product development - Investor Relations

Transcription

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PROTON 2007 ANNUAL REPORT
operations review
PRODUCT DEVELOPMENT
Developing new models and variants of high quality while meeting
the market's needs are amongst PROTON's top priorities.
In early 2007, PROTON introduced a brand new facelift for its
highly popular WAJA sedan. The facelift focuses on a simpler, more
contemporary design at the front that gives the car a bolder
appearance and improves engine cooling. There were also interior
and exterior colour changes as well as quality upgrades based on
customer feedback.
set of younger customers. Though development began late in the
calendar year 2006, the Savvy Light went on sale in July of financial
year 2007-2008.
The year under review also saw tangible efforts to enhance
linkages within our product development and motorsports
divisions. In the third quarter of 2006, PROTON unveiled a limited
edition of WAJA & GEN.2 variants that were designed and
developed by our motorsports division, R3. These enhanced
models have improved handling and performance, and are tuned
for the enthusiast.
Built to commemorate PROTON R3's overall victory in the Merdeka
Millennium Endurance Race 2005 & 2006, only 200 units of each
model were planned. These unique variants feature one-of-its-kind
bodykit styling and performance upgrades.
The Waja's facelift was closely followed with the unveiling of a
cosmetic freshening of our award-winning Savvy and the addition
of a premium model with standard ABS and airbags. Key features
include a new honeycomb radiator grille, a more modern, simplified
design for the rear liftgate and new exterior colours. This upscale
Savvy was developed alongside a Savvy Lite model that is
equipped and positioned at a lower price point to bring in a new
In the near future, PROTON plans to introduce a limited edition
series of the Satria NEO and Savvy to commemorate the 50th
anniversary of Malaysia's nationhood. These Merdeka editions will
commemorate the founding of the nation and will be produced in a
limited series of 200 cars each. Both the Neo and Savvy will be
finished in unique colours and feature styling accents derived from
traditional Malaysian Batik themes.
As testament to the dynamism of our Product Development team,
the PROTON Savvy has recorded various awards and
achievements during the year under review. A notable accolade
was the setting of a new record by our 1.2 litre Savvy for the Most
Fuel-Efficient Drive around Peninsular Malaysia as verified by the
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Malaysia Book of Records. The Savvy also walked away with the
New Straits Times/AmBank Group Cars, Bikes & Trucks 2006 Car
of the Year Award for the Supermini category, as an additional
testament to its abilities and virtues.
Kudos were not limited to our products, either. One of PROTON's
CAE (Computer Aided Engineering) Engineers, Noor Hisham Ismail,
contributed a study on Optimisation Technology that was named
Best Paper at the Altair CAE User Conference in Bangalore, India,
in August 2006.
An even greater adventure lies ahead, with the financial year
2006-2007 seeing the formative stages of development of two
new products that are key to a major renewal of PROTON's
complete portfolio of products. These models, to be introduced
in the second half of the financial year 2007-2008, will provide
the first step in the redefinition of PROTON as a manufacturer of
high value, high quality affordable cars.
Savvy’s entry into the Malaysia Book of
Records for achieving ‘The Most Fuel-Efficient
Drive Around Peninsular Malaysia’.
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RESEARCH & DEVELOPMENT
R&D remains an integral platform for PROTON to improve its
capabilities of developing products and offering services that meet
domestic and global market requirements.
Experience is a crucial factor for our R&D team, more so in an
operating environment where a short learning curve is imperative.
As such, during the year under review, our state-of-the-art R&D
facilities were put to productive use both internally to support
PROTON's initiatives as well as for external clients.
One of the core areas managed by our R&D team is in the area
of automotive testing. Spearheaded by PROTON's
Homologation, Testing & Prototype (HTP) Department, the year
under review saw a multitude of tests being conducted using our
facilities including testing of components, materials, safety and
strength (CMSS), exhaust emissions and fuel consumption and
complete vehicle testing.
Studies into applied research are currently focusing on the
application of natural gas as a clean and affordable fuel to
supplement petrol. The Government of Malaysia is promoting
natural gas as a supplement to petrol, and PROTON is taking a
lead position in the development of a NGV (Natural Gas Vehicle)
aimed at private buyers as well as one aimed at fleet usage,
currently the primary users of natural gas as a motor fuel. The NGV
models will cover a range of PROTON models, the first of which will
be introduced in calendar year 2008.
PROTON's subsidiary, Lotus Engineering, has developed a first
proof-of-concept petrol/electric hybrid car that was displayed at
the 2007 Geneva motor show in Switzerland. This vehicle uses its
combination of petrol engine and electrical drive to offer greatly
reduced exhaust emissions and improved fuel economy that are
well ahead of clean-air legislation in the region. Both the hybrid
vehicle project and the NGV programme are indicators as to how
PROTON is investigating and implementing ways to use
technology to overcome automotive-related environmental and
social issues facing the world today.
In addition to bolstering the skill-set of our R&D team, various tests
of components and systems conducted for external clients have
proven to be a revenue generator for the Group. PROTON has
provided testing and validation services and facilities to a number
of component manufacturers in the ASEAN region.
Lotus EVE Hybrid made its debut at the Geneva Motor Show
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TECHNICAL ENHANCEMENT
PROTON is cognisant that our human capital is the engine of
growth that powers the advancement and evolution of our
engineering capabilities. As such, consistent and relevant training
is crucial to ensure that our employees have the knowledge and
tools to help drive PROTON forward.
During the year under review, the Group participated in the
MAJAICO Programme, which is a government to government
programme between Malaysia and Japan focusing on industrial
development. A total of 14 PROTON engineers were sent to Japan
to learn and understand Japanese manufacturing theory and
processes while enhancing cross-cultural communications.
Participants of the MAJAICO Programme
In the last calendar year, a number of PROTON senior engineers
were seconded to Lotus, assisting the company's development of
a new model that will serve as a keystone product for the
renowned British manufacturer of sports cars. PROTON engineers
are not merely supporting Lotus, but are in lead positions in the
development team in the areas of product development and
production process for the new car.
In addition, the Lotus Suspension Dynamics Simulation and NVH
(Noise, Vibration and Harshness) analysis knowledge transfer to
PROTON have provided us with the industrial know-how to
improve and manage our Ride & Handling Programme and NVH
feature during the concept and planning stage of product
development.
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Manufacturing
The manufacturing capacity and cabability comprises two main plants
in Malaysia as well as two plants overseas. These are PROTON Shah
Alam in Selangor, PROTON Tanjung Malim in Perak, Chikarang in
Indonesia and Norwich in the United Kingdom.
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The total combined installed capacity for vehicle manufacturing is
400,000 units per year. As of today, over 2.8 million units of cars
and 2.6 million units of engines have been produced in these
Malaysian plants.
With a reputation of being one of the most integrated
manufacturing facilities in the region, the Malaysian facilities
comprise casting and foundry, machining, stamping, assembling
including painting and complete vehicle testing facilities which have
enabled PROTON to evolve from being a mere assembler to an
entity with full-fledged manufacturing capabilities.
Production volume was 104,485 units (comprising main plant
42,628 units, MVF 19,310 units, Tanjong Malim 41,107 units and
CKD 1,440 units). There was a negative variance of 98,515 units
from AMP production volume plan of 203,000 units. Delivery
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volume is 99,956 units (comprising domestic 79,008 units and
export 20,588 units) and average channel inventory stock is 2.3
months. All models have an average of more than two months
holding stock except for Satria Neo, Perdana and Iswara.
In order to support the best production and delivery volume,
among the key initiatives that were implemented included the Saga
Sub-27K Program from March 2007; introduction of PROTON
Production System and Total Productive Maintenance; build-up
quality improvement through on-line quality activities and
optimisation of productivity level and operation ratio that were
impacted by the lower than planned volume.
Among the mitigation initiatives taken to immediately respond to the
changes due to volume reduction included reduction of production
volume to meet required orders from June 2006, revising working
conditions from two shifts to one shift operations from June 2006,
line-shutdown in November and December 2006, manpower
rearrangement through reassignment to non-manufacturing
functions, rearrangement of production processes to reduce
utilities consumption and readjustment of CKD and Local Parts
ordering to reduce inventory and container retention charges.
PROTON SHAH ALAM
The Shah Alam plant has a combined capacity of 200,000 units
per year and this is made up of the medium volume factory, with a
capacity of 50,000 units per year and the main factory with a
capacity of 150,000 units per year. The casting, engine and
transmission factories are also located within Shah Alam and are
capable of producing 180,000 units of the CamPro engines per
year, serving not only Shah Alam but also the Tanjong Malim plant.
While the main plant produces the Saga, Wira, Perdana and Arena
models, the medium volume factory produces the Waja and
Chancellor models for domestic as well as for export markets.
Within the financial year, operations were severely impacted by the
changes in the market resulting in lower than planned volume as
well as high channel inventory. Due to volume reduction, mitigation
initiatives were taken to immediately respond to the changes and
focus was mainly on improving the quality of products, operational
efficiency, and new product variants and introductions. Amongst
the new products introduced were the Saga Sub-27K and
Waja enhancement with the CamPro engines. Concurrently,
preparations for the new Saga were undertaken and this model is
expected to be ready by the next financial year. New initiatives such
as Visual Information Control (VIC), PROTON Production System
(PPS) and PROTON Total Productive Maintenance (PTPM) will be
the main driver for further manufacturing efficiency improvement.
The built-up quality measurement has also been refined to include
customer perception and ensuring satisfaction during delivery. The
total production was 61,938 units with average production facilities
utilization rate of 31% due to strong competition in the domestic
market. The Shah Alam plant is also supplying Completely
Knocked-Down parts and components to Zagros-Khodro in Iran to
assemble and market PROTON vehicles in the region. Within the
financial year, 1,440 vehicle sets have been delivered for assembly.
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PROTON TANJUNG MALIM
This ultra-modern manufacturing and assembly plant has an
installed capacity of 150,000 units per year and is capable of
producing three different platforms and multiple variants. The plant
complex consists of engine, stamping, body assembly, painting
and final assembly facilities, inclusive of end-of-line vehicle testing
equipment fully integrated with the application of PROTON's
Automated-Assembly Line Controller. A community of suppliers is
housed within the vicinity of the plant complex to ensure effective
and efficient logistics network. To date, more than 10 major
modules and system suppliers are in operation in the Proton City
Vendor Park. The plant produces the Gen.2, Savvy and Satria Neo
models, which are all new platforms and products from the
PROTON stable.
Similarly, within the financial year, operations were severely
impacted by the changes in the market, resulting in lower than
planned volume as well as high channel inventory. Various initiatives
were implemented and focused mainly on improving quality of
products, operational efficiency, new product variants and
introduction of new products. Amongst the products introduced
were the Satria Neo, Gen.2 enhancement and Savvy face lift for
the domestic and export markets. Concurrently, preparations for
the Gen.2 sedan and CPS for domestic and export market are
being undertaken and are expected to be ready by the next
financial year.
To further enhance supply of parts in November 2006, the
consolidated logistics provider was implemented. To date, 22
vendors have signed on and the rest are expected to participate in
the second phase of the program which took place in April 2007
onwards.
New initiatives such as VIC, PPS and PTPM will be the main drivers
for further manufacturing efficiency improvement. Total production
was 41,107 units with average production facilities utilisation rate of
27% as a result of strong competition in the domestic market.
While the built-up quality measured in Defect per Unit (DPU) at
the PROTON Tanjung Malim plant has improved by almost 58%,
cost per unit however, has increased by 37% due to low
production volume.
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CHIKARANG, INDONESIA
P.T. Proton Tracoma Motors is a wholly owned company of
Perusahaan Otomobil Nasional Sdn Bhd and its main operation is
to manufacture PROTON products not only for Indonesia but also
for the ASEAN markets. Assembly equipment and facilities have
been fully commissioned with an installed capacity of 40,000 units
per year and the plant is ready for the assembling of the
appropriate model expected in the next financial year.
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PROSPECTS
Production and Delivery Volume Plan is based upon the base
domestic sales of 115,500 units (with a market share of 30%) and
exports sales of 29,200 units. However, the manufacturing division
is geared towards achieving the best domestic sales plan of
141,000 units (resulting in a market share of 37%) whilst
maintaining the export volume of 30,000 units. This plan has taken
into consideration domestic channel stock of 18,800 units as well
as export inventory of 3,000 units based on estimates as at the
end of March 2007.
Moving forward, in order to support the best production and
delivery volumes, the following key initiatives will be implemented
and these include puting into motion the Saga Sub-27K Program
from March 2007, the introduction of new models such as the new
Sedan by June 2007 and P2-110 by January 2008, the
introduction of the Integrated Air-Fuel Module and Cam Profile
Switching for the CamPro Engine by the second quarter of 2007,
adoption of the PROTON Production System and PROTON Total
Productive Maintenance also in the second quarter; build-up
quality of less than 2.0 DPU and out-going quality of less than 1.0
DPU for the new models; working towards achieving productivity
levels of 20 man-hours per unit for main-line and MVF and 18 manhours per unit for Tanjung Malim, whilst operation ratios are
targeted at 90% and ensuring that parts supply index and parts
quality index are more than 90% to ensure the quality and
productivity level targets are met.
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NORWICH, UNITED KINGDOM
With a recapitalised, strengthened balance sheet, a 5-year strategic
business plan and a more streamlined operational structure, coupled
with record sales in Japan and Europe due to new and exciting class
leading products coming on stream, Group Lotus Plc., a subsidiary of
PROTON, is set for exciting times ahead.
LOTUS CARS
PERFORMANCE OVERVIEW
The financial year under review was a challenging year for Lotus
Cars given the high level of stock in its sales pipeline, particularly in
North America, at the beginning of the year.
Lotus Elise - S (Hard Top)
As a specialist in the global automotive industry, Group Lotus is a
successful manufacturer of sports cars under its iconic Lotus
brand as well as a leading high technology engineering
consultancy, worldwide.
The manufacture and sale of sports cars are carried out by Lotus
Cars Limited (Lotus Cars) while its automotive engineering
consultancy business is primarily undertaken by Lotus Engineering
and is complemented by the other global automotive engineering
companies within the Group. Lotus Engineering carried out 287
projects for 123 clients last year.
Nevertheless, due to the company's dedicated and focused
initiatives to stimulate demand while at the same time managing
the production levels of new cars, Lotus Cars’ global stock
inventories were reduced by a significant 937 units or over 55%.
The reduction of inventories resulted in a cash in-flow of £20
million during the year.
With production for the year realigned to 2,633 units coupled with
the impact of a weaker dollar, Lotus Cars posted lower revenue of
£93.3 million compared to £121.8 million the previous year.
However, the negative impact of internal and external factors was
mitigated by an increase in average revenue per car as well as
aftersales revenue during the year under review.
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With the introduction of the Lotus Exige S variant in the USA in
December 2006, gross margins for Lotus Cars improved during
the year due to higher average margins per unit and improvement
in revenue for aftersales parts and services.
Overheads during the 2006 / 2007 financial year were addressed
by way of a “rightsizing” programme which resulted in the lowering
of fixed costs in 2007 / 2008 by approximately £5.2 million per
annum and lowered Lotus Cars breakeven volume by 50%.
Lotus Europa - S
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OPERATIONS
During the first quarter of 2006/2007 financial year, Group Lotus
saw Mr. Michael J. Kimberley taking over the helm of the company
as Chief Executive Officer. Mr. Kimberley, along with his
management team, has been tasked to deliver an aggressive 5year strategic plan that is tailored to turn the company into a
sustainably profitable long term business.
In line with this strategic plan, the year under review saw the
streamlining of the Lotus Cars workforce through a voluntary
separation scheme. The completion of this exercise has positively
impacted direct and indirect operating costs while creating a more
productive workforce with profitable results.
PROSPECTS
Moving forward, Lotus Cars plans to aggressively expand into its
core markets of North America, the UK, Europe and International
markets such as those in the vibrant Asia Pacific region including
Malaysia and China. To achieve this objective and to meet set
targets of its 5-year plan, the company is set to enhance its dealer
Lotus Elise - S
network worldwide while introducing 3 brand new models into the
market. New distributors have just been appointed in Thailand,
Hong Kong and Korea.
In the near future, Lotus fans worldwide can look forward to an allnew sports car currently code-named Project Eagle. This will be
followed closely by a new car to replace the iconic Lotus Esprit.
There is also a third car set to be introduced as part of the strategic
5-year initiative.
We expect sales volumes to improve as new models are
introduced, whilst overheads are kept in check to ensure
economies of scale are achieved.
Lotus Cars will also continue to invest in new research and
development that is creating revenue and profit opportunities
for the company in the future. A notable undertaking for the
2007/ 2008 financial year is the manufacturing of an electric
sports car for a USA confidential client which has already
gained substantial publicity worldwide.
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LOTUS ENGINEERING
PERFORMANCE OVERVIEW
Lotus Engineering recorded a profit for the year under review due
to one-off exceptional items such as the recapitalisation initiative
and an adjustment made on the postponement of a specific
project. Third party sales worldwide improved by £9.3 million or
36% over the previous year.
Operating profits were affected by lower revenues (particularly
with the cessation of projects from PROTON) and higher
overheads as well as unrealised savings of £1.3 million. Higher
expenditure on third party sales activities undertaken during the
year, as well as costs at the Lotus Engineering Malaysia/China
subsidiaries, were also factors.
OPERATIONS
In a bid to streamline operations to enhance productivity and
efficiencies, the year under review saw Lotus Engineering
implementing a new “fast to market” project delivery process. Part
of this initiative was the formation of the Project Management Office
(PMO) that has been tasked to oversee all engineering projects. A
new “lean and mean” project management group was also created
to manage projects relating to Lotus Cars. In addition, resource
managers were appointed to control resources more effectively
based on a global delivery model while performance objectives
were introduced to enhance management and delivery initiatives.
In tandem with improvements made internally, the year under review
also saw the development and implementation of a more robust
customer satisfaction feedback process that is conducted upon
completion of a project. This is aimed at ensuring brand recognition
is enhanced further via superior customer satisfaction levels.
PROSPECTS
The global market outlook for the automotive industry is positive for
the coming year with substantial growth forecast for all Lotus
Engineering's primary territories, particularly China and India.
Significant new business has now been agreed and contracted in
China.
Given the trend of going 'green', Lotus is paving the way with
increased investment in the R&D of environmentally-friendly
products and services that include electric vehicles and hybrid
projects, a bio fuel prototype programmes for the Lotus Exige
and the installation of wind turbines to supply Lotus power
utilities.
Lotus Engineering is proactively pursuing third party high tech
engineering globally and has achieved major successes in Asia,
particularly in China, as well as in Europe, India and the USA.
Management has been strengthened by the elevation to Vehicle
Engineering Director of the world's most renowned Vehicle
Dynamics expert and the appointment of a new Managing Director
of Lotus Engineering Limited from Jaguar.
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Quality Management
In line with PROTON's long-term commitment towards embracing a
system and culture that is centered on quality, the Group successfully
re-established and fortified its quality procedures and standards
throughout its manufacturing plants during the year under review.
At the same time, an aggressive Group-wide quality awareness campaign
was also introduced to instill the understanding and significance of
quality in all aspects and activities of PROTON.
QUALITY OPERATIONS
On an operational perspective, a cross-functional Quality
Improvement Committee (QIC) comprising senior representatives
of core divisions throughout PROTON was formed to address and
resolve quality issues impacting the Group internally as well as
externally.
PRODUCTION
On the production front, the year under review saw increased
assessment at vital stages of the production process. Problems
were identified and communicated to the relevant Quality
Improvement Teams who then worked alongside the respective
departments and individuals to solve them.
The Group's quality enhancement initiatives were specifically
targeted at five core areas of the Quality Value Chain, namely new
product development, manufacturing, vendors, technical &
warranty, and sales & services.
Improvements made by our Quality Improvement Teams were
discussed and monitored by the QIC, which chaired its
inaugural meeting in May 2006. The year under review saw the
QIC being convened a total of 42 times in which 98 quality
issues were addressed and resolved.
Ultimately, the primary objective is to derive total customer
satisfaction by delivering the highest standards of quality from the
production stage of a car to the after sales service experience.
SERVICE
On the external front, the Group's Quality Management Division via
its Quality Customer Satisfaction department continues to work
closely with its domestic and overseas distributors to continuously
improve service quality.
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In the fourth quarter of 2006, PROTON successfully brought its
warranty policy and management of claims procedures to be on
par with current market standards. This will positively impact our
competitiveness in our primary markets.
At the end of the financial year under review, all Proton Edar service
branches will be audited to comply with the 4Ms (Man, Machine,
Material & Methods) of the Customer Oriented Service Delivery
System.
In line with fostering a closer relationship with end users, PROTON,
under its Gerak CAT (Customer Action Team) initiative has
throughout the year conducted on site face to face meetings with
customers as well as our dealership personnel to address
concerns and rectify problems.
MOVING FORWARD
Our efforts in relation to quality have translated into improved
feedback and response from end-users, specifically for our new
SAVVY and Satria NEO models. It remains a priority that
PROTON continues to enhance quality Group-wide for the
coming financial years.
In the 2008 financial year, we intend to benchmark our existing ISO
9001 Quality & Service levels at Key Processes & Gateways to the
best practices of TS16949 and address issues and seal any gaps.
Additionally, we aim to improve our Warranty Management System
through software upgrades and better training for our employees
resulting in more accurate diagnosis of defects, faster
countermeasures and less 'comeback' jobs.
PROTON also aims to resolve any other existing quality issues
based on the newly established Global Priority Index, which
focuses on prioritising issues for the correct attention level.
Alongside Proton Edar, we also intend to establish a new CS
(Customer Satisfaction) Manual as a basic guideline for all
distributors to meet the desired quality standards.
The Group's Quality Management Division intends to speed up the
understanding of the Asian Multi-Local Original Equipment
Manufacturer operating (AMLO EM) environment while driving
changes in quality processes of complete-knock-down factories
and our contract assemblers. The Group will also be bolstering its
human resources in the Group Quality Management Division to
drive forward our overall quality improvement objectives.
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Marketing
DOMESTIC MARKETS
OVERVIEW
While the year under review may be challenging to say the least,
given depressed consumer demand, an over-saturated market and
a highly competitive operating environment, PROTON has been all
the more committed and adamant in our marketing efforts to
position the brand and our products ahead of our competitors.
On this score, PROTON Savvy took the limelight in 2006 when the
model successfully made it into the Malaysia Book of Records for
being the most fuel-cost efficient vehicle above 1000cc. This coup
was achieved when we took the Savvy on a 1,614 km journey
across Peninsular Malaysia using about 68 litres of petrol, which
amounted to only RM131.
Our marketing efforts for the Savvy were also bolstered by a
refreshing facelift for the model in response to consumer feedback.
At the same time, our Waja Campro with design enhancements
including standard leather seats for added comfort and luxury was
introduced into the market. PROTON's marketing team was able to
capitalize on these introductions to attract potential buyers.
All in all, the year under review saw Proton Edar Sdn Bhd mounting
a series of aggressive sales and marketing campaigns
encompassing trade-in values, financial assistance packages,
step-up financing, insurance subsidies, free petrol & service
vouchers and consumer contests nationwide during the festive
season when traditionally, car sales are at its peak. Our campaigns
were supported with the 5-year extended warranty for all PROTON
models, introduced to further add confidence to car buyers.
In line with the Government’s call to promote road safety and
reduce the number of road accidents in the country, PROTON's
Customer Management Center (CMC) introduced a novel one-onone driving course, namely DSSW which stands for Drive, Safe,
Smart & Wise, for its car buyers as part of its on-going customer
relations management initiatives. The course covers both
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classroom and practical defensive driving sessions conducted in
collaboration with certified trainers at PROTON's semi-high speed
test-track. Interested customers/prospects could inquire further or
request for registration either by calling:
PROTON i.care at 1300 880 888 or email to [email protected].
Since December 2005, CMC has organized 15 classes (about one
every month with a minimum of 15 - 20 participants) and the
outcome has been very encouraging with most of the participants
requesting for intermediate and advance classes.
From an operational perspective, the year under review saw Proton
Edar taking the bull by its horns in terms of solidifying positive brand
association and building closer rapport with its market segments.
On a tangible plane, the year saw Proton Edar's service centers
recording an increased throughput of 13% year-on-year.
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CUSTOMER TESTIMONY
Mohd Mazran Dato’ Mohd Mazlan, 25
Mohd Mazran has been driving his Gen.2
for the past two years and is looking
forward to being a satisfied owner for
many more years to come.
Mohd Fauzi Johari, 45
Mohd Fauzi Jauhari is the proud owner of
a PROTON Wira for the past ten years.
In January 2007, Proton Edar Service Center also introduced a
1-hour fast service a la “Pit Stop” concept, much to the delight
of customers, especially the working class, whose time is of the
essence.
Notable marketing initiatives undertaken by Proton Edar included
the set up of a flood relief center during the recent floods in Johor.
We also offered a 30% discount for vehicle parts to our buyers in
order to mitigate their hardship due to the floods.
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operations review
EXPORT MARKETS
OVERVIEW
The export market is fast becoming an attractive revenue generator
for PROTON. This augurs well for the Group in light of an
oversaturated and highly competitive domestic market. Exports for
the year under review saw a significant 64% jump in volume. Key
to this growth is the expansion of PROTON's market share in
strategic countries as well as the opening up of four new markets
across the Middle East and Asia.
Our focus in developing our export market was on the after sales
network and capabilities, as well as developing a better
understanding of the customers in the respective markets. To
achieve this, the Group augmented its International Sales &
Services Division with human resources and capacity.
As a result, the year under review saw PROTON recording
improved sales in all its core overseas markets, namely the United
Kingdom, Australia, the Middle East and Africa.
PROTON Savvy launch in Cyprus
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PERFORMANCE AND OPERATIONS
PROTON's market share in the strategic countries of Iran and
South Africa saw an increase during the year. Our market share in
Iran almost doubled to 0.39% from 0.19% and South Africa
registered an increase of five times to1.0% from 0.2%.
Prospects
Looking forward, in the new financial year, Iran is expected to
continue to be a major source of growth for PROTON. The
production of the Gen.2 in CKD form should lead to a reduction in
the “On-The-Road” price in Iran, thereby increasing volume.
The introduction of the Gen.2 as a complete built-up unit (CBU)
into Iran, was well received with orders exceeding expectations by
44%. As such, a program to produce the Gen.2 in a complete
knocked-down (CKD) form in Iran is now underway and expected
to be in operation within the new financial year. Similarly, in South
Africa, orders for the Satria Neo after its launch were beyond the
initial estimates.
Closer to home, Indonesia continues to be a focus growth market.
We also plan to expand into Thailand given the recent and most
welcomed, policy development.
The Left-Hand Drive Savvy was also introduced in the export
market during the year. A “Shootout” for A-Segment cars was done
by a “Taiwan Motor” magazine in their October 2006 edition in
which the PROTON Savvy was rated the No.1 Choice as
compared to several other Japanese and Korean brands.
Since technical support and after sales services have been
identified as our keys-to-success in our export market, we initiated
several “Service Campaigns” in our core markets with PROTON
technical personnel in attendance. Also known as PROTON
“STAR” (Service Technical Attribute And Image Rebuilding), these
campaigns involve customer focused promotions & activities
including free 43-point check with no labor cost and discounts for
spare parts and give-away vouchers valued at US$200.
PROTON GEN.2 cars are currently being used as
police cars in parts of the U.K.
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Proton Cars (UK)
The year under review saw Proton Cars (UK) Limited moving
forward positively despite operating in difficult market conditions.
OVERVIEW
The new car market in UK fell by over 4% in 2006, denoting a third
successive year of declining TIV. In particular, private buyers, which
make up one of the Group's main segments, performed less than
par with total market conditions falling further to just 44% of total UK
sales. Overall, with consumer buying patterns continuing to
fluctuate and change, the vehicle segments where PROTON's
products are featured, also fell. On this score, the first quarter of
2007 echoed similar market trends as experienced in 2006.
The background to these market conditions relates mostly to
economic factors in the private sector with record levels of personnel
debt, substantial interest rate hikes, high fuel prices and increasing
taxes on vehicle emissions. High fuel prices and C02 emissionbased taxes have led to private buyers switching demand to dual
fuel, diesel and small highly efficient fuel-based vehicles.
PERFORMANCE & OPERATIONS
Against this backdrop, Proton Cars (UK) Limited achieved a 63%
increase in sales during 2006 with average dealer throughput up 38%.
The additional appointment of 30 new dealers along with the
introduction of the Savvy model were major factors in volume growth
with improvements also seen in many other areas of the business, such
as increased brand and product awareness, higher customer
satisfaction levels with a class leading 88% CSI rating and improved
internal efficiencies including overhead and resource reductions.
Whilst volume and operational improvements have seen
encouraging results, the UK market conditions over the last 12
months have led to far greater levels of competitor activity from all
manufacturers creating heightened challenges in the trading
landscape and financial pressures.
A PROTON GEN.2 cruising through United Kingdom
PROSPECTS
All industry forecasts point to continued difficult market conditions
in the 2007-2008 financial period with an upturn predicted in the
year after. In view of the launch of Satria Neo and continued
expansion within the dealer networks in key open points to
increase geographical coverage of the United Kingdom car buying
population, Proton Cars (UK) Limited is bullish on increasing sales
by over 10% this coming year.
operations review
Proton Cars (Australia)
It was a progressive year for Proton Cars Australia Pty Ltd with the
successful induction of five new dealers and the launch of two new
models in the market, resulting in an increase in volume of over
10% during the financial year in review.
OVERVIEW
In 2006, when compared to the industry record of 988,269
achieved in 2005, sales for the Australian car industry fell by 2.6%.
The shift between the various vehicle segments was primarily
influenced by the rising cost of fuel which resulted in an increase in
the light and small segments and a dramatic decline in large vehicle
sales. The imported vehicles segment grew by 3% despite the
decline in overall sales with diesel powered vehicle sales increasing
16.5% and reinforcing the shift toward more fuel efficient models.
PROSPECTS
The industry forecast for 2007-2008 is pointing to a record year of
growth in all PROTON competing segments. One of the major
obstacles for the coming year will be competitor activity as the
smaller marques have employed the strategy of reducing pricing
and increasing standard features in an effort to establish
themselves in the growing Australian market. There are currently 55
brands marketing over 350 different models which allow
consumers unprecedented choice when selecting a new vehicle.
Proton Cars Australia plans to increase sales by over 29% this
coming year, leveraging on the back of Satria Neo and the new
dealers inducted in open points in the 2006-2007 fiscal period.
PERFORMANCE & OPERATIONS
Despite supply difficulties in the first quarter, Proton Cars Australia
successfully increased its sales by 10% and the introduction of the
Savvy model in the early part of 2006 resulted in incremental sales,
as the vehicle was well-received by both the franchised dealers
and public at large. The subsequent release of Satria Neo in 2007
was also well-received with press reports complementing the
vehicle on its class leading ride and handling capabilities. Market
competition has increased due to slowing sales resulting in heavy
discounting in an effort to maintain market share. Reductions in
overheads have allowed Proton Cars Australia to maintain the profit
forecasts.
PROTON Savvy
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operations review
Properties
PROTON continues to be a significant participant in the country's
property sector via its subsidiary Proton Hartanah Sdn Bhd, which
wholly-owns Proton Properties Sdn Bhd and has a 40% stake in
Proton City Development Corporation Sdn Bhd.
PROTON plant in Tanjung Malim
PROTON Centre of Excellence
Main PROTON plant in Shah Alam
operations review
The Group's properties are primarily located at its management
and manufacturing hub namely in Shah Alam, Selangor, and
Tanjung Malim, Perak.
During the year under review, PROTON's new administrative office in
Tanjung Malim reached its final stage of construction. Upon
completion, this new building would be able to house the required
administrative and support staff now at the Group's Shah Alam office.
The Proton City remaining land bank in Tanjung Malim, which totals
2720 acres, is currently being developed by Proton City
Development Corporation into a mixed-development township with
residential, recreational, commercial, institutional and industrial
units. Embedded in this township are state-of-the-art features such
as super high-speed integrated network, 'smart' homes and
schools as well as a number of information technology-based
amenities and utilities.
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operations review
Financial Services
PROTON has entered into relationships with reputable
financial institutions to provide convenient services that
include financing packages for customers and operational
facilities for authorised dealers.
•
Proton Commerce Sdn. Bhd. is a joint venture between
Proton Edar Sdn. Bhd. and Bumiputra Commerce Bank
Berhad;
•
Proton Finance Ltd. is a joint venture between Proton Cars
UK Ltd. and Llyods TSB Bank;
•
Lotus Finance Ltd. is a joint venture between Group Lotus
Plc. and Chartered Trust, which provides financial services
solely for Lotus cars.
operations review
Proton Commerce's e-Finance system enables customers to apply
for hire purchase facilities via the Internet. By simply logging onto
www.proton-edar.com.my or www.bcb.com.my from any
Internet terminal, customers are immediately advised as to whether
their applications have been rejected or conditionally approved,
subject to the submission of relevant supporting documents.
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operations review
PROTON's Commitment To Corporate
Social Responsibility
Corporate Social Responsibility (CSR) is a vital component to
PROTON as it is the national car manufacturer's tangible way of
contributing to the society that it operates within. As a Government
Linked Company and as a means of achieving and delivering
sustainable value to its stakeholders, PROTON's CSR platform works
in tandem with and fully supports the National Economic Policy and
9th Malaysia Plan.
PROTON's involvement in CSR activities is based on the triple
bottom line - management, environment and society which
focuses on environmental protection, human rights, employee
welfare, customer service, vendor and supplier partnerships,
community involvement as well as ethical business behaviour.
A CSR Committee was set up at the tail end of the year under
review with an objective to promote good CSR practices
throughout the organisation and its subsidiaries. Headed by the
Group Chairman, this committee is made up of senior
management and personnel spanning the various divisions and
serves as a means of check and balance for the Group in relation
to the initiatives executed.
operations review
ENVIRONMENTAL
PROTECTION
PROTON's environment philosophy revolves around sustainable
development that is defined as ‘economic and social
development to meet the needs of the present without
compromising the ability of future generations to meet their own
needs. It continues to be the mainstay for our CSR initiatives and
seeks to achieve the objective of protecting the environment by
minimising the impact on the environment as a result of our
business operations. Steps such as management of pollution,
emissions, toxic wastes and recycling are consciously taken to
protect the environment.
Environment friendly manufacturing processes are in position and
the Group as a whole is working aggressively towards total
compliance to ISO14001 Environment Management System
which is certified by an external assessment body and is an
internationally accepted standard of compliance. Naturally, this
commitment enables us to proactively contribute towards the
realisation of a sustainable society.
The Group ensures that good waste management practices are
in place as this is an indicator of a high degree of corporate
responsibility and commitment to comply with national waste
management requirements. Among the methods employed to
protect and minimise the impact on the environment are recycling
of by-products such as paper and boxes, scrap metal recycling,
utilising reusable plastic boxes and containers, water recycling
and the execution of energy saving methods.
PROTON is pleased to note that all efforts undertaken as far as
environment protection is concerned have borne fruit. A tangible
example is how all wastewater effluence discharged after
treatment complies with the requirements of the Environment
Quality Act and Regulations 1974. Efforts are consistently taken
to protect the environment by striving to minimise waste and
pollution, and by setting environmental objectives and targets
which meet or exceed all legal requirements.
In order to realise this environmental policy, we are committed to
put into practice the use of environmentally friendly material and
cleaner production technology throughout the various stages of
product development, from designing, manufacturing, and
utilisation to disposal. In addition, we worked hand-in-hand with
suppliers by providing information and assistance to increase
product recycling, resources reuse rate, and minimise the use of
environmental restricted substances.
As a means of encouraging our youth to cherish the environment,
the Green Project was launched and through this, PROTON
seeks to promote environmental awareness among school
children via tree-planting programmes, environmental picture
book and essay competitions.
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operations review
SOCIAL CONTRIBUTIONS
PROTON is involved in providing financial aid and support in kind
to deserving members of the society in the form of donations and
sponsorships. In the area of education, PROTON participates in
the Adopt-A-School Programme, themed Program Pintar, starting
with two schools in Penang, namely Sekolah Kebangsaan Bagan
Tuan Kechil, Butterworth, and Sekolah Menengah Kebangsaan
Paya Keladi, Kepala Batas. This programme commenced in
January 2007 and will continue until 2009. PROTON is also
involved in various motivational and educational programmes in
schools within the areas of Shah Alam and Tanjung Malim from
which it operates.
On a national interest level, PROTON is one of the main sponsors
of the prestigious Le Tour de Langkawi race. In the past,
PROTON has taken on the role of official car provider for a
number of international, regional and national events,
conferences and meetings including NAM, ASEAN and OIC and
has participated in several local and international exhibitions
relevant to the automotive industry and its core business.
In sports, PROTON is also the corporate custodian for badminton
in the country, and in 2007, it is the title sponsor for the World
Badminton Championships to be held in August. In the area of
motorsports, PROTON has a presence in the Petronas Malaysian
Formula 1 Grand Prix and in events such as the Merdeka
Millennium Endurance Race and the Malaysian Rally
Championship. It is also a partner to the A1 Team Malaysia.
operations review
Yayasan PROTON is the Group's way of investing and
contributing to the education needs of the underprivileged
segments among the young. Yayasan PROTON was established
with the intention of providing educational assistance to
deserving candidates in the form of scholarships.
Humanity assistance and contributions in aid of disaster victims,
environmental conservation and awareness programmes were
also provided in the wake of the floods in Johor. PROTON
initiated and activated a series of programmes to aid victims, from
extending financial assistance, donations in the form of food and
essential items to providing special discounts on parts and
repairs to victims' whose PROTON cars were damaged by the
natural disaster. We also set up a dedicated flood relief service
and repair centre at the Tampoi Centre equipped with tools and
equipment specific to PROTON cars, well-trained technicians
with experience in rectifying flood-damaged cars and dedicated
Service Advisors to assist customers in finding the best possible
repair option based on their financial standing. We also provided
guaranteed professional workmanship with warranty on replaced
parts and logistics management of the flood-damaged cars.
Human capital development efforts have been via assistance and
educational/training programmes designed to reach out to the
community. Over the years, PROTON's activities involving the
development of human capital has encompassed internship or
practical training, training of unemployed graduates, working to
develop useful and relevant programmes with Kolej PROTON in
Universiti Utara Malaysia, as well as providing expertise to help
schools, institutions of higher learning and other technical-based
organisations.
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operations review
PROTON is also a partner and sponsor of the Malaysian Skills
Competition (automotive category). In the year under review
PROTON also partnered with the Ministry of Higher Education to
kick-start a one-year internship programme for students from the
Community College to enable selected students to continue their
studies at PROTON's service centers.
Meanwhile, significant initiatives have been undertaken to
enhance our relationship with the public and PROTON car
customers. In celebrating Malaysia's 50th year of Independence
for example, PROTON on 4th March 2007 introduced an
incredibly attractive deal for customers by offering the PROTON
Saga for just RM26,999. This was just one of the many ways
PROTON is thanking Malaysians for their strong support of the
company and the brand over the years.
PROTON i.CARE is a new initiative that underscores PROTON's
commitment to improve every quality aspect of its business - from
sales, after-sales to products. The initiative will be a key driver to
transform and project PROTON as a Group that is committed to
improvement and growth in quality.
Not just a campaign or a programme, PROTON i.CARE is an all
encompassing culture and a way of life for each and everyone in
PROTON.
All PROTON customer service offerings will now fall under the
PROTON i.CARE umbrella. From hotline to 24-hour breakdown
services to after-sales service centres, PROTON i.CARE will be the
single point of contact, serving as The Companion for customers.
The latest initiative is the formation of 25 Mobile Service Teams with
108 mechanics going to the ground to meet customers.
PROTON i.CARE marks the beginning of a new chapter in which
PROTON reciprocates the commitment to its cars with equal or
even greater commitment to quality, quality improvements and
overall customer satisfaction.
Meanwhile, in support of the initiatives underlined in the New
Economic Policy, PROTON is also committed to developing the
commercial and industrial participation of Bumiputeras in the
automotive industry by providing business opportunities to
genuine and competitive local businesses.
operations review
Health and Safety Committee, briefings by group leaders at
morning roll-calls and site auditing for health and safety including
at workshops and equipments.
The Security Department of Group Security also provides a safe
and secure environment for the diverse population that
comprises the PROTON community. Specifically, it provides an
organised force of trained personnel to protect the various
facilities from fire, accidents, environmental pollution, theft,
intrusion and other unlawful acts that disturb the peace or which
place life and property in jeopardy.
HEALTH AND SAFETY
As a responsible corporate entity, PROTON implements good
employment practices for the benefit of employees by carrying
out safety campaigns for industrial safety at the workplace, festive
season road safety campaigns and defensive driving workshops
for car and motorcycle users. Other employee programmes
include hearing conservation training, forklift training, industrial
safety training, fire safety training as well as fire drills, and
evacuation training. Modules and training are provided by inhouse trainers on an annual basis, with an average of two
sessions conducted each month.
Health and safety related activities are often held to encourage
employees to pay attention to these issues and to put these
practices into place in their daily routine. Activities in the year
under review included a health and safety contest to increase
employee awareness on these issues, quarterly meetings of the
PROTON also provides an Ergonomic program where studies are
being done to reduce work-related injuries and occupational
diseases as well as to improve safety levels in the factory, work
quality and productivity.
Similar to the previous year, no fatal or serious accident cases
were recorded and incidences of cases related to minor industrial
accidents with medical leave and without medical leave saw a
reduction by 25% and 17% respectively. A lower motorcycle
accident trend amongst employees commuting to work was also
recorded.
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HUMAN CAPITAL DEVELOPMENT
With more than 11,000 employees worldwide under its banner,
PROTON's workforce spans the globe and through their
dedicated work, the company continues to build the brand's
name both on the domestic and international front. A majority of
the company's workforce commenced their career path with
PROTON and synergistically grew alongside the company.
At PROTON, we hold steadfast to the belief that consistent
communication is the cornerstone in all our dealings with our
employees. In light of this, a new and comprehensive employee
communications framework was developed to ensure that all
employees are aligned with the organisation's direction and goals.
To take this effort one step further, strategic human capital
capability-building initiatives were executed. In addition to
facilitating assessment, these initiatives sought to develop
leadership competencies, develop talent pool and put into
motion a succession planning programme to better equip the
workforce with skills to compete globally. The challenge lies in
executing this strategic plan to ensure PROTON's human capital
capability is fully realised.
operations review
The year also saw PROTON continue to provide opportunities for
students through Yayasan PROTON, where the Group explored
viable opportunities for human capital development through
programmes with secondary school students and university
graduates. Our role is to be a catalyst of success through our
educational programmes to underprivileged yet smart students
who can eventually be a part of the PROTON family.
PROTON also developed and launched Declaration of Assets
and ‘Whistleblower’ policies to clearly underline our seriousness
to establish integrity as one of our key values.
For the year under review, a new performance management
system that is directly linked to KPls was developed and
implemented. Cognisant of the fact that PROTON operates in an
increasingly competitive and challenging landscape, the
continuous development of our workforce is vital to ensure that
we measure up as a key player in the automotive industry.
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PROTON in Australia
PROTON GEN.2
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statement on corporate governance
Statement On Corporate Governance
The Board is committed to applying the recommendations of the
Malaysian Code on Corporate Governance to ensure that good
corporate governance is practiced throughout the Group to effectively
discharge its responsibilities to protect and enhance shareholder value.
Set out below is a statement on how the Group has applied the
principles of the Malaysian Code on Corporate Governance.
BOARD OF DIRECTORS
The Board is committed to establishing and enhancing shareholder
value in the long-term and is pleased to report that the Group has
to its best efforts and knowledge complied with the principles and
Best Practices of the Code throughout the financial year under
review. The Board continues to enhance its role in improving
governance practises effectively to safeguard the interests of the
shareholders as well as stakeholders. To this end, the Board has
full control of and is responsible for the Group's overall strategy,
acquisition and divestment policies, capital expenditure, annual
budget, review of financial and operational performance, internal
control and risk management processes. The Group's overall
strategic direction, development, implementation and control
remains of primary importance to the Board.
The roles and responsibilities of the Non-Executive Chairman and
the Managing Director are clearly defined. The Chairman ensures
the integrity and effectiveness of the Board as a whole. He
conducts Board meetings and ensures that it proceeds in an
orderly manner.
The Managing Director (“MD”) on the other hand is responsible
for making and ensuring the implementation of broad policies as
approved by the Board and reports to and discusses material
matters including regulatory developments and strategic
projects with the Board. There is therefore a natural separation
of management and governance leading to a balance of power
and authority.
The non-executive directors are independent of management and
are free from any business relationships which could materially
interfere with the exercise of their independent judgement.
The Board has delegated matters pertaining to the day to day
management, operations and strategic development of the Group
(subject to the Limits of Authorities and Group Policies and
Procedures), to the Managing Director who is supported by a
competent Management team whose expertise lies in Finance,
Human Resource, Risk Management, Marketing, Information
Technology, Operations, and Law amongst others.
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In the financial year ended 31 March 2007, the Board of PROTON Holdings Berhad (PHB) met fifteen (15) times. The following are the
details of attendance of the Directors:
No
Name Of Director
Designation
Date of
Appointment
1
Dato' Mohammed Azlan
Bin Hashim - Chairman
Non Independent
Non Executive Chairman
17 Dec 2004
-
15/15
2
Dato' Haji Syed Zainal Abidin
B Syed Mohamed Tahir
Managing Director
1 Jan 2006
-
15/15
3
Tuan Haji Abdul Jabbar
Bin Abdul Majid
Independent
Non Executive Director
12 Apr 2004
-
14/15
4
Encik Mohammad Zainal
Bin Shaari
Non Independent
17 Dec 2004
-
15/15
5
Tuan Haji Abdul Kadir
Bin Md Kassim
Independent
10 Mar 2005
-
13/15
6
Dato' Ahmad Bin Haji Hashim
Non Independent
26 Oct 2005
-
13/15
7
Dato' Michael Lim Heen Peok
Independent
15 Sep 2006
-
8/8
8
Dato' Mohd Izzaddin Bin Idris
Non Independent
15 Sep 2006
-
6/8
9
Encik Badrul Feisal Bin
Abdul Rahman
Non Independent
12 Apr 2004
7 Nov 2006
8/8
10
Lt. Gen (R) Dato' Seri
Mohamed Daud Bin Abu Bakar
Independent
12 Apr 2004
8 Sep 2006
(Retired by virtue of
Section 129 of the
Companies Act, 1965)
7/7
11
Datuk Kisai Bin Rahmat
Executive Director
1 Jan 2006
31 July 2006
5/5
The profiles of the directors are set out on pages 24 to 31 of the
Annual Report.
Board meetings for the Company and its subsidiaries are
scheduled in advance before the start of each calendar year and
Date of
Resignation
Meeting
Attendance
circulated to all Board Members at the beginning of each year.
This would enable the Directors to plan ahead and ensure
attendance at Board meetings. Additional meetings or Special
Board meetings are convened whenever necessary when there
are urgent and important decisions to be made.
BOARD COMPOSITION AND
BALANCE
The Board consists of eight (8) members with the Chairman being
a Non-Independent Non-Executive Director, three (3) NonIndependent Non-Executive Directors, three (3) Independent NonExecutive Directors and one (1) Executive Director who is the
Managing Director.
As in the previous year, Tuan Haji Abdul Jabbar Bin Abdul Majid
is the Company's Senior Independent Director to whom
concerns pertaining to the Group may be conveyed by
shareholders and the public.
INDEPENDENCE AND
CONFLICT OF INTEREST
The Directors are required to make written declarations and it is
their responsibility to declare whether they have a potential or actual
conflict of interest in any transaction. Where issues involve conflict
of interest, the interested Directors abstain from discussing or
voting on the matter.
SUPPLY OF INFORMATION
The Board has full access to all information pertaining to the
Group's business affairs to enable the Board to discharge its
responsibilities effectively.
In general, the agenda, board papers and minutes of previous
meetings of the Board and Board Committees including minutes of
Board meetings of subsidiary companies are circulated in advance
to the Board before a Board meeting. The agenda for every
meeting permits the Board members to review the contents of
meetings and assists in providing the Chairman a better and
efficient conduct of the proceedings at the Board meetings.
The Board has full access to the Company Secretary who is
available to provide the Directors with the appropriate advice and
services and also to ensure that the relevant procedures are
followed and rules and regulations are complied with. The Board is
from time to time, updated on any changes in Laws and other
regulatory requirements.
Senior Management as well as professionals and external advisors
are from time to time invited to attend Board meetings to deliberate
and clarify issues on the subject matter concerned.
POLICY ON DIRECTOR
APPOINTMENTS
The Board Nomination & Remuneration Committee reviews all new
appointments by taking into consideration the skill sets required by
the Company and the Group.
Board Members are appointed through a formal and transparent
selection process that is consistent with the Articles of Association
of the Company and Guiding Principles for Appointment of
Directors.
New directors are required to undergo familiarisation programmes,
plant visits and briefings to get a better understanding of the
PROTON Group, its operations and the automotive industry.
The Board Nomination & Remuneration Committee annually
reviews the mix of skills and experience of the Directors to ensure
that the Board has the right balance and effectiveness.
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100
RE-ELECTION OF DIRECTORS
BOARD COMMITTEES
All Directors including the Executive Director are subject to
retirement by rotation at least once in every three years and are
eligible for re-election. In accordance with the Articles of
Association, 1/3 of the Directors shall retire from office at each
Annual General Meeting.
The Board has delegated specific responsibilities to five subcommittees, namely the Board Audit Committee, Board
Nomination & Remuneration Committee, Board Risk Management
Committee and Board Disciplinary Committee, which assist the
Board in overseeing the affairs of the Group and have been
entrusted with specific responsibilities and authority and report to
the Board with recommendations.
Any new appointed director shall hold office only until the next
Annual General Meeting of the Company and shall be eligible for
re-election under Article 111. Directors who are over seventy (70)
years of age are required to submit themselves for retirement
annually at the Annual General Meeting, unless the Director is reappointed by way of special resolution in accordance with Section
129 (6) of the Companies Act, 1965.
At the forthcoming Annual General Meeting of PROTON Holdings
Berhad, the following Directors who retire have offered themselves
for re-election:
(i) Pursuant to Article 104
1. Encik Mohammad Zainal Bin Shaari
2. Tuan Haji Abdul Kadir Bin Md Kassim
(ii)
Pursuant to Article 111
1. Dato' Michael Lim Heen Peok
2. Dato' Mohd Izzaddin Bin Idris
None of the Directors are subject to retirement pursuant to Section
129 of the Companies Act, 1965 at the forthcoming Annual
General Meeting.
On 17 April 2007, the Board established an Executive Committee
primarily to assist the Management in addressing issues relating to
the implementation and monitoring of several key projects as well
as addressing issues relating to the identification of suitable
candidates to fill several key positions at PROTON.
The above Committees have the authority to examine specific
issues and report to the Board with their recommendations. The
responsibility of decisions on all matters ultimately lies with the
Board as a whole.
BOARD AUDIT COMMITTEE
The composition of the Board Audit Committee and their respective attendance record of meetings for the financial year ended 31 March
2007 are as follows:
No
Name Of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1
Bin Abdul Majid
Chairman Independent
10 Mar 2005
-
8/8
2
Encik Mohammad Zainal
Bin Shaari
Member Non Independent
10 Mar 2005
-
6/8
3
Bin Md Kassim
Member Independent
10 Mar 2005
-
7/8
4
Member Independent
29 Nov 2006
-
3/3
During the financial year, the Board Audit Committee of PROTON
Holdings Berhad undertook the following activities:
(a) Assisted the Board in discharging its statutory duties and
responsibilities relating to accounting and reporting practices
of the Company and the Group in accordance with Generally
Accepted Accounting Practices.
(b) Reviewed the external audit terms of engagement, the audit
strategy, the proposed audit fee and the achievement of the
agreed upon reporting timeframes for the audit of the financial
statements.
(c) Reviewed the external audit reports and discussed any
problems and reservations arising thereon.
(d) Reviewed the internal audit plan, methodology, functions and
resources.
(e) Reviewed major findings on internal audit reports and
management response.
The Terms of Reference of the Board Audit Committee are set out
below.
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COMPOSITION
The Committee shall be appointed from amongst the Board and
shall:(i) comprise no fewer than three members;
(ii) a majority of the members must be independent directors; and
(iii) at least one member must be a member of the Malaysian
Institute of Accountants or if he is not, then he must be a
person who complies with Paragraph 15.10 of Bursa Malaysia
Securities Berhad's Listing Requirements.
•
•
The Chairman, who shall be elected by the members of the
Committee, shall be an independent director.
No alternate director may be appointed as a member of the Board
Audit Committee.
The Board will review the terms of office and the performance of
the Board Audit Committee and its members at least once every
three years.
•
FUNCTIONS AND DUTIES
•
The functions and duties of the Board Audit Committee shall be to:(a) Review and report to the Board of Directors on the following:• with the External Auditors, the audit plan;
• with the External Auditors, the External Auditor's
evaluation of the system of internal control;
• with the External Auditors, the External Auditor's audit
report;
• the assistance given by the Company's employees to the
External Auditors;
• the adequacy of the scope, functions and resources of
the internal audit functions and that it has the necessary
•
authority to carry out its work, and the performance of the
members of the internal audit function;
the internal audit programme, processes, the results of
the internal audit programme, or investigation undertaken
and whether or not appropriate action is taken by the
management on the recommendations of the internal
audit function;
the quarterly results and year-end financial statements,
prior to the approval by the Board of Directors, focusing
particularly on:(i) changes in or implementation of major accounting
policy;
(ii) significant and unusual events;
(iii) compliance with accounting standards and other
legal requirements; and
(iv) accuracy and adequacy of the disclosure of
information essential to a fair and full presentation of
the financial affairs of the Group;
any related party and conflict of interest situation that may
arise within the listed issuer or group including any
transaction, procedure or course of conduct that raises
questions of management integrity;
promptly report to Bursa Malaysia Securities Berhad on
any matter reported by it to the Board of the Company
which has not been satisfactorily resolved resulting in a
breach of the Listing Requirements of Bursa Malaysia
Securities Berhad;
submit to the Board a Report on the summary of activities
of the Board Audit Committee in the discharge of its
functions and responsibilities in respect of each financial
year.
(b) Consider the appointment of the external auditor, the audit fee
and any questions of resignation and dismissal.
MEETINGS
INTERNAL AUDIT FUNCTION
The Committee shall hold meetings on at least four occasions each
year, although additional meetings may be called, as and when
necessary, by the Chairman of the Committee. These meetings will
usually be:• prior to the current year's audit;
• upon completion of the External Auditor's interim examination;
• prior to the meeting of the full Board to approve the financial
statements;
• prior to the announcement of the quarterly results;
• upon the request of any member of the Committee or the
External Auditors, the Chairman of the Committee shall
convene a meeting of the Committee to consider the matters
brought to its attention;
• at least once a year, the Committee shall meet with the
External Auditors without any Executive Directors present.
The Group uses the services of the Group Internal Audit Division to
accomplish its internal audit requirements. The Group Internal Audit
Division reports to the Board Audit Committee on matters
concerning the Group and assists the Board of Directors in
monitoring and managing risks and internal controls.
The Group Internal Audit Division reviews internal controls related to
all key activities of the Group and recommends improvements in
controls and procedures. The Group Internal Audit Division is
independent of the activities it audits and performs with impartiality
and due professional care. The findings of the Group Internal Audit
Division are reported to the Board Audit Committee.
ATTENDANCE
The Board Audit Committee approves the internal audit plan of
the Group Internal Audit Division each year. The scope of the
internal audit covers the audits of all units and operations,
including subsidiaries.
In order to form a quorum in respect of a meeting of an audit
committee, the majority of members present must be independent
directors. The Chairman may request that directors and members
of the management, the Internal Auditors and representatives of the
External Auditors be present at meetings of the Committee.
During the year, the Group Internal Audit Division serves to ensure
control measures are adequate and effective in mitigating key risks
and that they are monitored. The monitoring process will form the
basis for continually improving the risk management process in the
context of the Group's overall goals.
MINUTES
The Company Secretary shall be the Secretary to the Committee
and shall be present at all meetings to record minutes.
Minutes of each meeting shall be prepared and entered into the
books provided for the purpose and sent to the Committee
members and will be made available to all Board members. The
Minutes shall be signed by the Chairman of the Committee.
103
104
BOARD NOMINATION & REMUNERATION COMMITTEE
The Board Nomination & Remuneration Committee reviews new
director appointments of the Group and the balance and
effectiveness of the boards of directors, taking into account the
required mix of skills, experience and other qualities, before making
recommendations to the Board.
The Committee is empowered to conduct periodic reviews on the
overall remuneration policy and package of the Executive and NonExecutive Directors and Senior Management of the Group for
recommendation to the Board.
The authority and scope of coverage of the Nomination and
Remuneration Committee is over the PROTON Group which
includes subsidiaries and relevant associates and other investee
companies.
The Board Nomination & Remuneration Committee is made up
entirely of Non-Executive Directors, with the majority consisting of
Independent Non-Executive Directors.
Appointments to the Committee shall be for a period of three (3)
years which may be extended provided that the majority of the
Committee members remain independent.
The Committee has met four (4) times during the financial year.
The Composition of the Board Nomination & Remuneration Committee is as follows:
No
Name Of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1
Bin Hashim
Chairman Non Independent
10 Mar 2005
-
4/4
2
Encik Ahmad Tajuddin
Bin Abdul Carrim
Member Independent
29 Aug 2005
-
4/4
3
Encik Md Ali Bin Md Dewal
Member Independent
29 Aug 2005
-
3/4
4
Member Independent
13 Nov 2006
-
2/2
5
Encik Badrul Feisal
Bin Abdul Rahim
Member Non Independent
10 Mar 2005
7 Nov 2006
2/2
BOARD RISK MANAGEMENT COMMITTEE
The Board Risk Management Committee assists the Board to
oversee the overall management of all risks faced by the Group's
business. Further details of the activities of the Board Risk
Management Committee are spelt out in the Statement on Internal
Control.
The Board Risk Management Committee is made up entirely of
Non-Executive Directors and third party members (not being
directors of the Company) who are appointed by the Board from
time to time as follows:
No
Name Of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1
Bin Md Kassim
Chairman Independent
29 Sep 2005
-
4/4
29 Aug 2005
-
4/4
2
Datuk Tan Kim Leong
Member - Independent
The composition of the Board Risk Management Committee is
reviewed annually by the Board on the recommendation of the
Board Nomination and Remuneration Committee.
105
106
BOARD DISCIPLINARY COMMITTEE (“BDC”)
The BDC is a platform for the PROTON Group to deal primarily
with disciplinary issues. The BDC is part of the structural
mechanism for the handling of cases that may arise from the
introduction of the Whistleblower and Assets Declaration Policies.
The BDC has the power to initiate investigations, consider and
take appropriate action thereof on any case referred to it by any
party either received orally or in writing.
The BDC comprises members all of whom are non executive directors as follows:
No
Name Of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1
Bin Hashim
Chairman Non Independent
7 May 2006
-
5/5
2
Bin Abdul Majid
Independent
7 May 2006
-
5/5
3
Bin Md Kassim
Independent
7 May 2006
-
5/5
4
Dato' Ahmad Bin Haji Hashim
Non Independent
7 May 2006
-
4/5
PROTON BOARD EXECUTIVE COMMITTEE (“EXCO”)
On 17 April 2007, the Board establised an Executive Committee
primarily to assist the Management in addressing issues relating to
the implementation and monitoring of several key projects as well
as addressing issues relating to the identification of suitable
candidates to fill several key positions at PROTON.
The objectives of the re-establishment of the said EXCO is to assist
the Management in addressing issues relating to the
implementation and monitoring of several key projects, including
but not limited to PROTON’s Strategic Business Plan, Annual
Management Plan, PROTON’s Business Turnaround Plan and also
to address issues relating to identifying suitable candidates to fill
several key positions at PROTON. It is to be noted that the
functions of the EXCO shall not overlap that of other Board
Committees, such as the Board Nomination & Remuneration
Committee.
Subject to the resolutions of the Board from time to time, the
provisions contained in the Terms Of Reference and the
Memorandum and Articles of Association of the Company, the
EXCO may exercise any of the powers, authorities and discretions
for the time being vested in the Board with regard to the affairs and
business of the Company.
The Executive Committee which has met three (3) times since its establishment comprises three (3) representatives from amongst the
PHB Board members and one (1) Senior Management representative as follows:
No
Name Of Director
Designation
Date of
Appointment
1
Dato' Mohammed Azlan Bin Hashim
Chairman
Non Independent
17 Apr 2007
2
Dato' Haji Syed Zainal Abidin
B Syed Mohamed Tahir
Managing Director
17 Apr 2007
3
Independent
17 Apr 2007
4
Dato’ Mohd Izzaddin Bin Idris
Non Independent
17 Apr 2007
DIRECTORS' TRAINING
All Directors have successfully completed the Mandatory
Accreditation Programme conducted by the Research Institute of
Investment Analysts Malaysia as imposed by Bursa Malaysia
Securities Berhad (“Bursa Securities”).
Despite repeal of Bursa Securities' Continuing Educational
Programme with effect from 1 January 2005, the Directors
continue to identify and attend appropriate seminars and courses
to keep abreast of changes in legislation and regulations affecting
the Group.
The Company has arranged various in-house training programmes
and luncheon talks on topics relevant to the Company which were
attended by both the members of the Board and Senior
Management.
107
108
DIRECTORS' REMUNERATION
The Board Nomination & Remuneration Committee is responsible for
reviewing the performance of the Executive Directors and
recommending to the Board the remuneration package and reward
structure. The Board as a whole determines the remuneration of the
Executive and Non-Executive Directors. Directors do not participate
in any discussions or decisions concerning each individual’s
remuneration. In the case of the Executive Director, the
remuneration is structured to link rewards to corporate and
individual performance through key performance indicators
comprising fixed and performance-based rewards.
The level of remuneration of the Non-Executive Directors reflects
the experience and level of responsibilities undertaken by the
Director concerned. The Non-Executive Directors are paid annual
fees and attendance allowances in accordance with the number of
meetings attended. In addition, the Non-Executive Directors are
each provided with the use of a car.
Non-Executive Directors fees are paid upon shareholders approval
at each Annual General Meeting.
The Board Remuneration Committee carries out reviews when
appropriate and refers to remuneration surveys and consultants to
assist in determining the appropriate level of reward, which is
competitive and consistent with the corporate objectives. This is
necessary in order to attract and retain professionals with the
qualities needed to manage the Group successfully.
Details of the total remuneration of the Directors of PROTON Holdings Berhad for the financial year ended 31 March 2007 are as follows:
Directors
Basic Salaries
Bonus and Other Employee Benefits
Fees and
Allowances
Benefits
in Kind
Executive Director
Non-Executive Directors
RM1,276,278
-
RM1,533,125
RM63,000
RM35,993
RM1,339,278
RM1,569,118
TOTAL
RM1,276,278
RM 1,533,125
RM98,993
RM2,908,396
Remuneration
Range of Total Remuneration
Total
Executive
Number of Directors
Non-Executive
Total
Below RM50,000
-
2
2
RM50,001 - RM150,000
-
3
3
RM100,001 - RM500,000
-
3
3
RM500,001 - RM1,000,000
2
1
3
TOTAL
2
9
11
FINANCIAL REPORTING
The Board is committed to providing a balanced, clear and
meaningful assessment of the financial performance and
prospects of the Group to shareholders, the investor community
and the regulatory authorities. Shareholders and other stakeholders
are kept abreast of the Group's performance through the timely
announcement of the quarterly financial results and accompanying
press releases.
The Board Audit Committee assists the Board to oversee the
financial reporting processes and the quality of its financial
reporting. Quarterly financial results and annual financial statements
are reviewed by the Board Audit Committee to ensure adequacy
and completeness of information prior to the Board's approval. To
enhance quality of the Group's financial reporting, the external
auditors will be conducting quarterly reviews of the Group's
quarterly results in addition to the year-end audit.
DIRECTORS RESPONSIBILITY
STATEMENT
The Board is required by the Companies Act, 1965, to ensure that
financial statements prepared for each financial year have been
made out in accordance with the applicable approved accounting
standards and give a true and fair view of the state of affairs of the
Company and the Group at the end of the financial year and of the
results and cash flow of the Company and the Group for the
financial year.
The Board is responsible for ensuring that the Company keeps
accounting records which disclose with reasonable accuracy, the
financial position of the Company and the Group and that the
financial statements comply with the Companies Act, 1965.
In preparing the financial statements the Board has;
• Selected suitable accounting policies and applied them
consistently
• Made judgements and estimates that are reasonable and
prudent;
• Ensured that all applicable accounting standards have been
followed; and
• Prepared financial statements on the going concern basis as
the Directors have a reasonable expectation, having made
enquiries, that the Group has adequate resources to continue
in operations for the foreseeable future.
INTERNAL CONTROLS
The Board acknowledges its overall responsibility for maintaining a
system of internal controls that provides assurance of effective and
efficient operations and compliance with laws and regulations and
also its internal procedures and guidelines. The size and complexity
of the operations may give rise to risks of unanticipated or
unavoidable losses.
The system of internal controls is designed to provide reasonable
but not absolute assurance against the risk of material errors,
frauds or losses occurring. The Board Audit Committee reviews the
effectiveness of the system of internal controls, which covers
financial, operational and compliance controls, and also risk
management.
109
110
RELATIONSHIP WITH AUDITORS
The Board Audit Committee maintains an appropriate transparent
relationship with both the Group’s external auditors and internal
auditors. The external auditors are invited to attend Board Audit
Committee meetings and present their audit findings when the
Company's annual financial results are considered. The Board
Audit Committee meets with the external auditors at least once a
year without the presence of the Executive Director and
Management.
DIALOGUE BETWEEN THE
COMPANY AND
SHAREHOLDERS / INVESTORS
The Board recognises the importance of transparency and
accountability to its shareholders and investors. Different channels
of communication are optimised to provide shareholders and
investors with a balanced and complete view of the Group’s
performance and the issues faced by its businesses in a
competitive environment amidst a changing landscape.
The issue of the Annual Report is an important medium of
information for the shareholders and investors whereas the Annual
General Meeting of the Company is the main forum for
communication and dialogue with the shareholders. Shareholders
are encouraged to actively participate and interact with the Board
and members of the Senior Management pertaining to the agenda
items during the general meeting.
In addition, the Chairman briefs the shareholders on the company's
operations for the financial year. Senior Management and the
external auditors are present to respond to questions and queries
to ensure a high level of accountability and transparency of the
business goals, strategies and operations.
For investors, regular dialogues are held with financial analysts and
fund managers representing institutional and individual
shareholders through the investor relations programme.
Besides the Annual Report, the Board ensures timely
announcements are made to Bursa Malaysia Securities Berhad
and disseminates clear, accurate, and sufficient information to
enable the shareholders and investors to make informed decisions.
The Investor Relations Unit also proactively disseminates
appropriate and relevant information to the investor community and
attends to whatever queries they may have.
additional compliance information
NON-AUDIT FEES
During the financial year, the amount of non-audit fees paid and payable to the external auditors by the Group are as follows:
External Auditors
2007
2006
RM'000
RM'000
PricewaterhouseCoopers Malaysia
Member firm of PricewaterhouseCoopers International Limited,
(a separate and independent legal entity from PricewaterhouseCoopers Malaysia)
2,214
393
1,373
362
Total
2,607
1,735
MATERIAL CONTRACTS
Perusahaan Otomobil Nasional Sdn Bhd ("PONSB"), a wholly
owned subsidiary of the Company, had on 30 January 2007
entered into a conditional sale & purchase agreement ("SPA") with
Tracoma Holdings Berhad ("Tracoma") for PONSB and / or its
nominee(s) to acquire from Tracoma, the remaining 49% equity
interest in PT Proton Tracoma Motors comprising 10,780,000
ordinary shares of USD1.00 each for a total cash consideration of
USD10,133200 or USD0.94 per share.
The above acquisition of PT Proton Tracoma Motors was
completed on 10 August 2007.
Announcements to Bursa Malaysia Securities Berhad were made
in accordance with the Listing Requirements.
RECURRENT RELATED PARTY TRANSACTIONS OF A
REVENUE OR TRADING NATURE
By Resolution of the Extraordinary General Meeting of the
Company held on 8 September 2006, a mandate was granted by
the shareholders for recurrent related party transactions of a
revenue or trading nature, to be entered into during the period 8
September 2006 to 6 September 2007 (being the date of the
forthcoming AGM) between the Company or its subsidiaries and
related parties, the latter being based on an estimate. As required,
below is a listing of the said transactions as having been actually
entered during the period for the financial year ended 31 March
2007.
111
112
Transacting Related Party
Nature of Transaction
Company
within Group
Actual Value
1
Lub Dagangan Sdn. Bhd.
Purchase of lubricants
PONSB
2,314,647
2
Petronas Dagangan Sdn. Bhd.
PESB
7,917,305
3
Petronas Dagangan Sdn. Bhd.
PONSB
2,063,853
4
DZ Automobile Sdn. Bhd.
Sale of goods
PESB
11,205,803
5
EON Berhad
Sale of goods
PESB
1,005,624,614
6
EON Berhad
Sale of parts
PPCSB
97,996,196
7
GKN Driveline Malaysia Sdn. Bhd.
Purchase of parts
PONSB
41,552,686
8
Johnson Controls Auto Holding Sdn. Bhd.
Purchase of goods
PPCSB
942,810
9
Johnson Controls Auto Seating Sdn. Bhd.
Purchase of goods
PONSB
141,342,104
10
Johnson Controls Auto. Interior Sdn. Bhd.
Purchase of goods
PPCSB
498,549
11
Johnson Controls Auto. Interior Sdn. Bhd.
Purchase of goods
PONSB
30,353,303
12
PPCSB
Sale of goods
PONSB
13,381,836
13
PPCSB
Purchase of parts
PONSB
497,482
14
PPCSB
Purchase of parts
PESB
15
PPCSB
Commission/Royalties received
PONSB
3,988,344
16
PPCSB
Purchase of parts
PCUKL
5,367,144
17
PPCSB
Purchase of parts
PCA
3,332,176
18
PPCSB
Purchase of parts
P S'pore
1,021,401
75,087,385
19
Transacting Related Party
Nature of Transaction
Company
within Group
Actual Value
Hicom Teck See Manufacturing
Purchase of parts
PPCSB
1,672,980
Purchase of parts
PONSB
136,346,551
(M) Sdn. Bhd.
20
Hicom Teck See Manufacturing
(M) Sdn. Bhd.
21
Oriental Summit Industries Sdn. Bhd.
Purchase of parts
PPCSB
1,328,526
22
Oriental Summit Industries Sdn. Bhd.
Purchase of parts
PONSB
62,790,175
23
PHN Industry Sdn. Bhd.
Purchase of parts
PONSB
55,329,317
On 8 June 2007, the Group obtained exemption from Bursa
Malaysia Securities Berhad (“Bursa”) from disclosing Related Party
Transactions with the Khazanah Nasional Berhad Group of
companies. As a result, the Company is not required to seek a
renewal of the said general mandate at the forthcoming Annual
General Meeting of the Company.
Further, Bursa had on 14 December 2006 amended the Listing
Requirements pertaining to related party transactions whereby the
threshold for a major shareholder is now increased from 5% to 10%
of the aggregate nominal amount of voting shares in a company
provided that the said shareholder is not the largest shareholder of
the Company.
Notes:
PONSB
PESB
PPCSB
PCUKL
PCA
P’SPORE
Perusahaan Otomobil Nasional Sdn. Bhd.
PROTON Edar Sdn. Bhd.
PROTON Parts Centre Sdn. Bhd.
PROTON Cars (UK) Ltd.
PROTON Cars Australia Pty. Ltd.
PROTON Singapore Pte. Ltd.
113
114
statement on internal control
Statement On Internal Control
The Malaysian Code on Corporate Governance requires listed
companies to maintain a sound system of internal control to
safeguard shareholders' investments and the Group's assets.
Directors of listed companies are required to make disclosures in
their annual reports on the state of internal control in accordance
with the Revamped Listing Requirements of Bursa Malaysia
Securities Berhad. Bursa Malaysia's Statement on Internal Control:
Guidance for Directors of Public Listed Companies (“Guidance”)
provides guidance for compliance with these requirements. The
Board's Internal Control Statement, which has been prepared in
accordance with the Guidance is set out below.
BOARD RESPONSIBILITY
The Board recognises the importance of sound internal controls
and risk management practices for good corporate governance.
The Board has an overall responsibility for the Group's system of
internal controls and its effectiveness, as well as reviewing its
adequacy and integrity. The Group's system of internal control is
designed to manage the principal business risks that may impede
the Group from achieving its business objectives. The system, by
its nature, can only provide reasonable but not absolute assurance
against any material misstatement or loss occurrence.
RISK MANAGEMENT
Risk management is regarded by the Board of Directors (Board) to
be an integral part of the Group's operations with the objective of
maintaining a sound internal control system and ensuring its
continuing adequacy and integrity. As part of PROTON Group's
continuous efforts to enhance the level of risk management culture
and practices, the company continues to embed the risk
management process in the conduct of the business operations to
provide reasonable assurance of achieving the Group's business
objectives while at the same time enhancing shareholder's value.
The Group Risk Management Unit (GRMU) is responsible for
ensuring that an appropriate risk management framework exists
within the Group and is effectively implemented to manage the key
risks exposures of the organisation on an on-going basis. To further
inculcate the risk management culture within the company, the
Board has approved the revised risk management policy (Policy) to
ensure potential critical risks that organisations are exposed to are
managed effectively under the prevailing operating environment.
The Policy provides a clear guideline in respect of the key areas
where risk assessments are required to be performed at PROTON
Group. GRMU together with the Risk Management Champions
have undertaken a number of risk assessments during the year,
specifically on risks related to strategic, financial, business
environment, operations and vehicle development projects. GRMU
has facilitated in the process of risk identification, reporting,
mitigation and continuing resolution of these issues. If deemed
appropriate, these risks are escalated to the Group Risk
Management Committee (GRMC) for review and advice.
The GRMC, which comprises of Senior Management, is
responsible for overseeing the risk management implementation,
regular updating of the Group’s risk profiles and improving the
implementation methodology. The committee also provides
direction to the GRMU in carrying out its activities.
At GRMC, the Committee deliberates and decides the Group's
major risks to be escalated for the attention of the Board Risk
Management Committee (BRMC).
The BRMC was established to deliberate major risks highlighted by
the Management and assist the Board in reviewing PROTON's risk
policies and strategies.
For the financial year ended 31 March 2007, the GRMC and
BRMC have held quarterly meetings in accordance to the Charter.
ASSURANCE MECHANISM
Apart from risk management activities, the Board and Management
have established numerous processes for identifying, evaluating
and managing the significant risks faced by the Group. They
continue to strive in enhancing and implementing the internal
control system to manage those risks that could affect the Group's
growth and financial viability. These processes include updating the
system of internal controls when there are changes to the business
environment or regulatory guidelines.
115
116
The key elements of the Group's control environment include:
BOARD COMMITTEES
Board Committees were established by the Board to assist the
Board in the execution of its responsibilities to provide oversight on
the effectiveness of the Group's operations. The responsibilities
and authority of the Committees are governed by specific terms of
reference and these Committees are accountable to the Board.
The
•
•
•
•
Board Committees are:
Audit Committee
Nomination and Remuneration Committee
Risk Management Committee
Disciplinary Committee
The details of the above mentioned Board Committees are set out
in the Statement of Corporate Governance.
It also reviews the effectiveness of the internal audit function with
particular emphasis on the scope and quality of audits, resources
as well as independence of the Group Internal Audit Department (GIAD).
The BAC continues to meet regularly and have full and unimpeded
access to the internal and external auditors and all employees of
the Group.
Further information relating to the activities of the BAC are set out
in the Statement of Corporate Governance.
ORGANISATION STRUCTURE AND MANAGEMENT
COMMITTEES
An organisation structure, which is aligned to business and
operations requirements and led by Heads of Divisions with clearly
defined lines of responsibility, accountability and levels of authority,
is in place to assist in the implementation of the Group's strategies
and day-to-day businesses.
BOARD OF AUDIT COMMITTEE
The Board has delegated the duty of reviewing and monitoring the
effectiveness of the Group's system of internal control to the Board
of Audit Committee (BAC). The BAC, comprising a majority of
independent non-executive directors, brings with them wide
ranging in-depth experience, knowledge and expertise.
The BAC assumes the overall duties of reviewing with the external
auditors their audit plan, audit report, as well as their findings and
recommendations on internal controls highlighted annually in the
Internal Control Memorandum. Throughout the financial year, the
BAC was updated on the development of the Malaysian Financial
Reporting Standards, as well as legal and regulatory requirements.
Various functional Committees were set up at the management
level to ensure the Group's actions and operations are properly
aligned towards achieving the organisation's goals and objectives.
GROUP INTERNAL AUDIT
GIAD continues to independently monitor compliance with the
internal policies and procedures and the effectiveness of the
internal control systems and highlights significant findings for
corrective actions by the line management.
The annual audit plan, which covers the entity and its subsidiary
companies, and established primarily on a risk-based approach, is
reviewed and approved by the BAC annually before the
commencement of the following financial year and a quarterly work
status update is given by GIAD. GIAD regularly reviews the
approved annual audit plan to ensure significant risk areas are
given adequate audit focus. However, GIAD does not review the
internal control system of its associated companies and joint
controlled entities which fall within the control of their major
shareholders. Nonetheless, the interests of PROTON are served
through representation on the Board of Directors of the respective
associated companies and joint controlled entities.
•
•
•
•
On a monthly basis, GIAD also updates the Management
Committee on the status of corrective actions taken by the line
management arising from the audit findings highlighted by both
GIAD and the external auditors.
Further information relating to the activities of GIAD functions are set
out in the Statement of Corporate Governance.
OTHER KEY ELEMENTS OF INTERNAL CONTROL
The other key elements of the Group's internal control systems are
described below:• Defined delegation of responsibilities to committees and
management of Head Office and operating units, including
authorisation levels for various aspects of the business which
are set out in the Limits of Authority;
• Documented internal policies and procedures as set out in the
Group Policies and Procedures and certification by ISO
9001:2000 of the Quality System Procedures for the
Company and major subsidiaries within the Group;
• Quarterly financial statements and the Group's performance
•
•
•
are deliberated by the BAC, which subsequently presents
them to the Board for their review, consideration and approval;
Management Committee meetings are held on a regular basis
to identify, discuss and resolve operational, financial and key
management issues;
A comprehensive budgeting process where the annual
budgets are approved by the Board and reviewed at mid year;
The Board receives and reviews monthly reports from
Management on key strategic and operational issues and
provides direction to management;
Regular visits to operating units and subsidiaries by Senior
Management;
Measurement of each department's performance against a set
of common criteria via internal survey questionnaires;
Continuous training efforts to enhance competency of the
workforce; and
Formal employee appraisal system for effective coaching and
evaluation of employee performance. During the year, Key
Performance Indicators (KPIs) had been established to gauge
the performance of the respective business and functional
units within the Group.
CONCLUSIONS
For the Financial Year under review, after due and careful inquiry
and based on the information and assurance provided, the Board
is satisfied that the key elements of internal control are in place.
Nevertheless, identified areas of concerns are accorded closer
attention and more regular monitoring to ensure key internal
controls are adequate and effective to continually safeguard
shareholders' investment and the Group's assets.
117
118
risk management
Risk Management
PROTON Group acknowledges the need for a sound risk management
process and practices.
To ensure that a sound risk management process & practices are
implemented within the PROTON Group in accordance to the Malaysian
Code on Corporate Governance, the Board delegated the responsibility to
manage the Group's risks to the Board Risk Management Committee.
This responsibility is supported by the Group Risk Management Committee
comprising the Heads of key divisions in PROTON Group.
RISK MANAGEMENT FRAMEWORK
Recognizing the importance of a sound risk culture in PROTON,
a common risk language and framework were established and
implemented, which have become the guiding principles for the
business divisions, departments and subsidiaries.
risk management
The framework, process and practices provide clear guidelines
on the following:
•
RISK POLICY AND STRATEGY
Risk Management Policy
This year in review, the risk management policy was
significantly improved and enhanced. Among the critical
points in the policy relate to risk assessment requirement,
whereby four (4) obligatory business/proposal papers which
require risk assessment were identified. These included
proposal papers on new product development, new
investment and new market entry as well as major business
and strategic planning exercises.
This requirement, along with the robust risk operation
systems and management, will enable early detection,
evaluation and management of risks in the company.
•
RISK ORGANIZATION AND STRUCTURE
Board Risk Management Committee (BRMC)
The BRMC, which was established in 2003, was formed with
the main function of overseeing the implementation and
operations of the Risk Management Framework in the
PROTON Group. This year in review continued to see the
committee meeting periodically in accordance with the
BRMC charter. During these meetings, risk reports were
updated, and various discussions were held to ensure that
the risk management framework, process and practices are
robust and effectively implemented organisation wide.
Group Risk Management Committee (GRMC)
The GRMC, comprising Senior Management representing
the key business value chain, was initiated as the supporting
arm of the BRMC. Its responsibility, among others, is to
identify and evaluate principal risks and evaluate the
practicality of proposed risk mitigation actions. The Group
met quarterly in the period under review.
Group Risk Management Unit (GRMU)
The GRMU continued to vigilantly inculcate the risk
management culture within the PROTON Group through
Risk awareness and profiling workshops. In addition, several
facilitations and review sessions were held to assist the
group during the AMP 06/07 session. Special risk
assessments were also performed and monitored
specifically on projects, products, suppliers and quality.
Risk Management Units (RMU) of major subsidiaries and
business divisions
The risk management team of major subsidiaries and
divisions continued to perform self risk assessments and
regular mitigation status updates. The high risk events
deemed to be affecting the Group were highlighted to the
GRMC for review and advice.
The Risk Management Governance Structure of PROTON
Group and key roles and responsibilities of the committees
are illustrated in the diagram as follows:
119
120
risk management
BOARD OF DIRECTORS
Liaison
BOARD RISK MANAGEMENT COMMITTEE (BRMC)
REPORTING
FLOW MARKET
GROUP RISK
MANAGEMENT UNIT (GRMU)
GROUP CEO/MANAGING DIRECTOR
GROUP RISK MANAGEMENT COMMITTEE (GRMC)
Liaison
ALL BUSINESS UNITS & PROTON GROUP OF COMPANIES
RISK MANAGEMENT GOVERNANCE STRUCTURE
Division / Business units within
PROTON Holdings Berhad / PONSB
Corporate Direction & Approval
Subsidiaries
Board of Directors
Corporate Direction & Approval
Group Advice
Board of Directors
Board Risk Management Committee (BRMC)
Liaison
Endorsement of
BRMC papers
BRMC’s duties and responsibilities are
supported by the Group Risk Management
Committee (GRMC) which is to provide an
oversight role on the Risk Management process
and practices in PROTON Group
Group Facilitation
MCM
Group Risk Management
Unit (GRMU)
Group CEO / MD
Group Risk Management Committee (GRMC)
1.
RMU
Local Facilitation
Management
Advice
Subsidiaries
2.
Liaison
3.
Supervise the enforcement of Risk
Management Framework and review from
time to time the mechanism used in the Risk
Management process to ensure compliance
with latest regulations and corporate
governance best practices.
Evaluate and identify the principal risks and
ensure that control mechanism is in place to
mitigate the risks.
Review risks reports on a scheduled basis
and to communicate risk concerns to Group
CEO/MD for decisions and if necessary,
escalate to BRMC.
risk management
RISK MEASUREMENT
A standard Risk Management measurement and dashboard were
developed to aid various risk management units in identifying,
rating and monitoring strategic, business environment, project,
financial and operational related risks.
Using this measurement tool, GRMU was able to consolidate the
risks into Corporate Risk Profile and Business Unit Risk Profiles.
Only key risks which could significantly impact the Group's
objectives were escalated to GRMC and BRMC for deliberation.
RISK OPERATION AND SYSTEMS
This year in review, the Group Risk Management Unit continued its
effort to further instill the Risk Management culture through training
and facilitation programs. Risk assessment and reporting were also
performed using the standard risk management format to ensure a
uniform framework for reporting and updating of risks.
121
PROTON in Singapore
PROTON GEN.2
124
calendar of events
JULY 2006
JULY 2006
JULY 2006
• Satria Neo on display at the 39th
ASEAN Ministerial Meeting held
at Kuala Lumpur Convention Centre.
• Visit by Australian journalists to the
PROTON Centre of Excellence.
• Handing-over of keys to a new
Satria Neo owner.
JULY 2006
AUGUST 2006
AUGUST 2006
• Perak Chief Police Officer SAC (1)
Datuk Aziz Bulat visits PROTON’s
Tanjung Malim plant.
• Dato' Haji Syed Zainal Abidin flags off
the Satria Neo 2000km Challenge at
the PROTON Centre of Excellence.
• Class “O” Overall Champion’s of the
Merdeka Millennium Endurance Race
at the Sepang Circuit.
calendar of events
SEPTEMBER 2006
SEPTEMBER 2006
SEPTEMBER 2006
• The Group’s 3rd Annual General
Meeting held at the PROTON Centre of
Excellence in September last year.
• Wira taxis for PUSKOPAU at
Pekanbaru, Indonesia.
• The Satria GTi Club convoy trip to
Phuket, Thailand.
SEPTEMBER 2006
SEPTEMBER 2006
OCTOBER 2006
• A1 driver Alex Yoong at the Malaysia
Book of Records Savvy Fuel Economy
Drive.
• PROTON was the Official Car
for the 1st Malaysian Astronaut
Programme.
• PROTON Bridging Communities
initiative at an old folks home.
125
126
calendar of events
OCTOBER 2006
OCTOBER 2006
OCTOBER 2006
• Dato' Haji Syed Zainal Abidin handing
out goodies to orphans at PROTON
Tanjung Malim’s Buka Puasa.
• The happy winner of the HOT FM
‘Finding Neo’ challenge, Noraidah binti
Ariffin.
• Inspector-General of Police Tan Sri
Musa Hassan receiving PROTON
vehicles on behalf of Polis DiRaja
Malaysia.
OCTOBER 2006
OCTOBER 2006
OCTOBER 2006
• A visit by PROTON staff to the
Children’s Oncology Ward, Hospital
Kuala Lumpur.
• PROTON hosting a Buka Puasa
for children in Shah Alam.
• Members of the A1 Team Malaysia
visit PROTON in Shah Alam.
calendar of events
NOVEMBER 2006
NOVEMBER 2006
NOVEMBER 2006
• Invitees at Yayasan PROTON's Open
House.
• Launch and Motor Show at South
Africa.
• The PROTON Global Distribution
Conference 2007.
NOVEMBER 2006
DECEMBER 2006
DECEMBER 2006
• PROTON’s team getting ready for
the A1 Grand Prix at Sepang.
• Flag-off of Waja Performance Club
Convoy to Penang.
• PROTON’s Engineering division
receives the Anugerah Tangan Emas
Perdana Menteri.
127
128
calendar of events
JANUARY 2007
JANUARY 2007
JANUARY 2007
• PROTON staff assisting in the Flood
Relief program in Johor.
• Dato' Haji Syed Zainal Abidin and his
wife meet with flood victims and relief
members.
• Launch of the PROTON Waja MC3
and Savvy FL at the PROTON Centre
of Excellence.
JANUARY 2007
FEBRUARY 2007
MARCH 2007
• Launch of the Satria Neo in South
Africa.
• Stage 8 of Le Tour de Langkawi
from PROTON Shah Alam to
Genting Highlands.
• PROTON launches the Savvy and
Gen.2 in Indonesia witnessed by H.E.
Minister of Industry, Indonesia, Bapak
Fahmi Idris.
calendar of events
MARCH 2007
MARCH 2007
MARCH 2007
• The 6th International Auto Aftermarket
EXPO 2007 in Japan.
• Launch of PROTON’s Showroom
in Silipi, Jakarta.
• Secretary General, Ministry of
International Trade and Industry, Datuk
Abdul Rahman, visits the PROTON
booth at the Auto Mechanika exhibition
at the Kuala Lumpur Convention Centre.
MARCH 2007
MARCH 2007
APRIL 2007
• Students attending the KPP Smart
Learning Programme organised
by PROTON.
• Lotus EVE Hybrid was launched
at the Geneva Motor Show in 2007.
• Encik Ibrahim Marsidi, Managing
Director, Petronas Dagangan Berhad,
at “Proton Edar Servis Mesra” Launch
at the Litar Sepang Petronas Station.
129
130
calendar of events
APRIL 2007
APRIL 2007
APRIL 2007
• Invitees at the launch of Miyazu tooling
plant in Tanjung Malim by Chief Minister
of Perak, YAB Dato' Sri Di-Raja (Dr.)
Mohamad Tajol Rosli Mohd Ghazali.
• The national badminton players visit
PROTON Shah Alam.
• Launch of the Double Service
Campaign by Koo Kien Keat and
Tan Boon Heong, winners of the
Badminton All-England Open.
APRIL 2007
APRIL 2007
APRIL 2007
• Innovative Creative Circle (ICC)
Convention at the PROTON Centre
of Excellence.
• PROTON’s National Skills Competition
held at the Centre of Excellence.
• Alex Yoong briefing attendees at
the PROTON and HPC Track event
in Sepang International Circuit.
calendar of events
MAY 2007
MAY 2007
MAY 2007
• YAB Dato' Seri Mohd Najib Tun Abdul
Razak, Deputy Prime Minister, visiting
the PROTON booth at Pekan Fest,
Pahang.
• A1 end of season party is celebrated
at the PROTON Centre of Excellence.
• PROTON receives an award at the
Reader's Digest Trusted Brand
Awards 2007 presentation.
JUNE 2007
JUNE 2007
MAY 2007
• PROTON sponsors a visit to Kuala
Lumpur for one of its adopted schools
under the Program Pintar community
project.
• Prime Minister YAB Dato' Seri Abdullah
Ahmad Badawi checking out a car
at the PROTON booth at the
SMIDEX exhibition.
• Reader's Digest Trusted Brand
Awards 2007.
131
PROTON in Iran
PROTON GEN.2
Statutory Financial Statements
Contents
136
Directors’ Report
139
Income Statements
140
Balance Sheets
142
Consolidated Statement of
Changes in Equity
143
Company Statement of
Changes in Equity
144
Cash Flow Statements
147
Notes to the Financial Statements
221
Statement by Directors
222
Statutory Declaration
223
Report of the Auditors
136
directors’ report
DIRECTORS' REPORT
The Directors hereby submit their annual report to the members together with the audited financial statements of the Group and Company
for the financial year ended 31 March 2007.
PRINCIPAL ACTIVITIES
The Company is principally involved in investment holding activities.
The principal activities of the subsidiary companies, associated companies and jointly controlled entities are set out in Notes 16 to 18 of
the financial statements. There have been no significant changes in the activities of the Group and the Company during the financial year.
FINANCIAL RESULTS
(Loss)/profit for the year
Group
RM'000
Company
RM'000
(589,533)
233,779
DIVIDENDS
The amount of dividends paid or declared by the Company since 31 March 2006 were as follows:
RM'000
In respect of the financial year ended 31 March 2006:
Final tax exempt dividend of 5.0 sen per ordinary share,
paid on 13 October 2006
27,461
The Directors do not recommend any dividend payment for the financial year ended 31 March 2007.
RESERVES AND PROVISIONS
There were no material transfers to or from reserves and provisions during the financial year except as disclosed in the financial
statements.
directors’ report
(continued)
DIRECTORS
The Directors who have held office during the period since the date of the last report are:
Dato’ Mohammed Azlan bin Hashim
Dato' Syed Zainal Abidin bin Syed Mohamed Tahir
Haji Abdul Jabbar bin Abdul Majid
Mohammad Zainal bin Shaari
Haji Abdul Kadir bin Md Kassim
Dato’ Ahmad bin Hj Hashim
Dato' Lim Heen Peok
Dato' Mohd Izzaddin bin Idris
Datuk Kisai bin Rahmat
Lt Gen (R) Dato’ Seri Mohamed Daud bin Abu Bakar
Badrul Feisal bin Abdul Rahim
(appointed on 15.09.2006)
(appointed on 15.09.2006)
(resigned on 31.07.2006)
(retired on 08.09.2006)
(resigned on 07.11.2006)
In accordance with Article 104 of the Company’s Articles of Association, Mohammad Zainal bin Shaari and Haji Abdul Kadir bin Md
Kassim, retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.
In accordance with Article 111 of the Company’s Articles of Association, Dato' Lim Heen Peok and Dato' Mohd Izzaddin bin Idris retire at
the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.
DIRECTORS’ INTEREST IN SHARES AND DEBENTURES
According to the register of Directors` shareholdings, no Director in office at the end of the financial year held any interest in shares or
debentures in the Company or its related corporations.
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS
Before the Income Statements and Balance Sheets of the Group and Company were made out, the Directors took reasonable steps:
(a)
to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful
debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for
doubtful debts; and
(b)
to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values
as shown in the accounting records of the Group and Company had been written down to an amount which they might be expected
so to realise.
137
138
directors’ report
(continued)
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONTINUED)
At the date of this report, the Directors are not aware of any circumstances:
(a)
which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial
statements of the Group and Company inadequate to any substantial extent; or
(b)
which would render the values attributed to current assets in the financial statements of the Group and Company misleading; or
(c)
which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company
misleading or inappropriate.
No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end
of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and Company to meet
their obligations when they fall due.
At the date of this report, there does not exist:
(a)
any charge on the assets of the Group or the Company which has arisen since the end of the financial year which secures the
liability of any other person; or
(b)
any contingent liability of the Group or the Company which has arisen since the end of the financial year.
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial
statements which would render any amount stated in the financial statements misleading.
In the opinion of the Directors:
(a)
the results of the Group and Company's operations during the financial year were not substantially affected by any item,
transaction or event of a material and unusual nature except as disclosed in Note 16 to the financial statements; and
(b)
there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event
of a material and unusual nature likely to affect substantially the results of the operations of the Group or the Company for the
financial year in which this report is made.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
Signed on behalf of the Board of Directors in accordance with their resolution dated 24 July 2007.
DATO’ MOHAMMED AZLAN BIN HASHIM
Chairman
DATO' SYED ZAINAL ABIDIN BIN SYED MOHAMED TAHIR
Director
income statements
INCOME STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2007
Group
Company
2007
RM'000
Restated
2006
RM'000
2007
RM'000
2006
RM'000
4,911,841
(4,547,537)
7,796,932
(6,895,091)
667,983
-
111,097
-
364,304
136,882
(410,189)
(618,147)
(60,462)
901,841
230,544
(439,754)
(580,771)
(78,834)
667,983
393
(333,065)
-
111,097
836
(834)
-
7
9
(587,612)
(35,541)
33,026
(43,878)
335,311
-
111,099
-
17
3,219
17,033
-
-
18
1,805
11,804
-
-
(618,129)
17,985
335,311
111,099
28,596
28,596
(589,533)
28,409
28,409
46,394
(101,532)
(101,532)
233,779
(77)
(77)
111,022
Attributable to:
Equity holders of the Parent
Minority interest
(589,533)
(589,533)
46,690
(296)
46,394
233,779
233,779
111,022
111,022
(107)
N/A
9
N/A
Note
Revenue
Cost of sales
6
Gross profit
Other operating income
Distribution costs
Administrative expenses
Other operating expenses
(Loss)/profit before finance cost
Finance cost
Share of results of associated
companies
Share of results of jointly
controlled entities
(Loss)/profit before taxation
Taxation
- Company
- Subsidiary companies
10
(Loss)/earnings per share (sen)
- basic
- diluted
The notes on pages 147 to 220 form part of these financial statements.
11
11
139
140
balance sheets
BALANCE SHEETS AS AT 31 MARCH 2007
Group
2007
RM'000
2007
RM'000
2006
RM'000
13
3,179,439
3,312,947
-
-
14
15
16
17
18
19
20
29,008
169,075
169,758
223,550
10,397
3,781,227
29,008
17,999
160,409
245,256
10,397
105,786
3,881,802
1,708,651
13,600
6,475
1,728,726
1,465,659
13,600
6,475
1,485,734
21
22
1,273,612
981,025
1,389,005
1,142,851
5
195
23
-
-
66,219
68,041
24
24,314
40,391
-
-
25
10
26
10,618
176,048
73,448
9,288
51,491
211,965
314
-
118
-
27
626,475
3,165,540
1,585,982
4,430,973
10,610
77,148
49,835
118,189
6,946,767
8,312,775
1,805,874
1,603,923
Note
NON-CURRENT ASSETS
Property, plant and equipment
Goodwill
Other intangible assets
Subsidiary companies
Associated companies
Jointly controlled entities
Other long term investments
Deferred tax assets
Total Non-Current Assets
CURRENT ASSETS
Inventories
Trade and other receivables
Amounts due from subsidiary
companies
Amounts due from associated
companies
Amounts due from jointly controlled
entities
Tax recoverable
Current investments
Deposits, bank and
cash balances
Total Current Assets
TOTAL ASSETS
Company
Restated
2006
RM'000
balance sheets
(continued)
BALANCE SHEETS AS AT 31 MARCH 2007 (CONTINUED)
Group
Company
Note
2007
RM'000
Restated
2006
RM'000
28
549,213
549,213
549,213
549,213
29
4,681,375
5,321,439
1,248,223
1,041,905
5,230,588
5,230,588
5,870,652
5,870,652
1,797,436
1,797,436
1,591,118
1,591,118
30
20
181,637
754
182,391
100,255
805
101,060
-
-
31
32
33
34
35
1,046,338
196,067
99,675
25,060
2,222
164,426
1,533,788
1,247,328
217,062
46,231
8,811
16,865
804,766
2,341,063
790
7,647
8,437
2,719
10,086
12,805
TOTAL LIABILITIES
1,716,179
2,442,123
8,437
12,805
TOTAL EQUITY AND LIABILITIES
6,946,767
8,312,775
1,805,873
1,603,923
9.52
10.69
3.27
2.90
EQUITY AND LIABILITIES
Share capital
Reserves
Equity attributable to equity holders
of the Parent
Minority interests
Total Equity
NON-CURRENT LIABILITIES
Long term liabilities
Deferred tax liabilities
Total Non-Current Liabilities
CURRENT LIABILITIES
Trade and other payables
Provisions
Amounts due to subsidiary companies
Amounts due to associated companies
Amounts due to jointly controlled entities
Taxation
Short term borrowings
Total Current Liabilities
36
2007
RM'000
2006
RM'000
Net assets per share attributable to
equity holders of the Parent (RM)
141
142
consolidated statement of changes in equity for the financial year ended 31 March 2007
Attributable to equity holders of the Company
Foreign
Share
Capital
exchange
Retained
capital
reserve
reserve
profits
RM'000
RM'000
RM'000
RM'000
At 1 April 2005
Net income recognised directly
in equity - Foreign exchange
differences on translation
of foreign operations
Profit for the financial year
Total recognised income and
expense for the financial year
Final dividend for the financial year
ended 31 March 2005
At 31 March 2006
At 1 April 2006
Net income recognised directly
in equity - Foreign exchange
differences on translation
of foreign operations
Loss for the financial year
Total recognised income and
expense for the financial year
Final dividend for the financial year
ended 31 March 2006
At 31 March 2007
Total
RM'000
Minority
interest
RM'000
Total
equity
RM'000
549,213
475,617
(81,816)
4,916,935
5,859,949
333
5,860,282
-
-
18,934
-
46,690
18,934
46,690
(37)
(296)
18,897
46,394
-
-
18,934
46,690
65,624
(333)
65,291
549,213
475,617
(62,882)
(54,921)
(54,921)
4,908,704 5,870,652
-
(54,921)
5,870,652
549,213
475,617
(62,882)
4,908,704
5,870,652
-
5,870,652
-
-
(23,070)
-
(589,533)
(23,070)
(589,533)
-
(23,070)
(589,533)
-
-
(23,070)
(589,533)
(612,603)
-
(612,603)
549,213
475,617
(85,952)
(27,461)
(27,461)
4,291,710 5,230,588
-
(27,461)
5,230,588
company statement of changes in equity for the financial year ended 31 March 2007
Note
At 1 April 2005
Net profit attributable to shareholders
Final dividend for the financial year ended
31 March 2005
At 31 March 2006
At 1 April 2006
Net profit attributable to shareholders
Final dividend for the financial year ended
31 March 2006
At 31 March 2007
12
12
Issued and fully paid
ordinary shares
Nominal
Number
value of
of shares
RM1 each
'000
RM'000
Distributable
Retained
earnings
RM'000
Total
RM'000
549,213
549,213
985,804
1,535,017
-
-
111,022
111,022
549,213
549,213
(54,921)
1,041,905
(54,921)
1,591,118
549,213
-
549,213
-
1,041,905
233,779
1,591,118
233,779
549,213
549,213
(27,461)
1,248,223
(27,461)
1,797,436
143
144
cash flow statements for the financial year ended 31 March 2007
Group
Company
2007
RM'000
Restated
2006
RM'000
2007
RM'000
2006
RM'000
(589,533)
46,394
233,779
111,022
(28,596)
(28,409)
101,532
77
352,900
341,990
-
-
94,263
82,857
-
-
-
5,066
-
-
250
(218)
-
-
(30,681)
46,865
-
-
-
-
327,652
-
Amortisation of intangible assets
22,315
9,419
-
-
Interest expense
35,541
43,878
-
-
Interest income
(35,563)
(67,388)
(374)
(588)
Share of results of associated companies
(3,219)
(17,033)
-
-
Share of results of jointly controlled entities
(1,805)
(11,804)
-
-
-
(7,202)
-
-
(49,975)
(2,664)
-
-
-
48
-
-
(30,958)
117,923
-
-
(4,598)
(20,365)
-
-
38,737
81,314
-
-
(8,713)
(9,525)
(667,983)
(111,097)
(239,635)
611,146
(5,394)
(586)
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments for:
Taxation
Property, plant and equipment:
- depreciation
- written off
- impairment
- loss/(gain) on disposal
(Write back of)/allowance for inventories write down
Impairment loss on an investment in a subsidiary
Write back of diminution in value of current investments
Gain on disposal of current investments
Loss on dilution in interest of associated company
(Write back of)/allowance for doubtful debts
Unrealised foreign exchange gain
Provision for warranties (net of expected reimbursement)
Dividends income
Operating (loss)/profit before
working capital changes
(continued)
Group
Company
2007
RM'000
Restated
2006
RM'000
2007
RM'000
2006
RM'000
162,458
(468,790)
-
-
212,606
45,479
190
4,294
CASH FLOWS FROM OPERATING ACTIVITIES (CONTINUED)
Changes in working capital:
Inventories
Receivables
- trade and other receivables
- subsidiary companies
-
-
1,822
(61,726)
14,822
(8,259)
-
3,713
(204,712)
(420,151)
(1,929)
222
(88,219)
(90,151)
-
-
-
-
(2,438)
(3,269)
- associated companies and jointly controlled entities
69,691
9,613
-
-
Cash used in operations
(72,989)
(321,113)
(7,749)
(57,352)
(4,819)
(62,687)
(101,728)
(98)
- associated companies and jointly controlled entities
Payables
- trade and other payables
- provisions for liabilities and charges
- subsidiary companies
Taxation paid
Interest received
39,544
76,835
374
568
Interest paid
(42,927)
(40,505)
-
-
Retirement benefits paid
(15,401)
(14,536)
-
-
Net cash flow used in operating activities
(96,592)
(362,006)
(109,103)
(56,882)
(318,835)
(478,451)
-
-
-
-
(570,644)
-
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Additional investment in subsidiary companies
Additional investment in associated company
(7,169)
-
-
-
Purchase of intangible assets
(173,354)
-
-
-
Purchase of current investments
(284,513)
(207,817)
-
-
Proceeds from disposal of current investments
473,005
207,253
-
-
Proceeds from disposal of property, plant and equipment
Dividends received
Net cash flow (used in)/from investing activities
6,762
15,816
-
-
31,113
42,452
667,983
111,000
(272,991)
(420,747)
97,339
111,000
145
146
(continued)
Group
Note
Company
2007
RM'000
Restated
2006
RM'000
2007
RM'000
2006
RM'000
(27,461)
(54,921)
(27,461)
(54,921)
964,148
326,582
-
-
5,823
-
-
-
-
(54,436)
-
-
(384)
-
-
-
(1,467,399)
(312,152)
-
-
666,640
(11,123)
-
-
141,367
(106,050)
(27,461)
(54,921)
(228,216)
(888,803)
(39,225)
(803)
6,488
5,070
-
-
693,192
1,576,925
49,835
50,638
471,464
693,192
10,610
49,835
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid
Proceeds from borowings
Proceeds from lease and hire purchase
Repayment of term loans
Finance lease and hire
purchase installments paid
Repayment of short term borrowings
Fixed deposits pledged as security
43
Net cash flow from/(used in)
financing activities
NET DECREASE IN
CASH AND CASH EQUIVALENTS
EXCHANGE RATE EFFECTS
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE FINANCIAL YEAR
CASH AND CASH EQUIVALENTS AT
THE END OF THE FINANCIAL YEAR
43
notes to the financial statements - 31 March 2007
1
GENERAL INFORMATION
The Company is principally involved in investment holding activities.
The principal activities of the subsidiary companies, associated companies and jointly controlled entities are set out in Notes 16 to
18 to the financial statements. There have been no significant changes in the activities of the Group and the Company during the
financial year.
The Company was incorporated as a limited liability company, and is domiciled in Malaysia.
The address of the registered office and the principal place of business of the Company is:
HICOM Industrial Estate,
Batu 3, 40000 Shah Alam, Selangor Darul Ehsan, Malaysia.
2
BASIS OF PREPARATION
During the financial year, the Group made losses of RM589.5 million (2006: profits of RM46.4 million).
Going concern assumption
The Directors are of the opinion that the use of the going concern assumption in the preparation of the financial statements is
appropriate based on the approved Group business plan and available financing arrangements, including efforts in place to reduce
costs, control cash flows and the introduction of new models in the next twelve months. The Group has also obtained additional
facilities as described in Notes 27 and 30 to the financial statements.
The Directors expect the Group to continue to operate as a going concern and accordingly, the assets and liabilities of the Group
and Company are recorded on the basis that the Group and Company will be able to realise its assets and discharge its liabilities
in the normal course of business.
Estimates and judgement
The preparation of financial statements requires the Directors to make estimates and judgement that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the financial year. These estimates and judgement are based on the Directors’ best
knowledge of current events and actions.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
Group and the Company's financial statements are disclosed in Note 4 to the financial statements.
147
148
(continued)
2
BASIS OF PREPARATION (CONTINUED)
Financial Reporting Standards
The financial statements of the Group and Company have been prepared under the historical cost convention (as modified by the
revaluation of certain freehold land), unless otherwise indicated in the summary of significant accounting policies.
The financial statements comply with the Financial Reporting Standards (‘FRSs’), the Malaysian Accounting Standard Board ('MASB')
Approved Accounting Standards in Malaysia for Entities Other than Private Entities, and the provisions of the Companies Act, 1965.
As required under FRS 108, the following describes the new Standards and Interpretations which have been issued by the MASB:
(a)
Standards, amendments to published standards and Interpretations Committee (IC) interpretations that are effective
The new accounting standards, amendments to published standards and Interpretations issued by the MASB ('IC
interpretations') to the existing standards effective for the Group and Company's financial periods beginning 1 April 2006 are
as follows:
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
FRS
1
2
3
5
101
102
108
110
116
121
127
128
131
132
133
136
138
140
First-Time Adoption of Financial Reporting Standards
Share-based Payments
Business Combinations
Non-current Assets Held for Sale and Discontinued Operations
Presentation of Financial Statements
Inventories
Accounting Policies, Changes in Accounting Estimates and Errors
Events after the Balance Sheet Date
Property, Plant and Equipment
The Effects of Changes in Foreign Exchange Rates
Consolidated and Separate Financial Statements
Investments in Associates
Interests in Joint Ventures
Financial Instruments: Disclosure and Presentation
Earnings Per Share
Impairment of Assets
Intangible Assets
Investment Property
Amendment to FRS 119
the 'asset ceiling' test.
(2004)
Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures - in relation to
(continued)
2
(a)
Standards, amendments to published standards and Interpretations Committee (IC) interpretations that are effective
(continued)
IC
IC
IC
IC
IC
IC
IC
IC
IC
IC
IC
107
110
112
113
115
121
125
127
129
131
132
Introduction of the Euro
Government Assistance - No Specific Relation to Operating Activities
Consolidation - Special Purpose Entities
Jointly Controlled Entities - Non-Monetary Contributions by Venturers
Operating Leases - Incentives
Income Taxes - Recovery of Revalued Non-Depreciable Assets
Income Taxes - Changes in the Tax Status of an Entity or its Shareholders
Evaluating the Substance of Transactions Involving the Legal Form of a Lease
Disclosure - Service Concession Arrangements
Revenue - Better Transactions Involving Advertising Services
Intangible Assets - Web Site Costs
A summary of the impact of the new accounting standards, amendments to the published standards and IC interpretations
to existing standards on the financial statements of the Group is set out in Note 45 to the financial statements.
(b)
Standards, amendments to published standards and IC interpretations to existing standards that are not yet effective and have
not been early adopted
The new standards, amendments to published standards and interpretations that are mandatory for the Group financial
periods beginning on 1 April 2007, but which the Group has not early adopted, are as follows:
(i)
FRS 117 Leases (effective for accounting periods beginning on or after 1 October 2006). This standard requires the
classification of leasehold land as prepaid lease payments. The Group will apply this Standard from financial periods
beginning on 1 April 2007. The Group has not disclosed the financial impact of the application of this Standard following
the transitional provision which provides exemption from early disclosure of the financial impact prior to its effective date.
(ii)
Amendment to FRS 119 (2004) Employee Benefits – Actuarial Gains and Losses, Plans and Disclosures (effective for
accounting periods beginning on or after 1 January 2007). This amendment introduces the option of an alternative
recognition approach for actuarial gains and losses. It may impose additional recognition requirements for multiemployer plans where insufficient information is available to apply defined benefit accounting. It also adds new
disclosure requirements.
(iii)
FRS 124 Related Party Disclosures (effective for accounting periods beginning on or after 1 October 2006). This
standard will affect the identification of related parties and some other related party disclosures. The Group will apply
this standard from financial periods beginning on 1 April 2007. The Group has not disclosed the financial impact of the
application of this standard following the transitional provision which provides exemption from early disclosure of the
financial impact prior to its effective date.
149
150
(continued)
2
(b)
Standards, amendments to published standards and IC interpretations to existing standards that are not yet effective and have
not been early adopted (continued)
(iv)
FRS 139 Financial Instruments: Recognition and Measurement (effective date yet to be determined by MASB). This new
standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts
to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. The Group will apply
this standard when it becomes effective.
The MASB also issued the following revised Standards, amendment to Standards and IC Interpretations which are only
effective for annual periods on or after 1 July 2007. The Group will apply these Standards and Interpretations from financial
periods beginning on 1 April 2008.
FRS 111
Construction Contracts
FRS 112
Income Taxes
FRS 118
Revenue
FRS 120
Accounting for Government Grants and Disclosure of Government Assistance
Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates - Net Investment in Foreign Operation
FRS 134
Interim Financial Reporting
FRS 137
Provisions, Contingent Liabilities and Contingent Assets
IC Interpretation 1
Changes in Existing Decommissioning, Restoration and Similar Liabilities
IC Interpretation 2
Members' Shares in Co-operative Entities and Similar Instruments
IC Interpretation 5
Rights to Interest arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
IC Interpretation 6
Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment
IC Interpretation 7
Applying the Restatement Approach under FRS 129 (2004) Financial Reporting in Hyperinflationary
Economies
IC Interpretation 8
Scope of FRS 2
The above standards, amendments to published standards and IC interpretations to existing standards is not anticipated to
have significant impact to the Group.
(c)
Standards that are not yet effective and not relevant or material for the Group operations
FRS 6 Exploration for and Evaluation of Mineral Resources (effective for accounting periods beginning on or after 1 January
2007). This Standard is not relevant to the Group’s operations as the Group does not carry out exploration for and evaluation
of mineral resources.
(continued)
3
SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been used consistently in dealing with items which are considered material in relation to the
financial statements.
(a)
Subsidiary companies
Subsidiary companies are those corporations, partnerships or other entities in which the Group has power to exercise control
over the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another
entity.
Investments in subsidiary companies are stated at cost. Where an indication of impairment exists, the carrying amount of the
investment is assessed and written down immediately to its recoverable amount. The accounting policy on Impairment of
Assets is set out in Note 3(t).
Prior to 1 January 2006, the Group applied both the purchase method and the merger method to account for Business
Combinations in accordance with FRS 122. With effect from 1 January 2006, only the purchase method of accounting is
used to account for Business Combinations in accordance with FRS 3.
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date irrespective of the interest of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s
share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the
net assets of the subsidiary acquired, the difference is recognised as a gain in the Consolidated Income Statement.
Subsidiary companies are consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
Uniform accounting policies for like transactions and other events in similar circumstances are used by all companies in the
group in preparing the Consolidated Financial Statements. The financial statements of all companies within the Group used
in the preparation of the Consolidated Financial Statements are prepared as of the same reporting date.
Inter-company balances, inter-company transactions and unrealised gains on transactions between companies are eliminated
in full. Unrealised losses are also eliminated in full unless the assets transferred are impaired.
Minority interest represents that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that
are not owned, directly or indirectly through the subsidiaries by the parent. It is measured at the minorities’ share of the fair
values of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the
subsidiaries’ equity since that date. Separate disclosure is made of minority interest.
151
152
(continued)
3
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(a)
Subsidiary companies (continued)
The gain or loss on disposal of a subsidiary is the difference between the net disposal proceeds and the Group’s share of
the subsidiary’s net assets as of the date of disposal, including the cumulative amount of any exchange differences that relate
to that subsidiary which were previously recognised in equity, and is recognised in the Consolidated Income Statement.
(b)
Associated companies
Associates are those corporations, partnerships or other entities in which the Group exercises significant influence, but which
it does not control. Significant influence is the power to participate in the financial and operating policy decisions of the
associated companies but not the power to exercise control over those policies.
Investments in associated companies are stated at cost. Where an indication of impairment exists, the carrying amount of the
investment is assessed and written down immediately to its recoverable amount. The accounting policy on Impairment of
In the Consolidated Financial Statements, investments in associated companies are accounted for using the equity method.
Under the equity method, the Group’s share of its associates’ post-acquisition profits or losses is recognised in the Income
Statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition
movements are adjusted to the carrying amount of the investment. When the Group’s share of losses in an associated
company equals or exceeds its cost of investment in the associated company including any other unsecured receivables, the
Group discontinues its share of further losses, unless it has incurred legal or constructive obligations to make payments on
behalf of the associated company.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in
the associated companies. Unrealised losses are also eliminated unless the assets transferred are impaired.
In applying the equity method, the Group has ensured that uniform accounting policies for like transactions and other events
in similar circumstances of the associated companies are used. The equity method is applied based on the latest audited
financial statements or management financial statements that have the same reporting date.
(c)
Jointly controlled entities
Jointly controlled entities are corporations, partnerships or other entities over which there is contractually agreed sharing of
control by the Group with one or more parties where the strategic financial and operating policy decisions relating to the entity
requires unanimous consent of the parties sharing control. The Group’s interests in jointly controlled entities are accounted for
in the Consolidated Financial Statements by the equity method of accounting, as disclosed in Note 3.
(continued)
3
(c)
Jointly controlled entities (continued)
The Consolidated Income Statement includes the Group's share of results of the jointly controlled entities based on its latest
audited financial statements or management financial statements of the companies concerned. The cumulative postacquisition movements are adjusted to the carrying amount of the investment.
Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated to the extent of the
Group’s interest in the jointly controlled entities. Unrealised losses are also eliminated unless the assets transferred are
impaired.
In applying the equity method, the Group has ensured that uniform accounting policies of jointly controlled entities for like
transactions and other events in similar circumstances are used. The equity method is applied based on the latest audited
financial statements or management financial statements that have the same reporting date.
Investments in jointly controlled entities are stated at cost. Where an indication of impairment exists, the carrying amount of
the investment is assessed and written down immediately to its recoverable amount. The accounting policy on Impairment of
(d)
Investments
The Group uses its judgement to determine the classification of its investments into current and non-current. An investment
is classified as current if it is readily realisable and it is held for trading or intended to be realised within 12 months after the
balance sheet date. All other investments are classified as non-current.
Investments in other non-current investments are shown at cost and an allowance for diminution in value is made where, in
the opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been
a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the period in
which the decline is identified.
Current investments are carried at the lower of cost and market value, determined on an aggregate portfolio basis. Cost is
derived at on the weighted average basis whilst market value is calculated by reference to stock exchange quoted selling
prices at the close of business on the balance sheet date. Increases/decreases in the carrying amount of marketable
securities are credited/charged to the Income Statement.
On disposal of an investment, the difference between net disposal proceeds and its carrying amount is credited/charged to
the Income Statement.
153
154
(continued)
3
(e)
Property, plant and equipment
Property, plant and equipment are tangible items that:
I.
II.
(i)
are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes;
and
are expected to be used during more than one period.
Cost
Property, plant and equipment are initially stated at cost. Cost includes expenditure that is directly attributable to the
acquisition of the items and bringing them to the location and condition so as to render them operational in the manner
intended by the Group. The Group allocates the initial cost of an item of property, plant and equipment to its significant
component parts.
A piece of freehold land held by the Group is stated at Directors' valuation based on a 1983 independent professional
valuation of the open market value of the land on existing use basis. The surplus arising on revaluation was credited
directly to capital reserves and subsequently utilised.
The Group has adopted the transitional provision of IAS16 (revised) which allows the freehold land to be stated at the
amount revalued on 5 September 1983. All other land held by the Group is stated at cost.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and
maintenance are charged to the Income Statement during the financial period in which they are incurred.
(ii)
Depreciation
Freehold land is not depreciated as it has an infinite life. Depreciation of other property, plant and equipment is provided
for on a straight line basis to write off the cost or valuation of each asset to its residual value over the estimated useful
lives. The assets’ residual values, useful lives and depreciation method are reviewed annually and revised if appropriate.
(continued)
3
(e)
Property, plant and equipment (continued)
(ii)
Depreciation (continued)
The principal estimated useful lives of depreciation used are as follows:
Long term leasehold land
Buildings
Plant and machinery
Office equipment, furniture and fittings
Vehicles
over period of lease term of 98 years
15-40 years
5-15 years
2-8 years
3-5 years
Dies and jigs, included under plant and machinery are depreciated based on the unit of production basis to write off
the cost of the assets over the term of their estimated useful lives which range from 5 to 7 years.
Work in progress is not depreciated. Upon completion, the related costs will be transferred to the respective categories
of assets. Depreciation on work in progress commences when the assets are ready for their intended use. Cost of
toolings for pre-production are written off in the year they are incurred.
(iii)
Impairment
Where an indication of impairment exists, the carrying amount of the assets is assessed and written down immediately
to its recoverable amount. The accounting policy on Impairment of Assets is set out in Note 3(t).
(iv)
Gains or Losses on Disposal
Gain or losses on disposals are determined by comparing proceeds with carrying amount and are included in
profit/(loss) from operations. On disposal of revalued assets, amounts in revaluation reserve relating to those assets are
transferred to retained earnings.
(v)
Repairs and maintenance
Repairs and maintenance are charged to the Income Statement during the period in which they are incurred. The cost
of major renovations are included in the carrying amount of the asset when it is probable that future economic benefits
in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major
renovations are depreciated over the remaining useful life of the related asset.
155
156
(continued)
3
(f)
Intangible assets
(i)
Goodwill
Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment at least annually, or
when events or circumstances occur indicating that an impairment may exist. Impairment of goodwill is charged to the
Consolidated Income Statement as and when it arises. Impairment losses on goodwill are not reversed. Gains or losses
on the disposal of an entity include the carrying amount of goodwill relating to the entity disposed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each cash-generating unit or a
group of cash-generating units represents the lowest level within the Group at which goodwill is monitored for internal
management purposes and which are expected to benefit from the synergies of the combination. The Group allocates
goodwill to each business segment in each country in which it operates.
Goodwill on acquisition of associated companies and jointly controlled entities are included in the carrying value of the
investment in associated companies and jointly controlled entities respectively. Such goodwill are tested for impairment
as part of the overall balance.
(ii)
Computer software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their estimated useful lives (3 to 5 years).
(iii)
Research and development cost
Research expenditure is recognised as an expense when incurred. Costs incurred on development projects (relating to
the design and testing of new or improved products) are recognised as intangible assets when the criteria for
recognition in FRS 138 are fulfilled.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Development expenses capitalised include costs incurred in the development from the date it first meet the recognition
criteria and up to the completion of the development project and commencement of commercial production. Capitalised
development expenditures are stated at cost less accumulated amortisation and accumulated impairment losses, if any.
Amortisation is based on the expected production volume over its total useful life, which does not exceed 7 years for
vehicles and 10 years for mechanical parts.
(continued)
3
(g)
Leases
Finance leases are leases of property, plant and equipment where the Group assumes substanstially all the benefits and risks
of ownership.
Property, plant and equipment acquired under finance leases are included in tangible property, plant and equipment and are
amortised in accordance with Note 3(e) above. Obligations under such agreements are treated as a liability and finance
charges are allocated to the Income Statement over the lease periods to give a constant periodic rate of interest on the
remaining lease liabilities.
(h)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first-in, first-out basis. Cost
includes the actual cost of materials and incidentals in bringing the inventories to their present location and condition, and is
determined on the first-in, first-out basis. Net realisable value represents the estimated selling price less all estimated costs
to completion and costs to be incurred in marketing, selling and distribution. In arriving at net realisable value, due allowance
is made for obsolete, slow moving or defective stocks.
In the case of work-in-progress and finished vehicles, an appropriate proportion of production overheads are included in the
costs.
(i)
Trade and other receivables
Trade and other receivables are carried at anticipated net realisable value. Allowances are made for doubtful debts based on
specific review of outstanding balances at balance sheet date. General allowances are made to cover possible losses, which
are not specifically identified. Other receivables are carried at anticipated realisable values. Bad debts are written off to the
Income Statements during the financial year in which they are identified.
(j)
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it
is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount
can be made. Where the Group expects a provision to be reimbursed (for example, under an insurance contract), the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are reviewed
at each balance sheet date and adjusted to reflect the current best estimate. When the effect of the time value of money is
material, the amount of provision is the present value of the expenditure expected to be required to settle the obligation.
Provisions are not recognised for future operating losses.
157
158
(continued)
3
(j)
Provisions (continued)
(i)
Warranties
Provision is recognised for the estimated liability on all products under warranty in addition to claims already received
and verified. Warranties are provided for a period of between one to three years for vehicles sold. The provision is
based on experienced levels of claims arising during the period of warranty. When the Group expects warranties to
be reimbursed from suppliers, the reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain.
(ii)
(k)
Onerous contracts
The Group recognises a provision for onerous contracts when the expected benefits to be derived from a contract are
less than the unavoidable costs of meeting the obligations under the contract.
Employee benefits
(i)
Short term employee benefits
Salaries, wages, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in
which the associated services are rendered by employees of the Group.
(ii)
Post employment benefits
The Group has various post-employment benefit schemes in accordance with the local conditions and practices in the
countries in which it operates. The Group has both defined contribution and defined benefit plans.
Defined contribution plans
The Group’s contributions to defined contribution plans are charged to the Income Statement in the period to which
they relate. Once the contributions have been paid, the Group has no further payment obligations.
(continued)
3
(k)
Employee benefits (continued)
Post employment benefits (continued)
(ii)
Defined benefit plans
The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the balance sheet
date minus the fair value of plan assets, together with adjustments for actuarial gains/losses and past service cost. The
Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient
regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that
would be determined at the balance sheet date.
The defined benefit obligation, calculated using the projected unit credit method, is determined by independent
actuaries on the basis of triennial valuations. Assumptions were made in relation to the annual investment returns, annual
salary increases and annual increases in pension payments.
Plan assets in excess of the defined benefit obligation are subject to the asset limitation specified in FRS 119.
Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net
actuarial gains and losses recognised in the Income Statement is determined by the corridor method in accordance
with FRS 119 and is charged or credited to income over the average remaining service lives of the related employees
participating in the defined benefit plan.
Upon initial adoption of FRS 119 effective on 1 April 2003, the increase in defined benefit liability is recognised as an
expense on a straight-line basis over 5 years in accordance with the transitional provision of the Standard.
(iii)
Termination benefits
Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date
or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises
termination benefits when it is demonstrably committed to either terminate the employment of current employees
according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an
offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are
discounted to present value.
159
160
(continued)
3
(l)
Income taxes
Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all
taxes based upon the taxable profits, including withholding taxes payable by a foreign subsidiary company on distributions of
retained earnings to companies in the Group.
Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed
to assets and liabilities for tax purposes and their carrying amounts in the financial statements.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences or unused tax losses can be utilised.
Deferred tax is recognised on temporary differences arising on investments in subsidiary companies, associated companies
and jointly controlled entities except where the timing of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are not recognised on temporary differences arising from:
(i)
goodwill; or
(ii)
from the initial recognition of an asset or liability in a transaction which is not a business combination and at time of the
transaction, affects neither accounting profit nor taxable profit.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet
date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
(m)
Foreign currency transactions and translation
(i)
Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured using its functional currency,
which is the currency of the primary economic environment in which the entity operates ('the functional currency'). The
Consolidated Financial Statements are presented in Ringgit Malaysia, which is the Group's functional and presentation
currency.
(continued)
3
(m)
Foreign currency transactions and translation (continued)
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the Income Statement.
(iii)
Group companies
The results and financial position of all the Group companies (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the presentation
currency as follows:
- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet;
- income and expenses for each Income Statement are translated at average exchange rates (unless this average is
not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
- all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to
shareholders’ equity. When a foreign operation is disposed off or sold, such exchange differences that were recorded in equity
are recognised in the Income Statement as part of the gain or loss on disposal.
(n)
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with
banks, other short term, highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank
overdrafts are included within borrowings in current liabilities on the Balance Sheet.
161
162
(continued)
3
(o)
Income recognition
Revenue from sales of vehicles, spare parts and accessories are recognised when significant risks and rewards have been
transferred to buyers. Significant risks and benefits are deemed to have been transferred upon delivery or acceptance of the
goods.
Revenue from sale of completed apartments is recognised when the Sale and Purchase Agreements are signed.
Revenue for rendering of services on long term engineering contracts is recognised on the basis of the stage of completion
of such contracts at the financial year end, where the contractual outcome can be assessed with reasonable certainty. Full
provision is made for all foreseeable losses on contracts entered into or commenced prior to the financial year end. Amounts
are included within receivables and prepayments to recognise timing differences arising between amounts invoiced and
amounts recognised in the Income Statement on individual engineering contracts.
Other revenue comprises mainly revenue from rental and royalty, which are recognised on an accrual basis.
Dividends are recognised when the Company’s right to receive payment is established.
(p)
Financial instruments
(i)
Description
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or
equity instrument of another enterprise.
A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another
enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are
potentially favourable, or an equity instrument of another enterprise.
A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another
enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially
unfavourable.
(continued)
3
(p)
Financial instruments (continued)
(ii)
Financial instruments recognised on the Balance Sheet
The particular recognition method adopted for financial instruments recognised on the Balance Sheet is disclosed in
the individual policy statements associated with each item.
(iii)
Financial instruments not recognised on the Balance Sheet
The Group enters into foreign currency forward contracts to protect the Group from movements in exchange rates by
establishing the rate at which a foreign currency asset or liability will be settled.
Exchange gains and losses arising on contracts entered into as hedges of anticipated future transactions are deferred
until the settlement of the contracts.
(iv)
Fair value estimation for disclosure purposes
The fair value of publicly traded derivatives and securities is based on quoted market prices at the balance sheet date.
The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance
sheet date.
In assessing the fair value of non-traded derivatives and financial instruments, the Group uses a variety of methods and
makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or
dealer quotations for the specific or similar instruments are used for long term debt. Unquoted long term investments
are valued based on quoted investments with similar features.
The face values, less any estimated credit adjustments, for financial assets and liabilities classified as current are
assumed to approximate their fair values.
163
164
(continued)
3
(q)
Borrowings
Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. Subsequently,
borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction
costs) and the redemption value is recognised in the Income Statement over the period of the borrowings.
Borrowing costs are charged to the Income Statement as an expense in the period in which they have accrued. In subsequent
periods, borrowings are stated at cost less repayment made during the year.
Interest, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability is reported
within finance cost in the Income Statement.
Borrowings are classified as current liabilities unless the Group has unconditional right to defer settlement of the liability for
least 12 months after the balance sheet date.
(r)
Share capital
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are expensed off in the
Income Statement.
Dividends on ordinary shares are recognised as liabilities when proposed or declared before the balance sheet date.
A dividend proposed or declared after the balance sheet date, but before the financial statements are authorised for issue,
is not recognised as a liability at the balance sheet date. Upon the dividend becoming payable, it will be accounted for as
liability.
(s)
Contingent liabilities and contingent assets
The Group and Company does not recognise a contingent liability but discloses its existence in the financial statements. A
contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future
events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow
of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstance where
there is a liability that cannot be recognised because it cannot be measured reliably.
(continued)
3
(s)
Contingent liabilities and contingent assets (continued)
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future
events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where
inflows of economic benefits are probable, but not virtually certain.
(t)
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or whenever
events or circumstances occur indicating that an impairment may exist. Property, plant and equipment and other non-current
assets, including intangible assets, are reviewed for impairment losses whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by which the carrying amount
of the asset exceeds its recoverable amount. The recoverable amount is measured at the higher of the fair value less cost to
sell of an asset and its value-in-use. The value-in-use is the net present value of the projected future cash flow derived from
that asset discounted at the appropriate discount rate. Assets other than goodwill that suffered impairment are reviewed for
possible reversal at each reporting date.
The projected cash flows are based on the Group’s estimates calculated based on historical, industry trend, general market,
economic conditions and other available information. For the purposes of assessing impairment, assets are grouped at the
lowest level for which there is separately identifiable cash flows.
The impairment loss is charged to the Income Statement unless it reverses a previous revaluation in which case it is charged
to the revaluation surplus. Any subsequent increase in recoverable amount is recognised in the Income Statement unless it
reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus.
Irrespective of whether there is any indication of impairment, the Group shall test an intangible asset with an indefinite useful
life or an intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable
amount. This impairment test may be performed at any time during an annual period; it is performed at the same time every
year. Different intangible assets may be tested for impairment at different times. However, if such an intangible asset was
initially recognised during the current annual period, that intangible asset shall be tested for impairment before the end of the
current annual period.
165
166
(continued)
4
KEY ESTIMATES AND JUDGEMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely
equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to
have a material impact on the Group’s results and financial position are tested for sensitivity to changes in the underlying parameters.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below.
(i)
Carrying value of property, plant and equipment
The Group assesses impairment of the assets mentioned above whenever the events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than the recoverable
amount. Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use.
The value-in-use is the net present value of the projected future cash flow derived from that asset discounted at an appropriate
discount rate.
Projected future cash flows are based on Group’s estimates calculated based on historical, sector and industry trends,
general market and economic conditions, changes in technology and other available information regarding the automotive
sector, primarily in Malaysia, which is the Group's key market. The assumptions used, results and conclusion of the
impairment assessment are stated in Note 13 to the financial statements.
(ii)
Estimated useful lives of property, plant and equipment and capitalised development costs
The Group reviews annually the estimated useful lives of property, plant and equipment and capitalised development costs
based on factors such as business plan and strategies, expected level of usage and future technological developments.
Future results of operations could be materially affected by changes in these estimates brought about by changes in the
factors mentioned. A reduction in the estimated useful lives of property, plant and equipment and development costs would
increase the recorded depreciation or amortisation and decrease the property, plant and equipment and development cost
balance.
(continued)
4
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
(iii)
Deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which
the temporary differences can be utilised. This involves significant judgments regarding the future financial performance of the
Group, the likely timing and level of future taxable profits together with future tax planning strategies to support the basis of
recognition of deferred tax assets. An analysis of the deferred tax balance is set out in Note 20 to the financial statements.
The Directors have considered the ability of the Group to generate sufficient taxable income to utilise the deferred tax asset
and have concluded no deferred tax assets should be recognised at 31 March 2007.
(iv)
Estimation of income taxes
Income taxes are estimated based on the rules governed under the Income Tax Act, 1967. Significant judgment is required
in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income
taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary
course of business.
Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will
impact the income tax provisions in the period in which such determination is made. The status of the income tax position of
the Group is in Note 10 to the financial statements.
(v)
Provision for warranty obligations and amounts recoverable
Provision is made for the estimated liability on all products under warranty in addition to claims already received. The accrual
recorded is based on the actual levels and trends of claims experienced by the Group arising during the period of warranty
over a number of years which provides a basis for calculating expected warranty claims. In addition, the Group records an
asset for the amount expected to be recoverable from its vendors based on similar actual claims and trends of claims
experienced.
An analysis of the estimated obligation and utilisation of the provision is stated in Note 32 to the financial statements.
(vi)
Allowance for inventory write down
Allowance for inventory write down is made based on an analysis of the ageing profile and expected sales patterns of
individual items held in inventory. This requires an analysis of inventory usage based on expected future sales transactions
taking into account current market prices, useful lives of models and expected cost to sell. Changes in the inventory ageing
and expected usage profiles can have an impact on the allowance recorded. The movement in allowance and the net
realisable amount of inventory is stated in Notes 7 and 21 to the financial statements respectively.
167
168
(continued)
4
5
KEY ESTIMATES AND JUDGEMENTS (CONTINUED)
(vii)
Allowance for receivables
The allowance is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of receivables. This is determined based on the ageing profile, expected collection patterns of
individual receivable balances, credit quality and credit losses incurred. The Group carefully monitors the credit quality of
receivable balances and makes estimates about the amount of credit losses that have been incurred at each financial
statement reporting date. Any changes to the ageing profile, collection patterns, credit quality and credit losses can have an
impact on the allowance recorded.
(viii)
Impairment of goodwill
The Group tests goodwill for impairment at least annually in accordance with its accounting policy or whenever events or
change in circumstances indicate that this in necessary. The assumptions used, results and conclusion of the impairment
assessment are stated in Note 14 to the financial statements.
SIGNIFICANT EVENT
During the financial year, Perusahaan Otomobil Nasional Sdn Bhd (‘PONSB’), a wholly-owned subsidiary company of the Company
entered into a conditional sale and purchase agreement with Tracoma Holdings Berhad ('Tracoma') to acquire the remaining 49%
equity interest in PT Proton Tracoma Motors comprising 10,780,000 oridinary shares of USD1.00 each for total cash consideration
of USD10,133,200 or USD0.94 per share ('Proposed Acquisition').
At the date of the financial statements, both PONSB and Tracoma have mutually agreed to extend the date to 31 August 2007 for
fulfillment of all the conditions precedent in respect of the Proposed Acquisition as stated in the Sale and Purchase Agreement.
(continued)
6
REVENUE
Revenue represents the invoiced value of goods sold and services provided and is net of commission paid to dealers and related
taxes. Revenue comprises:
Group
Sale of vehicles, spare parts and accessories
Gross dividend income
Rendering of services
Others
7
Company
2007
2006
RM'000
RM'000
2007
RM'000
2006
RM'000
4,685,418
7,645,963
-
-
168
219,942
6,313
4,911,841
142,957
8,012
7,796,932
667,983
667,983
111,097
111,097
(LOSS)/PROFIT BEFORE FINANCE COST
Group
Restated
2007
2006
RM'000
RM'000
Company
2007
RM'000
2006
RM'000
The following items have been charged/
(credited) in arriving at (loss)/profit from operations:
Gross dividends receivable from:
- subsidiary company, unquoted being dividend-in-specie
- subsidiary company, unquoted
- associated companies, unquoted
- others, quoted
- others, unquoted
Property, plant and equipment:
- depreciation
- written off
- impairment
- loss/(gain) on disposal
Impairment loss on an investment in a
subsidiary
Amortisation of intangible assets
Research and development expenditure
Provision for warranties
(net of expected reimbursement)
(8,545)
(168)
(9,525)
-
(376,482)
(289,600)
(1,733)
(168)
(109,843)
(1,254)
-
352,900
94,263
250
341,990
82,857
5,066
(218)
-
-
22,315
48,653
9,419
192,429
327,652
-
-
38,737
81,314
-
-
169
170
(continued)
7
(LOSS)/PROFIT BEFORE FINANCE COST (CONTINUED)
Group
Restated
2007
2006
RM'000
RM'000
(Write back of)/allowance for doubtful debts
Write back of diminution in value of current investments
(Gain)/loss on disposal of investment:
- current investments
- joint ventures
Statutory audit fees to PricewaterhouseCoopers
Malaysia:
- current year
- underprovision of prior year
Other member firms of PricewaterhouseCoopers
International Limited*
Audit related fees to PricewaterhouseCoopers
- Malaysia
Non-audit fees to PricewaterhouseCoopers
- Malaysia
- Other member firms of PricewaterhouseCoopers
International Limited*
Operating lease rental
Hire of plant, machinery and equipment
Rental of land and building
Foreign exchange gain:
- transactions
- translation
Rental income on land and buildings
Interest income
(Write back of)/allowance for inventories
write down
Insurance claims on Medium Volume
Factory Fire
Company
2007
RM'000
2006
RM'000
(30,958)
117,923
-
-
-
(7,202)
-
-
(49,975)
-
(2,664)
5,113
-
-
945
1,113
514
200
966
195
-
87
-
525
561
-
-
2,214
393
1,373
362
-
-
3,975
696
16,794
7,644
12,722
-
-
(21,833)
(4,598)
(1,667)
(35,563)
(3,695)
(20,365)
(1,307)
(67,388)
(374)
(223)
(588)
(30,681)
46,865
-
-
-
(46,737)
-
-
* PricewaterhouseCoopers Malaysia and other member firms of PricewaterhouseCoopers International Limited are separate and
independent legal entities
(continued)
8
STAFF COST
Group
Wages, salaries and bonuses
Termination benefits
Pension cost
- defined contribution plan
- defined benefit plan
Other employee benefits
Reorganisation and redundancy costs of a
principal subsidiary of the Group
Number of employees
(including executive directors)
Company
2007
2006
RM'000
RM'000
2007
RM'000
2006
RM'000
493,768
501,823
-
180
1,980
1,839
-
-
31,365
21,852
38,495
31,818
45,065
58,874
-
16
27,086
614,546
639,419
-
196
9,525
11,159
-
-
Directors’ remuneration
The aggregate amount of emoluments receivable by the Directors of the Group and Company during the financial year was as
follows:
Group
Non-executive Directors:
- fees
- estimated money value of benefits-in-kind
- other benefits
Executive Directors:
- salaries and bonuses
- estimated money value of benefits-in-kind
- other employee benefits
Company
2007
2006
RM'000
RM'000
2007
RM'000
2006
RM'000
1,243
36
291
514
24
178
621
145
514
24
178
1,102
63
174
2,909
955
57
128
1,856
766
180
16
912
Details of the defined contribution and defined benefit plans of the Group and Company are set out in Note 37.
171
172
(continued)
9
FINANCE COST
Group
2007
RM'000
Interest expense on:
Long term loans
Short term borrowings
Others
2006
RM'000
24,321
29,105
9,280
13,791
982
43,878
1,940
35,541
Included in other operating income of the Group is interest income amounting to RM35,563,000 (2006: RM67,388,000).
10
TAXATION
Group
Restated
2007
2006
RM'000
RM'000
Taxation in Malaysia
Current taxation:
- charge for the financial year
- (over)/under accrual in respect of prior years
Taxation outside Malaysia
Current taxation:
- charge for the financial year
- over accrual in respect of prior years
Deferred taxation (Note 20)
Origination and reversal of temporary differences
Write off of deferred tax asset
Company
2007
RM'000
2006
RM'000
50
(137,452)
35,557
2,005
101,532
-
169
(92)
3,071
-
2,173
(568)
-
-
(51)
105,786
(28,596)
(67,576)
(28,409)
101,532
77
(continued)
10
TAXATION (CONTINUED)
Taxation for Group and Company
Group
Restated
2007
2006
RM'000
RM'000
2007
RM'000
2006
RM'000
(28,596)
101,532
77
(28,409)
Company
A numerical reconciliation between the average effective tax rate and the statutory tax rate is as follows:
Group
Restated
2007
2006
%
%
%
Malaysia tax rate
Tax effects of:
- double deduction and allowance incentive
on qualifying expenditure
-
expenses not deductible for tax purposes
income not subject to tax
current year tax losses not recognised
over under accrual in respect of prior years
reversal of previously recognised deferred
tax assets
- recognition of previously unrecognissed
tax losses
- effect on temporary differences not recognised
- tax on share of associated companies and
jointly controlled entities
- lower tax rate
Average effective tax rate
Company
2007
%
2006
%
27
28
27
28
5
(5)
3
(39)
22
(388)
203
(125)
157
8
(12)
-
(28)
-
(17)
7
-
-
10
(1)
(10)
(7)
-
-
5
(45)
14
(158)
15
-
173
174
(continued)
10
TAXATION (CONTINUED)
Group
Restated
2007
2006
RM'000
RM'000
Company
2007
RM'000
2006
RM'000
Disclosure items:
Current year tax losses utilised
during the financial year
31,267
Tax savings arising from such tax losses
8,442
1,057
298
-
-
Previously unrecognised tax losses
utilised during the financial year
Tax savings arising from such tax losses
223,263
60,281
6,675
1,869
-
-
843,939
1,561,714
614,461
1,421,028
-
-
Unutilised tax losses carried forward
Unutilised reinvestment allowance
The tax recoverable which resulted from a writeback arose following the Inland Revenue Board (IRB) agreeing to settle tax disputes
in respect of one of the subsidiary’s treatment of certain items in the tax submissions for Years of Assessment 1989 to 1993.
(continued)
11
(LOSS)/EARNINGS PER SHARE
Basic (loss)/earnings per share is calculated by dividing the net (loss)/profit attributable to shareholders by the weighted average
number of ordinary shares in issue during the financial year.
Group
2007
2006
Net (loss)/profit attributable to shareholders (RM’000)
(589,533)
46,690
Weighted average number of ordinary shares in issue (‘000)
549,213
(107.34)
549,213
8.50
Basic (loss)/earnings per share (sen)
Diluted (loss)/earnings per share is not presented in the financial statements since there are no dilutive potential ordinary shares.
12
DIVIDENDS
There is no dividend proposed in respect of the financial year ended 31 March 2007.
Group
Final dividend for the financial year ended 31 March 2006:
Tax exempt dividend of 5.0 sen per ordinary share
Final dividend for financial year ended 31 March 2005:
Tax exempt dividend of 10.0 sen per ordinary share
2007
RM'000
2006
RM'000
27,461
-
-
54,921
175
176
(continued)
13
PROPERTY, PLANT AND EQUIPMENT
Group
2007
Cost/valuation
At 1 April 2006
2007
Accumulated
depreciation
At 1 April 2006
Currency translation
differences
Charge for the
financial year
Disposals
Written off
Reclassification
Transfer to inventory
At 31 March 2007
Work-in
progress
RM'000
Total
RM'000
Note
Freehold
RM'000
Land
Long term
leasehold
RM'000
Buildings
RM'000
Plant
and
machinery
RM'000
45
256,009
10,989
1,279,834
4,082,411
1,084,357
168,856
6,882,456
861
-
9,195
9,819
10,453
(243)
30,085
5,202
262,072
10,989
196
(22)
(2,583)
46,071
(1,170)
1,331,521
15,717
(27,592)
(15,559)
76,218
4,141,014
differences
Additions
Disposals
Written off
Reclassification
Transfer to inventory
At 31 March 2007
Group
Office
equipment,
furniture
fittings and
vehicles
RM'000
Note
45
48,143 249,577
318,835
(13,217)
(2,851)
(43,682)
(52,300)
(91,287)
(161,729)
13,239 (135,528)
(1,170)
1,090,675 188,524 7,024,795
Office
equipment,
furniture
fittings and
vehicles
RM'000
Work-in
progress
RM'000
Total
RM'000
Freehold
RM'000
Land
Long term
leasehold
RM'000
Buildings
RM'000
Plant
and
machinery
RM'000
-
933
345,130
2,270,842
663,786
-
3,280,691
-
-
1,766
5,007
5,160
-
11,933
-
112
1,045
39,366
(671)
(264)
385,327
210,626
(27,585)
(15,421)
2,433,469
102,796
(9,085)
(51,374)
711,283
-
352,900
(36,670)
(67,466)
(264)
3,541,124
(continued)
13
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Group
2007
Accumulated
impairment losses
At 1 April 2006
differences
Charge for the
financial year
Disposals
At 31 March 2007
Office
equipment,
furniture
fittings and
vehicles
RM'000
Work-in
progress
RM'000
Total
RM'000
Freehold
RM'000
Land
Long term
leasehold
RM'000
Buildings
RM'000
Plant
and
machinery
RM'000
13,671
-
138,713
80,436
55,998
-
288,818
920
-
7,304
4,150
3,040
-
15,414
14,591
-
146,017
84,586
59,038
-
304,232
247,481
9,944
800,177
1,612,959
320,354
188,524
3,179,439
Office
equipment,
furniture
fittings and
vehicles
RM'000
Work-in
progress
RM'000
Total
RM'000
468,451
6,639,237
Net book value
At 31 March 2007
Group (restated)
Note
2006
Cost/valuation
At 1 April 2005
differences
Additions
Disposals
Written off
Reclassification
As previously stated
Effect of adopting
FRS 138
At 31March 2006
as restated
15
Freehold
RM'000
Land
Long term
leasehold
RM'000
Buildings
RM'000
Plant
and
machinery
RM'000
243,464
12,045
1,181,676
3,718,608
1,014,993
(1,525)
14,070
256,009
(106)
(950)
10,989
(20,977)
5,626
(8,840)
122,349
1,279,834
(23,401)
14,041
(6,887)
(12,656)
392,706
4,082,411
(19,405)
(137)
(65,551)
69,766 374,948
478,451
(29,565)
(114)
(46,356)
(6,217)
(77,034)
(95,907)
82,203 (597,258)
1,111,775 168,856 6,909,874
-
-
-
-
(27,418)
-
(27,418)
256,009
10,989
1,279,834
4,082,411
1,084,357
168,856
6,882,456
177
178
(continued)
13
Group (restated)
2006
Accumulated
depreciation
At 1 April 2005
differences
Charge for the
financial year
Disposals
Written off
As previously stated
Effect of adopting
FRS 138
At 31 March 2006
as restated
Group (restated)
2006
Accumulated
impairment losses
At 1 April 2005
differences
Charge for the
financial year
Disposals
At 31 March 2006
as restated
Note
15
Office
equipment,
furniture
fittings and
vehicles
RM'000
Work-in
progress
RM'000
Total
RM'000
Freehold
RM'000
Land
Long term
leasehold
RM'000
Buildings
RM'000
Plant
and
machinery
RM'000
-
821
331,834
2,090,916
576,354
-
2,999,925
-
-
(4,250)
(13,383)
(9,530)
-
(27,163)
-
112
933
19,702
(2,156)
345,130
205,133
(4,989)
(6,835)
2,270,842
126,462
(13,866)
(6,215)
673,205
-
351,409
(21,011)
(13,050)
3,290,110
-
-
-
-
(9,419)
-
(9,419)
-
933
345,130
2,270,842
663,786
-
3,280,691
Office
equipment,
furniture
fittings and
vehicles
RM'000
Work-in
progress
RM'000
Total
RM'000
Freehold
RM'000
Land
Long term
leasehold
RM'000
Buildings
RM'000
Plant
and
machinery
RM'000
14,879
1,056
158,616
89,079
62,330
-
325,960
(1,497)
(106)
(15,916)
(8,827)
(6,115)
-
(32,461)
289
-
(950)
2,699
(6,686)
2,062
(1,878)
16
(233)
-
5,066
(9,747)
13,671
-
138,713
80,436
55,998
-
288,818
242,338
10,056
795,991
1,731,133
364,573
168,856
3,312,947
Net book value
At 31 March 2006
as restated
(continued)
13
A piece of a subsidiary company’s freehold land was revalued on 5 September 1983 based on an independent professional
valuation. The surplus of RM36,881,980 arising on the revaluation was credited to the capital reserves and subsequently utilised.
Had this freehold land been carried at historical cost, the net book value of freehold land that would have been included in the
financial statements at the end of the financial year would be RM22,448,000 (2006: RM22,448,000).
The long term leasehold land comprise 2 parcels of land held by certain subsidiary companies which have unexpired leases of 90
and 69 years respectively as at 31 March 2007 (2006: 91 and 70 years respectively).
The title deed to the land of the Group amounting to net book value of RM72,258,000 (2006: RM72,258,000) has not been
transferred pending subdivision of the master title.
During the financial year, the Group acquired office equipment with an aggregate cost of RM6,778,500 (2006: Nil) by means of a
finance lease. The net book value of the office equipment under finance lease at the balance sheet date was RM6,493,803 (2006:
Nil).
Impairment test for property, plant and equipment
The carrying value of property, plant and equipment of a subsidiary company at balance sheet date is RM2,812,826,000 (2006:
RM2,914,708,000). During the financial year, the subsidiary company undertook a test for impairment of property, plant and
equipment.
The property, plant and equipment were allocated to the subsidiary company’s cash-generating units, i.e. production plants.
(a)
Key assumptions used in the value-in-use calculations
The recoverable amounts of the production plants are determined based on value-in-use calculations. This value-in-use
calculations apply a discounted cash flow model using cash flow projections covering a ten-year period for the two older
production plants and a fifteen-year period for the new production plant. The projections over these periods reflect the
subsidiary company’s expectation of usage, revenue growth, operating costs and margins for each production plant based
on past experience and current assessment of market share, expectations of market growth and industry growth. The valuein-use calculation for the newer plant reflects the initial low utilisation and the expectation of increased utilisation to the end of
the useful life of the plant.
Cash flows projections beyond the tenth year for the two older production plants and fifteenth year for the new production
plant are not extrapolated using estimated terminal growth rates. However the cash flow projections are assumed to be
derived from the dismantling of the production plants and disposal of the land on which the 3 specific plants are located.
179
180
(continued)
13
(a) Key assumptions used in the value-in-use calculations (continued)
For purposes of the value-in-use calculation, a discount rate of 13% has been applied. The discount rate reflects the
prevailing independent market rate applicable to the Group in Malaysia.
The sales volumes used in the projections indicate a significant increase from current levels as the subsidiary
company is planning to introduce new models where capital expenditure has been incurred to date, over the
projection periods. However, the projected sales volume does not include future new models for which capital
expenditure has not been incurred.
The terminal value assumed for the disposal of land resulted in a discounted cash flow which is significantly higher
than the historical cost to the subsidiary company.
b)
Impact of possible changes in key assumptions
Sensitivity analysis show that no impairment loss is required for the carrying amount of property, plant and
equipment assessed, including where realistic variations are applied to key assumptions.
notes to financial statements - 31 March 2007
(continued)
14
GOODWILL
Group
At 31 March
2007
RM'000
2006
RM'000
29,008
29,008
Impairment tests for goodwill
The Group undertook the annual test for impairment of goodwill. The carrying amount of goodwill is allocated to the Group's cash
generating unit.
(a)
Key assumptions used in the value-in-use calculation
The recoverable amount of the cash-generating unit including goodwill in this test is determined based on the value-in-use
calculation. This value-in-use calculation applies a discounted cash flow model using cash flow projections covering a fiveyear period for the distribution business in Malaysia. The projections reflect the subsidiary company's expectation of revenue
growth, operating costs and margins based on past experience and current assessment of market share, expectation of
market growth and industry growth.
For purposes of the value-in-use calculation, a discount rate of 13% has been applied. The discount rate reflects an
independent market rate applicable to the Group in Malaysia.
The sales volumes used in the projections indicate a significant increase from current levels as the Group is planning to
introduce new models where capital expenditure has been incurred to date, over the projected periods. However, the
projected sales volume does not include future new models for which capital expenditure has not been incurred. A nil terminal
value has been assumed.
(b)
Sensitivity analysis show that no impairment loss is required for the carrying amount of goodwill, including where realistic
variations are applied to key assumptions.
181
182
(continued)
15
OTHER INTANGIBLE ASSETS
Group
2007
Cost
At 1 April 2006
Additions
Capitalised
costs for
product under
development
RM'000
Computer
software
RM'000
Total
RM'000
142,975
27,418
30,379
27,418
173,354
142,975
57,797
200,772
(37)
11,648
11,611
9,419
10,667
20,086
9,419
(37)
22,315
31,697
131,364
37,711
169,075
13
-
27,418
27,418
27,418
27,418
13
-
9,419
9,419
9,419
9,419
-
17,999
17,999
Note
13
At 31 March 2007
Amortisation
At 1 April 2006
Exchange rate adjustments
Charge for the financial year
At 31 March 2007
13
Net book value
At 31 March 2007
Group (restated)
2006
Cost
At 1 April 2005
Effects of adopting FRS 138
At 31 March 2006
Amortisation
At 1 April 2005
Effects of adopting FRS 138
At 31 March 2006
Net book value
At 31 March 2006
(continued)
16
SUBSIDIARY COMPANIES
Company
2007
2006
RM'000
RM'000
Unquoted shares at cost:
At 1 April
Additional investments in subsidiaries
Allowance for impairment losses
At 31 March
1,465,659
1,465,659
570,644
-
2,036,303
(327,652)
1,708,651
1,465,659
1,465,659
During the financial year, the Group undertook a restructuring exercise of its overseas subsidiaries, Proton Cars Australia Pty. Ltd.
('PCA'), Proton Cars (UK) Ltd. (‘PCUK’) and Lotus Group International Ltd. ('LGIL') which involved partial waiver and capitalisation of
inter-company debts. This exercise had resulted in PCA, PCUK and LGIL now having positive shareholders equity.
The additional investments represent subscription for 255,000,000 new Redeemable Convertible Preference Shares ('RCPS') of
RM0.10 each for a consideration of RM255,000,000 in Proton Marketing Sdn. Bhd., capitalisation of inter-company loan of
RM308,475,000 with the LGIL Group and subscription of 7,169,000 in new ordinary shares of RM0.10 for a consideration of
RM7,169,000 in Lotus Advance Technologies Sdn. Bhd..
The details of the subsidiary companies are as follows:
Country of
incorporation
Group's effective
interest
2007
2006
Name
Principal activities
Perusahaan Otomobil
Nasional Sdn. Bhd.^
Manufacture, assemble
and sale of motor vehicles
and related products
Malaysia
100%
100%
Proton Tanjung Malim Sdn. Bhd.^
Assembly of motor vehicles
Malaysia
100%
100%
Proton Marketing Sdn. Bhd.
Investment holding
Malaysia
100%
100%
Lotus Advance Technologies Sdn. Bhd
Investment holding
Malaysia
100%
100%
Proton Hartanah Sdn. Bhd.
Investment holding
Malaysia
100%
100%
Proton Capital Sdn. Bhd.
Investment holding
Malaysia
100%
100%
183
184
(continued)
16
SUBSIDIARY COMPANIES (CONTINUED)
Country of
incorporation
Group's effective
interest
2007
2006
Name
Subsidiary of Perusahaan
Otomobil Nasional Sdn. Bhd.
Proton Automobiles (China) Ltd. ^
Dormant
British Virgin
Islands
100%
100%
Subsidiaries of Proton
Marketing Sdn. Bhd.
Proton Corporation Sdn. Bhd. ^
Dormant
Malaysia
100%
100%
Proton Cars (UK) Ltd.*^
Distributor of Proton
vehicles in United Kingdom
England
100%
100%
Proton Cars Australia Pty. Ltd.*^
Importation and
distribution of motor vehicles
Australia
100%
100%
Proton Cars Benelux NV. SA*^
Dormant
Belgium
100%
100%
Lotus Cars Asia Pacific Sdn. Bhd.^
Dormant
Malaysia
100%
100%
Auto Compound and
Distribution Centre Sdn. Bhd.^
Dormant
Malaysia
100%
100%
Proton Edar Sdn. Bhd.^
Sale of motor vehicles,
related spare parts and
accessories
Malaysia
100%
100%
Subsidiaries of Lotus
Advance Technologies Sdn. Bhd.
Proton Engineering
Research Technology Sdn. Bhd.^
Provision of engineering
services
Malaysia
100%
100%
Lotus Group International Ltd.*^
Investment holding
England
100%
100%
Property development
and management
Malaysia
100%
100%
Subsidiary of Proton
Hartanah Sdn. Bhd.
Proton Properties Sdn. Bhd.^
(continued)
16
Group's effective
interest
2007
2006
Name
Country of
incorporation
Subsidiaries of Proton Cars (UK) Ltd.
Smith & Sons Motors Ltd.*^
Dormant
England
100%
100%
Proton Direct Ltd.+^
Motor dealership
England
100%
100%
Proton Cars (Imports) Ltd.*^
Dormant
England
100%
100%
Proton Cars Direct Limited*^
Dormant
England
100%
100%
related spare parts
and accessories
Singapore
100%
100%
Proton Edar Resources Sdn. Bhd.^
Repair and maintenance
of motor vehicles
(previously dormant)
Malaysia
100%
100%
Proton Edar Ventures Sdn. Bhd.^
Dormant
Malaysia
100%
100%
PT Proton Edar Indonesia*
related spare parts and
accessories
Indonesia
95%
95%
Leasing of equipment
and asset
United States
of America
100%
100%
Holds intellectual property
England
100%
100%
Subsidiaries of Proton Edar Sdn. Bhd.
Proton Singapore Pte. Ltd.*^
Subsidiary of Proton Engineering
Research Technology Sdn. Bhd.
Marco Acquisition Corporation*^
Subsidiary of Lotus Group
International Ltd.
Group Lotus Plc*^
185
186
(continued)
16
Country of
incorporation
Group's effective
interest
2007
2006
Car manufacture and
engineering consultancy
England
100%
100%
Lotus Body Engineering Ltd.*^
Dormant
England
100%
100%
Lotus Motorsports Ltd.*^
Dormant
England
100%
100%
Lotus Holdings Inc.*^
Holding company for
operations in North America
United States
of America
100%
100%
Carries out specific
engineering contracts
England
100%
100%
Engineering consultancy
Malaysia
100%
100%
Engineering consultancy
in North America
United States
of America
100%
100%
Lotus Cars USA Inc.*^
Car sales and servicing
United States
of America
100%
100%
Subsidiary of Proton Cars
Australia Pty. Ltd.
Lotus Cars Australia Pty. Ltd.*
Sale of cars
Australia
100%
100%
Name
Subsidiaries of Group Lotus Plc
Lotus Cars Ltd.*^
Subsidiary of Lotus Cars Ltd.
Lotus Engineering Ltd.*^
Subsidiary of Lotus Engineering Ltd.
Lotus Engineering (Malaysia) Sdn. Bhd.^
Subsidiaries of Lotus Holdings Inc.
Lotus Engineering Inc.*^
* Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity
from PricewaterhouseCoopers, Malaysia.
+ Not audited by PricewaterhouseCoopers.
^ Consolidated by merger method of accounting prior to 1 April 2006.
At 31 March 2007, the Directors are of the opinion that the carrying amount of the investment in a subsidiary company exceeds the
recoverable amount. Accordingly, an impairment loss of RM327,652,000 was recognised. The Directors estimated the recoverable
amount based on a 5 year discounted cash flow model.
(continued)
17
ASSOCIATED COMPANIES
Group
Restated
2007
2006
RM'000
RM'000
Unquoted shares at cost
Additional investment
Accumulated impairment losses
Share of post acquisition reserves
52,083
7,169
(22,000)
37,252
132,506
169,758
52,083
(22,000)
30,083
130,326
160,409
Company
2007
RM'000
2006
RM'000
13,600
13,600
13,600
13,600
13,600
13,600
The Group's share of the assets, liabilities, revenue and expenses of the associated companies are as follows:
Group
Restated
2007
2006
RM'000
RM'000
Non-current assets
Current assets
Current liabilities
Net assets
103,615
178,840
(112,697)
169,758
80,134
168,449
(88,174)
160,409
Revenue
210,643
245,062
Expenses (excluding tax)
Profit from ordinary activity before taxation
Taxation
Profit from ordinary activity after taxation
(205,793)
4,850
(1,631)
3,219
(222,126)
22,936
(5,903)
17,033
187
188
(continued)
17
ASSOCIATED COMPANIES (CONTINUED)
The details of the associated companies are as follows:
Country of
incorporation
Group's effective
interest
2007
2006
Name
PHN Industry Sdn. Bhd.
Manufacture and sales
of stamped parts and
sub-assembly of automotive
metal components
Malaysia
35%
35%
Marutech Elastomer
Industries Sdn. Bhd.
Manufacture and
production of moulded
products, extruded and
rubber hoses for motor
vehicles, motorcycle
and other related
products
Malaysia
25%
25%
Exedy (Malaysia) Sdn. Bhd.
Manufacture and
assembly of manual
clutch and automatic
transmission parts
Malaysia
45%
45%
Import, assembly and
distribution of vehicles
Socialist
Republic of
Vietnam
25%
25%
Property developer and
project management
Malaysia
40%
40%
Provide dealer and
customer finance
England
49.99%
49.99%
Engaged in the
manufacture, assembly
and sale of vehicle racking devices
Malaysia
40%
40%
Associated company of Perusahaan
Vina Star Motors Corporation
Associated company of
Proton Hartanah Sdn. Bhd.
Proton City Development
Corporation Sdn. Bhd.
Proton Cars (UK) Ltd.
Proton Finance Ltd.
Proton Edar Sdn. Bhd.
Netstar Advance Systems Sdn. Bhd.
(continued)
17
ASSOCIATED COMPANIES (CONTINUED)
Name
Country of
incorporation
Group's effective
interest
2007
2006
Associated company of Proton
Automobile (China) Ltd.
Goldstar Proton Automobiles Co. Ltd.*
Associated company of Lotus Advance
Technology Sdn. Bhd.
Mizayu (Malaysia) Sdn. Bhd.#
Production of automobile
tools and components
People's
Republic of
China
49%
49%
Malaysia
51%
51%
Development, marketing
and sale of products and
service relating to dies,
moulds and jigs
* The Board has resolved to dissolve the Company.
# In the previous year, the Group had classified Miyazu (Malaysia) Sdn. Bhd. as a jointly controlled entity. The Group has reassessed
the classification of its investment in Miyazu following the adoption of FRS 131 “Interests in Joint Ventures” where all significant
matters relating to financial and operating matters require the unanimous approval of all ventures. The Directors have now
reclassified the investment in Miyazu as an associated company. The change in classification does not have significant impact to
the Group.
18
JOINTLY CONTROLLED ENTITIES
Group
Restated
2007
2006
RM'000
RM'000
Unquoted shares at cost
Accumulated impairment losses
Share of post-acquisition reserves
179,303
179,303
(1,114)
(1,114)
178,189
67,067
245,256
178,189
45,361
223,550
189
190
(continued)
18
JOINTLY CONTROLLED ENTITIES (CONTINUED)
The Group's share of the assets, liabilities, revenue and expenses of the jointly controlled entities are as follows:
Group
Restated
2007
2006
RM'000
RM'000
Non-current assets
Current assets
Current liabilities
217,327
89,871
(83,648)
227,369
117,910
Net assets
223,550
(100,023)
245,256
Revenue
Expenses (excluding tax)
Profit from ordinary activity before taxation
Taxation
Profit from ordinary activity after taxation
172,267
(167,019)
5,248
(3,443)
1,805
162,561
(147,763)
14,798
(2,994)
11,804
The details of the jointly controlled entities are as follows:
Name
Jointly controlled entities of Proton
Marketing Sdn. Bhd.
Proton Parts Centre Sdn. Bhd.#
Proton Cars (Europe) Ltd.#
Jointly controlled entity of Perusahaan
PT Proton Tracoma Motors (Indonesia)#
Jointly controlled entity of
Group Lotus Plc
Lotus Finance Ltd.
Country of
incorporation
Group's effective
interest
2007
2006
Trading of motor vehicle
components, spare parts
and accessories
Malaysia
55%
55%
Dormant
England
56%
56%
Manufacturing and sales of
motor vehicles
Indonesia
51%
51%
Motor vehicles financing
England
49.9%
49.9%
(continued)
18
JOINTLY CONTROLLED ENTITIES (CONTINUED)
Name
Country of
incorporation
Jointly controlled entity of
Proton Edar Sdn. Bhd.
Proton Commerce Sdn. Bhd.
Motor vehicles financing
Malaysia
Group's effective
interest
2007
2006
50%
50%
# Companies in which the Group owns more than one half of the voting power. However, as the Group has joint control over the
financial and operating policies, these investments are treated as jointly controlled entities.
There are no commitments and contingencies relating to the jointly controlled entities.
Impairment test for investment in PT Proton Tracoma
The carrying amount of the Group's investment in PT Proton Tracoma at balance sheet date is RM29.1 million (2006: RM37.6 million).
The Group undertook the test for impairment of its investment in PT Proton Tracoma.
(a)
Key assumptions used in the value-in-use calculations
The recoverable amount of the investment is determined based on value-in-use calculations. This value-in-use calculation apply
a discounted cash flow model using cash flow projections covering a five-year period. The projections reflect the Group's
expectation of revenue growth, operating costs and margins for the investment based on the current assessment of market
share, expectations of market growth and industry growth.
For purposes of the value-in-use calculation, a discount rate of 22% has been applied. The discount rate reflect the prevailing
independent market rate applicable to the industry in the country in which the joint controlled entity operates, as adjusted for
risk premium.
The sales volumes used in the projections indicate a significant increase from current levels as the Group is planning to
introduce new models over the projection periods and expansion is expected for this relatively new investment.
(b)
Sensitivity analysis show that no impairment loss is required for the carrying amount of investment in the joint controlled entity
assessed, including where realistic variations are applied to key assumptions.
191
192
(continued)
19
OTHER LONG TERM INVESTMENTS
Group
Unquoted investments in Malaysia:
At cost
Allowance for diminution in value
20
2007
RM'000
2006
RM'000
13,347
(2,950)
10,397
13,347
(2,950)
10,397
Company
2007
2006
RM'000
RM'000
8,575
(2,100)
6,475
8,575
(2,100)
6,475
DEFERRED TAXATION
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting,
are shown in the balance sheet:
Group
Subject to income tax:
Deferred tax assets
Deferred tax liabilities
2006
RM'000
(754)
105,786
(805)
-
-
(754)
104,981
-
-
Group
Movement of deferred tax
At beginning of financial year
(Charged)/credited to Income Statement (Note 10)
- property, plant and equipment
- inventories
- allowances and provisions
- receivables
At end of financial year
Company
2007
2006
RM'000
RM'000
2007
RM'000
Company
2007
2006
RM'000
RM'000
2007
RM'000
2006
RM'000
104,981
37,405
-
-
(46,290)
(18,987)
(61,361)
20,903
(105,735)
(754)
54,237
589
9,296
3,454
67,576
104,981
-
-
(continued)
20
DEFERRED TAXATION (CONTINUED)
Group
Company
2007
2006
RM'000
RM'000
2007
RM'000
2006
RM'000
- inventories
-
46,290
18,987
-
-
- allowances and provisions
-
61,361
126,638
(20,852)
105,786
-
-
(754)
(754)
(754)
(7,178)
(14,479)
(21,657)
20,852
(805)
-
-
Deferred tax assets (before offsetting)
Offset of deferred tax liabilities
Deferred tax assets (after offsetting)
Deferred tax liabilities (before offsetting)
- receivables
Offset against deferred tax assets
Deferred tax liabilities (after offsetting)
The amount of liability not offset relates to deferred tax liabilities arising in an overseas subsidiary for which there is no available asset
for offset.
The tax effect of deductible temporary differences and unused tax losses (both of which have no expiry date) for which no deferred
tax asset is recognised in the Balance Sheet are as analysed below. The availability of the unused tax losses and unabsorbed capital
allowances for offsetting against future taxable profits of the Company and the respectively subsidiary companies are subject to no
substantial changes in shareholdings of those companies under Section 44 (5A) and (5B) of Income Tax Act, 1967.
193
194
(continued)
20
DEFERRED TAXATION (CONTINUED)
Group
2007
2006
RM'000
RM'000
Deductible temporary differences of which no deferred tax assets is recognised
Unrecognised tax losses
Unabsorbed capital allowances
Unrecognised reinvestment allowances
Other temporary differences
Taxable temporary differences of which no deferred tax liabilities is recognised
Surplus from land revaluation
243,496
347,473
421,589
8,982
184,214
47,395
397,888
4,661
12,201
11,572
As at 31 March 2007, there is no temporary differences associated with unremitted earnings of subsidiary companies, associated
companies and jointly controlled entities for the recognition of deferred tax liabilities (2006: Nil).
21
INVENTORIES
Group
2007
RM'000
2006
RM'000
Raw materials:
- completely knocked-down packs of vehicles
- others
Parts, accessories and general stores
Work-in-progress
230,077
77,220
84,992
149,973
264,920
148,174
91,257
102,933
Finished vehicles
Goods-in-transit
Apartments for sale
693,339
23,072
14,939
698,931
65,988
16,802
1,273,612
1,389,005
(continued)
22
TRADE AND OTHER RECEIVABLES
Group
Company
2007
2006
RM'000
RM'000
2007
RM'000
2006
RM'000
786,349
969,300
-
-
(37,550)
748,799
(52,662)
916,638
-
-
Other receivables
Allowance for doubtful debts
140,594
(70,487)
70,107
143,778
(86,333)
57,445
5
5
195
195
Warranty claims recoverable (Note 32)
Prepayments
Deposits
121,397
25,096
15,626
981,025
125,835
28,709
14,224
1,142,851
5
195
Currency exposure at 31.3.2007
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
Trade receivables
Allowance for doubtful debts
The currency exposure profile of trade and other receivables are as follows:
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
724,825
724,825
28,338
32,767
61,105
77,944
18,343
96,287
51,098
19,479
70,577
20,246
6,399
1,586
28,231
902,451
76,988
1,586
981,025
5
-
-
-
-
5
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Others
Company
Functional currency
Ringgit Malaysia
195
196
(continued)
22
TRADE AND OTHER RECEIVABLES (CONTINUED)
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
958,916
958,916
113
61,349
61,462
60,673
14,459
270
75,402
3,697
14,015
4
17,716
249
8,964
20,142
29,355
1,023,648
98,787
20,416
1,142,851
195
-
-
-
-
195
Total
RM'000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Others
Company
Functional currency
Ringgit Malaysia
Credit terms of trade receivable for the Group ranges from 14 days to 360 days (2006: 14 days to 360 days). However, the majority
of the Group trade receivables have a credit term between 14 days to 60 days (2006: 14 days to 60 days).
Group sales are concentrated in Malaysia with one major third party customer in Malaysia making up 20% (2006: 31%) of total Group
revenue.
23
AMOUNTS DUE FROM SUBSIDIARY COMPANIES
The amounts due from subsidiary companies are denominated in Ringgit Malaysia, interest free and has no fixed terms of payment.
(continued)
24
AMOUNTS DUE FROM ASSOCIATED COMPANIES
The amounts due from associated companies arose from normal trade transactions. These amounts have credit terms ranging from
30 days to 60 days (2006: 30 days to 60 days).
Ringgit
Pound
Malaysia
Sterling
Total
RM'000
RM'000
RM'000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
22,599
22,599
1,715
1,715
22,599
1,715
24,314
Ringgit
Pound
Malaysia
Sterling
Total
RM'000
RM'000
RM'000
Group (restated)
Functional currency
Ringgit Malaysia
Pound Sterling
39,040
39,040
1,351
1,351
39,040
1,351
40,391
197
198
(continued)
25
AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES
The amounts due from jointly controlled entities arose from normal trade transactions. These amounts have credit terms ranging
from 30 days to 45 days (2006: 30 days to 45 days).
Advances to a jointly controlled entity in 2006 were due within 180 days and interest of 7.23% was charged.
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
4,668
-
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
9,201
9,201
-
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
Group
Functional currency
Ringgit Malaysia
5,950
-
-
10,618
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
Group (restated)
Functional currency
Ringgit Malaysia
Pound Sterling
26
-
74
13
87
-
9,275
13
9,288
CURRENT INVESTMENTS
Group
Quoted investments in Malaysia:
Cost:
Shares
Commercial paper and corporate debt
Unquoted investments in Malaysia:
Cost:
2007
RM'000
2006
RM'000
15,496
584
116,736
16,080
584
117,320
57,368
73,448
94,645
211,965
(continued)
26
CURRENT INVESTMENTS (CONTINUED)
Group
Restated
2007
2006
RM'000
RM'000
Market value of quoted investments:
Shares
27
16,355
121,868
2,313
18,668
4,351
129,219
DEPOSITS, BANK AND CASH BALANCES
Group
Short term funds deposited with:
Licensed banks
Discount houses
Other financial institutions
Bank and cash balances
2007
RM'000
2006
RM'000
493,206
43,000
536,206
90,269
626,475
1,168,787
227,470
57,465
1,453,722
132,260
1,585,982
Group
2007
RM'000
2006
RM'000
0 - 1 month
363,428
2 - 3 months
4 - 6 months
6 - 12 months
More than 12 months
73,666
94,900
4,212
536,206
626,287
83,386
90,500
353,549
300,000
1,453,722
Bank balances are deposits held at call with banks.
Company
2007
2006
RM'000
RM'000
9,500
9,500
1,110
10,610
49,000
49,000
835
49,835
Company
2007
2006
RM'000
RM'000
9,500
9,500
49,000
49,000
199
200
(continued)
27
DEPOSITS, BANK AND CASH BALANCES (CONTINUED)
The currency exposure profile of deposits, bank and cash balances are as follows:
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
532,993
532,993
21,860
14,459
36,319
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
1,483,290
1,483,290
1,312
14,807
16,119
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Australian Dollar
Others
15,495
3,633
19,128
8,809
1,215
10,024
1,260
26,751
28,011
580,417
18,092
1,215
26,751
626,475
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Australian Dollar
Others
15,549
10,154
25,703
789
34,570
35,359
4,057
2,992
18,462
25,511
1,504,997
27,953
34,570
18,462
1,585,982
Deposits, bank and cash balances in the Company as at 31 March 2007 and 2006 are denominated in Ringgit Malaysia.
The weighted average effective interest rates of deposits at the balance sheet date were 3.22% (2006: 3.10%) per annum for the
Group and 2.95% (2006: 2.73%) for the Company.
The Group has facilities comprising Letter of Credit, Banker's Acceptance and Bank Guarantee amounting to RM525.1 million
available as at 31 March 2007.
(continued)
28
SHARE CAPITAL
Group and Company
2007
2006
RM'000
RM'000
Authorised:
Issued and fully paid:
At beginning/end of financial year
29
1,000,000
1,000,000
549,213
549,213
RESERVES
The Company has sufficient tax credits under Section 108(6) of the Income Tax Act, 1967 to frank all (2006: RM936.3 million) of its
retained profits as at 31 March 2007 if paid out as dividends. The extent of the retained earnings not covered at that date amounted
to Nil (2006: RM105.6 million).
In addition, the Company has tax exempt income as at 31 March 2007 amounting to approximately RM320.6 million (2006: RM56.6
million) available for distribution as tax exempt dividends to shareholders. This tax exempt income is subject to the agreement by the
Inland Revenue Board.
The capital reserves arose as a result of a Group reorganisation exercise whereby all existing shareholders of Perusahaan Otomobil
Nasional Sdn. Bhd. ('PONSB') (previously Perusahaan Otomobil Nasional Berhad) exchanged all their ordinary shares of RM1.00
each comprising of 549,213,000 ordinary shares in PONSB for 549,213,000 new ordinary shares of RM1.00 each in the Company
in a one-for-one share exchange on 5 April 2004. Following the share for share exchange, the Company has no share premium.
Accordingly, the amount of share premium previously recognised on consolidation has been designated as capital reserve.
30
LONG TERM LIABILITIES
Group
2007
2006
RM'000
RM'000
Unsecured:
Long term loans (Note a)
Portion repayable within twelve months (Note 36)
135,027
(58,877)
115,490
(56,613)
76,150
58.877
201
202
(continued)
30
LONG TERM LIABILITIES (CONTINUED)
Group
2007
2006
RM'000
RM'000
Secured:
Long term loans
Lease and hire purchase creditors
- secured (Note b)
Employee retirement benefits (Notes (d) & 37)
Automotive Development Fund (Notes (c) & 43)
(a)
-
570,900
(570,900)
-
6,400
(956)
5,444
-
49,842
50,201
41,378
-
181,637
100,255
Long term loans - unsecured
Group
2006
2007
RM'000
RM'000
The long term loans are repayable as follows:
Within one year (Note (i))
Between one and two years
More than two years (Note (ii))
(i)
58,877
76,150
135,027
56,613
58,877
115,490
Repayable within one year
The loan balance comprises of 2 separate tranches of RM10.9 million (2006: RM21.6 million) and RM48.0 million (2006:
RM93.9 million) respectively. The repayment of the first tranche of the loan is due on 22 June 2007 and the second
tranche is due on 30 September 2007. Both tranches of the loan bear a fixed interest rate of 4% per annum and is
repayable in Ringgit Malaysia.
Subsequent to the financial year end, the Group obtained a deferment for the repayment of the second tranche loan of
RM47.8 million due on 30 September 2007 to 30 September 2009.
(continued)
30
LONG TERM LIABILITIES (CONTINUED)
(a)
Long term loans - unsecured (continued)
(ii)
Repayable more than two years
Subsequent to the financial year end, the Government of Malaysia has approved a loan of up to RM400 million to the
Group at concessionary terms. The loan is due to be repaid in 4 installments over a 4 year period commencing 1 April
2009. At 31 March 2007, RM76.2 million has been advanced by the Government of Malaysia in respect of this facility.
(b)
Lease and hire purchase creditors - secured
The lease and hire purchase arrangements obtained by subsidiary companies are secured against the assets of the respective
subsidiary companies.
Group
2007
2006
RM'000
RM'000
The lease and hire purchase creditors are repayable as follows:
Within one year
Between one and two years
Between two and five years
Later than five years
Total Gross Payments
Less: Finance charges
Total Net Payments
(c)
1,403
1,403
4,216
820
7,842
(1,442)
6,400
-
Automotive Development Fund
The Government of Malaysia has approved the setting up of an Automotive Development Fund ('ADF') under the Ninth Malaysia
Plan with the objective of modernising and automating the manufacturing processes, improving efficiency, productivity, quality
and the application of automation for the Malaysian automotive industry.
The Government of Malaysia had, at 31 March 2007, disbursed a total of RM50 million to the Group to be utilised for payments
to external parties for the purpose of developing and promoting a competitive and viable domestic automotive sector as a
means to achieve the objective of the ADF.
(d)
Employee retirement benefits
The employee retirement benefits represents the scheme operated by Lotus Group International Ltd., as disclosed in Note 37.
203
204
(continued)
31
TRADE AND OTHER PAYABLES
Group
Trade payables
Other payables
Accruals
Amounts due to related parties
Deferred revenue
Lease and hire purchase creditors
- current portion (Note 30)
2007
RM'000
2006
RM'000
242,801
203,553
558,124
131
40,773
250,129
350,118
625,743
21,338
-
Company
2007
2006
RM'000
RM'000
790
-
617
2,102
-
956
-
-
-
1,046,338
1,247,328
790
2,719
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
The currency exposure profile of the trade and other payables are as follows:
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Others
Company
Functional currency
Ringgit Malaysia
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Others
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
673,641
15,893
-
22,245
130,000
-
121,510
25,642
-
16,826
17,414
-
20,773
422
1,972
854,995
189,371
1,972
689,534
152,245
147,152
34,240
23,167
1,046,338
790
-
-
-
-
790
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
960,123
-
4,514
103,949
-
16,678
15,371
357
28,133
1,273
-
95,767
8,641
12,522
1,105,215
129,234
12,879
960,123
108,463
32,406
29,406
116,930
1,247,328
(continued)
31
TRADE AND OTHER PAYABLES (CONTINUED)
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
2,658
-
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
Company
Functional currency
Ringgit Malaysia
-
-
61
2,719
Terms of trade payables granted to the Group and Company varies up to 60 days (2006: 60 days) credit days and no credit (2006:
no credit) respectively.
32
PROVISIONS
Group
At 1 April
Exchange differences
Charged to income statement
Warranties receivable
Additional provision for the financial year
Utilised during the financial year
At 31 March
2007
RM'000
2006
RM'000
217,062
1,996
38,737
239,888
(5,043)
81,314
26,491
65,228
(88,219)
196,067
(8,946)
72,368
(90,151)
217,062
The Group expects to be reimbursed by suppliers in respect of warranties amounting to RM121,397,000 (2006: RM125,835,000)
as disclosed in Note 22.
33
AMOUNTS DUE TO SUBSIDIARY COMPANIES
Amounts due to subsidiary companies are unsecured, denominated in Ringgit Malaysia, interest free and have no fixed repayment
terms.
34
AMOUNTS DUE TO ASSOCIATED COMPANIES
Amounts due to associated companies arose from normal trade transactions, denominated in Ringgit Malaysia and are payable
within 60 days.
205
206
(continued)
35
AMOUNTS DUE TO JOINTLY CONTROLLED ENTITIES
Amounts due to jointly controlled entities arose from normal trade transactions and are due between 30 days to 45 days (2006: 30
days to 45 days).
The currency exposure profile of the amounts due to jointly controlled entities is as follows:
Ringgit
Malaysia
RM'000
US
Pound
Sterling
Dollar
Total
RM'000
RM'000
RM'000
Group
Functional currency
Ringgit Malaysia
25,060
Ringgit
Malaysia
RM'000
Group
Functional currency
Ringgit Malaysia
36
8,736
-
-
25,060
Pound
US
Sterling
Dollar
Total
RM'000
RM'000
RM'000
75
-
8,811
SHORT TERM BORROWINGS
Group
2007
2006
RM'000
RM'000
Unsecured:
Long term loan
- current portion (Note 30)
Bankers acceptance
Bank overdrafts
Secured:
Bank overdrafts
Long term loan - current portion (Note 30)
58,877
739
27,128
56,613
1,304
58,260
86,744
116,177
77,682
77,682
164,426
117,689
570,900
688,589
804,766
(continued)
36
SHORT TERM BORROWINGS (CONTINUED)
The interest rate charged for bank overdrafts during the financial year ranged from 5.79% to 6.79% (2006: 5.50% to 6.83%) per
annum.
The bank overdraft facilities are secured by way of a corporate guarantee from a subsidiary company.
The bankers acceptance was drawn in Ringgit Malaysia and payable within 60 days. No interest was charged to the amount drawn
(2006: Nil).
The currency exposure profile of the short-term borrowings is as follows:
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
59,616
59,616
104,810
104,810
Ringgit
Malaysia
RM'000
Pound
Sterling
RM'000
57,917
57,917
332,193
332,193
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
-
-
Total
RM'000
-
59,616
104,810
164,426
US
Dollar
Euro
Others
RM'000
RM'000
RM'000
Total
RM'000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
67,504
67,504
313,740
5,169
318,909
28,243
28,243
371,657
433,109
804,766
207
208
(continued)
37
EMPLOYEE RETIREMENT BENEFITS
(a) Defined contribution plan
Group companies incorporated in Malaysia contribute to the Employees Provident Fund, the national defined contribution plan.
Once the contributions are paid, the Group has no further payment obligations.
(b)
Defined benefit plan
Lotus Group Scheme - defined benefit scheme
Lotus Group International Ltd. and its subsidiaries ('Lotus Group'), operate a defined benefit pension scheme, the Lotus
Pension Plan. The assets are held in separate trustee administered funds. In addition, it provides life assurance cover for all
employees.
Contributions to the scheme are charged to the Income Statement so as to spread the cost of pensions over employees'
working lives with the Lotus Group. The contributions are determined by a qualified actuary on the basis of triennial valuations.
The latest actuarial valuation of the plan was carried out on 31 December 2005, using the Projected Unit method, updated to
31 December 2006.
The movements during the financial year in the amount recognised in the Consolidated Balance Sheet is as follows :
Group
2007
2006
RM'000
RM'000
At 1 April
Currency translation differences
Charged to Income Statement
Contributions and benefits paid
At 31 March
41,378
14,213
2,013
21,852
(15,401)
49,842
(3,364)
45,065
(14,536)
41,378
The amounts recognised in the Consolidated Balance Sheet is analysed as follows:
Group
2007
2006
RM'000
RM'000
Present value of obligation
392,068
370,548
Fair value of plan assets
Shortfall of funded plan
Unrecognised actuarial gain
Unrecognised transitional liability
Liability on Balance Sheet
(369,469)
22,599
42,040
(14,797)
49,842
(309,543)
61,005
8,455
(28,082)
41,378
(continued)
37
EMPLOYEE RETIREMENT BENEFITS (CONTINUED)
The expense recognised in the Consolidated Income Statement is analysed as follows:
Group
2007
2006
RM'000
RM'000
Current service cost
Interest cost
Expected return on plan assets
14,383
19,988
11,996
15,159
Actuarial gain recognised
Gain on curtailments and settlement
Amortisation of transitional liability
Total, included in staff cost within administrative expenses (Note 8)
(22,790)
(4,701)
14,972
21,852
(16,750)
(2,670)
37,330
45,065
Actual return on plan assets
28,059
65,290
The principal actuarial assumptions used in respect of the Group's defined benefit plan were as follows:
Group
2007
%
2006
%
Discount rates
Expected return on plan assets
5.40
5.00
- equities
- bonds
- others
7.50
4.75
4.00
7.25
4.50
Expected rate of salary increase
Expected rate of pension payment increase
Inflation
4.10
3.00
3.10
4.00
3.85
2.85
2.85
209
210
(continued)
38
SEGMENTAL INFORMATION
The Group is principally engaged in the automobile industry namely manufacturing, assembling, trading and provision of engineering
and other services in respect of motor vehicles and related products. Accordingly, no segmental information is considered necessary
for analysis by industry segments.
Inter-segment sales comprise of sales of cars, parts and engineering services to companies in different geographical locations.
Analysis of the Group's revenue, results and other information by geographical locations of the assets are as follows:
Malaysia
Other countries
Elimination
Total
2007
2006
2007
2006
2007
2006
2007
2006
RM'million RM'million RM'million RM'million RM'million RM'million RM'million RM'million
Revenue
External sales
3,729.3
Inter-segment sales
Total revenue
243.0
3,972.3
6,654.6
129.9
6,784.5
1,182.5
124.8
1,307.3
1,142.3
149.6
1,291.9
(367.8)
(367.8)
(448.4)
58.6
(183.9)
(118.1)
(49.5)
14.5
21.3
(4.2)
7.5
(5.3)
Result
Segment operating
(loss)/profit
Unallocated expenses
Unallocated income
Interest expense
Interest income
Share of net results of
associated companies
and jointly controlled
entities
Taxation
(Loss)/profit after taxation
(279.5)
(279.5)
4,911.8
4,911.8
7,796.9
5.4
(681.7)
58.50
(35.5)
35.6
(54.1)
9.9
9.9
(43.9)
67.4
-
5.0
28.6
(589.5)
28.8
28.4
46.4
7,796.9
(continued)
38
SEGMENTAL INFORMATION (CONTINUED)
Malaysia
Other countries
Elimination
Total
2007
2006
2007
2006
2007
2006
2007
2006
Other information
Segment assets
Unallocated assets
Total assets
5,379.3
6,907.1
745.4
620.4
822.1
785.3
6,124.7
822.1
6,946.8
7,527.5
785.3
8,312.8
Segment liabilities
Unallocated liabilities
Total liabilities
871.1
1,282.1
545.3
278.7
299.8
881.3
1,416.4
299.8
1,716.2
1,560.8
881.3
2,442.1
Capital expenditure
Depreciation and
amortisation
Assets written off
Impairment
Other non-cash items
294.7
455.4
24.1
23.1
-
-
318.8
478.5
351.9
92.2
(26.5)
336.3
82.9
269.2
23.3
2.1
3.9
15.1
5.1
59.5
-
-
375.2
94.3
(22.6)
351.4
82.9
5.1
328.7
Unallocated income includes dividend from other investments, gain on disposal of current investments and writeback of provision for
diminution in value of current investments. Unallocated expenses represent losses on current investments, both realised and
unrealised. Segment assets consist primarily of property, plant and equipment, inventories, receivables and operating cash, and
exclude investments in associated companies, jointly controlled entities, long term investments, current investments and deferred tax
assets. Segment liabilities comprise operating liabilities and exclude items such as taxation and borrowings.
Capital expenditure mainly comprises additions to property, plant and equipment (Note 13).
211
212
(continued)
38
SEGMENTAL INFORMATION (CONTINUED)
Secondary reporting format
The primary reporting format is based on geographical locations of the assets. The industry segmentation is considered unnecessary
as the Group is principally engaged in the automobile industry. Therefore, only sales to external customers based on customer
location is presented.
Malaysia
Other countries
Elimination
Total
2007
2006
2007
2006
2007
2006
2007
2006
Revenue
External sales
Inter-segment sales
Total revenue
39
3,386.8
243.0
3,629.8
6,441.0
129.9
6,570.9
1,525.0
124.8
1,649.8
1,355.9
149.6
1,505.5
(367.8)
(367.8)
(279.5)
(279.5)
4,911.8
4,911.8
7,796.9
7,796.9
CAPITAL AND OTHER COMMITMENTS
Capital commitments
Capital expenditure for property, plant and equipment approved by the Board not provided for in the financial statements:
Group
Contracted for
Not contracted for
40
2007
RM'000
2006
RM'000
283,328
2,266,587
267,727
3,900,523
2,549,915
4,168,250
OPERATING LEASES
As at 31 March 2007, the Group was committed to making the following payments in respect of operating leases expiring:
Group
Within one year
Between one and five years
After five years
Land and
buildings
RM'000
2007
Plant and
machinery
RM'000
Total
RM'000
Land and
buildings
RM'000
2006
Plant and
machinery
RM'000
Total
RM'000
-
1,162
1,162
1,246
2,212
3,458
1,144
1,144
747
123
2,032
1,891
123
3,176
5,753
6,999
1,884
4,096
7,637
11,095
(continued)
41
SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES
In the normal course of business, the Group and Company undertake a variety of transactions at mutually agreed terms with
subsidiary companies, associated companies, jointly controlled entities and other related parties. The related parties with whom the
Group and Company transact with, include the following companies:
Related parties
PEPS-JV (M) Sdn. Bhd.
Technomeiji Rubber Industries Sdn. Bhd.
Aluminium Alloy Industries Sdn. Bhd.
Relationship
Equity investment
Equity investment
Equity investment
In addition to related parties disclosures mentioned elsewhere in the financial statements, set out below are other significant related
party transactions. The related party transactions described below were carried out on terms and conditions obtainable in
transactions with unrelated parties unless otherwise stated.
(a)
Sales of goods and services
Group
2006
2007
RM'000
RM'000
- Jointly controlled entities
(b)
13,615
18,650
Purchases of goods and services from:
Group
2007
2006
RM'000
RM'000
- Associated companies
- Jointly controlled entities
- PEPS-JV (M) Sdn Bhd
- Technomeiji Rubber Industries Sdn. Bhd.
- Aluminium Alloy Industries Sdn. Bhd.
227,435
84,280
157,536
165,940
128,948
7,970
2,715
186,259
13,597
16,601
213
214
(continued)
42
CONTINGENT LIABILITIES
(a)
A supplier had obtained a judgement in default against a subsidiary company for RM12.2 million after failing to reach a formal
agreement. The subsidiary had obtained legal opinion that the claims are without basis and an action to strike out a portion of
the claim (i.e. RM7.2million) would be successful.
(b)
43
A Distributor instituted arbitration proceedings against a subsidiary company as a result of the termination of its distributorship,
for which the Distributor had claimed USD9,941,973 (RM37,779,497) plus general damages and interest. The Arbitration
Award was handed down on 30 October 2006 wherein the Distributor's claim against the subsidiary company was dismissed.
The Distributor has filed an action in court to set aside the Arbitration Award. The subsidiary has obtained legal advice that it is
highly unlikely that such action will be successful.
CASH AND CASH EQUIVALENTS
Group
Licensed banks
Discount houses
Other licensed financial institutions
Bank and cash balances
Deposits, bank and cash balances
Bank overdrafts
Fixed deposit pledged as security
Bank balance in respect of ADF Fund (Note 30)
Company
2007
2006
RM'000
RM'000
2007
RM'000
2006
RM'000
493,206
1,168,787
9,500
49,000
43,000
536,206
90,269
626,475
(104,810)
(50,201)
471,464
227,470
57,465
1,453,722
132,260
1,585,982
(175,949)
(716,841)
693,192
9,500
1,110
10,610
10,610
49,000
835
49,835
49,835
(continued)
44
FINANCIAL INSTRUMENTS
(a) Financial risk management objectives and policies
The Group's activities are exposed to a variety of financial risks, including foreign currency exchange risk, interest rate risk, market
risk, credit risk, liquidity and cash flow risk. The Group focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group. Financial risk management is carried out through risks
reviews, internal control systems, a global insurance programme and adherence to Group financial risk management policies.
The Board regularly reviews these risks and approves the treasury policies, which covers the management of these risks.
The Group uses derivative financial instruments such as foreign exchange contracts and interest rate instruments to hedge
certain exposures. It does not trade in financial instruments.
(i)
Foreign currency exchange risk
The Group is exposed to currency risk as a result of the foreign currency transactions entered into by the Company and
subsidiary companies in currencies other than their functional currency. The Group enters into forward foreign currency
exchange contracts to limit the exposure on foreign currency receivables and payables, and on cash flows generated
from anticipated transactions denominated in foreign currencies.
(ii)
Interest rate risk
The Group's income and operating cash flows are not substantially affected by changes in market interest rates except for
interest from bank deposits. Derivative financial instruments are used, where appropriate, to generate the desired interest
rate profile.
(iii)
Market risk
The Group does not face significant exposure from the risk from changes in debt and equity prices.
(iv)
Credit risk
The Group seeks to invest cash assets safely and profitably. The Group considers the risk of material loss in the event
of non-performance by a financial counter party to be unlikely in view of the financial strength of those counter-parties.
The Group seeks to control customers credit risk by ensuring that significant sales of product and services are made to
customers with an appropriate credit history.
(v)
Liquidity and cash flow risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions.
215
216
(continued)
44
FINANCIAL INSTRUMENTS (CONTINUED)
(b) Forward foreign exchange contracts
Forward foreign exchange contracts are entered into by the Group in currencies other than the functional currency to manage
exposure to fluctuations in foreign currency exchange rates on specific transactions.
As at 31 March 2007, the outstanding notional principal amount of the Group foreign exchange contracts are as follows:
Group
Maturity
Less than 6 months
Between 6 months and 1 year
2007
RM'000
2006
RM'000
149,864
45,873
42,311
192,175
41,986
87,859
The foreign currency amounts to be received and the contractual exchange rates of the Group's outstanding contracts are as
follows:
Currency
to be
received
Hedged item
2007
Group
Future purchase of raw materials over the
following 6 months
JPY
Currency
to be
paid
RM'000
equivalent
Average
contracted rate
USD
114,947
1 USD = RM3.0170
GBP
GBP
USD
JPY
34,917
42,311
192,175
1 USD = GBP 1.9209
1 USD = JPY 219.7491
2006
Group
Future purchase of raw materials over the
following 6 months
Forecasted receivables
- the following 6 months
GBP
- 6 to 12 months
GBP
USD
USD
45,873
41,986
87,859
Forecasted receivables
- the following 6 months
- 6 to 12 months
1 USD = GBP 1.7701
1 USD = GBP 1.7571
(continued)
44
FINANCIAL INSTRUMENTS (CONTINUED)
(c) Fair values
The carrying amounts of financial assets and liabilities of the Group and Company at the balance sheet date approximated their
fair values except as set out below:
Group
Company
Carrying
Fair
amount
value
RM'000
RM'000
Note
Carrying
amount
RM'000
Fair
value
RM'000
Current investments
Advance - Government loan facility
Lease and hire purchase creditor - long term portion
26
19
30
30
73,448
10,397
(76,150)
(5,444)
76,036
*
#
(5,036)
6,475
*
-
-
2006
Recognised on the Balance Sheet
Current investments
Long term loans - unsecured
26
19
30
211,965
10,397
(115,490)
220,864
*
(115,078)
6,475
-
*
-
-
(5,041)
-
-
2007
Recognised on the Balance Sheet
Not recognised on the Balance Sheet
Foreign exchange hedge instruments
*
#
It was not practicable within the constraints of timeliness and cost to estimate the fair values of the unquoted shares
reliably. The Group’s share of the net tangible worth of the investments at the balance sheet date is RM15,660,813 (2006
: RM14,956,000).
It was not practicable within the constraints of timeliness and cost to estimate the fair value of the advance from the
Government reliably as the terms of the facility has yet to be finalised.
217
218
(continued)
45
CHANGES IN ACCOUNTING POLICIES
The following describes the impact of the new accounting standards, amendments to the published standards and IC interpretations
adopted by the Group and Company for financial year beginning 1 April 2006 as listed in Note 2 of Basis of Preparation of the
Financial Statements.
(a)
Irrelevant or immaterial effect on financial statements
The adoption of FRS 1, 2, 3, 5, 102, 108, 110, 121, 127, 128, 132, 133, 140 and the 'assets ceiling' amendments to FRS
119 (2004) did not result in significant changes to the Group and Company's accounting policies. In summary:
•
•
•
•
(b)
FRS 1, 2, 3, 133, 140 and the amendment to FRS 119 (2004) are not relevant to the Company's operations,
FRS 5 requires the Group and Company to continue to depreciate its property, plant and equipment where assets
identified for disposal do not meet the criteria set out by that standard; previously, depreciation ceased when the Board
has plans to sell the assets,
FRS 5, 102, 108, 110, 127, 128, 132 and ICs had no material effect on the Group and Company's policies,
FRS 121 had no material effect on the Group and Company's policies as the Group and Company has the same
functional currency as its measurement policy.
Reclassification of prior year comparatives
Set out below are changes in accounting policies that resulted in reclassification of prior year comparatives but did not effect
the recognition and measurement of the Group's net assets:
(i)
FRS 101 has affected the presentation of minority interest. In the Consolidated Balance Sheets, minority interest is now
presented within total equity. In the Consolidated Income Statement, minority interest is presented as an allocation of the
net profit or loss for the period. The movement in minority interest is now presented in the Consolidated Statement of
Changes in Equity. Consequently, total recognised income and expenses for the period, showing separately the amounts
attributable to equity holders of the parent and to minority interest are shown in the Consolidated Statement of Changes
in Equity. Share of results in associated companies and jointly controlled entities is now disclosed net of taxation in the
Consolidated Income Statement.
(ii)
FRS 131 has affected the classification of investment in jointly controlled entity. The Group has reassessed the
classification of its investment in Miyazu Sdn Bhd following the adoption of FRS 131 where all significant matters relating
to financial and operating matters require the unanimous approval of all venturers. The Directors have now reclassified
the investment in Miyazu Sdn Bhd as an associated company.
(continued)
45
CHANGES IN ACCOUNTING POLICIES (CONTINUED)
(c) Relevant effect from adoption of new accounting policies or change in accounting policies
(i)
FRS 116: Property, Plant and Equipment
The adoption of FRS 116 has resulted in extension of the accounting policy on property, plant and equipment as follows:
•
The cost of property, plant and equipment includes costs of dismantling, removal and restoration, the obligation
incurred as a consequence of installing the assets;
•
The assets' residual values and useful life are reviewed and adjusted as appropriate at least at each financial yearend; and
•
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance expenses are charged to the Income
Statement during the financial period in which they are incurred.
The Group has applied retrospectively the aforesaid and no material adjustment resulted from this assessment.
(ii)
FRS 136 : Impairment of Assets
The adoption of FRS 136 had resulted in the extension of the accounting policy on impairment of goodwill. The
accounting policy on Impairment of Assets is set out in Note 3(t).
(iii)
FRS 138 : Intangible Assets
The adoption of FRS 138 prospectively resulted in the extension of the accounting policy on intangible assets with the
resulting impact:
•
Computer software was previously capitalized as an integral component of property, plant and equipment. Under
FRS 138, such computer software is now recognized separately as an intangible asset and amortised over the
useful lives. The change in policy has no significant impact to the Income Statement.
•
Intangible assets also now includes development cost of products where such costs meet the asset recognition
criteria in FRS 138 and the cost is amortised over the expected useful life upon commercial launch of the products.
219
220
(continued)
45
CHANGES IN ACCOUNTING POLICIES (CONTINUED)
(c) Relevant effect from adoption of new accounting policies or change in accounting policies (continued)
The effects of the change in accounting policies as mentioned in (b) and (c)(iii) are as follows:
As previously
reported
RM'000
Adjustments
RM'000
As
restated
RM'000
38,924
28,072
18,322
(10,087)
(10,087)
10,087
28,837
17,985
28,409
6,909,874
(3,290,110)
3,330,946
155,702
249,963
4,394
45,285
34,904
20,138
(27,418)
9,419
(17,999)
17,999
4,707
(4,707)
35,997
(35,997)
11,327
(11,327)
6,882,456
(3,280,691)
3,312,947
17,999
160,409
245,256
40,391
9,288
46,231
8,811
Group
Income Statements (FRS 101)
Share of results of associated and jointly controlled entities
Profit before taxation
Taxation
Group
Balance Sheets (FRS 138) and (FRS 131)
Property, plant and equipment - Cost
Property, plant and equipment - Accumulated depreciation
Property, plant and equipment - Net book value
Other intangible assets
Investment in associated companies
Investment in jointly controlled entities
Amounts due from associated company
Amounts due from jointly controlled entities
Amounts due to associated company
Amounts due to jointly controlled entities
46
APPROVAL OF FINANCIAL STATEMENTS
The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 24 July 2007.
statement by directors pursuant to section 169(15) of the companies act, 1965
We, Dato' Mohammed Azlan Bin Hashim and Dato' Syed Zainal Abidin Bin Syed Mohamed Tahir, being two of the Directors of Proton
Holdings Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 139 to 220 are drawn up so as to
give a true and fair view of the state of affairs of the Group and the Company as at 31 March 2007 and of the results and cash flows of
the Group and the Company for the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and
Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for the Entities Other than Private Entities.
Signed on behalf of the Board of Directors in accordance with their resolution dated 24 July 2007.
DATO' MOHAMMED AZLAN BIN HASHIM
Chairman
DATO' SYED ZAINAL ABIDIN BIN SYED MOHAMED TAHIR
Director
221
222
statutory declaration pursuant to section 169(16) of the companies act, 1965
I, Tan Chun Weng, being the Officer primarily responsible for the financial management of Proton Holdings Berhad, do solemnly and
sincerely declare that the financial statements set out on pages 139 to 220. are, in my opinion, correct and I make this solemn declaration
conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
TAN CHUN WENG
Subscribed and solemnly declared by the abovenamed Tan Chun Weng at Shah Alam in Malaysia on 27 July 2007, before me.
COMMISSIONER FOR OATHS
report of the auditors to the members of PROTON holdings berhad
We have audited the financial statements set out on pages 139 to 220. These financial statements are the resposibility of the Company’s
Director. It is our reponsibility to form an independent opinion, based on our audit, on these financial statements to report our opinion to
you, as a body, in accordance with Section 174 of the Companies Act 1965 and for no other purpose. We do not assume responsibility
to any other person for the content of this report.
We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by the Directors, as well as evaluting the overall financial statements
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion:
(a)
the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and Financial Reporting
Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and
fair view of:
(i)
the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and
(ii)
the state of affairs of the Group and of the Company as at 31 March 2007 and of the results and cash flows of the Group and
Company for the financial year ended on that date;
and
(b)
the accounting and other records and the registers required by the Act to be kept by the Company and by subsidiaries of which we
have acted auditors have been propely kept in accordance with the provisions of the Act.
The names of the subsidiary companies of which we have not acted as auditors are indicated in Note 16 to the financial statements. We
have considered the financial statements of these subsidiaries and the auditors’ reports thereon.
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company's financial statements are
in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have
received satisfactory information and explanations required by us for those purposes.
The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment
made under subsection (3) of section 174 of the Act.
PRICEWATERHOUSECOOPERS
(No. AF: 1146)
Chartered Accountants
DATO’ AHMAD JOHAN BIN MOHAMMAD RASLAN
(No. 1867/09/08 (J))
Partner of the Firm
223
224
shareholdings statistics as at 16 July 2007
ANALYSIS OF SHAREHOLDINGS
Share Capital
Authorised Share Capital Issued and Fully Paid Up Capital
Issued and Fully Paid Up Capital
Class of Shares
Voting Rights
RM1,000,000,000/RM549,213,002/Ordinary Shares of RM1/- each
One (1) Voting Right for one (1) Ordinary Share
ANALYSIS OF SHAREHOLDINGS BY RANGE GROUPS
1 - 99
100 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 27,460,649
27,460,650 and above
Total
No. of
Shareholders/
Held
% of
Shareholders/
Capital
No. of
Shares
Held
% of
Issued
Capital
76
3,776
2,347
448
148
3
6,798
1.1180
55.5457
34.5249
6.5902
2.1771
0.0441
100.0000
761
3,506,447
8,681,890
13,788,575
202,056,056
321,179,273
549,213,002
0.0001
0.6384
1.5808
2.5106
36.7901
58.4799
100.0000
DISTRIBUTIONS OF SHAREHOLDINGS
Malaysian
Malaysian
No. of
% of
Shareholders/ Shareholders/
Depositors
Depositors
Malaysian
No. of
Shares
Held
Malaysian
Foreign
Foreign
% of
No. of
% of
Share Shareholders/ Shareholders/
Capital
Depositors
Depositors
Foreign
No. of
Shares
Held
Foreign
% of
Share
Capital
1 - 99
100 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 27,460,649
27,460,650 and above
73
3,678
2,215
364
84
3
1.0738
54.1041
32.5831
5.3545
1.2357
0.0441
678
3,426,217
8,122,639
10,718,900
101,159,027
321,179,273
0.0001
0.6238
1.4790
1.9517
18.4189
58.4799
3
98
132
84
64
0
0.0441
1.4416
1.9417
1.2357
0.9415
0.0000
83
0.0000
80,230
0.0146
559,251
0.1018
3,069,675
0.5589
100,897,029 18.3712
0
0.0000
Total
6,417
94.3954
444,606,734
80.9534
381
5.6046
104,606,268 19.0466
SUBSTANTIAL SHAREHOLDERS
Name
1
2
3
KHAZANAH NASIONAL BERHAD
EMPLOYEES PROVIDENT FUND BOARD
PETROLIAM NASIONAL BERHAD
Shareholding
%
210,484,693
67,573,900
43,120,680
321,179,273
38.3248
12.3038
7.8514
58.48
(continued)
THIRTY LARGEST SHAREHOLDERS
Name of Shareholders
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
KHAZANAH NASIONAL BERHAD
EMPLOYEES PROVIDENT FUND BOARD
CARTABAN NOMINEES (TEMPATAN) SDN BHD
PETROLIAM NASIONAL BERHAD (STRATEGIC INV)
CIMSEC NOMINEES (TEMPATAN) SDN BHD
SECURITY TRUSTEE (KCW ISSUE 2)
LEMBAGA TABUNG HAJI
HSBC NOMINEES (ASING) SDN BHD
TNTC FOR SAUDI ARABIAN MONETARY AGENCY
CITIGROUP NOMINEES (ASING) SDN BHD
EXEMPT AN FOR MELLON BANK (MELLON)
CARTABAN NOMINEES (ASING) SDN BHD
GOVERNMENT OF SINGAPORE INVESTMENT CORPORATION
PTE LTD FOR GOVERNMENT OF SINGAPORE (C)
TNTC FOR BRANDES INSTITUTIONAL EQUITY TRUST
AMANAH SSCM NOMINEES (TEMPATAN) SDN BHD FOR
EMPLOYEES PROVIDENT FUND BOARD (JF404)
GSI FOR INDUS EVENT DRIVEN MASTER FUND LTD
SSBT FUND NDS6 FOR NORTHROP GRUMMAN PENSION
MASTER TRUST
MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD
MIDF AMANAH ASSET MANAGEMENT BERHAD FOR AMANAH
MILLENIA FUND BERHAD (JM730)
PERMODALAN NASIONAL BERHAD
CITIGROUP NOMINEES (TEMPATAN) SDN BHD
EXEMPT AN FOR PRUDENTIAL ASSURANCE MALAYSIA BERHAD
BNY BRUSSELS FOR ING EMERGING COUNTRIES FUND
VALUECAP SDN BHD
INVESTORS BANK AND TRUST COMPANY FOR ISHARES, INC.
No. of Shares
%
210,484,693
67,573,900
43,120,680
38.3248
12.3038
7.8514
24,250,000
4.4154
16,820,427
11,832,198
3.0626
2.1544
9,632,117
1.7538
7,882,800
1.4353
5,723,300
1.0421
5,427,500
0.9882
5,200,100
0.9468
4,856,700
0.8843
4,782,500
0.8708
4,599,900
4,344,500
0.8375
0.7910
3,856,014
0.7021
3,829,600
3,769,600
0.6973
0.6864
225
226
(continued)
THIRTY LARGEST SHAREHOLDERS (CONTINUED)
Name of Shareholders
No. of Shares
%
19
CBNY FOR DFA EMERGING MARKETS FUND
3,652,500
0.6650
20
EXEMPT AN FOR JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION (AUSTRALIA)
GOVERNMENT OF SINGAPORE INVESTMENT CORPORATION
PTE LTD FOR MONETARY AUTHORITY OF SINGAPORE (H)
TNTC FOR UTAH STATE RETIREMENT SYSTEMS
EXEMPT AN FOR AMERICAN INTERNATIONAL ASSURANCE LIMITED
SSBT FUND NXW3 FOR BRANDES GLOBAL SMALL CAP EQUITY FUND
EXEMPT AN FOR AMANAH SSCM NOMINEES (TEMPATAN)
SDN BHD (ACCOUNT 1)
EXEMPT AN FOR FORTIS BANQUE LUXEMBOURG (OPCVM A/C)
BANK SIMPANAN NASIONAL
MAYBAN NOMINEES (TEMPATAN) SDN BHD
AVENUE INVEST BERHAD FOR KUMPULAN WANG AMANAH
PENCEN (E00170-220136)
3,152,900
0.5741
3,033,700
0.5524
2,775,476
0.5054
2,741,100
0.4991
2,612,466
0.4757
2,302,000
0.4191
2,201,875
0.4009
1,883,000
1,865,400
0.3429
0.3396
1,861,600
1,839,000
0.3390
0.3348
467,907,546
85.1960
21
22
23
24
25
26
27
28
29
30
TOTAL
DIRECTOR’S SHAREHOLDINGS
None of the Directors hold any shares in the Company.
properties owned by PROTON Group as at 31 March 2007
Location
Description and existing use
Tenure
Date of
acquisition /
revaluation
Age of
building
Net book value
RM’million
PROPERTIES OWNED BY PERUSAHAAN OTOMOBIL NASIONAL SDN. BHD.
No. H.S. (D)71311, No. P.T.82
Mukim of Damansara, District
of Petaling, Selangor Darul
Ehsan. (Formerly, HICOM
Industrial Estate encompassing
part of Lots 563, 564, 568,
570 and Lot 15, Mukim of
Damansara, District of
Petaling, Selangor Darul
Ehsan).
Land with an area of
6,231,080 sq. ft. with main
office, main factory, engine
factory, medium volume
factory, canteen buildings,
sports facilities, car park for
production cars and additional
R&D laboratories building.
Total built-up area is
2,594,603 sq. ft.
Freehold
05.09.1983
22 years
Land: 68.4
Buildings: 141.7
HICOM Industrial Estate
encompassing Lot 572, Mukim
of Damansara, District of
Petaling, Selangor Darul Ehsan.
3 units of flats currently
rented out.
Freehold
09.04.1986
22 years
Flats: 0.04
No. H.S.(D) 71309, No. P.T. 80,
Mukim of Damansara, District of
(Formerly, HICOM Industrial
Estate encompassing Lot 568
Grant No. 5941,H.S.(D) 22208
No. P.T. 5115,H.S.(D) 22207,
No. P.T.5116, Mukim of
Damansara, District of Petaling,
Selangor Darul Ehsan).
Land with an area of 158,107
sq. ft. used as the car park for
staff.
Freehold
19.11.1993
-
Land: 2.6
Lot 25, HICOM Glenmarie
Industrial Park, Mukim of
Damansara, District of
Petaling, Selangor Darul
Ehsan.
1,036,728 sq. ft. with office,
factory and canteen buildings
and sports facilities used for
the Casting Plant. Total builtup area is 194,579 sq. ft.
Freehold
30.12.1992
13 years
Flats: 20.6
Buildings: 42.9
227
228
(continued)
Location
Tenure
Date of
acquisition /
revaluation
Age of
building
Net book value
RM’million
PROPERTIES OWNED BY PERUSAHAAN OTOMOBIL NASIONAL SDN. BHD.
No. H.S.(D) 86554, No. P.T.
257 encompassing Lot 54,60
and 62, Sime UEP Industrial
Park, Mukim of Damansara,
District of Petaling, Selangor
Darul Ehsan.
2,396,727sq. ft. adjoining the
Company's northern boundary
housing the semi-high speed
test track and control building.
2,102,731 sq. ft.
Freehold
18.04.1994
13 years
Land: 54.9
Track and
buildings: 20.0
No. H.S. (D) B.P.5653 and
5654 Bil P.T. 16162 and
10163, District of Batang
Padang, Mukim of Ulu Bernam
Timur, Perak Darul Ridwan.
55,444,116 sq. ft, for the
construction of a second
automobile plant,
administrative building and
sports complex facilities.
3,374,577 sq.ft.
Freehold
03.02.1999
4 years
Land: 1.0
Buildings: 427.0
Freehold
31.03.1994
31 years
Land: 6.5
Buildings: 1.9
Freehold
01.12.2000
6 years
Buildings: 5.1
PROPERTY OWNED BY PROTON CARS (UK) LTD.
Ref. AV 915, Units 1-3, Crawley
Way, Avonmouth, Bristol Avon
BS11 9YR, England.
sq. ft. with a parts warehouse
building.
PROPERTIES OWNED BY PROTON EDAR SDN. BHD.
Vehicel Preparation Centre
(VPC)
No H.S. (D) 86555, PT No. 258
and H.S. (D) 86557, PT
No.260, TP 5 Road, Sime UEP
Industrial Park, 47600 Subang
Jaya, Selangor Darul Ehsan.
Vehicle Preparation Centre
and stock control building with
total built up area of 101,956
sq.ft.
(continued)
Location
Tenure
Date of
acquisition /
revaluation
Age of
building
Net book value
RM’million
PROPERTIES OWNED BY PROTON EDAR SDN. BHD. (CONTINUED)
Centre of Excellence (COE) &
Pre-Delivery and Inspection
Centre (PDI)
No H.S. (D) 86596, PT No.
299 and H.S. (D) 86597, PT
No. 300, TP 5 Road, Sime
UEP Industrial Park, 47600
Subang Jaya, Selangor Darul
Ehsan.
Administration & Operations
Office and Pre-Delivery &
Inspection Centre with total
built up area of 30,212 sq. ft.
Freehold
01.03.2001
6 years
Land: 35.7
Buildings: 139
No. 2, Lrg. Samarinda 6A, Off
Jalan Kebun H.S (D) 60042,
P.T.No. 64566 Mukim Klang
Selangor Darul Ehsan,
3 storey shop units with
approximately 2,475.7 sq. ft.
in built-up area.
Freehold
10.05.2002
5 years
Buildings: 0.7
Lot 859, Block 16 Kuching
Central Land District, Stampin
41/2 Mile, Penrissen Road
Kuching, Sarawak
48,383.73 sq. ft. to be used
for sales outlet and service
centre.
Freehold
29.04.2002
5 years
Land: 2.8
No. 218089. Mukim Plentong,
Daerah Johor Bahru, Johor
sq. ft. to be used for sales
outlet and service centre.
Freehold
29.04.2002
5 years
Land: 8.1
Buildings: 6.6
H.S(D) 63313, P.T.No. 9671
Mukim of Ampangan District of
Seremban, Negeri Sembilan
sq.ft. used for sales outlet and
service centre is 7,175 sq.ft.
Freehold
19.07.2002
41/2 years Land: 3.1
3 years
Buildings: 2.9
229
230
(continued)
Location
Tenure
Date of
acquisition /
revaluation
Age of
building
Net book value
RM’million
H.S.(D) 318392, PTD 81816,
Mukim of Pulai, District of
Johor Bahru.
sq.ft. to be used for sales
Freehold
06.08.2002
Part of Lot 45, Held under
Master Title geran 29164 Lot
5458, Mukim & District of
Freehold
01.08.2002
Lot PT 22489, Mukim Batu
District of Gombak, Selangor
Darul Ehsan.
Freehold
26.08.2002
Lot PT 4352, Mukim Kuah
District of Langkawi, Kedah
Darul Aman.
Freehold
13.09.2002
H.S. (D) 144330, PT 40019
Mukim of Sungai Buloh,
District of Petaling, Selangor
Darul Ehsan.
Freehold
02.09.2002
01.03.2004
3 years
Buildings: 6.5
H.S. (D) 159654, PT.1 Jalan
Kemajuan, District of Petaling
Freehold
24.08.2005
(continued)
Location
Tenure
Date of
acquisition /
revaluation
Age of
building
05.12.2005
Net book value
RM’million
No H.S. (D) 86596, PT No.
302, TP 5 Road, Sime UEP
Industrial Park, 47600 Subang
sq. ft. to be used for
stockyard area.
Freehold
PROPERTIES OWNED BY PROTON EDAR VENTURES SDN. BHD.
No. H.S. (D) 588, No. PT.
2361, Mukim Gelung, District
of Kubang Pasu, Kedah Darul
Aman.
1,373,925 sq. ft. to be used
as site for industrial building.
Freehold
11.12.1990
17 years
Land: 1.7
Lot 1229, Mergong Industrial
Estate Phase 11, Mukim of
Mergong, District of Kota
Setar, Kedah Darul Aman.
sq.ft. with a 1 1/2 storey
building leased to Proton Edar
Sdn. Bhd. Used as
Pre-Delivery inspection and
service centre.
Long
15.05.1977
leasehold
(Year of expiry:
2076)
30 years
Land: 0.3
Building: 0.2
Long
25.02.1998
leasehold of
99 years
(Year of expiry:
2097)
9 years
Land: 10.1
PROPERTY OWNED BY PROTON CORPORATION SDN. BHD.
Lot No. 23 & 24, Section 7
Phase 1A, Pulau Indah
Industrial Park, Westport,
Pelabuhan Klang, Selangor
Darul Ehsan.
Industrial land with an area of
approximately 671,204 sq. ft.
used as warehouse for
production export car.
231
232
properties owned by PROTON Group as at 31 march 2007
(continued)
Location
Tenure
Date of
acquisition /
revaluation
Age of
building
Net book value
RM’million
Freehold
26.09.1968
40 years
Land: 6.4
Buildings: 80.9
Freehold
01.03.2000
8 years
Buildings: 14.4
Freehold
24.02.2000
Office:
87 years
Land: 0.9
Buildings: 7.1
PROPERTIES OWNED BY LOTUS CARS LTD. (UK)
Lotus Cars Limited
Land adjacent to Potash Lane,
Hethel, Norwich, Norfolk NR
14 8EZ, England
and
Land north of Browick Road,
Hethel, Norwich, Norfolk NR14
8EZ, England.
Two parcels of land with a
total area of 6,286,550 sq. ft.
with the factory, engineering
facilities, offices and test track
of Lotus Group International
Ltd. Total built up area is
515,500 sq. ft.
PROPERTY OWNED BY GROUP LOTUS PLC.
Potash Lane Hethel, Norwich,
Norfolk NR14 8EZ, England.
R&D building rented to
Group’s companies. Total built
up area is 86,600 sq.ft.
PROPERTY OWNED BY MARCO ACQUISITION CORPORATION
1254 North Main St, Ann
Arbor, Michigan, USA.
approximately 165,528 sq. ft.
with office and workshop.
Total built up area is 73,000
sq. ft.
Workshop:
41 years
share price and volume traded
Share
Price (RM)
233
Volume
(’000)
10.00
5000
9.00
4500
8.00
4000
7.00
3500
6.00
3000
5.00
2500
4.00
2000
3.00
1500
2.00
1000
1.00
500
0.00
0
Apr
06
May
Jun
Share Price
July
Aug
Sep
Oct
Volume
Nov
Dec
Jan
07
Feb
Mar
Apr
May
Jun
Jul
234
notice of annual general meeting
NOTICE IS HEREBY GIVEN that the Fourth (4th) Annual General Meeting of the
Company will be held at the Auditorium, PROTON Centre of Excellence, KM 33.8,
Westbound Shah Alam Expressway, 47600 Subang Jaya, Selangor Darul Ehsan,
Malaysia on Thursday, 6 September 2007 at 10.00 a.m for the following
purposes:
1.
To lay the Reports of the Directors and Auditors and the Audited Statement of Accounts for the year ended 31 March 2007;
2.
To elect the following Directors who retire in accordance with the Company's Articles of Association:Article 104
(i) Encik Mohammad Zainal Bin Shaari
(ii) Tuan Haji Abdul Kadir Bin Md Kassim
RESOLUTION 1
RESOLUTION 2
Article 111
(i) Dato' Michael Lim Heen Peok
(ii) Dato' Mohd Izzaddin Bin Idris
RESOLUTION 3
RESOLUTION 4
3.
To approve the Directors' fees for the year ended 31 March 2007.
RESOLUTION 5
4.
To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors
to fix their remuneration.
RESOLUTION 6
5.
To transact any other ordinary business for which due notice has been given.
RESOLUTION 7
6.
AS SPECIAL BUSINESS
To consider and, if thought fit, to pass the following Ordinary Resolution:Authority to allot and issue shares pursuant to Section 132D of the Companies Act, 1965
“THAT subject always to the provisions of the Companies Act, 1965, the Articles of Association of the
Company and the approval of the relevant authorities and pursuant to Section 132D of the Companies Act,
1965, the Directors be and are hereby authorised to issue and allot shares in the Company from time to time
at such price, upon such terms and conditions, for such purposes and to such person or persons
whomsoever as the Directors may deem fit, provided that the aggregate number of shares to be issued
pursuant to this resolution does not exceed 10 percent (%) of the issued share capital of the Company for
the time being and that such authority shall continue to be in force until the conclusion of the next Annual
General Meeting of the Company”.
RESOLUTION 8
notice of annual general meeting
By Order of the Board
MOHD NIZAMUDDIN BIN MOKHTAR
(LS NO. 006128)
Company Secretary
Shah Alam
15 August 2007
NOTES:
1.
2.
3.
4.
5.
6.
A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead.A proxy may but need
not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply.
The instrument appointing a proxy must be in writing under the hands of the appointor or his attorney duly authorised in writing or, if such appointor is a corporation,
under its common seal or the hand of an officer or attorney duly authorised. If the Form of Proxy is signed under the hand of an officer duly authorised, it should be
accompanied by a statement reading “signed as authorised officer under Authorisation Document which is still in force, no notice of revocation having been received.”
If the Form of Proxy is signed under the attorney duly authorised, it should be accompanied by a statement reading “signed under Power of Attorney which is still in
force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the
laws of the jurisdiction, in which it was created and is exercised, should be enclosed.
The maximum number of proxies that may be appointed is two. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies
the proportion of his shareholdings to be represented by each proxy.
Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy
in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Every appointment submitted
by an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, must specify the CDS Account Number.
The instrument appointing the proxy must be deposited at the office of the Registrar, Tenaga Koperat Sdn Bhd, 20th Floor, Plaza Permata, Jalan Kampar, Off Jalan
Tun Razak, 50400 Kuala Lumpur not less than forty eight (48) hours before the time appointed for the meeting.
For the purpose of determining a member who shall be entitled to attend the Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd, in
accordance with Article 67(b) of the Company's Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General
Meeting Record of Depositors as at 28 August 2007. Only a depositor whose name appears on the General Meeting Record of Depositors as at 28 August 2007
shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his stead.
EXPLANATORY NOTES TO THE SPECIAL BUSINESS:The Ordinary Resolution No. 8, if passed, will give the Directors of the Company the authority to issue shares in the Company up to an amount not exceeding in total 10%
of the issued and paid up capital of the Company for such purposes as the Directors consider would be in the interest of the Company. This would avoid any delay and
cost involved in convening a general meeting to specifically approve such an issue of shares. This authority, unless revoked or varied at a general meeting, will expire at the
next Annual General Meeting of the Company.
235
236
statement accompanying the notice of annual general meeting
"STATEMENT ACCOMPANYING THE NOTICE OF FOURTH (4TH) ANNUAL GENERAL MEETING"
Pursuant to Paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad, appended hereunder are:
DIRECTORS STANDING FOR RE-ELECTION
Directors who are standing for re-election at the Fourth (4th) Annual General
Meeting of the Company which will be held at the Auditorium, PROTON Centre
of Excellence, KM 33.8, Westbound Shah Alam Expressway, 47600 Subang
Jaya, Selangor Darul Ehsan, Malaysia on Thursday, 6 September 2007
at 10.00 a.m. pursuant to the Company's Articles of Association.
Article 104
(i) Encik Mohammad Zainal Bin Shaari
(ii) Tuan Haji Abdul Kadir Bin Md Kassim
Refer to Page 27 of the Annual Report
Article 111
(i) Dato' Michael Lim Heen Peok
(ii) Dato’ Mohd Izzaddin Bin Idris
FORM OF PROXY
No. of Shares held
CDS Account No. of Authorised Nominee
(name of shareholder, in capital letters)
I/We
(new)
(old) ID No./Company No.
NRIC No.
(full address) being a member of Proton Holdings
of
Berhad, hereby appoint
(name of proxy as per NRIC, in
capital letters) NRIC No.
(old) or failing him/her
(new)
(name of proxy as per NRIC, in capital letters) NRIC No.
(new)
(old)
or failing him/her, the CHAIRMAN OF THE MEETING as my/our proxy to vote for me/us on my/our behalf at the Fourth (4th) Annual General
Meeting of the Company to be held at the Auditorium, PROTON Centre of Excellence, KM 33.8, Westbound Shah Alam Expressway, 47600
Subang Jaya, Selangor Darul Ehsan, Malaysia on Thursday, 6 September 2007 at 10.00 a.m and at any adjournment thereof.
My/Our proxy is to vote as indicated below:FOR
ORDINARY RESOLUTIONS
1. To elect the following Directors who retire in accordance with the Company's
Articles of Association:Article 104
i. Encik Mohammad Zainal Bin Shaari
ii. Tuan Haji Abdul Kadir Bin Md Kassim
Article 111
i. Dato' Michael Lim Heen Peok
ii. Dato' Mohd Izzaddin Bin Idris
Resolution 1
Resolution 2
2.
To approve the Directors' fees for the year ended 31 March 2007.
Resolution 3
Resolution 4
Resolution 5
3.
To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to
authorise the Directors to fix their remuneration.
To transact any other ordinary business for which due notice has been given.
Resolution 6
Resolution 7
4.
AGAINST
AS SPECIAL BUSINESS
5.
To consider and, if thought fit, to pass the following resolution:Ordinary Resolution - Authority to allot and issue shares pursuant to Section 132D
of the Companies Act, 1965.
Resolution 8
(Please indicate with an “X” in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain
from voting at his/her discretion.)
Dated this
day of
Signature/Common Seal of Appointer
2007.
For appointment of more than one proxy, number of shares and
percentage of shareholdings to be represented by the proxies:-
No. of shares
Percentage
Proxy 1
%
Proxy 2
%
NOTES:
1.
2.
3.
4.
5.
6.
A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead.A proxy may but need
not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply.
The instrument appointing a proxy must be in writing under the hands of the appointor or his attorney duly authorised in writing or, if such appointor is a corporation,
under its common seal or the hand of an officer or attorney duly authorised. If the Form of Proxy is signed under the hand of an officer duly authorised, it should be
accompanied by a statement reading “signed as authorised officer under Authorisation Document which is still in force, no notice of revocation having been received.”
If the Form of Proxy is signed under the attorney duly authorised, it should be accompanied by a statement reading “signed under Power of Attorney which is still in
force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the
laws of the jurisdiction, in which it was created and is exercised, should be enclosed.
The maximum number of proxies that may be appointed is two. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies
the proportion of his shareholdings to be represented by each proxy.
Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy
in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Every appointment submitted
by an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, must specify the CDS Account Number.
The instrument appointing the proxy must be deposited at the office of the Registrar, Tenaga Koperat Sdn Bhd, 20th Floor, Plaza Permata, Jalan Kampar, Off Jalan
Tun Razak, 50400 Kuala Lumpur not less than forty eight (48) hours before the time appointed for the meeting.
For the purpose of determining a member who shall be entitled to attend the Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd, in
accordance with Article 67(b) of the Company's Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General
Meeting Record of Depositors as at 28 August 2007. Only a depositor whose name appears on the General Meeting Record of Depositors as at 28 August 2007
shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his stead.
Fold Here
STAMP
TENAGA KOPERAT SDN. BHD.
20th Floor, Plaza Permata
Jalan Kampar, Off Jalan Tun Razak
50400 Kuala Lumpur
Fold Here

product development - Investor Relations

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