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081PROTON 2008 Annual Report

• operations review

Moving ForwardIn the current financial year, the Group’s Quality Division will

remain focused on further enhancing market, manufacturing,

supplier and design quality improvements through various process

enhancements and initiatives.

Additionally, the Group formed the Defect Per Unit Improvement Team

(DPU-IT) and implemented quality gates initiatives to augment quality

improvements in the production plant. These two initiatives have been

put into place to ensure that quality is built into the processes and at

the source and this has so far proven effective. Quality level in the plant

improved significantly to more than 50% compared to the previous

financial year.

In line with our path towards achieving global standards, we are

committed to adopt the Asian Multi-Local Original Equipment

Manufacturer Operating (AMLO) business strategy. Hence, the new

financial year will see the Group’s Quality Division continuing to drive

improvements in processes in CKD factories and contract assemblers.

Quality inspection by the Managing Director during the Quality Campaign

082 PROTON 2008 Annual Report


Sales & Distribution

Domestic Markets In spite of the on-going challenges of a highly competitive operating environment and the

rise in fuel prices, PROTON during the year under review, achieved an increase in market

share in the domestic arena which was bolstered by favourable market conditions and

consumer sentiments.

Factors such as increments for civil servants, which positively affected purchasing power

from the second half of 2007, as well as the stabilisation of duty structures and interest rates

in the automobile sector, resulted in improved demand for passenger cars in the year.

We were able to capitalise on this positive trend and respond directly to challenges

faced by this sector, by strategically introducing new models that were supported by

aggressive domestic marketing initiatives.



PerformancePremised on our philosophy of ‘the right car, for the right market, at the

right price and at the right time’, we launched the Persona in August

2007, followed by the introduction of our brand new Saga in January

2008, both to favourable consumer response. More than 30,000 units

of the Persona are currently on the road, while bookings for the new

Saga have reached 50,000 units as at end June 2008.

Proton Edar Sdn Bhd spearheaded the introduction of a unique “Peek-

A-Boo” teaser campaign prior to the unveiling of the Persona. A closed

box containing the new car was placed at several busy venues such as

shopping malls, hypermarkets and PROTON showrooms. The boxes,

with large letterings that read “Take a peek at our pride and joy”, were

marked with small peep-holes through which members of the public

could get a glimpse of the Persona.

As a result of the campaign’s success in creating hype and excitement

for the Persona, a similar teaser campaign was used for the new Saga

with positive results.

We sustained our marketing efforts throughout the year with strategic

nationwide sales and promotional campaigns that included financial

Prospects

In the new financial year, plans are already underway for the launch of

PROTON’s first multi-purpose vehicle to address the growing needs of

the domestic market segment in this category. Upcoming marketing

campaigns will focus on the ‘Persona: Special Edition’ and ‘Saga: My

First Car, Most Affordable Family Sedan’, among others.

assistance packages. Roadshows were also held in urban and rural

areas to enable Malaysians to view and experience our new products,

while attractive incentives and discounts were introduced in conjunction

with the country’s 50th Merdeka celebrations.

The year under review saw PROTON making positive headway in

strengthening the sales distribution network, thereby enhancing

dealership value and profitability.

“ PROTON is like a rainbow; full of hope. ”Jimmy Khor

PROTON dealer

Persona’s promotional campaign at the Curve



Performance and OperationsThe year under review saw PROTON aggressively augmenting the

International Sales & Services Division with additional human resources,

focusing primarily on technical support as well as after-sales and

customer services. Clearly, this investment reflects the importance of

the export market in PROTON’s long-term growth.

In terms of market expansion, the Group successfully penetrated into

China and Thailand, while expanding our reach in Iran, the Middle East

and Indonesia. At the same time, we re-energised the Saudi Arabian

market, which is crucial to our success in the Middle East.

The year also saw the implementation of a special programme for semi

knocked-down (SKD) and completely knocked-down (CKD) exports to

Iran and China, which are expected to contribute positively towards the

new financial year’s export volume growth.

Export MarketsThe future of PROTON lies within the export market. Towards this

end, the Group’s primary objective is to essentially strengthen

the PROTON brand globally by expanding market share in

high-growth countries in the Middle East and Asia. In line with

PROTON’s AMLO (Asian Multi-Local Original-Manufacturer) market

strategy, the Group has gained a solid foothold in Thailand and China’s

automotive markets. We also increased our product lines with the

introduction of new models such as the Gen.2, Savvy, Satria Neo and

Persona to our overseas markets.

On top of this, during the year under review, particular attention

was directed towards enhancing our after-sales network and

capabilities, as well as developing a better understanding of our customers

in each market.

PROTON’s technical support and after-sales service capabilities must be

of high standards in order to further enhance PROTON’s brand equity in

the international market. Towards this end, several ‘Service Campaigns’

were held during the year under review in our key export markets. Also

known as PROTON STAR, these campaigns included customer-focused

initiatives ranging from a 43-point check to discounts for spare parts.

Naturally, these campaigns are ideal platforms to bring PROTON closer

to the international customer base.

During the year, there was also a marked increase in the frequency of

visits by both the sales and technical teams to the various countries in

which PROTON has presence, to enhance our understanding of the

markets and provide better response to the customers.



Export Volume over Last 5 Years & 2008/09 Forecast

(forecast)

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Volume

Year

2003/04

7275

2004/05

17243

2005/06

12526

2006/07

20595

2008/09

51000

2007/08

17337

ProspectsMoving forward, PROTON will continue to focus on high-growth

regional markets, namely ASEAN, China, India and the Middle East

North Africa (MENA) for economies of scale. We plan to leverage on

pre-existing trade and cultural linkages to make further in-roads into

these markets.

PROTON also intends to focus on market-driven product development,

while achieving economies of scale. Towards this end, Iran and China

will remain major sources of international growth for PROTON. The

production of the Gen.2 in CKD form is also expected to reduce the

model’s ‘on-the-road’ price in Iran, further enhancing competitiveness.



ASEAN Markets

Performance and Operations

PT Proton Edar Indonesia registered higher sales of 1,422 units

compared with 546 units in the previous fiscal year. In July 2007, the

company launched the Waja and Neo models in conjunction with the

Indonesia International Motor Show 2007.

Prospects

The Indonesian Automotive Industry Association (Gaikindo) had

forecasted a steady total industry volume growth over the next three

years from 500,000 units in 2008 to 600,000 in 2010. The Company is

expected to perform better in the next financial year with the launching

of the Gen.2 Persona in July 2008 and the new Saga before the end

of 2008.

To achieve the anticipated sales increase and improve the after-sales

support, the Company has expanded its network by an additional four

branches and five dealers.


PROTON made its entry into Thailand on 30 January 2008 through its

wholly-owned subsidiary, Proton Motors (Thailand) Limited.

Within a short span of time, PROTON managed to successfully penetrate

the Thai market with sales of its cars exceeding 1200 units within the

first six months of its launch.

Since making in-roads into the Thai market, PROTON captured 1.3%

of the market share in the passenger car segment and was ranked 8th

overall.

Prospects

For financial year 2008/09, PROTON aims to achieve sales of 4000

units through the sale of various models including the Savvy, Gen.2,

Neo and Persona.

Indonesia Thailand

“ Sent on a journey of ten thousand miles,

thrown into the depths of R&D and now totally

inspired by Management. Thank you PROTON

for the exhilarating ride! ”Muzamil ‘Mooz’ Adzib, PROTON Scholar

Facilitator, Transformation Management Office & Special Projects



Singapore


The Certificate of Entitlement quota for cars in Singapore was lower by

3.1% in 2007. This reduction signaled the end of bumper quotas in

the island state and resulted in distributors reducing their margins to

clear outstanding stock. The year also saw the introduction of China-

made cars into Singapore.

Currently, 80% of cars in Singapore are less than four years old while

90% are less than five years. The reduction in quota, coupled with

the introduction of China-made cars led to a 43% reduction of brands

operating in our segment.

Prospects Given the market conditions in Singapore, a number of initiatives are in

the pipeline to increase our operational efficiency here.

The Satria Neo in Singapore

The Savvy and Satria Neo at the Bangkok Auto Show

Sales were also further affected by the increased petrol prices and

tightening of credit due to the sub-prime fall-out in the US, as banks

were more cautious in lending money.

On another note, the PROTON Persona launched in October 2007

received encouraging response and drew accolades from both the

press and customers.


Performance and OperationsOverall, Proton Cars (UK) Ltd saw a reduction in sales by 8% during

the year under review. Nevertheless, despite reduced marketing

expenditure, retail sales increased by 3.5% during the period, which

bodes well for the brand in the long term.

Sales of the Gen.2 model improved during the year and the Satria,

which was launched in March 2007, was well-received by dealers,

motoring press and the general public. However, sales for Waja were

impacted due to a drop in demand throughout the segment while the

Savvy faced severe competition from other brands in its category.

ProspectsIn the second half of 2007 and early 2008, the operating environment

in the UK became more challenging with higher interest rates, a

slow-down in the housing market and rising cost of living.

Given these market conditions, Proton Cars (UK) is adopting a number

of initiatives which will lower operating costs, while maintaining a high

level of support for our dealer network and customers.

United Kingdom

OverviewContrary to concerns surrounding the automotive industry, the overall

UK total industry volume (TIV) in 2007 increased by approximately

2.5% to reflect over 2,400,000 sales. The increase was due to the

business and fleet sectors where sales rose by 5.5% and 3.3%

respectively, while private buyer sales were static, contributing only

43% of the total market share.

Sales of diesel cars continued to rise, capturing over 44% of market

share by end-2007, and is forecasted to sustain its momentum. With

regards to body types, the only significant growth came from MPVs

which rose by over 16%, usurping sales from the more traditional

three, four and five-door segments.

The year 2007 also saw the top ten market leaders focusing on private

buyers with all of them seeing a substantial rise in sales, now accounting

for over 70% of the entire UK volume between them.

One of the key topics that took centre-stage in 2007 was the ‘green

issue’ which influenced the perception of the UK buying public. Sales

of ‘green’ cars were spearheaded by both the Government through

vehicle taxation and manufacturers of highly fuel-efficient and low

CO2 emission vehicles marketing its benefits. Sales of low CO2 tax

band vehicles rose by 15%, while high tax band CO2 vehicle sales

dropped by 17%.

“ I love my Savvy because it’s different from

other cars. It’s cute for girls! ”Zharafina Abdul Nasir

PROTON Savvy owner




Australia

OverviewThe total Australian vehicle sales grew by 9.1% and reached a record

1.049 million units. Sales of smaller fuel-efficient vehicles accounted

for the majority of the increase due to the increasing price of oil and

rising interest rates. The small and light segments, which PROTON

competes in, grew by 10.2% and 5.9% respectively whilst PROTON’s

retail sales increased by 16%.

The current shift of sales towards smaller vehicles is expected to

continue as fuel prices continue to rise and the economy slows down.


The positive financial results were due to improved Lotus vehicle sales

and reduced operational costs by Proton Cars Australia. In addition, the

company also managed to increase retail sales during the financial year

in the face of heavy discounting by its main competitors.

Prospects

Automotive sales in the coming financial year are expected to ease

slightly on the back of rising interest rates. On top of this, high fuel

prices are projected to shift customers’ preference to more fuel-efficient

models which could translate to increased sales in the small and light

vehicle segments.

However, the launch of Persona in May 2008 and the subsequent

release of the face-lift Gen.2 are expected to boost volume by 22% in

the new financial year.

The number of dealers is also estimated to increase slightly.

However, Proton Cars Australia will be implementing an aggressive

rationalisation programme to improve dealer throughput and increase

the yield in under-performing regions. The strong focus on these two

key areas is expected to result in increased revenue and better

operational returns.

Proton Cars Australia successfully increased its dealer network to

41 dealers nationally during this period. Currently, all main regions

throughout Australia are covered.

Sales of the Savvy and Jumbuck also improved significantly towards the

end of the year under review as a result of several innovative marketing

campaigns.

The Savvy in Australia



Properties

The centralisation of all activities related to the management and maintenance of properties

under the PROTON Group by Proton Properties Sdn Bhd, a wholly-owned subsidiary of

Proton Hartanah Sdn Bhd, will enable the Group to further enhance the overall capacity and

efficient utilisation of properties.

Our primary properties include the management-cum-manufacturing hubs in Shah Alam,

Selangor and Tanjung Malim, Perak, as well as our administrative centre, PROTON Centre

of Excellence in Subang Jaya, Selangor. In addition, PROTON’s property portfolio consists

of an apartment building known as Taman Seri Proton in Klang, Selangor, and the Group’s

numerous 3S centres nationwide.



The year under review saw the completion of PROTON’s new

administrative building in Tanjung Malim with the award of its Certificate

of Fitness in February 2008. Apart from its contemporary design and

technologically-advanced features, this facility also boasts a ‘green’

environment complete with a lush landscape of trees and shrubs.

PROTON Sports Complex, one of the most well-equipped sports

complexes in Tanjung Malim, continued to attract support from both

the private and public sectors throughout the area. The Group aims

to further upgrade this sports facility to make it a venue of choice for

sports and social activities in Southern Perak.

Additionally, PROTON’s involvement in property development, via

its 40%-owned associate company, Proton City Development

Corporation Sdn Bhd, continued to enjoy positive progress during the

year. Proton City, with its modern well-planned infrastructure, facilities

and amenities, complete with recreational parks and rich landscaping,

has become an attraction for home buyers and investors alike.

As of 31 March 2008, Proton City had a balance of 2,720 acres in

undeveloped land bank. In moving forward, given the challenges

currently faced by the property development industry, the Group will

continue to introduce products in Proton City that can cater to the

current needs of home buyers.

“ My PROTON Saga is user friendly and a cost

saver. It’s my ‘knight rider’. ” Malar Moses

Saga owner



Financial Services

PROTON has entered into relationships with reputable financial institutions to provide

convenient services that include financing packages for customers and operational facilities

for authorised dealers.



Proton Commerce’s e-Finance system enables customers to apply

for hire purchase facilities via the Internet. By simply logging onto

www.proton-edar.com.my or www.cimb.com.my from any

Internet terminal, customers are immediately advised as to whether

their applications have been rejected or conditionally approved,

subject to the submission of relevant supporting documents.

• Proton Commerce Sdn Bhd is a joint venture between Proton Edar

Sdn Bhd and CIMB Bank Berhad;

• Proton Finance Ltd is a joint venture between Proton Cars UK Ltd

and Llyods TSB Bank;

• Lotus Finance Ltd is a joint venture between Group Lotus Plc and

Black Horse Group Limited, a subsidiary of LIoyds TSB Group Plc.

“ The new models have been an important part of the current

market strategy as sales are increasing and PROTON aims to stay

ahead by improving each year, both domestically and regionally. ”

Effandy Bin Zainal Abidin

Sales Advisor



Corporate Social Responsibility

PROTON firmly believes that progress in business should go hand-in-hand with social and

environmental development and as such, we have been committed to the principle of the

triple bottom line of people, planet and profits throughout our operations.

The ambit of corporate social responsibility (CSR) goes beyond donations or intermittent

philanthropic activities. At PROTON, sound CSR practices are advocated Group-wide in a

manner that not only benefits all within, but also contributes to the society we operate in.

PROTON’s CSR initiatives are categorised into four focal segments namely, the marketplace,

workplace, community and the environment.

Four schools have been ‘adopted’ via the PROTON ‘Program Pintar’



Corporate Social Responsibility MarketplaceMarketplace CSR is generally defined as all business activities that are

related to the commercial or business interaction between PROTON

and its stakeholders. It involves among others, adherence to ethical

business practices, quality management, attention to product safety,

compliance to regulations and vendor development.

In upholding ethical business practices, PROTON aligns itself with

the best global standards and regulatory requirements and commits

itself towards the continual improvement of these standards. The

cornerstone of our ethical business practices is the implementation

of an Employee Code of Ethics which all employees would have to

pledge their adherence to upon their employment with PROTON.

Complementing the Code of Ethics is the compulsory declaration of

assets by all PROTON employees and also the notification of any major

changes in the assets declared. PROTON’s ethical standards were

further fortified with the introduction of the Whistleblower Policy in

2007. The Whistleblower Policy provides an avenue for anyone from

within or outside PROTON to raise any concerns with regards to

unethical or improper conduct to the Management in a safe and

acceptable manner.

One of the major concerns among PROTON stakeholders is quality.

In response to this concern, PROTON initiated radical changes in its

quality management in order to effectively address quality related

issues. It began with the centralisation of monitoring PROTON’s entire

quality management into the Group Quality Division followed by the

establishment of the Quality Improvement Team - a high level cross

functional committee that deliberates quality strategies and monitors

quality performance throughout the Group.

A Quality Management system was also put into place within PROTON’s

operations through ISO 9002:2001. The system covers the area of

design, development, manufacturing, control and delivery of PROTON

products, of which, the certification was recently given by SIRIM and VCA

for the period 2006 – 2009. Besides the ISO 9002:2001 accreditation,

certification was also given on Conformity to Production based on

the Australian Design Rules and EC requirements by their respective

sanctioning bodies. On top of the management system, PROTON has

also taken the initiative to constantly monitor the performance of its

products and address quality issues in weekly cross-functional technical

meetings chaired by the Managing Director.

PROTON benchmarks itself against the highest international standards

when it comes to passive safety. Generally, the European Safety

Standard is used as it is currently the most stringent of standards

available. We also refer to other globally available standards such as

Australian Design Rule (ADR) and Saudi Arabian Standards Organisation

(SASO)/Gulf Standards and adopt the best of these standards as a

benchmark. To ensure that compliance is met across the board, we

have made all safety requirements to be 20 - 30% more stringent than

benchmarked figures. Test results so far have indicated that we have

not only achieved the targets set but exceeded most of them as well.

PROTON introduced radical changes in quality management



WorkplaceWorkplace CSR refers to how PROTON manages its employees and the

practices carried out to ensure a conducive and sustainable working

environment. Priority is given to PROTON’s safety and health policies,

training initiatives, benefits and a host of other things related to the

employees and their welfare.

PROTON values its Human Capital and goes to great lengths to ensure

that it provides the best working conditions possible by emulating

or exceeding the best global Human Capital Management practices

that encourage high employee morale and loyalty to the company.

On top of that, PROTON also ensures that its employment practices

observe local rules and regulations, uphold human rights, and respect

values, individuality and privacy. PROTON also avoids any form of

discriminatory behaviour based on race, age, religion, sex, nationality

and physical ability.

In line with the above philosophy, PROTON employees generally enjoy

competitive benefits that exceed what is offered in the market. They

also enjoy a host of facilities at their working premises tailored for their

convenience such as, an in-house clinic, child nursery and an on-site

sports complex.

With a workforce that spans the globe, PROTON ensures that people

development is actively practiced by continuously upgrading employee

skills, knowledge and capabilities. In the year under review, our Learning

and Development (L&D) Department of the Human Resource Division

was tasked to enhance the Group’s human capital development. The

L&D Department successfully organised various in-house programmes

on Quality Training, Safety Training, as well as Teambuilding Activities

and Development. Employees were also sent to external seminars,

workshops or conferences to acquire specialised knowledge and

skills-set, while various leadership development programmes were

coordinated for the Senior Management’s development. During the

year, the L&D Department spent an average of 4.4 man days per

employee for training.

The Managing Director addresses the staff during one of his visits to the plant



During the year under review, only 18 industrial accidents were

recorded throughout PROTON - an improvement by 42% compared

to the previous financial year. This is consistent with the downward

trend of accident rates in the past few years as a result of:

• Frequent safety awareness programmes and activities being

carried out at all levels of the company

• Continuous safety audits at the workplace

• Cross audits by respective departments

• Hazard elimination at the workplace

• Automation and improvement (Kaizen) at the assembly line

Given that safety training and awareness campaigns bring out

positive results, PROTON is committed to undertake a total of

four training initiatives a month on various issues of safety such

as hearing conservation as well as fire and workplace hazards at

respective departments.

During the year, we continued to conduct defensive and safety driving

courses for staff and external parties on a monthly basis, and carried

out the annual safety campaign in collaboration with the Department

of Occupational Safety and Health and the National Institute of

Occupational Safety and Health.

“ The Workers Union thanks PROTON for

continuously being committed to the welfare of

its workers. We’ve been through thick and thin with

PROTON and we believe in the Company’s bright

future. We also appreciate PROTON’s confidence

in us as skilled and experienced workers, who

will uphold and further contribute towards the

Company’s development. ”Nordin Bin Ahmad

President, Workers Union



CommunityCommunity CSR focuses on the Group’s interaction with the general

public including the locales around our business operations, youth

communities, NGOs and various other special interest groups. All

donations or philanthropic activities also fall within this segment.

Programme with the Government of Malaysia through the Ministry

of Higher Education in a bid to educate students with ambitions of

becoming light automotive vehicle mechanics by providing deserving

underprivileged candidates with scholarships and work-based learning

opportunities at PROTON service centres.

In the year under review, we organised the Malaysian Skills Competition

for the Automobile Sector to support the nation’s efforts to produce a

pool of young skillful talents in various fields. The winner from each

category will represent the nation in the 7th ASEAN Skills Competition

in 2008 in Kuala Lumpur and subsequently the 40th World Skills

Competition in Calgary, Canada, in 2009. A total of 40 participants

from 30 technical institutions and organisations participated in this

competition. The Malaysian Skills Competition organised by PROTON

PROTON has committed to a three-year sponsorship of the

A1-Team Malaysia

For the year under review, PROTON expanded ‘Program PINTAR’ by

adopting two more schools, namely Sekolah Rendah Kebangsaan

Paloh Pintu Gang in Kota Bharu and Sekolah Kebangsaan Tanjung

Malim, near Tanjung Malim, Perak. This brings the number of adopted

schools under the three-year programme which culminates in 2009

to four. We have also invested in the PROTON Diploma in Engineering

The year saw PROTON continue to implement various improvements

in terms of ergonomic working conditions aimed at reducing the

number of occupational related injuries. These initiatives included the

introduction of the ‘quiet factory concept’ through the implementation

of a chainless conveyor, testing booths that insulate sound and low

noise tools. Air conditioning was improved with the usage of industrial

fans throughout the plant and in an effort to reduce backache problems,

PROTON initiated the ‘door-less’ car on the assembly line for easier

access and also to enable work to proceed without having to walk

along the conveyor.


“ I’ve been driving and racing PROTON ever since I had my

license. I’ve always had an involvement with PROTON throughout

my career and I’m proud to be associated with the brand. ” Alex Yoong

A1 Driver


On a national level, PROTON was once again a key supporter of the

prestigious Le Tour de Langkawi by being the official car provider. This

time around, 150 cars of varying models were provided for the use

of officials and the media, while 60 PROTON cars were a part of the

cavalcade leading the race.

Additionally, through a three-year sponsorship of RM5.2 million,

we continued to support the A1-Team Malaysia, while the year also

saw us sponsoring PROTON’s Football Club to play in the Malaysian

Super League. PROTON also provided cars for the marshals of the FIA

Formula 1 event.

As the corporate custodian of badminton in the country, PROTON

was the main title sponsor for the PROTON Malaysia Super Series

Badminton Tournament organised by the Badminton Association

of Malaysia (BAM). Currently, we are assisting in the development,

production, sales, marketing and support of the World Rally Super

2000 category of the FIA international level motor-rally event in 2008

where our very own Satria Neo will be competing.

The year also saw Yayasan PROTON providing a total of 17 scholarships

mainly to students furthering their education. We conducted workshops

and seminars for students and arranged for industrial attachments for

scholars. Additionally, we organised the Majlis Restu Ilmu with Sekolah

Menengah Teknik Shah Alam and the Bijak Belajar IPT Program. In

recognition of students who excelled in the PMR examination, a Majlis

Anugerah Kecemerlangan Akademik PROTON – PMR 2007 was

organised for the children of PROTON employees.

The national badminton team


• operations review100 PROTON 2008 Annual Report

Environment Report



The scope of our environmental CSR intertwines with the notion of

sustainable development where all relevant activities that allow the

growth of PROTON must, at the same time, positively contribute

towards the environment. At PROTON, all environmental initiatives are

driven by our Environmental, Safety and Health Policy which stresses

our commitment to take responsibility for environmental issues, provide

the necessary resources for environmental preservation and constantly

monitor and maintain high standards of environmental conduct.

ISO 14001 Environment Management System

One of the most significant aspects of PROTON’s environmental

management is our aggressive pursuit of the ISO 14001 Environment

Management System (ISO 14000 EMS) standards in order to join the

ranks of being an environmentally friendly car producer. Initiated in

2007, the ISO 14001 EMS will allow us at PROTON to systematically

manage our environmental performance as well as the collection of

various environment related data such as water usage, energy usage,

and waste disposal. Measurements of the said data would help

PROTON to strategically determine the necessary benchmarks and

targets that reflect our level of commitment to environmental

preservation and betterment.

The ISO 14000 project is currently in progress and is targeted for

completion by end-2008. PROTON is also considering providing

incentives to its suppliers and resellers to embark on the ISO 14000

initiative in the near future.

Waste Water Recycling

In a bid to use water resources in a responsible manner, PROTON

has initiated water recycling within the manufacturing facilities. Waste

water from both domestic and industrial sources, which have been

chemically and biologically treated, are partly used as incinerator coolant

before being discharged into the environment. Part of the water is also

used to water plants within the manufacturing facilities. This initiative

has enabled considerable savings on water usage at a quantum of

approximately 172,800m3 of clean water valued at approximately

RM264,000 during the year under review.

PROTON plans to continually upgrade its water recycling efforts. In the

near future, PROTON aims to have an entirely closed water ecosystem

within its manufacturing facilities whereby 100% of the water used

within its plants is recycled.

Environment Report



End of Life Vehicles

During the year under review, PROTON embarked on a review of its

products to ensure these cars comply with the End Of Life Vehicle

(ELV) directive issued by the European Union. Under the directive,

car manufacturers who sell their cars in Europe are required to

ensure that:

• Cars sold do not contain any heavy metal materials (such as Lead,

Hex-Chromium, Cadmium & Mercury);

• All vehicles produced comply with a 95% reuse/recovery rate

and 85% of reuse/recycle rate by 2008;

• All vehicles produced comply with 95% of reuse/recovery rate and

85% of reuse/recycle rate for all in service vehicles by 2010;

• Dismantling manuals are produced six months after vehicles are

put on sale.

The purpose of this directive is to ensure that upon end of life disposal,

cars that go into the landfills do not end up causing long-term harm to

the people and the environment. Heavy metal in cars for instance, can

induce severe growth defects among children and strict regulation is

required to minimise or eliminate the possibility of this occurring due

to the disposal of cars.

As a result of the review and subsequent adjustments made to the

product line, all PROTON cars are in compliance with this directive.

PROTON Xchange Scrap Programme

PROTON, in collaboration with UEM Environment Sdn Bhd and the

Government, initiated a trade-in programme catered towards removing

unsafe cars and highly polluted cars from Malaysian roads. Dubbed

PROTON Xchange, the progamme encourages owners whose cars are

more than 15 years of age to trade their cars in for a RM5,000 voucher

that can be used towards the down-payment for a new Savvy.

The purpose of this programme amongst others is to stimulate the

local car industry as well as to start a national End of Life Vehicle

management programme. Aging cars that are traded in via this

programme are scrapped and used as raw material by PROTON or

disposed to other interested parties.

“ I’d like to thank PROTON for having sponsored

my participation in the Malaysian Open Bowling

Championship recently and also for its on-going

commitment and confidence in my ability. I hope it will

also sponsor other bowlers. ”Isham Bin Razali

PROTON Bowler



This programme will give PROTON the necessary foundation to

achieve its ultimate goal to produce cars entirely from recycled materials

in the future.

Natural Gas Vehicles

Another major initiative in creating products that are environmentally

friendly is the production of the Natural Gas Vehicle (NGV) variant. This

initiative was spurred by the rising fuel prices and is currently in the final

stages of development. Expected to be launched in the third quarter of

2008, NGV variants will include the new Saga, Waja and Persona.

The main difference between PROTON’s in-house NGV system and the

NGV kit installed by a third party is that PROTON cars can seamlessly

switch between NGV and petrol. This is particularly useful as NGVs are

known to have less power than petrol-based cars. In the event that

extra power is needed, the system would use petrol to propel the car.

Once power is no longer needed, it will automatically switch back to

natural gas without the driver noticing any change.

E20 Cars and ECO Cars Project

In support of the Thai market demand for a cheaper fuel alternative,

PROTON is upgrading its current models to run on ethanol fuel, E20

which is a mixture of 20% ethanol and 80% petrol.

PROTON is currently conducting tests on the E20 car to ensure

that the components and materials are compatible with the

relevant requirements.

On top of the E20 compliance, PROTON is also considering the option

of a car variant that complies with that of an ECO car. The project aims

to produce cars of approximately 1300 cc with emission levels at a

minimum of EURO 4 standards and fuel consumption of below 5 liters

/ 100km.

Other Engine Programmes

PROTON is constantly looking for ways to increase the efficiency and

the environmental friendliness of its engines. Although PROTON’s

engines have already achieved the EURO 4 standards for emissions,

it is still seeking to further exceed the requirements in anticipation of

future regulatory requirements. Works are already underway to comply

with EURO 5 and the anticipated EURO 6 standards.

Besides research on internal combustion engine technology, PROTON

is exploring other engine technologies as well. Among the technology

that is currently being researched is the hybrid engine along with its

Plug-in and Non Plug-in variants. Plug-in Hybrids are cars that run

on both petrol/diesel and electricity but require the car battery to be

charged from an external source, while Non Plug-in cars do not require

any external charging but rely solely on the car’s momentum to charge

its battery.




“ It’s fun

when my whole

family travels

together. The

Persona is a safe

and spacious

car that’s

affordable. ”

Sharidan Bin Azraai and family,Persona owner


• statement on corporate governance

Statement on Corporate Governance

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, striving to maintain a high level of corporate governance within the

PROTON Group by ensuring that the highest standards of corporate culture are practiced

throughout. Good corporate governance is the foundation of the culture and business

practices of the PROTON Group.



Board of DirectorsThe Board is committed to establishing and enhancing shareholder

value in the long-term and is pleased to report that the Group has to

its best efforts and knowledge complied with the Principles and Best

Practices of the Code throughout the financial year under review. The

Board continues to enhance its role in improving governance practices

effectively to safeguard the interests of the shareholders as well as

stakeholders. To this end, the Board has full control of and is responsible

for the Group’s overall strategy, acquisition and divestment policies,

capital expenditures, annual budget, review of financial and operational

performance, and internal controls and risk management processes.

The Group’s overall strategic direction, development, implementation

and control remain of primary importance to the Board.

The roles and responsibilities of the Non-Executive Chairman and

the Managing Director are clearly defined. The Chairman ensures the

integrity and effectiveness of the Board as a whole. He conducts Board

meetings and ensures that they proceed in an orderly manner. The

Chairman, Dato’ Mohammed Azlan Bin Hashim, was not a previous

Chief Executive Officer of the Company.

The Managing Director (“MD”) on the other hand is responsible for

making and ensuring the implementation of broad policies as approved

by the Board and reports to and discusses material matters including

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.

This statement describes how the Principles of Good Governance and

provisions of the Code are applied by the Group.

regulatory developments and strategic projects with the Board. There is

therefore a natural separation of management and governance leading

to a balance of power and authority.

The non-executive directors are independent of management and are

free from any business relationships which could materially interfere

with the exercise of their independent judgement.

The Board has delegated matters pertaining to the day to day

management, operations and strategic development of the Group

(subject to the Limits of Authorities and Group Policies and Procedures),

to the Managing Director who is supported by a competent

Management team whose expertise lies in Finance, Human Resource,

Risk Management, Marketing, Information Technology, Operations, and

Law amongst others.


No Name of Director Designation Date of Appointment

Date of Resignation

Meeting Attendance

Percentage

1 Dato’ MohammedAzlan Bin Hashim

Non-Independent / Non-Executive Chairman

17 December 2004 N/A 6 / 6 100

2 Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir

Managing Director 1 January 2006 N/A 6 / 6 100

3 Tuan Haji Abdul Jabbar Bin Abdul Majid

Independent Non- Executive Director

12 April 2004 N/A 6 / 6 100

4 Tuan Haji Abdul Kadir Bin Md Kassim


10 March 2005 N/A 6 / 6 100

5 Dato’ Michael Lim Heen Peok


15 September 2006 N/A 6 / 6 100

6 Datuk Zalekha Binti Hassan

Non-IndependentNon-Executive Director

11 February 2008 N/A 1 / 1 100

7 Encik Mohammad Zainal Bin Shaari

Non-Independent Non-Executive Director

17 December 2004 3 April 2008 6 / 6 100

8 Dato’ Ahmad Bin Haji Hashim


26 October 2005 11 February 2008 5 / 5 100

9 Dato’ Mohd Izzaddin Bin Idris


15 September 2006 30 November 2007 5 / 5 100

In the financial year ended 31 March 2008, the Board of PROTON Holdings Berhad (PHB) met six (6) times. The following are the details of

attendance of the Directors:

The profiles of the directors are set out on (pages 28 to 33) of the

Annual Report.

Board meetings for the Company and its subsidiaries are scheduled

in advance before the start of each calendar year and circulated to all

Board Members at the beginning of each year. This would enable the

Directors to plan ahead and ensure attendance at Board Meetings.

Additional meetings or Special Board meetings are convened

whenever necessary when there are urgent and important decisions

to be made.



Board Composition and BalanceThe Board consists of six (6) members with the Chairman being a Non-

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

Executive Director, three (3) Independent Non-Executive Directors and

one (1) Executive Director who is the Managing Director.

As in the previous year, Tuan Haji Abdul Jabbar Bin Abdul Majid is the

Company’s Senior Independent Director to whom concerns pertaining

to the Group may be conveyed by the shareholders and the public.

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 judgement.

Independence and Conflict of InterestThe 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 conflicts of

interest, the interested Directors abstain from discussing or voting on

the matter.

Policy on Appointment of DirectorsThe Board Nomination & Remuneration Committee reviews all new

appointments by taking into consideration the skills set, required by

the Company and the Group.

Board Members are appointed through a formal and transparent

selection process that is consistent with the Articles of Association of

the Company and the Company’s Selection Policy for Directors.

New directors are required to undergo familiarisation programmes,

plant visits and briefings to get a better understanding of the PROTON

Group, its operations and the automotive industry.

The Board Nomination & Remuneration Committee annually reviews

the mix of skills and experience of the Directors to ensure that the

Board has the right balance and effectiveness.

Supply of InformationThe Board has full access to all information pertaining to the

Group’s business affairs to enable the Board to discharge its

responsibilities effectively.

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

meetings of the Board and Board Committees, including minutes of

Board meetings of subsidiary companies, are circulated in advance

to the Board before a Board meeting. The agenda for every meeting

permits the Board members to review the content of meetings and

assists in providing the Chairman a better and efficient conduct of the

proceedings at the Board meetings.

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

to provide the Directors with the appropriate advice and services and

also to ensure that the relevant procedures are followed and rules and

regulations are complied with. The Board is, from time to time, updated,

on any changes in the Law and other regulatory requirements.

Senior Management as well as professionals and external advisors are

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

subject matter concerned.

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

prior approval of the Board. The same is reflected in PROTON’s Group

Policy and Procedures.



Re-Election of DirectorsAll Directors including the Executive Director are subject to retirement

by rotation at least once in every three years and are eligible for

re-election. In accordance with the Articles of Association, 1/3 of the

Directors shall retire from office at each Annual General Meeting.

Any new appointed director shall hold office only until the next Annual

General Meeting of the Company and shall be eligible for re-election

under Article 111. Directors who are over seventy (70) years of age are

required to submit themselves for retirement annually at the Annual

General Meeting, unless the Director is re-appointed by way of special

resolution in accordance with Section 129 (6) of the Companies Act,

1965.

At the forthcoming Annual General Meeting of PROTON Holdings

Berhad, the following Directors who retire have offered themselves for

re-election:

(i) Pursuant to Article 104:

• Dato’ Mohammed Azlan Bin Hashim

• Tuan Haji Abdul Jabbar Bin Abdul Majid

(ii) Pursuant to Article 111

• Datuk Zalekha Binti Hassan

(iii) Pursuant to Article 139

• Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir

None of the Directors are subject to retirement pursuant to Section

129 of the Companies Act, 1965, at the forthcoming Annual

General Meeting.

Board CommitteesThe Board has delegated specific responsibilities to five

sub-committees, namely the Board Audit Committee, Board Executive

Committee, Board Nomination & Remuneration Committee, Board Risk

Management Committee and Board Disciplinary Committee, which

assist the Board in overseeing the affairs of the Group and have been

entrusted with specific responsibilities and authority and report to the

Board with recommendations.

On 17 April 2007, the Board established the Board Executive Committee

primarily to assist the Management in addressing issues relating to

implementation and monitoring of several key projects as well as

addressing issues relating to the identification of suitable candidates to

fill in several key positions for PROTON.

The abovementioned Board Committees have the authority to examine

specific issues and report to the Board with their recommendations.

The responsibility of decisions on all matters ultimately lies with the

Board as a whole.



Board Audit Committee

The Board Audit Committee (“BAC”) met eleven (11) 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 2008 are as follows:

During the financial year, the BAC of PROTON Holdings Berhad

undertook the following activities:

• Assisted the Board in discharging its statutory duties and

responsibilities relating to accounting and reporting practices of

the Company and the Group in accordance with Generally Accepted

Accounting Practices.

• Reviewed the external audit terms of engagement, the audit

strategy, the proposed audit fee and the achievement of the

agreed upon reporting time frames for the audit of the financial

statements.

• Reviewed the external audit reports and discussed any problems

and reservations arising thereon.

• Reviewed the internal audit plan, methodology, functions and

resources.

• Reviewed major findings on internal audit reports and

management response.


Date of Resignation

Meeting Attendance

1 Tuan Haji Abdul Jabbar Bin Abdul Majid – Chairman

Chairman – Independent Non-Executive Director

10 March 2005 N/A 11 / 11


Member – Independent Non-Executive Director

10 March 2005 N/A 9 / 11



29 November 2006 N/A 10 / 11

4 Encik Mohammad Zainal Bin Shaari

Member – Non-Independent Non-Executive Director

10 March 2005 3 April 2008 10 / 11



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

• comprise no fewer than three members;

• a majority of the members must be independent directors; and

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

Institute of Accountants or if he is not, then he must be a person

who complies with Para. 15.10 of Bursa Malaysia Securities

Berhad’s Listing Requirements.

The Chairman, who shall be elected by the members of the Committee,

shall be an independent director.

No alternate director may be appointed as a member of the 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 shall be to:-

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

• with the External Auditors, the audit plan;

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

system of internal controls;

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

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

Auditors;

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

internal audit functions and that it has the necessary authority to

carry out its work, and the performance of the members of the

internal audit function;

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

internal audit programme, or investigation undertaken and

whether or not appropriate action is taken by the management

on the recommendations of the internal audit function;

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

the approval by the Board of Directors, focusing particularly on:-

• changes in or implementation of major accounting policy;

• significant and unusual events;

• compliance with accounting standards and other legal

requirements; and

• accuracy and adequacy of the disclosure of information

essential to a fair and full presentation of the financial affairs

of the Group;

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

within the listed issuer or group including any transaction,

procedure or course of conduct that raises questions of

management integrity;

• promptly report to Bursa Malaysia Securities Berhad on any

matter reported by it to the Board of the Company which has

not been satisfactorily resolved resulting in a breach of the Listing

Requirements of Bursa Malaysia Securities Berhad;

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

BAC in the discharge of its functions and responsibilities in respect

of each financial year.

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

any questions of resignation and dismissal.

The Terms of Reference of the BAC are set out below.



Meetings

The Committee shall hold meetings on at least four (4) occasions

each year, although additional meetings may be called, as and when

necessary, by the Chairman of the Committee. These meetings will

usually be:-

• prior to the current year’s audit;

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

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

statements;

• prior to the announcement of the quarterly results;

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

Auditors, the Chairman of the Committee shall convene a meeting

of the Committee to consider the matters brought to its attention;

• at least once a year, the Committee shall meet with the External

Auditors without any Executive Directors present.

Internal Audit Function

The Group uses the services of the Group Internal Audit Division to

accomplish its internal audit requirements. The Group Internal Audit

Division reports to the BAC on matters concerning the Group and

assists the Board of Directors in monitoring and managing risks and

internal controls.

The Group Internal Audit Division reviews internal controls related to all

key activities of the Group and recommends improvements in controls

and procedures. The Group Internal Audit Division is independent of the

activities it audits and performs with impartiality and due professional

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

the 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

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.

AttendanceIn order to form a quorum in respect of a meeting of an audit

committee, the majority of members present must be independent

directors. The Chairman may request that directors and members of

the management, the Internal Auditors and representatives of the

External Auditors be present at meetings of the Committee.

MinutesThe Company Secretary shall be the Secretary to the Committee and

shall be present at all meetings to record minutes.

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

provided for the purpose and sent to the Committee members and will

be made available to all Board members. The minutes shall be signed

by the Chairman of the Committee.



Board Nomination & Remuneration Committee

The objectives of the Board Nomination & Remuneration Committee

(“NRC”) are in accordance with the Terms of Reference as approved

by the Board of Directors of PROTON on 26 July 2006.

The NRC reviews new director appointments of the Group and the

balance and effectiveness of the Board of Directors, taking into account

the required mix of skills, experience and other qualities before making

recommendations to the Board.

The Committee is empowered to conduct periodic reviews on

the overall remuneration policy and package of the Executive and

Non-Executive Directors and Senior Level Mission Critical Positions of

the Group for recommendation to the Board.

The authority and scope of coverage of the NRC is over the PROTON

Group, which includes subsidiaries and relevant associate and other

investee companies.

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

majority consisting of Independent Non-Executive Directors.

Appointments to the Committee shall be for a period of three (3) years,

which may be extended provided that the majority of the Committee

members remain independent.

The NRC has met three (3) times during the financial year.The composition of the NRC is as follows:


Date of Resignation

Meeting Attendance

1 Dato’ Mohammed Azlan Bin Hashim

Chairman – Non-Independent Non-Executive Director

10 March 2005 N/A 3 / 3

2 Encik Ahmad Tajuddin Bin Abdul Carrim

Member – Independent 29 August 2005 N/A 3 / 3

3 Encik Md Ali Bin Md Dewal

Member – Independent 29 August 2005 N/A 3 / 3



13 November 2006 N/A 2 / 3



Board Risk Management Committee

The Board Risk Management Committee (“BRMC”) assists the Board

to oversee the overall management of all risks faced by the Group’s

business. Further details of the activities of the BRMC are spelt out in

the Statement of Internal Control.

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

The BRMC is made up entirely of Non-Executive Directors and third party

members (not being directors of the Company) who are appointed by

the Board from time to time as follows:


Date of Resignation

Meeting Attendance


Chairman – Independent Non-Executive Director

29 September 2005 N/A 4 / 4

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



Board Executive Committee The objectives of the Board Executive Committee (“Board EXCO”) is to

assist the Management in addressing issues relating to implementation

and monitoring of several key projects, including but not limited to the

PROTON Strategic Business Plan, Annual Management Plan, PROTON

Business Turnaround Plan and also to address issues relating to

identifying suitable candidates to fill several key positions for PROTON.

It is to be noted that the functions of the Board EXCO shall not overlap

that of other Board Committees, such as the Board Nomination &

Remuneration Committee.

Subject to the resolutions of the Board of Directors of PROTON from

time to time, the provisions contained in the Terms of Reference and

the Memorandum and Articles of Association of the Company, the

Board EXCO may exercise any of the powers, authorities and discretions

for the time being vested in the Board of Directors with regard to the

affairs and business of the Company.


Date of Resignation

Meeting Attendance

1 Dato’ Mohammed Azlan Bin Hashim

Chairman – Non-Independent Non-Executive Director

7 May 2006 N/A 2 / 2

2 / 2

2 / 2

-

1 / 2



7 May 2006 N/A

3 Tuan Haji Abdul Jabbar Bin Abdul Majid


7 May 2006 N/A

4 Tuan Haji Yusof Bin Ahmad


21 February 2008 N/A

5 Dato’ Ahmad Bin Haji Hashim

Member – Non-Independent Non-Executive Director

7 May 2006 21 February 2008

Board Disciplinary Committee

The Board Disciplinary Committee (“BDC”) is a platform for the

PROTON Group to deal primarily with disciplinary issues. The BDC is

part of the structural mechanism for the handling of cases that may

arise from the introduction of the Whistleblower and Assets Declaration

Policies. The BDC has the power to initiate investigations, consider and

take appropriate action thereof on any case referred to it by any party

either received orally or in writing.

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



Directors’ TrainingAll Directors have successfully completed the Mandatory Accreditation

Programme conducted by the Research Institute of Investment Analysts’

Malaysia as imposed by Bursa Malaysia Securities Berhad.

Despite repeal of Bursa Malaysia Securities Berhad’s Continuing

Educational Programme with effect from 1 January 2005, the Directors

continue to identify and attend appropriate seminars and courses

to keep abreast of changes in legislation and regulations affecting

the Group.

Date of Appointment

17 April 2007

17 April 2007

17 April 2007

17 April 2007

No

1

2

3

5

Name of Director

Dato’ Mohammed Azlan Bin Hashim

Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir

Dato’ Michael Lim Heen Peok

Dato’ Mohd Izzaddin Bin Idris

Designation

Chairman / Non-IndependentNon-Executive Director

Managing Director

IndependentNon-Executive Director


Date of Resignation

N/A 11 / 11

10 / 11

11 / 11

5 / 9

N/A

N/A

30 November 2007

16 June 20084 Ms Vimala Menon Member / Director, Finance & Corporate Affairs

--

Meeting Attendance

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

representatives as follows:

The Company has arranged various in-house training programmes and

luncheon talks on topics relevant to the Company, which were attended

by both the members of the Board and Senior Management.

The Directors have also in the course of the year attended

programmes for building high performance directors, the Chairman’s

Forum, workshops, conferences and talks organised by the Malaysian

Directors Academy, better known as “MINDA”, an initiative under

the GLC Transformation Programme officially launched by the Prime

Minister, YAB Dato’ Seri Haji Abdullah bin Haji Ahmad Badawi on

8 December 2006.



Directors Basic Salaries, Bonus and Other Employee Benefits

Fees and Allowances

Benefits-in-Kind Total

Executive Directors 626,400 64,700 691,100-

1,453,606 38,797 1,492,403-

1,453,606 103,497 2,183,503626,400

Non-Executive Directors

TOTAL

Remuneration Number of Directors

Range of Total Remuneration Executive Non-Executive Total

Below RM50,000

RM50,001 – RM100,000

RM100,001 – RM500,000

RM500,001 – RM1,000,000

TOTAL

- 2 2

- 3 3

- 2 2

1 1 2

1 8 9

attendance allowances in accordance with the number of meetings

attended. In addition, the Non-Executive Directors are each provided

with the use of a car.

Non–Executive Directors fees are paid upon shareholders approval at

each Annual General Meeting.

The NRC carries out reviews when appropriate and refers to

remuneration surveys and consultants to assist in determining the

appropriate level of reward, which is competitive and consistent

with the corporate objectives. This is necessary in order to attract

and retain professionals with the qualities needed to manage the

Group successfully.

Details of the total remuneration of the Directors of PROTON Holdings

Berhad for the financial year ended 31 March 2008 are as follows:

Directors’ RemunerationThe 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



Financial ReportingThe Board is committed to providing a balanced, clear and meaningful

assessment of the financial performance and prospects of the Group

to shareholders, the investor community and the regulatory authorities.

Shareholders and other stakeholders are kept abreast of the Group’s

performance through the timely announcement of the quarterly

financial results and accompanying press releases.

The Board Audit Committee assists the Board to oversee the financial

reporting processes and the quality of its financial reporting. Quarterly

financial results and annual financial statements are reviewed by the

Board Audit Committee to ensure adequacy and completeness of

information prior to the Board’s approval. To enhance quality of the

Group’s financial reporting, the external auditors will be conducting

quarterly reviews of the Group’s quarterly results in addition to the

year-end audit.

Directors Responsibility StatementThe 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 as well as 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;

• selectedsuitableaccountingpoliciesandappliedthemconsistently;

• madejudgementsandestimatesthatarereasonableandprudent;

•statement on corporate governance

• ensuredthatallapplicableaccountingstandardshavebeen

followed; and

• preparedfinancialstatementsonthegoingconcernbasisasthe

Directors have a reasonable expectation, having made enquiries,

that the Group has adequate resources to continue its operations

for the foreseeable future.

Internal ControlThe Board acknowledges its overall responsibility for maintaining

a system of internal control 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 control 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 control, which covers financial, operational

and compliance controls, and also risk management.

Relationship with AuditorsThe 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 / InvestorsThe Board recognises the importance of transparency and accountability

to its shareholders and investors. Different channels of communication

are optimised to provide shareholders and investors with a balanced

and complete view of the Group’s performance and the issues

faced by its businesses in the competitive environment amidst a

changing landscape.

The issue of the Annual Report is an important medium of information

for the shareholders and investors whereas the Annual General Meeting

of the Company is the main forum for communication and dialogue with

the shareholders. Shareholders are encouraged to actively participate

and interact with the Board and members of the Senior Management

pertaining to the agenda items during the general meeting.

In addition, the Chairman briefs the shareholders on the company’s

operations for the financial year. Senior Management and the external

auditors are present to respond to questions and queries to ensure

a high level of accountability and transparency of the business goals,

strategy and operations.

The Board strives to maintain a good dialogue with shareholders

and regular meetings are held with institutional shareholders

throughout the year to discuss the progress of the Group, future growth

prospects and strategy. Other channels of communication include

company presentations, seminars, press releases and interim and

annual reports. There is a company website www.proton.com which

provides information on the company for all shareholders and the

general public.


“ PROTON has turned around and is doing well

under the new Management. It is now successfully

established globally and its presence is getting even

stronger. It’s good to see PROTON in so many foreign

countries. This is as a result of the tireless efforts and

hard work of its Management and staff. ”Mr. William Woon Peng Wah

Shareholder


Code of Conduct and DisciplinePROTON 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.

The 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.

• CodeofEthics

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 the Management’s responsibility to apply

these rules fairly and equitably to all employees.

Infringement of these rules may lead to disciplinary action such as

“verbal or written warnings”, “suspension without pay” and “separation

from the Company / Group”.


Besides the Annual Report, the Board ensures timely announcements

are made to Bursa Malaysia Securities Berhad and disseminates clear,

accurate and sufficient information to enable the shareholders and

investors to make informed decisions. The Investor Relations Unit also

pro-actively disseminates appropriate and relevant information to the

investor community and attends to whatever queries they may have.

Mr. William Woon Peng Wah

Shareholder



• PurposeofPolicy

The purpose of this policy is to provide a framework for the proper

conduct of directors and employees while on the job. The policy gives

directors and employees guidance in identifying business situations

which have the potential to create legal and ethical problems and to

provide direction in handling those potential and actual situations.

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

Business ConductThe Group is committed to the highest standards of business conduct

and seeks to maintain these standards across all of its operations

throughout the world. The Group has in place group finance policies

and employee procedures.

The Group has an appropriate organisational structure for planning,

executing, controlling and monitoring business operations in order to

achieve group objectives. Lines of responsibility and delegations of

authority are documented.Whistleblower PolicyPROTON 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.


• additional compliance information

External Auditors 2008 2007 RM’000 RM’000

NON-AUDIT FEES

PricewaterhouseCoopers Malaysia 1,234 2,214 Member firm of PricewaterhouseCoopers International Limited, 1,961 896 (a separate and independent legal entity from PricewaterhouseCoopers Malaysia)

Total 3,195 3,110

During the financial year, the amount of non-audit fees paid and payable to the external auditors by the Group are as follows:

Recurrent Related Party Transactions

On 8 June 2007, PROTON obtained exemption from Bursa Malaysia

Securities Berhad (“Bursa”) from disclosing Recurrent Related Party

Transactions with the Khazanah Nasional Berhad Group of 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.

Definition :

PONSB Perusahaan Otomobil Nasional Sdn Bhd

PESB Proton Edar Sdn Bhd

PPCSB Proton Parts Centre Sdn Bhd

PCUKL Proton Cars (UK) Ltd

PCA Proton Cars Australia Pty Limited

P’Spore Proton Singapore Pte Ltd

Corporate Disclosure

On 31 March 2008 CIMB Investment Bank Berhad on behalf of

PROTON announced the following:

(a) Proposal to strike-off the following subsidiaries:

(i) Auto Compound and Distribution Centre Sdn Bhd

(ii) Lotus Cars Asia Pacific Sdn Bhd

(iii) Proton Cars Direct Limited

(iv) Proton Cars Imports Limited

(b) Proposed Members Voluntary Liquidation of the following

companies:

(i) Proton Corporation Sdn Bhd

(ii) Smith & Sons Motors Limited

(iii) Proton Direct Limited

(iv) Proton Cars (Europe) Limited

Material Contracts

Neither PROTON nor any of its subsidiaries entered into any

material contracts during the year.



Transacting Related Party Nature of Transaction Company within the PROTON Group

Actual01/04/07 - 31/03/08

RM

1 Lub Dagangan Sdn Bhd Purchase of lubricants PONSB 2,976,089

3 Petronas Dagangan Sdn Bhd Purchase of lubricants PONSB 2,620,421

4 EONB Sale of goods PESB 1,609,771,377

5 EONB Sale of goods PPCSB 94,579,164

7

Johnson Controls Auto Seating Purchase of goods PONSB 98,187,4858

9 Johnson Controls Auto Interior Purchase of goods PONSB 13,062,520

10 PPCSB Sale of goods PONSB 14,329,720

11 PPCSB Purchase of parts PONSB 420,974

13 PPCSB Commission / Royalties received PONSB 3,595,486

14 PPCSB Purchase of parts PCUKL 5,530,251

15 PPCSB Purchase of parts PCA 3,386,837

16 PPCSB Purchase of parts P’Spore 779,084

12 PPCSB Purchase of parts PESB 76,721,836

Johnson Controls Auto Seating Purchase of goods PPCSB 260,974

6 Johnson Controls Auto Holding Purchase of goods PPCSB 686,472

2 Petronas Dagangan Sdn Bhd Purchase of lubricants PESB 8,739,626

Below is a list of Recurrent Related Party Transactions entered during the period for the financial year ended 31 March 2008.



RM

17

Hicom Teck See Purchase of parts PONSB 126,491,25118

Tenaga Nasional Berhad Sale of cars PESB 313,79319

Oriental Summit Industries Purchase of parts PPCSB 1,487,818 20

Oriental Summit Industries Purchase of parts PONSB 51,788,40221

22 PHN Industry Purchase of parts PONSB 70,337,466

Hicom Teck See Purchase of parts PPCSB 2,491,437

Transacting Related Party Nature of Transaction Company within the PROTON Group

Actual01/04/07 - 31/03/08


• statement on internal control

Statement on Internal Control

The Malaysian Code on Corporate Governance requires listed companies to maintain

a sound system of internal control to safeguard shareholders’ investments and the

Group’s assets.

Directors of listed companies are required to make disclosure in their annual reports on the

state of internal control in accordance with the Revamped 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 ResponsibilityThe 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 control is designed to manage the

principal business risks that may impede the Group from achieving its

business objectives. The system, by its nature, can only provide

reasonable but not absolute assurance against any material

misstatement or loss occurrence.

Risk ManagementRisk Management is regarded by the Board of Directors (Board) to

be an integral part of the Group’s operations with the objective of

maintaining a sound internal control system and ensuring its continuing

adequacy and integrity. As part of the PROTON Group’s continuous

efforts to enhance the level of risk management culture and practices,

the company continues to embed the risk management process in the

conduct of the business operations to provide reasonable assurance

of achieving the Group’s business objectives while at the same time

enhancing shareholders’ value.

The Group reaffirms its on-going efforts towards achieving sustainable

risk management practices within the Group with the current set-up

of Group Risk Management Unit (GRMU), Group Risk Management

Committee (GRMC) and Board Risk Management Committee (BRMC).

The GRMU is responsible for ensuring that an appropriate risk

management framework exists within the Group and is effectively

implemented to manage the key risk exposures of the organisation on

an on-going basis. During the financial year, GRMU’s main focus was to

further integrate the risk management process in key business activities,

whereby risk assessments and reporting were carried out at key

stages of new product development, new market entry as well as

during the annual business planning process. If deemed appropriate,

significant risks are escalated to the GRMC for review and advice.

The GRMC, which comprises of Senior Management, is responsible

for overseeing the risk management implementation, regular updating

of the Group’s risk profiles and improving the implementation

methodology. The committee also provides direction to the GRMU in

carrying out its activities. At GRMC level, the Committee deliberates

and decides the Group’s major risks to be escalated for the attention

of the BRMC.

The BRMC was established to deliberate major risks highlighted by the

Management and assist the Board in reviewing PROTON’s risk policies

and strategies.

To further enhance the communication of risks between the

management and the Board, information relating to key risks as well as

risk mitigation measures were incorporated into the monthly business

performance report for the attention of the BRMC and Board.

For the financial year ended 31 March 2008, the GRMC and BRMC

have held quarterly meetings in accordance to the Charter.

Assurance MechanismApart from risk management activities, the Board and Management

have established numerous processes for identifying, evaluating and

managing the significant risks faced by the Group. They continue to

strive in enhancing and implementing the internal control system to

manage those risks that could affect the Group’s growth and financial

viability. These processes include updating the system of internal

controls when there are changes to the business environment or

regulatory guidelines.


Board Audit CommitteeThe Board has delegated the duty of reviewing and monitoring the

effectiveness of the Group’s system of internal control to the Board

Audit Committee (BAC). The BAC, comprising a majority of independent

non-executive directors, brings with them wide-ranging and in-depth

experience, knowledge and expertise.

The BAC assumes the overall duties of reviewing with the external

auditors their audit plan, audit report, as well as findings and

recommendations on internal controls highlighted annually in the

Internal Control Memorandum. Throughout the financial year, the BAC

was updated on the development of the Malaysian Financial Reporting

Standards, as well as legal and regulatory requirements. It also reviews

the effectiveness of the internal audit function with particular emphasis

on the scope and quality of audits, resources as well as independence

of the Group Internal Audit Division (GIAD).

Organisation Structure and Management CommitteesAn organisation structure, which is aligned to the business and

operations 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 businesses.

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.

Board CommitteesBoard Committees were established by the Board to assist the

Board in the execution of its responsibilities to provide oversight on

the effectiveness of the Group’s operations. The responsibilities and

authority of the Committees are governed by specific terms of reference

and these Committees are accountable to the Board.

The Board Committees are:

• Audit Committee

• Executive Committee (“EXCO”)

• Nomination and Remuneration Committee

• Risk Management Committee

• Disciplinary Committee

The details of the above-mentioned Board Committees are set

out in the Statement of Corporate Governance.

Group Internal Audit DivisionThe Group Internal Audit Division (GIAD) continues to independently

monitor compliance with the internal policies and procedures and the

effectiveness of the internal control systems and highlights significant

findings for corrective actions by the line management.

The annual audit plan, which covers the entity and its subsidiary

companies and was established primarily on a risk-based approach, is

reviewed and approved by the BAC annually before the commencement

of the following financial year and a quarterly work status update is

given by GIAD. GIAD regularly reviews the approved annual audit

plan to ensure significant risk areas are given adequate audit focus.

However, GIAD does not review the internal control system of the

associated companies and joint controlled entities which fall within

the control of their major shareholders. Nonetheless, the interests of

The BAC continues to meet regularly and have full and unimpeded

access to the internal and external auditors and all employees of

the Group.

Further information relating to the activities of the BAC is set out in the

Statement of Corporate Governance.

The key elements of the Group’s control environment include:



Other Key Elements of Internal ControlThe other key elements of the Group’s internal control systems are

described below:-

• Defined delegation of responsibilities to committees and

management of Head Office and operating units, including

authorisation levels for various aspects of the business which are

set out in the Limits of Authority;

• Documented internal policies and procedures as set out in the

Group Policies and Procedures and certification by ISO 9001:2000

of the Quality System Procedures for the Company and major

subsidiaries within the Group;

• Quarterly financial statements and the Group’s performance are

deliberated by the BAC, which subsequently presents them to the

Board for their review, consideration and approval;

• Management Committee meetings held on a regular basis to

identify, discuss and resolve operational, financial and key

management issues;

• A comprehensive budgeting process where the annual budgets are

approved by the Board and reviewed at mid-year;

• The Board receives and reviews monthly reports from management

on key strategic and operational issues and provides direction

to management;

PROTON are served through representation on the Board of Directors

of the respective associated companies and joint controlled entities.

On a quarterly basis, the GIAD updates the BAC on the status of

corrective actions taken by the line management arising from the audit

findings highlighted by both GIAD and the external auditors.

Further information relating to the activities of GIAD functions is set out

in the Statement of Corporate Governance.

• Regular visits to operating units and subsidiaries by

senior management;

• Various improvement programmes were established in the

PROTON Group and its subsidiaries to enhance business

operations;

• Continuous training efforts to enhance the leadership quality and

competency of the workforce;

• Regular employee perception surveys were conducted to

obtain feedback from employees to promote continuous

improvements; and

• Formal employee appraisal system for effective coaching and

evaluation of employee performance. During the year, Key

Performance Indicators (KPIs) had been established to gauge the

performance of the respective business and functional units within

the Group.

ConclusionsFor the financial year under review, after due and careful inquiry and

based on the information and assurance provided, the Board is satisfied

that the key elements of internal control are in place. Nevertheless,

identified areas of concerns are accorded closer attention and more

regular monitoring to ensure key internal controls are adequate and

effective to continually safeguard shareholders’ investment and the

Group’s assets.



• risk management

Risk Management

The PROTON Group acknowledges the need for a sound risk management process

and practices.

To ensure that the risk management framework is effectively implemented within the

PROTON Group, the Board delegated the responsibility to manage the Group’s risks to the

Board Risk Management Committee (BRMC). This responsibility is supported by the Group

Risk Management Committee (GRMC) comprising the heads of key divisions and business

units in the PROTON Group.


• risk management

Risk Management FrameworkThe Board regards risk management as an integral part of the Group’s

operation. In order to provide reasonable assurance to the Board

and other stakeholders that all risks are being effectively managed, a

consistent, disciplined and systematic approach for managing risks was

endorsed and implemented within the Group.

The framework, process and practices consist of the following:-

Risk Policy and StrategyThe year in review saw our primary focus was to further integrate

the risk management process to become an integral part of the key

business and decision-making process.

Risk assessment on new market entry and business planning for export

markets was performed to inform the Management on the possible

threats and opportunities that could arise from the business expansion

exercise. Risk assessments were also performed at key stages of the

vehicle development process to better ensure project objectives were

achieved.

To further enhance the communication on risk assessments between

the Management and the Board, information relating to key risks

as well as risk mitigation measures were incorporated into the

monthly business performance report for the attention of the BRMC

and Board.

This initiative, along with the robust risk operation systems and

monitoring, further enhanced the effectiveness of risk management

practices within the PROTON Group.

Risk Structure and OrganisationThe Group adopted a three-level risk defense mechanism to ensure

that all risks inherent or residual impacting the Group were effectively

organised and managed. (See attached diagram).

• First Level of Defense: Daily risk management.

The business and operations units form the first line of defense.

They are responsible for managing the risks that may impact business

operations in their day-to-day activities.

“ I’ve been with PROTON for 14 years where I

have grown and gained valuable experience. ”Muhammad Firdaus Petail Bin Abdullah

Group Secretarial & Compliance


Risk Measurement, Risk Operations and SystemsEffective risk management is performed through formalised and

centralised operations and systems. In the year under review, a

standard measurement tool and reporting format was developed to

ensure uniformity in identifying, rating and monitoring all types of risks

faced by the Group.

By using this measurement tool, all risks were prioritised into

Corporate Risk Profile, Major Risk Profile and Business Unit Risk Profile.

Corporate and majors risks were monitored at the GRMC and BRMC

levels respectively.

Way ForwardThe year under review was a crucial period for risk management

practices within PROTON. Its significance was increasingly felt in the

Group’s operations and successfully incorporated in the Group’s

business planning, performance tracking activities, and cascaded down

to the operational level.

Going forward, PROTON will continue to enhance the appreciation

of risk management and strive for a stronger and more resilient risk

management culture in the Group.

• risk management

• Second Level of Defense: Risk oversight.

The second level of defense comprises the Group Risk Management

Unit (GRMU). GRMU provides specialised resources for developing

risk framework, policies, methodologies, tools and appropriate

training for the management to ensure risk management processes

are carried out effectively and consistently throughout the Group.

• Third Level of Defense: Independent assurance.

The Group Internal Audit Division (GIAD) of PROTON acts as the

third line of defense. GIAD carries out internal control review to

provide independent assurance to the Board on the effectiveness

of the whole enterprise risk management process.

At the management level, a GRMC was set up to discuss significant

risks escalated by the individual business units. Its primary activity

is to evaluate risks that could have significant impact on the Group’s

business objectives and to ensure these risks are effectively managed

by the respective business units. The GRMC will escalate major risks

impacting the Group on quarterly intervals to the BRMC for its

deliberation and advice.

The BRMC’s main function is to oversee the effective implementation

and operations of the risk management framework in the PROTON

Group. It also advises the Board on the appropriate risk policies and

strategies to be adopted within the Group.


• risk management

First Line Defense

Daily Risk Management

Second Line Defense

Risk Oversight

Third Line Defense

Independent Assurance

Function:• Formulate and maintain risk policies and framework.• Implement appropriate risk management methodologies and tools. • Facilitate risk training and risk profiling exercise• Coordinate reporting of risks to GRMC and BRMC.

Function:• Identify key risks in a timely manner.• Evaluate and prioritise risks.• Effectively implement risk counter-measures.• Report risks to GRMC on a quarterly basis.

Responsibility of:• Respective Business Units

Responsibility of:• Group Risk Management Unit (GRMU)

Responsibility of:• Board Audit Committee (BAC) • Group Internal Audit Division (GIAD)

Function:• Provide independent assurance on the effectiveness of risk management activities.



“ PROTON is committed

to the advancement of the

Malaysian A1 Team. ”


• calendar of events

August 2007 The Satria Gemilang, the 50th

Anniversary car, being unveiled for the first time

on the eve of Merdeka at Stadium Merdeka

September 2007 PROTON launches its annual

Occupational Health & Safety at the Workplace to

remind staff of the importance of safety at work and

on the road ahead of the Hari Raya Aidilfitri holidays

September 2007 PROTON marks its entry into

Thailand with the appointment of well-established

Phranakorn Auto Sales Co. Ltd, as its sole distributor

August 2007 DYMM Seri Paduka Baginda Yang di-Pertuan Agong officiates at the launch of the Persona

July 2007 BAM players conducting a badminton

clinic for children of PROTON staff

July 2007 PROTON i.CARE is our commitment to quality which we uphold via the message ‘You Can Count On Us’



September 2007 Yayasan PROTON awards 17 students with full scholarships to pursue their higher education

November 2007 PROTON clinches orders for

5,000 units of Waja to be used as taxis in Iran

November 2007 Drivers of A1 teams visit

PROTON

December 2007 Flood victims in Kelantan,

Pahang and Johor receive aid

November 2007 PROTON introduces the

new face-lift Gen.2, Savvy, and Satria Neo in the Thai

market

October 2007 H.E. Prince (Dr) Turki Saud Mohammed Al Saud, Vice President for Research Institute King Abdul Aziz City for Science and Technology Riyadh, visits PROTON



December 2007 PROTON Gen.2 shipment to

China sees the first batch of Youngman’s 30,000

export orders delivered

December 2007 The PROTON Managing

Director flanked by loyal customers during

Customer Day at the PROTON Centre of Excellence

January 2008 A new saga begins: YAB Dato’

Seri Abdullah Ahmad Badawi, Prime Minister of

Malaysia, launches the new Saga

February 2008 PROTON is the official car for

Le Tour de Langkawi

January 2008 PROTON unveils a new car with a

twist

February 2008 PROTON and National Productivity

Corporation agree to collaborate in vendor

development



February 2008 Sekolah Rendah Kebangsaan

Paloh, Pintu Gang, joins PROTON’s Pintar Program,

a CSR initiative

March 2008 Hundreds of customers gather at

PROTON’s ‘Customer Appreciation Day’

March 2008 Motivation Camp for students from

the Pintar Program schools

March 2008 An enhanced version of the Gen.2

hatchback, fitted with a CamPro (Cam Profile

Switching) engine, is introduced

March 2008 Twenty journalists from various

media organisations in China visit PROTON’s Shah

Alam and Tanjung Malim plants

April 2008 PROTON clinches the Gold Award for

Reader’s Digest Trusted Brand for the third year



June 2008 PROTON and GIATMARA come together

for the Advancement of Automotive Training

June 2008 Persona is named Best Model of the Year at the 2008 Frost & Sullivan Asean Automotive Awards

April 2008 Tan Sri Dato’ Haji Muhyiddin Bin Mohd Yassin, Minister of International Trade and Industry, visits the Shah Alam plant

May 2008 The annual National Skills Competition

May 2008 The Satria Neo Asian Touring Car Series 1500 Max represents Malaysia in the Asian Festival of Speed

June 2008 PROTON collaborates with the Road

Safety Department to promote vehicle, road & user

safety through a community based programme



July 2008 PROTON Axle Racing is part of the

Asian Touring Car Series 1500 Max at Sentul Circuit,

Indonesia

June 2008 Fun in the sun during PROTON’s

Family Day at Sunway Lagoon

June 2008 A company-wide Quality Campaign is launched to affirm PROTON’s steadfast commitment to quality improvement in moving forward as a world-class manufacturer

July 2008 PROTON at the Jakarta International

Motor Show

July 2008 The Lotus Evora is launched in the

United Kingdom

July 2008 The Satria Neo Super 2000 Rally Car

unveiled in Bristol, UK



“ National Service

trainees surrounding

a Lotus car which was

part of the PROTON

Cavalcade during

Le Tour de Langkawi. ”


Statutory Financial Statements


Contents

146 Directors’ Report

150 Income Statements

151 Balance Sheets

153 Consolidated Statement of Changes in Equity

154 Company Statement of Changes in Equity

155 Cash Flow Statements

158 Notes to the Financial Statements

233 Statement by Directors

234 Statutory Declaration

235 Report of the Auditors


DIRECTORS’ REPORT

The Directors have pleasure in submitting their annual report together with the audited financial statements of the Group and Company for the

financial year ended 31 March 2008.

PRINCIPAL ACTIVITIES

The Company is principally involved in investment holding activities.

The principal activities of the subsidiaries, associated companies and jointly controlled entities are set out in Notes 17 to 19 of the financial

statements. There have been no significant changes in the activities of the Group and Company during the financial year.

FINANCIAL RESULTS

DIVIDEND

No dividend has been paid or declared by the Company since the end of the previous financial year.

The Directors do not recommend any dividend payment for the financial year ended 31 March 2008.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves and provisions during the financial year except as disclosed in the financial statements.

• directors’ report

Net profit for the year 184,551 30,381

Group Company

RM’000 RM’000


DIRECTORS

The Directors who have held office during the period since the date of the last report are:

Dato’ Mohammed Azlan Bin Hashim

Dato’ Syed Zainal Abidin B Syed Mohamed Tahir

Haji Abdul Jabbar Bin Abdul Majid

Haji Abdul Kadir Bin Md Kassim

Dato’ Lim Heen Peok

Datuk Zalekha Binti Hassan (appointed on 11.02.2008)

Mohammad Zainal Bin Shaari (resigned on 03.04.2008)

Dato’ Ahmad Bin Hj Hashim (resigned on 11.02.2008)

Dato’ Mohd Izzaddin Bin Idris (resigned on 30.11.2007)

In accordance with Article 104 of the Company’s Articles of Association, Dato’ Mohammed Azlan Bin Hashim and Haji Abdul Jabbar Bin Abdul

Majid, 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 Zalekha Binti Hassan retires at the forthcoming Annual General

Meeting and, being eligible, offers herself for re-election.

In accordance with Article 139 of the Company’s Article of Association, Dato’ 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.

• directors’ report (continued)


STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets of the Group and Company were made out, the Directors took reasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts

and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful

debts; and

(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values

as shown in the accounting records of the Group and Company had been written down to an amount which they might be expected

so to realise.

At the date of this report, the Directors are not aware of any circumstances:

(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements

of the Group and Company inadequate to any substantial extent; or

(b) which would render the values attributed to current assets in the financial statements of the Group and Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company

misleading or inappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the

financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and Company to meet their obligations

when they fall due.




STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONTINUED)

At the date of this report, there does not exist:

(a) any charge on the assets of the Group or the Company which has arisen since the end of the financial year which secures the liability of

any other person; or

(b) any contingent liability of the Group or the Company which has arisen since the end of the financial year.

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which

would render any amount stated in the financial statements misleading.

In the opinion of the Directors:

(a) the results of the Group’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 5 (d) to the financial statements; and

(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a

material and unusual nature likely to affect substantially the results of the operations of the Group or the Company for the financial year

in which this report is made.

AUDITORS

The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors in accordance with their resolution dated 16 July 2008.

DATO’ MOHAMMED AZLAN BIN HASHIM DATO’ SYED ZAINAL ABIDIN B SYED MOHAMED TAHIR

CHAIRMAN DIRECTOR


INCOME STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2008

Revenue 6 5,621,594 4,687,330 41,203 667,983

Cost of sales (5,056,854) (4,547,537) - -

Gross profit 564,740 139,793 41,203 667,983

Research and development grant 5(d) 193,782 - - -

Other operating income 134,889 136,882 302 393

Distribution costs (201,095) (185,678) - -

Administrative expenses (512,914) (618,147) (607) (333,065)

Other operating expenses (38,121) (60,462) - -

Profit/(loss) before finance cost 7 141,281 (587,612) 40,898 335,311

Finance cost 9 (17,936) (35,541) - -

Share of results of associated

companies 18 13,134 3,219 - -

Share of results of jointly

controlled entities 19 7,837 1,805 - -

Profit/(loss) before taxation 144,316 (618,129) 40,898 335,311

Taxation 10 40,235 28,596 (10,517) (101,532)

Profit/(loss) for the year 184,551 (589,533) 30,381 233,779

Attributable to:

Equity holders of the Company 184,551 (589,533) 30,381 233,779

Earnings/(loss) per share (sen)

- basic 11 34 (107)

- diluted 11 N/A N/A

Group Company

Restated 2008 2007 2008 2007 Note RM’000 RM’000 RM’000 RM’000

• income statements

The notes on pages 158 to 232 form part of these financial statements.


• balance sheets

BALANCE SHEETS AS AT 31 MARCH 2008

Group Company


NON-CURRENT ASSETSProperty, plant and equipment 13 3,150,446 3,169,495 - -

Prepaid land lease payments 14 24,031 9,944 - -

Goodwill 15 29,008 29,008 - -

Intangible assets 16 275,192 169,075 - -

Subsidiary companies 17 - - 1,708,651 1,708,651

Associated companies 18 165,443 169,758 13,600 13,600

Jointly controlled entities 19 192,747 223,550 - -

Investments 20 10,397 10,397 6,475 6,475

Total Non-Current Assets 3,847,264 3,781,227 1,728,726 1,728,726

CURRENT ASSETSInventories 22 1,100,286 1,273,612 - -

Trade and other receivables 23 969,344 981,025 14 5

Amounts due from subsidiary

companies 24 - - 66,219 66,219

Amounts due from associated

companies 25 10,713 24,314 - -

Amounts due from jointly controlled

entities 26 4,430 10,618 - -

Tax recoverable 10 114,479 176,048 273 314

Current investments 27 20,822 73,448 - -

Dividends receivable - - 14,800 -

Deposits, bank and

cash balances 28 1,226,010 626,475 26,296 10,610

Total Current Assets 3,446,084 3,165,540 107,602 77,148

TOTAL ASSETS 7,293,348 6,946,767 1,836,328 1,805,874


BALANCE SHEETS AS AT 31 MARCH 2008 (CONTINUED)

Group Company


• balance sheets (continued)


EQUITY AND LIABILITIESShare capital 29 549,213 549,213 549,213 549,213Reserves 30 4,872,043 4,681,375 1,278,604 1,248,223Equity attributable to equity holders of the Company 5,421,256 5,230,588 1,827,817 1,797,436

Total Equity 5,421,256 5,230,588 1,827,817 1,797,436

NON-CURRENT LIABILITIESLong term liabilities 31 230,473 181,637 - -Deferred tax liabilities 21 2,439 754 - -

Total Non-Current Liabilities 232,912 182,391 - -

CURRENT LIABILITIESTrade and other payables 32 1,235,520 1,046,338 575 790Provisions 33 186,556 196,067 - -Amounts due to subsidiary companies 34 - - 7,936 7,648Amounts due to associated companies 35 84,984 99,675 - -Amounts due to jointly controlled entities 36 16,958 25,060 - -Taxation 1,556 2,222 - -Short term borrowings 37 113,606 164,426 - -

Total Current Liabilities 1,639,180 1,533,788 8,511 8,438

LIABILITIES 1,872,092 1,716,179 8,511 8,438

TOTAL EQUITY AND LIABILITIES 7,293,348 6,946,767 1,836,328 1,805,874

Net assets per share attributableto equity holders of the Company (RM) 9.87 9.52


• consolidated statement of changes in equity for the financial year ended 31 March 2008

At 1 April 2006 549,213 475,617 (62,882) 4,908,704 5,870,652

Net income recognised directly in equity

- Foreign exchange differences

on translation of foreign operations - - (23,070) - (23,070)

Loss for the financial year - - - (589,533) (589,533)

Total recognised income

and expense for the financial year - - (23,070) (589,533) (612,603)

Final dividend for the financial year ended

31 March 2006 12 - - - (27,461) (27,461)

At 31 March 2007 549,213 475,617 (85,952) 4,291,710 5,230,588

Attributable to equity holders of the Company Foreign Share Capital Exchange Retained capital reserve reserve profits Total Note RM’000 RM’000 RM’000 RM’000 RM’000


At 1 April 2007 549,213 475,617 - (85,952) 4,291,710 5,230,588

Net income recognised directly in equity

- Foreign exchange differences on

translation of foreign operations - - - 3,755 - 3,755

Arising from business combination - - 2,362 - - 2,362

Profit for the financial year - - - - 184,551 184,551

Total recognised income and expense

for the financial year - - 2,362 3,755 184,551 190,668

At 31 March 2008 549,213 475,617 2,362 (82,197) 4,476,261 5,421,256

Attributable to equity holders of the Company Fair value of previously held interest in a Foreign Share Capital piecemeal exchange Retained capital reserve acquisition reserve profits Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


• company statement of changes in equity for the financial year ended 31 March 2008

At 1 April 2006 549,213 549,213 1,041,905 1,591,118

Profit for the financial year - - 233,779 233,779

Final dividend for the financial year ended

31 March 2006 12 - - (27,461) (27,461)

At 31 March 2007 549,213 549,213 1,248,223 1,797,436

At 1 April 2007 549,213 549,213 1,248,223 1,797,436

Profit for the financial year - - 30,381 30,381

At 31 March 2008 549,213 549,213 1,278,604 1,827,817

Issued and fully paid ordinary shares Distributable

Nominal Number value of Retained Note of shares RM1 each earnings Total ’000 RM’000 RM’000 RM’000



• cash flow statements for the financial year ended 31 March 2008

CASH FLOWS FROM OPERATING ACTIVITIESProfit/(loss) for the year 184,551 (589,533) 30,381 233,779

Adjustments for:

Taxation (40,235) (28,596) 10,517 101,532

Property, plant and equipment:

- depreciation 382,556 352,788 - -

- written off 18,557 94,263 - -

- impairment (800) - - -

- (gain)/loss on disposal (12,546) 250 - -

Prepaid land lease payments

- amortisation 89 112 - -

- gain on disposal (990) - - -

Impairment of goodwill 6,741 - - -

Write back of inventories write down (25,053) (30,681) - -

Impairment of investment in a subsidiary company - - - 327,652

Impairment of investment in an associated company 4,200 - - -

Amortisation of intangible assets 34,817 22,315 - -

Interest expense 17,936 35,541 - -

Interest income (32,143) (35,563) (301) (374)

Share of results of associated companies (13,134) (3,219) - -

Share of results of jointly controlled entities (7,837) (1,805) - -

Gain on disposal of current investments (1,678) (49,975) - -

Reversal of allowance for doubtful debts (19,708) (39,659) - -

Allowance for doubtful debts 7,737 8,701 - -

Unrealised foreign exchange gain (10,230) (4,598) - -

Provision for warranties and free service

(net of expected reimbursement) 45,526 38,737 - -

Research and development grant (193,782) - - -

Provision for retirement benefits 14,616 - - -

Dividend income (2,896) (8,713) (41,203) (667,983)

Operating profit/(loss) before working capital changes 356,294 (239,635) (606) (5,394)

Group Company

Restated 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000


• cash flow statements for the financial year ended 31 March 2008 (continued)

Group Company


CASH FLOWS FROM OPERATING ACTIVITIES (continued)Changes in working capital:Inventories 217,044 162,458 - -Receivables- trade and other receivables 73,075 212,606 (9) 190- subsidiary companies - - - 1,822- associated companies and jointly controlled entities 19,789 14,822 - -Payables- trade and other payables 196,067 (204,712) (215) (1,929)- provisions for liabilities and charges (99,301) (88,219) - -- subsidiary companies - - 288 (2,438)- associated companies and jointly controlled entities (22,793) 69,691 - -

Cash generated from/(used in) operations 740,175 (72,989) (542) (7,749)

Taxation paid (8,571) (4,819) - -Taxation refund 108,955 - - -Interest received 32,143 39,544 301 374Interest paid (17,936) (42,927) - -Retirement benefits paid (11,155) (15,401) - -

Net cash flow generated from/(used in) operating activities 843,611 (96,592) (241) (7,375)

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment (391,997) (318,835) - -Additional investment in subsidiary companies (32,616) - - (570,644)Additional investment in associated company - (7,169) - -Purchase of intangible assets (141,217) (173,354) - -Purchase of current investments - (284,513) - -Proceeds from disposal of current investments 54,304 473,005 - -Proceeds from disposal of property, plant and equipment 50,722 6,762 - -Proceeds from disposal of prepaid land lease payments 1,304 - - -Dividends received 25,698 31,113 15,927 566,255

Net cash flow (used in)/generated from investing activities (433,802) (272,991) 15,927 (4,389)


• cash flow statements for the financial year ended 31 March 2008 (continued)


CASH FLOWS FROM FINANCING ACTIVITIESDividend paid 12 - (27,461) - (27,461)

Proceeds from borrowings 421,598 964,148 - -

Proceeds from lease and hire purchase - 5,823 - -

Finance lease and hire purchase installments paid (1,293) (384) - -

Repayment of borrowings (125,820) (1,467,399) - -

Fixed deposits pledged as security - 666,640 - -

Net cash flows generated from/(used in)

financing activities 294,485 141,367 - (27,461)

NET INCREASE/(DECREASE) IN

CASH AND CASH EQUIVALENTS 704,294 (228,216) 15,686 (39,225)

EXCHANGE RATE EFFECTS (1,819) 6,488 - -

CASH AND CASH EQUIVALENTS AT THE

BEGINNING OF THE FINANCIAL YEAR 471,464 693,192 10,610 49,835

CASH AND CASH EQUIVALENTS AT THE END

OF THE FINANCIAL YEAR 44 1,173,939 471,464 26,296 10,610

Group Company



• notes to the financial statements - 31 March 2008

1 GENERAL INFORMATION The Company is principally involved in investment holding activities.

The principal activities of the subsidiaries, associated companies and jointly controlled entities are set out in Notes 17 to 19 to the financial statements. There have been no significant changes in the activities of the Group and Company during the financial year.

The Company was incorporated as a limited liability company, and is domiciled in Malaysia.

The address of the registered office and the principal place of business of the Company is:

HICOM Industrial Estate Batu Tiga, 40000 Shah Alam, Selangor Darul Ehsan, Malaysia.

2 BASIS OF PREPARATION

During the financial year, the Group made profits after taxation of RM184.6 million (2007: loss of RM589.5 million) which includes a research and development grant of RM193.8 million and sale of rights for use of intellectual property rights of RM33.5 million.

Going concern assumption

The Directors are of the opinion that the use of the going concern assumption in the preparation of the financial statements is appropriate based on the approved Group business plan and available financing arrangements. The efforts put in by the Group in the current financial year such as cost reduction, cash flows control and increasing sales on the back of new models launched during the financial year, has improved the profitability and cash position of the Group.

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. The Group has also indicated its present intention to procure financing, where required, for certain subsidiary companies both to meet their liabilities as and when they fall due for the twelve months subsequent to their balance sheet dates.

Estimates and judgement

The preparation of financial statements requires the Directors to make estimates and judgement that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the financial year. These estimates and judgement are based on the Directors’ best knowledge of current events and actions, 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.


• notes to the financial statements - 31 March 2008 (continued)

2 BASIS OF PREPARATION (CONTINUED)

Financial Reporting Standards

The financial statements of the Group and Company have been prepared under the historical cost convention (as modified by the revaluation of certain freehold land), unless otherwise indicated in the summary of significant accounting policies.

The financial statements comply with the Financial Reporting Standards (‘FRSs’), the Malaysian Accounting Standard Board (‘MASB’), Approved Accounting Standards in Malaysia for Entities Other than Private Entities, and the provisions of the Companies Act, 1965.

As required under FRS 108, the following describes the new Standards and Interpretations which have been issued by the MASB:

(a) Standards, amendments to published standards and Interpretation Committee (‘IC’) interpretations that are applicable to the Group and are effective

Accounting policies adopted by the Group have been applied consistently in dealing with items that are considered material in relation to the financial statements, unless otherwise stated. The following new and revised FRSs that are relevant to the Group have been adopted during the financial year:

• FRS 117 Leases • FRS 124 Related Party Disclosures

A summary of the impact of the new accounting standards, amendments to the published standards and IC interpretations to existing standards on the financial statements of the Group and of the Company is set out in Note 46 to the financial statements.

(b) Standards, amendments to published standards and IC interpretations that are effective but not applicable to the Group:

• FRS 6 Exploration for and Evaluation of Mineral Resources • Amendments to FRS119 Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures • TRi – 1 Accounting for Zakat on Business • TRi – 2 Ijarah




(c) Standards, amendments to published standards and IC interpretations to existing standards that are not yet effective and have not been early adopted

The new standards, amendments to published standards and interpretation that are mandatory for the Group’s financial periods beginning on or after 1 April 2008, but which the Group and Company has not early adopted, are as follows:

• FRS 112 “Income Taxes” (effective for accounting periods beginning on or after 1 July 2007). This revised standard removes the requirements that prohibit recognition of deferred tax on unutilised reinvestment allowances or other allowances in excess of capital allowances.

• FRS 120 “Accounting for Government Grants and Disclosure of Government Assistance” (effective for accounting periods beginning on or after 1 July 2007). This revised standard allows the alternative treatment of recording non-monetary government grant at nominal amount on initial recognition.

• Amendment to FRS 121 “The Effects of Changes in Foreign Exchange Rates – Net Investment in Foreign Operation” (effective for accounting periods beginning on or after 1 July 2007). This amendment requires exchange differences on monetary items that form part of the net investment in a foreign operation to be recognised in equity instead of in profit or loss regardless of the currency in which these items are denominated in.

• FRS 139 “Financial Instruments: Recognition and Measurement“ (effective date yet to be determined by MASB). This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. The Group has applied the transitional provision in FRS 139 which exempts entities from disclosing the possible impact arising from the initial application of this standard on the financial statements. The Group will apply this standard when effective.

• FRS 134 Interim Financial Reporting. FRS 134, removed additional disclosures on the qualification and current status of matters giving rise to the qualification where audit report of preceding financial statements was qualified and on the fact that valuations of property, plant and equipment have been brought forward without amendment from the previous annual financial statements.

• Other revised standards (effective for accounting periods beginning on or after 1 July 2007) that have no significant changes compared to the original standards:

- FRS 107 Cash Flow Statement - FRS 118 Revenue - FRS 137 Provisions, Contingent Liabilities and Contingent Assets - FRS 111 Construction Contracts

The Group will apply these standards from financial periods beginning on 1 April 2008. With the exception of FRS 139, the above standards, amendments to published standards above are not expected to have a material impact on the financial statements.




(d) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and not relevant to the Group’s operations

The following standards, amendments to published standards and interpretations to existing standards are mandatory for the Group’s financial year beginning on 1 April 2008 but are not relevant for the Group’s operations:

• IC Interpretation 1 “Changes in Existing Decommissioning, Restoration and Similar Liabilities” (effective for accounting periods beginning on or after 1 July 2007). This interpretation deals with changes in the estimated timing or amount of the outflow of resources required to settle the obligation or a change in the discount rate.

• IC Interpretation 2 “Members’ Shares in Co-operative Entities and Similar Instruments” (effective for accounting periods beginning on or after 1 July 2007). The interpretation deals with liabilities or equity classification of financial instruments which give the holder the right to request redemption, but subject to limits on whether it will be redeemed.

• IC Interpretation 5 “Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds” (effective for accounting periods beginning on or after 1 July 2007). This interpretation deals with accounting in the financial statements of a contributor for its interests arising from decommissioning funds.

• IC Interpretation 6 “Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment” (effective for accounting periods beginning on or after 1 July 2007). This interpretation provides guidance on the recognition, in the financial statements of producers, of liabilities for waste management under the European Union Directive in respect of sales of historical household equipment.

• IC Interpretation 7 “Applying the Restatement Approach” under FRS 129 “Financial Reporting in Hyperinflationary Economies” (effective for accounting periods beginning on or after 1 July 2007). This interpretation provides guidance on how to apply the requirements of FRS 129 in a reporting period in which an entity identifies the existence of hyperinflationary in the economy of its functional currency, when that economy was not hyperinflationary in the prior period.

• IC Interpretation 8 “Scope of FRS 2” (effective for accounting periods beginning on or after 1 July 2007). This interpretation clarifies that FRS 2 “Share-based Payment” applies even in the absence of specifically identifiable goods or services.



3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements.

(a) Subsidiary companies

Subsidiary companies are those corporations, partnerships or other entities in which the Group has the power to exercise control over the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Investments in subsidiary companies are stated at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. The accounting policy on Impairment of Assets is set out in Note 3(v).

Prior to 1 January 2006, the Group applied both the purchase method and the merger method to account for Business Combinations in accordance with FRS 122. With effect from 1 January 2006, only the purchase method of accounting is used to account for Business Combinations in accordance with FRS 3.

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date irrespective of the interest of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. The accounting policy on goodwill is set out in Note 3(f)(i). If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised as a gain in the Consolidated Income Statements.

Subsidiary companies are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Uniform accounting policies for like transactions and other events in similar circumstances are used by all companies in the Group in preparing the Consolidated Financial Statements. The financial statements of all companies within the Group used in the preparation of the Consolidated Financial Statements are prepared as of the same reporting date.

Inter-company balances, inter-company transactions and unrealised gains on transactions between Group companies are eliminated in full. Unrealised losses are also eliminated in full unless the assets transferred are impaired.

Minority interests represent that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through the subsidiaries by the parent. It is measured at the minorities’ share of the fair values of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since that date.



3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) Subsidiary companies (continued)

The gain or loss on disposal of a subsidiary is the difference between the net disposal proceeds and the Group’s share of the subsidiary’s net assets as of the date of disposal, including the cumulative amount of any exchange differences that relate to that subsidiary which were previously recognised in equity, and is recognised in the Consolidated Income Statements.

(b) Associated companies

Associated companies are those corporations, partnerships or other entities in which the Group exercises significant influence, but which it does not control. Significant influence is the power to participate in the financial and operating policy decisions of the associated companies but not the power to exercise control over those policies.

Investments in associated companies are stated at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. The accounting policy on Impairment of Assets is set out in Note 3(v).

In the Consolidated Financial Statements, investments in associated companies are accounted for using the equity method. Under the equity method, the Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted to the carrying amount of the investment. When the Group’s share of losses in an associated company equals or exceeds its cost of investment in the associated company including any other unsecured receivables, the Group discontinues its share of further losses, unless it has incurred legal or constructive obligations to make payments on behalf of the associated company.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the assets transferred are impaired.

In applying the equity method, the Group has ensured that uniform accounting policies for like transactions and other events in similar circumstances of the associated companies are used. The equity method is applied based on the latest audited financial statements.

(c) Jointly controlled entities

Jointly controlled entities are corporations, partnerships or other entities over which there is contractually agreed sharing of control by the Group with one or more parties where the strategic financial and operating policy decisions relating to the entity requires unanimous consent of the parties sharing control. The Group’s interests in jointly controlled entities are accounted for in the Consolidated Financial Statements by the equity method of accounting, as disclosed in Note 3(b).




(c) Jointly controlled entities (continued)

The Consolidated Income Statements include the Group’s share of results of the jointly controlled entities based on its latest audited financial statements or management financial statements of the companies concerned. The cumulative 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 audited financial statements or management financial statements that have the same reporting date.

Investments in jointly controlled entities are stated at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. The accounting policy on Impairment of Assets is set out in Note 3(v).

(d) Investments

The Group uses its judgement to determine the classification of its investments into current and non-current. An investment is classified as current if it is readily realisable and it is held for trading or intended to be realised within 12 months after the balance sheet date. All other investments are classified as non-current.

Investments in other non-current investments are shown at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the period in which the decline is identified.

Current investments are carried at the lower of cost and market value, determined on an aggregate portfolio basis by category of investments. Cost is derived at on the weighted average basis whilst market value is calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date. Increases/decreases in the carrying amount of marketable securities are credited/charged to the Consolidated Income Statements.

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is credited/charged to the Income Statement.




(e) 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, for rental to others, 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 IAS16 (revised) which allows the freehold land to be stated at the amount revalued on 5 September 1983. All other land held by the Group is stated at cost.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the Income Statement during the financial period in which they are incurred.

(ii) Depreciation

Freehold land is not depreciated as it has an infinite life. Depreciation of other property, plant and equipment is provided for on a straight line basis to write off the cost or valuation of each asset to its residual value over the estimated useful lives. The assets’ residual values, useful lives and depreciation method are reviewed annually and revised if appropriate.

The principal estimated useful lives of depreciation used are as follows:

Buildings 15-40 years Plant and machinery 5-15 years Office equipment, furniture, fittings 2-8 years Vehicles 3-5 years




(e) Property, plant and equipment (continued)

(ii) Depreciation (continued)

Dies and jigs, included under plant and machinery are depreciated based on the unit of production basis to write off the cost of the assets over the term of their estimated useful lives which range from 5 to 7 years.

Work in progress is not depreciated. Upon completion, the related costs will be transferred to the respective categories of assets. Depreciation on work in progress commences when the assets are ready for their intended use. Costs of toolings for pre-production are written off in the year they are incurred.

(iii) Impairment

Where an indication of impairment exists, the carrying amount of the assets is assessed and written down immediately to its recoverable amount. The accounting policy on Impairment of Assets is set out in Note 3(v).

(iv) Gains or Losses on Disposal

Gains or losses on disposals are determined by comparing proceeds with carrying amount and are included in profit/(loss) from operations. On disposal of revalued assets, amounts in revaluation reserve relating to those assets are transferred to retained earnings.

(v) Repairs and maintenance

Repairs and maintenance are charged to the Consolidated Income Statements during the period in which they are incurred. The cost of major renovations are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.

(f) Intangible assets

(i) Goodwill

Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment at least annually, or when events or circumstances occur indicating that an impairment may exist. Impairment of goodwill is charged to the Consolidated Income Statements as and when it arises. Impairment losses on goodwill are not reversed. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity disposed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each cash-generating unit or a group of cash-generating units represents the lowest level within the Group at which goodwill is monitored for internal management purposes and which are expected to benefit from the synergies of the combination. The Group allocates goodwill to each business segment in each country in which it operates.




(f) Intangible assets (continued)

(i) Goodwill (continued)

Goodwill on acquisition of associated companies and jointly controlled entities are included in the carrying value of the investment in associated companies and jointly controlled entities respectively. Such goodwill are tested for impairment as part of the overall balance.

(ii) Computer software

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific 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 Company, 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

Research expenditure is recognised as an expense when incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the criteria for recognition in FRS 138 are fulfilled.

Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development expenses capitalised include costs incurred in the development from the date it first meet the recognition criteria and up to the completion of the development project and commencement of commercial production. Capitalised development expenditure are stated at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is based on the expected production volume over its total useful life, which does not exceed 7 years for vehicles and 10 years for mechanical parts.

(g) Leases

Leases of property, plant and equipment where the Group assume substantially all the benefits and risks or ownership are classified as finance lease.

Finance lease are capitalised at the inception of the lease at the lower of the fair value of the leased property 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 rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to the Consolidated Income Statements over the lease period.




(g) Leases (continued)

Property, plant and equipment acquired under finance leases are included in tangible property, plant and equipment and are depreciated in accordance with the Note 3(e) above.

(h) Prepaid land lease payment

Leasehold land that normally has a finite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted for prepaid land lease payment that is amortised over the lease term in accordance with the pattern of benefits provided.

(i) 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 on the first-in first-out basis and 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 stocks.

In the case of work-in-progress and finished vehicles, an appropriate proportion of production overheads are included in the costs.

(j) Trade and other receivables

Trade and other receivables are carried at anticipated net realisable value. Allowances are made for doubtful debts based on specific review of outstanding balances at balance sheet date. General allowances are made to cover possible losses, which are not specifically identified. Other receivables are carried at anticipated realisable values. Bad debts are written off to the Consolidated Income Statements during the financial period in which they are identified.

(k) Government grants

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.

Government grants relating to expenditure are deferred and recognised in the Consolidated Income Statements over the period necessary to match them with the costs they are intended to compensate.




(l) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. When the effect of the time value of money is material, the amount of provision is the present value of the expenditure expected to be required to settle the obligation. Provisions are not recognised for future operating losses.

(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.

(iii) Provisions for liabilities

Provisions for free services are recognised based on expected levels of claims arising during the free services period.

(m) Employee benefits

(i) Short term employee benefits

Salaries, wages, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which the associated services are rendered by employees of the Group.

(ii) Post employment benefits

The Group has various post-employment benefit schemes in accordance with the local conditions and practices in the countries in which it operates. The Group has both defined contribution and defined benefit plans.




(m) Employee benefits (continued)

(ii) Post employment benefits (continued)

Defined contribution plans

The Group’s contributions to defined contribution plans are charged to the Consolidated Income Statements in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

Defined benefit plans

The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets, together with adjustments for actuarial gains/losses and past service cost. The Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date.

The defined benefit obligation, calculated using the projected unit credit method, is determined by independent actuaries on the basis of triennial valuations. Assumptions were made in relation to the annual investment returns, annual salary increases and annual increases in pension payments.

Plan assets in excess of the defined benefit obligation are subject to the asset limitation specified in FRS 119.

Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net actuarial gains and losses recognised in the Consolidated Income Statements is determined by the corridor method in accordance with FRS 119 and is charged or credited to income over the average remaining service lives of the related employees participating in the defined benefit plan.

Upon initial adoption of FRS 119 effective on 1 April 2003, the increase in defined benefit liability is recognised as an expense on a straight-line basis over 5 years in accordance with the transitional provision of the Standard.

(iii) Termination benefits

Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.




(n) Income taxes

Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes based upon the taxable profits, including withholding taxes payable by a foreign subsidiary company on distributions of retained earnings to companies in the Group.

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences or unused tax losses can be utilised.

Deferred tax is recognised on temporary differences arising on investments in subsidiary companies, associated companies and jointly controlled entities except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are not recognised on temporary differences arising from:

(i) goodwill; or

(ii) from the initial recognition of an asset or liability in a transaction which is not a business combination and at time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

(o) Foreign currency transactions and translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using its functional currency, which is the currency of the primary economic environment in which the entity operates (‘the functional currency’). The Consolidated Financial Statements are presented in Ringgit Malaysia, which is the Group’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Income Statements.




(o) Foreign currency transactions and translation (continued)

(iii) Group companies

The results and financial position of all the Group companies (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

- income and expenses for each Income Statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

- all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. When a foreign operation is disposed of or sold, such exchange differences that were recorded in equity are recognised in the Consolidated Income Statements as part of the gain or loss on disposal.

(p) Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short term, highly liquid investments with original maturities of not more than twelve months, and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the Balance Sheet.

(q) Income recognition

Revenue from sales of vehicles, spare parts and accessories are recognised when significant risks and rewards have been transferred to buyers. Significant risks and benefits are deemed to have been transferred upon delivery or acceptance of the goods.

Revenue from sale of completed apartments is recognised when the Sale and Purchase Agreements are signed.

Revenue for rendering of 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 prepayments to recognise timing differences arising between amounts invoiced and amounts recognised in the Income Statement on individual engineering contracts.




(q) Income recognition (continued)

Other revenue comprises mainly revenue from rental and royalty, which are recognised on an accrual basis. Other operating income comprises mainly interest income, realised foreign exchange gains, scrap sales and gains on disposal of investments. 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 accrual basis.

Sales of intellectual property are recognised on an accrual basis in accordance with the substance of the relevant agreements.

Dividends are recognised when the Company’s right to receive payment is established.

(r) Financial instruments

(i) Description

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise.

A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable.

(ii) Financial instruments recognised on the Balance Sheet

The particular recognition method adopted for financial instruments recognised on the Balance Sheet is disclosed in the individual policy statements associated with each item.

(iii) Financial instruments not recognised on the Balance Sheet

The Group enters into foreign currency forward contracts to protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset or liability will be settled.

Exchange gains and losses arising on contracts entered into as hedges of anticipated future transactions are deferred until the settlement of the contracts.

(iv) Fair value estimation for disclosure purposes

The fair value of publicly traded derivatives and securities is based on quoted market prices at the balance sheet date.

The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.




(r) Financial instruments (continued)

(iv) Fair value estimation for disclosure purposes (continued)

In assessing the fair value of non-traded derivatives and financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotations for the specific or similar instruments are used for long term debt. Unquoted long term investments are valued based on quoted investments with similar features.

The face values, less any estimated credit adjustments, for financial assets and liabilities classified as current are assumed to approximate their fair values.

(s) Borrowings

Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. Subsequently, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the Income Statement over the period of the borrowings.

Borrowing costs are charged to the Consolidated Income Statements as an expense in the period in which they have accrued. In subsequent periods, borrowings are stated at cost less repayment made during the year.

Interest, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability is reported within finance cost in the Consolidated Income Statements.

Borrowings are classified as current liabilities unless the Group has unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(t) Share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are expensed off in the Consolidated Income Statements.

Dividends on ordinary shares are recognised as liabilities when proposed or declared before the balance sheet date. A dividend proposed or declared after the balance sheet date, but before the financial statements are authorised for issue, is not recognised as a liability at the balance sheet date. Upon the dividend becoming payable, it will be accounted for as liability.




(u) Contingent liabilities and contingent assets

The Group and Company does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstance where there is a liability that cannot be recognised because it cannot be measured reliably.

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.

(v) Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or whenever events or circumstances occur indicating that an impairment may exist. Property, plant and equipment and other non-current assets, including intangible assets, are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is measured at the higher of the fair value less cost to sell of an asset and its value-in-use. The value-in-use is the net present value of the projected future cash flow derived from that asset discounted at the appropriate discount rate. Assets other than goodwill that suffered impairment are reviewed for possible reversal at each reporting date.

The projected cash flows are based on the Group’s estimates calculated based on historical, industry trend, general market, economic conditions and other available information. For the purposes of assessing impairment, assets are grouped at the lowest level for which there is separately identifiable cash flows.

The impairment loss is charged to the Consolidated Income Statements unless it reverses a previous revaluation in which case it is charged to the revaluation surplus. Any subsequent increase in recoverable amount is recognised in the Income Statement unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus.

Irrespective of whether there is any indication of impairment, the Group shall test an intangible asset with an indefinite useful life or an intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test may be performed at any time during an annual period; it is performed at the same time every year. Different intangible assets may be tested for impairment at different times. However, if such an intangible asset was initially recognised during the current annual period, that intangible asset shall be tested for impairment before the end of the current annual period.



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 outlined below.

(i) Carrying value of property, plant and equipment

The Group assesses impairment of the assets mentioned above whenever the events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than the recoverable amount. Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use. The value-in-use is the net present value of the projected future cash flows derived from the asset discounted at an appropriate discount rate.

Projected future cash flows are based on the Group’s estimates calculated based on historical, sector and industry trends, general market and economic conditions, changes in technology and other available information regarding the automotive sector, primarily in Malaysia, which is the Group’s key market. The assumptions used, results and conclusion of the impairment assessment are stated in Note 13 to the financial statements.

(ii) Estimated useful lives of property, plant and equipment and capitalised development costs

The Group reviews annually the estimated useful lives of property, plant and equipment and capitalised development costs based on factors such as business plan and strategies, expected level of usage and future technological developments.

Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned. A reduction in the estimated useful lives of property, plant and equipment and development costs would increase the recorded depreciation or amortisation and decrease the property, plant and equipment and development cost balance.

(iii) Deferred tax assets

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. This involves significant judgments regarding the future financial performance of the Group, the likely timing and level of future taxable profits together with future tax planning strategies to support the basis of recognition of deferred tax assets. An analysis of the deferred tax balance is set out in Note 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 at 31 March 2008.



4 KEY ESTIMATES AND JUDGEMENTS (CONTINUED)

(iv) Estimation of income taxes payable and recoverable

Income taxes are estimated based on the rules governed under the Income Tax Act, 1967. Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax provisions in the period in which such determination is made. The status of the income tax position of the Group is stated in Note 10 to the financial statements.

(v) Provision for warranty obligations and amounts recoverable

Provision is made for the estimated liability on all products under warranty in addition to claims already received. The accrual recorded is based on the actual levels and trends of claims experienced by the Group arising during the period of warranty over a number of years which provides a basis for calculating expected warranty claims. In addition, the Group records an asset for the amount expected to be recoverable from its vendors based on similar actual claims and trends of claims experienced.

An analysis of the estimated obligation and utilisation of the provision is stated in Note 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 models and expected cost to sell. Changes in the inventory ageing and expected usage profiles can have an impact on the allowance recorded. The movement in allowance of inventory is stated in Note 7 to the financial statements.

(vii) Allowance for receivables

The allowance is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. This is determined based on the ageing profile, expected collection patterns of individual receivable balances, credit quality and credit losses incurred. Management carefully monitors the credit quality of receivable balances and makes estimates about the amount of credit losses that have been incurred at each financial statement reporting date. Any changes to the ageing profile, collection patterns, credit quality and credit losses can have an impact on the allowance recorded. The movement in allowance for doubtful debts are disclosed in Notes 7 and 23 to the financial statements respectively.

(viii) Impairment of goodwill

The Group tests goodwill for impairment at least annually in accordance with its accounting policy or whenever events or changes in circumstances indicate that this is necessary. The assumptions used, results and conclusion of the impairment assessment are stated in Note 15 to the financial statements.



5 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

During the financial year,

(a) Perusahaan Otomobil Nasional Sdn. Bhd. (‘PONSB’), a wholly owned subsidiary company of Proton Holdings Berhad (‘PROTON’) had on 10 August 2007, completed the acquisition of an additional 49% equity interest in PT Proton Cikarang Indonesia (formerly known as PT Proton Tracoma Motors). As a result, PT Proton Cikarang Indonesia (formerly known as PT Proton Tracoma Motors) became a wholly owned subsidiary of PONSB. Further details of the acquisition is disclosed in Note 17 to the financial statements.

(b) Lotus Cars Limited, a wholly owned subsidiary of LGIL and PROTON, had incorporated a wholly owned subsidiary in People’s Republic of China, known as Lotus Engineering Co. Ltd. (Shanghai) with a paid up share capital of USD140,000.

(c) Proton Marketing Sdn. Bhd., a wholly owned subsidiary of PROTON, had incorporated a wholly owned subsidiary in Thailand, known as Proton Motors (Thailand) Co. Ltd with a paid up share capital of 100 million Baht.

(d) The Government of Malaysia has set up the National Automotive Policy (‘NAP’) and one of the policy thrusts of NAP is for the Government to provide support and incentives based on sustainable economic contribution. The support will be in the form of access to the Industrial Adjustments Fund and Research and Development grant (‘R&D grant’). PONSB, a wholly owned subsidiary company of PROTON, as a full fledged automotive manufacturer has complied with the requirements and applied for the facility provided for under the NAP. The application was approved on 31 March 2008.

The R&D grant was awarded for expenditure incurred in respect of qualifying work done up to 31 March 2008 amounting to RM193.8 million and this amount due has been set off from an existing loan from the Government as disclosed Note 31 to the financial statements.

(e) On 31 March 2008, CIMB Investment Bank Berhad on behalf of the Board of Directors of PROTON announced a proposal to strike-off and liquidate certain dormant companies with the intention to reduce cost, streamline and align entities within the PROTON Group to create a leaner, efficient and flexible corporate structure. The list of entities proposed for strike-off and liquidation are identified in Notes 17 and 19 to the financial statements.

The proposal is expected to be completed within the next financial year.



6 REVENUE

Revenue represents the invoiced value of goods sold and engineering services provided and is net of taxes, discounts and commission paid to dealers. Revenue comprises:

7 PROFIT/(LOSS) BEFORE FINANCE COST

Sale of vehicles, spare parts and accessories 5,361,826 4,460,907 - -

Gross dividend income 417 168 41,203 667,983

Rendering of engineering services 219,386 219,942 - -

Others 39,965 6,313 - -

5,621,594 4,687,330 41,203 667,983

The following items have been charged/(credited) in arriving at profit/(loss) before finance cost:

Gross dividends receivable from:- subsidiary company, unquoted being dividend-in-specie - - - (376,482)- subsidiary company, unquoted - - (40,000) (289,600)- associated companies, unquoted - - (786) (1,733)- others, quoted (2,479) (8,545) - -- others, unquoted (417) (168) (417) (168)Research and development grant (193,782) - - -Property, plant and equipment:- depreciation 382,556 352,788 - -- written off 18,557 94,263 - -- impairment (800) - - -- (gain)/loss on disposal (12,546) 250 - -

Group Company


Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

Included in Others is sale of rights for the use of intellectual property rights to an export market amounting to RM33,515,000 (2007: Nil)


7 PROFIT/(LOSS) BEFORE FINANCE COST (CONTINUED)

Prepaid land lease payments:- amortisation 89 112 - -- gain on disposal (990) - - -Impairment of goodwill (Note 15) 6,741 - - -Impairment of investment in a subsidiary company - - - 327,652Impairment of investment in an associated company 4,200 - - -Amortisation of intangible assets (Note 16) 34,817 22,315 - -Research and development expenditure 37,447 48,653 - -Provision for warranties and free service (net of expected reimbursement) (Note 33) 45,526 38,737 - -Reversal of allowance for doubtful debts (19,708) (39,659) - -Allowance for doubtful debts 7,737 8,701 - -Gain on disposal of current investments (1,678) (49,975) - -Statutory audit fees to PricewaterhouseCoopers- Malaysia: - current year 569 945 84 195 - overprovision in prior year (57) - - -- Other member firms of PricewaterhouseCoopers International Limited* 1,394 1,113 - -Audit related fees to PricewaterhouseCoopers- Malaysia 560 525 - -Non-audit fees to PricewaterhouseCoopers - Malaysia 1,234 2,214 - -- Other member firms of PricewaterhouseCoopers International Limited* 1,961 896 - -Operating lease rental 4,752 3,975 - -Hire of plant, machinery and equipment 50 696 - -Rental of land and buildings 14,789 16,794 - -Foreign exchange loss/(gain):- transactions 7,276 (21,833) - -- translation (10,230) (4,598) - -Rental income on land and buildings (3,891) (1,667) - -Interest income (32,143) (35,563) (301) (374)Write back of inventories write down (25,053) (30,681) - -

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

* PricewaterhouseCoopers Malaysia and other member firms of PricewaterhouseCoopers International Limited are separate and independent legal entities.



8 STAFF COST

Group

2008 2007 RM’000 RM’000

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

* The Executive Directors’ remuneration is fully recharged to PONSB, a wholly owned subsidiary.


Wages, salaries and bonuses 527,185 493,768

Pension cost

- defined contribution plan 49,762 31,365

- defined benefit plan (Note 38) 14,616 21,852

Other employee benefits 43,099 38,495

Reorganisation and redundancy costs of a principal subsidiary of the Group - 27,086

Termination benefits 22 1,980

634,684 614,546

Non-executive Directors:

- allowances 505 579 389 441

- fees 948 955 291 333

- estimated money value of benefits-in-kind 39 36 39 36

Executive Directors *:

- salaries and bonuses 540 1,102 540 1,102

- defined contribution plan 86 174 86 174

- estimated money value of benefits-in-kind 65 63 65 63

- fees - - 42 -

- allowances - - 12 -

2,183 2,909 1,464 2,149

Directors’ remuneration The aggregate amount of emoluments receivable by the Directors of the Group and Company during the financial year was as follows:


9 FINANCE COST

10 TAXATION

Group

2008 2007 RM’000 RM’000

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000


Interest expense on:

Long term loans 7,750 24,321

Short term borrowings 9,405 9,280

Others 781 1,940

17,936 35,541

Taxation in MalaysiaCurrent taxation:

- charge for the financial year 7,020 50 10,517 101,532

- write back in respect of prior financial years (45,859) (137,452) - -

(38,839) (137,402) 10,517 101,532

Taxation outside MalaysiaCurrent taxation:

- charge for the financial year 885 3,071 - -

- over accrual in respect of prior financial years (1,527) - - -

(642) 3,071 - -

Deferred taxation (Note 21)Origination and reversal of temporary differences (754) (51) - -

Reversal of deferred tax asset - 105,786 - -

(754) 105,735 - -

(40,235) (28,596) 10,517 101,532


10 TAXATION (CONTINUED)

Group Company

2008 2007 2008 2007 % % % %

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000


Malaysian tax rate 26 (27) 26 27

Tax effects of:

- double deduction and allowance incentive

on qualifying expenditure (1) (5) - -

- expenses not deductible for tax purposes 15 5 - -

- income not subject to tax (51) (3) (13) (12)

- current year tax losses not recognised 4 39 - -

- over accrual in respect of prior years (32) (22) - -

- reversal of previously recognised deferred tax assets - 17 - -

- recognition of previously unrecognised deductible (8) (10) - -

temporary differences

- effect on temporary differences not recognised 22 1 - -

- different tax rates in other countries (3) - - -

Average effective tax rate (28) (5) 13 15

Disclosure items:

Current year tax losses utilised during the financial year - 31,267 - -

Tax savings arising from such tax losses - 8,442 - -

Previously unrecognised tax losses utilised during

the financial year 5,369 223,263 - -

Tax savings arising from such tax losses 1,396 60,281 - -

Unabsorbed capital allowance carried forward 1,313,744 942,055 - -

Unutilised tax losses carried forward 643,682 843,939 - -

Unutilised reinvestment allowance 1,790,117 1,561,714 - -

A numerical reconciliation between the average effective tax rate and the statutory tax rate effect is as follows:



10 TAXATION (CONTINUED)

The tax write back during the financial year relates mainly to the settlement of disputes of a subsidiary company with the Inland Revenue Board (‘IRB’) for which Section 127 relief on the differences in the interpretation of the qualifying period for investment tax credit. The relief was claimed for Year of Assessment 1992.

The tax write back in the previous financial year arose following the IRB agreeing to settle tax disputes in respect of one of a subsidiary company’s treatment of certain items in the tax submissions for Years of Assessment 1989 to 1993.

11 EARNINGS/(LOSS) PER SHARE

Basic earnings/(loss) per share is calculated by dividing the net profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year.

Diluted earnings/(loss) per share is not presented in the financial statements since there are no potential dilutive ordinary shares.

12 DIVIDENDS

There is no dividend proposed in respect of the financial year ended 31 March 2008.

Group

2008 2007

Net profit/(loss) attributable to equity holders of the Company (RM’000) 184,551 (589,533)

Weighted average number of ordinary shares in issue (‘000) 549,213 549,213

Basic earnings/(loss) per share (sen) 33.60 (107.34)

Group

2008 2007 RM’000 RM’000

Final dividend for the financial year ended 31 March 2006:

Tax exempt dividend of 5.0 sen per ordinary share - 27,461


13 PROPERTY, PLANT AND EQUIPMENT

Office equipment, furniture, Freehold Plant and fittings and Work-in Note land Buildings machinery vehicles progress TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


2008Cost/valuation

At 1 April 2007 262,072 1,331,521 4,141,014 1,090,675 188,524 7,013,806Currency translation differences (1,118) (12,189) (17,329) (9,719) (54) (40,409)Additions 261 1,011 18,802 46,073 325,850 391,997Disposals (24,853) (583) (16,768) (24,899) (6,230) (73,333)Acquisition through business combination 17 - 12,756 36,493 60 - 49,309Written off - (376) (105,598) (97,748) (17,558) (221,280)Reclassification of completed work-in-progress - 64,723 318,790 70,037 (453,550) -Reclassification to inventory - - - - (9,124) (9,124)

At 31 March 2008 236,362 1,396,863 4,375,404 1,074,479 27,858 7,110,966

2008Accumulated depreciation

At 1 April 2007 - 385,327 2,443,469 711,283 - 3,540,079Currency translation differences - (4,566) (10,286) (3,655) - (18,507)Charge for the financial year - 52,728 239,917 89,911 - 382,556Disposals - (387) (16,768) (18,002) - (35,157)Acquisition through business combinations 17 - 1,423 7,449 48 - 8,920Written off - (376) (104,923) (97,424) - (202,723)

At 31 March 2008 - 434,149 2,558,858 682,161 - 3,675,168

• notes to the financial statements - 31 March 2008 (Continued)


13 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)


Office equipment, Long term furniture, Freehold leasehold Plant and fittings and Work-in Note land land Buildings machinery vehicles progress TotalGroup RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2007Cost/valuation

At 1 April 2006- As previously reported 256,009 10,989 1,279,834 4,082,411 1,084,357 168,856 6,882,456FRS 117 adjustment 46 - (10,989) - - - - (10,989)

As restated 256,009 - 1,279,834 4,082,411 1,084,357 168,856 6,871,467

Currency translation differences 861 - 9,195 9,819 10,453 (243) 30,085Additions 5,202 - 196 15,717 48,143 249,577 318,835Disposals - - (22) (27,592) (13,217) (2,851) (43,682)Written off - - (2,583) (15,559) (52,300) (91,287) (161,729)Reclassification of completed work-in-progress - - 46,071 76,218 13,239 (135,528) -Reclassification to inventory - - (1,170) - - - (1,170)

At 31 March 2007 262,072 - 1,331,521 4,141,014 1,090,675 188,524 7,013,806


2008Accumulated impairment losses

At 1 April 2007 14,591 146,017 84,586 59,038 - 304,232Currency translation differences (1,055) (8,652) (4,954) (3,419) - (18,080)Reversal of impairment loss - - - (800) - (800)

At 31 March 2008 13,536 137,365 79,632 54,819 - 285,352

Net book value

At 31 March 2008 222,826 825,349 1,736,914 337,499 27,858 3,150,446





2007Accumulated depreciation

At 1 April 2006- As previously reported - 933 345,130 2,270,842 663,786 - 3,280,691FRS 117 adjustment 46 - (933) - - - - (933)

As restated - - 345,130 2,270,842 663,786 - 3,279,758

Currency translation differences - - 1,766 5,007 5,160 - 11,933Charge for the financial year - - 39,366 210,626 102,796 - 352,788Disposals - - - (27,585) (9,085) - (36,670)Written off - - (671) (15,421) (51,374) - (67,466)Reclassification to inventory - - (264) - - - (264)

At 31 March 2007 - - 385,327 2,443,469 711,283 - 3,540,079

2007Accumulated impairment losses

At 1 April 2006 13,671 - 138,713 80,436 55,998 - 288,818Currency translation differences 920 - 7,304 4,150 3,040 - 15,414

At 31 March 2007 14,591 - 146,017 84,586 59,038 - 304,232

Net book value

At 31 March 2007 247,481 - 800,177 1,612,959 320,354 188,524 3,169,495




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 (2007: RM22,448,000).

During the financial year, property, plant and equipment of a wholly owned subsidiary with a net book value of RM61.9 million was charged

to a licensed bank as security for borrowings as disclosed in Note 31(b) to the financial statements.

The net book value of the office equipment acquired under finance lease at the balance sheet date was RM5,480,000

(2007: RM6,494,000).

Impairment test for property, plant and equipment The carrying value of property, plant and equipment of a subsidiary company at balance sheet date is RM2,773,719,000 (2007:

RM2,812,826,000). During the financial year, the subsidiary company undertook a test for impairment of its property, plant and equipment.

No impairment loss was required for the carrying amount of property, plant and equipment assessed as at 31 March 2008, as their

recoverable amounts were in excess of their carrying values.

The property, plant and equipment were allocated to the subsidiary company’s cash-generating units which are identified according to

production plants.

(a) Key assumptions used in the value-in-use calculations

The recoverable amounts of the production plants are determined based on value-in-use calculations. This value-in-use calculations

apply a discounted cash flow model using cash flow projections covering a five year period, and assuming a zero growth rate for

subsequent periods up to ten years for the two older production plants and fifteen years for the new production plant. The projections

over these periods reflect the subsidiary company’s expectation of usage, revenue growth, operating costs and margins for each

production plant based on past experience and current assessment of market share, expectations of market and industry growth.

The value-in-use calculation for the newer plant reflects the initial low utilisation and the expectation of increased utilisation to the end

of the useful life of the plant.

The sales volumes used in the projections indicate a significant increase from current levels as the subsidiary company had recently

introduced new models successfully. The subsidiary company is also planning to introduce new models in a different segment which

the subsidiary company is not currently in, where capital expenditure has been incurred to date, over the projection periods. However,

the projected sales volume does not include future new models for which capital expenditure has not been incurred.

Terminal values of the production plants in year ten and fifteen are assumed to be derived from the disposal of the land in which the

three specific plants are located.

For purposes of the value-in-use calculation, discount rates of 12% and 20% have been applied to domestic and export sales

respectively. The discount rate of 12% reflects the prevailing independent market rate applicable to the Group.




14 PREPAID LAND LEASE PAYMENTS

(b) Impact of possible changes in key assumptions

Sensitivity analysis show that no impairment loss is required for the carrying amount of property, plant and equipment assessed,

including where realistic variations are applied to key assumptions.

Cost

At 1 April- As previously reported - -- FRS 117 adjustment (Note 46) 10,989 10,989

- As restated 10,989 10,989

Currency translation differences (1,077) -Acquisition through business combination (Note 17) 25,108 -Disposal (394) -Reclassification to inventory (Note 22) (10,595) -

At 31 March 24,031 10,989

Accumulated amortisation

At 1 April- As previously reported - -- FRS 117 adjustment (Note 46) 1,045 933

- As restated 1,045 933

Amortisation 89 112Disposal (80) -Reclassification to inventory (Note 22) (1,054) -

At 31 March - 1,045

Net book value

At 31 March 24,031 9,944

Group

2008 2007 RM’000 RM’000



15 GOODWILL

At 31 March 29,008 29,008

Acquisition through business combination (Note 17) 6,741 -

35,749 29,008

Less: Impairment loss (6,741) -

At 31 March 29,008 29,008

Group

2008 2007 RM’000 RM’000

Impairment test for goodwill

The Group undertook the annual test for impairment of goodwill. The carrying amount of goodwill is allocated to the Group’s

cash-generating unit, i.e. subsidiary companies.

(a) Proton Edar Sdn Bhd - RM29,008,000 (2007: RM29,008,000)

The recoverable amount of the cash-generating unit including goodwill in this test is determined based on the value-in-use calculation.

This value-in-use calculation applies a discounted cash flow model using cash flow projections covering a five-year period for the

distribution business in Malaysia. The projections reflect the subsidiary company’s expectation of revenue growth, operating costs and

margins based on past experience and current assessment of market share, expectations of market growth and industry growth.

For purposes of the value-in-use calculation, a discount rate of 12% has been applied. The discount rate reflects the prevailing

independent market rate applicable to the Group in Malaysia.

The sales volumes used in the projections indicate a significant increase from current levels as the Group had recently introduced new

models successfully. The Group is also planning to introduce new models in a different segment which the Group is not currently in,

where capital expenditure has been incurred to date, over the projection periods. However, the projected sales volume does not

include future new models for which capital expenditure has not been incurred. A nil terminal value has been assumed.

Sensitivity analysis shows that no impairment loss is required for the carrying amount of goodwill, including where realistic variations

are applied to key assumptions.

(b) PT Proton Cikarang Indonesia (formerly known as PT Proton Tracoma Motors) - RM6,741,000 (2007: RM Nil)

The recoverable amount of the cash-generating unit including goodwill in this test is determined based on the fair value of the assets,

less cost to sell. The fair value of the property, plant and equipment is derived based on an independent professional valuation. As a

result of this test, an impairment charge of RM6,741,000 was recognised.



16 INTANGIBLE ASSETS

Capitalised cost for product under Computer development software Total RM’000 RM’000 RM’000


Group2008Cost

At 1 April 2007 142,975 57,797 200,772Currency translation differences (730) (180) (910)Additions 133,559 7,658 141,217Written off - (142) (142)

At 31 March 2008 275,804 65,133 340,937

Amortisation

At 1 April 2007 11,611 20,086 31,697Currency translation differences (593) (34) (627)Charge for the financial year 16,721 18,096 34,817Written off - (142) (142)

At 31 March 2008 27,739 38,006 65,745

Net book value

At 31 March 2008 248,065 27,127 275,192

2007Cost

At 1 April 2006 - 27,418 27,418Additions 142,975 30,379 173,354

At 31 March 2007 142,975 57,797 200,772

Amortisation

At 1 April 2006 - 9,419 9,419Currency translation differences (37) - (37)Charge for the financial year 11,648 10,667 22,315

At 31 March 2007 11,611 20,086 31,697

Net book value

At 31 March 2007 131,364 37,711 169,075


17 SUBSIDIARY COMPANIES

The details of the subsidiary companies are as follows:

Unquoted shares at cost:

At 1 April 2,036,303 1,465,659

Additional investment in subsidiaries - 570,644

2,036,303 2,036,303

Less: Impairment loss (327,652) (327,652)

At 31 March 1,708,651 1,708,651

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

Technologies Sdn. Bhd. Investment holding Malaysia 100 100

Proton Hartanah Sdn. Bhd. Investment holding Malaysia 100 100

Proton Capital Sdn. Bhd. Investment holding Malaysia 100 100

Company

2008 2007 RM’000 RM’000

Country of Group’sName Principal activities incorporation effective interest 2008 2007 % %



17 SUBSIDIARY COMPANIES (CONTINUED)

Subsidiaries of Perusahaan Otomobil Nasional Sdn. Bhd.PT Proton Cikarang Indonesia Manufacturing and Indonesia 100 - (formerly known as PT Proton sales of motor vehicles Tracoma Motors) *

Proton Automobiles (China) Ltd. ^ Dormant British Virgin Islands 100 100Subsidiaries of Proton Marketing Sdn. Bhd.Proton Corporation Sdn. Bhd. ^## Dormant Malaysia 100 100 Proton Cars (UK) Ltd.*^ Importation and England 100 100 distribution of motor vehicles and related products

Proton Cars Australia Pty. Ltd.*^ Importation and Australia 100 100 distribution of motor vehicles and related products

Proton Cars Benelux NV. SA*^ Dormant Belgium 100 100

Lotus Cars Asia Pacific Dormant Malaysia 100 100 Sdn. Bhd.^#

Auto Compound and Dormant Malaysia 100 100 Distribution Centre Sdn. Bhd.^#

Proton Edar Sdn. Bhd.^ Sales of motor vehicles, Malaysia 100 100 related spare parts and accessories Proton Motors (Thailand) Dormant Thailand 100 - Co. Ltd.*





Subsidiaries of Lotus Advance Technologies Sdn. Bhd.Proton Engineering Research Provision of Engineering Malaysia 100 100 Technology Sdn. Bhd.^ Services Lotus Group International Ltd.*^ Investment holding England 100 100 Subsidiary of Proton Hartanah Sdn. Bhd.Proton Properties Sdn. Bhd.^ Property development Malaysia 100 100 and management

Subsidiaries of Proton Cars (UK) Ltd.Smith & Sons Motors Ltd.*^## Dormant England 100 100 Proton Direct Ltd.+^## Dormant England 100 100

Proton Cars (Imports) Ltd.*^# Dormant England 100 100

Proton Cars Direct Limited*^# Dormant England 100 100

Subsidiaries of Proton Edar Sdn. Bhd.Proton Singapore Pte. Ltd.*^ Sales of motor vehicles, Singapore 100 100 related spare parts and accessories

Proton Edar Resources Sdn. Bhd.^ Repair and maintenance Malaysia 100 100 of motor vehicles

Proton Edar Ventures Sdn. Bhd.^ Dormant Malaysia 100 100 PT Proton Edar Indonesia * Sales of motor vehicles, Indonesia 95 95 related spare parts and accessories





Subsidiary of Lotus Group International Ltd.Group Lotus Plc*^ Investment holding England 100 100

Subsidiaries of Group Lotus PlcLotus Cars Ltd.*^ Motor vehicles manufacture England 100 100 and engineering consultancy

Lotus Body Engineering Ltd.*^ Dormant England 100 100

Lotus Motorsports Ltd.*^ Dormant England 100 100

Lotus Holdings Inc.*^ Investment holding United States of America 100 100 Marco Acquisition Corporation*^@ Leasing of equipment and United States of America 100 100 assets

Subsidiaries of Lotus Cars Ltd.Lotus Engineering Ltd.*^ Engineering consultancy England 100 100 Lotus Engineering Engineering consultancy People’s Republic 100 - Co. Ltd. (Shanghai)* of China Subsidiary of Lotus Engineering Ltd.Lotus Engineering (Malaysia) Sdn. Bhd.^ Engineering consultancy Malaysia 100 100





Subsidiaries of Lotus Holdings Inc.Lotus Engineering Inc.*^ Engineering consultancy United States of America 100 100

Lotus Cars USA Inc.*^ Sales of motor vehicles United States of America 100 100 and servicing

Subsidiary of Proton Cars Australia Pty. Ltd.Lotus Cars Australia Pty. Ltd.* Sales of motor vehicles Australia 100 100


RM’000

* Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia + Not audited by PricewaterhouseCoopers ^ Consolidated by merger method of accounting prior to 1 April 2006 # Proposed for ‘strike-off’ (Refer to Note 5(e) to the financial statements) ## Proposed for members’ voluntary liquidation (Refer to Note 5(e) to the financial statements) @ On 1 January 2008, the Group undertook an internal reorganisation exercise to rationalise the operations of Marco Acquisition Corporation (‘Marco’), a wholly owned subsidiary of the PROTON group. The reorganisation involved the disposal of Marco by Proton Engineering Research Technology Sdn. Bhd. to Lotus Advance Technologies Sdn. Bhd, which in turn disposed Marco to Lotus Group International Ltd. (‘LGIL’) and eventually to Lotus Holdings Inc. (‘LHI’), USA, a wholly owned subsidiary of LGIL. LHI would eventually acquire the assets and equipment from Marco prior to its liquidation.

On 10 August 2007, PONSB a wholly owned subsidiary of the Company completed the acquisition of the remaining 49% equity interest in PT Proton Cikarang Indonesia (formerly known as PT Proton Tracoma Motors). As a result, on 10 August 2007, PT Proton Cikarang Indonesia (formerly known as PT Proton Tracoma Motors), a jointly controlled entity, became a wholly owned subsidiary of PONSB.

Purchase consideration:- cash consideration 33,750 - settlement of amount due from Tracoma Holdings Berhad 1,356

35,106

Fair value of net assets acquired (28,365)

Goodwill (Note 15) 6,741




Property, plant and equipment (Note 13) 41,951 40,389Prepaid land lease payment (Note 14) 16,476 25,108Receivables, deposits and prepayments 3,045 4,356Deposits, bank and cash balances 1,134 1,134Payables and other liabilities (9,348) (11,096)Deferred tax (Note 21) - (2,439)

Net assets acquired 53,258 57,452

Less: Amount previously accounted for as a jointly controlled entity (29,087)

28,365

Details of cash flow arising from the acquisition are as follows:Purchase consideration settled in cash 33,750Less: Cash and cash equivalents of subsidiary acquired (1,134)

Cash outflow of the Group on acquisition 32,616

The acquired business contributed revenue of RM849,000 and loss of RM2,795,000 to the Group for the period from 10 August 2007

to 31 March 2008. Had the acquisition taken effect at the beginning of the financial year, the revenue and loss of the Group would have

been RM1,100,000 and RM5,297,000 respectively.

Acquiree’s carrying value Fair value RM’000 RM’000

Unquoted shares at cost 59,252 52,083 13,600 13,600Additional investment - 7,169 - -

59,252 59,252 13,600 13,600

Less: Impairment loss (26,200) (22,000) - -

33,052 37,252 13,600 13,600

Share of post acquisition reserves 132,391 132,506 - -

165,443 169,758 13,600 13,600

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

18 ASSOCIATED COMPANIES



Non-current assets 70,438 103,615

Current assets 215,597 178,840

Current liabilities (120,592) (112,697)

Net assets 165,443 169,758

Revenue 260,507 210,643

Expenses (excluding tax) (245,202) (205,793)

Profit from ordinary activity before taxation 15,305 4,850

Taxation (2,171) (1,631)

Profit from ordinary activity after taxation 13,134 3,219

The Group’s share of the assets, liabilities, revenue and expenses of the associated companies are as follows:

The details of the associated companies are as follows:

Group

2008 2007 RM’000 RM’000

18 ASSOCIATED COMPANIES (CONTINUED)

PHN Industry Sdn. Bhd. Manufacture and sales of Malaysia 35 35 stamped parts and sub-assembly of automotive metal components





Marutech Elastomer Industries Manufacture and production Malaysia 25 25 Sdn. Bhd. of moulded products, extruded and rubber hoses for motor vehicles, motorcycle and other related products

Exedy (Malaysia) Sdn. Bhd. Manufacture and assembly Malaysia 45 45 of manual clutch and automatic transmission parts

Associated company of Perusahaan Otomobil Nasional Sdn. Bhd.Vina Star Motors Import, assembly and Socialist 25 25 Corporation distribution of motor vehicles Republic of Vietnam

Associated company of Proton Hartanah Sdn. Bhd.Proton City Development Property developer and Malaysia 40 40 Corporation Sdn. Bhd. project management

Associated company of Proton Cars (UK) Ltd.Proton Finance Ltd. Provide dealer and England 49.99 49.99 customer financing

Associated company of Proton Edar Sdn. Bhd.Netstar Advance Systems Engaged in the manufacture, Malaysia 40 40 Sdn. Bhd. assembly and sales of vehicle tracking devices

Associated company of Proton Automobile (China) Ltd.Goldstar Proton Production of automobile People’s Republic 49 49 Automobiles Co. Ltd. * tools and components of China




Unquoted shares at cost 179,303 179,303Reclassified to investment in subsidiary (42,655) -

136,648 179,303

Accumulated impairment loss (1,114) (1,114)

135,534 178,189

Share of post-acquisition reserves 57,213 45,361

192,747 223,550


19 JOINTLY CONTROLLED ENTITIES

Associated company of Lotus Advance Technology Sdn. Bhd.Miyazu (Malaysia) Sdn. Bhd. Development, marketing and Malaysia 51 51 sales of products and service relating to dies, moulds and jigs


* The Board has resolved to dissolve the Company.

The share of capital commitments relating to the associated companies are as follows:

Group

2008 2007 RM’000 RM’000

Group

2008 2007 RM’000 RM’000

Capital commitmentsCapital expenditure for property, plant and equipment approved by the Board not provided for in the financial statements: Contracted for 745 1,111 Not contracted for 8,990 10,826

9,735 11,937



Jointly controlled entities of Proton Marketing Sdn. Bhd.Proton Parts Centre Sdn. Bhd.* Trading in motor vehicle Malaysia 55 55 components, spare parts and accessories

Proton Cars (Europe) Ltd.*## Dormant England 56 56

Jointly controlled entity of Group Lotus PlcLotus Finance Ltd. Motor vehicles financing England 49.9 49.9

Jointly controlled entity of Proton Edar Sdn. Bhd.Proton Commerce Sdn. Bhd. Motor vehicles financing Malaysia 50 50

Jointly controlled entity of Perusahaan Otomobil Nasional Sdn. Bhd.PT Proton Cikarang Indonesia Manufacturing and sales Indonesia - 51 (formerly known as PT Proton of motor vehicles Tracoma Motors)*

19 JOINTLY CONTROLLED ENTITIES (CONTINUED)

Group

2008 2007 RM’000 RM’000

The Group’s share of the assets, liabilities, revenue and expenses of the jointly controlled entities are as follows:

The details of the jointly controlled entities are as follows:

* Companies in which the Group owns more than half of the voting powers. However, the Group has joint control over the financial and operating policies, these investments are treated as jointly controlled entities. ## Proposed for members’ voluntary liquidation (Refer to Note 5(e) to the financial statements).


Non-current assets 122,622 217,327Current assets 94,087 89,871Current liabilities (23,962) (83,648)

Net assets 192,747 223,550

Revenue 168,746 172,267Expenses (excluding tax) (157,642) (167,019)

Profit from ordinary activity before taxation 11,104 5,248

Taxation (3,267) (3,443)

Profit from ordinary activity after taxation 7,837 1,805



Capital commitmentsCapital expenditure for property, plant and equipment approved by the Board not provided for in the financial statements:

Not contracted for 1,288 1,044

Subject to income tax:Deferred tax liabilities (2,439) (754)

(2,439) (754)

19 JOINTLY CONTROLLED ENTITIES (CONTINUED)

21 DEFERRED TAXATION

20 INVESTMENTS

Group

2008 2007 RM’000 RM’000

Group

2008 2007 RM’000 RM’000

The share of capital commitments relating to the jointly controlled entities is as follows:

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities

and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in

the balance sheet:

Unquoted investments in Malaysia:At cost 13,347 13,347 8,575 8,575 Allowance for diminution in value (2,950) (2,950) (2,100) (2,100)

10,397 10,397 6,475 6,475

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000



Movement of deferred taxAt start of financial year (754) 104,981Credited/(charged) to income statement (Note 10) - property, plant and equipment 5,519 (46,290) - capitalised cost for product development (1,865) - - inventories - (18,987) - allowances and provisions (8,115) (61,361) - receivables 5,215 20,903 754 (105,735)Acquired through business combination (Note 17) (2,439) -

At end of financial year (2,439) (754)

Deferred tax assets (before offsetting)- allowances and provisions 36,450 44,565

36,450 44,565

Offset of deferred tax liabilities (36,450) (44,565)

Deferred tax assets (after offsetting) - -

Deferred tax liabilities (before offsetting)- revaluation surplus (2,439) -- capitalised cost for product under development (34,928) (33,063)- property, plant and equipment (1,522) (7,041)- receivables - (5,215)

(38,889) (45,319)

Offset against deferred tax assets 36,450 44,565

Deferred tax liabilities (after offsetting) (2,439) (754)

21 DEFERRED TAXATION (CONTINUED)

Group

2008 2007 RM’000 RM’000



Raw materials:- completely knocked-down parts of vehicles 193,514 230,077- others 89,290 77,220Parts, accessories and general stores 73,995 84,992Work-in-progress 188,779 149,973Finished vehicles 511,065 693,339Goods-in-transit 21,520 23,072Land held for development 9,541 -Properties for sale 12,582 14,939

1,100,286 1,273,612

21 DEFERRED TAXATION (CONTINUED)

22 INVENTORIES

Group

2008 2007 RM’000 RM’000

Group 2008 2007 RM’000 RM’000

As at 31 March 2008, there are no temporary differences associated with unremitted earnings of subsidiaries, associated companies and joint controlled entities for the recognition of deferred tax liabilities (2007: Nil).

Deductible temporary differences of which no deferred tax assets is recognisedUnrecognised tax losses 187,146 243,496Unabsorbed capital allowances 341,574 347,473Unrecognised reinvestment allowances 465,431 421,589Other temporary differences 41,894 8,982


The tax effect of deductible temporary differences and unused tax losses (both of which have no expiry date) for which no deferred tax asset is recognised in the balance sheet are as analysed below:


Currency exposure profile as at 31.3.2008 Ringgit Pound US Malaysia Sterling Dollar Euro Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

23 TRADE AND OTHER RECEIVABLES

The currency exposure profile of trade and other receivables are as follows:

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

Trade receivables 707,039 786,349 - -Allowance for doubtful debts (19,277) (37,550) - -

687,762 748,799 - -

Other receivables 213,099 140,594 14 5Allowance for doubtful debts (77,122) (70,487) - -

135,977 70,107 14 5

Warranty claims recoverable (Note 33) 112,258 121,397 - -Prepayments 18,316 25,096 - -Deposits 15,031 15,626 - -

969,344 981,025 14 5

GroupFunctional currency

Ringgit Malaysia 623,802 24,660 63,254 34,508 92,134 838,358

Pound Sterling 1,395 46,943 46,864 18,382 6,916 120,500

Others - - - 207 10,279 10,486

625,197 71,603 110,118 53,097 109,329 969,344

CompanyFunctional currency

Ringgit Malaysia 14 - - - - 14



Currency exposure profile as at 31.3.2007 Ringgit Pound US Malaysia Sterling Dollar Euro Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Currency exposure profile as at 31.3.2008

Ringgit Pound Malaysia Sterling Total RM’000 RM’000 RM’000

23 TRADE AND OTHER RECEIVABLES (CONTINUED)

Credit terms of trade receivables for the Group ranges from 14 days to 360 days (2007: 14 days to 360 days). However, the majority of the Group trade receivables have a credit term between 14 days to 60 days (2007: 14 days to 60 days).

Group sales are concentrated in Malaysia with one major third party customer in Malaysia making up 25% (2007: 20%) of total Group revenue.

24 AMOUNTS DUE FROM SUBSIDIARY COMPANIES

The amounts due from subsidiary companies are denominated in Ringgit Malaysia, interest free and repayable on demand.

25 AMOUNTS DUE FROM ASSOCIATED COMPANIES

The amounts due from associated companies arose from normal trade transactions. These amounts have credit terms ranging from 30 days to 60 days (2007: 30 days to 60 days).

Group

Ringgit Malaysia 724,825 28,338 77,944 51,098 20,246 902,451Pound Sterling - 32,767 18,343 19,479 6,399 76,988Others - - - - 1,586 1,586

724,825 61,105 96,287 70,577 28,231 981,025




Ringgit Malaysia 9,645 - 9,645Pound Sterling - 1,068 1,068

9,645 1,068 10,713



Currency exposure profile as at 31.3.2007 Ringgit Pound Malaysia Sterling Total RM’000 RM’000 RM’000



22,599 1,715 24,314

25 AMOUNTS DUE FROM ASSOCIATED COMPANIES (CONTINUED)

26 AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES The amounts due from jointly controlled entities arose from normal trade transactions. These amounts have credit terms ranging from 30 days to 45 days (2007: 30 days to 45 days).

In respect of the previous financial year, the amount included an advance given to a jointly controlled entity of RM5,235,000 which is unsecured, bearing interest at 3.5% per annum and repayable on demand.

The functional currency and the currency exposure profile of amounts due from jointly controlled entities are all denominated in Ringgit Malaysia.



27 CURRENT INVESTMENTS

28 DEPOSITS, BANK AND CASH BALANCES

Bank balances are deposits held at call with banks.

Quoted investments in Malaysia:Cost:Shares - 15,496Commercial papers and corporate debt 526 584

526 16,080

Unquoted investments in Malaysia:Cost:Commercial papers and corporate debt 20,296 57,368

20,822 73,448

Market value of quoted investments:Shares - 16,355Commercial papers and corporate debt 806 892

806 17,247

Short term funds deposited with:Licensed banks 1,062,834 493,206 25,920 9,500Discount houses - 43,000 - -

1,062,834 536,206 25,920 9,500

Bank and cash balances 163,176 90,269 376 1,110

1,226,010 626,475 26,296 10,610

The maturity profile of short term funds are as follows:0 - 1 month 279,583 363,428 19,800 9,5002 - 3 months 773,899 73,666 6,120 -4 - 6 months 1,800 94,900 - -6 - 12 months 7,552 4,212 - -

1,062,834 536,206 25,920 9,500

Group 2008 2007 RM’000 RM’000

Group Company 2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000




Ringgit Pound US Malaysia Sterling Dollar Euro Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000




Ringgit Malaysia 1,107,346 2,501 2,726 4,960 7,354 1,124,887

Pound Sterling 630 33,496 19,243 5,454 2,713 61,536

Australian Dollar - - - - 38,451 38,451

Others - - - 1,136 - 1,136

1,107,976 35,997 21,969 11,550 48,518 1,226,010


Ringgit Malaysia 532,993 21,860 15,495 8,809 1,260 580,417

Pound Sterling - 14,459 3,633 - - 18,092

Australian Dollar - - - 1,215 - 1,215

Others - - - - 26,751 26,751

532,993 36,319 19,128 10,024 28,011 626,475

28 DEPOSITS, BANK AND CASH BALANCES (CONTINUED)

Deposits, bank and cash balances in the Company as at 31 March 2008 and 2007 are denominated in Ringgit Malaysia.

The weighted average effective interest rates of deposits at the balance sheet date were 3.52% (2007: 3.22%) per annum for the Group and 3.20% (2007: 2.95%) per annum for the Company.

The Group has facilities comprising Letters of Credit, Bankers’ Acceptances and Bank Guarantees amounting to RM783.0 million (2007: RM525.1 million) available as at 31 March 2008.



29 SHARE CAPITAL

30 RESERVES Under the single-tier tax system which came into effect from the year of assessment 2008, companies are not required to have tax credits under Section 108 of the Income Tax Act, 1967 for dividend payment purposes. Dividends paid under this system are tax exempt in the hands of shareholders.

Companies with Section 108 credits as at 31 December 2007 may continue to pay franked dividends until the Section 108 credits are exhausted or 31 December 2013 whichever is earlier unless they opt to disregard the Section 108 credits to pay single-tier dividends under the special transitional provisions of the Finance Act, 2007. As at 31 March 2008, the Company has sufficient Section 108 tax credits to frank approximately RM1,325.8 million (2007: RM1,325.8 million) of its retained profits as at 31 March 2008 if paid out as dividends.

In addition, the Company has tax exempt income as at 31 March 2008 amounting to approximately RM321.5 million (2007: RM320.7 million) available for distribution as tax exempt dividends to shareholders.

The capital reserves arose as a result of a Group reorganisation exercise whereby all existing shareholders of Perusahaan Otomobil Nasional Sdn. Bhd. (‘PONSB’) exchanged all their ordinary shares of RM1.00 each comprising 549,213,000 ordinary shares in PONSB for 549,213,000 new ordinary shares of RM1.00 each in the Company in a one-for-one share exchange on 5 April 2004. Following the share for share exchange, the Company has no share premium. Accordingly, the amount of share premium previously recognised on consolidation has been re-designated as capital reserve.

Authorised: 1,000,000 1,000,000

Issued and fully paid:

At beginning/end of financial year 549,213 549,213

Group and Company

2008 2007 RM’000 RM’000



31 LONG TERM LIABILITIES

The currency exposure profile of the long term liabilities is as follows:

Group 2008 2007 RM’000 RM’000



Unsecured:Long term loan (Note 31(a)) 47,879 135,027Portion repayable within twelve months (Note 37) - (58,877)

47,879 76,150

Secured:Long term loan (Note 31(b)) 83,005 -

Lease and hire purchase creditors (Note 31(c)) 5,124 6,400Less: Portion repayable within twelve months (Note 32) (973) (956)

4,151 5,444

Automotive Development Fund (Notes 31(d) and 44) 45,343 50,201Employee retirement benefits (Notes 31(e) and 38) 50,095 49,842 230,473 181,637



93,221 137,252 230,473


Ringgit Malaysia 126,351 - 126,351Pound Sterling - 55,286 55,286 126,351 55,286 181,637



(i) Repayable between one and two years The loan balance of RM47.9 million (2007: RM58.9 million) is due on 30 September 2009 bearing a fixed interest rate of 4% (2007: 4%) per annum and is repayable in Ringgit Malaysia. The loan was originally due on 30 September 2007 and the subsidiary company has obtained the deferment for the repayment to 30 September 2009.

(ii) Repayable more than two years In the previous financial year, the Government of Malaysia had approved a loan of up to RM400 million to a subsidiary company at concessionary terms. The loan was originally scheduled to be repaid in 4 installments over a 4 year period commencing from 1 April 2009.

Total loan amount received was RM193.8 million at 31 March 2008. This loan was set off against the research and development grant as disclosed in Note 5(d) to the financial statements.

31 LONG TERM LIABILITIES (CONTINUED)

(b) Long term loan - secured7,879 135,027

Group 2008 2007 RM’000 RM’000

Group 2008 2007 RM’000 RM’000

The long term loans are repayable as follows:

Within one year - 58,877 Between one and two years (Note (i)) 47,879 - More than two years (Note (ii)) - 76,150

47,879 135,027

The long term loan is repayable as follows:

Between one and two years 44,695 - More than two years 38,310 -

83,005 -

(a) Long term loans - unsecured

The long term loan is secured over the subsidiary’s fixed and floating assets and bears an interest rate of 8.44% during the financial year.



31 LONG TERM LIABILITIES (CONTINUED)

(c) Lease and hire purchase creditors - secured The lease and hire purchase arrangements obtained by subsidiary companies are secured against the assets of the respective subsidiary companies.

(d) Automotive Development Fund The Government of Malaysia has approved the setting up of an Automotive Development Fund (‘ADF’) under the Ninth Malaysia Plan with the objective of modernising and automating the manufacturing processes, improving efficiency, productivity, quality and the application of automation for the Malaysian automotive industry.

The Government of Malaysia had at 31 March 2007, disbursed a total of RM50 million to the Group to be utilised for payments to external parties for the purpose of developing and promoting a competitive and viable domestic automotive sector as a mean to achieve the objective of the ADF.

(e) Employee retirement benefits The employee retirement benefits represents the scheme operated by Lotus Group International Ltd., as disclosed in Note 38 to the financial statements.

Group

2008 2007 RM’000 RM’000

Group

2008 2007 RM’000 RM’000


The lease and hire purchase creditors are repayable as follows:

Within one year 1,325 1,403 Between one and two years 1,325 1,403 Between two and five years 3,421 4,216 Later than five years - 820

Total gross payments 6,071 7,842

Less: Future finance charges (947) (1,442)

Total net payments 5,124 6,400

As at 31 March 2008, the balance outstanding is as follows: At 1 April 50,201 - Disbursed during the financial year - 50,000 Interest earned during the financial year 1,402 201

51,603 50,201

Less: Utilised during the financial year (6,260) -

45,343 50,201


The currency exposure profile of the trade and other payables are as follows:

32 TRADE AND OTHER PAYABLES

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000



Trade payables 313,546 242,801 - -

Other payables 123,034 203,553 575 790

Accruals 741,756 558,124 - -

Amounts due to related parties - 131 - -

Payments received in advance for

engineering contracts 56,211 40,773 - -

Lease and hire purchase creditors

- current portion (Note 31) 973 956 - -

1,235,520 1,046,338 575 790


Ringgit Malaysia 919,360 1,897 48,680 12,762 47,403 1,030,102

Pound Sterling 5,420 131,948 42,092 21,357 779 201,596

Others - - - - 3,822 3,822

924,780 133,845 90,772 34,119 52,004 1,235,520





32 TRADE AND OTHER PAYABLES (CONTINUED)

33 PROVISIONS

Currency exposure as at 31.3.2007


Group Functional currency

Ringgit Malaysia 673,641 22,245 121,510 16,826 20,773 854,995 Pound Sterling 15,893 130,000 25,642 17,414 422 189,371 Others - - - - 1,972 1,972

689,534 152,245 147,152 34,240 23,167 1,046,338

Company Functional currency


Group

2008 2007 RM’000 RM’000

At 1 April 196,067 217,062

Exchange differences (1,308) 1,996

Charged to income statement (Note 7) 45,526 38,737

Warranties receivable 45,572 26,491

Additional provision for the financial year 91,098 65,228

Utilised during the financial year (99,301) (88,219)

At 31 March 186,556 196,067

The Group expects to be reimbursed by suppliers in respect of warranties amounting to RM112,258,000 (2007: RM121,397,000) as disclosed in Note 23 to the financial statements.

Terms of trade payables granted to the Group and Company varies up to 60 days (2007: 60 days) credit days and no credit (2007: no credit) respectively.



34 AMOUNTS DUE TO SUBSIDIARY COMPANIES

Amounts due to subsidiary companies are unsecured, denominated in Ringgit Malaysia, interest free and repayable on demand.

35 AMOUNTS DUE TO ASSOCIATED COMPANIES

Amounts due to associated companies arose from normal trade transactions, denominated in Ringgit Malaysia and are payable within 60 days (2007: 60 days).

36 AMOUNTS DUE TO JOINTLY CONTROLLED ENTITIES

Amounts due to jointly controlled entities arose from normal trade transactions and are due between 30 days to 45 days (2007: 30 days to 45 days).

The currency exposure profile of the amounts due to jointly controlled entities is as follows:

Currency exposure profile as at 31.3.2008 Ringgit Malaysia Total RM’000 RM’000

Currency exposure profile as at 31.3.2007 Ringgit Malaysia Total RM’000 RM’000


Ringgit Malaysia 16,347 16,347

Pound Sterling 290 290

Australian Dollar 321 321

16,958 16,958


Ringgit Malaysia 25,060 25,060



37 SHORT TERM BORROWINGS





The bank overdrafts and revolving credit are secured over the subsidiary’s fixed and floating assets.

The currency exposure profile of the short term borrowings is as follows:

Effective Interest Rate during the financial year Group

2008 2007 2008 2007 % % RM’000 RM’000

Unsecured: Long term loan - current portion (Note 31) - 4.00 - 58,877 Bridging loan 5.00 – 6.00 - 31,985 - Bankers’ acceptance 4.20 3.86 964 739 Revolving credit 4.00 – 6.00 - 38,310 - Bank overdrafts 7.51 – 7.59 5.79 - 6.79 6,728 27,128

77,987 86,744

Secured: Revolving credit 7.00 – 10.00 - 35,619 - Bank overdrafts - 5.79 – 6.79 - 77,682

35,619 77,682

113,606 164,426


Ringgit Malaysia 964 - 964 Pound Sterling - 112,642 112,642

964 112,642 113,606

Group Functional currency

Ringgit Malaysia 59,616 - 59,616 Pound Sterling - 104,810 104,810

59,616 104,810 164,426



38 EMPLOYEE RETIREMENT BENEFITS

(a) Defined contribution plan Group companies incorporated in Malaysia contribute to the Employees Provident Fund, the national defined contribution plan. Once the contributions are paid, the Group has no further payment obligations.

(b) Defined benefit plan

Lotus Group Scheme - defined benefit scheme

Lotus Group International Ltd. and its subsidiaries (‘Lotus Group’), operate a defined benefit pension scheme, the Lotus Pension Plan. The assets are held in separate trustee administered funds. In addition, it provides life assurance cover for all employees.

Contributions to the scheme are charged to the Income Statement so as to spread the cost of pensions over employees’ working lives with the Lotus Group. The contributions are determined by a qualified actuary on the basis of triennial valuations. The latest actuarial valuation of the plan was carried out on 31 December 2005, using the Projected Credit Unit method, updated at 31 March 2008.

The movements during the financial year in the amount recognised in the Consolidated Balance Sheet is as follows:

Group 2008 2007 RM’000 RM’000

Group 2008 2007 RM’000 RM’000

At 1 April 49,842 41,378 Currency translation differences (3,208) 2,013 Charged to income statement (Note 8) 14,616 21,852 Contributions and benefits paid (11,155) (15,401)

At 31 March 50,095 49,842

The amounts recognised in the Consolidated Balance Sheet is analysed as follows:

Present value of obligation 316,128 392,068 Fair value of plan assets (341,917) (369,469)

(Excess)/shortfall of funded plan (25,789) 22,599

Unrecognised actuarial gain 75,884 42,040 Unrecognised transitional liability - (14,797)

Liability on balance sheet 50,095 49,842



38 EMPLOYEE RETIREMENT BENEFITS (CONTINUED)

The expense recognised in the Consolidated Income Statement is analysed as follows:

Group 2008 2007 RM’000 RM’000

Group 2008 2007 % %

Current service cost 4,768 14,383

Interest cost 21,066 19,988

Expected return on plan assets (25,976) (22,790)

Gain on curtailments and settlement - (4,701)

Amortisation of transitional liability 14,758 14,972

Total, included in staff costs within administrative expenses (Note 8) 14,616 21,852

Actual return on plan assets (12,509) 28,059

The principal actuarial assumptions used in respect of the Group’s defined benefit plan were as follows:

Discount rates 6.60 5.40

Expected return on plan assets

- equities 7.25 7.50

- bonds 4.50 4.75

- others 4.50 4.00

Expected rate of salary increase 4.40 4.10

Expected rate of pension payment increase 3.30 3.00

Inflation 3.40 3.10



39 SEGMENTAL INFORMATION

Malaysia Other countries Elimination Total Restated Restated 2008 2007 2008 2007 2008 2007 2008 2007 RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million

The Group is principally engaged in the automobile industry namely, manufacturing, assembling, trading and provision of engineering and

other services in respect of motor vehicles and related products. Accordingly, no segmental information is considered necessary for analysis

by industry segments.

Inter segment sales comprise sales of motor vehicles, parts and engineering services to companies in different geographical locations.

Analysis of the Group’s revenue, results and other information by geographical locations of the assets are as follows:

Revenue External sales 4,617.4 3,504.8 1,004.2 1,182.5 - - 5,621.6 4,687.3 Inter segment sales 117.4 243.0 30.6 124.8 (148.0) (367.8) - -

Total revenue 4,734.8 3,747.8 1,034.8 1,307.3 (148.0) (367.8) 5,621.6 4,687.3

Result Segment operating loss (30.1) (448.4) (18.4) (183.9) (40.8) (49.4) (89.3) (681.7)Research and development grant 193.8 - Unallocated income 4.7 58.5 Interest expense (17.9) (35.5) Interest income 32.1 35.6 Share of net results of associated companies and jointly controlled entities 14.5 14.5 12.8 (4.2) (6.3) (5.3) 21.0 5.0 Taxation 40.2 28.6

Profit/(loss) after taxation 184.6 (589.5)



39 SEGMENTAL INFORMATION (CONTINUED)

Malaysia Other countries Elimination Total 2008 2007 2008 2007 2008 2007 2008 2007 RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million

Other informationSegment assets 6,096.9 5,379.3 663.5 745.4 - - 6,760.4 6,124.7 Unallocated assets 532.9 822.1

Total assets 7,293.3 6,946.8

Segment liabilities 1,324.1 871.1 199.9 545.3 - - 1,524.0 1,416.4 Unallocated liabilities 348.1 299.8

Total liabilities 1,872.1 1,716.2

Capital expenditure 440.7 468.0 92.5 24.1 - - 533.2 492.1 Depreciation and amortisation 368.7 351.9 48.7 23.3 - - 417.4 375.2 Assets written off 18.3 92.2 0.2 2.1 - - 18.5 94.3 Other non-cash items (16.6) (26.5) 31.5 3.9 - - 14.9 (22.6)



39 SEGMENTAL INFORMATION (CONTINUED)

Malaysia Other countries Elimination Total Restated Restated 2008 2007 2008 2007 2008 2007 2008 2007 RM’million RM’million RM’million RM’million RM’million RM’million RM’million RM’million

Unallocated income includes dividend from investments, gains on disposal of current investments and write back of provision for

diminution in value of current investments. Segment assets consist primarily of property, plant and equipment, inventories, receivables

and operating cash, and exclude investments in associated companies, jointly controlled entities, investments, current investments and

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 assests (Notes 13 and 16 to the financial

statements).

Secondary reporting format

The primary reporting format is based on geographical locations of the assets. The industry segmentation is considered unnecessary as the

Group is principally engaged in automobile industry. Therefore, only sales to external customer based on customer location is presented.

Revenue

External sales 4,165.4 3,162.3 1,456.2 1,525.0 - - 5,621.6 4,687.3 Inter segment sales 117.4 243.0 30.6 124.8 (148.0) (367.8) - -

Total revenue 4,282.8 3,405.3 1,486.8 1,649.8 (148.0) (367.8) 5,621.6 4,687.3



40 CAPITAL AND OTHER COMMITMENTS

41 OPERATING LEASES As at 31 March 2008, the Group was committed to making the following payments in respect of operating leases expiring:

Group 2008 2007 RM’000 RM’000

Group

Land and Plant and Land and Plant and buildings machinery Total buildings machinery Total 2008 2008 2008 2007 2007 2007 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Capital commitmentsCapital expenditure for property, plant and equipment

approved by the Board not provided for in the financial

statements:

Contracted for 276,748 283,328

Not contracted for 2,017,329 2,266,587

2,294,077 2,549,915


Within one year 2,306 1,087 3,393 - 1,162 1,162 Between one and five years 3,258 841 4,099 1,144 747 1,891 After five years - - - - 123 123

5,564 1,928 7,492 1,144 2,032 3,176


42 SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES

In the normal course of business, the Group and Company undertake a variety of transactions at mutually agreed terms with subsidiaries, 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 Miyazu (Malaysia) Sdn. Bhd. Associated company PHN Industries Sdn. Bhd. Associated company Marutech Elastomer Industries Sdn. Bhd. Associated company Exedy (Malaysia) Sdn. Bhd. Associated company Proton City Development Sdn. Bhd. Associated company Netstar Advance Systems Sdn. Bhd. Associated company Proton Parts Centre Sdn. Bhd. Jointly controlled entity PEPS-JV (M) Sdn. Bhd. Equity investment Technomeiji Rubber Industries Sdn. Bhd. Equity investment Aluminium Alloy Industries Sdn. Bhd. Equity investment Ara Borgstena Sdn. Bhd. Equity investment

In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. The related party transactions described below were carried out on terms and conditions obtainable in transactions with unrelated parties unless otherwise stated.

(a) Sales of goods and services

Group

2008 2007 RM’000 RM’000

Jointly controlled entity - Proton Parts Centre Sdn. Bhd. 17,929 15,980

(b) Purchases of goods and services from:


Group

2008 2007 RM’000 RM’000

Associated companies - PHN Industries Sdn. Bhd. 70,338 55,329 - Marutech Elastomer Industries Sdn. Bhd. 1,302 2,253 - Exedy (Malaysia) Sdn. Bhd. 11,089 9,673 - Proton City Development Sdn. Bhd. 111 134 - Netstar Advance Systems Sdn. Bhd. 14,407 38,518 - Miyazu (Malaysia) Sdn. Bhd. 185,398 202,393

Jointly controlled entity - Proton Parts Centre Sdn. Bhd. 86,838 84,280


42 SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES (CONTINUED)

(b) Purchases of goods and services from (continued):

(c) 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:

Equity investment companies - PEPS-JV (M) Sdn. Bhd. 189,054 128,948

- Technomeiji Rubber Industries Sdn. Bhd. 7,410 7,970

- Aluminium Alloy Industries Sdn. Bhd. 17,583 2,715

- Ara Borgstena Sdn. Bhd. 1,247 -

Salaries and other short-term employee benefits 8,054 7,124

Defined contribution retirement plan 811 631

Group

2008 2007 RM’000 RM’000

Group

2008 2007 RM’000 RM’000



43 CONTINGENT LIABILITIES

(a) A supplier had obtained a judgement in default against a subsidiary company for RM12.2 million after failing to reach a formal agreement. The subsidiary had obtained legal opinion that the claims are without basis and an action to strike out a portion of the claim (i.e. RM7.2 million) would be successful. (b) A Distributor instituted arbitration proceedings against a subsidiary company as a result of the termination of its distributorship, for which the Distributor had claimed USD9,942,000 (RM37,779,000) plus general damages and interest. The Arbitration Award was handed down on 30 October 2006 wherein the Distributor’s claim against the subsidiary company was dismissed. The Distributor has filed an action in court to set aside the Arbitration Award. The subsidiary has obtained legal advice that it is highly unlikely that such action will be successful.

(c) A subsidiary company has issued notice of termination of the Joint Venture (‘JV’) Company on 11 July 2006 to the subsidiary’s partner in the joint venture. The subsidiary’s partner (Respondent) is disputing the termination. Amount claimed cannot be quantified at present due to damages claimed which can only be ascertained from evidence produced during the arbitration process. According to the JV contract, disputes must be referred to arbitration. The subsidiary has filed the Statement of Case with the Singapore International Arbitration Centre on 31 January 2008. The Respondent has produced a Memorandum allegedly signed by the subsidiary 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 maintains that the Memorandum is a forgery. The arbitration panel has stated that it has jurisdiction to hear the matter challenging its jurisdiction and this will be by way of a full hearing involving witnesses and evidence.

Disputed claims 17,900 -

Group

2008 2007 RM’000 RM’000



Licensed banks 1,062,834 493,206 25,920 9,500

Discount houses - 43,000 - -

1,062,834 536,206 25,920 9,500

Bank and cash balances 163,176 90,269 376 1,110

Deposits, bank and cash balances 1,226,010 626,475 26,296 10,610

Bank overdrafts (Note 37) (6,728) (104,810) - -

Bank balance in respect

of ADF Fund (Note 31 (d)) (45,343) (50,201) - -

1,173,939 471,464 26,296 10,610

Group Company

2008 2007 2008 2007 RM’000 RM’000 RM’000 RM’000

44 CASH AND CASH EQUIVALENTS

45 FINANCIAL INSTRUMENTS (a) Financial risk management objectives and policies The Group’s activities are exposed to a variety of financial risks, including foreign currency exchange risk, interest rate risk, market risk, credit risk, liquidity and cash flow risk. The Group focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Financial risk management is carried out through risks reviews, internal control systems, a global insurance programme and adherence to Group financial risk management policies. The Board regularly reviews these risks and approves the treasury policies, which covers the management of these risks.

The Group uses derivative financial instruments such as foreign exchange contracts and interest rate instruments to hedge certain exposures. It does not trade in financial instruments.

(i) Foreign currency exchange risk

The Group is exposed to currency risk as a result of the foreign currency transactions entered into by the Company and subsidiaries in currencies other than their functional currency. The Group enters into forward foreign currency exchange contracts to limit the exposure on foreign currency receivables and payables, and on cash flows generated from anticipated transactions denominated in foreign currencies.



45 FINANCIAL INSTRUMENTS (CONTINUED)

(a) Financial risk management objectives and policies (continued)

(ii) Interest rate risk

The Group’s income and operating cash flows are not substantially affected by changes in market interest rates except for interest from bank deposits. Derivative financial instruments are used, where appropriate, to generate the desired interest rate profile.

(iii) Market risk

The Group does not face significant exposure from the risk from changes in debt and equity prices.

(iv) Credit risk

The Group seeks to invest cash assets safely and profitably. The Group considers the risk of material loss in the event of non-performance by a financial counter-party to be unlikely in view of the financial strength of those counter-parties.

The Group seeks to control customers credit risk by ensuring that significant sales of product and services are made to customers with an appropriate credit history.

(v) Liquidity and cash flow risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

(b) Forward foreign exchange contracts

Forward foreign exchange contracts are entered into by the Group in currencies other than the functional currency to manage exposure to fluctuations in foreign currency exchange rates on specific transactions.




(b) Forward foreign exchange contracts (continued) As at 31 March 2008, the outstanding notional principal amounts of the Group foreign exchange contracts are as follows:

The foreign currency amounts to be received and the contractual exchange rates of the Group‘s outstanding contracts are as follows:

Maturity Less than 6 months 49,129 149,864

Between 6 months and 1 year 9,067 42,311

58,196 192,175

Group

2008 2007 RM’000 RM’000

2008 Group Forecasted receivables

- the following 6 months GBP USD 49,129 1 USD = GBP 1.9448

- 6 to 12 months GBP USD 9,067 1 USD = GBP 1.9344

58,196

2007 Group Future purchase of raw materials

over the following 6 months JPY USD 114,947 1 USD = RM 3.0170

Forecasted receivables

- the following 6 months GBP USD 34,917 1 USD = GBP 1.9209

- 6 to 12 months GBP JPY 42,311 1 USD = JPY 219.7491

192,175

Currency Currency Average to be to be RM’000 contracted Hedged item received paid equivalent rate




(c) Fair values

The carrying amounts of financial assets and liabilities of the Group and Company at the balance sheet date approximated their fair values except as set out below:

* It was not practicable within the constraints of timeliness and cost to estimate the fair values of the unquoted shares reliably. The Group’s and Company’s share of the net tangible worth of the investments at the balance sheet date is RM15,067,000 (2007: RM15,661,000).

# It was not practicable within the constraints of timeliness and cost to estimate the fair value of the advance from the Government reliably as the terms of the facility has yet to be finalised.

2008 Recognised on the balance sheet Investments 20 10,397 * 6,475 *

Current investments

- quoted 27 526 806 - -

- unquoted 27 20,296 20,152 - -

Advance - Government loan facility 31 (47,879) (47,764) - -

Lease and hire purchase

creditor - long term portion 31 (4,151) (3,860) - -

2007 Recognised on the balance sheet Investments 20 10,397 * 6,475 *

Current investments

- quoted 27 16,080 17,247 - -

- unquoted 27 57,368 58,790 - -

Advance - Government loan facility 31 (76,150) # - -

Lease and hire purchase

creditor - long term portion 31 (5,444) (5,036) - -

Group Company

Carrying Carrying Note amount Fair value amount Fair value RM’000 RM’000 RM’000 RM’000



46 CHANGES IN ACCOUNTING POLICIES

The list of new accounting standards, amendments to published standards and interpretations on existing standards adopted by the Group and Company from the financial year beginning of 1 April 2007 is listed in Note 2, to the financial statements. The following describes the impact of new standards, amendments to published standards and interpretations to existing standards adopted in the financial statements of the Group and Company:

(a) The adoption of FRS 124 “Related Party Disclosures” affects the identification of related parties and other similar related party disclosures. FRS 124 requires the disclosure of related party transactions and outstanding balances with other entities within the Group as disclosed in Note 42 to the financial statements.

(b) The adoption of FRS 117 “Leases” has resulted in an extension of the accounting policy on leases. Upfront payments on leasehold land are classified as prepaid land lease payments and amortised on a straight line basis over the remaining lease period. Previously, upfront payments on leasehold land are included in property, plant and equipment. This change in accounting policy has been applied retrospectively. Consequently, the Group has reclassified leasehold land as prepaid land lease payments as detailed below:

As Change in previously accounting As reported policy restated RM’000 RM’000 RM’000


Balance sheet as at 31 March 2007 Property, plant and equipment

- Cost 10,989 (10,989) -

- Accumulated amortisation 933 (933) -

Prepaid land lease payments

- Cost - 10,989 10,989

- Accumulated amortisation - 933 933

Income statement and cashflow statement for the financial year ended 31 March 2007 Depreciation of property, plant and equipment 112 (112) -

Amortisation of prepaid land lease payments - 112 112


47 COMPARATIVES Distribution cost of RM224,511,000 in the previous financial year has been set off against revenue to conform with current year’s presentation.

48 SUBSEQUENT EVENT On 15 May 2008, Lotus Body Engineering Limited, a wholly owned subsidiary of Lotus Group International Limited (‘LGIL’) and PROTON entered into a Share Purchase Agreement with Jeremy Holden, Richard Williams, Robert Dorny-Smith and Peter Bullvant-Clark for the purchase of the entire issued and paid up share capital of Holden Lightweight Structures Limited comprising 100,000 ordinary shares of GBP0.01 for a cash consideration of GBP100,000.

The acquisition would not have any effect on the issued and paid up share capital and the shareholding structure of PROTON, nor will it have any material effect on the consolidated earnings or net assets of PROTON for the financial year ending 31 March 2009. The acquisition which is not subject to the approval of the shareholders of PROTON nor any regulatory authorities was completed on 15 May 2008.

49 APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 16 July 2008.



• statement by directors pursuant to section 169(15) of the Companies Act, 1965

We, Dato’ Mohammed Azlan Bin Hashim and Dato’ Syed Zainal Abidin B Syed Mohamed Tahir, two of the Directors of Proton Holdings Berhad,

state that, in the opinion of the Directors, the financial statements set out on pages 150 to 232 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 2008 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 the MASB Approved Accounting Standards

in Malaysia for Entities Other Than Private Entities.

Signed on behalf of the Board of Directors in accordance with their resolution dated 16 July 2008.

DATO’ MOHAMMED AZLAN BIN HASHIM DATO’ SYED ZAINAL ABIDIN B SYED MOHAMED TAHIR

CHAIRMAN DIRECTOR


• statutory declaration pursuant to section 169(16) of the Companies Act, 1965

I, Tan Chun Weng, 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 150 to 232 are, in my opinion, correct and I make this solemn declaration conscientiously believing

the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

TAN CHUN WENG

Subscribed and solemnly declared by the abovenamed Tan Chun Weng at Shah Alam in Malaysia on 16 July 2008, before me.

COMMISSIONER FOR OATHS


• report of the auditors to the members of PROTON Holdings Berhad (company no. 623177-A)

We have audited the financial statements of Proton Holdings Berhad, which comprise the balance sheets as at 31 March 2008 of the Group and

Company, and the income statements, statements of changes in equity and cash flow statements of the Group and Company for the year then

ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 150 to 232.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with MASB

Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965. This responsibility includes:

designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free

from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting

estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved

standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain

reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures

selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to

fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the

financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with MASB Approved Accounting Standards in Malaysia for

Entities Other than Private Entities and the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and

Company as of 31 March 2008 and of their financial performance and cash flows for the year then ended.


• report of the auditors to the members of PROTON Holdings Berhad (company no. 623177-A) (continued)

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 accounts and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are

indicated in Note 17 to the financial statements.

(c) We are satisfied that the accounts 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 accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3)

of the Act.

OTHER MATTERS

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia

and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PRICEWATERHOUSECOOPERS THAYAPARAN A/L S. SANGARAPILLAI

(No. AF: 1146) (No. 2085/09/08 (J))

Chartered Accountants Partner of the firm

Kuala Lumpur

16 July 2008


• shareholdings statistics as at 15 July 2008

No. of % of No. of % of Shareholders/ Shareholders/ Shares IssuedSize of Holdings Held Depositors Held Capital

Name Shareholding %

Malaysian Malaysian Malaysian Malaysian Foreign Foreign Foreign Foreign No. of % of No. of % of No. of % of No. of % of Shareholders/ Shareholders/ Shares Share Shareholders/ Shareholders/ Shares ShareSize of Holdings Depositors Depositors Held Capital Depositors Depositors Held Capital

1 - 99 78 0.8611 868 0.0002

100 - 1,000 4,420 48.7966 4,104,485 0.7473

1,001 - 10,000 3,795 41.8967 14,557,694 2.6506

10,001 - 100,000 632 6.9773 18,674,023 3.4001

100,001 - 27,460,649 130 1.4352 159,702,259 29.0784

27,460,650 and above 3 0.0331 352,173,673 64.1233

Total 9,058 100.0000 549,213,002 100.0000

1 KHAZANAH NASIONAL BERHAD 234,734,693 42.7402

2 EMPLOYEES PROVIDENT FUND BOARD 74,318,300 13.5318

3 CARTABAN NOMINEES (TEMPATAN) SDN BHD

PETROLIAM NASIONAL BERHAD (STRATEGIC INV) 43,120,680 7.8514

1 - 99 76 0.8390 805 0.0001 2 0.0221 63 0.0000

100 - 1,000 4,367 48.2115 4,054,685 0.7383 53 0.5851 49,800 0.0091

1,001 - 10,000 3,705 40.9031 14,197,693 2.5851 90 0.9936 360,001 0.0655

10,001 - 100,000 574 6.3369 16,675,021 3.0362 58 0.6403 1,999,002 0.3640

100,001 - 27,460,649 79 0.8722 86,700,674 15.7863 51 0.5630 73,001,585 13.2920

27,460,650 and above 2 0.0221 309,052,993 56.2720 1 0.0110 43,120,680 7.8514

Total 8,803 97.1848 430,681,871 78.4180 255 2.8152 118,531,131 21.5820

ANALYSIS OF SHAREHOLDINGS

ANALYSIS OF SHAREHOLDINGS BY RANGE GROUPS

DISTRIBUTIONS OF SHAREHOLDINGS

SUBSTANTIAL SHAREHOLDERS

Share CapitalAuthorised Share Capital Issued and Fully Paid Up Capital RM1,000,000,000/-

Issued and Fully Paid Up Capital RM549,213,002/-

Class of Shares Ordinary Shares of RM1/- each

Voting Rights One (1) Voting Right for one (1) Ordinary Share


• shareholdings statistics as at 15 July 2008 (continued)

Name of Shareholders No. of Shares %

1 KHAZANAH NASIONAL BERHAD 234,734,693 42.7402

2 EMPLOYEES PROVIDENT FUND BOARD 74,318,300 13.5318

3 CARTABAN NOMINEES (TEMPATAN) SDN BHD 43,120,680 7.8514

PETROLIAM NASIONAL BERHAD (STRATEGIC INV)

4 LEMBAGA TABUNG HAJI 16,820,427 3.0626

5 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD 16,270,400 2.9625

SKIM AMANAH SAHAM BUMIPUTERA

6 CITIGROUP NOMINEES (ASING) SDN BHD 15,926,210 2.8998

EXEMPT AN FOR MELLON BANK (MELLON)

7 HSBC NOMINEES (ASING) SDN BHD 8,968,800 1.6330

TNTC FOR BRANDES INSTITUTIONAL EQUITY TRUST

8 VALUECAP SDN BHD 7,703,700 1.4027


MIDF AMANAH ASSET NOMINEES (TEMPATAN) SDN BHD FOR EMPLOYEES PROVIDENT FUND BOARD

(JF404)


TNTC FOR STATES OF JERSEY PUBLIC EMPLOYEES CONTRIBUTORY RETIEMENT SCHEME

11 CARTABAN NOMINEES (ASING) SDN BHD

SSBT FUND NXW4 FOR BRANDES EMERGING MARKETS EQUITY FUND 3,694,200 0.6726

12 CITIGROUP NOMINEES (ASING) SDN BHD 3,652,500 0.6650

CBNY FOR DFA EMERGING MARKETS FUND


EXEMPT AN FOR FORTIS BANQUE LUXEMBOURG (OPCVM A/C)


TNTC FOR UTAH STATE RETIREMENT SYSTEMS

15 HSBC NOMINEES (TEMPATAN) SDN BHD 2,695,000 0.4907

NOMURA ASSET MGMT MALAYSIA FOR EMPLOYEES PROVIDENT FUND

16 CARTABAN NOMINEES (ASING) SDN BHD 2,572,800 0.4685

GOVERNMENT OF SINGAPORE INVESTMENT CORPORATION PTE LTD FOR GOVERNMENT OF SINGAPORE (C)

17 ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD 2,545,900 0.4636

ALLIANCE INVESTMENT MANAGEMENT BERHAD FOR EMPLOYEES PROVIDENT FUND


TNTC FOR CITY OF LOS ANGELES FIRE AND POLICE PENSION PLAN

THIRTY LARGEST SHAREHOLDERS


• shareholdings statistics as at 15 July 2008 (continued)

Name of Shareholders No. of Shares %

THIRTY LARGEST SHAREHOLDERS (CONTINUED)

DIRECTOR’S SHAREHOLDINGS


BNY BRUSSELS FOR QUEENSLAND INVESTMENT CORPORATION


EXEMPT AN FOR MORGAN STANLEY & CO. INCORPORATED


TNTC FOR THE MCGRAW HILL INC SAVINGS PLAN COLLECTIVE INVESTMENT TRUST


EXEMPT AN FOR MIDF AMANAH ASSET NOMINEES (TEMPATAN) SDN BHD (ACCOUNT 1)

23 BANK SIMPANAN NASIONAL 1,933,000 0.3520





EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (AUSTRALIA)

28 CARTABAN NOMINEES (ASING) SDN BHD

SSBT FUND MF57 FOR SAN BERNARDINO COUNTY EMPLOYEES RETIREMENT ASSOCIATION 1,689,900 0.3077


EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (USA)

30 AMANAH RAYA NOMINEES (TEMPATAN) SDN BHD

AMANAH SAHAM MALAYSIA 1,638,200 0.2983

Total 470,759,836 85.72

None of the Directors hold any shares in the Company.


Date of Age of Net Book Value Acquisition / Properties (RM ‘Mil)Location Description Tenure Revaluation

No. H.S. (D)71311, No. P.T.82 Mukim of Damansara, District of Petaling, Selangor Darul Ehsan. (Formerly, HICOM Industrial Estate encompassing part of Lots 563, 564, 568, 570 and Lot 15, Mukim of Damansara, District of Petaling, Selangor Darul Ehsan).

No. H.S.(D) 71309, No. P.T. 80, Mukim of Damansara, District of Petaling, Selangor Darul Ehsan. (Formerly, HICOM Industrial Estate encompassing Lot 568 Grant No. 5941,H.S.(D) 22208 No. P.T. 5115,H.S.(D) 22207, No. P.T.5116, Mukim of Damansara, District of Petaling, Selangor Darul Ehsan).

HICOM Industrial Estate encompassing Lot 572, Mukim of Damansara, District of Petaling, Selangor Darul Ehsan.

Lot 25,HICOM Glenmarie Industrial Park, Mukim of Damansara, District of Petaling, Selangor Darul Ehsan.

Land with an area of 6,231,080 sq. ft. with main office, main factory, engine factory, medium volume factory, canteen buildings, sports facilities, car park for production cars and additional R&D laboratories building. Total built -up area is 2,594,603 sq. ft.

Land having an area of 158,107 sq. ft. used as the car park for staff.

3 units of flats currently rented out.

Land with an area of 1,036,728 sq. ft. with office, factory and canteen buildings and sports facilities used for the Casting Plant. Total built-up area is 194,579 sq. ft.

Freehold

Freehold

Freehold

Freehold

05.09.1983

19.11.1993

09.04.1986

30.12.1992

23 Years

-

23 Years

14 Years

Land : 68.4Buildings : 129.8

Land : 2.6

Flats : 0.04


Properties owned by Perusahaan Otomobil Sdn Bhd (PONSB)

• properties owned by PROTON Group as at 31 March 2008



No H.S (D) B.P5653 and 5654 Bil P.T. 16162 and 10163, District of Batang Padang, Mukim of Ulu Bernam Timur, Perak Darul Ridzwan.

Vehicle Preparation Centre (VPC) No H.S. (D) 86555, PT No. 258 and H.S. (D) 86557, PT No.260, TP 5 Road, Sime UEP Industrial Park, 47600 Subang Jaya,Selangor Darul Ehsan.

Centre of Excellence (COE) & Pre-Delivery and Inspection Centre (PDI) No H.S. (D) 86596, Pt No.299 and H.S. (D) 86597, PT No. 300, TP5 Road. Sime UEP Industrial Park, 47600 Subang Jaya, Selangor Darul Ehsan.

Land with an area of 55,444,116 sq. ft, for the construction of a second automobile plant,administrative building and sports complex facilities. Total built-up area is 3,374,577 sq.ft.

Vehicle Preparation Centre and stock control building with total built up area of 101,956 sq ft.

Administration & Operation Office and Pre-Delivery & Inspection Centre with total built up area of 30,212 sq. ft.

Freehold

Freehold

Freehold

03.02.1999

01.12.2000

01.03.2001

5 Years

6 Years

7 Years


Building : 4.5

Land : 35.7Building : 127.4

Properties owned by Perusahaan Otomobil Sdn Bhd (PONSB) (continued)

Properties owned by Proton Edar Sdn Bhd (PESB)

No. H.S.(D) 86554, No. P.T. 257 encompassing Lot 54,60 and 62, Sime UEP Industrial Park, Mukim of Damansara, District of Petaling, Selangor Darul Ehsan.

Land with an area of 2,396,727sq. ft. adjoining the Company’s northern boundary housing the semi-high speed test track and control building. Total built-up area is 2,102,731 sq. ft.

Freehold 18.04.1994 14 Years Land : 54.9Track and Buildings : 20.3

• properties owned by PROTON Group as at 31 March 2008 (continued)



Properties owned by Proton Edar Sdn Bhd (PESB) (continued)

Lot 859, Block 16 Kuching Central Land District, Stampin 41/2 Mile, Penrissen Road Kuching, Sarawak

No. 218089. Mukim Plentong, Daerah Johor Bahru, Johor

Land with an area of 48,383.73 sq. ft. to be used for sales outlet and service centre

Land with an area of 87,120 sq. ft. to be used for sales outlet and service centre

Freehold

Freehold

29.04.2002

29.04.2002

6 Years

6 Years

Land : 2.8


H.S(D) 63313, P.T.No. 9671 Mukim of Ampangan District of Seremban, Negeri Sembilan

H.S. (D) 144330, PT 40019 Mukim of Sungai Buloh, District of Petaling, Selangor

No H.S. (D) 86596, PT No. 302, TP 5 Road, Sime UEP Industrial Park, 47600 Subang Jaya, Selangor Darul Ehsan

H.S.(D) 318392, PTD 81816, Mukim of Pulai, District of Johor Bahru.

Lot PT 22489, Mukim Batu District of Gombak, Selangor Darul Ehsan

Lot PT 4352, Mukim Kuah District of Langkawi, Kedah

Land with an area of 79,949 sq.ft. used for sales outlet and service centre is 7,175 sq.ft.


Land with an area of 123,853 sq. ft. to be used for stockyard area

Land with an area of 57,267 sq.ft. to be used for sales outlet and service centre



Freehold

Freehold

Freehold

Freehold

Freehold

Freehold

19.07.200229.09.2003

02.09.200201.03.2004

05.12.2005

06.08.2002

26.08.2002

13.09.2002

5½ Years3 Years

5½ Years3 Years

2 1/4 years

5 ½ Years

5 ½ Years

5 ½ Years



Land : 5.8

Land : 5.1

Land : 7.6

Land : 1.4

No. 2, Lrg. Samarinda 6A Off Jalan Kebun H.S (D) 60042, P.T. No. 64566 Mukim Klang, Selangor

3 storey shop units with approximately 2,475.7 sq. ft.

Freehold 10.05.2002 5 Years Building : 0.6




Properties owned by Proton Cars (UK) Ltd (PCUK)

Properties owned by Group Lotus Plc.

Properties owned by Lotus Cars Ltd. (UK)

Properties owned by Lotus Group International Ltd (LGIL)

Properties owned by PT Proton Cikarang Indonesia (formely known as PT Proton Tracoma Motors)

Ref. AV 915, Units 1-3, Crawley Way, Avonmouth, Bristol Avon BS11 9YR, England

Potash Lane, Hethel, Norwich, Norfolk NR14 8EZ, England.

Land with an area of 162,479 sq. ft. with a parts warehouse building

R&D building rented to group companies. Total built up area is 86,600 sq.ft.

Freehold

Freehold

31.03.1994

01.03.2000

31 Years

8 Years


Building : 14.4

Land adjacent to Potash Lane, Hethel, Norwich, Norfolk NR 14 8EZ, England and Land north of Browick Road, Hethel, Norwich, Norfolk NR14 8EZ, England

1254 North Main St, Ann Arbor, Michigan USA

No. 353,596 and 597, Desa Sukaresmi, Kecamatan, Lemahabang, Kabupaten Bekasi, West Jawa, Indonesia

Two parcels of land with a total area of 6,286,550 sq. ft. with the factory, engineering facilities, offices and test track of Lotus Group International Ltd. Total built up area is 515,500 sq. ft.

Land with an area of approximately 165,528 sq. ft. with office and workshop. Total built up area is 73,000 sq. ft.

Land with an area of 136,610 sq. metres with factories, office, canteen, warehouse, utility and security facilities

Freehold

Freehold

Leasehold(Year of expiry: 2025, 2021 and 2023)

26.09.1968

24.02.2000

10.08.2007

40 Years

Office: 88 YearsWorkshop:42 Years

13 years


Land : 0.8

Building : 6.37

Land : 11.3

Building : 24.0



Apr 07 May July Sep Nov Jan

08 Mar MayJun Aug Oct Dec Feb Apr Jun0

5000

10000

15000

20000

25000

40000

35000

0

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

SharePrice (RM)

Volume(’000)

Share Price Volume

• share price and volume traded


NOTICE IS HEREBY GIVEN that the Fifth (5th) 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, 28 August 2008 at 10.00 am for the following

purposes:

1. To lay the Reports of the Directors and Auditors and the Statutory Financial Statements for the year ended 31 March 2008;

2. To elect the following Directors who retire in accordance with the Company’s Articles of Association:-

Article 104

(i) Dato’ Mohammed Azlan Bin Hashim Ordinary Resolution 1

(ii) Tuan Haji Abdul Jabbar Bin Abdul Majid Ordinary Resolution 2

Article 111

(i) Datuk Zalekha Binti Hassan Ordinary Resolution 3

Article 139

(i) Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Ordinary Resolution 4

3. To approve the Directors’ fees for the year ended 31 March 2008. Ordinary Resolution 5

4. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise

the Directors to fix their remuneration. Ordinary Resolution 6

5. To transact any other ordinary business for which due notice has been given. Ordinary Resolution 7

6. SPECIAL RESOLUTION 1

PROPOSED ADOPTION OF NEW ARTICLES OF ASSOCIATION OF PROTON HOLDINGS BERHAD

(“PROPOSED ADOPTION”) Special Resolution 1

• notice of annual general meeting


“THAT conditional upon the approvals of the relevant parties or authorities (if required) being

obtained, the Company be and is hereby authorised to adopt the revised Articles of Association of the

Company in the manner as set out in the Company’s Circular to Shareholders dated 6 August 2008.

AND THAT the Directors of the Company be and are hereby authorised to complete and give

effect to the Proposed Adoption and do all acts and things for and on behalf of the Company as they

may consider necessary or expedient to give effect to the issue including but not limited to assenting

to any conditions imposed by any relevant authorities and effecting any requisite modifications,

variations and / or amendments and all previous actions taken by the Company’s Board or any Director

of the Board in connection with the Proposed Adoption are hereby ratified.”


By Order of the Board

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 appointor or his attorney duly authorised in writing

or, if such appointor is a corporation, under its common seal or the hand of an officer or attorney duly authorised. If the Form of Proxy

is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer

under Authorisation Document which is still in force, no notice of revocation having been received.” If the Form of Proxy is signed under

MOHD NIZAMUDDIN BIN MOKHTAR

(LS NO. 006128)

Company Secretary

Shah Alam

6 August 2008



the attorney duly authorised, it should be accompanied by a statement reading “signed under Power of Attorney which is still in force,

no notice of revocation having been received.” A copy of the Authorisation Document or the Power of Attorney, which should be valid in

accordance with the laws of the jurisdiction, in which it was created and is exercised, should be enclosed.

3. The maximum number of proxies that may be appointed is two. Where a member appoints more than one proxy, the appointment shall be

invalid unless he specifies the proportion of his shareholdings to be represented by each proxy.

4. Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991,

it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the

credit of the said securities account.

Every appointment submitted by an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, must

specify the CDS Account Number.

5. The instrument appointing the proxy must be deposited at the office of the Registrar, Tenaga Koperat Sdn Bhd, G-01, Ground Floor, Plaza

Permata, Jalan Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur, not less than forty eight (48) hours before the time appointed for

the meeting.

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 20 August 2008. Only a depositor whose name

appears on the General Meeting Record of Depositors as at 20 August 2008 shall be entitled to attend the said meeting or appoint

proxies to attend and/or vote in his stead.

EXPLANATORY NOTES TO THE SPECIAL RESOLUTION:-

Special Resolution 1

The proposed adoption of Special Resolution 1 is mainly to streamline the existing Articles of Association with the provisions in the Companies

Act, 1965, and the Listing Requirements of Bursa Malaysia Securities Berhad as have been amended from time to time and also to add clarity

to the Articles of Association of the Company.


• statement accompanying the notice of annual general meeting

“STATEMENT ACCOMPANYING THE NOTICE OF FIFTH (5TH) ANNUAL GENERAL MEETING”

Pursuant to Paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad, appended hereunder are:

DIRECTORS STANDING FOR RE-ELECTION

Directors who are standing for re-election at the Fifth (5th) 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, 28 August 2008 at 10.00 am pursuant to the

Company’s Articles of Association.

Article 104

(i) Dato’ Mohammed Azlan Bin Hashim Refer to page 28 of the Annual Report

(ii) Tuan Haji Abdul Jabbar Bin Abdul Majid Refer to page 30 of the Annual Report

Article 111

(i) Datuk Zalekha Binti Hassan Refer to page 33 of the Annual Report

Article 139

(i) Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir Refer to page 29 of the Annual Report

FORM OF PROXY No. of Shares held

CDS Account No. of Authorised Nominee

(Please indicate with an “X” in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his/her discretion.)

For appointment of more than one proxy, number of shares andpercentage of shareholdings to be represented by the proxies:-

No. of shares Percentage

%Proxy 1

Proxy 2 %

Dated this day of 2008.

Signature/Common Seal of Appointer

I/We (name of shareholder, in capital letters)

NRIC No. (new) (old) ID No./Company No.

of (full address) being a member of PROTON Holdings

Berhad, hereby appoint (name of proxy as per NRIC,

in capital letters) NRIC No. (new) (old) or failing him/her

(name of proxy as per NRIC, in capital letters) NRIC No. (new) (old)

or failing him/her, the CHAIRMAN OF THE MEETING as my/our proxy to vote for me/us on my/our behalf at the Fifth (5th) 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, 28 August 2008 at 10.00am and at any adjournment thereof.

My/Our proxy is to vote as indicated below:-

ORDINARY RESOLUTIONS FOR AGAINST

To lay the Reports of the Directors and Auditors and the Audited Statement of Accounts for the year ended 31 March 2008;

To elect the following Directors who retire in accordance with the Company’s Articles of Association:-Article 104 (i) Dato’ Mohammed Azlan Bin Hashim

(ii) Tuan Haji Abdul Jabbar Bin Abdul Majid Article 111(i) Datuk Zalekha Binti Hassan Article 139(i) Dato’ Haji Syed Zainal Abidin B Syed Mohamed Tahir

To approve the Directors’ fees for the year ended 31 March 2008.

To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors to fix their remuneration.

To transact any other ordinary business for which due notice has been given.

SPECIAL RESOLUTION 1

PROPOSED ADOPTION OF NEW ARTICLES OF ASSOCIATION OF PROTON HOLDINGS BERHAD(“PROPOSED ADOPTION”)

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5

Resolution 6

Resolution 7

Special Resolution 1

1.

2.

3.

4.

5.

6.

Registered Office

HICOM Industrial Estate

Batu Tiga, 40000 Shah Alam, Selangor Darul Ehsan

Tel: +603 8026 9741 Fax: +603 8026 9744 www.proton.com

PROTON 2008

Documents

operations review - ChartNexusir.chartnexus.com/proton/website_HTML/attachments/... · • operations review ... the PROTON Persona launched in October 2007 ... Savvy faced severe