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 www.proton.com (Company No: 623177-A) PROTON Holdings Berhad ANNUAL REPORT 2006 ourHERITAGE ourBRANDS ourFUTURE ANNUAL REPORT 2006 contents PROTON Holdings Berhad 1 Corporate Mantra & Core Values 74 Statement on Corporate Governance 2 Financial Calendar 87 Additional Compliance Information 3 Key Financial Indicators 88 Statement on Internal Control 4 Summary of Financial Highlights for Five Years 92 Risk Management 6 Corporate Profile 94 Calendar of Events 2005-2006 8Awards & 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 Chairman’s Statement 190 Statement Accompanying the 36 An Interview with the Managing Director Notice of Annual General Meeting 46 Operations Review Form of Proxy 1 ANNUAL REPORT 2006 THE PROTON WAY PROTON employees are dedicated to the Group’s long-term success. Every PROTON employee shall operate under the Group’s shared values and rely on these values to guide their behaviour with each other and the customers. These values form the foundation of how we work and conduct business. Corporate Mantra & Core Values CORE ideology CORE values AUDACIOUS GOAL QUALITY TEAMWORK Driving Malaysia’s transformation into a leader in We make products that work first time, We trust, respect and share knowledge technology and quality. every time. to foster teamwork at the workplace. VIVID DESCRIPTION CUSTOMER FOCUS SPEED We deliver innovative and superior quality Customers are the source of our We have a “can-do” attitude and will products and services. Our brands inspire income. We deliver on our promises to not rest until the problem is solved. confidence and pride. customers’ satisfaction. We have an inherent sense of urgency in everything we do. PURPOSE INNOVATION We are a passionate group of people working We challenge convention, always CARING together, creating exhilarating products and seeking new and better ways to do As a responsible corporate citizen, services for global markets, synonymous with things. We view change as opportunity. we invest in safety, health and the great styling, innovation and leading technology. environment. 2 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 K EY FI NANCIAL DIVIDEND PAID DIVIDEND PAID 2002 78.7 BASIC EARNINGSPERSHARE 2002 216.1 2003 87.9 2003 197.7 IN 2004 93.3 2004 92.9 DICATORS (RM’Million) 2005 137.3 2005 80.6 2006 54.9 2006 8.5 (Sen) CARRIED FORWARD RETAINED PROFITS 2002 3,197.2 NET ASSETS 2002 7.73 2003 4,195.1 2003 9.41 2004 4,611.8 2004 10.14 (RM) 2005 4,916.9 2005 10.67 (RM’Million) 2006 4,908.8 2006 10.69 ANNUAL REPORT 2006 3 4 SUMMARY OF FINANCIAL HIGHLIGHTS FOR FIVE YEARS PROTON HOLDINGS BERHAD BALANCE SHEET AS AT 31 MARCH (RM Million) 2006 2005 2004 2003 2002 (restated) (restated) (restated) (restated) Current Assets Inventories 1,389.0 967.1 795.8 813.6 689.4 Receivables 1,244.0 1,403.2 930.0 822.5 871.5 Short term investments 212.0 201.5 182.0 166.4 185.0 Deposits, bank and cash balances 1,586.0 2,454.7 2,877.4 3,713.7 3,591.8 4,431.0 5,026.5 4,785.2 5,516.2 5,337.7 Current Liabilities Payables 2,324.2 2,207.4 1,900.5 2,438.4 2,231.1 Taxation 16.9 2.6 140.3 192.3 272.2 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 3,330.9 3,313.3 2,908.4 2,221.4 1,703.1 Associated companies 155.7 162.0 170.1 146.9 89.3 Jointly controlled entities 249.9 255.4 110.7 75.2 59.0 Other long term investments 10.4 6.3 6.3 6.3 6.3 Long term liabilities (101.0) (760.7) (447.4) (222.3) (509.8) Minority interest 0.0 (0.3) 0.0 (1.6) (1.5) Deferred tax assets 105.8 38.4 45.5 25.7 (10.0) Goodwill 29.0 29.0 29.0 29.0 29.0 5,870.6 5,859.9 5,567.0 5,166.1 4,199.8 Shareholders’ Funds Share capital 549.2 549.2 549.2 549.2 543.1 Other reserves 412.7 393.8 406.0 421.8 459.5 Retained profits 4,908.7 4,916.9 4,611.8 4,195.1 3,197.2 5,870.6 5,859.9 5,567.0 5,166.1 4,199.8 5 ANNUAL REPORT 2006 INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH (RM Million) 2006 2005 2004 2003 2002 Revenue 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 Retained profit attributable to shareholders 4,963.6 5,054.2 4,705.1 4,283.0 3,275.9 Dividend (54.9) (137.3) (93.3) (87.9) (78.7) Retained profit carried forward 4,908.7 4,916.9 4,611.8 4,195.1 3,197.2 SHARE INFORMATION 2006 2005 2004 2003 2002 Per share Basic earnings (sen) 8.5 80.6 92.9 197.7 216.1 Tax-exempt dividend paid 10.0 25.0 17.0 16.0 14.5 Net assets 10.69 10.67 10.14 9.41 7.73 Issued share capital 549,213 549,213 549,213 549,213 543,144 * Comparatives have been restated to conform with current year’s presentation and prior year adjustment arising from certain changes in accounting policies. 6 PROTON HOLDINGS BERHAD 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: versatile Arena/Jumbuck, the fun-to-drive Savvy and the •To spearhead the development of component desirable sporty Satria Neo. PROTON Group’s portfolio also manufacturing industries, includes the world-renown sports cars Lotus Elise, Lotus Esprit •To acquire and upgrade technology and industrial skills and the recently launched Lotus Europa. These cars are within the automotive manufacturing industry, and manufactured in Malaysia and the United Kingdom. •To strengthen the international competitiveness of PROTON Group conducts research in its centres in the United Malaysia’s industrial capability. Kingdom and Malaysia for new technologies with the PROTON commands a substantial share of the domestic ultimate aim of putting these innovations into production market for passenger cars and over the years has been through partnership with Tier One Suppliers of OEM building up distribution networks in key market centres across customers. A number of these patents have been licensed these four regions: to leading car manufacturers. • United Kingdom, Currently, PROTON Group has almost 11,000 employees who • The Middle East, are involved in a spectrum of business ranging from • South-East Asia, and research, design, development, testing, stamping, casting, • Australasia. machining and assembly to marketing, distribution and after- sales activities. The business of the PROTON Group has been expanded to include engineering consultancy, manufacturing, distribution, Strong customer-orientation and competitively-priced financial services and property investments. With a turnover products are the foundation of PROTON’s business and are of almost RM8 billion in financial year 2005/2006, PROTON essential to the group’s success. PROTON aims to maintain Group is one of the largest companies listed on Bursa market leadership by continuing to develop innovative Malaysia Securities Berhad. products and through satisfying its customers in a better and more profitable way than its competitors. 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 8 AWARDS & RECOGNITION PROTON HOLDINGS BERHAD Awards& Recognition 2006 2004 2002 ● Reader’s Digest Trusted Brand 2006 – ● Malaysia Best Brand Award.