1,923,822 1,626,169
Non-current liabilities (1,690,541) (1,721,284)
Current liabilities (1,095,008) (784,272)
Net assets 885,140 951,355

Revenue 2,695,738 2,672,113

Expenses (2,654,423) (2,606,299)
Profit before taxation 41,315 65,814
Taxation (19,110) (18,152)
Net profit representing total comprehensive income 22,205 47,662
 DRB-HICOM BERHAD
262 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

19 JOINT VENTURES (Continued)

(d) The summarised financial information based on Group’s interest in joint ventures for the
years are as follows:

Group
2017 2016
RM’000 RM’000

Non-current assets 853,458 892,162

Current assets 939,722 799,421
Non-current liabilities (845,116) (860,494)
Current liabilities (534,238) (380,066)
Net assets 413,826 451,023

Net profit representing total comprehensive income 9,575 22,059

Cash dividends received by the Group 39,281 18,556

(e) Capital commitments for property, plant and equipment

- contracted 172 552

- not contracted 6,719 4,644
6,891 5,196

(f) There is no material contingency relating to joint ventures.

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 263

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

20 ASSOCIATED COMPANIES

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

Share of net assets 756,543 1,364,616 - -

Quoted shares, at cost - - - 605,170
Unquoted shares, at cost - - 64,603 71,800
Less: Accumulated impairment
losses - - (3,433) (530)
756,543 1,364,616 61,170 676,440

(a) The details of the associated companies are listed in Note 3.

(b) The Group’s material associated companies, based on effective equity interest are as
follows:

Effective equity interest held by the Group

2017 2016
Honda Malaysia Sdn. Bhd. 34.00% 34.00%
Pos Malaysia Berhad - 32.21%

On 13 September 2016, Pos Malaysia Berhad became a 53.50% owned subsidiary

company of the Group as disclosed in Note 51(i)(b).

(c) Capital commitments for property, plant and equipment

Group
2017 2016
RM’000 RM’000

- contracted 19,107 15,403

- not contracted 29,601 66,048
48,708 81,451

(d) There is no material contingency relating to associated companies.

(e) The accumulated share of losses that have not been recognised by the Group amounted to
RM11,869,000 (2016: RM11,868,000). The Group has no obligation in respect of these
losses.

(f) In the previous financial year, the investment in an associated company with carrying value
of RM605,170,000 had been charged as security for bank borrowings (Notes 38 and 44).
 264

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

DRB-HICOM BERHAD
ANNUAL REPORT 2017

20 ASSOCIATED COMPANIES (Continued)

(g) The summarised financial information of the associated companies, not adjusted for the proportion of ownership interest held by the Group, are as
follows:

Honda
Malaysia Pos Malaysia
Sdn. Bhd. Berhad Others Total
RM’000 RM’000 RM’000 RM’000
As at 31 March 2017
Non-current assets 1,003,796 - 122,425 1,126,221
Current assets 2,136,240 - 508,769 2,645,009
Non-current liabilities (226,424) - (10,360) (236,784)
Current liabilities (1,315,092) - (209,888) (1,524,980)
Net assets 1,598,520 - 410,946 2,009,466

Financial year ended 31 March 2017

Revenue 8,415,910 810,992 1,086,345 10,313,247
Expenses (7,531,369) (756,313) (1,083,785) (9,371,467)
Profit before taxation 884,541 54,679 2,560 941,780
Taxation (224,188) (16,099) (814) (241,101)
Net profit representing total comprehensive income 660,353 38,580 1,746 700,679

The financial result of Pos Malaysia Berhad is for the period from April 2016 to September 2016.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

20 ASSOCIATED COMPANIES (Continued)

(g) The summarised financial information of the associated companies, not adjusted for the proportion of ownership interest held by the Group, are as
follows: (Continued)

Honda
Malaysia Pos Malaysia
Sdn. Bhd. Berhad Others Total
RM’000 RM’000 RM’000 RM’000
As at 31 March 2016
Non-current assets 804,254 700,923 123,749 1,628,926
Current assets 1,776,544 1,167,823 556,527 3,500,894
Non-current liabilities (263,131) (36,169) (7,369) (306,669)
Current liabilities (1,055,100) (716,981) (241,966) (2,014,047)
Net assets 1,262,567 1,115,596 430,941 2,809,104

Financial year ended 31 March 2016

Revenue 7,744,308 1,717,439 1,054,032 10,515,779
Expenses (7,024,520) (1,624,938) (1,085,537) (9,734,995)
Profit/(loss) before taxation 719,788 92,501 (31,505) 780,784
Taxation (141,312) (29,408) (4,695) (175,415)
Net profit/(loss) representing total comprehensive income/(loss) 578,476 63,093 (36,200) 605,369
DRB-HICOM BERHAD
ANNUAL REPORT 2017
265
 266

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

DRB-HICOM BERHAD
ANNUAL REPORT 2017

20 ASSOCIATED COMPANIES (Continued)

(h) The summarised financial information based on Group’s interest in associated companies for the years are as follows:

Honda
Malaysia Pos Malaysia
Sdn. Bhd. Berhad Others Total
RM’000 RM’000 RM’000 RM’000
As at 31 March 2017
Group’s share of net assets represents carrying value of
Group’s interest in associated companies 543,498 - 213,045 756,543

Group’s share of net profit representing total comprehensive

income 224,520 12,427 2,960 239,907

Cash dividends received by the Group 110,296 20,241 4,020 134,557

As at 31 March 2016
Group’s share of net assets 429,273 359,333 234,299 1,022,905
Intangible asset - 341,711 - 341,711
Carrying value of Group’s interest in associated companies 429,273 701,044 234,299 1,364,616

Group’s share of net profit/(loss) representing total

comprehensive income/(loss) 196,682 20,322 (11,998) 205,006

Cash dividends received by the Group 130,050 22,663 14,348 167,061

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

21 INTANGIBLE ASSETS

Capitalised
development
Product cost of
Customer Computer development work-in- Dealership Brand
Goodwill relationship software expenditure progress network name Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 402,156 4,127 140,381 660,166 414,034 17,748 41,710 1,680,322
Acquisitions of subsidiary
companies 51(i) 357,396 - - - - - - 357,396
Disposals of subsidiary companies 52(i) - - (41) - - - - (41)
Additions - - 9,231 15,897 166,575 - - 191,703
Transfer from/(to) property, plant
and equipment 13 - - 2,377 365 (56,103) - - (53,361)
Amortisation 6 - (2,360) (36,246) (186,864) - (5,916) - (231,386)
Impairment loss 6 - - (303) (55,290) - - - (55,593)
Written off 6 - - - - (71,348) - - (71,348)
Currency translation differences - - - (3,837) (1,332) - - (5,169)
Reclassification - - 8,951 234,704 (243,655) - - -
At 31 March 2017 759,552 1,767 124,350 665,141 208,171 11,832 41,710 1,812,523

Cost 834,081 9,436 436,927 2,244,506 216,923 41,412 41,710 3,824,995

Accumulated amortisation - (7,669) (312,506) (1,244,209) - (29,580) - (1,593,964)
Accumulated impairment losses (74,529) - (71) (335,156) (8,752) - - (418,508)
Net book value 759,552 1,767 124,350 665,141 208,171 11,832 41,710 1,812,523
DRB-HICOM BERHAD
ANNUAL REPORT 2017
267
 268

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

DRB-HICOM BERHAD
ANNUAL REPORT 2017

21 INTANGIBLE ASSETS (Continued)

Capitalised
development
Product cost of
Customer Computer development work-in- Dealership Brand
Goodwill relationship software expenditure progress network name Total
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2016 (Restated)
At 1 April 2015 365,580 6,487 133,536 450,652 370,844 23,664 41,710 1,392,473
Acquisitions of subsidiary
companies 51(iii) 104,086 - - - - - - 104,086
Additions - - 16,602 102 402,951 - - 419,655
Transfer from property, plant and
equipment 13 - - 5,636 305 - - - 5,941
Amortisation 6 - (2,360) (35,085) (135,218) - (5,916) - (178,579)
Impairment loss 6 (67,510) - - (13,963) - - - (81,473)
Currency translation differences - - (1) 46,528 (28,308) - - 18,219
Reclassification - - 19,693 311,760 (331,453) - - -
At 31 March 2016 402,156 4,127 140,381 660,166 414,034 17,748 41,710 1,680,322

Cost 476,685 9,436 416,556 2,006,614 422,786 41,412 41,710 3,415,199

Accumulated amortisation - (5,309) (276,175) (1,061,252) - (23,664) - (1,366,400)
Accumulated impairment losses (74,529) - - (285,196) (8,752) - - (368,477)
Net book value 402,156 4,127 140,381 660,166 414,034 17,748 41,710 1,680,322
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 269

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

21 INTANGIBLE ASSETS (Continued)

(a) In the previous financial years, core deposits with cost of RM61,400,000 had been fully
amortised.

(b) Impairment testing for goodwill, brand name and capitalised development cost of work-in-
progress is done annually. Their carrying values were allocated to 8 (2016: 7) of the Group’s
cash-generating units (“CGU”), for impairment testing as follows:
2017 2016
(Restated)
RM’000 RM’000

Postal services 355,844 -

Integrated logistics services 264,734 264,734
Automotive 246,475 454,446
Construction and leasing 105,639 104,086
Airport ground handling services 16,648 16,648
Banking 13,456 11,349
Defence services 4,665 4,665
Leasing of motor vehicles 1,972 1,972
1,009,433 857,900

The recoverable amounts of certain CGUs were determined based on value in use
calculations using cash flow projections prepared based on financial budgets approved by
Management covering a 5-year period. The pre-tax discount rate applied to the cash flow
projections range from 9.00% to 17.00% (2016: 3.79% to 12.00%) per annum. The
forecasted growth rates used to extrapolate cash flows beyond the 5-year period range from
0% to 4% (2016: 0% to 2%). The budgeted gross margins were determined based on past
performance and their expectations of market development. The discount rates used are
pre-tax and reflect specific risks relating to the relevant segments.

The recoverable amounts of certain other CGUs were determined based on valuations
performed by an independent valuer. The objective is to estimate the price that would be
received in an orderly transaction between market participants at the reporting date under
current market condition. The impairment test was performed by comparing the CGU’s
carrying amount with its fair value less costs of disposal.

Based on management’s impairment review, impairment loss of RM55,593,000 (2016:

RM81,473,000) was recognised for intangible assets during the year.

(c) Customer relationship is stated at cost and amortised on a straight line basis over a period of
3 years (2016: 4 years).

(d) During the financial year, the borrowing costs capitalised for the purpose of development of
intangible assets amounted to RM964,000 (2016: RM1,138,000) at the interest rate of 5.00%
(2016: 5.00%) per annum.
 DRB-HICOM BERHAD
270 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

22 DEFERRED TAXATION

Group
2017 2016
Note RM’000 RM’000

At beginning of the financial year 25,384 32,296

Acquisitions of subsidiary companies 51(i) (35,881) -
Disposals of subsidiary companies 52(i) (268) -
Currency translation differences - (14)
Credited/(charged) to profit or loss 10
- Intangible assets 1,992 (14,072)
- Investment properties (11,716) 1,580
- Property, plant and equipment (10,314) (4,991)
- Property development expenditure 7,424 (4,621)
- Provisions 53,651 43,851
- Receivables (5,696) (21,403)
- Tax losses (10,419) (3,830)
24,922 (3,486)

Credited/(charged) to other comprehensive

income 10
- Fair value changes of investment securities:
available-for-sale 3,667 (3,383)
- Fair value adjustments on property, plant
equipment and prepaid lease properties - (28)
- Actuarial gains and losses on defined benefits
plan (7) (1)
3,660 (3,412)

At end of the financial year 17,817 25,384

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 271

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

22 DEFERRED TAXATION (Continued)

Group
2017 2016
RM’000 RM’000

Subject to income tax

Deferred tax assets (before offsetting)
Investment securities 10,753 -
Investment properties 393 453
Property, plant and equipment 97,411 81,204
Property development expenditure 13,410 5,936
Provisions 348,989 272,546
Receivables 2,730 9,315
Tax losses 16,306 26,725
489,992 396,179
Offsetting (342,800) (304,460)
Deferred tax assets (after offsetting) 147,192 91,719

Deferred tax liabilities (before offsetting)

Intangible assets (172,583) (174,576)
Investment properties (18,063) (6,136)
Investment securities (7,181) (95)
Property, plant and equipment (269,221) (184,022)
Property development expenditure (84) (34)
Receivables (5,043) (5,932)
(472,175) (370,795)
Offsetting 342,800 304,460
Deferred tax liabilities (after offsetting) (129,375) (66,335)

Presented after appropriate offsetting as follows:

Deferred tax assets 147,192 91,719
Deferred tax liabilities (129,375) (66,335)
17,817 25,384
 DRB-HICOM BERHAD
272 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

22 DEFERRED TAXATION (Continued)

Company
2017 2016
Note RM’000 RM’000

At beginning of the financial year (1,278) (2,100)

(Charged)/credited to profit or loss 10
- Investment properties (686) 609
- Property, plant and equipment 1,317 213
631 822

At end of the financial year (647) (1,278)

Subject to income tax

Deferred tax assets (before offsetting)

Property, plant and equipment 2,217 900

Offsetting (2,217) (900)
Deferred tax assets (after offsetting) - -

Deferred tax liabilities (before offsetting)

Investment properties (2,864) (2,178)

Offsetting 2,217 900
Deferred tax liabilities (after offsetting) (647) (1,278)
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 273

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

23 INVESTMENT SECURITIES

(a) Investment securities: financial assets at fair value through profit or loss

Non-
Banking banking
Held by a
banking Held by a
subsidiary subsidiary
company company Total
RM’000 RM’000 RM’000
Group
2017
Private equity funds 197,208 175 197,383

Non-current 197,208 - 197,208

Current - 175 175
197,208 175 197,383

2016
Private equity funds 186,355 - 186,355

Non-current 186,355 - 186,355

 DRB-HICOM BERHAD
274 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

23 INVESTMENT SECURITIES (Continued)

(b) Investment securities: available-for-sale, at fair value

Non-
Banking banking
Held by a Held by
banking other
subsidiary subsidiary
company companies Total
RM’000 RM’000 RM’000
Group
2017
Government securities and treasury bills
Malaysian government investment certificates 3,531,945 - 3,531,945

Quoted securities
Equity securities, in Malaysia 159,858 155 160,013

Unquoted securities
Islamic private debt securities, in Malaysia 2,386,622 - 2,386,622
Cagamas bonds 25,385 - 25,385
Equity securities, in Malaysia 5,381 45,998 51,379
Foreign Islamic private debt securities and
22,225 - 22,225
sukuk
Total 6,131,416 46,153 6,177,569

Non-current 5,040,929 46,153 5,087,082

Current 1,090,487 - 1,090,487
6,131,416 46,153 6,177,569
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 275

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

23 INVESTMENT SECURITIES (Continued)

(b) Investment securities: available-for-sale, at fair value (Continued)

Non-
Banking banking
Held by a Held by
banking other
subsidiary subsidiary
company companies Total
RM’000 RM’000 RM’000
Group
2016
Government securities and treasury bills
Malaysian government investment certificates 2,871,545 - 2,871,545

Quoted securities
Equity securities, in Malaysia 190,028 155 190,183
Equity securities, outside Malaysia 5,577 - 5,577

Unquoted securities
Islamic private debt securities, in Malaysia 2,539,330 - 2,539,330
Cagamas bonds 61,222 - 61,222
Equity securities, in Malaysia 5,381 46,048 51,429
Foreign Islamic private debt securities and
27,083 - 27,083
sukuk
Total 5,700,166 46,203 5,746,369

Non-current 5,058,434 46,203 5,104,637

Current 641,732 - 641,732
5,700,166 46,203 5,746,369
 DRB-HICOM BERHAD
276 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

23 INVESTMENT SECURITIES (Continued)

(c) Investment securities: held-to-maturity, at amortised cost - Banking

Group
2017 2016
RM’000 RM’000

Non-current
Unquoted Islamic private debt securities, in Malaysia 142,168 140,607

24 OTHER ASSETS

Group
2017 2016
RM’000 RM’000

Golf memberships, at cost less accumulated impairment 516 441

25 BANKING RELATED ASSETS - FINANCING OF CUSTOMERS

Group
2017 2016
RM’000 RM’000
Cash line 670,262 824,516
Term financing
- Home financing 14,985,909 14,543,463
- Hire purchase receivables 886,833 1,034,092
- Syndicated financing 1,669,415 1,358,170
- Leasing receivables 4,997 9,038
- Other term financing 10,622,280 10,125,420
Revolving credits 1,207,755 1,171,887
Claims on customers under acceptance credits 695,741 564,524
Staff financing 191,970 174,808
Sukuk 110,349 154,605
Trust receipts 50,675 101,943
Ar-Rahnu 103,328 63,779
Sub-total carried forward 31,199,514 30,126,245
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 277

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

25 BANKING RELATED ASSETS - FINANCING OF CUSTOMERS (Continued)

Group
2017 2016
RM’000 RM’000

Sub-total brought forward 31,199,514 30,126,245

Less: Unearned income (16,174,674) (15,509,352)
15,024,840 14,616,893
Less: Allowance for impaired financing:
- Collective assessment (236,159) (208,439)
- Individual assessment (76,865) (81,078)
Total net financing 14,711,816 14,327,376

Non-current 10,772,103 10,600,485

Current 3,939,713 3,726,891
14,711,816 14,327,376

(a) The table below shows the credit quality for financing of customers exposed to credit risk,
based on the banking subsidiary company's internal credit ratings:

Group
2017 2016
RM’000 RM’000

Neither past due nor impaired

- Good 14,046,988 13,589,681
- Satisfactory 336,584 402,996
1 to 60 days past due not impaired 200,899 213,683
61 to 90 days past due not impaired 88,449 84,063
289,348 297,746
Impaired 351,920 326,470
15,024,840 14,616,893

Financing of customers that are neither past due nor impaired

Financing of customers which are neither past due nor impaired are identified into 2 grades.
Good grade refers to financing of customers which are neither past due nor impaired in the
last 6 months and have never undergone any rescheduling or restructuring exercise
previously. Satisfactory grade refers to financing of customers which may have been past due
but not impaired or impaired during the last 6 months or have undergone a rescheduling or
restructuring exercise previously.
 DRB-HICOM BERHAD
278 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

25 BANKING RELATED ASSETS - FINANCING OF CUSTOMERS (Continued)

(a) (Continued)

Financing of customers that are past due but not impaired

Past due but not impaired financing of customers refers to where the customer has failed to
make principal or profit payment or both after the contractual due date for more than one day
but less than 3 months.

Financing of customers that are impaired

Classification of impaired financing and provisioning is made on the financing assets upon
determination of the existence of objective evidence of impairment and categorisation into
individual assessment and collective assessment in accordance with Note 2.9(iv).

(b) The movements of the allowance for financing during the financial year are as follows:

Collective Individual
assessment assessment Total
Note RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 208,439 81,078 289,517
Charged 6 351,926 30,753 382,679
Write backs 6 (292,349) (14,552) (306,901)
Written off (31,857) (20,414) (52,271)
At 31 March 2017 236,159 76,865 313,024

2016
At 1 April 2015 239,227 42,631 281,858
Charged 6 419,481 50,307 469,788
Write backs 6 (395,965) (5,658) (401,623)
Written off (54,304) (6,202) (60,506)
At 31 March 2016 208,439 81,078 289,517
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 279

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

25 BANKING RELATED ASSETS - FINANCING OF CUSTOMERS (Continued)

(c) Collateral and other credit enhancements

The amount and type of collateral required depends on assessment of credit risk of the
counterparty. Guidelines are implemented regarding the acceptability of types and collateral
and valuation parameters. The collateral obtained by the banking subsidiary company are
charges over properties and vehicles under financing, pledges over investment securities and
charges over the business assets.

The financial effect of collateral (i.e. quantification of the extent to which collateral and other
credit enhancements mitigate credit risk) held for financing of customer for the banking
subsidiary company is at 84.70% as at 31 March 2017 (2016: 100.60%).

As at 31 March 2017, the fair value of collateral that the banking subsidiary company holds
relating to financing of customers individually determined to be impaired amounted to
RM56,077,000 (2016: RM84,028,000). The collateral consists of cash, securities, letters of
guarantee, and properties.

(d) Repossessed collateral

It is the banking subsidiary company's policy that states disposal of repossessed collateral to
be carried out in an orderly manner. The proceeds are used to reduce or repay the
outstanding balance of financing. Collateral repossessed are subject to disposal as soon as it
is practical to do so. The banking subsidiary company does not occupy repossessed
properties for its own business use.

26 BANKING RELATED ASSETS - STATUTORY DEPOSIT WITH BANK NEGARA MALAYSIA

The statutory deposit is maintained with Bank Negara Malaysia in compliance with Section 26(2)(c)
and Section 26(3) of the Central Bank of Malaysia Act 2009, the amount of which is determined at set
percentages of total eligible liabilities.

27 ASSETS HELD FOR SALE

Group
2017 2016
Note RM’000 RM’000
Investment properties 16 4,500 10,812
Other assets, represent golf membership - 7
4,500 10,819
 DRB-HICOM BERHAD
280 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

28 INVENTORIES

Group
2017 2016
RM’000 RM’000

Raw materials 477,426 505,853

Work-in-progress 458,575 379,916
Finished goods 1,075,941 618,815
Parts and accessories 235,245 228,169
Completed units of unsold properties/land 38,265 27,874
2,285,452 1,760,627

Certain inventories of the Group have been charged as security for bank borrowings (Notes 38 and
44).

29 TRADE AND OTHER RECEIVABLES

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000

Trade receivables 2,092,430 1,568,746 - -

Less: Allowance for
doubtful debts (149,611) (180,343) - -
1,942,819 1,388,403 - -

Other receivables 1,332,135 1,446,959 957 2,264

Less: Allowance for
doubtful debts (318,474) (291,445) - -
1,013,661 1,155,514 957 2,264

Amounts due from

subsidiary companies - - 1,220,736 1,142,888
Amounts due from joint
ventures 76,950 79,971 - -
Amounts due from
associated companies 40,874 42,187 699 688
Amounts due from
related parties 247 3,390 - -
Amounts due from
customers on contracts 49 624,628 1,394,196 - -
Sub-total carried forward 742,699 1,519,744 1,221,435 1,143,576
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 281

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

29 TRADE AND OTHER RECEIVABLES (Continued)

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

Sub-total brought forward 742,699 1,519,744 1,221,435 1,143,576

Accrued billings 174,293 104,357 - -
Deposits 50,438 60,959 156 175
Prepayments 199,261 150,021 559 416
1,166,691 1,835,081 1,222,150 1,144,167

Total 4,123,171 4,378,998 1,223,107 1,146,431

Non-current 264,144 104,589 - -

Current 3,859,027 4,274,409 1,223,107 1,146,431
4,123,171 4,378,998 1,223,107 1,146,431

(a) The currency exposure profile of trade and other receivables is as follows:

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 3,596,620 4,067,708 1,223,107 1,146,431

- US Dollar 315,078 162,033 - -
- Pound Sterling 184,291 103,487 - -
- Euro 17,082 16,163 - -
- Japanese Yen 3,265 3,320 - -
- Indonesian Rupiah 2,803 3,136 - -
- Thai Baht 1,306 9,305 - -
- Singapore Dollar - 10,354 - -
- Other currencies 2,726 3,492 - -
4,123,171 4,378,998 1,223,107 1,146,431

(b) Trade receivables are non-interest bearing. The Group’s normal trade credit terms range from
14 days to 180 days (2016: 14 days to 180 days). They are recognised at their original invoice
amounts which represent their fair values on initial recognition. Other credit terms are
assessed and approved on a case by case basis.

(c) Included in the amounts due from subsidiary companies are balances of RM1,030,913,000
(2016: RM1,034,159,000) which are interest bearing and unsecured. The interest rates range
from 3.45% to 7.50% (2016: 3.47% to 7.50%) per annum.

(d) All other amounts due from joint ventures, associated companies and related parties are non-
interest bearing, unsecured and repayable on demand.
 DRB-HICOM BERHAD
282 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

29 TRADE AND OTHER RECEIVABLES (Continued)

(e) The ageing analysis of the Group’s trade receivables is as follows:

Group
2017 2016
RM’000 RM’000

Neither past due nor impaired 1,342,898 805,785

1 to 30 days past due not impaired 274,944 181,028
31 to 60 days past due not impaired 126,377 112,328
61 to 90 days past due not impaired 50,454 139,397
91 to 120 days past due not impaired 38,521 57,878
More than 121 days past due not impaired 109,625 91,987
599,921 582,618
Impaired 149,611 180,343
2,092,430 1,568,746

Receivables that are neither past due nor impaired

Trade receivables that are neither past due nor impaired are creditworthy debtors with good
payment records with the Group. None of the Group’s trade receivables that are neither past
due nor impaired have been renegotiated during the financial year.

Receivables that are past due but not impaired

The Group has trade receivables amounting to RM599,921,000 (2016: RM582,618,000) that
are past due at the reporting date but not impaired. At the reporting date, majority of the trade
receivables of the Group are active customers with healthy business relationship, in which the
Management is of the view that the amounts are recoverable based on past payments history.

Receivables that are impaired

The Group’s trade receivables that are impaired at the reporting date and the movements of
the allowance for doubtful debts of trade receivables during the financial year are as follows:

Group
2017 2016
RM’000 RM’000

At beginning of the financial year 180,343 165,628

Acquisitions of subsidiary companies 25,443 -
Disposals of subsidiary companies (9,028) -
Charged 21,185 15,579
Write backs (53,498) (416)
Written off (12,003) (3,828)
Currency translation differences (2,831) 3,380
At end of the financial year 149,611 180,343
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 283

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

29 TRADE AND OTHER RECEIVABLES (Continued)

(e) (Continued)

Trade receivables that are individually determined to be impaired at the reporting date relate
to debtors that have defaulted payments.

(f) The movements of the allowance for doubtful debts of other receivables during the financial
year are as follows:
Group
2017 2016
RM’000 RM’000

At beginning of the financial year 291,445 158,341

Acquisitions of subsidiary companies 1,019 -
Disposals of subsidiary companies (366) -
Charged 32,701 129,343
Written off (7,244) -
Currency translation differences 919 3,761
At end of the financial year 318,474 291,445

(g) Certain receivables of the Group have been charged as security for bank borrowings (Notes
38 and 44).

30 SHORT TERM DEPOSITS

(a) Deposits with licensed banks and financial institutions of the Group and of the Company with
maturity profile above 3 months amounting to RM11,242,000 (2016: RM36,396,000) and
RM542,000 (2016: RM11,112,000) respectively are excluded from cash and cash
equivalents.

(b) Certain deposits with licensed banks of the Group amounting to RM830,665,000 (2016:
RM1,018,558,000) have been charged as security for bank borrowings (Notes 38 and 44).

(c) The weighted average effective annual interest rates of short term deposits at the end of the
financial year is as follows:

Group Company
2017 2016 2017 2016
% % % %
Deposits with licensed banks 2.98 3.08 3.21 3.21

(d) The deposits of the Group and of the Company have an average maturity period of 41 days
(2016: 43 days) and 18 days (2016: 50 days) respectively.
 DRB-HICOM BERHAD
284 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

30 SHORT TERM DEPOSITS (Continued)

(e) The currency exposure profile of short term deposits is as follows:

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 1,280,225 1,397,264 223,771 239,534

- Indonesian Rupiah 29,523 1,258 - -
- US Dollar 22,183 - - -
- Thai Baht 25 14,719 - -
- Pound Sterling - 6,466 - -
- Other currencies 575 846 - -
1,332,531 1,420,553 223,771 239,534

31 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 RM81,671,000 (2016:
RM68,503,000).

(c) Included in cash and bank balances of the Group are cash restricted for payment of project
expenses held by a subsidiary company amounting to RM146,215,000 (2016:
RM19,906,000).

(d) The currency exposure profile of cash and bank balances is as follows:

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 1,228,773 480,811 33,707 11,909

- US Dollar 278,846 2,061 - -
- Pound Sterling 12,776 9,982 - -
- Thai Baht 9,711 64 - -
- Indonesian Rupiah 8,984 34,056 - -
- Australian Dollar 2,397 5,626 - -
- Euro 2,078 6,583 - -
- Other currencies 766 11,816 - -
1,544,331 550,999 33,707 11,909
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 285

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

32 BANKING RELATED ASSETS - CASH AND SHORT-TERM FUNDS

Group
2017 2016
RM’000 RM’000

Money at call and interbank placements maturing within one

month 900,914 821,890
Cash and balances with banks and other financial institutions 126,828 186,501
Licensed Islamic banks 22,183 60,710
1,049,925 1,069,101

(a) The currency exposure profile of cash and short-term funds is as follows:

Group
2017 2016
RM’000 RM’000

- Ringgit Malaysia 559,386 587,498

- US Dollar 455,532 428,181
- Japanese Yen 20,602 38,329
- Euro 4,637 7,501
- Pound Sterling 3,116 4,344
- Other currencies 6,652 3,248
1,049,925 1,069,101

(b) The weighted average effective profit rates of money at call and interbank placements
maturing within 1 month is 2.50% (2016: 2.40%) per annum.

(c) The weighted average effective profit rates and weighted average maturity of cash and
balances with banks and other financial institution is 1% (2016: 1%) per annum and 62 days
(2016: 62 days) respectively.
 DRB-HICOM BERHAD
286 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

33 DERIVATIVE FINANCIAL INSTRUMENTS

Contract/ Fair value

Notional
Value Assets Liabilities
RM’000 RM’000 RM’000
Group
2017
Financial instruments at fair value through profit or
loss
Currency forward foreign exchange contracts 1,762,164 57,227 2,284
Currency swaps foreign exchange contracts 1,545,210 3,502 54,090
Islamic profit rate swap 2,000,000 - 8,490
Capped cross currency interest rate swap 579,467 765 -
5,886,841 61,494 64,864

Group
2016
Financial instruments at fair value through profit or
loss
Currency forward foreign exchange contracts 1,087,269 21,828 34,416
Currency swaps foreign exchange contracts 580,728 19,123 15,238
Islamic profit rate swap 3,675,000 - 13,903
Capped cross currency interest rate swap 651,900 - 34,789
5,994,897 40,951 98,346

(a) There is no significant change for the financial derivatives in respect of the following since the
last financial year ended 31 March 2016:

(i) the credit risk, market risk and liquidity risk associated with these financial derivatives;

(ii) the cash requirements of the financial derivatives; and

(iii) the policy in place for mitigating or controlling the risks associated with these financial
derivatives.

(b) Disclosure of gain/loss arising from fair value changes of financial derivatives

During the current financial year, the Group recognised a total net gain of RM54,025,000
(2016: net loss of RM75,519,000) in profit or loss arising from the fair value changes on the
currency forward foreign exchange contracts, currency swaps foreign exchange contracts,
Islamic profit rate swap and capped cross currency interest rate swap which are marked to
market as at 31 March 2017.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 287

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

34 SHARE CAPITAL

Group and Company

2017 2016
Number Number
of Monetary of Nominal
Shares Value Shares value
’000 RM’000 ’000 RM’000
Authorised:
Ordinary shares of RM1.00 each - - 2,000,000 2,000,000

Issued and fully paid:

Ordinary shares:
At beginning of the financial year 1,933,237 1,719,601 1,933,237 1,719,601
Transfer of share premium on 31
January 2017 - 20,701 - -
At end of the financial year 1,933,237 1,740,302 1,933,237 1,719,601

(a) Under the Companies Act 2016 in Malaysia which came into effect on 31 January 2017, the
concept of authorised share capital no longer exists.

(b) In accordance with Section 74 of the Companies Act 2016, the Group’s and the Company’s
ordinary share no longer have a par or nominal value with effect from 31 January 2017.
Pursuant to Section 618 of the Companies Act 2016, the amount standing to the credit of the
Group’s and of the Company’s share premium became part of the Group’s and of the
Company’s share capital. There is no impact on the numbers of ordinary shares in issue or
the relative entitlement of any of the members of the Group and of the Company.

35 PERPETUAL SUKUK

The Perpetual Sukuk is related to the Company’s Sukuk Musharakah Programme of up to

RM2,000,000,000 in nominal value, which was approved by the Securities Commission Malaysia on
27 November 2014. The Perpetual Sukuk is under the Islamic principle of Musharakah.

As at 31 March 2017, the total Perpetual Sukuk issued by the Company is RM1,040,000,000 (2016:
RM1,040,000,000).

Total
Series Date of issue First call date RM’000
th
1 30 December 2014 5 anniversary of issue date 415,000
th
7 anniversary of issue date 300,000
th
2 27 February 2015 5 anniversary of issue date 100,000
th
3 15 April 2015 5 anniversary of issue date 100,000
th
4 15 May 2015 5 anniversary of issue date 50,000
th
5 12 August 2015 5 anniversary of issue date 75,000
1,040,000
 DRB-HICOM BERHAD
288 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

35 PERPETUAL SUKUK (Continued)

The Perpetual Sukuk holders are conferred a right to receive distribution on a semi-annual basis from
their issuance date at 7.45% to 8.00% (2016: 7.45% to 8.00%) per annum, subject to a step-up rate
st rd st
after the 1 call date and on the 3 anniversary of the 1 call date of their respective tranches.

The Perpetual Sukuk has no fixed maturity and is redeemable in whole or in part, at the Company’s
st
option on their respective 1 call date together with any accrued, unpaid or deferred distributions.
While any distributions are unpaid or deferred, the Company will not declare, pay dividends or make
similar periodic payments in respect of, or redeem, buy-back or otherwise acquire any securities of
lower or equal rank. Based on its terms, the Perpetual Sukuk has been classified as an equity
instrument.

The Perpetual Sukuk was issued for the Company’s working capital purposes as well as to finance
investments such as purchase of shares, lands, buildings and property and development and
construction costs.

36 REDEEMABLE CONVERTIBLE CUMULATIVE PREFERENCE SHARES

On 6 June 2016, PROTON Holdings Berhad (“PROTON”), a wholly-owned subsidiary company of the
Group, entered into a conditional subscription agreement with GOVCO Holdings Berhad (“GOVCO”),
a 99.99% company owned by Minister of Finance Incorporated, for the issuance of up to
1,250,000,000 redeemable convertible cumulative preference shares (“RCCPS”) of RM0.01 each in
PROTON at an issue price of RM1.00 per RCCPS to GOVCO (“Initial Subscription Agreement”). The
issuance of RCCPS is to enable PROTON to settle the long outstanding balances payable to the
various vendors. The Initial Subscription Agreement was completed on 7 June 2016 (“Initial
Subscription RCCPS”).

On 5 September 2016, PROTON entered into another conditional subscription agreement with
GOVCO for the issuance of up to 250,000,000 RCCPS at an issue price of RM1.00 per RCCPS to
GOVCO. At the Extraordinary General Meeting on 29 September 2016, the shareholders of DRB-
HICOM Berhad approved the issuance of up to 250,000,000 RCCPS by PROTON. On 22 June 2017,
GOVCO completed the subscription of the 250,000,000 RCCPS (“Subsequent Subscription RCCPS”).

The key salient terms of the Initial Subscription RCCPS and Subsequent Subscription RCCPS are as
follows:

Tenure Up to 15 years after the date of issuance of the Initial

Subscription on 7 June 2016.

Dividend rate 4.0% per annum on a cumulative basis.

Grace period 5 years from the date of issuance of the Initial Subscription
RCCPS.

Conversion rights PROTON has the option to convert partially or wholly any
outstanding RCCPS into new ordinary shares of PROTON at
any time after the Grace Period.

Conversion ratio 1 RCCPS : 1.152 new ordinary shares of PROTON.

 DRB-HICOM BERHAD
ANNUAL REPORT 2017 289

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

37 DEFERRED INCOME

This represents the following items:

(i) Club membership licence fees received in advance by a subsidiary company, net of amounts
recognised as income in the financial statements;
(ii) Grants received in advance; and
(iii) Deferred revenue mainly comprises fair value of free services given to customers upon sale
of vehicles and prepaid rental received.

Advance
license Deferred
fees Grants revenue Total
Note RM’000 RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 72,848 39,912 71,500 184,260
Disposals of subsidiary
companies 52(i) - - (1,137) (1,137)
Received 225 23,399 72,249 95,873
Amortisation 6 (1,634) (30,505) (46,986) (79,125)
Currency translation
differences - - 160 160
At 31 March 2017 71,439 32,806 95,786 200,031

Non-current 70,137 20,114 61,370 151,621

Current 1,302 12,692 34,416 48,410
71,439 32,806 95,786 200,031
Group
2016
At 1 April 2015 74,109 36,822 79,447 190,378
Received 133 16,133 36,885 53,151
Amortisation 6 (1,394) (13,043) (44,924) (59,361)
Currency translation
differences - - 92 92
At 31 March 2016 72,848 39,912 71,500 184,260

Non-current 72,848 19,516 27,326 119,690

Current - 20,396 44,174 64,570
72,848 39,912 71,500 184,260
 DRB-HICOM BERHAD
290 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

38 LONG TERM BORROWINGS

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
Secured
 Hire purchase and
finance lease liabilities 35,237 47,514 - -
- Portion repayable
within 12 months
included under
bank borrowings 44 (13,033) (18,159) - -
22,204 29,355 - -

 Long term loans 1,421,672 1,836,108 195,887 31,441

- Portion repayable
within 12 months
included under
bank borrowings 44 (548,238) (420,866) (78,355) (31,441)
873,434 1,415,242 117,532 -

 Long term loans under

Islamic financing 2,733,099 3,105,916 1,435,632 1,891,385
- Portion repayable
within 12 months
included under
bank borrowings 44 (299,975) (659,930) (14,776) (485,753)
2,433,124 2,445,986 1,420,856 1,405,632

Unsecured
 Long term loans 1,726 8,849 - -
- Portion repayable
within 12 months
included under
bank borrowings 44 (1,726) (7,278) - -
- 1,571 - -

 Long term loans under

Islamic financing 781,412 415,474 - -
- Portion repayable
within 12 months
included under
bank borrowings 44 (4,767) (4,135) - -
776,645 411,339 - -

4,105,407 4,303,493 1,538,388 1,405,632

DRB-HICOM BERHAD DRB-HICOM BERHAD
(203430-W) ANNUAL REPORT 2017 291
(Incorporated in Malaysia)

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

38 LONG TERM BORROWINGS (Continued)

(a) The hire purchase and finance lease liabilities are secured against the respective assets
acquired as disclosed in Notes 13(f) and 14(b).

(b) Long term loans (secured and unsecured)

Group

The long term loans of the Group mainly comprise the following:

(i) The term loan of RM593,476,000 (2016: RM850,270,000) which bears floating interest
rate of 2.00% (2016: 2.00%) per annum above effective cost of funds, is repayable by
8 (2016: 12) instalments on quarterly basis, commencing from February 2015 to
refinance the outstanding balance of Lotus Cars Limited’s syndicated financing
facilities. The effective interest rate as at the reporting date was 6.17% (2016: 6.26%)
per annum.

(ii) The USD115,000,000 syndicated term loan (equivalent to RM516,235,000) (2016:

USD135,000,000) which bears interest rate of 5.40% (2016: 5.40%) per annum, is
repayable by 8 (2016: 9) semi-annual instalments, commencing from January 2017
and was utilised for working capital and general corporate purposes.

(iii) The term loan of RM90,370,000 (2016: RM150,370,000) which bears floating interest
rate of 1.75% (2016: 1.75%) per annum above effective cost of funds, is repayable by
7 (2016: 11) instalments on quarterly basis, commencing from May 2014 for the
acquisition of shares in Composites Technology Research Malaysia Sdn. Bhd. The
effective interest rate as at the reporting date was 5.77% (2016: 6.13%) per annum.

(iv) The term loan of RM200,000,000 which bears floating interest rate of 1.75% per
annum above effective cost of funds, is repayable by 5 instalments on semi-annual
basis, commencing from March 2017 and was utilised for working capital and general
corporate purposes. The effective interest rate as at the reporting date was 6.42% per
annum.

The secured long term loans are secured by fixed and floating charges over shares in certain
subsidiary companies, certain property, plant and equipment, concession assets, prepaid
lease properties, investment properties, property development activities, inventories,
receivables and short term deposits as disclosed in Notes 3, 13, 14, 15, 16, 17, 28, 29 and
30.

Company

The long term loans of the Company are borrowings with terms as disclosed in Note 38(b)(iv)
above.
 DRB-HICOM BERHAD
292 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

38 LONG TERM BORROWINGS (Continued)

(c) Long term loans under Islamic financing (secured and unsecured)

Group

The long term loans under Islamic financing of the Group mainly comprise the following:

(i) The Islamic Medium Term Notes (“IMTN”) of RM1,420,000,000 (2016:

RM1,800,000,000) which bears the yield-to-maturity rates range from 4.85% to 5.33%
(2016: 4.60% to 5.33%) per annum, is repayable commencing from April 2016 to
March 2022. The IMTN were utilised to partially finance the acquisition of shares in
PROTON Holdings Berhad and working capital purposes.

(ii) The Tier-2 Capital Islamic Subordinated Sukuk of RM400,000,000 had been fully
redeemed by a banking subsidiary company on 15 June 2016.

(iii) During the financial year, a banking subsidiary company undertook the following
issuances:

(a) Subordinated Sukuk of RM250,000,000 which carries a tenure of 5 years with a

profit rate of 5.80% per annum. The RM250,000,000 Subordinated Sukuk
qualifies as Tier-2 capital for the purpose of Bank Negara Malaysia capital
adequacy requirement.

(b) A total Senior Sukuk of RM505,000,000 which comprise of Senior Sukuk 1 of

RM5,000,000 and Senior Sukuk 2 of RM500,000,000. Senior Sukuk 1 carries a
tenure of 1 year from 7 June 2016 with a profit rate of 4.80% per annum. Senior
Sukuk 2 carries a tenure of 5 years from 25 November 2016 with a profit rate of
5.50% per annum.

(iv) The term loan of RM236,351,000 (2016: RM299,377,000) which bears the profit rate of
2.00% (2016: 2.00%) per annum above effective cost of funds, is repayable by 15
(2016: 19) instalments on quarterly basis for the acquisition of shares in Pos Logistics
Berhad (formerly known as Konsortium Logistik Berhad) and Pos Asia Cargo Express
Sdn. Bhd. (formerly known as DRB-HICOM Asia Cargo Express Sdn. Bhd.) by Pos
Aviation Sdn. Bhd. (formerly known as KL Airport Services Sdn. Bhd.) (“PASB”). The
term loan was novated from PASB to HICOM Holdings Berhad during the financial
year. The effective profit rate as at the reporting date was 6.21% (2016: 6.78%) per
annum.

(v) The syndicated term loan of RM389,550,000 (2016: RM296,412,000) which bears the
profit rates range from 5.86% to 6.95% (2016: 5.68% to 6.95%) per annum, is
repayable by 16 (2016: 18) instalments on a quarterly basis commencing from
November 2016 to purchase plant and equipment by a subsidiary company, HICOM
Automotive Manufacturers (Malaysia) Sdn. Bhd.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 293

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

38 LONG TERM BORROWINGS (Continued)

(c) Long term loans under Islamic financing (secured and unsecured) (Continued)

Group (Continued)

(vi) The term loan of RM164,567,000 (2016: RM150,999,000) which bears floating profit
rate of 1.25% (2016: 1.25%) per annum above effective cost of funds, is repayable by
135 (2016: 144) monthly instalments commencing from July 2016 to finance the
development cost of DRB-HICOM University of Automotive Malaysia. The effective
profit rate as at the reporting date was 5.45% (2016: 5.80%) per annum.

(vii) The syndicated term loan of RM91,856,000 (2016: RM116,351,000) which bears the
profit rate of 1.50% (2016: 1.50%) per annum above effective cost of funds, is
repayable on a quarterly basis commencing from March 2016 to finance the purchase
of concession assets. The effective profit rate as at the reporting date was 5.66%
(2016: 5.90%) per annum.

(viii) The USD18,333,000 syndicated term loan (equivalent to RM82,298,000) (2016:

USD15,000,000) which bears the profit rate of 5.40% (2016: 5.40%) per annum, is
repayable by 8 (2016: 9) equal semi-annual instalments commencing from January
2017 and utilised for working capital and general corporate purposes.

The secured long term loans under Islamic financing are secured by fixed and floating
charges over shares in certain subsidiary companies, certain property, plant and equipment,
concession assets, prepaid lease properties, investment properties, property development
activities, inventories, receivables and short term deposits as disclosed in Notes 3, 13, 14, 15,
16, 17, 28, 29 and 30.

Company

The long term loans under Islamic financing of the Company are borrowings with terms as
disclosed in Note 38(c)(i) above. In addition, the IMTN is also secured by a charge over the
Revenue Account in respect of the assignments of all proceeds from any entitlements to the
Company, including the repayments, distribution of capital, dividend payments and/or
advances from subsidiary companies and associated companies.

(d) The weighted average effective annual interest/profit rates at the end of the financial year are
as follows:

Group Company
2017 2016 2017 2016
% % % %

Hire purchase and finance

lease liabilities 3.08 3.90 - -
Long term loans 5.73 5.53 6.42 6.46
Long term loans under
Islamic financing 5.50 5.43 5.05 5.04
 DRB-HICOM BERHAD
294 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

38 LONG TERM BORROWINGS (Continued)

(e) The currency exposure profile of long term borrowings is as follows:

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 3,662,911 3,537,033 1,538,388 1,405,632

- US Dollar 442,496 524,327 - -
- Singapore Dollar - 242,133 - -
4,105,407 4,303,493 1,538,388 1,405,632

(f) Hire purchase and finance lease liabilities

Group
2017 2016
RM’000 RM’000

Minimum hire purchase and finance lease payments:

- not later than 1 year 14,871 20,867
- later than 1 year and not later than 2 years 10,821 18,558
- later than 2 years and not later than 3 years 7,981 12,282
- later than 3 years and not later than 4 years 4,713 1,083
- later than 4 years and not later than 5 years 478 255
- later than 5 years - 10
38,864 53,055
Future finance charges on hire purchase and finance
lease liabilities (3,627) (5,541)
Present value of hire purchase and finance lease
liabilities 35,237 47,514

Representing hire purchase and finance lease

liabilities:
- non-current 22,204 29,355
- current (included in Note 44) 13,033 18,159
35,237 47,514
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 295

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

38 LONG TERM BORROWINGS (Continued)

(g) The exposure of long term borrowings to interest/profit rate risk is as follows:

Maturity profile
Carrying Year 5
amount Year 2 Year 3 Year 4 and above
RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
Fixed rate
Hire purchase and finance lease liabilities 22,204 9,718 7,443 4,573 470
Long term loans 385,471 128,665 128,715 127,836 255
Long term loans under Islamic financing 2,395,839 555,367 384,433 440,589 1,015,450
2,803,514 693,750 520,591 572,998 1,016,175

Floating rate
Long term loans 487,963 435,369 48,876 2,722 996
Long term loans under Islamic financing 813,930 247,659 246,384 232,148 87,739
1,301,893 683,028 295,260 234,870 88,735

4,105,407 1,376,778 815,851 807,868 1,104,910

2016
Fixed rate
Hire purchase and finance lease liabilities 29,355 16,647 11,996 709 3
Long term loans 493,643 130,041 125,832 119,620 118,150
Long term loans under Islamic financing 1,995,327 63,742 524,447 329,426 1,077,712
2,518,325 210,430 662,275 449,755 1,195,865

Floating rate
Long term loans 923,170 335,392 350,462 2,899 234,417
Long term loans under Islamic financing 861,998 271,051 246,067 209,005 135,875
1,785,168 606,443 596,529 211,904 370,292

4,303,493 816,873 1,258,804 661,659 1,566,157

Company
2017
Floating rate
Long term loans 117,532 78,355 39,177 - -

Fixed rate
Long term loans under Islamic financing 1,420,856 481,323 329,883 399,788 209,862
1,538,388 559,678 369,060 399,788 209,862

2016
Fixed rate
Long term loans under Islamic financing 1,405,632 15,142 481,125 299,821 609,544
 DRB-HICOM BERHAD
296 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

39 PROVISION FOR LIABILITIES AND CHARGES

Provision
for claims
Sales from
Warranty returns suppliers Total
Note RM’000 RM’000 RM’000 RM’000
Group
2017
At 1 April 2016 157,138 143 251,715 408,996
Charged 6 73,555 347 - 73,902
Unused amounts reversed 6 (4,088) (160) (8,436) (12,684)
Utilised (99,742) (125) (53,334) (153,201)
Warranties reimbursable
from suppliers 45,947 - - 45,947
Transfer from other
payables 15,620 - - 15,620
Currency translation
differences (1,948) - - (1,948)
Fair value adjustment - - (11,083) (11,083)
At 31 March 2017 186,482 205 178,862 365,549

Non-current 18,025 - 72,531 90,556

Current 168,457 205 106,331 274,993
186,482 205 178,862 365,549

2016
At 1 April 2015 198,556 207 - 198,763
Charged 6 39,911 295 251,715 291,921
Unused amounts reversed 6 (7,685) (131) - (7,816)
Utilised (83,699) (228) - (83,927)
Warranties reimbursable
from suppliers 8,350 - - 8,350
Currency translation
differences 1,705 - - 1,705
At 31 March 2016 157,138 143 251,715 408,996

Non-current 2,606 - 122,598 125,204

Current 154,532 143 129,117 283,792
157,138 143 251,715 408,996
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 297

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

40 PROVISION FOR CONCESSION ASSETS

Group
2017 2016
Note RM’000 RM’000

At beginning of the financial year 129,055 92,131

Effect of changes in estimates 14 1,920 8,582
Replacements 29,614 27,882
Utilised (20,987) (3,599)
Unwinding of discounts 5,353 4,059
At end of the financial year 144,955 129,055

Non-current 138,809 103,841

Current 6,146 25,214
144,955 129,055

Non-current:
- later than 2 years and not later than 5 years 1,704 1,267
- later than 5 years 137,105 102,574
138,809 103,841

As disclosed in Note 2.28(iii), the above represents the contractual obligation by a subsidiary
company in relation to the Service Concession Agreement.
 DRB-HICOM BERHAD
298 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

41 POST-EMPLOYMENT BENEFIT OBLIGATIONS

The Group operates a funded defined benefit plan in respect of a foreign subsidiary company and
also unfunded defined benefit plans for eligible employees of certain subsidiary companies. The
carrying value of the post-employment benefit obligations of the Group was based on the valuations
by actuaries. The level of benefits provided depends on members’ length of service and their salary
in the final years leading up to retirement.

(a) The amount shown in the statement of financial position is presented as follows:

Group
2017 2016
RM’000 RM’000

Present value of funded obligations 663,698 581,267

Fair value of plan assets (633,985) (544,524)
Shortfall of funded plan 29,713 36,743
Present value of unfunded obligations 8,523 7,767
Benefit liability 38,236 44,510

Non-current 37,741 44,033

Current 495 477
38,236 44,510

(b) Changes in present value of defined benefit obligations are as follows:

Group
2017 2016
RM’000 RM’000

At beginning of the financial year 589,034 583,298

Current service costs 6,017 7,843
Provision for past service costs - 883
Interest costs 21,000 22,442
Actuarial loss/(gain) on obligations:
- Effect of changes in financial assumptions 106,113 (34,270)
- Effect of changes in demographic assumptions (5,088) 6,017
- Effect of experience gains on liabilities (16,024) -
Employees contribution 3,033 3,589
Currency translation differences (9,229) 11,851
Benefits paid/payable (22,635) (12,619)
At end of the financial year 672,221 589,034

Present value of funded obligations 663,698 581,267

Present value of unfunded obligations 8,523 7,767
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 299

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

41 POST-EMPLOYMENT BENEFIT OBLIGATIONS (Continued)

(c) Changes in fair value of plan assets are as follows:

Group
2017 2016
RM’000 RM’000

At beginning of the financial year 544,524 548,507

Interest income 19,527 20,633
Employers contributions 14,180 11,876
Employees contributions 3,033 3,589
Currency translation differences (8,672) 12,766
Benefits paid (21,935) (11,993)
Re-measurement gain/(loss) – Return on plan assets
excluding interest income 89,384 (33,730)
Plan expenses (6,056) (7,124)
At end of the financial year 633,985 544,524

(d) The expenses recognised in profit or loss are analysed as follows:

Group
2017 2016
Note RM’000 RM’000

Administrative costs 6,056 7,124

Current service costs 6,017 7,843
Interest costs (net) 1,473 1,809
Provision of past service costs - 883
Staff costs 8 13,546 17,659

(e) The principal actuarial assumptions used in the latest actuarial valuation are as follows:

Group
2017 2016

Discount rate (%) 2.80 - 6.00 3.70 - 6.00

Expected rate of salary increase (%) 2.00 - 6.00 2.00 - 5.73
Expected return on plan assets (%)
- equities 2.80 3.70
- bonds 2.80 3.70
- others 2.80 3.70
Inflation rate (%) 2.50 - 3.50 2.50 - 3.50
 DRB-HICOM BERHAD
300 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

41 POST-EMPLOYMENT BENEFIT OBLIGATIONS (Continued)

(f) The currency exposure profile of post-employment benefit obligations is as follows:

Group
2017 2016
RM’000 RM’000
- Pound Sterling 29,713 36,602
- Ringgit Malaysia 8,287 7,767
- Thai Baht 236 141
38,236 44,510

(g) The following table demonstrates the sensitivity of the Group’s defined benefit obligations
to a reasonably possible change in significant assumptions as at 31 March 2017:

Increase Decrease
RM’000 RM’000
Group
2017
Discount rate (0.5% movement) (61,546) 70,417
Future salary (0.5% movement) 7,853 (7,290)

2016
Discount rate (0.5% movement) (52,109) 59,434
Future salary (0.5% movement) 6,476 (7,020)

(h) The maturity profile of defined benefit obligations is as follows:

Group
2017 2016

Average duration of the defined benefit obligations (years) 6.85 - 19 6.8 - 20

(i) The expected contributions to defined benefit obligations are as follows:

Group
2017 2016
RM’000 RM’000
Within the next 12 months 18,097 19,671
Between 2 and 5 years 72,703 109,410
Between 5 and 10 years 7,808 2,470
Beyond 10 years 9,816 11,905
Total expected payments 108,424 143,456
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 301

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

41 POST-EMPLOYMENT BENEFIT OBLIGATIONS (Continued)

(j) The categories of plan assets of the foreign subsidiary company are as follows:

Group
2017 2016
RM’000 RM’000

Equities 368,086 407,103

Bonds 68,206 115,792
Cash and cash equivalents 197,693 21,629
633,985 544,524

42 BANKING RELATED LIABILITIES - DEPOSITS FROM CUSTOMERS

Group
2017 2016
RM’000 RM’000
Savings deposits
Qard 1,052,795 1,096,785
Tawarruq 107,869 -
1,160,664 1,096,785

Demand deposits
Qard 2,994,706 3,679,040
Tawarruq 70,481 -
3,065,187 3,679,040

Term deposits
Negotiable Islamic debts certificates 1,550,790 1,703,656
Fixed term accounts tawarruq 11,003,797 11,114,518
Short term accounts 2,438,572 1,248,375
General investment deposits 140,575 211,475
15,133,734 14,278,024

Other deposits 38,309 39,806

Total 19,397,894 19,093,655

Non-current 418,615 66,987

Current 18,979,279 19,026,668
19,397,894 19,093,655
 DRB-HICOM BERHAD
302 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

42 BANKING RELATED LIABILITIES - DEPOSITS FROM CUSTOMERS (Continued)

(a) The currency exposure profile of deposits from customers is as follows:

Group
2017 2016
RM’000 RM’000

- Ringgit Malaysia 18,624,276 18,749,157

- US Dollar 769,765 337,377
- Euro 2,579 7,056
- Pound Sterling 848 63
- Other currencies 426 2
19,397,894 19,093,655

(b) The maturity period of the deposits from customers is as follows:

Group
2017 2016
RM’000 RM’000

- not later than 6 months 17,603,386 16,619,769

- later than 6 months and not later than 1 year 1,375,893 2,406,899
- later than 1 year and not later than 5 years 418,615 66,987
19,397,894 19,093,655

(c) The weighted average effective annual profit rates of deposits from customers at the end of
the financial year is 3.00% (2016: 3.10%) per annum.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 303

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

43 TRADE AND OTHER PAYABLES

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000

Trade payables 2,618,119 1,988,200 - -

Other payables and accruals 3,012,265 2,554,364 85,652 96,654
Advances received on
contracts 625,944 1,565,957 - -
Progress billings 393 1,073 - -
Amounts due to subsidiary
companies - - 1,484,258 1,645,051
Amounts due to joint
ventures 30,211 17,788 - -
Amounts due to associated
companies 7,113 20,233 - -
Amounts due to related
parties 6,026 7,869 - -
Amounts due to customers
on contracts 49 120,385 43 - -
6,420,456 6,155,527 1,569,910 1,741,705

(a) The currency exposure profile of trade and other payables is as follows:

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 4,512,146 4,874,156 1,569,910 1,741,705

- US Dollar 845,363 438,535 - -
- Euro 601,883 581,652 - -
- Japanese Yen 232,121 50,533 - -
- Pound Sterling 135,975 160,251 - -
- Thai Baht 46,104 34,278 - -
- Chinese Yuan 27,075 - - -
- Singapore Dollar 7,899 6,869 - -
- Australian Dollar 6,901 1,714 - -
- Indonesian Rupiah 2,979 7,513 - -
- Other currencies 2,010 26 - -
6,420,456 6,155,527 1,569,910 1,741,705

(b) The Group’s normal trade payables terms range from 30 days to 180 days (2016: 30 days to
180 days).
 DRB-HICOM BERHAD
304 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

43 TRADE AND OTHER PAYABLES (Continued)

(c) Included in the amounts due to subsidiary companies are balances of RM662,834,000
(2016: RM773,664,000) which are interest bearing and unsecured. The interest rates range
from 3.00% to 6.15% (2016: 3.10% to 6.15%) per annum.

(d) All other amounts due to joint ventures, associated companies and related parties are non-
interest bearing, unsecured and repayable on demand.

44 BANK BORROWINGS

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
(i) Bank overdrafts
- secured 1,042 11,669 - -
- unsecured 5,469 9,793 - -
6,511 21,462 - -

(ii) Other bank borrowings

Secured
Bankers acceptances 53,281 2,741 - -
Revolving credits 275,772 48,427 86,500 86,500
Short term loans 1,510 13,332 - -
Short term loans under
Islamic financing 155,502 155,247 - -
Hire purchase and
finance lease
liabilities - portion
repayable within 12
months 38 13,033 18,159 - -
Long term loans -
portion repayable
within 12 months 38 548,238 420,866 78,355 31,441
Long term loans under
Islamic financing -
portion repayable
within 12 months 38 299,975 659,930 14,776 485,753
Sub-total 1,347,311 1,318,702 179,631 603,694
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 305

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

44 BANK BORROWINGS (Continued)

Group Company
2017 2016 2017 2016
Note RM’000 RM’000 RM’000 RM’000
(ii) Other bank borrowings
(Continued)
Unsecured
Bankers acceptances 590,553 803,932 - -
Revolving credits 207,500 375,743 66,000 105,000
Short term loans under
Islamic financing 30,000 30,000 - -
Long term loans -
portion repayable
within 12 months 38 1,726 7,278 - -
Long term loans under
Islamic financing -
portion repayable
within 12 months 38 4,767 4,135 - -
Deferred liability 4,534 6,515 - -
Sub-total 839,080 1,227,603 66,000 105,000

Total (Others - Secured

and Unsecured) 2,186,391 2,546,305 245,631 708,694

Total bank borrowings 2,192,902 2,567,767 245,631 708,694

(a) The currency exposure profile of bank overdrafts and other bank borrowings is as follows:

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

- Ringgit Malaysia 1,880,231 2,310,899 245,631 708,694

- US Dollar 297,058 215,723 - -
- Pound Sterling 15,613 35,117 - -
- Singapore Dollar - 2,899 - -
- Thai Baht - 3,129 - -
2,192,902 2,567,767 245,631 708,694

(b) The secured bank overdrafts and other borrowings are secured by way of fixed and floating
charges over shares in certain subsidiary companies, certain property, plant and equipment,
concession assets, prepaid lease properties, investment properties, property development
activities, inventories, receivables and short term deposits (Notes 3, 13, 14, 15, 16, 17, 28,
29 and 30).
 DRB-HICOM BERHAD
306 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

44 BANK BORROWINGS (Continued)

(c) The deferred liability owing by solid waste subsidiary company to local municipalities is in
relation to the transfer of certain units of movable assets from these municipalities to the
subsidiary company and the amounts are non-interest bearing, unsecured and payable in
accordance with the repayment schedule.

(d) The weighted average effective annual interest/profit rates of the bank overdrafts and other
bank borrowings at the end of the financial year are as follows:

Group Company
2017 2016 2017 2016
% % % %
Bank overdrafts 8.25 7.71 - -
Bankers acceptances 4.13 4.31 - -
Revolving credits 5.29 5.64 5.36 5.73
Short term loans 3.56 3.90 - -
Short term loans under
Islamic financing 4.23 3.40 - -

45 BANKING RELATED LIABILITIES - DEPOSITS AND PLACEMENTS OF BANKS AND OTHER

FINANCIAL INSTITUTIONS

Group
2017 2016
RM’000 RM’000
Non-Mudharabah
Bank Negara Malaysia 9,770 10,132
Licensed banks 551,884 432,120
561,654 442,252

The above are denominated in Ringgit Malaysia and the average maturity period is not exceeding 1
year (2016: not exceeding 1 year).

46 BANKING RELATED LIABILITIES - BILLS AND ACCEPTANCES PAYABLE

Bills and acceptances payable are denominated in Ringgit Malaysia and the average maturity period
is not exceeding 1 month (2016: not exceeding 1 month).

47 MERGER RESERVE

Pursuant to Section 60(4)(a) of the previous 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 were not recorded as share premium. The difference between
the issue price and the nominal value of shares issued were classified as merger reserve.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 307

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

48 OTHER RESERVES

Group
2017 2016
RM’000 RM’000
Non-distributable
Share of subsidiary companies’ reserve 406,200 363,562
Reserves arising from dilution of interest in a subsidiary
company 81,179 -
Asset revaluation reserve on step-up acquisition of subsidiary
companies 21,101 21,101
Fair value reserve on property, plant and equipment and
prepaid lease properties 20,651 16,170
Share of associated companies’ reserves 2,400 2,769
Reserve on valuation of post-employment benefit obligations (31,400) (35,964)
500,131 367,638

49 CONSTRUCTION CONTRACTS

Group
2017 2016
Note RM’000 RM’000

Aggregate contract costs incurred 3,985,768 3,298,746

Recognised profits 811,283 605,146
Provision for foreseeable losses (30,596) -
4,766,455 3,903,892
Less: Progress billings (4,262,212) (2,509,739)
504,243 1,394,153
Analysed as follows:
Amounts due from customers on contracts 29 624,628 1,394,196
Amounts due to customers on contracts 43 (120,385) (43)
504,243 1,394,153

50 RETAINED EARNINGS

The balance of the entire retained earnings of the Company as at 31 March 2017 may be distributed
under the single tier system.
 DRB-HICOM BERHAD
308 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

51 SUMMARY OF EFFECTS OF ACQUISITION, INCORPORATION AND RE-ORGANISATION OF

COMPANIES

2017

(i) Subsidiary companies

(a) On 15 June 2016, Composites Technology Research Malaysia Sdn. Bhd. (“CTRM”),
an indirect 96.87% owned subsidiary company of the Group, completed the
acquisition of an additional 35% equity interest in Unmanned Systems Technology
Sdn. Bhd. (“UST”) for a cash consideration of RM35,000. On 9 March 2017, CTRM
completed the acquisition of the remaining 14% equity interest in UST for a cash
consideration of RM14,000. As a result, UST became an effective 96.87% owned
subsidiary company of the Group.

(b) On 13 September 2016, following the completion of corporate exercise set out in
Note 57(b), Pos Malaysia Berhad (“Pos Malaysia”) which was formerly a 32.21%
owned associated company became a 53.50% owned subsidiary company of the
Group.

(c) On 31 January 2017, PHN Industry Sdn. Bhd. (“PHN”), an indirect wholly-owned
subsidiary company of the Group, completed the acquisition of 100% equity interest
in Oriental Summit Industries Sdn. Bhd. (“OSI”) from HICOM Holdings Berhad, a
wholly-owned subsidiary company of the Group for a cash consideration of
RM23,958,000, via an internal re-organisation. As a result, OSI became a wholly-
owned subsidiary company of PHN.

(d) On 17 February 2017, HICOM Berhad, an indirect wholly-owned subsidiary

company of the Group, completed the acquisition of the remaining 51% equity
interest in Dekad Kaliber Sdn. Bhd. (“DKSB”) for a consideration of RM7,000,000
involving RM3,650,000 as cash consideration and RM3,350,000 as settlement of
outstanding advances owing from DKSB to Malaysian Resources Corporation
Berhad group. As a result, DKSB became an indirect wholly-owned subsidiary
company of the Group.

(e) On 31 March 2017, DRB-HICOM EZ-Drive Sdn. Bhd. (“DHEZ”), a wholly-owned

subsidiary company of EON, completed the acquisition of 100% equity interest in
DRB-HICOM Leasing Sdn. Bhd. (“DLSB”) from Edaran Otomobil Nasional Berhad
(“EON”), an indirect wholly-owned subsidiary company of the Group, via an internal
re-organisation. As a result, DLSB became a wholly-owned subsidiary company of
DHEZ.

Details of cash flow arising from the acquisitions for items (b) and (d) are as follows:
RM’000
Total purchase considerations (943,588)
Less: Non-cash consideration arising from the acquisition for items (b)
and (d) 937,043
Purchase consideration, settled in cash (including the direct expenses of
RM2,895,000 attributable to the acquisition) (6,545)
Cash and cash equivalents arising from acquisitions of subsidiary
companies 613,582
Net cash inflow from acquisitions 607,037
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 309

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

51 SUMMARY OF EFFECTS OF ACQUISITION, INCORPORATION AND RE-ORGANISATION OF

COMPANIES (Continued)

2017 (Continued)

(i) Subsidiary companies (Continued)

The subsidiary companies acquired during the financial year contributed revenue of
approximately RM958,717,000 and profit after taxation of approximately RM41,325,000 to the
Group for the period from the dates of acquisitions to 31 March 2017. Had the acquisitions
taken effect at the beginning of the financial year, the revenue and profit after taxation
contributed to the Group would have been RM1,811,680,000 and RM82,302,000 respectively.

Details of net assets acquired and goodwill arising from the acquisitions for items (b) and (d)
are as follows:

Carrying
value Fair value
RM’000 RM’000
Property, plant and equipment 653,537 653,537
Investment properties 31,100 31,100
Investment securities: financial assets at fair value
through profit or loss 408 408
Investment securities: held-to-maturity 84,136 84,136
Inventories 13,411 13,411
Trade and other receivables 495,831 495,831
Amount due from customers 17,325 17,325
Tax recoverable 8,131 8,131
Short term deposits 346,820 346,820
Cash and bank balances 266,762 266,762
Bank borrowings – current (98,798) (98,798)
Tax payable (1,500) (1,500)
Trade and other payables (690,559) (690,559)
Deferred tax liabilities (35,881) (35,881)
Non-controlling interest (507,426) (507,426)
Share of net assets acquired 583,297 583,297
Goodwill 357,396
Direct expenses attributable to the acquisition 2,895
Total purchase considerations 943,588
 DRB-HICOM BERHAD
310 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

51 SUMMARY OF EFFECTS OF ACQUISITION, INCORPORATION AND RE-ORGANISATION OF

COMPANIES (Continued)

(i) Subsidiary companies (Continued)

The accounting of business combination of Pos Malaysia and DKSB were based on the
provisional fair values of its identifiable assets, liabilities, and contingent liabilities. In
accordance with FRS 3, the Group will be carrying out the Purchase Price Allocation (“PPA”)
exercise within 12 months from the date of acquisitions.

(f) During the financial year ended 31 March 2017, the Group has completed the PPA
exercise to determine the fair values of the net assets of Media City Ventures Sdn.
Bhd. (“MCVSB”) and Northern Gateway Infrastructure Sdn. Bhd. (“NGISB”) within
the stipulated time period, i.e. 12 months from the acquisition dates, in accordance
with FRS 3. The details are as follows:

RM’000
Provisional goodwill 104,932
Final goodwill 104,086
Differences (846)

The goodwill of RM104,086,000 comprises the value of expected synergies arising

from the acquisitions, which is not separately recognised. Goodwill is allocated
entirely to the construction segment.

The adjusted fair values of MCVSB’s and NGISB’s identifiable assets, liabilities and
contingent liabilities have been reflected in the Consolidated Statement of Financial
Position as at 31 March 2016.

Below are the effects of the final PPA adjustments in accordance with FRS 3:

As
previously As
stated Adjustments restated
RM’000 RM’000 RM’000
As at 31 March 2016
Consolidated Statement of
Financial Position
Non-current assets
Intangible assets 1,681,168 (846) 1,680,322
Equity
Reserves 4,823,487 (863) 4,822,624
Non-controlling interest 908,342 17 908,359

Consolidated Statement of
Changes in Equity
Retained earnings 3,471,991 (863) 3,471,128
Non-controlling interest 908,342 17 908,359
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 311

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

51 SUMMARY OF EFFECTS OF ACQUISITION, INCORPORATION AND RE-ORGANISATION OF

COMPANIES (Continued)

2017 (Continued)

(i) Subsidiary companies (Continued)

(f) (Continued)

Below are the effects of the final PPA adjustments in accordance with FRS 3:
(Continued)

As
previously As
stated Adjustments restated
RM’000 RM’000 RM’000

For the financial year ended 31

March 2016
Consolidated Statement of
Comprehensive Income
Administrative expenses (1,600,637) (863) (1,601,500)
Net loss for the financial year
attributable to Owners of the
Company (991,900) (863) (992,763)
Total comprehensive loss for the
financial year attributable to
Owners of the Company (940,410) (863) (941,273)

(ii) Joint venture

On 18 October 2016, Isuzu Service Center Sdn. Bhd. (“ISC”) was incorporated with issued
and paid-up share capital of RM100 divided into 100 ordinary shares of RM1 each. The
shareholdings of 51% and 49% in ISC are held by Isuzu Malaysia Sdn. Bhd. and Automotive
Corporation (Malaysia) Sdn. Bhd. respectively. As a result, ISC became an indirect 73.69%
joint venture of the Group.

2016

(iii) Subsidiary companies

(a) On 8 June 2015, the Company completed the acquisition of 100% equity interest in
EON Network Systems Sdn. Bhd. (“ENSSB”) comprising 2 ordinary shares of
RM1.00 each from EON Technologies Sdn. Bhd., an indirect wholly-owned
subsidiary company of the Group, via an internal re-organisation. On 16 June 2015,
ENSSB changed its name to DRB-HICOM Northern Gateway Sdn. Bhd.

(b) On 15 September 2015, DRB-HICOM SPV (Labuan) Limited, a wholly-owned

subsidiary company of the Group, was incorporated under the Labuan Companies
Act 1990 in the Federal Territory of Labuan, Malaysia. It is involved in investment,
funding and treasury related functions for the DRB-HICOM Group.
 DRB-HICOM BERHAD
312 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

51 SUMMARY OF EFFECTS OF ACQUISITION, INCORPORATION AND RE-ORGANISATION OF

COMPANIES (Continued)

2016 (Continued)

(iii) Subsidiary companies (Continued)

(c) On 20 November 2015, DRB-HICOM Northern Gateway Sdn. Bhd., a wholly-owned

subsidiary company, completed the acquisition of 100% equity interest in Northern
Gateway Infrastructure Sdn. Bhd. (“NGISB”) for a cash consideration of
RM20,000,000. As a result, NGISB became a wholly-owned subsidiary company of
the Group.

(d) On 18 December 2015, the Company completed the acquisition of 51% equity
interest in Media City Ventures Sdn. Bhd. (“MCVSB”) for a purchase consideration
of RM85,680,000. As a result, MCVSB became a subsidiary company of the Group.

Details of cash flow arising from the acquisitions for items (c) and (d) are as follows:

RM’000
Purchase considerations, settled in cash (105,680)
Cash and cash equivalents arising from acquisitions of subsidiary
companies 3,053
Net cash outflow from acquisitions (102,627)

The subsidiary companies acquired during the financial year contributed revenue of
approximately RM18,930,000 and loss after taxation of approximately RM153,000 to the
Group for the period from the dates of acquisitions to 31 March 2016. Had the acquisitions
taken effect at the beginning of the financial year, the revenue and loss after taxation
contributed to the Group would have been RM18,930,000 and RM711,000 respectively.

Details of net assets acquired and goodwill arising from the acquisitions for items (c) and (d)
are as follows:

Carrying
value Fair value
RM’000 RM’000

Property, plant and equipment 1,000 1,000

Trade and other receivables 97,967 97,967
Tax recoverable 4 4
Fixed deposits 2,532 2,532
Cash and bank balances 522 522
Trade and other payables (101,462) (101,462)
Long term borrowings (2,000) (2,000)
Non-controlling interest 3,031 3,031
Share of net assets acquired 1,594 1,594
Goodwill 104,086
Total purchase considerations 105,680
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 313

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

51 SUMMARY OF EFFECTS OF ACQUISITION, INCORPORATION AND RE-ORGANISATION OF

COMPANIES (Continued)

2016 (Continued)

(iv) Joint venture

On 25 September 2015, PROTON Holdings Berhad (“PROTON”), Lotus Group International

Limited (“LGIL”), effectively wholly-owned subsidiary companies of the Group, and Goldstar
Heavy Industrial Co., Ltd. (“Goldstar”) formed a joint venture known as Goldstar LOTUS
Automobile Co., Ltd. (“Goldstar LOTUS”) to produce and sell LOTUS branded passenger
cars, engines, parts and components, and accessories, and to provide after-sales services
(including spare parts), in connection with its products in the People’s Republic of China.
PROTON’s, LGIL’s and Goldstar’s shareholdings in Goldstar LOTUS are 40%, 10% and 50%
respectively. As a result, Goldstar LOTUS became a 50% owned joint venture of the Group.

(v) Associated company

On 7 July 2015, HICOM Builders Sdn. Bhd. (“HBSB”), an indirect wholly-owned subsidiary
company of the Group, entered into an agreement with MRCB Engineering Sdn. Bhd.
(“MESB”) and Dekad Kaliber Sdn. Bhd. (“DKSB”), in relation to the proposed development of
the integrated, custom, quarantine and security complex located at Bukit Kayu Hitam, Kedah.
HBSB’s and MESB’s shareholdings in DKSB are 49% and 51% respectively. As a result,
DKSB became a 49% associated company of the Group.

52 SUMMARY OF EFFECTS OF DILUTION AND DISPOSAL OF COMPANIES

2017

(i) Subsidiary companies

(a) On 20 July 2016, the Group announced that Lotus Cars Australia Pty. Limited
(“LCA”), an indirect dormant wholly-owned subsidiary company of PROTON
Holdings Berhad (“PROTON”) was voluntarily deregistered and as a result, LCA
ceased to be a subsidiary company of the Group.

(b) On 13 September 2016, following the completion of the corporate exercise set out in
Note 57(b), the Group’s effective equity interest in KL Airport Services Sdn. Bhd.
(now known as Pos Aviation Sdn. Bhd.) group has reduced from 100% to 53.50%.

(c) On 15 November 2016, HICOM Megah Sdn. Bhd., an indirect wholly-owned

subsidiary company of the Group, completed the disposal of its entire equity interest
of 90% in Corwin Holding Pte. Ltd. (“Corwin”) for a total cash consideration of
SGD170,900,000. As a result, Corwin ceased to be an indirect subsidiary company
of the Group.

(d) On 20 January 2017, the Group announced the dissolution of Proton Motor Pars Co.
(Private Joint Stock) (“PMP”), an indirect dormant wholly-owned subsidiary company
of PROTON. Upon the completion of dissolution, PMP will cease to be an indirect
wholly-owned subsidiary company of the Group.
 DRB-HICOM BERHAD
314 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

52 SUMMARY OF EFFECTS OF DILUTION AND DISPOSAL OF COMPANIES (Continued)

2017 (Continued)

(i) Subsidiary companies (Continued)

(e) On 31 January 2017, Edaran Otomobil Nasional Berhad (“EON”), an indirect wholly-
owned subsidiary company of the Group, completed the disposal of its entire 100%
equity interest in Multi Automotive Service and Assist Sdn. Bhd. (“MASA”) for a cash
consideration of RM1.00. As a result, MASA ceased to be an indirect wholly-owned
subsidiary company of the Group.

(f) On 7 March 2017, HICOM Holdings Berhad, a wholly-owned subsidiary company of

the Group, completed the disposal of its entire 70% equity interest in Scott & English
Electronics Holdings Sdn. Bhd. (“SEEH”) for a total cash consideration of
RM1,540,000. As a result, SEEH ceased to be a subsidiary company of the Group.

(g) On 30 March 2017, the Company announced the proposed winding-up of its direct
and indirect subsidiary companies via members’ voluntary winding up (“MVL”) and
creditors’ voluntary winding up (“CVL”) and the companies involved in the exercise
are as follows:

Companies under MVL

1. Ladang Gadek Development Sdn. Bhd.
2. Ladang Kupang Development Sdn. Bhd.
3. EON Trading Sdn. Bhd.
4. Comtrac Development Sdn. Bhd.
5. Comtrac Premises Sdn. Bhd.
6. Comtrac-Sabkar Development Sdn. Bhd.
7. Jubli Premis Sdn. Bhd.
8. HICOM Power Sdn. Bhd.
9. Glenmarie Asset Management Sdn. Bhd.
10. HICOM Megah Sdn. Bhd.
11. HICOM United Leasing Sdn. Bhd.
12. Gemilang Komposit Auto Sdn. Bhd.
13. HICOM Technical and Engineering Services Sdn. Bhd.
14. Syarikat Pengangkutan Malaysia Sendirian Berhad
15. DRB-HICOM Export Corporation Sdn. Bhd.
16. Mega Komposit Auto Sdn. Bhd.
17. HICOM-Potenza Sports Cars Sdn. Bhd.
18. CTRM Excelnet Engineering Sdn. Bhd.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 315

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

52 SUMMARY OF EFFECTS OF DILUTION AND DISPOSAL OF COMPANIES (Continued)

2017 (Continued)

(i) Subsidiary companies (Continued)

(g) (Continued)

Companies under CVL

1. EONMobil Sdn. Bhd.
2. EON Technologies Sdn. Bhd.
3. Comtrac Trading Sdn. Bhd.
4. Bukit Kledek Development Sdn. Bhd.
5. NSE Development Sdn. Bhd.
6. Euro Truck & Bus ( Malaysia ) Sdn. Bhd.
7. HICOM Premier Malaysia Sdn. Bhd.
8. Imatex Management Services Sdn. Bhd.
9. Intrakota Komposit Sdn.Bhd.
10. S.J. Kenderaan Sdn. Bhd.
11. Intrakota Consolidated Berhad
12. S.J. Binateknik Sdn. Bhd.
13. Proton Engineering Research Technology Sdn. Bhd.
14. Glenview Management Corporation Sdn. Bhd.

Upon the completion of the liquidation exercise, the above companies will cease to
be subsidiary companies of the Group. There was a minimal financial impact arising
from the deconsolidation of subsidiary companies as above to the Group’s assets
and liabilities.

The effects of the disposals for items (c), (e) and (f), up to the dates of disposals on the results
of the Group are shown below:

RM’000
Revenue 19,448
Cost of sales (10,786)
Gross profit 8,662
Other income 3,589
Selling and distribution expenses (71)
Administrative expenses (4,094)
Finance costs (4,850)
Profit before taxation 3,236
Taxation 573
Profit after taxation 3,809
 DRB-HICOM BERHAD
316 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

52 SUMMARY OF EFFECTS OF DILUTION AND DISPOSAL OF COMPANIES (Continued)

2017 (Continued)

(i) Subsidiary companies (Continued)

Below are the effects of the disposals for items (c), (e) and (f) on the financial position and
the cash flows of the Group:

RM’000
Property, plant and equipment 212
Investment properties 427,812
Intangible assets 41
Deferred tax assets 268
Trade and other receivables 2,680
Tax recoverable 124
Short term deposits 1,923
Cash and bank balances 11,028
Trade and other payables (8,777)
Deferred income (1,137)
Bank borrowings - current (3,056)
Long term borrowings (255,229)
Non-controlling interest (27,185)
Share of net assets disposed 148,704
Gain on disposals (net) 398,257
Other comprehensive income – reclassification adjustments (37,387)
Total sales considerations (net) 509,574
Less: Cash and cash equivalents of the subsidiary companies disposed (12,951)
Net cash inflow from disposals 496,623
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 317

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

52 SUMMARY OF EFFECTS OF DILUTION AND DISPOSAL OF COMPANIES (Continued)

2017 (Continued)

(i) Subsidiary companies (Continued)

The effects of the disposals for items (c), (e) and (f), up to the dates of disposals on the results
of the Group are shown below: (Continued)

RM’000

Total sales considerations 517,993

Less: Direct expenses attributable to the disposals (8,419)
Total sales considerations (net) 509,574

(ii) Associated company

On 17 October 2016, Suzuki Malaysia Automobile Sdn. Bhd. (“SMA”), a 40% owned
associated company of the Group has commenced the dissolution exercise via members’
voluntary winding up. Upon the completion of dissolution, SMA will cease to be a 40%
owned associated company of the Group.

2016

(iii) Subsidiary companies

(a) On 26 August 2015, the Company announced that Myanmar Scott & English Co.,
Ltd (“MSE”), a wholly-owned dormant subsidiary company of Scott & English
(Malaysia) Sdn. Bhd., which in turn is an indirect 70% owned subsidiary company of
the Group, was voluntarily deregistered. As a result, MSE ceased to be a subsidiary
company of the Group.

(b) On 26 August 2015, the Company announced that Scott & English (Cambodia)
Limited (“SEC”), a wholly-owned dormant subsidiary company of Scott & English
(Malaysia) Sdn. Bhd., which in turn is an indirect 70% owned subsidiary company of
the Group, was voluntarily deregistered. As a result, SEC ceased to be a subsidiary
company of the Group.

(iv) Associated companies

(a) On 27 April 2015, Edaran Otomobil Nasional Berhad, an indirect wholly-owned

subsidiary company of the Group, entered into a share sale agreement with Johnson
Controls Holding Japan TYK for the disposal of its entire 30% equity interest in
Johnson Controls Automotive Holding (M) Sdn. Bhd. (“JCAH”) for a cash
consideration of RM45,000,000. The transaction was completed on even date. As a
result, JCAH ceased to be an associated company of the Group.

(b) On 11 August 2015, Perusahaan Otomobil Nasional Sdn. Bhd., an indirect wholly-
owned subsidiary company of the Group, completed the disposal of its entire 25%
equity interest in Vina Star Motors Corporation (“VSMC”) to Mitsubishi Motor
Corporation and Mitsubishi Corporation for a sale consideration of RM17,146,000.
As a result, VSMC ceased to be an associated company of the Group.
 DRB-HICOM BERHAD
318 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

53 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 mutually agreed
terms and conditions.

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

(a) Sale of goods/services to:

- Joint ventures 87,513 60,838 - -
- Associated companies 208,265 215,834 - -
- Related parties 114,717 82,130 - -

(b) Purchase of goods/services

from:
- Joint ventures 346,715 357,791 - -
- Related parties 120,276 121,291 - -

(c) Dividend income:

- Subsidiary companies - - 695,159 182,600
- Associated companies - - 110,296 152,713

(d) Interest income:

- Subsidiary companies - - 76,970 50,161

(e) Finance costs:

- Subsidiary companies - - 46,815 13,953

(f) Year end balances -

banking:
- Associated companies
Short term deposits 35,635 18,769 - -
Revolving credits - 48,923 - -
- Related parties
Short term deposits 677,038 548,331 - -
Revolving credits 449,092 410,786 - -
Trade line 497,107 416,745 - -
Term loan 64,475 61,069 - -
Bank guarantee 62,252 62,125 - -
Bonds purchased 20,208 55,114 - -
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 319

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

53 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (Continued)

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

(g) Key management

compensation:
- Salaries, bonuses,
allowances and other
benefits 7,714 12,248 - -
- Defined contribution plan 944 999 - -

54 CAPITAL AND OTHER COMMITMENTS

(a) Non-banking

(i) Capital commitments

Capital expenditure as at the reporting date is as follows:

Group
2017 2016
RM’000 RM’000
Authorised capital expenditure for property, plant and
equipment, investment properties and intangible
assets not provided for in the financial statements
- contracted for 257,442 570,522
- not contracted for 1,538,015 2,055,354
1,795,457 2,625,876

(ii) Operating lease commitments – as lessee

Future minimum rentals payable under commitments for non-cancellable operating

leases at the reporting date are as follows:

Group
2017 2016
RM’000 RM’000

Repayable within 1 year 82,343 54,216

Repayable within 2 to 5 years 84,204 53,159
Repayable more than 5 years 21,191 15,125
187,738 122,500
 DRB-HICOM BERHAD
320 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

54 CAPITAL AND OTHER COMMITMENTS (Continued)

(a) Non-banking (Continued)

(iii) Operating lease commitments – as lessor

Future minimum rentals receivable under commitments for non-cancellable

operating leases at the reporting date are as follows:

Group
2017 2016
RM’000 RM’000

Receivable within 1 year 60,229 35,620

Receivable within 2 to 5 years 203,672 37,264
Receivable more than 5 years 48,592 5,374
312,493 78,258

(b) Banking

In the normal course of business, the banking subsidiary company makes various
commitments and incurs certain contingent liabilities with legal resource to its customers. No
material losses are anticipated as a result of these transactions.

Risk weighted exposures of a banking subsidiary company are as follows:

Total
Credit risk
Principal equivalent weighted
amount amount amount
RM’000 RM’000 RM’000
At 31 March 2017

Contingent liabilities
Direct credit substitutes 213,136 213,136 181,099
Trade-related contingencies 22,970 4,594 4,581
Transaction related contingencies 425,973 212,986 208,304

Commitments
Credit extension commitment:
- maturity within 1 year 798,577 159,715 146,883
- maturity exceeding 1 year 1,019,465 509,732 452,990

Islamic derivative financial instruments

Profit rate related contracts 2,000,000 104,111 20,822
Foreign exchange related contracts 2,875,367 88,561 69,605
7,355,488 1,292,835 1,084,284
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 321

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

54 CAPITAL AND OTHER COMMITMENTS (Continued)

(b) Banking (Continued)

Risk weighted exposures of a banking subsidiary company are as follows: (Continued)

Total
Credit risk
Principal equivalent weighted
amount amount amount
RM’000 RM’000 RM’000
At 31 March 2016

Contingent liabilities
Direct credit substitutes 61,401 61,401 60,691
Trade-related contingencies 9,778 1,956 1,444
Transaction related contingencies 247,807 123,904 123,775

Commitments
Credit extension commitment:
- maturity within 1 year 808,248 161,650 155,099
- maturity exceeding 1 year 1,878,796 939,398 185,501

Islamic derivative financial instruments

Profit rate related contracts 3,675,000 48,901 9,780
Foreign exchange related contracts 1,333,866 61,167 37,838
8,014,896 1,398,377 574,128
 DRB-HICOM BERHAD
322 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

55 GROUP SEGMENT REPORTING

For management purpose, the Group is organised into business units based on the industry and has
3 reportable segments as follows:

Industry segment Description

Automotive Manufacturing, assembly, vehicles importation, pre-delivery

inspection, composite manufacturing, vehicles leasing, distribution
and sale of motor vehicles, military vehicles, motorcycles and
special purpose vehicles including sale of related spares and
services.

Services (i) Concession - Vehicle inspection, solid waste management and

airport ground handling business.
(ii) Banking - Islamic banking and related financial services.
(iii) Postal - Mail, courier and retail.
(iv) Integrated logistics and inventory solutions.
(v) Education - Higher education and vocational training institution.

Property, Asset Property holding, development and construction works.

and Construction

The Management Committee monitors the operating results of its business units separately for the
purpose of making decisions about resource allocation and performance assessment. Segment
performance is evaluated based on profit or loss and is measured consistently with profit or loss in
the consolidated financial statements.

(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 of primarily of property, plant and equipment, concession assets,
prepaid lease properties, investment properties, inventories, receivables, property
development costs, land held for property development, investment securities, banking
related assets, cash and bank balances and derivative assets. Segment liabilities comprise
mainly payables, banking related liabilities, provision for liabilities and charges, provision for
concession assets and derivative liabilities. Unallocated liabilities consist of accruals on
corporate operating and administrative expenses.

Capital expenditure comprises additions of property, plant and equipment, concession

assets, prepaid lease properties, investment properties, intangible assets, land held for
property development and property development costs.

(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.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

55 GROUP SEGMENT REPORTING (Continued)

The information of each of the Group’s business segments for the financial year ended 31 March 2017 is as follows:
Primary reporting format - business segment
Property,
Asset & Investment
Automotive Services Construction Holding Group
RM’000 RM’000 RM’000 RM’000 RM’000
Financial year ended 31 March 2017

Revenue
Total revenue 8,650,536 3,714,283 535,957 50,016 12,950,792
Inter-segment revenue (573,026) (160,771) (108,645) (50,016) (892,458)
External revenue 8,077,510 3,553,512 427,312 - 12,058,334

Segment results (955,699) 389,853 506,933 (66,726) (125,639)

Unallocated expenses (32,497)
Interest income 57,375
Finance costs (370,905)
Share of results of joint ventures (net of tax) 8,134 - 1,441 - 9,575
Share of results of associated companies (net of tax) 223,863 15,032 1,012 - 239,907
Loss before taxation (222,184)
Taxation (38,218)
Net loss for the financial year (260,402)
Attributable to:
Owners of the Company (454,401)
Holders of Perpetual Sukuk 79,655
Holders of Redeemable Convertible Cumulative Preference Shares 40,685
Non-controlling interest 73,659
DRB-HICOM BERHAD
ANNUAL REPORT 2017
323
 324

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

DRB-HICOM BERHAD
ANNUAL REPORT 2017

55 GROUP SEGMENT REPORTING (Continued)

Primary reporting format - business segment (Continued)

Property,
Asset & Investment
Automotive Services Construction Holding Group
RM’000 RM’000 RM’000 RM’000 RM’000

Financial year ended 31 March 2017

Other information

Segment assets 11,188,022 26,922,267 2,572,749 311,686 40,994,724

Interest bearing short term deposits 1,332,531
Taxation assets 345,725
Joint ventures 371,087 - 42,739 - 413,826
Associated companies 741,669 14,874 - - 756,543
Assets held for sale 4,500 - - - 4,500
Total assets 43,847,849

Segment liabilities 4,836,256 21,640,618 614,147 98,291 27,189,312

Bank borrowings 6,298,309
Taxation liabilities 208,190
Unallocated liabilities 13,523
Total liabilities 33,709,334

Capital expenditure 591,227 129,612 234,876 (736) 954,979

Depreciation and amortisation 713,307 176,864 18,787 3,280 912,238
Impairment loss 56,028 18,771 5,742 - 80,541
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

55 GROUP SEGMENT REPORTING (Continued)

The information of each of the Group’s business segments for the financial year ended 31 March 2016 is as follows:
Primary reporting format - business segment

Property,
Asset & Investment
Automotive Services Construction Holding Group
RM’000 RM’000 RM’000 RM’000 RM’000

Financial year ended 31 March 2016 (Restated)

Revenue
Total revenue 9,773,299 2,685,623 351,168 56,024 12,866,114
Inter-segment revenue (407,396) (172,403) (57,350) (56,024) (693,173)
External revenue 9,365,903 2,513,220 293,818 - 12,172,941

Segment results (1,038,941) 284,890 32,072 52,661 (669,318)

Unallocated expenses (50,909)
Interest income 53,126
Finance costs (382,094)
Share of results of joint ventures (net of tax) 20,333 - 1,726 - 22,059
Share of results of associated companies (net of tax) 182,369 22,523 114 - 205,006
Loss before taxation (822,130)
Taxation (49,491)
Net loss for the financial year (871,621)
Attributable to:
Owners of the Company (992,763)
Holders of Perpetual Sukuk 76,865
Non-controlling interest 44,277
DRB-HICOM BERHAD
ANNUAL REPORT 2017
325
 326

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

DRB-HICOM BERHAD
ANNUAL REPORT 2017

55 GROUP SEGMENT REPORTING (Continued)

Primary reporting format - business segment (Continued)

Property,
Asset & Investment
Automotive Services Construction Holding Group
RM’000 RM’000 RM’000 RM’000 RM’000

Financial year ended 31 March 2016 (Restated)

Other information

Segment assets 11,291,194 24,081,322 2,864,189 223,068 38,459,773

Interest bearing short term deposits 1,420,553
Taxation assets 334,719
Joint ventures 404,747 - 46,276 - 451,023
Associated companies 639,532 714,373 10,711 - 1,364,616
Assets held for sale - 10,819 - - 10,819
Total assets 42,041,503

Segment liabilities 5,499,427 20,407,978 520,748 144,656 26,572,809

Bank borrowings 6,871,260
Taxation liabilities 81,849
Unallocated liabilities 13,142
Total liabilities 33,539,060

Capital expenditure 1,002,009 123,976 360,947 1,472 1,488,404

Depreciation and amortisation 597,715 116,064 19,472 3,640 736,891
Impairment loss 85,577 23,076 - - 108,653
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 327

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

56 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements 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 events. The resulting
accounting estimates will, by definition, rarely equal to 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:

(a) Impairment of property, plant and equipment and intangible assets

The Group tests property, plant and equipment and intangible assets for impairment if there
is any indicator of impairment. The recoverable amounts are determined based on value in
use or fair value less cost to sell, whichever is higher. Under the fair value less cost to sell
approach, when estimating the fair value of certain assets, the objective is to estimate the
price that would be received in an orderly transaction between market participants at the
reporting date under current market conditions. Under the value in use approach, estimating
the value in use involves estimating the future cash inflows and outflows that will be derived
from these assets and discounting them at an appropriate rate. Based on management’s
impairment review, impairment loss of RM8,049,000 (2016: RM4,355,000) and
RM55,593,000 (2016: RM81,473,000) was recognised for property, plant and equipment and
intangible assets respectively during the financial year.

(b) Impairment of loans and receivables

The Group assesses at each reporting date whether there is any objective evidence that a
financial asset is impaired. To determine whether there is objective evidence of impairment,
the Group considers factors such as the probability of insolvency or significant financial
difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows
are estimated based on historical loss experience for assets with similar credit risk
characteristics.

(c) Impairment of banking related assets - financing of customers

Financing that have been assessed individually but for which no impairment is required as
well as all individually insignificant financing need to be assessed collectively, in groups of
assets with similar credit risk characteristics. This is to determine whether impairment should
be made due to incurred loss events for which there is objective evidence but effects of
which are not yet evident. The collective assessment takes into account of data from the
financing portfolio (such as credit quality, levels of arrears, credit utilisation, financing to
collateral ratios) and judgements on the effect of concentrations of risks (such as the
performance of different individual groups).
 DRB-HICOM BERHAD
328 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

56 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

(d) 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. Judgement 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 judgement, the Group relies on past
experience and work of specialists.

(e) Deferred tax assets

Deferred tax assets are recognised for all unabsorbed tax losses, unutilised capital
allowances, unutilised reinvestment allowances, unutilised investment tax allowances and
other deductible temporary differences to the extent that it is probable that taxable profit will
be available against which the losses and tax allowances can be utilised. Significant
management judgement 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.

(f) Allowance for inventory write down

Allowance for inventory write down is made based on an analysis of the ageing profile and
expected sales patterns of individual items held in inventory. This requires an analysis of
inventory usage based on expected future sales transactions taking into account current
market prices, useful lives of inventories and expected cost to sell. Changes in the inventory
ageing and expected usage profiles can have an impact on the allowance recorded.

(g) Fair value of derivatives and other financial instruments

The fair value of financial instruments that are not traded in an active market is determined
by using valuation techniques. The Group uses its judgement to select a variety of methods
and make assumptions that are mainly based on market conditions existing at the end of
each reporting date. The Group has used discounted cash flow analysis for various
available-for-sale financial assets that are not traded in active markets.

(h) Estimate of fair value of investment properties

The Group and the Company estimate the fair values of its investment properties using
investment and market comparison methods. The fair value of investment properties is
determined by independent professional valuers, having appropriate recognised professional
qualifications and recent experience in the location and category of property being valued.
The independent professional valuers provide the fair value of the Group’s and of the
Company’s investment properties portfolio annually. The principal assumptions underlying
these valuations are further explained in Note 59(c)(v).
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 329

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

56 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

(i) Fair value estimation of derivative financial instruments, investment securities: financial
investments at fair value through profit or loss and available-for-sale

For financial instruments measured at fair value, where the fair values cannot be derived
from active markets, these fair values are determined using a variety of valuation techniques,
including the use of mathematical models. Whilst the Group generally uses widely
recognised valuation models with market observable inputs, judgement is required where
market observable data are not available. Such judgement normally incorporate assumptions
that other market participants would use in their valuations, including assumptions on profit
rate yield curves, exchange rates, volatilities and prepayment and default rates.

(j) Classification of leases – as lessor

The Group, as the lessor, has entered into long term leasing agreements for certain of its
motor vehicles with its customers (as lessees). The Group assessed the following:

(i) The Group does not pass the titles of the motor vehicles to the lessee by the end of
the lease term;

(ii) The lessee has no option to purchase the motor vehicles;

(iii) The lease term is not for a major part of the economic life of the motor vehicles;

(iv) At the inception of the lease, the present value of the minimum lease payments
amounts is not substantially all the fair value of the leased motor vehicles; and

(v) The motor vehicles leased are not specialised in nature.

Management are of the view that the Group retains all the significant risks and rewards of
ownership of these motor vehicles and thus accounted for the leasing agreements as
operating leases.

(k) Provision for claims from suppliers

Provision for claims from suppliers have been computed based on the shortfall of the actual
order volume compared to the required volume for vendors to recover their tooling cost. The
provision recorded is computed based on the estimated payout for claims which is subject to
negotiation on a case-by-case basis with its suppliers. It is expected that most of the
provision for claims from suppliers for models will be incurred within 1 to 3 years from the
reporting date. When there are deviations from the original estimate, such difference will
impact the carrying value of the provision and will be charged to profit or loss in the period
such an estimate has been changed.

The carrying amount of the provision for claims from suppliers are disclosed in Note 39.
 DRB-HICOM BERHAD
330 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

56 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

(l) Provision for product warranties

Certain subsidiary companies make provision 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 judgement and estimates. It is expected
that most of these cost will be incurred within 1 year from the reporting date. When there are
deviations from the original estimate, such difference will impact the carrying value of the
provision and will be charged to profit or loss in the period such an estimate has been
changed.

The carrying amounts of provision for product warranties for defective works are disclosed in
Note 39.

(m) Provision for concession assets

Under the Service Concession Agreement, the concession subsidiary company has
contractual obligations to ensure that the levels of investments are sufficient to maintain the
collection services and public cleansing management services to a specified standard. The
subsidiary company has recognised a provision for its obligation which depends on the
estimated future capital expenditure to maintain the services. These judgements and
assumptions are subject to risks and uncertainties, hence there is a possibility that changes
in circumstances will alter expectations, which may impact the amount of provisions
recognised in the financial statements.

The carrying amount of provision recognised is disclosed in Note 40.

(n) Impairment of investment in subsidiary companies

The Company tests investment in subsidiary companies for impairment if there is an

indication of impairment. The recoverable amounts are determined based on fair value less
costs to sell. When estimating the fair value of the subsidiary companies, the objective is to
estimate the price that would be received in an orderly transaction between market
participants at the reporting date under current market conditions. Based on these
calculations, an impairment loss of RM360,154,000 (2016: RM581,000,000) was recognised
during the financial year, of which RM335,154,000 (2016: RM581,000,000) was related to an
automotive subsidiary company.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 331

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

57 SIGNIFICANT EVENTS

(a) On 6 June 2016, PROTON Holdings Berhad (“PROTON”), a wholly-owned subsidiary

company of the Group, entered into a conditional subscription agreement with GOVCO
Holdings Berhad (“GOVCO”), a 99.99% company owned by Minister of Finance
Incorporated, for the issuance of up to 1,250,000,000 redeemable convertible cumulative
preference shares (“RCCPS”) in PROTON at an issue price of RM1.00 per RCCPS to
GOVCO. The subscription agreement was completed on 7 June 2016 where PROTON had
issued and GOVCO had subscribed for the 1,250,000,000 RCCPS on even date.

On 5 September 2016, PROTON entered into a subsequent conditional subscription

agreement with GOVCO for the issuance of up to 250,000,000 RCCPS at an issue price of
RM1.00 per RCCPS to GOVCO. On 29 September 2016, the shareholders of DRB-HICOM
approved the issuance of up to 250,000,000 RCCPS by PROTON at the Extraordinary
General Meeting. The subsequent subscription agreement was completed on 22 June 2017
where PROTON had issued and GOVCO had subscribed for the 250,000,000 RCCPS on
even date.

(b) On 13 September 2016, the Group completed the following corporate exercise:

(i) Acquired 225,030,030 new ordinary shares of RM0.50 each in Pos Malaysia Berhad
(“POSM Shares”) satisfied by way of disposing 100% equity interest in KL Airport
Services Sdn. Bhd. (“KLAS”) (now known as Pos Aviation Sdn. Bhd.) by HICOM
Holdings Berhad to Pos Malaysia Berhad (“Pos Malaysia”); and

(ii) Acquired 20,720,721 new POSM Shares satisfied by way of disposing part of a parcel
of freehold industrial land measuring 9.912 acres located in Section 28, Shah Alam
(“Section 28 Land”) by HICOM Indungan Sdn. Bhd. to Pos Malaysia.

As a result of the above transactions, Pos Malaysia which was formerly a 32.21% owned
associated company became a 53.50% owned subsidiary company of the Group and the
Group’s effective equity interest in KLAS has reduced from 100% to 53.50%.

The purchase consideration for the acquisition of control in Pos Malaysia is determined as
the aggregate of the following:

RM’000
(i) Remeasurement of the previously held interest of 32.21% at the date of 563,972
acquisition
(ii) Dilution of 46.50% of the Group’s interest in KLAS and Section 28 Land 371,057
935,029

(c) On 15 November 2016, HICOM Megah Sdn. Bhd., an indirect wholly-owned subsidiary
company of the Group, completed the disposal of its entire equity interest of 90% in Corwin
Holding Pte. Ltd. (“Corwin”) for a total cash consideration of SGD170,900,000. As a result,
Corwin ceased to be an indirect subsidiary company of the Group.
 DRB-HICOM BERHAD
332 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

58 SUBSEQUENT EVENTS

(a) On 10 March 2017, DRB-HICOM Defence Technologies Sdn. Bhd., a wholly-owned

subsidiary of the Group, entered into a share sale agreement with its 96.87% owned
subsidiary company, Composites Technology Research Malaysia Sdn. Bhd. (“CTRM”) for the
proposed acquisitions of the entire equity interests in the three (3) wholly-owned subsidiary
companies of CTRM namely, CTRM Systems Integration Sdn. Bhd., CTRM Aviation Sdn.
Bhd. and Unmanned Systems Technology Sdn. Bhd. via an internal re-organisation for a
total cash consideration of RM1,049,000. The transaction was completed on 30 June 2017.

(b) On 24 May 2017, the Company entered into the following binding heads of agreement with
Zhejiang Geely Holding Group Co., Ltd. (“ZGH”) for the:

(i) proposed subscription of new shares in PROTON Holdings Berhad (“PROTON”), a

wholly-owned subsidiary company of the Group, representing 49.9% equity interest
of the enlarged paid-up share capital in PROTON by ZGH (“Proposed Share
Subscription”).

(ii) proposed divestment by the Company of its indirect 100% equity interest in Lotus
Advance Technologies Sdn. Bhd. (“Lotus Advance”), a wholly-owned subsidiary
company of PROTON comprising 51% equity interest to ZGH and 49% equity
interest to Etika Automotive Sdn. Bhd. (“Etika Automotive”) (“Proposed Divestment”).

On 23 June 2017, the Company entered into the following agreements:

(i) a conditional share subscription agreement with ZGH and PROTON for subscription
of 547,020,534 ordinary shares by ZGH, representing 49.9% of the enlarged paid-up
share capital of PROTON for a total subscription price of RM460,300,000 to be
satisfied as follows:

(a) RM170,300,000 in cash; and

(b) the grant of the licence of Boyue model by ZGH (without the right to sub-
licence) to Perusahaan Otomobil Nasional Sdn. Bhd. (“PONSB”), an indirect
wholly-owned subsidiary company of the Group at an ascribed value of
RM290,000,000.

(ii) a conditional share purchase agreement with ZGH and Etika Automotive for the sale
of 100% of its indirect equity in Lotus Advance, through its subsidiary company,
PROTON comprising 51% equity interest to ZGH and 49% equity interest to Etika
Automotive for a total cash consideration of GBP100,000,000.

The Proposed Share Subscription and Proposed Divestment are collectively referred to as
“Proposals”.

The Proposals are subject to approvals of the relevant authorities and shareholders of the
Company. Upon the completion of the Proposals, PROTON which is currently a wholly-
owned subsidiary company will become a 50.1% owned subsidiary company of the Group
and Lotus Advance will cease to be an indirect wholly-owned subsidiary company of the
Group.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 333

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

58 SUBSEQUENT EVENTS (Continued)

(c) On 21 June 2017, the Ministry of Finance approved the award of a Research and
Development (“R&D”) Reimbursement Grant for R&D activities carried out by PONSB, in line
with the policies of the Government of Malaysia. The R&D Reimbursement Grant of
RM1,100,000,000 will be disbursed upon completion of the agreements relating to the
Proposed Share Subscription as set out in Note 58(b)(i). The R&D Reimbursement Grant will
be utilised to settle the syndicated term loan under PONSB, shareholders advances owed by
PROTON to the Company and any other lenders which have advanced funds to PONSB to
service the syndicated term loan payments prior to its settlement.

(d) On 22 June 2017, the Company reached an agreement in principle with the Ministry of
Finance on the following:
st
(i) to purchase the principal redemption certificate relating to the 1 Tranche of the
redeemable convertible cumulative preference shares (“RCCPS”) (with redemption
date of 6 June 2023), amounting to RM300,000,000 from GOVCO including the
preference dividend certificate for the annual dividend entitlement ended 6 June
2017 of RM50,000,000 (collectively, “RCCPS Purchase”); and

(ii) to create a first charge on certain identified assets, to the benefit of GOVCO, where
the portfolio of such fixed legal assets would have a minimum value equivalent to the
prevailing face value of the remaining principal tranches of RCCPS holding by
GOVCO, which would stand at RM1,200,000,000, after the RCCPS Purchase.

The transactions for items (b), (c) and (d) are expected to be completed by the end of the next
financial year.
 DRB-HICOM BERHAD
334 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

59 FAIR VALUE MEASUREMENT

(a) Financial and non-financial instruments measured at fair value

The table below provides the fair value measurement hierarchy of the Group’s and the
Company’s assets and liabilities:

Level 1 Level 2 Level 3 Total

RM’000 RM’000 RM’000 RM’000
Group
2017
Assets measured at fair
value:
Investment securities:
available-for-sale 160,013 6,012,240 5,316 6,177,569
Investment securities: fair
value through profit or
loss 175 - 197,208 197,383
Derivative assets - 61,494 - 61,494
Investment properties - - 246,889 246,889
160,188 6,073,734 449,413 6,683,335

Liabilities measured at
fair value:
Derivative liabilities - 64,864 - 64,864

2016
Assets measured at fair
value:
Investment securities:
available-for-sale 96,086 5,631,019 19,264 5,746,369
Investment securities: fair
value through profit or
loss - - 186,355 186,355
Derivative assets - 40,951 - 40,951
Investment properties - - 617,955 617,955
96,086 5,671,970 823,574 6,591,630

Liabilities measured at
fair value:
Derivative liabilities - 98,346 - 98,346
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 335

NOTES TO THE FINANCIAL STATEMENTS – 31 MARCH 2017

59 FAIR VALUE MEASUREMENT (Continued)

(a) Financial and non-financial instruments measured at fair value (Continued)

The table below provides the fair value measurement hierarchy of the Group’s and the
Company’s assets and liabilities: (Continued)

Level 1 Level 2 Level 3 Total

RM’000 RM’000 RM’000 RM’000
Company
2017
Assets measured at fair
value:
Investment properties - - 130,654 130,654

2016
Assets measured at fair
value:
Investment properties - - 136,355 136,355

There is no transfer from Levels 1, 2 and 3 during the financial year.

For fair value measurements categorised within Levels 2 and 3 of the fair value hierarchy,
the fair values are determined using appropriate valuations technique, which include the use
of mathematical models, such as discounted cash flow models and option pricing models,
comparison to similar instruments for which market observable prices exist and other
valuation techniques. Valuation techniques used incorporate assumptions regarding discount
rates, profit rate yield curves, estimates of future cash flows and other factors.
 DRB-HICOM BERHAD
336 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

59 FAIR VALUE MEASUREMENT (Continued)

(a) Financial and non-financial instruments measured at fair value (Continued)

The reconciliation of the financial and non-financial assets that are measured at Level 3 of
the hierarchy of fair value is as follows:

Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

At beginning of the financial

year 823,574 700,984 136,355 144,316
Acquisitions of subsidiary
companies 31,100 - - -
Disposals of subsidiary
companies (427,812) - - -
Total (loss)/gain through profit
or loss (17,879) 45,865 6,416 (8,134)
Purchases 9,357 50,002 41 173
Sales (627) (474) (10,800) -
Transfer (to)/from property,
plant and equipment (12,470) 1,295 - -
Transfer from property
development costs 1,216 - - -
Transfer to assets held for sale (4,500) (10,812) - -
Currency translation differences 47,454 35,262 - -
Reclassification from
investment securities: held-to-
maturity - 4,933 - -
Coupon received by a banking
subsidiary company - (3,481) - -
Adjustment - - (1,358) -
At end of the financial year 449,413 823,574 130,654 136,355
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

59 FAIR VALUE MEASUREMENT (Continued)

(b) Financial instruments that are not measured at fair value and which carrying amounts are not reasonable approximation of fair value:

Total Carrying
Level 1 Level 2 Level 3 fair value amount
RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
Assets
Investment securities: held-to-maturity - 150,663 - 150,663 142,168
Financing of customers - 8,509,050 5,142,939 13,651,989 14,711,816
- 8,659,713 5,142,939 13,802,652 14,853,984

Liabilities
Hire purchase and finance lease liabilities - 22,204 - 22,204 22,204
Long term loans (fixed rate) - 385,471 - 385,471 385,471
Long term loans under Islamic financing (fixed rate) - 2,395,764 - 2,395,764 2,395,839
Bank borrowings (non-current) - 2,803,439 - 2,803,439 2,803,514
Deposits from customers - 2,559,148 16,838,626 19,397,774 19,397,894
Deposits and placements of banks and other
financial institutions - 551,884 9,403 561,287 561,654
Bills and acceptances payable - - 9,196 9,196 9,196
- 5,914,471 16,857,225 22,771,696 22,772,258
DRB-HICOM BERHAD
ANNUAL REPORT 2017
337
 338

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

DRB-HICOM BERHAD
ANNUAL REPORT 2017

59 FAIR VALUE MEASUREMENT (Continued)

(b) Financial instruments that are not measured at fair value and which carrying amounts are not reasonable approximation of fair value:
(Continued)

Total Carrying
Level 1 Level 2 Level 3 fair value amount
RM’000 RM’000 RM’000 RM’000 RM’000
Group
2016
Assets
Investment securities: held-to-maturity - 143,374 - 143,374 140,607
Financing of customers - 8,014,064 4,706,692 12,720,756 14,327,376
- 8,157,438 4,706,692 12,864,130 14,467,983

Liabilities
Hire purchase and finance lease liabilities - 29,355 - 29,355 29,355
Long term loans (fixed rate) - 493,643 - 493,643 493,643
Long term loans under Islamic financing (fixed rate) - 1,994,373 - 1,994,373 1,995,327
Bank borrowings (non-current) - 2,517,371 - 2,517,371 2,518,325
Deposits from customers - 931,301 18,163,632 19,094,933 19,093,655
Deposits and placements of banks and other
financial institutions - 432,120 9,823 441,943 442,252
Bills and acceptances payable - - 29,350 29,350 29,350
- 3,880,792 18,202,805 22,083,597 22,083,582
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

59 FAIR VALUE MEASUREMENT (Continued)

(b) Financial instruments that are not measured at fair value and which carrying amounts are not reasonable approximation of fair value:
(Continued)

Total Carrying
Level 1 Level 2 Level 3 fair value amount
RM’000 RM’000 RM’000 RM’000 RM’000
Company
2017
Liabilities
Bank borrowings (non-current) - long term loans
under Islamic financing (fixed rate) - 1,420,781 - 1,420,781 1,420,856

2016
Liabilities
Bank borrowings (non-current) - long term loans
under Islamic financing (fixed rate) - 1,404,679 - 1,404,679 1,405,632
DRB-HICOM BERHAD
ANNUAL REPORT 2017
339
 DRB-HICOM BERHAD
340 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

59 FAIR VALUE MEASUREMENT (Continued)

(c) Determination of fair value

(i) Assets and liabilities that are not carried at fair value and whose carrying amounts
are reasonable approximation of fair value

The following are classes of financial instruments that are not carried at fair value
and whose carrying amounts are reasonable approximation of fair value:

Note
Banking related assets - statutory deposit with Bank Negara Malaysia 26
Trade and other receivables (current) 29
Bank borrowings (non-current - floating rate) 38
Banking related liabilities - deposits from customers 42
Trade and other payables (current) 43
Bank borrowings (current) 44

The carrying amounts of these financial assets and liabilities are reasonably
approximate fair value, either due to their short-term nature or that they are floating
rate instruments that are re-priced to market interest rates on or near the reporting
date.

(ii) Amounts due from subsidiary companies, loans to/from subsidiary companies,
finance lease obligations and fixed rate bank loans

The fair values of these financial instruments are estimated by discounting the
expected future cash flows at market incremental lending rate for similar types of
lending, borrowing or leasing arrangements at the reporting date.

(iii) Derivatives

Currency forward foreign exchange contracts, currency swaps foreign exchange

contracts, Islamic profit rate swap and capped cross currency interest rate swap
are valued using a valuation technique with market observable inputs. The most
frequently applied valuation techniques include forward pricing models, using
present value calculations. The models incorporate various inputs including the
credit quality of counterparties, foreign exchange spot and forward rate curves.

(iv) Banking related assets - financing of customers

The fair values of financing of customers are estimated based on the expected
future cash flows of contractual instalment payments, discounted at applicable and
prevailing rates at the reporting date offered for similar facilities to new customers
with similar credit profiles. In respect of non-performing financing, the fair values
are deemed to approximate the carrying values, which are net of individual
assessment allowance for bad and doubtful financing.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 341

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

59 FAIR VALUE MEASUREMENT (Continued)

(c) Determination of fair value (Continued)

(v) Investment properties

Fair value of investment properties have been generally derived using the
investment method and market comparison approach. The inputs used for the
determination of fair value of investment properties are categorised as Level 3.

Investment method entails the capitalisation of the net rent from a property at a
suitable rate of return. Net rent is the balance sum after deducting service charge,
property tax and a reasonable percentage for vacancy from the gross rent. The
significant unobservable inputs are market rental rate, outgoings, vacancy rate,
term yield and reversionary yield.

For market comparison method, 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 valuations are
obtained for these estimates. The significant unobservable inputs are location,
accessibility, size, shape, tenurial interest and restriction (if any) and other relevant
characteristics. An increase/decrease in the adjustments for unobservable inputs
will decrease/increase the loss/profit after tax of the Group and of the Company
respectively.

(vi) Investment securities: available-for-sale

Fair value for quoted equity shares in Malaysia is determined based on the quoted
(unadjusted) market prices in active markets for identical instruments.

Fair value for unquoted private debt securities and Malaysian government
investment certificates are determined based on the Bond Pricing Agency Malaysia
bid prices adjusted by the accretion of discount or amortisation of premium.

Fair value for unquoted equity shares in Malaysia and defaulted foreign Islamic
corporate sukuk are generally determined using the discounted cash flow method,
which approximates to the fair value. The inputs used for the determination of fair
value are categorised as Level 3. An increase/decrease in the adjustments for
unobservable inputs will decrease/increase the loss/profit after tax of the Group.

(vii) Investment securities: financial assets at fair value through profit or loss

Fair value of investment in private equity funds have been generally derived using
the net asset value approach. The Group determined that the reported net asset
value represents the fair value as at reporting date. The inputs used for the
determination of fair value are categorised as Level 3. An increase/decrease in the
adjustments for unobservable inputs will decrease/increase the loss/profit after tax
of the Group.
 DRB-HICOM BERHAD
342 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

60 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group and the Company are exposed to financial risks arising from their operations and the use
of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk,
foreign exchange currency risk and market price risk. The Board of Directors reviews and sets
policies and procedures for the management of these risks. The Risk Committee in accordance with
the Group’s Enterprise Risk Management framework provides independent oversight to the
effectiveness of the risk management process.

It is, and has been throughout the current and previous financial year, the Group’s policy that no
derivatives shall be undertaken except for the use as hedging where appropriate and cost-efficient.
The Group and the Company do not apply hedge accounting.

The following sections provide details regarding the Group’s and the Company’s exposure to the
above-mentioned financial risks and the objectives, policies and processes for the management of
these risks.

(a) 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 and the maximum
exposure to credit risk is represented by the carrying amount of financial instruments.

(b) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting
financial obligations due to shortage of funds. The Group’s and the Company’s exposure to
liquidity risk arises primarily from mismatches of the maturities of financial assets and
liabilities. The Group’s and the Company’s objective is to maintain a balance between
continuity of funding and flexibility through the use of stand-by credit facilities.

The table below summarises the maturity profile of the Group’s and the Company’s liabilities
at the reporting date based on contractual undiscounted repayment obligations.

On demand
or within 1 1 to 5 Over 5
year years years Total
RM’000 RM’000 RM’000 RM’000
Group
2017
Financial liabilities:
Bills and acceptances
payable 9,196 - - 9,196
Deposits from customers 18,979,279 458,439 - 19,437,718
Deposits and placements
of banks and other
financial institutions 561,654 - - 561,654
Banking related liabilities 19,550,129 458,439 - 20,008,568
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 343

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

60 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

(b) Liquidity risk (Continued)

On demand
or within 1 1 to 5 Over 5
year years years Total
RM’000 RM’000 RM’000 RM’000
Group
2017 (Continued)
Financial liabilities:
Bank borrowings 2,453,374 4,361,904 128,242 6,943,520
Derivative liabilities 64,864 - - 64,864
Trade and other payables 6,420,456 - - 6,420,456
Total undiscounted
financial liabilities 28,488,823 4,820,343 128,242 33,437,408

2016
Financial liabilities:
Bills and acceptances
payable 29,350 - - 29,350
Deposits from customers 19,026,668 71,598 - 19,098,266
Deposits and placements
of banks and other
financial institutions 422,252 - - 422,252
Banking related liabilities 19,478,270 71,598 - 19,549,868
Bank borrowings 2,811,874 4,126,234 761,888 7,699,996
Derivative liabilities 98,346 - - 98,346
Trade and other payables 6,155,527 - - 6,155,527
Total undiscounted
financial liabilities 28,544,017 4,197,832 761,888 33,503,737

Company
2017
Financial liabilities:
Trade and other payables 1,569,910 - - 1,569,910
Bank borrowings 332,796 1,703,994 - 2,036,790
Total undiscounted
financial liabilities 1,902,706 1,703,994 - 3,606,700
 DRB-HICOM BERHAD
344 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

60 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

(b) Liquidity risk (Continued)

On demand
or within 1 1 to 5 Over 5
year years years Total
RM’000 RM’000 RM’000 RM’000
Company
2016
Financial liabilities:
Trade and other payables 1,741,705 - - 1,741,705
Bank borrowings 798,855 1,401,920 220,727 2,421,502
Total undiscounted
financial liabilities 2,540,560 1,401,920 220,727 4,163,207

(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the
Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s and the Company’s exposure to interest rate risk arises primarily from their
loans and borrowings at floating rates. The Group’s policy is to manage interest cost using a
mix of fixed and floating rate debts.

The following table demonstrates the sensitivity of the Group’s and of the Company’s
(loss)/profit after tax to a reasonably possible change in 50 basis points to interest rate, with
all other variables held constant.

(Loss)/profit after tax

Basis Group Company
points
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000

Bank borrowings +50 (10,201) (16,357) (345) (1,915)

- floating rates -50 10,201 16,357 345 1,915

The assumed movement in basis points for interest rate sensitivity analysis is based on the
currently observable market environment.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 345

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

60 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)

(d) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in foreign exchange rates. 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.

(e) Market price risk

Market price risk is the risk that the fair value of future cash flows of the Group’s financial
instruments will fluctuate because of changes in market prices (other than interest or
exchange rates).

The Group is exposed to equity price risks mainly arising from quoted shares held by the
Group. Quoted shares are mainly listed on Bursa Malaysia Securities Berhad. These
instruments are classified as financial assets designated at fair value through profit or loss
and available-for-sale.

At the end of the reporting date, if the quoted shares on Bursa Malaysia had been 10%
higher or lower, with all other variables held constant, the Group’s loss after tax would have
been approximately RM8,287,000 lower/higher (2016: RM10,144,000 lower/higher), arising
as a result of an increase/decrease in the fair values of the quoted shares.
 DRB-HICOM BERHAD
346 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

61 CAPITAL MANAGEMENT

The primary objective of the Group’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios in order to support its business and maximise shareholders’
value. The Group manages its capital structure and makes adjustments to it, in light of changes in
economic conditions.

The Group monitors capital using gearing ratio, which is total interest bearing debts divided by total
equity. Total debts is equivalent to total bank borrowings (including current and non-current
borrowings) as shown in the consolidated statement of financial position. The Group’s policy is to
keep the gearing ratio at an acceptable level.

2017 2016
(Restated)
Note RM’000 RM’000
Group
Short term borrowings excluding deferred liability 44 2,188,368 2,561,252
Long term borrowings 38 4,105,407 4,303,493
Total bank borrowings 6,293,775 6,864,745

Total equity 10,138,515 8,502,443

Gross gearing (times) 0.62 0.81

Company
Short term borrowings excluding deferred liability 44 245,631 708,694
Long term borrowings 38 1,538,388 1,405,632
Total bank borrowings 1,784,019 2,114,326

Total equity 6,714,129 6,475,950

Gross gearing (times) 0.27 0.33

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

62 CATEGORIES OF FINANCIAL INSTRUMENTS

The table below provides an analysis of financial instruments categorised as follows:

(i) Fair value through profit or loss (“FVTPL”);

(ii) Loans and receivables (“L&R”);
(iii) Held-to-maturity (“HTM”);
(iv) Available-for-sale financial assets (“AFS”); and
(v) Other liabilities (“OL”)

Carrying
amount FVTPL L&R HTM AFS
Note RM’000 RM’000 RM’000 RM’000 RM’000

Group
Financial assets
2017
Investment securities 23 6,517,120 197,383 - 142,168 6,177,569
Trade and other receivables (excluding amounts
due from customers on contracts, accrued
billings, prepayments and advances to suppliers
included in other receivables) 29 2,749,382 - 2,749,382 - -
Banking related assets
- Cash and short-term funds 32 1,049,925 - 1,049,925 - -
- Financing of customers 25 14,711,816 - 14,711,816 - -
- Statutory deposit with Bank Negara Malaysia 26 698,636 - 698,636 - -
Short term deposits 30 1,332,531 - 1,332,531 - -
Cash and bank balances 31 1,544,331 - 1,544,331 - -
Derivative assets 33 61,494 61,494 - - -
DRB-HICOM BERHAD
ANNUAL REPORT 2017
347
 348

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

DRB-HICOM BERHAD
ANNUAL REPORT 2017

62 CATEGORIES OF FINANCIAL INSTRUMENTS (Continued)

Carrying
amount FVTPL L&R HTM AFS
Note RM’000 RM’000 RM’000 RM’000 RM’000

Group
Financial assets (Continued)
2016
Investment securities 23 6,073,331 186,355 - 140,607 5,746,369
Trade and other receivables (excluding amounts
due from customers on contracts, accrued
billings, prepayments and advances to suppliers
included in other receivables) 29 2,219,925 - 2,219,925 - -
Banking related assets
- Cash and short-term funds 32 1,069,101 - 1,069,101 - -
- Financing of customers 25 14,327,376 - 14,327,376 - -
- Statutory deposit with Bank Negara Malaysia 26 703,261 - 703,261 - -
Short term deposits 30 1,420,553 - 1,420,553 - -
Cash and bank balances 31 550,999 - 550,999 - -
Derivative assets 33 40,951 40,951 - - -
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 349

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

62 CATEGORIES OF FINANCIAL INSTRUMENTS (Continued)

Carrying
amount FVTPL OL
Note RM’000 RM’000 RM’000

Group
Financial liabilities
2017
Trade and other payables (exclude
progress billings and amounts due
to customers on contracts) 43 6,299,678 - 6,299,678
Bank borrowings (excluding deferred
liability) 38 & 44 6,293,775 - 6,293,775
Banking related liabilities
- Deposits from customers 42 19,397,894 - 19,397,894
- Deposits and placements of banks
and other financial institutions 45 561,654 - 561,654
- Bills and acceptances payable 46 9,196 - 9,196
Derivative liabilities 33 64,864 64,864 -

2016
Trade and other payables (exclude
progress billings and amounts due
to customers on contracts) 43 6,154,411 - 6,154,411
Bank borrowings (excluding deferred
liability) 38 & 44 6,864,745 - 6,864,745
Banking related liabilities
- Deposits from customers 42 19,093,655 - 19,093,655
- Deposits and placements of banks
and other financial institutions 45 442,252 - 442,252
- Bills and acceptances payable 46 29,350 - 29,350
Derivative liabilities 33 98,346 98,346 -
 DRB-HICOM BERHAD
350 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

62 CATEGORIES OF FINANCIAL INSTRUMENTS (Continued)

Carrying
amount L&R OL
Note RM’000 RM’000 RM’000

Company
Financial assets
2017
Trade and other receivables
(excluding prepayments) 29 1,222,548 1,222,548 -
Short term deposits 30 223,771 223,771 -
Cash and bank balances 31 33,707 33,707 -

2016
Trade and other receivables
(excluding prepayments) 29 1,146,015 1,146,015 -
Short term deposits 30 239,534 239,534 -
Cash and bank balances 31 11,909 11,909 -

Financial liabilities
2017
Trade and other payables 43 1,569,910 - 1,569,910
Bank borrowings 38 & 44 1,784,019 - 1,784,019

2016
Trade and other payables 43 1,741,705 - 1,741,705
Bank borrowings 38 & 44 2,114,326 - 2,114,326

63 APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board
of Directors on 10 July 2017.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 351

NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2017

64 SUPPLEMENTARY INFORMATION ON THE BREAKDOWN OF REALISED AND UNREALISED

PROFITS

The breakdown of the retained earnings of the Group and of the Company as at 31 March 2017 into
realised and unrealised earnings is presented as follows:

Group Company
2017 2016 2017 2016
(Restated)
RM’000 RM’000 RM’000 RM’000

Total retained earnings of the

Company and subsidiary companies:
- Realised 2,369,411 2,964,434 1,590,687 1,359,535
- Unrealised (293,257) (139,330) 12,980 5,933
2,076,154 2,825,104 1,603,667 1,365,468

Total share of retained earnings from

joint ventures:
- Realised 109,234 142,643 - -
- Unrealised 5,472 2,225 - -

Total share of retained earnings from

associated companies:
- Realised 476,608 479,601 - -
- Unrealised 39,542 21,555 - -

Total retained earnings as per financial

statements 2,707,010 3,471,128 1,603,667 1,365,468
 DRB-HICOM BERHAD
352 ANNUAL REPORT 2017

STATEMENT BY DIRECTORS PURSUANT TO

STATEMENT BY DIRECTORS PURSUANT TO
SECTION
STATEMENT 251(2) BYOF THE COMPANIES
DIRECTORS PURSUANT ACTTO 2016
STATEMENT
SECTION STATEMENT BY DIRECTORS
251(2)BY DIRECTORS
OF THE COMPANIES PURSUANT ACTTO 2016
SECTION
SECTION 251(2)
STATEMENT 251(2)BY OF OF THE COMPANIES
THE COMPANIES
DIRECTORS PURSUANT ACT
ACTTO 2016
2016
We, Brig. Gen. Pursuant
(K) Tan Sri ToDato’
Section 251(2)
Sri (Dr.) Of The
Haji Mohd Companies
Khamil bin Jamil andActDato’ 2016Sri Syed Faisal Albar bin
SECTION
We, Brig. Gen. 251(2)(K) OFTan THE SriCOMPANIES
Dato’ Sri (Dr.) ACT 2016
Haji Mohd Khamil bin Jamil and Dato’ Sri Syed Faisal Albar bin
Syed A.R. Gen.
We, Brig.
Brig. Albar,(K) being
Tantwo Sriof the Directors
Dato’ (Dr.) of
Sri (Dr.) DRB-HICOM
Haji Mohd Khamil
Khamil Berhad, stateand
bin Jamil
Jamil that,Dato’
in theSri opinion
Syed of the Directors,
Faisal Albar bin
bin
Syed A.R. Gen.
Albar,(K) being two of the Directors
Dato’ Sri of DRB-HICOM Berhad, stateand
that, in the opinion of the Directors,
We,
STATEMENT
the
Syedfinancial
A.R. Albar,BYbeing Tan
DIRECTORS
statements Sri
set
two out
of thePURSUANT
onDirectors
pages 168 Haji
ofTO toMohd
356 are drawn
DRB-HICOM
bin
Berhad, up state to Dato’
so asthat, give
in aSri
the true Syed
andFaisal
opinion fair
of the
Albar
view of the
Directors,
the financial
Syed A.R. statements
Albar, being twosetof
out
theonDirectors
pages 168 toMohd
356 are
of DRB-HICOM drawn bin up
Berhad, so as
state toDato’
that, give
in aSri
true andFaisal
offairtheview of the
We,
SECTIONBrig.
financial
the financial
Gen.
financial251(2)
position (K)OF
of
statements
Tan
theTHE Sri
Group
set
Dato’
COMPANIES
outand
Sri
on of
(Dr.)
theACT
pages
Haji
1682016
Company to 356
356asKhamil
at 31
are drawnMarch Jamil
2017
up so
so
and
as and
to giveof the
give theiropinion
a true
true
Syed
financial
and fair
Directors,
Albar
fairperformance
view of
bin
of the
the
financial
the
Syedthe A.R.position
Albar, of
statements
beingthe Group
set out
two Group and
on of the
pages
of the Directors Company
168 to
of Company
DRB-HICOMas at
are 31
drawnMarch
Berhad, up 2017
as and
stateyearto of
that, ended their
a
in the opinion financial
and performance
view
of the Directors,
and
financial cash
positionflows of of
the theGroup andand
of of
the the
Company as for
at 31the financial
March 2017 and of theirin accordance
financial with
performancethe
and the
financial
the cash
position
financial flows of the
of the Group Group andand of
of the the Company
Company for the
to 356asReporting
at drawn
31 Marchfinancial
2017 year
as and ended
of their in accordance
financial with
performancethe
provisions
and thethe ofstatements
cash the
flowsCompanies
of the
set out
the Act
Group
Dato’
on2016
pages
and(Dr.)
Sri and
of
168
theFinancial
Company
are
for the
thebin
up so
Standards
financial
toingive
year
and ended
a true
Malaysia. and fair
The
inSyed
accordance
view of the
informationwith set
the
We, Brig.cash
provisions
and
financial Gen.
of the
position (K)
flowsof Tan
Companies
of
the SriGroup
Group Actand2016
and
of and
of
the theHaji Mohd
Financial
Company
Company asKhamil
Reporting
for
at 31 Jamil
Standards
financial
March 2017 yearinDato’
and Malaysia.
ended
of Sriin
their TheFaisal
accordance
financial Albar
informationwith
performance bin
set
the
out
Syed in Note
provisions
A.R. 64
of
Albar, to
the the
being financial
Companiestwo of statements
Act
the 2016 and
Directors on page
Financial
of 357
DRB-HICOM have
Reportingbeen
Berhad, prepared
Standards
state in
in
that, accordance
Malaysia.
in the opinionThewith
of Guidance
information
the on
set
Directors,
out
and in
provisionsNote
the cash 64
of the to
flowsthe financial
Companies
of1,the Groupstatements
Act 2016
and ofofand on
the page
Financial
Company357 have
Reportingbeen
forUnrealised prepared
Standards
the financial yearin oraccordance
Malaysia.
ended Thewith
in accordance Guidance
information on
set
with the
Special
out
the in Matter
Note
financial 64 toNo.
the
statements Determination
financial
set outstatements
on pages Realised
on
168page
to 357
350
356 and
have
are been
drawn up soProfits
prepared
as to in
give Losses
accordance
a true in
and the
with
fair Context
Guidance
view of of
on
the
Special
out in Matter
Note 64
provisions ofPursuant to No.
the
the Companies1, Determination
financial statements
Act 2016 andof onRealised
page
Financial357and
haveUnrealised
Reportingbeen Profits
prepared
Standards in or Losses
accordance
in Malaysia. in
The the
with Context
Guidance
information of
on
set
Disclosures
Special
financial Matter
position No.
of to
1,
the Bursa
Group Malaysia
Determination
and of theSecurities
of Realised
Company Berhad
and
as at Listing
Unrealised
31 March Requirements,
Profits
2017 and orof as issued
Losses
their inby
financial the
the Malaysian
Context
performance of
Disclosures
Special
out in Note Pursuant
Matter No. 1,to Bursa Malaysia
Determination Securities
of Realised Berhad
and Listing
Unrealised Requirements,
Profits
64 to the financial statements on page 357 have been prepared in accordance with Guidance on or as issued
Losses in bythethe Malaysian
Context of
Institute
Disclosures
and the of of Accountants.
cash Pursuant
flows to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian
Institute
Disclosures
Special Matter No. of1,tothe
Accountants.
Pursuant Group
Bursa and ofofSecurities
Malaysia
Determination the Company
Realised andforUnrealised
Berhad the financial
Listing year or
Requirements,
Profits ended in accordance
as issued
Losses inbythe with the
theContext
Malaysian of
Institute of
provisions
Institute of of
Accountants.
the
Accountants.Companies Act 2016 and Financial Reporting Standards in Malaysia. The information set
Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian
Signed
out in Noteon behalf
64 to of the the Board statements
financial in accordance on with
pageaa357resolution
351 have beenof theprepared
Directors dated 10 Julywith 2017.
Signed
Institute on
of behalf of the
Accountants. Board in accordance with resolution of the Directorsindated accordance10 July 2017. Guidance on
Special
Signed on Matter
on behalf
behalf of No. 1,
of the Determination
the Board
Board in of
in accordance
accordance withRealised and Unrealised
with aa resolution
resolution of of the Profits
the Directors or
Directors dated Losses
dated 10 10 July in 2017.Context of
the
July 2017.
Signed
Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian
Signed
Instituteon of behalf of the Board in accordance with a resolution of the Directors dated 10 July 2017.
Accountants.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 10 July 2017.
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
BRIG. GEN.
BRIG. GEN. (K)
Chairman
Chairman (K) TAN
TAN SRI
SRI DATO’
DATO’ SRI
SRI (DR.) HAJI MOHD
(DR.) HAJI MOHD KHAMIL
KHAMIL BIN
BIN JAMIL
JAMIL
Chairman
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
Chairman
Chairman
BRIG. GEN. (K) TAN SRI DATO’ SRI (DR.) HAJI MOHD KHAMIL BIN JAMIL
Chairman
DATO’ SRI SYED FAISAL ALBAR BIN SYED A.R. ALBAR
DATO’ SRI SYED FAISAL ALBAR BIN SYED A.R. ALBAR
Group
DATO’Managing
DATO’
Group SRI SYEDDirector
SRI SYED
Managing FAISAL ALBAR
FAISAL
Director ALBAR BIN
BIN SYED
SYED A.R. ALBAR
A.R. ALBAR
Group Managing
DATO’
Group Managing Director
FAISAL ALBAR BIN SYED A.R. ALBAR
SRI SYEDDirector
Group Managing Director
STATUTORY DECLARATION
DATO’ SRI SYED FAISAL ALBAR BIN SYED A.R. ALBAR
Group Managing
STATUTORY Pursuant
DirectorTo Section
DECLARATION PURSUANT 251(1)(b)
TO Of The Companies Act 2016
STATUTORY DECLARATION PURSUANT TO
SECTION
STATUTORY
STATUTORY 251(1)(b) OF THE COMPANIES
DECLARATION
DECLARATION PURSUANTACT
PURSUANT TO 2016
TO
SECTION 251(1)(b) OF THE COMPANIES ACT 2016
SECTION 251(1)(b)
SECTION 251(1)(b)
STATUTORY OF THE COMPANIES
OF THE COMPANIES
DECLARATION PURSUANT ACT ACT 2016
TO 2016
I, Amalanathan Thomas, the officer primarily responsible for the financial management of DRB-HICOM
SECTION
I, Amalanathan251(1)(b) OF THE
Thomas, theCOMPANIES ACTresponsible
officer primarily 2016 for the financial management of DRB-HICOM
Berhad, do solemnly
I, Amalanathan
Amalanathan and sincerely
Thomas, the officerdeclare
officer that the
primarily financial for
responsible statements set outmanagement
the financial
financial on pages 168 of to 357 are, in
DRB-HICOM
Berhad,
I, do solemnly and sincerely
Thomas, the declare that responsible
primarily the financial for
statements
the set out on pages 168
management of to 357 are, in
DRB-HICOM
STATUTORY
my opinion,
Berhad, do DECLARATION
correct
solemnly and I make
and PURSUANT
this solemn
sincerely declare TO the financial
declaration
that conscientiously
statements believing
set out thepages
on same to
168 betotrue,
357and
351 are,byin
my opinion,
Berhad,
I,SECTION do
Amalanathan correct
solemnly and I
and
Thomas, make this
sincerely
theStatutorysolemn
declare declaration
that
officer primarily the conscientiously
financial
responsible statements believing
set out the
on same
pages to
168 betotrue,
357 and
are, by
in
virtue
my of the251(1)(b)
opinion, correct OF
provisions
andofITHE
the
make COMPANIES
this solemn ACT
Declarations2016
declaration 1960.for the financial
Act conscientiously management of DRB-HICOM
believing the same to be true, and by
virtue
Berhad, of do
my opinion,thesolemnly
provisions
correct andofI make
and the Statutory
sincerely Declarations
this declare
solemn Actconscientiously
declaration
that 1960.statementsbelieving
the financial thepages
set out on same 168
to betotrue,
357 and
are, by
in
virtue of
virtue of the
the provisions
provisions of
of the
the Statutory
Statutory Declarations
Declarations Act
Act 1960.
1960.
my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by
I, Amalanathan
virtue Thomas,
of the provisions of the theStatutory
officer primarily responsible
Declarations Act 1960.for the financial management of DRB-HICOM
Berhad, do solemnly and sincerely declare that the financial statements set out on pages 168 to 357 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 1960.
AMALANATHAN THOMAS
AMALANATHAN THOMAS
AMALANATHAN THOMAS
AMALANATHAN THOMAS
Subscribed and solemnly declared
declared by
by the
the abovenamed
abovenamed Amalanathan
Amalanathan Thomas
Thomas at
at Shah
Shah Alam
Alam in
in Malaysia
Malaysia on
AMALANATHAN THOMAS
Subscribed and solemnly on
10
10 July 2017.
Subscribed and solemnly
July 2017. solemnly declared
declared by
by the
the abovenamed
abovenamed Amalanathan
Amalanathan Thomas
Thomas at
at Shah
Shah Alam
Alam in
in Malaysia
Malaysia on
on
Subscribed and
10 July 2017.
10 July 2017.
Subscribed
AMALANATHANand solemnly
THOMAS declared by the abovenamed Amalanathan Thomas at Shah Alam in Malaysia on
10 July 2017.
Subscribed
Before me, and solemnly declared by the abovenamed Amalanathan Thomas at Shah Alam in Malaysia on
Before
10 July me,
2017.
Commissioner
Before me,
Before me,
Commissioner for
for Oaths
Oaths
Commissioner
Commissioner
Before me, for
for Oaths
Oaths
Commissioner for Oaths 191
191
Before me, 191
191
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 353

INDEPENDENT AUDITORS’ REPORT

To The Members of DRB-HICOM Berhad

203430-W

Independent auditors’ report to the members of

DRB-HICOM Berhad
(Incorporated in Malaysia)

Report on the financial statements

Opinion

We have audited the financial statements of DRB-HICOM Berhad, which comprise the statements of financial position as at 31
March 2017 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and
statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies
168 to 356.
and other explanatory notes, as set out on pages 174 350

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the
Company as at 31 March 2017, and of their financial performance and their cash flows for the year then ended in accordance with
Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Basis for opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our
responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.

Independence and other ethical responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and
Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code
of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the
By-Laws and the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the Group and the Company for the year ended 31 March 2017. These matters were addressed in the context of our
audit of the financial statements of the Group and the Company as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.

We have fulfilled the responsibilities described in the Auditors’ responsibilities for the audit of the financial statements section of our
report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to
our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial
statements.

192
 DRB-HICOM BERHAD
354 ANNUAL REPORT 2017

203430-W

Independent auditors’ report to the members of

DRB-HICOM Berhad (Continued)
(Incorporated in Malaysia)

Key Audit Matters (Continued)

1. Impairment testing of non-current assets of certain automotive companies

(Refer to Note 2.22, Note 13, Note 21 and Note 56 to the financial statements)

As at 31 March 2017, the carrying amounts of the property, plant and equipment and intangible assets of a Malaysian
automotive subsidiary and a foreign automotive subsidiary amounted to RM1,960,939,000 and RM500,422,000
respectively.

The continued losses reported by these automotive companies indicated that the carrying amount of these property, plant
and equipment and intangible assets may be impaired. Accordingly, the Group performed an impairment test of these
property, plant and equipment and intangible assets by estimating the recoverable amount.

Due to the significance of the carrying amounts of the property, plant and equipment and intangible assets and the
judgements involved in estimating the recoverable amounts of these assets, we have identified these to be areas of audit
focus.

i. A Malaysian automotive subsidiary

The management engaged a firm of independent valuers to estimate the recoverable amount of the property, plant
and equipment and intangible assets of a Malaysian automotive subsidiary based on the fair values of these
assets less costs of disposal. When estimating the fair values of these assets, the objective is to estimate the price
that would be received from the sale of these assets in an orderly transaction between market participants at the
reporting date under current market conditions.

Our audit procedures focused on the valuations performed by a firm of independent valuers, which included
amongst others the following procedures:

 We considered the objectivity, independence and expertise of the firms of independent valuers;
 We obtained an understanding of the methodology adopted by the independent valuers in estimating the fair
value of these assets and assessed whether such methodology is consistent with those used in the industry;
 As part of our evaluations of the fair values of these assets, we had discussions with the independent valuers
to obtain an understanding of the related market data used as input to the valuation models; and
 We assessed whether the adjustment factors applied to the market data in arriving at fair values of the assets
were within a range commonly accepted by the industry.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 355

203430-W

Independent auditors’ report to the members of

DRB-HICOM Berhad
203430-W(Continued)
(Incorporated in Malaysia)
Independent auditors’ report to the members of
Key Audit Matters (Continued)
DRB-HICOM Berhad (Continued)
(Incorporated in Malaysia)
1. Impairment testing of non-current assets of certain automotive companies (Continued)
Key Audit Matters (Continued)
ii. A foreign automotive subsidiary
1. Impairment testing of non-current assets of certain automotive companies (Continued)
The management estimated the recoverable amount of the property, plant and equipment and intangible assets of
a foreign
ii. automotive subsidiary
A foreign automotive company
subsidiarybased on Value-In-Use (“VIU”). Estimating the VIU involves estimating
the future cash inflows and outflows that will be derived from these assets and discounting them at an appropriate
rate. The management estimated the recoverable amount of the property, plant and equipment and intangible assets of
a foreign automotive subsidiary based on Value-In-Use (“VIU”). Estimating the VIU involves estimating the future
In addressing this
casharea of audit
inflows focus, wethat
and outflows evaluated the management’s
will be derived assumption
from these assets on the revenue
and discounting them growth, gross
at an appropriate rate.
profit margin, terminal growth rate and discount rate by performing the following:
In addressing this area of audit focus, we evaluated the management’s assumption on the revenue growth, gross
 Obtainedprofit
an understanding
margin, terminalof the relevant
growth rate internal controls
and discount rateover estimating the following:
by performing VIU;
 Evaluated the management’s assumptions on revenue growth rate, gross profit margin and terminal growth
 Obtained
rate by comparing to the an understanding
historical of the relevant internal controls over estimating the VIU;
trends; and
 Evaluated
Assessed whether the management’s
the discount assumptions
rate used to determine theon revenue
present growth
value of therate,
cashgross
flowsprofit margin
reflects and terminal growth
the return
that investors rate
wouldby comparing to thewere
require if they historical trends;an
to choose andinvestment that would generate cash flows of
amounts, timingAssessed whetherequivalent
and risk profile the discount rate used
to those to determine
that the the present
entity expects value of the cash flows reflects the return
to derive.
that investors would require if they were to choose an investment that would generate cash flows of
amounts, timing and risk profile equivalent to those that the entity expects to derive.
2. Impairment of Banking related assets – financing of customers

(Refer
2. to Note Impairment
2.9, Note 25 of
andBanking
Note 56related
to the financial
assets –statements)
financing of customers

(Refer to Note 2.9, Note 25 and Note 56 to the financial statements)

As at 31 March 2017, the Banking related assets – financing of customers of RM14,711,816,000 accounted for
approximately 33.55% of the total assets of the Group. The impairment assessment of these assets is performed by the
management using
As atmodels developed
31 March 2017,internally and involves
the Banking relatedsignificant
assets – judgements
financing ofandcustomers
estimates.ofDue to the significance accounted for
RM14,711,816,000
of these assetsapproximately
and the uncertainty
33.55% inherent
of the intotal
estimates
assets made, we considered
of the Group. this as a key
The impairment audit matter.
assessment of these assets is performed by the
management using models developed internally and involves significant judgements and estimates. Due to the significance
Our audit procedures included the following:
of these assets and the uncertainty inherent in estimates made, we considered this as a key audit matter.
 We assessed the internalincluded
Our audit procedures controlsthe
over the approval, recording and monitoring of Banking related assets –
following:
financing of customers, and evaluating the methodologies, inputs and assumptions used by the Group in
calculating collective impairment
We assessed theallowance and individual
internal controls impairment
over the approval,allowance.
recording and monitoring of Banking related assets –
 For collective impairment
financing ofassessment,
customers, weandcompared
evaluatingkeytheassumptions used inputs
methodologies, by the and
Group (such as loss
assumptions usedrates,
by the Group in
loss identification periods collective
calculating and the observation
impairment period)
allowanceto the
andhistorical
individualdata and to externally
impairment allowance.available industry,
financial and
 economic data. impairment assessment, we compared key assumptions used by the Group (such as loss rates,
For collective
 For individual loss
impairment assessment,
identification periods we
andassessed the assumptions
the observation applied
period) to the by thedata
historical Group
and into estimating the
externally available industry,
expected futurefinancial
cash flows from the customers,
and economic data. including the estimated realisable values of collateral based on
available market
 Forinformation.
individual impairment assessment, we assessed the assumptions applied by the Group in estimating the
 We assessed whether
expectedthe disclosures
future in the
cash flows fromfinancial statements
the customers, appropriately
including reflect realisable
the estimated the Group’s exposure
values to
of collateral based on
credit risk. available market information.
 We assessed whether the disclosures in the financial statements appropriately reflect the Group’s exposure to
credit risk.
194

194
 DRB-HICOM BERHAD
356 ANNUAL REPORT 2017

203430-W

Independent auditors’ report to the members of

DRB-HICOM Berhad (Continued)
(Incorporated in Malaysia)

Key Audit Matters (Continued)

3. Provision for liabilities and charges

(Refer to Note 2.28, Note 39 and Note 56 to the financial statements)

As of 31 March 2017, the provisions for warranty and provision for claims from suppliers of the Group amounted to
RM186,482,000 and RM178,862,000 respectively.

A provision by its nature is more uncertain than most other items in the statement of financial position. The estimates of the
outcome and financial effects are determined by the judgement of the management, supplemented by experience from
similar transactions. The evidence considered will also include any additional evidence provided by events after the
reporting period. Accordingly, we consider this area to be an area of audit focus.

(a) Provision for warranty

In addressing this area of audit focus:

 We obtained an understanding of the relevant internal controls of the Group over the estimation of provisions for
warranty;
 We read the terms of the sales contracts to determine the Group’s obligations for the provision of warranty for
vehicles sold; and
 We assessed whether the assumptions on which the provision for warranty are based are consistent with
historical trends and adjusted to take into consideration any relevant changes which arose during the current
year.

(b) Provision for claims from suppliers

In addressing this area of audit focus:

 We obtained an understanding of the relevant internal controls of the Group over the estimation of provisions for
claims from suppliers;
 We discussed with the management to obtain an understanding of the future vehicle production plans and the
estimated purchases of vehicle parts;
 We compared such plans to available supporting evidences such as historical sales data and economic outlook;
 We assessed whether the assumptions applied in estimating the provision for claims from suppliers were
consistent with the management’s future vehicle production plans and the estimated purchases of vehicle parts;
and
 We reviewed the arithmetical accuracy of management’s computation on the provision for claims from suppliers.

195
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 357

203430-W

Independent auditors’ report to the members of

DRB-HICOM Berhad (Continued)
(Incorporated in Malaysia)

Key Audit Matters (Continued)

4. Investment in an automotive subsidiary

(Refer to Note 2.7, Note 18 and Note 56 to the financial statements)

As at 31 March 2017, the carrying amount of the Company’s investment in an automotive subsidiary was
RM2,214,154,000.

The history of continued losses and the depleting shareholders’ funds reported by the Company’s automotive subsidiary,
indicated that the carrying amount of the Company’s cost of investment in the automotive subsidiary may be impaired.
Accordingly, the management of the Company performed an impairment test on its investment. The aforementioned
impairment review gave rise to an impairment loss of investment in an automotive subsidiary of RM335,154,000 for the
year ended 31 March 2017.

The management of the Company estimated the recoverable amount of its investment in the automotive subsidiary based
on fair value less cost of disposal. When estimating the fair value of the automotive subsidiary, the objective is to estimate
the price that would be received in an orderly transaction between market participants at the reporting date under current
market conditions. Given the highly subjective nature of the estimation process, we identified the impairment assessment
as an area of audit focus.

Our audit procedures focused on the valuations performed by firms of independent valuers, which included amongst others
the following procedures:

 We considered the objectivity, independence and expertise of the firms of independent valuers;
 We obtained an understanding of the methodology adopted by the independent valuers in estimating the fair
value of this investment and assessed whether such methodology is consistent with those used in the
industry;
 As part of our evaluations of the fair values of this investment, we had discussions with the independent
valuers to obtain an understanding of the related market data used as input to the valuation models; and
 We assessed whether the adjustment factors applied to the market data in arriving at fair values of this
investment were within a range commonly accepted by the industry.

196
 DRB-HICOM BERHAD
358 ANNUAL REPORT 2017

203430-W

Independent auditors’ report to the members of

DRB-HICOM Berhad (Continued)
(Incorporated in Malaysia)

Information other than the financial statements and auditors’ report thereon

The directors of the Company are responsible for the other information. The other information comprises the information included in
the Group’s 2017 Annual Report, but does not include the financial statements of the Group and of the Company and our auditors’
report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the other information and we do not
express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements of the Group and of the Company or our
knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.

Responsibilities of directors for the financial statements

The directors of the Company are responsible for the preparation of financial statements of the Group and of the Company that give
a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.
The directors are also responsible for such internal control as directors determine is necessary to enable the preparation of financial
statements of the Group and of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the directors are responsible for assessing the Group’s and
the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless directors either intend to liquidate the Group or the Company to cease operations, or have no
realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved
standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 359

203430-W

Independent auditors’ report to the members of

DRB-HICOM Berhad (Continued)
(Incorporated in Malaysia)

Auditors’ responsibilities for the audit of the financial statements (Continued)

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we
exercise professional judgement and maintain professional scepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

 Obtain an understanding of internal control relevant to the audit 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 Group’s and the Company’s internal
control.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.

 Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Group’s or the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Group and of the
Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group or the Company to
cease to continue as a going concern.

 Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company, including
the disclosures, and whether the financial statements of the Group and of the Company represent the underlying transactions
and events in a manner that achieves fair presentation.

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Group to express an opinion on the financial statements of the Group. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.

198
 DRB-HICOM BERHAD
360 ANNUAL REPORT 2017

203430-W

Independent auditors’ report to the members of

DRB-HICOM Berhad (Continued)
(Incorporated in Malaysia)

Auditors’ responsibilities for the audit of the financial statements (Continued)

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the
financial statements of the Group and of the Company for the current year and are therefore the key audit matters. We describe
these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have not
acted as auditors, are disclosed in Note 3 to the financial statements.

Other reporting responsibilities

The supplementary information set out in Note 64 on page 357 351 is disclosed to meet the requirement of Bursa Malaysia Securities
Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information
in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of
Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants
("MIA Guidance") and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared,
in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other matters

This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in
Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Ernst & Young Sundralingam A/L Navaratnam

AF: 0039 No. 2984/05/18(J)
Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia

10 July 2017

199
This page has been intentionally left blank.
 DRB-HICOM BERHAD
364 ANNUAL REPORT 2017

ANALYSIS OF SHAREHOLDINGS
As At 30 June 2017

Class of Securities : Ordinary share

Issued and Fully Paid-Up Share Capital : RM1,933,237,051 comprising 1,933,237,051 ordinary shares
Voting Rights : One (1) vote per ordinary share, on a poll voting
Number of Shareholders : 39,329

DISTRIBUTION OF SHAREHOLDINGS
Number of % of Number of % of
Size of Shareholdings Shareholders Shareholders Shares Held Issued Shares

1 - 99 674 1.71 12,693 0.00*

100 - 1,000 17,595 44.74 12,707,132 0.66

1,001 - 10,000 17,129 43.55 66,260,612 3.43

10,001 - 100,000 3,435 8.73 105,411,565 5.45

100,001 - 96,661,851 494 1.26 567,920,821 29.38

(Less than 5% of issued shares)

96,661,852 and above 2 0.01 1,180,924,228 61.08

(5% and above of issued shares)

Total 39,329 100.00 1,933,237,051 100.00

Note:
* Less than 0.01%

TOP THIRTY SECURITIES ACCOUNT HOLDERS

(Based on the Record of Depositors without aggregating the securities from different securities accounts belonging to the
same Depositor)
Number of % of
No. Name Shares Held Issued Shares

1. Etika Strategi Sdn. Bhd. 1,081,061,741 55.92

2. Citigroup Nominees (Tempatan) Sdn. Bhd. 99,862,487 5.17

Employees Provident Fund Board

3. Lembaga Tabung Haji 91,457,700 4.73

4. Kumpulan Wang Persaraan (Diperbadankan) 66,720,300 3.45

5. CIMB Group Nominees (Tempatan) Sdn. Bhd. 34,114,700 1.76

CIMB Bank Berhad (EDP 2)
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 365

Number of % of
No. Name Shares Held Issued Shares

6. Cartaban Nominees (Tempatan) Sdn. Bhd. 19,500,000 1.01

PAMB for Prulink Equity Fund

7. HSBC Nominees (Asing) Sdn. Bhd. 14,365,000 0.74

BBH and Co Boston for Vanguard Emerging Markets Stock Index Fund

8. Citigroup Nominess (Asing) Sdn. Bhd. 12,880,400 0.67

Exempt an for Citibank New York (Norges Bank 14)

9. Citigroup Nominess (Asing) Sdn. Bhd. 11,232,200 0.58

Macquarie Bank Limited (DBU A/C)

10. HSBC Nomines (Asing) Sdn. Bhd. 11,214,000 0.58

JPMCB NA for Vanguard Total International Stock Index Fund

11. Tai Tak Estates Sdn. Bhd. 10,952,653 0.57

12. Citigroup Nominees (Asing) Sdn. Bhd. 10,365,100 0.54

CBNY for Dimensional Emerging Markets Value Fund

13. Citigroup Nominess (Asing) Sdn. Bhd. 10,184,397 0.53

CBNY for Emerging Market Core Equity Portfolio DFA Investment
Dimension Group Inc

14. HSBC Nominees (Asing) Sdn. Bhd. 8,526,100 0.44

TNTC for Baring Pacific Fund

15. Citaria Sdn Bhd 8,224,572 0.43

16. Cartaban Nominees (Asing) Sdn. Bhd. 7,475,000 0.39

Exempt an for State Street Bank & Trust Company (West CLT OD67)

17. Citigroup Nominees (Asing) Sdn. Bhd. 7,093,800 0.37

CGML IPB for Pedder Street Asia Absolute Return Master Fund Limited

18. Foo Khen Ling 6,850,000 0.35

19. Yap Ah Fatt 6,680,000 0.35

20. Maybank Nominees (Tempatan) Sdn. Bhd. 6,428,400 0.33

National Trust Fund (IFM Maybank)

21. Cartaban Nominees (Tempatan) Sdn. Bhd. 5,000,000 0.26

PAMB for Prulink Dana Unggul

22. Cartaban Nominees (Tempatan) Sdn. Bhd. 5,000,000 0.26

PBTB for Takafulink Dana Ekuiti

23. Maybank Nominees (Tempatan) Sdn. Bhd. 4,000,000 0.21

Etiqa Takaful Berhad (Family PRF EQ)
 DRB-HICOM BERHAD
366 ANNUAL REPORT 2017

Number of % of
No. Name Shares Held Issued Shares

24. Maybank Nominees (Tempatan) Sdn. Bhd. 3,665,000 0.19

Etiqa Takaful Berhad (Shareholders FD)

25. Citigroup Nominees (Asing) Sdn. Bhd. 3,546,000 0.18

CBNY for DFA Emerging Markets Small Cap Series

26. Maybank Nominees (Tempatan) Sdn. Bhd. 3,500,000 0.18

Etiqa Insurance Berhad (Growth Fund)

27. Maybank Nominees (Tempatan) Sdn. Bhd. 3,275,000 0.17

Etiqa Insurance Berhad (Life Par Fund)

28. Meng Lee Motors Sdn Berhad 3,000,000 0.16

29. CIMB Group Nominess (Asing) Sdn. Bhd. 2,877,500 0.15

Exempt an for DBS Bank Ltd (SFS)

30. Kam Loong Credit Sdn. Bhd. 2,800,000 0.14

SUBSTANTIAL SHAREHOLDERS’ SHAREHOLDINGS

(Based on the Register of Substantial Shareholders)

Direct Interest Indirect Interest

Number of % of Issued Number of % of Issued Total % of

Name Shares Held Shares Shares Held Shares Issued Shares

Etika Strategi Sdn. Bhd. 1,081,061,741 55.92 - - 55.92

Employees Provident Fund Board 102,272,487 5.29 - - 5.29

Tan Sri Dato’ Seri Syed Mokhtar Shah - - 1,081,061,741 55.92 55.92
bin Syed Nor (N1)

Note:
(N1)
Deemed interest by virtue of his interest in Etika Strategi Sdn. Bhd. pursuant to Section 8 of the Companies Act 2016.
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 367

DIRECTORS’ SHAREHOLDINGS IN THE COMPANY AND ITS RELATED CORPORATIONS

(Based on the Register of Directors’ Shareholdings)

Direct Interest Indirect Interest

Number of % of Issued Number of % of Issued

Interest in the Related Corporation Shares Held Shares Shares Held Shares

Shares held in Etika Strategi Sdn. Bhd., the holding

company by:
Brigadier General (K) Tan Sri Dato’ Sri (Dr) 30,000 10.00 - -
Haji Mohd Khamil bin Jamil

Shares held in Pos Malaysia Berhad, the subsidiary

company by:
Brigadier General (K) Tan Sri Dato’ Sri (Dr) 57 0.00* - -
Haji Mohd Khamil bin Jamil

Note:
* Less than 0.01%

Save as disclosed above, none of the other Directors of the Company has any interest in shares in the Company or its
related corporations.

SENIOR MANAGEMENT’S SHAREHOLDINGS IN THE COMPANY AND ITS RELATED CORPORATIONS

(Based on the Record of Depositors)

Direct Interest Indirect Interest

Number of % of Issued Number of % of Issued

Interest in the Company Shares Held Shares Shares Held Shares

Datuk Mohamed Razeek bin Md Hussain Maricar 3,100 0.00* - -

Amalanathan Thomas 37,000 0.00* - -

Note:
* Less than 0.01%

Save as disclosed above, none of the other Senior Management of the Company has any interest in shares in the
Company or its related corporations.
 DRB-HICOM BERHAD
368 ANNUAL REPORT 2017

SHARE PERFORMANCE CHART

Share Price From April 2016 to March 2017
 DRB-HICOM BERHAD
ANNUAL REPORT 2017 369

MATERIAL PROPERTIES OF
DRB-HICOM GROUP
As At 31 March 2017

Group
Net book
Approximate value as at
age of Approx. 31 March 2017
Location Description/existing use building Tenure area RM’000

1 HS(D) B.P. 5653 and 5654 Automobile plant, 14 years Freehold 5,150,600 489,181
Bil PT 16162 and 10163 administrative building and sq.m
Mukim of Ulu Bernam Timur sports complex facilities. (Land)
District of Batang Padang
Perak Darul Ridzuan

2 Lots No. 39617, 39619 and 46970 Main office, main factory, engine 20-32 years Freehold 816,100 456,089
Mukim of Damansara factory, medium volume factory, sq.m
District of Petaling canteen buildings, sports facilities, (Land)
Selangor Darul Ehsan additional R&D laboratories building,
car park for production cars and staff
and semi-high speed test track.

3 PTD 176399 to 176523, Land held for residential and - Freehold 2,083,996 412,165
176536 to 177094, 177101, 177108, 177109, commercial development. sq.m
177114, 177115, 177127, 177137, 177138 (Land)
and 177638
Mukim Tebrau
Daerah Johor Bahru
Johor Darul Ta’zim


4 HS(D) 4546, PT 13225 and University college campus and hostel. 5 years Leasehold 262,290 233,478
HS(D) 4609, PT 2743 99 years sq.m
Daerah Pekan, Mukim Pekan expiring in (Land)
Pahang Darul Makmur years 2109
and 2112


5 Lot No. 77170 and individual titles from Land held for residential and
master titles (Lots No. 77174 and 77175) commercial development. - Freehold 444,215 198,913
Mukim and District of Klang sq.m
Selangor Darul Ehsan (Land)



 DRB-HICOM BERHAD
370 ANNUAL REPORT 2017

Group
Net book
Approximate value as at
age of Approx. 31 March 2017
Location Description/existing use building Tenure area RM’000

6 Lots No. 63004 (PT 772), 63108 (PT 1828 & 1829) Hotel, golf course and club house. 23-24 years Freehold 1,489,836 182,957
63109 (PT 465), 63110 (PT 466), sq.m
63111 (PT 467) and 63112 (PT 468) (Land)
Town of Glenmarie, Mukim Damansara
District of Petaling
Selangor Darul Ehsan

7 GM 1867 Lot 1468, 94 units chalet & marina and 17-20 years Freehold and 1,565,651 155,427
HS(D) 423-588 (PT 919-1088) land held for development. Leasehold sq.m
Mukim Kedawang expiring in (Land)
Daerah Langkawi years 2054
Kedah Darul Aman

8 HS(D) 63928, PT 5689 and Industrial land with office and building. 21 years Freehold 650,360 147,174
HS(D) 63929, PT 5690 sq.m
Mukim Gurun (Land)
Daerah Kuala Muda
Kedah Darul Aman

9 Land adjacent to Potash Lane Factory, engineering facilities, office 49 years Freehold 584,040 140,944
Hethel, Norwich, Norfolk NR 14 8EZ and test track. sq.m
England and Land North of Browic (Land)


10 Lots 348 (HSD 17814), 350 (HSD 17815) and Land held for future development. - Freehold 809,371 130,789
351 (HSD 17817) sq.m
Bandar Kota Perdana (Land)
Mukim Bukit Kayu Hitam
Daerah Kubang Pasuh, Kedah
Make Today
Count Because
Today Is The
First Day Of
The Future.
This page has been intentionally left blank.
FORM OF PROXY DRB-HICOM BERHAD
(Company No.: 203430-W)
ANNUAL GENERAL MEETING
(Incorporated in Malaysia)

Number of Shares held

CDS Account No. - -

I/We,_____________________________________________________________________________ NRIC/Company No. __________________________________________

(FULL NAME AS PER NRIC/CERTIFICATE OF INCORPORATION IN BLOCK LETTERS)

(Tel No: __________________________ ) of __________________________________________________________________________________________________________
(FULL ADDRESS)
being a member/members of DRB-HICOM Berhad, hereby appoint the following:

Name of Proxy NRIC/Passport No. Proportion of Shareholdings (%)

and/or failing him/her

or failing him/her, the Chairman of the Meeting, as my/our proxy to attend and vote for me/us on my/our behalf at the Twenty-Seventh
Annual General Meeting (“27th AGM”) of the Company to be held at Glenmarie Ballroom, Holiday Inn Kuala Lumpur Glenmarie
(Tel: 03-7803 1000), No. 1, Jalan Usahawan U1/8, Seksyen U1, 40250 Shah Alam, Selangor Darul Ehsan on Wednesday, 30 August 2017 at
9.00 a.m. and at any adjournment thereof.

My/our proxy is to vote on the resolutions as indicated by an “X” in the appropriate spaces below. If this form is returned without any
indication as to how the proxy shall vote, the proxy shall vote or abstain as he/she thinks fit.

No. Ordinary Resolution For Against

1. Declaration of first and final dividend

2. Re-election of Dato’ Ibrahim bin Taib as Director

3. Re-election of Datuk Ooi Teik Huat as Director

4. Re-election of Datuk Idris bin Abdullah as Director

5. Approval of Directors’ fees for the financial year ended 31 March 2017

6. Approval of Directors’ fees from 1 April 2017 until the conclusion of the next AGM

7. Approval of Directors’ benefits from 31 January 2017 until the conclusion of the
next AGM

8. Re-appointment of Messrs Ernst & Young as Auditors

9. Retention of Datuk Ooi Teik Huat as Senior Independent Non-Executive Director

Dated this __________ day of ________________________, 2017.

......................................................................
Signature(s) of shareholder(s) or
Common Seal of corporate shareholder
NOTES :
(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) Where a member of the Company is an authorised nominee, as defined under the
Securities Industry (Central Depositories) Act 1991, it may appoint not more than
two (2) proxies in respect of each securities account it holds to which ordinary shares
in the Company are credited.
(c) For an exempt authorised nominee which holds ordinary shares in the Company for
multiple beneficial owners in one (1) securities account (omnibus account), there is no
limit to the number of proxies which the exempt authorised nominee may appoint in
respect of each omnibus account it holds.
(d) 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.
(e) Where a member/an authorised nominee/an exempt authorised nominee appoints
proxies, the proportion of shareholdings to be represented by each proxy must be
specified in the instrument appointing the proxies. If the form of proxy is returned
without an indication as to how the proxy shall vote on any particular matter, the
proxy may exercise his/her discretion as to whether to vote on such matter and if
so,how.
(f) A proxy appointed to attend and vote at the meeting shall have the same rights as the
member to speak at the meeting. The lodging of a form of proxy does not preclude
a member from attending and voting in person at the meeting should the member
subsequently decide to do so.
(g) 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 office of the Share Registrar, Symphony Share Registrars Sdn. Bhd.,
Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling
Jaya, Selangor Darul Ehsan (Tel: 03-7849 0777) not less than forty-eight (48)
hours before the time set for holding this meeting or adjourned meeting, or in the
case of a poll, not less than twenty-four (24) hours before the time appointed for the
taking of a poll, and in default the instrument of proxy shall not be treated as valid.
(h) For purpose of determining a member who shall be entitled to the 27th AGM, the
Company shall be requesting Bursa Malaysia Depository Sdn. Bhd. to issue a General
Meeting Record of Depositors as at 23 August 2017. Only a depositor whose name
appears therein shall be entitled to attend the said meeting or appoint a proxy(ies) to
attend and vote on such depositor’s behalf.
 DRB-HICOM Berhad (203430-W)

Level 5, Wisma DRB-HICOM

No. 2, Jalan Usahawan U1/8,
Seksyen U1, 40150 Shah Alam, Selangor.

Tel : +603 2052 8000

Fax : +603 2052 8099

www.drb-hicom.com