malaysia: economic review and outlook

L P I C a p i t a l B h d 75

MALAYSIA: ECONOMIC REVIEW AND OUTLOOK

0

3

6

9

12

15

Source: Bank Negara Malaysia, Annual Report, various issues and Quarterly Bulletin, Second Quarter, 2007.

2002 2003 2004 2005 2006

RM

bill

ion

2007(Jan-Sep)

Source: Bank Negara Malaysia, Monthly Statistical Bulletin, various issues.

% o

f to

tal l

oans

0

2

4

6

8

J’06 F M A M J J A S O N D

J’07 F M A M J J A S O

The level of non-performing loans (“NPLs”) improved due to recoveries, reclassifi cations of NPLs to performing status and write-offs. The ratio of net NPLs to total loans dropped from 4.8% at the end of 2006 to 3.4% at the end of October 2007 (Graph 11). The loan loss coverage increased from 58.9% at the end of 2006 to 71.5% at the end of October 2007.

Lending activity was healthy, supported by lending to households and small and medium enterprises. Annual loan growth of the banking system rose to 10.1% at the end of October 2007 (2006: 6.3%) due to higher growth in business loans. Total deposits of the banking system including negotiable instruments of deposit (“NIDs”), grew strongly by 11.1% for the ten-month period. The loan-to-deposit ratio of the banking system rose from 72% in January 2007 to 77.0% in October 2007. In the fi rst ten months of 2007, total new loans approved by the banking system rose to RM234 billion (2006: RM188.3 billion).

Activity in the insurance industry is strong in 2007, after a healthy growth in 2006. In the fi rst half of 2007, premium income of life and general insurance sectors (including the takaful sector) grew nearly 10% to RM13 billion (2006: 5.7%). For the same period, the assets of the life and general funds grew by 14% to RM116 billion. The growth momentum is expected to continue in 2008.

OUTLOOK FOR 2008

Looking forward, the Malaysian economy is expected to remain positive in 2008, amidst slowing global economy due to deceleration in the US economy. However, to some extent, the

slack in the US economy is expected to be offset by growth in Europe, Japan, and China. The sub-prime mortgage crisis and credit tightening in the US is not expected to have material impact on economic activity in Malaysia next year.

Growth in 2008 will continue to be supported by domestic demand. Strong private consumption is likely to sustain, given the low unemployment, low interest rates, high commodity prices, modest infl ation and a recent pay hike for government offi cials. Private investment is expected to sustain because of high capacity utilisation in the manufacturing sector, positive business sentiment and higher public spending on the 9MP projects. Export is expected to remain modest.

Infl ation is expected to remain modestly high. Current conditions suggest that infl ation could have some upward bias due to high oil prices and other factors such as the expectations of lower fuel subsidy and upward revision in road toll charges. A stronger Ringgit, however, will moderate infl ationary pressures.

Monetary and fi scal policies are expected to remain stable and supportive of growth. The Overnight Policy Rate is expected to remain at the current level and the defi cit in the public spending remains at 3.1% of GDP in 2008. Given the strong economic fundamentals such as low infl ation, strong banking system, high international reserves, large current account surplus and low external debt, the Malaysian economy has the fl exibility to respond if the global economy grows sharply lower than expected.

corporateresponsibility 78 Corporate Governance Statement

92 Risk Management

98 Code of Ethics, Integrity and Trust

99 Statement on Internal Control

102 Audit Committee Report

106 Bursa Securities Listing Requirements

Compliance Information

108 Corporate Philosophy

116 Corporate Social Responsibility

121 Calendar of Signifi cant Events

76 L P I C a p i t a l B h d

We will continue

to employ

effective risk

management

to achieve

sustainable

growth.

LPI Group

is committed

to enhancing

shareholders’ value

and fostering the

highest standards of

corporate governance.

The Group is

focused on achieving

sustainable excellence

as a responsible

and caring corporate

citizen.



Corporate Governance Statement

LPI Group recognises the importance of enhancing shareholders’ value through continued profi tability and fostering the highest standards of corporate governance. The Board of Directors (“Board”) strongly believes that good corporate governance is vital to the enhanced long-term performance and continuous economic growth of LPI Group. Hence, a sound governance structure is fundamental to safeguard the interests of LPI Group’s shareholders.

The commitment of the Board, Management and staff of LPI Group in enhancing shareholder value is attested by the awards and recognition that LPI Group had received in 2007.

LPI’s excellent corporate governance and shareholder value were duly recognised with the conferment of the Malaysian Business Corporate Governance Merit Award and the KPMG Shareholder Value Award for three (3) consecutive years since 2004. LPI received a higher recognition for the KPMG Shareholder Value Award 2005 and 2006 when it emerged as the Sectoral Winner under the Financial Services category for both fi nancial year ended 31 December 2005 and 2006.

In addition, LPI was awarded a Certifi cate of Merit of the National Award for Management Accounting (NAfMA) 2007 after receiving a Certifi cate of Finalist of the same award in 2006 distinguishing its excellence in management accounting practices.

In year 2007, LPI was accorded with the following prestigious awards and recognition:

Malaysian Business Corporate Governance Award 2006

Merit Award

KPMG Shareholder Value Award 2006

Sectoral WinnerFinancial Services

National Award for Management Accounting (NAfMA) 2007

Certifi cate of Merit

BOARD OF DIRECTORS

The Board is fully committed to ensure that the highest standards of corporate governance are observed throughout the Group so that the affairs of the Group are conducted with integrity and professionalism with the objective of safeguarding shareholders’ investment and ultimately enhancing their value.

DIRECTORS

• The Board

The Board is responsible for the overall governance of the Group and discharges this responsibility through compliance with relevant rules, laws, regulations, directives and guidelines in addition to adopting the best practices in the Malaysian Code of Corporate Governance.

The duties and responsibilities of the Board include setting the strategic and succession plans of the Group, monitoring performance goals, formalising documentation on matters specifi cally reserved for its decision and ensuring that the Group’s internal controls, risk management and reporting procedures are well in place.


CORPORATE GOVERNANCE STATEMENT

The Board has established Board Committees as well as various Management Committees to assist the Board in the discharge of its duties. Each committee operates under approved terms of reference as set out on pages 85 to 87.

The Board and Management Committees are as follows:

Board Committees

• Audit Committee • Employees’ Share Option Scheme Committee• Nominating Committee • Risk Management Committee• Remuneration Committee • Share Buy-Back Committee• Investment Committee

Management Committees

• Working Risk Management Committee • Internet Committee • Credit Control Committee • Business Resumption Continuity Plan (“BRCP”) Committee• Information Technology (“IT”) Steering Committee • Occupational Safety and Health Committee

Members of the Board Committees and their attendance of meetings are refl ected as follows:

Members of Board Committees

C - Chairman M - Member Aud

it C

omm

ittee

Nom

inat

ing

Com

mitt

ee

Rem

uner

atio

n C

omm

ittee

Inve

stm

ent

Com

mitt

ee

Em

ploy

ees’

Sha

re O

ptio

n

Sch

eme

Com

mitt

ee

Ris

k M

anag

emen

t

Com

mitt

ee

Sha

re B

uy-B

ack

Com

mitt

ee

Tan Sri Dato’ Sri Dr. Teh Hong Piow

Non-Executive ChairmanC C C

Tee Choon Yeow

Executive Director/ Chief Executive Offi cerM M M M

Dato’ Yeoh Chin Kee

Independent Non-Executive DirectorC C C M C

Dato’ Haji Abdul Aziz bin Omar

Independent Non-Executive DirectorM M M M

Kong Thian Mee

Company SecretaryM M



Attendance at Board Committee Meetings

Aud

it C

omm

ittee

Nom

inat

ing

Com

mitt

ee

Rem

uner

atio

n C

omm

ittee

Inve

stm

ent

Com

mitt

ee

Em

ploy

ees’

Sha

re O

ptio

n

Sch

eme

Com

mitt

ee

Ris

k M

anag

emen

t

Com

mitt

ee

Sha

re B

uy-B

ack

Com

mitt

ee


Non-Executive Chairman- - - 1/1 N1 - 4/4

Tee Choon Yeow

Executive Director/ Chief Executive Offi cer- - - 1/1 N1 2/2 4/4


Independent Non-Executive Director7/7 3/3 1/1 - N1 2/2 -

Dato’ Haji Abdul Aziz bin Omar #

Independent Non-Executive Director1/1 1/1 1/1 - - N2 -

Geh Cheng Hooi ##

Independent Non-Executive Director6/6 2/2 - - N1 2/2 -

Lee Chin Guan ###

Independent Non-Executive Director5/6 1/1 - - - 1/2 -

Kong Thian Mee

Company Secretary- - - 1/1 - - 4/4

# From his appointment date on 9 October 2007## Up to his resignation date on 29 November 2007### Up to his resignation date on 9 October 2007

N1 - No Employees’ Share Option Scheme in 2007N2 - No meeting held from the date of appointment to the end of fi nancial year

• Board Balance

As at 31 December 2007, the Board comprises a Chairman who is a Non-Independent Non-Executive Director, two (2) Independent Non-Executive Directors, one (1) Non-Executive Director and one (1) Executive Director who is also the Chief Executive Offi cer.

The size of the Board, comprises fi ve (5) Members, is optimum given the scope, size and complexity of the Group’s operations. The composition of the Board is well balanced with an effective mix of whom two (2) are independent as defi ned by the Bursa Malaysia Securities Berhad (“Bursa Securities”) Listing Requirements.



There is a clearly accepted distinct division of roles and responsibility between the Chairman and the Chief Executive Offi cer to ensure balance of power and authority.

Two (2) of the Non-Executive Directors are independent of Management and free from any business or other relationship with the Group that could materially affect and/ or interfere with the exercise of their independent judgment.

Since the last Annual Report, two (2) Board members resigned during the fi nancial year, namely, Mr. Lee Chin Guan (Independent Non-Executive Director) and Mr. Geh Cheng Hooi (Independent Non-Executive Director) and one (1) new Board member was appointed namely, Dato’ Haji Abdul Aziz bin Omar (Independent Non-Executive Director).

The profi les of the Members of the Board are presented on

pages 28 to 31.

• Board Meetings and Supply of Information to the Board

Board meetings for the following fi nancial year are scheduled before the end of the current fi nancial year so as to enable Directors to plan ahead their other appointment dates in order to facilitate their attendance at the LPI Board meetings.

The Board meets quarterly. In addition, the Board meets on an ad-hoc basis as and when necessary to consider corporate proposals or business issues that require the urgent decision of the Board. The Board met twelve (12) times during the fi nancial year ended 31 December 2007.

The dates of the Board meetings are as follows:

• 3 January 2007• 25 January 2007• 5 April 2007• 30 April 2007• 29 June 2007• 4 July 2007• 11 July 2007• 26 July 2007• 5 September 2007• 9 October 2007• 26 October 2007• 29 November 2007

Attendance by each Member of the Board during the fi nancial year ended 31 December 2007 is as follows:

DirectorNumber of Board

Meetings Held

Number of Board

Meetings Attended

i. Tan Sri Dato’ Sri Dr. Teh Hong Piow 12 12

ii. Tee Choon Yeow 12 12

iii. Tan Kok Guan 12 12

iv. Dato’ Yeoh Chin Kee 12 12

v. Dato’ Haji Abdul Aziz bin Omar # 3 3

vi. Geh Cheng Hooi ## 11 10

vii. Lee Chin Guan ### 9 7

# From his appointment date on 9 October 2007

## Up to his resignation date on 29 November 2007

### Up to his resignation date on 9 October 2007



The commitment of the Board of Directors in ensuring effective discharge of their duties and responsibilities is refl ected by the high number of Board meetings held during the year ended 31 December 2007.

Tan Sri Dato’ Sri Dr. Teh Hong Piow, the Non-Executive Chairman, chairs all the Board meetings.

In advance of each Board meeting, the members of the Board are provided with the agenda together with the relevant documents and information in a form and of a quality appropriate, so that the Directors have ample time to review matters to be deliberated at the Board meeting and to facilitate informed decision making by the Directors.

At the Board meetings, the Board reviews the Group’s business operations by analysing the profi t and loss account and balance sheet of the Group as compared to the same corresponding period.

The Board also notes the decisions and salient issues deliberated by the Audit Committee and Risk Management Committee through minutes of these committees, which are tabled to the Board.

In addition to the quarterly Board meetings, ad-hoc Board meetings are convened for the purpose of approving the Company’s quarterly fi nancial statements, which had been reviewed by the Audit Committee.

Minutes of the Board meeting are circulated to all Directors for their perusal prior to the confi rmation of the minutes at the following Board meeting.

The Board has unrestricted access to information relating to the Group’s operations in the discharge of their duties and may require to be provided with further details or clarifi cations on the Board meeting agenda items.

The Directors are regularly updated by the Company Secretary on the new statutory as well as regulatory requirements relating to Directors’ duties and responsibilities or the discharge of their duties as Directors of the Company. The Company Secretary attends all Board meetings and ensures that accurate and adequate records of the proceedings of Board meetings and decisions made are properly kept.

All Directors have access to the advice and services of the Company Secretary and also to take independent professional advice at the Company’s expense, if necessary.

• Appointments to the Board

The proposed appointment of a new Member to the Board will be deliberated on by the full Board based upon a formal report, prepared by the Nominating Committee on the necessity for and qualifi cation and experience of the proposed director. The Nominating Committee also carried out annual assessment of each Director’s contribution to the Company and recommend for the re-appointment and re-election of Directors who are seeking for re-appointment and re-election at the Annual General Meeting.

The Nominating Committee is comprised entirely of Independent Non-Executive Directors; all the two (2) Independent Non-Executive Directors are Members of the Nominating Committee.

The terms of reference of the Nominating Committee is set out on page 85.

• Re-Appointment and Re-Election of Directors

Pursuant to Section 129(2) of the Companies Act, 1965, Directors who are over the age of seventy (70) years shall retire at every Annual General Meeting and may offer themselves for re-appointment to hold offi ce until the next Annual General Meeting.



In accordance with the Company’s Memorandum and Articles of Association, one-third (1/3) of the Directors, or, if their number is not a multiple of three (3), the number nearest to one-third (1/3) with a minimum of one (1), shall retire from offi ce at each Annual General Meeting and they may offer themselves for re-election. Directors who are appointed by the Board are subject to re-election by the shareholders at the next Annual General Meeting held following their appointments.

DIRECTORS’ REMUNERATION

The remuneration of each Director is reviewed annually by the Remuneration Committee. The Remuneration Committee has a formal and transparent procedure for the full Board to approve remuneration for Executive Directors, which is based on corporate and individual performance, and approving remuneration of Non-Executive Directors including Non-Executive Chairman, which is based on experience and level of responsibilities of the Directors concerned.

Each individual Director abstains from the Board decision on his own remuneration package. Directors’ fees are approved at the Annual General Meeting by the shareholders.

The Directors are reimbursed for Board meeting expenses incurred.

The Remuneration Committee is comprised entirely of Independent Non-Executive Directors; all the two (2) Independent Non-Executive Directors are Members of the Remuneration Committee.

The terms of reference of Remuneration Committee is set out on page 85. The remuneration of each Director for fi nancial year ended 31 December 2007 is disclosed in Note 22 to the fi nancial statements on page 172.

DIRECTORS’ TRAINING AND EDUCATION

The Directors are mindful that they should receive appropriate continuous training by attending seminars and briefi ngs in order to broaden their perspectives and to keep abreast with the development in the business environment as well as with the new regulatory and statutory requirements.

The training programmes and seminars attended by the Directors during the fi nancial year ended 31 December 2007 are, inter-alia, on areas relating to insurance industry, corporate governance, risk management and fi nancial reporting.

The details of training attended by the Directors during the fi nancial year ended 31 December 2007 are as follows:


Date Title of Seminar/ Workshop/ Course

30 January 2007 Training Programme on Implications of Major New Accounting Rules for Banks

28 March 2007 Seminar on Islamic Finance : Concept, Issues and Challenges

31 July 2007 Training Programme on Tax Incentives, Accounting and Financial Reporting Regime and Capital Adequacy in relation to Islamic Banking

23 October 2007 Discussion with Bank Negara Malaysia on Issues Pertaining to Malaysia as Islamic Financial Centre

31 October 2007 Training Programme on Responsibilities of Audit Committee

31 October 2007 Training Programme on International Convergence of Capital Measurement and Capital Standards

28 November 2007 Training Programme on Key Corporate Governance Developments

28 November 2007 Training Programme on Emerging Audit Committee Challenges



Tee Choon Yeow


21 March 2007 Briefi ng on the Bank Negara Malaysia Annual Report 2006 and the Financial Stability and Payment Systems Report 2006

27 – 28 March 2007 Global Islamic Finance Forum

3 April 2007 Briefi ng on Anti-Money Laundering Act 2001

21 June 2007 Seminar on Risk Based Capital Framework

12 – 20 August 2007 Malaysian Re CEO Programme

Tan Kok Guan


27 – 28 March 2007 Global Islamic Finance Forum

3 April 2007 Briefi ng on Anti-Money Laundering Act 2001

24 April 2007 MIM’s CEO Forum

10 – 11 June 2007 International Seminar on Utilisation & Marketing of ACACIAS


21 November 2007 Bank Negara Malaysia - Focus Group Directors’ Education Programme



22 January 2007 Briefi ng on Anti-Money Laundering Act 2001










TERMS OF REFERENCE

The terms of reference and frequency of meetings for the Board and Management Committees are as follows:

BOARD COMMITTEES

i) Nominating Committee

• To propose nominees for appointment to the Board.

• To carry out annual assessment of each Director’s contribution to the Company.

• To propose the removal of ineffective Directors.

The Nominating Committee meets as and when required.

ii) Remuneration Committee

• To review and deliberate on the quantum of Directors’ annual fees.

The Remuneration Committee meets as and when required.

iii) Investment Committee

• To formulate policies, strategies and other matters relating to investment in shares and private debt securities.

• To review the Company’s investment on shares and private debt securities and take necessary measures to improve its value, profi tability and risk.

The Investment Committee meets as and when required.

iv) Employees’ Share Option Scheme (“ESOS”) Committee

• To administer the ESOS in accordance with the ESOS Bye-laws.

The ESOS Committee meets as and when required.

v) Risk Management Committee

• To review and recommend risk management strategies, policies and risk tolerance for the Board’s approval.

• To review and assess the adequacy of risk management policies and framework for identifying, measuring, monitoring and controlling risks as well as the extent to which these risks are operating effectively.

• To ensure adequate infrastructure, resources and systems are in place for an effective risk management i.e. ensuring that the staff responsible for implementing risk management systems perform those duties independently of the Group’s risk taking activities.

• To review the management’s periodic reports on risk exposure, risk portfolio composition and risk management activities.

• To perform any other functions in relation to the risk management as may be agreed by the Risk Management Committee and the Board.

The Risk Management Committee meets every half yearly.





31 July 2007 Training Programme on Tax Incentives, Accounting and Financial Reporting Regime and Capital Adequacy in relation to Islamic Banking



13 November 2007 Seminar on Shared Services & Outsourcing in the Financial Sector





vi) Share Buy-Back Committee

• To ensure that the Share Buy-Back complies with the mandate given to the Share Buy-Back Committee by the Board to determine the purchase date, amount and price of LPI ordinary shares to be bought back.

• To ensure that the LPI ordinary shares bought back are retained as Treasury Shares unless otherwise determined by the Board.

• To ensure that LPI remains solvent after each Share Buy-Back in accordance with Section 67A of the Companies Act 1965, Part IIIA of the Companies Regulations 1966, and the Listing Requirements of Bursa Securities (“Solvency Declaration”).

• To formulate plans and strategies to ensure that LPI’s purchase of its own ordinary shares is carried out in the most effi cient manner.

The Share Buy-Back Committee meets as and when required.

MANAGEMENT COMMITTEES

i) Working Risk Management Committee

• To assist the Risk Management Committee (“RMC”) on the management of operational, fi nancial and general risks to achieve business objectives.

• To identify and communicate to the RMC on critical risks (present and potential) in terms of likelihood exposures and impact on the business and the management action plans to manage these risks on a continuing basis.

• To oversee the formal development of operational, fi nancial and general risks management policies encompassing all business and activities and ensuring the development of procedures and manuals.

• To evaluate and assess the adequacy of controls to manage the overall operational, fi nancial and general risks associated with the business activities inclusive of physical/ premises security.

• To review reports on signifi cant fraudulent cases and lapses in operational, fi nancial and general risks management processes.

• To ensure that there is adequate and prompt risk reporting in respect of operational, fi nancial and general risks management.

• Monitor, assess and advise the credit risk portfolio composition.

• Review reports of the credit review process, assets quality and ensure that corrective actions are taken.

• Ensure compliance with regulatory requirements.

• To keep abreast with the latest developments, both domestic as well as international in the insurance industry and fi nancial markets.

• To evaluate the adequacy of the capital available in the insurance and shareholders’ equity to support the Total Capital Required as specifi ed in the Risk-Based Capital Framework for Insurers issued by Bank Negara Malaysia.

• To develop an outsourcing risk management programme and policies for RMC’s approval.

• To evaluate the materiality of all existing and prospective outsourcing, based on the framework approved by the Board.

• Implement approved outsourcing policies and procedures.

• Periodically review the outsourcing policies and procedures implemented to ensure their continued effectiveness in managing outsourcing risks.

• To communicate information pertaining to material outsourcing risks to the RMC in a timely manner.

• To oversee the Working Risk Management Committee – Singapore Branch.

• To perform any other functions in relation to the risk management as may be agreed by the RMC and the Board.

The Working Risk Management Committee meets quarterly.



ii) Credit Control Committee

• To maximise the conversion of accounts receivable into cash fl ow and minimise bad debts write off whenever possible.

• To ensure timely collection of outstanding debts, identify problems (e.g. short payment, cancellation, unidentifi ed items) and resolve it in a timely manner.

The Credit Control Committee meets monthly.

iii) Information Technology (“IT”) Steering Committee

• Ensure the establishment of effective computerisation plans for the Group in line with corporate objectives and business strategy.

• Overall control of the implementation of the plans by monitoring and reviewing its performance and progress.

• Setting budgets within which computerisation objectives should be achieved and authorising any expenditure above pre-defi ned limits.

• To establish objectives, policies and strategies for computerisation in the Group.

• To develop long-term strategic plans for computerisation of the Group.

• To establish a detailed annual IT Plan.

• To establish standards for:

i) Hardware/ Software Acquisition;

ii) Systems Development Lifecycle and Program Change Operations; and

iii) Computer Security.

• To consider software, hardware acquisitions and all items related to computerisation.

• To monitor and review progress of ongoing projects and the performance monitoring will be geared to the strategic plans, action plans and budgets.

• To review and approve new IT Project proposals.

The IT Steering Committee holds a minimum of six (6) meetings a year.

iv) Internet Committee

• To ensure that there is adequate security, expertise and resources to operate and maintain the internet insurance system.

• To ensure the implementation of internet insurance services are consistent with the overall strategic and business objectives of the Group.

• To conduct performance monitoring of internet insurance products, services, delivery channels and processes.

The Internet Committee meets as and when required.

v) Business Resumption Continuity Plan (“BRCP”)

Committee

• To prepare a Business Resumption Continuity Plan to ensure that the Group suffers minimum interruption to its systems, processes or operations in the event of any disasters.

The BRCP Committee meets as and when required.

vi) Occupational Safety and Health (“OSH”) Committee

• To review the measures taken to ensure the safety and health of persons at the place of work.

• To investigate any matter at the place of work:

- which a member of the OSH Committee or a person employed thereat considers is not safe or is a risk to health, and

- which has been brought to the attention of the employer.

• Attempt to resolve any matter referred to in the above investigation, and if unable to do so, requests the management to undertake an inspection of the place of work for that purpose.

The OSH Committee meets quarterly.



ACCOUNTABILITY AND AUDIT

Financial Reporting

The Directors recognise the responsibility for ensuring that accounting records are properly kept and that the fi nancial statements are prepared in accordance with applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965, the Insurance Act and Regulations 1996 and the directives from Bank Negara Malaysia.

Early issuance of annual report and releases of announcements on the quarterly results to Bursa Securities refl ect the Board’s commitment to give timely, transparent and up-to-date assessments on the Group’s performance and prospects.

The Board is assisted by the Audit Committee to oversee the fi nancial reporting processes and the quality of the fi nancial reporting by the LPI Group. The Audit Committee reviews the integrity of the Group’s annual and quarterly fi nancial statements. The Audit Committee also assists the Board in reviewing the appropriateness of the accounting policies applied by the Group as well as the changes to these policies.

The Statement of Responsibility by Directors in respect of the preparation of the annual audited fi nancial statements of LPI and LPI Group is presented on page 133.

Internal Controls

The Board assumes the overall responsibility for maintaining an effective system of internal controls that provides reasonable assurance of effective and effi cient operations, compliance with laws and regulations, as well as adherence with internal procedures and guidelines.

The Group has established internal controls, which cover all levels of personnel, and business processes that ensure the Group’s operations are effective and effi cient as well as the safeguarding of the Group’s assets and shareholders’ interest.

The size and complexity of the business operations involve the acceptance and management of operational risks, fi nancial risks and general risks. The nature of these risks may give rise to the unanticipated or unavoidable losses. LPI Group’s systems of internal controls are designed to provide reasonable and not absolute assurance against the risk of material errors, frauds or losses occurring.

During the year, the Risk Management Committee ensures that the accountability for managing the signifi cant risks identifi ed is clearly assigned and that identifi ed risks are being monitored on an ongoing basis.

The effectiveness of the system of internal controls of the Group is reviewed periodically by the Audit Committee. The Internal Audit Department monitors compliance with policies and standards and the effectiveness of internal control system across the LPI Group.

The Statement on Internal Control furnished on pages 99 to 101 of this Annual Report provides an overview of the state of internal controls within the Group.

Audit Committee

The Group’s fi nancial reporting and internal control system is overseen by the Audit Committee, which comprises all the two (2) Independent Non-Executive Directors.

The composition, terms of reference and summary of the activities of the Audit Committee during the fi nancial year are disclosed in the Audit Committee Report on pages 102 to 105 of this Annual Report. The activities of the Audit Committee are governed by a charter that is approved by the Board.

The Audit Committee meets quarterly. Additional meetings are held as and when required. During the fi nancial year ended 31 December 2007, a total of seven (7) Audit Committee meetings were held.



The Audit Committee meeting is always held before the Board’s meeting. This is to ensure that all critical issues highlighted can be brought to the attention of the Board on a timely basis. The minutes of the Audit Committee meetings are tabled to the Board for noting and for action by the Board where appropriate.

The Heads of Departments in Head Offi ce are invited to attend the Audit Committee meetings when deemed necessary by the Audit Committee for the purpose of briefi ng the Audit Committee on the activities involving their areas of responsibilities.

Relationship with External Auditors

The Audit Committee meets with the Group’s external auditors at least twice a year to review the scope and adequacy of the audit process, the annual fi nancial statements and their audit fi ndings. The Audit Committee also meets with the external auditors whenever it deems necessary.

The service provided by the external auditors include statutory audits and non-audit services. The terms of engagement for the services rendered by the external auditors are reviewed by the Audit Committee and approved by the Board. The Audit Committee also reviews the proposed fees for non-audit services and subsequently recommends to the Board for approval. In their review, the Audit Committee considers the independence and objectivity of the external auditors to ensure that these will not be compromised.

The details of audit fee payable and non-audit fee paid to the external auditors are set out below:

2007

RM’000

Audit fee payable to KPMG

• Malaysia• Singapore

205136

Non-audit fee paid to KPMG

• Malaysia 45

Total 386

Internal Audit

The Group has an established Internal Audit Department, which assists the Audit Committee in the discharge of its duties and responsibilities. Its role is to provide independent and objective reports on the organisation’s management, records, accounting policies and controls to the Board. The internal audits include evaluation of the processes by which signifi cant risks are identifi ed, assessed and managed. Such audits also ensure instituted controls are appropriate, effectively applied and achieve acceptable risk exposures consistent with the Group’s risk management policy.

The internal audit function reports directly to the Audit Committee and its fi ndings and recommendations are communicated to the Board.

RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS

The Group recognises the importance of maintaining accountability and transparency to its shareholders through proper communication with its shareholders. The Company reaches out to its shareholders through its distribution of the annual reports. The Group consistently practises the provision of clear, comprehensive and timely information to its shareholders and investors, to facilitate informed investment decision making.

An important avenue for communication and dialogue with the shareholders is the Company’s Annual General Meeting (“AGM”). All shareholders are encouraged to attend the Company’s AGM and to participate in the proceedings. Shareholders’ suggestions received during AGMs are reviewed and considered for implementation, wherever possible. Every opportunity is given to the shareholders to ask questions and seek clarifi cation on the performance of the Company and Group.

The Group also provides an executive summary of its annual report, highlighting key fi nancial and corporate information as well as the analysis of the balance sheet and income statement, in order to facilitate shareholders’ easy access to the information.


Prompt and timeliness in dissemination of information is important for shareholders and investors to make informed investment decisions. All announcements requiring immediate release as specifi ed by Bursa Securities have been complied with. The Group has strived for early issuance of its annual report and consistently released its quarterly results well ahead of the deadlines specifi ed in the Bursa Securities Listing Requirements, as refl ected below:

Release of Annual Report

Date of Issue

No. of Days After

End of Year

Deadline Imposed

by Bursa Securities

Annual Report 2004 27 January 2005 27 30 June 2005




Release of 2007 Quarterly Results

Date of Issue

No. of Days After

End of Quarter

Deadline Imposed

by Bursa Securities

1st Quarter 5 April 2007 5 31 May 2007

2nd Quarter 4 July 2007 4 31 August 2007

3rd Quarter 9 October 2007 9 30 November 2007

4th Quarter 14 January 2008 14 29 February 2008

The Group consistently managed to achieve such early issuance of its annual reports and releases of the quarterly fi nancial results despite of the regulatory requirements, which need to be complied with, including a signifi cantly higher level of disclosure of fi nancial information. The prompt and timely availability of information clearly enhances the value of such information to the shareholders and investors and refl ects the high standard of transparency within the Group.

The Group has also established a website (www.lonpac.com) to which shareholders can access for all the corporate and fi nancial information. The Group’s quarterly and annual results announcements and press releases are also posted on the website to promote wider dissemination of corporate and fi nancial disclosures that is made public.

The Chairman and Executive Director/ Chief Executive Offi cer are responsible for providing clarifi cations on issues that may be raised by shareholders at the Company’s general meetings and they avail themselves to clarify matters or enquiries from shareholders.



Investor Relations activities such as meetings with fund managers and analysts and interviews by the press are attended by the following Directors to explain the Group’s strategy, performance and major developments:-

Primary Contacts for Investor Relations Matters

Tee Choon Yeow

Director

Contact DetailsTelephone number: (03) 2262 8688Email: [email protected]

Mr. Tee was appointed to the Board of the Company on 29 October 1991. He is the Chief Executive Offi cer and Executive Director of LPI.

Mr. Tee holds a Bachelor’s Degree in Commerce from the University of Canterbury, New Zealand. He is a Chartered Accountant of the Institute of Chartered Accountants, New Zealand and the Malaysian Institute of Accountants.

He is also the Managing Director and Chief Executive Offi cer of Lonpac Insurance Bhd, a wholly-owned subsidiary of LPI.

Tan Kok Guan

Director

Contact DetailsTelephone number: (03) 2262 8633Email: [email protected]

Mr. Tan was appointed to the Board of the Company on 29 October 1996. He is the Non-Executive Director of LPI.

Mr. Tan holds a Bachelor’s Degree in Science (Hons.) from the University of London, United Kingdom and a Master of Business Administration from the University of Hawaii. He is also a Chartered Insurer of the Chartered Insurance Institute at London and an Associate of the Malaysian Insurance Institute at Kuala Lumpur.

He is also the Executive Director and Chief Operating Offi cer of Lonpac Insurance Bhd, a wholly-owned subsidiary of LPI.

This Corporate Governance Statement is made in accordance with the resolution of the Board of Directors dated 14 January 2008.


Chairman



Risk Management

In today’s fi nancial and economic environment, risk management has become one of the critical factors in determining the success of an organisation. The Group, being in the insurance industry, primarily is in the risk business and operates in a rapidly-changing business environment with diverse risks. The Board recognises the importance of effective risk management to achieve sustainable growth in profi tability and continued enhancement of shareholders’ value.

The Board, with the assistance of the management, implemented the risk management processes within the Group that set out the overall business strategies and the general risk management philosophy. The major areas of risk that the activities of the Group are exposed to are operational risks, fi nancial risks and general risks. All identifi ed risks are comprehensively dealt with and managed by established controls and monitoring measures. The controls are constantly monitored and reviewed in line with the risk appetite and strategies of the Group, taking into account of changes in business market conditions, products and risk management best practices.

OVERALL RISK MANAGEMENT FRAMEWORK

The risk management framework for the Group was established with emphasis on the insurance operations as the core business of the Group by one of its subsidiary company, namely Lonpac Insurance Bhd (“Lonpac”).

A Risk Management Committee (“RMC”) was established by the Board to drive risk management processes in identifying principal business risks and ensures the implementation of appropriate systems to manage these risks. The RMC is supported by the Working Risk Management Committee (“WRMC”) of Lonpac.

The WRMC, headed by the Managing Director/ Chief Executive Offi cer was established with the responsibility to identify and communicate to the RMC on critical risks (present and potential) in terms of likelihood exposures and impact on the Group’s business and the management action plans to manage these risks on a continuing basis.

A Working Risk Management Committee – Singapore Branch (“WRMCS”) was also established with the responsibility to identify and communicate to the WRMC on critical risks (present and potential) in terms of likelihood exposures and impact on the business of Lonpac’s Singapore branch and the management action plans to manage these risks on a continuing basis. The WRMCS is also chaired by the Managing Director/ Chief Executive Offi cer of Lonpac.

The role of the Audit Committee supported by the Internal Audit Department, is to provide an independent assessment of the adequacy and reliability of the risk management processes and system of internal controls and compliance with risk policies, laws, internal and regulatory guidelines.

The RMC structure of the Group is depicted in the diagram below:

Board of Directors Audit Committee

Risk Management Committee

Working Risk Management Committee (Lonpac)

Working Risk Management Committee – Singapore Branch(Lonpac)


RISK MANAGEMENT

AREAS OF RISK

The major areas of risk that the activities of the Group are exposed to are as follows:

SUPPORT DIVISIONS BUSINESS DEVELOPMENT DIVISIONS

• Underwriting• Reinsurance• Claims• Accounts & Finance• Human Resource• Information Technology• Customer Service• Compliance

• Agency• Financial Institution• Broking• NIPPONKOA • Branches

Operational Risks Financial Risks General Risks

Risks of operational disruption caused by failure of systems and facilities

Risks of fi nancial disruption caused by credit risk, liquidity risk, investment risk and also volatility in interest rates and foreign currency

Risks related to human resources, physical operational and reputational risks

• Underwriting Risks• Business Development Risks• Claims Risks• Information Technology (“IT”) Risks• Internet Risks

• Credit Risk• Liquidity Risk• Investment Risk• Interest Rate Risk• Foreign Currency Risk

• Personnel Risk• Physical Operational Risk• Reputational Risk

OPERATIONAL RISKS

Underwriting Risks

Underwriting risks relate to the following:

• accepting or holding covered risks declined or unacceptable in treaties or backdated periods of insurance and exceeding the retention of the organisation

• dealings with reinsurers with poor fi nancial standing and poor reputation for claims settlement• improper allocation and control of cover note books• poorly drafted treaty contracts• improper selection and appointment of reinsurance brokers• improper facultative reinsurance placements


RISK MANAGEMENT

Underwriting risks also include processing risks, physical loss or damage risks, moral risks, human resource risks, breach of regulatory guidelines risks, new product development risks and money laundering and terrorist fi nancing risks.

Processing risks arise as a result of disruption or failure of IT operational systems caused by system breakdown, lack or absence of system support and power failure; malicious damage to software and hardware; fi ling errors resulting in misplaced or lost documents; and erroneous data entries resulting inaccurate documentation, duplication of documents and double entries.

Physical loss or damage risks relate to damages to documents, offi ce equipments and offi ce premises (including branch offi ces) resulting from perils such as fi re, fl ood, explosion, collapse of building, denial of access, malicious damage, theft and impact damage.

Moral risks arise from fraud resulting in false data, unauthorised signatories in policies and cover notes and breach of confi dentiality resulting in information given to competitors.

Human resource risks refer to termination, resignation and prolonged illness of key employees, integrity of employees in disclosure of confi dential information to competitors and staff competency level.

Breach of regulatory guidelines risks relate to breaches of guidelines issued by regulatory bodies such as Bank Negara Malaysia (“BNM”), Persatuan Insurans Am Malaysia (“PIAM”), Monetary Authority of Singapore (“MAS”) and General Insurance Association of Singapore (“GIAS”) which may result in fi nes imposed to the organisation.

New product development risks arise from ignorance or incompetency of staff and inadequate market research upon launching of new products which may result in deterioration of claims ratio, affect the reputation of the Group and expose the risks of non-compliance with related regulations.

Money laundering and terrorist fi nancing risks refer to the Group being used as a platform by the criminals and terrorists for their money laundering and terrorist fi nancing activities.

Business Development Risks

Business Development risks affect the Group’s image and reputation arising from lack of care, poor product knowledge and poor standard of services of personnel that undermine the public’s trust and confi dence in the organisation.

Claims Risks

Claims risks include delay of claims settlement, fraudulent claims and inaccuracy and inadequacy of claims reserves provision arising from obsolete and cumbersome procedures, incompetent staff and human errors.

IT Risks

IT risks include disruption to the operations of the Group, which arises from system breakdown, lack or absence of system support and security, legal or regulatory problems due to non-conformance or violation of laws, and adverse business decision or improper implementation of decisions that affect capital outlay and incapable of meeting the organisation’s needs.

Internet Risks

Internet risks include key aspects of security such as data confi dentiality, data integrity, authentication of users, non-repudiation of transactions and access control.

FINANCIAL RISKS

Credit Risk

Credit risk represents the loss that would be recognised if counterparties to insurance, reinsurance and investment transactions failed to perform as contracted.

Liquidity Risk

Liquidity risk arises due to inability of the Group to meet its fi nancial obligations as and when they fall due.

Investment Risk

Investment risk arises from fl uctuation in the market prices of equities. Investment credit risk refers to the ability of an issuer or counterparty to make timely payment of interest, principals and proceeds from realisation of investments.


RISK MANAGEMENT

Interest Rate Risk

Interest rate risk refers to changes in interest income as a result of fl uctuation in interest rates in fi xed deposits and other fi xed interest securities.

Foreign Currency Risk

Foreign currency risk refers to the risk which arises from fl uctuation in the foreign exchange rates.

GENERAL RISKS

Personnel Risk

Personnel risk refers to the risk of losing key functional personnel which directly affects the ongoing business of the Group.

Physical Operational Risk

Physical operational risk affects the continuity of the Group in conducting business in the event of disaster.

Reputational Risk

Reputational risk affects the reputation of the Group when unauthorised statements of the Group were made to the public without the approval of the Executive Director/ Chief Executive Offi cer.

RISK MANAGEMENT PROCESS

The Group has established a structured approach within its risk management framework that comprises eight (8) phases that are categorised into four (4) distinct stages as listed below:

A FORMAL APPROACH

STAGE A Phase 1

Planning & Control

Phase 2

Identify Core Business Process & Supporting Mission-Critical System

STAGE B Phase 4

Perform Risk & Impact AssessmentPhase 3

Identify Risk

STAGE C Phase 5

Develop the Control & Monitoring Measures

Phase 6

Document Risk Management Manual

STAGE D Phase 7

Develop & Initiate Training Programme

Phase 8

Maintenance of the Risk Management Manual


The key risk management processes for each phase are as follows:

STAGE A

Phase 1 – Planning And Control

• Established WRMC and WRMCS which comprise representatives from various departments i.e. Underwriting, Claims, Business Development, Accounts and Finance, Information Technology, Human Resources, Compliance and Internal Audit. The reporting structure of the WRMC and WRMCS is presented on page 92.

• Defi ne the Terms of Reference for the WRMC and WRMCS.

• Defi ne roles and responsibilities for each WRMC and WRMCS members.

• The Group’s risks are grouped into Operational, Financial and General perspectives and also focusing the planning effort on risks relating to critical core business processes.

Phase 2 – Identifi cation Of Core Business Process And

Supporting Mission-Critical System

• Identifi ed underwriting operations as the core business for the Group whilst the support mission-critical systems are Claims, Business Developments, Accounts and Finance, Information Technology and Human Resource operations.

STAGE B

Phase 3 – Identifi cation Of Risks

• Analyse possible threats (both internal and external) to the Group’s business as a result of the occurrence of operational, fi nancial and general risks.

Phase 4 – Performing Risk And Impact Assessment

• Assess each risk identifi ed in Phase 3 to establish the degree of impact and risk likelihood of the particular risk into the following category:

Degree of Impact Likelihood of Risk Degree

Fatal High

Signifi cant Medium

Insignifi cant Low

• Risk Mapping is used to determine the best way to focus resources in order to maximise the return and minimise risk through risk management as depicted below:

HighPriority

HighPriority

MediumPriority

HighPriority

MediumPriority

Low Priority

MediumPriority

Low Priority

Low Priority

Low Medium High

Risk Likelihood

D

eg

ree o

f Im

pact

Insi

gnifi

cant

Sig

nifi c

ant

Fata

l

High Priority = Major Focus

Medium Priority = Peripheral Focus

Low Priority = Minor Focus

RISK MANAGEMENT


• The objective of categorising the degree of impact as well as risk likelihood is to prioritise the protection of those components of the Group’s core business which would be most severely impacted by the identifi ed risks.

STAGE C

Phase 5 – Developing The Control And Monitoring

Measures

• Develop control and monitoring measures for each area of risk identifi ed to counter the impact of the risks.

Phase 6 – Documenting Risk Management Manual

• Control and monitoring measures resulting from the analysis in Phases 3, 4 and 5 were translated into standard controls and operating procedures in the Risk Management Manual.

RISK MANAGEMENT

STAGE D

Phase 7 – Developing And Initiating Training Programme

• Develop and initiate training programme to address the following:

i. The Risk Management Structure and Terms of Reference

ii. Specifi c Responsibilities of Various Teams

iii. Risk and Impact Assessment

iv. Control and Monitoring Measures

Phase 8 – Maintenance Of The Risk Management Manual

• Review and update Risk Management Manual for ongoing changes in the risk profi le.

• A yearly review on the Risk Management Manual will be conducted to ensure the completion of the risk profi le and risk management.


Code of Ethics, Integrity and Trust

The LPI Group via its wholly-owned subsidiary, Lonpac Insurance Bhd (“Lonpac”), operates in an industry where integrity and trust are of utmost importance. The trust and confi dence that customers and the public have in Lonpac are vital to the continued growth and success of the Group. The Group actively strives with enthusiasm to conduct itself with integrity and trustworthiness to develop such trust and confi dence in the Group. In addition, measures to safeguard the Group’s integrity and credibility are undertaken to minimise the exposure to reputational risk arising from unethical or fraudulent conduct by Group’s employees.

The Group recognises that employees play an important role in building a trusted and reputable enterprise in the eyes of the public. The Group has taken, and continues to take proactive initiatives to ensure that employees have values and principles, and conduct themselves, to the standards that are consistent with the expectations of customers and the public.

The acceptable conduct expected of employees of the Group is formalised in the form of a clear and documented codes and policies. This is a critical part of building a culture of trust and integrity in employee conduct and behaviour. Included amongst such codes and policies are a Code of Ethics, an Anti-Fraud Policy and an Anti-Money Laundering and Counter Financing of Terrorism Policy.

CODE OF ETHICS

Persatuan Insurans Am Malaysia (“PIAM”) issues guidelines to promote proper standards of conduct and sound and prudent practices amongst general insurance companies. In today’s insurance operations, it is essential that these ethical rules be codifi ed and issued as written guidelines in order to promote and maintain a uniform ethical standard.

Lonpac had codifi ed ethical rules that are vital in the Staff Disciplinary Handbook which emphasises on 5 key principles:

• Avoid confl ict of interest

• Avoid misuse of position for personal advantage/ benefi t/ preferential treatment in any way

• Avoid misuse of information for personal gains or for any purpose other than that intended by the Company

• Observe integrity of records and transactions

• Observe confi dentiality

ANTI-FRAUD POLICY

Lonpac has a formalised Anti-Fraud Policy to prevent and detect fraud and fraudulent activities. The Anti-Fraud Policy outlines that employees are responsible in preventing and detecting defalcations, misappropriations and other irregularities. In addition, the Anti-Fraud Policy also sets out the fraud discovery reporting procedures and warns employees on the disciplinary actions against fraudulent acts.

Bank Negara Malaysia (“BNM”) requires licensed insurers to report all cases on fraud and defalcation and breaches of code of ethics and conduct. With effect from 1 November 2000, licensed insurers are required to submit such reports, if any via BNM’s Fraud Information Database System (“FIDS”).

ANTI-MONEY LAUNDERING AND COUNTER FINANCING

OF TERRORISM POLICY

The Board of Lonpac has approved the Anti-Money Laundering and Counter Financing of Terrorism (“AML/CFT”) Manual which is based on the Anti-Money Laundering and Anti-Terrorism Financing Act 2001, and the Guidelines on AML/CFT, issued by BNM.

The AML/CFT Manual include:

• Defi nition of Money Laundering and Financing of Terrorism

• AML/CFT measures as follows:- Customer Acceptance Policy- Customer Due Diligence - Record Keeping- Ongoing Monitoring- Suspicious Transaction Reporting

• Examples of Suspicious Transactions

A communication system is in place to promptly update staff on procedural changes in fi ghting money laundering and terrorist fi nancing. Part and parcel of this communication is training. Training is conducted for staff to promote the understanding of their fundamental responsibility in adhering to the procedures of verifying customers and reporting of suspicious transactions.

Lonpac remains concern and undertakes, so far as is reasonably possible and practicable, to safeguard itself from being involved with money launderers and terrorist fi nanciers.


Statement on Internal Control

The Board recognises the importance of a sound system of internal control to safeguard shareholders’ investment and the Group’s assets.

The Board’s Statement on Internal Control outlines the nature and scope of internal control of the Group during the year.

BOARD RESPONSIBILITIES

The Board affi rms its overall responsibility for the Group’s system of internal control. This includes reviewing the adequacy and integrity of fi nancial, operational and compliance controls and risk management procedures. In view of the limitations that are inherent in any system of internal control, this system is designed to manage the Group’s risks within an acceptable risk profi le, rather than eliminate the risk of failure to achieve the policies and business objectives of the Group. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement of management and fi nancial information and records or against fi nancial losses or fraud.

Following the publication of the Statement on Internal Control: Guidance for Directors of Public Listed Companies (“Internal Control Guidance”), the Board confi rms that there is a process for identifying, evaluating and managing signifi cant risks faced by the Group. The process which includes updating the system of internal controls when there are changes in the business environment or regulatory guidelines, is reviewed by the Board and accords with the Internal Control Guidance.

The Board is of the view that the system of internal controls in place for the year under review and up to the date of approval of the annual report and fi nancial statements is sound and suffi cient to safeguard the shareholders’ investment, the interests of customers, regulators and employees, and the Group’s assets.

The Board is also assisted by the management in the implementation of the Board’s policies and procedures on risk and control by identifying and assessing the risks faced, and in the design, operation and monitoring the suitable internal controls to mitigate and control these risks.

RISK MANAGEMENT FRAMEWORK

The Board fully supports the contents of the Internal Control Guidance and with the assistance of the management, implemented the risk management processes within the Group.

The core business of the Group is underwriting general insurance business by one of its subsidiary companies, namely Lonpac Insurance Bhd (“Lonpac”). Thus, the risk management framework for the Group was established with emphasis on the insurance operations.

The formalisation of the risk management framework was enhanced by the following initiatives:

• A Risk Management Committee was established to drive the risk management processes in identifying principal business risks and ensures the implementation of appropriate systems to manage these risks. The Risk Management Committee is supported by the Working Risk Management Committee (“WRMC”) of Lonpac.

• The WRMC, headed by the Managing Director/ Chief Executive Offi cer of Lonpac was established with the responsibility to identify and communicate to the Risk Management Committee on critical risks (present and potential) in terms of likelihood exposures and impact on the Group’s business and the management action plans to manage these risks on a continuing basis.

• A Working Risk Management Committee – Singapore

Branch (“WRMCS”) was established with the responsibility to identify and communicate to the WRMC on critical risks (present and potential) in terms of likelihood exposures and impact on the business of Lonpac’s Singapore branch and the management action plans to manage these risks on a continuing basis. The WRMCS is also chaired by the Managing Director/ Chief Executive Offi cer of Lonpac.

• The consolidated risk profi le of the Group and the risk

management manual are in place.

• The details of the risk management processes are presented in the Risk Management on pages 92 to 97.


STATEMENT ON INTERNAL CONTROL

KEY INTERNAL CONTROL PROCESSES

The Group’s internal control key processes include the following:

• There is an organisational structure with formally defi ned lines of responsibility and delegation of authority to ensure proper identifi cation of accountabilities and segregation of duties.

• Operating policies and procedures, which incorporate regulatory and internal requirements, are prescribed in the form of circulars to line management in all departments and updated on a timely basis.

• There are operational authority limits imposed on executive directors and management within the Group in respect of day-to-day operations, covering underwriting on accepting risks, claims settlement and fi xed assets purchases.

• The treaty programme ensures that there is a proper well spread of reinsurers with secure ratings from accredited rating agencies. The securities of treaty reinsurers are stringently reviewed on an annual basis.

• The management submits annually a business plan and budget with six (6) year projections for approval by the Board. The Board reviews monthly management accounts, which are measured against budgets and the previous year’s results to gauge performance. Any defi ciencies are corrected and acted on a timely basis.

• The public releases of quarterly reports are made after being reviewed by the Audit Committee and the approval of the Board.

• Management meetings chaired by the Managing Director/ Chief Executive Offi cer are conducted regularly to review fi nancial performance, business development and deliberate on management and corporate issues.

• The Investment Committee is responsible for formulating policies, strategies as well as reviewing matters relating to the investment in shares and private debt securities.

• The IT Steering Committee is chaired by the Managing Director/ Chief Executive Offi cer. The committee is responsible for establishing effective computerisation plans, authorising IT related expenditure above pre-defi ned limits and monitoring the progress of approved projects.

• Internal control requirements are embedded in computerised systems as well.

• The Internet Committee is chaired by the Chief Operating Offi cer. The committee is responsible to ensure the implementation of Internet insurance services are consistent with the overall strategies and business objectives of the Group, to ascertain that there is adequate security, expertise and resources to operate and maintain the Internet insurance system, and to conduct performance monitoring of Internet insurance products, services, delivery channels and processes. The committee also monitors the risk management of Internet insurance services and thereafter reports to the WRMC.

• The Business Development – Agency Division meeting is chaired by the Managing Director/ Chief Executive Offi cer and is held regularly to review the performance of Agency Division and deliberate on market development as well as on technical and operational issues.

• The Credit Control Committee is chaired by the Managing Director/ Chief Executive Offi cer and represented by the Head of the Business Development Divisions and Accounts and Finance Department. Monthly meeting is conducted with the objective of maximising the conversion of accounts receivable into cash fl ow and minimising bad debts written off.


STATEMENT ON INTERNAL CONTROL

• The Business Resumption Continuity Plan (“BRCP”) Committee is chaired by the Chief Operating Offi cer. The committee is responsible to prepare a BRCP to ensure that the Group suffers minimum interruption to its systems, processes or operations in the event of any disasters. The BRCP for the Singapore branch of Lonpac is reviewed by the WRMCS.

• A BRCP manual was formulated to ascertain that the Group suffers no material interruptions to its systems, processes or operations, or material damages to its assets upon the occurrence of any disastrous events. A separate BRCP manual was formulated for the Singapore branch. The BRCP is tested every year including testing for the Singapore branch. The BRCP testings are being observed by the Internal Audit Department to highlight any defi ciencies noted during the testings.

• Training and development programmes are conducted to enhance staff competencies and maintain a risk control conscious culture.

• Training for agents are conducted on a regular basis to enhance their competencies and technical knowledge for better risk management in developing the agency networking.

• There are proper guidelines within the Group for hiring and termination of staff, and annual performance appraisals in place to ensure that staff are competent in carrying out their responsibilities.

• The Internal Audit function is in place to enable the Audit Committee to discharge its functions effectively. The Internal Audit Department monitors compliance with policies and procedures and the effectiveness of the internal control systems and highlights signifi cant fi ndings in respect of any non-compliance. Audits are carried out on all Head

Offi ce departments and branches, the frequency of which is determined by the level of risk assessed, to provide an independent and objective report on operational and management activities of these Head Offi ce departments and branches. The fi ndings of the audits are tabled at the Audit Committee meetings for deliberation and the Audit Committee’s expectation on the corrective measures will be communicated to the respective head of the departments and branches. The annual Internal Audit Plan is reviewed and approved by the Audit Committee. A summary of internal audit function is presented in the Audit Committee Report on page 105.

• The Audit Committee of the Group reviews any internal control issues identifi ed by the Internal Audit Department, the external auditors, regulatory authorities and management, and evaluate the adequacy and effectiveness of the risk management and internal control systems. The Audit Committee also reviews the internal audit functions and quality of internal audits. The minutes of the Audit Committee meetings are tabled to the Board on a periodic basis. Further details of the activities undertaken by the Audit Committee of the Group are set out in the Audit Committee Report on pages 104 and 105.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORS

The external auditors have reviewed this Statement on Internal Control for inclusion in the annual report of the Group for the year ended 31 December 2007 and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal controls within the Group.

This Statement on Internal Control is made in accordance with the resolution of the Board of Directors dated 14 January 2008.


Audit Committee Report

CHAIRMAN

Independent Non-Executive DirectorDato’ Yeoh Chin Kee

DIMP, FCPA (Aust), F Fin (Aust)

MEMBER

Independent Non-Executive DirectorDato’ Haji Abdul Aziz bin Omar

DIMP, ACA (England & Wales), CA (M), FIBM (M’sia)

1. MEMBERSHIP AND ATTENDANCE

The Audit Committee members and details of attendance of each member at the Audit Committee meetings held during the year are as follows:

Composition of Audit Committee Number of Audit Committee Meetings

Held Attended


Chairman/ Independent Non-Executive Director7 7


Member/ Independent Non-Executive Director(Appointed on 9 October 2007)

1* 1*

Geh Cheng Hooi

Member/ Independent Non-Executive Director(Resigned on 29 November 2007)

6** 6**

Lee Chin Guan

Member/ Independent Non-Executive Director(Resigned on 9 October 2007)

6*** 5***

* From his appointment date on 9 October 2007

** Up to his resignation date on 29 November 2007

*** Up to his resignation date on 9 October 2007

2. COMPOSITION AND TERMS OF REFERENCE

2.1 Members

The Board of Directors (“Board”) shall elect an Audit Committee from amongst themselves (pursuant to a resolution of the Board) which fulfi ls the following requirements:

i. the Audit Committee shall consist of at least three (3) directors;

ii. all members of the Audit Committee should be non-executive directors and the majority of the Audit Committee must be independent directors; and

iii. at least one (1) member of the Audit Committee:

(a) must be a member of the Malaysian Institute of Accountants (“MIA”);


AUDIT COMMITTEE REPORT

(b) if he/ she is not a member of the MIA, he/ she must have at least three (3) years’ working experience and:

• he/ she must have passed the examinations specifi ed in Part I of the 1st Schedule of the Accountants Act 1967; or

• he/ she must be a member of one of the associations of accountants specifi ed in Part II of the 1st Schedule of the Accountants Act 1967; or

(c) fulfi ls such other requirements as prescribed by Bursa Malaysia Securities Berhad (“Bursa Securities”).

If the members of the Audit Committee for any reason be reduced to below three (3), the Board shall within three (3) months of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members.

2.2 Chairman

The members of the Audit Committee shall elect a Chairman from amongst themselves who shall be an independent director.

2.3 Meetings

• The Audit Committee will hold a minimum of three (3) meetings a year, although additional meetings may be called at any time at the Audit Committee Chairman’s discretion or if requested by any Audit Committee member, the management, the internal or external auditors.

• The Head of Internal Audit will attend the meetings. Representatives of the external auditors, are to be in attendance at meetings where matters relating to the audit of the statutory accounts and/ or the external auditors are to be discussed.

• The Audit Committee members shall meet with the external auditors at least twice a year, without any executive Board members present.

• The Chief Executive Offi cer and/ or other appropriate offi cers may be invited to attend, except for those portions of the meetings where their presence may be considered inappropriate, as determined by the Chairman.

• The quorum for each meeting shall be at least two thirds (2/3) of the members with independent directors forming the majority.

• The Company Secretary shall be the Secretary to the Audit Committee.

• Minutes of each meeting will be circulated to each member of the Audit Committee and the Audit Committee Chairman shall report on each meeting to the Board.

2.4 Authority

The Audit Committee shall, at the Company’s expense:

i. have authority to investigate any matter within its terms of reference;

ii. have the resources which are required to perform its duties;

iii. have full and unrestricted access to any records, information, property and personnel of the Company;

iv. have direct communication channels with the external and internal auditors;

v. be able to obtain independent professional or other advice; and

vi. be able to convene meetings with the external auditors, excluding the attendance of the executive Board members, where deemed necessary.

2.5 Duties and Responsibilities

The duties and responsibilities of the Audit Committee include the following:

INTERNAL AUDIT

• To review and report the adequacy of the scope, functions and resources of the internal audit function and that it has the necessary authority to carry out its works;

• To review the results of the Group’s internal audit procedures and the adequacy of actions taken by the management based on the reports;

• Review any appraisal or assessment of the performance of members of the internal audit function and approve any appointment or termination of the senior internal audit staff.



EXTERNAL AUDIT

• To review with the external auditors, the audit plan, scope of the audit and the areas of audits of the Company/ Group;

• To review with the external auditors, their evaluation of the system of internal controls and audit fi ndings;

• To discuss problems and reservations arising from the audit, and any other matters the auditors may wish to discuss;

• To review the external auditors’ management letter and management’s response;

• To review the audit report with the external auditors;

• To review and report the assistance given by the Company’s/ Group’s Offi cers to the external auditors and the overall conduct of the audit;

• To review the suitability of the external auditors for recommendation to the Board for re-appointment and the audit fee thereof;

• To make appropriate recommendations to the Board on matters of resignation or dismissal of external auditors.

FINANCIAL REPORTING

• To review the annual audited fi nancial statements of the Company/ Group and quarterly results of the Group, and thereafter submit them to the Board for approval, focusing particularly on:

- Any changes in accounting policies and practices; - Signifi cant adjustments arising from the audit; - The going concern assumption; - Signifi cant and unusual events; and - Compliance with accounting standards and other legal requirements.

• To ensure prompt publication of annual audited fi nancial statements.

RISK MANAGEMENT

• To review the adequacy and effectiveness of risk management and internal control systems instituted within the Group.

RELATED PARTY TRANSACTIONS

• To review any related party transactions that may arise within the Company/ Group.

OTHER FUNCTIONS

• To review and verify the allocation of shares option to eligible employees in accordance with the criteria set by the Employees’ Share Option Scheme (“ESOS”) Committee;

• To perform any other functions as may be agreed by the Audit Committee and the Board.

3. SUMMARY OF ACTIVITIES

During the year under review, the Audit Committee carried out the following activities:

3.1 Financial Results

• Reviewed the annual audited fi nancial statements of the Company/ Group, semi-annual returns and quarterly results of the Group, and thereafter, submitted them to the Board for approval.

• Reviewed the Statement on Internal Control pursuant to Paragraph 15.27(b) of Bursa Securities’ Listing Requirements for Board’s approval.

3.2 Internal Audit

• Reviewed the results of the Group’s internal audit procedures and the adequacy of actions taken by the management based on the Internal Audit Reports. Where appropriate, the Audit Committee has directed the management to rectify and improve controls and operational workfl ow based on the internal audit’s recommendations for improvements.

• Reviewed the Internal Audit Reports arising from the follow-up reviews following each audits.

• Reviewed and approved the Annual Report of the Audit Committee for insurance subsidiary in respect of the fi nancial year ended 31 December 2006 for submission to BNM, pursuant to JPI/ GPI 25 – Prudential Framework of Corporate Governance for Insurers.

• Reviewed the results of the half-yearly stress tests for insurance subsidiary and thereafter submit to the Board pursuant to JPI/ GPI 25 – Prudential Framework of Corporate Governance for Insurers.

• Reviewed the Internal Audit Report on Compliance with BNM’s Circular no. JPI: 7/2006 in relation to JPI/ GPI 2 – Guidelines on Control Operating Costs of General Insurance Business.



• Discussed the outsourcing of Information System audit and recommended to the Board for approval.

• Reviewed the Report on Forged Motor Cover Note.

• Discussed and approved the Internal Audit Plan 2008 for the Group.

• Reviewed the Compliance Checklist on the Malaysian Code on Corporate Governance (Revised 2007) on matters pertaining to Audit Committee.

• Reviewed the Revised Audit Charter pursuant to the Malaysian Code on Corporate Governance (Revised 2007) and recommended to the Board for approval.

• Noted the appointment and resignation of Audit Committee members.

• Reviewed and noted the Progress Report of Internal Audit Plan and minutes of meetings of the Internal Audit Department.

3.3 External Audit

• Reviewed the following of the external auditors:

- their audit plan, audit strategy and scope of audits of the Company/ Group for the year;

- their evaluation on the system of internal controls of the Company/ Group;

- the results of the annual audit, management letter for insurance subsidiary including the management’s response to the fi ndings of the external auditors and also the auditors’ report to the shareholders.

• Reviewed the suitability of the external auditors and recommended to the Board for re-appointment and the audit fee thereof.

• Noted the Review Report of the External Auditors to the Board on the Statement on Internal Control.

• Reviewed the draft Representation Letter to external auditors pursuant to the Revised JPI/ GPI 13: Guidelines on Audit Committees and Internal Audit Departments for Insurance Companies.

• Discussed the updated letters of engagement from the external auditors.

3.4 Related Party Transactions

• Reviewed the nature of related party transactions within the Company or Group.

4. AUDIT COMMITTEE TRAINING AND EDUCATION

The details of training attended by each Audit Committee during the fi nancial year ended 31 December 2007 are presented in the Corporate Governance Statement on Directors’ Training and Education on pages 84 and 85.

5. INTERNAL AUDIT FUNCTION

The Audit Committee is assisted by the Internal Audit Department in discharging its duties and responsibilities. The internal audit function is established to add value and improve the Group’s operations by providing independent, objective assurance and consulting activities through its audit of the Group’s key operations and also to ensure consistency in the control environment and the application of policies and procedures.

The Internal Audit Department undertakes internal audit functions based on the audit plan that is reviewed and approved by the Audit Committee. The audit plan covers review of adequacy of operational controls, risk management, compliance with established procedures, laws and regulations, quality of assets, management effi ciency, computer application system and telecommunications network, amongst others.

A risk based audit approach is used to ensure that the higher risk activities in each auditable area are audited annually. These are designed to evaluate and enhance risk management, control and governance processes to assist management to achieve its corporate goals.

Internal Audit Department participates as consultative role prior to the implementation of new IT projects in overseeing the controls issues.

The Internal Audit Reports prepared by the Internal Audit Department are deliberated by the Audit Committee and recommendations are duly acted upon by the management.


Bursa Securities Listing Requirements Compliance Information

The information set out below is disclosed in compliance with the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”).

i) Utilisation of Proceeds Raised from Corporate Proposals

There were no proceeds raised from corporate proposals.

Disclosed in accordance with Appendix 9C, Part A, item 13 of the Listing Requirements of Bursa Securities.

ii) Share Buy-Back

During the fi nancial year, LPI Capital Bhd (“LPI”) bought back a total of 263,600 of its ordinary shares of RM1.00 each (“LPI Shares”) which are listed on the Main Board of Bursa Securities in the open market. The details of the LPI Shares bought back during the year are as follows:

Monthly

Breakdown

No. of LPI Shares Bought

Back & Retained as

Treasury Shares

Buy Back Price

Per Share (RM)

Average Cost

Per Share

(RM)

Total Cost

(RM)

Lowest Highest Average

April 31,700 10.00 10.20 10.10 10.17 322,372

May 104,500 10.60 11.30 10.95 11.06 1,156,156

June 19,000 11.00 11.00 11.00 11.05 209,911

July 50,700 11.40 11.70 11.55 11.62 589,001

August 52,700 10.10 10.70 10.40 10.46 551,289

September 5,000 10.30 10.30 10.30 10.35 51,727

Total 263,600 10.00 11.70 10.85 10.93 2,880,456

All the LPI Shares bought back during the year are held as treasury shares in accordance with Section 67A Subsection (3A)(b) of the Companies Act, 1965. As at 31 December 2007, a total of 1,051,200 LPI Shares were held as treasury shares. None of the treasury shares held were resold or cancelled during the fi nancial year.

Disclosed in accordance with Paragraph 12.24, Appendix 12D of the Listing Requirements of Bursa Securities.

iii) Options, Warrants or Convertible Securities

LPI has not issued any options, warrants or convertible securities during the fi nancial year ended 31 December 2007.


iv) Sanctions and/ or Penalties

There were no sanctions and/ or penalties imposed on LPI Capital Bhd and its subsidiary companies (“the LPI Group”), directors or management by the relevant regulatory bodies during the fi nancial year.


v) Non-audit Fees

The amount of non-audit fees paid to external auditors by the LPI Group for the fi nancial year amounted to RM45,000.


vi) Variation in Results

There was no profi t forecast issued by the LPI Group during the fi nancial year.



BURSA SECURITIES LISTING REQUIREMENTS COMPLIANCE INFORMATION

vii) Profi t Guarantee

There were no profi t guarantees given by the LPI Group during the fi nancial year.


viii) Material Contracts

There were no material contracts entered into by the LPI Group involving directors’ and major shareholders’ interests either still subsisting at the end of the fi nancial year ended 31 December 2007 or entered into since the end of the previous fi nancial year.


ix) Revaluation Policy on Landed Properties

The revaluation policy on landed properties classifi ed as Investment Properties is as disclosed in Note 2(d) to the fi nancial statements.


x) Directors’ Training and Education

All directors of LPI attended numerous trainings during the fi nancial year ended 31 December 2007 and the details of trainings are disclosed in the Corporate Governance Statement: Directors’ Training and Education on pages 83 to 85 of this Annual Report.

Disclosed in accordance with Appendix 9C, Part A, item 28 and Paragraph 15.09(2) of the Listing Requirements of Bursa Securities.

xi) Recurrent Related Party Transactions of a Revenue or

Trading Nature

At the Annual General Meeting on 31 January 2007, LPI Capital Bhd had obtained a mandate from its shareholders to allow the LPI Group to enter into recurrent related party transactions of a revenue or trading nature.

The details of the recurrent related party transactions of a revenue or trading nature conducted during the fi nancial year ended 31 December 2007 pursuant to the said shareholders’ mandate are as follows:

Company in the Group Involved in

Recurrent Transactions

Lonpac Insurance Bhd

Related Parties Public Bank Berhad, PB International Factors Sdn. Bhd., Public Holdings Sdn. Bhd., Public Investment Bank Berhad (formerly known as PB Securities Sdn. Bhd.), Public Mutual Berhad, PB Properties Sdn. Bhd. (Collectively known as “PBB Group”).

Interested Related Parties Tan Sri Dato’ Sri Dr. Teh Hong PiowDato’ Yeoh Chin KeeDato’ Haji Abdul Aziz bin Omar

Nature of Relationship Tan Sri Dato’ Sri Dr. Teh Hong Piow is the Chairman and a major shareholder of LPI and Public Bank Berhad.

Dato’ Yeoh Chin Kee is the Director and a shareholder of LPI and Public Bank Berhad.

Dato’ Haji Abdul Aziz bin Omar is the Director of LPI and Public Bank Berhad and a shareholder of Public Bank Berhad.

Nature of Transaction Premium income generated from assets of PBB Group insured with Lonpac. *1

Value of TransactionsRM’000 6,251

Note *1: Comprises insurance premium that do not qualify as exempted transactions as defi ned under Paragraph 10.08 (9)(g), Part E of Chapter 10 of the Listing Requirements of Bursa Securities.

Disclosed in accordance with Paragraph 10.09(1)(b) and Section 4.1.5 of Practice Note 12/2001 of the Listing Requirements of Bursa Securities.


Corporate Philosophy

Responsibility to... Our Insured

Our Employees

Our Shareholders

RESPONSIBILITY TO OUR INSURED

LPI Group is committed in its ongoing pursuit for customer quality service as governed by its corporate mission, “To provide customers with excellent products and services of international standard backed by proven technical and fi nancial strength in line with the Financial Sector Master Plan”.

As a responsible insurer, the Group offers a wide-ranged of innovative insurance products that are commercially and economically viable to meet the changing needs of our customers, backed by highly trained and motivated service personnels to deliver excellent services.

LPI Group has also invested in several initiatives to provide value added products and quality service, including the setting up of central processing centre for speedy delivering of policies and the opening of our customer service centre to improve before and after sales service. The customer service centre serves as a one-stop centre which handles the insurance needs of our customers and has been operating successfully since 2004.

The Group also offers complimentary value added services via the Lonpac E-Assist for its comprehensive private car insurance policyholders as an appreciation to our valued customers. This carefully planned and designed Lonpac E-Assist offers a wide scope of value added services ranging from 24-hour minor roadside repairs and emergency towing services, car rental referral services and arrangement for hotel accommodation in the event of cars breakdown or accident.

LPI Group also offers referral services to its householder and houseowner policyholders, namely, Lonpac Home-Assist, ranging from electrical, plumbing and locksmith assistance, air-conditioning and pest control services, leaking roof and cleaning and restoration of carpets.

In view of the Internet being globally used as a delivery channel in the business community and the impending market liberalisation, LPI Group has prepared itself to face all these challenges by upgrading its IT infrastructure for enhanced capabilities and effi cient performance. Amongst the IT enhancements was the


CORPORATE PHILOSOPHY

deployment of latest network technology and infrastructure for a more reliable network system which would enhance the response time to customers’ enquiries on their policies. The Group has also implemented an enterprise output solution whereby the insurance policies can be assembled digitally and distributed through multiple distribution channels.

LPI Group has also an exclusive website, www.lonpac.com, to promote the Group’s products and services virtually as well as to further improve customer care and productivity. It is the Group’s strategy to provide customers with an easy access to the information and responsive services in an effi cient and cost effective manner. The website is constantly updated with the latest news on the products and services, current insurance market issues and other insurance related information. The website also serves as a platform for enquiries, feedbacks and complaints on the services provided.

Looking ahead, the Group will continue to embark on long-term customer retention programmes and also constantly upgrading its customer service standard.

RESPONSIBILITY TO OUR EMPLOYEES

LPI Group believes that human capital is a strategic resource. Hence, it should be nurtured and enhanced with adequate and relevant skills development to meet the impending market liberalisation. In addition to the attractive staff remuneration and fringe benefi ts, the Group continues to undertake activities with the objective of promoting the overall well being of its employees.

Service Recognition Awards

The Group compliments its long servicing staff through the annual presentation of Service Recognition Awards. The Service Recognition Awards that begins in 2001 were presented with the primary objectives of motivating staff to develop their career with LPI Group and rewarding them for their dedication and whole-hearted commitments towards the development and growth of the Group.

A total of 253 staff received the Service Recognition Awards since 2001 with a number of staff receiving more than once throughout their career with the Group. This indicates the trust and loyalty of the staff for the Group and their total confi dence in the leadership of our Chairman, Tan Sri Dato’ Sri Dr. Teh.



The number of the Service Recognition Awards recipients since year 2001 to year 2007 are as depicted below:

Numbers of Recipients

Years of Service 2001 2002 2003 2004 2005 2006 2007

35 years - - - - - 1 2

30 years - 1 13 5 3 3 1

25 years 21 3 2 - - 5 5

20 years 7 6 5 5 2 1 2

15 years 13 2 4 2 2 4 10

10 years* - 28 17 27 10 17 24

Total 41 40 41 39 17 31 44

* 10-year Service Award category was granted commencing from year 2002 onwards.

LPI Group is proud and honoured to witness the loyalty and perseverance of its staff, where some of them have been with the Group for as long as 35 years. Their unwavering dedication and whole-hearted commitment have contributed towards the progress of the Group and have also inspired their colleagues, who are younger in service.



Staff Activities

LPI Group organised many get-along activities for its staff with the objectives of strengthening the bonds among staff and at the same time creating team spirit for staff to meet and interact with each other.

Lonpac Sports Club (“Sports Club”) was established in 1983 with the aim to provide sports and leisure activities for its members. The Sports Club is proud to have the Managing Director/ Chief Executive Offi cer as the Sports Club’s President who is elected by the members at the Sports Club Annual General Meeting. Every year, the Sports Club’s offi ce bearers i.e. President, Vice President, Secretary, Committees, Treasurer and Auditors are nominated and elected by the members at the Sports Club’s Annual General Meeting. The election of the Sports Clubs offi ce bearers is held annually with the objectives to encourage members’ participation and instil transparent management within the Sports Club’s organisation.

The Sports Club actively organises sports and leisure activities for its members throughout the year. During the year, the Sports Club subsidised two (2) overseas trips for its members. In addition to the subsidised trips, the Sports Club also organised sports activities to promote a healthy lifestyle among its members. This includes badminton, netball and table tennis. Members of the Sports Club also played indoor games such as scrabble, carom and darts.

In addition to sports activities held under the Sports Club, Lonpac also has its very own football team, recognising football as one of the famous sports in Malaysia. Many football activities comprising Fun Football Matches (friendly matches among staff of Lonpac), fi eld practices and futsal activities were held during year without any limitation on the age or gender i.e. opened to all Lonpac staff. In year 2007, the Company has successfully organised Lonpac 1st Futsal Competition which attracted a total of forty-two (42) staff’s participation including twelve (12) ladies players. Staff of different departments and ranks were gathered and divided into six (6) teams. Team efforts and good sportsmanship were evident throughout the competition.



LPI Group perceives itself as one Big Family with a total staff force of more than 400 people. With a view of instiling good family values among the families of its staff, Lonpac organised annual Family Day gathering. The gathering creates opportunities for the staff and their families to interact with other families during the activities that include telematch games, kids games and kids show.

The highlight of the staff calendar of events during the year is none other than the Anniversary Dinner & Dance, an exciting event for the staff and our agents and business associates. In this event, the Company shows its appreciation to the staff for their unwavering commitment, and to its agents and business associates for their relentless support throughout the year.

All these activities are expected to promote stronger bond among the staff and unite all staff as one.

Safety And Health Policy

It is the policy of the Group to provide conducive working environment that promote safety and good health to its

employees. LPI Group ensures that all works performed in its offi ces are conducted using safe work practices, free from potential occupational hazards and in compliance with the Occupational Safety and Health Act, 1994.

The Group has an Occupational Safety and Health (“OSH”) Policy in place which is in line with the Occupational Safety and Health Act, 1994. The OSH Policy was adopted with the objective of promoting a safe and healthy working environment as well as preventing any potential occupational hazards. The OSH Policy outlines the responsibilities of the Group to ensure the safety, health and welfare at work of all its employees. On the other hand, the OSH Policy also states the duties of every employee in relation to safety and health.

One of the ultimate pre-requisite in one’s life is Good Health. Though there are numerous insurance products in the market which provide fi nancial aids due to medical conditions, no one is willing to suffer any physical disability that renders loss of manpower hours and quality time for their employer and family respectively.



In line with the saying, “To Prevent Is Better Than To Cure”, the Group believes that a healthy body and mind would generate high productivity and outstanding results. Hence, the Group promotes a healthy lifestyle through the numerous sports activities organised by the Sports Club.

During the year, LPI Group has organised a health talk for its staff on critical diseases including cancers, diabetes as well as heart, kidney and liver diseases, which was presented by a medicare company. The 30-minute health talk explained to the staff on the signs and symptoms of the diseases, their complications as well as the ways to prevent and control the diseases. A free urine test was also provided to staff for their health screening.

In addition to being health conscious, LPI Group also views that safety issues at workplace are of equal importance. In line with the building security policy, the Group has imposed a “Non-Smoking Area” policy in all its offi ce premises. The policy aims at eliminating fi re hazard risk and at the same time discouraging staff from smoking for a healthier life.

A fi re warden and an assistant fi re warden were appointed for each fl oor that the Group occupies at its Head Offi ce. The fi re wardens are guided by the building security offi cers to immediately react on emergency situations such as fi re and bomb threat. The fi re wardens are trained to lead their colleagues on the building evacuation procedures in case of such emergency. LPI Group has also been very participative in numerous fi re drills conducted by the building security division in collaboration with the Fire and Rescue Department of Malaysia.

A fi rst aid course on “First Aid at Work for the Public” was held for staff, especially the fi re wardens and fi re warden assistants, to expose and train them on the basics of fi rst aid treatments. During the course, participants were also shown the correct techniques of Cardio Pulmonary Resuscitation (“CPR”).

LPI Group endeavours to promote the importance of safety and health within its human capital from time to time.


Medical Benefi ts

LPI Group covers Group “All Benefi ts” Personal Accident and Group Hospital & Surgical insurances for all its employees to compensate or provide fi nancial aid to the employees or their families in case of accident or illness. The insurance coverage is suffi cient to help ease the fi nancial burden of the employees due to the escalating medical treatment and surgical costs.

In addition, the Group extends medical benefi ts in terms of medical cost reimbursements to employees’ spouse and children subject to a maximum annual limit.

LPI Group also bears the cost of various medical check-up benefi ts for its staff in accordance with the Staff Benefi ts Handbook to promote health awareness among staff. The medical check-up includes blood test for general screening, papsmear test, mammogramm test and health screening at the Institut Jantung Negara.

RESPONSIBILITY TO OUR SHAREHOLDERS

LPI Group has been fi nancially consistent as refl ected in the heady growth-and-profi tability results backed by exceptional corporate governance practices and managerial and entrepreneurial savvy of the Group’s top executives. These are the key factors which drives healthy returns to the shareholders and enhances long-term shareholders’ value.

The Annual General Meeting (“AGM”) of LPI Capital Bhd, chaired by our Chairman, Tan Sri Dato’ Sri Dr. Teh Hong Piow, is an open and transparent platform where shareholders are given fair and equal opportunities to express their views on the performance of the LPI Group. Adequate time would be allocated for the shareholders to make enquiries and seek clarifi cation on issues pertaining to the performance of the Group.

In line with the Group’s commitment

to deliver excellent shareholders’

return, LPI paid a strong dividend of

105 sen less 28% taxation per share

for the fi nancial year ended

31 December 2006.



In 2007, more than 300 shareholders and proxy holders attended the 46th AGM of LPI Capital Bhd including the Chief Executive Offi cer of Minority Shareholder Watchdog Group (“MSWG”). The number of shareholders attending the AGM has been increasing over the years.

The Malaysian Business accorded LPI’s excellence in corporate governance practices with the merit award of the Malaysian Business Corporate Governance Award for the third consecutive year since 2004. LPI has also won the KPMG Shareholder Value Award for the third consecutive year since 2004, enhancing its position as the Financial Services Sectoral Winner for the years 2005 and 2006 among all listed companies in Bursa Securities.

In line with the Group’s commitment to deliver excellent shareholders’ return, LPI paid a strong dividend of 105 sen less taxation per share for the fi nancial year ended 31 December 2006 with a total dividend paid of RM105.4 million. It was the highest dividend payment in the past years.

LPI has been consistent in its dividend policy since listed in 1993. The dividend per share paid by LPI since 1993 is depicted below:

Year Dividend per share (sen)

2006 105.02005 70.02004 60.02003 25.02002 15.0*2001 15.0*2000 15.0*1999 12.5*1998 27.51997 40.01996 40.01995 30.01994 25.01993 18.0

* Tax Exempt



Corporate Social Responsibility

Profi t maximisation is no longer the sole consideration to ensure business sustainability. Nowadays, the stakeholders are becoming more discerning especially in respect of the impact of business on the community, marketplace, workplace and environment. As a result, there is an increasing awareness among business organisations of the importance to focus beyond compliance with laws to respond to the dynamic economic, social and environmental changes.

It is the central objectives of Vision 2020 to achieve a society infused by strong moral and ethical values, democratic, liberal and tolerant, caring, economically just and equitable, progressive and prosperous, which perfectly refl ect the principles of Corporate Social Responsibility (“CSR”).

The Board of LPI Group acknowledges the importance of CSR and views CSR as an extension of the Group’s efforts in fostering a strong corporate governance culture. Ultimately, both corporate governance and CSR would ensure the sustainability of business via good business practices as both infl uence corporate strategy and draw on the same elements of accountability, honesty, transparency and sustainability. LPI Group believes that effective

The Group continues to play its role as a socially responsible

corporate citizen through various activities held with the aim

of caring for our community.

adoption of CSR has the twin effects of improving both short-term and long-term corporate performance. Working towards CSR enables the Group to co-exist with the community and the environment while building a sound business. CSR also enables the Group to be recognised by the community as a responsible corporate citizen that helps to make sustainable growth a reality.

LPI Group also believes that CSR is a good business proposition of which CSR helps to enhance corporate image and increase the Group’s ability to attract and retain its quality human capital towards improving fi nancial performance.

Towards this end, LPI Group has always fully subscribed to the CSR practices and is in line with the CSR Framework for Public Listed Companies launched by Bursa Malaysia Securities Berhad (“Bursa Securities”). The CSR Framework of Bursa Securities endorses the Triple Bottom Line (“TBL”) reporting concept which focuses on three (3) elements, namely social, environmental and fi nancial accountability. Business decision making process based on TBL reporting is becoming an accepted approach in implementing the intangible concept of sustainability.


CORPORATE SOCIAL RESPONSIBILITY

The LPI Group emphasises CSR on four (4) focal areas as follows:

Community Marketplace

To be socially responsible to the society at large and play a role as a caring corporate citizen.

To be socially responsible in the economic boundaries it operates through exemplary corporate governance practices.

Workplace Environment

To be socially responsible to its employees by providing a conducive working environment including on matters pertaining to health and safety at workplace, developing its human capital and observing the rights of its employees.

To be socially responsible and play a role in preserving the environment.

COMMUNITY

The Group plays its role as a socially responsible corporate citizen in the community through various activities held with the aim of caring for the wellbeing of the society at large.

During the year, the Group jointly organised a Road Safety Campaign with Malaysian Chinese Association Youth in collaboration with Road Safety Department which was held in conjunction with the Chinese New Year Celebration 2007. With the theme “Use Signals for Safety”, the campaign encouraged all road users to form a habit of using signals while driving or motorcycling on the road, think safety for themselves and their loved ones. In short, the safety campaign emphasised the importance of incorporating simple preventive and positive motoring behaviours into everyday life.

The Group had also jointly set up a Special Relief Fund with Public Bank Berhad to lighten the burden of Public Bank’s housing loan customers whose residential properties were badly damaged by the fl oods and were not covered by their existing insurance policies with the Group. The Group contributed equal share of the fund which paid compensation to the fl ood victims between RM1,500 to RM3,000 per customer depending on the value of their properties.

In addition, the LPI Group had also organised social visits and donations towards the children with special needs association and old folks home, and contributions to charity fund raising activities. The Group also participated in the sponsors and contributions to healthcare, sports and education development funds. The Group has also been hiring fresh graduates for the available job vacancies in the Group to create employment opportunities as an initiative to help the government in reducing unemployment.


MARKETPLACE

At the marketplace, the Group maintains high integrity of corporate governance practices as well as enhancing the shareholders’ value through strategic business planning and exceptional management accounting practices. In achieving its corporate goals, business ethical values will not be compromised. The Group’s efforts as a socially responsible corporate citizen were evident in the awards and recognition accorded to LPI. LPI has won the Malaysian Business Corporate Governance Merit Award and KPMG Shareholder Value Award for the third consecutive year since 2004.

LPI was also conferred with the Certifi cate of Merit of the National Award for Management Accounting (NAfMA) 2007 after receiving a Certifi cate of Finalist of the same award in 2006. The NAfMA award is a recognition for the Group’s exemplary management accounting practices including its CSR practices.

In November 2007, the Group’s insurance subsidiary, Lonpac Insurance Bhd (“Lonpac”) was assigned with a fi nancial strength rating of A- (Excellent) and an issuer credit rating of “a-” by A.M. Best. The ratings refl ect Lonpac’s track record of profi table operation, diversifi ed business composition and adequate capitalisation. The ratings also consider the Company’s distribution capabilities and the growth opportunity in the Malaysian general insurance sector.

WORKPLACE

LPI Group is committed in its social responsibilities at the workplace via compliance and respect to Human Rights which includes employment of staff under fair and equitable terms as well as offering equal opportunity for career advancement based on performance. Continuous learning and development programmes were carried out throughout the year to equip the staff with relevant skills, knowledge and experience which would enhance the individual staff’s competency and eventually add value to the Group. Upward mobility of staff is encouraged and staff welfare is closely monitored to avoid any violation to Labour or Human Rights.

In addition, the Group also emphasised on the health and safety aspects at the workplace by setting up an Occupational Safety and Health Committee that oversees the safety, health and welfare at work for all employees. Health talk on critical diseases and training on fi rst aid procedures were conducted to instil a health-conscious mind among staff. The Group also imposed a “Non-Smoking Area” policy in all its offi ce premises with the intention to discourage smoking habit among staff for a healthier life and eliminate fi re hazard risks at the workplace. In addition, information on health and safety issues were disseminated to all staff from time to time.



ENVIRONMENT

As an environmental socially responsible corporate citizen, the Group undertook several initiatives in preserving the environment including upgrading its IT infrastructure on its move to a paperless environment, reducing the usage of papers via electronic communication and recycling paper waste as well as contributing through donations to the environmental programmes.

The Group’s initiatives in supporting CSR will be an ongoing commitment and in year 2007, the Group has also participated in the following activities:

Safety Campaign

• Jointly organised a Road Safety Campaign “Use Signal for Safety” with Malaysian Chinese Association Youth in collaboration with Road Safety Department in conjunction with Chinese New Year Celebration 2007.

Special Relief Fund for Flood Victims

• Jointly set up a Special Relief Fund for fl ood victims with Public Bank Berhad.

Healthcare

• Contributed towards Charity Concert in Aid of Hospis Malaysia.

• Contributed towards Hospis Malaysia “Voices for Hospices 2007”.

Education

• Contributed towards “Minority Shareholder Watchdog Group (“MSWG”) – Towards Credibility & Sustainability” on the launching of MSWG’s Guide For Retail Investors.

• Contributed towards fund raising for Majlis Pembakuan Bahasa Cina Malaysia.

• Contributed towards SP Setia Foundation Charity Dinner 2007.

Environmental

• Staff are encouraged to maintain an environmentally friendly working atmosphere via effi cient utilisation of stationeries effi ciently and recycling practice. The encouragement on the ‘environmentally friendly working atmosphere’ is expressly stated in the Staff Disciplinary Handbook.




Continuous initiatives are carried out and practised throughout the organisation in aid of preserving the environment including:

– Communication via emails to reduce usage of papers on letters or memos.

– Document Management System (“DMS”) in place to store documents electronically in pursuit of paperless environment.

– Staff are encouraged to print double-sided to reduce usage of papers.

• Contributed towards Labour Day Assembly 2007 at Putra Stadium, National Sports Complex, Bukit Jalil.

• Contributed towards Mothers’ Day and Miss Malaysia Tourism Queen International Preview 2007.

Workplace

• Organised a health talk on critical diseases including cancers, diabetes as well as heart, kidney and liver diseases, which was presented by a medicare company.

• Organised a fi rst aid course on “First Aid at Work for the Public”.

• A “Non-Smoking Area” policy in all Group’s offi ce premises.

• First Aid Kit boxes are allocated at the Group’s Head Offi ce and branches.

Sports

• Sponsored the 9th Sarawak Chief Minister’s Cup ITF World Junior Tennis Championship 2007.

Community

• Contributed towards “Disabled Indeed Very Able” Charity Fund.

• Contributed towards Tabung Kebajikan Kawasan Alor Gajah, Melaka.

• Contributed towards Penjanabebas Annual Charity Dinner 2007.

• Contributed towards Migrant Ministry Klang Inter Church Food and Fun Carnival.

• Contributed towards Persatuan Binaan Rumah Berhala Sing Ann Keong.

• Contributed towards Sekolah Jenis Kebangsaan (C) Taman Connaught for the expansion of canteen and upgrading of school facilities fund.

• Contributed towards Persatuan Kanak-Kanak Istimewa, Hulu Langat.

• Contributed towards Sungei Way Old Folks Home.

LPI Group initiates its CSR practices within the Group itself. In this view, the Group believes that the prerequisites of its own staff should not be overlooked whilst undertaking CSR activities. As such, LPI Group views that by taking care of the wellbeing and welfare of its staff, the Group will also contribute positively towards the harmony of the society as a whole. In addition to rewarding performance through competitive remuneration packages, the staff also benefi ted from various staff activities organised throughout the year. Many get-along and social activities for staff were held with the objectives of strengthening the bonds among staff and enhancing team spirit where staff could interact with each other more often via formal and informal activities.

All these activities are expected to promote stronger bond among the staff and unite all staff as one. The Group also aims at making a difference through CSR for the staff and society as a whole.


of Signifi cant Events

31 Jan - Corporate

LPI’S 46TH ANNUAL GENERAL MEETING

Mandarin Oriental Hotel, Kuala Lumpur

Calendar


15 Feb - Community

LONPAC PARTICIPATED IN THE ROAD

SAFETY CAMPAIGN 2007

Toll Plaza, Sungai Besi

18-20 May - Human Resource Development

LONPAC’S AGENCY CONVENTION

Pangkor Island Beach Resort, Perak

25 May - Community

SOCIAL CONTRIBUTION TO PERSATUAN

KANAK-KANAK ISTIMEWA HULU LANGAT

Cheras, Selangor

CALENDAR OF SIGNIFICANT EVENTS

07-11 Apr - Human Resource Development

MANAGERS’ CONFERENCE 2007

Nagoya/ Osaka, Japan


14-19 Jun - Human Resource Development

SENIOR MANAGERS’

CONFERENCE 2007

Hokkaido, Japan

12 Jul - Awards & Recognition

LPI RECEIVED MALAYSIAN BUSINESS

CORPORATE GOVERNANCE AWARD 2006

Nikko Hotel, Kuala Lumpur

14-15 Jul - Employee Relations

LONPAC WHEELS FOR FUN

Swiss-Garden Damai Laut, Lumut

22 Jul - Employee Relations

LONPAC PARTICIPATED IN MII BIG WALK 2007

Kuala Lumpur



24 Jul - Employee Relations

LONPAC’S 45TH ANNIVERSARY CELEBRATION

Shangri-La Hotel, Kuala Lumpur



28-31 Jul - Employee Relations

SPORTS CLUB TRIP I

Bali, Indonesia

25 Jul - Corporate

MANAGERS’ BUSINESS MEETING

Lonpac’s Head Offi ce, Kuala Lumpur

04-05 Aug - Employee Relations

LONPAC’S FAMILY DAY

Swiss Garden Resort, Kuantan

11 Aug - Employee Relations

LONPAC’S 1ST FUTSAL

COMPETITION

Sports Planet, Ampang



17-19 Aug - Human Resource Development

PROFESSIONAL INDEMNITY AND DIRECTORS’

& OFFICERS’ LIABILITY SEMINAR FOR

LONPAC SINGAPORE BRANCH

Equatorial Hotel, Melaka

09-11 Sep - Human Resource Development

ASSISTANT MANAGERS’ & SENIOR EXECUTIVES’ SEMINAR 2007

- LEADERSHIP IN ACTION

Awana Kijal Beach Resort, Terengganu

06 Sep - Customer Relations

LONPAC E-ASSIST GOLF CARNIVAL 2007

Perangsang Templer Golf Club, Selangor

17 Sep - Employee Relations

HEALTH AWARENESS TALK




01 Oct - Awards & Recognition

LPI RECEIVED KPMG

SHAREHOLDER VALUE

AWARD 2006

Kuala Lumpur

19 Nov - Corporate

NIPPONKOA REGIONAL

MANAGERS’ MEETING


31 Oct-07 Nov - Employee Relations

SPORTS CLUB TRIP II

Kunming-Dali-Lijiang, China

27 Nov - Community

SOCIAL CONTRIBUTION TO

SUNGEI WAY OLD FOLKS HOME

Petaling Jaya, Selangor

13 Nov - Corporate

MANAGERS’ ANNUAL

MEETING


13 Dec - Awards & Recognition

LPI RECEIVED CERTIFICATE

OF MERIT - NAfMA 2007

Mandarin Oriental Hotel, Kuala Lumpur


fi nancial statements 130 Analysis of the Financial Statements

133 Statement of Responsibility by Directors

134 Directors’ Report

138 Statement by Directors

139 Statutory Declaration

140 Report of the Auditors to the Members

of LPI Capital Bhd

141 Balance Sheets

142 Income Statements

143 General Insurance Revenue Account

144 Statements of Changes in Equity

146 Cash Flow Statements

148 Notes to the Financial Statements



Analysis of the Financial Statements

ANALYSIS OF THE BALANCE SHEET

Total Assets

The LPI Group’s total assets increased to RM792.4 million as at 31 December 2007, registering a growth of 5% over the previous fi nancial year. The asset growth was mainly attributed by the investment in associated company, CampuBank Lonpac Insurance Plc and the increase in the trade receivables as a result of the signifi cant increase in the growth of premium income in 2007. The investment portfolio accounted for 85% of the Group’s total assets of which the details are shown in the Note 7 to the fi nancial statements.

Investment Properties

The investment properties stood at RM10.0 million, an increase by 17.6% from RM8.5 million registered in 2006. The increase was due to the high appreciation of property market and the investment properties were revalued in accordance with the revaluation reports by the external independent valuation companies.

Investments

Total investments for the Group registered a growth of 1.7% to RM673.3 million from RM662.1 million in 2006. The investment portfolio of the Group is well diversifi ed with long-term and short-term investments. Short-term investments such as the placements in fi xed deposits decreased to RM456.9 million from RM460.2 million during the year. The decline was mainly due to the shift of investment from short-term deposits to bonds and investment in associated company.

The Group’s long-term investments in Government Securities and Government Guaranteed Loans constituted 7.5% of the total investments whilst the investments in quoted equity securities increased by 16.7% to RM106.9 million from RM91.6 million in 2006. The investment in quoted equity securities remained healthy and strong with the year-end market value of RM608.2 million, an impressive appreciation of RM501.3 million or 4.7 times over its book value of RM106.9 million.

Loans (Secured)

The Group’s secured loans are in respect of the staff loans. The staff loans remained unchanged at RM18.9 million.

Trade and Other Receivables

The Group’s trade and other receivables increased to RM68.0 million from RM50.5 million in 2006 mainly attributed by the higher outstanding premium due from clients as a result of a few big risks that were booked towards the end of the year.

Total Liabilities

The Group’s total liabilities grew by 17.8% to RM422.4 million from RM358.5 million in 2006. The increase was mainly due to higher unearned premium reserves and provision for outstanding claims in tandem with the expanded business portfolio. The unearned premium reserves and provision for outstanding claims accounted for 88.8% of the Group’s total liabilities. The details are shown in Notes 14 and 15 to the fi nancial statements respectively.

Unearned Premium Reserves

The Group’s unearned premium reserves rose signifi cantly to RM169.8 million from RM143.7 million in 2006, a growth of 18.2%. The increase was in line with the premium income growth.


ANALYSIS OF THE FINANCIAL STATEMENTS

Provision for Outstanding Claims

The Group’s provision for outstanding claims increased to RM205.5 million from RM170.9 million in 2006. Thus, the net claims incurred ratio stood at 51.2%, which is deemed reasonable in view of the escalating industry loss ratio, particularly in the motor class of business.

Trade and Other Payables

The Group’s trade and other payables decreased by 9.2% to RM32.6 million from RM35.9 million in 2006. The decrease was attributed by the Group’s policy in effi cient settlement of outstanding balances.

Shareholders’ Equity

The Group’s shareholders’ equity remained strong at RM370.0 million despite the payment of high dividends amounting to RM110.7 million and share buy-back totalling RM2.9 million in 2007. This is due to the strong net profi t of RM87.8 million registered in 2007. With improved earnings, the Group is expected to maintain a strong shareholders’ equity.

ANALYSIS OF THE INCOME STATEMENT

For the fi nancial year ended 31 December 2007, the Group’s revenue grew signifi cantly by 16.5% to RM551.6 million whilst its profi t before taxation rose to RM121.8 million from RM110.5 million in 2006, a growth of 10.2%. The Group’s profi t before taxation was generated mainly from the general insurance business, contributing RM94.2 million (2006 : RM87.0 million) as refl ected in the Group’s General Insurance Revenue Account.

Revenue

Despite operating in a competitive business environment, the Group recorded a signifi cant increase in revenue by 16.5% to RM551.6 million from RM473.5 million in 2006. The growth was achieved on the back of an increase in gross premium income by 16.5% to RM494.3 million from RM424.4 million in 2006 and also the substantial increase in dividend income by 19.7% to RM37.1 million from RM31.0 million in 2006.

Gross Premium

The several business strategies and marketing efforts undertaken by the Group in 2007 were effective in increasing the Group’s gross premium income. The increase of 16.5% in the Group’s gross premium income to RM494.3 million was mainly attributed by the Motor and Fire classes of insurance, contributing 62% and 32% of the total increase in the gross premium income respectively.

Net Premium and Earned Premium

In tandem with the growth in gross premium, both the Group’s net premium and also earned premium increased during the year 2007. Net premium income grew by 26.4% to RM335.2 million from RM265.2 million in 2006 whilst the earned premium income grew by 22.8% to RM309.1 million from RM251.7 million in 2006. This refl ects the effectiveness of the Group’s reinsurance programme.

Net Claims Incurred

The increase in the Group’s net claims incurred corresponded with the growth in earned premium. The Group’s net claims incurred increased by 29.4% to RM158.1 million from RM122.2 million in 2006. This was expected in the light of the high industry claims experience in 2007, particularly in the motor class of business. Hence, the overall claims incurred ratio increased to 51.2% from 48.5% in 2006.


ANALYSIS OF THE FINANCIAL STATEMENTS

Net Commission

The Group’s net commission increased to RM30.4 million from RM17.5 million in 2006. The net commission ratio against net premium increased to 9.1% from 6.6% in 2006. The increase was in line with the growth in gross premium income.

Management Expenses

The management expenses of the Group increased by 15.9% to RM62.0 million from RM53.5 million in 2006. The increased is consistent with the increased staff force in 2007. The staff costs constituted RM31.3 million or 50.5% of the total management expenses. The management expenses ratio against earned premium income reduced to 19.8% from 21.0% in 2006 as a result of improved work processes and delivery system.

Underwriting Surplus

The Group maintained the underwriting surplus at RM59.2 million for the year 2007 despite operating in an increasing competitive market and escalating claims cost. The Group was able to maintain the quality of its business portfolio, recording underwriting surplus in all classes of insurance.

Investment Income

The investment income increased signifi cantly by 17.2% to RM56.6 million from RM48.3 million in 2006. The increase was due to the higher dividend income and interest income received during the fi nancial year.

Other Operating Income

The Group’s other operating income increased to RM6.6 million from RM3.7 million in 2006. The increase was mainly arisen from revaluation gain in the Group’s investment properties and gain on disposal of investment in bonds and shares.

Tax Expenses

The Group’s tax expenses for the year 2007 increased to RM34.0 million from RM32.4 million in 2006 in line with the higher profi t achieved. The Group’s effective tax rate of 27.9% was slightly higher than the statutory tax rate of 27.0% due to the non-tax deductible of certain expenses.


The Directors are responsible for ensuring that the annual audited fi nancial statements of the Group and the Company are drawn up in accordance with the requirements of the applicable approved accounting standards for entity other than private entities issued by the Malaysian Accounting Standards Board, the provisions of the Companies Act, 1965, Bank Negara Malaysia’s Guidelines and the Listing Requirements of Bursa Malaysia Securities Berhad.

The Directors are also responsible for ensuring that the annual audited fi nancial statements of the Group and the Company are prepared with reasonable accuracy from the accounting records of the Group and the Company so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2007, and of the results of their operations and cash fl ows for the year ended on that date.

In preparing the annual audited fi nancial statements, the Directors have:

• applied the appropriate and relevant accounting policies on a consistent basis;

• made judgments and estimates that are reasonable and prudent; and

• prepared the annual audited fi nancial statements on a going concern basis.

The Directors are also responsible for ensuring that the Group and the Company maintain proper accounting records, which disclose with reasonable accuracy at any time the fi nancial position of the Group and the Company.

The Directors also have a general responsibility for taking reasonable steps to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities.

This Statement of Responsibility by Directors is made in accordance with the resolution of the Board of Directors dated 14 January 2008.

Statement of Responsibility by Directorspursuant to paragraph 15.27(a) of the Listing Requirements of Bursa Malaysia Securities Berhad


The Directors have pleasure in submitting their report and the audited fi nancial statements of the Group and of the Company for the fi nancial year ended 31 December 2007.

PRINCIPAL ACTIVITIES

The Company is engaged principally in investment holding whilst the principal activities of the subsidiaries are as stated in Note 5 to the fi nancial statements. There have been no signifi cant change in the nature of these principal activities during the fi nancial year.

RESULTS

Group Company

RM’000 RM’000

Net profi t for the year 87,770 120,469

RESERVES AND PROVISIONS

There were no material transfers to or from reserves and provisions during the fi nancial year except as disclosed in the fi nancial statements.

DIVIDENDS

Since the end of the previous fi nancial year, the Company paid:

i) a special dividend of 25.00 sen per ordinary share less tax at 27% (18.25 sen net per ordinary share) and a fi nal dividend of 55.00 sen per ordinary share less tax at 27% (40.15 sen net per ordinary share) totaling RM80,554,000 in respect of the year ended 31 December 2006 on 13 February 2007; and

ii) an interim dividend of 30.00 sen per ordinary share less tax at 27% totaling RM30,163,000 (21.90 sen net per ordinary share) in respect of the year ended 31 December 2007 on 25 July 2007.

A special dividend and a fi nal dividend recommended by the Directors in respect of the year ended 31 December 2007 are 25.00 sen per ordinary share less tax at 26% (18.50 sen net per ordinary share) and 55.00 sen per ordinary share less tax at 26% (40.70 sen net per ordinary share) respectively, on the issued and paid-up share capital as at entitlement date on 19 February 2008.

DIRECTORS OF THE COMPANY

Directors who served since the date of the last report are:

Tan Sri Dato’ Sri Dr. Teh Hong PiowDato’ Yeoh Chin KeeTee Choon YeowTan Kok Guan Dato’ Haji Abdul Aziz bin Omar [appointed on 9 October 2007]

Lee Chin Guan [resigned on 9 October 2007]

Geh Cheng Hooi [resigned on 29 November 2007]

Directors’ Reportfor the year ended 31 December 2007


DIRECTORS’ INTEREST

The interest and deemed interest in the shares of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at year end as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1.00 each

At Transferred At

1.1.2007 Bought Sold in/(out) 31.12.2007


Interest in the Company:- own 1,952,000 - - - 1,952,000

Deemed interest in the Company:- own 59,123,000 - - - 59,123,000- others 50,000 - - - 50,000

Dato’ Yeoh Chin Kee Interest in the Company:- own 350,000 - (215,000) 500,000 635,000

Deemed interest in the Company:- others 500,000 - - (500,000) -

Tee Choon Yeow Interest in the Company:- own 400,000 - - - 400,000

Deemed interest in the Company:- others 100,000 - - - 100,000

Tan Kok Guan Deemed interest in the Company:- others 285,000 - - - 285,000

By virtue of his interests in the shares of the Company shown above, Tan Sri Dato’ Sri Dr. Teh Hong Piow is deemed interested in the shares of the subsidiaries to the extent that LPI Capital Bhd has an interest.

DIRECTORS’ BENEFITS

Since the end of the previous fi nancial year, no Director of the Company has received nor become entitled to receive any benefi t (other than a benefi t included in the aggregate amount of emoluments received or due and receivable by Directors or the fi xed salaries of full time employees of the Company as disclosed in Note 22 to the fi nancial statements) by reason of a contract made by the Company or a related corporation with the Director or with a fi rm of which the Director is a member, or with a company in which the Director has a substantial fi nancial interest, other than a Director who has signifi cant fi nancial interests in companies which traded with the Group in the ordinary course of business as disclosed in Note 29 to the fi nancial statements.

There were no arrangements during and at the end of the fi nancial year which had the object of enabling Directors of the Company to acquire benefi ts by means of the acquisition of shares in or debentures of the Company.

DIRECTORS’ REPORT

for the year ended 31 December 2007


ISSUE OF SHARES

There were no changes in the issued and paid-up capital of the Company during the fi nancial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the year.

SHARE BUY-BACK

On 31 January 2007, the shareholders of the Company renewed their approval for the Company to buy-back its own shares. During the fi nancial year, the Company bought back from the open market, 263,600 of its issued ordinary shares of RM1.00 each (“LPI Shares”) listed on the Main Board of Bursa Securities at an average buy-back price of RM10.93 per ordinary share. The total consideration paid for the share buy-back of LPI Shares by the Company during the fi nancial year, including transaction costs, was RM2,880,456 and was fi nanced by internally generated funds. The LPI Shares bought back are held as treasury shares in accordance with Section 67A Subsection 3(A)(b) of the Companies Act, 1965. None of the treasury shares held were resold or cancelled during the fi nancial year.

As at 31 December 2007, the Company held 1,051,200 LPI Shares as treasury shares out of its total issued and paid-up share capital of 138,723,000 LPI Shares. Such treasury shares are held at a carrying amount of RM8,589,726. Further information are as disclosed in Note 12 to the fi nancial statements.

OTHER STATUTORY INFORMATION

Before the balance sheets and income statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i) there was adequate provision for incurred claims, including Incurred But Not Reported (IBNR) claims,

ii) all known bad debts have been written off and adequate provision made for doubtful debts, and

iii) all current assets have been stated at the lower of cost and net realisable value.

At the date of this report, the Directors are not aware of any circumstances:

i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the Group and in the Company inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the Group and in the Company fi nancial statements misleading, or

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or

iv) not otherwise dealt with in this report or the fi nancial statements, that would render any amount stated in the fi nancial statements of the Group and of the Company misleading.

DIRECTORS’ REPORT



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

i) any charge on the assets of the Group or of the Company that has arisen since the end of the fi nancial year and which secures the liabilities of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the fi nancial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the fi nancial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

For the purpose of this paragraph, contingent and other liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Group.

In the opinion of the Directors, the results of the operations of the Group and of the Company for the fi nancial year ended 31 December 2007 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that fi nancial year and the date of this report.

AUDITORS

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board in accordance with a resolution of the Directors:


Tee Choon Yeow

Kuala Lumpur,Date: 14 January 2008

DIRECTORS’ REPORT



In the opinion of the Directors, the fi nancial statements set out on pages 141 to 182 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 December 2007 and of the results of their operations and cash fl ows for the year ended on that date.

Signed on behalf of the Board in accordance with a resolution of the Directors:


Tee Choon Yeow


Statement by Directorspursuant to Section 169(15) of the Companies Act, 1965


I, Tee Choon Yeow, the Director primarily responsible for the fi nancial management of LPI Capital Bhd, do solemnly and sincerely declare that the fi nancial statements set out on pages 141 to 182 are, to the best of my knowledge and belief, 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.

Subscribed and solemnly declared by the abovenamed in Kuala Lumpur on 14 January 2008.

Tee Choon Yeow

Before me:

G. Ganesan

Commissioner for OathKuala Lumpur

Statutory Declarationpursuant to Section 169(16) of the Companies Act, 1965


We have audited the fi nancial statements set out on pages 141 to 182. The preparation of the fi nancial statements is the responsibility of the Company’s Directors.

It is our responsibility to form an independent opinion, based on our audit, on the fi nancial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by the Directors, as well as evaluating the overall fi nancial statements presentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the fi nancial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965, and applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board so as to give a true and fair view of:

i) the state of affairs of the Group and of the Company at 31 December 2007 and the results of their operations and cash fl ows for the year ended on that date; and

ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the fi nancial statements of the Group and of the Company; and

(b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and the subsidiaries have been properly kept in accordance with the provisions of the said Act.

We are satisfi ed that the fi nancial statements of the subsidiaries that have been consolidated with the Company’s fi nancial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated fi nancial statements and we have received satisfactory information and explanations required by us for those purposes.

The audit reports on the fi nancial statements of the subsidiaries were not subject to any qualifi cation and did not include any comment made under subsection (3) of Section 174 of the Act.

KPMG Khaw Hock Hoe

Firm Number: AF 0758 PartnerChartered Accountants Approval Number: 2229/04/08(J)


Report of the Auditors to the Members of LPI Capital Bhd


Group Company

Note 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Assets

Property and equipment 3 5,755 7,997 - -Investment properties 4 9,990 8,546 - -Investment in subsidiary companies 5 - - 101,100 101,100Investment in associated company 6 10,424 - 10,833 -Investments 7 673,271 662,145 217,727 220,938Loans (secured) 8 18,965 18,927 - - Trade and other receivables 9 68,029 50,482 151 701 Cash and cash equivalents 10 5,955 6,593 63 145

Total assets 792,389 754,690 329,874 322,884

Capital and reserves

Share capital 11 138,723 138,723 138,723 138,723Treasury shares, at cost 12 (8,590) (5,709) (8,590) (5,709)Reserves 239,868 263,220 199,113 189,361

Shareholders’ equity 370,001 396,234 329,246 322,375

Liabilities

Deferred tax liabilities 13 - 392 - -Unearned premium reserves 14 169,792 143,660 - - Provision for outstanding claims 15 205,454 170,862 - - Trade and other payables 16 32,581 35,886 255 237Taxation 14,561 7,656 373 272

Total liabilities 422,388 358,456 628 509

Total liabilities and shareholders’ equity 792,389 754,690 329,874 322,884

The notes on pages 148 to 182 are an integral part of these fi nancial statements.

Balance Sheetsat 31 December 2007


Group Company

Note 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Revenue 18 551,624 473,490 166,045 92,172

Transfer from general insurance revenue account 94,219 86,975 - -Investment income 19 28,218 24,052 166,045 92,172Management expenses 21 (679) (545) (658) (527)

Results from operating activities 121,758 110,482 165,387 91,645Share of profi t after tax of equity accounted associated company 6 8 - - -

Profi t before taxation 121,766 110,482 165,387 91,645Tax expense 23 (33,996) (32,354) (44,918) (25,676)

Net profi t for the year 87,770 78,128 120,469 65,969

Attributable to:

Shareholders of the Company 87,770 78,128 120,469 65,969

Basic earnings per ordinary share (sen) 24 63.8 56.6


Income Statementsfor the year ended 31 December 2007


General Insurance Revenue Accountfor the year ended 31 December 2007

Group Marine, Aviation

Note Fire Motor & Transit Miscellaneous Total

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Gross premium 155,832 133,499 169,412 126,151 16,841 17,728 152,204 147,062 494,289 424,440Less: Reinsurance (63,932) (53,512) (14,907) (17,527) (7,160) (9,303) (73,067) (78,890) (159,066) (159,232)

Net premium 91,900 79,987 154,505 108,624 9,681 8,425 79,137 68,172 335,223 265,208Movement in unearned premium reserves 14 (3,691) (4,619) (17,959) (8,520) 118 (637) (4,600) 254 (26,132) (13,522)

Earned premium 88,209 75,368 136,546 100,104 9,799 7,788 74,537 68,426 309,091 251,686

Net claims incurred 26 (25,513) (18,893) (83,666) (59,055) (5,415) (3,315) (43,529) (40,887) (158,123) (122,150)Net commission (9,757) (5,356) (16,204) (10,277) (1,094) (513) (3,360) (1,339) (30,415) (17,485)

(35,270) (24,249) (99,870) (69,332) (6,509) (3,828) (46,889) (42,226) (188,538) (139,635)

Underwriting surplus before management expenses 52,939 51,119 36,676 30,772 3,290 3,960 27,648 26,200 120,553 112,051

Management expenses 21 (61,322) (52,940)

Underwriting surplus 59,231 59,111Investment income 19 28,378 24,213Other operating income - net 20 6,610 3,651 Transfer to income statement 94,219 86,975



Non-distributable Distributable

Property Foreign

Share Treasury Share revaluation Capital exchange Retained

Group Note capital shares premium reserve reserve reserve profi ts Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2006 138,723 (4,430) 104,635 709 209 5,338 145,016 390,200Change in accounting policy: Effect of adopting FRS 140 - - - 2,903 - - 1,400 4,303 Deferred tax relating to adoption of FRS 140 - - - - - - (392) (392)

- - - 2,903 - - 1,008 3,911

At 1 January 2006, restated 138,723 (4,430) 104,635 3,612 209 5,338 146,024 394,111

Currency translation differences - - - - - (161) - (161)Net losses not recognised in the income statement - - - - - (161) - (161)Share buy-back - (1,279) - - - - - (1,279)Net profi t for the year - - - - - - 78,128 78,128Dividends 25 - - - - - - (74,565) (74,565)

At 31 December 2006/ 1 January 2007 138,723 (5,709) 104,635 3,612 209 5,177 149,587 396,234

Currency translation differences - - - - - (405) - (405)Net losses not recognised in the income statement - - - - - (405) - (405)Share buy-back - (2,881) - - - - - (2,881)Net profi t for the year - - - - - - 87,770 87,770Dividends 25 - - - - - - (110,717) (110,717)

At 31 December 2007 138,723 (8,590) 104,635 3,612 209 4,772 126,640 370,001

Note 11 Note 12

(a) The property revaluation reserve represents the surplus on revaluation of investment properties. It is not distributable as cash dividends until after the sale of the investment properties.

(b) The capital reserve represents gain arising from disposal of investment (realised) by a subsidiary and is not distributable as provided under the subsidiary’s Memorandum and Articles of Association.

Statements of Changes in Equityfor the year ended 31 December 2007


Non-distributable Distributable

Foreign

Share Treasury Share exchange Capital Retained

Company Note capital shares premium reserve reserve profi ts Total

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2006 138,723 (4,430) 104,635 10 6,492 86,820 332,250Share buy-back - (1,279) - - - - (1,279)Net profi t for the year - - - - - 65,969 65,969Dividends 25 - - - - - (74,565) (74,565)

At 31 December 2006 138,723 (5,709) 104,635 10 6,492 78,224 322,375Share buy-back - (2,881) - - - - (2,881)Net profi t for the year - - - - - 120,469 120,469Dividends 25 - - - - - (110,717) (110,717)

At 31 December 2007 138,723 (8,590) 104,635 10 6,492 87,976 329,246

Note 11 Note 12 Note 17

(a) Capital reserve represents the amount transferred from retained profi ts in respect of gain on disposal of investment to a subsidiary and foreign exchange reserves and property revaluation reserve realised on transfer of certain assets and liabilities to a subsidiary in prior years.


STATEMENTS OF CHANGES IN EQUITY



Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Cash fl ows from operating activities

Profi t before taxation 121,766 110,482 165,387 91,645 Adjustments for: Depreciation 3,480 3,732 - - Gain on disposal of property and equipment (179) (7) - - Gain on disposal of investments (3,095) (765) (1,391) - Movement in unearned premium reserves 26,132 13,522 - - Interest paid on reinsurers’ deposits 2 3 - - Investment income (55,683) (48,265) (164,459) (92,172) Provision for outstanding claims 34,592 21,077 - - Provision for/ (Writeback of) diminution in value of investments 132 (33) - - Share of profi t of equity accounted associate (8) - - - Fair value movement in investment properties (1,444) (527) - - Amortisation of premiums, net of accretion of discounts 478 584 (195) -

Profi t/ (Loss) from operations before changes in operating assets and liabilities 126,173 99,803 (658) (527) Changes in operating assets and liabilities Decrease in lease receivables 29 33 - - Increase in due premiums including agents/ brokers and co-insurers balances and amount due from reinsurers and cedants (18,067) (389) - - Decrease in other receivables, deposits and prepayments and income due and accrued 491 891 550 658 Increase in staff loans (38) (2,006) - - Decrease in amount due to reinsurers, cedants, agents/ brokers, co-insurers and insureds (4,749) (5,726) - - Increase in other payables and accrued expenses 1,444 1,554 18 26 Increase/ (Decrease) in fi xed deposits 3,325 (15,483) 34,732 29,627 Fair value movement in investment properties - (1,430) - - Repayment/ (Issuance) of corporate loan 500 (6,000) - - Purchase of Malaysian Government Securities (9,097) (5,325) - - Purchase of unquoted debentures, bonds, unit trust and loan stocks (39,078) (26,166) - (20,000) Purchase of other investments (22,933) (2,819) (62,494) -

Cash Flow Statementsfor the year ended 31 December 2007


CASH FLOW STATEMENTS


Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Changes in operating assets and liabilities (Cont’d) Proceeds from maturity of Malaysian Government Securities 11,000 4,500 - - Proceeds from disposal of unquoted debentures, bonds, unit trust and loan stocks 39,699 14,548 31,291 - Proceeds from disposal of investment 20,186 5,601 1,268 - Interest paid on reinsurers’ deposits (2) (3) - - Dividend income received 37,082 30,989 162,794 88,613 Interest income received 18,282 17,272 1,665 3,151 Other income received 319 180 - -

Cash generated from operating activities before tax 164,566 110,024 169,166 101,548 Tax paid (39,726) (27,060) (44,817) (25,714)

Net cash generated from operating activities 124,840 82,964 124,349 75,834

Cash fl ows from investing activities

Investment in associate company (10,833) - (10,833) - Proceeds from disposal of property and equipment 286 13 - - Purchase of property and equipment (1,345) (2,521) - - Fair value adjustment for properties prior to transfer to investment properties - (2,903) - -

Net cash used in investing activities (11,892) (5,411) (10,833) -

Cash fl ows from fi nancing activities

Dividend paid to shareholders of the Company (110,717) (74,565) (110,717) (74,565) Buy-back of shares (2,881) (1,279) (2,881) (1,279)

Net cash used in fi nancing activities (113,598) (75,844) (113,598) (75,844)

Net (decrease)/ increase in cash and cash equivalents (650) 1,709 (82) (10)Cash and cash equivalents at beginning of year 6,593 5,045 145 155Foreign exchange differences on opening balances 12 (161) - -

Cash and cash equivalents at end of year 5,955 6,593 63 145



LPI Capital Bhd is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Board of the Bursa Malaysia Securities Berhad. The addresses of its registered offi ce and principal place of business are as follows:

REGISTERED OFFICE/ PRINCIPAL PLACE OF BUSINESS

6th Floor, Bangunan Public Bank6, Jalan Sultan Sulaiman50000 Kuala Lumpur

The consolidated fi nancial statements of the Company as at and for the year ended 31 December 2007 comprise the Company, its subsidiaries and the Group’s interest in an associate (together referred to as the Group). The fi nancial statements of the Company as at and for the year ended 31 December 2007 do not include other entities.

The Company is principally engaged in investment holding, whilst the principal activities of the subsidiaries are as stated in Note 5 to the fi nancial statements.

The fi nancial statements were approved by the Board of Directors on 14 January 2008.

1. BASIS OF PREPARATION

(a) Statement of compliance

The fi nancial statements of the Group and of the Company have been prepared in accordance with applicable approved Financial Reporting Standards (FRS) issued by the Malaysian Accounting Standards Board (MASB), accounting principles generally accepted in Malaysia and the provisions of the Companies Act, 1965, the Insurance Act and Regulations, 1996 and Guidelines/ Circular issued by Bank Negara Malaysia. These fi nancial statements also comply with the applicable disclosure provisions of the Listing Requirements of the Bursa Malaysia Securities Berhad.

The accounting policies adopted by the Group and the Company are consistent with those adopted in the previous year except for the adoption of the new and revised FRSs issued by MASB that are effective for the fi nancial period beginning on 1 January 2007 as follows:

FRS 117 Leases FRS 124 Related Party Disclosures FRS 128 Investments in Associates

Notes to the Financial Statements


NOTES TO THE FINANCIAL STATEMENTS

1. BASIS OF PREPARATION (CONT’D)

(a) Statement of compliance (Cont’d)

Other than the expanded disclosure requirements as shown in Notes 6 and 29, the adoption of FRS 117, FRS 124 and FRS 128 does not have any signifi cant fi nancial impact on the Group and the Company.

The MASB has also issued the following FRSs and Interpretations that are effective for fi nancial periods beginning after 1 January 2007 and that have not been applied in preparing these fi nancial statements.

Standard/ Interpretation Effective date

FRS 107, Cash Flow Statements 1 July 2007

FRS 111, Construction Contracts 1 July 2007

FRS 112, Income Taxes 1 July 2007

FRS 118, Revenue 1 July 2007

FRS 119, Employee Benefi ts 1 July 2007

FRS 120, Accounting for Government Grants and Disclosure of Government Assistance 1 July 2007

Amendment to FRS 121, The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign Operation

1 July 2007

FRS 126, Accounting and Reporting by Retirement Benefi ts Plan 1 July 2007

FRS 129, Financial Reporting in Hyperinfl ationary Economies 1 July 2007

FRS 134, Interim Financial Reporting 1 July 2007

FRS 137, Provisions, Contingent Liabilities and Contingent Assets 1 July 2007

FRS 139, Financial Instruments: Recognition and Measurement To be announced

IC Interpretation 1, Changes in Existing Decommissioning, Restoration and Similar Liabilities 1 July 2007

IC Interpretation 2, Members’ Shares in Co-operative Entities and Similar Instruments 1 July 2007

IC Interpretation 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

1 July 2007

IC Interpretation 6, Liabilities arising from Participating in a Specifi c Market – Waste Electrical and Electronic Equipment

1 July 2007

IC Interpretation 7, Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinfl ationary Economies

1 July 2007

IC Interpretation 8, Scope of FRS 2 1 July 2007

The Group and the Company plans to apply the above mentioned FRSs and Interpretations (except for FRS 111, FRS 120, FRS 126, FRS 129, IC Interpretations 1, 2, 5, 6, 7 as explained below and FRS 139 of which its effective date has yet to be announced) for annual periods beginning 1 January 2008. The initial application of the said FRSs and Interpretations are not expected to have any material impact on the fi nancial statements of the Group and the Company.

FRS 111, FRS 120, FRS 126, FRS 129, IC Interpretations 1, 2, 5, 6 and 7 are not applicable to the Group and Company. Hence, no further disclosure is warranted.

The impact of applying FRS 139 on the fi nancial statements upon fi rst adoption of this standard as required by paragraph 30(b) of FRS 108, Accounting Policies, Changes in Accounting Estimates and Errors is not disclosed by virtue of the exemption given in paragraph FRS139.103AB.



1. BASIS OF PREPARATION (CONT’D)

(b) Basis of measurement

The fi nancial statements of the Group and the Company have been prepared on the historical cost basis except as disclosed in the Note 2(d) to the fi nancial statements.

(c) Functional and presentation currency

These fi nancial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency. All fi nancial information presented in RM has been rounded to the nearest thousand, unless otherwise stated.

(d) Use of estimates and judgements

The preparation of fi nancial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

There are no signifi cant areas of estimation uncertainty and critical judgements in applying accounting policies that have a signifi cant effect on the amounts recognised in the fi nancial statements other than those disclosed in the following notes:

Note 2 (d) - Valuation of investment properties Note 2 (k) - Provision for outstanding claims

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to the periods presented in these fi nancial statements, and have been applied consistently by Group entities, unless otherwise stated.

(a) Basis of Consolidation

(i) Subsidiaries

Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Group has the ability to exercise its power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Subsidiaries are consolidated using the purchase method of accounting.

Under the purchase method of accounting, the fi nancial statements of subsidiaries are included in the consolidated fi nancial statements from the date that control commences until the date that control ceases.

Investments in subsidiaries are stated in the Company’s balance sheet at cost less impairment losses (if any), unless the investment is classifi ed as held for sale (or included in a disposal group that is classifi ed as held for sale).



2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(a) Basis of Consolidation (Cont’d)

(ii) Associates

Associates are entities, including unincorporated entities, in which the Group has signifi cant infl uence, but not control, over the fi nancial and operating policies.

Associates are accounted for in the consolidated fi nancial statements using the equity method unless it is classifi ed as held for sale (or included in a disposal group that is classifi ed as held for sale). The consolidated fi nancial statements include the Group’s share of the post tax income and expenses of the equity accounted associates, after any adjustments to align the accounting policies with those of the Group, from the date that signifi cant infl uence commences until the date that signifi cant infl uence ceases.

When the Group’s share of losses exceeds its interest in an equity accounted associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Investments in associates are stated in the Company’s balance sheet at cost less any impairment losses, unless the investment is classifi ed as held for sale (or included in a disposal group that is classifi ed as held for sale).

(iii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated fi nancial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Currency conversion and translation

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rates at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the exchange rate on that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign exchange differences arising on retranslation are recognised in the income statement.

(ii) Financial statements of Singapore branch

The assets and liabilities of a subsidiary’s Singapore branch, which operates in functional currency other than RM, are translated to RM at exchange rates ruling at the balance sheet date. The revenues and expenses of the branch are translated to RM at average exchange rates applicable throughout the year.

Foreign currency differences are recognised in foreign exchange reserve. On disposal of the branch, accumulated

foreign exchange differences will be recognised in the consolidated income statement as part of the gain or loss on sale.




(b) Currency conversion and translation (Cont’d)

(iii) Investment in foreign associate

The carrying amount of the investment is translated to RM at the exchange rates ruling at the balance sheet date. The share of results for the year is translated at the average exchange rates applicable throughout the year.

Foreign currency differences are recognised in foreign exchange reserve. On disposal, accumulated foreign exchange differences are recognised in the consolidated income statement as part of the gain or loss on sale.

(c) Property and equipment

(i) Recognition and measurement

Property and equipment except for capital work-in-progress and long leasehold offi ce premises are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Capital work-in-progress is stated at cost less impairment losses, if any. Long leasehold offi ce premises are stated at valuation less impairment losses, if any.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When signifi cant parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

Gain and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of the disposed property and are recognised within “other operating income/ (expenses) - net” in the income statements.

(ii) Subsequent costs

The cost of replacing part of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefi ts embodied within the part will fl ow to the Group and its cost can be measured reliably. The carrying amount of those parts that are replaced is derecognised. The costs of the day-to-day servicing of property and equipment are recognised in the income statement as incurred.

(iii) Depreciation

Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Capital work-in-progress are not depreciated until the assets are ready for their intended use.




(c) Property and equipment (Cont’d)

(iii) Depreciation (Cont’d)

The estimated useful lives for the current and comparative periods are as follows:

• Long leasehold offi ce premises 50 years• Offi ce equipment 4 years• Furniture and fi ttings 4 years• Renovation 5 years• Computers 4 years• Motor vehicles 5 years

The depreciable amount is determined after deducting the residual value.

Depreciation method, useful lives and residual values are reassessed at each balance sheet date.

(d) Investment properties

(i) Investment properties carried at fair value

Investment properties are properties which are owned or held under a leasehold interest to earn rental income or for capital appreciation or for both.

Investment properties are measured initially at cost and subsequently at fair value with any change therein recognised in the income statement.

(ii) Reclassifi cations to/ from investment properties carried at fair value

When an item of property and equipment is transferred to investment properties following a change in its use, any difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity as a revaluation of property and equipment. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the income statement. Upon disposal of investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through the income statement.

When the use of a property changes such that it is reclassifi ed as property and equipment, its fair value at the date of reclassifi cation becomes its cost for subsequent accounting.




(d) Investment properties (Cont’d)

(iii) Determination of fair value

Independent valuation companies, having appropriate recognised professional qualifi cations and recent experience in the location and category of property being valued, values the Group’s investment property portfolio annually.

Fair value of investment properties is determined by comparing its current value with recent sale of similar properties in the vicinity with appropriate adjustments made to differences in location, fl oor area and other relevant factors before arriving at the fair value of the investment properties. The determination of appropriate adjustments to the recent sale value involves a degree of judgement before arriving at the respective investment property’s fair value.

The fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and, without compulsion.

(e) Investments

Investments are recognised initially at purchase price plus attributable transaction costs. Subsequent to initial recognition:

• Malaysian and Singapore Government Securities, Malaysian Government Guaranteed Loan, unquoted bonds and other investments as specifi ed by Bank Negara Malaysia and held to maturity are stated at cost adjusted for amortisation of premiums or accretion of discounts calculated on a constant yield basis, from the date of purchase to maturity date. The amortisation of premiums and accretion of discounts are recognised in the revenue account.

• Quoted investments are stated at the lower of cost and market value determined on an aggregate portfolio basis by category of investments except that if diminution in value of a particular investment is not regarded as temporary, provision is made against the value of that investment.

Diminution in value of a particular investment is not regarded as temporary when the market value has been less than 80% of its cost at all times during the preceding 24 months, and a specifi c allowance for diminution in value will be made by writing down the cost of that quoted investment to the average median price for each month during that 24 month period.

• Unquoted equity investments are stated at cost. A provision is made when the Directors are of the view that there is a diminution in their value which is other than temporary.

On disposal of investments, the difference between net disposal proceeds and the carrying amount is recognised in the revenue account/ income statement.

(f) Impairment of assets

The carrying amount of assets, except for investment property that is measured at fair value and fi nancial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. For the purpose of impairment testing, assets are group together into the smallest groups of assets that generates cash infl ows from continuing use that are largely independent of the cash infl ows of other assets or group of assets (the “cash-generating unit”).




(f) Impairment of assets (Cont’d)

An impairment loss is recognised in the income statement if the carrying amount of an asset or its cash-generating unit, exceeds its recoverable amount unless the asset is carried at a revalued amount, in which case the impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Impairment losses recognised in respect of cash-generating units are allocated fi rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.

Impairment losses, if any, recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised, unless it reverses an impairment loss on a revalued asset, in which case it is credited directly to revaluation surplus. Where an impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that impairment loss is also recognised in the income statement.

(g) Lease receivables

Finance lease receivables are recognised in the fi nancial statements using the fi nance lease method and are presented as a receivable at an amount equal to the net investment in the lease less any allowance for doubtful debts.

(h) Trade and other receivables

Trade and other receivables are initially recognised at their cost when the contractual right to received cash or another fi nancial asset from another entity is established.

Subsequent to initial recognition, trade and other receivables are stated at cost less allowance for doubtful debts.

Known bad debts are written off and specifi c allowances are made as follows:

(i) motor premiums which remain outstanding for more than 30 days from the date on which they become receivable;

(ii) non-motor premiums, including agents or reinsurance balances, which remain outstanding for more than six (6) months from the date on which they become receivable; and

(iii) all debts which are considered doubtful.

Trade and other receivables are not held for the purpose of trading.

(i) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances with banks but excludes fi xed deposits classifi ed as investments.

(j) Trade and other payables

Payables are measured initially and subsequently at cost. Payables are recognised when there is a contractual obligation to deliver cash or another fi nancial asset to another entity.



(k) General insurance underwriting results

The general insurance underwriting results, are determined for each class of business after taking into account inter alia, reinsurances, commissions, unearned premium reserves and claims incurred.

Premium income

Premium is recognised in a fi nancial period in respect of risks assumed during that particular fi nancial period except for inward treaty reinsurance premiums which are recognised on the basis of periodic advices/ accounts received from ceding insurers.

Unearned Premium Reserves

The Unearned Premium Reserves (UPR) represents the portion of the net premiums of insurance policies written that relate to the unexpired periods of the policies at the end of the fi nancial period.

In determining the UPR at balance sheet date, the method that most accurately refl ects the actual unearned premium is used and is as follows:

Annual policies

(i) 25% method for marine cargo, aviation cargo and transit business. (ii) 1/24th method for all other classes of Malaysian general policies and overseas inward business.

The UPR calculation is adjusted for additional UPR as required under the guidelines issued by Bank Negara Malaysia in respect of premiums ceded to overseas reinsurers.

Non annual policies

Premium are apportioned evenly over the period the policy is on risk.

Provision for outstanding claims

A liability for outstanding claims is recognised in respect of both direct insurance and inward reinsurance. The amount of outstanding claims is the best estimate of the expenditure required together with related expenses less recoveries to settle the present obligation at the balance sheet date.

Provision is also made for the cost of claims, together with related expenses incurred but not reported at balance sheet date, using a mathematical method of estimation carried out by an external actuary.

Estimating the provision for outstanding claims, involves projection of the Company’s future claims experience based on current claims experience. As with all projections, there are elements of uncertainty and thus the projected future claims experience may be different from its actual claims experience due to the level of uncertainty involved in projecting future claims experience based on past claims experience.

These uncertainties arise from changes in underlying risks, changes in spread of risks, timing and amounts of claims settlement as well as uncertainties in the projection model and underlying assumptions.

Acquisition costs

The cost of acquiring and renewing insurance policies net of income derived from ceding reinsurance premiums is recognised as incurred and properly allocated to the periods in which it is probable they give rise to income. Acquisition costs or ceding income which are not recoverable, or not payable in the event of a termination of the policy to which they relate, are not deferred but are recognised in the period in which they occur.





(l) Taxation

Tax expense comprises current and deferred tax. Tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profi t (tax loss). Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax liability is recognised for all taxable temporary differences.

A deferred tax asset is recognised to the extent that it is probable that future taxable profi ts will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.

Additional taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

(m) Other income recognition

(i) Interest income

Interest income on loans and other interest-bearing investments are recognised on an accrual basis except where a loan is considered non-performing i.e. where repayments are in arrears for more than six (6) months, in which case recognition of such interest is suspended. Subsequent to suspension, interest income is recognised on the receipt basis until all arrears have been paid.

Finance income from the fi nancing of leases is recognised in the income statement based on a pattern refl ecting a constant periodic rate of return on the Group’s net investment outstanding in respect of the fi nance lease.

(ii) Rental income

Rental income is recognised on an accrual basis except where default in payment of rent has already occurred and rent due remains outstanding for over six (6) months, in which case recognition of rental income is suspended. Subsequent to suspension, rental income is recognised on the receipt basis until all arrears have been paid.

(iii) Dividend income

Dividend income is recognised when the right to receive payment is established.




(n) Employee benefi ts

Short-term employee benefi ts

Short-term employee benefi t obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profi t-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

The Group’s contributions to the statutory pension funds are charged to the income statements in the year to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

(o) Treasury shares

When share capital recognised as equity is repurchased, the amount of consideration paid, including directly attributable costs. Repurchased shares are classifi ed as treasury shares and presented as a deduction from shareholders’ equity.

When treasury shares are distributed as share dividends, the cost of the treasury shares is applied in the reduction of the share premium account or distributable reserves, or both.

Where treasury share are reissued by re-sale in the open market, the difference between the share consideration net of directly attributable costs and the carrying amount of the treasury shares is recognised in equity.

(p) Earnings per share

The Group presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the Company by the weighted average number of shares outstanding during the period. No diluted EPS is disclosed in these fi nancial statements as there are no dilutive potential ordinary shares.

(q) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.



3. PROPERTY AND EQUIPMENT

Long leasehold Furniture Capital

offi ce Offi ce and Motor work-in-

Group premises equipment fi ttings Renovation Computers vehicles progress Total


Cost/ Valuation

At 1 January 2006 4,567 773 3,331 3,716 13,258 3,055 56 28,756Additions - 42 343 516 1,192 313 115 2,521Offset of accumulated depreciation on property transferred to investment properties (1,281) - - - - - - (1,281)Fair value adjustment prior to transfer to investment properties 2,903 - - - - - - 2,903Transfer to investment properties (Note 4) (6,189) - - - - - - (6,189)Disposals - (6) (3) (25) - (14) - (48)Written off - (9) (24) (24) - - - (57)Exchange differences - 2 5 7 9 4 - 27

At 31 December 2006/ 1 January 2007 - 802 3,652 4,190 14,459 3,358 171 26,632Additions - 2 101 72 653 154 363 1,345Transfer to property and equipment - - 45 112 130 - (287) - Disposals - - (17) - - (350) - (367)Written off - (8) (5) - (12) - - (25)

At 31 December 2007 - 796 3,776 4,374 15,230 3,162 247 27,585


3. PROPERTY AND EQUIPMENT (CONT’D)

Long leasehold Furniture Capital

offi ce Offi ce and Motor work-in-

Group premises equipment fi ttings Renovation Computers vehicles progress Total


Accumulated depreciation

At 1 January 2006 1,281 566 2,157 2,175 8,478 1,604 - 16,261Charge for the year - 112 537 560 1,911 612 - 3,732Offset of accumulated depreciation on property transferred to investment properties (1,281) - - - - - - (1,281)Disposals - (4) (3) (25) - (10) - (42)Written off - (9) (24) (23) - - - (56)Exchange differences - 1 4 5 8 3 - 21

At 31 December 2006/ 1 January 2007 - 666 2,671 2,692 10,397 2,209 - 18,635Charge for the year - 80 460 492 1,999 449 - 3,480Disposals - - (17) - - (243) - (260)Written off - (8) (5) - (12) - - (25)

At 31 December 2007 - 738 3,109 3,184 12,384 2,415 - 21,830

Carrying amount

At 1 January 2006 3,286 207 1,174 1,541 4,780 1,451 56 12,495

At 31 December 2006/ 1 January 2007 - 136 981 1,498 4,062 1,149 171 7,997

At 31 December 2007 - 58 667 1,190 2,846 747 247 5,755

Included in property and equipment are the following fully depreciated assets which are still in use:

Group

2007 2006

RM’000 RM’000

At cost: Offi ce equipment 509 461 Furniture and fi ttings 2,110 1,653 Renovation 1,840 1,811 Computers 8,131 6,741 Motor vehicles 1,556 638




4. INVESTMENT PROPERTIES

Note 2007 2006

Group RM’000 RM’000

At 1 January 8,546 400Effect of movements in exchange rates - 30Transfer from property and equipment 3 - 6,189Change in fair value - retained earnings - 1,400Change in fair value - income statement 1,444 527

At 31 December 9,990 8,546

Investment properties comprise commercial properties that are leased to third parties.

The following are recognised in the income statement in respect of investment properties: 2007 2006


Rental income 319 180Direct operating expenses (3) (5)

5. INVESTMENT IN SUBSIDIARY COMPANIES

Company

2007 2006

RM’000 RM’000

At cost: Unquoted shares 101,100 101,100

Details of subsidiaries, which are all incorporated in Malaysia are as follows:

Effective ownership

interest

Name of subsidiaries Principal activities 2007 2006

% %

Lonpac Insurance Bhd Underwriting of general insurance 100 100London & Pacifi c Holdings Sdn Bhd Investment holding 100 100Public United Leasing and Factoring Sdn Bhd Financing of leases 100 100


6. INVESTMENT IN ASSOCIATED COMPANY

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Unquoted shares, at cost 10,833 - 10,833 -Share of post acquisition reserves* 8 - - -Post acquisition foreign exchange translation reserve (417) - - -

10,424 - 10,833 -

Summary fi nancial information on associate:

Effective

Country of ownership Profi t / Total Total

Company incorporation interest Revenues (Loss) assets liabilities

2007 (100%) (100%) (100%) (100%)

% RM’000 RM’000 RM’000 RM’000

CampuBank Lonpac Insurance Plc Cambodia 45 1,924 18 25,291 2,175

During the year, the Company acquired a 45% interest in CampuBank Lonpac Insurance Plc. This investment was established to develop the Group’s insurance business in Cambodia.

* Share of post acquisition reserves of the investment in associate is accounted for using management accounts as at 31 December 2007.



7. INVESTMENTS

2007 2006

Market Market

Cost Value Cost Value

RM’000 RM’000 RM’000 RM’000

Group

Malaysian Government Securities 38,238 41,740 Amortisation of premiums (1,394) (2,337)

36,844 39,403

Malaysian Government Guaranteed Loan 10,000 10,136Amortisation of premiums - (118)

10,000 10,018

Singapore Government Securities 3,725 3,725Amortisation of premiums (221) (170)

3,504 3,555

Quoted: Unit trust In Malaysia 24,987 25,918 24,988 26,044 Outside Malaysia 104 343 102 293

25,091 26,261 25,090 26,337

Quoted:Equity securities in corporations In Malaysia 104,924 606,037 91,249 426,897 Outside Malaysia 2,013 2,147 330 588

106,937 608,184 91,579 427,485

Unquoted:Equity securities in corporations In Malaysia 235 235 Outside Malaysia 56 56

291 291Provision for diminution in value (56) (56)

235 235

Unquoted:Debentures, bonds and loan stocks 28,726 24,312 Provision for diminution in value (455) (422)(Amortisation of premium)/ Accretion of discounts (14) 2,147

28,257 26,037




7. INVESTMENTS (CONT’D)

2007 2006

Market Market

Cost Value Cost Value

RM’000 RM’000 RM’000 RM’000

Group (Cont’d)

Corporate loan 5,500 6,000

216,368 201,917

Fixed deposits with: - licensed banks in Malaysia 391,970 406,349 - banks outside Malaysia 64,933 47,879 - licensed fi nance companies - 6,000

456,903 460,228

Total investments 673,271 662,145

Company

Quoted: Equity securities in corporations In Malaysia 126,156 420,381 64,930 262,434

Unquoted:Bonds - 8,178Accretion of discounts - 1,527

- 9,705

Quoted:Unit trust In Malaysia - - 20,000 20,442

126,156 94,635

Fixed deposits with: - licensed banks in Malaysia 91,571 126,303

91,571 126,303

Total investments 217,727 220,938

Included in the Group’s fi xed deposits with banks outside Malaysia are deposits amounting to RM1,135,000 (SGD500,000) (2006 - RM1,135,000 (SGD500,000)) lodged with the Monetary Authority of Singapore as a statutory deposit under Section 14 of the Singapore Insurance Act, Chapter 142.

Included in the Group’s and Company’s investments in shares of corporations quoted in Malaysia are investments in Public Bank Berhad shares with a carrying value of RM100,763,000 (2006 - RM88,320,000) and RM126,156,000 (2006 - RM64,930,000), respectively.



8. LOANS (SECURED)

Group

2007 2006

RM’000 RM’000

Staff loans:Receivable within twelve months 1,758 1,787Receivable after twelve months 17,207 17,140

18,965 18,927

9. TRADE AND OTHER RECEIVABLES

Group Company

2007 2006 2007 2006

Note RM’000 RM’000 RM’000 RM’000

Trade receivables:Due premiums including agents/ brokers and co-insurers balances 44,071 39,237 - -Due from reinsurers and cedants 18,285 5,563 - -Less: Allowance for doubtful debts 9.1 (1,052) (1,563) - -

61,304 43,237 - -

Other receivables:Other receivables, deposits and prepayments 3,326 3,115 9 20Income due and accrued 3,396 4,098 142 681

6,722 7,213 151 701

68,026 50,450 151 701

Lease receivables 9.2 3 32 - -

Total trade and other receivables 68,029 50,482 151 701

9.1 During the year, doubtful debts of RM663,000 (2006 – RM173,000) was written off against the allowance for doubtful debts.



9. TRADE AND OTHER RECEIVABLES (CONT’D)

9.2 Lease receivables

Group

2007 2006

RM’000 RM’000

Receivables within twelve months 3 31Less: Unexpired lease income - (2)

3 29

Receivables after twelve months - 3Less: Unexpired lease income - -

- 3

3 32

10. CASH AND CASH EQUIVALENTS

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Cash and bank balances 5,955 6,593 63 145

11. SHARE CAPITAL

Company

Number Number

Amount of shares Amount of shares

2007 2007 2006 2006

RM’000 ’000 RM’000 ’000

Ordinary shares of RM1.00 each Authorised 500,000 500,000 500,000 500,000

Issued and fully paid 138,723 138,723 138,723 138,723



12. TREASURY SHARES

The balance relates to the acquisition cost of treasury shares.

On 31 January 2007, the shareholders of the Company renewed their approval for the Company to buy-back its own shares. During the fi nancial year, the Company bought back from the open market, 263,600 of its issued ordinary shares of RM1.00 each (“LPI Shares”) listed on the Main Board of Bursa Securities at an average buy-back price of RM10.93 per ordinary share. The total consideration paid for the share buy-back of LPI Shares by the Company during the fi nancial year, including transaction costs, was RM2,880,456 and was fi nanced by internally generated funds. The LPI Shares bought back are held as treasury shares in accordance with Section 67A Subsection 3(A)(b) of the Companies Act, 1965.

As at 31 December 2007, the Company held 1,051,200 LPI Shares as treasury shares out of its total issued and paid-up share capital. As at 31 December 2007, the number of outstanding shares in issued and paid-up is therefore 137,671,800 ordinary shares of RM1.00 each.

None of the treasury shares held were resold or cancelled during the fi nancial year. Treasury shares have no rights to voting, dividends or participation in other distribution.

13. DEFERRED TAX LIABILITIES

Recognised deferred tax liabilities

Recognised deferred tax liabilities are attributable to the following: Group

2007 2006

RM’000 RM’000

Investment properties - 392

14. UNEARNED PREMIUM RESERVES

Marine,

Aviation &

Fire Motor Transit Miscellaneous Total

Group RM’000 RM’000 RM’000 RM’000 RM’000

2007

At 1 January 39,060 53,318 3,428 47,854 143,660Increase/ (Decrease) 3,691 17,959 (118) 4,600 26,132

At 31 December 42,751 71,277 3,310 52,454 169,792

2006

At 1 January 34,433 44,761 2,789 47,973 129,956Increase/ (Decrease) 4,619 8,520 637 (254) 13,522Movement taken up in foreign exchange reserve 8 37 2 135 182

At 31 December 39,060 53,318 3,428 47,854 143,660


15. PROVISION FOR OUTSTANDING CLAIMS

Group

2007 2006

RM’000 RM’000

Provision for outstanding claims 399,784 327,467Less: Recoverable from reinsurers (194,330) (156,605)

Net outstanding claims 205,454 170,862

16. TRADE AND OTHER PAYABLES

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Trade payables: Due to reinsurers and cedants 18,115 23,027 - - Due to agents/ brokers, co-insurers and insureds 4,093 3,930 - -

22,208 26,957 - - Other payables: Other payables and accrued expenses 10,373 8,929 255 237

32,581 35,886 255 237

Included in the Group’s other payables and accrued expenses are the following balances:

2007 2006

RM’000 RM’000

Collateral deposits received from policyholders 69,811 80,364Less: Fixed deposits - cash collateral (69,535) (79,985)

276 379

The above balances are netted off as the fi xed deposits are held as cash collateral for guarantees issued on behalf of policyholders.

17. RETAINED PROFITS (DISTRIBUTABLE)

Subject to agreement by the Inland Revenue Board, the Company has suffi cient Section 108 tax credit and tax exempt income to frank all of its retained profi ts at 31 December 2007 if paid out as dividends.

The Malaysian Budget 2008 introduced a single tier company income tax system with effect from year of assessment 2008. As such, the Section 108 tax credit as at 31 December 2007 will be available to the Company until such time the credit is fully utilised or upon expiry of the six-year transitional period on 31 December 2013, whichever is earlier.




18. REVENUE

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Gross premium 494,289 424,440 - - Dividend income 37,082 30,989 162,794 88,613Interest income 18,280 17,267 1,665 3,151Lease interest income 2 5 - - Rental of premises 319 180 - - Accretion of discounts 261 609 195 408Profi t on disposal of other investment 1,391 - 1,391 -

551,624 473,490 166,045 92,172

19. INVESTMENT INCOME

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Insurance fund

Gross dividends- unit trust 257 175 - - - quoted shares in Malaysia 12,339 10,800 - - - quoted shares outside Malaysia 219 133 - - - unquoted shares in Malaysia 71 82 - - Interest income- Corporate loan 290 271 - - - Malaysian Government Securities 2,282 2,486 - - - Malaysian Government Guaranteed Loan 420 400 - - - Cagamas bonds - 116 - - - Singapore Government Securities 160 195 - - - Debentures/ Bonds/ Loan Stocks (unquoted) 754 407 - - - Fixed deposits 11,940 9,552 - - Rental of properties received from third parties 319 180 - - Amortisation of premiums, net of accretion of discounts (673) (584) - -

28,378 24,213 - -


19. INVESTMENT INCOME (CONT’D)

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Non-insurance fund

Interest income- Fixed deposits 2,434 3,840 1,665 3,151- Lease receivables 2 5 - - Accretion of discounts 195 408 195 408Gross dividends - quoted shares in Malaysia 23,399 19,799 21,997 18,613- unquoted subsidiary - - 140,000 70,000- unit trust 797 - 797 - Gain on disposal of investment 1,391 - 1,391 -

28,218 24,052 166,045 92,172

Total investment income 56,596 48,265 166,045 92,172

20. OTHER OPERATING INCOME - NET

Group

2007 2006

RM’000 RM’000

Insurance fund

Gain on disposal of investments 1,704 765Gain on disposal of property and equipment 179 7Interest on staff car loans 183 183Interest on staff housing loans 447 404Interest received on inward treaties 1 - (Provision for)/ Writeback of diminution in value of investment (132) 33Sundry income 2,784 1,732Fair value movement in investment properties 1,444 527

6,610 3,651




21. MANAGEMENT EXPENSES

Group Company

2007 2006 2007 2006

Note RM’000 RM’000 RM’000 RM’000

Insurance fund

Personnel expenses (including key management personnel) 21.1 - Wages, salaries and others 28,389 25,335 - - - Contributions to Employees’ Provident Fund 2,910 2,546 - -

31,299 27,881 - - Auditors’ remuneration- current year 281 246 - - Bad and doubtful debts provided/ (written back) 152 (241) - - Depreciation 3,480 3,732 - - Rental expense on offi ce premises 3,326 3,216 - - Interest paid on reinsurers’ deposits 2 3 - - IGSF levies 721 595 - - Other expenses 22,061 17,508 - -

61,322 52,940 - -

Non-insurance fund

Directors’ fees 22 205 198 205 198Auditors’ remuneration 60 52 45 40Other expenses 414 295 408 289

679 545 658 527

Total management expenses 62,001 53,485 658 527

21.1 The subsidiary of the Company, Lonpac Insurance Bhd, is providing the administrative services to the Group, and as such, the staff costs are borne by the subsidiary.



22. KEY MANAGEMENT PERSONNEL COMPENSATION

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Executive Directors- Fees 160 155 60 54- Salaries and contribution to Employees’ Provident Fund 1,058 918 - - - Bonuses 584 528 - - - Benefi ts-in-kind 72 68 - -

1,874 1,669 60 54

Non-Executive Directors- Fees 537 548 145 144 - Benefi ts-in-kind 22 36 - - - Other remuneration 72 72 - -

631 656 145 144

Total Directors’ Remuneration 2,505 2,325 205 198

Total Directors’ Remuneration (excluding benefi ts-in-kind) 2,411 2,221 205 198

The total remuneration (including benefi ts-in-kind) of the Directors are as follow:

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Executive Directors- Tee Choon Yeow 1,175 1,062 30 27- Tan Kok Guan 699 607 30 27

1,874 1,669 60 54

Non-Executive Directors- Tan Sri Dato’ Sri Dr. Teh Hong Piow 248 260 60 60- Dato’ Yeoh Chin Kee 134 132 30 28- Lee Chin Guan 103 132 23 28- Geh Cheng Hooi 113 132 25 28- Dato’ Haji Abdul Aziz bin Omar 33 - 7 -

631 656 145 144



23. TAX EXPENSE

Group Company

2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000

Current tax expense

Malaysian - current year 34,756 31,901 44,918 25,676 - prior years (401) 402 - -Overseas - current year 33 51 - -

Total current tax 34,388 32,354 44,918 25,676Deferred tax expense

Malaysian - prior year (392) - - -

33,996 32,354 44,918 25,676

Reconciliation of effective tax expense Profi t for the year 87,770 78,128 120,469 65,969Total taxation 33,996 32,354 44,918 25,676

Profi t excluding tax 121,766 110,482 165,387 91,645

Income tax using Malaysian tax rates of 27% (2006: 28%) 32,877 30,936 44,654 25,661Effect of different tax rates for offshore business (656) (404) - - Non-deductible expenses 2,694 1,294 107 129Tax exempt income (346) (186) (256) (114)Effect of deductible temporary differences not recognised 102 50 - - Other items 118 262 413 -

34,789 31,952 44,918 25,676(Over)/ Under provision in prior years (793) 402 - -

Tax expense 33,996 32,354 44,918 25,676

With effect from year of assessment 2007, the corporate tax rate is at 27%. The Malaysian Budget 2007 also announced the reduction of corporate tax rate to 26% in 2008 and to 25% with effect from year of assessment 2009 respectively. Consequently, deferred tax assets and liabilities are measured using these tax rates.



24. EARNINGS PER ORDINARY SHARE - GROUP

Basic earnings per share

The calculation of basic earnings per ordinary share is based on the net profi t attributable to ordinary shareholders of RM87,770,000 (2006 - RM78,128,000) and the weighted average number of ordinary shares outstanding during the year of 137,671,800 (2006 - 137,935,400).

Weighted average number of ordinary shares

2007 2006

’000 ’000

Issued ordinary shares at beginning of the year 138,723 138,723Effect of share buy-back (1,051) (788)

Weighted average number of ordinary shares 137,672 137,935

25. DIVIDENDS

Dividends recognised in the current year by the Company are:

Sen Total

per share amount Date of

2007 (net of tax) RM’000 payment

Special 2006 ordinary 18.25 25,173 13 February 2007Final 2006 ordinary 40.15 55,381 13 February 2007Interim 2007 ordinary 21.90 30,163 25 July 2007

Total amount 110,717

2006

Special 2005 ordinary 18.00 24,855 20 February 2006Final 2005 ordinary 18.00 24,855 20 February 2006Interim 2006 ordinary 18.00 24,855 11 August 2006

Total amount 74,565

After the balance sheet date, the following dividends were proposed by the Directors. These dividends will be recognised in subsequent fi nancial reports upon approval by the shareholders.

Group

Sen Total

per share amount

(net of tax) RM’000

Special ordinary 18.50 25,469Final ordinary 40.70 56,033

Total amount 81,502



26. NET CLAIMS INCURRED

Marine,

Aviation &

Fire Motor Transit Miscellaneous Total

Group RM’000 RM’000 RM’000 RM’000 RM’000

2007

Gross claims paid less salvage 89,149 71,579 5,319 53,154 219,201Reinsurance recoveries (65,265) (8,936) (1,926) (19,543) (95,670)

Net claims paid (a) 23,884 62,643 3,393 33,611 123,531Net outstanding claims: At 31 December (b) 20,048 110,083 5,235 70,088 205,454 At 1 January (c) 18,419 89,060 3,213 60,170 170,862

Net claims incurred (a+b-c) 25,513 83,666 5,415 43,529 158,123

2006

Gross claims paid less salvage 21,775 64,350 5,469 66,276 157,870Reinsurance recoveries (9,716) (10,644) (2,362) (34,075) (56,797)

Net claims paid (a) 12,059 53,706 3,107 32,201 101,073Net outstanding claims: At 31 December (b) 18,419 89,060 3,213 60,170 170,862 At 1 January (c) 11,578 83,644 3,003 51,243 149,468Exchange difference taken up in foreign exchange reserve (d) 7 67 2 241 317

Net claims incurred (a+b-c-d) 18,893 59,055 3,315 40,887 122,150

27. SEGMENT INFORMATION

Segment information is presented in respect of the Group’s business and geographical segments. The primary format, geographical segments by location of customer, is based on the Group’s management and internal reporting structure. Inter-segment pricing is determined based on negotiated terms.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.



27. SEGMENT INFORMATION (CONT’D)

Geographical segments

The general insurance business operates in two principal geographical areas, Malaysia and Singapore. The investment holding and fi nancing of leases business segments only operates in Malaysia.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

Business segments

The Group comprises the following main business segments: General insurance Underwriting of all classes of general insurance business Investment holding Investment holding company Financing of leases Provide fi nancing of leases

Malaysia Singapore Eliminations Consolidated

2007 2006 2007 2006 2007 2006 2007 2006


Geographical segments

by location of customers

Revenue from external customers 486,749 429,490 64,875 44,000 - - 551,624 473,490

Total revenue 486,749 429,490 64,875 44,000 - - 551,624 473,490

Segment result 144,342 87,448 842 (473) (50,965) - 94,219 86,975Investment income 28,218 24,052Management expenses (679) (545)Share of profi t after tax of equity accounted associated company 8 -

Profi t before taxation 121,766 110,482Tax expense (33,996) (32,354)

Net profi t for the year 87,770 78,128

Segment assets 756,349 706,870 104,038 76,832 (67,998) (29,012) 792,389 754,690

Segment liabilities 347,609 310,112 103,638 77,356 (28,859) (29,012) 422,388 358,456

Capital expenditure 1,294 2,457 51 64 - - 1,345 2,521Depreciation 3,365 3,408 115 324 - - 3,480 3,732Other non-cash expenses 33,551 28,654 25,861 5,384 - - 59,412 34,038



27. SEGMENT INFORMATION (CONT’D)

General Investment Financing

insurance holding of leases Eliminations Consolidated

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Business segments

Revenue from external customers 524,036 450,006 27,580 23,475 8 9 - - 551,624 473,490Inter-segment revenue - - 140,000 70,000 - - (140,000) (70,000) - -

Total revenue 524,036 450,006 167,580 93,475 8 9 (140,000) (70,000) 551,624 473,490

Segment assets 624,157 555,462 336,569 328,421 189 194 (168,526) (129,387) 792,389 754,690 Capital expenditure 1,345 2,521 - - - - - - 1,345 2,521

28. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

Exposure to market, underwriting, credit, interest rate, foreign currency and liquidity risks arises in the normal course of the Group and the Company’s business. The Group and the Company are guided by risk management policies and guidelines which set out the overall business strategies and the general risk management philosophy. The Group and the Company have established processes to monitor the risks on an ongoing basis.

Market risk

The net asset value of the investments by the Group and the Company may fl uctuate due to changes in market conditions. Market risk is managed through portfolio diversifi cation and asset allocation.

Underwriting risk

Underwriting risk includes the risk of incurring higher claims costs than expected owing to the random nature of claims and their frequency and severity and the risk of change in legal or economic conditions or behavioral patterns affecting insurance pricing and conditions of insurance or reinsurance cover. This may result in the insurer having either received too little premium for the risks it has agreed to underwrite and hence has not enough funds to invest and pay claims, or that claims are in excess of those expected. The Group and the Company seek to minimise underwriting risks with a balanced mix and spread of business between classes of business and by observing underwriting guidelines and limits, adequate claims provisions, and high standards applied to the security of reinsurers.


28. FINANCIAL INSTRUMENTS (CONT’D)

Credit risk

Credit risk represents the loss that would be recognised if counterparties to insurance, reinsurance and investment transactions fail to perform as contracted.

Management monitors the exposure to credit risk on an ongoing basis.

At balance sheet date, there were no signifi cant concentrations of credit risk. The maximum exposure to credit risk for the Group and the Company are represented by the carrying amount of each fi nancial asset.

Interest rate risk

The Group and the Company’s earnings are affected by changes in market interest rates due to the impact such changes have on interest income from cash and cash equivalents and investments. The management monitors the risks in the Group and the Company’s investments, including careful selection of issuers and a geographical spread of investment.

Foreign currency risk

The Group and the Company is exposed to foreign currency risk on transactions that are denominated in a currency other than Ringgit Malaysia, the translation of the fi nancial statements of a subsidiary’s Singapore branch to Ringgit Malaysia, the retranslation of the cost of the investment in associate at the closing rate of exchange and share of associate results are translated at average exchange rates applicable throughout the year. Exposures to foreign currency risks are monitored on an ongoing basis.

The Group and the Company do not hedge their foreign currency risk. Liquidity risk

The Group and the Company monitor and maintain a level of cash and cash equivalents deemed adequate by management to fi nance the Group and the Company’s operations and to mitigate the effects of fl uctuations in cash fl ows.

The following table shows information about the Group and the Company’s exposure to interest rate risk.

Effective interest rates and repricing analysis

In respect of interest-earning fi nancial assets, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice or mature, whichever is earlier. There are no interest-bearing fi nancial liabilities.





Liquidity risk (Cont’d)

2007 2006

Effective Effective

interest Within 1 - 5 After interest Within 1 - 5 After

rate Total 1 year years 5 years rate Total 1 year years 5 years

Financial assets % RM’000 RM’000 RM’000 RM’000 % RM’000 RM’000 RM’000 RM’000

Group

Debt securities held to maturity: Malaysian Government Securities 5.16 36,844 - 32,818 4,026 6.25 39,403 11,246 28,157 - Malaysian Government Guaranteed Loan 3.70 10,000 - 10,000 - 3.70 10,018 - 10,018 - Singapore Government Securities 4.66 3,504 1,148 1,197 1,159 4.67 3,555 - 2,394 1,161 Debentures, bonds and loan stocks - Unquoted 4.46 28,257 1,815 10,114 16,328 5.29 26,037 5,499 10,705 9,833 Corporate loan 5.00 5,500 1,000 4,500 - 5.00 6,000 500 5,000 500 Fixed deposits 3.29 456,903 456,903 - - 3.40 460,228 460,228 - - Staff loans 3.14 18,965 1,758 6,310 10,897 3.17 18,927 1,787 6,184 10,956 Lease receivables 10.85 3 3 - - 10.85 32 29 3 -

Company

Debentures, bonds and loan stocks - Unquoted - - - - - 6.04 9,705 - 9,705 -Fixed deposits 3.49 91,571 91,571 - - 3.44 126,303 126,303 - -




Fair values

Recognised fi nancial instruments

The aggregate fair values of fi nancial assets carried on the balance sheet as at 31 December are represented in the following table.

2007 2007 2006 2006

Carrying Fair Carrying Fair

amount value amount value

Financial assets RM’000 RM’000 RM’000 RM’000

Group

Malaysian Government Securities 36,844 36,963 39,403 39,721Malaysian Government Guaranteed Loan 10,000 10,036 10,018 10,021Singapore Government Securities 3,504 3,562 3,555 3,576Unit trust 25,091 26,261 25,090 26,337Equity securities in corporations - Quoted 106,937 608,184 91,579 427,485Debentures, bonds and loan stocks 28,257 28,514 26,037 28,567Corporate loan 5,500 5,500 6,000 6,000Staff loans 18,965 18,965 18,927 18,927

235,098 737,985 220,609 560,634

Company

Equity securities in corporations- Quoted 126,156 420,381 64,930 262,434Debentures, bonds and loan stocks - - 9,705 10,840Unit trust - - 20,000 20,442

126,156 420,381 94,635 293,716

The fair value of quoted securities is their quoted market price at the balance sheet date. For other fi nancial instruments listed above, fair values are indicative prices at the balance sheet date. In respect of cash and cash equivalents, fi xed deposits, trade and other receivables, trade and other payables and lease receivables, the carrying amounts approximate their fair value due to the relatively short-term nature of these fi nancial instruments.

The fair value of the staff loans approximates the carrying amount as it is immaterial in the context of the fi nancial statements.

It is not practicable within constraints of time and cost to estimate the fair value of unquoted securities in corporations. The Group’s investment in unquoted securities in corporations is insignifi cant in the context of the fi nancial statements.



29. SIGNIFICANT RELATED PARTY DISCLOSURES

For the purpose of these fi nancial statements, parties are considered to be related to the Group or the Company if the Group or the Company has the ability, directly or indirectly, to control the other party or exercise signifi cant infl uence over the other party in making fi nancial or operational decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common signifi cant infl uence. Related parties may be individuals or other entities. The related parties of the Group and the Company are:

i) Subsidiary Companies

Details of the subsidiary companies are shown in Note 5.

ii) Associated Company

Associated company in which the Group holds an interest of between 20% to 50% in the entity as disclosed in Note 6.

iii) Key Management Personnel

Key management personnel includes the Company’s Executive and Non-Executive Directors and are defi ned as those persons having authority and responsibility for planning, directing and controlling the activities of the Group or Company either directly or indirectly. Executive and Non-Executive Directors compensation is disclosed in Note 22.

iv) Companies in Which a Director Has Substantial Financial Interest

These are entities in which signifi cant voting power in such entities resides with, directly or indirectly, a Director of the Company.

(a) The signifi cant related party transactions of the Group and the Company, other than key management personnel

compensations, are as follows:

Companies in which

a Director has

Substantial Financial Interest

2007 2006


Income earned:

Premium income generated from assets insured with the Group 19,733 16,222Dividend income 36,600 30,252Fixed deposits income 5,924 4,952

62,257 51,426

Expenditure incurred:

Rental paid (2,165) (2,161) Commission incurred for insurance business introduced (18,066) (15,474)Stock broking commission paid for equity investment (106) (23)Corporate advisory fees (30) (18)

(20,367) (17,676)


29. SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D)

Companies in which

Subsidiary a Director has

Companies Substantial Financial Interest

2007 2006 2007 2006

Company RM’000 RM’000 RM’000 RM’000

Income earned: Dividend income (Note 19) 140,000 70,000 22,794 18,613Fixed deposits income - - 884 662

140,000 70,000 23,678 19,275

Expenditure incurred:

Stockbroking commission paid for equity investment - - (102) (4)Corporate advisory fees - - (30) (18)

- - (132) (22)

Transactions:

Purchase of quoted equity securities in Malaysian corporations - at market value (62,494) - - -

(b) The signifi cant outstanding balances of the Group and the Company with its related parties are as follows:

Companies in which

a Director has

Substantial Financial Interest

2007 2006


Balances with related parties:

Fixed deposits 189,722 189,706Bank balances 2,333 2,584

192,055 192,290

Company Balances with related parties:

Fixed deposits 85,071 46,989Bank balances 63 145

85,134 47,134



Analysis of Shareholdingsas at 31 December 2007

Authorised share capital RM500,000,000Issued and fully paid-up share capital RM138,723,000 comprising 138,723,000 ordinary shares of RM1.00 eachClass of shares Ordinary shares of RM1.00 eachVoting rights One (1) vote per ordinary share

DISTRIBUTION OF SHAREHOLDINGS

Size of Shareholdings

Shareholders No. of Shares Held

Malaysia Foreign Malaysia Foreign

No. % No. % No. % No. %

Less than 100 shares 41 1.20 3 0.09 1,167 - 141 -

100 – 1,000 shares 1,266 37.04 21 0.61 1,029,770 0.75 18,510 0.01

1,001 – 10,000 shares 1,508 44.12 74 2.17 6,101,976 4.43 353,200 0.26

10,001 – 100,000 shares 393 11.50 34 0.99 10,517,256 7.64 1,120,780 0.82

100,001 to 6,883,589 (less than 5% of issued shares*1)

67 1.96 7 0.20 41,273,200 29.98 13,327,800 9.68

6,883,590 (5% of issued shares*1) and above

3 0.09 1 0.03 52,114,000 37.85 11,814,000 8.58

Total 3,278 95.91 140 4.09 111,037,369 80.65 26,634,431 19.35

Note: *1 Excluding a total of 1,051,200 LPI Capital Bhd (“LPI”) shares bought-back by LPI and retained as treasury shares as at 31 December 2007.


TOP THIRTY SHAREHOLDERS

(Without aggregating the securities from different securities accounts belonging to the same Depositor)

Name of Shareholders No. of Shares Held % of Issued Shares*1

1. Selected Holdings Sdn Berhad 19,446,000 14.12%

2. Kepunyaan Chintamani Sdn Bhd 16,748,000 12.17%

3. NIPPONKOA INSURANCE CO., LTD 10,739,000 7.80%

4. Kepunyaan Pejal Sdn Berhad 8,920,000 6.48%

5. Public Invest Nominees (Tempatan) Sdn Bhd Qualifi er: Public Bank Group Offi cers’ Retirement Benefi ts Fund

6,739,400 4.90%

6. Selected Holdings Sdn Berhad 3,000,000 2.18%

7. Premium Bond Company Limited 3,000,000 2.18%

8. HSBC Nominees (Asing) Sdn Bhd Qualifi er: Exempt An for BNP Paribas Securities Services (Convert in USD)

2,500,900 1.82%

9. Mayban Nominees (Tempatan) Sdn BhdQualifi er: Mayban Trustees Berhad for Public Regular Savings Fund

2,118,900 1.54%

10. Kepunyaan Pejal Sdn Berhad 2,000,000 1.45%

11. Kepunyaan Chintamani Sdn Bhd 2,000,000 1.45%

12. Cartaban Nominees (Asing) Sdn Bhd Qualifi er: State Street London Fund XCB9 for Aberdeen Asian Smaller

Companies Investment Trust PLC

2,000,000 1.45%

13. Tan Sri Dato’ Sri Dr. Teh Hong Piow 1,800,000 1.31%

14. Amanah Raya Nominees (Tempatan) Sdn Bhd Qualifi er: Public Growth Fund

1,664,200 1.21%

15. Amanah Raya Nominees (Tempatan) Sdn BhdQualifi er: Public Far-East Dividend Fund

1,607,000 1.17%

ANALYSIS OF SHAREHOLDINGS

as at 31 December 2007




Name of Shareholders No. of Shares Held % of Issued Shares*1

16. Amanah Raya Nominees (Tempatan) Sdn BhdQualifi er: Public Savings Fund

1,356,200 0.99%

17. Amanah Raya Nominees (Tempatan) Sdn Bhd Qualifi er: Public Equity Fund

1,269,300 0.92%

18. Teo Ah Khiang @ Chiang Kee Foon 1,209,000 0.88%

19. Mayban Nominees (Tempatan) Sdn BhdQualifi er: Aberdeen Asset Management Sdn Bhd for the Employees’

Provident Fund Board

1,145,000 0.83%

20. Premium Bond (M) Sdn Berhad 1,100,000 0.80%

21. NIPPONKOA INSURANCE CO., LTD 1,075,000 0.78%

22. Tunku Osman Ahmad 1,070,000 0.78%

23. Tasec Nominees (Asing) Sdn Bhd Qualifi er: TA Securities (HK) Ltd for Wincase Holdings Ltd

1,039,400 0.75%

24. Mayban Nominees (Tempatan) Sdn BhdQualifi er: Mayban Trustees Berhad for Public Balanced Fund

1,001,500 0.73%

25. Premium Bond Company Limited 1,000,000 0.73%

26. Premium Bond Company Limited 896,000 0.65%

27. PM Nominees (Tempatan) Sdn Bhd Qualifi er: Olive Lim Swee Lian

885,880 0.64%

28. HSBC Nominees (Asing) Sdn Bhd Qualifi er: HSBC-FS for Aberdeen Malaysia Equity Fund

869,500 0.63%

29. Amanah Raya Nominees (Tempatan) Sdn BhdQualifi er: Public South-East Asia Select Fund

816,600 0.59%

30. Geh Cheng Hooi 810,000 0.59%

Total 99,826,780 72.51%





SUBSTANTIAL SHAREHOLDERS

as per Register of Substantial Shareholders as at 31 December 2007

Name of Shareholders

No. of Shares Held

Direct Interests Indirect Interests Total

% of Issued

Shares*1

1. Selected Holdings Sdn Berhad 22,446,000 - 22,446,000 16.30%

2. Kepunyaan Chintamani Sdn Bhd 18,748,000 - 18,748,000 13.62%

3. NIPPONKOA INSURANCE CO., LTD 11,814,000 - 11,814,000 8.58%

4. Kepunyaan Pejal Sdn Berhad 10,920,000 - 10,920,000 7.93%

5. Tan Sri Dato’ Sri Dr. Teh Hong Piow 1,952,000 59,173,000 61,125,000 44.40%

6. Consolidated Teh Holdings Sdn Berhad 422,000 58,701,000 59,123,000 42.94%

7. Kayakita Corporation Sdn Bhd - 10,920,000 10,920,000 7.93%

8. Monivest Sdn Bhd - 10,920,000 10,920,000 7.93%

DIRECTORS’ SHAREHOLDINGS


Name of Shareholders

No. of Shares Held

Direct Interests Indirect Interests Total

% of Issued

Shares*1

1. Tan Sri Dato’ Sri Dr. Teh Hong Piow 1,952,000 59,173,000 61,125,000 44.40%

2. Dato’ Yeoh Chin Kee 635,000 - 635,000 0.46%

3. Mr. Tee Choon Yeow 400,000 100,000 500,000 0.36%

4. Mr. Tan Kok Guan - 285,000 285,000 0.21%



Authorised and Issued Share Capital

AUTHORISED SHARE CAPITAL

The authorised share capital as at 31 December 2007 is RM500,000,000 divided into 500,000,000 ordinary shares of RM1.00 each. The changes in the authorised share capital are as follows :-

Date Increase in Authorised Share Capital

(RM)

Total Authorised Share Capital

(RM)

24.05.1962 1,000,000 1,000,000

28.06.1972 4,000,000 5,000,000

14.11.1972 5,000,000 10,000,000

14.05.1973 20,000,000 30,000,000

01.03.1995 70,000,000 100,000,000

19.02.1997 400,000,000 500,000,000

ISSUED AND PAID-UP SHARE CAPITAL

The issued and paid-up share capital as at 31 December 2007 is RM138,723,000 comprising of 138,723,000 ordinary shares of RM1.00 each. The changes in the issued and paid-up share capital are as follows :-

Date of

Allotment

No. of Shares

Allotted Consideration

Total Issued and

Paid-up Share

Capital (RM)

04.10.1962 2 Subscribers’ Shares 2

28.03.1963 999,998 Allotment of Shares to Essex Securities Ltd andMontreal Trust Company

1,000,000

28.06.1972 2,000,000 Bonus Issue 1:2 of 500,000 ordinary shares of RM1.00 eachand Allotment of 1,500,000 ordinary shares of RM1.00 each to Kuala Lumpur Holdings Sdn. Berhad, Far Eastern Oriental Sdn. Berhad and Mr. Fred Eu Keng Fai

3,000,000

30.12.1972 3,000,000 Allotment of ordinary shares of RM1.00 each to Wei WooEstates & Investment Limited, Hong Kong, in exchange of6,000,000 shares of HK$1.00 each in Wei Woo Estates & Investment Limited

6,000,000

18.01.1973 2,000,000 Rights Issue 1:3 at RM1.00 8,000,000

10.06.1980 6,000,000 Allotment of 7 1/2% Convertible Preference Shares of RM0.50 each to Selected Holdings Sdn. Berhad

11,000,000

29.10.1992 8,800,000 Capitalisation of share premium account, capital reserveaccount and revenue reserve account (Bonus Issue 4:5)

19,800,000

22.06.1994 9,900,000 Capitalisation of share premium account and revenue reserve account (Bonus Issue 1:2)

29,700,000

01.11.1996 11,880,000 Capitalisation of unappropriated profi ts(Bonus Issue 2:5)

41,580,000


Date of

Allotment

No. of Shares


Total Issued and

Paid-up Share

Capital (RM)

10.12.1996 11,880,000 Rights Issue 2:5 at RM7.00 53,460,000

15.01.1999 53,460,000 Capitalisation of share premium reserve account (Bonus Issue 1:1)

106,920,000

12.04.2000 435,000 Exercise of share options under LPI ESOS at option priceof RM2.60 per share

107,355,000


107,398,000

24.07.2002 10,739,000 Subscription of new ordinary shares of LPI by NIPPONKOAINSURANCE CO., LTD. At RM3.81 per share

118,137,000


118,610,000

21.08.2003 1,117,000 Exercise of share options under LPI ESOS at option priceof RM3.29 per share

119,727,000


120,159,000

08.01.2004 1,237,000 Exercise of share options under LPI ESOS at option priceof RM3.29 per share

121,396,000

29.03.2004 1,857,000 Exercise of share options under LPI ESOS as follows :-- 1,773,000 shares at option price of RM3.29- 84,000 shares at option price of RM3.76

123,253,000

04.06.2004 619,000 Exercise of share options under LPI ESOS as follows :-- 592,000 shares at option price of RM3.29- 27,000 shares at option price of RM3.76

123,872,000

27.08.2004 921,000 Exercise of share options under LPI ESOS as follows :-- 675,000 shares at option price of RM3.29- 4,000 shares at option price of RM3.76- 242,000 shares at option price of RM3.66

124,793,000

22.10.2004 1,545,000 Exercise of share options under LPI ESOS as follows :-- 1,050,000 shares at option price of RM3.29- 15,000 shares at option price of RM3.76- 480,000 shares at option price of RM3.66

126,338,000


127,318,000

AUTHORISED AND ISSUED SHARE CAPITAL



Date of

Allotment

No. of Shares


Total Issued and

Paid-up Share

Capital (RM)

24.12.2004 1,583,000 Exercise of share options under LPI ESOS as follows :-- 567,000 shares at option price of RM3.29- 71,000 shares at option price of RM3.76- 756,000 shares at option price of RM3.66- 189,000 shares at option price of RM4.30

128,901,000

24.01.2005 1,257,000 Exercise of share options under LPI ESOS as follows :-- 391,000 shares at option price of RM3.29- 255,000 shares at option price of RM3.76- 526,000 shares at option price of RM3.66- 85,000 shares at option price of RM4.30

130,158,000

08.02.2005 5,653,000 Exercise of share options under LPI ESOS as follows :-- 94,000 shares at option price of RM3.29- 594,000 shares at option price of RM3.76- 4,888,000 shares at option price of RM3.66- 77,000 shares at option price of RM4.30

135,811,000

18.04.2005 435,000 Exercise of share options under LPI ESOS as follows :-- 27,000 shares at option price of RM3.29- 161,000 shares at option price of RM3.76- 112,000 shares at option price of RM3.66- 27,000 shares at option price of RM4.30- 108,000 shares at option price of RM5.94

136,246,000


136,438,000


137,368,000

07.10.2005 288,000 Exercise of share options under LPI ESOS as follows :-- 3,000 shares at option price of RM3.29- 26,000 shares at option price of RM3.76- 26,000 shares at option price of RM3.66- 8,000 shares at option price of RM4.30- 150,000 shares at option price of RM5.94- 75,000 shares at option price of RM6.29

137,656,000


Date of

Allotment

No. of Shares


Total Issued and

Paid-up Share

Capital (RM)


137,927,000


137,950,000


138,011,000


138,176,000

27.12.2005 547,000 Exercise of share options under LPI ESOS as follows :-- 3,000 shares at option price of RM3.29- 10,000 shares at option price of RM3.76- 12,000 shares at option price of RM3.66- 1,000 shares at option price of RM4.30- 380,000 shares at option price of RM5.94- 67,000 shares at option price of RM6.29- 74,000 shares at option price of RM6.95

138,723,000



Particulars of Properties Held by the Group

Location No. 34, 34-1 to 34-3 Jalan Sri Hartamas 8 (Jalan 8/70A), Sri Hartamas 50480 Kuala Lumpur

Units 02-39, 02-41, 02-43 and 02-45 Goldhill Plaza Newton RoadSingapore

Description 4 storey shop offi ce 2nd fl oor of 6 storey building

Current use Rented out to third parties Rented out to third parties

Tenure Freehold Leasehold999 years

Remaining lease period(Expiry date)

- 963 years(26 February 2971)

Age of property 24 years 36 years

Built-up area 1,600 sq. ft. per fl oor 4,952 sq. ft.

Net book value RM1,900,000 RM8,090,280

Date of acquisition 1 September 1984 26 February 1972

Date of last revaluation 5 November 2007 10 December 2007

I/We NRIC No./Co. No.:

of

being a member/members of LPI CAPITAL BHD (“the Company”), hereby appoint

NRIC No.:

of

or failing him/her, the CHAIRMAN OF THE MEETING as my/our proxy, to vote for me/us on my/our behalf, at the Forty-Seventh Annual General Meeting of the Company to be held on 13 February 2008 at 11.00 a.m. and at any adjournment thereof in respect of my/our holding of shares in the manner indicated below:

No. Resolution For Against

1. Adoption of Audited Financial Statements and Reports thereon for the fi nancial year ended 31 December 2007.

2. Declaration of special dividend of 25% less 26% Malaysian income tax for the fi nancial year ended 31 December 2007.

3. Declaration of fi nal dividend of 55% less 26% Malaysian income tax for the fi nancial year ended 31 December 2007.

4. Re-election of Dato’ Yeoh Chin Kee as Director.

5. Re-election of Dato’ Haji Abdul Aziz bin Omar as Director.

6. Re-appointment of Tan Sri Dato’ Sri Dr. Teh Hong Piow as Director.

7. Approval of payment of Directors’ fees.

8. Appointment of Auditors and to authorise the Directors to fi x the Auditors’ remuneration.

9. Appointment of Tan Sri Dato’ Thong Yaw Hong as Director.

10. Authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares.

11. Proposed Renewal of Share Buy-Back Authority.

12. Proposed Amendments to the Articles of Association of the Company.

Signature of First or Sole Shareholder or Common Seal:

Dated this day of 2008

NOTES:

1. A member entitled to attend and vote at the meeting of the Company is entitled to appoint one or more proxies (who need not be members of the Company) to attend and vote in his/her stead. The instrument appointing a proxy must be deposited at the registered offi ce of the Company at 6th Floor, Bangunan Public Bank, 6, Jalan Sultan Sulaiman, 50000 Kuala Lumpur not less than 48 hours before the time set for the meeting.

2. In the case of a corporation, the instrument appointing a proxy or proxies must be under seal or under the hand of an offi ce or attorney duly authorised.

3. The signature to the instrument appointing a proxy or proxies executed outside Malaysia must be attested by a solicitor, notary public, consul or magistrate.

4. Please indicate with an X in the appropriate space opposite each resolution how you wish the proxy to vote on your behalf. If this form of proxy is signed and returned without any indications as to how the proxy shall vote, he will exercise his decision as to whether or not he abstains from voting and, if appropriate, as to how he votes.

5. Please insert the number of ordinary shares to which this proxy relates in the space provided. If a number is inserted, this form of proxy will be deemed to relate only to those shares. If no number is inserted, this form will be deemed to relate to all the ordinary shares in the Company which are registered in your name (whether alone or jointly with others).

6. In the case of joint shareholders, this form of proxy must be signed by the shareholder whose name stands fi rst in the Register of Shareholders.

Proxy Form(Incorporated in Malaysia)

The Company Secretary

LPI CAPITAL BHD

6th Floor, Bangunan Public Bank,6, Jalan Sultan Sulaiman,

50000 Kuala Lumpur, Malaysia.

STAMP

FOLD HERE

FOLD HERE

HEAD OFFICE6th Floor, Bangunan Public Bank,6, Jalan Sultan Sulaiman,50000 Kuala Lumpur, Malaysia.Tel No. : (03) 2262 8688 / 2723 7888Fax No. : (03) 2078 7455

SUBSIDIARIES Lonpac Insurance Bhd

HEAD OFFICE

LG, 6th-7th, 21st-25th Floor,Bangunan Public Bank,6, Jalan Sultan Sulaiman,50000 Kuala Lumpur.P.O. Box 10708,50722 Kuala Lumpur.Tel No. : (03) 2262 8688 / 2723 7888Fax No. : (03) 2715 1332 / 2078 7455 / 2034 2654 / 2715 0722 / 2072 3385 / 2715 0696 / 2715 0697Website : www.lonpac.com

BRANCH OFFICES

Alor Setar Branch

202B & 202C (1st & 2nd Floor),Medan Putra, Seberang Jalan Putra,05150 Alor Setar, Kedah.

Branch Manager: Encik Mohd Ruzaimi Mohd Yusof

Tel No. : (04) 731 4413 / 731 5854 Fax No. : (04) 733 6100Email : [email protected]

Penang Branch

66, Penang Street,10200 Penang.

Branch Manager: Mr. Wong Boon Chuan

Tel No. : (04) 261 7998Fax No. : (04) 262 0784Email : [email protected]

Ipoh Branch

36A, 1st Floor,Jalan Dato Onn Ja’afar,30300 Ipoh, Perak.

Senior Branch Manager: Mr. James Kong Wai Mun


Kuantan Branch

B-62B, 1st Floor,Lorong Tun Ismail 8, Sri Dagangan II,25000 Kuantan, Pahang.

Branch Manager: Mr. Yong Kim Keong

Tel No. : (09) 514 4107 / 515 0317 / 516 4428Fax No. : (09) 514 5001Email : [email protected]

Group Corporate Directory

Kota Bharu Branch

No. PT 285, Tingkat 2,Jalan Kebun Sultan,15300 Kota Bharu, Kelantan.

Branch Manager: Mr. Won Pier Chyuan

Tel No. : (09) 744 3166 / 744 3066Fax No. : (09) 744 9948Email : [email protected]

Seremban Branch

No. 6 & 7, Campbell Street,70000 Seremban, Negeri Sembilan.

Branch Manager: Mr. Bernard Fong Luen Foo


Melaka Branch

547-A & B, Taman Melaka Raya,75000 Melaka.

Branch Manager: Mr. Tai Lai Meng


Johor Bahru Branch

Suite No. 25.03 & 25.04, 25th Floor,Public Bank Tower, No. 19,Jalan Wong Ah Fook,80000 Johor Bahru, Johor.

Branch Manager: Mr. Yap Chee Kiat


Singapore Branch

101 Thomson Road # 18-01,United Square, Singapore 307591.

Principal Offi cer: Mr. Terence Teo Chin Poh

Tel No. : (02) 6250 7388

Fax No. : (02) 6253 2058Email : [email protected]

Kuching Branch

Lot 258 & 259, Section 49,KTLD (1st Floor), Jalan Chan Chin Ann,93100 Kuching, Sarawak.

Branch Manager: Mr. Ting Siew Teck


Miri Branch

No. 780, 1st Floor,Bintang Jaya Commercial Centre,Jalan Bintang, 98000 Miri, Sarawak.

Branch Manager: Ms. Margaret Rose Chia Kin Lin

Tel No. : (085) 410 233 / 420 233 / 438 017Fax No. : (085) 422 188Email : [email protected]

Kota Kinabalu Branch

Level 9, Wisma Fook Loi,No. 38, Jalan Gaya,88000 Kota Kinabalu, Sabah.

Branch Manager: Mr. Nicholas Wong Kok Choong

Tel No. : (088) 217 922 / 212 097/ 222 025Fax No. : (088) 236 917Email : [email protected]

Tawau Branch

TB 305, 1st Floor, Leong Hua Building,Jalan Dunlop, 91000 Tawau, Sabah.

Branch Manager: Ms. Tiffany Kok Kim Lee

Tel No. : (089) 756 997/ 756 998Fax No. : (089) 756 995Email : [email protected]

London & Pacifi c Holdings Sdn Bhd6th Floor, Bangunan Public Bank,6, Jalan Sultan Sulaiman,50000 Kuala Lumpur, Malaysia.

Director: Mr. Tee Choon Yeow


Public United Leasing And Factoring Sdn Bhd6th Floor, Bangunan Public Bank,6, Jalan Sultan Sulaiman,50000 Kuala Lumpur, Malaysia.

Director: Mr. Tee Choon Yeow


ASSOCIATED COMPANYCampuBank Lonpac Insurance Plc

HEAD OFFICE

No. 112 D, Monivong Blvd, Phnom Penh, Cambodia.

General Manager: Mr. David Juffely Sitagap

Tel No. : (855) 23 986 313Fax No. : (855) 23 986 308Email : [email protected]

LPI Capital Bhd (4688-D)

6th Floor, Bangunan Public Bank

6, Jalan Sultan Sulaiman

50000 Kuala Lumpur, Malaysia

Tel : (03) 2262 8688 / 2723 7888

Fax : (03) 2078 7455

www.lonpac.com

malaysia: economic review and outlook

Documents