Annual Report of PROTON 2006

Registered Office
HICOM Industrial Estate
PROTON Holdings Berhad
Batu Tiga, 40000 Shah Alam, Selangor Darul Ehsan
(Company No. 623177-A)
Tel: +603 8026 9741 Fax: +603 8026 9744
(Company No: 623177-A)
www.proton.com
ANNUAL REPORT 2006
o u r H E R I TA G E
ourBRANDS
ourFUTURE
A N N U A L R E P O R T 2006
c o n t e n t s
1
Corporate Mantra & Core Values
74
Statement on Corporate Governance
Financial Calendar
87
Additional Compliance Information
Key Financial Indicators
88
Statement on Internal Control
Summary of Financial Highlights for Five Years
92
Risk Management
Corporate Profile
94
Calendar of Events 2005-2006
Awards & Recognition
102
Statutory Financial Statements
10
Corporate Information
177
Shareholdings Statistics
12
Group Operations
180
Properties Owned by PROTON Group
14
Profile of Directors
187
Share Price and Volume Traded
22
Senior Management
188
Notice of Annual General Meeting
26
Chairmans Statement
190
36
An Interview with the Managing Director
Statement Accompanying the

Notice of Annual General Meeting
46
Operations Review
Form of Proxy
1
ANNUAL REPORT 2006
THE PROTON WAY

PROTON employees are dedicated to the Groups long-term success. Every
PROTON employee shall operate under the Groups shared values and rely on
these values to guide their behaviour with each other and the customers.
These values form the foundation of how we work and conduct business.
Corporate Mantra
& Core Values
CORE ideology
CORE values
AUDACIOUS GOAL
QUALITY
TEAMWORK
Driving Malaysias transformation into a leader in

technology and quality.
We make products that work first time,

every time.
We trust, respect and share knowledge

to foster teamwork at the workplace.
VIVID DESCRIPTION
CUSTOMER FOCUS
SPEED
We deliver innovative and superior quality

products and services. Our brands inspire
confidence and pride.
Customers are the source of our

income. We deliver on our promises to
customers satisfaction.
We have a can-do attitude and will

not rest until the problem is solved.
We have an inherent sense of urgency
in everything we do.
PURPOSE
INNOVATION
We are a passionate group of people working

together, creating exhilarating products and
services for global markets, synonymous with
great styling, innovation and leading technology.
We challenge convention, always

seeking new and better ways to do
things. We view change as opportunity.
CARING
As a responsible corporate citizen,
we invest in safety, health and the
environment.
FINANCIAL CALENDAR
PROTON HOLDINGS BERHAD
EVENTS
DATE
Unaudited First (1st) Quarter results for the period ended 30 June 2005
30/08/2005
Second (2nd) Annual General Meeting
28/09/2005
Entitlement date for the tax exempt final dividend of 10% for the financial year ended 31 March 2005
07/10/2005
Payment of the tax exempt final dividend of 10% for the financial year ended 31 March 2005
28/10/2005
Unaudited Second (2nd) Quarter results for the period ended 30 September 2005
29/11/2005
Unaudited Third (3rd) Quarter results for the period ended 31 December 2005
27/02/2006
Unaudited Fourth (4th) Quarter results for the period ended 31 March 2006
30/05/2006
Third (3rd) Annual General Meeting
08/09/2006
Extraordinary General Meeting
08/09/2006
Entitlement date for the tax exempt final dividend of 5 sen for the financial year ended 31 March 2006
14/09/2006
Payment of the tax exempt final dividend of 5 sen for the financial year ended 31 March 2006
18/10/2006
78.7
87.9
93.3
137.3
54.9
3,197.2
4,195.1
4,611.8
4,916.9
4,908.8
2002
2003
2004
2005
2006
2002
2003
2004
2005
2006
BASIC EARNINGS PER SHARE
DIVIDEND PAID
(RMMillion)
(Sen)
NET ASSETS
RETAINED PROFITS
CARRIED FORWARD
2006
2005
10.69
10.67
10.14
2004
8.5
2006
9.41
80.6
2005
2003
92.9
2004
7.73
197.7
2003
2002
216.1
2002
KEY FINANCIAL INDICATORS

3
ANNUAL REPORT 2006
(RM)
(RMMillion)
SUMMARY OF FINANCIAL HIGHLIGHTS FOR FIVE YEARS

BALANCE SHEET AS AT 31 MARCH

(RM Million)
Current Assets
Inventories
Receivables
Short term investments
Deposits, bank and cash balances
2006
2005
(restated)
2004
(restated)
2003
(restated)
2002
(restated)
1,389.0
1,244.0
212.0
1,586.0
967.1
1,403.2
201.5
2,454.7
795.8
930.0
182.0
2,877.4
813.6
822.5
166.4
3,713.7
689.4
871.5
185.0
3,591.8
4,431.0
5,026.5
4,785.2
5,516.2
5,337.7
2,324.2
16.9
2,207.4
2.6
1,900.5
140.3
2,438.4
192.3
2,231.1
272.2
2,341.1
2,210.0
2,040.8
2,630.7
2,503.3
Net current assets
2,089.9
2,816.5
2,744.4
2,885.5
2,834.4
Property, plant and equipment

Associated companies
Jointly controlled entities
Other long term investments
Long term liabilities
Minority interest
Deferred tax assets
Goodwill
3,330.9
155.7
249.9
10.4
(101.0)
0.0
105.8
29.0
3,313.3
162.0
255.4
6.3
(760.7)
(0.3)
38.4
29.0
2,908.4
170.1
110.7
6.3
(447.4)
0.0
45.5
29.0
2,221.4
146.9
75.2
6.3
(222.3)
(1.6)
25.7
29.0
1,703.1
89.3
59.0
6.3
(509.8)
(1.5)
(10.0)
29.0
5,870.6
5,859.9
5,567.0
5,166.1
4,199.8
549.2
412.7
4,908.7
549.2
393.8
4,916.9
549.2
406.0
4,611.8
549.2
421.8
4,195.1
543.1
459.5
3,197.2
5,870.6
5,859.9
5,567.0
5,166.1
4,199.8
Current Liabilities
Payables
Taxation
Shareholders Funds
Share capital
Other reserves
Retained profits
5
ANNUAL REPORT 2006
INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH

(RM Million)
2006
2005
2004
2003
2002
7,796.9
8,483.3
6,361.2
9,133.5
10,169.2
Profit before taxation
28.1
412.3
576.7
1,326.9
1,495.7
Profit after taxation
46.7
442.4
510.3
1,086.0
1,173.7
4,963.6
5,054.2
4,705.1
4,283.0
3,275.9
Revenue
Retained profit attributable to shareholders

Dividend
Retained profit carried forward
(54.9)
(137.3)
(93.3)
(87.9)
(78.7)
4,908.7
4,916.9
4,611.8
4,195.1
3,197.2
2006
2005
2004
2003
2002
8.5
10.0
10.69
549,213
80.6
25.0
10.67
549,213
92.9
17.0
10.14
549,213
197.7
16.0
9.41
549,213
216.1
14.5
7.73
543,144
SHARE INFORMATION
Per share
Basic earnings (sen)
Tax-exempt dividend paid
Net assets
Issued share capital
* Comparatives have been restated to conform with current years presentation and prior year adjustment arising from certain changes in
accounting policies.
6
Corporate
PROFILE
PROTON was established on 7 May 1983

as a private limited company under the name Perusahaan Otomobil Nasional Sdn.
Bhd. (PONSB) and was subsequently listed on the Main Board of the then Kuala
Lumpur Stock Exchange (now Bursa Malaysia Securities Berhad) on 26 March 1992 as
Perusahaan Otomobil Nasional Berhad (PONB). PROTON Holdings Berhad (PHB)
which was incorporated on 28 July 2003 assumed the listing status of PONB on
16 April 2004 pursuant to a Scheme of Arrangement under Section 176 of the
Companies Act 1965.
7
ANNUAL REPORT 2006
PROTON has three primary national policy objectives:

To spear head the development of component
manufacturing industries,
To acquire and upgrade technology and industrial skills
within the automotive manufacturing industry, and
To strengthen the inter national competitiveness of
Malaysias industrial capability.
PROTON commands a substantial share of the domestic
market for passenger cars and over the years has been
building up distribution networks in key market centres across
these four regions:
United Kingdom,
The Middle East,
South-East Asia, and
Australasia.
The business of the PROTON Group has been expanded to

include engineering consultancy, manufacturing, distribution,
financial services and property investments. With a turnover
of almost RM8 billion in financial year 2005/2006, PROTON
Group is one of the largest companies listed on Bursa
Malaysia Securities Berhad.
PROTON Group designs and produces cars for diverse
consumer preferences. The portfolio of PROTON models
includes the family sedan Waja, the stylish Gen.2, the
versatile Arena/Jumbuck, the fun-to-drive Savvy and the

desirable sporty Satria Neo. PROTON Groups portfolio also
includes the world-renown sports cars Lotus Elise, Lotus Esprit
and the recently launched Lotus Europa. These cars are
manufactured in Malaysia and the United Kingdom.
PROTON Group conducts research in its centres in the United
Kingdom and Malaysia for new technologies with the
ultimate aim of putting these innovations into production
through partnership with T ier One Suppliers of OEM
customers. A number of these patents have been licensed
to leading car manufacturers.
Currently, PROTON Group has almost 11,000 employees who
are involved in a spectrum of business ranging from
research, design, development, testing, stamping, casting,
machining and assembly to marketing, distribution and aftersales activities.
Strong customer-orientation and competitively-priced
products are the foundation of PROTONs business and are
essential to the groups success. PROTON aims to maintain
market leadership by continuing to develop innovative
products and through satisfying its customers in a better and
more profitable way than its competitors.
AWARDS & RECOGNITION

Awards&
Recognition
2006
Readers Digest Trusted Brand 2006

Gold Award for Car Category.
Nanyang Siang Paus 2006 Chinese
New Year Greeting Advertisement
Award Full Color Category 5th
Runner Up.
2005
Readers Digest Super Brand 2005

Gold Award for Car Category.
Merdeka Millennium Endurance Race

2005 1st place Overall and Class O
Winner.
Malaysian Rally Championship 2005

Overall class Winner P10 Category.
2004
2002
Malaysia Best Brand Award.
National Creativity & Innovation

Award 2004.
Best Landscape Competition

(Second Place Factory Category).
*Proton WAJA 4.5 stars out of 5 star

rating for being the Most Economical
and Greenest Sedan in Australia.
Appreciation Award for Contribution to

the development of Malaysian
Motorsports for 2002.
KPMG/The Edge Shareholder Value

Award 2002 Sectoral Winner Industrial
Market. The award measured
economic profit as a percentage of
invested capital.
Highest Increase in Turnover Award

among companies listed on the Kuala
Lumpur Stock Exchange for financial
year 2002-2003.
Motor vehicles and transport

equipment sector leader award among
the top 1,000 Malaysian companies.
2003
Industry Excellence Award 2003,

Quality management category III.
Industry Excellence Award 2003.
Best Landscape Competition

(First Place Factory Category).
9
ANNUAL REPORT 2006
As testimony to our efforts in leading the Malaysian automotive industry as well as making
inroads in branding and motor sports, PROTON received the following awards and
accolades from various organisations:
Highest Increase in Net Profit Award

among companies listed on the
Kuala Lumpur Stock Exchange for
financial year 2002-2003.
2001
Certificate of Merit for 2001 NACRA

Award.
Appreciation Award for sponsoring

Le Tour de Langkawi 2001 event.
Superbrand Award for Automotive

sector for year 2001.
1999
Satria GTI Wheels Magazine

Best Hot Hatch Buy Year 1999.
PROTON was also appreciated for its

contributions to various national causes
and its support of community events
by the following organisations:
2006
Certificate of Appreciation from the

Badminton Association of Malaysia
for the Badminton Melayu Malaysia
Piala DYMM Sultan-Sultan ke-50
tournament.
2005
Certificate of Appreciation for the

production of the Kelantan Royal
Project 2005 special documentary.
Special Membership Certificate to

commemorate the Malaysian
Industry-Government Group for
High Technologys 10th Anniversary.
Certificate of Appreciation in
conjunction with QDay by the
Ministry of Cooperation and
Entrepreneur Development.
Certificate of Appreciation for

the support of the Karnival Kulim
Hi-Tech Park.
Support of the International CEOs

Conference 2005 Global issues and
challenges facing Asian corporations.
Certificate of Appreciation for the

National Anti-Drug Campaign.
10
Corporate
Information
BOARD OF DIRECTORS
Dato Mohammed Azlan bin Hashim (Chairman)
Syed Zainal Abidin bin Syed Mohamed Tahir
Lt. Gen (R) Dato Seri Mohamed Daud bin Abu Bakar
Abdul Jabbar bin Abdul Majid
Badrul Feisal bin Abdul Rahim
Mohammad Zainal bin Shaari
Abdul Kadir bin Md Kassim
Dato Ahmad bin Haji Hashim
(appointed on 26 October 2005)
Dato Haji Abd. Rahim bin Haji Abdul
(resigned w.e.f. 2 September 2005)
Tengku Tan Sri Dr. Mahaleel bin Tengku Ariff
(retired w.e.f. 30 September 2005)
Datuk Kisai bin Rahmat
(appointed on 1 January 2006)

(resigned w.e.f. 31 July 2006)
(appointed on 1 January 2006)
CORPORATE INFORMATION
11
ANNUAL REPORT 2006
BOARD AUDIT COMMITTEE

Chairman
BOARD RISK MANAGEMENT

COMMITTEE
Chairman
Md Ali bin Md Dewal
BOARD NOMINATION COMMITTEE
Datuk Tan Kim Leong
Dato Michael Lim Heen Peok
Lt. Gen (R) Dato Seri Mohamed

Daud bin Abu Bakar
PricewaterhouseCoopers
(Chartered Accountants)
11th Floor, Wisma Sime Darby
Jalan Raja Laut, P.O. Box 10192
50706 Kuala Lumpur
Tel : 03-2693 1077
Fax : 03-2693 0997
(appointed on 29 August 2005)
Dato Mohammed Azlan bin Hashim

Chairman
AUDITORS
(resigned w.e.f. 29 August 2005)

Daud bin Abu Bakar
REGISTERED OFFICE
Batu Tiga
40000 Shah Alam
Tel : 03-8026 9741
Fax : 03-8026 9744
REGISTRAR
BOARD EXECUTIVE COMMITTEE
BOARD REMUNERATION COMMITTEE
(Established on 1 January 2006)

(Disbanded w.e.f. 30 June 2006)

Chairman

Chairman

Ahmad Tajuddin bin Abdul Carrim
Syed Zainal Abidin bin Syed

Mohamed Tahir
Tenaga Koperat Sdn. Bhd.

20th Floor, Plaza Permata
Jalan Kampar, Off Jalan Tun Razak
50400 Kuala Lumpur
Tel : 03-4041 6522
Fax : 03-4042 6352

Md Ali bin Md Dewal
STOCK EXCHANGE LISTING

Main Board of
Bursa Malaysia Securities Berhad

Daud bin Abu Bakar
COMPANY SECRETARY
Mohd Nizamuddin bin Mokhtar
(LS 006128)
12
GROUP OPERATIONS
ENGINEERING SERVICES DIVISION

LOTUS ADVANCE TECHNOLOGIES
SDN. BHD. (100%)
PROTON ENGINEERING RESEARCH

TECHNOLOGY SDN. BHD. (100%)
Marco Acquisition Corporation (USA)

(100%)
MIYAZU (MALAYSIA) SDN. BHD. (51%)
LOTUS GROUP INTERNATIONAL

LIMITED (100%)
Group Lotus Plc. (100%)

Lotus Cars Ltd. (100%)
Lotus Engineering Ltd. (100%)
Lotus Engineering (M) Sdn. Bhd.
(100%)
MANUFACTURING DIVISION
PROTON TANJUNG MALIM
SDN. BHD. (100%)
PERUSAHAAN OTOMOBIL NASIONAL
SDN. BHD. (100%)
Lotus Body Engineering Ltd. (100%)

Lotus Motorsport Ltd. (100%)
Lotus Cars USA Inc. (100%)

Lotus Pension Trustees Ltd. (100%)
Lotus Cars Foundation (100%)
Lotus Finance Ltd. (49.9%)
Goldstar PROTON Automobiles

Co. Ltd (49%)
PT PROTON TRACOMA MOTORS

(INDONESIA) (51%)
VINA STAR MOTORS CORPORATION

(VIETNAM) (25%)
Lotus Holdings Inc. (USA) (100%)

Lotus Engineering Inc. (100%)
PROTON AUTOMOBILES
CHINA LTD. (BVI) (100%)
13
ANNUAL REPORT 2006
MARKETING DIVISION
PROTON MARKETING SDN. BHD. (100%)
PROTON EDAR SDN. BHD. (100%)
Proton Edar Resources Sdn. Bhd. (100%)
Proton Edar Ventures Sdn. Bhd. (100%)
Proton Singapore Pte. Ltd. (100%)
PT Proton Edar Indonesia (95%)
Proton Commerce Sdn. Bhd. (50%)
Netstar Advanced Systems Sdn. Bhd. (40%)
PROTON PARTS CENTRE SDN. BHD. (55%)
PROTON CARS (UK) LTD. (100%)
PROPERTY DIVISION
PROTON HARTANAH SDN. BHD. (100%)
PROTON PROPERTIES SDN. BHD. (100%)
PROTON CITY DEVELOPMENT CORPORATION SDN. BHD. (40%)
FINANCIAL DIVISION
PROTON CAPITAL SDN. BHD. (100%)
INVESTEE & ASSOCIATE COMPANIES
Smith & Sons Motors Ltd. (100%)
EXEDY (MALAYSIA) SDN. BHD. (45%)
Proton Direct Ltd. (100%)
PHN INDUSTRY SDN. BHD. (35%)
Proton Cars (Imports) Ltd. (100%)
ALUMINIUM ALLOY INDUSTRIES SDN. BHD. (19%)
Proton Cars Direct Ltd. (100%)
Proton Finance Ltd. (49.99%)
PROTON CARS (EUROPE) LTD. (55.56%)
PROTON CARS AUSTRALIA PTY. LTD. (100%)
PROTON CARS BENELUX NV SA (BELGIUM) (100%)
AUTO COMPOUND AND DISTRIBUTION CENTRE

SDN. BHD. (100%)
PROTON CORPORATION SDN. BHD. (100%)
LOTUS CARS ASIA PACIFIC SDN. BHD. (100%)
MARUTECH ELASTOMER INDUSTRIES SDN. BHD. (25%)

TECHNOMEIJI RUBBER SDN. BHD. (15%)
ARA BORGSTENA SDN. BHD. (6.67%)
PEPS-JV SDN. BHD. (10.50%)
OTHERS
YAYASAN PROTON
14
PROFILE OF DIRECTORS
DATO MOHAMMED AZLAN BIN HASHIM

Chairman
Non-Independent Non-Executive Director
Aged 49, Malaysian
Dato Mohammed Azlan bin Hashim was appointed as a Director

on 17 December 2004 and was re-designated as Chairman on
7 February 2005. A Chartered Accountant, he graduated with a
Bachelor of Economics from Monash University, Australia. He is a
member of the Institute of Chartered Accountants, Australia,
Malaysian Institute of Accountants, Fellow Member of Malaysian
Institute of Directors and Fellow Member of the Institute of
Chartered Secretaries and Administrators.
He has extensive experience in the corporate sectors including
in financial services and investments. Among others, he has
served as Chief Executive/Executive Director of Bumiputra
Merchant Bank Berhad, Group Managing Director of Amanah
Capital Malaysia Berhad and Executive Chairman of Bursa
Malaysia Securities Berhad (formerly known as Kuala Lumpur
Stock Exchange) Group.
Dato Azlan also served on various government bodies, including
Finance Committee on Corporate Governance, the Second
National Economic Consultative Council and Financial Reporting
Foundation.
He is currently a Board Member of among others, Labuan
Offshore Financial Services Authority, Employees Provident Fund,
Khazanah Nasional Berhad, Scomi Group Bhd., D&O Ventures
Berhad and Malaysian Industry-Government Group for High
Technology. He was recently appointed Chairman of Universiti
Darul Iman Malaysia.
Within PROTON Holdings Berhad, Dato Azlan serves as Chairman
of Board Nomination Committee and Board Disciplinary
Committee.
He attended 20 out of 21 Board of Directors Meetings held
during the Financial Year. He was nominated to the Board
by Khazanah Nasional Berhad and has no conflict of interest
with the Company and does not have any family relationship
with any director and/or major shareholder of the Company.
He has had no conviction of any offences within the past ten
(10) years.
15
ANNUAL REPORT 2006
Syed Zainal Abidin bin Syed Mohamed Tahir was appointed

as the Managing Director of PROTON on 1 January 2006.
He graduated from the University of Maryland, USA with a
Bachelor of Science in Civil Engineering in 1983.
Syed Zainal Abidin began his career in 1987 as a Project
Engineer with Petronas Gas Sdn. Bhd. before joining
Petroliam Nasional Berhad in 1992 as Senior Executive,
Corporate Planning & International Business Development. In
1995, he joined HICOM Holdings Berhad and assumed
various senior positions in the company.
In 1999, Syed Zainal Abidin joined Perodua as Senior General
Manager. In 2002, he was appointed as the Executive
Director of Perodua Auto Corporation Sdn. Bhd. and was later
promoted as Deputy Managing Director in October 2005.
Syed Zainal Abidin also sits as a director in several subsidiary
and investee/associate companies with the PROTON Group.
He has attended 4 out of 4 Board of Directors Meetings
held during the Financial Year. He has no conflict of interest
with the Company and does not have any family
relationship with any director and/or major shareholders of
the Company. He has had no conviction of any offences
within the past ten (10) years.
SYED ZAINAL ABIDIN BIN SYED MOHAMED TAHIR

Managing Director
Aged 44, Malaysian
16
Lt. Gen. (R) Dato Seri Mohamed Daud bin Abu Bakar was
appointed to the Board on 12 April 2004. He graduated from
the world renowned Royal Military Academy, Sandhurst; the
Army Staff College, Camberley and the Royal College of
Defence Studies in United Kingdom.
He served the Malaysian Army with distinction for 36 years.
During his military career, he was appointed to various key
command and staff appointments both in the field
headquarters and in the Ministry of Defence, amongst them,
Director of Army Training, Commandant of Armed Forces
Staff College, Brigade Commander, Division Commander,
Chief of Armed Forces Logistics and Army Corps Commander
cum General officer Commanding-in-Chief responsible for
command and operations in Peninsular Malaysia.
He has also served in various committees at national and
international levels, including as Joint Chairman of the
Regional Border Committee (with Thailand), Deputy
Chairman of the Socio Economic Development Committee
and Member, General Border Committee (with Thailand).
Lt. Gen. (R) Dato Seri Mohamed Daud is currently a member
of the Board Nomination Committee of the Company. He is
the Chairman of Johan Ceramics Berhad and a Director of
Mieco Chipboard Berhad and Bank Kerjasama Rakyat
Malaysia Berhad (Bank Rakyat). He is also Chairman of the
Audit Committee, member of the Nomination Committee of
Mieco Chipboard Berhad; member of the Nomination
Committee, the Board Risk Management Committee and
the Audit Examination Committee of Bank Rakyat.
He attended 19 out of 21 Board of Directors Meetings held
during the Financial Year. Save for the PROTON dealership
held by his son, Lt. Gen. (R) Dato Seri Mohamed Daud has
no conflict of interest with the Company. He has no family
relationship with any other director or major shareholders of
the Company. He has had no conviction of any offences
within the past ten (10) years.
LT. GEN. (R) DATO SERI MOHAMED DAUD

BIN ABU BAKAR
Independent Non-Executive Director
Aged 70, Malaysian
17
ANNUAL REPORT 2006
Abdul Jabbar bin Abdul Majid was appointed as a Director on

12 April 2004. He is a Fellow Member of the Institute of Chartered
Accountants, Australia, as well as a member of the Malaysian
Institute of Accountants. He is also a member of the Executive
Council of the Malaysian Institute of Certified Public Accountants
(MICPA).
He started his career in 1974 as Senior Manager in the Internal
Audit and Organisation Department of Bank Pertanian Malaysia.
In 1977, he joined KPMG Malaysia as Manager and was
admitted to partnership two years later. In 1993, he was
promoted to Deputy Senior Partner and was made Senior
Partner in 1995, a position he held until his retirement in 2000. He
joined Malaysia Derivatives Exchange Berhad in 2001 and
retired as Executive Chairman on 28 February 2004. He was a
past president of MICPA. He is an Adjunct Professor of the
Faculty of Economics and Accounting of the International
Islamic University. He was a member of the Senate of the Open
University Malaysia Board.
Abdul Jabbar is currently the Chairman of the Board Audit
Committee and a member of Board Nomination and Board
Remuneration Committees of the Company. He is also a member
of Board Disciplinary Committee. Besides PROTON Holdings
Berhad, he is an Independent Non-Executive Director of Malakoff
Berhad and Tradewinds Corporation Berhad and also the
Chairman of the Audit Committee of Tradewinds Corporation
Berhad and Malakoff Berhad. He is also a Director of Opcom
Holdings Berhad and Bank Muamalat Malaysia Berhad.
Abdul Jabbar attended 15 out of 21 Board of Directors Meetings
held during the Financial Year. He has no conflict of interest with
the Company and has no family relationships with any other
director or major shareholders of the Company. He has had no
conviction of any offences within the past ten (10) years.
ABDUL JABBAR BIN ABDUL MAJID

Aged 61, Malaysian
18
Badrul Feisal bin Abdul Rahim was appointed to the Board

on 12 April 2004. He holds an American Associate Degree
in Accountancy (AAD) and also a Bachelor of Science
in Accountancy from University of Missouri, Columbia, USA
in 1994.
He started his career with Arthur Andersen & Co as an intern
and thereafter held the posts of Senior Officer, Internal Audit
of United Overseas Bank, Kuala Lumpur; Manager, Investment
Department of Malaysian Technology Development
Corporation Sdn. Bhd. and Executive Director of MTDC
Private Equity Management Sdn. Bhd. He joined Khazanah
Nasional Berhad in February 2001 as Senior Manager and is
now a Senior Vice President, Investments.
Badrul Feisal is currently the Chair man of the Board
Remuneration Committee and a member of the Board
Nomination and Board Risk Management Committees of the
Company.
Badrul Feisal attended 19 out of 21 Board of Directors
Meetings held during the Financial Year. He was nominated
to the Board of the Company by Khazanah Nasional Berhad
and has no conflict of interest with the Company and has
no family relationships with any other director or major
shareholders of the Company. He has had no conviction of
any offences within the past ten (10) years.
BADRUL FEISAL BIN ABDUL RAHIM

Aged 37, Malaysian
19
ANNUAL REPORT 2006
MOHAMMAD ZAINAL BIN SHAARI

Aged 43, Malaysian
Mohammad Zainal bin Shaari was appointed as a Director

on 17 December 2004. He is currently the Executive
Director/Chief Operating Officer at Khazanah Nasional
Berhad (Khazanah). He spent 18 years in the public
accounting profession and has worked in the United
Kingdom, USA and Malaysia. In 1997 he was made a partner
in Price Waterhouse (now PricewaterhouseCoopers). In 2002
he left PricewaterhouseCoopers and joined BinaFikir Sdn.
Bhd. in 2003.
Mohammad Zainal is a member of the Board Audit
Committee of the Company.
He is a Fellow of the Institute of Chartered Accountants in
England & Wales and a fellow of the Association of
Chartered Certified Accountants (UK), as well as a member
of the Malaysian Institute of Accountants and the Malaysian
Institute of Certified Public Accountants.
Mohammad Zainal has attended all Board of Directors
Meetings held during the Financial Year. He is a nominee
director for Khazanah Nasional Berhad and has no conflict
of interest with the Company and does not have any family
relationships with any director and/or major shareholder of
the Company.
20
Abdul Kadir bin Md Kassim was appointed to the Board of

PROTON Holdings Berhad (the Company) on 10 March
2005. Kadir serves as the Chairman of the Board Risk
Management Committee. He is also a member of the Board
Audit Committee, Board Nomination Committee and Board
Disciplinary Committee of the Company.
Kadir holds a Bachelor of Laws Degree from University of
Singapore. He served in the Malaysian Administrative and
Diplomatic Service and in the Judicial and Legal Service
between 1966 and 1973, holding various positions. He is
currently the managing partner of Messrs Kadir, Andri &
Partners. He is also a chairman of Ho Hup Construction
Company Berhad and a director of United Engineers
(Malaysia) Berhad, UEM World Berhad, Suria Capital Holdings
Ber had, TIME dotCom Ber had, and a few private
companies, including being chairman of the Committee of
Labuan International Financial Exchange.
Abdul Kadir has attended all Board of Directors Meetings
held during the Financial Year. He has no conflict of interest
with the Company and does not have any family relationship
with any director and/or major shareholders of the Company.
He has had no conviction of any offences within the past
ten (10) years.
ABDUL KADIR BIN MD KASSIM

Aged 66, Malaysian
21
ANNUAL REPORT 2006
Dato Ahmad bin Haji Hashim was appointed Director of

PROTON on 26 October 2005. He graduated from the University
of Malaya with a Bachelor of Economics (Hons) in 1974 and
obtained his Master in Business Administration from City
University, Washington State, USA in 1983. He has attended the
Oxford Advanced Management Programme, University of
Oxford, United Kingdom conducted in 2004 and also attended
Leaders in Development: Managing Political and Economic
Change, Harvard University, USA conducted in 2006.
Ahmad began his career in 1974, as an Assistant Secretary,
Implementation and Coordination Unit, in the Prime Ministers
Department and has served numerous Ministries including the
Ministry of Finance between 1977 and 1984, holding various
positions, before joining the Ministry of International Trade and
Industry as the Principal Assistant Secretary in 1985. In 1992, he
joined the Foreign Investment Committee, EPU, Prime Minister's
Department as Principal Assistant Secretary. In 1996, Ahmad was
appointed as Deputy Secretary, Economic and International
Division, Treasury in the Ministry of Finance (MoF). He was later
appointed as Secretary in the Loan Management and Financial
Policy Division, Treasury, MoF in 2000. He served in the Ministry of
Health as Deputy Secretary General (Finance) in 2003 until he
assumed his present position as the Deputy Secretary General
(Operation), Treasury, MoF in September 2005. Ahmad has
previously held directorships and memberships in several
organisations between 1999 to 2004, such as Institut Jantung
Negara, Islamic Development Bank in Jeddah, Bank Simpanan
Nasional, Lembaga Tabung Haji, Perbadanan Labuan,
Employees Provident Fund, Johor Corporation, Malaysian Timber
Industry Board, Klang Port Management Sdn. Bhd. and Penang
Regional Development Authority.
Throughout his illustrious career with the Malaysian civil service,
he has also represented Malaysia in APEC Economic
Committee, APEC Finance Ministers/Leaders meetings, Islamic
Development Bank Board of Governors meetings, Commonwealth
Finance Ministers meetings, Asia-Europe (ASEM) Leaders
meeting, WTO meetings, among others.
Ahmad is also a Director of Telekom Malaysia Berhad and
Keretapi Tanah Melayu Berhad.
He has attended 6 out of 8 Board of Directors Meetings held
during the Financial Year. He has no conflict of interest with
the Company and does not have any family relationship with
any director and/or major shareholders of the Company.
He has had no conviction of any offences within the past ten
(10) years.
DATO AHMAD BIN HAJI HASHIM

Director
Aged 54, Malaysian
22
SENIOR MANAGEMENT
Senior
M a n a g e m e n t
Razif bin Ahmad

Director,
Procurement
Syed Zainal
Abidin bin Syed
Mohamed Tahir
Datuk
Kamarulzaman
bin Darus
Managing Director
Director,
Manufacturing
Fauzi bin
Che Rus
Abdul Wahab
Mohamed Khalid
Director,
Human Resource
Head,
Engineering
Datuk Maruan
bin Mohd. Said
Director,
Domestic Markets
Ahmad Tifli
bin Dato
Mohd. Talha
Head,
Exports Markets
23
ANNUAL REPORT 2006
Tan Chun Weng
Mohd.
Nizamuddin
Mokhtar
Head,
Group Finance
Head,
Group Secretarial
& Compliance
Michelle
Kythe Lim
Andy Khoo
Boo Teik
Head,
Group Legal
Chief Information
Officer
Low Pheng
Dato
Tony Chan
Kok Chuen
Head,
Group
Internal Audit
Head,
Quality
Management
Key Personnel
Abroad
Michael J.Kimberley
Brian Collier
Chief Executive Officer (Acting) Managing Director

Group Lotus Plc.
Proton Cars (UK) Ltd.
John Startari
Managing Director
Proton Cars (Australia) Pty. Ltd.
Robert Braner
Moses Tan
Dwi Sasetia
Chief Executive Officer

Lotus Cars, USA
Managing Director
Proton Singapore Pte. Ltd.
Director
P.T. Proton Edar Indonesia
SPEED
The attitude of being able to do everything and
anything with purpose.
26
Chairmans
Statement

CHAIRMAN
27
ANNUAL REPORT 2006
On behalf of the Board of Directors, I am pleased to present the

Annual Report and Audited Financial Statements of the PROTON
Group and Company for the financial year ended 31 March 2006.
INDUSTRY OVERVIEW
In the financial period under review, the
Malaysian auto industry continued to
experience significant changes brought
upon by a more liberalised operating
environment and challenging market
conditions. The year was marked by
aggressive marketing efforts by almost
all automotive manufacturers and
distributors with the rapid introduction of
new vehicles and very competitive
promotional campaigns. Higher petrol
prices and increased cost of raw
materials resulting in lower profit
margins, also posed a challenge. As a
result of these extremely competitive
conditions and rising prices at the
pump, the domestic market saw a shift
in favour of cars with smaller engine
displacement and relatively cheaper
people-movers.
Total vehicle industry volume rose by
13% to 551,052 units in 2005, with total
sales for passenger cars rising by 5.3%
to 400,835 units. The industry was
relatively firm throughout 2005 particularly
for commercial vehicles, including MPV
and 4X4, which saw sales increasing by
40.3%. However, sales softened during
the first half of 2006. In the JanuaryJune
2006 period, the total industry volume

of vehicles sold was at 248,407 units
compared with 261,111 in the equivalent
period last year. Passenger cars, which
make up 74% of the industry, saw
184,725 units sold, against 199,554 units
previously.
This recent decline has been attributed
to a number of factors, including the
rise in fuel prices, tighter credit policies
leading to less loans being approved as
well as the fall in used car values which
have affected trade-ins. It is expected
that the market will continue to remain
soft until the end of 2006.
FINANCIAL PERFORMANCE
Given the industry scenarios described,
characterised by increased market
competition and a dearth of products
in the growing market segments,
PROTONs domestic sales volume for
the financial period under review
declined by 11.1% to 166,968 units in
comparison to 187,800 units in the
previous financial year. PROTON also
saw its domestic market share decline
to 40% in 2005 in comparison to the 44%
market share recorded in 2004.
The Malaysian auto

industry continued to
experience significant
changes brought upon
by a more liberalised
operating environment
and challenging market
conditions
Although exports to Australia and the

United Kingdom increased by 49.8%
and 16% respectively for the financial
year, total export sales for the period
declined 7% to 12,765 units.
With the reduction in sales, PROTONs
financial performance for the year in
review also recorded a decline. Group
revenue decreased by 8% to RM7,796.9
million compared to RM8,483.3 million in
the preceding financial year. Group
profit after tax however, decreased by
89% to RM46.7 million from RM442.4
million (adjusted) in the preceding year.
28
CHAIRMANS STATEMENT
DIVIDENDS
MV Augusta Motors SpA
In view of the performance of PROTON

for the year under review, the Board of
Directors recommends a final taxexempt dividend of 5 sen a share in
respect of the financial year ended 31
March 2006. This is subject to the
approval of the shareholders at the
forthcoming Annual General Meeting to
be held on 6 September 2006.
The Group-wide review of PROTONs

investments, was to determine their
continued relevance and the changes,
if any, that would be required to ensure
the investments provided positive
returns to the Group going forward.
As a result of this review, Proton Capital
Sdn. Bhd. (PCSB), a wholly-owned
subsidiary of PROTON, made a decision
to dispose of its entire interest in MV
Agusta Motors SpA (MVAM). The
Share Sale Agreement was signed on
23 December 2005 and completed on
1 March 2006.
If approved, the total dividends

payable for the financial year under
review would amount to 5 sen a share
or a total tax-exempt dividend of
RM27,460,650 as compared to 35 sen a
share or a total tax-exempt dividend of
RM192,224,550 in the previous financial
period.
CORPORATE DEVELOPMENTS DURING

THE PERIOD UNDER REVIEW
In last years Chairmans Statement, it
was clearly stated that PROTON must
be versatile and dynamic, to remain
relevant and competitive. Following on
from the management changes
announced in July 2005, the Group has
continued its comprehensive review to
ensure it remains relevant and is able to
compete more effectively and efficiently
going forward. From this review, a
number of corporate exercises had
been initiated and undertaken during
the year to realign the strategic
direction of the company. Some of
these are explained further in the
following paragraphs.
As already publicly explained, this

action was deemed necessary as there
is very little synergy to be gained by the
continued investment in MVAM.
Further more, continuing to be a
shareholder in this financially troubled
entity, which is in a net liability position,
would have put both PCSB and
PROTON at great financial and
reputational risk, were MVAM to fall into
bankruptcy. With the sale finalised,

PROTON can now harness its resources
and focus on strengthening its core
businesses of automotive design,
engineering, manufacturing and sales
for the benefit of all its stakeholders,
including its customers and shareholders.
It is unfortunate that there are a few who
continue to question the disposal. But let
us assure all stakeholders, PROTON has
done a thorough assessment of its
involvement in MVAM before its decision
on this matter. PROTON now considers
this matter closed.
Governance Structures
Since July 2005, PROTON initiated the
move to review its gover nance
structures to ascertain weaknesses in
the system and to determine possible
actions that could be taken to remedy
the situation. In addition, PROTON has
also completed a review of the
decision making process for investments
undertaken by PROTON in the past.
...there is very little synergy to be gained by the

continued investment in MVAM. Furthermore,
continuing to be a shareholder in this financially
troubled entity, which is in a net liability position,
would have put both PCSB and PROTON at great
financial and reputational risk...
29
ANNUAL REPORT 2006
...PROTON initiated the

move to review its
governance structures to
ascertain weaknesses in
the system...
Again this was to ascertain weaknesses

in the process leading to these
investment decisions and to identify
measures to strengthen the process.
As a result of the various reviews,
changes have been made to the
Management Committee and Board
structures of PROTON and its Group. In
addition, the decision-making structures
and limits of authorities, especially with
respect to investments, have also been
tightened to ensure better clarity to all
those concerned, as to actual authority
and essential information to be disclosed.
Apart from the re-organisation of
domestic structures, PROTON has also
undertaken changes to the governance
structures of its overseas investments.
This is with a view to improve and
strengthen their financial discipline.
Launching of new products
During the financial year, in June 2005,
PROTON launched the Savvy, a supermini, in both manual and automated
manual transmission (AMT) configurations.
The Savvy has the body strength of a

car twice its size and comes with safety
features surpassing those usually found
in cars of similar class. To top it off, with
the collaboration of Lotus Engineering,
the Savvys ride and handling is among
the best in its class.
In December 2005, PROTON officially
launched the Chancellor, a car
developed mainly as a chauffeur driven
saloon to further expand its product
line-up. This model was specifically
conceived to provide a higher level of
comfort, luxury and quality for its
passengers. This car is now expected to
be the official Government car for
senior members of Government, senior
civil servants and other senior corporate
executives.
More recently, on 16 June 2006,
PROTON launched the Satria Neo as a
successor to its popular Satria. This
new product is representative of
PROTONs joint-efforts with Lotus
Engineering. As a result, the Satria Neo
has the unique combination of good
styling, per for mance and safety
features unparalleled in many other
cars within the same segment.
Y.A.B. Dato Seri Abdullah Haji Ahmad Badawi,

Prime Minister of Malaysia, officially launched
the Satria Neo at PROTONs Centre of Excellence
Complex, Subang Jaya.
...the Satria Neo has the unique combination of

good styling, performance and safety features
unparalleled in many other cars within the
same segment...
30
CHAIRMANS STATEMENT
OTHER SIGNIFICANT DEVELOPMENTS

DURING THE PERIOD UNDER REVIEW
Apart from the various corporate
developments mentioned, there have
also been other external developments
during the financial year which have
had an impact on PROTONs
performance and its prospects going
forward.
National Automotive Policy
The financial year in review saw the
release of the National Automotive
Policy (NAP), which represents a
comprehensive framework of the
Gover nments
aspirations
and
expectations of the automotive sector.
The overall objective of the NAP is to
generate sustainable economic value
through maximising the long-ter m
contributions of the automotive sector
to the national economy, while
simultaneously benefiting the Malaysian
consumer. This thrust by Government for
the local industry to create economic
value will entail all segments of the
industry to work together. It is also
essential that the industry continues to
receive the full support of the
Government, in its efforts to strengthen
itself, in order to become fully
competitive globally.
The NAP and its specific policy
instruments will benefit the Malaysian
automotive industry over the longer
term. With this clearly outlined policy,
local manufacturers, assemblers and

other industry players, including potential
investors, will be able to better plan
their businesses and automotive-related
investments.
In the spirit of the NAP, PROTON on
24 March 2006, announced that the
prices of its cars would be reduced
across the board by between 2.5%
to 7%, representing a reduction
of between RM1,000 to RM3,000
depending on the model. This is in line
with the Governments call for local
manufacturers to produce cars which
are more affordable.
CONTINUING INDUSTRY CHALLENGES

In todays global automotive industry,
opportunities and risks are everywhere,
in emerging and mature markets alike.
But while possibilities are plentiful,
profitable growth is becoming more
difficult to achieve, as challenges
emerge from within the supply chain
right through to the retail environment.
Hence automotive players must
conduct their business amidst this new
environment which requires them to be

able to adapt to the challenges of
globalisation, new regulations, higher
energy prices, endure the rapid
emergence of increased competition
and changing customer needs.
Globalisation has spurred the automotive
industry to introduce better quality
products and concurrently strive for
lower manufacturing costs. It has forced
players to introduce the World Car
strategy a vehicle based on a single
platfor m that can be the base for
multiple products and sold in multiple
regions in the world, thus leveraging on
engineering, distribution, development
and marketing costs and achieve the
economies of scale in production.
New regulations that call for the
harmonisation of safety regulations and
emission levels with inter national
standards, are forcing automakers to
meet stringent new standards, produce
cleaner vehicles and meet customer
expectations for higher fuel economy,
safety and performance features.
...National Automotive Policy (NAP), which

represents a comprehensive framework of the
Governments aspirations and expectations of
the automotive sector...
31
ANNUAL REPORT 2006
demanding that their suppliers too,

adapt to these changes. For some time
now, major OEMs have put their Tier 1
suppliers under intense and relentless
cost pressures, forcing annual cost cuts.
As a result, Malaysian suppliers too are
now required to deliver further cost
reductions, by significantly cutting costs
and even consider to merge in order to
achieve greater economies of scale.
Higher energy prices have provided the

impetus to introduce better and more
fuel efficient and economical vehicles.
The push by well-informed consumers
and environmental regulations for
cleaner and more eco-friendly vehicles,
has seen auto players devoting more
resources towards development of
concept models for hybrid cars and
alternative fuel vehicles.
The changing business landscape
means that todays automotive players
have to compete with new products
and adapt to new regulations while
simultaneously
managing
costs,
capacity and inventory to remain
competitive and profitable. As
automakers look for greater economies
of scale by introducing common
platfor ms for multiple models and
multiple markets, they are also
The consumer revolution is bringing

about the emergence of a customer
base that has become more discerning,
well-informed and demanding. Todays
automakers must ultimately balance
the increasingly stringent regulations
with the needs of consumers who have
become more spoilt for choice. These
consumers look to brands they can
trust, brands that are reliable, and
brands that are in a position to offer
them the best value for money and
after sales support.
On the domestic front, as PROTON
moves forward into its new financial
year, intense competition in both the
domestic and export markets is
Globalisation has spurred the automotive industry

to introduce better quality products and
concurrently strive for lower manufacturing costs
32
CHAIRMANS STATEMENT
expected to continue to put pressure

on Group sales and profitability. Tighter
credit control by financial institutions
coupled with increasing interest rates
and the softening of the used car
market will continue to dampen new
car sales. Higher fuel prices and the
recent increase in electricity tariffs will
correspondingly increase the cost of
production.
going it alone. PROTON does not have

the luxury of time to develop the
necessary range of products from
scratch. Consequently, the previous
operating strategy to develop multiple
platforms in-house has to be revamped
to reflect current challenges. Thus the
pursuit of strategic alliances with
international partners for mutual benefit.
Alliance and Collaboration Strategy
The PROTON Group recognises the

immense challenges facing the industry
globally and at home and is undertaking
the necessary measures to adapt to this
changing landscape. The Group is
positioning itself to leverage upon its
strengths and every opportunity that
comes its way, to prepare it to rise
above the challenges it may encounter.
The Group seeks to assure its
stakeholders that it is financially sound
and has the resources, commitment
and resolve to transform itself for the
better and will spare no effort to
improve its long-term profitability.
STRATEGIC INITIATIVES GOING

FORWARD
In light of the increased competition
and liberalisation within the domestic
automotive industry, rapidly changing
trends and industry challenges, PROTON
has to re-strategise how it should
compete. It is clear that PROTON can
utilise its limited resources more efficiently
via strategic collaborations rather than
In the last one year, PROTON undertook

a review of its alliance and collaboration
strategy. Clearly, the proposed
collaboration in the past could not
meet the specific needs of the Group.
Going forward, PROTON will pursue a
collaborative strategy that is flexible,
balanced, mutually beneficial and
specifically tailored for the Group
requirements. It will focus on establishing
collaborations aimed at acquiring the
right technology, expertise and knowhow to become a competitive
car manufacturer globally. These
collaborations are also for the purpose
of
acquiring
products,
where
appropriate, to optimise capacity usage
and even for gaining market access.
PROTON could conceivably establish
alliances and collaborations with
different partners for different purposes.
It is in line with this new philosophy that
on 3 February 2006, PROTON entered
into a Memorandum of Understanding
with Japanese automaker, Mitsubishi
Motor Corporation (Mitsubishi). The

collaboration with Mitsubishi is part of
the Product Alliance strategy and will
enable PROTON to quickly develop
additional products and technical
expertise in specific areas.
In addition to the agreement with
Mitsubishi, PROTON had also entered
into a Memorandum of Understanding
with Chery Automobile Company
Limited (Chery) on 23 May 2006. The
business arrangement with Chery
provides the opportunity for both
companies to work together, amongst
others, to co-source materials and
components.
PROTON, via Lotus Engineering Malaysia,
had also entered into a Memorandum
of Understanding with Jinhua-Youngman
Automobile Limited (Jinhua-Youngman)
on 23 May 2006. The collaboration with
Jinhua-Youngman is particularly
significant from a business standpoint as
it provides PROTON with the opportunity
to improve its revenue generating
capabilities from the licensing of some
of the Groups technologies. More
importantly, this collaboration will also
assist in introducing PROTONs products
to China, one of the most vibrant
automotive markets in the world.
33
ANNUAL REPORT 2006
Under the management team led by

Managing Director, Syed Zainal Abidin,
the Group is actively looking to rebuild
and realign its inter nal resources,
particularly its managerial resources, to
be able to meet new priorities and new
challenges. While there is a need for
haste, at the same time more discipline
is warranted to ensure things are done
in an effective manner for long-term
profitability.
...going forward, PROTON will focus on

delivering to its customers, the right car
for the right market at the right time for
the right price
Apart
from
the
inter national
collaborations, PROTON had also on
2 February 2006, signed a Memorandum
of Understanding with Petroliam
Nasional Ber had (Petronas). This
collaboration is aimed at exploring the
possibility of further developing Petronas
large capacity engines for use in
PROTONs cars.
In all these relationships, PROTON will
seek to establish partnerships that are
mutually beneficial and which will
optimise stakeholder value.
Operations Strategy
Despite the shortcomings of the past
and the current challenging environment
going forward, the Group will endeavour
to improve and regain its domestic
market share, while continuing to
promote export growth. The Group will
also continue to intensify efforts to
further improve quality, enhance cost
competitiveness and introduce new
models to mitigate the impact of higher
costs and increasing competition.
Some of the clear lessons learnt in the

last year include the need for PROTON
to realign its resources to enable rapid
renewal of its core products, and the
need to be more economical in its
product development strategy. These
were not applied vigorously enough in
the past and led to PROTON losing its
dominant market share in the domestic
market. Moving forward, rapid renewal
of core products and a more realistic
platform strategy for optimising the use
of available platforms and components
bin, will form the cornerstones of the
Companys strategy to improve its costcompetitiveness.
Despite the focus on improving costcompetitiveness, PROTON will not
renege on the promise to deliver the
right car for the right market at the right
time for the right price. It will spare no
effort to deliver on this promise. Although
PROTON has had to re-evaluate its
product planning, I am confident that
34
CHAIRMANS STATEMENT
the company will be able to introduce

a new product range based on this
philosophy within the next 12 months.
This will then herald in the new product
cycle of PROTON, developed on the
promise of giving the customer what it
wants!
In addition, the Group is also planning

to rationalise and optimise its domestic
and international distribution/dealer
network, to make the network more
cost-effective, whilst at the same time
improve customer satisfaction at point
of sale as well as after-sales service.
The implementation of quality

programmes to enhance the quality of
PROTONs products, services and brand
image is an extremely important thrust
given the continued perception issues
afflicting the brand. PROTON has shown
that it is capable of producing good
quality products, as evident with the
recently launched Satria Neo. Going
forward, the company will continue to
stress on the need to over deliver on
quality to address the continuing
perception issues regarding its quality.
Both restructuring efforts are significant

undertakings and will likely take some
time to implement successfully. Once
fully implemented, PROTON has no
doubt that the subsidiaries and
distribution/dealer network will be on a
better financial footing and will be able
to serve its customers better.
Restructurings and recapitalisations

Apart from the above, it is also clear
that further restructuring of the Group is
needed to make it more efficient and
effective. The restructuring will also
include recapitalisation of key overseas
subsidiaries to ensure they remain
financially sound to better serve the
interest of their respective customers.
With this in mind, PROTON is currently
working towards recapitalising its
distributive arms in the United Kingdom
and Australia, as well as its subsidiary,
Lotus Group International Ltd.
The three strategic initiatives mentioned

are but a few of the initiatives currently
being worked on by PROTON. There are
naturally other initiatives that will be
implemented as part of the Groups
commitment to improve itself. The
industry landscape is such that PROTON
must continue to demonstrate great
commitment and self-reliance to
remain relevant to its stakeholders. The
Group is confident that these key thrusts
will take it back on the road to
profitability and long-term success.
FUTURE PROSPECTS
The various challenges and trends
affecting the global automotive
industry, have to a large extent
adversely affected the fortunes of
many automotive industry players.
There are not that many that have
emerged from the last few years
unscathed. Looking ahead, market
complexity and interdependence are
increasing. The road ahead for PROTON
will continue to be challenging given
the global trends affecting the
automotive sector and specific factors
affecting the company.
It is with this in mind that since mid2005, PROTON had been realigning its
various core strategies such as the
new product and export strategy.
However, due to the complexity of
several of these initiatives, some remain
in the process of implementation and
have yet to generate a positive effect
for the company.
Notwithstanding this fact, PROTON
remains positive that with the various
remedial steps being taken and the
commitment of its staff and employees,
as well as other stakeholders, it will be
able to surmount the current challenges
and emerge a stronger, leaner and
more disciplined company.
35
ANNUAL REPORT 2006
ACKNOWLEDGEMENTS
As PROTON puts another year behind it
and moves on to new challenges, we
want to appreciate the efforts of the
many people that make up the
PROTON family.
On behalf of the Board of Directors,
I wish to convey our sincere appreciation
to PROTONs staff and employees, at all
levels and across the various functions
and many continents. We are grateful
for all your sacrifices and contributions.
I trust that the staff and employees of
the PROTON Group will continue to
provide their support and hard work to
ensure PROTONs continued success,
as we forge ahead into the new
automotive landscape.
On behalf of PROTON Group, I would
also like to convey my appreciation to
Datuk Kisai Rahmat, who has resigned,
for his service and contribution to the
Group over the years.
We are also grateful to the support
shown by our partners PROTONs
vendors and suppliers as well as our
distribution and sales teams. Our utmost
appreciation to the vendors who have
stood by us through both the good and
lean times we acknowledge the
many sacrifices you have made. To our
distributors and dealers PROTONs
brand ambassadors we applaud your

efforts and contributions to PROTONs
success.
We take this opportunity to acknowledge
the contributions of Edaran Otomobil
Nasional Berhad (EON) and their dealers
under EDAM, and also our very own
PROTON Edar and their dealers grouped
under PEDA. We look forward to your
continued support and on our part will
do what is necessary to enhance and
strengthen our partnership for our
mutual benefits.
PROTON would not be where it is today
without the strong support of the
Rt.Hon. Prime Minister, Y.A.B. Dato Seri
Abdullah Haji Ahmad Badawi and the
Malaysian Gover nment through its
various Ministries and agencies. We are
committed to working closely with the
Government, in the spirit of Malaysia
Incorporated, for the betterment of the
national automotive industry and our
nation.
PROTON would also like to record its
appreciation to all its customers that
have continuously supported the
company and its products over the
years. We realise full well that a large
part of the companys success over the
years is due to the strong support
shown by customers. As such, PROTON
is committed to ensure that going

forward it will continuously improve the
quality of its products as well as the
level of after-sales service.
Last but not least, our sincere
appreciation to PROTONs shareholders
who have to a great extent, been
instrumental in nurturing its success from
a fledgling automotive manufacturer to
where it is today. Of course, there is still
a long way to go before PROTON can
truly call itself a successful global player.
In any event, we thank you for your
support and guidance which has
helped seen this Company through.
It is our sincere hope that all our key
stakeholders will continue to support
and work together with PROTON
with renewed commitment and
perseverance to support our products,
the brand and the Group, more so
amidst this challenging new landscape.
Thank you.

Chairman
36
AN INTERVIEW WITH THE MANAGING DIRECTOR

An Interview
w i t h
t h e
Managing
Director
THE WAY FORWARD

PROTONs new Managing Director, Syed Zainal Abidin bin Syed
Mohamed Tahir, shares his insights on the strategic initiatives being
undertaken to make PROTON more competitive and agile amidst
a rapidly changing automotive landscape.
What are
your impressions of PROTON since you
came onboard 1 January 2006?

The basics are very much in place at PROTON. The one thing is
that, somewhere along the line we may have lacked the
discipline to ensure that certain processes were followed
appropriately. We intend to put everything back into perspective
so that everyone is aligned. If we are strong in monitoring this, we
will achieve the results we want it will all come together. Whats
needed now is that the right people are in the right system
(business process) with a strong desire to set things right.

MANAGING DIRECTOR
37
ANNUAL REPORT 2006
Youve been tasked with moving PROTON forward
how will you achieve this?
After taking a long hard look internally and externally, weve decided to focus on seven critical areas that will put us back
on the road to being truly competitive. Our key thrusts will involve initiatives in the areas of:
1. Product Development We will focus on introducing the
2. Quality Enhancements and Improvements A number of
right car, for the right market, at the right price and at
quality programmes have been initiated and more will be
the right time. It is about producing vehicles that are not
introduced to enhance the quality of not only our
only exciting, of a diverse range and model, but also
products but also our services. These programmes aim to
those that are in line with what the market wants and of
paint a more positive perception of the brand among
better and higher quality. We will be sending at least 50
car buyers and existing PROTON car owners. To ensure
technical staff to dealers and service centres in various
this, the division that looks after product quality will no
parts of the country to get feedback. These staff will act
longer fall under the control of the factory but will report
as our ambassadors to gather feedback from customers
directly to me. Every morning, employees at our factories
for three months and if the outcome is positive we will
are reminded about the importance of quality for 60
implement it over a longer period. PROTON will use this
seconds before they begin work. There is always room for
information to build cars that the people want instead of
improvement because quality is not something that
what it feels they should drive. PROTON will also abandon
remains stagnant, but constantly evolves. PROTON must
its silo approach to building cars so that the good and
keep abreast of these developments and changes in the
the bad experiences can be shared across all platforms.
industry as well as customer needs and requirements.
PROTON will also develop new cars of its own and those
in collaboration with other car makers, to replace some
of PROTONs existing models which have been on the
road for too long. PROTON is tapping deeper synergies
with LOTUS and will work on producing more affordable
LOTUS cars using advanced PROTON vehicle platforms.
38

3. Cost Improvements Cost improvements or cost savings
5. Vendor Development As a national car company and
here do not necessarily translate into lower or cheaper
as the backbone of Malaysias automotive industry,
quality products and services. Instead, improvements
PROTON has both a national and social obligation to
here focus on the entire networks ability to operate in a
ensure that local vendors have the necessary expertise,
more productive and efficient manner thus further
resources, skills, international accreditation and competitive
reducing wastage or unnecessary costs. PROTON will
edge to take Malaysias component manufacturing
consolidate its parts-making manufacturers and suppliers,
industry several notches up. PROTON will implement a
focussing on 20 to 30 core vendors. The rest of the parts
first-tier concept for our vendors. The selection for Tier
and components suppliers should deal directly with these
One vendors will be very stringent. Tier One vendors must
key vendors. Currently we have 14 logistics providers and
prove that they posses the capability as well as astute
this is not very efficient. We may want to reduce this
financial and management skills to run their business well;
number to three or two, at best. This will translate into
besides this, they must uphold high quality standards and
better response and cost efficiencies. Improvements in
undertake research and development activities. PROTON
quality and factory efficiencies will further contribute to
will work closely with the vendors to ensure continuous
cost savings.
improvement in quality and efficiency is implemented.
4. Enhancements to Production and Efficiency This initiative
6. Enhancement of Sales, Distribution and After Sales Service
relates to how PROTON will identify and arrest weaknesses
PROTON will focus on consolidating and improving its
and inefficiencies across the board in its current
existing network and presenting itself to consumers in a
operations. PROTON will reduce the 1,700 third party
more effective manner. Delivery or cars will be done at
suppliers of raw materials and other non-automotive
our customers convenience even if they request the
components and will deal directly with the source. This
pick-up at 10 pm, we must be able to accommodate this
will minimise transactions that do not create any value for
request. PROTON will also now refocus on its export
PROTON. The production process will be reviewed to
strategy and will ensure a balance between volume and
eliminate any inefficiency in manpower and machinery.
profitability when pursuing its export model. Other

initiatives here will also include creating synergies in
logistics, distribution, spare-parts and training. PROTON is
no longer in the business of just manufacturing and selling
cars, but must, however, undertake measures to enhance
its pre, in and post-customer service efforts.
39
ANNUAL REPORT 2006
7. Human Capital Development Every employee, representative and even our business partners must not only understand
what is required of them and have the appropriate resources at hand, more importantly, they must be equipped with the
right knowledge and skills. Our people are our greatest asset. A renewed emphasis will be given to upgrading employees
and representatives skills-sets and technical knowledge, as well as inculcating a positive mindset among them to
embrace the changes going forward.
EXPECTED
DELIVERABLES
SATISFIED CUSTOMERS
WIDER MARKET
COMPETITIVE PRICING
POSITIVE PERCEPTION
MORE CUSTOMERS
SUSTAINABLE MARGIN
THE WAY FORWARD

7 CRITICAL AREAS OF FOCUS
PRODUCT
DEVELOPMENT
QUALITY
COST
CONTROL
MANUFACTURING
EFFICIENCY
ORGANISATION
VENDOR
DEVELOPMENT
STRUCTURE
SALES &
DISTRIBUTION
40

If we are to truly move forward, we must do all that is

necessary to ensure these seven key areas are effectively
turned around. They will be the foundation upon which we
build this company up again. To build a house you need a
strong foundation. If the sub-structure and the floor is weak,
your house will collapse and thats something we cant
How will PROTONs product development initiative

play out?
afford. The elements of the new road map for PROTON

underline this i.e. that we form and strengthen the foundation
first, so that when the future presents itself, we already have
a strong base and are prepared to respond accordingly.
We need to venture out to really understand what the

market wants. We will go out and study our customers,
dealers, etc. to understand who our target market is. This
information must be in place before we can even start
thinking of building a car.
What is your part in all this?

My job, and that of my team, is to harness and align every
member in the PROTON family to help realise our objectives.
Were not here merely to help set the direction, but, to
support the family, making sure that there is a conducive
working environment in order to achieve our objectives.
There is no individual in this world who does not want to
improve or to change, but in order to do so successfully,
there has to be the right working environment and chemistry.
PROTONs new management understands this, is focused on
We will focus on segments where we are very strong and will

expand our presence there by introducing a greater variety
of products. We will be open-minded and look at products
that are suitable across borders. Having said that, we have
to be really realistic about the markets we want to penetrate
into, taking into account our weaknesses and strengths. We
will study these markets by living in them, by understanding
the people, by analysing buying trends and by studying what
other companies are doing only then will we design a
product and position it to suit that market.
what it wants to do, and will effect the necessary positive

changes to move forward.
It truly is all about having the right product and coming out
with it at the right time and at the right price all these three
elements must work hand in hand for PROTON to be successful.
Only when we have a full suite of products in every segment
of the car market can you call us a true auto manufacturer.
41
ANNUAL REPORT 2006
What will
the quality improvement initiatives
What will you do to manage costs and enhance
entail?
production and efficiency as well as vendors efforts?
Everyone knows about the numerous quality complaints that
A reduction in costs does not necessarily translate into
plague our brand. We need to be realistic here and stop
reduced margins. We can in fact improve our margins. We
pointing fingers at any one group, as quality is the ownership
need to be clear on the areas that we need to be more
and responsibility of everyone. There needs to be a change of
efficient in. Some 80% of a car is built of add-on materials
attitude and mindset throughout the length and breadth of
so its not just the parts we have to look at, but the cost of
our organisation if we are to improve this is the very first step.
producing these parts and cost of assembling the car. An
I believe the journey of improvement has started at PROTON.
extensive vendor programme to improve the overall cost
Some improvements have started, others may take months to
index is essential here.
achieve. Having said this, it is imperative that we satisfy the

requirements of our customers quickly.
While we are on a level playing field with other automotive

players in terms of labour costs, raw material costs and the
Going forward, PROTON must and will offer better quality
type of facilities we utilise, we cannot say the same for our
products. We intend to put the best practices into every car
overheads. There are two things to consider here: Firstly, the
that rolls out of the factory. How do we instil this? It has to be
things we have put in place to enhance capacity have not
done via training, having managers and supervisors frequently
yet been amortised. It is only a matter of time before these
conducting checks, through visualisation, and through a strong
costs are recoverable. In this area, we will work to enhance
belief in quality. We must also set higher benchmarks and
our capacity so there is some incremental reduction.
everyone in our organisation must have strong quality

awareness not just speaking of it, but visualising it and
Secondly, inefficiencies undoubtedly exist. Many vendors do
practicing it in a consistent and not sporadic manner.
not rise to the level of quality we require, resulting in many

rejections all of which have a direct impact on cost. As a
A Quality Improvement Committee has been tasked with
manufacturer, PROTON views our vendors not just as our
coordinating and improving all quality programmes found to
business partners we need one another to survive. Going
be inconsistent in the past. Our processes and relationships
forward, we will allocate the resources and work hand-in-
with vendors are also being reviewed so that all parties
hand with our vendors to improve the situation by reducing
understand their respective roles in ensuring quality products.
these inefficiencies.
We also need to acquire more information on our customers

buying experiences, analyse this and take the proper steps to
resolve negative experiences. Quality must and will be
ingrained in everyone.
42

We also envisage the inefficiencies within our own factories

improving once quality improves and expect this to translate
into automatic cost savings. Our Cost Reduction Committee
will review the entire supply chain, from components and
production to sales and marketing. We will also review the
number of outlets we have against the volume we want to
push and will initiate a programme to consolidate our dealer
network system.
How will
you harness strategic partnerships and
alliances to move forward?

As a national car manufacturer, we have strong national
In engaging with others, we firstly need to ask ourselves what
objectives to fulfil; but at the same time, we must also be
are the products we want; then, who has them now; and
realistic. Can we do everything by ourselves? I think not.
who are the right people with the right product who can
Consider the MPV and SUV segment today its the fastest
assist us in getting into a market? Once we identify who has
growing market segment in Malaysia. However, PROTON is
these attractive products, its about courting them to see if
definitely not a player here and by the time we can produce
they are willing to work with us in a win-win situation.
a suitable product, Im afraid we would have already lost out

on the opportunity. The one option we have of entering this
In identifying partners, we will carefully look at three criteria.
segment is to engage strategic partnerships and alliances.

Here, a strategic alliance may not necessarily involve equity
Firstly, a partner must be willing to share with us the product
participation. There are many other forms of cooperation
that we are looking for.
including the sharing of resources. In todays auto industry, it

is common for two to three auto manufacturers to
Secondly, they must also be willing to share with us the
collaborate to save on cost, time and development
technology aimed at enhancing our know-how of building
expenditure and in the process obtain a larger volume.
cars and the knowledge of managing manufacturing

efficiency, quality, costs, etc. effectively.
43
ANNUAL REPORT 2006
Finally, they must also be able to present us with a market or

markets in which we have not been able to penetrate
because of the lack of a suitable product. At the same time,
we must be prepared to offer our partners any of our
products that may suit their needs, our own expertise and
know-how, as well as open up our markets.
Can you elaborate
on the key challenges
At the same time, we will also explore strategic collaborations
for PROTON today?
and alliances, which will form the base for PROTONs future
Today, we acknowledge that PROTON needs to regain its sales
products, improved quality and operational efficiency. We
and market share as the leading car brand in the domestic
will also implement a more structured human capital
market, mainly through the consolidated effort on sales
development programme with an emphasis on technical
operations and quality improvement. The export revenue and
training and exposure to the worlds best practices, and,
brand presence abroad must also be increased. On top of it
conduct this on an ongoing basis. In recognition of the fact
all, customer satisfaction is an all-important element where
that our people are the companys key asset, we will deploy
various initiatives are being or will be rolled out to make the
experienced and skilled personnel to key support functions to
experience of owning a PROTON, a satisfying one.
strengthen our competitive edge in our markets.
Additionally, improvements on manufacturing operations,
Its going to be a tough journey, but it is one that we must
production systems and purchasing processes; as well as the
take and will take. We trust that all the parties that have
consolidation of vendors, shall deliver a better financial
supported us in the past, plus the new ones that want to
position for PROTON.
come along on this adventure, will remain steadfastly with us

till we reach the finishing line.
FOCUS
Our vehicles move beyond fulfilling a need
rather we share an experience
46
OPERATIONS REVIEW
ENGINEERING
SERVICES
47
ANNUAL REPORT 2006
The PROTON Groups engineering capabilities have grown by leaps and bounds
over the years and today encompass a wide spectrum of automotive research and
developmental (R&D) activities. Today, PROTON is able to develop new models from
scratch with most activities done in-house at the Shah Alam R&D facility.
PROTONs Engineering and R&D division possesses its own
PROTON also boasts extended engineering capabilities as a
New Product Introduction (NPI) process which enables us to
result of the resources of the other subsidiaries within the
undertake all stages of the NPI process from concept
Group, namely Lotus Group International Limited which is
initiation, vehicle engineering, and powertrain engineering to
renowned for its automotive engineering services, and Miyazu
prototyping, homologation, testing and production
(Malaysia) Sdn. Bhd., for its die and mould-making capability.
preparation. This in-house capability within PROTON makes
PROTON has also been able to leverage on Lotuss global
Malaysia one of thirteen countries with the capability to
network to gain speedy entry into foreign markets where we
develop a model from the ground-up.
offer our own products and engineering services.
48
OPERATIONS REVIEW
Research &
Development
Our efforts to establish our very own R&D facility, reflect
PROTONs commitment to meeting the objectives of
The new enhancements to PROTONs R&D facilities

include:
Malaysias Second Industrial Master Plan (IMP 2).
Upgraded design facilities boasting the latest

CATIA version 5 which provides for more versatile
and compatible operating system support and
networkability.
Upgraded laboratory equipment for chassis

engineering and vehicle testing to enhance data
range and accuracy during vehicle development
and testing.
A Virtual Reality Facility for digital mock-ups of

vehicles which allows for faster assessment of design
concepts and significant savings and flexibility.
Our R&D teams are continuously working to enhance

our capabilities, retain our position at the forefront of
technological development and enhance our
competitive edge.
With the commencement of Malaysias Third Industrial
Master Plan (IMP 3), which aims to develop human
capital and support the knowledge growth of local
talent, PROTON has initiated efforts to transfer
technology and accelerate our learning curve. This has
resulted in extensive R&D facilities coming into being,
which in turn translates into a renewed focus on the
quality of the end product and the services that
PROTON offers.
49
ANNUAL REPORT 2006
Product
Development
PROTON has received recognition from the automotive
industry for our recent product development activities
which have materialised in the product line-up that we
currently offer the local and international markets.
The CamPro, Malaysias first commercialised engine,

has proven itself in the market since its integration
into the Gen.2 model. The engines cost advantages
and fuel efficiency had provided PROTON with a
SAVVY
The PROTON Savvy creates a new standard for the
compact car segment by raising the bar in the
area of safety, ride and handling and components
reliability. PROTON has also introduced the muchawaited Automated Manual Transmission (AMT)
variant for the Savvy incorporating the essence of
both manual and automatic shifting for product
versatility.
WAJA CAMPRO
definite market advantage. The integration of the

CamPro into the Waja platform has also enabled
PROTON to extend this advantage on a larger scale
while revitalising the Waja model.
SATRIA NEO
The much-awaited Satria Neo met the Start of
Production (SOP) date by utilising PROTONs Tanjung
Malim manufacturing facility. The two-door hatchback
CHANCELLOR
powered by PROTONs very own CamPro engine is
PROTONs new flagship vehicle, the Chancellor,

offers a choice of luxury with its four-seat stretch
and chauffeur-driven focus. Fitted with plush leather
seats and the necessary elements that provide for
a refined ride, the Chancellor also boasts superb incar multimedia components such as a DVD player
and LCD display which are both standard fittings.
The Chancellor is also offered in a five-seat longwheel sedan option.
designed to provide exceptional ride and handling

as well as occupant safety and is compliant with
EURO 4 emission standards. The Satria Neo, was
launched by the Prime Minister on 16 June 2006.
50
OPERATIONS REVIEW
Moving
Forward
In the near future, PROTON will endeavour to create excitement in our

product line-up by releasing enhancements and cosmetic changes to existing
platforms such as the Waja, Gen.2 and Savvy appealing new colour shades
and styling cues will be standard features. New models are also planned to
help us penetrate the MPV and luxury sedan segments for both the domestic
and export markets.
Technology
Development
PROTON will continue to keep abreast of technological
COMPOSITE MATERIAL RESEARCH
advancements in the automotive industry by undertaking
The Lotus Europa S which made its debut along with
projects that aim to enhance our technical know-how
the APX at the Geneva Motorshow signifies the
and capabilities in high-technology areas as well as
Groups intent to enhance our knowledge and
provide potential long-term benefits. Our intent is that
capabilities in the area of composite materials. The
every effort we undertake will translate into tangible end
end product saw a low volume production line
products and that we will be able to capitalise on the
successfully set up at the Shah Alam manufacturing
knowledge gained from these activities.
facility. The Europa project had also established an

industrial partnership between PROTON and
ALUMINIUM PERFORMANCE CROSSOVER (APX)
Composite Technology Research Malaysia (CTRM)
PROTON Group had successfully developed a
who are known for their support activities on the
concept prototype that utilises the Versatile Vehicle
Airbus A380.
Architecture (VVA) that was developed through Lotus

Engineering. The APX was built with an aluminium-
PARALLEL HYBRID ELECTRIC VEHICLE (PHEV)
based VVA powered by a V6 supercharged engine
PROTON had embarked on a project with the Lotus
and is a seven-seat crossover vehicle. The APX made
Group to develop a hybrid vehicle capable of
its debut in the Geneva Motorshow in early 2006 and
running on either electricity or gasoline. This
was also PROTONs highlight for the KL International
programme aims to elevate our technology to a
Motorshow 2006.
level that is on par with our global competitors by

creating an alternative vehicle for the future which
provides customers with better fuel economy,
reduced emissions and uncompromising performance.
51
ANNUAL REPORT 2006
Continuous
Initiatives
PROTON continuously innovates and improves to
PROTONs pursuit of engineering excellence also aims
provide our customers better quality products.
to elevate the standards of Malaysias automotive
Testing activities and initiatives continue past the
industry and is exemplified though our commitment in
commencement of production and model launches to
providing Engineering and R&D services to facilitate the
ensure industry standards are dynamically surpassed.
supply chain and other local car manufacturers.
This is reflective of the PROTON Brand Essence of
The services we provide span the entire range of
striving for customer satisfaction.
facilities, from clay modelling, prototyping and vehicle

engineering to homologation and testing.
52
OPERATIONS REVIEW
MANUFACTURING
53
ANNUAL REPORT 2006
PROTONs manufacturing capacity and capability comprises two main plants in

Malaysia, namely Perusahaan Otomobil Nasional Sdn. Bhd. in Selangor and Proton
Tanjung Malim Sdn. Bhd. in Perak, as well as two overseas subsidiary plants P.T. Proton
Tracoma Motors in Indonesia and Lotus Cars in the United Kingdom. Together, these
plants possess a combined installed manufacturing capacity of 400,000 units annually.
MALAYSIAN FACILITIES
The manufacturing facilities in Malaysia are the most integrated within the region. With casting and foundry facilities as well
as machining, stamping, assembly, painting and complete vehicle testing facilities, PROTON has moved beyond being a mere
assembler to becoming a full-fledged auto manufacturer.
54
OPERATIONS REVIEW
Shah Alam
The Shah Alam plant, with its combined capacity of 200,000
units annually, comprises the main factory which produces
the Saga, Wira, Perdana and Arena models, and the medium
volume factory which produces the Waja and Chancellor
models for the domestic and export markets.
PROTONs casting, engine and transmission factories are also
located in Shah Alam and these facilities are capable of
producing 180,000 units of CamPro engines per year for both
the Shah Alam and Tanjong Malim plants. The Shah Alam plant
also supplies CKD (Completely Knocked-Down) parts and
components to Zagros-Khodro in Iran to assemble and market
PROTON vehicles in the Middle East region. In the period under
review, 1,740 vehicle sets were delivered for assembly.
In the period under review, various initiatives focusing on
improving the quality of products, operational efficiency and
new product variants and introductions, were implemented.
Among the new products introduced were the Saga Iswara
Special Edition and a low end variant as well as the Perdana
V6 enhancement, the Waja enhancement with CamPro
Engine, and the Chancellor.
Over the course of the year, the built-up quality (measured in
Defect per Unit or DPU) at both the main and medium
volume factories improved by almost 20%, while the cost per
unit was reduced by 1%.
55
ANNUAL REPORT 2006
Ta n j u n g M a l i m
PROTONs ultra-modern manufacturing and assembly
In the period under review, several initiatives aimed at
plant in Tanjung Malim has an annual installed capacity
improving the quality of products and operational
of 150,000 units and is capable of producing three
efficiency as well as new products variant and
different platforms and multiple variants. The plant
introductions were implemented.
currently produces the Gen.2 and Savvy models two

new platforms and products from the PROTON stable.
The CamPro facilities in the engine factory, comprising

the main machining facilities for the CamPro cylinder
The plant complex consists of engine, stamping, body
head, camshaft, crankshaft and cylinder block, were
assembly, painting and final assembly facilities, inclusive
successfully commissioned. New product introductions
of end-of-line vehicle testing equipment that is fully
included the Gen.2 1.3 variant and Savvy AMT both for
integrated into PROTONs Automated-Assembly Line
the domestic and the RHD export markets. Concurrently,
Controller (PALC) application.
preparations for the Gen.2 and Savvy LHD-export

variants, including a new Satria model, are being
While the Tanjung Malim Plant has the potential of
undertaken and these models should be ready in the
assembling up to one million vehicles, to date, only 240
next financial year.
acres of the total 1,280 acres have been developed.

A community of suppliers has developed in the vicinity
The financial year saw the Tanjung Malim plants built-
of the plant complex ensuring effective and efficient
up quality (measured in DPU) improving by almost 25%,
logistics network. To date, more than 10 major modules
while its cost per unit was reduced by 1%.
and system suppliers are operating in the PROTON City

Vendor Park.
56
OPERATIONS REVIEW
OVERSEAS FACILITIES
Chikarang, Indonesia
The manufacturing plant in Indonesia is held under a
The assembly equipment and facilities were completed
joint venture between Perusahaan Otomobil Nasional
and fully-commissioned in the third quarter of 2005.
Sdn. Bhd. (which owns 51% equity) and Tracoma Holdings
The plant is all set to assemble vehicles in the coming
Berhad (which owns 49% equity). The joint venture
financial period and has an installed capacity of 40,000
company, P.T. Proton Tracoma Motors, is involved
units per year.
mainly in the manufacture of PROTONs products not

only for Indonesia but also for the ASEAN markets.
57
ANNUAL REPORT 2006
Norwich, United Kingdom

PROTONs manufacturing plant in the United Kingdom is
mainly involved in the manufacture and distribution of sports
cars. A fully-owned subsidiary of PROTON, Lotus Cars has an
annual capacity of 10,000 units per year. The main products
produced by Lotus Cars are the Exige and Elise models
mainly for the European and US markets.
In the period under review, efforts focused on new product
development including the development of the Europa
among others. An Esprit replacement is also being intensely
developed with its introduction targeted within the next two
years. With these imminent new products, efforts and
activities will focus on marketing and sales in the United
States in particular, as this is a major market of the future.
58
OPERATIONS REVIEW
MARKETING
Crystal Showroom, PROTONs Centre of Excellence Complex, Subang Jaya.
59
ANNUAL REPORT 2006
Domestic
Markets
In the year 2005, the Malaysian automotive industry
The PROTON brand recorded another milestone with
registered its best performance to date chalking up
the introduction of the totally new PROTON Savvy in
motor vehicle sales of 551,042 units, up 13% from
June 2005. The Wira, Gen.2 and Saga models were also
487,605 units in 2004. Sales in the passenger car
given fresh touches in order to compete with newer
segment grew by 5.3% to 400,835 units from 380,568
products. The Waja, meanwhile, was repackaged with
units in the previous year. It was the best year ever for
PROTONs own Campro engine in January 2006.
the industry despite the uncertainties of the muchanticipated National Automotive Policy (NAP). The
On the operational front, Proton Edar Sdn. Bhd.
industrys record sales in 2005 were mainly attributed to
continued to focus on its sales and service network, our
the strong sales of many new models introduced at
key focus and advantage over other brands, to serve
competitive prices, in addition to low interest rates and
our customers better. The year under review saw our
longer repayment periods.
sales outlets increasing to 234 outlets from 224 outlets

the year before, whereas the service network grew to
168 outlets from 150 outlets in the preceding year.
60
OPERATIONS REVIEW
Another key highlight was the opening up of the
Various initiatives were implemented to boost sales as
Crystal Showroom within the Centre of Excellence
well as to bring in service revenue. The PROTON 20-Year
(COE) Complex in Subang Jaya in October 2005.
Campaign (P20Y) carried out from September to
This world-class showroom is fully equipped with state-
November 2005 managed to boost sales by 70% to hit
of-the-art facilities and a dedicated Customer Delivery
22,917 units in October 2005, the highest in PROTONs
Centre (CDC) which will deliver new cars directly to the
history to date. The Customer Management Center
buyers within the Klang Valley.
(CMC) was strengthened and tasked with monitoring

the overall Customer Satisfaction Index (CSI). This will
ensure that the products and services we offer are on
par or better than our competitors.
61
ANNUAL REPORT 2006
Export
Markets
The export market for the financial year under review
review. The response to the Savvy has been very
experienced a reduction in volume shipped compared
encouraging, with the Savvy now being the best selling
to the previous financial year, from 17,243 units in
model for PROTON in South Africa. Left-Hand-Drive
FY2005 to 12,526 units in FY2006. While actual orders
versions of the Savvy are expected to be introduced
by the various overseas markets were far in excess of
from September 2006 onwards. This is expected to
the number shipped, the difference was due to
further increase the popularity of the Savvy and
constraints in the supply chain. There is no doubt that
contribute towards our overall export numbers.
demand for PROTON cars in the overseas markets

exists. As such, looking forward into FY2007, we
New markets are also continually being opened up.
anticipate a significant improvement in the number of
Saudi Arabia and Pakistan are the latest to be
PROTON cars sold overseas.
penetrated by PROTON, and should start showing results

within the current financial year. Closer to home,
The many markets that were opened in the preceding
following the announcement of the NAP, countries within
financial year are now beginning to show encouraging
ASEAN are evolving into attractive markets. The duty
signs of ramping-up volume. South Africa, which started
structures within these ASEAN countries are expected to
distributing PROTON cars in August 2005, is fast growing
be rationalised within the AFTA guidelines, thus making
to become PROTONs third largest overseas market
PROTONs entry into these markets a viable proposition.
after the United Kingdom and Australia. The Gen.2,

inclusive of the Left-Hand-Drive version, was well
In the longer term, PROTONs exports are expected to
received upon its introduction into new countries in the
contribute significantly to the volume sold. Based on the
overseas market.
roadmap of new markets to be opened, coupled with

the expected introduction of new models in PROTONs
The Savvy was also introduced into the Right-Hand-
product line-up, the export market will continue to be
Drive overseas markets including the United Kingdom,
an exciting area of expansion, accelerating forward
Australia, Singapore and South Africa in the year under
PROTONs position as a global automotive player.
62
OPERATIONS REVIEW
PROPERTIES
Rear view of PROTONs Manufacturing Plant at Tanjung Malim, Perak.
63
ANNUAL REPORT 2006
PROTON is involved in the property sector through its equity ownership in Proton
Hartanah Sdn. Bhd., which in turn wholly owns Proton Properties Sdn. Bhd. and 40%
equity in Proton City Development Corporation Sdn. Bhd.
PROTON manages 1,280 acres encompassing its plant in
The Proton plant contributes towards the continuing
Tanjung Malim and has access to a further 2,720 acres via its
development of the Tanjung Malim township and the
investment in Proton City Development Corporation Sdn. Bhd.
surrounding neighbourhood. As a caring employer, PROTON
The latter project comprises an integrated development for
offers its staff the opportunity to own low and medium-cost
residential, commercial, educational and vendor parks as
apartments in the vicinity of their workplace.
well as recreational facilities.
64
OPERATIONS REVIEW
FINANCIAL
SERVICES
PROTONs Centre of Excellence view at dawn.
65
ANNUAL REPORT 2006
PROTON has entered into relationships with reputable financial institutions to provide
convenient services that include financing package for customers and operational
facilities for authorised dealers.
PROTON Commerce Sdn. Bhd. is a venture between

Proton Edar Sdn. Bhd. and Bumiputra Commerce Bank
Berhad;
Proton Finance Ltd. is a venture between Proton Cars UK

Ltd. and Llyods TSB Bank;
Lotus Finance Ltd., is a venture between Group Lotus Plc.

and Chartered Trust, provides financial services solely for
Lotus cars.
Proton Commerces e-Finance system enables customers to

apply for hire purchase facilities via the Internet. By simply
logging onto www.proton-edar.com.my or www.bcb.com.my
from any Internet terminal, customers are immediately
advised as to whether their applications have been rejected
or conditionally approved, subject to the submission of
relevant supporting documents.
66
OPERATIONS REVIEW
HUMAN
CAPITAL DEVELOPMENT
67
ANNUAL REPORT 2006
PROTONs global workforce today comprises 11,000 employees, many of whom are
long-service employees that began their careers at PROTON and have grown with
the Company. PROTON has also brought in many new employees hired from top
multinational companies.
This infusion of new blood aims to balance the new ideas
and skills against the rich knowledge and experience of our
long-standing employees. Recognising that our success
depends very much on our people, PROTON has made
human capital development one of our foremost priorities.
The Company provides a conducive learning environment
where employees are encouraged to continually ascend an
upward learning curve.
PROTONs top-line organisation has been restructured to
ensure that it supports the companys current and future
business needs. Structured training and development
programmes focusing on leadership and managerial
competencies as well as technical functional competencies
have been developed. Some of these initiatives have
involved joint programmes with the University of Malaya since
March 2003 i.e. the Executive Development Programme
(EDP) and Managerial Development Programme (MDP).
December 2005 saw our third EDP intake kicking off with 150
executives and the graduates are expected to receive their
certificates in December 2006. The first module of the MDP
kicked off in April 2004 with a total of 53 managerial heads
with the graduates receiving their certificates in December
2005. To fulfil the Companys future human capital needs, we
have also identified top-notch students from universities and
provided them scholarships through Yayasan PROTON.
At PROTON, we believe in providing our employees a

favourable platform to contribute creative and innovative
ideas to Management. The Innovative and Creative Circles
(ICC) initiative is a channel that enables employees to
showcase their creativity and innovation in solving problems
at the workplace and in creating accessories, tools or
administrative functions that will help boost the Companys
productivity. The ICC is also a platform that lends to our
workforce sharpening its customer service and leadership
skills. By empowering our employees, we aim to inculcate a
greater sense of involvement and ownership among them.
The ICC concept and methodology was first implemented at
the main factory in Shah Alam and now covers the factory
in Tanjung Malim as well as the value chain of PROTON
suppliers and dealers.
An ICC Secretariat has also been set up to further develop
and promote the ICC concept and methodology among
PROTON employees. The Secretariat and ICC facilitators have
been tasked with visiting each registered ICC project at least
twice during the tenure of a project as well as with educating
its members and helping them achieve their project goals.
Going forward, PROTON will continue to focus on performance
measurements, using key per formance indicators (KPIs)
directly linked to reward and recognition. Human Capital
Development will continue to play an important role in
ensuring PROTON measures up as a competitive player
amidst the changing automotive landscape.
68
OPERATIONS REVIEW
CORPORATE
SOCIAL RESPONSIBILITY
Dato Mohammed Azlan Hashim, Chairman of PROTON, handing over the contribution for earthquake relief aid to
Rt.Hon. Dr. Muhammad Jusuf Kala, Vice President of the Republic of Indonesia.
69
ANNUAL REPORT 2006
PROTON is committed to serving the various communities in which we operate. Over

the course of the year under review, PROTON continues to lend support to various
organisations and worthy causes. As part of our collaborative efforts with the
Government to highlight the nations automotive capabilities and the PROTON brand,
we extended our support as the Official Car sponsor to international events such as
the 39th ASEAN Ministerial Meeting, the 11th ASEAN Summit Kuala Lumpur, the First
Malaysian Womens Games, the Perdana Global Peace Forum and COMINAC.
PROTON also undertook several educational initiatives
including those related to the automotive industry and key
support services. These included supporting a special
educational scheme for unemployed graduates and one for
high-flyers in the SPM examinations; collaborating with
institutes of higher-learning; contributing cash or donations in
kind or sponsoring cars for activities initiated by educationalrelated organisations; and providing an educational relief
fund for underprivileged groups.
& Time Attack and the A1 GP Malaysia. We also helped

promote Malaysia among international motorsport audiences
by supporting Malaysias A1 Team. Other sports initiatives
included supporting the Womens Sports & Fitness Foundation
of Malaysia in their national fitness programme as well as
sponsoring the Tour de Langkawi.
In support of road safety efforts, PROTON supported a

defensive driving course for car owners and supported a
defensive motorcycle riding programme for employees and
the public in conjunction with Majlis Keselamatan Jalan Raya.
We also supported the KLIMS 2006 Road Safety Campaign.
Funds were also channelled towards various registered

charities and worthy causes including the Yayasan Harapan
Kanak-Kanak Malaysias Gift of Hope Night 06; Pusat Harian
Kanak-kanak Spastik Bandar Ipoh; Majlis Amal Pesara for a
haemodialysis machine; as well as the Pertubuhan Kebajikan
Anak-anak Yatim & Miskin for its charity fund. We also lent our
support to other institutions such as the Yayasan Sultan Idris
Shah and Badan Amal Darling.
As part of our commitment to the development of national

sports, in particular key sports that would enhance Malaysias
and PROTONs image in the global sports arena, we
supported the development of Malaysian Badminton through
the Program Penajaan Sukan (PROTON-BAM) and local
motorsports through several motorsports events. Our
motorsports initiatives included such R3 (RaceRallyResearch)
programmes as the Merdeka Millennium Endurance (MME)
Race, the Malaysian Rally Championship, the Street Shoot Out
As part of PROTONs natural disaster fund relief efforts, we

provided assistance to the community in Shah Alam affected
by floods in early 2006. In addition, fishing boats pledged by
PROTON in aid of the tsunami victims in Kedah were recently
delivered to fishermen who were affected by the tragedy.
We have allocated funds for disbursement to affected
communities for future relief efforts as and when such help is
required. PROTON remains committed to raising the standards
of and caring for the communities we operate in.
70
OPERATIONS REVIEW
ENVIRONMENT,
HEALTH AND SAFETY
71
ANNUAL REPORT 2006
As a responsible corporate citizen, PROTON has taken steps to ensure that we

practice sustainable development meeting present needs without compromising
future prospects as part of our overall working environment, from the manufacturing
process and the cars we make, to factory safety and the conditions under which
our employees work.
PROTON provides the resources for as well as promotes good

environmental protection, health and safety (EHS) practices
to ensure the safety and health of our employees and the
protection of our environment. We actively instil an awareness
of and look after the safety and health needs of our
employees, our business associates and the general public.
PROTON believes that technological advancements and
national development at the cost of the environment or
civilised society will not help us achieve the Malaysia that we
aspire to create. We stand fir m in the belief that all
development must be sustainable to be viable.
In line with this philosophy, we have integrated our objective
into every component of PROTON. Although it is an added
cost of millions of ringgit a year to us, PROTON believes that
being an environmental-friendly corporate citizen is an integral
part of our responsibility as the national car manufacturer.
PROTONs car manufacturing processes have been designed
to be environmentally-friendly and to comply with strict
internationally-accepted standards and legal compliance.
For example, waste water resulting from the manufacturing
process and other sources are treated at PROTONs own
waste water treatment facility in compliance with the
Department of Environments regulations before being
discharged into the river as clean water.
Recycling is also encouraged and by-products such as paper

and boxes are sent to vendors for recycling. The increased
use of metal and reusable plastic boxes instead of wooden
boxes, is a conscious effort on our part to reduce the need
for logging trees.
PROTON is also committed to phasing-out the consumption
of Ozone Depleting Substances in the manufacturing process
and components we use by using alternative materials and
processes. PROTON also encourages our component
suppliers to phase-out Ozone Depleting Substances in their
industrial and manufacturing processes.
PROTON, as a responsible corporate organisation, carries out
various safety campaigns and training, including training on
hearing conservation, defensive driving and riding and also
fire safety for all its employees.
PROTON also provides an Ergonomics programme where
studies are being made to reduce work related injuries,
occupational diseases, improve safety levels in the factory,
work quality and productivity.
As we move ahead, PROTON will endeavour to uphold good
EHS practices in all our dealings with all our target audiences
and in all our activities.
CARING
Taking care of our customer needs dictate
how we design the environment around us.
74
STATEMENT ON CORPORATE GOVERNANCE

Statement on
Corporate
Governance
The Board is committed to applying the recommendations of the Malaysian Code on

Corporate Governance to ensure that good corporate governance is practiced throughout
the Group to effectively discharge its responsibilities to protect and enhance shareholder
value. Set out below is a statement on how the Group has applied the principles of the
Malaysian Code on Corporate Governance.
BOARD OF DIRECTORS
The Board is committed to establishing and enhancing shareholder value
in the long-term. To this end, the Board is responsible for the overall Group
strategy, acquisition and divestment policies, capital expenditures, annual
budget, review of financial and operational performance, and internal
controls and risk management processes.
The Managing Director (MD) on the other hand is responsible for the
implementation of broad policies approved by the Board and reports and
discusses material matters including regulatory developments and strategic
projects to the Board. There is therefore a natural separation of management
and governance leading to a balance of power and authority.
75
ANNUAL REPORT 2006
In the financial year ended 31 March 2006, the Board of PROTON Holdings Berhad (PHB) met twenty one (21) times. The
following are the details of attendance of the Directors:
No.
Name of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1.
Dato Mohammed Azlan

bin Hashim Chairman
Non-Independent
Non-Executive Chairman
17 Dec 2004
20/21
2.
Syed Zainal Abidin bin Syed

Mohamed Tahir
Managing Director
1 Jan 2006
4/4
3.

Daud bin Abu Bakar
Independent
Non-Executive Director
12 Apr 2004
20/21
4.
Independent
12 Apr 2004
15/21
5.
Non-Independent
12 Apr 2004
19/21
6.
Non-Independent
17 Dec 2004
21/21
7.
Independent
10 Mar 2005
21/21
8.
Non-Independent
26 Oct 2005
6/8
9.
Dato Haji Abd. Rahim

bin Haji Abdul
Non-Independent
17 Dec 2004
2 Sep 2005
6/9
10.
Tengku Tan Sri Dr. Mahaleel

bin Tengku Ariff
Chief Executive Officer
12 Apr 2004
30 Sep 2005
6/11
11.
Executive Director
I Jan 2006
31 Jul 2006
3/4
The profiles of the directors are set out on pages 14 to 21 of the Annual Report.
Board meetings for a particular year are scheduled in advance before the start of each calendar year. Additional meetings
are convened whenever necessary.
76

BOARD COMPOSITION AND BALANCE

The Board consists of eight members, with the Chairman who
is a Non-Independent Non-Executive Director, three NonIndependent Non-Executive Directors, three Independent
Non-Executive Directors and one Executive Director.
POLICY ON DIRECTOR APPOINTMENTS

The Board Nomination Committee reviews all new appointments
by taking into consideration the skill sets required by the
Company and the Group. The Board has formulated guiding
principles for appointment of directors for Proton Holdings
Berhad, its subsidiary, associate and investee companies.
As in the previous year, Abdul Jabbar bin Abdul Majid is the

Companys Senior Independent Director to whom concerns
pertaining to the Group may be conveyed by shareholders
and the public.
INDEPENDENCE AND CONFLICT

OF INTEREST
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 Committee annually reviews the mix
of skills and experience of the Directors to ensure that the
Board has the right balance and effectiveness.
The Directors are required to make written declarations and

it is their responsibility to declare whether they have a
RE-ELECTION OF DIRECTORS
potential or actual conflict of interest in any transaction.

Where issues involve conflict of interest, the interested
Directors abstain from discussing or voting on the matter.
SUPPLY OF INFORMATION
In general, 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.
Senior management as well as professionals and external
advisors are, from time to time invited to attend board
meetings.
All Directors including the Executive Director are subject to

retirement by rotation at least once in every three years and
are eligible for re-election. In accordance with Article 104 of
the Companys Articles of Association, 1/3 of the Directors
shall retire from office at each Annual General Meeting.
The following Directors shall retire by rotation at the forthcoming
Annual General Meeting of PROTON Holdings Berhad and
have offered themselves for re-election:
1.
2.
Dato Mohammed Azlan bin Hashim; and

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.
The Board has 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.
The following Directors shall retire pursuant to the said Article

and have offered themselves for re-election.
1.
2.

77
ANNUAL REPORT 2006
BOARD COMMITTEES
The Board has delegated specific responsibilities to five sub-committees, namely the Board Audit Committee, Board
Nomination Committee, Board Remuneration Committee, Board Risk Management Committee and Board Executive
Committee. The said 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.
(I) BOARD AUDIT COMMITTEE

The composition of the Board Audit Committee and the respective attendance record of meetings of its members for the
financial year ended 31 March 2006 are as follows:
No.
Name of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1.

Chairman
Chairman
Independent
10 Mar 2005
16/16
2.
Member
Non-Independent
10 Mar 2005
15/16
3.
Member
Independent
10 Mar 2005
16/16
During the financial year, the Board Audit Committee of PROTON Holdings Berhad undertook the following activities:
(a)
Assisted the Board in discharging its statutory duties and responsibilities relating to accounting and reporting practices of
the Company and the Group in accordance with Generally Accepted Accounting Practices.
(b)
Reviewed the external audit terms of engagement, the audit strategy, the proposed audit fee and the achievement of
the agreed upon reporting timeframes for the audit of the financial statements.
(c)
Reviewed the external audit reports and discussed any problems and reservations arising thereon.
(d)
Reviewed the internal audit plan, methodology, functions and resources.
(e)
Took cognisance of findings on internal audit reports and management response.
The Board Audit Committee Terms of Reference is set out below.
78

COMPOSITION
The Committee shall be appointed from amongst the Board

and shall:(i)
comprise of no fewer than three members;
(ii)
a majority of the members must be independent

directors; and
(iii)
at least one member must be a member of the

Malaysian Institute of Accountants or if he is not, then he
must be a person who complies with Paragraph 15.10 of
Bursa Malaysia Securities Berhads Listing Requirements.
The Chairman, who shall be elected by the members of the

Committee, shall be an independent director.
No alternate director may be appointed as a member of the
Board Audit Committee.
The Board will review the terms of office and the performance
of the Board Audit Committee and its members at least once
every three years.
FUNCTIONS AND DUTIES

The functions and duties of the Board Audit Committee shall
be to:
(a)
Review and report to the Board of Directors on the

following:
with the External Auditors, the audit plan;

with the External Auditors, the External Auditors
evaluation of the system of internal controls;
with the External Auditors, the External Auditors audit
report;
the assistance given by the Companys employees
to the External Auditors;
(b)
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 investigations
undertaken and whether or not appropriate
action is taken by the management on the
recommendations of the internal audit function;
the quarterly results and year-end financial
statements, prior to the approval by the Board of
Directors, focusing particularly on:(i)
changes in or implementation of major

accounting policy;
(ii)
significant and unusual events;
(iii)
compliance with accounting standards and

other legal requirements; and
(iv) accuracy and adequacy of the disclosure

of information essential to a fair and full
presentation of the financial affairs of the Group;
any related party and conflict of interest situation that
may arise within the listed issuer or group including
any transaction, procedure or course of conduct that
raises questions of management integrity;
promptly report to Bursa Malaysia Securities Berhad
on any matter reported by it to the Board of the
Company which has not been satisfactorily resolved
resulting in a breach of the Listing Requirements of
Bursa Malaysia Securities Berhad;
submit to the Board a Report on the summary of
activities of the Board Audit Committee in the
discharge of its functions and responsibilities in
respect of each financial year.
Consider the appointment of the external auditor, the

audit fee and any questions of resignation and dismissal.
79
ANNUAL REPORT 2006
MEETINGS
INTERNAL AUDIT FUNCTION
The Committee shall hold meetings on at least four occasions

each year, although additional meetings may be called, as
and when necessary, by the Chairman of the Committee.
These meetings will usually be:-
The Group uses the services of the Group Internal Audit

Division to accomplish its internal audit requirements. The
Group Internal Audit Division reports to the Board Audit
Committee on matters concerning the Group and assists the
Board of Directors in monitoring and managing risks and
internal controls.
prior to the current years audit;

upon completion of the Exter nal Auditors interim
examination;
prior to the meeting of the full board to approve the
financial statements;
prior to the announcement of the quarterly results;
upon the request of any member of the Committee or
the External Auditors, the Chairman of the Committee
shall convene a meeting of the Committee to consider
the matters brought to its attention;
at least once a year, the Committee shall meet with the
External Auditors without any Executive Directors present.
ATTENDANCE
In order to form a quorum in respect of a meeting of an
audit committee, the majority of members 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.
MINUTES
The Company Secretary shall be the Secretary to the
Committee and shall be present at all meetings to record
minutes.
Minutes of each meeting shall be prepared and entered into
the books provided for the purpose and sent to the
Committee members and will be made available to all
Board members. The Minutes shall be signed by the
Chairman of the Committee.
The Group Internal Audit Division reviews internal controls

related to all key activities of the Group and recommends
improvements in controls and procedures. The Group Internal
Audit Division is independent of the activities it audits and
performs with impartiality and due professional care. The
findings of the Group Internal Audit Division are reported to
the Board Audit Committee.
The Board Audit Committee approves the internal audit plan
of the Group Internal Audit Division each year. The scope of
the inter nal 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 for m the basis for continually
improving the risk management process in the context of the
Groups overall goals.
In the course of auditing, the Group Internal Audit Division
has identified some minor internal control weaknesses during
the period, which have been or are being addressed. None
of the weaknesses has resulted in any material losses,
contingencies or uncertainties that would require disclosure in
the Groups Annual Report.
80

(II) BOARD NOMINATION COMMITTEE

The Board Nomination Committee reviews new director appointments of the Group and the balance and effectiveness of
the boards of directors, taking into account the required mix of skills and experience and other qualities, before making
recommendations to the Board. It also reviews appointments of Senior Level Critical Mission positions for PROTON Group.
The Board Nomination Committee is made up entirely of Non-Executive Directors, with the majority consisting of Independent
Non-Executive Directors.
No.
Name of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1.
Dato Mohammed Azlan

bin Hashim
Chairman
Non-Independent
10 Mar 2005
5/5
2.

Daud bin Abu Bakar
Member
Independent
10 Mar 2005
5/5
3.
Member
Non-Independent
10 Mar 2005
4/5
4.
Member
Independent
10 Mar 2005
3/5
5.
Member
Independent
10 Mar 2005
5/5
* With effect from 1 August 2006, the Board Nomination Committee and Board Remuneration Committee have merged as one entity, known
as Board Nomination & Remuneration Committee.
81
ANNUAL REPORT 2006
(III) BOARD REMUNERATION COMMITTEE

The Board Remuneration Committee is empowered to conduct periodic reviews on the overall remuneration policy and
package for the Executive and Non-Executive Directors and Senior Level Critical Mission positions of the Group for
recommendation to the Board.
The Board Remuneration Committee is made up of Non-Executive Directors and third party members (not being directors of
the Company) who are appointed by the Board from time to time.
No.
Name of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1.
Chairman
Non-Independent
10 Mar 2005
5/5
2.
Member
Independent
10 Mar 2005
4/5
3.
Ahmad Tajuddin bin Abdul Carrim
Member Independent
29 Aug 2005
4/4
4.
Md Ali bin Md Dewal
Member Independent
29 Aug 2005
4/4
5.

Daud bin Abu Bakar
Member
Non-Independent
10 Mar 2005
29 Aug 2005
1/1
6.
Chairman
Non-Independent
10 Mar 2005
29 Aug 2005
1/1
* With effect from 1 August 2006, the Board Remuneration Committee and Board Nomination Committee have merged as one entity, known
as Board Nomination & Remuneration Committee.
82

(IV) BOARD RISK MANAGEMENT COMMITTEE

The Board Risk Management Committee assists the Board to oversee the overall management of all risks faced by the Groups
business. Further details of the activities of the Board Risk Management Committee are spelt out in the Statement of Internal
Control.
The Board Remuneration Committee is made up of Non-Executive Directors and third party members (not being directors of
the Company) who are appointed by the Board from time to time.
No.
Name of Director
Designation
Date of
Appointment
Date of
Resignation
Meeting
Attendance
1.
Chairman
Independent
29 Aug 2005
1/1
2.
Member
Non-Independent
29 Aug 2005
1/1
3.
Datuk Michael Lim Heen Peok
Member Independent
29 Aug 2005
1/1
4.
Datuk Tan Kim Leong
Member Independent
29 Aug 2005
1/1
5.
Md Ali bin Md Dewal
Member Independent
29 Aug 2005
1/1
6.

Daud bin Abu Bakar
Member
Independent
10 Mar 2005
29 Aug 2005
1/1
7.
Chairman
Non-Independent
10 Mar 2005
29 Aug 2005
1/1
8.
Dato Haji Abd. Rahim bin

Haji Abdul
Member
Non-Independent
10 Mar 2005
29 Aug 2005
1/1
83
ANNUAL REPORT 2006
(V) GROUP EXECUTIVE COMMITTEE/

(a)
GROUP EXECUTIVE COMMITTEE

A Group Executive Committee (GEXCO) was formed on
26 July 2006, to facilitate the transition period, in view of
the retirement of the then Group Chief Executive
Officer. The GEXCO comprised four members, with two
representatives from amongst the Board members and
the remaining representatives from the management
DIRECTORS TRAINING
All Directors have successfully completed the Mandatory
Accreditation Programme. Despite repeal of Bursa Malaysia
Securities Berhads 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.
team. The members were:

Chairman : Dato Mohammed Azlan bin Hashim
Members : Badrul Feisal bin Abdul Rahim
DIRECTORS REMUNERATION
In the case of the Executive Directors, the remuneration is
structured to link rewards to corporate and individual
(Joint Chief Operating Officer)
performance through key performance indicators comprising
Datuk Kamarulzaman bin Darus

(Joint Chief Operating Officer)
fixed and per for mance-based rewards. The Board

Remuneration Committee is responsible for reviewing the
performance of the Executive Directors and recommending
(b)

Subsequently on 21 December 2005, the Board resolved
to disband the GEXCO with effect from 31 December
2006 and in place, set up a Board Executive Committee
(EXCO) comprising the following members:
to the Board the remuneration package and reward

structure. The Board Remuneration Committee carries out
reviews when appropriate and refers to remuneration surveys
and consultants to assist in determining the appropriate level
of reward, which is competitive and consistent with the
corporate objectives. This is necessary in order to attract and
Chairman : Dato Mohammed Azlan bin Hashim

Members : Syed Zainal Abidin bin Syed Mohamed Tahir
The key objective of the Board EXCO is to facilitate decisions
to be made by the Board and the timely response to changes
affecting the Company through more frequent meetings of a
smaller number of appointed members of the Board who
have the power to provide direction to the Management of
the Company. The Board subsequently resolved to disband
Board EXCO with effect from 30 June 2006.
retain professionals with the qualities needed to manage the

Group successfully.
84

In the case of Non-Executive Directors, the Board as a whole determines the remuneration of the Non-Executive Directors.
A Non-Executive Directors Scheme/Policy has been formulated as a guideline for the determination of remuneration and
benefits for the Non-Executive Directors at PROTON Group. The level of remuneration of the Non-Executive Directors reflects the
experience and level of responsibilities undertaken by the Director concerned. The Non-Executive Directors are paid annual
fees and attendance allowances in accordance with the number of meetings attended. In addition, the Non-Executive
Directors are each provided with the use of car.
Details of the total remuneration of the Directors of PROTON Holdings Berhad for the financial year ended 31 March 2006 are
as follows:
Directors
Executive Directors
Non-Executive Directors
TOTAL
Basic Salaries
Bonus and EPF
Fees and
Allowance
Benefits in Kind
Total
955,638
127,070
56,837
1,139,545
691,811
23,733
715,544
955,638
818,881
80,570
1,855,089
Number of Directors
Range of Total Remuneration
Executive
Non-Executive
Total
RM50,000 and below
RM50,001 RM100,000
RM150,001 RM200,000
RM250,001 RM300,000
RM500,000 RM1,000,000
TOTAL
11
85
ANNUAL REPORT 2006
FINANCIAL REPORTING
In preparing the financial statements the Board has;
The Board is committed to providing a balanced, clear and

meaningful assessment of the financial performance and
consistently;
prospects of the Group to shareholders, the investor

community and the regulatory authorities. Shareholders and
quarterly financial results and accompanying press releases.
Made judgements and estimates that are reasonable

and prudent;
other stakeholders are kept abreast of the Groups

per formance through the timely announcement of the
Selected suitable accounting policies and applied them
Ensured that all applicable accounting standards have

been followed; and
Prepared financial statements on the going concern basis

as the Directors have a reasonable expectation, having
made enquiries that the Group has adequate resources
The Board Audit Committee assists the Board to oversee the
to continue its operations for the foreseeable future.
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
INTERNAL CONTROLS
ensure adequacy and completeness of information prior to

the Boards approval. To enhance the quality of the Groups
The Board acknowledges its overall responsibility for
financial reporting, the external auditors will be conducting
maintaining a system of internal controls that provides
quarterly reviews of the Groups quarterly results in addition to
assurance of effective and efficient operations and
the year-end audit.
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
DIRECTORS RESPONSIBILITY STATEMENT
unavoidable losses.
The Board is required by the Companies Act, 1965, to ensure
The system of internal controls is designed to provide
that financial statements prepared for each financial year
reasonable but not absolute assurance against the risk of
have been made out in accordance with the applicable
material errors, frauds or losses occurring. The Board Audit
approved accounting standards and give a true and fair view
Committee reviews the effectiveness of the system of internal
of the state of affairs of the Company and the Group at the
controls, which covers financial, operational and compliance
end of the financial year, as well as of the results and cash
controls, and also risk management.
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.
86

RELATIONSHIP WITH AUDITORS
In addition, the Chairman briefs the shareholders on the

companys operations for the financial year. Senior
The Board Audit Committee maintains an appropriate
management and the external auditors are present to
transparent relationship with both the Group external auditors
respond to questions and queries to ensure a high level of
and internal auditors. The external auditors are invited to
accountability and transparency of the business goals,
attend Board Audit Committee meetings and present their
strategy and operations.
audit findings when the Companys annual financial results

are considered. The Board Audit Committee meets with the
For investors, regular dialogues are held with financial analysts
external auditors at least once a year without the presence
and fund managers representing institutional and individual
of the Executive Director and management.
shareholders through the investor relations programme.

Besides the Annual Report, the Board ensures timely
DIALOGUE BETWEEN THE COMPANY

AND INVESTORS
The Board recognises the importance of transparency and
accountability to its shareholders and investors. Different
channels of communication are optimised to provide
shareholders and investors with a balanced and complete
view of the Groups 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.
announcements are made to Bursa Malaysia Securities

Berhad and disseminates clear, accurate, and sufficient
information to enable the shareholders and investors to make
informed decisions. The Investor Relations Unit also proactively
disseminates appropriate and relevant information to the
investor community and attends to whatever queries they
may have.
ADDITIONAL COMPLIANCE INFORMATION
87
ANNUAL REPORT 2006
NON-AUDIT FEES
During the financial year, the amount of non-audit fees paid and payable to the external auditors by the Group are as follows:
External Auditors
2006
RM000
2005
RM000
PricewaterhouseCoopers Malaysia
Member firm of PricewaterhouseCoopers International Limited,
a separate and independent legal entity from PricewaterhouseCoopers Malaysia
1,934
362
87
1,682
Total
2,296
1,769
MATERIAL CONTRACTS
(i)
By an investment agreement dated 7 July 2004 entered into between Proton Capital Sdn. Bhd. (PCSB) and Claudio
Castiglioni, PCSB acquired 57,750,000 Class A shares representing 57.75% of the corporate capital of MV Agusta Motor
S.p.A (MVA) for Euro70 million. MVA is a company organised and existing under the laws of Italy and the principal
activity of MVA is the manufacturing and marketing of motorcycles and related products. In connection with the
investment agreement, PCSB entered into a shareholders agreement dated 26 November 2004 with Claudio Castiglioni
in relation to governance and other shareholder issues concerning MVA.
(ii)
By an agreement dated 24 December 2005 entered into between PCSB and GEVI S.pA, a company incorporated under
the laws of Italy (Purchaser), PCSB agreed to sell to the Purchaser 57,750,000 Class A shares representing 57.75% of the
corporate capital of MVA to the Purchaser in consideration of Euro 1.00. The agreement was completed on 1 March 2006.
Announcements to Bursa Malaysia Securities Berhad were made in accordance with the Listing Requirements.
88
STATEMENT ON INTERNAL CONTROL

Statement
On
Internal
CONTROL
INTRODUCTION
The Malaysian Code on Corporate Governance requires listed companies to
maintain a sound system of internal control to safeguard shareholders
investments and the Groups assets.
Directors of listed companies are required to make disclosures in their annual reports on the
state of internal control in accordance with the Revamped Listing Requirements of the Bursa
Malaysia. The Bursa Malaysias Statement on Internal Control: Guidance for Directors of
Public Listed Companies (Guidance) provides guidance for compliance with these
requirements. The Boards Internal Control Statement, which has been prepared in
accordance with the Guidance is set out below.
BOARD RESPONSIBILITY
The Board recognizes the importance of sound internal controls and risk management
practices to good corporate governance. The Board has an overall responsibility for the
Groups system of internal controls and its effectiveness, as well as reviewing its adequacy
89
ANNUAL REPORT 2006
and integrity. The Groups system of internal control is designed to manage the principal business risks
that may impede the Group from achieving its business objectives. The system, by its nature, can only
provide reasonable but not absolute assurance against any material misstatement or loss occurrence.
RISK MANAGEMENT
Risk Management is regarded by the Board of Directors to be an integral part of the Groups operation
with the objective of maintaining a sound internal control system and ensuring its continuing adequacy
and integrity. It is for this reason that it continues to embed the risk management process in the conduct
of the business operations to provide reasonable assurance of achieving the Groups business objective
while at the same time enhancing shareholders value.
The Group Risk Management Unit (GRMU), established since July 2002, is responsible for ensuring that an
appropriate risk management framework exist within the Group and effectively implemented to manage
the key risk exposures of the organization on an ongoing basis.
90
STATEMENT ON INTERNAL CONTROL

To ensure the effective & systematic implementation of the

Groups Risk Management Framework, Risk Management
Champions were nominated comprising representatives from
key Business Units and Subsidiaries to ensure enterprise level
risks are effectively cascaded down to the operational level
and effectively managed. GRMU together with the Risk
Management Champions has undertaken a number of risk
assessments during the year which include risks associated to
quality, vendors and continue to monitor risk related to
operations and projects. GRMU has facilitated in the process
of risk identification, reporting, mitigation and continuing
resolution of these issues.
The Group Risk Management Committee (GRMC) comprises
of senior management is responsible for overseeing the risk
management implementation, regular updating of the group
risk profiles and improving the implementation methodology.
The committee also provides direction to the GRMU in
carrying out its activities.
The Board Risk Management Committee (BRMC), established
in November 2003 had conducted periodic meetings to
deliberate on risk issues and assist the Board in reviewing risk
policies and strategies.
ASSURANCE MECHANISM
The Board and Management have established numerous
processes for identifying, evaluating and managing the
significant risks faced by the Group. These processes include
updating the system of internal controls when there are
changes to the business environment or regulatory guidelines.
The key elements of the Groups control environment include:
Organisation structure
The Board is supported by a number of established Board
committees in the execution of its responsibilities, namely
Audit, Nomination, Remuneration and Risk Management,
the details of which are set out in the Statement on
Corporate Governance. Each committee has a clearlydefined terms of reference.
Responsibility for implementing the Groups strategies and

day-to-day businesses are delegated to the Management.
The organization structure sets out clear segregation of
roles and responsibilities, lines of accountability and levels
of authority to ensure effective and independent
stewardship.
During the financial year, the Chief Executive Officer
(CEO) had retired. Following the retirement, a Group
Executive Committee was promptly set up to assume the
decision making authority of the CEO. In addition, a Joint
Chief Operating Officers (COO) position was established
to oversee the day-to-day operations of the Group. The
above measures were taken prior to the appointment of
the Managing Director.
Board Audit Committee

The Board has delegated the duty of reviewing and
monitoring the effectiveness of the Groups system of
internal control to the Board of Audit Committee (BAC).
The BAC comprises non-executive members of the Board,
the majority of whom are independent directors. The BAC
assumes the overall duties of reviewing with the external
auditors their audit plan, audit report, as well as their
findings and recommendations on internal controls
highlighted annually in the Internal Control Memorandum.
Throughout the financial year, the BAC is updated on 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
Department (GIAD).
The composition of the Audit Committee consists of
members who bring with them a wide variety of
experience from different industries and backgrounds.
They continue to meet regularly and have full and
unimpeded access to the internal and external auditors
and all employees of the Group.
Further information relating to the activities of the BAC
are set out in the Statement on Corporate Governance.
91
ANNUAL REPORT 2006
Group Internal Audit

The GIAD continues to independently monitor
compliance with policies and procedures and the
effectiveness of the internal control systems and highlights
significant findings and corrective measures in respect of
any non-compliance on a timely basis. The annual audit
plan, 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 also reports to the Management Committee on
monthly basis on the status of implementation of
recommendations arising from the audit findings by both
GIAD and also the external auditors.
Further information relating to the activities of GIAD
functions are set out in the Statement on Corporate
Governance.
Management Committee meetings are held on a regular

basis to identify, discuss and resolve operational, financial
and key management issues;
A comprehensive budgeting process where the annual

budgets are approved by the Board and reviewed at
mid year;
The Board receives and reviews monthly reports from

management on key strategic and operational issues and
provides direction to management;
Regular visits to operating units and subsidiaries by senior

management;
Measurement of each departments per for mance

against a set of common criteria via internal survey
questionnaires;
Continuous training efforts to enhance competency of

the workforce; and
Formal employee appraisal system for effective coaching

and evaluation of employee performance.
OTHER KEY ELEMENTS OF INTERNAL CONTROL

The other key elements of the Groups internal control
systems are described below:
Defined delegation of responsibilities to committees and

management of Head office and operating units,
including authorization levels for various aspects of the
business which are set out in the Limits of Authority which
had been revised in 2005 in line with the changing
business, operational and statutory reporting needs;
Documented internal policies and procedures set out in

the Group Policies and Procedures which also had been
revised in 2005 to meet changing business, operational
and statutory reporting needs and certification by ISO
9001:2000 of the Quality System Procedures for the
Company and 2 major subsidiaries within the Group;
Quarterly financial statements and the Groups

per for mance are deliberated by the BAC, which
subsequently presents them to the Board for their review,
consideration and approval.
CONCLUSIONS
For the Financial Year under review, after due and careful
inquiry and based on the infor mation and assurance
provided, the Board is satisfied that there were no material
losses as a result of weaknesses in the system of internal
control, that would require separate disclosure in the
Companys Annual Report. Nevertheless, areas requiring
attention are accorded with more regular monitoring to
ensure ongoing adequacy and effectiveness of internal
controls and safeguarding shareholders investment and the
Groups assets.
The statement is made in accordance with the resolution of
the Board of Directors dated 26 July 2006.
92
RISK MANAGEMENT
RISK
Management
Balancing risk and reward is important but reward
does not come without risk. PROTON has continued
to implement a Risk Management Framework to
ensure risks that are faced by the organization are
effectively managed.
RISK MANAGEMENT FRAMEWORK

PROTON Group has adopted a Risk Management Framework that
consists of the following:-
RISK POLICY & STRATEGY

Risk policies had been developed in PROTON and its major
subsidiaries to provide a basis to manage potential risk that arise from
the business process and as a guide in its decision making process.
93
ANNUAL REPORT 2006
RISK GOVERNANCE & CULTURE
BOARD OF DIRECTORS
Liaison
BOARD RISK MANAGEMENT COMMITTEE (BRMC)
Reporting Flow Chart
GROUP CEO/MANAGING DIRECTOR
GROUP RISK
MANAGEMENT UNIT
(GRMU)
GROUP RISK MANAGEMENT COMMITTEE (GRMC)
Liaison
ALL BUSINESS UNITS & PROTON GROUP OF COMPANIES
Board Risk Management Committee
Risk Management Units of major subsidiaries
The Board Risk Management Committee that was formed in

November 2003, continues to meet periodically to review
among others, the risk report updates, and oversee the
implementation and operation of the Risk Management
Framework. The Board Risk Management Committee
comprise of 5 non-executive directors.
Risk Management Unit of major subsidiaries continues to report

to Group Risk Management Committee high risk events facing
their respective companies and its mitigation status, via the
Group Risk Management Unit. Group Risk Management Unit
consolidates the group significant risks and reports it to Group
Risk Management Committee.
Group Risk Management Committee
The Group Risk Management Committee that comprise

members of senior management has the responsibility
among others, to identify and evaluate principal risks and
evaluate the practicality of the proposed risk mitigation
actions. The Group Risk Management Committee met 6 times
for the period of review.
A standard Risk Management methodology has been

developed and has been used for Risk Assessment
purposes for identifying, rating and monitoring the
operational risk, market risk and project risk faced by
PROTON and its major subsidiaries.
Group Risk Management Unit

The Group Risk Management Unit continues to inculcate the
Risk Management culture within PROTON and its major
subsidiaries via the Risk Awareness and Profiling programs.
Group Risk Management Unit together with the risk
champions of business operating units has undertaken a
series of Risk Profiling programs namely risk related to
projects, operations, quality and supplier.
RISK MEASUREMENT
RISK OPERATIONS & SYSTEM

The Group Risk Management Unit is continuously
conducting training to ensure that reporting are done
using the standard risk reporting format.
CHALLENGES
Moving forward, the challenge is to institutionalize Risk
Management culture within PROTON Group as a business
culture and to be able to use Risk Management tool to add
value towards achieving PROTONs business objectives and
enhancing shareholders value.
94
CALENDAR OF EVENTS 2005-2006

14-15 July 2005
24 July 2005
Savvy Analysts drive from KL to

Kuantan, experiencing the driving
capability of the model.
The 18th Annual General Meeting

of PROTON Workers Union.
Calendar of
EVENTS 05-06
26 July-4 August 2005

HR Week themed, Living the Values,
in conjunction with the launch
of Corporate Mantra.
10 August 2005
A visit by worldwide trade commissioners from
MATRADE for a first-hand view of PROTONs facilities.
95
ANNUAL REPORT 2006
10 September 2005
12-14 August 2005
A 10-year Service Award Ceremony

was held to honour and acknowledge
long-serving employees of PROTON.
The 15th National Skills Competition,

organised by PROTON and Works
Ministry, to inculcate technical skills
among apprentices.
28 September 2005
PROTON Holdings Berhads
2nd Annual General Meeting.
5 October 2005
29 September 2005
Innovative and Creative Circle (ICC)
Convention for PROTON vendors.
Visit by the Minister for

Housing & Urban
Development,
Punjab, Pakistan,
H.E. Syed Raza Ali Gillani.
96

15 November 2005
14 November 2005
Media preview of the Savvy AMT,

introducing a new technology to
local market.
Prize presentation to the winner of

National Jersey Competition, in which
PROTON is one of the main sponsors.
15 November 2005
Official unveiling of Savvy AMT,
handing over to its first batch of customers.
16 November 2005
Journalists from Qatar and Egypt
visit PROTON.
21 November 2005
Handover Ceremony of official cars for 11th ASEAN
Summit organised by the Ministry of Foreign Affairs.
97
ANNUAL REPORT 2006
24 November 2005
The PROTON team emerged second runnerup at the National Level Innovation
Convention Circle competition organised
by the National Productivity Centre.
10-14 December 2005

PROTON showcased its products
at the East-Asia Business Exhibition
(EABEX 05) held at Kuala Lumpur
Convention Centre.
15 December 2005
Launch of the
Proton Chancellor by the
Deputy Minister of Transport,
Tengku Dato Seri Azlan ibni
Sultan Abu Bakar.
11 December 2005
The Drive Safe, Smart and Wise
programme for Gen.2 Club members.
30 November 2005
The prize presentation to the winners
of PROTON 20-Year Campaign (P20Y).
98

15 December 2005
28 December 2005
Visit by directors of PROTON Groups
to Tanjung Malim plant.
Visit by representatives of Jinhua Youngman

Automobile Manufacturing, China.
4 January 2006
Media visit to Chancellor assembly line.
13 January 2006
Official launch of the Proton Waja Campro.
27 January 2006
PROTON officially sponsors A1 Team Malaysia
in the inaugural A1 Grand Prix 2006.
99
ANNUAL REPORT 2006
3 February 2006
Signing ceremony of the
Memorandum of Understanding
between PROTON and Mitsubishi
Motors Corporation, witnessed
by the Minister of International
Trade & Industry, Y.B. Dato
Seri Rafidah Aziz.
3-12 February 2006

PROTON participates
as the Official Vehicle
sponsor for
the Le Tour De
Langkawi 2006.
19 February 2006
Customers Appreciation Day held at
PROTON Centre of Excellence,
Subang Jaya.
17 March 2006
Charity program
organised for Rumah
Amal Limpahan Kasih,
a home for underprivileged
orphans and single mothers.
1 March 2006
Launch of Lotus Europa at Geneva Motorshow.
14 February 2006
A Savvy Kind of Love promotion
launched by Malaysian Idols 2005,
Daniel Lee.
100

4 April 2006
Haji Abdul Kadir Md. Kassim with
Y.A.B. Dato Seri Mahadzir Kadir,
the Menteri Besar of Kedah,
during the handing over of boats
to fishermen affected by the
Tsunami in Kedah.
25-27 March 2006

Journalists and dealers
from Turkey visit PROTON.
5 April 2006
Launch of the company-wide
Quality Campaign.
25 April 2006
PROTON showcasing its R&D capabilities
at the MIGHT Dialogue held at the
Putrajaya Convention Centre.
28-30 April 2006

Langkawi Adventure Race 2006 organised
by Kelab PROTON for its members.
101
ANNUAL REPORT 2006
30 April 2006
A1 Team Malaysias
podium finish at the
final round of A1 Grand
Prix 2006 in China.
16-17 May 2006

PROTON showcase
at SMIDEX, exhibiting its
exclusive components.
23 May 2006
The Embassys fraternity visits PROTON
Showroom at Mutiara Damansara
enroute to Tanjung Malim plant.
16 June 2006
Launch of the new
Satria Neo, by the Prime
Minister of Malaysia,
Datuk Seri Abdullah Haji
Ahmad Badawi.
29 May 2006
Majlis Anugerah Kecemerlangan by Yayasan
Proton to honour children of PROTONs staff who
performed with flying colours in PMR and SPM.
25 May-4 June 2006

PROTONs showcasing range of
concept cars and special editions held
at KL International Motorshow 2006.
STATUTORY
Financial
Statements
c o n t e n t s
104
Directors Report
113
108
Income Statements
116
Notes to the Financial Statements
109
Balance Sheets
175
Statement by Directors
111
Consolidated Statement of Changes in Equity
175
Statutory Declaration
112
Company Statement of Changes in Equity
176
Report of the Auditors
Cash Flow Statements
104
DIRECTORS REPORT
The Directors have pleasure in submitting their annual report to the members together with the audited financial statements
of the Group and Company for the financial year ended 31 March 2006.
PRINCIPAL ACTIVITIES
The Company is principally involved in investment holding activities.
The principal activities of the subsidiaries, jointly controlled entities and associated companies are set out in Notes 24 to 26 of
the financial statements. There have been no significant changes in the activities of the Group and the Company during the
financial year.
FINANCIAL RESULTS
Group
RM000
Company
RM000

Minority interests
46,394
296
111,022
Net profit attributable to shareholders
46,690
111,022
DIVIDENDS
The amount of dividends paid or declared by the Company since 31 March 2005 were as follows:
RM000
In respect of the financial year ended 31 March 2005:
Final tax exempt dividend of 10.0 sen per ordinary share, paid on 28 October 2005
54,921
The Directors now recommend the payment of a final tax exempt dividend of 5.0 sen per ordinary share on 549,213,002
ordinary shares amounting to RM27,460,650 for the financial year ended 31 March 2006, subject to the approval of members
at the forthcoming Annual General Meeting of the Company.
DIRECTORS REPORT
105
(CONTINUED)
ANNUAL REPORT 2006
RESERVES AND PROVISIONS

There were no material transfers to or from reserves and provisions during the financial year except as disclosed in the financial
statements.
DIRECTORS
The Directors who have held office during the period since the date of the last report are:
Lt Gen (R) Dato Seri Mohamed Daud bin Abu Bakar
Haji Abdul Kadir bin Md Kassim
Dato Ahmad bin Hj Hashim
Dato Haji Abd. Rahim bin Haji Abdul
Tengku Tan Sri Dr Mahaleel bin Tengku Ariff
(Appointed on 1.1.2006)
(Resigned on 2.9.2005)
(Resigned on 30.9.2005)
In accordance with Article 104 of the Companys Articles of Association, Abdul Jabbar bin Abdul Majid and Dato
Mohammed Azlan bin Hashim, retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for
re-election.
In accordance with Article 111 of the Companys Articles of Association, Syed Zainal Abidin bin Syed Mohamed Tahir and
Dato Ahmad bin Hj Hashim retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.
In accordance with Section 129(2) of the Companies Act 1965, Lt Gen (R) Dato Seri Mohamed Daud bin Abu Bakar, having
attained the age of 70, retires at the forthcoming Annual General Meeting and offers himself for reappointment under Section
129(6) of the Companies Act 1965.
Datuk Kisai bin Rahmat has tendered his resignation with effect from 31 July 2006.
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.
106
DIRECTORS REPORT
(CONTINUED)
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets of the Group and Company were made out, the Directors took reasonable
steps:
(a)
to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance
for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance
had been made for doubtful debts; and
(b)
to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their
values as shown in the accounting records of the Group and Company had been written down to an amount which
they might be expected so to realise.
At the date of this report, the Directors are not aware of any circumstances:
(a)
which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the
financial statements of the Group and Company inadequate to any substantial extent; or
(b)
which would render the values attributed to current assets in the financial statements of the Group and Company
misleading; or
(c)
which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and
Company misleading or inappropriate.
No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months
after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the
Group and Company to meet their obligations when they fall due.
At the date of this report, there does not exist:
(a)
any charge on the assets of the Group or the Company which has arisen since the end of the financial year which
secures the liability of any other person; or
(b)
any contingent liability of the Group or the Company which has arisen since the end of the financial year.
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 Groups and Companys operations during the financial year were not substantially affected by any
item, transaction or event of a material and unusual nature except as disclosed in Notes 4 and 43 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.
DIRECTORS REPORT
107
(CONTINUED)
ANNUAL REPORT 2006
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 26 July 2006.

Chairman

Director
108
INCOME STATEMENTS
for the financial year ended 31 March 2006

Group
Restated
2006
2005
RM000
RM000
Note
Revenue
Cost of sales
Company
2006
RM000
2005
RM000
7,796,932
(6,895,091)
8,483,295
(7,102,493)
111,097
1,488,839
901,841
230,544
(439,754)
(580,771)
(78,834)
1,380,802
148,572
(301,453)
(409,057)
(46,369)
111,097
836
(834)
1,488,839
(1,320)
(209)
33,026
(43,878)
23,383
772,495
(46,192)
39,818
111,099
1,487,310
15,541
13,771
(367,577)
Profit before taxation
28,072
412,315
111,099
1,487,310
Taxation
Company
Subsidiary companies
Share of taxation in associated companies
Share of taxation in jointly controlled entities
28,409
(7,093)
(2,994)
43,161
(8,396)
(4,638)
(77)
(364,203)
18,322
30,127
(77)
(364,203)
46,394
442,442
111,022
1,123,107
296
46,690
442,442
111,022
1,123,107
8.5
N/A
80.6
N/A
Gross profit
Other operating income
Distribution costs
Administrative expenses
Other operating expenses
Profit from operations
Finance cost
Share of results of associated companies
Share of results of jointly controlled entities
operating results
goodwill impairment charge
4
6
26
7
Minority interests
Earnings per share (sen)

basic
diluted
8
8
The notes on pages 116 to 174 form part of these financial statements.
BALANCE SHEETS
109
as at 31 March 2006
ANNUAL REPORT 2006
Note
CURRENT ASSETS
Inventories
Trade and other receivables
Amounts due from subsidiary companies
Amounts due from associated companies
Amount due from jointly controlled entities
Tax recoverable
Deposits, bank and cash balances
CURRENT LIABILITIES
Trade and other payables
Provisions
Amounts due to subsidiary companies
Amounts due to associated companies
Amount due to jointly controlled entities
Taxation
Short term borrowings
10
11
12
13
14
15
16
17
18
19
20
21
22
NET CURRENT ASSETS

NON-CURRENT ASSETS
Deferred tax assets
Goodwill
23
24
25
26
27
28
29
Group
Restated
2006
2005
RM000
RM000
Company
2006
RM000
2005
RM000
1,389,005
1,142,851
4,394
45,285
51,491
211,965
1,585,982
967,080
1,348,555
3,554
37,866
13,179
201,535
2,454,718
195
68,041
118
49,835
4,489
6,315
3,713
50,638
4,430,973
5,026,487
118,189
65,155
1,247,328
217,062
34,904
20,138
16,865
804,766
1,694,165
239,888
5,034
40,395
2,624
227,921
2,719
10,086
2,517
13,355
2,341,063
2,210,027
12,805
15,872
2,089,910
2,816,460
105,384
49,283
3,330,946
155,702
249,963
10,397
105,786
29,008
3,313,352
161,963
255,457
6,276
38,479
29,008
1,465,659
13,600
6,475
1,465,659
17,600
2,475
3,881,802
3,804,535
1,485,734
1,485,734
110
BALANCE SHEETS
as at 31 March 2006 (CONTINUED)

Note
NON-CURRENT LIABILITIES
Deferred tax liabilities
FINANCED BY:
Share capital
Reserves
30
28
31
32
SHAREHOLDERS FUNDS
MINORITY INTERESTS
Group
Restated
2006
2005
RM000
RM000
Company
2006
RM000
2005
RM000
100,255
805
759,639
1,074
101,060
760,713
5,870,652
5,860,282
1,591,118
1,535,017
549,213
5,321,439
549,213
5,310,736
549,213
1,041,905
549,213
985,804
5,870,652
5,859,949
1,591,118
1,535,017
333
5,870,652
5,860,282
1,591,118
1,535,017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

ANNUAL REPORT 2006
Issued and fully paid

ordinary shares
Note
At 1 April 2004
as previously stated
Effect of change in
accounting policy
43
As restated
Currency translation
differences
Net profit attributable
to shareholders
Dividend for the financial
year ended 31 March
2005 interim
At 31 March 2005
At 1 April 2005
as previously stated
Effect of change in
accounting policy
43
As restated
differences
Net profit attributable
to shareholders
Dividend for the financial
year ended 31 March
2005 final
At 31 March 2006
Non-distributable
Distributable
Foreign
exchange
translation
RM000
Retained
earnings
RM000
Total
RM000
4,942,385
5,537,987
Number
of shares
000
Nominal
value of
RM1 each
RM000
Capital
reserves
RM000
549,213
549,213
475,617
359,597
549,213
549,213
475,617
(69,631)
4,611,796
(12,185)
442,442
442,442
(137,303)
(137,303)
549,213
549,213
475,617
549,213
549,213
475,617
727,174
549,213
549,213
475,617
(81,816)
549,213
549,213
Goodwill
RM000
(359,597)
(727,174)
(69,631)
(330,589)
29,008
5,566,995
(12,185)
(81,816)
4,916,935
5,859,949
(81,816)
5,615,101
5,830,941
(698,166)
29,008
4,916,935
5,859,949
18,934
18,934
46,690
46,690
(54,921)
(54,921)
475,617
(62,882)
4,908,704
5,870,652
111
112
COMPANY STATEMENT OF CHANGES IN EQUITY

Issued and fully paid

ordinary shares
Distributable
Number
of shares
000
Nominal
value of
RM1 each
RM000
Retained
earnings
RM000
Total
RM000
Ordinary share issued

Dividend for the financial year ended 31 March 2005
interim
549,213
549,213
1,123,107
549,213
1,123,107
At 31 March 2005
549,213
549,213
985,804
1,535,017
At 1 April 2005
Dividend for the financial year ended 31 March 2005
final
549,213
549,213
985,804
111,022
1,535,017
111,022
549,213
549,213
Note
At 1 April 2004
At 31 March 2006
*
#
Number of share issued is 2 units.

Nominal value of share issued is RM2.
(137,303)
(54,921)
1,041,905
(137,303)
(54,921)
1,591,118
CASH FLOW STATEMENTS
113

ANNUAL REPORT 2006
Note
CASH FLOWS FROM OPERATING ACTIVITIES

Group
Restated
2006
2005
RM000
RM000
46,394
442,442
Adjustments for:
Taxation
Property, plant and equipment:
depreciation
written off
impairment
(gain)/loss on disposal
Allowance for inventories write down
Interest expense
Interest income
Share of results of associated companies
Share of results of jointly controlled entities
Impairment of investment in associated company
Impairment of goodwill
(Write back)/diminution in value of short term investments
Gain on disposal of short term investments
Loss on dilution in interest of associated company
Allowance for doubtful debts
Unrealised foreign exchange (gain)/loss
Provision for warranties (net of expected reimbursement)
Dividend-in-specie
Dividend income
(18,322)
(30,127)
351,409
82,857
5,066
(218)
46,865
43,878
(67,388)
(23,383)
(15,541)
(7,202)
(2,664)
48
117,923
(20,365)
81,314
(9,525)
312,428
135,643
1,879
23,713
18,527
46,192
(87,910)
(39,818)
(13,771)
22,000
367,577
7,202
(11,106)
9,983
(6,208)
55,645
(9,178)
Operating profit before working capital changes
611,146
1,245,113
Company
2006
RM000
2005
RM000
111,022
1,123,107
77
364,203
(588)
(111,097)
224
(1,300,724)
(188,115)
(586)
(1,305)
114
for the financial year ended 31 March 2006 (CONTINUED)

Note
Group
Restated
2006
2005
RM000
RM000
Company
2006
RM000
2005
RM000
CASH FLOWS FROM OPERATING ACTIVITIES (CONTINUED)

Changes in working capital:
Inventories
Receivables
trade and other receivables
subsidiary companies
associated companies and jointly controlled entities
Payables
trade and other payables
provisions for liabilities and charges
subsidiary companies
associated companies and jointly controlled entities
(468,790)
(184,016)
45,479
(8,259)
(441,182)
(35,488)
4,294
(61,726)
3,713
(4,713)
(6,315)
(3,713)
(420,151)
(90,151)
9,613
233,318
(87,706)
9,639
222
(3,269)
2,517
13,355
Cash generated from operations
(321,113)
739,678
(57,352)
(62,687)
76,835
(40,505)
(53,696)
94,704
(43,844)
Net cash flow (used in)/from operating activities
(347,470)
736,842
(56,882)
CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment
Additional investment in jointly controlled entities
Purchase of short term investments
Proceeds from disposal of short term investments
Proceeds from disposal of property, plant and equipment
Dividends received
Redemption of preference shares in an associated company
(478,451)
(207,817)
207,253
15,816
42,452
(895,206)
(510,232)
(222,128)
206,477
17,447
32,069
4,000
111,000
188,115
Net cash flow (used in)/from investing activities
(420,747)
(1,367,573)
111,000
188,115
Taxation paid
Interest received
Interest paid
(98)
568
(174)
(174)
115
for the financial year ended 31 March 2006 (CONTINUED)

ANNUAL REPORT 2006
Note
CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid
Contribution by minority interest
Proceeds from short term borrowings
Proceeds from new term loan
Repayment of term loans
Finance lease and hire purchase instalments paid
Repayment of short term borrowings
Fixed deposits pledged as security
Group
Restated
2006
2005
RM000
RM000
Company
2006
RM000
2005
RM000
(54,921)
326,582
(54,436)
(326,688)
(11,123)
(137,303)
333
778,353
344,155
(52,342)
(10)
(777,177)
(396,838)
(54,921)
(137,303)
Net cash flows used in financing activities
(120,586)
(240,829)
(54,921)
(137,303)
NET (DECREASE)/INCREASE IN CASH AND

CASH EQUIVALENTS
(888,803)
(871,560)
(803)
39
EXCHANGE RATE EFFECTS

CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE FINANCIAL YEAR
CASH AND CASH EQUIVALENTS AT THE END OF THE
FINANCIAL YEAR
39
50,638
5,070
513
1,576,925
2,447,972
50,638
693,192
1,576,925
49,835
50,638
116
NOTES TO THE FINANCIAL STATEMENTS
31 March 2006
GENERAL INFORMATION
The Company is principally involved in investment holding activities.
The principal activities of the subsidiaries, jointly controlled entities and associated companies are set out in Notes 24 to
26 to the financial statements. There have been no significant changes in the activities of the Group and the Company
during the financial year.
The Company was incorporated as a limited liability company, and is domiciled in Malaysia.
There were 11,159 (2005: 10,300) employees in the Group and no employee (2005: Nil) in the Company at the end of
the financial year. The Company is managed by employees of Perusahaan Otomobil Nasional Sdn. Bhd.
The address of the registered office and the principal place of business of the Company is:
Batu Tiga
40000 Shah Alam
Selangor Darul Ehsan
Malaysia
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)
Basis of preparation
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 MASB approved accounting standards in Malaysia and the provisions of
the Companies Act, 1965. The preparation of financial statements in conformity with MASB approved accounting
standards in Malaysia and the provisions of the Companies Act, 1965 require the Directors to make estimates and
assumptions 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 are based on the Directors best knowledge of current events and actions.
117
31 March 2006 (CONTINUED)

ANNUAL REPORT 2006
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b)
Basis of consolidation
(i)
Subsidiary companies are those companies in which the Group has power to exercise control over the financial
and operating policies so as to obtain benefits from their activities.
Subsidiaries are consolidated using the acquisition method of accounting except for certain subsidiaries (as
disclosed in Note 24), which were accounted for using the merger method arising from internal group
reorganisation as defined in FRS 122 (2004): Business Combinations, where:
the ultimate shareholders remain the same, and the rights of each shareholder, relative to other are
unchanged; and
the minorities share of net assets of the Group are not altered by the transfer.
Under the acquisition method of accounting, the results of subsidiaries acquired or disposed during the financial
year are included from the date of acquisition up to the date of disposal. The cost of an acquisition is the
amount of cash paid and the fair value at the date of acquisition of other purchase consideration. At the
date of acquisition, the fair values of the subsidiaries net assets are determined and these values are reflected
in the consolidated financial statements. The difference between the cost of acquisition over the Groups share
of the fair value of the identifiable net assets of the subsidiaries acquired at the date of acquisition is reflected
as goodwill.
Minority interest is measured at the minorities share of the post acquisition fair values of the identifiable assets
and liabilities of the acquiree. Separate disclosure is made of minority interest.
Under the merger method of accounting, the results of the subsidiaries are presented as if the merger had been
effected throughout the current and previous financial periods. The cost of investment in a merger is recorded
at the aggregate of the nominal value of equity shares issued, cash and cash equivalents and fair value of
other consideration. On consolidation, the difference between the carrying value of the investment over the
nominal value of the share acquired, if any, is taken to a non-distributable merger reserve or merger deficit.
Investments in subsidiaries 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. Refer to accounting policy
Note 2(u) on impairment of assets.
(ii)
Associated companies are companies in which the Group exercises significant influence. Significant influence
is the power to participate in the financial and operating policy decisions of the associated companies but
not control over those policies. Investments in associated companies are accounted for in the consolidated
financial statements by the equity method of accounting.
118


(b)
Basis of consolidation (continued)

(ii) Associated companies (continued)
The consolidated income statement includes the Groups share of results of the associated companies based
on its latest audited financial statements or management financial statements of the companies concerned.
In the consolidated balance sheet, the Groups interest in the associated companies is stated at cost plus the
Groups share of post acquisition results and reserves.
Investments in associates 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. Refer to accounting policy
Note 2(u) on impairment of assets.
(iii)

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. The Groups interests in jointly controlled
entities are accounted for in the consolidated financial statements by the equity method of accounting.
The consolidated income statement includes the Groups share of results of the jointly controlled entities based
on its latest audited financial statements or management financial statements of the companies concerned.
In the consolidated balance sheet, the Groups interest in the jointly controlled entities is stated at cost plus
the Groups share of post acquisition results and reserves.
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. Refer
to accounting policy Note 2(u) on impairment of assets.
(c)
Investments
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 financial year in which the decline is identified. Refer to accounting policy Note 2(u) on
impairment of assets.
Short-term investments are carried at the lower of cost and market value, determined on an aggregate portfolio
basis by category of investments. 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 short term
investments are credited/charged to the income statement.
On disposal of an investment, the difference between net disposal proceeds and its carrying amount is
charged/credited to the income statement.
119

ANNUAL REPORT 2006

(d)
Goodwill
Goodwill arising on consolidation represents the excess of the purchase price over the fair value of the net assets
of subsidiary and associated companies and jointly controlled entities at the date of acquisition.
In prior financial years, goodwill on acquisition was written off and set off against reserves in the year of acquisition.
In the current year, the Directors made the decision to change the accounting policy to recognise goodwill as an
asset subject to annual impairment review (Refer to accounting policy Note 2(u) on impairment of assets). The
Directors believe that this change in policy will result in better presentation of the financial statements and is in the
line with developments in international standards on goodwill, namely FRS 3 Business Combinations as it relates to
goodwill accounting. The effect of the change in policy is detailed in Note 43 to the financial statements.
(e)

A piece of freehold land held by a subsidiary company is stated at Directors valuation based on a 1983
independent professional valuation of the open market value of the land on existing use basis. The surplus arising on
revaluation was credited directly to capital reserves and subsequently utilised. This valuation has not been updated.
All other land held by the Group are stated at cost. Freehold land and work in progress are not amortised. All long
leasehold land are amortised over the period of their lease term.
All other property, plant and equipment except for dies and jigs included under plant and machinery, held by the
Group are stated at cost less accumulated depreciation and impairment losses. Depreciation is charged on a
straight-line basis to write off the costs of the assets over the term of their estimated useful lives. Where an indication
of impairment exists, the carrying amount of the assets is assessed and written down immediately to its recoverable
amount. Refer to accounting policy Note 2(u) on impairment of assets.
The principal annual rates of depreciation used are as follows:
Long leasehold land
Buildings
Plant and machinery
Office equipment, furniture, fittings and vehicles
Over period of lease term of 98 years

2% 5%
10% 50%
10% 50%
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 6 years.
Work in progress is not depreciated. Upon completion, the related costs will be transferred to the respective
category of assets. Depreciation on work in progress commences when the assets are ready for their intended use.
120


(f)
Land and development expenditure

Land and development expenditure consists of land held for development and related development costs common
to projects. Developed land is stated at the lower of cost and net realisable value.
All expenditure incurred on uncompleted projects are capitalised and are included in the balance sheet as
development expenditure.
Upon completion of the projects, land and related development cost are reclassified as apartments for sale.
(g)
Leases
Finance leases are leases of property, plant and equipment where the Group assumes substantially all the benefits
and risks of ownership.
Property, plant and equipment acquired under finance leases are included in tangible property, plant and
equipment and are amortised in accordance with Note 2(e) above. Obligations under such agreements are
treated as a liability and finance charges are allocated to the income statement over the lease periods to give a
constant periodic rate of interest on the remaining lease liabilities.
Operating leases are leases of assets under which a significant portion of the risks and benefits of ownership are
effectively retained by the lessor. Payments made under operating leases are charged to the income statement on
a straight-line basis over the lease period.
(h)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first-in, first-out basis.
In the case of work-in-progress and finished vehicles, an appropriate proportion of production overheads are
included in the costs.
(i)
Trade and other receivables

Trade and other receivables are carried at anticipated net realisable value. Allowances are made for doubtful
debts based on specific review of outstanding balances at balance sheet date. General allowances are made to
cover possible losses that are not specifically identified. Bad debts are written off to the income statement during
the financial year in which they are identified.
(j)
Research and development expenditure

Research and development expenditure is recognised as an expense when incurred. Costs incurred on
development projects are capitalised to the extent that such expenditure is reasonably certain to generate future
economic benefits. Expenditure that have been capitalised are depreciated over the useful lives of the product.
Development costs initially recognised as an expense are not recognised as an asset in a subsequent period.
121

ANNUAL REPORT 2006

(k)
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events,
when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable
estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement
is recognised as a separate asset but only when the reimbursement is virtually certain.
Provision for warranties
Provision is made for the estimated liability on all products under warranty in addition to claims already received.
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.
(l)
Employee benefits
(i)
Short term employee benefits
Salaries, wages, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the
period in which the associated services are rendered by employees of the Group.
(ii)
Post employment benefits

The Group has various post-employment benefit schemes in accordance with the local conditions and practices
in the countries in which it operates. The Group has both defined contribution and defined benefit plans.
Defined contribution plans
The Groups contributions to defined contribution plans are charged to the income statement in the period to
which they relate. Once the contributions have been paid, the Group has no further payment obligations.
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 (2004).
122


(l)
Employee benefits (continued)

(ii) Post employment benefits (continued)
Defined benefit plans (continued)
Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The
amount of net actuarial gains and losses recognised in the income statement is determined by the corridor
method in accordance with FRS 119 (2004) 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 (2004) 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 employees 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.
(m) Income taxes

Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and
include all taxes based upon the taxable profits, including withholding taxes payable by a foreign subsidiary
company on distributions of retained earnings 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 subsidiaries, associates and joint
ventures 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.
Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.
123

ANNUAL REPORT 2006

(n)
Foreign currency transactions and translation

Transactions in foreign currencies during the financial year are translated into Ringgit Malaysia at exchange rates
ruling at the transaction dates. Foreign currency monetary assets and liabilities at the balance sheet date are
translated into Ringgit Malaysia at the exchange rates ruling at that date. Exchange differences arising from the
settlement of foreign currency transactions and from the translation of foreign currency monetary assets and
liabilities are included in the income statement.
Results of foreign subsidiary and associated companies are translated into Ringgit Malaysia at average rates of
exchange for the financial year. Assets and liabilities are translated into Ringgit Malaysia, at the rates of exchange
ruling at the balance sheet date. Exchange differences arising from the translation of the results for the financial
year at average rates and assets and liabilities at year end rates and the restatement at year end rates of the
opening net investments in foreign subsidiary and associated companies are taken to a foreign exchange
translation account as a component of shareholders funds.
The principal closing rates used in translation of foreign currency amounts were as follows:
Foreign currency
1 USD
1 GBP
1 AUD
1 EURO
100 JPY
31.3.2006
RM
31.3.2005
RM
3.69
6.43
2.64
4.48
3.14
3.80
7.14
2.93
4.92
3.54
(o)
Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, bank balances, bank deposits, bank overdrafts and short term,
highly liquid investments that are readily convertible to known amounts of cash which are subject to insignificant
risk of changes in value.
(p)
Revenue recognition
Revenue from sales of vehicles, spare parts and accessories are recognised upon delivery.
Revenue from sale of completed apartments is recognised when the Sale and Purchase Agreements are signed.
Revenue for rendering of services on long term engineering contracts is recognised on the basis of the stage of
completion of such contracts at the financial year end, where the contractual outcome can be assessed
with reasonable certainty. Full provision is made for all foreseeable losses on contracts entered into or commenced
prior to the financial year end. Amounts are included within receivables and prepayments to recognise timing
differences arising between amounts invoiced and amounts recognised in the income statement on individual
engineering contracts.
124


(p)
Revenue recognition (continued)

Other revenue comprises mainly revenue from rental and royalty, which are recognised on an accrual basis.
Dividends are recognised when the companys right to receive payment is established.
(q)
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

Foreign currency forward contracts
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 date of such transaction, at which time they are included in the measurement of such
transactions.
All other exchange gains and losses relating to hedge instruments are recognised in the income statement in
the same period as the exchange differences on the underlying hedged items. Gains and losses on contracts
which are no longer designated as hedges are included in the income statement.
(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.
125

ANNUAL REPORT 2006

(q)
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.
Unquoted long term investments are valued based on quoted investments with similar features. The fair value
for long term debts is estimated by discounting the future contractual cash flows at the current market interest
rate available to the Group for similar instruments.
The face values, less any estimated credit adjustments, for financial assets and liabilities classified as current
are assumed to approximate their fair values.
(r)
Borrowings
Classification
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.
Interest, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability is
reported within finance cost in the income statement.
Capitalisation of borrowings cost
Borrowings cost incurred on specific and identifiable borrowings used to finance property development and
construction contract is capitalised until the properties are ready for their intended use.
(s)
Share capital
Ordinary shares are classified as equity. External cost directly attributable to the issue of new shares are expensed
off in the income statement.
Final dividends payable on ordinary shares are recognised as liabilities when formally approved.
(t)
Contingent liabilities and contingent assets

The Group 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.
126


(u)
Impairment of assets
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 the higher of an assets net selling price and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest level for which there is separately identifiable cash flows.
The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it is
charged to the revaluation surplus. Any subsequent increase in recoverable amount is recognised in the income
statement unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus.
REVENUE
Revenue represents the invoiced value of goods sold and services provided and is net of commission paid to dealers
and related taxes. Revenue comprises:
Group
Sale of vehicles, spare parts and accessories

Gross dividend income
Rendering of services
Others
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
7,645,963
142,957
8,012
8,141,045
333,493
8,757
111,097
1,488,839
7,796,932
8,483,295
111,097
1,488,839
127

ANNUAL REPORT 2006
PROFIT FROM OPERATIONS

Group
Restated
2006
2005
RM000
RM000
Company
2006
RM000
2005
RM000
The following items have been charged/(credited) in arriving

at profit from operations:
Gross dividends receivable from:
subsidiary company, unquoted being dividend-in-specie
subsidiary company, unquoted
associated companies, unquoted
others, quoted
others, unquoted
Property, plant and equipment:
depreciation
written off
impairment
(gain)/loss on disposal
Research and development expenditure
Provision for warranties (net of expected reimbursement)
Impairment of investment in associated companies
Impairment of goodwill
(Write back)/diminution in value of short term investments
Loss on disposal of a jointly controlled entity
Gain on disposal of short term investments
Group audit fees to PricewaterhouseCoopers
Malaysia current year
underprovision of prior year
firms of worldwide organisation
Non-audit service fees to PricewaterhouseCoopers
Malaysia
firms of worldwide organisation
Operating lease rental
Hire of plant, machinery and equipment
Rental of premises
Foreign exchange (gain)/loss:
transactions
translation
Rental income on land and buildings
Interest income
Allowance for inventories write down
Recovery of insurance claims on Medium Volume Factory Fire
(9,525)
(8,136)
(1,042)
351,409
82,857
5,066
(218)
271,661
81,314
117,923
(7,202)
5,113
(2,664)
312,428
135,643
1,879
23,713
347,193
55,645
9,983
22,000
367,577
7,202
(11,106)
(109,843)
(1,254)
(1,300,724)
(187,303)
(812)
514
200
966
572
1,217
87
105
1,934
362
7,644
12,722
87
1,682
3,956
580
21,044
(3,695)
(20,365)
(1,307)
(67,388)
46,865
(46,737)
(2,238)
(6,208)
(383)
(87,910)
18,527
(223)
(588)
(15)
224
128

STAFF COST
Group
Wages, salaries and bonuses

Termination benefits
Pension cost
defined contribution plan
defined benefit plan
Other employee benefits
Reversal of overprovision of defined benefit plan
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
501,823
1,839
590,051
28,680
180
707
31,818
45,065
58,874
19,749
22,551
45,568
(22,052)
16
91
639,419
684,547
196
798
Prior to 31 March 2002, retirement benefit contributions by a subsidiary company were paid to the Hicom Retirement
Benefit Scheme, an approved independent fund. With effect from 1 April 2002, the subsidiary converted the defined
benefit scheme to a defined contribution plan with the Employees Provident Fund (EPF). Accrued benefits under the
earlier scheme were transferred to the EPF.
As at 31 March 2002, the shortfall in the defined scheme was estimated by the subsidiary. The actual shortfall was
determined in the previous financial year, resulting in the reversal of over provisions previously made.
Directors remuneration
The aggregate amount of emoluments receivable by the Directors of the Company during the financial year was as follows:
Group
Non-executive Directors:
fees
estimated money value of benefits-in-kind
other employee benefits
Executive Directors:
salaries and bonuses
estimated money value of benefits-in-kind
other employee benefits
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
514
24
178
500
40
514
24
178
412
32
955
57
128
707
15
76
180
16
707
15
76
1,856
1,338
912
1,242
Details of the defined contribution and defined benefit plans of the Group and Company are set out in Note 33.
129

ANNUAL REPORT 2006
FINANCE COST
Group
Interest expense on:

Long term loans
Short term borrowings
Others
2006
RM000
2005
RM000
29,105
13,791
982
26,512
18,117
1,563
43,878
46,192
Included in other operating income of the Group is interest income amounting to RM67,388,000 (2005: RM87,910,000).
TAXATION
Group
Taxation in Malaysia
Current taxation:
charge for the financial year
under/(over) accrual in respect of prior years
Taxation on share of profits of associated companies
Taxation on share of profits of jointly controlled entities
Taxation outside Malaysia
Current taxation:
charge for the financial year
(over)/under accrual in respect of prior years
Taxation on share of profits of associated companies
Taxation on share of profits of jointly controlled entities
Deferred taxation (Note 28)
Origination and reversal of temporary differences
2006
RM000
2005
RM000
35,557
2,005
2,798
2,454
96,175
(152,480)
2,270
4,027
Company
2006
2005
RM000
RM000
169
(92)
364,203
2,173
(568)
4,295
540
2,074
2,941
6,126
611
(67,576)
8,129
(18,322)
(30,127)
77
364,203
130

TAXATION (CONTINUED)
Group
Total
Taxation for Company and subsidiaries
Share of taxation in associated companies
Share of taxation in jointly controlled entities
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
(28,409)
7,093
2,994
(43,161)
8,396
4,638
77
364,203
(18,322)
(30,127)
77
364,203
Numerical reconciliation between the average effective tax rate and the Malaysian tax rate.
Group
Restated
2006
2005
%
%
Malaysian tax rate
Tax effects of:
double deduction and allowance incentive on qualified
expenditure
expenses not deductible for tax purposes
income not subject to tax
current year tax losses not recognised
under/(over) accrual in respect of prior years
others
Average effective tax rate
Company
2006
%
2005
%
28
28
28
28
(249)
139
(91)
101
5
2
(30)
33
(2)
2
(34)
(4)
(28)
(4)
(65)
(7)
24
131

ANNUAL REPORT 2006
TAXATION (CONTINUED)
Group
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
Current year tax losses utilised during the financial year

Tax savings arising from such tax losses
1,057
298
2,864
858
Previously unrecognised tax losses utilised during the

financial year
Tax savings arising from such tax losses
6,675
1,869
5,014
1,467
614,461
1,421,028
803,175
1,118,500
Disclosure items:
Unutilised tax losses carried forward

Unutilised reinvestment allowance
EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average
number of ordinary shares in issue during the financial year.
Group
Restated
2006
2005
Net profit attributable to shareholders (RM000)
Weighted average number of ordinary shares in issue (000)
Basic earnings per share (sen)
46,690
442,442
549,213
549,213
8.5
80.6
Diluted earnings per share is not presented in the financial statements since there are no dilutive potential ordinary
shares.
132

DIVIDENDS
Dividends declared or proposed in respect of the financial year ended 31 March 2006 are as follows:
Group
Final dividend proposed for the financial year ended 31 March 2006:
Tax exempt dividend of 5.0 sen (2005: 10.0 sen) per ordinary share
Interim dividend paid for the financial year ended 31 March 2006:
RM Nil (2005: tax exempt dividend of 25.0 sen) per ordinary share
2006
RM000
2005
RM000
27,461
54,921
137,303
27,461
192,224
At the forthcoming Annual General Meeting, a final gross dividend of 5.0 sen per share (tax exempt) amounting to
RM27,461,000 will be proposed for shareholders approval. The financial statements do not reflect this final dividend,
which will only be accrued as a liability when approved by shareholders.
10
INVENTORIES
Group
At cost
Raw materials:
completely knocked-down packs of vehicles
others
Parts, accessories and general stores
Work-in-progress
Finished vehicles
Goods-in-transit
Apartments for sale
Balance carried forward
2006
RM000
2005
RM000
262,996
148,174
91,139
102,933
651,574
65,988
171
155,635
111,986
87,393
102,209
389,709
36,604
9,482
1,322,975
893,018
133

ANNUAL REPORT 2006
10
INVENTORIES (CONTINUED)
Group
Balance brought forward

At net realisable value
Raw materials:
completely knocked-down packs of vehicles
Parts, accessories and general stores
Finished vehicles
Apartments for sale
11
2006
RM000
2005
RM000
1,322,975
893,018
1,924
118
47,357
16,631
2,492
1,718
58,709
11,143
66,030
74,062
1,389,005
967,080
TRADE AND OTHER RECEIVABLES

Group
2006
RM000
Trade receivables
Other receivables
Warranty claims recoverable (Note 18)

Prepayments
Deposits
2005
RM000
Company
2006
2005
RM000
RM000
969,300
(52,662)
1,067,824
(19,861)
916,638
1,047,963
143,778
(86,333)
118,790
(1,211)
195
45
57,445
117,579
195
45
125,835
28,709
14,224
146,261
23,796
12,956
4,444
1,142,851
1,348,555
195
4,489
134

11
TRADE AND OTHER RECEIVABLES (CONTINUED)

The currency exposure profile of trade and other receivables are as follows:
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Others
Company
Functional currency
Ringgit Malaysia
Company
Functional currency
Ringgit Malaysia
Others
RM000
Total
RM000
958,916
113
61,349
60,673
14,459
270
3,697
14,015
4
249
8,964
20,142
1,023,648
98,787
20,416
958,916
61,462
75,402
17,716
29,355
1,142,851
195
195
Others
RM000
Total
RM000
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Others
Currency exposure at 31.3.2006

Pound
US
Sterling
Dollar
Euro
RM000
RM000
RM000

Pound
US
Sterling
Dollar
Euro
RM000
RM000
RM000
1,034,819
58,352
62,629
31,500
91,649
23,858
5
13,607
10,838
21,298
1,202,704
124,548
21,303
1,034,819
58,352
94,129
115,512
45,743
1,348,555
45
4,444
4,489
135

ANNUAL REPORT 2006
11
TRADE AND OTHER RECEIVABLES (CONTINUED)

Credit terms of trade receivable for the Group ranges from 14 days to 360 days (2005: 14 days to 360 days). However,
the majority of the Group trade receivables have a credit term between 14 days to 60 days (2005: 14 days to 60 days).
Group sales are concentrated in Malaysia with one major third party customer in Malaysia making up 31% (2005: 28%)
of total Group revenue.
12
AMOUNTS DUE FROM SUBSIDIARY COMPANIES

The amounts due from subsidiary companies are denominated in Ringgit Malaysia, interest free and has no fixed terms
of payment.
13
AMOUNTS DUE FROM ASSOCIATED COMPANIES

The amounts due from associated companies arose from normal trade transactions. These amounts have credit terms
ranging from 30 to 60 days (2005: 30 to 60 days).
Ringgit
Pound
Malaysia
Sterling
Total
RM000
RM000
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
3,043
1,351
3,043
1,351
3,043
1,351
4,394

Ringgit
Pound
Malaysia
Sterling
Total
RM000
RM000
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
1,784
1,770
1,784
1,770
1,784
1,770
3,554
136

14
AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES

Group
Amounts due from jointly controlled entities

Advances to a jointly controlled entity
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
45,285
17,937
19,929
3,713
45,285
37,866
3,713
The amounts due from jointly controlled entities arose from normal trade transactions. These amounts have credit terms
ranging from 30 to 45 days (2005: 30 to 45 days).
Advances to a jointly controlled entity in 2005 were due within 180 days and interest of 7.23% was charged.
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Total
RM000
45,198
74
13
45,272
13
45,198
87
45,285

Japanese
US
Euro
Yen
Dollar
RM000
RM000
RM000
Total
RM000
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling

Japanese
US
Euro
Yen
Dollar
RM000
RM000
RM000
9,512
19,929
3,713
4,712
17,937
19,929
9,512
19,929
3,713
4,712
37,866
Company
The amount due from a jointly controlled entity in the previous financial year was denominated in Japanese Yen.
137

ANNUAL REPORT 2006
15
SHORT TERM INVESTMENTS

Group
Quoted investments in Malaysia:

Cost:
Shares
Commercial paper and corporate debt
Unquoted investments in Malaysia:

Cost:
Allowance for diminution in value
Market value of investments:

Shares
2006
RM000
2005
RM000
116,736
584
120,177
584
117,320
120,761
94,645
87,976
211,965
208,737
(7,202)
211,965
201,535
121,868
98,996
112,975
91,898
220,864
204,873
138

16
DEPOSITS, BANK AND CASH BALANCES

Group
Short term funds deposited with:

Licensed banks
Discount houses
Other financial institutions
Bank and cash balances
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
1,168,787
227,470
57,465
2,063,539
112,816
48,268
49,000
1,453,722
132,260
2,224,623
230,095
49,000
835
50,638
1,585,982
2,454,718
49,835
50,638
Included in deposits are fixed deposits of RM716,841,000 (2005: RM705,718,000) pledged as restricted cash security the
term loans obtained by subsidiary companies as explained in Note 30(b).
The deposits have the following maturity profiles:
Group
0 1 month
2 3 months
4 6 months
6 12 months
More than 12 months
Bank balances are deposits held at call with banks.
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
626,287
83,386
90,500
353,549
300,000
558,172
113,724
90,932
1,161,795
300,000
49,000
1,453,722
2,224,623
49,000
139

ANNUAL REPORT 2006
16
DEPOSITS, BANK AND CASH BALANCES (CONTINUED)

The currency exposure profile of deposits, bank and cash balances are as follows:
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Australian Dollar
Others
Others
RM000
Total
RM000
1,483,290
1,312
14,807
15,549
10,154
789
34,570
4,057
2,992
18,462
1,504,997
27,953
34,570
18,462
1,483,290
16,119
25,703
35,359
25,511
1,585,982
Others
RM000
Total
RM000
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Australian Dollar
Others

Pound
US
Australian
Sterling
Dollar
Dollar
RM000
RM000
RM000

Pound
US
Australian
Sterling
Dollar
Dollar
RM000
RM000
RM000
2,193,509
69,599
62,123
17,956
22,533
26,312
18,838
17,788
6,756
19,304
2,325,164
91,412
18,838
19,304
2,193,509
131,722
40,489
45,150
43,848
2,454,718
Deposits, bank and cash balances in the Company as at 31 March 2006 and 2005 are denominated in Ringgit Malaysia.
The weighted average effective interest rates of deposits at the balance sheet date were 3.10% (2005: 2.87%) per annum
for the Group and 2.73% (2005: Not applicable) for the Company.
140

17
TRADE AND OTHER PAYABLES

Group
Restated
2006
2005
RM000
RM000
Trade payables
Other payables
Accruals
Amounts due to related parties
Leasing and hire purchase creditors
current portion
Company
2006
RM000
2005
RM000
250,129
350,118
625,743
21,338
461,026
204,957
1,028,178
617
2,102
381
2,136
1,247,328
1,694,165
2,719
2,517
Others
RM000
Total
RM000
The currency exposure profile of the trade and other payables are as follows:
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Others
Company
Functional currency
Ringgit Malaysia

Pound
US
Japanese
Sterling
Dollar
Yen
RM000
RM000
RM000
960,123
4,514
103,949
16,678
15,371
357
28,133
1,273
95,767
8,641
12,522
1,105,215
129,234
12,879
960,123
108,463
32,406
29,406
116,930
1,247,328
2,658
61
2,719
141

ANNUAL REPORT 2006
17
TRADE AND OTHER PAYABLES (CONTINUED)
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Others
Ringgit
Malaysia
RM000
Currency exposure at 31.3.2005 (Restated)

Pound
US
Japanese
Sterling
Dollar
Yen
Others
RM000
RM000
RM000
RM000
1,289,762
894
204,434
87,196
14,750
40,413
129
34,384
12,017
10,186
1,452,649
231,330
10,186
1,289,762
205,328
101,946
40,542
56,587
1,694,165
845
48
10
1,418
196
2,517
Company
Functional currency
Ringgit Malaysia
Total
RM000
Terms of trade payables granted to the Group and Company varies up to 60 days (2005: 60 days) credit days and no
credit (2005: Not applicable) respectively.
18
PROVISIONS
Group
Warranties
2006
2005
RM000
RM000
At 1 April
Exchange differences
239,888
(5,043)
237,636
1,315
81,314
(8,946)
55,645
33,473
Additional provision for the financial year

Utilised during the financial year
72,368
(90,151)
89,118
(88,181)
At 31 March
217,062
239,888
Charged to income statement

Warranties receivable
The Group expects to receive reimbursement from suppliers in respect of warranties amounting to RM125,835,000
(2005: RM146,261,000) as disclosed in Note 11.
142

19
AMOUNTS DUE TO SUBSIDIARY COMPANIES

Amounts due to subsidiary companies are unsecured, denominated in Ringgit Malaysia, interest free and have no fixed
repayment terms.
20
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.
21
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
(2005: 30 days to 45 days).
The currency exposure profile of the amounts due to jointly controlled entities is as follows:
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
20,063
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Others

Pound
US
Sterling
Dollar
RM000
RM000
75

Pound
US
Sterling
Dollar
RM000
RM000
Total
RM000
20,138
Total
RM000
39,097
596
702
39,693
702
39,097
596
702
40,395
143

ANNUAL REPORT 2006
22
SHORT TERM BORROWINGS

Group
Unsecured:
Long term loan
current portion (Note 30)
Bankers acceptance
Bank overdrafts
Secured:
Bank Overdrafts
Long term loan current portion (Note 30)
2006
RM000
2005
RM000
56,613
1,304
58,260
54,436
1,410
172,075
116,177
227,921
117,689
570,900
688,589
804,766
227,921
The interest rate charged for bank overdrafts during the financial year ranged from 5.50% to 6.86% (2005: 5.50% to 6.83%)
per annum.
The bankers acceptance was drawn in Ringgit Malaysia and payable within 60 days. No interest was charged to the
amount drawn (2005: Nil).
The currency exposure profile of the short-term borrowings is as follows:
Group
Functional currency
Ringgit Malaysia
Pound Sterling
Ringgit
Malaysia
RM000
Pound
Sterling
RM000
USD
RM000
Euro
RM000
Others
RM000
Total
RM000
57,917
332,193
67,504
313,740
5,169
28,243
371,657
433,109
57,917
332,193
67,504
318,909
28,243
804,766
144

22
SHORT TERM BORROWINGS (CONTINUED)

Pound
Sterling
USD
Others
RM000
RM000
RM000
Total
RM000
55,846
106,653
52,705
12,717
55,846
172,075
55,846
106,653
52,705
12,717
227,921
Office
equipment,
furniture,
fittings and
vehicles
RM000
Work-inprogress
RM000
Total
RM000
1,014,993
468,451
6,639,237
Ringgit
Malaysia
RM000
Group
Functional currency
Ringgit Malaysia
Pound Sterling
23
PROPERTY, PLANT AND EQUIPMENT
Land
Note
Group
2006
Cost/valuation
At 1 April 2005
differences
Additions
Disposals
Written off
Reclassification
At 31 March 2006
Freehold
RM000
Long term
leasehold
RM000
Buildings
RM000
Plant
and
machinery
RM000
243,464
12,045
1,181,676
3,718,608
(1,525)
14,070
256,009
(106)
(950)
10,989
(20,977)
5,626
(8,840)
122,349
1,279,834
(23,401)
14,041
(6,887)
(12,656)
392,706
4,082,411
(19,405)
69,766
(29,565)
(6,217)
82,203
1,111,775
(137)
374,948
(114)
(77,034)
(597,258)
168,856
(65,551)
478,451
(46,356)
(95,907)
6,909,874
145

ANNUAL REPORT 2006
23
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Land
Note
Group
2006
Accumulated
depreciation
At 1 April 2005
Freehold
RM000
Long term
leasehold
RM000
Buildings
RM000
Plant
and
machinery
RM000
821
331,834
2,090,916
Office
equipment,
furniture,
fittings and
vehicles
RM000
Work-inprogress
RM000
Total
RM000
576,354
2,999,925
differences
Charge for the
financial year
Disposals
Written off
(4,250)
(13,383)
(9,530)
(27,163)
112
19,702
(2,156)
205,133
(4,989)
(6,835)
126,462
(13,866)
(6,215)
351,409
(21,011)
(13,050)
At 31 March 2006
933
345,130
2,270,842
673,205
3,290,110
14,879
1,056
158,616
89,079
62,330
325,960
(106)
(15,916)
(8,827)
(6,115)
(32,461)
(950)
2,699
(6,686)
2,062
(1,878)
16
(233)
5,066
(9,747)
Accumulated
impairment losses
At 1 April 2005
differences
Charge for the
financial year
Disposals
(1,497)
289
At 31 March 2006
13,671
138,713
80,436
55,998
288,818
Net book value

At 31 March 2006
242,338
10,056
795,991
1,731,133
382,572
168,856
3,330,946
146

23
Land
Note
Group
2005
Cost/valuation
At 1 April 2004
differences
Additions
Disposals
Written off
Capitalisation of
work-in-progress
At 31 March 2005
Accumulated
depreciation
At 1 April 2004
Office
equipment,
furniture,
fittings and
vehicles
RM000
Work-inprogress
RM000
Total
RM000
855,213
307,195
5,993,504
7,244
18,149
(99,191)
(273)
5,137
60,648
(14,536)
(3,796)
5
811,159
(135,636)
(514,272)
Freehold
RM000
Long term
leasehold
RM000
Buildings
RM000
Plant
and
machinery
RM000
241,914
12,015
1,186,424
3,390,743
431
1,148
(29)
30
6,070
4,102
(14,929)
18,917
895,206
(128,685)
(139,705)
401,936
112,327
243,464
12,045
1,181,676
3,718,608
1,014,993
468,451
6,639,237
723
315,242
1,961,218
489,262
2,766,445
4,591
2,688
8,586
95,217
(8,159)
(2,654)
differences
Charge for the
financial year
Disposals
Written off
1,307
98
19,921
(4,636)
At 31 March 2005
821
331,834
197,192
(71,824)
(261)
2,090,916
576,354
312,428
(84,619)
(2,915)
2,999,925
147

ANNUAL REPORT 2006
23
Land
Office
equipment,
furniture,
fittings and
vehicles
RM000
Work-inprogress
RM000
Total
RM000
Freehold
RM000
Long term
leasehold
RM000
Buildings
RM000
Plant
and
machinery
RM000
14,448
1,025
156,585
85,186
61,408
318,652
431
31
4,672
2,541
1,795
9,470
253
(2,894)
1,358
(6)
268
(1,141)
1,879
(2,894)
(1,147)
At 31 March 2005
14,879
1,056
158,616
89,079
62,330
325,960
Net book value

At 31 March 2005
228,585
10,168
691,226
1,538,613
376,309
468,451
3,313,352
Note
Group
2005
Accumulated
impairment losses
At 1 April 2004
differences
Charge for the
financial year
Disposals
Written off
A piece of a subsidiary companys freehold land was revalued on 5 September 1983 based on an independent
professional valuation. The surplus of RM36,881,980 arising on the revaluation was credited to the capital reserves and
subsequently utilised.
Had the 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 (2005: RM22,448,000).
The long term leasehold land comprise 2 parcels of land held by certain subsidiary companies which have unexpired
leases of 91 and 70 years respectively as at 31 March 2006 (2005: 92 and 71 years respectively). A leasehold land with
unexpired lease period of 137 years was disposed during the year.
The title deed to the land of the Group amounting to net book value of RM72,258,000 (2005: RM52,260,000) has not been
transferred pending subdivision of the master title.
148

24
SUBSIDIARY COMPANIES
Company
2006
2005
RM000
RM000
Unquoted shares at cost:
At 1 April
Acquisition of subsidiary companies
At 31 March
1,465,659
*
1,465,659
1,465,659
1,465,659
The cost of investment in subsidiary companies is RM8.
The details of the subsidiary companies are as follows:

Country of
incorporation
Groups effective
interest
2006
2005
Name
Principal activities
Perusahaan Otomobil
Nasional Sdn. Bhd.^
Manufacture, assemble and sale of

motor vehicles and related products
Malaysia
100%
100%
Proton Tanjung Malim Sdn. Bhd.^
Assembly of motor vehicles and

related products
Malaysia
100%
100%
Proton Marketing Sdn. Bhd.
Investment holding
Malaysia
100%
100%
Lotus Advance
Technologies Sdn. Bhd.
Investment holding
Malaysia
100%
100%
Proton Hartanah Sdn. Bhd.
Investment holding
Malaysia
100%
100%
Proton Capital Sdn. Bhd.
Investment holding
Malaysia
100%
100%
Investment holding
Dormant
British Virgin
Islands
100%
100%
Subsidiary of Perusahaan
Otomobil Nasional Sdn. Bhd.
Proton Automobiles (China) Ltd.^
149

ANNUAL REPORT 2006
24
SUBSIDIARY COMPANIES (CONTINUED)

Name
Country of
incorporation
Subsidiary of Proton
Marketing Sdn. Bhd.
Proton Corporation Sdn. Bhd.^
Dormant
Malaysia
100%
100%
Proton Cars (UK) Ltd.*^
Distributor of Proton vehicles in

United Kingdom
England
100%
100%
Proton Cars Australia Pty. Ltd.*^
Importation and distribution of

motor vehicles and related products
Australia
100%
100%
Proton Cars Benelux NV. SA*^
Dormant
Belgium
100%
100%
Lotus Cars Asia Pacific Sdn. Bhd.^
Dormant
Malaysia
100%
100%
Auto Compound and

Distribution Centre Sdn. Bhd.^
Dormant
Malaysia
100%
100%
Proton Edar Sdn. Bhd.^
Sale of motor vehicles, related spare

parts and accessories
Malaysia
100%
100%
Provision of Engineering Services
Malaysia
100%
100%
Lotus Group International Ltd.*^
Investment holding
England
100%
100%
Subsidiaries of Proton
Hartanah Sdn. Bhd.
Proton Properties Sdn. Bhd.^
Property development and management
Malaysia
100%
100%
Subsidiaries of Lotus Advance

Technologies Sdn. Bhd.
Proton Engineering Research
Technology Sdn. Bhd.^
Groups effective
interest
2006
2005
150

24

Name
Country of
incorporation
Subsidiary of Proton Cars (UK) Ltd.

Smith & Sons Motors Ltd.*^
Dormant
England
100%
100%
Proton Direct Ltd.+^
Motor dealership
England
100%
100%
Proton Cars (Imports) Ltd.*^
Dormant
England
100%
100%
Proton Cars Direct Limited*^
Dormant
England
100%
100%

Singapore
100%
100%
Proton Edar Resources Sdn. Bhd.^
Repair and maintenance of motor

vehicles (previously dormant)
Malaysia
100%
100%
Proton Edar Ventures Sdn. Bhd.^
Dormant
Malaysia
100%
100%
PT Proton Edar Indonesia*

Indonesia
95%
95%
Subsidiary of Proton Engineering

Research Technology Sdn. Bhd.
Marco Acquisition Corporation*^
Leasing of Equipment and Asset
United States of
America
100%
100%
Subsidiary of Lotus
Group International Ltd.
Group Lotus plc*^
Holds intellectual property
England
100%
100%
Subsidiary of Proton Edar Sdn. Bhd.

Proton Singapore Pte. Ltd.*^
Groups effective
interest
2006
2005
151

ANNUAL REPORT 2006
24

Name
Subsidiaries of Group Lotus plc

Lotus Cars Ltd.*^
Country of
incorporation
Groups effective
interest
2006
2005
Car manufacture and

engineering consultancy
England
100%
100%
Lotus Body Engineering Ltd.*^
Dormant
England
100%
100%
Lotus Motorsports Ltd.*^
Dormant
England
100%
100%
Lotus Holdings Inc.*^
Holding company for operations in

North America
United States of
America
100%
100%
Carries out specific engineering

contracts
England
100%
100%
Engineering consultancy
Malaysia
100%
100%
Engineering consultancy
in North America
United States of
America
100%
100%
Lotus Cars USA Inc.*^
Car sales and servicing
United States of
America
100%
100%
Subsidiary of Proton
Cars Australia Pty Ltd.
Lotus Cars Australia Pty. Ltd.*
Sale of cars
Australia
100%
100%
Subsidiary of Lotus Cars Ltd.

Lotus Engineering Ltd.*^
Subsidiary of Lotus Engineering Ltd.

Lotus Engineering (Malaysia)
Sdn. Bhd.^
Subsidiary of Lotus Holdings Inc.
Lotus Engineering Inc.*^
*
+
^
Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent
legal entity from PricewaterhouseCoopers, Malaysia
Not audited by PricewaterhouseCoopers
Consolidated by merger method of accounting
152

25
ASSOCIATED COMPANIES
Group
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
Unquoted shares at cost

Accumulated impairment losses
50,298
(22,000)
54,288
(22,000)
13,600
17,600
Share of post acquisition reserves
28,298
127,404
32,288
129,675
13,600
17,600
155,702
161,963
13,600
17,600
Group
2006
RM000
2005
RM000
151,865
3,837
157,799
4,164
155,702
161,963
Interest in associated companies are represented by:

Groups share of net tangible assets
Groups share of intangible assets
The details of the associated companies are as follows:

Country of
incorporation
Groups effective
interest
2006
2005
Name
PHN Industry Sdn. Bhd.
Manufacture and sales of stamped

parts and sub-assembly of
automotive metal components
Malaysia
35%
35%
Aluminium Alloy Industries

Sdn. Bhd.#
Development, manufacture and sale

of aluminium alloy casting products
Malaysia
25%
153

ANNUAL REPORT 2006
25
ASSOCIATED COMPANIES (CONTINUED)

Country of
incorporation
Groups effective
interest
2006
2005
Name
Marutech Elastomer
Industries Sdn. Bhd.
Manufacture and production

of moulded products, extruded and
rubber hoses for motor vehicles,
motorcycle and other related products
Malaysia
25%
25%
Exedy (Malaysia) Sdn. Bhd.
Manufacture and assembly of

manual clutch and automatic
transmission parts
Malaysia
45%
45%
Import, assembly and distribution

of vehicles
Socialist Republic
of Vietnam
25%
25%
Associated company of
Proton Hartanah Sdn. Bhd.
Proton City Development
Corporation Sdn. Bhd.
Property developer and project

management
Malaysia
40%
40%
Associated company
of Proton Cars (UK) Ltd.
Proton Finance Ltd.
Provide dealer and customer finance
England
Associated company
of Proton Edar Sdn. Bhd.
Netstar Advance Systems
Sdn. Bhd.
Engaged in the manufacture, assembly

and sale of vehicle tracking devices
Malaysia
40%
40%
Proton Automobile China Ltd.
Goldstar Proton Automobiles
Co. Ltd.
Production of automobile tools and

components
Peoples Republic
of China
49%
49%
Perusahaan Otomobil Nasional
Sdn. Bhd.
Vina Star Motors Corporation
49.99% 49.99%
The investment in this company was reduced to 19% and as such it was reclassified to long term investment.
154

26
JOINTLY CONTROLLED ENTITIES

Group
Restated
2006
2005
RM000
RM000
Unquoted shares at cost
Accumulated impairment losses
181,088
(1,114)
548,665
(1,114)
Share of post-acquisition reserves

Goodwill impairment charge during the year
179,974
69,989
547,551
75,483
(367,577)
249,963
255,457
In November 2004, the Group via its wholly owned subsidiary, Proton Capital Sdn. Bhd., acquired 57.75% interest in MV
Agusta Motor S.p.A. The goodwill arising from this acquisition amounting to RM367,577,000 was written off to reserves in
accordance with the accounting policy in the previous financial year.
During the current financial year, the accounting policy on goodwill was changed as explained in Notes 2(d) and 43.
This had resulted in the restatement of goodwill of RM367,577,000 on the balance sheet at the date of acquisition, which
was subsequently impaired at 31 March 2005 based on the Directors assessment of the carrying amount of its investment
in the jointly controlled entity.
The Groups share of the assets, liabilities, revenue and expenses of the jointly controlled entities are as follows:
Group
Non-current assets
Current assets
Current liabilities
Net assets
2006
RM000
2005
RM000
231,168
159,594
(140,799)
158,988
228,119
(131,650)
249,963
255,457
155

ANNUAL REPORT 2006
26
JOINTLY CONTROLLED ENTITIES (CONTINUED)

Group
2006
RM000
2005
RM000
195,321
(179,780)
203,461
(189,690)
Profit from ordinary activities before taxation

Taxation (Note 7)
15,541
(2,994)
13,771
(4,638)
Profit from ordinary activities after taxation
12,547
9,133
Revenue
Expenses (excluding tax)
The Group had excluded RM23,474,000 that would otherwise have been accounted for in respect of previous financial
year, share of losses after taxation of a jointly controlled entity from the financial statements following discontinuation of
the equity accounting for the results of the entity upon the carrying amounts of the investment having been fully eroded.
The Group had no obligation to finance those losses. The Groups investment in the related jointly controlled entity has
been disposed during the financial year.
The details of the jointly controlled entities are as follows:
Name
Country of
incorporation
Advanced Engine Research

Sdn. Bhd.^
Dormant
Malaysia
0%
50%
Trading of motor vehicle components,

spare parts and accessories
Malaysia
55%
55%
Dormant
England
56%
56%
Development, marketing and

sale of products and services
relating to dies, moulds and jigs
Malaysia
51%
51%
Jointly controlled entity of

Proton Marketing Sdn. Bhd.
Proton Parts Centre Sdn. Bhd.#
Proton Cars (Europe) Ltd.#

Lotus Advance Technology
Miyazu (Malaysia) Sdn. Bhd.#
Groups effective
interest
2006
2005
156

26
JOINTLY CONTROLLED ENTITIES (CONTINUED)


Perusahaan Otomobil Nasional
Sdn. Bhd.
PT Proton Tracoma Motors
(Indonesia)#
Manufacturing and sales of

motor vehicles
Indonesia
Manufacture and marketing of

motorcycles and related product
Italy
Jointly controlled entity

of Group Lotus plc
Lotus Finance Ltd.
Motor vehicles financing
Jointly controlled entity

of Proton Edar Sdn. Bhd.
Proton Commerce Sdn. Bhd.
Motor vehicles financing

Proton Capital Sdn. Bhd.
MV Agusta Motor SpA#^
#
^
27
Country of
incorporation
Name
Groups effective
interest
2006
2005
51%
51%
0%
58%
England
49.9%
49.9%
Malaysia
50%
50%
Companies in which the Group owns more than one half of the voting power. However, as the Group has joint
control over the financial and operating policies, these investments are treated as jointly controlled entities.
Disposed during the financial year.
OTHER LONG TERM INVESTMENTS

Group
2006
RM000
Unquoted investments in Malaysia:
At cost
Allowance for diminution in value
2005
RM000
Company
2006
2005
RM000
RM000
13,347
(2,950)
9,226
(2,950)
8,575
(2,100)
4,575
(2,100)
10,397
6,276
6,475
2,475
157

ANNUAL REPORT 2006
28
DEFERRED TAXATION
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined
after appropriate offsetting, are shown in the balance sheet:
Group
2006
RM000
2005
RM000
Company
2006
2005
RM000
RM000
Subject to income tax:

Deferred tax assets
Deferred tax liabilities
105,786
(805)
38,479
(1,074)
104,981
37,405
37,405
45,534
54,237
589
9,296
3,454
(15,985)
6,940
1,713
(797)
67,576
(8,129)
104,981
37,405
46,290
18,987
61,361
18,398
52,065
Offset of deferred tax liabilities
126,638
(20,852)
70,463
(31,984)
Deferred tax assets (after offsetting)
105,786
38,479
Movement of deferred tax

At start of financial year
(Charged)/credited to income statement:
(Note 7)
property, plant and equipment
inventories
allowances and provisions
receivables
At end of financial year
Deferred tax assets (before offsetting)

inventories
allowances and provisions
158

28
DEFERRED TAXATION (CONTINUED)

Group
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
Deferred tax liabilities (before offsetting)

receivables
(7,178)
(14,479)
(15,125)
(17,933)
Offset against deferred tax assets
(21,657)
20,852
(33,058)
31,984
(805)
(1,074)
Deferred tax liabilities (after offsetting)
The amount of liability not offset relates to deferred tax liabilities arising in an overseas subsidiary for which there is no
available asset for offset.
The tax effect of deductible temporary differences and unused tax losses (both of which have no expiry date) for which
no deferred tax asset is recognised in the balance sheet are as follows:
Group
2006
RM000
2005
RM000
Deductible temporary differences of which no deferred tax assets is recognised

Unrecognised tax losses
Unabsorbed capital allowances
Unrecognised reinvestment allowances
Other temporary differences
184,214
47,395
397,888
4,661
241,107
52,041
313,180
9,466
Taxable temporary differences of which no deferred tax liabilities is recognised

Surplus from land revaluation
11,572
12,860
As at 31 March 2006, there is no temporary differences associated with unremitted earnings of subsidiaries for the
recognition of deferred tax liabilities (2005: Nil).
159

ANNUAL REPORT 2006
29
GOODWILL
Group
RM000
30
At 1 April 2004/1 April 2005, as previously stated

Effect of change in policy (Note 43)
29,008
At 31 March 2005, as restated/At 31 March 2006
29,008
LONG TERM LIABILITIES

Group
Restated
2006
2005
RM000
RM000
Unsecured:
Long term loans (Note a)
Portion repayable within twelve months (Note 22)
Secured:
Long term loans (Note b)
Portion repayable within twelve months (Note 22)
115,490
(56,613)
169,926
(54,436)
58,877
115,490
570,900
(570,900)
629,936
Finance lease and hire purchase creditors

secured (Note c)
Portion repayable within twelve months
Employee retirement benefits (Note d)
629,936
4
(4)
41,378
14,213
100,255
759,639
160

30
LONG TERM LIABILITIES (CONTINUED)

(a)
Long term loans unsecured

Group
Restated
2006
2005
RM000
RM000
The long term loans are repayable as follows:
Within one year
Between one and two years
Between two and five years
56,613
58,877
54,436
56,613
58,877
115,490
169,926
The term loans are repayable by 5 annual instalments over a 5-year period. The loan balance comprises of two
separate tranches of RM21.6 million (2005: RM31.7 million) and RM93.9 million (2005: RM138.2 million) respectively. The
final payment of the first tranche of the loan is due on 22 June 2007 and the second tranche is due on 30 September
2007. Both tranches of the loan bears a fixed interest rate of 4% per annum and is repayable in Ringgit Malaysia.
(b)
Long term loans secured

The secured long term loans obtained by certain subsidiary companies are:
(i)
A term loan of 40 million was obtained by a foreign subsidiary company in October 2005. Interest is payable
at a fixed rate of 4.94% per annum and the loan is repayable in full in October 2006. The loan is secured
against another subsidiarys cash deposit in a bank in Malaysia (Note 39).
During the financial year, the loan was reclassified as short term as it falls due within the next twelve months.
(ii)
A term loan of Euro 70 million was obtained by a Malaysian subsidiary company. The loan was drawn to
finance an investment in a jointly controlled entity. The loan was drawn in Euro, secured against another
subsidiarys cash deposit in a bank in Malaysia (Note 39) and repayable in full on 26 November 2009. Interest
is payable at a fixed rate of 3.275% per annum on a half yearly basis.
During the financial year, the loan was reclassified as short term as the related investment was disposed and the
loan will be paid within the next twelve months.
161

ANNUAL REPORT 2006
30
31
LONG TERM LIABILITIES (CONTINUED)

(c)
Leasing and hire purchase creditors

The leasing and hire purchase arrangements obtained by subsidiary companies are secured against the assets of
the respective subsidiary companies.
(d)
Employee retirement benefits

The employee retirement benefits represents the scheme operated by Lotus Group International Ltd, as disclosed in
Note 33.
SHARE CAPITAL
Company
2006
2005
RM000
RM000
Authorised:
Issued and fully paid:

At beginning of financial year
Issuance of ordinary shares of RM1 each during the financial year
At end of financial year
32
1,000,000
1,000,000
549,213
*
549,213
549,213
549,213
2 units subscribers shares amounted to RM2 was issued and fully paid.
RESERVES
The Company has sufficient tax credits under Section 108(6) of the Income Tax Act, 1967 to frank approximately RM936.8
million (2005: RM936.3 million) of its retained profits as at 31 March 2006 if paid out as dividends. The extent of the
retained earnings not covered at that date amounted to RM105.1 million (2005: RM49.5 million).
In addition, the Company has tax exempt income as at 31 March 2006 amounting to approximately RM56.6 million (2005:
RM0.8 million) available for distribution as tax exempt dividends to shareholders. This tax exempt income is subject to the
agreement by the Inland Revenue Board.
Capital Reserves Group
The reserves arose as a result of the Group reorganisation. Following the share for share exchange, the Company has
no share premium. Accordingly, the amount of share premium previously recognised on consolidation has been
designated as capital reserve.
162

33
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 2002, using the
Projected Unit method, updated to 31 March 2006.
The movements during the financial year in the amount recognised in the consolidated balance sheet is as follows:
Group
At 1 April
Currency translation differences
Charged to income statement
Contributions and benefits paid
At 31 March
2006
RM000
2005
RM000
14,213
(3,364)
45,065
(14,536)
10,757
724
22,551
(19,819)
41,378
14,213
163

ANNUAL REPORT 2006
33
EMPLOYEE RETIREMENT BENEFITS (CONTINUED)

The amounts recognised in the consolidated balance sheet is analysed as follows:
Group
Present value of obligation

Fair value of plan assets
Shortfall of funded plan
Unrecognised actuarial gain/(losses)
Unrecognised transitional liability
Liability in balance sheet
2006
RM000
2005
RM000
370,548
(309,543)
299,940
(255,652)
61,005
8,455
(28,082)
44,288
(19,322)
(10,753)
41,378
14,213
The expense recognised in the consolidated income statement is analysed as follows:

Group
2006
RM000
2005
RM000
11,996
15,159
(16,750)
(2,670)
37,330
16,333
15,680
(14,038)
1,052
3,524
Total, included in staff costs within administrative expenses (Note 5)
45,065
22,551
Actual return on plan assets
65,290
25,720
Current service cost

Interest cost
Expected return on plan assets
Actuarial (gain)/losses recognised
Amortisation of transitional liability
164

33
EMPLOYEE RETIREMENT BENEFITS (CONTINUED)

The principal actuarial assumptions used in respect of the Groups defined benefit plan were as follows:
Group
Discount rates
Expected return on plan assets
equities
bonds
others
Expected rate of salary increase
Expected rate of pension payment increase
Inflation
34
2006
%
2005
%
5.00
5.40
7.25
4.50
4.00
3.85
2.85
2.85
7.50
5.00
3.75
3.75
2.75
2.75
SEGMENTAL INFORMATION
The Group is principally engaged in the automobile industry namely manufacturing, assembling, trading and provision of
engineering and other services in respect of motor vehicles and related products. Accordingly, no segmental information
is considered necessary for analysis by industry segments.
Intersegment sales comprise of sales of cars, parts and engineering services to companies in different geographical
locations.
Analysis of the Groups revenue, results and other information by geographical locations of the assets are as follows:
Malaysia
Other countries
Elimination
2006
RMmillion
Restated
2005
RMmillion
2006
RMmillion
2005
RMmillion
Revenue
External sales
Inter-segment sales
6,654.6
129.9
7,299.6
114.7
1,142.3
149.6
1,183.7
280.1
(279.5)
Total revenue
6,784.5
7,414.3
1,291.9
1,463.8
(279.5)
2006
RMmillion
Total
2006
RMmillion
Restated
2005
RMmillion
(394.8)
7,796.9
8,483.3
(394.8)
7,796.9
8,483.3
2005
RMmillion
165

ANNUAL REPORT 2006
34
SEGMENTAL INFORMATION (CONTINUED)

Malaysia
Result
Segment operating
profit/(loss)
Unallocated expenses
Unallocated income
Interest expense
Interest income
Share of net results of
associated companies
and jointly controlled
entities
Taxation
2006
RMmillion
Restated
2005
RMmillion
58.6
797.5
21.3
(347.2)
Other countries
2006
RMmillion
(118.1)
7.5
2005
RMmillion
Elimination
2006
RMmillion
(21.4)
5.4
20.2
2005
RMmillion
(85.5)
Other information
Segment assets
Unallocated assets
6,907.1
7,443.8
620.4
723.5
Total assets
Segment liabilities
Unallocated liabilities
1,282.1
1,665.1
278.7
328.6
Total liabilities
Capital expenditure
Depreciation and
amortisation
Assets written off
Impairment
Other non-cash items
Total
2006
RMmillion
Restated
2005
RMmillion
(54.1)
9.9
9.5
(43.9)
67.8
690.6
(18.1)
12.0
(46.2)
87.9
28.8
28.4
(327.0)
43.2
46.4
442.4
7,527.5
785.3
8,167.3
663.7
8,312.8
8,831.0
1,560.8
881.3
1,993.7
977.0
2,442.1
2,970.7
455.4
855.5
23.1
39.7
478.5
895.2
336.3
82.9
269.2
293.9
135.6
1.9
77.9
15.1
5.1
59.5
18.5
28.3
351.4
82.9
5.1
328.7
312.4
135.6
1.9
106.2
166

34
SEGMENTAL INFORMATION (CONTINUED)

Unallocated income includes dividend from other investments, gain on disposal of short-term investments and writeback of
provision for diminution in value of short-term investments. Unallocated costs represent losses on short-term investments, both
realised and unrealised. Segment assets consist primarily of property, plant and equipment, inventories, receivables and
operating cash, and exclude investments in associates, joint venture, long term investments, short term investments and
deferred tax assets. Segment liabilities comprise operating liabilities and exclude items such as taxation and borrowings.
Capital expenditure mainly comprises additions to property, plant and equipment (Note 23).
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.
Malaysia
35
Other countries
Elimination
2006
RMmillion
2005
RMmillion
2006
RMmillion
2005
RMmillion
2006
RMmillion
Revenue
External sales
Inter segment sales
6,441.0
129.9
7,052.0
114.7
1,355.9
149.6
1,431.3
280.1
(279.5)
Total revenue
6,570.9
7,166.7
1,505.5
1,711.4
(279.5)
2005
RMmillion
Total
2006
RMmillion
2005
RMmillion
(394.8)
7,796.9
8,483.3
(394.8)
7,796.9
8,483.3
CAPITAL AND OTHER COMMITMENTS

Group
2006
RM000
2005
RM000
267,727
3,900,523
717,455
2,724,111
4,168,250
3,441,566
Capital commitments
Capital expenditure for property, plant and equipment approved by the Board
not provided for in the financial statements:
Contracted for
Not contracted for
167

ANNUAL REPORT 2006
36
OPERATING LEASES
As at 31 March 2006, the Group was committed to making the following payments in respect of operating leases expiring:
Group
Land and
buildings
2006
RM000
Plant and
machinery
2006
RM000
Total
2006
RM000
Land and
buildings
2005
RM000
Plant and
machinery
2005
RM000
Total
2005
RM000
1,246
5,753
2,212
1,884
3,458
7,637
1,100
5,844
622
2,815
2,552
115
3,915
8,396
737
6,999
4,096
11,095
7,566
5,482
13,048
Within one year

Between one and five years
After five years
37
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
PEPS-JV (M) Sdn. Bhd.

Technomeiji Rubber Industries Sdn. Bhd.
Aluminium Alloy Industries Sdn. Bhd.
Equity investment
Equity investment
Equity investment
In addition to related parties disclosures mentioned elsewhere in the financial statements, set out below are other
significant related party transactions. The related party transactions described below were carried out on terms and
conditions obtainable in transactions with unrelated parties unless otherwise stated.
168

37
SIGNIFICANT RELATED PARTY TRANSACTIONS DISCLOSURES (CONTINUED)

Group
(a)
(b)
(c)
Sales of goods and services

Sales of goods
Tenmaz Sdn. Bhd.
Tenmaz Engineering (M) Sdn. Bhd.
Purchases of goods and services from:

Mitsubishi Corporation, Japan
Technomeiji Rubber Industries Sdn. Bhd.
PEPS-JV (M) Sdn. Bhd.
Aluminium Alloy Industries Sdn. Bhd.
Advances to a jointly controlled entity
38
2006
RM000
2005
RM000
18,650
*
*
22,034
7,012
175
157,536
165,940
13,597
186,259
16,601
1,002,033
156,749
182,316
12,444
176,170
19,929
Not applicable for the current financial year as these companies ceased to be related party.
CONTINGENT LIABILITIES
A supplier had obtained a judgement in default against a subsidiary company for RM12.2 million after failing to reach
a formal agreement. Management had obtained legal opinion that the claims are without basis and action has been
taken to set aside the judgement.
169

ANNUAL REPORT 2006
39
CASH AND CASH EQUIVALENTS

Group
40
Company
2006
2005
RM000
RM000
2006
RM000
2005
RM000
Licensed banks
Discount houses
Other licensed financial institutions
1,168,787
227,470
57,465
2,063,539
112,816
48,268
49,000
Bank and cash balances

Bank overdrafts
Fixed deposit pledged as security (Note 30)
1,453,722
132,260
(175,949)
(716,841)
2,224,623
230,095
(172,075)
(705,718)
49,000
835
50,638
693,192
1,576,925
49,835
50,638
FINANCIAL INSTRUMENTS
(a)
Financial risk management objectives and policies

The Groups 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.
(ii)
Interest rate risk

The Groups 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.
170

40
FINANCIAL INSTRUMENTS (CONTINUED)

(a)
Financial risk management objectives and policies (continued)

(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)
(b)
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.
Forward foreign exchange contracts

Forward foreign exchange contracts are entered into by the Group in currencies other than the functional currency
to manage exposure to fluctuations in foreign currency exchange rates on specific transactions.
As at 31 March 2006, the outstanding notional principal amount of the Group foreign exchange contracts are as follows:
Group
Maturity
Less than 6 months
Between 6 months and 1 year
2006
RM000
2005
RM000
45,873
41,986
327,518
78,948
87,859
406,466
171

ANNUAL REPORT 2006
40

(b)
Forward foreign exchange contracts (continued)

The foreign currency amounts to be received and the contractual exchange rates of the Groups outstanding
contracts are as follows:
Hedged item
Currency to
be received
Currency
to be paid
GBP
GBP
USD
USD
RM000
equivalent
Average
contracted rate
2006
Group
Future purchase of raw materials
over the following 6 months
Forecasted receivables
the following 6 months
6 to 12 months
45,873
41,986
1 USD = GBP 1.7701

1 USD = GBP 1.7571
87,859
2005
Group
Future purchase of raw materials
over the following 6 months
Forecasted receivables
the following 6 months
6 to 12 months
JPY
EUR
GBP
GBP
USD
USD
USD
AUD
145,280
28,115
14,901
11,611
1
1
1
1
GBP
GBP
USD
USD
127,611
78,948
1 USD = GBP 1.8875

1 USD = GBP 1.8875
406,466
USD
USD
USD
GBP
=
=
=
=
JPY 104.39
EUR 1.3037
GBP 1.8735
AUD 0.4070
172

40

(c)
Fair values
The carrying amounts of financial assets and liabilities of the Group and Company at the balance sheet date
approximated their fair values except as set out below:
Group
2006
Recognised on the balance sheet
Long term loans
unsecured
2005
Recognised on the balance sheet
Long term loans
unsecured
secured
Not recognised on the balance sheet
Foreign exchange hedge instruments
Note
Carrying
amount
RM000
Fair value
RM000
15
27
211,965
10,397
220,864
*
30
(115,490)
(115,078)
15
27
201,535
6,276
204,873
*
30
30
(169,926)
(629,936)
Company
Carrying
amount
Fair value
RM000
RM000
6,475
2,475
(169,123)
(631,324)
(5,041)
It was not practicable within the constraints of timeliness and cost to estimate the fair values of the unquoted
shares reliably. The Group and Company share of the net tangible worth of the investments at the balance
sheet date is RM14,956,000 (2005: RM9,510,000).
173

ANNUAL REPORT 2006
41
SIGNIFICANT DISPOSAL
On 24 December 2005, Proton Capital Sdn. Bhd., a wholly owned subsidiary of PROTON Holdings Berhad, entered into a
Share Purchase & Investment Agreement with GEVI S.p.A, a company organised and existing under the laws of Italy, in
relation to a proposed disposal involving the disposal of 57,750,000 Class A shares representing 57.75% of the corporate
capital of MV Agusta Motor S.p.A for a cash consideration of Euro 1.00 (The Disposal). The Disposal did not have any
significant effect on the earnings, net assets, share capital nor shareholdings of the PROTON Group.
With the Disposal completed on 1 March 2006, the loan of EUR70 million taken to acquire MV Agusta Motor S.p.A was
repaid on 26 May 2006 by utilising the restricted cash security as explained in Notes 30(b) and 39.
42
SUBSEQUENT EVENTS
Subsequent to the year end, the Group undertook a recapitalisation exercise to address the deficit in shareholders funds
and strengthen the operations of its overseas subsidiaries, Proton Cars (UK) Ltd and Proton Cars Australia Pty. Ltd via
partial waiver of intercompany balances and settlement of the remaining balances following the waiver.
This recapitalisation exercise requires the approval of the Boards of Directors of the respective entities and Bank Negara
Malaysia for additional overseas investment and the waiver of export trade debts. The proposal was approved by Bank
Negara Malaysia on 29 June 2006.
43
COMPARATIVES
Certain figures for the year ended 31 March 2005 presented have been reclassified or adjusted, as compared to the
original statutory accounts, due to the reasons below:
Consistent presentation with the financial statements disclosure requirements for the financial year ended 31 March
2006; and
Prior year adjustments arising from certain changes in accounting policies as described in Notes 2(d) and Note 26 as
summarised below.
The goodwill balance as at 31 March 2005 arising from the acquisition of a subsidiary company had been restated upon
the change in accounting policy as stated in Note 2(d). The goodwill arising from the investment in a jointly controlled
entity was restated as detailed in Note 26. The consequence of the change in goodwill policy was also the classification
of reserves between goodwill reserves and retained earnings.
174

43
COMPARATIVES (CONTINUED)
The effect of the change in accounting policy and the reclassification described above are as detailed below:
As previously
stated
RM000
As restated
RM000
Income statement
Profit after tax
810,019
(367,577)
442,442
Balance sheet
Retained earnings
Goodwill reserve
Goodwill
5,615,101
(727,174)
(698,166)
727,174
29,008
4,916,935
29,008
As previously
stated
RM000
Balance sheet
Trade and other payables
44
Adjustments
RM000
(1,708,378)
(745,426)
Reclassifications
RM000
14,213
(14,213)
As restated
RM000
(1,694,165)
(759,639)
APPROVAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on
26 July 2006.
STATEMENT BY DIRECTORS
pursuant to Section 169(15) of the Companies Act, 1965

ANNUAL REPORT 2006
We, Dato Mohammed Azlan bin Hashim and Syed Zainal Abidin bin 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 108 to 174 are
drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 March 2006 and
of the results and cash flows of the Group and the Company for the financial year ended on that date in accordance with
the provisions of the Companies Act, 1965 and the MASB approved accounting standards in Malaysia.
Signed on behalf of the Board of Directors in accordance with their resolution dated 26 July 2006.

Chairman
STATUTORY DECLARATION

Director
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 108 to 174 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 26 July 2006, before me.
COMMISSIONER FOR OATHS
175
176
REPORT OF THE AUDITORS
to the Members of PROTON Holdings Berhad
(Company No. 623177 A)

We have audited the financial statements set out on pages 108 to 174. These financial statements are the responsibility of the
Companys Directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statements
and to report our opinion to you, as a body, in accordance with section 174 of the Companies Act 1965 and for no other
purpose. We do not assume responsibility to any other person for the content of this report.
We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion:
(a)
the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and MASB
approved accounting standards in Malaysia so as to give a true and fair view of:
(i)
the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and
(ii)
the state of affairs of the Group and of the Company as at 31 March 2006 and of the results and cash flows of
the Group and Company for the financial year ended on that date;
and
(b)
the accounting and other records and the registers required by the Act to be kept by the Company and by the
subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
The names of the subsidiary companies of which we have not acted as auditors are indicated in Note 24 to the financial
statements. We have considered the financial statements of these subsidiaries and the auditors reports thereon.
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Companys financial
statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial
statements and we have received satisfactory information and explanations required by us for those purposes.
The auditors reports on the financial statements of the subsidiaries were not subject to any qualification and did not include
any comment made under subsection (3) of section 174 of the Act.
PRICEWATERHOUSECOOPERS
(No. AF: 1146)
Chartered Accountants
Kuala Lumpur
26 July 2006
DATO AHMAD JOHAN BIN MOHAMMAD RASLAN

(No. 1867/09/06 (J))
Partner of the Firm
SHAREHOLDINGS STATISTICS
177
as at 20 July 2006
ANNUAL REPORT 2006
ANALYSIS OF SHAREHOLDINGS
Share Capital
Authorised Share Capital
Issued and Fully Paid Up Capital
Class of Shares
Voting Rights
RM1,000,000,000/RM549,213,002/Ordinary Shares of RM1/- each

One (1) Voting Right for one (1) Ordinary Share
ANALYSIS OF SHAREHOLDINGS BY RANGE GROUPS
1 100
101 1,000
1,001 10,000
10,001 100,000
100,001 27,460,649
27,460,650 and Above
No. of
Shares
% Over Total
Shares
No. of
Shareholders
% Over Total
Shareholders
769
3,129,826
5,030,112
10,666,820
224,207,102
306,178,373
0.00
0.57
0.92
1.94
40.82
55.75
78
3,333
1,450
308
198
3
1.45
62.07
27.00
5.74
3.69
0.05
549,213,002
100.00
5,370
100.00
DISTRIBUTION OF SHAREHOLDINGS
1 100
101 1,000
1,001 10,000
10,001 100,000
100,001 27,460,649
27,460,650 and Above
Malaysian
No. of
Shares
Foreign
No. of
Shares
Malaysian
% Over
Total Share
Foreign
% Over
Total Share
Malaysian
No. of
Shareholders
Foreign
No. of
Shareholders
Malaysian
% Over Total
Shareholders
Foreign
% Over Total
Shareholders
686
3,041,296
4,454,561
6,904,700
122,706,127
306,178,373
83
88,530
575,551
3,762,120
101,500,975
0
0.00
0.55
0.81
1.26
22.34
55.75
0.00
0.02
0.10
0.69
18.48
0.00
75
3,225
1,316
214
90
3
3
108
134
94
108
0
1.40
60.06
24.51
3.99
1.68
0.05
0.05
2.01
2.49
1.75
2.01
0.00
443,285,743
105,927,259
80.71
19.29
4,923
447
91.69
8.31
549,213,002
100.00
5,370
100.00
178
as at 20 July 2006 (CONTINUED)

SUBSTANTIAL SHAREHOLDERS (5% AND ABOVE)

Name
1
2
3
KHAZANAH NASIONAL BERHAD

EMPLOYEES PROVIDENT FUND BOARD
PETROLIAM NASIONAL BERHAD
Shareholding
210,484,693
60,017,000
35,676,680
38.32
10.93
6.50
No. of Shares
THIRTY LARGEST SHAREHOLDERS

Name of Shareholders
1.
KHAZANAH NASIONAL BERHAD
210,484,693
38.32
2.
EMPLOYEES PROVIDENT FUND BOARD
60,017,000
10.93
3.
RHB NOMINEES (TEMPATAN) SDN. BHD.

PETROLIAM NASIONAL BERHAD
35,676,680
6.50
4.
CIMSEC NOMINEES (TEMPATAN) SDN. BHD.

SECURITY TRUSTEE (KCW ISSUE 2)
24,250,000
4.42
5.
LEMBAGA TABUNG HAJI
16,820,427
3.06
6.
CARTABAN NOMINEES (ASING) SDN. BHD.

GOVERNMENT OF SINGAPORE INVESTMENT CORPORATION PTE. LTD.
FOR GOVERNMENT OF SINGAPORE (C)
14,185,300
2.58
7.
PERMODALAN NASIONAL BERHAD
8,838,000
1.61
8.
CARTABAN NOMINEES (TEMPATAN) SDN. BHD.

AMANAH SSCM NOMINEES (TEMPATAN) SDN. BHD. FOR EMPLOYEES PROVIDENT FUND BOARD (JF404)
8,094,900
1.47
9.
PERECOM INDUSTRIES SDN. BHD.
7,444,000
1.36
10.
HSBC NOMINEES (ASING) SDN. BHD.

TNTC FOR SAUDI ARABIAN MONETARY AGENCY
6,835,998
1.24
11.

GOVERNMENT OF SINGAPORE INVESTMENT CORPORATION PTE. LTD.
FOR MONETARY AUTHORITY OF SINGAPORE (H)
5,960,200
1.09
12.
MALAYSIA NOMINEES (TEMPATAN) SENDIRIAN BERHAD

AMANAH SSCM ASSET MANAGEMENT BERHAD FOR AMANAH MILLENIA FUND BERHAD (JM730)
4,268,400
0.78
13.

SSBT FUND NDS6 FOR NORTHROP GRUMMAN PENSION MASTER TRUST
3,686,500
0.67
14.

TNTC FOR BRANDES INSTITUTIONAL EQUITY TRUST
3,658,200
0.67
15.
CITIGROUP NOMINEES (ASING) SDN. BHD.

EXEMPT AN FOR AMERICAN INTERNATIONAL ASSURANCE COMPANY LIMITED
3,534,500
0.64
179
as at 20 July 2006 (CONTINUED)

ANNUAL REPORT 2006
THIRTY LARGEST SHAREHOLDERS (CONTINUED)

Name of Shareholders
No. of Shares
16.
AMANAH RAYA NOMINEES (TEMPATAN) SDN. BHD.

AMANAH SAHAM MALAYSIA
3,471,800
0.63
17.

CBNY FOR DFA EMERGING MARKETS FUND
3,112,500
0.57
18.

MELLON BANK, N.A. FOR WEST VIRGINIA INVESTMENT MANAGEMENT BOARD
2,929,200
0.53
19.
CARTABAN NOMINEES (TEMPATAN) SDN. BHD.

EXEMPT AN FOR AMANAH SSCM NOMINEES (TEMPATAN) SDN. BHD. (ACCOUNT 1)
2,888,200
0.53
20.

EXEMPT AN FOR JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (AUSTRALIA)
2,862,300
0.52
21.

TNTC FOR UTAH STATE RETIREMENT SYSTEMS
2,354,176
0.43
22.

SSBT FUND NXW3 FOR BRANDES GLOBAL SMALL CAP EQUITY FUND
2,231,566
0.41
23.

INVESTORS BANK AND TRUST COMPANY FOR ISHARES, INC.
1,995,300
0.36
24.

TNTC FOR POLAR CAPITAL FUNDS PLC (ASIA EX JAPAN F)
1,986,100
0.36
25.

EXEMPT AN FOR FORTIS BANQUE LUXEMBOURG (OPCVM A/C)
1,953,575
0.36
26.

BNY BRUSSELS FOR ING EMERGING COUNTRIES FUND
1,903,014
0.35
27.
MAYBAN NOMINEES (TEMPATAN) SDN. BHD.

AVENUE INVEST BERHAD FOR KUMPULAN WANG AMANAH PENCEN (E00170-220136)
1,865,400
0.34
28.
BANK SIMPANAN NASIONAL
1,853,000
0.34
29.
1,852,000
0.34
30.
1,852,000
0.34
448,864,929
81.75
TOTAL
180
PROPERTIES OWNED BY PROTON GROUP

Location
Description and Existing Use
Tenure
Date of
Acquisition/
Revaluation
Age of
Building
Net Book Value

RM Million
PROPERTIES OWNED BY
PERUSAHAAN OTOMOBIL NASIONAL SDN. BHD.
No. H.S.(D) 71311, No. P.T. 82
Mukim of Damansara,
District of Petaling,
Selangor Darul Ehsan.
(Formerly, HICOM Industrial Estate
encompassing part of Lots 563,
564, 568, 570 and Lot 15,
Mukim of Damansara,
Selangor Darul Ehsan).
Land with an area of 6,231,080

Freehold
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.
05.09.1983
21 Years
Land: 68.4
Buildings: 146.5

encompassing Lot 572,
Mukim of Damansara,
3 units of flats currently

rented out
Freehold
09.04.1986
21 Years
Flats: 0.05
Freehold
19.11.1993
Land: 2.6
No. H.S.(D) 71309, No. P.T. 80,

Land having an area of
Mukim of Damansara,
158,107 sq. ft. used as the car
park for staff
(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).
181
(CONTINUED)
ANNUAL REPORT 2006
Location
Tenure
Date of
Acquisition/
Revaluation
Age of
Building
Net Book Value

RM Million
PROPERTIES OWNED BY
PERUSAHAAN OTOMOBIL NASIONAL SDN. BHD.
(CONTINUED)
Lot 25, HICOM Glenmarie
Industrial Park,
Mukim of Damansara,

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
30.12.1992
12 Years
Land: 20.6
Buildings: 44.2
No. H.S.(D) 86554, No. P.T. 257

encompassing Lot 54, 60 and 62,
Sime UEP Industrial Park,
Mukim of Damansara,

sq. ft. adjoining the Companys
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
12 Years
Land: 54.9
Track &
Buildings: 27
No. H.S.(D) B.P. 5653 and 5654

Bil P.T. 16162 and 10163,
District of Batang Padang,
Mukim of Ulu Bernam Timur,
Perak Darul Ridzuan.
Land with an area of

55,444,116 sq. ft. with
a second automobile plant.
Total built-up area is
3,374,577 sq. ft.
Freehold
03.02.1999
3 Years
Land: 1.0
Building: 405
182
(CONTINUED)
Location
Tenure
Date of
Acquisition/
Revaluation
6 units of 3-bedroom Seri

Hijauan apartments with a total
built-up area of 6,522 sq. ft.
D-3-17 of East Wing,
D-5-24 of East Wing,
B-4-01 of West Wing,
B-5-01 of West Wing,
A-10-01 of North Wing,
A-11-01 of North Wing
Freehold
15.06.1995
12 Years
Apartments: 1.0
Land with an area of 162,479

sq. ft. with a parts warehouse
building
Freehold
31.03.1994
30 Years
Land: 6.5
Buildings: 1.9

sq. ft. with office and
warehouse. Total built-up area is
220,000 sq. ft.
Freehold
01.01.1993
13 Years
Land: 10.2
Buildings: 21.8
Age of
Building
Net Book Value

RM Million
PROPERTIES OWNED BY
PROTON PROPERTIES SDN. BHD.
No. H.S.(D) No. 71662,
No. P.T. 439,
Mukim of Damansara,
PROPERTIES OWNED BY
PROTON CARS (UK) LTD.
Ref. AV 915, Units 1-3,
Crawley Way, Avonmouth,
Bristol Avon BS11 9YR, England.
PROPERTY OWNED BY
PROTON PARTS CENTRE SDN. BHD.
Lot 91, HICOM Glenmarie
Industrial Park,
Mukim of Damansara,
183
(CONTINUED)
ANNUAL REPORT 2006
Tenure
Date of
Acquisition/
Revaluation
Age of
Building
Net Book Value

RM Million
Vehicle Preparation Centre (VPC) Vehicle Preparation Centre and

No. H.S.(D) 86555, P.T. No. 258
stock control building with total
and H.S.(D) 86557, P.T. No. 260,
TP 2 Road, Sime UEP Industrial
Park, 47600 Subang Jaya,
Freehold
01.12.2000
5 Years
Building: 5.2
Centre of Excellence (COE) &

Pre-Delivery and Inspection
Centre (PDI)
No H.S.(D) 86596, P.T. No. 299
and H.S.(D) 86597, P.T. No. 300,
Administration & Operation

Office and Pre-Delivery &
Inspection Centre with total
Freehold
01.03.2001
5 Years
Land: 35.7
Building: 141.3
No. 2, Lrg. Samarinda 6A Off

Jalan Kebun H.S.(D) 60042,
P.T. No. 64566, Mukim of Klang,
Selangor Darul Ehsan
3 storey shop units which

approximately 2,475.7 sq. ft.
Freehold
10.05.2002
4 Years
Building: 0.7
Lot 859, Block 16 Kuching Central

Land District, Stampin 412 Mile,
Penrissen Road Kuching,
Sarawak.

48,383.73 sq. ft. to be
used for sales outlet
and service centre
Freehold
29.04.2002
4 Years
Land: 2.8
No. 218089, Mukim of Plentong,

District of Johor Bahru,
Johor Darul Takzim.

sq. ft. to be used for sales
outlet and service centre
Freehold
29.04.2002
4 Years
Land: 8.1
Location
PROPERTY OWNED BY
PROTON EDAR SDN. BHD.
184
(CONTINUED)
Location
Date of
Acquisition/
Revaluation
Age of
Building
Net Book Value

RM Million
Tenure

sq. ft. used for sales outlet and
service centre is 7,175 sq. ft.
Freehold
19.07.2002
29.09.2003
312 Years
2 Years
Land: 3.1
Building: 3.1

service centre
Freehold
06.08.2002
312 Years
Land: 5.1
Part of Lot 45, Held under Master Land with an area of 87,120
Title geran 29164 Lot 5458,
Mukim & District of Petaling,
service centre
Freehold
01.08.2002
312 Years
Land: 9.7
Lot P.T. 22489, Mukim of Batu,

District of Gombak,

service centre
Freehold
26.08.2002
312 Years
Land: 7.6
Lot P.T. 4352, Mukim of Kuah,

District of Langkawi,
Kedah Darul Aman.

service centre
Freehold
13.09.2002
312 Years
Land: 1.4
H.S.(D) 144330, P.T. 40019

Mukim of Sungai Buloh,

service centre
Freehold
02.09.2002
01.03.2004
312 Years
2 Years
Land: 9.3
Building: 6.9
PROPERTY OWNED BY
(CONTINUED)
H.S.(D)
Mukim
District
Negeri
63313, P.T. No. 9671

of Ampangan
of Seremban,
Sembilan Darul Khusus.
H.S.(D) 318392, PTD 81816,

Mukim of Pulai,
District of Johor Bahru,
Jahor Darul Takzim.
185
(CONTINUED)
ANNUAL REPORT 2006
Tenure
Date of
Acquisition/
Revaluation
H.S.(D) 159654,
P.T. 1 Jalan Kemajuan,
District of Petaling Jaya,

sq. ft. used for sales outlet
and service centre
Freehold
24.08.2005
No. H.S.(D) 86596, P.T. No. 302,


sq. ft. used for stockyard area
Freehold
05.12.2005
Land: 0.6
Land: 1.7
Location
Age of
Building
Net Book Value

RM Million
7 Months
Land: 13.5
PROPERTY OWNED BY
(CONTINUED)
PROPERTIES OWNED BY
PROTON EDAR VENTURES SDN. BHD.
No. H.S.(D) 588, No. P.T. 2361,
Mukim of Gelung,
District of Kubang Pasu,
Kedah Darul Aman.

sq. ft. used as site for industrial
building
Freehold
11.12.1990
Lot 1229, Mergong Industrial

Estate Phase 11,
Mukim of Mergong,
District of Kota Setar,
Kedah Darul Aman.

sq. ft. with a 112 storey building
leased to Proton Edar Sdn.
Bhd., used as Pre-Delivery
inspection and service centre
Long
leasehold
(Year
of expiry:
2076)
15.05.1977
29 Years
Land: 0.3
Building: 0.3
186
(CONTINUED)
Location
Tenure
Date of
Acquisition/
Revaluation
Age of
Building
Net Book Value

RM Million
PROPERTY OWNED BY
PROTON CORPORATION SDN. BHD.
Lot No. 23 & 24,
Section 7, Phase 1A,
Pulau Indah Industrial Park,
Westport, Pelabuhan Klang,
Industrial land with an area of

approximately 671,204 sq. ft.
used to warehouse production
export car
Long
25.02.1998
leasehold
of 99 years
(Year of
expiry:
2097)
Land: 10.5
(i) Lotus Cars Limited,

Land adjacent to Potash
Lane, Hethel, Norwich, Norfolk
NR 14 8EZ, England.
(ii) Land North of Browick Road,
Hethel, Norwich, Norfolk NR14
8EZ, England.
Two parcels of land with a total

area of 6,286,550 sq. ft. with the
factory, engineering facilities,
offices and test track of Lotus
Group International Ltd. Total
built-up area is 515,500 sq. ft.
Freehold
26.09.1968
39 Years
Land: 6.3
Building: 86.2
Group Lotus Plc.

Potash Lane Hethel, Norwich,
Norfolk NR14 8EZ, England.
R&D building rented to group

companies. Total built-up area
is 86,600 sq. ft.
Freehold
01.03.2000
7 Years
Building: 7
Freehold
24.02.2000
Office:
86 Years
Land: 0.9
Building: 7.9
PROPERTIES OWNED BY
LOTUS CARS LTD. (UK)
PROPERTY OWNED BY
MARCO ACQUISITION CORPORATION
1254 North Main St,
Ann Arbor, Michigan USA.

approximately 165,528 sq. ft.
with office and workshop. Total
built-up area is 73,000 sq. ft.
Workshop:
40 Years
SHARE PRICE AND VOLUME TRADED
187
ANNUAL REPORT 2006
Price (RM)
10,000
10
12,500
Volume (000)
2,500
5,000
7,500
Apr
05
May
Jun
Volume
(000)
Jul
Aug
Sep
Opening
Oct
Nov
Dec
05
Highest
Jan
06
Feb
Mar
Lowest
Apr
May
Jun
Closing
Jul
06
188
NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Third (3rd) Annual General Meeting of the
Company will be held at the Auditorium, PROTON Centre of Excellence, KM 33.8,
Westbound Shah Alam Expressway, 47600 Subang Jaya, Selangor Darul Ehsan,
Malaysia on Friday, 8 September 2006 at 3.30 p.m. for the following purposes:
1.
To lay the Reports of the Directors and Auditors and the Audited Statement of Accounts for the year
ended 31 March 2006.
2.
To approve the payment of a final (tax exempt) dividend of 5 sen per ordinary share.
3.
To elect the following Directors who retire in accordance with the Companys Articles of Association:-
RESOLUTION 1
Article 104
(i)
(ii)

RESOLUTION 2
RESOLUTION 3
Article 111
(i)
(ii)
4.

RESOLUTION 4
RESOLUTION 5
To elect the following Director who retires in accordance with Section 129 of the Companies Act, 1965
(CA)
(i)
RESOLUTION 6
5.
To approve the Directors fees for the year ended 31 March 2006.
RESOLUTION 7
6.
To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the

Directors to fix their remuneration.
RESOLUTION 8
7.
To transact any other ordinary business for which due notice has been given.
RESOLUTION 9
8.
AS SPECIAL BUSINESS
To consider and, if thought fit, to pass the following resolution as Ordinary Resolution:That subject always to the provisions of the Companies Act, 1965, the Articles of Association of the
Company and the approval of the relevant authorities and pursuant to Section 132D of the Companies
Act, 1965, the Directors be and are hereby authorized to issue and allot shares in the Company from
time to time at such price, upon such terms and conditions, for such purposes and to such person or
persons whomsoever as the Directors may deem fit, provided that the aggregate number of shares to
be issued pursuant to this resolution does not exceed 10 percent (%) of the issued share capital of the
Company for the time being and that such authority shall continue to be in force until the conclusion
of the next Annual General Meeting of the Company.
RESOLUTION 10
NOTICE OF ANNUAL GENERAL MEETING
189
(CONTINUED)
ANNUAL REPORT 2006
NOTICE OF BOOK CLOSURE AND DIVIDEND PAYMENT

NOTICE IS HEREBY GIVEN THAT the Register of Members of the Company will be closed on 14 September 2006 to determine
shareholders entitlement to a final (tax exempt) dividend of 5 sen for the financial year ended 31 March 2006.
The dividend, if approved by the shareholders at the Companys Third (3rd) Annual General Meeting, will be paid on
18 October 2006 to shareholders whose names appear in the Record of Depositors on 14 September 2006.
FURTHER NOTICE IS ALSO HEREBY GIVEN THAT a Depositor shall qualify for entitlement to the dividend only in respect of:(a)
securities deposited into the Depositors Securities Account on or before 4.00 p.m. on 14 September 2006 in respect of
securities which are exempted from mandatory deposit;
(b)
securities transferred into the Depositors Securities Account before 4.00 p.m. on 14 September 2006 in respect of ordinary
transfer;
(c)
securities bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa
Malaysia Securities Berhad.
By Order of the Board
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.
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.
MOHD NIZAMUDDIN BIN MOKHTAR

(LS NO. 006128)
Company Secretary
Shah Alam
17 August 2006
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, 20th Floor, Plaza Permata, Jalan Kampar, Off Jalan Tun Razak, 50400 Kuala
Lumpur not less than forty eight (48) hours before the time appointed for the meeting.
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 Companys 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 30 August 2006.
Only a depositor whose name appears on the General Meeting Record of Depositors as at 30
August 2006 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote
in his stead.
EXPLANATORY NOTES TO THE SPECIAL BUSINESS:The Ordinary Resolution No. 10, if passed, will give the Directors of the Company the authority to issue
shares in the Company up to an amount not exceeding in total 10% of the issued and paid up capital
of the Company for such purposes as the Directors consider would be in the interest of the Company.
This would avoid any delay and cost involved in convening a general meeting to specifically approve
such an issue of shares. This authority, unless revoked or varied at a general meeting, will expire at the
next Annual General Meeting of the Company.
190
STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING

STATEMENT ACCOMPANYING THE NOTICE OF THE THIRD (3RD) 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 Third (3rd) Annual General Meeting of the Company which will be held at
the Auditorium, PROTON Centre of Excellence, KM 33.8, Westbound Shah Alam Expressway, 47600 Subang Jaya, Selangor
Darul Ehsan, Malaysia on Friday, 8 September 2006 at 3.30 p.m. pursuant to the Companys Articles of Association and Section
129 of the Companies Act, 1965 are as follows:Article 104
Refer to Page 14 of the Annual Report

Article 111

Section 129 of the Companies Act

FORM OF PROXY
Company No: 623177-A
No. of Shares held

CDS Account No. of Authorised Nominee
I/We
(name of shareholder as per NRIC, in capital letters)
NRIC No.
(new)
(old) ID No./Company No.
of
(full address) being a member/members of Proton Holdings
Berhad, hereby appoint

capital letters) NRIC No.
(name of proxy as per NRIC, in

(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 Third (3rd) Annual General
Meeting of the Company to be held at the Auditorium, PROTON Centre of Excellence, KM 33.8, Westbound Shah Alam Expressway,
47600 Subang Jaya, Selangor Darul Ehsan, Malaysia on Friday, 8 September 2006 at 3.30 p.m. and at any adjournment thereof.
My/Our proxy is to vote as indicated below:ORDINARY RESOLUTIONS
1. To approve the payment of a final (tax exempt) dividend of 5 sen
per ordinary share.
2. To elect the following Directors who retire in accordance with the Companys
Articles of Association:Article 104
i. Dato Mohammed Azlan bin Hashim
ii. Abdul Jabbar bin Abdul Majid
Article 111
iii. Dato Ahmad bin Haji Hashim
iv. Syed Zainal Abidin bin Syed Mohamed Tahir
3. To elect the following Director who retires in accordance with Section 129 of the
Companies Act, 1965 (CA)
i. Lt. Gen (R) Dato Seri Mohamed Daud bin Abu Bakar
4. To approve the Directors fees for the year ended 31 March 2006.
5. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and
to authorise the Directors to fix their remuneration.
6. To transact any other ordinary business for which due notice has been given.
AS SPECIAL BUSINESS
7. To approve authority to Directors to allot and issue shares pursuant to
Section 132D of the Companies Act, 1965.
FOR
AGAINST
Resolution 1
Resolution 2
Resolution 3
Resolution 4
Resolution 5
Resolution 6
Resolution 7
Resolution 8
Resolution 9
Resolution 10
(Please indicate with an X in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his/her
discretion.)
Dated this
day of
2006.
For appointment of more than one proxy, number of shares and

percentage of shareholdings to be represented by the proxies:No. of shares
Signature/Common Seal of Appointer
Percentage
Proxy 1
Proxy 2
NOTES:1.
A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead.
A proxy may but need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply.
2.
The instrument appointing a proxy must be in writing under the hands of the 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.
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, 20th Floor, Plaza Permata, Jalan
Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur not less than forty eight (48) hours before the time appointed for the meeting.
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 Companys 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 30 August 2006. Only a depositor whose name appears
on the General Meeting Record of Depositors as at 30 August 2006 shall be entitled to attend the said meeting or appoint proxies to attend
and/or vote in his stead.
Fold Here
STAMP
TENAGA KOPERAT SDN. BHD.

20th Floor, Plaza Permata
Jalan Kampar, Off Jalan Tun Razak
50400 Kuala Lumpur
Fold Here
Registered Office
Batu Tiga, 40000 Shah Alam, Selangor Darul Ehsan
(Company No. 623177-A)
Tel: +603 8026 9741 Fax: +603 8026 9744
(Company No: 623177-A)
www.proton.com
ANNUAL REPORT 2006
o u r H E R I TA G E
ourBRANDS
ourFUTURE
A N N U A L R E P O R T 2006

Annual Report of PROTON 2006

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Annual Report of PROTON 2006

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Registered Office

HICOM Industrial Estate

PROTON Holdings Berhad

Batu Tiga, 40000 Shah Alam, Selangor Darul Ehsan

(Company No. 623177-A)

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

PROTON Holdings Berhad

(Company No: 623177-A)

ANNUAL REPORT 2006

Corporate Mantra & Core Values

Statement on Corporate Governance

Additional Compliance Information

Key Financial Indicators

Statement on Internal Control

Summary of Financial Highlights for Five Years

Calendar of Events 2005-2006

Awards & Recognition

Statutory Financial Statements

Properties Owned by PROTON Group

Share Price and Volume Traded

Notice of Annual General Meeting

An Interview with the Managing Director

Statement Accompanying the

THE PROTON WAY

Driving Malaysias transformation into a leader in

We make products that work first time,

We trust, respect and share knowledge

We deliver innovative and superior quality

Customers are the source of our

We have a can-do attitude and will

We are a passionate group of people working

We challenge convention, always

Second (2nd) Annual General Meeting

Third (3rd) Annual General Meeting

Extraordinary General Meeting

BASIC EARNINGS PER SHARE

KEY FINANCIAL INDICATORS

ANNUAL REPORT 2006

SUMMARY OF FINANCIAL HIGHLIGHTS FOR FIVE YEARS

BALANCE SHEET AS AT 31 MARCH

Net current assets

Property, plant and equipment

INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH

Profit before taxation

Profit after taxation

Retained profit attributable to shareholders

PROTON was established on 7 May 1983

PROTON has three primary national policy objectives:

The business of the PROTON Group has been expanded to

versatile Arena/Jumbuck, the fun-to-drive Savvy and the

AWARDS & RECOGNITION

Readers Digest Trusted Brand 2006

Readers Digest Super Brand 2005

Merdeka Millennium Endurance Race

Malaysian Rally Championship 2005

Malaysia Best Brand Award.

National Creativity & Innovation

Best Landscape Competition

*Proton WAJA 4.5 stars out of 5 star

Appreciation Award for Contribution to

KPMG/The Edge Shareholder Value

Highest Increase in Turnover Award

Motor vehicles and transport