Operations Review - ChartNexus
Operations Review - ChartNexus
Operations Review - ChartNexus
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PROTON’s MPV, the Exora, goes into production.<br />
<strong>Operations</strong> <strong>Review</strong><br />
PROTON 2009 ANNUAL REPORT<br />
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<strong>Operations</strong> <strong>Review</strong><br />
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The Group also anticipates strong local demand for the Persona and Saga, while export<br />
volume is expected to increase especially for the Exora with plans already in place to<br />
introduce this vehicle to the ASEAN market in the second half of 2009. Furthermore, with<br />
the expansion of the Overseas Manufacturing Plants in China and Iran, the export business<br />
on completely–knocked–down (CKD) vehicles is expected to increase as well.<br />
New robots and more sophisticated handling equipment were installed successfully with<br />
minimal line disruptions. Previous PROTON production systems and Total Productive<br />
Maintenance (TPM) activities have already resulted in the main plant having one of the<br />
lowest downtimes in history and similar activities were implemented successfully in the<br />
Casting and Engine Transmission Department. Much effort was taken to maintain this.<br />
An increasing number of model lines or equipment was established through ‘yokoten’,<br />
a Japanese term which essentially means duplicating. The next stage in these intensive<br />
improvement activities will be the implementation of ‘Kobetsu Kaizen’ (which means<br />
‘Focus Improvement’) and the usage of Overall Equipment Efficiency (OEE) as the de facto<br />
parameter to measure equipment efficiency.<br />
In view of PROTON’s commitment to improvement, the Manufacturing Division has<br />
started implementing the world-renowned practice of ‘Genba Kanri’, another Japanese<br />
term this time referring to ‘Shopfloor Control’. This is to reflect how the division is<br />
continuously improving itself by benchmarking PROTON against world-class industry<br />
players. We shall aim to reach level 4 (which means sustainable world-class level in<br />
shop control) in ‘Genba Kanri’ by the year 2011.
PROTON Shah Alam<br />
<strong>Operations</strong> <strong>Review</strong><br />
State-of-the-art equipment at our manufacturing facilities in Shah Alam.<br />
The main plant and the MVF are located in Shah Alam, with the combined total installed<br />
capacity for both being 200,000 units per year. The casting, engine and transmission plant<br />
is also in Shah Alam and has the capacity to produce 180,000 units of CamPro engines<br />
annually.<br />
The main plant has been producing 6,000 units of the Saga each month. The Perdana,<br />
Waja, Wira and Arena are also produced here but in a much smaller volume. The current<br />
production of the Wira is exclusively for the taxi market but the Wira will be discontinued<br />
by around July 2009.<br />
Thereafter, the taxi market will be supplied with the new PROTON Saga NGV which is a<br />
1.6 litre engine installed with a specially designed NGV kit. Preparations are also underway<br />
for a minor cosmetic enhancement to the new Saga for a special edition to be introduced<br />
in the market by August 2009. In the same month, the Group will also start producing the<br />
Saga for the Australian market.<br />
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<strong>Operations</strong> <strong>Review</strong><br />
PROTON Tanjung Malim<br />
PROTON Tanjung Malim is the largest manufacturing and assembly plant within the Group.<br />
The plant complex, which sits on 1,500 acres of land in the state of Perak, facilitates the<br />
processes of engine machining, stamping, body assembly, painting and final assembly.<br />
The plant has a capacity of 150,000 units per year and can operate on a two-shift basis.<br />
However, due to the global economic crisis, since December 2008, the plant has been<br />
running on one shift. By switching to one shift, PROTON was able to relocate excess<br />
manpower to the MVF in preparation for the production of the Exora. As such, this enabled<br />
the Company to minimise cost and retain skilled personnel.<br />
84<br />
The MVF was also given the task of producing the Exora. Produced in 18 months, this was<br />
deemed an outstanding feat in the automotive world. Since the plant had previously been<br />
manufacturing the Waja, all facilities had to be either modified or newly installed with<br />
equipment to manufacture the MPV.<br />
Daily meetings attended by top Management were held to ensure that the manufacturing<br />
decisions were made quickly and in a decisive manner. Comprehensive online training and<br />
quality improvement teams were formed using the PROTON Production System (PPS) as the<br />
main driver. All cars had to also undergo tests to ensure that there was no rattling or other<br />
noise defects.<br />
Featuring an automatic transmission when it was first introduced, PROTON has in July<br />
introduced a manual version of the Exora to cater especially for the Indonesian market.<br />
The monthly production volume is targeted at 3,000 units per month and is expected to<br />
increase when export to Indonesia begins. Following its introduction in Indonesia in July<br />
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<br />
versions of existing models were introduced. The first was the Persona SE, which features<br />
a more sporty style and was introduced in September 2008. Current production of the<br />
Persona SE is estimated at 500 units per month.<br />
The second upgrade was the Satria Neo High Line version which is equipped with a<br />
CamPro CPS (Cam Profile Switching) engine. The improved, now trendier Satria Neo CPS<br />
comes with a stylish new front and rear bumper, as well as a new leather interior. As it is<br />
exclusively targeted for a limited market, the production volume is only at 60 units per<br />
month currently.<br />
Plans for the Persona NGV and Persona cosmetic change productions are already on the<br />
drawing board and mass productions are expected to begin by the end of 2009.<br />
PROTON’s plant in Tanjung Malim is the largest of the Group’s manufacturing facilities.<br />
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PROTON 2009 ANNUAL REPORT<br />
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Improving plant operational efficiencies will be a key focus in the next financial year.<br />
Prospects<br />
Total production volume for the next financial year is forecasted to increase by 3% to<br />
162,000 units. The single digit increase is a result of the cautious tone adopted by the<br />
market due to the global economic crisis, which has undoubtedly impacted the world car<br />
market.<br />
As the overseas market has been severely affected, approximately 90% of the volume is<br />
being allocated for the domestic market, with the remaining 10% reserved for export.<br />
Production volume is expected to utilise less than 50% of PROTON’s installed plant capacity<br />
and all plants are expected to operate on a one-shift basis in the new financial year.
<strong>Operations</strong> <strong>Review</strong><br />
Production of the Exora is expected to<br />
receive a further boost once launched<br />
into the Indonesian market.<br />
The loss of volume has motivated the Group to further improve operational efficiencies<br />
and to enhance cost reduction activities. PROTON is confident that all the proposed cost<br />
reduction initiatives will be carried out accordingly.<br />
On the other hand, demand for the Saga is expected to stablise in the domestic market,<br />
while an increase in production volume is anticipated when exports to Australia and the<br />
Gulf Community Countries (GCC) begin. The cosmetic change and special edition models<br />
also provide a positive outlook for the Saga.<br />
The Group also forsees that the high number of bookings for the Exora would result in<br />
high volumes in excess of 3,000 units a month. Export to the Indonesian market slated for<br />
July 2009 will further boost production volume. The plan for the new financial year is to<br />
produce 35,000 units and we expect this target to be achieved, if not, exceeded.<br />
While demand for the Exora is on the rise and demand for the Persona and Saga is stabilising,<br />
the corresponding requirement for the CamPro engines is as per the last financial year.<br />
The CamPro engine component machine and assembly capacity expansion plans are also<br />
constantly being reviewed and we anticipate that the current capacity of 180,000 units will<br />
be sufficient to cater for the coming year.<br />
PROTON 2009 ANNUAL REPORT<br />
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<strong>Operations</strong> <strong>Review</strong><br />
LOTUS<br />
Against the backdrop of profitability in the previous<br />
financial year, Lotus was confident of further<br />
improving its performance in 2009 in line with its<br />
Strategic Business Plan before the turn of events<br />
in September 2008 which culminated in the global<br />
financial and economic crisis.<br />
Nevertheless, for the fiscal year ended 31 March 2009,<br />
Lotus increased its turnover to £110m or RM574.8m<br />
compared to £108m or RM564.3m in the year before.<br />
This was underpinned by the diversity of the Lotus<br />
business driven by the growth in third party high<br />
technology engineering consultancy revenue, the<br />
ability of the Cars Division to act swiftly to negate the<br />
impact of the global downturn and the contribution<br />
of Lotus Light Weight Structures.<br />
As a net exporter of its products and services, a<br />
weakening sterling at the time had benefited Lotus<br />
and acted as a self-hedging mechanism for nonsterling<br />
denominated costs. Conversely, however,<br />
the volatile movement of the sterling against world<br />
currencies also resulted in substantial unrealised<br />
foreign exchange losses which together with<br />
provisions for bad debts, pension protection levy<br />
and asset impairment contributed adversely to the<br />
net loss posted.<br />
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<strong>Operations</strong><br />
During the course of the fiscal year, Lotus produced<br />
2,202 vehicles compared to 2,649 units in the previous<br />
year. This included the production of 388 Tesla allelectric<br />
roadsters.<br />
In order to improve sales, Lotus introduced new<br />
derivatives to refresh its current model line-up which<br />
include the Europa SE, Exige 260, 2-Eleven 190 as well<br />
as the restyled 2010 model year Exige launched at the<br />
March 2009 Geneva Motorshow. As a result, Lotus<br />
saw better global market penetration compared to<br />
its competitors in most territories.<br />
In July 2008 Lotus’ first new model in 13 years, the<br />
Evora, was unveiled at the British International<br />
Motorshow to international acclaim. The world’s<br />
first mid-engine 2+2 supercar had its formal press<br />
launch in Scotland in May 2009 resulting in the<br />
Evora dominating the global media headlines.<br />
The Evora, which was launched in 2008, was Lotus’ first new model in<br />
13 years.
Evora’s successful press launch is a clear reflection<br />
of the niche vehicle product engineering capability<br />
of Lotus Cars which attracted hundreds of orders and<br />
a substantial number of road test requests and firm<br />
enquiries from prospective buyers even before the<br />
planned sales launch.<br />
It took a clean sheet of paper and a little over 27<br />
months to design, develop and validate the Evora<br />
and put it into production. This supercar, remains<br />
true to Lotus’ heritage and core philosophies of being<br />
Visually Stunning, Exhilarating, Agile and Responsive.<br />
Production of the Evora began early 2009 with first<br />
deliveries to customers commencing in June.<br />
In anticipation of the Evora sales launch and to lay the<br />
foundation for future new models, Lotus continued<br />
to focus on strengthening its global distribution<br />
and dealer networks. Markets now include Saudi<br />
Arabia, Indonesia and Taiwan, bringing the current<br />
total dealer-distributor network to 162 across 42<br />
countries.<br />
In addition, Lotus, through its high technology<br />
engineering consultancy division, continued to<br />
provide worldwide year-on-year incremental third<br />
party business with turnover from the division<br />
increasing by 23%. This is a significant achievement<br />
given that OEMs and other engineering clients have<br />
scaled back their product plans and deferred some<br />
<strong>Operations</strong> <strong>Review</strong><br />
Lotus Evora was unveiled at the British Motorshow.<br />
investments in outsourced projects towards the end<br />
of 2008.<br />
The growth follows years of proactive market-driven<br />
policies to expand and market clear core product<br />
offerings and improve the global sales and delivery<br />
process. An example of new high technology domains<br />
acquired as a result of this policy are EV (electrical<br />
vehicle), bio fuels and hybrid technologies which are<br />
moving towards becoming leading world ecological<br />
products.<br />
Lotus Engineering successfully completed the<br />
development of its well-publicised EV sports car for<br />
a western OEM which has been showcased in various<br />
auto shows. Lotus is also proud to have successfully<br />
carried out mutual engineering, development and<br />
showing in China of its EVs based on the Saga and<br />
Persona platforms with parent company, PROTON.<br />
PROTON 2009 ANNUAL REPORT<br />
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<strong>Operations</strong> <strong>Review</strong><br />
Lotus continues to take advantage of its<br />
competencies and brand heritage to pursue<br />
engineering opportunities and expand its business<br />
into emerging economies in which demand for high<br />
technology engineering is rapidly growing. Lotus<br />
Engineering plans to explore establishing subsidiary<br />
companies in emerging economies, including India.<br />
It currently has a presence in six countries: United<br />
Kingdom, United States, Malaysia, China, Germany<br />
and Japan.<br />
By leveraging on the global business recognition of<br />
being at the forefront of green technology, Lotus<br />
Engineering secured matched funding from the<br />
Technology Strategic Board (TSB) and other<br />
governmental bodies for R&D on new green and<br />
revolutionary technologies. In March 2009 Lotus<br />
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Prospects<br />
Engineering was the proud recipient of the prestigious<br />
and historic 2008 Dewar Trophy from the Royal<br />
Automotive Club in recognition of its outstanding<br />
technical excellence in pioneering the Versatile<br />
Vehicle Architecture chassis technology.<br />
The fiscal year also saw Lotus complete the<br />
strategic acquisition of Holden Light Weight<br />
Structures Limited (now known as Lotus Light Weight<br />
Structures Limited) which produces the unique<br />
aluminum platforms of Lotus and other leading OEM<br />
products. This acquisition allows access to critical<br />
intellectual property in the area of light weight<br />
technology which is becoming increasingly important<br />
in the improvement of vehicle performance and<br />
efficiency in the transportation industry.<br />
The year ahead will see Lotus, like other companies in the automotive industry, being faced<br />
with ever-changing industry dynamics as companies emerge from the current global crisis.<br />
The primary focus is to ensure that the business continues to grow and remains relevant to<br />
our stakeholders.<br />
Lotus Cars will continue to capitalise on the current success of the Evora, strengthening<br />
and building its global dealer network and expanding market coverage to include China<br />
and India. The Evora will be launched in North America in early 2010, with an automatic<br />
variant (6 speed torque converter type) to be unveiled in 2011. In tandem, the small<br />
platform vehicles (Elise and Exige) will be developed to meet a multitude of new legislative<br />
requirements for all markets.
A Lotus showroom in Europe.<br />
<strong>Operations</strong> <strong>Review</strong><br />
Lotus also has an on-going contract to produce Tesla all-electric roadsters, while there<br />
are several potential opportunities to further expand Lotus’ third party manufacturing<br />
business.<br />
The focus for Lotus Engineering will be to continue to expand and grow by generating<br />
new opportunities that leverage on its high technology know-how which include driving<br />
dynamics, niche vehicles, efficient performance as well as EV and HEV (hybrid electrical<br />
vehicle).<br />
Likewise, Lotus Light Weight Structures Limited will continue to provide expertise in light<br />
weight technologies by leveraging on Lotus Engineering’s network and capabilities.<br />
Lotus believes that it is now on a sound footing and ready to embark on the next phase of<br />
an 8-Year Strategic Business Plan thanks to the tremendous support from parent company<br />
PROTON, employees, customers and suppliers. There is no doubt that the coming year<br />
will continue to be challenging given the prevailing weak consumer sentiments and<br />
market conditions. Nevertheless, Lotus is cautiously optimistic of an improved financial<br />
performance in the next financial year spurred by the sales of Evora.<br />
PROTON 2009 ANNUAL REPORT<br />
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<strong>Operations</strong> <strong>Review</strong><br />
Quality Management<br />
It is unwise for any organisation to believe that quality<br />
only means producing products that are reliable and meet<br />
customers expectations.<br />
Quality Improvements<br />
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Quality excellence must transcend all aspects of a business as well as corporate culture<br />
in order for an organisation to achieve long-term success, and in turn add value to<br />
shareholders.<br />
In the past year, PROTON spared no effort to sustain the quest to embed the culture<br />
of quality excellence throughout the organisation and business value chain. The strategic<br />
focus has always been to enforce quality improvements in all areas; entrench quality<br />
excellence into the processes of design, supply, manufacturing and marketing; as well as to<br />
increase the overall competency level of quality management.<br />
During the year under review, the Group re-ignited<br />
the rally-call for quality excellence, which was<br />
encapsulated in the slogan “PROTON stays committed<br />
to quality improvements”. The campaign involved<br />
a comprehensive evaluation and subsequent<br />
implementation of initiatives that were aimed at<br />
enhancing quality excellence throughout the entire<br />
process chain of the Group. Ultimately, the goal is<br />
to push the PROTON brand forward as a world-class<br />
manufacturer.<br />
Translating the slogan into action, a quality<br />
improvement framework was developed with a<br />
view to ensure that all quality concerns were<br />
communicated to the relevant levels within the<br />
organisation. In addition, the framework also put in<br />
place a proper gate-keeping process to make certain<br />
that quality concerns are solved in a correct and<br />
timely manner.
PROTON 2009 ANNUAL REPORT<br />
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<strong>Operations</strong> <strong>Review</strong><br />
On the same score, the Quality Improvement Circle<br />
(QIC), which is a committee introduced in the 2008<br />
financial year to manage and resolve quality issues<br />
Group-wide on a timely basis, was further augmented<br />
with sub-QIC teams during the last financial year to<br />
bolster efficiencies and effectiveness.<br />
Stemming from QIC and sub-QIC, the Quality<br />
Improvement Team (QIT) was formed at the<br />
operational level to address specific quality concerns<br />
impacting the Group’s processes. At the end of the<br />
2009 financial year, we registered a total of 136 QITs<br />
that were involved in the successful resolution of<br />
more than 70 quality concerns.<br />
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Achieving quality excellence continued<br />
to be a top priority for the Group.<br />
Quality in Design & Development<br />
In addition to problem-solving, the Group also<br />
encourages creative innovations that can enhance<br />
quality excellence. Hence, we have continued to<br />
support the pre-existing Innovative and Creative<br />
Circle (ICC) and Kaizen Suggestion Scheme, which<br />
are programmes tasked to undertake quality<br />
improvement initiatives at our production facilities.<br />
In the year under review, our plants in Shah Alam<br />
and Tanjung Malim successfully completed a total<br />
of 250 ICC projects, while a total of 18,000 process<br />
improvements were made under the Kaizen<br />
Suggestion Scheme, marking a more than 70%<br />
expansion in projects carried out for both these<br />
programmes.<br />
When it comes to delivering quality products, leading automakers all over the world<br />
embrace the philosophy of ‘getting it right the first time’.
Quality in Supply<br />
<strong>Operations</strong> <strong>Review</strong><br />
At PROTON, we clearly understand the importance of building in the elements of quality<br />
from the earliest stage of our processes: during the design and development stage. This<br />
philosophy was incorporated in a comprehensive and tangible manner in the development<br />
of PROTON’s very first multi-purpose vehicle (MPV), the Exora.<br />
In order to build quality into the various stages of the Exora, PROTON installed a structured<br />
quality planning system and carried out systematic quality assurance initiatives throughout<br />
each stage of the creation process of the model. Some of these initiatives included stricter<br />
New Product Introduction (NPI) gateway control, structured supplier Advance Product<br />
Quality Planning (APQP) and consolidated Quality Residence Engineer (QRE) activities,<br />
which were all aimed to make the Exora the highest quality PROTON vehicle to date.<br />
Clearly, based on the latest customer feedback and response to date for the Exora, our<br />
diligent efforts and investments are paying off handsomely.<br />
The PROTON Group’s supply chain represents one<br />
of the most important elements in ensuring quality<br />
excellence. We cannot afford any weakened links<br />
that may negatively impact our brand.<br />
During the financial year, we continued to be<br />
highly stringent in our surveillance and monitoring<br />
processes to ensure that the components we<br />
received from our suppliers met our requirements.<br />
Technical indicators such as incoming quality checks,<br />
as well as the number of warranty claims and audit<br />
ratings provided us with clear indications on the<br />
performance of our suppliers. For those who fail<br />
to meet our specifications, they are made to work<br />
closely with our QITs to improve.<br />
All in all, 10 of our suppliers who have been working<br />
closely with our QITs in the past year recorded an<br />
impressive 20% improvement in terms of overall<br />
quality standards, which will in turn benefit the<br />
overall production chain, the customer, and<br />
ultimately PROTON’s business.<br />
Quality inspection of the Exora in progress.<br />
PROTON 2009 ANNUAL REPORT<br />
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<strong>Operations</strong> <strong>Review</strong><br />
PROTON’s manufacturing process saw the introduction of the ‘Zero Defect Initiative’ to raise quality levels.<br />
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Quality in Manufacturing<br />
During the year under review, the Company implemented a bold, yet crucial quality<br />
excellence initiative into our product manufacturing process. Aptly called the Zero Defect<br />
Initiative, this programme aims to ultimately manufacture cars with zero defect by making<br />
certain that quality is consistently on our mind, while simultaneously driving home the<br />
problem-solving culture Group-wide.<br />
The Zero Defect Initiative includes the setting up of PROTON’s Quality View Center, which<br />
is a platform to track results and achievements of this Initiative; daily meetings to discuss<br />
quality measures and solve minor concerns; as well as the organising of talks to effectively<br />
communicate the importance of doing work right first time, every time to all employees.<br />
Since the implementation of the Zero Defect Initiative, PROTON significantly improved the<br />
number of defects per unit and the direct pass rate by more than 50% todate.
Quality in the Market<br />
Quality excellence touches all aspects of PROTON’s business, including customer<br />
experience.<br />
<strong>Operations</strong> <strong>Review</strong><br />
Quality excellence does not end with the passing of keys to our customers. It is important<br />
for PROTON to ensure that when our customers come into contact with the brand, may it<br />
be test driving our cars for the very first time or an after-sales interaction, their experience<br />
is a positive one.<br />
The Group’s unrelenting goal to fortify quality customer service continues to bear results<br />
given that our brand recorded an improvement in JD Power’s Customer Satisfaction Index<br />
for 2008. Internally, the Group also recorded a 3% improvement in terms of satisfied<br />
customers and a reduction of 2% for less satisfied customers.<br />
While the trend is positive and we have progressed, there still remain gaps to be narrowed<br />
or closed in our journey to attain world-class standards of quality. Changing perceptions of<br />
quality is a long-term process, and as such PROTON will remain committed to engaging our<br />
customers and catering effectively to their needs by continuously strengthening our quality<br />
standards in all areas in the coming years.<br />
PROTON 2009 ANNUAL REPORT<br />
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<strong>Operations</strong> <strong>Review</strong><br />
Sales & Distribution<br />
Domestic Market<br />
In 2008, primarily as a result of heightened sales activity by the<br />
industry players on the back of a strong economic growth of 5%<br />
and positive consumer sentiment during the first three quarters of<br />
the year, Total Industry Volume (TIV) surpassed the 500,000 mark to<br />
hit 548,115 units. The half a million mark had only been breached<br />
once before in previous years (2005). Volatile fuel prices and the<br />
weakening domestic economic climate, however, had negatively<br />
impacted the fourth quarter of the year and we expect the full<br />
impact of the on-going global financial downturn to further impact<br />
auto industries worldwide in 2009.<br />
98<br />
Performance<br />
In response to the daunting economic conditions, the Malaysian Government had introduced<br />
a scrapping scheme as part of the RM60 billion stimulus package to support the automotive<br />
industry and boost domestic consumer spending. This scheme essentially enables owners<br />
to trade in cars manufactured more than 10 years ago for a RM5,000 discount to purchase<br />
a new national car. Since the introduction of this scheme, also known as PROTON Xchange<br />
Program, we have received an average of 1,500 submissions as compared to 300 submissions<br />
per month. At the close of the financial year, PROTON had cumulatively issued 4,500<br />
redemption vouchers.<br />
The Group also remained cognisant of our philosophy of introducing ‘the right car, for the<br />
right market, at the right price and at the right time’. In line with this, the Group launched<br />
several new economical models to meet the discerning needs of the Malaysian market.
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<strong>Operations</strong> <strong>Review</strong><br />
The Delivery Centre at PROTON’s Centre of Excellence. The first truly Malaysian MPV takes centre-stage.<br />
100<br />
One significant milestone for both PROTON and the industry was the launch of Malaysia’s<br />
first home-grown MPV, the Exora. With its excellent product features, the Exora has<br />
garnered a highly favourable response from customers with bookings having reached<br />
14,400 units as of end June 2009.<br />
Todate, the revamped Saga remains the Company’s best-seller, as evidenced by bookings of<br />
more than 120,000 units since its launch in January 2008. The introductions of the refreshed<br />
Satria Neo, now sportier and with a CamPro CPS engine to boost, and the Persona SE, which<br />
has a more elegant and distinctive design, were also well-received among the niche market<br />
segments.<br />
As part of the plans to strategically right-size and re-map the dealer network to solidify<br />
our position in the market, we are on course with the rationalisation of PROTON Edar<br />
Sdn Bhd and the Edaran Otomobil Nasional Berhad (EON) sales and distribution network.<br />
The primary objective of this programme is to position PROTON as the sole brand with<br />
a stronger and unified distribution network as well as marketing arm. Additionally, we<br />
aim to leverage on best practices from both entities while carrying out focused, cohesive<br />
marketing initiatives across networks.<br />
The year also saw PROTON being bestowed with several awards. The Saga received three<br />
awards: Winner in Small Sedan Category (Autocar Award 2008); Entry Level Car of the Year<br />
2008 (NST/Maybank); and Best People’s Car (Asian Auto – VCA Auto Industry Awards 2008).<br />
The Persona too, received the Best Model of the Year 2008 award from Frost & Sullivan.
Prospects<br />
Undoubtedly the economy will continue to remain challenging in the next financial year.<br />
However, PROTON is optimistic and prepared with numerous comprehensive marketing<br />
and sales plans which include introduction of soon-to-be-launched new variants for the<br />
Saga and Exora in order to expand the market segment further as well as to meet the<br />
increasingly high expectations of customers. We are also on course to streamline our<br />
market positioning and offerings to the market with our sound after-sales service. This will<br />
provide a more integrated approach to improving business volume in the after-sales and<br />
auto parts segments.<br />
With this in mind, PROTON will continue with efforts in emphasising quality, attractive<br />
products and focused marketing strategies to win the hearts of Malaysian car buyers.<br />
Export Markets<br />
<strong>Operations</strong> <strong>Review</strong><br />
Economic challenges ravaged automotive industries worldwide and PROTON did not escape<br />
unscathed. Intense competition coupled with the credit crunch faced by our subsidiaries<br />
and distributors particularly in the Australian and United Kingdom markets as well as an<br />
escalation in fuel prices were among the key factors that contributed to the weakened<br />
export environment.<br />
In order to survive this turbulent period, car companies across Asia, Europe and North<br />
America were forced to implement more creative marketing strategies to increase<br />
consumers’ appetite.<br />
Despite these challenges, which we will continue to overcome in the new financial year,<br />
PROTON remained true to the core goal of fortifying our international presence in various<br />
export markets by being steadfast in our commitment to further enhance the Group’s<br />
operational efficiencies as well as quality of our products and services.<br />
PROTON 2009 ANNUAL REPORT<br />
101
<strong>Operations</strong> <strong>Review</strong><br />
102<br />
Performance and <strong>Operations</strong><br />
The year under review saw PROTON strengthening the Export Division with the<br />
appointment of a new Director of Export whose primary responsibility is to enhance<br />
sales and brand performance in overseas markets. The role also includes overseeing the<br />
development of international subsidiaries, distributors and dealers which is aligned with<br />
the Group’s Asian Multi-Local OEM (AMLO) marketing strategy.<br />
Additionally, in terms of market expansion, we took steps to increase PROTON’s visibility<br />
in Egypt, Syria and Thailand. The Group also made rapid progress with business operations<br />
in China, where three plants commenced the assembly operations for the Gen.2 and<br />
Persona models. This is expected to contribute positively towards our volume growth for<br />
the next financial year.<br />
PROTON also took the opportunity to launch new models in select markets: Persona and<br />
Saga in Indonesia, Persona CNG in Thailand, and Persona left-hand-drive in the Middle East<br />
and Gulf countries.<br />
The Persona and Saga are set to make waves abroad.
5-Year Export Volume and 2009/10 Forecast<br />
25,000<br />
20,000<br />
15,000<br />
10,000<br />
5,000<br />
0<br />
Prospects<br />
17,243<br />
2004/05<br />
12,526<br />
2005/06<br />
20,595<br />
2006/07<br />
17,337<br />
2007/08<br />
18,428<br />
2008/09<br />
<strong>Operations</strong> <strong>Review</strong><br />
20,925<br />
2009/10<br />
Forecast<br />
PROTON is deeply committed towards moving beyond the local market by also building a<br />
strong presence in other parts of Asia in the new financial year, with a key focus being the<br />
company’s first-ever MPV, Exora, which is expected to stimulate as much interest in regional<br />
markets as it has locally given its competitive pricing and value-for-money proposition.<br />
Indonesia, where 60% of car consumers fall into the MPV segment, and Thailand, have<br />
been earmarked as the first two countries for the export of the Exora targeted for July<br />
2009.<br />
Moving forward, the Group will also focus on high-growth regional markets in ASEAN for<br />
the completely-built-up (CBU) market, as well as China, India and Iran for the completelyknocked-down<br />
(CKD) market. Additionally, we plan to leverage on the existing trade and<br />
cultural linkages to make further in-roads into other Middle-Eastern countries such as Egypt<br />
and Syria for the CBU market, and to penetrate into Eastern European countries.<br />
PROTON 2009 ANNUAL REPORT<br />
103
<strong>Operations</strong> <strong>Review</strong><br />
Asia<br />
China<br />
Performance and <strong>Operations</strong><br />
China is poised to be a world leader in the automotive industry. In 2009 China’s total vehicle<br />
sales is forecasted to surpass that of the United States of America due to relatively stable<br />
economic growth and favourable government policies.<br />
During the year under review, PROTON’s business arrangement with China-based Jinhua<br />
Youngman Group saw us forming a strategic business collaboration which covered four<br />
major areas. This included the export of completely-built-up (CBU) Gen.2 and Persona for<br />
sale through Youngman’s network in China, with the first batch of CBU being delivered in<br />
early 2008. The collaboration also entails the supply of completely-knocked-down (CKD)<br />
Gen.2 and Persona which commenced in April 2009.<br />
In addition, PROTON can take advantage of China’s economies of scale and possible vendor<br />
collaboration by localising components and engines. The business arrangement also<br />
comprises technology transfer and technical support whereby PROTON provides technical<br />
support for China’s localisation programme and manufacturing start-up.<br />
Currently, PROTON cars are being sold through 80 appointed dealers throughout China<br />
under the Europestar brand.<br />
Prospects<br />
Moving forward, PROTON plans to set up a<br />
representative office in China in the second half of<br />
2009.<br />
Youngman plans to operate four plants in China,<br />
namely at Anshun, Jinan, Tai An and Hangzhou. In<br />
Hangzhou, there will be an engine plant for the<br />
production of CamPro engines, to be operational in<br />
October 2010.<br />
104<br />
PROTON’s operations begin in China.
Indonesia<br />
Performance and <strong>Operations</strong><br />
The Indonesian automotive market, like several others in the region, faced a highly volatile<br />
economic climate due to the hike in fuel prices and interest rates, while escalating nonperforming<br />
loans and high risk of defaults caused financial institutions to be more cautious<br />
in approving loans.<br />
The year under review saw the launch of the Gen.2, Persona and Saga in the Indonesian<br />
market. These new product offerings combined with the opening of additional sales outlets<br />
resulted in PT Proton Edar Indonesia registering an increase in retail sales by 49%.<br />
However, sales of PROTON taxis dipped by 57% as finance companies became more<br />
stringent in approving loan applications from taxi operators. Nonetheless, PROTON<br />
maintained the top 3 position in total taxi sales.<br />
There were also significant corporate developments for PROTON in the fiscal year. For one,<br />
PROTON secured a competitive financing affiliate from BCA Finance for its retail sales.<br />
Additionally, changes in the automotive policy which resulted in a lower CKD import duty<br />
for MFN (Most Favourable Nation) countries lowered competitors’ costs. As a result of the<br />
reduction in CKD import duty to a flat 15%, the import duty gap was narrowed between<br />
PROTON and auto competitors that enjoy an AFTA CEPT rate of 5%.<br />
PROTON has also strengthened its presence in Indonesia by appointing senior officers to<br />
helm the Company.<br />
Prospects<br />
<strong>Operations</strong> <strong>Review</strong><br />
The year ahead is expected to be a difficult one due to on-going economic challenges and<br />
recent price hikes by car brands. Despite these conditions, the Company will continue to<br />
strengthen the sales network, while maintaining operational efficiency.<br />
PROTON 2009 ANNUAL REPORT<br />
105
<strong>Operations</strong> <strong>Review</strong><br />
Iran<br />
Performance and <strong>Operations</strong><br />
PROTON’s presence in Iran began in 2001 with the appointment of Zagross Khodro (ZK)<br />
first as a distributor and subsequently, assembler of PROTON vehicles in the country. ZK<br />
started with the CBU import initially and seeing its potential, invested extensively in the<br />
sales and after-sales network throughout the country.<br />
Due to the company’s strong commitment and trust in the PROTON brand, ZK took a bold<br />
step by establishing a CKD assembly plant in the Borujerd province, approximately 400km<br />
south of Tehran, with production capacity up to 25,000 units a year.<br />
The plant started with the assembly of the Wira in 2002 and thereafter began producing the<br />
Gen.2 in May 2009. The targeted volume for the Gen.2 production will be approximately<br />
3,000 units in the new financial year and we expect this to double in fiscal year 2011.<br />
In addition to the partnership with ZK, PROTON also entered into a strategic collaboration<br />
agreement with the SAIPA Group, one of the biggest automotive manufacturers in Iran.<br />
The collaboration enables PROTON to explore opportunities in other areas such as research<br />
and development.<br />
106<br />
Prospects<br />
The new financial year will see PROTON’s market presence being further strengthened in<br />
Iran with CKD operations to include the production of the Persona. With Total Industry<br />
Volume (TIV) of more than 1.2 million vehicles annually, Iran has the potential to become<br />
one of the major export markets for PROTON in the coming years.
<strong>Operations</strong> <strong>Review</strong><br />
An agreement was signed with Zagross Khodro for the supply of automotive parts to assemble the Gen.2 in Iran.<br />
PROTON 2009 ANNUAL REPORT<br />
107
<strong>Operations</strong> <strong>Review</strong><br />
Singapore<br />
Performance and <strong>Operations</strong><br />
The slowdown in the global economy saw Singapore’s GDP contracting significantly to a<br />
growth of 1.1% compared to 7.8% a year ago. The weaker than expected growth impacted<br />
many sectors, especially retail.<br />
Sales for PROTON Singapore in the year under review saw a decline of 29% as fewer<br />
customers invested in big ticket items such as vehicles or property. This was primarily due<br />
to the hike in fuel prices and tightening of credit. As a result of firmer credit control, 20%<br />
of PROTON bookings were cancelled as customers could not obtain the necessary loans. In<br />
addition, the Certificate of Entitlement quota which controls the total new car population<br />
in Singapore was reduced by 11.9% from the previous year.<br />
However, the launch of the Saga in July 2008 generated positive response from first-time<br />
and price sensitive buyers.<br />
Despite the challenging conditions faced, PROTON Singapore managed to record a modest<br />
profit owing to the successful implementation of marketing strategies and aggressive<br />
re-structuring and cost cutting measures.<br />
The Saga landed in Singapore in mid 2008.<br />
108<br />
Prospects<br />
Moving forward, PROTON Singapore expects to<br />
further intensify marketing efforts in 2010 as the<br />
green shoots of a recovering economy begin<br />
to emerge, while we continue to enhance cost<br />
management.
Thailand<br />
Performance and <strong>Operations</strong><br />
The global financial crisis saw Thailand’s automotive<br />
TIV dropping by 2.5% in the year under review. Fear<br />
of recession, a weakening Thai Baht against the US<br />
Dollar, risk-averse financial institutions and a rise in<br />
fuel prices, collectively impacted the industry here as<br />
they did in many other parts of the world.<br />
In spite of this backdrop, PROTON registered sales<br />
of 3,279 units and achieved the No. 8 ranking in<br />
Thailand’s Passenger Car Segment in the first year<br />
of its entry into this market.<br />
Two products mainly drove sales: the Savvy and<br />
Persona. Voted among Thailand’s Top 10 cars for<br />
2008 by local publication, The Nation, the Savvy<br />
currently dominates the small car segment here<br />
but price competition could erode profitability.<br />
The Savvy’s success was followed by the launch<br />
of the eco-friendly Persona CNG in October 2008.<br />
Prospects<br />
<strong>Operations</strong> <strong>Review</strong><br />
Given the growing appeal of the Persona CNG as a<br />
result of escalating fuel prices in Thailand, the model<br />
has turned out to be a viable alternative to the Savvy<br />
to drive volume.<br />
PROTON subsequently launched the full Persona<br />
range in November 2008 at the Thai Motor Expo 2008<br />
to enthusiastic response. The Persona, which had also<br />
been hailed as one of the Top 10 most exciting new<br />
cars to enter the market in 2009 by the Bangkok Post,<br />
was also well-received at the Bangkok Motorshow<br />
in March 2009 and contributed to almost 49% of<br />
PROTON sales derived here.<br />
By the end of the financial year, Proton Motors<br />
(Thailand) Co Ltd had successfully started its operations<br />
in March 2009 with importation of PROTON cars into<br />
Thailand for wholesale to the distributor, Phranakorn<br />
Auto Sales Co Ltd, who had also established a network<br />
of 30 showrooms across Thailand during this period.<br />
In the coming year, while economic challenges will still prevail, PROTON is cautiously<br />
optimistic about strengthening our presence in Thailand especially in the small car segment,<br />
while enhancing our operational efficiency.<br />
PROTON 2009 ANNUAL REPORT<br />
109
<strong>Operations</strong> <strong>Review</strong><br />
Australia<br />
Overview<br />
On the back of record sales in 2007, the Australian<br />
automotive industry was on track for another record<br />
year in early 2008 with a 3.5% increase in sales in<br />
June. However, the effects of the global crisis resulted<br />
in an overall decline of 3.7% in sales for the year<br />
under review, with the slowdown most evident in the<br />
last three months of 2008. This was compounded by<br />
the withdrawal of two leading finance providers who<br />
were previously responsible for over 50% of retail<br />
automotive financing.<br />
Performance and <strong>Operations</strong><br />
During the year, Proton Cars Australia embarked<br />
on an ambitious campaign to rationalise the dealer<br />
network in preparation for the launch of the new<br />
Saga. While this campaign resulted in lower sales<br />
for the year, the operational aspects of the business<br />
were reviewed in preparation for the introduction of<br />
a long-term volume growth strategy.<br />
The challenging trading environment combined<br />
with the lack of readily-available vehicle financing<br />
compounded the effects of the dealer rationalisation<br />
programme. Sales fell by 20% compared with the<br />
16% increase in the previous year. With reductions<br />
made in marketing expenditure and overall cost<br />
containment, we managed to lessen the effect on the<br />
bottom line.<br />
The Jumbuck continued to be the highest selling<br />
model, followed by Savvy and Persona. Among the<br />
110<br />
PROTON sponsors the Wests Tigers Rugby team in Australia.<br />
accolades received by the Jumbuck was Australia’s<br />
Greenest Utility Vehicle due to its low emissions. It<br />
was also awarded the lowest cost vehicle to own<br />
and run, in its class, by the National Road Motorists<br />
Association.<br />
PROTON in Australia also continued our association<br />
with ‘Safe Drive Training’, an organisation responsible<br />
for training over 5,000 school age drivers from 113<br />
schools across New South Wales and Queensland<br />
annually.<br />
Furthermore, we continued with our sponsorship of<br />
the Wests Tigers Rugby League Football team. An<br />
estimated 400,000 people attended the Wests Tigers<br />
matches during the season with an additional 14.2<br />
million watching them on television which gave<br />
PROTON an opportunity to maintain a visible brand<br />
presence.
The Persona is launched Down Under.<br />
Prospects<br />
<strong>Operations</strong> <strong>Review</strong><br />
The year ahead is expected to be the most prosperous since the introduction of the brand<br />
in Australia. This is despite the 2009 forecast of a decline in overall industry volume which<br />
has been set lower again with estimates indicating a drop of up to 10%.<br />
Proton Cars Australia will be rolling out an ambitious volume growth plan which includes<br />
expansion of the current dealer network from 25 to 51 dealers nationally. The enhanced<br />
exposure coupled with an increase in marketing efforts and product diversity is expected<br />
to boost rapid growth.<br />
This will result in both an increase in sales as well as profitability, thereby putting in place<br />
the foundation for years of profitable growth moving forward.<br />
PROTON 2009 ANNUAL REPORT<br />
111
<strong>Operations</strong> <strong>Review</strong><br />
United Kingdom<br />
Overview<br />
The overall UK new car market total industry volume (TIV) decreased by over 11% in 2008<br />
compared with a year ago. The last quarter saw an even sharper decline in sales of over<br />
27% with total sales decreasing from 2.404 million units in 2007 to 2.132 million units in<br />
2008.<br />
While the fleet and business sales sectors generally fared better, the private buyer sector<br />
was the worst hit with a 15% sales dip in the year.<br />
‘Green cars’, however, continued to see a rise in demand. There was an increase in sales of<br />
diesel engine vehicles, particularly the 1.6 size diesel engines which saw a 26% increase,<br />
and petrol engines producing low levels of CO2. This was due primarily to high fuel prices<br />
and new car tax based on CO2 levels. Sales of petrol vehicles reduced by 17%.<br />
Demand for all body types and segments was reduced with the exception of Superminis<br />
which saw significant increase in sales as consumers looked for more economical but wellequipped<br />
and roomy vehicles. The successful introduction of new replacement models by<br />
the two market leaders further strengthened their stronghold.<br />
112<br />
Performance and <strong>Operations</strong><br />
Challenging economic conditions saw PROTON sales decrease significantly by 38% during<br />
the year under review. Despite the circumstances, Proton Cars (UK) Ltd achieved several<br />
operational goals which helped offset the downturn.<br />
A number of initiatives were introduced to improve operational performance and cost base.<br />
These included a company-wide resource re-organisation, a cost reduction programme,<br />
the amalgamation of all departments into one cost efficient central office, the setting<br />
up of a new in-house vehicle storage and preparation centre, centralised training, new<br />
dealer support systems and improved IT operations. The new in-house storage and PDI<br />
(pre delivery inspection) centre in particular saved cost while reducing delivery speed and<br />
improving quality.
Prospects<br />
The year 2009 is expected to be a difficult one for the automotive industry with little<br />
improvement in the UK forecast before next year. Competition will continue to increase as<br />
manufacturers strive to gain volume share and offset falling demand.<br />
Against this backdrop, Proton Cars (UK) Ltd is adopting prudent measures to counter the<br />
effects of market conditions, currency devaluation and the public’s lack of confidence<br />
and credit availability to buy new cars. These measures are expected to provide on-going<br />
cost savings whilst ensuring targets are met and class leading service levels continue to be<br />
maintained.<br />
The Gen.2 in the UK.<br />
<strong>Operations</strong> <strong>Review</strong><br />
PROTON 2009 ANNUAL REPORT<br />
113
<strong>Operations</strong> <strong>Review</strong><br />
Properties<br />
The year under review saw PROTON focusing on the disposal<br />
of non-core assets, which were mostly residential units<br />
and a few parcels of vacant land held by wholly-owned<br />
subsidiaries.<br />
114<br />
PROTON Group’s main manufacturing-based assets are located in Shah Alam and Glenmarie<br />
in Selangor, and Tanjung Malim in Perak. Other assets comprise our primary administrative<br />
building known as the Centre of Excellence in Subang Jaya as well as the numerous 3S<br />
centres nationwide.<br />
In recognition of the PROTON Sports Complex being one of Tanjung Malim’s most wellequipped<br />
sports facilities, it was selected by the Football Association of Malaysia as the<br />
home stadium for Proton FC for its President’s Cup League 2008. It is our intention to carry<br />
on improving and upgrading these facilities in order to become Southern Perak’s leading<br />
hub for sports and social activities.<br />
Additionally, Proton City Development Corporation Sdn Bhd, a 40% owned associate<br />
company, continued to enhance visibility for Proton City in Tanjung Malim. Proton City<br />
was planned with modern infrastructures, recreational park and rich landscaping which<br />
have all contributed towards making it a viable investment option for buyers of residential<br />
units in the area.<br />
While the year ahead poses its challenges given the downturn in the economy, to ensure<br />
the marketability of Proton City, we will focus on re-planning selected products to better<br />
cater to discerning home buyers. The undeveloped land bank in Proton City remained at<br />
2,720 acres at the end of the fiscal year.
Top: The Centre of Excellence in Subang Jaya.<br />
Bottom: PROTON’s Sports Complex is one of Tanjung Malim’s best sports facilities.<br />
PROTON 2009 ANNUAL REPORT<br />
115
<strong>Operations</strong> <strong>Review</strong><br />
Financial Services<br />
Proton Commerce Sdn Bhd (PCSB) is a joint venture company<br />
between Proton Edar Sdn Bhd and CIMB Bank Berhad, which<br />
enables PROTON to provide quality financing services to our<br />
customers.<br />
PCSB offers competitive hire purchase loan financing<br />
packages to new PROTON car purchasers through the PESB<br />
and EON sales network nationwide.<br />
116<br />
Customers will not only enjoy better deals for car financing but also speedier application<br />
and approval processes as well as value-added packages that offer a combination of other<br />
financial products.<br />
Backed by the expertise and reliability of two established parent companies, the PROTON<br />
Group is committed to delivering competitive hire purchase packages that prioritises<br />
providing fast, efficient and friendly service to our car buyers. By doing this, it is our aim<br />
to become the preferred automotive finance provider for the purchase of new PROTON<br />
vehicles, while being recognised as a competitive and capable player in the local automotive<br />
financing industry.
PROTON 2009 ANNUAL REPORT<br />
117
<strong>Operations</strong> <strong>Review</strong><br />
Corporate Social Responsibility<br />
PROTON is fully aware that the attention to a company’s<br />
profitability must correspond to a similar focus on human<br />
resource development and the environment it operates in.<br />
118<br />
With this in mind, the Group is committed to making positive strides and worthwhile<br />
contributions towards creating a sustainable business that benefits our people and society<br />
at large.<br />
In carrying out our corporate social responsibility (CSR) initiatives, the Group aims to<br />
achieve several broad objectives which will meet the expectations of good corporate<br />
governance, ethical corporate values and responsible corporate citizenry. It is also vital<br />
that we advocate a corporate culture that appreciates the value of social service and how<br />
it impacts stakeholders as a whole.<br />
At PROTON, we divide our CSR initiatives into four main segments: marketplace, workplace,<br />
community and environment.
PROTON Malaysia Open 2009, an annual event anticipated by badminton fans worldwide.<br />
PROTON 2009 ANNUAL REPORT<br />
119
<strong>Operations</strong> <strong>Review</strong><br />
PROTON i-CARE plays a key part in enhancing value for our customers.<br />
120<br />
Marketplace<br />
CSR initiatives in this area are essentially related to the Group’s objective of maintaining<br />
sound business practices at all times, be it with the shareholder, customer or supplier. We<br />
take utmost care to ensure that all businesses are not only conducted in an ethical and<br />
professional manner, but are also in compliance with regulatory requirements.<br />
Maintaining customer satisfaction is one of the foremost pillars of PROTON’s business<br />
management and much effort is taken to cultivate strong relationships with our customers<br />
in order to improve their satisfaction levels. A primary tool to enhance customer satisfaction<br />
is our customer survey which is specifically tailored to PROTON’s business operations. The<br />
valuable information gleaned is analysed and then incorporated into product and service<br />
developments, sales as well as customer care activities so we can ensure that the customers’<br />
experience with PROTON is constantly being enhanced.<br />
The year saw the Group continuing to elevate the standards of PROTON i-CARE by<br />
emphasising the importance of creating the best value for our customers. From the<br />
moment the customers make a call to the Call Centre, they should have a smooth, seamless
<strong>Operations</strong> <strong>Review</strong><br />
experience and this includes receiving free technical advice and assistance at our highly<br />
competent technical centres.<br />
PROTON employees are also encouraged to evaluate this process periodically in order to<br />
better understand a customer’s needs and thereby improve the quality and speed of our<br />
response to customers.<br />
If a product experiences a malfunction, the Company acts promptly to minimise adverse<br />
effects to customers and mobilises all divisions affected to provide a rapid response. In<br />
critical cases, particularly where customer safety is involved, we assess the scope of damages<br />
and thoroughly investigate the cause of the incident.<br />
In accordance with best practises of major OEMs, PROTON would recall a product that has<br />
possible defects. As part of corporate responsibility and good governance, PROTON makes<br />
public announcements either through newspaper advertisements or the website to ensure<br />
customers are immediately informed.<br />
Additionally, PROTON strives to build sound partnerships with our suppliers through<br />
fair trading in compliance with procurement-related policies, laws and regulations. We<br />
continuously monitor the performance of suppliers with on-going quality audits and<br />
where necessary, request for improvements and provide guidance. For new procurement<br />
transactions, we not only ensure that goods and services procured conform to the Group’s<br />
policies but also take into consideration the suppliers’ manufacturing sites, management<br />
systems and the state of their operations. Suppliers’ efficiency and productivity are also<br />
supported through the Improve, Control and Educate (ICE) initiative whereby sustainability<br />
of supply capacity and training are greatly emphasised. PROTON closely monitors the<br />
progress through extensive reviews and follow-up visits.<br />
For small and medium sized suppliers, PROTON provides technical support that enables<br />
them to have access to the Automotive Development Fund which was established by the<br />
Government to ease financial difficulties resulting from the current economic crisis. To<br />
date, approximately RM35 million has been disbursed.<br />
PROTON 2009 ANNUAL REPORT<br />
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<strong>Operations</strong> <strong>Review</strong><br />
Workplace<br />
At PROTON, we recognise that a talented, productive human capital represents the<br />
backbone of our development and progress.<br />
Our workplace CSR does not only provide our employees with optimum working conditions,<br />
as evidenced by the Group’s safety and health policies, training exercises and other benefits<br />
to safeguard each one’s welfare. We also ensure that their skills and talents are nurtured.<br />
By harnessing this cohesively, we can further enhance PROTON’s competitive advantage in<br />
the industry.<br />
As important as it is to grow as one seamless entity, we must also develop and retain<br />
qualified leaders. Through the Group’s management initiatives, we develop key members<br />
of our workforce by using PROTON’s Core and Leadership Competency Model. A similar<br />
approach is applied for those who are keen to advance along the technical career track<br />
via the Technical & Functional Competency Model. By using these competency models, our<br />
Talent Management Programme has enhanced PROTON’s ability to identify, develop, and<br />
retain critical skills and talents, especially for positions that play a critical role in delivering<br />
business and strategic growth.<br />
Maintaining open communications between employees and Management is also vital.<br />
PROTON has implemented a range of initiatives specifically designed to encourage such<br />
communication so employees can achieve their full potential and progress within the<br />
company. Initiatives include disclosing key performance indices, shared assessments,<br />
personnel system reforms and streamlining the scheme of service throughout the Group.<br />
To further strengthen PROTON’s learning capability, we implemented the PROTON<br />
Development Framework which includes the Centre of Manufacturing Excellence, Centre of<br />
Knowledge Excellence, and Centre of Human Capital Excellence. In essence, this initiative<br />
promotes a strong knowledge culture by encouraging continuous learning through various<br />
training programmes.<br />
122
PROTON conducts numerous training<br />
programmes for staff in different<br />
divisions.<br />
In 2008 PROTON trained a total of 6,348 staff comprising executives and non-executives.<br />
The Group also kicked off a 5-year Competency Based In-house Trainers Development<br />
Programme to help drive knowledge-building initiatives. These initiatives were further<br />
strengthened by collaborating with established training and higher learning institutions.<br />
A Memorandum of Understanding was signed between GIAT MARA Malaysia in June 2008<br />
to collaborate on Work Based Learning (WBL) for students from the institute. The first<br />
batch of 155 students completed their 4-month WBL at the Tanjung Malim plant, following<br />
which, 50 trainees were offered full-time employment with PROTON. PROTON is also<br />
collaborating with community colleges to provide WBL for specialised & technical work<br />
such as maintenance & machining in the manufacturing plants.<br />
<strong>Operations</strong> <strong>Review</strong><br />
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123
<strong>Operations</strong> <strong>Review</strong><br />
To facilitate the development of non-executive employees, PROTON is also in discussions<br />
with BATC to develop an Executive Diploma in Manufacturing Systems Engineering. The<br />
first intake is expected to take place by September 2009.<br />
PROTON has also embarked on a major initiative of institutionalising Knowledge<br />
Management (KM) practices which is key to our on-going growth and building a knowledgebased<br />
human capital. In support of this initiative, we launched our first KM portal ASPIRE<br />
(Advanced Strategic Proton Information Repository Engine) in April 2009. We are optimistic<br />
that with the presence of good equipment, techniques and practices, PROTON can ‘ASPIRE’<br />
to be a leading player in the automotive industry both domestically and in the region.<br />
After years of prioritising health and safety, PROTON has accumulated a wealth of<br />
knowledge and experience in health and safety management, education, maintenance, and<br />
the environment. As such, a wide range of occupational health and safety measures have<br />
been implemented throughout the Group’s premises and related businesses nationwide.<br />
To further complement this, the Group organised numerous health talks, carnivals,<br />
exhibitions and programmes throughout the year to create awareness amongst employees<br />
on the importance of adopting safe and healthy lifestyles. Steering and working committees<br />
were established to allow for more effective monitoring of health and safety related issues<br />
throughout the PROTON Group of companies.<br />
124<br />
Community<br />
Community CSR is another important segment for the Group and encompasses philanthropic<br />
activities and donations mainly revolving around local communities, youth programmes,<br />
NGOs and various other special interest groups.<br />
On an annual basis, PROTON disburses approximately RM200,000 in the form of scholarships<br />
to deserving students so they can pursue their higher education ambitions at recognised<br />
local institutions of higher learning.
Additionally, Yayasan PROTON carried out several educational initiatives during the year. In<br />
November 2008, 16 scholars from universities around the country received scholarships from<br />
the Group at a ceremony, which also witnessed representatives from Yayasan PROTON’s<br />
‘Adopted School Programme’ being presented with mock cheques. These ‘adopted’<br />
schools, located in Shah Alam and Tanjung Malim, require financial support for educational<br />
activities such as PMR and SPM tuition classes and motivational seminars, among others.<br />
Yayasan PROTON awards students with scholarships to pursue their higher education.<br />
<strong>Operations</strong> <strong>Review</strong><br />
During the year under review, Yayasan PROTON through its ‘Adopted School Programme’<br />
contributed funds in support of educational activities for four schools: Sekolah Menengah<br />
Kebangsaan Agama Slim River, Sekolah Menengah Teknik Shah Alam, Sekolah Menengah<br />
Kebangsaan Dato’ Khir Johari and Sekolah Kebangsaan Behrang.<br />
PROTON 2009 ANNUAL REPORT<br />
125
<strong>Operations</strong> <strong>Review</strong><br />
A badminton clinic for ‘Pintar Programme’ school children in Penang being conducted by national coach<br />
and ex-national player Tuan Haji Misbun Sidek.<br />
126<br />
Yayasan PROTON scholars also participated in the Group’s annual team-building activity in<br />
February 2009 at Kelana Resort, Seremban, where scholars were exposed to the company’s<br />
core values and took part in outdoor activities aimed to develop team spirit and build<br />
confidence.<br />
In the same month, RM40,000 was contributed by Yayasan PROTON towards PROTON’s<br />
Tabung Pendidikan, while the Majlis Anugerah Kecemerlangan Akademik PMR and SPM<br />
was held to reward children of staff who had achieved excellent results.
<strong>Operations</strong> <strong>Review</strong><br />
As part of our commitment to nation-building, we aim to enhance national unity amongst<br />
Malaysians and promote economic development. A major initiative under this platform<br />
is PROTON’s involvement in the ‘Pintar Programme’ which is spearheaded by Khazanah<br />
Nasional Berhad and involves other Government-Linked Companies. Our main objective<br />
is to assist children from low-income families improve their academic performance and<br />
develop positive characteristics while young. The ‘adoption’, which involves a commitment<br />
of RM0.5 million, is for three years and began in the 2007/2008 financial year, with<br />
structured activities to be implemented throughout the duration.<br />
In the year under review PROTON’s ‘Pintar Programme’ adopted four schools with a total<br />
number of 3,006 students. Collectively, 36 activities were held including motivational<br />
programmes, weekly tuition classes, coaching for exam year students, English classes as<br />
well as recreational activities such as football and badminton clinics in collaboration with<br />
the Badminton Association of Malaysia (BAM) and PROTON Football Club. PROTON also<br />
provided necessities such as water coolers and library books as well as incentives to the<br />
poorer and high achieving students in the form of cash and bicycles.<br />
The four schools are Sekolah Rendah Kebangsaan Bagan Tuan Kechil in Butterworth, Penang;<br />
Sekolah Menengah Paya Keladi in Kepala Batas, Penang; Sekolah Rendah Kebangsaan,<br />
Tanjung Malim, Perak; and Sekolah Rendah Kebangsaan Pintu Gang, Paloh, Kelantan.<br />
In sports, PROTON continued to build talent at the grassroot level through development<br />
programmes particularly for badminton and football enthusiasts. Going beyond this<br />
objective, our initiatives under this platform also serve to promote Malaysia as a preferred<br />
destination for sports tourism.<br />
We continued our role as the major sponsor of badminton through BAM, with an allocation<br />
of RM3.5 million (including promotions) for the sport during the year under review. The<br />
year 2008 was a successful one for BAM as its players performed well in various international<br />
outings particularly in the Beijing 2008 Olympics where top national player Lee Chong Wei<br />
bagged the country’s only medal in the games.<br />
PROTON 2009 ANNUAL REPORT<br />
127
<strong>Operations</strong> <strong>Review</strong><br />
A convoy of PROTON sponsored vehicles at the Le Tour de Langkawi.<br />
128<br />
The year also saw PROTON’s football team qualifying for the Liga Perdana in the National<br />
Football League, while we once again sponsored the country’s A1 team to promote the<br />
growth of the motorsports industry in the country as well as the PROTON brand in the<br />
international arena.<br />
The Le Tour de Langkawi international cycling event, which PROTON has long been<br />
associated with, also continued to receive sponsorship and organisational assistance. The<br />
event has not only helped place the nation on the world map, but more importantly, it has<br />
spurred the development of homegrown cycling talents to compete at international level.
<strong>Operations</strong> <strong>Review</strong><br />
Under Bridging Community Programme, PROTON lends its hand to the less fortunate<br />
members of society by building and repairing homes. The year saw PROTON carrying out<br />
various repair works for Rumah Anak Yatim Siraman Kasih in Rawang and Rumah Anak<br />
Yatim Sekendi in Sabak Bernam. PROTON also built a hostel for 60 inmates at Rumah Anak-<br />
Anak Yatim & Miskin Darul Aitam, Tepoh, Perak.<br />
In addition, PROTON annually supports various national bodies and organisations such<br />
as MERCY, Yayasan Harapan Kanak-Kanak, Pediatric Ward of Hospital Tengku Ampuan<br />
Rahimah, Yayasan Orang Kurang Upaya Kelantan, and PEMADAM with the sponsorship<br />
of cars.<br />
PROTON also has an on-going programme involving automotive technical education<br />
through the contribution of used/scrap engines, components and body parts to national<br />
technical institutions such as GIAT Mara, Institut Latihan Perindustrian under the Ministry<br />
of Human Resources, Akademi Latihan Bomba and Institut Kejuruteraan Tentera Darat, as<br />
well as various community colleges. PROTON has been the main sponsor for the Malaysian<br />
Skills Competition (the automobile technology sector) organised by the Ministry of Works<br />
for the past seven years. The annual Grant includes sending Malaysian representatives to<br />
the ASEAN and World Competitions, with the objective of nurturing young local talents in<br />
this sector and building world-class human capital.<br />
PROTON’s football team is in the<br />
National Football League.<br />
PROTON 2009 ANNUAL REPORT<br />
129
<strong>Operations</strong> <strong>Review</strong><br />
Environment, Health & Safety Report<br />
As Malaysia’s largest manufacturer of automobiles, PROTON<br />
is committed towards protecting the environment by<br />
conforming to the Environmental Quality Act, 1974, OSHA<br />
(Occupational Safety and Health Administration) guidelines<br />
as well as other rules and regulations as part of our corporate<br />
responsibility.<br />
130<br />
PROTON’s Environmental, Health and Safety Policy together with Quality Policy ensures that<br />
the Group is conscientious about its operations impact on the surroundings and protecting<br />
the health and safety of PROTON’s greatest assets, its people, and the community at<br />
large.<br />
ISO14001 Environment Management System<br />
Reducing the carbon footprint as part of PROTON’s environmental initiatives continued to<br />
be a core focus for the Group. In 2007, we had embarked on an ambitious journey in order<br />
to achieve international standards in managing our environment. During the year under<br />
review, PROTON passed the pre-assessment audit on ISO14001 Environmental Management<br />
System carried out jointly by Vehicle Certification Agency (VCA) and SIRIM Malaysia, and<br />
accredited by the United Kingdom Accreditation Service (UKAS).<br />
Considered a means to building greater trust in the marketplace, this internationally<br />
recognised evaluation gives the assurance that PROTON is systematically managing the<br />
environment by benchmarking itself against international standards. Strong customer<br />
confidence in PROTON’s products and services is a must; as such we take pride in these<br />
certifications as they do create a favourable impression especially on export markets such<br />
as the UK and Australia, where environmental concerns are of paramount importance.
PROTON 2009 ANNUAL REPORT<br />
131
<strong>Operations</strong> <strong>Review</strong><br />
132<br />
Amongst PROTON’s environmentally-friendly measures at all its plants include the<br />
installation of ‘green’ equipment, machinery, robots and automation systems. As these<br />
utilise less energy and emit less waste into the atmosphere, such installations have<br />
contributed towards improving efficiency levels at PROTON.<br />
Waste Water Recycling<br />
PROTON utilises water resources in a responsible manner. Wastewater from the domestic and<br />
industrial sources are chemically and biologically treated within PROTON’s manufacturing<br />
facilities.<br />
Currently, the recycled wastewater is used as incinerator coolant at the rate of 25,000 litres<br />
per hour to cool down and maintain proper operating temperature. The recycled water is<br />
also used to water plants, as well as clean roads and drains within PROTON’s facilities.<br />
Toxic Waste Treatment<br />
During the year, PROTON’s industrial wastewater effluence discharged after treatment was<br />
well below the legal limit under the Environmental Quality Act, 1974:<br />
• COD – Chemical Oxygen Demand’s standard is 100 mg/l; PROTON’s actual discharge<br />
was less than 50 mg/l.<br />
• BOD – Biological Oxygen Demand’s standard is 50 mg/l; PROTON’s actual discharge<br />
was less than 10 mg/l.<br />
Scheduled waste is defined as any toxic waste falling within the categories of waste listed<br />
in the First Schedule, Environment Quality (Scheduled Waste) Regulations, 2005. While<br />
PROTON manages the treating of scheduled waste within the plant premises, the final dry<br />
sludge from the scheduled waste is transferred to Kulaiti Alam Sdn Bhd, the sole national<br />
schedule waste management centre located in Negeri Sembilan.<br />
During the manufacturing process, several types of scheduled wastes are generated. These<br />
are mainly the result of the overspray dust that occurs during the painting process and<br />
are known as paint sludge, which is treated by an incineration process that requires a<br />
temperature of more than 1,000 Celsius.<br />
PROTON’s volume of scheduled waste generated as a by-product from the manufacturing<br />
process during the year was once again on a downward trend in keeping with previous<br />
years.
End of Life Vehicles<br />
The quality of the cars manufactured can also impact the environment. In view of this,<br />
PROTON continues to ensure that all automobiles produced by the Group for the UK<br />
and European markets comply with the End of Life Vehicle (ELV) directive issued by the<br />
European Union. By maintaining exacting standards in our product line, we have taken<br />
further steps to ensure PROTON vehicles do not cause harm to the environment and people<br />
upon their end of life disposal.<br />
PROTON X-Change Programme<br />
<strong>Operations</strong> <strong>Review</strong><br />
In a bid to remove old cars from Malaysian roads and curb pollution, PROTON had in the<br />
previous year embarked on the X-Change Programme where cars that were more than 10<br />
years old can be exchanged for a rebate of RM5,000 to be used towards the down-payment<br />
of a brand new PROTON car. Cars that are traded in are usually used as scrap metal.<br />
The programme, which is a part of the Government’s second stimulus package, will come<br />
to an end in December 2009. Owners of aging cars with low resale value have been taking<br />
advantage of this programme that has already seen close to 11,900 rebate vouchers being<br />
issued by PROTON as of July 2009.<br />
PROTON 2009 ANNUAL REPORT<br />
133
<strong>Operations</strong> <strong>Review</strong><br />
Green Cars<br />
Growing concerns with protecting the environment, managing carbon footprint, as well as<br />
volatile petrol prices, have resulted in an increasing interest in ‘green’ vehicles worldwide.<br />
During the year under review, PROTON’s vision of creating an automobile that is powered<br />
by natural gas became a reality with the Saga NGV (natural gas vehicle). PROTON is currently<br />
also focusing its R&D efforts on another alternative fuel vehicle, the electric vehicle.<br />
134<br />
Health and Safety<br />
Management Commitment<br />
With the formalisation of the Environment, Health and Safety policy, the Group ensured<br />
that its implementation was supported with adequate manpower and funds. As a result<br />
of top-down commitment, the Company was able to sustain employees’ interest in various<br />
programmes which helped to reduce, and in some cases eliminate, occupational injuries<br />
and illnesses.<br />
Numerous Occupational Safety and Health (OSH) programmes and activities were developed<br />
to ensure the safety, health & welfare of persons at the workplace and to protect external<br />
parties against possible hazards.<br />
A key activity is PROTON’s ergonomics improvement programme which aims to maintain<br />
human-friendly working conditions and reduce work load at the assembly line. Ergonomics<br />
covers all aspects of the job from the physical stress it places on joints, muscles, nerves,<br />
tendons, bones and the like, to environmental factors which can affect hearing, vision and<br />
general health.<br />
Through this programme, PROTON had during the year abolished the following:<br />
• The practise of carrying heavy items that are more than 10 kg in weight such as<br />
window glass, seats, instrument panels, exhaust pipes and tires.<br />
• Heavy physical work such as high torque wrench corresponding to more than 10 kg-m<br />
for the tightening of suspension, tire bolts and drive shafts.<br />
• Untidy work and other dislikes by operators such as urethane application and fluid<br />
charging.
Instilling sound commuting practices that revolve around safety at all times is an on-going<br />
priority for PROTON. The following campaigns were carried out during the year:<br />
• Road safety campaigns during festive seasons in collaboration with DOSH, Police,<br />
NIOSH and other agencies.<br />
• Defensive riding courses for employees by in-house skilled trainers.<br />
• Motorcycle convoy skills to foster correct motorcycle riding, which included<br />
programmes such as convoys to Teluk Batik and Ilham Resort, Port Dickson, with in-<br />
house union members.<br />
• Defensive driving training programmes for the public and customers to educate and<br />
teach PROTON car owners safety and defensive driving techniques. This was in line<br />
with the Government’s aim to make roads safer and bring down the alarming<br />
number of road accidents and fatalities.<br />
<strong>Operations</strong> <strong>Review</strong><br />
As a result of stringent safety practices on site, the number of industrial accidents recorded<br />
in years 2006, 2007 and 2008 were 27, 18 and 11 respectively. The rate is consistent with the<br />
downward trend in the past few years and PROTON will continue in its efforts in this area.<br />
Staff who ride motorcycles to work receive helmets and reflective vests from the Managing Director.<br />
PROTON 2009 ANNUAL REPORT<br />
135
Shouldering Responsibility
Shouldering<br />
Responsibility<br />
PROTON’s evolution as<br />
a national automaker<br />
lies in maintaining<br />
integrity, transparency<br />
and commitment to the<br />
Company’s values as it<br />
upholds the interests of<br />
stakeholders.<br />
Innovation in Motion
Statement on Corporate<br />
Governance<br />
138<br />
The Board of PROTON is committed to applying the<br />
recommendations of the Malaysian Code on Corporate<br />
Governance (revised 2007) (“the Code”) and the principles<br />
of Best Practices recommended in the Code to ensure that<br />
good corporate governance is practised throughout the<br />
Group to effectively discharge its responsibilities to protect<br />
and enhance shareholder value.
The Board is also committed to abiding by the Guidelines to Enhance Board Effectiveness<br />
as set by the Putrajaya Committee on GLC High Performance (PCG), and at the same time,<br />
striving to maintain a high level of corporate governance within the PROTON Group<br />
by ensuring that the highest standards of corporate culture are practised throughout.<br />
Good corporate governance is the foundation of the culture and business practices of<br />
the PROTON Group.<br />
Set out herein is a statement on how the Group has applied the principles and adopted<br />
the best practices as laid down in the Code. This statement describes how the Principles of<br />
Good Governance and provisions of the Code are applied by the Group.<br />
PROTON 2009 ANNUAL REPORT<br />
139
Statement on Corporate Governance<br />
140<br />
Board of Directors<br />
The Board is committed to establishing and enhancing shareholder value in the long-term<br />
and is pleased to report that the Group has to its best efforts and knowledge complied with<br />
the Principles and Best Practices of the Code throughout the financial year under review.<br />
The Board continues to enhance its role in improving governance practices effectively<br />
to safeguard the interests of the shareholders as well as stakeholders. To this end, the<br />
Board has full control of and is responsible for the Group’s overall strategy, acquisition<br />
and divestment policies, capital expenditures, annual budget, review of financial and<br />
operational performance, and internal controls and risk management processes. The<br />
Group’s overall strategic direction, development, implementation and control remain of<br />
primary importance to the Board.<br />
Dato’ Mohammed Bin Azlan Hashim resigned as Non-Executive Chairman of PROTON on<br />
1 January 2009. Dato’ Mohd Nadzmi Bin Mohd Salleh who was previously the Managing<br />
Director of Perusahaan Otomobil Nasional Berhad (the then listed entity on the Kuala<br />
Lumpur Stock Exchange) from 29 June 1993 until 1 April 1996 was appointed as the new<br />
Non-Executive Chairman of PROTON on 1 January 2009.<br />
The roles and responsibilities of the Non-Executive Chairman and the Managing Director<br />
are clearly defined. The Chairman ensures the integrity and effectiveness of the Board as a<br />
whole. He conducts Board meetings and ensures that it proceeds in an orderly manner.<br />
The Managing Director (“MD”) on the other hand is responsible for making, and ensures<br />
the implementation of, broad policies as approved by the Board and reports to and<br />
discusses material matters including regulatory developments and strategic projects with<br />
the Board. There is therefore a natural separation of management and governance leading<br />
to a balance of power and authority.<br />
The non-executive directors are independent of management and are free from any business<br />
relationship, which could materially interfere with the exercise of their independent<br />
judgment.<br />
The Board has delegated matters pertaining to the day to day management, operations and<br />
strategic development of the Group subject to the Limits of Authorities and Group Policies<br />
and Procedures to the Managing Director who is supported by a competent Management<br />
Team.
Statement on Corporate Governance<br />
In the financial year ended 31 March 2009, the Board of PROTON Holdings Berhad (PHB) met nine (9) times<br />
details of which are as shown below:<br />
No Name of Director Designation Date of Date of Meeting Percentage<br />
Appointment Resignation Attendance<br />
1 Dato’ Mohd Nadzmi Non-Independent/ 1 January 2009 N/A 1/1 100%<br />
Bin Mohd Salleh Non-Executive Chairman<br />
2 Dato’ Haji Syed Zainal Managing Director 1 January 2006 N/A 8/9 89%<br />
Abidin B Syed<br />
Mohamed Tahir<br />
3 Tuan Haji Abdul Jabbar Independent Non- 12 April 2004 N/A 8/9 89%<br />
Bin Abdul Majid Executive Director<br />
4 Tuan Haji Abdul Kadir Independent Non- 10 March 2005 N/A 9/9 100%<br />
Bin Md Kassim Executive Director<br />
5 Dato’ Michael Independent Non- 15 September 2006 N/A 8/9 89%<br />
Lim Heen Peok Executive Director<br />
6 Datuk Zalekha Binti Non-Independent 11 February 2008 N/A 6/9 67%<br />
Hassan Non-Executive Director<br />
7 Dato’ Mohammed Non-Independent/ 17 December 2004 1 January 2009 8/8 100%<br />
Azlan Bin Hashim Non-Executive Chairman<br />
Note: On 13 May 2009, Encik Oh Kim Sun was appointed Independent Non-Executive Director of PROTON.<br />
The profiles of the directors are set out on (pages 28 to 35) of the Annual Report.<br />
Board meetings for the Company and its subsidiaries are scheduled in advance before the start of each calendar<br />
year and the meetings calendar is circulated to all Board Members at the beginning of each year. This would<br />
enable the Directors to plan ahead and ensure attendance at Board Meetings. Additional meetings or Special<br />
Board meetings are convened whenever necessary when there are urgent and important decisions to be<br />
made.<br />
PROTON 2009 ANNUAL REPORT<br />
141
Statement on Corporate Governance<br />
142<br />
Board Composition and Balance<br />
The Board consists of seven (7) members with the Chairman being a Non-Independent Non-<br />
Executive Director, one (1) Non-Independent Non-Executive Director, four (4) Independent<br />
Non-Executive Directors and one (1) Executive Director who is the Managing Director.<br />
Tuan Haji Abdul Jabbar Bin Abdul Majid and Tuan Haji Abdul Kadir Bin Md Kassim are the<br />
Company’s Senior Independent Directors to whom concerns pertaining to the Group may<br />
be conveyed by the shareholders and the public.<br />
Apart for the Managing Director, all the Non-Executive Directors are independent of<br />
management and free from any business or other relationship, which could materially<br />
interfere with the exercise of independent judgment.<br />
Independence and Conflict of Interest<br />
The Directors are required to make written declarations and it is their responsibility to<br />
declare whether they have a potential or actual conflict of interest in any transaction.<br />
Where issues involve conflict of interest, the interested Directors abstain from discussing or<br />
voting on the matter.<br />
Supply of Information<br />
The Board has full access to all information pertaining to the Group’s business affairs to<br />
enable the Board to discharge its responsibilities effectively.<br />
In general, the agenda, board papers and minutes of previous meetings of the Board<br />
and Board Committees including minutes of board meetings of subsidiary companies are<br />
circulated in advance to the Board before meetings. The agenda for every meeting permits<br />
the Board members to review the contents of meetings and enables the Chairman to better<br />
and more efficiently conduct the proceedings at the Board meetings.<br />
The Board has full access to the Company Secretary who is available to provide the Directors<br />
with the appropriate advice and services and also to ensure that the relevant procedures<br />
are followed and rules and regulations are complied with. The Board is, from time to time,<br />
updated, with any changes in the law, governance and other regulatory requirements.<br />
Senior Management as well as professional and external advisors are from time to time<br />
invited to attend board meetings to deliberate and clarify issues on the subject matter<br />
concerned.<br />
The Company has drawn up a list of transactions that would require the prior approval of<br />
the Board. The same is reflected in PROTON’s Group Policy and Procedures and Limits of<br />
Authority.
Statement on Corporate Governance<br />
Policy on Appointment of Directors<br />
The Board Nomination & Remuneration Committee reviews all new appointments by taking<br />
into consideration the skill sets required by the Company and the Group.<br />
Board Members are appointed through a formal and transparent selection process that is<br />
consistent with the Articles of Association of the Company and the Company’s Selection<br />
Policy for Directors.<br />
New directors are required to undergo familiarisation programmes, plant visits and briefings<br />
to get a better understanding of the PROTON Group, its operations and the automotive<br />
industry.<br />
The Board Nomination & Remuneration Committee, apart from carrying out annual reviews<br />
on the mix of skills and experience of the Directors to ensure that the Board has the right<br />
balance and effectiveness also ensures an effective process of selection of all key posts within<br />
the PROTON Group and this includes all members of the senior management committee<br />
and similar level executives including direct reports to the respective chief executive officer<br />
both at holding company level and throughout the PROTON Group.<br />
Re-Election of Directors<br />
All Directors including the Executive Director are subject to retirement by rotation at least<br />
once in every three years and are eligible for re-election. In accordance with the Articles of<br />
Association and the Listing Requirements of Bursa Malaysia Securities Berhad, at least 1/3 of<br />
the Directors shall retire from office at each Annual General Meeting. Any new appointed<br />
director shall hold office only until the next Annual General Meeting of the Company and<br />
shall be eligible for re-election under Article 111. Directors who are over seventy (70) years<br />
of age are required to submit themselves for retirement annually at the Annual General<br />
Meeting, unless the Director is re-appointed by way of special resolution in accordance with<br />
Section 129 (6) of the Companies Act, 1965.<br />
At the forthcoming Annual General Meeting of PROTON Holdings Berhad the following<br />
Directors will retire and are eligible for re-election:<br />
(i) Pursuant to Article 104<br />
• Dato’ Michael Lim Heen Peok<br />
• Tuan Haji Abdul Kadir Bin Md Kassim<br />
• Tuan Haji Abdul Jabbar Bin Abdul Majid<br />
Note: Tuan Haji Abdul Jabbar Bin Abdul Majid although eligible, does not seek re-election.<br />
(ii) Pursuant to Article 111<br />
• Dato’ Mohd Nadzmi Bin Mohd Salleh<br />
• Encik Oh Kim Sun<br />
None of the Directors are subject to retirement pursuant to Section 129 of the Companies<br />
Act, 1965 at the forthcoming Annual General Meeting.<br />
PROTON 2009 ANNUAL REPORT<br />
143
Statement on Corporate Governance<br />
Board Committees<br />
The Board has delegated specific responsibilities to five (5) sub-committees, namely the Board Executive<br />
Committee, Board Audit Committee, Board Nomination & Remuneration Committee, Board Risk Management<br />
Committee and Board Disciplinary Committee, which assist the Board in overseeing the affairs of the<br />
Group and have been entrusted with specific responsibilities and authority and report to the Board with<br />
recommendation.<br />
The abovementioned Board Committees have the authority to examine specific issues and report to the Board<br />
with their recommendations. The responsibility of decisions on all matters ultimately lies with the Board as a<br />
whole.<br />
Board Audit Committee<br />
The Board Audit Committee (“BAC”) met eight (8) times during the course of the financial year. The composition<br />
of the BAC and their respective attendance record of meetings for the financial year ended 31 March 2009<br />
are as follows:<br />
No Name of Director Designation Date of Date of Meeting<br />
Appointment Resignation Attendance<br />
1 Tuan Haji Abdul Jabbar Bin Chairman – Independent 10 March 2005 N/A 8/8<br />
Abdul Majid – Chairman* Non-Executive Director<br />
2 Tuan Haji Abdul Kadir Bin Member – Independent 10 March 2005 N/A 7/8<br />
Md Kassim Non-Executive Director<br />
3 Dato’ Michael Member – Independent 29 November 2006 N/A 8/8<br />
Lim Heen Peok Non-Executive Director<br />
*Note: Encik Oh Kim Sun was appointed as Member and Chairman of the Board Audit Committee on 1<br />
June 2009. Tuan Haji Abdul Jabbar Bin Abdul Majid was on the same date re-designated as<br />
Member of the Board Audit Committee.<br />
During the financial year, the BAC of PROTON Holdings Berhad undertook the following activities:<br />
• Assisted the Board in discharging its statutory duties and responsibilities relating to accounting and<br />
reporting practices of the Company and the Group in accordance with Generally Accepted Accounting<br />
Practices.<br />
• <strong>Review</strong>ed the external audit terms of engagement, the audit strategy, the proposed audit fee and the<br />
achievement of the agreed upon reporting timeframes for the audit of the financial statements.<br />
• <strong>Review</strong>ed the external audit reports and discussed any problems and reservations arising thereon.<br />
• <strong>Review</strong>ed the internal audit plan, methodology, functions and resources.<br />
• <strong>Review</strong>ed major findings on internal audit reports and management response.<br />
144
Statement on Corporate Governance<br />
The Terms of Reference of the Board Audit Committee are set out below.<br />
Composition<br />
The Committee shall be appointed from amongst the Board and shall:-<br />
• comprise no fewer than three members;<br />
• all the members must be independent directors; and<br />
• at least one member must be a member of the Malaysian Institute of Accountants<br />
or if he is not, then he must be a person who complies with Para. 15.10 of Bursa<br />
Malaysia Securities Berhad’s Listing Requirements.<br />
No alternate director may be appointed as a member of the Board Audit Committee.<br />
The Board will review the terms of office and the performance of the Board Audit Committee<br />
and its members at least once every three years.<br />
Functions and Duties<br />
The functions and duties of the Board Audit Committee shall be to:-<br />
(a) <strong>Review</strong> and report to the Board of Directors on the following:-<br />
• with the External Auditors, the audit plan;<br />
• with the External Auditors, the External Auditor’s evaluation of the system of<br />
internal controls;<br />
• with the External Auditors, the External Auditor’s audit report;<br />
• the assistance given by the Company’s employees to the External Auditors;<br />
• the adequacy of the scope, functions and resources of the internal audit<br />
functions and that it has the necessary authority to carry out its work, and the<br />
performance of the members of the internal audit function;<br />
• the internal audit programme, processes, the results of the internal audit<br />
programme, or investigation undertaken and whether or not appropriate action is<br />
taken by the management on the recommendations of the internal audit function;<br />
• the quarterly results and year-end financial statements, prior to the approval by<br />
the Board of Directors, focusing particularly on:-<br />
– changes in or implementation of major accounting policy;<br />
– significant and unusual events;<br />
– compliance with accounting standards and other legal requirements; and<br />
– accuracy and adequacy of the disclosure of information essential to a fair<br />
and full presentation of the financial affairs of the Group;<br />
• any related party and conflict of interest situation that may arise within the<br />
listed issuer or group including any transaction, procedure or course of conduct<br />
that raises questions of management integrity;<br />
• promptly report to Bursa Malaysia Securities Berhad on any matter reported by it to<br />
the Board of the Company which has not been satisfactorily resolved resulting in a<br />
breach of the Listing Requirements of Bursa Malaysia Securities Berhad;<br />
• submit to the Board a Report on the summary of activities of the Board Audit<br />
Committee in the discharge of its functions and responsibilities in respect of each<br />
financial year.<br />
(b) Consider the appointment of the external auditor, the audit fee and any questions<br />
of resignation and dismissal.<br />
PROTON 2009 ANNUAL REPORT<br />
145
Statement on Corporate Governance<br />
146<br />
Meetings<br />
The Committee shall hold meetings on at least four occasions each year, although additional<br />
meetings may be called, as and when necessary, by the Chairman of the Committee. These<br />
meetings will usually be:-<br />
• prior to the current year’s audit;<br />
• upon completion of the External Auditor’s interim examination;<br />
• prior to the meeting of the full board to approve the financial statements;<br />
• prior to the announcement of the quarterly results;<br />
• upon the request of any member of the Committee or the External Auditors, the<br />
Chairman of the Committee shall convene a meeting of the Committee to consider<br />
the matters brought to its attention;<br />
• at least once a year, the Committee shall meet with the External Auditors without<br />
any Executive Directors present.<br />
Attendance<br />
In order to form a quorum in respect of a meeting of an audit committee, the majority<br />
of members must be present throughout the meeting. The Chairman may request that<br />
directors and members of the management, the Internal Auditors and representatives of<br />
the External Auditors be present at meetings of the Committee.<br />
Minutes<br />
The Company Secretary shall be the Secretary to the Committee and shall be present at all<br />
meetings to record minutes.<br />
Minutes of each meeting shall be prepared and entered into the books provided for the<br />
purpose and sent to the Committee members and will be made available to all Board<br />
members. The minutes shall be signed by the Chairman of the Committee.<br />
Internal Audit Function<br />
The Group uses the services of the Group Internal Audit Division to accomplish its internal<br />
audit requirements. The Group Internal Audit Division reports to the Board Audit Committee<br />
on matters concerning the Group and assists the Board of Directors in monitoring and<br />
managing risks and internal controls.<br />
The Group Internal Audit Division reviews internal controls related to all key activities of<br />
the Group and recommends improvements in controls and procedures. The Group Internal<br />
Audit Division is independent of the activities it audits and performs with impartiality and<br />
due professional care. The findings of the Group Internal Audit Division are reported to the<br />
Board Audit Committee.<br />
The Board Audit Committee approves the internal audit plan of the Group Internal Audit<br />
Division each year. The scope of the internal audit covers the audits of all units and operations,<br />
including subsidiaries.
Statement on Corporate Governance<br />
During the year, the Group Internal Audit Division serves to ensure internal control measures are adequate<br />
and effective in mitigating key risks and that they are monitored. The monitoring process will form the basis<br />
for continually improving the risk management process in the context of the Group’s overall goals.<br />
Board Nomination & Remuneration Committee<br />
The objectives of the Board Nomination & Remuneration Committee (“NRC”) are in accordance with the Terms<br />
of Reference as approved by the Board of Directors of PROTON on 26 July 2006.<br />
The NRC reviews new director appointments of the Group and the balance and effectiveness of the boards<br />
of directors, taking into account the required mix of skills and experience and other qualities, before making<br />
recommendations to the Board.<br />
The Committee is empowered to conduct periodic reviews on the overall remuneration policy and package<br />
of the Executive and Non-Executive Directors and Senior Level Mission Critical Positions of the Group for<br />
recommendation to the Board.<br />
The authority and scope of coverage of the NRC is over the PROTON Group, which includes subsidiaries and<br />
relevant associate and other investee companies.<br />
The NRC is made up entirely of Non-Executive Directors, with the majority consisting of Independent<br />
Non-Executive Directors.<br />
Appointments to the Committee shall be for a period of three (3) years, which may be extended provided that<br />
the majority of the Committee members remain independent.<br />
The NRC met eight (8) times during the financial year.<br />
The Composition of the NRC is as follows:<br />
No Name of Director Designation Date of Date of Meeting<br />
Appointment Resignation Attendance<br />
1 Dato’ Mohd Nadzmi Chairman – 1 January 2009 N/A 2/2<br />
Bin Mohd Salleh Non-Independent<br />
Non-Executive Director<br />
2 Encik Ahmad Tajuddin Member – Independent 29 August 2005 N/A 8/8<br />
Bin Abdul Carrim<br />
3 Encik Md Ali Bin Member – Independent 29 August 2005 N/A 8/8<br />
Md Dewal<br />
4 Dato’ Michael Member – Independent 13 November 2006 N/A 8/8<br />
Lim Heen Peok Non-Executive Director<br />
5 Dato’ Mohammed Azlan Chairman – 10 March 2005 1 January 2009 6/6<br />
Bin Hashim Non-Independent<br />
Non-Executive Director<br />
PROTON 2009 ANNUAL REPORT<br />
147
Statement on Corporate Governance<br />
Board Risk Management Committee<br />
The Board Risk Management Committee (“BRMC”) assists the Board to oversee the overall management of all<br />
risks faced by the Group’s business. Further details of the activities of the Board Risk Management Committee<br />
are spelt out in the Statement of Internal Control.<br />
The BRMC is made up entirely of Non-Executive Directors and third party members (not being directors of the<br />
Company) who are appointed by the Board from time to time as follows:<br />
No Name of Director Designation Date of Date of Meeting<br />
Appointment Resignation Attendance<br />
1 Tuan Haji Abdul Kadir Chairman – Independent 29 September 2005 N/A 4/4<br />
Bin Md Kassim Non-Executive Director<br />
2 Datuk Tan Kim Leong Member – Independent 29 August 2005 N/A 3/4<br />
3 Dato’ Zainuddin<br />
Bin Che Din Member – Independent 1 October 2008 N/A 3/3<br />
The composition of the BRMC is reviewed annually by the Board of Directors based on the recommendation<br />
of the NRC.<br />
The Group Risk Management Unit (GRMU) is entrusted with the responsibility for ensuring that an appropriate<br />
risk management framework exists within the Group and is effectively implemented to manage the key risks<br />
of the organization on an on-going basis.<br />
The GRMC, which comprises of Senior Management, is responsible for overseeing risk management<br />
implementation, regular updating of the Group’s risk profiles and improving the implementation of<br />
methodology for risk management. The Committee deliberates and determines the Group’s major risks<br />
to be escalated to the attention of the BRMC.<br />
148
Statement on Corporate Governance<br />
Board Disciplinary Committee (“BDC”)<br />
The BDC is a platform for the PROTON Group to deal primarily with disciplinary issues. The BDC is part of the<br />
structural mechanism for the handling of cases that may arise from the introduction of the Whistleblower and<br />
Assets Declaration Policies. The BDC has the power to initiate investigations, consider and take appropriate<br />
action on any case referred to it by any party either received orally or in writing.<br />
The BDC comprises members all of whom are non executive directors as follows:<br />
No Name of Director Designation Date of Date of Meeting<br />
Appointment Resignation Attendance<br />
1 Dato’ Mohd Nadzmi Chairman – Non-Independent 1 January 2009 N/A N/A<br />
Bin Mohd Salleh Non-Executive Director<br />
2 Tuan Haji Abdul Kadir Member – Independent 7 May 2006 N/A 2/2<br />
Bin Md Kassim Non-Executive Director<br />
3 Tuan Haji Abdul Jabbar Member – Independent 7 May 2006 N/A 2/2<br />
Bin Abdul Majid Non-Executive Director<br />
4 Tuan Haji Yusof Member – Independent 21 February 2008 N/A 2/2<br />
Bin Ahmad Non-Executive Director<br />
5 Dato’ Mohammed Azlan Chairman – Non-Independent 7 May 2006 1 January 2009 2/2<br />
Bin Hashim Non-Executive Director<br />
PROTON Board Executive Committee<br />
The objectives of the Board Executive Committee (“Board EXCO”) is to assist the Management in addressing<br />
issues relating to implementation and monitoring of several key projects, including but not limited to PROTON<br />
Strategic Business Plan, Annual Management Plan, PROTON Business Turnaround Plan and also to address<br />
issues relating to identifying suitable candidates to fill in several key positions for PROTON. It is to be noted<br />
that the functions of the Board EXCO shall not overlap that of other Board Committees, such as the Board<br />
Nomination & Remuneration Committee.<br />
Subject to the resolutions of the Board of Directors of PROTON from time to time, the provisions contained in<br />
the Terms Of Reference and the Memorandum and Articles of Association of the Company, the Board EXCO<br />
may exercise any of the powers, authorities and discretions for the time being vested in the Board of Directors<br />
with regard to the affairs and business of the Company.<br />
PROTON 2009 ANNUAL REPORT<br />
149
Statement on Corporate Governance<br />
PROTON’s Board EXCO comprises two (2) representatives from amongst the PROTON Board Members and two<br />
(2) Senior Management representatives as follows:<br />
No Name of Director Designation Date of Date of Meeting<br />
Appointment Resignation Attendance<br />
1 Dato’ Mohd Nadzmi Chairman / Non-Independent 1 January 2009 N/A 3/3<br />
Bin Mohd Salleh Non-Executive<br />
2 Dato’ Haji Syed Zainal Managing Director 17 April 2007 N/A 15/18<br />
Abidin B Syed Mohamed<br />
Tahir<br />
3 Dato’ Michael Independent Non-Executive 17 April 2007 N/A 18/18<br />
Lim Heen Peok Director<br />
4 Vimala Menon Director of Finance and 16 June 2008 N/A 12/12<br />
Corporate Affairs<br />
5 Dato’ Mohammed Azlan Chairman / Non-Independent 17 April 2007 1 January 2009 15/15<br />
Bin Hashim Non-Executive Director<br />
Directors’ Training<br />
All Directors have successfully completed the Mandatory Accreditation Programme conducted by the Research<br />
Institute of Investment Analysts’ Malaysia as imposed by Bursa Malaysia Securities Berhad.<br />
Despite repeal of Bursa Malaysia Securities Berhad’s Continuing Education Programme with effect from 1<br />
January 2005, the Directors continue to identify and attend appropriate seminars and courses to keep abreast<br />
of changes in legislation and regulations affecting the Group.<br />
The Company has arranged various in-house training programmes and luncheon talks on topics relevant to<br />
the Company, which were attended by both the members of the Board and Senior Management. PROTON<br />
has engaged the services of a global growth consulting company to share global and regional automotive<br />
knowledge with the Board Members and Management through various types of workshops. The goal of<br />
this engagement is to deliver continuous learning to PROTON through interactive sessions supported by<br />
market analysis, technology trends, best practices, economic and policy impact analysis from across the region.<br />
The automotive consultant has during the course of the year conducted workshops and luncheon training<br />
programmes for both the Directors and Management of PROTON Group.<br />
The Directors have also in the course of the year attended programmes for building high performance directors,<br />
the Chairman’s Forum, workshops, conferences and talks including those organised by the Malaysian Directors<br />
Academy, better known as “MINDA”, an initiative under the GLC Transformation Programme.<br />
150
Statement on Corporate Governance<br />
Directors’ Remuneration<br />
The NRC is responsible for reviewing the performance of the Executive Directors and recommending to the<br />
Board the remuneration package and reward structure. The Board as a whole determines the remuneration<br />
of the Executive and Non-Executive Directors. Directors do not participate in any discussions or decisions<br />
concerning each individual’s remuneration.<br />
In the case of the Executive Director, the remuneration is structured to link rewards to corporate and individual<br />
performance through key performance indicators comprising fixed and performance-based rewards.<br />
The level of remuneration of the Non-Executive Directors reflects the experience and level of responsibilities<br />
undertaken by the Director concerned. The Non-Executive Directors are paid annual fees and attendance<br />
allowances in accordance with the number of meetings attended. In addition, the Non-Executive Directors are<br />
each provided with the use of a car.<br />
Non-Executive Directors fees are paid upon shareholders approval at each Annual General Meeting.<br />
The NRC carries out reviews when appropriate and refers to remuneration surveys and consultants to assist<br />
in determining the appropriate level of reward, which is competitive and consistent with the corporate<br />
objectives. This is necessary in order to attract and retain professionals with the qualities needed to manage<br />
the Group successfully.<br />
Details of the total remuneration of the Directors of PROTON Holdings Berhad for the financial year ended 31<br />
March 2009 are as follows:<br />
Directors Basic Salaries, Bonus and Fees and Benefits Total<br />
Other Employee Benefits Allowances in Kind<br />
Executive Directors 814,464 - 81,126 895,590<br />
Non-Executive Directors - 1,522,454 59,276 1,581,730<br />
TOTAL 814,464 1,522,454 140,402 2,477,320<br />
Remuneration Number of Directors<br />
Range of Total Remuneration Executive Non-Executive Total<br />
Below RM50,000 - - -<br />
RM50,001 – RM100,000 - 2 2<br />
RM100,001 – RM500,000 - 2 2<br />
RM500,001 – RM1,000,000 1 2 3<br />
TOTAL 1 6 7<br />
PROTON 2009 ANNUAL REPORT<br />
151
Statement on Corporate Governance<br />
152<br />
Financial Reporting<br />
The Board is committed to providing a balanced, clear and meaningful assessment of the<br />
financial performance and prospects of the Group to shareholders, the investor community<br />
and the regulatory authorities. Shareholders and other stakeholders are kept abreast of the<br />
Group’s performance through the timely announcement of the quarterly financial results<br />
and accompanying press releases.<br />
The Board Audit Committee assists the Board to oversee the financial reporting processes<br />
and the quality of its financial reporting. Quarterly financial results and annual financial<br />
statements are reviewed by the Board Audit Committee to ensure adequacy and<br />
completeness of information prior to the Board’s approval. To enhance quality of the<br />
Group’s financial reporting, the external auditors will be conducting quarterly reviews of<br />
the Group’s quarterly results in addition to the year-end audit.<br />
Directors Responsibility Statement<br />
The Board is required by the Companies Act, 1965, to ensure that financial statements<br />
prepared for each financial year have been made out in accordance with the applicable<br />
approved accounting standards and give a true and fair view of the state of affairs of the<br />
Company and the Group at the end of the financial year and of the results and cash flow of<br />
the Company and the Group for the financial year.<br />
The Board is responsible for ensuring that the Company keeps accounting records which<br />
disclose with reasonable accuracy, the financial position of the Company and the Group<br />
and that the financial statements comply with the Companies Act, 1965.<br />
In preparing the financial statements the Board has:<br />
• selected suitable accounting policies and applied them consistently;<br />
• made judgements and estimates that are reasonable and prudent;<br />
• ensured that all applicable accounting standards have been followed; and<br />
• prepared financial statements on the going concern basis as the Directors have<br />
a reasonable expectation, having made enquiries, that the Group has adequate<br />
resources to continue in operations for the foreseeable future.<br />
Internal Controls<br />
The Board acknowledges its overall responsibility for maintaining a system of internal controls<br />
that provides assurance of effective and efficient operations and compliance with laws and<br />
regulations and also its internal procedures and guidelines. The size and complexity of the<br />
operations may give rise to risks of unanticipated or unavoidable losses.<br />
The system of internal controls is designed to provide reasonable but not absolute assurance<br />
against the risk of material errors, frauds or losses occurring. The Board Audit Committee<br />
reviews the effectiveness of the system of internal controls, which cover financial, operational<br />
and compliance controls, and also risk management.
Statement on Corporate Governance<br />
Relationship with Auditors<br />
The Board Audit Committee maintains an appropriate transparent relationship with both the<br />
Group external auditors and internal auditors. The external auditors are invited to attend<br />
Board Audit Committee meetings and present their audit findings when the Company’s annual<br />
financial results are considered. The Board Audit Committee meets with the external auditors at<br />
least once a year without the presence of the Executive Director and management.<br />
Dialogue Between The Company and Shareholders / Investors<br />
The Board recognises the importance of transparency and accountability to its shareholders<br />
and investors. Different channels of communication are optimised to provide shareholders and<br />
investors with a balanced and complete view of the Group performance and the issues faced by<br />
its businesses in the competitive environment amidst a changing landscape.<br />
The issue of the Annual Report is an important medium of information for the shareholders<br />
and investors whereas the Annual General Meeting of the Company is the main forum for<br />
communication and dialogue with the shareholders. Shareholders are encouraged to actively<br />
participate and interact with the Board and members of the Senior Management pertaining to<br />
the items on the agenda during the general meeting.<br />
In addition, the Chairman briefs the shareholders on the Company’s operations for the financial<br />
year. Senior management and the external auditors are present to respond to questions and<br />
queries to ensure a high level of accountability and transparency of the business goals, strategy<br />
and operations.<br />
The Board strives to maintain a good dialogue with shareholders and regular meetings<br />
are held with institutional shareholders throughout the year to discuss the progress of<br />
the Group, future growth prospects and strategy. In the course of the year the Board and<br />
Management have engaged in dialogue sessions with the Major Shareholders of PROTON<br />
and the representatives from the Malaysian Institute of Corporate Governance and Minority<br />
Shareholder Watchdog Group. Other channels of communication include Company<br />
presentations, seminars, press releases, and interim and annual reports. There is a Company<br />
website, www.proton.com, which provides information on the Company for all shareholders<br />
and the general public.<br />
Besides the Annual Report, the Board ensures timely announcements are made to Bursa<br />
Malaysia Securities Berhad and disseminates clear, accurate, and sufficient information to enable<br />
the shareholders and investors to make informed decisions. The Investor Relations Unit also<br />
proactively disseminates appropriate and relevant information to the investor community and<br />
attends to whatever queries they may have.<br />
Code of Conduct and Discipline<br />
PROTON has in place a Code of Conduct and Discipline. Every employee is required to comply<br />
with this said code and as may be determined by the Board, from time to time. This code<br />
consists of matters, prohibitions, duties or procedures relating to his / her employment.<br />
PROTON 2009 ANNUAL REPORT<br />
153
Statement on Corporate Governance<br />
154<br />
Such code may be modified, added to, substituted for or otherwise amended from time to<br />
time as the Board deems fit. An employee is also required to comply with the penal code<br />
of the country.<br />
Code of Ethics<br />
The PROTON Group has established specific rules and regulations to govern the conduct of its<br />
employees. The Directors and employees of PROTON Group are expected to obey all laws in<br />
conducting business and to always act with honesty, integrity, loyalty, trustworthiness, fairness<br />
and responsibility.<br />
It is PROTON’s policy and Management’s responsibility to apply these rules fairly and equitably<br />
to all employees.<br />
Infringement of these rules may lead to disciplinary action such as “verbal or written warnings”,<br />
“suspension without pay” and “separation from the Company/Group”.<br />
Purpose of Policy<br />
The purpose of this policy is to provide a framework for the proper conduct of directors and<br />
employees while on the job. The policy gives Directors and employees guidance in identifying<br />
business situations which have the potential to create legal and ethical problems and to provide<br />
directions in handling those potential and actual situations.<br />
The respective codes are made available to the Directors and employees.<br />
Whistleblower Policy<br />
PROTON had on 27 July 2006 implemented a Whistleblower Policy. The objective of the policy<br />
is to provide a mechanism for preventive and corrective action within the Group without the<br />
negative effects that come with public disclosure, such as loss of Company image or reputation,<br />
financial distress and loss of investor confidence.<br />
The policy encourages employees or representatives of PROTON to disclose genuine concerns<br />
about illegal, unethical or improper business conduct within the Group. In this manner, the<br />
employees can help the PROTON Group to monitor and keep track of such illegal, unethical or<br />
improper business conduct within, which otherwise, may not be easily detected through normal<br />
process or transaction.<br />
Business Conduct<br />
The Group is committed to the highest standards of business conduct and seeks to<br />
maintain these standards across all of its operations throughout the world. The Group<br />
has in place group finance policies and employee procedures.<br />
The Group has an appropriate organisational structure for planning, executing, controlling<br />
and monitoring business operations in order to achieve group objectives. Lines of<br />
responsibility and delegations of authority are documented.
Statement on Corporate Governance<br />
PROTON 2009 ANNUAL REPORT<br />
155
Additional Compliance Information<br />
Non-Audit Fees<br />
During the financial year, the amount of non-audit fees paid and payable to the external auditors by the<br />
Group are as follows:<br />
External Auditors 2009 2008<br />
RM’000 RM’000<br />
PricewaterhouseCoopers Malaysia 2,120 1,234<br />
Member firm of PricewaterhouseCoopers International Limited 2,545 1,961<br />
(a separate and independent legal entity from<br />
PricewaterhouseCoopers Malaysia)<br />
Total 4,665 3,195<br />
Additional compliance information in accordance with Appendix 9C of the Listing Requirements of Bursa<br />
Malaysia Securities Berhad.<br />
Utilisation of Proceeds Raised from Corporate<br />
Proposals<br />
There were no proceeds raised from corporate<br />
proposals during the financial year.<br />
Share Buy-back<br />
There was no proposal by the Company to carry out a<br />
share buy-back during the financial year.<br />
Options, Warrants or Convertible Securities<br />
The Company did not issue any warrants or convertible<br />
securities during the financial year.<br />
American Depository Receipt (“ADR”) or<br />
Global Depository Receipt (“GDR”)<br />
Programme<br />
The Company did not sponsor any ADR or GDR<br />
Programme during the financial year.<br />
156<br />
Imposition of Sanctions / Penalties<br />
There were no public sanctions and / or penalties<br />
imposed on the Company and its subsidiaries,<br />
Directors or Management by relevant regulatory<br />
bodies during the financial year.<br />
Variation in Results<br />
There were no profit estimations, forecasts or<br />
projections made or released by the Company during<br />
the financial year.<br />
Profit Guarantee<br />
There was no profit guarantee for the financial year.<br />
Material Contracts<br />
There was no material contract entered into by the<br />
PROTON Group involving the interest of Directors and<br />
major shareholders, either still subsisting at the end<br />
of the financial year ended 31 March 2009 or entered<br />
into since the end of the previous financial year.
Revaluation Policy on Landed Properties<br />
The Significant accounting policies on property, plant<br />
and equipment are disclosed in Note 3(e) of the<br />
Summary of Significant Accounting Policies.<br />
Recurrent Related Party Transactions<br />
On 8 June 2007, PROTON obtained exemption from<br />
Bursa Malaysia Securities Berhad (“Bursa”) from<br />
disclosing Recurrent Related Party Transactions with<br />
Khazanah Nasional Berhad’s investee companies. As<br />
a result, PROTON is not required to seek shareholders’<br />
mandate for such transactions at the forthcoming<br />
Annual General Meeting of the Company.<br />
Further, Bursa had on 14 December 2006 amended<br />
the Listing Requirements pertaining to related party<br />
transactions whereby the threshold for a major<br />
shareholder was increased from 5% to 10% of the<br />
aggregate nominal amount of voting shares in a<br />
company, provided that the said shareholder is not<br />
the largest shareholder of the company.<br />
Additional Compliance Information<br />
The Employees Provident Fund Board (“EPF”) which<br />
currently holds approximately 15.896% of the issued<br />
and paid up capital of PROTON is not deemed a<br />
related party by virtue of the fact that EPF and / or<br />
person(s) connected with EPF:<br />
a. is / are not the largest shareholder of the<br />
Company<br />
b. is / are not a party to any transaction, initiator,<br />
agent or involved in any manner in any<br />
transaction with the PROTON Group; and<br />
c. does not have any representative in an executive<br />
capacity on the Board of Directors of PROTON or<br />
any of the subsidiaries.<br />
The third largest major shareholder, Petroliam<br />
Nasional Berhad, holds 7.851% equity interest in<br />
PROTON.<br />
PROTON 2009 ANNUAL REPORT<br />
157
Additional Compliance Information<br />
Below is a list of Recurrent Related Party Transactions entered during the period for the financial year ended<br />
31 March 2009.<br />
Transacting Related Party Nature of Transaction Company within Actual<br />
the PROTON Group 01/04/08 -<br />
31/03/09<br />
1 Lub Dagangan Sdn Bhd Purchase of lubricants PONSB 2,709,289<br />
2 Petronas Dagangan Sdn Bhd Purchase of lubricants PONSB 3,794,840<br />
3 Petronas Dagangan Sdn Bhd Purchase of lubricants PESB 10,995,796<br />
4 EON Sale of goods PESB 1,868,300,918<br />
5 EON Sale of goods PPCSB 113,925,867<br />
6 Johnson Controls Auto Holding Purchase of goods PPCSB 496,344<br />
7 Johnson Controls Auto Seating Purchase of goods PONSB 96,628,802<br />
8 Johnson Controls Auto Interior Purchase of goods PONSB 4,808,244<br />
9 PPCSB Purchase of goods PONSB 2,454,309<br />
10 PPCSB Sale of goods PONSB 25,558,760<br />
11 PPCSB Purchase of parts PESB 87,132,079<br />
12 PPCSB Sale of goods PCUK 7,021<br />
13 PPCSB Purchase of parts PCUK 3,180,114<br />
14 PPCSB Purchase of parts PCA 2,862,809<br />
15 PPCSB Purchase of parts PSPL 603,777<br />
158
Additional Compliance Information<br />
Transacting Related Party Nature of Transaction Company within Actual<br />
the PROTON Group 01/04/08 -<br />
31/03/09<br />
16 PPCSB Purchase of parts PEI 1,946,237<br />
17 Hicom Teck See Purchase of parts PONSB 201,301,804<br />
18 Hicom Teck See Purchase of parts PPCSB 3,087,740<br />
19 Tenaga Nasional Berhad Sale of goods PESB 869,236<br />
20 Oriental Summit Industries Purchase of parts PONSB 63,304,332<br />
21 Oriental Summit Industries Purchase of parts PPCSB 1,463,932<br />
22 PHN Industry Sdn Bhd Purchase of goods PONSB 123,622,655<br />
Definition:<br />
PONSB Perusahaan Otomobil Nasional Sdn Bhd<br />
PESB Proton Edar Sdn Bhd<br />
PPCSB Proton Parts Centre Sdn Bhd<br />
PCUKL Proton Cars (UK) Ltd<br />
PCA Proton Cars Australia Pty Limited<br />
P’Spore Proton Singapore Pte Ltd<br />
PROTON 2009 ANNUAL REPORT<br />
159
Statement on Internal Control<br />
The Malaysian Code on Corporate Governance requires listed<br />
companies to maintain a sound system of internal control<br />
to safeguard shareholders’ investments and the Group’s<br />
assets. Directors of listed companies are required to make<br />
disclosures in their annual reports on the state of internal<br />
control in accordance with the Listing Requirements of<br />
Bursa Malaysia Securities Berhad (“Bursa Malaysia”). Bursa<br />
Malaysia’s Statement on Internal Control: Guidance for<br />
Directors of Public Listed Companies (“Guidance”) provides<br />
guidance for compliance with these requirements. The<br />
Board’s Internal Control Statement, which has been prepared<br />
in accordance with the Guidance, is set out below.<br />
160<br />
Board Responsibility<br />
The Board of Directors (Board) recognises the importance of sound internal controls<br />
and risk management practices to good corporate governance. The Board has an overall<br />
responsibility for the Group’s system of internal controls and its effectiveness, as well as<br />
reviewing its adequacy and integrity. The Group’s system of internal controls is designed<br />
to manage the principal business risks that may impede the Group from achieving its<br />
business objectives. The system, by its nature, can only provide reasonable but not absolute<br />
assurance against any material misstatement or loss occurrence.
Risk Management<br />
Risk management is regarded by the Board to be an integral part of the Group’s operations<br />
with the objective of maintaining a sound internal control system and ensuring its continuing<br />
adequacy and integrity. A formal risk management framework and policy was approved<br />
by the Board for the Group to identify, assess, treat, report and monitor, key risks faced<br />
by the Group. The effectiveness of the risk mitigation actions are reviewed quarterly by<br />
the Group Risk Management Committee (GRMC) and Board Risk Management Committee<br />
(BRMC) respectively.<br />
The Group Risk Management Unit (GRMU) is entrusted with the responsibility of ensuring<br />
that an appropriate risk management framework exists within the Group and is effectively<br />
implemented to manage the key risks of the organisation on an on-going basis.<br />
The GRMC, which comprises Senior Management, is responsible for overseeing risk<br />
management implementation, regular updating of the Group’s risk profiles and improving<br />
the implementation of methodology for risk management. The Committee deliberates and<br />
determines the Group’s major risks to be escalated to the attention of the BRMC.<br />
PROTON 2009 ANNUAL REPORT<br />
161
Statement on Internal Control<br />
162<br />
The BRMC was established to deliberate major risks highlighted by the management and<br />
assist the Board in reviewing Group’s risk policies and strategies.<br />
For the financial year ended 31 March 2009, the GRMC and BRMC have held quarterly<br />
meetings in accordance with their respective terms of reference.<br />
Assurance Mechanism<br />
Apart from risk management activities, the Board and Management have established<br />
other processes for identifying, evaluating and managing significant risks faced by the<br />
Group. They continue to strive in enhancing and implementing the internal control system<br />
to manage those risks that could affect the Group’s growth and financial viability. These<br />
processes include updating the system of internal controls when there are changes to the<br />
business environment or regulatory guidelines. The key elements of the Group’s control<br />
environment include:<br />
Board Committees<br />
Board Committees were established by the Board to assist the Board in the execution of<br />
its responsibilities to provide oversight on the effectiveness of the Group’s operations.<br />
The responsibilities and authority of the Committees are governed by specific terms of<br />
reference and these Committees are accountable to the Board.<br />
The Board Committees are:<br />
• Audit Committee<br />
• Nomination and Remuneration Committee<br />
• Risk Management Committee (“BRMC”)<br />
• Disciplinary Committee<br />
• PROTON Board Executive Committee (“EXCO”)<br />
The details of the abovementioned Board Committees are set out in the Statement of<br />
Corporate Governance.<br />
Board Audit Committee<br />
The Board has delegated the duty of reviewing and monitoring the effectiveness of the<br />
Group’s system of internal controls to the Board Audit Committee (BAC).
Statement on Internal Control<br />
The BAC assumes the overall duties of reviewing with the external auditors their audit<br />
plan, audit report, as well as their findings and recommendations on internal controls<br />
highlighted annually in the Internal Control Memorandum. Throughout the financial year,<br />
the BAC was updated on the developments of Malaysian Financial Reporting Standards, as<br />
well as legal and regulatory requirements. It also reviews the effectiveness of the internal<br />
audit function with particular emphasis on the scope and quality of audits, resources as<br />
well as the independence of the Group Internal Audit Division (GIAD).<br />
The BAC continues to meet regularly and has full and unimpeded access to the internal and<br />
external auditors and all employees of the Group.<br />
Further information relating to the activities of the BAC is set out in the Statement of<br />
Corporate Governance.<br />
Organisation Structure and Management Committees<br />
An organisation structure, which is aligned to the business and operational requirements<br />
and led by Heads of Division with clearly defined lines of responsibility, accountability and<br />
levels of authority, is in place to assist in implementing the Group’s strategies and day-today<br />
business activities.<br />
Various functional committees were set up at the Management level to ensure the Group’s<br />
actions and operations are properly aligned towards achieving the organisation’s goals and<br />
objectives.<br />
Group Internal Audit Division (GIAD)<br />
GIAD continues to independently monitor compliance with internal policies and procedures,<br />
effectiveness of the internal control systems and highlights significant findings for corrective<br />
actions by line management and reports directly to the BAC.<br />
The annual audit plan which covers PROTON and its subsidiary companies and which was<br />
established primarily on a risk-based approach, is reviewed and approved by the BAC<br />
annually. A quarterly work status update is given by the GIAD to the BAC. GIAD regularly<br />
reviews the approved annual audit plan to ensure significant risk areas are given adequate<br />
audit focus.<br />
PROTON 2009 ANNUAL REPORT<br />
163
Statement on Internal Control<br />
164<br />
The interests of PROTON in associated companies and jointly controlled entities are primarily<br />
served through representation on the board of directors of the respective companies.<br />
Internal controls of associated companies and jointly controlled entities are reviewed upon<br />
any ad-hoc request by the BAC.<br />
On a quarterly basis, GIAD updates the BAC on the status of corrective actions taken by<br />
line management arising from the audit findings highlighted by both GIAD and the<br />
external auditors.<br />
Further information relating to the activities of GIAD is set out in the Statement of Corporate<br />
Governance.<br />
Other Key Elements of Internal Control<br />
The other key elements of the Group’s internal control systems are described below:-<br />
• Defined delegation of responsibilities to committees and management of head<br />
office and operating units, including authorisation levels for various aspects of the<br />
business, which are set out in the Limits of Authority;<br />
• Documented internal policies and procedures as set out in the Group Policies and<br />
Procedures and ISO 9001:2000 certification of the Quality System Procedures for<br />
PROTON and major subsidiaries within the Group;<br />
• Quarterly financial statements and the Group’s performance are deliberated by the<br />
BAC, which subsequently presents them to the Board for their review, consideration<br />
and approval;<br />
• Management Committee meetings are held on a regular basis to identify, discuss and<br />
resolve operational, financial and key management issues;<br />
• A comprehensive budgeting process where the annual budgets are approved by the<br />
Board;<br />
• The Board receives and reviews monthly reports from Management on key strategic<br />
and operational issues and provides direction to Management;
• Regular visits to operating units by Senior Management;<br />
Statement on Internal Control<br />
• Various improvement programmes were established in PROTON and its subsidiaries to<br />
enhance its business operations;<br />
• Continuous training efforts to enhance the leadership quality and competency of the<br />
workforce;<br />
• Regular employee perception surveys were conducted to obtain feedback from<br />
employees to promote continuous improvements; and<br />
• Formal employee appraisal system for effective coaching and evaluation of employee<br />
performance using established Key Performance Indicators (KPIs).<br />
For the financial year under review, after due and careful inquiry and based on the<br />
information and assurance provided, the Board was satisfied that the key elements of<br />
internal controls are in place. Nevertheless, identified areas of concern are being accorded<br />
closer attention and more regular monitoring to ensure key internal controls are adequate<br />
and effective to continually safeguard shareholders’ investment and the Group’s assets.<br />
PROTON 2009 ANNUAL REPORT<br />
165
Risk Management<br />
Embracing Challenges<br />
PROTON is exposed to a multitude of risks, either residual or inherent in<br />
the course of its daily operations. Ensuring that these risks are effectively<br />
managed and capitalised is imperative in order to ensure maximisation<br />
of shareholders value.<br />
166<br />
Overview<br />
The Group recognises the importance of a sound risk management system throughout the<br />
organsation to provide reasonable assurance to the shareholders that the risks the Group<br />
is exposed to be are being effectively managed, controlled and capitalised. PROTON’s<br />
risk management framework, formulated in 2003, ensures a consistent application of risk<br />
management across the Group, through a standardised risk registration and reporting<br />
system. Through this effort, Management and the Board are able to deliberate risk issues<br />
on a uniformed and scheduled basis.<br />
Risk Management Framework<br />
PROTON’s risk management framework was implemented to provide a complete cycle of<br />
managing risks. It consists of Risk Policy and Strategy, Risk Governance and Structure, Risk<br />
Measurement and Risk <strong>Operations</strong> and Systems.<br />
Risk Policy and Strategy<br />
The PROTON Risk Management policy was revised in 2007 to act as a guiding mechanism<br />
in implementing a standardised and robust risk management practice throughout the<br />
organisation. Effective management and monitoring systems are combined into uniform<br />
risk management programmes, to meet the best practice requirements and for business<br />
value enhancement.<br />
With the use of the risk management requirement and business concerns, risks involving<br />
the various divisions were identified. The risks registered were further prioritised into<br />
Corporate Risk Profile and Major risk profile. This prioritisation will ensure that efforts are<br />
focused on high concern areas on an informed basis.
Risk Governance and Structure<br />
Board of Directors<br />
Board Risk Management<br />
Committee (BRMC)<br />
Group Risk Management<br />
Committee (GRMC)<br />
Group Risk Management<br />
Units (GRMU)<br />
Risk Champions of Business<br />
Units<br />
Risk Management Units of<br />
Subsidaries<br />
Annual <strong>Review</strong> and Approval of Risk Management Policy<br />
Advises the BOD on significant changes to the Risk Management<br />
Policy.<br />
Identifies and evaluates principal risks and assesses the practicality of<br />
the proposed risk mitigation actions.<br />
Serves as the secretariat to GRMC & assist GRMC in ensuring effective<br />
implementation of Risk Management Framework in the PROTON<br />
Group.<br />
Responsible for ensuring that risk assessments are conducted in<br />
relations to their business units’ activities.<br />
Prepares risk reports regularly.<br />
PROTON 2009 ANNUAL REPORT<br />
167
Risk Management<br />
Board Risk Management Committee (BRMC)<br />
The Board Risk Management Committee (BRMC) was<br />
established to give assurance that an appropriate risk<br />
management policy is in place. The BRMC provides<br />
overall risk strategy and clear direction to the Group<br />
Risk Management Committee (GRMC) and Group<br />
Risk Management Unit (GRMU) in implementing the<br />
risk management policy.<br />
The BRMC presided four (4) times within the period<br />
under review.<br />
Group Risk Management Committee (GRMC)<br />
The Group Risk Management Committee (GRMC)<br />
comprising Senior Management was set up to discuss<br />
risks that could have significant impact on the Group’s<br />
strategic business and operating objectives and<br />
to ensure that these risks are effectively managed.<br />
The GRMC assesses the practicality of the mitigation<br />
action and escalates risks that require the Board’s<br />
attention to the BRMC on a quarterly basis.<br />
Group Risk Management Unit (GRMU)<br />
The Group Risk Management unit (GRMU) provides<br />
specialised resources for developing risk framework,<br />
policies, methodologies, tools and appropriate<br />
training for Management to ensure that risk<br />
management processes are carried out effectively and<br />
consistently throughout the Group. Every quarter,<br />
the GRMU will collate group-wide risk mitigation<br />
updates and escalate the reports to the GRMC and<br />
BRMC respectively.<br />
Risk Champions / Risk Management Unit<br />
The business and operations units form the first line<br />
of defense in managing risks. They are responsible<br />
for describing their principal risks and identifying<br />
possible mitigations to address these risks. The risk<br />
champions, via their risk team members, ensure that<br />
risks are continually assessed and monitored.<br />
168<br />
Risk Measurement, <strong>Operations</strong> and System<br />
Effective risk management is performed through<br />
formalised and centralised operations and system.<br />
The year in review saw major enhancements in the<br />
risk registration format, whereby items such as Key<br />
Risk Indicators and Risk Appetite were incorporated.<br />
This is to cultivate more proactive risk detection within<br />
the Group and promote uniformity in identifying,<br />
rating and monitoring all types of risks.<br />
Major Initiatives<br />
Risk Assessments for Business Planning<br />
This year in review, risk assessments were performed<br />
in conjunction with the yearly business planning. All<br />
divisions within the Group, including subsidiaries,<br />
have submitted their risk registrations during this<br />
exercise. The risks collated were then prioritised into<br />
three risk profiles, Corporate Risk Profiles (CRP), Major<br />
Risk Profiles (MRP) and Business Units Risk Profiles<br />
(BRP). CRP and MRP were tracked and monitored in<br />
the GRMC and BRMC meetings.<br />
Risk Assessment for New Product Introduction<br />
During the year under review, risk assessments were<br />
done for the introduction of two new models. Risks<br />
related to costs, market and product acceptance were<br />
identified and mitigations were monitored.<br />
Risk Awareness and Profiling Sessions<br />
The year in review saw several risk awareness sessions<br />
conducted. The objective of these sessions is to further<br />
inculcate the risk management culture within the<br />
Group. It also provides opportunities for GRMU and<br />
the risk owners to ensure that the risk registration is<br />
aligned with the overall business objectives.<br />
Risk Factors<br />
Country Risk<br />
PROTON conducts its businesses across regions. For<br />
this reason, it is exposed to risks related to pandemic,
war, terrorism, politics, natural disasters and other<br />
events that are beyond its control. This may disrupt<br />
and delay PROTON’s local supply and operations and<br />
consequently impact the Group’s ultimate objective.<br />
Risk assessments were carried out in tandem with<br />
country risks and were monitored regularly.<br />
Regulatory and Intellectual Property<br />
Policies regarding vehicle emission, the environment<br />
and fuel economy are extensive and subject to<br />
frequent changes and scrutiny. Complying with<br />
this regulation requires extensive cost and effort.<br />
Therefore, in order to proactively anticipate any<br />
changes in regulatory requirements, domestic and<br />
abroad, the Group monitors this development to<br />
anticipate foreseeable requirements for future<br />
product development.<br />
As the Group progresses towards international<br />
exposure, the Group is faced with many risks relating<br />
to disclosure of intellectual property especially in<br />
connection to licensing of IPR in strategic projects.<br />
Appropriate measures are currently being taken<br />
in managing all aspects of IPR by establishing an<br />
IPR policy and issuing manuals for identification,<br />
protection and commercialisation of IPR. This effort<br />
will significantly bring maximum benefit to the<br />
organisation by return on investments and profits in<br />
Risk Management<br />
the form of payment for licensing and royalties<br />
and at the same time the IPR’s are duly protected.<br />
Credit Risk<br />
Credit risk is inherent in any business, resulting from<br />
default payment by customers and related parties.<br />
Management of this risk is mainly undertaken by<br />
the Finance Division via credit policy, export credit<br />
insurance and interest charges.<br />
Market Risk<br />
The third quarter of the year witnessed a global<br />
financial crisis, which threatened the performance<br />
of the automotive industry. With the world<br />
economy becoming substantially less dynamic,<br />
the domestic and overseas automotive markets<br />
have slid even lower. Credit crunch has resulted<br />
in financial institutions being more stringent with<br />
loan approvals, which consequently affected car<br />
sales. Dwindling price gaps between competitors<br />
and PROTON has caused intense struggle in the<br />
industry. FOREX volatility, increase in raw material<br />
prices and customer’s uncertainty all added to the<br />
considerable economic risks which the Group has<br />
faced in the year under review. Measures, such as<br />
extensive hedging activities and active marketing<br />
initiatives were taken to minimise the impact of<br />
these risks.<br />
Conclusion<br />
Providing assurance that the risks are effectively managed requires effort and commitment<br />
from all divisions. Risk management awareness will continue to be given top priority to<br />
provide reasonable assurance to the shareholders that risks are effectively managed within<br />
the Group. With support and direction from the BRMC, risk management function will<br />
continue to move forward in enhancing the appreciation of risk management and strive<br />
for a stronger and more resilient risk management culture in the Company.<br />
PROTON 2009 ANNUAL REPORT<br />
169
Bright Outlook
Bright Outlook<br />
Despite challenges, there<br />
are highlights to keep<br />
PROTON moving towards<br />
its vision of being a<br />
leading national and<br />
regional automaker.<br />
Innovation in Motion
Calendar of Events<br />
Aug 2008 Former Prime Minister, Tun Abdullah Haji<br />
Ahmad Badawi officiates the launch of the three millionth<br />
car during PROTON Technology Week 2008.<br />
Aug 2008 PROTON’s 5 th Annual General Meeting.<br />
Aug 2008 Team PROTON R3 is launched for participation<br />
in the Merdeka Millennium 12 hours endurance race I (MME)<br />
with Satria Neo and Waja in Class B (1601 cc and 1900 cc) and<br />
Gen.2 in Class C (below 1600 cc).<br />
172<br />
Aug 2008 PROTON Technology Week saw more than<br />
60,000 visitors visiting our facilities to understand PROTON’s<br />
capabilities in automotive technology, innovation and R&D.<br />
Aug 2008 Visit by H E Dr Mahmoud Mohieddin, Minister<br />
of Investment, Egypt, with 15-member delegation.<br />
Aug 2008 Staff and their families visit Rumah Anak-Anak<br />
Yatim Darul Aitam Temoh, Perak, one of PROTON’s adopted<br />
orphanages.
Aug 2008 PROTON gives away bicycles to deserving<br />
students in Program Pintar.<br />
Sept 2008 PROTON launches the Workplace and Road<br />
Safety & Health Campaign in conjunction with the festive<br />
season holidays.<br />
Oct 2008 More than nine months after its launch, the<br />
Saga wins the Autocar Asean Award 2008.<br />
Sept 2008 Buka Puasa with staff and children from local<br />
orphanages is a yearly activity during the month of<br />
Ramadhan.<br />
Oct 2008 PROTON presents the Saga Taxi, with the new<br />
vibrant red body and yellow top. Public Cab Sdn Bhd, KCM<br />
Fleet Sdn Bhd, Avenue Drive (M) Sdn Bhd and Perniagaan<br />
Lima Sejati Sdn Bhd were the first to take delivery.<br />
Oct 2008 PROTON participates in the 5 th China-ASEAN<br />
Expo organised by MATRADE.<br />
PROTON 2009 ANNUAL REPORT<br />
173
Calendar of Events<br />
Nov 2008 The 2 nd International Trade Malaysia 2008<br />
Exhibition (INTRADE Malaysia 2008) held at PWTC.<br />
Nov 2008 The Saga is awarded Car of the Year 2008<br />
(Entry Level) by NST.<br />
Nov 2008 Yayasan PROTON and young scholars at the<br />
certificate Presentation Ceremony.<br />
174<br />
Nov 2008 PROTON strengthens its Middle Eastern<br />
presence with simultaneous launchings of the Persona<br />
first in Riyadh, Saudi Arabia, then in Cairo, Egypt, and later<br />
Oman, Qatar, Bahrain and Syria.<br />
Nov 2008 PROTON Managing Director is named<br />
“Automotive Man of the Year” at the Car of the Year<br />
Awards by NST.<br />
Dec 2008 Persona wins 1 st place as the Most Fuel Efficient<br />
Family Car at the Asian Auto-Bosch Fuel Efficiency Awards<br />
2008.
Dec 2008 BWF Super Series Masters Final 2008 in Kota<br />
Kinabalu, Sabah.<br />
Jan 2009 The official unveiling of the Satria Neo Super<br />
2000 at the Autosport Show UK 2009, for participation in<br />
the intercontinental rally in Belgium.<br />
Dec 2008 PROTON signs an agreement with Zagross<br />
Khodro for the supply of automotive parts to Iran.<br />
Jan 2009 PROTON sponsors the PROTON Malaysia Open<br />
2009 Badminton Tournament.<br />
Feb 2009 Media preview of the refreshed Satrio Neo CPS. Feb 2009 PROTON Chairman and Managing Director at<br />
the event to announce ‘Exora’ as the name for Malaysia’s first<br />
home-grown MPV.<br />
PROTON 2009 ANNUAL REPORT<br />
175
Calendar of Events<br />
Mar 2009 The PROTON Showcase at the UMNO General<br />
Assembly Expo attracts many visitors.<br />
Apr 2009 Prime Minister YAB Dato’ Sri Mohd Najib Bin<br />
Tun Abdul Razak officially launches the much-anticipated<br />
Exora.<br />
May 2009 A new Master Dealership Agreement is signed<br />
by PROTON Edar Sdn Bhd and Edaran Otomobil Nasional<br />
Berhad.<br />
176<br />
Mar 2009 Detroit Electric Holdings Ltd and Perusahaan<br />
Otomobil Nasional Sdn Bhd agree to collaborate.<br />
Apr 2009 The Exora is delivered to the first ten customers.<br />
May 2009 PROTON once again takes home the Gold<br />
Award in Reader’s Digest Trusted Brand Awards.
May 2009 Dato’ Mustapa Bin Mohamed, Minister of<br />
International Trade and Industry, visits the Shah Alam plant<br />
with a 12-member delegation.<br />
Jun 2009 Deputy Prime Minister, YAB Tan Sri Dato’ Haji<br />
Muhyiddin Bin Mohd Yassin visiting the PROTON booth at<br />
the 12 th annual SMIDEX Exhibition.<br />
Jun 2009 PROTON together with Badminton Association<br />
of Malaysia flags off a convoy in conjunction with Malaysia’s<br />
participation in the Singapore Open Super Series 2009.<br />
May 2009 The 18 th Malaysian Skills (Automobile Sector)<br />
Competition is organised for the 7 th year, along with the 3 rd<br />
PROTON Competition.<br />
Jun 2009 PROTON R3 Racing Team finishes 2 nd in class<br />
2 and 5 th overall in the inaugural Sepang 1000KM Race.<br />
July 2009 Director of Export Markets Division speaks at<br />
PROTON’s International Distributor Conference in Phuket.<br />
PROTON 2009 ANNUAL REPORT<br />
177
Moving Ahead
Moving Ahead<br />
Being committed to<br />
meticulous care and<br />
bringing value to<br />
shareholders will propel<br />
PROTON forward.<br />
Innovation in Motion
Statutory Financial Statements<br />
Contents<br />
180<br />
181 Directors’ Report<br />
185 Income Statements<br />
186 Balance Sheets<br />
188 Consolidated Statement of Changes in Equity<br />
189 Company Statement of Changes in Equity<br />
190 Cash Flow Statements<br />
193 Notes to the Financial Statements<br />
280 Statement by Directors<br />
280 Statutory Declaration<br />
281 Independent Auditors Report
DIRECTORS’ REPORT<br />
The Directors hereby submit their report together with the audited financial statements of the Group and<br />
Company for the financial year ended 31 March 2009.<br />
PRINCIPAL ACTIVITIES<br />
The Company is principally involved in investment holding activities.<br />
The principal activities of the subsidiary companies, associated companies and jointly controlled entities<br />
are set out in Notes 17 to 19 of the financial statements. There have been no significant changes in the<br />
activities of the Group and Company during the financial year.<br />
FINANCIAL RESULTS<br />
Group Company<br />
RM’000 RM’000<br />
Net (loss)/profit for the financial year (301,806) 367,170<br />
DIVIDENDS<br />
Dividends on ordinary shares paid or declared by the Company since 31 March 2008 are as follows:<br />
In respect of the financial year ended 31 March 2009:<br />
Interim dividend of 5 sen per share less tax at 25%,<br />
paid on 14 January 2009 20,595<br />
PROTON 2009 ANNUAL REPORT<br />
RM’000<br />
The Directors do not recommend the payment of a final dividend for the financial year ended 31 March 2009.<br />
RESERVES AND PROVISIONS<br />
There were no material transfers to or from reserves and provisions during the financial year except as<br />
disclosed in the financial statements.<br />
181
DIRECTORS’ REPORT (CONTINUED)<br />
DIRECTORS<br />
The Directors who have held office during the period since the date of the last report are:<br />
Dato’ Mohd Nadzmi bin Mohd Salleh (appointed on 1.01.2009)<br />
Dato’ Syed Zainal Abidin B Syed Mohamed Tahir<br />
Haji Abdul Jabbar bin Abdul Majid<br />
Haji Abdul Kadir bin Md Kassim<br />
Dato’ Lim Heen Peok<br />
Datuk Zalekha binti Hassan<br />
Encik Oh Kim Sun (appointed on 13.05.2009)<br />
Dato’ Mohammed Azlan bin Hashim (resigned on 1.01.2009)<br />
In accordance with Article 104 of the Company’s Articles of Association, Haji Abdul Kadir bin Md Kassim<br />
and Dato’ Lim Heen Peok retire at the forthcoming Annual General Meeting and, being eligible, offer<br />
themselves for re-election.<br />
Haji Abdul Jabbar bin Abdul Majid who is retiring in accordance with Article 104 of the Company’s Articles<br />
of Association at the forthcoming Annual General Meeting does not wish to seek re-election as a Director<br />
of the Company. Accordingly, he will retire at the conclusion of the Annual General Meeting of the<br />
Company.<br />
In accordance with Article 111 of the Company’s Articles of Association, Dato’ Mohd Nadzmi bin Mohd<br />
Salleh and Encik Oh Kim Sun retire at the forthcoming Annual General Meeting and, being eligible, offer<br />
themselves for re-election.<br />
DIRECTORS’ BENEFITS<br />
During and at the end of the financial year, no arrangements subsisted to which the Company is a party,<br />
being arrangements with the object or objects of enabling Directors of the Company to acquire benefits<br />
by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.<br />
Since the end of the previous financial year, no Director has received or become entitled to receive a<br />
benefit (other than benefits disclosed as Directors’ remuneration in Note 8 to the financial statements)<br />
by reason of a contract made by the Company or a related corporation with the Director or with a firm<br />
of which the Director is a member, or with a company in which the Director has a substantial financial<br />
interest.<br />
DIRECTORS’ INTEREST IN SHARES AND DEBENTURES<br />
According to the register of Directors’ shareholdings, no Director in office at the end of the financial year<br />
held any interest in shares or debentures in the Company or its related corporations.<br />
182
DIRECTORS’ REPORT (CONTINUED)<br />
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS<br />
Before the income statements and balance sheets of the Group and Company were made out, the Directors<br />
took reasonable steps:<br />
(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the<br />
making of allowance for doubtful debts and satisfied themselves that all known bad debts had been<br />
written off and that adequate allowance had been made for doubtful debts; and<br />
(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course<br />
of business their values as shown in the accounting records of the Group and Company had been<br />
written down to an amount which they might be expected so to realise.<br />
At the date of this report, the Directors are not aware of any circumstances:<br />
(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful<br />
debts in the financial statements of the Group and Company inadequate to any substantial extent; or<br />
(b) which would render the values attributed to current assets in the financial statements of the Group and<br />
Company misleading; or<br />
(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the<br />
Group and Company misleading or inappropriate.<br />
No contingent or other liability has become enforceable or is likely to become enforceable within the period of<br />
twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially<br />
affect the ability of the Group and Company to meet their obligations when they fall due.<br />
At the date of this report, there does not exist:<br />
(a) any charge on the assets of the Group or the Company which has arisen since the end of the financial year<br />
which secures the liability of any other person; or<br />
(b) any contingent liability of the Group or the Company which has arisen since the end of the financial<br />
year.<br />
PROTON 2009 ANNUAL REPORT<br />
183
DIRECTORS’ REPORT (CONTINUED)<br />
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONTINUED)<br />
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in<br />
this report or the financial statements which would render any amount stated in the financial statements<br />
misleading.<br />
In the opinion of the Directors:<br />
(a) the results of the Group’s and Company’s operations during the financial year were not substantially<br />
affected by any item, transaction or event of a material and unusual nature except as disclosed in Notes<br />
5 and 13 to the financial statements; and<br />
(b) there has not arisen in the interval between the end of the financial year and the date of this report<br />
any item, transaction or event of a material and unusual nature likely to affect substantially the results of<br />
the operations of the Group or the Company for the financial year in which this report is made.<br />
AUDITORS<br />
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.<br />
Signed on behalf of the Board of Directors in accordance with their resolution dated 22 July 2009.<br />
DATO’ MOHD NADZMI BIN MOHD SALLEH DATO’ SYED ZAINAL ABIDIN B SYED<br />
CHAIRMAN MOHAMED TAHIR<br />
MANAGING DIRECTOR<br />
184
INCOME STATEMENTS<br />
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009<br />
Revenue 6 6,486,570 5,621,594 362,357 41,203<br />
Cost of sales 7 (6,075,913) (5,056,854) - -<br />
Gross profit 410,657 564,740 362,357 41,203<br />
Other operating income<br />
- Research and development grant 80,656 193,782 - -<br />
- Others 197,895 134,889 7,321 302<br />
Distribution costs (187,668) (201,095) - -<br />
Administrative expenses (515,270) (504,184) (1,329) (607)<br />
Other operating expenses<br />
Group Company<br />
2009 2008 2009 2008<br />
Note RM’000 RM’000 RM’000 RM’000<br />
- Impairment of property, plant<br />
and equipment and capitalised<br />
development cost 13 (278,476) - - -<br />
- Others (47,401) (46,851) - -<br />
(Loss)/profit before finance cost 7 (339,607) 141,281 368,349 40,898<br />
Finance cost<br />
Share of results of associated<br />
9 (14,408) (17,936) - -<br />
companies<br />
Share of results of jointly<br />
18 20,220 13,134 - -<br />
controlled entities 19 14,594 7,837 - -<br />
(Loss)/profit before taxation (319,201) 144,316 368,349 40,898<br />
Taxation 10 17,395 40,235 (1,179) (10,517)<br />
(Loss)/profit for the financial year (301,806) 184,551 367,170 30,381<br />
Attributable to:<br />
Equity holders of the Company (301,806) 184,551 367,170 30,381<br />
(Loss)/earnings per share (sen)<br />
- basic 11 (55) 34<br />
- diluted 11 (55) 34<br />
The notes on pages 193 to 279 form part of these financial statements.<br />
PROTON 2009 ANNUAL REPORT<br />
185
BALANCE SHEETS<br />
AS AT 31 MARCH 2009<br />
NON-CURRENT ASSETS<br />
186<br />
Group Company<br />
2009 2008 2009 2008<br />
Note RM’000 RM’000 RM’000 RM’000<br />
Property, plant and equipment 13 2,827,111 3,150,446 - -<br />
Prepaid land lease payments 14 - 24,031 - -<br />
Goodwill 15 29,008 29,008 - -<br />
Intangible assets 16 431,668 275,192 - -<br />
Subsidiary companies 17 - - 1,708,651 1,708,651<br />
Associated companies 18 158,367 165,443 13,600 13,600<br />
Jointly controlled entities<br />
Amounts due from subsidiary<br />
19 195,622 192,747 - -<br />
companies 20 - - 177,870 -<br />
Investments 21 10,397 10,397 6,475 6,475<br />
Deferred tax assets 22 5,727 - - -<br />
Total Non-Current Assets 3,657,900 3,847,264 1,906,596 1,728,726<br />
CURRENT ASSETS<br />
Inventories 23 1,395,081 1,100,286 - -<br />
Trade and other receivables<br />
Amounts due from subsidiary<br />
24 890,095 969,344 145 14<br />
companies<br />
Amounts due from associated<br />
20 - - 58,912 66,219<br />
companies<br />
Amounts due from jointly<br />
25 18,284 10,713 - -<br />
controlled entities 26 11,353 4,430 - -<br />
Tax recoverable 10 160,610 114,479 77 273<br />
Current investments 27 15,313 20,822 - -<br />
Dividends receivable<br />
Deposits, bank and<br />
- - - 14,800<br />
cash balances 28 913,850 1,226,010 209,423 26,296<br />
Total Current Assets 3,404,586 3,446,084 268,557 107,602<br />
Non-current assets held for sale 29 36,412 - - -<br />
TOTAL ASSETS 7,098,898 7,293,348 2,175,153 1,836,328
BALANCE SHEETS<br />
AS AT 31 MARCH 2009 (CONTINUED)<br />
EQUITY AND LIABILITIES<br />
Group Company<br />
2009 2008 2009 2008<br />
Note RM’000 RM’000 RM’000 RM’000<br />
Share capital 30 549,213 549,213 549,213 549,213<br />
Reserves 31 4,552,327 4,872,043 1,625,179 1,278,604<br />
Equity attributable to equity<br />
holders of the Company 5,101,540 5,421,256 2,174,392 1,827,817<br />
TOTAL EQUITY 5,101,540 5,421,256 2,174,392 1,827,817<br />
NON-CURRENT LIABILITIES<br />
Long term liabilities 32 101,516 230,473 - -<br />
Deferred tax liabilities 22 12,243 2,439 - -<br />
Total Non-Current Liabilities 113,759 232,912 - -<br />
CURRENT LIABILITIES<br />
Trade and other payables 33 1,277,658 1,235,520 482 575<br />
Provisions 34 189,779 186,556 - -<br />
Amounts due to subsidiary<br />
companies 35 - - - 7,936<br />
Amounts due to associated<br />
companies 36 88,606 84,984 - -<br />
Amounts due to jointly<br />
controlled entities 37 15,195 16,958 - -<br />
Taxation 6,322 1,556 279 -<br />
Short term borrowings 38 306,039 113,606 - -<br />
Total Current Liabilities 1,883,599 1,639,180 761 8,511<br />
TOTAL LIABILITIES 1,997,358 1,872,092 761 8,511<br />
TOTAL EQUITY AND LIABILITIES 7,098,898 7,293,348 2,175,153 1,836,328<br />
Net assets per share attributable<br />
to equity holders of the Company (RM) 9.29 9.87<br />
The notes on pages 193 to 279 form part of these financial statements.<br />
PROTON 2009 ANNUAL REPORT<br />
187
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY<br />
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009<br />
188<br />
Attributable to equity holders of the Company<br />
Asset Foreign<br />
Share Capital revaluation exchange Retained<br />
capital reserve reserve reserve earnings Total<br />
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
At 1 April 2008 549,213 475,617 2,362 (82,197) 4,476,261 5,421,256<br />
Net income recognised<br />
directly in equity<br />
- Foreign exchange<br />
differences on translation<br />
of foreign operations - - - 2,685 - 2,685<br />
Loss for the financial year - - - - (301,806) (301,806)<br />
Total recognised income<br />
and expense for the<br />
financial year - - - 2,685 (301,806) (299,121)<br />
Interim dividend for<br />
the financial year ended<br />
31 March 2009 12 - - - - (20,595) (20,595)<br />
At 31 March 2009 549,213 475,617 2,362 (79,512) 4,153,860 5,101,540<br />
At 1 April 2007 549,213 475,617 - (85,952) 4,291,710 5,230,588<br />
Net income recognised<br />
directly in equity<br />
- Foreign exchange<br />
differences on translation<br />
of foreign operations - - - 3,755 - 3,755<br />
Arising from business<br />
combination - - 2,362 - - 2,362<br />
Profit for the financial year - - - - 184,551 184,551<br />
Total recognised income<br />
and expense for the<br />
financial year - - 2,362 3,755 184,551 190,668<br />
At 31 March 2008 549,213 475,617 2,362 (82,197) 4,476,261 5,421,256<br />
The notes on pages 193 to 279 form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY<br />
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009<br />
Issued and fully<br />
paid ordinary shares<br />
Nominal<br />
Distributable<br />
Number value of Retained<br />
of shares RM1 each earnings Total<br />
Note ‘000 RM’000 RM’000 RM’000<br />
At 1 April 2008 549,213 549,213 1,278,604 1,827,817<br />
Profit for the financial year - - 367,170 367,170<br />
Interim dividend for the financial<br />
year ended 31 March 2009 12 - - (20,595) (20,595)<br />
At 31 March 2009 549,213 549,213 1,625,179 2,174,392<br />
At 1 April 2007 549,213 549,213 1,248,223 1,797,436<br />
Profit for the financial year - - 30,381 30,381<br />
At 31 March 2008 549,213 549,213 1,278,604 1,827,817<br />
The notes on pages 193 to 279 form part of these financial statements.<br />
PROTON 2009 ANNUAL REPORT<br />
189
CASH FLOW STATEMENTS<br />
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009<br />
CASH FLOWS FROM OPERATING ACTIVITIES<br />
190<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
(Loss)/profit for the financial year (301,806) 184,551 367,170 30,381<br />
Adjustments for:<br />
Taxation (17,395) (40,235) 1,179 10,517<br />
Property, plant and equipment:<br />
- depreciation 450,346 382,556 - -<br />
- written off 38,746 18,557 - -<br />
- impairment 257,674 - - -<br />
- reversal of impairment (1,616) (800) - -<br />
- loss/(gain) on disposal 19,417 (12,546) - -<br />
Prepaid land lease payments:<br />
- amortisation - 89 - -<br />
- gain on disposal - (990) - -<br />
Impairment of goodwill - 6,741 - -<br />
Write down/(write back) of inventories 114,950 (25,053) - -<br />
Impairment of investment in an<br />
associated company 6,678 4,200 - -<br />
Intangible assets:<br />
- amortisation 48,493 34,817 - -<br />
- impairment 20,802 - - -<br />
Interest expense 14,408 17,936 - -<br />
Interest income (42,089) (32,143) (4,618) (301)<br />
Share of results of associated companies (20,220) (13,134) - -<br />
Share of results of jointly<br />
controlled entities (14,594) (7,837) - -<br />
Current investments:<br />
- loss/(gain) on disposal 44 (1,678) - -<br />
- write down in market value 1,084 - - -<br />
Reversal of allowance for doubtful debts (63,315) (19,708) - -<br />
Allowance for doubtful debts 45,616 7,737 - -<br />
Gain on unrealised foreign exchange (8,284) (10,230) - -<br />
Operating profit before working<br />
capital changes (carried forward) 548,939 492,830 363,731 40,597
CASH FLOW STATEMENTS<br />
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009 (CONTINUED)<br />
CASH FLOWS FROM OPERATING<br />
ACTIVITIES (CONTINUED)<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
Operating profit before working<br />
capital changes (brought forward) 548,939 492,830 363,731 40,597<br />
Provision for warranties 62,862 45,526 - -<br />
Provision for onerous contract 4,426 - - -<br />
Research and development grant (80,656) (193,782) - -<br />
(Reversal)/provision for retirement benefits (8,042) 14,616 - -<br />
Amortisation of capital grant (21,646) - - -<br />
Dividend income (1,260) (2,896) (362,357) (41,203)<br />
Operating profit/(loss) before working<br />
capital changes 504,623 356,294 1,374 (606)<br />
Changes in working capital:<br />
Inventories (445,982) 217,044 - -<br />
Receivables<br />
- trade and other receivables 161,578 73,075 (131) (9)<br />
- subsidiary companies - - 7,307 -<br />
- associated companies and<br />
jointly controlled entities (14,688) 19,789 - -<br />
Payables<br />
- trade and other payables 108,309 196,067 (93) (215)<br />
- provisions (102,257) (99,301) - -<br />
- subsidiary companies - - (7,936) 288<br />
- associated companies and<br />
jointly controlled entities 6,606 (22,793) - -<br />
Cash generated from/(used in) operations 218,189 740,175 521 (542)<br />
Tax paid (31,550) (8,571) (704) -<br />
Tax refund 9,717 108,955 - -<br />
Interest received 47,047 32,143 4,618 301<br />
Interest paid (12,394) (17,936) - -<br />
Retirement benefits paid (9,369) (11,155) - -<br />
Net cash flow generated from/<br />
(used in) operating activities 221,640 843,611 4,435 (241)<br />
PROTON 2009 ANNUAL REPORT<br />
191
CASH FLOW STATEMENTS<br />
FOR THE FINANCIAL YEAR ENDED 31 MARCH 2009 (CONTINUED)<br />
CASH FLOWS FROM<br />
INVESTING ACTIVITIES<br />
192<br />
Group Company<br />
2009 2008 2009 2008<br />
Note RM’000 RM’000 RM’000 RM’000<br />
Purchase of property, plant<br />
and equipment (462,781) (391,997) - -<br />
Proceeds from acquisition of<br />
a subsidiary company 17(a) 3,998 - - -<br />
Additional investment in<br />
a subsidiary company 17(b) - (32,616) - -<br />
Purchase of intangible assets (237,632) (141,217) - -<br />
Purchase of current investments (58) - - -<br />
Proceeds from disposal of<br />
current investments 4,439 54,304 - -<br />
Proceeds from disposal of property,<br />
plant and equipment 29,073 50,722 - -<br />
Proceeds from disposal of prepaid<br />
land lease payments - 1,304 - -<br />
Dividends received 20,590 25,698 377,157 15,927<br />
Net cash flow (used in)/generated<br />
from investing activities (642,371) (433,802) 377,157 15,927<br />
CASH FLOWS FROM<br />
FINANCING ACTIVITIES<br />
Dividend paid 12 (20,595) - (20,595) -<br />
Proceeds from borrowings 356,506 421,598 - -<br />
Advances to a subsidiary company - - (177,870) -<br />
Lease and hire purchase creditors<br />
installments paid (890) (1,293) - -<br />
Repayment of borrowings (195,421) (132,080) - -<br />
Release of restricted ADF 31,557 6,260 - -<br />
Net cash flows generated from/<br />
(used in) financing activities 171,157 294,485 (198,465) -<br />
NET (DECREASE)/INCREASE IN<br />
CASH AND CASH EQUIVALENTS (249,574) 704,294 183,127 15,686<br />
EFFECTS OF EXCHANGE DIFFERENCES (24,982) (1,819) - -<br />
CASH AND CASH<br />
EQUIVALENTS AT THE BEGINNING<br />
OF THE FINANCIAL YEAR 1,173,939 471,464 26,296 10,610<br />
CASH AND CASH<br />
EQUIVALENTS AT THE END<br />
OF THE FINANCIAL YEAR 44 899,383 1,173,939 209,423 26,296<br />
The notes on pages 193 to 279 form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009<br />
1 GENERAL INFORMATION<br />
The Company is principally involved in investment holding activities.<br />
The principal activities of the subsidiary companies, associated companies and jointly controlled entities<br />
are set out in Notes 17 to 19 to the financial statements. There have been no significant changes in the<br />
activities of the Group and Company during the financial year.<br />
The Company is a limited liability company incorporated, and domiciled in Malaysia, and listed on the<br />
Main Board of Bursa Malaysia Securities Berhad.<br />
The address of the registered office and the principal place of business of the Company is:<br />
Centre of Excellence<br />
KM 33.8, Westbound Shah Alam Expressway<br />
47600 Subang Jaya<br />
Selangor Darul Ehsan<br />
Malaysia<br />
2 BASIS OF PREPARATION<br />
During the financial year, the Group incurred a net loss of RM301.8 million (2008: net profit for the<br />
financial year of RM184.6 million) which was substantially due to impairment of certain property, plant<br />
and equipment and capitalised development cost totaling RM278.5 million as well as, inventory writedown<br />
of RM81.8 million relating to certain vehicle models impacted by sales volume contraction.<br />
Going concern assumption<br />
The Directors are of the opinion that the use of the going concern assumption in the preparation of the<br />
financial statements is appropriate based on the approved Group business plan and available financing<br />
arrangements. This includes efforts to control cash flows and the introduction of a new model in a segment<br />
which is different from those the Group is currently in.<br />
The Directors expect the Group to continue to operate as a going concern and accordingly, the assets and<br />
liabilities of the Group and Company are recorded on the basis that the Group and Company will be able<br />
to realise its assets and discharge its liabilities in the normal course of business.<br />
Estimates and judgements<br />
The preparation of financial statements requires the Directors to make estimates and judgements that<br />
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities<br />
at the date of the financial statements and the reported amounts of revenues and expenses during the<br />
financial year. It also requires the Directors to exercise their judgements in the process of applying the<br />
Group’s and the Company’s accounting policies. Although these estimates and judgements are based on<br />
the Directors’ best knowledge of current events and actions, actual results may differ.<br />
PROTON 2009 ANNUAL REPORT<br />
193
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
2 BASIS OF PREPARATION (CONTINUED)<br />
Estimates and judgements (continued)<br />
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates<br />
are significant to the Group’s financial statements are disclosed in Note 4 to the financial statements.<br />
Financial Reporting Standards<br />
The financial statements of the Group and of the Company have been prepared in accordance with<br />
the provisions of the Companies Act, 1965 and comply with the Financial Reporting Standards (‘FRSs’),<br />
Malaysian Accounting Standard Board (‘MASB’) Approved Accounting Standards in Malaysia for Entities<br />
Other than Private Entities.<br />
The financial statements of the Group and Company have been prepared under the historical cost<br />
convention (as modified by the revaluation of certain freehold land), unless otherwise indicated in the<br />
summary of significant accounting policies.<br />
(a) Standards, amendments to published standards and Issues Committee (‘IC’)<br />
interpretations that are effective and applicable to the Group<br />
194<br />
The new accounting standards, amendments to published standards and interpretations to existing<br />
standards effective for the financial year beginning 1 April 2008 are as follows:<br />
• FRS 107 Cash Flow Statements<br />
• FRS 111 Construction Contracts<br />
• FRS 112 Income Taxes<br />
• FRS 118 Revenue<br />
• FRS 120 Accounting for Government Grants and Disclosure of<br />
Government Assistance<br />
• FRS 134 Interim Financial Reporting<br />
• FRS 137 Provisions, Contingent Liabilities and Contingent Assets<br />
• Amendment to FRS 121 The Effect of Changes in Foreign Exchange Rates<br />
– Net Investment in a Foreign Operation<br />
• IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar<br />
Liabilities<br />
• IC Interpretation 2 Members’ Share in Co-operative Entities and Similar Instruments<br />
• IC Interpretation 5 Rights to Interests arising from Decommission, Restoration and<br />
Environmental Rehabilitation Funds<br />
• IC Interpretation 6 Liabilities arising from Participating in a Specific Market<br />
– Waste Electrical and Electronic Equipment<br />
• IC Interpretation 7 Applying the Restatement Approach under FRS129 2004<br />
Financial Reporting in Hyperinflationary Economies<br />
• IC Interpretation 8 Scope of FRS 2<br />
IC Interpretation 1, 2, 5, 6, 7 and 8 are not relevant to the Group and the Company. The adoption<br />
of FRS 107, 111, 112, 118, 120, 121, 134 and 137 did not result in any substantial changes to<br />
the accounting policies of the Group and the Company nor have any significant financial impact<br />
on the financial statements of the Group and the Company.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
2 BASIS OF PREPARATION (CONTINUED)<br />
(b) Standards, amendments to published standards and IC interpretations that are not<br />
yet effective and have not been early adopted<br />
The new standards and interpretations that are applicable to the Group and the Company, but which<br />
the Group and the Company have not early adopted:<br />
• FRS 7 Financial Instruments: Disclosures (effective for annual periods beginning 1 January<br />
2010). The Group and the Company have applied the transitional provision in FRS 7 which<br />
exempts entities from disclosing the possible impact arising from the initial application of<br />
this standard on the financial statements.<br />
• FRS 8 Operating Segments (effective for annual periods beginning 1 July 2009) replaces<br />
FRS 114 2004 Segment Reporting. The new standard requires a ‘management approach’, under<br />
which segment information is presented on the same basis as that used for internal reporting<br />
purposes.<br />
• FRS 139 Financial Instruments: Recognition and Measurement (effective for annual periods<br />
beginning 1 January 2010). This new standard established principles for recognising and<br />
measuring financial assets, financial liabilities and some contracts to buy and sell non-financial<br />
items. Hedge accounting is permitted only under strict circumstances. The Group and the<br />
Company have applied the transitional provision in FRS 139 which exempts entities from<br />
disclosing the possible impact arising from the initial application of this standard on the<br />
financial statements.<br />
• FRS 123 Borrowing costs (effective for annual periods beginning 1 January 2010) which<br />
replaces FRS 123 2004 , removes the option of immediately recognising as an expense borrowing<br />
costs that are directly attributable to the acquisition, construction or production of a qualifying<br />
asset.<br />
• FRS 2 Share Based Payment (Amendment) (effective for annual periods beginning 1 January<br />
2010). This new amendment clarifies that vesting conditions are service conditions and<br />
performance conditions only and do not include other features of a share based payment.<br />
• FRS 127 Consolidated and Separate Financial Statements (Amendment) (effective for annual<br />
periods beginning 1 January 2010). This amendment deals with situations where a parent<br />
reorganises its group by establishing a new entity as its parent. Under the new rules, the new<br />
parent measures the cost of its investment in the original parent at the carrying amount of<br />
its share of the equity items shown in the separate financial statements of the original parent<br />
at the reorganisation date.<br />
PROTON 2009 ANNUAL REPORT<br />
195
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
2 BASIS OF PREPARATION (CONTINUED)<br />
(b) Standards, amendments to published standards and IC interpretations that are not<br />
yet effective and have not been early adopted (continued)<br />
196<br />
• IC Interpretation 9 Reassessment of Embedded Derivatives (effective for annual<br />
periods beginning 1 January 2010). IC Interpretation 9 requires an entity to assess whether<br />
an embedded derivative is required to be separated from the host contract and accounted<br />
for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment<br />
is prohibited unless there is a change in the terms of the contract that significantly modifies the<br />
cash flows that otherwise would be required under the contract, in which case reassessment is<br />
required.<br />
• IC Interpretation 10 Interim Financial Reporting and Impairment (effective for annual periods<br />
beginning 1 January 2010). IC Interpretation 10 prohibits the impairment losses recognised in<br />
an interim period on goodwill and investments in equity instruments and in financial assets<br />
carried at cost to be reversed at a subsequent balance sheet date.<br />
• IC Interpretation 11, FRS 2: Group and Treasury Share Transactions (effective for annual periods<br />
beginning 1 January 2010) clarifies how share based payment transactions involving its own or<br />
another entity’s instruments in the same group are to be treated and that cancellations by<br />
parties other than the entity are to be treated in the same way as cancellations by the entity.<br />
• IC Interpretation 13, Customer Loyalty Programs (effective for annual periods beginning 1<br />
January 2010) explains how entities that grant loyalty award points to its customers should<br />
account for their obligation to provide free or discounted goods or services if and when the<br />
customers redeem the points.<br />
• IC Interpretation 14, FRS 119: The Limit on a Defined Benefit Asset, Minimum Funding<br />
Requirement and their Interactions (effective for annual periods beginning 1 January 2010)<br />
addresses how entities should determine the limit placed on the amount of a surplus in a<br />
pension plan they can recognise as an asset. Also, it addresses how a minimum funding<br />
requirement affects that limit and when a minimum funding requirement creates an onerous<br />
obligation that should be recognised as a liability in addition to that otherwise recognised<br />
under FRS 119.<br />
(c) Standards, amendments to published standards and interpretations that are not yet<br />
effective and not relevant to the Group’s operations<br />
FRS 4 Insurance Contracts is effective for annual periods beginning 1 January 2010. This new<br />
standard exempts entities from disclosing information required under paragraph 30(b) of FRS<br />
108 “Accounting Policies, Changes in Accounting Estimates and Errors”.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES<br />
The following accounting policies have been used consistently in dealing with items which are considered<br />
material in relation to the financial statements.<br />
(a) Subsidiary companies<br />
Subsidiary companies are those corporations, partnerships or other entities in which the Group<br />
has the power to exercise control over the financial and operating policies so as to obtain benefits<br />
from their activities, generally accompanying a shareholding of more than one half of the voting<br />
rights. The existence and effect of potential voting rights that are currently exercisable or convertible<br />
are considered when assessing whether the Group controls another entity.<br />
Investments in subsidiary companies are stated at cost less accumulated impairment losses. Where<br />
an indication of impairment exists, the carrying amount of the investment is assessed and written<br />
down immediately to its recoverable amount. The accounting policy on Impairment of Assets is set<br />
out in Note 3(v).<br />
Prior to 1 January 2006, the Group applied both the purchase method and the merger method to<br />
account for Business Combinations in accordance with prior financial reporting standards. With<br />
effect from 1 January 2006, only the purchase method of accounting is used to account for Business<br />
Combinations in accordance with FRS 3.<br />
The cost of an acquisition is measured as the fair value of the assets given, equity instruments<br />
issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to<br />
the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a<br />
business combination are measured initially at their fair values at the acquisition date irrespective of<br />
the interest of any minority interest. The excess of the cost of acquisition over the fair value of<br />
the Group’s share of the identifiable net assets acquired is recorded as goodwill. The accounting<br />
policy on goodwill is set out in Note 3(f)(i). If the cost of acquisition is less than the fair value of the<br />
net assets of the subsidiary company acquired, the difference is recognised as a gain in the<br />
Consolidated Income Statements.<br />
Subsidiary companies are consolidated from the date on which control is transferred to the Group.<br />
They are de-consolidated from the date that control ceases.<br />
Uniform accounting policies for like transactions and other events in similar circumstances are used<br />
by all companies in the Group in preparing the Consolidated Financial Statements. The financial<br />
statements of all companies within the Group used in the preparation of the Consolidated Financial<br />
Statements are prepared as of the same reporting date.<br />
Inter-company balances, inter-company transactions and unrealised gains on transactions between<br />
Group companies are eliminated in full. Unrealised losses are also eliminated in full unless the assets<br />
transferred are impaired.<br />
Minority interests represent that portion of the profit or loss and net assets of a subsidiary company<br />
attributable to equity interests that are not owned, directly or indirectly through the subsidiary<br />
companies by the parent. It is measured at the minorities’ share of the fair values of the subsidiary<br />
companies’ identifiable assets and liabilities at the acquisition date and the minorities’ share of<br />
changes in the subsidiary companies equity since that date.<br />
PROTON 2009 ANNUAL REPORT<br />
197
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(a) Subsidiary companies (continued)<br />
198<br />
The gain or loss on disposal of a subsidiary company is the difference between the net disposal<br />
proceeds and the Group’s share of the subsidiary company’s net assets as of the date of disposal,<br />
including the cumulative amount of any exchange differences that relate to that subsidiary company<br />
which were previously recognised in equity, and is recognised in the Consolidated Income<br />
Statements.<br />
(b) Associated companies<br />
Associated companies are those corporations, partnerships or other entities in which the Group<br />
exercises significant influence, but which it does not control. Significant influence is the power to<br />
participate in the financial and operating policy decisions of the associated companies but not the<br />
power to exercise control over those policies.<br />
Investments in associated companies are stated at cost. Where an indication of impairment exists,<br />
the carrying amount of the investment is assessed and written down immediately to its recoverable<br />
amount. The accounting policy on Impairment of Assets is set out in Note 3(v).<br />
In the Consolidated Financial Statements, investments in associated companies are accounted for<br />
using the equity method. Under the equity method, the Group’s share of its associated companies<br />
post-acquisition results is recognised in the income statement, and its share of post-<br />
acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition<br />
movements are adjusted to the carrying amount of the investment. When the Group’s share of losses<br />
in an associated company equals or exceeds its cost of investment in the associated company<br />
including any other unsecured receivables, the Group discontinues its share of further losses, unless<br />
it has incurred legal or constructive obligations to make payments on behalf of the associated<br />
company.<br />
Unrealised gains on transactions between the Group and its associated companies are eliminated to<br />
the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated<br />
unless the assets transferred are impaired.<br />
In applying the equity method, the Group has ensured that uniform accounting policies for like<br />
transactions and other events in similar circumstances of the associated companies are used. The<br />
equity method is applied based on the latest financial statements made up to the financial year end<br />
of the Group.<br />
(c) Jointly controlled entities<br />
Jointly controlled entities are corporations, partnerships or other entities over which there<br />
is contractually agreed sharing of control by the Group with one or more parties where the strategic<br />
financial and operating policy decisions relating to the entity requires unanimous consent of<br />
the parties sharing control. The Group’s interests in jointly controlled entities are accounted for in<br />
the Consolidated Financial Statements by the equity method of accounting, as disclosed in Note<br />
3(b).
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(c) Jointly controlled entities (continued)<br />
Investments in jointly controlled entities are stated at cost. Where an indication of impairment<br />
exists, the carrying amount of the investment is assessed and written down immediately to its<br />
recoverable amount. The accounting policy on Impairment of Assets is set out in Note 3(v).<br />
The Consolidated Income Statements include the Group’s share of results of the jointly controlled<br />
entities based on the financial statements made up to the financial year end of the Group. The<br />
cumulative post-acquisition movements are adjusted to the carrying amount of the investment.<br />
Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated<br />
to the extent of the Group’s interest in the jointly controlled entities. Unrealised losses are also<br />
eliminated unless the assets transferred are impaired.<br />
In applying the equity method, the Group has ensured that uniform accounting policies of jointly<br />
controlled entities for like transactions and other events in similar circumstances are used. The<br />
equity method is applied based on the latest financial statements made up to the financial year end<br />
of the Group.<br />
(d) Investments<br />
The Group uses its judgement to determine the classification of its investments into current and<br />
non-current. An investment is classified as current if it is readily realisable and it is held for trading<br />
or intended to be realised within 12 months after the balance sheet date. All other investments are<br />
classified as non-current.<br />
Non-current investments are shown at cost and an allowance for diminution in value is made where,<br />
in the opinion of the Directors, there is a decline other than temporary in the value of such<br />
investments. Where there has been a decline other than temporary in the value of an investment,<br />
such a decline is recognised as an expense in the period in which the decline is identified.<br />
Quoted and unquoted current investments are carried at the lower of cost and market value,<br />
determined on an aggregate portfolio basis by category of investments. Cost is derived at on the<br />
weighted average basis whilst market value is calculated by reference to stock exchange quoted<br />
selling prices at the close of business on the balance sheet date. Increases/decreases in the carrying<br />
amount of current investments are credited/charged to the Consolidated Income Statements.<br />
On disposal of an investment, the difference between net disposal proceeds and its carrying amount<br />
is credited/charged to the income statement.<br />
PROTON 2009 ANNUAL REPORT<br />
199
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(e) Property, plant and equipment<br />
200<br />
Property, plant and equipment are tangible items that:<br />
I. are held for use in the production or supply of goods or services, or for administrative<br />
purposes; and<br />
II. are expected to be used during more than one period.<br />
(i) Cost<br />
Property, plant and equipment are initially stated at cost. Cost includes expenditure that is<br />
directly attributable to the acquisition of the items and bringing them to the location and<br />
condition so as to render them operational in the manner intended by the Group. The Group<br />
allocates the initial cost of an item of property, plant and equipment to its significant<br />
component parts.<br />
A piece of freehold land held by the Group is stated at the Directors’ valuation based on a 1983<br />
independent professional valuation of the open market value of the land on an existing<br />
use basis. The surplus arising on revaluation was credited directly to capital reserves and<br />
subsequently utilised.<br />
The Group has adopted the transitional provision of FRS 116 which allows the freehold land<br />
to be stated at the amount revalued on 5 September 1983. All other land held by the Group is<br />
stated at cost.<br />
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,<br />
as appropriate, only when it is probable that future economic benefits associated with the<br />
item will flow to the Group and the cost of the item can be measured reliably. The carrying<br />
amount of the replaced part is derecognised. All other repairs and maintenance are charged to<br />
the income statement during the financial period in which they are incurred.<br />
(ii) Depreciation<br />
Freehold land is not depreciated as it has an infinite life. Depreciation of other property, plant<br />
and equipment is provided for on a straight line basis to write off the cost or valuation of each<br />
asset to its residual value over their estimated useful lives. The assets’ residual values, useful<br />
lives and depreciation method are reviewed annually and revised if appropriate.<br />
The principal estimated useful lives of depreciation used are as follows:<br />
Buildings 15-50 years<br />
Plant and machinery 5-15 years<br />
Office equipment, furniture, fittings and vehicles 2-8 years
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(e) Property, plant and equipment (continued)<br />
(ii) Depreciation (continued)<br />
Dies and jigs, which are included under plant and machinery, are depreciated based on the unit<br />
of production basis.<br />
Work-in-progress is not depreciated. Upon completion, the related costs will be transferred<br />
to the respective categories of assets. Depreciation on work-in-progress commences when the<br />
assets are ready for their intended use.<br />
(iii) Impairment<br />
Where an indication of impairment exists, the carrying amount of the assets is assessed and<br />
written down immediately to its recoverable amount. The accounting policy on Impairment of<br />
Assets is set out in Note 3(v).<br />
(iv) Gains or losses on disposals<br />
Gains or losses on disposals are determined by comparing proceeds with their related carrying<br />
amounts and are included in profit/(loss) from operations.<br />
(v) Repairs and maintenance<br />
Repairs and maintenance are charged to the Consolidated Income Statements during the<br />
period in which they are incurred. The cost of major renovations are included in the carrying<br />
amount of the asset when it is probable that future economic benefits in excess of the originally<br />
assessed standard of performance of the existing asset will flow to the Group. Major renovations<br />
are depreciated over the remaining useful life of the related asset.<br />
(f) Intangible assets<br />
(i) Goodwill<br />
Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for<br />
impairment at least annually, or when events or circumstances occur indicating that an<br />
impairment may exist. Impairment of goodwill is charged to the Consolidated Income<br />
Statements as and when it arises. Impairment losses on goodwill are not reversed. Gains or<br />
losses on the disposal of an entity includes the carrying amount of goodwill relating to the<br />
entity disposed.<br />
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each<br />
cash-generating unit or a group of cash-generating units represents the lowest level within<br />
the Group at which goodwill is monitored for internal management purposes and which are<br />
expected to benefit from the synergies of the combination. The Group allocates goodwill to<br />
each business segment in each country in which it operates.<br />
PROTON 2009 ANNUAL REPORT<br />
201
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(f) Intangible assets (continued)<br />
202<br />
(i) Goodwill (continued)<br />
Goodwill on acquisition of associated companies and jointly controlled entities are included in<br />
the carrying value of the investment in associated companies and jointly controlled entities<br />
respectively. Such goodwill are tested for impairment as part of the overall balance.<br />
(ii) Computer software<br />
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire<br />
and bring to use the specific computer software. These costs are amortised over their<br />
estimated useful lives of 3 to 5 years.<br />
Costs associated with developing or maintaining computer software programmes are<br />
recognised as an expense when incurred. Costs that are directly associated with identifiable<br />
and unique software products controlled by the Group, and that will probably generate<br />
economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs<br />
include employee costs incurred as a result of developing software and an appropriate portion<br />
of relevant overheads. Computer software development costs recognised as assets are amortised<br />
using the straight line method over their estimated useful lives, not exceeding a period of<br />
3 years.<br />
(iii) Capitalised development cost<br />
Research expenditure is recognised as an expense when incurred. Costs incurred on<br />
development projects (relating to the design and testing of new or improved products) are<br />
recognised as intangible assets when the criteria for recognition in FRS 138 are fulfilled.<br />
Development costs previously recognised as an expense are not recognised as an asset in a<br />
subsequent period. Development expenses capitalised include costs incurred in the<br />
development from the date it first meets the recognition criteria and up to the completion of<br />
the development project and commencement of commercial production. Capitalised<br />
development cost is stated at cost less accumulated amortisation and accumulated impairment<br />
losses, if any. Amortisation is based on the expected production volume over its total useful<br />
life, which does not exceed 7 years for vehicles and 10 years for mechanical parts.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(g) Leases<br />
Leases of property, plant and equipment where the Group assume substantially all the benefits and<br />
risks or ownership are classified as finance leases.<br />
Finance leases are capitalised at the inception of the lease at the lower of the fair value of the<br />
leased property, plant and equipment and the present value of the minimum lease payments. Each<br />
lease payment is allocated between the liability and finance charges so as to achieve a periodic<br />
constant rate of interest on the balance outstanding. The corresponding obligations, net of<br />
finance charges, are included in borrowings. The interest element of the finance charge is charged<br />
to the Consolidated Income Statements over the lease period.<br />
Property, plant and equipment acquired under finance leases are included in tangible property,<br />
plant and equipment and are depreciated in accordance with the Note 3(e) above.<br />
(h) Inventories<br />
Inventories are stated at the lower of cost and net realisable value. Cost includes the actual cost<br />
of materials and incidentals in bringing the inventories to their present location and condition, and<br />
is determined either on the first-in first-out basis and weighted average basis depending on the<br />
nature of inventory. Net realisable value represents the estimated selling price less all estimated<br />
costs to completion and costs to be incurred in marketing, selling and distribution. In arriving at net<br />
realisable value, due allowance is made for obsolete, slow moving or defective inventories.<br />
In the case of work-in-progress and finished vehicles, an appropriate proportion of production<br />
overheads is included in the costs.<br />
(i) Trade and other receivables<br />
Trade and other receivables are carried at anticipated net realisable value. Allowances are made for<br />
doubtful debts based on specific reviews of outstanding balances at the balance sheet date. General<br />
allowances are made to cover possible losses, which are not specifically identified. Bad debts<br />
are written off to the Consolidated Income Statements during the financial period in which<br />
they are identified.<br />
(j) Non-current assets classified as assets held for sale<br />
Non-current assets are classified as assets held for sale when the carrying amount is to be recovered<br />
principally through a sale transaction. They are stated at the lower of their carrying amount and<br />
fair value less costs to sell if the carrying amount is to be recovered principally through a sale<br />
transaction rather than through continuing use.<br />
PROTON 2009 ANNUAL REPORT<br />
203
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(k) Government grants<br />
204<br />
Grants from government are recognised at their fair values where there are reasonable assurances<br />
that the grants will be received and the Group will comply with all attached conditions.<br />
Capital grants<br />
Government grants relating to capital expenditure are deferred and recognised in the income<br />
statement over the period necessary to match them with the costs they are intended to<br />
compensate.<br />
Government grants relating to the purchase of plant and equipment are included in non-current<br />
liabilities as capital grant and are credited to the income statement on a straight line basis<br />
over the expected lives of the related assets.<br />
Income grants<br />
Income grants are grants other than capital grants and recognised in the income statement where<br />
there is a reasonable assurance that the grant will be received and the Group will comply with all<br />
attached conditions.<br />
(l) Provisions<br />
Provisions are recognised when the Group has a present legal or constructive obligation as a result<br />
of past events, when it is probable that an outflow of resources will be required to settle the<br />
obligation, and when a reliable estimate of the amount can be made. Where the Group expects<br />
a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when<br />
the reimbursement is virtually certain. Provisions are reviewed at each balance sheet date and<br />
adjusted to reflect the current best estimate. When the effect of the time value of money is material,<br />
the amount of provision is the present value of the expenditure expected to be required to settle<br />
the obligation. Provisions are not recognised for future operating losses.<br />
(i) Warranties<br />
Provision is recognised for the estimated liability on all products under warranty in addition to<br />
claims already received and verified. Warranties are provided for a period of between one<br />
to three years for vehicles sold. The provision is based on experienced levels of claims arising<br />
during the period of warranty. When the Group expects warranties to be reimbursed from<br />
suppliers, the reimbursement is recognised as a separate asset but only when the<br />
reimbursement is virtually certain.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(l) Provisions (continued)<br />
(ii) Onerous contracts<br />
The Group recognises a provision for onerous contracts when the expected benefits to<br />
be derived from a contract are less than the unavoidable costs of meeting the obligations<br />
under the contract or estimated costs of exiting the contract.<br />
(m) Employee benefits<br />
(i) Short term employee benefits<br />
Salaries, wages, paid annual leave and sick leave, bonuses and non-monetary benefits are<br />
accrued in the period in which the associated services are rendered by employees of the<br />
Group.<br />
(ii) Post employment benefits<br />
The Group has various post employment benefit schemes in accordance with the local<br />
conditions and practices in the countries in which it operates. The Group has both defined<br />
contribution and defined benefit plans.<br />
Defined contribution plans<br />
The Group’s contributions to defined contribution plans are charged to the Consolidated<br />
Income Statements in the period to which they relate. Once the contributions have been<br />
paid, the Group has no further payment obligations.<br />
Defined benefit plan<br />
The liability in respect of a defined benefit plan is the present value of the defined benefit<br />
obligation at the balance sheet date minus the fair value of plan assets, together with<br />
adjustments for actuarial gains/losses and past service cost. The Group determines the<br />
present value of the defined benefit obligation and the fair value of any plan assets with<br />
sufficient regularity such that the amounts recognised in the financial statements do not<br />
differ materially from the amounts that would be determined at the balance sheet date.<br />
The defined benefit obligation, calculated using the projected unit credit method, is<br />
determined by independent actuaries on the basis of full triennial valuations and updated<br />
annually. Assumptions were made in relation to the annual investment returns, annual<br />
salary increases and annual increases in pension payments.<br />
Plan assets in excess of the defined benefit obligation are subject to the asset limitation<br />
test specified in FRS 119.<br />
PROTON 2009 ANNUAL REPORT<br />
205
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(m) Employee benefits (continued)<br />
206<br />
(ii) Post employment benefits (continued)<br />
Defined benefit plan (continued)<br />
Actuarial gains and losses arise from experience adjustments and changes in actuarial<br />
assumptions. The amount of net actuarial gains and losses recognised in the Consolidated<br />
Income Statements is determined by the corridor method in accordance with FRS 119<br />
and is charged or credited to Consolidated Income Statements over the average remaining<br />
service lives of the related employees participating in the defined benefit plan.<br />
(iii) Termination benefits<br />
Termination benefits are payable whenever an employee’s employment is terminated<br />
before the normal retirement date or whenever an employee accepts voluntary redundancy<br />
in exchange for these benefits. The Group recognises termination benefits when it<br />
is demonstrably committed to either terminate the employment of current employees<br />
according to a detailed formal plan without possibility of withdrawal or to provide<br />
termination benefits as a result of an offer made to encourage voluntary redundancy.<br />
Benefits falling due more than 12 months after balance sheet date are discounted to<br />
present value.<br />
(n) Income taxes<br />
Current tax expense is determined according to the tax laws of each jurisdiction in which the Group<br />
operates and include all taxes based upon the taxable profits, including withholding taxes payable<br />
by a foreign subsidiary company on distributions of retained earnings.<br />
Deferred tax is recognised in full, using the liability method, on temporary differences arising<br />
between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts<br />
in the financial statements.<br />
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be<br />
available against which the deductible temporary differences or unused tax losses can be utilised.<br />
Deferred tax is recognised on temporary differences arising on investments in subsidiary companies,<br />
associated companies and jointly controlled entities except where the timing of the reversal of the<br />
temporary difference can be controlled and it is probable that the temporary difference will not<br />
reverse in the foreseeable future.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(n) Income taxes (continued)<br />
Deferred tax assets and liabilities are not recognised on temporary differences arising from:<br />
(i) goodwill; or<br />
(ii) from the initial recognition of an asset or liability in a transaction which is not a business<br />
combination and at time of the transaction, affects neither accounting profit nor taxable<br />
profit.<br />
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially<br />
enacted by the balance sheet date and are expected to apply when the related deferred tax<br />
asset is realised or the deferred tax liability is settled.<br />
(o) Foreign currency transactions and translation<br />
(i) Functional and presentation currency<br />
Items included in the financial statements of each of the Group’s entities are measured using<br />
its functional currency, which is the currency of the primary economic environment in which<br />
the entity operates (‘the functional currency’). The Consolidated Financial Statements are<br />
presented in Ringgit Malaysia, which is the Group’s functional and presentation currency.<br />
(ii) Transactions and balances<br />
Foreign currency transactions are translated into the functional currency using the exchange<br />
rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting<br />
from the settlement of such transactions and from the translation at year-end exchange rates<br />
of monetary assets and liabilities denominated in foreign currencies are recognised in the<br />
Consolidated Income Statements.<br />
(iii) Group companies<br />
The results and financial position of all the Group companies (none of which has the currency<br />
of a hyperinflationary economy) that have a functional currency different from the presentation<br />
currency are translated into the presentation currency as follows:<br />
- assets and liabilities for each balance sheet presented are translated at the closing rate at<br />
the date of that balance sheet;<br />
- income and expenses for each income statement are translated at average exchange rates<br />
(unless this average is not a reasonable approximation of the cumulative effect of the<br />
rates prevailing on the transaction dates, in which case income and expenses are translated<br />
at the dates of the transactions); and<br />
- all resulting exchange differences are recognised as a separate component of equity.<br />
PROTON 2009 ANNUAL REPORT<br />
207
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(o) Foreign currency transactions and translation (continued)<br />
208<br />
(iii) Group companies (continued)<br />
On consolidation, exchange differences arising from the translation of the net investment in<br />
foreign operations are taken to shareholders’ equity. Net investment in foreign operations is<br />
defined as the amount of the reporting entity’s interest in the net assets of that operation,<br />
which includes advances that are assessed as long term in nature. When a foreign operation<br />
is disposed of or sold, such exchange differences that were recorded in equity are recognised<br />
in the Consolidated Income Statements as part of the gain or loss on disposal.<br />
(iv) Closing rates<br />
The principal closing rates (units of Malaysian Ringgit per foreign currency) used in translating<br />
significant balances at financial year end are as follows:<br />
Foreign currency 31 March 2009 31 March 2008<br />
US Dollar 3.6595 3.1985<br />
Sterling Pound 5.2225 6.3850<br />
Indonesian Rupiah (100) 0.0313 0.0343<br />
Singapore Dollar 2.4048 2.3147<br />
Thai Baht 0.1029 0.1017<br />
Australian Dollar 2.4935 2.9270<br />
(p) Cash and cash equivalents<br />
For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand,<br />
deposits held at call with banks, other short term, highly liquid investments with original maturities<br />
of not more than twelve months and bank overdrafts. Bank overdrafts are included within<br />
borrowings in current liabilities on the balance sheet.<br />
(q) Income recognition<br />
Revenue from sales of vehicles, spare parts and accessories are recognised when significant risks and<br />
rewards have been transferred to buyers. Significant risks and benefits are generally deemed to<br />
have been transferred upon delivery or acceptance of the goods.<br />
Revenue from sale of completed apartments is recognised when the Sale and Purchase Agreements<br />
are signed.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(q) Income recognition (continued)<br />
Revenue from rendering of engineering services on long term engineering contracts is recognised<br />
on the basis of the stage of completion of such contracts at the financial year end, where the<br />
contractual outcome can be assessed with reasonable certainty. Full provision is made for all<br />
foreseeable losses on contracts entered into or commenced prior to the financial year end.<br />
Amounts are included within receivables and payables to recognise timing differences arising<br />
between amounts invoiced and amounts recognised in the income statement on individual<br />
engineering contracts.<br />
Other revenue comprises mainly revenue from rental and royalties, which are recognised on an<br />
accrual basis. Interest income is recognised on proportionate basis that reflects the effective yield<br />
on the asset. Scrap sales and gains on disposal of investments are recognised on an accrual basis.<br />
Sale of rights for the use of intellectual property rights are recognised on an accrual basis in<br />
accordance with the substance of the relevant agreements.<br />
Dividends are recognised when the Company’s right to receive payment is established.<br />
(r) Financial instruments<br />
(i) Description<br />
A financial instrument is any contract that gives rise to both a financial asset of one enterprise<br />
and a financial liability or equity instrument of another enterprise.<br />
A financial asset is any asset that is cash, a contractual right to receive cash or another financial<br />
asset from another enterprise, a contractual right to exchange financial instruments with<br />
another enterprise under conditions that are potentially favourable, or an equity instrument<br />
of another enterprise.<br />
A financial liability is any liability that is a contractual obligation to deliver cash or another<br />
financial asset to another enterprise, or to exchange financial instruments with another<br />
enterprise under conditions that are potentially unfavourable.<br />
(ii) Financial instruments recognised on the balance sheet<br />
The particular recognition method adopted for financial instruments recognised on the Balance<br />
Sheet is disclosed in the individual policy statements associated with each item.<br />
(iii) Financial instruments not recognised on the balance sheet<br />
The Group enters into foreign currency forward contracts to protect the Group from movements<br />
in exchange rates by establishing the rate at which a foreign currency asset or liability will be<br />
settled.<br />
Exchange gains and losses arising on contracts entered into as hedges of anticipated future<br />
transactions are deferred until the settlement of the related forward contracts.<br />
PROTON 2009 ANNUAL REPORT<br />
209
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(r) Financial instruments (continued)<br />
210<br />
(iv) Fair value estimation for disclosure purposes<br />
(s) Borrowings<br />
The fair value of publicly traded derivatives and securities is based on quoted market prices at<br />
the balance sheet date.<br />
The fair value of forward foreign exchange contracts is determined using forward foreign<br />
exchange market rates at the balance sheet date.<br />
In assessing the fair value of non-traded derivatives and financial instruments, the Group uses<br />
a variety of methods and makes assumptions that are based on market conditions existing at<br />
each balance sheet date. Unquoted investments are valued based on quoted investments<br />
with similar features.<br />
The fair value of financial liabilities with a maturity of more than one year is estimated by<br />
discounting the future contractual cash flows at this current market interest rate available to<br />
the Group for similar financial instruments.<br />
The face values, less any estimated credit adjustments, for financial assets and liabilities<br />
classified as current are assumed to approximate their fair values.<br />
Borrowings are initially recognised based on the proceeds received, net of transaction costs<br />
incurred. Subsequently, borrowings are stated at amortised cost using the effective yield method;<br />
any difference between proceeds (net of transaction costs) and the redemption value is recognised<br />
in the income statement over the period of the borrowings.<br />
Borrowing costs are charged to the Consolidated Income Statements as an expense in the period in<br />
which they have accrued.<br />
Borrowings are classified as current liabilities unless the Group has the unconditional right to defer<br />
settlement of the liability for at least 12 months after the balance sheet date.<br />
(t) Share capital<br />
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares<br />
are expensed off in the Consolidated Income Statements.<br />
Dividends on ordinary shares are recognised as liabilities when proposed or declared before the<br />
balance sheet date. A dividend proposed or declared after the balance sheet date, but before the<br />
financial statements are authorised for issue, is not recognised as a liability at the balance sheet<br />
date. Upon the dividend becoming payable, it will be accounted for as liability.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(u) Contingent liabilities and contingent assets<br />
The Group and Company do not recognise a contingent liability but discloses its existence in the<br />
financial statements. A contingent liability is a possible obligation that arises from past events<br />
whose existence will be confirmed by uncertain future events beyond the control of the Group or<br />
a present obligation that is not recognised because it is not probable that an outflow of resources<br />
will be required to settle the obligation. A contingent liability also arises in the extremely rare<br />
circumstance where there is a liability that cannot be recognised because it cannot be measured<br />
reliably.<br />
A contingent asset is a possible asset that arises from past events whose existence will be<br />
confirmed by uncertain future events beyond the control of the Group. The Group does not<br />
recognise contingent assets but discloses its existence where inflows of economic benefits are<br />
probable, but not virtually certain.<br />
In the acquisition of subsidiary companies by the Group under a business combination, the<br />
contingent liabilities assumed are measured initially at their fair values at the acquisition date,<br />
irrespective of the extent of any minority interests.<br />
The Group recognises separately the contingent liabilities of the acquirees as part of allocating<br />
the cost of a business combination where their fair values can be measured reliably. Where the fair<br />
values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising<br />
from the acquisition.<br />
Subsequent to the initial recognition, the Group measures the contingent liabilities that are<br />
recognised separately at the date of acquisition at the higher of the amount that would be<br />
recognised in accordance with the provisions of FRS 137 and the amount initially recognised less,<br />
when appropriate, cumulative amortisation recognised in accordance with FRS 118.<br />
(v) Impairment of assets<br />
Assets that have an indefinite useful life are not subject to amortisation and are tested annually<br />
for impairment, or whenever events or circumstances occur indicating that an impairment may exist.<br />
Property, plant and equipment and other non-current assets, including intangible assets, are<br />
reviewed for impairment losses whenever events or changes in circumstances indicate that the<br />
carrying amount may not be recoverable. Impairment loss is recognised for the amount by which<br />
the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is<br />
measured at the higher of the fair value less cost to sell of an asset and its value-in-use. The value-<br />
in-use is the net present value of the projected future cash flows derived from that asset discounted<br />
at the appropriate discount rate. Assets other than goodwill that suffered an impairment are<br />
reviewed for possible reversal at each reporting date.<br />
The projected cash flows are based on the Group’s estimates calculated based on historical, industry<br />
trend, general market, economic conditions and other available information. For the purposes of<br />
assessing impairment, assets are grouped at the lowest level for which there is separately identifiable<br />
cash flows.<br />
PROTON 2009 ANNUAL REPORT<br />
211
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)<br />
(v) Impairment of assets (continued)<br />
212<br />
The impairment loss is charged to the Consolidated Income Statements. Any subsequent increase<br />
in recoverable amount is recognised in the Consolidated Income Statements.<br />
Irrespective of whether there is any indication of impairment, the Group shall test an intangible<br />
asset with an indefinite useful life or an intangible asset not yet available for use for impairment<br />
annually by comparing its carrying amount with its recoverable amount. This impairment test may<br />
be performed at any time during an annual period; it is performed at the same time every year.<br />
Different intangible assets may be tested for impairment at different times. However, if such an<br />
intangible asset was initially recognised during the current annual period, that intangible asset<br />
shall be tested for impairment before the end of the current annual period.<br />
4 KEY ESTIMATES AND JUDGEMENTS<br />
Estimates and judgements are continually evaluated and are based on historical experience and<br />
other factors, including expectations of future events that are believed to be reasonable under the<br />
circumstances.<br />
The Group makes estimates and assumptions concerning the future. The resulting accounting<br />
estimates will, by definition, rarely equal the related actual results. To enhance the information<br />
content of the estimates, certain key variables that are anticipated to have a material impact on the<br />
Group’s results and financial position are tested for sensitivity to changes in the underlying<br />
parameters. The estimates and assumptions that have a significant risk of causing a material<br />
adjustment to the carrying amounts of assets and liabilities within the next financial year are<br />
mentioned below.<br />
(i) Carrying value of property, plant and equipment and capitalised development cost<br />
The Group assesses the carrying amount of property, plant and equipment and capitalised<br />
development cost whenever the events or changes in circumstances indicate that the carrying<br />
amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than<br />
the recoverable amount. Recoverable amount is measured at the higher of the fair value less<br />
cost to sell for that asset and its value-in-use. The value-in-use is the net present value of the<br />
projected future cash flows derived from the asset discounted at an appropriate discount<br />
rate.<br />
Projected future cash flows are based on the Group’s estimates calculated based on historical,<br />
sector and industry trends, general and Malaysian market and economic conditions, changes<br />
in technology and other available information regarding the automotive sector.<br />
The assumptions used, results and conclusion of the impairment assessment are stated in Note<br />
13 to the financial statements.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
4 KEY ESTIMATES AND JUDGEMENTS (CONTINUED)<br />
(ii) Estimated useful lives of dies and jigs and capitalised development cost<br />
The Group reviews annually the estimated production units used for assessing the estimated useful<br />
lives of dies and jigs and capitalised development cost based on factors incorporated in business plans<br />
and strategies such as the expected level of demand and usage and future technological<br />
developments.<br />
Future results of operations could be materially affected by changes in these estimates brought<br />
about by changes in the factors mentioned. A reduction in the estimated production units for<br />
assessing the carrying values of dies and jigs and capitalised development cost would increase the<br />
recorded depreciation and amortisation respectively.<br />
(iii) Deferred tax assets<br />
Deferred tax assets are recognised to the extent that it is probable that future taxable profits<br />
will be available against which the temporary differences can be utilised. This involves significant<br />
judgements regarding the future financial performance of the Group, the likely timing and level<br />
of future taxable profits together with future tax planning strategies to support the basis of<br />
recognition of deferred tax assets. An analysis of the deferred tax balance is set out in Note 22<br />
to the financial statements.<br />
The Directors have considered the ability of the Group to generate sufficient taxable income<br />
to utilise the deferred tax assets and have concluded that no deferred tax asset should be<br />
recognised for certain subsidiary companies as at 31 March 2009.<br />
(iv) Estimation of income taxes payable and recoverable<br />
Income taxes are estimated based on the rules governed under the Income Tax Act, 1967.<br />
Significant judgement is required in determining the capital allowances and deductibility of<br />
certain expenses during the estimation of the provision for income taxes. There are many<br />
transactions and calculations for which the ultimate tax determination is uncertain during the<br />
ordinary course of business.<br />
Where the final tax outcome of these matters is different from the amounts that were<br />
initially recognised, such differences will impact the income tax provisions in the period in<br />
which such determination is made. The status of the income tax position of the Group is stated<br />
in Note 10 to the financial statements.<br />
(v) Provisions for warranty<br />
Provision is made for the estimated liability on all products under warranty in addition to claims<br />
already received. The accrual recorded is based on the actual claims experienced by the Group<br />
arising during the period of warranty over a number of years which provides a basis for<br />
calculating expected warranty claims. In addition, the Group records an asset for the amount<br />
expected to be recoverable from its vendors based on similar actual reimbursement experienced<br />
by the Group.<br />
An analysis of the utilisation of the provision is stated in Note 34 to the financial statements.<br />
PROTON 2009 ANNUAL REPORT<br />
213
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
4 KEY ESTIMATES AND JUDGEMENTS (CONTINUED)<br />
(vi) Allowance for inventory write down<br />
214<br />
Allowance for inventory write down is made based on an analysis of the ageing profile and<br />
expected sales patterns of individual items held in inventory. This requires an analysis of<br />
inventory usage based on expected future sales transactions taking into account current market<br />
prices, useful lives of vehicle models and expected cost to sell. Changes in the inventory ageing<br />
and expected usage profiles can have an impact on the allowance recorded.<br />
(vii) Allowance for receivables<br />
The allowance is established when there is objective evidence that the Group will not be able<br />
to collect all amounts due according to the original terms of receivables. This is determined<br />
based on the ageing profile, expected collection patterns of individual receivable balances,<br />
credit quality and credit losses incurred. Management carefully monitors the credit quality of<br />
receivable balances and makes estimates about the amount of credit losses that have been<br />
incurred at each financial statement reporting date. Any changes to the ageing profile,<br />
collection patterns, credit quality and credit losses can have an impact on the allowance<br />
recorded.<br />
(viii) Impairment of goodwill<br />
The Group tests goodwill for impairment at least annually in accordance with its accounting<br />
policy or whenever events or changes in circumstances indicate that this is necessary. The<br />
assumptions used, results and conclusion of the impairment assessment are stated in Note 15<br />
to the financial statements.<br />
5 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR<br />
During the financial year,<br />
(a) As reported in the prior financial year,<br />
(i) CIMB Investment Bank Berhad on behalf of Directors announced on 31 March 2008, a<br />
proposal to strike-off and liquidate eight dormant companies with the intention to reduce<br />
cost, streamline and align business operations within the Group. The proposal was<br />
completed during the financial year.<br />
(ii) The internal reorganisation exercise to rationalise the operations of Marco Acquisition<br />
Corporation, USA (‘Marco’), a wholly owned subsidiary company of the Company held through<br />
Proton Engineering Research Technology Sdn. Bhd. had been completed on 12 September<br />
2008 following the merger and dissolution of Marco into Lotus Holdings Inc., USA.<br />
(b) Proton Cars Benelux Limited (‘Benelux’), a 99% owned subsidiary company of Proton Marketing<br />
Sdn. Bhd. (‘PMSB’) was placed under Members’ Voluntary Liquidation on 2 February 2009.<br />
Benelux had not commenced operations since incorporation.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
5 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED)<br />
(c) Proton Edar Ventures Sdn. Bhd. and Proton Edar Resources Sdn. Bhd., wholly owned subsidiary<br />
companies of Proton Edar Sdn. Bhd. which is in turn a wholly owned subsidiary of PMSB and<br />
Proton Capital Sdn. Bhd., a wholly owned subsidiary company of the Company were placed under<br />
Members’ Voluntary Liquidation on 6 March 2009.<br />
6 REVENUE<br />
Revenue at the Group represents the invoiced value of goods sold and engineering services provided and<br />
is presented net of taxes, discounts and commission paid to dealers.<br />
Revenue at the Company represents income from shares held in subsidiary companies and associated<br />
companies.<br />
Revenue comprises:<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
Sale of vehicles, spare parts 6,220,872 5,361,826 - -<br />
and accessories<br />
Rendering of engineering services 235,667 219,386 - -<br />
Others 30,031 40,382 - -<br />
Gross dividend income - - 362,357 41,203<br />
6,486,570 5,621,594 362,357 41,203<br />
Included in others is sale of rights for the use of intellectual property rights to an export market amounting<br />
to RM19,612,000 (2008: RM33,515,000).<br />
PROTON 2009 ANNUAL REPORT<br />
215
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
7 (LOSS)/PROFIT BEFORE FINANCE COST<br />
The following items have been charged/<br />
(credited) in arriving at (loss)/profit<br />
before finance cost:<br />
Gross dividends receivable from:<br />
- subsidiary company, unquoted - - (359,000) (40,000)<br />
- associated companies, unquoted - - (3,357) (786)<br />
- others, quoted (1,260) (2,479) - -<br />
- others, unquoted - (417) - (417)<br />
Research and development grant (80,656) (193,782) - -<br />
Property, plant and equipment:<br />
- depreciation 450,346 382,556 - -<br />
- write off 38,746 18,557 - -<br />
- impairment 257,674 - - -<br />
- reversal of impairment (1,616) (800) - -<br />
- loss/(gain) on disposal 19,417 (12,546) - -<br />
Prepaid land lease payments:<br />
- amortisation - 89 - -<br />
- gain on disposal - (990) - -<br />
Impairment of goodwill - 6,741 - -<br />
Impairment of investment<br />
in an associated company 6,678 4,200 - -<br />
Intangible assets:<br />
- amortisation 48,493 34,817 - -<br />
- impairment 20,802 - - -<br />
Write down/(write back) of inventories** 114,950 (25,053) - -<br />
Current investment:<br />
- loss/(gain) on disposal 44 (1,678) - -<br />
- write down in market value 1,084 - - -<br />
Research and development expenditure 45,127 37,447 - -<br />
Provision for warranties (Note 34) 62,862 45,526 - -<br />
Reversal of allowance for doubtful debts (63,315) (19,708) - -<br />
Allowance for doubtful debts 45,616 7,737 - -<br />
Statutory audit fees to:<br />
PricewaterhouseCoopers Malaysia:<br />
- current year 599 569 88 84<br />
- under/(over) provision in prior year 114 (57) 60 60<br />
Other member firms of<br />
PricewaterhouseCoopers International<br />
Limited*:<br />
- current year 1,380 1,394 - -<br />
- under provision in prior year 206 - - -<br />
216<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
7 (LOSS)/PROFIT BEFORE FINANCE COST (CONTINUED)<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
Audit related fees to PricewaterhouseCoopers<br />
- Malaysia 505 560 - -<br />
Non-audit fees to PricewaterhouseCoopers:<br />
- Malaysia 902 1,234 - -<br />
- Other member firms of PricewaterhouseCoopers<br />
International Limited* 959 1,961 - -<br />
Provision for onerous contract 4,426 - - -<br />
Rental of plant, machinery and equipment 1,765 50 - -<br />
Rental of land and buildings<br />
Foreign exchange loss/(gain):<br />
16,725 14,789 - -<br />
- transactions (7,481) 7,276 - -<br />
- translation (8,284) (10,230) - -<br />
Rental income on land and buildings (1,925) (3,891) - -<br />
Interest income<br />
Automotive Development Fund<br />
(42,089) (32,143) (4,618) (301)<br />
- amortisation of capital grant (21,646) - - -<br />
* PricewaterhouseCoopers Malaysia and other member firms of PricewaterhouseCoopers<br />
International Limited are separate and independent legal entities.<br />
** Cost of sales includes inventories written down amounting to RM114,950,000 of which<br />
RM81,841,000 relates to the vehicle models which were impacted by contraction in sales volume<br />
as disclosed in Note 13 to the financial statements (2008: write back of RM25,053,000).<br />
PROTON 2009 ANNUAL REPORT<br />
217
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
8 STAFF COST<br />
218<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Wages, salaries and bonuses 598,390 527,185<br />
Pension cost<br />
- defined contribution plan 55,228 49,762<br />
- defined benefit plan (Note 32(e)) (8,042) 14,616<br />
Other employee benefits 62,842 43,099<br />
Termination benefits - 22<br />
Directors’ remuneration<br />
708,418 634,684<br />
The aggregate amount of emoluments receivable by the Directors of the Group and Company during the<br />
financial year was as follows:<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
Non-Executive Directors:<br />
- allowances 584 505 424 389<br />
- fees<br />
- estimated monetary value<br />
939 948 217 291<br />
of benefits-in-kind 59 39 59 39<br />
Executive Director*:<br />
- salaries and bonuses 705 540 705 540<br />
- defined contribution plan<br />
- estimated monetary value<br />
109 86 109 86<br />
of benefits-in-kind 81 65 81 65<br />
- fees - - 42 42<br />
- allowances - - 16 12<br />
2,477 2,183 1,653 1,464<br />
* The Executive Director’s remuneration in the Company is fully recharged to a subsidiary company.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
9 FINANCE COST<br />
2009<br />
Group<br />
2008<br />
RM’000 RM’000<br />
Interest expense on:<br />
Long term loans 6,957 7,750<br />
Short term borrowings 6,110 9,405<br />
Others 1,341 781<br />
10 TAXATION<br />
Taxation in Malaysia<br />
14,408 17,936<br />
Current taxation:<br />
- charge for the financial year 28,027 7,020 1,179 10,517<br />
- over accrual in respect<br />
of prior financial years (49,456) (45,859) - -<br />
Taxation outside Malaysia<br />
(21,429) (38,839) 1,179 10,517<br />
Current taxation:<br />
- charge for the financial year 801 885 - -<br />
- over accrual in respect of prior<br />
financial years (844) (1,527) - -<br />
Deferred taxation (Note 22)<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
(43) (642) - -<br />
Origination and reversal of<br />
temporary differences (1,409) (754) - -<br />
Tax benefits arising from previously<br />
unrecognised temporary differences 5,486 - - -<br />
4,077 (754) - -<br />
(17,395) (40,235) 1,179 10,517<br />
PROTON 2009 ANNUAL REPORT<br />
219
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
10 TAXATION (CONTINUED)<br />
A numerical reconciliation between the average effective tax rate and the statutory tax rate effect is as<br />
follows:<br />
Malaysian statutory tax rate (25) 26 25 26<br />
Tax effects of:<br />
- double deduction and<br />
incentive on qualifying expenditure (3) (1) - -<br />
- expenses not deductible for tax purposes 1 15 - -<br />
- income not subject to tax (11) (51) (25) -<br />
- current year tax losses not recognised 6 4 - -<br />
- current year deductible temporary<br />
differences not recognised 50 22 - -<br />
- over accrual in respect<br />
of prior years (16) (32) - -<br />
- recognition of previously unrecognised<br />
deductible temporary differences (2) (8) - -<br />
- recognition of previously unrecognised<br />
tax losses (4) - - -<br />
- different tax rates in subsidiary<br />
companies outside Malaysia (1) (3) - -<br />
Average effective tax rate (5) (28) - 26<br />
Previously unrecognised temporary<br />
differences utilised during the financial year 19,640 - - -<br />
Tax savings arising from temporary differences 5,486 - - -<br />
Previously unrecognised tax losses<br />
utilised during the financial year 45,068 5,369 - -<br />
Tax savings arising from such tax losses 11,267 1,396 - -<br />
Unabsorbed capital allowances<br />
carried forward 1,964,254 1,553,523 - -<br />
Unutilised tax losses carried forward 566,932 601,584 - -<br />
Unutilised reinvestment allowances 1,993,363 1,790,117 - -<br />
220<br />
Group Company<br />
2009 2008 2009 2008<br />
% % % %<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
10 TAXATION (CONTINUED)<br />
The tax write back during the financial year arose following an agreement with the Inland Revenue<br />
Board (‘IRB’) to settle tax disputes in respect of a subsidiary company’s treatment of certain items in the<br />
tax submissions for Years of Assessment (‘YA’) 1989 to 1998. The basis of agreed claims was subsequently<br />
applied for YA 1999 to 2002.<br />
The tax write back in the previous financial year relates mainly to the settlement of disputes of a subsidiary<br />
company with the IRB in relation to Section 127 relief on the differences in the interpretation of the<br />
qualifying period for investment tax credit. The relief was claimed for YA 1992.<br />
The tax recoverable amount of RM140,960,000 (2008: RM82,452,000) relates to settlement of tax disputes<br />
for YA 1989 to 2002 while the amount of RM19,650,000 (2008: RM32,027,000) relates to overpayment of<br />
tax liabilities for YA 2007 and 2008.<br />
11 (LOSS)/EARNINGS PER SHARE<br />
Basic (loss)/earnings per share is calculated by dividing the net (loss)/profit attributable to equity holders of<br />
the Company by the weighted average number of ordinary shares in issue during the financial year.<br />
Diluted (loss)/earnings per share equals to basic (loss)/earnings per share.<br />
12 DIVIDENDS<br />
PROTON 2009 ANNUAL REPORT<br />
Group<br />
2009 2008<br />
Net (loss)/profit attributable to equity holders<br />
of the Company (RM’000) (301,806) 184,551<br />
Weighted average number of ordinary shares in issue (‘000) 549,213 549,213<br />
Basic (loss)/earnings per share (sen) (55) 34<br />
Dividends declared in respect of the financial year ended 31 March 2009 are as follows:<br />
Interim dividend of 5.0 sen per ordinary share less tax at 25% 20,595 -<br />
The Directors do not recommend the payment of a final dividend for the financial year ended 31 March<br />
2009.<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
221
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
13 PROPERTY, PLANT AND EQUIPMENT<br />
222<br />
Office<br />
equipment,<br />
furniture,<br />
Freehold Plant and fittings and Work-in-<br />
land Buildings machinery vehicles progress Total<br />
Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
2009<br />
Cost/valuation<br />
At 1 April 2008<br />
Currency translation<br />
236,362 1,396,863 4,375,404 1,074,479 27,858 7,110,966<br />
differences (2,611) (35,192) (45,094) (30,946) (88) (113,931)<br />
Additions 759 2,457 22,629 85,685 351,251 462,781<br />
Disposals<br />
Acquisition through<br />
(7,638) - (43,136) (20,848) (10,560) (82,182)<br />
business combination 17(a) - 2,794 420 26 - 3,240<br />
Written off<br />
Reclassification<br />
of completed<br />
- (3,778) (38,668) (10,053) (19,212) (71,711)<br />
work-in-progress<br />
Reclassification from<br />
- 1,256 312,680 39,073 (353,009) -<br />
inventory<br />
Reclassification to<br />
non-current assets<br />
- - - - 9,124 9,124<br />
held for sale 29 - (11,918) (4,407) - - (16,325)<br />
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)<br />
13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)<br />
Office<br />
equipment,<br />
furniture,<br />
Freehold Plant and fittings and Work-in-<br />
land Buildings machinery vehicles progress Total<br />
Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
2009<br />
Accumulated depreciation<br />
At 1 April 2008<br />
Currency translation<br />
- 434,149 2,558,858 682,161 - 3,675,168<br />
differences<br />
Charge for the<br />
- (7,849) (28,592) (14,004) - (50,445)<br />
financial year - 52,647 306,075 91,624 - 450,346<br />
Disposals<br />
Acquisition through<br />
- - (19,571) (14,121) - (33,692)<br />
business combination 17(a) - 1,298 102 26 - 1,426<br />
Written off<br />
Reclassification to<br />
non-current assets<br />
- - (23,004) (9,961) - (32,965)<br />
held for sale 29 - (2,569) (28) - - (2,597)<br />
At 31 March 2009 - 477,676 2,793,840 735,725 - 4,007,241<br />
2009<br />
Accumulated<br />
impairment losses<br />
At 1 April 2008<br />
Currency translation<br />
13,536 137,365 79,632 54,819 - 285,352<br />
differences (13,536) (24,034) (18,759) (17,471) - (73,800)<br />
Charge for the<br />
financial year<br />
Reversal of<br />
- - 257,674 - - 257,674<br />
impairment loss - (502) (786) (328) - (1,616)<br />
At 31 March 2009 - 112,829 317,761 37,020 - 467,610<br />
Net book value<br />
At 31 March 2009 226,872 761,977 1,468,227 364,671 5,364 2,827,111<br />
PROTON 2009 ANNUAL REPORT<br />
223
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)<br />
224<br />
Office<br />
equipment,<br />
furniture,<br />
Freehold Plant and fittings and Work-in-<br />
land Buildings machinery vehicles progress Total<br />
Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
2008<br />
Cost/valuation<br />
At 1 April 2007<br />
Currency translation<br />
262,072 1,331,521 4,141,014 1,090,675 188,524 7,013,806<br />
differences (1,118) (12,189) (17,329) (9,719) (54) (40,409)<br />
Additions 261 1,011 18,802 46,073 325,850 391,997<br />
Disposals<br />
Acquisition through<br />
(24,853) (583) (16,768) (24,899) (6,230) (73,333)<br />
business combination 17(b) - 12,756 36,493 60 - 49,309<br />
Written off<br />
Reclassification<br />
of completed<br />
- (376) (105,598) (97,748) (17,558) (221,280)<br />
work-in-progress - 64,723 318,790 70,037 (453,550) -<br />
Reclassification to inventory - - - - (9,124) (9,124)<br />
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)<br />
13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)<br />
Office<br />
equipment,<br />
furniture,<br />
Freehold Plant and fittings and Work-in-<br />
land Buildings machinery vehicles progress Total<br />
Group Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
2008<br />
Accumulated depreciation<br />
At 1 April 2007<br />
Currency translation<br />
- 385,327 2,443,469 711,283 - 3,540,079<br />
differences<br />
Charge for the<br />
- (4,566) (10,286) (3,655) - (18,507)<br />
financial year - 52,728 239,917 89,911 - 382,556<br />
Disposals<br />
Acquisition through<br />
- (387) (16,768) (18,002) - (35,157)<br />
business combination 17(b) - 1,423 7,449 48 - 8,920<br />
Written off - (376) (104,923) (97,424) - (202,723)<br />
At 31 March 2008 - 434,149 2,558,858 682,161 - 3,675,168<br />
2008<br />
Accumulated<br />
impairment losses<br />
At 1 April 2007<br />
Currency translation<br />
14,591 146,017 84,586 59,038 - 304,232<br />
differences<br />
Reversal of<br />
(1,055) (8,652) (4,954) (3,419) - (18,080)<br />
impairment loss - - - (800) - (800)<br />
At 31 March 2008 13,536 137,365 79,632 54,819 - 285,352<br />
Net book value<br />
At 31 March 2008 222,826 825,349 1,736,914 337,499 27,858 3,150,446<br />
PROTON 2009 ANNUAL REPORT<br />
225
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)<br />
A piece of a subsidiary company’s freehold land was revalued on 5 September 1983 based on an independent<br />
professional valuation. The surplus of RM36,882,000 arising from the revaluation was credited to the<br />
capital reserves and subsequently utilised. Had this freehold land been carried at historical cost, the net<br />
book value of freehold land that would have been included in the financial statements at the end of the<br />
financial year would be RM22,448,000 (2008: RM22,448,000).<br />
Property, plant and equipment of a wholly owned subsidiary company with a net book value of<br />
RM111,777,000 (2008: RM61,857,000) was charged to a licensed bank as security for borrowings as disclosed<br />
in Note 32(b) to the financial statements.<br />
The net book value of the office equipment acquired under finance lease at the balance sheet date was<br />
RM3,959,000 (2008: RM5,480,000).<br />
The land title for a freehold land with net book value of RM20,600,000 (2008: RM20,600,000) has not yet<br />
been transferred to the Group pending subdivision of the master title.<br />
Impairment test for property, plant and equipment and capitalised development cost<br />
The carrying value of property, plant and equipment of a subsidiary company at balance sheet date is<br />
RM2,458,078,000 (2008: RM2,773,719,000).<br />
The softening of the automotive industry in the second half of the financial year has resulted in a<br />
contraction in sales volume. Arising from this, a subsidiary company undertook a test for impairment of its<br />
property, plant and equipment and capitalised development cost.<br />
The projections used for the impairment assessment of property, plant and equipment and capitalised<br />
development cost reflect the Group’s expectation of the usage, revenue growth, operating costs and<br />
margins for each production plant based on past experience and current assessment of market share,<br />
expectation of market and industry growth. The impairment assessment indicated that the carrying values<br />
of property, plant and equipment and capitalised development cost relating to certain vehicle models<br />
impacted by volume contraction may not be recoverable.<br />
As a result, the following impairment of property, plant and equipment and capitalised development cost<br />
were recognised during the financial year:<br />
226<br />
Group<br />
2009<br />
RM’000<br />
Property, plant and equipment 257,674<br />
Capitalised development cost (Note 16) 20,802<br />
278,476
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)<br />
The property, plant and equipment were allocated to the cash-generating units which are identified<br />
according to production plants and vehicle models. An impairment assessment was performed due to<br />
certain vehicle models being impacted by a contraction in sales volume.<br />
(a) Key assumptions used in the value-in-use calculations<br />
The recoverable amounts are determined based on value-in-use calculations. This value-in-use<br />
calculations apply a discounted cash flow model using cash flow projections covering a five year<br />
period, and assuming a zero growth rate for subsequent periods up to fifteen years. The projections<br />
over these periods were based on an approved business plan and reflect the subsidiary company’s<br />
expectation of usage, revenue growth, operating costs and margins based on past experience and<br />
current assessment of market share, expectations of market growth and industry growth.<br />
The sales volumes for the Malaysian market indicate a reduction from current levels as the Group<br />
does not include future new models for which capital expenditure has not been incurred. However,<br />
the total overall cash flow arising from sales volume indicates a significant increase arising from<br />
growth in sales of completely-knocked-down packs to the export markets.<br />
Based on past trends, cashflows arising from government grants are included in the value-in-use<br />
calculations, estimated based on a percentage of projected investment level.<br />
Terminal values of the production plants in year fifteen are assumed to be derived from the fair<br />
market values by an internal registered valuer arising from the disposal of the land and buildings on<br />
which the three specific plants are located. A discount factor of 6.5% was used to discount the<br />
terminal value which reflects the prevailing borrowing cost for land and buildings.<br />
Terminal values of platforms relating to certain vehicle models incorporate the estimated net<br />
realisable value from the disposal of the model platform.<br />
For purposes of the value-in-use calculation, discount rates of 8% and 16% have been applied<br />
to domestic and export sales respectively. The discount rate of 8% reflects the prevailing independent<br />
market rate applicable to the Group.<br />
(b) Impact of possible changes in key assumptions<br />
The sensitivity test indicated that a plant owned by a subsidiary company may require further<br />
impairment should the projected sales volume drop by 6% over the projection period. No further<br />
impairment loss is required where other realistic variations are applied to key assumptions.<br />
PROTON 2009 ANNUAL REPORT<br />
227
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
14 PREPAID LAND LEASE PAYMENTS<br />
Cost<br />
228<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
At 1 April 24,031 10,989<br />
Currency translation differences (1,347) (1,077)<br />
Acquisition through business combination (Note 17(b)) - 25,108<br />
Disposal - (394)<br />
Reclassification to inventory (Note 23) - (10,595)<br />
Reclassification to non-current assets held for sale (Note 29) (22,684) -<br />
At 31 March - 24,031<br />
Accumulated amortisation<br />
At 1 April - 1,045<br />
Amortisation - 89<br />
Disposal - (80)<br />
Reclassification to inventory (Note 23) - (1,054)<br />
At 31 March - -<br />
Net book value<br />
At 31 March - 24,031
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
15 GOODWILL<br />
Impairment test for goodwill<br />
2009<br />
Group<br />
2008<br />
RM’000 RM’000<br />
At 1 April 35,749 29,008<br />
Acquisition through business combination (Note 17(b)) - 6,741<br />
35,749 35,749<br />
Less: Accumulated impairment loss (6,741) (6,741)<br />
At 31 March 29,008 29,008<br />
The Group undertook an annual test for impairment of goodwill. The carrying amount of goodwill is<br />
allocated to the cash-generating unit that the goodwill relates to, i.e. distribution business in Malaysia.<br />
The recoverable amount of the cash-generating unit including goodwill in this test is determined based<br />
on the value-in-use calculation. This value-in-use calculation applies a discounted cash flow model using<br />
cash flow projections covering a five-year period for the distribution business in Malaysia. The projections<br />
reflect the Group’s expectations of revenue growth, operating costs and margins based on past experience<br />
and current assessment of market share, expectations of market growth and industry growth.<br />
For purposes of the value-in-use calculation, a discount rate of 8% has been applied. The discount rate<br />
reflects the prevailing independent market rate applicable to the Group in Malaysia.<br />
The sales volumes used in the projections indicate an increase from current levels through the introduction<br />
of a new model in a segment for which the Group is not currently in and where capital expenditure has<br />
been incurred to date, over the projection periods. However, the projected sales volume does not include<br />
future new models for which capital expenditure has not been incurred. A nil terminal value has been<br />
assumed.<br />
Sensitivity analysis shows that no impairment loss is required for the carrying amount of goodwill, including<br />
where realistic variations are applied to key assumptions.<br />
PROTON 2009 ANNUAL REPORT<br />
229
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
16 INTANGIBLE ASSETS<br />
Capitalised<br />
development Computer<br />
cost software Total<br />
Group RM’000 RM’000 RM’000<br />
2009<br />
Cost<br />
At 1 April 2008 275,804 65,133 340,937<br />
Currency translation differences (14,144) - (14,144)<br />
Additions 231,468 6,164 237,632<br />
Written off - (16) (16)<br />
Disposal - (16) (16)<br />
At 31 March 2009 493,128 71,265 564,393<br />
Amortisation<br />
At 1 April 2008 27,739 38,006 65,745<br />
Currency translation differences (2,283) - (2,283)<br />
Charge for the financial year 33,945 14,548 48,493<br />
Written off - (16) (16)<br />
Disposal - (16) (16)<br />
At 31 March 2009 59,401 52,522 111,923<br />
Accumulated impairment loss<br />
At 1 April 2008 - - -<br />
Charge for the financial year (Note 13) 20,802 - 20,802<br />
At 31 March 2009 20,802 - 20,802<br />
Net book value<br />
At 31 March 2009 412,925 18,743 431,668<br />
2008<br />
Cost<br />
At 1 April 2007 142,975 57,797 200,772<br />
Currency translation differences (730) (180) (910)<br />
Additions 133,559 7,658 141,217<br />
Written off - (142) (142)<br />
At 31 March 2008 275,804 65,133 340,937<br />
Amortisation<br />
At 1 April 2007 11,611 20,086 31,697<br />
Currency translation differences (593) (34) (627)<br />
Charge for the financial year 16,721 18,096 34,817<br />
Written off - (142) (142)<br />
At 31 March 2008 27,739 38,006 65,745<br />
Net book value<br />
At 31 March 2008 248,065 27,127 275,192<br />
The remaining amortisation period for intangible assets ranges from 3 to 7 years.<br />
230
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
17 SUBSIDIARY COMPANIES<br />
Unquoted shares at cost:<br />
Company<br />
2009 2008<br />
RM’000 RM’000<br />
At 1 April 2,036,303 2,036,303<br />
Less: Impairment loss (327,652) (327,652)<br />
At 31 March 1,708,651 1,708,651<br />
The details of the subsidiary companies are as follows:<br />
Country of Group’s<br />
Name Principal activities incorporation effective interest<br />
2009 2008<br />
% %<br />
Perusahaan Otomobil Manufacture, assembly Malaysia 100 100<br />
Nasional Sdn. Bhd.^ and sales of motor vehicles<br />
and related products<br />
Proton Tanjung Malim Assembly of motor vehicles Malaysia 100 100<br />
Sdn. Bhd.^ and related products<br />
Proton Marketing Sdn. Bhd. Investment holding Malaysia 100 100<br />
Lotus Advance Investment holding Malaysia 100 100<br />
Technologies Sdn. Bhd.<br />
Proton Hartanah Sdn. Bhd. Investment holding Malaysia 100 100<br />
Proton Capital Sdn. Bhd. In Members’ Voluntary Malaysia 100 100<br />
Liquidation<br />
Subsidiariy companies of<br />
Perusahaan Otomobil<br />
Nasional Sdn. Bhd.<br />
PT Proton Cikarang Ceased operations Indonesia 100 100<br />
Indonesia<br />
Proton Automobiles Dormant British Virgin Islands 100 100<br />
(China) Ltd. ^<br />
PROTON 2009 ANNUAL REPORT<br />
231
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
17 SUBSIDIARY COMPANIES (CONTINUED)<br />
Country of Group’s<br />
Name Principal activities incorporation effective interest<br />
2009 2008<br />
% %<br />
Subsidiary companies of<br />
Proton Marketing Sdn. Bhd.<br />
Proton Corporation Liquidated during the Malaysia - 100<br />
Sdn. Bhd. ^ financial year<br />
Proton Cars (UK) Ltd.*^ Importation and England 100 100<br />
distribution of motor<br />
vehicles and related<br />
products<br />
Proton Cars Australia Importation and Australia 100 100<br />
Pty. Ltd.*^ distribution of motor<br />
vehicles and related<br />
products<br />
Proton Cars Benelux In Members’ Voluntary Belgium 100 100<br />
NV. SA*^ Liquidation<br />
Lotus Cars Asia Pacific Liquidated during the Malaysia - 100<br />
Sdn. Bhd.^ financial year<br />
Auto Compound and Liquidated during the Malaysia - 100<br />
Distribution Centre financial year<br />
Sdn. Bhd.^<br />
Proton Edar Sdn. Bhd.^ Sales of motor vehicles, Malaysia 100 100<br />
related spare parts<br />
and accessories<br />
Proton Motors (Thailand) Importation and wholesale Thailand 100 100<br />
Co. Ltd.* of motor vehicles and<br />
related products<br />
Subsidiary companies of<br />
Lotus Advance<br />
Technologies Sdn. Bhd.<br />
Proton Engineering Dormant Malaysia 100 100<br />
Research Technology<br />
Sdn. Bhd.^<br />
Lotus Group International Investment holding England 100 100<br />
Ltd.*^<br />
232
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
17 SUBSIDIARY COMPANIES (CONTINUED)<br />
Country of Group’s<br />
Name Principal activities incorporation effective interest<br />
2009 2008<br />
% %<br />
Subsidiary company of<br />
Proton Hartanah Sdn. Bhd.<br />
Proton Properties Property development Malaysia 100 100<br />
Sdn. Bhd.^ and management<br />
Subsidiary companies of<br />
Proton Cars (UK) Ltd.<br />
Smith & Sons Motors Liquidated during the England - 100<br />
Ltd.*^ financial year<br />
Proton Direct Ltd.*^ Liquidated during the England - 100<br />
financial year<br />
Proton Cars Liquidated during the England - 100<br />
(Imports) Ltd.*^ financial year<br />
Proton Cars Direct Liquidated during the England - 100<br />
Limited* financial year<br />
Subsidiary company of<br />
Proton Cars Australia Pty. Ltd.<br />
Lotus Cars Australia Importation and distribution Australia 100 100<br />
Pty. Ltd.*^ of motor vehicles and related<br />
products<br />
Subsidiary companies of<br />
Proton Edar Sdn. Bhd.<br />
Proton Singapore Importation and distribution Singapore 100 100<br />
Pte. Ltd.*^ of motor vehicles and related<br />
products<br />
Proton Edar Resources In Members’ Voluntary Malaysia 100 100<br />
Sdn. Bhd.^ Liquidation<br />
Proton Edar Ventures In Members’ Voluntary Malaysia 100 100<br />
Sdn. Bhd.^ Liquidation<br />
PT Proton Edar Importation and distribution Indonesia 95 95<br />
Indonesia* of motor vehicles and related<br />
products<br />
PROTON 2009 ANNUAL REPORT<br />
233
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
17 SUBSIDIARY COMPANIES (CONTINUED)<br />
Country of Group’s<br />
Name Principal activities incorporation effective interest<br />
2009 2008<br />
% %<br />
Subsidiary company<br />
of Lotus Group<br />
International Ltd.<br />
Group Lotus Plc.*^ Investment holding England 100 100<br />
Subsidiary companies of<br />
Group Lotus Plc.<br />
Lotus Cars Ltd.*^ Manufacture of motor England 100 100<br />
vehicles and engineering<br />
consultancy services<br />
Lotus Body Investment holding England 100 100<br />
Engineering Ltd.*^<br />
Lotus Motorsports Ltd.*^ Dormant England 100 100<br />
Lotus Holdings Inc.*^ Investment holding United States 100 100<br />
of America<br />
Marco Acquisition Liquidated during United States - 100<br />
Corporation*^ the financial year of America<br />
Subsidiary companies of<br />
Lotus Cars Ltd.<br />
Lotus Engineering Ltd.*^ Engineering consultancy England 100 100<br />
services<br />
Lotus Engineering Engineering consultancy People’s Republic 100 100<br />
Co. Ltd. (Shanghai)* services of China<br />
Subsidiary company of<br />
Lotus Body Engineering Ltd.<br />
Lotus Lightweight Investment holding England 100 -<br />
Structures Holdings Ltd.<br />
(formerly known as<br />
Holden Lightweight<br />
Structures Ltd.)*<br />
234
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
17 SUBSIDIARY COMPANIES (CONTINUED)<br />
Country of Group’s<br />
Name Principal activities incorporation effective interest<br />
2009 2008<br />
% %<br />
Subsidiary company of Lotus<br />
Lightweight Structures<br />
Holdings Ltd. (formerly<br />
known as Holden<br />
Lightweight Structures Ltd.)<br />
Lotus Lightweight Manufacture of England 100 -<br />
Structures Ltd. automotive components<br />
(formerly known as Holden<br />
Aluminium Worcester Ltd.)*<br />
Subsidiary company of<br />
Lotus Engineering Ltd.<br />
Lotus Engineering Engineering consultancy Malaysia 100 100<br />
(Malaysia) Sdn. Bhd.^ services<br />
Subsidiary companies of<br />
Lotus Holdings Inc.<br />
Lotus Engineering Inc.*^ Engineering consultancy United States 100 100<br />
services of America<br />
Lotus Cars USA Inc.*^ Sales of motor vehicles United States 100 100<br />
and related spare parts of America<br />
and accessories<br />
* Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and<br />
independent legal entity from PricewaterhouseCoopers, Malaysia<br />
^ Consolidated by merger method of accounting prior to 1 April 2006<br />
PROTON 2009 ANNUAL REPORT<br />
235
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
17 SUBSIDIARY COMPANIES (CONTINUED)<br />
(a) On 15 May 2008, Lotus Body Engineering Ltd., a wholly owned subsidiary company of Lotus Group<br />
International Ltd. which in turn is a wholly owned subsidiary company of the Company acquired<br />
the entire issued and paid up share capital of Lotus Lightweight Structures Holdings Ltd. (formerly<br />
known as Holden Lightweight Structures Ltd.).<br />
236<br />
The effects of the acquisition on the financial results of the Group during the financial year are as<br />
follows:<br />
2009<br />
RM’000<br />
Revenue 46,204<br />
Operating costs (57,957)<br />
Loss before tax (11,753)<br />
Tax expense -<br />
Loss for the financial year (11,753)<br />
The details of net assets acquired and cash flows arising from the acquisition of the subsidiary company<br />
during the financial year are as follows:<br />
Acquiree’s<br />
carrying value Fair value<br />
RM’000 RM’000<br />
Property, plant and equipment (Note 13) 4,995 1,814<br />
Inventories 5,173 5,173<br />
Receivables, deposits and prepayments 7,512 7,512<br />
Deposits, bank and cash balances 4,520 4,520<br />
Payables and other liabilities (14,355) (18,497)<br />
Net assets/ Fair value of net assets acquired 7,845 522<br />
Details of cash flow arising from the acquisition are as follows:<br />
Purchase consideration settled in cash 522<br />
Less: Cash and cash equivalents of subsidiary company acquired (4,520)<br />
Cash inflow to the Group on acquisition of subsidiary company 3,998<br />
Cash inflow to the Group on acquisition of subsidiary company 3,998<br />
Had the acquisition taken effect at the beginning of the financial year, the contributed revenue and loss to the<br />
Group would have been RM55,193,000 and RM13,160,000 respectively.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
17 SUBSIDIARY COMPANIES (CONTINUED)<br />
(b) In the prior year, Perusahaan Otomobil Nasional Sdn. Bhd. (‘PONSB’), a wholly owned subsidiary company of<br />
the Company completed the acquisition of the remaining 49% equity interest in PT Proton Cikarang<br />
Indonesia. As a result, PT Proton Cikarang Indonesia, a jointly controlled entity, became a wholly owned<br />
subsidiary company of PONSB.<br />
RM’000<br />
Purchase consideration:<br />
- cash consideration 33,750<br />
- settlement of amount due from Tracoma Holdings Berhad 1,356<br />
The acquired business contributed revenue of RM849,000 and loss of RM2,795,000 to the Group for<br />
the period from 10 August 2007 to 31 March 2008. Had the acquisition taken effect at the beginning<br />
of the financial year, the contributed revenue and loss to the Group would have been RM1,100,000 and<br />
RM5,297,000 respectively.<br />
PROTON 2009 ANNUAL REPORT<br />
35,106<br />
Fair value of net assets acquired (28,365)<br />
Goodwill (Note 15) 6,741<br />
Acquiree’s<br />
carrying value Fair value<br />
RM’000 RM’000<br />
Property, plant and equipment (Note 13) 41,951 40,389<br />
Prepaid land lease payment (Note 14) 16,476 25,108<br />
Receivables, deposits and prepayments 3,045 4,356<br />
Deposits, bank and cash balances 1,134 1,134<br />
Payables and other liabilities (9,348) (11,096)<br />
Deferred tax (Note 22) - (2,439)<br />
Net assets acquired 53,258 57,452<br />
Less: Amount previously accounted for as a jointly controlled entity (29,087)<br />
Fair value of net assets acquired 28,365<br />
Details of cash flow arising from the acquisition are as follows:<br />
Purchase consideration settled in cash 33,750<br />
Less: Cash and cash equivalents of subsidiary company acquired (1,134)<br />
Cash outflow of the Group on acquisition of subsidiary company 32,616<br />
237
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
18 ASSOCIATED COMPANIES<br />
Unquoted shares at cost 59,252 59,252 13,600 13,600<br />
Share of post-acquisition reserves 131,993 132,391 - -<br />
The Group’s share of the assets, liabilities, revenue and expenses of the associated companies are as follows:<br />
238<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
191,245 191,643 13,600 13,600<br />
Less: Impairment loss (32,878) (26,200) - -<br />
158,367 165,443 13,600 13,600<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Non-current assets 112,703 81,652<br />
Current assets 161,000 204,383<br />
Current liabilities (105,804) (110,902)<br />
Non-current liabilities (9,532) (9,690)<br />
Net assets 158,367 165,443<br />
Revenue 236,058 260,507<br />
Expenses (excluding tax) (222,351) (245,202)<br />
Profit before taxation 13,707 15,305<br />
Taxation 6,513 (2,171)<br />
Profit for the financial year 20,220 13,134
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
18 ASSOCIATED COMPANIES (CONTINUED)<br />
The details of the associated companies are as follows:<br />
Country of Group’s<br />
Name Principal activities incorporation effective interest<br />
2009 2008<br />
% %<br />
PHN Industry Sdn. Bhd. Manufacture and sales of Malaysia 35 35<br />
stamped parts and<br />
sub-assembly of automotive<br />
metal components<br />
Marutech Elastomer Manufacture and production Malaysia 25 25<br />
Industries Sdn. Bhd. of moulded products,<br />
extruded and rubber hoses<br />
for motor vehicles, motorcycle<br />
and other related products<br />
Exedy (Malaysia) Sdn. Bhd. Manufacture and assembly Malaysia 45 45<br />
of manual clutch and<br />
automatic transmission parts<br />
Associated company of<br />
Perusahaan Otomobil<br />
Nasional Sdn. Bhd.<br />
Vina Star Motors Import, assembly and Socialist 25 25<br />
Corporation distribution of motor vehicles Republic of<br />
Vietnam<br />
Associated company of<br />
Proton Hartanah Sdn. Bhd.<br />
Proton City Development Property developer and Malaysia 40 40<br />
Corporation Sdn. Bhd. project management<br />
Associated company<br />
of Proton Cars (UK) Ltd.<br />
Proton Finance Ltd. Provision of dealer and England 49.99 49.99<br />
customer financing<br />
PROTON 2009 ANNUAL REPORT<br />
239
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
18 ASSOCIATED COMPANIES (CONTINUED)<br />
Country of Group’s<br />
Name Principal activities incorporation effective interest<br />
2009 2008<br />
% %<br />
Associated company<br />
of Proton Edar Sdn. Bhd.<br />
Netstar Advance Systems Manufacture, assembly and Malaysia 40 40<br />
Sdn. Bhd. sales of vehicle tracking<br />
devices<br />
Associated company<br />
of Proton Automobile<br />
(China) Ltd.<br />
Goldstar Proton Dormant People’s Republic 49 49<br />
Automobiles Co. Ltd. * of China<br />
Associated company of<br />
Lotus Advance Technology<br />
Sdn. Bhd.<br />
Miyazu (Malaysia) Development, marketing Malaysia 51 51<br />
Sdn. Bhd.** and sale of products and<br />
provision of services relating<br />
to dies, moulds and jigs<br />
* The Group has initiated proceeding to dissolve the associated company via an arbitration process<br />
(Note 43(c)).<br />
** Company in which the Group owns more than 50% and exercises significant influence. However, it does not<br />
have control over its financial and operating policies.<br />
240<br />
The share of capital commitments relating to the associated companies are as follows:<br />
Capital commitments<br />
Capital expenditure for property, plant and equipment<br />
approved but not provided for in the financial<br />
statements:<br />
2009<br />
Group<br />
2008<br />
RM’000 RM’000<br />
Contracted for 233 745<br />
Not contracted for 1,736 8,990
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
19 JOINTLY CONTROLLED ENTITIES<br />
Unquoted shares at cost<br />
At 1 April 2008 136,648 179,303<br />
Reclassified to investment in subsidiary company - (42,655)<br />
Liquidated (1,114) -<br />
At 31 March 2009 135,534 136,648<br />
Accumulated impairment loss<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
At 1 April 2008 1,114 1,114<br />
Liquidated (1,114) -<br />
At 31 March 2009 - 1,114<br />
Share of post-acquisition reserves 60,088 57,213<br />
195,622 192,747<br />
The Group’s share of the assets, liabilities, revenue and expenses of the jointly controlled entities are as<br />
follows:<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Non-current assets 290,168 319,710<br />
Current assets 151,926 153,300<br />
Current liabilities (82,559) (53,198)<br />
Non-current liabilities (163,913) (227,065)<br />
Net assets 195,622 192,747<br />
Revenue 175,673 168,746<br />
Expenses (excluding tax) (156,000) (157,642)<br />
Profit before taxation 19,673 11,104<br />
Taxation (5,079) (3,267)<br />
Profit for the financial year 14,594 7,837<br />
PROTON 2009 ANNUAL REPORT<br />
241
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
19 JOINTLY CONTROLLED ENTITIES (CONTINUED)<br />
The details of the jointly controlled entities are as follows:<br />
Country of Group’s<br />
Name Principal activities incorporation effective interest<br />
2009 2008<br />
% %<br />
Jointly controlled entities of<br />
Proton Marketing Sdn. Bhd.<br />
Proton Parts Centre Trading in motor vehicle Malaysia 55 55<br />
Sdn. Bhd.* components, spare parts<br />
and accessories<br />
Proton Cars (Europe) Ltd. Liquidated during the England - 56<br />
financial year<br />
Jointly controlled entity<br />
of Group Lotus Plc.<br />
Lotus Finance Ltd. Provision of motor England 49.9 49.9<br />
vehicles financing<br />
Jointly controlled entity<br />
of Proton Edar Sdn. Bhd.<br />
Proton Commerce Provision of motor Malaysia 50 50<br />
Sdn. Bhd. vehicles financing<br />
* Company in which the Group owns more than half of the voting powers. However, as the Group only<br />
has joint control over its financial and operating policies, this investment is treated as a jointly<br />
controlled entity.<br />
The share of capital commitments relating to the jointly controlled entities is as follows:<br />
Capital commitments<br />
Capital expenditure for property, plant and equipment<br />
approved but not provided for in the financial<br />
statements:<br />
Not contracted for 1,062 1,288<br />
242<br />
2009<br />
Group<br />
2008<br />
RM’000 RM’000
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
20 AMOUNTS DUE FROM SUBSIDIARY COMPANIES<br />
The amounts due from subsidiary companies are denominated in Ringgit Malaysia, interest free and repayable<br />
on demand.<br />
Advances to a subsidiary company are denominated in Ringgit Malaysia, repayable between 1 to 3 years and<br />
bears interest at 3.5% per annum.<br />
21 INVESTMENTS<br />
Company<br />
Less than More than Less than More than<br />
1 year 1 year Total 1 year 1 year Total<br />
2009 2009 2009 2008 2008 2008<br />
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
Amounts due from subsidiary<br />
companies 58,912 - 58,912 66,219 - 66,219<br />
Advances to a subsidiary company - 177,870 177,870 - - -<br />
Unquoted investments in Malaysia:<br />
58,912 177,870 236,782 66,219 - 66,219<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
At cost 13,347 13,347 8,575 8,575<br />
Allowance for diminution in value (2,950) (2,950) (2,100) (2,100)<br />
10,397 10,397 6,475 6,475<br />
PROTON 2009 ANNUAL REPORT<br />
243
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
22 DEFERRED TAXATION<br />
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax<br />
assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following<br />
amounts, determined after appropriate offsetting, are shown in the balance sheet:<br />
Subject to income tax:<br />
Deferred tax assets 5,727 -<br />
Deferred tax liabilities (12,243) (2,439)<br />
244<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
(6,516) (2,439)<br />
Movement of deferred tax<br />
At start of financial year<br />
Credited/(charged) to income<br />
statement (Note 10)<br />
(2,439) (754)<br />
- property, plant and equipment (8,841) 5,519<br />
- capitalised development cost (43,436) (1,865)<br />
- allowances and provisions 49,624 (8,115)<br />
- others (1,424) 5,215<br />
(4,077) 754<br />
Acquired through business combination (Note 17(b)) - (2,439)<br />
At end of financial year (6,516) (2,439)<br />
Deferred tax assets (before offsetting)<br />
- property, plant and equipment 17 -<br />
- allowances and provisions 86,074 36,450<br />
- others 561 -<br />
86,652 36,450<br />
Offset of deferred tax liabilities (80,925) (36,450)<br />
Deferred tax assets (after offsetting) 5,727 -
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
22 DEFERRED TAXATION (CONTINUED)<br />
Deferred tax liabilities (before offsetting)<br />
- capitalised development cost (78,364) (34,928)<br />
- property, plant and equipment (12,819) (3,961)<br />
- others (1,985) -<br />
(93,168) (38,889)<br />
Offset against deferred tax assets 80,925 36,450<br />
Deferred tax liabilities (after offsetting) (12,243) (2,439)<br />
Temporary differences of which<br />
no deferred tax asset is recognised<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
The tax effect of temporary differences (which have no expiry dates) for which no deferred tax asset is<br />
recognised in the balance sheet are as analysed below:<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Unrecognised tax losses 158,263 174,516<br />
Unabsorbed capital allowances 497,646 413,507<br />
Unrecognised reinvestment allowances 498,341 465,431<br />
Other temporary differences 79,082 34,768<br />
As at 31 March 2009, there are no temporary differences associated with unremitted earnings of subsidiary<br />
companies, associated companies and joint controlled entities for the recognition of deferred tax liabilities<br />
(2008: Nil).<br />
PROTON 2009 ANNUAL REPORT<br />
245
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
23 INVENTORIES<br />
Raw materials:<br />
- completely knocked-down packs of vehicles 244,888 193,514<br />
- others 164,115 89,290<br />
Parts, accessories and general stores 68,862 73,995<br />
Work-in-progress 219,188 188,779<br />
Finished vehicles 640,945 511,065<br />
Goods-in-transit 35,723 21,520<br />
Land held for development 9,552 9,541<br />
Properties for sale 11,808 12,582<br />
24 TRADE AND OTHER RECEIVABLES<br />
246<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
1,395,081 1,100,286<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
Trade receivables 611,944 707,039 - -<br />
Allowance for doubtful debts (51,583) (19,277) - -<br />
560,361 687,762 - -<br />
Other receivables 125,820 213,099 145 14<br />
Allowance for doubtful debts (22,954) (77,122) - -<br />
102,866 135,977 145 14<br />
Government grant receivable 80,656 - - -<br />
Warranty claims reimbursable (Note 34) 111,451 112,258 - -<br />
Prepayments 20,368 18,316 - -<br />
Deposits 14,393 15,031 - -<br />
890,095 969,344 145 14
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
24 TRADE AND OTHER RECEIVABLES (CONTINUED)<br />
The currency exposure profile of trade and other receivables are as follows:<br />
Group<br />
Functional currency<br />
Ringgit Pound US<br />
Currency exposure profile as at 31.3.2009<br />
Malaysia Sterling Dollar Euro Others Total<br />
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
Ringgit Malaysia 530,497 31,764 78,307 21,985 51,611 714,164<br />
Pound Sterling - 37,178 82,823 15,503 2,410 137,914<br />
Others - - - 198 37,819 38,017<br />
Company<br />
Functional currency<br />
530,497 68,942 161,130 37,686 91,840 890,095<br />
Ringgit Malaysia 145 - - - - 145<br />
Group<br />
Functional currency<br />
Ringgit Pound US<br />
Currency exposure profile as at 31.3.2008<br />
Malaysia Sterling Dollar Euro Others Total<br />
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
Ringgit Malaysia 625,197 24,660 63,254 34,508 92,134 839,753<br />
Pound Sterling - 46,943 46,864 18,382 6,916 119,105<br />
Others - - - 207 10,279 10,486<br />
Company<br />
Functional currency<br />
625,197 71,603 110,118 53,097 109,329 969,344<br />
Ringgit Malaysia 14 - - - - 14<br />
PROTON 2009 ANNUAL REPORT<br />
247
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
24 TRADE AND OTHER RECEIVABLES (CONTINUED)<br />
Credit terms of trade receivables for the Group ranges from 14 to 360 days (2008: 14 to 360 days). However, the<br />
majority of the Group’s trade receivables have a credit term between 14 to 90 days (2008: 14 to 90 days).<br />
Group sales are concentrated in Malaysia with one major third party customer in Malaysia making up 27.5%<br />
(2008: 25%) of total Group revenue.<br />
The Group has no significant concentrations of credit risk except for an amount of RM81,138,000 (2008:<br />
RM205,057,000) due from a single customer. The Directors are of the view that the credit risk is minimal in view<br />
of the stability and historical settlement of the receivables from this customer.<br />
25 AMOUNTS DUE FROM ASSOCIATED COMPANIES<br />
The amounts due from associated companies arose from normal trade transactions. These amounts have credit<br />
terms ranging from 30 to 60 days (2008: 30 to 60 days).<br />
The currency exposure profile of amounts due from associated companies are as follows:<br />
Group<br />
Functional currency<br />
248<br />
Currency exposure profile as at 31.3.2009<br />
Ringgit Pound<br />
Malaysia Sterling Total<br />
RM’000 RM’000 RM’000<br />
Ringgit Malaysia 18,219 16 18,235<br />
Pound Sterling - 49 49<br />
Group<br />
Functional currency<br />
18,219 65 18,284<br />
Currency exposure profile as at 31.3.2008<br />
Ringgit Pound<br />
Malaysia Sterling Total<br />
RM’000 RM’000 RM’000<br />
Ringgit Malaysia 9,645 - 9,645<br />
Pound Sterling - 1,068 1,068<br />
9,645 1,068 10,713
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
26 AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES<br />
The amounts due from jointly controlled entities arose from normal trade transactions. These amounts have<br />
credit terms ranging from 30 to 45 days (2008: 30 to 45 days).<br />
The currency exposure profile of amounts due from jointly controlled entities are as follows:<br />
Group<br />
Functional currency<br />
Currency exposure profile as at 31.3.2009<br />
Ringgit Pound<br />
Malaysia Sterling Total<br />
RM’000 RM’000 RM’000<br />
Ringgit Malaysia 8,894 16 8,910<br />
Pound Sterling - 2,443 2,443<br />
Group<br />
Functional currency<br />
8,894 2,459 11,353<br />
Currency exposure profile as at 31.3.2008<br />
Ringgit Pound<br />
Malaysia Sterling Total<br />
RM’000 RM’000 RM’000<br />
Ringgit Malaysia 4,430 - 4,430<br />
PROTON 2009 ANNUAL REPORT<br />
249
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
27 CURRENT INVESTMENTS<br />
Lower of cost and market value:<br />
Commercial papers and corporate debt<br />
28 DEPOSITS, BANK AND CASH BALANCES<br />
250<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
- quoted investments in Malaysia 584 526<br />
- unquoted investments in Malaysia 14,729 20,296<br />
15,313 20,822<br />
Market value of quoted investments:<br />
Commercial papers and corporate debt 724 806<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
Short term funds deposited with<br />
licensed banks 717,221 1,062,834 208,955 25,920<br />
Bank and cash balances 196,629 163,176 468 376<br />
The maturity profile of short term funds<br />
are as follows:<br />
913,850 1,226,010 209,423 26,296<br />
0 - 1 month 486,044 279,583 51,159 19,800<br />
2 - 3 months 224,784 773,899 157,796 6,120<br />
4 - 6 months - 1,800 - -<br />
6 - 12 months 6,393 7,552 - -<br />
717,221 1,062,834 208,955 25,920
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
28 DEPOSITS, BANK AND CASH BALANCES (CONTINUED)<br />
Bank balances are deposits held at call with banks.<br />
Group<br />
Functional currency<br />
Ringgit Pound US<br />
Currency exposure profile as at 31.3.2009<br />
Malaysia Sterling Dollar Euro Others Total<br />
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
Ringgit Malaysia 717,899 4,978 23,536 5,194 21,079 772,686<br />
Pound Sterling - 67,549 16,305 10,165 5,554 99,573<br />
Australian Dollar - - - - 15,012 15,012<br />
Others - - - 1,086 25,493 26,579<br />
Group<br />
Functional currency<br />
717,899 72,527 39,841 16,445 67,138 913,850<br />
Ringgit Pound US<br />
Currency exposure profile as at 31.3.2008<br />
Malaysia Sterling Dollar Euro Others Total<br />
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
Ringgit Malaysia 1,107,976 2,501 2,726 4,960 7,354 1,125,517<br />
Pound Sterling - 33,496 19,243 5,454 2,713 60,906<br />
Australian Dollar - - - - 38,451 38,451<br />
Others - - - 1,136 - 1,136<br />
1,107,976 35,997 21,969 11,550 48,518 1,226,010<br />
Deposits, bank and cash balances in the Company as at 31 March 2009 and 2008 are denominated in Ringgit<br />
Malaysia.<br />
The weighted average effective interest rates of deposits at the balance sheet date were 2.59% (2008: 3.52%)<br />
per annum for the Group and 1.90% (2008: 3.20%) per annum for the Company.<br />
The Group has unutilised banking facilities amounting to RM623.7 million (2008: RM783.0 million) as at<br />
31 March 2009.<br />
PROTON 2009 ANNUAL REPORT<br />
251
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
29 NON-CURRENT ASSETS HELD FOR SALE<br />
Non-current assets classified as held for sale:<br />
- property, plant and equipment (Note 13) 13,728 -<br />
- prepaid land lease payments (Note 14) 22,684 -<br />
30 SHARE CAPITAL<br />
252<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
36,412 -<br />
Group and Company<br />
2009 2008<br />
RM’000 RM’000<br />
Authorised:<br />
Ordinary shares of RM1.00 each<br />
At start/end of financial year 1,000,000 1,000,000<br />
Issued and fully paid:<br />
Ordinary shares of RM1.00 each<br />
At start/end of financial year 549,213 549,213
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
31 RESERVES<br />
(a) Retained earnings<br />
Under the single-tier tax system which came into effect from the year of assessment 2008, companies are<br />
not required to have tax credits under Section 108 of the Income Tax Act, 1967 for dividend payment<br />
purposes. Dividends paid under this system are tax exempt in the hands of shareholders.<br />
Companies with Section 108 credits as at 31 December 2007 may continue to pay franked dividends until<br />
the Section 108 credits are exhausted or 31 December 2013 whichever is earlier unless they opt to disregard<br />
the Section 108 credits to pay single-tier dividends under the special transitional provisions of the Finance<br />
Act, 2007.<br />
As at 31 March 2009, the Company has sufficient Section 108 tax credits to frank approximately RM1,377.0<br />
million (2008: RM1,325.8 million) of its retained earnings as at 31 March 2009 if paid out as dividends.<br />
In addition, the Company has tax exempt income as at 31 March 2009 amounting to approximately RM324.8<br />
million (2008: RM321.5 million) available for distribution of tax exempt dividends to its shareholders.<br />
(b) Capital reserve<br />
The capital reserve arose as a result of a Group reorganisation exercise whereby all existing shareholders<br />
of Perusahaan Otomobil Nasional Sdn. Bhd. (‘PONSB’) exchanged all their ordinary shares of RM1.00 each<br />
comprising 549,213,000 ordinary shares in PONSB for 549,213,000 new ordinary shares of RM1.00 each in the<br />
Company in a one-for-one share exchange on 5 April 2004. Following the share for share exchange,<br />
the Company has no share premium. Accordingly, the amount of share premium previously recognised on<br />
consolidation has been re-designated as capital reserve.<br />
(c) Asset revaluation reserve<br />
The asset revaluation reserve arose as a result of a fair value adjustment of the 51% equity interest<br />
previously held in PT Proton Cikarang Indonesia as a jointly controlled entity upon the acquisition of the<br />
remaining 49% equity interest on 10 August 2007.<br />
PROTON 2009 ANNUAL REPORT<br />
253
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES<br />
Unsecured:<br />
Long term loan (Note 32(a)) 47,879 47,879<br />
Portion repayable within twelve months (Note 38) (47,879) -<br />
254<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
- 47,879<br />
Secured:<br />
Long term loan (Note 32(b)) 67,893 83,005<br />
Portion repayable within twelve months (Note 38) (15,668) -<br />
52,225 83,005<br />
Lease and hire purchase creditors (Note 32(c)) 3,395 5,124<br />
Less: Portion repayable within twelve months (Note 33) (858) (973)<br />
2,537 4,151<br />
Automotive Development Fund (Note 32(d)) 21,686 45,343<br />
Employee retirement benefits (Note 32(e)) 25,068 50,095<br />
The currency exposure profile of the long term liabilities is as follows:<br />
Group<br />
Functional currency<br />
101,516 230,473<br />
Currency exposure profile as at 31.3.2009<br />
Ringgit Pound<br />
Malaysia Sterling Total<br />
RM’000 RM’000 RM’000<br />
Ringgit Malaysia 21,686 - 21,686<br />
Pound Sterling - 79,830 79,830<br />
21,686 79,830 101,516
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES (CONTINUED)<br />
Group<br />
Functional currency<br />
The long term loan is repayable as follows:<br />
Currency exposure profile as at 31.3.2008<br />
Ringgit Pound<br />
Malaysia Sterling Total<br />
RM’000 RM’000 RM’000<br />
Ringgit Malaysia 93,221 - 93,221<br />
Pound Sterling - 137,252 137,252<br />
(a) Long term loan - unsecured<br />
93,221 137,252 230,473<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Within one year 47,879 -<br />
Between one and two years - 47,879<br />
47,879 47,879<br />
The loan balance of RM47.9 million (2008: RM47.9 million) which is due on 30 September 2009, is interest<br />
free and denominated in Ringgit Malaysia.<br />
PROTON 2009 ANNUAL REPORT<br />
255
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES (CONTINUED)<br />
(b) Long term loan - secured<br />
256<br />
The long term loan is repayable as follows:<br />
Within one year 15,668 -<br />
Between one and two years 20,890 44,695<br />
More than two years 31,335 38,310<br />
The lease and hire purchase creditors are repayable as follows:<br />
67,893 83,005<br />
Within one year 1,084 1,325<br />
Between one and two years 1,084 1,325<br />
Between two and five years 1,714 3,421<br />
3,882 6,071<br />
Less: Future finance charges (487) (947)<br />
Present value of lease and hire purchase creditors 3,395 5,124<br />
Current (Note 33) 858 973<br />
Non-current 2,537 4,151<br />
Present value of lease and hire purchase creditors 3,395 5,124<br />
The lease and hire purchase creditors bears an interest rate of 7.5% (2008: 7.5%) per annum.<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
The long term loan is secured over a subsidiary company’s fixed and floating assets as disclosed in Note 13<br />
and bears an interest rate of 7.32% (2008: 8.44%) per annum.<br />
(c) Lease and hire purchase creditors - secured<br />
The lease and hire purchase arrangements obtained by subsidiary companies are secured against the related<br />
assets of the respective subsidiary companies.<br />
Group<br />
2009 2008<br />
RM’000 RM’000
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES (CONTINUED)<br />
(d) Automotive Development Fund<br />
The Government of Malaysia approved the setting up of an Automotive Development Fund (‘ADF’) under<br />
the Ninth Malaysia Plan with the objective of modernising and automating the manufacturing processes,<br />
improving efficiency, productivity, quality and the application of automation for the Malaysian automotive<br />
industry.<br />
The Government of Malaysia had as at 31 March 2008, disbursed a total of RM50 million to the Group to be<br />
utilised for payments to external parties for the purpose of developing and promoting a competitive and<br />
viable domestic automotive sector as a mean to achieve the objective of the ADF.<br />
The ADF comprises:<br />
(i) ADF liabilities 14,467 45,343<br />
(ii) Capital grant 9,403 -<br />
23,870 45,343<br />
Less: Current portion of capital grant (2,184) -<br />
Non-current 21,686 45,343<br />
(i) ADF liabilities<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
At 1 April 45,343 50,201<br />
Interest earned during the financial year 681 1,402<br />
46,024 51,603<br />
Less: Utilised during the financial year (31,557) (6,260)<br />
At 31 March (Note 44) 14,467 45,343<br />
PROTON 2009 ANNUAL REPORT<br />
257
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES (CONTINUED)<br />
(d) Automotive Development Fund (continued)<br />
258<br />
(ii) Capital grant<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
At 1 April - -<br />
Add: Received during the financial year 31,049 -<br />
Less: Amortisation (21,646) -<br />
At 31 March 9,403 -<br />
Current 2,184 -<br />
Non-current 7,219 -<br />
The current portion of the capital grant is presented within other payables (Note 33).<br />
(e) Employee retirement benefits<br />
The employee retirement benefits represents the scheme operated by a subsidiary company.<br />
(i) Defined contribution plan<br />
9,403 -<br />
The Group pays contributions to publicly or privately administered pension plans on either a<br />
mandatory, contractual or voluntary basis depending on the nature of the defined contribution<br />
plans. The Group has no further payment obligations once the contributions have been paid. The<br />
contributions are recognised as employee benefit expense when they are due. Prepaid contributions<br />
are recognised as an asset to the extent that a cash refund or reduction in the future payments is<br />
available.<br />
(ii) Defined benefit plan<br />
Lotus Group Scheme - defined benefit scheme<br />
Lotus Group International Ltd. and its subsidiary companies (‘Lotus Group’), operate a defined benefit<br />
pension scheme, the Lotus Pension Plan. The assets are held in separate trustee administered funds. In<br />
addition, it provides life assurance cover for all employees.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES (CONTINUED)<br />
(e) Employee retirement benefits (continued)<br />
(ii) Defined benefit plan (continued)<br />
Contributions to the scheme are charged to the income statement so as to spread the cost of pensions<br />
over employees’ working lives with the Lotus Group. The contributions are determined by a qualified<br />
actuary. An actuarial update of the plan was carried out for the period from 1 April 2008 to 31 March<br />
2009.<br />
The movements during the financial year in the Consolidated Balance Sheet are as follows:<br />
At 1 April 50,095 49,842<br />
Currency translation differences (7,616) (3,208)<br />
(Credited)/charged to income statement (Note 8) (8,042) 14,616<br />
Contributions paid (9,369) (11,155)<br />
At 31 March 25,068 50,095<br />
The amounts recognised in the Consolidated Balance Sheet are analysed as follows:<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Present value of obligation 234,156 316,128<br />
Fair value of plan assets (224,494) (341,917)<br />
Shortfall/(excess) of funded plan 9,662 (25,789)<br />
Unrecognised actuarial gain 15,406 75,884<br />
Liability on balance sheet 25,068 50,095<br />
PROTON 2009 ANNUAL REPORT<br />
259
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES (CONTINUED)<br />
(e) Employee retirement benefits (continued)<br />
260<br />
(ii) Defined benefit plan (continued)<br />
The movements in the defined benefit obligation during the financial year are as follows:<br />
At 1 April 316,128 392,068<br />
Currency translation differences (55,588) (20,000)<br />
Interest cost 18,926 21,066<br />
Current service cost 4,266 4,768<br />
Employee contributions 3,817 4,509<br />
Benefits paid (11,495) (9,941)<br />
Actuarial gain on obligation (41,898) (76,342)<br />
At 31 March 234,156 316,128<br />
The movements in the fair value of plan assets during the financial year are as follows:<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
At 1 April 341,917 369,469<br />
Currency translation differences (55,571) (20,766)<br />
Expected return on plan assets 21,162 26,219<br />
Employer contributions 9,369 11,155<br />
Employee contributions 3,817 4,509<br />
Benefits paid (11,495) (9,941)<br />
Actuarial loss on plan assets (84,705) (38,728)<br />
At 31 March 224,494 341,917
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES (CONTINUED)<br />
(e) Employee retirement benefits (continued)<br />
(ii) Defined benefit plan (continued)<br />
The mortality assumptions used were as follows:<br />
Longevity at age 65 for current pensioners:<br />
- Male 84.9 84.7<br />
- Female 87.9 87.8<br />
Longevity at age 65 for future pensioners:<br />
- Male 86.1 86.0<br />
- Female 89.1 89.0<br />
The expenses recognised in the Consolidated Income Statements are analysed as follows:<br />
Current service cost 4,266 4,768<br />
Interest cost 18,926 21,066<br />
Expected return on plan assets (21,162) (26,219)<br />
Net actuarial gain recognised in financial year (10,072) -<br />
Amortisation of transitional liability - 15,001<br />
Total, included in staff costs within<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
administrative expenses (Note 8) (8,042) 14,616<br />
Actual return on plan assets (63,543) (12,509)<br />
PROTON 2009 ANNUAL REPORT<br />
261
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
32 LONG TERM LIABILITIES (CONTINUED)<br />
(e) Employee retirement benefits (continued)<br />
262<br />
(ii) Defined benefit plan (continued)<br />
The principal actuarial assumptions used in respect of the Group’s defined benefit plan were as follows:<br />
Discount rates 6.90 6.60<br />
Expected return on plan assets<br />
Group<br />
2009 2008<br />
% %<br />
- equity 7.25 7.25<br />
- bonds 4.50 4.50<br />
- others 4.50 4.50<br />
Expected rate of salary increase 4.00 4.40<br />
Expected rate of pension payment increase 3.00 3.30<br />
Inflation 3.00 3.40<br />
The expected return on the average value of the assets over the period is calculated using the long-term<br />
average rate of return expected over the remaining term of the Lotus Pension Plan’s liabilities.<br />
33 TRADE AND OTHER PAYABLES<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
Trade payables 287,158 313,546 - -<br />
Other payables 95,597 126,189 482 575<br />
Accruals 817,796 738,601 - -<br />
Payments received in advance for<br />
engineering contracts<br />
Lease and hire purchase creditors<br />
76,249 56,211 - -<br />
- current portion (Note 32) 858 973 - -<br />
1,277,658 1,235,520 482 575
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
33 TRADE AND OTHER PAYABLES (CONTINUED)<br />
The currency exposure profile of trade and other payables are as follows:<br />
Group<br />
Functional currency<br />
Ringgit Pound US<br />
Currency exposure profile as at 31.3.2009<br />
Malaysia Sterling Dollar Euro Others Total<br />
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
Ringgit Malaysia 959,908 523 39,428 7,080 30,821 1,037,760<br />
Pound Sterling - 127,742 80,028 22,584 1,599 231,953<br />
Others - - - 203 7,742 7,945<br />
Company<br />
Functional currency<br />
959,908 128,265 119,456 29,867 40,162 1,277,658<br />
Ringgit Malaysia 482 - - - - 482<br />
Group<br />
Functional currency<br />
Ringgit Pound US<br />
Currency exposure profile as at 31.3.2008<br />
Malaysia Sterling Dollar Euro Others Total<br />
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000<br />
Ringgit Malaysia 924,780 1,897 48,680 12,762 47,403 1,035,522<br />
Pound Sterling - 131,948 42,092 21,357 779 196,176<br />
Others - - - - 3,822 3,822<br />
Company<br />
Functional currency<br />
924,780 133,845 90,772 34,119 52,004 1,235,520<br />
Ringgit Malaysia 575 - - - - 575<br />
Terms of trade payables granted to the Group and Company varies between no credit to 60 days (2008: no credit<br />
to 60 days) credit.<br />
PROTON 2009 ANNUAL REPORT<br />
263
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
34 PROVISIONS<br />
2009<br />
264<br />
Provision Onerous<br />
Group<br />
for warranty contract Total<br />
RM’000 RM’000 RM’000<br />
At 1 April 186,556 - 186,556<br />
Currency translation differences (4,862) - (4,862)<br />
Charge to income statement (Note 7) 62,862 4,426 67,288<br />
Warranties reimbursable 43,054 - 43,054<br />
Provision for the financial year 105,916 4,426 110,342<br />
Utilised during the financial year (102,257) - (102,257)<br />
At 31 March 185,353 4,426 189,779<br />
2008<br />
Provision Onerous<br />
Group<br />
for warranty contract Total<br />
RM’000 RM’000 RM’000<br />
At 1 April 196,067 - 196,067<br />
Currency translation differences (1,308) - (1,308)<br />
Charged to income statement (Note 7) 45,526 - 45,526<br />
Warranties reimbursable 45,572 - 45,572<br />
Provision for the financial year 91,098 - 91,098<br />
Utilised during the financial year (99,301) - (99,301)<br />
At 31 March 186,556 - 186,556<br />
The Group expects to be reimbursed by suppliers in respect of warranties amounting to RM111,451,000 (2008:<br />
RM112,258,000) as disclosed in Note 24 to the financial statements.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
35 AMOUNTS DUE TO SUBSIDIARY COMPANIES<br />
Amounts due to subsidiary companies were fully repaid during the financial year.<br />
36 AMOUNTS DUE TO ASSOCIATED COMPANIES<br />
Amounts due to associated companies arose from normal trade transactions, are denominated in Ringgit<br />
Malaysia and payable within 30 to 60 days (2008: 30 to 60 days).<br />
37 AMOUNTS DUE TO JOINTLY CONTROLLED ENTITIES<br />
Amounts due to jointly controlled entities arose from normal trade transactions, and are due between 30 to 45<br />
days (2008: 30 to 45 days).<br />
The currency exposure profile of the amounts due to jointly controlled entities is as follows:<br />
Group<br />
Functional currency<br />
Currency exposure profile as at 31.3.2009<br />
Pound US Ringgit<br />
Sterling Dollar Malaysia Total<br />
RM’000 RM’000 RM’000 RM’000<br />
Ringgit Malaysia - - 14,622 14,622<br />
Pound Sterling 307 - - 307<br />
Australian Dollar - 266 - 266<br />
Group<br />
Functional currency<br />
307 266 14,622 15,195<br />
Currency exposure profile as at 31.3.2008<br />
Pound US Ringgit<br />
Sterling Dollar Malaysia Total<br />
RM’000 RM’000 RM’000 RM’000<br />
Ringgit Malaysia - - 16,347 16,347<br />
Pound Sterling 290 - - 290<br />
Australian Dollar - 321 - 321<br />
290 321 16,347 16,958<br />
PROTON 2009 ANNUAL REPORT<br />
265
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
38 SHORT TERM BORROWINGS<br />
266<br />
Effective interest rate<br />
during the financial year Group<br />
2009 2008 2009 2008<br />
% % RM’000 RM’000<br />
Unsecured:<br />
Long term loan<br />
- current portion (Note 32) - - 47,879 -<br />
Bridging loan 5.00 – 6.00 5.00 – 6.00 36,595 31,985<br />
Bankers’ acceptance 2.88 – 4.82 4.20 141,317 964<br />
Revolving credit 3.50 – 6.00 4.00 – 6.00 30,813 38,310<br />
Bank overdrafts - 7.51 – 7.59 - 6,728<br />
256,604 77,987<br />
Secured:<br />
Long term loan<br />
- current portion (Note 32) 7.32 - 15,668 -<br />
Revolving credit 4.00 – 10.00 7.00 – 10.00 33,767 35,619<br />
The revolving credit is secured over a subsidiary company’s fixed and floating assets.<br />
The currency exposure profile of the short term borrowings is as follows:<br />
Group<br />
Functional currency<br />
49,435 35,619<br />
306,039 113,606<br />
Currency exposure profile as at 31.3.2009<br />
Ringgit Pound<br />
Malaysia Sterling Total<br />
RM’000 RM’000 RM’000<br />
Ringgit Malaysia 189,196 - 189,196<br />
Pound Sterling - 116,843 116,843<br />
189,196 116,843 306,039
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
38 SHORT TERM BORROWINGS (CONTINUED)<br />
Group<br />
Functional currency<br />
39 SEGMENTAL INFORMATION<br />
Currency exposure profile as at 31.3.2008<br />
Ringgit Pound<br />
Malaysia Sterling Total<br />
RM’000 RM’000 RM’000<br />
Ringgit Malaysia 964 - 964<br />
Pound Sterling - 112,642 112,642<br />
964 112,642 113,606<br />
The Group is principally engaged in the automobile industry namely, manufacturing, assembling, trading and<br />
provision of engineering and other services in respect of motor vehicles and related products. Accordingly, no<br />
segmental information is considered necessary for analysis by industry segment.<br />
Inter-segment sales comprise sales of motor vehicles, parts and engineering services to Group companies in<br />
different geographical locations.<br />
Analysis of the Group’s revenue, results and other information by geographical locations are as follows:<br />
Malaysia Other countries Elimination Total<br />
2009 2008 2009 2008 2009 2008 2009 2008<br />
RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million<br />
Revenue<br />
External sales 5,689.6 4,617.4 797.0 1,004.2 - - 6,486.6 5,621.6<br />
Inter-segment sales 121.6 117.4 47.2 30.6 (168.8) (148.0) - -<br />
Total revenue 5,811.2 4,734.8 844.2 1,034.8 (168.8) (148.0) 6,486.6 5,621.6<br />
Results<br />
Segment operating<br />
(loss)/profit (273.0) 163.7 (106.5) (18.4) (3.4) (40.8) (382.9) 104.5<br />
Unallocated income 1.3 4.7<br />
Interest expense (14.4) (17.9)<br />
Interest income 42.0 32.1<br />
Share of net results of<br />
associated companies<br />
and jointly controlled<br />
entities 20.3 14.5 5.3 12.8 9.2 (6.3) 34.8 21.0<br />
Taxation 17.4 40.2<br />
(Loss)/profit after taxation (301.8) 184.6<br />
PROTON 2009 ANNUAL REPORT<br />
267
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
39 SEGMENTAL INFORMATION (CONTINUED)<br />
Other information<br />
Segment assets 5,703.4 6,096.9 820.5 663.5 - - 6,523.9 6,760.4<br />
Unallocated assets 575.0 532.9<br />
Total assets 7,098.9 7,293.3<br />
Segment liabilities 1,287.0 1,324.1 284.3 199.9 - - 1,571.3 1,524.0<br />
Unallocated liabilities 426.1 348.1<br />
Total liabilities 1,997.4 1,872.1<br />
Capital expenditure<br />
Depreciation and<br />
562.4 440.7 138.0 92.5 - - 700.4 533.2<br />
amortisation 473.4 368.7 25.4 48.7 - - 498.8 417.4<br />
Assets written off<br />
Impairment:<br />
- property, plant and<br />
34.2 18.3 4.6 0.2 - - 38.8 18.5<br />
equipment<br />
- capitalised<br />
257.7 - - - - - 257.7 -<br />
development cost<br />
Research and<br />
20.8 - - - - - 20.8 -<br />
development grant<br />
Allowance for<br />
(80.7) (193.8) - - - - (80.7) (193.8)<br />
doubtful debts<br />
Write down/(write back)<br />
45.6 7.7 - - - - 45.6 7.7<br />
of inventories 108.8 (27.2) 6.1 2.1 - - 114.9 (25.1)<br />
268<br />
Malaysia Other countries Elimination Total<br />
2009 2008 2009 2008 2009 2008 2009 2008<br />
RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million<br />
Unallocated income includes dividend from other investments, gain/(loss) on disposal of current investments<br />
and write down/(write back) of provision for diminution in value of current investments. Segment assets consist<br />
primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash, and<br />
excludes investments in associated companies, jointly controlled entities, investments, current investments,<br />
goodwill and taxation. Segment liabilities comprise operating liabilities and exclude items such as taxation,<br />
borrowings and employee retirement benefits.<br />
Capital expenditure mainly comprises additions to property, plant and equipment and intangible assets (Notes<br />
13 and 16 to the financial statements).
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
39 SEGMENTAL INFORMATION (CONTINUED)<br />
Secondary reporting format<br />
The primary reporting format is based on geographical locations of the assets. The industry segmentation is<br />
considered unnecessary as the Group is principally engaged in the automobile industry. Therefore, only sales to<br />
external customers based on the location of the customer are presented below:<br />
Malaysia Other countries Elimination Total<br />
2009 2008 2009 2008 2009 2008 2009 2008<br />
RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million<br />
Revenue<br />
External sales 5,372.3 4,165.4 1,114.3 1,456.2 - - 6,486.6 5,621.6<br />
Inter segment sales 121.6 117.4 47.2 30.6 (168.8) (148.0) - -<br />
Total revenue 5,493.9 4,282.8 1,161.5 1,486.8 (168.8) (148.0) 6,486.6 5,621.6<br />
40 CAPITAL AND OTHER COMMITMENTS<br />
Capital commitments<br />
Capital expenditure for property, plant and equipment<br />
and intangible assets approved by the Board but not provided<br />
for in the financial statements:<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Contracted for 184,745 276,748<br />
Not contracted for 2,421,085 2,017,329<br />
PROTON 2009 ANNUAL REPORT<br />
269
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
41 OPERATING LEASES<br />
As at 31 March 2009, the Group was committed to making the following payments in respect of operating leases<br />
expiring:<br />
2009<br />
270<br />
Office<br />
Land and Plant and equipment<br />
Group<br />
buildings machinery and vehicles Total<br />
RM’000 RM’000 RM’000 RM’000<br />
Within one year 11,414 965 1,254 13,633<br />
Between one and five years 13,896 2,261 1,231 17,388<br />
After five years 1,353 52 - 1,405<br />
2008<br />
26,663 3,278 2,485 32,426<br />
Office<br />
Land and Plant and equipment<br />
Group<br />
buildings machinery and vehicles Total<br />
RM’000 RM’000 RM’000 RM’000<br />
Within one year 12,597 1,164 514 14,275<br />
Between one and five years 14,931 955 659 16,545<br />
27,528 2,119 1,173 30,820
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
42 SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES<br />
In the normal course of business, the Group and Company undertake a variety of transactions at mutually agreed<br />
terms with subsidiary companies, associated companies, jointly controlled entities and other related parties.<br />
The related parties with whom the Group and Company transact with, include the following companies:<br />
Related parties Relationship<br />
Lotus Group International Ltd. Subsidiary company<br />
Miyazu (Malaysia) Sdn. Bhd. Associated company<br />
PHN Industry Sdn. Bhd. Associated company<br />
Marutech Elastomer Industries Sdn. Bhd. Associated company<br />
Exedy (Malaysia) Sdn. Bhd. Associated company<br />
Proton City Development Corporation Sdn. Bhd. Associated company<br />
Netstar Advance Systems Sdn. Bhd. Associated company<br />
Proton Finance Ltd. Associated company<br />
Lotus Finance Ltd. Jointly controlled entity<br />
Proton Parts Centre Sdn. Bhd. Jointly controlled entity<br />
PEPS-JV (M) Sdn. Bhd. Equity investment<br />
Technomeiji Rubber Industries Sdn. Bhd. Equity investment<br />
Aluminium Alloy Industries Sdn. Bhd. Equity investment<br />
Ara Borgstena Sdn. Bhd. Equity investment<br />
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are<br />
other significant related party transactions. The related party transactions described below were carried out on<br />
terms and conditions obtainable in transactions with unrelated parties unless otherwise stated.<br />
(a) Interest income from advances to a subsidiary company<br />
2009<br />
Company<br />
2008<br />
Subsidiary company<br />
RM’000 RM’000<br />
- Lotus Group International Ltd. 5,680 301<br />
(b) Sales of goods and services<br />
2009<br />
Group<br />
2008<br />
RM’000 RM’000<br />
Jointly controlled entities<br />
- Proton Parts Centre Sdn. Bhd. 25,566 17,925<br />
- Lotus Finance Ltd.* 45,988 88,590<br />
Associated company<br />
- Proton Finance Ltd.* 30,787 61,892<br />
* Under the terms of financing agreements, Lotus Finance Ltd. and Proton Finance Ltd. provide financing<br />
services to dealers and customers of the Group to acquire vehicles. Vehicles under financing arrangements<br />
are sold through Lotus Finance Ltd. and Proton Finance Ltd..<br />
PROTON 2009 ANNUAL REPORT<br />
271
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
42 SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES (CONTINUED)<br />
(c) Purchases of goods and services from:<br />
272<br />
Associated companies<br />
- PHN Industry Sdn. Bhd. 123,623 70,338<br />
- Marutech Elastomer Industries Sdn. Bhd. 1,048 1,302<br />
- Exedy (Malaysia) Sdn. Bhd. 8,619 11,089<br />
- Proton City Development Corporation Sdn. Bhd. 34 111<br />
- Netstar Advance Systems Sdn. Bhd. 6,487 14,407<br />
- Miyazu (Malaysia) Sdn. Bhd. 136,524 185,398<br />
Jointly controlled entity<br />
- Proton Parts Centre Sdn. Bhd. 98,179 86,838<br />
Equity investment companies<br />
- PEPS-JV (M) Sdn. Bhd. 191,301 189,054<br />
- Technomeiji Rubber Industries Sdn. Bhd. 3,589 7,410<br />
- Aluminium Alloy Industries Sdn. Bhd. 44,712 17,583<br />
- Ara Borgstena Sdn. Bhd. 30 1,247<br />
(d) Interest expense<br />
Associated company<br />
- Proton Finance Ltd. 694 465<br />
(e) Key management personnel compensation<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Key management is defined as those persons having authority and responsibility for planning, directing and<br />
controlling the activities of the Group, directly or indirectly, including Executive and Non-Executive<br />
directors. The key management compensation disclosed below excludes the Executive and Non-Executive<br />
Directors’ compensation as disclosed in Note 8 to the financial statements:<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Salaries and other short-term employee benefits 10,822 8,054<br />
Defined contribution retirement plan 1,243 811
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
43 CONTINGENT LIABILITIES<br />
(a) In a prior financial year, a supplier had obtained a judgment in default against a subsidiary<br />
company for RM12.2 million after failing to reach a formal agreement. The subsidiary company<br />
had obtained legal opinion that the claims are without basis and action has been taken to set aside<br />
the judgment. The Directors are of the opinion, based on legal advice, that the claims have no merits<br />
and are unlikely to succeed.<br />
(b) A distributor instituted arbitration proceedings against a subsidiary company as a result of the<br />
termination of its distributorship, for which the distributor had claimed USD9.9 million (RM36.2<br />
million) plus general damages and interest. The arbitration award was handed down on 30 October<br />
2006 wherein the distributor’s claim against the subsidiary company was dismissed. The distributor<br />
has filed an action in court to set aside the arbitration award. The subsidiary company has obtained<br />
legal advice that it is probable that such an action will not be successful.<br />
(c) A subsidiary company had issued a notice of termination of an associated company on 11 July 2006<br />
to the subsidiary company’s joint venture partner (‘Respondent’). The subsidiary company’s joint<br />
venture partner is disputing the termination. The amount claimed cannot be quantified due to<br />
the nature of damages being claimed which can only be ascertained from evidence produced during<br />
the arbitration process. According to the Joint Venture Contract (‘JV Contract’), disputes must be<br />
referred to arbitration. The subsidiary company filed the Statement of Case with the Singapore<br />
International Arbitration Centre on 31 January 2008. The Respondent subsequently produced a<br />
Memorandum allegedly signed by the subsidiary company and the Respondent dated the same<br />
date as the JV Contract which allegedly states that the forum for settling of disputes should be the<br />
Chinese courts and not arbitration. The subsidiary company maintains that the Memorandum is<br />
a forgery. The arbitration tribunal has stated that it has jurisdiction to hear the matter challenging<br />
its jurisdiction and this will be by way of a full hearing involving witnesses and evidence.<br />
On 5 May 2009, the subsidiary company had obtained an injunction to stop the Respondent<br />
from continuing proceedings at the Chinese courts and submit itself to arbitration. The arbitration<br />
tribunal has ordered that:<br />
(i) it has jurisdiction to hear and decide the Respondent’s challenge over the arbitration and the<br />
claim that a Chinese court should have jurisdiction over the arbitration and/or the matter raised<br />
is rejected; and<br />
(ii) it has jurisdiction over this arbitration and all matters submitted under the dispute resolution<br />
provision stated in the JV Contract, which includes but is not limited to the subsidiary company’s<br />
claims under the notice of arbitration, and therefore the Respondent’s claim that this arbitration<br />
should be terminated or suspended is rejected.<br />
On 9 June 2009, the arbitration tribunal has further ordered that the Respondent shall pay the<br />
subsidiary company all its legal costs relating to the jurisdiction proceedings, amounting to<br />
Singapore Dollar 424,058 (RM1,020,000).<br />
On 25 June 2009, the subsidiary company’s counsel in China has also entered a conditional<br />
appearance and filed its objection with the Dongguan Court in China.<br />
The arbitration tribunal will now proceed with the substantive hearing to decide on the termination<br />
of the JV Contract.<br />
PROTON 2009 ANNUAL REPORT<br />
273
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
43 CONTINGENT LIABILITIES (CONTINUED)<br />
(d) A vendor has commenced arbitration proceedings against two subsidiary companies. The claim<br />
against one subsidiary company amounts to RM19.3 million and against the other subsidiary<br />
company is for RM14.2 million. Both parties are in the midst of exchanging points of claims and<br />
defences which will be followed by the exchange of documents in support of such claims and<br />
defences. The Directors are of the opinion, based on legal advice, that the claims have no merits and<br />
are unlikely to succeed.<br />
44 CASH AND CASH EQUIVALENTS<br />
Short term funds deposited with<br />
licensed banks 717,221 1,062,834 208,955 25,920<br />
Bank and cash balances 196,629 163,176 468 376<br />
Deposits, bank and cash balances 913,850 1,226,010 209,423 26,296<br />
Bank overdrafts (Note 38)<br />
Bank balance in respect<br />
- (6,728) - -<br />
of ADF (Note 32(d)) (14,467) (45,343) - -<br />
45 FINANCIAL INSTRUMENTS<br />
(a) Financial risk management objectives and policies<br />
274<br />
The Group’s activities are exposed to a variety of financial risks, including foreign currency exchange<br />
risk, interest rate risk, market risk, credit risk, liquidity and cash flow risk. The Group focuses on<br />
the unpredictability of financial markets and seeks to minimise potential adverse effects on the<br />
financial performance of the Group. Financial risk management is carried out through risks reviews,<br />
internal control systems, a comprehensive insurance programme and adherence to Group financial<br />
risk management policies. The Board regularly reviews these risks and approves the treasury policies,<br />
which covers the management of these risks.<br />
The Group uses derivative financial instruments such as foreign exchange contracts and interest<br />
rate instruments to hedge certain exposures. It does not trade in financial instruments.<br />
(i) Foreign currency exchange risk<br />
Group Company<br />
2009 2008 2009 2008<br />
RM’000 RM’000 RM’000 RM’000<br />
899,383 1,173,939 209,423 26,296<br />
The Group is exposed to currency risk as a result of the foreign currency transactions entered<br />
into by the Company and subsidiary companies in currencies other than their functional<br />
currency. The Group enters into forward foreign currency exchange contracts to limit the<br />
exposure on foreign currency receivables and payables, and on cash flows arising from<br />
anticipated transactions denominated in foreign currencies.
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
45 FINANCIAL INSTRUMENTS (CONTINUED)<br />
(a) Financial risk management objectives and policies (continued)<br />
(ii) Interest rate risk<br />
The Group’s income and operating cash flows are not substantially affected by changes in<br />
market interest rates except for interest from bank deposits. Derivative financial instruments<br />
are used, where appropriate, to generate the desired interest rate profile.<br />
(iii) Market risk<br />
The Group does not face significant exposure from the risk from changes in debt and equity<br />
prices.<br />
(iv) Credit risk<br />
The Group seeks to invest cash assets safely and profitably. The Group considers the risk of<br />
material loss in the event of non-performance by a financial institution to be unlikely in view<br />
of the financial strength of those counter-parties.<br />
The Group seeks to control customers credit risk by ensuring that significant sales of vehicles<br />
and provision of services are made to customers with an appropriate credit history.<br />
(v) Liquidity and cash flow risk<br />
Prudent liquidity risk management implies maintaining sufficient cash, the availability of<br />
funding through an adequate amount of committed credit facilities and the ability to close out<br />
market positions.<br />
(b) Forward foreign exchange contracts<br />
Forward foreign exchange contracts are entered into by the Group in currencies other than<br />
the functional currency to manage exposure to fluctuations in foreign currency exchange rates on<br />
specific transactions.<br />
PROTON 2009 ANNUAL REPORT<br />
275
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
45 FINANCIAL INSTRUMENTS (CONTINUED)<br />
(b) Forward foreign exchange contracts (continued)<br />
276<br />
As at 31 March 2009, the outstanding notional principal amounts of the Group foreign exchange<br />
contracts are as follows:<br />
Maturity<br />
Group<br />
2009 2008<br />
RM’000 RM’000<br />
Less than 6 months 38,343 47,793<br />
Between 6 months and 1 year - 8,820<br />
38,343 56,613<br />
The foreign currency amounts to be received and the contractual exchange rates of the Group‘s<br />
outstanding contracts are as follows:<br />
Currency Currency Average<br />
to be to be RM’000 contracted<br />
Hedged item received paid equivalent rate<br />
2009<br />
Group<br />
Forecasted receivables<br />
- the following 6 months JPY RM 1,907 1 RM = JPY 26.705<br />
GBP USD 21,956 1 USD = GBP 1.6567<br />
GBP EURO 14,480 1 EURO = GBP 1.1746<br />
2008<br />
Group<br />
38,343<br />
Forecasted receivables<br />
- the following 6 months GBP USD 47,793 1 USD = GBP 1.9448<br />
- 6 to 12 months GBP USD 8,820 1 USD = GBP 1.9344<br />
56,613
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
45 FINANCIAL INSTRUMENTS (CONTINUED)<br />
(c) Fair values<br />
The carrying amounts of financial assets and liabilities of the Group and Company at the balance<br />
sheet date approximated their fair values except as set out below:<br />
2009<br />
Recognised on the<br />
balance sheet<br />
Amounts due from<br />
subsidiary companies 20 - - 177,870 138,284<br />
Investments - unquoted 21 10,397 17,618 6,475 17,618<br />
Current investments:<br />
- quoted 27 584 724 - -<br />
- unquoted 27 14,729 14,729 - -<br />
Lease and hire purchase<br />
creditor - long term portion 32 (2,537) (2,256) - -<br />
ADF liability 32(d) (14,467) (14,203) - -<br />
Long term loan 32 (52,225) (46,053) - -<br />
Off balance sheet<br />
Forward foreign exchange<br />
Group Company<br />
Carrying Carrying<br />
amount Fair value amount Fair value<br />
Note RM’000 RM’000 RM’000 RM’000<br />
contracts 45(b) 38,343 38,218 - -<br />
PROTON 2009 ANNUAL REPORT<br />
277
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
45 FINANCIAL INSTRUMENTS (CONTINUED)<br />
(c) Fair values (continued)<br />
278<br />
2008<br />
Recognised on the<br />
balance sheet<br />
Investments - unquoted 21 10,397 15,067 6,475 15,067<br />
Current investments:<br />
- quoted 27 526 806 - -<br />
- unquoted 27 20,296 20,296 - -<br />
Advance - Government<br />
loan facility 32 (47,879) (47,879) - -<br />
Lease and hire purchase<br />
creditor - long term portion 32 (4,151) (3,860) - -<br />
ADF liability 32(d) (45,343) (43,683) - -<br />
Long term loan 32 (83,005) (68,647) - -<br />
Off balance sheet<br />
Forward foreign exchange<br />
Group Company<br />
Carrying Carrying<br />
amount Fair value amount Fair value<br />
Note RM’000 RM’000 RM’000 RM’000<br />
contracts 45(b) 56,613 57,078 - -
NOTES TO THE FINANCIAL STATEMENTS - 31 MARCH 2009 (CONTINUED)<br />
46 SUBSEQUENT EVENTS<br />
(a) On 8 May 2009, the Company announced that its wholly owned subsidiary, Proton Edar Sdn. Bhd.<br />
(‘PESB’) had signed a Master Dealership Agreement with Edaran Otomobil Nasional Berhad (‘EON’)<br />
(‘the Agreement’), for the purpose of rationalising the sales and distribution network between<br />
PESB and EON with the objective of improving, developing and strengthening the Distribution and<br />
Service Dealer Network as well as, allowing parties to rationalise and achieve the cost reduction<br />
objectives (‘Proposed Rationalisation’).<br />
Under the terms of the Agreement, PESB agreed to appoint EON as a sales and service dealer for<br />
PESB on a non-exclusive basis pursuant to the terms and conditions of the Agreement and of other<br />
related agreements to be entered in by parties.<br />
The execution of a Sales <strong>Operations</strong> Agreement and a Service <strong>Operations</strong> Agreement shall be<br />
finalised and executed on or before 30 June 2009 or such other extended period to be agreed upon<br />
by parties, failing which the Agreement shall lapse and be of no further effect.<br />
The Company announced on 1 July 2009 that the following agreements have been signed:<br />
(i) Sales <strong>Operations</strong> Agreement<br />
PESB has appointed EON to undertake the promotion and sale of the Company vehicles and<br />
products on a non-exclusive basis within Malaysia for a period of 5 years beginning 1 July<br />
2009, and<br />
(ii) Service <strong>Operations</strong> Agreement<br />
PESB has appointed EON to undertake the service and sales of parts/spare parts to customers<br />
on a non-exclusive basis within Malaysia for a period of 5 years beginning 1 July 2009.<br />
(b) On 29 May 2009, the Liquidator of Proton Capital Sdn. Bhd. (‘Proton Capital’) had convened and<br />
lodged a return relating to final meeting with the Companies Commission of Malaysia and the<br />
Official Receiver. On the expiration of three months from 29 May 2009, Proton Capital will be<br />
dissolved.<br />
47 APPROVAL OF FINANCIAL STATEMENTS<br />
The financial statements have been approved for issue in accordance with a resolution of the Board<br />
of Directors on 22 July 2009.<br />
PROTON 2009 ANNUAL REPORT<br />
279
STATEMENT BY DIRECTORS PURSUANT TO<br />
SECTION 169(15) OF THE COMPANIES ACT, 1965<br />
We, Dato’ Mohd Nadzmi bin Mohd Salleh and Dato’ Syed Zainal Abidin B Syed Mohamed Tahir, two of the<br />
Directors of Proton Holdings Berhad, state that, in the opinion of the Directors, the financial statements<br />
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<br />
Group and Company as at 31 March 2009 and of the results and cash flows of the Group and Company for<br />
the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and<br />
MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities.<br />
Signed on behalf of the Board of Directors in accordance with their resolution dated 22 July 2009.<br />
DATO’ MOHD NADZMI BIN MOHD SALLEH DATO’ SYED ZAINAL ABIDIN B SYED MOHAMED TAHIR<br />
CHAIRMAN MANAGING DIRECTOR<br />
STATUTORY DECLARATION PURSUANT TO<br />
SECTION 169(16) OF THE COMPANIES ACT, 1965<br />
I, Vimala a/p V.R. Menon, the officer primarily responsible for the financial management of Proton Holdings<br />
Berhad, do solemnly and sincerely declare that the financial statements set out on pages 185 to 279 are, in<br />
my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and<br />
by virtue of the provisions of the Statutory Declarations Act, 1960.<br />
VIMALA A/P V.R. MENON<br />
Subscribed and solemnly declared by the abovenamed Vimala a/p V.R. Menon at Shah Alam in Malaysia<br />
on 22 July 2009, before me.<br />
COMMISSIONER FOR OATHS<br />
280
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF<br />
PROTON HOLDINGS BERHAD<br />
(Incorporated in Malaysia) (Company No. 623177-A)<br />
We have audited the financial statements of Proton Holdings Berhad, which comprise the balance sheets<br />
as at 31 March 2009 of the Group and Company, and the income statements, statements of changes in<br />
equity and cash flow statements of the Group and Company for the year then ended, and a summary of<br />
significant accounting policies and other explanatory notes, as set out on pages 185 to 279.<br />
Directors’ Responsibility for the Financial Statements<br />
The Directors of the Company are responsible for the preparation and fair presentation of these financial<br />
statements in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than<br />
Private Entities and the Companies Act, 1965. This responsibility includes: designing, implementing and<br />
maintaining internal control relevant to the preparation and fair presentation of financial statements that<br />
are free from material misstatement, whether due to fraud or error; selecting and applying appropriate<br />
accounting policies; and making accounting estimates that are reasonable in the circumstances.<br />
Auditors’ Responsibility<br />
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted<br />
our audit in accordance with approved standards on auditing in Malaysia. Those standards require that<br />
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance<br />
whether the financial statements are free from material misstatement.<br />
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in<br />
the financial statements. The procedures selected depend on our judgement, including the assessment of<br />
risks of material misstatement of the financial statements, whether due to fraud or error. In making those<br />
risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation<br />
of the financial statements in order to design audit procedures that are appropriate in the circumstances,<br />
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An<br />
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of<br />
accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial<br />
statements.<br />
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for<br />
our audit opinion.<br />
Opinion<br />
In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved<br />
Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965 so<br />
as to give a true and fair view of the financial position of the Group and Company as of 31 March 2009<br />
and of their financial performance and cash flows for the year then ended.<br />
PROTON 2009 ANNUAL REPORT<br />
281
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF<br />
PROTON HOLDINGS BERHAD (CONTINUED)<br />
(Incorporated in Malaysia) (Company No. 623177-A)<br />
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS<br />
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the<br />
following:<br />
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept<br />
by the Company and its subsidiaries of which we have acted as auditors have been properly<br />
kept in accordance with the provisions of the Act.<br />
(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries<br />
of which we have not acted as auditors, which are indicated in Note 17 to the financial statements.<br />
(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated<br />
with the Company’s financial statements are in form and content appropriate and proper for the<br />
purposes of the preparation of the financial statements of the Group and we have received<br />
satisfactory information and explanations required by us for those purposes.<br />
(d) The audit reports on the financial statements of the subsidiaries did not contain any qualification<br />
or any adverse comment made under Section 174(3) of the Act.<br />
OTHER MATTERS<br />
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of<br />
the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any<br />
other person for the content of this report.<br />
PRICEWATERHOUSECOOPERS THAYAPARAN A/L S. SANGARAPILLAI<br />
(No. AF: 1146) (No. 2085/09/10 (J))<br />
Chartered Accountants Chartered Accountant<br />
Kuala Lumpur<br />
22 July 2009<br />
282
SHAREHOLDING STATISTICS AS AT 30 JUNE 2009<br />
Analysis of Shareholdings<br />
Share Capital<br />
Authorised Share Capital Issued and Fully Paid Up Capital RM1,000,000,000/-<br />
Issued and Fully Paid Up Capital RM549,213,002/-<br />
Class of Shares Ordinary Shares of RM1/- each<br />
Voting Rights One (1) Voting Right for one (1) Ordinary Share<br />
Analysis of Shareholdings by Range Groups<br />
Distributions of Shareholdings<br />
Malaysian Malaysian Malaysian Malaysian Foreign Foreign Foreign Foreign<br />
No. of % of No. of % of No. of % of No. of % of<br />
Shareholders/ Shareholders/ Shares Issued Shareholders/ Shareholders/ Shares Issued<br />
Depositors Depositors Held Capital Depositors Depositors Held Capital<br />
Size of Holdings<br />
1 - 99 92 1.0783 1,298 0.0002 3 0.0352 64 0.0000<br />
100 - 1,000 4,148 48.6170 3,852,264 0.7014 47 0.5509 43,800 0.0080<br />
1,001 - 10,000 3,459 40.5415 13,461,946 2.4511 75 0.8790 286,600 0.0522<br />
10,001 - 100,000 525 6.1533 15,586,621 2.8380 53 0.6212 1,902,499 0.3464<br />
100,001 - 27,460,649 84 0.9845 107,117,101 19.5037 43 0.5040 41,802,436 7.6113<br />
27,460,650 and above 2 0.0234 322,037,693 58.6362 1 0.0117 43,120,680 7.8514<br />
Total 8,310 97.3980 462,056,923 84.1307 222 2.6020 87,156,079 15.8693<br />
Substantial Shareholders<br />
No. of No. of No.of % of<br />
Shareholders/ Shareholders/ Shares/ Issued<br />
Depositors Depositors Securities Capital<br />
1 - 99 95 1.1135 1,362 0.0002<br />
100 - 1,000 4,195 49.1678 3,896,064 0.7094<br />
1,001 - 10,000 3,534 41.4205 13,748,546 2.5033<br />
10,001 - 100,000 578 6.7745 17,489,120 3.1844<br />
100,001 - 27,460,649 127 1.4885 148,919,537 27.1151<br />
27,460,650 and above 3 0.0352 365,158,373 66.4876<br />
Total 8,532 100.0000 549,213,002 100.0000<br />
No. CDS Account No Name Normal Holdings<br />
Holdings Percentage<br />
1 087-001-014418354 Khazanah Nasional Berhad 234,734,693 42.7402<br />
2 226-001-004488797 Employees Provident Fund Board 87,303,000 15.8960<br />
3 209-001-044650448 Cartaban Nominees (Tempatan) Sdn Bhd<br />
Petroliam Nasional Berhad (Strategic Inv) 43,120,680 7.8514<br />
PROTON 2009 ANNUAL REPORT<br />
283
SHAREHOLDING STATISTICS AS AT 30 JUNE 2009 (CONTINUED)<br />
Thirty Largest Shareholders<br />
NO. CDS ACCOUNT NO NAME IC/ID NO. NORMAL HOLDINGS<br />
HOLDINGS PERCENTAGE<br />
1 087-001-014418354 KHAZANAH NASIONAL BERHAD 275505K 234,734,693 42.7402<br />
2 226-001-004488797 EMPLOYEES PROVIDENT FUND BOARD EPFACT1991 87,303,000 15.8960<br />
3 209-001-044650448 CARTABAN NOMINEES (TEMPATAN) SDN BHD<br />
PETROLIAM NASIONAL BERHAD (STRATEGIC INV) 263368K 43,120,680 7.8514<br />
4 258-001-037482247 LEMBAGA TABUNG HAJI ACT5351995 16,820,427 3.0626<br />
5 245-001-019638741 AMANAH RAYA NOMINEES (TEMPATAN)<br />
SDN BHD SKIM AMANAH SAHAM BUMIPUTERA 434217U 16,270,400 2.9625<br />
6 201-001-008776270 MAYBAN NOMINEES (TEMPATAN) SDN BHD<br />
MAYBAN TRUSTEES BERHAD FOR PUBLIC<br />
REGULAR SAVINGS FUND (N14011940100 ) 258939H 11,894,400 2.1657<br />
7 206-001-048735070 HSBC NOMINEES (ASING) SDN BHD<br />
EXEMPT AN FOR THE BANK OF<br />
NEW YORK MELLON (MELLON ACCT) 4381U 11,757,710 2.1408<br />
8 257-001-037151271 VALUECAP SDN BHD 595989V 10,150,000 1.8481<br />
9 206-001-037379120 HSBC NOMINEES (ASING) SDN BHD<br />
TNTC FOR BRANDES INSTITUTIONAL EQUITY TRUST 4381U 3,823,100 0.6961<br />
10 207-001-034438135 CITIGROUP NOMINEES (ASING) SDN BHD<br />
CBNY FOR DFA EMERGING MARKETS FUND 263875D 3,581,500 0.6521<br />
11 206-001-043591320 HSBC NOMINEES (ASING) SDN BHD<br />
EXEMPT ANFOR JPMORGAN CHASE BANK,<br />
NATIONAL ASSOCIATION (U.S.A.) 4381U 2,855,375 0.5199<br />
12 201-001-008776213 MAYBAN NOMINEES (TEMPATAN) SDN BHD<br />
MAYBAN TRUSTEES BERHAD FOR PUBLIC<br />
AGGRESSIVE GROWTH FUND (N14011940110) 258939H 2,828,000 0.5149<br />
13 206-001-039929690 HSBC NOMINEES (ASING) SDN BHD<br />
BNY BRUSSELS FOR QUEENSLAND INVESTMENT<br />
CORPORATION 4381U 2,800,000 0.5098<br />
14 222-001-040942609 ALLIANCEGROUP NOMINEES<br />
(TEMPATAN) SDN BHD<br />
ALLIANCE INVESTMENT MANAGEMENT BERHAD<br />
FOR EMPLOYEES PROVIDENT FUND 42234H 2,545,900 0.4636<br />
15 245-001-031302672 AMANAH RAYA NOMINEES<br />
(TEMPATAN) SDN BHD<br />
AMANAH SAHAM MALAYSIA 434217U 2,449,300 0.4460<br />
16 245-001-046775391 AMANAH RAYA NOMINEES<br />
(TEMPATAN) SDN BHD<br />
PUBLIC SECTOR SELECT FUND 434217U 2,349,400 0.4278<br />
284
SHAREHOLDING STATISTICS AS AT 30 JUNE 2009 (CONTINUED)<br />
Thirty Largest Shareholders (continued)<br />
NO. CDS ACCOUNT NO NAME IC/ID NO. NORMAL HOLDINGS<br />
HOLDINGS PERCENTAGE<br />
17 201-001-008776312 MAYBAN NOMINEES (TEMPATAN) SDN BHD<br />
MAYBAN TRUSTEES BERHAD FOR PUBLIC BALANCED<br />
FUND (N14011950210 ) 258939H 2,265,000 0.4124<br />
18 245-001-032020729 AMANAH RAYA NOMINEES<br />
(TEMPATAN) SDN BHD<br />
PUBLIC SMALLCAP FUND 434217U 2,069,700 0.3768<br />
19 076-001-032786725 BANK SIMPANAN NASIONAL BSNACT1461974 1,933,000 0.3520<br />
20 098-001-035241124 BANK SIMPANAN NASIONAL BSNACT1461974 1,889,000 0.3439<br />
21 065-001-042567479 BANK SIMPANAN NASIONAL BSNACT1461974 1,861,600 0.3390<br />
22 086-001-001732320 BANK SIMPANAN NASIONAL BSNACT1461974 1,812,000 0.3299<br />
23 209-001-021330287 CARTABAN NOMINEES (ASING) SDN BHD<br />
GOVERNMENT OF SINGAPORE INVESTMENT<br />
CORPORATION PTE LTD FOR GOVERNMENT<br />
OF SINGAPORE (C) 263367W 1,756,800 0.3199<br />
24 206-001-022024434 HSBC NOMINEES (TEMPATAN) SDN BHD<br />
NOMURA ASSET MGMT MALAYSIA FOR<br />
EMPLOYEES PROVIDENT FUND 258854D 1,695,000 0.3086<br />
25 087-001-002671394 KUMPULAN WANG SIMPANAN PEKERJA ACT425 1,500,000 0.2731<br />
26 206-001-043881986 HSBC NOMINEES (ASING) SDN BHD<br />
EXEMPT AN FOR BGL (OPCVM A/C) 4381U 1,435,775 0.2614<br />
27 206-001-043590827 HSBC NOMINEES (ASING) SDN BHD<br />
EXEMPT AN FOR JPMORGAN CHASE BANK,<br />
NATIONAL ASSOCIATION (AUSTRALIA) 4381U 1,386,600 0.2525<br />
28 206-001-040893414 HSBC NOMINEES (ASING) SDN BHD<br />
TNTC FOR UTAH STATE RETIREMENT SYSTEMS 4381U 1,327,976 0.2418<br />
29 053-001-046800884 KAF TRUSTEE BERHAD KAF FUND<br />
MANAGEMENT SDN BHD FOR KAF SEAGROATT<br />
& CAMPBELL BERHAD 648477U 1,200,000 0.2185<br />
30 245-001-019638832 AMANAH RAYA NOMINEES<br />
(TEMPATAN) SDN BHD<br />
PUBLIC GROWTH FUND 434217U 1,179,000 0.2147<br />
TOTAL 478,595,336 87.14<br />
PROTON 2009 ANNUAL REPORT<br />
285
PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009<br />
Properties Owned by Perusahaan Otomobil Sdn Bhd (PONSB)<br />
Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)<br />
Acquisition Building Building<br />
/Revaluation<br />
No. H.S. (D)71311,<br />
No. P.T.82 Mukim of<br />
Damansara, District<br />
of Petaling, Selangor<br />
Darul Ehsan. (Formerly,<br />
HICOM Industrial Estate<br />
encompassing part of<br />
Lots 563, 564, 568, 570<br />
and Lot 15, Mukim of<br />
Damansara, District of<br />
Petaling, Selangor Darul<br />
Ehsan).<br />
HICOM Industrial Estate<br />
encompassing Lot 572,<br />
Mukim of Damansara,<br />
District of Petaling,<br />
Selangor Darul Ehsan.<br />
No. H.S. (D) 71309,<br />
No. P.T. 80, Mukim of<br />
Damansara, District<br />
of Petaling, Selangor<br />
Darul Ehsan. (Formerly,<br />
HICOM Industrial<br />
Estate encompassing<br />
Lot 568 Grant No.<br />
5941,H.S.(D) 22208 No.<br />
P.T. 5115,H.S.(D) 22207,<br />
No. P.T.5116, Mukim of<br />
Damansara, District of<br />
Petaling, Selangor Darul<br />
Ehsan).<br />
286<br />
Land with an area of<br />
6,231,080 sq. ft. with<br />
main office, main<br />
factory, engine factory,<br />
medium volume factory,<br />
canteen buildings,<br />
sports facilities, car park<br />
for production cars<br />
and additional R&D<br />
laboratories building.<br />
Total built-up area is<br />
2,594,603 sq. ft.<br />
3 units of flats currently<br />
rented out.<br />
Land with an area of<br />
158,107 sq. ft. used as<br />
the car park for staff.<br />
Freehold<br />
Freehold<br />
Freehold<br />
05.09.1983<br />
09.04.1986<br />
19.11.1993<br />
2008 2009 2008 2009<br />
23 Years<br />
23 Years<br />
-<br />
24 Years<br />
24 Years<br />
-<br />
Land<br />
Buildings<br />
Flats<br />
Land<br />
68.4<br />
129.8<br />
0.04<br />
2.6<br />
68.4<br />
113.0<br />
0.04<br />
2.6
PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)<br />
Properties Owned by Perusahaan Otomobil Sdn Bhd (PONSB) (continued)<br />
Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)<br />
Acquisition Building Building<br />
/Revaluation<br />
Geran 215214,<br />
Lot 61821, HICOM<br />
Glenmarie Industrial<br />
Park, Mukim of<br />
Damansara, District of<br />
Petaling, Selangor Darul<br />
Ehsan.<br />
No. H.S. (D) 86554, No.<br />
P.T. 257 encompassing<br />
Lot 54, 60 and 62, Sime<br />
UEP Industrial Park,<br />
Mukim of Damansara,<br />
District of Petaling,<br />
Selangor Darul Ehsan.<br />
No. H.S. (D) B.P.5653 and<br />
5654 Bil P.T. 16162 and<br />
10163, District of Batang<br />
Padang, Mukim of Ulu<br />
Bernam Timur, Perak<br />
Darul Ridzwan.<br />
Land with an area of<br />
1,036,728 sq. ft. with<br />
office, factory and<br />
canteen buildings and<br />
sports facilities used for<br />
the Casting Plant. Total<br />
built-up area is 194,579<br />
sq. ft.<br />
Land with an area of<br />
55,440,519 sq. ft. for the<br />
construction of a second<br />
automobile plant,<br />
administrative building<br />
and sports complex<br />
facilities. Total built-up<br />
area is 3,374,577 sq.ft.<br />
Freehold<br />
Freehold<br />
30.12.1992<br />
Land with an area<br />
of 2,396,727 sq. ft.<br />
adjoining the Company’s<br />
northern boundary<br />
housing the semihigh<br />
speed test track<br />
and control building.<br />
Total built-up area is<br />
2,102,731 sq. ft.<br />
Freehold 18.04.1994<br />
03.02.1999<br />
2008 2009 2008 2009<br />
14 Years<br />
14 Years<br />
5 Years<br />
15 Years<br />
15 Years<br />
6 Years<br />
Land<br />
Buildings<br />
Land<br />
Track &<br />
Buildings<br />
Land<br />
Building<br />
20.5<br />
39.8<br />
54.9<br />
20.3<br />
1.0<br />
454.3<br />
PROTON 2009 ANNUAL REPORT<br />
21.2<br />
36.8<br />
54.9<br />
13.0<br />
1.0<br />
436.1<br />
287
PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)<br />
Properties Owned by Proton Edar Sdn Bhd (PESB)<br />
Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)<br />
Acquisition Building Building<br />
/Revaluation<br />
Vehicle Preparation<br />
Centre (VPC) No H.S.<br />
(D) 86555, PT No. 258<br />
and H.S. (D) 86557,<br />
PT No.260, TP 5 Road,<br />
Sime UEP Industrial<br />
Park, 47600 Subang<br />
Jaya,Selangor Darul<br />
Ehsan.<br />
Lot 859, Block 16<br />
Kuching Central Land<br />
District, Stampin 4 1/2<br />
Mile, Penrissen Road,<br />
Kuching, Sarawak.<br />
H.S. (D) 351587,<br />
PTD 173042, Mukim<br />
Plentong, Daerah Johor<br />
Bahru, Johor.<br />
288<br />
2008 2009 2008 2009<br />
Vehicle Preparation<br />
Centre and stock<br />
control building with<br />
total built-up area of<br />
101,956 sq. ft.<br />
Freehold 01.12.2000 6 Years 7 Years Building 4.5 4.2<br />
Centre of Excellence Land with area of Freehold<br />
(COE) & Pre-Delivery and 465,185 sq. ft. and<br />
Inspection Centre (PDI) Administration &<br />
No H.S. (D) 86596, PT No. Operation Office<br />
299 and H.S. (D) 86597, and Pre-Delivery &<br />
PT No. 300, TP 5 Road, Inspection Centre<br />
Sime UEP Industrial Park, with total built-up<br />
47600 Subang Jaya,<br />
Selangor Darul Ehsan.<br />
area of 422,943 sq. ft.<br />
No. 2, Lrg. Samarinda 3 storey shop units Freehold<br />
6A, Off Jalan Kebun, H.S which approximately<br />
(D) 60042, P.T.No. 64566<br />
Mukim, Klang, Selangor<br />
Darul Ehsan.<br />
2,475.7 sq. ft.<br />
Land with an area of<br />
50,570 sq. ft. to be<br />
used for sales outlet<br />
and service centre.<br />
Land with an area of<br />
87,120 sq. ft. to be<br />
used for sales outlet<br />
and service centre.<br />
Freehold<br />
Freehold<br />
01.03.2001<br />
10.05.2002<br />
29.04.2002<br />
27.11.2007<br />
29.04.2002<br />
7 Years<br />
5 Years<br />
6 Years<br />
-<br />
6 Years<br />
8 Years<br />
6 Years<br />
7 Years<br />
1 Year<br />
7 Years<br />
Land<br />
Building<br />
Building<br />
Land<br />
Building<br />
Land<br />
Building<br />
35.7<br />
127.4<br />
0.6<br />
2.8<br />
-<br />
8.4<br />
6.4<br />
35.7<br />
120.6<br />
0.6<br />
2.8<br />
6.9<br />
8.1<br />
6.1
PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)<br />
Properties Owned by Proton Edar Sdn Bhd (PESB)(continued)<br />
Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)<br />
Acquisition Building Building<br />
/Revaluation<br />
H.S. (D) 63313, P.T.No.<br />
9671 Mukim of<br />
Ampangan, District<br />
of Seremban, Negeri<br />
Sembilan.<br />
H.S. (D) 318392, PTD<br />
81816, Mukim of Pulai,<br />
District of Johor Bahru.<br />
H.S. (M) 212, PT 4352,<br />
Mukim Kuah, District of<br />
Langkawi, Kedah.<br />
H.S. (D) 144330, PT<br />
40019 Mukim of Sungai<br />
Buloh, District of<br />
Petaling, Selangor Darul<br />
Ehsan.<br />
No H.S. (D) 86599, PT<br />
No. 302, TP 5 Road, Sime<br />
UEP Industrial Park,<br />
47600 Subang Jaya,<br />
Selangor Darul Ehsan.<br />
L&D Tanjung Malim,<br />
Proton Edar Sdn Bhd, c/o<br />
Proton Tanjung Malim<br />
Sdn Bhd, Proton City,<br />
35900 Tanjung Malim,<br />
Perak.<br />
Land with an area Freehold<br />
of 79,949 sq. ft. used<br />
for sales outlet and<br />
service centre is 7,175<br />
sq. ft.<br />
Land with an area of<br />
57,267 sq. ft. to be<br />
used for sales outlet<br />
and service centre.<br />
Land with an area of<br />
51,979 sq. ft. to be<br />
used for sales outlet<br />
and service centre.<br />
Land with an area of<br />
61,524 sq. ft. to be<br />
used for sales outlet<br />
and service centre.<br />
Land with an area<br />
of 123,853 sq. ft. to<br />
be used for<br />
stockyard area.<br />
Administration &<br />
Operation Office.<br />
Freehold<br />
Freehold<br />
Freehold<br />
Freehold<br />
Freehold<br />
19.07.2002<br />
29.09.2003<br />
06.08.2002<br />
13.09.2002<br />
02.09.2002<br />
01.03.2004<br />
05.12.2005<br />
31.07.2007<br />
2008 2009 2008 2009<br />
5 Years<br />
3 Years<br />
5 Years<br />
5 Years<br />
5 Years<br />
3 Years<br />
2 Years<br />
-<br />
6 Years<br />
4 Years<br />
6 Years<br />
6 Years<br />
6 Years<br />
4 Years<br />
3 Years<br />
1 Year<br />
Land<br />
Building<br />
Land<br />
Land<br />
Land<br />
Building<br />
Land<br />
Building<br />
3.1<br />
2.7<br />
5.1<br />
1.4<br />
9.6<br />
6.2<br />
5.8<br />
PROTON 2009 ANNUAL REPORT<br />
-<br />
3.1<br />
2.5<br />
5.1<br />
1.4<br />
9.6<br />
5.9<br />
5.8<br />
4.7<br />
289
PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)<br />
Properties Owned by Proton Cars (UK) Ltd (PCUK)<br />
Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)<br />
Acquisition Building Building<br />
/Revaluation<br />
Ref. AV 915, Units<br />
1-3, Crawley Way,<br />
Avonmouth, Bristol<br />
Avon BS11 9YR, England<br />
Potash Lane, Hethel,<br />
Norwich, Norfolk NR14<br />
8EZ, England.<br />
Land adjacent to<br />
Potash Lane, Hethel,<br />
Norwich, Norfolk<br />
NR 14 8EZ, England<br />
and<br />
Land north of Browic.<br />
290<br />
Land with an area of<br />
162,479 sq. ft. with<br />
a parts warehouse<br />
building.<br />
Properties Owned by Group Lotus Plc<br />
R&D building rented to<br />
group companies. Total<br />
built-up area is 86,600<br />
sq.ft.<br />
Properties Owned by Lotus Cars Ltd<br />
Two parcels of land<br />
with a total area of<br />
6,286,550 sq. ft. with<br />
the factory, engineering<br />
facilities, offices and test<br />
track of Lotus Group<br />
International Ltd. Total<br />
built-up area is 515,500<br />
sq. ft.<br />
Freehold<br />
Freehold<br />
Freehold<br />
31.03.1994<br />
01.03.2000<br />
26.09.1968<br />
2008 2009 2008 2009<br />
32 Years<br />
9 Years<br />
41 Years<br />
33 Years<br />
10 Years<br />
42 Years<br />
Land<br />
Buildings<br />
Building<br />
Land<br />
Building<br />
6.5<br />
1.9<br />
12.3<br />
6.1<br />
74.5<br />
5.3<br />
1.6<br />
9.7<br />
5.2<br />
59.0
PROPERTIES OWNED BY PROTON GROUP AS AT 31 MARCH 2009 (CONTINUED)<br />
Properties Owned by PT Proton Cikarang Indonesia (PCI)<br />
Location Description Tenure Date of Age of Age of Net Book Value (RM’Mil)<br />
Acquisition Building Building<br />
/Revaluation<br />
Hak Guna Bangunan<br />
No. 353, 596, 597, Desa<br />
Sukaresmi, Kecamatan<br />
Lemahabang,<br />
Kabupaten Bekasi, West<br />
Java, Indonesia.<br />
Combined land area Leasehold<br />
of 136,610 sq. meters (Expiry:<br />
was erected with 24.09.2025,<br />
factories, office, 2021 and<br />
canteen, warehouse, 2023)<br />
utility and security<br />
facilities.<br />
Properties Owned by Lotus Holdings Inc<br />
1254 North Main St, Ann<br />
Arbor, Michigan, USA.<br />
Land with an area of<br />
approximately 165,528<br />
sq. ft. with office and<br />
workshop. Total built-up<br />
area is 73,000 sq. ft.<br />
Freehold<br />
21.09.2004<br />
24.02.2000<br />
2008 2009 2008 2009<br />
13 Years 14 Years Land 15.6<br />
Building 11.7<br />
Office:<br />
88 Years<br />
Office:<br />
89 Years<br />
Workshop: Workshop:<br />
42 Years 43 Years<br />
Land<br />
Building<br />
0.8<br />
8.7<br />
PROTON 2009 ANNUAL REPORT<br />
14.1<br />
9.9<br />
0.7<br />
6.7<br />
291
Share Price and Volume Traded<br />
Share<br />
Price (RM)<br />
4.50<br />
4.00<br />
3.50<br />
3.00<br />
2.50<br />
2.00<br />
1.50<br />
1.00<br />
0.50<br />
0.00<br />
292<br />
Apr 08 May Jun Jul Aug Sep Oct Nov Dec Jan 09 Feb Mar<br />
Share Price<br />
Volume<br />
Volume<br />
8,000,000<br />
7,000,000<br />
6,000,000<br />
5,000,000<br />
4,000,000<br />
3,000,000<br />
2,000,000<br />
1,000,000<br />
0
Notice of Annual General Meeting<br />
NOTICE IS HEREBY GIVEN that the Sixth (6th) Annual General Meeting<br />
of the Company will be held at the Auditorium, PROTON Centre of<br />
Excellence, KM 33.8, Westbound Shah Alam Expressway, 47600 Subang<br />
Jaya, Selangor Darul Ehsan, Malaysia on Friday, 21 August 2009 at 3.00pm<br />
for the following purposes:<br />
1. To lay the Report of the Directors and Auditors and the Audited Statement of Accounts for the year<br />
ended 31 March 2009.<br />
2. To elect the following Directors who retire in accordance with the Company’s Articles of Association:-<br />
Article 104<br />
(i) Tuan Haji Abdul Kadir Bin Md Kassim Ordinary Resolution 1<br />
(ii) Dato’ Michael Lim Heen Peok Ordinary Resolution 2<br />
(iii) Tuan Haji Abdul Jabbar Bin Abdul Majid* -<br />
*Note: Tuan Haji Abdul Jabbar Bin Abdul Majid, although eligible, does not seek re-election.<br />
Article 111<br />
(i) Dato’ Mohd Nadzmi Bin Mohd Salleh Ordinary Resolution 3<br />
(ii) Encik Oh Kim Sun Ordinary Resolution 4<br />
3. To approve the Directors’ fees for the year ended 31 March 2009. Ordinary Resolution 5<br />
4. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Ordinary Resolution 6<br />
Company and to authorise the Directors to fix their<br />
remuneration.<br />
5. To transact any other ordinary business for which due notice has Ordinary Resolution 7<br />
been given.<br />
By Order of the Board<br />
MOHD NIZAMUDDIN BIN MOKHTAR (LS NO. 006128)<br />
Company Secretary<br />
Subang Jaya, Selangor Darul Ehsan<br />
30 July 2009<br />
PROTON 2009 ANNUAL REPORT<br />
293
NOTES<br />
1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or<br />
more proxies to attend and vote in his stead. A proxy may but need not be a member of the Company<br />
and the provision of Section 149(1)(b) of the Companies Act, 1965, shall not apply.<br />
2. The instrument appointing a proxy must be in writing under the hands of the appointer or his<br />
attorney duly authorised in writing or, if such appointer is a corporation, under its common seal or<br />
the hand of an officer or attorney duly authorised. If the Form of Proxy is signed under the hand of<br />
an officer duly authorised, it should be accompanied by a statement reading “signed as authorised<br />
officer under Authorisation Document which is still in force, no notice of revocation having been<br />
received”. If the Form of Proxy is signed under the attorney duly authorised, it should be accompanied<br />
by a statement reading “signed under Power of Attorney which is still in force, no notice of<br />
revocation having been received”. A copy of the Authorisation Document or the Power of Attorney,<br />
which should be valid in accordance with the laws of the jurisdiction in which it was created and is<br />
exercised, should be enclosed.<br />
3. The maximum number of proxies that may be appointed is two. Where a member appoints more than<br />
one proxy, the appointment shall be invalid unless he specifies the proportion of his shareholdings to<br />
be represented by each proxy.<br />
4. Where a member of the Company is an authorised nominee as defined under the Securities Industry<br />
(Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each securities account<br />
it holds with ordinary shares of the Company standing to the credit of the said securities account.<br />
Every appointment submitted by an authorised nominee as defined under the Securities Industry<br />
(Central Depositories) Act, 1991, must specify the CDS Account Number.<br />
5. The instrument appointing the proxy must be deposited at the office of the Registrar, Tenaga Koperat<br />
Sdn Bhd, Level 17, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala<br />
Lumpur not less than forty eight (48) hours before the time appointed for the meeting.<br />
6. For the purpose of determining a member who shall be entitled to attend the Meeting, the Company<br />
shall be requesting Bursa Malaysia Depository Sdn Bhd, in accordance with Article 67(b) of the<br />
Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories)<br />
Act, 1991, to issue a General Meeting Record of Depositors as at 13 August 2009. Only a depositor<br />
whose name appears on the General Meeting Record of Depositors as at 13 August 2009 shall be<br />
entitled to attend the said meeting or appoint proxies to attend and/or vote in his stead.<br />
294
Statement Accompanying the Notice of<br />
Sixth (6th) Annual General Meeting<br />
Pursuant to Paragraph 8.28(2) of the Listing Requirements of Bursa<br />
Malaysia Securities Berhad, appended hereunder are:<br />
DIRECTORS STANDING FOR RE-ELECTION<br />
Directors who are standing for re-election at the Sixth (6 th ) Annual General Meeting of the Company which<br />
will be held at The Auditorium, PROTON Centre of Excellence, KM 33.8, Westbound Shah Alam Expressway,<br />
47600 Subang Jaya, Selangor Darul Ehsan, Malaysia on Friday, 21 August 2009 at 3.00pm pursuant to the<br />
Company’s Articles of Association.<br />
Article 104<br />
(i) Tuan Haji Abdul Kadir Bin Md Kassim Refer to page 32 of the Annual Report<br />
(ii) Dato’ Michael Lim Heen Peok Refer to page 33 of the Annual Report<br />
(iii) Tuan Haji Abdul Jabbar Bin Abdul Majid* Refer to page 31 of the Annual Report<br />
*Note: Tuan Haji Abdul Jabbar Bin Abdul Majid, although eligible, does not seek re-election.<br />
Article 111<br />
(i) Dato’ Mohd Nadzmi Bin Mohd Salleh Refer to page 28 of the Annual Report<br />
(ii) Encik Oh Kim Sun Refer to page 35 of the Annual Report<br />
PROTON 2009 ANNUAL REPORT<br />
295
This page is intentionally left blank.
✂<br />
FORM OF PROXY<br />
PROTON ANNUAL REPORT 2009<br />
Success. Challenges. Responsibility.<br />
PROTON Holdings Berhad (Company No.623177-A)<br />
I/We (name of shareholder, in capital letters)<br />
NRIC No. (new) (old) ID No./Company No.<br />
of (full address) being a member of PROTON Holdings<br />
Berhad, hereby appoint (name of proxy as per NRIC, in capital letters)<br />
NRIC No. (new) (old) or failing him/her<br />
(name of proxy as per NRIC, in capital letters) NRIC No. (new) (old) or failing him/her, the<br />
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<br />
to be held at The Auditorium, Level 1, PROTON Centre of Excellence, KM 33.8, Westbound Shah Alam Expressway, 47600 Subang Jaya,<br />
Selangor Darul Ehsan, Malaysia, on Friday, 21 August 2009 at 3.00pm and at any adjournment thereof.<br />
My/Our proxy is to vote as indicated below:-<br />
ORDINARY RESOLUTIONS FOR AGAINST<br />
1.<br />
2.<br />
3.<br />
4.<br />
5.<br />
To lay the Report of the Directors and Auditors and the Audited Statement of Accounts for the year<br />
ended 31 March 2009.<br />
To elect the following Directors who retire in accordance with the Company’s Articles of Association:-<br />
Article 104<br />
(i) Tuan Haji Abdul Kadir Bin Md Kassim<br />
(ii) Dato’ Michael Lim Heen Peok<br />
(iii) Tuan Haji Abdul Jabbar Bin Abdul Majid*<br />
*Note: Tuan Haji Abdul Jabbar Bin Abdul Majid, although eligible, does<br />
not seek re-election.<br />
Article 111<br />
(i) Dato’ Mohd Nadzmi Bin Mohd Salleh<br />
(ii) Encik Oh Kim Sun<br />
To approve the Directors’ fees for the year ended 31 March 2009.<br />
To re-appoint Messrs PricewaterhouseCoopers as Auditors of the<br />
Company and to authorise the Directors to fix their remuneration.<br />
To transact any other ordinary business for which due notice has been<br />
given.<br />
(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<br />
abstain from voting at his/her discretion.)<br />
Dated this day of 2009.<br />
Signature/Common Seal of Appointer<br />
No. of Shares Held<br />
CDS Account No. of Authorised Nominee<br />
Ordinary Resolution 1<br />
Ordinary Resolution 2<br />
-<br />
Ordinary Resolution 3<br />
Ordinary Resolution 4<br />
Ordinary Resolution 5<br />
Ordinary Resolution 6<br />
Ordinary Resolution 7<br />
For appointment of more than one proxy, state number of shares<br />
and percentage of shareholdings to be represented by the proxies:-<br />
No. of Shares Percentage<br />
Proxy 1<br />
%<br />
Proxy 2 %<br />
P.T.O
NOTES:<br />
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<br />
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.<br />
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<br />
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<br />
authorised, it should be accompanied by a statement reading “signed as authorised officer under Authorisation Document which is still in force, no notice of<br />
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<br />
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<br />
Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed.<br />
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<br />
specifies the proportion of his shareholdings to be represented by each proxy.<br />
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<br />
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.<br />
Every appointment submitted by an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, must specify the CDS<br />
Account Number.<br />
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<br />
City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty eight (48) hours before the time appointed for the meeting.<br />
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,<br />
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<br />
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<br />
August 2009 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote in his stead.<br />
Fold Here<br />
Fold Here<br />
The Registrar<br />
Tenaga Koperat Sdn Bhd<br />
Level 17, The Gardens North Tower<br />
Mid Valley City, Lingkaran Syed Putra<br />
59200 Kuala Lumpur<br />
STAMP<br />
✂