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PROTON’s MPV, the Exora, goes into production.

Operations Review

PROTON 2009 ANNUAL REPORT

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Operations Review

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The Group also anticipates strong local demand for the Persona and Saga, while export

volume is expected to increase especially for the Exora with plans already in place to

introduce this vehicle to the ASEAN market in the second half of 2009. Furthermore, with

the expansion of the Overseas Manufacturing Plants in China and Iran, the export business

on completely–knocked–down (CKD) vehicles is expected to increase as well.

New robots and more sophisticated handling equipment were installed successfully with

minimal line disruptions. Previous PROTON production systems and Total Productive

Maintenance (TPM) activities have already resulted in the main plant having one of the

lowest downtimes in history and similar activities were implemented successfully in the

Casting and Engine Transmission Department. Much effort was taken to maintain this.

An increasing number of model lines or equipment was established through ‘yokoten’,

a Japanese term which essentially means duplicating. The next stage in these intensive

improvement activities will be the implementation of ‘Kobetsu Kaizen’ (which means

‘Focus Improvement’) and the usage of Overall Equipment Efficiency (OEE) as the de facto

parameter to measure equipment efficiency.

In view of PROTON’s commitment to improvement, the Manufacturing Division has

started implementing the world-renowned practice of ‘Genba Kanri’, another Japanese

term this time referring to ‘Shopfloor Control’. This is to reflect how the division is

continuously improving itself by benchmarking PROTON against world-class industry

players. We shall aim to reach level 4 (which means sustainable world-class level in

shop control) in ‘Genba Kanri’ by the year 2011.


PROTON Shah Alam

Operations Review

State-of-the-art equipment at our manufacturing facilities in Shah Alam.

The main plant and the MVF are located in Shah Alam, with the combined total installed

capacity for both being 200,000 units per year. The casting, engine and transmission plant

is also in Shah Alam and has the capacity to produce 180,000 units of CamPro engines

annually.

The main plant has been producing 6,000 units of the Saga each month. The Perdana,

Waja, Wira and Arena are also produced here but in a much smaller volume. The current

production of the Wira is exclusively for the taxi market but the Wira will be discontinued

by around July 2009.

Thereafter, the taxi market will be supplied with the new PROTON Saga NGV which is a

1.6 litre engine installed with a specially designed NGV kit. Preparations are also underway

for a minor cosmetic enhancement to the new Saga for a special edition to be introduced

in the market by August 2009. In the same month, the Group will also start producing the

Saga for the Australian market.

PROTON 2009 ANNUAL REPORT

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Operations Review

PROTON Tanjung Malim

PROTON Tanjung Malim is the largest manufacturing and assembly plant within the Group.

The plant complex, which sits on 1,500 acres of land in the state of Perak, facilitates the

processes of engine machining, stamping, body assembly, painting and final assembly.

The plant has a capacity of 150,000 units per year and can operate on a two-shift basis.

However, due to the global economic crisis, since December 2008, the plant has been

running on one shift. By switching to one shift, PROTON was able to relocate excess

manpower to the MVF in preparation for the production of the Exora. As such, this enabled

the Company to minimise cost and retain skilled personnel.

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The MVF was also given the task of producing the Exora. Produced in 18 months, this was

deemed an outstanding feat in the automotive world. Since the plant had previously been

manufacturing the Waja, all facilities had to be either modified or newly installed with

equipment to manufacture the MPV.

Daily meetings attended by top Management were held to ensure that the manufacturing

decisions were made quickly and in a decisive manner. Comprehensive online training and

quality improvement teams were formed using the PROTON Production System (PPS) as the

main driver. All cars had to also undergo tests to ensure that there was no rattling or other

noise defects.

Featuring an automatic transmission when it was first introduced, PROTON has in July

introduced a manual version of the Exora to cater especially for the Indonesian market.

The monthly production volume is targeted at 3,000 units per month and is expected to

increase when export to Indonesia begins. Following its introduction in Indonesia in July

2009, the Exora will be launched in Singapore, Brunei and Thailand.


To boost sales in the wake of economic uncertainty in the domestic market, two up-graded

versions of existing models were introduced. The first was the Persona SE, which features

a more sporty style and was introduced in September 2008. Current production of the

Persona SE is estimated at 500 units per month.

The second upgrade was the Satria Neo High Line version which is equipped with a

CamPro CPS (Cam Profile Switching) engine. The improved, now trendier Satria Neo CPS

comes with a stylish new front and rear bumper, as well as a new leather interior. As it is

exclusively targeted for a limited market, the production volume is only at 60 units per

month currently.

Plans for the Persona NGV and Persona cosmetic change productions are already on the

drawing board and mass productions are expected to begin by the end of 2009.

PROTON’s plant in Tanjung Malim is the largest of the Group’s manufacturing facilities.

Operations Review

PROTON 2009 ANNUAL REPORT

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Operations Review

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Improving plant operational efficiencies will be a key focus in the next financial year.

Prospects

Total production volume for the next financial year is forecasted to increase by 3% to

162,000 units. The single digit increase is a result of the cautious tone adopted by the

market due to the global economic crisis, which has undoubtedly impacted the world car

market.

As the overseas market has been severely affected, approximately 90% of the volume is

being allocated for the domestic market, with the remaining 10% reserved for export.

Production volume is expected to utilise less than 50% of PROTON’s installed plant capacity

and all plants are expected to operate on a one-shift basis in the new financial year.


Operations Review

Production of the Exora is expected to

receive a further boost once launched

into the Indonesian market.

The loss of volume has motivated the Group to further improve operational efficiencies

and to enhance cost reduction activities. PROTON is confident that all the proposed cost

reduction initiatives will be carried out accordingly.

On the other hand, demand for the Saga is expected to stablise in the domestic market,

while an increase in production volume is anticipated when exports to Australia and the

Gulf Community Countries (GCC) begin. The cosmetic change and special edition models

also provide a positive outlook for the Saga.

The Group also forsees that the high number of bookings for the Exora would result in

high volumes in excess of 3,000 units a month. Export to the Indonesian market slated for

July 2009 will further boost production volume. The plan for the new financial year is to

produce 35,000 units and we expect this target to be achieved, if not, exceeded.

While demand for the Exora is on the rise and demand for the Persona and Saga is stabilising,

the corresponding requirement for the CamPro engines is as per the last financial year.

The CamPro engine component machine and assembly capacity expansion plans are also

constantly being reviewed and we anticipate that the current capacity of 180,000 units will

be sufficient to cater for the coming year.

PROTON 2009 ANNUAL REPORT

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Operations Review

LOTUS

Against the backdrop of profitability in the previous

financial year, Lotus was confident of further

improving its performance in 2009 in line with its

Strategic Business Plan before the turn of events

in September 2008 which culminated in the global

financial and economic crisis.

Nevertheless, for the fiscal year ended 31 March 2009,

Lotus increased its turnover to £110m or RM574.8m

compared to £108m or RM564.3m in the year before.

This was underpinned by the diversity of the Lotus

business driven by the growth in third party high

technology engineering consultancy revenue, the

ability of the Cars Division to act swiftly to negate the

impact of the global downturn and the contribution

of Lotus Light Weight Structures.

As a net exporter of its products and services, a

weakening sterling at the time had benefited Lotus

and acted as a self-hedging mechanism for nonsterling

denominated costs. Conversely, however,

the volatile movement of the sterling against world

currencies also resulted in substantial unrealised

foreign exchange losses which together with

provisions for bad debts, pension protection levy

and asset impairment contributed adversely to the

net loss posted.

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Operations

During the course of the fiscal year, Lotus produced

2,202 vehicles compared to 2,649 units in the previous

year. This included the production of 388 Tesla allelectric

roadsters.

In order to improve sales, Lotus introduced new

derivatives to refresh its current model line-up which

include the Europa SE, Exige 260, 2-Eleven 190 as well

as the restyled 2010 model year Exige launched at the

March 2009 Geneva Motorshow. As a result, Lotus

saw better global market penetration compared to

its competitors in most territories.

In July 2008 Lotus’ first new model in 13 years, the

Evora, was unveiled at the British International

Motorshow to international acclaim. The world’s

first mid-engine 2+2 supercar had its formal press

launch in Scotland in May 2009 resulting in the

Evora dominating the global media headlines.

The Evora, which was launched in 2008, was Lotus’ first new model in

13 years.


Evora’s successful press launch is a clear reflection

of the niche vehicle product engineering capability

of Lotus Cars which attracted hundreds of orders and

a substantial number of road test requests and firm

enquiries from prospective buyers even before the

planned sales launch.

It took a clean sheet of paper and a little over 27

months to design, develop and validate the Evora

and put it into production. This supercar, remains

true to Lotus’ heritage and core philosophies of being

Visually Stunning, Exhilarating, Agile and Responsive.

Production of the Evora began early 2009 with first

deliveries to customers commencing in June.

In anticipation of the Evora sales launch and to lay the

foundation for future new models, Lotus continued

to focus on strengthening its global distribution

and dealer networks. Markets now include Saudi

Arabia, Indonesia and Taiwan, bringing the current

total dealer-distributor network to 162 across 42

countries.

In addition, Lotus, through its high technology

engineering consultancy division, continued to

provide worldwide year-on-year incremental third

party business with turnover from the division

increasing by 23%. This is a significant achievement

given that OEMs and other engineering clients have

scaled back their product plans and deferred some

Operations Review

Lotus Evora was unveiled at the British Motorshow.

investments in outsourced projects towards the end

of 2008.

The growth follows years of proactive market-driven

policies to expand and market clear core product

offerings and improve the global sales and delivery

process. An example of new high technology domains

acquired as a result of this policy are EV (electrical

vehicle), bio fuels and hybrid technologies which are

moving towards becoming leading world ecological

products.

Lotus Engineering successfully completed the

development of its well-publicised EV sports car for

a western OEM which has been showcased in various

auto shows. Lotus is also proud to have successfully

carried out mutual engineering, development and

showing in China of its EVs based on the Saga and

Persona platforms with parent company, PROTON.

PROTON 2009 ANNUAL REPORT

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Operations Review

Lotus continues to take advantage of its

competencies and brand heritage to pursue

engineering opportunities and expand its business

into emerging economies in which demand for high

technology engineering is rapidly growing. Lotus

Engineering plans to explore establishing subsidiary

companies in emerging economies, including India.

It currently has a presence in six countries: United

Kingdom, United States, Malaysia, China, Germany

and Japan.

By leveraging on the global business recognition of

being at the forefront of green technology, Lotus

Engineering secured matched funding from the

Technology Strategic Board (TSB) and other

governmental bodies for R&D on new green and

revolutionary technologies. In March 2009 Lotus

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Prospects

Engineering was the proud recipient of the prestigious

and historic 2008 Dewar Trophy from the Royal

Automotive Club in recognition of its outstanding

technical excellence in pioneering the Versatile

Vehicle Architecture chassis technology.

The fiscal year also saw Lotus complete the

strategic acquisition of Holden Light Weight

Structures Limited (now known as Lotus Light Weight

Structures Limited) which produces the unique

aluminum platforms of Lotus and other leading OEM

products. This acquisition allows access to critical

intellectual property in the area of light weight

technology which is becoming increasingly important

in the improvement of vehicle performance and

efficiency in the transportation industry.

The year ahead will see Lotus, like other companies in the automotive industry, being faced

with ever-changing industry dynamics as companies emerge from the current global crisis.

The primary focus is to ensure that the business continues to grow and remains relevant to

our stakeholders.

Lotus Cars will continue to capitalise on the current success of the Evora, strengthening

and building its global dealer network and expanding market coverage to include China

and India. The Evora will be launched in North America in early 2010, with an automatic

variant (6 speed torque converter type) to be unveiled in 2011. In tandem, the small

platform vehicles (Elise and Exige) will be developed to meet a multitude of new legislative

requirements for all markets.


A Lotus showroom in Europe.

Operations Review

Lotus also has an on-going contract to produce Tesla all-electric roadsters, while there

are several potential opportunities to further expand Lotus’ third party manufacturing

business.

The focus for Lotus Engineering will be to continue to expand and grow by generating

new opportunities that leverage on its high technology know-how which include driving

dynamics, niche vehicles, efficient performance as well as EV and HEV (hybrid electrical

vehicle).

Likewise, Lotus Light Weight Structures Limited will continue to provide expertise in light

weight technologies by leveraging on Lotus Engineering’s network and capabilities.

Lotus believes that it is now on a sound footing and ready to embark on the next phase of

an 8-Year Strategic Business Plan thanks to the tremendous support from parent company

PROTON, employees, customers and suppliers. There is no doubt that the coming year

will continue to be challenging given the prevailing weak consumer sentiments and

market conditions. Nevertheless, Lotus is cautiously optimistic of an improved financial

performance in the next financial year spurred by the sales of Evora.

PROTON 2009 ANNUAL REPORT

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Operations Review

Quality Management

It is unwise for any organisation to believe that quality

only means producing products that are reliable and meet

customers expectations.

Quality Improvements

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Quality excellence must transcend all aspects of a business as well as corporate culture

in order for an organisation to achieve long-term success, and in turn add value to

shareholders.

In the past year, PROTON spared no effort to sustain the quest to embed the culture

of quality excellence throughout the organisation and business value chain. The strategic

focus has always been to enforce quality improvements in all areas; entrench quality

excellence into the processes of design, supply, manufacturing and marketing; as well as to

increase the overall competency level of quality management.

During the year under review, the Group re-ignited

the rally-call for quality excellence, which was

encapsulated in the slogan “PROTON stays committed

to quality improvements”. The campaign involved

a comprehensive evaluation and subsequent

implementation of initiatives that were aimed at

enhancing quality excellence throughout the entire

process chain of the Group. Ultimately, the goal is

to push the PROTON brand forward as a world-class

manufacturer.

Translating the slogan into action, a quality

improvement framework was developed with a

view to ensure that all quality concerns were

communicated to the relevant levels within the

organisation. In addition, the framework also put in

place a proper gate-keeping process to make certain

that quality concerns are solved in a correct and

timely manner.


PROTON 2009 ANNUAL REPORT

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Operations Review

On the same score, the Quality Improvement Circle

(QIC), which is a committee introduced in the 2008

financial year to manage and resolve quality issues

Group-wide on a timely basis, was further augmented

with sub-QIC teams during the last financial year to

bolster efficiencies and effectiveness.

Stemming from QIC and sub-QIC, the Quality

Improvement Team (QIT) was formed at the

operational level to address specific quality concerns

impacting the Group’s processes. At the end of the

2009 financial year, we registered a total of 136 QITs

that were involved in the successful resolution of

more than 70 quality concerns.

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Achieving quality excellence continued

to be a top priority for the Group.

Quality in Design & Development

In addition to problem-solving, the Group also

encourages creative innovations that can enhance

quality excellence. Hence, we have continued to

support the pre-existing Innovative and Creative

Circle (ICC) and Kaizen Suggestion Scheme, which

are programmes tasked to undertake quality

improvement initiatives at our production facilities.

In the year under review, our plants in Shah Alam

and Tanjung Malim successfully completed a total

of 250 ICC projects, while a total of 18,000 process

improvements were made under the Kaizen

Suggestion Scheme, marking a more than 70%

expansion in projects carried out for both these

programmes.

When it comes to delivering quality products, leading automakers all over the world

embrace the philosophy of ‘getting it right the first time’.


Quality in Supply

Operations Review

At PROTON, we clearly understand the importance of building in the elements of quality

from the earliest stage of our processes: during the design and development stage. This

philosophy was incorporated in a comprehensive and tangible manner in the development

of PROTON’s very first multi-purpose vehicle (MPV), the Exora.

In order to build quality into the various stages of the Exora, PROTON installed a structured

quality planning system and carried out systematic quality assurance initiatives throughout

each stage of the creation process of the model. Some of these initiatives included stricter

New Product Introduction (NPI) gateway control, structured supplier Advance Product

Quality Planning (APQP) and consolidated Quality Residence Engineer (QRE) activities,

which were all aimed to make the Exora the highest quality PROTON vehicle to date.

Clearly, based on the latest customer feedback and response to date for the Exora, our

diligent efforts and investments are paying off handsomely.

The PROTON Group’s supply chain represents one

of the most important elements in ensuring quality

excellence. We cannot afford any weakened links

that may negatively impact our brand.

During the financial year, we continued to be

highly stringent in our surveillance and monitoring

processes to ensure that the components we

received from our suppliers met our requirements.

Technical indicators such as incoming quality checks,

as well as the number of warranty claims and audit

ratings provided us with clear indications on the

performance of our suppliers. For those who fail

to meet our specifications, they are made to work

closely with our QITs to improve.

All in all, 10 of our suppliers who have been working

closely with our QITs in the past year recorded an

impressive 20% improvement in terms of overall

quality standards, which will in turn benefit the

overall production chain, the customer, and

ultimately PROTON’s business.

Quality inspection of the Exora in progress.

PROTON 2009 ANNUAL REPORT

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Operations Review

PROTON’s manufacturing process saw the introduction of the ‘Zero Defect Initiative’ to raise quality levels.

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Quality in Manufacturing

During the year under review, the Company implemented a bold, yet crucial quality

excellence initiative into our product manufacturing process. Aptly called the Zero Defect

Initiative, this programme aims to ultimately manufacture cars with zero defect by making

certain that quality is consistently on our mind, while simultaneously driving home the

problem-solving culture Group-wide.

The Zero Defect Initiative includes the setting up of PROTON’s Quality View Center, which

is a platform to track results and achievements of this Initiative; daily meetings to discuss

quality measures and solve minor concerns; as well as the organising of talks to effectively

communicate the importance of doing work right first time, every time to all employees.

Since the implementation of the Zero Defect Initiative, PROTON significantly improved the

number of defects per unit and the direct pass rate by more than 50% todate.


Quality in the Market

Quality excellence touches all aspects of PROTON’s business, including customer

experience.

Operations Review

Quality excellence does not end with the passing of keys to our customers. It is important

for PROTON to ensure that when our customers come into contact with the brand, may it

be test driving our cars for the very first time or an after-sales interaction, their experience

is a positive one.

The Group’s unrelenting goal to fortify quality customer service continues to bear results

given that our brand recorded an improvement in JD Power’s Customer Satisfaction Index

for 2008. Internally, the Group also recorded a 3% improvement in terms of satisfied

customers and a reduction of 2% for less satisfied customers.

While the trend is positive and we have progressed, there still remain gaps to be narrowed

or closed in our journey to attain world-class standards of quality. Changing perceptions of

quality is a long-term process, and as such PROTON will remain committed to engaging our

customers and catering effectively to their needs by continuously strengthening our quality

standards in all areas in the coming years.

PROTON 2009 ANNUAL REPORT

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Operations Review

Sales & Distribution

Domestic Market

In 2008, primarily as a result of heightened sales activity by the

industry players on the back of a strong economic growth of 5%

and positive consumer sentiment during the first three quarters of

the year, Total Industry Volume (TIV) surpassed the 500,000 mark to

hit 548,115 units. The half a million mark had only been breached

once before in previous years (2005). Volatile fuel prices and the

weakening domestic economic climate, however, had negatively

impacted the fourth quarter of the year and we expect the full

impact of the on-going global financial downturn to further impact

auto industries worldwide in 2009.

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Performance

In response to the daunting economic conditions, the Malaysian Government had introduced

a scrapping scheme as part of the RM60 billion stimulus package to support the automotive

industry and boost domestic consumer spending. This scheme essentially enables owners

to trade in cars manufactured more than 10 years ago for a RM5,000 discount to purchase

a new national car. Since the introduction of this scheme, also known as PROTON Xchange

Program, we have received an average of 1,500 submissions as compared to 300 submissions

per month. At the close of the financial year, PROTON had cumulatively issued 4,500

redemption vouchers.

The Group also remained cognisant of our philosophy of introducing ‘the right car, for the

right market, at the right price and at the right time’. In line with this, the Group launched

several new economical models to meet the discerning needs of the Malaysian market.


PROTON 2009 ANNUAL REPORT

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Operations Review

The Delivery Centre at PROTON’s Centre of Excellence. The first truly Malaysian MPV takes centre-stage.

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One significant milestone for both PROTON and the industry was the launch of Malaysia’s

first home-grown MPV, the Exora. With its excellent product features, the Exora has

garnered a highly favourable response from customers with bookings having reached

14,400 units as of end June 2009.

Todate, the revamped Saga remains the Company’s best-seller, as evidenced by bookings of

more than 120,000 units since its launch in January 2008. The introductions of the refreshed

Satria Neo, now sportier and with a CamPro CPS engine to boost, and the Persona SE, which

has a more elegant and distinctive design, were also well-received among the niche market

segments.

As part of the plans to strategically right-size and re-map the dealer network to solidify

our position in the market, we are on course with the rationalisation of PROTON Edar

Sdn Bhd and the Edaran Otomobil Nasional Berhad (EON) sales and distribution network.

The primary objective of this programme is to position PROTON as the sole brand with

a stronger and unified distribution network as well as marketing arm. Additionally, we

aim to leverage on best practices from both entities while carrying out focused, cohesive

marketing initiatives across networks.

The year also saw PROTON being bestowed with several awards. The Saga received three

awards: Winner in Small Sedan Category (Autocar Award 2008); Entry Level Car of the Year

2008 (NST/Maybank); and Best People’s Car (Asian Auto – VCA Auto Industry Awards 2008).

The Persona too, received the Best Model of the Year 2008 award from Frost & Sullivan.


Prospects

Undoubtedly the economy will continue to remain challenging in the next financial year.

However, PROTON is optimistic and prepared with numerous comprehensive marketing

and sales plans which include introduction of soon-to-be-launched new variants for the

Saga and Exora in order to expand the market segment further as well as to meet the

increasingly high expectations of customers. We are also on course to streamline our

market positioning and offerings to the market with our sound after-sales service. This will

provide a more integrated approach to improving business volume in the after-sales and

auto parts segments.

With this in mind, PROTON will continue with efforts in emphasising quality, attractive

products and focused marketing strategies to win the hearts of Malaysian car buyers.

Export Markets

Operations Review

Economic challenges ravaged automotive industries worldwide and PROTON did not escape

unscathed. Intense competition coupled with the credit crunch faced by our subsidiaries

and distributors particularly in the Australian and United Kingdom markets as well as an

escalation in fuel prices were among the key factors that contributed to the weakened

export environment.

In order to survive this turbulent period, car companies across Asia, Europe and North

America were forced to implement more creative marketing strategies to increase

consumers’ appetite.

Despite these challenges, which we will continue to overcome in the new financial year,

PROTON remained true to the core goal of fortifying our international presence in various

export markets by being steadfast in our commitment to further enhance the Group’s

operational efficiencies as well as quality of our products and services.

PROTON 2009 ANNUAL REPORT

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Operations Review

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Performance and Operations

The year under review saw PROTON strengthening the Export Division with the

appointment of a new Director of Export whose primary responsibility is to enhance

sales and brand performance in overseas markets. The role also includes overseeing the

development of international subsidiaries, distributors and dealers which is aligned with

the Group’s Asian Multi-Local OEM (AMLO) marketing strategy.

Additionally, in terms of market expansion, we took steps to increase PROTON’s visibility

in Egypt, Syria and Thailand. The Group also made rapid progress with business operations

in China, where three plants commenced the assembly operations for the Gen.2 and

Persona models. This is expected to contribute positively towards our volume growth for

the next financial year.

PROTON also took the opportunity to launch new models in select markets: Persona and

Saga in Indonesia, Persona CNG in Thailand, and Persona left-hand-drive in the Middle East

and Gulf countries.

The Persona and Saga are set to make waves abroad.


5-Year Export Volume and 2009/10 Forecast

25,000

20,000

15,000

10,000

5,000

0

Prospects

17,243

2004/05

12,526

2005/06

20,595

2006/07

17,337

2007/08

18,428

2008/09

Operations Review

20,925

2009/10

Forecast

PROTON is deeply committed towards moving beyond the local market by also building a

strong presence in other parts of Asia in the new financial year, with a key focus being the

company’s first-ever MPV, Exora, which is expected to stimulate as much interest in regional

markets as it has locally given its competitive pricing and value-for-money proposition.

Indonesia, where 60% of car consumers fall into the MPV segment, and Thailand, have

been earmarked as the first two countries for the export of the Exora targeted for July

2009.

Moving forward, the Group will also focus on high-growth regional markets in ASEAN for

the completely-built-up (CBU) market, as well as China, India and Iran for the completelyknocked-down

(CKD) market. Additionally, we plan to leverage on the existing trade and

cultural linkages to make further in-roads into other Middle-Eastern countries such as Egypt

and Syria for the CBU market, and to penetrate into Eastern European countries.

PROTON 2009 ANNUAL REPORT

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Operations Review

Asia

China

Performance and Operations

China is poised to be a world leader in the automotive industry. In 2009 China’s total vehicle

sales is forecasted to surpass that of the United States of America due to relatively stable

economic growth and favourable government policies.

During the year under review, PROTON’s business arrangement with China-based Jinhua

Youngman Group saw us forming a strategic business collaboration which covered four

major areas. This included the export of completely-built-up (CBU) Gen.2 and Persona for

sale through Youngman’s network in China, with the first batch of CBU being delivered in

early 2008. The collaboration also entails the supply of completely-knocked-down (CKD)

Gen.2 and Persona which commenced in April 2009.

In addition, PROTON can take advantage of China’s economies of scale and possible vendor

collaboration by localising components and engines. The business arrangement also

comprises technology transfer and technical support whereby PROTON provides technical

support for China’s localisation programme and manufacturing start-up.

Currently, PROTON cars are being sold through 80 appointed dealers throughout China

under the Europestar brand.

Prospects

Moving forward, PROTON plans to set up a

representative office in China in the second half of

2009.

Youngman plans to operate four plants in China,

namely at Anshun, Jinan, Tai An and Hangzhou. In

Hangzhou, there will be an engine plant for the

production of CamPro engines, to be operational in

October 2010.

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PROTON’s operations begin in China.


Indonesia

Performance and Operations

The Indonesian automotive market, like several others in the region, faced a highly volatile

economic climate due to the hike in fuel prices and interest rates, while escalating nonperforming

loans and high risk of defaults caused financial institutions to be more cautious

in approving loans.

The year under review saw the launch of the Gen.2, Persona and Saga in the Indonesian

market. These new product offerings combined with the opening of additional sales outlets

resulted in PT Proton Edar Indonesia registering an increase in retail sales by 49%.

However, sales of PROTON taxis dipped by 57% as finance companies became more

stringent in approving loan applications from taxi operators. Nonetheless, PROTON

maintained the top 3 position in total taxi sales.

There were also significant corporate developments for PROTON in the fiscal year. For one,

PROTON secured a competitive financing affiliate from BCA Finance for its retail sales.

Additionally, changes in the automotive policy which resulted in a lower CKD import duty

for MFN (Most Favourable Nation) countries lowered competitors’ costs. As a result of the

reduction in CKD import duty to a flat 15%, the import duty gap was narrowed between

PROTON and auto competitors that enjoy an AFTA CEPT rate of 5%.

PROTON has also strengthened its presence in Indonesia by appointing senior officers to

helm the Company.

Prospects

Operations Review

The year ahead is expected to be a difficult one due to on-going economic challenges and

recent price hikes by car brands. Despite these conditions, the Company will continue to

strengthen the sales network, while maintaining operational efficiency.

PROTON 2009 ANNUAL REPORT

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Operations Review

Iran

Performance and Operations

PROTON’s presence in Iran began in 2001 with the appointment of Zagross Khodro (ZK)

first as a distributor and subsequently, assembler of PROTON vehicles in the country. ZK

started with the CBU import initially and seeing its potential, invested extensively in the

sales and after-sales network throughout the country.

Due to the company’s strong commitment and trust in the PROTON brand, ZK took a bold

step by establishing a CKD assembly plant in the Borujerd province, approximately 400km

south of Tehran, with production capacity up to 25,000 units a year.

The plant started with the assembly of the Wira in 2002 and thereafter began producing the

Gen.2 in May 2009. The targeted volume for the Gen.2 production will be approximately

3,000 units in the new financial year and we expect this to double in fiscal year 2011.

In addition to the partnership with ZK, PROTON also entered into a strategic collaboration

agreement with the SAIPA Group, one of the biggest automotive manufacturers in Iran.

The collaboration enables PROTON to explore opportunities in other areas such as research

and development.

106

Prospects

The new financial year will see PROTON’s market presence being further strengthened in

Iran with CKD operations to include the production of the Persona. With Total Industry

Volume (TIV) of more than 1.2 million vehicles annually, Iran has the potential to become

one of the major export markets for PROTON in the coming years.


Operations Review

An agreement was signed with Zagross Khodro for the supply of automotive parts to assemble the Gen.2 in Iran.

PROTON 2009 ANNUAL REPORT

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Operations Review

Singapore

Performance and Operations

The slowdown in the global economy saw Singapore’s GDP contracting significantly to a

growth of 1.1% compared to 7.8% a year ago. The weaker than expected growth impacted

many sectors, especially retail.

Sales for PROTON Singapore in the year under review saw a decline of 29% as fewer

customers invested in big ticket items such as vehicles or property. This was primarily due

to the hike in fuel prices and tightening of credit. As a result of firmer credit control, 20%

of PROTON bookings were cancelled as customers could not obtain the necessary loans. In

addition, the Certificate of Entitlement quota which controls the total new car population

in Singapore was reduced by 11.9% from the previous year.

However, the launch of the Saga in July 2008 generated positive response from first-time

and price sensitive buyers.

Despite the challenging conditions faced, PROTON Singapore managed to record a modest

profit owing to the successful implementation of marketing strategies and aggressive

re-structuring and cost cutting measures.

The Saga landed in Singapore in mid 2008.

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Prospects

Moving forward, PROTON Singapore expects to

further intensify marketing efforts in 2010 as the

green shoots of a recovering economy begin

to emerge, while we continue to enhance cost

management.


Thailand

Performance and Operations

The global financial crisis saw Thailand’s automotive

TIV dropping by 2.5% in the year under review. Fear

of recession, a weakening Thai Baht against the US

Dollar, risk-averse financial institutions and a rise in

fuel prices, collectively impacted the industry here as

they did in many other parts of the world.

In spite of this backdrop, PROTON registered sales

of 3,279 units and achieved the No. 8 ranking in

Thailand’s Passenger Car Segment in the first year

of its entry into this market.

Two products mainly drove sales: the Savvy and

Persona. Voted among Thailand’s Top 10 cars for

2008 by local publication, The Nation, the Savvy

currently dominates the small car segment here

but price competition could erode profitability.

The Savvy’s success was followed by the launch

of the eco-friendly Persona CNG in October 2008.

Prospects

Operations Review

Given the growing appeal of the Persona CNG as a

result of escalating fuel prices in Thailand, the model

has turned out to be a viable alternative to the Savvy

to drive volume.

PROTON subsequently launched the full Persona

range in November 2008 at the Thai Motor Expo 2008

to enthusiastic response. The Persona, which had also

been hailed as one of the Top 10 most exciting new

cars to enter the market in 2009 by the Bangkok Post,

was also well-received at the Bangkok Motorshow

in March 2009 and contributed to almost 49% of

PROTON sales derived here.

By the end of the financial year, Proton Motors

(Thailand) Co Ltd had successfully started its operations

in March 2009 with importation of PROTON cars into

Thailand for wholesale to the distributor, Phranakorn

Auto Sales Co Ltd, who had also established a network

of 30 showrooms across Thailand during this period.

In the coming year, while economic challenges will still prevail, PROTON is cautiously

optimistic about strengthening our presence in Thailand especially in the small car segment,

while enhancing our operational efficiency.

PROTON 2009 ANNUAL REPORT

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Operations Review

Australia

Overview

On the back of record sales in 2007, the Australian

automotive industry was on track for another record

year in early 2008 with a 3.5% increase in sales in

June. However, the effects of the global crisis resulted

in an overall decline of 3.7% in sales for the year

under review, with the slowdown most evident in the

last three months of 2008. This was compounded by

the withdrawal of two leading finance providers who

were previously responsible for over 50% of retail

automotive financing.

Performance and Operations

During the year, Proton Cars Australia embarked

on an ambitious campaign to rationalise the dealer

network in preparation for the launch of the new

Saga. While this campaign resulted in lower sales

for the year, the operational aspects of the business

were reviewed in preparation for the introduction of

a long-term volume growth strategy.

The challenging trading environment combined

with the lack of readily-available vehicle financing

compounded the effects of the dealer rationalisation

programme. Sales fell by 20% compared with the

16% increase in the previous year. With reductions

made in marketing expenditure and overall cost

containment, we managed to lessen the effect on the

bottom line.

The Jumbuck continued to be the highest selling

model, followed by Savvy and Persona. Among the

110

PROTON sponsors the Wests Tigers Rugby team in Australia.

accolades received by the Jumbuck was Australia’s

Greenest Utility Vehicle due to its low emissions. It

was also awarded the lowest cost vehicle to own

and run, in its class, by the National Road Motorists

Association.

PROTON in Australia also continued our association

with ‘Safe Drive Training’, an organisation responsible

for training over 5,000 school age drivers from 113

schools across New South Wales and Queensland

annually.

Furthermore, we continued with our sponsorship of

the Wests Tigers Rugby League Football team. An

estimated 400,000 people attended the Wests Tigers

matches during the season with an additional 14.2

million watching them on television which gave

PROTON an opportunity to maintain a visible brand

presence.


The Persona is launched Down Under.

Prospects

Operations Review

The year ahead is expected to be the most prosperous since the introduction of the brand

in Australia. This is despite the 2009 forecast of a decline in overall industry volume which

has been set lower again with estimates indicating a drop of up to 10%.

Proton Cars Australia will be rolling out an ambitious volume growth plan which includes

expansion of the current dealer network from 25 to 51 dealers nationally. The enhanced

exposure coupled with an increase in marketing efforts and product diversity is expected

to boost rapid growth.

This will result in both an increase in sales as well as profitability, thereby putting in place

the foundation for years of profitable growth moving forward.

PROTON 2009 ANNUAL REPORT

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Operations Review

United Kingdom

Overview

The overall UK new car market total industry volume (TIV) decreased by over 11% in 2008

compared with a year ago. The last quarter saw an even sharper decline in sales of over

27% with total sales decreasing from 2.404 million units in 2007 to 2.132 million units in

2008.

While the fleet and business sales sectors generally fared better, the private buyer sector

was the worst hit with a 15% sales dip in the year.

‘Green cars’, however, continued to see a rise in demand. There was an increase in sales of

diesel engine vehicles, particularly the 1.6 size diesel engines which saw a 26% increase,

and petrol engines producing low levels of CO2. This was due primarily to high fuel prices

and new car tax based on CO2 levels. Sales of petrol vehicles reduced by 17%.

Demand for all body types and segments was reduced with the exception of Superminis

which saw significant increase in sales as consumers looked for more economical but wellequipped

and roomy vehicles. The successful introduction of new replacement models by

the two market leaders further strengthened their stronghold.

112

Performance and Operations

Challenging economic conditions saw PROTON sales decrease significantly by 38% during

the year under review. Despite the circumstances, Proton Cars (UK) Ltd achieved several

operational goals which helped offset the downturn.

A number of initiatives were introduced to improve operational performance and cost base.

These included a company-wide resource re-organisation, a cost reduction programme,

the amalgamation of all departments into one cost efficient central office, the setting

up of a new in-house vehicle storage and preparation centre, centralised training, new

dealer support systems and improved IT operations. The new in-house storage and PDI

(pre delivery inspection) centre in particular saved cost while reducing delivery speed and

improving quality.


Prospects

The year 2009 is expected to be a difficult one for the automotive industry with little

improvement in the UK forecast before next year. Competition will continue to increase as

manufacturers strive to gain volume share and offset falling demand.

Against this backdrop, Proton Cars (UK) Ltd is adopting prudent measures to counter the

effects of market conditions, currency devaluation and the public’s lack of confidence

and credit availability to buy new cars. These measures are expected to provide on-going

cost savings whilst ensuring targets are met and class leading service levels continue to be

maintained.

The Gen.2 in the UK.

Operations Review

PROTON 2009 ANNUAL REPORT

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Operations Review

Properties

The year under review saw PROTON focusing on the disposal

of non-core assets, which were mostly residential units

and a few parcels of vacant land held by wholly-owned

subsidiaries.

114

PROTON Group’s main manufacturing-based assets are located in Shah Alam and Glenmarie

in Selangor, and Tanjung Malim in Perak. Other assets comprise our primary administrative

building known as the Centre of Excellence in Subang Jaya as well as the numerous 3S

centres nationwide.

In recognition of the PROTON Sports Complex being one of Tanjung Malim’s most wellequipped

sports facilities, it was selected by the Football Association of Malaysia as the

home stadium for Proton FC for its President’s Cup League 2008. It is our intention to carry

on improving and upgrading these facilities in order to become Southern Perak’s leading

hub for sports and social activities.

Additionally, Proton City Development Corporation Sdn Bhd, a 40% owned associate

company, continued to enhance visibility for Proton City in Tanjung Malim. Proton City

was planned with modern infrastructures, recreational park and rich landscaping which

have all contributed towards making it a viable investment option for buyers of residential

units in the area.

While the year ahead poses its challenges given the downturn in the economy, to ensure

the marketability of Proton City, we will focus on re-planning selected products to better

cater to discerning home buyers. The undeveloped land bank in Proton City remained at

2,720 acres at the end of the fiscal year.


Top: The Centre of Excellence in Subang Jaya.

Bottom: PROTON’s Sports Complex is one of Tanjung Malim’s best sports facilities.

PROTON 2009 ANNUAL REPORT

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Operations Review

Financial Services

Proton Commerce Sdn Bhd (PCSB) is a joint venture company

between Proton Edar Sdn Bhd and CIMB Bank Berhad, which

enables PROTON to provide quality financing services to our

customers.

PCSB offers competitive hire purchase loan financing

packages to new PROTON car purchasers through the PESB

and EON sales network nationwide.

116

Customers will not only enjoy better deals for car financing but also speedier application

and approval processes as well as value-added packages that offer a combination of other

financial products.

Backed by the expertise and reliability of two established parent companies, the PROTON

Group is committed to delivering competitive hire purchase packages that prioritises

providing fast, efficient and friendly service to our car buyers. By doing this, it is our aim

to become the preferred automotive finance provider for the purchase of new PROTON

vehicles, while being recognised as a competitive and capable player in the local automotive

financing industry.


PROTON 2009 ANNUAL REPORT

117


Operations Review

Corporate Social Responsibility

PROTON is fully aware that the attention to a company’s

profitability must correspond to a similar focus on human

resource development and the environment it operates in.

118

With this in mind, the Group is committed to making positive strides and worthwhile

contributions towards creating a sustainable business that benefits our people and society

at large.

In carrying out our corporate social responsibility (CSR) initiatives, the Group aims to

achieve several broad objectives which will meet the expectations of good corporate

governance, ethical corporate values and responsible corporate citizenry. It is also vital

that we advocate a corporate culture that appreciates the value of social service and how

it impacts stakeholders as a whole.

At PROTON, we divide our CSR initiatives into four main segments: marketplace, workplace,

community and environment.


PROTON Malaysia Open 2009, an annual event anticipated by badminton fans worldwide.

PROTON 2009 ANNUAL REPORT

119


Operations Review

PROTON i-CARE plays a key part in enhancing value for our customers.

120

Marketplace

CSR initiatives in this area are essentially related to the Group’s objective of maintaining

sound business practices at all times, be it with the shareholder, customer or supplier. We

take utmost care to ensure that all businesses are not only conducted in an ethical and

professional manner, but are also in compliance with regulatory requirements.

Maintaining customer satisfaction is one of the foremost pillars of PROTON’s business

management and much effort is taken to cultivate strong relationships with our customers

in order to improve their satisfaction levels. A primary tool to enhance customer satisfaction

is our customer survey which is specifically tailored to PROTON’s business operations. The

valuable information gleaned is analysed and then incorporated into product and service

developments, sales as well as customer care activities so we can ensure that the customers’

experience with PROTON is constantly being enhanced.

The year saw the Group continuing to elevate the standards of PROTON i-CARE by

emphasising the importance of creating the best value for our customers. From the

moment the customers make a call to the Call Centre, they should have a smooth, seamless


Operations Review

experience and this includes receiving free technical advice and assistance at our highly

competent technical centres.

PROTON employees are also encouraged to evaluate this process periodically in order to

better understand a customer’s needs and thereby improve the quality and speed of our

response to customers.

If a product experiences a malfunction, the Company acts promptly to minimise adverse

effects to customers and mobilises all divisions affected to provide a rapid response. In

critical cases, particularly where customer safety is involved, we assess the scope of damages

and thoroughly investigate the cause of the incident.

In accordance with best practises of major OEMs, PROTON would recall a product that has

possible defects. As part of corporate responsibility and good governance, PROTON makes

public announcements either through newspaper advertisements or the website to ensure

customers are immediately informed.

Additionally, PROTON strives to build sound partnerships with our suppliers through

fair trading in compliance with procurement-related policies, laws and regulations. We

continuously monitor the performance of suppliers with on-going quality audits and

where necessary, request for improvements and provide guidance. For new procurement

transactions, we not only ensure that goods and services procured conform to the Group’s

policies but also take into consideration the suppliers’ manufacturing sites, management

systems and the state of their operations. Suppliers’ efficiency and productivity are also

supported through the Improve, Control and Educate (ICE) initiative whereby sustainability

of supply capacity and training are greatly emphasised. PROTON closely monitors the

progress through extensive reviews and follow-up visits.

For small and medium sized suppliers, PROTON provides technical support that enables

them to have access to the Automotive Development Fund which was established by the

Government to ease financial difficulties resulting from the current economic crisis. To

date, approximately RM35 million has been disbursed.

PROTON 2009 ANNUAL REPORT

121


Operations Review

Workplace

At PROTON, we recognise that a talented, productive human capital represents the

backbone of our development and progress.

Our workplace CSR does not only provide our employees with optimum working conditions,

as evidenced by the Group’s safety and health policies, training exercises and other benefits

to safeguard each one’s welfare. We also ensure that their skills and talents are nurtured.

By harnessing this cohesively, we can further enhance PROTON’s competitive advantage in

the industry.

As important as it is to grow as one seamless entity, we must also develop and retain

qualified leaders. Through the Group’s management initiatives, we develop key members

of our workforce by using PROTON’s Core and Leadership Competency Model. A similar

approach is applied for those who are keen to advance along the technical career track

via the Technical & Functional Competency Model. By using these competency models, our

Talent Management Programme has enhanced PROTON’s ability to identify, develop, and

retain critical skills and talents, especially for positions that play a critical role in delivering

business and strategic growth.

Maintaining open communications between employees and Management is also vital.

PROTON has implemented a range of initiatives specifically designed to encourage such

communication so employees can achieve their full potential and progress within the

company. Initiatives include disclosing key performance indices, shared assessments,

personnel system reforms and streamlining the scheme of service throughout the Group.

To further strengthen PROTON’s learning capability, we implemented the PROTON

Development Framework which includes the Centre of Manufacturing Excellence, Centre of

Knowledge Excellence, and Centre of Human Capital Excellence. In essence, this initiative

promotes a strong knowledge culture by encouraging continuous learning through various

training programmes.

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PROTON conducts numerous training

programmes for staff in different

divisions.

In 2008 PROTON trained a total of 6,348 staff comprising executives and non-executives.

The Group also kicked off a 5-year Competency Based In-house Trainers Development

Programme to help drive knowledge-building initiatives. These initiatives were further

strengthened by collaborating with established training and higher learning institutions.

A Memorandum of Understanding was signed between GIAT MARA Malaysia in June 2008

to collaborate on Work Based Learning (WBL) for students from the institute. The first

batch of 155 students completed their 4-month WBL at the Tanjung Malim plant, following

which, 50 trainees were offered full-time employment with PROTON. PROTON is also

collaborating with community colleges to provide WBL for specialised & technical work

such as maintenance & machining in the manufacturing plants.

Operations Review

PROTON 2009 ANNUAL REPORT

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Operations Review

To facilitate the development of non-executive employees, PROTON is also in discussions

with BATC to develop an Executive Diploma in Manufacturing Systems Engineering. The

first intake is expected to take place by September 2009.

PROTON has also embarked on a major initiative of institutionalising Knowledge

Management (KM) practices which is key to our on-going growth and building a knowledgebased

human capital. In support of this initiative, we launched our first KM portal ASPIRE

(Advanced Strategic Proton Information Repository Engine) in April 2009. We are optimistic

that with the presence of good equipment, techniques and practices, PROTON can ‘ASPIRE’

to be a leading player in the automotive industry both domestically and in the region.

After years of prioritising health and safety, PROTON has accumulated a wealth of

knowledge and experience in health and safety management, education, maintenance, and

the environment. As such, a wide range of occupational health and safety measures have

been implemented throughout the Group’s premises and related businesses nationwide.

To further complement this, the Group organised numerous health talks, carnivals,

exhibitions and programmes throughout the year to create awareness amongst employees

on the importance of adopting safe and healthy lifestyles. Steering and working committees

were established to allow for more effective monitoring of health and safety related issues

throughout the PROTON Group of companies.

124

Community

Community CSR is another important segment for the Group and encompasses philanthropic

activities and donations mainly revolving around local communities, youth programmes,

NGOs and various other special interest groups.

On an annual basis, PROTON disburses approximately RM200,000 in the form of scholarships

to deserving students so they can pursue their higher education ambitions at recognised

local institutions of higher learning.


Additionally, Yayasan PROTON carried out several educational initiatives during the year. In

November 2008, 16 scholars from universities around the country received scholarships from

the Group at a ceremony, which also witnessed representatives from Yayasan PROTON’s

‘Adopted School Programme’ being presented with mock cheques. These ‘adopted’

schools, located in Shah Alam and Tanjung Malim, require financial support for educational

activities such as PMR and SPM tuition classes and motivational seminars, among others.

Yayasan PROTON awards students with scholarships to pursue their higher education.

Operations Review

During the year under review, Yayasan PROTON through its ‘Adopted School Programme’

contributed funds in support of educational activities for four schools: Sekolah Menengah

Kebangsaan Agama Slim River, Sekolah Menengah Teknik Shah Alam, Sekolah Menengah

Kebangsaan Dato’ Khir Johari and Sekolah Kebangsaan Behrang.

PROTON 2009 ANNUAL REPORT

125


Operations Review

A badminton clinic for ‘Pintar Programme’ school children in Penang being conducted by national coach

and ex-national player Tuan Haji Misbun Sidek.

126

Yayasan PROTON scholars also participated in the Group’s annual team-building activity in

February 2009 at Kelana Resort, Seremban, where scholars were exposed to the company’s

core values and took part in outdoor activities aimed to develop team spirit and build

confidence.

In the same month, RM40,000 was contributed by Yayasan PROTON towards PROTON’s

Tabung Pendidikan, while the Majlis Anugerah Kecemerlangan Akademik PMR and SPM

was held to reward children of staff who had achieved excellent results.


Operations Review

As part of our commitment to nation-building, we aim to enhance national unity amongst

Malaysians and promote economic development. A major initiative under this platform

is PROTON’s involvement in the ‘Pintar Programme’ which is spearheaded by Khazanah

Nasional Berhad and involves other Government-Linked Companies. Our main objective

is to assist children from low-income families improve their academic performance and

develop positive characteristics while young. The ‘adoption’, which involves a commitment

of RM0.5 million, is for three years and began in the 2007/2008 financial year, with

structured activities to be implemented throughout the duration.

In the year under review PROTON’s ‘Pintar Programme’ adopted four schools with a total

number of 3,006 students. Collectively, 36 activities were held including motivational

programmes, weekly tuition classes, coaching for exam year students, English classes as

well as recreational activities such as football and badminton clinics in collaboration with

the Badminton Association of Malaysia (BAM) and PROTON Football Club. PROTON also

provided necessities such as water coolers and library books as well as incentives to the

poorer and high achieving students in the form of cash and bicycles.

The four schools are Sekolah Rendah Kebangsaan Bagan Tuan Kechil in Butterworth, Penang;

Sekolah Menengah Paya Keladi in Kepala Batas, Penang; Sekolah Rendah Kebangsaan,

Tanjung Malim, Perak; and Sekolah Rendah Kebangsaan Pintu Gang, Paloh, Kelantan.

In sports, PROTON continued to build talent at the grassroot level through development

programmes particularly for badminton and football enthusiasts. Going beyond this

objective, our initiatives under this platform also serve to promote Malaysia as a preferred

destination for sports tourism.

We continued our role as the major sponsor of badminton through BAM, with an allocation

of RM3.5 million (including promotions) for the sport during the year under review. The

year 2008 was a successful one for BAM as its players performed well in various international

outings particularly in the Beijing 2008 Olympics where top national player Lee Chong Wei

bagged the country’s only medal in the games.

PROTON 2009 ANNUAL REPORT

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Operations Review

A convoy of PROTON sponsored vehicles at the Le Tour de Langkawi.

128

The year also saw PROTON’s football team qualifying for the Liga Perdana in the National

Football League, while we once again sponsored the country’s A1 team to promote the

growth of the motorsports industry in the country as well as the PROTON brand in the

international arena.

The Le Tour de Langkawi international cycling event, which PROTON has long been

associated with, also continued to receive sponsorship and organisational assistance. The

event has not only helped place the nation on the world map, but more importantly, it has

spurred the development of homegrown cycling talents to compete at international level.


Operations Review

Under Bridging Community Programme, PROTON lends its hand to the less fortunate

members of society by building and repairing homes. The year saw PROTON carrying out

various repair works for Rumah Anak Yatim Siraman Kasih in Rawang and Rumah Anak

Yatim Sekendi in Sabak Bernam. PROTON also built a hostel for 60 inmates at Rumah Anak-

Anak Yatim & Miskin Darul Aitam, Tepoh, Perak.

In addition, PROTON annually supports various national bodies and organisations such

as MERCY, Yayasan Harapan Kanak-Kanak, Pediatric Ward of Hospital Tengku Ampuan

Rahimah, Yayasan Orang Kurang Upaya Kelantan, and PEMADAM with the sponsorship

of cars.

PROTON also has an on-going programme involving automotive technical education

through the contribution of used/scrap engines, components and body parts to national

technical institutions such as GIAT Mara, Institut Latihan Perindustrian under the Ministry

of Human Resources, Akademi Latihan Bomba and Institut Kejuruteraan Tentera Darat, as

well as various community colleges. PROTON has been the main sponsor for the Malaysian

Skills Competition (the automobile technology sector) organised by the Ministry of Works

for the past seven years. The annual Grant includes sending Malaysian representatives to

the ASEAN and World Competitions, with the objective of nurturing young local talents in

this sector and building world-class human capital.

PROTON’s football team is in the

National Football League.

PROTON 2009 ANNUAL REPORT

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Operations Review

Environment, Health & Safety Report

As Malaysia’s largest manufacturer of automobiles, PROTON

is committed towards protecting the environment by

conforming to the Environmental Quality Act, 1974, OSHA

(Occupational Safety and Health Administration) guidelines

as well as other rules and regulations as part of our corporate

responsibility.

130

PROTON’s Environmental, Health and Safety Policy together with Quality Policy ensures that

the Group is conscientious about its operations impact on the surroundings and protecting

the health and safety of PROTON’s greatest assets, its people, and the community at

large.

ISO14001 Environment Management System

Reducing the carbon footprint as part of PROTON’s environmental initiatives continued to

be a core focus for the Group. In 2007, we had embarked on an ambitious journey in order

to achieve international standards in managing our environment. During the year under

review, PROTON passed the pre-assessment audit on ISO14001 Environmental Management

System carried out jointly by Vehicle Certification Agency (VCA) and SIRIM Malaysia, and

accredited by the United Kingdom Accreditation Service (UKAS).

Considered a means to building greater trust in the marketplace, this internationally

recognised evaluation gives the assurance that PROTON is systematically managing the

environment by benchmarking itself against international standards. Strong customer

confidence in PROTON’s products and services is a must; as such we take pride in these

certifications as they do create a favourable impression especially on export markets such

as the UK and Australia, where environmental concerns are of paramount importance.


PROTON 2009 ANNUAL REPORT

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Operations Review

132

Amongst PROTON’s environmentally-friendly measures at all its plants include the

installation of ‘green’ equipment, machinery, robots and automation systems. As these

utilise less energy and emit less waste into the atmosphere, such installations have

contributed towards improving efficiency levels at PROTON.

Waste Water Recycling

PROTON utilises water resources in a responsible manner. Wastewater from the domestic and

industrial sources are chemically and biologically treated within PROTON’s manufacturing

facilities.

Currently, the recycled wastewater is used as incinerator coolant at the rate of 25,000 litres

per hour to cool down and maintain proper operating temperature. The recycled water is

also used to water plants, as well as clean roads and drains within PROTON’s facilities.

Toxic Waste Treatment

During the year, PROTON’s industrial wastewater effluence discharged after treatment was

well below the legal limit under the Environmental Quality Act, 1974:

• COD – Chemical Oxygen Demand’s standard is 100 mg/l; PROTON’s actual discharge

was less than 50 mg/l.

• BOD – Biological Oxygen Demand’s standard is 50 mg/l; PROTON’s actual discharge

was less than 10 mg/l.

Scheduled waste is defined as any toxic waste falling within the categories of waste listed

in the First Schedule, Environment Quality (Scheduled Waste) Regulations, 2005. While

PROTON manages the treating of scheduled waste within the plant premises, the final dry

sludge from the scheduled waste is transferred to Kulaiti Alam Sdn Bhd, the sole national

schedule waste management centre located in Negeri Sembilan.

During the manufacturing process, several types of scheduled wastes are generated. These

are mainly the result of the overspray dust that occurs during the painting process and

are known as paint sludge, which is treated by an incineration process that requires a

temperature of more than 1,000 Celsius.

PROTON’s volume of scheduled waste generated as a by-product from the manufacturing

process during the year was once again on a downward trend in keeping with previous

years.


End of Life Vehicles

The quality of the cars manufactured can also impact the environment. In view of this,

PROTON continues to ensure that all automobiles produced by the Group for the UK

and European markets comply with the End of Life Vehicle (ELV) directive issued by the

European Union. By maintaining exacting standards in our product line, we have taken

further steps to ensure PROTON vehicles do not cause harm to the environment and people

upon their end of life disposal.

PROTON X-Change Programme

Operations Review

In a bid to remove old cars from Malaysian roads and curb pollution, PROTON had in the

previous year embarked on the X-Change Programme where cars that were more than 10

years old can be exchanged for a rebate of RM5,000 to be used towards the down-payment

of a brand new PROTON car. Cars that are traded in are usually used as scrap metal.

The programme, which is a part of the Government’s second stimulus package, will come

to an end in December 2009. Owners of aging cars with low resale value have been taking

advantage of this programme that has already seen close to 11,900 rebate vouchers being

issued by PROTON as of July 2009.

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Operations Review

Green Cars

Growing concerns with protecting the environment, managing carbon footprint, as well as

volatile petrol prices, have resulted in an increasing interest in ‘green’ vehicles worldwide.

During the year under review, PROTON’s vision of creating an automobile that is powered

by natural gas became a reality with the Saga NGV (natural gas vehicle). PROTON is currently

also focusing its R&D efforts on another alternative fuel vehicle, the electric vehicle.

134

Health and Safety

Management Commitment

With the formalisation of the Environment, Health and Safety policy, the Group ensured

that its implementation was supported with adequate manpower and funds. As a result

of top-down commitment, the Company was able to sustain employees’ interest in various

programmes which helped to reduce, and in some cases eliminate, occupational injuries

and illnesses.

Numerous Occupational Safety and Health (OSH) programmes and activities were developed

to ensure the safety, health & welfare of persons at the workplace and to protect external

parties against possible hazards.

A key activity is PROTON’s ergonomics improvement programme which aims to maintain

human-friendly working conditions and reduce work load at the assembly line. Ergonomics

covers all aspects of the job from the physical stress it places on joints, muscles, nerves,

tendons, bones and the like, to environmental factors which can affect hearing, vision and

general health.

Through this programme, PROTON had during the year abolished the following:

• The practise of carrying heavy items that are more than 10 kg in weight such as

window glass, seats, instrument panels, exhaust pipes and tires.

• Heavy physical work such as high torque wrench corresponding to more than 10 kg-m

for the tightening of suspension, tire bolts and drive shafts.

• Untidy work and other dislikes by operators such as urethane application and fluid

charging.


Instilling sound commuting practices that revolve around safety at all times is an on-going

priority for PROTON. The following campaigns were carried out during the year:

• Road safety campaigns during festive seasons in collaboration with DOSH, Police,

NIOSH and other agencies.

• Defensive riding courses for employees by in-house skilled trainers.

• Motorcycle convoy skills to foster correct motorcycle riding, which included

programmes such as convoys to Teluk Batik and Ilham Resort, Port Dickson, with in-

house union members.

• Defensive driving training programmes for the public and customers to educate and

teach PROTON car owners safety and defensive driving techniques. This was in line

with the Government’s aim to make roads safer and bring down the alarming

number of road accidents and fatalities.

Operations Review

As a result of stringent safety practices on site, the number of industrial accidents recorded

in years 2006, 2007 and 2008 were 27, 18 and 11 respectively. The rate is consistent with the

downward trend in the past few years and PROTON will continue in its efforts in this area.

Staff who ride motorcycles to work receive helmets and reflective vests from the Managing Director.

PROTON 2009 ANNUAL REPORT

135


Shouldering Responsibility


Shouldering

Responsibility

PROTON’s evolution as

a national automaker

lies in maintaining

integrity, transparency

and commitment to the

Company’s values as it

upholds the interests of

stakeholders.

Innovation in Motion


Statement on Corporate

Governance

138

The Board of PROTON is committed to applying the

recommendations of the Malaysian Code on Corporate

Governance (revised 2007) (“the Code”) and the principles

of Best Practices recommended in the Code to ensure that

good corporate governance is practised throughout the

Group to effectively discharge its responsibilities to protect

and enhance shareholder value.


The Board is also committed to abiding by the Guidelines to Enhance Board Effectiveness

as set by the Putrajaya Committee on GLC High Performance (PCG), and at the same time,

striving to maintain a high level of corporate governance within the PROTON Group

by ensuring that the highest standards of corporate culture are practised throughout.

Good corporate governance is the foundation of the culture and business practices of

the PROTON Group.

Set out herein is a statement on how the Group has applied the principles and adopted

the best practices as laid down in the Code. This statement describes how the Principles of

Good Governance and provisions of the Code are applied by the Group.

PROTON 2009 ANNUAL REPORT

139


Statement on Corporate Governance

140

Board of Directors

The Board is committed to establishing and enhancing shareholder value in the long-term

and is pleased to report that the Group has to its best efforts and knowledge complied with

the Principles and Best Practices of the Code throughout the financial year under review.

The Board continues to enhance its role in improving governance practices effectively

to safeguard the interests of the shareholders as well as stakeholders. To this end, the

Board has full control of and is responsible for the Group’s overall strategy, acquisition

and divestment policies, capital expenditures, annual budget, review of financial and

operational performance, and internal controls and risk management processes. The

Group’s overall strategic direction, development, implementation and control remain of

primary importance to the Board.

Dato’ Mohammed Bin Azlan Hashim resigned as Non-Executive Chairman of PROTON on

1 January 2009. Dato’ Mohd Nadzmi Bin Mohd Salleh who was previously the Managing

Director of Perusahaan Otomobil Nasional Berhad (the then listed entity on the Kuala

Lumpur Stock Exchange) from 29 June 1993 until 1 April 1996 was appointed as the new

Non-Executive Chairman of PROTON on 1 January 2009.

The roles and responsibilities of the Non-Executive Chairman and the Managing Director

are clearly defined. The Chairman ensures the integrity and effectiveness of the Board as a

whole. He conducts Board meetings and ensures that it proceeds in an orderly manner.

The Managing Director (“MD”) on the other hand is responsible for making, and ensures

the implementation of, broad policies as approved by the Board and reports to and

discusses material matters including regulatory developments and strategic projects with

the Board. There is therefore a natural separation of management and governance leading

to a balance of power and authority.

The non-executive directors are independent of management and are free from any business

relationship, which could materially interfere with the exercise of their independent

judgment.

The Board has delegated matters pertaining to the day to day management, operations and

strategic development of the Group subject to the Limits of Authorities and Group Policies

and Procedures to the Managing Director who is supported by a competent Management

Team.


Statement on Corporate Governance

In the financial year ended 31 March 2009, the Board of PROTON Holdings Berhad (PHB) met nine (9) times

details of which are as shown below:

No Name of Director Designation Date of Date of Meeting Percentage

Appointment Resignation Attendance

1 Dato’ Mohd Nadzmi Non-Independent/ 1 January 2009 N/A 1/1 100%

Bin Mohd Salleh Non-Executive Chairman

2 Dato’ Haji Syed Zainal Managing Director 1 January 2006 N/A 8/9 89%

Abidin B Syed

Mohamed Tahir

3 Tuan Haji Abdul Jabbar Independent Non- 12 April 2004 N/A 8/9 89%

Bin Abdul Majid Executive Director

4 Tuan Haji Abdul Kadir Independent Non- 10 March 2005 N/A 9/9 100%

Bin Md Kassim Executive Director

5 Dato’ Michael Independent Non- 15 September 2006 N/A 8/9 89%

Lim Heen Peok Executive Director

6 Datuk Zalekha Binti Non-Independent 11 February 2008 N/A 6/9 67%

Hassan Non-Executive Director

7 Dato’ Mohammed Non-Independent/ 17 December 2004 1 January 2009 8/8 100%

Azlan Bin Hashim Non-Executive Chairman

Note: On 13 May 2009, Encik Oh Kim Sun was appointed Independent Non-Executive Director of PROTON.

The profiles of the directors are set out on (pages 28 to 35) of the Annual Report.

Board meetings for the Company and its subsidiaries are scheduled in advance before the start of each calendar

year and the meetings calendar is circulated to all Board Members at the beginning of each year. This would

enable the Directors to plan ahead and ensure attendance at Board Meetings. Additional meetings or Special

Board meetings are convened whenever necessary when there are urgent and important decisions to be

made.

PROTON 2009 ANNUAL REPORT

141


Statement on Corporate Governance

142

Board Composition and Balance

The Board consists of seven (7) members with the Chairman being a Non-Independent Non-

Executive Director, one (1) Non-Independent Non-Executive Director, four (4) Independent

Non-Executive Directors and one (1) Executive Director who is the Managing Director.

Tuan Haji Abdul Jabbar Bin Abdul Majid and Tuan Haji Abdul Kadir Bin Md Kassim are the

Company’s Senior Independent Directors to whom concerns pertaining to the Group may

be conveyed by the shareholders and the public.

Apart for the Managing Director, all the Non-Executive Directors are independent of

management and free from any business or other relationship, which could materially

interfere with the exercise of independent judgment.

Independence and Conflict of Interest

The Directors are required to make written declarations and it is their responsibility to

declare whether they have a potential or actual conflict of interest in any transaction.

Where issues involve conflict of interest, the interested Directors abstain from discussing or

voting on the matter.

Supply of Information

The Board has full access to all information pertaining to the Group’s business affairs to

enable the Board to discharge its responsibilities effectively.

In general, the agenda, board papers and minutes of previous meetings of the Board

and Board Committees including minutes of board meetings of subsidiary companies are

circulated in advance to the Board before meetings. The agenda for every meeting permits

the Board members to review the contents of meetings and enables the Chairman to better

and more efficiently conduct the proceedings at the Board meetings.

The Board has full access to the Company Secretary who is available to provide the Directors

with the appropriate advice and services and also to ensure that the relevant procedures

are followed and rules and regulations are complied with. The Board is, from time to time,

updated, with any changes in the law, governance and other regulatory requirements.

Senior Management as well as professional and external advisors are from time to time

invited to attend board meetings to deliberate and clarify issues on the subject matter

concerned.

The Company has drawn up a list of transactions that would require the prior approval of

the Board. The same is reflected in PROTON’s Group Policy and Procedures and Limits of

Authority.


Statement on Corporate Governance

Policy on Appointment of Directors

The Board Nomination & Remuneration Committee reviews all new appointments by taking

into consideration the skill sets required by the Company and the Group.

Board Members are appointed through a formal and transparent selection process that is

consistent with the Articles of Association of the Company and the Company’s Selection

Policy for Directors.

New directors are required to undergo familiarisation programmes, plant visits and briefings

to get a better understanding of the PROTON Group, its operations and the automotive

industry.

The Board Nomination & Remuneration Committee, apart from carrying out annual reviews

on the mix of skills and experience of the Directors to ensure that the Board has the right

balance and effectiveness also ensures an effective process of selection of all key posts within

the PROTON Group and this includes all members of the senior management committee

and similar level executives including direct reports to the respective chief executive officer

both at holding company level and throughout the PROTON Group.

Re-Election of Directors

All Directors including the Executive Director are subject to retirement by rotation at least

once in every three years and are eligible for re-election. In accordance with the Articles of

Association and the Listing Requirements of Bursa Malaysia Securities Berhad, at least 1/3 of

the Directors shall retire from office at each Annual General Meeting. Any new appointed

director shall hold office only until the next Annual General Meeting of the Company and

shall be eligible for re-election under Article 111. Directors who are over seventy (70) years

of age are required to submit themselves for retirement annually at the Annual General

Meeting, unless the Director is re-appointed by way of special resolution in accordance with

Section 129 (6) of the Companies Act, 1965.

At the forthcoming Annual General Meeting of PROTON Holdings Berhad the following

Directors will retire and are eligible for re-election:

(i) Pursuant to Article 104

• Dato’ Michael Lim Heen Peok

• Tuan Haji Abdul Kadir Bin Md Kassim

• Tuan Haji Abdul Jabbar Bin Abdul Majid

Note: Tuan Haji Abdul Jabbar Bin Abdul Majid although eligible, does not seek re-election.

(ii) Pursuant to Article 111

• Dato’ Mohd Nadzmi Bin Mohd Salleh

• Encik Oh Kim Sun

None of the Directors are subject to retirement pursuant to Section 129 of the Companies

Act, 1965 at the forthcoming Annual General Meeting.

PROTON 2009 ANNUAL REPORT

143


Statement on Corporate Governance

Board Committees

The Board has delegated specific responsibilities to five (5) sub-committees, namely the Board Executive

Committee, Board Audit Committee, Board Nomination & Remuneration Committee, Board Risk Management

Committee and Board Disciplinary Committee, which assist the Board in overseeing the affairs of the

Group and have been entrusted with specific responsibilities and authority and report to the Board with

recommendation.

The abovementioned Board Committees have the authority to examine specific issues and report to the Board

with their recommendations. The responsibility of decisions on all matters ultimately lies with the Board as a

whole.

Board Audit Committee

The Board Audit Committee (“BAC”) met eight (8) times during the course of the financial year. The composition

of the BAC and their respective attendance record of meetings for the financial year ended 31 March 2009

are as follows:

No Name of Director Designation Date of Date of Meeting

Appointment Resignation Attendance

1 Tuan Haji Abdul Jabbar Bin Chairman – Independent 10 March 2005 N/A 8/8

Abdul Majid – Chairman* Non-Executive Director

2 Tuan Haji Abdul Kadir Bin Member – Independent 10 March 2005 N/A 7/8

Md Kassim Non-Executive Director

3 Dato’ Michael Member – Independent 29 November 2006 N/A 8/8

Lim Heen Peok Non-Executive Director

*Note: Encik Oh Kim Sun was appointed as Member and Chairman of the Board Audit Committee on 1

June 2009. Tuan Haji Abdul Jabbar Bin Abdul Majid was on the same date re-designated as

Member of the Board Audit Committee.

During the financial year, the BAC of PROTON Holdings Berhad undertook the following activities:

• Assisted the Board in discharging its statutory duties and responsibilities relating to accounting and

reporting practices of the Company and the Group in accordance with Generally Accepted Accounting

Practices.

Reviewed the external audit terms of engagement, the audit strategy, the proposed audit fee and the

achievement of the agreed upon reporting timeframes for the audit of the financial statements.

Reviewed the external audit reports and discussed any problems and reservations arising thereon.

Reviewed the internal audit plan, methodology, functions and resources.

Reviewed major findings on internal audit reports and management response.

144


Statement on Corporate Governance

The Terms of Reference of the Board Audit Committee are set out below.

Composition

The Committee shall be appointed from amongst the Board and shall:-

• comprise no fewer than three members;

• all the members must be independent directors; and

• at least one member must be a member of the Malaysian Institute of Accountants

or if he is not, then he must be a person who complies with Para. 15.10 of Bursa

Malaysia Securities Berhad’s Listing Requirements.

No alternate director may be appointed as a member of the Board Audit Committee.

The Board will review the terms of office and the performance of the Board Audit Committee

and its members at least once every three years.

Functions and Duties

The functions and duties of the Board Audit Committee shall be to:-

(a) Review and report to the Board of Directors on the following:-

• with the External Auditors, the audit plan;

• with the External Auditors, the External Auditor’s evaluation of the system of

internal controls;

• with the External Auditors, the External Auditor’s audit report;

• the assistance given by the Company’s employees to the External Auditors;

• the adequacy of the scope, functions and resources of the internal audit

functions and that it has the necessary authority to carry out its work, and the

performance of the members of the internal audit function;

• the internal audit programme, processes, the results of the internal audit

programme, or investigation undertaken and whether or not appropriate action is

taken by the management on the recommendations of the internal audit function;

• the quarterly results and year-end financial statements, prior to the approval by

the Board of Directors, focusing particularly on:-

– changes in or implementation of major accounting policy;

– significant and unusual events;

– compliance with accounting standards and other legal requirements; and

– accuracy and adequacy of the disclosure of information essential to a fair

and full presentation of the financial affairs of the Group;

• any related party and conflict of interest situation that may arise within the

listed issuer or group including any transaction, procedure or course of conduct

that raises questions of management integrity;

• promptly report to Bursa Malaysia Securities Berhad on any matter reported by it to

the Board of the Company which has not been satisfactorily resolved resulting in a

breach of the Listing Requirements of Bursa Malaysia Securities Berhad;

• submit to the Board a Report on the summary of activities of the Board Audit

Committee in the discharge of its functions and responsibilities in respect of each

financial year.

(b) Consider the appointment of the external auditor, the audit fee and any questions

of resignation and dismissal.

PROTON 2009 ANNUAL REPORT

145


Statement on Corporate Governance

146

Meetings

The Committee shall hold meetings on at least four occasions each year, although additional

meetings may be called, as and when necessary, by the Chairman of the Committee. These

meetings will usually be:-

• prior to the current year’s audit;

• upon completion of the External Auditor’s interim examination;

• prior to the meeting of the full board to approve the financial statements;

• prior to the announcement of the quarterly results;

• upon the request of any member of the Committee or the External Auditors, the

Chairman of the Committee shall convene a meeting of the Committee to consider

the matters brought to its attention;

• at least once a year, the Committee shall meet with the External Auditors without

any Executive Directors present.

Attendance

In order to form a quorum in respect of a meeting of an audit committee, the majority

of members must be present throughout the meeting. The Chairman may request that

directors and members of the management, the Internal Auditors and representatives of

the External Auditors be present at meetings of the Committee.

Minutes

The Company Secretary shall be the Secretary to the Committee and shall be present at all

meetings to record minutes.

Minutes of each meeting shall be prepared and entered into the books provided for the

purpose and sent to the Committee members and will be made available to all Board

members. The minutes shall be signed by the Chairman of the Committee.

Internal Audit Function

The Group uses the services of the Group Internal Audit Division to accomplish its internal

audit requirements. The Group Internal Audit Division reports to the Board Audit Committee

on matters concerning the Group and assists the Board of Directors in monitoring and

managing risks and internal controls.

The Group Internal Audit Division reviews internal controls related to all key activities of

the Group and recommends improvements in controls and procedures. The Group Internal

Audit Division is independent of the activities it audits and performs with impartiality and

due professional care. The findings of the Group Internal Audit Division are reported to the

Board Audit Committee.

The Board Audit Committee approves the internal audit plan of the Group Internal Audit

Division each year. The scope of the internal audit covers the audits of all units and operations,

including subsidiaries.


Statement on Corporate Governance

During the year, the Group Internal Audit Division serves to ensure internal control measures are adequate

and effective in mitigating key risks and that they are monitored. The monitoring process will form the basis

for continually improving the risk management process in the context of the Group’s overall goals.

Board Nomination & Remuneration Committee

The objectives of the Board Nomination & Remuneration Committee (“NRC”) are in accordance with the Terms

of Reference as approved by the Board of Directors of PROTON on 26 July 2006.

The NRC reviews new director appointments of the Group and the balance and effectiveness of the boards

of directors, taking into account the required mix of skills and experience and other qualities, before making

recommendations to the Board.

The Committee is empowered to conduct periodic reviews on the overall remuneration policy and package

of the Executive and Non-Executive Directors and Senior Level Mission Critical Positions of the Group for

recommendation to the Board.

The authority and scope of coverage of the NRC is over the PROTON Group, which includes subsidiaries and

relevant associate and other investee companies.

The NRC is made up entirely of Non-Executive Directors, with the majority consisting of Independent

Non-Executive Directors.

Appointments to the Committee shall be for a period of three (3) years, which may be extended provided that

the majority of the Committee members remain independent.

The NRC met eight (8) times during the financial year.

The Composition of the NRC is as follows:

No Name of Director Designation Date of Date of Meeting

Appointment Resignation Attendance

1 Dato’ Mohd Nadzmi Chairman – 1 January 2009 N/A 2/2

Bin Mohd Salleh Non-Independent

Non-Executive Director

2 Encik Ahmad Tajuddin Member – Independent 29 August 2005 N/A 8/8

Bin Abdul Carrim

3 Encik Md Ali Bin Member – Independent 29 August 2005 N/A 8/8

Md Dewal

4 Dato’ Michael Member – Independent 13 November 2006 N/A 8/8

Lim Heen Peok Non-Executive Director

5 Dato’ Mohammed Azlan Chairman – 10 March 2005 1 January 2009 6/6

Bin Hashim Non-Independent

Non-Executive Director

PROTON 2009 ANNUAL REPORT

147


Statement on Corporate Governance

Board Risk Management Committee

The Board Risk Management Committee (“BRMC”) assists the Board to oversee the overall management of all

risks faced by the Group’s business. Further details of the activities of the Board Risk Management Committee

are spelt out in the Statement of Internal Control.

The BRMC is made up entirely of Non-Executive Directors and third party members (not being directors of the

Company) who are appointed by the Board from time to time as follows:

No Name of Director Designation Date of Date of Meeting

Appointment Resignation Attendance

1 Tuan Haji Abdul Kadir Chairman – Independent 29 September 2005 N/A 4/4

Bin Md Kassim Non-Executive Director

2 Datuk Tan Kim Leong Member – Independent 29 August 2005 N/A 3/4

3 Dato’ Zainuddin

Bin Che Din Member – Independent 1 October 2008 N/A 3/3

The composition of the BRMC is reviewed annually by the Board of Directors based on the recommendation

of the NRC.

The Group Risk Management Unit (GRMU) is entrusted with the responsibility for ensuring that an appropriate

risk management framework exists within the Group and is effectively implemented to manage the key risks

of the organization on an on-going basis.

The GRMC, which comprises of Senior Management, is responsible for overseeing risk management

implementation, regular updating of the Group’s risk profiles and improving the implementation of

methodology for risk management. The Committee deliberates and determines the Group’s major risks

to be escalated to the attention of the BRMC.

148


Statement on Corporate Governance

Board Disciplinary Committee (“BDC”)

The BDC is a platform for the PROTON Group to deal primarily with disciplinary issues. The BDC is part of the

structural mechanism for the handling of cases that may arise from the introduction of the Whistleblower and

Assets Declaration Policies. The BDC has the power to initiate investigations, consider and take appropriate

action on any case referred to it by any party either received orally or in writing.

The BDC comprises members all of whom are non executive directors as follows:

No Name of Director Designation Date of Date of Meeting

Appointment Resignation Attendance

1 Dato’ Mohd Nadzmi Chairman – Non-Independent 1 January 2009 N/A N/A

Bin Mohd Salleh Non-Executive Director

2 Tuan Haji Abdul Kadir Member – Independent 7 May 2006 N/A 2/2

Bin Md Kassim Non-Executive Director

3 Tuan Haji Abdul Jabbar Member – Independent 7 May 2006 N/A 2/2

Bin Abdul Majid Non-Executive Director

4 Tuan Haji Yusof Member – Independent 21 February 2008 N/A 2/2

Bin Ahmad Non-Executive Director

5 Dato’ Mohammed Azlan Chairman – Non-Independent 7 May 2006 1 January 2009 2/2

Bin Hashim Non-Executive Director

PROTON Board Executive Committee

The objectives of the Board Executive Committee (“Board EXCO”) is to assist the Management in addressing

issues relating to implementation and monitoring of several key projects, including but not limited to PROTON

Strategic Business Plan, Annual Management Plan, PROTON Business Turnaround Plan and also to address

issues relating to identifying suitable candidates to fill in several key positions for PROTON. It is to be noted

that the functions of the Board EXCO shall not overlap that of other Board Committees, such as the Board

Nomination & Remuneration Committee.

Subject to the resolutions of the Board of Directors of PROTON from time to time, the provisions contained in

the Terms Of Reference and the Memorandum and Articles of Association of the Company, the Board EXCO

may exercise any of the powers, authorities and discretions for the time being vested in the Board of Directors

with regard to the affairs and business of the Company.

PROTON 2009 ANNUAL REPORT

149


Statement on Corporate Governance

PROTON’s Board EXCO comprises two (2) representatives from amongst the PROTON Board Members and two

(2) Senior Management representatives as follows:

No Name of Director Designation Date of Date of Meeting

Appointment Resignation Attendance

1 Dato’ Mohd Nadzmi Chairman / Non-Independent 1 January 2009 N/A 3/3

Bin Mohd Salleh Non-Executive

2 Dato’ Haji Syed Zainal Managing Director 17 April 2007 N/A 15/18

Abidin B Syed Mohamed

Tahir

3 Dato’ Michael Independent Non-Executive 17 April 2007 N/A 18/18

Lim Heen Peok Director

4 Vimala Menon Director of Finance and 16 June 2008 N/A 12/12

Corporate Affairs

5 Dato’ Mohammed Azlan Chairman / Non-Independent 17 April 2007 1 January 2009 15/15

Bin Hashim Non-Executive Director

Directors’ Training

All Directors have successfully completed the Mandatory Accreditation Programme conducted by the Research

Institute of Investment Analysts’ Malaysia as imposed by Bursa Malaysia Securities Berhad.

Despite repeal of Bursa Malaysia Securities Berhad’s Continuing Education Programme with effect from 1

January 2005, the Directors continue to identify and attend appropriate seminars and courses to keep abreast

of changes in legislation and regulations affecting the Group.

The Company has arranged various in-house training programmes and luncheon talks on topics relevant to

the Company, which were attended by both the members of the Board and Senior Management. PROTON

has engaged the services of a global growth consulting company to share global and regional automotive

knowledge with the Board Members and Management through various types of workshops. The goal of

this engagement is to deliver continuous learning to PROTON through interactive sessions supported by

market analysis, technology trends, best practices, economic and policy impact analysis from across the region.

The automotive consultant has during the course of the year conducted workshops and luncheon training

programmes for both the Directors and Management of PROTON Group.

The Directors have also in the course of the year attended programmes for building high performance directors,

the Chairman’s Forum, workshops, conferences and talks including those organised by the Malaysian Directors

Academy, better known as “MINDA”, an initiative under the GLC Transformation Programme.

150


Statement on Corporate Governance

Directors’ Remuneration

The NRC is responsible for reviewing the performance of the Executive Directors and recommending to the

Board the remuneration package and reward structure. The Board as a whole determines the remuneration

of the Executive and Non-Executive Directors. Directors do not participate in any discussions or decisions

concerning each individual’s remuneration.

In the case of the Executive Director, the remuneration is structured to link rewards to corporate and individual

performance through key performance indicators comprising fixed and performance-based rewards.

The level of remuneration of the Non-Executive Directors reflects the experience and level of responsibilities

undertaken by the Director concerned. The Non-Executive Directors are paid annual fees and attendance

allowances in accordance with the number of meetings attended. In addition, the Non-Executive Directors are

each provided with the use of a car.

Non-Executive Directors fees are paid upon shareholders approval at each Annual General Meeting.

The NRC carries out reviews when appropriate and refers to remuneration surveys and consultants to assist

in determining the appropriate level of reward, which is competitive and consistent with the corporate

objectives. This is necessary in order to attract and retain professionals with the qualities needed to manage

the Group successfully.

Details of the total remuneration of the Directors of PROTON Holdings Berhad for the financial year ended 31

March 2009 are as follows:

Directors Basic Salaries, Bonus and Fees and Benefits Total

Other Employee Benefits Allowances in Kind

Executive Directors 814,464 - 81,126 895,590

Non-Executive Directors - 1,522,454 59,276 1,581,730

TOTAL 814,464 1,522,454 140,402 2,477,320

Remuneration Number of Directors

Range of Total Remuneration Executive Non-Executive Total

Below RM50,000 - - -

RM50,001 – RM100,000 - 2 2

RM100,001 – RM500,000 - 2 2

RM500,001 – RM1,000,000 1 2 3

TOTAL 1 6 7

PROTON 2009 ANNUAL REPORT

151


Statement on Corporate Governance

152

Financial Reporting

The Board is committed to providing a balanced, clear and meaningful assessment of the

financial performance and prospects of the Group to shareholders, the investor community

and the regulatory authorities. Shareholders and other stakeholders are kept abreast of the

Group’s performance through the timely announcement of the quarterly financial results

and accompanying press releases.

The Board Audit Committee assists the Board to oversee the financial reporting processes

and the quality of its financial reporting. Quarterly financial results and annual financial

statements are reviewed by the Board Audit Committee to ensure adequacy and

completeness of information prior to the Board’s approval. To enhance quality of the

Group’s financial reporting, the external auditors will be conducting quarterly reviews of

the Group’s quarterly results in addition to the year-end audit.

Directors Responsibility Statement

The Board is required by the Companies Act, 1965, to ensure that financial statements

prepared for each financial year have been made out in accordance with the applicable

approved accounting standards and give a true and fair view of the state of affairs of the

Company and the Group at the end of the financial year and of the results and cash flow of

the Company and the Group for the financial year.

The Board is responsible for ensuring that the Company keeps accounting records which

disclose with reasonable accuracy, the financial position of the Company and the Group

and that the financial statements comply with the Companies Act, 1965.

In preparing the financial statements the Board has:

• selected suitable accounting policies and applied them consistently;

• made judgements and estimates that are reasonable and prudent;

• ensured that all applicable accounting standards have been followed; and

• prepared financial statements on the going concern basis as the Directors have

a reasonable expectation, having made enquiries, that the Group has adequate

resources to continue in operations for the foreseeable future.

Internal Controls

The Board acknowledges its overall responsibility for maintaining a system of internal controls

that provides assurance of effective and efficient operations and compliance with laws and

regulations and also its internal procedures and guidelines. The size and complexity of the

operations may give rise to risks of unanticipated or unavoidable losses.

The system of internal controls is designed to provide reasonable but not absolute assurance

against the risk of material errors, frauds or losses occurring. The Board Audit Committee

reviews the effectiveness of the system of internal controls, which cover financial, operational

and compliance controls, and also risk management.


Statement on Corporate Governance

Relationship with Auditors

The Board Audit Committee maintains an appropriate transparent relationship with both the

Group external auditors and internal auditors. The external auditors are invited to attend

Board Audit Committee meetings and present their audit findings when the Company’s annual

financial results are considered. The Board Audit Committee meets with the external auditors at

least once a year without the presence of the Executive Director and management.

Dialogue Between The Company and Shareholders / Investors

The Board recognises the importance of transparency and accountability to its shareholders

and investors. Different channels of communication are optimised to provide shareholders and

investors with a balanced and complete view of the Group performance and the issues faced by

its businesses in the competitive environment amidst a changing landscape.

The issue of the Annual Report is an important medium of information for the shareholders

and investors whereas the Annual General Meeting of the Company is the main forum for

communication and dialogue with the shareholders. Shareholders are encouraged to actively

participate and interact with the Board and members of the Senior Management pertaining to

the items on the agenda during the general meeting.

In addition, the Chairman briefs the shareholders on the Company’s operations for the financial

year. Senior management and the external auditors are present to respond to questions and

queries to ensure a high level of accountability and transparency of the business goals, strategy

and operations.

The Board strives to maintain a good dialogue with shareholders and regular meetings

are held with institutional shareholders throughout the year to discuss the progress of

the Group, future growth prospects and strategy. In the course of the year the Board and

Management have engaged in dialogue sessions with the Major Shareholders of PROTON

and the representatives from the Malaysian Institute of Corporate Governance and Minority

Shareholder Watchdog Group. Other channels of communication include Company

presentations, seminars, press releases, and interim and annual reports. There is a Company

website, www.proton.com, which provides information on the Company for all shareholders

and the general public.

Besides the Annual Report, the Board ensures timely announcements are made to Bursa

Malaysia Securities Berhad and disseminates clear, accurate, and sufficient information to enable

the shareholders and investors to make informed decisions. The Investor Relations Unit also

proactively disseminates appropriate and relevant information to the investor community and

attends to whatever queries they may have.

Code of Conduct and Discipline

PROTON has in place a Code of Conduct and Discipline. Every employee is required to comply

with this said code and as may be determined by the Board, from time to time. This code

consists of matters, prohibitions, duties or procedures relating to his / her employment.

PROTON 2009 ANNUAL REPORT

153


Statement on Corporate Governance

154

Such code may be modified, added to, substituted for or otherwise amended from time to

time as the Board deems fit. An employee is also required to comply with the penal code

of the country.

Code of Ethics

The PROTON Group has established specific rules and regulations to govern the conduct of its

employees. The Directors and employees of PROTON Group are expected to obey all laws in

conducting business and to always act with honesty, integrity, loyalty, trustworthiness, fairness

and responsibility.

It is PROTON’s policy and Management’s responsibility to apply these rules fairly and equitably

to all employees.

Infringement of these rules may lead to disciplinary action such as “verbal or written warnings”,

“suspension without pay” and “separation from the Company/Group”.

Purpose of Policy

The purpose of this policy is to provide a framework for the proper conduct of directors and

employees while on the job. The policy gives Directors and employees guidance in identifying

business situations which have the potential to create legal and ethical problems and to provide

directions in handling those potential and actual situations.

The respective codes are made available to the Directors and employees.

Whistleblower Policy

PROTON had on 27 July 2006 implemented a Whistleblower Policy. The objective of the policy

is to provide a mechanism for preventive and corrective action within the Group without the

negative effects that come with public disclosure, such as loss of Company image or reputation,

financial distress and loss of investor confidence.

The policy encourages employees or representatives of PROTON to disclose genuine concerns

about illegal, unethical or improper business conduct within the Group. In this manner, the

employees can help the PROTON Group to monitor and keep track of such illegal, unethical or

improper business conduct within, which otherwise, may not be easily detected through normal

process or transaction.

Business Conduct

The Group is committed to the highest standards of business conduct and seeks to

maintain these standards across all of its operations throughout the world. The Group

has in place group finance policies and employee procedures.

The Group has an appropriate organisational structure for planning, executing, controlling

and monitoring business operations in order to achieve group objectives. Lines of

responsibility and delegations of authority are documented.


Statement on Corporate Governance

PROTON 2009 ANNUAL REPORT

155


Additional Compliance Information

Non-Audit Fees

During the financial year, the amount of non-audit fees paid and payable to the external auditors by the

Group are as follows:

External Auditors 2009 2008

RM’000 RM’000

PricewaterhouseCoopers Malaysia 2,120 1,234

Member firm of PricewaterhouseCoopers International Limited 2,545 1,961

(a separate and independent legal entity from

PricewaterhouseCoopers Malaysia)

Total 4,665 3,195

Additional compliance information in accordance with Appendix 9C of the Listing Requirements of Bursa

Malaysia Securities Berhad.

Utilisation of Proceeds Raised from Corporate

Proposals

There were no proceeds raised from corporate

proposals during the financial year.

Share Buy-back

There was no proposal by the Company to carry out a

share buy-back during the financial year.

Options, Warrants or Convertible Securities

The Company did not issue any warrants or convertible

securities during the financial year.

American Depository Receipt (“ADR”) or

Global Depository Receipt (“GDR”)

Programme

The Company did not sponsor any ADR or GDR

Programme during the financial year.

156

Imposition of Sanctions / Penalties

There were no public sanctions and / or penalties

imposed on the Company and its subsidiaries,

Directors or Management by relevant regulatory

bodies during the financial year.

Variation in Results

There were no profit estimations, forecasts or

projections made or released by the Company during

the financial year.

Profit Guarantee

There was no profit guarantee for the financial year.

Material Contracts

There was no material contract entered into by the

PROTON Group involving the interest of Directors and

major shareholders, either still subsisting at the end

of the financial year ended 31 March 2009 or entered

into since the end of the previous financial year.


Revaluation Policy on Landed Properties

The Significant accounting policies on property, plant

and equipment are disclosed in Note 3(e) of the

Summary of Significant Accounting Policies.

Recurrent Related Party Transactions

On 8 June 2007, PROTON obtained exemption from

Bursa Malaysia Securities Berhad (“Bursa”) from

disclosing Recurrent Related Party Transactions with

Khazanah Nasional Berhad’s investee companies. As

a result, PROTON is not required to seek shareholders’

mandate for such transactions at the forthcoming

Annual General Meeting of the Company.

Further, Bursa had on 14 December 2006 amended

the Listing Requirements pertaining to related party

transactions whereby the threshold for a major

shareholder was increased from 5% to 10% of the

aggregate nominal amount of voting shares in a

company, provided that the said shareholder is not

the largest shareholder of the company.

Additional Compliance Information

The Employees Provident Fund Board (“EPF”) which

currently holds approximately 15.896% of the issued

and paid up capital of PROTON is not deemed a

related party by virtue of the fact that EPF and / or

person(s) connected with EPF:

a. is / are not the largest shareholder of the

Company

b. is / are not a party to any transaction, initiator,

agent or involved in any manner in any

transaction with the PROTON Group; and

c. does not have any representative in an executive

capacity on the Board of Directors of PROTON or

any of the subsidiaries.

The third largest major shareholder, Petroliam

Nasional Berhad, holds 7.851% equity interest in

PROTON.

PROTON 2009 ANNUAL REPORT

157


Additional Compliance Information

Below is a list of Recurrent Related Party Transactions entered during the period for the financial year ended

31 March 2009.

Transacting Related Party Nature of Transaction Company within Actual

the PROTON Group 01/04/08 -

31/03/09

1 Lub Dagangan Sdn Bhd Purchase of lubricants PONSB 2,709,289

2 Petronas Dagangan Sdn Bhd Purchase of lubricants PONSB 3,794,840

3 Petronas Dagangan Sdn Bhd Purchase of lubricants PESB 10,995,796

4 EON Sale of goods PESB 1,868,300,918

5 EON Sale of goods PPCSB 113,925,867

6 Johnson Controls Auto Holding Purchase of goods PPCSB 496,344

7 Johnson Controls Auto Seating Purchase of goods PONSB 96,628,802

8 Johnson Controls Auto Interior Purchase of goods PONSB 4,808,244

9 PPCSB Purchase of goods PONSB 2,454,309

10 PPCSB Sale of goods PONSB 25,558,760

11 PPCSB Purchase of parts PESB 87,132,079

12 PPCSB Sale of goods PCUK 7,021

13 PPCSB Purchase of parts PCUK 3,180,114

14 PPCSB Purchase of parts PCA 2,862,809

15 PPCSB Purchase of parts PSPL 603,777

158


Additional Compliance Information

Transacting Related Party Nature of Transaction Company within Actual

the PROTON Group 01/04/08 -

31/03/09

16 PPCSB Purchase of parts PEI 1,946,237

17 Hicom Teck See Purchase of parts PONSB 201,301,804

18 Hicom Teck See Purchase of parts PPCSB 3,087,740

19 Tenaga Nasional Berhad Sale of goods PESB 869,236

20 Oriental Summit Industries Purchase of parts PONSB 63,304,332

21 Oriental Summit Industries Purchase of parts PPCSB 1,463,932

22 PHN Industry Sdn Bhd Purchase of goods PONSB 123,622,655

Definition:

PONSB Perusahaan Otomobil Nasional Sdn Bhd

PESB Proton Edar Sdn Bhd

PPCSB Proton Parts Centre Sdn Bhd

PCUKL Proton Cars (UK) Ltd

PCA Proton Cars Australia Pty Limited

P’Spore Proton Singapore Pte Ltd

PROTON 2009 ANNUAL REPORT

159


Statement on Internal Control

The Malaysian Code on Corporate Governance requires listed

companies to maintain a sound system of internal control

to safeguard shareholders’ investments and the Group’s

assets. Directors of listed companies are required to make

disclosures in their annual reports on the state of internal

control in accordance with the Listing Requirements of

Bursa Malaysia Securities Berhad (“Bursa Malaysia”). Bursa

Malaysia’s Statement on Internal Control: Guidance for

Directors of Public Listed Companies (“Guidance”) provides

guidance for compliance with these requirements. The

Board’s Internal Control Statement, which has been prepared

in accordance with the Guidance, is set out below.

160

Board Responsibility

The Board of Directors (Board) recognises the importance of sound internal controls

and risk management practices to good corporate governance. The Board has an overall

responsibility for the Group’s system of internal controls and its effectiveness, as well as

reviewing its adequacy and integrity. The Group’s system of internal controls is designed

to manage the principal business risks that may impede the Group from achieving its

business objectives. The system, by its nature, can only provide reasonable but not absolute

assurance against any material misstatement or loss occurrence.


Risk Management

Risk management is regarded by the Board to be an integral part of the Group’s operations

with the objective of maintaining a sound internal control system and ensuring its continuing

adequacy and integrity. A formal risk management framework and policy was approved

by the Board for the Group to identify, assess, treat, report and monitor, key risks faced

by the Group. The effectiveness of the risk mitigation actions are reviewed quarterly by

the Group Risk Management Committee (GRMC) and Board Risk Management Committee

(BRMC) respectively.

The Group Risk Management Unit (GRMU) is entrusted with the responsibility of ensuring

that an appropriate risk management framework exists within the Group and is effectively

implemented to manage the key risks of the organisation on an on-going basis.

The GRMC, which comprises Senior Management, is responsible for overseeing risk

management implementation, regular updating of the Group’s risk profiles and improving

the implementation of methodology for risk management. The Committee deliberates and

determines the Group’s major risks to be escalated to the attention of the BRMC.

PROTON 2009 ANNUAL REPORT

161


Statement on Internal Control

162

The BRMC was established to deliberate major risks highlighted by the management and

assist the Board in reviewing Group’s risk policies and strategies.

For the financial year ended 31 March 2009, the GRMC and BRMC have held quarterly

meetings in accordance with their respective terms of reference.

Assurance Mechanism

Apart from risk management activities, the Board and Management have established

other processes for identifying, evaluating and managing significant risks faced by the

Group. They continue to strive in enhancing and implementing the internal control system

to manage those risks that could affect the Group’s growth and financial viability. These

processes include updating the system of internal controls when there are changes to the

business environment or regulatory guidelines. The key elements of the Group’s control

environment include:

Board Committees

Board Committees were established by the Board to assist the Board in the execution of

its responsibilities to provide oversight on the effectiveness of the Group’s operations.

The responsibilities and authority of the Committees are governed by specific terms of

reference and these Committees are accountable to the Board.

The Board Committees are:

• Audit Committee

• Nomination and Remuneration Committee

• Risk Management Committee (“BRMC”)

• Disciplinary Committee

• PROTON Board Executive Committee (“EXCO”)

The details of the abovementioned Board Committees are set out in the Statement of

Corporate Governance.

Board Audit Committee

The Board has delegated the duty of reviewing and monitoring the effectiveness of the

Group’s system of internal controls to the Board Audit Committee (BAC).


Statement on Internal Control

The BAC assumes the overall duties of reviewing with the external auditors their audit

plan, audit report, as well as their findings and recommendations on internal controls

highlighted annually in the Internal Control Memorandum. Throughout the financial year,

the BAC was updated on the developments of Malaysian Financial Reporting Standards, as

well as legal and regulatory requirements. It also reviews the effectiveness of the internal

audit function with particular emphasis on the scope and quality of audits, resources as

well as the independence of the Group Internal Audit Division (GIAD).

The BAC continues to meet regularly and has full and unimpeded access to the internal and

external auditors and all employees of the Group.

Further information relating to the activities of the BAC is set out in the Statement of

Corporate Governance.

Organisation Structure and Management Committees

An organisation structure, which is aligned to the business and operational requirements

and led by Heads of Division with clearly defined lines of responsibility, accountability and

levels of authority, is in place to assist in implementing the Group’s strategies and day-today

business activities.

Various functional committees were set up at the Management level to ensure the Group’s

actions and operations are properly aligned towards achieving the organisation’s goals and

objectives.

Group Internal Audit Division (GIAD)

GIAD continues to independently monitor compliance with internal policies and procedures,

effectiveness of the internal control systems and highlights significant findings for corrective

actions by line management and reports directly to the BAC.

The annual audit plan which covers PROTON and its subsidiary companies and which was

established primarily on a risk-based approach, is reviewed and approved by the BAC

annually. A quarterly work status update is given by the GIAD to the BAC. GIAD regularly

reviews the approved annual audit plan to ensure significant risk areas are given adequate

audit focus.

PROTON 2009 ANNUAL REPORT

163


Statement on Internal Control

164

The interests of PROTON in associated companies and jointly controlled entities are primarily

served through representation on the board of directors of the respective companies.

Internal controls of associated companies and jointly controlled entities are reviewed upon

any ad-hoc request by the BAC.

On a quarterly basis, GIAD updates the BAC on the status of corrective actions taken by

line management arising from the audit findings highlighted by both GIAD and the

external auditors.

Further information relating to the activities of GIAD is set out in the Statement of Corporate

Governance.

Other Key Elements of Internal Control

The other key elements of the Group’s internal control systems are described below:-

• Defined delegation of responsibilities to committees and management of head

office and operating units, including authorisation levels for various aspects of the

business, which are set out in the Limits of Authority;

• Documented internal policies and procedures as set out in the Group Policies and

Procedures and ISO 9001:2000 certification of the Quality System Procedures for

PROTON and major subsidiaries within the Group;

• Quarterly financial statements and the Group’s performance are deliberated by the

BAC, which subsequently presents them to the Board for their review, consideration

and approval;

• Management Committee meetings are held on a regular basis to identify, discuss and

resolve operational, financial and key management issues;

• A comprehensive budgeting process where the annual budgets are approved by the

Board;

• The Board receives and reviews monthly reports from Management on key strategic

and operational issues and provides direction to Management;


• Regular visits to operating units by Senior Management;

Statement on Internal Control

• Various improvement programmes were established in PROTON and its subsidiaries to

enhance its business operations;

• Continuous training efforts to enhance the leadership quality and competency of the

workforce;

• Regular employee perception surveys were conducted to obtain feedback from

employees to promote continuous improvements; and

• Formal employee appraisal system for effective coaching and evaluation of employee

performance using established Key Performance Indicators (KPIs).

For the financial year under review, after due and careful inquiry and based on the

information and assurance provided, the Board was satisfied that the key elements of

internal controls are in place. Nevertheless, identified areas of concern are being accorded

closer attention and more regular monitoring to ensure key internal controls are adequate

and effective to continually safeguard shareholders’ investment and the Group’s assets.

PROTON 2009 ANNUAL REPORT

165


Risk Management

Embracing Challenges

PROTON is exposed to a multitude of risks, either residual or inherent in

the course of its daily operations. Ensuring that these risks are effectively

managed and capitalised is imperative in order to ensure maximisation

of shareholders value.

166

Overview

The Group recognises the importance of a sound risk management system throughout the

organsation to provide reasonable assurance to the shareholders that the risks the Group

is exposed to be are being effectively managed, controlled and capitalised. PROTON’s

risk management framework, formulated in 2003, ensures a consistent application of risk

management across the Group, through a standardised risk registration and reporting

system. Through this effort, Management and the Board are able to deliberate risk issues

on a uniformed and scheduled basis.

Risk Management Framework

PROTON’s risk management framework was implemented to provide a complete cycle of

managing risks. It consists of Risk Policy and Strategy, Risk Governance and Structure, Risk

Measurement and Risk Operations and Systems.

Risk Policy and Strategy

The PROTON Risk Management policy was revised in 2007 to act as a guiding mechanism

in implementing a standardised and robust risk management practice throughout the

organisation. Effective management and monitoring systems are combined into uniform

risk management programmes, to meet the best practice requirements and for business

value enhancement.

With the use of the risk management requirement and business concerns, risks involving

the various divisions were identified. The risks registered were further prioritised into

Corporate Risk Profile and Major risk profile. This prioritisation will ensure that efforts are

focused on high concern areas on an informed basis.


Risk Governance and Structure

Board of Directors

Board Risk Management

Committee (BRMC)

Group Risk Management

Committee (GRMC)

Group Risk Management

Units (GRMU)

Risk Champions of Business

Units

Risk Management Units of

Subsidaries

Annual Review and Approval of Risk Management Policy

Advises the BOD on significant changes to the Risk Management

Policy.

Identifies and evaluates principal risks and assesses the practicality of

the proposed risk mitigation actions.

Serves as the secretariat to GRMC & assist GRMC in ensuring effective

implementation of Risk Management Framework in the PROTON

Group.

Responsible for ensuring that risk assessments are conducted in

relations to their business units’ activities.

Prepares risk reports regularly.

PROTON 2009 ANNUAL REPORT

167


Risk Management

Board Risk Management Committee (BRMC)

The Board Risk Management Committee (BRMC) was

established to give assurance that an appropriate risk

management policy is in place. The BRMC provides

overall risk strategy and clear direction to the Group

Risk Management Committee (GRMC) and Group

Risk Management Unit (GRMU) in implementing the

risk management policy.

The BRMC presided four (4) times within the period

under review.

Group Risk Management Committee (GRMC)

The Group Risk Management Committee (GRMC)

comprising Senior Management was set up to discuss

risks that could have significant impact on the Group’s

strategic business and operating objectives and

to ensure that these risks are effectively managed.

The GRMC assesses the practicality of the mitigation

action and escalates risks that require the Board’s

attention to the BRMC on a quarterly basis.

Group Risk Management Unit (GRMU)

The Group Risk Management unit (GRMU) provides

specialised resources for developing risk framework,

policies, methodologies, tools and appropriate

training for Management to ensure that risk

management processes are carried out effectively and

consistently throughout the Group. Every quarter,

the GRMU will collate group-wide risk mitigation

updates and escalate the reports to the GRMC and

BRMC respectively.

Risk Champions / Risk Management Unit

The business and operations units form the first line

of defense in managing risks. They are responsible

for describing their principal risks and identifying

possible mitigations to address these risks. The risk

champions, via their risk team members, ensure that

risks are continually assessed and monitored.

168

Risk Measurement, Operations and System

Effective risk management is performed through

formalised and centralised operations and system.

The year in review saw major enhancements in the

risk registration format, whereby items such as Key

Risk Indicators and Risk Appetite were incorporated.

This is to cultivate more proactive risk detection within

the Group and promote uniformity in identifying,

rating and monitoring all types of risks.

Major Initiatives

Risk Assessments for Business Planning

This year in review, risk assessments were performed

in conjunction with the yearly business planning. All

divisions within the Group, including subsidiaries,

have submitted their risk registrations during this

exercise. The risks collated were then prioritised into

three risk profiles, Corporate Risk Profiles (CRP), Major

Risk Profiles (MRP) and Business Units Risk Profiles

(BRP). CRP and MRP were tracked and monitored in

the GRMC and BRMC meetings.

Risk Assessment for New Product Introduction

During the year under review, risk assessments were

done for the introduction of two new models. Risks

related to costs, market and product acceptance were

identified and mitigations were monitored.

Risk Awareness and Profiling Sessions

The year in review saw several risk awareness sessions

conducted. The objective of these sessions is to further

inculcate the risk management culture within the

Group. It also provides opportunities for GRMU and

the risk owners to ensure that the risk registration is

aligned with the overall business objectives.

Risk Factors

Country Risk

PROTON conducts its businesses across regions. For

this reason, it is exposed to risks related to pandemic,


war, terrorism, politics, natural disasters and other

events that are beyond its control. This may disrupt

and delay PROTON’s local supply and operations and

consequently impact the Group’s ultimate objective.

Risk assessments were carried out in tandem with

country risks and were monitored regularly.

Regulatory and Intellectual Property

Policies regarding vehicle emission, the environment

and fuel economy are extensive and subject to

frequent changes and scrutiny. Complying with

this regulation requires extensive cost and effort.

Therefore, in order to proactively anticipate any

changes in regulatory requirements, domestic and

abroad, the Group monitors this development to

anticipate foreseeable requirements for future

product development.

As the Group progresses towards international

exposure, the Group is faced with many risks relating

to disclosure of intellectual property especially in

connection to licensing of IPR in strategic projects.

Appropriate measures are currently being taken

in managing all aspects of IPR by establishing an

IPR policy and issuing manuals for identification,

protection and commercialisation of IPR. This effort

will significantly bring maximum benefit to the

organisation by return on investments and profits in

Risk Management

the form of payment for licensing and royalties

and at the same time the IPR’s are duly protected.

Credit Risk

Credit risk is inherent in any business, resulting from

default payment by customers and related parties.

Management of this risk is mainly undertaken by

the Finance Division via credit policy, export credit

insurance and interest charges.

Market Risk

The third quarter of the year witnessed a global

financial crisis, which threatened the performance

of the automotive industry. With the world

economy becoming substantially less dynamic,

the domestic and overseas automotive markets

have slid even lower. Credit crunch has resulted

in financial institutions being more stringent with

loan approvals, which consequently affected car

sales. Dwindling price gaps between competitors

and PROTON has caused intense struggle in the

industry. FOREX volatility, increase in raw material

prices and customer’s uncertainty all added to the

considerable economic risks which the Group has

faced in the year under review. Measures, such as

extensive hedging activities and active marketing

initiatives were taken to minimise the impact of

these risks.

Conclusion

Providing assurance that the risks are effectively managed requires effort and commitment

from all divisions. Risk management awareness will continue to be given top priority to

provide reasonable assurance to the shareholders that risks are effectively managed within

the Group. With support and direction from the BRMC, risk management function will

continue to move forward in enhancing the appreciation of risk management and strive

for a stronger and more resilient risk management culture in the Company.

PROTON 2009 ANNUAL REPORT

169


Bright Outlook


Bright Outlook

Despite challenges, there

are highlights to keep

PROTON moving towards

its vision of being a

leading national and

regional automaker.

Innovation in Motion


Calendar of Events

Aug 2008 Former Prime Minister, Tun Abdullah Haji

Ahmad Badawi officiates the launch of the three millionth

car during PROTON Technology Week 2008.

Aug 2008 PROTON’s 5 th Annual General Meeting.

Aug 2008 Team PROTON R3 is launched for participation

in the Merdeka Millennium 12 hours endurance race I (MME)

with Satria Neo and Waja in Class B (1601 cc and 1900 cc) and

Gen.2 in Class C (below 1600 cc).

172

Aug 2008 PROTON Technology Week saw more than

60,000 visitors visiting our facilities to understand PROTON’s

capabilities in automotive technology, innovation and R&D.

Aug 2008 Visit by H E Dr Mahmoud Mohieddin, Minister

of Investment, Egypt, with 15-member delegation.

Aug 2008 Staff and their families visit Rumah Anak-Anak

Yatim Darul Aitam Temoh, Perak, one of PROTON’s adopted

orphanages.


Aug 2008 PROTON gives away bicycles to deserving

students in Program Pintar.

Sept 2008 PROTON launches the Workplace and Road

Safety & Health Campaign in conjunction with the festive

season holidays.

Oct 2008 More than nine months after its launch, the

Saga wins the Autocar Asean Award 2008.

Sept 2008 Buka Puasa with staff and children from local

orphanages is a yearly activity during the month of

Ramadhan.

Oct 2008 PROTON presents the Saga Taxi, with the new

vibrant red body and yellow top. Public Cab Sdn Bhd, KCM

Fleet Sdn Bhd, Avenue Drive (M) Sdn Bhd and Perniagaan

Lima Sejati Sdn Bhd were the first to take delivery.

Oct 2008 PROTON participates in the 5 th China-ASEAN

Expo organised by MATRADE.

PROTON 2009 ANNUAL REPORT

173


Calendar of Events

Nov 2008 The 2 nd International Trade Malaysia 2008

Exhibition (INTRADE Malaysia 2008) held at PWTC.

Nov 2008 The Saga is awarded Car of the Year 2008

(Entry Level) by NST.

Nov 2008 Yayasan PROTON and young scholars at the

certificate Presentation Ceremony.

174

Nov 2008 PROTON strengthens its Middle Eastern

presence with simultaneous launchings of the Persona

first in Riyadh, Saudi Arabia, then in Cairo, Egypt, and later

Oman, Qatar, Bahrain and Syria.

Nov 2008 PROTON Managing Director is named

“Automotive Man of the Year” at the Car of the Year

Awards by NST.

Dec 2008 Persona wins 1 st place as the Most Fuel Efficient

Family Car at the Asian Auto-Bosch Fuel Efficiency Awards

2008.


Dec 2008 BWF Super Series Masters Final 2008 in Kota

Kinabalu, Sabah.

Jan 2009 The official unveiling of the Satria Neo Super

2000 at the Autosport Show UK 2009, for participation in

the intercontinental rally in Belgium.

Dec 2008 PROTON signs an agreement with Zagross

Khodro for the supply of automotive parts to Iran.

Jan 2009 PROTON sponsors the PROTON Malaysia Open

2009 Badminton Tournament.

Feb 2009 Media preview of the refreshed Satrio Neo CPS. Feb 2009 PROTON Chairman and Managing Director at

the event to announce ‘Exora’ as the name for Malaysia’s first

home-grown MPV.

PROTON 2009 ANNUAL REPORT

175


Calendar of Events

Mar 2009 The PROTON Showcase at the UMNO General

Assembly Expo attracts many visitors.

Apr 2009 Prime Minister YAB Dato’ Sri Mohd Najib Bin

Tun Abdul Razak officially launches the much-anticipated

Exora.

May 2009 A new Master Dealership Agreement is signed

by PROTON Edar Sdn Bhd and Edaran Otomobil Nasional

Berhad.

176

Mar 2009 Detroit Electric Holdings Ltd and Perusahaan

Otomobil Nasional Sdn Bhd agree to collaborate.

Apr 2009 The Exora is delivered to the first ten customers.

May 2009 PROTON once again takes home the Gold

Award in Reader’s Digest Trusted Brand Awards.


May 2009 Dato’ Mustapa Bin Mohamed, Minister of

International Trade and Industry, visits the Shah Alam plant

with a 12-member delegation.

Jun 2009 Deputy Prime Minister, YAB Tan Sri Dato’ Haji

Muhyiddin Bin Mohd Yassin visiting the PROTON booth at

the 12 th annual SMIDEX Exhibition.

Jun 2009 PROTON together with Badminton Association

of Malaysia flags off a convoy in conjunction with Malaysia’s

participation in the Singapore Open Super Series 2009.

May 2009 The 18 th Malaysian Skills (Automobile Sector)

Competition is organised for the 7 th year, along with the 3 rd

PROTON Competition.

Jun 2009 PROTON R3 Racing Team finishes 2 nd in class

2 and 5 th overall in the inaugural Sepang 1000KM Race.

July 2009 Director of Export Markets Division speaks at

PROTON’s International Distributor Conference in Phuket.

PROTON 2009 ANNUAL REPORT

177


Moving Ahead


Moving Ahead

Being committed to

meticulous care and

bringing value to

shareholders will propel

PROTON forward.

Innovation in Motion


Statutory Financial Statements

Contents

180

181 Directors’ Report

185 Income Statements

186 Balance Sheets

188 Consolidated Statement of Changes in Equity

189 Company Statement of Changes in Equity

190 Cash Flow Statements

193 Notes to the Financial Statements

280 Statement by Directors

280 Statutory Declaration

281 Independent Auditors Report


DIRECTORS’ REPORT

The Directors hereby submit their report together with the audited financial statements of the Group and

Company for the financial year ended 31 March 2009.

PRINCIPAL ACTIVITIES

The Company is principally involved in investment holding activities.

The principal activities of the subsidiary companies, associated companies and jointly controlled entities

are set out in Notes 17 to 19 of the financial statements. There have been no significant changes in the

activities of the Group and Company during the financial year.

FINANCIAL RESULTS

Group Company

RM’000 RM’000

Net (loss)/profit for the financial year (301,806) 367,170

DIVIDENDS

Dividends on ordinary shares paid or declared by the Company since 31 March 2008 are as follows:

In respect of the financial year ended 31 March 2009:

Interim dividend of 5 sen per share less tax at 25%,

paid on 14 January 2009 20,595

PROTON 2009 ANNUAL REPORT

RM’000

The Directors do not recommend the payment of a final dividend for the financial year ended 31 March 2009.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves and provisions during the financial year except as

disclosed in the financial statements.

181


DIRECTORS’ REPORT (CONTINUED)

DIRECTORS

The Directors who have held office during the period since the date of the last report are:

Dato’ Mohd Nadzmi bin Mohd Salleh (appointed on 1.01.2009)

Dato’ Syed Zainal Abidin B Syed Mohamed Tahir

Haji Abdul Jabbar bin Abdul Majid

Haji Abdul Kadir bin Md Kassim

Dato’ Lim Heen Peok

Datuk Zalekha binti Hassan

Encik Oh Kim Sun (appointed on 13.05.2009)

Dato’ Mohammed Azlan bin Hashim (resigned on 1.01.2009)

In accordance with Article 104 of the Company’s Articles of Association, Haji Abdul Kadir bin Md Kassim

and Dato’ Lim Heen Peok retire at the forthcoming Annual General Meeting and, being eligible, offer

themselves for re-election.

Haji Abdul Jabbar bin Abdul Majid who is retiring in accordance with Article 104 of the Company’s Articles

of Association at the forthcoming Annual General Meeting does not wish to seek re-election as a Director

of the Company. Accordingly, he will retire at the conclusion of the Annual General Meeting of the

Company.

In accordance with Article 111 of the Company’s Articles of Association, Dato’ Mohd Nadzmi bin Mohd

Salleh and Encik Oh Kim Sun retire at the forthcoming Annual General Meeting and, being eligible, offer

themselves for re-election.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party,

being arrangements with the object or objects of enabling Directors of the Company to acquire benefits

by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a

benefit (other than benefits disclosed as Directors’ remuneration in Note 8 to the financial statements)

by reason of a contract made by the Company or a related corporation with the Director or with a firm

of which the Director is a member, or with a company in which the Director has a substantial financial

interest.

DIRECTORS’ INTEREST IN SHARES AND DEBENTURES

According to the register of Directors’ shareholdings, no Director in office at the end of the financial year

held any interest in shares or debentures in the Company or its related corporations.

182


DIRECTORS’ REPORT (CONTINUED)

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets of the Group and Company 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 allowance for doubtful debts and satisfied themselves that all known bad debts had been

written off and that adequate allowance had been made for doubtful debts; and

(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course

of business their values as shown in the accounting records of the Group and Company had been

written down to an amount which they might be expected so to realise.

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

(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful

debts in the financial 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

Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the

Group and Company misleading or inappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of

twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially

affect the ability of the Group and Company to meet their obligations when they fall due.

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

(a) any charge on the assets of the Group or the Company which has arisen since the end of the financial year

which secures the liability of any other person; or

(b) any contingent liability of the Group or the Company which has arisen since the end of the financial

year.

PROTON 2009 ANNUAL REPORT

183


DIRECTORS’ REPORT (CONTINUED)

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONTINUED)

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in

this report or the financial statements 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 Company’s operations during the financial year were not substantially

affected by any item, transaction or event of a material and unusual nature except as disclosed in Notes

5 and 13 to the financial statements; and

(b) there has not arisen in the interval between the end of the financial year and the date of this report

any item, transaction or event of a material and unusual nature likely to affect substantially the results of

the operations of the Group or the Company for the financial year in which this report is made.

AUDITORS

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors in accordance with their resolution dated 22 July 2009.

DATO’ MOHD NADZMI BIN MOHD SALLEH DATO’ SYED ZAINAL ABIDIN B SYED

CHAIRMAN MOHAMED TAHIR

MANAGING DIRECTOR

184


INCOME STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009

Revenue 6 6,486,570 5,621,594 362,357 41,203

Cost of sales 7 (6,075,913) (5,056,854) - -

Gross profit 410,657 564,740 362,357 41,203

Other operating income

- Research and development grant 80,656 193,782 - -

- Others 197,895 134,889 7,321 302

Distribution costs (187,668) (201,095) - -

Administrative expenses (515,270) (504,184) (1,329) (607)

Other operating expenses

Group Company

2009 2008 2009 2008

Note RM’000 RM’000 RM’000 RM’000

- Impairment of property, plant

and equipment and capitalised

development cost 13 (278,476) - - -

- Others (47,401) (46,851) - -

(Loss)/profit before finance cost 7 (339,607) 141,281 368,349 40,898

Finance cost

Share of results of associated

9 (14,408) (17,936) - -

companies

Share of results of jointly

18 20,220 13,134 - -

controlled entities 19 14,594 7,837 - -

(Loss)/profit before taxation (319,201) 144,316 368,349 40,898

Taxation 10 17,395 40,235 (1,179) (10,517)

(Loss)/profit for the financial year (301,806) 184,551 367,170 30,381

Attributable to:

Equity holders of the Company (301,806) 184,551 367,170 30,381

(Loss)/earnings per share (sen)

- basic 11 (55) 34

- diluted 11 (55) 34

The notes on pages 193 to 279 form part of these financial statements.

PROTON 2009 ANNUAL REPORT

185


BALANCE SHEETS

AS AT 31 MARCH 2009

NON-CURRENT ASSETS

186

Group Company

2009 2008 2009 2008

Note RM’000 RM’000 RM’000 RM’000

Property, plant and equipment 13 2,827,111 3,150,446 - -

Prepaid land lease payments 14 - 24,031 - -

Goodwill 15 29,008 29,008 - -

Intangible assets 16 431,668 275,192 - -

Subsidiary companies 17 - - 1,708,651 1,708,651

Associated companies 18 158,367 165,443 13,600 13,600

Jointly controlled entities

Amounts due from subsidiary

19 195,622 192,747 - -

companies 20 - - 177,870 -

Investments 21 10,397 10,397 6,475 6,475

Deferred tax assets 22 5,727 - - -

Total Non-Current Assets 3,657,900 3,847,264 1,906,596 1,728,726

CURRENT ASSETS

Inventories 23 1,395,081 1,100,286 - -

Trade and other receivables

Amounts due from subsidiary

24 890,095 969,344 145 14

companies

Amounts due from associated

20 - - 58,912 66,219

companies

Amounts due from jointly

25 18,284 10,713 - -

controlled entities 26 11,353 4,430 - -

Tax recoverable 10 160,610 114,479 77 273

Current investments 27 15,313 20,822 - -

Dividends receivable

Deposits, bank and

- - - 14,800

cash balances 28 913,850 1,226,010 209,423 26,296

Total Current Assets 3,404,586 3,446,084 268,557 107,602

Non-current assets held for sale 29 36,412 - - -

TOTAL ASSETS 7,098,898 7,293,348 2,175,153 1,836,328


BALANCE SHEETS

AS AT 31 MARCH 2009 (CONTINUED)

EQUITY AND LIABILITIES

Group Company

2009 2008 2009 2008

Note RM’000 RM’000 RM’000 RM’000

Share capital 30 549,213 549,213 549,213 549,213

Reserves 31 4,552,327 4,872,043 1,625,179 1,278,604

Equity attributable to equity

holders of the Company 5,101,540 5,421,256 2,174,392 1,827,817

TOTAL EQUITY 5,101,540 5,421,256 2,174,392 1,827,817

NON-CURRENT LIABILITIES

Long term liabilities 32 101,516 230,473 - -

Deferred tax liabilities 22 12,243 2,439 - -

Total Non-Current Liabilities 113,759 232,912 - -

CURRENT LIABILITIES

Trade and other payables 33 1,277,658 1,235,520 482 575

Provisions 34 189,779 186,556 - -

Amounts due to subsidiary

companies 35 - - - 7,936

Amounts due to associated

companies 36 88,606 84,984 - -

Amounts due to jointly

controlled entities 37 15,195 16,958 - -

Taxation 6,322 1,556 279 -

Short term borrowings 38 306,039 113,606 - -

Total Current Liabilities 1,883,599 1,639,180 761 8,511

TOTAL LIABILITIES 1,997,358 1,872,092 761 8,511

TOTAL EQUITY AND LIABILITIES 7,098,898 7,293,348 2,175,153 1,836,328

Net assets per share attributable

to equity holders of the Company (RM) 9.29 9.87

The notes on pages 193 to 279 form part of these financial statements.

PROTON 2009 ANNUAL REPORT

187


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009

188

Attributable to equity holders of the Company

Asset Foreign

Share Capital revaluation exchange Retained

capital reserve reserve reserve earnings Total

Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2008 549,213 475,617 2,362 (82,197) 4,476,261 5,421,256

Net income recognised

directly in equity

- Foreign exchange

differences on translation

of foreign operations - - - 2,685 - 2,685

Loss for the financial year - - - - (301,806) (301,806)

Total recognised income

and expense for the

financial year - - - 2,685 (301,806) (299,121)

Interim dividend for

the financial year ended

31 March 2009 12 - - - - (20,595) (20,595)

At 31 March 2009 549,213 475,617 2,362 (79,512) 4,153,860 5,101,540

At 1 April 2007 549,213 475,617 - (85,952) 4,291,710 5,230,588

Net income recognised

directly in equity

- Foreign exchange

differences on translation

of foreign operations - - - 3,755 - 3,755

Arising from business

combination - - 2,362 - - 2,362

Profit for the financial year - - - - 184,551 184,551

Total recognised income

and expense for the

financial year - - 2,362 3,755 184,551 190,668

At 31 March 2008 549,213 475,617 2,362 (82,197) 4,476,261 5,421,256

The notes on pages 193 to 279 form part of these financial statements.


COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009

Issued and fully

paid ordinary shares

Nominal

Distributable

Number value of Retained

of shares RM1 each earnings Total

Note ‘000 RM’000 RM’000 RM’000

At 1 April 2008 549,213 549,213 1,278,604 1,827,817

Profit for the financial year - - 367,170 367,170

Interim dividend for the financial

year ended 31 March 2009 12 - - (20,595) (20,595)

At 31 March 2009 549,213 549,213 1,625,179 2,174,392

At 1 April 2007 549,213 549,213 1,248,223 1,797,436

Profit for the financial year - - 30,381 30,381

At 31 March 2008 549,213 549,213 1,278,604 1,827,817

The notes on pages 193 to 279 form part of these financial statements.

PROTON 2009 ANNUAL REPORT

189


CASH FLOW STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009

CASH FLOWS FROM OPERATING ACTIVITIES

190

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

(Loss)/profit for the financial year (301,806) 184,551 367,170 30,381

Adjustments for:

Taxation (17,395) (40,235) 1,179 10,517

Property, plant and equipment:

- depreciation 450,346 382,556 - -

- written off 38,746 18,557 - -

- impairment 257,674 - - -

- reversal of impairment (1,616) (800) - -

- loss/(gain) on disposal 19,417 (12,546) - -

Prepaid land lease payments:

- amortisation - 89 - -

- gain on disposal - (990) - -

Impairment of goodwill - 6,741 - -

Write down/(write back) of inventories 114,950 (25,053) - -

Impairment of investment in an

associated company 6,678 4,200 - -

Intangible assets:

- amortisation 48,493 34,817 - -

- impairment 20,802 - - -

Interest expense 14,408 17,936 - -

Interest income (42,089) (32,143) (4,618) (301)

Share of results of associated companies (20,220) (13,134) - -

Share of results of jointly

controlled entities (14,594) (7,837) - -

Current investments:

- loss/(gain) on disposal 44 (1,678) - -

- write down in market value 1,084 - - -

Reversal of allowance for doubtful debts (63,315) (19,708) - -

Allowance for doubtful debts 45,616 7,737 - -

Gain on unrealised foreign exchange (8,284) (10,230) - -

Operating profit before working

capital changes (carried forward) 548,939 492,830 363,731 40,597


CASH FLOW STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009 (CONTINUED)

CASH FLOWS FROM OPERATING

ACTIVITIES (CONTINUED)

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

Operating profit before working

capital changes (brought forward) 548,939 492,830 363,731 40,597

Provision for warranties 62,862 45,526 - -

Provision for onerous contract 4,426 - - -

Research and development grant (80,656) (193,782) - -

(Reversal)/provision for retirement benefits (8,042) 14,616 - -

Amortisation of capital grant (21,646) - - -

Dividend income (1,260) (2,896) (362,357) (41,203)

Operating profit/(loss) before working

capital changes 504,623 356,294 1,374 (606)

Changes in working capital:

Inventories (445,982) 217,044 - -

Receivables

- trade and other receivables 161,578 73,075 (131) (9)

- subsidiary companies - - 7,307 -

- associated companies and

jointly controlled entities (14,688) 19,789 - -

Payables

- trade and other payables 108,309 196,067 (93) (215)

- provisions (102,257) (99,301) - -

- subsidiary companies - - (7,936) 288

- associated companies and

jointly controlled entities 6,606 (22,793) - -

Cash generated from/(used in) operations 218,189 740,175 521 (542)

Tax paid (31,550) (8,571) (704) -

Tax refund 9,717 108,955 - -

Interest received 47,047 32,143 4,618 301

Interest paid (12,394) (17,936) - -

Retirement benefits paid (9,369) (11,155) - -

Net cash flow generated from/

(used in) operating activities 221,640 843,611 4,435 (241)

PROTON 2009 ANNUAL REPORT

191


CASH FLOW STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009 (CONTINUED)

CASH FLOWS FROM

INVESTING ACTIVITIES

192

Group Company

2009 2008 2009 2008

Note RM’000 RM’000 RM’000 RM’000

Purchase of property, plant

and equipment (462,781) (391,997) - -

Proceeds from acquisition of

a subsidiary company 17(a) 3,998 - - -

Additional investment in

a subsidiary company 17(b) - (32,616) - -

Purchase of intangible assets (237,632) (141,217) - -

Purchase of current investments (58) - - -

Proceeds from disposal of

current investments 4,439 54,304 - -

Proceeds from disposal of property,

plant and equipment 29,073 50,722 - -

Proceeds from disposal of prepaid

land lease payments - 1,304 - -

Dividends received 20,590 25,698 377,157 15,927

Net cash flow (used in)/generated

from investing activities (642,371) (433,802) 377,157 15,927

CASH FLOWS FROM

FINANCING ACTIVITIES

Dividend paid 12 (20,595) - (20,595) -

Proceeds from borrowings 356,506 421,598 - -

Advances to a subsidiary company - - (177,870) -

Lease and hire purchase creditors

installments paid (890) (1,293) - -

Repayment of borrowings (195,421) (132,080) - -

Release of restricted ADF 31,557 6,260 - -

Net cash flows generated from/

(used in) financing activities 171,157 294,485 (198,465) -

NET (DECREASE)/INCREASE IN

CASH AND CASH EQUIVALENTS (249,574) 704,294 183,127 15,686

EFFECTS OF EXCHANGE DIFFERENCES (24,982) (1,819) - -

CASH AND CASH

EQUIVALENTS AT THE BEGINNING

OF THE FINANCIAL YEAR 1,173,939 471,464 26,296 10,610

CASH AND CASH

EQUIVALENTS AT THE END

OF THE FINANCIAL YEAR 44 899,383 1,173,939 209,423 26,296

The notes on pages 193 to 279 form part of these financial statements.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009

1 GENERAL INFORMATION

The Company is principally involved in investment holding activities.

The principal activities of the subsidiary companies, associated companies and jointly controlled entities

are set out in Notes 17 to 19 to the financial statements. There have been no significant changes in the

activities of the Group and Company during the financial year.

The Company is a limited liability company incorporated, and domiciled in Malaysia, and listed on the

Main Board of Bursa Malaysia Securities Berhad.

The address of the registered office and the principal place of business of the Company is:

Centre of Excellence

KM 33.8, Westbound Shah Alam Expressway

47600 Subang Jaya

Selangor Darul Ehsan

Malaysia

2 BASIS OF PREPARATION

During the financial year, the Group incurred a net loss of RM301.8 million (2008: net profit for the

financial year of RM184.6 million) which was substantially due to impairment of certain property, plant

and equipment and capitalised development cost totaling RM278.5 million as well as, inventory writedown

of RM81.8 million relating to certain vehicle models impacted by sales volume contraction.

Going concern assumption

The Directors are of the opinion that the use of the going concern assumption in the preparation of the

financial statements is appropriate based on the approved Group business plan and available financing

arrangements. This includes efforts to control cash flows and the introduction of a new model in a segment

which is different from those the Group is currently in.

The Directors expect the Group to continue to operate as a going concern and accordingly, the assets and

liabilities of the Group and Company are recorded on the basis that the Group and Company will be able

to realise its assets and discharge its liabilities in the normal course of business.

Estimates and judgements

The preparation of financial statements requires the Directors to make estimates and judgements that

affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities

at the date of the financial statements and the reported amounts of revenues and expenses during the

financial year. It also requires the Directors to exercise their judgements in the process of applying the

Group’s and the Company’s accounting policies. Although these estimates and judgements are based on

the Directors’ best knowledge of current events and actions, actual results may differ.

PROTON 2009 ANNUAL REPORT

193


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

2 BASIS OF PREPARATION (CONTINUED)

Estimates and judgements (continued)

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates

are significant to the Group’s financial statements are disclosed in Note 4 to the financial statements.

Financial Reporting Standards

The financial statements of the Group and of the Company have been prepared in accordance with

the provisions of the Companies Act, 1965 and comply with the Financial Reporting Standards (‘FRSs’),

Malaysian Accounting Standard Board (‘MASB’) Approved Accounting Standards in Malaysia for Entities

Other than Private Entities.

The financial statements of the Group and Company have been prepared under the historical cost

convention (as modified by the revaluation of certain freehold land), unless otherwise indicated in the

summary of significant accounting policies.

(a) Standards, amendments to published standards and Issues Committee (‘IC’)

interpretations that are effective and applicable to the Group

194

The new accounting standards, amendments to published standards and interpretations to existing

standards effective for the financial year beginning 1 April 2008 are as follows:

• FRS 107 Cash Flow Statements

• FRS 111 Construction Contracts

• FRS 112 Income Taxes

• FRS 118 Revenue

• FRS 120 Accounting for Government Grants and Disclosure of

Government Assistance

• FRS 134 Interim Financial Reporting

• FRS 137 Provisions, Contingent Liabilities and Contingent Assets

• Amendment to FRS 121 The Effect of Changes in Foreign Exchange Rates

– Net Investment in a Foreign Operation

• IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar

Liabilities

• IC Interpretation 2 Members’ Share in Co-operative Entities and Similar Instruments

• IC Interpretation 5 Rights to Interests arising from Decommission, Restoration and

Environmental Rehabilitation Funds

• IC Interpretation 6 Liabilities arising from Participating in a Specific Market

– Waste Electrical and Electronic Equipment

• IC Interpretation 7 Applying the Restatement Approach under FRS129 2004

Financial Reporting in Hyperinflationary Economies

• IC Interpretation 8 Scope of FRS 2

IC Interpretation 1, 2, 5, 6, 7 and 8 are not relevant to the Group and the Company. The adoption

of FRS 107, 111, 112, 118, 120, 121, 134 and 137 did not result in any substantial changes to

the accounting policies of the Group and the Company nor have any significant financial impact

on the financial statements of the Group and the Company.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

2 BASIS OF PREPARATION (CONTINUED)

(b) Standards, amendments to published standards and IC interpretations that are not

yet effective and have not been early adopted

The new standards and interpretations that are applicable to the Group and the Company, but which

the Group and the Company have not early adopted:

• FRS 7 Financial Instruments: Disclosures (effective for annual periods beginning 1 January

2010). The Group and the Company have applied the transitional provision in FRS 7 which

exempts entities from disclosing the possible impact arising from the initial application of

this standard on the financial statements.

• FRS 8 Operating Segments (effective for annual periods beginning 1 July 2009) replaces

FRS 114 2004 Segment Reporting. The new standard requires a ‘management approach’, under

which segment information is presented on the same basis as that used for internal reporting

purposes.

• FRS 139 Financial Instruments: Recognition and Measurement (effective for annual periods

beginning 1 January 2010). This new standard established principles for recognising and

measuring financial assets, financial liabilities and some contracts to buy and sell non-financial

items. Hedge accounting is permitted only under strict circumstances. The Group and the

Company have applied the transitional provision in FRS 139 which exempts entities from

disclosing the possible impact arising from the initial application of this standard on the

financial statements.

• FRS 123 Borrowing costs (effective for annual periods beginning 1 January 2010) which

replaces FRS 123 2004 , removes the option of immediately recognising as an expense borrowing

costs that are directly attributable to the acquisition, construction or production of a qualifying

asset.

• FRS 2 Share Based Payment (Amendment) (effective for annual periods beginning 1 January

2010). This new amendment clarifies that vesting conditions are service conditions and

performance conditions only and do not include other features of a share based payment.

• FRS 127 Consolidated and Separate Financial Statements (Amendment) (effective for annual

periods beginning 1 January 2010). This amendment deals with situations where a parent

reorganises its group by establishing a new entity as its parent. Under the new rules, the new

parent measures the cost of its investment in the original parent at the carrying amount of

its share of the equity items shown in the separate financial statements of the original parent

at the reorganisation date.

PROTON 2009 ANNUAL REPORT

195


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

2 BASIS OF PREPARATION (CONTINUED)

(b) Standards, amendments to published standards and IC interpretations that are not

yet effective and have not been early adopted (continued)

196

• IC Interpretation 9 Reassessment of Embedded Derivatives (effective for annual

periods beginning 1 January 2010). IC Interpretation 9 requires an entity to assess whether

an embedded derivative is required to be separated from the host contract and accounted

for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment

is prohibited unless there is a change in the terms of the contract that significantly modifies the

cash flows that otherwise would be required under the contract, in which case reassessment is

required.

• IC Interpretation 10 Interim Financial Reporting and Impairment (effective for annual periods

beginning 1 January 2010). IC Interpretation 10 prohibits the impairment losses recognised in

an interim period on goodwill and investments in equity instruments and in financial assets

carried at cost to be reversed at a subsequent balance sheet date.

• IC Interpretation 11, FRS 2: Group and Treasury Share Transactions (effective for annual periods

beginning 1 January 2010) clarifies how share based payment transactions involving its own or

another entity’s instruments in the same group are to be treated and that cancellations by

parties other than the entity are to be treated in the same way as cancellations by the entity.

• IC Interpretation 13, Customer Loyalty Programs (effective for annual periods beginning 1

January 2010) explains how entities that grant loyalty award points to its customers should

account for their obligation to provide free or discounted goods or services if and when the

customers redeem the points.

• IC Interpretation 14, FRS 119: The Limit on a Defined Benefit Asset, Minimum Funding

Requirement and their Interactions (effective for annual periods beginning 1 January 2010)

addresses how entities should determine the limit placed on the amount of a surplus in a

pension plan they can recognise as an asset. Also, it addresses how a minimum funding

requirement affects that limit and when a minimum funding requirement creates an onerous

obligation that should be recognised as a liability in addition to that otherwise recognised

under FRS 119.

(c) Standards, amendments to published standards and interpretations that are not yet

effective and not relevant to the Group’s operations

FRS 4 Insurance Contracts is effective for annual periods beginning 1 January 2010. This new

standard exempts entities from disclosing information required under paragraph 30(b) of FRS

108 “Accounting Policies, Changes in Accounting Estimates and Errors”.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been used consistently in dealing with items which are considered

material in relation to the financial statements.

(a) Subsidiary companies

Subsidiary companies are those corporations, partnerships or other entities in which the Group

has the power to exercise control over the financial and operating policies so as to obtain benefits

from their activities, generally accompanying a shareholding of more than one half of the voting

rights. The existence and effect of potential voting rights that are currently exercisable or convertible

are considered when assessing whether the Group controls another entity.

Investments in subsidiary companies are stated at cost less accumulated impairment losses. Where

an indication of impairment exists, the carrying amount of the investment is assessed and written

down immediately to its recoverable amount. The accounting policy on Impairment of Assets is set

out in Note 3(v).

Prior to 1 January 2006, the Group applied both the purchase method and the merger method to

account for Business Combinations in accordance with prior financial reporting standards. With

effect from 1 January 2006, only the purchase method of accounting is used to account for Business

Combinations in accordance with FRS 3.

The cost of an acquisition is measured as the fair value of the assets given, equity instruments

issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to

the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a

business combination are measured initially at their fair values at the acquisition date irrespective of

the interest of any minority interest. The excess of the cost of acquisition over the fair value of

the Group’s share of the identifiable net assets acquired is recorded as goodwill. The accounting

policy on goodwill is set out in Note 3(f)(i). If the cost of acquisition is less than the fair value of the

net assets of the subsidiary company acquired, the difference is recognised as a gain in the

Consolidated Income Statements.

Subsidiary companies are consolidated from the date on which control is transferred to the Group.

They are de-consolidated from the date that control ceases.

Uniform accounting policies for like transactions and other events in similar circumstances are used

by all companies in the Group in preparing the Consolidated Financial Statements. The financial

statements of all companies within the Group used in the preparation of the Consolidated Financial

Statements are prepared as of the same reporting date.

Inter-company balances, inter-company transactions and unrealised gains on transactions between

Group companies are eliminated in full. Unrealised losses are also eliminated in full unless the assets

transferred are impaired.

Minority interests represent that portion of the profit or loss and net assets of a subsidiary company

attributable to equity interests that are not owned, directly or indirectly through the subsidiary

companies by the parent. It is measured at the minorities’ share of the fair values of the subsidiary

companies’ identifiable assets and liabilities at the acquisition date and the minorities’ share of

changes in the subsidiary companies equity since that date.

PROTON 2009 ANNUAL REPORT

197


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) Subsidiary companies (continued)

198

The gain or loss on disposal of a subsidiary company is the difference between the net disposal

proceeds and the Group’s share of the subsidiary company’s net assets as of the date of disposal,

including the cumulative amount of any exchange differences that relate to that subsidiary company

which were previously recognised in equity, and is recognised in the Consolidated Income

Statements.

(b) Associated companies

Associated companies are those corporations, partnerships or other entities in which the Group

exercises significant influence, but which it does not control. Significant influence is the power to

participate in the financial and operating policy decisions of the associated companies but not the

power to exercise control over those policies.

Investments in associated companies are stated at cost. Where an indication of impairment exists,

the carrying amount of the investment is assessed and written down immediately to its recoverable

amount. The accounting policy on Impairment of Assets is set out in Note 3(v).

In the Consolidated Financial Statements, investments in associated companies are accounted for

using the equity method. Under the equity method, the Group’s share of its associated companies

post-acquisition results is recognised in the income statement, and its share of post-

acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition

movements are adjusted to the carrying amount of the investment. When the Group’s share of losses

in an associated company equals or exceeds its cost of investment in the associated company

including any other unsecured receivables, the Group discontinues its share of further losses, unless

it has incurred legal or constructive obligations to make payments on behalf of the associated

company.

Unrealised gains on transactions between the Group and its associated companies are eliminated to

the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated

unless the assets transferred are impaired.

In applying the equity method, the Group has ensured that uniform accounting policies for like

transactions and other events in similar circumstances of the associated companies are used. The

equity method is applied based on the latest financial statements made up to the financial year end

of the Group.

(c) Jointly controlled entities

Jointly controlled entities are corporations, partnerships or other entities over which there

is contractually agreed sharing of control by the Group with one or more parties where the strategic

financial and operating policy decisions relating to the entity requires unanimous consent of

the parties sharing control. The Group’s interests in jointly controlled entities are accounted for in

the Consolidated Financial Statements by the equity method of accounting, as disclosed in Note

3(b).


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Jointly controlled entities (continued)

Investments in jointly controlled entities are stated at cost. Where an indication of impairment

exists, the carrying amount of the investment is assessed and written down immediately to its

recoverable amount. The accounting policy on Impairment of Assets is set out in Note 3(v).

The Consolidated Income Statements include the Group’s share of results of the jointly controlled

entities based on the financial statements made up to the financial year end of the Group. The

cumulative post-acquisition movements are adjusted to the carrying amount of the investment.

Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated

to the extent of the Group’s interest in the jointly controlled entities. Unrealised losses are also

eliminated unless the assets transferred are impaired.

In applying the equity method, the Group has ensured that uniform accounting policies of jointly

controlled entities for like transactions and other events in similar circumstances are used. The

equity method is applied based on the latest financial statements made up to the financial year end

of the Group.

(d) Investments

The Group uses its judgement to determine the classification of its investments into current and

non-current. An investment is classified as current if it is readily realisable and it is held for trading

or intended to be realised within 12 months after the balance sheet date. All other investments are

classified as non-current.

Non-current investments are shown at cost and an allowance for diminution in value is made where,

in the opinion of the Directors, there is a decline other than temporary in the value of such

investments. Where there has been a decline other than temporary in the value of an investment,

such a decline is recognised as an expense in the period in which the decline is identified.

Quoted and unquoted current investments are carried at the lower of cost and market value,

determined on an aggregate portfolio basis by category of investments. Cost is derived at on the

weighted average basis whilst market value is calculated by reference to stock exchange quoted

selling prices at the close of business on the balance sheet date. Increases/decreases in the carrying

amount of current investments are credited/charged to the Consolidated Income Statements.

On disposal of an investment, the difference between net disposal proceeds and its carrying amount

is credited/charged to the income statement.

PROTON 2009 ANNUAL REPORT

199


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Property, plant and equipment

200

Property, plant and equipment are tangible items that:

I. are held for use in the production or supply of goods or services, or for administrative

purposes; and

II. are expected to be used during more than one period.

(i) Cost

Property, plant and equipment are initially stated at cost. Cost includes expenditure that is

directly attributable to the acquisition of the items and bringing them to the location and

condition so as to render them operational in the manner intended by the Group. The Group

allocates the initial cost of an item of property, plant and equipment to its significant

component parts.

A piece of freehold land held by the Group is stated at the Directors’ valuation based on a 1983

independent professional valuation of the open market value of the land on an existing

use basis. The surplus arising on revaluation was credited directly to capital reserves and

subsequently utilised.

The Group has adopted the transitional provision of FRS 116 which allows the freehold land

to be stated at the amount revalued on 5 September 1983. All other land held by the Group is

stated at cost.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,

as appropriate, only when it is probable that future economic benefits associated with the

item will flow to the Group and the cost of the item can be measured reliably. The carrying

amount of the replaced part is derecognised. All other repairs and maintenance are charged to

the income statement during the financial period in which they are incurred.

(ii) Depreciation

Freehold land is not depreciated as it has an infinite life. Depreciation of other property, plant

and equipment is provided for on a straight line basis to write off the cost or valuation of each

asset to its residual value over their estimated useful lives. The assets’ residual values, useful

lives and depreciation method are reviewed annually and revised if appropriate.

The principal estimated useful lives of depreciation used are as follows:

Buildings 15-50 years

Plant and machinery 5-15 years

Office equipment, furniture, fittings and vehicles 2-8 years


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Property, plant and equipment (continued)

(ii) Depreciation (continued)

Dies and jigs, which are included under plant and machinery, are depreciated based on the unit

of production basis.

Work-in-progress is not depreciated. Upon completion, the related costs will be transferred

to the respective categories of assets. Depreciation on work-in-progress commences when the

assets are ready for their intended use.

(iii) Impairment

Where an indication of impairment exists, the carrying amount of the assets is assessed and

written down immediately to its recoverable amount. The accounting policy on Impairment of

Assets is set out in Note 3(v).

(iv) Gains or losses on disposals

Gains or losses on disposals are determined by comparing proceeds with their related carrying

amounts and are included in profit/(loss) from operations.

(v) Repairs and maintenance

Repairs and maintenance are charged to the Consolidated Income Statements during the

period in which they are incurred. The cost of major renovations are included in the carrying

amount of the asset when it is probable that future economic benefits in excess of the originally

assessed standard of performance of the existing asset will flow to the Group. Major renovations

are depreciated over the remaining useful life of the related asset.

(f) Intangible assets

(i) Goodwill

Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for

impairment at least annually, or when events or circumstances occur indicating that an

impairment may exist. Impairment of goodwill is charged to the Consolidated Income

Statements as and when it arises. Impairment losses on goodwill are not reversed. Gains or

losses on the disposal of an entity includes the carrying amount of goodwill relating to the

entity disposed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each

cash-generating unit or a group of cash-generating units represents the lowest level within

the Group at which goodwill is monitored for internal management purposes and which are

expected to benefit from the synergies of the combination. The Group allocates goodwill to

each business segment in each country in which it operates.

PROTON 2009 ANNUAL REPORT

201


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Intangible assets (continued)

202

(i) Goodwill (continued)

Goodwill on acquisition of associated companies and jointly controlled entities are included in

the carrying value of the investment in associated companies and jointly controlled entities

respectively. Such goodwill are tested for impairment as part of the overall balance.

(ii) Computer software

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire

and bring to use the specific computer software. These costs are amortised over their

estimated useful lives of 3 to 5 years.

Costs associated with developing or maintaining computer software programmes are

recognised as an expense when incurred. Costs that are directly associated with identifiable

and unique software products controlled by the Group, and that will probably generate

economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs

include employee costs incurred as a result of developing software and an appropriate portion

of relevant overheads. Computer software development costs recognised as assets are amortised

using the straight line method over their estimated useful lives, not exceeding a period of

3 years.

(iii) Capitalised development cost

Research expenditure is recognised as an expense when incurred. Costs incurred on

development projects (relating to the design and testing of new or improved products) are

recognised as intangible assets when the criteria for recognition in FRS 138 are fulfilled.

Development costs previously recognised as an expense are not recognised as an asset in a

subsequent period. Development expenses capitalised include costs incurred in the

development from the date it first meets the recognition criteria and up to the completion of

the development project and commencement of commercial production. Capitalised

development cost is stated at cost less accumulated amortisation and accumulated impairment

losses, if any. Amortisation is based on the expected production volume over its total useful

life, which does not exceed 7 years for vehicles and 10 years for mechanical parts.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(g) Leases

Leases of property, plant and equipment where the Group assume substantially all the benefits and

risks or ownership are classified as finance leases.

Finance leases are capitalised at the inception of the lease at the lower of the fair value of the

leased property, plant and equipment and the present value of the minimum lease payments. Each

lease payment is allocated between the liability and finance charges so as to achieve a periodic

constant rate of interest on the balance outstanding. The corresponding obligations, net of

finance charges, are included in borrowings. The interest element of the finance charge is charged

to the Consolidated Income Statements over the lease period.

Property, plant and equipment acquired under finance leases are included in tangible property,

plant and equipment and are depreciated in accordance with the Note 3(e) above.

(h) Inventories

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

of materials and incidentals in bringing the inventories to their present location and condition, and

is determined either on the first-in first-out basis and weighted average basis depending on the

nature of inventory. Net realisable value represents the estimated selling price less all estimated

costs to completion and costs to be incurred in marketing, selling and distribution. In arriving at net

realisable value, due allowance is made for obsolete, slow moving or defective inventories.

In the case of work-in-progress and finished vehicles, an appropriate proportion of production

overheads is included in the costs.

(i) Trade and other receivables

Trade and other receivables are carried at anticipated net realisable value. Allowances are made for

doubtful debts based on specific reviews of outstanding balances at the balance sheet date. General

allowances are made to cover possible losses, which are not specifically identified. Bad debts

are written off to the Consolidated Income Statements during the financial period in which

they are identified.

(j) Non-current assets classified as assets held for sale

Non-current assets are classified as assets held for sale when the carrying amount is to be recovered

principally through a sale transaction. They are stated at the lower of their carrying amount and

fair value less costs to sell if the carrying amount is to be recovered principally through a sale

transaction rather than through continuing use.

PROTON 2009 ANNUAL REPORT

203


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Government grants

204

Grants from government are recognised at their fair values where there are reasonable assurances

that the grants will be received and the Group will comply with all attached conditions.

Capital grants

Government grants relating to capital expenditure are deferred and recognised in the income

statement over the period necessary to match them with the costs they are intended to

compensate.

Government grants relating to the purchase of plant and equipment are included in non-current

liabilities as capital grant and are credited to the income statement on a straight line basis

over the expected lives of the related assets.

Income grants

Income grants are grants other than capital grants and recognised in the income statement where

there is a reasonable assurance that the grant will be received and the Group will comply with all

attached conditions.

(l) Provisions

Provisions are recognised when the Group has a present legal or 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 reliable estimate of the amount can be made. Where the Group expects

a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when

the reimbursement is virtually certain. Provisions are reviewed at each balance sheet date and

adjusted to reflect the current best estimate. When the effect of the time value of money is material,

the amount of provision is the present value of the expenditure expected to be required to settle

the obligation. Provisions are not recognised for future operating losses.

(i) Warranties

Provision is recognised for the estimated liability on all products under warranty in addition to

claims already received and verified. Warranties are provided for a period of between one

to three years for vehicles sold. The provision is based on experienced levels of claims arising

during the period of warranty. When the Group expects warranties to be reimbursed from

suppliers, the reimbursement is recognised as a separate asset but only when the

reimbursement is virtually certain.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) Provisions (continued)

(ii) Onerous contracts

The Group recognises a provision for onerous contracts when the expected benefits to

be derived from a contract are less than the unavoidable costs of meeting the obligations

under the contract or estimated costs of exiting the contract.

(m) Employee benefits

(i) Short term employee benefits

Salaries, wages, paid annual leave and sick leave, bonuses and non-monetary benefits are

accrued in the period in which the associated services are rendered by employees of the

Group.

(ii) Post employment benefits

The Group has various post employment benefit schemes in accordance with the local

conditions and practices in the countries in which it operates. The Group has both defined

contribution and defined benefit plans.

Defined contribution plans

The Group’s contributions to defined contribution plans are charged to the Consolidated

Income Statements in the period to which they relate. Once the contributions have been

paid, the Group has no further payment obligations.

Defined benefit plan

The liability in respect of a defined benefit plan is the present value of the defined benefit

obligation at the balance sheet date minus the fair value of plan assets, together with

adjustments for actuarial gains/losses and past service cost. The Group determines the

present value of the defined benefit obligation and the fair value of any plan assets with

sufficient regularity such that the amounts recognised in the financial statements do not

differ materially from the amounts that would be determined at the balance sheet date.

The defined benefit obligation, calculated using the projected unit credit method, is

determined by independent actuaries on the basis of full triennial valuations and updated

annually. Assumptions were made in relation to the annual investment returns, annual

salary increases and annual increases in pension payments.

Plan assets in excess of the defined benefit obligation are subject to the asset limitation

test specified in FRS 119.

PROTON 2009 ANNUAL REPORT

205


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(m) Employee benefits (continued)

206

(ii) Post employment benefits (continued)

Defined benefit plan (continued)

Actuarial gains and losses arise from experience adjustments and changes in actuarial

assumptions. The amount of net actuarial gains and losses recognised in the Consolidated

Income Statements is determined by the corridor method in accordance with FRS 119

and is charged or credited to Consolidated Income Statements over the average remaining

service lives of the related employees participating in the defined benefit plan.

(iii) Termination benefits

Termination benefits are payable whenever an employee’s employment is terminated

before the normal retirement date or whenever an employee accepts voluntary redundancy

in exchange for these benefits. The Group recognises termination benefits when it

is demonstrably committed to either terminate the employment of current employees

according to a detailed formal plan without possibility of withdrawal or to provide

termination benefits as a result of an offer made to encourage voluntary redundancy.

Benefits falling due more than 12 months after balance sheet date are discounted to

present value.

(n) Income taxes

Current tax expense is determined according to the tax laws of each jurisdiction in which the Group

operates and include all taxes based upon the taxable profits, including withholding taxes payable

by a foreign subsidiary company on distributions of retained earnings.

Deferred tax is recognised in full, using the liability method, on temporary differences arising

between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts

in the financial statements.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be

available against which the deductible temporary differences or unused tax losses can be utilised.

Deferred tax is recognised on temporary differences arising on investments in subsidiary companies,

associated companies and jointly controlled entities except where the timing of the reversal of the

temporary difference can be controlled and it is probable that the temporary difference will not

reverse in the foreseeable future.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Income taxes (continued)

Deferred tax assets and liabilities are not recognised on temporary differences arising from:

(i) goodwill; or

(ii) from the initial recognition of an asset or liability in a transaction which is not a business

combination and at time of the transaction, affects neither accounting profit nor taxable

profit.

Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially

enacted by the balance sheet date and are expected to apply when the related deferred tax

asset is realised or the deferred tax liability is settled.

(o) Foreign currency transactions and translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using

its functional currency, which is the currency of the primary economic environment in which

the entity operates (‘the functional currency’). The Consolidated Financial Statements are

presented in Ringgit Malaysia, which is the Group’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange

rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting

from the settlement of such transactions and from the translation at year-end exchange rates

of monetary assets and liabilities denominated in foreign currencies are recognised in the

Consolidated Income Statements.

(iii) Group companies

The results and financial position of all the Group companies (none of which has the currency

of a hyperinflationary economy) that have a functional currency different from the presentation

currency are translated into the presentation currency as follows:

- assets and liabilities for each balance sheet presented are translated at the closing rate at

the date of that balance sheet;

- income and expenses for each income statement are translated at average exchange rates

(unless this average is not a reasonable approximation of the cumulative effect of the

rates prevailing on the transaction dates, in which case income and expenses are translated

at the dates of the transactions); and

- all resulting exchange differences are recognised as a separate component of equity.

PROTON 2009 ANNUAL REPORT

207


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(o) Foreign currency transactions and translation (continued)

208

(iii) Group companies (continued)

On consolidation, exchange differences arising from the translation of the net investment in

foreign operations are taken to shareholders’ equity. Net investment in foreign operations is

defined as the amount of the reporting entity’s interest in the net assets of that operation,

which includes advances that are assessed as long term in nature. When a foreign operation

is disposed of or sold, such exchange differences that were recorded in equity are recognised

in the Consolidated Income Statements as part of the gain or loss on disposal.

(iv) Closing rates

The principal closing rates (units of Malaysian Ringgit per foreign currency) used in translating

significant balances at financial year end are as follows:

Foreign currency 31 March 2009 31 March 2008

US Dollar 3.6595 3.1985

Sterling Pound 5.2225 6.3850

Indonesian Rupiah (100) 0.0313 0.0343

Singapore Dollar 2.4048 2.3147

Thai Baht 0.1029 0.1017

Australian Dollar 2.4935 2.9270

(p) Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand,

deposits held at call with banks, other short term, highly liquid investments with original maturities

of not more than twelve months and bank overdrafts. Bank overdrafts are included within

borrowings in current liabilities on the balance sheet.

(q) Income recognition

Revenue from sales of vehicles, spare parts and accessories are recognised when significant risks and

rewards have been transferred to buyers. Significant risks and benefits are generally deemed to

have been transferred upon delivery or acceptance of the goods.

Revenue from sale of completed apartments is recognised when the Sale and Purchase Agreements

are signed.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q) Income recognition (continued)

Revenue from rendering of engineering services on long term engineering contracts is recognised

on the basis of the stage of completion of such contracts at the financial year end, where the

contractual outcome can be assessed with reasonable certainty. Full provision is made for all

foreseeable losses on contracts entered into or commenced prior to the financial year end.

Amounts are included within receivables and payables to recognise timing differences arising

between amounts invoiced and amounts recognised in the income statement on individual

engineering contracts.

Other revenue comprises mainly revenue from rental and royalties, which are recognised on an

accrual basis. Interest income is recognised on proportionate basis that reflects the effective yield

on the asset. Scrap sales and gains on disposal of investments are recognised on an accrual basis.

Sale of rights for the use of intellectual property rights are recognised on an accrual basis in

accordance with the substance of the relevant agreements.

Dividends are recognised when the Company’s right to receive payment is established.

(r) Financial instruments

(i) Description

A financial instrument is any contract that gives rise to both a financial asset of one enterprise

and a financial liability 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 from another enterprise, a contractual right to exchange financial instruments with

another enterprise under conditions 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 to another enterprise, or to exchange financial instruments with another

enterprise under conditions that are potentially unfavourable.

(ii) Financial instruments recognised on the balance sheet

The particular recognition method adopted for financial instruments recognised on the Balance

Sheet is disclosed in the individual policy statements associated with each item.

(iii) Financial instruments not recognised on the balance sheet

The Group enters into foreign currency forward contracts to protect the Group from movements

in exchange rates by establishing the rate at which a foreign currency asset or liability will be

settled.

Exchange gains and losses arising on contracts entered into as hedges of anticipated future

transactions are deferred until the settlement of the related forward contracts.

PROTON 2009 ANNUAL REPORT

209


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(r) Financial instruments (continued)

210

(iv) Fair value estimation for disclosure purposes

(s) Borrowings

The fair value of publicly traded derivatives and securities is based on quoted market prices at

the balance sheet date.

The fair value of forward foreign exchange contracts is determined using forward foreign

exchange market rates at the balance sheet date.

In assessing the fair value of non-traded derivatives and financial instruments, the Group uses

a variety of methods and makes assumptions that are based on market conditions existing at

each balance sheet date. Unquoted investments are valued based on quoted investments

with similar features.

The fair value of financial liabilities with a maturity of more than one year is estimated by

discounting the future contractual cash flows at this current market interest rate available to

the Group for similar financial instruments.

The face values, less any estimated credit adjustments, for financial assets and liabilities

classified as current are assumed to approximate their fair values.

Borrowings are initially recognised based on the proceeds received, net of transaction costs

incurred. Subsequently, borrowings are stated at amortised cost using the effective yield method;

any difference between proceeds (net of transaction costs) and the redemption value is recognised

in the income statement over the period of the borrowings.

Borrowing costs are charged to the Consolidated Income Statements as an expense in the period in

which they have accrued.

Borrowings are classified as current liabilities unless the Group has the unconditional right to defer

settlement of the liability for at least 12 months after the balance sheet date.

(t) Share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares

are expensed off in the Consolidated Income Statements.

Dividends on ordinary shares are recognised as liabilities when proposed or declared before the

balance sheet date. A dividend proposed or declared after the balance sheet date, but before the

financial statements are authorised for issue, is not recognised as a liability at the balance sheet

date. Upon the dividend becoming payable, it will be accounted for as liability.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(u) Contingent liabilities and contingent assets

The Group and Company do not recognise a contingent liability but discloses its existence in the

financial statements. A contingent liability is a possible obligation that arises from past events

whose existence will be confirmed by uncertain future events beyond the control of the Group or

a present obligation that is not recognised because it is not probable that an outflow of resources

will be required to settle the obligation. A contingent liability also arises in the extremely rare

circumstance where there is a liability that cannot be recognised because it cannot be measured

reliably.

A contingent asset is a possible asset that arises from past events whose existence will be

confirmed by uncertain future events beyond the control of the Group. The Group does not

recognise contingent assets but discloses its existence where inflows of economic benefits are

probable, but not virtually certain.

In the acquisition of subsidiary companies by the Group under a business combination, the

contingent liabilities assumed are measured initially at their fair values at the acquisition date,

irrespective of the extent of any minority interests.

The Group recognises separately the contingent liabilities of the acquirees as part of allocating

the cost of a business combination where their fair values can be measured reliably. Where the fair

values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising

from the acquisition.

Subsequent to the initial recognition, the Group measures the contingent liabilities that are

recognised separately at the date of acquisition at the higher of the amount that would be

recognised in accordance with the provisions of FRS 137 and the amount initially recognised less,

when appropriate, cumulative amortisation recognised in accordance with FRS 118.

(v) Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually

for impairment, or whenever events or circumstances occur indicating that an impairment may exist.

Property, plant and equipment and other non-current assets, including intangible assets, are

reviewed for impairment losses whenever events or changes in circumstances indicate that the

carrying amount may not be recoverable. Impairment loss is recognised for the amount by which

the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is

measured at the higher of the fair value less cost to sell of an asset and its value-in-use. The value-

in-use is the net present value of the projected future cash flows derived from that asset discounted

at the appropriate discount rate. Assets other than goodwill that suffered an impairment are

reviewed for possible reversal at each reporting date.

The projected cash flows are based on the Group’s estimates calculated based on historical, industry

trend, general market, economic conditions and other available information. For the purposes of

assessing impairment, assets are grouped at the lowest level for which there is separately identifiable

cash flows.

PROTON 2009 ANNUAL REPORT

211


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(v) Impairment of assets (continued)

212

The impairment loss is charged to the Consolidated Income Statements. Any subsequent increase

in recoverable amount is recognised in the Consolidated Income Statements.

Irrespective of whether there is any indication of impairment, the Group shall test an intangible

asset with an indefinite useful life or an intangible asset not yet available for use for impairment

annually by comparing its carrying amount with its recoverable amount. This impairment test may

be performed at any time during an annual period; it is performed at the same time every year.

Different intangible assets may be tested for impairment at different times. However, if such an

intangible asset was initially recognised during the current annual period, that intangible asset

shall be tested for impairment before the end of the current annual period.

4 KEY ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and

other factors, including expectations of future events that are believed to be reasonable under the

circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting

estimates will, by definition, rarely equal the related actual results. To enhance the information

content of the estimates, certain key variables that are anticipated to have a material impact on the

Group’s results and financial position are tested for sensitivity to changes in the underlying

parameters. The estimates and assumptions that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year are

mentioned below.

(i) Carrying value of property, plant and equipment and capitalised development cost

The Group assesses the carrying amount of property, plant and equipment and capitalised

development cost whenever the events or changes in circumstances indicate that the carrying

amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than

the recoverable amount. Recoverable amount is measured at the higher of the fair value less

cost to sell for that asset and its value-in-use. The value-in-use is the net present value of the

projected future cash flows derived from the asset discounted at an appropriate discount

rate.

Projected future cash flows are based on the Group’s estimates calculated based on historical,

sector and industry trends, general and Malaysian market and economic conditions, changes

in technology and other available information regarding the automotive sector.

The assumptions used, results and conclusion of the impairment assessment are stated in Note

13 to the financial statements.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

4 KEY ESTIMATES AND JUDGEMENTS (CONTINUED)

(ii) Estimated useful lives of dies and jigs and capitalised development cost

The Group reviews annually the estimated production units used for assessing the estimated useful

lives of dies and jigs and capitalised development cost based on factors incorporated in business plans

and strategies such as the expected level of demand and usage and future technological

developments.

Future results of operations could be materially affected by changes in these estimates brought

about by changes in the factors mentioned. A reduction in the estimated production units for

assessing the carrying values of dies and jigs and capitalised development cost would increase the

recorded depreciation and amortisation respectively.

(iii) Deferred tax assets

Deferred tax assets are recognised to the extent that it is probable that future taxable profits

will be available against which the temporary differences can be utilised. This involves significant

judgements regarding the future financial performance of the Group, the likely timing and level

of future taxable profits together with future tax planning strategies to support the basis of

recognition of deferred tax assets. An analysis of the deferred tax balance is set out in Note 22

to the financial statements.

The Directors have considered the ability of the Group to generate sufficient taxable income

to utilise the deferred tax assets and have concluded that no deferred tax asset should be

recognised for certain subsidiary companies as at 31 March 2009.

(iv) Estimation of income taxes payable and recoverable

Income taxes are estimated based on the rules governed under the Income Tax Act, 1967.

Significant judgement is required in determining the capital allowances and deductibility of

certain expenses during the estimation of the provision for income taxes. There are many

transactions and calculations for which the ultimate tax determination is uncertain during the

ordinary course of business.

Where the final tax outcome of these matters is different from the amounts that were

initially recognised, such differences will impact the income tax provisions in the period in

which such determination is made. The status of the income tax position of the Group is stated

in Note 10 to the financial statements.

(v) Provisions for warranty

Provision is made for the estimated liability on all products under warranty in addition to claims

already received. The accrual recorded is based on the actual claims experienced by the Group

arising during the period of warranty over a number of years which provides a basis for

calculating expected warranty claims. In addition, the Group records an asset for the amount

expected to be recoverable from its vendors based on similar actual reimbursement experienced

by the Group.

An analysis of the utilisation of the provision is stated in Note 34 to the financial statements.

PROTON 2009 ANNUAL REPORT

213


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

4 KEY ESTIMATES AND JUDGEMENTS (CONTINUED)

(vi) Allowance for inventory write down

214

Allowance for inventory write down is made based on an analysis of the ageing profile and

expected sales patterns of individual items held in inventory. This requires an analysis of

inventory usage based on expected future sales transactions taking into account current market

prices, useful lives of vehicle models and expected cost to sell. Changes in the inventory ageing

and expected usage profiles can have an impact on the allowance recorded.

(vii) Allowance for receivables

The allowance is established when there is objective evidence that the Group will not be able

to collect all amounts due according to the original terms of receivables. This is determined

based on the ageing profile, expected collection patterns of individual receivable balances,

credit quality and credit losses incurred. Management carefully monitors the credit quality of

receivable balances and makes estimates about the amount of credit losses that have been

incurred at each financial statement reporting date. Any changes to the ageing profile,

collection patterns, credit quality and credit losses can have an impact on the allowance

recorded.

(viii) Impairment of goodwill

The Group tests goodwill for impairment at least annually in accordance with its accounting

policy or whenever events or changes in circumstances indicate that this is necessary. The

assumptions used, results and conclusion of the impairment assessment are stated in Note 15

to the financial statements.

5 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

During the financial year,

(a) As reported in the prior financial year,

(i) CIMB Investment Bank Berhad on behalf of Directors announced on 31 March 2008, a

proposal to strike-off and liquidate eight dormant companies with the intention to reduce

cost, streamline and align business operations within the Group. The proposal was

completed during the financial year.

(ii) The internal reorganisation exercise to rationalise the operations of Marco Acquisition

Corporation, USA (‘Marco’), a wholly owned subsidiary company of the Company held through

Proton Engineering Research Technology Sdn. Bhd. had been completed on 12 September

2008 following the merger and dissolution of Marco into Lotus Holdings Inc., USA.

(b) Proton Cars Benelux Limited (‘Benelux’), a 99% owned subsidiary company of Proton Marketing

Sdn. Bhd. (‘PMSB’) was placed under Members’ Voluntary Liquidation on 2 February 2009.

Benelux had not commenced operations since incorporation.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

5 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED)

(c) Proton Edar Ventures Sdn. Bhd. and Proton Edar Resources Sdn. Bhd., wholly owned subsidiary

companies of Proton Edar Sdn. Bhd. which is in turn a wholly owned subsidiary of PMSB and

Proton Capital Sdn. Bhd., a wholly owned subsidiary company of the Company were placed under

Members’ Voluntary Liquidation on 6 March 2009.

6 REVENUE

Revenue at the Group represents the invoiced value of goods sold and engineering services provided and

is presented net of taxes, discounts and commission paid to dealers.

Revenue at the Company represents income from shares held in subsidiary companies and associated

companies.

Revenue comprises:

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

Sale of vehicles, spare parts 6,220,872 5,361,826 - -

and accessories

Rendering of engineering services 235,667 219,386 - -

Others 30,031 40,382 - -

Gross dividend income - - 362,357 41,203

6,486,570 5,621,594 362,357 41,203

Included in others is sale of rights for the use of intellectual property rights to an export market amounting

to RM19,612,000 (2008: RM33,515,000).

PROTON 2009 ANNUAL REPORT

215


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

7 (LOSS)/PROFIT BEFORE FINANCE COST

The following items have been charged/

(credited) in arriving at (loss)/profit

before finance cost:

Gross dividends receivable from:

- subsidiary company, unquoted - - (359,000) (40,000)

- associated companies, unquoted - - (3,357) (786)

- others, quoted (1,260) (2,479) - -

- others, unquoted - (417) - (417)

Research and development grant (80,656) (193,782) - -

Property, plant and equipment:

- depreciation 450,346 382,556 - -

- write off 38,746 18,557 - -

- impairment 257,674 - - -

- reversal of impairment (1,616) (800) - -

- loss/(gain) on disposal 19,417 (12,546) - -

Prepaid land lease payments:

- amortisation - 89 - -

- gain on disposal - (990) - -

Impairment of goodwill - 6,741 - -

Impairment of investment

in an associated company 6,678 4,200 - -

Intangible assets:

- amortisation 48,493 34,817 - -

- impairment 20,802 - - -

Write down/(write back) of inventories** 114,950 (25,053) - -

Current investment:

- loss/(gain) on disposal 44 (1,678) - -

- write down in market value 1,084 - - -

Research and development expenditure 45,127 37,447 - -

Provision for warranties (Note 34) 62,862 45,526 - -

Reversal of allowance for doubtful debts (63,315) (19,708) - -

Allowance for doubtful debts 45,616 7,737 - -

Statutory audit fees to:

PricewaterhouseCoopers Malaysia:

- current year 599 569 88 84

- under/(over) provision in prior year 114 (57) 60 60

Other member firms of

PricewaterhouseCoopers International

Limited*:

- current year 1,380 1,394 - -

- under provision in prior year 206 - - -

216

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

7 (LOSS)/PROFIT BEFORE FINANCE COST (CONTINUED)

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

Audit related fees to PricewaterhouseCoopers

- Malaysia 505 560 - -

Non-audit fees to PricewaterhouseCoopers:

- Malaysia 902 1,234 - -

- Other member firms of PricewaterhouseCoopers

International Limited* 959 1,961 - -

Provision for onerous contract 4,426 - - -

Rental of plant, machinery and equipment 1,765 50 - -

Rental of land and buildings

Foreign exchange loss/(gain):

16,725 14,789 - -

- transactions (7,481) 7,276 - -

- translation (8,284) (10,230) - -

Rental income on land and buildings (1,925) (3,891) - -

Interest income

Automotive Development Fund

(42,089) (32,143) (4,618) (301)

- amortisation of capital grant (21,646) - - -

* PricewaterhouseCoopers Malaysia and other member firms of PricewaterhouseCoopers

International Limited are separate and independent legal entities.

** Cost of sales includes inventories written down amounting to RM114,950,000 of which

RM81,841,000 relates to the vehicle models which were impacted by contraction in sales volume

as disclosed in Note 13 to the financial statements (2008: write back of RM25,053,000).

PROTON 2009 ANNUAL REPORT

217


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

8 STAFF COST

218

Group

2009 2008

RM’000 RM’000

Wages, salaries and bonuses 598,390 527,185

Pension cost

- defined contribution plan 55,228 49,762

- defined benefit plan (Note 32(e)) (8,042) 14,616

Other employee benefits 62,842 43,099

Termination benefits - 22

Directors’ remuneration

708,418 634,684

The aggregate amount of emoluments receivable by the Directors of the Group and Company during the

financial year was as follows:

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

Non-Executive Directors:

- allowances 584 505 424 389

- fees

- estimated monetary value

939 948 217 291

of benefits-in-kind 59 39 59 39

Executive Director*:

- salaries and bonuses 705 540 705 540

- defined contribution plan

- estimated monetary value

109 86 109 86

of benefits-in-kind 81 65 81 65

- fees - - 42 42

- allowances - - 16 12

2,477 2,183 1,653 1,464

* The Executive Director’s remuneration in the Company is fully recharged to a subsidiary company.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

9 FINANCE COST

2009

Group

2008

RM’000 RM’000

Interest expense on:

Long term loans 6,957 7,750

Short term borrowings 6,110 9,405

Others 1,341 781

10 TAXATION

Taxation in Malaysia

14,408 17,936

Current taxation:

- charge for the financial year 28,027 7,020 1,179 10,517

- over accrual in respect

of prior financial years (49,456) (45,859) - -

Taxation outside Malaysia

(21,429) (38,839) 1,179 10,517

Current taxation:

- charge for the financial year 801 885 - -

- over accrual in respect of prior

financial years (844) (1,527) - -

Deferred taxation (Note 22)

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

(43) (642) - -

Origination and reversal of

temporary differences (1,409) (754) - -

Tax benefits arising from previously

unrecognised temporary differences 5,486 - - -

4,077 (754) - -

(17,395) (40,235) 1,179 10,517

PROTON 2009 ANNUAL REPORT

219


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

10 TAXATION (CONTINUED)

A numerical reconciliation between the average effective tax rate and the statutory tax rate effect is as

follows:

Malaysian statutory tax rate (25) 26 25 26

Tax effects of:

- double deduction and

incentive on qualifying expenditure (3) (1) - -

- expenses not deductible for tax purposes 1 15 - -

- income not subject to tax (11) (51) (25) -

- current year tax losses not recognised 6 4 - -

- current year deductible temporary

differences not recognised 50 22 - -

- over accrual in respect

of prior years (16) (32) - -

- recognition of previously unrecognised

deductible temporary differences (2) (8) - -

- recognition of previously unrecognised

tax losses (4) - - -

- different tax rates in subsidiary

companies outside Malaysia (1) (3) - -

Average effective tax rate (5) (28) - 26

Previously unrecognised temporary

differences utilised during the financial year 19,640 - - -

Tax savings arising from temporary differences 5,486 - - -

Previously unrecognised tax losses

utilised during the financial year 45,068 5,369 - -

Tax savings arising from such tax losses 11,267 1,396 - -

Unabsorbed capital allowances

carried forward 1,964,254 1,553,523 - -

Unutilised tax losses carried forward 566,932 601,584 - -

Unutilised reinvestment allowances 1,993,363 1,790,117 - -

220

Group Company

2009 2008 2009 2008

% % % %

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

10 TAXATION (CONTINUED)

The tax write back during the financial year arose following an agreement with the Inland Revenue

Board (‘IRB’) to settle tax disputes in respect of a subsidiary company’s treatment of certain items in the

tax submissions for Years of Assessment (‘YA’) 1989 to 1998. The basis of agreed claims was subsequently

applied for YA 1999 to 2002.

The tax write back in the previous financial year relates mainly to the settlement of disputes of a subsidiary

company with the IRB in relation to Section 127 relief on the differences in the interpretation of the

qualifying period for investment tax credit. The relief was claimed for YA 1992.

The tax recoverable amount of RM140,960,000 (2008: RM82,452,000) relates to settlement of tax disputes

for YA 1989 to 2002 while the amount of RM19,650,000 (2008: RM32,027,000) relates to overpayment of

tax liabilities for YA 2007 and 2008.

11 (LOSS)/EARNINGS PER SHARE

Basic (loss)/earnings per share is calculated by dividing the net (loss)/profit attributable to equity holders of

the Company by the weighted average number of ordinary shares in issue during the financial year.

Diluted (loss)/earnings per share equals to basic (loss)/earnings per share.

12 DIVIDENDS

PROTON 2009 ANNUAL REPORT

Group

2009 2008

Net (loss)/profit attributable to equity holders

of the Company (RM’000) (301,806) 184,551

Weighted average number of ordinary shares in issue (‘000) 549,213 549,213

Basic (loss)/earnings per share (sen) (55) 34

Dividends declared in respect of the financial year ended 31 March 2009 are as follows:

Interim dividend of 5.0 sen per ordinary share less tax at 25% 20,595 -

The Directors do not recommend the payment of a final dividend for the financial year ended 31 March

2009.

Group

2009 2008

RM’000 RM’000

221


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

13 PROPERTY, PLANT AND EQUIPMENT

222

Office

equipment,

furniture,

Freehold Plant and fittings and Work-in-

land Buildings machinery vehicles progress Total

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

2009

Cost/valuation

At 1 April 2008

Currency translation

236,362 1,396,863 4,375,404 1,074,479 27,858 7,110,966

differences (2,611) (35,192) (45,094) (30,946) (88) (113,931)

Additions 759 2,457 22,629 85,685 351,251 462,781

Disposals

Acquisition through

(7,638) - (43,136) (20,848) (10,560) (82,182)

business combination 17(a) - 2,794 420 26 - 3,240

Written off

Reclassification

of completed

- (3,778) (38,668) (10,053) (19,212) (71,711)

work-in-progress

Reclassification from

- 1,256 312,680 39,073 (353,009) -

inventory

Reclassification to

non-current assets

- - - - 9,124 9,124

held for sale 29 - (11,918) (4,407) - - (16,325)

At 31 March 2009 226,872 1,352,482 4,579,828 1,137,416 5,364 7,301,962


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Office

equipment,

furniture,

Freehold Plant and fittings and Work-in-

land Buildings machinery vehicles progress Total

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

2009

Accumulated depreciation

At 1 April 2008

Currency translation

- 434,149 2,558,858 682,161 - 3,675,168

differences

Charge for the

- (7,849) (28,592) (14,004) - (50,445)

financial year - 52,647 306,075 91,624 - 450,346

Disposals

Acquisition through

- - (19,571) (14,121) - (33,692)

business combination 17(a) - 1,298 102 26 - 1,426

Written off

Reclassification to

non-current assets

- - (23,004) (9,961) - (32,965)

held for sale 29 - (2,569) (28) - - (2,597)

At 31 March 2009 - 477,676 2,793,840 735,725 - 4,007,241

2009

Accumulated

impairment losses

At 1 April 2008

Currency translation

13,536 137,365 79,632 54,819 - 285,352

differences (13,536) (24,034) (18,759) (17,471) - (73,800)

Charge for the

financial year

Reversal of

- - 257,674 - - 257,674

impairment loss - (502) (786) (328) - (1,616)

At 31 March 2009 - 112,829 317,761 37,020 - 467,610

Net book value

At 31 March 2009 226,872 761,977 1,468,227 364,671 5,364 2,827,111

PROTON 2009 ANNUAL REPORT

223


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

224

Office

equipment,

furniture,

Freehold Plant and fittings and Work-in-

land Buildings machinery vehicles progress Total

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

2008

Cost/valuation

At 1 April 2007

Currency translation

262,072 1,331,521 4,141,014 1,090,675 188,524 7,013,806

differences (1,118) (12,189) (17,329) (9,719) (54) (40,409)

Additions 261 1,011 18,802 46,073 325,850 391,997

Disposals

Acquisition through

(24,853) (583) (16,768) (24,899) (6,230) (73,333)

business combination 17(b) - 12,756 36,493 60 - 49,309

Written off

Reclassification

of completed

- (376) (105,598) (97,748) (17,558) (221,280)

work-in-progress - 64,723 318,790 70,037 (453,550) -

Reclassification to inventory - - - - (9,124) (9,124)

At 31 March 2008 236,362 1,396,863 4,375,404 1,074,479 27,858 7,110,966


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Office

equipment,

furniture,

Freehold Plant and fittings and Work-in-

land Buildings machinery vehicles progress Total

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

2008

Accumulated depreciation

At 1 April 2007

Currency translation

- 385,327 2,443,469 711,283 - 3,540,079

differences

Charge for the

- (4,566) (10,286) (3,655) - (18,507)

financial year - 52,728 239,917 89,911 - 382,556

Disposals

Acquisition through

- (387) (16,768) (18,002) - (35,157)

business combination 17(b) - 1,423 7,449 48 - 8,920

Written off - (376) (104,923) (97,424) - (202,723)

At 31 March 2008 - 434,149 2,558,858 682,161 - 3,675,168

2008

Accumulated

impairment losses

At 1 April 2007

Currency translation

14,591 146,017 84,586 59,038 - 304,232

differences

Reversal of

(1,055) (8,652) (4,954) (3,419) - (18,080)

impairment loss - - - (800) - (800)

At 31 March 2008 13,536 137,365 79,632 54,819 - 285,352

Net book value

At 31 March 2008 222,826 825,349 1,736,914 337,499 27,858 3,150,446

PROTON 2009 ANNUAL REPORT

225


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

A piece of a subsidiary company’s freehold land was revalued on 5 September 1983 based on an independent

professional valuation. The surplus of RM36,882,000 arising from the revaluation was credited to the

capital reserves and subsequently utilised. Had this freehold land been carried at historical cost, the net

book value of freehold land that would have been included in the financial statements at the end of the

financial year would be RM22,448,000 (2008: RM22,448,000).

Property, plant and equipment of a wholly owned subsidiary company with a net book value of

RM111,777,000 (2008: RM61,857,000) was charged to a licensed bank as security for borrowings as disclosed

in Note 32(b) to the financial statements.

The net book value of the office equipment acquired under finance lease at the balance sheet date was

RM3,959,000 (2008: RM5,480,000).

The land title for a freehold land with net book value of RM20,600,000 (2008: RM20,600,000) has not yet

been transferred to the Group pending subdivision of the master title.

Impairment test for property, plant and equipment and capitalised development cost

The carrying value of property, plant and equipment of a subsidiary company at balance sheet date is

RM2,458,078,000 (2008: RM2,773,719,000).

The softening of the automotive industry in the second half of the financial year has resulted in a

contraction in sales volume. Arising from this, a subsidiary company undertook a test for impairment of its

property, plant and equipment and capitalised development cost.

The projections used for the impairment assessment of property, plant and equipment and capitalised

development cost reflect the Group’s expectation of the usage, revenue growth, operating costs and

margins for each production plant based on past experience and current assessment of market share,

expectation of market and industry growth. The impairment assessment indicated that the carrying values

of property, plant and equipment and capitalised development cost relating to certain vehicle models

impacted by volume contraction may not be recoverable.

As a result, the following impairment of property, plant and equipment and capitalised development cost

were recognised during the financial year:

226

Group

2009

RM’000

Property, plant and equipment 257,674

Capitalised development cost (Note 16) 20,802

278,476


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

The property, plant and equipment were allocated to the cash-generating units which are identified

according to production plants and vehicle models. An impairment assessment was performed due to

certain vehicle models being impacted by a contraction in sales volume.

(a) Key assumptions used in the value-in-use calculations

The recoverable amounts are determined based on value-in-use calculations. This value-in-use

calculations apply a discounted cash flow model using cash flow projections covering a five year

period, and assuming a zero growth rate for subsequent periods up to fifteen years. The projections

over these periods were based on an approved business plan and reflect the subsidiary company’s

expectation of usage, revenue growth, operating costs and margins based on past experience and

current assessment of market share, expectations of market growth and industry growth.

The sales volumes for the Malaysian market indicate a reduction from current levels as the Group

does not include future new models for which capital expenditure has not been incurred. However,

the total overall cash flow arising from sales volume indicates a significant increase arising from

growth in sales of completely-knocked-down packs to the export markets.

Based on past trends, cashflows arising from government grants are included in the value-in-use

calculations, estimated based on a percentage of projected investment level.

Terminal values of the production plants in year fifteen are assumed to be derived from the fair

market values by an internal registered valuer arising from the disposal of the land and buildings on

which the three specific plants are located. A discount factor of 6.5% was used to discount the

terminal value which reflects the prevailing borrowing cost for land and buildings.

Terminal values of platforms relating to certain vehicle models incorporate the estimated net

realisable value from the disposal of the model platform.

For purposes of the value-in-use calculation, discount rates of 8% and 16% have been applied

to domestic and export sales respectively. The discount rate of 8% reflects the prevailing independent

market rate applicable to the Group.

(b) Impact of possible changes in key assumptions

The sensitivity test indicated that a plant owned by a subsidiary company may require further

impairment should the projected sales volume drop by 6% over the projection period. No further

impairment loss is required where other realistic variations are applied to key assumptions.

PROTON 2009 ANNUAL REPORT

227


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

14 PREPAID LAND LEASE PAYMENTS

Cost

228

Group

2009 2008

RM’000 RM’000

At 1 April 24,031 10,989

Currency translation differences (1,347) (1,077)

Acquisition through business combination (Note 17(b)) - 25,108

Disposal - (394)

Reclassification to inventory (Note 23) - (10,595)

Reclassification to non-current assets held for sale (Note 29) (22,684) -

At 31 March - 24,031

Accumulated amortisation

At 1 April - 1,045

Amortisation - 89

Disposal - (80)

Reclassification to inventory (Note 23) - (1,054)

At 31 March - -

Net book value

At 31 March - 24,031


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

15 GOODWILL

Impairment test for goodwill

2009

Group

2008

RM’000 RM’000

At 1 April 35,749 29,008

Acquisition through business combination (Note 17(b)) - 6,741

35,749 35,749

Less: Accumulated impairment loss (6,741) (6,741)

At 31 March 29,008 29,008

The Group undertook an annual test for impairment of goodwill. The carrying amount of goodwill is

allocated to the cash-generating unit that the goodwill relates to, i.e. distribution business in Malaysia.

The recoverable amount of the cash-generating unit including goodwill in this test is determined based

on the value-in-use calculation. This value-in-use calculation applies a discounted cash flow model using

cash flow projections covering a five-year period for the distribution business in Malaysia. The projections

reflect the Group’s expectations of revenue growth, operating costs and margins based on past experience

and current assessment of market share, expectations of market growth and industry growth.

For purposes of the value-in-use calculation, a discount rate of 8% has been applied. The discount rate

reflects the prevailing independent market rate applicable to the Group in Malaysia.

The sales volumes used in the projections indicate an increase from current levels through the introduction

of a new model in a segment for which the Group is not currently in and where capital expenditure has

been incurred to date, over the projection periods. However, the projected sales volume does not include

future new models for which capital expenditure has not been incurred. A nil terminal value has been

assumed.

Sensitivity analysis shows that no impairment loss is required for the carrying amount of goodwill, including

where realistic variations are applied to key assumptions.

PROTON 2009 ANNUAL REPORT

229


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

16 INTANGIBLE ASSETS

Capitalised

development Computer

cost software Total

Group RM’000 RM’000 RM’000

2009

Cost

At 1 April 2008 275,804 65,133 340,937

Currency translation differences (14,144) - (14,144)

Additions 231,468 6,164 237,632

Written off - (16) (16)

Disposal - (16) (16)

At 31 March 2009 493,128 71,265 564,393

Amortisation

At 1 April 2008 27,739 38,006 65,745

Currency translation differences (2,283) - (2,283)

Charge for the financial year 33,945 14,548 48,493

Written off - (16) (16)

Disposal - (16) (16)

At 31 March 2009 59,401 52,522 111,923

Accumulated impairment loss

At 1 April 2008 - - -

Charge for the financial year (Note 13) 20,802 - 20,802

At 31 March 2009 20,802 - 20,802

Net book value

At 31 March 2009 412,925 18,743 431,668

2008

Cost

At 1 April 2007 142,975 57,797 200,772

Currency translation differences (730) (180) (910)

Additions 133,559 7,658 141,217

Written off - (142) (142)

At 31 March 2008 275,804 65,133 340,937

Amortisation

At 1 April 2007 11,611 20,086 31,697

Currency translation differences (593) (34) (627)

Charge for the financial year 16,721 18,096 34,817

Written off - (142) (142)

At 31 March 2008 27,739 38,006 65,745

Net book value

At 31 March 2008 248,065 27,127 275,192

The remaining amortisation period for intangible assets ranges from 3 to 7 years.

230


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

17 SUBSIDIARY COMPANIES

Unquoted shares at cost:

Company

2009 2008

RM’000 RM’000

At 1 April 2,036,303 2,036,303

Less: Impairment loss (327,652) (327,652)

At 31 March 1,708,651 1,708,651

The details of the subsidiary companies are as follows:

Country of Group’s

Name Principal activities incorporation effective interest

2009 2008

% %

Perusahaan Otomobil Manufacture, assembly Malaysia 100 100

Nasional Sdn. Bhd.^ and sales of motor vehicles

and related products

Proton Tanjung Malim Assembly of motor vehicles Malaysia 100 100

Sdn. Bhd.^ and related products

Proton Marketing Sdn. Bhd. Investment holding Malaysia 100 100

Lotus Advance Investment holding Malaysia 100 100

Technologies Sdn. Bhd.

Proton Hartanah Sdn. Bhd. Investment holding Malaysia 100 100

Proton Capital Sdn. Bhd. In Members’ Voluntary Malaysia 100 100

Liquidation

Subsidiariy companies of

Perusahaan Otomobil

Nasional Sdn. Bhd.

PT Proton Cikarang Ceased operations Indonesia 100 100

Indonesia

Proton Automobiles Dormant British Virgin Islands 100 100

(China) Ltd. ^

PROTON 2009 ANNUAL REPORT

231


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

17 SUBSIDIARY COMPANIES (CONTINUED)

Country of Group’s

Name Principal activities incorporation effective interest

2009 2008

% %

Subsidiary companies of

Proton Marketing Sdn. Bhd.

Proton Corporation Liquidated during the Malaysia - 100

Sdn. Bhd. ^ financial year

Proton Cars (UK) Ltd.*^ Importation and England 100 100

distribution of motor

vehicles and related

products

Proton Cars Australia Importation and Australia 100 100

Pty. Ltd.*^ distribution of motor

vehicles and related

products

Proton Cars Benelux In Members’ Voluntary Belgium 100 100

NV. SA*^ Liquidation

Lotus Cars Asia Pacific Liquidated during the Malaysia - 100

Sdn. Bhd.^ financial year

Auto Compound and Liquidated during the Malaysia - 100

Distribution Centre financial year

Sdn. Bhd.^

Proton Edar Sdn. Bhd.^ Sales of motor vehicles, Malaysia 100 100

related spare parts

and accessories

Proton Motors (Thailand) Importation and wholesale Thailand 100 100

Co. Ltd.* of motor vehicles and

related products

Subsidiary companies of

Lotus Advance

Technologies Sdn. Bhd.

Proton Engineering Dormant Malaysia 100 100

Research Technology

Sdn. Bhd.^

Lotus Group International Investment holding England 100 100

Ltd.*^

232


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

17 SUBSIDIARY COMPANIES (CONTINUED)

Country of Group’s

Name Principal activities incorporation effective interest

2009 2008

% %

Subsidiary company of

Proton Hartanah Sdn. Bhd.

Proton Properties Property development Malaysia 100 100

Sdn. Bhd.^ and management

Subsidiary companies of

Proton Cars (UK) Ltd.

Smith & Sons Motors Liquidated during the England - 100

Ltd.*^ financial year

Proton Direct Ltd.*^ Liquidated during the England - 100

financial year

Proton Cars Liquidated during the England - 100

(Imports) Ltd.*^ financial year

Proton Cars Direct Liquidated during the England - 100

Limited* financial year

Subsidiary company of

Proton Cars Australia Pty. Ltd.

Lotus Cars Australia Importation and distribution Australia 100 100

Pty. Ltd.*^ of motor vehicles and related

products

Subsidiary companies of

Proton Edar Sdn. Bhd.

Proton Singapore Importation and distribution Singapore 100 100

Pte. Ltd.*^ of motor vehicles and related

products

Proton Edar Resources In Members’ Voluntary Malaysia 100 100

Sdn. Bhd.^ Liquidation

Proton Edar Ventures In Members’ Voluntary Malaysia 100 100

Sdn. Bhd.^ Liquidation

PT Proton Edar Importation and distribution Indonesia 95 95

Indonesia* of motor vehicles and related

products

PROTON 2009 ANNUAL REPORT

233


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

17 SUBSIDIARY COMPANIES (CONTINUED)

Country of Group’s

Name Principal activities incorporation effective interest

2009 2008

% %

Subsidiary company

of Lotus Group

International Ltd.

Group Lotus Plc.*^ Investment holding England 100 100

Subsidiary companies of

Group Lotus Plc.

Lotus Cars Ltd.*^ Manufacture of motor England 100 100

vehicles and engineering

consultancy services

Lotus Body Investment holding England 100 100

Engineering Ltd.*^

Lotus Motorsports Ltd.*^ Dormant England 100 100

Lotus Holdings Inc.*^ Investment holding United States 100 100

of America

Marco Acquisition Liquidated during United States - 100

Corporation*^ the financial year of America

Subsidiary companies of

Lotus Cars Ltd.

Lotus Engineering Ltd.*^ Engineering consultancy England 100 100

services

Lotus Engineering Engineering consultancy People’s Republic 100 100

Co. Ltd. (Shanghai)* services of China

Subsidiary company of

Lotus Body Engineering Ltd.

Lotus Lightweight Investment holding England 100 -

Structures Holdings Ltd.

(formerly known as

Holden Lightweight

Structures Ltd.)*

234


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

17 SUBSIDIARY COMPANIES (CONTINUED)

Country of Group’s

Name Principal activities incorporation effective interest

2009 2008

% %

Subsidiary company of Lotus

Lightweight Structures

Holdings Ltd. (formerly

known as Holden

Lightweight Structures Ltd.)

Lotus Lightweight Manufacture of England 100 -

Structures Ltd. automotive components

(formerly known as Holden

Aluminium Worcester Ltd.)*

Subsidiary company of

Lotus Engineering Ltd.

Lotus Engineering Engineering consultancy Malaysia 100 100

(Malaysia) Sdn. Bhd.^ services

Subsidiary companies of

Lotus Holdings Inc.

Lotus Engineering Inc.*^ Engineering consultancy United States 100 100

services of America

Lotus Cars USA Inc.*^ Sales of motor vehicles United States 100 100

and related spare parts of America

and accessories

* Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and

independent legal entity from PricewaterhouseCoopers, Malaysia

^ Consolidated by merger method of accounting prior to 1 April 2006

PROTON 2009 ANNUAL REPORT

235


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

17 SUBSIDIARY COMPANIES (CONTINUED)

(a) On 15 May 2008, Lotus Body Engineering Ltd., a wholly owned subsidiary company of Lotus Group

International Ltd. which in turn is a wholly owned subsidiary company of the Company acquired

the entire issued and paid up share capital of Lotus Lightweight Structures Holdings Ltd. (formerly

known as Holden Lightweight Structures Ltd.).

236

The effects of the acquisition on the financial results of the Group during the financial year are as

follows:

2009

RM’000

Revenue 46,204

Operating costs (57,957)

Loss before tax (11,753)

Tax expense -

Loss for the financial year (11,753)

The details of net assets acquired and cash flows arising from the acquisition of the subsidiary company

during the financial year are as follows:

Acquiree’s

carrying value Fair value

RM’000 RM’000

Property, plant and equipment (Note 13) 4,995 1,814

Inventories 5,173 5,173

Receivables, deposits and prepayments 7,512 7,512

Deposits, bank and cash balances 4,520 4,520

Payables and other liabilities (14,355) (18,497)

Net assets/ Fair value of net assets acquired 7,845 522

Details of cash flow arising from the acquisition are as follows:

Purchase consideration settled in cash 522

Less: Cash and cash equivalents of subsidiary company acquired (4,520)

Cash inflow to the Group on acquisition of subsidiary company 3,998

Cash inflow to the Group on acquisition of subsidiary company 3,998

Had the acquisition taken effect at the beginning of the financial year, the contributed revenue and loss to the

Group would have been RM55,193,000 and RM13,160,000 respectively.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

17 SUBSIDIARY COMPANIES (CONTINUED)

(b) In the prior year, Perusahaan Otomobil Nasional Sdn. Bhd. (‘PONSB’), a wholly owned subsidiary company of

the Company completed the acquisition of the remaining 49% equity interest in PT Proton Cikarang

Indonesia. As a result, PT Proton Cikarang Indonesia, a jointly controlled entity, became a wholly owned

subsidiary company of PONSB.

RM’000

Purchase consideration:

- cash consideration 33,750

- settlement of amount due from Tracoma Holdings Berhad 1,356

The acquired business contributed revenue of RM849,000 and loss of RM2,795,000 to the Group for

the period from 10 August 2007 to 31 March 2008. Had the acquisition taken effect at the beginning

of the financial year, the contributed revenue and loss to the Group would have been RM1,100,000 and

RM5,297,000 respectively.

PROTON 2009 ANNUAL REPORT

35,106

Fair value of net assets acquired (28,365)

Goodwill (Note 15) 6,741

Acquiree’s

carrying value Fair value

RM’000 RM’000

Property, plant and equipment (Note 13) 41,951 40,389

Prepaid land lease payment (Note 14) 16,476 25,108

Receivables, deposits and prepayments 3,045 4,356

Deposits, bank and cash balances 1,134 1,134

Payables and other liabilities (9,348) (11,096)

Deferred tax (Note 22) - (2,439)

Net assets acquired 53,258 57,452

Less: Amount previously accounted for as a jointly controlled entity (29,087)

Fair value of net assets acquired 28,365

Details of cash flow arising from the acquisition are as follows:

Purchase consideration settled in cash 33,750

Less: Cash and cash equivalents of subsidiary company acquired (1,134)

Cash outflow of the Group on acquisition of subsidiary company 32,616

237


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

18 ASSOCIATED COMPANIES

Unquoted shares at cost 59,252 59,252 13,600 13,600

Share of post-acquisition reserves 131,993 132,391 - -

The Group’s share of the assets, liabilities, revenue and expenses of the associated companies are as follows:

238

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

191,245 191,643 13,600 13,600

Less: Impairment loss (32,878) (26,200) - -

158,367 165,443 13,600 13,600

Group

2009 2008

RM’000 RM’000

Non-current assets 112,703 81,652

Current assets 161,000 204,383

Current liabilities (105,804) (110,902)

Non-current liabilities (9,532) (9,690)

Net assets 158,367 165,443

Revenue 236,058 260,507

Expenses (excluding tax) (222,351) (245,202)

Profit before taxation 13,707 15,305

Taxation 6,513 (2,171)

Profit for the financial year 20,220 13,134


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

18 ASSOCIATED COMPANIES (CONTINUED)

The details of the associated companies are as follows:

Country of Group’s

Name Principal activities incorporation effective interest

2009 2008

% %

PHN Industry Sdn. Bhd. Manufacture and sales of Malaysia 35 35

stamped parts and

sub-assembly of automotive

metal components

Marutech Elastomer Manufacture and production Malaysia 25 25

Industries Sdn. Bhd. of moulded products,

extruded and rubber hoses

for motor vehicles, motorcycle

and other related products

Exedy (Malaysia) Sdn. Bhd. Manufacture and assembly Malaysia 45 45

of manual clutch and

automatic transmission parts

Associated company of

Perusahaan Otomobil

Nasional Sdn. Bhd.

Vina Star Motors Import, assembly and Socialist 25 25

Corporation distribution of motor vehicles Republic of

Vietnam

Associated company of

Proton Hartanah Sdn. Bhd.

Proton City Development Property developer and Malaysia 40 40

Corporation Sdn. Bhd. project management

Associated company

of Proton Cars (UK) Ltd.

Proton Finance Ltd. Provision of dealer and England 49.99 49.99

customer financing

PROTON 2009 ANNUAL REPORT

239


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

18 ASSOCIATED COMPANIES (CONTINUED)

Country of Group’s

Name Principal activities incorporation effective interest

2009 2008

% %

Associated company

of Proton Edar Sdn. Bhd.

Netstar Advance Systems Manufacture, assembly and Malaysia 40 40

Sdn. Bhd. sales of vehicle tracking

devices

Associated company

of Proton Automobile

(China) Ltd.

Goldstar Proton Dormant People’s Republic 49 49

Automobiles Co. Ltd. * of China

Associated company of

Lotus Advance Technology

Sdn. Bhd.

Miyazu (Malaysia) Development, marketing Malaysia 51 51

Sdn. Bhd.** and sale of products and

provision of services relating

to dies, moulds and jigs

* The Group has initiated proceeding to dissolve the associated company via an arbitration process

(Note 43(c)).

** Company in which the Group owns more than 50% and exercises significant influence. However, it does not

have control over its financial and operating policies.

240

The share of capital commitments relating to the associated companies are as follows:

Capital commitments

Capital expenditure for property, plant and equipment

approved but not provided for in the financial

statements:

2009

Group

2008

RM’000 RM’000

Contracted for 233 745

Not contracted for 1,736 8,990


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

19 JOINTLY CONTROLLED ENTITIES

Unquoted shares at cost

At 1 April 2008 136,648 179,303

Reclassified to investment in subsidiary company - (42,655)

Liquidated (1,114) -

At 31 March 2009 135,534 136,648

Accumulated impairment loss

Group

2009 2008

RM’000 RM’000

At 1 April 2008 1,114 1,114

Liquidated (1,114) -

At 31 March 2009 - 1,114

Share of post-acquisition reserves 60,088 57,213

195,622 192,747

The Group’s share of the assets, liabilities, revenue and expenses of the jointly controlled entities are as

follows:

Group

2009 2008

RM’000 RM’000

Non-current assets 290,168 319,710

Current assets 151,926 153,300

Current liabilities (82,559) (53,198)

Non-current liabilities (163,913) (227,065)

Net assets 195,622 192,747

Revenue 175,673 168,746

Expenses (excluding tax) (156,000) (157,642)

Profit before taxation 19,673 11,104

Taxation (5,079) (3,267)

Profit for the financial year 14,594 7,837

PROTON 2009 ANNUAL REPORT

241


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

19 JOINTLY CONTROLLED ENTITIES (CONTINUED)

The details of the jointly controlled entities are as follows:

Country of Group’s

Name Principal activities incorporation effective interest

2009 2008

% %

Jointly controlled entities of

Proton Marketing Sdn. Bhd.

Proton Parts Centre Trading in motor vehicle Malaysia 55 55

Sdn. Bhd.* components, spare parts

and accessories

Proton Cars (Europe) Ltd. Liquidated during the England - 56

financial year

Jointly controlled entity

of Group Lotus Plc.

Lotus Finance Ltd. Provision of motor England 49.9 49.9

vehicles financing

Jointly controlled entity

of Proton Edar Sdn. Bhd.

Proton Commerce Provision of motor Malaysia 50 50

Sdn. Bhd. vehicles financing

* Company in which the Group owns more than half of the voting powers. However, as the Group only

has joint control over its financial and operating policies, this investment is treated as a jointly

controlled entity.

The share of capital commitments relating to the jointly controlled entities is as follows:

Capital commitments

Capital expenditure for property, plant and equipment

approved but not provided for in the financial

statements:

Not contracted for 1,062 1,288

242

2009

Group

2008

RM’000 RM’000


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

20 AMOUNTS DUE FROM SUBSIDIARY COMPANIES

The amounts due from subsidiary companies are denominated in Ringgit Malaysia, interest free and repayable

on demand.

Advances to a subsidiary company are denominated in Ringgit Malaysia, repayable between 1 to 3 years and

bears interest at 3.5% per annum.

21 INVESTMENTS

Company

Less than More than Less than More than

1 year 1 year Total 1 year 1 year Total

2009 2009 2009 2008 2008 2008

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

Amounts due from subsidiary

companies 58,912 - 58,912 66,219 - 66,219

Advances to a subsidiary company - 177,870 177,870 - - -

Unquoted investments in Malaysia:

58,912 177,870 236,782 66,219 - 66,219

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

At cost 13,347 13,347 8,575 8,575

Allowance for diminution in value (2,950) (2,950) (2,100) (2,100)

10,397 10,397 6,475 6,475

PROTON 2009 ANNUAL REPORT

243


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

22 DEFERRED TAXATION

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax

assets against 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:

Subject to income tax:

Deferred tax assets 5,727 -

Deferred tax liabilities (12,243) (2,439)

244

Group

2009 2008

RM’000 RM’000

(6,516) (2,439)

Movement of deferred tax

At start of financial year

Credited/(charged) to income

statement (Note 10)

(2,439) (754)

- property, plant and equipment (8,841) 5,519

- capitalised development cost (43,436) (1,865)

- allowances and provisions 49,624 (8,115)

- others (1,424) 5,215

(4,077) 754

Acquired through business combination (Note 17(b)) - (2,439)

At end of financial year (6,516) (2,439)

Deferred tax assets (before offsetting)

- property, plant and equipment 17 -

- allowances and provisions 86,074 36,450

- others 561 -

86,652 36,450

Offset of deferred tax liabilities (80,925) (36,450)

Deferred tax assets (after offsetting) 5,727 -


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

22 DEFERRED TAXATION (CONTINUED)

Deferred tax liabilities (before offsetting)

- capitalised development cost (78,364) (34,928)

- property, plant and equipment (12,819) (3,961)

- others (1,985) -

(93,168) (38,889)

Offset against deferred tax assets 80,925 36,450

Deferred tax liabilities (after offsetting) (12,243) (2,439)

Temporary differences of which

no deferred tax asset is recognised

Group

2009 2008

RM’000 RM’000

The tax effect of temporary differences (which have no expiry dates) for which no deferred tax asset is

recognised in the balance sheet are as analysed below:

Group

2009 2008

RM’000 RM’000

Unrecognised tax losses 158,263 174,516

Unabsorbed capital allowances 497,646 413,507

Unrecognised reinvestment allowances 498,341 465,431

Other temporary differences 79,082 34,768

As at 31 March 2009, there are no temporary differences associated with unremitted earnings of subsidiary

companies, associated companies and joint controlled entities for the recognition of deferred tax liabilities

(2008: Nil).

PROTON 2009 ANNUAL REPORT

245


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

23 INVENTORIES

Raw materials:

- completely knocked-down packs of vehicles 244,888 193,514

- others 164,115 89,290

Parts, accessories and general stores 68,862 73,995

Work-in-progress 219,188 188,779

Finished vehicles 640,945 511,065

Goods-in-transit 35,723 21,520

Land held for development 9,552 9,541

Properties for sale 11,808 12,582

24 TRADE AND OTHER RECEIVABLES

246

Group

2009 2008

RM’000 RM’000

1,395,081 1,100,286

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

Trade receivables 611,944 707,039 - -

Allowance for doubtful debts (51,583) (19,277) - -

560,361 687,762 - -

Other receivables 125,820 213,099 145 14

Allowance for doubtful debts (22,954) (77,122) - -

102,866 135,977 145 14

Government grant receivable 80,656 - - -

Warranty claims reimbursable (Note 34) 111,451 112,258 - -

Prepayments 20,368 18,316 - -

Deposits 14,393 15,031 - -

890,095 969,344 145 14


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

24 TRADE AND OTHER RECEIVABLES (CONTINUED)

The currency exposure profile of trade and other receivables are as follows:

Group

Functional currency

Ringgit Pound US

Currency exposure profile as at 31.3.2009

Malaysia Sterling Dollar Euro Others Total

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

Ringgit Malaysia 530,497 31,764 78,307 21,985 51,611 714,164

Pound Sterling - 37,178 82,823 15,503 2,410 137,914

Others - - - 198 37,819 38,017

Company

Functional currency

530,497 68,942 161,130 37,686 91,840 890,095

Ringgit Malaysia 145 - - - - 145

Group

Functional currency

Ringgit Pound US

Currency exposure profile as at 31.3.2008

Malaysia Sterling Dollar Euro Others Total

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

Ringgit Malaysia 625,197 24,660 63,254 34,508 92,134 839,753

Pound Sterling - 46,943 46,864 18,382 6,916 119,105

Others - - - 207 10,279 10,486

Company

Functional currency

625,197 71,603 110,118 53,097 109,329 969,344

Ringgit Malaysia 14 - - - - 14

PROTON 2009 ANNUAL REPORT

247


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

24 TRADE AND OTHER RECEIVABLES (CONTINUED)

Credit terms of trade receivables for the Group ranges from 14 to 360 days (2008: 14 to 360 days). However, the

majority of the Group’s trade receivables have a credit term between 14 to 90 days (2008: 14 to 90 days).

Group sales are concentrated in Malaysia with one major third party customer in Malaysia making up 27.5%

(2008: 25%) of total Group revenue.

The Group has no significant concentrations of credit risk except for an amount of RM81,138,000 (2008:

RM205,057,000) due from a single customer. The Directors are of the view that the credit risk is minimal in view

of the stability and historical settlement of the receivables from this customer.

25 AMOUNTS DUE FROM ASSOCIATED COMPANIES

The amounts due from associated companies arose from normal trade transactions. These amounts have credit

terms ranging from 30 to 60 days (2008: 30 to 60 days).

The currency exposure profile of amounts due from associated companies are as follows:

Group

Functional currency

248

Currency exposure profile as at 31.3.2009

Ringgit Pound

Malaysia Sterling Total

RM’000 RM’000 RM’000

Ringgit Malaysia 18,219 16 18,235

Pound Sterling - 49 49

Group

Functional currency

18,219 65 18,284

Currency exposure profile as at 31.3.2008

Ringgit Pound

Malaysia Sterling Total

RM’000 RM’000 RM’000

Ringgit Malaysia 9,645 - 9,645

Pound Sterling - 1,068 1,068

9,645 1,068 10,713


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

26 AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES

The amounts due from jointly controlled entities arose from normal trade transactions. These amounts have

credit terms ranging from 30 to 45 days (2008: 30 to 45 days).

The currency exposure profile of amounts due from jointly controlled entities are as follows:

Group

Functional currency

Currency exposure profile as at 31.3.2009

Ringgit Pound

Malaysia Sterling Total

RM’000 RM’000 RM’000

Ringgit Malaysia 8,894 16 8,910

Pound Sterling - 2,443 2,443

Group

Functional currency

8,894 2,459 11,353

Currency exposure profile as at 31.3.2008

Ringgit Pound

Malaysia Sterling Total

RM’000 RM’000 RM’000

Ringgit Malaysia 4,430 - 4,430

PROTON 2009 ANNUAL REPORT

249


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

27 CURRENT INVESTMENTS

Lower of cost and market value:

Commercial papers and corporate debt

28 DEPOSITS, BANK AND CASH BALANCES

250

Group

2009 2008

RM’000 RM’000

- quoted investments in Malaysia 584 526

- unquoted investments in Malaysia 14,729 20,296

15,313 20,822

Market value of quoted investments:

Commercial papers and corporate debt 724 806

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

Short term funds deposited with

licensed banks 717,221 1,062,834 208,955 25,920

Bank and cash balances 196,629 163,176 468 376

The maturity profile of short term funds

are as follows:

913,850 1,226,010 209,423 26,296

0 - 1 month 486,044 279,583 51,159 19,800

2 - 3 months 224,784 773,899 157,796 6,120

4 - 6 months - 1,800 - -

6 - 12 months 6,393 7,552 - -

717,221 1,062,834 208,955 25,920


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

28 DEPOSITS, BANK AND CASH BALANCES (CONTINUED)

Bank balances are deposits held at call with banks.

Group

Functional currency

Ringgit Pound US

Currency exposure profile as at 31.3.2009

Malaysia Sterling Dollar Euro Others Total

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

Ringgit Malaysia 717,899 4,978 23,536 5,194 21,079 772,686

Pound Sterling - 67,549 16,305 10,165 5,554 99,573

Australian Dollar - - - - 15,012 15,012

Others - - - 1,086 25,493 26,579

Group

Functional currency

717,899 72,527 39,841 16,445 67,138 913,850

Ringgit Pound US

Currency exposure profile as at 31.3.2008

Malaysia Sterling Dollar Euro Others Total

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

Ringgit Malaysia 1,107,976 2,501 2,726 4,960 7,354 1,125,517

Pound Sterling - 33,496 19,243 5,454 2,713 60,906

Australian Dollar - - - - 38,451 38,451

Others - - - 1,136 - 1,136

1,107,976 35,997 21,969 11,550 48,518 1,226,010

Deposits, bank and cash balances in the Company as at 31 March 2009 and 2008 are denominated in Ringgit

Malaysia.

The weighted average effective interest rates of deposits at the balance sheet date were 2.59% (2008: 3.52%)

per annum for the Group and 1.90% (2008: 3.20%) per annum for the Company.

The Group has unutilised banking facilities amounting to RM623.7 million (2008: RM783.0 million) as at

31 March 2009.

PROTON 2009 ANNUAL REPORT

251


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

29 NON-CURRENT ASSETS HELD FOR SALE

Non-current assets classified as held for sale:

- property, plant and equipment (Note 13) 13,728 -

- prepaid land lease payments (Note 14) 22,684 -

30 SHARE CAPITAL

252

Group

2009 2008

RM’000 RM’000

36,412 -

Group and Company

2009 2008

RM’000 RM’000

Authorised:

Ordinary shares of RM1.00 each

At start/end of financial year 1,000,000 1,000,000

Issued and fully paid:

Ordinary shares of RM1.00 each

At start/end of financial year 549,213 549,213


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

31 RESERVES

(a) Retained earnings

Under the single-tier tax system which came into effect from the year of assessment 2008, companies are

not required to have tax credits under Section 108 of the Income Tax Act, 1967 for dividend payment

purposes. Dividends paid under this system are tax exempt in the hands of shareholders.

Companies with Section 108 credits as at 31 December 2007 may continue to pay franked dividends until

the Section 108 credits are exhausted or 31 December 2013 whichever is earlier unless they opt to disregard

the Section 108 credits to pay single-tier dividends under the special transitional provisions of the Finance

Act, 2007.

As at 31 March 2009, the Company has sufficient Section 108 tax credits to frank approximately RM1,377.0

million (2008: RM1,325.8 million) of its retained earnings as at 31 March 2009 if paid out as dividends.

In addition, the Company has tax exempt income as at 31 March 2009 amounting to approximately RM324.8

million (2008: RM321.5 million) available for distribution of tax exempt dividends to its shareholders.

(b) Capital reserve

The capital reserve arose as a result of a Group reorganisation exercise whereby all existing shareholders

of Perusahaan Otomobil Nasional Sdn. Bhd. (‘PONSB’) exchanged all their ordinary shares of RM1.00 each

comprising 549,213,000 ordinary shares in PONSB for 549,213,000 new ordinary shares of RM1.00 each in the

Company in a one-for-one share exchange on 5 April 2004. Following the share for share exchange,

the Company has no share premium. Accordingly, the amount of share premium previously recognised on

consolidation has been re-designated as capital reserve.

(c) Asset revaluation reserve

The asset revaluation reserve arose as a result of a fair value adjustment of the 51% equity interest

previously held in PT Proton Cikarang Indonesia as a jointly controlled entity upon the acquisition of the

remaining 49% equity interest on 10 August 2007.

PROTON 2009 ANNUAL REPORT

253


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES

Unsecured:

Long term loan (Note 32(a)) 47,879 47,879

Portion repayable within twelve months (Note 38) (47,879) -

254

Group

2009 2008

RM’000 RM’000

- 47,879

Secured:

Long term loan (Note 32(b)) 67,893 83,005

Portion repayable within twelve months (Note 38) (15,668) -

52,225 83,005

Lease and hire purchase creditors (Note 32(c)) 3,395 5,124

Less: Portion repayable within twelve months (Note 33) (858) (973)

2,537 4,151

Automotive Development Fund (Note 32(d)) 21,686 45,343

Employee retirement benefits (Note 32(e)) 25,068 50,095

The currency exposure profile of the long term liabilities is as follows:

Group

Functional currency

101,516 230,473

Currency exposure profile as at 31.3.2009

Ringgit Pound

Malaysia Sterling Total

RM’000 RM’000 RM’000

Ringgit Malaysia 21,686 - 21,686

Pound Sterling - 79,830 79,830

21,686 79,830 101,516


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES (CONTINUED)

Group

Functional currency

The long term loan is repayable as follows:

Currency exposure profile as at 31.3.2008

Ringgit Pound

Malaysia Sterling Total

RM’000 RM’000 RM’000

Ringgit Malaysia 93,221 - 93,221

Pound Sterling - 137,252 137,252

(a) Long term loan - unsecured

93,221 137,252 230,473

Group

2009 2008

RM’000 RM’000

Within one year 47,879 -

Between one and two years - 47,879

47,879 47,879

The loan balance of RM47.9 million (2008: RM47.9 million) which is due on 30 September 2009, is interest

free and denominated in Ringgit Malaysia.

PROTON 2009 ANNUAL REPORT

255


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES (CONTINUED)

(b) Long term loan - secured

256

The long term loan is repayable as follows:

Within one year 15,668 -

Between one and two years 20,890 44,695

More than two years 31,335 38,310

The lease and hire purchase creditors are repayable as follows:

67,893 83,005

Within one year 1,084 1,325

Between one and two years 1,084 1,325

Between two and five years 1,714 3,421

3,882 6,071

Less: Future finance charges (487) (947)

Present value of lease and hire purchase creditors 3,395 5,124

Current (Note 33) 858 973

Non-current 2,537 4,151

Present value of lease and hire purchase creditors 3,395 5,124

The lease and hire purchase creditors bears an interest rate of 7.5% (2008: 7.5%) per annum.

Group

2009 2008

RM’000 RM’000

The long term loan is secured over a subsidiary company’s fixed and floating assets as disclosed in Note 13

and bears an interest rate of 7.32% (2008: 8.44%) per annum.

(c) Lease and hire purchase creditors - secured

The lease and hire purchase arrangements obtained by subsidiary companies are secured against the related

assets of the respective subsidiary companies.

Group

2009 2008

RM’000 RM’000


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES (CONTINUED)

(d) Automotive Development Fund

The Government of Malaysia approved the setting up of an Automotive Development Fund (‘ADF’) under

the Ninth Malaysia Plan with the objective of modernising and automating the manufacturing processes,

improving efficiency, productivity, quality and the application of automation for the Malaysian automotive

industry.

The Government of Malaysia had as at 31 March 2008, disbursed a total of RM50 million to the Group to be

utilised for payments to external parties for the purpose of developing and promoting a competitive and

viable domestic automotive sector as a mean to achieve the objective of the ADF.

The ADF comprises:

(i) ADF liabilities 14,467 45,343

(ii) Capital grant 9,403 -

23,870 45,343

Less: Current portion of capital grant (2,184) -

Non-current 21,686 45,343

(i) ADF liabilities

Group

2009 2008

RM’000 RM’000

At 1 April 45,343 50,201

Interest earned during the financial year 681 1,402

46,024 51,603

Less: Utilised during the financial year (31,557) (6,260)

At 31 March (Note 44) 14,467 45,343

PROTON 2009 ANNUAL REPORT

257


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES (CONTINUED)

(d) Automotive Development Fund (continued)

258

(ii) Capital grant

Group

2009 2008

RM’000 RM’000

At 1 April - -

Add: Received during the financial year 31,049 -

Less: Amortisation (21,646) -

At 31 March 9,403 -

Current 2,184 -

Non-current 7,219 -

The current portion of the capital grant is presented within other payables (Note 33).

(e) Employee retirement benefits

The employee retirement benefits represents the scheme operated by a subsidiary company.

(i) Defined contribution plan

9,403 -

The Group pays contributions to publicly or privately administered pension plans on either a

mandatory, contractual or voluntary basis depending on the nature of the defined contribution

plans. The Group has no further payment obligations once the contributions have been paid. The

contributions are recognised as employee benefit expense when they are due. Prepaid contributions

are recognised as an asset to the extent that a cash refund or reduction in the future payments is

available.

(ii) Defined benefit plan

Lotus Group Scheme - defined benefit scheme

Lotus Group International Ltd. and its subsidiary companies (‘Lotus Group’), operate a defined benefit

pension scheme, the Lotus Pension Plan. The assets are held in separate trustee administered funds. In

addition, it provides life assurance cover for all employees.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES (CONTINUED)

(e) Employee retirement benefits (continued)

(ii) Defined benefit plan (continued)

Contributions to the scheme are charged to the income statement so as to spread the cost of pensions

over employees’ working lives with the Lotus Group. The contributions are determined by a qualified

actuary. An actuarial update of the plan was carried out for the period from 1 April 2008 to 31 March

2009.

The movements during the financial year in the Consolidated Balance Sheet are as follows:

At 1 April 50,095 49,842

Currency translation differences (7,616) (3,208)

(Credited)/charged to income statement (Note 8) (8,042) 14,616

Contributions paid (9,369) (11,155)

At 31 March 25,068 50,095

The amounts recognised in the Consolidated Balance Sheet are analysed as follows:

Group

2009 2008

RM’000 RM’000

Group

2009 2008

RM’000 RM’000

Present value of obligation 234,156 316,128

Fair value of plan assets (224,494) (341,917)

Shortfall/(excess) of funded plan 9,662 (25,789)

Unrecognised actuarial gain 15,406 75,884

Liability on balance sheet 25,068 50,095

PROTON 2009 ANNUAL REPORT

259


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES (CONTINUED)

(e) Employee retirement benefits (continued)

260

(ii) Defined benefit plan (continued)

The movements in the defined benefit obligation during the financial year are as follows:

At 1 April 316,128 392,068

Currency translation differences (55,588) (20,000)

Interest cost 18,926 21,066

Current service cost 4,266 4,768

Employee contributions 3,817 4,509

Benefits paid (11,495) (9,941)

Actuarial gain on obligation (41,898) (76,342)

At 31 March 234,156 316,128

The movements in the fair value of plan assets during the financial year are as follows:

Group

2009 2008

RM’000 RM’000

Group

2009 2008

RM’000 RM’000

At 1 April 341,917 369,469

Currency translation differences (55,571) (20,766)

Expected return on plan assets 21,162 26,219

Employer contributions 9,369 11,155

Employee contributions 3,817 4,509

Benefits paid (11,495) (9,941)

Actuarial loss on plan assets (84,705) (38,728)

At 31 March 224,494 341,917


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES (CONTINUED)

(e) Employee retirement benefits (continued)

(ii) Defined benefit plan (continued)

The mortality assumptions used were as follows:

Longevity at age 65 for current pensioners:

- Male 84.9 84.7

- Female 87.9 87.8

Longevity at age 65 for future pensioners:

- Male 86.1 86.0

- Female 89.1 89.0

The expenses recognised in the Consolidated Income Statements are analysed as follows:

Current service cost 4,266 4,768

Interest cost 18,926 21,066

Expected return on plan assets (21,162) (26,219)

Net actuarial gain recognised in financial year (10,072) -

Amortisation of transitional liability - 15,001

Total, included in staff costs within

Group

2009 2008

RM’000 RM’000

Group

2009 2008

RM’000 RM’000

administrative expenses (Note 8) (8,042) 14,616

Actual return on plan assets (63,543) (12,509)

PROTON 2009 ANNUAL REPORT

261


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

32 LONG TERM LIABILITIES (CONTINUED)

(e) Employee retirement benefits (continued)

262

(ii) Defined benefit plan (continued)

The principal actuarial assumptions used in respect of the Group’s defined benefit plan were as follows:

Discount rates 6.90 6.60

Expected return on plan assets

Group

2009 2008

% %

- equity 7.25 7.25

- bonds 4.50 4.50

- others 4.50 4.50

Expected rate of salary increase 4.00 4.40

Expected rate of pension payment increase 3.00 3.30

Inflation 3.00 3.40

The expected return on the average value of the assets over the period is calculated using the long-term

average rate of return expected over the remaining term of the Lotus Pension Plan’s liabilities.

33 TRADE AND OTHER PAYABLES

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

Trade payables 287,158 313,546 - -

Other payables 95,597 126,189 482 575

Accruals 817,796 738,601 - -

Payments received in advance for

engineering contracts

Lease and hire purchase creditors

76,249 56,211 - -

- current portion (Note 32) 858 973 - -

1,277,658 1,235,520 482 575


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

33 TRADE AND OTHER PAYABLES (CONTINUED)

The currency exposure profile of trade and other payables are as follows:

Group

Functional currency

Ringgit Pound US

Currency exposure profile as at 31.3.2009

Malaysia Sterling Dollar Euro Others Total

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

Ringgit Malaysia 959,908 523 39,428 7,080 30,821 1,037,760

Pound Sterling - 127,742 80,028 22,584 1,599 231,953

Others - - - 203 7,742 7,945

Company

Functional currency

959,908 128,265 119,456 29,867 40,162 1,277,658

Ringgit Malaysia 482 - - - - 482

Group

Functional currency

Ringgit Pound US

Currency exposure profile as at 31.3.2008

Malaysia Sterling Dollar Euro Others Total

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

Ringgit Malaysia 924,780 1,897 48,680 12,762 47,403 1,035,522

Pound Sterling - 131,948 42,092 21,357 779 196,176

Others - - - - 3,822 3,822

Company

Functional currency

924,780 133,845 90,772 34,119 52,004 1,235,520

Ringgit Malaysia 575 - - - - 575

Terms of trade payables granted to the Group and Company varies between no credit to 60 days (2008: no credit

to 60 days) credit.

PROTON 2009 ANNUAL REPORT

263


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

34 PROVISIONS

2009

264

Provision Onerous

Group

for warranty contract Total

RM’000 RM’000 RM’000

At 1 April 186,556 - 186,556

Currency translation differences (4,862) - (4,862)

Charge to income statement (Note 7) 62,862 4,426 67,288

Warranties reimbursable 43,054 - 43,054

Provision for the financial year 105,916 4,426 110,342

Utilised during the financial year (102,257) - (102,257)

At 31 March 185,353 4,426 189,779

2008

Provision Onerous

Group

for warranty contract Total

RM’000 RM’000 RM’000

At 1 April 196,067 - 196,067

Currency translation differences (1,308) - (1,308)

Charged to income statement (Note 7) 45,526 - 45,526

Warranties reimbursable 45,572 - 45,572

Provision for the financial year 91,098 - 91,098

Utilised during the financial year (99,301) - (99,301)

At 31 March 186,556 - 186,556

The Group expects to be reimbursed by suppliers in respect of warranties amounting to RM111,451,000 (2008:

RM112,258,000) as disclosed in Note 24 to the financial statements.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

35 AMOUNTS DUE TO SUBSIDIARY COMPANIES

Amounts due to subsidiary companies were fully repaid during the financial year.

36 AMOUNTS DUE TO ASSOCIATED COMPANIES

Amounts due to associated companies arose from normal trade transactions, are denominated in Ringgit

Malaysia and payable within 30 to 60 days (2008: 30 to 60 days).

37 AMOUNTS DUE TO JOINTLY CONTROLLED ENTITIES

Amounts due to jointly controlled entities arose from normal trade transactions, and are due between 30 to 45

days (2008: 30 to 45 days).

The currency exposure profile of the amounts due to jointly controlled entities is as follows:

Group

Functional currency

Currency exposure profile as at 31.3.2009

Pound US Ringgit

Sterling Dollar Malaysia Total

RM’000 RM’000 RM’000 RM’000

Ringgit Malaysia - - 14,622 14,622

Pound Sterling 307 - - 307

Australian Dollar - 266 - 266

Group

Functional currency

307 266 14,622 15,195

Currency exposure profile as at 31.3.2008

Pound US Ringgit

Sterling Dollar Malaysia Total

RM’000 RM’000 RM’000 RM’000

Ringgit Malaysia - - 16,347 16,347

Pound Sterling 290 - - 290

Australian Dollar - 321 - 321

290 321 16,347 16,958

PROTON 2009 ANNUAL REPORT

265


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

38 SHORT TERM BORROWINGS

266

Effective interest rate

during the financial year Group

2009 2008 2009 2008

% % RM’000 RM’000

Unsecured:

Long term loan

- current portion (Note 32) - - 47,879 -

Bridging loan 5.00 – 6.00 5.00 – 6.00 36,595 31,985

Bankers’ acceptance 2.88 – 4.82 4.20 141,317 964

Revolving credit 3.50 – 6.00 4.00 – 6.00 30,813 38,310

Bank overdrafts - 7.51 – 7.59 - 6,728

256,604 77,987

Secured:

Long term loan

- current portion (Note 32) 7.32 - 15,668 -

Revolving credit 4.00 – 10.00 7.00 – 10.00 33,767 35,619

The revolving credit is secured over a subsidiary company’s fixed and floating assets.

The currency exposure profile of the short term borrowings is as follows:

Group

Functional currency

49,435 35,619

306,039 113,606

Currency exposure profile as at 31.3.2009

Ringgit Pound

Malaysia Sterling Total

RM’000 RM’000 RM’000

Ringgit Malaysia 189,196 - 189,196

Pound Sterling - 116,843 116,843

189,196 116,843 306,039


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

38 SHORT TERM BORROWINGS (CONTINUED)

Group

Functional currency

39 SEGMENTAL INFORMATION

Currency exposure profile as at 31.3.2008

Ringgit Pound

Malaysia Sterling Total

RM’000 RM’000 RM’000

Ringgit Malaysia 964 - 964

Pound Sterling - 112,642 112,642

964 112,642 113,606

The Group is principally engaged in the automobile industry namely, manufacturing, assembling, trading and

provision of engineering and other services in respect of motor vehicles and related products. Accordingly, no

segmental information is considered necessary for analysis by industry segment.

Inter-segment sales comprise sales of motor vehicles, parts and engineering services to Group companies in

different geographical locations.

Analysis of the Group’s revenue, results and other information by geographical locations are as follows:

Malaysia Other countries Elimination Total

2009 2008 2009 2008 2009 2008 2009 2008

RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million

Revenue

External sales 5,689.6 4,617.4 797.0 1,004.2 - - 6,486.6 5,621.6

Inter-segment sales 121.6 117.4 47.2 30.6 (168.8) (148.0) - -

Total revenue 5,811.2 4,734.8 844.2 1,034.8 (168.8) (148.0) 6,486.6 5,621.6

Results

Segment operating

(loss)/profit (273.0) 163.7 (106.5) (18.4) (3.4) (40.8) (382.9) 104.5

Unallocated income 1.3 4.7

Interest expense (14.4) (17.9)

Interest income 42.0 32.1

Share of net results of

associated companies

and jointly controlled

entities 20.3 14.5 5.3 12.8 9.2 (6.3) 34.8 21.0

Taxation 17.4 40.2

(Loss)/profit after taxation (301.8) 184.6

PROTON 2009 ANNUAL REPORT

267


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

39 SEGMENTAL INFORMATION (CONTINUED)

Other information

Segment assets 5,703.4 6,096.9 820.5 663.5 - - 6,523.9 6,760.4

Unallocated assets 575.0 532.9

Total assets 7,098.9 7,293.3

Segment liabilities 1,287.0 1,324.1 284.3 199.9 - - 1,571.3 1,524.0

Unallocated liabilities 426.1 348.1

Total liabilities 1,997.4 1,872.1

Capital expenditure

Depreciation and

562.4 440.7 138.0 92.5 - - 700.4 533.2

amortisation 473.4 368.7 25.4 48.7 - - 498.8 417.4

Assets written off

Impairment:

- property, plant and

34.2 18.3 4.6 0.2 - - 38.8 18.5

equipment

- capitalised

257.7 - - - - - 257.7 -

development cost

Research and

20.8 - - - - - 20.8 -

development grant

Allowance for

(80.7) (193.8) - - - - (80.7) (193.8)

doubtful debts

Write down/(write back)

45.6 7.7 - - - - 45.6 7.7

of inventories 108.8 (27.2) 6.1 2.1 - - 114.9 (25.1)

268

Malaysia Other countries Elimination Total

2009 2008 2009 2008 2009 2008 2009 2008

RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million

Unallocated income includes dividend from other investments, gain/(loss) on disposal of current investments

and write down/(write back) of provision for diminution in value of current investments. Segment assets consist

primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash, and

excludes investments in associated companies, jointly controlled entities, investments, current investments,

goodwill and taxation. Segment liabilities comprise operating liabilities and exclude items such as taxation,

borrowings and employee retirement benefits.

Capital expenditure mainly comprises additions to property, plant and equipment and intangible assets (Notes

13 and 16 to the financial statements).


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

39 SEGMENTAL INFORMATION (CONTINUED)

Secondary reporting format

The primary reporting format is based on geographical locations of the assets. The industry segmentation is

considered unnecessary as the Group is principally engaged in the automobile industry. Therefore, only sales to

external customers based on the location of the customer are presented below:

Malaysia Other countries Elimination Total

2009 2008 2009 2008 2009 2008 2009 2008

RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million

Revenue

External sales 5,372.3 4,165.4 1,114.3 1,456.2 - - 6,486.6 5,621.6

Inter segment sales 121.6 117.4 47.2 30.6 (168.8) (148.0) - -

Total revenue 5,493.9 4,282.8 1,161.5 1,486.8 (168.8) (148.0) 6,486.6 5,621.6

40 CAPITAL AND OTHER COMMITMENTS

Capital commitments

Capital expenditure for property, plant and equipment

and intangible assets approved by the Board but not provided

for in the financial statements:

Group

2009 2008

RM’000 RM’000

Contracted for 184,745 276,748

Not contracted for 2,421,085 2,017,329

PROTON 2009 ANNUAL REPORT

269


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

41 OPERATING LEASES

As at 31 March 2009, the Group was committed to making the following payments in respect of operating leases

expiring:

2009

270

Office

Land and Plant and equipment

Group

buildings machinery and vehicles Total

RM’000 RM’000 RM’000 RM’000

Within one year 11,414 965 1,254 13,633

Between one and five years 13,896 2,261 1,231 17,388

After five years 1,353 52 - 1,405

2008

26,663 3,278 2,485 32,426

Office

Land and Plant and equipment

Group

buildings machinery and vehicles Total

RM’000 RM’000 RM’000 RM’000

Within one year 12,597 1,164 514 14,275

Between one and five years 14,931 955 659 16,545

27,528 2,119 1,173 30,820


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

42 SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES

In the normal course of business, the Group and Company undertake a variety of transactions at mutually agreed

terms with subsidiary companies, associated companies, jointly controlled entities and other related parties.

The related parties with whom the Group and Company transact with, include the following companies:

Related parties Relationship

Lotus Group International Ltd. Subsidiary company

Miyazu (Malaysia) Sdn. Bhd. Associated company

PHN Industry Sdn. Bhd. Associated company

Marutech Elastomer Industries Sdn. Bhd. Associated company

Exedy (Malaysia) Sdn. Bhd. Associated company

Proton City Development Corporation Sdn. Bhd. Associated company

Netstar Advance Systems Sdn. Bhd. Associated company

Proton Finance Ltd. Associated company

Lotus Finance Ltd. Jointly controlled entity

Proton Parts Centre Sdn. Bhd. Jointly controlled entity

PEPS-JV (M) Sdn. Bhd. Equity investment

Technomeiji Rubber Industries Sdn. Bhd. Equity investment

Aluminium Alloy Industries Sdn. Bhd. Equity investment

Ara Borgstena Sdn. Bhd. Equity investment

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are

other significant related party transactions. The related party transactions described below were carried out on

terms and conditions obtainable in transactions with unrelated parties unless otherwise stated.

(a) Interest income from advances to a subsidiary company

2009

Company

2008

Subsidiary company

RM’000 RM’000

- Lotus Group International Ltd. 5,680 301

(b) Sales of goods and services

2009

Group

2008

RM’000 RM’000

Jointly controlled entities

- Proton Parts Centre Sdn. Bhd. 25,566 17,925

- Lotus Finance Ltd.* 45,988 88,590

Associated company

- Proton Finance Ltd.* 30,787 61,892

* Under the terms of financing agreements, Lotus Finance Ltd. and Proton Finance Ltd. provide financing

services to dealers and customers of the Group to acquire vehicles. Vehicles under financing arrangements

are sold through Lotus Finance Ltd. and Proton Finance Ltd..

PROTON 2009 ANNUAL REPORT

271


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

42 SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES (CONTINUED)

(c) Purchases of goods and services from:

272

Associated companies

- PHN Industry Sdn. Bhd. 123,623 70,338

- Marutech Elastomer Industries Sdn. Bhd. 1,048 1,302

- Exedy (Malaysia) Sdn. Bhd. 8,619 11,089

- Proton City Development Corporation Sdn. Bhd. 34 111

- Netstar Advance Systems Sdn. Bhd. 6,487 14,407

- Miyazu (Malaysia) Sdn. Bhd. 136,524 185,398

Jointly controlled entity

- Proton Parts Centre Sdn. Bhd. 98,179 86,838

Equity investment companies

- PEPS-JV (M) Sdn. Bhd. 191,301 189,054

- Technomeiji Rubber Industries Sdn. Bhd. 3,589 7,410

- Aluminium Alloy Industries Sdn. Bhd. 44,712 17,583

- Ara Borgstena Sdn. Bhd. 30 1,247

(d) Interest expense

Associated company

- Proton Finance Ltd. 694 465

(e) Key management personnel compensation

Group

2009 2008

RM’000 RM’000

Key management is defined as those persons having authority and responsibility for planning, directing and

controlling the activities of the Group, directly or indirectly, including Executive and Non-Executive

directors. The key management compensation disclosed below excludes the Executive and Non-Executive

Directors’ compensation as disclosed in Note 8 to the financial statements:

Group

2009 2008

RM’000 RM’000

Salaries and other short-term employee benefits 10,822 8,054

Defined contribution retirement plan 1,243 811


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

43 CONTINGENT LIABILITIES

(a) In a prior financial year, a supplier had obtained a judgment in default against a subsidiary

company for RM12.2 million after failing to reach a formal agreement. The subsidiary company

had obtained legal opinion that the claims are without basis and action has been taken to set aside

the judgment. The Directors are of the opinion, based on legal advice, that the claims have no merits

and are unlikely to succeed.

(b) A distributor instituted arbitration proceedings against a subsidiary company as a result of the

termination of its distributorship, for which the distributor had claimed USD9.9 million (RM36.2

million) plus general damages and interest. The arbitration award was handed down on 30 October

2006 wherein the distributor’s claim against the subsidiary company was dismissed. The distributor

has filed an action in court to set aside the arbitration award. The subsidiary company has obtained

legal advice that it is probable that such an action will not be successful.

(c) A subsidiary company had issued a notice of termination of an associated company on 11 July 2006

to the subsidiary company’s joint venture partner (‘Respondent’). The subsidiary company’s joint

venture partner is disputing the termination. The amount claimed cannot be quantified due to

the nature of damages being claimed which can only be ascertained from evidence produced during

the arbitration process. According to the Joint Venture Contract (‘JV Contract’), disputes must be

referred to arbitration. The subsidiary company filed the Statement of Case with the Singapore

International Arbitration Centre on 31 January 2008. The Respondent subsequently produced a

Memorandum allegedly signed by the subsidiary company and the Respondent dated the same

date as the JV Contract which allegedly states that the forum for settling of disputes should be the

Chinese courts and not arbitration. The subsidiary company maintains that the Memorandum is

a forgery. The arbitration tribunal has stated that it has jurisdiction to hear the matter challenging

its jurisdiction and this will be by way of a full hearing involving witnesses and evidence.

On 5 May 2009, the subsidiary company had obtained an injunction to stop the Respondent

from continuing proceedings at the Chinese courts and submit itself to arbitration. The arbitration

tribunal has ordered that:

(i) it has jurisdiction to hear and decide the Respondent’s challenge over the arbitration and the

claim that a Chinese court should have jurisdiction over the arbitration and/or the matter raised

is rejected; and

(ii) it has jurisdiction over this arbitration and all matters submitted under the dispute resolution

provision stated in the JV Contract, which includes but is not limited to the subsidiary company’s

claims under the notice of arbitration, and therefore the Respondent’s claim that this arbitration

should be terminated or suspended is rejected.

On 9 June 2009, the arbitration tribunal has further ordered that the Respondent shall pay the

subsidiary company all its legal costs relating to the jurisdiction proceedings, amounting to

Singapore Dollar 424,058 (RM1,020,000).

On 25 June 2009, the subsidiary company’s counsel in China has also entered a conditional

appearance and filed its objection with the Dongguan Court in China.

The arbitration tribunal will now proceed with the substantive hearing to decide on the termination

of the JV Contract.

PROTON 2009 ANNUAL REPORT

273


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

43 CONTINGENT LIABILITIES (CONTINUED)

(d) A vendor has commenced arbitration proceedings against two subsidiary companies. The claim

against one subsidiary company amounts to RM19.3 million and against the other subsidiary

company is for RM14.2 million. Both parties are in the midst of exchanging points of claims and

defences which will be followed by the exchange of documents in support of such claims and

defences. The Directors are of the opinion, based on legal advice, that the claims have no merits and

are unlikely to succeed.

44 CASH AND CASH EQUIVALENTS

Short term funds deposited with

licensed banks 717,221 1,062,834 208,955 25,920

Bank and cash balances 196,629 163,176 468 376

Deposits, bank and cash balances 913,850 1,226,010 209,423 26,296

Bank overdrafts (Note 38)

Bank balance in respect

- (6,728) - -

of ADF (Note 32(d)) (14,467) (45,343) - -

45 FINANCIAL INSTRUMENTS

(a) Financial risk management objectives and policies

274

The Group’s activities are exposed to a variety of financial risks, including foreign currency exchange

risk, interest rate risk, market risk, credit risk, liquidity and cash flow risk. The Group focuses on

the unpredictability of financial markets and seeks to minimise potential adverse effects on the

financial performance of the Group. Financial risk management is carried out through risks reviews,

internal control systems, a comprehensive insurance programme and adherence to Group financial

risk management policies. The Board regularly reviews these risks and approves the treasury policies,

which covers the management of these risks.

The Group uses derivative financial instruments such as foreign exchange contracts and interest

rate instruments to hedge certain exposures. It does not trade in financial instruments.

(i) Foreign currency exchange risk

Group Company

2009 2008 2009 2008

RM’000 RM’000 RM’000 RM’000

899,383 1,173,939 209,423 26,296

The Group is exposed to currency risk as a result of the foreign currency transactions entered

into by the Company and subsidiary companies in currencies other than their functional

currency. The Group enters into forward foreign currency exchange contracts to limit the

exposure on foreign currency receivables and payables, and on cash flows arising from

anticipated transactions denominated in foreign currencies.


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

45 FINANCIAL INSTRUMENTS (CONTINUED)

(a) Financial risk management objectives and policies (continued)

(ii) Interest rate risk

The Group’s income and operating cash flows are not substantially affected by changes in

market interest rates except for interest from bank deposits. Derivative financial instruments

are used, where appropriate, to generate the desired interest rate profile.

(iii) Market risk

The Group does not face significant exposure from the risk from changes in debt and equity

prices.

(iv) Credit risk

The Group seeks to invest cash assets safely and profitably. The Group considers the risk of

material loss in the event of non-performance by a financial institution to be unlikely in view

of the financial strength of those counter-parties.

The Group seeks to control customers credit risk by ensuring that significant sales of vehicles

and provision of services are made to customers with an appropriate credit history.

(v) Liquidity and cash flow risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of

funding through an adequate amount of committed credit facilities and the ability to close out

market positions.

(b) Forward foreign exchange contracts

Forward foreign exchange contracts are entered into by the Group in currencies other than

the functional currency to manage exposure to fluctuations in foreign currency exchange rates on

specific transactions.

PROTON 2009 ANNUAL REPORT

275


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

45 FINANCIAL INSTRUMENTS (CONTINUED)

(b) Forward foreign exchange contracts (continued)

276

As at 31 March 2009, the outstanding notional principal amounts of the Group foreign exchange

contracts are as follows:

Maturity

Group

2009 2008

RM’000 RM’000

Less than 6 months 38,343 47,793

Between 6 months and 1 year - 8,820

38,343 56,613

The foreign currency amounts to be received and the contractual exchange rates of the Group‘s

outstanding contracts are as follows:

Currency Currency Average

to be to be RM’000 contracted

Hedged item received paid equivalent rate

2009

Group

Forecasted receivables

- the following 6 months JPY RM 1,907 1 RM = JPY 26.705

GBP USD 21,956 1 USD = GBP 1.6567

GBP EURO 14,480 1 EURO = GBP 1.1746

2008

Group

38,343

Forecasted receivables

- the following 6 months GBP USD 47,793 1 USD = GBP 1.9448

- 6 to 12 months GBP USD 8,820 1 USD = GBP 1.9344

56,613


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

45 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Fair values

The carrying amounts of financial assets and liabilities of the Group and Company at the balance

sheet date approximated their fair values except as set out below:

2009

Recognised on the

balance sheet

Amounts due from

subsidiary companies 20 - - 177,870 138,284

Investments - unquoted 21 10,397 17,618 6,475 17,618

Current investments:

- quoted 27 584 724 - -

- unquoted 27 14,729 14,729 - -

Lease and hire purchase

creditor - long term portion 32 (2,537) (2,256) - -

ADF liability 32(d) (14,467) (14,203) - -

Long term loan 32 (52,225) (46,053) - -

Off balance sheet

Forward foreign exchange

Group Company

Carrying Carrying

amount Fair value amount Fair value

Note RM’000 RM’000 RM’000 RM’000

contracts 45(b) 38,343 38,218 - -

PROTON 2009 ANNUAL REPORT

277


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

45 FINANCIAL INSTRUMENTS (CONTINUED)

(c) Fair values (continued)

278

2008

Recognised on the

balance sheet

Investments - unquoted 21 10,397 15,067 6,475 15,067

Current investments:

- quoted 27 526 806 - -

- unquoted 27 20,296 20,296 - -

Advance - Government

loan facility 32 (47,879) (47,879) - -

Lease and hire purchase

creditor - long term portion 32 (4,151) (3,860) - -

ADF liability 32(d) (45,343) (43,683) - -

Long term loan 32 (83,005) (68,647) - -

Off balance sheet

Forward foreign exchange

Group Company

Carrying Carrying

amount Fair value amount Fair value

Note RM’000 RM’000 RM’000 RM’000

contracts 45(b) 56,613 57,078 - -


NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)

46 SUBSEQUENT EVENTS

(a) On 8 May 2009, the Company announced that its wholly owned subsidiary, Proton Edar Sdn. Bhd.

(‘PESB’) had signed a Master Dealership Agreement with Edaran Otomobil Nasional Berhad (‘EON’)

(‘the Agreement’), for the purpose of rationalising the sales and distribution network between

PESB and EON with the objective of improving, developing and strengthening the Distribution and

Service Dealer Network as well as, allowing parties to rationalise and achieve the cost reduction

objectives (‘Proposed Rationalisation’).

Under the terms of the Agreement, PESB agreed to appoint EON as a sales and service dealer for

PESB on a non-exclusive basis pursuant to the terms and conditions of the Agreement and of other

related agreements to be entered in by parties.

The execution of a Sales Operations Agreement and a Service Operations Agreement shall be

finalised and executed on or before 30 June 2009 or such other extended period to be agreed upon

by parties, failing which the Agreement shall lapse and be of no further effect.

The Company announced on 1 July 2009 that the following agreements have been signed:

(i) Sales Operations Agreement

PESB has appointed EON to undertake the promotion and sale of the Company vehicles and

products on a non-exclusive basis within Malaysia for a period of 5 years beginning 1 July

2009, and

(ii) Service Operations Agreement

PESB has appointed EON to undertake the service and sales of parts/spare parts to customers

on a non-exclusive basis within Malaysia for a period of 5 years beginning 1 July 2009.

(b) On 29 May 2009, the Liquidator of Proton Capital Sdn. Bhd. (‘Proton Capital’) had convened and

lodged a return relating to final meeting with the Companies Commission of Malaysia and the

Official Receiver. On the expiration of three months from 29 May 2009, Proton Capital will be

dissolved.

47 APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board

of Directors on 22 July 2009.

PROTON 2009 ANNUAL REPORT

279


STATEMENT BY DIRECTORS PURSUANT TO

SECTION 169(15) OF THE COMPANIES ACT, 1965

We, Dato’ Mohd Nadzmi bin Mohd Salleh and Dato’ Syed Zainal Abidin B Syed Mohamed Tahir, two of the

Directors of Proton Holdings Berhad, state that, in the opinion of the Directors, the financial statements

set out on pages 185 to 279 are drawn up so as to give a true and fair view of the state of affairs of the

Group and Company as at 31 March 2009 and of the results and cash flows of the Group and Company for

the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and

MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities.

Signed on behalf of the Board of Directors in accordance with their resolution dated 22 July 2009.

DATO’ MOHD NADZMI BIN MOHD SALLEH DATO’ SYED ZAINAL ABIDIN B SYED MOHAMED TAHIR

CHAIRMAN MANAGING DIRECTOR

STATUTORY DECLARATION PURSUANT TO

SECTION 169(16) OF THE COMPANIES ACT, 1965

I, Vimala a/p V.R. Menon, the officer primarily responsible for the financial management of Proton Holdings

Berhad, do solemnly and sincerely declare that the financial statements set out on pages 185 to 279 are, in

my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and

by virtue of the provisions of the Statutory Declarations Act, 1960.

VIMALA A/P V.R. MENON

Subscribed and solemnly declared by the abovenamed Vimala a/p V.R. Menon at Shah Alam in Malaysia

on 22 July 2009, before me.

COMMISSIONER FOR OATHS

280


INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF

PROTON HOLDINGS BERHAD

(Incorporated in Malaysia) (Company No. 623177-A)

We have audited the financial statements of Proton Holdings Berhad, which comprise the balance sheets

as at 31 March 2009 of the Group and Company, and the income statements, statements of changes in

equity and cash flow statements of the Group and Company for the year then ended, and a summary of

significant accounting policies and other explanatory notes, as set out on pages 185 to 279.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation and fair presentation of these financial

statements in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than

Private Entities and the Companies Act, 1965. This responsibility includes: designing, implementing and

maintaining internal control relevant to the preparation and fair presentation of financial statements that

are free from material misstatement, whether due to fraud or error; selecting and applying appropriate

accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted

our audit in accordance with approved standards on auditing in Malaysia. Those standards require that

we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance

whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the financial statements. The procedures selected depend on our judgement, including the assessment of

risks of material misstatement of the financial statements, whether due to fraud or error. In making those

risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation

of the financial statements in order to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An

audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial

statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved

Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965 so

as to give a true and fair view of the financial position of the Group and Company as of 31 March 2009

and of their financial performance and cash flows for the year then ended.

PROTON 2009 ANNUAL REPORT

281


INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF

PROTON HOLDINGS BERHAD (CONTINUED)

(Incorporated in Malaysia) (Company No. 623177-A)

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the

following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept

by the Company and its subsidiaries of which we have acted as auditors have been properly

kept in accordance with the provisions of the Act.

(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries

of which we have not acted as auditors, which are indicated in Note 17 to the financial statements.

(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated

with the Company’s financial statements are in form and content appropriate and proper for the

purposes of the preparation of the financial statements of the Group and we have received

satisfactory information and explanations required by us for those purposes.

(d) The audit reports on the financial statements of the subsidiaries did not contain any qualification

or any adverse comment made under Section 174(3) of the Act.

OTHER MATTERS

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of

the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any

other person for the content of this report.

PRICEWATERHOUSECOOPERS THAYAPARAN A/L S. SANGARAPILLAI

(No. AF: 1146) (No. 2085/09/10 (J))

Chartered Accountants Chartered Accountant

Kuala Lumpur

22 July 2009

282


SHAREHOLDING STATISTICS AS AT 30 JUNE 2009

Analysis of Shareholdings

Share Capital

Authorised Share Capital Issued and Fully Paid Up Capital RM1,000,000,000/-

Issued and Fully Paid Up Capital RM549,213,002/-

Class of Shares Ordinary Shares of RM1/- each

Voting Rights One (1) Voting Right for one (1) Ordinary Share

Analysis of Shareholdings by Range Groups

Distributions of Shareholdings

Malaysian Malaysian Malaysian Malaysian Foreign Foreign Foreign Foreign

No. of % of No. of % of No. of % of No. of % of

Shareholders/ Shareholders/ Shares Issued Shareholders/ Shareholders/ Shares Issued

Depositors Depositors Held Capital Depositors Depositors Held Capital

Size of Holdings

1 - 99 92 1.0783 1,298 0.0002 3 0.0352 64 0.0000

100 - 1,000 4,148 48.6170 3,852,264 0.7014 47 0.5509 43,800 0.0080

1,001 - 10,000 3,459 40.5415 13,461,946 2.4511 75 0.8790 286,600 0.0522

10,001 - 100,000 525 6.1533 15,586,621 2.8380 53 0.6212 1,902,499 0.3464

100,001 - 27,460,649 84 0.9845 107,117,101 19.5037 43 0.5040 41,802,436 7.6113

27,460,650 and above 2 0.0234 322,037,693 58.6362 1 0.0117 43,120,680 7.8514

Total 8,310 97.3980 462,056,923 84.1307 222 2.6020 87,156,079 15.8693

Substantial Shareholders

No. of No. of No.of % of

Shareholders/ Shareholders/ Shares/ Issued

Depositors Depositors Securities Capital

1 - 99 95 1.1135 1,362 0.0002

100 - 1,000 4,195 49.1678 3,896,064 0.7094

1,001 - 10,000 3,534 41.4205 13,748,546 2.5033

10,001 - 100,000 578 6.7745 17,489,120 3.1844

100,001 - 27,460,649 127 1.4885 148,919,537 27.1151

27,460,650 and above 3 0.0352 365,158,373 66.4876

Total 8,532 100.0000 549,213,002 100.0000

No. CDS Account No Name Normal Holdings

Holdings Percentage

1 087-001-014418354 Khazanah Nasional Berhad 234,734,693 42.7402

2 226-001-004488797 Employees Provident Fund Board 87,303,000 15.8960

3 209-001-044650448 Cartaban Nominees (Tempatan) Sdn Bhd

Petroliam Nasional Berhad (Strategic Inv) 43,120,680 7.8514

PROTON 2009 ANNUAL REPORT

283


SHAREHOLDING STATISTICS AS AT 30 JUNE 2009 (CONTINUED)

Thirty Largest Shareholders

NO. CDS ACCOUNT NO NAME IC/ID NO. NORMAL HOLDINGS

HOLDINGS PERCENTAGE

1 087-001-014418354 KHAZANAH NASIONAL BERHAD 275505K 234,734,693 42.7402

2 226-001-004488797 EMPLOYEES PROVIDENT FUND BOARD EPFACT1991 87,303,000 15.8960

3 209-001-044650448 CARTABAN NOMINEES (TEMPATAN) SDN BHD

PETROLIAM NASIONAL BERHAD (STRATEGIC INV) 263368K 43,120,680 7.8514

4 258-001-037482247 LEMBAGA TABUNG HAJI ACT5351995 16,820,427 3.0626

5 245-001-019638741 AMANAH RAYA NOMINEES (TEMPATAN)

SDN BHD SKIM AMANAH SAHAM BUMIPUTERA 434217U 16,270,400 2.9625

6 201-001-008776270 MAYBAN NOMINEES (TEMPATAN) SDN BHD

MAYBAN TRUSTEES BERHAD FOR PUBLIC

REGULAR SAVINGS FUND (N14011940100 ) 258939H 11,894,400 2.1657

7 206-001-048735070 HSBC NOMINEES (ASING) SDN BHD

EXEMPT AN FOR THE BANK OF

NEW YORK MELLON (MELLON ACCT) 4381U 11,757,710 2.1408

8 257-001-037151271 VALUECAP SDN BHD 595989V 10,150,000 1.8481

9 206-001-037379120 HSBC NOMINEES (ASING) SDN BHD

TNTC FOR BRANDES INSTITUTIONAL EQUITY TRUST 4381U 3,823,100 0.6961

10 207-001-034438135 CITIGROUP NOMINEES (ASING) SDN BHD

CBNY FOR DFA EMERGING MARKETS FUND 263875D 3,581,500 0.6521

11 206-001-043591320 HSBC NOMINEES (ASING) SDN BHD

EXEMPT ANFOR JPMORGAN CHASE BANK,

NATIONAL ASSOCIATION (U.S.A.) 4381U 2,855,375 0.5199

12 201-001-008776213 MAYBAN NOMINEES (TEMPATAN) SDN BHD

MAYBAN TRUSTEES BERHAD FOR PUBLIC

AGGRESSIVE GROWTH FUND (N14011940110) 258939H 2,828,000 0.5149

13 206-001-039929690 HSBC NOMINEES (ASING) SDN BHD

BNY BRUSSELS FOR QUEENSLAND INVESTMENT

CORPORATION 4381U 2,800,000 0.5098

14 222-001-040942609 ALLIANCEGROUP NOMINEES

(TEMPATAN) SDN BHD

ALLIANCE INVESTMENT MANAGEMENT BERHAD

FOR EMPLOYEES PROVIDENT FUND 42234H 2,545,900 0.4636

15 245-001-031302672 AMANAH RAYA NOMINEES

(TEMPATAN) SDN BHD

AMANAH SAHAM MALAYSIA 434217U 2,449,300 0.4460

16 245-001-046775391 AMANAH RAYA NOMINEES

(TEMPATAN) SDN BHD

PUBLIC SECTOR SELECT FUND 434217U 2,349,400 0.4278

284


SHAREHOLDING STATISTICS AS AT 30 JUNE 2009 (CONTINUED)

Thirty Largest Shareholders (continued)

NO. CDS ACCOUNT NO NAME IC/ID NO. NORMAL HOLDINGS

HOLDINGS PERCENTAGE

17 201-001-008776312 MAYBAN NOMINEES (TEMPATAN) SDN BHD

MAYBAN TRUSTEES BERHAD FOR PUBLIC BALANCED

FUND (N14011950210 ) 258939H 2,265,000 0.4124

18 245-001-032020729 AMANAH RAYA NOMINEES

(TEMPATAN) SDN BHD

PUBLIC SMALLCAP FUND 434217U 2,069,700 0.3768

19 076-001-032786725 BANK SIMPANAN NASIONAL BSNACT1461974 1,933,000 0.3520

20 098-001-035241124 BANK SIMPANAN NASIONAL BSNACT1461974 1,889,000 0.3439

21 065-001-042567479 BANK SIMPANAN NASIONAL BSNACT1461974 1,861,600 0.3390

22 086-001-001732320 BANK SIMPANAN NASIONAL BSNACT1461974 1,812,000 0.3299

23 209-001-021330287 CARTABAN NOMINEES (ASING) SDN BHD

GOVERNMENT OF SINGAPORE INVESTMENT

CORPORATION PTE LTD FOR GOVERNMENT

OF SINGAPORE (C) 263367W 1,756,800 0.3199

24 206-001-022024434 HSBC NOMINEES (TEMPATAN) SDN BHD

NOMURA ASSET MGMT MALAYSIA FOR

EMPLOYEES PROVIDENT FUND 258854D 1,695,000 0.3086

25 087-001-002671394 KUMPULAN WANG SIMPANAN PEKERJA ACT425 1,500,000 0.2731

26 206-001-043881986 HSBC NOMINEES (ASING) SDN BHD

EXEMPT AN FOR BGL (OPCVM A/C) 4381U 1,435,775 0.2614

27 206-001-043590827 HSBC NOMINEES (ASING) SDN BHD

EXEMPT AN FOR JPMORGAN CHASE BANK,

NATIONAL ASSOCIATION (AUSTRALIA) 4381U 1,386,600 0.2525

28 206-001-040893414 HSBC NOMINEES (ASING) SDN BHD

TNTC FOR UTAH STATE RETIREMENT SYSTEMS 4381U 1,327,976 0.2418

29 053-001-046800884 KAF TRUSTEE BERHAD KAF FUND

MANAGEMENT SDN BHD FOR KAF SEAGROATT

& CAMPBELL BERHAD 648477U 1,200,000 0.2185

30 245-001-019638832 AMANAH RAYA NOMINEES

(TEMPATAN) SDN BHD

PUBLIC GROWTH FUND 434217U 1,179,000 0.2147

TOTAL 478,595,336 87.14

PROTON 2009 ANNUAL REPORT

285


PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009

Properties Owned by Perusahaan Otomobil Sdn Bhd (PONSB)

Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)

Acquisition Building Building

/Revaluation

No. H.S. (D)71311,

No. P.T.82 Mukim of

Damansara, District

of Petaling, Selangor

Darul Ehsan. (Formerly,

HICOM Industrial Estate

encompassing part of

Lots 563, 564, 568, 570

and Lot 15, Mukim of

Damansara, District of

Petaling, Selangor Darul

Ehsan).

HICOM Industrial Estate

encompassing Lot 572,

Mukim of Damansara,

District of Petaling,

Selangor Darul Ehsan.

No. H.S. (D) 71309,

No. P.T. 80, Mukim of

Damansara, District

of Petaling, Selangor

Darul Ehsan. (Formerly,

HICOM Industrial

Estate encompassing

Lot 568 Grant No.

5941,H.S.(D) 22208 No.

P.T. 5115,H.S.(D) 22207,

No. P.T.5116, Mukim of

Damansara, District of

Petaling, Selangor Darul

Ehsan).

286

Land with an area of

6,231,080 sq. ft. with

main office, main

factory, engine factory,

medium volume factory,

canteen buildings,

sports facilities, car park

for production cars

and additional R&D

laboratories building.

Total built-up area is

2,594,603 sq. ft.

3 units of flats currently

rented out.

Land with an area of

158,107 sq. ft. used as

the car park for staff.

Freehold

Freehold

Freehold

05.09.1983

09.04.1986

19.11.1993

2008 2009 2008 2009

23 Years

23 Years

-

24 Years

24 Years

-

Land

Buildings

Flats

Land

68.4

129.8

0.04

2.6

68.4

113.0

0.04

2.6


PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)

Properties Owned by Perusahaan Otomobil Sdn Bhd (PONSB) (continued)

Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)

Acquisition Building Building

/Revaluation

Geran 215214,

Lot 61821, HICOM

Glenmarie Industrial

Park, Mukim of

Damansara, District of

Petaling, Selangor Darul

Ehsan.

No. H.S. (D) 86554, No.

P.T. 257 encompassing

Lot 54, 60 and 62, Sime

UEP Industrial Park,

Mukim of Damansara,

District of Petaling,

Selangor Darul Ehsan.

No. H.S. (D) B.P.5653 and

5654 Bil P.T. 16162 and

10163, District of Batang

Padang, Mukim of Ulu

Bernam Timur, Perak

Darul Ridzwan.

Land with an area of

1,036,728 sq. ft. with

office, factory and

canteen buildings and

sports facilities used for

the Casting Plant. Total

built-up area is 194,579

sq. ft.

Land with an area of

55,440,519 sq. ft. for the

construction of a second

automobile plant,

administrative building

and sports complex

facilities. Total built-up

area is 3,374,577 sq.ft.

Freehold

Freehold

30.12.1992

Land with an area

of 2,396,727 sq. ft.

adjoining the Company’s

northern boundary

housing the semihigh

speed test track

and control building.

Total built-up area is

2,102,731 sq. ft.

Freehold 18.04.1994

03.02.1999

2008 2009 2008 2009

14 Years

14 Years

5 Years

15 Years

15 Years

6 Years

Land

Buildings

Land

Track &

Buildings

Land

Building

20.5

39.8

54.9

20.3

1.0

454.3

PROTON 2009 ANNUAL REPORT

21.2

36.8

54.9

13.0

1.0

436.1

287


PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)

Properties Owned by Proton Edar Sdn Bhd (PESB)

Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)

Acquisition Building Building

/Revaluation

Vehicle Preparation

Centre (VPC) No H.S.

(D) 86555, PT No. 258

and H.S. (D) 86557,

PT No.260, TP 5 Road,

Sime UEP Industrial

Park, 47600 Subang

Jaya,Selangor Darul

Ehsan.

Lot 859, Block 16

Kuching Central Land

District, Stampin 4 1/2

Mile, Penrissen Road,

Kuching, Sarawak.

H.S. (D) 351587,

PTD 173042, Mukim

Plentong, Daerah Johor

Bahru, Johor.

288

2008 2009 2008 2009

Vehicle Preparation

Centre and stock

control building with

total built-up area of

101,956 sq. ft.

Freehold 01.12.2000 6 Years 7 Years Building 4.5 4.2

Centre of Excellence Land with area of Freehold

(COE) & Pre-Delivery and 465,185 sq. ft. and

Inspection Centre (PDI) Administration &

No H.S. (D) 86596, PT No. Operation Office

299 and H.S. (D) 86597, and Pre-Delivery &

PT No. 300, TP 5 Road, Inspection Centre

Sime UEP Industrial Park, with total built-up

47600 Subang Jaya,

Selangor Darul Ehsan.

area of 422,943 sq. ft.

No. 2, Lrg. Samarinda 3 storey shop units Freehold

6A, Off Jalan Kebun, H.S which approximately

(D) 60042, P.T.No. 64566

Mukim, Klang, Selangor

Darul Ehsan.

2,475.7 sq. ft.

Land with an area of

50,570 sq. ft. to be

used for sales outlet

and service centre.

Land with an area of

87,120 sq. ft. to be

used for sales outlet

and service centre.

Freehold

Freehold

01.03.2001

10.05.2002

29.04.2002

27.11.2007

29.04.2002

7 Years

5 Years

6 Years

-

6 Years

8 Years

6 Years

7 Years

1 Year

7 Years

Land

Building

Building

Land

Building

Land

Building

35.7

127.4

0.6

2.8

-

8.4

6.4

35.7

120.6

0.6

2.8

6.9

8.1

6.1


PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)

Properties Owned by Proton Edar Sdn Bhd (PESB)(continued)

Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)

Acquisition Building Building

/Revaluation

H.S. (D) 63313, P.T.No.

9671 Mukim of

Ampangan, District

of Seremban, Negeri

Sembilan.

H.S. (D) 318392, PTD

81816, Mukim of Pulai,

District of Johor Bahru.

H.S. (M) 212, PT 4352,

Mukim Kuah, District of

Langkawi, Kedah.

H.S. (D) 144330, PT

40019 Mukim of Sungai

Buloh, District of

Petaling, Selangor Darul

Ehsan.

No H.S. (D) 86599, PT

No. 302, TP 5 Road, Sime

UEP Industrial Park,

47600 Subang Jaya,

Selangor Darul Ehsan.

L&D Tanjung Malim,

Proton Edar Sdn Bhd, c/o

Proton Tanjung Malim

Sdn Bhd, Proton City,

35900 Tanjung Malim,

Perak.

Land with an area Freehold

of 79,949 sq. ft. used

for sales outlet and

service centre is 7,175

sq. ft.

Land with an area of

57,267 sq. ft. to be

used for sales outlet

and service centre.

Land with an area of

51,979 sq. ft. to be

used for sales outlet

and service centre.

Land with an area of

61,524 sq. ft. to be

used for sales outlet

and service centre.

Land with an area

of 123,853 sq. ft. to

be used for

stockyard area.

Administration &

Operation Office.

Freehold

Freehold

Freehold

Freehold

Freehold

19.07.2002

29.09.2003

06.08.2002

13.09.2002

02.09.2002

01.03.2004

05.12.2005

31.07.2007

2008 2009 2008 2009

5 Years

3 Years

5 Years

5 Years

5 Years

3 Years

2 Years

-

6 Years

4 Years

6 Years

6 Years

6 Years

4 Years

3 Years

1 Year

Land

Building

Land

Land

Land

Building

Land

Building

3.1

2.7

5.1

1.4

9.6

6.2

5.8

PROTON 2009 ANNUAL REPORT

-

3.1

2.5

5.1

1.4

9.6

5.9

5.8

4.7

289


PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)

Properties Owned by Proton Cars (UK) Ltd (PCUK)

Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)

Acquisition Building Building

/Revaluation

Ref. AV 915, Units

1-3, Crawley Way,

Avonmouth, Bristol

Avon BS11 9YR, England

Potash Lane, Hethel,

Norwich, Norfolk NR14

8EZ, England.

Land adjacent to

Potash Lane, Hethel,

Norwich, Norfolk

NR 14 8EZ, England

and

Land north of Browic.

290

Land with an area of

162,479 sq. ft. with

a parts warehouse

building.

Properties Owned by Group Lotus Plc

R&D building rented to

group companies. Total

built-up area is 86,600

sq.ft.

Properties Owned by Lotus Cars Ltd

Two parcels of land

with a total area of

6,286,550 sq. ft. with

the factory, engineering

facilities, offices and test

track of Lotus Group

International Ltd. Total

built-up area is 515,500

sq. ft.

Freehold

Freehold

Freehold

31.03.1994

01.03.2000

26.09.1968

2008 2009 2008 2009

32 Years

9 Years

41 Years

33 Years

10 Years

42 Years

Land

Buildings

Building

Land

Building

6.5

1.9

12.3

6.1

74.5

5.3

1.6

9.7

5.2

59.0


PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)

Properties Owned by PT Proton Cikarang Indonesia (PCI)

Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)

Acquisition Building Building

/Revaluation

Hak Guna Bangunan

No. 353, 596, 597, Desa

Sukaresmi, Kecamatan

Lemahabang,

Kabupaten Bekasi, West

Java, Indonesia.

Combined land area Leasehold

of 136,610 sq. meters (Expiry:

was erected with 24.09.2025,

factories, office, 2021 and

canteen, warehouse, 2023)

utility and security

facilities.

Properties Owned by Lotus Holdings Inc

1254 North Main St, Ann

Arbor, Michigan, USA.

Land with an area of

approximately 165,528

sq. ft. with office and

workshop. Total built-up

area is 73,000 sq. ft.

Freehold

21.09.2004

24.02.2000

2008 2009 2008 2009

13 Years 14 Years Land 15.6

Building 11.7

Office:

88 Years

Office:

89 Years

Workshop: Workshop:

42 Years 43 Years

Land

Building

0.8

8.7

PROTON 2009 ANNUAL REPORT

14.1

9.9

0.7

6.7

291


Share Price and Volume Traded

Share

Price (RM)

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00

292

Apr 08 May Jun Jul Aug Sep Oct Nov Dec Jan 09 Feb Mar

Share Price

Volume

Volume

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0


Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Sixth (6th) Annual General Meeting

of the Company will be held at the Auditorium, PROTON Centre of

Excellence, KM 33.8, Westbound Shah Alam Expressway, 47600 Subang

Jaya, Selangor Darul Ehsan, Malaysia on Friday, 21 August 2009 at 3.00pm

for the following purposes:

1. To lay the Report of the Directors and Auditors and the Audited Statement of Accounts for the year

ended 31 March 2009.

2. To elect the following Directors who retire in accordance with the Company’s Articles of Association:-

Article 104

(i) Tuan Haji Abdul Kadir Bin Md Kassim Ordinary Resolution 1

(ii) Dato’ Michael Lim Heen Peok Ordinary Resolution 2

(iii) Tuan Haji Abdul Jabbar Bin Abdul Majid* -

*Note: Tuan Haji Abdul Jabbar Bin Abdul Majid, although eligible, does not seek re-election.

Article 111

(i) Dato’ Mohd Nadzmi Bin Mohd Salleh Ordinary Resolution 3

(ii) Encik Oh Kim Sun Ordinary Resolution 4

3. To approve the Directors’ fees for the year ended 31 March 2009. Ordinary Resolution 5

4. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Ordinary Resolution 6

Company and to authorise the Directors to fix their

remuneration.

5. To transact any other ordinary business for which due notice has Ordinary Resolution 7

been given.

By Order of the Board

MOHD NIZAMUDDIN BIN MOKHTAR (LS NO. 006128)

Company Secretary

Subang Jaya, Selangor Darul Ehsan

30 July 2009

PROTON 2009 ANNUAL REPORT

293


NOTES

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or

more proxies to attend and vote in his stead. A proxy may but need not be a member of the Company

and the provision of Section 149(1)(b) of the Companies Act, 1965, shall not apply.

2. The instrument appointing a proxy must be in writing under the hands of the appointer or his

attorney duly authorised in writing or, if such appointer is a corporation, under its common seal or

the hand of an officer or attorney duly authorised. If the Form of Proxy is signed under the hand of

an officer duly authorised, it should be accompanied by a statement reading “signed as authorised

officer under Authorisation Document which is still in force, no notice of revocation having been

received”. If the Form of Proxy is signed under the attorney duly authorised, it should be accompanied

by a statement reading “signed under Power of Attorney which is still in force, no notice of

revocation having been received”. A copy of the Authorisation Document or the Power of Attorney,

which should be valid in accordance with the laws of the jurisdiction in which it was created and is

exercised, should be enclosed.

3. The maximum number of proxies that may be appointed is two. Where a member appoints more than

one proxy, the appointment shall be invalid unless he specifies the proportion of his shareholdings to

be represented by each proxy.

4. Where a member of the Company is an authorised nominee as defined under the Securities Industry

(Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each securities account

it holds with ordinary shares of the Company standing to the credit of the said securities account.

Every appointment submitted by an authorised nominee as defined under the Securities Industry

(Central Depositories) Act, 1991, must specify the CDS Account Number.

5. The instrument appointing the proxy must be deposited at the office of the Registrar, Tenaga Koperat

Sdn Bhd, Level 17, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala

Lumpur not less than forty eight (48) hours before the time appointed for the meeting.

6. For the purpose of determining a member who shall be entitled to attend the Meeting, the Company

shall be requesting Bursa Malaysia Depository Sdn Bhd, in accordance with Article 67(b) of the

Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories)

Act, 1991, to issue a General Meeting Record of Depositors as at 13 August 2009. Only a depositor

whose name appears on the General Meeting Record of Depositors as at 13 August 2009 shall be

entitled to attend the said meeting or appoint proxies to attend and/or vote in his stead.

294


Statement Accompanying the Notice of

Sixth (6th) Annual General Meeting

Pursuant to Paragraph 8.28(2) of the Listing Requirements of Bursa

Malaysia Securities Berhad, appended hereunder are:

DIRECTORS STANDING FOR RE-ELECTION

Directors who are standing for re-election at the Sixth (6 th ) Annual General Meeting of the Company which

will be held at The Auditorium, PROTON Centre of Excellence, KM 33.8, Westbound Shah Alam Expressway,

47600 Subang Jaya, Selangor Darul Ehsan, Malaysia on Friday, 21 August 2009 at 3.00pm pursuant to the

Company’s Articles of Association.

Article 104

(i) Tuan Haji Abdul Kadir Bin Md Kassim Refer to page 32 of the Annual Report

(ii) Dato’ Michael Lim Heen Peok Refer to page 33 of the Annual Report

(iii) Tuan Haji Abdul Jabbar Bin Abdul Majid* Refer to page 31 of the Annual Report

*Note: Tuan Haji Abdul Jabbar Bin Abdul Majid, although eligible, does not seek re-election.

Article 111

(i) Dato’ Mohd Nadzmi Bin Mohd Salleh Refer to page 28 of the Annual Report

(ii) Encik Oh Kim Sun Refer to page 35 of the Annual Report

PROTON 2009 ANNUAL REPORT

295


This page is intentionally left blank.



FORM OF PROXY

PROTON ANNUAL REPORT 2009

Success. Challenges. Responsibility.

PROTON Holdings Berhad (Company No.623177-A)

I/We (name of shareholder, in capital letters)

NRIC No. (new) (old) ID No./Company No.

of (full address) being a member of PROTON Holdings

Berhad, hereby appoint (name of proxy as per NRIC, in capital letters)

NRIC No. (new) (old) or failing him/her

(name of proxy as per NRIC, in capital letters) NRIC No. (new) (old) or failing him/her, the

CHAIRMAN OF THE MEETING as my/our proxy to vote for me/us on my/our behalf at the Sixth (6 th ) Annual General Meeting of the Company

to be held at The Auditorium, Level 1, PROTON Centre of Excellence, KM 33.8, Westbound Shah Alam Expressway, 47600 Subang Jaya,

Selangor Darul Ehsan, Malaysia, on Friday, 21 August 2009 at 3.00pm and at any adjournment thereof.

My/Our proxy is to vote as indicated below:-

ORDINARY RESOLUTIONS FOR AGAINST

1.

2.

3.

4.

5.

To lay the Report of the Directors and Auditors and the Audited Statement of Accounts for the year

ended 31 March 2009.

To elect the following Directors who retire in accordance with the Company’s Articles of Association:-

Article 104

(i) Tuan Haji Abdul Kadir Bin Md Kassim

(ii) Dato’ Michael Lim Heen Peok

(iii) Tuan Haji Abdul Jabbar Bin Abdul Majid*

*Note: Tuan Haji Abdul Jabbar Bin Abdul Majid, although eligible, does

not seek re-election.

Article 111

(i) Dato’ Mohd Nadzmi Bin Mohd Salleh

(ii) Encik Oh Kim Sun

To approve the Directors’ fees for the year ended 31 March 2009.

To re-appoint Messrs PricewaterhouseCoopers as Auditors of the

Company and to authorise the Directors to fix their remuneration.

To transact any other ordinary business for which due notice has been

given.

(Please indicate with an “X” in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or

abstain from voting at his/her discretion.)

Dated this day of 2009.

Signature/Common Seal of Appointer

No. of Shares Held

CDS Account No. of Authorised Nominee

Ordinary Resolution 1

Ordinary Resolution 2

-

Ordinary Resolution 3

Ordinary Resolution 4

Ordinary Resolution 5

Ordinary Resolution 6

Ordinary Resolution 7

For appointment of more than one proxy, state number of shares

and percentage of shareholdings to be represented by the proxies:-

No. of Shares Percentage

Proxy 1

%

Proxy 2 %

P.T.O


NOTES:

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy may

but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965, shall not apply.

2. The instrument appointing a proxy must be in writing under the hands of the appointer or his attorney duly authorised in writing or, if such appointer is a

corporation, under its common seal or the hand of an officer or attorney duly authorised. If the Form of Proxy is signed under the hand of an officer duly

authorised, it should be accompanied by a statement reading “signed as authorised officer under Authorisation Document which is still in force, no notice of

revocation having been received”. If the Form of Proxy is signed under the attorney duly authorised, it should be accompanied by a statement reading “signed

under Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of

Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed.

3. The maximum number of proxies that may be appointed is two. Where a member appoints more than one proxy, the appointment shall be invalid unless he

specifies the proportion of his shareholdings to be represented by each proxy.

4. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least

one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

Every appointment submitted by an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, must specify the CDS

Account Number.

5. The instrument appointing the proxy must be deposited at the office of the Registrar, Tenaga Koperat Sdn Bhd, Level 17, The Gardens North Tower, Mid Valley

City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty eight (48) hours before the time appointed for the meeting.

6. For the purpose of determining a member who shall be entitled to attend the Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd,

in accordance with Article 67(b) of the Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991, to issue

a General Meeting Record of Depositors as at 13 August 2009. Only a depositor whose name appears on the General Meeting Record of Depositors as at 13

August 2009 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote in his stead.

Fold Here

Fold Here

The Registrar

Tenaga Koperat Sdn Bhd

Level 17, The Gardens North Tower

Mid Valley City, Lingkaran Syed Putra

59200 Kuala Lumpur

STAMP

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