Full Annual Report 2005 - MAA Group

A N N U A L R E P O R T 2 0 0 5

c o n t e n t s2 Financial Highlights4 MAA Regional Network5 MAA Buildings8 Board Of Directors’ Profile12 Corporate Information15 Notice Of Annual General Meeting20 Statement Accompanying Notice Of Annual General Meeting21 Penyata Pengerusi25 Tinjauan Operasi Perniagaan28 Chairman’s Statement32 Business Operations Review35 Appraisal Value On The Life Insurance Business Of Malaysian Assurance Alliance Berhad39 Statement On Corporate Governance45 Risk Management47 Other Bursa Securities Compliance Information51 Statement Of Internal Control52 Directors’ Responsibility Statement In Respect Of Annual Audited Accounts53 Audit Committee Report56 Directors’ Report60 Statement By Directors60 Statutory Declaration61 Report Of The Auditors To The Members Of MAA Holdings Berhad62 Balance Sheets As At 31 December 200564 Income Statements For The Financial Year Ended 31 December 200565 General Insurance Revenue Account For The Financial Year Ended 31 December 200566 General Insurance Revenue Account For The Financial Year Ended 31 December 200467 Life Fund Balance Sheet As At 31 December 200568 Life Insurance Revenue Account For The Financial Year Ended 31 December 200569 Consolidated Statement of Changes In Equity For The Financial Year Ended 31 December 200570 Consolidated Statement of Changes In Equity For The Financial Year Ended 31 December 200471 Company Statement of Changes In Equity For The Financial Year Ended 31 December 200572 Consolidated Cash Flow Statement For The Financial Year Ended 31 December 200574 Company Cash Flow Statement For The Financial Year Ended 31 December 200576 Notes To The Financial Statements - 31 December 2005162 List Of Property Investment Held As At 31 December 2005167 List Of Substantial Shareholders And Directors’ Shareholdings As At 28 April 2006168 Statistics Of Shareholdings

MAA Buildings (continued)1 2364 567 89 10 111. Wisma MAA Butterworth2. Wisma MAA Manjung3. Menara MAA Kota Kinabalu4. Wisma MAA Petaling Jaya5. Wisma MAA Gurun6. Menara MAA Kuching7. Wisma MAA Miri8. Wisma MAA Segamat9. Wisma MAA Kangar10. Wisma MAA Kluang11. Wisma MAA Melaka

MAA Buildings (continued)1213 1415 16718 191721 222012. Menara MAA Seremban13. Wisma MAA Sungai Petani14. Wisma MAA Ipoh15. Menara MAA Penang16. Wisma MAA Kuantan17. Wisma MAA Klang18. Wisma MAA Batu Pahat19. Wisma MAA Kuala Terengganu20. Wisma MAA Tawau21. Wisma MAA Muar22. Menara MAA Johor Bahru

Board Of Directors’ Profile123 481Tunku Tan Sri Abdullah Ibni AlmarhumTuanku Abdul RahmanNon-Independent Non-Executive ChairmanTunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul Rahman,aged 81, a Malaysian, is the Chairman of MAA Holdings Berhad("MAAH"). He was appointed to the Board on 8 June 1999.Tunku Tan Sri Abdullah is an indirect substantial shareholder byvirtue of his relationship with Tunku Dato' Ya'acob who is thesubstantial shareholder of Khyra Sdn Bhd, the ultimatesubstantial shareholder of MAAH. His shareholding in theCompany is disclosed in page 167 of the Annual Report.Tunku Tan Sri Abdullah holds a Diploma in Public Administrationfrom University of Glasgow, Scotland and a Diploma inAgriculture from Miyazaki, Japan. He actively served in the civilservice for more than 10 years before being involved in politics.He was the member for Parliament in Rawang Constituency from1964 to 1974 whilst presiding in several voluntary organisationssuch as Malaysian Association of Youth Clubs (1954 - 1970),Malaysia Youth Council (1966 - 1972), Asian Youth Council(1972 -1978) and was also an executive member of the WorldAssembly of Youth.Currently, Tunku Tan Sri Abdullah also serves as the Chairman ofthe Board of Melewar Industrial Group Berhad and Melewar GroupBerhad.Tunku Tan Sri Abdullah does not have any personal interest in anybusiness arrangements involving the Company.Tunku Tan Sri Abdullah does not have any conflict of interest withthe Company and he has had no convictions for any offenceswithin the past 10 years.

Board Of Directors’ Profile (continued)5 67 892Tunku Dato’ Ya’acob bin Tunku Tan Sri AbdullahGroup Managing Director/Chief Executive Officer> Member of Audit CommitteeTunku Dato' Ya'acob bin Tunku Tan Sri Abdullah, aged 45, aMalaysian, has been a Director since its inception in November 1998.He was appointed as the Group Managing Director/Chief ExecutiveOfficer in 1999.Tunku Dato’ Ya’acob is deemed to be interested in MAAH byvirtue of him being the substantial shareholder of Khyra Sdn. Bhd,the ultimate substantial shareholder of MAAH.Tunku Dato' Ya'acob obtained a Bachelor of Science (Honours) inEconomics and Accounting from The City of London Universityand is a Fellow Member of the Institute of Chartered Accountantsin England and Wales. He is also Member of the MalaysianInstitute of Accountants.Tunku Dato' Ya'acob started his career as an Auditor with PriceWaterhouse in London from 1982 to 1985 and subsequently,employed by the same firm in Kuala Lumpur from 1986 to 1987.Tunku Dato' Ya'acob joined Malaysian Assurance Alliance Berhad("MAA") in 1987 as Chief General Manager and has beenheading the MAAH Group of Companies since 1999.Currently, Tunku Dato' Ya'acob is a Board Member of MelewarIndustrial Group Berhad, M3nergy Berhad (Formerly known asTrenergy (Malaysia) Bhd), Toyochem Corporation Berhad, MycronSteel Berhad, Melewar Group Berhad and several private limitedcompanies. His shareholding in the Company is disclosed in page167 of the Annual Report.Tunku Dato' Ya'acob also serves in the following tradeassociations: the National Insurance Association of Malaysia(NIAM) as Chairman, the Federation of Public Listed Companies(FPLC) as Vice President, the Financial Planning Association ofMalaysia (FPAM) as Immediate Past President and the Federationof Malaysian Unit Trust Managers (FMUTM) as Chairman.Tunku Dato' Ya'acob does not have any personal interest in anybusiness arrangements involving the Company.Tunku Dato' Ya'acob does not have any conflict of interest with theCompany and he has had no convictions for any offences withinthe past 10 years.

Board Of Directors’ Profile (continued)3Tunku Dato’ Seri Iskandar binTunku Tan Sri AbdullahNon-Independent Non-Executive Director> Member of Nomination Committee> Member of Remuneration Committee5Major General Lai Chung Wah (Rtd)Independent Non-Executive Director> Chairman of Audit Committee> Member of Remuneration Committee> Member of Nomination Committee10Tunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah, aged 59,a Malaysian, was appointed to the Board on 8 June 1999. He isan indirect substantial shareholder by virtue of his relationshipwith Tunku Ya'acob who is the substantial shareholder of KhyraSdn Bhd, the ultimate substantial shareholder of MAAH. Hisshareholding in the Company is disclosed in page 167 of theAnnual Report.Tunku Dato' Seri Iskandar holds a Master of Science degree inInternational Marketing from the University of Strathclyde,United Kingdom. He is a Fellow of the Chartered Institute ofMarketing (UK), the Institute of Administrative Management(UK) and the Institute of Marketing Malaysia.Presently, Tunku Dato' Seri Iskandar is the Chairman of MycronSteel Berhad and also serves on the Boards of MelewarIndustrial Group Berhad, MBF Holdings Berhad, MBFCorporation Berhad and Melewar Group Berhad.Tunku Dato' Seri Iskandar does not have any personal interest inany business arrangements involving the Company.Tunku Dato' Seri Iskandar does not have any conflict of interestwith the Company and has had no convictions for any offenceswithin the last 10 years.4Tan Sri Dato' Ir Abu Zarim bin Haji OmarIndependent Non-Executive DirectorTan Sri Dato' Ir Abu Zarim bin Haji Omar, aged 82, a Malaysian,was appointed to the Board on 8 June 1999.Tan Sri Abu Zarim sits on the boards of several private limitedcompanies. He currently does not hold any directorships inother public companies.Tan Sri Abu Zarim obtained an Honours Diploma in ElectricalEngineering from Loughborough College, United Kingdom. Healso holds Honorary Fellowship of the Institution of EngineersMalaysia (IEM), Fellowship of the Institution of ElectricalEngineers, United Kingdom and Fellowship of the Associationof Electrical Supply Industries of East Asia and Pacific (AESIEAP)and Fellowship of the Academy of Science Malaysia. He was theChairman of the Malaysian National Committee of the WorldEnergy Conference ("WEC") from 1974 to 1984, Vice-Chairman of International Executive Council of WEC from 1980to 1982, Permanent Honorary Vice-Chairman of WEC,President of the IEM from 1970 to 1972. He was conferred thehonorary degrees of Doctor of Technology by LoughboroughUniversity of Technology in 1999 and Doctor of Engineering bythe Universiti Tenaga Nasional in 2000. He is currently Pro-Chancellor of the Universiti.Other than as disclosed, Tan Sri Abu Zarim does not have anyrelationship with any other Director and/or major shareholder ofMAAH. He has no personal interest in any businessarrangements involving MAAH. He also does not have anyshareholding in the Company. He has had no convictions forany offences within the past 10 years.Major General Lai Chung Wah (Rtd), aged 73, a Malaysian, wasappointed to the Board on 8 June 1999.General Lai (Rtd)'s directorships in other public companies in theMAAH Group are in MAAKL Mutual Bhd and MAA BancwellTrustee Berhad. He is also a Board Member of several privatelimited companies.General Lai (Rtd) served the Malaysian Armed Forces in generaland the Army in particular for 35 years (1952 - 1987) andretired with the rank of Major General. He is a graduate of theRoyal Military Academy Sandhurst, United Kingdom in 1955and the Command & Staff College, Quetta, Pakistan in 1963.He was awarded a Diploma by the Armed Forces DefenceCollege, Malaysia.General Lai (Rtd) does not have any family relationship with anyDirector and/or major shareholder of MAAH. He has nopersonal interest in any business arrangements involvingMAAH. He also does not have any shareholding in theCompany. He has had no convictions for any offences withinthe past 10 years.6Dato’ Iskandar Michael bin AbdullahIndependent Non-Executive Director> Chairman of Nomination Committee> Member of Risk Management Committee> Member of Audit Committee> Member of Remuneration CommitteeDato' Iskandar Michael bin Abdullah, aged 61, a Malaysian, wasappointed to the Board on 30 April 2001.Dato' Michael is the senior partner of the law firm of BalendranChong & Bodi with office in Kuantan. He specialises inconveyancing and corporate law. He was born in Perak and didhis schooling in St. Michael's Institution Ipoh. He is a Barristerat-Lawof Inner Temple, Inns of Court of London. Since 1969,he has been practising law in Kuantan and was the Chairmanof the Pahang Bar from 1985 to 1987.Dato' Michael does not have any family relationship with anyDirector and/or major shareholder of MAAH. He has nopersonal interest in any business arrangements involvingMAAH. He also does not have any shareholding in theCompany and he has had no convictions for any offenceswithin the past 10 years.

Board Of Directors’ Profile (continued)7 YEO TOOK KEATGroup Chief Operating Officer8> Non-Independent Executive Director> Member of Risk Management CommitteeMr Yeo Took Keat, aged 48, a Malaysian, was appointed to theBoard on 24 February 2005.Mr Yeo has vast experience in accounting and finance havingserved various capacities in insurance companies and audit firmupon completing his studies in 1980. He joined MalaysianAssurance Alliance Berhad in 1986 and has held severalpositions, the last of which was as Senior Vice President -Finance & Admin before his transfer to MAAH in May 2002 asthe Group Chief Operating Officer.Mr Yeo is a Fellow of The Association of Chartered CertifiedAccountants, UK and a Member of the Malaysian Institute ofAccountants. He is also an Executive Committee member of theFederation of Public Listed Companies Berhad and hascontributed to the Working Groups on accounting standardsled by the Malaysian Accounting Standards Board.Presently, Mr Yeo holds several directorships in other publiccompanies in the MAAH Group, namely, Malaysian AssuranceAlliance Berhad, MAA Bancwell Trustee Berhad, MAAKL MutualBhd and Mithril Berhad. He also serves on the Boards of severalprivate limited companies in the MAAH Group.Mr Yeo does not have any personal interest in any businessarrangements involving the company.Mr Yeo does not have any family relationship with any Directorand/or major shareholder of MAAH and he has had noconvictions for any offences within the past 10 years. Hisshareholding in the company is disclosed in page 167 of theAnnual Report.General Dato’ Sri Hj Suleiman binMahmud (Rtd)Independent Non-Executive Director> Chairman of Risk Management Committee> Chairman of Remuneration Committee> Member of Audit CommitteeGeneral Dato' Sri Hj Suleiman bin Mahmud (Rtd), aged 58, aMalaysian, was appointed to the Board on 18 May 2005.General Suleiman (Rtd) is a graduate of the Royal New ZealandAir Force Command and Staff College and the United States AirForce, Air War College. He holds a Master of Science Degree inOperational Research and Systems Analysis, and a PostGraduate Diploma in Business Administration, both from theUniversity of Aston, United Kingdom. He has been appointed asan Honorary Fellows of the Malaysian Institute of Logistics.General Suleiman (Rtd) retired from the Royal Malaysian AirForce in March 2003 after serving more than 38 years. Besidesbeing a pilot, he had held several command positions at variouslevels in the Air Force. He had also served in several positions inthe Department of Air Force and the Armed ForcesHeadquarters. He then rose to become the Chief of Air Forcebefore his retirement.General Suleiman (Rtd) is also a director of Malaysian AssuranceAlliance Berhad, a wholly-owned subsidiary of MAA HoldingsBerhad. He also holds directorships in several private limitedcompanies.General Suleiman (Rtd) does not have any personal interest inany business arrangements involving the Company.General Suleiman (Rtd) does not have any family relationshipwith any Director and/or major shareholder of MAAH and hehas had no convictions for any offences within the past 10years.11

Corporate InformationBOARD OF DIRECTORSTunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul Rahman (Non-Independent Non-Executive Chairman)Tunku Dato’ Ya'acob Bin Tunku Tan Sri Abdullah (Group Managing Director/Chief Executive Officer)Tunku Dato’ Seri Iskandar Bin Tunku Tan Sri Abdullah (Non-Independent Non-Executive Director)Tan Sri Dato' Ir Abu Zarim Bin Haji Omar (Independent Non-Executive Director)Major General Lai Chung Wah (Rtd) (Independent Non-Executive Director)Dato’ Iskandar Michael Bin Abdullah (Independent Non-Executive Director)General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) (Independent Non-Executive Director)Yeo Took Keat (Executive Director)SECRETARIESYeo Took Keat (MIA No. 3308)Lily Yin Kam May (MAICSA No. 0878038)AUDITORSPricewaterhouseCoopersChartered AccountantsREGISTERED OFFICESuite 20.03, 20th Floor, Menara MAA12, Jalan Dewan Bahasa50460 Kuala LumpurTelephone No: 03-2141 3060Facsimile No: 03-2141 306112PRINCIPAL PLACE OF BUSINESS22nd Floor, Menara MAA12, Jalan Dewan Bahasa50460 Kuala LumpurTelephone No: 03-2146 8300Facsimile No: 03-2142 5489SHARE REGISTRARTRACE MANAGEMENT SERVICES SDN BHDSuite 20.03, 20th Floor, Menara MAA12, Jalan Dewan Bahasa50460 Kuala LumpurTelephone No: 03-2141 3060Facsimile No: 03-2141 3061

Corporate Information (continued)PANEL OF REINSURERS 2006General ReinsurersRatingRatingHannover Ruckversicherung, AGMalaysian Branch#1 Suite 31-1, 31st Floor Wisma UOA II,21, Jalan Pinang, 50450 Kuala LumpurMunich Reinsurance Company,Malaysian BranchSuite 13.1, Level 13, Menara IMC,8, Jalan Sultan Ismail, 50250, Kuala LumpurSirius International Insurance Corporation(PUBL), Labuan Branchc/o MNI Offshore Insurance (L) Ltd.,Level 11(B) Block 4, Office Tower,Financial Park Labuan Complex,Jalan Merdeka, 87000 W.P. Labuan.24, Raffles Place, #10-01/02, Clifford Centre,Singapore 048621Malaysian Reinsurance Berhad, Malaysia12th Floor, Bangunan Malaysian Re,No 17, Lorong Dungun, Damansara Heights,50490 Kuala LumpurLabuan Reinsurance (L) Limited, MalaysiaLevel 4 (B) Main Office Tower,Financial Park Labuan, Jalan Merdeka,87000 W.P. LabuanEverest Reinsurance Co20 Cecil Street, #08-06, Equity Plaza,Singapore 049705AXA Re Asia Pacific Pte Ltd152 Beach Road, #27-01, Gateway East,Singapore 189721China International Reinsurance Co Ltd,Labuan Branchc/o MNI Offshore Insurance (L) Ltd, Block 4,Office Tower, Level 11(B), Financial Park,Labuan Complex, Jalan Merdeka, 87000 W.P.LabuanAA-(S&P)A+(S&P)A-(S&P)BBBpi(S&P)B++(AM Best)AA-(S&P)AA-(S&P)A-(S&P)Partner Reinsurance Co Ltd., Labuan BranchLevel 11(B), Block 4 Office Tower Financial ParkLabuan Complex, Jalan Merdeka,87000 W.P. Labuan.Management Office :2, Battery Road, #23-01 Maybank Tower,Singapore 049907Odyssey America Reinsurance Corporation,Singapore Branch9, Raffles Place, #37-01, Republic Plaza,Singapore 048619Mitsui Sumitomo Reinsurance Ltd., LabuanBranchLevel 13 (F2) Main Office Tower, Financial ParkLabuan, Jalan Merdeka, 87000 W.P. Labuan.Marketing Office:Lot 14(A), 14th Floor, UBN Tower, 10 Jalan P.Ramlee, 50250 Kuala Lumpur.Caisse Centrale de Reassurance, Labuan Branchc/o MNI Offshore Insurance (L) Ltd, Level 11(B),Block 4, Office Tower, Financial Park LabuanComplex, Jalan Merdeka, 87000 W.P. LabuanSwiss Reinsurance Company, Kuala Lumpur28th Floor, Menara Keck Seng,203, Jalan Bukit Bintang, 55100 Kuala LumpurB.E.S.T. Reinsurance Far East Regional Office,MalaysiaSuite 3A, Level 8, Block 3A, Plaza Sentral,Jalan Stesen Sentral 5, Kuala Lumpur Sentral,50470 Kuala LumpurLimit - Lloyd's Syndicate 0566 STNLimit 566, Plantation Place, 30Fenchurch Street, London, EC3M 3BDWellington - Lloyd's Syndicate 2020 WELWellington Underwriting, 88 LeadenhallStreet, London, EC3A 3BAMomentum Underwriting ManagementLimited (MUM)as agents for 100% Transatlantic Reinsurance CompanyMomentum Underwriting Management,37-39 Lime Street, London, EC3M 7AYAA-(S&P)A-(S&P)AA-(S&P)AAA(S&P)AA(S&P)BBB(S&P)A(S&P)A(S&P)AA(S&P)13Life ReinsurersMalaysian Life Reinsurance Group Berhad3B/21-3, Block 3B, Level 21, Plaza Sentral,Jalan Stesen 5, Kuala Lumpur Sentral,50470 Kuala LumpurRatingA-(S&P)Cologne Reinsurance Company plc.Singapore Branch9 Raffles Place, #24-01 Republic Plaza,Singapore 048619RatingAAA(S&P)SCOR Vie Singapore Branch143 Cecil Street, #20-04 GB Building,Singapore 069542A-(S&P)Hannover Rueckversicherung, AG M'sia BranchSuite 31-1, 31st Floor, Wisma UOA II,21, Jln Pinang, 50450 Kuala Lumpur.AA-(S&P)Munich Re Singapore Branch20 Collyer Quay, #13-01 Tung Centre,Singapore 049319A+(S&P)

Corporate Information (continued)GROUP STRUCTURE100%MALAYSIANASSURANCEALLIANCE BERHAD100%MAA CREDIT SDN BHD100%MALAYSIAN ALLIANCEPROPERTYSERVICES SDN BHD70%MAAKL MUTUAL BHD100%MAA CORPORATEADVISORY SDN BHD100%MERIDIAN ASSETMANAGEMENTSDN BHD100%WIRA SECURITYSERVICES SDN BHD100%MERIDIAN ASSETMANAGEMENT(ASIA) LTDMAA HOLDINGSBERHAD *100%MAACORPORATIONSDN BHD100%MAAGNET SYSTEMSSDN BHD98%P.T.MAA LIFEASSURANCE1451%MERIDIAN ASSETMANAGEMENTHOLDINGS SDN BHD94%P.T.MAA GENERALASSURANCE100%MAA INTERNATIONALASSURANCE LTD40%MAA GENERALASSURANCEPHILIPPINES, INC100%MAA INTERNATIONALINVESTMENTS LTD100%MAA MUTUALIFEPHILIPPINES, INC.100%MAA INTERNATIONALCORPORATION LTD100%MAA CORPORATE& COMPLIANCEPHILS. INC.49%MAA BANCWELLTRUSTEE BERHAD100%MULTIOTOBREAKDOWNASSISTANCE SDN BHD34%MITHRIL BERHAD*30%NISHIO RENTALL (M) SDN BHD* Listed on Bursa Malaysia

Notice Of Eighth Annual General MeetingNOTICE IS HEREBY GIVEN that the EIGHTH ANNUAL GENERAL MEETING of the Company will be held at The Auditorium,Podium 1, Menara MAA, 12, Jalan Dewan Bahasa, 50460 Kuala Lumpur on Wednesday, 21 June 2006 at 10.00 a.m. for thefollowing purposes: -AS ORDINARY BUSINESSResolution(1) To receive the Audited Financial Statements for the year ended 31 December 2005 together with theReports of the Directors and the Auditors thereon.1(2) To approve the payment of Directors' fees amounting to RM280,000.00 in respect of the financial yearending 31 December 2006 to be payable quarterly in arrears.2(3) To approve the payment of a first and final tax-exempt dividend of 10% in respect of the financial yearended 31 December 2005.(4) To re-elect the following Directors of the Company who are retiring in accordance with Article 73 of theCompany's Articles of Association and who, being eligible, offer themselves for re-election: -i) Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah3415ii)Tunku Dato' Seri Iskandar bin Tunku Tan Sri Abdullah5(5) To re-appoint the following directors who are retiring pursuant to Section 129(6) of the Companies Act1965 to hold office until the conclusion of the next Annual General Meeting: -i) Tunku Tan Sri Abdullah ibni Almarhum Tuanku Abdul Rahman6ii)iii)Tan Sri Dato' Ir Abu Zarim bin Haji OmarMajor General Lai Chung Wah (Rtd)78(6) To re-appoint Messrs. PricewaterhouseCoopers as Auditors of the Company and to authorise the Directorsto fix their remuneration.9

Notice Of Eighth Annual General Meeting (continued)AS SPECIAL BUSINESS(7) To consider and, if thought fit, to pass the following resolutions as Ordinary/Special Resolutions: -ORDINARY RESOLUTIONS(a) Authority to allot and issue shares in general pursuant to Section 132D of the Companies Act, 196510“THAT subject to the Companies Act, 1965, Articles of Association of the Company and approvalsfrom the Bursa Malaysia Securities Berhad and other Governmental or regulatory bodies, where suchapproval is necessary, full authority be and is hereby given to the Directors pursuant to Section 132Dof the Companies Act, 1965 to issue shares of the Company from time-to-time and upon such termsand conditions and for such purposes as the Directors may, in their discretion, deem fit provided thatthe aggregate number of shares to be issued pursuant to this Resolution shall not exceed ten percent(10%) of the issued share capital of the Company for the time being and such authority shall continueto be in force until the conclusion of the next Annual General Meeting of the Company.”(b) Proposed Renewal of authority for the Company to purchase its own shares1116“THAT subject to compliance with Section 67A of the Companies Act 1965, the Listing Requirementsof Bursa Malaysia Securities Berhad (“Bursa Securities”) and any prevailing laws, rules, regulations,orders, guidelines and requirements issued by any relevant authority, the Company be and is herebyunconditionally and generally authorized to purchase and hold such number of ordinary shares ofRM1.00 each in the Company (“Proposed Renewal of Share Buy-Back Authority”) as may bedetermined by the Directors of the Company from time to time through the Bursa Securities upon suchterms and conditions as the Directors may deem fit in the interest of the Company provided that theaggregate number of shares to be purchased pursuant to this Resolution does not exceed ten percent(10%) of the issued and paid-up share capital of the Company and that an amount not exceeding theCompany's total audited retained profits of RM181,626,000.00 and share premium account ofRM11,744,000.00 as at 31 December 2005 would be allocated by MAAH for the Proposed Renewalof Share Buy-Back Authority.AND THAT such authority shall commence immediately upon passing of this ordinary resolution andwill expire at the conclusion of the next Annual General Meeting of the Company unless earlierrevoked or varied by ordinary resolution of shareholders of MAAH in a general meeting or upon theexpiration of the period within which the next Annual General Meeting is required by law to be heldwhichever is the earlier but not so as to prejudice the completion of purchase(s) made by the Companybefore the aforesaid expiry date;AND THAT the Directors be and are hereby authorized to take all steps necessary to implement, finaliseand to give full effect to the Proposed Renewal of Share Buy-Back Authority and further THATauthority be and is hereby given to the Directors to decide in their absolute discretion to either retainthe shares so purchased as treasury shares or cancel them or both.”

Notice Of Eighth Annual General Meeting (continued)(c)Proposed Shareholders' Mandate for Recurrent Related Party Transactions of a Revenue orTrading Nature (“RRPTs”)12“THAT the mandate granted by the shareholders of the Company on 28 June 2005 pursuant toparagraph 10.09 of the Listing Requirements of the Bursa Malaysia Securities Berhad (“BursaSecurities”), authorizing the Company and its subsidiaries (“the MAAH Group”) to enter into therecurrent related party transactions of a revenue or trading nature which are necessary for the MAAHGroup's day-to-day operations as set out in Section 3 of Part B of the Circular to Shareholders (“theCircular”) dated 30 May 2006 with the related parties mentioned therein, be and is hereby renewed,AND THAT mandate be and is hereby granted by the shareholders of the Company to apply to theadditional recurrent related party transactions of a revenue or trading nature as set out in Section 3 ofPart B of the Circular with the related parties mentioned therein provided that: -(a) the transactions are in the ordinary course of business and are on terms which are not morefavourable to the related parties than those generally available to the public and on terms not tothe detriment of the minority shareholders of the Company;(b)(c)the transactions are made at arm's length and on normal commercial terms; anddisclosure will be made in the annual report providing the breakdown of the aggregate value ofthe transactions conducted pursuant to the mandate during the financial year, amongst others,based on the following information: -i) the type of the RRPTs made;ii)the names of the related parties involved in each type of the RRPTs made and theirrelationship with the Company.AND THAT, authority conferred by such renewed and granted mandate shall continue to be in force(unless revoked or varied by the Company in general meeting), until17(a)(b)(c)the conclusion of the next Annual General Meeting (“AGM”) of the Company following theforthcoming AGM at which time it will lapse, unless by a resolution passed at that meeting orExtraordinary General Meeting whereby the authority is renewed; orthe expiration of the period within which the next AGM after the date it is required to be heldpursuant to Section 143(1) of the Companies Act 1965 (“the Act”) (but shall not extend to suchextension as may be allowed pursuant to Section 143(2) of the Act); orrevoked or varied by resolution passed by the shareholders in general meeting;whichever is earlier.AND THAT the Directors of the Company be authorised to complete and do all such acts and things(including executing such documents as may be required) as they may consider expedient or necessaryto give effect to the transactions contemplated and/or authorised by this Ordinary Resolution.”

Notice Of Eighth Annual General Meeting (continued)(d) Proposed Bonus Issue of 152,176,876 new ordinary shares of RM1.00 each in MAAH (“BonusShares”) as fully paid on the basis of one (1) Bonus Share for every one (1) existing MAAHshare held at a date to be determined later (“Proposed Bonus Issue”)13“THAT, subject to the approval of the Bursa Securities for the listing of and quotation for 152,176,876Bonus Shares to be issued hereunder and the approval of such other relevant authorities as may berequired, approval be and is hereby given for the Company to capitalise a sum of RM152,176,876.00from its retained earnings account AND THAT the Directors of the Company be and are herebyauthorised to apply the said sum in paying up in full at par for 152,176,876 Bonus Shares which shallrank pari passu in all respects with the existing MAAH Shares save and except that they shall not beentitled to any dividends (including the first and final tax exempt dividend of 10% declared by theCompany for the financial year ended 31 December 2005), rights, allotments and/or otherdistributions, the entitlement date (namely the date as at the close of business on which theshareholders must be registered in order to be entitled to any dividends, rights, allotments and/or otherdistributions) of which is prior to the date of allotment of the Bonus Shares, and to issue and allot suchshares so paid-up to the shareholders of the Company whose names appear in the Record ofDepositors at the close of business on a date to be determined by the Directors of the Company, in theproportion of one (1) Bonus Share for every one (1) MAAH Shares then held AND THAT the BonusShares so allotted shall be treated for all purposes as an increase of the capital held by such shareholderand not as income AND THAT the Directors of the Company be and are hereby authorised to assentto any conditions, modifications, variations and/or amendments that may be required by the relevantauthorities and to take all steps and do all acts and things in any manner as the Directors may deemfit or expedient to give full effect to the said bonus issue.”18SPECIAL RESOLUTION(e) Proposed Amendments to Articles of Association of the Company“THAT the deletion, alterations, modifications and/or additions to the Articles of Association of theCompany as set out under Section 1 of Part D of the Circular to Shareholders of the Company dated30 May 2006 be and are hereby approved and adopted.”14NOTICE IS ALSO HEREBY GIVEN that the Register of Members of the Company will be closed at 5.00 p.m. on 10 July 2006for the purpose of determining shareholders' entitlement to the First and Final tax-exempt dividend of 10% in respect of thefinancial year ended 31 December 2005.The dividend, if approved, will be paid on 9 August 2006 to shareholders whose names appear in the Record of Depositorsdated 10 July 2006.A Depositor shall qualify for entitlement to the dividend only in respect of: -(a) Securities transferred into the Depositor's Securities Account before 4.00 p.m. on 10 July 2006 in respect of transfers; and(b) Shares bought on the Bursa Securities on a cum entitlement basis according to the Rules of the Bursa Securities.By Order of the BoardYEO TOOK KEAT (MIA NO. 3308)LILY YIN KAM MAY (MAICSA NO. 0878038)Company SecretariesKuala LumpurDated : 30 May 2006

Notice Of Eighth Annual General Meeting (continued)NOTES: -1. A member entitled to attend and vote at a meeting of the Company is entitled to appoint a proxy to attend and vote in his stead. A proxy may but need notbe a member of the Company.2. A member of the Company who is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, may appoint one (1) proxyin respect of each securities account.3. The instrument appointing a proxy, shall be in writing under the hand of the appointer or his attorney duly authorised in writing, and in the case of acorporation, either under seal or under hand of an officer or attorney duly authorised.4. The instrument appointing a proxy must be deposited at the Company's Registered Office, Suite 20.03, 20th Floor, Menara MAA, No.12, Jalan Dewan Bahasa,50460 Kuala Lumpur, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.5. Any alteration in the form of proxy must be initialed.6. Explanatory notes to Special Business of the Agenda 7 : -(a) Authority to allot and issue shares in general pursuant to Section 132D of the Companies Act, 1965.This resolution is proposed pursuant to Section 132D of the Companies Act, 1965, and if passed, will give the Directors of the Company, from the dateof the above Annual General Meeting, authority to issue and allot shares from the unissued share capital of the Company for such purposes as theDirectors deem fit and in the interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of thenext Annual General Meeting of the Company.(b) Proposed Renewal of authority for the Company to purchase its own sharesThe proposed Resolution 11, if passed, would empower the Directors to exercise the power of the Company to purchase its own shares (“the Proposal”)by utilising its financial resources not immediately required. The Proposal may have a positive impact on the market price of the Company's shares. Thisauthority, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company.(c)Proposed Shareholders' Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (“RRPTs”)The Proposed Resolution 12, if passed, will empower the Company to conduct recurrent related party transactions of a revenue or trading nature whichare necessary for the Group's day-to-day operations, and will eliminate the need to convene separate general meetings from time to time to seekshareholders' approval. This will substantially reduce administrative time, inconvenience and expenses associated with the convening of such meetings,without compromising the corporate objectives of the Group or adversely affecting the business opportunities available to the Group.The detailed information on Recurrent Related Party Transactions is set out in Part B of the Circular dated 30 May 2006 which is despatched togetherwith this Annual Report.(d) Proposed Bonus Issue of 152,176,876 new ordinary shares of RM1.00 each in MAAH (“Bonus Shares”) as fully paid on the basis of one (1)Bonus Share for every one (1) existing MAAH share held at a date to be determined later (“Proposed Bonus Issue”)19The Proposed Resolution 13, if passed, will empower the Company to issue 152,176,876 new ordinary shares of RM1.00 each in MAAH (“Bonus Shares”)as fully paid on the basis of one (1) Bonus Share for every one (1) existing MAAH share.(e) Proposed Amendments to Articles of Association of the CompanyThe Proposed Resolution 14, if passed, will update the Articles of Association of the Company to ensure continued compliance with the ListingRequirements of Bursa Securities and to further enhance the administration of the internal affairs of the Company.

Statement Accompanying Notice Of Annual General MeetingPursuant to Paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad appended herewith are: -A. DIRECTORS WHO ARE SEEKING FOR RE-ELECTION OR RE-APPOINTMENT AT THE 8TH ANNUAL GENERAL MEETING OF THECOMPANYThe Directors retiring by rotation pursuant to the Company’s Articles of Association and seeking for re-election are asfollows: -i) Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullahii) Tunku Dato’ Seri Iskandar bin Tunku Tan Sri AbdullahThe Directors who are over the age of seventy years seeking re-appointment are as follows: -(a) Tunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul Rahman(b) Tan Sri Dato' Ir Abu Zarim Bin Haji Omar(c) Major General Lai Chung Wah (Rtd)The details of these five (5) Directors who are seeking for re-election or re-appointment are set out in their respectiveprofiles in the Directors’ Profile on pages 8 to 11 of this Annual Report. Their securities holdings in the Company are setout in the Analysis of Shareholdings which appear on pages 168 and 170 of this Annual Report.B. BOARD MEETINGS HELD IN THE FINANCIAL YEAR ENDED 31 DECEMBER 200520During the financial year ended 31 December 2005, a total of six (6) Board of Directors’ Meetings were held. Theattendance of each of the Directors is as as follows: -Total Meetings Percentage ofName of Directors Attended AttendanceTunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul Rahman 6/6 100%Tunku Dato’ Ya'acob Bin Tunku Tan Sri Abdullah 6/6 100%Tunku Dato’ Seri Iskandar Bin Tunku Tan Sri Abdullah 5/6 83%Tan Sri Dato' Ir Abu Zarim Bin Haji Omar 6/6 100%Major General Lai Chung Wah (Rtd) 6/6 100%Dato’ Iskandar Michael Bin Abdullah 6/6 100%Mr Yeo Took Keat 5/5* 100%General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) 4/4* 100%* Mr Yeo Took Keat and General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) were appointed on 24 February 2005 and 18May 2005 respectively.C. DETAILS OF EIGHTH ANNUAL GENERAL MEETINGThe place, date and time of the Eighth Annual General Meeting are as follows:-Date Time Place21 June 2006 10.00 a.m. The Auditorium, Podium 1, Menara MAA12, Jalan Dewan Bahasa, 50460 Kuala Lumpur

Penyata PengerusiMAA, sentiasa memberi anda layanan mesra.MAA, always providing the human touch.Bagi pihak Lembaga Pengarah, saya dengan sukacitanyamembentangkan Laporan Tahunan dan Akaun Kumpulan bagi tahunberakhir 31 Disember 2005.PERSEKITARAN OPERASIEkonomi negara yang teruskukuh membolehkan Malaysiamencatat pertumbuhanKeluaran Dalam NegaraKasar (KDNK) 5.3% padatahun 2005 meskipunharga minyak melambungnaik, tekanan ke atasinflasi meningkat dankitaran elektronik globalmeleset pada separuhtahun pertama. Pertumbuhanekonomi sekali lagi dipacuoleh sektor swasta dankeadaan kewangan yangmemberangsangkan di negaraini. Dasar-dasar makroekonomisokongan yang diteruskanoleh Kerajaan Malaysiadan Bank NegaraMalaysia untukm e n j a m i npertumbuhanekonomi secarakekal untuk jangkapanjang telahmembolehkansemua sektor, kecuali sektor pembinaan, mencatatpertumbuhan positif.Kumpulan berjaya mengekalkan prestasi cemerlangsecara keseluruhan melalui strategi-strategi kecekapankos yang berterusan, peningkatan produktiviti danpengenalan produk yang inovatif.TINJAUAN PRESTASIBagi tahun dalam tinjauan, jumlah hasil operasiKumpulan bertambah 26.1% kepada RM2.9 bilion(2004: RM2.3 bilion). Pendapatan premium kasarBahagian Insurans Hayat meningkat 7.7% kepadaRM1.4 juta (2004: RM1.3 juta) manakala jumlahpremium kasar Bahagian Insurans Am mencatatkenaikan 12.9% kepada RM460.0 juta (2004:RM407.5 juta).Selaras dengan prestasi positif ini, Kumpulan mencatatkeuntungan sebelum cukai RM43.0 juta (2004:RM63.1 juta) bagi tahun dalam tinjauan, denganBahagian Insurans Hayat dan Bahagian Insurans Ammasing-masing menyumbang keuntungan sebelumcukai RM20.9 juta (2004 : RM52.4 juta) dan RM12.1juta (2004: RM25.0 juta). Keuntungan yang lebihrendah ini sebahagian besarnya adalah disebabkanperuntukan lebih tinggi yang dibuat bagi susut nilaipelaburan yang disebut harga dan keuntungan lebihrendah daripada pelaburan.Sehingga 31 Disember 2005, nilai aset Kumpulanberjumlah RM6.6 bilion, naik 6.5% daripada RM6.2billion pada tahun 2004.21TINJAUAN OPERASI PERNIAGAANSepanjang tahun dalam tinjauan, empat operasi terasKumpulan (khususnya Operasi Insurans HayatMalaysia, Operasi Insurans Am Malaysia, Operasi UnitAmanah Malaysia dan Operasi Antarabangsa)memperlihatkan prestasi yang memuaskan. Butiranprestasi masing-masing dihuraikan secara berasingan.

Penyata Pengerusi (bersambung)22DIVIDENBagi tahun berakhir 31 Disember 2005, LembagaPengarah telah mengesyorkan pembayaran dividen bebascukai pertama dan terakhir sebanyak10% (2004: 15%)sebagai ganjaran kepada semua pemegang saham di atassokongan dan keyakinan mereka kepada Kumpulan.PERKEMBANGAN MENGENAI CADANGANKORPORAT TERKINIKumpulan dengan sukacitanya melaporkan perkembanganberikut:(a) Terbitan hak boleh ditolak sehingga 152.2 SahamKeutamaan Tidak Boleh Ditebus baru bernilai RM1.00setiap satu (“IPS Hak”) bersama dengan sehingga152.2 Saham Biasa boleh cerai percuma bernilaiRM1.00 setiap satu (“Saham Bonus”) dan sehingga152.2 Waran boleh cerai percuma (“Waran”) telahdiluluskan oleh pemegang saham di Mesyuarat AgungLuar Biasa yang diadakan pada 22 Februari 2005.Pada 23 Februari 2005, Lembaga Pengarahmengumumkan bahawa harga terbitan bagi IPS Hakdan Waran masing-masing telah ditetapkan padaharga RM2.00 setiap IPS Hak dan RM2.00 setiap Waran.Pada 27 Mei 2005, Suruhanjaya Sekuriti (“SC”)meluluskan permohonan MAA Holdings Berhad(“MAAH') untuk melanjutkan tarikh pelengkapan IPSHak dari 3 Jun 2005 kepada 31 Disember 2005,memandangkan sentimen tidak pasti dalam pasaranekuiti Malaysia.Pada 14 Disember 2005, keadaan tidak pasti yangberterusan dalam pasaran ekuiti Malaysia mendorongMAAH memohon kepada SC untuk melanjutkantempoh tersebut selama enam (6) bulan, dari 1 Januari2006 hingga 30 Jun 2006, bagi menyempurnakanpelaksanaan Hak bagi IPS. SC telah meluluskanpermohonan tersebut pada 23 Disember 2005.Pada 3 Mei 2006, MAAH, setelah mengambil kirakeadaan pasaran semasa dan prestasi pasaran bagisaham biasa MAAH, telah mengumumkanpengguguran Terbitan Hak IPS.Meskipun Terbitan Hak IPS digugurkan, MAAH telahmengumumkan bahawa ia akan terus dengancadangan Terbitan Bonus sehingga 152,176,876saham biasa baru bernilai RM1 setiap satu dalamMAAH sebagai dibayar penuh berdasarkan satu (1)Saham Bonus bagi setiap satu (1) saham MAAH sediaada yang dipegang kepada para pemegang sahamberdaftar yang mana nama mereka tersenarai dalamRekod Para Penyimpan Syarikat pada penutupanperniagaan pada tarikh hak bagi menentukan dankemudiannya mengumumkan Terbitan BonusDicadangkan. Terbitan Bonus Dicadangkan akandimodalkan dari saham premium dan perolehantertahan Syarikat.(b) Pada 21 Februari 2006, MAAH mengumumkanPerjanjian Usaha Sama dengan Solidarity CompanyBSC (C) (“Solidarity”) untuk menubuhkan sebuahsyarikat usaha sama (“JVCO”) bagi menjalankanperniagaan Takaful di Malaysia, sebaik sahaja menerimakelulusan daripada Bank Negara Malaysia (“BNM”).Sebagai permulaan, modal berbayar JVCO berjumlahRM100 juta dibahagi kepada 100 juta saham biasabernilai RM1.00 setiap satu, dengan 75% saham dipegangoleh MAAH dan 25% saham dipegang oleh Solidarity.PERKEMBANGAN BARUPada 3 Mac 2006, MAAH menerima kelulusan lesenTakaful baru daripada Bank Negara Malaysia untuk syarikatusaha sama MAAH dan Solidarity Company BSC (C)(“Solidarity”), Bahrain.Solidarity adalah syarikat perniagaan Takaful yangditubuhkan di bawah undang-undang dan peraturanKerajaan Bahrain untuk memenuhi permintaan yangsemakin meningkat bagi produk Takaful di rantau TimurTengah. Solidarity beroperasi sepenuhnya menurutprinsip-prinsip Syariah dan menawarkan rangkaian penuhproduk Keluarga dan Takaful Am. Aset modal yangmelebihi US$100 juta menjadikan Solidarity syarikatinsurans terbesar (dari segi modal berbayar) di Bahrain dansyarikat permodalan Takaful yang terbesar di dunia.Pada 21 Februari 2006, satu Perjanjian Usaha Sama telahditandatangani dengan Solidarity untuk membentuksyarikat usaha sama bagi menjalankan perniagaan Takafuldi Malaysia. Syarikat usaha sama itu akan mempunyaimodal berbayar RM100 juta, dengan kepentingan ekuiti75% dan 25% masing-masing dipegang oleh MAAH danSolidarity. Perniagaan usaha sama Takaful dijangkaberoperasi pada bulan Jun 2006.Kumpulan menjangkakan syarikat usaha sama Takafulmendapat pulangan balik modal dengan serta-mertadengan penggunaan rangkaian agensi MAA yang kukuh,di mana kira-kira 40% atau 7,000 daripada ejen insuranshayatnya adalah Bumiputera, disertakan sokonganinfrastruktur sedia ada yang akan membantu dalampengurangan kos tetap.Lebih penting lagi, Kumpulan akan menggunakankerjasama Takaful dengan Solidarity sebagai batu loncatanke pasaran global, terutama sekali negara-negara Islam diTimur Tengah, pada masa hadapan.EKUITI JENAMAKumpulan akan meneruskan falsafah ekuiti jenamasebagai salah satu daripada aset kami yang paling penting,untuk mengekalkan kekukuhan imej korporat yang telahkami bina selama ini. Imej ini adalah landasan pertumbuhanhasil dan keuntungan kami yang berterusan dan telahmenjadi tunggak kesetiaan pelanggan dan ejen kami.Pemilikan 48 bangunan pejabat di seluruh Malaysiamenyerlahkan kedudukan kami dan memberi keyakinankepada pelanggan dan ejen kami untuk terus memberikepercayaan kepada Kumpulan kami.Kumpulan juga merupakan syarikat insurans yang palingmenonjol dalam arena pengiklanan dan media. ImejKumpulan kami paling kerap dipaparkan dalam iklantelevisyen (satu-satunya syarikat insurans yang sering

Penyata Pengerusi (bersambung)muncul dalam iklan TV), papan iklan di jalan raya dan lebuhraya (lebih daripada 58 lokasi di seluruh Malaysia), iklancetak dalam akhbar (sekurang-kurangnya satu iklan dalamakhbar-akhbar utama setiap minggu), dan juga aktivitiaktivitiamal dan perhubungan awam.Cogan kata kami diketahui umum, “Say Yes to MAA. SayYes To Solid Financial Security”.TUMPUAN KEPADA KUALITIKumpulan juga berbangga melaporkan bahawa sejak enamtahun yang lalu operasi insurans Malaysia berupayamengekalkan status kualiti ISO 9001. Tumpuan yangsentiasa diberikan terhadap usaha untuk mengekalkansistem IT dan proses dalaman yang terbaik serta programpendidikan dan latihan kakitangan yang berterusan telahmembantu memastikan pelanggan dan ejen kami mendapatperkhidmatan yang sebaik mungkin. Hanya menerusitumpuan kepada kualiti, Kumpulan dapat menjaminkejayaan kami pada masa hadapan.Kumpulan telah mempertingkatkan piawaian dalam operasiinsuransnya di Malaysia pada tahun 2005 menerusi programEnam Sigma.PELABURANDengan iklim pelaburan yang mencabar sepanjang tahun,hasil pendapatan daripada pelaburan Kumpulan hanyameningkat 3.2% kepada RM256.0 juta (2004: RM248.1juta). Kenaikan ini sebahagian besarnya adalah disebabkanpenyusunan semula portfolio pada tahun dalam tinjauan,hasil daripada usaha mengekalkan falsafah pelaburan yangkonservatif yang menekankan pengekalan modal,keuntungan dan aliran pendapatan yang konsisten.Pelaburan pendapatan tetap dijangka terus menjadi asetportfolio teras, dengan bon korporat sebagai instrumen pilihan.23Di samping itu, kami mungkin menilai semula portfoliopelaburan dana bukan penyertaan Hayat dan dana Amdengan mengurangkan portfolio ekuiti disebut harga untukmelindungi pendapatan Kumpulan daripadakemudahubahan pasaran ekuiti.Namun, Kumpulan akan sentiasa mengkaji dan menyemaksemula strategi-strateginya untuk merebut peluangdaripada persekitaran ekonomi dan kewangan yangdijangka kukuh pada tahun-tahun akan datang.TEKNOLOGI MAKLUMATKumpulan akan terus melabur dalam teknologi maklumatterkini bagi meningkatkan lagi kecekapan operasi dankosnya. Untuk itu, MAA telah merangka RancanganStrategi Teknologi Maklumat (“IT”) 5 tahun, denganmatlamat utama untuk menyokong keperluan perniagaanpada masa hadapan. Rancangan Strategi IT akanmenangani isu-isu penting berikut:• penjajaran organisasi untuk pelaksanaan strategi ITsecara berkesan• pembangunan aplikasi, automasi dan penyepaduan sistem• penyimpanan data, pengumpulan data dan perisikanperniagaan• strategi e-niaga• inisiatif proses yang boleh dicontohi Ruang perbincangan yang anggun, sesuai untuk meterai urusanperniagaan penting.Elegant discussion areas to seal that all important business deal.

Penyata Pengerusi (bersambung)24PENILAIAN PERNIAGAAN INSURANS MALAYSIASeperti pada tahun-tahun sebelumnya, Kumpulan telahmengambil aktuari luar untuk mengira Nilai TaksiranPerniagaan Insurans Hayat Malaysia mengikut teknikpenilaian sama seperti yang digunakan di peringkatantarabangsa untuk menilai perniagaan insurans hayat.Nilai Taksiran adalah aliran tunai terdiskaun keuntungankepada pemegang saham, daripada polisi yang dijual padamasa lalu (“nilai terbenam”) dan daripada jualan polisipada masa hadapan (“nilai struktur”).Sebagaimana yang dinyatakan pada muka surat 35 hingga38, tiga (3) nilai ditetapkan bagi portfolio insurans hayatMalaysia, berdasarkan andaian pertumbuhan masa depan,iaitu RM2.3 bilion, RM2.9 bilion dan RM3.7 bilion.Jika nilai perniagaan insurans am Malaysia ditaksirkan 85%daripada pendapatan premium kasar RM424.3 juta padatahun 2004, ini bermakna nilai Bahagian ini ialah RM361juta.Dengan demikian, nilai bahagian insurans hayat dan amtergabung ialah RM4.1 bilion (Taksiran Penuh), RM3.3bilion (Taksiran Pertengahan) dan RM2.7 bilion (TaksiranRendah).Lembaga Pengarah sentiasa memantau penilaian operasiinsurans Malaysia kerana ia akan digunakan sebagai asasbagi sebarang rundingan pergabungan ataupengambilalihan pada masa hadapan.Jika MAA Holdings Berhad menggunakan penilaian yangsama seperti operasi insurans Malaysia, nilai harga sahamKumpulan adalah jauh lebih tinggi daripada harga pasaranRM3.12 sesaham pada 31 Disember 2005. Jikadimasukkan Dana Pemegang Saham MAA HoldingsBerhad sebanyak RM391.8 juta pada akhir tahun, nilaiyang sepatutnya bagi saham Kumpulan ialah RM29.60sesaham (Taksiran Penuh), RM24.20 sesaham (TaksiranPertengahan) dan RM20.24 sesaham (Taksiran Rendah).TANGGUNGJAWAB SOSIAL KORPORATDalam usahanya untuk menjadi warga korporat yangprihatin dan bertanggungjawab, Kumpulan telahmenubuhkan MAA-Medicare Kidney Charity Fund padatahun 1994, dengan matlamat untuk menyediakanrawatan dialisis buah pinggang dengan kos yang lebihmurah. Kumpulan telah memperbesar rangkaian pusatdialisis buah pinggangnya kepada sebelas (11) buah bagimenampung keperluan perkhidmatan perubatanbersubsidi bagi pesakit buah pinggang yang semakinramai.Kumpulan juga telah mengambil Yayasan KebajikanBudimas (Yayasan) sebagai anak angkat pada tahun 2002dengan matlamat untuk menjaga kebajikan kanak-kanakkurang bernasib baik dan golongan miskin. Untuk itu,Yayasan telah menjadikan lima buah rumah kebajikankanak-kanak kurang bernasib baik dan anak yatim sebagaianak angkat, dengan memberikan sokongan kewangansecara beterusan, buat permulaan selama lima tahun, daritahun 2002 hingga 2007.Kumpulan akan terus menyediakan peruntukan bagimeluaskan objektif aktiviti-aktiviti kebajikan pada tahuntahunyang akan datang.PROSPEKDalam Laporan Tahunan 2005, Bank Negara Malaysiamelaporkan bahawa dengan persekitaran global yanglebih memberangsangkan, ekonomi Malaysia pada tahun2006 dijangka lebih kukuh. KDNK diramalkan mencatatpertumbuhan 6%, dipacu oleh eksport dan permintaandalam negara yang meningkat, serta pelancaranRancangan Malaysia Kesembilan oleh Kerajaan, yangmenetapkan asas bagi prospek pembangunan danpengukuhan ekonomi negara. Ini menyediakan landasanyang kuat untuk industri insurans Malaysia mencatatpertumbuhan yang memberangsangkan pada tahuntahunakan datang.Kumpulan sedar akan cabaran-cabaran yang menanti danpersekitaran yang semakin kompetitif yang dihadapi.Maka itu, Kumpulan akan meneruskan inisiatifnya untukmelabur dalam teknologi terkini, bagi meningkatkan lagikecekapan operasi, mengukuhkan sistem pengedaran,sumber manusia dan pembangunan agensi, danmenghasilkan produk yang inovatif untuk memperbaikilagi kualiti perkhidmatan kepada pelanggan.Kumpulan amat yakin dengan keupayaannya untukmencapai keputusan yang lebih baik pada tahun-tahunakan datang menerusi pelbagai strategi yang dilaksanakanuntuk menjadi sebuah kumpulan perkhidmatan kewanganyang bersepadu.PENGIKTIRAFAN DAN PENGHARGAANBagi pihak Lembaga Pengarah, saya ingin mengucapkanterima kasih kepada pasukan pengurusan dan kakitangankami untuk komitmen, dedikasi dan sumbangan merekayang berterusan dalam memastikan pertumbuhan dankejayaan berterusan Kumpulan.Saya juga ingin mengambil kesempatan ini untukmerakamkan setinggi-tinggi penghargaan kepada pihakberkuasa undang-undang atas bimbingan dan sokonganberterusan yang diberikan kepada kami; kepada parapelanggan, ejen-ejen kami, sekutu perniagaan danpemegang saham kami di atas sokongan, keyakinan dankepercayaan yang diberikan kepada kami.Akhir kata, saya ingin mengucapkan terima kasih kepadarakan-rakan sejawat saya dalam Lembaga Pengarah untukkepimpinan dan sumbangan mereka kepada Kumpulan.TUNKU TAN SRI ABDULLAH IBNI ALMARHUMTUANKU ABDUL RAHMANPengerusi

Kemudahan ATM bagi keperluan pelanggan.ATM service for customers’ convenience.TinjauanOperasi PerniagaanTINJAUAN BAHAGIAN INSURANSHAYAT MALAYSIABahagian Insurans Hayat mencatatkanpertumbuhan sederhana sebanyak 7.7% bagijumlah pendapatan premium RM1.4 bilion (2004:RM1.3 bilion), di mana sebahagian besarnyadiperolehi daripada perniagaan premium tunggal,khususnya pelan bertempoh tetap dan pelanberkaitan pelaburan. Pertumbuhan premiumberterusan dicapai kerana rangkaian cawanganMAA yang luas (kini berjumlah 76), tenaga agensiyang besar yang menyokong kapasiti pengedaranserta kesedaran jenama. Kadar faedah semasayang rendah dan perubahan pilihan penggunadaripada perlindungan insurans biasa kepadapolisi jenis tabungan/pelaburan telah menyaksikanpeningkatan dalam jualan produk berkaitanpelaburan dan pelan bertempoh tetap.Dari segi premium perniagaan baru tahunan, yang menjadiukuran aktiviti jualan secara tahunan, Bahagian InsuransHayat mencatatkan pertumbuhan menggalakkan sebanyak12.3% kepada RM898.4 juta (2004: RM800.2 juta). Angkaini mengatasi pertumbuhan 0.6% yang dicatatkan olehindustri, lantas mencerminkan keupayaan MAA untuk terusmenembusi pasaran.Bahagian Insurans Hayat mencatakan Keuntungan SebelumCukai yang lebih rendah, iaitu daripada RM50.8 juta pada2004 kepada RM14.5 juta pada 2005. KemerosotanKeuntungan Sebelum Cukai pada 2005 disebabkanterutamanya oleh peruntukan lebih tinggi bagi penyusutannilai pelaburan yang dibuat pada tahun tersebut dankeuntungan pelaburan lebih rendah, serta kenaikan dalambayaran bonus tunai dan tuntutan perubatan daripadapolisi perubatan. Tanpa mengambil kira pemindahankeuntungan kepada akaun Dana Pemegang Saham secarakeseluruhan, Lebihan Dana Insurans Hayat tetap kukuhdengan lebihan kumulatif yang dibawa ke hadapansebanyak RM500.8 juta pada 31 Disember 2005.Sejajar dengan peranan perkhidmatan perancangankewangan yang semakin penting di negara ini, MAA akanterus memberi tumpuan kepada latihan agensi denganmendaftarkan ejen untuk mengikuti kursus PerancangKewangan Bertauliah (CFP) dan Perancang KewanganBerdaftar (RFP). Kursus ini akan mempertingkatkan tahapprofesionalisme dengan melengkapkan ejen denganpengetahuan tentang perancangan kewangan sertakemahiran dan keupayaan untuk memenuhi permintaanpengguna yang semakin tinggi dan menangani persaingandaripada perkhidmatan kewangan lain. Untuk tujuan ini,berkuatkuasa 1 Januari 2005, Persatuan Insurans HayatMalaysia (“LIAM”) telah melaksanakan peraturan baruyang mensyaratkan ejen insurans hayat yang telahberkecimpung dalam industri selama lebih daripada satu (1)tahun untuk mengikuti modul 1 dan modul 2 program RFP,untuk melatih ejen tersebut menjadi perancang kewangan.Pada akhir bulan Disember 2005, syarikat mempunyaiseramai 12,773 (2004: 15,802) ejen. Pada masa depan,tumpuan utama MAA ialah mempertingkatkan tahapprofesionalisme dan pengetahuan ejennya untukmempertingkatkan produktiviti ejen dan bukannyamenambahkan bilangan jurujual.Bahagian ini telah memerhatikan perubahan dalampermintaan orang ramai yang lebih cenderung ke arahpelan berkaitan pelaburan. Kumpulan meramalkan bahawatrend ini akan berterusan pada masa depan dan kini sedangmerangka pelan-pelan berkaitan pelaburan yang lebihmenarik untuk memenuhi permintaan yang semakin bertambah.Pelan yang telah berjaya dilancarkan pada tahun tinjauantermasuk pelan berkaitan pelaburan Siri MaaxLife (versiMaaxWanita, MaaxUmaat dan MaaxEducation yang dinaiktaraf), Pelan Maaster Yield Guaranteed, pengagihan keduaPelan Maaster Capital Guaranteed, pelan kemalanganperibadi PA 500, pelan insurans SeniorGold untuk wargaemas, dan pelancaran semula pelan penjagaan kesihatanutamanya, iaitu MedicaLife 200 dan MedicaGen 200.MAA memberi penekanan kepada usaha memenuhikepuasan pelanggan. Maka itu, syarikat akan mengekalkanstrategi-strategi dan meneruskan pelbagai inisiatif yangtelah dimulakannya, termasuk pelaksanaan IndeksKepuasan Pengguna (“CSI”) untuk memperbaiki danmempertingkatkan kualiti perkhidmatan kepada pelanggan kami.Di peringkat industri, tahun 2006 bakal menyaksikanpelancaran Pelan Anuiti jenama bersama oleh PersatuanInsurans Kebangsaan Malaysia (“NIAM”) yang akanmerupakan sebuah produk berkaitan pelaburan premiumtunggal. Untuk tujuan ini, LIAM juga telah mengemukakansatu cadangan kepada KWSP untuk melaksanakan skimpengeluaran pelaburan pencarum, untuk pelan berkaitanpelaburan premium tunggal, yang sama seperti skimpengeluran pelaburan sedia ada untuk amanah saham.Semua usaha ini dilaksanakan untuk memberikan pilihanpelaburan lebih luas kepada orang ramai dan palingpenting lagi, menyediakan khidmat perancangan persaraandan pengurusan kekayaan.25

Tinjauan Operasi Perniagaan (bersambung)26TINJAUAN INSURANS AMMALAYSIABahagian Insurans Am mencatatkan pertumbuhan16.3% dari segi premium bertulis kasar kepadaRM424.3 juta (2004: RM364.8 juta), mengatasipertumbuhan 9.7% yang dicatat oleh industripada 2005. Selepas melaksanakan pembersihanportfolio taja jaminnya pada 2004 denganmengenepikan agensi dan pelanggan yangmerugikan dan pada masa yang samamengenakan syarat taja jamin yang lebih ketat,Bahagian ini menumpukan semula kepadastrateginya dan mengguna pakai pendekatan yanglebih berasaskan produk untuk memperluaskanperniagaan pada 2005.Premium perniagaan kenderaan motor meningkatsebanyak 13.0% kepada RM208.0 juta (2004: RM184.0juta) manakala premium bukan motor meningkat sebanyak19.7% kepada RM216.3 juta (2004: RM180.7 juta).Perniagaan kenderaan motor terus menjadi penggerakutama, dengan sumbangan portfolio sebanyak 49.0%daripada jumlah pendapatan premium kasar untuk seluruhBahagian ini (2004: 50.4%). Sumbangan portfolio bukanmotor turut meningkat, dengan Insurans Kebakaran,perniagaan Rampaian, perniagaan Motosikal dan Marinmasing-masing menyumbang 14.9%, 21.6%, 9.7% dan4.7% (2004: 16.2%, 20.2%, 9.5% dan 3.7%).Hasil daripada kawalan tuntutan yang ketat dan langkahlangkahtaja jamin yang dilaksanakan, nisbah tuntutan2005 menyusut kepada 62.2% (2004: 66.3%). Penyusutanini, disokong oleh syarat pembaharuan perjanjian yanglebih baik yang telah membolehkan Bahagian Insurans Ammencatatkan keuntungan taja jamin berjumlah RM0.6 juta(2004: RM0.8 juta). Walaupun jumlahnya kecil,keuntungan telah dicapai buat tahun kedua berturut-turut.Walaupun prestasi taja jamin lebih baik, Bahagian inimengalami Kerugian Sebelum Cukai bernilai RM5.3 jutaberbanding keuntungan RM17.3 juta pada 2004. Kerugianini disebabkan terutamanya oleh peruntukan lebih tinggibagi penyusutan nilai pelaburan yang dibuat dalam tahunkewangan yang dilaporkan dan keuntungan pelaburanlebih rendah.Sejak 2004, Bahagian ini telah mengguna pakai falsafahPemprosesan Pusat untuk menyediakan kawalan lebih ketatmenggunakan Teknologi Maklumat. Bahagian ini telahmelaksanakan Sistem Insurans Am, (GIS) yang telahdiperbaiki yang memberi tumpuan automasi penuh prosesterasnya pada 2004, bermula dengan bahagian motor danberakhir dengan bahagian bukan motor pada akhir 2005.Sejak 2001, Industri Insurans Am telah mengemukakanbeberapa cadangan kepada pihak pengawal selia untukmengimbangkan semula tarif premium insurans motorkenderaan, yang kali terakhir dipinda pada 1978 atau 28tahun lepas. Pindan tarif ini perlu untuk menampung kosalat ganti kenderaan yang semakin tinggi, kadar kecurianyang meningkat dan bayaran tuntutan mahkamah yanglebih besar. Tarif baru yang disyorkan akan mengambil kirafaktor-faktor baru yang sebelum ini diabaikan, iaitu lokasigeografi, jantina, usia dan sejarah tuntutan pemandu sertabutiran mengenai jenis dan model kenderaan. Setakat ini,cadangan ini masih menunggu keputusan pihak berkuasa.Dalam usaha berterusan kami untuk menyediakanperkhidmatan lebih baik kepada pelanggan, selain daripadakhidmat Bantuan Kerosakan MotorClub di seluruh negara,Bahagian ini akan melancarkan Skim Bantuan Kemalanganpada 2006, di mana bantuan di tempat kejadian akandiberikan untuk meliputi semua kemalangan danperlanggaran yang dilaporkan. Pada masa yang sama,Bahagian ini juga akan menyediakan penilaian risikokebakaran menyeluruh dan khidmat pencegahan secarapercuma kepada semua pemegang polisi kebakaran. Iniakan membantu pemegang polisi kebakaran menikmatikadar premium yang lebih berpatutan dengan sistempencegahan kebakaran yang lebih baik dan berkesan danpada masa yang sama, membantu mengurangkan kejadiankebakaran.TINJAUAN AMANAH SAHAMMALAYSIASuasana kadar faedah rendah dan orang ramaiyang semakin maklum dan bijak dalam hal ehwalpelaburan telah menyaksikan pelabur beralih keamanah saham untuk memperolehi pulanganpelaburan dan pertumbuhan modal lebih tinggidalam tahun yang dilaporkan. Memanfaatkantrend ini, industri amanah saham swastamencatatkan pertumbuhan dua angka. JumlahNilai Aset Bersih (“NAV”) dana di bawahpengurusan di Malaysia berkembang 160.6%kepada RM98.5 bilion (2004: RM37.8 bilion).MAAKL Mutual Bhd (“MAAKL”) telah mengambilkesempatan daripada permintaan yang semakin tinggi inidan melancarkan 3 dana baru dalam tahun yang dilaporkandengan saiz dana diluluskan berjumlah 2.6 juta unit, iaituMAAKL Pacific Fund (dana asing pertama di Malaysia),MAAKL Eagle Fund dan MAAKL AL-FAUZAN. Dengantambahan tiga dana baru tersebut, MAAKL mempunyaiempat belas (14) dana di bawah pengurusannya. MAAKLPacific Fund telah dilancarkan selepas kawalan tukaranasing dilonggarkan pada 1 April 2005 oleh Bank NegaraMalaysia, yang membolehkan syarikat amanah sahamuntuk melabur sehingga 30% daipada jumlah nilai asetmereka di luar negara. MAAKL Pacific Fund direka ciptauntuk memberikan peningkatan modal jangka panjangmenerusi pelaburan dalam ekuiti tersenarai dan instrumenberkaitan ekuiti di pasaran-pasaran terpilih di rantau AsiaPasifik. Kejayaan pelancaran dana asing pertama ini akanmembantu meletakkan batu asas bagi memperkenalkandana amanah saham global pada masa depan.Pada tahun yang dilaporkan, MAAKL telah menambahRM270.4 juta kepada jumlah aset di bawah

Tinjauan Operasi Perniagaan (bersambung)pengurusannya, lantas meningkatkan lagi jumlah Nilai AsetBersih dana amanah di bawah pengurusan MAAKL padaakhir Disember 2005 kepada RM694.2 juta (2004:RM423.8 juta). Dengan pertumbuhan Nilai Aset Bersihsebanyak 63.8%, syarikat telah mengatasi pertumbuhanindustri buat tahun kedua berturut-turut sebanyak 15.9%pada 2005.Usaha membina tenaga agensi menjadi teras rancanganMAAKL, dalam usaha mencapai wawasannya untukmenyediakan produk dan perkhidmatan kepada seluruhrakyat Malaysia menerusi sekumpulan kakitangan amanahsaham yang profesional. Pada akhir Disember 2005,MAAKL disokong tenaga kerja seramai 1,125 ejen (2004:1,249 ejen). Untuk melengkapkan para penasihat amanahsaham dengan peralatan berasaskan pengetahuan yangmembolehkan mereka menawarkan tahap perkhidmatandan profesionalisme yang lebih tinggi kepada pelanggan,MAAKL telah meningkatkan taraf Home Office Suite,sebuah program perisian komputer yang membantupenasihat amanah saham menguruskan portfoliopelanggan mereka dengan lebih berkesan, denganbeberapa ciri-ciri baru, termasuk paparan nama pemegangbersama, tarikh pelaburan dan urus niaga terakhir danakhir sekali pilihan Model Pengimbangan Semula Aset(“ARM”) untuk membantu pelanggan bertindak balasdengan lebih pantas kepada keadaan atau matlamatkewangan yang semakin berubah.Untuk itu, MAAKL, dengan kerjasama HIJRAH StrategicAdvisory Group, melancarkan Alat Perancangan IslamPertama di Malaysia yang dikenali sebagai “PerancangKewangan MAAKL”. Alat perancangan kewangan Islam initelah direka cipta dengan teliti untuk membantu penasihatamanah saham memberi panduan kepada pelanggan Islamtentang cara untuk membuat perancangan Persaraan,Menunaikan Haji dan Umrah, membiayai pendidikanKanak-Kanak, mengumpulkan Kekayaan dan Menawarkanbarangan kepunyaan dan harta benda untuk tujuankebajikan.Kumpulan berbangga untuk menyatakan bahawaberasaskan jumlah pulangan dana, MAAKL telah menerimasebanyak empat (4) Anugerah Dana Terbaik Industridaripada The Edge-Lipper sempena Anugerah DanaAmanah Saham Malaysia 2004. Anugerah yang dimenangioleh MAAKL ialah Dana Bon Terbaik, Dana Indeks EkuitiTerbaik, Dana Ekuiti Islam Terbaik dan Dana Ekuiti Terbaik(diedarkan oleh ejen amanah saham).Pada tahun yang dilaporkan, berasaskan LaporanPenarafan Bintang Dana Standard & Poor's, tiga daripadadana syarikat ditarafkan di tempat pertama dari segiprestasi pulangan berbanding 2004, iaitu MAAKL As-Saaddalam kategori pendapatan tetap bon Islam, MAAKLMoney Market dalam kategori pasaran wang pendapatantetap dan juga MAAKL Growth dalam kategori modal/ekuitikecil.Kumpulan yakin terhadap masa depan bahagian ini. Pada2006, MAAKL akan melancarkan beberapa dana baru danakan terus memberi tumpuan eksklusif kepada strategijangka panjang untuk membentuk ejen yang dapatmemberikan perkhidmatan dan kata nasihat kepadapelanggan dan pada masa yang sama, menjana jualan.Sehingga Mac 2006, syarikat melancarkan dua lagi danabaru, iaitu MAAKL Dividend dan MAAKL Al-Umran.TINJAUAN OPERASIANTARABANGSAMAA International Assurance Ltd (“MAAIA”),bahagian insurans dan pelaburan yang bertapak diLabuan, mencatatkan pendapatan premium kasaryang lebih tinggi berjumlah RM62.1 juta (2004:RM56.9 juta), dan juga keuntungan sebelum cukaiyang lebih tinggi iaitu daripada RM0.6 juta pada2004 kepada RM7.6 juta. Peningkatan dalamkeuntungan diperolehi terutamanya kerana tuntutanlebih rendah daripada perniagaan insurans semula am.MAAIA juga merupakan syarikat pegangan pelaburan bagikepentingan antarabangsa Kumpulan, termasuk operasisedia ada di Indonesia dan Filipina dan pelaburan baru diThailand dan Sri Lanka. Di Thailand, MAAIA telahmemperolehi kepentingan 60% dalam MAAKK WealthManagement Co. Ltd (“MAAKK”) yang menyediakanperkhidmatan perancangan kewangan dan merupakanusaha sama dengan kumpulan pengedar perkhidmatankewangan terbesar Thailand. Syarikat memulakan operasipada tahun yang dilaporkan dengan menyediakan khidmatwasiat dan pelan amanah. Pada masa depan, MAAKKbercadang menceburi bidang pembrokeran insurans danpengurusan dana amanah saham.Pada Jun 2005, Kumpulan memperolehi kepentingan 15%dalam Hatton National Bank (“HNB”) yang disenaraikan diBursa Saham Colombo. Pertama sekali, pelaburan strategikini dibuat berasaskan pelan perkembangan serantauKumpulan menerusi anak syarikat insurans tersenarai HNB,iaitu HNB Assurance Limited (syarikat insurans komposit) diSri Lanka yang mempunyai cawangan di India, khususnyasebagai pintu masuk bagi menembusi perniagaan insuranshayat, amanah saham dan pengurusan aset di India padatahun-tahun akan datang, dan keduanya, memanfaatkanpotensi keuntungan modal daripada pelaburan tersebut.Pada amnya, dasar Kumpulan terhadap pelaburanantarabangsa berteraskan strategi 'membina kubu' danmemang diakui bahawa tempoh masa beberapa tahunmungkin diperlukan sebelum operasi tersebut memberisumbangan hasil dan keuntungan yang ketara kepadaKumpulan dari segi pengautan hasil dan keuntungan. Buattahun kedua berturut-turut, kedua-dua perniagaaninsurans di Indonesia dan Filipina menghasilkan sumbanganpositif kepada keputusan Kumpulan.Kumpulan berbangga untuk mengumumkan bahawa anaksyarikat insurans di Indonesia, PT MAA Life Assurance,walaupun masih kecil, telah memenangi anugerah SyarikatTakaful Terbaik di Indonesia pada 2004 daripada MajelisUlama Indonesia. Pada masa yang sama di Filipina, anaksyarikat amanah saham Kumpulan, MAA Mutual LifePhilippines Inc. telah diberikan anugerah Dana Bon US$Terbaik 2004, berasaskan jumlah pulangan dana.27

Chairman’s StatementMAA, always caring for the customer.Di MAA, kami sentiasa mengambil berat pelanggan kami.On behalf of the Board of Directors, I am pleased to present theAnnual Report and Accounts of the Group for the year ended31 December 2005.28OPERATINGENVIRONMENTThe Malaysian economyremained resilient with aGross Domestic Product(GDP) growth of 5.3% in2005 despite the high oilprices, increasing pressureon inflation and thedownturn in the globalelectronics cycle in thefirst half of the year. Theeconomic growth wasagain driven by the privatesector and favourablefinancial conditions in thecountry. All sectors with theexception of the constructionsector registeredpositive growth, asthe MalaysianGovernment andBank NegaraM a l a y s i acontinued toa d o p tsupportivemacroeconomic policies to position the economyfor sustainability and long-term growth.Against this challenging backdrop, the Group didwell to be able to sustain its overall performancewith the on-going cost efficiency strategies,productivity enhancement and introduction ofinnovative products.PERFORMANCE REVIEWFor the year under review, the Group's totaloperating revenue grew by 26.1% to RM2.9 billion(2004: RM2.3 billion). The Life Insurance Division'sgross premium income increased by 7.7% toRM1.4 million (2004: RM1.3 million) whereas theGeneral Insurance Division registered an increase of12.9% in terms of total gross premium toRM460.0million (2004: RM407.5 million).In line with this positive performance, the Groupregistered a healthy profit before tax of RM43.0million (2004: RM63.1 million) for the current yearunder review with the Life Insurance Division andGeneral Insurance Division contributing a profitbefore tax of RM20.9 million (2004 : RM52.4million) and RM12.1million (2004: RM25.0 million)respectively. The lower profit was due mainly toadditional to higher provision made for diminutionin value of quoted investments and lowerinvestment gains.As at 31 December 2005, the Group's total assetsstood at RM6.6 billion, an increase of 6.5% over2004 of RM6.2 billion.BUSINESS OPERATIONS REVIEWFor the year under review, the four core operationsof the Group (namely Malaysian Life InsuranceOperations, Malaysian General InsuranceOperations, Malaysian Unit Trust Operations andthe International Operations) performedsatisfactory. Details of their performance areseparately discussed in the attached pages.

Chairman’s Statement (continued)DIVIDENDSFor the year ended 31 December 2005, the Boardof Directors has recommended the payment of afirst and final tax-exempt dividend of 10% (2004:15%) to reward all the shareholders for theirsupport and confidence to the Group.UPDATES ON RECENT CORPORATEPROPOSALSThe Group is pleased to provide the following updates:(a) The renounceable rights issue of up to 152.2new Irredeemable Preference Shares of RM1.00each (“Rights IPS”) together with up to 152.2free detachable Ordinary Shares of RM1.00each (“Bonus Shares”) and up to 152.2 freedetachable Warrants (“Warrants”) was approvedby the shareholders at the ExtraordinaryGeneral Meeting held on 22 February 2005.On 23 February 2005, the Board announcedthat the issue price for the Rights IPS and theWarrant had been fixed respectively at RM2.00per Rights IPS and RM2.00 per Warrant.On 27 May 2005 the Securities Commission(“SC”) approved the application of MAAHoldings Berhad (“MAAH”) to extend thecompletion of the Rights IPS from 3 June 2005to 31 December 2005, given the prevailing uncertainsentiments in the Malaysian equity market.On 14 December 2005, given the continuinguncertain sentiments in the Malaysian equitymarket, MAAH applied to the SC for a furtherextension of time of six (6) months from 1January 2006 to 30 June 2006 to complete theimplementation of the Rights of IPS. The SC hasapproved the application for the furtherextension of time to complete theimplementation of the Rights of IPS on 23December 2005.On May 3 2006, MAAH after taking intoconsideration the current market sentimentsand the market performance of the ordinaryshares of MAAH, has announced the abortionof the Rights Issue IPS.Notwithstanding the abortion of the RightsIssue of IPS, MAAH announced that it willproceed with the proposed Bonus Issue of up to152,176,876 new ordinary shares of RM1 eachin MAAH as fully paid on the basis of one (1)Bonus Share for every one (1) existing MAAHshare held to the registered shareholders whosenames appear in the Record of Depositors ofthe Company at the close of business on anentitlement date for the Proposed Bonus Issueto be determined and announced later. TheProposed Bonus Issue shall be capitalised fromthe share premium and retained earnings of theCompany.(b) On 21 February 2006, MAAH announced theentering into a Joint Venture Agreement withSolidarity Company BSC (C) (“Solidarity”) toform a joint venture company (“JVCO”) to carryon Takaful business in Malaysia, upon receipt ofthe approval from Bank Negara Malaysia (“BNM”).The JVCO's paid up capital will initially becapitalized in an amount of RM100 milliondivided into 100 million ordinary shares ofRM1.00 each in accordance with theshareholding proportion of 75% by MAAH and25% by Solidarity.NEW DEVELOPMENTOn 3 March 2006, MAAH received Bank NegaraMalaysia's approval for a new Takaful license forthe joint-venture of MAAH and Solidarity CompanyBSC (C) (“Solidarity”), Bahrain.Solidarity is a company incorporated under the lawsand regulations of the Kingdom of Bahrain andengaged in Takaful business. It was set up in directresponse to the growing demand for Takafulproducts across the Middle Eastern region.Solidarity operates in full accordance with theguiding principles of Syariah and provides a fullrange of Family and General Takaful products. Withover US$100 million in capital assets, Solidarity isthe largest insurance company (in term of paid-upcapital) in the Kingdom of Bahrain and the largestcapitalized Takaful company in the world.On 21 February 2006, a Joint-Venture Agreementwas signed with Solidarity to form a joint-venturecompany to carry on the Takaful business inMalaysia. The joint-venture company will have apaid up capital of RM100 million with equityinterest of MAAH and Solidarity in the proportionof 75% and 25% respectively. The Group targets theTakaful business to commence operations in June 2006.The Group expects the joint-venture Takafulcompany to breakeven immediately while riding onMAA's strong agency network of which about 40%or 7,000 of its life agency force are Bumiputraagents, coupled with its existing infrastructurewhich will help to attain a low-fix cost.Lastly, the Group will capitalize on its takafulcollaboration with Solidarity as a springboard intothe global markets, especially the Islamic nations inthe Middle East in the near future.BRAND EQUITYThe Group will continue with its philosophy ofbrand equity as one of our most important assets tomaintain the strong corporate image that we havedeveloped to-date. This image has been themainstay of our continued growth, in revenues andin profits, and has been the pillar that has kept ourclients and our agents loyal to us.29

Chairman’s Statement (continued)30In this respect, ownership of our own officebuildings, of which there are 48 in numbers,throughout Malaysia with excellent visibility, hasprovided our clients and agents with the confidenceto continue to place their trust in our Group.The Group is also the most visible insurer in theadvertising and media arena. Our image is mostnotably remembered in our television commercials(the only insurer appearing regularly on TV), roadand highway billboards (over 58 sites throughoutMalaysia), newsprint advertisements (at least oneinsertion in major newspapers a week), as well asconcerted public relations activities and charityprogrammes.Our tag-line is well recognized, “Say Yes to MAA.Say Yes To Solid Financial Security”.QUALITY FOCUSThe Group is also proud to report that theMalaysian insurance operation has for the last sixyears been able to retain its ISO 9001 quality status.Its on-going focus on maintaining tip-top IT systemsand internal processes, staff training and educationprograms help to ensure that our clients and agentsget the best possible service. Only through afocused effort on quality, can the Group guaranteeour success in the future.The Group has further enhanced its cutting-edgestandards by adopting Six Sigma programme in2005 in its Malaysian insurance operation.INVESTMENTSAmidst the challenging investment climate duringthe year, the Group's total investment incomeincreased marginally by 3.2% to RM256.0 million(2004: RM248.1 million). This improvement wasdue mainly to the timely portfolio structure adoptedduring the year, as a result of maintaining agenerally conservative investment philosophy thatemphasises capital preservation, profitability andconsistent income flows. Fixed income investmentsare expected to remain the core portfolio asset,with corporate bonds being the preferred instrument.In additions, moving forward we may reassess theinvestment portfolio of Life non-participating fundand the General fund by reducing the quotedequity portfolio to shelter the Group's earningsagainst the volatility of the equity market.Nevertheless, the Group will constantly review andrevise its strategies to take advantage of theexpected strong economic and financialenvironment in the coming years.INFORMATION TECHNOLIGYThe Group will continue with its effort to invest inthe latest information technologies to furtherenhance its operational and cost efficiency. Towardsthis end, MAA has formulated a 5 year InformationTechnology (“IT”) Strategy Plan with the main aimto support future business requirements. The ITStrategy Plan will address main issues of:• organization alignment for effective IT strategyexecution• application development, automation andsystem integration• datawarehousing, data mining and businessintelligence• E-business strategy• Process modeling initiativeVALUATION OF THE MALAYSIANINSURANCE BUSINESSAs in prior years, the Group has engaged anexternal actuary to compute the Appraisal Value ofthe Malaysian Life Insurance Business, following thesame valuation technique used internationally tovalue life insurance businesses. The Appraisal Valueis the discounted cash flow of profits to theshareholder, from policies sold in the past(“embedded value”) and from future policy sales(“structural value”).Based on the Appraisal Value, as set out on page 35to 38, the Malaysian life insurance portfolio isassigned three (3) values, based on assumed futuregrowth scenarios, namely RM2.3 billion, RM2.9billion and RM3.7 billion.If one were to value the Malaysian generalinsurance business at 85% of 2005 gross premiumincome of RM424.3 million, this would value theDivision at RM361 million.The combined life and general insurance divisionsare thus valued at RM4.1 billion (Full Valuation),RM3.3 billion (Mid Valuation) and RM2.7 billion(Low Valuation).The Board is constantly monitoring this valuationfor the Malaysian insurance operations as it will beused as the base for any future merger oracquisition negotiations.It is interesting to note that if MAA Holdings Berhadwere to take on the same valuation as its Malaysianinsurance operations, the value for the Group'sshare price would be substantially higher than theprevailing share market price of RM3.12 per shareas at 31 December 2005. If one included the yearendShareholder Fund of MAA Holdings Berhad ofRM391.8 million, the corresponding value forGroup's shares would be RM29.60 per share (FullValuation), RM24.20 per share (Mid Valuation) andRM20.24 per share (Low Valuation).CORPORATE SOCIAL RESPONSIBILITYIn its quest to be a responsible and caring citizen,the Group has set up MAA-Medicare KidneyCharity Fund since 1994, with the aim to providefor cheaper kidney dialysis treatment cost. Over theyears, the Group has expanded its network to

Chairman’s Statement (continued)eleven (11) kidney dialysis centres to cater for the needs ofthe ever-increasing number of new patients for suchsubsidized medical services.ATMs located at branches nationwide for greater customerconvenience.Mesin ATM yang terdapat di cawangan-cawangan seluruhnegara untuk kemudahan pelanggan.The Group has also adopted The Budimas CharitableFoundation (the Foundation) in 2002 with the objective ofproviding welfare to the under-privileged children and thepoor. Towards this end, the Foundation has adopted fivehomes for under-privileged children and orphans, wherefinancial support continuously for an initial period of fiveyears from year 2002 to 2007 shall be given.The Group will continue to allocate resources to furtherthe objectives of these charitable activities in the years ahead.PROSPECTSBank Negara Malaysia reported in its Annual Report 2005that the Malaysian economy in 2006 is expected tostrengthen further albeit the environment of a morefavourable global conditions. With real GDP projected togrow at a faster rate of 6%, driven by strengtheningexport performance and resilient domestic demand,coupled with the Government launching the NinthMalaysia Plan which sets out the foundation for furtherdevelopment and strengthening the prospects for theMalaysian economy, the Malaysian insurance industry ispoised to register favourable growth in the years ahead.The Group is well aware of the many challenges aheadand the increasing competitive environment it is facing.Towards this end, the Group will continue its initiative toinvest in the latest technologies to further enhanceoperations efficiency, strengthening distribution system,human resource and agency development anddeveloping innovative products to improve further thequality of services to customers.31Lastly, the Group is optimistic of achieving better results inthe years ahead through the various strategies undertakento position itself as an integrated financial services group.ACKNOWLEDGEMENT AND APPRECIATIONOn behalf of the Board of Directors, I would like to thankthe management team and staff for their continuedcommitment, dedication and contributions to ensure thecontinued growth and success of the Group.I would also like to take this opportunity to extend ourappreciation to the regulatory bodies for their continuedguidance and support; to our valued customers, agents,business associates and the shareholders for theirinvaluable support, confidence and trust they have placedin us.Finally, I would like to thank my fellow Board members fortheir stewardship and contribution to the Group.TUNKU TAN SRI ABDULLAH IBNI ALMARHUMTUANKU ABDUL RAHMANChairman

Highly skilled and professional staff assure each customer of excellent service.Sikap profesional dan kemantapan kakitangan kami menjamin setiappelanggan menerima layanan terbaik.BusinessOperations Review32MALAYSIAN LIFEINSURANCE REVIEWThe Life Insurance Division posted a moderategrowth of 7.7% in its total premium income toRM1.4 billion (2004: RM1.3 billion), largely fromsingle premium business, in particular endowmentand investment-linked plans. The continuedpremium growth was attributed to MAA'sextensive network of branches countrywide(currently numbering 76), its sizeable agency forcethat underpin its distribution capacity and brandawareness. The current low interest rate regimeand the shift in consumer preference from plainprotection to savings/investments type of policieshave contributed to the increased sales ofinvestment-linked products and endowmentplans.In terms of annualised new business premiums, ameasure of the year's new sales activity, the LifeInsurance Division has registered a commendablegrowth of 12.3% to RM898.4 million (2004: RM800.2million). This outperforms the 0.6% growth recorded bythe industry, which reflects MAA's ability to furtherpenetrate the market. The slower industry growth wasmainly due to the scaling back of new sales of capitalguaranteedinvestment-linked insurance products by lifeinsurers.The Life Insurance Division recorded a lower ProfitBefore Tax from RM50.8 million in 2004 to RM14.5million in 2005. The lower profit before tax in 2005 wasdue mainly to higher provision for diminution in value ofinvestments made in that year and lower investmentgains, coupled with increase in cash bonus payment andmedical claims from medical policies. Notwithstandingthe transfer of profit to Shareholders' Fund account, theoverall Life Insurance Fund Surplus, remains healthy witha cumulative surplus carried forward of RM500.8 millionas at 31 December 2005.In line with the growing importance of financialplanning services in the country, MAA will continue tofocus its effort on agency training via the enrolment ofagents to the Certified Financial Planner (CFP) course,and the Registered Financial Planner (RFP) programme.The aim of which is to enhance professionalism byequipping agents with financial planning knowledge,and the skills and competency to cope with risingconsumer demand as well as competition from otherfinancial services. Towards this end, with effect from 1January 2005, the Life Insurance Association of Malaysia(“LIAM”) has implemented new ruling requiring lifeinsurance agents who have been in the industry formore than one (1) year to attend module 1 and module2 of the RFP programme, to train agents to becomefinancial planners. As at end December 2005, MAA'sagency force stood at 12,773 (2004: 15,802). Movingforward, MAA's primary emphasis will be to elevate thelevel of professionalism and knowledge of its agents toimprove sales productivity rather than growing the salesforce.The Division has noted the public's changing demandtrend towards investment-linked plans. The Groupexpects this trend to continue in the future, and iscurrently planning even more exciting investment-linkedplans to meet this ever-increasing demand.Plans that have been successfully launched during theyear, include the investment-linked MaaxLife Series (i.e.upgraded version of Maax Wanita, MaaxUmaat andMaaxEducation), Maaster Yield Guaranteed Plan, 2ndtranche of Maaster Capital Guaranteed Plan, personalaccident plans, PA500, insurance plan for senior citizens,the SeniorGold and relaunched of its signaturehealthcare plans, MedicaLife 200 and MedicaGen 200.MAA places great importance on meeting customers'satisfaction. Towards this end, it will maintain itsstrategies and the various initiatives that it had alreadyembarked on, including the development of a CustomerSatisfaction Index (“CSI”) to enhance and raise thequality of our services to customers.On the industry front, 2006 may see the launch of anew common branded Annuity Plan by the NationalInsurance Association of Malaysia (“NIAM”), which willbe a single-premium investment-linked product.Towards this end, LIAM has also submitted to the EPF, aproposal for a participant investment withdrawalscheme, for single-premium investment-linked plans,which are similar to the existing withdrawal investmentscheme for unit trusts. All these efforts are made tooffer the public at large the opportunities of widerinvestment choices and most importantly retirementplanning and wealth management.

Business Operations Review (continued)MALAYSIAN GENERAL INSURANCEREVIEWThe General Insurance Division recorded a growthof 16.3% in gross written premium to RM424.3million (2004: RM364.8 million), outperformed theindustry growth of 9.7% in 2005. After embarkedon a cleanup in 2004 of its underwriting portfolioby systematically purging loss-making agenciesand clients, and at the same time implementedmore stringent underwriting terms, the Divisionrefocuses its strategies again and adopts a moreproduct-oriented approach to grow the business in2005.Motor vehicle business premiums increased by 13.0% toRM208.0 million (2004: RM184.0 million) whilst nonmotorpremiums increased by 19.7% to RM216.3million (2004: RM180.7 million).Motor vehicle business continues to be the dominantclass, with a portfolio share of 49.0% of the total grosspremium income of the Division (2004: 50.4%). Nonmotorportfolio share have increased, with FireInsurance, Miscellaneous business, Motor Cycle andMarine business accounting for 14.9%, 21.6%, 9.7%and 4.7% respectively (2004: 16.2%, 20.2%, 9.5% and3.7%).As a result of the stringent claims controls andunderwriting measures implemented, the claim ratio for2005 improved further to 62.2% (2004: 66.3%). Thiscoupled with improvement in treaty renewal terms hasenabled the General Insurance Division to recordunderwriting profit, although small, for the secondconsecutive year of RM0.6 million (2004: RM0.8million).Notwithstanding the improvement in the underwritingperformance, the Division recorded a Loss Before Tax ofRM5.3 million from a profit of RM17.3 million in 2004.The loss was due mainly to higher provision fordiminution in value of investments made in during theyear and lower investment gains.The Division has since 2004 adopted a CentralisedProcessing philosophy to provide better controls usingInformation Technology. The Division rolled out arevamped General Insurance System (GIS), whichfocuses on full automation of the Division's coreprocesses in 2004 starting with motor section andcompleted it with the non-motor sections at end 2005.Since 2001, the General Insurance Industry has madeproposals to the regulators to rebalance the motorvehicle insurance premium tariff, which was last revisedin 1978, or 28 years ago. A revised tariff is needed tomeet the ever increasing cost of vehicle spare-parts,vehicle theft frequencies and higher court awards. Theproposed new tariff take into account new factorswhich were previously ignored, namely: geographicallocation, sex, age and claims history of the driver, anddetails of the vehicle's make and model. To-date, adecision on this matter is still pending.In our continuing efforts to provide better services to ourcustomers, in addition to the existing MotorClubBreakdown Assistance service nationwide, the Divisionwill roll out the Accident Assistance Scheme in 2006,where on the scene assistance will be rendered for allcalled-in accidents and collisions. At the same time, theDivision will also be looking at providing free of chargecomprehensive fire risk assessment and preventionservices to its fire policyholders. This will help firepolicyholders to enjoy better premium rates withimproved and effective fire prevention systems andconcurrently, help to mitigate incidence of fireoccurrence.MALAYSIAN UNIT TRUST REVIEWThe low interest rate environment and anincreasing well-informed investing public have ledinvestors looking to unit trusts for higher returnsand capital growth during the year. Riding on this,the private unit trust industry registered a doubledigit growth with total Net Asset Value (“NAV”) offunds under management in Malaysia expandedby 160.6% to RM98.5 billion (2004: RM37.8billion).MAAKL Mutual Bhd (“MAAKL”) was able to capitalizedon this increasing demand and launched 3 new fundsduring the year with a total initial approved fund size of2.6 billion units, namely MAAKL Pacific Fund (the firstforeign fund in Malaysia), MAAKL Eagle Fund andMAAKL AL-FAUZAN, bringing the total funds undermanagement to fourteen (14). MAAKL Pacific Fund waslaunched after the relaxation of the foreign exchangecontrols on 1 April 2005 by Bank Negara Malaysia whichallowed unit trust companies to invest up to 30% oftheir total net asset value overseas. MAAKL Pacific Fundis designed to provide long term capital appreciationthrough investment in listed equities and equity-relatedinstruments in selected markets within the Pacificregion. The successful launch of this first foreign fundwill help to lay the foundation for the introduction ofglobal unit trust funds in the near future.During the year, MAAKL added RM270.4 million to itstotal assets under management, raising further the totalNet Asset Value of unit trust funds under managementof MAAKL as at end December 2005 stood at RM694.2million (2004: RM423.8 million). With this growth of63.8% in Net Asset Value, the company for the secondconsecutive year has outperformed the industry growthof 15.9% in 2005.Building the agency force is at the forefront of MAAKL'splans, to fulfill its vision to provide products and services33

34Business Operations Review (continued)for all Malaysian through a team of unit trustprofessionals. As at end December 2005, the agencyforce stood at 1,125 agents (2004: 1,249 agents). Toequip its unit trust advisers with the necessaryknowledge-based tools that enable them to offer ahigher level of service and professionalism to clients,MAAKL has enhanced its Home Office Suite, a softwareprogramme that helps unit trust advisers manage theirclients' portfolios more effectively, with several newfeatures, including display of joint holder name, lastinvestment date and transaction date and lastly theAsset Rebalancing Model (“ARM”) option to help clientsrespond quickly to changing conditions or financial goals.Towards this end, MAAKL, in collaboration with HIJRAHStrategic Advisory Group, launched the First IslamicPlanning Tool in Malaysia known as “PerancangKewangan MAAKL”. This Islamic planning tool has beencarefully designed to help our unit trust advisors guideMuslim clients on how best to methodically plan forRetirement, Performing the Haj and Umrah, Children'seducation, Wealth accumulation and Offering materialbelongings and property for charity purposes.The Group is proud to highlight that, based on totalfund returns MAAKL was presented with four (4)industry Best Funds Awards, by The Edge-Lipper, in theMalaysia Unit Trust Fund Awards 2004. The awards wonby MAAKL were Best Bond Fund, Best Equity IndexFund, Best Islamic Equity Fund and Best Equity Fund(distributed by unit trust agents).During the year, based on Standard & Poor's Fund StarRanking Report, three of the company's funds wereranked number one in terms of return performancecompared to 2004, namely MAAKL As-Saad in thecategory of fixed income Islamic bond, MAAKL MoneyMarket in the category of fixed income money marketand lastly MAAKL Progress in the category of smallcap/equity.The Group is optimistic about the future of this division.In 2006, MAAKL will be launching a variety of newfunds, and will continue to focus exclusively on its longterm strategy to develop who are able to service andadvise clients well and at the same time, generate sales.As at March 2006, the company further launched twonew funds, namely MAAKL Dividend Fund and MAAKLAl-Umran Fund.increase in profit before tax from RM0.6 million in2004 to RM7.6 million. The increase in profit wasdue mainly to lower claims experience from cededgeneral reinsurance business.MAAIA is also the investment holding company for theGroup's international interest, which includes existingoperations in Indonesia and Philippines, and newinvestments in Thailand and Sri Lanka. In Thailand,MAAIA acquired a 60% interest in MAAKK WealthManagement Co. Ltd (“MAAKK”), which providesfinancial planning services and is a joint-venture set upwith Thailand's largest financial services distributiongroup. The company started operations during the yearin providing wills and trust plans. Moving forward,MAAKK plans to venture into insurance broking andunit trust funds management.In June 2005, the Group acquired a 15% interest inHatton National Bank (“HNB”), which is listed on theColombo Stock Exchange. This strategic investment wasmade firstly along the Group's regional expansion planto via HNB's listed insurance subsidiary company, HNBAssurance Limited (a composite insurer) in Sri Lankawith a branch in India, to gain the gateway to the lifeinsurance, unit trust and asset management businessesin India in the coming years, and secondly to capitalizeon the potential capital gain of the investment.In general, the Group's policy towards internationalinvestments is one of a “beach-head” strategy, and it isrecognized that it will take some years before theseoperations become significant to the Group, in terms ofrevenues and profits. For the second consecutive year,both the general insurance business in Indonesia andthe Philippines contributed positively to the results ofthe Group.The Group is proud to announce that its Indonesiainsurer, PT MAA Life Assurance, although still small, wasawarded the Best Takaful Company in Indonesia for2004, by the Majelis Ulama Indonesia.At the same time, in the Philippines, the Group's unittrust subsidiary, MAA MutuaLife Philippines Inc. wasawarded the 2004 Best US$ Bond Fund, based on totalfunds returns.INTERNATIONAL OPERATIONSREVIEWMAA International Assurance Ltd (“MAAIA”), theLabuan based offshore insurance and investmentarm of the Group, recorded a higher grosspremium income of RM62.1 million (2004:RM56.9 million), and correspondingly a marked

Appraisal Value On The Life Insurance Business OfMalaysian Assurance Alliance Berhad20 April 2006The DirectorsMalaysian Assurance Alliance Berhad22nd Floor, Menara MAA12, Jalan Dewan Bahasa50460 Kuala LumpurDear SirsIntroductionWe have been engaged by Malaysian Assurance Alliance Berhad (“MAA” or “the Company”) to perform an appraisalvaluation of its life insurance business as at 31 December 2005. The appraisal valuation was carried out based on a set ofassumptions that the management of MAA consider reasonable and realistic, taking into consideration the past performanceof MAA, its operating structure, the economic growth of Malaysia and the stage of development of the life insurance industryin Malaysia.AssumptionsMAA has projected a total new business premium for the year 2006 of RM1,190 million. This includes RM830 million inpremiums from the Single Premium Fixed Dividend Endowment Plan. Premium received for this FDE plan amounted to RM618million in 2005.The following set of assumptions has been used in the appraisal valuation:i) Base year total new business (2006)Projected New BusinessGrowth in 2005Projected Premium(RM million)35Conventional Business- Par 118% 32- Non Par 23% 174- FDE 42% 830Investment Linked Business- Regular Premium 16% 54- Single Premium 26% 100Total Projected New Business in 2006 1,190

Appraisal Value On The Life Insurance Business OfMalaysian Assurance Alliance Berhad (continued)ii) Subsequent New Business Growth (2007 onwards)The range of expected subsequent new business growth is as follows:YearRange of expectationScenario A Scenario B Scenario CLow Medium High2007-2015 10% p.a. 15% p.a. 20% p.a.2016 onwards 3% p.a. 3% p.a. 3% p.a.iii) Investment returns Par Plans 7.0% p.a.Annuity business7.0% p.a.Non Par Plans (excluding FDE)6.5% p.a.FDE Plans5.5% p.a.iv) Discount rates Business in force 9% p.a.New business12% p.a.Appraisal ValueDue to the long-term nature of the life insurance business, reserves (the life fund) are set aside to meet future liabilities. Profitsare only expected to emerge gradually over the years. An Appraisal Value takes into account the expected future cash flowsand discounts future surpluses at a suitable rate. It is equal to the sum of the Embedded Value and the Structural Value.36The Embedded Value is the assessment of the present value of distributions that will accrue to the shareholders over the futurelifetime of all existing policies.The Structural Value is the assessment of the life business’s ability to generate profits from its assets – as evidence by pastperformance – by continuing to write new business on profitable terms. It incorporates, among others, the value of theexisting agency structure. It is based on the assumption that the projected mix of new business in 2006 and the profitabilitythereof is representative of the future flow of new business. Any change in the mix of new business (for example an increasein investment linked business at the expense of traditional business) would affect the valuation. It is also heavily dependenton the capitalization factor used to gross up the value of one year’s business.

Appraisal Value On The Life Insurance Business OfMalaysian Assurance Alliance Berhad (continued)The Appraisal Value of MAA’s life insurance business as at 31 December 2005 is as follows (RM million):Range of expected business growth rate Scenario A Scenario B Scenario CEmbedded Value:Conventional 439.42 439.42 439.42Investment Linked 101.89 101.89 101.89Total Embedded Value 541.31 541.31 541.31Structural Value:Conventional 1,038.89 1,373.88 1,824.83Investment Linked 742.74 1,010.96 1,378.69Total Structural Value 1,781.63 2,384.84 3,204.52Appraisal Value:Conventional 1,478.31 1,813.30 2,265.25Investment Linked 844.63 1,112.85 1,480.58Total Appraisal Value 2,322.94 2,926.15 3,745.83The Appraisal Value has been calculated based on the above set of assumptions of new business growth and the Company’sexpected future experience regarding agency costs, termination rates, claim payments, management expenses, taxation andbonuses that are consistent with the Company’s past experience.The Appraisal Value excludes the value of the Shareholders’ Fund and the General Insurance Business of the Company.RelianceIn preparing this report, we have relied on an extensive range of information, qualitative and quantitative, supplied by theCompany. We have relied where possible on written materials including descriptive, financial and statistical information, andwe have supplemented our understanding by interviews and other discussions with executives of the Company. While we havereviewed all information supplied to us for reasonableness and consistency, we have relied on the Company for accuracy andcompleteness of all information supplied.37We have relied on the Company for assumptions as to the expected future growth of its business. The Company is targetinggrowth of its lines of business ranging from 16% to 118%. The high growth assumption is in respect to MAA’s participatingnew business which is relatively small and registered a negative growth in 2004/5 due to uncertainties created by regulatorychanges.The following table sets out the Company’s actual sales performance against that projected/targeted for each year. Thefluctuation in the investment linked business is mainly due to the volume of new business achieved for single premium typeplans being lower than expected.% of Sales Target Achieved 2005 2004 2003 2002 2001Ordinary Life (excluding FDE) 79% 122% 74% 80% 73%Investment Linked 56% 122% 23% 67% 22%

Appraisal Value On The Life Insurance Business OfMalaysian Assurance Alliance Berhad (continued)Comments on ResultsThe Appraisal Value of the Company has increased by 4.3% over the year to RM2,323 million (at 9% base discount rate onScenario Growth A). The Embedded Value of the Life Fund has increased significantly by 24% or RM106 million. The increase inthe Embedded Value is mainly due to contribution from profitable regular premium investment linked business. The Structural Valueis broadly unchanged compared to last year. There is currently a Quota Share reinsurance arrangement with MAA InternationalAssurance Ltd for some lines of business secured from 2000. This has been factored in our calculations.LimitationsThis report has been prepared at the request of the Directors of MAA for the purpose of disclosure of the Company’s AppraisalValue in the Annual Report of MAA and MAA Holdings Berhad respectively and it may not be used for any other purpose.This report has been prepared on the basis of the information provided to us and our understanding of the business of MAA.Nevertheless, the reader should be aware that future events cannot be predicted with certainty and, as a result, deviationsfrom any financial estimates referred to in this report and pertaining to the future are normal and are to be expected.The reader should also understand that an Appraisal Value is a subjective assessment and is cautioned that the figures in thisstatement should not be used as the sole basis for determining MAA’s final value to an investor.Yours faithfully38Zainal Abidin Mohd Kassim, FIAPrincipal and ActuaryMercer Zainal Consulting Sdn Bhd

Statement On Corporate Governance (continued)Under Paragraph 15.26 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Board ofDirectors of the Company (“Board”) is required to make a statement in relation to its compliance with the Malaysian Code onCorporate Governance (“the Code”). The statement below sets out how the Company has applied the Principles and theextent of its compliance with the Best Practices under the Code throughout the financial year ended 31 December 2005.1. BOARD OF DIRECTORS1.1 Composition and Size of BoardThe Board is composed as at the date of this Annual Report, of 8 Directors, 4 of whom are Independent Non ExecutiveDirectors within the meaning of Chapter 1.01 of the Listing Requirements of Bursa Securities. At least 1/3 of the Boardmembers are Independent Directors, who are free from any business or other relationship that could materiallyinterfere with the exercise of their objective and independent judgment.1.2 Board BalanceThe Board is a balanced Board with a complementary blend of expertise with professionals drawn from variedbackgrounds; such as accounting and finance, legal, engineering and the armed forces, bringing with them, in depthand diversity in experience, expertise and perspectives to the Group's business operations. A brief profile of each ofthe Directors is presented separately in the Annual Report.The Independent Non Executive Directors provide an unbias and independent view, advice and judgment to take intoaccount the interest, not only the Group but also of shareholders, empoyees and communities in which the Groupconducts business.The roles of the Chairman and Group Managing Director/Chief Executive Officer (“Group MD/CEO”) are distinct andseparate and each as a clearly accepted division of responsibilities to ensure a balance of power and authority. TheChairman, Tunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul Rahman, is a Non Executive Director, while the GroupMD/CEO, Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah, is an Executive Director.The Chairman assumes responsibility for the management of the Board and ensures that regular Board meetings areheld and ad hoc Board meetings are convened when necessary. The Board agenda is set by the Group MD/CEO andapproved by the Chairman. The Chairman ensures that Board members are provided with complete, adequate andtimely information.The Group MD/CEO is the most senior executive in the Group and assumes executive responsibilities for the Group'sbusiness and is responsible to ensure the execution of strategic goals, effective operation within the Group, explain,clarify and inform the Board on matters pertaining to the Group.391.3 Principal Duties and Resposibilities of the BoardIn discharging its stewardship responsibilities, the Board has formally adopted a schedule of matters specificallyreserved for its decision. The schedule of matters specifically reserved for the Board's decision is as follows:-• Reviewing and adopting a strategic plan for the Company;• Overseeing the conduct of the Company's business to evaluate whether the business is being properly managed;• Identifying principal risks and ensure the implementation of appropriate systems to manage these risks;• Succession planning, including appointing, training, fixing the compensation of and where appropriate, replacingsenior management;• Developing and implementing an investor relations programme or shareholders communication policy for theCompany; and• Reviewing the adequacy and the integrity of the Company's internal control systems and management informationsystems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.1.4 Board Meeting and Attendance of Directors to Board MeetingRegular scheduled meetings and also ad hoc Board meetings are held as and when required to receive, deliberate anddecide on matters reserved for its decision. The Board met 6 times during the financial year ended 31 December 2005.The details of the attendance by each of the Directors are as follows:Members of the Board No. of Attendance %Tunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul Rahman 6/6 100Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah 6/6 100Tunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah 6/6 100Tan Sri Dato' Abu Zarim bin Haji Omar 6/6 100Major General Lai Chung Wah (Rtd) 6/6 100Dato' Iskandar Michael bin Abdullah 6/6 100Yeo Took Keat (Appointed on 24 February 2005) 5/5 100General Dato' Sri Hj. Suleiman bin Mahmud (Rtd) (Appointed on18 May 2005) 4/4 100

Statement On Corporate Governance (continued)1.5 Supply of InformationThe Directors are provided with the relevant agenda and Board papers in sufficient time prior to Board meeting fortheir perusal and consideration and to enable them to obtain further explanation and clarification to facilitateinformed decision making.The Board has unrestricted access to timely and accurate information, which is not only confined to qualitative andquantitative information, but also to other information deemed suitable such as customer satisfaction, products andservices quality, market share and market reaction and macro economic performance.All Directors have access to the advice and services of the Company Secretary and the Senior Management staff inthe Group and may obtain independent professional advice at the Company's expense in furtherence of their duties.The Directors are regularly updated by the Compliance Section on new statutory as well as regulatory requirementsrelating to the duties and responsibilities of Directors and the operation of the Group.1.6 Appointments to the BoardAll new directors are appointed by the Board on the recommendation of the Nomination Committee.In selecting a suitable candidate, the Nomination Committee takes into account of the size of the Board with a viewof determining the impact of the number upon its effectiveness, the available vacancy due to retirement or death ofa Director and the required mix of skill, expertise and experience required for an effective Board. The final decision onthe appointment of a candidate recommended by the Nomination Committee rests with the whole Board. In makingits decision, the Board is guided by a comprehensive Procedure for the Appointment and Removal of Directors, whichit previously adopted.The Board has also implemented the mechanism for the formal assessment on the effectiveness of the Board as awhole and the contribution of each Director to the effectiveness of the Board.401.7 Re-electionIn accordance with the Articles of Association of the Company, at least one third of the Directors will retire by rotationat each Annual General Meeting and they can offer themselves for re election at the Annual General Meeting.The Directors will also retire from office at least once in 3 years, but will be eligible for re election. Directors over 70years of age are requried to submit themselves for re-appointment annually in accordance with Section 129(6) of theCompanies Act, 1965.The Board ensures that full information is disclosed through the notice of meeting regarding Directors who are retiringand who are willing to serve if re elected.1.8 Directors' TrainingPractice Note No. 15/2003 on Continuing Education Programme has been repealed effective from 1 January 2005.Directors who have yet to accumulate a total minimum of 72 CEP points for both the calendar years of 2003 and2005 have accumulated at least 72 CEP points before 31 December 2005. In the financial year ended 31 December2005, the training attended by the Directors include, inter alia, the following:-• Managing Corporate Turnaround and Change Management• Board Agenda Briefing : Business Impact of New Financial Reporting Standards• Understanding Unit Trusts• Boardroom Briefing for Diectors/Chief Executive Officers• Finacial Reporting System WorkshopThe Nomination Committee has been tasked with the responsibility to review and recommend the training needs ofeach Director to enable the Director to discharge his duties effectively and proficiently.2. DIRECTORS' REMUNERATION2.1 Determination of Directors' Remuneration and FeesThe remuneration of Directors is decided by the Board on the recommendation of the Remuneration Committee. TheBoard has adopted a Procedure for Determining the Remuneration of Directors, Chief Executive Officer and Key SeniorOfficers which sets out the criteria for determining the remuneration of Directors, Chief Executive Officer and KeySenior Officers of the Company.The remuneration of the Executive Directors, namely the Group ED/CEO, Tunku Dato’ Ya’acob bin Tunku Tan SriAbdullah and the Executive Director/Group Chief Operating Officer, Mr Yeo Took Keat (“ED/Group COO”) are whollybased on their respective performance evaluation. The performance of the Group ED/CEO is evaluated by the Boardwhereas and the performance of the ED/Group COO is evaluated by the Group ED/CEO.

Statement On Corporate Governance (continued)Non Executive Directors do not receive remuneration but are paid yearly directors' fees which are approved by theShareholders at the Annual General Meeting and meeting attendance allowance for each Board and BoardCommittee meeting. Non Executive Directors are evaluated based on their responsibilities and experience and the sizeof the particular companies they participate in.2.2 DisclosureThe remuneration of the Directors of the Company for the financial year ended 31 December 2005 are set out below:ExecutiveDirectors (RM)Non-ExecutiveDirectors (RM)Fees - 206,903Salaries and allowances 2,364,458 50,000Bonus 776,000 -Other Benefits 47,115 31,600Total 3,187,573 288,503The number of Directors whose total remuneration falls within the following bands is as follows:Executive Non-ExecutiveRange of Remuneration Directors DirectorsBelow RM50,000 - 5RM100,001 to RM150,000 - 1RM850,001 to RM900,000 1 -RM2,250,001 to RM2,300,000 1 -3. BOARD COMMITTEESThe Board has establish Board Committees to assist the Board in performing its duties and discharging its responsibilitiesmore efficiently and effectively. The Board Committees operate on Terms of Reference approved by the Board and makeregular reports to the Board on their activities. The details of the Board Committees are as follows:-413.1 Audit CommitteeThe Board has established an Audit Committee principally to review the Company's and the Group's financialreporting and ensure the effectiveness of the systems of internal control and compliance.The Audit Committee consists of 4 Directors, 3 of whom are Independent Non Executive Directors. The AuditCommittee functions on a Terms of Reference approved by the Board. Full details on the membership, the Terms ofReference and the activities of the Audit Committee for the financial year ended 31 December 2005 are disclosedseparately in this Annual Report under Internal Control Statement.3.2 Nomination CommitteeIn compliance with the Listing Requirements of Bursa Securities, a Nomination Committee was established on 30August 2001. The Committee comprises 3 Non Executive Directors, 2 of whom are independent. The members ofthe Nomination Committee as at the date of this Annual Report are:-Chairman :Members :Dato' Iskandar Michael bin Abdullah - Independent Non Executive DirectorTunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah - Non Executive DirectorMajor General Lai Chung Wah (Rtd) - Independent Non Executive DirectorThe Nomination Committee functions on a Terms of Reference approved by the Board. The principal duties andfunctions of the Nomination Committee are as follows:-(a) establishing the scope of work for the Board, Chief Executive Officer and Board Committees;(b) recommending and assessing new nominees for Board and Board Committees;(c) overseeing the overall composition of the Board in terms of appropriate size, mix of skill, and the balance betweenexecutive directors, non-executive directors and independent non-executive directors;

Statement On Corporate Governance (continued)(d) establishing a mechanism for the formal assessment and assessing the effectiveness of the Board as a whole,individual Directors, Board Committees and the chief executive officer;(e) recommending to the Board on the removal of a director and/or chief executive officer if he is ineffective, errantor negligent in discharging his responsibilities;(f) ensuring that all directors undergo appropriate induction programmes and receive adequate and appropriatecontinuous training; and(g) overseeing appointment, management of succession planning and performance evaluation of key senior officers,and recommending to the Board the removal of key senior officers if they are ineffective, errant and negligent indischarging their responsibilities.The Nomination Committee meets at least once a year, with additional meetings convened as necessary. During thefinancial year ended 31 December 2005, the Nomination Committee met 4 times and proposed appointment of MrYeo Took Keat and General Dato' Sri Suleiman bin Mahmud to the Board.3.3 Remuneration CommitteeIn compliance with the Listing Requirements of Bursa Securities, a Remuneration Committee was established on 30August 2001. The Committee comprises 4 Non Executive Directors, 3 of whom are independent. The members ofthe Remuneration Committee as at the date of this Annual Report are:-Chairman : General Dato' Sri Hj. Suleiman bin Mahmud (Rtd) - Independent Non Executive DirectorMembers : Major General Lai Chung Wah (Rtd) - Independent Non Executive DirectorDato' Iskandar Michael bin Abdullah - Independent Non Executive DirectorTunku Dato’ Seri Iskandar bin Tunku Tan Sri Abdullah - Non-Independent Non Executive DirectorThe Remuneration Committee functions on a Terms of Reference approved by the Board. The primary duties andfunctions of the Remuneration Committee are as follows:-42(a) recommending a policy and framework for determining the remuneration of Directors, Chief Executive Directorand Key Senior Officers; and(b) recommending specific remuneration packages for Directors, Chief Executive Officer and Key Senior Officers.The Remuneration Committee meets at least once a year, with additional meetings convened as necessary. TheRemuneration Committee met 2 times during the financial year ended 31 December 2005.3.4 Risk Management CommitteeUnder Best Practices AAI of the Code, the Board is expected to identify the principal risks affecting the Company andthe Group and ensure the implementation of appropriate systems to manage these risks. A Risk ManagementCommittee has been established on 29 May 2003 to evaluate the principal risks affecting the Company and the Group,assess the sufficiency of controls to minimise those risks and if necessary recommend a particular risk to be terminated.The Risk Management Committee comprises a majority of Non Executive Directors and is chaired by an IndependentNon Executive Director.The members of the Risk Management Committee as at the date of this Annual Report are-:Chairman : General Dato' Sri Hj. Suleiman bin Mahmud (Rtd) - Independent Non Executive DirectorMembers : Dato' Iskandar Michael bin Abdullah - Independent Non Executive DirectorMr Yeo Took Keat - Executive DirectorThe Risk Management Committee functions on a Terms of Reference approved by the Board. The principal duties andfunctions of the Risk Management Committee are, inter alia, as follows:-(i) setting up a risk management structure;(ii) reviewing and recommending risk management strategies, policies and framework for identifying, measuring,monitoring and controlling risks;(iii) ensuring adequate infrastucture, resources and systems are in place for effective risk management; and(iv) reviewing of management's periodic reports on risk exposure, risk portfolio composition and risk managementactivities.The Risk Management Committee met three (3) times during the financial year ended 31 December 2005.

Statement On Corporate Governance (continued)4. SHAREHOLDERS4.1 Dialogue between Companies and InvestorsThe Company values dialogue with shareholders as a means of effective communication that enables the Board toconvey information about the Group's performance, corporate strategy and other matters affecting shareholders' interests.The Company holds Investors Briefing every half yearly to update institutional shareholders on the development ofthe Group and invite questions from the floor. The ED/Group COO who is responsible for investors' relations also holdsregular meetings with fund managers and analysts on a personal basis.Institutional investors can also access the Company's website www.maa.com.my for the latest corporate informationof the Group.4.2 Annual General MeetingThe Annual General Meeting is the principal forum for dialogue with individual shareholders. At the Annual GeneralMeeting, which is generally well attended, shareholders have direct access to the Board and are given the opportunityto ask questions during the open question and answer session prior to moving for adoption of the Company'sAudited Financial Statements and Directors' Report for the financial year and other businesses (if applicable). Theshareholders are encouraged to ask questions both about the resolutions being proposed or about the Group'soperations in general.Extraordinary General Meetings are held as and when shareholders' approvals are required on specific matters andshareholders are notified of such meetings in accordance with the Listing Requirements of Bursa Securities.The Board is also committed to ensure that the shareholders and other investors are well informed of majordevelopments of the Group and the information is also communicated to them through the following channels:(a) the Annual Report;(b) various disclosures and announcements made to Bursa Securities, including the quarterly results and annual results; and(c) the Company's website www.maa.com.my through which shareholders and the public in general can gain accessto the latest corporate information of the Group.Further, the Board has appointed Major General Lai Chung Wah (Rtd) as the Senior Independent Director to whomall concerns may be conveyed.435. ACCOUNTABILITY AND AUDIT5.1 Financial ReportingThe Board is responsible to ensure that the Company's and the Group's financial statements are in accordance withthe applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965.The Group publishes full financial statements annually, half yearly and quarterly as required by the ListingRequirements of Bursa Securities.Before financial statements are released to Bursa Securities, the financial statements are reviewed by the AuditCommittee and approved by the Board. The details of the Company's and the Group's financial positions are includedin the Financial Statements section of the Annual Report.5.2 Internal ControlSystem of Internal ControlThe Board maintains a sound system of internal control to safeguard shareholders' investment and the Group'sassets. The system of internal control covers not only financial controls but also controls relating to operations,compliance and risk management. The system of internal control involves each key business unit and its management,including the Board, and is designed to meet the business units' particular needs, and to manage the risks to whichthey are exposed. The system of internal control, by its nature, can only provide reasonable and not absoluteassurance against material errors, frauds or losses occuring.A sound system of internal controls can only operate within a defined organisational and policy framework. Themanagement framework of the Company clearly defined the roles, responsibilities and reporting lines of eachbusiness units and support units. Delegations of authority, control processes and operational procedures aredocumented and disseminated to staff. While all employees have a part to play in upholding the system of internalcontrol, the Company has established certain sections to provide independent oversight and control. These sectionsinclude the Internal Audit Department, Legal Affairs Section, Compliance Section, Risk Management Section andFraud Control Section.

Statement On Corporate Governance (continued)Internal AuditThe internal audit function is performed by the Internal Audit Department which is independent of the activities itaudit and is performed with impartiality, proficiency and due professional care. Its role is to provide independent andobjective reports on the organisation's management, records, accounting policies and controls to the AuditCommittee. The internal audits include evaluation of the processes by which significant risks are identified assessedand managed. Such audits also ensure instituted controls are appropriate and are effectively applied to achieveacceptable risk exposures in line with the Group's risk management framework.LegalThe Legal Affairs Section seeks to manage the legal risks of the Company and the Group by ensuring that all legaldocumentations are properly executed and that the interest of the Company and the Group is protected at all times.It further monitors the quality of legal services provided by external solicitors and acts as a liaison between theManagement and the external solicitors.ComplianceThe compliance function has specific accountability for instilling and maintaining a strong compliance culture andframework within the Group. The compliance function is undertaken by an independent Compliance Section whichensures the Company's compliance with the Listing Requirements of Bursa Securities and other regulatoryrequirements.Risk ManagementRisk Management is essential to the Group's businesses. The Risk Management Section is responsible for institutingan enterprise risk management framework and infrastructure for the Company and the Group.The Board recognises that risks cannot be fully eliminated. As such, the systems, processes and procedures being putin place are aimed at minimising and managing them. Ongoing reviews are continuously carried out to ensure theeffectiveness, adequacy and integrity of the system of internal controls in safeguarding the Company's and theGroup's assets.44The risk management process in the Company is further strengthened through regular deliberation of the major risksconfronting the Company and the Group by the Risk Management Committee who assesses the sufficiency of theexisting controls to mitigate the major risks, and where appropriate, terminate risks that are unacceptable.The effectiveness of the system of internal controls of the Company and the Group is reviewed periodically by theAudit Committee. The Statement on Internal Control, which provides an overview of the state of internal controlwithin the Group is set out separately in this Annual Report.Fraud ControlIn an effort to minimise the risk of fraud, the Board has adopted an Anti-Fraud Framework for the Company and theGroup. The Anti-Fraud Framework consists of strategies for prevention and detection of fraud. A Fraud ControlSection has been set up at the end of 2005 to assist the Audit Committee in the implementation of the Anti-FraudFramework.5.3 Relationship with External AuditorsThe independent External Auditors fill an essential role for the shareholders by enhancing the realiability of theGroup's financial statements and giving assurance of that realiability to users of these financial statements. TheExternal Auditors have an obligation to bring any significant defects in the Group's system of control and complianceto the attention of Management, the Audit Committee and the Board.It is a policy of the Audit Committee to meet with the External Auditors at least twice a year to discuss their auditplan, audit findings and the financial statements.The Audit Committee also meets with the External Auditorswhenever it deems necessary.6. COMPLIANCE WITH THE CODEThe Company is in substantial compliance with the Principles and Best Practices of the Code throughout the financial yearended 31 December 2005.

Risk ManagementThe Board recognises that risk management is an integral part of the Group's business operations and that the identificationand management of risks will affect the achievement of the Group's business objectives. The Group has implemented an ongoingprocess of identifying, evaluating, monitoring and managing the significant risks affecting the achievement of itsbusiness objectives and has taken into account the guidelines of the Malaysian Code on Corporate Governance. The on-goingapplication of an integrated enterprise wide risk management framework is aimed at enhancing the internal control byensuring that risks related to the Company and the Group are managed through a systematic and consistent risk managementprocess.Accountability and ResponsibilitiesThe Company believes that there must be clear accountability and responsibilities for the risk management process. The riskmanagement framework of the Group is based on the following principles:-1. The Board is ultimately responsible for the management of risks. The Board through the Risk Management Committeemaintains overall responsibilities for the risk oversight within the Group.2. The Risk Management Committee is responsible for the risk oversight for the key risk affecting the Group. The RiskManagement Committee assesses the adequacy of the existing controls to minimise the key risk factors and decide on theappropriate risk treatment on those risks.3. The Risk Management Section of the Company is responsible for managing the risk management system and ensurestimely review of the risks affecting each Business Units within the Group. It is also responsible for assisting Business Unitsin the identification, measurement and monitoring of risks.4. The Business Units are primarily responsible for identifying and evaluating risks within their Units. They are required toimplement the recommendation of the Risk Management Committee by putting in place appropriate risk policies in criticalareas of their operations to ensure that their day-to-day activities are carried out within acceptable risk parameters.5. The Audit Committee's key role, supported by the Internal Audit Department, is to provide an independent assessment ofthe adequacy and reliability of the risk management processes, and compliance with risk policies and regulatory guidelines.Risk Management Process45The Company has established within its risk management framework a structured approach to enterprise wide riskmanagement. The risk management process encompasses the following 4 stages:-1. Stage 1 - Risk IdentificationDuring the risk identification stage, the Risk Management Section working together with the Business Units set out toidentify the Business Units' exposure to current and potential risks that could affect the Business Units' goals in achievingthe Company's objectives.The Risk Management Committee has classified risks into 9 key risk factors (“KRF”), namely:(i) Product Risk - risk associated with the functions, services or product (deliverables) of a Business Unit ordepartmental outputs and contributions.(ii) Human Risk - risk associated with the qualification, experience and expertise of the person responsible for aparticular function.(iii) Regulatory Risk- risk associated with the non-compliance or breaching of relevant rules, regulation, guidelines,standards or laws issued by regulatory bodies.(iv) Operational Risk - risk associated with the day-to-day activities in performing and delivering the “Product”.(v) Financial Risk - risk associated with financial loss or lost or potential financial gain.(vi) External Risk- risk associated with external factors that the Company has no or little influence.

Risk Management (continued)(vii) Customer Risk(viii) Integrity Risk- risk brought by users or customers of function, service or product offered or provided by aBusiness Unit.- risk associated with the attitude and behavioural aspects of employees with respect topersonality, trustworthy, creditworthiness and loyalty.(ix) Supplier Risk - risk associated with persons who supply information or services to the Business Units.2. Stage 2 - Risk EvaluationIn this stage, risks identified are evaluated on their probability of occurrence and their impact severity. It is at this stage thatthe risk profile for each risk is established. The risks are rated either as High Risk, Significant Risk, Moderate Risk or LowRisk.3. Stage 3 - Risk TreatmentThis is the stage where risks are treated according to the risk appetite of the Company. The risk can be treated in thefollowing ways:-(i) Accept - Risk is accepted and controls are sufficient.(ii) Minimise - Risk is accepted but controls are required to minimise risk.(iii) Transfer - Risk is accepted but function is to be outsourced/insured.(iv) Terminate - Risk is at unacceptable level. To terminate function.464. Risk MonitoringRisks are monitored through a Risk Management Plan. The progress on the implementation of risk policies are reported tothe Risk Management Committee periodically. The Internal Audit Department of the Company play a crucial role inmonitoring compliance with the risk management policies and action plan.

Other Bursa Securities Compliance Information1. Utilisation of Proceeds Raised from Corporate ProposalIn 2004, the Company proposed a Renounceable Rights Issue of up to 152,176,876 new Irredeemable Preference Shares ofRM1.00 each ("IPS") ("Rights IPS") together with up to 152,176,876 free Detachable Ordinary Shares of RM1.00 each ("OrdinaryShares") ("Bonus Shares") and up to 152,176,876 free Detachable warrants ("Warrants") at an indicative issue price of RM2.00per rights IPS, on the basis of one (1) rights IPS with one (1) free Detachable Bonus Share and one (1) free Detachable Warrantfor every one (1) existing ordinary share held in the Company at an entitlement date to be determined ("Proposed Rights Issue of IPS").The Proposed Rights Issue of IPS has on 22 February 2005 obtained its shareholders approval and was expected to be completedby 3 June 2005.Due to the uncertain sentiments in the Malaysian equity market prevailing then, the Company had applied to the SecuritiesCommission (“SC”) for approval to extend the completion of the Proposed Rights Issue of IPS from 3 June 2005 to 31 December2005. SC had granted approval on 27 May 2005.On 23 December 2005, given the continuing uncertain sentiments in the Malaysian equity market, upon application by theCompany, the SC had approved a further extension of time of six (6) months from 1 January 2006 to 30 June 2006 for theCompany to complete the implementation of the Rights Issue of IPS.On May 3 2006, MAAH after taking into consideration the current market sentiments and the market performance of the ordinaryshares of MAAH, has announced the abortion of the Rights Issue IPS.Notwithstanding the abortion of the Rights Issue of IPS, MAAH announced that it will proceed with the proposed Bonus Issue ofup to 152,176,876 new ordinary shares of RM1 each in MAAH as fully paid on the basis of one (1) Bonus Share for every one (1)existing MAAH share held to the registered shareholders whose names appear in the Record of Depositors of the Company at theclose of business on an entitlement date for the Proposed Bonus Issue to be determined and announced later. The Proposed BonusIssue shall be capitalised from the share premium and retained earnings of the Company.2. Share Buy-BackThe Company has not purchased any of its own shares during the financial year ending 31 December 2005 and the precedingfinancial year.3. Options, Warrants or Convertible SecuritiesDuring the financial year ended 31 December 2005, the Company exercised its right of conversion of 5.6 million warrants inMithril Berhad (“Mithril”), an associated company, to 5.6 million ordinary shares of RM1 each with a resulted 34% interest inMithril. The warrants conversion was necessary to maintain the Group's minimum interest of 33% as imposed by the SecuritiesCommission for the duration of the warrants pursuant to the debt restructuring exercise of Tajo Berhad.47Other than as stated above, there were no options, warrants or convertible securities exercised or converted by the Company.4. American Depository Receipt (ADR) or Global Depository Receipt (GDR)The Company has not sponsored any ADR or GDR programme for the financial year ended 31 December 2005.5. Sanctions and/or PenaltiesSave as disclosed below, there were no sanctions and/or penalties imposed on the Company, its subsidiaries, directors ormanagement by the relevant regulatory bodies during the financial year ended 31 December 2005:-On 16 March 2005, Malaysian Alliance Assurance Berhad (“MAA”), a wholly owned subsidiary of the Company, was compoundedby Bank Negara Malaysia (“BNM”) for a sum of Ringgit Malaysia Ten Thousand (RM10,000.00) for the breach of Section 141(1)of the Insurance Act 1996 read together with Paragraph 65(1)(a) of the Insurance Regulations 1996, for failing to collect motorinsurance premiums prior to issuance of cover notes to its direct customers. This breach was committed throughout the thirdquarter of year 2003. MAA accepted the compound and made payment to BNM within the stipulated time frame.6. Non-Audit FeesThere was no non-audit fee paid to external auditors for the financial year ended 31 December 2005.7. Variation in ResultsThe Company did not make or announce any profit forecast or projection during the financial year ended 31 December 2005.There was also no variation to the unaudited results which were announced for the financial year ended 31 December 2005.8. Profit GuaranteesDuring the financial year, there were no profit guarantees given by the Company.9. Revaluation PolicyIn the financial year ended 31 December 2005, the Company does not own any landed properties. The subsidiary companies thatown landed properties revalued their properties in accordance with the requirements of the relevant regulatory authorities.10. Material ContractsThere was no material contracts entered into by the Group which involved directors' and major shareholders' interests, either stillsubsisting at the end of the financial year ended 31 December 2005 or entered into since the end of the previous financial year.

Other Bursa Securities Compliance Information (continued)Recurrent Related Party Transactions of a Revenue or Trading NatureOn 28 June 2005, the Company sought approval for a shareholders’ mandate for the MAAH Group to enter into Recurrent Transactions (asdefined in the Circular to Shareholders dated 31 May 2005) in their ordinary course of business with related parties (“Shareholders’ Mandate”)as defined in Chapter 10 of the Listing Requirements of Bursa Securities.The aggregate value of transactions conducted during the financial year ended :-TransactingPartyNature ofTransactionRelated PartyNature of InterestValue ofTransaction(1/1/2005-31/12/2005)RM ’000Malaysian AssuranceAlliance Berhad(MAA)Office rentalincome receivedand receivableTrace Management Services SdnBhd (Trace)A company in which TA, TI and TY*have deemed interest by virtue oftheir substantial interest in TheMelewar Corporation Berhad, thesubstantial shareholder of Trace70Melewar Group Berhad (MGB)A company in which TA, TI and TYare directors and major shareholders33Green Silk Sdn BhdA company in which TA is a directorand major shareholder163Melewar Equities Sdn Bhd (MESB)A major shareholder of theCompany84Sistem Sewa Kereta MalaysiaSdn Bhd (SSKM)A company in which TI is a directorand has deemed interest by virtue ofhis substantial interest in MelewarLeisure Sdn Bhd, the holdingcompany of SSKM12048Melewar Apex Sdn BhdA company controlled by TunkuSoraya binti Tunku Tan Sri Abdullah,who is the daughter of TA and sisterof TI and TY175Melewar IntegratedEngineering Sdn BhdA subsidiary of MIG** in which TA,TI and TY are directors. Thesubstantial shareholders of MIG areMESB, Melewar Equities (BVI) Ltd andMAA, companies controlled by TY116Mitra Malaysia Sdn Bhd (Mitra)A company in which TI is a directorand has deemed interest by virtue ofhis substantial interest in MelewarLeisure Sdn Bhd, the holdingcompany of Mitra20MAAKL Mutual Bhd(MAAKL MUTUAL)A 70% subsidiary of the Companyand 20% owned by Khyra LibertySdn Bhd, a company controlled by TY537Pacific World Travel Sdn Bhd(PWT)A company in which TI is a directorand has deemed interest by virtue ofhis substantial interest in MelewarLeisure Sdn Bhd, the holdingcompany of PWT17MAA Bancwell Trustee Berhad(MAA Bancwell)An associated company and acompany in which TA, TI and TYhave deemed interest by virtue oftheir substantial shareholdings inMGB, a shareholder of MAABancwell40The Budimas CharitableFoundationA corporation body registered underTrustee (Incorporation) Act, 1952 inwhich TY is a Trustee56

Other Bursa Securities Compliance Information (continued)TransactingPartyNature ofTransactionRelated PartyNature of InterestValue ofTransaction(1/1/2005-31/12/2005)RM ’000Malaysian AssuranceAlliance Berhad(MAA)Office rentalincome receivedand receivableMithrilA company in which TA, TI and TYare deemed interested in Mithril byvirtue of their deemed substantialinterest in MAAH who is asubstantial shareholder of Mithril170MAA-Medical Kidney CharityFundA company in which TA, TI and TYare trustees of the trust fundestablished pursuant to a Trust Deed72MAAOffice rentalexpenses paid andpayableCentral Market DevelopmentSdn Bhd (CMD)A company in which TI has deemedinterest by virtue of his subtantialinterest in Melewar Leisure Sdn Bhd,the holding company of CMD61MithrilA company in which TA, TI and TYare deemed interested in Mithril byvirtue of their deemed substantialinterest in MAAH who is asubstantial shareholder of Mithril6,800MAAH GroupPurchase of airtickets and travelpackage paid andpayableMitraA company in which TI is a directorand has deemed interest by virtue ofhis subtantial interest in MelewarLeisure Sdn Bhd, the holdingcompany of Mitra3,739MAAH GroupCorporatesecretarial andrelated services feespaid and payableTraceA company in which TA, TI and TYhave deemed interest by virtue oftheir substantial interest in TheMelewar Corporation Berhad, thesubstantial shareholder of Trace33349MAACollection agentfees received andreceivableMAAKL MUTUALA 70% subsidiary of the Companyand 20% owned by Khyra LibertySdn Bhd, a company controlled by TY5Maagnet SystemsSdn Bhd (MAAGNET)Unit Trust Systemsupport andmaintenance feesreceived andreceivableMAAKL MUTUALA 70% subsidiary of the Companyand 20% owned by Khyra LibertySdn Bhd, a company controlled by TY98MAAGNETHuman Resourcesystem facility feesreceived andreceivableMAAKL MUTUALA 70% subsidiary of the Companyand 20% owned by Khyra LibertySdn Bhd, a company controlled by TY4MAAGNETSales of computersMAAKL MUTUALA 70% subsidiary of the Companyand 20% owned by Khyra LibertySdn Bhd, a company controlled by TY97MAAGNETGIMS systemsupport andmaintenance feeMAA General AssurancePhilippines, Inc.An associated company and a companyin which TY is deemed interested viahis substantial interest in MAAH73MAAGNETSoftwaredevelopment feeMAAKL MUTUALA 70% subsidiary of the Companyand 20% owned by Khyra LibertySdn Bhd, a company controlled by TY14BancwellAn associated company and acompany in which TA, TI and TY havedeemed interest by virtue of theirsubstantial shareholdings in MGB, ashareholder of MAA Bancwell10

Federación Latinoamericana de Bancos -FELABAN-volver a integrarlo como mínimo tres años después de la última reelección permitida). Seautoevalúan. El Consejo de Administración define la remuneración de sus miembros (nopueden recibir ninguna otra). El Comité creó dos concepciones de auditoría: una corporativa(que vigila que todos los bancos sigan las orientaciones de la holding) y una operacional (queestá en cada unidad de negocio), ambas reportando al Comité de Auditoría 37 .• Comité de Divulgación y Negociación 38 : administra la política de divulgación de acto ohecho relevante y de la negociación de valores mobiliarios, abarcando una gama de accionesinternas para mejorar los flujos de información 39 . Está integrado por el director de Relacionescon Inversionistas (es su presidente) y de dos a 10 consejeros (actualmente tres son miembrosindependientes y siete son ejecutivos del Itaú). Los dos comités fueron elevados a estatutariospor la Asamblea General de 2005 y unificados en un comité único (Comité de Divulgación yde Negociación) por la Asamblea de 2006. Se reúne como mínimo cuatro veces al año.• Consejo Consultivo Internacional: evalúa las perspectivas de coyuntura económica mundial y laaplicación de códigos y lineamientos internacionalmente aceptados 40 . Se integra por el directorpresidente y adicionalmente por tres a 20 Consejeros y/o directores, y personalidades de reconocidacompetencia en el campo financiero y económico internacional. El Consejo de Administraciónpuede reglamentar su funcionamiento. Su remuneración es fijada por la Asamblea General.• Consejo Consultivo: está compuesto de tres a 20 miembros, elegidos anualmente por el Consejode Administración. Colabora con el Directorio a través de sugerencias para solucionarproblemas, en el momento que sea necesario. Su remuneración se fija por la Asamblea General,y compete al Consejo de Administración reglamentarlo.Es importante resaltar que Itaú Holding Financeira S.A. (cabeza de la organización) cuenta para lacoordinación de la acción administrativa con los siguientes órganos colegiados (integrados por losejecutivos, que presentan sus informes al Consejo de Administración), quienes preparan las políticasen cada una de sus materias, las cuales son adoptadas por cada unidad de negocio, con lasvariaciones que se requieran por parte de los comités ya mencionados:• Comisión Superior de Auditoría y Gestión de Riesgos Operacionales.• Comisión Superior de Ética.• Comisión Superior de Crédito.• Comisión Superior de Administración de Riesgos Financieros.• Comisión Superior de Políticas Contables.• Comisión Superior Tributaria.37Al final de cada ejercicio social el Comité de Auditoría elabora una relatoría sobre sus funciones, enviando copia alConsejo de Administración y manteniéndolo a disposición del Banco Central de Brasil y la Superintendencia de SegurosPrivados por cinco años como mínimo. En los mismos términos se debe elaborar una relatoría semestral al final y primersemestre de cada ejercicio social, cuyo resumen se publica en conjubstantial shareholder ofMithrilAn associated company and acompany in which TY is deemedinterested via his substantial interestin MAAH3773MAA CorporateAdvisory Sdn Bhd(MAACA)Provision ofcorporate advisoryservicesMIGA company in which TA, TI and TYare directors of MIG. TY is deemedinterested in MIG by virtue of hissubstantial interest in MESB, who inturn is the major shareholder of MIG95MAAGNETDisaster RecoveryCentre Facility feeMAAKL MUTUALA 70% subsidiary of the Companyand 20% owned by Khyra LibertySdn Bhd, a company controlled by TY12MAA Credit Sdn BhdLeasing ofequipmentTajo BerhadA subsidiary company of Mithril, acompany on which TA, TI and TY aredeemed interested by virtue of theirdeemed substantial interest in MAAHwho is a substantial shareholder ofMithril2,064MAAH GroupTrustee fees paidand payableMAA BancwellAn associated company and acompany in which TA, TI and TY havedeemed interest by virtue of theirsubstantial shareholdings in MGB, asubstantial shareholder of MAABancwell172Notes :-* TA is Tunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul RahmanTI is Tunku Dato’ Seri Iskandar bin Tunku Tan Sri AbdullahTY is Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah** MIG is Melewar Industrial Group Berhad

Statement Of Internal ControlThe Malaysian Code on Corporate Governance requires the board of listed companies to maintain a sound system of internalcontrol to safeguard shareholder's investments and the Group's assets. Paragraph 15.27(b) of the Bursa Malaysia ListingRequirements requires Board of Directors of listed companies to include a statement in their annual reports on the state oftheir internal controls.A. THE BOARD'S AND MANAGEMENT'S RESPONSIBILITYThe Board of Directors (“Board”) has overall responsibility for reviewing and adopting a strategic direction for the Group,overseeing and evaluating whether the Group's business is being properly managed, identifying principal risks andimplementing appropriate system to manage risks, developing and implementing a investors relations programme for theGroup and reviewing the adequacy and integrity of the Group's internal control systems and management informationsystems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.The Board recognizes the importance of sound internal controls and risk management practices to good corporategovernance. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achievecorporate objectives. However, the system can only provide reasonable but not absolute assurance against materialmisstatement or loss.B. INTERNAL CONTROL PROCESSESA system of internal controls provides a mechanism to facilitate assessment of effective and efficient operation and toensure compliance with laws, regulations, internal procedure and guidelines. This system is also designed to safeguard theassets of the Group, ensure the maintenance of proper accounting records and provide reliable financial information foruse within the business of the Group and for publication.The Board has established an organizational structure with clearly defined lines of accountability and delegated authority.The Chief Executive Officer (“CEO”) and senior management team are assigned with the responsibility of managing theGroup. They are accountable for the conduct and performance of their business within the agreed business strategies.Through their review of performance and operation reports, as well as by attending management meetings, the CEO andsenior management team monitor the day-to-day affairs of the Group. Other than through the above meetings andreports, the CEO and senior management also regularly meet with the head of departments and the management teamof subsidiaries to address any matters arising. Significant issues are brought to the attention of the CEO, who in turn willdirect these matters, if necessary, to the Board for its attention.51Continuous actions are being taken to improve the policies, processes, people and structures as key elements of internalcontrol. This continuous improvement is not only to improve the management of existing risks but also to anticipate andmanage potential risks considering the changes in the risk profile experienced by the industry and the Group.Key elements of Group's internal control system, including the processes in place to review its adequacy, are:i) a clearly defined organizational structure that is aligned to business and operations requirement headed by accountableChief Executive Officers;ii)annual budget and monthly reporting of results and key performance indicators to assess and sustain the effectivenessof the Group's system of controls;iii) the establishment of a Management Committee comprising the senior management with responsibilities that includeexecution of the following controls:a) monthly performance reviews of actual performance against expectations and budget; andb) quality assurance on key information and performance reports.iv) procedures with embedded internal control are documented in series of operating manuals. Continuous efforts areundertaken to ensure standardisation, timeliness, comprehensiveness and improved communications on key internalcontrol procedures including authorisation, accountability, monitoring and reconciliation processes;v) continuous education for employees on the importance of governance and internal control as part of theirdevelopment programme;

Statement Of Internal Control (continued)vi) the establishment of an independent Internal Audit Department which reports to the Audit Committee. The internalaudit teams conduct its audit function in accordance with the annual audit plan approved by the Audit Committeecovering compliance, operational and system audit of the company. The audit function includes performing systematicreviews of key processes relating to high risk areas and assessing the effectiveness of internal control includingcompliance. Areas for improvement and proposed recommendations are highlighted to senior management and theAudit Committee with a periodic follow-up review on actions taken;vii) the Audit Committee, on behalf of the Board, regularly reviews internal control issues identified in reports prepared bythe internal auditor and external auditor and the related actions taken with senior management. The scope of thisreview includes any significant internal control aspects of issues identified in the financial statements as disclosed in thisannual report.The Board ensures that on-going reviews are continuously carried out to measure the effectiveness of the internal controlsystem and to establish shareholders' confidence. This is to ensure that the Group's system of internal control is updatedin line with the changes in the operating environment and consistent with the Group's overall objectives. The Board furtherseeks regular assurance on the continuity and effectiveness of the internal control system through independent appraisalsby internal and external auditors.Major associated companies have been dealt within this statement as part of the Group for the purposes of applying theinternal control processes.The Board is of the view that current system of internal control is sufficient to safeguard the Group's interest.52Directors’ Responsibility Statement InRespect Of Annual Audited AccountsThe Directors are responsible for ensuring that the annual audited financial statements of the Company and the Group aredrawn up in accordance with the requirements of the applicable approved accounting standards in Malaysia, the provisions ofthe Companies Act, 1965, Bank Negara Malaysia Guidelines and the Listing Requirements of Bursa Securities.The Directors are also responsible for ensuring that the annual audited financial statements of the Company and the Groupare prepared with reasonable accuracy from the accounting records of the Company and the Group so as to give a true andfair view of the state of affairs of the Company and the Group as at 31 December 2005.In preparing the annual audited financial statements, the Directors have:-(a) applied the appropriate and relevant accounting policies on a consistent basis;(b) made judgments and estimates that are reasonable and prudent; and(c) prepared the annual audited financial statements on a going concern basis.

Audit Committee Report (continued)2.0 MeetingsThe Audit Committee meetings shall be conducted at least three (3) times annually, or more frequently as circumstancesdictate. The Senior Management's representatives, the Internal Audit representatives, and the External Auditors'representatives attend the meetings when appropriate. Other Board members and employees may attend meetings uponthe invitation of the Audit Committee.3.0 QuorumA quorum shall consist of a majority of Committee members who are non-executive directors.4.0 AuthorityThe Audit Committee shall, in accordance with a procedure to be determined by the Board of Directors and at the expenseof the Company,(a) investigate any activity within its terms of reference. All employees shall be directed to cooperate as requested bymembers of the Audit Committee;(b) have full and unlimited/unrestricted access to all information and documents/resources which are required to performits duties as well as to the internal and external auditors and senior management of the Company;(c) obtain, if it considers necessary, independent professional advice or other advice and to secure the attendance ofoutsiders with relevant experience and expertise;(d) be able to convene meetings with the auditors, external or internal, without the attendance of the Executive Director,whenever deemed necessary; and(e) be able to make reports when necessary to the relevant authorities if a breach of any legal or regulatory requirementhas occurred.545.0 Duties and ResponsibilitiesThe duties and responsibilities of the Audit Committee are as follows:(a) to review:i. with the external auditors on their audit plan, scope and nature of audit for the Company and the Group;ii. with the external auditors on their evaluation of the system of internal controls of the Group and its audit findings ;iii. any problems and reservations arising from the interim and final external audits, and any matters the externalauditors may wish to highlight;iv. the quality of external auditors and make recommendations concerning their appointment, termination andremuneration and to consider the nomination of external auditors;v. the liaison between the external auditors, the management and the Board of Directors and also the assistance givenby management and employees to the external auditors;vi. the adequacy of the scope, functions and resources of the Internal Audit Department and that it has the necessaryauthority to carry out its work;vii. the internal audit programme, processes, results of the audit and whether or not appropriate action has been takenas per the recommendations of the Internal Audit Department;viii. quarterly results and year end financial statements prior to the Board of Directors' approval pertaining to:• major accounting policy changes.• significant and unusual events.• compliance with accounting standards and other legal requirements and to monitor any related partytransactions and conflict of interest situation that may arise within the Group and to report, if any, transactionsbetween the Group and any related party outside the Group which are not based on arms length terms andwhich are disadvantageous to the Group.(b) to recommend the appointment of the external auditors, and to discuss their audit fees and any questions ofresignation or dismissal;(c) to monitor organizational compliance with Bursa Malaysia's requirements; and(d) to perform any other functions as may be mutually agreed by the Committee and the Board of Directors.6.0 SecretaryThe Secretary of the Company shall also be the Secretary of the Committee. The Secretary shall be responsible for drawingup the agenda in consultation with the chairperson and shall be responsible for keeping the minutes of the meeting of theCommittee, circulating them to committee members and ensuring compliance with regulatory requirements. The agendatogether with relevant explanatory papers and documents are circulated to the committee members.

financialstatements2005

Directors’ ReportThe Directors have pleasure in submitting their report together with the audited financial statements of the Group and theCompany for the financial year ended 31 December 2005.PRINCIPAL ACTIVITIESThe Company is principally engaged in investment holding and providing management services. The principal activities ofthe Group consist of general and life insurance businesses, investment holding, hire purchase, leasing and other creditactivities, unit trust, property management, fund management and investment advisory, security and consultancy services.There have been no significant changes in the nature of these activities for the Group or the Company during the financialyear.FINANCIAL RESULTSGROUPRM'000COMPANYRM'000Net profit for the financial year 44,170 48,349DIVIDENDSSince the end of the previous financial year, the Company paid a first and final tax exempt dividend of 15 sen per share,totalling RM22,827,000, on 22 August 2005 in respect of the financial year ended 31 December 2004, as shown in theDirectors' report of that financial year.56financialstatements2005The Directors now recommend the payment of a first and final tax exempt dividend of 10 sen per share on 152,177,000ordinary shares, totalling RM15,218,000, in respect of the financial year ended 31 December 2005, subject to the approvalof the members at the forthcoming Annual General Meeting of the Company.RESERVES AND PROVISIONSAll material transfers to or from reserves or provisions during the financial year are shown in the financial statements.DIRECTORSThe Directors who have held office during the financial period since the date of the last report are:Tunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul RahmanTunku Dato' Ya'acob bin Tunku Tan Sri AbdullahTunku Dato' Seri Iskandar bin Tunku Tan Sri AbdullahTan Sri Dato' Ir Abu Zarim bin Haji OmarMajor General (Rtd) Lai Chung WahDato' Iskandar Michael bin AbdullahYeo Took KeatGeneral Dato' Sri Hj Suleiman bin Mahmud (Rtd)In accordance with Section 129(6) of the Companies Act, 1965, Tunku Tan Sri Abdullah Ibni Almarhum Tuanku AbdulRahman, Tan Sri Dato' Ir Abu Zarim bin Haji Omar and Major General (Rtd) Lai Chung Wah retire and they, being eligible,offer themselves for re-election.In accordance with the Company's Articles of Association, Tunku Dato' Seri Iskandar bin Tunku Tan Sri Abdullah and GeneralDato' Sri Hj Suleiman bin Mahmud (Rtd) retire at the forthcoming Annual General Meeting and being eligible, offerthemselves for re-election.DIRECTORS' INTERESTSAccording to the register of Directors' shareholdings, particulars of interests of Directors who held office at the end of thefinancial year in shares in the Company are as follows:

Directors’ Report (continued)DIRECTORS' INTERESTS (continued)CompanyNumber of ordinary shares of RM1 eachAt 1.1.2005/Atdate of appointment Acquired Disposed 31.12.2005Tunku Tan Sri Abdullah IbniAlmarhum Tuanku Abdul Rahman- Indirect * 51,889,342 - - 51,889,342Tunku Dato' Seri Iskandar binTunku Tan Sri Abdullah- Indirect * 51,889,342 - - 51,889,342Tunku Dato' Ya'acob binTunku Tan Sri Abdullah- Direct 618,750 - - 618,750- Indirect * 51,889,342 - - 51,889,342Yeo Took Keat 40,000 - - 40,000* Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965, held through Iternum Melewar Sdn Bhd, acompany in which the above mentioned Directors have an interest.By virtue of the above mentioned Directors' interests in the shares of the Company, they are also deemed to have asubstantial interest in the shares of the subsidiary companies of the Company to the extent the Company has an interest.None of the other Directors in office at the end of the financial year held any interest in shares in, or debentures of, theCompany or its related corporations during the financial year.DIRECTORS' BENEFITSDuring and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangementswith the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of sharesin, or debentures of, the Company or any other body corporate.57financialstatements2005Since the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit(other than Directors' remuneration, fees paid to a company in which certain Directors have an interest and benefits providedto Directors as disclosed in note 27 to the financial statements) by reason of a contract made by the Company or a relatedcorporation with the Director or with a firm of which he is a member, or with a company in which he has a substantialfinancial interest.STATUTORY INFORMATION ON THE FINANCIAL STATEMENTSBefore the income statements and balance sheets were made out, the Directors took reasonable steps:(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowancefor doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowancehad been made for doubtful debts; and(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business theirvalues as shown in the accounting records of the Group and Company had been written down to an amount which theymight be expected so to realise.At the date of this report, the Directors are not aware of any circumstances:(a) which would render the amounts written off for bad debts or the amounts of the allowance for doubtful debts in thefinancial statements of the Group and Company inadequate to any substantial extent; or(b) which would render the values attributed to current assets in the financial statements of the Group and Companymisleading; or(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group andCompany misleading or inappropriate.

Directors’ Report (continued)STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (continued)No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelvemonths after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Groupor the Company to meet their obligations when they fall due.For the purpose of the above paragraph, contingent or other liabilities do not include liabilities arising from contracts ofinsurance underwritten in the ordinary course of business of the insurance subsidiary companies of the Company.At the date of this report, there does not exist:(a) any charge on the assets of the Group or Company which has arisen since the end of the financial year which securesthe liability of any other person; or(b) any contingent liability of the Group or Company which has arisen since the end of the financial year.At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or thefinancial statements which would render any amount stated in the financial statements misleading.In the opinion of the Directors:(a) the results of the Group's and the Company's operations during the financial year were not substantially affected by anyitem, transaction or event of a material and unusual nature; and(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transactionor event of a material and unusual nature likely to affect substantially the results of the operations of the Group orCompany for the financial year in which this report is made.58financialstatements2005SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR(a) On 6 October 2005, the Company together with Melewar Industrial Group Berhad, M3nergy Berhad (formerly knownas Trenegy (Malaysia) Berhad), Mycron Steel Berhad and Malaysian Merchant Marine Berhad (collectively referred to as“the Subscribing Companies”) subscribed for 100 ordinary shares of RM1 each in a shelf company by the name ofMaybach Logistics Sdn Bhd (formerly known as Trilink Major Sdn Bhd) (“MLSB”), of which 45 ordinary shares of RM1each was subscribed by the Company.The Subscribing Companies subsequently on 9 December 2005 subscribed for 2,000,000 Redeemable Preference Shares(“RPS”) of RM0.10 each at an issue price of RM1 per RPS in MLSB, of which 900,000 RPS of RM1 each was subscribedby the Company.(b) On 22 February 2005, the shareholders of the Company approved the following corporate proposals (collectively referredto as the “Proposals”):(i)Proposed renounceable rights issue of up to 152,176,876 new irredeemable preference shares of RM1 each (“IPS”)(“Rights IPS”) together with up to 152,176,876 free detachable ordinary shares of RM1 each (“Bonus Shares”) andup to 152,176,876 free detachable warrants (“Warrants”) on the basis of 1 Rights IPS with 1 free detachable BonusShare and 1 free detachable Warrant for every 1 existing ordinary share held in the Company at an entitlement dateto be determined later (“Rights Issue of IPS”);(ii) Proposed increase in the authorised share capital of the Company from RM500,000,000 comprising 500,000,000ordinary shares to RM1,000,000,000 comprising 500,000,000 ordinary shares and 500,000,000 IPS (“ProposedIncrease in Authorised Share Capital”);(iii) Proposed amendments to the Memorandum and Articles of Association of the Company pursuant to the ProposedRights Issue of IPS and Proposed Increase in Authorised Share Capital (“Proposed Amendments”);(iv) Proposed exemption by Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah (“TY”), a director and shareholder of theCompany and parties acting in concert with him (“TY and PAC”) from the obligation to extend a mandatory offerfor the remaining shares in the Company not already owned by them (“Mandatory Offer”) after the Proposed Rightsissue of IPS as provided under Practice Note 2.9.1 of the Malaysian Code on Take-Overs and Mergers, 1998(“Proposed Exemption”).

Directors’ Report (continued)SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (continued)(b) On 22 February 2005, the shareholders of the Company approved the following corporate proposals (collectively referredto as the “Proposals”) (continued):On 23 February 2005, the Company announced that the issue price for the Rights IPS to be issued pursuant to theProposals had been fixed by the Board at RM2 per Rights IPS. The issue price of RM2 each was arrived at after takinginto consideration the theoretical ex-bonus price of the Company's ordinary shares of approximately RM2.63, which wascalculated based on the weighted average market price of the Company's ordinary shares for the past 5 days up to andincluding 22 February 2005 (being the market day immediately preceding the price fixing date of 23 February 2005), ofapproximately RM5.25. The issue price of RM2 represented a discount of RM0.63 or approximately 24.0% over thetheoretical ex-bonus price for the Rights IPS.In addition, the Board has also fixed the exercise price of the Warrants, which are to be issued free with the Rights IPSpursuant to the Proposed Rights Issue of IPS, at RM2 per Warrant, which was arrived at after taking into considerationthe theoretical ex-bonus price of the Company's ordinary shares. The exercise price of the Warrants of RM2 representeda discount of RM0.63 or approximately 24.0% over the theoretical ex-bonus price.On 27 May 2005, the Securities Commission (“SC”) approved the Company's application to extend the completion ofthe Rights Issue of IPS from 3 June 2005 to 31 December 2005, given the prevailing uncertain sentiments in theMalaysian equity market.On 23 December 2005, given the continuing uncertain sentiments in the Malaysian equity market, the SC approved afurther extension of time of six (6) months from 1 January 2006 to 30 June 2006 for the Company to complete theimplementation of the Rights Issue of IPS.SIGNIFICANT EVENTS SUBSEQUENT TO THE FINANCIAL YEAROn 21 February 2006, the Company announced the entering into a Joint Venture Agreement with Solidarity Company BSC(C) (“Solidarity”) (hereinafter referred to as “JV”).The salient terms of the JV are as follows:(i)The parties will form a joint venture company (“NEWCO”) to carry on Takaful business in Malaysia upon receipt of theapproval from Bank Negara Malaysia (“BNM”).59financialstatements2005(ii) NEWCO will have an authorised and paid-up share capital of RM150 million and RM100 million respectively or such otheramount as may be agreed by the parties.(iii) NEWCO will initially be capitalised in an amount of RM100 million divided into 100 million ordinary shares of RM1 eachin accordance with the proportion of the shareholding set out below.(iv) The equity interest of the Company and Solidarity in NEWCO will be in proportion of 75% and 25% respectively.(v) The paid-up capital of NEWCO will be increased to meet the capital requirement for Takaful operators as determined byBNM from time to time.AUDITORSThe auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.Signed on behalf of the Board of Directors in accordance with their resolution dated 28 April 2006.TUNKU DATO' YA'ACOB BIN TUNKU TAN SRI ABDULLAHDIRECTORTUNKU TAN SRI ABDULLAH IBNI ALMARHUMTUANKU ABDUL RAHMANDIRECTORKuala Lumpur28 April 2006

Statement By Directors Pursuant ToSection 169(15) Of The Companies Act, 1965We, Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah and Tunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul Rahman, twoof the Directors of MAA Holdings Berhad, state that, in the opinion of the Directors, the financial statements set out onpages 62 to 161 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as at31 December 2005 and of the results and the cash flows of the Group and the Company for the financial year ended onthat date in accordance with Malaysian Accounting Standards Board (“MASB”) approved accounting standards in Malaysiaand the provisions of the Companies Act, 1965.Signed on behalf of the Board of Directors in accordance with their resolution dated 28 April 2006.TUNKU DATO' YA'ACOB BIN TUNKU TAN SRI ABDULLAHDIRECTORTUNKU TAN SRI ABDULLAH IBNI ALMARHUMTUANKU ABDUL RAHMANDIRECTORKuala LumpurStatutory Declaration Pursuant ToSection 169(16) Of The Companies Act, 196560financialstatements2005I, Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah, being the director primarily responsible for the financial management ofMAA Holdings Berhad, do solemnly and sincerely declare that the financial statements set out on pages 62 to 161 are, inmy opinion correct, and I make this solemn declaration conscientiously believing the same to be true, and by virtue of theprovisions of the Statutory Declarations Act, 1960.TUNKU DATO' YA'ACOB BIN TUNKU TAN SRI ABDULLAHSubscribed and solemnly declared by the abovenamed Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah at Kuala Lumpur inMalaysia on 28 April 2006, before me.LEONG TUCK ONNCOMMISSIONER FOR OATHS

Report Of The Auditors To The Members Of(Company No. 471403 A) (Incorporated in Malaysia)MAA Holdings BerhadWe have audited the financial statements set out on pages 62 to 161. These financial statements are the responsibility ofthe Company's Directors. It is our responsibility to form an independent opinion, based on our audit, on these financialstatements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 andfor 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 auditing standards in Malaysia. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors,as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis forour opinion.In our opinion:(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 andMalaysian Accounting Standards Board (“MASB”) approved accounting standards in Malaysia so as to give a true andfair view of:(i)the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; andand(ii) the state of affairs of the Group and of the Company as at 31 December 2005 and of the results and cash flows ofthe Group and Company for the financial year ended on that date;(b) the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiarycompanies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.The names of the subsidiary companies of which we have not acted as auditors are indicated in note 10 to the financialstatements. We have considered the financial statements of these subsidiary companies and the auditors' reports thereon.We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the Company'sfinancial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidatedfinancial statements and we have received satisfactory information and explanations required by us for those purposes.The auditors' reports on the financial statements of the subsidiary companies were not subject to any qualification and didnot include any comment made under subsection 3 of section 174 of the Act.61financialstatements2005PRICEWATERHOUSECOOPERS(No. AF: 1146)Chartered AccountantsJAYARAJAN A/L U. RATHINASAMY(No. 2059/06/06 (J))Partner of the firmKuala Lumpur28 April 2006

Balance SheetsAs At 31 December 2005GROUPCOMPANYNote 2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000ASSETSGENERAL AND SHAREHOLDERS' FUND ASSETSProperty, plant and equipment 4(a) 22,785 23,152 2,029 2,268Intangible asset 5 6,189 6,536 - -Investment properties 6(a) 130,183 122,099 - -Financial assets:Investments- at fair value through profit or loss 7(a) 174,609 197,589 10,879 13,588- available-for-sale 7(a) 133,120 130,184 - -- held-to-maturity 7(a) 10,714 12,583 - -Loans and receivables, excludinginsurance receivables 8(a) 355,013 367,344 146,847 137,365Insurance receivables 9(a) 81,313 80,426 - -Subsidiary companies 10 - - 252,076 252,076Associated companies 11 14,029 3,581 31,344 24,410Tax recoverable 18,784 15,324 1,792 463Deferred tax assets 12 9,597 4,237 690 150Fixed and call deposits 36(a) 140,007 94,986 2,385 3,105Cash and bank balances 35 28,935 16,433 542 42062financialstatements2005TOTAL GENERAL ANDSHAREHOLDERS' FUND ASSETS 1,125,278 1,074,474 448,584 433,845TOTAL LIFE FUND ASSETS 5,477,669 5,089,059 - -TOTAL ASSETS 6,602,947 6,163,533 448,584 433,845

Balance SheetsAs At 31 December 2005 (continued)LIABILITIESGENERAL AND SHAREHOLDERS' FUND LIABILITIESGROUPCOMPANYNote 2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Provision for outstanding claims 13(a) 287,333 312,426 - -Insurance payables 14(a) 62,514 64,823 - -Financial liabilities:Borrowings- bonds - unsecured 16 60,000 80,000 60,000 80,000- term loans 17 67,155 30,000 30,000 30,000- bank overdrafts - unsecured 18 14,293 2,670 12,579 2,670Trade and other payables, excludinginsurance payables 15(a) 74,817 69,869 458 462Current tax liabilities 9,417 20,853 - -Deferred tax liabilities 12 4,805 180 - -TOTAL GENERAL ANDSHAREHOLDERS' FUND LIABILITIES 580,334 580,821 103,037 113,132TOTAL LIFE FUND LIABILITIES 538,597 641,973 - -1,118,931 1,222,794 103,037 113,132Unearned premium reserves 19 151,349 133,642 - -Life policyholders' fund 20 4,930,032 4,447,086 - -5,081,381 4,580,728 - -TOTAL LIABILITIES 6,200,312 5,803,522 103,037 113,13263financialstatements2005Life fund assets revaluation reserve 23(b) 9,040 - - -6,209,352 5,803,522 103,037 113,132EQUITYCapital and reserve attributable to theCompany's equity holdersShare capital 21 152,177 152,177 152,177 152,177Share premium 22 11,744 11,744 11,744 11,744Retained earnings 23(a) 226,836 194,644 181,626 156,792Other reserves 23(a) 1,063 (93) - -391,820 358,472 345,547 320,713Minority interest 1,775 1,539 - -TOTAL EQUITY 393,595 360,011 345,547 320,713TOTAL LIABILITIES AND EQUITY 6,602,947 6,163,533 448,584 433,845The accompanying notes are an integral part of these financial statements.

Income StatementsFor The Financial Year Ended 31 December 2005GROUPCOMPANYNote 2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000OPERATING REVENUE 24 2,887,240 2,247,556 93,314 115,486SHAREHOLDERS' FUNDInvestment income 25(a) 3,305 6,002 90,634 113,557Other operating income - net 26(a) 78,234 47,678 550 2,408Management expenses 27 (60,781) (58,587) (13,001) (9,648)SURPLUS TRANSFERRED FROMINSURANCE REVENUE ACCOUNTS:20,758 (4,907) 78,183 106,317General insurance 12,143 25,035 - -Life insurance 20,857 52,439 - -Profit from operations 53,758 72,567 78,183 106,317Finance costs 28 (9,859) (10,293) (8,574) (9,631)Share of (loss)/profit of associated companies (931) 816 - -64financialstatements2005PROFIT BEFORE TAXATION 42,968 63,090 69,609 96,686Taxation 29 1,202 (20,793) (21,260) (28,900)PROFIT FOR THE FINANCIAL YEAR 44,170 42,297 48,349 67,786Attributable to:- Equity holders of the Company 43,940 42,403 48,349 67,786- Minority interest 230 (106) - -44,170 42,297 48,349 67,786GROSS DIVIDENDS PER SHARE (sen) 30 10.0 15.0 10.0 15.0EARNINGS PER SHARE FORPROFIT ATTRIBUTABLE TO THEEQUITY HOLDERS OF THECOMPANY DURING THE FINANCIALYEAR (sen)- basic 31 28.8 27.9The accompanying notes are an integral part of these financial statements.

General Insurance Revenue AccountFor The Financial Year Ended 31 December 2005GROUPMarine,Motor Motor Aviation Misce-Note Fire vehicles cycles & Transit llaneous TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000Gross premium 83,089 215,689 41,466 23,762 95,959 459,965Reinsurance (53,327) (14,394) (6,036) (18,897) (39,545) (132,199)Net premium 29,762 201,295 35,430 4,865 56,414 327,766Increase in unearned premiumreserves 19 (1,480) (8,798) (3,521) (355) (3,875) (18,029)Earned premium 28,282 192,497 31,909 4,510 52,539 309,737Net claims incurred 32 (17,230) (128,840) (16,381) (2,149) (18,220) (182,820)Net commission (91) (21,295) (3,447) (444) (7,009) (32,286)Underwriting surplus beforemanagement expenses 10,961 42,362 12,081 1,917 27,310 94,631Management expenses 27 (77,324)Underwriting surplus 17,307Investment income 25(b) 23,267Other operating expenses - net 26(b) (28,431)Surplus transferred toIncome Statement 12,14365financialstatements2005The accompanying notes are an integral part of these financial statements.

General Insurance Revenue AccountFor The Financial Year Ended 31 December 2004GROUPMarine,Motor Motor Aviation Misce-Note Fire vehicles cycles & Transit llaneous TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000Gross premium 76,340 193,176 34,603 17,445 85,883 407,447Reinsurance (53,227) (12,407) (4,850) (13,108) (24,464) (108,056)Net premium 23,113 180,769 29,753 4,337 61,419 299,391(Increase)/decrease inunearned premium reserves 19 (1,822) 30,629 3,530 (57) (453) 31,827Earned premium 21,291 211,398 33,283 4,280 60,966 331,218Net claims incurred 32 (13,483) (146,193) (25,939) (2,066) (31,092) (218,773)Net commission (290) (20,048) (2,658) (367) (9,445) (32,808)Underwriting surplus beforemanagement expenses 7,518 45,157 4,686 1,847 20,429 79,637Management expenses 27 (72,246)Underwriting surplus 7,391Investment income 25(b) 23,15266financialstatements2005Other operating expenses - net 26(b) (5,508)Surplus transferred toIncome Statement 25,035The accompanying notes are an integral part of these financial statements.

Life Fund Balance SheetAs At 31 December 2005GROUPNote 2005 2004RM'000 RM'000ASSETSProperty, plant and equipment 4(b) 32,105 37,103Investment properties 6(b) 961,493 875,555Financial assets:Investments- at fair value through profit or loss 7(b) 782,926 785,881- available-for-sale 7(b) 1,259,685 1,253,395- held-to-maturity 7(b) 346,734 224,964Loans and receivables, excluding insurance receivables 8(b) 986,401 816,810Insurance receivables 9(b) 46,701 34,964Tax recoverable 10,994 5,374Deferred tax assets 12 9,173 1,759Fixed and call deposits 36(b) 680,872 750,267Cash and bank balances 35 27,762 43,009Investment-linked fund assets 33 332,823 259,978TOTAL LIFE FUND ASSETS 5,477,669 5,089,059LIABILITIESProvision for outstanding claims 13(b) 14,439 16,428Provision for life agents' retirement benefits 34 5,001 5,575Insurance payables 14(b) 414,362 483,138Trade and other payables, excluding insurance payables 15(b) 90,538 124,130Current tax liabilities 149 5,786Deferred tax liabilities 12 4,101 152Investment-linked fund liabilities 33 10,007 6,764TOTAL LIFE FUND LIABILITIES 538,597 641,97367financialstatements2005LIFE POLICYHOLDERS' FUND 20 4,930,032 4,447,086TOTAL LIFE FUND LIABILITIES AND LIFE POLICYHOLDERS' FUND 5,468,629 5,089,059ASSETS REVALUATION RESERVE 23(b) 9,040 -5,477,669 5,089,059The accompanying notes are an integral part of these financial statements.

Life Insurance Revenue AccountFor The Financial Year Ended 31 December 2005GROUPNote 2005 2004RM'000 RM'000Gross premium 1,422,936 1,289,562Reinsurance (19,765) (34,035)Net premium 1,403,171 1,255,527Gross benefits paid and payable:Death (42,384) (46,826)Maturity (489,462) (312,818)Cash bonus (163,260) (143,062)Surrender (162,451) (129,252)Annuity (701) (570)Others (53,415) (40,759)Reinsurance recoveries 7,162 11,618Net benefits paid and payable (904,511) (661,669)498,660 593,858Commission and agency expenses (142,787) (130,961)Management expenses 27 (87,400) (86,683)68financialstatements2005268,473 376,214Investment income 25(c) 229,408 218,905Other operating (expenses)/income - net 26(c) (26,291) 55,057Surplus from operations 471,590 650,176Finance costs 28 (15) (6)Surplus before taxation 471,575 650,170Taxation 29 (7,846) (20,276)Surplus for the financial year after taxation 463,729 629,894(Deficit)/surplus from investment-linked fund 33 (21,543) 3,903Net surplus before changes in policy reservesfor the financial year 442,186 633,797Life policyholders' fund at beginning of financial year: 20- as previously reported 4,447,086 3,865,728- adjustments due to changes in accounting policies 61,617 -- as restated 4,508,703 3,865,728Surplus transferred to Income Statement 20 (20,857) (52,439)Life policyholders' fund at end of financial year 20 4,930,032 4,447,086The accompanying notes are an integral part of these financial statements.

Consolidated Statement Of Changes In EquityFor The Financial Year Ended 31 December 20052005Attributable to equity holders of the CompanyIssued and fully paidordinary shares ofRM1 eachNumber Nominal Share Other Retained MinorityNote of shares value premium reserves earnings interest Total'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Balance as at 1 January- as previously stated 152,177 152,177 11,744 (93) 194,644 1,539 360,011- adjustments due to changes inaccounting policies 23(a) - - - 1,195 11,079 - 12,274Balance as at 1 January - restated 152,177 152,177 11,744 1,102 205,723 1,539 372,285Increase arising from subsidiarycompanies acquired during thefinancial year - - - - - 6 6Currency translation differencesarising during the financial year 23(a) - - - 215 - - 215Net change in available-for-salefinancial assets 7(a), 7(b), 23(a) - - - (254) - - (254)Net profit for the financial year - - - - 43,940 230 44,170Dividends paid for the financial yearended 31 December 2004 30 - - - - (22,827) - (22,827)Balance as at 31 December 152,177 152,177 11,744 1,063 226,836 1,775 393,59569financialstatements2005The accompanying notes are an integral part of these financial statements.

Consolidated Statement Of Changes In EquityFor The Financial Year Ended 31 December 20042004Attributable to equity holders of the CompanyIssued and fully paidordinary shares ofRM1 eachNumber Nominal Share Other Retained MinorityNote of shares value premium reserves earnings interest Total'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Balance as at 1 January 152,177 152,177 11,744 2,015 194,131 1,519 361,586Reserve/goodwill arising fromacquisition of:23(a)- subsidiary companies - - - - 284 126 410- business - - - - (3,541) - (3,541)- associated company - - - - (31,024) - (31,024)Currency translation differencesarising during the financial year 23(a) - - - (2,108) - - (2,108)Net profit for the financial year - - - - 42,403 (106) 42,297Dividends paid for the financial yearended 31 December 2003 30 - - - - (7,609) - (7,609)Balance as at 31 December 152,177 152,177 11,744 (93) 194,644 1,539 360,01170financialstatements2005The accompanying notes are an integral part of these financial statements.

Company Statement Of Changes In EquityFor The Financial Year Ended 31 December 20052005Issued and fully paidordinary shares of Non-RM1 each distributable DistributableNumber Nominal Share RetainedNote of shares value premium earnings Total'000 RM'000 RM'000 RM'000 RM'000Balance as at 1 January- as previously stated 152,177 152,177 11,744 216,192 380,113- prior year adjustment 23(a) - - - (59,400) (59,400)- adjustments due to changesin accounting policies 23(a) - - - (688) (688)Balance as at 1 January - restated 152,177 152,177 11,744 156,104 320,025Net profit for the financial year - - - 48,349 48,349Dividends paid for the financial yearended 31 December 2004 30 - - - (22,827) (22,827)Balance as at 31 December 152,177 152,177 11,744 181,626 345,5472004Balance as at 1 January- as previously stated 152,177 152,177 11,744 172,215 336,136- prior year adjustment 23(a) - - - (75,600) (75,600)Balance as at 1 January - restated 152,177 152,177 11,744 96,615 260,536Net profit for the financial year - - - 67,786 67,78671financialstatements2005Dividends paid for the financial yearended 31 December 2003 30 - - - (7,609) (7,609)Balance as at 31 December 152,177 152,177 11,744 156,792 320,713The accompanying notes are an integral part of these financial statements.

Consolidated Cash Flow StatementFor The Financial Year Ended 31 December 2005CASH FLOWS FROM OPERATING ACTIVITIESGROUPNote 2005 2004RM'000 RM'000Net profit for the financial year 44,170 42,29772financialstatements2005Adjustments for:Loss/(gain) on disposal of:- investments - net 68,884 (85,835)- investment properties (12,974) 1,164Fair value loss in financial assets at fair value through profit or loss 71,218 -Fair value loss in investment properties 993 -Impairment on financial asset held-to-maturity 10,000 -Allowance for diminution in value of investments - 33,964Increase in value of investments in investment-linked business 9,741 6,894Property, plant and equipment:- depreciation 15,374 14,576- (gain)/loss on disposal (98) 264- write off 433 9Amortisation of intangible asset 347 347Increase/(decrease) in unearned premium reserves 18,029 (31,827)Life fund surplus before changes in policy reserves 442,186 633,797Interest expense 9,872 10,299Investment income (267,929) (256,024)Share of loss/(profit) of associated companies 931 (1,123)Provision for agents' retirement benefits 1,490 2,084Transfer of life fund surplus to income statement (20,857) (52,439)Bad debts write off 424 6,650Allowance for doubtful debts 1,781 5,066Allowance for/(write back of) doubtful debt on loans 141 (608)Other provisions 19,602 -Tax expense 6,644 42,063Exchange reserve (71) (2,697)Minority interest 236 126Profit from operations before changes in operatingassets and liabilities 420,567 369,047Decrease in receivables (49,752) 779Increase in payables (91,891) 126,996(Decrease)/increase in provision for outstanding claims (27,082) (9,494)(Increase)/decrease in fixed and call deposits (46,738) 32,293(Increase)/decrease loans and receivables (114,745) 95,170Interest paid (9,872) (10,299)Dividends received 56,960 33,409Interest received 190,726 199,814Other investment income received 13,079 13,066

Consolidated Cash Flow StatementFor The Financial Year Ended 31 December 2005 (continued)CASH FLOWS FROM OPERATING ACTIVITIES (continued)GROUPNote 2005 2004RM'000 RM'000Payments of agents' retirement benefits (2,064) (2,290)Proceeds from disposal of investments 1,744,667 1,123,983Purchases of investments (2,018,023) (1,743,562)Purchases of investment properties (75,472) (176,678)Proceeds from disposal of investment properties 70,778 88,013Cash generated from operations 61,138 140,247Income taxes paid (48,328) (32,027)NET CASH INFLOW FROM OPERATING ACTIVITIES 37 12,810 108,220CASH FLOWS FROM INVESTING ACTIVITIESPurchases of property, plant and equipment (12,203) (16,716)Proceeds from disposal of property, plant and equipment 1,859 783Investment in associated company (11,379) (147)Acquisition of Charlie Reserve business 39(b) - (2,973)Net cash outflow from acquisition of subsidiary companies 38(c) - (216)NET CASH OUTFLOW FROM INVESTING ACTIVITIES 37 (21,723) (19,269)CASH FLOWS FROM FINANCING ACTIVITIESDividends paid (22,827) (7,609)Term loan obtained /(repayment of term loans) 37,155 (4,684)Repayment of bond (20,000) (20,000)NET CASH OUTFLOW FROM FINANCING ACTIVITIES 37 (5,672) (32,293)73financialstatements2005NET (DECREASE)/INCREASE IN CASH ANDCASH EQUIVALENTS 37 (14,585) 56,658CASH AND CASH EQUIVALENTS ATBEGINNING OF FINANCIAL YEAR 62,792 6,134CASH AND CASH EQUIVALENTS ATEND OF FINANCIAL YEAR 35 48,207 62,792The accompanying notes are an integral part of these financial statements.

Company Cash Flow StatementFor The Financial Year Ended 31 December 2005CASH FLOWS FROM OPERATING ACTIVITIESCOMPANYNote 2005 2004RM'000 RM'000Net profit for the financial year 48,349 67,786Adjustments for:(Write back of)/allowance for diminution in value of investments 2,021 (474)Property, plant and equipment- depreciation 453 333- loss on disposal 105 -Interest expense 8,574 9,631Interest income (8,134) (8,165)Dividend income (82,500) (105,392)Tax expense 21,260 28,900Loss from operations before changes in operatingassets and liabilities (9,872) (7,381)Decrease/(increase) in loans 79 (264)Decrease in other receivables (210) 61Decrease in other payables (4) (91)(Increase)/decrease in current balances with subsidiary companies (1,495) 3,99874financialstatements2005Cash used in operations (11,502) (3,677)Interest paid (8,574) (9,631)Interest received 278 2,382Dividends received 59,400 105,392Tax paid (29) (29,580)NET CASH INFLOW FROM OPERATING ACTIVITIES 39,573 64,886CASH FLOWS FROM INVESTING ACTIVITIESProceeds from disposal of property, plant and equipment 105 2Purchase of property, plant and equipment (424) (144)Proceeds from withdrawal of fixed and call deposits 720 660Investment in associated companies (6,934) (24,370)NET CASH OUTFLOW FROM INVESTING ACTIVITIES (6,533) (23,852)

Company Cash Flow StatementFor The Financial Year Ended 31 December 2005 (continued)CASH FLOWS FROM FINANCING ACTIVITIESCOMPANYNote 2005 2004RM'000 RM'000Repayment of bond (20,000) (20,000)Dividends paid (22,827) (7,609)NET CASH OUTFLOW FROM FINANCING ACTIVITIES (42,827) (27,609)NET (DECREASE)/ INCREASE IN CASH ANDCASH EQUIVALENTS (9,787) 13,425CASH AND CASH EQUIVALENT AT BEGINNINGOF FINANCIAL YEAR (2,250) (15,675)CASH AND CASH EQUIVALENT AT ENDOF FINANCIAL YEAR 35 (12,037) (2,250)75financialstatements2005The accompanying notes are an integral part of these financial statements.

Notes To The Financial Statements - 31 December 20051 PRINCIPAL ACTIVITIES AND GENERAL INFORMATIONThe Company is principally engaged in investment holding and providing management services. The principalactivities of the Group consist of general and life insurance businesses, investment holding, hire purchase, leasing andother credit activities, unit trust, property management, fund management and investment advisory, security andconsultancy services.There have been no significant changes in the nature of these activities for the Group and the Company during thefinancial year.The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the MainBoard of the Malaysia Securities Exchange Berhad.The registered office and principal place of business of the Company are as follows:Registered officeSuite 20.03, 20th FloorMenara MAA12, Jalan Dewan Bahasa50460 Kuala LumpurPrincipal place of business23rd Floor, Menara MAA12, Jalan Dewan Bahasa50460 Kuala Lumpur76financialstatements2005The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of theDirectors on 28 April 2006.2 SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been used consistently in dealing with items which are considered material inrelation to the financial statements, unless otherwise stated.(a) Basis of preparationThe financial statements have been prepared under the historical cost convention modified by the valuation ofinvestments in the investment-linked business at market value, the revaluation of investment properties,remeasurement at fair value of available-for-sale financial assets, and financial assets and financial liabilities heldat fair value through profit or loss. The financial statements also comply with the Malaysian AccountingStandards Board (“MASB”) approved accounting standards in Malaysia and the provisions of the Companies Act,1965, in all material aspects.The preparation of financial statements in conformity with the MASB approved accounting standards in Malaysiaand the provisions of the Companies Act, 1965 requires the Directors to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dateof the financial statements, and the reported amounts of revenues and expenses during the reported financialyear. Although these estimates are based on the Directors' best knowledge of current events and actions, actualresults may differ from those estimates. The areas involving a higher degree of judgement or complexity, or areaswhere assumptions and estimates are significant to the consolidated financial statement, are disclosed in note 3to the financial statements.Early adoptionIn 2005, the Group early adopted the Financial Reporting Standards (“FRS”) below, applicable for annual periodsbeginning on or after 1 January 2006, as adopted by MASB and which are relevant to the Group's operations.The 2004 comparatives have been restated as required, in accordance with the relevant requirements.

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(a) Basis of preparation (Continued)FRS 3 - Business CombinationFRS 101 - Presentation of Financial StatementsFRS 102 - InventoriesFRS 107 - Cash Flow StatementsFRS 108 - Accounting Policies, Changes in Accounting Estimates and ErrorsFRS 110 - Events After the Balance Sheet DateFRS 112 - Income TaxesFRS 114 - Segment ReportingFRS 116 - Property, Plant and EquipmentFRS 117 - LeasesFRS 118 - RevenueFRS 119 - Employee BenefitsFRS 121 - The Effects of Changes in Foreign Exchange RatesFRS 124 - Related Party DisclosuresFRS 127 - Consolidated and Separate Financial StatementsFRS 128 - Investments in AssociatesFRS 132 - Financial Instruments : Disclosure and PresentationFRS 133 - Earnings Per ShareFRS 136 - Impairment of AssetsFRS 137 - Provisions, Contingent Liabilities and Contingent AssetsFRS 138 - Intangible AssetsFRS 139 - Financial Instruments : Recognition and MeasurementFRS 140 - Investment propertyThe early adoption of FRS 101, 102, 107, 108, 112, 114, 116, 118, 119, 121, 124, 127, 128, 133, 136, and 137did not result in substantial changes to the Group's/Company's accounting policies. In summary:- FRS 101 has affected the presentation of minority interests and other disclosures.- FRS 121 had no material effect on the Group's policy. The functional currency of each of the consolidatedentities has been re-evaluated based on the guidance to the revised standard. All the Group's entities have thesame functional currency as their measurement currency.- FRS 124 has affected the identification of related parties and some other related party disclosures.77financialstatements2005The early adoption of FRS 110 resulted in a change in the accounting policy in the recognition of dividend incomefrom subsidiary companies by the Company. Dividends proposed by an entity should not be recognised as aliability at the balance sheet. Similarly, equity holder shall only recognise dividend income in the year theproposed dividends are approved in the annual general meetings of subsidiary companies. Until 31 December2004, the Company recognised dividend income from subsidiary companies when the board of subsidiarycompanies proposed final dividend. The effects of this change in accounting policy has been adjustedretrospectively as reflected in notes 23 and 47 to the financial statements.The early adoption of FRS 138 resulted in a change in the accounting policy for goodwill. Until 31 December2004, the excess or deficit of the acquisition cost over the fair values of the Group's share of the subsidiarycompanies identifiable net assets as at the date of acquisition is written off to reserves in the financial year ofacquisition. With the adoption of FRS 138 for the financial year ended 31 December 2005, goodwill is capitalisedand tested annually for impairment, and when there is indication of impairment.The early adoption of FRS 139 has resulted in a change in the accounting policy relating to the classification offinancial assets in the following categories:- fair value through profit or loss- available-for-sale- held-to-maturity- loans and receivables

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(a) Basis of preparation (Continued)Similarly the accounting policies relating to the measurement of these financial assets changed from 31 December2004 onwards, as described in notes 2(f) and (g) to the financial statements.The early adoption of FRS 140 has resulted in a change in the accounting policy for investment properties. Until31 December 2004, the Group recognised investment properties using cost method. In accordance with FRS 140,investment properties can be valued either using cost or fair value method. The Group has adopted fair valuemethod in measuring investment properties with effect from 1 January 2005.All changes in the accounting policies have been made in accordance with the transitional provisions of therespective standards. All standards adopted by the Group require retrospective application, except for FRS 139;but since the early adoption of these standards, except for FRS 110, did not result in substantial changes to theGroup's accounting policies, there were no retrospective amendment made to the comparatives. FRS 139 isapplied prospectively upon first application of the standard, following the transitional provisions of the standard.FRS 139 requires simultaneous adoption with FRS 132.FRS 3 requires simultaneous adoption with FRS 136 and FRS 138.The effects of early adopting these FRS standards, to the opening retained earnings of the Group and Companyfor the financial year ended 31 December 2005 is disclosed in note 23 to the financial statements.(b) Basis of consolidationThe consolidated financial statements include the financial statements of the Company and all its subsidiarycompanies made up to the end of the financial year.78financialstatements2005Subsidiary companies are those companies in which the Group has power to exercise control over the financialand operating policies so as to obtain benefits from their activities. Subsidiary companies are consolidated fromthe date on which control is transferred to the Group and are no longer consolidated from the date that controlceases. The existence and effect of potential voting rights that are currently exercisable or convertible areconsidered when assessing whether the Group controls another entity. Subsidiary companies are consolidatedusing the acquisition method of accounting, except for the acquisition of Malaysian Assurance Alliance Berhad(“MAA”) which was consolidated using the merger method of accounting in accordance with MalaysianAccounting Standard (“MAS”) No. 2 - Accounting for Acquisitions and Mergers, the extant accounting standardprevailing at the time of the merger.Under the acquisition method of accounting, the results of subsidiary companies acquired or disposed off duringthe financial year are included from the date of acquisition up to the date of disposal. At the date of acquisition,the fair values of the subsidiary companies' net assets are determined and these values are reflected in theconsolidated financial statements. For acquisition of subsidiary companies made prior to 1 January 2005, theexcess or deficit of the acquisition cost over the fair values of the Group's share of the subsidiary companies'identifiable net assets as at the date of acquisition is written off to reserves in the financial year of acquisition.Under the merger method of accounting prescribed by MAS 2, the results of the subsidiary companies arepresented as if the merger had been effected throughout the current and previous financial years. Onconsolidation, the difference between the carrying value of the investment in the subsidiary company over thenominal value of the shares acquired is taken to merger reserve.The Group has taken advantage of the exemption provided by FRS 3 - Business Combination to apply thisStandard prospectively. Accordingly, business combinations entered into prior to 1 January 2005 have not beenrestated to comply with this Standard. In addition, merger method accounting is no longer allowed by thisStandard.Under FRS 3, the excess of the cost of acquisition over the fair values of the Group's share of the subsidiarycompanies' identifiable net assets is recorded as goodwill (see note 2(j)). If the cost of acquisition is less than thefair values of the net assets of the subsidiary company acquired, the difference is recognised directly in the incomestatement.Intragroup transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are alsoeliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statementsof a subsidiary company to ensure consistency of accounting policies with those of the Group.Minority interest is measured at the minorities' share of the post acquisition fair values of the identifiable assetsand liabilities of the acquiree.

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(c) Associated companiesAssociated companies are companies in which the Group exercises significant influence. Significant influence isthe power to participate in the financial and operating policy decisions of the associated companies but notcontrol over those policies. Investments in associated companies are accounted for in the consolidated financialstatements by the equity method of accounting.Equity accounting involves recognising in the income statement, the Group's share of the results of associatedcompanies for the financial year. The Group's investments in associated companies are carried in the balancesheet at an amount that reflects its share of the net assets of the associated companies. Equity accounting isdiscontinued when the carrying amount of the investment in an associated company reaches zero, unless theGroup has incurred obligations or guaranteed obligations in respect of the associated company.For acquisitions of associated companies made prior to 1 January 2005, the excess or deficit of the acquisitioncost over the fair values of the Group's share of associated companies' identifiable net assets as at the date ofacquisition is written off to reserves in the financial year of acquisition to the extent of the cost of acquisitionwhen the Group has no further obligations or guaranteed obligations in respect of the associated company.Following the early adoption of FRS 128, the excess of the cost of acquisition over the fair values of the Group'sshare of the associated companies' identifiable net assets as at the date of acquisition is included in the Group'sinvestment in associated companies (see note 2(j)).Unrealised gains on transactions between the Group and its associated companies are eliminated to the extentof the Group's interest in the associated companies; unrealised losses are also eliminated unless the transactionprovides evidence of impairment of the asset transferred. Where necessary, in applying the equity method,adjustments are made to the financial statements of associated companies to ensure consistency of accountingpolicies with those of the Group.(d) Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and accumulated impairmentlosses.Assets under construction are not depreciated until the assets are ready for their intended use.79financialstatements2005Depreciation of property, plant and equipment is provided so as to allocate the cost to the residual value of eachasset on a straight line basis over the estimated useful lives of the assets. The annual depreciation rates are asfollows:Plant and machinery 10% - 20%Furniture, fittings and equipment 10% - 50%Motor vehicles 20%Renovation 10% - 20%At each balance sheet date, the Group assesses whether there is any indication of impairment. If such indicationsexist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A writedown is made if the carrying amount exceeds the recoverable amount. See accounting policy note 2(g) onimpairment of assets.The assets' residual values and useful lives are reviewed at each balance sheet date and adjusted, if appropriate.For the financial year ended 31 December 2005, the Group and the Company revised the useful lives of computerhardware and motor vehicles from 10 years to 5 years. As a result, the accelerated depreciation charged to theincome statements and/or revenue accounts of the Group and the Company amounted to RM626,532 andRM112,668 respectively.Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are credited orcharged to the income statements and/or revenue accounts.Repairs and maintenance are charged to the income statements and/or revenue accounts during the financialyear in which they are incurred. The cost of major renovation is included in the carrying amount of the assetwhen it is probable that future economic benefits in excess of the originally assessed standard of performance ofthe existing asset will flow to the Group. Major renovations are depreciated over the remaining useful lives ofthe related assets.

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(e) Investment propertiesProperties held for long term rental yields that are not occupied by the companies in the Group are classified asinvestment properties.Investment properties, comprising freehold land and buildings as well as leasehold land and buildings acquiredprior to 1 January 1994, are stated at the net book value as at 1 January 1994. Subsequent acquisitions areinitially stated at cost, and include related and incidental expenditure incurred. Investment properties are notdepreciated. Up to 31 December 2004, investment properties are shown at cost/net book value less accumulatedimpairment losses.From 1 January 2005 onwards, freehold land and buildings are carried at fair value based on triennial valuationsfor investment property that is being redeveloped for continuing use as investment property, or for which themarket has became less active, continues to be measured at fair value. Fair value is based on active market prices,adjusted if necessary, for any differences in the nature, location or condition of the specific asset. If thisinformation is not available, the Group uses alternative valuation methods such as discounted cash flowprojections or recent prices on less active markets.These valuations are reviewed annually by independent valuation experts and changes in fair value are recordedin the income statements and/or revenue accounts.Property located on land that is held under operating lease is classified as investment property as long as it is heldfor long term rental yields and is not occupied by the companies in the Group. The initial cost of the property isthe lower of the fair value of the property and the present value of the minimum lease payments. The propertyis carried at fair value after initial recognition.80financialstatements2005If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment, and its fairvalue at the date of reclassification becomes its cost for subsequent accounting purposes.If an item of property, plant and equipment becomes an investment property because its use has changed, anydifference arising between the carrying amount and the fair value of this item at the date of transfer is recognisedin equity as a revaluation of property, plant and equipment. However, if a fair value gain reverses a previousimpairment loss, the gain is recognised in the income statements and/or revenue accounts. Upon the disposal ofsuch investment property, any surplus previously recorded in equity is transferred to retained earnings, thetransfer is not made through the income statements and/or revenue accounts.(f) InvestmentsFor the financial year ended 31 December 2004, the Group's accounting policies on investments were as below:Malaysian Government Securities, Treasury bills, Bank Negara Malaysia papers, Cagamas papers and otherunquoted approved debt securities are stated at cost adjusted for the amortisation of premiums or accretion ofdiscounts, calculated on constant yield basis, from the date of purchase to maturity date. The amortisation ofpremiums and accretion of discounts are recognised in the income statements and/or revenue accounts.Quoted investments of the insurance subsidiary companies are stated at the lower of cost and market valuedetermined on an aggregate portfolio basis by category of investments except that if diminution in value of aparticular investment is not regarded as temporary, specific allowance is made against the value of thatinvestment. Market value is determined by reference to the stock exchange closing price at the balance sheetdate.Investments in non-current quoted investments by non-insurance subsidiary companies are stated at cost and anallowance for diminution in value is made where, in the opinion of the Directors, there is a decline other thantemporary in the value of such investments. Where there has been a decline other than temporary in the valueof an investment, such a decline is recognised as an expense in the financial year in which the decline is identified.Unquoted investments are shown at cost and an allowance for diminution in value is made where, in the opinionof the Directors, there is a decline other than temporary in the value of such investment. Where there has beena decline other than temporary in the value of an investment, such a decline is recognised as an expense in thefinancial year in which the decline is identified.Following the early adoption of FRS 139 for the financial year ended 2005 and the transitional provisions therein,the Group's accounting policies on investments for the financial year ended 2005 are as follows:

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(f) Investments (Continued)The Group classifies its investments into the following categories: financial assets measured at fair value throughprofit or loss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets. Theclassification depends on the purpose for which the investments were acquired. Management determines theclassification of its investments at initial recognition and re-evaluates this at every reporting date.(i) Financial assets measured at fair value through profit or lossThis category has two sub-categories: financial assets held for trading and those designated at fair valuethrough profit or loss at inception. A financial asset is classified into this category at inception if acquiredprincipally for the purpose of selling in the short term, if it forms part of a portfolio of financial assets in whichthere is evidence of short term profit-taking, or if so designated by management. Derivatives are alsoclassified as held-for-trading unless they are designated as hedges.(ii) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market other than those that the Group intends to sell in the short term or that it hasdesignated as at fair value through profit or loss or available-for-sale. Receivables arising from insurancecontracts are also classified in this category (see note 2(i)).(iii)Held-to-maturity financial assetsHeld-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments andfixed maturities - other than those that meet the definition of loans and receivables - that the Group'smanagement has the positive intention and ability to hold to maturity.(iv)Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are either designated in this categoryor not classified in any of the other categories.Regular way purchases and sales of investments are recognised on trade dates - the dates on which the Groupcommits to purchase or sell the assets. Investments are initially recognised at fair value plus, in the case of allfinancial assets not carried at fair value through profit or loss, transaction costs that are directly attributable totheir acquisitions. Investments are derecognised when the rights to receive cash flows from the investments haveexpired or where they have been transferred and the Group has also transferred substantially all risks and rewardsof ownership.81financialstatements2005Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carriedat fair value. Loans and receivables, except for receivables arising from insurance contracts, and held-to-maturityfinancial assets are carried at amortised cost using the effective interest method. Realised and unrealised gainsand losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss'category are included in the income statements and/or revenue accounts in the period in which they arise.Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified asavailable-for-sale are recognised in reserves. When securities classified as available-for-sale are sold or impaired,the accumulated fair value adjustments are included in the income statements and/or revenue accounts as netrealised gains/losses on financial assets.The fair values of quoted investments are based on current bid prices. If the market for a financial asset is notactive, the Group establishes fair value by using valuation techniques. These include the use of recent arm'slength transactions, reference to other instruments that are substantially the same, discounted cash flow analysisand option pricing models.For both financial years, investments of investment-linked business are valued at the market value at balancesheet date for quoted investments and at the prices quoted by financial institutions at the balance sheet date forunquoted investments. Any increase or decrease in the value of these investments is recognised in the revenueaccount of the investment-linked fund.Investment in subsidiary and associated companies are stated at cost less accumulated impairment losses. Wherean indication of impairment exists, the carrying amount of the investment is assessed and written downimmediately to its recoverable amount. See accounting policy note 2(g) on impairment of assets.

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(g) Impairment of assets(i) Financial assets carried at amortised costThe Group assesses at each balance sheet date whether there is objective evidence that a financial asset orgroup of financial assets is impaired. A financial asset or group of financial assets is impaired and impairmentlosses are incurred only if there is objective evidence of impairment as a result of one or more events that haveoccurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impacton the estimated future cash flows of the financial asset or group of financial assets that can be reliablyestimated.The Group first assesses whether objective evidence of impairment exists individually for financial assets thatare individually significant. If the Group determines that no objective evidence of impairment exists for anindividually assessed financial asset, whether significant or not, it includes the asset in a group of financialassets with similar credit risk characteristics and collectively assesses them for impairment. Assets that areindividually assessed for impairment and for which an impairment loss is or continues to be recognised arenot included in a collective assessment of impairment.If there is objective evidence that an impairment loss has been incurred on loans and receivables or held-tomaturityinvestments carried at amortised cost, the amount of the loss is measured as the difference betweenthe asset's carrying amount and the present value of estimated future cash flows (excluding future creditlosses that have been incurred) discounted at the financial asset's original effective interest rate. The carryingamount of the asset is reduced through the use of an allowance account and the amount of the loss isrecognised in the income statements and/or revenue accounts. If a held-to-maturity investment or a loan hasa variable interest rate, the discount rate for measuring any impairment loss is the current effective interestrate determined under contract.82financialstatements2005For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similarcredit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groupsof such assets by being indicative of the issuer's ability to pay all amounts due under the contractual terms ofthe debt instrument being evaluated.If in a subsequent period, the amount of the impairment loss decreases and the decrease can be relatedobjectively to an event occurring after the impairment was recognised (such as improved credit rating), thepreviously recognised impairment loss is reversed by adjusting the allowance account. The amount of thereversal is recognised in the income statements and/or revenue accounts.(ii) Financial assets carried at fair valueThe Group assesses at each balance sheet date whether there is objective evidence that an available-for-salefinancial asset is impaired, including in the case of equity investments classified as available-for-sale, asignificant or prolonged decline in the fair value of the security below its cost. If any such evidence exists foravailable-for-sale financial assets, the cumulative loss - measured as the difference between the acquisitioncost and current fair value, less any impairment loss on the financial asset previously recognised in profit orloss - is removed from equity and recognised in the income statements and/or revenue accounts. Impairmentlosses recognised in the income statements and/or revenue accounts on equity instruments are notsubsequently reversed. The impairment loss is reversed through the income statements and/or revenueaccounts, if in a subsequent period the fair value of a debt instrument classified as available-for-sale increasesand the increase can be objectively related to an event occurring after the impairment loss was recognised inprofit or loss.(iii)Impairment of other non-financial assetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually forimpairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changesin circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognisedfor the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverableamount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessingimpairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows(cash-generating units).

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(h) Derivative instrumentsDerivative instruments, comprising mainly Kuala Lumpur Composite Index (“KLCI”) futures, are initiallyrecognised in the balance sheet at cost and are subsequently remeasured at their fair values.The method of recognising the resulting gain or loss depends on whether the derivative is designated as ahedging instrument, and if so, the nature of the item being hedged. As the Group's derivative instruments donot qualify for hedge accounting, changes in the fair value of all such derivative instruments are recognisedimmediately in the income statements and/or revenue accounts.(i) Loans and receivablesFor the financial year ended 31 December 2004, the Group's accounting policies on loans and receivables wereas follows:Trade receivables are carried at invoiced amount less an allowance made for doubtful debts.For the insurance subsidiary companies and non-insurance subsidiary companies, known bad debts are writtenoff and specific allowances are made for any premiums including agents balances or reinsurance balances whichremain outstanding for more than six months from the date on which they become receivable and for all debtswhich are considered doubtful. In addition to specific allowance, for a non-insurance subsidiary company, ageneral allowance of 1% of the total outstanding loans net of unearned interest, interest suspended and specificallowance for doubtful debts, has also been provided in the financial statements.Following the early adoption of FRS 139 for the financial year ended 31 December 2005, and the transitionalprovisions therein, the Group's accounting policies on receivables are as follows:Loans and receivables, except for those relating to insurance contracts, are recognised initially at fair value andsubsequently measured at amortised cost using the effective interest method, less provision for impairment. Aprovision for impairment of loans and receivables is established when there is an objective evidence that theGroup will not be able to collect all amounts due according to the original terms of receivables. The amount ofthe provision is the difference between the assets' carrying amount and the present value of estimated futurecash flows discounted at the effective interest rate. The amount of the provision is recognised in the incomestatement.83financialstatements2005For the insurance subsidiary companies with insurance receivables, known bad debts are written-off and specificallowances are made for any premiums including agents balances or reinsurance balances which remainoutstanding for more than six months from the date on which they become receivable except for motorpremiums for which allowance is made for amount outstanding for more than 30 days, and for all debts whichare considered doubtful.(j) Intangible assets(i) GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of thenet identifiable assets of the acquired subsidiary/associate at the acquisition date. For the financial year ended31 December 2004, goodwill is written-off to reserves in the financial year of acquisition. Following to theearly adoption of FRS 3 for the financial year ended 31 December 2005, goodwill on acquisition ofsubsidiaries made on or after 1 January 2005, is included in intangible assets. Goodwill on acquisition ofassociates is included in investments in associates. Goodwill is tested annually for impairment and carried atcost less accumulated impairment losses. All goodwill is allocated to cash generating units for the purposeof impairment testing.(ii) Management rightsThis represents the purchase consideration to acquire the rights to manage unit trust funds. The purchaseconsideration on the acquired right is capitalised and amortised over a period of 20 years, the period in whichthe Group expects to recognise the related revenue.

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(k) Employee benefitsShort-term employee benefitsWages, salaries, paid annual leave, bonuses and non-monetary benefits, which are short-term employee benefits, areaccrued in the financial year in which the associated services are rendered by employees of the Group and Company.Post employment benefitsThe Group and Company has post-employment benefit schemes for eligible employees, which are definedcontribution plans.A defined contribution plan is a pension plan under which the Group and Company pay fixed contributions orvariable contributions as determined yearly, into a separate entity (“a fund”), and will have no legal orconstructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employeebenefits relating to employee service in the current and prior financial years.The Group's and Company's contributions to defined contribution plans, including the Employees' ProvidentFund, are charged to the income statements and/or revenue accounts in the financial year to which they relate.Once the contributions have been paid, the Group and Company have no further payment obligations.(l) Provision for life agents' retirement benefitsAn insurance subsidiary company of the Group operates a retirement benefits scheme for its eligible life agents,calculated in accordance with the terms and conditions as per respective Agent Retirement Plan Arrangementwith the insurance subsidiary company.84financialstatements2005The retirement benefits earned by the eligible life agents on and subsequent to year 2001 were funded throughinvestments in an investment-linked business managed by the insurance subsidiary company.The retirement benefits earned by the eligible life agents who opted to remain in the scheme prior to year 2001were unfunded and have been recorded as provision for life agents' retirement benefits.In accordance with the requirements of the FRS 119 - Employee Benefits, the scheme is treated as a fundeddefined benefit scheme or an unfunded defined benefit scheme as appropriate.(m) General insurance underwriting resultsThe general insurance underwriting results are determined for each class of business after taking into accountreinsurances, commissions, unearned premiums and claims incurred.Premium incomePremium income is recognised in a financial year in respect of risks assumed during that particular year. Premiumsfrom direct business are recognised during the financial year upon the issuance of insurance policies. Premiumsin respect of risks incepted for which insurance policies have not been raised as of the balance sheet date areaccrued at that date.Inward treaty reinsurance premiums are recognised on the basis of periodic advices received from ceding insurers.Outward reinsurance premiums are recognised in the same accounting period as the original policy to which thereinsurance relates.Unearned premium reservesUnearned premium reserves (“UPR”) represent the portion of the net premiums of insurance policies written thatrelate to the unexpired periods of the policies at the end of the financial year.In determining the UPR at the balance sheet date, the method that most accurately reflects the actual unearnedpremium is used, as follows:- 25% method for marine cargo, aviation cargo and transit; and- 1/24th method for all other classes of Malaysian general policies reduced by the percentage of accounted grossdirect business commissions to the corresponding premiums.- time apportionment method for policies with insurance periods other than 12 months

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(m) General insurance underwriting results (Continued)Provision for claimsA liability for outstanding claims is recognised in respect of both direct insurance and inward reinsurance. Theamount of outstanding claims is the best estimate of the expenditure required together with related expenses lessrecoveries 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 (“IBNR”)at the balance sheet date, based on an actuarial valuation by an independent qualified actuary.Acquisition costsThe 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.(n) Life insurance underwriting resultsThe surplus transferable from the life fund to the income statement is based on the surplus determined by anannual actuarial valuation of the long term liabilities to policyholders.Premium incomePremium income includes premium recognised in the life fund and the investment-linked fund.Premium income of the life fund is recognised as soon as the amount of the premium can be reliably measured.First premium is recognised from inception date and subsequent premium is recognised when it is due.At the end of the financial year, all due premiums are accounted for to the extent that they can be reliablymeasured.Outward reinsurance premiums are recognised in the same accounting period as the original policies to whichthe reinsurance relates.85financialstatements2005Premium income of the investment-linked fund includes net creation of units which represents premiums paid bypolicyholders as payment for a new contract or subsequent payments to increase the amount of that contract.Net creation of units is recognised on a receipt basis.Commission and agency expensesCommission and agency expenses, which are costs directly incurred in securing premium on insurance policies,net of income derived from reinsurers in the course of ceding of premium to reinsurers, are charged to therevenue account in the financial year in which they are incurred.Provision for claimsClaims and settlement costs that are incurred during the financial year are recognised when a claimable eventoccurs and/or the insurer is notified.Recoveries on reinsurance claims are accounted for in the same financial year as the original claims arerecognised.Claims and provisions for claims arising on life insurance policies including settlement costs, less reinsurancerecoveries, are accounted for using the case basis method and for this purpose, the benefits payable under a lifeinsurance policy are recognised as follows:(a) maturity or other policy benefit payments due on specified dates are treated as claims payable on the due dates;(b) death, surrender and other benefits without due dates are treated as claims payable, on the date of receiptof intimation of death of the assured or occurrence of contingency covered.

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(o) Other revenue recognitionUptill the financial year ended 31 December 2004, interest income on loans were recognised on an accrual basisexcept where a loan is considered non-performing, i.e. where repayments are in arrears for more than six months,in which case recognition of such interest is suspended. Subsequent to suspension, interest is recognised on thereceipt basis until all arrears have been paid.Finance income and interest earned from lease and hire purchase financing and the provision of loans settled onfixed instalment basis were accounted for over the period of the lease, hire purchase and loan contracts inproportion to the net funds invested, using the 'sum-of-digits ' method. For term loans with single repaymentof principal and interest, the associated interest and finance charges are earned on the monthly rest basis.Overdue interest is recognised on a receipt basis.With the early adoption of FRS 139 for the financial year ended 31 December 2005, interest income for financialassets that are not classified as fair value through profit or loss is recognised using the effective interest method.When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being theestimated future cash flow discounted at the original effective interest rate of the investment and continuesunwinding the discount as interest income.Other interest income including the amount of amortisation of premiums and accretion of discounts, isrecognised on a time proportion basis that takes into account the effective yield of the asset.Rental income is recognised on an accrual basis except where default in payment of rent has already occurredand rent due remains outstanding for over six months, in which case the rental income receivable is reduced toits recoverable amount.Dividend income is recognised when the right to receive payment is established.86financialstatements2005Management, investment advisory, security and consultancy services fees are recognised when the services are provided.(p) Foreign currenciesItems included in the financial statements of each of the Group's entities are measured using the currency of theprimary economic movement in which the entity operates ('functional currency')The consolidated financial statements are presented in Ringgit Malaysia which is the Company's functional andpresentational currency.The Group's foreign entities are those operations that are not an integral part of the operations of the Company.Income statements of foreign entities are translated into Ringgit Malaysia at average exchange rates for thefinancial year and the balance sheets are translated at exchange rates ruling at the balance sheet date. Exchangedifferences arising from the retranslation of the net investment in foreign entities are taken to “exchange reserve”in shareholders' equity. On disposal of the foreign entity, such translation differences are recognised in theincome statements as part of the gain or loss on disposal.Translation differences on non-monetary items, such as equities held at fair value through profit or loss arereported as part of the fair value gain or loss. Translation differences on non-monetary items such as equitiesclassified as available-for-sale financial statements, are included in the fair value reserve.Foreign currency transactions in the Group are accounted for at exchange rates prevailing at the transactiondates. Foreign currency monetary assets and liabilities are translated at exchange rates prevailing at the balancesheet date. Exchange differences arising from the settlement of foreign currency transactions and from thetranslation of foreign currency monetary assets and liabilities are included in the income statements and/orrevenue accounts.The principal closing rates used in the translation of foreign currency amounts are as follows:Foreign currency 31.12.2005 31.12.20041 US Dollar RM3.79 RM3.801,000 Indonesian Rupiah RM0.39 RM0.411 Philippine Peso RM0.0716 RM0.06751 Thai Baht RM0.09246 -

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(q) Income taxesCurrent tax expense is determined according to the tax laws of the jurisdictions in which the Group operates andincludes all taxes based upon the taxable profits.Deferred tax is recognised in full, using the liability method, on temporary differences arising between theamounts attributed to assets and liabilities for tax purpose and their carrying amounts in the financial statements.Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available againstwhich the deductible temporary differences or unused tax losses can be utilised.Deferred tax is recognised on temporary differences arising on investments in subsidiary and associatedcompanies expect where the timing of the reversal of the temporary difference can be controlled and it isprobable that the temporary difference will not reverse in the foreseeable future.Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.(r) Finance leases - lessorWhen assets are leased out under a finance lease, the present value of the lease payments is recognised as areceivable. The difference between the gross receivable and the present value of the receivable is recognised asunearned finance income. Lease income is recognised over the term of the lease using the sum of digits method.(s) BorrowingsBonds issued by the Company, prior to the early adoption of FRS 139 are stated at nominal value. The bondsissuance expenses are charged to the income statements in the financial year of issuance.With the early adoption of FRS 139 for the financial year ended 31 December 2005, the bonds are subsequentlystated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption valueis recognised in the income statements over the period of the bonds using the effective interest method.Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequentlystated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption valueis recognised in the income statements over the period of the borrowings using the effective interest method.87financialstatements2005Interests on bonds and borrowings are charged to the income statements as finance cost on an accrual basis.(t) DividendsDividends are recognised as liabilities when the obligation to pay is established.(u) Contingent liabilities and contingent assetsThe Group does not recognise a contingent liability but discloses its existence in the financial statements. Acontingent liability is a possible obligation that arises from past events whose existence will be confirmed byuncertain future events beyond the control of the Group or a present obligation that is not recognised becauseit is not probable that an outflow of resources will be required to settle the obligation. A contingent liability alsoarises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measuredreliably.A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertainfuture events beyond the control of the Group. The Group does not recognise contingent assets but discloses itsexistence where inflows of economic benefits are probable, but not virtually certain.(v) ProvisionsProvisions are recognised when the Group has a present legal constructive obligation as a result of past events,when it is probable that an outflow of resources will be required to settle the obligation, and when a reliableestimate of the amount can be made.

Notes To The Financial Statements - 31 December 2005 (continued)2 SIGNIFICANT ACCOUNTING POLICIES (Continued)(w) Cash and cash equivalentsCash and cash equivalents consist of cash and bank balances less bank overdrafts, excluding fixed and calldeposits, that are readily convertible to known amounts of cash and which are subject to an insignificant risk ofchanges in value.(x) Financial instrumentsDescriptionA financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financialliability or equity instrument of another enterprise.A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset fromanother enterprise, a contractual right to exchange financial instruments with another enterprise underconditions that are potentially favourable, or an equity instrument of another enterprise.A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset toanother enterprise, or to exchange financial instruments with another enterprise under conditions that arepotentially unfavourable.The particular recognition method adopted for financial instruments recognised on the balance sheet is disclosedin the individual accounting policy note associated with each item.(y) Segment reporting88financialstatements2005Segment reporting is presented for enhanced assessment of the Group's risks and returns. Business segmentsprovide products or services that are subject to risk and returns that are different from those of other businesssegments. Geographical segments provide products or services within a particular economic environment that issubject to risks and returns that are different from those components operating in other economic environments.Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of asegment that are directly attributable to the segment and the relevant portion that can be allocated on areasonable basis to the segment. Segment revenue, expense, assets and liabilities are determined beforeintragroup balances and intragroup transactions are eliminated as part of the consolidation process, except to theextent that such intragroup balances and transactions are between group enterprises within a single segment.3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIESThe Group's accounting policies and use of estimates are integral to the reported results. Certain accountingestimates require exercise of management's judgement in determining the appropriate methodology for valuation ofassets and liabilities. In addition, procedures are in place to ensure that methodologies are reviewed and revised asappropriate. The Group believes its estimates for determining the valuation of its assets and liabilities are appropriate.The following is a brief description of the Group's critical accounting estimates involving management's valuationjudgement.(a) Impairment allowances on loans and receivables (excluding insurance receivables)It is the Group's policy to establish impairment allowance in respect of estimated and inherent credit losses in itsloans and receivables portfolio.In determining impairment allowance, management considers objective evidence of impairment as a result of oneor more events that have occurred after the initial recognition. When there is objective evidence that a loan hasbeen impaired, a specific provision is assessed by using the discounted cash flow method, measured as thedifference between the loan's carrying amount and the present value of estimated future cash flow discountedat the original effective interest rate. The amount of specific provision also takes into account the collateral valueand recoverable amount of interest due, which may be discounted to reflect the impact of recovery process. Theestimated recovery process is estimated to be between one to three years, depending on default condition of theloan and type of collateral.

Notes To The Financial Statements - 31 December 2005 (continued)3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTINGPOLICIES (Continued)(b) Fair value of financial instrumentsFair value is defined as the value at which positions can be closed or sold in a transaction with a willing andknowledgeable counterparty over a time period that is consistent with the Groups' trading or investment strategy.The majority of the Group's financial instruments reported at fair value are based on quoted and observablemarket prices for quoted investments; for unquoted investments where possible using discounted cash flowanalysis or by computing the average of two or more prices quoted by the intermediate or brokers or financialinstitutions; for investment properties at market prices by independent valuation experts.Management exercise judgment in determining the risk characteristics of various financial instruments, discountrates, estimates of future cash flows and other factors used in valuation process. Also, judgement may be appliedin estimating prices for less readily observable external parameters.(c) Review of intangible assets' useful lives and impairmentThe intangible asset under the Group's subsidiary company, MAAKL Mutual Bhd (“MAAKL Mutual”) representsthe acquired rights to manage unit trust funds (“the Rights”) from MBf Unit Trust Management Berhad pursuantto the Sale of Business Agreement dated 5 August 2003. The Rights has a useful life of 20 years which representsthe period in which the Group and MAAKL Mutual expect to recognise the related revenue that will derive fromthe Rights, after exercising judgement in estimating frequency of the funds' new sales, switching and redemption.The Group applies these developed criteria consistently in the annual review of the Rights' useful life.The Group also performs an impairment review when changes in circumstances indicate that the carrying amountof the intangible assets may not be recoverable. The recoverable amount represents the present value of theestimated future cash flows from continuing operations expected to arise from the cash-generating unit to whichthe intangible assets are allocated. In arriving at the recoverable amount, management exercise judgment inestimating the future cash flows, growth rate and discount rate.(d) Impairment review of available-for-sale and held-to-maturity financial assetsThe Group performs an impairment review when changes in circumstances indicate that the carrying amounts ofavailable-for-sale and held-to-maturity financial assets may not be recoverable. The recoverable amountrepresents the current fair value or present value of the estimated future cash flows discounted at the originaleffective interest rate expected to arise from the affected financial assets. In arriving at the current fair value orestimated future cash flows, management exercise judgment in estimating the collectible or realisable amountsincluding extent of credit loss.89financialstatements2005(e) Classification of investment properties from owner-occupiedThe Group's insurance subsidiary companies classifies investment properties as those purchased with the mainpurpose of holding those properties on a long-term basis for their investment potential to earn rental income andfor capital appreciation. Nevertheless, in the ordinary course of business, some of the investment propertiescomprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for usefor administrative purposes. However, the values of these portions cannot be separately identified due to nonavailabilityof information for administrative purposes, especially branch offices. Under such circumstances, theseproperties are still classified as investment properties instead of owner-occupied. Moreover the insurancesubsidiary companies charges imputed rentals on an arm's length basis as with unrelated third parties, i.e. selfrenting, to account for the reflective rental yields of these properties for the purposes of the performance of theinsurance funds. The Group applied these developed criteria consistently to classify properties held for rentalincome and capital appreciation, including self-renting under investment properties.

Notes To The Financial Statements - 31 December 2005 (continued)4 PROPERTY, PLANT AND EQUIPMENT(a) GENERAL AND SHAREHOLDERS' FUNDSGROUPNet book valueFurniture,AssetsPlant and fittings and Motor undermachinery equipment vehicles Renovation construction TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000At 1 January 2005 155 9,249 8,362 3,614 1,772 23,152Additions at cost 16 3,430 1,778 753 2,255 8,232Disposals at net book value - (29) (1,363) - - (1,392)Write off at net book value - (339) (94) - - (433)Depreciation chargefor the financial year (10) (4,263) (1,713) (788) - (6,774)At 31 December 2005 161 8,048 6,970 3,579 4,027 22,785At 31 December 200590financialstatements2005Cost 498 31,300 13,722 9,391 4,027 58,938Accumulatedimpairment losses - (65) - - - (65)Accumulated depreciation (337) (23,187) (6,752) (5,812) - (36,088)Net book value 161 8,048 6,970 3,579 4,027 22,785At 31 December 2004Cost 546 28,477 14,941 8,727 1,772 54,463Accumulatedimpairment losses - (65) - - - (65)Accumulated depreciation (391) (19,163) (6,579) (5,113) - (31,246)Net book value 155 9,249 8,362 3,614 1,772 23,152Depreciation charge for thefinancial year ended31 December 2004 38 3,156 1,218 674 - 5,086

Notes To The Financial Statements - 31 December 2005 (continued)4 PROPERTY, PLANT AND EQUIPMENT (Continued)(a) GENERAL AND SHAREHOLDERS' FUNDS (Continued)COMPANYNet book valueFurniture,fittings and Motorequipment vehicles Renovation TotalRM'000 RM'000 RM'000 RM'000At 1 January 2005 304 1,924 40 2,268Additions at cost 83 329 12 424Disposals at net book value - (210) - (210)Depreciation charge for the financial year (139) (308) (6) (453)At 31 December 2005 248 1,735 46 2,029At 31 December 2005Cost 498 2,842 64 3,404Accumulated depreciation (250) (1,107) (18) (1,375)Net book value 248 1,735 46 2,029At 31 December 2004Cost 416 2,863 51 3,330Accumulated depreciation (112) (939) (11) (1,062)Net book value 304 1,924 40 2,26891financialstatements2005Depreciation charge for thefinancial year ended 31 December 2004 42 286 5 333

Notes To The Financial Statements - 31 December 2005 (continued)4 PROPERTY, PLANT AND EQUIPMENT (Continued)(b) LIFE FUNDGROUPNet book valueFurniture,fittings and Motorequipment vehicles Renovation TotalRM'000 RM'000 RM'000 RM'000At 1 January 2005 16,191 3,710 17,202 37,103Additions at cost 2,404 647 920 3,971Disposals at net book value (6) (342) (21) (369)Depreciation charge for the financial year (4,783) (497) (3,320) (8,600)At 31 December 2005 13,806 3,518 14,781 32,105At 31 December 2005Cost 57,353 6,024 41,264 104,641Accumulated depreciation (43,547) (2,506) (26,483) (72,536)Net book value 13,806 3,518 14,781 32,10592financialstatements2005At 31 December 2004Cost 54,967 6,016 40,364 101,347Accumulated depreciation (38,776) (2,306) (23,162) (64,244)Net book value 16,191 3,710 17,202 37,103Depreciation charge for the financialyear ended 31 December 2004 5,471 672 3,347 9,490

Notes To The Financial Statements - 31 December 2005 (continued)5 INTANGIBLE ASSETGROUP2005 2004RM'000 RM'000Cost 7,000 7,000Accumulated amortisation (811) (464)Net book value 6,189 6,536Intangible asset represents the acquired rights to manage unit trust funds (“the Rights”). Pursuant to the Sale ofBusiness Agreement dated 5 August 2003 between MAAKL Mutual Bhd (“MAAKL”), a 70% owned subsidiarycompany of MAA Corporation Sdn Bhd which is in turn a wholly owned subsidiary company of the Company, andMBf Unit Trust Management Berhad (“MUTMB”), MAAKL acquired the Rights from MUTMB to manage four unittrust funds (“the Funds”) managed by MUTMB. The Funds are MAAKL Equity Index Fund, MAAKL Value Fund,MAAKL Mutual Balanced Fund and MAAKL Syariah Index Fund. The effective date of the transfer of themanagement of the Funds was on 1 December 2003.The Rights is amortised over a straight line basis, over a period of 20 years (2004: 20 years), the period in which theGroup expects to recognise the related revenue.6 INVESTMENT PROPERTIES(a) GENERAL AND SHAREHOLDERS' FUNDSGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Balance as at 1 January 122,099 137,120 - -Adjustments due to changes inaccounting policies 8,337 - - -Balance as at 1 January - restated 130,436 137,120 - -Additions 1,391 115 - -Disposals (1,676) (15,136) - -Fair value gain - net of realised loss(note 26(a),(b)) 32 - - -93financialstatements2005Balance as at 31 December 130,183 122,099 - -Comprising of:Freehold land and buildings 95,799 93,691 - -Leasehold land and buildings 34,384 28,408 - -130,183 122,099 - -

Notes To The Financial Statements - 31 December 2005 (continued)6 INVESTMENT PROPERTIES (Continued)(b) LIFE FUNDGROUP2005 2004RM'000 RM'000Balance as at 1 January 875,555 773,033Adjustments due to changes in accounting policies 69,005 -Balance as at 1 January - restated 944,560 773,033Additions 74,082 170,671Disposals (56,124) (68,149)Fair value loss - net of realised loss (note 26(c)) (1,025) -Balance as at 31 December 961,493 875,555Comprising of:Freehold land and buildings 703,900 720,698Leasehold land and buildings 257,573 154,857961,493 875,555Investment properties relating to the previous financial year ended 31 December 2004 were carried at cost, based onthe prevailing MASB approved accounting standards. Comparative balances have not been restated following thetransitional provision provided under FRS 140.94financialstatements2005Leasehold land which is held under operating lease, are acquired for investment purposes. Any income arising fromthis investment is primarily for the fair value gain expected as a result of market appreciation on the value of the land.The properties are valued by independent valuation experts where the fair values are determined by reference toobservable prices in an active market or recent market transactions on arm's length terms, adjusted if necessary, forany differences in the nature, location or condition of the specific asset. The latest valuation was conducted as at 31December 2005.Land is held for long term capital appreciation rather than short term sale. Buildings are held for purposes of derivingrental income and/or for capital appreciation. Rental income earned by the Group and the related marketing andadministrative expenses are included in “Investment Income”, as disclosed in note 25 to the financial statements.The titles to certain investment properties of the general and shareholders' fund and the life fund of an insurancesubsidiary company, amounting to RM31,397,000 (2004: RM31,397,000) and RM313,389,880 (2004:RM313,389,880) respectively, are in the process of being transferred to the insurance subsidiary company. Risks,rewards and effective titles to these investment properties have been passed to the insurance subsidiary companyupon unconditional completion of the acquisition of those properties. The insurance subsidiary company hassubmitted the relevant documents to the authorities for transfer of legal titles to them and are awaiting the processand formalising of these transfers to be completed.7 INVESTMENTSThe Group's financial assets are summarised by measurement category in the following presentation:(a) GENERAL AND SHAREHOLDERS' FUNDSGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Held for trading 174,609 197,589 10,879 13,588Available-for-sale 133,120 130,184 - -Held-to-maturity 10,714 12,583 - -318,443 340,356 10,879 13,588

Notes To The Financial Statements - 31 December 2005 (continued)7 INVESTMENTS (Continued)(a) GENERAL AND SHAREHOLDERS' FUNDS (Continued)The current portion of financial assets is RM26,000,000 the remaining portion being non-current. The comparativesare not presented due to inavailability of information. The assets included in each of the categories above are detailedin the tables below:Investments held for tradingGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Equity securities- Quoted 131,053 154,585 10,879 13,588- Unquoted 1,276 1,276 - -132,329 155,861 10,879 13,588Corporate debt securities- Quoted in Malaysia 13,641 5,982 - -Unit trust 12,091 22,165 - -Investment-linked units 16,548 13,581 - -Total financial assets at fair valuethrough profit or loss 174,609 197,589 10,879 13,588Following the transitional provisions under FRS 139, the comparative balances are stated at its carrying value asat 31 December 2004.All assets are held for trading.GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'00095financialstatements2005Available-for-sale financial assetsEquity securities- Unquoted 502 500 - -Corporate debt securities 60,761 56,689 - -Malaysian Government Securities/Treasury bills/Bank Negara Malaysia papers 41,828 38,001 - -Cagamas papers 30,029 34,994 - -Total available-for-sale financial assets 133,120 130,184 - -Held-to-maturityCorporate debt securities 10,714 12,583 - -Total held-to-maturity financial assets 10,714 12,583 - -

Notes To The Financial Statements - 31 December 2005 (continued)7 INVESTMENTS (Continued)(a) GENERAL AND SHAREHOLDERS' FUNDS (Continued)Financial assets held-to-maturity are not presented on the Group's balance sheet at their fair value. The fair valueof the held-to-maturity assets is RM10,961,000.Fair values for held-to-maturity debt securities are based on market prices or broker/dealer price quotations.Where the information is not available, fair value has been estimated using quoted market prices for securitieswith similar credit maturity and yield characteristics.The table below illustrated the movements in investments for the current financial year.2005GROUPFair valuethrough Available Held toincome for sale maturity TotalRM'000 RM'000 RM'000 RM'000At beginning of the year 197,589 130,184 12,583 340,356Adjusted for changes in accounting policies (368) 1,306 - 938Adjusted balance 197,221 131,490 12,583 341,29496financialstatements2005Additions 200,392 20,328 10,726 231,446Disposals (246,933) (17,544) (12,600) (277,077)(Amortisation of premiums)/accretion of discounts - (800) 5 (795)Fair value gain/(loss) - (note 26(a),(b)) 23,929 (354) - 23,575At end of the year 174,609 133,120 10,714 318,443(b) LIFE FUND AND INVESTMENT - LINKED FUNDGROUPINVESTMENT-_______________________ LIFE FUND ______________________LINKED FUND2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Held for trading 782,926 785,881 231,562 213,587Available-for-sale 1,259,685 1,253,395 - -Held-to-maturity 346,734 224,964 - -Total financial assets 2,389,345 2,264,240 231,562 213,587

Notes To The Financial Statements - 31 December 2005 (continued)7 INVESTMENTS (Continued)(b) LIFE FUND AND INVESTMENT - LINKED FUND (Continued)The current portion of financial assets is RM2,083,000, the remaining portion being non-current. Thecomparatives are not presented due to inavailability of information. The assets included in each of thecategories above are detailed in the tables below:Investments held for tradingEquity securities- Quoted 576,931 654,442 92,089 131,748- Unquoted 2,094 2,125 - -579,025 656,567 92,089 131,748Unit trust 100,750 93,414 3,460 18,414Corporate debt securities 100,037 32,972 115,417 59,270Investment-linked units 3,114 2,928 20,596 4,155Total financial assets at fair valuethrough profit or loss 782,926 785,881 231,562 213,587Following the transitional provisions under FRS 139, the comparative balances are stated at its carrying value asat 31 December 2004.All assets above are held for trading.97financialstatements2005Available-for-sale financial assetsGROUPINVESTMENT-_______________________ LIFE FUND ______________________LINKED FUND2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000GROUPINVESTMENT-_______________________ LIFE FUND ______________________LINKED FUND2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Corporate debt securities 797,471 764,321 - -Malaysian Government Securities/Treasury Bills/Bank Negara Malaysia papers 311,969 284,000 - -Cagamas papers 150,245 205,074 - -Total available-for-sale financial assets 1,259,685 1,253,395 - -Held-to-maturityCorporate debt securities- Quoted 356,734 224,964 - -Impairment (10,000) - - -Total held-to-maturity financial assets 346,734 224,964 - -

Notes To The Financial Statements - 31 December 2005 (continued)7 INVESTMENTS (Continued)(b) LIFE FUND AND INVESTMENT - LINKED FUND (Continued)Financial assets held-to-maturity are not presented on the Group's balance sheet at their fair value. The fair value of the held-tomaturityassets is RM340,574,000.Fair values for held-to-maturity debt securities are based on market prices or broker/dealer price quotations. Where the informationis not available, fair value has been estimated using quoted market prices for securities with similar credit maturity and yieldcharacteristics.The table below illustrated the movements in the financial assets (including loans and receivables - see note 8(b) ):Life Fund2005GROUPFair valuethrough Available Held toincome for sale maturity TotalRM'000 RM'000 RM'000 RM'000At beginning of the year 785,881 1,253,395 224,964 2,264,240Adjusted for changes in accounting policies (2,069) 11,541 - 9,472Adjusted balance 783,812 1,264,936 224,964 2,273,71298financialstatements2005Additions 1,308,954 262,115 231,804 1,802,873Disposals (1,214,329) (264,870) (107,118) (1,586,317)(Amortisation of premiums)/accretion of discounts - (779) 7,084 6,305Fair value net gain (excludingnet realised gain) (note 26(c)) (95,511) (1,717) - (97,228)At end of the year 782,926 1,259,685 346,734 2,389,345Investment-linked Fund2005At beginning of the year 213,587 - - 213,587Adjusted for changes in accounting policies - - - -Adjusted balance 213,587 - - 213,587Additions 177,065 - - 177,065Disposals (149,349) - - (149,349)Fair value net loss (excludingnet realised gain) (note 26(d)) (9,741) - - (9,741)At end of the year 231,562 - - 231,562

Notes To The Financial Statements - 31 December 2005 (continued)8 LOANS AND RECEIVABLES, EXCLUDING INSURANCE RECEIVABLES(a) GENERAL AND SHAREHOLDERS' FUNDSLoans arising from:GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Mortgage loans 40,926 38,147 750 796Other secured loans 67,047 81,924 - 28Unsecured loans 78 90 1 6108,051 120,161 751 830Interest-in-suspense (12,256) (29,193) - -Allowance for doubtful debts (7,043) (7,954) - -Net loans 88,752 83,014 751 830Lease, hire purchase andother loan receivables (note 8(a)(i)) 188,476 173,911 - -Receivables:Trade receivables of non-insurance subsidiaries 9,095 10,112 - -Amount due from subsidiaries - - 144,814 135,461Amount due from related companies 6,955 6,516 - -Outstanding proceeds from disposal of investments 2,880 2,385 - -Income due and accrued 3,976 3,758 - 2Assets held under Malaysian Motor Insurance Pool 2,450 1,733 - -Amount due from Life Fund (note 15(b)) 28,791 69,673 - -Manager's stocks 6,825 3,955 - -Other receivables, deposits and prepayments 16,813 12,287 1,282 1,07277,785 110,419 146,096 136,53599financialstatements2005355,013 367,344 146,847 137,365The net loans can be analysed as follows:Receivable within 12 months 83,460 54,901 64 62Receivable after 12 months 5,292 28,113 687 76888,752 83,014 751 830

Notes To The Financial Statements - 31 December 2005 (continued)8 LOANS AND RECEIVABLES, EXCLUDING INSURANCE RECEIVABLES (Continued)(a) GENERAL AND SHAREHOLDERS' FUNDS (Continued)(i) Lease, hire purchase and other loans receivableGROUP2005 2004RM'000 RM'000Gross investments in lease, hire purchase and other loans receivables:Not later than 1 year 204,694 183,025Later than 1 year and not later than 5 years 17,280 17,263Later than 5 years 7,415 9,994229,389 210,282Unearned future finance income (8,311) (10,180)Future finance income in suspense (17,932) (14,647)Allowance for doubtful debts (14,553) (11,280)Unguaranteed residual value (117) (264)Net investments in lease, hire purchase and otherloans receivables 188,476 173,911Representing:Current receivables 170,353 154,875Non-current receivables 18,123 19,036100financialstatements2005The net investments in lease, hire purchase and other loans receivablescan be analysed as follows:188,476 173,911Not later than 1 year 170,353 154,875Later than 1 year and not later than 5 years 11,488 10,434Later than 5 years 6,635 8,602188,476 173,911

Notes To The Financial Statements - 31 December 2005 (continued)8 LOANS AND RECEIVABLES, EXCLUDING INSURANCE RECEIVABLES (Continued)(a) GENERAL AND SHAREHOLDERS' FUNDS (Continued)Included in amounts due from subsidiary companies are advances to subsidiary companies amounting toRM107,345,000 (2004: RM105,850,000) which bear interest rates ranging from 7.0% to 8.8% (2004: 7.0% to8.8%) per annum and are currently rolled over on a monthly basis.Amounts due from related companies are unsecured, interest free and have no fixed terms of repayment.Lease, hire purchase and other loans receivablesincluded loans to the following related parties:GROUP2005 2004RM'000 RM'000Mithril Saferay Sdn Bhd 95 -Mithril Marketing Sdn Bhd 6,936 -Mitra Malaysia Sdn Bhd - 31Tajo Berhad 16,063 16,94623,094 16,977The relationships of the above related parties are disclosed in note 43 to the financial statements.Included in the current year's balances are prior year adjustments made to loans and receivables of approximatelyRM8,145,000, increasing the carrying values of such loans and receivables, arising from the adoption of FRS 139.The effects of the adjustment to the opening retained earnings for the financial year ended 31 December 2005is disclosed in note 23 to the financial statements.(b) LIFE FUND AND INVESTMENT - LINKED FUNDGROUPINVESTMENT-_______________________ LIFE FUND ______________________LINKED FUND2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000101financialstatements2005Loans arising from:Policy loans 244,123 218,611 - -Mortgage loans 366,977 377,654 - -Other secured loans 266,952 171,933 - -Unsecured loans 3,815 526 - -881,867 768,724 - -Interest-in-suspense (26,409) (17,069) - -Allowance for doubtful debts (1,241) - - -Net loans 854,217 751,655 - -

Notes To The Financial Statements - 31 December 2005 (continued)8 LOANS AND RECEIVABLES, EXCLUDING INSURANCE RECEIVABLES (Continued)(b) LIFE FUND AND INVESTMENT - LINKED FUND (Continued)Receivables:GROUPINVESTMENT-_______________________ LIFE FUND ______________________LINKED FUND2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Outstanding proceeds from disposal of investments 60,912 1,525 1,391 1,816Income due and accrued 35,426 34,270 1,424 781Amount due from investment-linkedFund (note 15(b)) 5,358 2,466 - -Amount due from shareholders' fund (note 15(a)) 16,682 9,952 - -Amount due from life fund (note 15(b)) - - 2,899 1,502Other receivables, deposits and prepayments 13,806 16,942 1,270 323132,184 65,155 6,984 4,422986,401 816,810 6,984 4,422The net loans can be analysed as follows:Receivable within 12 months 673,760 435,978 - -Receivable after 12 months 180,457 315,677 - -102financialstatements2005854,217 751,655 - -The estimated fair values of loans and receivables are the discounted amount of the estimated future cash flowsexpected to be received. Expected cash flows are discounted at current market rates to determine the fair values,as shown below:GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Loans arising from:- mortgage loans 403,625 415,120 708 787- other secured loans 312,752 222,619 - 27Leases, hire purchase and other loans receivables 188,308 174,294 - -904,685 812,033 708 814The effective interest rates on non-current receivables were as follows:GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Mortgage loans 10.5 10.2 5.8 5.8Other secured loans 11.0 10.8 5.5 5.5Unsecured loans 4.2 4.0 6.5 6.5Lease, hire purchase and other receivables 11.1 11.1 - -The Group has recognised a loss of RM1,426,000 (2004: RM nil) for the allowance for doubtful debts of its loansduring the financial year ended 31 December 2005. The allowance has been included in “Other OperatingIncome/(Expenses)” as disclosed in note 26 to the financial statements.

Notes To The Financial Statements - 31 December 2005 (continued)9 INSURANCE RECEIVABLES(a) GENERAL AND SHAREHOLDERS' FUNDSTrade receivablesGROUP2005 2004RM'000 RM'000Due premiums including agents, brokers and co-insurers balances 87,168 85,005Due from reinsurers and cedants 21,331 20,767108,499 105,772Allowance for doubtful debts (27,186) (25,346)81,313 80,426(b) LIFE FUNDTrade receivablesDue premiums including agents, brokers and co-insurers balances 46,701 34,96410 SUBSIDIARY COMPANIESCOMPANY2005Net2004NetCarrying tangible Carrying tangiblevalue assets value assetsRM'000 RM'000 RM'000 RM'000103financialstatements2005Unquoted shares, at cost 252,076 310,665 252,076 360,975Details of the subsidiary companies are as follows:Group's effectiveCountry ofinterestName of company incorporation 2005 2004 Principal activities% %Malaysian Assurance Malaysia 100 100 General and life insuranceAlliance BerhadbusinessesMAA Corporation Sdn Bhd Malaysia 100 100 Investment holding andgeneral tradingSubsidiary companies of MAACorporation Sdn BhdMAA-Medicare Sdn Bhd Malaysia 100 100 Operation of charitabledialysis centresMAA Credit Sdn Bhd Malaysia 100 100 Hire purchase, leasing andother credit activitiesMalaysian Alliance Property Malaysia 100 100 Property managementServices Sdn Bhdservices

Notes To The Financial Statements - 31 December 2005 (continued)10 SUBSIDIARY COMPANIES (Continued)Group's effectiveCountry ofinterestName of company incorporation 2005 2004 Principal activities% %Subsidiary companies of MAACorporation Sdn Bhd (continued)MAA International Assurance Ltd Labuan, 100 100 Offshore insurance andMalaysiareinsurance businesses* MAAKL Mutual Bhd Malaysia 70 70 Unit trust fundsmanagementMAA Holdings (BVI) Ltd British Virgin 100 100 Providing insuranceIslandstechnical and financialconsultancy servicesMAA Corporate Advisory Sdn Bhd Malaysia 100 100 Providing corporate advisoryand consultancy services# Wira Security Services Sdn Bhd Malaysia 100 100 Providing security servicesand trading in securityequipmentMAA Financial Advisors Sdn Bhd Malaysia 100 100 Dormant104financialstatements2005Maagnet Systems Sdn Bhd Malaysia 100 100 Providing informationtechnology consultancyservices# Meridian Asset Management Malaysia 51 51 Investment holdingHoldings Sdn BhdMaaple Eldercare Sdn Bhd Malaysia 80 80 DormantMAA International Investments Ltd Labuan, 100 100 Investment holdingMalaysiaMenang Bernas Sdn Bhd Malaysia 100 100 Restaurant operatorUkay Sentral Sdn Bhd Malaysia 100 100 DormantJendela Sutera Sdn Bhd Malaysia 100 100 DormantValiant Properties Sdn Bhd Malaysia 100 100 DormantMAA Claims Investigation Malaysia 100 100 Dormant& Survey Sdn BhdDaman Development Sdn Bhd Malaysia 100 100 DormantMytele Direct Sdn Bhd Malaysia 100 100 DormantMAA InternationalLabuan,Corporation Ltd Malaysia 100 100 Investment holdingChelsea Parking Services Sdn Bhd Malaysia 100 100 Operating, maintaining andmanaging car parksMultioto Breakdown Malaysia 100 100 Provision of motorAssistance Sdn Bhdbreakdown assistanceservices

Notes To The Financial Statements - 31 December 2005 (continued)10 SUBSIDIARY COMPANIES (Continued)Group's effectiveCountry ofinterestName of company incorporation 2005 2004 Principal activities% %Subsidiary companies of MAACorporation Sdn Bhd (continued)MAA Universal Sdn Bhd Malaysia 100 - DormantMAA Cards Sdn Bhd Malaysia 100 - DormantMAA Fire-X Sdn Bhd Malaysia 55 - DormantSubsidiary company of MAAHoldings (BVI) LtdMAA - JCA (BVI) Ltd British Virgin 70 70 DormantIslandsSubsidiary companies of WiraSecurity Services Sdn Bhd# Wira Security Services(Sabah) Sdn Bhd Malaysia 100 100 Dormant# Wira Security Services(Sarawak) Sdn Bhd Malaysia 100 100 DormantSubsidiary of MAA CorporateAdvisory Sdn Bhd105financialstatements2005MAACA Labuan Ltd Labuan, 51 - Providing offshore corporateMalaysiaadvisory and consultancyservicesSubsidiary companies ofMeridian Asset ManagementHoldings Sdn Bhd# Meridian Asset Management Malaysia 51 51 Fund management andSdn Bhdinvestment advisoryservices# Meridian Asset Management Labuan, 51 51 Fund management and(Asia) Ltd Malaysia investment advisoryserviceSubsidiary companies of MAAInternational Assurance Ltd# P.T. MAA Life Assurance Indonesia 98 98 Life insurance business# P.T. MAA General Assurance Indonesia 94 94 General insurance business# Tuang Thai Co. Ltd Thailand 49 - Investment holding

Notes To The Financial Statements - 31 December 2005 (continued)10 SUBSIDIARY COMPANIES (Continued)Group's effectiveCountry ofinterestName of company incorporation 2005 2004 Principal activities% %Subsidiary company of MAAInternational Investments Ltd# MAA Mutualife Philippines, Inc. Philippines 100 100 Unit trust fundsmanagementSubsidiary company of MAAInternational Corporation Ltd# MAA Corporate & Compliance Philippines 100 100 Investment holding andPhils. Inc.providing managementservices* A company that is 70% owned by the Company, 20% owned by a company controlled by a Director of theCompany and the balance 10% owned by certain directors of the company.# Subsidiary companies not audited by PricewaterhouseCoopers.106financialstatements200511 ASSOCIATED COMPANIESGROUP2005 2004Carrying Market Carrying Marketvalue value value valueRM'000 RM'000 RM'000 RM'000Quoted shares, at cost 36,609 5,674 31,024 14,427Unquoted shares, at cost 11,976 6,182Share of post acquisition profit 2,878 3,80951,463 41,015Less: Goodwill written-off (37,434) (37,434)14,029 3,581GROUP2005 2004RM'000 RM'000Share of net tangible assets other than goodwill of associated companies 14,029 3,581

Notes To The Financial Statements - 31 December 2005 (continued)11 ASSOCIATED COMPANIES (Continued)The Group's interest in its principal associated companies, are as follows:Profit/(loss) % interestName Assets Liabilities Revenues after taxation heldRM'000 RM'000 RM'000 RM'0002005Mithril Berhad 67,047 40,372 20,198 (156) 34MAA General Assurance Philippines, Inc. 21,361 16,426 12,601 498 4088,408 56,798 32,799 3422004Mithril Berhad 73,216 51,078 14,171 (1,854) 37MAA General Assurance Philippines, Inc. 15,957 11,478 12,981 631 4089,173 62,556 27,152 (1,223)The Group has not recognised losses from Mithril Berhad (“Mithril”) as the investment has been written down to anominal carrying amount of RM1 in 2004, the year of acquisition.Share of post acquisition losses in Mithril not recognised:GROUP2005 2004RM'000 RM'000At the beginning of financial year 1,854 -Share of post acquisition loss during the financial year 156 1,854At the end of financial year 2,010 1,854107financialstatements2005On 16 April 2004, the Group's interest in Mithril has been diluted from 40% to 37% as a result of conversion ofRM5.6 million Redeemable Convertible Unsecured Loan Stocks (“RCULS”) to 5.6 million ordinary shares of RM1 eachin Mithril by the holders of RCULS.During the first 5 months ended 30 May 2005, holders of RCULS converted another RM18.9 million RCULS to 18.9million ordinary shares of RM1 each in Mithril, diluting the Groups' interest in Mithril from 37% to 30%. On 30 May2005, the Group exercised conversion of 5.6 million Mithril warrants to 5.6 million ordinary shares of RM1 eachraising its interest in Mithril from 30% to 34% to maintain the minimum level required of 33% as imposed by theSecurities Commission during the duration of the warrants pursuant to the debt restructuring exercise of Tajo Berhad.Gain on dilution of interest in Mithril not recognised:GROUP2005 2004RM'000 RM'000At beginning of financial year 3,197 -Gain on dilution of investments arising during the financial year 15,927 3,197At end of financial year 19,124 3,197

Notes To The Financial Statements - 31 December 2005 (continued)11 ASSOCIATED COMPANIES (Continued)COMPANY2005 2004Carrying Market Carrying Marketvalue value value valueRM'000 RM'000 RM'000 RM'000Quoted shares, at cost 29,894 4,634 24,310 11,304Unquoted shares, at cost 1,450 10031,344 24,410Details of the associated companies are as follows:Group's effectiveCountry ofinterestName of company incorporation 2005 2004 Principal activities% %* Nishio Rent All (M) Sdn Bhd Malaysia 30 30 Renting of constructionand industrial equipmentMAA Bancwell Trustee Berhad Malaysia 49 49 Trust fund managementand trust services108financialstatements2005MAA General Assurance Philippines 40 40 General insurance businessPhilippines, Inc.* Mithril Berhad Malaysia 34 37 Investment holdingMaybach Logistics Sdn Bhd Malaysia 45 - Provision of transportation(formerly known asand logisticsTrilink Major Sdn Bhd)MAAKK Wealth Management Thailand 42 - Providing financial planningCo. Ltdand advisory servicesSubsidiary company ofMAAKK Wealth ManagementCo. Ltd.MAAKK General Broker Co. Ltd. Thailand 100 - Dormant* The financial year-ends of these associated companies are not co-terminous with the Group. However, forpurposes of consolidation, these associated companies had prepared financial statements as at the same balancesheet date as the financial statements of the Group.

Notes To The Financial Statements - 31 December 2005 (continued)12 DEFERRED TAXDeferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assetsagainst current tax liabilities and when the deferred taxes relate to the same tax authority.The following amounts, determined after appropriate offsetting, are shown in the balance sheet:GROUPGeneral andInvestment-__________________________ Shareholders' funds __________________________ Life fund __________________________linked fund2005 2004 2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Deferred tax assets 9,597 4,237 9,173 1,759 154 -Deferred tax liabilities (4,805) (180) (4,101) (152) (163) (735)4,792 4,057 5,072 1,607 (9) (735)At 1 January 4,057 1,219 1,607 (599) (735) (1,237)(Charged)/credited toincome statements/revenue accounts (note 29):- property, plant and equipment (48) (101) 1,201 87 - -- investments 3,992 1,939 2,418 2,119 726 502- tax losses (340) (77) - - - -- unabsorbed capital allowances 50 25 - - - -- unearned premium reserves 193 (224) - - - -- loans and receivables (3,144) - (154) - - -- tax losses not previously recognised - 1,356 - - - -- others 32 (80) - - - -735 2,838 3,465 2,206 726 502At 31 December 4,792 4,057 5,072 1,607 (9) (735)109financialstatements2005Subject to income tax:Deferred tax assets (before offsetting)Property, plant and equipment - 103 - - - -Investments 7,590 4,267 10,118 3,771 154 -Tax losses 1,732 2,072 - - - -Unabsorbed capital allowances 213 163 - - - -Others 62 147 - - - -9,597 6,752 10,118 3,771 154 -Offsetting - (2,515) (945) (2,012) - -Deferred tax assets (after offsetting) 9,597 4,237 9,173 1,759 154 -Deferred tax liabilities (before offsetting)Property, plant and equipment (1,599) (2,368) (945) (2,164) - -Investments - - (3,947) - (163) (735)Unearned premium reserves (31) (224) - - - -Others (3,175) (103) (154) - - -(4,805) (2,695) (5,046) (2,164) (163) (735)Offsetting - 2,515 945 2,012 - -Deferred tax liabilities (after offsetting) (4,805) (180) (4,101) (152) (163) (735)

Notes To The Financial Statements - 31 December 2005 (continued)12 DEFERRED TAX (Continued)COMPANY2005 2004RM'000 RM'000Deferred tax assets 690 150At 1 January 150 50(Charged)/credit to income statement (note 29):- property, plant and equipment (16) 208- investments 506 (133)- unabsorbed capital allowances 50 25540 100At 31 December 690 150Subject to income tax:Deferred tax assets (before offsetting)Investments 566 60Unabsorbed capital allowances 213 163779 223Offsetting (89) (73)110financialstatements2005Deferred tax assets (after offsetting) 690 150Deferred tax liabilities (before offsetting)Property, plant and equipment (89) (73)Offsetting 89 73Deferred tax liabilities (after offsetting) - -The amount of deductible temporary differences and unused tax losses (both of which have no expiry date) for whichno deferred tax asset is recognised in the balance sheet is as follows:GROUP2005 2004RM'000 RM'000Deductible temporary differences 1,346 9,341Tax losses 2,649 2,6993,995 12,040The deferred tax liabilities arising from the temporary differences associated with the unallocated surplus carriedforward of the Group's life fund to be transferred to the shareholders' fund have not been disclosed in the financialstatements due to the subjectivity in determining the amount to be transferred.

Notes To The Financial Statements - 31 December 2005 (continued)13 PROVISION FOR OUTSTANDING CLAIMS(a) GENERAL AND SHAREHOLDERS' FUNDSGROUP2005 2004RM'000 RM'000Provision for outstanding claims 432,403 448,956Less: Recoverable from reinsurers (145,070) (136,530)Net outstanding claims 287,333 312,426(b) LIFE FUNDProvision for outstanding claims 26,084 25,819Less: Recoverable from reinsurers (11,645) (9,391)Net outstanding claims 14,439 16,42814 INSURANCE PAYABLESGROUP2005 2004RM'000 RM'000(a) GENERAL AND SHAREHOLDERS' FUNDSTrade payablesDue to agents, brokers and co-insurers 30,930 47,400Due to reinsurers and cedants 22,942 9,729Reinsurers' deposits withheld 8,642 7,694111financialstatements200562,514 64,823(b) LIFE FUNDTrade payablesDue to agents, brokers and co-insurers 366,278 305,301Due to reinsurers and cedants 2,593 14,692Reinsurers' deposits withheld - 113,572Premium deposit 45,491 49,573414,362 483,138Reinsurers' deposits withheld of the life fund for the previous financial year was in respect of a quota sharereinsurance treaty entered into by an insurance subsidiary company in 1997 for certain non-participating life businesswritten on or prior to 31 December 1997. Under the terms of the treaty, the insurance subsidiary company withholdsreinsurance deposits of an amount equivalent to the reduction in the liabilities to policyholders at the respectivebalance sheet dates, arising from this treaty arrangement.On 1 January 2005, the insurance subsidiary company terminated the treaty arrangement. As a result of thistermination, the Company is no longer required to withhold any reinsurance deposit on this treaty arrangement, andpremiums in respect of the terminated block of business is reassumed and is reflected under “Other OperatingIncome”, as disclosed in note 26(c) to the financial statements. Similarly, this resulted in an increase in liabilities topolicyholders' of the same amount, as described in note 20 to the financial statements.

Notes To The Financial Statements - 31 December 2005 (continued)15 TRADE AND OTHER PAYABLES, EXCLUDING INSURANCE PAYABLES(a) GENERAL AND SHAREHOLDERS' FUNDSGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Trade payables from non-insurancesubsidiary companies 4,491 3,472 - -Other payablesCash collaterals held on bond business 24,064 24,654 - -Unclaimed monies 3,156 3,574 - -Amount due to a Director 145 145 - -Amount due to life fund (note 8(b)) 16,682 9,952 - -Defined contribution retirement plan payable 1,121 1,170 109 102Accrual for unutilised staff leave 1,716 1,578 150 129Stakeholders' deposits 1,450 2,828 - -Other payables and accruals 21,992 22,496 199 23170,326 66,397 458 46274,817 69,869 458 462112financialstatements2005Amount due to a Director by a subsidiary company is unsecured, interest free and has no fixed terms ofrepayment.(b) LIFE FUND AND INVESTMENT-LINKED FUNDGROUPINVESTMENT-_______________________ LIFE FUND ______________________LINKED FUND2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Other payablesAccrued interest payable 26,117 21,092 - -Unclaimed monies 5,237 8,172 - -Amount due to shareholders' fund (note 8(a)) 28,791 69,673 - -Amount due to investment-linked fund (note 8(b)) 2,899 1,502 - -Amount due to life fund (note 8(b)) - - 5,358 2,466Defined contribution retirement plan payable 582 746 - -Accrual of unutilised staff leave 868 771 - -Rental deposits 6,074 6,046 - -Other payables and accruals 19,970 16,128 3,945 2,96090,538 124,130 9,303 5,426

Notes To The Financial Statements - 31 December 2005 (continued)16 BONDS - UNSECUREDGROUP/COMPANY2005 2004RM'000 RM'000RM120 million 6-year structured serial bonds 60,000 80,000Analysis of the bonds:Payable within 1 year 30,000 20,000Payable between 1 year to 2 years 30,000 30,000Payable between 2 years to 5 years - 30,00060,000 80,000In the financial year ended 31 December 2001, the Company issued RM120 million 6-year structured serial bonds("the Bonds") in a total of 5 tranches, comprising 3 tranches with a nominal value of RM20 million each and 2tranches with a nominal value of RM30 million each, to the primary subscribers. The tenure of the Bonds rangesfrom 2 to 6 years from the date of issue and bear interest rates ranging from 5.80% to 8.20% per annum, payablesemi-annually in advance, beginning from the date of issue and every 6 months thereafter. The Bonds are traded ina secondary market on a willing-buyer willing-seller basis.During the financial year, the interest rates charged were in the range of 7.20% to 8.20% (2004: 7.20% to 8.20%)per annum.The Bonds were constituted by a trust deed dated 6 August 2001 between the Company and the trustee, to act forthe benefit of the bondholders.The Bonds are secured against an assignment of dividend proceeds from the Company's wholly owned subsidiarycompany, Malaysian Assurance Alliance Berhad (“MAA”), a first fixed charge over the designated accounts, a firstfixed charge over all permitted investments out of all designated accounts and an assignment over the Company'srights under a Dividend Upstream Agreement which was signed on 6 August 2001.Under the Dividend Upstream Agreement, MAA shall, so long as the Bonds remain outstanding, declare and pay bya date to be agreed each year, a minimum dividend which after deduction of the Company's projected tax andoperating expenses for the financial year, would leave the Company with a net amount of RM20 million. Suchdeclaration and payment of dividend shall be subject to the availability of distributable reserves, legal and regulatoryconstraints.113financialstatements2005Proceeds from the issue of the Bonds were utilised to finance the purchase of redeemable preference shares issuedby the Company's wholly owned subsidiary company, MAA Corporation Sdn Bhd, from MAA, to refinance its bankborrowings, to fund the Company's investment in MAA Corporation Sdn Bhd, to pre-fund the first two interestservice payments and to supplement the Company's working capital requirements including discount on the issue ofthe Bonds and expenses in connection with the arrangement of the facility.The Bonds unless repurchased and cancelled, shall be redeemed at the price of 100% of the nominal value of theBonds at the maturity dates.

Notes To The Financial Statements - 31 December 2005 (continued)17 TERM LOANSGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Term loans:- Unsecured 30,000 30,000 30,000 30,000- Secured 37,155 - - -67,155 30,000 30,000 30,000Payable within 1 year 37,155 - - -Payable between 2 years to 5 years 30,000 30,000 30,000 30,00067,155 30,000 30,000 30,000The unsecured term loan of RM30,000,000 from a licensed bank of the Company bears a fixed interest rate of 7.5%(2004: 7.5%) per annum. The loan is to be settled by a bullet repayment at the end of seven years from the dateof full disbursement of the loan.In connection with this term loan, the Company has signed a deed of assignment of dividend proceeds with the saidbank on 29 June 2001. Under the terms of the deed, the Company has assigned unto the bank, the dividendproceeds payable to the Company by its subsidiary companies, MAA and MAA Corporation Sdn Bhd, for the financialyear ending 31 December 2007 ("the Dividend Payment") and all rights, titles and benefits of the Dividend Paymentto the bank by way of continuing security.114financialstatements2005During the financial year, the offshore insurance subsidiary company of the Group obtained a term loan facility ofUS$12 million. The loan is secured against certain equity investments quoted offshore of the subsidiary company andto be settled at the end of one year from the date of drawndown.As at 31 December 2005, an amount of US$9.8 million has been drawn down. The secured term loan bears aninterest rate of 1.0% per annum above the applicable Singapore Inter-Bank Offer Rate (“SIBOR”) payable monthlybasis in arrears. During the financial year, the interest rate charged was in the range of 4.30% to 5.20% per annum.18 BANK OVERDRAFTS - UNSECUREDThe unsecured bank overdraft facility of the Company has a limit of RM20 million and bears an interest rate of 2.0%per annum above the prevailing base lending rate. During the financial year, the interest rate charged was in therange of 8.0% to 8.25% (2004: 8.0%) per annum.The unsecured bank overdraft facility of a subsidiary company has a limit of RM10 million and bears an interest rateof 2.5% per annum above the prevailing base lending rate. During the financial year, the interest rate charged was8.75% (2004: 8.5%) per annum.The unsecured bank overdraft facilities of the shareholders' fund, general fund and life fund of an insurancesubsidiary company of the Company have limits of RM3.5 million, RM2.0 million and RM3.0 million (2004: RM3.5million, RM2.0 million and RM3.0 million) respectively. During the financial year, the interest rates charged were8.5% (2004: 8.2%) per annum. There were no overdrawn facilities utilised at the balance sheet date by theinsurance subsidiary company.

Notes To The Financial Statements - 31 December 2005 (continued)19 UNEARNED PREMIUM RESERVESGENERAL FUNDGROUP2005Marine,Motor Motor Aviation Misce-Fire vehicles cycles & Transit llaneous TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000At beginning of financial year 11,779 83,620 13,266 1,469 23,508 133,642Currency translation differences (70) (199) - (251) 198 (322)Increase in reserves 1,480 8,798 3,521 355 3,875 18,029At end of financial year 13,189 92,219 16,787 1,573 27,581 151,3492004At beginning of financial year 10,067 114,643 16,796 1,452 23,100 166,058Currency translation differences (110) (394) - (40) (45) (589)Increase/(decrease) in reserves 1,822 (30,629) (3,530) 57 453 (31,827)At end of financial year 11,779 83,620 13,266 1,469 23,508 133,64220 LIFE POLICYHOLDERS' FUNDActuarial liabilitiesGROUP2005 2004RM'000 RM'000115financialstatements2005At beginning of financial year 3,834,996 3,341,351Add : Increase in policy reserves- on normal business during the financial year 239,739 338,260- on reassumed business previously ceded 113,572 -Bonus allocated to participating policyholders,including interim bonus from normal surplus 175,596 155,385528,907 493,645Less: Interim bonus (13,301) -At end of financial year 4,350,602 3,834,996

Notes To The Financial Statements - 31 December 2005 (continued)20 LIFE POLICYHOLDERS' FUND (Continued)GROUP2005 2004RM'000 RM'000Unallocated surplusAt beginning of financial year - as previously stated 612,090 524,377Adjustments due to changes in accounting policies:- Financial assets at fair value through profit or loss (1,683) -- Investment properties at fair value 63,300 -At beginning of financial year - restated 673,707 524,377Add: Surplus arising during the financial year 102,176 295,537Less: Bonus allocated to participating policyholders,including interim bonus from normal surplus (175,596) (155,385)Transfer to Income Statement (20,857) (52,439)(94,277) 87,713At end of financial year 579,430 612,090Life policyholders' fund at end of financial year:Actuarial liabilities 4,350,602 3,834,996Unallocated surplus 579,430 612,0904,930,032 4,447,086116financialstatements2005The liabilities to policyholders for ordinary life non-participating policies as at 31 December 2004 are stated afterdeduction of reinsurance deposits of RM113,572,000, as disclosed in note 14(b).As at 1 January 2005, an insurance subsidiary company terminated its quota share reinsurance treaty arrangementwhich was originally entered into in 1997. Under the terms of the treaty, the Company withholds reinsurancedeposits equal to the actuarial valuation in the life fund on the block of business reinsured. As a result of thetermination, the liabilities to policyholders for certain ordinary life non-participating policies for the financial yearended 31 December 2005, increased by RM113,572,000, representing the liabilities of the previously ceded nonparticipatinglife business that the insurance subsidiary company has now to reassume as part of its business.21 SHARE CAPITALGROUP/COMPANY2005 2004RM'000 RM'000Authorised ordinary shares of RM1 each:At beginning and end of financial year 500,000 500,000Issued and fully paid ordinary shares of RM1 each:At beginning and end of financial year 152,177 152,17722 SHARE PREMIUMAt beginning and end of financial year 11,744 11,744

Notes To The Financial Statements - 31 December 2005 (continued)23 RESERVES(a) GENERAL AND SHAREHOLDERS' FUNDSGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Retained earnings 224,837 194,644 181,626 156,792Other reserves:- Foreign exchange reserve 122 (93) - -- Assets revaluation reserve 941 - - -225,900 194,551 181,626 156,792Movements in retained earningsRetained earnings:As previously stated 194,644 194,131 216,192 172,215Prior year adjustments - - (59,400) (75,600)Adjustments due to changes inaccounting policies (net of tax):- Financial assets at fair valuethrough profit or loss (306) - (688) -- Loans and receivables 4,667 - - -- Investment properties at fair value 6,718 - - -At beginning of financial year - restated 205,723 194,131 156,104 96,615Net profit for the financial year 43,940 42,403 48,349 67,786Reserve/goodwill arising from:- acquisition of subsidiary companies (note 38(c)) - 284 - -- acquisition of business (note 39(b)) - (3,541) - -- acquisition of associated company - (31,024) - -117financialstatements2005- (34,281) - -Dividends paid for the previous financial year (22,827) (7,609) (22,827) (7,609)At end of financial year 226,836 194,644 181,626 156,792Movement in foreign exchange reserveAt beginning of financial year (93) 2,015 - -Current translation differencesarising during the financial year 215 (2,108) - -At end of financial year 122 (93) - -

Notes To The Financial Statements - 31 December 2005 (continued)23 RESERVES (Continued)(a) GENERAL AND SHAREHOLDERS' FUNDS (Continued)Movement in assets revaluation reserveGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000At beginning of the financial year - - - -Adjustments due to changes inaccounting policies - net of tax 1,195 - - -At beginning of financial year - restated 1,195 - - -Revaluation - gross (354) - - -Revaluation - tax 100 - - -(254) - - -At end of financial year 941 - - -The retained earnings balance represents the amount available for dividend distribution to the equity shareholdersof the Company.118financialstatements2005Subject to agreement by the Inland Revenue Board, the Company has sufficient tax credits under Section 108 ofthe Income Tax Act, 1967 and tax exempt account under Section 12 of the Income Tax (Amendment) Act, 1999to frank all of its retained earnings at 31 December 2005, if paid out as dividends(b) LIFE FUNDGROUP2005 2004RM'000 RM'000Assets revaluation reserveAt beginning of financial year - -Adjustments due to changes in accounting policies - net of tax 10,618 -At beginning of financial year - restated 10,618 -Revaluation - gross (1,715) -Revaluation - tax 137 -At end of financial year 9,040 -

Notes To The Financial Statements - 31 December 2005 (continued)24 OPERATING REVENUE2005GROUPShareholders' General Life Investmentfundsfund fund linked fund TotalRM'000 RM'000 RM'000 RM'000 RM'000Gross premium income - 459,965 1,280,260 142,676 1,882,901Investment income (note 25) 3,305 23,267 229,408 11,949 267,929Gross interest income fromhire purchase, leasing andother credit activities 10,063 - - - 10,063Income from propertymanagement, unit trust fundmanagement, security servicesand consultancy services 726,347 - - - 726,347739,715 483,232 1,509,668 154,625 2,887,2402004Gross premium income - 407,447 1,205,258 84,304 1,697,009Investment income (note 25) 6,002 23,152 218,905 7,965 256,024Gross interest income fromhire purchase, leasing andother credit activities 20,366 - - - 20,366Income from propertymanagement, unit trust fundmanagement, security servicesand consultancy services 274,157 - - - 274,157300,525 430,599 1,424,163 92,269 2,247,556119financialstatements2005Gross premium income stated in the life insurance revenue account comprises both gross premium income from thelife fund and the investment-linked fund.COMPANY2005 2004RM'000 RM'000Investment income (note 25(a)) 90,634 113,557Management fees (note 26(a)) 2,680 1,92993,314 115,486

Notes To The Financial Statements - 31 December 2005 (continued)25 INVESTMENT INCOME(a) SHAREHOLDERS' FUNDGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Interest income from:Financial assets:Debt securities- at available-for-sale 121 524 - -Loans and receivables,excluding insurance receivables- mortgage loans 47 1,138 47 37- other secured and unsecured loans 286 2,431 1 3- other receivables 24 8 7,929 7,669Fixed and call deposits 625 1,381 157 456Waiver of prior financial year'sother interest income - (148) - -1,103 5,334 8,134 8,165Amortisation of premiums fromdebt securities at held-to-maturity - (1) - -120financialstatements2005Gross dividends from equitysecurities of corporations:- at fair value through profit or loss 2,318 556 - 392- at available-for-sale - - 82,500 105,0002,318 556 82,500 105,392Gross rental income 216 367 - -Less: Rates and maintenancefor investment properties (331) (254) - -(115) 113 - -Others (1) - - -3,305 6,002 90,634 113,557

Notes To The Financial Statements - 31 December 2005 (continued)25 INVESTMENT INCOME (Continued)(b) GENERAL FUNDGROUP2005 2004RM'000 RM'000Interest income from:Financial assets:Malaysian Government Securities/Treasury Bills/Bank Negara Malaysia papers 2,589 2,531Cagamas papers 1,212 1,253Debt securities- at fair value through profit or loss 687 -- at available-for-sale 3,389 -- at held-to-maturity 482 3,676Loans and receivables, excluding insurance receivables- mortgage loans 6,120 969- other secured and unsecured loans 2,878 7,542Fixed and call deposits 3,057 4,14020,414 20,111(Amortisation of premiums)/accretion of discounts from:Financial assets:Malaysian Government Securities/Treasury Bills/Bank Negara Malaysia papers (1,227) (1,109)Cagamas papers 7 (19)Debt securities- at available-for-sale 427 545- at held-to-maturity (2) -(795) (583)121financialstatements2005Gross dividends from equity securities of corporations:- at fair value through profit or loss 3,354 2,774Gross rental income 1,682 2,490Less: Rates and maintenance for investment properties (1,393) (1,640)289 850Less: Investment expenses 5 -23,267 23,152

Notes To The Financial Statements - 31 December 2005 (continued)25 INVESTMENT INCOME (Continued)(c) LIFE FUNDGROUP2005 2004RM'000 RM'000Interest income from:Financial assets:Malaysian Government Securities/Treasury Bills/Bank Negara Malaysia papers 14,885 12,524Cagamas papers 6,727 7,865Debt securities- at fair value through profit or loss 6,584 356- at available-for-sale 51,431 -- at held-to-maturity 12,781 49,805Loans and receivables, excluding insurance receivables- mortgage loans 37,985 50,459- policy loans 18,682 16,861- other secured and unsecured loans 14,891 18,269Fixed and call deposits 19,049 23,318183,015 179,457122financialstatements2005(Amortisation of premiums)/accretion of discounts from:Financial assets:Malaysian Government Securities/Treasury Bills/Bank Negara Malaysia papers (4,209) (4,851)Cagamas papers (129) (545)Debt securities- at available-for-sale 3,556 -- at held-to-maturity 7,014 7,8826,232 2,486Gross dividends from equity securities of corporations:- at fair value through profit or loss 33,631 26,630Gross rental income 18,241 21,084Less: Rates and maintenance for investment properties (12,895) (10,752)5,346 10,332Others 1,184 -229,408 218,905

Notes To The Financial Statements - 31 December 2005 (continued)25 INVESTMENT INCOME (Continued)(d) INVESTMENT-LINKED FUNDGROUP2005 2004RM'000 RM'000Interest income from:Financial assets:Debt securities- at fair value through profit or loss 4,109 2,352Fixed and call deposits 1,552 9465,661 3,298Accretion of discounts from:Financial assetsDebt securities- at fair value through profit or loss 538 494Gross dividends from equity securities of corporations:- at fair value through profit or loss 5,316 3,449Others 434 72411,949 7,965123financialstatements2005

Notes To The Financial Statements - 31 December 2005 (continued)26 OTHER OPERATING INCOME/(EXPENSES) - NET(a) SHAREHOLDERS' FUNDGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Gain on disposal of financial assets:Equity securities- at fair value through profit or loss - 50 - -Debt securities- at available-for-sale 303 - - -Unit trusts- at fair value through profit or loss 73 - - -376 50 - -Net fair value gain/(loss) of financialassets at fair value through profit or loss:- equity securities 34,592 - (2,021) -- unit trusts (141) - - -34,451 - (2,021) -124financialstatements2005Write back of/(allowance for) diminutionin value of investments:- Quoted equity securities of corporations - 22 - 474- Quoted corporate debt securities - (4) - -- 18 - 474Net fair value loss on investment properties (250) - - -Net fair value gain on manager's stocks 26 - - -Allowance for impairment loss onloans and receivables (187) - - -

Notes To The Financial Statements - 31 December 2005 (continued)26 OTHER OPERATING INCOME/(EXPENSES) - NET (Continued)(a) SHAREHOLDERS' FUND (Continued)GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Property, plant and equipment:- (loss)/gain on disposal (51) 8 (105) -- write off (429) (9) - -Revenue from non-insurance businesses:- management fee income 515 60 2,680 1,929- unit trust fund management fee income 7,639 4,916 - -- sale and cancellation of unit trusts 694,133 248,519 - -- interest income from hire purchase, leasingand other credit activities 10,063 20,366 - -- billings for securities services 19,215 14,631 - -- others 4,845 6,031 - -Value of unit created and redeemed (684,663) (246,045) - -Commission paid and payableto unit trusts agents (10,312) (4,090) - -Increase in allowance for doubtfuldebts on loans (44) (37) - -Amortisation of intangible asset (347) (347) - -Others 3,254 3,607 (4) 543,818 47,610 2,571 1,934Other operating income - net 78,234 47,678 550 2,408125financialstatements2005

Notes To The Financial Statements - 31 December 2005 (continued)26 OTHER OPERATING INCOME/(EXPENSES) - NET (Continued)(b) GENERAL FUNDGROUP2005 2004RM'000 RM'000(Loss)/gain on disposal of:Financial assets:Equity securities- at fair value through profit or loss (20,647) 3,033Debt securities- at available-for-sale 1 16Unit trusts- at fair value through profit or loss - 1,388Derivative instruments- at fair value through profit or loss - (647)Investment properties 686 (1,292)(19,960) 2,498Net fair value loss of financial assetsat fair value through profit or loss:- equity securities (9,664) -- debt securities (282) -- unit trusts (392) -- investment-linked units (184) -126financialstatements2005(10,522) -(Allowance for)/write back of diminutionin value of investments:- Quoted equity securities of corporations - (2,958)- Quoted corporate debt securities - (3,987)- Investment-linked units - (326)- (7,271)Net fair value gain on investment properties 282 -Gain/(loss) on disposal of property, plant and equipment 145 (434)Decrease in allowance for doubtful debts on loans 1,142 -Others 482 (301)1,769 (735)Other operating expenses - net (28,431) (5,508)

Notes To The Financial Statements - 31 December 2005 (continued)26 OTHER OPERATING INCOME/(EXPENSES) - NET (Continued)(c) LIFE FUNDGROUP2005 2004RM'000 RM'000(Loss)/gain on disposal of:Financial assets:Equity securities- at fair value through profit or loss (39,197) 57,194Debt securities- at fair value through profit or loss 2,205 2,159- at available-for-sale 8,694 -Unit trusts- at fair value through profit or loss (117) 20,584Derivative instruments- at fair value through profit or loss - (4,594)Investment properties 12,288 128(16,127) 75,471Net fair value (loss)/gain of financial assetsat fair value through profit or loss:- equity securities (84,164) -- debt securities (601) -- unit trusts (10,473) -- investment-linked units 91 -(95,147) -(Allowance for)/write back of diminutionin value of investments:- Quoted equity securities of corporations - (16,735)- Quoted corporate debt securities - (12,795)- Unquoted corporate debt securities (10,000) -- Unit trusts - 2,781- Investment - linked units - 38127financialstatements2005(10,000) (26,711)Net fair value loss on investment properties (1,025) -Allowance for shortfall in collateral value of loans (1,239) -Gain on disposal of property, plant and equipment 4 162Write back of allowance for doubtful debts on loans - 645Reassumed premiums previously ceded (i) 113,572 -Other provisions (see note 41(b)) (19,602) -Others 3,273 5,49096,008 6,297Other operating (expenses)/income - net (26,291) 55,057(i)Reassumed premiums previously ceded in the life fund is in respect of termination of a treaty agreement asdisclosed in note 15(b) to the financial statements.

Notes To The Financial Statements - 31 December 2005 (continued)26 OTHER OPERATING INCOME/(EXPENSES) - NET (Continued)(d) INVESTMENT-LINKED FUNDGROUP2005 2004RM'000 RM'000Gain/(loss) on disposal of financial assets:Equity securities- at fair value through profit or loss (20,624) 6,652Debt securities- at fair value through profit or loss 425 -(20,199) 6,652Decrease in value of investments (9,741) (5,784)Others (3,838) (4,243)(13,579) (10,027)Other operating expenses - net (33,778) (3,375)128financialstatements2005

Notes To The Financial Statements - 31 December 2005 (continued)27 MANAGEMENT EXPENSESGROUP__________________________ Shareholders' fund __________________________ General fund __________________________ Life fund2005 2004 2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Staff costs (includingexecutive directors):- salaries and bonus 37,283 27,427 32,921 31,875 29,201 28,134- defined contributionretirement benefits 4,755 3,258 7,553 6,271 5,254 4,94842,038 30,685 40,474 38,146 34,455 33,082Property, plant andequipment- depreciation 2,587 1,937 4,187 3,149 8,600 9,490Auditors' remuneration- statutory audit 102 71 72 75 98 122- other services - 50 - - - -- under provision inprior financial year 17 2 1 - 1 -Auditors' remunerationpayable/paid to otheraudit firms 22 32 20 16 - 26Fees paid to a companyin which certainDirectors have an interest 280 224 - 15 15 15(Write back of)/allowancefor doubtful debts (726) 4,443 2,392 623 - -Bad debts written off 457 6,140 - 510 - -Rental of office equipment 114 50 424 420 5 523Training expenses 307 172 1,292 2,434 5,423 4,774Repairs and maintenance 112 64 2,101 2,167 4,541 6,631EDP expenses 48 - 2,712 3,501 2,512 2,151Advertising andpromotional expenses 38 1,039 6,435 5,678 6,745 6,041Office rental 378 248 2,690 2,302 4,451 5,100Other expenses 15,007 13,430 14,524 13,210 20,554 18,728129financialstatements200560,781 58,587 77,324 72,246 87,400 86,683Included in management expenses were emoluments receivable by Directors of the Group during the financial year:GROUP__________________________ Shareholders' fund __________________________ General fund __________________________ Life fund2005 2004 2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Executive directors:- salaries 3,546 840 926 45 372 45- bonus 987 380 55 60 55 60- defined contributionretirement benefits 678 174 80 15 82 15- other emoluments 8 - 115 135 115 135Non-executive directors:- fees 264 230 224 54 223 54- other emoluments 71 56 16 20 16 205,554 1,680 1,416 329 863 329

Notes To The Financial Statements - 31 December 2005 (continued)27 MANAGEMENT EXPENSES (Continued)COMPANY2005 2004RM'000 RM'000Staff costs (including executive directors):- salaries and bonus 6,224 4,377- defined contribution retirement benefits 1,503 1,0857,727 5,462Depreciation of property, plant and equipment 453 333Auditors' remuneration- statutory audit 25 20- other services - 50- under provision in prior financial year 5 -Fees paid to a company in which certain Directors have an interest 258 200Office rental payable to a subsidiary company 449 326Other expenses 4,084 3,25713,001 9,648Included in management expenses were emoluments receivable by Directors of the Company during the financial year:130financialstatements2005COMPANY2005 2004RM'000 RM'000Executive directors:- salaries 1,946 840- bonus 776 380- defined contribution retirement benefits 418 174Non-executive directors:- fees 207 203- other emoluments 50 473,397 1,644

Notes To The Financial Statements - 31 December 2005 (continued)27 MANAGEMENT EXPENSES (Continued)The estimated monetary value of benefits provided to Directors during the financial year by way of usage of theGroup's and Company's assets amounted to RM177,000 (2004: RM130,000) and RM78,700 (2004: RM31,600)respectively.The Directors of the Company in office during the financial year were as follows:Tunku Tan Seri Abdullah Ibni Almarhum Tuanku Abdul RahmanTan Sri Dato' Ir Abu Zarim bin Haji OmarMajor General (Rtd) Lai Chung WahTunku Dato' Seri Iskandar bin Tunku Tan Sri AbdullahTunku Dato' Ya'acob bin Tunku Tan Sri AbdullahDato' Iskandar Michael bin AbdullahYeo Took KeatGeneral Dato' Sri Hj Suleiman bin Mahmud (Rtd)28 FINANCE COSTSGROUP_______________________Shareholders’ fund _______________________ Life fund2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Interest on bonds 5,670 7,035 - -Interest on term loans 2,908 2,526 - -Interest on bank overdrafts 1,281 732 15 69,859 10,293 15 6COMPANY2005 2004RM'000 RM'000131financialstatements2005Interest on bonds 5,670 7,035Interest on term loan 2,250 2,250Interest on bank overdraft 654 3468,574 9,631The interest rates charged during the financial year for bonds, term loans and bank overdrafts are disclosed in notes16, 17 and 18 to the financial statements respectively.

Notes To The Financial Statements - 31 December 2005 (continued)29 TAXATIONGROUPGeneral andInvestment-__________________________ Shareholders' funds __________________________ Life fund __________________________linked fund2005 2004 2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Current tax (467) 23,631 11,311 22,482 440 1,189Deferred tax (note 12) (735) (2,838) (3,465) (2,206) (726) (502)Tax expense/(income) (1,202) 20,793 7,846 20,276 (286) 687Current taxCurrent financial year (437) 23,439 10,650 22,482 651 1,189Under/(over) accrualin prior financial years (30) 192 661 - (211) -Deferred taxOrigination and reversalof temporary differences 1,090 (2,838) (3,465) (2,206) (726) (502)Benefit from previouslyunrecognised tax losses (1,825) - - - - -(1,202) 20,793 7,846 20,276 (286) 687132financialstatements2005COMPANY2005 2004RM'000 RM'000Current tax 21,800 29,000Deferred tax (note 12) (540) (100)Tax expense 21,260 28,900Current taxCurrent year 21,800 29,000Deferred taxOrigination and reversal of temporary differences (540) (100)21,260 28,900

Notes To The Financial Statements - 31 December 2005 (continued)29 TAXATION (Continued)GROUP2005 2004% %Numerical reconciliation between the average effectivetax rate and the statutory tax rate:Malaysian tax rate 28 28Tax effects of expenses not deductible for tax purposes - 5Temporary differences not recognised in previous financial year (31) -Average effective tax rate (3) 33COMPANY2005 2004% %Numerical reconciliation between the average effectivetax rate and the statutory tax rate:Malaysian tax rate 28 28Tax effects of expenses not deductible for tax purposes 2 2Average effective tax rate 30 30The taxation charge in the income statement of the Group relates to income attributable to the Company and thegeneral and shareholders' funds.The taxation charge on the Group's life fund is based on the method prescribed under the Income Tax Act, 1967 forlife business.133financialstatements200530 DIVIDENDSGROUP/COMPANY2005 2004Gross Amount of Gross Amount ofdividend dividend, dividend dividend,per share tax exempt per share tax exemptSen RM'000 Sen RM'000Proposed final dividend 10.0 15,218 15.0 22,827Dividends paid:Proposed final dividend of prior financial year 15.0 22,827 5.0 7,60915.0 22,827 5.0 7,609At the forthcoming Annual General Meeting to be held on 21 June 2006, a final gross tax exempt dividend in respectof the financial year ended 31 December 2005 of 10 sen per share (2004: 15 sen per share) amounting toRM15,218,000 (2004: RM22,827,000) will be proposed for shareholders' approval.These financial statements do not reflect this final dividend which will be accrued as a liability in the financial yearending 31 December 2006 when approved by shareholders.

Notes To The Financial Statements - 31 December 2005 (continued)31 EARNINGS PER SHARE - GROUPThe basic earnings per ordinary share has been calculated by dividing the Group's net profit for the financial year ofRM43,940,000 (2004: RM42,403,000) by the weighted average number of ordinary shares of the Company in issueduring the financial year of 152,177,000 shares (2004: 152,177,000 shares).The effects on the basic earnings per ordinary share for the financial year ended 31 December 2005 arising from theassumed conversion of redeemable convertible secured loan stocks, redeemable convertible unsecured loan stocks,irredeemable cumulative convertible preference shares, irredeemable convertible unsecured loan stocks and warrantsof the associated company of the Group is anti-dilutive. Accordingly, the diluted earnings per ordinary share for thefinancial year ended 31 December 2005 has not been presented.32 NET CLAIMS INCURREDGENERAL FUNDGROUP2005Marine,Motor Motor Aviation Misce-Fire vehicles cycles & Transit llaneous TotalRM'000 RM'000 RM'000 RM'000 RM'000 RM'000Gross claims paid less salvage 27,492 176,763 31,458 10,001 29,430 275,144Reinsurance recoveries (15,016) (31,792) (5,196) (7,529) (8,831) (68,364)134financialstatements2005Net claims paid 12,476 144,971 26,262 2,472 20,599 206,780Net outstanding claims:At end of financial year 17,837 179,953 42,453 5,751 41,339 287,333Currency translation differences 72 (1,046) - 65 2,042 1,133At beginning of financial year (13,155) (195,038) (52,334) (6,139) (45,760) (312,426)Net claims incurred 17,230 128,840 16,381 2,149 18,220 182,8202004Gross claims paid less salvage 23,869 186,497 28,163 5,924 47,398 291,851Reinsurance recoveries (13,626) (35,164) (4,781) (2,108) (14,492) (70,171)Net claims paid 10,243 151,333 23,382 3,816 32,906 221,680Net outstanding claims:At end of financial year 13,155 195,038 52,334 6,139 45,760 312,426Currency translation differences 91 1,546 - 81 (1,928) (210)At beginning of financial year (10,006) (201,724) (49,777) (7,970) (45,646) (315,123)Net claims incurred 13,483 146,193 25,939 2,066 31,092 218,773

Notes To The Financial Statements - 31 December 2005 (continued)33 INVESTMENT-LINKED FUNDBALANCE SHEETASSETSGROUP2005 2004RM'000 RM'000Financial assets:- at fair value through profit or loss (note 7(b)) 231,562 213,587Loans and receivables (note 8(b)) 6,984 4,422Tax recoverable 1,023 162Deferred tax assets (note 12) 154 -Fixed and call deposits (note 36) 87,297 35,787Cash and bank balances (note 35) 5,803 6,020LIABILITIES332,823 259,978Trade and other payables (note 15(b)) 9,303 5,426Current tax liabilities 541 603Deferred tax liabilities (note 12) 163 73510,007 6,764NET ASSET VALUE OF FUNDS 322,816 253,214REPRESENTED BY:UNITHOLDERS' ACCOUNTAt beginning of financial year 253,214 201,948Net creation of units 96,446 48,791Net surplus for the financial year after taxation (21,543) 3,903135financialstatements2005328,117 254,642Distribution during the financial year (5,301) (1,428)At end of financial year 322,816 253,214INCOME STATEMENTInvestment income (note 25(d)) 11,949 7,965Other operating expenses - net (note 26(d)) (33,778) (3,375)(Deficit)/surplus before taxation (21,829) 4,590Taxation (note 29) 286 (687)Net (deficit)/surplus for the financial year after taxation (21,543) 3,903

Notes To The Financial Statements - 31 December 2005 (continued)34 PROVISION FOR LIFE AGENTS’ RETIREMENT BENEFITSGROUPLife fund2005 2004RM'000 RM'000At beginning of financial year 5,575 5,781Provision for the financial year 1,490 2,084Utilised during the financial year (2,064) (2,290)At end of financial year 5,001 5,575Payable within 12 months 419 407Payable after 12 months 4,582 5,1685,001 5,575The amount recognised in the balance sheet is analysed as follows:Present value of funded obligations 15,240 11,562Fair value of plan assets (15,240) (11,562)Status of funded plan - -Present value of unfunded obligations 5,001 5,575136financialstatements2005Liability in the balance sheet 5,001 5,575The expense recognised in the life insurance revenue account under commission and agency expenses may beanalysed as follows:GROUPLife fund2005 2004RM'000 RM'000Current service cost 1,301 1,852Interest cost 189 2321,490 2,084The actual return on plan asset was RM1,527,000 (2004: RM809,000).Present value of funded obligations is always equal to the fair value of plan assets of funded retirement benefitscheme as actual payment to agents is based on actual fair value of plan assets at the time of retirement. Theinsurance subsidiary company assumes that all agents who have served the company for more than 10 years willcontinue to serve the company until their age of retirement and eligible for the retirement benefit.

Notes To The Financial Statements - 31 December 2005 (continued)35 CASH AND CASH EQUIVALENTSGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Cash and bank balances:- General and Shareholders' funds 28,935 16,433 542 420- Life fund 27,762 43,009 - -- Investment-linked fund (note 33) 5,803 6,020 - -62,500 65,462 542 420Bank overdrafts:- General and Shareholders' funds (14,293) (2,670) (12,579) (2,670)48,207 62,792 (12,037) (2,250)The cash and cash equivalents of the life fund are applicable only to meet such part of the life fund's liabilities andexpenses as are properly so attributable.36 FIXED AND CALL DEPOSITS(a) GENERAL AND SHAREHOLDERS' FUNDSGROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Fixed and call deposits with:Licensed banks 139,826 87,171 2,385 3,105Licensed finance companies 181 5,031 - -Other corporations - 2,784 - -137financialstatements2005140,007 94,986 2,385 3,105(b) LIFE FUND AND INVESTMENT-LINKED FUNDGROUP_______________________ Life fund _______________________Investment-linked fund2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Fixed and call deposits with:Licensed banks 563,462 655,870 61,558 35,787Licensed finance companies 100 12,800 - -Other corporations 117,310 81,597 25,739 -680,872 750,267 87,297 35,787

Notes To The Financial Statements - 31 December 2005 (continued)37 CASH FLOW SEGMENT INFORMATION2005GROUPGeneral Shareholders' Life Investmentfundsfund fund linked fund TotalRM'000 RM'000 RM'000 RM'000 RM'000Cash flows from:Operating activities 18,446 6,230 (11,649) (217) 12,810Investing activities (2,368) (15,757) (3,598) - (21,723)Financing activities - (5,672) - - (5,672)16,078 (15,199) (15,247) (217) (14,585)Net increase/(decrease) incash and cash equivalents 16,078 (15,201) (15,247) (217) (14,585)Cash and cash equivalents:At beginning of financial year 2,146 11,617 43,009 6,020 62,792At end of financial year 18,224 (3,582) 27,762 5,803 48,2072004138financialstatements2005Cash flows from:Operating activities 1,795 72,355 32,821 1,249 108,220Investing activities (4,718) (7,264) (7,287) - (19,269)Financing activities - (32,293) - - (32,293)(2,923) 32,798 25,534 1,249 56,658Net (decrease)/increase incash and cash equivalents (2,923) 32,798 25,534 1,249 56,658Cash and cash equivalents:At beginning of financial year 5,069 (21,181) 17,475 4,771 6,134At end of financial year 2,146 11,617 43,009 6,020 62,792

Notes To The Financial Statements - 31 December 2005 (continued)38 ACQUISITIONS OF SUBSIDIARY COMPANIES(a) The effects of the acquisitions of MAA Corporate & Compliance Phils, Inc., Chelsea Parking Services Sdn Bhd andMultioto Breakdown Assistance Sdn Bhd acquired in the previous financial year to the financial statements, onthe financial results of the Group in the financial year ended 31 December 2004 were as follows:GROUP2004RM'000Operating revenue 993Management expenses (1,160)Loss before taxation (167)Taxation (7)Decrease in Group net profit for the financial year (174)(b) The effects of the acquisitions on the financial position of the Group at the financial year ended 31 December2004 were as follows:GROUP2004RM'000Property, plant and equipment 464Investments 50Loans 3Trade and other receivables -Cash and bank balances 454Payables (458)Group's share of net assets 513Increase in Group's net assets 513139financialstatements2005(c) Details of net assets acquired, goodwill and cash flows arising from the acquisition in the financial year ended 31December 2004 were as follows:GROUPAt date ofacquisition2004RM'000Property, plant and equipment 494Investments 302Trade and other receivables 119Cash and bank balances 187Payables (415)Fair value of net assets acquired 687Reserve on acquisition (note 23) (284)Purchase consideration 403Less: Cash and cash equivalents in subsidiary companies (187)Net cash outflow on acquisitions 216

Notes To The Financial Statements - 31 December 2005 (continued)39 ACQUISITION OF BUSINESS(a) The effects of the acquisition of a restaurant business by the Group to the financial statements on the financialposition of the Group at the financial year ended 31 December 2004 were as follows:GROUP2004RM'000Property, plant and equipment 215Inventories 61Trade and other receivables 346Cash and bank balances 247Payables (1,081)Net liabilities acquired (212)Decrease in Group's net assets 212(b) Details of net assets acquired, goodwill and cash flows arising from the business acquisition are as follows:GROUPAt date ofacquisition2004RM'000140financialstatements2005Property, plant and equipment 232Trade and other receivables 281Cash and bank balances 27Payables (1,081)Fair value of net liabilities acquired (541)Goodwill arising from acquisition of business (note 23(a)) 3,541Purchase consideration 3,000Less: Cash and cash equivalents acquired (27)Net cash outflow on acquisition 2,97340 CAPITAL AND OTHER COMMITMENTSCapital expenditure not provided for in the financial statements are as follows:GROUPGeneral and_______________________Shareholders’ fund _______________________ Life fund2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Authorised and contracted for:- property, plant and equipment 6,772 4,273 - -- acquisition of investment properties 450 1,035 35,415 2,6377,222 5,308 35,415 2,637Authorised but not contracted for:- acquisition of investment properties - - 59,000 16,302

Notes To The Financial Statements - 31 December 2005 (continued)41 CONTINGENT LIABILITIES(a) During the financial year, unsecured contingent liabilities in respect of guarantees issued to banks for bankingfacilities extended to subsidiary companies amounted to RM26 million (2004: Nil). At 31 December 2005, theunsecured contingent liabilities in respect of guarantees issued to banks drawndown by subsidiary companiesamounted to RM3.0 million (2004: Nil). It is anticipated that no material liabilities will arise as a result of theseguarantees.(b) During the financial year, two clients of Meridian Asset Management Sdn Bhd (“MAMS”), a 51% ownedsubsidiary company of MAA Corporation Sdn Bhd which is in turn a wholly owned subsidiary company of theCompany, had suffered a RM27.6 million loss of investment moneys arising from the negligence of Am TrusteeBerhad (“Am Trustee”), the appointed trustee, in the provision of custodian services. MAMS has instituted legalproceedings on behalf of the clients against Am Trustee and other parties to recover the losses.The directors of MAMS, supported by legal advice, are of the opinion that MAMS has a strong case against AmTrustee in the legal actions mentioned above. However, for prudence purposes, a provision amounting of RM19.6million has been made in the financial statements for the financial year ended 31 December 2005.42 NON-CANCELLABLE OPERATING LEASE COMMITMENTS2005GROUPGeneral and_______________________Shareholders’ fund _______________________ Life fundFuture Future Future Futureminimum minimum minimum minimumlease sublease lease subleasepayments receipts payments receiptsRM'000 RM'000 RM'000 RM'000Not later than 1 year 1,553 875 5,247 2,228Later than 1 year and not later than 5 years 3,106 1,750 10,494 4,4564,659 2,625 15,741 6,684141financialstatements20052004Not later than 1 year 1,553 875 5,247 2,228Later than 1 year and not later than 5 years 4,659 2,625 15,741 6,6846,212 3,500 20,988 8,912

Notes To The Financial Statements - 31 December 2005 (continued)43 SIGNIFICANT RELATED PARTY DISCLOSURESRelated parties and relationshipsThe subsidiary and associated companies of the Company are disclosed in notes 10 and 11 to the financial statementsrespectively.The other related parties of, and their relationships with the Group and the Company, are as follows:142financialstatements2005Related partyIternum Melewar Sdn BhdMelewar Equities Sdn BhdGreensilk Sdn BhdTrace Management ServicesSdn BhdMelewar Group BerhadMelewar Industrial Group BerhadMycron Steel BerhadCentral Market DevelopmentSdn BhdSistem Sewa Kereta MalaysiaSdn BhdMitra Malaysia Sdn BhdMelewar Integrated EngineeringSdn BhdMalaysian Merchant Marine BerhadMelewar Apex Sdn BhdMithril BerhadTajo BerhadRelationshipSubstantial shareholder of the CompanySubstantial shareholder of the CompanyCompany controlled by certain Directors of the CompanyCompany controlled by certain Directors of the CompanyCompany controlled by certain Directors of the CompanyCompany controlled by certain Directors of the CompanyCompany controlled by certain Directors of the CompanyCompany controlled by certain Directors of the CompanyCompany controlled by certain Directors of the CompanyCompany controlled by a Director of the CompanyCompany controlled by a Director of the CompanyCompany controlled by a Director of the CompanyCompany controlled by person connected to certainDirectors of the CompanyAn associated company of the GroupA subsidiary company of an associated company ofthe GroupDuring the financial year, the Group and the Company undertook various transactions with its subsidiary companies,associated companies and other companies deemed related parties as disclosed above.

Notes To The Financial Statements - 31 December 2005 (continued)43 SIGNIFICANT RELATED PARTY DISCLOSURES (Continued)Significant related party transactionsThe significant related party transactions during the financial year are as follows:GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Transactions with subsidiary companies:Interest income from advances to subsidiary companies - - 7,929 7,669Gross dividend income from a subsidiary company - - 82,500 105,000Management fee income from subsidiary companies - - 2,680 1,929*Rental expense payable to a subsidiary company - - (449) (326)*Rental income receivable from related parties:Trace Management Services Sdn Bhd 70 114 - -Melewar Group Berhad 33 105 - -Greensilk Sdn Bhd 163 139 - -Melewar Equities Sdn Bhd 84 84 - -Sistem Sewa Kereta Malaysia Sdn Bhd 120 48 - -Melewar Apex Sdn Bhd 175 38 - -Melewar Integrated Engineering Sdn Bhd 116 102 - -Mithril Berhad 170 477 - -*Premium income receivable from related parties:Sistem Sewa Kereta Malaysia Sdn Bhd - 81 - -Melewar Industrial Group Berhad - 101 - -*Other transactions with related parties:Rental expense payable to CentralMarket Development Sdn Bhd (61) (61) - -Purchase of air tickets and travel packagesfrom Mitra Malaysia Sdn Bhd (3,739) (3,564) (87) (26)Purchase of Islamic Preference Share fromMalaysian Merchant Marine Berhad (20,856) - - -Purchase of loan stocks from Mithril Berhad (8,219) - - -Rental and utility deposits paid to Mithril Berhad - (2,267) - -Company secretarial and relatedfees payable to Trace ManagementServices Sdn Bhd (333) (254) (258) (200)Rental expenses payable to Mithril Berhad (6,800) (5,100) - -Consultancy advisory fee receivablefrom Mithril Berhad - 500 - -Consultancy advisory fee receivablefrom Melewar Industrial Group Berhad 95 319 - -Consultancy advisory fee receivablefrom Mycron Steel Berhad - 750 - -143financialstatements2005*Interest income receivable from related parties:Mithril Berhad - net of waiver - (148) - -Tajo Berhad 2,064 169 - -Transactions with associated companies:Management fee income from associated company - - 480 65System support and maintenance feeincome from associated company 73 - - -*Security services fee receivable from related parties:Mycron Steel Berhad 124 - - -Melewar Industrial Group Berhad 127 - - -* Related party transactions on terms and conditions equivalent to those in arm's length transactions with unrelatedparties.

Notes To The Financial Statements - 31 December 2005 (continued)43 SIGNIFICANT RELATED PARTY DISCLOSURES (Continued)Related party receivables/payablesThe balances with related companies at the financial year end are disclosed in note 8 and 15 to the financialstatements. There are no significant balances with other related parties at the financial year end.In addition, directors and key management personnel received remuneration for services rendered during thefinancial year. The total compensation paid to the Group and the Company's directors and key managementpersonnel as well as fees paid to directors were as follows:GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Salaries and other short-term employee benefits 7,632 9,564 3,106 2,231Defined contribution retirement benefits 1,949 2,208 869 6639,581 11,772 3,975 2,894The financial year end balances with key management personnel were as follows:GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Amount receivable from mortgage loans 2,418 2,080 391 425Amount payable to a director 145 145 - -144financialstatements2005The amount receivable from mortgage loans are secured against the properties pledged with fixed repayment termsand bearing interest at the rates ranging from 5% to 8.5% per annum (2004: 5% to 8.5% per annum).The amount payable to a director is unsecured, interest free and with no fixed terms of repayment.44 SEGMENTAL INFORMATION(a) Business segmentsThe Group operates in three main business segments:• Life insurance - underwriting life insurance business, including investment-linked business• General insurance - underwriting all classes of general insurance business• Unit trust fund management - management of unit trust fundsOther operations of the Group mainly comprise investment holding, hire purchase, leasing and other creditactivities, unit trust, property management and investment advising, security and consultancy services, none ofwhich are of a significant size to be reported separately.Intersegment sales comprise property management, fund management, security and consultancy servicesprovided to the insurance business segments on an arms-length basis.

Notes To The Financial Statements - 31 December 2005 (continued)44 SEGMENTAL INFORMATION (Continued)(a) Business segments (Continued)2005Operating revenueLife insuranceShareholders'Non- General Unit trust fundInvestment investment insurance fund and other-linked fund -linked fund fund management operations Eliminations GroupRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000External revenue 154,625 1,509,745 483,876 701,994 37,720 - 2,887,240Inter-segment sales - 2,822 143 - 16,083 (19,048) -Total operating revenue 154,625 1,512,567 484,019 701,994 53,083 (19,048) 2,887,240ResultsSegment results (21,543) (61,006) 1,367 653 33,179 1,432 (40,519)Transfer from life reserve - 94,277 - - - - 94,277(Loss)/profit fromoperations (21,543) 33,271 1,367 653 33,179 1,432 53,758Finance costs (9,859)Share of loss ofassociated companies (931)Taxation 1,202Profit after taxation 44,170Other information145financialstatements2005Segment assets 332,823 5,144,846 689,666 26,402 376,983 18,198 6,588,918Investments inassociated companies 14,029Total assets 6,602,947Segment liabilities/totalliabilities 10,007 5,467,746 553,427 6,537 162,595 - 6,200,312Capital expenditure - 3,971 3,303 658 4,271 - 12,203Depreciation of property,plant and equipment - 8,600 4,187 425 2,162 - 15,374

Notes To The Financial Statements - 31 December 2005 (continued)44 SEGMENTAL INFORMATION (Continued)(a) Business segments (Continued)2004Operating revenueLife insuranceShareholders'Non- General Unit trust fundInvestment investment insurance fund and other-linked fund -linked fund fund management operations Eliminations GroupRM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000External revenue 92,269 1,424,163 430,599 253,469 47,056 - 2,247,556Intersegment sales - 2,145 65 - 12,892 (15,102) -Total operating revenue 92,269 1,426,308 430,664 253,469 59,948 (15,102) 2,247,556ResultsSegment results 3,903 127,993 20,399 262 5,547 2,176 160,280Transfer to life reserve - (87,713) - - - - (87,713)Profit from operations 3,903 40,280 20,399 262 5,547 2,176 72,567146financialstatements2005Finance costs (10,293)Share of profit ofassociated companies 816Taxation (20,793)Profit after taxation 42,297Other informationSegment assets 259,978 4,814,458 664,294 24,428 398,821 (2,027) 6,159,952Investments inassociated companies 3,581Total assets 6,163,533Segment liabilities/total liabilities 6,764 5,082,297 487,371 4,075 223,015 - 5,803,522Capital expenditure - 7,768 4,781 1,454 2,713 - 16,716Depreciation of property,plant and equipment - 9,490 3,149 243 1,694 - 14,576(b) Geographical segmentsThe Group operates mainly in Malaysia, Indonesia and Philippines. In determining the geographical segments ofthe Group, revenue is based on the geographical location of customers. Total assets and capital expenditure arebased on the geographical location of assets.Operating revenue Total assets Capital expenditure2005 2004 2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000 RM'000 RM'000Malaysia 2,828,001 2,195,371 6,548,388 6,103,269 11,875 16,097Indonesia 58,955 51,869 44,087 48,892 320 526Philippines 284 316 8,473 11,372 8 932,887,240 2,247,556 6,600,948 6,163,533 12,203 16,716

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISKFinancial risk management objectives and policiesThe Group's activities expose it to a variety of financial risks, including underwriting risk, credit risk, settlement risk,market risk, equity price risk, liquidity risk, foreign currency exchange risk and operational risk.The Group carried out its financial risk management through internal control systems, standard operating procedures,investment strategies and adherence to all rules and regulations as stipulated by the Guidelines for Investments issuedby Bank Negara Malaysia, Labuan Offshore Financial Services Authority and the Ministry of Finance, Indonesia, for itslocal and overseas insurance subsidiary companies.The Board regularly reviews these risks and approves policies for managing each of these risks.Underwriting riskFor the Group's insurance subsidiary companies, underwriting risk represents the inherent risk in insurance ofincurring higher claims costs than expected. This is due to the random nature of claims, changes in legal or economicconditions or behavioural patterns affecting the frequency and severity of claims.The Group seeks to manage underwriting risks through the following means:• Maintaining a measure of conservatism with respect to the adequacy of insurance premium rate levels andprovisions with respect to insurance liabilities;• Writing a balanced mix and spread of business, geographically and between classes of business;• Observing underwriting guidelines, which cover exclusions, loadings and cover limits;• Transferring risk through a program of reinsurance that seeks to limit the exposure to any one risk or life as wellas protect the overall retained portfolio from a general deterioration in claims as well as catastrophic events.Credit riskCredit risk is the risk of loss from the default by a debtor or counter party. Credit risks arise in the Group's lendingand investment activities.In lending and investment activities, the Group undertakes credit analysis whereby the credit standing of borrowers,structure of loans and the general risk entered into are assessed and evaluated.147financialstatements2005Minimum credit quality applies to investments carried out by the Group in private debt securities with a minimumrating of BBB-/BBB3 accorded by reputable rating agencies. The Group however intends to maintain a minimumA+/A1 portfolio average under current return objectives. The Group does not solely depend on the ratings providedbut as in all credit applications, reviews the credit based on publicly available information together with in-houseanalysis based on information provided by the borrowers/issuers, peer group comparisons, industry comparisons andother quantitative tools.

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Credit risk (Continued)Debtor recoverability and risk concentration monitoring, including on-going monitoring of the financial standing ofthese debtors or counter parties, are part of credit risk management of the Group to ensure that the Group isexposed to minimal credit risk. For the Group's insurance subsidiary companies, allowance for doubtful debts ismade on those loans (or part of remaining amounts) where the level of required security has been impaired.The Group's credit risk exposure in the insurance subsidiary companies is analysed as follows:Carrying amountAnalysed by rating2005 2004Quoted Unquoted Quoted Unquotedcorporate corporate corporate corporatedebt debt debt debtsecurities securities Loans securities securities LoansRM'000 RM'000 RM'000 RM'000 RM'000 RM'000Government Guaranteed - 26,619 - - 26,694 -AAA - 157,738 - - 83,574 -AA - 372,830 - - 293,095 -A - 675,592 - - 559,101 -BBB 32,728 137,420 - 27,606 107,667 -BB of lower - 31,909 - - 30,821 -Non-investment grade 3,367 6,572 942,969 8,489 20,235 834,669148financialstatements2005The rating categories are based on the gradings of reputable rating agencies.36,095 1,408,680 942,969 36,095 1,121,187 834,6692005 2004Quoted Unquoted Quoted Unquotedcorporate corporate corporate corporatedebt debt debt debtsecurities securities Loans securities securities LoansRM'000 RM'000 RM'000 RM'000 RM'000 RM'000Analysed by industryAgriculture, forestry, fisheries - 159,468 102 - 149,197 102Construction - 20,291 - - 34,930 -Finance - 222,304 156,551 7,966 140,892 159,537Industrial/Manufacturing 36,095 131,011 - 28,129 104,173 -Infrastructure - 283,271 - - 209,983 -Power - 232,030 - - 149,236 -Property - 184,968 469,643 - 142,466 395,079Trading/Services - 175,337 57,125 - 189,810 56,141Others - - 259,548 - 500 223,81036,095 1,408,680 942,969 36,095 1,121,187 834,669Settlement riskSettlement risk arises when there is an exchange of value for the same or different value dates and is not verified orexpected until the Group has paid or delivered its obligation to the trade. All transactions currently entered into aremainly with approved counter parties for settlement methods i.e. RENTAS System Intraday Credit Facility thatminimises the risks.

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market riskMarket risk is the risk of loss due to adverse changes or volatility of prices in financial markets on the Group'sinvestments.Interest rate risk is the market risk due to movements in interest rates and may affect valuation and reinvestmentissues to the Group. The Investment Committee actively monitors such developments as well as discusses changes inmaturity profiles of assets and liabilities to minimise overall mismatch.Interest rate exposure also arises from the Group's borrowings. The Group finances its operations through a mixtureof retained profits and bank borrowings. Borrowings are managed through the use of fixed and floating rate debts.The following table provides information about financial assets and financial liabilities, showing the weighted averageeffective interest rate and the contractual maturing date for each class of interest-bearing financial instrument in thebalance sheet.2005Financial assetsGROUPInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %Financial assets at FVTPL:Equity securities- quoted 800,073 - - - 800,073- unquoted 3,370 - - - 3,370Corporate debt securities- quoted 3,367 - 11,006 21,722 36,095 5.45- unquoted - 5,304 163,793 23,903 193,000 6.59Unit trusts andinvestment-linked units- quoted 26,067 - - - 26,067- unquoted 130,492 - - - 130,492149financialstatements2005963,369 5,304 174,799 45,625 1,189,097Financial assets at AFS:Equity securities- unquoted 502 - - - 502MGS/treasury bills/BNM papers - 180,343 173,454 - 353,797 3.25Cagamas papers - 120,200 60,074 - 180,274 3.55Corporate debt securities - 158,450 636,472 63,310 858,232 5.45502 458,993 870,000 63,310 1,392,805

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)GROUPInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2005 (Continued)Financial assets (Continued)Financial assets at HTM:Corporate debt securities- quoted - 6,545 - - 6,545 5.45- unquoted - 31,659 21,500 297,744 350,903 6.59- 38,204 21,500 297,744 357,448Loans and receivables(excluding insurance receivables):150financialstatements2005Loans:Policy loans - 244,123 - - 244,123 7.57Mortgage loans - 236,717 123,598 24,581 384,896 10.53Other secured loans - 276,259 37,365 56 313,680 11.04Unsecured loans - 202 68 - 270 4.24- 757,301 161,031 24,637 942,969Other receivables:Income due and accrued 40,826 - - - 40,826Others 357,777 - - - 357,777398,603 - - - 398,603Fixed and call deposits - 842,745 - 65,431 908,176 3.03Cash and bank balances 62,500Other financial assets 128,014Total financial assets 5,379,612Other assets:Property, plant and equipment 54,890Investment properties 1,091,676Intangible asset 6,189Associated companies 14,029Tax recoverable 30,801Deferred tax assets 18,924Other receivables 6,826Total assets 6,602,947

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)GROUPInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2005 (Continued)Financial liabilitiesBonds - unsecured - 30,000 30,000 - 60,000 7.90Term loans - 37,155 30,000 - 67,155 7.50Bank overdrafts - unsecured - 14,293 - - 14,293 7.02Other payables 160,501 - - - 160,501160,501 81,448 60,000 - 301,949Other financial liabilities* 5,874,392Total financial liabilities 6,176,341Other liabilities:Current tax liabilities 9,566Deferred tax liabilities 8,906Other payables 5,499Total liabilities 6,200,312* Disclosure information for financial assets and liabilities that relate to rights and obligations arising underemployee benefits, insurance contracts and leases are not shown as they are excluded from the scope of FRSStandard 132 - Financial Instruments : Disclosure and Presentation.151financialstatements2005

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)GROUPInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2004Financial assets152financialstatements2005Investments:Malaysian GovernmentSecurities/Treasurybills/Bank NegaraMalaysia papers - 20,536 301,465 - 322,001 3.35Cagamas papers - 60,253 179,815 - 240,068 3.57Corporate debt securities- quoted 523 8,018 14,932 12,622 36,095 6.12- unquoted - 150,000 706,985 264,202 1,121,187 6.98Equity securities ofcorporations- quoted 940,774 - - - 940,774 -- unquoted 3,401 - - - 3,401 -Unit trusts andinvestment-linked units- quoted 6,665 - - - 6,665 -- unquoted 147,992 - - - 147,992 -Fixed and call deposits - 815,538 - 65,502 881,040 3.051,099,355 1,054,345 1,203,197 342,326 3,699,223

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)GROUPInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2004 (Continued)Financial assets (Continued)Loans:Policy loans - 218,611 - - 218,611 7.57Mortgage loans - 110,481 179,934 104,867 395,282 10.15Other secured loans - 161,535 58,841 79 220,455 10.78Unsecured loans 3 249 69 - 321 3.993 490,876 238,844 104,946 834,669Other receivables:Income due and accrued 38,809 - - - 38,809Others 122,787 242 - - 123,029 7.00161,596 242 - - 161,838Cash and bank balances 65,462 - - - 65,4621,326,416 1,545,463 1,442,041 447,272 4,761,192Other financial assets * 295,197Total financial assets 5,056,389153financialstatements2005Other assets:Property, plantand equipment 60,255Investment properties 997,654Intangible asset 6,536Associated companies 3,581Tax recoverable 20,860Deferred tax assets 5,996Other receivables 12,2621,107,144Total assets 6,163,533

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)GROUPInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2004 (Continued)Financial liabilitiesBonds - unsecured - 20,000 60,000 - 80,000 7.82Term loans - unsecured - - 30,000 - 30,000 7.50Bank overdrafts - unsecured - 2,670 - - 2,670 7.02Other payables 161,855 - - - 161,855161,855 22,670 90,000 - 274,525Other financial liabilities * 5,490,613Total financial liabilities 5,765,138154financialstatements2005Other liabilities:Current tax liabilities 27,242Deferred tax liabilities 1,067Other payables 10,07538,384Total liabilities 5,803,522* Disclosure information for financial assets and liabilities that relate to rights and obligations arising underemployee benefits, insurance contracts and leases are not shown as they are excluded from the scope of FRSStandard 132 - Financial Instruments : Disclosure and Presentation.The comparative presentation has not been amended to conform with the current financial year's presentation as itis impracticable to do so.

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)COMPANYInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2005Financial assetsFinancial assets at FVTPL:Quoted equity securitiesof corporations 10,879 - - - 10,879Loans and receivables(excluding insurance receivables):Loans:Mortgage loans - 63 368 319 750 5.67Unsecured loans - 1 - - 1 6.50- 64 368 319 751Other receivables:Amounts due fromsubsidiary companies 37,469 107,345 - - 144,814 8.50Fixed and call deposits - 2,385 - - 2,385 2.35158,829155financialstatements2005Cash and bank balances 542Total financial assets 159,371Other assets:Property, plant and equipment 2,029Investment in subsidiary andassociated companies 283,420Tax recoverable 1,792Deferred tax assets 690Others 1,282Total assets 448,584

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)COMPANYInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2005 (Continued)Financial liabilitiesBonds - unsecured - 30,000 30,000 - 60,000 7.90Term loans - unsecured - - 30,000 - 30,000 7.50Bank overdraft - unsecured - 12,579 - - 12,579 7.02- 42,579 60,000 - 102,579Other liabilities:Others 458Total liabilities 103,037156financialstatements2005

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)COMPANYInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2004Financial assetsInvestments:Quoted equity securitiesof corporations 13,588 - - - 13,588Fixed and call deposits - 3,105 - - 3,105 2.3613,588 3,105 - - 16,693Loans:Mortgage loans - 47 279 470 796 5.67Other secured loans - 9 19 - 28 5.54Unsecured loans 3 3 - - 6 6.503 59 298 470 830Amounts due fromsubsidiary companies 29,611 105,850 - - 135,461 8.00Income due and accrued 2 - - - 2Cash and bank balances 420 - - - 42030,033 105,850 - - 135,883157financialstatements200543,624 109,014 298 470 153,406Other assets:Property, plant and equipment 2,268Investment in subsidiary andassociated companies 276,486Tax recoverable 463Deferred tax assets 150Others 1,072Total assets 433,845

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Market risk (Continued)COMPANYInterest-bearing/contractualmaturity dateWeightedNon- More Total averageinterest Up to 1 to 5 than carrying effectivebearing 1 year years 5 years amount interest rateRM'000 RM'000 RM'000 RM'000 RM'000 %2004 (Continued)Financial liabilitiesBonds - unsecured - 20,000 60,000 - 80,000 7.82Term loans - unsecured - - 30,000 - 30,000 7.50Bank overdraft - unsecured - 2,670 - - 2,670 7.02- 22,670 90,000 - 112,670Other liabilities:Others 462Total liabilities 113,132The comparative presentation has not been amended to conform with the current financial year's presentation as itis impracticable to do so.158financialstatements2005Equity price riskThe equity investment portfolio of the Group is exposed to movements in equity markets. The Group monitors itsequity price risk through regular stress testing. The Group uses historical stock betas, index levels and equity prices,and estimates the volatility and correlation of each of these share prices and index levels to calculate the gain or lossthat could occur over a defined period of time, given a certain index level.The Group uses derivative financial instruments (index futures contracts) as a means of hedging against the impactof market movements on the value of assets in the portfolio so as to reduce and eliminate risks. The Group's policyis to trade in derivatives only to hedge existing financial market risk and not for the purpose of speculation.In respect of the risks associated with the use of derivative financial instruments, price risk is controlled through thesetting of exposure limits, which are subject to detailed monitoring and review.Liquidity riskLiquidity risk is the risk that the Group is unable to meet its financial obligations when due. To ensure and avoid suchoccurrences, an adequate cushion in the form of cash and very liquid investments are always maintained. The Groupalso ensures the availability of funding through an adequate amount of committed credit facilities. The Groupmonitors on a weekly basis all known obligations outstanding together with unplanned obligation reserve (asprojected by the actuary) for the insurance subsidiary companies, to monitor mismatches in the investment portfolio.

Notes To The Financial Statements - 31 December 2005 (continued)45 MANAGEMENT OF FINANCIAL RISK (Continued)Foreign currency riskThe Group has overseas subsidiary and associated companies that operate in Indonesia, British Virgin Islands,Philippines and Thailand whose revenue and expenses are denominated exclusively in Indonesian Rupiah, UnitedStates Dollar, Peso and Thai Baht respectively. It also has subsidiary companies that operate in Labuan whose revenueand expenses are denominated mainly in United States Dollar. In order to protect the Group's exposure to themovements in the Ringgit Malaysia/Indonesian Rupiah, Ringgit Malaysia/Peso and Ringgit Malaysia/Thai Bahtexchange rates, the Group finances its net investments in the subsidiary and associated companies in Indonesia,Philippines and Thailand by means of United States Dollar denominated funds.The Group also has transactional currency exposures entered into by subsidiary companies, mainly in United States Dollar.Operational riskOperational risk includes risks that arise from internal processes of an organisation. These may result frominadequacies or failures in processes, controls or project due to fraud, unauthorised activities, error, omission,inefficiency, system failure or from external event. Operational risk is less direct than credit and market risks, butmanaging them is critical, particularly in a rapidly changing environment with increasing transaction volumes. Inorder to reduce or mitigate these risks, the Group has comprehensive operating policies and procedures manualswhich have been approved by the Board of Directors. Furthermore, the Group has established a ComplianceDepartment (which included a Risk Management Unit) and Internal Audit Department to review and check thecurrent procedures adhere to all rules and regulations and the procedures manuals.Fair valuesThe carrying amounts of the financial assets and liabilities of the Group and the Company as at the balance sheetdate approximate their fair values, except as set out below:GROUPCOMPANY2005 2004 2005 2004RM'000 RM'000 RM'000 RM'000Amounts due from subsidiary companies - - 144,814 135,461Amounts due from related companies 6,955 6,516 - -159financialstatements2005It is not practicable to determine the fair values of amounts due from subsidiary and related companies because thesebalances have no fixed terms of repayment and are repayable on demand.

Notes To The Financial Statements - 31 December 2005 (continued)46 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR(a) On 6 October 2005, the Company together with Melewar Industrial Group Berhad, M3nergy Berhad (formerlyknown as Trenegy (Malaysia) Berhad), Mycron Steel Berhad and Malaysian Merchant Marine Berhad (collectivelyreferred to as “the Subscribing Companies”) subscribed for 100 ordinary shares of RM1 each in a shelf companyby the name of Maybach Logistics Sdn Bhd (formerly known as Trilink Major Sdn Bhd) (“MLSB”), of which 45ordinary shares of RM1 each was subscribed by the Company.The Subscribing Companies subsequently on 9 December 2005 subscribed for 2,000,000 Redeemable PreferenceShares (“RPS”) of RM0.10 each at an issue price of RM1 per RPS in MLSB, of which 900,000 RPS of RM1 eachwas subscribed by the Company.(b) On 22 February 2005, the shareholders of the Company approved the following corporate proposals (collectivelyreferred to as the “Proposals”):(i)Proposed renounceable rights issue of up to 152,176,876 new irredeemable preference shares of RM1 each(“IPS”) (“Rights IPS”) together with up to 152,176,876 free detachable ordinary shares of RM1 each (“BonusShares”) and up to 152,176,876 free detachable warrants (“Warrants”) on the basis of 1 Rights IPS with 1free detachable Bonus Share and 1 free detachable Warrant for every 1 existing ordinary share held in theCompany at an entitlement date to be determined later (“Rights Issue of IPS”);(ii) Proposed increase in the authorised share capital of the Company from RM500,000,000 comprising500,000,000 ordinary shares to RM1,000,000,000 comprising 500,000,000 ordinary shares and 500,000,000IPS (“Proposed Increase in Authorised Share Capital”);(iii) Proposed amendments to the Memorandum and Articles of Association of the Company pursuant to theProposed Rights Issue of IPS and Proposed Increase in Authorised Share Capital (“Proposed Amendments”);160financialstatements2005(iv) Proposed exemption by Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah (“TY”), a director and shareholderof the Company and parties acting in concert with him (“TY and PAC”) from the obligation to extend amandatory offer for the remaining shares in the Company not already owned by them (“Mandatory Offer”)after the Proposed Rights issue of IPS as provided under Practice Note 2.9.1 of the Malaysian Code on Take-Overs and Mergers, 1998 (“Proposed Exemption”).On 23 February 2005, the Company announced that the issue price for the Rights IPS to be issued pursuant tothe Proposals had been fixed by the Board at RM2 per Rights IPS. The issue price of RM2 each was arrived atafter taking into consideration the theoretical ex-bonus price of the Company's ordinary shares of approximatelyRM2.63, which was calculated based on the weighted average market price of the Company's ordinary sharesfor the past 5 days up to and including 22 February 2005 (being the market day immediately preceding the pricefixing date of 23 February 2005), of approximately RM5.25. The issue price of RM2 represented a discount ofRM0.63 or approximately 24.0% over the theoretical ex-bonus price for the Rights IPS.In addition, the Board has also fixed the exercise price of the Warrants, which are to be issued free with the RightsIPS pursuant to the Proposed Rights Issue of IPS, at RM2 per Warrant, which was arrived at after taking intoconsideration the theoretical ex-bonus price of the Company's ordinary shares. The exercise price of the Warrantsof RM2 represented a discount of RM0.63 or approximately 24.0% over the theoretical ex-bonus price.On 27 May 2005, the Securities Commission (“SC”) approved the Company's application to extend thecompletion of the Rights Issue of IPS from 3 June 2005 to 31 December 2005, given the prevailing uncertainsentiments in the Malaysian equity market.On 23 December 2005, given the continuing uncertain sentiments in the Malaysian equity market, the SC hadapproved a further extension of time of six (6) months from 1 January 2006 to 30 June 2006 for the Companyto complete the implementation of the Rights Issue of IPS.

Notes To The Financial Statements - 31 December 2005 (continued)47 SIGNIFICANT EVENTS SUBSEQUENT TO THE FINANCIAL YEAROn 21 February 2006, the Company announced the entering into a Joint Venture Agreement with SolidarityCompany BSC (C) (“Solidarity”) (hereinafter referred to as “JV”).The salient terms of the JV are as follows:(i)The parties will form a joint venture company (“NEWCO”) to carry on Takaful business in Malaysia upon receiptof the approval from Bank Negara Malaysia (“BNM”).(ii) NEWCO will have an authorised and paid-up share capital of RM150 million and RM100 million respectively orsuch other amount as may be agreed by the parties.(iii) NEWCO will initially be capitalised in an amount of RM100 million divided into 100 million ordinary shares ofRM1 each in accordance with the proportion of the shareholding set out below.(iv) The equity interest of the Company and Solidarity in NEWCO will be in proportion of 75% and 25% respectively.(v) The paid-up capital of NEWCO will be increased to meet the capital requirement for Takaful operators asdetermined by BNM from time to time.48 COMPARATIVESCertain comparative figures of the Company have been restated to conform with the current year's accountingtreatment.DividendsIn previous years, dividends from subsidiary companies were accrued as income when proposed by the subsidiarycompanies. In accordance with FRS 110, the Company has now changed this accounting policy to recognisingdividend income in the period in the proposed dividends are approved in the annual general meetings of thosesubsidiary companies. Therefore, final dividends due from subsidiary companies are now accrued as income onlyafter approval by the shareholders at the Annual General Meeting and the previously reported figures as restated asfollows:161financialstatements2005As Effects ofpreviously changes Asreported in policy restatedRM'000 RM'000 RM'000CompanyStatement of changes in equity- retained earnings (172,215) 75,600 (96,615)Other debtors- dividends receivables 75,600 (75,600) -

List of Property Investment Held As 31 December 2005No. LOCATION OF PROPERTIES TENURE LAND/ DESCRIPTION/ APPROX. NET BOOK DATE OFBUILT-UP EXISTING USE AGE OF VALUE ACQUISITION (A)/AREA BUILDING (RM'000) REVALUATION (R)(SQ.M)(year)1 Wisma MAA Freehold 1,217 Shophouses 7 1,500 30/3/99 (A)No. 21-5,21-6, Jalan Zabedahfor branch office83000 Batu PahatJohor Darul Takzim2 Menara MAA Freehold 61,105 Office building 3 125,000 26/6/01 (A)No. 15, Jalan Dato Abdullah Tahirfor branch office80300 Johor Bahru and rental incomeJohor Darul Takzim3 12 Units of Condominium Freehold 1,573 Condominiums 9 3,576 23/2/04 (R)Tanjung Puteri Condominiumfor rental incomeNo. 1, Jalan Stulang Laut 2Off Jalan Ibrahim Sultan, Stulang Laut80300 Johor BahruJohor Darul Takzim4 Wisma MAA Leasehold 1,048 Shophouses 9 1,640 10/3/97 (A)No. 11A & 15 for 99 years for branch officeJalan Syed Abdul Hamid Sagaffexpiring on86000 Kluang 2093Johor Darul Takzim5 Wisma MAA Freehold 1,569 Office building 22 1,800 26/11/93 (A)No.34, Jalan Bakrifor branch office84000 MuarJohor Darul Takzim162financialstatements20056 Wisma MAA Freehold 2,362 Shophouses 9 3,130 6/8/94 (A)No.1, 2, 3 & 4, Jalan Emasfor branch officeTaman Batu Hamparand rental income85000 SegamatJohor Darul Takzim7 No.18-E, Jalan Raya Freehold 446 Shophouses 12 290 19/1/97 (A)08300 Gurun for branch officeKedah Darul Amanand rental income8 HS(M) No. 622/96 PT No. 5365A Freehold 534 Shop office under - 330 5/2/04 (R)HS(M) No. 623/96 PT No. 5366constructionHS(M) No. 626/96 PT No. 5369Mukim Sungai SeluangKedah Darul Aman9 Wisma MAA Leasehold 1,570 Shophouses 10 1,100 31/12/96 (A)No. 117 & 118, Jalan Pengkalan for 99 years for branch officeTaman Pekan Baruexpiring on08000 Sungai Petani 19/12/2091Kedah Darul Aman10 Bangunan Wira Security Freehold 5,290 Office building 44 19,000 29/12/94 (A)No. 183, Jalan Ipohfor rental income51200 Kuala Lumpur11 Menara MAA Freehold 71,793 Office building 6 246,779 26/2/04 (R)No. 12, Jalan Dewan Bahasafor head office use50460 Kuala Lumpur and rental income12 Lot 21, Jalan 4/32A Leasehold 3,864 Industrial building 2.7 6,600 19/2/01 (R)Kepong Industrial Area for 60 years for rental incomeBatu 6 1/2 Kepongexpiring on51200 Kuala Lumpur 05/01/203913 1 Unit of Condominium Freehold 279 Condominiums 5 1,187 23/11/04 (A)No. 403 Fernlea Courtfor rental income16, Persiaran Ampang Hilir55000 Kuala Lumpur

List of Property Investment Held As 31 December 2005 (continued)No. LOCATION OF PROPERTIES TENURE LAND/ DESCRIPTION/ APPROX. NET BOOK DATE OFBUILT-UP EXISTING USE AGE OF VALUE ACQUISITION (A)/AREA BUILDING (RM'000) REVALUATION (R)(SQ.M)(year)14 11 Units of Bungalow lots at Freehold 10,977 Vacant land - 21,293 1/6/05 (A)Hartamas Heights, Sri Hartamas,Kuala Lumpur15 Wisma MAA Leasehold 2,764 Shophouses 14 2,800 6/5/91 (A)No.185 to 190 for 99 years for branch officeTaman Melaka Raya expiring on and rental income75000 Melaka 19/08/207516 Casa Rachado Leasehold 14,414 Training resort 10 12,000 24/2/04 (R)Tanjung Biru for 99 years for staff and agencyBatu 10, Jalan Pantaiexpiring on71250 Si-Rusa Port Dickson 13/10/2036Negeri Sembilan Darul Khusus17 Lot 1478, Nilai Industrial Leasehold 5,853 Factory building 9 6,400 12/8/94 (A)Estate Phase II for 99 years for rental income71800 Nilai expiring onNegeri Sembilan Darul Khusus 20/08/208918 PT 1561 Leasehold 3,902 Factory building 15 4,330 29/5/95 (A)Kawasan Perusahaan Nilai for 60 years for rental income71800 Nilai expiring onNegeri Sembilan Darul Khusus 05/11/205019 No. 14 & 15 Jalan Toman 2 Freehold 14,922 Shophouses 8 5,449 20/2/04 (R)Kemayan Squarefor branch office70200 SerembanNegeri Sembilan Darul Khusus20 1 units of Shophouses Freehold 361 Shophouses for 7 485 12/1/00 (A)Kemayan Square (parent title) rental income70200 SerembanNegeri Sembilan Darul Khusus21 22-Storey Office Tower Freehold 15,003 Office tower for 0.3 45,000 28/12/04 (R)Terminal One Commerce Centreintended forLot 5318, Jalan Lintangrental income70000 SerembanNegeri Sembilan Darul Khusus163financialstatements200522 21 Units of Shop Lots Freehold 3,646 Commercial lots 7 12,361 29/8/01 (A)Terminal One Shopping Centrefor rental income20B Jalan Lintang70000 SerembanNegeri Sembilan Darul Khusus23 Wisma MAA Freehold 721 Shophouses 15 880 2/1/90 (A)No. A1, Jalan Stadiumfor branch office25200 KuantanPahang Darul Makmur24 CT4300, Lot 16, Section 22, Lot 16 Freehold 4,040 Vacant land - 6,000 23/4/98 (A)Town and District of KuantanPahang Darul Makmur25 Lot 2638 S, Jalan Kampar Freehold 2,076 Vacant land - 2,500 1/3/04 (R)30250 IpohPerak Darul Ridzuan26 No. 12 ( Lot 35154) Freehold 4,846 Vacant land - 5,372 19/7/01 (A)Off Jalan Chin Choon SamNo. 142 (35155)Jalan Sultan Abdul JalilIpohPerak Darul Ridzuan

List of Property Investment Held As 31 December 2005 (continued)No. LOCATION OF PROPERTIES TENURE LAND/ DESCRIPTION/ APPROX. NET BOOK DATE OFBUILT-UP EXISTING USE AGE OF VALUE ACQUISITION (A)/AREA BUILDING (RM'000) REVALUATION (R)(SQ.M)(year)27 No. 28, Medan Silibin Leasehold 2,381 Shophouses 6 2,200 13/6/00 (A)30300 Ipoh for 99 years for rental incomePerak Darul Ridzuanexpiring on29/09/209828 Wisma MAA Leasehold 3,281 Office building 9 7,200 27/3/92 (A)No. 65, Persiaran Greenhill for 999 years for branch office30450 Ipoh expiring onPerak Darul Ridzuan 21/09/289429 HS(D) 106957-106967, 106982-107005, Leasehold 8,584 Residential houses - 7,431 14/7/03 (A)107008-107032 Mukim of Kampar for 99 years for sales/District of Kinta expiring on rental incomePerak Darul Ridzuan 22/05/210130 No. 19, 21, 23 & 25 Leasehold 658 Shophouses - 840 14/4/03 (A)Lebuh Kledang Utara 2B for 99 years intended forTaman Arkid expiring on rental incomeMenglembu 17/09/2095Perak Darul Ridzuan31 Wisma MAA Leasehold 3,924 Shophouses 6 2,310 13/2/04 (R)No. 11-17, Jalan SM 1C/15 for 99 years for branch officeFasa 1C 4, Bandar Baru Sri Manjung expiring on and rental income32040 Sri Manjung 01/08/2079Perak Darul Ridzuan164financialstatements200532 No.10, Jalan Sena Indah 1 Leasehold 240 Shophouses 7 230 29/1/99 (A)Taman Sena Indah for 99 years for branch office01000 Kangar expiring onPerlis Indera Kayangan 02/10/209433 Wisma MAA Freehold 1,625 Shophoses 6 1,950 24/5/98 (A)No. 7126 - 7128for branch officeJalan Bagan JermalTaman Bintang12300 ButterworthPulau Pinang34 Menara MAA Freehold 23,103 Office building 6 47,500 1/7/97 (A)No. 170, Jalan Argyllfor branch office10250 Pulau Pinang and rental income35 Section 14, Bandar Gergetown Freehold 6,311 Land and 1,363 19/12/05 (A)Timur Laut Pulau Pinang:Building for rentalLot 497 and 502 Land for rental - -Lot 499 Building for rental 76 -Lot 501 Building for rental 116 -36 H.S(D) 14713 Leasehold for 60 10,849 Factory building 15 9,863 28/1/05 (A)PT No.2926, Mukim 11 years expiring on for rentalDistrict of Seberang Prai Tengah 08/05/2052 incomeState of Pulau Pinang37 Jalan Lintas Leasehold 46,497 Residential - 30,000 6/1/05 (R)Kota Kinabalu, Sabah for 999 years housesCL 015 017 679 expiring on intended for16/04/2922 sale/rentalincomeCL 015 019 217expiring on17/06/2924CL 015 008 803expiring onDistrict of Kota Kinabulu, Sabah 20/04/290938 Lot No. 4/G3 to 4/G7 Leasehold 1,250 Shophouses 11 3,750 10/1/94 (A)Api-Api Centre, Jalan Centre Point for 99 years for rental income88000 Kota Kinabalu expiring onSabah 31/08/2086

List of Property Investment Held As 31 December 2005 (continued)No. LOCATION OF PROPERTIES TENURE LAND/ DESCRIPTION/ APPROX. NET BOOK DATE OFBUILT-UP EXISTING USE AGE OF VALUE ACQUISITION (A)/AREA BUILDING (RM'000) REVALUATION (R)(SQ.M)(year)39 Lot 11, General Industrial Zone Package 1 Leasehold 26,952 Vacant land - 3,770 2/10/03 (A)Kota Kinabalu Industrial Park KM 25 for 99 yearsJalan Tuaranexpiring onKota Kinabalu 21/12/2098Sabah40 Ground Floor to Third Floor Leasehold 1,179 Office building 23 2,334 18/11/89 (A)Wisma Pendidikan for 99 years for branch officeJalan Balai Polisexpiring on88850 Kota Kinabalu 31/12/2073Sabah41 Wisma MAA Leasehold 3,976 Office building 16 3,650 7/11/89 (A)TB224, Town Extension II for 999 years for branch office91000 Tawau expiring on and rental incomeSabah 01/01/289642 2 units bungalow lot (land) Leasehold for 2,717 Vacant land - 2,462 7/9/05 (R)in town no. 01754486 & 017544875 99 years expiringat Sembulan, Kota Kinabalu, Sabah on 31/12/209143 Provisional lease 106261205 Leasehold for 1,235,546 Vacant land - 23,729 2/9/05 (A)District of Tawau, Along KM 13 99 years expiringJalan Apas Tawau, Sabah on 10/04/206044 Menara MAA Leasehold 2,598 Office building 9 10,188 25/11/93 (A)Lot 86, Section 53 for 99 years for branch officeJalan Ban Hockexpiring on93100 Kuching 28/04/2051Sarawak45 HS(M) 6690, PT 129 Leasehold 6,988 Vacant land - 6,390 2/1/04 (R)Mukim Damansarafor 99 yearsDistrict of Petaling Jayaexpiring onState of Selangor 28/01/2092(Kelana Jaya)46 43 Units of Condominiums Leasehold 8,569 Condominiums 9 15,418 20/2/04 (R)Tiara Kelana Condominum for 99 years for rental incomeJalan SS7/19, Taman Sri Kelana expiring onKelana Jaya 28/01/209247301 Petaling JayaSelangor Darul Ehsan165financialstatements200547 Millennium Court Leasehold 13,016 Hostel 3 110,000 30/3/01 (A)Lots PT 1, 2, 2A, 3, 4, 5, 6, 9 & 50 for 99 years for rental incomeSection 16, Lorong Ilmuexpiring onPetaling Jaya 11/03/2068Selangor Darul Ehsan48 No. 11, Jalan SS 8/4 Freehold 6,743 Factory building 17 8,000 12/2/04 (R)Sungai Way Free Industrial Zonefor rental income47300 Petaling JayaSelangor Darul Ehsan49 Lot 34, Jalan Delima 1/3 Freehold 3,106 Factory building 8 5,300 7/11/89 (A)Subang Hi-Tech Industrial Parkfor rental income40000 Shah AlamSelangor Darul Ehsan50 Wisma MAA Freehold 2,520 Shophouses 33 6,850 27/9/95 (A)No. 14, 16, 18, 20, 22 & 24for branch officeJalan SS 3/5, Taman Sentosaand rental income47300 Petaling JayaSelangor Darul Ehsan51 No. 2, Jalan PPU 1 Freehold 28,302 Industrial building 3.5 38,500 2/7/01 (A)Taman Perindustrian Puchong Utamafor rental income47100 PuchongSelangor Darul Ehsan (PT. No. 32333)

List of Property Investment Held As 31 December 2005 (continued)No. LOCATION OF PROPERTIES TENURE LAND/ DESCRIPTION/ APPROX. NET BOOK DATE OFBUILT-UP EXISTING USE AGE OF VALUE ACQUISITION (A)/AREA BUILDING (RM'000) REVALUATION (R)(SQ.M)(year)52 No. 23, Rawang Industrial Park Freehold 8,094 Industrial building 5 9,450 16/5/01 (A)48000 Rawang for rental incomeSelangor Darul Ehsan53 5 Units of Condominium Leasehold 12,128 Condominiums 8 957 5/2/04 (R)Sinaran Ukay Condominium for 99 years for rental incomeJalan BU 1/1expiring onTaman Bukit Utama 03/08/209868000 Bukit AntarabangsaAmpang, Selangor Darul Ehsan54 EMR 6095, PT 2981 & Freehold 15,609 Vacant land - 1,246 2/1/04 (R)EMR 6096, PT 2982Mukim SetapakDistrict of GombakState of Selangor55 HS(M) 10339/PT No. 14251 Freehold 249,449 Vacant land - 163,415 28/5/04 (A)HS(D) 24220/PT No. 14250MukIm of Ulu KelangDistrict of GombakState of Selangor56 Geran 23827 Lot 2718 Freehold 77,168 Vacant land - 5,814 30/4/03 (R)Mukim KajangDistrict Hulu Langat166financialstatements200557 Wisma MAA Freehold 3,747 Shophouses 9 5,925 8/10/98 (A)No. 77, 79, 81, 83, 85, 87 & 89for branch officeLorong Tiong, Taman Orkidand rental income41050 KlangSelangor Darul Ehsan58 Plot 57 H.S (M) 3505, PT 7198 & Leasehold 1,924 Vacant land - 1,730 10/1/05 (A)Plot 58 H.S (M) 3504, PT 7197 for 99 yearsMukim Bukit Raja Daerah Petaling expiring onSelangor Darul Ehsan 28/1/210359 Wisma MAA Freehold 1,343 Office building 28 2,050 19/5/97 (A)No.134, Jalan Sultan Zainal Abidinfor branch office20000 Kuala TerengganuTerengganu Darul Iman60 1 unit of Tiara Kelana Condominium Leasehold 596 Condominium 9 483 20/2/04 (R)Taman Sri Kelana for 99 years for rental/salePetaling Jayaexpiring onSelangor Darul Ehsan 01/08/209261 Flat 5, 19-23 Leasehold 135 Apartment for use 9 5,653 10/3/05 (R)Palace Court for 999 years by selectedLondon W2LP expiring on corporate clients30/09/299562 Flat 9, 19-23 Leasehold 135 Apartment for use 9 5,653 10/3/05 (R)Palace Court for 999 years by selectedLondon W2LP expiring on corporate clients30/09/299563 Desa Ungasan, Kecamatan Kuta Selatan Leasehold 1,860 Vacant land - 1,271 26/9/02 (A)Kabupaten Badung, Bali Province for 20 yearsRepublic of Indonesiaexpiring on2024TOTAL NET BOOK VALUE 1,091,677

List Of Substantial Shareholders And Directors’ ShareholdingsAs At 28 April 2006SUBSTANTIAL SHAREHOLDERSName No. of shares held % of issued capitalTunku Tan Sri Abdullah ibni Almarhum Tuanku Abdul RahmanIndirect Interest 51,889,342 34.10Tunku Dato' Seri Iskandar bin Tunku Tan Sri Tan Sri AbdullahIndirect Interest 51,889,342 34.10Tunku Dato' Ya'acob bin Tunku Tan Sri AbdullahDirect Interest 618,750 0.41Indirect Interest 51,889,342 34.10Iternum Melewar Sdn BhdIndirect Interest 51,889,342 34.10+Khyra Sdn BhdIndirect Interest 51,889,342 34.10 #DIRECTORS' SHAREHOLDINGSNumber of Shares HeldName Direct % Indirect %Tunku Tan Sri Abdullah ibni Almarhum Tuanku Abdul Rahman - - 51,889,342 34.10*Tunku Dato' Seri Iskandar bin Tunku Tan Sri Abdullah - - 51,889,342 34.10*Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah 618,750 0.41 51,889,342 34.10*167financialstatements2005Yeo Took Keat 40,000 ^ - -Notes:+ Iternum Melewar Sdn Bhd (“IMSB”) is deemed interested in MAAH by virtue of it being the holding company of Melewar Equities Sdn Bhd(“MESB”) who in turn is the holding company of Melewar Khyra Sdn Bhd (“MKSB”). MESB and MKSB are substantial shareholders of MAAH.# Khyra Sdn Bhd is deemed interested in MAAH by virtue of it being the ultimate holding company of IMSB.* Deemed interested by virtue of Section 6A(4) of the Companies Act 1965, held through Iternum Melewar Sdn Bhd, a company in which theabove mentioned Directors have an interest.^Negligible

Statistics Of Shareholdings As At 28 April 2006Authorised CapitalRM500,000,000Issued and Paid-up CapitalRM152,176,876Class of SharesOrdinary shares of RM1.00 eachTotal Number of Shares Issued 152,176,876Number of Shareholders 4,793BREAKDOWN OF SHAREHOLDINGSSize of holdings No. of holders % of holders No. of shares % of shares1-99 218 4.55 6,946 0.00100 - 1,000 1,389 28.98 1,073,201 0.711,001 - 10,000 2,676 55.83 9,344,819 6.1410,001 - 100,000 425 8.87 10,535,975 6.92100,000 and below 5% 81 1.69 88,241,887 57.995% and above 4 0.08 42,974,048 28.244,793 100.00 152,176,876 100.00LIST OF TOP THIRTY SHAREHOLDERSName No. of shares held % of issued capital168financialstatements20051. AMSEC Nominees (Tempatan) Sdn BhdBeneficiary: AmBank (M) Berhad for Melewar Equities Sdn Bhd 12,333,333 8.102. Merchant Nominees (Tempatan) Sdn BhdBeneficiary: Pledged securities account for Melewar Khyra Sdn Bhd 11,000,000 7.233. Amanah Raya Nominees (Tempatan) Sdn BhdBeneficiary: Skim Amanah Saham Bumiputera 10,884,200 7.154. Melewar Equities Sdn Bhd 8,756,515 5.755. Tangent Star Sdn Bhd 6,382,306 4.196. HSBC Nominees (Asing) Sdn BhdBeneficiary: Natexis for Magellan 5,500,000 3.617. HSBC Nominees (Asing) Sdn BhdBeneficiary: RBC Dist for Melewar Equities (BVI) Limited 5,483,333 3.608. Amanah Raya Nominees (Tempatan) Sdn BhdBeneficiary: Amanah Saham Malaysia 5,102,833 3.359. Melewar Khyra Sdn Bhd 4,880,522 3.2110. Employees Provident Fund Board 4,432,800 2.9111. HSBC Nominees (Asing) Sdn BhdBeneficiary: Natexis for Comgest Nouvelle Asie 4,350,000 2.86

Statistics Of Shareholdings As At 28 April 2006 (continued)Name No. of shares held % of issued capital12. HSBC Nominees (Asing) Sdn BhdBeneficiary: Exempt An for J.P. Morgan Bank (Ireland) Public Limited Company 3,981,300 2.6213. Amanah Raya Nominees (Tempatan) Sdn BhdBeneficiary: Amanah Saham Nasional Wawasan 2020 3,835,200 2.5214. HSBC Nominees (Asing) Sdn BhdBeneficiary: TNTC for Atlantis Asia Recovery Fund Plc 3,071,600 2.0215. HDM Nominees (Tempatan) Sdn BhdBeneficiary: UOB Kay Hian Pte Ltd for Melewar Equities (BVI) Ltd 3,053,333 2.0116. Lembaga Tabung Angkatan Tentera 2,933,333 1.9317. Cartaban Nominees (Tempatan) Sdn BhdBeneficiary: RBC Dexia Investor Services Bank for MMA Asie 2,700,000 1.7718. Malaysia Nominees (Tempatan) Sendirian BerhadBeneficiary: Amanah SSCM Asset Management Berhad for AmanahMillenia Fund Berhad (JM730) 2,369,000 1.5619. Cartaban Nominees (Tempatan) Sdn BhdBeneficiary: Amanah SSCM Nominees (Tempatan) Sdn Bhdfor Employees Provident Fund Board (JF404) 2,040,000 1.3420. Permodalan Nasional Berhad 2,000,000 1.3121. Amanah Raya Nominees (Tempatan) Sdn BhdBeneficiary: Sekim Amanah Saham Nasional 1,969,200 1.29169financialstatements200522. HSBC Nominees (Asing) Sdn BhdBeneficiary: Natexis for CG Actions Asie Hors Japon 1,600,000 1.0523. HSBC Nominees (Asing) Sdn BhdBeneficiary: TNTC for Far Eastern Fund (Halifax Intl) 1,470,666 0.9724. HSBC Nominees (Asing) Sdn BhdBeneficiary: TNTC for Atlantis Asia Opportunities Fund(ATL INT UMB FD) 1,200,000 0.7925. Cartaban Nominees (Asing) Sdn BhdBeneficiary: Investors Bank and Trust Company for Ishares, Inc 939,400 0.6226. Cartaban Nominees (Asing) Sdn BhdBeneficiary: SSBT Fund IE1J for Van Eck World wide InsuranceTrust Worldwide Emerging Markets Fund 895,000 0.5927. Universal Trustee (Malaysia) BerhadBeneficiary: Mayban Balanced Trust Fund 736,000 0.48

Statistics Of Shareholdings As At 28 April 2006 (continued)Name No. of shares held % of issued capital28. HSBC Nominees (Asing) Sdn BhdBeneficiary: TNTC for Atlantis Asian Special Situations Fund(ATL INT UMB FD) 720,000 0.4729. Amanah Raya Nominees (Tempatan) Sdn BhdBeneficiary: Amanah Saham Nasional 2 704,000 0.4630. Citigroup Nominees (Asing) Sdn BhdBeneficiary: Nom HK for Kegani Pacific Ltc Fnd L.P. 661,500 0.43115,985,374 76.22170financialstatements2005

NoticeThere will beno distributionof door gifts.FORM OF PROXY(Before completing this form, please see notes below)No. of ordinary shares heldI/We, _______________________________________________________________ NRIC No./Co. No./CDS No.: _____________________________(Full Name in block letters)of ___________________________________________________________________________________________________________________(Full address)being a member/members of MAA HOLDINGS BERHAD hereby appoint the following person(s) :-Name of proxy, NRIC No. & Address1. ____________________________________________________________________________________________________________________________________________________________________2. ____________________________________________________________________________________________________________________________________________________________________No. of shares to be represented by proxy__________________________________________________________or failing him / her, the Chairman of the Meeting as my / our proxy to vote for me/us and my / our behalf at the Eighth Annual General Meeting of the Company to beheld at the Auditorium, Podium 1, Menara MAA, No. 12 Jalan Dewan Bahasa, 50460 Kuala Lumpur on Wednesday, 21 June 2006 at 10.00 a.m.My / our proxy is to vote as indicated below : -RESOLUTIONSFIRST PROXY SECOND PROXYFOR AGAINST FOR AGAINSTResolution 1Resolution 2Resolution 3Resolution 4Resolution 5Resolution 6Resolution 7Resolution 8Resolution 9Resolution 10Resolution 11Resolution 12Resolution 13Resolution 14To receive the Audited Financial Statements for the year ended 31 December 2005 together with the Reports ofthe Directors and the Auditors thereon.To approve the payment of Directors' fees in respect of the financial year ending 31 December 2006 to bepayable quarterly in arrears.To approve the payment of a first and final tax-exempt dividend of 10% in respect of the financial year ended31 December 2005.To re-elect the following Directors of the Company who are retiring pursuant to Article 73 of the Company'sArticles of Association: -(i) Tunku Dato' Ya'acob bin Tunku Tan Sri Abdullah(ii) Tunku Dato' Seri Iskandar bin Tunku Tan Sri AbdullahTo re-appoint the following directors who are retiring pursuant to Section 129(6) of the Companies Act, 1965: -Tunku Tan Sri Abdullah Ibni Almarhum Tuanku Abdul RahmanTan Sri Dato' Ir Abu Zarim bin Haji OmarMajor General Lai Chung Wah (Rtd)To re-appoint Messrs. PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors tofix their remuneration.To authorise the Directors to allot and issue shares in the Company pursuant to S132D of the Companies Act,1965.To authorise the renewal of share buy-back authorityTo approve the Shareholders' Mandate for Recurrent Related Party TransactionsTo approve the Bonus Issue of 152,176,876 Ordinary Shares of RM1.00 eachTo approve the amendments to Articles of Association of the Company(Please indicate with a “✔” or “X” in the space provided how you wish your vote to be cast. If no instruction as to voting is given, the proxy will vote or abstain from voting at his/her discretion).Dated this____________ day of___________________________ 2006Notes:1. A member entitled to attend and vote at a meeting of the Company is entitled to appoint a proxy to attend and vote in his stead. A proxy maybut need not be a member of the Company.2. A member of the Company who is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, mayappoint one (1) proxy in respect of each securities account.3. The instrument appointing a proxy, shall be in writing under the hand of the appointer or his attorney duly authorised in writing, and in thecase of a corporation, either under seal or under hand of an officer or attorney duly authorised.4. The instrument appointing a proxy must be deposited at the Company's Registered Office, Suite 20.03, 20th Floor, Menara MAA, No.12,Jalan Dewan Bahasa, 50460 Kuala Lumpur, not less than 48 hours before the time appointed for holding the meeting or any adjournmentthereof.5. Any alteration in the form of proxy must be initialed.6. Explanatory notes to Special Business of the Agenda 7 : -(a) Authority to allot and issue shares in general pursuant to Section 132D of the Companies Act, 1965.This resolution is proposed pursuant to Section 132D of the Companies Act, 1965, and if passed, will give the Directors of theCompany, from the date of the above Annual General Meeting, authority to issue and allot shares from the unissued share capital ofthe Company for such purposes as the Directors deem fit and in the interest of the Company. This authority, unless revoked or variedat a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company.(b) Proposed Renewal of authority for the Company to purchase its own sharesThe proposed Resolution 11, if passed, would empower the Directors to exercise the power of the Company to purchase its own sharesSignature/Common Seal(“the Proposal”) by utilising its financial resources not immediately required. The Proposal may have a positive impact on the marketprice of the Company's shares. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the nextAGM of the Company.(c) Proposed Shareholders' Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (“RRPTs”)The Proposed Resolution 12, if passed, will empower the Company to conduct recurrent related party transactions of a revenue ortrading nature which are necessary for the Group's day-to-day operations, and will eliminate the need to convene separate generalmeetings from time to time to seek shareholders' approval. This will substantially reduce administrative time, inconvenience andexpenses associated with the convening of such meetings, without compromising the corporate objectives of the Group or adverselyaffecting the business opportunities available to the Group.The detailed information on Recurrent Related Party Transactions is set out in Part B of the Circular dated 30 May 2006 which isdespatched together with this Annual Report.(d) Proposed Bonus Issue of 152,176,876 new ordinary shares of RM1.00 each in MAAH (“Bonus Shares”) as fully paidon the basis of one (1) Bonus Share for every one (1) existing MAAH share held at a date to be determined later(“Proposed Bonus Issue”)The Proposed Resolution 13, if passed, will empower the Company to issue 152,176,876 new ordinary shares of RM1.00 each inMAAH (“Bonus Shares”) as fully paid on the basis of one (1) Bonus Share for every one (1) existing MAAH share.(e) Proposed Amendments to Articles of Association of the CompanyThe Proposed Resolution 14, if passed, will update the Articles of Association of the Company to ensure continued compliance withthe Listing Requirements of Bursa Securities and to further enhance the administration of the internal affairs of the Company.

Fold hereSTAMPThe SecretaryMAA HOLDINGS BERHADSuite 20.03, 20th Floor, Menara MAANo. 12, Jalan Dewan Bahasa50460 Kuala LumpurFold hereNoticeThere will be no distribution of door gifts.