Cover Concept. "Source of LIFE"

Transcription

1 Annual Report 2002

2 Cover Concept "Source of LIFE" Rivers have been the life source of living communities since time immemorial. Their fresh, ever-flowing waters support life, carry life and above all, nourish the lives of all those who reside within them and around their productive plains. This year, our Annual Report cover pays tribute to the mighty Sungai Selangor, whose strength, versatility and ability to sustain growth wherever it flows are true reflections of Puncak Niaga s inherent qualities. As Malaysia s Leading Water Specialist, Puncak Niaga practises the highest standards of excellence and integrity in all that it pursues. Like the nurturing river, we do our utmost to ensure that the quality and outcome of our core activities significantly enhance the quality of life for our customers, our shareholders and our country. And just as the river flows continuously forward, Puncak Niaga works relentlessly towards increasing its strength and value, surging ahead to become Malaysia s Leading and Dynamic Integrated Water Services Company. Cover Photo: Sungai Selangor meandering through the lush terrain.

3 Contents 2-3 Corporate Information 4-5 Fact Sheet 8 Financial Highlights 9 Financial & Share Performances Corporate Profile 12 Corporate Structure 13 Organisation Structure Corporate Achievements Board of Directors Senior Management Vision & Mission Statements Executive Chairman Speaks Operations Review Corporate Calendar of Events Statement on Corporate Governance Statement on Internal Control Audit Committee Report Risk Management Policy & Report Investor Relations Policy & Report Pull Out Environmental Policy & Report 96 Organisational Safety and Health Policy 97 Quality Policy Newspaper Clippings Distribution Schedule of Equity Securities & Property Financial Reports Notice of Annual General Meeting 162 Statement Accompanying the Notice of Annual General Meeting Other Compliance Information Proxy Form Sixth Annual General Meeting Date :Wednesday, 25 June 2003 Time :9.30 a.m Venue :Banquet Hall Kuala Lumpur Golf & Country Club No. 10 Jalan 1/70D Off Jalan Bukit Kiara Kuala Lumpur

4 Corporate Information Board of Directors YBhg Tan Sri Rozali Ismail Executive Chairman Encik Ruslan Hassan Executive Vice Chairman/ Executive Director Corporate Affairs Division Encik Mat Hairi Ismail Executive Director Finance Division Ir Lee Miang Koi Executive Director Project & Business Development Division Encik Abdul Majid Abdul Karim Independent Non-Executive Director YBhg Dato' Hari Narayanan Govindasamy Independent Non-Executive Director YB Dato' Seri Dr Ting Chew Peh Independent Non-Executive Director Group Company Secretary Madam Tan Bee Lian, MAICSA Registered Office Suite , 14th Floor Plaza See Hoy Chan Jalan Raja Chulan Kuala Lumpur Tel: Fax : Principal Office Suite , 26th Floor Plaza See Hoy Chan Jalan Raja Chulan Kuala Lumpur Tel : Fax : website : (general) : corpcom@puncakniaga.com.my (investors) : investors@puncakniaga.com.my Date and Place of Incorporation 7 January 1997, Malaysia Company Number U Auditors Messrs PricewaterhouseCoopers (AF 1146) Tax Advisor PricewaterhouseCoopers Taxation Services Sdn Bhd ( M) Principal Bankers RHB Bank Berhad (6171-M) Bumiputra-Commerce Bank Berhad (13491-P) United Overseas Bank (Malaysia) Berhad ( K) Solicitors Messrs Kadir, Andri Aidham & Partners Messrs Wong & Partners Messrs Lee Hishammuddin Messrs Sivananthan Messrs Ng Yook Woon, Andrew TC Saw & Co Messrs Azian Haslina & Co Puncak Niaga Holdings Berhad Annual Report

5 Share Registrar (Place where all registers of securities are kept) Tenaga Koperat Sdn Bhd ( V) 20th Floor, Plaza Permata Jalan Kampar Off Jalan Tun Razak Kuala Lumpur Tel : Fax : Stock Exchange Listing Main Board of Kuala Lumpur Stock Exchange (KLSE) under the Infrastructure Project Companies Sector Indices KLSE Composite Index KLSE Syariah Index MSCI Index Audit Committee Chairman: Encik Abdul Majid Abdul Karim Members: YBhg Dato' Hari Narayanan Govindasamy YB Dato' Seri Dr Ting Chew Peh Encik Mat Hairi Ismail Secretary: Madam Tan Bee Lian Remuneration Committee Chairman: YB Dato' Seri Dr Ting Chew Peh Members: YBhg Dato' Hari Narayanan Govindasamy Encik Abdul Majid Abdul Karim Encik Mat Hairi Ismail Secretary: Madam Tan Bee Lian Nomination Committee Chairman: YB Dato' Seri Dr Ting Chew Peh Members: YBhg Dato' Hari Narayanan Govindasamy Encik Abdul Majid Abdul Karim Secretary: Madam Tan Bee Lian Compliance, Internal Control and Risk Policy Committee (CICR) Chairman: YB Dato' Seri Dr Ting Chew Peh Members: Encik Ruslan Hassan (Head of CICR) Encik Sonari Solor Mr Ng Wah Tar Madam Tan Bee Lian Secretary: Encik Mohammed Sofian Ismail (Head of Risk Management Section) Puncak Niaga Holdings Berhad Annual Report

6 Fact Sheet PUNCAK NIAGA HOLDINGS BERHAD S FACT SHEET AS AT 29 APRIL 2003 Group Staff Strength Management Staff 55 Executive Staff 177 Non-Executive Staff 373 Total 605 No. of Puncak Niaga s Water Treatment Plants 28 No. of Water Treatment Plants with ISO Certifications 14 Authorised Share Capital RM1,000,000,000 Paid-Up Share Capital RM439,278,000 (comprising 439,278,000 ordinary shares of RM1.00 each) Number of RUN Issued 546,875,000 RUN Coupon Rates 2.5% per annum for the first 10 years and 3.5% per annum for the remaining 5 years RUN Semi-Annual Coupon Payment Dates 20 May and 20 November RUN Maturity Date 18 November 2016 RUN Holders Put Option Date 20 November 2011 Number of Warrants Issued 109,374,869 Warrant Conversion Price RM2.62 Number of Warrants Converted None Warrant Maturity Date 20 November 2006 Effective Date of ESOS 25 February 2002 Expiry Date of ESOS 24 February 2007 ESOS Exercise Price (1st Tranche) RM2.37 per share ESOS Exercise Price (2nd Tranche) RM2.47 per share ESOS Exercise Price (3rd Tranche) RM2.13 per share Number of ESOS Offered (1st Tranche) 33,422,000 Number of ESOS Offered (2nd Tranche) 2,933,000 Number of ESOS Offered (3rd Tranche) 2,817,000 Number of ESOS Exercised To-Date 1,778,000 Puncak Niaga Holdings Berhad Annual Report

7 List Of Corporate Memberships:- 1. Malaysian Water Association Member since Malaysia South-South Association Member since Federation of Public Listed Companies Member since Malaysian Employers Federation Member since Malaysian Industry-Government Group For Member since 2001 High Technology (MIGHT) 6. Malaysian-German Chamber of Commerce Member since 2002 and Industry (MGCCI) 7. National Institute of Occupational Safety Member since 2002 and Health (NIOSH) 8. American Water Works Association (AWWA) Member since Malaysian-French Chamber of Commerce Member since 2002 and Industry (MFCCI) 10. British Malaysian Chamber of Commerce Member since 2003 List Of Water Treatment Plants Telephone Nos. 1. Ampang Intake* Batang Kali* Bernam River Headworks* Bukit Nanas* Bukit Tampoi* Cheras Mile 11* Gombak* Kalumpang Kepong Kuala Kubu Bharu North Hummock* Rantau Panjang* / Salak Tinggi* Sungai Batu* Sungai Buaya Sungai Dusun Sungai Keroh / Sungai Langat* Sungai Lolo / Sungai Pangsoon Sungai Pusu / Sungai Rangkap Sungai Rumput Sungai Selangor Phase 2* Sungai Selisek Sungai Serai Sungai Tengi Wangsa Maju* *Water Treatment Plants with ISO 9002 Certification. Puncak Niaga Holdings Berhad Annual Report

8 Charting our Course Puncak Niaga Holdings Berhad Annual Report

9 From the onset of its journey high above in the Titiwangsa Range, the Selangor River works to achieve the perfect balance between the amount of water it carries, and the sediment it transports downstream. Guided by a clear vision to become the Leading and Dynamic Integrated Water Services Company, Puncak Niaga is continuously striving to balance the development of existing water resources with our economic, social and environmental responsibilities. Puncak Niaga Holdings Berhad Annual Report

10 Financial Highlights In RM 000 Year 2002 Year 2001 Year 2000 Balance sheet Property, plant and equipment 1,528,703 1,606,425 1,659,010 Project development expenditure 245, , ,967 Other non-current assets 185, ,520 50,045 Current assets 907, , ,935 Total tangible assets 2,856,603 2,688,980 2,507,973 Issued and paid-up capital Share capital 439, , ,500 Reserves 737, , ,410 Shareholders fund 1,177, , ,910 Net tangible assets per share (RM) Ratios and statistics Turnover 565, , ,564 Net profit after tax 179, ,314 91,225 Interest bearing debt 1,529,608 1,585,076 1,579,372 In sen Earnings per share In % of turnover Operating profit In times Gearing ratio Current ratio FINANCIAL CALENDAR Financial year end 31 December 2002 Announcement of results 1st quarter results ended 31 March May nd quarter results ended 30 June August rd quarter results ended 30 September November th quarter results ended 31 December February 2003 Audited Accounts for the financial year ended 31 December April 2003 Published Annual Report 3 June 2003 Annual General Meeting 25 June 2003 Puncak Niaga Holdings Berhad Annual Report

11 Financial & Share Performances FINANCIAL PERFORMANCE Turnover RM ' , , , , ,105 Profit After Taxation Total Tangible Assets RM '000 RM '000 57,226 98,972 91, , ,745 2,042,776 2,107,695 2,507,973 2,688,980 2,856, SHARE PERFORMANCE CI Share Price (RM) m 60m 40m 20m J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Monthly Highest Closing Prices Monthly Lowest Closing Prices KLSE Composite Index (CI) Volume of shares traded Puncak Niaga Holdings Berhad Annual Report

12 Corporate Profile Puncak Niaga Holdings Berhad (PNHB) was incorporated on 7 January 1997 under the Malaysian Companies Act, 1965 as a public company limited by shares. It is an investment holding company with interest in infrastructure activities specialising in water treatment engineering and water-related activities. PNHB was listed on the Main Board of Kuala Lumpur Stock Exchange (KLSE) on 8 July It is the first water treatment and supply concession company to be listed on the KLSE under the Infrastructure Project Company guidelines issued by the Securities Commission. As an investment holding company, PNHB acted as the listing vehicle for Puncak Niaga (M) Sdn Bhd (PNSB), an Infrastructure Project Company (IPC). PNSB is the holder of two concessions awarded by the Selangor State Government. The first, a Privatisation Cum Concession Agreement (PCCA) awarded on 22 September 1994 allowed PNSB to take over, operate, maintain, manage, rehabilitate and refurbish 27 existing water treatment plants formerly under the management of the Selangor Waterworks Department, now corporatised and known as Perbadanan Urus Air Selangor Berhad. The second concession, a Construction Cum Operation Agreement (CCOA) was awarded on 22 March 1995 to finance, design, construct, operate, manage and maintain a new 950 million litres per day water treatment plant at Bukit Badong under the Selangor State Government s Sungai Selangor Water Supply Scheme Phase 2 Project (SSP2). Both the PCCA and CCOA provide for the concessions to expire on 31 December Under the CCOA, the development of the SSP2 Water Treatment Plant was undertaken in two stages. The first stage, with a production capacity of 475 million litres per day, was completed in October 1998, two months ahead of the commitment given to the Selangor State Government. The second stage of the SSP2 Water Treatment Plant, with a production capacity of 475 million litres per day was originally scheduled for completion and commissioning on 1 January Instead, it was completed and commissioned one year ahead of schedule on 1 January During the water crisis in 1998, PNSB was entrusted by the Federal Government to finance, design and construct the Wangsa Maju Water Treatment Plant at a cost of RM122.0 million. This water treatment plant was completed in a record time of six months, an amazing feat by engineering standards. The above mentioned early completion of projects clearly exemplifies Puncak Niaga s excellent capabilities in managing and undertaking large-scale water supply projects in Malaysia. In recognition of Puncak Niaga s expertise and vast experience in water privatisation projects over the past years, PNHB was invited by the Negeri Sembilan State Government to participate in the privatisation of Jabatan Bekalan Air Negeri Sembilan (JBANS) in On 20 December 2000, PNHB signed a Memorandum of Understanding to undertake the proposed privatisation which PNHB will hold a 30% equity stake in NS Water Konsortium Sdn Bhd, the concession company which has been granted the exclusive privatisation rights of JBANS by the Negeri Sembilan State Government. Today, PNSB is the largest water supply concessionaire in Malaysia. We operate, manage and maintain 28 water treatment plants with a total average production capacity of 1,903 million litres per day. This volume is equivalent to approximately 56% of the treated water requirement in the State of Selangor Darul Ehsan and the Federal Territory of Kuala Lumpur. Puncak Niaga Holdings Berhad Annual Report

13 Puncak Niaga Holdings Berhad Annual Report

14 Corporate Structure Puncak Niaga Holdings Berhad Investment Holding and Provision of Management Services Puncak Niaga (M) Sdn Bhd 100% operation, maintenance, management, construction and undertaking the rehabilitation and refurbishment of water treatment facilities Unggul Raya (M) Sdn Bhd 100% operation, management, maintenance and monitoring the operation of dams Ideal Water Resources Sdn Bhd 100% operation, management, maintenance and undertaking the rehabilitation and refurbishment of water treatment plants Puncak Research Centre Sdn Bhd 100% dormant Puncak Seri (M) Sdn Bhd 100% dormant NS Water System Sdn Bhd 100% dormant NS Water Management Sdn Bhd 40% dormant Puncak Niaga Holdings Berhad Annual Report

15 Organisation Structure Puncak Niaga Holdings Berhad Executive Chairman YBhg Tan Sri Rozali Ismail General Manager Internal Audit Encik Sonari Solor Strategic Resource Centre Executive Vice Chairman Encik Ruslan Hassan Finance Division Executive Director Encik Mat Hairi Ismail General Manager Finance & Accounts Mr Ng Wah Tar Assistant General Manager Finance Encik Ismail Maidin Senior Manager Accounts Encik Nik Azmi Nik Yaacob Operation Division Acting Executive Director Encik Ruslan Hassan Operations I General Manager Operations I Tuan Syed Danial Syed Ariffin Senior Manager/Plant Manager SSP2 WTP Ir Ausamah Darwish Mohd Daud Operations II Manager/Plant Manager Wangsa Maju WTP Encik Abdul Rahman Kadir Senior General Manager Operations II Ir Loh Kit Mun Senior Manager Rehabilitation of WTP Encik Nasir Ismail Senior Manager Operation Contract Supervision (26 WTPs) Encik Hashim Omar Senior Manager Water Resources & Environmental/Dam Operations Puan Roowina Merican A Rahim Merican Human Resources & Administration Division Acting Executive Director Encik Ruslan Hassan General Manager Human Resources & Administration Encik Ahmad Fauzi Yahya Senior Manager Training Encik Said Muhamad Khalil Abdul Madza Manager Manpower Services & Industrial Relations Puan Poziah Abas Manager Compensation & Benefits Vacant Manager Administration Encik Kamarulzaman Abu Bakar Manager Protective Services Encik Saadon Kardi Corporate Affairs Division Executive Director Encik Ruslan Hassan Senior General Manager Corporate Communications Encik Ibrahim Ismail Senior General Manager Secretarial/Group Company Secretary Madam Tan Bee Lian General Manager Legal Madam Chan Siew Meei Assistant General Manager Information Technology Encik Mohd Sabaruldin Che Bakar Project & Business Development Division Executive Director Ir Lee Miang Koi Senior Manager Business Development Ir Ahmad Marzuki Hashim Senior Manager Project Management Encik Ishak Awang Senior Manager Contract Ir Teh Lee Ngo Manager Special Project Ir Lee Chok Beng Puncak Niaga Holdings Berhad Annual Report

16 Corporate Achievements In its relentless pursuit towards excellence, Puncak Niaga continuously strives to achieve the highest standards of excellence in its corporate and operational activities. As in the previous years, the Group continued to garner several prestigious awards and accolades for the year 2002 as follows:- ASIA WATER MANAGEMENT EXCELLENCE AWARD 2002 Awarded to Puncak Niaga s Executive Chairman, YBhg Tan Sri Rozali Ismail under the Individual Award Category during the Water 2002 International Water Technology, Equipment, Services & Management Exhibition & Conference, 26 March 2002 ROC-MAICSA COMPANY SECRETARY AWARD 2001 Awarded to Puncak Niaga s Group Company Secretary/Senior General Manager, Secretarial Department, Madam Tan Bee Lian, under the Listed Company Category, 22 July 2002 MSOSH OSH GRAND AWARD 2001 by Malaysian Society For Occupational Safety And Health for Sungai Selangor Phase 2 Water Treatment Plant, 31 July 2002 MSOSH OSH GOLD AWARD 2001 by Malaysian Society For Occupational Safety And Health for Wangsa Maju Water Treatment Plant, 31 July 2002 Puncak Niaga Holdings Berhad Annual Report

17 ANUGERAH KESELAMATAN & KESIHATAN PEKERJAAN KEBANGSAAN 2002 Sijil Penghargaan to Puncak Niaga (M) Sdn Bhd for Facilities Category organised by Ministry of Human Resources, 7 October 2002 NATIONAL ANNUAL CORPORATE REPORT AWARDS (NACRA) 2002 Industry Excellence Award under the Construction & Infrastructure Project Companies Category, 31 October 2002 ANUGERAH CITRA LAPORAN TAHUNAN 2002 Hadiah Penghargaan by Dewan Bahasa dan Pustaka for correct usage of the national language in the Annual Report 2001, 17 December 2002 ERNST & YOUNG ENTREPRENEUR OF THE YEAR AWARD-MALAYSIA 2002 YBhg Tan Sri Rozali Ismail was identified as a Top 10 Nominee under the Master Entrepreneur Category, 16 January 2003 ASIAMONEY CORPORATE GOVERNANCE POLL 2002 Voted Best Corporate Governance Standards in the Utilities Sector in Malaysia, 20 February 2003 Puncak Niaga Holdings Berhad Annual Report

18 Directing the Flow Puncak Niaga Holdings Berhad Annual Report

19 The banks of the river steer its course; yet it is ever-shifting, accommodating change when needs arise. Just like the river banks, the Management of Puncak Niaga provides vital support to our Group of Companies; steadily guiding them through their respective missions while simultaneously advancing with the times to effectuate better efficiency. Puncak Niaga Holdings Berhad Annual Report

20 Board Of Directors Puncak Niaga Holdings Berhad Annual Report

21 From left to right: Encik Abdul Majid Abdul Karim, YBhg Tan Sri Rozali Ismail, Encik Ruslan Hassan, Encik Mat Hairi Ismail, Ir Lee Miang Koi, YB Dato Seri Dr Ting Chew Peh, YBhg Dato Hari Narayanan Govindasamy. Puncak Niaga Holdings Berhad Annual Report

22 Board Of Directors YBhg Tan Sri Rozali Ismail, aged 46, Malaysian Executive Chairman YBhg Tan Sri Rozali is the founder of PNSB, the Executive Chairman and a substantial shareholder of PNHB. He was appointed to the Board of PNHB on 24 April Upon obtaining a Bachelor of Laws Degree from the University of Malaya in 1981, he began his career as Legal Advisor with the Urban Development Authority (UDA) before joining Bank Islam (M) Berhad in Together with a few pioneer bank staff, YBhg Tan Sri Rozali conceptualised the first institution of Islamic banking in Malaysia. Subsequently, he started his own legal practice as an Advocate and Solicitor for 7 years, specialising in corporate, property and banking work. In 1989, YBhg Tan Sri Rozali set up a family-owned company and embarked into the property development sector, with involvement in several development projects in the Klang Valley, Kuantan and Johor. Under the banner of Puncak Alam Housing Sdn Bhd, he is now actively developing a new township known as Bandar Baru Puncak Alam. The family-owned company also ventured into the utility business in 1989 with the setting up of PNSB. Due to his vast experience in various fields, he was entrusted by the Selangor State Government, via PNSB, to manage the water treatment plants for the whole of the State of Selangor Darul Ehsan and the Federal Territory of Kuala Lumpur. PNHB was subsequently incorporated in 1997 as the holding company of PNSB and was listed on the Main Board of Kuala Lumpur Stock Exchange (KLSE) on 8 July On 6 November 2001, YBhg Tan Sri Rozali was conferred the Fellowship Award by the Institute of Marketing Malaysia for his invaluable contribution to the Institute and the marketing fraternity, in recognition of his superb marketing strategies adopted for the Bandar Baru Puncak Alam and Bandar Puncak Perdana projects. On 26 March 2002, he was awarded the Asia Water Management Excellence Award 2002 (Individual Award Category) in recognition of his outstanding contributions in championing management excellence and best practices in the water industry. More recently, on 16 January 2003, YBhg Tan Sri Rozali was honoured as a Top 10 Nominee for the inaugural Ernst & Young Entrepreneur Of The Year - Malaysia 2002 (Master Entrepreneur Category) Award in recognition of his outstanding entrepreneurship and leadership skills. Currently, YBhg Tan Sri Rozali is the Executive Chairman and substantial shareholder of U-Wood Holdings Berhad, a KLSE Main Board company which is developing Bandar Puncak Perdana, a 243-hectare mixed development project located near the Sultan Abdul Aziz Shah Airport. He is also the Executive Chairman and substantial shareholder of WWE Holdings Bhd, a KLSE Second Board company which is an investment holding company and contractor for the provision of engineering services related to design, fabrication, installation and commissioning of water, wastewater treatment, environmental facilities and construction activities. YBhg Tan Sri Rozali also sits on the Board of several other private companies and is the Deputy President of the Malaysian Water Association (MWA). YBhg Tan Sri Rozali is the Chairman of PNHB s ESOS Option Committee and is related to another PNHB Director, Encik Mat Hairi Ismail (his younger brother) who serves as PNHB s Executive Director, Finance Division. He is also related to Encik Shaari Ismail (his elder brother) who is a substantial shareholder of the Company. Puncak Niaga Holdings Berhad Annual Report

23 Puncak Niaga Holdings Berhad Annual Report YBhg Tan Sri Rozali Ismail, Executive Chairman

24 Board Of Directors Encik Ruslan Hassan, Executive Vice Chairman and Executive Director, Corporate Affairs Division Encik Mat Hairi Ismail, Executive Director, Finance Division Puncak Niaga Holdings Berhad Annual Report

25 Encik Ruslan Hassan, aged 47, Malaysian Executive Vice Chairman and Executive Director, Corporate Affairs Division Encik Ruslan joined PNSB on 1 November 1995 as Head of Corporate Affairs Division. His appointments to-date are to the PNSB Board on 26 December 1996, to the Board of Directors of PNHB on 24 April 1997 and as the Executive Vice Chairman of PNHB on 6 April Currently, he is the Head of PNHB s Compliance, Internal Control and Risk Policy Committee and a member of PNHB s ESOS Option Committee. As the Executive Vice Chairman of PNHB, Encik Ruslan oversees the day-to-day management of the PNHB Group, especially in the areas of corporate affairs, operations, human resources and administration. After obtaining a Bachelor of Laws Degree from the University of Malaya in 1981, Encik Ruslan began his career as Legal Advisor with Esso Production Malaysia Inc. In 1985, he joined Pernas Sime Darby Holdings Sdn Bhd as Group Legal Advisor/Company Secretary. Encik Ruslan has 6 years experience as an advocate and solicitor. In 1993, he joined Rashid Hussain Berhad as Corporate Affairs Senior General Manager and Executive Committee Member. From November 1995 to February 2003, Encik Ruslan sat on the Board of Rashid Hussain Berhad and Rashid Hussain Securities Sdn Bhd and served as an Audit Committee member of both companies. He also sits on the Board of several other private companies. Encik Mat Hairi Ismail, aged 41, Malaysian Executive Director, Finance Division Appointed to the Board of PNSB on 24 May 1994 and then to the Board of PNHB on 24 April 1997, Encik Mat Hairi is the Executive Director, Finance Division and also a member of PNHB s Audit Committee, Remuneration Committee and ESOS Option Committee. He graduated from Universiti Kebangsaan Malaysia in 1985 with a Bachelor in Accounting (Hons) Degree and is a member of the Malaysian Institute of Accountants (MIA). In 1985, he started his career as an Accountant at the Accountant General s Office in Labuan, and from 1989 to 1992 he served at the Malaysian High Commission in London. Prior to joining PNSB, Encik Mat Hairi s last appointment was with the Langkawi Development Authority (LADA) ( ). Encik Mat Hairi is the Executive Director (Corporate Services Division) and substantial shareholder of WWE Holdings Bhd, a KLSE Second Board company which is an investment holding company and contractor for the provision of engineering services related to design, fabrication, installation and commissioning of water, wastewater treatment, environmental facilities and construction activities. He is also a Non-Executive Director and substantial shareholder of U-Wood Holdings Berhad, a KLSE Main Board company and sits on the Board of several other private companies. Encik Mat Hairi is related to YBhg Tan Sri Rozali Ismail (his elder brother) who is the Executive Chairman and substantial shareholder of PNHB. He is also related to another substantial shareholder of PNHB, Encik Shaari Ismail (his eldest brother). Puncak Niaga Holdings Berhad Annual Report

26 Board Of Directors Ir Lee Miang Koi, aged 49, Malaysian Executive Director, Project & Business Development Division Ir Lee joined PNSB in 1995 and is responsible for all aspects of PNHB Group s project management and business development for new water supply projects. Ir Lee was appointed as a Director of PNSB on 2 February 1999 and subsequently to the Board of PNHB on 1 September He is also a member of PNHB s ESOS Option Committee. Ir Lee graduated as a civil engineer from University of Technology Malaysia in 1978 and in 1989, he obtained a Masters Degree in Engineering majoring in water supply and wastewater engineering from the Asian Institute of Technology in Bangkok. Ir Lee has 25 years experience in the water supply sector and has held various positions during his tenure with the Public Works Department as well as the Waterworks Department in Malaysia, especially in the field of water supply services. He was previously a Senior Executive Engineer in the Design and Planning of the Water Supply Branch in the Public Works Department Headquarters and also Director of the Negeri Sembilan Waterworks Department. He left the Public Works Department in 1991 to join Ranhill Bersekutu Sdn Bhd, holding positions from Senior Engineer to Vice President. Ir Lee is also a director of several other private companies within the PNHB Group. YB Dato Seri Dr Ting Chew Peh, aged 60, Malaysian Independent Non-Executive Director YB Dato Seri Dr Ting joined PNHB on 15 July 2000 as an Independent Non-Executive Director and a member of the Audit Committee. Currently, he is the Chairman of PNHB s Nomination Committee, Remuneration Committee and Compliance, Internal Control and Risk Policy Committee. He graduated with a Bachelor of Arts Degree from the University of Malaya in 1970 and obtained a Master of Science from the University of London in He also holds a Doctorate in Philosophy, which he obtained from the University of Warwick in YB Dato Seri Dr Ting started his career as a lecturer in the Faculty of Humanities and Social Sciences at Universiti Kebangsaan Malaysia from 1974 to 1980 and was subsequently an Associate Professor of the said Faculty until Between 1979 to 1986, YB Dato Seri Dr Ting published two books entitled Konsep Asas Sosiologi and Hubungan Ras dan Etnik. In 1987, YB Dato Seri Dr Ting ventured into politics with his election as a Member of Parliament for the Gopeng constituency, which he holds until today. He previously served as Parliamentary Secretary of the Ministry of Health ( ), Deputy Minister of the Prime Minister s Department ( ) and Minister of Housing and Local Government ( ). Currently, YB Dato Seri Dr Ting is the Secretary-General of the Malaysian Chinese Association (MCA) and the Chairman of the Port Klang Authority. He also sits on the Boards of Pan Malaysia Capital Berhad Group, Pan Malaysia Holdings Berhad and Hua Yang Bhd which are listed on the Main Board of KLSE, and also serves as director of several other private companies. Puncak Niaga Holdings Berhad Annual Report

27 Ir Lee Miang Koi, Executive Director, Project & Business Development Division YB Dato Seri Dr Ting Chew Peh, Independent Non-Executive Director Puncak Niaga Holdings Berhad Annual Report

28 Board Of Directors YBhg Dato Hari Narayanan Govindasamy, Independent Non-Executive Director Encik Abdul Majid Abdul Karim, Independent Non-Executive Director Puncak Niaga Holdings Berhad Annual Report

29 YBhg Dato Hari Narayanan Govindasamy, aged 53, Malaysian Independent Non-Executive Director YBhg Dato Hari Narayanan was appointed to the Board of PNHB on 1 July 1999 as an Independent Non-Executive Director. He is also a member of PNHB s Audit Committee, Remuneration Committee and Nomination Committee. He holds a Bachelors Degree in Electrical and Electronics Engineering from the Polytechnic of Newcastle-Upon-Tyne, England. He is a member of the Institute of Engineers, Malaysia and a Registered Professional Engineer with the Board of Engineers, Malaysia. He is also a Director of Tenaga Nasional Berhad, SP Setia Berhad, Lembaga Lebuhraya Malaysia, Asian Institute of Medicine, Science and Technology and several other private companies. Encik Abdul Majid Abdul Karim, aged 44, Malaysian Independent Non-Executive Director A past PNSB Director ( ), Encik Abdul Majid was appointed to the Board of PNHB on 24 April 1997 as an Independent Non-Executive Director. He is the Chairman of PNHB s Audit Committee and a member of the Remuneration Committee and Nomination Committee. He obtained a Bachelor of Science (Hons) Degree in Civil Engineering from the University of Glasgow, United Kingdom in He began his career as a Technical Assistant with the Urban Development Authority (UDA) ( ), as Property Executive at Boustead Holdings Berhad ( ) and subsequently as Sales Engineer at UAC Berhad ( ). Encik Abdul Majid also sits on the Board of several other private companies. Notes: 1. Save as disclosed above, none of the Directors have:- (a) any family relationship with any Directors and/or substantial shareholders of the Company; (b) any conflict of interest with the Company; and (c) any conviction for offences (other than traffic offences) within the past 10 years. 2. The respective Directors interests in the Company s equity securities are detailed in pages 106 and 109 of the Annual Report. Puncak Niaga Holdings Berhad Annual Report

30 Senior Management From left to right: Encik Ibrahim Ismail, Madam Loh Lim Chai Kheng, Ir Loh Kit Mun, Madam Chan Siew Meei, Encik Sonari Solor, Mr Ng Wah Tar, Encik Ahmad Fauzi Yahya, Tuan Syed Danial Syed Ariffin, Madam Tan Bee Lian, Encik Azizul Nizam Bidin. Puncak Niaga Holdings Berhad Annual Report

31 Puncak Niaga Holdings Berhad Annual Report

32 Senior Management Encik Azizul Nizam Bidin, aged 35, Malaysian Executive Director, Puncak Seri (M) Sdn Bhd Encik Azizul was appointed Executive Director of Puncak Seri (M) Sdn Bhd, a wholly-owned subsidiary of PNHB on 24 September He holds a Diploma in Management from the Malaysian Institute of Management (MIM) and a Diploma in Hotel Management from Stamford College Group. In late 1996, Encik Azizul set-up a family owned company focusing in the automotive industry. Through his achievements and experiences as an entrepreneur for 11 years, he has also participated in joint ventures or partnerships with Multi National Companies (MNCs) from countries such as USA, Australia and South Korea which offer domestic services in Malaysia. In addition to his involvement in entrepreneurship and politics, he is also active in contributing his leadership qualities in Yayasan GerakBakti Kebangsaan (YGK) and is a committee member of The Sultan Abdul Hamid College Old Collegians Association (SAHOCA). Encik Ibrahim Ismail, aged 46, Malaysian Senior General Manager, Corporate Communications Encik Ibrahim joined PNSB in April 1997 as General Manager of the Corporate Affairs Division. He graduated with a Bachelor of Laws Degree in 1981 from the University of Malaya and holds a Master of Laws Degree obtained in 1989 from the University of London. He began his legal career with the Judicial & Legal services, serving as a Magistrate from 1981 to He left the service to join a private practice and was the Dean for the Faculty of Law at Universiti Kebangsaan Malaysia ( ). He served with Petronas as Senior Legal Counsel in its Gas Division ( ) and Senior Manager for the Market Development Department of Malaysia LNG Tiga Sdn Bhd ( ). He has 22 years experience in various aspects of litigation, conveyancing and corporate work. He is currently the Senior General Manager of the Corporate Communications Department. Ir Loh Kit Mun, aged 49, Malaysian Senior General Manager, Operations II Ir Loh joined PNSB in April 1998 and oversees the operation, maintenance and rehabilitation of 26 WTPs, contract supervision, dam operations, water resources, environmental matters and initial development of the Geographical Information System (GIS). Upon graduation from the University of Malaya with a Bachelor of Civil Engineering Degree in 1978, he worked as an Engineer with the Drainage and Irrigation Department ( ). Then he served as Chief Engineer (last designation) at SMHB Sdn Bhd ( ), Associate at Ranhill Bersekutu Sdn Bhd ( ) and General Manager (Infrastructure) Puncak Niaga Holdings Berhad Annual Report

33 at KL Linear City Sdn Bhd ( ). His 25 years of working experience covers areas pertaining to irrigation drainage, hydrology, water resources and supply, design and construction of dams, river engineering, drainage and flood mitigation, infrastructure development, environmental assessment, development of GIS, management of engineering projects and operation of water treatment plants. Madam Tan Bee Lian, aged 37, Malaysian Senior General Manager, Secretarial/Group Company Secretary Madam Tan has more than 14 years of corporate secretarial experience in both private and public listed companies. She joined PNSB in November 1994 as Company Secretary. She has been the Group Company Secretary of the PNHB Group since January In January 2003, she was promoted to Senior General Manager, Secretarial. Madam Tan is a Fellow of both the Malaysian Association of the Institute of Chartered Secretaries and Administrators (MAICSA) and the Institute of Company Secretaries Malaysia (ICSM). Prior to joining PNSB, she worked in the Secretarial & Legal Department of Project Lebuhraya Utara-Selatan Berhad (PLUS) and was the Assistant Company Secretary of Metramac Corporation Sdn Bhd/Metacorp Berhad, a company listed on the Second Board of the Kuala Lumpur Stock Exchange. On 22 July 2002, Madam Tan emerged as the winner of the ROC-MAICSA Company Secretary Award 2001 for the Listed Company Category in recognition of her excellence, competence and professionalism as a Chartered Secretary. Encik Ahmad Fauzi Yahya, aged 42, Malaysian General Manager, Human Resources & Administration Encik Ahmad Fauzi joined PNSB in January 2002 as General Manager, Human Resources & Administration. His responsibilities include to develop and implement the Group's Human Resources policies as approved by the Board and to maintain good working relations with the Group's in-house unions. He graduated from the Eastern Michigan University, USA, with a Bachelor of Business Administration degree majoring in Human Resource Management. He has 17 years of extensive working experience in Japanese and American multinational companies and has exposure in various disciplines such as human resources, public relations, marketing and sales. His last employment was with Mobil Oil Malaysia Sdn Bhd (now known as ExxonMobil Malaysia), where he served since Puncak Niaga Holdings Berhad Annual Report

34 Senior Management Madam Chan Siew Meei, aged 46, Malaysian General Manager, Legal Madam Chan joined PNSB in May 1998 as General Manager, Legal. She obtained her Bachelor of Laws Degree from the University of Malaya in During the course of her 22-year career, Madam Chan has served as an Advocate and Solicitor, lecturer, company secretary and as legal adviser to two public listed companies. Her employment portfolio covers very diverse activities ranging from the timber and plantation sectors to engineering, property and manufacturing. As such, apart from her legal and corporate duties, she has attained considerable experience in administration, human resources and company secretarial work. Madam Loh Lim Chai Kheng, aged 42, Malaysian General Manager, Executive Chairman s Office Madam Loh Lim joined PNSB as General Manager, Executive Chairman s Office in November Her portfolio covers feasibility assessment of potential investments and projects, planning and setting up of new projects and investments, including assisting in drawing up financing, agreements and systems set up. She is a member of the Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of Accountants (MIA). Madam Loh Lim has 20 years of working experience in the areas of audit, accounting, corporate finance, company secretarial and operations. Mr Ng Wah Tar, aged 39, Malaysian General Manager, Finance & Accounts Mr Ng commenced his articleship with an accounting firm in He is a member of the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Accountants (MICPA). After spending 10 years in the accounting profession where he last served as Audit Manager for 3 years, he joined United Engineers (M) Berhad (UEM) as the Accountant of its Trading Division in He was subsequently promoted to Senior Manager, Finance in 1997 and subsequently transferred to the Management Services Division overseeing the finance and accounting functions of UEM. After serving UEM for 6 years, Mr Ng joined PNSB in March 2000 as General Manager, Finance & Accounts. Puncak Niaga Holdings Berhad Annual Report

35 Encik Sonari Solor, aged 46, Malaysian General Manager, Internal Audit Encik Sonari has more than 15 years experience in auditing and accountancy in public listed companies dealing in property development, manufacturing, timber and consultancy services. He is a member of the Malaysian Institute of Accountants (MIA) and a fellow member of The Chartered Association of Certified Accountants (UK). He also holds a professional qualification from the Chartered Institute of Management Accountants (UK). Prior to joining PNSB in 1998, Encik Sonari served as Group Divisional Chief, Internal and Management Audit of Land & General Berhad, Chief Operating Officer of Sepakat Computer Consultants Sdn Bhd, Audit Manager of DMIB Berhad and Accountant of Utusan Melayu Berhad. Tuan Syed Danial Syed Ariffin, aged 45, Malaysian General Manager, Operations I Tuan Syed Danial graduated in 1981 with a BSc. (Hons) Degree in Civil Engineering from University of Aston in Birmingham, United Kingdom. He joined PNSB in December 1995 and currently holds the position of General Manager, Operations I Department. Prior to joining PNSB, he worked with the Pahang Public Works Department for 10 years, holding positions from Project Engineer ( ) to District Engineer for JKR Cameron Highlands ( ) and the Selangor Water Works Department between 1991 to 1995 whereby he was the Senior Project Engineer overseeing the construction of the Sungai Selangor Phase 1 Project. Puncak Niaga Holdings Berhad Annual Report

36 Vision & Mission Statements Our Vision To Be The Leading And Dynamic Integrated Water Services Company. Our Mission To provide a synergy of socio-economic products and services in the realm of water treatment, management and distribution and other related businesses. To cater to the increasing challenges in the demand for high quality water production and distribution through the continuous implementation of high quality standards, efficient services, human resources development, innovative technology and operational systems. To actively participate in regional and global business opportunities with linkages to the Company s core activities and related interests. To actively support and participate in programmes and activities aimed at uplifting the community s living standards and value systems in line with the aspirations of Vision To address national and international concerns pertaining to the protection, conservation and enhancement of the natural environment we live in. Puncak Niaga Holdings Berhad Annual Report

37 Puncak Niaga Holdings Berhad Annual Report

38 Executive Chairman Speaks To Our Dear Shareholders On behalf of the Board of Directors of Puncak Niaga Holdings Berhad, I am pleased to present to you the Annual Report of the Group and of the Company for the financial year ended 31 December FINANCIAL REVIEW The Group achieved a total gross revenue of RM million for the financial year ended 31 December 2002, an increase of 2.3% compared to RM million for the financial year ended 31 December The increase in total gross revenue is attributed to the annual upward adjustment in the bulk supply rate. Despite an increase in financing cost, profit before taxation for the current financial year rose 0.24% to RM million compared to RM million for the preceding financial year as a result of the higher total gross revenue coupled with lower operating cost. Puncak Niaga Holdings Berhad Annual Report

39 CORPORATE DEVELOPMENT The Employees Share Option Scheme (ESOS) which was approved by the shareholders of the Company on 26 June 2001, became effective on 25 February The ESOS is to enable the Executive Directors and eligible employees of the Group to participate in the future growth of the Group. It is also designed to reward and retain key employees and attract new employees with skills vital for improvement of the operations and continued growth of the Group. The ESOS exercise price for the 1st tranche was fixed at RM2.37 per share on 25 February 2002 based on a 10% discount of the 5 days weighted average market price. On 26 August 2002, the exercise price for the 2nd tranche ESOS to newly eligible employees of the Group was fixed at RM2.47 per share, also based on a 10% discount of the 5 days weighted average market price. More recently, the exercise price for the 3rd tranche was fixed at RM2.13 per share on 26 February 2003 based on a 10% discount of the 5 days weighted average market price. Puncak Niaga Holdings Berhad Annual Report

40 Executive Chairman Speaks For the RM546,875,000 Nominal Value 15-Year Redeemable Unconvertible Junior Notes (RUN) which were listed on 28 November 2001, the Company had made two semi-annual coupon payments at 2.5% per annum totaling RM13,671,875 to the holders of the RUN. The first coupon payment was made on 20 May 2002 while the second payment was made on 20 November The third payment will be made on 20 May None of the 109,374,869 free detachable warrants which were issued with the RUN has been converted to-date due to the sluggish market condition. (Note: Warrant conversion price is at RM2.62) INDUSTRY OUTLOOK Under the Eighth Malaysian Plan period from years 2001 to 2005, a total of RM3.97 billion has been allocated for the development of the nation s water resources. This represents an increase of 43% over that provided for under the Seventh Malaysian Plan. The key objective of the Eighth Malaysian Plan is Growth With Resilience, increasing efficiency, productivity and reliability of service through continuous review and stricter enforcement of performance standards and technical specifications by using the latest proven technologies. The focus would be on efficiency in the management of the nation s water resources to ensure the nation will have an adequate supply of safe water. The Group s corporate objectives in the water supply business are very much in line with the foregoing to participate in any opportunity that may arise in the process of the implementation of the Eighth Malaysian Plan by the Government. The Group s areas of operations in the State of Selangor Darul Ehsan and the Federal Territory of Kuala Lumpur currently have a population of 5.55 million and are estimated to grow by 10% by year 2005, including inward migration from other states in Malaysia. Current water consumption estimated at 3,400 million litres per day is expected to grow by 6% to 8% per annum for the next five years. Industrial and commercial users account for about 34% of total metered consumption while residential and other consumers account for the balance. The process of corporatisation or privatisation of state water authorities has continued from the Seventh Malaysian Plan period. The Terengganu Water Supply Department, the Penang Water Authority and the Selangor Water Supply Department have been corporatised and the water authorities for Melaka, Negeri Sembilan, Pahang, Perak and Sabah are slated either for corporatisation or privatisation under the current Plan period. The Group is keeping abreast with the progress of this development so as to seize any opportunities that may arise for the participation by the Group. Insufficient water resources in the State of Selangor Darul Ehsan, Melaka and Pulau Pinang are foreseen as all viable water sources to meet the continued growth in water demand in those states have already been fully exploited. Inter-state and inter-basin water transfers will become a necessary feature to overcome shortfalls in supply for water-deficit states. The Federal Government has put in efforts to enhance inter-basin water transfers such as from the Kelinchi Dam in the Muar River Basin to the Terip Dam in the Puncak Niaga Holdings Berhad Annual Report

41 Linggi River Basin, Negeri Sembilan. The engineering study and design for the inter-state water transfer from Pahang to Selangor, which involves the construction of the Kelau Dam and a 45-kilometer tunnel, was completed in year The Pahang-Selangor Raw Water Transfer Project is designed to transfer a maximum capacity of 2,400 million litres per day of raw water through pipelines and a tunnel from Pahang to Selangor as well as the Federal Territory of Kuala Lumpur and subsequently to Negeri Sembilan. This proposed inter-state water transfer project once implemented by the Federal Government would provide the Group with opportunities to expand its range of water-related businesses. PRODUCTIVITY AND QUALITY IMPROVEMENTS THROUGH INFORMATION & COMMUNICATION TECHNOLOGY (ICT) AND RESEARCH & DEVELOPMENT (R&D) INVESTMENTS Water treatment techniques are continuously being fine-tuned to produce good quality potable water. The processes are adopted after continuous R&D studies to enhance operational efficiency which in turn reduced the operating costs of water treatment plants without compromising on the quality of the treated water produced by our plants. The Group has increased the use in applications of ICT to help establish databases for the operational requirement and Management s decision-making. The Group s IT infrastructure has also been upgraded in phases for both hardware and software to increase staff efficiency and productivity. Drinking water must be clear, colourless and odourless. It must be pleasant to drink and free from all harmful micro-organisms, chemicals and radiochemical contaminants and within the safety and quality standards set by the Ministry of Health under the National Guidelines for Drinking Water Quality. During the year, the Group continued its R&D works. The most notable achievement from our R&D efforts is the improvement in effective manganese removal process in treated water as well as efficiency gains in modification of the process system such as flouride dosing of treated water. CORPORATE GOVERNANCE Our Statement on Corporate Governance is set out on pages 68 to 76. There were no sanctions, reprimands and/or penalties imposed on either the Company or the Group, Directors or Management by the relevant regulatory authorities during the year. ENVIRONMENTAL PROTECTION INITIATIVES The environmental conditions of the Group s areas of operations impact significantly on the level and quality of service and product delivered to end-users. During the year, a total of six Environmental Impact Studies were conducted to ensure that the Group s activities continue to be carried out in an environmentally responsible manner. Sanitary Surveys and Water Quality Monitoring are conducted throughout the year as part of the operational and monitoring programmes. We work closely with the governmental authorities to stop any third-party activity that may have the potential to cause pollution to our water sources. Puncak Niaga Holdings Berhad Annual Report

42 Executive Chairman Speaks Whilst safeguarding the security and safety of drinking water, the Group s environmental programmes also play an important role in helping the Government to prevent environmental degradation by ignorant or irresponsible parties. The Group is in the process to construct a sludge treatment plant at the Wangsa Maju Water Treatment Plant at our cost as further contribution towards environmental protection. Four sludge lagoons have already been constructed at the SSP2 Water Treatment Plant. This clearly demonstrates our commitment towards environmental protection and emphasises the need for sludge treatment facilities at the water treatment plants for proper treatment of sludge. We are hopeful that these pilot sludge treatment facilities would persuade the Government to allocate funds and authorise the construction of similar sludge treatment facilities at all the water treatment plants under our management. CORPORATE SOCIAL RESPONSIBILITIES In line with the Group s philosophy of being a caring and responsible corporate citizen, the Group has continuously supported various charitable non-profit organisations such as Pusat Zakat Selangor, UMNO Bumiputra Education Fund, PUSPANITA Fund and local orphanages whereby a total of RM1,482, was donated to these organisations during the financial year. LOOKING FORWARD Up to the third quarter of year 2002, Malaysia s Gross Domestic Product (GDP) growth has been driven by strong domestic demand and has also benefited from the recovery in exports. The Government s fiscal and expansionary monetary policies put in place have buoyed the domestic economy. Exports expanded on the back of a gradual recovery in electronics, while primary commodity exports have done well with the upsurge in prices. The year 2002 Bank Negara Annual Report indicated real GDP expanded by 4.2%. However, the economy is expected to be negatively affected for the year 2003, given the weak world economy and uncertain threats posed by the Severe Acute Respiratory Syndrome (SARS) virus and the aftermath of the Iraq war. Malaysia s GDP is projected to decelerate to 3.7% in 2003 in view of the foreseeable weaknesses in the external sector even though the Government had announced that the fiscal stimulus package would mitigate the impact on the country s economy. The Group has pursued various water-related business opportunities in the domestic as well as in the regional markets. Relying on its core competencies, the Group continues to actively pursue growth in potable water-related projects in the various states in Malaysia, trying to secure a share of the corporatisation or privatisation opportunities arising from the various state water authorities. I am pleased to report a recent success in our business forays. On 22 November 2002, the Company has, on behalf of a Consortium comprising the Company, Lanco Infratech Ltd and Kris Heavy Engineering & Construction Sdn Bhd signed a contract with the Chennai Metropolitan Water Supply and Sewerage Board of India on the Chennai Water Supply Augmentation Project 1 Package III (Chennai Project). The Chennai Project which involves the supply and laying of water supply pipelines, including a 5-year operation and maintenance contract, is worth a total contract sum of Rs292,47,05, or approximately RM234 million. PNHB holds a 70% stake in the Consortium. Puncak Niaga Holdings Berhad Annual Report

43 On the domestic front, NS Water Konsortium Sdn Bhd (NSWK), the water concession company which has been granted the exclusive privatisation rights of Jabatan Bekalan Air Negeri Sembilan (JBANS) is still engaged in negotiations on the terms and conditions of the concession agreement for the privatisation of JBANS. The Company will hold a 30% equity stake in NSWK. The substantial amount of account receivables has remained high despite our collection efforts. There is however, negligible risk of default and the Group has remained engaged with our customer to resolve the issue of slow payments. Whilst it may be a concern for shareholders, there are opportunities inherent in staying engaged in negotiations for strategic positioning that may well yield the Group favourable business opportunities in the process of resolving the issue. The world and the Malaysian economies weigh heavily on the global business confidence where it is now in a stage of uncertainty. However, the water supply business where the Group is engaged is resilient towards economic vagary since water is a basic necessity. The challenge for the year 2003 as recognised by the Board of Directors is to achieve growth in the Group s business amidst such uncertainty and increasing market competition. ACKNOWLEDGEMENTS On behalf of the Board of Directors of Puncak Niaga Holdings Berhad, I would like to express my sincere thanks and utmost appreciation to our valued customers, end-users and shareholders for their continued support and trust. My gratitude and thanks also go to our Management and all employees for their hard work, dedication and commitment. It is with their continued support, loyalty and commitment that the Group is able to face the challenges and take advantage of any business opportunities that may arise in future. Last but not least, our special thanks to the various Governmental authorities and agencies, Non-Governmental Organisations (NGOs), our business and strategic partners, associates, suppliers and financiers, all of whom have contributed significantly to our successes this past year and who would continue to play an important role in our future success. Tan Sri Rozali Ismail Executive Chairman 23 April 2003 YBhg Tan Sri Rozali Ismail, a Top 10 Nominee for the Ernst & Young Entrepreneur of The Year-Malaysia 2002 (Master Entrepreneur Category) Award Puncak Niaga Holdings Berhad Annual Report

44 Carving Opportunities New Puncak Niaga Holdings Berhad Annual Report

45 The power generated by the river allows it to carve out new landscapes; forming fresh tributaries and spreading its area of influence to enable the growth of new regions. Backed by years of experience and knowledge, Puncak Niaga is in the position to take on new opportunities; creating even more innovative products and services to further grow our business while enhancing the living standards of our communities. Puncak Niaga Holdings Berhad Annual Report

46 Operations Review Sungai Selangor Phase 2 Water Treatment Plant During the year 2002, the Sungai Selangor Phase 2 (SSP2) Water Treatment Plant continued to operate smoothly. A total of million cubic meters of treated water was produced at the plant, marking an increase of 30% from the million cubic meters produced in The rise was attributed to the extension of water supply to the Klang and Shah Alam areas via the Bukit Mayong Reservoir. SSP2 Water Treatment Plant SSP2 Water Treatment Plant s reliability for year 2002 stood at 100%, with water production stabilised to million litres per day. There was no incident of any violation in treated water quality nor any major shutdown throughout the year. This was largely due to the on-line monitoring system and stringent control measures in place. As part of PNSB s commitment to ensure clean water supply to the consumers, SSP2 Water Treatment Plant in collaboration with Perbadanan Urus Air Selangor Berhad (PUAS) undertook the cleaning of two reservoirs during the year. The first was at Matang Pagar Reservoir in May 2002 and the second at Bukit Mayong Reservoir in June Due to the slippery floor and the high chlorine fumes in the tank at Matang Pagar Reservoir, the work was considered dangerous. The Emergency Response Plan was activated with strict safety and health regulations imposed. With proper planning and coordination, cleaning works at both reservoirs were carried out smoothly and successfully without any interruption to water supply or complaints from the consumers. In July 2002, SSP2 Water Treatment Plant was awarded the MSOSH s Grand Award for its excellence in safety management systems at the plant. SSP2 Water Treatment Plant is one of only four companies/facilities in the country to be conferred with this prestigious award. After two comprehensive surveillance audits conducted by Lloyd s Register Quality Assurance of United Kingdom, SSP2 Water Treatment Plant has once again maintained its ISO 9002 accreditation. This bears testimony to the hard work and dedication of the entire team at the plant, who has remained totally committed to achieving the highest standards in quality of plant operations. In compliance with the latest standard requirements and to ensure continuity of the management process, SSP2 Water Treatment Plant has targeted to upgrade the current Quality Management System ISO 9002:1994 to ISO 9001:2000 by July Our competent employees are currently conducting the exercise in-house. Puncak Niaga Holdings Berhad Annual Report

47 SSP2 Water Treatment Plant has also targeted to be accredited with the Environmental Management System ISO 14001:1996 and Safety & Health Management System OHSAS 18001:1999. At this juncture, awareness training and preparation of documentation is being carried out and the plant is on schedule to obtain certification in May With the certification, SSP2 Water Treatment Plant will be the first water treatment plant in the country to obtain a system that is integrated with quality, environment and safety. In October 2002, SSP2 Water Treatment Plant took the initiative to carry out the chemical exposure monitoring to check the concentration of airborne chemicals. Results showed that the plant is in compliance with the Permissible Exposure Limit (PEL) set by the Department of Safety and Health (DOSH), Malaysia. Wangsa Maju Water Treatment Plant For the year 2002, Wangsa Maju Water Treatment Plant s production stood at million cubic meters of treated water, an increase of 25% from the million cubic meters achieved in year This increase in production was mainly due to the additional areas that had to be supplied by the plant during the prolonged drought from February to September Average daily production for Wangsa Maju Water Treatment Plant in year 2002 was million litres per day. Like SSP2 Water Treatment Plant, Wangsa Maju Water Treatment Plant enjoyed 100% performance in year 2002, with no shutdown or violation in the quality of water produced. Wangsa Maju Water Treatment Plant After two surveillance audits conducted by Lloyd s Register Quality Assurance of United Kingdom, Wangsa Maju Water Treatment Plant has successfully maintained its ISO 9002 accreditation. This achievement reflects PNSB s commitment towards producing quality water through disciplined management processes that improve plant operations. For the year 2003, we have targeted to upgrade the plant s current Quality Management System ISO 9002:1994 to ISO 9001:2000 by July 2003 and are on course for the Environmental Management System ISO 14001:1996 accreditation in December In July 2002, Wangsa Maju Water Treatment Plant, in its first attempt at the MSOSH safety competition, won the prestigious Gold Award for excellence in safety management systems at the plant, marking once again, its commitment to excellence. In an effort to improve security, a state-of-the-art Digital Video Security Surveillance System (DVR) was installed to enhance security features at the plant. The pilot project, which will eventually be extended to Puncak Niaga Holdings Berhad Annual Report

48 Operations Review all water treatment plants, is equipped with digital recording, motion detector, alarm system, auto-dialling and remote viewing to provide full video surveillance of the water treatment plant. Thus far, it has helped to reduce the number of security guards required at the plant. Operations Of 26 Water Treatment Plants Under PCCA In year 2002, the 26 water treatment plants operated by Puncak Niaga under the PCCA produced million cubic meters of treated water, which is 9.18% above the designed capacity. This, however, signifies a decrease of 3.00% in production compared to that of year The decrease in production of treated water from the 26 water treatment plants was mainly due to the exercise by PUAS to reconfigure the water distribution system in view of the full commissioning of the SSP2 Water Treatment Plant in October 2000 and the Sungai Rasa Water Treatment Plant in November The decrease in production was also attributed to PUAS purchasing water from other water operators. Despite the above and there being more than 4,000 hours lost due to unscheduled shutdowns in the year 2002, the 26 water treatment plants combined production was still above the PCCA s designated quantity. The major cause of the shutdowns was raw water violations, which accounted for 57.7% of the total shutdowns. Scheduled maintenance accounted for 18.7% of the total shutdowns and 10.8% was due to electrical power interruptions. The water treatment plants maintenance and production performance continued to be diligently monitored under the yearly Plant Audit programme. Supplemented by the Competent Electrical Engineers Inspection and the monthly Mechanical and Electrical Corrective Maintenance Inspections, plant shutdowns were kept to a minimum. In addition, our close rapport with Tenaga Nasional Berhad (TNB) has assisted in a substantial reduction in shutdown time caused by power failure. Thus far, TNB has been swift in mobilising standby power generators to any water treatment plants affected by power interruptions. Under the PCCA, 12 water treatment plants have received the MS ISO 9002 certification from SIRIM namely, the Bukit Nanas, Sungai Batu, Bernam River Headworks, Sungai Langat, North Hummock, Batang Kali, Rantau Panjang, Gombak, Cheras Mile 11, Bukit Tampoi, Ampang Intake and Salak Tinggi Water Treatment Plants. With 12 water treatment plants under the PCCA being certified MS ISO 9002, in addition to SSP2 and Wangsa Maju Water Treatment Plants, Puncak Niaga takes pride that 98% of its total production are from water treatment plants managed according to established quality assurance standards. This bears strong testimony of Puncak Niaga s commitment to all-round service and operational excellence. Puncak Niaga Holdings Berhad Annual Report

49 Dam Operations PNSB continues to operate and maintain the Sungai Langat, Klang Gates and Tasik Subang Dams with prudence and exercises good practice in releasing the optimal amount of water for the water treatment plants. The three dams recorded an annual rainfall difference of +6.02%, -3.08% and % respectively in year 2002 as compared to year From January to April 2002, all three dams experienced varying degrees of low rainfall due to the slight effects of the El Nino phenomena, resulting in several residential areas being affected by water shortages. Nevertheless, the dams managed to recover their storage by the end of year Klang Gates Dam The Dam Operations Unit continued to work closely with PUAS on the monitoring of the water level and identification of alternative raw water sources such as ponds and rivers. The operation of the dams is regulated by the Dam Operations Control Curves developed for each dam. As part of the dam safety management procedure, the Company has implemented a programme to constantly survey and monitor the general area, structure and water quality of the dams. Daily instrumentation readings are taken to gauge the safety of the dams, as well as monthly visual inspections of the dam areas, particularly along water banks and upstream tributaries. If there are any abnormalities detected, an environmental investigation would be carried out. All the dams are also constantly monitored for structural integrity. A regular inspection of the surrounding topography is taken to protect against landslide formation. In line with international standards and procedures, the Company also allows an internationally recognised consultant to inspect the dams once in every five years. BUSINESS DEVELOPMENT The year 2002 saw the Company spreading its wings and establishing business ties on new shores. Tenders were submitted for several water-related infrastructure projects, both locally and abroad throughout the year. As a result of competitive bidding, the Company was successful in securing a new water supply project in Chennai, India. The Chennai Water Supply Augmentation Project 1 - Package III involves the supply and laying of 114 km of water supply pipelines with a diameter of 1,750 mm to 1,875 mm in Chennai, India and the operation and maintenance of the completed works for 5 years. The Company signed a RM234 million Contract with the Chennai Metropolitan Water Supply and Sewerage Board on Puncak Niaga Holdings Berhad Annual Report

50 Operations Review 22 November Puncak Niaga Holdings Berhad (PNHB) enters the project as part of a consortium which includes Lanco Infratech Ltd and Kris Heavy Engineering & Construction Sdn Bhd with a 70:20:10 participation ratio. In light of these developments, the Group remains confident of securing future successes in its business development efforts and will remain focused in identifying and pursuing new water-related infrastructure projects in Malaysia and abroad to enhance the Group s net worth. RESEARCH AND DEVELOPMENT (R&D) In order to maintain PNSB s position at the forefront of the water industry and to meet the constant demands of producing high quality water from our water treatment plants, the Company continues to invest a significant percentage of its resources into R&D. For the year 2002, the Group spent close to RM5.2 million on R&D. As a result of these initiatives, various innovative technologies have been developed and implemented to increase operational efficiency while reducing costs at the plants. Filter Media Research at SSP2 Water Treatment During the year 2002, a new fluoridation system was Plant s laboratory installed at the SSP2 Water Treatment Plant to improve the quality of water for prevention of tooth decay. Previously, the fluoride solution in the preparation tank was transferred to the dosing system through pumps. Through research, the system has been modified to use ejectors to transfer the solution. This has eliminated the need for electricity and maintenance of the pump and resulted in cost savings in plant operations without compromising on quality. The SSP2 Water Treatment Plant had also experienced many technical difficulties with the lime D-mixer. Leakage of lime through the gland packing had left the chemical room dirty and had also contributed to high maintenance costs. However, due to extensive research carried out over a nine month period by the plant employees, the leakage and frequent system breakdowns were subsequently resolved by replacing a rotating blade with a lighter material. Other studies have also been successfully conducted to increase the effectiveness of manganese removal in treated water and removal of excess sand from the sludge plant. All these were done using internal resources. Not only does this reflect the high level of competency amongst the plant employees, more importantly, it encourages them to be innovative and directly involved in the Group s efforts towards reducing operating costs. Puncak Niaga Holdings Berhad Annual Report

51 INFORMATION TECHNOLOGY (IT) In line with our continued efforts to improve productivity with IT-driven automation, an exercise was carried out in year 2002 to replace all IT equipment that was deemed outdated and obsolete. Personal computers, servers, printers and other peripherals were all replaced, where necessary. In tandem, productivity tools (software) were also upgraded to the latest versions in this exercise. Year 2002 saw an increased effort in mitigating the menace arising from software virus attacks through the Internet and other IT disasters affecting the operations of the Group s computer systems. An IT Systems Disaster Recovery Plan was formulated to outline a set of procedures and remedial action plan to guide the Group to restore lost data, replace faulty hardware and to relocate to a temporary office site in the event of major calamities. Inspired by its Corporate Vision to achieve excellence, the IT Department developed its own in-house Computerised Asset Management System which will ensure effective and efficient asset management for the Group. The IT Department is currently developing a similar system to better monitor and administer the maintenance of the Group s vehicles. A Computerised Auto Staff Attendance programme has also been implemented to help ensure safety and security at the workplace. Apart from keeping unauthorised people out of the workplace, the system also allows the Administration Department to manage and monitor the daily attendance of the employees with the touch of a button. For the Group to maintain its competitive edge, the implementation of the mysap.com system will be followed by the Human Resource and Payroll modules which is planned to be fully implemented in year Our water treatment plants rely on state-of-the-art systems to ensure the highest standards of operational quality are met. The Company continues to operate the Supervisory, Control and Data Acquisition (SCADA) System for centralised monitoring and supervision. This allows tracking of all relevant information and data from the water treatment plants and dams via real-time at the operations centre. The management of the maintenance activities at the SSP2 Water Treatment Plant is simplified and assisted by a Computerised Management System called MAXIMO that enables automated management and control of the activities at the desktop. Along with the River Warning Monitoring System (RWMS) which are already in operation at Sungai Langat and Sungai Selangor, the Company is developing a prototype mobile RWMS to analyse raw water quality and alert the water treatment plants on any potential pollution. Puncak Niaga Holdings Berhad Annual Report

52 Operations Review STRATEGIC RESOURCE CENTRE (SRC) The SRC was set up in 1997 specifically for the purpose of establishing a one-stop centre where information of strategic importance including water industry research findings, in-house R&D projects results and other strategic business intelligence are gathered and disseminated to the relevant departments within the Group. It is the Group s long-term goal to develop a full-fledged think tank, which will be coordinated through the SRC. It is hoped that the think tank will grow into a strategic business partner of the Company via its industry and market research reports, informative articles and write-ups. It is SRC s aspiration to play an active and important role in Puncak Niaga s business expansion activities in the domestic and overseas markets. During the year 2002, SRC produced several informative fact-sheets on other markets as well as write-ups and reports on relevant issues in the water and water-related industries. SRC intends to become a more active player in formulating and strategising the Group s business decisions in the ever-competitive water industry. CRISIS MANAGEMENT The Crisis Management Plan (CMP) and the Water Treatment Plant Emergency Response Plan (ERP), which were put in place in year 2001 and updated in year 2002, enabled the team to be in a constant state of readiness to respond effectively to any form of emergency, crisis or disaster at the Group s premises and installations. The Plans work together to ensure the most effective response to any crisis situation or disaster with minimal disruption to the Group s business operations, and most importantly, to protect the Group s corporate image. They are constantly reviewed and improved to address any weaknesses noted. In order to test the effectiveness of the CMP and ERP and to assess the level of readiness of employees from both the Headquarters and water treatment plants, safety drills and crisis management drills were conducted during the year, incorporating elements of the Plans. On 30 July 2002, an emergency safety drill was conducted at the Bukit Nanas Water Treatment Plant and the CMP and ERP were activated. During the drill, the crisis management procedures on responding to an emergency situation at the water treatment plant were tested, reviewed and proven to be effective. Emergency safety drill at Bukit Nanas Water Treatment Plant Chemical suppliers, in particular chlorine suppliers, were also required to have their Crisis Management Plan (CMP) and this requirement has been incorporated in the Chemical Supply Agreement. The suppliers CMPs were also tested and coordinated with the CMP and ERP. Puncak Niaga Holdings Berhad Annual Report

53 OCCUPATIONAL SAFETY & HEALTH Puncak Niaga remains fully committed in ensuring a safe and healthy working environment for its employees. Guided by the Corporate Safety and Health Committee and realising its duty as a responsible employer, the Group had increased funding to organise safety and health programmes and activities during the year Along with regular training programmes involving chemical disaster and first aid handling, fire-fighting equipment handling and chemical safety, three significant safety-oriented programmes were also implemented in year On 30 July 2002, an emergency drill was held at the Bukit Nanas Water Treatment Plant as part of the activities implemented in relation to the Control of Industrial Major Accident Hazards Regulations, 1996 (CIMAH). The drill was held with the participation of several Government and private agencies such as Bomba dan Penyelamat Wilayah Persekutuan, Royal Malaysian Police, Department of Occupational of Safety and Health (DOSH), Department of Environment (DOE), Enforcement Department from City Hall and our chemical supplier, CCM Chemical Sdn Bhd. Employees receiving training by Bomba dan Penyelamat Wilayah Persekutuan In October 2002, a series of evacuation talks were also organised and held at Puncak Niaga s Headquarters for all Headquarters employees. The talks, conducted by Bomba and Penyelamat Wilayah Persekutuan, were designed to prepare the employees to respond to any emergency within the building including the use of various types of fire extinguishers. An Occupational Safety and Health Awareness Talk was conducted at the Stadium Shah Alam on 19 October 2002 for all employees and a speaker was specially invited from the National Institute of Ocupational Safety & Health (NIOSH) to brief the employees on their respective responsibilities towards ensuring occupational safety and health in the work place, in line with the Occupational Safety and Health Act, In relation to training on chlorine handling, our employees are regularly sent to the chlorine manufacturer s premises to undergo extra training on correct chlorine handling procedures. Puncak Niaga Holdings Berhad Annual Report

54 Operations Review HUMAN RESOURCES MANAGEMENT The Company continues to implement various programmes and initiatives to encourage work excellence amongst employees, while at the same time ensuring their welfare. Adopting a pro-active results-orientated work culture, Puncak Niaga encourages its employees to express their individual views to help develop and improve the work process. Employee Unions The year 2002 saw the signing of the Collective Agreement between PNSB and the Non-Executive Union (Kesatuan Kakitangan PNSB) on 15 May 2002, which was approved by the Industrial Court through its consent award on 22 May The Executive Union (Kesatuan Eksekutif Syarikat PNSB) is currently in negotiation with the Company on its Collective Agreement. To facilitate effective evaluation of the proposed Collective Agreement, a Collective Agreement Committee was formed before the commencement of negotiations. Signing of the First Collective Agreement between Puncak Niaga and the Non-Executive Union Except for some designated positions, employees of the Company are free to join either the Executive or Non-Executive Union. Overall, the relationship between the Management and Union representatives remains cordial and co-operation is focused on achieving the Company s goals and objectives. Employees Training Programmes Training is an on-going process and an integral component for the continued success of any organisation. The underlying purpose of conducting training is to keep the organisation competitive by keeping its people competitive. It is a straight forward attempt to attain business results through its people. As such, the training objectives implemented at Puncak Niaga are multiple in nature. They are complementary, yet far reaching in scope. All training programmes that were initiated in year 2002 sought to achieve the following three major areas:- Define what jobs mean in the organisation. Identify and describe the core competencies that premise the jobs. Define and describe the developmental interventions which are necessary to ensure the job incumbents remain competent and current in their set of competencies. Puncak Niaga Holdings Berhad Annual Report

55 In our efforts to minimise the skill gaps and improve core competencies among our employees, specific training interventions have been designed to enable them to perform successfully in their jobs. This has directly benefited the Company by enhancing the employees job efficacy towards better productivity. The training interventions included a broad range of inter-disciplinary training programmes, whereby employees were exposed to skills outside their immediate areas of expertise. This approach has, to a large extent, equipped the employees with multi-skill competencies in discharging their duties whilst at the same time, allowing them to be flexible and adapt to any changes. The in-house Saturday Encounter programme, which was initiated in 1999, has helped the employees enhance their understanding with regards to the policies and procedures at departmental and organisational levels, as well as improving their job knowledge skills. In year 2002, the Training Department successfully conducted and co-ordinated the following Saturday Encounter programmes:- Finance for Non Finance Managers Legal Seminar Safety and Health Seminar Employees Insurance Coverage Policy Talk Fire Demonstration and Evacuation Drills The Group spent RM127,293 for training during the financial year 2002, of which RM43,731 was spent on in-house programmes and the remaining RM83,562 was used for external training programmes. Sexual Harassment Committee Since the formation of the Sexual Harassment Committee comprising a cross-section of employees from various departments on 20 October 2001, no cases of sexual harassment have been reported in the Group. The Group s Sexual Harassment Policy was adopted and officially implemented on 20 October In year 2002, the Committee members attended seminars on Sexual Harassment to equip themselves with the requisite knowledge and skills to handle and investigate any complaints of sexual harassment in the Group. In March 2002, the Groups Sexual Harassment Policy Handbook was distributed to all employees with the hope that the handbook will provide the employees with a better understanding of what constitutes sexual harassment, the policies and procedures involved in handling sexual harassment and their respective roles and rights. Puncak Niaga Holdings Berhad Annual Report

56 Operations Review Security Services The water treatment plants and dams managed by PNSB are considered important strategic assets to the country. Therefore, PNSB takes the job of protecting these installations very seriously. Maintaining its own security personnel, PNSB ensures that the security force receives the relevant training to enable them to carry out their duties effectively. Apart from the basic Security Guards training received by 98% of the security force, there were also other courses such as Security Guards Physical Aptitude Test, Basic Investigation Techniques, Top Supervisors and Police Investigation Courses conducted for the security personnel in year EMPLOYEE WELFARE Foster Parent Programme The Foster Parent Programme was first initiated in the early days of PNSB, with the aim of creating better relations and more effective two-way interactive communications between the Headquarters and water treatment plants employees. The programme has proven to be an excellent platform used to identify problems and difficulties faced by employees at the water treatment plant and for them to channel these issues to the Management. It also gives Management an in-depth understanding on the roles and functions of water treatment plants employees, creating opportunities for both parties to exchange views pertaining to their job functions and responsibilities. Under the programme, the Management is required to visit the respective water treatment plants employees under their care once a month. The visits are meant to build rapport and exchange ideas and views on improving the overall working standard of the water treatment plants. The meetings have proven to be productive and constructive in addressing issues that would otherwise be left unnoticed. During the year 2002, the projects that have been carried out under the Foster Parent Programme at the water treatment plants included the construction of children s playgrounds, badminton courts, fishponds and landscape beautification projects on a gotong-royong concept. The refurbishment and construction of children s playgrounds at the water treatment plants were also initiated under the programme. The construction of the playgrounds is a continuing project undertaken on a need basis. During the Hari Raya, Deepavali and Chinese New Year festivals, employees at the water treatment plants were presented with gifts from the Management. The gifts were delivered together with a message from the Executive Chairman through the Foster Parents for each of the water treatment plants. Puncak Niaga Holdings Berhad Annual Report

57 Once again, the programme continued to receive warm support from both the Management and employees in year The level of commitment shown by both parties has made the programme a significant channel for a two-way interactive communication to improve administrative, operational and social matters of the water treatment plants employees. Quarters Committee The Quarters Committee, comprising nine members from various departments, was formed in early 2002 to ensure that the housing needs and welfare of the employees at the water treatment plants are being looked after in accordance with PNSB s Quarters Policy, which serves as a guide to the Quarters Committee on the administration of the quarters facilities and amenities. An inventory audit of all the 26 water treatment plants and its occupants has been completed by the Quarters Committee for the purpose of updating the records to facilitate a more efficient management and administration of the quarters. To monitor the maintenance and upkeep of the quarters and its amenities throughout the State of Selangor Darul Ehsan and the Federal Territory of Kuala Lumpur, three quarters assessments were carried out and reports were prepared to update the Board. For year 2002, 22 new applications for quarters or transfers were processed by the Quarters Committee. SSP2 Water Treatment Plant s newly built surau The Quarters Committee held eight meetings throughout the year 2002 and forwarded several recommendations on improvement of the quarters for the Board s consideration and approval. Sports and Recreational Club Since its establishment in 1994, Kelab Sukan dan Kebajikan Puncak Niaga (Sports Club) has become a vital tool in promoting social interaction and integration between all levels of employees. The Sports Club regularly organises various social, sports and recreational activities for the employees. Sports Club members participating in a football tournament In year 2002, apart from regular sports activities such as fishing, volleyball, football and bowling competitions, there was also a sports carnival organised with Jabatan Puncak Niaga Holdings Berhad Annual Report

58 Operations Review Bekalan Air Negeri Sembilan, the state water agency, with the intention of establishing better interaction and rapport between the two organisations. 50 employees, including the Management, participated in the successful 2-day event held in Seremban. Educational visits to Petrosains, Kuala Lumpur City Centre and the Kuala Lumpur Tower were also arranged for the employees children during the school holidays. The visits were spread over three days since the response was overwhelming, with 113 children participating in the field trip. Educational visit to Petrosains Special events for religious celebrations such as Ma al Hijrah and Ibadah Korban were also organised, along with functions to celebrate major festivals such as Hari Raya Aidil Adha and Hari Raya Aidilfitri. YBhg Puan Sri Faridah Idris presenting prizes during the Women s Day celebration In conjunction with Women s Day 2002, the women s section of the Sports Club, Biro Hawa, organised a Women s Day celebration with the theme Bekerja Dalam Kesepaduan: Wanita, Hak Asasi Manusia Dan Keamanan which was held on 22 June 2002 at the Maple Suite, Jalan Changkat Raja Chulan, Kuala Lumpur. The event was officiated by YBhg Puan Sri Faridah Idris, wife of the Executive Chairman and was attended by the Group s female employees. SOCIAL CONTRIBUTIONS As a caring corporate citizen, Puncak Niaga takes pride in its social and civic responsibilities and allocates a percentage of its funds for donations to worthy charitable causes. For the financial year 2002, a total of RM1,421,835 was contributed to various religious and educational foundations, youth, sports and entrepreneurial associations and other charities. In addition, our Executive Chairman and Senior Management personnel have contributed many hours of their time to various educational foundations and community development programmes. The women s section of the Sports Club, Biro Hawa, organised Puncak Niaga Holdings Berhad Annual Report

59 an annual outing for orphans in conjunction with the Hari Raya Aidilfitri celebration, whereby children from three orphanages were treated with baju raya shopping at a departmental store in Petaling Jaya before breaking fast. Cash donations were also given to the orphans. The event was graced by YBhg Puan Sri Faridah Idris, wife of the Executive Chairman. COMMUNITY RELATIONS The Company, through its team of dedicated employees, continues to utilise its resources to help create awareness on the YBhg Puan Sri Faridah Idris shopping with orphans in importance of protection of our natural water sources from all conjunction with the Hari Raya Adilfitri celebration forms of pollution. Utilising our resources, both monetary and knowledge, Puncak Niaga supports various schemes and programmes that have been developed and implemented to educate the local communities on the importance of having access to clean water. River Rescue Brigade (Briged Penyelamat Sungai) Established on 14 March 1998, the River Rescue Brigade was the brainchild of Puncak Niaga s Executive Chairman, YBhg Tan Sri Rozali Ismail. Its objectives are to create awareness amongst the younger generation and to educate them on the importance of conservation and protection of our rivers. The year 2002 saw the River Rescue Brigade grow to 1,110 members from 49 participating schools in the State of Selangor Darul Ehsan and the Federal Territory of Kuala Lumpur. Activities included visits to water treatment plants where the school children are exposed to the importance of potable water production and the effects and prevention of river pollution. News bulletins were distributed to the club members once in every two months to keep them updated on current water issues and events of the River Rescue Brigade. Puncak Niaga plans to extend the River Rescue Brigade to the secondary and tertiary students in year There are also plans to organise a Perkhemahan Alam Sekitar or Summer Camp for its members. River Rescue Brigade event The establishment of the River Rescue Brigade is a clear indication of Puncak Niaga s role and commitment in creating a caring younger generation who are aware of their environment. It is hoped that the school children will benefit from the club and will act as catalysts to create a change of attitude in handling future river pollution issues. Puncak Niaga Holdings Berhad Annual Report

60 Operations Review Educational Outreach Programme (Turun Ke Padang) Similar to the River Rescue Brigade, the Educational Outreach Programme (EOP) educates our future generation on the importance of river preservation in ensuring the continuous supply of clean water. Puncak Niaga has implemented a comprehensive programme where our officers make visits to selected primary schools in the State of Selangor Darul Ehsan and the Federal Territory of Kuala Lumpur each month. The EOP was launched on 15 June 1997 by Puncak Niaga s Executive Chairman, YBhg Tan Sri Rozali Ismail and was approved by the Education Departments of the State of Selangor Darul Ehsan and the Federal Territory of Kuala Lumpur respectively. The EOP highlights the role of Puncak Niaga and other parties like PUAS in the treatment and supply of water to the consumers. Talks and video screenings are given on the importance of the river as a source of clean water and group activities are organised to allow the students to conduct their own water treatment experiments. Students participating in the Educational Outreach Programme The students are also quizzed based on the talks and demonstrations given by the Company s officers. Currently, the EOP is purely targeted at primary school students since we believe that the young will be an agent of change or a catalyst in the change of attitude towards river preservation. In year 2002, a total of ten primary schools were selected and visited by Puncak Niaga under the EOP. The same quota has been set for year Workshops, Forums, Exhibitions and Seminars In year 2002, the Group continued to actively participate in various workshops, forums, exhibitions and seminars on the privatisation of public water facilities, water industry, environment and investor relations, as follows:- 1. Water 2002 Expo organised by AMB Exhibitions in collaboration with the Ministry of Works on 26 March Bengkel Eksekutif Perniagaan Workshop organised by Pusat Pungutan Zakat Selangor on 2 May Puncak Niaga Holdings Berhad Annual Report

61 3. Presentation of a working paper at the Pengurusan Lembangan Sungai Selangor Seminar organised by Lembaga Urus Air Selangor and WWF Malaysia on 30 May Presentation of a paper entitled Kesan Pencemaran Terhadap Mutu Air Yang Dirawat Di Loji Rawatan Air at the Bengkel Pengurusan Mutu Air Negeri Selangor organised by Jabatan Kesihatan Negeri Selangor on 8 and 9 July Presentation of a paper entitled Air: Cabaran, Isu dan Masa Depan at the Air Anugerah Tuhan Seminar organised by Institut Kefahaman Islam Malaysia on 17 July Presentation of a working paper by PNSB at the Pengurusan Lembangan Sungai Selangor Seminar 6. Water Industry Exhibition organised by PUAS on 25 July Malaysian Malay Symposium and Exhibition organised by Universiti Kebangsaan Malaysia from 24 to 31 August KLSE Investors Week 2002 from 23 to 29 September Paya Indah Wetlands Exhibition from 11 to 13 October Selangor Environmental Week Exhibition from 27 to 29 October Puncak Niaga Holdings Berhad Annual Report

62 Corporate Calendar of Events 12 January 2002 Safety Briefing to employees at the Bukit Nanas Water Treatment Plant by the Fire and Safety Department. 9 February 2002 Visit by Messrs PricewaterhouseCoopers to the SSP2 Water Treatment Plant. 21 February 2002 Puncak Niaga donated a haemodialysis machine to the Tg Karang District Hospital. 24 February 2002 Puncak Niaga s Sports & Recreational Club organised a Hari Raya Aidil Adha Korban Programme at the Sungai Langat Water Treatment Plant. Contribution of Haemodialysis Machine, 21 February February 2002 Briefing to analysts on the Group s financial results for the year ended 31 December March 2002 Visit by Penang Water Works Department to the Wangsa Maju Water Treatment Plant. 15 March 2002 Puncak Niaga participated in the Ma al Hijrah celebration held at Stadium Bukit Jalil. PNHB s Executive Chairman, YBhg Tan Sri Rozali Ismail receiving the Asia Water Management Excellence Award 2002 (Individual Award Category), 26 March March 2002 Executive Chairman s working visit to the Bukit Nanas Water Treatment Plant in conjunction with the World Water Day March 2002 Puncak Niaga participated in The Water 2002 Expo held at The Mines Exhibition and Convention Centre, Kuala Lumpur. In conjuction with the event, YBhg Tan Sri Rozali Ismail was awarded The Asia Water Management Excellence Award 2002 (Individual Award Category). 2 April 2002 Educational Outreach Programme No. 18 at Sekolah Kebangsaan Pandan Indah, Ampang. Executive Chairman s working visit to Bukit Nanas Water Treatment Plant, 22 March 2002 Launching of River Rescue Brigade No. 12, 30 April April 2002 Educational Outreach Programme No. 19 at Sekolah Rendah Jenis Kebangsaan (Cina) Yit Khwan, Tanjung Karang. 30 April 2002 River Rescue Brigade No. 12 at Bernam River Headworks Water Treatment Plant, officiated by YB Dato Mohd Sharif Jajang, Selangor State EXCO member. Puncak Niaga Holdings Berhad Annual Report

63 2 May 2002 Puncak Niaga participated in the Klang District Water Conservation Campaign, officiated by YB Dato Mohd Sharif Jajang, Selangor State EXCO member. 3 May 2002 Educational Outreach Programme No. 20 at Sekolah Kebangsaan Bandar, Banting. 4 May 2002 Puncak Niaga participated in the National Labour Day 2002 celebration, officiated by the Prime Minister, YAB Dato Seri Dr. Mahathir Mohamed at Stadium Malawati, Shah Alam. Signing Ceremony of the Collective Agreement, 15 May May 2002 Signing of the Collective Agreement between Puncak Niaga (M) Sdn Bhd and its Non-Executive Union. 23 May 2002 Cheque presentation of RM790, to Pusat Zakat Selangor, being voluntary business tithing for year May 2002 Puncak Niaga participated in the march pass for the National Maulidur Rasul celebration at Stadium Putra, Bukit Jalil. 30 & 31 May 2002 Puncak Niaga presented a working paper entitled Pengurusan Lembangan Sungai Selangor at the 2-day workshop organised by Lembaga Urus Air Selangor and World Wildlife Fund Malaysia at Fraser s Hill. PNHB s 5th Annual General Meeting, 26 June 2002 Payment of Zakat Pendapatan to Pusat Zakat Selangor in conjunction with the Executive Business Tithe Workshop, 23 May 2002 Women s Day celebration, 22 June June 2002 Educational Outreach Programme No. 21 and donation of 3 computers at Sekolah Kebangsaan Seksyen 18, Shah Alam. 15 June 2002 Puncak Niaga s Employees Meeting at Stadium Malawati, Shah Alam. 15 June 2002 Friendly bowling match between TV3 and Puncak Niaga at Bangsar Bowl, Bangsar Shopping Complex. 22 June 2002 Women s Day celebration with the theme Bekerja Dalam Kesepaduan:Wanita, Hak Asasi Manusia Dan Keamanan, organised by Biro Hawa at the Maple Suite, Jalan Changkat Raja Chulan, Kuala Lumpur. 26 June 2002 PNHB s 5th Annual General Meeting at the Kuala Lumpur Golf and Country Club. Puncak Niaga Holdings Berhad Annual Report

64 Corporate Calendar of Events 29 June 2002 Puncak Niaga (PNSB) Sports and Welfare Club s 8th Annual General Meeting (AGM) at Stadium Shah Alam. 3 July 2002 Visit by Ministry of Health to the SSP2 Water Treatment Plant. 4 July 2002 Safety Audit by the Malaysian Society Of Occupational Safety & Health (MSOSH) to evaluate the operations of the SSP2 Water Treatment Plant for the MSOSH Grand Award Competition. 13 July 2002 Visit by the Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB), India to the SSP2 Water Treatment Plant. Madam Tan Bee Lian, our Group Company Secretary, receiving the ROC-MAICSA Company Secretary Award 2001, 22 July July 2002 Educational Outreach Programme No. 22 at Sekolah Kebangsaan Dato Abu Bakar Baginda, Sepang, Kajang. 16 & 17 July 2002 Puncak Niaga s Executive Vice Chairman presented a paper entitled Air, Cabaran, Isu dan Masa Depan, at the Air Anugerah Tuhan seminar organised by Institut Kefahaman Islam Malaysia. PNSB s Sports and Welfare Club s 8th AGM, 29 June July 2002 Puncak Niaga contributed RM50,000 to the UMNO Bumiputra Education Fund during the dinner of the Alumni of Overseas UMNO Clubs at the Putra World Trade Centre. 22 July 2002 PNHB s Group Company Secretary was awarded the ROC-MAICSA Company Secretary Award 2001, under the Listed Company Category. CMWSSB s visit to SSP2 Water Treatment Plant, 13 July July 2002 Puncak Niaga participated in the Water Industry Exhibition in conjunction with Seminar Kepenggunaan Air organised by Perbadanan Urus Air Selangor Berhad at the Grand Blue Wave Hotel, Shah Alam. 30 July 2002 Educational Outreach Programme No. 23 at the Sekolah Kebangsaan Kuala Selangor. Alumni of Overseas UMNO Clubs Dinner, 20 July August 2002 PNHB participated in the Mayban Securities International Investors Conference held at the Andaman Datai Bay, Langkawi. Puncak Niaga Holdings Berhad Annual Report

65 8 August 2002 Educational Outreach Programme No. 24 at Sekolah Kebangsaan Gombak Setia, Kuala Lumpur. 10 August 2002 Puncak Niaga participated in the Save Water Campaign for the District of Hulu Langat. 10 & 24 August 2002 Visit by employees of Assunta Hospital, Petaling Jaya to the Wangsa Maju Water Treatment Plant. MSOSH Occupational Safety and Health Award ceremony, 10 September August 2002 Friendly bowling match between Utusan Malaysia and Puncak Niaga at the Ampang Super Bowl, Ampang Point. 17 August 2002 Puncak Niaga donated RM50,000 to the PUSPANITA Fund during the Majlis Makan Malam Amal Sumbangsih 2002 at Dewan Perdana FELDA, Kuala Lumpur. 17 & 24 August 2002 Visit by students of Universiti Putra Malaysia (UPM) to the SSP2 Water Treatment Plant. 30 August 2002 Puncak Niaga participated in the National Day 2002 march pass at Dataran Kemerdekaan, Shah Alam August 2002 Puncak Niaga participated in the exhibition held in conjunction with the Malaysian Malay Symposium and the 45th National Day Celebration, at Dewan Canselor Tun Abdul Razak, Universiti Kebangsaan Malaysia. UPM s visit to SSP2 Water Treatment Plant, 17 & 24 August September 2002 Visit by the Persatuan Perusahaan Air Minum Seluruh Indonesia and George Kent (M) Bhd to the SSP2 Water Treatment Plant. Malaysian Malay Symposium, 24 August September 2002 SSP2 and Wangsa Maju Water Treatment Plants won the Grand Award and Gold Award respectively for occupational safety and health, organised by the Malaysian Society for Occupational Safety & Health (MSOSH). 12 September 2002 Visit by students of The Japanese School of Kuala Lumpur to the Wangsa Maju Water Treatment Plant and Klang Gates Dam. 14 September 2002 Friendly bowling match between Unit Perancangan Ekonomi Selangor and Puncak Niaga at Plaza Alam Sentral, Shah Alam. 45th National Day celebration, 30 August 2002 Puncak Niaga Holdings Berhad Annual Report

66 Corporate Calendar of Events 17 September 2002 Educational Outreach Programme No. 25 at Sekolah Rendah Jenis Kebangsaan Tamil Vivekananda, Petaling Jaya. 19 September 2002 Visit by students of Universiti Malaya to Wangsa Maju Water Treatment Plant September 2002 PNHB participated in the KLSE Investors Week September 2002 Friendly bowling match between Berita Harian and Puncak Niaga at the Cosmic Bowl, Sunway Pyramid. Friendly bowling match between Puncak Niaga and Berita Harian, 28 September , 11 & 18 October 2002 Safety Talk by officials of the Fire and Safety Department on fire and evacuation procedures for high-rise buildings to Puncak Niaga s employees at the Company s Headquarters. 10 October circles participated at Puncak Niaga s Quality Control Circle (QCC) Project Presentation. Encik Md Nor Ahmad, KLSE s Deputy President Exchange Operations visiting PNHB s booth during the launch of the KLSE Investors Week 2002, September October 2002 Puncak Niaga participated in an exhibition held in conjunction with the launching of Paya Indah Wetlands by YAB Dato Seri Dr Mahathir Mohamad. 17 October 2002 Educational Outreach Programme No. 26 at Sekolah Kebangsaan Bukit Beruntung, Rawang. QCC Project Presentation, 10 October October 2002 Puncak Niaga participated in an exhibition held in conjunction with the launching of the Kempen Penjimatan Air Negeri Selangor for Hulu Langat District. 19 October 2002 Occupational Safety and Health Awareness Talk by officials of NIOSH at Stadium Shah Alam for Puncak Niaga s employees. PNSB/JBANS Mini Sports Carnival, October October 2002 Puncak Niaga sponsored the ICT Centre at Sungai Choh, Rawang which was officiated by YAB Menteri Besar Selangor October 2002 PNSB/JBANS Mini Sports Carnival held at Sekolah Teknik Ampangan, Seremban. Puncak Niaga Holdings Berhad Annual Report

67 Majlis Berbuka Puasa with employees and orphans, 20 November October 2002 Puncak Niaga participated in an exhibition at Stadium Kajang in conjunction with the Selangor Environmental Week, which was officiated by YAB Menteri Besar Selangor. 29 October 2002 Visit by officials of Health Ministry of Vietnam to the Wangsa Maju Water Treatment Plant. 31 October 2002 PNHB was awarded the NACRA Industry Excellence Award 2002 for the Construction & Infrastructure Project Companies Category for its 2001 Annual Report. 6 November 2002 Educational Outreach Programme No. 27 at Sekolah Kebangsaan Klang. 17 November 2002 Puncak Niaga contributed RM10,000 to ophanages in conjunction with the Majlis Berbuka Puasa ceremony by Selangor UMNO Youth held at the residence of YAB Menteri Besar Selangor. 20 November 2002 Puncak Niaga s Sports and Welfare Club donated RM60,000 to 210 orphans from Asrama Damai Rumah Anak-anak Yatim Kuang, Pertubuhan Anak-anak Yatim Darul Izzah and Pertubuhan Kebajikan Anak-anak Yatim Sekendi. YBhg Puan Sri Faridah Idris shopping with orphans for Hari Raya celebration, 20 November November 2002 Majlis Berbuka Puasa for Puncak Niaga s employees and 210 orphans at Stadium Shah Alam. 23 & 30 November 2002 Visit by students of Universiti Malaya to the Wangsa Maju Water Treatment Plant. PNHB s Executive Vice Chairman receiving the NACRA Industry Excellence Award 2002, 31 October November 2002 Company Briefing to EPF officials at the Company s Headquarters. Hari Raya Gathering, 28 December November 2002 Puncak Niaga donated RM33,000 to four foster families for the Hari Raya celebration and as educational aid. 17 December 2002 Puncak Niaga was awarded the Hadiah Penghargaaan, Anugerah Citra Laporan Tahunan 2001 by Dewan Bahasa dan Pustaka for correct usage of the national language in its 2001 Annual Report. 18, 20 & 24 December 2002 Educational visit to Petrosains, KLCC & KL Tower by PNSB employees children. 28 December 2002 Hari Raya Aidilfitri gathering at the Company s Headquarters for all employees. Puncak Niaga Holdings Berhad Annual Report

68 Nurturing and Sustaining Growth Puncak Niaga Holdings Berhad Annual Report

69 The river never rests. It continually feeds and nurtures its environs to ensure it receives, in return, the sediments and organisms necessary to maintain its balance and sustain the life within its waters. The success of Puncak Niaga lies not only in the completion of our projects but in the stringent, on-going controls we undertake to ensure that each development operates at its optimal level of efficiency at all times. Puncak Niaga Holdings Berhad Annual Report

70 Statement on Corporate Governance The Board places utmost importance on the practice of high standards of corporate governance in the Group s business dealings and is unreservedly committed towards ensuring that the principles and best practices of corporate governance as set out in the Malaysian Code on Corporate Governance (the Code) are complied by the Company. Accordingly, the Board is pleased to report to the shareholders on how the Company has applied the principles of the Code and complied with the best practices in corporate governance as set out in the Code. During the year, proactive steps were taken by the Board to further enhance the Group s corporate governance procedures and processes in line with international best practices on corporate governance, which include:- formulation and implementation of the Guidelines for Recommending Candidates for Board Appointments by the Nomination Committee; formulation and implementation of the Guidelines for Determining Directors Remuneration by the Remuneration Committee; formulation and implementation of the Form of Evaluation of Board Effectiveness by the Nomination Committee; and formulation and implementation of the Audit Committee Self-Assessment Form by the Nomination Committee. BOARD OF DIRECTORS The Board The Board takes full responsibility for the performance of the Group and guides the Group towards achieving its short and long-term objectives, setting corporate strategies for growth and new business development while providing advice and direction to the Management to enable the Group to achieve its corporate goals, thus enhancing the shareholders investment. The Board has a formal list of matters reserved for its decision making, including overall Group strategy and direction, setting the human resources and administration policies, approval of the annual budget, acquisitions and disposals, corporate exercises, major capital expenditure, operational and financial matters as well as promoting customer, shareholders and investor relations. Some matters are delegated to the Board Committees which operate within clearly defined terms of reference. Composition of the Board The Board comprises seven members, of whom four are Executive Directors and three are Independent Non-Executive Directors. There was no change in the Board s composition during the year The profile of the Board is set out on Pages 20 to 27 of the Annual Report. The Board members are professionals from diverse disciplines, tapping on their respective qualifications and experiences in law, engineering and accounting. Together, they bring a wide range of business experience Puncak Niaga Holdings Berhad Annual Report

71 and expertise which are vital towards the effective discharge of the Board s responsibilities for the Company s stewardship and the successful direction and growth of the Group. More than one third of the Board is represented by Independent Non-Executive Directors who are independent of the Management and free from any business or other relationship with the Management; thereby promoting independence in the Board s deliberations and decision making. The roles of the Executive Chairman and Executive Vice Chairman are separate, each with clearly defined responsibilities. YB Dato Seri Dr Ting Chew Peh is the Company s Senior Independent Non-Executive Director, to whom shareholders concerns may be conveyed. Board Meetings In year 2002, the Board met five times at the Board Room on 26th Floor, Suite , Plaza See Hoy Chan, Jalan Raja Chulan, Kuala Lumpur. The meetings were held as follows:- Day Date Time Wednesday 27 February p.m. Wednesday 24 April p.m. Tuesday 21 May p.m. Wednesday 21 August p.m. Thursday 21 November p.m. The details of the respective Directors attendances for the above meetings are as follows:- Name of Director Designation No. of Meetings held No. of Meetings % during the financial year attended * YBhg Tan Sri Executive Chairman Rozali Ismail Encik Ruslan Hassan Executive Vice Chairman ** Encik Mat Executive Director, Hairi Ismail Finance Ir Lee Miang Koi Executive Director, Project & Business Development Encik Abdul Majid Independent Non-Executive Abdul Karim Director ***YBhg Dato Hari Independent Non-Executive Narayanan Director Govindasamy YB Dato Seri Independent Non-Executive Dr Ting Chew Peh Director * YBhg Tan Sri Rozali Ismail was away on overseas official trip. ** Encik Mat Hairi Ismail was away on Haj leave. *** YBhg Dato Hari Narayanan Govindasamy was unable to attend the Board Meetings as he had to attend other business meetings. Puncak Niaga Holdings Berhad Annual Report

72 Statement on Corporate Governance To facilitate the smooth transaction of the Group s business and operations, the day-to-day administration and management of the Group have been delegated to the Board of Puncak Niaga (M) Sdn Bhd (PNSB), who met eight times in year 2002, to deliberate and approve on matters related to the Group s business including corporate plans and annual budgets, capital investments, project and business development, internal controls and changes in the Group s policies and procedures. Performance factors such as product and service quality and environmental issues were also discussed. Supply of Information and Access To Advice All Board Meetings held during the year were preceded by a notice issued by the Group Company Secretary. The agenda together with the relevant reports and papers for each meeting are made available to the Directors at least seven days prior to the date of each Board Meeting. The Directors are also given sufficient time to obtain further information or explanation on matters presented in the Board papers. The matters tabled during the Board Meetings include:- Minutes of Meetings of the Board Committees; operational and financial performance reports; any changes to the Group s corporate strategies; environmental issues directly affecting the Group s operations; and other special issues which require the Board s attention and decision. Where necessary, the Board whether as a full Board or in their individual capacities, may engage independent professionals at the Company s expense to advise on issues of concerns to facilitate the proper discharge of their statutory and fiduciary duties. All Directors have access to the advice and services of the Group Company Secretary. The Directors are regularly updated by the Group Company Secretary on the latest developments in the legislations and regulatory framework affecting the Group and they are also advised on their duties and responsibilities as well as the implementation of good corporate governance and compliance practices in the Group. Appointment of Directors All appointments of new Directors are recommended by the Nomination Committee to the Board for approval. The Board, through the Nomination Committee, annually reviews the required mix of skills, experience and other qualities of the Directors to ensure that the Board is functioning effectively and efficiently. In year 2002, there was no new appointment to the Board as the Board was confident that the present Board possesses adequate experience and expertise to efficiently oversee and ensure that the Group s strategies are properly considered and implemented. The Company recognises that its Directors may be invited to sit on the Board of other companies. It allows its Directors to accept non-executive appointments, with the Board s prior consent and as long as these appointments are not in conflict with the Company s interest. The Board is of the view that the exposure gained by its Directors from the directorships in other companies will be valuable to the Company as it will enable the Directors to have a wider perspective of various aspects of business. Puncak Niaga Holdings Berhad Annual Report

73 Re-election of Directors Article 98 of the Company s Articles of Association provides that one-third of the Directors shall retire from office at each Annual General Meeting and being eligible, may offer themselves for re-election. Upon the recommendation of the Nomination Committee, Encik Mat Hairi Ismail and YBhg Dato Hari Narayanan Govindasamy shall retire by rotation at the forthcoming Annual General Meeting and have offered themselves for re-election. Board Committees To enable the Board to effectively and efficiently discharge its duties, the Board is assisted by the following Board Committees with their respective approved terms of reference:- Committee Audit Committee Remuneration Committee Nomination Committee Compliance, Internal Control and Risk Policy Committee ESOS Option Committee Management Committee Chaired by Encik Abdul Majid Abdul Karim, Independent Non-Executive Director YB Dato Seri Dr Ting Chew Peh, Independent Non-Executive Director YB Dato Seri Dr Ting Chew Peh, Independent Non-Executive Director YB Dato Seri Dr Ting Chew Peh, Independent Non-Executive Director YBhg Tan Sri Rozali Ismail, Executive Chairman Encik Ruslan Hassan, Executive Vice Chairman (a) Audit Committee The Audit Committee Report for the financial year 2002 is set out on pages 79 to 85 of the Annual Report. (b) Remuneration Committee The Remuneration Committee comprises the following members:- Chairman : YB Dato Seri Dr Ting Chew Peh (Independent Non-Executive Director) Members : YBhg Dato Hari Narayanan Govindasamy (Independent Non-Executive Director) Encik Abdul Majid Abdul Karim (Independent Non-Executive Director) Encik Mat Hairi Ismail (Executive Director, Finance) Secretary : Madam Tan Bee Lian (Group Company Secretary) The terms of reference of the Remuneration Committee are:- to establish and annually review the remuneration packages of each individual Executive Director such that the levels of remuneration are sufficient to attract and retain the Directors needed to run the Company successfully; and Puncak Niaga Holdings Berhad Annual Report

74 Statement on Corporate Governance to make recommendation to the Board and the respective Directors shall abstain from the discussion of their own remuneration. The levels of remuneration of the Executive Directors reflect their experience, level of responsibilities and contribution to the Company. The Remuneration Committee met twice during the year 2002 with its members in full attendance. At the meeting held on 22 January 2002, the Committee recommended the Salary Increment for Year 2002 and Bonus for Year 2001 for the Executive Directors of PNSB for PNSB s Board s approval. At the subsequent meeting held on 1 April 2002, the Guidelines for Determining Directors Remuneration were adopted for implementation by the Remuneration Committee. (c) Nomination Committee The Nomination Committee comprises the following members:- Chairman : YB Dato Seri Dr Ting Chew Peh (Independent Non-Executive Director) Members : YBhg Dato Hari Narayanan Govindasamy (Independent Non-Executive Director) Encik Abdul Majid Abdul Karim (Independent Non-Executive Director) Secretary : Madam Tan Bee Lian (Group Company Secretary) The terms of reference of the Nomination Committee are:- to annually review the required mix of skills and experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board; to recommend to the Board, candidates for all directorships to be filled; to recommend to the Board, Directors to fill the seats on Board Committees; to annually assess the effectiveness of the Board as a whole, the committees of the Board and for assessing the contribution of each individual Director; and to examine the size of the Board with a view to determining the impact of the number upon its effectiveness. In year 2002, two meetings of the Nomination Committee were held whereby the Nomination Committee approved the implementation of the Guidelines for Recommending Candidates for Board Appointments on 1 April 2002 and also the Form of Evaluation of Board Effectiveness and the Audit Committee Self-Assessment Form on 17 December (d) Compliance, Internal Control and Risk Policy Committee (CICR) The primary responsibility of CICR is to monitor the Risk Management process within the Group and the extent of compliance with the Statement of Internal Control requirements. The CICR provides summary reports to the Board at regular intervals. Puncak Niaga Holdings Berhad Annual Report

75 (e) ESOS Option Committee The ESOS Option Committee administers the Group s Employees Share Option Scheme (ESOS Scheme) which became effective on 25 February The ESOS Option Committee comprises the following members:- Chairman : YBhg Tan Sri Rozali Ismail (Executive Chairman) Members : Encik Ruslan Hassan (Executive Vice Chairman) Encik Mat Hairi Ismail (Executive Director, Finance) Ir Lee Miang Koi (Executive Director, Project & Business Development) Secretary : Madam Tan Bee Lian (Group Company Secretary) The ESOS Option Committee met three times in year 2002 to approve the ESOS Option Committee s Term Sheet and Work Plan, to deliberate and approve on matters relating to the allocation of ESOS to the eligible employees and to approve the issuance of the first and second tranches of ESOS to the eligible employees. (f) Management Committee The Management Committee, headed by the Executive Vice Chairman, is made up of the Executive Directors and Senior Management personnel of the Company. At its meetings, the Management Committee reviews the performance of the Company and resolves operational as well as inter-departmental issues. The Management Committee also reviews and comments on proposal papers prior to tabling to the Board for approval. The Management Committee meets at least once in every two months. In year 2002, the Management Committee met eight times. Directors Remuneration (a) Level and Make Up of Remuneration In recommending the remuneration for the Executive Directors, the Remuneration Committee aims to give the Executive Directors every encouragement to enhance their s and the Company s performance and to ensure that the Executive Directors are fairly but responsibly rewarded for their individual contributions and performance. The Remuneration Committee does not determine the remuneration of the Non-Executive Directors but may make recommendation to the Board on the sum, if requested. The Non-Executive Directors remuneration is a matter to be determined by the Board as a whole. The fees paid to the individual Non-Executive Directors are a fair reflection of the contribution which they make to the Company and the time they spend attending to the Company s affairs, for example, as members of the Board Committees. In order to preserve their independence, the Non-Executive Directors do not participate in any Company performance related or profit sharing scheme, pension fund or medical aid. Puncak Niaga Holdings Berhad Annual Report

76 Statement on Corporate Governance (b) Procedure The Remuneration Committee deliberates and recommends to the Board, the remuneration packages of the Executive Directors. The Board, as a whole, determines the remuneration of the Non-Executive Directors. During the Board s deliberation on the respective Directors remuneration, the respective Directors play no part in deciding their own remuneration and abstain from discussing or voting on their own remuneration. (c) Disclosure of Remuneration The details of the remuneration of each Director of the Company during the financial year ended 31 December 2002 are as follows:- Name of Directors Fees Salaries Bonuses Benefit- Allowance Employees in-kind Provident Fund Tan Sri Rozali Ismail Ruslan Hassan Mat Hairi Ismail Lee Miang Koi Abdul Majid ,406 - Abdul Karim Dato Hari Narayanan ,010 - Govindasamy Dato Seri Dr Ting ,010 - Chew Peh Total ,426 - The remuneration packages of the Directors of the Group for the financial year ended 31 December 2002 with categorisation into the appropriate components are as follows:- Remuneration Packages Executive Directors Independent Non-Executive (RM) Directors (RM) Fees - - Salaries 2,578,452 - Bonuses 172,580 - Benefits-in-kind 230,491 - Allowance 708, ,426 Employees Provident Fund 428,145 - Total 4,118, ,426 Puncak Niaga Holdings Berhad Annual Report

77 On 26 February 2002, the Executive Directors were offered a total of 5.9 million new ordinary shares of the Company under the ESOS Scheme. As at 31 December 2002, 360,000 options had been exercised by the Executive Directors. Directors Training In year 2002, the Directors attended various seminars and courses to train and equip themselves to effectively discharge their duties and to keep abreast with the latest developments in the legislations and the water industry. An in-house Induction Programme is arranged for newly appointed Directors to facilitate their understanding of the Group s business operations and corporate strategy. During the induction, the new Directors are introduced to the Senior Management personnel of the Company. A Directors Manual is also made available to the new Directors for their reference. SHAREHOLDERS Investor Relations The Company s Investor Relations Policy & Report is set out on pages 91 to 93 of the Annual Report. Annual General Meeting (AGM) The Company recognises the importance of maintaining effective bilateral communication with its shareholders and uses the AGM as one of the platforms to achieve this purpose. All shareholders are encouraged to attend the AGM and participate in the proceedings. They are given the opportunity to ask questions relating to the Group s performance and business activities and seek clarification on the resolutions proposed. ACCOUNTABILITY AND AUDIT Financial Reporting It is the Board s responsibility to ensure that the financial statements of the Group and the Company give a true and fair view of the state of affairs of the Group and the Company as required under Section 169(15) of the Companies Act, Efforts are made to ensure that the financial statements comply with the provisions of the Companies Act, 1965 and the applicable approved accounting standards in Malaysia. The Board also ensures that the quarterly and annual financial results are released to the Kuala Lumpur Stock Exchange well within the stipulated time frame in order to provide timely and accurate information to the investing public at large. Puncak Niaga Holdings Berhad Annual Report

78 Statement on Corporate Governance Statement of Directors Responsibility for Preparation of Financial Statements The financial statements of the Group and Company have been drawn up in accordance with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, The Directors are responsible in ensuring that the financial statements give a true and fair view of the state of affairs of the Group and Company at the end of the financial year and of the results and cash flows of the Group and Company for the financial year. In preparing the financial statements, the Directors have:- selected suitable accounting policies and applied them consistently; made judgements and estimates that are reasonable and prudent; ensured that all applicable accounting standards have been followed; and prepared financial statements on the going concern basis as the Directors have a reasonable expectation, having made appropriate enquiries, that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. The Directors have the responsibility for ensuring that the Company keeps accounting records which disclose with reasonable accuracy, the financial position of the Group and Company and which enables them to ensure that financial statements comply with the Companies Act, The Board has the overall responsibilities for taking all reasonable steps as are reasonably open to them to safeguard the assets of the Group to prevent and detect frauds and other irregularities. Relationship with Auditors The Internal Auditors attend all Audit Committee Meetings. The external auditors are also invited to attend the Audit Committee Meetings that deliberate on the Company s quarterly and annual financial results. During the Audit Committee Meetings, the external auditors highlighted observations made during the course of audit to the Audit Committee. The Company has always maintained a close and transparent professional relationship with the external auditors. Internal Control The Statement on Internal Control is set out on pages 77 to 78 of the Annual Report. Statement On Going Concern Upon conducting due and reasonable enquiry into the affairs of the Company, the Board firmly believes that the Company shall continue to operate as a going concern business in the foreseeable future. Puncak Niaga Holdings Berhad Annual Report

79 Statement On Internal Control INTRODUCTION The Malaysian Code on Corporate Governance requires public listed companies to maintain a sound system of internal control to safeguard shareholders investments and the Company s assets. The Kuala Lumpur Stock Exchange (KLSE) Listing Requirements requires Directors of public listed companies to include a statement in their annual reports on the state of their internal controls. RESPONSIBILITY The Board of Puncak Niaga is responsible for maintaining a sound system of internal control and for reviewing its adequacy and integrity so as to safeguard shareholders investments and the Group s assets. The Board and Management have implemented a control system designed to identify and manage risks facing the Group in pursuit of its business objectives. This internal control system, by its nature, can only provide reasonable and not absolute assurance against material misstatement or loss. The Group has in place ongoing processes for identifying, evaluating, monitoring and managing significant risks faced by the Group during the year. The Management is responsible for the identification and evaluation of significant risks applicable to their respective areas of business and to formulate suitable internal controls. This process is reviewed by the Board via a specific Board Committee, namely the Compliance, Internal Control and Risk Policy Committee, which dedicates its time at periodic intervals throughout the year for discussion on this matter. RISK MANAGEMENT FRAMEWORK Risk Management is firmly embedded in the Group s Management system and is every employee s responsibility. In October 2001, the Board formally approved a systematic risk management structure and process for the Group. Since then, the structure and process have been fully implemented by the Management and employees of the Puncak Niaga Group. The Group s risk management framework is explained in detail in the Group s Risk Management Policy & Report set out on pages 86 to 90 of the Annual Report. INTERNAL CONTROL SYSTEM The key elements of the Group s internal control system and assurance processes, inter alia, encompass the following:- All major decisions require the final approval of the Board and are only made after appropriate in-depth analysis. The Board receives regular and comprehensive information covering all Divisions and Departments within the Group. All Departments and Divisions have clearly documented Procedures Manuals incorporating control procedures and the scopes of responsibilities and authorities. The Procedures Manuals are updated regularly depending on practical needs and to incorporate all elements necessitated by changes in the Puncak Niaga Holdings Berhad Annual Report

80 Statement On Internal Control legislation, industry best practices and business dynamics. The latest revision in-line with the increase in risk awareness being promulgated throughout the Group was completed in April The recent update on the Procedures Manuals was carried out in March The Internal Audit Department independently reviews the control processes implemented by the Management from time to time and periodically reports on its findings and recommendations to the Audit Committee. The duties and responsibilities of the Audit Committee are detailed in the Terms of Reference of the Audit Committee set out on pages 82 to 85 of the Annual Report. The Audit Committee, by consideration of both Internal and External Audit Reports, is able to gauge the effectiveness and adequacy of the internal control system, for presentation of its findings to the Board. The Compliance, Internal Control and Risk Policy Committee, which is chaired by YB Dato Seri Dr Ting Chew Peh, an Independent Non-Executive Director was established in October This Committee closely monitors the Risk Management process within the Group and the extent of compliance with the Statement on Internal Control requirements. The Tender and Contracts Committee, which was set up in year 2000, ensures transparency and competitive pricing in the award of contracts within the Group. Management Committee Meetings which are attended by all Executive Directors and Senior Management are held bi-monthly to discuss and resolve, where necessary, on the Group s operational matters. A detailed budgeting process has been established, requiring all Divisions and Departments to prepare their respective budgets annually. These budgets are then reviewed and approved by the Board prior to actual implementation each year. The monitoring of actual performance versus budget, with major variances being followed up, is done on a monthly basis and management action is taken to tighten or to rectify any shortcomings, where necessary. Guidance for Directors of Public Listed Companies The KLSE Task Force on Internal Control issued the Statement on Internal Control: Guidance for Directors of Public Listed Companies (Guidance) in December Based on the Guidance, the Group formulated a comprehensive checklist to monitor its level of readiness on the Guidance. The Group aims to not just achieve full compliance, but also to improve on the Group s processes by implementing best business practices in line with international best practice standards. Throughout the year 2002, the Compliance, Internal Control and Risk Policy Committee has closely monitored the Group s level of readiness with the Guidance. This Statement on Internal Control has been prepared in accordance with the Guidance and has been reviewed by the external auditors and subsequently approved by the Board of Puncak Niaga. For and on behalf of the Board of Puncak Niaga Holdings Berhad, Dato Seri Dr Ting Chew Peh Chairman Compliance, Internal Control and Risk Policy Committee 23 April 2003 Puncak Niaga Holdings Berhad Annual Report

81 Audit Committee Report The Board of PNHB is pleased to present the Audit Committee Report for the financial year Composition of the Audit Committee The Audit Committee comprises the following: Chairman: Encik Abdul Majid Abdul Karim (Independent Non-Executive Director) Members : Encik Mat Hairi Ismail (Executive Director, Finance) YBhg Dato Hari Narayanan Govindasamy (Independent Non-Executive Director) YB Dato Seri Dr Ting Chew Peh (Independent Non-Executive Director) Secretary : Madam Tan Bee Lian (Group Company Secretary) 2.Activities of the Audit Committee In its effort to further enhance the effectiveness and quality of its internal audit function, the Audit Committee has formally adopted the Guidelines on Internal Audit Function which were issued in July The Guidelines were prepared by a special taskforce set up with the guidance of the Securities Commission and published in July 2002 to complement the KLSE Listing Requirements and the Statement on Internal Control : Guidance for Directors of Public Listed Companies. Activities undertaken by the Audit Committee during the financial year 2002 were:- review of the Annual Audit Plan with the external auditors on the scope of their audit including audit procedures, significant accounting and auditing issues, impact of new or proposed changes in accounting standards and regulatory requirements; review of the Internal Audit Department s (IAD) Strategic Audit Plan to ensure sufficient coverage was accorded to all high risk areas of the Group s business and activities; monitored the implementation of IAD s Annual Audit Plan and any changes thereto; review of the major findings reported by IAD and Management s implementation of the recommended corrective actions; assessed the manpower capacity of IAD to ascertain that the department was adequately manned by appropriate employees with the right qualifications and experience to fulfil its responsibilities as a corporate resource in support of the Audit Committee; evaluated the standards of internal controls of the Group and financial reporting by holding regular discussions with Management on the overall adequacy of the Group s Internal Control System; acted upon the directives of the Board to investigate and report on issues relating to the management of the Group; reviewed the Group s compliance with the relevant government regulations; and assessed the performance of the Group s financial management. 3.Meetings of the Audit Committee The Audit Committee met five times in the financial year 2002 and the details of the attendance of each member of the Audit Committee are as per overleaf:- Puncak Niaga Holdings Berhad Annual Report

82 Audit Committee Report Audit Designation Designation in No. of Meetings No. of Percentage Committee in Audit PNHB held during Meetings % Member Committee the year attended Encik Abdul Chairman Independent Non Majid Abdul Executive Director Karim Encik Mat Member Executive Director, Hairi Ismail Finance YBhg Dato Member Independent Non Hari Narayanan Executive Director Govindasamy YB Dato Seri Member Independent Non Dr Ting Executive Director Chew Peh During the Audit Committee Meetings, IAD tabled its internal audit reports to the Audit Committee for deliberation and direction. Weaknesses of procedures were identified and the respective Heads of Departments were asked to take the necessary actions to rectify those weaknesses and improve on procedures and control mechanisms to prevent future occurrences of a similar nature. The Audit Committee also invited the external auditors to present their findings in respect of the Company s audited annual financial results before the Audit Committee submitted its recommendation to the Board for approval. Minutes of the Audit Committee Meetings were distributed to all members of the Board for notation and also tabled at the Board Meetings for further deliberation. At each Board Meeting, the Chairman of the Audit Committee reported and highlighted to the Board, all findings discussed by the Audit Committee. For year 2002, IAD initially planned its audit on departmental basis by reviewing the level of each Department s compliance with policy and procedures, statutory requirements, good industry practices, etc and identifying risks, which were peculiar to the respective Departments under review. However, in the second half of 2002, with the Audit Committee s consent, IAD focused on the enterprise-wide risks i.e risks that were identified during the brainstorming sessions of the Risk Management Scorecard Working Group (comprising Executive Directors and Senior Management). The enterprise-wide risks identified are risks facing the Group as a whole and the controls implemented to manage these risks are being managed by one or more departments in the Company. IAD played an important role in providing assurances to the Audit Committee and ultimately to the Board of Directors as to whether effective controls were being implemented in the monitoring and mitigation of the possible risk exposures affecting the Group. Set out below are some recommendations and assurances provided by IAD for year 2002:- 1. Inventory and Storage System at the SSP2 Water Treatment Plant Storehouse. 2. Increasing Receivables. 3. Inadequate Raw Water Quantity and Poor Raw Water Quality. Puncak Niaga Holdings Berhad Annual Report

83 Audit on Inventory and Storage System at the SSP2 Water Treatment Plant Storehouse The scope and objective of the audit included evaluating the accuracy and completeness of the inventory system through inventory verification to ascertain physical existence, storage system and recording system. In addition, IAD also conducted the assessment of software controls, securities facilities and adherence to established procedures. Generally, IAD concluded that the storehouse was well maintained, tidy and clean. Management agreed to look into ways to further enhance the current policies and procedures on the disaster recovery plan and other areas affecting the SSP2 Water Treatment Plant Storehouse. Audit on Increasing Receivables The objectives and the scope of the review were to assess the extent of level of comfort that could be placed on Management in controlling trade receivables. As at 31 May 2002, the short and long term trade receivables and the debt for the DSS2 project amounted to RM728 million, out of which RM195 million was the balance outstanding for the DSS2 project. Average collection from January 2001 to May 2002 was about 59% of the invoices billed. It was observed that the trade receivables is on the increasing trend as PUAS is only able to make partial settlement towards the monthly invoices raised by PNSB. Management is taking pro-active measures to develop proposals to the Selangor State Government to resolve the huge outstanding receivables. In general, IAD concluded that the billings, collection administration and records maintained by the Finance & Accounts Department were addressed satisfactorily. Audit on Inadequate Raw Water Quantity and Risk of Poor Raw Water Quality IAD noted the controls that were in place to manage the risk of inadequate raw water quantity and the risk of poor raw water quality. Dam Control Rules Curves have been developed to control the operation of Sungai Langat Dam, Klang Gates Dam and Tasik Subang Dam respectively. The curves give the maximum abstraction rate to ensure supply is available on a sustainable basis. There were close monitoring of rainfall pattern, weather, river flow and climatic changes. Environmental Impact Studies were carried out for the whole catchment areas to identify existing activities and potential sources of pollution and its effect on current and future water quality. Environmental investigations were carried out to look into specific environmental issues such as plant shutdowns, pollution, etc. Detailed Sanitary Survey Reports were submitted to the Menteri Besar of Selangor, PUAS, Jabatan Alam Sekitar Negeri Selangor and Jabatan Kesihatan Negeri Selangor for their further action. To further enhance the quality of raw water, regular raw water samplings were conducted by PNSB and an independent laboratory. On public educational programmes, PNSB implemented the River Rescue Brigade, Education Outreach Programme, visits to water treatment plants and participated in various exhibitions aimed at creating public awareness on the importance of protecting our raw water sources. Puncak Niaga Holdings Berhad Annual Report

84 Audit Committee Report 4.Terms of Reference of the Audit Committee a. Composition The Board shall elect an Audit Committee from amongst themselves (pursuant to a resolution of the Board of Directors), comprising of at least three (3) Directors where the majority of them should not be:- i. Executive Directors of the Company or any related corporation; ii. A spouse, parent, brother, sister, son or adopted son, daughter or adopted daughter of an Executive Director of the Company or any related corporation; or iii. Any person having a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgement in carrying out the function of the Audit Committee. The members of the Audit Committee shall elect a Chairman from amongst themselves who is not an Executive Director or employee of the Company or any related corporation. It would be advantageous if the Chairman possesses a strong personality, have knowledge and experience in financial reporting, good leadership skills and is keen to get financial reporting and controls right. All members of the Audit Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company. Should any member of the Audit Committee cease to be a Director of the Company, his membership in the Audit Committee would cease forthwith. It is desirable for membership on the Audit Committee to be rotated amongst all the Directors of the Company such that each Director will serve a period of three (3) years on the Audit Committee. If the members of the Audit Committee for any reason be reduced to below three (3), the Board of Directors shall within three (3) months of that event, appoint such number of new members as may be required to make up the minimum number of three (3) members. b.objectives The primary objectives of the Audit Committee are to:- i. Provide assistance to the Board in fulfilling its fiduciary responsibilities, particularly in the areas relating to the Company s accounting and management controls, financial reporting and business ethics policies. ii. Provide greater emphasis on the audit function by increasing the objectivity and independence of external and internal auditors and providing a forum for discussion that is independent of the Management. iii. Maintain through regularly scheduled meetings a direct line of communication between the Board and the external auditors, internal auditors and financial management. iv. Strengthen the role of Non-Executive Directors by improving their knowledge and understanding of the Company s operation. v. Undertake such additional duties as may be appropriate and necessary to assist the Board. However, whether or not the Audit Committee should undertake one or more of the additional duties rests on the Board s viewpoint on corporate needs and the environment in which the Company operates. Puncak Niaga Holdings Berhad Annual Report

85 c. Duties and Responsibilities In fulfilling its primary objectives, the Audit Committee will need to undertake the following duties and responsibilities:- c.1 Oversee All Matters Relating to External and Internal Audits i. Review the annual audit plan with the external auditors. The Committee shall meet with the external auditors prior to the commencement of the annual audit to discuss:- - The general outline of the extent and timing of the auditors proposed coverage of location such as branches, departments, factories, divisions and subsidiaries. - The nature of the audit procedures to be performed. - The extent of any planned reliance on the work of the internal auditors and the anticipated effect of this reliance on the examination. - Any significant accounting and auditing problems that the auditors can foresee. - The impact on the financial statements of any new or proposed changes in accounting standards or regulatory requirements. - The effect on the audit of significant data-processing systems. Following review of the plan, the Audit Committee may request the external auditors to perform additional audit work directed to specific areas of concern to the Committee. ii. Oversee the internal audit department. The Audit Committee in overseeing the internal audit department will:- - Review the audit programme, scope, performance and findings of the internal auditors. - Monitor the implementation of the programme so that sufficient internal audit coverage is accorded. In this respect, only the Committee can consider and approve or otherwise, all requests by Senior Management to utilise internal audit personnel for non-audit assignments. - Assess the capacity of the internal audit department to fulfil its responsibilities by considering, amongst other things, the scope of the department's authority as presented in the department's charter, the qualifications and experience level of its staff, the degree to which internal auditors are independent of the activities they audit and the reporting relationship between the head of internal audit and Senior Management. -To review the coordination of audit efforts between external and internal auditors, where practical, with a view to maximising audit effectiveness and controlling external audit costs. iii.review the assistance and cooperation given by the Company's officers to the external and internal auditors. iv. To nominate the external auditors for appointment. v. The external and/or internal auditors shall have the right to appear and be heard at any meeting of the Audit Committee and shall appear before the Audit Committee when required to do so by the Audit Committee. Puncak Niaga Holdings Berhad Annual Report

86 Audit Committee Report vi. Upon the request of the external and/or internal auditors, the Chairman of the Audit Committee shall convene a meeting of the Committee to consider any matters the auditors believe should be brought to the attention of the Committee. c.2 Evaluate the Standards of Internal Control and Financial Reporting i. Hold specific discussions with Senior Corporate Management to discuss the overall adequacy of the internal control system. ii. Meet with the internal and external auditors concerning their evaluation of the system of internal accounting controls. iii. Consider the nature and disposition of the relevant comments appearing in the reports prepared by the internal auditors and in the external auditors management letter. c.3 Review of Financial Statements i. Meet with the Management and the external auditors to discuss the annual financial statements of the Company or Group and the results of the audit before recommending approval by the Board. ii. Review the nature and resolution of any significant accounting and auditing problems encountered during the examination. iii. It is good practice for the Audit Committee to meet the Management at a regular interval to review the results of the Company or Group, such as quarterly review of the results. iv. Review the nature of any related party transactions that may arise within the Company or Group. v. Review the nature of any significant adjustments, reclassifications or additional disclosures proposed by the external auditors that are currently significant or may become significant in the future. vi. Review the adequacy of disclosure of the impact of any changes during the year in accounting policies, standards and/or regulatory requirements. vii. Review the reasons for the major fluctuations in financial statement balances for the current year compared to prior years. viii.review for any unusual circumstances or situations reflected in the financial statements, including identifying any marginal operations. ix. Review the nature of any unusual or significant commitments or contingent liabilities. x. Review of any significant differences between the annual report and other reports, such as reports to the regulatory agencies. xi. Review for any significant differences in format or disclosure from industry norms. c.4 Additional Duties and Responsibilities i. Act upon the Board of Directors request to investigate and report on any issues or concerns in regard to the management of the Company. ii. Review the Company s business ethics code, the method of monitoring compliance with the code and the disposition of reported exceptions. iii. Review executive expenses. iv. Review policies on sensitive payments. Puncak Niaga Holdings Berhad Annual Report

87 v. Review compliance with certain government regulations. vi. Review policies to avoid conflicts of interest and review past or proposed transactions between the Company and members of the Management. vii. Review certain aspects of the Company s pension plan and compliance with relevant laws and regulations. viii.assess the performance of financial management. ix. Such other functions as may be agreed to by the Audit Committee and the Board of Directors. d. Access to Records In carrying out their duties and responsibilities, the Audit Committee will in principle have full, free and unrestricted access to all Company records, property and personnel. e. Meetings and Minutes It is good practice for the Audit Committee to hold a minimum of four (4) meetings a year, although additional meetings may be called at any time at the Chairman s discretion. It would be desirable that the notice of meetings be sent at least seven (7) days before the time set for the meeting together with an agenda to all members of the Committee and any persons that may be required to attend. The recommended quorum for each meeting shall be three (3) members. In addition to the Committee members, the head of internal audit will normally be in attendance at the meetings. Representatives of the external auditors are to be in attendance at meetings where matters relating to the audit of the statutory accounts and/or the external auditors are to be discussed. The Chief Executive Officer and/or other appropriate officers may be invited to attend, except for those portions of the meetings where their presence is considered inappropriate, as determined by the Committee Chairman. Minutes of each meeting shall be kept and distributed to each member of the Committee and also to the members of the Board. The Committee Chairman shall report on each meeting to the Board. The Secretary to the Audit Committee shall be the Company Secretary. Puncak Niaga Holdings Berhad Annual Report

88 Risk Management Policy & Report RISK MANAGEMENT POLICY The Board has approved the following Group s Risk Management Policy Statement: "The Puncak Niaga Group s Risk Management Policy is to identify, measure and control risks that may prevent the Group from achieving its objectives. Our challenge is to apply risk management to all parts of our business to ensure business risks are minimised and opportunities enhanced. We will achieve, maintain and review a proper risk management system. This commitment is driven by the Board of Directors, which in turn is implemented by the Management and extends to all employees of the Group. This policy statement assigns responsibility for risk management to all Puncak Niaga Group employees and acknowledges that corporate responsibility lies with the Board of Directors of the Puncak Niaga Group." RISK MANAGEMENT REPORT There are risks faced by all companies in the various facets of their corporate lives. The nature of such risks including systemic, market, employees, economic, legislation, financial and others, need to be identified and managed to reduce the possibility and impact of any adverse effects. Puncak Niaga recognises this and has initiated risk management programmes to ensure its business risks are minimised and opportunities enhanced. The Board of Puncak Niaga established the following framework in October 2001, for the management of the Group s corporate risks:- 1. Group s Risk Management Policy Statement. 2. Formation of the Compliance, Internal Control and Risk Policy Committee. 3. Terms of Reference of the Compliance, Internal Control and Risk Policy Committee. 4. Setting up of a Risk Management Section, which reports to the Compliance, Internal Control and Risk Policy Committee. As a follow-up from the Strategic Corporate Risk Management Workshop held for the Board and Senior Management in August 2001, information on Risk Management has been fully disseminated to all employees in the form of booklets, posters and through the Group s internal communications network. In addition, the risk management framework which was established in October 2001 has since then been fully implemented by the Management and employees of Puncak Niaga. Puncak Niaga Holdings Berhad Annual Report

89 COMPLIANCE, INTERNAL CONTROL AND RISK POLICY COMMITTEE (CICR) The establishment of the CICR was formalised by the Board in October The members of the CICR comprise the following:- Chairman : YB Dato Seri Dr Ting Chew Peh (Independent Non-Executive Director) Members : En Ruslan Hassan Executive Vice Chairman (Head of Compliance, Internal Control and Risk Policy Committee) Mr Ng Wah Tar General Manager, Finance and Accounts Department En Sonari Solor General Manager, Internal Audit Department Madam Tan Bee Lian Senior General Manager, Secretarial Department Secretary : En Mohammed Sofian Ismail Manager, Internal Audit Department (Head of Risk Management Section) There was no change in the membership of the CICR during the year TERMS OF REFERENCE OF THE CICR The CICR shall provide assistance to the Board of Directors of Puncak Niaga in discharging its fiduciary responsibilities relating to safeguarding shareholders investment and the Group s assets through a structured approach to Risk Management. The primary responsibilities of the CICR are:- Formulating strategies to manage the overall risks associated with the Group s activities. This entails decisions on:- º Long-term and short-term strategies. º Justifiable capital allocation based on return per unit of risk. Recommending the appropriate risk management policies and procedures, which shall be reviewed frequently to ensure consistency with fundamental changes in the economy, market conditions and regulations. To periodically review the Group s overall objectives by assessing the current risk portfolio composition and determining the desired exposures of each major area of risk. To monitor and assess the risk portfolio composition of significant activities of the Group. To keep abreast of both current risk management techniques and theories, and any possible or actual changes in the regulatory environment, and to recommend the appropriate action. Puncak Niaga Holdings Berhad Annual Report

90 Risk Management Policy & Report CICR ACTIVITIES Meetings held and attendance During the year 2002, the CICR held five meetings and the attendance of the CICR members is as follows:- (i) Meetings chaired by YB Dato Seri Dr Ting Chew Peh (Chairman of CICR) Name Designation Designation in Meetings invited Meetings Percentage in Committee PNHB Group to attend attended % YB Dato Seri Dr Chairman Independent Non Ting Chew Peh Executive Director Mr Ng Wah Tar Member General Manager Encik Sonari Solor Member General Manager Madam Tan Bee Lian Member Senior General Manager Encik Mohammed Secretary Manager Sofian Ismail (ii) Meetings chaired by Encik Ruslan Hassan (Head of CICR) Name Designation Designation in Meetings invited Meetings Percentage in Committee PNHB Group to attend attended % Encik Ruslan Hassan Head Executive Vice Chairman Mr Ng Wah Tar Member General Manager Encik Sonari Solor Member General Manager Madam Tan Bee Lian Member Senior General Manager Encik Mohammed Secretary Manager Sofian Ismail At its meetings, the CICR reviewed in detail, the Status Reports prepared by the Risk Management Section. The issues covered included the following:- 1. The level of readiness of the Group and the respective Divisions and Departments with regard to the Statement on Internal Control requirements. 2. The progress of the risk assessment and risk monitoring exercises at Departmental, Divisional and enterprise-wide levels. 3. The results of enterprise-wide risk audits carried out by the Internal Audit Department. Puncak Niaga Holdings Berhad Annual Report

91 4. The review to ascertain the effective utilisation of the Corporate Risk Scorecard software to identify, measure and monitor all corporate risks identified within the Group. 5. Other relevant risk issues affecting the Group, from time to time. RISK MANAGEMENT SCORECARD WORKING GROUP & ENTERPRISE-WIDE RISKS The Group recognises that Risk Management involves a structured approach, combining the efforts of all functions within the Group, to minimise the possibility and impact of unexpected damages so as to contribute towards greater efficiency and better decision making. The Risk Management Scorecard Working Group comprising all Executive Directors and the Heads of Departments held a total of 37 brainstorming sessions from October 2001 to April 2002 to comprehensively develop the Group s Risk Profile and to set up the various key controls and process requirements across all functions. These are subsequently updated annually after taking into consideration the changing risk profiles as dictated by changes in the business environment, strategies and functional activities of the Group from time to time. The Group s Risk Profile has been recently reassessed by the Risk Management Scorecard Working Group in early 2003 in order to ensure that the Group s Risk Profile is up-to-date. DIVISIONAL AND DEPARTMENTAL RISKS The respective Heads of Divisions/Departments are responsible for assessing and managing their Divisional/Departmental risks. Using the Corporate Risk Scorecard software, the Heads of Divisions/Departments have submitted their detailed risk scorecard reports to the Risk Management Section on a regular basis. The first risk scorecard reports were finalised by all Divisions/Departments in the first half of year These reports which documented the controls and processes for managing the risks for purposes of assessing the effectiveness of the controls, were then subsequently updated quarterly, i.e. as at 30 September 2002 and 31 December 2002 respectively. CORPORATE RISK SCORECARD SOFTWARE The Group invested in a risk management tool namely, the Corporate Risk Scorecard (CRS) software in October 2001, to identify, measure and manage all corporate risks affecting the Group. The CRS software offers a systematic approach to the management of enterprise-wide risks facing corporations. The CRS software, inter alia, assists the Management of Puncak Niaga to successfully achieve their corporate objectives. It was implemented at Enterprise and Divisional/Departmental levels within the Puncak Niaga Group in October 2001 and was fully completed in April The risk scorecard reports produced by the CRS software, incorporates the strategy, objectives, controls, management action plans, gross and nett risk ratings. In July 2002, the CRS software was further upgraded to Version 2, wherein a multitude of enhanced and additional features were incorporated in the CRS software to facilitate more comprehensive Risk Management techniques. With the upgrade to Version 2, the Group s Risk Assessment function is now linked to the compliance/audit aspect within the Enterprise-wide Risk Management Framework and enables all key risk activities of the Group to be synchronised. Puncak Niaga Holdings Berhad Annual Report

92 Risk Management Policy & Report GROUP RISK MANAGEMENT ORGANISATION BOARD Compliance, Internal Control and Risk Policy Committee Chairman Independent Non-Executive Director Head Executive Vice Chairman Define risk strategies and policies Implement risk strategies Compliance, Internal Control & Risk Policy Committee Board Understand the risks affecting the Group Ultimately responsible for managing risks Ensure overall effectiveness of controls and risks Approve risk management strategies and policies Risk Management Section Section Head Selected personnel totally involved in this activity Full time support to Compliance, Internal Control and Risk Policy Committee Carry out day-to-day risk management function Risk Management Section Risk Management Scorecard Working Group Heads of Departments and Directors Brainstorms Risk Profile at Group level Puncak Niaga Holdings Berhad Annual Report

93 Investor Relations Policy & Report INVESTOR RELATIONS POLICY As a responsible corporate citizen, Puncak Niaga is totally committed to upholding the highest standards of transparency, accountability and integrity in the conduct of our business activities in the best interest of our shareholders as well as to allow potential investors to make careful and informed investment decisions based on full and transparent disclosure of information. Puncak Niaga s Investor Relations Policy aims to build long-term relationships and credibility with our shareholders and potential investors based on trust, honesty, openness, transparency and sound understanding of the Company. Investors Briefing on Puncak Niaga s financial results To achieve its objectives, the Company will endeavour to undertake the following:- 1.Creating Quality Dialogue To create an environment where the effective bilateral communication between the Company and our shareholders and investors both informs and educates through regular, open and transparent provision of relevant and invaluable information over the long-term which will build mutually beneficial long-term relationships vis-à-vis to foster a clearer understanding of the shareholders and investors expectations of the Company. To engage in quality dialogue with our shareholders and investors whereby the relationship is based on the principles of honesty, openness and transparency and to foster mutual understanding between the Company and our shareholders and investors. To reap the benefits of engaging in quality dialogue:- º perception on our Company s risk is reduced; º enhance feedback of our Company s performance; º our Company s share valuation becomes more realistic; º develop confidence in our Management team and management style; and º works as a guide in the evaluation of our Company s business strategy. 2.Investor Communications Statement To implement an efficient and effective Investor Relations Programme as part of our ongoing shareholders and investors communication obligations. To provide high quality, meaningful and timely information over and above that is required by law in order to improve the shareholders and investors understanding of our Company. To strive for key competence in the area of professional investor relations vide adequate resources and capability. To earn the trust, respect and confidence of our existing shareholders and investors. To build and maintain long-term relationships with our existing shareholders and investors. To initiate long-term relationship building with potential shareholders and investors. Our commitment to the above Policy is driven by the Board of Directors of Puncak Niaga Group and implemented by the Management. Puncak Niaga Holdings Berhad Annual Report

94 Investor Relations Policy & Report INVESTOR RELATIONS REPORT The Company s Investor Relations Policy, which is founded on the Investor Communications Statement, provides the framework for formulating the Company s investor relations activities and support infrastructure for investor relations. The Investor Communications Policy is structured towards improving the market s perception and understanding of the Company and its business. YBhg Datuk Azlan Zainol, Chief Executive Officer of EPF listening attentively to the Company s briefing In pursuit of building a long-term relationship with its shareholders and institutional investors, the Board has set up an Investor Relations Unit under the purview of the Company s Secretarial Department to maintain an open and transparent channel of communication with the shareholders and institutional investors. A dedicated address, investors@puncakniaga.com.my was set up in year 2002 for the purpose of facilitating open communication with the shareholders and investors as an avenue for them to direct their enquiries. The Investor Relations Unit also maintains a record of the shareholders and investors addresses and updates them regularly on the Company s latest developments. A journal recording all forms of communication whether through mail, fax, or telephone is kept and reviewed by the Group Company Secretary to ensure that all shareholders queries are recorded and attended to promptly. During the reporting period, the Company received numerous queries including one from a shareholder regarding the Put Option Date for the Company s Redeemable Unconvertible Junior Notes (RUN) and another from an overseas analyst regarding the Company s capital structure. The Company also regularly receives commendations from shareholders via its investor relations address. Mr Tan Lee Seng wrote, Thank you for sending us the write ups on Puncak Niaga Group while Mr Tan Chong Suew ed Thank you for keeping shareholders informed on the great achievement of the Company. Please convey my heartfelt congratulations to the entire team. Keep up the great job. These are just a couple of excerpts from the s received by the Company in year In addition to the Annual Reports that are sent to the shareholders and the Quarterly Financial Results that are announced to the Kuala Lumpur Stock Exchange (KLSE) for public release, the Company also makes timely public announcements of corporate proposals and material information to the KLSE in accordance with the Listing Requirements of the KLSE. The Company s general meetings is yet another forum for the Company to build its rapport and relationship with its shareholders. Shareholders are encouraged to attend and participate at these meetings by raising questions on the resolutions proposed and to enquire on the affairs of the Group. Our Senior Independent Non-Executive Director, YB Dato Seri Dr Ting Chew Peh has also availed himself to attend to any queries that the shareholders may have. In year 2002, the Investor Relations Unit organised three analyst briefings and more than 50 dialogues were held with various financial analysts, local and foreign research and investment houses as part of the Company s ongoing investor relations programme. Puncak Niaga Holdings Berhad Annual Report

95 The Company was also invited to participate in the Mayban Securities International Investors Conference organised by Mayban Securities Sdn Bhd from 2-4 August 2002 at The Andaman Datai Bay, Langkawi. At the conference, the Company gave a presentation on the Company s development and outlook. YBhg Tan Sri Rozali Ismail receiving a souvenir at the Mayban Securities International Investors Conference During the KLSE Investors Week 2002 which was held at the Exchange Square from September 2002, the Company took up two exhibition booths and gave a onehour Company presentation to approximately 80 analysts and investors. In view of the encouraging response from investors during the KLSE Investors Week, the Company will continue to support the KLSE in this event in the coming years for the following reasons:- a) To further stimulate the interest of potential investors through an effective and direct dissemination of information on the Group s business activities, market position, revenue flows, management and control structures of the Group; b) To promote the Company s corporate image to the public so as to create a distinction from its competitors and to correct any public misconception arising from the Company s business activities; and c) To promote and stimulate growth in the Malaysian capital market. Our employees who were involved in the KLSE Investors Week 2002 have also gained invaluable experience from the interaction and communication with the investing public. In gaining knowledge of the investors motivation and fears over their investments in general and in PNHB in particular; has helped the Company in the formulation of its strategies in addressing all investor-related issues, whether real or imagined. At the request of the Employees Provident Fund Board (EPF), a major shareholder of the Company, a Company briefing was arranged for seven senior representatives of EPF on 25 November 2002 at the Company s premises. The EPF delegation was headed by its Chief Executive Officer, YBhg Datuk Azlan Zainol. Our Financial Advisor taking questions from the press and analysts during the KLSE Investors Week 2002 The Company s website, is accessible for our shareholders, investors and members of the public to obtain information on the Company. Shareholders, investors and the public are also encouraged to communicate any comments, feedbacks, views, concerns and queries to the Company via our addresses, i.e corpcom@puncakniaga.com.my (public enquiries) or investors@puncakniaga.com.my (investors enquiries), to enable us to further improve on our level of operations and service to the community and to achieve our Vision as The Leading And Dynamic Integrated Water Services Company. Puncak Niaga Holdings Berhad Annual Report

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98 Ensuring Our Future

99 Environmental Policy & Report

100

101 MALAYSIA S WATER SPECIALIST

102

103 Environmental Policy & Report ENVIRONMENTAL POLICY Puncak Niaga, a water treatment specialist company, is committed to continuous improvements in protecting the environment, minimising pollution, conserving natural resources and operating its facilities in an environmentally sound manner. Clear water at Sungai Kancing, Taman Rimba In accordance with its Environmental Policy, the Company shall:- 1.Established an Environmental Management System sets objectives and targets for improvement of environmental performance; develop and implement programmes and activities in line with our Environmental Policy; emphasise the prevention of pollution in our activities; and develop and implement procedures to avoid and manage incidents which may have an adverse environmental impact. 2.Compliance to Requirement fully comply with all applicable environmental laws, regulations and standards including the National Standards and Malaysian Regulations and other requirements relevant to the water industry; establish an internal environmental control standard/system, where applicable, in order to comply with the requirements; and to operate in a manner that provides for environmental specifications and sensitivity to the environmental needs of the community, where practicable. 3.Monitoring and Controlling of Environmental Issues continuously monitor and control the environmental parameters for environmental performance improvement; implement pollution reduction programmes where feasible to minimise the environmental impact from hazardous materials, noise and wastewater; and develop and implement continuous programmes on the management of scheduled and non-scheduled waste incorporating the 4R Concept, i.e. Refrain, Reuse, Recycle and Reduce. Clear water at Sungai Batang Kali 4.Communication and Training communicate and create awareness of the Company s Environmental Policy and environmental issues amongst our employees, contractors, visitors and interested members of society; and encourage our employees in environmental initiatives and support them with training and awareness programmes in environmental issues. Puncak Niaga s Environmental Policy shall be reviewed by Management from time to time for possible revisions in light of changing conditions.

104 ENVIRONMENTAL REPORT The level of pollution in the waterways feeding the dams and water treatment plants significantly impacts on our performance to produce water to the required Drinking Water Quality Standards stipulated by the Ministry of Health. The various initiatives taken by us to safeguard the environment, not only benefits the country as a whole, but also contributes to a better and healthier standard of living for our community, through access to clean water. Physical safeguards and water pollution monitoring procedures are in place to detect pollution before the pollution load reaches the intake in the waterways. Even though we do not have the legislative powers to stop polluters, our close cooperation with the Department of Environment (DOE), local enforcement authorities, the Ministry of Health and other governmental agencies have assisted us to preserve the environment and ensure the sustainability of our business activities. The main causes of raw water pollution are accidental spillage of contaminants, illegal discharge or dumping of raw sewage or chemicals and siltation due to indiscriminate land development. All these factors regularly cause disruptions and hinder our operations at the water treatment plants. Raw Water Violations Based on the monthly analysis carried out by a certified independent laboratory, there were 909 cases of raw water quality violations in year 2002 (compared to 957 cases recorded in year 2001). This represents a reduction of 5.02%. Our vigilance in reporting violations to the authorities has helped in identifying sources of raw water pollution leading to action being taken against some of the polluters. In year 2002, there were 175 cases of plant shutdowns due to raw water pollution, mostly due to high turbidity and colour levels. With our assistance, the DOE was able to trace the source of pollution and act against the polluters. Several meetings were held between the DOE State of Selangor and the DOE State of Negeri Sembilan, to discuss raw water pollution problems at the Sungai Labu catchment area leading to shutdowns at the Rubbish dumping along Sungai Selangor, contributing to water pollution Soil erosion by the banks of Sungai Sembah Earthworks activities at the banks of Sungai Selangor

105 Salak Tinggi Water Treatment Plant. These meetings resulted in the formation of a joint watch group involving both states to monitor the pollution load at the Sungai Labu catchment area. Our Company s toll free river watch line, , has been in operation since April It enables the public to report any incidences of pollution or to bring to the Company s attention, cases of parties polluting the waterways, such as indiscriminate dumping of untreated waste, illegal sand mining activities, illegal logging activities and others. Raw Water Quality Monitoring Initiatives We are commited in discharging our responsibility to ensure that the treated water produced from our water treatment plants are safe and of the highest quality. The quality of the raw water at the intake and the treated water as it leaves the water treatment plants are monitored and laboratory tested at frequent intervals, as follows:- Once every two hours daily, on a 24-hour basis against normal days quality standards of three physical and six chemical parameters; Daily, for microbiological parameters and on a weekly basis by the Ministry of Health; and Monthly, for all parameters by an accredited independent laboratory according to the schedules set by the Ministry of Health. Water is regularly tested to ensure it complies with quality standards The quality of water is monitored at every stage of the process i.e. from the point of entry at the intake of the water treatment plant, to the settled water and until it leaves the water treatment plant at the balancing reservoir. In addition to the above, we also adhere strictly to the following:- Water Quality Compliance monitoring is conducted to ensure the raw, settled and treated water of the water treatment plants complies with the Standards set out in the Privatisation Cum Concession Agreement (PCCA), Construction Cum Operation Agreement (CCOA) and the Ministry of Health s Drinking Water Quality Standards; Fluoride levels in the treated water are also monitored regularly and reports are submitted to the Dentistry Office of the Ministry of Health; and Treated Water Compliance daily monitoring on minimum and maximum levels of key parameters. River Gated Weir is used to regulate the river level for water extraction Monitoring the status of the water treatment process The Company conducts regular sanitary surveys to identify potential polluters of raw water sources either jointly with the Ministry of Health or independently. A total of six sanitary surveys were conducted in year 2002, bringing the total sanitary surveys conducted since year 1998 to 38. Environmental impact investigations, which are preliminary forms of sanitary surveys, continue to be carried out in year These investigations highlighted the following sources of pollution:- Effluent discharges from industrial and inefficient sewage treatment plants; Domestic waste from local residential areas; Deforestation and earthworks contributing to surface run-off and soil erosion;

106 Environmental Policy & Report Leachate from illegal dumping sites; Agricultural and livestock farming activities; and Encroachment and recreation along the riverbanks and within the dam catchment areas. The River Warning Monitoring System (RWMS) installed at Sungai Langat and Sungai Selangor respectively continue to provide advance warning of possible raw water violations based on selected physical and chemical parameters. The RWMS analyses water using standard methodologies of selected parameters and gives prior warning to the water treatment plants of potential polluted raw water from the rivers before it reaches the water treatment plant. River Warning Monitoring System Dam Safety Management In the area of dam safety management, we have implemented a programme to constantly survey and monitor the dam area. The programme includes:- daily observation on the dams general area, structure and water quality; monthly visual inspection of dam areas, particularly along the dam embankments and upstream tributaries. Should there be any abnormalities detected, environmental investigations will be carried out; monthly raw water pipeline and downstream river monitoring for any signs of structural faults, contamination or encroachment; scheduled water quality sampling and analysis at selected stations within the dam areas and incoming tributaries within the catchment areas; and inspection by an independent dam consultant at five-year intervals. Sludge Thickening Tanks Sludge Treatment at Water Treatment Plants The water treatment plants taken over by us under the PCCA were not equipped with proper facilities for sludge treatment. As such, we have proposed to the Selangor State Government to build sludge treatment facilities at all of the 26 water treatment plants under the PCCA in stages. Perbadanan Urus Air Selangor (PUAS) has been assigned to study and implement the proposal. Protective emergency response suits For the SSP2 Water Treatment Plant, four sludge lagoons were constructed at our own cost. Similarly, for the Wangsa Maju Water Treatment Plant, a sludge treatment plant would also be constructed at our own cost as our contribution towards environmental protection. Chlorine Safety As chlorine is a major hazard to the environment, all water treatment plants have provided a specific chemical building whereby exhaust fans are installed to operate automatically to disperse gas in minute quantity upon the sensor detecting the presence of chlorine gas. However, should the chlorine gas level exceed five milligrams per litre, the ventilation fans will automatically close and the chemical building will be sealed to prevent the chlorine gas from escaping into the atmosphere. The major water treatment plants have been installed with Chlorine Scrubber Systems. The system will be activated automatically to neutralise any chlorine gas trapped in the chemical building in the event of leakage before the neutralised gas is allowed to be discharged into the atmosphere.

107 In addition to the above safety arrangement, our selected employees have also been trained at the chlorine manufacturer s premises to handle chlorine leaks and they have been equipped with the necessary equipment. Periodic drills are conducted under the Water Treatment Plant Emergency Response Plan and the employees have been made to familiarise themselves with the action required of them, to investigate and seal the leak should it occur. ISO 14001:1996 Certification - Environmental Management System The Company s business processes that may have environmental impact are constantly under review and, where necessary, modified with the adoption of best practices in balancing environmental sensitivities. In this connection, the SSP2 and Wangsa Maju Water Treatment Plants target to obtain the Environmental Management System ISO 14001:1996 certification by May 2003 and December 2003 respectively. Environmental Rejuvenation & Protection Our ongoing commitment to the preservation of the environment and natural habitat, is aptly demonstrated in the beautification of the landscape surrounding the Bukit Gasing Pumping Station, where an extensive tree planting and landscaping project was completed in year The exercise resulted in the restoration of a large green lung area affected by the construction of a reservoir. This project shall be the model for the reforestation and landscaping of sites affected by the Company s future projects. There are also extensive landscaping works at both the SSP2 and Wangsa Maju Water Treatment Plants. They have become our showcase projects, demonstrating our commitment for technological innovations in our development activities, made with a conscious effort at environmental preservation and conservation. We are conscious of the possible environmental impact from our business activities. Research & Development activities into design of water clarification processes using mechanical means instead of chemicals are on-going. Efforts for development of optimal chemical dosing levels are made to reduce the chemical loads in water. This will ensure the safest standards for water quality to not only safeguard the consumer s health but to also safeguard the riverine flora and fauna. QCC Presentation on chemical dosage Reforestation at Bukit Gasing Pumping Station

108 The Company s efforts in environmental protection are highlighted in the Company s in-house newsletter, KITA, which is circulated to all employees to raise their level of awareness on rivercare and environmental protection and the impact of their work on the environment. Rivercare Awareness and Educational Programmes Puncak Niaga will continue to support all efforts by the Governmental and non-governmental agencies towards the protection and conservation of the environment by participating in various exhibitions and programmes aimed at creating public awareness on the importance of protecting our water sources. On our own, we have also been aggressively inculcating rivercare awareness and the importance of environmental protection amongst school children through our River Rescue Brigade and Educational Outreach Programmes. We have spent RM135, on both programmes during the year The programmes have been designed to educate the younger generation on the importance of potable water production and the effects and prevention of river pollution. Activities include visits to the water treatment plants, river cleaning projects, as well as theoretical education on the causes of pollution. River Rescue Brigade No. 9 A bi-monthly newsletter entitled DIDI Newsletter is produced and distributed to members of the River Rescue Brigade to keep them updated on current water issues. The success of these programmes and activities has persuaded Puncak Niaga to extend its reach by introducing the newsletter to a wider audience. There are also plans to set up a Perkhemahan Alam Sekitar or Summer Camp for the River Rescue Brigade members. Educational Outreach Programmes held in year 2002 Programme Date Venue No April 2002 Sekolah Kebangsaan Pandan Indah, Ampang April 2002 Sekolah Rendah Jenis Kebangsaan (Cina) Yit Khwan, Tanjung Karang May 2002 Sekolah Kebangsaan Bandar, Banting June 2002 Sekolah Kebangsaan Seksyen 18, Shah Alam July 2002 Sekolah Kebangsaan Dato Abu Bakar Baginda, Sepang, Kajang July 2002 Sekolah Kebangsaan Kuala Selangor August 2002 Sekolah Kebangsaan Gombak Setia, Kuala Lumpur September 2002 Sekolah Rendah Jenis Kebangsaan Tamil Vivekananda, Petaling Jaya October 2002 Sekolah Kebangsaan Bukit Beruntung, Rawang November 2002 Sekolah Kebangsaan Klang. Educational Outreach Programme No. 18 Educational Outreach Programme No. 21

109 THE FUTURE IS ALSO IN YOUR HANDS Each and every one of us has a part to play in ensuring our future. Here are a few simple steps we can take to save water, prevent pollution and help improve the quality of our rivers and drinking water in our daily routine. 1. Repair leaky taps and toilets as soon as you notice them - help save up to 300 litres of water a day. 2. Turn off the tap while brushing your teeth, shaving and washing the dishes - save litres each time. 3. Run the washing machine and dishwasher only when they are fully loaded - save between 1,500-2,500 litres of water each month. 4. Recycle water when there may be another use for it - e.g. for watering plants or garden. 5. Sweep off, instead of hosing, the driveway or patio - save 650 litres of water and prevent contaminants such as dirt, motor oil, fertilisers and animal waste from flowing into our rivers. 6. Install water-saving showerheads and high-performance, low-flush toilets - save up to 90 litres a day per person, or up to 75,000 litres of water a year per family of four. 7. Fix car leaks promptly - help prevent contaminants such as motor oil and other fluids from flowing down our streets, through the monsoon drains and into our rivers. 8. Water your lawn and garden only in the morning or evening - water evaporates quickly during the middle of the day. 9. Report all significant water losses to the respective authorities - e.g. broken pipes, open hydrants, etc. 10. Buy and use environmentally friendly products - choose safer, multi-purpose cleansers marked with only a Caution warning, rather than Poison and Danger on the label. Remember, every drop counts. You can make a difference.

110 Organisational Safety & Health Policy It is the policy of Puncak Niaga to provide, so far as is practicable pursuant to Section 15 of the Occupational Safety and Health Act, 1994 and all other relevant legislations, a safe and healthy working environment for all its employees, and in the spirit of consultation and cooperation, the Management and employees shall together strive to achieve the established goals and objectives of this policy. Without prejudice to the generality of the above statement, the Organisational Safety & Health Policy of Puncak Niaga is:- to provide and maintain a safe place and system of work; to ensure that all the employees are informed, instructed, trained and supervised on how to perform their jobs safely and without risk to health; to investigate all accidents and near-misses and to take corrective measures to ensure that accidents or near-misses will not recur; to comply with all legal requirements on safety and health as stipulated in the Occupational Safety and Health Act, 1994, the regulations made under it and the approved codes of practices; and to review this policy as and when appropriate. Safety Drill at Bukit Nanas Water Treatment Plant Safety talk conducted by Bomba dan Penyelamat Wilayah Persekutuan at Bukit Nanas Water Treatment Plant Puncak Niaga Holdings Berhad Annual Report

111 Quality Policy Water Treatment Plant employee at work Wangsa Maju Water Treatment Plant accredited with ISO 9002 It is the policy of Puncak Niaga to provide quality services to fulfil its contractual obligations to the Selangor State Government. Puncak Niaga shall strive to consistently meet the quality standards pre-determined in the PCCA and CCOA. Puncak Niaga is fully committed to perform all its obligations under the PCCA and CCOA with full responsibility, due diligence and efficiency. To Be The Leading And Dynamic Integrated Water Services Company, we shall adopt a quality management system based on internationally recognised standards, which will ensure a planned, systematic and proactive approach to quality in all aspects of our work. Puncak Niaga s quality management shall be characterised by:- proactiveness at all levels; the consistent application of Right First Time Every Time principle; empowerment of employees to solve problems expeditiously; and a culture of continuous improvement and teamwork. All employees shall share the responsibility to understand and diligently implement the Quality Policy. Puncak Niaga Holdings Berhad Annual Report

112 Newspaper Clippings Puncak Niaga Holdings Berhad Annual Report

113 Puncak Niaga Holdings Berhad Annual Report

114 Newspaper Clippings Puncak Niaga Holdings Berhad Annual Report

115 Puncak Niaga Holdings Berhad Annual Report

116 Enriching the Lives We Touch Puncak Niaga Holdings Berhad Annual Report

117 The river is rich in its usefulness. It cleanses, nourishes, transports and generates growth wherever it flows. Like the river, Puncak Niaga seeks to enrich the lives we touch through our products and services. As the leading water specialist in the country, we are committed to deliver the best returns in value to our customers and shareholders alike. Puncak Niaga Holdings Berhad Annual Report

118 Distribution Schedule Of Equity Securities & Property ORDINARY SHARES AS AT 29 APRIL 2003 Authorised Capital Issued and Paid-Up Capital Nominal Value : RM1,000,000,000 : RM439,278,000 : RM1.00 per ordinary share Holdings No. of Holders % of Holders Total Holdings % of Issued Capital less than 1, , ,000-10,000 8, ,762, , ,000 1, ,550, ,001-21,963,899 (less than 5% of issued capital) ,657, ,963,900 (5% of issued capital) and above ,156, TOTAL 10, ,278, Largest Shareholders As Per Record of Depositors No. of % of Issued Name of Shareholders Shares Held Capital 1.Amsec Nominees (Tempatan) Sdn Bhd 85,013, AmFinance Berhad For Central Plus (M) Sdn Bhd 2.Central Plus (M) Sdn Bhd 47,564, Employees Provident Fund Board 37,579, AMMB Nominees (Tempatan) Sdn Bhd 17,026, AmTrustee Berhad For Central Plus (M) Sdn Bhd (7/914-8) 5.RHB Capital Nominees (Tempatan) Sdn Bhd 16,000, Pledged Securities Account For Central Plus (M) Sdn Bhd (TSR ) 6.Central Plus (M) Sdn Bhd 11,723, CIMB Nominees (Tempatan) Sdn Bhd 8,720, Commerce International Merchant Bankers Berhad 8.Malaysia Nominees (Tempatan) Sendirian Berhad 8,344, Great Eastern Life Assurance (Malaysia) Berhad (Par 1) 9.Bank Kerjasama Rakyat Malaysia Berhad 7,000, Pledged Securities Account For Kumpulan Darul Ehsan Berhad 10. AmFinance Berhad 6,523, Pledged Securities Account For Central Plus (M) Sdn Bhd 11. Corporate Line (M) Sdn Bhd 6,134, HLG Nominee (Tempatan) Sdn Bhd 5,023, PB Trustee Services Berhad For HLG Growth Fund Puncak Niaga Holdings Berhad Annual Report

119 30 Largest Shareholders As Per Record of Depositors No. of % of Issued Name of Shareholders (continued) Shares Held Capital 13. Malaysian Assurance Alliance Berhad 5,000, Mayban Nominees (Tempatan) Sdn Bhd 4,197, Mayban Trustees Berhad For Affin Equity Fund (930090) 15. Amanah Raya Nominees (Tempatan) Sdn Bhd 4,000, Amanah Saham Malaysia 16. Malaysia Nominees (Tempatan) Sendirian Berhad 3,600, Pledged Securities Account For Kumpulan Perangsang Selangor Bhd ( ) 17. Kumpulan Wang Amanah Pencen 3,500, Universal Trustee (Malaysia) Berhad 3,343, CMS Premier Fund 19. Amanah Raya Nominees (Tempatan) Sdn Bhd 3,238, Amanah Saham Wawasan AllianceGroup Nominees (Tempatan) Sdn Bhd 3,000, Alliance Merchant Nominees (Tempatan) Sdn Bhd For Kumpulan Darul Ehsan Berhad 21. Malaysia National Insurance Berhad 2,619, AMMB Nominees (Tempatan) Sdn Bhd 2,514, AmTrustee Berhad For HLG Penny Stock Fund (5/4-3) 23. Amanah Raya Nominees (Tempatan) Sdn Bhd 2,448, Sekim Amanah Saham Nasional 24. Malaysia Nominees (Tempatan) Sendirian Berhad 2,395, Great Eastern Life Assurance (Malaysia) Berhad (Par 2) 25. AMMB Nominees (Tempatan) Sdn Bhd 2,345, AmTrustee Berhad For BHLB Pacific Dana Al-Ihsan (5/2-7) 26. Universal Trustee (Malaysia) Berhad 2,307, BHLB Pacific High Growth Fund 27. Malaysia Nominees (Tempatan) Sendirian Berhad 2,300, Amanah SSCM Asset Management Berhad For Amanah Smallcap Fund Berhad (JM730) 28. Universal Trustee (Malaysia) Berhad 2,298, BHLB Pacific Emerging Companies Growth Fund 29. AMMB Nominees (Tempatan) Sdn Bhd 2,250, MIDF Aberdeen Asset Management Sdn Bhd For Employees Provident Fund (7/836-2) 30. AmFinance Berhad 2,033, Pledged Securities Account For Fang Kok Phang Soon Fook (SMART) TOTAL 310,040, Puncak Niaga Holdings Berhad Annual Report

120 Distribution Schedule Of Equity Securities & Property Directors Interests in Ordinary Shares As Per Register of Directors Shareholdings No. Name No. Of Shares Held In The Company Direct Interest % Deemed Interest % 1 YBhg Tan Sri Rozali Ismail 330, ,051, Encik Ruslan Hassan 394, , Encik Mat Hairi Ismail 22, , Ir Lee Miang Koi 144, , Encik Abdul Majid Abdul Karim 3, YBhg Dato Hari Narayanan Govindasamy , YB Dato Seri Dr Ting Chew Peh 1 Deemed interest by virtue of 50% equity interest each in Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd respectively 2 Held in nominee name, CIMSEC Nominees (Tempatan) Sdn Bhd 3 Held in nominee name, Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd 4 Held in nominee name, Mayfin Nominees (Tempatan) Sdn Bhd List of Substantial Shareholders As Per Register of Substantial Shareholders (excluding bare trustees) No. Name No. Of Shares Held In The Company Direct Interest % Deemed Interest % 1 YBhg Tan Sri Rozali Ismail 330, ,051, Encik Shaari Ismail ,051, Central Plus (M) Sdn Bhd 59,304, ,562, Employees Provident Fund Board 37,579, ,630, Deemed interest by virtue of 50% equity interest each in Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd respectively 2 Held in various nominee names 3 Shares held and managed by various Portfolio Managers Puncak Niaga Holdings Berhad Annual Report

121 WARRANTS AS AT 29 APRIL 2003 Holdings No. of Holders % of Holders Total Holdings % of Warrants Issued less than 1, , ,000-10,000 3, ,710, , , ,091, ,001-5,468,742 (less than 5% of warrants issued) ,234, ,468,743 (5% of warrants issued) and above ,994, TOTAL 5, ,374, Largest Warrant Holders As Per Record of Depositors No. of Warrants % of Warrants Name of Warrant Holders Held Issued 1.Rozali Bin Ismail 51,466, Employees Provident Fund Board 5,527, AmFinance Berhad 2,047, Pledged Securities Account For Fang Kok Phang Sook Fook (SMART) 4.Malaysia Nominees (Tempatan) Sendirian Berhad 1,971, Great Eastern Life Assurance (Malaysia) Berhad (Par 1) 5.Bank Kerjasama Rakyat Malaysia Berhad 1,750, Pledged Securities Account For Kumpulan Darul Ehsan Berhad 6.Corporate Line (M) Sdn Bhd 1,533, HLG Nominee (Tempatan) Sdn Bhd 1,255, PB Trustee Services Berhad for HLG Growth Fund 8.Fang Kok Phang Soon Fook 1,103, Universal Trustee (Malaysia) Berhad 1,000, TA Islamic Fund 10. BHLB Trustee Berhad 875, TA Comet Fund 11. Lau Wai Fong 735, Malaysia Nominees (Tempatan) Sendirian Berhad 575, Amanah SSCM Asset Management Berhad for Amanah Smallcap Fund Berhad (JM730) 13. Cheong Pang Kwan 572, Wong Lee Yun 550, Puncak Niaga Holdings Berhad Annual Report

122 Distribution Schedule Of Equity Securities & Property 30 Largest Warrant Holders As Per Record of Depositors No. of Warrants % of Warrants Name of Warrant Holders (continued) Held Issued 15. Malaysia Nominees (Tempatan) Sendirian Berhad 454, Great Eastern Life Assurance (Malaysia) Berhad (Par 2) 16. HSBC Nominees (Tempatan) Sdn Bhd 436, HSBC (M) Trustee Bhd for Amcumulative Growth (3639) 17. Universal Trustee (Malaysia) Berhad 374, Alliance First Fund 18. Mak Ngia Mak Yoke Lum 357, Lembaga Tabung Angkatan Tentera 343, Teo Kin Swee 312, OSK Nominees (Asing) Sdn Berhad 292, Pledged Securities Account For Tan Boon Chiang 22. Southern Investment Bank Berhad 286, Employee s Provident Fund 23. Mayban Nominees (Tempatan) Sdn Bhd 268, Pledged Securities Account For Fong Swee Eng (318AC0001) 24. Mayban Nominees (Tempatan) Sdn Bhd 266, Pledged Securities Account For Su Tiing Uh (178AW0603) 25. Amanah Raya Nominees (Tempatan) Sdn Bhd 238, AUTB Progress Fund 26. Malaysia Nominees (Tempatan) Sendirian Berhad 237, Great Eastern Life Assurance (Malaysia) Berhad (Non Par 1) 27. Tan Seng Kow 237, Wong Kok Hou 230, Asia Life (M) Berhad 223, As Beneficial Owner (M sia Life Fund) 30. Tasec Nominees (Tempatan) Sdn Bhd 220, TA Asset Management Sdn Bhd For Yayasan Sabah (YS) TOTAL 75,737, Puncak Niaga Holdings Berhad Annual Report

123 Directors Interests In Warrants As Per Register Of Directors Warrantholdings No. Name No. Of Warrants Held In The Company Direct Interest % Deemed Interest % 1 YBhg Tan Sri Rozali Ismail 51,466, ,545, Encik Ruslan Hassan 41, Encik Mat Hairi Ismail 52, Ir Lee Miang Koi 18, Encik Abdul Majid Abdul Karim YBhg Dato Hari Narayanan Govindasamy , YB Dato Seri Dr Ting Chew Peh Deemed interest by virtue of 50% equity interest in Corporate Line (M) Sdn Bhd 2 Held in nominee name, Mayfin Nominees (Tempatan) Sdn Bhd LIST OF PROPERTY AS AT 31 DECEMBER 2002 Remaning Leasehold Period Description & Date of Land Area Net Book (Expiry Existing Location Acquisition Value Tenure Date) use Vacant Land 14/2/ ,364 sq.m. RM8,283, years 97 years none H.S.(D) Leasehold expiring on PT 32, Section 14 17/12/2099 Bandar Shah Alam District of Petaling Selangor Puncak Niaga Holdings Berhad Annual Report

124 Director s Report for the financial year ended 31 December 2002 This page has been intentionally left blank. Puncak Niaga Holdings Berhad Annual Report

125 Financial Reports Directors Report Consolidated Income Statement Company Income Statement Balance Sheets Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Cash Flow Statements Notes to the Financial Statements Statement by Directors Statutory Declaration Report of the Auditors Puncak Niaga Holdings Berhad Annual Report

126 Directors Report for the financial year ended 31 December 2002 The Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December Principal activities The Group is principally engaged in the operation, maintenance, management, construction and rehabilitation of water treatment facilities. The principal activities of the Company during the financial year are that of investment holding and provision of management services. The principal activities of the subsidiaries are set out in Note 13 to the financial statements. There has been no significant change in the nature of the activities of the Group and of the Company during the financial year. Financial Results Group Company RM RM Profit after taxation 179,745,431 1,870,146 Dividends No dividends have been paid or declared by the Company since 31 December The Directors do not recommend the payment of any dividend for the financial year ended 31 December Reserves and provisions Material transfers to and from reserves during the financial year are disclosed in the Statement of Changes in Equity. There were no material transfers to or from provisions during the financial year. Share capital During the financial year, the issued and fully paid up capital of the Company increased from RM437,500,000 to RM439,278,000 by way of the issuance of 1,778,000 new ordinary shares of RM1.00 each for cash as follows: Purpose of issue No. of ordinary shares of RM1.00 each Exercise of share options by eligible employees pursuant to the Employees Share Option Scheme 1,778,000 The above new ordinary shares issued during the financial year ranked pari-passu in all respects with the existing ordinary shares of the Company. Employees Share Option Scheme The Company s Employees Share Option Scheme ( ESOS ), governed by the ESOS Bye-Laws, was principally approved by the shareholders at the Extraordinary General Meeting of the Company held on 26 June 2001 and became effective following the implementation by the Company on 25 February The ESOS shall be in forced for a duration of five (5) years commencing from 25 February Puncak Niaga Holdings Berhad Annual Report

127 Employees Share Option Scheme (continued) The salient features of the ESOS are as follows: (a) The ESOS is set up for the participation in ordinary shares of the Company only. The maximum number of new ordinary shares which may be made available under the ESOS shall not exceed 10% of the total issued and paid up ordinary shares of the Company at the point in time when an offer is made. At the commencement of the ESOS, the total number of new ordinary shares available for offer was 43,750,000 ordinary shares of RM1.00 each. (b) Eligible employees are those who have been in service of the Group for a continuous period of at least one (1) year including full time Executive Directors who are involved in the day-to-day management and on the payroll of the Group. (c) The ESOS is administered by the Option Committee which comprise the Executive Directors of the Company. (d) The options granted under the ESOS may be exercised by the grantee by notice in writing to the Company during the period commencing from the date of offer and before the expiry of the ESOS on 24 February (e) (f) The exercise price of the options at which the eligible employees are entitled to subscribe for the ordinary shares of RM1.00 each in the Company under the ESOS is the weighted average market price of the shares of the Company as quoted in the daily official list issued by the Kuala Lumpur Stock Exchange for the five (5) market days immediately preceding the respective dates of offer subject to a discount of not more than 10%, or at the par value of the ordinary shares of the Company of RM1.00 each, whichever is higher. The eligible employee to whom the options have been granted has no right to participate, by virtue of the options, in any share issue of any other company. (g) The new ordinary shares issued arising from the ESOS shall rank pari-passu in all respects with the then existing ordinary shares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the said new ordinary shares. (h) The basis on which the options may be exercised, up to the expiry of the ESOS on 24 February 2007, in accordance with the Directors approval is as follows: Number of options granted and Percentage of options exercisable Tranche unexercised as at 31 December * % % % % % 1 30,524, ,843, ,367,000 * The ESOS expires on 24 February 2007 Puncak Niaga Holdings Berhad Annual Report

128 Directors Report for the financial year ended 31 December 2002 Employees Share Option Scheme (continued) (i) The movements of the options over the ordinary shares of RM1.00 each of the Company granted under the ESOS during the financial year are as follows: Exercise Number of share options Date of options price At Tranche granted per option Granted Exercised Lapsed** RM ,422,000 (1,778,000) (1,120,000) 30,524, RM2.47 2,933,000 0 (90,000) 2,843,000 36,355,000 (1,778,000) (1,210,000) 33,367,000 ** Due to resignations or offers not taken up (j) The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the full list of option holders and their holdings, except for eligible employees (excluding Executive Directors) with option allocation of 250,000 options and above, which are as follows: Number of options over ordinary shares of RM1.00 each At date of At Name of eligible employees offer/granted Exercised Lapsed* Nik Nazman bin Husin 500, ,000 Beh Men Huat 350,000 0 (350,000) 0 Ibrahim bin Ismail 350, ,000 Loh Kit Mun 350, ,000 Azlan bin Hamid 300, ,000 Ramalingam a/l K.R. Arumugam 300, ,000 Sonari bin Solor 300,000 (30,000) 0 270,000 Syed Danial bin Syed Ariffin 300, ,000 Tan Bee Lian 300, ,000 Chan Siew Meei 250,000 (8,000) 0 242,000 Ismail bin Maidin 250, ,000 Mohd Sabaruldin bin Che Bakar 250, ,000 * Due to resignation Puncak Niaga Holdings Berhad Annual Report

129 Directors The Directors who have held office during the period since the date of the last report are: Tan Sri Rozali bin Ismail Ruslan bin Hassan Mat Hairi bin Ismail Lee Miang Koi Abdul Majid bin Abdul Karim Dato Hari Narayanan a/l Govindasamy Dato Seri Dr. Ting Chew Peh In accordance with Article 98 of the Company s Articles of Association, Mat Hairi bin Ismail and Dato Hari Narayanan a/l Govindasamy retire from office by rotation at the forthcoming Annual General Meeting and, being eligible and upon the recommendation of the Nomination Committee, offer themselves for re-election. Directors' interests According to the Register of Directors Shareholdings, particulars of interests in shares, notes, warrants and options in the Company and its related corporations during the financial year of those Directors holding office at the end of the financial year are as follows: Number of ordinary shares of RM1.00 each At Transfer At Acquired Sold from/(to) Direct interests in the Company: Tan Sri Rozali bin Ismail 0 330, ,000 Ruslan bin Hassan 364,000 30, ,000 Mat Hairi bin Ismail 22, ,750 Lee Miang Koi 144, ,000 Abdul Majid bin Abdul Karim 3, ,000 Indirect interests in the Company: Tan Sri Rozali bin Ismail 212,251,000 0 (22,200,000) 0 190,051,000* Ruslan bin Hassan 202, ,500^^ Mat Hairi bin Ismail 209, ,500^^ Lee Miang Koi 20, ,000^^ Dato Hari Narayanan a/l Govindasamy 210, ,000^^ (* deemed interest by virtue of 50% shareholding interest in both Central Plus (M) Sdn. Bhd., a substantial corporate shareholder, and in Corporate Line (M) Sdn. Bhd., a corporate shareholder of the Company) (^^ held by nominees) Puncak Niaga Holdings Berhad Annual Report

130 Directors Report for the financial year ended 31 December 2002 Directors' interests (continued) Redeemable Unconvertible Junior Notes in RM At Transfer At Acquired Sold from/(to) Direct interests in the Company: Ruslan bin Hassan 708, ,125 Mat Hairi bin Ismail 261, ,875 Lee Miang Koi 245, ,000 Indirect interests in the Company: Tan Sri Rozali bin Ismail 20,608, ,608,891** Dato Hari Narayanan a/l Govindasamy 262, ,500^^ Number of warrants At Transfer At Acquired Sold from/(to) Direct interests in the Company: Tan Sri Rozali bin Ismail 51,516,812 0 (50,000) 0 51,466,812 Ruslan bin Hassan 141,625 0 (100,000) 0 41,625 Mat Hairi bin Ismail 52, ,375 Lee Miang Koi 49,000 0 (31,000) 0 18,000 Indirect interests in the Company: Tan Sri Rozali bin Ismail 1,545, ,545,937^ Dato Hari Narayanan a/l Govindasamy 52, ,500^^ Number of options over ordinary shares of RM1.00 each At date of At offer/granted Exercised Lapsed Direct interests in the Company: Tan Sri Rozali bin Ismail 2,500,000 (330,000) 0 2,170,000 Ruslan bin Hassan 1,700,000 (30,000) 0 1,670,000 Mat Hairi bin Ismail 850, ,000 Lee Miang Koi 850, ,000 (** held by nominee and deemed interest by virtue of 50% shareholding interest in Corporate Line (M) Sdn. Bhd.) (^ deemed interest by virtue of 50% shareholding interest in Corporate Line (M) Sdn. Bhd.) (^^ held by nominees) Puncak Niaga Holdings Berhad Annual Report

131 Directors' interests (continued) By virtue of his substantial interests in shares of Central Plus (M) Sdn. Bhd. ( CPMSB ), a substantial corporate shareholder of the Company, Tan Sri Rozali bin Ismail is deemed to have an interest in the shares of the Company and all its subsidiaries and associate to the extent CPMSB has an interest. Number of ordinary shares of RM1.00 each At At Acquired Sold Deemed interest in the Company: Tan Sri Rozali bin Ismail 206,067,250 0 (22,200,000) 183,867,250 The other Director in office at the end of the financial year did not hold any interest in shares, notes, warrants or options in the Company or its related corporations. Directors' benefits During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate other than the options over the shares granted by the Company to eligible employees and Executive Directors of the Company and its subsidiaries pursuant to the Company s ESOS mentioned above. Since the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit (other than the Directors' remuneration and benefits as disclosed in Note 7 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except for: (i) certain Directors who received remuneration as Directors/Executive Directors of related corporations; (ii) Tan Sri Rozali bin Ismail who has deemed interests in a related party, Mandai Sari Sdn. Bhd., which undertakes to operate, maintain and manage the water treatment facilities under the terms of the Operation and Maintenance Agreement dated 8 October 1994 with Puncak Niaga (M) Sdn. Bhd. ( PNSB ), a wholly-owned subsidiary; and (iii) Tan Sri Rozali bin Ismail who has deemed interests in a related party, RZ Management Services Sdn. Bhd. which provides corporate secretarial services to the Group. Statutory information on the financial statements Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and Puncak Niaga Holdings Berhad Annual Report

132 Directors Report for the financial year ended 31 December 2002 Statutory information on the financial statements (continued) (b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise. At the date of this report, the Directors are not aware of any circumstances: (a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or (c) 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. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liability of any other person; or (b) any contingent liability of the Group or of the Company which has arisen since the end of the financial year except as disclosed in Note 37 to the financial statements. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. In the opinion of the Directors, (a) the results of the Group's and of the Company s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and (b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made. Puncak Niaga Holdings Berhad Annual Report

133 Significant events during the financial year The significant event that occurred during the financial year are disclosed in Note 36 to the financial statements. Significant event subsequent to the financial year balance sheet date The significant event that occurred subsequent to balance sheet date is disclosed in Note 37 to the financial statements. Ultimate holding company The Company has no corporate shareholder being regarded by the Directors of the Company as the ultimate holding company nor as the holding company. Auditors The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with their resolution dated 23 April Tan Sri Rozali bin Ismail Director Mat Hairi bin Ismail Director Kuala Lumpur Puncak Niaga Holdings Berhad Annual Report

134 Consolidated Income Statement for the financial year ended 31 December 2002 Group Note RM RM Revenue 6 565,105, ,336,942 Other operating income 14,416,902 11,514,068 Operating and maintenance cost (113,801,833) (126,318,650) Staff cost (26,878,109) (25,754,925) Administrative expenses (21,589,129) (20,412,047) Depreciation and amortisation expenses (101,087,863) (98,694,027) Profit from operations 7 316,165, ,671,361 Finance cost 8 (136,051,435) (112,982,535) Profit from ordinary activities before taxation 180,113, ,688,826 Taxation 9 (368,212) (374,770) Net profit for the financial year 179,745, ,314,056 Earnings per ordinary share - basic sen sen - diluted sen N/A* * N/A Not applicable Company Income Statement for the financial year ended 31 December 2002 Company Note RM RM Revenue 6 3,960,000 3,960,000 Other operating income 32,870,919 3,201,340 Staff cost (277,357) (396,278) Administrative expenses (951,870) (773,365) Amortisation of leasehold land (88,045) (95,404) Profit from operations 7 35,513,647 5,896,293 Finance cost 8 (32,839,198) (3,051,830) Profit from ordinary activities before taxation 2,674,449 2,844,463 Taxation 9 (804,303) (846,760) Net profit for the financial year 1,870,146 1,997,703 The notes on pages 125 to 157 form an integral part of these financial statements. Puncak Niaga Holdings Berhad Annual Report

135 Balance Sheets as at 31 December 2002 Group Company Note RM RM RM RM Non-current assets Property, plant and equipment 11 1,528,702,848 1,606,425,301 8,283,525 8,371,570 Project development expenditure ,838, ,727, Subsidiaries ,000, ,000,105 Associate Other investments 15 12,662 45, Junior Notes A ,775, ,609,835 Advances to a subsidiary ,368, ,368,807 Debt Service Reserve Account 18 79,618,389 77,249, Long-term receivables ,108, ,225, ,960,280,932 2,098,672, ,428, ,350,317 Current assets Inventories ,277 1,051, Trade and other receivables ,850, ,445,470 17,007,741 10,857,054 Tax recoverable 1,122, , , ,576 Deposits, bank and cash balances 23 85,316,135 61,960, ,693 1,016, ,106, ,692,505 18,076,821 12,107,666 Less: Current liabilities Trade and other payables ,596, ,414,890 1,828,991 2,031,887 Hire-purchase payables ,149 1,176, Borrowings 26 86,170,443 98,081, Taxation 0 649, ,743, ,321,920 1,828,991 2,031,887 Net current assets 659,363, ,370,585 16,247,830 10,075,779 Less: Non-current liabilities Long-term borrowings 27 1,439,397,047 1,484,247, ,775, ,609,835 Hire-purchase payables 25 3,063,230 1,571, ,442,460,277 1,485,818, ,775, ,609,835 1,177,183, ,224, ,900, ,816,261 Capital and reserves Share capital ,278, ,500, ,278, ,500,000 Share premium 53,294,348 50,858,488 53,294,348 50,858,488 Reserve on consolidation 92,322 92, Merger reserve (40,999,998) (40,999,998) 0 0 Retained earnings ,519, ,773,680 16,327,919 14,457,773 1,177,183, ,224, ,900, ,816,261 The notes on pages 125 to 157 form an integral part of these financial statements. Puncak Niaga Holdings Berhad Annual Report

136 Consolidated Statement of Changes in Equity for the financial year ended 31 December 2002 Share capital Non-distributable Distributable Nominal Share Reserve on Merger Retained value premium consolidation reserve earnings Total Note RM RM RM RM RM RM Group At 1 January ,500,000 50,858,488 92,322 (40,999,998) 366,459, ,910,436 Net profit for the financial year ,314, ,314,056 At 31 December ,500,000 50,858,488 92,322 (40,999,998) 545,773, ,224,492 Issue of share capital 28 1,778,000 2,435, ,213,860 Net profit for the financial year ,745, ,745,431 At 31 December ,278,000 53,294,348 92,322 (40,999,998) 725,519,111 1,177,183,783 Company Statement of Changes in Equity for the financial year ended 31 December 2002 Non- Share capital distributable Distributable Nominal Share Retained value premium earnings Total Note RM RM RM RM Company At 1 January ,500,000 50,858,488 12,460, ,818,558 Net profit for the financial year 0 0 1,997,703 1,997,703 At 31 December ,500,000 50,858,488 14,457, ,816,261 Issue of share capital 28 1,778,000 2,435, ,213,860 Net profit for the financial year 0 0 1,870,146 1,870,146 At 31 December ,278,000 53,294,348 16,327, ,900,267 The notes on pages 125 to 157 form an integral part of these financial statements. Puncak Niaga Holdings Berhad Annual Report

137 Cash Flow Statements for the financial year ended 31 December 2002 Group Company Note RM RM RM RM Operating activities Receipts from customer 352,176, ,796, Dividends received 0 0 2,764,800 2,764,800 Payments for operating expenses (140,930,550) (165,727,298) (1,602,471) (1,302,519) Payments to contractors (1,508,674) (74,551,425) 0 0 Net cash generated from operations ,737, ,517,801 1,162,329 1,462,281 Interest paid (99,669,941) (98,641,528) (13,671,875) 0 Taxation paid (1,905,450) (1,206,136) (18,914) (1,206,136) Interest received 1,060, ,394 13,704, ,510 (100,515,208) (99,176,270) 14,119 (1,056,626) Net cash inflow from operating activities 109,222,161 54,341,531 1,176, ,655 Investing activities Purchase of property, plant and equipment (10,983,077) (6,701,032) 0 (249,801) Purchase of Junior Notes A (176,093,750) Advances to subsidiaries 0 0 (5,861,651) 0 Repayment of advances by a subsidiary ,000,000 Proceeds from disposal of property, plant and equipment 622, , Net cash outflow from investing activities (10,360,766) (5,789,642) (5,861,651) (128,343,551) Financing activities Proceeds from long-term borrowings 0 287,357, ,093,750 Exercise of share options pursuant to ESOS 4,213, ,213,860 0 Repayment of borrowings (78,000,000) (277,988,554) 0 (48,000,000) Repayment of hire-purchase (1,719,744) (1,819,177) 0 0 Repayment of advances to a related party 0 (4,347,241) 0 0 Payment of debt issuance expenses 0 (5,848,665) 0 0 Net cash (outflow)/inflow from financing activities (75,505,884) (2,646,152) 4,213, ,093,750 The notes on pages 125 to 157 form an integral part of these financial statements. Puncak Niaga Holdings Berhad Annual Report

138 Cash Flow Statements for the financial year ended 31 December 2002 (continued) Group Company Note RM RM RM RM Net increase/(decrease) in cash and cash equivalents 23,355,511 45,905,737 (471,343) 155,854 Cash and cash equivalents at beginning of the financial year 61,960,624 42,054,887 1,016, ,182 Transfer to Debt Service Reserve Account 18 0 (26,000,000) 0 0 Transfer to designated account for repayment of Term Loan (DSS II) 23 (55,726,548) Cash and cash equivalents at end of the financial year 29,589,587 61,960, ,693 1,016,036 Cash and cash equivalents comprise: Deposits with licensed banks 56,580,289 12,855, Less: Deposits held in a designated account for repayment of Term Loan (DSS II) 23 (55,726,548) ,741 12,855, Bank and cash balances 28,735,846 49,104, ,693 1,016,036 29,589,587 61,960, ,693 1,016,036 The notes on pages 125 to 157 form an integral part of these financial statements. Puncak Niaga Holdings Berhad Annual Report

139 Notes to the Financial Statements for the financial year ended 31 December General information The Group is principally engaged in the operation, maintenance, management, construction and rehabilitation of water treatment facilities. The principal activities of the Company during the financial year are that of investment holding and provision of management services. The principal activities of the subsidiaries are set out in Note 13 to the financial statements. The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Board of the Kuala Lumpur Stock Exchange. The address of the registered office of the Company is as follows: Suite , 14th Floor Plaza See Hoy Chan Jalan Raja Chulan Kuala Lumpur The Company has no corporate shareholder being regarded by the Directors of the Company as the ultimate holding company nor as the holding company. The Group and the Company did not transact in foreign currencies during the financial year. All transactions and balances of the Group and of the Company are denominated in Ringgit Malaysia. 2 Financial risk management objectives and policies The Group s activities expose it to a variety of financial risks, including interest rate risk, market risk, credit risk, liquidity and cash flow risk. The Group s overall financial risk management objective is to ensure that the Group creates value for its shareholders. The Group focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Finance risk management is carried out through risk reviews, internal control systems, insurance programmes and adherence to Group financial risk management policies. The Board regularly reviews these risks and approves the risk management policies, which covers the management of these risks. Interest rate risk The Group s income and operating cash flows are substantially independent of changes in market interest rates. Interest rate exposure arises from the Group s borrowings and deposits, and is managed through the use of a mix of fixed and floating rate debts. Market risk For key product and/or service purchases, the Group establishes floating and fixed priced levels that the Group considers acceptable. The bulk supply rates charged by Puncak Niaga (M) Sdn. Bhd. ( PNSB ), a wholly-owned subsidiary, to the State Government of Selangor for the supply of treated water is indexed to changes in prices of chemicals, electricity tariff and Consumer Price Index. Accordingly, this helps to mitigate inflation risk. Puncak Niaga Holdings Berhad Annual Report

140 Notes to the Financial Statements for the financial year ended 31 December Financial risk management objectives and policies (continued) Credit risk Credit risk arises when sales are made on deferred credit terms. The Group s credit risk is concentrated on a single customer i.e. the State Government of Selangor, and the terms of payments are stated in the concession agreements with the State Government of Selangor. At present, the Group is solely dependent on the State Government of Selangor being a single customer for the purchase of its treated water and due to this sole dependency on the State Government of Selangor for revenue, any late or non-payment by the State Government of Selangor may have an adverse impact on the cash flows and/or profits of the Group. The Group seeks to control credit risk by continuously holding discussions and negotiations with the State Government of Selangor with respect to the settlement and recoverability of the amounts due. Liquidity and cash flow risk Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the capital intensive and project based nature of the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed credit lines available. 3 Award of concessions PNSB, a wholly-owned subsidiary, had been awarded the following concessions by the State Government of Selangor: (i) to take over, operate, maintain, manage, rehabilitate and refurbish existing water treatment plants located in Selangor Darul Ehsan and Wilayah Persekutuan of Kuala Lumpur for a period of 26 years ending on 31 December 2020; and (ii) to construct, operate, maintain and manage the new water treatment facilities, namely the Sungai Selangor Water Supply Scheme Phase 2, Stages I and II ( SSP2 ) for a period of 26 years ending on 31 December On 17 January 1998, PNSB was given a right by the Federal Government to develop a water treatment plant and its related facilities in Wangsa Maju. The construction work commenced in January 1998 and was completed in July Subsequent to the completion, PNSB has been managing, operating and maintaining the water treatment plant. 4 Basis of preparation The financial statements of the Group and of the Company have been prepared under the historical cost convention unless otherwise indicated in the summary of significant accounting policies below. The financial statements comply with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, Puncak Niaga Holdings Berhad Annual Report

141 4 Basis of preparation (continued) The new applicable approved accounting standards adopted in the financial statements of the Group and of the Company for the financial year ended 31 December 2002 are as follows: (a) Restrospective application (i) MASB Standard 19 Events After the Balance Sheet Date (ii) MASB Standard 20 Provisions, Contingent Liabilities and Contingent Assets (iii) MASB Standard 22 Segment Reporting The adoption of the above new Standards did not have any significant impact to the presentation of the financial statements nor to the income recognition and measurement principles of the Group and of the Company. (b) Prospective application from 1 January 2002 (i) MASB Standard 21 Business Combinations The Group has elected to adopt the transitional provision to apply this Standard prospectively. Accordingly, the effects of the business combination of PNSB under the merger accounting entered into prior to 1 January 2002 have not been restated. (ii) MASB Standard 23 Impairment of Assets The adoption of this new Standard did not have any material impact to the financial statements. (iii) MASB Standard 24 Financial Instruments: Disclosure and Presentation The Group has elected to adopt the transitional provision to apply this Standard prospectively. Accordingly, the following presentation and disclosures have been adopted in the financial statements: comparatives are not disclosed upon first application of this Standard; and the effects of compound instruments issued prior to 1 January 2002 have not been reclassified to its liability and equity components. This Standard is not intended to apply to the recognition, measurement and disclosure of transactions and events conducted on the basis of Islamic banking principles. The preparation of financial statements in conformity with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported financial year. Actual results could differ from those estimates. 5 Summary of significant accounting policies The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. (a) Basis of consolidation The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to the end of the financial year. Financial statements of subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date when that control ceases. Puncak Niaga Holdings Berhad Annual Report

142 Notes to the Financial Statements for the financial year ended 31 December Summary of significant accounting policies (continued) (a) Basis of consolidation (continued) Financial statements of subsidiaries are consolidated using the acquisition method of accounting except for the financial statements of PNSB, which is consolidated using the merger method of accounting in accordance with Malaysian Accounting Standard No. 2 Accounting for Acquisitions and Mergers. Merger method Under the merger method of accounting, the results of the subsidiary is presented as if the merger had been effected throughout the current and previous financial years. On consolidation, the difference between the carrying value of the investment over the nominal value of the shares acquired is treated as merger reserve in accordance with the merger relief provisions under Section 60(4) of the Companies Act, Acquisition method Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the financial year are included from the date of acquisition 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 consolidated 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. All intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated, unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, adjustments are made to the financial statements of the subsidiaries to ensure consistency with the accounting policies adopted by the Group. The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group s share of its net assets together with the goodwill on acquisition, and is recognised in the income statement in the financial year in which the disposal is made. (b) Goodwill on consolidation Goodwill arising on consolidation represents the excess of the cost of acquisition of subsidiaries over the Group s share of the fair value of their separable net assets at the date of acquisition and is written off against the Group s retained earnings. Negative goodwill represents the excess of the fair value of the Group s share of identifiable net assets acquired over the cost of acquisition. Negative goodwill is presented in the same balance sheet classification as goodwill. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group s plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities, that portion of negative goodwill is recognised in the income statement when the future losses and expenses are recognised. Any remaining negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the income statement over the remaining weighted average useful life of those assets; negative goodwill in excess of the fair values of those assets is recognised in the income statement immediately. (c) Subsidiaries A subsidiary is an enterprise in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities. Puncak Niaga Holdings Berhad Annual Report

143 5 Summary of significant accounting policies (continued) (c) Subsidiaries (continued) Investments in subsidiaries are stated at cost except where, in the opinion of the Directors, there is an indication of impairment, in which case the carrying amount of the investment is assessed and written down immediately to its recoverable amount. (d) Associate An associate is an enterprise in which the Group is able to exercise significant influence. Significant influence is the ability to participate in the financial and operating policy decisions of the associate but not control over those policies. Investment in associate is stated at cost except where, in the opinion of the Directors, there is an indication of impairment, in which case the carrying amount of the investment is assessed and written down immediately to its recoverable amount. Investment in associate is accounted for in the consolidated financial statements using the equity method of accounting. Equity accounting involves recognising in the income statement the Group s share of the results of the associate for the period. The Group s investment in associate is carried in the balance sheet at an amount that reflects its share of the net assets of the associate less premium paid on acquisition, which is written off against the Group s retained earnings. Equity accounting is discontinued when the carrying amount of the investment in an associate reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associate. Unrealised gains on transactions between the Group and its associate are eliminated to the extent of the Group s interest in the associate. Unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of the associate to ensure consistency of accounting policies with the Group. (e) Jointly controlled entity Jointly controlled entity comprises unincorporated joint venture over which there is contractually agreed sharing of control by the Group with third parties. The Group s interest in jointly controlled entity is accounted for in the consolidated financial statements by the equity method of accounting. Equity accounting involves recognising in the income statement the Group s share of the results of the jointly controlled entity for the period. The Group s investment in the jointly controlled entity is carried in the balance sheet at an amount that reflects its share of the net assets of the jointly controlled entity. Unrealised gains on transactions between the Group and its jointly controlled entity are eliminated to the extent of the Group s interest in the jointly controlled entity; unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments have been made to the financial statements of jointly controlled entity to ensure consistency of accounting policies with those of the Group. (f) Other investments Long-term investments are stated at cost and allowance is only made where, in the opinion of the Directors, there is a permanent diminution in value. Permanent diminution in the value of an investment is recognised as an expense in the financial year in which the diminution is identified. Puncak Niaga Holdings Berhad Annual Report

144 Notes to the Financial Statements for the financial year ended 31 December Summary of significant accounting policies (continued) (f) Other investments (continued) The gain or loss on disposal of an investment is the difference between net disposal proceeds and its carrying amount, and is recognised in the income statement in the financial year in which the disposal is made. Notes which are acquired and held up to maturity are stated at cost adjusted for amortisation of premium and/or accretion of discount to maturity. (g) Property, plant and equipment Property, plant and equipment are stated at cost, which comprises the acquisition cost and any incidental cost arising from the acquisition, less accumulated depreciation and impairment losses except for capital work-in-progress which are not depreciated. Long-term leasehold land is stated at cost less accumulated amortisation and impairment losses. The long-term leasehold land is amortised over the period of the lease of 99 years. All other property, plant and equipment are depreciated on a straight line basis to write off the cost of each asset to their residual values over their estimated useful lives at the following annual rates: Water treatment plants Over the remaining period of the concession ending 31 December 2020 Plant and equipment 10% to 20% Office equipment 20% Furniture and fittings 20% Motor vehicles 20% Computers and software 33 1/3% Renovation 20% to 33 1/3% Where an indication of impairment exists, the carrying amount of an asset is assessed and written down immediately to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the income statement in the financial year in which the disposals are made. (h) Assets acquired under hire-purchase arrangements Property, plant and equipment acquired under hire-purchase are capitalised in the financial statements and are depreciated in accordance with the accounting policy set out in Note 5(g) above. The corresponding outstanding obligations due under the hire-purchase after deducting finance charges are included as liabilities in the financial statements. Finance charges are allocated to the income statements over the periods of the respective agreements. (i) Project development expenditure Project development expenditure are stated at cost and comprise expenditure incurred for the rehabilitation and refurbishment of water treatment facilities and concession acquisition cost. Project development expenditure are amortised over the period of the concession. However, should no future economic benefits be expected to be derived from the project development expenditure, the amount capitalised is charged as an expense in the income statement in the financial year in which such a decision is made. Puncak Niaga Holdings Berhad Annual Report

145 5 Summary of significant accounting policies (continued) (j) Construction contracts When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable and contract costs are recognised as expenses. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised over the period of the contract as revenue and expenses respectively. The Group uses the percentage of completion method to determine the appropriate amount of revenue and costs to recognise in a given period; the stage of completion is measured by reference to the actual costs incurred to date to the estimated total costs for each contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. No profit is recognised where contract works are in its initial stage or have not reached a stage of completion where it is possible to determine the financial outcome of the contract with reasonable accuracy. The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against the progress billings up to the financial year end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is shown as Amounts due from customers on construction contracts. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as Amounts due to customers on construction contracts. (k) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis and includes transportation and handling cost incurred. (l) Receivables Receivables are carried at anticipated realisable value. Bad debts are written off in the financial year in which they are identified. An estimate is made for doubtful debts based on a review of all outstanding amounts at the balance sheet date. (m) Bonds and notes Bonds and notes issued by the Company and the Group are initially recognised based on the proceeds received, net of issuance expenses incurred and are adjusted in subsequent financial years for amortisation of premium and/or accretion of discount to maturity, using the effective yield method. The premium amortised and/or discount accreted is recognised in the income statement over the period of the bonds and notes. (n) Capitalisation of borrowing costs Borrowing costs incurred in connection with financing the construction of the capital work-in-progress are capitalised and included as part of the construction costs respectively until the assets are ready for their intended use. (o) Deferred taxation Deferred taxation is provided for using the liability method in respect of all material timing differences between accounting income and taxable income except where the tax effects of such timing differences are not expected to be reversed in the foreseeable future. Deferred tax benefits are recognised only if there is a reasonable expectation of their realisation in the foreseeable future. Puncak Niaga Holdings Berhad Annual Report

146 Notes to the Financial Statements for the financial year ended 31 December Summary of significant accounting policies (continued) (p) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank balances, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (q) Revenue recognition Revenue of the Group is recognised when the treated water is discharged through the reading meter installed at the respective reservoirs. Dividend income is recognised when the shareholder s right to receive payment is established. Management fee is recognised on an accrual basis. Other revenue earned by the Group are recognised on the following bases: (i) Revenue relating to long-term construction contracts are accounted for under the percentage of completion method; the stage of completion is measured by reference to the actual costs incurred to date to estimated total costs for each contract. (ii) Interest income is recognised on an accrual basis. (r) Financial instruments Financial instruments carried on the balance sheet include deposits, bank and cash balances, other investments, receivables, payables and borrowings. (i) Financial instruments recognised on the balance sheet The particular recognition methods adopted for financial instruments recognised on the balance sheet are disclosed in the individual policy statements associated with each item. (ii) Fair value estimation for disclosure purposes The fair value of publicly traded securities is based on quoted market prices at the balance sheet date. In assessing the fair value of financial instruments, the Group and the Company use a variety of methods and make assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for the specific or similar instruments are used for long term debt. Other technique, such as the discounted value of future cash flows, is used to determine the fair value for the remaining financial instruments. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group and the Company for similar financial instruments. The face values for financial assets and liabilities with a maturity of less than one (1) year are assumed to approximate their fair values. Puncak Niaga Holdings Berhad Annual Report

147 6 Revenue Group Company RM RM RM RM Invoiced value of bulk quantity of treated water supplied to the State Government of Selangor 565,105, ,336, Gross dividend income 0 0 3,840,000 3,840,000 Management fees , , ,105, ,336,942 3,960,000 3,960,000 7 Profit from operations Group Company RM RM RM RM The following items have been charged/(credited) in arriving at profit from operations: Depreciation of property, plant and equipment 4,142,885 3,950,523 88,045 95,404 Amortisation of water treatment plants 81,946,473 80,782, Amortisation of project development expenditure 14,999,624 13,961, Rental of premises 2,413,310 1,874, Hire of transport and equipment 165, , Accretion of discount on bonds and notes 20,401,865 2,647,671 19,166,011 1,516,085 Amortisation of debt issuance expenses 836, , Directors remuneration: - Directors of the Company other emoluments 260, , , ,748 - Directors of subsidiaries other emoluments 3,888,037 4,698, Auditors' remuneration 90,000 90,000 15,000 15,000 Allowance for diminution in value of other investments 32, Interest income from deferred payment contract (8,775,680) (8,802,901) 0 0 Interest income on deposits (3,434,301) (2,137,656) (33,033) (149,510) Interest income on advances to a subsidiary 0 0 (13,671,875) (1,535,745) Income from discount on notes 0 0 (19,166,011) (1,516,085) Profit on construction contracts * 0 (148,382) 0 0 Gain on disposal of property, plant and equipment (510,404) (198,649) 0 0 Puncak Niaga Holdings Berhad Annual Report

148 Notes to the Financial Statements for the financial year ended 31 December Profit from operations (continued) * Profit on construction contracts of the Group is arrived at as follows: Group RM RM Gross revenue recognised 0 38,489,068 Contract cost recognised 0 (38,340,686) 0 148,382 The estimated monetary value of benefits-in-kind provided to the Directors of the Group by way of usage of the Group s assets and provision of other benefits amounted to RM230,491 (2001:RM138,906). The number of persons employed by the Group and the Company at the end of the financial year were 616 (2001:617) and Nil (2001:1) respectively. 8 Finance cost Group Company RM RM RM RM Finance cost comprises: Financing cost on borrowings under Islamic banking principles 79,136,153 84,087, Financing cost on conventional borrowings 56,152,340 28,403,450 32,837,886 3,051,830 Interest expense on hire-purchase 369, , Bank charges 393, ,611 1,312 0 Other interest expense ,051, ,982,535 32,839,198 3,051,830 9 Taxation The taxation charge in the income statements represents: Group Company RM RM RM RM Malaysian income tax based on the chargeable income for the financial year 606, , , ,710 (Over)/underprovision in prior years (237,978) 25, , , , , ,760 Puncak Niaga Holdings Berhad Annual Report

149 9 Taxation (continued) The taxation charge for the Group for the financial year is principally in respect of interest income received by its subsidiary. The effective tax rate of the Group is lower than the applicable statutory tax rate due to the utilisation of available capital allowances. The amount of tax savings arising from the utilisation of the capital allowances for the Group for which credit is taken for the financial year is approximately RM78,701,000 (2001:RM76,213,000). The taxation charge for the Company for the financial year is principally in respect of dividend income received from its subsidiary. The effective tax rate of the Company is higher than the applicable statutory tax rate due to the disallowance of certain expense items as a deduction for taxation purposes. Group Company RM RM RM RM Tax losses Tax savings as a result of the utilisation of current year tax losses for which the related tax credit is recognised during the financial year 9,465, ,490 9,465, ,490 Tax savings from the utilisation of tax losses brought forward from previous years for which the related tax credit is recognised during the financial year 545, Tax losses for which the related tax credit has not been recognised in the financial statements 594,078 1,139, , , Earnings per ordinary share The basic earnings per ordinary share of the Group for the financial year of sen (2001:40.99 sen) is calculated by dividing the net profit for the financial year of RM179,745,431 (2001:RM179,314,056) by the weighted average number of ordinary shares in issue during the financial year of 438,543,449 (2001:437,500,000) shares. The diluted earnings per ordinary share of the Group for the financial year of sen (2001:not applicable) is calculated by dividing the net profit for the financial year of RM179,745,431 by the weighted average number of ordinary shares in issue adjusted to assume the conversion of all dilutive potential ordinary shares i.e. warrants, which was granted for free to all subscribers of the RUN (Note 27(iv)), and share options granted to the eligible employees pursuant to the ESOS (Note 28). In assessing the dilution in earnings per share arising from the issue of both warrants and share options, a calculation is done to determine the number of shares that could have been acquired at market price. This calculation serves to determine the bonus element to the ordinary shares outstanding for the purpose of computing the dilution. No adjustment is made to net profit for the financial year in the calculation of the diluted earnings per share in connection with the issue of the warrants and share options. Puncak Niaga Holdings Berhad Annual Report

150 Notes to the Financial Statements for the financial year ended 31 December Earnings per ordinary share (continued) 2002 RM Net profit for the financial year 179,745,431 Weighted average number of ordinary shares in issue 438,543,449 Adjustment for: - warrants 2,108,483 - share options 3,082,752 Weighted average number of ordinary shares for diluted earnings per share 443,734,684 Diluted earnings per share sen The comparative for diluted earnings per ordinary share is not presented in the financial statements as the effects of the assumed exercise of warrants in prior financial year is anti-dilutive. The share options were granted to the eligible employees during the financial year. 11 Property, plant and equipment Long-term Water Plant Furniture Computers leasehold treatment and Office and Motor and Group land plants equipment equipment fittings vehicles software Renovation Total RM RM RM RM RM RM RM RM RM 2002 Cost At 1 January 8,716,411 1,746,704,712 7,820,490 2,097,747 3,174,286 11,191,726 5,148,602 5,208,551 1,790,062,525 Additions 0 2,734,201 79, ,041 55,092 3,152,485 1,228, ,146 8,473,483 Disposals 0 0 (30,000) 0 0 (2,349,166) 0 0 (2,379,166) At 31 December 8,716,411 1,749,438,913 7,870,045 2,379,788 3,229,378 11,995,045 6,377,565 6,149,697 1,796,156,842 Accumulated depreciation At 1 January 344, ,828, ,505 1,643,479 3,026,825 8,093,625 3,849,735 4,872, ,637,224 Charge for the financial year 88,045 81,946, , ,045 91,613 1,737, , ,027 86,089,358 Released on disposals 0 0 (5,250) 0 0 (2,267,338) 0 0 (2,272,588) At 31 December 432, ,775,290 1,824,255 1,863,524 3,118,438 7,563,409 4,767,768 5,108, ,453,994 Net book value At 31 December 8,283,525 1,506,663,623 6,045, , ,940 4,431,636 1,609,797 1,041,273 1,528,702,848 Puncak Niaga Holdings Berhad Annual Report

151 11 Property, plant and equipment (continued) Long-term Water Plant Furniture Computers leasehold treatment and Office and Motor and Group land plants equipment equipment fittings vehicles software Renovation Total RM RM RM RM RM RM RM RM RM 2001 Cost At 1 January 8,466,610 1,721,904,044 2,718,419 2,073,157 3,334,389 11,493,203 4,327,543 4,827,306 1,759,144,671 Additions 249,801 24,800,668 5,912, ,714 33, , , ,290 32,860,779 Disposals 0 0 (810,584) (155,124) (193,259) (755,188) (20,725) (8,045) (1,942,925) At 31 December 8,716,411 1,746,704,712 7,820,490 2,097,747 3,174,286 11,191,726 5,148,602 5,208,551 1,790,062,525 Accumulated depreciation At 1 January 249,437 80,046, ,700 1,496,442 2,907,157 6,911,901 3,141,258 4,789, ,134,818 Charge for the financial year 95,404 80,782, , , ,313 1,811, ,099 84,341 84,732,590 Released on disposals 0 0 (347,555) (105,782) (126,645) (629,463) (19,622) (1,117) (1,230,184) At 31 December 344, ,828, ,505 1,643,479 3,026,825 8,093,625 3,849,735 4,872, ,637,224 Net book value At 31 December 8,371,570 1,585,875,895 6,842, , ,461 3,098,101 1,298, ,154 1,606,425,301 Puncak Niaga Holdings Berhad Annual Report

152 Notes to the Financial Statements for the financial year ended 31 December Property, plant and equipment (continued) Company Long-term leasehold land RM 2002 Cost At 1 January/31 December 8,716,411 Accumulated depreciation At 1 January 344,841 Charge for the financial year 88,045 At 31 December 432,886 Net book value At 31 December 8,283, Cost At 1 January 8,466,610 Additions 249,801 At 31 December 8,716,411 Accumulated depreciation At 1 January 249,437 Charge for the financial year 95,404 At 31 December 344,841 Net book value At 31 December 8,371,570 At 31 December 2002, the unexpired period of lease of the long-term leasehold land is 97 years. Included in cost of water treatment plants are interest and financing cost on long-term borrowings capitalised amounting to RM286,075,263 (2001:RM286,075,263). Property, plant and equipment of a wholly-owned subsidiary, PNSB, with a total net book value of RM1,520,384,302 (2001:RM1,598,005,574), have been charged as security for long-term borrowings (Note 27(iii)). In determining the recoverable amount of property, plant and equipment of the Group with the exception of the long-term leasehold land, expected future cash flows have been discounted to their present value. Puncak Niaga Holdings Berhad Annual Report

153 11 Property, plant and equipment (continued) Assets acquired under hire-purchase arrangements The value of the property, plant and equipment of the Group includes the following assets acquired under hire-purchase arrangements: Motor vehicles RM RM Cost 6,843,637 7,939,111 Accumulated depreciation (2,690,524) (5,083,051) Net book value 4,153,113 2,856, Project development expenditure Group RM RM Cost At 1 January 310,603, ,882,232 Additions 5,110,835 20,721, ,714, ,603,705 Accumulated amortisation (69,876,054) (54,876,430) At 31 December 245,838, ,727,275 Included in project development expenditure is concession acquisition cost of RM14,847,596 (2001:RM14,847,596) with an unamortised balance of RM10,785,240 (2001:RM11,384,573) at the end of the financial year. 13 Subsidiaries Company RM RM Unquoted shares in Malaysia, at cost 123,000, ,000,105 Puncak Niaga Holdings Berhad Annual Report

154 Notes to the Financial Statements for the financial year ended 31 December Subsidiaries (continued) The details of the subsidiaries are as follows: Country of Effective equity interest Name of company incorporation held by the Group Principal activities % % Puncak Niaga (M) Sdn. Bhd. # Malaysia Operation, maintenance, management, construction and undertaking the rehabilitation and refurbishment of water treatment facilities Held through 100% ownership by Puncak Niaga (M) Sdn. Bhd. - Ideal Water Resources Sdn. Bhd.* Malaysia Operation, management, maintenance and undertaking the rehabilitation and refurbishment of water treatment plants - Unggul Raya (M) Sdn. Bhd.* Malaysia Operation, management, maintenance and monitoring the operation of dams Puncak Research Centre Sdn. Bhd.* Malaysia Dormant Puncak Seri (M) Sdn. Bhd.* Malaysia Dormant NS Water System Sdn. Bhd.* Malaysia Dormant # subsidiary consolidated using the merger accounting method * not audited by PricewaterhouseCoopers, Malaysia 14 Associate Group Company RM RM RM RM Unquoted investment in Malaysia, at cost 20,000 20,000 20,000 20,000 Allowance for diminution in value of investment 0 0 (20,000) (20,000) Share of loss in associate (20,000) (20,000) The Group has excluded its share of cumulative loss after taxation of the associate amounting to RM18,483 (2001:RM18,357) from the financial statements following the discontinuation of the equity accounting for the results of the associate as the carrying value of this investment has reached zero. Puncak Niaga Holdings Berhad Annual Report

155 14 Associate (continued) The details of the associate are as follows: Country of Effective equity interest Name of company incorporation held by the Group Principal activities % % NS Water Management Sdn. Bhd. Malaysia Dormant 15 Other investments Group RM RM Quoted shares in Malaysia, at cost 471, ,139 Allowance for diminution in value of other investments (458,477) (426,089) 12,662 45,050 Market value of quoted investments 12,662 16,488 The market value of these investments at the balance sheet date is equivalent to the fair value. 16 Junior Notes A Company RM RM Nominal value 546,875, ,875,000 Less: Yield to maturity (370,781,250) (370,781,250) At cost 176,093, ,093,750 Cumulation of accretion of yield to maturity 20,682,096 1,516, ,775, ,609,835 The Company subscribed for RM546,875,000 nominal value of Junior Notes A ( JNA ) issued on 20 November 2001 by its wholly-owned subsidiary, PNSB, at an issue price of RM0.322 per RM1.00 nominal value of JNA. The JNA are redeemable, unconvertible, unsecured and substantially mirror the structure of the Redeemable Unconvertible Junior Notes ( RUN ) issued by the Company. The proceeds of the JNA was utilised to repay RM168 million of PNSB s Al-Murabahah Commercial Papers ( MCPs ) with the remaining balance utilised for its working capital purposes. Puncak Niaga Holdings Berhad Annual Report

156 Notes to the Financial Statements for the financial year ended 31 December Junior Notes A (continued) The main features of the JNA are as follows: (a) The JNA carries a coupon rate of 2.5% per annum receivable semi-annually for the immediate ten (10) years from the date of issue of the JNA and 3.5% per annum receivable semi-annually thereafter for the next five (5) years. (b) PNSB shall redeem the JNA in ten (10) equal instalments each comprising 10% of the aggregate nominal value of all outstanding JNA commencing on the sixth (6th) anniversary of the date of issue of the JNA. On the tenth (10th) anniversary of the date of issue of the JNA, PNSB has the option to redeem the JNA by paying the principal amount outstanding on that date. On the same day, the holders of the JNA also have the option to sell the JNA back to PNSB for a consideration equivalent to the principal amount outstanding on that day. (c) The JNA was issued back-to-back with the RUN. Proceeds from the RUN was immediately utilised to subscribe for the JNA by the Company. Accordingly, the proceeds from the coupon payments and redemptions of the JNA would be utilised by the Company for coupon payments and redemptions of the RUN. At balance sheet date, the carrying amount of the JNA approximated the fair value. The effective interest rate applicable to the JNA at the balance sheet date was 7.30% (2001: 7.70%) per annum. 17 Advances to a subsidiary The advances to a wholly-owned subsidiary, PNSB, are unsecured, interest free and are not repayable within the period of twelve (12) months from the balance sheet date. The carrying amount of these advances at the balance sheet date were not reduced to their estimated fair value of RM345,807,471 (Note 35) as these advances are receivable from a profitable wholly-owned subsidiary and the Directors are of the opinion that the amounts are recoverable in full. 18 Debt Service Reserve Account Under the terms of agreement for the issue of the RM1,020 million 10 years Al-Bai Bithaman Ajil Islamic Debt Securities primary bonds together with non-detachable secondary bonds ( BaIDS ) and RM350 million MCPs/Al-Murabahah Medium Term Notes ( MMTNs ) Issuance Facility by its wholly-owned subsidiary, PNSB, a deposit equivalent to twelve (12) months projected payment obligations under the BaIDS and MCPs/MMTNs that are outstanding at any point in time is required to be placed in a Debt Service Reserve Account ( DSRA ). PNSB is not entitled to withdraw any money from the DSRA without prior consent of the Security Trustee except on condition that the BaIDS and MCPs/MMTNs have been fully redeemed (Note 27(iii)). At the balance sheet date, the carrying amount of the deposits held in the DSRA approximated the fair value. The deposits held in the DSRA is maintained for long term until the full redemption and expiry of the BaIDS on 27 October 2010 (Note 27(iii)) and is presently yielding interest income at market interest rates. The weighted average effective interest rate applicable to the deposits held in the DSRA at the balance sheet date was 2.97% (2001:2.90%) per annum. Puncak Niaga Holdings Berhad Annual Report

157 19 Long-term receivables The long-term receivables mainly represent an amount due from a customer i.e. the State Government of Selangor, on contract in respect of the Sungai Selangor Water Supply Scheme Phase 2 - Distribution Supply System II ( DSS II ) which was completed on 6 July Pursuant to the terms of the contract, the payments for the contract sum are to be made over a period of five (5) years commencing from 2001 (Note 21). Group RM RM Deferred repayment periods are as follows: Amount receivable within 12 months (included in trade receivables - Note 21) 59,338,454 72,083,447 Amount receivable after 12 months 106,108, ,225, ,447, ,308,984 Included in amount receivable after twelve (12) months is retention sum on contract amounting to RM8,314,334 (2001:RM8,314,334). The weighted average effective interest rate per annum applicable to the long-term receivables at the balance sheet date and the fair value of long-term receivables as at balance sheet date were as follows: Weighted average effective interest rate Carrying Fair per annum amount value RM RM % % Group Long-term receivables (excluding retention sum) 157,132, ,089, Retention sum 8,314,334 7,653, Long-term receivables (Note 35) 165,447, ,742,451 The carrying amount of the long-term receivables at the balance sheet date were not reduced to their estimated fair value of RM162,742,451 as the Directors are of the opinion that the amounts are recoverable. 20 Inventories Group RM RM Water treatment chemicals, at cost 817,277 1,051,835 Puncak Niaga Holdings Berhad Annual Report

158 Notes to the Financial Statements for the financial year ended 31 December Trade and other receivables Group Company RM RM RM RM Trade receivables 780,816, ,916, Advances and loans to staff 1,745,350 2,492, Amounts due from subsidiaries (Note 22) ,713,479 5,730,304 Sundry receivables 34,044,584 28,040,335 5,194,262 5,126,750 Deposits 2,125,244 1,501, ,000 0 Prepayments 1,119, , ,850, ,445,470 17,007,741 10,857,054 Included in trade receivables is RM59,338,454 (2001:RM72,083,447) representing unpaid and current portion of deferred payments on contract due within twelve (12) months, pursuant to the DSS II contract. Included in sundry receivables of the Group is RM8,442,598 (2001:RM11,448,958) due from a subsidiary of Central Plus (M) Sdn. Bhd. ( CPMSB ), a substantial corporate shareholder of the Company. The credit term of trade receivables is 30 days. 22 Amounts due from subsidiaries The amounts due from subsidiaries are interest free, unsecured and payable at call. 23 Deposits, bank and cash balances Group Company RM RM RM RM Deposits with licensed banks 56,580,289 12,855, Bank and cash balances 28,735,846 49,104, ,693 1,016,036 85,316,135 61,960, ,693 1,016,036 Included in deposits with licensed banks are restricted monies amounting to RM55,726,548 (2001:RM Nil) representing deposits in a designated account for the repayment of the Term Loan (DSS II) (Note 27 (ii)). The weighted average effective interest rate applicable to deposits with licensed banks at the balance sheet date was 2.53% (2001:2.70%) per annum. Deposits of the Group have an average maturity of 14 days (2001:30 days). Puncak Niaga Holdings Berhad Annual Report

159 24 Trade and other payables Group Company RM RM RM RM Trade payables 72,466,155 48,264, Amounts due to contractors 3,789,973 1,479, Finance cost payable 65,849,524 51,726,910 1,535,745 1,535,745 Trade accruals 18,455,888 19,834, , ,142 Retention sum 17,923 92, Amount owing to Directors 16,799 16, ,596, ,414,890 1,828,991 2,031,887 Included in trade payables and trade accruals are RM70,897,978 (2001:RM44,753,806) and RM81,000 (2001:RM100,000) respectively which are amounts due to subsidiaries of CPMSB, a substantial corporate shareholder of the Company. The credit term of trade payables granted to the Group is 30 days. Notwithstanding, the Group is paying its major trade payables on back-to-back terms based on collections from its sole customer i.e. the State Government of Selangor. 25 Hire-purchase payables Group RM RM Analysis of hire-purchase payables: Payable within one year 1,254,032 1,311,494 Payable between one and two years 1,073, ,646 Payable between two and five years 2,212, ,112 Payable after five years 300, ,249 4,840,425 3,267,501 Less: Financing charges (800,046) (520,195) 4,040,379 2,747,306 Present value of hire-purchase payables: Payable within one year 977,149 1,176,156 Payable between one and two years 952, ,003 Payable between two and five years 1,998, ,610 Payable after five years 112,712 55,537 4,040,379 2,747,306 Representing hire-purchase payables, net of interest-in-suspense: Payable within 12 months 977,149 1,176,156 Payable after 12 months 3,063,230 1,571,150 4,040,379 2,747,306 Puncak Niaga Holdings Berhad Annual Report

160 Notes to the Financial Statements for the financial year ended 31 December Hire-purchase payables (continued) The weighted average effective interest rate per annum applicable to hire-purchase payables at the balance sheet date and the fair value of hire-purchase payables as at balance sheet date were as follows: Weighted average effective interest rate Carrying Fair per annum amount value RM RM % % Group Hire-purchase payables (Note 35) 4,040,379 4,306, Borrowings Group RM RM Secured: Government support loan due within 12 months (Note 27) 30,443,895 24,355,116 Term loan (DSS II) due within 12 months (Note 27) 55,726,548 55,726,548 Al-Murabahah Commercial Papers due within 12 months (Note 27) 0 18,000,000 86,170,443 98,081, Long-term borrowings Group Company RM RM RM RM Secured: Government support loan 121,775, ,775, Term loan (DSS II) 171,936, ,936, Al-Bai Bithaman Ajil Bonds 1,008,601,662 1,006,831, Al-Murabahah Commercial Papers 32,000, ,000, Redeemable Unconvertible Junior Notes 191,253, ,785, ,775, ,609,835 1,525,567,490 1,582,329, ,775, ,609,835 Due within 12 months Government support loan (Note 26) 30,443,895 24,355, Term loan (DSS II) (Note 26) 55,726,548 55,726, Al-Murabahah Commercial Papers (Note 26) 0 18,000, ,170,443 98,081, Due after 12 months Government support loan 91,331,684 97,420, Term loan (DSS II) 116,210, ,210, Al-Bai Bithaman Ajil Bonds 1,008,601,662 1,006,831, Al-Murabahah Commercial Papers 32,000,000 92,000, Redeemable Unconvertible Junior Notes 191,253, ,785, ,775, ,609,835 1,439,397,047 1,484,247, ,775, ,609,835 1,525,567,490 1,582,329, ,775, ,609,835 Puncak Niaga Holdings Berhad Annual Report

161 27 Long-term borrowings (continued) Analysis of borrowings: Group Company RM RM RM RM Payable within one year 86,170,443 98,081, Payable between one and two years 59,493,388 59,493, Payable between two and five years 653,072, ,072, Payable after five years 726,831, ,682, ,775, ,609,835 1,525,567,490 1,582,329, ,775, ,609,835 All the long-term borrowings carry fixed interest rates except for the Al-Murabahah Commercial Papers. The Al-Bai Bithaman Ajil Bonds and Redeemable Unconvertible Junior Notes are further analysed as follows: Group Group Company Redeemable Unconvertible Redeemable Unconvertible Al-Bai' Bithaman Ajil Bonds Junior Notes Junior Notes RM RM RM RM RM RM Nominal value 1,020,000,000 1,020,000, ,875, ,875, ,875, ,875,000 Less: Yield to maturity (10,532,693) (10,532,693) (370,781,250) (370,781,250) (370,781,250) (370,781,250) 1,009,467,307 1,009,467, ,093, ,093, ,093, ,093,750 Less: Debt issuance expenses (4,552,312) (4,552,312) (5,848,665) (5,848,665) 0 0 Net proceeds 1,004,914,995 1,004,914, ,245, ,245, ,093, ,093,750 Cumulation of accretion of yield to maturity 2,574,114 1,338,260 20,682,096 1,516,085 20,682,096 1,516,085 Cumulation of amortisation of debt issuance expenses 1,112, , ,237 23, ,008,601,662 1,006,831, ,253, ,785, ,775, ,609,835 Puncak Niaga Holdings Berhad Annual Report

162 Notes to the Financial Statements for the financial year ended 31 December Long-term borrowings (continued) (i) Government Support Loan The Government Support Loan which was obtained from the Federal Government in 1998 to finance the construction of the Wangsa Maju water treatment plant and its related facilities, is repayable in equal annual instalments over a period of twenty (20) years commencing on 11 April It is secured on all moneys standing to the credit of the Special Project Account. The interest rate is fixed at 8% (2001:8%) per annum on the outstanding balance of the loan amount. PNSB is currently negotiating with the Federal Government to restructure the loan in view of the lower bulk supply rate offered by the State Government of Selangor. (ii) Term Loan ( DSS II ) The Term Loan to finance the Sungai Selangor Water Supply Scheme Phase 2 Stage II - Distribution Supply System II ( DSS II ) project is repayable in five (5) unequal instalments commencing on 31 October 2001 and thereafter on 2 January The subsequent repayments will be on an annual basis until year The Term Loan (DSS II) is secured via the assignments of the DSS II construction contract and project account, proceeds from the DSS II project and the designated account, contractors performance bond and insurance policies on the DSS II project. Interest is payable semi-annually and fixed at 7.60% (2001: 7.60%) per annum. (iii) Al-Bai Bithaman Ajil Bonds and Al-Murabahah Commercial Papers/Al-Murabahah Medium Term Notes On 12 October 2000, PNSB entered into several agreements with United Overseas Bank (Malaysia) Berhad and various parties to raise RM1,020 million 10-Year Al-Bai Bithaman Ajil Islamic Debt Securities primary bonds together with non-detachable secondary bonds ( BaIDS ) and RM350 million Al-Murabahah Commercial Papers ( MCPs )/Al- Murabahah Medium Term Notes ( MMTNs ) Issuance Facility. Subsequently, on 28 October 2000, PNSB issued the entire BaIDS and RM120 million of MCPs, the proceeds of which were utilised mainly to repay the Revolving Underwriting Facility of RM800 million and Term Loan of RM300 million. The BaIDS primary bonds will mature beginning 27 October 2005 and on an annual basis, for each series issued. The non-detachable BaIDS secondary bonds are redeemable semi-annually from the date the primary bonds were issued, at rates of 7% to 8% (2001:7% to 8%) per annum during the financial year on the primary bonds outstanding. The MCPs/MMTNs will expire five (5) years from the date of agreement i.e. 12 October The tender rates ranged between 2.80% and 3.20% (2001:2.80% and 3.12%) per annum during the financial year. The facilities for the BaIDS, MCPs and MMTNs are secured by way of deposit of an aggregate sum in the DSRA equivalent to twelve (12) months projected payment obligations under the BaIDS and MCPs/MMTNs that are outstanding at any point in time. PNSB is not entitled to withdraw any money from the DSRA without prior consent of the Security Trustee except on condition that the BaIDS, MCPs and MMTNs have been fully redeemed. In addition, the facilities are also secured by fixed charges over all the assets of PNSB, the rights of PNSB under the concession agreements, construction contracts and project agreements undertaken by PNSB. Puncak Niaga Holdings Berhad Annual Report

163 27 Long-term borrowings (continued) (iii) Al-Bai Bithaman Ajil Bonds and Al-Murabahah Commercial Papers/Al-Murabahah Medium Term Notes (continued) No dividend by PNSB will be declared and paid where inter-alia: the outstanding balance in the DSRA is less than 1.0 time of the aggregate quantum of the Issuer s payment obligations under the BaIDS and MCPs/MMTNs for a period of twelve (12) months commencing from the date on which the dividend is contemplated; or the Annual Debt Service Cover Ratio and the Forward Debt Service Cover Ratio are less than 1.7 times. The Company will also be required to maintain the following financial ratios, which will be measured annually commencing on 31 December 2001: (i) Interest Cover Ratio of at least 2.0 times; (ii) Debt Equity Ratio of not more than 4.0 times; and (iii) Annual Debt Service Cover Ratio of at least 1.25 times. (iv) Redeemable Unconvertible Junior Notes On 20 November 2001, the Company issued RM546,875,000 Nominal Value 15-Year Redeemable Unconvertible Junior Notes ( RUN ) with 109,374,869 free detachable warrants at an issue price of RM0.322 per RM1.00 nominal value of RUN on the basis of RM5.00 nominal value of RUN with one (1) free warrant for every four (4) existing ordinary shares of RM1.00 each held in the Company. The RUN was offered to the entitled shareholders and is constituted by a Trust Deed dated 5 September The RM176 million proceeds from the RUN issue was immediately utilised to subscribe for the JNA issued by PNSB, the Company s wholly-owned subsidiary. PNSB subsequently, utilised the proceeds to repay RM168 million of its MCPs with the remaining balance utilised for its working capital purposes. The main features of the RUN and warrants are as follows: (a) The RUN carries a coupon rate of 2.5% per annum payable semi-annually for the immediate ten (10) years from the date of the issue of the RUN and 3.5% per annum payable semi-annually thereafter for the next five (5) years. (b) The Company shall redeem the RUN in ten (10) equal instalments each comprising 10% of the aggregate nominal value of all outstanding RUN commencing on the sixth (6th) anniversary of the date of issue of the RUN. On the tenth (10th) anniversary of the date of issue of the RUN, the Company has the option to redeem the RUN by paying the principal amount outstanding on that date. On the same day, the holders of the RUN also have the option to sell the RUN back to the Company for a consideration equivalent to the principal amount outstanding on that day. (c) The RUN and the warrants are transferable and are quoted on the Kuala Lumpur Stock Exchange. (d) The RUN is secured on the JNA issued by PNSB. The Company is also required to create a security account to receive only proceeds from coupon payment and redemption of the JNA by PNSB, and thereafter to pay the coupon payment and redemption of the RUN. Puncak Niaga Holdings Berhad Annual Report

164 Notes to the Financial Statements for the financial year ended 31 December Long-term borrowings (continued) (iv) Redeemable Unconvertible Junior Notes (continued) (e) Holders of the warrants have the right to subscribe for new ordinary shares of the Company in cash at any time during the period commencing one (1) day after the date of issue of the warrants and ending on the date being five (5) years from the date of issue of the warrants ( exercise period ). The exercise price of the warrants is RM2.62 per new ordinary share of the Company subject to adjustments under certain circumstances in accordance with the provisions of the Deed Poll dated 5 September (f) The warrants that are not exercised during the exercise period will lapse and become void thereafter. (g) The new ordinary shares issued arising from the exercise of the warrants during the exercise period shall rank pari-passu in all respects with the then existing ordinary shares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the said new ordinary shares. The Company is restricted from declaring and paying any dividends: (i) if there is any amount due but not paid under the RUN; or (ii) in the event a default has occurred or is continuing and has not been waived. (v) Effective interest rates The effective interest rates per annum applicable to conventional long-term borrowings i.e. not under the basis of Islamic banking principles, at the balance sheet date were as follows: Effective interest rate per annum % % Group Government Support Loan Term Loan (DSS II) Group and Company Redeemable Unconvertible Junior Notes (vi) Estimated fair values The carrying amounts of the RUN of the Group and of the Company at balance sheet date approximated their fair values. The fair values of other conventional long-term borrowings at balance sheet date were as follows: Carrying Fair amount value RM RM Group Government Support Loan (Note 35) 121,775, ,051,923 Term Loan (DSS II) (Note 35) 171,936, ,451,870 Puncak Niaga Holdings Berhad Annual Report

165 28 Share capital Ordinary share of RM1.00 each Group Company RM RM RM RM Authorised: At 1 January 1,000,000, ,000,000 1,000,000, ,000,000 Increased during the financial year 0 500,000, ,000,000 At 31 December 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 Issued and fully paid up: At 1 January 437,500, ,500, ,500, ,500,000 Issued during the financial year: Exercise of options under ESOS 1,778, ,778,000 0 At 31 December 439,278, ,500, ,278, ,500,000 During the financial year, 1,778,000 new ordinary shares of RM1.00 each were issued by the Company for cash arising from the exercise of options by eligible employees pursuant to the Company s Employees Share Option Scheme at an exercise price of RM2.37 per share. The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company. Employees Share Option Scheme The Company s Employees Share Option Scheme ( ESOS ), governed by the ESOS Bye-Laws, was principally approved by the shareholders at the Extraordinary General Meeting of the Company held on 26 June 2001 and became effective following the implementation by the Company on 25 February The ESOS shall be in forced for a duration of five (5) years commencing from 25 February The salient features of the ESOS are as follows: (a) The ESOS is set up for the participation in ordinary shares of the Company only. The maximum number of new ordinary shares which may be made available under the ESOS shall not exceed 10% of the total issued and paid up ordinary shares of the Company at the point in time when an offer is made. At the commencement of the ESOS, the total number of new ordinary shares available for offer was 43,750,000 ordinary shares of RM1.00 each. (b) Eligible employees are those who have been in service of the Group for a continuous period of at least one (1) year including full time Executive Directors who are involved in the day-to-day management and on the payroll of the Group. (c) The ESOS is administered by the Option Committee which comprise the Executive Directors of the Company. Puncak Niaga Holdings Berhad Annual Report

166 Notes to the Financial Statements for the financial year ended 31 December Share capital (continued) Employees Share Option Scheme (continued) (d) The options granted under the ESOS may be exercised by the grantee by notice in writing to the Company during the period commencing from the date of offer and before the expiry of the ESOS on 24 February (e) (f) The exercise price of the options at which the eligible employees are entitled to subscribe for the ordinary shares of RM1.00 each in the Company under the ESOS is the weighted average market price of the shares of the Company as quoted in the daily official list issued by the Kuala Lumpur Stock Exchange for the five (5) market days immediately preceding the respective dates of offer subject to a discount of not more than 10%, or at the par value of the ordinary shares of the Company of RM1.00 each, whichever is higher. The eligible employee to whom the options have been granted has no right to participate, by virtue of the options, in any share issue of any other company. (g) The new ordinary shares issued arising from the ESOS shall rank pari-passu in all respects with the then existing ordinary shares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the entitlement date of which is prior to the date of allotment of the said new ordinary shares. (h) The basis on which the options may be exercised, up to the expiry of the ESOS on 24 February 2007, in accordance with the Directors approval is as follows: Number of Options Percentage of options exercisable granted and unexercised as at Tranche 31 December * % % % % % 1 30,524, ,843, ,367,000 * The ESOS expires on 24 February 2007 (i) The movements of the options over the ordinary shares of RM1.00 each of the Company granted under the ESOS during the financial year are as follows: Date of Exercise Number of share options options price At Tranche granted per option Granted Exercised Lapsed** RM ,422,000 (1,778,000) (1,120,000) 30,524, RM2.47 2,933,000 0 (90,000) 2,843,000 36,355,000 (1,778,000) (1,210,000) 33,367,000 ** Due to resignations or offers not taken up Puncak Niaga Holdings Berhad Annual Report

167 29 Retained earnings The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 to frank the payment of net dividends up to approximately RM17,168,000 (2001:RM15,976,000) out of its retained earnings as at 31 December 2002, without incurring additional tax liabilities. 30 Net cash generated from operation Group Company RM RM RM RM Net profit for the financial year 179,745, ,314,056 1,870,146 1,997,703 Adjustments for: Depreciation of property, plant and equipment 4,142,885 3,950,523 88,045 95,404 Amortisation of project development expenditure 14,999,624 13,961, Amortisation of water treatment plants 81,946,473 80,782, Accretion of discount on bonds and notes 20,401,865 2,647,671 19,166,011 1,516,085 Amortisation of debt issuance expenses 836, , Interest on hire-purchase 369, , Gain on disposal of property, plant and equipment (510,404) (198,649) 0 0 Allowance for diminution in value of other investments 32, Taxation 368, , , ,760 Interest income (12,209,981) (10,940,557) (32,870,919) (3,201,340) Interest expense 114,050, ,329,966 13,671,875 1,535,745 Changes in working capital: - Receivables (219,324,077) (211,232,462) (1,364,236) (2,585,158) - Payables 24,888,645 (15,373,267) (202,896) 1,257,082 Net cash generated from operations 209,737, ,517,801 1,162,329 1,462, Significant related party transactions and balances CPMSB is a substantial corporate shareholder of the Company. Tan Sri Rozali bin Ismail, a Director of the Company has substantial direct interest in shares in CPMSB. In the normal course of business, the Company undertakes on agreed terms and prices, certain transactions with companies deemed related parties by virtue of having a common substantial shareholder. The CPMSB group of companies and other related parties, with whom the Group and Company transacted with, include the following: Related parties Mandai Sari Sdn. Bhd. Syarikat Bekalan Air Selangor Sdn. Bhd. RZ Management Services Sdn. Bhd. Puncak Niaga Overseas Capital Sdn. Bhd. Relationship A subsidiary of CPMSB A subsidiary of CPMSB A Director related corporation A Director related corporation Puncak Niaga Holdings Berhad Annual Report

168 Notes to the Financial Statements for the financial year ended 31 December Significant related party transactions and balances (continued) The common Directors of PNSB, who are also Directors of the Company are Tan Sri Rozali bin Ismail, Ruslan bin Hassan, Mat Hairi bin Ismail and Lee Miang Koi. Ruslan bin Hassan and Lee Miang Koi, who are Directors of the Company, are also Directors of Unggul Raya (M) Sdn. Bhd., NS Water System Sdn. Bhd. and Puncak Research Centre Sdn. Bhd. Tan Sri Rozali bin Ismail, Mat Hairi bin Ismail and Ruslan bin Hassan are also Directors of Ideal Water Resources Sdn. Bhd. Ruslan bin Hassan is also the Director for Puncak Seri (M) Sdn. Bhd. Significant related party transactions The related party transactions undertaken in the normal course of business are on terms and prices agreed with the respective related parties. The significant related party transactions during the financial year are as follows: Group RM RM Operating and maintenance charges by Mandai Sari Sdn. Bhd. 65,320,322 68,909,495 Repayment of advance to Syarikat Bekalan Air Selangor Sdn. Bhd. 0 4,347,241 Management fees charged by Puncak Niaga Overseas Capital Sdn. Bhd ,000 Management fees charged by Mandai Sari Sdn. Bhd. 500, ,004 Secretarial fees charged by RZ Management Services Sdn. Bhd. 240, ,000 Related party balances Related party balances which arose from the above significant related party transactions and remained outstanding at the balance sheet date, are as follows: Group Related party Type of transaction RM RM Payables Mandai Sari Sdn. Bhd. Operating and maintenance charges 70,897,978 44,753,806 RZ Management Services Sdn. Bhd. Secretarial fees 81, ,000 70,978,978 44,853,806 Puncak Niaga Holdings Berhad Annual Report

169 32. Capital Commitments Group RM RM Commitment under the terms of the Privatisation Cum Concession Agreement dated 22 September 1994 for the rehabilitation and refurbishment of water treatment facilities 10,265,062 16,933,000 Commitment under the terms of the Construction Cum Operation Agreement dated 22 March 1995 for the construction and completion of Sungai Selangor Water Supply Scheme Phase 2 Stage II 0 500, Contingent Liabilities Group Company RM RM RM RM Unsecured Corporate guarantee given to a bank for facilities granted to a subsidiary ,000,000 50,000,000 Trade and performance guarantees extended to third parties 26,451,500 17,448, Segmental reporting - Group Segmental analysis is not presented as the Group is primarily involved in the operation, maintenance, construction, rehabilitation and refurbishment of water treatment facilities and operates principally in Malaysia. 35 Financial instruments Financial instruments are contracts that give rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. These includes, amongst others, investments, deposits, cash and bank balances, receivables, payables and borrowings. Fair values There is no disclosure of fair value for investments in subsidiaries and associate, and borrowings under the basis of Islamic banking principles as these are excluded from MASB Standard 24 Financial Instruments: Disclosure and Presentation. Puncak Niaga Holdings Berhad Annual Report

170 Notes to the Financial Statements for the financial year ended 31 December Financial instruments (continued) Fair values (continued) The carrying amounts of other financial assets and liabilities of the Group and of the Company at the balance sheet date approximated their fair values except as set out below: Group Carrying Fair Note amount value RM RM Financial asset Long-term receivables ,447, ,742,451 Financial liabilities Hire-purchase payables 25 (4,040,379) (4,306,549) Long-term borrowings: - Government Support Loan 27 (121,775,579) (120,051,923) - Term Loan (DSS II) 27 (171,936,831) (171,451,870) (297,752,789) (295,810,342) Company Carrying Fair Note amount value RM RM Financial asset Advances to a subsidiary ,368, ,807, Significant events during the financial year (a) The Company implemented an ESOS on 25 February The ESOS, governed by the ESOS Bye-Laws, was principally approved by the shareholders at the Extraordinary General Meeting of the Company held on 26 June The ESOS shall be in forced for a duration of five (5) years commencing from 25 February (b) On 4 March 2002, the Company entered into a Second Supplemental Agreement with N.S. Water Sdn. Bhd., Eastern Utilities Sdn. Bhd. and Lembaga Pemegang-Pemegang Amanah Yayasan Negeri Sembilan for the purpose of extending the Memorandum of Understanding ( MOU ) dated 20 December 2000 by yet another six (6) months with effect from 20 December 2001 up to 30 June The MOU sets out the respective parties mutual intention and understanding in respect of the proposed privatisation of Jabatan Bekalan Air Negeri Sembilan by N.S. Water Konsortium Sdn. Bhd. With the execution of the said supplemental agreement, the MOU shall continue to subsist unless terminated by the occurrence of any of the events as stated in Clause 5 of the MOU. On 12 August 2002, the Company entered into a Third Supplemental Agreement with N.S. Water Sdn. Bhd., Eastern Utilities Sdn. Bhd. and Lembaga Pemegang-Pemegang Amanah Yayasan Negeri Sembilan for the purpose of extending the MOU dated 20 December 2000 by a further six (6) months with effect from 1 July 2002 up to 31 December Puncak Niaga Holdings Berhad Annual Report

171 36 Significant events during the financial year (continued) (c) On 28 January 2002, the Company formed a consortium with Lanco Infratech Ltd. and Kris Heavy Engineering & Construction Sdn. Bhd. to submit a tender bid to undertake the Chennai Water Supply Augmentation Project 1 - Package III ( Chennai Project ) which involves the supply and laying of water supply pipelines (including a 5-year operation and maintenance contract). On 6 November 2002, the Company, on behalf of the consortium, received a letter from the Chennai Metropolitan Water Supply and Sewereage Board of India informing its acceptance of the consortium s tender bid. The total contract sum awarded is INR292,47,05, (Rupees Two Hundred and Ninety Two Crores Forty Seven Lakhs Five Thousand One Hundred and Two and Paise Seventy Six) which is equivalent to approximately RM234 million. The Chennai Project shall be undertaken by the consortium via the establishment of an unincorporated joint venture, comprising the Company, Lanco Infratech Ltd. and Kris Heavy Engineering & Construction Sdn. Bhd., with a participating ratio of 70%:20%:10% respectively. The unincorporated joint venture has not commenced operations as at 31 December Significant event subsequent to balance sheet date On 24 March 2003, the unincorporated joint venture mentioned in Note 36(c) above, accepted credit facilities totalling INR950 million (equivalent to approximately RM76 million) from a licensed bank in India. The credit facilities are secured by way of a Standby Letter of Credit ( SBLC ), the facility of which was granted to the Company by a licensed bank in Malaysia. Todate, the cumulative amount of SBLC issued amounted to approximately RM46 million. Puncak Niaga Holdings Berhad Annual Report

172 Statement by Directors Pursuant to Section 169(15) of the Companies Act, 1965 We, Tan Sri Rozali bin Ismail and Mat Hairi bin Ismail, being two of the Directors of Puncak Niaga Holdings Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 120 to 157 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2002 and of the results and cash flows of the Group and of the Company for the financial year ended on that date in accordance with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, Signed on behalf of the Board of Directors in accordance with their resolution dated 23 April Tan Sri Rozali bin Ismail Director Mat Hairi bin Ismail Director Statutory Declaration I, Mat Hairi bin Ismail, being the Director primarily responsible for the financial management of Puncak Niaga Holdings Berhad, do solemnly and sincerely declare that the financial statements set out on pages 120 to 157 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Mat Hairi bin Ismail Director Subscribed and solemnly declared by the abovenamed Mat Hairi bin Ismail at Kuala Lumpur, Malaysia on 23 April Before me Pasiah Muridan (No. W187) Commissioner for Oaths Puncak Niaga Holdings Berhad Annual Report

173 Report of the Auditors to the Members of Puncak Niaga Holdings Berhad We have audited the financial statements set out on pages 120 to 157. These financial statements are the responsibility of the Company s Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of: (i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and (ii) the state of affairs of the Group and of the Company as at 31 December 2002 and of the results and cash flows of the Group and Company for the financial year ended on that date; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiary of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. The names of the subsidiaries of which we have not acted as auditors are indicated in Note 13 to the financial statements. We have considered the financial statements of these subsidiaries and the auditors reports thereon. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the 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 auditors reports on the financial statements of the subsidiary companies were not subject to any qualification and did not include any comment made under subsection (3) of Section 174 of the Act. PricewaterhouseCoopers (AF: 1146) Chartered Accountants Mohd Daruis Zainuddin (969/03/05(J/PH)) Partner of the firm Kuala Lumpur 23 April 2003 Puncak Niaga Holdings Berhad Annual Report

174 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Sixth Annual General Meeting of Puncak Niaga Holdings Berhad ( U) will be held at the Banquet Hall, Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off Jalan Bukit Kiara, Kuala Lumpur on Wednesday, 25 June 2003 at 9.30 a.m. for the following purposes:- 1. To receive the Audited Accounts of the Company for the financial year ended 31 December 2002 Resolution 1 and the Reports of the Directors and Auditors thereon. 2. To re-elect the following Directors of the Company retiring in accordance with Article 98 of the Company's Articles of Association:- (a) Encik Mat Hairi Bin Ismail Resolution 2 (b) YBhg Dato Hari Narayanan a/l Govindasamy Resolution 3 3. To re-appoint Messrs PricewaterhouseCoopers as the Auditors of the Company and to authorise Resolution 4 the Directors of the Company to fix their remuneration. AS SPECIAL BUSINESS:- To consider and, if thought fit, to pass the following Ordinary Resolution:- 4. Allotment Of Shares Pursuant To Section 132D Of The Companies Act, 1965 Resolution 5 "THAT, subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant governmental/regulatory authorities, the Directors of the Company be and are hereby empowered, pursuant to Section 132D of the Companies Act, 1965, to issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors of the Company may deem fit provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being AND THAT the Directors of the Company be and are hereby also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Kuala Lumpur Stock Exchange AND FURTHER THAT such authority shall continue to be in force until the conclusion of the next Annual General Meeting of the Company." 5. To transact any other ordinary business of which due notice shall have been given. BY ORDER OF THE BOARD TAN BEE LIAN (MAICSA ) Secretary Kuala Lumpur 3 June 2003 Puncak Niaga Holdings Berhad Annual Report

175 Notes:- 1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company. 2. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised or if such appointer is a corporation, it must be either under its seal or under the hand of an officer or attorney duly authorised. 3. The instrument appointing the proxy must be deposited at the Registered Office of the Company at Suite , 14th Floor, Plaza See Hoy Chan, Jalan Raja Chulan, Kuala Lumpur not less than 48 hours before the time set for holding the Meeting or any adjournment thereof. 4. Explanatory Note On Special Business:- Resolution 5:- The Ordinary Resolution proposed under item 4, if passed, will give the Directors of the Company, from the date of the above Meeting, authority to issue and allot ordinary shares from the unissued capital of the Company for such purposes as the Directors of the Company consider would be in the interest of the Company. The authority will, unless revoked or varied at a General Meeting, expire at the next Annual General Meeting of the Company. Puncak Niaga Holdings Berhad Annual Report

176 Statements Accompanying the Notice of Annual General Meeting Particulars of Directors standing for re-election at the Sixth Annual General Meeting:- Names of Retiring Directors Encik Mat Hairi Bin Ismail YBhg Dato Hari Narayanan Details a/l Govindasamy Age Nationality Malaysian Malaysian Qualification Bachelor in Accounting (Hons) Degree Bachelor Degree in Electrical and from Universiti Kebangsaan Malaysia Electronics Engineering from Polytechnic of Newcastle-Upon- Tyne, England Position in PNHB Executive Director, Finance Division Independent Non-Executive Director Working Experience & Encik Mat Hairi has 18 years of YBhg Dato Hari has 26 years of Occupation working experience. For details, working experience. For details, please refer to his profile on page 23 please refer to his profile on page of the Annual Report 27 of the Annual Report Directorships in (1) WWE Holdings Bhd (1) Tenaga Nasional Berhad other public companies (2) U-Wood Holdings Berhad (2) SP Setia Berhad Details of attendance at 4/5 (80%) 3/5 (60%) Board Meetings The place, date and hour of the Please refer to page 69 of the Please refer to page 69 of the Board Meetings Annual Report Annual Report Equity securities interests in Please refer to pages 106 and 109 Please refer to pages 106 and 109 PNHB and its subsidiaries of the Annual Report of the Annual Report Family relationship with any Encik Mat Hairi is the younger brother None director and/or substantial of YBhg Tan Sri Rozali Ismail, the shareholder of PNHB Executive Chairman and substantial shareholder of PNHB; and Encik Shaari Ismail, who is a substantial shareholder of PNHB Any conflict of interest Encik Mat Hairi is a substantial None with PNHB shareholder of WWE Holdings Bhd, which is an investment holding company and contractor for the provision of engineering services related to design, fabrication, installation and commissioning of water, wastewater treatment, environmental facilities and construction activities List of convictions for offences None None (other than traffic offences) within the past 10 years Puncak Niaga Holdings Berhad Annual Report

177 Other Compliance Information (a) Share-Buy Backs The Company did not purchase any of its own shares during the financial year ended 31 December (b) Options, Warrants or Convertible Securities The Company had issued two (2) tranches of share options on 26 February 2002 and 26 August 2002 respectively pursuant to the ESOS which became effective on 25 February During the financial year 2002, 1,778,000 options had been exercised. On warrants, none of the warrant holders converted their warrants into ordinary shares during the financial year ended 31 December (c) American Depository Receipt (ADR) / Global Depository Receipt (GDR) The Company does not sponsor any ADR or GDR programme. (d) Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year ended 31 December (e) Non-Audit Fees During the financial year ended 31 December 2002, the Company did not pay any non-audit fees to the external auditors. (f) Variations in Results The Company s/group s audited results for the financial year ended 31 December 2002 did not vary from the unaudited results which was announced to the KLSE on 26 February (g) Profit Guarantee Not applicable. (h) Revaluation Policy on Landed Properties The Group does not adopt a policy of regular revaluation of its property. (i) Recurrent Related Party Transaction The Company did not enter into any recurrent related party transaction which requires the shareholders mandate during the financial year ended 31 December (j) Directors Remuneration The details of the Directors Remuneration at Company and Group Level for the financial year ended 31 December 2002, in successive bands of RM50,000 are tabulated overleaf:- Puncak Niaga Holdings Berhad Annual Report

178 Other Compliance Information Range of Remuneration Company Level Group Level per annum No. of Executive No. of Non-Executive No. of Directors Directors Directors RM1 to RM50, RM50,001 to RM100, RM100,001 to RM150, RM150,001 to RM200, RM600,001 to RM650, RM900,001 to RM950, RM1,350,001 to RM1,400, (k) Material Contracts Involving Directors and Substantial Shareholders Interests During the financial year ended 31 December 2002, neither the Company nor its subsidiaries entered into any material contracts with the Directors and substantial shareholders of the Company. However, material contracts involving Directors and substantial shareholders which are still subsisting at the end of the financial year ended 31 December 2002, are as follows:- Date Nature of Contract Parties Consideration/Mode Relationship with of Satisfaction Director/Substantial Shareholder 8 October Operation & Maintenance Puncak Niaga (M) PNSB to pay Mandai Sari a Mandai Sari is a 1994 Agreement - For Mandai Sdn Bhd (PNSB) and fixed monthly fee of RM41,667 subsidiary of Central Sari Sdn Bhd to undertake Mandai Sari Sdn Bhd as well as for treated water Plus (M) Sdn Bhd (CP), the operation and (Mandai Sari) produced and supplied, which whereby CP is a maintenance of the 27 is measured in accordance with substantial shareholder water treatment plants the provisions of the PCCA of Puncak Niaga under the Privatisation Holdings Berhad Cum Concession (PNHB) Agreement (PCCA) 8 October Refurbishment Works PNSB, Mandai Sari and Contract sum of RM150 million Mandai Sari is a 1994 Agreement - For CGE C.G.E Utilities (M) Sdn which is being paid subsidiary of CP, to undertake the Bhd (CGE) progressively to CGE based on whereby CP is a refurbishment works for physical progress and subject substantial shareholder the 27 water treatment to verification by Perbadanan of PNHB plants under the PCCA Urus Air Selangor Berhad 31 May Operation & Maintenance PNSB, Mandai Sari, Mandai Sari to pay CGE for Mandai Sari is a 1995 Sub-Contract - For CGE and Compagnie treated water produced and subsidiary of CP, Mandai Sari to sub- General Des Eaux supplied, which is measured in whereby CP is a contract the above (now known as accordance with the provisions substantial shareholder Operation & Maintenance Vivendi Water) of the agreement of PNHB Agreement to CGE Puncak Niaga Holdings Berhad Annual Report

179 Proxy Form I/We of being a Member/Members of the Company hereby appoint of as my/our proxy, to vote for me/us and on my/our behalf at the Sixth Annual General Meeting of Puncak Niaga Holdings Berhad to be held at the Banquet Hall, Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off Jalan Bukit Kiara, Kuala Lumpur on Wednesday, 25 June 2003 at 9.30 a.m. and at any adjournment thereof, as indicated below:- No. Resolution For Against 1. To receive the Audited Accounts of the Company for the financial year ended 31 December 2002 and the Reports of the Directors and Auditors thereon. 2. To re-elect Encik Mat Hairi Bin Ismail as Director of the Company. 3. To re-elect YBhg Dato Hari Narayanan a/l Govindasamy as Director of the Company. 4. To re-appoint Messrs PricewaterhouseCoopers as the Auditors of the Company and to authorise the Directors of the Company to fix their remuneration. 5. To empower the Directors of the Company to issue shares pursuant to Section 132D of the Companies Act, Please indicate with a cross ( ) how you wish your votes to be cast in respect of each Resolution. In the absence of specific directions, your proxy will vote or abstain as he thinks fit. No. of shares held Signature(s)/Common Seal of Shareholder(s) Signed this day of 2003 Notes: 1.A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company. 2The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorised or if such appointer is a corporation, it must be either under its seal or under the hand of an officer or attorney duly authorised. 3.The instrument appointing the proxy must be deposited at the Registered Office of the Company at Suite , 14th Floor, Plaza See Hoy Chan, Jalan Raja Chulan, Kuala Lumpur not less than 48 hours before the time set for holding the Meeting or any adjournment thereof. Puncak Niaga Holdings Berhad Annual Report

180 Fold Here Stamp Puncak Niaga Holdings Berhad ( U) Suite , 14th Floor Plaza See Hoy Chan Jalan Raja Chulan Kuala Lumpur Fold Here Puncak Niaga Holdings Berhad Annual Report

181 Malaysia s Water Specialist Pakar Air Malaysia Puncak Niaga Holdings Berhad ( U) Suite , 26th Floor, Plaza See Hoy Chan, Jalan Raja Chulan, Kuala Lumpur. Tel: Fax: website: corpcom@puncakniaga.com.my