with pride, passion and unrelenting progressir.chartnexus.com/proton/docs/ar_2011.pdfproton holdings...

PRO

TON

Holdings B

erhad (623177-A)annual report 2011

PROTON Centre of ExcellenceKM33.8 Westbound Shah Alam Expressway47600 Subang Jaya Selangor Darul Ehsan

Tel: +603 8026 9741 Fax: +603 8026 9744

www.proton.com

ww

w.proton.com

PROTON Holdings Berhad (623177-A)

Annual Report 2011

PR

OTO

N H

oldings Berhad (6

23

17

7-A

)A

nnual Report 2

01

1


Tel: +603 8026 9741 Fax: +603 8026 9744

www.proton.com

ww

w.proton.com

Unlocking our Potential

...with pride, passion and unrelenting progress

The Proton Saga EV is a full battery operated electric vehicle designed towards zero CO2 tailpipe emission. The vehicle is driven by two compact and highly efficient permanent magnet AC synchronous motors. With maximum power capacity of 52kw, it can deliver almost 197Nm of torque.

We move ahead with pride, passion and progress by delving deeper to achieve

Breakthroughs in Tech nology and Innovation.

The heart of the vehicle is monitored by the intelligent electronic traction master that communicates with other electronic control units.

The vehicle’s energy comes from the 16kwh lithium-ion battery cells designed using German technology. When fully charged, the battery enables the vehicle to travel a distance of up to 120km, making it ideal for city driving.

We move ahead with pride, passion and progress by delving deeper to achieve

Breakthroughs in Tech nology and Innovation.

ConTenTs

2 Corporate Mantra & Core Values

4 PROTON’s Policies

8 Financial Calendar

9 Key Financial Indicators

10 Summary of Financial Highlights

14 Corporate Profile

17 Awards

18 Corporate Information

20 Group Operations

24 Board of Directors

26 Profile of Directors

36 PROTON Group Management Committee Members

40 Heads of International Subsidiaries

44 Chairman’s Statement

50 Group Managing Director’s Review

56 Operations Review

118 Statement on Corporate Governance

133 Additional Compliance Information

135 Statement on Internal Control

138 Risk Management

142 Calendar of Events

156 Statutory Financial Statements

274 Shareholding Statistics

277 Properties Owned by PROTON Group

281 Share Price and Volume Traded

282 Notice of 8th Annual General Meeting

285 Statement Accompanying the Notice of 8th Annual General Meeting

286 Explanatory Notes on the Proposed Amendmentsto the Company’s Articles of Association

Form of Proxy

> The Auditorium, Level 1PROTON Centre of Excellence

KM 33.8, Westbound Shah Alam Expressway 47600 Subang Jaya

Selangor Darul Ehsan, Malaysia

> Thursday, 15 September 2011 at 10.00 a.m.

th Annual General Meeting of PRoTon will be held at:

The

8

PROTON 2011 Annual Report

CoRPoRATe MAnTRA & CoRe VALUes

2 PRoTon 2011 ANNUAL REPORT

Core IdeologyAudacious GoalDriving Malaysia’s transformation into a leader in technology and quality.

Vivid DescriptionWe deliver innovative and superior quality products and services. Our brands inspire confidence and pride.

PurposeWe are a passionate group of people working together, creating exhilarating products and services for global markets, synonymous with great styling, innovation and leading technology.

Core ValuesQualityWe make products that work the first time, every time.

Customer FocusCustomers are the source of our income. We deliver on our promises to our customers’ satisfaction.

InnovationWe challenge convention, always seeking new and better ways of doing things. We view change as opportunity.

TeamworkWe trust, respect and share knowledge to foster teamwork at the workplace.

speedWe have a “can-do” attitude and will not rest until the problem is solved. We have an inherent sense of urgency in everything we do.

CaringAs a responsible corporate citizen, we invest in safety, health and the environment.

HonestyWe nurture ethically-minded organisations through personal discipline, values, self-control and policies that reinforce ethical behavior.

THE PRoTon WAYPROTON EMPLOYEES ARE DEDICATED TO THE GROUP’S

LONG-TERM SUCCESS. EVERY PROTON EMPLOYEE

SHALL OPERATE UNDER THE GROUP’S SHARED

VALUES AND RELY ON THESE VALUES TO GUIDE THEIR

BEHAVIOUR WITH EACH OTHER AND THE CUSTOMERS.

THESE VALUES FORM THE FOUNDATION OF HOW WE

WORK AND CONDUCT BUSINESS.

PRoTon 2011 ANNUAL REPORT 3

PRoTon’s PoLICIes

THE COMPANY’S MISSION IS TO

STRIVE TOWARDS EXCELLENCE

IN ALL ASPECTS OF PROTON’S

OPERATIONS. IN ACHIEVING

OUR GOAL, IT IS NECESSARY TO

PROMOTE AND PROTECT THE

HEALTH AND SAFETY OF PROTON

EMPLOYEES AND ENSURE THAT

THE ENVIRONMENT IS UNHARMED.

The Group is committed to providing a conducive, safe and healthy working environment for our employees and to ensure this, it is our policy to:-

• Take responsibility for the safety and health of our employees;

• Provide the appropriate resources;

• Take all action necessary to remedy any noncompliance;

• Monitor and maintain high standards in environmental protection as well as health and safety measures.

In implementing the Company’s policy, we shall, where reasonably practicable:

• Comply with all rules and regulations concerning the environment, health and safety;

• Provide all the necessary facilities and equipment for the employees;

• Actively promote programmes for the employees to instill awareness for the safety and health of the employees, our business associates and the public;

• Provide adequate information and assistance to our employees and our neighbours to avoid unacceptable effects on the environment.


To assist the Company in achieving our goals, we shall work together and towards this end, employees shall:

• Abidebyallrulesandregulationsconcerningtheworkplace;

• Utilise all the facilities provided by themanagement in a safe and proper manner;

• Maintaingoodworkpractices;

• Actively participate in all the Environmental,Health and Safety (EHS) programmes.

This is our objective and it is our intention to put this EHS Policy into action and to make it our way of life.

Quality PolicyTO ACHIEVE OUR COMMITMENT TO QUALITY, PROTON WILL:

• EnsurequalityastheNumberOneworkethicsinall operations;

• EstablishaneffectiveandefficientQualitySystembased on the requirements of ISO 9001:2008 standards;

• Provide adequate skills and knowledge to alllevels of personnel through systematic and structured training programmes;

• Provideacultureandenvironmentofcontinuouslearning, improvement and innovation towards total quality excellence;

• Provide a conducive, safe and healthy workingenvironment in which people like to work and prosper.


PROTON was established in 1983 as part of an ambitious national industrialisation plan. The national car company drove automobile ownership among Malaysians and pioneered Malaysia’s capabilities in automobile engineering, research, development and manufacturing, and is today a symbol of national PRIDE.

201023 August 1st Quarter

Financial results for the period ended 30 June 2010

30 August Notice of 7th Annual General Meeting

23 September 7th Annual General Meeting

30 September Entitlement date for the First and Final Dividend of 20 sen (less 25% tax) declared for the Financial Year ended 31 March 2010

22 October Payment of the First and Final Dividend of 20 sen (less tax)

25 November 2nd QuarterFinancial results for the period ended 30 September 2010

201125 February 3rd Quarter

Financial results for the period ended 31 December 2010

25 May 4th QuarterFinancial results for the period ended 31 March 2011

26 July Audited accounts for the Financial Year ended 31 March 2011

26 July Declaration of First & Final Dividend of 10 sen per ordinary share of RM1.00 each (less 25% tax) for the Financial Year ended 31 March 2011

24 August Notice of 8th Annual General Meeting

15 september 8th Annual General Meeting

23 September Entitlement Date for the First and Final Dividend of 10 sen (less 25% income tax)

20 October Payment Date for the First and Final Dividend of 10 sen (less 25% income tax)

FInAnCIAL CALenDAR


KeY FInAnCIAL InDICAToRs

07

08

09

10

11

07

08

09

10

11

(107.3)

33.6

(54.9)

39.9

28.3

9.5

9.9

9.3

9.7

9.8

07

08

09

10

11

07

08

09

10

11

27.5

–

20.6

–

82.4

4,291.7

4,476.2

4,153.9

4,372.8

4,444.0

Basic earnings/(loss) Per share (sen) net Assets Per share (RM)

07

08

09

10

11

07

08

09

10

11

(107.3)

33.6

(54.9)

39.9

28.3

9.5

9.9

9.3

9.7

9.8

07

08

09

10

11

07

08

09

10

11

27.5

–

20.6

–

82.4

4,291.7

4,476.2

4,153.9

4,372.8

4,444.0

Retained earnings Carried Forward (RM’ million) Dividend Paid (RM’ million)


Statements of Financial Position as at 31 March

RM’ Million 2011 2010 2009 2008 2007

non-CURRenT AsseTs

Property, plant and equipment 2,529.9 2,624.4 2,827.1 3,174.5 3,179.4

Goodwill 29.0 29.0 29.0 29.0 29.0

Intangible assets 877.4 564.0 431.7 275.2 169.1

Associated companies 151.3 152.6 158.4 165.4 169.8

Jointly controlled entities 215.5 202.6 195.6 192.7 223.6

Investments – – 10.4 10.4 10.4

Deferred tax assets 16.7 15.0 5.7 – –

TOTAL NON-CURRENT ASSETS 3,819.8 3,587.6 3,657.9 3,847.2 3,781.3

CURRenT AsseTs

Inventories 1,207.1 1,227.2 1,395.1 1,100.3 1,273.6

Receivables 1,329.5 991.6 1,080.3 1,099.0 1,192.0

Available-for-sale financial assets 4.5 – – – –

Current investments – 9.7 15.3 20.8 73.4

Deposits, bank and cash balances 1,293.0 1,652.1 913.9 1,226.0 626.5

TOTAL CURRENT ASSETS 3,834.1 3,880.6 3,404.6 3,446.1 3,165.5

Non-current assets held for sale – 36.9 36.4 – –

ToTAL AsseTs 7,653.9 7,505.1 7,098.9 7,293.3 6,946.8

sUMMARY oF FInAnCIAL HIGHLIGHTs


RM’ Million 2011 2010 2009 2008 2007

eQUITY

Share capital 549.2 549.2 549.2 549.2 549.2

Other reserves 413.5 411.0 398.5 395.8 389.7

Retained profits 4,444.0 4,372.8 4,153.9 4,476.2 4,291.7

Equity attributable to equity holders of the Company 5,406.7 5,333.0 5,101.6 5,421.2 5,230.6

Minority interest – – – – –

TOTAL EQUITY 5,406.7 5,333.0 5,101.6 5,421.2 5,230.6

non-CURRenT LIABILITIes

Long term liabilities 28.2 59.1 49.3 99.7 105.4

Long term borrowings 9.8 29.6 52.2 130.8 76.2

Deferred tax liabilities 8.2 10.7 12.2 2.4 0.8

TOTAL NON-CURRENT LIABILITIES 46.2 99.4 113.7 232.9 182.4

CURRenT LIABILITIes

Payables 1,826.6 1,918.4 1,571.3 1,524.0 1,367.2

Short term borrowings 361.5 142.2 306.0 113.6 164.4

Taxation 12.9 12.1 6.3 1.6 2.2

TOTAL CURRENT LIABILITIES 2,201.0 2,072.7 1,883.6 1,639.2 1,533.8

TOTAL LIABILITIES 2,247.2 2,172.1 1,997.3 1,872.1 1,716.2

ToTAL eQUITY AnD LIABILITIes 7,653.9 7,505.1 7,098.9 7,293.3 6,946.8


Statements of Comprehensive Income for the financial year ended 31 March

RM’ Million 2011 2010 2009 2008 2007

Revenue 8,969.9 8,226.9 6,486.6 5,621.6 4,687.3

Profit/(Loss) before taxation 214.4 260.9 (319.2) 144.3 (618.1)

Profit/(Loss) after taxation 155.6 218.9 (301.8) 184.6 (589.5)

Retained earnings attributable to shareholders 4,526.4 4,372.8 4,174.5 4,476.2 4,319.2

Dividend paid (82.4) – (20.6) – (27.5)

Retained earnings carried forward 4,444.0 4,372.8 4,153.9 4,476.2 4,291.7

share Information Per share

Basic earnings/(loss) (sen) 28.3 39.9 (54.9) 33.6 (107.3)

Dividend paid (sen) 20.0 – 5.0 – 5.0

Net assets (RM) 9.8 9.7 9.3 9.9 9.5

Issued share capital (‘000) 549,213 549,213 549,213 549,213 549,213

sUMMARY oF FInAnCIAL HIGHLIGHTs (ConT’D)


CoRPoRATe PRoFILe

INCORPORATED ON 7 MAY 1983, PROTON PIONEERED MALAYSIA’S

VENTURE INTO THE HEAVY INDUSTRIES AND ITS MAIN OBJECTIVES ARE:• To spearhead the automotive industrialisation process and manufacturing industries;

• To acquire/upgrade technology and industrial skills within the automotive manufacturing industry; and

• To strengthen the international competitiveness of Malaysia’s industrial capability

With substantial capital investment over the last quarter of a century and the corporate philosophy that success can be achieved by having ‘the right car for the right market, at the right price and at the right time’, PROTON commands a substantial share of the domestic market for passenger cars and through the years, has expanded its international footprint.

PROTON’s business activities span throughout the whole automotive value chain encompassing vehicle engineering, research and development, manufacturing, distribution, sales, after-sales services as well as financing.

The foundation of the Group’s growth is due to the understanding of the economic development stimulus, diverse customer needs and the ability to translate them into products that customers want, through research and development.

The current portfolio of PROTON models includes the Saga, which was named Best Model of the Year for two consecutive years 2009 and 2010; the Persona, winner of the 2008 ASEAN Automotive Award for Best Model of the Year; the stylish Gen.2; the fun-to drive Savvy; the desirably sporty Satria Neo; Malaysia’s first home-grown multipurpose vehicle (MPV), the Exora; as well as the Inspira.


Also in the Group’s portfolio, is the world-renowned Lotus sportscar brand, with models such as Elise, Exige, Europa and the Evora, the latest supercar that remains true to Lotus’ heritage and core philosophies of being Visually Stunning, Exhilarating, Agile and Responsive, to suit a range of customer demands and preferences.

With the Group’s spirit of achievement, the industry has recognised the Company’s efforts and bestowed these awards on PROTON in 2010/2011:

• Frost&SullivanMalaysiaExcellenceAwards2010 – Best Passenger Car Model of the Year for Proton Saga

• Frost&SullivanMalaysiaExcellenceAwards2010 – Best Automotive Debut Model of the Year for Exora

• CIMBAutoworldCaroftheYearAwards2010 – Best MPV - Overall Value-for-Money for Exora

• Labour Day Achievement Award for the category Competitive Employer Award (Big Corporations) in conjunction with 2010 Workers’ Day Celebrations

• MITIIndustryExcellenceAwardforthecategoryQualityManagementExcellenceAward

• Reader’sDigestTrustedBrand2011GoldAwardforCarCategory

• Frost&SullivanMalaysiaExcellenceAwards2011 – Value-for-Money Car of the Year (1.3L and above) for the Proton Persona

• IndonesianOtomotifAwards – “Best Budget MPV in Indonesia” for the Exora

• AsianAuto–AutoIndustryAwards2011 – “Best People’s Car” for the Saga FL – “Best Value-for-Money Family Car” for the Inspira


As a global automotive challenger, the Group conducts research in its centres throughout the world, on new technologies to create cars that are unique in both design and driving performance. Through Lotus, the Group provides comprehensive and versatile consultancy services to many of the world’s OEMs and Tier 1 suppliers. Today, Group Lotus is organised into two business divisions. Lotus Cars focuses on sales of world-class, prestigious, high-performance sports cars, whilst Lotus Engineering provides engineering solutions for automotive manufacturers and suppliers.

To boost the quality of its products, PROTON performs a continuous Company-wide quality improvement programme and quality-conscious work culture that assures:

• Quality in everything (products and individuals);

• Quality in the way things are done (doing it right the first time);

• Quality in spending, including reducingmaterials costs;

• High-quality products (end products must be of the right technology and designed to meet market expectations); and

• Quality services to customers, including after-sales support.

With staff strength close to 12,000 employees worldwide, we ensure that each individual is aligned to our core values, thereby ensuring strong customer orientation in order to produce competitive products that drive our business forward.

CoRPoRATe PRoFILe (ConT’D)


AWARDs

1. Proton Exora Best MPV – Overall Value-for-Money CIMB Autoworld Car of the Year Awards 2010

2. Proton Inspira Best Value-for-Money Family Car Asian Auto – Auto Industry Awards 2011

3. Quality Management Excellence Award MITI Industry Excellence Award

4. Proton Saga Best People’s Car Asian Auto – Auto Industry Awards 2011

5. Gold Award for Car Category Reader’s Digest Trusted Brand 2011

6. Proton Persona Value-for-Money Car of the Year (1.3L and above) Frost & Sullivan Malaysia Excellence Awards 2011

7. Masterclass Bumiputra CEO of the Year, Malaysia Business Leadership Awards

1

5 76

2 3 4


CoRPoRATe InFoRMATIon

Board Audit Committee

Encik Abdul Rahim Bin Abdul Hamid – Chairman

Dato’ Michael Lim Heen Peok

Tan Sri Rainer Althoff

Datuk Johar Bin Che Mat

Datuk Zalekha Binti Hassan(Resigned w.e.f. 15 October 2010)

Behara Venkata Rama Subbu(Resigned w.e.f. 20 July 2010)

Oh Kim Sun (Resigned as Chairman and Member w.e.f. 27 May 2010)

Abdul Kadir Bin Md. Kassim(Resigned w.e.f. 27 May 2010)

Board nomination & Remuneration Committee

Dato’ Sri Mohd Nadzmi Bin Mohd Salleh – Chairman

Ahmad Tajuddin Bin Abdul Carrim


Datuk Nozirah Binti Bahari

Datuk Zalekha Binti Hassan(Resigned w.e.f. 6 July 2011)

Md. Ali Bin Md. Dewal(Resigned w.e.f. 27 May 2010)

BoARD oF DIReCToRs

Dato’ Sri Mohd Nadzmi Bin Mohd Salleh – ChairmanAppointed on 1 January 2009

Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed TahirAppointed on 1 January 2006

Dato’ Michael Lim Heen PeokAppointed on 15 September 2006

Behara Venkata Rama SubbuAppointed on 1 March 2010

Tan Sri Rainer AlthoffAppointed on 22 June 2010

Abdul Rahim Bin Abdul HamidAppointed on 20 July 2010

Datuk Johar Bin Che MatAppointed on 15 October 2010

Datuk Nozirah Binti BahariAppointed on 6 July 2011

Datuk Zalekha Binti HassanAppointed on 11 February 2008 (Resigned w.e.f. 6 July 2011)

Haji Abdul Kadir Bin Md KassimAppointed on 10 March 2005 (Resigned w.e.f. 27 May 2010)

Oh Kim SunAppointed on 13 May 2009 (Resigned w.e.f. 27 May 2010)


Board Risk Management Committee

Abdul Rahim Bin Abdul Hamid – Chairman


Tan Sri Rainer Althoff


Tan Kim Leong(Resigned w.e.f. 1 August 2010)

Dato’ Zainuddin Che Din(Resigned w.e.f. 1 August 2010)

Abdul Kadir Md. Kassim(Resigned w.e.f. 27 May 2010)

Board Disciplinary Committee

Dato’ Sri Mohd Nadzmi Bin Mohd Salleh – Chairman

Ahmad Tajuddin Bin Abdul Carrim


Tuan Haji Yusoff Ahmad


Datuk Zalekha Binti Hassan(Resigned w.e.f. 6 July 2011)

Tuan Haji Abdul Kadir Bin Md. Kassim(Resigned w.e.f. 27 May 2010)

Md. Ali Bin Md. Dewal(Resigned w.e.f. 27 May 2010)

Auditors

PricewaterhouseCoopers(Chartered Accountants)Level 10, 1 Sentral, Jalan TraversKuala Kumpur SentralPO Box 1019250706 Kuala Lumpur, MalaysiaTel : 03-2173 1188Fax : 03-2173 1288

Registered office

PRoTon Centre of excellenceKM 33.8, Westbound Shah Alam Expressway47600 Subang Jaya Selangor Darul EhsanTel : 03-8026 9741Fax : 03-8026 9744

Registrar

Tricor Investor services sdn. Bhd. Level 17, The Gardens, North TowerMidvalley City, Lingkaran Syed Putra59200 Kuala LumpurTel : 03-2264 3883Fax : 03-2282 1886

stock exchange Listing

Main Market of Bursa Malaysia Securities Berhad

Company secretary

Suhla Binti Al Asri (MAICSA 7025570)

Investor Relations

Izwan Bin ZainuddinTel : 03-8026 9094

Zulazlan Bin Zainal AbidinTel : 03-8026 9041


GRoUP oPeRATIons

MAnUFACTURInG

100% Perusahaan Otomobil Nasional Sdn. Bhd.

100% Proton Tanjung Malim Sdn. Bhd.

100% PT Proton Cikarang Motors (Indonesia)

100% Proton Automobiles (China) Ltd. (BVI)

100% Lotus Cars Limited (UK)

100% Lotus Lightweight Structures Holdings Limited (UK)

100% Lotus Lightweight Structures Limited (UK)

51% Miyazu (Malaysia) Sdn. Bhd.

49% Goldstar Proton Automobiles Co. Ltd. (China)

PRoTon Holdings Berhad

enGIneeRInG seRVICes

100% Lotus Advance Technologies Sdn. Bhd.

100% Proton Engineering Research Technology Sdn. Bhd.

100% Lotus Group International Limited (UK)

100% Group Lotus plc (UK)

100% Lotus Engineering Limited (UK)

100% Lotus Engineering (Shanghai) Co. Ltd. (China)

100% Lotus Engineering Malaysia Sdn. Bhd.

100% Lotus Body Engineering Limited (UK)

100% Lotus Motorsport Limited (UK)

100% Lotus Holdings Inc. (USA)

100% Lotus Engineering Inc. (USA)


sALes & DIsTRIBUTIon

100% Proton Marketing Sdn. Bhd.

100% Proton Edar Sdn. Bhd.

100% Proton Cars (UK) Limited

100% Proton Cars Australia Pty. Ltd.

100% Proton Motors (Thailand) Co. Ltd.

100% Proton Singapore Pte. Ltd.

100% PT Proton Edar Indonesia

100% Lotus Cars Australia Pty. Ltd.

100% Lotus Cars USA Inc.

55% Proton Parts Centre Sdn. Bhd.

oTHeRs

Yayasan Proton

Lotus Pension Trustees Limited (UK)

Lotus Cars Foundation (UK)

InVesTee & AssoCIATe CoMPAnIes

45% Exedy (Malaysia) Sdn. Bhd.

40% Netstar Advanced Systems Sdn. Bhd.

35% PHN Industry Sdn. Bhd.

25% Marutech Elastomer Industries Sdn. Bhd.

25% Vina Star Motors Corporation (Vietnam)

16% Aluminium Alloy Industries Sdn. Bhd.

6.7% Ara Borgstena Sdn. Bhd.

PRoPeRTY

100% Proton Hartanah Sdn. Bhd.

100% Proton Properties Sdn. Bhd.

40% Proton City Development Corporation Sdn. Bhd.

FInAnCIAL seRVICes

50% Proton Commerce Sdn. Bhd.

49.9% Lotus Finance Limited (UK)

49.9% Proton Finance Limited (UK)


Through the years the PROTON Group has collectively realised over 24 various models, and received numerous awards and recognition. From processes, to brands, to the excellence of our cars, every achievement is a testament of our relentless PROGRESS towards excellence.

Board of Directors


Behara Venkata Rama Subbu

Tan Sri Rainer Althoff Abdul Rahim Bin Abdul Hamid



Dato’ sri Haji syed Zainal Abidin B syed Mohamed Tahir (Group Managing Director)


Dato’ sri Mohd nadzmi Bin Mohd salleh (Chairman)


DATo’ sRI MoHD nADZMI BIn MoHD sALLeH

Chairman Aged 57, Malaysian

Dato’ Sri Mohd Nadzmi Mohd Salleh was appointed Chairman of PROTON on 1 January 2009 and is also the Chairman of the Boards of various subsidiaries within the PROTON Group of Companies.

Dato’ Sri Mohd Nadzmi obtained his M.A. in Economics & Statistics from the Miami University, USA in 1980; in Chemistry & Mathematics in 1978; and B.A. in Economics in 1978 from the Ohio University respectively.

Dato’ Sri Mohd Nadzmi’s colourful career also includes serving as the Managing Director of PROTON (1993-1996); Deputy Managing Director of PROTON (1992-1993); Executive Director & CEO of Edaran Otomobil Nasional Berhad (1990-1992), General Manager Marketing Division of EON Berhad (1986-1990); Manager of Marketing Services Department, EON Berhad (1984-1986); Assistant Manager of the Project Division, Heavy Industries Corporation (M) Berhad (1982-1984); Marketing Executive of the International Marketing Division, PETRONAS (1981-1982); and Lecturer, Faculty of Economic Resource & Agribusiness, UPM (1980-1981).

He has also been awarded with numerous professional honours and awards including “Lifetime Achievement Award 2011” from the Kuala Lumpur Malay Chamber of Commerce, “Anugerah Usahawan Cemerlang” from Bank Pembangunan & Infrastruktur Malaysia Berhad (2005), “2004 Malaysian Entrepreneur of the Year and 2004 Master Entrepreneur of the Year” by Ernst & Young Entrepreneur of The Year Malaysia; “Achiever of The Year 2003” by The Chartered Institute of Logistics & Transport in Malaysia, “The Outstanding Young Malaysian” in the Category of Business & Economics Innovation from the Junior Chamber of Malaysia in 1993 and “Man of The Year” by the Malaysian Business Magazine in 1986 for his key role in the Malaysian National Car Project Team.

In 1994, Dato’ Sri Mohd Nadzmi was elected into the prestigious and exclusive membership of “Global Leaders for Tomorrow” by The World Economic Forum at Davos, Switzerland.

His professional affiliations include being Member of the National Economic Action Council; President of the Badminton Association of Malaysia; Board Member of the Malaysia Institute of Road Safety; Advisory Board Member of University of Malaya; Adjunct Professor of LimKokWing University of Creative Technology, to name a few.

Dato’ Sri Mohd Nadzmi has attended all Board meetings held in the Financial Year ended 31 March 2011. Dato’ Sri Mohd Nadzmi has no conflict of interest with the Company and does not have any family relationships with any other Director and/or Major Shareholder of the Company. Dato’ Sri Mohd Nadzmi has never been convicted for any offence within the past ten (10) years.


PRoFILe oF DIReCToRs

DATo’ sRI HAJI sYeD ZAInAL ABIDIn B sYeD MoHAMeD TAHIR

Group Managing Director Aged 49, Malaysian

Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed Tahir was appointed PROTON’s Group Managing Director on 1 January 2006. Dato’ Sri Haji Syed Zainal also sits on the Boards of various subsidiaries within the PROTON Group of companies.

After graduating with a Bachelor of Science in Engineering from the University of Maryland, USA, Dato’ Sri Haji Syed Zainal Abidin began his career as a Project Engineer with Petronas Gas Sdn Bhd in 1987. Thereafter he joined Petroliam Nasional Berhad in 1992 as the Senior Executive of Corporate Planning & International Business Development. Dato’ Sri Syed Zainal then left to join HICOM Holdings Berhad in 1995, where he assumed various senior positions in the company.

In 1999, Dato’ Sri Haji Syed Zainal Abidin was appointed Senior General Manager of PERODUA. In 2002 he was appointed Executive Director of PERODUA Auto Corporation Sdn Bhd and subsequently promoted to Deputy Managing Director in October 2005.

In April 2010, Dato’ Sri Haji Syed Zainal Abidin was named “International Business Leader in the Automotive Sector” at the Middle-East Business Leadership Summit Awards in Dubai for his strong leadership qualities in steering PROTON to becoming a leading regional and global brand with an increasing presence in the Middle East. Shortly after in May 2010, Dato’ Sri Syed Zainal Abidin received the “Masterclass Bumiputra CEO of the Year” award at the 2nd Malaysia Business Leadership Awards in recognition of his outstanding contribution to the development of a pool of entrepreneurs, engineers and skilled workers in Malaysia.

More recently, in July 2011, Dato’ Sri Haji Syed Zainal Abidin clinched the prestigious “Global Leadership Award in Automotive Sector” at the Global Leadership Awards 2011. The award was granted to Dato’ Sri Haji Syed Zainal Abidin by Leaders International, a high profile business magazine as a token of his relentless efforts to ready PROTON for a new regional and global chapter, from both a product and strategic perspective.

Dato’ Sri Haji Syed Zainal Abidin has attended all Board of Directors’ Meetings held during the Financial Year. He has no conflict of interest with the Company and does not have any family relationships with any other Director and/or Major Shareholder of the Company. Dato’ Sri Haji Syed Zainal Abidin has never been convicted for any offence within the past ten (10) years.


BeHARA VenKATA RAMA sUBBU

Independent Non-Executive Director Aged 57, Indian National

Mr. B.V.R. Subbu who was appointed a Director of PROTON on 1 March 2010, is also a Director of PROTON’s wholly owned subsidiaries, Lotus Group International Limited and Group Lotus plc.

Mr. Subbu holds a Masters in Economics from the Jawaharlal Nehru University, New Delhi, India. He began his career with the Tata Administrative Service and was deputed to Tata Motors where he held a variety of senior line and staff responsibilities in the areas of CV Marketing, Sales, Service, Spare Parts and Sales Finance between 1978 and 1996.

In 1997, Mr. Subbu moved to Hyundai Motor, India as Director of Marketing & Sales and thereafter promoted to President in 2002, a position he held until 2006.

Mr. Subbu is the Founder Director of NMC Automotive Infrastructure Pvt. Ltd. an investment company with interests in the entire automotive value chain from diesel engine manufacture to CV distribution in India. Mr. Subbu serves on the Boards of technology focused Indian companies including Larsen & Toubro’s MIPC subsidiary.

Having been previously awarded with the CNBC Commendation for Five years of Business Leadership for Displaying Extraordinary Corporate Leadership and Entrepreneurial Spirit, Mr Subbu was also named among “India’s 100 most powerful CEOs” by the Economic Times in 2005.

Mr. Subbu has attended all but one of the 14 Board meetings held during the Financial Year Ended 31 March 2011. He has no conflict of interest with the Company and has no family relationships with any other Director and/or Major Shareholder of the Company. Mr. Subbu has not been convicted of any offence for the past ten (10) years.

DATo’ MICHAeL LIM Heen PeoK

Independent Non-Executive Director Aged 63, Malaysian

Dato’ Michael Lim has been a Director of PROTON since 15 September 2006 and is also a Member of PROTON’s Board Audit Committee, Board Disciplinary Committee and Board Nomination & Remuneration Committee. Dato’ Michael also sits on the Boards of various subsidiaries within the PROTON Group of companies.

Dato’ Michael began his career with the UMW Group in 1975 and held various senior managerial positions after graduating with an Honours Degree in Engineering from the University of Strathclyde, in the United Kingdom.

In 1986 Dato’ Michael was appointed Managing Director/Chief Executive Officer of UMW Toyota Motor Sdn. Bhd., a joint venture company between UMW and Toyota Motor Corporation of Japan. Dato’ Michael retired in 2004.

Dato’ Michael is currently the Chairman of Furniweb Industrial Products Bhd., and lends his expertise to the export oriented manufacturing company with plants in Malaysia, Vietnam and Thailand.

Dato’ Michael has attended 12 out of the 14 Board of Directors’ Meetings held during the Financial Year Ended 31 March 2011. He has no conflict of interest with the Company and has no family relationships with any other Director and/or Major Shareholder of the Company. He has never been convicted for any offence within the past ten (10) years.

PRoFILe oF DIReCToRs (ConT’D)


TAn sRI RAIneR ALTHoFF

Independent Non-Executive DirectorAged 65, German National

Tan Sri Rainer Althoff was appointed as Director of PROTON on 22 June 2010, as well as Member of the Company’s Board Audit Committee and Risk Management Committee.

Tan Sri Rainer holds a Masters Degree in Electronics and Electrical Engineering from Bergische University Wuppertal, Germany since 1969 and has spent a majority of his working life with Siemens AG. Since 1999 Tan Sri Rainer was the President and Chief Executive Officer of Siemens Malaysia Sdn Bhd and also the Siemens spokesperson for all Siemens operations and affiliated companies in Malaysia from 1 January 1999 until 30 November 2009.

Tan Sri Rainer is the non executive Chairman of Nokia Siemens Networks Sdn. Bhd. Malaysia, since his appointment in December 2009. He is also a Member of the International Advisory Panel to the board of directors of CIMB Bank, Trustee of Jeffrey Chia Foundation Malaysia and Managing Director of Jatro Pte. Ltd., Singapore.

Tan Sri Rainer has attended all Board meetings held since the date of his appointment to the Board. He has no conflict of interest with the Company and has no family relationships with any other Director and/or Major Shareholder of the Company. Tan Sri Rainer has never been convicted for any offence within the past ten (10 ) years.

ABDUL RAHIM BIn ABDUL HAMID

Independent Non-Executive DirectorAged 61, Malaysian

Encik Abdul Rahim Bin Abdul Hamid was appointed Independent Non Executive Director of PROTON and Chairman of PROTON’s Board Audit Committee on 20 July 2010.

Encik Abdul Rahim who is a Qualified Certified Accountant began his career in Coopers & Lybrand in 1971 and became the Managing Partner/Chief Executive of the firm in 1993. In 1998, he assumed the position of Deputy Executive Chairman of PricewaterhouseCoopers until his retirement in 2004.

Encik Abdul Rahim is currently the Vice President of the Malaysian Institute of Accountants as well as the President of the ASEAN Federation of Accountants.

Encik Abdul Rahim is a director of MIDF Amanah Asset Management Berhad and Petra Energy Berhad. He represents the Ministry of Finance on the boards of MIMOS Berhad and Malaysian Debt Ventures Berhad.

Encik Abdul Rahim has attended all Board meetings held during the Financial Year Ended 31 March 2011 since his appointment. He has no conflict of interest with the Company and neither does he have any family relationships with any other Director and/or Major Shareholder of the Company. Encik Rahim has never been convicted for any offence within the past ten (10) years.



DATUK JoHAR BIn CHe MAT

Independent Non-Executive DirectorAge 59, Malaysian

Datuk Johar Bin Che Mat was appointed Director of PROTON on 15 October 2010 and also a Member of PROTON’s Board Audit Committee. Datuk Johar is also a Director of various subsidiaries within the PROTON Group

Datuk Johar obtained his Bachelor of Economics Degree from the University of Malaya in 1975 and began his career with Maybank in the same year.

During the course of his employment with Maybank, Datuk Johar held various posts including Head, Malaysian Business, Corporate Banking Division (1993); Regional Manager of Selangor/Negeri Sembilan (1993 – 1995); General Manager, Commercial Banking Division (1996); Head, Enterprise Banking Division (2002); and his next appointment was as the Head, Retail Financial Services.

Datuk Johar was appointed as Chief Operations Officer of Maybank Group in 2006 and held the position until his retirement in June 2010. He has 34 years of vast experience in the banking industry and was a Board Member of AseamBankers, Aseamlease Berhad, ASEAM Credit Sdn. Bhd., Mayban Trustee Berhad, Maybank Islamic Berhad, Mayban Life Assurance Berhad, Maybank Takaful Berhad, Myfin Berhad (Mayban Finance Bhd), and Mayban Allied Credit & Leasing Bhd.

Datuk Johar is currently a director of AGRO Bank and Amanah Raya Bhd.

Datuk Johar has attended all Board meetings held in the Financial Year Ended 31 March 2011 since his appointment to the Board on 15 October 2010. Datuk Johar has no conflict of interest with the Company and does not have any family relationships with any other Director and/or Major Shareholder of the Company. Datuk Johar has never been convicted for any offence within the past ten (10) years.

DATUK noZIRAH BInTI BAHARI

Non-Independent Non-Executive Director Age 55, Malaysian

Datuk Nozirah Binti Bahari was appointed Director of PROTON on 6 July 2011. Datuk Nozirah sits on the Board Nomination and Remuneration Committee as well the Board Disciplinary Committee. Datuk Nozirah is also a member of the Board of Governors of Yayasan PROTON.

Datuk Nozirah is currently the Deputy Secretary General (Management) in the Ministry of Finance. Prior to this she was the Director of the Budget Management Division in the Ministry of Finance.

Datuk Nozirah obtained her Bachelor’s Degree in Social Science (Urban Studies) from the University of Science Malaysia. Datuk Nozirah has also attended several Senior Management Courses such as Global Leadership Development Programme organised by the International Centre for Leadership in Finance and Advanced Management Training in Harvard Business School. She started off her career in the Ministry of Finance (Finance Division) holding the portfolio of Assistant Secretary. Over the years Datuk Nozirah has served in various other Ministries including the Ministry of Health, Ministry of Agriculture as well as Director of MAMPU Sabah and Deputy Finance Officer of Treasury Sabah.

Datuk Nozirah is currently a Board Member of Bank Simpanan Nasional and Tenaga Nasional Berhad. Datuk Nozirah is also a Member of the Investment Panel of Retirement Fund Incorporated (KWAP).

Datuk Nozirah was appointed in July 2011 and therefore has not attended any Board meetings held in the Financial Year Ended 31 March 2011. She has no conflict of interest with the Company and further has no family relationships with any other Director and/or Major Shareholder of the Company. Datuk Nozirah has not been convicted for any offence within the past ten (10) years.



PRoTon GRoUP MAnAGeMenT CoMMITTee MeMBeRs

Dato’ sri Haji syed Zainal Abidin B syed Mohamed Tahir

Group Managing Director

Azhar Bin othman

Chief Financial Officer

Dr. Wolfgang Karl epple

Senior Director, Group Operations

Mohamad shukor Bin Ibrahim

Chief Executive Officer, Proton Edar Sdn Bhd


Klaus e. Liske

Director, Group Procurement

Tajul Zahari Bin Abu Bakar

Director, Engineering

Claudius Meynert

Director, Export

Azmi Bin Idris

Director, Group Quality


John D. Chacko

Director, Group Marketing & Branding

Inderjith Madireddi

Director, Group Manufacturing

Michele Kythe Lim Beng sze

Chief Legal Counsel

PRoTon GRoUP MAnAGeMenT CoMMITTee MeMBeRs (ConT’D)

suhaimi Bin sulong

Director, Group Human Resource

Note: Yohani Binti Mohd Yusof has resigned as Director, Group Marketing & After Sales effective 31 August 2011.


Muhammad Aris Bin Anuar

General Manager, Manufacturing

Dr. Badrulhisham Bin Mohd Ghazali

General Manager, Corporate Planning

Zahari Bin Husin

General Manager, Product Strategy

Hazrin Fazail Bin Haroon

General Manager, Product Planning


HeADs oF InTeRnATIonAL sUBsIDIARIes

Danny Taner Bahar

Chief Executive Officer, Group Lotus Plc

Brian Collier

Managing Director, Proton Cars (UK) Ltd

John startari

Managing Director, Proton Cars Australia Pty Ltd

Gunther scherz

President Director, PT Proton Edar Indonesia


samson Chua

Managing Director, Proton Singapore Pte Ltd

Lee Weng Yew

Acting Managing Director, Proton Motors (Thailand) Co Ltd


We measure our success not only by profitability but based on the impact we make at the marketplace and workplace, in the communities we serve and on the environment. Growing our repute not just as a global automaker, we are also passionate about evolving as a socially responsible entity that delivers benefits in more ways than one.

CHAIRMAn’s sTATeMenT

PRIDe. PAssIon. PRoGRess.

This phrase was coined a couple of years ago to ignite and drive the PRoTon Group of Companies (PRoTon) as we ventured forth into the second decade of the 21st century. As a result, numerous achievements were recorded but for our shareholders, the Malaysian public and the country, PRoTon surpassed the RM8 billion revenue and RM200 million profit before tax (PBT) milestones for both Financial Year (FY) 09/10 and 10/11, numbers which were last achieved a handful of years ago.


As we leave the year of our Silver Jubilee, let us reflect on the 365 days that were FY 10/11 and peek into what is in store for us for the upcoming year. On behalf of the Board of Directors of the Company, I am pleased to present the Annual Report together with the Audited Financial Statements of PROTON for FY 10/11.

InDUsTRY oVeRVIeW

Picking up from where we left off, the recorded Total Industry Volume (TIV) for the months of January to March 2010 were 33%, 9% and 25% higher, respectively, than they were in the corresponding months of the previous year and an encouragingly superior 22% compared to the same calendar quarter last year.

From April to June 2010, the second calendar quarter of 2010 continued to outperform 2009’s corresponding quarter by a commanding 17%. On the strength of this, the Malaysian Automotive Association (MAA) revised its 2010 TIV forecast from 550,000 units to 570,000 units; conservative by any account but truly justified as despite the bumper first half numbers, the second half is traditionally slower based on historical data.

Be that as it may, the TIV defied all expectations and at the closing of the 2010 calendar year, an all-time high figure of 605,156 was posted. For the first time in Malaysian history, the 600,000 mark was breached. The passenger vehicle TIV also recorded a first by breaking the 500,000 mark, ending the year at 543,594 units. All in all, the TIV was 13% higher than the preceding year, with the passenger vehicle TIV recording a 12% increase.

From products to technology to people, PRoTon continues to innovate towards excellence. Assuredly, our future is exciting and with pride, passion and progress, the future is ours to determine.

”“


In 2009, a lagging automotive industry was resuscitated thanks to immediate and proactive action by the Government of Malaysia through the Second Stimulus Plan. The Government played its part again in 2010, with record breaking TIV numbers attributable to a strong economy which registered a 7.2% growth, and confidence boosting investment friendly initiatives undertaken such as the Economic and Government Transformation programmes, the New Economic Model and the 10th Malaysia Plan. Coupled with these, the introduction of new and exciting models together with attractive loan packages drove the TIV to never before attainable heights.

In tandem with the industry, PROTON’s sales also increased by 6%, contributing more than 157,000 units to the TIV. The ubiquitous multi-award winning Saga continued to impose its presence once again by breaching the 70,000 units mark in 2010. The seemingly timeless Persona continued to garner accolades and confounded critics by clocking in more than 40,000 units in terms of sales, convincingly outpacing its performance in 2009, whilst the Exora continued its fine form, with more than 26,000 units registered, averaging a monthly figure of 2,200 units. FY 10/11 also saw the launch of the Inspira with the 1.8 litre and 2.0 litre variants; our latest offering is contributing 6% towards PROTON’s monthly sales as we tap into a wider market segment.

It is very encouraging to note that PROTON’s three top-selling models surpassed its 2009 sales numbers, entrenching the Saga, Persona and Exora firmly amongst the Top 10 Models of 2010. It could be surmised that the growing support from our customers is a clear reflection of our erstwhile and continuous efforts to re-establish the brand, which essentially translates to better sales volume.

Moving forward, MAA has revised its initial 2011 TIV forecast of 618,000 by shedding 10,000 units. This is primarily due to the slowing down of global economies and the uncertainties that currently prevail, especially in Europe, Japan and the USA. Be that as it may, flowing into the 2011 calendar year, the TIV for the first calendar quarter was still unrelentingly bullish, posting a 4% growth over the previous quarter and a 7% growth as compared to the preceding year’s corresponding quarter.

On the international front, PROTON recorded an increase of 12.3% in terms of shipment against the same period last financial year, largely attributable to an increase in demand in China from our Complete Knock-Down (CKD) programme. In spite of this, our recorded growth was stifled by the challenges faced in our Complete Build-Up (CBU) markets. Be that as it may, we continue to make inroads in Thailand and Indonesia, where the Exora was voted as one of the best passenger car models for 2010 by the Bangkok Post, and PROTON was recognised among the Top 12 brands in Indonesia.

Dato’ Sri Mohd Nadzmi Bin Mohd Salleh briefing analysts following the announcement of PROTON’s fourth quarterly results. Also present were Group Managing Director Dato’ Sri Haji Syed Zainal Abidin B SyedMohamed Tahir (left), and Chief Financial Officer Azhar Bin Othman (right).


As always, PROTON remains very sensitive to market needs and wants. We will maintain our doggedness to ensure that our customers’ loyalty and trust are not wantonly forsaken. Our ever-growing customer base is a result of an ultra critical self-assessment after a painful lesson in humility. We are encouraged but we are not satisfied – we understand that we can be better and we will be better – if only to serve our customers, both external as well as internal.

FInAnCIAL PeRFoRMAnCe

For FY 10/11, PROTON Holdings Berhad posted a consolidated PBT of RM214 million, which is a slight decrease compared to the PBT of RM261 million in the last financial year.

This is largely attributed to higher branding costs and restructuring expenses incurred by Lotus Group International Limited, which is currently undergoing a business transformation exercise. Nevertheless, these efforts are showing positive early signs with the successful global unveiling of five new Lotus sports cars that are due to go on sale as early as 2013.

Revenue for the year ended 31 March 2011 grew by 10% to RM9 billion compared to RM8.2 billion posted in the last financial year. This performance was the result of encouraging sales recorded by the three core models – the Saga, Persona and Exora.

His Majesty DYMM Seri Paduka Baginda Yang di-Pertuan Agong Al-Wathiqu Billah, Tuanku Mizan Zainal Abidin Ibni Almarhum Sultan Mahmud Al Mukhtafi Billah Shah with PROTON’s Chairman and Group Managing Director during His Majesty’s visit to Lotus in the UK.

Additionally, PROTON’s cash and cash equivalents are maintained above the RM1 billion mark and this augurs well for the Group as cash resources are required for continued investments in the development of more exciting and better offerings.

Despite a shrinking of the PBT, what is important to note is that PROTON is on a positive trajectory as we re-establish our revenue growth and profitability. From 2007 to 2011, PROTON recorded a revenue growth of 91% and a PBT growth of 133%. Operationally, we have also registered an improving trend from 1.0 to 0.6 defects per unit. In terms of market share, we have also arrested the decline at 24% and gradually increased the same to just below 30%.

Essentially, as we rise to reclaim the number one position in Malaysia and strive to achieve greater acceptance internationally, it is imperative for our esteemed shareholders and key stakeholders to appreciate that we have gone through a laborious phase where legacy issues have been properly addressed and, of equal importance, improved on key processes to ensure greater efficiency.

DIVIDenDs

On the back of a profitable FY 10/11, the Board of Directors of PROTON recommend the payment of a First and Final dividend of 10 sen per ordinary share of RM1.00 each less tax at 25% on 549,213,002 ordinary shares amounting to RM41,190,975 in respect of the financial year ended 31 March 2011, subject to the approval of our Shareholders at the Company’s forthcoming Annual General Meeting.

ToWARDs eXCeLLenCe

Following my statement in the previous annual report, PROTON has met its projected product milestones by launching the Inspira and the Saga FL. Thereon, for FY 11/12, the eagerly awaited introduction of our turbo engine, facelift of our best selling model and the launch of a brand new product are in the pipeline.


Our Global Small Car programme is also progressing according to schedule and barring any unforeseen circumstances, 2013 will be another defining year for PROTON as we venture further into the global arena. Based on the EMAS (Eco-Mobility Advanced Solution), the Global Small Car promises to be an exciting product proposition not only for PROTON but for Lotus as well, and this would be the first time such an arrangement is entered into by both companies.

Beyond that, the Malaysian public was given a sneak preview of what PROTON is innovating at the Kuala Lumpur International Motorshow 2010. The “Pahlawan” series is a clear statement of our aspirations, in terms of concept, styling, design, technology and elements of it will be incorporated in all our future product and technological offerings.

With regard to technology, our focus on electric and hybrid technologies is already bearing fruit with the success at the Brighton to London Future Car Challenge on 6 November 2010. Organised by the Royal Automobile Club, this race is a new motoring challenge for electric, hybrid and low-emission internal combustion engine vehicles that use the least amount of energy on a 60 mile route from Brighton to London.

PROTON was among the 40 entrants in the race, entering our Saga Electric Vehicle and the Exora Range Extender Electric Vehicle (REEV). Amongst more illustrious and renowned competition, not only did our entries finish the race, the Exora was awarded the Best Range Extender Electric Vehicle, a feat which relegated the celebrated Vauxhall Ampera to the runner-up position. I am indeed happy to state that we are on track with our Exora REEV and as such, our Fleet Test programme will kick start by the end of the year, if not sooner.

For Lotus, FY 10/11 announced the “Dawn of a New Era” for Lotus Group of Companies. With the transformation programme in place, Lotus is in full turnaround mode. Initiatives are in place to ensure a positive change in culture and to attain operational improvements, whilst preserving the Lotus heritage and pedigree. Early signs are good with an 8% increase in revenue and 3% increase in sales.

However, the most telling sign of improvement and innovation surely must have been Lotus’ unveiling of six brand new concept cars – from the effervescent Elan to the enigmatic Esprit, which was voted by critics to be one of the stars of the show at the 2010 Paris Motorshow.

Prime Minister Dato’ Sri Mohd Najib bin Tun Haji Abdul Razak taking a closer look at Lotus technology during his visit to Lotus facilities in the UK. With him are PROTON’s Chairman Dato’ Sri Mohd Nadzmi Bin Mohd Salleh and CEO of Group Lotus, Dany Taner Bahar (extreme right).


It was also heartening to note that the Lotus booth was one of the most visited booths at the show, a true sign that Lotus is on the correct path. To further ensure that Lotus is moving in the right direction, an Advisory Council consisting of leading experts such as Mr Bob Lutz and Mr Tom Purves, was established.

From products to technology to people, PROTON continues to innovate towards excellence. Assuredly, our future is exciting and with pride, passion and progress, the future is ours to determine.

ACKnoWLeDGeMenT

PROTON’s strength comes from the core and at the very heart of this organisation, more than 11,000 people inject in this company their pride, passion and progress as a daily ritual. As such, to each and every one of you, on behalf of the Board of Directors, I extend a heartfelt Thank You for your contributions to PROTON for the financial year under review.

I would like to thank Datuk Zalekha Binti Hassan who has recently resigned from the Board for her invaluable contributions during her years of service with PROTON.

I would also like to take this opportunity to thank the members of the Board for their invaluable contribution and guidance and, at the same time, I would like to thank YBhg Datuk Zalekha Hassan, who recently resigned, for her years of service on the Board. Your role in the development of PROTON will be forever appreciated. Additionally, PROTON welcomes YBhg Datuk Johar Che Mat, the former Chief Operating Officer of Maybank Berhad, and YBhg Datuk Nozirah Bahari, the current Deputy Secretary General, Ministry of Finance, onto the Board. I am very certain that your combined experience in the banking and financial sector will be a boon to PROTON as we continue our journey towards excellence.

To our shareholders, sales/service dealers and vendors and business partners domestically and internationally, our sincerest appreciation for your continued support and commitment. However, on a sombre note, our commiseration goes out to our

Dato’ sri Mohd nadzmi Bin Mohd sallehChairman

PROTON’s Chairman and Group Managing Director at PROTON’s Aidilfitri celebration.

Japanese business partners, in particular Mitsubishi Motors Corporation, who were impacted by the 2011 TÕhoku earthquake and tsunami, which struck the nation on Friday, 11 March 2011.

I would also like to record my thanks to the Management Team, ably led by YBhg Dato’ Sri Syed Zainal Abidin Syed B Mohamed Tahir, for another good financial year.

On behalf of the PROTON family, we extend our sincerest gratitude to our Prime Minister YAB Dato’ Sri Mohd Najib Tun Abdul Razak; our advisor YABhg Tun Dr Mahathir Mohamed; and all the Ministries and agencies for your generous support, guidance and unwavering assistance.

Finally, to the growing number of PROTON supporters globally – our sincerest, humblest and biggest Thank You. As always, it is our hope that you remain positively PROTON.

I take this opportunity to wish all of you Selamat Hari Raya and Happy Merdeka!


FRoM HUMBLe BeGInnInGs

Initially incorporated in 1983 as a humble car assembler in a country then vastly dependant on agriculture, PRoTon is now a full-fledged car manufacturer based in a nation now coined as a “newly industrialised country”: this is our story; not only PRoTon’s, but Malaysia’s as well. PRoTon, now Malaysia’s largest auto manufacturer, is the only home-grown and indigenous oeM car manufacturer in southeast Asia. Clearly, since PRoTon’s inception, the journey can be best summed up as one of pride, passion and progress.

GRoUP MAnAGInG DIReCToR’s ReVIeW


Today, PROTON’s operations reach across South-East Asia, the Middle East, China, Australia and the United Kingdom. With a workforce exceeding 12,000 to date, the PROTON family works across the whole spectrum of the automotive industry including vehicle design, R&D, manufacturing, marketing, sales & distribution and corporate services.

We are especially proud today because PROTON now boasts a range of well-proven and well-received products that enables the brand to seize market share at home where the gap between PROTON and the competition is closing, as well as abroad. Furthermore, through our subsidiary, high-performance car marque Lotus, the Group has all the assets it needs to build a stronger brand globally.

Our efforts and achievements over the past years have enabled PROTON to weather various challenges. Ranging from the financial meltdown of 2008 to the

devastating Tsunami that hit Japan in March 2011 and the recent financial market instability due to debt downgrades in the United States, PROTON has managed to record solid and encouraging growth by providing high quality and appealing vehicles to a growing customer base coupled with competitive pricing.

During the period under review, the launch of the PROTON Inspira was a testament of PROTON’s pledge to always offer unmatched quality and performance at a competitive price. This was shortly followed by the introduction of significant refreshers such as the Saga FL and FLX, the latter using a Continuously Variable Transmission (CVT) paired to the proven CamPro engine - a first in PROTON’s history. These models are well-accepted by the market and have contributed significantly to PROTON’s earnings and growth.

PRoTon continues to strengthen its position domestically and globally through the introduction of new models and variants and pursuing opportunities in new markets. These efforts also focus on establishing better integration and cohesiveness within the Group’s entire operations.

”“


Dato’ Sri Mohd Nadzmi Bin Mohd Salleh with PROTON’s Advisor Tun Dr Mahathir Mohamad, Dato Sri Mustapa Bin Mohamed, Minister for International Trade and Industry and Group Managing Director Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed Tahir at the launch of Proton Inspira.

oPeRATIonAL eXCeLLenCe

2010 has been a landmark year in terms of strengthening PROTON’s operational sustainability practices.

First of all, the construction of the centralised logistics hub project initiated in 2009 in Sijangkang, Selangor as PROTON’s centralised Centre for Logistics Allocation Storage and Services (CLASS) was completed in March 2010 and went operational on 1 April 2010. Meanwhile, the second hub in PROTON Tanjung Malim built by PROTON Edar Sdn Bhd also came online in November 2010. Both hubs have managed to reduce PROTON Edar’s warranty cost by 78%. Furthermore, feedback from customers show that the quality at delivery point has improved by 18% since the start of centralised operations at the hub.

Secondly, the Process and Operational Excellence (PROPEX) project is already one and a half years in its journey. One of PROPEX’s initiatives under Complexity Management includes a Vehicle Cost Reduction Programme (VCR) involving a team of fully trained engineers responsible for generating and analysing cost saving strategies to achieve PROPEX’s goals. Ultimately, PROPEX will increase PROTON’s profit margin without sacrificing customer satisfaction and of course avoid increment of On the Road (OTR) price despite material cost increases, amongst others.

Committed to the journey of technological innovation and progress, PROTON has entered the Electric chapter head-on. With a PROTON Digital Range Extender Electric (D-REE) vehicle slated to be unveiled within the next three years, PROTON is striving to become one of the linchpins in environmental protection and green transportation, propelling Malaysia forward as a hub of green technology. Most importantly, at the heart of PROTON’s green projects is the will to develop an affordable electric car which will lessen the burden of volatile energy price to the consumer as well as the nation.

Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed Tahir and PROTON’s Advisor Tun Dr Mahathir Mohamad takinga closer look at a vehicle during the launch of the logistics hub in Sijangkang.


PROTON’s foremost pledge is to deliver quality cars at an affordable price. In order for us to continuously fulfill this vow, PROTON is invested in a two tiered approach: in-house improvement and working with its vendor base.

In-house, PROTON has launched a Zero Defect Campaign, Innovative Creative Circle (ICC) and KAIZEN programmes to enhance upstream supply operations. These initiatives have improved supply quality performance by 50%. Furthermore, with the Zero Defect Campaign, the Complete Build-Up (CBU) outgoing quality level for both Shah Alam and Tanjung Malim plants improved by 30%.

Creation of a reliable and competitive supplier base is key to sustained competitiveness; as is the need to ensure that core vendor efficiencies, competencies and standards meet global market requirements. Hence, in anticipation of meeting these critical objectives, PROTON has taken proactive steps to initiate a dedicated Vendor Development Programme known as the “Improvement, Control and Education Initiative”.

It is hoped that through this initiative, PROTON can help its vendors to continuously improve supply

network, product quality, cost competitiveness, delivery performance, engineering capability, financial stability, management competencies and innovation.

PAssIon

Having achieved our initial goals, PROTON has reached the critical point where it must strengthen its global presence as we are now able to manufacture cars that have a global appeal.

We believe that the value of the PROTON brand is a result of many factors including products and services, customers’ experiences and marketing strategies.

PROTON’s increased global brand equity and presence is garnering tremendous appeal through Motorsports with the Satria Neo S2000 achievements such as taking pole positions in the third round of the FIA-Asia Pacific Rally Championship (APRC) in New Caledonia. Chris Atkinson won the rally while his team mate Alister McRae took third spot in June 2011. It was Atkinson’s second victory and he is now at the top of the driver’s standing in APRC.

YB Dato’ Sri Ahmad Shabery Cheek, Minister of Youth and Sports, officiated the launch of the PROTON Motorsports Rally Team for the 2011 season.


And of course, through Formula One, the young Lotus-Renault GP team has yielded promising results with its driver Vitaly Petrov scoring his first podium in the opening race in Melbourne in March 2011 and later, his team mate Nick Heidfeld giving the team a second podium finish when he came out third in the Petronas Malaysian Formula One Grand Prix at Sepang in April 2011. This is a significant milestone indeed: every lesson learnt on the track will ultimately translate into technologies PROTON can use on its road cars.

It is through such constant efforts that PROTON has managed to deliver quality cars and receive a flurry of awards throughout the years. Domestically, the Proton Saga won the “Best Passenger Car Model of the Year (Malaysia) 2010” and the Proton Exora “Best Automotive Debut Model of the Year (Malaysia) 2010.

However, 2011 was a dramatic turning point for PROTON as it achieved a phenomenal milestone internationally by having its own Exora win the 2011 Indonesian Otomotif award for “Best Budget MPV in Indonesia” and the Saga FL win the “Best People’s Car of 2011” by Asian Auto. Frost & Sullivan Malaysia 2011 Automotive Awards also recognised the Proton Persona as “Best Value-for-Money Car” for 1.6L and above.

THe FUTURe

PROTON is committed to the development of its green technology in line with the government’s initiative to make Malaysia a regional hub for hybrid, electric and environment-friendly vehicles.

We will be conducting a Fleet Test Vehicle Program for our Range Extender Electric Vehicle (REEV) in collaboration with the Malaysian Government in the the second half of 2011.

PROTON’s decision to be involved in the hybrid and Electric Vehicle (EV) powertrains is strategic in nature. Indeed, in comparison to global OEMs, PROTON is a relatively smaller company which has not committed as much investments into internal combustion engine (ICE) powertrain technologies, thus allowing us to quickly and efficiently switch to alternative powertrain technologies such as battery storage powertrain (used in hybrids and EVs). We believe that with the new PROTON hybrids, we will be able to compete with global OEMs who have already launched their hybrid cars in the market.

The EMAS project was the trigger for PROTON’s efforts to meet global trends and to deliver a new family of world-class and eco-friendly vehicles, and a message to the public that PROTON will not compromise on space, quality and performance through the electrification process.

A group picture taken during the Prime Minister’s visit to Lotus facilities in the UK.


True to its origins and original aspirations, PROTON aims to be at the core of Malaysia’s green initiatives and establish the nation as a premier green-tech innovation centre.

PROTON’s future is also in exports. Indeed, PROTON has been able to implement the Group’s long-term Asian Multi-Local OEM (AMLO) strategy and in general, PROTON recorded increasing Complete Knock Down (CKD) sales to China while sustaining CBU exports from Malaysia. Our total shipment to overseas markets increased 12.3% compared to the same period the previous year. We believe that with increased global brand presence, ever-improving products and better appeal, PROTON’s current international growth is only set to continue and improve even further.

DATo’ sRI HAJI sYeD ZAInAL ABIDIn B sYeD MoHAMeD TAHIRGroup Managing Director

Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed Tahir launching PROTON’s Zero Defect Programme.

Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed Tahir receiving the MITI Industry Excellence Award from Prime Minister Dato’ Sri Mohd Najib Tun Abdul Razak.

PRoGRess AnD VIsIon

Looking at the dramatic turnaround PROTON has undergone in the past six years, I take this opportunity to thank all PROTON staff for their unrelenting efforts, passion and hard work without which PROTON would not be where it is today: at the doorstep of a new regional and global chapter.

While many see new daunting challenges and risks ahead in this new venture of ours to become a global Malaysian brand, I remain confident as the PROTON family has displayed exceptional loyalty and dedication to the Company in good and more turbulent times. PROTON will one day stand strong and proud on the global automotive map. We are already seeing the beginning of a success story that saw an automotive company start from humble beginnings to a competitive and global automotive manufacturer uplifting with it, along the process, a pool of creative engineers and skilled workers.

On this note, I am pleased to present to you our Operations Review that highlights the key developments and initiatives of the Group, which is a clear reflection of our achievements to date.


ENGINEERING SERVICES

TEChNoloGy aNd INNoVaTIoN aRE ThE dRIVING foRCES bEhINd PRoToN’S ENGINEERING SERVICES dIVISIoN aS ThE GRouP CoNTINuES To PRoGRESS wITh PRIdE aNd PaSSIoN IN PRoduCT dEVEloPmENT, STylING aNd TEChNoloGy dEVEloPmENT, CollaboRaTIoNS, PEoPlE dEVEloPmENT aNd PRoCESS ImPRoVEmENTS.

OPERATIONS REVIEW

56 PROTON 2011 aNNual REPoRT

PRODUCT & DEVELOPMENT

PROTON Inspira

launched in November 2010, the Inspira is a trendy 4-door sedan that provides a sporty ride at an affordable price. Encompassing the bold and aggressive styling, the Inspira transpires its excellent performance in terms of PRoToN’s renowned ride and handling characteristics and advanced powertrain. The transmission premiers PRoToN’s first smooth-shifting Continuously Variable Transmission (CVT) that comes with INVECS III and the advanced fuzzy logic based transmission that optimizes gearing for the benefit of both performance and fuel economy.

Not only does the best-in-class ride and handling (R&h) quality offer the fun-to-drive factor, it also inspires confidence during hard driving and provides added safety during emergency situations. four-wheel anti-lock braking system (abS) and electronic brake distribution (Ebd) ensures that the driver can control the car in unlikely events. automatic air-conditioning system allows the driver to set his desired temperature as the system automatically adjusts to maintain optimum comfort. meanwhile, the driver can enjoy the mP3-equipped arkamys surround system that ensures a rich and high quality sound. a bonus aspect is the ‘‘welcome and coming home’ feature that ensures the lights stay illuminated until the driver safely enters the house.

PROTON Saga Face Lift

after three years into what has been an extremely successful run, the Saga just got even better. PRoToN has introduced the new Saga fl which offers customers not only a wide array of enhancements but injects more dynamic styling and design into the popular introductory family sedan. befitting its popularity especially amongst the younger generation of car buyers, the Saga fl has undergone exterior restyling to take on a more spirited, young, sporty and trendy appearance.

The Saga fl features an all-new fender design, hood, headlamps, front grille, as well as front and rear bumpers. also new is the introduction of side mirrors incorporating lEd turn signals, a rear combi with lEd, rear reflector and muffler cutter. for improved driver and passenger safety, the Executive model features additional passenger side airbag, an audio head unit with mP3, uSb, and auX ports, and steering wheel with audio switches.

PROTON Inspira

PROTON 2011 aNNual REPoRT 57

The Saga fl represents the new way of doing things at PRoToN. Instead of relying on the popularity and success of the existing Saga, the overwhelming public acceptance motivated us even more to make an already good model even better. It’s again a manifestation of PRoToN’s commitment to provide malaysians with exceptional value for money mobility in terms of affordability in ownership, practicality, style, level of features, and safety.

STYLING & TECHNOLOGY DEVELOPMENT

Global Styling – Pahlawan Series Show Car

KLIMS 2010

The Kuala lumpur International motor Show 2010 was a grand affair for PRoToN as it coincided with our 25th anniversary celebrations. a coming-of- age of sorts, the event provided a perfect platform

to showcase our product offerings, technology showcases and design activities. one of the main highlights of the event was the unveiling of the Pahlawan series of show cars that illustrated how PRoToN capitalised on design to elevate the value of our products over that of competitors. It was a significant success that garnered positive response from visitors to the booth as well as in on-line/off-line mediums. another high traffic area was the installation of the interactive Styling Studio that enabled visitors to have firsthand experience in exploring digital sketching, renderings, colour and trim selection, personalised car configuration and taking a virtual drive in the PRoToN Tuah show car. all of this illustrates PRoToN’s commitment to share its pride and passion in building high quality cars for malaysians as well as its export markets.

The Pahlawan Series


Tuah – The name Tuah pays tribute to hang Tuah, the legendary malay warrior from malacca. as the name implies this concept was the star of KlImS 2010. It has been designed as the precursor to what is in store for the future new sedan. The Tuah has all the qualities of a winning design. Throughout the design one can see the use of PRoToN design’s as a new Global design language.

Jebat – a surefire surprise during the event was the Jebat. based on the Inspira it personifies maximum aggression and future style by applying major changes on the sheet metal and plastic parts. dark coloured roof and prominent rear spoiler entail the strong character and more importantly, distances itself securely from the donor vehicle.

Kasturi – To commemorate the launch of the refreshed Saga fl this show car was designed as an aspirational vehicle. The Kasturi takes sportiness to the next level. overall the Kasturi has a slight boy-racer look to it, one that exudes aggressiveness with a touch of modern hues.

Lekir – The lekir is a realision of how lotus and PRoToN can collaborate in creating an exciting product.


Lekiu – The lekiu was born to heed the public’s call of a national SuV.

Technology Development

Globalisation has challenged PRoToN to be even greater than before. In order to survive in the complex and volatile global market PRoToN consistently requires new updated directions and insight into the philosophy of new automotive business trends. business innovation through globalisation, green technology, alternative fuel and sustainable technology are some of the current driving factors for continual existence.

with the appointment of the PRoToN Technology advisory Council (PTaC), PRoToN will enhance its current strategy for timely preparation and risk mitigation of technology acquisition based on the information given by the panels. The purpose of PTaC is to advise and provide recommendation to PRoToN on current, future technologies and global automotive directions.

PROTON Technology Roadmap

The PRoToN Technology roadmap (PTR) serves as a blueprint for the Company in shaping PRoToN’s car of the future. It forms an integral part of the decision making process of the technologies that should be acquired so as to remain competitive and profitable in the domestic and global market within a ten

year time frame. The PTR enables this by aligning business objectives with in-house capabilities and resources. our pillar of PTR is largely based on body, Chassis, Safety, Electrical, Electronic, Powertrain and alternative Powertrain. The foundation of six technology clusters contributes to realising the ‘Ride and handling’ differentiator. To ensure that technology visions are constantly met, if not exceeded, PRoToN is relentless in its lookout for cutting edge technology which will catapult the PRoToN brand into the forefront of automotive excellence.

Technology Transfer

The Government of Saudi arabia recently initiated a cluster programme to develop and provide support to a range of new industries whereby the mission is to grow and diversify the Saudi arabian economy by developing targeted industrial clusters that leverage the Kingdom’s resources. PRoToN has worked on a feasibility study programme with King abdulaziz City for Science and Technology (KaCST), an independent scientific organisation in Saudi arabia, to develop the plan to achieve full automotive development and manufacturing capability in the Kingdom of Saudi arabia.

KaCST Technology Transfer Programme has two main deliverables which are:

• Knowledge transfer through tutoring-on-the-jobalongside PRoToN’s engineers

• Knowledgetransferonprototypetechnical-know-how through prototype car build up.

The key accomplishments that PRoToN managed to achieve to date are:

• All the 11 engineers returned to KACST withbasic technical knowledge of car development related to their modules.

• Theprototypecarwassuccessfullycompletedby22 october 2010 and was showcased during the Riyadh motor Show from 4 – 9 december 2010.

OPERATIONS REVIEW (CONT’D)


Electric Vehicle

Exora REEV was developed to reduce Co2 emissions in conjunction with the Government’s green growth agenda and to provide consumers with the best fuel economy solution and improved vehicle performance. It is realised by integrating leading edge powertrain electrification and engine-generator systems through serial hybridisation.

The PRoToN REEV innovation was proven on the global stage when Exora REEV won the best E-REV category in the brighton to london future Car Challenge in November 2010. This serves as a testament to PRoToN’s engineering prowess and technological advancement.

Exora REEV will be subjected to a fleet Test Vehicle (fTV) programme. The fTV programme will facilitate the growth of charging station infrastructure, regulatory standards, EV related supporting sectors and also proliferate the paradigm shifts in consumer acceptance for new automotive technology. PRoToN REEV system will be the sustainable solution in ensuring PRoToN’s competitiveness globally as we enter the next wave of automotive revolution.

PROTON was among the 40 entrants in the RAC Brighton to London Future Car Challenge 2010, entering our Saga Electric Vehicle and the Exora Range Extender Electric Vehicle (REEV).

The Exora Range Extender Electric Vehicle (REEV) was awarded the Best Range Extender Electric Vehicle.


COLLABORATION

Research Collaboration with Universities & Research Institutes

The PRoToN Critical mass Scheme serves as a platform to establish the critical mass within PRoToN employees as a whole and the Engineering division particularly by increasing the ratio of Phd and master holders. This programme is one of the mou components under the PRoToN-university Technology malaysia (uTm) collaboration initiative. To date, 36 PRoToN staff have successfully registered under PCmS at uTm International Campus – 24 under the Industrial Phd Programme and 12 for the master’s Programme. about 70% of these employees are from the Engineering division.

PEOPLE & RECOGNITION

Skills Development and Training

The focus on staff development within the Engineering division is to enhance skills and capability. from october till december 2010 over 47 new engineers have successfully equipped themselves with basic skills and knowledge which have enabled them to carry out their responsibilities in their current tasks, while 26 engineers were deployed overseas for on the job training to upgrade their skills and capability in engine development at lotus in uK, Germany, and automotive development skills in Italy, Spain and Japan.

The exposure has enhanced their skills in their areas of specialisation which gives PRoToN an edge in the product development process for the Inspira, Saga facelift and also in engine development. The Engineering division has also established a PRoToN Professorship programme to spearhead the collaboration works between PRoToN and uTm. The activities comprise an automotive research programme and engineering capability development.


Signing ceremony for the PROTON-UTM Professorship Programme

International and Technical Participation

In November 2010, PRoToN participated in the International Conference of Reliability and Structural Safety which was held in Venice. PRoToN engineers teamed up with representatives from local universities to present a Technical Paper titled “application of Pearson Parametric distribution model in fatigue life Reliability Evaluation”.

PRoToN was also a main sponsor of the International Conference on the Sustainable mobility (ICSm) which was held between 1 – 3 december 2010. The main agenda of the ICSm was to provide an avenue to present ideas and studies related to the aspect of sustainable technology and also to share knowledge among universities, industries and government bodies towards achieving excellence in automotive engineering.

during this prestigious event one of the senior engineers from the Engineering division gave a talk on “Time frequency analysis and Jury Testing for door Closing Sound development”. These active participations in international and technical programmes are proof that PRoToN continues to successfully inculcate a culture of innovation among its people.


Proton Innovation & Invention Competition 2010

The PRoToN Invention and Innovation Competition (PICC) which was established in 2009 is an annual event which enables PRoToN staff to generate new ideas and interest in creating next generation cars and also for employees to feel that their ideas and contributions are valued by the Company.

PICC 2010’s theme was “Going Green”. This theme was choosen in line with the Company’s corporate responsibility agenda to reduce carbon emission as part of its efforts in combating global warming and also to support Government Initiatives towards realizing a greener and safer environment.

The competition began in april 2010 and was completed in october 2010 when each team presented their final creation to the judges. The winners were decided based on the green concept, creativity, innovation, design and styling, originality, practicality and building cost – all of which were evaluated by external judges from the ministry of Science, Technology and Innovation, university malaya, university Technology malaysia and Kementerian Tenaga, Teknologi hijau dan air malaysia. all the 20 concept cars were displayed in a parade during PRoToN’s family day in November 2010.

PROCESS IMPROVEMENTS

Product Lifecycle Management

Phase 1 of Product lifecycle management (Plm) which was implemented since 2010, is an aggressive process improvement initiative that PRoToN has embraced.

Phase 1 solution involved upstream activities in managing product development, and sought to:

• Enablemoretimeefficientcollaborativeprocessesacross the functional teams as changes could be adopted quickly.

• Allowdifferent teams to trackchangesateverystage in the development cycle and hence keep the strategic focus aligned.

• Share data within and outside of the productteam, avoiding duplication and wastage in the development. This will streamline the product development process and allow leveraging of data and knowledge from experienced engineers.

• Manage a single source of engineering masterdata (bill of material) with seamless integration to other systems and functions enterprise wide.

These combinations provide a platform for collaboration and integration of business processes which help PRoToN improve operational efficiency, refine product management and eliminate redundant processes.

Vehicle Cost Reduction

The Process and operational Excellence (PRoPEX) project is already in its one and a half years journey and is gaining momentum. many initiatives across PRoPEX are now in the implementation mode. one of the initiatives is known as Complexity management. The Vehicle Cost Reduction (VCR) team is a group of fully trained engineers that are responsible for generating and analysing cost saving ideas to accomplish PRoPEX goals. besides this, the team also plays an important role to make sure all feasible ideas are being implemented. The team was established on 1 february 2010 and currently there are full time PRoToN engineers to run the whole streamline. The Company’s main VCR objectives are to:

• Minimiseeffectofmaterialcostincreasetothecar price.

• Consider cost improving activities even atdesigning stage.


maNufaCTuRING

ThE NEXT fIVE yEaRS wIll bE ThE moST CRITICal yEaRS IN ThE hISToRy of maNufaCTuRING IN PRoToN bECauSE of ThE ImPENdING maRKET lIbERalISaTIoN duE To TaKE EffECT IN 2016. wITh ITS RElaTIVEly ‘low’ VolumE, ThE CoST of maKING CaRS IS ThE maNufaCTuRING dIVISIoN’S fIRST PRIoRITy. ThE STRaTEGy IS To uSE QualITy ImPRoVEmENT aS a CoST REduCTIoN STRaTEGy.



The notion of reducing cost by lowering expectations or standards is something that PRoToN will never settle for. To meet higher customer expectations, we consider each customer’s complaint as a golden opportunity to improve quality either in our products or in the quality of our assembled work.

The period under review has been relatively good despite small setbacks in the Complete Knock-down (CKd) exports. Good sales of core models especially the Saga was boosted with the introduction of the Inspira. The Inspira which is adopted from the award winning model from mitsubishi proved to be a popular choice among malaysians. It also paved the way for new manufacturing processes through the introduction of the latest car technologies and the new CVT transmission.

The successful launch and introduction of the Inspira, helped to increase total production volume from 166,308 to 171,659 Complete build-up (Cbu) units in fy 2010/2011. The Saga also increased in production from 69,961 units (fy 2009/2010) to 76,536 units (fy 2010/2011) proving that its value for money and continuous quality improvements have inspired confidence and trust among many proud malaysian owners.

The Saga underwent a major facelift where the whole front view was completely redesigned. The new hood with sporty headlamps and front grille and new fender gave the car a younger and more contemporary look. In addition, the front and rear bumpers and the rear lamps were also given a fresher image in tune with the times. Coupled with this, the interior was also refurbished with passenger airbag, rear passenger central lock, six switch-on steering wheel audio control, leather gear shift knob, single disk player, uSb and mP3. So it was not surprising when the demand for the Saga kept increasing.

The Saga underwent another minor facelift in august 2011. This included a change in the powertrain where a new improved engine and transmission were introduced.

In November 2011, the new Exora Turbo will be produced. The new engine that is being developed by both PRoToN and lotus Engineers, comes with a powerful 138bhp to a maximum of 151bhp. The exterior will also be improved with sport rims, smoke lenses, rear combi lamp, chrome front radiator grille with black ribs and deep titanium finishing lamp.


lastly, we will introduce our first locally produced global car to be manufactured at the Tanjung malim plant. The new car is now being tested for production optimisation and production is expected to commence by early february 2012. The new car will not only possess the latest trend in looks and style but it also comes with several new technology features and enhancements.

for example, 14 parts of the body in white are composed of a very hard metal derived through a process called hot Press forming (hPf). This new high technology process is a first in malaysia and South East asia. with this process, the parts can withstand a force of 1,500 mega Pascal. hence with the addition of these parts, it is possible for PRoToN to have a five star ncap rating car. another new production technology is the rolled hemming process. by this process each area can be finely tuned to give optimum pressure and hence higher quality. These production technologies are a cost reduced investment and are expected in the future, to reap benefits for PRoToN and decrease costs further.

all these means that continuous upgrades in the skills of our employees are a must. our employees, from the assemblers to the engineers, are committed to improve the quality and reliability of our cars. Various teams have been set up and daily audits are conducted at the workplace.

These efforts have led to increased numbers of suggestions received as part of our KaIZEN scheme. a total of 26,214 suggestions were received during the period under review, with total cost reduction recorded at Rm42.84 million.

Efforts to improve productivity and quality remains a core focus within the manufacturing division. Quality levels improved in 2010, and with the increase in production volume, we are also taking steps to raise our productivity index. we are putting plans in place to involve the vendor community in our efforts to raise manufacturing standards in the near future. This is crucial as minor disruptions in their operations can severely affect the performance of our production lines.


Plant operations at PROTON Shah Alam


In line with our target of quality improvement as a cost reduction strategy, the division has identified areas for improvement. In this respect not only is product quality being emphasised, we find it necessary to encompass the quality culture in our workplace to improve and sustain the quality levels of our products.

our employees are being continuously educated through on the job training and a problem solving culture is being built by having “GENba audits” daily. These early morning audits have proven effective in improving working conditions and many KaIZENs have been made as a result of these GENba observations.

further observations and daily improvement meetings to solve on-line quality problems have resulted in our team members gaining experience and confidence in problem solving.

This resulted in better numbers in our quality index and less rejection for our process.

PROTON Shah Alam

The PRoToN Shah alam manufacturing complex includes the original main Plant and the smaller multi Vehicle factory (mVf). a separate Engine machining and assembly building is also contained within the complex where cylinder blocks, crankshaft and camshafts for the Campro engine are machined and subsequently assembled.

There is also a Casting plant which is situated in the nearby Glenmarie industrial area. The casting plant is able to produce up to 180,000 cylinder blocks, crankshafts and bearing caps. There are plans to increase this capacity to 250,000 units per year. This year we are going to start the in-house cylinder head aluminum casting due to Start of Production (SoP) in december 2011.

This is our first time casting aluminum products. Nevertheless, with proper planning and training we are confident of acquiring this technology and delivering the results. Currently our cylinder head casting comes from Perodua and dung Jeo Korea.

The main plant’s capacity is 150,000 units while the mVf’s capacity is 50,000 giving a total capacity of 200,000 units per year.

The main plant currently produces the Saga, waja and arena models. The Saga is the highest volume model produced, averaging about 6,378 units a month during the period under review, and is expected to increase to 7,300 units a month for the next financial year. Production of the waja has ceased as planned since June 2011.

for the record, up to march 2011, production of the Saga reached a cumulative volume of 239,212 units since the start of production. by contrast, the production volume for the waja and arena were 4,772 units and 472 units respectively.

The medium Volume factory (mVf) solely produces the first malaysian mPV namely, the Exora. Since its introduction in april 2009, mVf has produced 58,795 units of Exora up till march 2011. In ensuring the EXoRa continues to capture the mPV segment, production of Exora fl has been planned and targeted for launch in November 2011. The stylish body kit, sporty alloy rims and the new interior look of tempest gray are designed to attract younger drivers who appreciate aesthetic touches.

This plant is also currently producing the Inspira – the designated replacement car for the waja. Production started in November 2010 and the volume produced for the Inspira in fy 2010/2011 is 7,035 units. The rise in interest shown has resulted in the increase of volume in the coming months. In order to cater to market demand, we have embarked on ongoing preparations to increase production capacity, such as adding a new automated spray line by September 2011 to increase the capacity of the Painting shop.


PROTON Tanjung Malim

PRoToN’s Tanjung malim plant in Perak has an annual capacity of 150,000 units (involving two shifts) with a 60% automation level, allowing man and machine to interact more efficiently, productively and safely. The plant comprises five main buildings namely Engine & Transmission (ETm), Stamping, body assembly, Painting and Trim and final assembly; all equipped with an automatic line Control or error-proof system to assist workers to enhance built up quality on-line and to achieve better production efficiencies.

To allow for greater flexibility in production, the plant is capable of producing multi-model products on a common line. Each line can assemble vehicles on three different platforms and produce up to nine different models at any one time. The Stamping shop is equipped with a 4,600 tonne transfer press, the largest stamping equipment and the biggest of its kind in the Southeast asian region.

Certified by ISo 9001 and ISo 14001, PRoToN Tanjung malim has set new standards for a more conducive, comfortable and safe working environment. worker friendly features include a high roof concept and natural aspirated ventilations that channel a cooling effect within the complex, where good ergonomics, brightly coloured floors and well lit interiors facilitate energetic and dynamic performance.

Currently, PRoToN’s Tanjung malim plant produces the Persona, Gen.2, Savvy and Satria Neo models with Persona being the highest volume model produced on a monthly basis. during the year under review, the plant produced 47,849 units of Persona; 3,090 units of Gen.2; 2,225 units of Savvy; and 4,574 units of Satria Neo.

for the next fiscal year, the production of Gen.2, Savvy and Satria Neo will cease. This is to make way for the production of our new first global car, the replacement for the Persona. although the current Persona model still commands a respectable volume, the company has formulated new replacement models as a refreshed effort not only to improve product but also as a means to increase the capabilities of our people.

Preparation is currently underway to validate production processes and various equipment are being installed in order to meet the scheduled start of production by early 2012. with new manufacturing technologies, there is a critical need to train our employees. Preparatory work such as early training and identification of problems is currently being carried out to ensure all aspects of our operations will be enhanced in time.

Automated plant operations at PROTON Tanjung Malim


Prospects

The total production volume for PRoToN cars in fy 2011/2012 is forecasted to increase by 2% compared to fy 2010/2011’s actual production volume of 186,769 units. The volume for this fiscal year has been set based on the projected domestic economic recovery, growth in Total Industrial Volume (TIV) and export volume expansion.

The small increase in volume is forcing PRoToN to rethink its strategy to optimise plant utilisation and if possible minimise additional required investment. This is to maximise the reduction of the overall manufacturing cost per unit.

manufacturing is committed to improve product quality and deliver new products on time. we are confident that we can achieve the required volume, but more importantly, we want our products to have enhanced quality at optimum cost.

for the next financial year, we plan to deliver 189,900 units, which means plant utilisation can now reach up to 91%. further upside in the volume is also envisaged due to positive developments in the Iran and middle East markets. furthermore, in view of the launch of cosmetic changes for the current models and the new replacement model for the waja, we are certain of an imminent increase in the production volumes, which is a very challenging scenario indeed.

Presently the Saga, Persona and Exora make up more than 55% of the total fy 2011/2012 volume forecast. as part of the activities to continuously refresh these models, cosmetic changes or face lifts have been planned. In addition, with the new full model change to replace the Persona, we anticipate renewed interest to result in an increase in production volume.

PRoToN is continuously improving its people capabilities in facing future challenges. In order to meet customer expections for better quality and services, we are putting together new plans to train our people and counter potential talent deficits. future endeavors such as the venture for CKd operations in Iran and India in addition to our current operations in China will require personnel with higher capabilities and greater experience.

apart from internal training, on-the-job training and GENba KaNRI (shop floor/control management), the manufacturing division has also introduced simulation training facilities, or the IEd simulation training centre. This has enabled us to train our employees on the concept of the Toyota Production system or lEaN manufacturing methods and simulate them off-line. New employees and management personnel have undergone this training to synergize their understanding of these concepts.

we are also currently in negotiation for possible collaboration with our vendors to realise cross training programmes for our executives to enhance their experience and expand their industry network. Several vendors have indicated their interest to be involved in this win-win partnership to improve performance. Such collaborations will remain a permanent agenda in our future plans.


QualITy maNaGEmENT

PRofESSoR dR. EdwaRdS dEmING, REfERREd To aS ThE faThER of QualITy EVoluTIoN, ofTEN REfERREd To STaTISTICS aS “Two PERCENT of ThE woRK... aNd ThE oThER 98 PERCENT IS abouT PEoPlE”. GENERally QualITy IS alwayS PERCEIVEd aS ThE ElEmENT of PRoduCT, whERE SomEThING wRoNG lIES wITh ThE PRoduCT wE buy oR uSE EIThER duE To SuPERfICIal oR fuNCTIoNal faIluRE. bEhINd ThE obVIouS ThouGh, ThE RooT of ThE PRoblEm uSually lIES wITh PEoPlE.



we can engineer the RIGhT product with the RIGhT system but without having the RIGhT aTTITudE or RIGhT CulTuRE in PEoPlE, we cannot succeed in producing QualITy products.

developing the ‘RIGhT CulTuRE & RIGhT aTTITudE in PEoPlE’ is PRoToN’s focal point for improvement. during the period under review, Group Quality division activities continue to build on people-centric quality improvement initiatives and programmes.

Customer Focus: Quality Improvement Team

within PRoToN, Quality Improvement Teams (QITs) – a cross functional team with representatives from various divisions namely Quality, manufacturing, Engineering & Procurement – are tasked to contionously improve Proton cars.

In fy 2010/2011, more than 300 improvement items have been implemented by the QIT as to reflect PRoToN committment towards customer satisfaction. with a total number of 530 staff working across the division to resolve customer concerns, the list of concerns collected throughout the years are recorded in the ‘lesson learnt’ database which are used by the Engineers as point of reference and guidelines in order to improve the future PRoToN models.

Towards Quality Culture: Quality Improvement Committee

The highest platform in PRoToN to discuss, recommend and resolve issues related to Quality, is through the Quality Improvement Committee (QIC). The weekly QIC meetings are attended by all operational units (ie Engineering, Group Procurement, manufacturing, Quality and after Sales division) and is chaired by the director of Group Quality. The QIC continues to be the platform for PRoToN’s seven core values, namely Quality, Customer focus, Innovation, Teamwork, Speed, Caring and honesty.

all improvement initiatives are discussed and resolved during the weekly QIC meetings under the four main areas of Engineering design, Suppliers, manufacturing and after Sales.

PROTON representatives posing with the MPC Chairman Award received during the Malaysia ICC National Convention 2010.


Innovative-Driven Quality: All Innovation Matters (AIM)

Improvement – whether related to work, family, financial or life – is the driving force that evolves human lifestyles. Through time, changing technologies are discovered and new human needs evolve driven by the human desire for improvement. Take for example, communication. we have now evolved from sending a letter across the world that would usually take weeks to arrive to writing e-mails which reach recipients instantaneously.

at PRoToN, the 7 PRoToN CoRE ValuES establish the basis for all innovation activities, be it on a small scale through ideas mooted by individuals (via aIm Suggestion Scheme) or on a big scale mode (via ICC)involving a group of six to eight people within the same department who are trained to identify, analyse, resolve or enrich work-related concerns guided by the Plan-do-Check-action (PdCa) cycle.

during the 2010/2011 financial year (fy 2010/2011), aIm Suggestion Scheme recorded 57,789 suggestions which resulted in cost avoidance amounting to Rm30.8 million; an improvement of more than 30% compared to fy 2009/2010. Through group innovation activities such as ICC, the period under review saw 415 groups registering cost avoidance valued at Rm49.8 million as a result of the projects implemented.

The industry recognised PRoToN’s ICC Group’s achievements with a Gold award during the International ICC Convention 2010 in India and mPC Chairman award during the malaysia ICC National Convention 2010.

believing that Quality Culture development should not be confined to the manufacturing plant but also nurtured and stimulated among the communities, PRoToN collaborated with TV3, SIRIm and the ministry of Science, Technology and Innovation (moSTI) to organise a Reality TV contest called ‘malaysian Inventors Challenge (IdEa)’ which aired on TV3 every Saturday at 7 pm from September till November 2010. The programme, developed as part of PRoToN’s Corporate Social Responsibility (CSR), was hosted by well-known artistes daphne Iking and malaysia’s astronaut mejar dr. faiz Khaled.

Total Quality Ownership (TQO)

PRoToN’s quality culture related activities are also extended to the suppliers. In fy 2010/2011, PRoToN’s Group Quality division in collaboration with PRoToN’s Group Procurement division, rigorously promoted Quality activities among the suppliers.

PROTON’s ICC Group celebrating after receiving the Gold Award at the International ICC Convention 2010 in Hyderabad, India.


a Zero defect campaign, ICC and KaIZEN programmes make up some of the activities introduced to enhance upstream supply operations.In fy2010/2011, more than 80 ICC were implemented by suppliers and selected suppliers were also involved in the Zero defect program. These initiatives have improved supplier quality PPm performance by 50%.

PRoToN’s quest for Quality perfection continues within both our Shah alam and Tanjung malim plants. with the Zero defect and Zero Quality control initiatives, the Cbu outgoing quality level for both plants improved by 30%.

Business Excellence: Quality Management Excellence Award (QMEA)

Comparing and measuring quality performance within our own turf is limiting. The only way for PRoToN to understand where it stands within the industry is to compare itself with other manufacturers of similar business size and highly accredited by reputable organisations or government bodies.

with that in mind, PRoToN eagerly accepted an invitation from the malaysia Productivity Corporation (mPC) and ministry of International Trade and Industry (mITI) to participate in the highly competitive Quality management Excellence award (QmEa) 2010.

PRoToN was selected by mPC as a participant to compete with other Government linked Companies (GlCs) and Global Companies that operated in malaysia under Category IV (annual sales turnover exceeding Rm100 million).

after a three-month evaluation (inclusive of an onsite visit) of PRoToN’s performance records from 2007 – 2009, mITI awarded PRoToN the prestigious QmEa during the malaysia Industry Excellence award (IEa) 2010 presentation ceremony in Kuala lumpur Convention Centre.

The selection criteria for PRoToN in winning the QmEa were based on excellence shown in:

• TopManagementLeadershipandManagementofQuality;

• Use of Quality Data and Information in theorganisation;

• HumanResourceManagement;

• CustomerFocus;

• QualityAssuranceofExternalSuppliers;

• ProcessManagement;and

• QualityandOperational/BusinessResults.

PRoToN’s Group managing director, dato’ Sri haji Syed Zainal abidin b Syed mohamed Tahir, received the award from Prime minister, dato’ Sri mohd Najib Tun abdul Razak and the minister of International Trade and Industry malaysia, dato’ Sri mustapa mohamed. PRoToN’s Chairman dato’ Sri mohd Nadzmi mohd Salleh and the Senior management of PRoToN were also in attendance to celebrate this proud achievement.



SalES & dISTRIbuTIoN

DOMESTIC MARKETThE fINaNCIal yEaR of 2010/2011 (fy 10/11) haS bEEN a SmooThER RIdE ComPaREd To ThE PREVIouS PERIod uNdER REVIEw. alThouGh wE aRE STIll faCING ThE Global ECoNomIC TuRmoIl, ThE ToTal INduSTRy VolumE (TIV) RECoRdEd a hISToRICal 605,156 uNITS, a 12% INCREmENT fRom ThE 536,905 uNITS RECoRdEd IN 2009. IN faCT, IT haS alSo SuRPaSSEd ThE oRIGINal TaRGET SET by malaySIaN auTomoTIVE aSSoCIaTIoN of 570,000 uNITS. ThE GRowTh IS SuPPoRTEd by Good PuRChaSE SENTImENT, fRIENdly fINaNCE faCIlITIES aS wEll aS maSSIVE PRoduCT lauNChES by auTomoTIVE PlayERS.

Campaign ambassadors DJ Lin (Suria FM), Jack Lim (MY FM) and Aanatha (THR Raaga) with Abdul Sidik Abdul Hamid, GM of Marketing, Proton Edar Sdn Bhd (second from right) at the launch of the ‘Persona Undoubtedly Campaign’.


PRoToN ranked second in terms of market share at 26%. with proper sales and marketing strategy combined with product launches of the Exora mC, Saga fl and Inspira, the performance in fy 10/11 was 3% higher at 162,012 units compared to 157,170 units in fy09/10.

The launch of the latest addition, Proton Inspira, to the family, has allowed us to capture more customers from different segments. The new sporty sedan contributed 6% to our monthly sales, the fourth largest contributor after the Saga, Persona and Neo. Saga remained the strongest contributor making up 45% of sales, continuing this multi award winning car’s reign as the most preferred amongst PRoToN models especially after the introduction of the Saga fl. The introduction of Exora mC has also enabled us to maintain our mPV sales performance while offering our customers a fresher look and feel.

To reach out to a wider consumer segment, PRoToN embarked on aggressive marketing initiatives during the period under review. There were more on ground activities, product demos as well as comprehensive advertisement campaigns via print ads, radio and outdoor media (billboard, overhead bridge, etc) to reach out to customers. The activities included the Exora VIP Test drive, Peace of mind campaign, roadshows, ‘Saga Snap & win’ contest, ‘Proton 4 you’ day and many more.

as part of our efforts to appeal to the Chinese market, we have appointed Jack lim as the Persona ambassador. Since then there has been vast improvement in terms of acceptance of the PRoToN brand.

In terms of Service marketing, more intense activities are being carried out to capture the “after warranty” customers in order to promote their visits to Proton Edar Sdn bhd (PESb) service centres. better value for money packages have been introduced to boost the said segment. In addition, tactical campaigns are also implemented every quarter to induce the element of surprise and enhance a ‘feel good’ sentiment among our customers.

Saga FL



during the Kuala lumpur International motorshow (KlIm) 2010, PRoToN showcased its five latest concept cars named after the five warriors i.e. Tuah, Jebat, lekir, Kasturi and lekiu. The response from the public was positive with the PRoToN booth enjoying high traffic visitation, positive feedback and immense enquires pertaining to the line-up.

awards achieved in 2010/11:

Model Awards

Saga Readers Digest Trusted Brand 2010 Gold Malaysia Voted by ConsumersFrost & Sullivan 2010 best Practices awards

Exora Readers Digest Trusted Brand 2010 Gold Malaysia Voted by ConsumersFrost & Sullivan 2010 best Practices awardsCar of The Year Awards 2010 CImb bank auto.Ride

Persona Readers Digest Trusted Brand 2010 Gold Malaysia Voted by ConsumersFrost & Sullivan 2011 best Practices awards

The PROTON booth at The Kuala Lumpur International Motorshow 2010


EXPORT MARKETThE PRoToN EXPoRT buSINESS waS EXPECTEd To GRow EXPoNENTIally ThRouGhouT ThE fISCal yEaR GIVEN a SERIES of PoSITIVE ouTComE RECoRdEd IN ThE SamE PERIod of ThE PREVIouS yEaR. howEVER, dESPITE ThE NoRmal aNTICIPaTIoN baSEd oN ThE GRowTh of dEmaNd foR PRoToN CaRS, SomE uNEXPECTEd ChallENGES aRoSE aNd RESulTEd IN REVISIoNS oN ImPlEmENTaTIoN aPPRoaChES IN SomE maRKETS, SuCh aS ChINa, auSTRalIa aNd ThE mIddlE EaST REGIoN.



Nonetheless, PRoToN continued to sustain business operations in existing markets and concurrently assessed strategic permutations to execute the Group’s long-term aspirations of the asian multi-local oEms (amlo). Essentially, major pre-requisites towards realising the amlo Strategy were being aligned in order to ensure market-driven products and an equitable business model will be delivered in a timely manner, with ‘customer-satisfaction’ being of top priority.

Performance and Operation

The period under review continued to emphasise the efforts to strengthen PRoToN’s export foundation, especially in terms of attaining sustainable sales and improving the overall business implementation, in terms of financial performance and customer management.

In general, PRoToN recorded an achievement in increasing Complete Knock-down (CKd) sales to China and sustaining Complete build-up (Cbu) exports from malaysia to existing markets, in line with the amlo implementation plan. The total shipment to overseas markets increased 12.3% compared to the same period of the previous year. This was mainly contributed by the incremental CKd and Cam Profile Switching (CPS) engine to China by 2.5 times more compared to the previous year. however, despite challenges faced in key markets such as australia and the middle-East region, Cbu exports were able to achieve a shipment of within 10% compared to the previous year, in which the five top performing markets were Thailand, australia, Indonesia, Egypt and Syria.

In Thailand, Proton models were gaining higher acceptance gauging from various feedback from the customers, dealers, motorshows and mass media. The Exora received accolades as one of the Top Ten Passenger Cars 2010 in the bangkok Post. The introduction of Saga fl and improvement initiatives at dealer network will be a hopeful stream for PRoToN to achieve greater success.

In Indonesia, PRoToN has established itself as the 12th top brand in the market and managed to increase volume by 23% in 2010, in which the Exora has again been the best selling model and has remained the core product for PRoToN Indonesia. with the current outlook and barring any unforeseen circumstances, PT PEI is expected to perform better in the new fiscal year.

besides the sales drive, PRoToN has also implemented several initiatives as attempts to enhance the overall export-related operations:

• Implementation of the PROMISE system hasenabled PRoToN to improve inventory control and develop a more reliable sales plan by having better visibility in terms of tracking of stock, delivery-to-Customers and shipment.

• Amorestructuredengagementwithdistributorsand dealers has ascertained business requirements in the respective markets abroad, resulting in a more reliable marketing plan and timely execution.

• Constant,directandamorestructuredfeedbackfrom distributors have enabled PRoToN to carry out detailed product analysis for future model development.

• As part of the Group’s efforts to enhance PRoToN’s global brand recognition, promotional activities in relevant key markets were conducted to leverage on motorsports programmes e.g. lotus-Renault Grand Prix in formula-1 and Team Proton motorsports S2000 in the world Rally Championship. Eventually, the association will promote ‘ride and handling’ as the unique selling proposition of Proton cars.

• Dealerdevelopmentisnowcentrallycoordinatedto ensure compliance with Corporate Identity implementation, consistent 4m standards and focus on CSI/SSI improvements.


• On after-sales parts operations, the orderfulfillment rate has been improved to 90%, progressively mitigating concern areas in three categories – fast-moving (serviceable items), medium-moving (wear and tear items) and slow-moving (body parts and crash-repair items).

Through feedback from all importers, PRoToN now has a clear price and product positioning when compared against key competitors by segment, in respective markets. The information has enabled PRoToN to strengthen the long-term product strategy, business model and brand-building programmes in realising the amlo aspirations.

Prospects

moving forward, in order to achieve the Group’s aspirations towards realising the amlo Strategy, business requirements in key markets abroad will need to be ascertained in great detail. Phased implementation plans have been laid out in order to ensure focused programmes are effectively executed.

acknowledging the immediate focus on major pre-requisites, PRoToN will place emphasis on activities in key related areas:

• Productstrategiestoensuremarketrequirementsare fulfilled in the new models throughout their lifecycle. detailed analysis on positioning, price-volume sensitivity and commercial viability shall enable development programmes to be precisely coordinated, from conceptual stage to manufacturing preparation activities.

• Operationalstandardsaretobeestablishedwitha concerted intent towards attaining customer satisfaction and confidence towards the PRoToN brand. These cover after-sale services, dealer development, marketing and communication.

• Aviablebusinesscaseneedstobedevelopedinorder to conclude an equitable business model with our business partners in the respective markets, especially in amlo markets. To date, dedicated cross-functional teams have been tasked to explore strategic opportunities respectively in China, India and Iran, with the intention of leveraging on each others’ strength in the core value chain, such as product engineering, manufacturing, vendor base and local market experience. Eventually, the desirable package covering product portfolio, market presence and operational approach will determine an executable collaboration structure and eventually deliver benefits to both the Group’s and PRoToN’s export businesses.

whilst the focus on current export operations remain, PRoToN will continue to pursue the benchmarking exercise that will eventually enrich the brand value and improve profitability to the Group and respective stakeholders. The focus on product portfolio and positioning, marketing, distribution and customer experience such as quality and after-sales services will chart the pathway towards successful businesses abroad for PRoToN.

Participants of the PROTON International Distributor Conference 2011



CHINA

Overview

In 2010 China continued to record robust growth with 18.1 million vehicles sold which represent a 33% increase over 2009. The growth was mainly powered by favorable government incentives, urban economic development and China’s stimulus package to boost the economy. we expect China’s long-term growth to remain intact and continue in the next few years due to the current low motorisation rate and buoyant economy. Caam (China association of automotive manufacturers) expects China’s TIV to reach 20 million units in 2011.

Operations

during the period under review, PRoToN’s business arrangement with China-based Jinhua’s youngman automobile Group has developed from Cbu into CKd to capitalise on tax savings for locally manufactured vehicles and leveraging on China’s lower cost base for manufacturing and components sourcing.

youngman plants in anshun, Jinan and Tai an have been operational since 2009 and the hangzhou plant has been operational since early 2011. The hangzhou plant produces the youngman l5 model which utilises the modified Gen.2 platform and Campro CPS engine.

To accelerate PRoToN’s strategy into China and serve the market better, PRoToN will upgrade the current Representative office in hangzhou, Zhejiang Province to a wholly owned foreign Entity (wofE) in Shanghai which will be operational by end 2011. The wofE will allow PRoToN to conduct business and pursue new opportunities in China. The Satria Neo, artiga Concept Car and lotus Europa were displayed during the Shanghai motor Show in april 2011 to enable PRoToN to gauge market acceptance and pursue future opportunities for these products.

Currently, PRoToN cars are being sold under the youngman brand through 100 appointed dealers throughout China.

Thailand Motor Show

THAILAND

Overview

Thailand’s automotive industry in 2010 showed a significant increase of 46% against 2009 despite domestic political instability. The remarkable growth in the Thai automotive industry is due in part to the reduction in excise duties for small passenger cars. This reduced the prices of cars and the added advantage of credit availability was instrumental in increasing demand. The rise in petroleum prices did little to dampen the automotive market growth in Thailand.

PRoToN continues to make headway in the Thai market with our strategy of practical designs at affordable prices. The Proton Exora which was introduced in dec 2009 was voted as a Top 10 model by bangkok Post for the year 2010. In 2010 we also saw the introduction of Saga fl in the market, competing heads on with Eco cars. Currently, through our Thailand distributor, Phranakorn auto Sales Co., ltd (PaS), PRoToN has a network of 40 dealers (all 3S outlets) throughout Thailand. The current in service models consist of Savvy, Saga fl, Neo, Neo CPS, Gen.2, Persona and Exora.


Prospects

To combat the negative climate and retain the “detroit of asia” title, the Thai government has set up industrial estates which offer tax incentives, lower import duties, one-stop visa and work permit advantages. also, multinational investors are not required to have a local partner which is an advantageous proposition compared to most other Southeast asian countries.

for the automotive industry, the Thai government introduced a number of measures to encourage both the production and the domestic sales of more environmentally friendly vehicles, including the promotion of bio-fuels. The eco car project was on stream with the 1st CKd eco car officially launched by Nissan during the march 2010 motor Show.

The recovery in the automotive industry is expected to continue in 2011 with a forecast target reaching 880,000 units despite sluggish business in the 2nd quarter stemming from Japan’s devastating earthquake and tsunami which disrupted production and demand. Nonetheless, stable interest rates and new launches in the small and mid-size car segment will spur demand from consumers. a factor which should be closely monitored is the increase in fuel price which will drive the demand for cars that are capable of utilising alternative fuels like E20 and CNG as well as fuel efficient ECo cars or hybrids.

Operations and Performance

within a short span of three years, PRoToN has established itself as one of the top ten players in the Thai automotive market, with No. 8 position in the passenger car segment and No. 10 in terms of overall TIV in Thailand.

overall, as per financial year ended 31 march 2010, PRoToN achieved a remarkable result for fy 2010/11 with 5,615 units exported to Thailand surpassing the target of 4,060 units. In terms of retail sales, the PRoToN brand achieved 5,080 units

or a 46% increase against the target of 3,488 units. Total sales revenue improved correspondingly and was recorded at Rm259.9 million, a 43% increase against the target of Rm181.36 million.

INDONESIA

Overview

PT Proton Edar Indonesia (PT PEI) was established on 16 august 2002 but commenced full operations on 16 march 2007, as part of PRoToN’s brand expansion and amlo strategies to spread out its presence intensely and dynamically.

PT PEI till end 2010 offered the Indonesian market seven attractive models to target the different segments. The models are Savvy, launched in July 2007, that received 2 awards for best City Car from majalah mobil motor and auto bild Indonesia; the Gen.2 and Neo (also launched in 2007), with the more sporty and stylish outlook within the hatchback categories; and not forgetting the highly comfortable and functional mini sedan class, the Gen.2 Persona, and waja (launched July 2007) and the Saga (launched march 2009). Saga has won the “2009 best budget Sedan”, awarded by Indonesia otomotif awards.

In a country where there is a large preference for mPVs, the Proton Exora gathered the most accolades. This model has become the biggest sales contributor to PT PEI since its launch and debut at the Indonesian International motor Show in 2009. Exora has been awarded by Indonesia otomotif awards the “2011 best budget mPV”.

on the dealer network aspect, as of 31 march 2011, PT PEI has appointed 17 sales outlets and 30 after-sales service centres/authorised workshops throughout Indonesia and PT. PEI is looking at expanding its sales coverage to 25 outlets in fy 11/12.



Performance

PRoToN has established itself as the 12th top brand in the Indonesian automotive market; just below Chevrolet and hyundai.

Total Industry Sales increased by 57% to 764,710 in 2010 vs. 2009 while the Passenger Segment increased by almost 55% to 447,336 units. while PRoToN’s growth was not as spectacular, it still managed to increase the volume by 23.45% to 2,060 units in 2010. The Exora has again been the best selling model and achieved a growth of 57% as opposed to that of 2009 and has remained the core product for Proton Indonesia with 1,038 units in 2010. In fy 11/12, PT PEI aims to improve sales by 50% leveraging on the positive response for the Exora.

Prospects

while Indonesia’s economy is expected to grow, there were some question marks on the sustainability of last year’s growth in the automotive sector. firstly, possible increases in tax for second and third cars in a household will likely dampen growth. further, a decrease of fuel subsidies will also challenge the growth of the automotive industry in 2011. In this prespective, PT PEI has charted short term and long term implementation plans to sustain the favorable response towards PRoToN, by capitalising on the positive response for the Exora.

Growing market confidence in PRoToN has enabled PT PEI to garner support and cooperation from several leading finance and banking institutions. This confidence has also stimulated interest from the car rental and public transport sectors throughout Indonesia which in turn can assist in increasing PRoToN’s resale value. with the current outlook amd barring any unforeseen circumstances, PT PEI is expected to perform even better in the new fiscal year.

SINGAPORE

Performance and Operations

The new car market in Singapore is regulated by the Certificate of Entitlement quota (CoE) which is issue by the land Transport authority (lTa). TIV has consistently outgrown the road space development which leads the lTa to introduce a drastic change in the formulation of quota supply. This new measure has created a drastic decline of quota supply and as a result, the quota premium (Category a for 1.6l and below) witnessed a jump of 157% (from S$18,502 to S$47,604) within the year 2010 which is a ten year record high.

due to the high CoE prices, Singapore’s 2010 TIV contracted over 39% compared to 2009; with Category a in particular shrinking over 51%. a few China makes have thus withdrawn from the local market due to this high CoE. PRoToN’s sales also suffered a 38% drop in this tough environment. however, the premium segment has gained the opportunity of this CoE price and the robust Singapore economy to increase its market share.

besides continuing to be more cost efficient and productive, Proton Singapore is planning to restructure its operations so as to obtain a better balance of economies of scale. moving forward, a long-term plan is being formulated to ensure sustainability and continuity to enhance PRoToN’s network and presence.

Prospects

outlook for the next two years will be tough as the CoE quota supply will continue to reduce and increase competition in Category a from premium brands. The TIV in 2011 is forecasted to be hovering around 25,000 units, due to the CoE regularisation process.

PRoToN Singapore’s team has a clear focus on the future; and with the new business structure and attractive model lineup, Proton Singapore is confident of growing stronger once the local market recovers.


AUSTRALIA

Overview

over this period the australian industry volume increased by 10.5% compared to the previous year. Improved economic conditions and heavy promotion by industry competitors lead to an overall volume of 1.035 million sales. The sales result was the second highest annual volume recorded in the australian market.

Proton Cars australia recorded a 16.1% increase in sales on the back of the improved trading environment. The main sales increase came from the successful launch of the S16 (Saga) which was overwhelmingly accepted by the australian public.

The introduction of Chinese and Indian manufactured vehicles continues to place pricing pressure on the wider market. The outlook is for prices to fall slightly with an increasing number of players however the strong australian dollar will result in an increase in gross margins.

Operations

The 2010/11 financial year was one of rationalisation and consolidation. The improved economic conditions attracted many new entrants to the market hoping to capitalize on the increasing sales. The induction of new dealers kept overall representation stable as the consolidation and rationalisation of the network continued.

Proton australia continued with its sponsorship of the west Tigers Rugby league football team, who qualified for the finals series for the first time in the five year sponsorship. an estimated 420,000 people attended matches live during the season enhancing the PRoToN profile in australia.

Proton australia also continued the miss universe australia pageant association where the winner acts as PRoToN’s ambassador in australia. This year Jesinta Campbell was the successful contestant who subsequently went on to represent australia in the miss universe Pageant in las Vegas where she finished second runner up. Proton australia has also continued with its support of the Safe drive Training programme which trains school students throughout New South wales and Queensland.

Performance for The Financial Year

on the back of an increase in sales volume, Proton Cars australia is committed to overhead cost reduction via innovative supply chain improvement. The combined effects of these activities will yield improvements in the financial results.

Prospects

Proton australia continues to grow and is bullish in its outlook for the coming financial year. despite a forecast decline in total industry volume, Proton Cars australia is expected to continue to improve unit sales and the overall financial result. The launch of the Exora and S16 toward the end of the financial year will assist in leveraging new dealer representation and set a footing for continued growth over the next decade.

Jesinta Campbell, winner of Miss Universe Australia, takes on her role as PROTON’s ambassador in Australia.



UNITED KINGDOM

Overview

The uK car market in 2010 was certainly a game of two halves. In total the TIV grew by nearly 2% over 2009 but the increase was entirely due to the strong performance of the fleet/business buyer segment which accounts for over 50% of uK sales. The retail buyer segment saw a 7% decrease in sales and this would have been significantly lower had it not been supported by the government scrappage scheme which ended in the first half of 2010.

high fuel prices and economic factors drove demand for smaller more fuel efficient cars, with “b” segment (Supermini) vehicles accounting for 37% market share and diesel vehicles increasing market share to over 46%.

The uK government’s commitment to lowering emission levels was spearhead by changes to annual car tax costs which saw higher Co2 cars paying more tax while lower emission cars saw reductions or even zero tax rates on some models. This along with other initiatives such as exemption from london congestion charges and free parking for lowest emission vehicles increased consumer demand for these models.

Performance & Operations

Continued reduced demand in the retail segment where PRoToN Cars (uK) ltd mainly operates and competitive pressure saw PRoToN sales fall by 20% over 2009 although first half sales were over target.

In such tough market conditions it was important that the company continued to drive cost cutting and efficiency programmes while maintaining industry leading service levels. Towards this end significant overhead cost reductions were achieved while service was maintained as evidenced by a uK wide survey of new car dealers where Proton Cars (uK) ltd was awarded six first place positions for various categories of support to its dealer network.

Prospects

The uK Vehicle market is forecast to improve from this year and expected to return towards the record 2.4 million annual sales levels of previous years in the short to medium-term.

Strong growth is forecast in the supermini, mPV and Crossover vehicle segments while demand for alternative fuel vehicles which took a 1% market share in 2010 is sure to grow thereby supporting PRoToN’s plans in these areas.

84

The LOTUS Story

Unveiling the New Lotus Vision

To say that the financial year ended 31 march 2011 was an exciting one in lotus’ history would be an understatement. Excitement aside, it was a year of extreme importance to the development of the lotus Group as on the back of a new five year business plan, lotus embarked on a bold transformation plan – a plan that set a new benchmark within the industry.

at the beginning of the financial year, the management team set aggressive corporate objectives in line with the approved business plan. These objectives could be broadly summarised as follows:

Existing Operations

• Changetheworkcultureandstrengthenmanagement;

• Improveoperationalexcellenceandincreaseworkforceproductivity;

• Sustainsalesofcurrentproductrangevianewproductintroduction and improvement and focused marketing campaigns;

• Reshape Lotus Engineering organisation and growthird party engineering business;

loTuS



during the course of the fiscal year, the revenue from sales of vehicles and parts amounted to £98 million and the total units of lotus products sold increased by approximately 3% to 1,985 units. This was driven by demand for the lotus Elise closely followed by the lotus Evora. lotus products were sold globally across 31 countries. In addition to lotus products, lotus continued to contract manufacture the Tesla electric roadsters, with a total of 690 units manufactured during the fiscal year.

The management team continued to employ prudent policies to control and stem the rise in operational costs. There was an increase in operational cost compared to the preceding financial year driven by higher marketing and promotional costs. These arose from activities aimed to radically shift and reposition the lotus brand and investment of this kind is critical to support future lotus products, the first of which will be the lotus Esprit which is slated to be commercialised by end of 2013.

overall, the financial performance of the lotus Group was in line with that projected in the business turnaround plan.

Future Investment

• UnveilthenewLotusvisionandfutureLotusproductrangetoaglobalaudienceatthe Paris motor Show;

• Commenceandacceleratethedevelopmentoffuturemodels;

• Consolidateandoptimisethedealernetwork;and

• RevitaliseandrebuildHetheltocaterforfuturebusinessrequirements.

above all, the management team set out to achieve the financial targets and in this, they succeeded. for the financial year ended 31 march 2011, the consolidated revenue of the lotus Group increased by 8% to approximately £150 million compared to the preceding financial year. This can be primarily attributed to the increase in revenues of the Engineering division as well as the wholly-owned subsidiary lotus lightweight Structures ltd, which provides aluminium fabrication services to automotive clients.


Organisational Development and Employee Relations

with the formulation of the new five year business plan, it was crucial that lotus had the right people with the right skill sets and experience to deliver the new vision. a world class management team was assembled, with individuals from leading premium brands such as ferrari, mercedes amG, Porsche and aston martin recruited. The strengthening of the management team did not stop at the senior management level, the mid-management level was also substantially strengthened covering all areas of the business including production, operations, engineering, sales and marketing as well as support services. This initiative is part of lotus’ long term strategy to build, develop and nurture its human capital.

Realising such an ambitious business plan is no small undertaking and to assist with this an advisory Council was established comprising leading industry experts including bob lutz, Tom Purves, dr Prof burkhard Göschel and frank Tuch. between them they possess more than 150 years of accumulative automotive experience covering engineering, technology, product marketing, sales and distribution, production and quality.

The advisory Council met three times during the fiscal year and played an important role in providing lotus management with valuable guidance and advice on the various aspects relating to the delivery of the transformation plan.

In addition, the management recognised the importance of cascading the vision, mission and core values within the organisation. In this respect, the management frequently engaged with staff representatives as well as the general workforce with quarterly briefings and events taking place to keep them abreast of the latest corporate developments. a new employee handbook setting out lotus’ corporate aspirations and values was introduced to promote work culture changes, increase morale and re-motivate the workforce with a new sense of pride, purpose and a feeling of belonging.


Operational Improvements

of the various corporate objectives set for the financial year, one of the top priorities was to improve the operational excellence and the quality of lotus’ products and services by employing industry best practices and processes. To begin this process, the factory and workforce standards were raised in line with brand aspirations and business requirements. The concept of lean organisation was reiterated with the re-organisation of top line managers and supervisors across the business and the introduction of flexible working patterns in the factory to cater for the seasonal requirements of the car business.

The setup of the lotus production lines were re-evaluated and eventually changed from two separate lines to a multi-line format to improve line optimisation and flow. New processes such as kitting were introduced to improve material flow and reduce missing parts and general obsolescence and the supply Chain management System was further improved to reduce stock levels.

as a result of these efficiency processes and various other initiatives, operational efficiency and workforce productivity improved. for example, Evora assembly hours were reduced by 16% and wastage and scrapage were reduced by a 57%.


Lotus Engineering

lotus Engineering continues to play a crucial role within the lotus Group, not just because of the revenue generated but also because of the innovation and technology prowess that it brings to both lotus and the PRoToN Group.

lotus Engineering continues to gain recognition for engineering and technological excellence for its ability to create innovative and advanced technological solutions. In december 2010 lotus Engineering scooped two trophies at the Engineer awards for Project omnivore and the fuel Cell hybrid Taxi. In addition to these awards, lotus Engineering won recognition as The New Economy’s Smart mobility & Networks Company of the year 2010.

during the year, lotus Engineering underwent a re-organisation process to realign its business strategy and strengthen its foundations in order to further grow its third party business. The breadth and depth of lotus Engineering was significantly improved focusing on the four core competencies;

• LightweightArchitectures

• DrivingDynamics

• EfficientPerformance

• ElectricandElectronicIntegration

a competence gap analysis and improvement strategy was undertaken resulting in strategic partnerships with other leading engineering service provider to fill the gaps and jointly exploit business opportunities.

lotus Engineering has been awarded numerous contracts by major oEms to design and engineer various green ecological vehicle demonstrators utilising fuel cells and electric and hybrid electric with range extender capabilities. These demonstrators were showcased at various international motor shows and engineering exhibitions which further reaffirmed lotus Engineering credentials.

Fuel Cell Hybrid Taxi

Omnivore engine


New Product Introduction and Improvement

lotus products have historically been and will continue to be at the centre of all activities undertaken by lotus. It is lotus’ mission to offer its customers best-in-class products focusing on key attributes of premium sportscars. during the year, lotus undertook various development programmes to enhance its product offerings by launching new variants of the current product range therefore broadening and refreshing the range of products available to customers. In addition, numerous quality improvements initiatives were undertaken and introduced throughout lotus products.

New model variants successfully launched during the fiscal year included:

Evora S and Evora IPS (Intelligent Precision Shift)

The Evora S and Evora IPS option were evolutions of the multi-award winning Evora. These new model variants were unveiled at the Paris motor Show in September 2010 to international acclaim.

The Evora S was developed with performance in mind as it boasts a power upgrade of 70 PS to 350 PS. In addition, the Evora S comes with quality improvements and a visual differentiation when compared to the base Evora.

The Evora IPS on the other hand sees the Evora fitted with an 6-speed automatic gearbox with lotus developed transmission control assuring a superior automatic driving experience. The IPS version of the Evora allows the driver to easily switch between manual paddle shift and automatic drive modes.

The Evora IPS broadens the appeal of the Evora and reaches out to slightly different markets, such as asia, the middle East and america where automatic vehicles are more widely established.

Elise Club Racer

True to the lotus ethos of performance through lightweight, the Elise Club Racer was unveiled at the Geneva motor Show in march 2011. This variant reaffirmed the iconic Elise’s status as the lightest of

lotus’ modern cars shedding a further 24kg of the weight to 876kg. Thanks to intelligent engineering, the Elise Club Racer also boasts the lowest Co2/km of any gasoline sportscar at a mere 149g/km.

Sales and Marketing Activities

In order to support the sales of existing products and services as well as to ensure continuous excitement is generated for the lotus brand in accordance with the brand repositioning aspirations and core values, more than 250 marketing activities were undertaken during the fiscal year. This included an exciting motorsport programme, national advertisements and direct marketing campaigns, product placement and presentations as well as tactical “city storm” campaigns and track day events.

furthermore, lotus worked closely with the dealer network to support local marketing activities. New marketing collateral was developed including product brochures in multiple languages with new corporate identity, sensational product videos, an innovative and dynamic new website with product configurator features, dealer toolkit with guidelines on marketing activities, standardised collaterals production, training material and many more.

Participation and the manner in which a premium sportscar manufacturer appears at international motor shows are of great importance as these events are used as a showcase to the industry as well as the public. In this respect, lotus completely revamped its corporate identity which included the realignment of the lotus brand dNa and the introduction of new corporate identity guidelines.



on the back of the revamped corporate identify, lotus invested in new motor show stands and fixtures to provide a premium experience and a standardised look and feel for participation at any motor show or event. The adoption of this revamped corporate identity was first rolled out when lotus participated at the Goodwood festival of Speed, uK in June 2010 and was subsequently used in the various other motor shows and events that lotus attended including:

• PebbleBeachConcoursed’Elegance,America

• ParisMotorShow,France

• LosAngelesAutoShow,America

• NewYorkMotorShow,America

• GenevaMotorShow,Switzerland;and

• KualaLumpurInternationalMotorShow,Malaysia

Re-launch of the Lotus Brand and the “Dawn of a New Era”

The Paris motor Show at the end of September 2010 was undoubtedly the most significant milestone made by lotus during the year. lotus’ “dawn of a New Era” campaign will go down in history as one of, if not the most remarkable debut event of any car manufacturer at a major international motor show. lotus was deemed the star of the show, clearly meeting the primary objective to unveil the new lotus vision and intent.

It was at the Paris motor Show that lotus showed the new corporate identity at what was the largest ever lotus motor show stand displaying a total of ten lotus products as well as a dedicated display area for lotus Engineering and lotus originals – the new merchandising range.

lotus revealed six brand new concept cars and in doing so brought back historical iconic models: the Elan, the Elite, and the star of the show, the Esprit. These product intent prototypes provided the industry and the public with an insight into the new lotus product range and gave people an idea as to what to expect in terms of styling, versatility, quality and performance, essentially showcasing the new dNa. The response received was highly encouraging clearly demonstrating that lotus was back and on the right track.

The lotus press conference at the Paris motor Show was broadcast live to a global audience via a web stream from the new website and news from the launch was picked up by more than 250 media outlets around the world. from Paris onwards, lotus has featured in various regional, nation and international media outlets (print, on-line and broadcast) which has helped create awareness of the lotus brand, the new vision, products of the future and crucially, the existing product offerings.

while the Paris motor Show was important to lotus from a marketing and brand promotion perspective, it was equally important for lotus to use the opportunity to capture industry feedback. This gave lotus tremendous market intelligence relating to the appeal factors of lotus product offerings, both existing products and future concepts which were fed back into the organisation and changes have or will be made where necessary to address any shortcomings.

Motorsport Activities

The past financial year also marked the re-entry of lotus in professional motorsports activities. This is a long-term project which is of extreme importance to lotus given its roots and rich history derived from motorsports. as a natural consequence motorsports will be the primary marketing and brand experience platform for lotus moving forward.


In december 2010, lotus became the title sponsor of the Renault formula one Team a top team within formula one™ resulting in the newly named lotus Renault GP. lotus Renault GP, which races in the famous black and gold livery, started the season in spectacular style with podium finishes at the australian and malaysian Grand Prix.

lotus’ association with lotus Renault GP has brought a magnitude of commercial benefits. In particular, lotus’ brand awareness has increased significantly especially in key growth markets such as asia, middle East and latin america, markets of which lotus plans to grow. In addition, lotus also benefits from technology transfers and sharing of facilities. lotus Renault GP has been instrumental in assisting lotus in developing products for its client racing activities, a good example of this is the formula one™ inspired customer race car, the lotus T125.

other professional racing activities that lotus has ventured into include IndyCar in america, GP2 and GP3 which are feeder series to formula one™ as well as GTE and GT4 endurance racing.

lotus’ involvement in professional racing activities is already starting to bear fruit as the lotus branded teams become more competitive and begin to win races. This is boosted by an increase in media coverage which in turn results in more followers around the world. Today, the lotus brand awareness is much higher than it was a year ago, raising the desirability of lotus’ product offerings amongst existing lotus owners and first time buyers alike.

In addition to professional racing activities, lotus had increased its focus on client racing activities developing new motorsports products for the motorsports fraternity. This not only brings an additional revenue stream to lotus but also provides a halo effect to the lotus roadcar products. Key programmes developed during the year include the Evora GT4 and Enduro both of which are derived from the road going Evora, reinforcing the superior handling and performance of the latter.

for the ultimate driving experience, lotus created the T125, a limited edition formula one™ inspired car that combines formula one™ technology with expert one-to-one advice from former formula one™ drivers such as Group lotus ambassador Jean alesi and professional trainers from the sport. The experience allows owners the unique opportunity to refine their driving skills and challenge themselves at the pinnacle of motorsport.

Not wanting to neglect the current race enthusiast lotus owners, lotus has undertaken an exercise to standardise and consolidate the various lotus Clubs in Europe, asia and america which together represent the second largest single manufacturer club series in the world. Together with the creation of the lotus driving academy, these client racing activities help to promote greater affinity and brand loyalty of both experienced and amateur racers.

Lotus Dealer Network

as part of lotus’ transformation plan and to ready the sales channels for the future products offerings, lotus has also undertaken a complete review of its dealer network and development strategy.

In august 2010, lotus began a strategic dealer rationalisation exercise initially covering the uK and Europe and later extended the activities to other regions including america and asia. New dealer standards were developed in line with the relaunch at the Paris motor Show. These new dealer standards were created to realign and uplift the brand with the objective of providing a best-in-class sales and after sales experience to lotus customers. It is lotus’ aim that the more premium standards will be introduce gradually over the next few years in preparation for the sales launch of the Esprit in 2013. meanwhile, lotus has developed interim dealer standards to provide a fresh look to lotus existing dealers.



during the year, lotus appointed new dealers and distributors to strengthen presence and coverage in existing and new markets. In respect of the latter, lotus appointed a distributor in China, a move which marked the official entry of lotus into the largest automotive market in the world.

Infrastructure Improvements at Hethel, Norwich

a considerable amount of investment has been earmarked for the expansion and modernisation on the infrastructure at lotus’ head quarters in hethel. This is to meet future business requirements as the cars, motorsports and engineering activities grow while at the same time transform hethel into the epicentre for the lotus brand.

during the year, lotus completed the refurbishment of the Corporate office building which also houses the lotus Engineering offices. work commenced to upgrade one of the factories that will provide lotus with further flexibility around production processes and cater for increase production volumes. The lotus test track, a key asset to lotus was upgraded to meet strict fIa standards, this was complete and relaunched in true lotus style on 21 June 2011.

Future Prospects

with the tremendous commitment and support from the various stakeholders, lotus has now entered into the second year of transformation armed with the necessary elements to execute the business plan. whilst there are still vast amounts of work to do and many challenges ahead, lotus believes that it has the conviction and determination to move forward with the plan for the future success of lotus and the PRoToN Group.

PROTON’s Group Managing Director Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed Tahir with the team at Lotus.

Lotus headquarters at Hethal



PRoToN aNd moToRSPoRTS

moToRSPoRTS IS PRoToN’S KEy STRaTEGy foR a dyNamIC ShowCaSE foR PRoToN’S bRaNd, PRoduCTS aNd TEChNoloGy. IT SuPPoRTS PRoToN’S ambITIoN IN ESTablIShING ThE bRaNd Globally ThRouGh a GRowING faN baSE woRldwIdE.

PROTON Motorsports Team celebrating after an impressive win at the Asia Pacific Rally Championships Malaysia 2011.


PRoToN’s involvement in motorsport is spearheaded by PRoToN’s motorsports division which pioneers the research, development and production of race and rally cars, Proton’s performance parts and special edition vehicles that are inspired by motorsports participation. In malaysia, PRoToN’s motorsports division is synonymous with the “R3” brand. The term “R3” stands for “Race, Rally and Research”.

Proton motorsports participated in the fIa asia Pacific Rally Championship (aPRC) and the Intercontinental Rally Challenge (IRC) spanning asia Pacific and European countries such as malaysia, Japan, New Zealand, New Caledonia, australia, China, monte Carlo, Spain, ukraine, belgium, Czech Republic, hungary, Italy and Scotland. PRoToN features the Satria Neo Super 2000 in these rallies, a car that is the result of a combination of innovative road car engineering designs and motorsports technology as stipulated under the fIa S2000 regulations.

PRoToN will also feature in the malaysian National Circuit Championship otherwise known as the malaysian Super Series (mSS). The team will feature a production class Satria Neo and Gen.2 in this highly competitive event. Competing against some of the largest teams and manufacturers in the world continues to push the boundaries of technical advances and design which has resulted in a combination of greater performance and reliability.

Operations Review

Carrying the malaysian flag in international rallying are world renowned drivers, alister mcRae, Chris atkinson, Giandomenico basso and PG andersson. These drivers have proven to be some of the sports most exciting drivers at the world Championship level having competed with some of the top manufacturers in the world such as mitsubishi, Subaru, hyundai, fiat and Suzuki.


PRoToN has had a colourful journey into global rallying. The Satria Neo S2000 made its debut in the IRC and aPRC in 2009. Since then, the team has proven to be one of the most popular with those “little yellow cars” and our drivers getting plenty of attention from both the spectators and media. The team has also been a consistent Top 10 finisher in the IRC against the likes of Peugeot, Skoda, fiat abarth, Subaru and mitsubishi. for the aPRC season ending 2010, the team finished on a high with a 1st

and 2nd placing in Rally China 2010, securing 2nd place in the manufacturers Championship. for the 2011 aPRC season, the team got off to a winning start by finishing 1st and 3rd in aPRC malaysia 2011. on the domestic front, the team has recently competed in the 1st round of the National circuit championship for production cars in support of the malaysian formula 1 Grand Prix and coming away with an outright victory.

Participation in motorsports is beneficial to the Company as the fast-paced world of motorsports provides invaluable returns in terms of research, development and technology. after every race, data and experience gained from the track is analysed and implemented into the development of Proton’s road cars and performance parts. Inspired by this, PRoToN’s motorsports division has launched two limited edition models for sale to the public last year, starting with 25 units of the Satria Neo lotus Racing edition and the 160 units run R3 Satria Neo. These cars actually contain some of the same exact performance parts as found on the Satria Neo production class circuit race car.


PROTON participated in the historic 100th Monte Carlo Rally.


motorsports also creates loyalty for a car manufacturer unlike any other activity. It is this loyalty that will also create a demand for Proton motorsports merchandise which is today available at all race venues that PRoToN is present in and soon to be available globally through the internet.

motorsports participation has also brought direct commercial benefits to PRoToN which culminated in the sales of standard Proton cars to Japan for the first time. Carrosser Co. ltd of Japan (Carrosser), a world renowned race team and manufacturer of performance parts entered into an agreement with PRoToN to distribute and market the Proton Satria Neo in Japan. In a technical collaboration with PRoToN, the fIa-homologated Group N Satria Neo rally car was developed by Carrosser into competition vehicles for Junior class Rallying in Japan and in the aPRC. The Satria Neo Group N rally car is now a regular competitor in the aPRC as well as the all Japan Rally Championship for 2011.

Not limited to the above, it has been proven that motorsports is indeed a powerful brand building platform for PRoToN. PRoToN has gained awareness in many new countries through motorsports which could help pave the way for the building of future new markets. Every victory or milestone achieved is the foundation for redefining limits for PRoToN and the race goes on to challenge the best.


fINaNCIal SERVICES

PRoToN CommERCE SdN. bhd. (PCSb) IS a JoINT VENTuRE ComPaNy bETwEEN PRoToN EdaR SdN bhd aNd CImb baNK bERhad, whICh ENablES PRoToN To PRoVIdE QualITy fINaNCING SERVICES To ouR CuSTomERS. PCSb offERS ComPETITIVE hIRE PuRChaSE loaN fINaNCING PaCKaGES To NEw PRoToN CaR PuRChaSERS ThRouGh ThE PRoToN EdaR SdN bhd aNd EdaRaN oTomobIl NaSIoNal bERhad SalES NETwoRKS NaTIoNwIdE.



Customers not only enjoy better deals for car financing but also value-added packages that offer a combination of other financial products.

backed by the expertise and reliability of two established parent companies, the PRoToN Group is committed to delivering competitive hire purchase packages that prioritises providing fast, efficient and friendly service to our car buyers. by doing this, it is our aim to become the preferred automotive finance provider for the purchase of new Proton vehicles, while being recognised as a competitive and capable player in the local automotive financing industry.

at the same time, PRoToN also holds a 49.9% equity stake in lotus finance limited, and a 49.99% stake in Proton finance limited, both of which are companies incorporated in the united Kingdom. Proton finance limited provides a range of hire purchase and finance lease options in connection with the financing of Proton cars, whilst lotus finance limited provides the same facilities for new and used lotus vehicles.


CoRPoRaTE SoCIal RESPoNSIbIlITy

PRoToN bElIEVES ThaT a ComPaNy’S PRofITabIlITy muST CoRRESPoNd To ITS humaN RESouRCE dEVEloPmENT aNd ThE ENVIRoNmENT IT oPERaTES IN. IT IS alSo ImPoRTaNT To adVoCaTE a CoRPoRaTE CulTuRE ThaT aPPRECIaTES ThE ValuE of SoCIal SERVICE aNd uNdERSTaNd ITS ImPaCT oN STaKEholdERS aS a wholE.



with this in mind, the Group is committed to making positive strides and worthwhile contributions towards creating a sustainable business that benefits our people, the environment, and society at large.

as we carry out our corporate social responsibility (CSR) initiatives, the Group focuses on several objectives to meet the expectations of good corporate governance, ethical corporate values and responsible corporate citizenry.

PRoToN’s CSR initiatives are divided into four main segments: marketplace, workplace, community and environment.

MARKETPLACE

PRoToN’s CSR initiatives in this area are essentially related to the Group’s objective of maintaining sound business practices at all times with our shareholders, customers and suppliers. The Group does its best to ensure that all businesses are not only conducted in an ethical and professional manner, but also in compliance with regulations and vendor development.

maintaining customer satisfaction is one of the foremost pillars of PRoToN’s business management, and we continue to improve our business processes in order to cultivate strong relationships with our customers and improve their satisfaction levels. Through regular customer surveys conducted by the contact center, we are able to gather and analyse feedback and incorporate them into product and service developments, as well as sales and customer care activities to continuously ensure that the customers’ experience with PRoToN is always positive and of high-quality.

PRoToN i.Care remains as the customers’ main channel in getting information, resolving issues and giving feedback to the Company. The unit is completely focused on ensuring that customers get their queries and concerns addressed and taken care of immediately. In addition to this, the Proton i.Care 24 hour assist Service continues to attend to customers with car breakdowns, as well as provide technical advice when required.

PRoToN employees are also encouraged to evaluate this process periodically in order to better understand a customer’s needs and thereby improve the quality and speed of our response to customers.


To meet the needs of our customers outside of PRoToN service outlets, we have held i.Care mobile Pitstops under our Care outreach programs at selected locations throughout malaysia such as Putatan in Sabah, Pasir Puteh in Kelantan and Jengka in Pahang where we offered technical assistance, information and free inspection on Proton cars.

In-line with our efforts to be an internationally recognised automotive manufacturer, our products meet global safety standards – most prominently the European Safety Standard as well as the australian design Rule (adR) and Saudi arabian Standards organisation (SaSo)/Gulf Standards – and we are committed to the continual improvement of these standards. and to ensure that compliance is met across the board, all our safety requirements are 20% to 30% more stringent than benchmarked figures.

our products now also meet China regulations (CCC), and we are currently planning for compliance with India Standards (IS) and Russia Standards for future products.

To ensure the level of quality of our products, we continue to strengthen our business relationships with our suppliers with fair trading, in compliance with procurement-related policies, laws and regulations.

we continuously monitor the performance of suppliers with on-going quality audits and where necessary, request for improvements and provide guidance. In addition, we conduct a rigorous vendor selection and performance evaluation to ensure that vendors supply only quality parts.

all PRoToN cars are manufactured under stringent controlled conditions that places emphasis on quality assurance through the Zero defect programme and auditing programmes in addition to thorough quality inspections before being released to customers. during production stage, all components are subjected to various inspections and testing at the vendors premises before they are supplied to PRoToN. Completed cars are also subjected to a thorough final quality check before being released to customers.


PROTON’s Group Managing Director engaging in conversation with staff during a safety campaign.

New procurement transactions not only need to conform to the Group’s policies, but we also take into consideration the suppliers’ manufacturing sites, management systems and the state of their operations. Suppliers’ efficiency and productivity are also supported through the Improve, Control and Educate (ICE) initiative whereby sustainability of supply capacity and training are greatly emphasised. PRoToN closely monitors the progress through extensive reviews and follow-up visits.

WORKPLACE

at PRoToN, we recognise that a talented, productive human capital represents the backbone of our on-going development and progress.

our workplace CSR provides our employees with optimum working conditions, as evidenced by the Group’s safety and health policies, training exercises and other benefits to safeguard each one’s welfare, and ensure that their skills and talents are also nurtured. This further enhances PRoToN’s competitive advantage in the industry.

while it is important to ensure that we are able to grow as one seamless entity, this must also go hand in hand with the development and retention of qualified leaders. Through the Group’s human Capital initiatives, we develop key members of our workforce by using PRoToN’s Core and leadership Competency model. for those who are keen to advance along the


technical career track, a similar approach is applied, that is via the Technical & functional Competency model. by using these competency models, our Talent management Programme has enhanced PRoToN’s ability to identify, develop, and retain critical skills and talents, especially for positions that play a critical role in delivering business and strategic growth.

maintaining open communications between employees and management is also vital. PRoToN has implemented a range of initiatives specifically designed to encourage such communication, so that there are no communication barriers in order for employees to achieve their full potential and progress within the Group. Initiatives include disclosing key performance indices, shared assessments, personnel system reforms and streamlining the scheme of service throughout the Group. The use of internal channels such as PRoToNCom to disseminate information updates and policies is another effort to foster constant engagement and encourage internal communication.

PRoToN has embarked on many projects to continually improve the way we do things. Improving efficiency and effectiveness is necessary in order to compete in the challenging global automotive industry. The focus on making “right information available to the masses right now”, has resulted in the expansion of our Knowledge management programme, “aSPIRE” to the masses through the web, and equipping our multi-site facilities with the latest electronic bulletin boards.

This provides all PRoToNians access to information even if their work does not involve using a PC. we have also embarked on a programme to equip and educate and provide computer access to our general workers by setting up computer kiosks at strategic locations on the factory floor. we believe, an informed and knowledgeable worker is a more engaged worker.

another such programme under the PRoPEX initiatives is the myofIS or my official Information System, that aims to enable staff to access, update and “self serve” on certain human resource (hR) transactions that were not previously available. This ambitious 5-year programme will revolutionise the way we work and set the stage for us to compete in the Global arena via the amlo programme.

To further strengthen PRoToN’s learning capability, we implemented the PRoToN development framework which includes the Centre of manufacturing Excellence, Centre of Knowledge Excellence, and Centre of human Capital Excellence. In essence, this initiative promotes a strong knowledge culture by encouraging continuous learning through various training programmes. from april 2010 to march 2011, our learning & development department has trained a total of 6,836 participants in 361 courses with average cost per head of Rm714 and average training hours per participant of 17 hours.

Staff participating at PROTON’s ICT Technology Day 2010.


during the period under review, the learning and development department embarked on several collaborative projects with selected higher educational institutions and ministries. for instance, the collaboration with the ministry of higher Education for advanced diploma in automotive design & manufacturing Engineering and with university Teknologi malaysia (uTm) for two programmes i.e. business & advanced Technology Centre (baTC) and PRoToN Critical mass Scheme.

Initiatives and plans are also being actively carried out to realise the establishment of the PRoToN Corporate university. a task force consisting of representatives from various divisions was identified and given the responsibility to carry out the related tasks. under the PRoToN Trainers development Programme – in collaboration with the malaysian Institute of management (mIm), PRoToN had identified 11 qualified staff members as mIm-Certified Professional Trainers who had completed their level 3

competency. The ‘SIfu’ (meaning mentor, counselor or teacher) Programme sees 13 of our supervisors, team leaders and new executives being trained to become a ‘SIfu’ to the others. Currently, there are 197 in-house trainers who are Subject matter Experts registered with the learning & development department. by 2012, it is our aspiration that PRoToN will achieve self sufficiency in trainer resources for all the organisation’s training needs and have minimal dependency on external training providers.

To further complement this, the Group organised numerous health talks, carnivals, exhibitions and programmes throughout the year to create awareness amongst employees on adopting a safe and healthy lifestyle. Steering and working committees were established to allow for more effective monitoring of health and safety related issues throughout the PRoToN Group.


PROTON staff at the Tanjung Malim plant take a breather to share moments with Group Lotus Ambassador, Jean Alesi when he visited the plant.


In order to strengthen the relationship and enhance good understanding and harmonious relationships between Group human Resource division (GhR) and the unions of Perusahaan otomobil Nasional Sdn bhd (PoNSb) and Proton Tanjung malim Sdn bhd (PTmSb), various activities were carried out throughout the financial year. a trip to China was organised to build synergy towards the Company’s mission and aspirations and exposure to amlo initiatives in line with the annual management Plan (amP) for 2010/2011. union members were invited to visit PRoToN’s Rep office in hangzhou and plant facilities of youngman automobile Group to understand PRoToN’s business establishment and our future goals in China.

Throughout the period under review, many other events and activities were carried out. GhR had organised other related activities such as the majlis Sambutan maal hijrah, buka Puasa and Solat Tarawih with our adviser – Tun dr mahathir, majlis berbuka Puasa with ybhg dato’ Sri mustapha mohamad the minister of International Trade and Industry, a programme in Vietnam in conjunction with the hari Raya aidil adha and an event to celebrate with employees who were leaving to perform the hajj as well as engagement sessions with the GhR director.

PRoToN continued to actively participate in Career days held at various universities and locations. This resulted in the hiring of at least 75% of the new Executive population. another 25% were sourced via the Graduate Employability Scheme (GEmS) initiated by Khazanah Nasional berhad, and also the Graduate Programme 200 (GP200) initiated by bank Negara malaysia.

In supporting Khazanah Nasional berhad – as part of The orange book initiative in Strengthening leadership development – PRoToN also participated in programmes such as the Cross assignment between Government linked Companies (GlCs) and Cross fertilization between GlCs and Government offices/ministries.

as part of the group-wide Change management initiative, the Change management Project management office (CmPmo) has been in existence since august 2010, after the completion of the denison organisational Culture Survey which was carried out in march 2010. This team has been conceptualised to take ownership and implement activities under the TØ initiatives. TØ has been regarded as the enabler stream of work and activities to support, integrate and amplify the need of other work streams (T1-T13). TØ, originated with the focus on mindset and behavioral transformation, has stipulated “maKING PRoToN a hIGh PERfoRmaNCE organisation” as its core objective with five specific initiatives as follows:

Change Starts With Me

Taking off as a two day one night awareness-cum-training intervention, the programme was then reconfigured into a half-day awareness talk for greater efficiency and return on investment (RoI); via a series of aggressive road-shows. It will be officially launched in the next financial year and almost 1,200 PRoToNians are targeted.

Turun Padang Initiatives (TPI)

Initially designed with seven specific activities involving all management Committee members (mCm) and few Key Personnel, TPIs were conceptualised as touch-base cum on-boarding activities for the leadership level. The first round of TPI rolled-out in august 2010. based on the feedback and lessons learnt, TPIs were revisited and reformulated to allow a bigger pool of participation among the next layer of leadership. hence 40 General managers were selected to undertake the second round of TPIs; namely TPI-2nd wave. The same will be continued with the inclusion of more Senior managers in the next immediate rounds, which will be stretched out till the end of amP11/12.


Core Value Realisation (CVR)

CVR has always been regarded as the heart of TØ with the challenge for PRoToNians to live the core-values of PRoToN in their everyday work transactions. The whole focus of CVR was to revitalise PRoToN’s Seven Core-Values and provide some supporting definitions on organisational cultural excellence. after consolidated efforts of the respective teams, PRoToN’s Seven Core Values were revised (with new definitions, new taglines, new dos & doNTs statements) both in bahasa malaysia & English. with the revised Core-Values, the same teams are now working on definite stages to translate the statements into behavioral descriptors which will then be embedded into the PRoPEX’s workstreams.

Leadership Alignment

This sub-workstream is objectively framed to realise high Performing mCms in order to create a high Performing organisation with a high Performance Culture. among others, the initiative which is relatively new, has these new-age programmes lined up for the leaders:

• GenerateRelationshipAwareness

• ConflictResolution(BasedonComplexityTheory;Chaotic Issues to Simple Resolutions)

• DisciplineofTeams

• Self-Deception

• BuildingALeadershipBrand

Communication Management (COM-MGMT)

This segment of TØ is the latest addition to the entire workstream with focus on internal and inter-departmental aligment (i.e. Group Communications, Group after Sales & marketing) communication plans, strategies and desired outcomes of communication excellence. Quarterly Group management Communication Sessions will be conducted actively throughout the next financial year.

To promote healthy living, PRoToN also held recreational activities throughout the year for its staff, their family members as well as the surrounding community. Some of the programmes held during the period under review included:

• a Mystery Drive from Shah Alam to Alor Setar,with the participation of over 600 employees;

• an ‘Adventure Hunt’ to Genting Highlands – aprogramme inspired by ‘The amazing Race’ reality show – involving about 100 employees;

• aLadies-only‘KenyalangWalk-Hunt’toKuching,Sarawak involving 100 female PRoToN staff;

• a‘CuttlefishSpearing’activityinMarang;

• aFishingCompetitioninShahAlam;and

• an inaugural Paintball Competition, whichattracted about 100 participants.

apart from these activities, The Group also held programmes for the family members of its staff, which included motivational classes and majlis berkhatan.

COMMUNITY

Corporate social responsibility (CSR) is high on PRoToN’s agenda and the Group is committed to its CSR initiatives. PRoToN constantly looks for appropriate ways to contribute to the social wellbeing of the community. The Group encourages its staff to participate in various CSR initiatives, charitable work and educational programmes under yayasan Proton as well as socio-economic programmes such as Pintar (an adopted school programmE) and Program Sejahtera (a community project) to assist poor students to improve their living standards.

The Group also provides support in the development of programmes to assist the poor and needy including orphans, the handicapped, single mothers, old folks and victims of natural disasters.



apart from that, the Group contributes to welfare programmes and extends sponsorships and donations towards orphanages, the handicapped, charitable organisations, places of worship, educational, cultural and community development initiatives.

during the period under review, PRoToN established a charity fund where it pledged Rm25 for every Proton car sold between 22 april and 30 June 2010. a total of 25 organisations received donations of Rm25,000 each from this fund. Three organisations – yayasan Pembangunan anak yatim/miskin, Persatuan Thalassemia malaysia and Persatuan orang-orang Cacat anggota malaysia were presented with mock cheques during PRoToN’s 25th anniversary Gala dinner in July 2010.

In may 2010, PRoToN sponsored 54 schoolchildren, aged between 10 and 12 years, from SK Taman alam megah and SK alam megah dua to watch and support the malaysian badminton team in action during the ‘PRoToN-bwf Thomas & uber Cup finals 2010’ held at Stadium Putra, bukit Jalil. The sponsorship was part of PRoToN’s effort to create interest in the sport among young talents and nurture young talents to play badminton with the right technique.

PRoToN also donated an Exora mPV to the National heart Institute (IJN) foundation in July 2010 in support of the foundation’s efforts to help the underprivileged to receive heart treatment at the institute. PRoToN’s Group managing director dato’ Sri haji Syed Zainal abidin Syed mohamed Tahir handed over the mPV to the foundation’s trustee dato’ Zainal abidin Putih. The mPV was meant to be used by the foundation as its official car to carry out related programmes and activities including ferrying poor patients from their homes to the institute and visiting patients funded by the foundation at their homes. The Group managing director and his wife, datin azizan hashim along with PRoToN’s Senior management Committee members also visited children at the paediatric ward to bring them cheer, and at the same time hand over donations as well.

Group Managing Director Dato’ Sri Haji Syed Zainal AbidinB Syed Mohamed Tahir and Datin Azizan Hashim celebrating with orphans at the Festival PROTON 1Malaysia Grand Finale Carnival.

during the month of Ramadhan in august, PRoToN carried out various community development and outreach programmes involving poor families and orphanages including breaking of fast and performing Tarawih prayers. The Group also carried out activities and presented donations to various orphanages as part of its annual PRoToN hari Raya programme.

The Group managing director and Senior management members took time off to break fast with poor families in bukit lanchong as well as orphanages including Pertubuhan Kebajikan yayasan anak yatim Piatu darul aitam (busarah), Temoh, Perak and Rumah amal Kasih besteri on 23 august, 26 august and1 September, 2010 respectively.

datin azizan hashim hosted ‘CSR Ramadan’ – an outreach programme which is aimed at bringing cheer and sharing the joy of the festivities with the underprivileged – at Rumah Nur Salam in Chow Kit Road, Kuala lumpur and presented duit raya and goodies to residents of the shelter. Rumah Nur Salam is the home for poor and underpriviledged children under the age of 18 from areas around Chow Kit Road.

Contributions to widows of deceased staff took place during a majlis berbuka Puasa with yabhg Tun dr mahathir mohamad and yabhg Tun dr Siti hasmah mohd ali on 1 September 2010. Tun dr Siti hasmah together with datin azizan hashim presented cash to seventeen recipients.


In october 2010, PRoToN sponsored ‘Tun dr mahathir: The musical’ held at Istana budaya, Kuala lumpur and sponsored 30 orphans from Rumah anak-anak yatim limpahan Kasih, Puchong to watch the show.

The following month, eighty orphans from Pertubuhan Kebajikan Nur Syaheera, Cheras, Kuala lumpur and Pertubuhan Kebajikan Ehsan Shakur (Pekeas) Tasik Putri, Rawang were given a rare treat when PRoToN took them on a visit to the Kuala lumpur International motorshow (KlImS) where PRoToN showcased its line-up of five concept vehicles and showcase cars called the Pahlawan series – Tuah, Jebat, Kasturi, lekir and lekiu.

when floods hit several parts of the country, PRoToN was actively involved in relief efforts to help ease the burden of flood victims. In November 2010, Proton Edar Sdn bhd and Proton Parts Centre Sdn bhd extended financial aid amounting to Rm50,000 each to flood victims in Kedah.

during the year under review, PRoToN carried out activities and gave out donations to various orphanages throughout the ‘festival PRoToN 1 malaysia Carnival’, which was part of the national car company’s 25th anniversary celebration.


PBB volunteers cleaning up the surrounding areas of a Muslim cemetery damaged by the flood in Johor.

on 31 december 2010, during the festival PRoToN 1 malaysia Grand Carnival finale, PRoToN presented orphans from selected orphanages with cash contributions and “back to School” goodies to prepare them for the new school year as well as cash donations to selected handicapped individuals at each venue in ten states during the festival’s road show.

during the event, the Group managing director presented cash donations to representatives from three orphanages, Rumah Kebajikan Nur Zaharah in bentong, Rumah Kebajikan anbu Illam in ulu Klang and Rumah anak-anak yatim Nasuha in Gombak as well as selected handicapped individuals from the Projek Perumahan Rakyat Termiskin in bukit lanchong.

In January 2011, PRoToN sponsered 40 orphans from Pertubuhan Kebajikan yayasan anak yatim Piatu darul aitam (busarah), Temoh, Perak and 200 schoolchildren from adopted school, SK Tanjung malim, Perak and several other schools in the vicinity to watch and cheer datuk lee Chong wei who was in action at the malaysia open badminton Championships held at Stadium Putra, bukit Jalil.

In february 2011, PRoToN established Pbb PRoToN (Pasukan bantuan bencana PRoToN), which is a platform to enable PRoToN staff to be involved in community service. The aim is to have a pool of volunteers ready to go down to the ground to assist and extend support to victims of natural disasters in the country at any time. with Pbb PRoToN, which has over 300 PRoToN staff across the nation registered as members, the Company’s CSR initiatives can now reach out to wider target groups. Pbb PRoToN volunteers’ involvement in CSR programmes and activities go beyond assisting victims of natural disasters to include outreach programmes to help the poor, handicapped and orphans, old folks and single mothers so that they will be able to lead a better life.


between 16 february and 19 february, 2011, Pbb PRoToN carried out relief efforts for flood victims in Seri medan, Pagoh and Segamat in Johor by organising a “gotong royong” to help clean up mosques and suraus in affected areas and handing out contributions of essential items amounting to Rm200,000, funded by the Group and PRoToN vendors.

when a landslide hit an orphanage, Rumah anak yatim hidayah, madrasah al-Takwa in hulu langat in may, a group of Pbb PRoToN volunteers helped distribute food to firemen and relief workers who helped in the rescue efforts of victims of the natural disaster.

during the financial year 2010/2011, yayaSaN PRoToN carried out several educational initiatives.

on 11 february 2011, PRoToN advisor Tun dr mahathir mohamad presented scholarships to 13 scholars from several local universities at a scholarship awards ceremony. PRoToN Chairman dato’ Sri mohd Nadzmi mohd Salleh and yayaSaN PRoToN Chairman dato’ Jaffar Indot and all board of Governors were present for the event.

The event also witnessed representatives from yayaSaN PRoToN’s adopted schools being presented with mock cheques with pledges of financial assistance. These ‘adopted’ schools, located in Shah alam and Tanjung malim, require financial support for educational activities, among others, PmR and SPm tuition classes and motivational seminars.

during the year under review, yayaSaN PRoToN through its “adopted School Programme” contributed funds in support of educational activities for four schools: Sekolah menengah Kebangsaan agama Slim River, Sekolah menengah Teknik Shah alam, Sekolah menengah Kebangsaan dato’ Khir Johari and Sekolah Kebangsaan behrang.

on 8 april 2011, PRoToN enabled 120 orphans and school children to participate in an educational visit to the Sepang International Circuit (SIC), which was part of PRoToN’s CSR initiative during the Petronas malaysian Grand Prix formula one race. The CSR initiative was meant to create excitement and interest in formula one and better awareness of the sport among the children as well as provide a different educational exposure and experience for them.

Representatives from PROTON’s Adopted Schools with the pledges of financial assistance from PROTON, posing with PROTON’s Advisor and Chairman.

PROTON’s scholarship recipients engaging in conversation with PROTON’s Advisor, Tun Dr Mahathir Mohamad.


The orphans, from Pertubuhan Kebajikan yayasan anak yatim Piatu darul aitam (busarah) in Temoh, Perak and Rumah bakti Nur Syaheera in Cheras, Kuala lumpur as well as school children from Sekolah Sultan alam Shah, Putrajaya and SK Tanjung malim Perak, were able to enjoy the f1 experiences as they witnessed the practice sessions from the Grandstand. The children, aged between eight and 17, also had the opportunity to meet the lotus Renault GP team drivers Vitaly Petrov and Nick heidfeld as well as the reserve driver bruno Senna during a meet-and-greet session at the pit walk.

The children further participated in fun-filled activities at the PRoToN booth at the f1 Village and visited the National automobile museum and explored the SIC mall area apart from taking part in an enjoyable quiz session organised for them.

In the same month, PRoToN sponsored the malaysian Skills competition for the automobile Sector, a programme initiated by the works ministry since 1990 and now, organised by the department of Skills development under the human Resource ministry. The competition which was held between 14 april and 17 april 2011, was open to students from technical and training institutions aged below 22. It was one of PRoToN’s efforts to develop human capital especially within the automotive industry via technical cooperation between the industry and various vocational institutions.

PRoToN is an avid supporter of the local sporting scene, particularly in badminton and football.

The Group’s involvement in badminton continues into its 16th year, as PRoToN strengthens its role as the major sponsor of malaysian badminton though its partnership with the badminton association of malaysia (bam). for the period under review, a total of Rm6.3 million (including promotional activities) was allocated for the sport.

as the corporate custodian of badminton in the country, PRoToN was the title sponsor of the prestigious PRoToN-bwf Thomas and uber Cup finals 2010 which was held in Stadium Juara in bukit Jalil, Kuala lumpur.

PRoToN also strengthened its brand through title sponsorships of local tournaments, namely the PRoToN malaysia open Superseries 2010 and PRoToN malaysia International Challenge finals 2010. PRoToN was also the title sponsor for the national circuit, with tournaments like the Kejohanan badminton Sirkit Kebangsaan PRoToN Terbuka Kedah (Stage 1) 2010, and Kejohanan badminton Sirkit Kebangsaan PRoToN Terbuka Perak (Stage 2), as well as the PRoToN National Circuit Grand Prix finals 2010 in Terengganu. PRoToN was also the official car sponsor to the malaysia open Grand Prix Gold 2010.


Prize presentation ceremony for the PROTON Malaysia Open Badminton Tournement.


The Group’s support is not just directed to the sport, but also in supporting budding talents and appreciating those who have succeeded in the game, such as world number one datuk lee Chong wei, who made history again when he won the coveted all-England title for the second time in a row. datuk lee also won his seventh consecutive PRoToN malaysia open title in January 2011 and is currently the record holder for the PRoToN National Circuit title for nine consecutive years since 2002.

In recognition of his years of accomplishments in the international badminton arena, national car manufacturer PRoToN presented datuk lee with the keys to a brand new, metallic black two-litre CVT Proton Inspira.

In tennis, PRoToN continued its involvement as the title sponsor for the malaysian open, an aTP world Tour tournament. a budget of Rm2.5 million (inclusive of promotional activities) was spent for this event.

In cycling, PRoToN has long been associated with the prestigious le Tour de langkawi international cycling event. Not only has le Tour placed malaysia firmly on the world cycling map, but it is a sporting event that has undoubtedly spurred the development of home-grown cycling talents into international names. for the year under review, PRoToN continued its support as the official car provider by supplying 150 cars of varying models for the use of officials and the media covering the cycling championship.

Prize presentation ceremony for the annual Inter-Division Sports Competition.

In the period under review, PRoToN was also actively involved in various local football competitions and regularly organised sporting activities for its employees under the administration of the sports clubs of respective PRoToN subsidiaries.

Kelab Proton (Shah alam) organised the annual Inter-division Sports Competition among the employees of PoNSb Shah alam, while PRoToN Edar held a Nationwide Inter-Region Sports Carnival for its employees.

In football, after being crowned champion of the Selangor Super league 2010, Team Proton fC began their preparations to defend the title for the 2011 season with an international friendly match between Proton fC and mitsubishi Corporation fC (Tokyo Japan). In this match, the winner was decided through a penalty shoot-out.

PRoToN’s Soccer Kids 2011 programme presented a list of exciting activities that attracted over 150 participants during the period under review. Selected participants were given the chance to usher the State football team in every home match of the malaysia Super league held at Stadium Shah alam, and were also given the golden opportunity to meet several players from the national squad to receive tips on how to succeed in football.

Datuk Lee Chong Wei receives the key to a brand new Inspira.


ENVIRoNmENT, hEalTh aNd SafETy

PRoToN GRouP, ThE laRGEST auTomoTIVE maNufaCTuRER IN malaySIa, IS CommITTEd TowaRdS maNaGING ThE hEalTh aNd SafETy of ouR EmPloyEES, CoNTRaCToRS, VENdoRS, SuPPlIERS aNd VISIToRS IN lINE wITh ThE NaTIoN’S oCCuPaTIoNal SafETy aNd hEalTh aCT 1994. uNdER ThE uNITEd NaTIoN’S fRamEwoRK CoNVENTIoN oN ClImaTE ChaNGE 1992 (uNfCCC) aNd ENVIRoNmENT QualITy aCT 1974, PRoToN IS alSo CommITTEd To CoNSERVE ThE ENVIRoNmENT ThRouGh SuSTaINablE oPERaTIoNS. ouR dEEP SEaTEd CommITmENT To ThESE aCTS IS affIRmEd wIThIN ouR ENVIRoNmENT, hEalTh aNd SafETy PolICy.



ISO 14001 Environmental Management Systems

In august 2009 PRoToN achieved the ISo 14001 Environmental management System international standards in environmental management, audited by the Vehicle Certification agency (VCa) and SIRIm malaysia which is accredited by the united Kingdom accreditation Service (uKaS). Since then we have continuously implemented international requirements and enhanced management practices to ensure compliance with the standard. The Group also encourages its other subsidiaries and suppliers towards acquiring ISo 14001 Environmental management System certification.

for several years now PRoToN has gradually reduced emission levels of greenhouse gasses in our business activities by increasing the utilisation of robot, machinery, automation systems and environmental friendly equipment in all our manufacturing processes. The painting process in our Paint Shop has also been converted to utilise electrostatic equipment to reduce paint consumption and waste. we have also retooled our powertrain manufacturing facilities with energy efficient equipment and process changes including flexible machining and minimum quantity lubricant. These facilities improve efficiency, utilise low energy and eliminate toxic emissions.

at the same time we strive to conserve the environment and improve energy efficiency within our non-manufacturing based activities by reducing consumption of electricity and paper at all offices, centres and buildings. To this end we have switched to energy efficient lighting at various locations and actively promote the use of electronic media technology such as e-mails and digitalised data memory to lessen the use of paper.

Health and Safety

PRoToN’s commitment towards ensuring a safe, healthy and conducive working environment is encapsulated within the Group’s Environment, health and Safety policy which falls under the purview of the top management.

PROTON’s Group Managing Director officiating the launch of PROTON’s safety campaign.


This comprehensive policy and programme was implemented to comply with the occupational Safety and health act 1994 (oSha 1994) and factories and machinery act 1967 (fma 1967). working in synergy with the National Institute of Safety and health (NIoSh) the Group’s oSh management division regularly conducts baseline assessment via ohSaS 18001, the occupational health and Safety assessment series, to ensure that our safety achievements are on par with international standards.

The policy’s objective is to secure the safety, health and welfare of persons at work and to protect all visitors and employees at the workplace from safety hazards. management is responsible for providing adequate resources and budget to ensure all meetings and planned programmes are implemented successfully.

These include:• Monthlysafety,healthandenvironmentaudits• Annualsafetyandhealthcampaigns• Safetyandhealthinformationdissemination• Safety,healthandfireinductiontraining• Motorcycledefensiveridingtraining• Forkliftsafetytraining• Firepreventionandtraining• Safetyanddefensivedrivingtraining• Hearingconservationtraining• Industrialsafetytraining• Evacuationexercises• PROTON-NIOSHSafetyPassportTraining• Drug-freeworkplaceprogramme


PROTON’s Group Managing Director officiating PROTON’s Health campaign.

People-Friendly Working Environment

Ergonomics improvement is a key driver towards creating a more conducive workplace and reducing workload. Ergonomics is applicable to all aspects of the work process from physical movement to mental stress. This includes awkward postures, overexertion and noisy, poorly lit, congested and dusty work environments. most ergonomic problems occur because of poorly designed workstations, inadequate training, repetitive movement, monotonous movement and heavy lifting over a period of time.

The following initiatives have been implemented to reduce ergonomic problems:

1. Elimination of heavy lifting by installing robots and manipulators;

2. Reduction of repetitive and monotonous movements of employees by redesigning workstations and rearranging job sequence;

3. Ensuring cool comfort by improving airflow at affected areas and increasing industrial installations;

4. Creation of more spacious work stations by redesigning and rearranging the work stations;

5. Improved communication between management and employees through regular safety audits and briefings.

These simple but effective measures add up to create a big impact for a better workplace, which in turn has led to increased productivity, cost savings and harmonious relationships. by implementing the above initiatives, PRoToN has succeeded in reducing the risk of backache problems and the high cost of related medical expenses to both employee and Company.


Commuting Safety

Commuting safely is not just a Company problem but it is also a National problem. Therefore PRoToN continues to focus on the following programmes for its employees:

1. annual road safety campaigns in cooperation with various government agencies such as department of occupational Safety & health (doSh), National Institute of occupational Safety & health (NIoSh), Jabatan Keselamatan Jalan Raya (JKJR) and Police;

2. monthly motorcycle defensive riding training for high risk riders and refresher courses;

3. Regular motorcycle safety audits.

Through our focus on practicing defensive riding and road safety awareness campaigns, PRoToN has achieved positive results in reducing motor vehicle accidents (mVa) amongst our staff.

Health and Safety Audit

our work to eliminate safety hazards, maintain plant cleanliness and reduce injuries is spurred by monthly audits. PRoToN implements monthly and quarterly safety audits to realise the planned programmes in order to achieve our targets and goals. all related safety and health committees from shop floor to top management conduct monthly and quarterly safety and health audits as part of their job scope.

Evacuation and Fire Drill

annual evacuation and fire drills are conducted at high risk areas and encompass the following activities and procedures:

1. full programme meeting and briefing;

2. Evacuation from the building;

3. head count and confirmation of total employees evacuated;

PROTON’s Director of Group Human Resource awarding certificates during the launch of PROTON’s safety campaign.

4. fire fighting demonstration by in-house fire squad;

5. fire fighting demonstration by bomba;

6. fire rescue by bomba;

7. medical assistance by in-house clinic;

8. Situation control;

9. dispersal;

10. Postmortem meeting and countermeasures.

all levels of employees including management and shop floor employees, are involved in the briefings and demonstrations. Regular education and practice in evacuation and drills heighten fire safety awareness and ensure that every individual in PRoToN knows how to act in case of an emergency.


For decades, we have striven to distinguish PROTON by reflecting our quality and PERSEVERING in perfecting our brand, in order to become a global automotive maker. From our very first SAGA to the latest INSPIRA, we spiral our capabilities every step of the way.

Best Value-for-Money Family Car

The Board of Directors of PROTON views high standards of Corporate Governance as fundamental to the culture and business practices of PROTON and its subsidiaries (PROTON Group) and in ensuring integrity, responsibility, transparency and accountability.

The Board of PROTON is committed to applying the recommendations of the Malaysian Code on Corporate Governance (revised 2007) (the Code) and the principles of Best Practices recommended in the Code to ensure that good corporate governance is practiced throughout the Group to effectively discharge its responsibilities to protect and enhance shareholder value. The Board is also committed to abiding by the Guidelines to Enhance Board Effectiveness as set by the Putrajaya Committee on GLC High Performance (PCG), and at the same time, strives to maintain a high standard of corporate governance within the PROTON Group by ensuring that the highest standards of corporate culture are practiced throughout.

Set out below is a statement on how the Group has applied the principles and adopted the best practices as laid down in the Code to achieve high standards of corporate governance. This statement describes how the Principles of Good Governance and provisions of the Code, are applied by the PROTON Group.

BOARD OF DIRECTORS

The Board is committed to establishing and enhancing shareholders’ 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 Practises of the Code throughout the financial year under review. The Board continues to enhance its role in improving governance practices effectively and raising the standard of governance 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, and internal controls and

risk management processes. The Group’s overall strategic direction, development, implementation and control remain of primary importance to the Board.

Dato Sri’ Mohd Nadzmi Bin Mohd Salleh, PROTON’s Chairman, was previously the Managing Director of Perusahaan Otomobil Nasional Berhad (the then listed entity on the Kuala Lumpur Stock Exchange) from 29 June 1993 until 1 April 1996. Dato’ Sri Mohd Nadzmi made a return to PROTON as Non Executive Chairman following his appointment on 1 January 2009.

The roles and responsibilities of the Non-Executive Chairman and the Managing Director are clearly defined. The Chairman’s primary role is to lead the Board and he sets the tone of Board discussions and at the same time, ensures high integrity and effectiveness of the Board as a whole. He conducts Board meetings and ensures that meetings proceed in an orderly manner.

The Managing Director 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. The Managing Director is responsible for the leadership of the Group’s business. There is therefore, a natural separation of management and governance leading to a balance of responsibility and authority.

The Non-Executive Directors are independent of management and are free from any business relationship which could materially interfere with the exercise of their independent judgment.

The Board has delegated matters pertaining to the day to day management, operations and strategic development of the Group, subject to the Limits of Authority and Group Policy and Procedures, to the Managing Director who is supported by a competent Management Team.

STATEMENT ON CORPORATE GOVERNANCE

118 PROTON 2011 ANNUAL REPORT

In the financial year ended 31 March 2011, the Board of PROTON Holdings Berhad (PHB) met fourteen (14) times, details of which are as shown below:

Name of Director DesignationDate of Appointment

Date of Resignation

Meeting Attendance %

Dato Sri’ Mohd Nadzmi Bin Mohd Salleh

Non-Independent/ Non-Executive Chairman

1 January 2009

N/A 14/14 100

Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed Tahir

Managing Director 1 January 2006

N/A 14/14 100

Dato’ Michael Lim Heen Peok Independent Non-Executive Director

15 September 2006

N/A 12/14 86

Mr. Behara Venkata Rama Subbu

Independent Non-Executive Director

1 March 2010

N/A 13/14 93

Tan Sri Rainer Althoff Independent Non-Executive Director

22 June 2010

N/A 11/11 100

Encik Abdul Rahim Bin Abdul Hamid


20 July 2010

N/A 11/11 100

Datuk Johar Bin Che Mat Independent Non-Executive Director

15 October 2010

N/A 7/7 100

Datuk Nozirah Binti Bahari Non-Independent Non-Executive Director

6 July 2011

N/A 0/0 NA

Dato’ Zalekha Binti Hassan Non-Independent Non-Executive Director

11 February 2008

6 July 2011

9/14 64

Tuan Haji Abdul Kadir Bin Md Kassim


10 March 2005

27 May 2010

1/3 33

Mr. Oh Kim Sun Independent Non-Executive Director

13 May 2009

27 May 2010

3/3 100

The profiles of the directors are set out on (pages 26 to 35) of the Annual Report.

Board meetings for the Company and its subsidiaries are scheduled in advance before the start of each calendar year and the meetings calendar is circulated to all Board Members at the beginning of each year. This would enable the Board Members to plan ahead and ensure attendance at Board Meetings. Additional meetings or Special Board meetings are convened whenever necessary when there are urgent and important decisions to be made.

PROTON 2011 ANNUAL REPORT 119

BOARD COMPOSITION AND BALANCE

The Board currently consists of eight (8) members with the Chairman being a Non-Independent Non-Executive Director, one (1) Non-Independent Non-Executive Director, five (5) Independent Non-Executive Directors and one (1) Executive Director who is the Managing Director.

Apart from the Managing Director, all the Non Executive Directors are independent of management and free from any business or other relationships, which could materially interfere with the exercise of independent judgment.

INDEPENDENCE AND CONFLICT OF INTEREST

The Directors are required to make written declarations and it is their responsibility to declare whether they have a potential or actual conflict of interest in any transaction. Where issues involve conflict of interest, the interested Directors shall abstain from discussing or voting on the matter.

SUPPLY OF INFORMATION

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 changes in the law, governance and other regulatory requirements.

At the same time, the Board may from time to time request for information pertaining to the Group’s business affairs to enable the Board to discharge its responsibilities effectively.

Senior Management and key personnel as well as professional and external advisors are from time to time invited to attend Board meetings to deliberate and clarify issues on the subject matter concerned.

In general, the agenda, board papers and minutes of previous meetings of the Board and Board Committees including minutes of board meetings of subsidiary companies are circulated in advance to the Board, before meetings. The agenda for every meeting permits the Board members to review the contents of meetings and enable the Chairman to better and more efficiently conduct the proceedings at Board meetings.

The Company has drawn up a list of transactions that would require the prior approval of the Board. The same is reflected in PROTON’s Group Policy and Procedures and Limits of Authority.

POLICY ON APPOINTMENT OF DIRECTORS

The Board Nomination & Remuneration Committee reviews all new appointments by taking into consideration the skill sets required by the PROTON Group. Board Members are appointed through a formal and transparent selection process that is consistent with the Articles of Association of the Company and the Company’s Selection Policy for Directors.

New Directors are required to undergo familiarisation programmes, plant visits and briefings to get a better understanding of the PROTON Group, its operations and the overall automotive industry.

Apart from carrying out annual reviews on the mix of skills and experience of the Directors, the Board Nomination & Remuneration Committee also ensures an effective process for selection of the Managing Director, Chief Executive Officer or Chief Operating Officer of all subsidiaries and any relevant associate and investee company, as well as all key posts within PROTON and the Group of Companies.

STATEMENT ON CORPORATE GOVERNANCE (CONT’D)


RE-ELECTION OF DIRECTORS

All Directors including the Managing Director are subject to retirement by rotation at least once in every three years and are eligible for re-election. In accordance with Article 104 of the Articles of Association of the Company and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, at least 1/3 of the Directors shall retire from office at each Annual General Meeting, PROVIDED ALWAYS that all Directors shall retire from office once at least in each three (3) years but shall be eligible for re-election.

In addition, Article 139 states that a Managing Director shall be subject to retirement by rotation, and he shall, subject to provisions of any contract between him and the Company, be subject to the same provisions as to resignation and removal as other Directors of the Company.

Further, any new Director appointed to fill a casual vacancy or as an addition to the existing Directors shall only hold office until the next Annual General Meeting of the Company and shall then be eligible for re-election as stipulated under Article 111.

Directors who are over seventy (70) years of age are required to submit themselves for retirement annually at the Annual General Meeting, unless the Director is re-appointed by way of special resolution in accordance with Section 129 (6) of the Companies Act, 1965. None of the Directors of the Company are subject to retirement pursuant to Section 129 of the Companies Act, 1965 at the forthcoming Annual General Meeting.

At the forthcoming Annual General Meeting of the Company, the following Directors will retire and are eligible for re-election:

(i) Pursuant to Article 104Dato’ Sri Mohd Nadzmi Bin Mohd SallehDato’ Michael Lim Heen Peok

(ii) Pursuant to Article 111Datuk Johar Bin Che MatDatuk Nozirah Binti Bahari

(iii) Pursuant to Article 139Dato’ Sri Syed Zainal Abidin B Syed Mohamed Tahir

BOARD COMMITTEES

The Board had previously established five (5) Board Committees, namely the Board Audit Committee, Board Nomination & Remuneration Committee, Board Risk Management Committee , Board Disciplinary Committee and Board Executive Committee, the primary functions of which were to assist the Board in overseeing the affairs of the Group and these Committees had been entrusted with specific responsibilities and authority.

The abovementioned Board Committees were authorised 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.


Following review of functions, the Board of PROTON had, on 27 July 2010, resolved the rationalisation of these Board Committees and with effect from 1 August 2010, PROTON had two (2) Board Committees as follows:

(i) Board Audit Committee (which apart from the functions stated herein, also assumed the role of overseeing the overall management of all risks of the Group’s businesses); and

(ii) Board Nomination and Remuneration Committee (which assumed the role of overseeing the disciplinary matters affecting senior officers of the Group, complaints lodged through the Whistle Blower Policy and all matters relating to the Code of Conduct and Ethics).

The Board has once again reviewed the rationalisation of the various Board Committees that took effect on 1 August 2010. Following recommendation of the Board Nomination and Remuneration Committee, the Board has resolved to split the existing two (2) Board Committees (ie: Board Audit Committee and Board Nomination and Remuneration Committee) into four (4) Board Committees with effect from 19 May 2011 as follows:

(i) Board Audit Committee;

(ii) Board Nomination and Remuneration Committee;

(iii) Board Disciplinary Committee; and

(iv) Board Risk Management Committee.

A. BOARD AUDIT COMMITTEE

The Board Audit Committee (BAC) met nine (9) times during the course of the financial year. The composition of the BAC and their respective attendance record of meetings for the financial year ended 31 March 2011 were as follows:


Date of Resignation

Meeting Attendance

Encik Abdul Rahim Bin Abdul Hamid (Chairman)

Member – Independent Non-Executive Director

20 July 2010

N/A 8/8

Dato’ Michael Lim Heen Peok Member – Independent Non-Executive Director

29 November 2006

N/A 8/9

Tan Sri Rainer Althoff Member – Independent Non-Executive Director

20 July 2010

N/A 8/8

Datuk Johar Bin Che Mat Member – Independent Non-Executive Director

15 October 2010

N/A 5/5




Date of Resignation

Meeting Attendance

Dato’ Zalekha Binti Hassan Member – Non-Independent Non-Executive Director

27 May 2010

15 October 2010

1/3

Mr. Behara Venkata Rama Subbu


27 May 2010

20 July 2010

0/0

Tuan Haji Abdul Kadir Bin Md Kassim (*)


10 March 2005

27 May 2010

1/1

Mr. Oh Kim Sun (*) Chairman – Independent Non Executive Director

1 June 2009

27 May 2010

1/1

Note (*): Following the resignations of Mr. Oh Kim Sun’s together with Tuan Haji Abdul Kadir Bin Md Kassim on 27 May 2010, the Company did not fulfill the requirements of Paragraph 15.09(1) (c) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad until the appointments of Encik Abdul Rahim bin Abdul Hamid and Tan Sri Rainer Althoff as Chairman and Member of the BAC respectively, which took effect on 20 July 2010.

During the financial year, the BAC 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 BAC was also entrusted with the responsibility of overseeing the overall management of all risks faced by the Group’s businesses.

The Group Risk Management Committee (GRMC) has been entrusted with the responsibility for ensuring that an appropriate risk management framework exists within the Group and is effectively implemented to manage the key risks of the organisation on an on-going basis. The GRMC which comprises of Senior Management, is responsible for overseeing risk management implementation, regular updating of the Group’s risk profiles and improving the implementation of methodology for risk management.


Prior to the rationalisation of the Board Committees on 1 August 2010, the then Board Risk Management Committee met once as follows:

Name DesignationDate of Appointment

Date of Resignation

Meeting Attendance

Datuk Tan Kim Leong Member – Independent 29 August 2005

1 August 2010

1/1

Dato’ Zainuddin Che Din Member – Independent 1 October 2008

1 August 2010

1/1

Tuan Haji Abdul Kadir Bin Md Kassim

Chairman – Independent Non Executive Director

29 September 2005

27 May 2010

1/1

The Salient Terms of Reference of the BAC is set out below.

Composition

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

(i) comprise of no fewer than three members;

(ii) all the members must be Non-Executive 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 Para. 15.09 (1) of Bursa Malaysia Securities Berhad’s Main Market Listing Requirements.

No alternate director may be appointed as a member of the BAC.

The Board will review the terms of office and the performance of the BAC and its members at least once every three years.

Functions and Duties

The functions and duties of the BAC for the period under review were as follows:

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

• withtheExternalAuditors,theauditplan;

• with theExternalAuditors, theExternalAuditor’s evaluation of the system of internal controls;

• with theExternalAuditors, theExternalAuditor’s audit report;

• the assistance given by the Company’semployees to the External Auditors;

• theadequacyofthescope,functionsandresources 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;

• theinternalauditprogramme,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.

• anyrelatedpartyandconflictofinterestsituation 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 MalaysiaSecurities 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 Main Market Listing Requirements of Bursa Malaysia Securities Berhad;

• submit to the Board a report on thesummary of activities of the BAC in the discharge of its functions and responsibilities in respect of each financial year.

(b) Oversee the implementation and operation of the Risk management framework

• Review the Risk Management Strategyand Policy;

• Review significant risks and exposuresidentified and assess steps that management has taken to manage such risks;

• Advise theBoardonsignificantchangesto the Risk Management Framework including the Risk Management Policy and Strategy.

(c) Consider the appointment of the external auditor, the audit fee and any questions of resignation and dismissal.

Meetings

The BAC 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:

• priortothecurrentyear’saudit;

• upon completion of the External Auditor’sinterim examination;

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

• prior to the announcement of the quarterlyresults;

• upon the request of any member of theCommittee 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 shallmeet with the External Auditors without the presence of any Executive Directors and Management.


Attendance

In order to form a quorum in respect of a meeting of the BAC, the majority of members must be present throughout the meeting. The Chairman may request that any Board member, and members of the management, the Internal Auditors and/or representatives of the External Auditors be present at meetings of the BAC.

Secretary & Records

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 BAC.

Internal Audit

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 BAC on matters concerning internal audit 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 BAC.

The BAC 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.

During the year, the Group Internal Audit Division serves to ensure internal control measures are adequate and effective in mitigating key risks and that they are monitored. The monitoring process will form the basis for continually improving the risk management process in the context of the Group’s overall goals.

The Group Internal Audit Division is staffed by a total of 13 internal auditors (inclusive of the Head of Group Internal Audit) with different backgrounds in engineering, quality, finance, accounting and economics. During the financial year, the Group Internal Audit Division undertook 89 audit assignments and 8 special assignments. The total expenditure incurred by the Group Internal Audit Division for the financial year 2010/2011 was approximately RM2.5 million.

B. BOARD NOMINATION & REMUNERATION COMMITTEE

The objectives of the Board Nomination & Remuneration Committee (NRC) are in accordance with the Terms of Reference as approved by the Board of Directors of PROTON.

The NRC reviews appointments of new directors of the Group and the balance and effectiveness of the boards of directors, taking into account the required mix of skills and experience and other qualities, before making recommendations to the Board. The Committee is empowered to conduct periodic reviews on the overall remuneration policy and package of the Executive and Non-Executive Directors and Senior Level Mission Critical Positions of the Group, for recommendation to the Board. The authority and scope of coverage of the NRC is over the PROTON Group, which includes subsidiaries and relevant associates and other investee companies.



Effective 1 August 2010, the NRC was also the platform for the PROTON Group in dealing with disciplinary issues. The NRC was part of the structural mechanism for the handling of cases that arose from the Whistleblower and Asset Declaration policies, and had the power to initiate investigation, consider and take appropriate action on any case referred to it by any party either received orally or in writing.

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

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

The NRC met five (5) times during the financial year.

The Composition of the NRC is as follows:

Name DesignationDate of Appointment

Date of Resignation

Meeting Attendance

Dato’ Sri Mohd Nadzmi Bin Mohd Salleh

Chairman 1 January 2009

N/A 5/5

Encik Ahmad Tajuddin Bin Abdul Carrim

Member – Independent 29 August 2005

N/A 5/5

Dato’ Michael Lim Heen Peok Member – Independent Non-Executive Director

13 November 2006

N/A 5/5

Datuk Nozirah Binti Bahari Member – Non-Independent Non-Executive Director

6 July 2011

N/A N/A

Dato’ Zalekha Binti Hassan Member – Non-Independent Non Executive Director

1 August 2010

6 July 2011

2/3

Encik Md Ali Bin Md Dewal Member – Independent Non-Executive Director

29 August 2005

27 May 2010

4/4


DIRECTORS’ TRAINING

All Directors have successfully completed the Mandatory Accreditation Programme (MAP) conducted by Bursatra Sdn. Bhd. and as imposed by Bursa Malaysia Securities Berhad.

Datuk Nozirah Binti Bahari, who was appointed non Independent Non Executive Director of PROTON on 6 July 2011 has until 6 November 2011 to complete the Mandatory Accreditation Programme.

Notwithstanding that Bursa Malaysia Securities Berhad’s Continuing Education Programme was repealed with effect from 1 January 2005, the Company, generally, and the Directors specifically 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 Group, which were attended by both the members of the Board and Senior Management, including briefing on new international financial reporting standards, in particular, FRS 139 (Financial Instruments: Recognition and Measurement), regional and global markets updates (and its impact to PROTON).

Full day knowledge sharing workshops and half day sessions on the global automotive outlook for 2010 and 2011 were also conducted in the course of the year.

PROTON has engaged the services of a global growth consulting company to share global and regional automotive knowledge with the Board Members and Management through various types of workshops. The goal of this engagement is to deliver continuous learning to PROTON through interactive sessions supported by market analysis, technology trends, best practices, economic and policy impact analysis from across the region. The automotive consultant has during the course of the year conducted workshops and luncheon training programmes for both the Directors and Management of PROTON Group.

The Directors of PROTON have also attended programmes for building high performance directors, as well as the various talks organised by the Malaysian Directors Academy or “MINDA” as it is popularly known.

DIRECTORS’ REMUNERATION

The NRC is responsible for reviewing the performance of the Executive Directors and recommending to the Board the remuneration package and reward structure. The Board as a whole determines the remuneration of the Executive and Non-Executive Directors. Directors do not participate in any discussions or decisions concerning each individual’s remuneration.

In the case of the Executive Director, the remuneration is structured to link rewards to corporate and individual performance through key performance indicators comprising fixed and performance-based rewards.

The level of remuneration of the Non-Executive Directors reflects the experience and level of responsibilities undertaken by the Director concerned. The Non-Executive Directors are paid annual fees and attendance allowances (in accordance with the number of meetings attended). In addition, the Non-Executive Directors are also provided with various Benefits-In-Kind, including provision of a fully maintained Company car, petrol card and full coverage under the Directors and Officers Insurance Scheme.

Non-Executive Directors Fees are paid upon shareholders’ approval at each Annual General Meeting.

The NRC carries out reviews when appropriate and refers to remuneration surveys and consultants to assist in determining the appropriate level of reward, which is competitive and consistent with the corporate objectives. This is necessary in order to attract and retain professionals with the qualities needed to manage the Group successfully.



Details of the total remuneration of the Directors of PROTON Holdings Berhad for the financial year ended 31 March 2011 are as follows:

Directors

Basic Salaries/ Bonus and Others Employee Benefits

(RM)

Fees and Allowances

(RM)Benefits in Kind

(RM)Total (RM)

Executive Directors 1,730,494 – 171,125 1,901,619

Non-Executive Directors – 1,137,989 198,253 1,336,242

Total 1,730,494 1,137,989 369,378 3,237,861

Remuneration Number of DirectorsRange of Total Remuneration Executive Non-Executive Total

RM1,000 – RM50,000 – 2 2

RM50,001 – RM100,000 – 4 4

RM100,001 – RM150,000 – 1 1

RM250,001 – RM300,000 – 1 1

RM600,001 – RM650,000 – 1 1

RM1,900,001 – RM1,950,000 1 – 1

Total 1 9 10

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 conduct 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:

• Selectedsuitableaccountingpoliciesandappliedthem consistently;

• Made judgments and estimates that arereasonable and prudent;

• Ensuredthatallapplicableaccountingstandardshave been followed; and

• Prepared financial statements on the goingconcern 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.

Relationship with Auditors

The Board Audit Committee maintains an appropriate transparent relationship with both the Group external auditors and internal auditors. The external auditors are invited to attend Board Audit Committee meetings and present their audit findings when the Company’s annual financial results are considered. The Board Audit Committee meets with the external auditors at least once a year without the presence of the Executive Director and Management.

Dialogue Between The Company and Shareholders/Investors

The Board recognises the importance of maintaining transparency and accountability to its shareholders and investors and to timely disseminate the Group’s performance and any significant developments affecting the Group to ensure that they are informed of all material business matters affecting the Group. Different channels of communication are optimised to ensure that clear, relevant and effective communication is facilitated. The Board and Management of PROTON communicate regularly with its shareholders and stakeholders through the following mediums:

Annual Report

The Annual Report is an important medium of information to the shareholders where it provides comprehensive information on the Group’s financials, operations and activities. The contents of the Annual Report are consistently enhanced to reflect transparency and accountability in line with the best corporate governance practices.



General Meetings

The Annual General Meeting remains the main forum for communication and dialogue with the shareholders. Shareholders are encouraged to actively participate and interact through the ‘questions and answers’ session where shareholders are accorded both opportunity and the time to raise questions on the Group’s performance, future growth prospects and strategies and other matters on the agenda during the meeting. The Board and members of the Senior Management as well as the External Auditors are available to provide explanations to the queries raised by the shareholders.

Bursa Malaysia Securities Berhad Announcements

The Board ensures that timely announcements of financial results and corporate developments are made to Bursa Malaysia Securities Berhad in accordance with the requirements of the Exchange. Analyst Briefings and Press Conferences

Press conferences and analyst briefings are normally held after the half and full year financial results are released to Bursa Malaysia Securities Berhad. Chaired by the Group Chairman and/or the Group MD, the briefings are to keep the investors informed of the various activities and initiatives undertaken by the Group and to provide clearer understanding of the Group’s financial and operational performance.

Press Releases

Press releases are issued to the media on all significant corporate developments and business initiatives.

One-to-One Meetings

The Group aims to communicate fully with fund managers, investors and analysts upon request. Regular one-to-one meetings with analysts and fund managers are held to provide updates on the Group’s strategy and financial performance.

Website for the Group

The Group has a website (www.proton.com) which provides information on the Group for all shareholders and the general public.

CODE OF CONDUCT AND DISCIPLINE

PROTON has in place a Code of Conduct and Discipline. Every Employee is required to comply with this said code and as may be determined by the Board, from time to time. This code consists of matters, prohibitions, duties or procedures relating to his/her employment.

Such code may be modified, added to, substituted for or otherwise amended from time to time as the Board deems fit. An employee is also required to comply with the penal code of the country.

Code of Ethics

The PROTON Group has established specific rules and regulations to govern the conduct of its employees. The Directors and employees of PROTON Group are expected to obey all laws in conducting business and to always act with honesty, integrity, loyalty, trustworthiness, fairness and responsibility.

It is PROTON’s policy and Management’s responsibility to apply these rules fairly and equitably to all employees.

Infringement of these rules may lead to disciplinary action such as verbal or written warnings, suspension without pay and dismissal from the Company/Group.


Purpose of Code of Ethics

This purpose of this Code of Ethics is to provide a framework for the proper conduct of Directors and employees while on the job. The policy gives Directors and employees guidance in identifying business situations which have the potential to create legal and ethical problems and to provide directions in handling those potential and actual situations.

The respective codes are made available to the Directors and employees.

Whistleblower Policy

PROTON had on 27 July 2006, implemented a Whistleblower Policy. The objective of the policy is to provide a mechanism for preventive and corrective action within the Group without the negative effects that come with public disclosure, such as loss of Company image or reputation, financial distress and loss of investor confidence.

The policy encourages employees or representatives of PROTON to disclose genuine concerns about illegal, unethical or improper business conduct within the Group. In this manner, the employees can help the PROTON Group to monitor and keep track of such illegal, unethical or improper business conduct within, which otherwise, may not be easily detected through normal process or transaction.

BUSINESS CONDUCT

The Group is committed to the highest standards of business conduct and seeks to maintain these standards across all of its operations throughout the world. The Group has in place group finance policies and employee procedures.

The Group has an appropriate organisation structure for planning, executing, controlling and monitoring business operations in order to achieve Group objectives. Lines of responsibility and delegations of authority are documented.



Additional Compliance Information in accordance with Appendix 9C of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad:

UTILISATION OF PROCEEDS RAISED FROM CORPORATE PROPOSALS

There were no proceeds raised from corporate proposals during the financial year.

ShARE BUY-BACK

There was no proposal by the Company to carry out a share buy-back during the financial year.

OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES

The Company did not issue any warrants or convertible securities during the financial year.

AMERICAN DEPOSITORY RECEIPT (“ADR”) OR GLOBAL DEPOSITORY RECEIPT (“GDR”) PROGRAMME

The Company did not sponsor any ADR or GDR Programme during the financial year.

IMPOSITION OF SANCTIONS/PENALTIES

There were no public sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by relevant regulatory bodies during the financial year.

VARIATION IN RESULTS

There were no profit estimations, forecasts or projections made or released by the Company during the financial year.

PROFIT GUARANTEE

There was no profit guarantee for the financial year.

MATERIAL CONTRACTS

There was no material contract entered into by the PROTON Group involving the interest of Directors and major shareholders, either still subsisting at the end of the financial year ended 31 March 2011 or entered into since the end of the previous financial year.

REVALUATION POLICY ON LANDED PROPERTIES

The Significant accounting policies on property, plant and equipment are disclosed in Note 3(C) of the Summary of Significant Accounting Policies.

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:

2011 RM’000

2010 RM’000

External Auditors

PricewaterhouseCoopers Malaysia

400 232

Member firm of PricewaterhouseCoopers International Limited (a separate and independent legal entity from PricewaterhouseCoopers Malaysia)

1,315 592

Total 1,715 824

ADDITIONAL COMPLIANCE INFORMATION


RECURRENT RELATED PARTY TRANSACTIONS

On 8 June 2007, PROTON obtained exemption from Bursa Malaysia Securities Berhad (Bursa) from disclosing Recurrent Related Party Transactions with Khazanah Nasional Berhad’s investee companies. As a result, PROTON is not required to seek shareholders mandate for such transactions at the forthcoming Annual General Meeting of the Company.

Further, Bursa had, on 14 December 2006 amended the Listing Requirements pertaining to related party transactions whereby the threshold for a major shareholder was increased from 5% to 10% of the aggregate nominal amount of voting shares in a company, PROVIDED that the said shareholder is not the largest shareholder of the company.

The Employees Provident Fund Board (EPF) which currently holds approximately 8.236% of the issued and paid up capital of PROTON is not deemed a related party by virtue of the fact that EPF and/or person(s) connected with the EPF:

a. is/are not the largest shareholder of the Company;

b. is/are not a party to any transaction, initiator, agent or involved in any manner in any transaction with the PROTON Group; and

c. does not have any representative in an executive capacity on the Board of Directors of PROTON or any of the subsidiaries.

The other major shareholder, Petroliam Nasional Berhad holds 7.851% equity interest in PROTON.

ADDITIONAL COMPLIANCE INFORMATION (CONT’D)


STATEMENT ON INTERNAL CONTROL

INTRODUCTION

The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard shareholders’ investments and the Group’s assets. Directors of listed companies are required to make disclosures in their annual reports on the state of internal control in accordance with the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). Bursa Malaysia’s Statement on Internal Control: Guidance for Directors of Public Listed Companies (“Guidance”) provides guidance for compliance with these requirements. The Board’s Internal Control Statement, which has been prepared in accordance with the Guidance, is set out below.

BOARD RESPONSIBILITY

The Board of Directors (“The Board”) recognises the importance of sound internal controls and risk management practices to good corporate governance. The Board has an overall responsibility for the Group’s system of internal controls and its effectiveness, as well as reviewing its adequacy and integrity. The Group’s system of internal controls is designed to manage the principal business risks that may impede the Group from achieving its business objectives. The system, by its nature, can only provide reasonable but not absolute assurance against any material misstatement or loss occurrence.

RISK MANAGEMENT

Risk management is regarded by the Board to be an integral part of the Group’s operations with the objective of maintaining a sound internal control system and ensuring its continuing adequacy and integrity. A formal risk management framework and policy was approved by the Board for the Group to identify, assess, treat, report and monitor key risks faced by the Group. The effectiveness of the risk mitigation actions are reviewed quarterly by the Group Risk Management Committee (GRMC) and Board Audit Committee (BAC), respectively.

The Group Risk Management Division (GRMD) is entrusted with the responsibility of ensuring that an appropriate risk management framework exists within the Group and is effectively implemented to manage the key risks of the organisation on an on-going basis. GRMD is also responsible for providing reasonable assurance to the GRMC that the risks facing the organisation are effectively managed.

The GRMC, which comprises of Senior Management, is responsible for overseeing risk management implementation, regular updating of the Group’s risk profiles and improving the implementation of methodology for risk management. The Committee deliberates and determines the Group’s major risks to be escalated for the attention of the BAC.

The BAC explicitly assumes the role to facilitate the discharge of the board’s stewardship responsibility in identifying principal risks and ensuring the implementation of appropriate systems to manage these risks. The BAC is also responsible for reviewing the adequacy and the integrity of the company’s internal control systems and management information systems, including system for compliance with applicable laws, regulations, rules, directives and guidelines.

For the financial year ended 31 March 2011, the GRMC and BAC have held quarterly meetings in accordance with their respective terms of reference.

ASSURANCE MEChANISM

Apart from risk management activities, the Board and Management have established other processes for identifying, evaluating and managing significant risks faced by the Group. They continue to strive in enhancing and implementing the internal control system to manage those risks that could affect the Group’s growth and financial viability. These processes include updating the system of internal controls when there are changes to the business environment or regulatory guidelines. The key elements of the Group’s control environment include:


Board Committees

Board Committees were established by the Board to assist the Board in the execution of its responsibilities to provide oversight on the effectiveness of the Group’s operations. The responsibilities and authority of the Committees are governed by specific terms of reference and these Committees are accountable to the Board.

The Board Committees are:

• AuditCommittee

• NominationandRemunerationCommittee

• RiskManagementCommittee

• DisciplinaryCommittee

• ExecutiveCommittee

The details of the abovementioned Board Committees are set out separately in the Statement on Corporate Governance of this annual report.

Board Audit Committee

The Board has delegated the duty of reviewing and monitoring the effectiveness of the Group’s system of internal controls to the Board Audit Committee (BAC).

The BAC assumes the overall duties of reviewing with the external auditors their audit plan, audit report, as well as their findings and recommendations on internal controls highlighted annually in the Internal Control Memorandum. Throughout the financial year, the BAC was updated on the developments of Malaysian Financial Reporting Standards, as well as legal and regulatory requirements. It also reviews the effectiveness of the internal audit function, with particular emphasis on the scope and quality of audits, resources as well as the independence of the Group Internal Audit Division (GIAD).

The BAC continues to meet regularly and has full and unimpeded access to the internal and external auditors and all employees of the Group.

Further information relating to the activities of the BAC is set out separately in the Statement on Corporate Governance of this annual report.

Organisation Structure and Management Committees

An organisation structure, which is aligned to the business and operational requirements and led by Heads of Division with clearly defined lines of responsibility, accountability and levels of authority, is in place to assist in implementing the Group’s strategies and day-to-day business activities.

Various functional committees were set up at the management level to ensure the Group’s actions and operations are properly aligned towards achieving the organisation’s goals and objectives.

The Management Audit Committee, comprising members of Senior Management from respective core business and support functions, regularly monitors major internal and external audit findings to ensure they are timely addressed and resolved.

Group Internal Audit Division (GIAD)

GIAD continues to independently monitor compliance with internal policies and procedures, effectiveness of the internal control systems and highlights significant findings for corrective actions by line management and reports directly to the BAC.

The annual audit plan, which covers PROTON and its subsidiary companies, is reviewed and approved by the BAC annually. A quarterly work status update is given by the GIAD to the BAC. GIAD regularly reviews the approved annual audit plan to ensure significant risk areas are given adequate audit focus.

The interests of PROTON in associated companies and jointly controlled entities are primarily served through representation on the board of directors of the respective companies. Internal controls of associated companies and jointly controlled entities are reviewed upon any ad-hoc request by the BAC.

STATEMENT ON INTERNAL CONTROL (CONT’D)


On a quarterly basis, GIAD updates the BAC on the status of corrective actions taken by line management arising from the audit findings highlighted by both GIAD and the external auditors.

Further information relating to the activities of GIAD is set out separately in the Statement on 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 tocommittees and management of head office and operating units, including authorisation levels for various aspects of the business, which are clearly set out in the revised Limits of Authority;

• Documented internal policies and proceduresas set out in the Group Policies and Procedures. There is extensive documentation of policies, procedures and guidelines on the Group’s intranet site (ASPIRE) including those relating to Financial, Contract Management, Marketing, Procurement, Human Resources, Information Systems etc;

• Quarterly financial statements and the Group’sperformance are deliberated by the BAC, which subsequently presents them to the Board for their review, consideration and approval;

• Management Committee meetings are held ona regular basis to identify, discuss and resolve operational, financial and key management issues;

• A comprehensive budgeting process where theannual budgets are approved by the Board;

• TheBoardreceivesandreviewsmonthlyreportsfrom Management on key strategic and operational issues and provides direction to Management;

• TheWhistleblowerPolicy is inplace toprovidean internal mechanism for employees to raise their concerns about malpractices, irregularities and negligence affecting PROTON without fear of adverse repercussions and with their confidentiality protected;

• Continuous training efforts to enhance theleadership quality and competency of the workforce are provided to staff through a wide variety of schemes and programme such as PROTON Leadership Talent, Cross Assignment to Government-Link-Companies (GLCs) and Cross Fertilization with Government Offices as part of the Orange Book initiatives in Strengthening Leadership Development;

• Regular employee perception surveys such asInternal Customer Satisfaction Survey (ICSS) and Employee Engagement Survey (EES) were conducted to obtain feedback from employees to promote continuous improvements; and

• Improvement to the formal employee appraisalsystem for effective coaching and evaluation of employee performance using established Key Performance Indicators (KPIs). The resolution rate of internal audit findings is also included in the Division KPIs to ensure gaps in the internal controls system are effectively and timely addressed by the business units.

CONCLUSION

For the financial year under review, some weaknesses in internal control were detected. However, after due and careful inquiry and based on the information and assurance provided, the Board is satisfied that there were no material losses as a result of weaknesses in the system of internal controls. Nevertheless, identified areas of concern 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.


“STEERING ThE COURSE TOWARDS REALISING ThE VISION”

The Financial Year 2010/11 was another milestone for PROTON in realising its vision as the next Asian Challenger in the automotive industry. As the integral part of the business strategy, a successful implementation of various key initiatives essentially required a structured, proactive, effective and consistent Enterprise Risk Management (ERM) framework.

The ERM Framework allows the prioritising of corporate and operational risks throughout the group. This has also enabled the development of an effective internal compliance and review plan. It addressed the Group business risk through complete risk management cycle, incorporating the assessment, reporting, treatment, monitoring and constant review of the risk profiles.

OVERVIEW

The Group firmly believes that effective Risk Management is an essential and integral part of its Corporate Governance and shall continuously strive for excellence to ensure effective and systematic protection of the overall business.

The Group operates in a highly competitive environment and is exposed to various corporate and operational risks. The Group’s ERM has proactively reviewed, monitor and managed these risks which include Market, Human Resource, Procurement, Manufacturing, Engineering, Project and Marketing.

A structured and integrated approach in managing key business risks has been adopted for the ERM in line with the risk management framework and best practices. It is consistent with the ISO 31000 which involves the systematic identification and analysis of risks which impact the organisation business objectives.

RISK ASSESSMENT AND REPORTING

Risk management is firmly embedded within the divisions through the Annual Management Plan (AMP) process and Key Performance Indicator (KPI) development. The divisions being the first line of defense against risks are responsible for identifying, mitigating and managing risks and has to ensure that their business activities are within the established risks policy and guidelines.

Activities carried out by Group Risk Management Division (GRMD) to discharge its duties and responsibilities were set out in the Charter, which include among others:

• AnalyseriskassessmentreportsfromallDivisionsand on quarterly basis reports to Group Risk Committee (GRMC) on the consolidated risks faced and the mitigation plan for deliberation.

• PresentquarterlytoBoardAuditCommittee(BAC)and Board Risk Management Committee (BRMC) on the key risks summary for further deliberation of risks that impact business objectives.

All risks identified were assessed to determine the risk rating based on a 3x3 risk matrix, with the rationale of improving efficiency, encouraging proactive response and promoting common risk language. The efforts and resources to mitigate the risks are aligned to the rating matrix.

RISK MANAGEMENT STATEMENT


Figure 1: Risk Matrix

Like

lihoo

d

Risk Map Risk Evaluation Table

Likely Medium High High Risk Rating Priority for Action

Possible Low Medium High High Immediate attention required

Unlikely Low Low Medium Medium Caution

Minor Moderate Major Low For notation

Impact

Source: Group Risk Management Policy

RISK AWARENESS AND COMMUNICATION

Risk Awareness sessions have been conducted for the company’s middle management. This is part of the Group continuous initiative to improve the risk management culture within the company.

In Financial Year 2010/11 risk management workshops were organised for all divisions within the Group in which divisional line managers were trained with the following objective:

• Facilitate and assist divisions to ensure riskmanagement is firmly embedded as a business process.

• Develop an enduring and positive riskmanagement culture throughout the Group.

The programme is continuously conducted with innovative approaches to impart risk management knowledge in ensuring that risks faced by the Group are being addressed proactively.

RISK MANAGEMENT SCORECARD

In the Financial year in review, the Group has enhanced the risk management framework and policy adopted from the global best practice guideline and standard in line with the Khazanah Green Book and Malaysian Corporate Code of Governance (MCCG).

Risk Management Scorecard (RMSC) was introduced to enhance the risk management process and practices. Furthermore it improves Group’s adequacy and effectiveness in managing and practicing risk management across its business operations.

Implementation of RMSC for Financial Year 2010/11 has helped to enhance and improve the risk management culture in the Group, with majority of the divisions within the Group achieving beyond target.

The results achieved were on the following thrusts:

• Systematicriskprofilingcapabilityimproved.

• Keyelementonriskassessmentsuchasrisklimitwas practiced.

• Activeintegrationofriskmanagementpracticesin divisional operation decision making.


Figure 2: Risk Management Scorecard (RMSC)

Sets The Company Risk Parameters

Understand Major Risk Exposure

Considers The Risk Factors in All Major Decisions

Objectives/Goals

Thresholds are controlled within pre-determined risk limits

Provide sufficient internal controls, clear accountabilities and mitigation plans

Culture of identifying and managing the potential risk throughout the organisation

What to measure?

Number of “risk limit” guideline established

Number of key risk profile, register & mitigate in timely manner

Number of risk management practices demonstrated at decision making process

Targets for FY2010/11

“Risk limit” established per division

Divisional risk profile conducted per year at strategic and operational initiatives

Application at key decision making process

RISK FACTORS

Various risk assessments were performed in the year under review specifically for our operations in every market. Updates on mitigation plan are reported to the GRMC and BRMC respectively on a quarterly basis. As the Group’s future lies in expanding into the export markets, it is imperative that efforts are taken to ensure that all risks factors faced by the organisation are effectively managed:

a. Industry and Business Risks

The global automotive market is highly competitive. Intense competition from other automotive manufacturers is constantly being faced by PROTON in the segments which it operates. Competition has intensified amidst difficult overall market conditions due to the weak global economy.

Each market that Proton competes in has been subjected to considerable volatility in demand. The large extent of social, political and economic conditions in those markets including the introduction of new technologies and vehicles are the main elements in the competition war.

The future success depends on the ability to offer new innovative competitively priced products that meet customer demand timely particularly relating to quality, safety and reliability. The timely introduction of new models, offered at competitive prices, meeting customer preferences and demand is crucial.

b. Financial Market and Economic Risks

The overall business operations are subjected to currency and interest rates fluctuations which may affect the pricing of the end product sold, raw materials and components. Use of certain derivative financial instruments including interest rate swaps and increased localised production helps reduced the effects.

Escalation of prices for raw materials used in the Group and its suppliers in manufacturing the end products and components may lead to higher production costs and subsequently pose a negative impact to the projected profit and adversely affect the ability to raise capital for future growth.

RISK MANAGEMENT STATEMENT (CONT’D)


c. Political, Regulatory and Legal Risks

The automotive industry is subjected to various laws and government regulations including vehicle safety and environment pressure such as emission levels, fuel economy, noise and pollution. This has exposed the Group to risks related to recalls for vehicle that may not comply with the safety standards within the law and regulation.

In addition, new tariffs, trade barriers, taxes and levies, enact price and exchange control and local protection imposed by government or countries in which PROTON operates, has also influenced the Group’s strategic objectives and decision making.

Global issues and events such as political instability, natural calamities, epidemics, terrorism and country sentiments may also affect Group business operations.

CONCLUSION

In view of PROTON’s strategic aspiration as an Asian Challenger in the Automotive industry, continuous improvement on risk management framework is crucial.

The Group shall continue to cultivate risk management culture to give reasonable assurance that the shareholders interests are protected. However, providing assurance that risks are effectively managed requires commitment and discipline from all divisions. Therefore, enhancement on the ERM framework and competency will remain the top priority of the Group to cultivate a more proactive risk management operation.

Managing key risks and identifying emerging risks especially in export markets will also be the Group’s focus Financial Year 2011/12 to catapult the Company into becoming a major international player. Concerted efforts on all fronts are crucial to maintain the commitment of all divisions towards embedding risk management practices as an integral part of the day-to-day decision making process in the organisation.

With the support of the BRMC, the risk management function will continue to move forward in enhancing the appreciation of risk management and strive for a stronger and more resilient risk management culture within the Group.


AUG 10

10 PROTON signed a Supply Chain Financing Solution agreement with CIMB to alleviate the cash-flow burden faced by vendors.

17 A Collaboration Agreement was signed between PROTON and UTM for a Professorship Programme. A professor from UTM will be assigned on a full-time basis in PROTON for a period of two years to strengthen PROTON’s research capabilities and assist with the development of a new generation of Proton cars.

10 17 17

20

17 PROTON Advisor, YABhg. Tun Dr. Mahathir Mohamad enjoying his ‘Buka Puasa’ with PROTON Chairman, Dato’ Sri Mohd. Nadzmi Mohd. Salleh during the breaking of fast with PROTON staff, in Shah Alam.

20 YB Dato’ Sri Mustapa Mohamed, Minister of International Trade & Industry together with PROTON Group Managing Director, Dato’ Sri Hj. Syed Zainal Abidin Syed Mohamed Tahir and some of the orphans invited to the ‘Berbuka Puasa’ event with the Minister.

CALENDAR OF EVENTS


23 25 5

6 14

SEPT 10

23 PROTON Holdings Berhad’s 7th Annual General Meeting was held at the PROTON Centre of Excellence.

25 Mikhail Youzhny hitting some tennis balls to the fans at the PROTON Malaysian Open ATP 250 Tennis Championship held at Stadium Putra, Bukit Jalil.

OCT 10

5 The actors taking a bow at the end of the Tun Mahathir Musical held at the Istana Budaya, Kuala Lumpur during PROTON’s Corporate Night.

6 A traditional Malay band serenading the guests during PROTON’s ‘Raya Open House’ at the Kuala Lumpur Convention Centre.

14 PROTON unveiled a new sedan name, the Proton Inspira, chosen via a naming competition. During the event at the PROTON Centre of Excellence, the winner was awarded a prize of RM10,000.


6 10 3

3115 18

NOV 10

6 PROTON competed in the inaugural ‘Brighton to London Future Car Challenge’ and won in the ‘Best Range Extender Electric Vehicle’ category with the Proton Exora REEV.

10 The launch of Proton Inspira by YB Dato’ Sri Mustapa Mohamed, Minister of International Trade & Industry at PROTON Centre of Excellence, Subang Jaya.

DEC 10

3 Proton Tuah, one of the five concept cars themed as the ‘Pahlawan Series’ was unveiled at the 2010 KL International Motorshow held at the Putra World Trade Centre.

15 Introduction of the new SAGA FL by PROTON Group Managing Director, Dato’ Sri Hj. Syed Zainal Abidin Syed Mohamed Tahir.

18 Flag off for the ‘Festival PROTON 1MALAYSIA’ car convoy in conjunction with PROTON’s 25th anniversary celebrations.

31 The public had a great time welcoming the arrival of the new year 2011 at the Grand Finale of ‘Festival PROTON 1Malaysia’ at the PROTON Centre of Excellence, Subang Jaya.

CALENDAR OF EVENTS (CONT’D)


4 12 17

22 23

JAN 11

4 Minister of Youth & Sports, YB Dato’ Sri Ahmad Shabery Cheek officiated the launch of PROTON Motorsports Rally Team for the 2011 season at the PROTON Centre of Excellence, Subang Jaya.

12 Proton Exora was voted the ‘Best MPV: Overall Value for Money’ by CIMB Autoworld Car of the Year Awards 2010.

17 PROTON Motorsports Rally Team makes its 2011 debut at the Rally of Monte Carlo.

18 ‘Pasukan Bantuan Bencana (PBB) PROTON’ was formed, comprising volunteers from PROTON and its subsidiaries to assist victims of natural disasters and catastrophes in Malaysia. Here, they assisted victims of the flood hit areas in Pagoh, Johor by clearing the surrounding areas of homes affected by the floods.

22 The triumphant Datuk Lee Chong Wei celebrates his win at the PROTON Malaysia Open Badminton 2011 championship, held at Stadium Putra, Bukit Jalil.

23 PROTON continues its long-term support of Le Tour de Langkawi by becoming the Official Car Provider and sponsor of the 16th Edition of the race event.

18


11 24

8 9 24

25

FEB 11

11 Yayasan PROTON awarded scholarships to 13 students to pursue further studies in Engineering, Accountancy and IT at various higher education institutions in the country.

24 Proton Inspira 1.8 (M) was awarded 2nd place in the ‘Family Car’ category (6.3litre/100km) and Lotus Elise S, 3rd place in the ‘High Performance Car’ category (8.2litre/100km) in the Asian Auto Fuel Efficiency Awards 2010.

25 An Analyst’s Briefing was held in relation to PROTON’s Q3 2010/11 Financial Announcement at the PROTON Centre of Excellence, Subang Jaya.

MAR 11

8 A special media briefing with Group Lotus and Lotus Renault GP Team in conjunction with Petronas Malaysia Grand Prix 2011 was held at the Pavilion, KL.

9 A media test drive of the new R3 Satria Neo was held at PROTON’s Test Track.

24 PROTON was awarded the Quality Management Excellence Award by the Ministry of International Trade & Industry during the Malaysia Industry Excellence Award 2010 dinner presentation at KL Convention Centre. Here, PROTON Group Managing Director Dato’ Sri Hj. Syed Zainal Abidin B Syed Mohamed Tahir receives the award from the Prime Minister of Malaysia, YAB Dato’ Sri Mohd Najib Tun Abdul Razak.



3

APR 11

3 PROTON Motorsports Rally Team grabbed the No. 1 and 3 podium finishes at the 1st round of FIA Asia Pacific Rally Championship (APRC) in Johor Bahru.

7 The Lotus Renault GP Team during a visit to PROTON in Subang Jaya. The delegation was led by Eric Boulier, Team Principal and Managing Director of LRGP and included Vitaly Petrov, Bruno Senna and F1 legend and Group Lotus ambassador, Jean Alesi.

10 The Lotus Renault GP team achieved a 3rd place podium finish at the Petronas Malaysia Grand Prix 2011 in Sepang International Circuit, thanks to Vitaly Petrov!

13 Proton Persona won the Best Value for Money Car (for 1.6L and above category) award at the Frost & Sullivan 2011 Malaysia Excellence Awards.

14 The Malaysian Skills Competition (Automotive Category) preliminary rounds was held at the Alor Star Stadium.

15 Lotus Cars Limited signed a GBP270 million syndication loan agreement with six banks to finance the Group Lotus Transformation Plan.

7 10

13 14 15


18 The ‘Change Starts with Me’ (CSWM) Awareness road show and company-wide campaign commenced to inform staff of the on-going change initiative.

21 The PROTON-PETRONAS ATFXP3 automatic transmission oil was launched by En. Shukor Ibrahim, CEO of Proton Edar Sdn Bhd at the Putrajaya International Convention Centre.

22 PROTON Group Managing Director, Dato’ Sri Hj. Syed Zainal Abidin B Syed Mohamed Tahir launched PROTON’s yearly Quality Campaign at its manufacturing premises in Shah Alam.

26 The media launch of ‘Persona Undoubtedly Campaign’, where the campaign ambassadors – Aanatha (THR Raaga), DJ Lin (Suria FM) and Jack Lim (MY FM) were introduced. On the extreme left is Abdul Sidik Abdul Hamid, GM of Marketing, Proton Edar Sdn Bhd.

MAY 11

10 Launch of Centre of Logistic Allocation Storage and Services (CLASS) at Sijangkang – a collaboration between PROTON and Konsortium Logistik Berhad.

21 22

26

18

10



25 PROTON handed over ten units of Proton Inspira cars to Polis DiRaja Malaysia at PROTON’s Test Track to be used for day-to-day police operations.

25 PROTON announced its Q4 Financial Results for 2010/11 at a Media Briefing attended by PROTON Chairman, Group Managing Director and Chief Financial Officer.

27 Hip-hop dancers at PROTON’s booth during the ‘Perhimpunan Sejuta Belia’ Hari Belia 2011 Celebration in Putrajaya, together with a host of other fun activities, added to PROTON’s appeal to the younger generation.

JUN 11

7 The LRGP Formula One race car ‘R31’ on display at PROTON’s booth at the SMIDEX Exhibition 2011.

20 PROTON hosted a visit by the delegates of the Langkawi International Dialogue to its Manufacturing and R&D facilities in Shah Alam.

24 PROTON Group Managing Director, Dato’ Sri Hj. Syed Zainal Abidin B Syed Mohamed Tahir greeting students from Sekolah Menengah Teknik Shah Alam during the GLC Open Day Exhibition 2011 at the KL Convention Centre.

25 25 27

7 20 24


22

25 26

2 12

26

JULY 11

2 YABhg. Tun Dr. Siti Hasmah Mohamad Ali presenting an award during Yayasan PROTON’s Academic Excellence Award Presentation Ceremony.

12 Proton Saga FL 1.6 won the ‘Best People’s Car’ award and the Proton Inspira 1.8 won the ‘Best Value For Money Family Car’ award in the Asian Auto – Auto Industry Awards 2011.

22 UTM-PROTON Research & Development satelite labs in both UTM campuses in Kuala Lumpur and Skudai, Johor were launched.

25 PROTON’s readiness for the production of its new Global Car at Tanjung Malim was announced and signified a new era for PROTON.

26 Proton Saga FLX 1.3L with CVT was launched providing consumers with better fuel-efficiency for consumers.

26 The kids and headmistress of Rumah Kebajikan Warisan Setia Damai, Pahang were elated with the makeover given to their home by Pasukan Bantuan Bencana (PBB) PROTON as part of PROTON’s Community Outreach Programme.



28

28 The ‘1Perayaan PROTON’ celebration was launched by PROTON Group Managing Director, Dato’ Sri Hj. Syed Zainal Abidin Syed Mohamed Tahir. The special programme celebrates Ramadhan, Syawal, Hari Merdeka and Hari Malaysia 2011 through various activities that will benefit the Malaysian public in the true spirit of 1Malaysia.


...Committed to be Better!

Winning Loyalty

PROTON is currently the market leader commanding 29% of the domestic market share. Malaysia’s largest auto manufacturer, PROTON is the only home-grown and indigenous OEM car manufacturer in Southeast Asia.

Winning International Acclaim (FI)

Through motorsports we are establishing a global presence and a dynamic showcase for our brand, products and technology.

PROTON has come a long way as a national automotive manufacturer. We have now evolved into an international automotive carmaker,

Winning Acclaim

With one of the world’s leading automotive engineering consultancy companies, Lotus, in its stable, PROTON has an invaluable resource to leverage upon. Winning The Nation’s Heart

Through PROTON, Malaysia now hosts state-of-the-art vehicle manufacturing plants and engineering capabilities. touching lives in Malaysia and across the

globe with pride, passion and progress - in many award-winning ways.

205mm 207mm 207mm 205mm

PROTON experienced an exhilarating start of the 2011 F1 season as Lotus-Renault came in third in both the Melbourne and Malaysian Grand Prix. The podium finishes accelerate our passion for excellence as we continue to make an impact in the international motor arena.

158 Directors’ Report

161 Statements of Comprehensive Income

162 Statements of Financial Position

164 Statements of Changes In Equity

166 Statements of Cash Flow

169 Notes to the Financial Statements

271 Statement by Directors

271 Statutory Declaration

272 Independent Auditors Report

STATUTORY FINANCIAL STATEMENTS

158

DIRECTORS’ REPORT

THE DIRECTORS HAVE PLEASURE IN SUBMITTING THEIR REPORT TOGETHER WITH THE AUDITED FINANCIAL STATEMENTS OF THE GROUP AND COMPANY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2011.

PRINCIPAL ACTIVITIES

The Company is principally involved in investment holding activities.

The principal activities of the subsidiary companies are set out in Note 16 of the financial statements. There have been no significant changes in the activities of the Group and Company during the financial year.

FINANCIAL RESULTS Group Company RM’000 RM’000

Profit for the financial year 155,612 118,125

DIVIDENDS

Since the end of the previous financial year, the Company has paid a final dividend of 20 sen per ordinary share less tax at 25% on 549,213,002 ordinary shares amounting to RM82,381,950 in respect of the financial year ended 31 March 2010.

The Directors recommend the payment of a final dividend of 10 sen per ordinary share less tax at 25% on 549,213,002 ordinary shares amounting to RM41,190,975 in respect of the financial year ended 31 March 2011, subject to the approval of members at the forthcoming Annual General Meeting.

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

The Directors who have held office during the period since the date of the last report are:

Dato’ Sri Mohd Nadzmi bin Mohd SallehDato’ Sri Syed Zainal Abidin B Syed Mohamed TahirDato’ Lim Heen PeokBehara Venkata Rama SubbuTan Sri Rainer AlthoffAbdul Rahim bin Abdul HamidDatuk Johar bin Che Mat (appointed on 15.10.2010)Datuk Nozirah binti Bahari (appointed on 06.07.2011)Datuk Zalekha binti Hassan (resigned on 06.07.2011)


DIRECTORS (cont’d)

In accordance with Article 104 of the Company’s Articles of Association, Dato’ Sri Mohd Nadzmi bin Mohd Salleh and Dato’ Lim Heen Peok 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, Datuk Johar bin Che Mat and Datuk Nozirah binti Bahari retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for election.

In accordance with Article 139 of the Company’s Article of Association, Dato’ Sri Syed Zainal Abidin B Syed Mohamed Tahir retires at the forthcoming Annual General meeting and, being eligible, offers himself for re-election.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits disclosed as Directors’ remuneration in Note 8 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

DIRECTORS’ INTEREST IN SHARES AND DEBENTURES

According to the register of Directors` shareholdings, no Director in office at the end of the financial year held any interest in shares or debentures in the Company or its related corporations.

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the financial statements 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.

DIRECTORS’ REPORT (cont’d)

160

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (cont’d)

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 except as disclosed in Note 47 to the financial statements; 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’s and Company’s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature except as disclosed in Note 6 (government grant income) 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 a resolution dated 26 July 2011.

DATO’ SRI MOHD NADZMI BIN MOHD SALLEH DATO’ SRI SYED ZAINAL ABIDIN BCHAIRMAN SYED MOHAMED TAHIR MANAGING DIRECTOR

DIRECTORS’ REPORT (cont’d)


Group Company Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Revenue 5 8,969,882 8,226,859 97,930 101,203 Cost of sales 6 (7,980,743) (7,382,698) – –

Gross profit 989,139 844,161 97,930 101,203

Research and development expenditure (20,673) (42,899) – – Other operating income 158,269 181,232 28,885 3,454 Distribution costs (153,772) (132,598) – – Administrative expenses (745,463) (546,584) (7,178) (1,004) Other operating expenses (22,337) (49,136) – (4,375)

Profit before finance cost 6 205,163 254,176 119,637 99,278

Other losses - net 7 (3,549) – – – Finance cost 9 (13,661) (12,053) – – Share of results of associated companies 17 2,918 5,535 – – Share of results of jointly controlled entities 18 23,536 13,235 – –

Profit before taxation and zakat 214,407 260,893 119,637 99,278

Zakat 10 (3,394) – – – Taxation 10 (55,401) (41,961) (1,512) (563)

Profit for the financial year attributable to equity holders of the Company 155,612 218,932 118,125 98,715

Other comprehensive income: - Foreign currency exchange differences 4,923 12,517 – – - Available-for-sale financial assets net fair value gains 2,097 – 4,900 – - Transfer to profit and loss on derecognition of available-for-sale financial assets (2,097) – (4,900) –

Total profit and comprehensive income attributable to equity holders of the Company 160,535 231,449 118,125 98,715

Earnings per share (sen) - basic 11 28 40 - diluted 11 28 40

STATEMENTS OF COMPREHENSIVE INCOME For The Financial Year Ended 31 March 2011

The notes on pages 169 to 270 form part of these financial statements.

162


NON-CURRENT ASSETS

Property, plant and equipment 13 2,529,861 2,624,418 – – Goodwill 14 29,008 29,008 – – Intangible assets 15 877,395 563,963 – – Subsidiary companies 16 – – 2,001,751 1,708,651 Associated companies 17 151,266 152,640 13,600 13,600 Jointly controlled entities 18 215,463 202,545 – – Amounts due from subsidiary companies 19 – – 58,573 232,946 Investments 20 – – – – Deferred tax assets 21 16,740 15,033 – –

3,819,733 3,587,607 2,073,924 1,955,197

CURRENT ASSETS

Inventories 22 1,207,072 1,227,212 – – Trade and other receivables 23 1,310,150 920,400 517 749 Amounts due from subsidiary companies 19 – – 61,248 59,978 Amounts due from jointly controlled entities 24 10,607 11,321 – – Tax recoverable 10 8,769 25,301 313 292 Available-for-sale financial assets 25 4,541 – – – Short term investments 26 – 9,676 – – Dividends receivable – – 33,850 6,950 Deposits, bank and cash balances 27 1,293,033 1,652,089 135,898 248,376

3,834,172 3,845,999 231,826 316,345 Non-current assets held for sale 28 – 36,931 – 2,100

TOTAL ASSETS 7,653,905 7,470,537 2,305,750 2,273,642

CAPITAL AND RESERVES

Share capital 29 549,213 549,213 549,213 549,213 Reserves 30 4,857,527 4,783,776 1,719,861 1,723,894

Equity attributable to equity holders of the Company 5,406,740 5,332,989 2,269,074 2,273,107

TOTAL EQUITY 5,406,740 5,332,989 2,269,074 2,273,107

STATEMENTS OF FINANCIAL POSITION As At 31 March 2011



NON-CURRENT LIABILITIES

Long term liabilities 31 37,990 88,650 – – Deferred tax liabilities 21 8,186 10,740 – –

46,176 99,390 – –

CURRENT LIABILITIES

Trade and other payables 32 1,566,371 1,630,364 832 535 Provisions 33 143,519 184,404 – – Deferred revenue 34 11,358 – – – Amount due to a subsidiary company 35 – – 35,825 – Amounts due to associated companies 36 61,195 45,115 19 – Amounts due to jointly controlled entities 37 43,773 23,940 – – Taxation 12,868 12,099 – – Short term borrowings 38 361,466 142,236 – – Derivative financial liabilities 39 439 – – –

2,200,989 2,038,158 36,676 535

TOTAL LIABILITIES 2,247,165 2,137,548 36,676 535

TOTAL EQUITY AND LIABILITIES 7,653,905 7,470,537 2,305,750 2,273,642

Net assets per share attributable to equity holders of the Company (RM) 9.84 9.71

STATEMENTS OF FINANCIAL POSITION As At 31 March 2011 (cont’d)


164

Attributable to equity holders of the Company Asset Available- Foreign Share Capital revaluation for-sale exchange Retained Note capital reserve reserve reserve reserve earnings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

At 1 April 2010, as previously reported 549,213 475,617 2,362 – (66,995) 4,372,792 5,332,989 Effects of adopting FRS 139 – – – – – (4,402) (4,402)

At 1 April 2010, as restated 549,213 475,617 2,362 – (66,995) 4,368,390 5,328,587

Profit for the financial year – – – – – 155,612 155,612

Other comprehensive income for the financial year - Foreign exchange differences – – – – 4,923 – 4,923 - Realisation of asset revaluation reserve – – (2,362) – – 2,362 –- Available-for-sale financial assets – – – 2,097 – – 2,097 - Transfer to statement of comprehensive income on derecognition of available- for-sale financial assets – – – (2,097) – – (2,097)

Total profit and comprehensive income for the financial year – – (2,362) – 4,923 157,974 160,535

Transactions with owners - Final dividend for the financial year ended 31 March 2010 12 – – – – – (82,382) (82,382)

At 31 March 2011 549,213 475,617 – – (62,072) 4,443,982 5,406,740

Attributable to equity holders of the Company Asset Foreign Share Capital revaluation exchange Retained Note capital reserve reserve reserve earnings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

At 1 April 2009 549,213 475,617 2,362 (79,512) 4,153,860 5,101,540

Profit for the financial year – – – – 218,932 218,932 Other comprehensive income for the financial year - Foreign exchange differences – – – 12,517 – 12,517

Total profit and comprehensive income for the financial year – – – 12,517 218,932 231,449

At 31 March 2010 549,213 475,617 2,362 (66,995) 4,372,792 5,332,989

STATEMENTS OF CHANGES IN EQUITY For The Financial Year Ended 31 March 2011



Issued and fully paid ordinary shares Distributable Nominal Available- Number value of for-sale Retained Note of shares RM1 each reserve earnings Total ‘000 RM’000 RM’000 RM’000 RM’000

Company

At 1 April 2010, as previously reported 549,213 549,213 – 1,723,894 2,273,107 Effects of adopting FRS 139 – – – (39,776) (39,776)

At 1 April 2010, as restated 549,213 549,213 – 1,684,118 2,233,331

Profit for the financial year – – – 118,125 118,125

Other comprehensive income for the financial year - Available-for-sale financial assets – – 4,900 – 4,900 - Transfer to statement of comprehensive income on derecognition of available-for-sale financial assets – – (4,900) – (4,900)

Total profit and comprehensive income for the financial year – – – 118,125 118,125

Transactions with owners - Final dividend for the financial year ended 31 March 2010 12 – – – (82,382) (82,382)

At 31 March 2011 549,213 549,213 – 1,719,861 2,269,074

At 1 April 2009 549,213 549,213 – 1,625,179 2,174,392 Total profit and comprehensive income for the financial year – – – 98,715 98,715

At 31 March 2010 549,213 549,213 – 1,723,894 2,273,107

STATEMENTS OF CHANGES IN EQUITY For The Financial Year Ended 31 March 2011 (cont’d)


166


CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the financial year 155,612 218,932 118,125 98,715

Adjustments for: Taxation 55,401 41,961 1,512 563 Zakat 3,394 – – – Property, plant and equipment: - depreciation 425,568 432,612 – – - written off 4,228 23,806 – – - impairment 25,087 6,000 – – - reversal of impairment (18,591) (53,447) – – - gain on disposal (2,049) (2,645) – – Write down of inventories 12,420 80,128 – – Investments: - reversal of impairment – (2,100) – (2,100) - provision for impairment – 10,397 – 6,475 Intangible assets: - amortisation 101,219 81,688 – – - impairment 19,492 – – – - written off 2,512 55,814 – – Interest expense 13,661 12,053 – – Interest income: - short term deposits with licensed banks (31,850) (28,546) (4,835) (3,437) - subsidiary company – – (20,782) – Share of results of associated companies (2,918) (5,535) – – Share of results of jointly controlled entities (23,536) (13,235) – – Other investments: - loss on disposal – 19 – – - provision for diminution in value – 282 – – Gain on derecognition of available-for-sale financial assets (2,097) – (4,900) – Gain on disposal of assets held for sale (5,781) – – – Write back of impairment for receivables (28,253) (23,534) – – Bad debts written off 12,834 19,359 – – Impairment of receivables 13,645 27,183 – – Impairment of goodwill 278 – – – Loss on unrealised foreign exchange 1,432 26,617 – –

Cash flows from operations (carried forward) 731,708 907,809 89,120 100,216

STATEMENTS OF CASH FLOW For The Financial Year Ended 31 March 2011



CASH FLOWS FROM OPERATING ACTIVITIES (cont’d)

Cash flows from operations (brought forward) 731,708 907,809 89,120 100,216

Provision for warranties 41,200 45,968 – – Research and development grant (297,747) (143,688) – – Provision for retirement benefits 5,630 4,970 – – Amortisation of capital grant (11,960) (31,255) – – Dividend income (556) (915) (97,930) (101,203)

468,275 782,889 (8,810) (987)

Changes in working capital: Inventories 6,510 95,382 – – Receivables - trade and other receivables (271,925) (58,227) 232 – - associated companies and jointly controlled entities 34,800 (16,928) – (350) Payables - trade and other payables (116,319) 311,407 297 53 - provisions (81,852) (49,651) – – - associated companies and jointly Ícontrolled entities 1,340 (170) 19 –

40,829 1,064,702 (8,262) (1,284)

Tax paid (59,732) (38,389) (1,100) (1,057) Tax refund 17,062 126,444 134 – Zakat (3,394) – – – Interest received 29,700 27,282 4,835 2,833 Interest paid (11,906) (8,009) – – Government grant received 175,000 125,000 – – Retirement benefits paid (12,523) (9,013) – – Receipt of restricted ADF 348 60,777 – – Release of restricted ADF (16,443) (54,732) – –

Net cash flows generated from/ (used in) operating activities 158,941 1,294,062 (4,393) 492

STATEMENTS OF CASH FLOW For The Financial Year Ended 31 March 2011 (cont’d)

168


CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (338,824) (145,330) – – Purchase of intangible assets (404,494) (269,634) – – Proceeds from disposal of available-for-sale financial assets 9,332 5,336 7,000 – Proceeds from disposal of property, plant and equipment 4,760 6,469 – – Proceeds from disposal of assets held for sale 40,612 – – – Dividends received 11,588 12,959 10,341 101,203 Purchase of non-controlling interest (278) – – – Advances to a subsidiary company – – (43,044) (62,742)

Net cash flows (used in)/generated from investing activities (677,304) (390,200) (25,703) 38,461

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend paid 12 (82,382) – (82,382) – Proceeds from borrowings 406,631 211,358 – – Lease and hire purchase creditors instalments paid (6,000) (4,368) – – Repayment of borrowings (204,374) (386,739) – –

Net cash flows generated from/ (used in) financing activities 113,875 (179,749) (82,382) –

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (404,488) 724,113 (112,478) 38,953

EFFECTS OF EXCHANGE DIFFERENCES 11,995 (17,387) – –

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR 1,606,109 899,383 248,376 209,423

CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 45 1,213,616 1,606,109 135,898 248,376

STATEMENTS OF CASH FLOW For The Financial Year Ended 31 March 2011 (cont’d)



1 GENERAL INFORMATION

The Company is principally involved in investment holding activities.

The principal activities of the subsidiary companies are set out in Note 16 of the financial statements. There have been no significant changes in the activities of the Group and Company during the financial year.

The Company is a public limited liability company incorporated, and domiciled in Malaysia, and listed on the Main Market of Bursa Malaysia Securities Berhad.

The address of the registered office and the principal place of business of the Company is:

Centre of Excellence KM 33.8, Westbound Shah Alam Expressway 47600 Subang Jaya Selangor Darul Ehsan Malaysia

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 26 July 2011.

2 BASIS OF PREPARATION

During the financial year, the Group recorded a net profit of RM156 million (2010: RM219 million) which was lower than the previous financial year. The decrease was substantially due to higher losses from Lotus Group International Limited (‘LGIL’) whilst better contribution from the Proton cars business partly offset the decline. Growth in domestic sales volume, as well as introduction of models with better profit margins mainly accounted for the improved performance of Proton cars. In line with its transformation plans, LGIL incurred higher branding, marketing and restructuring costs in the rebuilding of the brand and improving production capabilities respectively.

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’s business plans and available financing facilities arrangements in place for the LGIL’s transformation plans. This includes efforts to control cash flows and the introduction of new models as replacement for aged models and refreshers for Proton cars as well as, the new strategic business plan for LGIL during the current financial year. The Group has secured additional facilities as mentioned in Note 47 for the LGIL transformation business.

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.

NOTES TO THE FINANCIAL STATEMENTS 31 March 2011

170

2 BASIS OF PREPARATION (cont’d)

Estimates and judgements

The preparation of financial statements requires the Directors to make estimates and judgements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the financial year. It also requires the Directors to exercise their judgement in the process of applying the Group’s and the Company’s accounting policies. Although these estimates and judgements are based on the Directors’ best knowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Group’s financial statements are disclosed in Note 4 to the financial statements.

Financial Reporting Standards

The financial statements of the Group and of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and comply with the Financial Reporting Standards (‘FRSs’), Malaysian Accounting Standard Board (‘MASB’) Approved Accounting Standards in Malaysia for Entities Other than Private Entities.

The financial statements of the Group and Company have been prepared under the historical cost convention (as modified by the revaluation of certain freehold land), unless otherwise indicated in the summary of significant accounting policies.

(a) Standards, amendments to published standards and Issues Committee (‘IC’) interpretations that are effective and applicable to the Group

The new accounting standards, amendments to published standards and interpretations to existing standards effective for the financial year beginning 1 April 2010 are as follows:

• FRS7“FinancialInstruments:Disclosures”providesinformationtousersoffinancialstatementsabout an entity’s exposure to risks and how the entity manages those risks. The improvement to FRS 7 clarifies that entities must not present total interest income and expense as a net amount within finance costs on the face of the statements of comprehensive income.

• FRS8“OperatingSegments”replacesFRS1142004 Segment Reporting. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The improvement to FRS 8 clarifies that entities that do not provide information about segment assets to the chief operating decision-maker will no longer need to report this information. Prior year comparatives must be restated.

NOTES TO THE FINANCIAL STATEMENTS 31 March 2011 (cont’d)



(a) Standards, amendments to published standards and Issues Committee (‘IC’) interpretations that are effective and applicable to the Group (cont’d)

• TherevisedFRS101“PresentationofFinancialStatements”prohibitsthepresentationofitemsofincome and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. ‘Non-owner changes in equity’ are to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

Where entities restate or reclassify comparative information, they will be required to present a restated statements of financial position as at the beginning comparative period in addition to the current requirement to present statements of financial position at the end of the current period and comparative period.

• FRS123“BorrowingCosts”requiresanentitytocapitaliseborrowingcostsdirectlyattributabletothe acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs is removed. The improvement to FRS 123 clarifies that the definition of borrowing costs includes interest expense calculated using the effective interest method defined in FRS 139.

• AmendmentstoFRS127“ConsolidatedandSeparateFinancialStatements”dealwithsituationswhere a parent reorganises its group by establishing a new entity as its parent. Under the new rules, the new parent measures the cost of its investment in the original parent at the carrying amount of its share of the equity items shown in the separate financial statements of the original parent at the reorganisation date.

• AmendmentstoFRS127removestherequirementforaparententitytorecognisedividendsonlytothe extent that it represents distributions from profits to the investee arising after acquisition, with any excess dividends recognised as a reduction of the cost of investments.

• FRS132“FinancialInstruments:Presentation”

- Amendment removes the transitional provision that exempted entities from applying the component part classification for a compound instrument issued before 1 January 2003. Upon adoption of FRS 139, entities are required to classify the compound financial instruments into its liability and equity elements.

- Amendment on classification of rights issues addresses accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights are now classified as equity instruments instead of derivative liabilities, regardless of the currency in which the exercise price is denominated.

172



• FRS139“FinancialInstruments:RecognitionandMeasurement”.Thisnewstandardestablishedprinciples 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 amendments to FRS 139 provide further guidance on eligible hedged items. The amendment provides guidance for two situations. On the designation of a one-sided risk in a hedged item, the amendment concludes that a purchased option designated in its entirety as the hedging instrument of a one-sided risk will not be perfectly effective. The designation of inflation as a hedged risk or portion is not permitted unless in particular situations. The improvement to FRS 139 clarifies that the scope exemption in FRS 139 only applies to forward contracts but not options for business combinations that are firmly committed to being completed within a reasonable timeframe.

• ICInterpretation9“ReassessmentofEmbeddedDerivatives”requiresanentitytoassesswhetheran embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required.

• ICInterpretation10“InterimFinancialReportingandImpairment”prohibitstheimpairmentlossesrecognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent statement of financial position date.

• ICInterpretation13“CustomerLoyaltyProgrammes”explainshowentitiesthatgrantloyaltyawardpoints to its customers should account for their obligation to provide free or discounted goods or services if and when the customers redeem the points.

Previously, free services given to customers during campaigns and on purchase of cars are not treated as a separately identifiable component of the sale transaction.

WiththeadoptionofICInterpretation13“CustomerLoyaltyProgrammes”,revenueattributedtothe free services is measure at fair value and deferred as a liability at the date of the initial sale transaction and only recognised when the services are redeemed, have expired or no longer expected to be redeemed.

The adoption of IC Interpretation 13 is not material to the prior year’s statements of financial position, hence the impact is only reflected in the current financial year ended 31 March 2011.

• IC Interpretation 14, FRS 119: “The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interactions” addresses how entities should determine the limit placedon the amount of a surplus in a pension plan they can recognise as an asset. Also, it addresses how a minimum funding requirement affects that limit and when a minimum funding requirement creates an onerous obligation that should be recognised as a liability in addition to that otherwise recognised under FRS 119.





The following amendments are part of the MASB improvements project:

• FRS5“Non-currentAssetsHeldforSaleandDiscontinuedOperations”

- Improvement (effective from 1 January 2010) clarifies that FRS 5 disclosures apply to non-current assets or disposal groups that are classified as held for sale and discontinued operations.

- Improvement (effective from 1 July 2010) clarifies that all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met.

• FRS107“StatementofCashFlows”(effectivefrom1January2010)clarifiesthatonlyexpenditureresulting in a recognised asset can be categorised as a cash flow from investing activities.

• FRS110“EventsAftertheBalanceSheetDate”(effectivefrom1January2010)reinforcesexistingguidance that a dividend declared after the reporting date is not a liability of an entity at that date given that there is no obligation at that time.

• FRS116“Property,PlantandEquipment”(consequentialamendmenttoFRS107“StatementofCashFlows”)(effectivefrom1January2010)requiresentitieswhoseordinaryactivitiescompriserenting and subsequently selling assets to present proceeds from the sale of those assets as revenue and should transfer the carrying amount of the asset to inventories when the asset becomes held for sale. A consequential amendment to FRS 107 states that cash flows arising from purchase, rental and sale of those assets are classified as cash flows from operating activities.

• FRS117“Leases”(effectivefrom1January2010)clarifiesthatthedefaultclassificationoftheland element in a land and building lease is no longer an operating lease. As a result, leases of land should be classified as either finance or operating, using the general principles of FRS 117.

• FRS118“Revenue”(effectivefrom1January2010)providesmoreguidancewhendeterminingwhether an entity is acting as a ‘principal’ or as an ‘agent’.

• FRS119“Employeebenefits”(effectivefrom1January2010)clarifiesthataplanamendmentthatresults in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation. The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation.

• FRS120“AccountingforGovernmentGrants”(effectivefrom1January2010)clarifiesthatthebenefit of a below market rate government loan is accounted for in accordance with FRS 120.


174



The following amendments are part of the MASB improvements project: (cont’d)

• FRS 127 “Consolidated and Separate Financial Statements” (effective from 1 January 2010)clarifies that where an investment in a subsidiary that is accounted for under FRS 139 is classified as held for sale under FRS 5, FRS 139 would continue to be applied.

• FRS128“InvestmentsinAssociates”(effectivefrom1January2010)clarifiesthataninvestmentin an associate is treated as a single asset for impairment testing purposes. Reversals of impairment are recorded as an adjustment to the carrying amount of the investment to the extent that the recoverable amount of the associate increases.

• FRS128“Investments inAssociates"andFRS131"Interests inJointVentures”(consequentialamendmentstoFRS132“Financialinstruments:Presentation”andFRS7“Financialinstruments:Disclosure”)(effectivefrom1January2010)clarifythatwhereaninvestmentinassociateorjointventure is accounted for in accordance with FRS 139, only certain, rather than all disclosure requirements in FRS 128 or FRS 131 need to be made in addition to disclosures required by FRS 132 and FRS 7.

• FRS134“InterimFinancialReporting”(effectivefrom1January2010)clarifiesthatbasicanddiluted earnings per share (‘EPS’) must be presented in an interim report only in the case when the entity is required to disclose EPS in its annual report.

• FRS 136 “Impairment of Assets” (effective from 1 January 2010) clarifies that the largestcash-generating unit (or group of units) to which goodwill should be allocated for the purpose of impairment testing is an operating segment before the aggregation of segments with similar economic characteristics. The improvement also clarifies that where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use should be made.

• FRS 138 “Intangible Assets”. Improvement (effective from 1 January 2010) clarifies that a prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. This means that an expense will be recognised for mail order catalogues when the entity has access to the catalogues and not when the catalogues are distributed to customers. It confirms that the unit of production method of amortisation is allowed.




(b) Standards, amendments to published standards and IC interpretations that are not yet effective and have not been early adopted

Effective 1 July 2010

• TherevisedFRS3“BusinessCombinations”continuestoapplytheacquisitionmethodtobusinesscombinations, with some significant changes. That is, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statements of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed.

• TheimprovementtoFRS5“Non-currentAssetsHeldforSaleandDiscontinuedOperations”clarifiesthat all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met.

• TherevisedFRS127"ConsolidatedandSeparateFinancialStatements"(appliesprospectivelytotransactions with non-controlling interests from 1 July 2010) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. When this standard is effective, all earnings and losses of the subsidiary are attributed to the parent and the non-controlling interest, even if the attribution of losses to the non-controlling interest results in a debit balance in the shareholders’ equity. Profit or loss attribution to non-controlling interests for prior years is not restated. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in statements of comprehensive income.

• TheamendmenttoFRS138“IntangibleAssets”clarifiesthatagroupofcomplementaryintangibleassets acquired in a business combination is recognised as a single asset if the individual asset has similar useful lives.

• ICInterpretation17“DistributionofNon-CashAssetstoOwners”providesguidanceonaccountingfor arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. FRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable.


176


(b) Standards, amendments to published standards and IC interpretations that are not yet effective and have not been early adopted (cont’d)

Effective 1 January 2011

• Amendments to FRS7 “Financial Instruments:Disclosure” and FRS1 “First-timeAdoption ofFinancial Reporting Standards” require enhanced disclosures of fair value measurements andliquidity risks.

• ICInterpretation4“DeterminingWhetheranArrangementContainsaLease”requirestheGroupto identify any arrangement that does not take the legal form of a lease, but conveys a right to use an asset in return for a payment or series of payments. The interpretation provides guidance for determining whether such arrangements are, or contain leases.

The assessment is based on the substance of the arrangement and requires assessment of whether the fulfillment of the arrangement conveys a right to use the asset. If the arrangement contains alease,therequirementsofFRS117,“Leases”shouldbeappliedtotheleaseelementofthe arrangement.

Based on management’s assessment, certain arrangements with vendors are in substance operating leases for toolings. Hence, the amortisation costs included in the part prices purchased from vendors are essentially lease rental and should therefore be disclosed separately.

There is no material financial impact on the adoption of this IC Interpretation 4 as the amortisation costscurrentlyincludedwithinthepurchasepriceofpartsshouldbereclassifiedas“leaserentalontoolings”withincostofsales.

• TheimprovementtoFRS3“BusinessCombinations”:

- Clarifies that the choice of measuring non-controlling interests at fair value or at the proportionate share of the acquiree’s net assets applies only to instruments that represent present ownership interests and entitle their holders to a proportionate share of the net assets in the event of liquidation. All other components of non-controlling interest are measured at fair value unless another measurement basis is required by FRS.

- Clarifies that the amendments to FRS 7, FRS 132 and FRS 139 that eliminate the exemption for contingent consideration, do not apply to contingent consideration that arose from business combinations whose acquisition dates precede the application of FRS 3 (2010). Those contingent consideration arrangements are to be accounted for in accordance with the guidance in FRS 3 (2005).





Effective 1 July 2011

• IC Interpretation 19 “Extinguishing Financial Liabilities with Equity Instruments” providesclarification when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. A gain or loss, being the difference between the carrying value of the financial liability and the fair value of the equity instruments issued, shall be recognised in profit or loss. Entities are no longer permitted to reclassify the carrying value of the existing financial liability into equity with no gain or loss recognised in statement of comprehensive income.

Effective 1 January 2012

• TherevisedFRS124“RelatedPartyTransactions”requiresMalaysianstate-controlledentitiestodisclose:

- the name of the government that has a control, joint control or significant influence over the reporting entity and the nature of the relationship;

- the nature and amount of any individually-significant transactions; and

- the extent of any other collectively-significant transactions, qualitatively or quantitatively.

Theamendeddefinitionof“relatedparty”requiresadditionaldisclosures,forexample,asubsidiaryis now required to disclose transactions with an associate of its parent. An entity that is controlled by an individual who is part of the key management personnel of another entity is now required to disclose transactions with the second entity.

The adoption of the above standards, amendments to the standards and interpretations did not have a significant impact on the financial performance or position of the Group and the Company, except for those as discussed below:

FRS 7: “Financial Instruments: Disclosure”

Prior to 1 April 2010, information about financial instruments was disclosed in accordance with the requirements of FRS 132 “Financial Instruments: Disclosure and Presentation”. FRS 7 introducesnew disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative instruments, including instrument on credit risk, liquidity risk and market risk, as well as sensitivity analysis to market risk.

The Group and the Company have applied FRS 7 prospectively in accordance with the transitional provisions. Hence, the new disclosures have not been applied to the comparatives. The new disclosures are included throughout the Group’s and the Company’s financial statements for the year ended 31 March 2011. As the change in accounting policy only results in additional disclosures, there is no impact on earnings per share.


178



FRS 8: “Operating Segment”

FRS 8 replaces FRS 1142004 Segment Reporting requires a “management approach”, under whichsegment information is presented on a similar basis as that used for internal reporting purposes. As a result, the Group’s segmental reporting had been presented based on the internal reporting to the “ChiefOperatingDecision-Maker”whomakesdecisionsontheallocationofresourcesandassessestheperformance of the reportable segments.

The standard also requires the disclosure of information about the products and services provided by the segments, the geographical areas in which the Group operates, and revenue from major customers.

This is a disclosure standard and hence does not have any impact on the financial position and performance of the Group.

The Revised FRS 101: “Presentation of Financial Statements”

FRS 101 separates owner and non-owner changes in equity. The statement of changes in equity only includes details of transactions with owners while, all non-owner changes in equity are presented as a single line. Additionally, the revised standard introduces statement of comprehensive income. The statement of comprehensive income recognises all items of income and expense in the profit and loss, together with all other items directly in equity either in one single statement, or in two linked statements.

Comparative information, with the exception of requirements under FRS 139, had been represented so that it is in conformity with the revised standard. This standard does not have any impact on the financial position and performance of the Group and Company. The effects on the comparative figures to the Group on the adoption of FRS 101 are shown in note 48 to the financial statements.

FRS 139: “Financial Instruments”

The new FRS 139 establishes principles for the recognition and measurement of the Group’s and the Company’s financial assets, financial liabilities and contracts to buy and sell non-financial items. FRS 139 also sets out the requirements for the measurement of the Group’s financial instruments. The Group and the Company have adopted FRS 139 prospectively on 1 April 2010 in accordance with transitional provisions, hence comparatives are not restated.





FRS 139: “Financial Instruments” (cont’d)

The effects arising from this adoption of this standard has been accounted for by adjusting the opening balance of retained earnings as at 1 April 2010 are as follows:

(i) Loans and receivables

Prior to 1 April 2010, loans and receivables were stated at anticipated net realisable value. Allowances are made for doubtful debts based on specific reviews of outstanding balances at the statement of financial position date. General allowances are made to cover possible losses, which are not specifically identified. Bad debts are written off to the statements of comprehensive income during the financial period in which they are identified.

With the adoption of FRS 139, loans and receivables are initially measured at their fair values and subsequently at amortised cost using the effective interest method. Gain or loss arising from the derecognition of the loans and receivables, amortisation under the effective interest method and impairment is recognised in the statements of comprehensive income.

(ii) Fair value through profit or loss

Financial assets held for trading, including derivatives (except those designated as hedges) and those designated at fair value through profit or loss on initial recognition are the two sub-categories under this category. A financial asset is classified in this category if it is acquired principally for the purpose of selling in the short term.

Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the reporting period.

(iii) Available-for-sale financial assets

Available-for-sale financial assets are debt securities that are held for trading and are subsequently measured at fair value with the gain or loss recognised in statements of comprehensive income.

(iv) Derivative financial instruments

Prior to 1 April 2010, derivative financial instruments were not recognised in the financial statements. Gains and losses were not recognised in the financial statements on inception. Instead, they are recognised when settled, at which time they were included in the measurement of the transaction hedged.

With the adoption of FRS 139, derivative financial instruments are initially recognised at fair values on the date the derivative contract is entered into and subsequently re-measured at their fair values.


180



FRS 139: “Financial Instruments” (cont’d)

(v) Intercompany loans

During the current and prior years, inter-company loans are granted by the Company to subsidiary companies at below market interest rates. Prior to 1 April 2010, these loans are recorded at cost in the financial statements. With the adoption of FRS 139, these loans were assessed at fair value at inception and subsequently at amortised cost subject to impairment.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements.

(a) Economic entities in the Group

(i) Subsidiary companies

Subsidiary companies are those corporations, partnerships or other entities in which the Group has the power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Investments in subsidiary companies are stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. The accounting policy on impairment of assets is set out in Note 3(u).

Prior to 1 January 2006, the Group applied both the purchase method and the merger method to account for Business Combinations in accordance with prior financial reporting standards. With effect from 1 January 2006, only the purchase method of accounting is used to account for Business Combinations in accordance with FRS 3.

The cost of an acquisition is measured at 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 non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. The accounting policy on goodwill is set out in Note 3(d)(i). If the cost of acquisition is less than the fair value of the net assets of the subsidiary company acquired, the difference is recognised as a gain in the statements of comprehensive income.



3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(a) Economic entities in the Group (cont’d)

(i) Subsidiary companies (cont’d)

Subsidiary companies are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Uniform accounting policies for like transactions and other events in similar circumstances are used by all companies in the Group in preparing the Consolidated Financial Statements. The financial statements of all companies within the Group used in the preparation of the Consolidated Financial Statements are prepared as of the same reporting date.

Inter-company balances, inter-company transactions and unrealised gains on transactions between Group companies are eliminated in full. Unrealised losses are also eliminated in full unless the assets transferred are impaired.

Non-controlling interests represent that portion of the profit or loss and net assets of a subsidiary company attributable to equity interests that are not owned, directly or indirectly through the subsidiary companies by the parent. It is measured at the non-controlling interest share of the fair values of the subsidiary companies’ identifiable assets and liabilities at the acquisition date and the non-controlling interests’ share of changes in the subsidiary companies’ equity since that date.

The gain or loss on disposal of a subsidiary company is the difference between the net disposal proceeds and the Group’s share of the subsidiary company’s net assets as of the date of disposal, including the cumulative amount of any exchange differences that relate to that subsidiary company which were previously recognised in equity, and is recognised in the statements of comprehensive income.

(ii) Transactions with non-controlling interests

Disposal of equity shares to non-controlling interests for cash consideration and at fair value resulting in gain or loss for the Group is recorded in the statements of comprehensive income. The gain or loss is the difference between the Group’s share of net assets immediately before and after the disposal and a portion of goodwill is realised.

For purchase of equity shares from non-controlling interests for cash consideration and at fair value, the accretion of the Group’s interest in the subsidiary company is treated as purchase of equity interest under acquisition method of accounting. The identifiable assets and liabilities acquired are adjusted to their fair values and the difference is recognised as goodwill.

For purchases or disposals from or to non-controlling interests other than for cash and not at fair value, the accretion or dilution of the Group’s interests is treated as equity transactions between the subsidiary company and its shareholders. The gain or loss is recorded in the Group’s reserves. The gain or loss is the difference between the Group’s share of net assets immediately before and after the disposal and the purchase consideration received or paid.


182



(iii) Associated companies

Associated companies are those corporations, partnerships or other entities in which the Group exercises significant influence, but which it does not control. Significant influence is the power to participate in the financial and operating policy decisions of the associated companies but not the power to exercise control over those policies.

Investments in associated companies are stated at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. The accounting policy on impairment of assets is set out in Note 3(u).

In the Consolidated Financial Statements, investments in associated companies are accounted for using the equity method. Under the equity method, the Group’s share of its associated companies’ post-acquisition results is recognised in the statements of comprehensive income, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted to the carrying amount of the investment. When the Group’s share of losses in an associated company equals or exceeds its cost of investment in the associated company including any other unsecured receivables, the Group discontinues its share of further losses, unless it has incurred legal or constructive obligations to make payments on behalf of the associated company.

Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the assets transferred are impaired.

In applying the equity method, the Group has ensured that uniform accounting policies for like transactions and other events in similar circumstances of the associated companies are used. The equity method is applied based on the latest financial statements made up to the financial year end of the Group.

(iv) 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(a)(iii).

Investments in jointly controlled entities are stated at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. The accounting policy on impairment of assets is set out in Note 3(u).





(iv) Jointly controlled entities (cont’d)

The statements of comprehensive income include the Group’s share of results of the jointly controlled entities based on the financial statements made up to the financial year end of the Group. The cumulative post-acquisition movements are adjusted to the carrying amount of the investment.

Unrealised gains on transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group’s interest in the jointly controlled entities. Unrealised losses are also eliminated unless the assets transferred are impaired.

In applying the equity method, the Group has ensured that uniform accounting policies of jointly controlled entities for like transactions and other events in similar circumstances are used. The equity method is applied based on the latest financial statements made up to the financial year end of the Group.

(b) Financial assets

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. The Group uses its judgement to determine the classification of its financial assets at initial recognition:

• Financialassetsatfairvaluethroughprofitorloss:Financialassetsatfairvaluethroughprofitorloss are financial assets held for trading including derivatives (except those designated as hedges) and those designated at fair value through profit or loss on initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Assets in this category are classified as current assets;

• Loansandreceivables:Thesearenon-derivativefinancialassetswithfixedordeterminablepaymentsthat are not quoted in an active market. The Group’s loans and receivables are classified as current assets, except for those with maturities which are greater than 12 months, these are classified as non-current assets;

• Available-for-sale investments: Available-for-sale investments are those non-derivative financialassets that cannot be classified as financial assets at fair value through profit or loss and loans and receivables are designated in this category. They are included in non-current assets unless the investment matures or management intends to dispose it within 12 months at the end of the reporting period; and

• Held-to-maturityfinancialassets:Thesearefinancialassetsacquiredwiththeintentiontoholduntilthe expiry of such instruments.


184


(b) Financial assets (cont’d)

Recognition and measurement

Purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the assets. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, whereas transaction costs are expensed in the statements of comprehensive income.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and cash and cash equivalents are subsequently carried at amortised cost using the effective interest method.

Gainsorlossesarisingfromchangesinthefairvalueofthe“financialassetsatfairvaluethroughprofitorloss”categoryarepresentedinthestatementsofcomprehensiveincomeintheperiodinwhichtheyarise. Dividend income is included in the statements of comprehensive income when the Group’s right to receive payment is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognised in profit or loss and translation differences on non-monetary securities are recognised in other comprehensive income.

Changesinthefairvalueofmonetaryandnon-monetarysecuritiesclassifiedas“financialassetsavailable-for-sale”categoryarerecognisedinothercomprehensiveincome.Whenassetsclassifiedasavailable-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the statements of comprehensive income.

The fair values for quoted investments are based on observable market prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value using valuation techniques. These include the use of recent arm’s length transactions reference to other instruments that are substantially similar.

Offsetting financial assets

Financial assets and liabilities are offset and the net amount reported in the statements of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.





Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result ofoneormoreeventsthatoccurredaftertheinitialrecognitionoftheasset(a“lossevent”)andthatlossevent has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

(i) Assets carried at amortised cost

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

• Significantfinancialdifficultyoftheissuerorobligor;

• Abreachofcontract,suchasdefaultordelinquencyininterestofprincipalpayments;

• TheGroup,foreconomicorlegalreasonsrelatingtotheborrower’sfinancialdifficulty,grantingto the borrower a concession that the lender would not otherwise consider;

• Itbecomesprobablethattheborrowerwillenterbankruptcyorotherfinancialreorganisation;

• Thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties;or

• Observabledataindicatingthatthereisameasurabledecreaseintheestimatedfuturecashflows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

(i) Adverse changes in the payment status of borrowers in the portfolio; and

(ii) National or local economic conditions that correlate with defaults on the assets in the portfolio.

The Group first assesses whether objective evidence of impairment exists. The amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount is reduced and the amount of the loss is recognised in the statements of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the statements of comprehensive income.


186



Impairment of financial assets (cont’d)

(ii) Assets classified as available-for-sale

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Group uses the criteria referred to in Note 2(b). In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current impairment loss on that financial asset previously recognised in the profit or loss – is removed from equity and recognised in the separate statement of other comprehensive income. Impairment losses recognised in the statement of other comprehensive income on equity instruments are not reversed through statement of other comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the profit or loss, the impairment loss is reversed through the statement of other comprehensive income.

(c) Property, plant and equipment

Property, plant and equipment are tangible items that:

I. are held for use in the production or supply of goods or services, or for administrative purposes; and

II. are expected to be used during more than one period.

(i) Cost

Property, plant and equipment are initially stated at cost. Cost includes expenditure that is directly attributable to the acquisition of the items and bringing them to the location and condition so as to render them operational in the manner intended by the Group. The Group allocates the initial cost of an item of property, plant and equipment to its significant component parts.

A piece of freehold land held by the Group is stated at the Directors’ valuation based on a 1983 independent professional valuation of the open market value of the land on an existing use basis. The surplus arising on revaluation was credited directly to capital reserves and subsequently utilised.

The Group has adopted the transitional provision of FRS 116 which allows the freehold land to be stated at the amount revalued on 5 September 1983. All other land held by the Group are 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 statements of comprehensive income during the financial period in which they are incurred.




(c) Property, plant and equipment (cont’d)

(ii) Depreciation

Freehold land is not depreciated as it has an infinite life. Leasehold land is amortised in equal installments over the period of the respective leases that range from 22 to 910 years. Depreciation of other property, plant and equipment is provided for on a straight line basis to write off the cost or valuation of each asset to its residual value over their estimated useful lives. The assets’ residual values, useful lives and depreciation method are reviewed annually and revised if appropriate.

The principal estimated useful lives of depreciation used are as follows:

Leasehold land Over the period of lease term Buildings 15-50 years Plant and machinery 5-20 years Office equipment, furniture, fittings and vehicles 2-10 years

Dies and jigs, which are included under plant and machinery are depreciated on a straight line basis to write off the respective assets over their useful product life cycles.

Work-in-progress is not depreciated. Upon completion, the related costs will be transferred to the respective categories of assets. Depreciation on work-inprogress commences when the assets are ready for their intended use.

(iii) Impairment

Where an indication of impairment exists, the carrying amount of the assets is assessed and written down immediately to its recoverable amount if the carrying amount exceeds the recoverable amount. The accounting policy on impairment of assets is set out in Note 3(u).

(iv) Gains or losses on disposals

Gains or losses on disposals are determined by comparing proceeds with their related carrying amounts and are included in profit/(loss) from operations.

(v) Repairs and maintenance

Repairs and maintenance are charged to the statements of comprehensive income 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 lives of the related assets.


188


(d) 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 statements of comprehensive income as and when it arises. Impairment losses on goodwill are not reversed. Gains or losses on the disposal of an entity includes the carrying amount of goodwill relating to the entity disposed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each cash-generating unit or a group of cash-generating units represents the lowest level within the Group at which goodwill is monitored for internal management purposes and which are expected to benefit from the synergies of the combination. The Group allocates goodwill to each business segment in each country in which it operates.

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 is tested for impairment as part of the overall balance.

(ii) Computer software

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific computer software. These costs are amortised over their estimated useful lives of 3 to 5 years.

Costs associated with developing or maintaining computer software programmes are recognised as an expense when incurred. Costs that are directly associated with identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include employee costs incurred as a result of developing software and an appropriate portion of relevant overheads. Computer software development costs recognised as assets are amortised using the straight line method over their estimated useful lives, not exceeding a period of 3 years.

(iii) Research and development cost

Expenditure in connection with research activities (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 following criteria for recognition are fulfilled:




(d) Intangible assets (cont’d)

(iii) Research and development cost (cont’d)

(i) It is technically feasible to complete the intangible asset so that it will be available for use or sale;

(ii) Management’s intention to complete the intangible asset for use or sale;

(iii) There is an ability to use or sell the intangible asset;

(iv) It can be demonstrated that the intangible asset will generate probable future economic benefits;

(v) Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and

(vi) The expenditure attributable to the intangible asset during its development can be reliably measured.

Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development expenses capitalised include costs incurred in the development from the date it first meets the recognition criteria and up to the completion of the development project and commencement of commercial production. Capitalised development cost is stated at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation of research and development cost is based on straight line basis over its useful life, which does not exceed 7 years for vehicles and 10 years for mechanical parts.

(e) Leases

(i) Finance Leases

Leases of property, plant and equipment and intangible assets where the Group assume substantially all the benefits and risks or ownership are classified as finance leases.

Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property, plant and equipment and intangible assets, and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate of interest on the balance outstanding. The corresponding obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to the statements of comprehensive income over the lease period.

Property, plant and equipment and intangible assets acquired under finance leases are included in tangible property, plant and equipment and intangible assets are depreciated in accordance with Note 3(c)(ii) and Note 3(d)(ii) above respectively.

(ii) Operating leases

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the statements of comprehensive income on a straight line basis over the period of the lease.


190


(f) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost includes the actual cost of materials and incidentals in bringing the inventories to their present location and condition, and is determined either on the first-in first-out basis and weighted average basis depending on the nature of inventory. Cost of vehicles for sale is determined on a specific identification basis. Cost of parts and accessories is determined on a weighted average 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 inventories.

In the case of work-in-progress and finished vehicles, an appropriate proportion of production overheads is included in the costs based on normal operating capacity and is determined on a weighted average basis.

(g) Trade and other receivables

Trade and other receivables are initially measured at their fair values and subsequently at amortised cost using the effective interest method, less provision for impairment. If the collection is expected within one year or less, they are classified as current assets. If not, they are presented as non-current assets.

(h) Non-current assets classified as assets held for sale

Non-current assets are classified as assets held for sale when the carrying amount is to be recovered principally through a sale transaction. They are stated at the lower of carrying amount and fair value less costs to sell if the carrying amount is to be recovered principally through a sale transaction rather than through continuing use.

(i) Government grants

Government grants are recognised in the statements of comprehensive income on a systematic basis over the periods in which the Group recognises as expenses the related cost for which the grants are intended to compensate.

Grants from government are recognised at their fair values where there are reasonable assurances that the grants will be received and the Group will comply with all attached conditions.

Capital grants

Government grants relating to capital expenditure are deferred and recognised in the statements of comprehensive income over the period necessary to match them with the costs they are intended to compensate.

Government grants relating to the purchase of plant and equipment are included in non-current liabilities as deferred income and are credited to the statements of comprehensive income on a straight line basis over the expected lives of the related assets.




(i) Government grants (cont’d)

Income grants

Income grants are grants other than capital grants and recognised in the statements of comprehensive income where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Where a loan is granted by the Government at below market rate, the difference between the interest charged and market rate interest is accounted for as a benefit in the statements of comprehensive income.

(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, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are reviewed at each statement of financial position date and adjusted to reflect the current best estimate. When the effect of the time value of money is material, the amount of provision is the present value of the expenditure expected to be required to settle the obligation. Provisions are not recognised for future operating losses.

(i) Warranties

Provision is recognised for the estimated liability on all products under warranty in addition to claims already received and verified. Warranties are provided for a period of between one to three years for vehicles sold. The provision is based on experienced levels of claims arising during the period of warranty. When the Group expects warranties to be reimbursed from suppliers, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

(ii) Onerous contracts

The Group recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract or estimated costs of exiting the contract.

(iii) Free services

Provisions for free services are recognised based on expected levels of claims arising during the period when the free services are provided.


192


(k) 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 statements of comprehensive income in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

Defined benefit plan

The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the statement of financial position 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 statement of financial position date.

The defined benefit obligation, calculated using the projected unit credit method, is determined by independent actuaries on the basis of full triennial valuations and updated annually. Assumptions were made in relation to the annual investment returns, annual salary increases and annual increases in pension payments.

Plan assets in excess of the defined benefit obligation are subject to the asset limitation test specified in FRS 119.

Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net actuarial gains and losses recognised in the statements of comprehensive income is determined by the corridor method in accordance with FRS 119 and is charged or credited to the statements of comprehensive income over the average remaining service lives of the related employees participating in the defined benefit plan.




(k) Employee benefits (cont’d)

(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 statement of financial position date are discounted to present value.

(l) Zakat

This represents business zakat expense and is calculated based on certain percentage of the net current asset.

(m) Income taxes

Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes based upon the taxable profits, including withholding taxes payable by a foreign subsidiary company on distributions of retained earnings.

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences or unused tax losses can be utilised.

Deferred tax is recognised on temporary differences arising on investments in subsidiary companies, associated companies and jointly controlled entities except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

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 statement of financial position date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Tax benefit from reinvestment allowance is recognised when the tax credit is utilised and no deferred tax asset is recognised when the tax credit is receivable.


194


(n) Foreign currency transactions and translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using its functional currency, which is the currency of the primary economic environment in which the entity operates (‘the functional currency’). The Consolidated Financial Statements are presented in Ringgit Malaysia, which is the Group’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of comprehensive income.

(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 statement of financial position presented are translated at the closing rate at the date of that statements of financial position;

- income and expenses for each statement of comprehensive income 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. Net investment in foreign operations is defined as the amount of the reporting entity’s interest in the net assets of that operation, which includes advances that are assessed as long term in nature. When a foreign operation is disposed of or sold, such exchange differences that were recorded in equity are recognised in the statements of comprehensive income as part of the gain or loss on disposal.




(n) Foreign currency transactions and translation (cont’d)

(iv) Closing rates

The principal closing rates (units of Malaysian Ringgit per foreign currency) used in translating significant balances at financial year end are as follows:

Foreign currency 31 March 2011 31 March 2010

US Dollar 3.0280 3.2725 Sterling Pound 4.8730 4.9415 Indonesian Rupiah (100) 0.0318 0.0358 Singapore Dollar 2.4003 2.3388 Thai Baht 0.0999 0.1012 Australian Dollar 3.1250 3.0120 Euro 4.2800 4.3940 Japanese Yen (100) 0.0364 0.0369

(o) Cash and cash equivalents

For the purpose of the statements of cash flow, cash and cash equivalents comprise cash and bank balances, deposits held at call with banks, other short term, highly liquid investments with original maturities of not more than twelve months, bank overdrafts and pledged deposits. Bank overdrafts are included within borrowings in current liabilities on the statements of financial position.

(p) Income recognition

Revenue from sales of vehicles, spare parts and accessories are recognised when significant risks and rewards have been transferred to buyers. Significant risks and benefits are generally deemed to have been transferred upon delivery or acceptance of the goods.

Free services given to customers during campaigns and on purchase of cars are treated as a separately identifiable component of the sale transaction. Revenue attributed to the free service is measured at fair value and deferred as a liability at the date of the initial sale transaction in the statements of financial position and only recognised when the service is redeemed, has expired or no longer expected to be redeemed.

Revenue from rendering of engineering services on long term engineering contracts is recognised on the basis of the stage of completion of such contracts at the financial year end, where the contractual outcome can be assessed with reasonable certainty. Full provision is made for all foreseeable losses on contracts entered into or commenced prior to the financial year end. Amounts are included within receivables and payables to recognise timing differences arising between amounts invoiced and amounts recognised in the statements of comprehensive income on individual engineering contracts.


196


(p) Income recognition (cont’d)

Revenue from sale of completed apartments is recognised when the Sale and Purchase Agreements are signed, significant risks and rewards of ownership have been transferred to the buyer and the recovery of the consideration is probable.

Other revenue comprises mainly revenue from rental and royalties, which are recognised on an accrual basis. Interest income is recognised on proportionate basis that reflects the effective yield on the asset. Scrap sales and gains on disposal of investments are recognised on an accrual basis.

Sale of rights for the use of intellectual property rights are recognised on an accrual basis in accordance with the substance of the relevant agreements.

Dividends are recognised when the Company’s right to receive payment is established.

(q) Derivative financial instruments

Derivative financial instruments are initially recognised at fair value on the date of a derivative contract is entered into and are subsequently re-measured at their fair value.

The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

Derivatives that do not qualify for hedge accounting are classified as held for trading and accounted for in accordance with the accounting policy set out in Note 2(b).

(r) 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 statements of comprehensive income over the period of the borrowings.

Borrowing costs incurred on the acquisition, construction or production of property, plant and equipment that take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.

Borrowings are classified as current liabilities unless the Group has the unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.




(s) Share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are expensed off in the statements of comprehensive income.

Dividends on ordinary shares are recognised as liabilities when proposed or declared before the statement of financial position date. A dividend proposed or declared after the statement of financial position date, but before the financial statements are authorised for issue, is not recognised as a liability at the statement of financial position date. Upon the dividend becoming payable, it will be accounted for as liability.

(t) Contingent liabilities and contingent assets

The Group and Company do not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstance where there is a liability that cannot be recognised because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

In the acquisition of subsidiary companies by the Group under a business combination, the contingent liabilities assumed are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interests.

The Group recognises separately the contingent liabilities of the acquirees as part of allocating the cost of a business combination where their fair values can be measured reliably. Where the fair values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising from the acquisition.

Subsequent to the initial recognition, the Group measures the contingent liabilities that are recognised separately at the date of acquisition at the higher of the amount that would be recognised in accordance with the provisions of FRS 137 and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with FRS 118.


198


(u) 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 impairment may exist. Property, plant and equipment and other non-current assets, including intangible assets, are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is measured at the higher of the fair value less cost to sell of an asset and its value-in-use. The value-in-use is the net present value of the projected future cash flows derived from that asset discounted at the appropriate discount rate. Assets other than goodwill that suffered 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 statements of comprehensive income. Any subsequent increase in recoverable amount is recognised in the statements of comprehensive income.

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.

(v) Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and monitoring the performance of the operating segments, has been identified as the Group Managing Director and the Management Committee Members.



4 KEY ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have a material impact on the Group’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are mentioned below.

(i) Carrying value of property, plant and equipment and capitalised development cost

The Group assesses the carrying amount of property, plant and equipment and capitalised development cost whenever the events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than the recoverable amount. Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use. The value-in-use is the net present value of the projected future cash flows derived from the asset discounted at an appropriate discount rate.

Projected future cash flows are based on the Group’s estimates calculated based on the cash-generating unit’s operating results, approved business plans, expected market growth and industry growth, as well as future economic conditions and other data. The assumptions used, results and conclusion of the impairment assessment are stated in Note 13 to the financial statements.

(ii) Estimated useful lives of dies and jigs and capitalised development cost

The Group reviews annually the estimated useful lives of dies and jigs and capitalised development cost based on product life cycle. The product life cycle is assessed based on business plans and strategies such as, the expected product life cycle, as well as 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 used for assessing the carrying values of dies and jigs and capitalised development cost would increase the recorded depreciation and amortisation respectively.

(iii) Deferred tax assets

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. This involves significant judgements regarding the future financial performance of the Group, the likely timing and level of future taxable profits together with future tax planning strategies to support the basis of recognition of deferred tax assets. An analysis of the deferred tax balance is set out in Note 21 to the financial statements.

The Directors have considered the ability of the Group to generate sufficient taxable income to utilise the deferred tax assets and have concluded that no deferred tax asset should be recognised for certain subsidiary companies as at 31 March 2011 (Note 21).


200

4 KEY ESTIMATES AND JUDGEMENTS (cont’d)

(iv) Estimation of income taxes payable and recoverable

Income taxes are estimated based on the rules governed under the Income Tax Acts of the respective countries. Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax provisions in the period in which such determination is made. The status of the income tax position of the Group is stated in Note 10 to the financial statements.

(v) Provisions for warranty

Provision is made for the estimated liability on all products under warranty in addition to claims already received. The accrual recorded is based on the actual claims experienced by the Group arising during the period of warranty over a number of years which provides a basis for calculating expected warranty claims. In addition, the Group records an asset for the amount expected to be recoverable from its vendors based on similar actual reimbursement experienced by the Group.

An analysis of the utilisation of the provision is stated in Note 33 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 vehicle models and expected cost to sell. Changes in the inventory ageing and expected usage profiles can have an impact on the allowance recorded.

(vii) Impairment for receivables

The impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. This is determined based on the ageing profile, expected collection patterns of individual receivable balances, credit quality and credit losses incurred. Management carefully monitors the credit quality of receivable balances and makes estimates about the amount of credit losses that have been incurred at each financial statement reporting date. Any changes to the ageing profile, collection patterns, credit quality and credit losses can have an impact on the allowance recorded.

(viii) Impairment of goodwill

The Group tests goodwill for impairment at least annually in accordance with its accounting policy or whenever events or changes in circumstances indicate that this is necessary. The assumptions used, results and conclusion of the impairment assessment are stated in Note 14 to the financial statements.



5 REVENUE

Revenue at the Group represents the invoiced value of goods sold and engineering services provided and is presented net of taxes, discounts and commission paid to dealers.

Revenue at the Company represents dividend income from shares held in subsidiary companies, associated companies and available-for-sale financial assets.

Revenue comprises:

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Sale of vehicles, spare parts, accessories and engineering services 8,932,032 8,188,676 – – Gross dividend income – – 97,930 101,203 Others 37,850 38,183 – –

8,969,882 8,226,859 97,930 101,203

6 PROFIT BEFORE FINANCE COST Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

The following items have been (credited)/ charged in arriving at profit before finance cost:

Gross dividends received/receivable from: - subsidiary companies, unquoted – – (93,622) (96,600) - associated companies, unquoted – – (4,254) (4,603) - available-for-sale financial assets (556) (915) (54) – Purchase of raw materials 5,988,219 5,535,806 – – Property, plant and equipment: - depreciation 425,568 432,612 – – - written off 4,228 23,806 – – - gain on disposals (2,049) (2,645) – – - impairment 25,087 6,000 – – - reversal of impairment (18,591) (53,447) – – Investments: - reversal of impairment – (2,100) – (2,100) - provision for impairment – 10,397 – 6,475


202

6 PROFIT BEFORE FINANCE COST (cont’d)


Intangible assets: - amortisation 101,219 81,688 – – - impairment 19,492 – – – - written off 2,512 55,814 – – Write down of inventories 12,420 80,128 – – Other investments: - loss on disposal – 19 – – - provision for diminution in value – 282 – – Gain on derecognition of available-for-sale financial assets (2,097) – (4,900) – Gain on disposal of assets held for sale (5,781) – – – Research and development expenditure 20,673 42,899 – – Provision for warranties 41,200 45,968 – – Reversal of impairment of receivables (28,253) (23,534) – – Impairment of receivables 13,645 27,183 – – Bad debts written off 12,834 19,359 – – Impairment of goodwill 278 – – – Statutory audit fees to: PricewaterhouseCoopers Malaysia: - current year 605 620 88 88 - (over)/under provision in prior year (34) (67) – 27 Other member firms of PricewaterhouseCoopers International Limited:* - current year 1,367 1,502 – – - (over)/under provision in prior year (20) 24 – – Audit related fees to PricewaterhouseCoopers: - Malaysia 486 486 96 48 Non-audit fees to PricewaterhouseCoopers: - Malaysia 400 232 – – - Other member firms of PricewaterhouseCoopers International Limited* 1,315 592 – – Rental: - plant, machinery and equipment 1,194 2,536 – – - land and buildings 19,754 12,228 – – Foreign exchange loss: - transactions 3,549 7,989 – – - translation 1,432 26,617 – –



6 PROFIT BEFORE FINANCE COST (cont’d)


Rental income on land and buildings (282) (514) – – Interest income: - short term deposits with licensed banks (31,850) (28,546) (4,835) (3,437) - subsidiary company – – (20,782) – Automotive Development Fund - amortisation of capital grant (11,960) (31,255) – –

* PricewaterhouseCoopers Malaysia and other member firms of PricewaterhouseCoopers International Limited are separate and independent legal entities.

The Government of Malaysia has set up the National Automotive Policy (‘NAP’) and one of the policy thrust of NAP is for the Government to provide support and incentives based on sustainable economic contribution to enhance competitiveness and capability of the automotive industry through the development of the latest and more sophisticated technology. The support will be in the form of access to the Industrial Adjustment Fund and Research and Development grant (‘R&D grant’). Perusahaan Otomobil Nasional Sdn. Bhd. (‘PONSB’) a wholly owned subsidiary company, being a full fledged automotive manufacturer has complied with the requirements and had been allocated funds in the form of R&D grant.

As an initiative to support the Government’s call for Green Technology in the automotive industry, PONSB has embarked on a Fleet Test Vehicle (‘FTV’) program to develop Electric and Hybrid vehicles. During the financial year, PONSB was allocated a grant amounting to RM237.5 million in support of PONSB carrying out the FTV program, of which RM222.1 million is recorded as a receivable from the Government.

During the financial year, the Government grant expenditure and income recognised is as follows:

Group 2011 2010 RM’000 RM’000

Research and development expenditure 318,420 186,587 Research and development grant recognised (297,747) (143,688)

20,673 42,899

7 OTHER LOSSES - NET Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Net foreign exchange forward contract loss (Note 39) 3,549 – – –


204

8 STAFF COST Group 2011 2010 RM’000 RM’000

Wages, salaries and bonuses 692,475 644,297 Pension cost - defined contribution plan 53,982 50,436 - defined benefit plan (Note 31(d)) 5,630 4,970 Other employee benefits 57,777 53,293

809,864 752,996

Directors’ remuneration

The aggregate amount of emoluments received/receivable by the Directors of the Group and Company during the financial year was as follows:


Non-executive Directors: - allowances 636 695 556 524 - fees 501 695 264 223 - estimated monetary value of benefits-in-kind 198 109 198 109

Executive Director*: - salaries and bonuses 1,486 1,384 1,486 1,384 - defined contribution plan 244 248 244 248 - estimated monetary value of benefits-in-kind 171 128 171 128 - fees – – 34 42 - allowances – – 14 11

3,236 3,259 2,967 2,669

* The Executive Director’s remuneration in the Company is fully recharged to a subsidiary company.



9 FINANCE COST Group 2011 2010 RM’000 RM’000

Interest expense on: - Long term loans 6,599 5,892 - Short term borrowings 5,822 4,069 - Others 1,240 2,092

13,661 12,053

10 TAXATION AND ZAKAT Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Taxation in Malaysia

Current taxation: - charge for the financial year 37,588 41,197 1,512 607 - over accrual in respect of prior financial years (3,274) (3,144) – (44)

34,314 38,053 1,512 563

Taxation outside Malaysia

Current taxation: - charge for the financial year 25,708 14,448 – – - (over)/under accrual in respect of prior financial years (360) 269 – –

25,348 14,717 – –

Deferred taxation (Note 21)

Origination and reversal of temporary differences (4,261) (1,821) – – Tax benefits arising from previously unrecognised tax losses – (8,988) – –

(4,261) (10,809) – –

Tax expense 55,401 41,961 1,512 563 Zakat 3,394 – – –

58,795 41,961 1,512 563


206

10 TAXATION AND ZAKAT (cont’d)

A numerical reconciliation between the average effective tax rate and the Group’s average statutory tax rate effect is as follows:

Group Company 2011 2010 2011 2010 % % % %

Group’s average statutory tax rate 24 24 25 25

Tax effects of: - double deduction and incentive on qualifying expenditure (12) (17) – – - expenses not deductible for tax purposes 5 3 1 1 - income not subject to tax (40) (18) (25) (25) - tax losses not recognised as deferred tax 13 4 – – - current year temporary differences not recognised as deferred tax 37 26 – – - over accrual in respect of prior financial years (2) (1) – – - recognition of previously unrecognised deductible temporary differences – (2) – – - recognition of previously unrecognised tax losses – (3) – – - withholding tax on dividend from subsidiary company received 1 – – –

Average effective tax rate 26 16 1 1

2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Previously unrecognised temporary differences utilised during the financial year – 16,181 – – Tax savings arising from temporary differences – 4,045 – –

Previously unrecognised tax losses utilised during the financial year – 35,953 – – Tax savings arising from such tax losses – 8,988 – –

Unabsorbed capital allowances carried forward 1,888,620 1,519,542 – – Unutilised tax losses carried forward 925,490 735,405 – – Unutilised reinvestment allowances 1,893,024 2,020,379 – –

The effective tax rate in the current year is higher than the Group statutory tax rate mainly due to tax suffered by certain subsidiary companies for which there is no relief available for set off.



10 TAXATION AND ZAKAT (cont’d)

The tax recoverable amount of RM2,385,000 (2010: RM18,240,000) stated in the statement of financial position of the Group relates to settlement of tax disputes for YA 2002 (2010: YA 1999 to 2002) whilst the balance of RM6,384,000 (2010: RM7,061,000) relates to overpayment of tax liabilities.

The tax recoverable amount stated in the statement of financial position of the Company of RM313,000 (2010: RM292,000) relates to overpayment of tax liabilities.

The movement for zakat is as follows: Group 2011 2010 RM’000 RM’000

At 1 April – – Charge for the financial year 3,394 – Zakat paid (3,394) –

At 31 March – –

11 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year.

Group 2011 2010 Profit attributable to equity holders of the Company (RM’000) 155,612 218,932

Weighted average number of ordinary shares in issue (‘000) 549,213 549,213 Basic earnings per share (sen) 28 40

Diluted earnings per share equals to basic earnings per share.

12 DIVIDENDS Dividend declared and paid during the financial year is as follows:

Group and Company 2011 2010 RM’000 RM’000

Final dividend of 20 sen per ordinary share less tax at 25% in respect of financial year ended 31 March 2010, paid on 22 October 2010 82,382 –

The Directors recommend the payment of a final dividend of 10 sen per ordinary share less tax at 25% on 549,213,002 ordinary shares amounting to RM41,190,975 in respect of the financial year ended 31 March 2011, subject to the approval of members at the forthcoming Annual General Meeting. These financial statements do not reflect this dividend payable.


208

13 PROPERTY, PLANT AND EQUIPMENT Office

equipment, Plant furniture, Freehold Leasehold and fittings and Work-in- land land Buildings machinery vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

2011 Cost/valuation

At 1 April 2010 226,233 – 1,336,580 4,596,597 1,170,764 43,805 7,373,979 Currency translation differences (155) – (1,741) (2,352) (2,691) – (6,939) Additions 147 – 7,577 8,565 67,517 262,845 346,651 Disposals – – (106) (14,907) (10,663) – (25,676) Written off – – (13) (43,679) (13,203) (547) (57,442) Reclassification of completed work-in-progress – – 32,925 52,896 30,381 (116,202) – Reclassification from intangible assets (Note 15) – – – – – 37 37 Reclassification to leasehold land (10,916) 10,916 – – – – –

At 31 March 2011 215,309 10,916 1,375,222 4,597,120 1,242,105 189,938 7,630,610

Accumulated depreciation

At 1 April 2010 – – 557,019 3,078,569 833,083 – 4,468,671 Currency translation differences – – (747) (2,095) (1,637) – (4,479) Charge for the financial year – 1,448 44,739 292,032 87,349 – 425,568 Disposals – – (74) (14,878) (8,013) – (22,965) Written off – – (14) (40,295) (12,905) – (53,214) Reclassification – – 10 (6,628) 6,618 – – Adjustment in respect of reversal of impairment loss – – – 5,775 – – 5,775

At 31 March 2011 – 1,448 600,933 3,312,480 904,495 – 4,819,356

Accumulated impairment losses

At 1 April 2010 – – 15,308 265,144 438 – 280,890 Currency translation differences – – (177) (34) (7) – (218) Charge for the financial year – – – 25,087 – – 25,087 Reversal of impairment loss – – (15,131) (9,218) (17) – (24,366)

At 31 March 2011 – – – 280,979 414 – 281,393

Net book value

At 31 March 2011 215,309 9,468 774,289 1,003,661 337,196 189,938 2,529,861



13 PROPERTY, PLANT AND EQUIPMENT (cont’d)

Office equipment, Plant furniture, Freehold Leasehold and fittings and Work-in- land land Buildings machinery vehicles progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

2010 Cost/valuation

At 1 April 2009 226,872 – 1,352,482 4,579,828 1,137,416 5,364 7,301,962 Currency translation differences (639) – (6,952) (10,438) (9,546) – (27,575) Additions – – 209 38,015 56,143 108,804 203,171 Disposals – – – (10,726) (19,064) – (29,790) Written off – – (253) (66,916) (6,614) – (73,783) Reclassification of completed work-in-progress – – 407 57,521 12,435 (70,363) – Reclassification – – (9,313) 9,313 – – – Reclassification to intangible assets (Note 15) – – – – (6) – (6)

At 31 March 2010 226,233 – 1,336,580 4,596,597 1,170,764 43,805 7,373,979

Accumulated depreciation

At 1 April 2009 – – 477,676 2,793,840 735,725 – 4,007,241 Currency translation differences – – (1,092) (6,370) (2,811) – (10,273) Charge for the financial year – – 52,343 292,714 87,555 – 432,612 Disposals – – – (10,710) (15,256) – (25,966) Written off – – (160) (43,662) (6,155) – (49,977) Adjustment in respect of reversal of impairment loss – – 28,252 52,757 34,025 – 115,034

At 31 March 2010 – – 557,019 3,078,569 833,083 – 4,468,671

Accumulated impairment losses

At 1 April 2009 – – 112,829 317,761 37,020 – 467,610 Currency translation differences – – (15,455) (3,757) (5,027) – (24,239) Charge for the financial year – – – 6,000 – – 6,000 Reclassification – – (1,232) (1,357) 2,589 – – Reversal of impairment loss – – (80,834) (53,503) (34,144) – (168,481)

At 31 March 2010 – – 15,308 265,144 438 – 280,890

Net book value

At 31 March 2010 226,233 – 764,253 1,252,884 337,243 43,805 2,624,418


210


A piece of a subsidiary company’s freehold land was revalued on 5 September 1983 based on an independent professional valuation. The surplus of RM36,882,000 arising from the revaluation was credited to the capital reserves and subsequently utilised. Had this freehold land been carried at historical cost, the net book value of freehold land that would have been included in the financial statements at the end of the financial year would be RM22,448,000 (2010: RM22,448,000).

Property, plant and equipment of a wholly owned subsidiary company with a net book value of RM223,841,000 (2010: RM169,229,000) was charged to a licensed bank as security for borrowings as disclosed in Note 31(a) to the financial statements.

The net book value of the office equipment acquired under finance lease at the statement of financial position date was RM7,011,000 (2010: RM10,416,000).

The net cash outflow for the acquisition of property, plant and equipment during the financial year is:

Group 2011 2010 RM’000 RM’000

Total acquisition of property, plant and equipment 346,651 203,171 Less: Amount financed by hire purchase arrangements – (7,253) Amount acquired via ADF (Note 31(c)(ii)) – (50,588) Accrual of property, plant and equipment (7,827) –

Net cash outflow on acquisition of property, plant and equipment 338,824 145,330

Impairment test for property, plant and equipment and capitalised development cost, included within intangible assets

(a) Malaysian operations – Proton

An impairment assessment was undertaken in the current financial year due to weaker than expected market conditions adversely affecting sales volume for certain vehicle models. For the purpose of impairment, testing, the cash-generating units were determined at the business segment level.

The carrying amount of the segment assets totalling RM2,580,255,000 (2010: RM2,575,757,000) comprising property, plant and equipment, capitalised development cost and capitalised development costs of work-in-progress included within intangible assets were tested for impairment.

The impairment test was performed by comparing the cash-generating unit carrying amount with its recoverable amount. The recoverable amount is determined as the higher of the cash-generating unit’s fair value less costs to sell and its value-in-use.

Embedded in the development of the cash flow projections are assumptions and estimates derived from a review of the cash-generating unit’s operating results, approved business plans, expected market and industry growth rates, as well as, future economic conditions and other data. Most of these factors used in assessing the fair values are outside the control of management, hence these assumptions and estimates may change in future periods.




Impairment test for property, plant and equipment and capitalised development cost, included within intangible assets (cont’d)

(a) Malaysian operations – Proton (cont’d)

The review resulted in an impairment loss of RM25,087,000 (2010: RM6,000,000) allocated to property, plant and equipment in respect of a slow moving vehicle model for the current financial year ended 31 March 2011.

(i) Assumptions and approach used

The value-in-use calculations apply a discounted cash flow model using cash flow projections covering a five year period, and assuming a zero growth rate for subsequent periods. The five year projections were based on an approved business plan. The business plan reflects the cash-generating unit’s expectation of capacity utilisation, revenue growth, operating costs and margins based on past experience, current assessment of market share, expectations of market growth and industry growth.

The following are the key assumptions used in the cash flow projections:

• Business analysis - The cash-generatingunitmakes assumptions about thedemand for itsvehicles in the market place. These assumptions are used to drive the planning assumptions for sales volume and mix taking into consideration the projected lifecycle of the models. The cash generating unit also makes assumptions about cost levels.

The overall sales volume used in the projections does not indicate a significant growth from current levels due to tough competition in the passenger car market, both domestic and overseas.

• Long-termgrowthrate–Fromthesixthyearandonwards,azerogrowthrateisassumed.

• Terminalvaluesoflandandbuildings–Theestimatedresidualvalueofthelandandbuildingsis based on the fair market values by an internal registered valuer. The market value of the land and building is determined based on the comparison method and investment method. A discount factor of 6.3% (2010: 6.8%) was used to discount the terminal values for land and buildings.

• Discountrates–Inmeasuringtherecoverableamountsbasedonthevalue-in-usecalculations,discount rates of 12.7% and 20.7% (2010: 13.4% and 21.4%) have been applied to domestic and export sales respectively. The discount rate reflects the prevailing market rate applicable to the segment. A risk adjusted discount rate is used for the export market.

• Economicprojections–Assumptionsregardingthegeneraleconomicconditionsareappliedinarriving at the industry sales volume. Other macro-economic assumptions, such as commodities prices, inflation rates, interest rates and foreign currency exchange rates have also been considered.


212



(a) Malaysian operations – Proton (cont’d)

(ii) Impact of possible changes in key assumptions

The sensitivity tests indicated that no further impairment loss is required where other realistic variations are applied to key assumptions.

(b) Overseas operations – Lotus

In the previous financial year, the reversal of impairment provision amounting to RM53,447,000 (being accumulated impairment of RM168,481,000 less accumulated depreciation of RM115,034,000 in Note 13), was made as the cash-generating unit implemented a business transformation plan, which includes the introduction of new models.

During the current financial year, based on valuation of the building incorporated as terminal value and taking into consideration the approved business plan of the operations, the recoverable amount of the building indicated that an impairment charge previously provided for amounting to RM18,591,000 (being impairment of RM24,366,000 less accumulated depreciation of RM5,775,000) is no longer required. Since the impairment has been reversed during the current financial year, the building is stated at the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the building in prior years.

During the financial year, the segment assets carrying amount of RM561,850,000 (2010 : RM344,588,000) comprising property, plant and equipment, capitalised development cost and capitalised development cost of work-in-progress included within intangible assets were tested for impairment, due to weaker than expected market conditions adversely affecting sales volume.

The impairment test was performed by comparing the cash-generating unit carrying amount with its recoverable amount. The recoverable amount is determined as the higher of the cash-generating unit’s fair value less costs to sell and its value-in-use.

Embedded in the development of the cash flow projections are assumptions and estimates derived from a review of the cash-generating unit’s operating results, approved business plans, expected market and industry growth rates, as well as, future economic conditions and other data. Most of these factors used in assessing the fair values are outside the control of management, hence these assumptions and estimates may change in future periods.

The review resulted in an impairment loss of RM19,492,000 (2010: Nil) allocated to capitalised development cost in respect of a slow moving vehicle model for the current financial year ended 31 March 2011 (Note 15).





(b) Overseas operations – Lotus (cont’d)


The recoverable amounts are determined based on value-in-use calculations. The value-in-use calculations apply a discounted cash flow model using cash flow projections covering a ten year period. The projections over these periods were based on an approved business plan and reflect the cash-generating unit’s expectation of plant utilisation, revenue growth, operating costs and margins based on past experience and current assessment of market demand for premium sports cars.


• Businessanalysis–Thecarssalesvolumesusedinthevalue-in-usecalculationisbasedonsales projections of existing models taking into consideration the projected lifecycle of the models in line with the short range and long range product plans. Included in the long range product plan are sales projections from the five new Lotus products in the transformation plans. The Engineering services sales projections are based on existing projects-in-hand and include a forecast of new work to be won with emphasis on its core competencies and key service offerings.

• Long-termgrowthrate–Fromthesixthyearonwards,theassumedgrowthraterangesfromnegative 17% to a positive 40%.

• Terminalvaluesoflandandbuildings–Theestimatedresidualvalueisbasedonathirdpartyvaluation of the land and buildings which reflects the market values on which the land and buildings are located.

• Discount rates – For purposes of the value-in-use calculation, a discount rate of 10% (2010: 10%) has been applied. This is based on the prevailing market rate applicable to the segment.

• Economic projections – In arriving at the industry sales volume, assumptions are maderegarding the general economic conditions in its key markets, as well as, other macro-economic assumptions relating to the automotive industry.

(ii) Impact of possible changes in key assumptions

The sensitivity tests indicated that no further impairment loss is required where other realistic variations are applied to key assumptions.


214

14 GOODWILL

The carrying amount of goodwill is allocated to the cash-generating unit that the goodwill relates to, which is the selling and distribution business as presented below:

Group 2011 2010 RM’000 RM’000

At 1 April 35,749 35,749 Acquisition of non-controlling interest 278 –

At 31 March 36,027 35,749

Accumulated impairment loss

At 1 April (6,741) (6,741) Addition during the year (278) –

At 31 March (7,019) (6,741)

Carrying amount at 31 March 29,008 29,008

Impairment test for goodwill

The Group undertook an annual test for impairment of goodwill.


The recoverable amount of the cash-generating unit including goodwill in this test is determined based on the value-in-use calculation. This value-in-use calculation applies a discounted cash flow model using cash flow projections covering a five year period for the selling and distribution business of the Proton brand. The projections reflect the cash-generating unit’s expectations of revenue growth, operating costs and margins based on past experience and current assessment of market share, expectations of market growth and industry growth.


• Business projections – The cash-generating unit makes assumptions about the demand for theProton brand in the market place and are used to project the sales volume and mix.

• Businessanalysis–Theoverallsalesvolumeusedintheprojectionsdoesnotindicateasignificantgrowth from current levels due to tough competition in the domestic passenger car market.

• Discount rate – For purposes of the value-in-use calculation, a discount rate of 12.7% (2010: 13.4%) has been applied. The discount rate reflects the prevailing independent market rate applicable to the cash-generating unit.

• Economicprojections–Assumptionsregardingthegeneraleconomicconditionsareconsideredinarriving at the estimated sales volume and prices for the vehicles.



14 GOODWILL (cont’d)

Impairment test for goodwill (cont’d)

(ii) Sensitivity impact of possible changes in key assumptions

Sensitivity analysis shows that no impairment loss is required where other realistic variations are applied to key assumptions.

15 INTANGIBLE ASSETS Capitalised Capitalised development development Computer cost of work cost software in-progress Total RM’000 RM’000 RM’000 RM’000

Group

2011 Cost

At 1 April 2010 507,737 77,658 190,219 775,614 Currency translation differences (2,837) – – (2,837) Additions 93,975 11,764 333,300 439,039 Written off – – (2,512) (2,512) Reclassification of completed work-in-progress 88,548 – (88,548) – Reclassification to property, plant and equipment (Note 13) – (37) – (37)

At 31 March 2011 687,423 89,385 432,459 1,209,267

Amortisation

At 1 April 2010 123,966 66,883 – 190,849 Currency translation differences (490) – – (490) Charge for the financial year 94,877 6,342 – 101,219

At 31 March 2011 218,353 73,225 – 291,578


At 1 April 2010 20,802 – – 20,802 Charge for the financial year 19,492 – – 19,492

31 March 2011 40,294 – – 40,294

Net book value

At 31 March 2011 428,776 16,160 432,459 877,395


216

15 INTANGIBLE ASSETS (cont’d)

Capitalised Capitalised development development Computer cost of work cost software in-progress Total RM’000 RM’000 RM’000 RM’000

Group

2010 Cost

At 1 April 2009 302,909 71,265 190,219 564,393 Currency translation differences (7,595) – – (7,595) Additions 268,237 6,387 – 274,624 Written off (55,814) – – (55,814) Reclassification from property, plant and equipment (Note 13) – 6 – 6

At 31 March 2010 507,737 77,658 190,219 775,614

Amortisation

At 1 April 2009 59,401 52,522 – 111,923 Currency translation differences (2,762) – – (2,762) Charge for the financial year 67,327 14,361 – 81,688

At 31 March 2010 123,966 66,883 – 190,849


At 1 April 2009 / 31 March 2010 20,802 – – 20,802

Net book value

At 31 March 2010 362,969 10,775 190,219 563,963

The amortisation period for intangible assets ranges from 3 to 10 years (2010: 3 to 10 years).

The net cash outflow for the acquisition of intangible assets during the financial year is:

Group 2011 2010 RM’000 RM’000

Total acquisition of intangible assets 439,039 274,624 Less: Amount financed by hire purchase arrangements – (2,917) Accrual of intangible assets (34,545) (2,073)

Net cash outflows on acquisition of intangible assets 404,494 269,634




The net book value of the computer software acquired under finance lease at the statements of financial position date was RM1,644,000 (2010: RM2,880,000).

Impairment test for capitalised development cost has been performed together with the related property, plant and equipment as explained in Note 13 to the financial statements.

Recoverability assessment of capitalised development cost work-in-progress

(a) Malaysian operations – Proton development costs work-in-progress

In assessing recoverability of capitalised development cost work-in-progress, the cash-generating unit assesses the recoverability based on value-in-use calculations.

The value-in-use calculations apply a discounted cash flow model using cash flow projections covering a five year period, and assuming a zero growth rate for subsequent periods up to thirteen years. The projections over these periods were based on an approved business plan.


• Businessprojections–Assumptionsaboutthedemandforthevehicleinthemarketplaceareusedto project the sales volume and mix used in the projections.

The overall sales volume used in the projections does not indicate a significant growth from current levels due to tough competition in the domestic passenger car market.

• Long-termgrowthrate–Fromthesixthyearandonwards,azerogrowthrateisassumed.

• Discountrate–Forthepurposeofthevalue-in-usecalculation,adiscountrateof12.7%hasbeenapplied. The discount rate reflects the prevailing independent market rate, applicable to the Proton brand cash-generating unit.



218


Recoverability assessment of capitalised development cost work-in-progress (cont’d)

(b) Overseas operations – Lotus development costs work-in-progress

In assessing recoverability of capitalised development cost work-in-progress, the cash-generating unit assesses the recoverability based on value-in-use calculations.

The value-in-use calculations apply a discounted cash flow model using cash flow projections covering a ten year period. The projections over these periods were based on an approved business plan.


• Businessprojections–Assumptionsaboutthedemandforthevehiclesinthemarketplaceareusedto project the sales volume and mix used in the projections.

The cars sales volumes used in the value-in-use calculation is based on sales projections taking into consideration the projected lifecycle of the models.

• Long-termgrowthrate–Fromthesixthyearonwards,theassumedgrowthraterangesfromnegative17% to a positive 40%.

• Discountrate–Forthepurposeofthevalue-in-usecalculations,adiscountrateof10%hasbeenapplied. This is based on the prevailing market rate applicable to the segment.


16 SUBSIDIARY COMPANIES Company 2011 2010 RM’000 RM’000

Unquoted shares at cost: At 1 April 2,036,303 2,036,303 Additional investment during the year (Note 19) 293,100 –

2,329,403 2,036,303 Less: Impairment loss (327,652) (327,652)

At 31 March 2,001,751 1,708,651

During the financial year, the Company increased its investment in a subsidiary company through capitalisation of amount due from a subsidiary company of RM257,275,000 and cash of RM35,825,000 as investment in shares of the subsidiary company.



16 SUBSIDIARY COMPANIES (cont’d)

The details of the subsidiary companies are as follows:

Country of Group’s Name Principal activities incorporation effective interest 2011 2010

% %

Perusahaan Otomobil Manufacture, assembly Malaysia 100 100 Nasional Sdn. Bhd.^ and sales of motor vehicles and related products

Proton Tanjung Malim Assembly of motor vehicles Malaysia 100 100 Sdn. Bhd.^ and related products

Proton Marketing Sdn. Bhd. Investment holding Malaysia 100 100

Lotus Advance Investment holding Malaysia 100 100 Technologies Sdn. Bhd.

Proton Hartanah Sdn. Bhd. Investment holding Malaysia 100 100

Subsidiary companies of Perusahaan Otomobil Nasional Sdn. Bhd.

PT Proton Cikarang Ceased operations Indonesia 100 100 Indonesia+

Proton Automobiles Dormant British Virgin 100 100 (China) Limited^ Islands

Subsidiary companies of Proton Marketing Sdn. Bhd.

Proton Cars (UK) Importation and distribution England 100 100 Limited*^+ of motor vehicles and related products

Proton Cars Australia Importation and distribution Australia 100 100 Pty. Limited*^+ of motor vehicles and related products

Proton Edar Sdn. Bhd.^ Sales of motor vehicles, Malaysia 100 100 related spare parts and accessories


220


The details of the subsidiary companies are as follows (cont’d):


% %

Subsidiary companies of Proton Marketing Sdn. Bhd. (cont’d)

Proton Motors (Thailand) Importation and wholesale Thailand 100 100 Co. Limited*+ of motor vehicles and related products

Proton Cars Benelux In Members’ Voluntary Belgium 100 100 NV. SA*^+ Liquidation

Subsidiary companies of Lotus Advance Technologies Sdn. Bhd.

Proton Engineering Dormant Malaysia 100 100 Research Technology Sdn. Bhd.^

Lotus Group International Investment holding England 100 100 Limited*^+

Subsidiary company of Proton Hartanah Sdn. Bhd.

Proton Properties Property development Malaysia 100 100 Sdn. Bhd.^ and management

Subsidiary company of Proton Cars Australia Pty. Limited

Lotus Cars Australia Importation and distribution Australia 100 100 Pty. Limited*^+ of motor vehicles and related products






% %

Subsidiary companies of Proton Edar Sdn. Bhd.

Proton Singapore Importation and distribution Singapore 100 100 Pte. Limited*^+ of motor vehicles and related products

PT Proton Edar Importation and wholesale Indonesia 100 95 Indonesia*+ of motor vehicles and related products

Subsidiary company of Lotus Group International Limited

Group Lotus Plc*^+ Investment holding England 100 100

Subsidiary companies of Group Lotus Plc

Lotus Cars Limited*^+ Manufacture of motor England 100 100 vehicles and engineering consultancy services

Lotus Body Investment holding England 100 100 Engineering Limited*^+

Lotus Motorsports Limited*^+ Dormant England 100 100

Lotus Holdings Inc.*^+ Investment holding United States 100 100 of America

Subsidiary companies of Lotus Cars Limited

Lotus Engineering Limited*^+ Engineering consultancy England 100 100 services

Lotus Engineering Engineering consultancy People’s Republic 100 100 Company Limited services of China (Shanghai)*+


222




% %

Subsidiary company of Lotus Body Engineering Limited

Lotus Lightweight Structures Investment holding England 100 100 Holdings Limited*+

Subsidiary company of Lotus Lightweight Structures Holdings Limited

Lotus Lightweight Manufacture of England 100 100 Structures Limited*+ automotive components

Subsidiary company of Lotus Engineering Limited

Lotus Engineering Engineering consultancy Malaysia 100 100 (Malaysia) Sdn. Bhd.^ services

Subsidiary companies of Lotus Holdings Inc.

Lotus Engineering Inc.*^+ Engineering consultancy United States 100 100 services of America

Lotus Cars USA Inc.*^+ Sales of motor vehicles United States 100 100 and related spare parts of America and accessories

* Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia.

^ Consolidated by merger method of accounting prior to 1 April 2006

+ Not audited by PricewaterhouseCoopers, Malaysia

During the financial year, the Group increased its equity interest in PT Proton Edar Indonesia from 95% to 100% through acquisition of the remaining 5% equity interest for RM278,000.



17 ASSOCIATED COMPANIES Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Unquoted shares at cost 59,252 59,252 13,600 13,600 Share of post-acquisition reserves 124,892 126,266 – –

184,144 185,518 13,600 13,600 Less: Impairment loss (32,878) (32,878) – –

151,266 152,640 13,600 13,600

The Group’s share of the assets, liabilities, revenue and expenses of the associated companies are as follows:

Group 2011 2010 RM’000 RM’000

Non-current assets 100,026 107,560 Current assets 171,907 145,422 Current liabilities (115,443) (91,365) Non-current liabilities (5,224) (8,977)

Net assets 151,266 152,640

Revenue 226,015 227,976 Expenses (excluding tax) (221,048) (222,019)

Profit before taxation 4,967 5,957 Taxation (2,049) (422)

Profit for the financial year 2,918 5,535 Dividends (4,988) (4,394)

(2,070) 1,141

The details of the associated companies are as follows:


% %

PHN Industry Sdn. Bhd. Manufacture and sales Malaysia 35 35 of stamped parts and sub-assembly of automotive metal components


224

17 ASSOCIATED COMPANIES (cont’d)

The details of the associated companies are as follows (cont’d):


% %

Marutech Elastomer Manufacture and production Malaysia 25 25 Industries Sdn. Bhd. of moulded products, extruded and rubber hoses for motor vehicles, motorcycle and other related products

Exedy (Malaysia) Sdn. Bhd. Manufacture and assembly Malaysia 45 45 of manual clutch and automatic transmission parts

Associated company of Perusahaan Otomobil Nasional Sdn. Bhd.

Vina Star Motors Import, assembly and Socialist 25 25 Corporation distribution of motor Republic of vehicles Vietnam

Associated company of Proton Hartanah Sdn. Bhd.

Proton City Development Property developer and Malaysia 40 40 Corporation Sdn. Bhd. project management

Associated company of Proton Cars (UK) Limited

Proton Finance Limited Provision of dealer and England 49.99 49.99 customer financing

Associated company of Proton Edar Sdn. Bhd.

Netstar Advance Systems Manufacture, assembly Malaysia 40 40 Sdn. Bhd. and sales of vehicle tracking devices



17 ASSOCIATED COMPANIES (cont’d)

The details of the associated companies are as follows (cont’d):


% %

Associated company of Proton Automobiles (China) Limited

Goldstar Proton Dormant People’s Republic 49 49 Automobiles Co. Limited of China

Associated company of Lotus Advance Technologies Sdn. Bhd.

Miyazu (Malaysia) Development, marketing and Malaysia 51 51 Sdn. Bhd.* sale of products and provision of services relating to dies, moulds and jigs

* Company in which the Group owns more than 50%. However, although the Group exercises significant influence, it does not have control over its financial and operating policies.

18 JOINTLY CONTROLLED ENTITIES Group 2011 2010 RM’000 RM’000

Unquoted shares at cost 135,534 135,534 Share of post-acquisition reserves 79,929 67,011

215,463 202,545


226

18 JOINTLY CONTROLLED ENTITIES (cont’d)

The Group’s share of the assets, liabilities, revenue and expenses of the jointly controlled entities is as follows:

Group 2011 2010 RM’000 RM’000

Non-current assets 906,899 236,858 Current assets 259,045 199,151 Current liabilities (123,021) (93,566) Non-current liabilities (827,460) (139,898)

Net assets 215,463 202,545

Revenue 201,698 190,574 Expenses (excluding tax) (168,746) (170,480)

Profit before taxation 32,952 20,094 Taxation (9,416) (6,859)

Profit for the financial year 23,536 13,235 Dividend (6,600) (6,600)

16,936 6,635

The details of the jointly controlled entities are as follows:


% % Jointly controlled entity of

Proton Marketing Sdn. Bhd.

Proton Parts Centre Trading in motor vehicle Malaysia 55 55 Sdn. Bhd.* components, spare parts and accessories

Jointly controlled entity of Group Lotus Plc

Lotus Finance Limited Provision of motor England 49.9 49.9 vehicles financing

Jointly controlled entity of Proton Edar Sdn. Bhd.

Proton Commerce Provision of motor Malaysia 50 50 Sdn. Bhd. vehicles financing

* Company in which the Group owns more than half of the voting powers. However, as the Group only has joint control over its financial and operating policies, this investment is treated as a jointly controlled entity.



19 AMOUNTS DUE FROM SUBSIDIARY COMPANIES Company 2011 2010 RM’000 RM’000

As at 1 April

Non-current Advances to subsidiary companies 232,946 177,870 Effects of adopting FRS 139 (Note 48(a)) (39,776) –

As restated at 1 April 193,170 177,870

Advances given during the year 96,418 55,076 Interest income 20,782 –

310,370 232,946 Less: Recapitalisation of intercompany balances into cost of investment in a subsidiary company (Note 16) (251,797) –

As at 31 March 58,573 232,946

Current Amounts due from subsidiary companies 61,248 59,978 Dividend receivable 5,478 –

66,726 59,978 Less: Recapitalisation of intercompany balances into cost of investment in a subsidiary company (Note 16) (5,478) –

61,248 59,978

As at 31 March 119,821 292,924

Advances to subsidiary companies have maturity profile of more than 5 years.

The current amounts due from subsidiary companies are denominated in Ringgit Malaysia, interest free and repayable on demand.


228

20 INVESTMENTS Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Unquoted investments in Malaysia:

At cost – 13,347 – 8,575 Impairment for diminution in value – (11,247) – (6,475)

– 2,100 – 2,100 Reclassification to non-current assets held for sale (Note 28) – (2,100) – (2,100)

– – – –

21 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 statements of financial position:

Group 2011 2010 RM’000 RM’000

Subject to income tax: Deferred tax assets 16,740 15,033 Deferred tax liabilities (8,186) (10,740)

8,554 4,293

Movement of deferred tax At start of financial year 4,293 (6,516) Credited/(charged) to statement of comprehensive income (Note 10)

- property, plant and equipment 602 1,720 - capitalised development cost (51,578) (968) - allowances and provisions 55,726 8,136 - others (489) 1,921

4,261 10,809

At end of financial year 8,554 4,293



21 DEFERRED TAXATION (cont’d)

Group 2011 2010 RM’000 RM’000

Deferred tax assets (before offsetting) - allowances and provisions 149,936 94,210 - others 8 497

149,944 94,707 Offset of deferred tax liabilities (133,204) (79,674)

Deferred tax assets (after offsetting) 16,740 15,033

Deferred tax liabilities (before offsetting) - capitalised development cost (130,910) (79,332) - property, plant and equipment (10,480) (11,082)

(141,390) (90,414) Offset against deferred tax assets 133,204 79,674

Deferred tax liabilities (after offsetting) (8,186) (10,740)

The tax effects of temporary differences (which have no expiry dates) for which no deferred tax assets are recognised in the statements of financial position of certain subsidiary companies of the Group as at 31 March 2011, are as analysed below:

Group 2011 2010 RM’000 RM’000

Temporary differences of which no deferred tax assets are recognised

Unrecognised tax losses 231,372 183,851 Unabsorbed capital allowances 472,155 379,885 Unrecognised reinvestment allowances 473,256 505,095 Other temporary differences 14,475 18,547

As at 31 March 2011, there are no temporary differences associated with unremitted earnings of subsidiary companies, associated companies and joint controlled entities for the recognition of deferred tax liabilities (2010: Nil).


230

22 INVENTORIES Group 2011 2010 RM’000 RM’000

Raw materials: - completely knocked-down packs of vehicles 158,967 112,449 - others 163,936 125,883 Parts, accessories and general stores 66,568 66,910 Work-in-progress 190,786 274,458 Finished vehicles 564,423 581,569 Goods-in-transit 43,788 47,221 Land held for sale 10,049 10,049 Properties for sale 8,555 8,673

1,207,072 1,227,212

23 TRADE AND OTHER RECEIVABLES Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Trade receivables 904,802 621,177 – – Less: Impairment of trade receivables (35,218) (54,429) – –

869,584 566,748 – –

Other receivables 94,708 149,397 517 749 Less: Impairment of other receivables (30,367) (25,891) – –

64,341 123,506 517 749

Government grant receivable 222,091 99,344 – – Warranty claims reimbursable by vendors 71,241 95,758 – – Prepayments 67,612 20,957 – – Deposits 15,281 14,087 – –

1,310,150 920,400 517 749



23 TRADE AND OTHER RECEIVABLES (cont’d)

The trade and other receivables are denominated as follows:

As at 31.3.2011 Ringgit Pound US Thai

Malaysia Sterling Dollar Euro Baht Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group Functional currency

Ringgit Malaysia 969,938 – 42,784 659 – 506 1,013,887 Pound Sterling – 97,562 60,771 31,266 – 13,655 203,254 Thai Baht – – – – 62,907 – 62,907 Indonesian Rupiah – – – – – 26,813 26,813 Others – – – 176 – 3,113 3,289

969,938 97,562 103,555 32,101 62,907 44,087 1,310,150

Company Functional currency

Ringgit Malaysia 517 – – – – – 517


Malaysia Sterling Dollar Euro Baht Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 581,911 – 40,657 21,716 – 3,874 648,158 Pound Sterling – 18,553 103,023 11,295 – 11,656 144,527 Thai Baht – – – – 84,700 – 84,700 Indonesian Rupiah – – – – – 38,329 38,329 Others – – – 177 – 4,509 4,686

581,911 18,553 143,680 33,188 84,700 58,368 920,400


Ringgit Malaysia 749 – – – – – 749


232


Credit terms of trade receivables for the Group range from 14 to 180 days (2010: 14 to 180 days) and 91.4% of the Group’s trade receivables have a credit term between 14 to 90 days (2010: 14 to 90 days).

Group sales are concentrated in Malaysia with one major third party customer in Malaysia making up 12.9% (2010: 17.4%) of total Group revenue.

The Group has no significant concentration of credit risk except, for an amount of RM75,226,000 (2010: RM73,520,000) due from a single customer. The Directors are of the view that the credit risk is minimal in view of the stability and historical settlement of the receivables from this customer.

Trade receivables that are neither past due nor impaired

Trade receivables amounting to RM706,216,000 for the Group were neither past due nor impaired. None of the trade receivables of the Group and of the Company that are neither past due nor impaired have been renegotiated during the financial year.

Trade receivables that are past due but not impaired

As at 31 March 2011, the Group has trade receivables amounting to RM163,368,000 that are past due at the reporting date but not impaired. Trade receivables that are past due but not impaired relate to customers for whom there is no recent history of default. Based on past experience and no adverse information to date, the Directors of the Group are of the opinion that no allowance for impairment is necessary in respect of these balances as there has not been a significant change in the credit quality and the balances are still considered to be fully recoverable. The aging analysis of these trade receivables is as follows:

2011 Group Company RM’000 RM’000

Past due but not impaired: 0 to 30 days past due 110,159 – 31 to 60 days past due 27,381 – 61 to 90 days past due 10,660 – More than 90 days past due 15,168 –

163,368 –

The maximum exposure of the Group to credit risk for each class of financial instruments is their carrying values as presented in the statement of financial position except for, amounts secured by a bank guarantee.




Collaterals held by the Group as security for receivables are:

Carrying value Fair value of receivables of security RM’000 RM’000

Land – 11,000 Bank guarantee pledged by parts and service dealers 19,265 13,762

Land collateral held by Group as a security for the receivable is in respect of land located in a foreign country where the legal ownership rights attached are being transferred to the Group, hence full impairment has been made for the carrying value of the debts. The Group is in the process of realising the collateral through auction.

Trade receivables that are individually determined to be impaired at the end of the reporting period relate to those debtors that exhibit significant financial difficulties and have defaulted on payments.

The reconciliation of movement in the impairment loss is as follows:

Group 2011 RM’000

At 1 April 80,320 Currency translation (127) Charge for the financial year 13,645 Recovery of impairment of trade and other receivables (28,253)

At 31 March 65,585

24 AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES

The amounts due from jointly controlled entities arose from normal trade transactions. These amounts have credit terms ranging from 30 to 45 days (2010: 30 to 45 days).

The amounts due from jointly controlled entities are denominated as follows:

As at 31.3.2011 Ringgit Pound Malaysia Sterling Total RM’000 RM’000 RM’000 Group

Functional currency

Ringgit Malaysia 10,417 – 10,417 Pound Sterling – 190 190

10,417 190 10,607


234

24 AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES (cont’d)

The amounts due from jointly controlled entities are denominated as follows (cont’d):


Functional currency

Ringgit Malaysia 8,611 15 8,626 Pound Sterling – 2,695 2,695

8,611 2,710 11,321

Amounts due from jointly controlled entities of the Group of RM3,695,000 were neither past due nor impaired.

The ageing analysis of amount due from jointly controlled entities of the Group that is past due but not impaired is as follows:

2011 Group Company RM’000 RM’000

Past due but not impaired: 0 to 30 days past due 2,292 – 31 to 60 days past due 1,735 – 61 to 90 days past due 1,839 – More than 90 days past due 1,046 –

6,912 –

25 AVAILABLE-FOR-SALE FINANCIAL ASSETS Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Current

At 1 April – – – – Effects of adopting FRS 139 11,776 – 2,100 –

At 1 April - as restated 11,776 – 2,100 – Net fair value gain transferred to available-for-sale reserve 2,097 – 4,900 – Disposals during the year (net) (9,332) – (7,000) –

4,541 – – –



25 AVAILABLE-FOR-SALE FINANCIAL ASSETS (cont’d)


Available-for-sale financial assets include the following:

Debt securities in Malaysia - Quoted 584 – – – - Unquoted 3,957 – – –

4,541 – – –

The available-for-sale financial assets at the financial year end are denominated in Ringgit Malaysia.

The fair values of the quoted debt securities are determined based on the quoted market bid prices available on the relevant stock exchanges. The fair values of the unquoted debt securities are determined based on the prices traded over the counter.

26 CURRENT INVESTMENTS Group 2011 2010 RM’000 RM’000

Lower of cost and market value:

Commercial papers and corporate debt - quoted investments in Malaysia – 584 - unquoted investments in Malaysia – 10,458

– 11,042 Allowance for diminution in value – (1,366)

– 9,676

Market value of investments:

Quoted - commercial papers and corporate debt – 654 Unquoted - commercial papers and corporate debt – 9,022

Prior to 1 April 2010, the Group classified its equity investments as current investments which were carried at cost less allowance for diminution in value. With the adoption of FRS 139, these investments are now classified as available-for-sale financial assets.


236

27 DEPOSITS, BANK AND CASH BALANCES Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Short term funds deposited with licensed banks 956,437 1,385,703 134,586 248,119 Bank and cash balances 336,596 266,386 1,312 257

1,293,033 1,652,089 135,898 248,376


The maturity profile of short term funds is as follows:

0 - 1 month 789,647 845,272 9,000 83,088 2 - 3 months 83,457 388,206 43,406 106,102 4 - 6 months 83,333 68,052 82,180 10,252 6 - 12 months – 59,173 – 48,677 More than 1 year – 25,000 – –

956,437 1,385,703 134,586 248,119

Bank balances are deposits held at call with banks.

The deposits, bank and cash balances are denominated as follows:

As at 31.3.2011 Ringgit Pound US Australian Thai

Malaysia Sterling Dollar Dollar Baht Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 1,006,525 6,588 48,153 36,196 – 10,163 1,107,625 Pound Sterling – 22,099 2,360 – – 2,323 26,782 Australian Dollar – – – 13,518 – – 13,518 Thai Baht – – – – 93,609 – 93,609 Others – – 30,701 – – 20,798 51,499

1,006,525 28,687 81,214 49,714 93,609 33,284 1,293,033



27 DEPOSITS, BANK AND CASH BALANCES (cont’d)

The deposits, bank and cash balances are denominated as follows (cont’d):

As at 31.3.2010 Ringgit Pound US Australian Thai

Malaysia Sterling Dollar Dollar Baht Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 1,440,330 10,015 50,662 33,014 – 9,727 1,543,748 Pound Sterling – 14,194 27,254 – – 12,053 53,501 Australian Dollar – – – 21,629 – – 21,629 Thai Baht – – – – 11,703 – 11,703 Others – – 72 – – 21,436 21,508

1,440,330 24,209 77,988 54,643 11,703 43,216 1,652,089

Deposits, bank and cash balances of the Company as at 31 March 2011 and 31 March 2010 are denominated in Ringgit Malaysia.

The weighted average effective interest rates of deposits at the statement of financial position date were 2.84% (2010: 2.34%) per annum for the Group and 2.24% (2010: 1.90%) per annum for the Company.

The Group has unutilised banking facilities amounting to RM771.5 million (2010: RM777.3 million) as at 31 March 2011.

28 NON-CURRENT ASSETS HELD FOR SALE Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

As at 1 April – as previously reported 36,931 – 2,100 – Effects of adopting FRS 139 (2,100) – (2,100) –

As at 1 April – as restated 34,831 – – –

Non-current assets classified as held for sale:

- property, plant and equipment (Note 13) – 11,599 – – - prepaid land lease payments – 23,232 – – - investments (Note 20) – 2,100 – 2,100

– 36,931 – 2,100 Disposals (34,831) – – –

At 31 March – 36,931 – 2,100


238

29 SHARE CAPITAL Group and Company 2011 2010 RM’000 RM’000 Authorised:

Ordinary shares of RM1.00 each At start/end of financial year 1,000,000 1,000,000

Issued and fully paid: Ordinary shares of RM1.00 each

At start/end of financial year 549,213 549,213

30 RESERVES

(a) Retained earnings

Under the single-tier tax system which came into effect from the year of assessment 2008, companies are not required to have tax credits under Section 108 of the Income Tax Act, 1967 for dividend payment purposes. Dividends paid under this system are tax exempt in the hands of shareholders.

Companies with Section 108 tax credits as at 31 December 2007 may continue to pay franked dividends until the Section 108 tax credits are exhausted or 31 December 2013 whichever is earlier unless they opt to disregard the Section 108 tax credits to pay single-tier dividends under the special transitional provisions of the Finance Act, 2007.

As at 31 March 2011, the Company has sufficient Section 108 tax credits to frank approximately RM1,294.6 million (2010: RM1,377.0 million) of its retained earnings if paid out as dividends.

In addition, the Company has tax exempt income as at 31 March 2011 amounting to approximately RM393.2 million (2010: RM331.1 million) available for distribution of tax exempt dividends to its shareholders.

(b) Capital reserve

The capital reserve arose as a result of a Group reorganisation exercise whereby all existing shareholders of PONSB exchanged all their ordinary shares of RM1.00 each comprising 549,213,000 ordinary shares in PONSB for 549,213,000 new ordinary shares of RM1.00 each in the Company in a one-for-one share exchange on 5 April 2004. Following the share for share exchange, the Company has no share premium. Accordingly, the amount of share premium previously recognised on consolidation has been re-designated as capital reserve.

(c) Asset revaluation reserve

Asset revaluation reserve arose as a result of a fair value adjustment of the 51% equity interest previously held in PT Proton Cikarang Indonesia as a jointly controlled entity upon the acquisition of the remaining 49% equity interest on 10 August 2007.



31 LONG TERM LIABILITIES Group 2011 2010 RM’000 RM’000

Secured: Long term loans (Note 31(a)) 29,238 49,415 Portion repayable within twelve months (Note 38) (19,492) (19,766)

9,746 29,649

Lease and hire purchase creditors (Note 31(b)) 2,544 9,111 Less: Portion repayable within twelve months (Note 32) (1,646) (6,546)

898 2,565

Automotive Development Fund (Note 31(c)) 15,368 37,288 Employee retirement benefits (Note 31(d)) 11,978 19,148

37,990 88,650

The long term liabilities are denominated as follows:


Functional currency

Ringgit Malaysia 15,690 – 15,690 Pound Sterling – 22,300 22,300

15,690 22,300 37,990


Functional currency

Ringgit Malaysia 38,327 – 38,327 Pound Sterling – 50,323 50,323

38,327 50,323 88,650


240

31 LONG TERM LIABILITIES (cont’d)

(a) Long term loan - secured

Group 2011 2010 RM’000 RM’000

The long term loan is repayable as follows:

Within one year 19,492 19,766 Between one and two years 9,746 19,766 More than two years – 9,883

29,238 49,415

The long term loan is secured over a subsidiary company’s fixed and floating assets as disclosed in Note 13 and bears interest rate of 3.5% (2010: 3.5% - 4.5%) per annum.

(b) Lease and hire purchase creditors - secured

The lease and hire purchase arrangements obtained by subsidiary companies are secured against the related assets of the respective subsidiary companies.

Group 2011 2010 RM’000 RM’000

The lease and hire purchase creditors are repayable as follows:

Within one year 1,883 7,075 Between one and two years 918 1,814 Between two and five years – 927

2,801 9,816 Less: Future finance charges (257) (705)

2,544 9,111

Current (Note 32) 1,646 6,546 Non-current 898 2,565

2,544 9,111

The lease and hire purchase creditors bear an interest rate of 7.5% (2010: 7.5%) per annum.




(c) Automotive Development Fund

The Government of Malaysia approved the setting up of an Automotive Development Fund (‘ADF’) under the Ninth Malaysia Plan with the objective of modernising and automating the manufacturing processes, improving efficiency, productivity, quality and the application of automation for the Malaysian automotive industry.

As at 31 March 2011, the Government of Malaysia had disbursed a total of RM110 million to the Group to be utilised for payments to external parties for the purpose of developing and promoting a competitive and viable domestic automotive sector as a mean to achieve the objective of the ADF.

Group 2011 2010 RM’000 RM’000

The ADF comprises:

(i) ADF liabilities 4,417 20,512(ii) Capital grant 16,776 28,736

21,193 49,248Less: Current portion of capital grant (5,825) (11,960)

Non-current 15,368 37,288

(i) ADF liabilities At 1 April 20,512 14,467 Add: Additional ADF grant received during the financial year – 60,000 Interest 348 777

20,860 75,244 Less: Utilised during the financial year (16,443) (54,732)

At 31 March (Note 45) 4,417 20,512

(ii) Capital grant At 1 April 28,736 9,403 Add: Received during the financial year (Note 13) – 50,588 Less: Amortisation (11,960) (31,255)

At 31 March 16,776 28,736

Current 5,825 11,960 Non-current 10,951 16,776

16,776 28,736

The current portion of the capital grant is presented within other payables (Note 32).


242


(c) Automotive Development Fund (cont’d)

Group 2011 RM’000

The ADF will be disbursed as follows:

Within one year – Between one and two years 4,417

4,417

(d) Employee retirement benefits

The employee retirement benefits represent the scheme operated by a subsidiary company.

(i) Defined contribution plan

The Group pays contributions to publicly or privately administered pension plans on either a mandatory, contractual or voluntary basis depending on the nature of the defined contribution plans. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in the future payments is available.

(ii) Defined benefit plan

Lotus Group Scheme - defined benefit scheme

Lotus Group International Limited and its subsidiary companies (‘Lotus Group’), operate a defined benefit 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 statement of comprehensive income so as to spread the cost of pensions over employees’ working lives with the Lotus Group.

The contributions are determined by a qualified actuary. An actuarial valuation of the plan was carried out for the financial year ended 31 March 2011.




(d) Employee retirement benefits (cont’d)

(ii) Defined benefit plan (cont’d)

Lotus Group Scheme - defined benefit scheme (cont’d)

The movements during the financial year in the statement of financial position are as follows:

Group 2011 2010 RM’000 RM’000

At 1 April 19,148 25,068 Currency translation differences (277) (1,877) Charged to statement of comprehensive income (Note 8) 5,630 4,970 Contributions paid (12,523) (9,013)

At 31 March 11,978 19,148

The amounts recognised in the statement of financial position are analysed as follows:

Group 2011 2010 RM’000 RM’000

Present value of obligation 336,164 358,343 Fair value of plan assets (343,425) (313,138)

(Excess)/shortfall of funded plan (7,261) 45,205 Unrecognised actuarial gain/(loss) 19,239 (26,057)

Liability on statement of financial position 11,978 19,148

The movements in the defined benefit obligation during the financial year are as follows:

Group 2011 2010 RM’000 RM’000

At 1 April 358,343 234,156 Currency translation differences (4,954) (15,603) Interest cost 19,741 17,022 Current service cost 6,856 2,952 Employee contributions 3,791 3,662 Benefits paid (13,800) (8,410) Actuarial (gain)/loss on obligation (33,813) 8,331 Effect of changes in assumptions – 116,233

At 31 March 336,164 358,343


244





The movements in the fair value of plan assets during the financial year are as follows:

Group 2011 2010 RM’000 RM’000

At 1 April 313,138 224,494 Currency translation differences (4,406) (23,534) Expected return on plan assets 20,967 15,004 Employer contributions 12,524 9,013 Employee contributions 3,791 3,662 Benefits paid (13,800) (8,410) Actuarial gain on plan assets 11,211 92,909

At 31 March 343,425 313,138

The mortality assumptions used are as follows:

Group 2011 2010 Age Age

Longevity at age 65 for current pensioners: - Male 85.9 85.9 - Female 88.4 88.3 Longevity at age 65 for future pensioners: - Male 87.1 87.0 - Female 89.4 89.3

The expenses recognised in the statement of comprehensive income are analysed as follows:

Group 2011 2010 RM’000 RM’000

Current service cost 6,856 2,952 Interest cost 19,741 17,022 Expected return on plan assets (20,967) (15,004)

Total, included in staff costs within administrative expenses (Note 8) 5,630 4,970

Actual return on plan assets 32,178 107,913







The principal actuarial assumptions used in respect of the Group’s defined benefit plan are as follows:

Group 2011 2010 % %

Discount rates 5.60 5.60 Expected return on plan assets: - equity 7.15 7.25 - bonds 4.40 4.50 - others 4.40 4.50 Expected rate of salary increase 4.60 4.70 Expected rate of pension payment increase 2.85 3.50

Inflation 3.60 3.70

The expected return on the average value of the assets over the period is calculated using the long-term average rate of return expected over the remaining term of the Lotus Pension Plan’s liabilities.

32 TRADE AND OTHER PAYABLES Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Trade payables 857,549 853,843 – – Other payables 106,770 68,944 832 535 Accruals 559,787 611,292 – – Payments received in advance for engineering contracts 34,794 77,779 – – Lease and hire purchase creditors - current portion (Note 31(b)) 1,646 6,546 – – Deferred income 5,825 11,960 – –

1,566,371 1,630,364 832 535


246

32 TRADE AND OTHER PAYABLES (cont’d)

The trade and other payables are denominated as follows:


Malaysia Sterling Dollar Euro Baht Yen Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 1,111,816 1,498 18,586 17,630 – 65,696 2,837 1,218,063 Pound Sterling – 228,934 24,855 34,208 – 22,477 2,697 313,171 Thai Baht – – – – 20,137 – – 20,137 Others – – – 180 – – 14,820 15,000

1,111,816 230,432 43,441 52,018 20,137 88,173 20,354 1,566,371


Ringgit Malaysia 832 – – – – – – 832


Malaysia Sterling Dollar Euro Baht Yen Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 1,240,224 3,930 86,997 29,743 – 36,768 3,125 1,400,787 Pound Sterling – 147,164 10,372 20,142 – 20,705 2,629 201,012 Thai Baht – – – – 10,337 – – 10,337 Others – – – 184 – – 18,044 18,228

1,240,224 151,094 97,369 50,069 10,337 57,473 23,798 1,630,364


Ringgit Malaysia 535 – – – – – – 535

Terms of trade payables granted to the Group and Company vary up to 60 days (2010: up to 60 days) credit.



33 PROVISIONS Group Provision Onerous for warranty contract Total RM’000 RM’000 RM’000

2011

At 1 April 174,344 10,060 184,404 Currency translation differences (233) – (233)

Charge to statement of comprehensive income (Note 6) 41,200 – 41,200 Warranties reimbursable 15,526 – 15,526

Provision for the financial year 56,726 – 56,726 Utilised during the financial year (87,318) (10,060) (97,378)

At 31 March 143,519 – 143,519

2010

At 1 April 167,640 22,139 189,779 Currency translation differences (1,769) – (1,769)

Charge to statement of comprehensive income (Note 6) 45,968 – 45,968 Warranties reimbursable 24,320 – 24,320

Provision for the financial year 70,288 – 70,288 Utilised during the financial year (61,815) (12,079) (73,894)

At 31 March 174,344 10,060 184,404

34 DEFERRED REVENUE

Group 2011 2010 RM’000 RM’000

At 1 April – – Additions 26,482 – Credited to statement of comprehensive income (15,124) –

At 31 March 11,358 –

Deferred revenue represents free services given to customers during campaigns and on purchase of cars that have not expired and still redeemable as the statement of financial position date.


248

35 AMOUNT DUE TO A SUBSIDIARY COMPANY

Amount due to a subsidiary company is denominated in Ringgit Malaysia, and relates to an outstanding amount for share capital subscription by the Company during the year.

36 AMOUNTS DUE TO ASSOCIATED COMPANIES

Amounts due to associated companies are denominated in Ringgit Malaysia, unsecured, interest free and payable within 30 to 60 days (2010: 30 to 60 days).

37 AMOUNTS DUE TO JOINTLY CONTROLLED ENTITIES

Amounts due to jointly controlled entities arose from normal trade transactions and are due between 30 to 60 days (2010: 30 to 60 days).

The amounts due to jointly controlled entities are denominated as follows:

As at 31.3.2011 Ringgit US Pound Singapore

Malaysia Dollar Sterling Dollar Total RM’000 RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 42,469 – – – 42,469 Pound Sterling – – 210 – 210 Australian Dollar – 182 – – 182 Indonesian Rupiah – 826 – – 826 Singapore Dollar – – – 86 86

42,469 1,008 210 86 43,773

As at 31.3.2010 Ringgit US Pound

Malaysia Dollar Sterling Total RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 22,934 – – 22,934 Pound Sterling – – 323 323 Australian Dollar – 127 – 127 Indonesian Rupiah – 556 – 556

22,934 683 323 23,940



38 SHORT TERM BORROWINGS Effective interest rate during the financial year Group 2011 2010 2011 2010 % % RM’000 RM’000 per annum per annum

Unsecured: Bridging loan 3.50 – 6.00 5.00 – 6.00 225,200 32,724 Bankers’ acceptance / Bills of exchange 3.28 3.50 54,382 2,690 Revolving credit 2.87 2.84 6,091 25,696

285,673 61,110

Secured: Long term loan - current portion (Note 31(a)) 3.50 3.50 – 4.50 19,492 19,766 Revolving credit 1.80 – 4.50 1.80 – 4.50 56,301 61,360

75,793 81,126

361,466 142,236

The revolving credit is secured over a subsidiary company’s fixed and floating assets.

The short term borrowings are denominated as follows:

As at 31.3.2011 Ringgit Pound US

Malaysia Sterling Dollar Total RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 54,382 – – 54,382 Pound Sterling – 269,234 37,850 307,084

54,382 269,234 37,850 361,466

As at 31.3.2010 Ringgit Pound US

Malaysia Sterling Dollar Total RM’000 RM’000 RM’000 RM’000


Ringgit Malaysia 2,690 – – 2,690 Pound Sterling – 94,876 44,670 139,546

2,690 94,876 44,670 142,236


250

39 DERIVATIVE FINANCIAL LIABILITIES Group 2011 RM’000

At 1 April – Disposals during the year (net) (3,110) Loss taken to statement of comprehensive income (Note 7) 3,549

At 31 March 439

Group 2011 Contract/ Notional Amount Assets Liabilities RM’000 RM’000 RM’000

Foreign currency forward contracts 88,500 – 439

The Group classifies derivative financial instruments as financial assets/liabilities at fair value through profit or loss. None of the derivatives are designated as hedges as the Group does not apply hedge accounting during the year.

40 SEGMENTAL INFORMATION

Management has determined the operating segments based on reports reviewed by the chief operating decision-maker that are used to make strategic decisions. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segment, has been identified to be the Group Managing Director and Management Committee Members.

The chief operating decision-maker considers the business from both products and geographic perspective and has the following reportable segments:

•Proton – Manufacturing – Selling & distribution

• Lotus – Manufacturing&distribution

As for the other immaterial business segments including investments, they are aggregated and disclosed under“Others”astheyarenotsignificanttobereportedseparately.

Segment revenue, results, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment.



40 SEGMENTAL INFORMATION (cont’d)

Segment revenue, expense, assets and liabilities are determined before intragroup balances and intragroup transactions are eliminated as part of the consolidation process, except to the extent that such intragroup balances and transactions are between Group enterprises within a single segment.

Geographically, the management considers the total Group performance in Malaysia and Other countries separately and is determined based on sales to external customers at their respective locations.

Inter-segment sales comprise sales of motor vehicles, parts and engineering services to Group companies in different business segments. All inter-segments sales are conducted on an arm’s length basis.

The segment analysis of the Group is as follows:

Proton Lotus Selling & Manufacturing

Manufacturing distribution & distribution Others Total RM’million RM’million RM’million RM’million RM’million

2011

Revenue Total revenue 7,199.1 7,871.5 727.0 0.2 15,797.8

Inter-segment sales (6,760.8) (0.1) (67.0) – (6,827.9)

External sales 438.3 7,871.4 660.0 0.2 8,969.9

Results Segment operating profit/(loss) before research and development expenditure 166.5 191.1 (189.5) 15.6 183.7

Segment operating profit/(loss) 150.8 191.1 (194.5) 15.6 163.0

Unallocated income – – – – 6.7 Interest expense (2.0) (1.2) (10.5) – (13.7) Interest income 20.1 7.3 0.8 3.7 31.9

Share of net results of associated companies and jointly controlled entities 26.5

Profit before taxation 214.4 Taxation and zakat (58.8)

Profit after taxation 155.6


252


The segment analysis of the Group is as follows (cont’d):



2011

Other information Segment assets 4,242.5 1,791.6 1,003.2 207.5 7,244.8 Unallocated assets 16.6 224.8 3.6 164.1 409.1

Total assets 7,653.9

Segment liabilities 1,098.5 381.5 347.1 1.9 1,829.0 Unallocated liabilities 72.6 21.6 323.9 0.1 418.2

Total liabilities 2,247.2

Capital expenditure 467.1 36.0 281.4 1.2 785.7 Research and development grant (297.7) – – – (297.7) Reversal of impairment of

receivables (13.9) (12.2) (2.1) (0.1) (28.3) Impairment of receivables 8.2 3.4 2.0 – 13.6

Write down of inventories 10.2 2.2 – – 12.4 Property, plant and equipment:

- reversal of impairment – – (18.6) – (18.6) - impairment 25.1 – – – 25.1

- depreciation 370.9 25.0 29.3 0.4 425.6 - written off 4.2 – – – 4.2 Intangible assets: - impairment – – 19.5 – 19.5 - amortisation 59.3 0.5 41.4 – 101.2 - written off 2.5 – – – 2.5







2010

Revenue Total revenue 6,392.1 7,109.2 767.1 4.2 14,272.6

Inter-segment sales (6,000.5) – (45.2) – (6,045.7)

External sales 391.6 7,109.2 721.9 4.2 8,226.9

Results Segment operating profit/(loss) before research and development expenditure 75.2 197.8 29.7 (1.1) 301.6

Segment operating profit/(loss) 23.0 197.8 13.3 (1.1) 233.0

Unallocated expense – – – – (7.3) Interest expense (1.9) (2.3) (7.9) – (12.1) Interest income 15.4 8.3 1.2 3.6 28.5

Share of net results of associated companies and jointly controlled entities 18.8

Profit before taxation 260.9 Taxation and zakat (42.0)

Profit after taxation 218.9


254





2010

Other information Segment assets 4,354.5 1,693.8 674.5 328.6 7,051.4 Unallocated assets 41.0 221.4 2.8 153.9 419.1

Total assets 7,470.5

Segment liabilities 1,263.5 364.0 244.4 25.2 1,897.1 Unallocated liabilities 20.9 54.0 163.6 1.9 240.4

Total liabilities 2,137.5

Capital expenditure 340.1 25.0 112.7 – 477.8 Research and development grant (143.7) – – – (143.7) Reversal of impairment of

receivables (16.5) (0.5) (6.4) (0.1) (23.5) Impairment of receivables 14.0 13.2 – – 27.2

Write down of inventories 80.1 – – – 80.1 Provision for impairment in value of investments 10.4 – – – 10.4 Property, plant and Equipment: - impairment 6.0 – – – 6.0 - depreciation 376.8 27.8 28.0 – 432.6

- reversal of impairment – – (53.4) – (53.4) - written off 23.4 – – 0.4 23.8

Intangible assets: - amortisation 55.0 6.8 19.9 – 81.7 - written off 44.3 – 11.5 – 55.8




Unallocated income includes dividend from available-for-sale financial assets, gain/(loss) on disposal of financial assets through profit or loss and write down/(write back) of impairment of available-for-sale financial assets.

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash, and exclude investments in associated companies, jointly controlled entities, available-for-sale financial assets, goodwill and taxation. Segment liabilities comprise operating liabilities and exclude items such as taxation, borrowings and employee retirement benefits.

Capital expenditure mainly comprises additions to property, plant and equipment and intangible assets (Notes 13 and 15 to the financial statements).

Geographical locations

Revenue and asset information based on the geographical locations of customers and assets respectively are as follows:

Malaysia Other countries Total 2011 2010 2011 2010 2011 2010

RM’million RM’million RM’million RM’million RM’million RM’million Revenue

Total revenue 7,236.9 6,965.2 1,968.1 1,569.3 9,205.0 8,534.5 Inter-segment sales (168.0) (261.6) (67.1) (46.0) (235.1) (307.6)

External sales 7,068.9 6,703.6 1,901.0 1,523.3 8,969.9 8,226.9

Other information Segment assets 6,287.5 6,446.3 1,366.4 1,024.2 7,653.9 7,470.5

41 CAPITAL AND OTHER COMMITMENTS

Group 2011 2010 RM’000 RM’000

Capital commitments

Capital expenditure for property, plant and equipment and intangible assets approved by the Board but not provided for in the financial statements:

Contracted for 410,199 345,546 Not contracted for 1,584,027 2,883,331


256

42 NON-CANCELLABLE OPERATING LEASES

As at 31 March 2011, the Group was committed to making the following payments in respect of non-cancellable operating leases expiring:

Group Office Land and Plant and equipment buildings machinery and vehicles Total RM’000 RM’000 RM’000 RM’000

2011

Within one year 22,440 852 2,503 25,795 Between one and five years 21,658 435 2,366 24,459 After five years 22,141 234 642 23,017

66,239 1,521 5,511 73,271

Group Office Land and Plant and equipment buildings machinery and vehicles Total RM’000 RM’000 RM’000 RM’000

2010

Within one year 23,302 956 1,213 25,471 Between one and five years 49,055 1,280 1,598 51,933 After five years 1,280 12 – 1,292

73,637 2,248 2,811 78,696



43 SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES

In the normal course of business, the Group and Company undertake a variety of transactions at mutually agreed terms with subsidiary companies, associated companies, jointly controlled entities and other related parties. The related parties with whom the Group and Company transact with, include the following companies:

Related parties Relationship

Lotus Group International Limited Subsidiary company Miyazu (Malaysia) Sdn. Bhd. Associated company PHN Industry Sdn. Bhd. Associated company Marutech Elastomer Industries Sdn. Bhd. Associated company Exedy (Malaysia) Sdn. Bhd. Associated company Netstar Advance Systems Sdn. Bhd. Associated company Proton Finance Limited Associated company Lotus Finance Limited Jointly controlled entity Proton Parts Centre Sdn. Bhd. Jointly controlled entity Technomeiji Rubber Industries Sdn. Bhd. Equity investment Aluminium Alloy Industries Sdn. Bhd. Equity investment Ara Borgstena Sdn. Bhd. Equity investment

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions.

(a) Interest income from advances to a subsidiary company

Company 2011 2010 RM’000 RM’000

Subsidiary company - Lotus Group International Limited 16,832 –

(b) Sales of goods and services

Group 2011 2010 RM’000 RM’000

Jointly controlled entities - Proton Parts Centre Sdn. Bhd. 20,034 20,780 - Lotus Finance Limited* 67,691 74,641

Associated company - Proton Finance Limited* 15,679 29,100

* Under the terms of financing agreements, Lotus Finance Limited and Proton Finance Limited provide financing services to dealers and customers of the Group to acquire vehicles. Vehicles under financing arrangements are sold through Lotus Finance Limited and Proton Finance Limited.


258

43 SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES (cont’d)

(c) Purchases of goods and services from:

Group 2011 2010 RM’000 RM’000

Associated companies - PHN Industry Sdn. Bhd. 171,505 164,261 - Marutech Elastomer Industries Sdn. Bhd. 1,692 1,365 - Exedy (Malaysia) Sdn. Bhd. 11,388 8,186 - Netstar Advance Systems Sdn. Bhd. 6,451 5,489 - Miyazu (Malaysia) Sdn. Bhd. 80,907 44,057

Jointly controlled entity - Proton Parts Centre Sdn. Bhd. 160,242 133,429

Equity investment companies - Technomeiji Rubber Industries Sdn. Bhd. 4,326 3,063 - Aluminium Alloy Industries Sdn. Bhd. 15,532 38,706 - Ara Borgstena Sdn. Bhd. 1,288 566

(d) Interest expense

Group 2011 2010 RM’000 RM’000

Associated company - Proton Finance Limited 264 371

(e) Key management personnel compensation

Key management is defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including executive and non-executive directors. The key management compensation disclosed below excludes the Executive and Non-executive Directors’ compensation as disclosed in Note 8 to the financial statements:

Group 2011 2010 RM’000 RM’000

Salaries and other short-term employee benefits 14,310 15,067 Defined contribution retirement plan 1,563 1,184



44 CONTINGENT LIABILITIES Group 2011 2010 RM’000 RM’000

Disputed claims 2,387 27,503

(a) In a prior financial year, a supplier had obtained a judgment in default against a subsidiary company for RM12.5 million after failing to reach a formal agreement. The subsidiary company had obtained legal opinion that the claims are without basis and action has been taken to set aside the judgment. The Directors are of the opinion, based on legal advice, that the claims have no merits and are unlikely to succeed.

(b) A subsidiary company had issued a notice of termination of an associated company on 11 July 2006 to the subsidiary company’s joint venture partner (‘Respondent’). The subsidiary company’s joint venture partner is disputing the termination. The amount claimed cannot be quantified due to the nature of damages being claimed which can only be ascertained from evidence produced during the arbitration process. According to the Joint Venture Contract (‘JV Contract’), disputes must be referred to arbitration. The subsidiary company filed the Statement of Case with the Singapore International Arbitration Centre on 31 January 2008. The Respondent subsequently produced a Memorandum allegedly signed by the subsidiary company and the Respondent dated the same date as the JV Contract which allegedly states that the forum for settling of disputes should be the Chinese courts and not arbitration. The subsidiary company maintains that the Memorandum is a forgery. The arbitration tribunal stated that it has jurisdiction to hear the matter challenging its jurisdiction and this will be by way of a full hearing involving witnesses and evidence.

The Respondent had on 11 June 2008 filed an action in China seeking damages for the unlawful termination of the JV Contract by the subsidiary company. The subsidiary company has accordingly filed its objection to the action in China on the basis that the Chinese court has no jurisdiction to hear any matters in relation to the JV. This is supported by the tribunal awards on jurisdiction and on the valid termination of the JV. The objection is pending examination by the Chinese court.

On 2 February 2010, the arbitration tribunal issued a final award stating that the JV Contract was validly terminated.

On 24 May 2010, the arbitration tribunal ordered the Respondent to pay the subsidiary company all its legal and arbitration costs totalling Singapore Dollar 655,056 (RM1,572,134). The subsidiary company is currently in the midst of enforcing the arbitral award and initiating the winding-up process in China.

The enforcement of the arbitral award is still pending decision from the Guangzhou High court. Meanwhile the subsidiary company has made an application to the court for protective proceedings in relation to the final arbitral award (except for costs) and the final arbitral award in respect of costs.


260

44 CONTINGENT LIABILITIES (cont’d)

(c) A subsidiary company entered into a Licence Agreement (‘the Licence’) in respect of certain trade marks for use in limited areas of F1 motorsport for a period of 5 years. The Licensee has not honoured the terms of the Licence and as a result the subsidiary company gave notice to terminate the Licence in August 2010. The Licensee is disputing the termination and argues that the termination amounts to a repudiation of the Licence.

The Licensee initially issued proceedings against the subsidiary company in September 2010 but these were withdrawn and consolidated into the proceedings issued by the subsidiary company in October 2010.

The trial proceeded from 21 March 2011 and concluded on 1 April 2011. The judgment was handed down on 27 May 2011.

At the remedies hearing on 22 June 2011, the Judge made a number of orders in respect of the judgment and also granted permission for the subsidiary company to add further Defendants to the proceedings to take account of matters which had arisen during and immediately after the trial:

(i) With regards to the subsidiary company’s application for an injunction to restrain the Licensee from usingtheword“Lotus”onitsownasitschassisnameinF1(‘theChassisClaim’),theJudgedirectedthat this issue be determined at a later date;

(ii) The subsidiary company’s claim was dismissed except in relation to breaches of the Licence by the Licensee and a finding of fact that the subsidiary company had lawfully terminated the Licence. The subsidiary company has applied for an inquiry into the damages it has suffered;

(iii) Certain of the Licensee’s trade mark registrations were revoked;

(iv) The Licensee’s counterclaim is dismissed;

(v) A certificate that certain of the subsidiary company’s trade marks had been considered and were valid;

(vi) The subsidiary company and the Licensee refused leave to appeal;

(vii) With regards to costs:

The subsidiary company was ordered to pay the Licensee’s costs of the summary judgment application heard on 24 January 2011 and 70% of all of the residual costs of the action not provided for elsewhere subject to assessment, if not agreed. The subsidiary company is to make payment on account of costs to the Licensee amounting to £500,000 by 6 July 2011 subject to certain undertakings to be given to the Court by the Licensee.

The Licensee to pay the subsidiary company’s costs relating to the issue of revocation of the Licensee’s trade marks and the Licensee’s costs relating to Licensee’s counterclaims and 65% of the Claimants’ costs relating to the breaches of the Licence, subject to assessment, if not agreed.

Since the Judge refused both parties leave to appeal, a Notice of Appeal has been filed to the Court of Appeal.



45 CASH AND CASH EQUIVALENTS Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Short term funds deposited with licensed banks 970,341 1,385,703 134,586 248,119 Bank and cash balances 322,692 266,386 1,312 257

Deposits, bank and cash balances 1,293,033 1,652,089 135,898 248,376 Deposit pledged with a financial institution as security for banking facilities (75,000) (25,468) – – Bank balance in respect of ADF liabilities (Note 31(c)) (4,417) (20,512) – –

1,213,616 1,606,109 135,898 248,376

46 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

(a) Financial risk factors

The Group’s activities are exposed to a variety of financial risks, including foreign currency exchange risk, interest rate risk, price risk, credit risk, liquidity and cash flow risk. The Group’s overall financial risk management objective is to optimise value for its shareholders.

The Group focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Financial risk management is carried out through risks reviews, internal control systems, a comprehensive insurance programme and adherence to Group financial risk management policies. The Group uses derivative financial instruments, such as, foreign exchange contracts to hedge certain exposures. The Group does not trade in financial instruments.

Group risk management is carried out by Group Risk Department under policies approved by the Board of Directors, Board Audit Committee and Management Committee. Group Treasury identifies, evaluates and hedges financial risks in line with the Group’s operating units’ requirements. Written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and the use of derivative financial instruments, as well as investment of excess funds are provided by the Board.


262

46 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d)

(a) Financial risk factors (cont’d)

Group Treasury department reports directly to the Chief Financial Officer and Forex & Investment Committee (‘FIC’) which meets once every two months to provide guidance. The roles and responsibilities of the FIC, amongst others, include the approval of hedging strategies and transactions; money market placements and investment portfolio; and transactions and counter party limits treasury policy. It is also responsible for the recommendation of banking and funding facilities and signatories to bank accounts

The Board and the Management Committee Members regularly reviews these risks and approves the treasury policies, which cover the management of these risks.

(i) Foreign currency exchange risk

The Group operates internationally and is therefore exposed to currency risk as a result of the foreign currency transactions entered into by the Company and its subsidiary companies in currencies other than their functional currencies. The Group enters into forward foreign currency exchange contracts to limit the exposure on foreign currency receivables and payables, and on cash flows arising from anticipated transactions denominated in foreign currencies.

Management has set up a policy that requires all companies within the Group to manage their treasury activities and exposures. The Group treasury policy requires subsidiary companies to hedge their entire foreign exchange exposure up to 100% for firm commitments and is allowed to hedge up to 75% for forecast commitment, where appropriate. In addition, the Group also takes advantage of any natural effects of its foreign currencies revenues and expenses by maintaining current accounts in foreign currencies.

The Group’s principal foreign currency exposure relates mainly to United States Dollars (‘USD’), Japanese Yen (‘JPY’), Pound Sterling (‘GBP’) and Euro (‘EUR’).

If the functional currencies appreciated by 10% against the other currencies, with all other variables held constant, the impact would be as follows:

Group 2011 Increase/(decrease) RM’000 Profit before tax

RM/USD (7,235) RM/JPY 6,069 GBP/JPY 2,248 RM/EUR 1,697

A 10% weakening of the above currencies against the functional currencies concerned would have an opposite effect to the above amounts, on the basis that all other variables remain constant.





(ii) Interest rate risk

The Group’s interest income and finance costs are affected by changes in market interest rates on fixed deposits interest rates and interest rates on borrowings respectively.

Interest rates risk arises from the Group’s short term deposits and borrowings. The short term deposits are placed at prevailing interest rates.

If the GBP interest rates increase/(decrease) by 10%, with all other variables remaining constant, the Group’s profit before tax would be higher or lower by RM1,088,000 as a result of lower or higher interest expense.

(iii) Market risk

The Group does not face significant exposure from the risk from changes in debt and equity prices.

(iv) Credit risk

Financial assets that are potentially subject to credit risk consist principally of receivables, deposits, bank and cash balances.

The Group seeks to invest cash assets safely and profitably. The cash and cash equivalent which comprise deposits and cash at banks are placed with credit worthy financial institutions where all deposits are guaranteed by the Central banks or Bank Negara, where applicable. The Group considers the risk of material loss for deposits placed with banks is remote in view of the financial strength of the financial institutions.

The Group seeks to control customer’s credit risk by ensuring that significant sales of vehicles and provision of services are made to customers with an appropriate credit history. Receivables are presented net of impairment for doubtful debts

(v) Liquidity and cash flow risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

The overall objective of cash management is to maintain sufficient liquidity and available funds to meet daily cash needs, while maintaining controls and security over cash movements. The Group uses a series of processes to obtain maximum benefits from its flow of funds, such that they are efficiently managed to maximise income from investment and minimise cost on borrowed funds. Group Treasury also ensures that there are sufficient unutilised standby facilities, funding and liquid assets available to cover both short term and long term funding requirements.


264



(v) Liquidity and cash flow risk (cont’d)

The Group’s financial liabilities analysed into their relevant maturity from reporting date are as follows:

Group 2011 Less than Between More than 1 year 1 and 5 years 5 years RM’000 RM’000 RM’000

Trade and other payables and accruals 1,524,106 – – Bank borrowings 362,215 9,784 – Lease and hire purchase creditors 1,883 918 – Amounts due to associated companies 61,213 – – ADF liabilities – 4,417 – Amounts due to jointly controlled entities 43,773 – –

Company 2011 Less than Between More than 1 year 1 and 5 years 5 years RM’000 RM’000 RM’000

Trade and other payables 795 – – Amounts due to associated companies 19 – – Amounts due to a subsidiary company 35,825 – –

(b) Capital risk management

The Group’s objectives in managing capital are to safeguard its ability to continue as a going concern and to maintain an efficient capital structure that maximises returns to its shareholders and other stakeholders.

The Group monitors the capital structure using gearing ratio. This ratio is calculated as total debts (including short and long term borrowings) divided by total equity which is the sum of equity and total debt.

The long and short term borrowings amounting to RM310.7 million as at 31 March 2011 in respect of the Lotus Group has been repaid with the financing facilities mentioned in Note 47.




(b) Capital risk management (cont’d)

The Group gearing ratio as at 31 March 2011 is as follows:

2011 RM’000

Total debt 373,756 Total equity 5,406,740

Total capital 5,780,496

Gearing ratio 6.40%

(c) Fair values

The carrying amounts of financial assets and liabilities of the Group carried at amortised costs at the date of statement of financial position approximated their fair values.

47 SIGNIFICANT EVENTS SUBSEQUENT TO THE FINANCIAL YEAR

Subsequent to the Group’s financial year end, Lotus Cars Limited (‘Lotus Cars’ or the ‘Borrower’), a wholly owned subsidiary company of the Group secured financing facilities comprising:

(i) Syndicated Term Loan Facilities GBP230 million (RM1,120 million);

(ii) Revolving Credit Facility GBP25 million (RM122 million); and

(iii) Working Capital Facilities GBP15 million (RM73 million);

collectively known as ‘the Facilities’ totalling GBP270 million (RM1,315 million).

The Syndicated Term Loan Facilities are repayable in nine quarterly installments from 31 March 2015 to 31 March 2017. The Revolving Credit Facility and Working Capital Facilities are repayable on 31 March 2017. The interest on the Syndicated Term Loan Facilities and the Revolving Credit Facility is 2% per annum above the London Interbank Offered Rate (‘LIBOR’) plus the cost of maintaining statutory reserve on the amounts outstanding. The commission for Working Capital Facilities ranges between 0.1% to 0.125% per month to 1.2% per annum.


266

47 SIGNIFICANT EVENTS SUBSEQUENT TO THE FINANCIAL YEAR (cont’d)

The Facilities are secured by:

(i) Charge over land and building of Lotus Cars;

(ii) Assignment of Lotus Cars receivables;

(iii) Charge over designated bank accounts of certain subsidiary companies within LGIL;

(iv) Memorandum of deposit over shares of Lotus Cars;

(v) A corporate guarantee from PONSB; and

(vi) Negative pledge of Lotus Cars assets.

The Facilities subject the Group, Lotus Cars and PONSB to financial covenants such as Minimum Tangible Net Worth, Debt to Tangible Net Worth ratio and Minimum Cash Threshold, which are required to be tested quarterly, and Debt Cover and Debt Service Coverage ratio to be tested annually.

Additionally, Lotus Cars had given general undertakings to ensure that:

(i) A shareholder subscription agreement with a Joint Venture partner is to be executed by 30 June 2011 and procure the shareholder subscription agreement to be unconditional within 9 months of its execution (‘Shareholder Subscription Agreement 1’);

(ii) A shareholder subscription agreement with a key management personnel is to be executed by 30 June 2011, and to procure the shareholder subscription to be unconditional within 3 months of its execution; and that no less than GBP12.5 million is to be contributed by a key management personnel within 6 months and a remaining amount of GBP12.5 million is to be paid within 18 months of the agreement becoming unconditional (‘Shareholder Subscription Agreement 2’); and

(iii) Pledging of Lotus Cars USA Inc. bank accounts is to be perfected by 30 June 2011.

As at 30 June 2011, the above Shareholder Subscription Agreements have not been executed. The Facility Lenders had on 15 July 2011, approved the extension of time to:

(i) Execute the Shareholder Subscription Agreement 1 no later than 31 December 2011;

(ii) Execute the Shareholder Subscription Agreement 2 no later than 30 September 2011; and

(iii) Ensure the pledge over bank accounts of Lotus Cars USA Inc. is perfected no later than 31 December 2011.



48 EFFECTS OF ADOPTION OF NEW ACCOUNTING STANDARDS

(a) Impact on the statements of financial position

Balance as at Balance as at 31 March 2010 1 April 2010

As Effects of After effects previously adopting of adopting reported FRS 139 FRS 139 RM’000 RM’000 RM’000

Group

Non-current assets Associated companies 152,640 86 152,726 Jointly controlled entities 202,545 (4,488) 198,057

Current assets Available-for-sale financial assets – 11,776 11,776 Short term investments 9,676 (9,676) – Non-current assets held for sale 2,100 (2,100) –

Reserves and equity Retained earnings 4,372,792 (4,402) 4,368,390

Company

Non-current asset Amounts due from subsidiary companies 232,946 (39,776) 193,170

Reserves and equity Retained earnings 1,723,894 (39,776) 1,684,118


268

48 EFFECTS OF ADOPTION OF NEW ACCOUNTING STANDARDS (cont’d)

(a) Impact on the statements of financial position (cont’d)

Increase/(decrease) to balances as at 31 March 2011 IC 13 FRS 139 RM’000 RM’000

Group

Current liabilities Trade and other payables – 1,151 Deferred revenue 11,358 – Derivative financial liabilities – 439

Reserves and equity Retained earnings (11,358) (1,590)

Increase/(decrease) to balances as at 31 March 2011 FRS 139 RM’000

Company

Non–current assets Amounts due from subsidiary companies (2,159)

Reserves and equity Retained earnings (2,159)

(b) Impact on the statements of comprehensive income

Increase/(decrease) For the financial year ended 31 March 2011 IC 13 FRS 139 RM’000 RM’000

Group

Revenue (11,358) – Finance cost - others – (1,151) Net forward foreign exchange contract loss – (3,549)



48 EFFECTS OF ADOPTION OF NEW ACCOUNTING STANDARDS (cont’d)

(b) Impact on the statements of comprehensive income (cont’d)

Increase/(decrease) For the financial year ended 31 March 2011 FRS 139 RM’000

Company

Finance cost – Fair value adjustment on amount due from a subsidiary company (6,109) Interest income – Accretion of interest on amount due from a subsidiary company 3,951

49 COMPARATIVE FIGURES

Certain comparative figures in the financial statements of the Group have been reclassified to conform with presentation in the current financial year. These relate mainly to the following:

Group Company As As previously As previously As reported reclassified reported reclassified RM’000 RM’000 RM’000 RM’000

Statements of financial position Amounts due from associated companies 34,615 – 350 – Dividend receivable – – 6,600 6,950 Amounts due to associated companies (79,730) (45,115) – –

Statements of comprehensive income Cost of sales (7,616,732) (7,382,698) – – Research and development expense – (42,899) – – Other operating income 324,920 181,232 – – Other operating expense (1,689) (49,136) – –


270

50 REALISED AND UNREALISED RETAINED EARNINGS

Supplementary information disclosed pursuant to Bursa Malaysia Securities Berhad (‘Bursa Securities’) Listing Requirements.

The breakdown of the retained earnings of the Group and the Company as at 31 March 2011, into realised and unrealised profits, pursuant to a directive issued by Bursa Securities on 25 March 2010 is as follows:

Group Company 2011 2011 RM’000 RM’000

Total retained earnings of the Company and its subsidiaries: - Realised 4,375,043 1,719,861 - Unrealised (107,895) –

Total retained earnings from associated companies: - Realised 63,010 – - Unrealised – –

Total retained earnings from jointly controlled entities: - Realised 90,879 – - Unrealised (10,876) –

Consolidation adjustments 33,821 –

Total retained earnings as at 31 March 4,443,982 1,719,861

The determination of realised and unrealised profit is compiled based on Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Securities Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

The disclosure of realised and unrealised profits is solely for the purpose of complying with the disclosure requirements stipulated in the directive of Bursa Securities and should not be applied for any other purposes.



We, Dato’ Sri Mohd Nadzmi bin Mohd Salleh and Dato’ Sri Syed Zainal Abidin B Syed Mohamed Tahir, two of the Directors of Proton Holdings Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 161 to 270 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 31 March 2011 and of the results and cash flows of the Group and Company for the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities.

Signed on behalf of the Board of Directors in accordance with a resolution dated 26 July 2011.

DATO’ SRI MOHD NADZMI BIN MOHD SALLEH DATO’ SRI SYED ZAINAL ABIDIN BCHAIRMAN SYED MOHAMED TAHIR MANAGING DIRECTOR

I, Azhar bin Othman, 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 161 to 270 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.

AZHAR BIN OTHMAN

Subscribed and solemnly declared by the abovenamed Azhar bin Othman at Shah Alam in Malaysia on 26 July 2011, before me.

COMMISSIONER FOR OATHS

STATEMENT BY DIRECTORS PURSUANT TO Section 169(15) Of The Companies Act, 1965

STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965

272

REPORT ON THE FINANCIAL STATEMENTS

We have audited the financial statements of Proton Holdings Berhad on pages 161 to 269 which comprise the statements of financial position as at 31 March 2011 of the Group and of the Company, and the statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out in Notes 1 to 49.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965, and for such internal control as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as of 31 March 2011 and of their financial performance and cash flows for the year then ended.

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PROTON HOLDINGS BERHAD (Incorporated in Malaysia) (Company No. 623177-A)


REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 16 to the financial statements.

(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

OTHER REPORTING RESPONSIBILITIES

The supplementary information set out in Note 50 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements,asissuedbytheMalaysianInstituteofAccountants(“MIAGuidance”)andthedirectiveofBursaMalaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

OTHER MATTERS

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PRICEWATERHOUSECOOPERS THAYAPARAN A/L S. SANGARAPILLAI (No. AF: 1146) (No. 2085/09/12 (J)) Chartered Accountants Chartered Accountant

Kuala Lumpur26 July 2011

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF PROTON HOLDINGS BERHAD (cont’d)

(Incorporated in Malaysia) (Company No. 623177-A)

274

ANALYSIS OF SHAREHOLDINGS

Share Capital

Authorised Share Capital Issued and Fully Paid Up Capital RM1,000,000,000/-Issued and Fully Paid Up Capital RM549,213,002/-Class of Shares Ordinary Shares of RM1/- eachVoting Rights One (1) Voting Right for One (1) Ordinary Share

ANALYSIS OF SHAREHOLDINGS BY RANGE GROUPS

No. of % Shareholders/ of Shareholders/ % Size of Holdings Depositors Depositors No. of Shares of Shares held

1 - 99 133 1.815 1,638 0.000 100 - 1,000 3,640 49.687 3,381,071 0.616 1,001 - 10,000 2,943 40.172 11,282,291 2.054 10,001 - 100,000 453 6.184 14,065,039 2.561 100,001 - 27,460,649 154 2.102 196,894,690 35.850 27,460,650 and above 3 0.040 323,588,273 58.919

Total 7,326 100.000 549,213,002 100.000

DISTRIBUTIONS OF SHAREHOLDINGS

No. of Shareholders/ Depositors No. of Shares % of Shares heldSize of Holdings Malaysian Foreign Malaysian Foreign Malaysian Foreign

1 - 99 130 3 1,580 58 0.000 0.000 100 - 1,000 3,589 51 3,335,571 45,500 0.607 0.008 1,001 - 10,000 2,851 92 10,866,591 415,700 1.979 0.076 10,001 - 100,000 373 80 10,699,515 3,365,524 1.948 0.613 100,001 - 27,460,649 60 94 136,101,027 60,793,663 24.781 11.069 27,460,650 and above 3 0 323,588,273 0 58.919 0.000

Total 7,006 320 484,592,557 64,620,445 88.234 11.766

SHAREHOLDING STATISTICS As At 29 July 2011


SUBSTANTIAL SHAREHOLDERS

No. Name No. of Shares %

1 Khazanah Nasional Berhad 234,734,693 42.740

2 Citigroup Nominees (Tempatan) Sdn. Bhd. 45,732,900 8.326 Employees Provident Fund Board

3 Cartaban Nominees (Tempatan) Sdn. Bhd. 43,120,680 7.851 Petroliam Nasional Berhad (Strategic Inv)

THIRTY LARGEST SHAREHOLDERS


1 Khazanah Nasional Berhad 234,734,693 42.740

2 Citigroup Nominees (Tempatan) Sdn. Bhd. 45,732,900 8.326 Employees Provident Fund Board

3 Cartaban Nominees (Tempatan) Sdn. Bhd. 43,120,680 7.851 Petroliam Nasional Berhad (Strategic Inv)

4 MAYBAN Nominees (Tempatan) Sdn. Bhd. 20,493,600 3.731 MAYBAN Trustees Berhad for Public Regular Savings Fund

5 MAYBAN Nominees (Tempatan) Sdn. Bhd. 18,290,800 3.330 MAYBAN Trustees Berhad for Public Ittikal Fund

6 Lembaga Tabung Haji 16,820,427 3.062

7 Kumpulan Wang Persaraan (Diperbadankan) 13,554,200 2.467

8 Amanahraya Trustees Berhad 10,867,000 1.978 Amanah Saham Malaysia

9 Citigroup Nominees (Tempatan) Sdn. Bhd. 9,589,100 1.745 Employees Provident Fund Board (Nomura)

10 Amanahraya Trustees Berhad 8,460,000 1.540 Amanah Saham Wawasan 2020

11 HSBC Nominees (Asing) Sdn. Bhd. 7,629,300 1.389 Exempt An for The Bank of New York Mellon (Mellon Acct)

12 HSBC Nominees (Asing) Sdn. Bhd. 5,817,000 1.059 NTGS LDN for Skagen Kon-Tiki Verdipapirfond

13 Amanahraya Trustees Berhad 5,355,100 0.975 Skim Amanah Saham Bumiputera

14 Permodalan Nasional Berhad 4,599,900 0.837

15 Amanahraya Trustees Berhad 4,247,800 0.773 AS 1Malaysia

SHAREHOLDING STATISTICS As At 29 July 2011 (cont’d)

276

THIRTY LARGEST SHAREHOLDERS (cont’d)


16 Citigroup Nominees (Asing) Sdn. Bhd. 3,786,000 0.689 CBNY for Dimensional Emerging Markets Value Fund

17 Amanahraya Trustees Berhad 3,775,000 0.687 Public Islamic Sector Select Fund

18 HSBC Nominees (Asing) Sdn. Bhd. 2,234,100 0.406 Exempt An for JPMorgan Chase Bank, National Association (U.S.A.)

19 Cartaban Nominees (Asing) Sdn. Bhd. 2,179,100 0.396 Government of Singapore Investment Corporation Pte. Ltd. for Government of Singapore (C)

20 HSBC Nominees (Asing) Sdn. Bhd. 1,958,600 0.356 Exempt An for JPMorgan Chase Bank, National Association (Australia)

21 HSBC Nominees (Asing) Sdn. Bhd. 1,856,700 0.338 TNTC for Brandes Institutional Equity Trust

22 HSBC Nominees (Asing) Sdn. Bhd. 1,586,100 0.288 TNTC for LSV Emerging Markets Equity Fund L.P.

23 Employees Provident Fund Board 1,470,000 0.267

24 Citigroup Nominees (Asing) Sdn. Bhd. 1,404,700 0.255 CBNY for DFA Emerging Markets Small Cap Series

25 Citigroup Nominees (Tempatan) Sdn. Bhd. 1,400,000 0.254 Employees Provident Fund Board (RHB Inv)

26 Pertubuhan Keselamatan Sosial 1,385,900 0.252

27 Amanahraya Trustees Berhad 1,316,700 0.239 Public Islamic Select Treasures Fund

28 Kaf Trustee Berhad 1,200,000 0.218 Kaf Fund Management Sdn. Bhd. for Kaf Seagroatt & Campbell Berhad

29 Koperasi Permodalan Felda Malaysia Berhad 1,194,800 0.217

30 Citigroup Nominees (Asing) Sdn. Bhd. 1,141,200 0.207 Legal & General Assurance (Pensions Management)

TOTAL 477,201,400 86.888

DIRECTORS’ SHAREHOLDINGS

None of the Directors hold any shares in the Company.

SHAREHOLDING STATISTICS As At 29 July 2011 (cont’d)


PROPERTIES OWNED BY PERUSAHAAN OTOMOBIL NASIONAL SDN. BHD. (PONSB)

Date of Acquisition/ Age of Age ofLocation Description Tenure Revaluation Building Building Net Book Value (RM ‘Mil) 2010 2011 2010 2011

No. H.S. (D) 71311, Land with an area of Freehold 05.09.1983 25 26 Land 68.40 68.40 No. P.T 82 6,231,080 sq. ft. with Years Years Buildings 100.40 96.60 Mukim of Damansara, main office, main factory, District of Petaling, engine factory, medium Selangor Darul Ehsan. 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.

No. H.S. (D) 71309, Land having an area of Freehold 19.11.1993 – – Land 2.60 2.60 No. P.T. 80, 158,107 sq. ft. used Mukim of Damansara, as the car park for staff. District of Petaling, Selangor Darul Ehsan.

Geran 215214, Land with an area of Freehold 30.12.1992 16 Years 17 Years Land 21.20 21.20 Lot 61812 Bandar 1,027,339 sq. ft. with Buildings 33.70 30.70 Glenmarie, office, factory and District of Petaling, canteen buildings and Selangor Darul Ehsan. sports facilities used for the Casting Plant.

HSD 86554, PT 257, Land with an area Freehold 18.04.1994 16 Years 17 Years Land 54.90 54.90 Mukim of Damansara, of 2,396,727 sq. ft. Track & District of Petaling, adjoining the Company’s Buildings 6.90 4.80 Selangor Darul Ehsan. northern boundary housing the semi-high speed test track and control building. Size of Test Track is 2,102,731 sq. ft.

No. H.S. (D) B.P. 5653 Land with an area of Freehold 03.02.1999 7 Years 8 Years Land 1.00 1.00 and 5654 Bil P.T. 55,440,519 sq. ft, Building 417.90 404.60 16162 and 10163, for the construction of District of Batang a second automobile Padang, Mukim of plant, administrative Ulu Bernam Timur, building and sports Perak Darul Riduan. complex facilities. Total built-up area is 3,374,577 sq.ft.

PROPERTIES OWNED BY PROTON GROUP As At 31 March 2011

278

PROPERTIES OWNED BY PROTON GROUP As At 31 March 2011 (cont’d)

PROPERTIES OWNED BY PROTON EDAR SDN BHD (PESB)


Vehicel Preparation Vehicle Preparation Freehold 01.12.2000 8 Years 9 Years Building 3.90 3.66 Centre (VPC) Centre and stock control No H.S. (D) 86555, building with a land PT No. 258 and area of 315,553 sq. ft. H.S. (D) 86557, (total built-up area PT No. 260, TP 5 is 101,956 sq. ft.) Road, Sime UEP Industrial Park, 47600 Subang Jaya, Selangor Darul Ehsan.

Centre of Excellence Administration & Freehold 01.03.2001 9 Years 10 Years Land 35.70 35.70 (COE) & Pre-Delivery Operation Office and Building 113.90 107.48 and Inspection Pre-Delivery & Inspection Centre (PDI) Centre with total land No H.S. (D) 86596, area of 465,184 sq. ft. PT No. 299 and H.S. (D) 86597, PT No. 300, TP 5 Road, Sime UEP Industrial Park, 47600 Subang Jaya

No. 2, Lrg. Samarinda Three (3) storey corner Freehold 10.05.2002 7 Years 8 Years Building 0.55 0.51 6A Off Jalan Kebun terraced shopoffice H.S (D) 60042, unit with a land area P.T. No. 64566 of approximately Mukim Klang Selangor 2,476 sq. ft.

Lot 859, Block 16 Land with an area of Leasehold 12.07.2002 8 Years 9 Years Land 2.80 1.67 Kuching Central 48,384 sq. ft. used for 27.11.2007 2 Years 3 Years Building 6.70 6.37 Land District, sales outlet and service Stampin 4½ Mile, centre with a built-up Penrissen Road area of approximately Kuching, Sarawak 37,049 sq. ft.

No. 218089. Land with an area of Freehold 29.04.2002 8 Years 9 Years Land 8.10 8.10 Mukim Plentong, 87,120 sq. ft. to be Building 5.80 5.55 Daerah Johor Bahru, used for sales outlet Johor and service centre

H.S (D) 63313, Land with an area of Leasehold 19.07.2002 7½ Years 8½ Years Land 3.10 2.79 P.T. No. 9671 79,949 sq.ft. used for 29.09.2003 5 Years 6 Years Building 2.40 2.27 Mukim of Ampangan sales outlet and service District of Seremban, centre is 7,175 sq.ft. Negeri Sembilan


PROPERTIES OWNED BY PROTON EDAR SDN BHD (PESB) (cont’d)


HSD 318392, Land with an area of Leasehold 06.08.2002 7½ Years 8½ Years Land 5.10 5.01 PTD 81816, 57,267 sq.ft. to be used Mukim of Pulai, for sales outlet and District of service centre. Johor Bahru, Johor Darul Takzim.

Lot PT 4352, Land with an area of Freehold 13.09.2002 7½ Years 8½ Years Land 1.40 1.40 Mukim Kuah District 51,979 sq. ft. to be used of Langkawi Kedah. for sales outlet and service centre.

Geran 111857, Land with an area of Freehold 02.09.2002 7½ Years 8½ Years Land 9.60 9.60 Lot 67320, 61,524 sq. ft. to be used 01.03.2004 5 Years 5 Years Building 5.50 5.20 Mukim of Sungai for sales outlet and Buloh, District of service centre. Petaling, Selangor Darul Ehsan.

No H.S. (D) 36599, Land with an area of Freehold 05.12.2005 4½ Years 5½ Years Land 5.80 5.80 PT No. 302, 123,853 sq. ft. to be TP 5 Road, Sime used for stockyard area. UEP Industrial Park, 47600 Subang Jaya, Selangor Darul Ehsan.

L&D Tanjung Malim, Administration & Freehold 31.07.2007 2 Years 3 Years Building 4.40 4.20 Proton Edar Sdn. Bhd., Operation Office. c/o Proton Tanjung Malim Sdn. Bhd., Proton City, 35900, Tanjung Malim, Perak.

Central Hub Building, Logistik & Distribution. – 03.06.2010 – 1 Year Building – 27.44 Proton City, 35900, Tanjung Malim, Perak.

Joint Inspection Area, Vehicle Inspection. – 08.04.2010 – 1 Year Building – 0.46 Building@Shah Alam.


280

PROPERTIES OWNED BY PROTON CARS (UK) LTD (PCUK)


Ref. AV 915, Units Land with an area of Freehold 31.03.1994 34 Years 35 Years Land 5.01 4.94 1-3, Crowley Way, 162,479 sq. ft. with a Building 1.49 1.43 Avonmouth, parts warehouse building Bristol Avon BS11 9YR, England.

PROPERTIES OWNED BY LOTUS CARS LTD.


Land adjacent to Two parcels of land with Freehold 26.09.1968 42 Years 43 Years Land 4.87 4.80 Potash Lane, Hethel, a total area of 6,286,550 Building 52.07 51.88 Norwich, Norfolk NR sq. ft. with the factory, 14 8EZ, England and engineering facilities, Land north of Browic. offices and test track of Lotus Group International Ltd. Total built up area is 515,500 sq. ft.

Potash Lane, Hethel, R&D building rented Freehold 01.03.2000 10 Years 11 Years Building 8.89 20.82 Norwich, Norfolk to group companies. NR14 8EZ, England. Total built up area is 86,600 sq. ft.

PROPERTIES OWNED BY LOTUS HOLDINGS INC


1254 North Main Land with an area of Freehold 24.02.2000 Office: Office: Land 0.82 0.81 St, Ann Arbor, approximately 165,528 90 Years 91 Years Building 5.84 5.13 Michigan USA. sq. ft. with office and Workshop: Workshop: workshop. Total built up 44 Years 45 Years area is 73,000 sq. ft.



SHARE PRICE AND VOLUME TRADED

Volume Share Price

Share Price(RM) Volume

Apr 10 May Jun Jul Aug Sep Oct Nov Dec Jan 11 Feb Mar

6.00

5.00

4.00

3.00

2.00

1.00

0.00

4,000,000

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

282

NOTICE IS HEREBY GIVEN THAT THE EIGHTH (8TH) ANNUAL GENERAL MEETING OF THE COMPANY WILL BE HELD AT THE AUDITORIUM, LEVEL 1, PROTON CENTRE OF EXCELLENCE, KM 33.8, WESTBOUND SHAH ALAM EXPRESSWAY, 47600 SUBANG JAYA, SELANGOR DARUL EHSAN, MALAYSIA ON THURSDAY, 15 SEPTEMBER 2011 AT 10.00 A.M. FOR THE FOLLOWING PURPOSES:

1. To receive the Audited Financial Statements for the year ended 31 March 2011 together with the Reports of the Directors and the Auditors thereon.

2. To elect the following Directors who retire in accordance with the Company’s Articles of Association:

Article 104

(i) Dato’ Sri Mohd Nadzmi Bin Mohd Salleh

(ii) Dato’ Michael Lim Heen Peok

Article 111

(i) Datuk Johar Bin Che Mat

(ii) Datuk Nozirah Binti Bahari

Article 139

(i) Dato’ Sri Haji Syed Zainal Abidin B Syed Mohamed Tahir

3. To approve the payment of Directors’ Fees for the Financial Year ended 31 March 2011.

4. To declare and approve the payment of a first and final dividend of 10 sen per share less 25.0% income tax in respect of the Financial Year ended 31 March 2011 as recommended by the Directors.

5. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration.

Ordinary Resolution 1








NOTICE OF ANNUAL GENERAL MEETING


NOTICE OF ANNUAL GENERAL MEETING (cont’d)

6. SPECIAL BUSINESS

To consider and, if thought fit, to pass the following as Special Resolution:

PROPOSED AMENDMENTS TO THE COMPANY’S ARTICLES OF ASSOCIATION (‘PROPOSED AMENDMENTS’)

‘THAT the Proposed Amendments to the Company’s Articles of Association in the form and manner as set out in the Explanatory Notes appearing on pages 286 to 287 of this Annual Report be and are hereby approved.

AND THAT the Directors and/or any of them be and are authorised to do all acts, deeds and things as are necessary and/or expedient in order to give full effect to the Proposed Amendments with full powers to assent to any conditions, modifications, variation and/or amendments as may be required by Bursa Malaysia Securities Berhad or any relevant authorities.’

NOTICE OF BOOKS CLOSURE AND DIVIDEND PAYMENT

NOTICE IS HEREBY GIVEN THAT the first and final dividend of 10 sen less 25.0% income tax in respect of the Financial Year ended 31 March 2011, if approved at the Eighth (8th) Annual General Meeting will be paid on 20 October 2011 to shareholders whose names appear in the Register of Members and/or the Record of Depositors on 23 September 2011.

A Depositor shall qualify for entitlement to the first and final dividend only in respect of:

(a) Shares transferred into the Depositors’ Securities Account before 4:00 p.m. on 23 September 2011 in respect of transfer.

(b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.

By Order of the Board

SUHLA AL ASRI (MAICSA NO. 7025570) Company Secretary Subang Jaya 24 August 2011

Special Resolution 1

284

NOTES:

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

2. The instrument appointing a proxy must be in writing under the hands of the appointer or his attorney duly authorised in writing or, if such appointer is a corporation, under its common seal or that 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 “signedasauthorisedofficerunderAuthorisationDocumentwhichisstillinforce,nonoticeofrevocationhavingbeenreceived”.IftheFormofProxyissignedundertheattorneydulyauthorised,itshouldbeaccompaniedbyastatementreading“signedunderPowerofAttorneywhichisstillinforce,nonoticeofrevocationhavingbeenreceived”.Acopyofthe Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed.

3. The maximum number of proxies that may be appointed is two. Where a member appoints more than one proxy, the appointment shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

4. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

Every appointment submitted by an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, must specify the CDS Account Number.

5. The instrument appointing the proxy must be deposited at the office of the Registrars, Tricor Investor Services Sdn. Bhd. Level 17, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty eight (48) hours before the time appointed for the meeting.

6. For the purpose of determining a member who shall be entitled to attend the Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn. Bhd., in accordance with Article 67(b) of the Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 7 September 2011. Only a depositor whose name appears on the General Meeting Record of Depositors as at 7 September 2011 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his stead.

NOTICE OF ANNUAL GENERAL MEETING (cont’d)


PURSUANT TO PARAGRAPH 8.27(2) OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD, APPENDED HEREUNDER ARE:

DIRECTORS STANDING FOR RE-ELECTION

Directors who are standing for re-election at the Eighth (8th) Annual General Meeting of the Company which will be held at The Auditorium, Level 1, PROTON Centre of Excellence, KM 33.8, Westbound Shah Alam Expressway, 47600 Subang Jaya, Selangor Darul Ehsan, Malaysia, on Thursday, 15 September 2011 at 10.00 a.m. pursuant to the Company’s Articles of Association are:

Article 104

Dato’ Sri Mohd Nadzmi Bin Mohd Salleh Please refer to page 26 of the Annual Report

Dato’ Michael Lim Heen Peok Please refer to page 30 of the Annual Report

Article 111

Datuk Johar Bin Che Mat Please refer to page 34 of the Annual Report

Datuk Nozirah Binti Bahari Please refer to page 34 of the Annual Report

Article 139

Dato’ Sri Syed Zainal Abidin B Syed Mohamed Tahir Please refer to page 28 of the Annual Report

STATEMENT ACCOMPANYING THE NOTICE OF EIGHTH (8TH) ANNUAL GENERAL MEETING

286

Article No. 82(1)

Existing At any general meeting a resolution put to the vote of the meeting shall be determined by a show of hands of the members present in person or by proxy, unless a poll is demanded (before or upon the declaration of the result of a show of hands):

(a) By the chairman of the meeting;

(b) By at least two (2) members present in person or by proxy representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

(c) By a member or members holding shares in the Company conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one – tenth of the total sum paid up on all the shares conferring that right;

PROVIDED THAT no poll shall be demanded on the election of a Chairman of a meeting or on any question of adjournment. A proxy shall be entitled to vote on a show of hands on any question at any general meeting.

Revised At any general meeting, a resolution put to the vote of the meeting shall be determined by a show of hands of the members present in person or by proxy, unless a poll is demanded (before or upon the declaration of the result of a show of hands):

(a) By the chairman of the meeting;

(b) By at least two (2) members present in person or by proxy representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

(c) By a member or members holding shares in the Company conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one – tenth of the total sum paid up on all the shares conferring that right;

Subject to the above, a proxy shall be entitled to vote on a show of hands at any general meeting.

Rationale For better administration of voting at general meeting.

EXPLANATORY NOTES ON THE PROPOSED AMENDMENTSTO THE COMPANY’S ARTICLES OF ASSOCIATION


Article No. 168

Existing Any dividend, interest or other money payable in cash in respect of shares may be paid by cheque or warrant and sent through the post directed to the registered address of the holder or to such person and to the such address as the holder may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to such person as the holder entitled to the share in consequence of the death or bankruptcy of the holder may direct, and the payment of any such cheque or warrant shall operate as a good discharge to the Company in respect of the dividend represented thereby. Every such cheque or warrant shall be sent at the risk of the person entitled to the money represented thereby.

Revised Unless otherwise directed, any dividend, interest or other money payable in cash in respect of shares may be paid by / via (i) cheque or warrant made payable to the holder and sent through the post directed to the registered address of the holder or to such person and to such address as the holder may in writing direct, or, (ii) electronic fund transfer or remittance or other methods of funds transfer or remittance to such bank account of the holder or person entitled thereto as provided to the Central Depository from time to time subject to the rules and such payment shall operate as a good and full discharge by the Company in respect of the dividend represented thereby.

Every such cheque or warrant or electronic fund transfer or remittance shall be sent / made at the risk of the person entitled to the money thereby represented. No unpaid dividend or unpaid interest shall bear interest as against the Company.

Rationale To be in line with Bursa Malaysia’s Listing Requirements on E-Dividend.

Article No. 151A (New)

Existing –

Revised Where a Secretary gives notice of resignation to the Directors, the Secretary shall cease to be the Secretary of the Company upon the expiry of the notice of resignation as per his / her Letter of Appointment.

Rationale The rationale for the proposed incorporation of this new article is to improve the effectiveness of the process of resignation of the company secretary while upholding the principles of good corporate governance practice.

EXPLANATORY NOTES ON THE PROPOSED AMENDMENTS TO THE COMPANY’S ARTICLES OF ASSOCIATION (cont’d)

This page is intentionally left blank.

FORM OF PROXY

PROTON ANNUAL REPORT 2011PROTON Holdings Berhad (623177-A)

No. of Shares Held

CDS Account No. of Authorised Nominee

I/We ________________________________________________________________________________________ (name of shareholder, in capital letters)

NRIC No. __________________________________ (new) __________________________________ (old) ID No./Company No. _____________________

of _____________________________________________________________________________________________________________________ (full address)

being a member of PROTON Holdings Berhad, hereby appoint ______________________________________________________________________

(name of proxy as per NRIC, in capital letters) NRIC No. ________________________________ (new) _______________________________ (old)

or failing him/her, __________________________________________________________________________________________________________________

(name of proxy as per NRIC, in capital letters) NRIC No. ________________________________ (new) _______________________________ (old)

or failing him/her, the CHAIRMAN OF THE MEETING as my/our proxy to vote for me/our behalf at the Eighth (8th) Annual General Meeting of the Company to be held at The Auditorium, Level 1, PROTON Centre of Excellence, KM33.8, Westbound Shah Alam Expressway, 47600 Subang Jaya, Selangor Darul Ehsan, Malaysia at 10.00 a.m. on Thursday, 15 September 2011 or at any adjournment thereof.

My/Our proxy/proxies is/are to vote as indicated below:-

ORDINARY RESOLUTIONS FOR AGAINST

Re-election of Dato’ Sri Mohd Nadzmi Bin Mohd Salleh pursuant to Ordinary Resolution 1 Article 104

Re-election of Datuk Michael Lim Heen Peok pursuant to Article 104 Ordinary Resolution 2

Re-election of Datuk Johar Bin Che Mat pursuant to Article 111 Ordinary Resolution 3

Re-election of Datuk Nozirah Binti Bahari pursuant to Article 111 Ordinary Resolution 4

Re-election of Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Ordinary Resolution 5 pursuant to Article 139

To approve the payment of Directors’ Fees for the Financial Year Ordinary Resolution 6 ended 31 March 2011

To declare and approve the payment of a First and Final Dividend of Ordinary Resolution 7 10 sen per share less 25% income tax for the Financial Year ended 31 March 2011

To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Ordinary Resolution 8 Company and to authorise the Directors to fix their remuneration.

SPECIAL BUSINESS

Proposed amendments to the Company’s Articles of Association Special Resolution 1

(Please indicate with an “X” in the appropriate box against each resolution, how you wish your proxy to vote. If no instruction is given, this form will be taken to authorise the proxy to vote at his/her discretion.)

Dated this __________________ day of ________________ 2011.

__________________________________________________________Signature/Common Seal of Appointer(If the appointor is an attorney or a corporation, please see Note 2 below)

Contact No: ______________________________________________

For appointment of more than one proxy, state number of shares and percentage of shareholdings to be represented by the proxies:-

No. of Shares Percentage

Proxy 1 ________________________ _____________ %

Proxy 2 ________________________ _____________ %

NOTES:

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

2. The instrument appointing a proxy must be in writing under the hands of the appointer or his attorney duly authorised in writing or, if such appointer is a corporation, under its common seal or that of an officer or attorney duly authorised. If the Form of Proxy is signed under the hand of an officer dulyauthorised,itshouldbeaccompaniedbyastatementreading“signedasauthorisedofficerunderAuthorisationDocumentwhichisstillinforce,nonoticeofrevocationhavingbeenreceived”.IftheFormofProxyidsignedundertheattorneydulyauthorised,itshouldbeaccompaniedbyastatementreading“signedunderPowerofAttorneywhich isstill inforce,nonoticeof revocationhavingbeenreceived”.Acopyof theAuthorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed.

3. The maximum number of proxies that may be appointed is two. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

4. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

Every appointment submitted by an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, must specify the CDS Account Number.

5. The instrument appointing the proxy must be deposited at the office of the Registrars, Tricor Investor Services Sdn. Bhd., Level 17, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty eight (48) hours before the time appointed for the meeting.

6. For the purpose of determining a member who shall be entitled to attend the Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Article 67(b) of the Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 7 September 2011. Only a depositor whose name appears on the General Meeting Record of Depositors as at 7 September 2011 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his stead.

Fold Here

Fold Here

Fold Here

THE SHARE REGISTRAR OF

PROTON HOLDINGS BERHAD (Company No.623177-A)

Tricor Investor Services Sdn. Bhd. (Company No.118401-V)

Level 17, The Gardens North Tower,Mid Valley City, Lingkaran Syed Putra,59200 Kuala Lumpur, Malaysia

AFFIXSTAMP

PRO

TON

Holdings B

erhad (623177-A)annual report 2011


Tel: +603 8026 9741 Fax: +603 8026 9744

www.proton.com

ww

w.proton.com

PROTON Holdings Berhad (623177-A)

Annual Report 2011

PR

OTO

N H

oldings Berhad (6

23

17

7-A

)A

nnual Report 2

01

1


Tel: +603 8026 9741 Fax: +603 8026 9744

www.proton.com

ww

w.proton.com

Unlocking our Potential

...with pride, passion and unrelenting progress

with pride, passion and unrelenting progressir.chartnexus.com/proton/docs/ar_2011.pdfproton holdings...

Documents