MALAKOFF. Soaring to Greater Heights

Transcription

1 MALAKOFF Soaring to Greater Heights Annual Report 2005

2 Prai Power Plant Owner Prai Power Sdn. Bhd. (100%*) Type Combined cycle gas turbine (baseload plant) Capacity 350MW Location Prai, Pulau Pinang Total Cost RM1.0 billion Owner Type Capacity Location Total Cost Lumut Power Plant Segari Energy Ventures Sdn. Bhd. (93.75%*) Combined cycle gas turbine (baseload plant) 1,303MW Segari, Perak RM3.8 billion GB3 Power Plant Owner GB3 Sdn. Bhd. (75%*) Type Capacity Location Total Cost Combined cycle gas turbine (baseload plant) 640MW Segari, Perak RM1.4 billion Tanjung Bin Power Plant (Under Construction) Owner Tanjung Bin Power Sdn. Bhd. (90%*) Type Coal-fired (baseload plant) Capacity 2,100MW Location Tanjung Bin, Johor Total Cost RM7.9 billion (Estimation) Malakoff s Interest in Other Power Plants Type Capacity Location Kapar Power Station (40%*) Coal, oil and gas-fired (baseload & peaking plant) 2,420MW Kapar, Selangor (Malakoff has a 40% equity interest in Kapar Energy Ventures Sdn. Bhd., the owner of Kapar Power Station) Type Capacity Location Port Dickson Power Plant (25%*) Open cycle gas turbine (peaking plant) 440MW Port Dickson, Negeri Sembilan (Malakoff has a 25% equity interest via its wholly-owned subsidiary Hypergantic Sdn. Bhd.) * Represents Malakoff s shareholding percentage.

3 MALAKOFF S Power Plants Pulau Pinang Ipoh Kuala Lumpur Malakoff s Total Net Effective Generation Capacity Current : 3,130 MW (as at 31 August 2005) Future : 5,120 MW (as at 31 August 2007) Note: Johor Bahru Malakoff s Net Effective Generation Capacity in a particular power plant (MW) Malakoff s = shareholding percentage X in that plant (%) The Plant s capacity (MW)

4 The eagle soaring in the sky symbolises strength, splendour and speed. As it glides upward and onward, it is a vision of power, its penetrating eyes ever watchful of what lies below. Like the eagle, Malakoff is soaring higher, with commendable performance year upon year, poised to attain greater success. Like the eagle, Malakoff also casts its eyes far and wide in its continuous search for new opportunities at home and abroad.

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6 Performance Review 04 5-year Group Financial Performance 06 Letter to Shareholders 10 Managing Director s Review With purpose and power, we spread our wings, soaring to greater heights at home and abroad.

7 MALAKOFF BERHAD (24816-M) 1 VISION Contents To be a Cost Effective Energy Provider 02 MISSION In striving to enhance shareholders value and achieve our vision, we seek to: 20 Develop and utilise local expertise; Share knowledge and spur the growth of the power industry; and Promote innovation in all aspects 36 of our business. CORPORATE VALUES Integrity 53 Teamwork 101 Performance Review 04 5-year Group Financial Performance 06 Letter to Shareholders 10 Managing Director s Review Corporate Information 22 Corporate Profile 24 Corporate Structure 25 Corporate Data 26 Board of Directors 28 Profile of Board of Directors 32 Management Team 34 Calendar of Events Corporate Governance 38 Statement on Corporate Governance 44 Audit Committee Report 47 Statement on Internal Control 49 Approved Utilisation of Funds 50 Additional Compliance Information 52 Directors Responsibility Statement Financial Statements Other Corporate Information 102 Financial Calendar and Innovation Share Performance Chart 103 Analysis of Shareholdings Excellence Respect for Individual 106 Properties of the Group 107 Notice of Annual General Meeting 108 Statement Accompanying Notice of Annual General Meeting Proxy Form Direct Dividend Payment Service Application / Change of Particulars Form

8 4 MALAKOFF BERHAD (24816-M) 5-year Group Revenue RM Million 1,513 1,717 1,825 2,059 2,122 Profit After Tax & Minority Interest RM Million '01 '02 '03 '04 '05 '01 '02 '03 '04 '05 Shareholders' Funds RM Million 2,179 2,467 2,811 3,080 3,446 Total Assets Employed RM Million 12,490 14,805 5,780 6,991 7,359 '01 '02 '03 '04 '05 '01 '02 '03 '04 '05 Earnings per Share Sen Net Tangible Assets per Share Sen '01 '02 '03 '04 '05 '01 '02 '03 '04 '05

9 MALAKOFF BERHAD (24816-M) 5 Financial Performance 2005 Financial Highlights Group s net profit exceeded half-a-billion Ringgit. The full year dividend payout of 30 sen per share (gross) was the highest to-date. Increase/ (Decrease) from (%) RM 000 RM 000 RM 000 RM 000 RM 000 Revenue 3.1 2,122,003 2,059,078 1,825,013 1,717,462 1,513,462 Profit before taxation , , , , ,001 Profit after tax & minority interest , , , , ,970 As at 31 August Paid-up capital , , , , ,703 Shareholders funds ,445,801 3,080,100 2,811,285 2,467,135 2,178,526 Total assets employed ,804,662 12,490,328 7,358,996 6,990,589 5,780,491 Per share (sen) Earnings * Dividend (gross) Net tangible assets * * Pre-bonus issue figures which have been adjusted accordingly to ensure comparability with post-bonus issue figures. (A 2:1 Bonus Issue was implemented on 15 November 2001)

10 6 MALAKOFF BERHAD (24816-M) Letter TO SHAREHOLDERS Revenue RM million Profit After Tax & Minority Interest RM million 1,513 1,717 1,825 2,059 2, '01 '02 '03 '04 '05 '01 '02 '03 '04 '05 Dear Shareholders, I am pleased to present, on behalf of the Board of Directors of the Company, the Annual Report and the Audited Financial Statements of Malakoff Berhad for the financial year ended 31 August FINANCIAL HIGHLIGHTS The Group ended the financial year under review on a very satisfactory note, having achieved an increase in revenue from RM2,059.1 million in the previous financial year to RM2,122.0 million. This increase of RM62.9 million or 3.1% was mainly attributed to higher revenue from the Group s power plants. We also succeeded in posting an improved Group net profit for the financial year under review of RM510.6 million, an increase of RM50.3 million or 10.9% from RM460.3 million recorded in the preceding financial year. This performance has resulted in net earnings per share of 57.3 sen (FYE 2004: 52.4 sen). Shareholders funds accordingly rose from RM3,080.1 million to RM3,445.8 million as at 31 August Dividend We have established a record for paying good dividends for some years. The gross dividend of 28 sen per share declared for the financial year ended 31 August 2004 had made our stock one of the highest dividend-yielding on Bursa Malaysia Securities Berhad. For this financial year, our Board of Directors again declared an interim dividend of 13 sen per share less 28% tax on 29 April 2005, the second time that we have done so since the previous financial year. We expect to be able to continue with this practice of paying interim dividend in the years ahead. For the full year ended 31 August 2005, we are pleased to recommend a final dividend of 17 sen per share less 28% tax, subject to shareholders approval at this forthcoming Annual General Meeting. This brings the full-year dividend to 30 sen per share less 28% tax, the highest payout to-date. Capital-raising Exercises With the Group continuing to take advantage of power-related opportunities for business expansion locally and overseas, the Company has initiated capital-raising exercises for working capital as well as investment funding purposes during the financial year under review. On 27 January 2005, we announced a proposed private placement of new ordinary shares of RM1.00 each in Malakoff Berhad of up to 10% of the Company s issued and paidup share capital at the time of issuance. On 21 July 2005 at an Extraordinary General Meeting of Malakoff Berhad, shareholders approved the proposed issuance of up to USD200 million nominal value five-year guaranteed convertible bonds, which are convertible into new ordinary shares of RM1.00 each in Malakoff Berhad. The bonds, to be utilised for future overseas investments, are to be issued by Malakoff Capital (L) Ltd, a wholly-owned subsidiary of Malakoff Berhad incorporated in the Federal Territory of Labuan on 18 May The Labuan International Financial Exchange Inc and Singapore Exchange Securities Trading Ltd have granted approval for the listing of and quotation for the bonds on their respective exchanges. Relevant approvals for this capital exercise have also been received from the Labuan Offshore Financial Services Authority, Securities Commission, Foreign Investment Committee and Bank Negara Malaysia.

11 MALAKOFF BERHAD (24816-M) 7 The Group ended the financial year under review on a very satisfactory note, having achieved an increase in revenue from RM2,059.1 million in the previous financial year to RM2,122.0 million

12 8 MALAKOFF BERHAD (24816-M) LETTER TO SHAREHOLDERS Shareholders' Funds RM million Dividend Per Share Sen 2,179 2,467 2,811 3,080 3, '01 '02 '03 '04 '05 '01 '02 '03 '04 '05 The Company is currently reviewing the appropriate time for the implementation of the above mentioned proposals. Credit Ratings Due to our position as the country s leading independent power producer and our strong financial performance through the years, our debt papers have obtained strong credit ratings from Rating Agency Malaysia Berhad ( RAM ). During the year, ratings for the following facilities were reaffirmed by RAM: Malakoff Berhad s nominal RM1.85 billion Serial Revenue Bonds received a long-term rating of AA2; Malakoff Berhad s Commercial Papers/ Medium Term Notes Programme at AA1(s) and P1 respectively; the RM5.6 billion Istisna Medium Term Notes Programme issued by our subsidiary, Tanjung Bin Power Sdn Bhd, at AA3; GB3 Sdn Bhd s Senior Secured Al-Bai Bithaman Ajil Bond Facility at AA2 and its Senior Secured Al-Murabahah Commercial Papers/Medium Term Notes Facility at P1/ AA2; Prai Power Sdn Bhd s Al-Istisna Fixed Serial Bonds at AA3; and the three private debt securities issued by Segari Energy Ventures Sdn Bhd at AA1. CORPORATE HIGHLIGHTS Power Plants The power plants in the Group s portfolio comprise three combined cycle gas turbine power plants, namely the 1,303MW Lumut Power Plant, 640MW GB3 Power Plant and 350MW Prai Power Plant. We have equity interests in other power plants - the 2,420MW coal, oil and gas-fired Kapar Power Plant, through a 40% equity interest in Kapar Energy Ventures Sdn Bhd, as well as a 25% equity interest in the 440MW open cycle gas turbine Port Dickson Power Plant, through our whollyowned subsidiary, Hypergantic Sdn Bhd. In addition, we have a 90% equity interest in the 2,100MW coal-fired Tanjung Bin Power Plant. As at the financial year-end, the construction of the power plant is on track with over 72% completed. The first of the three 700MW power generating units is expected to be commissioned by 31 August 2006, with full completion of the power plant 12 months thereafter. Critical construction milestones were achieved as the project progressed. In May 2005, the lifting of the boiler drum for the first power generating unit was witnessed by YBhg Datuk Ir (Dr) Mohd. Annas bin Haji Mohd. Nor, then Chairman of the Energy Commission. The boiler drum is a significant component as it functions as the heart of the boiler. The boiler itself is crucial to the power plant because the steam produced drives the turbine, thus generating electricity. Another construction milestone achieved during the financial year under review was the completion of the Interconnection Facilities or Switchyard, for the export of electricity generated by the plant via high tension transmission lines to Tenaga Nasional Berhad ( TNB ). The Switchyard was handed over to TNB in September We are also pleased to inform that we have been successful in our corporate acquisition strategy during the year under review. On 15 April 2005, the Company completed its acquisition of an additional 18.75% equity interest in Segari Energy Ventures Sdn Bhd from Tenaga Nasional Berhad, which increased our shareholding from 75% to 93.75%. On 20 April 2005, our wholly-owned subsidiary, Teknik Janakuasa Sdn Bhd ( TJSB ), completed its acquisition of the remaining 49% equity interest in Natural Analysis Sdn Bhd ( NASB ) from SKS Ventures Sdn Bhd. NASB, the operations and maintenance operator of Prai Power Plant, is therefore now a wholly-owned subsidiary of TJSB. As at 31 August 2005, our total effective generation capacity stood at 3,130MW, representing an 18% share of the total generation capacity of about 17,000MW in Peninsular Malaysia. By the time Tanjung Bin Power Plant is fully operational in 2007, our market share will increase to about 24% on the back of 21,000MW generation capacity in Peninsular Malaysia. PROSPECTS Our ability to continue increasing our domestic earnings is limited due to the current excess capacity in the country. Further growth in earnings therefore will need to come from overseas ventures.

13 MALAKOFF BERHAD (24816-M) 9 By the time Tanjung Bin Power Plant is fully operational in 2007, our market share will increase to about 24% on the back of 21,000MW generation capacity in Peninsular Malaysia In March 2005, we formed a consortium with TNB and Riyadh-based Arabian Company for Water and Power Projects Ltd to bid for a 60% interest in the Shoaiba Phase 3 Independent Water and Power Project in the Kingdom of Saudi Arabia ( KSA ). The project, to be developed on a build, own and operate basis, is expected to commence in early 2006 with Project Commercial Operation Date scheduled three years later. When completed, the USD2,500 million plant will supply 900MW of power and 880,000 m 3 /day (194 MIGD) of desalinated water to cities in the western province on the Red Sea coast. We are pleased to advise that on 15 November 2005, the consortium, through a joint-stock company incorporated in the KSA, signed a 20-year Power and Water Purchase Agreement with Water Electricity Company LLC for the entire power and water from the Shoaiba plant. This will be our first overseas project and will pave the way for similar ventures abroad. The Shoaiba plant is scheduled for commissioning in and will sustain Malakoff s growth into the future. On the domestic front, we are confident of the strong demand for electricity over the next few years, forecasted to grow by 8% until 2010, which will be driven by growth in the manufacturing sector as well as the country s increasing urbanisation. Such demand should enable the Group to continue posting steady earnings in the coming years. CORPORATE SOCIAL RESPONSIBILITY While we strive hard to realise our financial and performance objectives, we have not forgotten our responsibility as a corporate citizen of Malaysia. The advancement of educational opportunities has always been a major focus for the Group, as we consider education to be one of the key avenues for individual success. Our pledge of RM600,000 towards the threeyear Education Development Programme for Primary and Secondary Schools, which commenced in May 2003, is now in its final leg. Students from selected schools in Mukim Pengkalan Baharu, Daerah Manjung, Perak, benefit in terms of subsidised costs for tuition, examination preparatory classes, motivational courses, study aids and computer facilities. An ongoing educational programme is the Adopted School Programme, which provides opportunities for students from the adopted schools within Mukim Pengkalan Baharu to visit places of interest in the country for educational purposes. Also ongoing is the award of scholarships to deserving students studying at Universiti Tenaga Nasional. Besides education, the Group fulfils its social obligations through financial contributions to worthwhile causes. One example is our contribution to help tsunami victims, where we donated RM200,000 through various organisations. We also raised RM40,000 for the National Kidney Foundation from corporate participants of the Malakoff Charity Duathlon and then matched it with another RM40,000 from our own funds. The Malakoff Charity Duathlon is part of our Malakoff Malaysia Duathlon Series held in March We are also a major sponsor of Powerman Malaysia. Both sporting events were initiated in 2002 and received the support of the Olympic Council of Malaysia in March ACKNOWLEDGEMENTS Another year of commendable performance on all fronts would not have been possible without the contributions of my fellow board members, to whom I extend my sincere thanks. I am also truly appreciative of all our employees for their dedication and commitment. The co-operation that we have received from various parties has facilitated our business operations. In this regard, my special thanks go to the regulatory authorities, our shareholders and business partners, bankers and financiers, as well as our customers. Tan Sri Abdul Halim bin Ali Chairman 24 November 2005 Kuala Lumpur

14 10 MALAKOFF BERHAD (24816-M) Our total net effective generation capacity during the period under review stood at 3,130MW. MANAGING DIRECTOR S The Malakoff Group have maintained its position as Malaysia s leading independent power producer ( IPP ) during the financial year under review. With their availability, reliability and efficiency, our existing power plants continued to be the main contributors to our performance. We are pleased to report that the construction of the Tanjung Bin Power Plant is slightly ahead of schedule and that we have begun to extend our presence overseas. POWER GENERATION Power generation remains our core business activity. Our total net effective generation capacity during the period under review stood at 3,130MW. This brought our share of the power generation market in Peninsular Malaysia to approximately 18%, based on a total installed capacity of around 17,000MW. Lumut Power Plant The Lumut Power Plant is held through our 93.75%-owned subsidiary, Segari Energy Ventures Sdn Bhd ( SEV ). The power plant has been operating for more than nine years and remains the largest combined cycle power plant in Malaysia, with a dependable capacity of 1,303MW. The Lumut Power Plant has maintained its high performance in terms of availability, reliability and efficiency. During the financial year under review, the power plant delivered approximately 6,631GWh of electricity to the National Grid, with an average capacity factor of approximately 60%. The plant s availability was 90.67%, far exceeding the 86% guaranteed under the Power Purchase Agreement ( PPA ) with Tenaga Nasional Berhad ( TNB ). SEV has received full capacity payments for having met all the required performance standards set out in the PPA.

15 MALAKOFF BERHAD (24816-M) 11 review GB3 Power Plant We own 75% of the GB3 Power Plant though our subsidiary GB3 Sdn Bhd. The power plant is in its fourth year of operation and for the financial year under review, the plant delivered a total of 4,386GWh of electricity to the National Grid, with an average capacity factor of approximately 80%. The plant s availability was 94.32%, well above the 91.5% required under the PPA. The GB3 Power Plant, also a combined cycle power plant, has a dependable capacity of 640MW. Prai Power Plant The Prai Power Plant, with a dependable capacity of 350MW, is a singleshaft combined cycle power plant. In its third year of operation, the plant delivered a total 2,266GWh of electricity for the financial year under review to the National Grid, with an average capacity factor of approximately 80%. The plant s availability was 96.12% and is on course to achieve a rolling three-year average availability of more than 93% by end-2005, as per the requirements of the PPA. Tanjung Bin Power Plant The 2,100MW power plant at Tanjung Bin, Johor, the largest privatised coal-fired power plant project under the IPP programme, is well into the development stage. As at end of the financial year under review, the overall progress was slightly ahead of schedule at 72%. Based on current progress, the first unit of the Tanjung Bin Power Plant is expected to meet its Scheduled Commercial Operations Date of 31 August The second and third units are expected to be commercially operational on 28 February 2007 and 31 August 2007 respectively. During the financial year, major milestones were achieved. Of significance was the lifting of the boiler for the power plant s first unit on 27 May The turbine for the first unit was put on base on 15 June The 500/275kV Interconnection Facilities were handed over to TNB, enabling the first back-feed to the power plant. Looking ahead, the next major milestone is the first receipt of coal supply for the power plant scheduled for early January This will be followed by the synchronisation and initial supply of electricity by the first unit to the National Grid in June 2006, before the Scheduled Commercial Operations Date of 31 August 2006.

16 12 MALAKOFF BERHAD (24816-M) Tanjung Bin Power Plant Construction in progress Upon completion, the 2,100MW Tanjung Bin Power Plant will be the largest privatised coal-fired power plant in Malaysia. As at 31 August 2005, the overall construction progress was at 72%.

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18 14 MALAKOFF BERHAD (24816-M) MANAGING DIRECTOR S REVIEW OPERATIONS AND MAINTENANCE (O&M) We are the only IPP in the country that operates and maintains our own power plants through our wholly-owned subsidiary, Teknik Janakuasa Sdn Bhd ( TJSB ). TJSB, established in 1995, maintains and operates the Lumut Power Plant, GB3 Power Plant and Prai Power Plant, all of which are gas-fired. This portfolio has been extended to include the Tanjung Bin Power Plant, which will be the first coal-fired power plant to be operated and maintained by TJSB. O&M Services to Power Plants The Lumut Power Plant, TJSB s flagship plant, continued to provide highly reliable supply to the National Grid during the financial year under review. The average availability rate of above 90% and the average Forced Outage Rate of 0.4% compared favourably with the industry norms of 87% and 2% respectively. The plant has successfully completed four third-cycle C-inspections during the period under review, which will enhance the plant s availability and reliability in the current financial year. In addition, several minor inspections were also carried out. The GB3 Power Plant fulfilled all operational requirements related to availability target and forced outage limit. By March 2005, the plant had completed its first C-inspection cycle for all units and continued to be dispatched favourably. Despite the complexity of operating a single-shaft unit coupled with stringent PPA requirements, the Prai Power Plant has operated smoothly during the period under review. TJSB has also taken proactive steps in improving plant operations through the implementation of Root Cause Analysis, Engineering Change Control and Manpower Development through Competency-based Assessment. In addition, TJSB has begun preparations for the commercial operation of the first unit of the Tanjung Bin Power Plant. For the financial year under review, TJSB has recruited approximately 40% of the plant s total manpower requirements. TJSB staff were actively involved in documentation preparation, office infrastructure and system set-up, and assisted the owner s engineers in design review. Training, locally as well as internationally, has been provided and planned for relevant staff. Life-Cycle Asset Information Management (LCAIM) On 24 February 2005, TJSB entered into a Commercial Cooperation Agreement, Software Customisation Agreement and Professional Services Agreement with ALCIM Technology Sdn Bhd to develop and implement the Life-Cycle Asset Information Management (LCAIM) system for the operations and maintenance of power plants. TJSB will own the Intellectual Property Rights of the LCAIM data model, the related work processes as well as the customised LCAIM software.

19 MALAKOFF BERHAD (24816-M) 15 MANAGING DIRECTOR S REVIEW TJSB becomes the first in the power industry to develop and implement this operational tool as an industry standard. The LCAIM system will also complement TJSB s core O&M functions and competencies. Power plants fitted with the LCAIM system will have as-built engineering data and information stored in its new integrated information system, which will be the main platform throughout the plant life. Reports show that the use of the LCAIM system in leading oil and gas companies led to significant savings in overall O&M costs as well as increases in engineering productivity and plant availability. TJSB will first roll-out the LCAIM system at the Tanjung Bin Power Plant on the Scheduled Commercial Operations Date of the first unit on 31 August Plans are also being made to implement the LCAIM system at the GB3 Power Plant in early TJSB also plans to market the system to other power plants overseas. Technical Support Group The Technical Support Group ( TSG ) within TJSB provides support and expertise to ensure that plants operated and maintained by TJSB are equipped with the latest O&M technologies. TSG continued to enhance the O&M tools at the Lumut Power Plant, GB3 Power Plant and Prai Power Plant as part of the Group s asset management. TSG has also been providing technical support to the international business development projects at Malakoff. ELECTRICITY DISTRIBUTION AND CHILLED WATER SUPPLY Malakoff s wholly-owned subsidiary, Wirazone Sdn Bhd ( WSB ), has been distributing electricity within the Kuala Lumpur Sentral ( KL Sentral ) development area since July 2000, under licence awarded by the Energy Commission. WSB also supplies chilled water to Plaza Sentral, an office complex, for air conditioning purposes. The financial year under review saw WSB s customer base for its electricity distribution business growing to 633 accounts from 589 in the last financial year. The highest recorded maximum power demand was 15.5MW, compared with 12.4MW in the last financial year. This increase in demand was mainly attributable to the enlarged customer base and greater activities in KL Sentral, including the commencement of construction works related to the remaining two office blocks of Plaza Sentral and Lot N tower. With the existing two office blocks fully occupied, the maximum cooling demand recorded for the centralised chilled water supply system remained at 1700RT (Refrigerant Ton), the same as the last financial year. As the sole electricity distributor in KL Sentral, WSB is dedicated to providing its customers with service of excellent standard and distinctive quality, a commitment that helped the company attain the MS ISO 9001:2000 accreditation on 27 October This commitment is reflected in a number of initiatives, such as the distribution of a Customer Charter to all customers, conduct of customer surveys from

20 16 MALAKOFF BERHAD (24816-M) MANAGING DIRECTOR S REVIEW time to time and the availability of feedback forms at the company s Customer Service Centre. While a Helpdesk operates 24 hours a day, customers may also send complaints or inputs via . WSB s emphasis on excellent customer service is also reflected in the multiple payment options offered to customers - by post or deposit at the Customer Service Centre where there is also an Express Cheque Counter for making payments during weekends, or via online banking. For added convenience, customers will soon be able to pay their bills via Fascek machines that will be located at the KL Sentral Station and Suasana Sentral Condominium. Customers may drop off their cheques into these machines at any time throughout the week. Business prospects for the current financial year are expected to be favourable due to the ongoing development activities in KL Sentral. Construction activities in the area include a retail complex and service apartment at Lot G, The Loft Condominium, KL Sentral clubhouse and UEM Tower, which are expected to add a further 10MW to the power demand. There will also be another 2,000RT in the demand for chilled water when Plaza Sentral s remaining two office blocks are completed and occupied. PROJECT MANAGEMENT The Group s in-house projects are undertaken by its project management arm, Malakoff Engineering Sdn Bhd ( MESB ). MESB provides large-scale project management expertise involving the negotiation and execution of engineering, procurement and construction contracts. Amongst the projects managed by MESB were the Lumut Power Plant and GB3 Power Plant; MNI Cogeneration Plant in Mentakab, Pahang; Juru and Bayan Lepas 275kV Substations and Submarine Cables; 500kv Transmission Towers Helicopter Erection; and the District Cooling System and Electricity Distribution System for KL Sentral. MESB is currently providing project management and technical support services for the Tanjung Bin Power Plant under an agreement with Rentak Jitu Project Management Sdn Bhd, the power plant s project manager.

21 MALAKOFF BERHAD (24816-M) 17 MANAGING DIRECTOR S REVIEW INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) We believe ICT is a powerful enabler in achieving the Group s vision. Other than ensuring a sustainable information management strategy and supporting infrastructure, a major ICT thrust is to adopt technology advances to facilitate business innovation and competitiveness. In terms of infrastructure, our Wide Area Network spans all operating power plants under the Group s portfolio. Voice and data convergence has moved to a new level with the implementation of Voice-over- Internet Protocol and video conferencing facilities for the Lumut Power Plant and Prai Power Plant. Further, the Lumut Power Plant Local Area Network has been upgraded with the completion of the new simulator building that hosts all servers under a controlled environment. We will continue to adopt wireless technology at other sites to improve accessibility and mobility. Server consolidation and virtualisation concepts have been realised during the financial year under review with the completion of the server migration exercise. A Storage Area Network has also been put in place to improve server performance and manage storage capacity over the long-term. For greater information sharing and a common platform for document generation, storage and retrieval, the existing Document Management Extension application system was extended to the Lumut Power Plant and Tanjung Bin office. A web-based application, utilising XML-based technology, is being developed to facilitate the capturing of shift and plant reports in a more structured and consistent manner for our power plants. At the enterprise application level, SAP procurement modules have been implemented for two other subsidiaries and cost centres have been revamped for better reporting. We have also leveraged on our existing investment in SAP with enhancements to maximise benefits. Security issues remain high on our priority list, particularly as we move towards easier access for information sharing and a collaborative working environment. We have rolled-out our Information Security Policy to users to protect the confidentiality and integrity of corporate information and data. Advanced monitoring and proactive security measures are in place, including an automated centralised back-up system and disaster recovery exercises. The above initiatives are aimed at integrating our strategic business and technology goals for increased competitiveness, revenue growth and optimal operations costs, while addressing risk management issues within the Group.

22 18 MALAKOFF BERHAD (24816-M) SAFETY, HEALTH AND ENVIRONMENT (SHE) Safety is always one of the most important aspects of conducting our day-to-day activities. Through the structured implementation of our SHE programme over the years, safety has become second nature to all our staff. Nevertheless, we have continued to institute a host of measures to provide a safe and healthy environment. Our staff and in-house contractors undergo regular safety training, some of which are conducted with external parties. All our contractors attend safety briefings before they start work and a comprehensive safety booklet is distributed after briefing. Our contractors representatives also attend our Safety Committee Meetings and take part in SHE activities. The Prai Power Plant experienced a good safety year during the period under review. The power plant did not experience any untoward incidents at the work site and achieved zero Lost Time Incident (LTI). In December 2004, the plant received the National Safety Award from the Department of Occupational Safety and Health ( DOSH ) for There was full environmental compliance during the financial year under review, with no violation of any environmental regulations. The Lumut Power Plant also had a good safety year without any LTI. To further enhance its safety record, the power plant conducted an audiometric test for all staff and in-house contractors, a verification of all scaffolding as well as regular site safety inspections by the Safety Committee. The Tanjung Bin Power Plant also achieved zero LTI. The cumulative manhours recorded for the project was approximately 12.2 million manhours with a total workforce of around 5,000 workers, mostly contractors. The best recorded manhours without an LTI was 9.9 million manhours. Safety, environment and security policies and procedures have been drawn up for the plant so that every level of the workforce will comply with the regulatory requirements from DOSH, the Department of Environment, Fire and Rescue Department and other statutory agencies. For our benefit as well as the community, we continue to be committed and responsible towards the environment in which we operate. Quarterly environmental monitoring by a local consulting firm is performed at the power plants and indicators show that we have achieved our environmental performance standards, which include ambient air quality, gaseous stack emission, wastewater quality, marine water quality and noise levels. HUMAN RESOURCE DEVELOPMENT Our business and operational targets have been achieved through the dedication and skills of our people. Nonetheless, their knowledge and capabilities need to be constantly enhanced so that we can maintain our competitive edge and remain at the forefront of our industry. This is undertaken through a comprehensive staff training schedule that covers functional and soft skills as well as on-the-job training, based on proper needs identification. There are also more specialised training initiatives. The plant-specific training simulator at the Lumut Power Plant, commissioned in early December 2004, provides a platform to simulate realistic power plant scenarios for effective training and competency assessment of our plant operators. We will be doing the same with the training simulator for the GB3 Power Plant, scheduled to be installed in April 2006.

23 MALAKOFF BERHAD (24816-M) 19 MANAGING DIRECTOR S REVIEW In preparation for the O&M of the Tanjung Bin Power Plant, we have embarked on a training programme for the plant operators. This training programme commenced in November 2004 and is ongoing, providing both theoretical knowledge as well as operational exposure on the running of a coal-fired power plant. A plant-specific training simulator has also been purchased, which will be available in March Malakoff s human resource development efforts extend beyond our own staff. Every year, we offer the Trainee Engineer programme to new engineering graduates to develop their competencies through training and working experience. The practical understanding and exposure gained will assist them in securing employment in the Group or other organisations in the future. We also provide SEV scholarships to deserving undergraduates at Universiti Tenaga Nasional, which aim to encourage and assist young people in pursuing relevant courses. Three scholarships were awarded for the academic year 2004/2005, bringing the total number awarded to 37 since these scholarships were introduced in Malakoff, as part of a consortium consisting of TNB and a Saudi partner, has been awarded the Shoaiba Phase 3 Independent Water and Power Project in the Kingdom of Saudi Arabia. The project, on a build, own and operate basis, involves the design, construction, commissioning, testing, ownership, operation and maintenance of a 900MW and 194MIGD (million Imperial Gallons per day) crude oil-fired power and desalination plant under a 20-year Power and Water Purchase Agreement with Water and Electricity Company of Saudi Arabia. The plant will be commissioned in stages, with the total construction period anticipated to be 42 months after financial close. TJSB is actively exploring O&M opportunities in the Middle East. In Saudi Arabia, TJSB is in the consortium selected as the main O&M contractor for the Shoaiba Project. This will give TJSB the opportunity to acquire new skills relating to desalination O&M services, extending the company s scope of services. INTERNATIONAL BUSINESS DEVELOPMENT Already the leading IPP in Malaysia, Malakoff needs to look at opportunities outside the country for future growth. Our focus is on power-related projects in the Asian and Middle East markets that meet our investment criteria. Ahmad Jauhari bin Yahya Managing Director 24 November 2005 Kuala Lumpur

24 20 MALAKOFF BERHAD (24816-M) With clarity of vision, we are focused on strategically positioning the Group for sustainable growth. 22 Corporate Profile 24 Corporate Structure 25 Corporate Data 26 Board of Directors 28 Profile of Board of Directors 32 Management Team 34 Calendar of Events Corporate Information

25 MALAKOFF BERHAD (24816-M) 21

26 22 MALAKOFF BERHAD (24816-M) CORPORATE Malakoff has succeeded in becoming Malaysia s leading independent power producer, with total Group assets of approximately RM15 billion and a market capitalisation of around RM7 billion as at 31 August Incorporated on 9 October 1975, Malakoff Berhad ( Malakoff ) was listed as a plantation-based company on the Main Board of the Kuala Lumpur Stock Exchange (now Bursa Malaysia Securities Berhad) in In October 1993, a shift in its corporate direction led to the disposal of Malakoff s plantation-based assets and entry into the power generation sector. Since then, Malakoff has succeeded in becoming Malaysia s leading independent power producer, with total Group assets of approximately RM15 billion and a market capitalisation of around RM7 billion as at 31 August Malakoff has constantly been featured amongst the top companies listed on Bursa Malaysia Securities Berhad in terms of market capitalisation. The Company s major shareholders are MMC Corporation Berhad, one of the leading conglomerates in Malaysia, International Power plc, which has power generation interests around the world, and the Employees Provident Fund Board. With a specialised portfolio of services covering power generation, operations and maintenance, electricity distribution and project management, Malakoff plays a pivotal role in supporting the nation s industrialisation drive. The Company s power generation assets are held through a number of subsidiaries and associate companies: Lumut Power Plant through a 93.75% equity interest in Segari Energy Ventures Sdn Bhd. GB3 Power Plant through a 75% equity interest in GB3 Sdn Bhd. Prai Power Plant through wholly-owned subsidiary Prai Power Sdn Bhd. Tanjung Bin Power Plant (under construction) through a 90% equity interest in Tanjung Bin Power Sdn Bhd. Port Dickson Power Plant through a 25% equity interest in Port Dickson Power Berhad, via wholly-owned subsidiary Hypergantic Sdn Bhd. Kapar Power Station through a 40% equity interest in Kapar Energy Ventures Sdn Bhd. Malakoff provides various services through dedicated subsidiary companies. Operations and maintenance ( O&M ) services are undertaken by wholly-owned subsidiary Teknik Janakuasa Sdn Bhd, one of the leading O&M service providers in the country. Electricity distribution activities are carried out by Wirazone Sdn Bhd, a whollyowned subsidiary that currently supplies centralised chilled water and distributes electricity to the landmark Kuala Lumpur Sentral development area. Malakoff Engineering Sdn Bhd, also wholly owned by Malakoff, provides project management services for in-house as well as external projects. Having established its premier position in the domestic power generation sector, Malakoff is embarking on a corporate plan to expand overseas. Strategic investments in power generation projects in regions such as the Middle East and other parts of Asia are being explored and, where feasible, pursued. As it forges ahead, Malakoff will continue to be mindful of its responsibilities and obligations to the nation, shareholders, customers, employees and the communities in which it operates.

27 MALAKOFF BERHAD (24816-M) 23 profile

28 24 Corporate Structure as at 11 November 2005 POWER GENERATION 93.75% Segari Energy Ventures Sdn. Bhd. 75% GB3 Sdn. Bhd. 100% Prai Power Sdn. Bhd. 90% Tanjung Bin Power Sdn. Bhd. 40% Kapar Energy Ventures Sdn. Bhd. 100% Hypergantic Sdn. Bhd. 25% Port Dickson Power Berhad OPERATIONS AND MAINTENANCE SERVICES 100% Teknik Janakuasa Sdn. Bhd. 100% Natural Analysis Sdn. Bhd. 100% TJSB International (Shoaiba) Limited ELECTRICITY DISTRIBUTION 100% Wirazone Sdn. Bhd. PROJECT MANAGEMENT 100% Malakoff Engineering Sdn. Bhd. OFFSHORE 100% Malakoff International Limited 100% Malakoff Gulf Limited 40% Malaysian Shoaiba Consortium Sdn. Bhd. 100% Spring Assets Limited* 100% Malakoff Capital (L) Ltd* OTHERS 100% Tuah Utama Sdn. Bhd. 20% Lekir Bulk Terminal Sdn. Bhd. 54% Desa Kilat Sdn. Bhd. 100% Transpool Sdn. Bhd.* * Dormant MALAKOFF BERHAD (24816-M)

29 MALAKOFF BERHAD (24816-M) 25 Corporate Data DIRECTORS Tan Sri Abdul Halim bin Ali Non-Independent Non-Executive Chairman Ahmad Jauhari bin Yahya Managing Director Dato Abdul Aziz bin Abdul Rahim Independent Non-Executive Director Abdul Jabbar bin Abdul Majid Independent Non-Executive Director Azizan bin Mohd Noor Independent Non-Executive Director Dato Ismail bin Shahudin Non-Independent Non-Executive Director Vincent Richard Harris Non-Independent Non-Executive Director Tan Sri Nuraizah binti Abdul Hamid Independent Non-Executive Director Georgina Seeley Alternate Director to Vincent Richard Harris Non-Independent Non-Executive Director COMPANY SECRETARIES Lim Wee Neo (LS ) Rozana binti Ismail (LS ) AUDIT COMMITTEE Abdul Jabbar bin Abdul Majid Chairman Dato Abdul Aziz bin Abdul Rahim Member Azizan bin Mohd Noor Member Ahmad Jauhari bin Yahya Member NOMINATION COMMITTEE Tan Sri Abdul Halim bin Ali Chairman Dato Abdul Aziz bin Abdul Rahim Member Abdul Jabbar bin Abdul Majid Member Azizan bin Mohd Noor Member REMUNERATION COMMITTEE Dato Abdul Aziz bin Abdul Rahim Chairman Dato Ismail bin Shahudin Member Tan Sri Nuraizah binti Abdul Hamid Member EMPLOYEES SHARE OPTION SCHEME COMMITTEE Ahmad Jauhari bin Yahya Chairman Dato Abdul Aziz bin Abdul Rahim Member Mohd Radzuan bin Yahya Member REGISTERED OFFICE Level 12, Block 3B Plaza Sentral Jalan Stesen Sentral Kuala Lumpur Tel: Fax: Website: SHARE REGISTRAR Symphony Share Registrars Sdn. Bhd. Level 26, Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur Tel: Fax: AUDITORS KPMG SOLICITORS Zaid Ibrahim & Co PRINCIPAL BANKERS Malayan Banking Berhad Bumiputra-Commerce Bank Berhad STOCK EXCHANGE LISTING Main Board of Bursa Malaysia Securities Berhad (12 February 1976)

30 26 MALAKOFF BERHAD (24816-M) Seated, from left Ahmad Jauhari bin Yahya Managing Director Tan Sri Abdul Halim bin Ali Chairman Dato Ismail bin Shahudin Standing, from left Tan Sri Nuraizah binti Abdul Hamid Abdul Jabbar bin Abdul Majid Vincent Richard Harris Azizan bin Mohd Noor Dato Abdul Aziz bin Abdul Rahim

31 MALAKOFF BERHAD (24816-M) 27 BOARD OF DIRECTORS

32 28 MALAKOFF BERHAD (24816-M) Profile of Board of Directors Tan Sri Abdul Halim bin Ali, 62, a Malaysian, was appointed the Non- Independent Non-Executive Chairman of Malakoff Berhad on 10 September 2001 and is the Chairman of the Nomination Committee of the Board. A Bachelor of Arts (Honours) graduate from University of Malaya, Malaysia, Tan Sri Abdul Halim joined the Malaysian Foreign Service soon after graduating in During the next thirty (30) years, his postings included the Malaysian High Commission in New Delhi, Republic of India, the Malaysian Consulate in Medan, Sumatra, Republic of Indonesia and the Malaysian Embassy in Tokyo, Japan. In 1976, he was appointed Principal Assistant Secretary, Ministry of Foreign Affairs and three (3) years later, was posted to the United Nations in New York, as Malaysia s Deputy Permanent Representative. In 1982, he assumed his first ambassadorial role as the Malaysian Ambassador to the Socialist Republic of Vietnam, coming back to Kuala Lumpur when he was appointed Deputy Secretary-General (III), Ministry of Foreign Affairs. In 1988, he was appointed Ambassador of Malaysia to Austria, where he also held the position of President Representative to UNIDO, IAEA, United Nations Office in Vienna, Austria. In 1991, he was named Deputy of Secretary-General (1), Ministry of Foreign Affairs, before his appointment as Secretary-General five (5) years later. In September 1996, he was appointed Chief Secretary to the Government, a post he held until his retirement in January 2001, when he was named Chairman of The Employees Provident Fund Board ( EPF ). He is also the Chairman of Malaysian Building Society Berhad, a subsidiary of EPF, Cycle and Carriage Bintang Berhad, Badan Pengawas Saham Minoriti Berhad (Minority Shareholders Watchdog Body Limited), Multimedia Development Corporation Sdn. Bhd. and University of Technology, Malaysia. He also sits on the boards of ESSO Malaysia Berhad and LCL Corporation Berhad. In recognition of his achievements and contributions to the country and corporate sector, Tan Sri Abdul Halim was conferred a Fellowship by the Governing Council of the Malaysian Institute of Directors. Ahmad Jauhari bin Yahya, 51, a Malaysian, is the Managing Director of Malakoff Berhad. He was appointed to the Board on 23 March 1994 and is a member of the Audit Committee and the Chairman of the Employees Share Option Scheme Committee of the Board. He holds a Bachelor of Science (Honours) degree in Electrical and Electronic Engineering from University of Nottingham, United Kingdom. From 1977 to 1979, he worked with ESSO Malaysia Berhad before joining The New Straits Times Press (M) Berhad ( NSTP ) as an Electrical and Electronic Engineer, where he was subsequently promoted to the positions of Engineering Manager, Production and Technical Director and Senior Group General Manager, Production and Circulation, in 1982, 1983 and 1990 respectively. In 1992, he moved to Time Engineering Berhad as Deputy Managing Director and was promoted to Managing Director the same year. In 1993, he joined Malaysian Resources Corporation Berhad ( MRCB ) as Managing Director, before resigning from the said position to assume his current position a year later. He however remained a Director of MRCB. He was appointed a Director of NSTP in July 1999 and Executive Vice-President of MRCB in February In July 2000, he resigned from his directorship at NSTP and also his directorship and executive vice-presidency at MRCB. He also sits on the board of Port Dickson Power Berhad, an associate company of Malakoff. He is also currently the Honorary President of Penjanabebas (Association of Independent Power Producers of Malaysia). Encik Ahmad Jauhari does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last ten (10) years. Encik Ahmad Jauhari had attended all four (4) Board meetings and seven (7) Special Board meetings held in the financial year. Tan Sri Abdul Halim does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last ten (10) years. Tan Sri Abdul Halim had attended all four (4) Board meetings and seven (7) Special Board meetings held in the financial year.

33 MALAKOFF BERHAD (24816-M) 29 PROFILE OF BOARD OF DIRECTORS Dato Abdul Aziz bin Abdul Rahim, 59, a Malaysian, was appointed an Independent Non-Executive Director of Malakoff Berhad on 11 March He is the Chairman of the Remuneration Committee and a member of the Audit Committee, the Employees Share Option Scheme Committee and the Nomination Committee of the Board. He is an Advocate & Solicitor of the High Court of Malaya and holds a Bachelor of Law (Hons.) degree from International Islamic University, Malaysia. From 1967 to 1975, he worked with the Federal Land Development Authority in various capacities before joining Kumpulan Ladang-Ladang Terengganu Sdn. Bhd. as an Estate Manager, a post he held until In 1991, he joined Messrs. Ngeow & Maurice Gomez as an Advocate and Solicitor, before starting his own partnership a year later under the name of Abdul Aziz Rahim & Co. Dato Abdul Aziz does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last ten (10) years. Dato Abdul Aziz had attended all four (4) Board meetings and seven (7) Special Board meetings held in the financial year. Abdul Jabbar bin Abdul Majid, 60, a Malaysian, was appointed an Independent Non-Executive Director of Malakoff Berhad on 23 November 2000 and is the Chairman of the Audit Committee and a member of the Nomination Committee of the Board. He is a Fellow of the Institute of Chartered Accountants, Australia, and a member of the Malaysian Institute of Certified Public Accountants ( MICPA ) and the Malaysian Institute of Accountants ( MIA ). He started his career in 1974 as Senior Manager in the Internal Audit and Organisation Department of Bank Pertanian. In 1977, he joined KPMG as Manager and became a Partner two years later. He was promoted to Deputy Senior Partner in 1993 and was made a Senior Partner in 1995, a position he held until his retirement in He is an Adjunct Professor of the Faculty of Economics and Accounting, International Islamic University, Malaysia, and was the past President and is a council member of MICPA. He was a member of the Open University Malaysia Board. He was a Committee Member of the Labuan International Financial Exchange Inc and the Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad). He is a committee member of the Malaysian Institute of Corporate Governance. He is a member of the boards of Perusahaan Otomobil Nasional Berhad, Tradewinds Corporation Berhad, Opcom Holdings Berhad and Bank Muamalat Malaysia Berhad. Encik Abdul Jabbar does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last ten (10) years. Encik Abdul Jabbar had attended three (3) Board meetings and seven (7) Special Board meetings held in the financial year.

34 32 MALAKOFF BERHAD (24816-M) MANAGEMENT TEAM Above, from left MALAKOFF BERHAD Ahmad Jauhari bin Yahya Managing Director Mohd Radzuan bin Yahya Chief Operating Officer Ruswati binti Othman Chief Financial Officer Below, from left Lim Wee Neo Head, Corporate Services/Secretary Naharuddin bin Zaizakrani Head, Investor Relations and Corporate Communication Siti Hajar binti Mohammad Dahlan Head, Human Resource Ho Chee Sheong Financial Controller

35 MALAKOFF BERHAD (24816-M) 33 Above, from left SEGARI ENERGY VENTURES SDN. BHD. Habib bin Husin Chief Operating Officer GB3 SDN. BHD. Rosli bin Abdul Hamid Senior General Manager PRAI POWER SDN. BHD. Ahmad bin Ali Chief Operating Officer TANJUNG BIN POWER SDN. BHD. Azhari bin Sulaiman Chief Operating Officer Below, from left TEKNIK JANAKUASA SDN. BHD. Head Office Nor Shakiman bin Muhammad Chief Operating Officer Lumut & GB3 Power Plants Chew Yee Chuan Station Manager Prai Power Plant Nordin bin Kasim Station Manager WIRAZONE SDN. BHD. Azizan bin Lebai Manat General Manager

36 34 MALAKOFF BERHAD (24816-M) CALENDAR OF for the financial year ended 31 August 2005 Events SEPTEMBER 2004 Extraordinary General Meeting Malakoff held an Extraordinary General Meeting at Crowne Plaza Mutiara Kuala Lumpur, where shareholders approved the Direct Dividend Payment Service for the crediting of dividends directly into shareholders bank accounts JANUARY 2005 Twenty-Ninth Annual General Meeting Malakoff held its Twenty-Ninth Annual General Meeting at Crowne Plaza Mutiara Kuala Lumpur & 30 JANUARY 2005 Malakoff Charity Ride The Malakoff Charity Ride was flagged off from Ayer Keroh Country Resort, Melaka, in which 40 staff from the Group cycled 118 km to Batu Pahat, Johor. A collection totaling RM16,700 was presented to two children charitable organisations, Pertubuhan Intervensi Awal Batu Pahat and Pertubuhan Kebajikan Anak-Anak Yatim Batu Pahat. The next day, the cyclists continued for another 93 km to Pontian, where a collection totaling RM23,800 was presented to Pusat Pemulihan Dalam Komuniti Sinar Bakti, Pertubuhan Kebajikan Anak-Anak Yatim Islam and Pusat Pemulihan Dalam Komuniti Peneroka FEBRUARY 2005 Life Cycle Asset Information Management (LCAIM) Project Teknik Janakuasa Sdn Bhd ( TJSB ) entered into a Commercial Cooperation Agreement, Software Customisation Agreement and Professional Services Agreement with ALCIM Technology Sdn Bhd to develop and implement a Life-Cycle Asset Information Management (LCAIM) system for the operations and maintenance (O&M) of power plants. TJSB also entered into a Contract for Software Delivery & Maintenance with software provider Innotech GmbH. 09 MARCH 2005 Malakoff Malaysian Duathlon Series First Leg Malakoff Charity Duathlon Race 2005 The first leg of the Malakoff Malaysian Duathlon Series 2005 kicked off at Dataran Merdeka, Kuala Lumpur. The Malakoff Charity Duathlon Race was held simultaneously, during which more than ten participating organisations contributed RM43,000. Malakoff matched the total sum collected and presented RM86,000 to the National Kidney Foundation, the beneficiary of this charity race MARCH 2005 Topping-up of Chimney Ceremony at Tanjung Bin Power Plant The Managing Director, Encik Ahmad Jauhari Yahya, poured the final concrete to top-up the chimney of Tanjung Bin Power Plant. The 200- metre high chimney, the tallest structure of the power plant, is designed to scrub the flue gas clean before emission, making the power plant one of the cleanest in the country.

37 MALAKOFF BERHAD (24816-M) APRIL 2005 Malakoff Acquires Additional Stake in SEV Malakoff successfully acquired an additional 18.75% equity interest in Segari Energy Ventures Sdn Bhd ( SEV ) for approximately RM372 million, raising its equity interest in SEV to 93.75% APRIL 2005 Sixth GT13E2 Users Conference and Exhibition Over 300 delegates and guests, including participants from over 20 power plants around the world, attended the conference organised in Kuala Lumpur by TJSB. The conference was successful in providing a platform for knowledge-sharing within the community of GT13E2 users. 20 APRIL 2004 TJSB Acquires Remaining Stake in NASB With the completion of this acquisition, Natural Analysis Sdn Bhd ( NASB ) became TJSB s wholly-owned subsidiary. NASB is the O&M operator of the Prai Power Plant MAY 2005 Malakoff Malaysian Duathlon Series Second Leg The second leg of the Malakoff Malaysian Duathlon Series 2005 was held at Lumut, Perak, with more than 400 participants from over 10 countries MAY 2005 Boiler Drum Lifting Ceremony at Tanjung Bin Power Plant The boiler drum lifting ceremony, witnessed by YBhg Datuk Ir (Dr) Mohd Annas bin Haji Mohd Nor, the then Chairman of the Energy Commission, was a significant milestone in the mechanical and engineering works of the Tanjung Bin power project. This is the first of the project s three drums, one for each of the three 700MW power-generating units JULY 2005 Malakoff Malaysian Duathlon Series Third Leg The third leg of the Malakoff Malaysian Duathlon Series 2005 was held at Dataran Johor, Johor Bahru, attracting some 500 participants. This race was the penultimate test before Powerman Malaysia on 25 September & 8 AUGUST 2005 Malakoff Sports Carnival and Family Day 2005 This sports carnival was slightly different from previous ones, with the inclusion of a Family Day on the last day of the carnival. Staff and family members enjoyed a variety of activities that included football, volleyball, sepak takraw and ping pong, as well as a drawing competition. There was also a concert with performances by staff. 9 AUGUST 2005 Corporate Governance Award In The Asset Benchmark Survey 2004, Malakoff was ranked third in the publication s corporate governance survey. The award, A Leader in Corporate Governance, Malaysia, was presented at a ceremony in Kuala Lumpur.

38

39 As we soar from success to success, vigilance and stringent monitoring continue to be crucial in upholding the integrity of our business practices and processes. Corporate Governance 38 Statement on Corporate Governance 44 Audit Committee Report 47 Statement on Internal Control 49 Approved Utilisation of Funds 50 Additional Compliance Information 52 Directors Responsibility Statement

40 38 MALAKOFF BERHAD (24816-M) Statement on Corporate Governance (pursuant to paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad) The Board of Directors (the Board ) of Malakoff Berhad (the Company ) remains committed in its efforts to implement the principles and best practices set out in the Malaysian Code on Corporate Governance (the Code ). The adoption of good corporate governance is a fundamental part of the Board s responsibility to protect and enhance shareholder value and the performance of the Group. The Board is pleased to present the following report on the application of the principles and compliance with the best practices as set out in the Code during the financial year ended 31 August A. BOARD OF DIRECTORS A1. Composition and Size of Board The Board is composed as at the date of this Annual Report, of nine (9) directors including an alternate director; four (4) of whom are independent non-executive directors. This composition complies with the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ), which require one-third of the Board to comprise independent directors. A2. Board Balance and Board Effectiveness The Board comprises members from varied backgrounds, such as engineering, banking, accounting, economics, legal as well as public administration, bringing with them, in-depth and diverse experience, expertise and perspectives to the Group s business operations. The profile of each director is presented from pages 28 to 31 of this Annual Report. The Board has implemented a formal process to annually assess the effectiveness of the Board as a whole. At the beginning of the financial year the principal accountabilities and performance targets of the Board were deliberated and agreed upon. Specific targets and objectives were set for each principal accountability areas of the Board and were cascaded to senior management to ensure proper alignment of management to Board objectives. There is a clear division of responsibility between the Chairman and the Managing Director to maintain a balance of power and authority. In order to ensure this balance, the positions of the Chairman and the Managing Director are held by separate members of the Board and their respective roles are clearly defined. The Chairman is primarily responsible for ensuring Board effectiveness and conduct whilst the Managing Director oversees the day-to-day running of the business, implementation of Board policies and decisions, and making of operational decisions. The presence of independent non-executive directors brings an additional element of balance to the Board as they provide unbiased and independent views, advice and judgment to take account of the interest, not only of the Group, but also of the shareholders, employees, customers, suppliers and the community. A3. Supply of Information All directors are provided with an agenda and a set of Board papers prior to the Board meeting. This allows the Directors to obtain further explanations and clarifications, where necessary, in order to be properly briefed before the meeting. Senior management staff would normally be invited to attend Board meetings to provide the Board with detailed explanations and clarifications on certain matters that are tabled to the Board. All directors have access to the advice and services of the Company Secretary and the senior management staff. The Directors may obtain independent professional advice in the furtherance of their duties at the Company s expenses.

41 MALAKOFF BERHAD (24816-M) 39 STATEMENT ON CORPORATE GOVERNANCE (pursuant to paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad) A4. Attendance at Board Meetings The Board meets on a scheduled basis at least four (4) times a year. When the need arises, special Board meetings are also convened. During the financial year ended 31 August 2005 there were four (4) Board meetings and seven (7) special Board meetings held and all Directors have attended more than 50% of the total meetings held. The following are the details of the attendance of each director in respect of the meetings held:- Directors No. of meetings attended Tan Sri Abdul Halim bin Ali 11 out of 11 Ahmad Jauhari bin Yahya 11 out of 11 Dato Abdul Aziz bin Abdul Rahim 11 out of 11 Abdul Jabbar bin Abdul Majid 10 out of 11 Azizan bin Mohd Noor 11 out of 11 Dato Ismail bin Shahudin 7 out of 11 Vincent Richard Harris 9 out of 11 Tan Sri Nuraizah binti Abdul Hamid 10 out of 11 A5. Appointments to the Board The Nomination Committee recommends the appointment of new directors to the Board. The selection criteria with regard to the prospective new candidates for directorship encompass the required mix of skills, experience and other requisite qualities of individuals towards achieving the Group s business goals. However, all decisions on appointments are made by the Board after considering the recommendations of such committee. As at the date of this Statement, all directors have attended the Mandatory Accreditation Programme (MAP) conducted by Research Institute of Investment Analysts Malaysia (RIIAM), an affiliate company of Bursa Malaysia, save for the alternate director who has been granted an extension of time to do so by December Apart from the MAP training, the directors have also attended various accredited programmes under the Continuing Education Programme (CEP) conducted by various course leaders, save for a director and the alternate director who were appointed for the first time as directors of the Company on 15 March 2004 and 26 January 2005, respectively. However, all Directors will continue to attend such further training as may be required from time to time to keep abreast with developments in the industry as well as the current changes in laws and regulations. A7. Re-election of Directors In accordance with the Company s Articles of Association, at least one-third of the directors are required to retire by rotation each financial year and can offer themselves for re-election at the Annual General Meeting. Directors who are appointed during the financial year are subject to re-election at the next Annual General Meeting following their appointment. All directors are required to retire from office once every three (3) years except for the Managing Director who is under a contract of employment entered into prior to 1 June Details of the directors seeking re-election at the forthcoming Annual General Meeting are disclosed in the Statement Accompanying the Notice of Annual General Meeting as set out on pages 108 and 109 of this Annual Report. A6. Directors Induction and Training There is a familiarisation programme in place for the new directors, including visit to the Group s businesses and meetings with senior management as appropriate, to familiarise their understanding of the Group s business and operations. A8. Number of directorships in other companies None of the directors of the Company hold more than ten (10) directorships in public listed companies or more than fifteen (15) in non-public listed companies, as required by the Listing Requirements.

42 40 MALAKOFF BERHAD (24816-M) STATEMENT ON CORPORATE GOVERNANCE (pursuant to paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad) B. BOARD COMMITTEES The Board has delegated certain responsibilities to Board Committees which operate within clearly defined terms of reference. These committees are:- B1. Audit Committee The Audit Committee consists of four (4) directors, three (3) of whom including the Chairman are independent non-executive directors. The terms of reference of the Audit Committee, its activities during the year, details of attendance of each member of the Committee and the number of meetings held are contained in the Audit Committee Report for the financial year ended 31 August This Report is presented on pages 44 to 46 of this Annual Report. B2. Nomination Committee The Committee consists of four (4) non-executive directors, the majority of whom are independent. The members of the Committee as at the date of this Annual Report are: i. Tan Sri Abdul Halim bin Ali (non-executive director) - Chairman ii. Dato Abdul Aziz bin Abdul Rahim (independent non-executive director) iii. Abdul Jabbar bin Abdul Majid (independent non-executive director) iv. Azizan bin Mohd Noor (independent non-executive director) The duties and responsibilities of the Committee are to:- a) identify and recommend to the Board candidates for directorships to the Board; b) make recommendations to the Board on all new or reappointments of members to the Board; d) formulate and plan orientation programme for new directors to familarise them with the Company s business; and e) review the succession plans of the Group with the assistance of an external consultants to produce an independent assessment of current skills and capabilities in the Group. The Committee met three times during the year to: a) assess the overall conduct and effectiveness of the Board as a whole and the Committees of the Board; b) determine the goals and measurable targets of the Board and Managing Director and related performance rating; and c) recommend the appointment of the Chief Financial Officer of the Company. B3. Remuneration Committee The Committee consists of three (3) non-executive directors, the majority of whom are independent. The members of the Committee as at the date of this Annual Report are:- i. Dato Abdul Aziz bin Abdul Rahim (independent non-executive director) - Chairman ii. Dato Ismail bin Shahudin (non-executive director) iii. Tan Sri Nuraizah binti Abdul Hamid (independent non-executive director) The duties and responsibilities of the Committee are to:- a) make recommendations to the Board on the Company s framework of remuneration and its cost and to determine on behalf of the board specific remuneration packages and terms and conditions of employment for the Group; c) evaluate the effectiveness of the Board as a whole and the Committees of the Board;

43 MALAKOFF BERHAD (24816-M) 41 STATEMENT ON CORPORATE GOVERNANCE (pursuant to paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad) b) provide remuneration input on any contract of employment with executive directors and determine the terms of any compensation in the event of early termination of the employment contracts thereon; and c) make recommendations to the Board on the remuneration of non-executive directors which shall be a decision of the Board as a whole. The Committee met twice during the year. During the meetings, the performance evaluation process and ratings of the Nomination Committee were presented. The Remuneration Committee has sought the assistance of an external consultant to present current remuneration market trends and to advise on the proper reward principles for the Directors and Senior Management. The Remuneration Committee strives to reward the Directors and Senior Management based on accountability, fairness and competitiveness as prescribed in the Code. Thus, there is a formal and transparent procedure for rewarding and fixing the remuneration packages of Directors and Senior Management. B4. Employees Share Option Scheme ( ESOS ) Committee The ESOS Committee was established on 7 March 1996 to administer the Malakoff Berhad Employees Share Option Scheme ( Scheme ). The Scheme was extended for another five (5) years up to 6 March The ESOS Committee ensures that the Scheme is administered in accordance with the Bye-laws approved by the shareholders of the Company. Subject to approval of the Board, the ESOS Committee will be dissolved upon the expiry of the Scheme in March C. DIRECTORS REMUNERATION The objective of the Company s policy on Directors remuneration is to attract and retain the directors of the caliber needed to run the Group successfully. Non-executive directors are paid attendance/meeting allowance for each Board and Committee meeting they attend. Directors fees are paid to non-executive directors and these are approved by the shareholders at the Annual General Meeting. Executive director is not paid attendance/meeting allowance and directors fees. Executive director s remuneration comprises basic salary (inclusive of statutory employer contribution to the Employees Provident Fund ( EPF )), bonus and benefits-in-kind. Salary review and bonus determination take into account the performance of the individual and the Group. Performance is measured against profits and other targets set based on the Company s annual budget and plans. The aggregate remuneration of the directors of the Company for the financial year ended 31 August 2005 categorised according to the appropriate components are as follows:- Executive Non-executive Director Directors RM RM Fees 396,000 Attendance / meeting allowance 108,450 Salary and bonus 932,411 EPF Contribution 186,479 Benefits-in-kind 61,968 23,950 Total 1,180, ,400 The members of the Committee as at the date of this Annual Report are:- i. Ahmad Jauhari bin Yahya (Managing Director) - Chairman ii. Dato Abdul Aziz bin Abdul Rahim (independent non-executive director) iii. Mohd Radzuan bin Yahya (Chief Operating Officer) The number of directors whose total remuneration falls within the following bands is as follows:- Number of Directors Range of Remuneration Executive Non-executive Below RM50,000 6 RM100,001 to RM150,000 1 RM1,150,001 to RM1,200,000 1 Total 1 7

44 42 MALAKOFF BERHAD (24816-M) STATEMENT ON CORPORATE GOVERNANCE (pursuant to paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad) D. ACCOUNTABILITY AND AUDIT D1. Financial Reporting The Board is responsible to ensure that the annual financial statements of the Company and the Group are drawn up in accordance with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, D3. Relationship with the Auditors Through the Audit Committee, the Board has established a formal and transparent arrangement for maintaining appropriate relationships with the Group s auditors, both external and internal. The Committee meets with the auditors without the presence of the executive director at least once a year. The Board aims to provide and present a balanced and meaningful assessment of the Group s financial performance and prospects, primarily through the annual financial statements, quarterly and half yearly announcements of results to the shareholders as well as the Chairman s statement and review of operations in the Annual Report. The Board is assisted by the Board Audit Committee to oversee the Group s financial reporting processes and the quality of its financial reporting. The Directors Responsibility Statement in respect of the annual audited financial statements is presented on page 52 of this Annual Report. D2. Internal Control The Board recognises the importance of a sound system of internal controls and risk management practices in achieving corporate objectives and safeguarding shareholders investment and the Group s assets. Bursa Malaysia Statement on Internal Control: Guidance for Directors of Public Listed Companies provides guidance for compliance with these requirements. The Statement on Internal Control is presented on pages 47 and 48 of this Annual Report. E. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS E1. Shareholder Communication and Investor Relations The Board and management recognise 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 comprehensive view of the Group s performance and the issues faced by its businesses in the competitive environment amidst a changing landscape. Regular dialogues are held with the financial analysts and fund managers representing institutional and individual shareholders through the investor relations program. The directors ensure timely announcements are made to the Bursa Malaysia and disseminate clear, relevant and sufficient information to enable the shareholders and investors to make informed decisions. All formal queries by Bursa Malaysia and other regulatory authorities are responded to on a timely basis. The Company s website, also provides easy and quick access to financial, corporate and other pertinent information on the Group s various activities.

45 MALAKOFF BERHAD (24816-M) 43 STATEMENT ON CORPORATE GOVERNANCE (pursuant to paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad) E2. General Meetings General meetings serve as the principal forum for dialogue with the shareholders of the Company. The role of the Board is to ensure that the general meetings are conducted in an efficient manner. This includes the supply of timely and relevant information to shareholders and the encouragement of active participation at the general meetings. The Board has adopted the following best practices to enhance the efficiency and value of general meetings: ensures that, for re-election of directors, the notice of meeting identifies the directors standing for re-election or election with a brief description to include matters such as age, relevant experience, list of directorships, date of appointment to the Board, details of participation in board committees and whether the particular director is independent; ensures that each item of special business included in the notice of meeting is accompanied by a full explanation of the effects of the proposed resolution; and ensures that the Chairman provides reasonable time at the meeting for discussion and for a question and answer session. The external auditors are also present to provide their professional and independent clarification on issues and concerns raised by the shareholders. The outcome of all resolutions proposed at the general meeting is announced to Bursa Malaysia at the end of the meeting day. A press conference is always held immediately after the annual general meeting or an extraordinary general meeting, in which the Chairman and Managing Director of the Company advise members of the media of the resolutions passed, and answer questions on the Group s operations fielded by the reporters. The Chief Operating Officer and the Chief Financial Officer are also present at the press conference to clarify and explain any issue. F. COMPLIANCE WITH THE CODE The Company is substantially in compliance with the Code during the financial year under review, save for the exceptions set out below:- The appointment of a senior independent non-executive director to whom concerns may be conveyed pursuant to the Best Practices Provision AA VII has not been made as the Board is composed of a majority of non-executive directors and the Chairman maintains an active and objective dialogue with Board members and encourages full deliberation of all matters submitted to the Board and Board Committee meetings; and The details of the remuneration of each Director have not been disclosed as the transparency and accountability aspects of corporate governance as applicable to Directors remuneration are appropriately served by the band disclosure made on page 41 of this Statement. This Statement is made in accordance with a resolution of the Board dated 24 November 2005.

46 44 MALAKOFF BERHAD (24816-M) Audit Committee Report for the financial year ended 31 August 2005 The Board of Directors (the Board ) of Malakoff Berhad is pleased to present the report of the Board Audit Committee (the Committee ) for the financial year ended 31 August The Committee was established by a resolution of the Board on 30 May MEMBERS AND MEETINGS The members of the Committee during the financial year together with their attendance at the Committee meetings during the year are set out below. The Committee held a total of six (6) meetings, that is, on 27 October 2004, 25 November 2004, 26 January 2005, 21 February 2005, 25 April 2005 and 19 July 2005 respectively. Names Status of directorship Independent Attendance of meetings Abdul Jabbar bin Abdul Majid Non-Executive Director * Yes 5 out of 6 (Chairman) Dato Abdul Aziz bin Abdul Rahim Non-Executive Director Yes 6 out of 6 Azizan bin Mohd Noor Non-Executive Director * Yes 6 out of 6 Ahmad Jauhari bin Yahya Managing Director No 5 out of 6 * Fellow of the Institute of Chartered Accountants, Australia and Fellow of the Institute of Chartered Accountants in England and Wales, respectively. Both are also members of the Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants. 2. TERMS OF REFERENCE The terms of reference of the Committee are as follows: 2.1 Membership The Committee shall be appointed by the Board from amongst its members and shall comprise not less than three (3) directors, the majority of whom shall be independent non-executive directors and at least one (1) of whom shall be a member of the Malaysian Institute of Accountants or one (1) of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act, The Chairman of the Committee shall be an independent non-executive director elected by the Committee from amongst its members. 2.2 Meetings and minutes Meetings shall be held at least four (4) times a year or more frequently as circumstances dictate. The Chairman shall call a meeting of the Committee if requested to do so by any Committee member, the management or the internal or external auditors. A representative of the external and internal auditors shall normally be invited to attend the meetings of the Committee. The management shall be represented at the meetings by the Managing Director, or in his absence, the Chief Operating Officer, and the Chief Financial Officer of the Company. The Committee shall meet at least once a year with the internal and external auditors without the attendance of the executive members of the Committee. The quorum for a meeting of the Committee shall be two (2) members present and both of whom must be independent non-executive directors. Minutes of each meeting shall be kept and distributed to each member of the Committee and of the Board. The Chairman of the Committee shall report on each meeting to the Board. The Company Secretaries shall be the Secretaries of the Committee.

47 MALAKOFF BERHAD (24816-M) 45 AUDIT COMMITTEE REPORT for the financial year ended 31 August Authority The Committee is authorised by the Board: (a) to investigate any matter within its terms of reference; (b) to have the resources in order to perform its duties and responsibilities as set out in its terms of reference; (c) to have full and unrestricted access to information pertaining to the Company and the Group; (d) to have direct communication channels to the internal and external auditors; and (e) to obtain, at the expense of the Company, external legal or other independent professional advice if it considers necessary. Where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ), the Committee has the responsibility to promptly report such matter to Bursa Malaysia. 2.4 Review of the Committee The term of office and performance of the Committee and each of its members shall be reviewed by the Board at least once every three (3) years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference. 2.5 Duties and Responsibilities The duties and responsibilities of the Committee are as follows:- (a) review and update the Audit Committee Charter as and when conditions dictate; (b) review with the external auditors and approve the audit scope and plan including any changes; (c) review and approve the adequacy of the internal audit scope and plan, functions and resources of the internal audit function and that it has the necessary authority to carry out its work; (d) review the internal and external audit reports to ensure that appropriate and prompt remedial action is taken by management for major deficiencies in controls or procedures that have been identified; (e) review major audit findings and the management s response with the management, the internal and external auditors including the status of previous audit recommendations; (f) review the assistance given by the Group s officers to the auditors, and any difficulties encountered in the course of audit work, including restrictions on the scope of activities or access to required information; (g) review the appointment and performance of the external auditors, the audit fee and any questions of resignation or dismissal before making recommendations to the Board; (h) review the nomination of a person or persons as external auditors; (i) review the adequacy and effectiveness of internal control systems, including the management information system, and the internal auditors and/or external auditors evaluation of the said systems; (j) direct and, where appropriate, supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts; (k) review the quarterly results and year-end financial statements of the Company and the Group, prior to approval by the Board, focusing particularly on: i. any changes in accounting policies and practices; ii. significant adjustments arising from the audit; iii. the going concern assumption; and iv. compliance with accounting standards and other regulatory requirements; (l) review procedures in place to ensure that the Group is in compliance with the Companies Act, 1965, the Listing Requirements of Bursa Malaysia and other regulatory and reporting requirements;

48 46 MALAKOFF BERHAD (24816-M) AUDIT COMMITTEE REPORT for the financial year ended 31 August 2005 (m) review any related party transaction and any conflict of interest situation that may arise within the Company or the Group; (n) prepare reports, at least once a year, to the Board summarising the Committee s activities during the year and the related significant results and findings; and (o) any other activities, as authorised by the Board. 3. SUMMARY OF ACTIVITIES In line with the terms of reference of the Committee, the following activities were carried out by the Committee during the year in the discharge of its duties and responsibilities: (a) reviewed with the internal auditors the internal audit plan for the Group; (b) reviewed with the external auditors the audit strategy and scope for the statutory audit of the Group; (c) reviewed the audit reports for the Group prepared by the internal and external auditors and major findings by the auditors and management s responses thereto including the status of previous audit recommendations; (d) reviewed the fees of the internal and external auditors before making their recommendations to the Board; (e) reviewed the quarterly unaudited financial statements and announcements and year-end audited financial statements of the Company and the Group with the management and the external auditors and ensured that the financial statements were drawn in accordance with the provisions of the Companies Act 1965, Listing Requirements of Bursa Malaysia and applicable accounting standards approved by Malaysian Accounting Standards Board ( MASB ) prior to the approval by the Board; (f) discussed with the external auditors on the updates and new developments /issuance of new accounting standards and the impact of the proposed changes; (g) ensured the follow-up actions by management on audit issues which have a significant impact on the financial results of the Company and the Group were taken in a timely and effective manner; (h) reviewed the related party transactions entered into by the Group prior to the approval by the Board and the disclosure of such transactions in the annual report of the Company; (i) reviewed the adequacy and integrity of internal control systems, including risk management and relevant management information system, the appropriate processes in place to identify, evaluate and manage the significant risks identified by the Group; (j) reviewed and monitored the significant risks identified by the Group on a quarterly basis and the corresponding actions plans taken by management to mitigate and to address such risks; (k) met with the internal and external auditors of the Company without the presence of the executive director; and (l) reviewed the list of eligible employees and the corresponding allocation of options granted to them by the Company pursuant to the Malakoff Berhad Employees Share Option Scheme. 4. INTERNAL AUDIT FUNCTION The Internal Audit Function of the Company and its subsidiaries is carried out by an audit firm to whom the internal audit function has been outsourced. The scope of Internal Audit has been carried out in accordance with the internal audit plan approved by the Committee. During the year, audit reviews and findings by the internal auditors were reported to the Committee on a quarterly basis in accordance to the annual audit plan, whereby recommendations on areas of improvement by the internal auditors to management were presented to the Committee and to the relevant persons concerned for their attention and necessary action. All actions plans were assigned with specified targeted completion date and allocation of responsibility to specific person(s). A follow-up review was subsequently carried out by the internal auditors and the status of such action plans was reported to the Committee. 5. STATEMENT BY THE COMMITTEE The Committee confirmed that the allocation of options granted by the Company to eligible employees of the Group during the year had complied with the Bye-Laws of the Malakoff Berhad Employees Share Option Scheme.

49 MALAKOFF BERHAD (24816-M) 47 Statement on Internal Control for the financial year ended 31 August 2005 INTRODUCTION The Board of Directors (the Board ) of Malakoff Berhad (the Company ) is committed to maintaining a sound system of internal control in the Group and is pleased to provide the following statement, which outlines the nature and scope on internal control of the Group during the financial year under review. BOARD RESPONSIBILITY The Board acknowledges its overall responsibility for the adequacy and integrity of the Company s system of internal control group-wide, including the review of its effectiveness. The Group s system of internal control is designed to ensure that the risks facing the Group s businesses in pursuit of its objectives are identified and managed at known and acceptable levels. Nevertheless, as with any internal control system, controls can only provide reasonable and not absolute assurance against material misstatement or loss. ENTERPRISE RISK MANAGEMENT The Group has implemented a risk management process which includes a method of identifying, analysing, assessing and monitoring the Group s risks and is an ongoing and a continuous process. Furthermore, in dealing with its stewardship responsibilities, the Board recognises that risk management is an integral part of good business management practice. For the financial year under review, monitoring of the significant risks is an ongoing process exercised through direct involvement of the Board in board meetings and senior management in Risk Management Committee meetings. The Risk Management Committee, made up of senior management and representatives from the respective Risk Management Units (RMUs), had several meetings during the year to review the risks identified by the RMUs, which includes the major subsidiaries and various departments within the Group, and assess the effectiveness of the action plans that are being carried out by the RMUs. Reports are provided on a quarterly basis to the Board Audit Committee and the Board of Directors particularly on the significant risks identified and the action plans taken to mitigate those risks. INTERNAL AUDIT FUNCTION The internal audit function of the Company and its subsidiaries is carried out by an audit firm to whom the internal audit function has been outsourced. The internal audit function provides the Board with the assurance it requires regarding the adequacy and integrity of the system of internal control. The internal audit function reviews the internal controls in the key activities of the Group s businesses based on the annual internal audit plan, which is presented to the Board Audit Committee for approval. The internal audit function adopts a risk-based approach and prepares its audit strategy and plan based on the risk profiles of the business units of the Group. The internal audit reports are reviewed by the Board Audit Committee. The Management is responsible for ensuring that corrective actions on reported weaknesses are taken within the required time frame. The Board Audit Committee has full access to both internal and external auditors and receives reports on all audits performed.

50 48 MALAKOFF BERHAD (24816-M) STATEMENT ON INTERNAL CONTROL for the financial year ended 31 August 2005 OTHER RISKS AND CONTROL PROCESSES Apart from risk management and internal audit, the Board has the following control processes in place: The Board meets at least quarterly and has set a schedule of matters, which is required to be brought to it for discussion, thus ensuring that it maintains a full and effective supervision over the appropriate controls. The Managing Director leads the presentation of the Board papers and provides an explanation of all pertinent issues. In arriving at any decision, on the recommendation by Management, a deliberation and discussion by the Board is a prerequisite. In addition, the Board is kept updated on the Group s activities and operations; The Managing Director also reports to the Board on significant changes in the business and external environment, which have a material impact to the Group. The Chief Financial Officer provides the Board with monthly and quarterly financial information, which includes key performance indicators. This includes, amongst others, the monitoring of results against budget, with major variances being followed up and management action taken, where necessary. Where areas of improvement in the system are identified, the Board considers the recommendations made by the Board Audit Committee and Management; Clearly defined lines of accountability and responsibility, which set out the decisions that need to be taken and the appropriate approving authority at various levels of management including matters that require the Board s approval; and An organisational structure with clearly defined lines of responsibility and delegation of authority. A reporting process, which provides for a documented and auditable trail of accountability, has been put in place. The Group has an Employee Handbook, which highlights the policies on health and safety, training and development, equality of opportunity, staff performance and serious misconduct. These policies are relevant across the Group s operations. The internal audit function reviews the implementation and compliance of these policies. Planned corrective actions, as required, are monitored for timely completion. INTERNAL CONTROL WEAKNESSES THAT RESULT IN MATERIAL LOSSES There were no material losses incurred during the financial year as a result of weaknesses in internal control. The Management continues to take measures to strengthen the control environment. This Statement is made in accordance with the resolution of the Board of Directors dated 24 November 2005.

51 MALAKOFF BERHAD (24816-M) 49 Approved Utilisation of Funds by the Securities Commission in the financial year ended 31 August 2005 Approved Actual Description Utilisation Utilisation Balance Comments RM million RM million RM million Issuance by Malakoff Berhad ( Malakoff ) of up to RM1,850 million nominal value unsecured Bonds (total net proceeds of RM1,500 million) 1, , The Securities Commission ( SC ) had, via their letter dated 14 October 2003, approved the utilisation of proceeds for Malakoff s investment in the following:- i) up to RM1,265 million, to fund Malakoff s investment of: a) up to RM735 million for the acquisition of 90% equity interest in SKS Power Sdn. Bhd. (now known as Tanjung Bin Power Sdn. Bhd.) ( SKS Power ); and b) up to RM530 million for Malakoff s equity injection into the proposed construction and development of the 2,100MW coal fired power plant by SKS Power in Tanjung Bin, Mukim Serkat, Johor Darul Takzim ( Tanjung Bin Project ); ii) up to RM232 million to fund Malakoff s investment of: a) up to RM32.52 million for the acquisition of 100% equity interest in Prai Power Sdn. Bhd. ( PPSB ) and; b) up to RM million for the settlement of shareholders advances owing by PPSB to SKS Ventures Sdn Bhd; and iii)balance for payments of fees in relation to the bonds and working capital of Malakoff. Issuance by Tanjung Bin Power Sdn Bhd ( Tanjung Bin Power ) of up to RM5,600 million Istisna Medium Term Notes Programme (*Although approval was given for issuance up to RM5,600 million, the final issuance of the Istisna Medium Term Notes Programme was RM5,570 million) 5, , , The SC had, via their letter dated 20 October 2003, approved the utilisation of the proceeds to repay all obligations under the short-term financing facility extended to Tanjung Bin Power as bridge financing of up to RM200 million and the balance of proceeds for the development and construction of the Tanjung Bin Project.

52 50 MALAKOFF BERHAD (24816-M) Additional Compliance Information The information set out below is disclosed in compliance with Appendix 9C, Part A of the Listing Requirement of Bursa Malaysia Securities Berhad:- 1. UTILISATION OF PROCEEDS During the financial year under review, no proceeds were raised by the Company from any corporate proposal. 2. SHARE BUY-BACKS The Company has not purchased any of its own shares and as such, there is no treasury shares maintained by the Company for share buybacks. 3. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES During the financial year under review, options to subscribe for 7,953,000 ordinary shares of RM1.00 each in the Company have been exercised and shares have been allotted pursuant to the Malakoff Berhad Employees Share Option Scheme. 4. AMERICAN DEPOSITORY RECEIPT ( ADR ) OR GLOBAL DEPOSITORY RECEIPT ( GDR ) PROGRAMME The Company did not sponsor any ADR or GDR programme during the financial year under review. 5. IMPOSITION OF SANCTIONS AND/OR PENALTIES There were no public sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by any regulatory body during the financial year under review. 6. NON-AUDIT FEES Non-audit fees payable to the external auditors, KPMG and its affiliated companies for the financial year ended 31 August 2005 amounted to RM700, and are as stated below. The fees were mainly in relation to tax advisory services, corporate governance advisory services and other assurance services. RM KPMG 226, KPMG Tax Services Sdn. Bhd. 440, KPMG Corporate Services Sdn. Bhd. 33, Total 700, VARIATION IN RESULTS There were no variations between the audited results for the financial year ended 31 August 2005 and the unaudited results for the fourth quarter ended 31 August 2005 of the Group.

53 MALAKOFF BERHAD (24816-M) 51 ADDITIONAL COMPLIANCE INFORMATION 8. PROFIT GUARANTEE The Company did not give any profit guarantee during the financial year under review. 9. REVALUATION POLICY ON PROPERTIES The Group revalues its properties comprising land and buildings every five (5) years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value. Freehold and leasehold land are stated at Directors valuation based on a professional valuation made by Encik Irhamy Ahmad, a chartered valuation surveyor, in Irhamy & Co Chartered Surveyors, on the open market basis conducted in 2005 and 2000 respectively. 10. MATERIAL CONTRACTS During the financial year under review, save as disclosed below, there were no other material contracts entered into by Malakoff Berhad ( MB ) and/or its subsidiaries involving directors and substantial shareholders interests either still subsisting at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial year:- Date 8 October 2004 Parties 1. Teknik Janakuasa Sdn Bhd ( TJSB ) as purchaser; and 2. SKS Ventures Sdn Bhd ( SKSV ) as vendor General Nature of Contract Conditional share sale agreement for the acquisition by TJSB from SKSV 49,000 ordinary shares of RM1.00 each in Natural Analysis Sdn Bhd ( NASB ) free from encumbrances representing 49% equity interest in NASB, which was then a 51% subsidiary of TJSB Consideration RM24 million cash Relationship Major Shareholders SKSV - by virtue of being a major shareholder of NASB which was then a 51% subsidiary of TJSB which in turn is a wholly-owned subsidiary of MB. Northern Power Sdn Bhd ( NPSB ) - by virtue of being, in the preceding 12 months of the date of transaction, a major shareholder of Tanjung Bin Power Sdn Bhd ( TBP ) which in turn is a 90% subsidiary of MB, notwithstanding that NPSB had disposed of its shareholding in and ceased to be a major shareholder of TBP on 1 July 2004, pursuant to Paragraph of the Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Malaysia ). Person Connected to Major Shareholder NPSB is deemed a person connected to SKSV by virtue of being a related corporation (within the meaning of the Listing Requirements of Bursa Malaysia) of SKSV.

54 52 MALAKOFF BERHAD (24816-M) Directors Responsibility Statement as at 31 August 2005 The Board of Directors of the Company is required under paragraph (a) of the Listing Requirements of Bursa Malaysia Securities Berhad to issue a statement explaining its responsibility for preparing the annual audited financial statements. The Directors are required by the Companies Act, 1965 (the Act ) to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group as at the financial year end and of the results and cash flows of the Company and of the Group for that financial year. The Directors consider that, in preparing the financial statements of the Company and of the Group for the financial year ended 31 August 2005 set out on pages 59 to 100 of this Annual Report, the Company and the Group have used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates. The Directors also consider that all applicable approved accounting standards in Malaysia have been followed and confirmed that the financial statements have been prepared on a going concern basis. The Directors are responsible for ensuring that the Company and its subsidiaries keep accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and which enable them to ensure that the financial statements comply with the provisions of the Act. The Directors are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. This Statement is made in accordance with a resolution of the Board of Directors dated 24 November 2005.

55 MALAKOFF BERHAD (24816-M) 53 Financial STATEMENTS 54 Directors Report 57 Statement by Directors 57 Statutory Declaration 58 Report of the Auditors 59 Balance Sheets 60 Income Statements 61 Statements of Changes in Equity 62 Cash Flow Statements 64 Notes to the Financial Statements

56 54 MALAKOFF BERHAD (24816-M) Directors Report for the year ended 31 August 2005 The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the year ended 31 August PRINCIPAL ACTIVITIES The principal activities of the Company are those of an investment holding company and provision of management services to its subsidiaries. The principal activities of the subsidiaries are shown in Note 30 to the financial statements. There has been no significant change in the nature of the principal activities of the Company and its subsidiaries during the financial year. RESULTS Group RM 000 Company RM 000 Net profit for the year 510, ,559 RESERVES AND PROVISIONS There were no material transfers to or from reserves and provisions during the year except as disclosed in the financial statements. DIVIDEND Since the end of the previous financial year, the Company paid: (i) (ii) a final dividend of 15 sen per share less 28% tax totalling RM96,124,000 in respect of the year ended 31 August 2004 which was paid on 26 January 2005; and an interim dividend of 13 sen per share less 28% tax totalling RM83,568,000 in respect of the year ended 31 August 2005 which was paid on 8 June The final dividend recommended by the Directors in respect of the year ended 31 August 2005 is 17 sen per share less 28% tax totalling RM109,415,000 (based on the issued and paid-up share capital as at 31 August 2005). DIRECTORS OF THE COMPANY Directors who served since the date of the last report are: Director Alternate Director Tan Sri Abdul Halim bin Ali (Chairman) Ahmad Jauhari bin Yahya (Managing Director) Dato Abdul Aziz bin Abdul Rahim Abdul Jabbar bin Abdul Majid Azizan bin Mohd Noor Dato Ismail bin Shahudin Tan Sri Nuraizah binti Abdul Hamid Vincent Richard Harris Simon David Pinnell (resigned on ) Georgina Seeley (appointed on )

57 MALAKOFF BERHAD (24816-M) 55 DIRECTORS REPORT for the year ended 31 August 2005 DIRECTORS INTEREST IN SHARES The holdings in the ordinary shares of the Company and of its related corporations of those who were Directors at year end as recorded in the Register of Directors Shareholdings are as follows: Number of ordinary shares of RM1.00 each At At Bought Sold Shareholdings in which a Director has direct interest Malakoff Berhad Ahmad Jauhari bin Yahya 1,500,000 1,500,000 The options granted to eligible Directors over unissued ordinary shares in Malakoff Berhad pursuant to the Employees Share Option Scheme are set out below: Number of options over ordinary shares of RM1.00 each At At Granted Exercised Malakoff Berhad Ahmad Jauhari bin Yahya 1,500,000 1,500,000 None of the other Directors holding office at 31 August 2005 had any interest in the shares of the Company and of its related corporations during the financial year. DIRECTORS BENEFITS Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate apart from the benefits given to the full time executive Director of the Company pursuant to the Employees Share Option Scheme. ISSUE OF SHARES During the financial year, the Company issued the following shares: Number of Class of shares shares Term of issue Purpose of issue Ordinary shares of 7,953,000 Cash Subscription under Employees Share Option RM1.00 each Scheme The additional issued and fully paid up shares rank pari passu in all respects with the existing shares.

58 56 MALAKOFF BERHAD (24816-M) DIRECTORS REPORT for the year ended 31 August 2005 OPTIONS GRANTED OVER UNISSUED SHARES No options were granted to any person to take up unissued shares or debentures of the Company during the year apart from the issue of options pursuant to the Employees Share Option Scheme (refer Note 16). OTHER STATUTORY INFORMATION Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that: (i) (ii) all known bad debts have been written off and adequate provision made for doubtful debts, and all current assets have been stated at the lower of cost and net realisable value. At the date of this report, the Directors of the Company are not aware of any circumstances: (i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the financial statements of the Group and of the Company inadequate to any substantial extent, or (ii) (iii) (iv) that would render the value attributed to the current assets in the Group and in the Company financial statements misleading, or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading. At the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year. No contingent liability or other liability of any company in the Group 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 of the Company to meet their obligations as and when they fall due. In the opinion of the Directors, the results of the operations of the Group and of the Company for the financial year ended 31 August 2005 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. AUDITORS The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment. Signed in accordance with a resolution of the Directors: Tan Sri Abdul Halim bin Ali Chairman Ahmad Jauhari bin Yahya Managing Director Kuala Lumpur, Malaysia. 24 November 2005

59 MALAKOFF BERHAD (24816-M) 57 Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965 In the opinion of the Directors, the financial statements set out on pages 59 to 100 are drawn up in accordance with applicable approved accounting standards in Malaysia so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 August 2005 and of the results of their operations and cash flows for the year ended on that date. Signed in accordance with a resolution of the Directors: Tan Sri Abdul Halim bin Ali Chairman Ahmad Jauhari bin Yahya Managing Director Kuala Lumpur, Malaysia. 24 November 2005 Statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965 I, Ho Chee Sheong, the officer primarily responsible for the financial management of Malakoff Berhad, do solemnly and sincerely declare that the financial statements set out on pages 59 to 100 are, to the best of my knowledge and belief, 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, Subscribed and solemnly declared by the abovenamed in Kuala Lumpur, Malaysia on 24 November 2005 Ho Chee Sheong Before me:

60 58 MALAKOFF BERHAD (24816-M) Report of the Auditors to the members of Malakoff Berhad We have audited the financial statements set out on pages 59 to 100. The preparation of the financial statements is the responsibility of the Company s Directors. It is our responsibility to form an independent opinion, based on our audit, on the 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 Standards on Auditing in Malaysia. These standards require that we plan and perform the audit to obtain all the information and explanations which we consider necessary to provide us with evidence to give reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. An audit also includes an assessment of the accounting principles used and significant estimates made by the Directors as well as evaluating the overall adequacy of the presentation of information in the financial statements. We believe our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of: (i) the state of affairs of the Group and of the Company at 31 August 2005 and the results of their operations and cash flows for the year ended on that date; and (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and of the Company; and (b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and the subsidiaries have been properly kept in accordance with the provisions of the said Act. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The audit reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment under sub-section (3) of Section 174 of the Act. KPMG Firm Number: AF 0758 Chartered Accountants Foong Mun Kong Partner Approval Number: 2613/12/06(J) Kuala Lumpur, Malaysia. 24 November 2005

61 MALAKOFF BERHAD (24816-M) 59 Balance Sheets at 31 August 2005 Group Company Note RM 000 RM 000 RM 000 RM 000 Property, plant and equipment 2 9,476,323 6,838,902 38,045 36,167 Investment in associated companies 3 571, , Investment in subsidiaries 4 1,496,810 1,194,817 Other investments 5 93,777 1,908,743 1,291,269 Deferred tax assets , ,027 Goodwill on consolidation 6 1,013,587 1,006,941 Current assets Inventories 7 272, ,546 Trade and other receivables 8 747, , , ,693 Cash and cash equivalents 9 2,722,429 3,095, , ,660 3,742,348 3,974, ,600 1,201,353 Current liabilities Trade and other payables , , ,389 10,688 Borrowings 11 1,183,218 1,127, , ,576 Hire purchase liabilities Taxation 30,230 29,757 21,837 1,872,573 1,480, , ,350 Net current assets 1,869,775 2,493,753 15, ,003 12,932,089 11,009,873 3,460,101 3,424,083 Financed by: Capital and reserves Share capital , , , ,961 Reserves 2,551,887 2,194, , ,580 Shareholders fund 3,445,801 3,080,100 1,774,159 1,784,541 Minority shareholders interests , ,688 Long term and deferred liabilities Borrowings 11 8,578,579 6,957,571 1,683,331 1,638,137 Hire purchase liabilities Deferred tax liabilities , ,793 Employee benefits 16 11,496 5,576 2,589 1,260 12,932,089 11,009,873 3,460,101 3,424,083 The financial statements were approved and authorised for issue by the Board of Directors on 24 November The notes set out on pages 64 to 100 form an integral part of, and should be read in conjunction with, these financial statements.

62 60 MALAKOFF BERHAD (24816-M) Income Statements for the year ended 31 August 2005 Group Company Note RM 000 RM 000 RM 000 RM 000 Revenue 17 2,122,003 2,059, , ,234 Cost of sales (979,636) (905,462) Gross profit 1,142,367 1,153, , ,234 Other operating income 131,803 17,048 5,266 1,191 Administrative expenses (97,319) (77,041) (28,954) (30,738) Other operating expenses (77,577) (87,045) Operating profit 18 1,099,274 1,006, , ,687 Interest expense 20 (431,401) (386,182) (157,375) (54,638) Interest income 107,923 75, , ,818 Share of profit of associated companies 100,505 46,746 Profit before taxation 876, , , ,867 Tax expense 21 (289,467) (215,740) (73,351) (112,979) Profit after taxation 586, , , ,888 Less: Minority interests (76,192) (66,434) Net profit for the year 510, , , ,888 Basic earnings per ordinary share (sen) Diluted earnings per ordinary share (sen) Dividends per ordinary share (net) (sen) The notes set out on pages 64 to 100 form an integral part of, and should be read in conjunction with, these financial statements.

63 MALAKOFF BERHAD (24816-M) 61 Statements of Changes in Equity for the year ended 31 August 2005 Non-distributable Distributable Share Revaluation Retained Share premium reserve profits Sub total capital Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Group At 1 September ,251 12,584 1,814,162 1,939, ,288 2,811,285 Issue of new shares 34,229 34,229 14,673 48, ,480 12,584 1,814,162 1,974, ,961 2,860,187 Net profit for the year 460, , ,298 Dividends (Note 23) (240,385) (240,385) (240,385) At 31 August ,480 12,584 2,034,075 2,194, ,961 3,080,100 Surplus on revaluation of land - 3,326 3,326 3,326 Issue of new shares 23,472 23,472 7,953 31, ,952 15,910 2,034,075 2,220, ,914 3,114,851 Net profit for the year 510, , ,642 Dividends (Note 23) (179,692) (179,692) (179,692) At 31 August ,952 15,910 2,365,025 2,551, ,914 3,445,801 Note 13 Company At 1 September ,251 12, , , ,288 1,568,136 Issue of new shares 34,229 34,229 14,673 48, ,480 12, , , ,961 1,617,038 Net profit for the year 407, , ,888 Dividends (Note 23) (240,385) (240,385) (240,385) At 31 August ,480 12, , , ,961 1,784,541 Surplus on revaluation of land 3,326 3,326 3,326 Issue of new shares 23,472 23,472 7,953 31, ,952 15, , , ,914 1,819,292 Net profit for the year 134, , ,559 Dividends (Note 23) (179,692) (179,692) (179,692) At 31 August ,952 15, , , ,914 1,774,159 Note 13 The notes set out on pages 64 to 100 form an integral part of, and should be read in conjunction with, these financial statements.

64 62 MALAKOFF BERHAD (24816-M) Cash Flow Statements for the year ended 31 August 2005 Group Company RM 000 RM 000 RM 000 RM 000 Cash flows from operating activities Profit before taxation 876, , , ,867 Adjustments for: Amortisation of goodwill 13,944 12,229 Depreciation 257, ,238 2,206 2,264 Dividend income from subsidiaries (204,625) (370,991) Dividend income from quoted unit trusts (2,674) (9,263) (1,081) (4,039) Gain on disposal of property, plant and equipment (54) (430) (55) (235) Interest expense 431, , ,375 54,638 Interest income (107,923) (75,330) (180,908) (220,818) Gain on disposal of unit trusts (15,700) (5,210) Share of profit of associated companies (100,505) (46,746) Property, plant and equipment written off 773 Provision for retirement benefits 5,920 5,576 1,329 1,260 Operating profit/(loss) before working capital changes 1,358,594 1,219,701 (23,059) (17,054) Inventories (19,875) (3,943) Trade and other receivables (63,515) 349,688 56, ,015 Trade and other payables 125,316 (265,598) 7,323 (7,070) Cash generated from operations 1,400,520 1,299,848 41, ,891 Tax paid (125,561) (123,854) (110,477) (99,877) Net cash generated from/(used in) operating activities 1,274,959 1,175,994 (69,386) 29,014 Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired (829,803) Dividends received from subsidiaries 204, ,991 Dividend received from associated company 65,340 Purchase of additional equity shareholding in subsidiaries (325,978) Purchase of unsecured loan stocks (55,896) Dividends received from quoted unit trusts 2,674 5,282 1,081 4,039 Investment in unsecured loan stocks (522,296) (803,787) Investment in associated companies (418,330) Investment in subsidiaries (301,993) (918,319) Interest received 50,469 75,330 59, ,173 Proceeds from disposal of unit trusts 109,477 43,365 Proceeds from loan notes 70,893 57,259 Proceeds from disposal of property, plant and equipment 577 1, Proceeds from redemption of investment in unquoted shares 4,074 4,320 Purchase of property, plant and equipment (ii) (2,892,502) (2,038,062) (799) (1,100) Net cash used in investing activities (3,041,765) (3,199,576) (445,701) (1,109,174)

65 MALAKOFF BERHAD (24816-M) 63 CASH FLOW STATEMENTS for the year ended 31 August 2005 Group Company RM 000 RM 000 RM 000 RM 000 Cash flows from financing activities Dividends paid (179,692) (240,385) (179,692) (240,385) Interest paid (139,402) (371,592) (12,620) (16,501) Issue of shares 31,425 48,902 31,425 48,902 Repayment of borrowings (568,879) (577,950) (150,000) (50,000) Repayment of hire purchase liabilities (201) (1,481) (201) (660) Proceeds from borrowings 2,250,851 4,232, ,000 1,500,000 Release of cash in sinking fund account 16,858 16,858 Net cash generated from/(used in) financing activities 1,410,960 3,089,495 (94,230) 1,241,356 Net (decrease)/increase in cash and cash equivalents (355,846) 1,065,913 (609,317) 161,196 Cash and cash equivalents at beginning of year 3,057,712 1,991, , ,043 Cash and cash equivalents at end of year 2,701,866 3,057, , ,239 Notes to the cash flow statement (i) Cash and cash equivalents: Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts: Group Company RM 000 RM 000 RM 000 RM 000 Deposits with licensed financial institutions 2,587,477 2,697, , ,722 Placement in commercial papers 72, ,143 49,285 Cash and bank balances 62, ,813 2,103 47,653 2,722,429 3,095, , ,660 Less: Cash placed in sinking fund account (20,563) (37,421) (20,563) (37,421) 2,701,866 3,057, , ,239 (ii) Includes interest capitalised of RM288,455,000 (2004 RM80,313,000). The notes set out on pages 64 to 100 form an integral part of, and should be read in conjunction with, these financial statements.

66 64 MALAKOFF BERHAD (24816-M) Notes to the Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are adopted by the Group and by the Company and are consistent with those adopted in previous years. (a) Basis of accounting The financial statements of the Group and of the Company are prepared on the historical cost basis except as disclosed in the notes to the financial statements are in compliance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia. (b) Basis of consolidation Subsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Subsidiaries are consolidated using the acquisition method of accounting except for Teknik Janakuasa Sdn. Bhd. which is consolidated using the merger method of accounting. A subsidiary is excluded from consolidation when control is intended to be temporary if the subsidiary is acquired and held exclusively with a view of its subsequent disposal in the near future and it has not previously been consolidated or it operates under severe long term restrictions which significantly impair its ability to transfer funds to the Company. Subsidiaries excluded on these grounds are accounted for as investments. Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the year are included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries net assets are determined and these values are reflected in the Group financial statements. The difference between the acquisition cost and the fair values of the subsidiaries net assets is reflected as goodwill or reserve on consolidation as appropriate. Under the merger method of accounting, the results of the subsidiaries are presented as if the companies had been combined throughout the current and previous financial years. The difference between the cost of acquisition and the nominal value of the share capital and reserves of the merged subsidiaries is taken to merger reserve. Intragroup transactions and balances and the resulting unrealised profits are eliminated on consolidation. Unrealised losses resulting from intragroup transactions are also eliminated unless cost cannot be recovered. (c) Associated companies Associated companies are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the total recognised gains and losses of associated companies on an equity accounted basis from the date that significant influence effectively commences until the date that significant influence effectively ceases. Unrealised profits arising on transactions between the Group and its associated companies which are included in the carrying amount of the related assets and liabilities are eliminated partially to the extent of the Group s interests in the associated companies. Unrealised losses on such transactions are also eliminated partially unless cost cannot be recovered. Goodwill on acquisition is calculated based on the fair value of net assets acquired.

67 MALAKOFF BERHAD (24816-M) 65 NOTES TO THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) (d) Property, plant and equipment Freehold land and construction in progress are stated at cost/valuation. Other property, plant and equipment are stated at cost/ valuation less accumulated depreciation. C-inspection costs represent costs incurred at the scheduled major inspection dates. The Group revalues its property comprising land and buildings every 5 years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value. Surpluses arising from revaluation are dealt with in the property revaluation reserve account. Any deficit arising is offset against the revaluation reserve to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is charged to the income statement. Property, plant and equipment retired from active use and held for disposal are stated at the carrying amount at the date when the asset is retired from active use, less impairment losses, if any. Depreciation Freehold land and construction in progress are not amortised. Leasehold land is amortised in equal instalments over the period of the lease which is 99 years. The straight-line method is used to write off the cost of the other assets over the term of their estimated useful lives at the following principal annual rates: Buildings 5% Power plant 2.9% Plant and machinery 4% to 20% C-inspection costs 32% Office equipment and furniture 20% Motor vehicles 20% Computers 33 1 / 3% (e) Accounting for hire purchase Property, plant and equipment acquired under hire purchase agreements are capitalised at their purchase cost and depreciated on the same basis as owned assets. The total amount payable under hire purchase agreements is included as hire purchase liabilities. The interest element of the rental obligations is charged to the income statement over the period of the hire purchase and accounted for based on the sum of digit method. (f) Investments Long term investments other than in subsidiaries and associated companies are stated at cost. An allowance is made when the Directors are of the view that there is a diminution in their value which is other than temporary. Long term investments in subsidiaries and associated companies are stated at cost in the Company, less impairment loss where applicable. Investment in redeemable preference shares are stated at cost. The premium receivable upon redemption of the redeemable preference shares is accrued over the tenor of the preference shares.

68 66 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) (g) Trade and other receivables Trade and other receivables are stated at cost less allowance for doubtful debts. (h) Goodwill Goodwill arising on an acquisition represents the excess of the cost of acquisition over the fair values of the net identifiable assets acquired and is stated at cost less accumulated amortisation and accumulated impairment losses (refer Note 1(l)). In respect of associated companies, the carrying amount of goodwill is included in the carrying amount of investment in the associated companies. Goodwill is amortised from the date of commencement of operations over its estimated useful life of not more than 21 years. (i) Inventories Spares, consumables and diesel fuel are stated at the lower of cost and net realisable value with weighted average being the main basis for cost. (j) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts, pledged deposits, placement in sinking fund account and cash deficiency support account. (k) Liabilities Trade and other payables are stated at cost. (l) Impairment The carrying amount of assets, other than inventories, deferred tax assets and financial assets (other than investments in subsidiaries and associated companies), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or the cash-generating unit to which it belongs exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless the asset is carried at a revalued amount, in which case the impairment loss is charged to equity. The recoverable amount is the greater of the asset s net selling price and its value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event of an exceptional nature that is not expected to recur and subsequent external events have occurred that reverse the effect of that event. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. The reversal is recognised in the income statement, unless it reverses an impairment loss on a revalued asset, in which case it is taken to equity.

69 MALAKOFF BERHAD (24816-M) 67 NOTES TO THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) (m) Capitalisation of borrowing costs Borrowing costs incurred on construction in progress are capitalised. Capitalisation of borrowing costs will cease when the assets are ready for their intended use. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is the weighted average of the borrowing costs applicable to the Group s borrowings that are outstanding during the year, other than borrowings made specifically for the purpose of financing a specific construction of plant, in which case the actual borrowing cost incurred on that borrowing less any investment income on the temporary investment of that borrowing will be capitalised. Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted. (n) Income tax Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Temporary differences are not recognised for goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that at the time of the transaction affects neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. (o) Provisions A provision is recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation (legal or constructive) as a result of a past event and a reliable estimate can be made of the amount. (p) Foreign currency Foreign current transactions Transactions in foreign currencies are translated to Ringgit Malaysia at rates of exchange ruling at the date of the transactions unless hedged by forward exchange contracts, in which case the rates specified in such forward contracts are used. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Ringgit Malaysia at the foreign exchange rates ruling at that date unless hedged by forward exchange contracts, in which case the rates specified in such forward contracts are used. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to Ringgit Malaysia at the foreign exchange rates ruling at the date of the transactions.

70 68 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) (p) Foreign currency (Cont d) The closing rates used in the translation of foreign currency monetary assets and liabilities are as follows: RM RM USD CHF EUR (q) Financial instruments Financial derivatives hedging instruments are used in the Group s risk management of foreign currency with respect to its financial liabilities. The underlying foreign currency liabilities are translated at their respective hedged exchange rates. Hedging costs are recognised in the income statement as and when incurred. (r) Affiliated company An affiliated company is a company which holds a long term interest of not less than 20% but not exceeding 50% in the equity capital of the Company and exercises significant influence over the financial and operating policies of the Company. (s) Income recognition (i) Capacity and energy payments, operation and maintenance charges, project management and engineering consultancy fees Revenue is measured at the fair value of the consideration receivable and is recognised in the income statement as it accrues. (ii) Income from land reclamation, shore protection, dredging, associated works and construction contract Income from land reclamation, shore protection, dredging, associated works and construction contracts is recognised on the percentage of completion method, measured by reference to surveys of work performed. When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable and contract costs are recognised as an expense in the period in which they are incurred. (iii) Dividend income Dividend income is recognised when the right to receive payment is established. (iv) Interest income Interest income is recognised in the income statement as it accrues, taking into account the effective yield of the asset.

71 MALAKOFF BERHAD (24816-M) 69 NOTES TO THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) (t) Expenses (i) Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease payments made. (ii) Interest expense All interest and other costs incurred in connection with borrowings, other than that capitalised in accordance with Note 1(m), are expensed as incurred. The interest component of hire purchase payments is recognised in the income statement over the period of the hire purchase and accounted for based on the sum of digits method. (u) Employee benefits (i) Short term employee benefits Wages, salaries and bonuses are recognised as expenses in the year in which the associated services are rendered by employees of the Group and of the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when absences occur. (ii) Defined contribution plan As required by law, eligible employers in Malaysia make contributions to the Employees Provident Fund. Such contributions are recognized as an expense in the income statement as incurred. (iii) Defined benefit plan The Group s net obligation in respect of a defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods and that benefit is discounted to determine the present value. The discount rate is the market yield at the balance sheet date on high quality corporate bonds or government bonds. The calculation is performed by an actuary using the projected unit credit method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement. In calculating the Group s obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds ten percent (10%) of the greater of the present value of the defined benefit obligation, that portion is recognised in the income statement over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised. Where the calculation results in a benefit to the Company, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. An actuarial valuation is conducted by an independent actuary at regular intervals. The last valuation performed was on 31 August 2004.

72 70 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) (u) Employee benefits (Cont d) (iv) Equity compensation benefits The share option programme allows Group employees to acquire shares of the Company. When the options are exercised, equity is increased by the amount of the proceeds received. 2. PROPERTY, PLANT AND EQUIPMENT Group At At Additions Revaluation Disposals Reclassification RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 2005/2000 valuation: Freehold land 18,190 3,326 21,516 Leasehold land 13,371 13,371 At cost: Leasehold land 16,000 16,000 Buildings 21,802 21,802 Construction-in-progress 2,156,600 2,657,136 (2,229) 4,811,507 Power plant 5,332,846 10,977 (108) 2,229 5,345,944 C-Inspection costs 329, , ,390 Plant and machinery 63, ,355 Office equipment and furniture 22,088 2,254 (170) 24,172 Motor vehicles 6,940 8 (798) 6,150 Computers 13,355 1, ,555 7,993,840 2,892,502 3,326 (906) 10,888,762 Charge Group At for the At Accumulated depreciation year Disposals RM 000 RM 000 RM 000 RM 000 At 2000 valuation: Leasehold land 1, ,321 At cost: Leasehold land ,397 Buildings 2,813 1,030 3,843 Power plant 875, ,385 (5) 1,032,044 C-Inspection costs 243,145 92, ,459 Plant and machinery 5,262 1,589 6,851 Office equipment and furniture 12,411 3,217 15,628 Motor vehicles 3, (378) 4,056 Computers 10,035 1,805 11,840 1,154, ,884 (383) 1,412,439

73 MALAKOFF BERHAD (24816-M) 71 NOTES TO THE FINANCIAL STATEMENTS 2. PROPERTY, PLANT AND EQUIPMENT (CONT D) Company At At Revaluation Additions Disposals RM 000 RM 000 RM 000 RM 000 RM 000 At 2005/2000 valuation: Freehold land 18,190 3,326 21,516 Leasehold land 6,159 6,159 At cost: Buildings 11,068 11,06111,068 Plant and machinery Office equipment and furniture 6, ,774 Motor vehicles 1,709 (246) 1,463 44,254 3, (246) 48,133 Charge At for the At Accumulated depreciation year Disposals RM 000 RM 000 RM 000 RM 000 At 2000 valuation: Leasehold land At cost: Buildings 1, ,283 Plant and machinery Office equipment and furniture 4,506 1,351 5,857 Motor vehicles 1, (205) 1,297 8,087 2,206 (205) 10,088

74 72 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 2. PROPERTY, PLANT AND EQUIPMENT (CONT D) Group Depreciation charge for the Company Depreciation charge for the Net book value year ended Net book value year ended August August 2004 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 2005/2000 valuation: Freehold land 21,516 18,190 21,516 18,190 Leasehold land 12,050 12, ,661 5, At cost: Leasehold land 14,603 15, Buildings 17,959 18,989 1,046 8,785 9, Construction-in-progress 4,811,507 2,156,600 Power plant 4,313,900 4,457, ,610 C Inspection costs 213,931 86,138 50,590 Plant and machinery 57,504 58,103 1, Office equipment and furniture 8,544 9,677 2,234 1,917 2,469 1,312 Motor vehicles 2,094 3, Computers 2,715 3,320 2,809 9,476,323 6,838, ,238 38,045 36,167 2,264 Revaluation Freehold and leasehold land are stated at Directors valuation based on a professional valuation made by Encik Irhamy Ahmad, a chartered valuation surveyor, in Irhamy & Co Chartered Surveyors, on the open market basis conducted in 2005 and 2000 respectively. Had the freehold and leasehold land been carried at historical cost, the carrying amount of the revalued asset that would have been included in the financial statements at the end of the financial year would be as follows: Group RM 000 RM 000 Freehold land 5,606 5,606 Leasehold land 12,051 12,185 17,657 17,791

75 MALAKOFF BERHAD (24816-M) 73 NOTES TO THE FINANCIAL STATEMENTS 2. PROPERTY, PLANT AND EQUIPMENT (CONT D) Security Group The property, plant and equipment of subsidiaries amounting to RM10,289,038,000 ( RM7,579,743,000) have been charged as security for debt securities issued by the subsidiaries. Company The Company entered into a sale and purchase agreement with a subsidiary for the disposal of portions of the leasehold land. Pending the subdivision of the land, a lease agreement was entered into with the subsidiary. On 20 November 2001, the lease was charged as security for certain debt securities issued by the subsidiary. Borrowing costs Included in construction-in-progress of the Group is interest capitalised at rates ranging from 6.0% to 8.6% ( % to 7.4%) per annum for the year of RM288,455,000 (2004 RM80,313,000). Assets under hire purchase arrangements Motor vehicles of the Group with a total net book value of RM375,000 (2004 RM1,023,000) were acquired under hire purchase arrangements. 3. INVESTMENT IN ASSOCIATED COMPANIES Group RM 000 RM 000 Unquoted shares at cost 81,375 81,375 Share of post acquisition reserves 85,282 81,039 Less: Goodwill amortised (19,238) (16,508) 147, ,906 Unquoted unsecured loan stocks, at cost 420, , , ,361 Investment in Redeemable Non Cumulative Convertible Preference Shares (RNCPS), at cost 4,074 Investment in Redeemable Cumulative Convertible Preference Shares (RCCPS), at cost 4,000 4,000 4,000 8, , ,435

76 74 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 3. INVESTMENT IN ASSOCIATED COMPANIES (CONT D) Group RM 000 RM 000 Represented by: Group s share of net assets 539, ,653 Goodwill on acquisition, less amortisation 27,981 30, , ,361 Company RM 000 RM 000 Unquoted shares at cost Details of the associated companies are as follows: Country of Percentage of incorporation ownership Principal activities Port Dickson Power Bhd. Malaysia Generation and sale of electricity Lekir Bulk Terminal Sdn. Bhd. Malaysia Bulk terminal jetty and coal-handling services Kapar Energy Ventures Sdn. Bhd. Malaysia Generation and sale of electricity 4. INVESTMENT IN SUBSIDIARIES Investment in subsidiaries is represented by: RM 000 RM 000 Unquoted shares at cost 1,496,810 1,194,817 Details of the subsidiaries are shown in Note 30.

77 MALAKOFF BERHAD (24816-M) 75 NOTES TO THE FINANCIAL STATEMENTS 5. OTHER INVESTMENTS Group Company RM 000 RM 000 RM 000 RM 000 Long term Quoted unit trusts, at cost 156,548 64,500 Less: Allowance for diminution in value (62,771) (26,345) 93,777 38,155 Unquoted unsecured loan stocks in subsidiaries and associate 1,908,743 1,253,114 93,777 1,908,743 1,291,269 Market value of quoted investments: Unit trusts 105,292 43,845 The loan stocks are unsecured, bear interest ranging from 6.0% to 15.0% ( % to 62.0%) per annum and are repayable over a period of 21 years. 6. GOODWILL ON CONSOLIDATION Group RM 000 RM 000 As at 1 September 1,006,941 93,336 Additions during the year 17, ,698 1,024,801 1,017,034 Less: Goodwill amortised during the year (11,214) (10,093) As at 31 August 1,013,587 1,006, INVENTORIES Group RM 000 RM 000 Spares and consumables 238, ,882 Diesel fuel 34,345 27, , ,546 All inventories are carried at cost.

78 76 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 8. TRADE AND OTHER RECEIVABLES Group Company RM 000 RM 000 RM 000 RM 000 Trade receivables 389, ,140 Less: Allowance for doubtful debts (33,618) (31,254) 355, ,886 Other receivables 391, ,789 91,113 59,689 Less: Allowance for doubtful debts (11,146) (5,146) 391, ,643 91,113 54, , ,529 91,113 54,543 Subsidiaries 194, , , , , ,693 Included in other receivables of the Group are interest receivable from an associate of RM66,112,000 (2004 8,658,000) and deposits paid to a spares supplier of RM17,691,000 (2004 RM4,463,000). The amount due from subsidiaries is unsecured, interest free and has no fixed term of repayment. 9. CASH AND CASH EQUIVALENTS Group Company RM 000 RM 000 RM 000 RM 000 Deposits with: Licensed banks 1,645,862 1,953,919 51, ,357 Finance companies 207, ,680 57,301 69,080 Discount houses 733, ,578 57, ,285 2,587,477 2,697, , ,722 Placement in commercial papers 72, ,143 49,285 Cash and bank balances 62, ,813 2,103 47,653 2,722,429 3,095, , ,660 Included in the Group s and Company s cash and bank balances is a sum of RM20,563,000 (2004 RM37,421,000) placed in a sinking fund account maintained with a financial institution, which has been charged as security for the repayment of principal and interest of the medium term notes.

79 MALAKOFF BERHAD (24816-M) 77 NOTES TO THE FINANCIAL STATEMENTS 10. TRADE AND OTHER PAYABLES Group Company RM 000 RM 000 RM 000 RM 000 Trade payables 101,466 84,450 Other payables and accrued expenses 557, , ,130 7,559 Subsidiaries 16,259 3, , , ,389 10,688 The amount due to subsidiaries is interest free and has no fixed term of repayment. Included in other payables of the Group are interest expense payable of RM257,013,000 (2004 RM113,214,000) and amount due to suppliers of spares and machinery of RM25,334,000 (2004 RM4,774,000). Also included in other payables of the Group is an amount due to a contractor (for the construction of a subsidiary s power plant) of RM201,696,000 (2004 Nil). 11. BORROWINGS Group Company RM 000 RM 000 RM 000 RM 000 Current Fixed rate bonds secured 175, ,154 Syndicated fixed rate loans secured 374, ,594 Subordinated loan notes unsecured 5,453 23,633 Medium term notes secured 150, ,000 Term loan unsecured 200, ,000 Al-Istisna bonds secured 63,947 63,518 Commercial papers secured 246, ,571 _ Commercial papers unsecured 117, , , ,576 1,183,218 1,127, , ,576

80 78 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 11. BORROWINGS (CONT D) Group Company RM 000 RM 000 RM 000 RM 000 Non-current Fixed rate bonds secured 336, ,772 Syndicated fixed rate loans secured 266, ,157 Subordinated loan notes unsecured 10,453 60,894 Medium term notes secured 100, , , ,000 Serial revenue bonds unsecured 1,583,331 1,538,137 1,583,331 1,538,137 Al-Bai Bithaman Ajil ( ABBA ) bonds secured 850, ,000 Istisna medium term notes secured 4,620,000 2,620,000 Al-Istisna bonds secured 647, ,610 Redeemable unsecured loan stocks 164, ,001 8,578,579 6,957,571 1,683,331 1,638,137 Total 9,761,797 8,084,617 2,001,090 1,907,713 Terms and debt repayment schedule Under Over 5 Total 1 year years years years Group RM 000 RM 000 RM 000 RM 000 RM 000 Secured Fixed rate bonds at 511, , , , % ( %) p.a. Syndicated fixed rate loans 640, , ,879 at 7.80% to 8.50% ( % to 8.50%) p.a. Medium term notes at 5.01% 100, ,000 ( % to 5.01%) p.a. Al-Istisna bonds at interest 711,204 63,947 63, , ,900 ranging from 6.20% to 9.20% ( % to 9.20%) p.a. Commercial papers at 2.84% 246, ,574 ( %) p.a. ABBA bonds at interest ranging 850, ,000 from 6.00% to 8.00% ( % to 8.00%) p.a. Istisna medium term notes at 4,620, ,000 3,640,000 interest ranging from 6.30% to 8.63% ( % to 7.70%) p.a. 7,680, , ,880 1,512,663 4,808,900

81 MALAKOFF BERHAD (24816-M) 79 NOTES TO THE FINANCIAL STATEMENTS 11. BORROWINGS (CONT D) Terms and debt repayment schedule (Cont d) Under Over 5 Total 1 year years years years Group RM 000 RM 000 RM 000 RM 000 RM 000 Unsecured Subordinated loan notes at 15,906 5,453 5,973 4, % ( %) p.a. Commercial papers at 2.98% 117, ,759 ( %) p.a. Term loan at 3.65% (2004 Nil) p.a. 200, ,000 Serial revenue bonds at 9.50% to 9.90% 1,583, ,511 1,261,820 ( % to 9.90%) p.a. Redeemable unsecured loan 164, ,352 stocks at 6.00% to 12.00% ( % to 62.00%) p.a 2,081, ,212 5, ,991 1,426,172 Total 9,761,797 1,183, ,853 1,838,654 6,235,072 Company Secured Medium term notes at 5.01% 100, ,000 ( % to 5.01%) p.a. 100, ,000 Unsecured Commercial papers at 2.98% 117, ,759 ( %) p.a. Term loan at 3.65% (2004-Nil) p.a 200, ,000 Serial revenue bonds at 9.50% 1,583, ,511 1,261,820 to 9.90% ( % to 9.90%) p.a. 1,901, , ,511 1,261,820 2,001, , ,511 1,261,820 The fixed rate bonds, syndicated fixed rate loans, ABBA bonds, Istisna medium term notes and Al-Istisna bonds are secured by fixed charges on relevant subsidiaries assets. The medium term notes are secured by a sinking fund account maintained with a financial institution.

82 80 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 12. HIRE PURCHASE LIABILITIES Group Company RM 000 RM 000 RM 000 RM 000 Hire purchase liabilities Less: Interest in suspense (38) (164) (38) (164) Amount payable less than 1 year Amount payable between 1 and 5 years SHARE CAPITAL Group and Company RM 000 RM 000 Ordinary shares of RM1.00 each: Authorised: 2,000,000 2,000,000 Issued and fully paid: At beginning of the year 885, ,288 Issued and paid-up during the year 7,953 14,673 At end of the year 893, ,961 At the end of the financial year, options to subscribe for 4,716,000 (2004 9,890,000) ordinary shares of RM1.00 each granted under the Employees Share Option Scheme at option prices ranging from RM1.74 to RM6.74 per share (2004 RM1.07 to RM5.20) remain unexercised. Options granted may be exercised on any working day from the date of the offer up to 5.00 p.m. on 6 March 2006, being the last date of the scheme. 14. MINORITY SHAREHOLDERS INTERESTS This consists of the minority shareholders proportion of share capital and reserves of subsidiaries, net of their share of subsidiary s goodwill on consolidation and amortisation of goodwill charged to the minority shareholders.

83 MALAKOFF BERHAD (24816-M) 81 NOTES TO THE FINANCIAL STATEMENTS 15. DEFERRED TAX The amounts, after appropriate offsetting, are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Deferred tax assets (530) (2,065) (422) (2,027) Deferred tax liabilities 769, , , ,728 (422) (2,027) Deferred tax liabilities and assets are offset above where there is a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred taxes relate to the same taxation authority. The recognised deferred tax assets and liabilities (before offsetting) are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Property, plant and equipment 1,120,531 1,047,894 2,480 1,584 Provisions (39,249) (54,670) (726) (1,794) Unabsorbed capital allowances (312,419) (390,496) (2,176) (1,817) 768, ,728 (422) (2,027) No deferred tax has been recognised for the following items: Group Company RM 000 RM 000 RM 000 RM 000 Taxable temporary differences 21,855 19,129 Unabsorbed capital allowances (20,475) (20,443) Unutilised tax losses (12,550) (12,550) (11,170) (13,864) The unutilised tax losses, unabsorbed capital allowances and taxable temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits.

84 82 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 16. EMPLOYEE BENEFITS Group Company RM 000 RM 000 RM 000 RM 000 Present value of unfunded obligations 19,086 15,695 4,474 3,773 Unrecognised transitional liability (7,590) (10,119) (1,885) (2,513) Recognised liability for defined benefit obligations 11,496 5,576 2,589 1,260 Movements in the net liability recognised in the balance sheets Group Company RM 000 RM 000 RM 000 RM 000 Net liability at 1 September 5,576 1,260 Expense recognised in the income statement 5,920 5,576 1,329 1,260 Net liability at 31 August 11,496 5,576 2,589 1,260 Expense recognised in the income statements Group Company RM 000 RM 000 RM 000 RM 000 Current service cost 2,304 2, Interest on obligation 1, Transitional liability 2,530 2, ,920 5,576 1,329 1,260 The expense is recognised in the following line item in the income statements: Group Company RM 000 RM 000 RM 000 RM 000 Administrative expenses 5,920 5,576 1,329 1,260

85 MALAKOFF BERHAD (24816-M) 83 NOTES TO THE FINANCIAL STATEMENTS 16. EMPLOYEE BENEFITS (CONT D) Liability for defined benefit obligations Principal actuarial assumptions used at the balance sheet date (expressed as weighted averages): Group and Company Discount rate 7.0% 7.0% Future salary increases 7.0% 7.0% Price inflation 3.0% 3.0% Equity compensation benefits The Company s Employees Share Option Scheme ( Scheme ) became effective on 7 March 1996 and was subsequently extended until 6 March The salient features of the Scheme are as follows: (i) (ii) (iii) (iv) (v) eligible employees are those who have been confirmed in writing as an employee of the Group for at least one (1) year of continuous service before the date of offer and an eligible Director is a full time Executive Director of the Group. the option is personal to the grantee and non-assignable. the option price for options granted during 7 March 2004, to and including 6 March 2006 ( Extended Period ) shall be set at a discount of not more than 10 per centum (10%) from the five (5) day weighted average market price of the ordinary shares of the Company immediately preceding the date of the offer or the par value of the ordinary shares of the Company, whichever is the higher. the options granted may be exercised on any working day from the date of the offer up to 5.00 p.m. on 6 March 2006, being the last date of the Scheme. the options granted/unexercised prior to the Extended Period of the Scheme shall be exercisable in the following manner: Exercisable dates Cumulative percentage of total new ordinary shares which may be subscribed for After 1 July % After 1 July % After 1 July %

86 84 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 16. EMPLOYEE BENEFITS (CONT D) (vi) the options granted during the Extended Period of the Scheme shall be exercisable in the following manner: Number of options granted Percentage of options exercisable per annum Year 1 Year 2 Year 3 Year 4 Year 5 Below 20, % 20,000 to less than 100,000 40% 1 30% 30% 2 100,000 and above 20% 20% 20% 20% 20% Note: 1. 40% or 20,000 options, whichever is the higher 2. 30% or the remaining number of options unexercised Options exercisable in a particular year but not exercised can be carried forward to the subsequent years subject to the earlier of time limit of the Scheme, or when the options are terminated due to reasons stipulated in the Bye-Laws of the Scheme. The options to take up unissued ordinary shares of RM1.00 each and the option prices are as follows: Adjusted Number of options over ordinary shares of RM1.00 each Offered Date of option Balance at and Balance at offer price * accepted Exercised Lapsed RM ,242 (1,931) (95) (114) (443) (51) (14) (17) (7) (10) (194) (3) (63) (725) (408) (493) (111) 21

87 MALAKOFF BERHAD (24816-M) 85 NOTES TO THE FINANCIAL STATEMENTS 16. EMPLOYEE BENEFITS (CONT D) Adjusted Number of options over ordinary shares of RM1.00 each Offered Date of option Balance at and Balance at offer price * accepted Exercised Lapsed RM (29) (151) (122) (282) (72) (333) (156) (78) (49) (465) ,896 (995) (20) (150) (74) 120 9,890 2,481 (7,635) (20) 4,716 * Adjusted for the effect of bonus issue made by the Company. The Group received proceeds of RM31,425,000 in respect of the 7,953,000 options exercised and shares allotted during the year: RM7,953,000 was credited to share capital and RM23,472,000 was credited to share premium (refer Note 13). 17. REVENUE The Group s revenue relates to capacity and energy payments, operation and maintenance charges, management fees and engineering consultancy fees. The Company s revenue relates to management fees and dividend income.

88 86 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 18. OPERATING PROFIT Group Company RM 000 RM 000 RM 000 RM 000 Operating profit is arrived at after charging: Amortisation of goodwill 13,944 12,229 Amortisation of refinancing expenses 2,330 2,330 Auditors fee statutory audit Depreciation (Note 2) 257, ,238 2,206 2,264 Directors remuneration: Non-executive directors fees attendance/meeting allowance estimated money value of benefits Executive director: salaries and other emoluments 1, , estimated money value of benefits Service fees paid to a company in which a Director has interest Rental of equipment Allowance for doubtful debts 2,364 37,254 Rental of premises Property, plant and equipment written off 773 Provision for retirement benefits 5,920 5,576 1,329 1,260 And crediting: Allowance for doubtful debts written back 11,146 18,374 5,146 Dividend income from subsidiaries 204, ,991 Dividend income from quoted unit trusts 2,674 9,263 1,081 4,039 Gain on disposal of property, plant and equipment Gain on disposal of unit trusts 15,700 5,210 Rental income 1,506 1, ,191

89 MALAKOFF BERHAD (24816-M) 87 NOTES TO THE FINANCIAL STATEMENTS 19. EMPLOYEES INFORMATION Group Company RM 000 RM 000 RM 000 RM 000 Employees provident fund 6,269 5,586 1,335 1,220 Other staff costs 37,906 32,948 9,795 7,360 The number of employees of the Group (including the Managing Director) at the end of the financial year was 420 ( ). The number of employees of the Company (including the Managing Director) at the end of the financial year was 67 ( ). 20. INTEREST EXPENSE Group Company RM 000 RM 000 RM 000 RM 000 Borrowings 372, , ,053 16,432 Hire purchase , Discount on bonds 58,487 52,882 45,194 38, , , ,375 54, TAX EXPENSE Group Company RM 000 RM 000 RM 000 RM 000 Current tax expense Malaysian current 93,061 97,423 71, ,006 prior year ,177 97,423 71, ,006 Deferred tax expense Origination and reversal of temporary differences 157,230 99,185 1,767 (2,027) Under/(over) provision in prior years 8,138 3,402 (162) 165, ,587 1,605 (2,027) Tax expense on share of profit of associated companies 30,922 15, , ,740 73, ,979

90 88 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 21. TAX EXPENSE (CONT D) Group Company RM 000 RM 000 RM 000 RM 000 Reconciliation of tax expense Profit before taxation 876, , , ,867 Income tax using Malaysian tax rates 245, ,892 58, ,843 Non-deductible expenses 33,810 8,729 14,411 3,346 Effect of deferred tax assets recognised (816) (2,065) (2,027) Tax exempt income (2,218) (34,183) Tax on gain on revaluation of freehold land Other items 2, , ,338 73, ,979 Under/(over) provision in prior years 8,254 3,402 (162) Tax expense 289, ,740 73, ,979 Subject to agreement by the Inland Revenue Board, the Company has sufficient tax credit under section 108 of the Income Tax Act, 1967 and tax exempt account to frank the payment of RM903,000,000 (2004 RM739,000,000) of its distributable reserves at 31 August 2005 as dividends. 22. EARNINGS PER SHARE Basic earnings per share The calculation of basic earnings per share is based on the net profit attributable to ordinary shareholders of RM510,642,000 (2004 RM460,298,000) and the weighted average number of ordinary shares outstanding during the year of 890,653,000 ( ,754,000) calculated as follows: Weighted average number of ordinary shares RM 000 RM 000 Issued ordinary shares at beginning of the year 885, ,288 Effects of shares issued 4,692 6,466 Weighted average number of ordinary shares 890, ,754 Diluted earnings per share The calculation of diluted earnings per share is based on the net profit attributable to ordinary shareholders of RM510,642,000 (2004 RM460,298,000) and the weighted average number of ordinary shares outstanding during the year of 892,762,000 ( ,025,000) calculated as follows:

91 MALAKOFF BERHAD (24816-M) 89 NOTES TO THE FINANCIAL STATEMENTS 22. EARNINGS PER SHARE (CONT D) Weighted average number of ordinary shares (diluted) RM 000 RM 000 Weighted average number of ordinary shares 890, ,754 Effects of share options 2,109 4,271 Weighted average number of ordinary shares (diluted) 892, , DIVIDENDS Group and Company RM 000 RM 000 Ordinary Interim paid: sen per share less tax 83,568 82,340 ( sen per share) Final paid: sen per share less tax ( sen per share less tax) 96, , , ,385 The proposed final dividend of 17 sen per share less 28% tax totalling RM109,415,000 is based on the issued and paid up share capital as at 31 August 2005 and this amount has not been accounted for in the financial statements. 24. OFF BALANCE SHEET FINANCIAL INSTRUMENTS The Group undertook forward foreign exchange contracts in relation to the hedging of foreign currency payments to foreign suppliers and contractors. The forward foreign exchange contracts will mature within 12 months from the end of the financial year. At the end of the financial year, the principal amount of forward foreign exchange contracts outstanding are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Forward foreign exchange contracts 40,097 30,188

92 90 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 25. CAPITAL COMMITMENTS Group Company RM 000 RM 000 RM 000 RM 000 Property, plant and equipment Authorised not contracted 25,248 36,068 1,328 1,483 contracted but not provided for in the financial statements 1,098,588 3,731,209 1,497 1,123,836 3,767,277 2,825 1, SEGMENTAL INFORMATION Segment information is presented in respect of the Group s business segments. All the Group s businesses are carried out in Malaysia. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Business segments The main business segments of the Group comprise the following: Power generation Operation and maintenance Power distribution The design, construction, generation and sale of electricity energy and generation capacity of power plants. Operation and maintenance of power plants. Build, own and operate an electricity distribution system and a centralised chilled water plant system. Operation Power and Power generation maintenance distribution Others Eliminations Total RM 000 RM 000 RM 000 RM 000 RM 000 RM Revenue Subsidiaries 2,090,486 2,473 24,779 4,265 2,122,003 Inter segment 450,102 (450,102) 2,090, ,575 24,779 4,265 (450,102) 2,122,003

93 MALAKOFF BERHAD (24816-M) 91 NOTES TO THE FINANCIAL STATEMENTS 26. SEGMENTAL INFORMATION (CONT D) Operation Power and Power generation maintenance distribution Others Eliminations Total 2005 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Results Segment profit/(loss) 830, ,407 2,818 (21,897) (21,884) 1,099,274 Interest income 107,923 Interest expense (431,401) Share of profit of associated companies 100,505 Profit before taxation 876,301 Taxation (289,467) Profit after taxation 586,834 Minority interests (76,192) Net profit for the year 510, Revenue Subsidiaries 2,004,776 19,783 17,963 16,556 2,059,078 Inter segment 411,776 (411,776) 2,004, ,559 17,963 16,556 (411,776) 2,059,078 Results Segment profit/(loss) 815, ,360 (102) (44,660) (4,202) 1,006,578 Interest income 75,330 Interest expense (386,182) Share of profit of associated companies 46,746 Profit before taxation 742,472 Taxation (215,740) Profit after taxation 526,732 Minority interests (66,434) Net profit for the year 460,298

94 92 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 26. SEGMENTAL INFORMATION (CONT D) Operation Power and Power generation maintenance distribution Others Eliminations Total 2005 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Segment assets 6,343, ,780 47,098 9,616,725 (2,457,074) 14,232,788 Investment in associated companies 64, , , ,874 Total assets 14,804,662 Segment liabilities 3,895, ,345 63,028 8,155,400 (1,793,755) 10,420,944 Unallocated liabilities 799,623 Total liabilities 11,220,567 Capital expenditure 14, , ,699,314 (48,868) 2,892,502 Depreciation and amortisation 159,002 94,285 2,276 2, ,884 Non-cash expenses other than depreciation and amortisation 40,390 7, ,058 51, Segment assets 6,419, ,521 44,060 6,566,209 (1,598,792) 11,915,893 Investment in associated companies 64, , , ,435 Total assets 12,490,328 Segment liabilities 4,437,681 50,423 63,520 5,159,450 (1,297,071) 8,414,003 Unallocated liabilities 634,550 Total liabilities 9,048,553 Capital expenditure 25,115 77,584 1,293 1,952,262 (18,192) 2,038,062 Depreciation and amortisation 147,001 52,688 2,208 2, ,238 Non-cash expenses other than depreciation and amortisation 37,630 3, ,493 42,831

95 MALAKOFF BERHAD (24816-M) 93 NOTES TO THE FINANCIAL STATEMENTS 27. RELATED PARTIES Identity of related parties The Group has controlling related party relationships with the Company s substantial shareholders and its subsidiaries as disclosed in Note 30. Transactions and balances with related parties Significant transactions and balances with related parties other than those disclosed elsewhere in the financial statements are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Interest income on subordinated loan notes received and receivable from a subsidiary 24,985 28,914 Interest income on redeemable unsecured loan stocks received and receivable from a subsidiary 87, ,521 Dividend income receivable from subsidiaries 204, ,991 Management fee receivable from a subsidiary 1,500 1,500 Associated companies Interest income on loan stocks 4,502 3,593 Interest income on redeemable unsecured loan notes 57,454 8,634 57,454 8,634 The Directors of the Company are of the opinion that the above transactions have been entered into in the normal course of business and have been established under negotiated terms. 28. ACQUISITIONS OF ADDITIONAL EQUITY INTEREST IN SUBSIDIARIES During the year, the Group acquired additional equity interest of 18.75% in Segari Energy Ventures Sdn Bhd ( SEV ) and 49% in Natural Analysis Sdn Bhd ( NASB ) for a total consideration of RM325,978,000. As a result, SEV is 93.75% owned by the Company and NASB is a wholly-owned subsidiary of Teknik Janakuasa Sdn. Bhd. The acquisitions of additional equity in these companies contributed RM9,625,000 to the consolidated net profit of the Group. 29. FINANCIAL INSTRUMENTS Financial risk management objectives and policies Exposure to credit, interest rate, currency and liquidity risks arises in the normal course of the Group and the Company s business. The Group and the Company have written risk management policies and guidelines which set out their overall business strategies, their tolerance to risk and their general risk management philosophy. The Group and the Company have established processes to monitor and control the hedging of transactions in a timely and accurate manner. Such written policies are reviewed annually by the Board of Directors, and quarterly reviews are undertaken to ensure that the Group and the Company s policy guidelines are adhered to.

96 94 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 29. FINANCIAL INSTRUMENTS (CONT D) Credit risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group and the Company do not require collateral in respect of financial assets. Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the Group and the Company. Given their high credit ratings management does not expect any counterparty to fail to meet their obligations. At balance sheet date, the Group has a concentration of credit risk in the form of trade debts due from Tenaga Nasional Berhad (TNB), representing approximately 98% of the total trade receivables of the Group. The maximum exposures to credit risk for the Group and the Company are represented by the carrying amount of each financial asset. Interest rate risk Interest rate exposure arises from the Group s and the Company s borrowings and is managed through the use of fixed and floating rate debts. The Group and the Company have no material interest rate risk arising from long term interest bearing assets. The investments in financial assets are mainly short term in nature and they are not held for speculative purposes but mostly placed in fixed deposits. The placements are short term and therefore their exposure to the effects of future changes in the prevailing level of interest rate is limited. Foreign currency risk The Group incurs foreign currency risk on purchases that are denominated in a currency other than Ringgit Malaysia. The currency giving rise to this risk is primarily the Swiss Franc. The Group hedges at least 50 percent of its trade payables denominated in foreign currency. At any point in time, the Group also hedges 50 percent of its estimated foreign currency exposure in respect of purchases over the following twelve months. Where necessary, the forward exchange contracts are rolled over at maturity at market rates. In respect of other monetary assets and liabilities held in currencies other than Ringgit Malaysia, the Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short term imbalances. Liquidity risk The Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group s operations and to mitigate the effects of fluctuations in cash flows.

97 MALAKOFF BERHAD (24816-M) 95 NOTES TO THE FINANCIAL STATEMENTS 29. FINANCIAL INSTRUMENTS (CONT D) The following table shows information about exposure to interest rate risk Effective interest rates and repricing analysis In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice or mature, whichever is earlier (the effective interest rates and fair values of Islamic financial instruments are not shown in the tables below). Effective Group interest Within 1 5 After rate Total 1 year years 5 years 2005 % RM 000 RM 000 RM 000 RM 000 Financial assets Cash and cash equivalents ,722,429 2,722,429 Financial liabilities Secured fixed rate bonds , , ,307 Secured syndicated fixed rate loans , , ,879 Unsecured subordinated loan notes ,906 5,453 10,453 Secured medium term notes , ,000 Unsecured commercial papers , ,759 Secured commercial papers , ,574 Unsecured serial revenue bonds ,583, ,511 1,261,820 Redeemable unsecured loan stocks , ,352 Unsecured term loan , , Financial assets Cash and cash equivalents ,095,133 3,095,133 Financial liabilities Secured fixed rate bonds , , ,772 Secured syndicated fixed rate loans , , ,157 Unsecured subordinated loan notes ,527 23,633 60,894 Secured medium term notes , , ,000 Unsecured commercial papers , ,576 Secured commercial papers , ,571 Unsecured serial revenue bonds ,538,137 1,538,137 Redeemable unsecured loan stocks , ,001

98 96 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 29. FINANCIAL INSTRUMENTS (CONT D) Effective Company interest Within 1 5 After rate Total 1 year years 5 years 2005 % RM 000 RM 000 RM 000 RM 000 Financial assets Cash and cash equivalents , ,485 Financial liabilities Secured medium term notes , ,000 Unsecured commercial papers , ,759 Unsecured term loan , ,000 Unsecured serial revenue bonds ,583, ,511 1,261, Financial assets Cash and cash equivalents , ,660 Financial liabilities Secured medium term notes , , ,000 Unsecured commercial papers , ,576 Unsecured serial revenue bonds ,538,137 1,538,137 Fair values Recognised financial instruments In respect of cash and cash equivalents, trade and other receivables, trade and other payables and short term borrowings, the carrying amounts approximate fair value due to the relatively short term nature of these financial instruments.

99 MALAKOFF BERHAD (24816-M) 97 NOTES TO THE FINANCIAL STATEMENTS 29. FINANCIAL INSTRUMENTS (CONT D) The aggregate fair values of other financial assets and liabilities (other than Islamic financial instruments) carried on the balance sheet as at 31 August are shown below: Carrying Fair Carrying Fair Group amount value amount value RM 000 RM 000 RM 000 RM 000 Financial assets Quoted unit trusts 93, ,292 Financial liabilities Secured fixed rate bonds 511, , , ,455 Secured syndicated fixed rate loans 266, , , ,366 Secured medium term notes 100, , , ,110 Unsecured serial revenue bonds 1,583,331 1,917,710 1,538,137 1,538,137 2,461,982 2,807,460 2,922,220 2,893,068 Company Financial assets Quoted unit trusts 38,155 43,845 Financial liabilities Secured medium term notes 100, , , ,110 Unsecured serial revenue bonds 1,583,331 1,917,710 1,538,137 1,538,137 1,683,331 2,020,350 1,788,137 1,788,247 For the financial instruments listed above, fair value has been determined by discounting the relevant cash flows using current interest rates for similar instruments, as far as practicable, at the balance sheet date and/or based on the quoted bid price for quoted securities. It is impracticable to estimate the fair value of the redeemable unsecured loan stocks as the instruments are issued to the shareholders at negotiated interest rates. Similarly, it is also impracticable to estimate the fair value of the Company s investment in unquoted unsecured loan stocks in its subsidiaries.

100 98 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 29. FINANCIAL INSTRUMENTS (CONT D) Unrecognised financial instruments The valuation of financial instruments not recognised in the balance sheet reflects their current market rates at the balance sheet date. The contracted amount and fair value of financial instruments not recognised in the balance sheet as at 31 August are: Contracted Fair Contracted Fair amount value amount value RM 000 RM 000 RM 000 RM 000 Group Forward foreign exchange contracts 40,097 37,785 30,188 29,619 Contracted amount Within 1 5 After Total 1 year years 5 years RM 000 RM 000 RM 000 RM 000 Group Forward foreign exchange contracts 40,097 40, SUBSIDIARIES The principal activities of the subsidiaries, their places of incorporation and the interest of Malakoff Berhad in the subsidiaries are as follows: Country of Percentage of incorporation ownership Principal activities Segari Energy Ventures Sdn. Bhd. Malaysia Design, construction, operation and maintenance of a combined cycle power plant, generation and sale of electrical energy and generating capacity of power plant Teknik Janakuasa Sdn. Bhd. Malaysia Operation and maintenance of power plants GB3 Sdn. Bhd. Malaysia Design, construction, operation and maintenance of a combined cycle power plant, generation and sale of electrical energy and generating capacity of the power plant

101 MALAKOFF BERHAD (24816-M) 99 NOTES TO THE FINANCIAL STATEMENTS 30. SUBSIDIARIES (CONT D) Country of Percentage of incorporation ownership Principal activities Prai Power Sdn. Bhd. Malaysia Design, construction, operation and maintenance of a combined cycle power plant, generation and sale of electrical energy and generating capacity of the power plant Tanjung Bin Power Sdn. Bhd. Malaysia Design, engineering, procurement, construction, installation and commissioning, testing, operation and maintenance of 2,100 MW coal fired electricity generating facilities located at Tanjung Bin, Daerah Pontian Johor Darul Takzim and sale of electrical energy and generating capacity of the power plant. Malakoff Engineering Sdn. Bhd. Malaysia Provision of engineering and project management services Wirazone Sdn. Bhd. Malaysia Build, own and operate an electricity distribution system and a centralised chilled water plant system Hypergantic Sdn. Bhd. Malaysia Investment holding Desa Kilat Sdn. Bhd. Malaysia Land reclamation, development and/or sale of reclaimed land Tuah Utama Sdn. Bhd. Malaysia Investment holding Transpool Sdn. Bhd. Malaysia Dormant Spring Assets Limited British Virgin Offshore operations Dormant Islands Malakoff Gulf Limited British Virgin Offshore Investment holding Islands Malakoff Capital (L) Ltd Malaysia 100 Offshore operations Dormant Malakoff International Limited Cayman 100 Offshore Investment holding Islands Subsidiary of Teknik Janakuasa Sdn Bhd Natural Analysis Sdn. Bhd. Malaysia Operation and maintenance of power plant

102 100 MALAKOFF BERHAD (24816-M) NOTES TO THE FINANCIAL STATEMENTS 31. CONTINGENT LIABILITIES Group Company RM 000 RM 000 RM 000 RM 000 Guarantees secured 130, ,470 35,987 12,470 unsecured 30,000 30,000 15,000 15, , ,470 50,987 27, EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) On 9 September 2005, Tanjung Bin Power Sdn. Bhd. ( TBP ) issued its fifteenth tranche Redeemable Unsecured Loan Stocks ( RULS ) of RM39.6 million; On 21 September 2005, the Company transferred its entire shareholding in its wholly-owned subsidiary, Malakoff Gulf Limited ( MGL ) to Malakoff International Limited ( MIL ). MGL is currently a wholly-owned subsidiary of MIL; On 28 September 2005, MGL acquired 40% equity interest in Malaysian Shoaiba Consortium Sdn. Bhd., a special purpose vehicle holding 50% equity interest in the bidder company, which in turn will hold 60% interest in the Shoaiba Phase 3 Independent Water and Power Project ( Project ) in the Kingdom of Saudi Arabia ( KSA ); On 11 October 2005, TBP issued its sixteenth tranche RULS of RM39.6 million; On 8 November 2005, a bid bond of Bahraini Dinar (BD)5 million (RM50 million), of which BD3 million (RM30 million) is MB s portion, was issued by an offshore financial institution, in favour of Ministry of Finance ( MOF ) of the Government of the Kingdom of Bahrain, as provided under the Request of Proposal issued by MOF, and shall remain valid until 1 June 2006; On 9 November 2005, TBP issued its seventeenth tranche RULS of RM56.3 million; On 10 November 2005, TBP issued the fifth and final tranche of its Istisna medium term notes of RM950 million; On 11 November 2005, Teknik Janakuasa Sdn. Bhd., the operations and maintenance arm of the Company and a wholly-owned subsidiary of the Company, incorporated a wholly-owned offshore subsidiary in the British Virgin Islands named TJSB International (Shoaiba) Limited ( TJSB Shoaiba ). TJSB Shoaiba is intended to hold 20% equity interest in the operations and maintenance company undertaking the operations and maintenance of the Shuaibah Phase 3 power and water desalination plant in the KSA ( Shoaiba Plant ) to be constructed under the Project; On 12 November 2005, Saudi-Malaysia Water & Electricity Company Limited ( Bidder Company/SAMAWEC ), a joint venture company incorporated in the KSA, which in turn is 50% held by Malaysian Shoaiba Consortium Sdn. Bhd. ( Malaysian Consortium SPV ) and the balance 50% by Shoaiba National Company for Water and Power Limited ( Saudi Consortium SPV ) signed a Share Sale and Purchase Agreement with related entities of Government of the KSA, namely, Public Investment Fund and Saudi Electricity Company for the acquisition of 60% equity interest in the Shuaibah Water & Electricity Company, the company undertaking the Project ( Project Company ); and On 15 November 2005, a bank guarantee of Saudi Riyal (SAR)37.5 million (RM38 million), being MB s portion of the SAR187.5 million (RM190 million) development security, was issued in favour of Water and Electricity Company LLC ( WEC ) by an offshore financial institution for and on behalf of MB. The bank guarantee shall remain valid until 14 July The Development Security is required under the Power and Water Purchase Agreement entered into between the Project Company and WEC to guarantee the Project Company s performance of its obligations up to the project commercial operation date.

103 MALAKOFF BERHAD (24816-M) 101 Other Corporate INFORMATION 102 Financial Calendar and Share Performance Chart 103 Analysis of Shareholdings 106 Properties of the Group

104 102 MALAKOFF BERHAD (24816-M) Financial Calendar and Share Performance Chart Announcements of Quarterly Results Financial year 2003 Financial year 2004 Financial year st Quarter 28 January 2003/ 29 January January February 2003 (Amended Announcement) 2nd Quarter 28 April April April rd Quarter 28 July July July th Quarter 17 October October October 2005 Dividends Payable Closure Date 5 March January January 2006 Payment Date 18 March January January 2006 Annual Report Issued 30 January December December 2005 Annual General Meeting 25 February January January 2006 TREND FOR THE PAST FIVE YEARS Gross Dividend per Share & Gross Dividend Yield sen/share at Financial Year-End Yield (%) 70 7 RM/share 12 Share Price at Financial Year-End pre-bonus issue post-bonus issue pre-bonus issue Gross Dividend Per Share Gross Dividend Yield (A 2:1 Bonus Issue was implemented on 15 November 2001) 2003 post-bonus issue Share Performance Volume (million) during the financial year ended 31 August 2005 Share Price (RM) Sept Oct Nov Dec Jan Feb Mar Apr May June Jul Aug Volume High Low Last Transaction

105 MALAKOFF BERHAD (24816-M) 103 Analysis of Shareholdings as at 8 November 2005 Class of Securities : Ordinary shares of RM1.00 each ( MB Shares ) Authorised Share Capital : RM2,000,000,000 Issued and Paid-up Share Capital : RM894,792,002 Voting Rights : One vote for every one ordinary share held Number of Shareholders : 8,297 ANALYSIS BY SIZE OF SHAREHOLDINGS No. of % of No. of % of MB Shares Issued Size of Shareholdings Shareholders Shareholders Held Capital Less than , to 1,000 2, ,516, ,001 to 10,000 3, ,434, ,001 to 100,000 1, ,268, ,001 to less than 5% ,049, % and above ,522, Total 8, ,792, SUBSTANTIAL SHAREHOLDERS (HOLDING 5% OR MORE OF THE ISSUED AND PAID-UP SHARE CAPITAL) Direct Indirect No. of No. of Names MB Shares % MB Shares % MMC Corporation Berhad ( MMC ) 197,858,334 (1) International Power Holdings Limited ( IPHL ) 161,595,000 (2) Employees Provident Fund Board 84,069,050 (3) 9.40 Seaport Terminal (Johore) Sdn. Bhd. 197,858,334 (4) Skim Amanah Saham Bumiputera 16,799,600 (5) ,858,334 (6) International Power plc 161,595,000 (7) Indra Cita Sdn. Bhd. 197,858,334 (8) Tan Sri Datuk Syed Mokhtar Shah bin Syed Nor 197,858,334 (9) NOTES: (1) Of which 92,790,000 MB Shares are held through Bumiputra-Commerce Nominees (Tempatan) Sdn. Bhd., 24,000,000 MB Shares are held through UOBM Nominees (Tempatan) Sdn. Bhd. and 6,500,000 MB Shares are held through EB Nominees (Tempatan) Sendirian Berhad. (2) Held through AMMB Nominees (Asing) Sdn. Bhd. (3) Of which 3,225,100 MB Shares are held through RHB Nominees (Tempatan) Sdn. Bhd., 3,848,700 MB Shares are held through HSBC Nominees (Tempatan) Sdn. Bhd., 2,697,000 MB Shares are held through SBB Nominees (Tempatan) Sdn. Bhd., 2,000,000 MB Shares are held through AM Nominees (Tempatan) Sdn. Bhd., 1,533,200 MB Shares are held through Mayban Nominees (Tempatan) Sdn. Bhd. and 656,100 MB Shares are held through Alliancegroup Nominees (Tempatan) Sdn. Bhd. (4) Deemed interested by virtue of its direct major shareholdings in MMC (5) Held through Amanah Raya Nominees (Tempatan) Sdn. Bhd. (6) Deemed interested by virtue of its direct major shareholdings in MMC which are held through Amanah Raya Nominees (Tempatan) Sdn. Bhd. (7) Deemed interested by virtue of its direct major shareholdings in its wholly-owned subsidiary, IPHL (8) Deemed interested through Seaport Terminal (Johore) Sdn. Bhd. (9) Deemed interested through Indra Cita Sdn. Bhd.

106 104 MALAKOFF BERHAD (24816-M) ANALYSIS OF SHAREHOLDINGS as at 8 November 2005 STATEMENT ON DIRECTORS INTEREST The Directors interest in shares/options of the Company and its related corporations are set out on page 55 of the Annual Report. LIST OF TOP THIRTY (30) LARGEST SHAREHOLDERS AS AT 8 NOVEMBER 2005 Name No. of MB Shares % 1. AMMB Nominees (Asing) Sdn. Bhd. 161,595, (Amtrustee Berhad for International Power Holdings Limited (7/913-0)) 2. Bumiputra-Commerce Nominees (Tempatan) Sdn. Bhd. 92,790, (Pledged Securities Account for MMC Corporation Berhad (201 JTRK)) 3. MMC Corporation Berhad 74,568, Employees Provident Fund Board 70,108, Valuecap Sdn. Bhd. 32,873, UOBM Nominees (Tempatan) Sdn. Bhd. 24,000, (Pledged Securities Account for MMC Corporation Berhad (IBS-KWAP)) 7. Amanah Raya Nominees (Tempatan) Sdn. Bhd. 16,799, (Skim Amanah Saham Bumiputera) 8. Amanah Raya Nominees (Tempatan) Sdn. Bhd. 14,718, (Amanah Saham Wawasan 2020) 9. Lembaga Tabung Haji 13,148, Amanah Raya Nominees (Tempatan) Sdn. Bhd. 12,953, (Amanah Saham Didik) 11. Amanah Raya Nominees (Tempatan) Sdn. Bhd. 10,432, (Amanah Saham Malaysia) 12. HSBC Nominees (Asing) Sdn. Bhd. 9,776, (TNTC for Sanford C. Bernstein & Co. Delaware Business Trust) 13. Malaysia National Insurance Berhad 7,355, Permodalan Nasional Berhad 6,750, EB Nominees (Tempatan) Sendirian Berhad 6,500, (Pledged Securities Account for MMC Corporation Berhad (CSC))

107 MALAKOFF BERHAD (24816-M) 105 ANALYSIS OF SHAREHOLDINGS as at 8 November 2005 LIST OF TOP THIRTY (30) LARGEST SHAREHOLDERS AS AT 8 NOVEMBER 2005 (CONT D) Name No. of MB Shares % 16. Citigroup Nominees (Tempatan) Sdn. Bhd. 6,300, (Prudential Assurance Malaysia Berhad (PAR Fund)) 17. Malaysia Nominees (Tempatan) Sendirian Berhad 6,300, (Great Eastern Life Assurance (Malaysia) Berhad (PAR 1)) 18. HSBC Nominees (Asing) Sdn. Bhd. 6,249, (Stichting Pensioenfonds ABP) 19. HSBC Nominees (Asing) Sdn. Bhd. 5,688, (Abu Dhabi Investment Authority) 20. HSBC Nominees (Asing) Sdn. Bhd. 5,163, (Emerging Markets Growth Fund) 21. HSBC Nominees (Asing) Sdn. Bhd. 4,976, (HSBC Sg for Island Investment Company (Private) Limited) 22. Citigroup Nominees (Asing) Sdn. Bhd. 4,594, (CB LDN for Stichting Pensioenfonds Voor De Gezondheid Geestelijke En Maatschappelijke Belangen) 23. Takaful Nasional Sdn. Bhd. 4,500, Cartaban Nominees (Asing) Sdn. Bhd. 4,416, (Investors Bank and Trust Company for Ishares Inc.) 25. HSBC Nominees (Asing) Sdn. Bhd. 3,995, (TNTC for Government of Singapore Investment Corporation Pte Ltd) 26. HSBC Nominees (Tempatan) Sdn. Bhd. 3,848, (Nomura Asset Mgmt Sg for Employees Provident Fund) 27. HSBC Nominees (Asing) Sdn. Bhd. 3,771, (HSBC Sg for Singapore Investments Pte Ltd) 28. Cartaban Nominees (Asing) Sdn. Bhd. 3,520, (State Street Luxembourg Fund M59E for ACM Bernstein Value Investments-Emerging Markets Value Portfolio) 29. Citigroup Nominees (Asing) Sdn. Bhd. 3,483, (Mellon Bank, N.A. for Emerging Markets Investors Fund) 30. Cartaban Nominees (Asing) Sdn. Bhd. 3,426, (SSBT Fund 2R26 for Emerging Markets Portfolio (SC Bernstein FD)) Total 624,603,

108 106 MALAKOFF BERHAD (24816-M) Properties of the Group as at 31 August 2005 Net Book Description Approximate Revaluation Value as at No. Location of Property age of building Tenure Area Date (RM 000) 1. Windsor Estate, Agricultural land Freehold ,516 Ulu Sepetang, hectares Perak 2. Mukim of Industrial land 11 years Leasehold ,729 Pengkalan Baharu, with power plant 99 years hectares District of Manjung, expiring on Perak 12 January Mukim of Industrial land 11 years Leasehold ,660 Pengkalan Baharu, with power plant 99 years hectares District of Manjung, expiring on Perak 27 February Mukim of Industrial land Leasehold ,661 Pengkalan Baharu, 99 years hectares District of Manjung, expiring on Perak 30 July Plaza Sentral, Office suites 5 years Freehold 31,797 12,931 Brickfields, square feet Kuala Lumpur 6. Plaza Sentral, Office cum 5 years Freehold 68,022 5,028 Brickfields, operations use square feet Kuala Lumpur

109 MALAKOFF BERHAD (24816-M) 107 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Thirtieth Annual General Meeting of Malakoff Berhad will be held at Nirwana Ballroom, Lower Lobby, Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, Kuala Lumpur, Malaysia on Thursday, 5 January 2006 at a.m. for the following purposes:- ORDINARY BUSINESS 1. THAT the Audited Financial Statements for the financial year ended 31 August 2005 and the Reports of the Directors and Auditors thereon be and are hereby received and adopted. (Ordinary Resolution 1) 2. THAT a final dividend of 17 sen per share, less tax at 28% for the financial year ended 31 August 2005 be and is hereby approved and declared payable on 27 January 2006 to the members of the Company registered at the close of business on 9 January (Ordinary Resolution 2) 3. THAT the following Directors, who retire as Directors in accordance with Article 80 of the Company s Articles of Association, and being eligible have offered themselves for re-election, be and are hereby re-elected as Directors of the Company:- i) Azizan bin Mohd Noor (Ordinary Resolution 3) ii) Dato Ismail bin Shahudin (Ordinary Resolution 4) 4. THAT the Directors fees for the financial year ended 31 August 2005 amounting to RM396,000 be and are hereby approved. (Ordinary Resolution 5) 5. THAT KPMG, who are eligible and have given their consent for re-appointment, be and are hereby re-appointed as Auditors of the Company until the conclusion of the next Annual General Meeting and that the remuneration to be paid to them be fixed by the Board of Directors. (Ordinary Resolution 6) NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS ALSO HEREBY GIVEN THAT shareholders who are registered in the Register of Members and Record of Depositors at the close of business on 9 January 2006 shall be entitled to the final dividend, if approved, which will be paid on 27 January A Depositor shall qualify for dividend entitlement only in respect of: a) Shares deposited into the Depositor s securities account before p.m. on 5 January 2006 in respect of shares which are exempted from mandatory deposit; b) Shares transferred into the Depositor s securities account before 4.00 p.m. on 9 January 2006 in respect of ordinary transfers; and c) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. BY ORDER OF THE BOARD Lim Wee Neo (LS ) Rozana binti Ismail (LS ) Secretaries Kuala Lumpur 14 December 2005 SPECIAL BUSINESS 6. To transact any other business of which due notice shall have been given in accordance with the Companies Act, 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 need not be a member of the Company. 2. Where a member appoints two or more proxies, the appointment shall be invalid unless he specifies the proportions of his holding to be represented by each proxy. 3. The instrument appointing a proxy or proxies, in the case of an individual, shall be signed by the appointer or his duly authorised attorney, and in the case of a corporation, either under seal or under the hand of an officer or attorney duly authorised in writing. In case of joint holders, the signature of any joint holder is sufficient. 4. The instrument appointing a proxy or proxies must be deposited at the Registrar, Symphony Share Registrars Sdn. Bhd., Level 26, Menara Multi-Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, Kuala Lumpur, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof.

110 108 MALAKOFF BERHAD (24816-M) Statement Accompanying Notice of Annual General Meeting (Pursuant to paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad) 1. DIRECTORS STANDING FOR RE-ELECTION PURSUANT TO ARTICLE 80 OF THE COMPANY S ARTICLES OF ASSOCIATION (Retirement by rotation) i) Azizan bin Mohd Noor ii) Dato Ismail bin Shahudin 2. BOARD MEETINGS HELD DURING THE FINANCIAL YEAR ENDED 31 AUGUST 2005 AND DETAILS OF ATTENDANCE OF DIRECTORS a) A total of eleven (11) Board meetings were held during the financial year. No. Meeting Date of Board meetings Time 1. SP/BOD* 30 September a.m. 2. BOD 29 October p.m. 3. SP/BOD* 26 November p.m. 4. BOD 27 January a.m. 5. SP/BOD* 22 February p.m. 6. SP/BOD* 09 March p.m. 7. BOD 29 April p.m. 8. SP/BOD* 03 June a.m. 9. SP/BOD* 22 June a.m. 10. BOD 25 July p.m. 11. SP/BOD* 29 July a.m. Note: * Special Board Meeting Except for the Board meeting on 30 September 2004 which was held at Lower Lobby, Mutiara Kuala Lumpur, Jalan Sultan Ismail, Kuala Lumpur, all the other Board meetings were held at Boardroom 1, Level 12, Plaza Sentral, Jalan Stesen Sentral 5, Kuala Lumpur. b) Details of attendance of Directors at Board meetings No. Name of Directors No. of meetings attended 1. Tan Sri Abdul Halim bin Ali 11 out of Ahmad Jauhari bin Yahya 11 out of Dato Abdul Aziz bin Abdul Rahim 11 out of Abdul Jabbar bin Abdul Majid 10 out of Azizan bin Mohd Noor 11 out of Dato Ismail bin Shahudin 7 out of Vincent Richard Harris 9 out of Tan Sri Nuraizah binti Abdul Hamid 10 out of 11

111 MALAKOFF BERHAD (24816-M) 109 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING (Pursuant to paragraph 8.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad) 3. DETAILS OF DIRECTORS STANDING FOR RE-ELECTION AT THE ANNUAL GENERAL MEETING Name Azizan bin Mohd Noor Dato Ismail bin Shahudin Age Nationality Malaysian Malaysian Qualification Fellow of the Institute of Chartered Bachelor of Economics (Honours) Accountants in England and Wales degree from University of Malaya, Member of both the Malaysian Institute Malaysia. of Certified Public Accountants ( MICPA ) and the Malaysian Institute of Accountants ( MIA ) Position on the Board Independent Non-Executive Director Non-Independent Non-Executive Director Date first appointed to the Board 14 May August 2002 Membership of Board Committees Audit Committee Remuneration Committee Nomination Committee Working Experience As enumerated in the Profile of Directors As enumerated in the Profile of Directors on page 30 of this Annual Report on page 30 of this Annual Report Occupation Chartered Accountant Group Chief Executive, MMC Corporation Berhad Any other directorships of Kumpulan FIMA Berhad MMC Corporation Berhad public companies Kramat Tin Dredging Berhad Malaysia Smelting Corporation Berhad MMC Engineering Group Berhad Tronoh Consolidated Malaysia Berhad IJM Corporation Berhad Bank Muamalat Malaysia Berhad Securities holdings in the Nil Nil Company and its subsidiaries (as at 31 August 2005) Family relationship with any Nil Nil Director and/or major shareholder of the Company List of convictions for offences Nil Nil within the past 10 years other than traffic offences, if any. Number of Board meetings 11 out of 11 7 out of 11 attended in the financial year

112

113 Proxy Form MALAKOFF BERHAD Company No.: M (Incorporated in Malaysia) I/We of (FULL NAME IN CAPITAL LETTER) (ADDRESS) being a member/members of MALAKOFF BERHAD hereby appoint (FULL NAME & NRIC NUMBER) of or failing whom of (ADDRESS) (FULL NAME & NRIC NUMBER) (ADDRESS) or failing him, the Chairman of the Meeting* as my/our proxy to attend and vote for me/us and on my/our behalf at the Thirtieth Annual General Meeting of the Company to be held at Nirwana Ballroom, Lower Lobby, Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, Kuala Lumpur, Malaysia on Thursday, 5 January 2006 at a.m. and at any adjournment thereof. My/our proxy is to vote on the Ordinary Resolutions as indicated by an X in the appropriate spaces below. If this form is returned without indication as to how the proxy shall vote, the proxy shall vote or abstain as he/she thinks fit. No. Ordinary Resolutions For Against 1. To receive and adopt the Audited Financial Statements for the financial year ended 31 August 2005 and the Reports thereon. 2. To declare a final dividend of 17 sen per share, less tax at 28% for the financial year ended 31 August To re-elect Azizan bin Mohd Noor as Director. (Article 80) 4. To re-elect Dato Ismail bin Shahudin as Director. (Article 80) 5. To approve the Directors fees of RM396,000 for the financial year ended 31 August To re-appoint KPMG as Auditors and to authorise the Directors to fix their remuneration. No. of shares held Dated this day of 2005/2006. Signature of shareholder(s) or Common Seal Notes: * Delete the words Chairman of the Meeting if you wish to appoint some other person(s) to be your proxy. 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 need not be a member of the Company. 2. Where a member appoints two or more proxies, the appointment shall be invalid unless he specifies the proportions of his holding to be represented by each proxy. 3. The instrument appointing a proxy or proxies, in the case of an individual, shall be signed by the appointer or his attorney duly authorised, and in the case of a corporation, either under seal or under the hand of an officer or attorney duly authorised in writing. In case of joint holders, the signature of one joint holder is sufficient. 4. The instrument appointing a proxy or proxies must be deposited at the Registrar, Symphony Share Registrars Sdn. Bhd., Level 26, Menara Multi-Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, Kuala Lumpur, Malaysia not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof.

114 fold here Stamp The Registrar Symphony Share Registrars Sdn. Bhd. ( D) Level 26, Menara Multi-Purpose Capital Square No. 8 Jalan Munshi Abdullah Kuala Lumpur Malaysia fold here

115 Notes to Shareholders: 1. Shareholders who have not opted for the Direct Dividend Payment Service ( DDPS ) and wish to do so, should complete and sign the form below. 2. Shareholders, who have already signed up for the DDPS, can update or amend any information in relation to their bank account and/or other details by completing and signing the form below. 3. To qualify for the electronic crediting of the final dividend payable on 27 January 2006, the duly completed and signed form must reach Symphony Share Registrars by 9 January MALAKOFF BERHAD (24816-M) (Incorporated in Malaysia under the Companies Act,1965) Registered Office: Level 12, Block 3B, Plaza Sentral, Jalan Stesen Sentral 5, Kuala Lumpur, Malaysia SYMPHONY SHARE REGISTRARS SDN. BHD. ( D) Level 26, Menara Multi-Purpose, Capital Square No. 8, Jalan Munshi Abdullah, Kuala Lumpur, Malaysia Tel: Fax: /2531 DIRECT DIVIDEND PAYMENT SERVICE ( DDPS ) APPLICATION / CHANGE OF PARTICULARS FORM * Please tick in the appropriate box New Applicant Change of bank account/other details PART A Name of Shareholder (as per CDS Account) New NRIC/Passport No./Company No. OLD NRIC No. CDS Account No. Telephone No. Address (as per CDS Account) Address I/We irrevocably request Symphony Share Registrars Sdn. Bhd. ( SSR ) to credit all dividends payable by Malakoff Berhad ( MB ) to me/us to my/our bank account as follows: PART B Bank Branch Bank Account No. * To be completed by Shareholder I/We hereby irrevocably authorise SSR to disclose to the bank as stated in Part B of this form all the information contained herein or as may be updated or amended from time to time and/or any information relating to any payment of dividends to my/our bank account in connection with the provisions of DDPS. By signing this form, I/we hereby irrevocably agree and authorise SSR to directly credit all dividends payable by MB to me/us to my/our bank account as stipulated in Part B of this form, and I/we further acknowledge, agree and confirm that all dividends payable by MB will be credited directly into my/our aforesaid bank account. In consideration of SSR acting in accordance with my/our request aforesaid, I/we hereby irrevocably and unconditionally agree and undertake to indemnify, and keep indemnified MB and SSR against all costs, expenses, claims, demands and liabilities for which MB and/or SSR may become liable and against all actions, suits, proceedings, claims or demands of any nature whatsoever which may be taken or made against MB and/or SSR or which may be incurred or which may arise directly or indirectly by reason of the provision of the services herein or by reason of anything done or omitted to be done in relation thereto. Signature/Common Seal Date Important notes: Shareholder s bank account must be opened with a Malaysian-based bank under the Malaysian Electronic Payment System ( MEPS ). Banks under the MEPS are (1) Affin Bank Berhad, (2) Alliance Bank Malaysia Berhad, (3) AmBank Berhad, (4) Bank Islam Malaysia Berhad, (5) Bumiputera-Commerce Bank Berhad, (6) Bank Muamalat Malaysia Berhad, (7) Bank Rakyat, (8) Citibank Malaysia Berhad, (9) EON Bank Berhad, (10) Hong Leong Bank Berhad, (11) HSBC Bank Malaysia Berhad, (12) Maybank Berhad, (13) OCBC Bank Malaysia Berhad, (14) Public Bank Berhad, (15) RHB Bank Berhad and (16) Southern Bank Berhad. The bank account must be in the name of the shareholder. Joint account is acceptable provided that the shareholder is one of the account holders. A cheque will automatically be sent to the shareholder s CDS address if the information provided is invalid/incomplete. For the shareholders signing up for the DDPS, a dividend cheque will no longer be issued to the shareholders. Shareholders will continue to receive their dividend voucher through the mail. Shareholders should check with their bank to confirm that the dividend has been credited into their bank account before commencing any banking transaction. A separate DDPS form is required to be submitted for each CDS account of the shareholder.

116 Fold Here No Stamps Required Setem Pos Tidak Diperlukan REPLY PAID/JAWAPAN BERBAYAR MALAYSIA NO. LESEN: BRS 4179 KL SYMPHONY SHARE REGISTRARS SDN. BHD. (Company no D) P.O. BOX Kuala Lumpur Malaysia Fold Here

117 Achieving excellence a. Winner - Energy and Natural Resources Sector KPMG Shareholder Value Award 2004 b. Bond Deal of the Year - Kapar Energy Ventures Sdn Bhd PFI Awards 2004 c. A Leader in Corporate Governance, Malaysia The Asset Benchmark Survey 2004 a b c