PROJECT REPORT

CORPORATE GOVERNANCE SECTION C

GROUP MEMBERS: HASEEB MURAD GILANI NOMAN MALIK ZOHAIB RAZA L1S11MBAM2114 L1S11MBAM2092 L1S11MBAM2094

PRESENTED TO:PROF. WALEED BIN AZHAR

Company Profile
Indus motor was incorporated in 1989 as a joint venture company between the House of Habib of Pakistan, Toyota Motor Corporation and Toyota Tsusho Corporation of Japan. The Company manufactures and markets Toyota and Daihatsu brand vehicles in Pakistan. The main product offerings include several variants of the flagship Corolla in the passenger cars category, Hilux in the light commercial vehicles segment and Fortuner in Sport Utility Vehicle Segment. The manufacturing facility and offices are located at a 100 acre site in Port Qasim, Karachi while the product is delivered to end customers nationwide through a strong network of 37 independent 3S Dealerships spread across the country. In its 24 years history since inception, IMC has sold more than 500,000 CBU/CKD vehicles and has demonstrated an impressive growth, in terms of volumetric increase from a modest beginning of 20 vehicles per day production in 1993 to 220 units daily at a present through the development of human talent embracing the Toyota Way of quality and lean manufacturing. Over the years, IMC has made large scale investments in enhancing its own capacity and in meeting customer requirements for new products. Today, Corolla is the largest selling automotive brand model in Pakistan and it also has the distinction of being no.1 in Toyotas Asian market. The Company invests heavily in training its 20,000 plus workforce of team members and management employees and creating a culture of high performing empowered teams working seamlessly across processes in search of quality to pursue high standards of business ethics and safety; communicate candidly by giving bad news first and respect for people. The biannual TMC morale surveys show employees giving a high positive score to the IMC work environment and level of job satisfaction. The Company has played a major role in the development of the entire value chain of the local auto industry and is proud to have contributed in poverty alleviation at the grass root level of nurturing localization that in turn has directly created thousands of job opportunities and transferred technology to 60 vendors supplying parts. IMC is also a major tax payer and significant contributor toward GOP exchequer.

Vision
To be the most respected and successful enterprise, delighting customers with a wide range of products and solutions in the automobile industry with the best technology.

Mission
IMCs Mission is reflected in our Companys Slogan ACT #1 Action, Commitment and teamwork to become no.1 in Pakistan. Respect & Corporate Image Quality & Safety Customer Satisfaction Production & Sales Profitability Best Employer

Pattern of Shareholdings
No. Categories Shareholders of No. Shares held of CategoryCategoryPercentage

wise no. of wise Folios/CDC Shares Accounts held 3,152,864 1,000 4.01% 0.00%

1. 2.

INDIVIDUALS INVESTMENT COMPANIES

3.232 1

3.

JOINT

STOCK

26

385,856

0.49%

COMPANIES 4. DIRECTORS, CHIEF EXECUTIVE OFFICER THEIR AND AND SPOUSE MINOR 6 272,612 0.35%

CHILDREN MR. ALI S. HABIB. MRS. 135,000

MUNIZEH 601

ALI HABIB. MR. MOHAMMADALI R. HABIB. MR. FARHAD 2,000 130,000

ZULFICAR. MR. GHIAS. MR. ANSARI. 5. 6. EXECUTIVES PUBLIC SECTOR COMPANIES AND 10 2 25,174 697,406 0.03% 0.89% RAZA 450 PARVEZ 4,561

CORPORATIONS NATIONAL BANK 693,706 OF PAKISTAN,

TRUSTEE DEPT. INVESTMENT CORPORATION OF PAKISTAN. 7. ASSOCIATED COMPANIES, UNDERTAKINGS AND RELATED 4 4,936,600 6.28% 3,700

PARTIES HABIB INSURANCE COMPANY LIMITED. THAL LIMITED. MOHAMEDALI HABIB WELFARE 5,000 TRUST. 8. BANKS, NBFIs, INSURANCE COMPANIES, MODARABAS & DFIs, 16 1,773,944 2.26% 4,890,000 41,600

PENSION FUNDS BANKS,DFIs NBFIs. INSURANCE COMPANIES. MODARABAS. PENSION FUNDS. 9. MUTUAL FUNDS 617,843 136,187 7 748,264 0.95% 986,899 & 33,015

CDC - TRUSTEES 4,577 AKD INDEX

TRACKER FUND. CDC TRUSTEE JS 21,300 ISLAMIC FUND. CDC TRUSTEE 66,130 MEEZAN BALANCED FUND. CDC TRUSTEE 488,012 MEEZAN ISLAMIC FUND. FIRST MUTUAL LIMITED. CDC TRUSTEE 34,781 KSE MEEZAN CAPITAL 20,000 FUND

INDEX FUND. CDC TRUSTEE 113,464 AL MEEZAN

MUTUAL FUND.

10.

FOREIGN INVESTORS Holding 5% Or

32

66,573,810 84.70%

more voting interest OVERSEAS PAKISTAN INVESTORS AG. TOYOTA MOTOR 19,650,000 27,382,730

CORPORATION. TOYOTA TSUSHO 9,825,000 CORPORATION. Others holding 9,716,080

below 5%

11.

CHARITABLE TRUSTS

21,679

0.03%

12.

OTHERS TOTAL

3 3,341

10,791

0.01%

78,600,000 100.00%

Board Of Directors
The board of Toyota Indus Motors comprises of 9 members, their names and details are given below. 1. Ali S. Habib(Chairman) Ali S. habib is the Chairman of Indus Motor Company Ltd., he is also the founding director of the company. He also serves as a member on the board of directors of Thal Ltd., Shabbir Tiles & Ceramics Ltd.

2. Keiichi Murakami(Vice Chairman) He was elected as a member of the board and appointed as Vice Chairman of the company on January, 2013. He has been serving the Toyota Motor Company for over 30 years now and has been working in different areas i.e Product Planning and Marketing Research.

3. Parvez Ghias (CEO & Director) He has been the Chief Executive Officer and director of the company since 2005. Before joining the company he was the vice president and CFO at Engro Chemical Pakistan Limited and had also served as their board of directors.

4. Farhad Zulficar He is the founding director of Indus Motor Company Ltd. He was the first managing director of the company from 1989 to 2001 and has also been a director on various listed and private companies.

5. Mohamedali R. Habib He is also the founding director for the company, he has been the executive director of Habib Metropolitan Bank Ltd. He has been serving as a member of the board of Thal Limited and Habib Insurance Company Ltd.

6. Kyoichi Tanada He was appointed as the director of the company in May, 2013. Currently he is serving as the President of Toyota Motor Thailand.

7. Mitoshi Okimoto He was appointed as the director in January , 2010 and is serving the company as senior director manufacturing. He has been associated with the company since 2010. He has been with the Toyota group since 1972 and has held various senior positions during this period.

8. Hiroyuki Niwa He has been associated with the Toyota Corporation from 1980 to 2011. He was appointed as a director for Indus Motors in July, 2011. As a member of the management team he holds directorships of certain companies of the Toyota group in various countries.

9. Raza Ansari He was elected in October, 2011 as a non-executive director of the company. He was also a member of the audit committee. He joined the company in 1989 when the company was formed and has served in various positions. Currently he is CEO of Shabbir Tiles.

COMMITTEES
The Indus Motor Company has 6 committees the names and the details are given below.

1. Board Human Resource and Remuneration Committee The remuneration committee is a sub-committee of the board. It recommends human resource management policies to the Board. It also recommends selection, evaluation, compensation and succession plan of the CEO and Senior Management who directly report to the CEO. This committee consists of 3 nonexecutive, one executive, CEO and secretary.

2.

Board Ethics Committee This committee has the responsibility of overseeing ethical policies and compliance by the company. It provides expeditious actions on disclosures of wrongdoing. The Ethics committee also reviews and investigates proceedings of the whitle-blown.

3. Investment Committee This committee assists the board in fulfilling its oversight responsibility for the investment in assets of the company. It evaluates the capital expenditures required to be made and recommends the same to the board for approval. It is also responsible for formulating the overall polices for investment in fixed assets, subject to approval by the board and establishing investment guidelines. It consists of CEO, 2 directors, the CFO and secretary.

4. Marketing Technical Co-ordination Committee It is the committee responsible for synchronization between the marketing and technical departments. This committee also controls new products or minor model specification changes and schedules. This committee is chaired by the CEO every month and representation is from marketing and technical departments.

5. ACT #1 Management Committee This committee is responsible for monitoring of organizational KPIs and stewardship of financial performance every month. It also reviews departmental targets and accomplishments achieved during the month. In addition it reviews government regulatory affairs including macro-economic situations which results in formation of the companys strategy and risk management policies.

6. Safety Health and Environment Committee This committee meets on a monthly basis and keeps a close eye on the company wide S.H.E statistics, KPI trends, relevant local laws compliance, promulgating drive and focus on S.H.E issues prevailing on the the shop floor and ways to resolve them via efficient and swift decision making. This committee is chaired by the CEO who formulates policies regarding S.H.E.

Statement of Compliance with the Code of Corporate Governance

This statement is being presented to comply with the Code of Corporate Governance (CCG) contained in Regulation 35 of the Listing Regulations of the Karachi Stock Exchange Limited, Lahore Stock Exchange Limited and Islamabad Stock Exchange Limited, for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the CCG in the following manner: 1. At year ended June 30, 2013, the Board consists of the following Non-Executive and Executive Directors: Non-Executive Directors Mr. Ali S. Habib (Chairman) Executive Directors Mr. Keiichi Murakami (Vice Chairman) Mr. Parvez Ghias (Chief Executive)

Mr. Kyoichi Tanada (Director) Mr. Hiroyuki Niwa (Director)

Mr.Mitoshi Okimoto (Senior Director Manufacturing)

Mr. Farhad Zulficar

(Director)

Mr. Mohamedali R. Habib (Director) Mr. Raza Ansari (Director)

2. The Directors have confirmed that none of them is serving as a director in more than seven listed companies, including this Company. 3. During the year, casual vacancies occurred on the Board on January 1, 2013 and May 28, 2013, that were filled by the Directors, namely Mr. Keiichi Murakami and Mr. Kyoichi Tanada, respectively, on the same day. 4. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 5. The Company has prepared a Code of Conduct and has ensured that appropriate steps are taken to disseminate it throughout the Company along with its supporting policies and procedures.

6. The Board has adopted a Vision / Mission statement, overall corporate strategy and significant policies of the Company prepared by the management. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive and other executive directors, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. During the year, the Board has arranged orientation courses for the Directors. 10. The Board has approved the appointment of Chief Financial Officer (CFO), Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment. 11. The Directors Report for this year has been prepared in compliance with the requirements of the CCG and fully describes the salient matters required to be disclosed 12. The financial statements of the Company were duly endorsed by the CEO and the CFO before approval by the Board. 13. The Directors, CEO and Executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding. 14. The Company has complied with all the corporate and financial reporting requirements of the CCG. 15. The Board has formed an Audit Committee. It comprises of five members, who are nonexecutive directors including the Chairman of the Committee. 16. The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and final results of the Company and as required by the CCG. The terms

of reference of the committee have been formulated and advised to the committee for compliance. 17. The Board has formed an HR and Remuneration Committee. It comprises of five members, of whom three are non- executive directors including the Chairman of the committee. 18. The Board has set-up an effective internal audit function within the Company. 19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review programed of the Institute of Chartered Accountants of Pakistan (ICAP), that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by ICAP. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. The closed period, prior to the announcement of interim / final results, and business decisions, which may materially affect the market price of Companys securities, was determined and intimated to directors, employees and stock exchanges. 22. Material / prices sensitive information has been disseminated among all market participants at once through stock exchanges. 23. We confirm that all other material principles enshrined in the CCG have been complied with.

Auditors:
A.F. Ferguson & Co. Chartered Accountants, State Life Building No. 1-C, I.I. Chundrigar Road, Karachi. There are not mentioned in report which firm is conducted internal audit and external audit

Toyota Motor Corporation CSR policy

CSR:

Policy:

CONTRIBUTION

TOWARDS

SUSTAINABLE

DEVELOPMENT
We, TOYOTA MOTOR CORPORATION and our subsidiaries, take the initiative to contribute to the harmonious and sustainable development of society and earth through all business activities that we carry out in each country and region, based on our guiding principles. We comply with local, national and international laws and regulation as well as the spirit thereof and we conduct our business operation with honesty and integrity. In order to contribute to sustainable development, we believe that the management interacting with its stakeholders as described below is of considerable importance, and we will endeavor to build and maintain sound relationship whit our stakeholders through open and fair communication, we except our business partners to support these initiatives and ac in accordance with it.

Customers:
Based on our philosophy of "Customer First", we develop and provide innovative, safe and outstanding high quality products and services that meet a wide variety of customers' demands to enrich the lives of people around the world. (Guiding Principles 3 and 4) We will endeavor to protect the personal information of customers and everyone else we are engaged in business with, in accordance with the letter and spirit of each country's privacy laws. (Guiding Principles 1)

Employees:
We respect our employees and believe that the success of our business is led by each individual's creativity and good teamwork. We stimulate personal growth for our employees. (Guiding Principles 5) We support equal employment opportunities, diversity and inclusion for our employees and do not discriminate against them. (Guiding Principles 5)

We strive to provide fair working conditions and to maintain a safe and healthy working environment for all our employees. (Guiding Principles 5) We respect and honor the human rights of people involved in our business and, in particular, do not use or tolerate any form of forced or child labor. (Guiding Principles 5) Through communication and dialogue with our employees, we build and share the value "Mutual Trust and Mutual Responsibility" and work together for the success of our employees and the company.

We recognize our employees' right to freely associate, or not to associate, complying with the laws of the countries in which we operate. (Guiding Principles 5) Management of each company takes leadership in fostering a corporate culture, and implementing policies, that promote ethical behavior. (Guiding Principles 1 and 5)

Business Partners
We respect our business partners such as suppliers and dealers and work with them through long-term relationships to realize mutual growth based on mutual trust. (Guiding Principles 7) Whenever we seek a new business partner, we are open to any and all candidates, regardless of nationality or size, and evaluate them based on their overall strengths. (Guiding Principles 7) We maintain fair and free competition in accordance with the letter and spirit of each country's competition laws. (Guiding Principles 1 and 7)

Shareholders
We strive to enhance corporate value while achieving a stable and long-term growth for the benefit of our shareholders. (Guiding Principles 6) We provide our shareholders and investors with timely and fair disclosure on our operating results and financial condition. (Guiding Principles 1 and 6)

Global Society/Local Communities

Environment
we aim for growth that is in harmony with the environment by seeking to minimize the environmental impact of our business operations, such as by working to reduce the effect of our vehicles and operations on climate change and biodiversity. We strive to develop, establish and promote technologies enabling the environment and economy to coexist harmoniously and to build close and cooperative relationships with a wide spectrum of individuals and organizations involved in environmental preservation. (Guiding Principles 3)

Community
We implement our philosophy of "respect for people" by honoring the culture, customs, history and laws of each country. (Guiding Principles 2) We constantly search for safer, cleaner and superior technology that satisfy the evolving needs of society for sustainable mobility. (Guiding Principles 3 and 4) We do not tolerate bribery of or by any business partner, government agency or public authority and maintain honest and fair relationships with government agencies and public authorities. (Guiding Principles 1) Social Contribution

Wherever we do business, we actively promote and engage, both individually and with partners, in social contribution activities that help strengthen communities and contribute to the enrichment of society. (Guiding Principles 2)

Relationship between CSR Policy and the Guiding Principles at Toyota, and Various Regulations

In 2011, Toyota adopted "Toyota Global Vision", which is based on the Guiding Principles at Toyota. In order to achieve this vision, a medium- to long-term management plan was drafted and Toyota is working toward achieving the goals specified in the plan. In addition, the Toyota Way 2001 and Toyota Code of Conduct contain the values and methods that employees should adopt in putting the Guiding Principles at Toyota into practice and serve as guides for day-to-day activities.

THE TEN UNGC PRINCIPLES WE ADHERE

Human Rights
1. Support and respect the protection of internationally proclaimed human rights 2. Ensure businesses are not complicit in Human Rights abuses

Labor
3. Uphold the freedom of association and the effective recognition of the right to collective barging 4. Elimination of all forms of forced and compulsory labor 5. Effective abolition of child labor 6. Elimination of discrimination in respect of employment and occupation

Environment
7. Support a precautionary approach to environment challenges 8. Undertake initiatives to promote greater environmental responsibility

9. Encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption
10. Work against corruption in all its forms, including extortion and bribery.

Guiding Principles at Toyota

1. Honor the language and spirit of the law of every nation and undertake open and fair business activities to be a good corporate citizen of the world. 2. Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in their respective communities. 3. Dedicate our business to providing clean and safe products and to enhancing the quality of life everywhere through all of our activities. 4. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide. 5. Foster a corporate culture that enhances both individual creativity and the value of teamwork, while honoring mutual trust and respect between labor and management. 6. Pursue growth through harmony with the global community via innovative management. 7. Work with business partners in research and manufacture to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships.

Five Main Principles of Toyoda

Always be faithful to your duties, thereby contributing to the company and to the overall good.

Always be studious and creative, striving to stay ahead of the times. Always be practical and avoid frivolousness. Always strive to build a homelike atmosphere at work that is warm and friendly. Always have respect for spiritual matters, and remember to be grateful at all times.

Names of Directors
Mr. Ali S. Habib Mr. Keiichi Murakami / Mr. Koji hyodo (Former Director) Mr. Parvez Ghias Mr. Farhad Zulficar Mr. Mohamedali R. Habib Mr. Kyoichi Tanada / Mr. Takahiro Iwase (former director) / Mr. M. Aoi (Alternate) Mr. Hiroyuki Niwa / Mr. R. Hatakeyama (alternate) Mr. Mitoshiu Okimoto Mr. Raza Ansari During the year, Mr. Keiichi Murakami has been appointed as a director on the registration of Mr. Koji Hyodo from January1, 2013. Mr. Kyoichi Tanada has been appointed as a Director on the resignation of Mr. Takahiro Iwase. Subsequesnt to year end, Mr. tetsuro Hirai has been appointed a s a Director on the resignation of Mr. Hiroyuki Niwa from july4, 2013. The board acknowledges the valuable contributions made by the outgoing directors and welcome the new directors.

Board Audit Committee:

The board Audit committee comprises of five non-executive directors, including the Chairman of the Board Audit Committee, The terms of references of the committee include reviews of annual and quarterly financial statements, internal audit report, information before dissemination to stock Exchange and proposal for appoint of external auditors for approval of the shareholders, apart from other matters of significant nature. Four meeting were held during the period under review.

Appointment of Auditors:
The present auditors, M/s A.F. Ferguson & Co., Charted Accountants retire at the conclusion of the meeting and being eligible; offer themselves for re-appointment. The directors endorse recommendation of the Audit Committee for Re-appointment of, M/s A.F. Ferguson & Co., as the auditors for the financial year 2013-2014.

Code of Corporate Governance:

The Board members are pleased to state that the management of the Company is committed to good corporate governs and complying with the best practice. In compliance with the code of corporate Governs, the directors are pleased to state as follows: The financial statement prepared by the management of the company present fairly its state of affairs, the result of its operations, cash flows and changes in equity. Proper books of accounts of the company have maintained. Appropriate accounting policies have been consistently applied in preparation of the financial statement and according estimates are based on reasonable and prudent judgment. International Financial reporting Standards, as applicable in Pakistan, have been followed in prepaat9ion of the financial statements. The system of internal control is sound in design and has been effectively implemented and monitored. There are no significant doubts upon the Companys ability to continue as a going concern. There has been no material departure from the best practices of corporate governs as detailed in the listing regulations.

Recommendation:
The board of directors focuses on supervision of executive officers Evaluate board and director performance and pursue opportunities for improvement

Effective risk management supports better decision making because it develops a

deeper insight into the risk-reward trade-offs that all organisations face.