COVER RATIONALE - Puncak Niaga Holdings Berhad€¦ · · 2016-06-10COVER RATIONALE Touching Lives ... Planning Unit, ... privatisation of the water supply services in the State

COVER RATIONALE

Touching Lives

Puncak Niaga’s business touches the lives of the communities where we operate. It is therefore

our duty to manage and develop our business in a responsible and sustainable manner.

The year in review has seen us consolidate resources and build on our core strengths. The

theme pages of this year’s Annual Report expresses our commitment towards achieving

sustainable development within the water industry in Malaysia and the region, while benefiting

the communities and our stakeholders.

We will continue to work together with the communities we serve and reinforce the

foundations for a better tomorrow.

Table Of Contents

2-3

4-6

7-8

9

12

13

14

15

18-23

24-27

28-29

32-35

36-43

44-45

46-51

52-53

56-63

64-65

66-71

72-74

75-78

79

80-85

89-151

152-154

155-156

157

Pull-out

Corporate Information

Fact Sheet

Corporate Profile

Vision & Mission Statements

Corporate Structure

Organisation Structure

Financial Highlights

Financial & Share Performances

Board of Directors

Senior Management

Corporate Achievements

Executive Chairman Speaks

Operations Review

Corporate Social Responsibility

Corporate Calendar of Events

Newspaper Clippings

Statement on Corporate Governance

Statement on Internal Control

Audit Committee Report

Risk Management Policy & Report

Investor Relations Policy & Report

Quality Policy

Distribution Schedule of Equity Securities & Property

Financial Reports

Notice of Annual General Meeting

Statement Accompanying the Notice ofAnnual General Meeting

Proxy Form

Health, Safety & Environmental Policy & Report

SEVENTH ANNUAL GENERAL MEETING

DATE : Monday, 28 June 2004TIME : 9.30 a.mVENUE : Banquet Hall

Kuala Lumpur Golf & Country ClubNo. 10 Jalan 1/70D Off Jalan Bukit Kiara 60000 Kuala Lumpur

Puncak Niaga Holdings Berhad Annual Report 2003

2Puncak Niaga Holdings Berhad Annual Report 2003


BOARD OF DIRECTORSYBhg Tan Sri Rozali IsmailExecutive Chairman

Encik Ruslan HassanExecutive Vice Chairman/Executive Director Corporate Affairs Division

Encik Mat Hairi IsmailExecutive DirectorFinance Division

Ir Lee Miang KoiExecutive DirectorProject & Business Development Division

Tuan Syed Danial Syed AriffinExecutive Director Operation Division

Encik Abdul Majid Abdul KarimIndependent Non-Executive Director

YBhg Tan Sri Dato’ Hari Narayanan GovindasamyIndependent Non-Executive Director

YB Tan Sri Dato’ Seri Dr Ting Chew PehIndependent Non-Executive Director

GROUP COMPANY SECRETARYMadam Tan Bee Lian, MAICSA 7006285

REGISTERED OFFICESuite 1401-1406, 14th Floor Plaza See Hoy ChanJalan Raja Chulan 50200 Kuala LumpurTel : 03-2031 8648Fax : 03-2078 4386

PRINCIPAL OFFICESuite 2601-2606, 26th Floor Plaza See Hoy Chan Jalan Raja Chulan 50200 Kuala LumpurTel : 03-2031 8648Fax : 03-2031 8658website : www.puncakniaga.com.mye-mail (general) : [email protected] (investors) : [email protected]

DATE AND PLACE OF INCORPORATION7 January 1997, Malaysia

COMPANY NUMBER416087-U

AUDITORSMessrs PricewaterhouseCoopers (AF 1146)

TAX ADVISORPricewaterhouseCoopers Taxation Services Sdn Bhd (464731-M)

PRINCIPAL BANKERSRHB Bank Berhad (6171-M)Bumiputra-Commerce Bank Berhad (13491-P)United Overseas Bank (Malaysia) Berhad (271809-K)

SOLICITORSMessrs Kadir, Andri Aidham & PartnersMessrs Wong & Partners Messrs Lee HishammuddinMessrs SivananthanMessrs Ng Yook Woon, Andrew TC Saw & CoMessrs Azian Haslina & Co

3 Puncak Niaga Holdings Berhad Annual Report 2003


SHARE REGISTRAR(Place where all registers of securities are kept)Tenaga Koperat Sdn Bhd (118401-V)20th Floor, Plaza PermataJalan KamparOff Jalan Tun Razak 50400 Kuala LumpurTel : 03-4041 6522Fax : 03-4042 6352

STOCK EXCHANGE LISTINGMain Board of Bursa Malaysia under the Infrastructure Project Companies Sector

INDICESKuala Lumpur Composite Index (KLCI)Kuala Lumpur Syariah IndexMorgan Stanley Composite Index

AUDIT COMMITTEEChairman:Encik Abdul Majid Abdul Karim

Members:YBhg Tan Sri Dato’ Hari Narayanan Govindasamy YB Tan Sri Dato’ Seri Dr Ting Chew PehEncik Mat Hairi Ismail

Secretary:Madam Tan Bee Lian

REMUNERATION COMMITTEEChairman:YB Tan Sri Dato’ Seri Dr Ting Chew Peh

Members:YBhg Tan Sri Dato’ Hari Narayanan Govindasamy Encik Abdul Majid Abdul KarimEncik Mat Hairi Ismail


NOMINATION COMMITTEEChairman:YB Tan Sri Dato’ Seri Dr Ting Chew Peh

Members:YBhg Tan Sri Dato’ Hari Narayanan GovindasamyEncik Abdul Majid Abdul Karim


COMPLIANCE, INTERNAL CONTROL AND RISK POLICY COMMITTEE (CICR)Chairman:YB Tan Sri Dato’ Seri Dr Ting Chew Peh

Members:Encik Ruslan Hassan (Head of CICR)Encik Sonari SolorMr Ng Wah TarMadam Tan Bee Lian

Secretary:Encik Mohammed Sofian Ismail (Head of Risk Management Section)


Fact Sheet

PUNCAK NIAGA HOLDINGS BERHAD’S FACT SHEET AS AT 26 APRIL 2004

Group Manpower:Management Employees 82Executive Employees 178Non-Executive Employees 380Total 640

No. of Puncak Niaga’s Water Treatment Plants 28

No. of Water Treatment Plants with ISO Certifications 2

Authorised Share Capital RM1,000,000,000

Paid-Up Share Capital RM457,785,000 (comprising 457,785,000 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

ESOS Exercise Price (4th Tranche) RM2.71 per share

ESOS Exercise Price (5th Tranche) RM3.27 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 Offered (4th Tranche) 1,349,000

Number of ESOS Offered (5th Tranche) 1,635,000

Total 42,156,000


Fact Sheet

List of Corporate Memberships:

1. Malaysian Water Association (MWA) Member since 1994

2. Malaysia South-South Association (MASSA) Member since 1995

3. Federation of Public Listed Companies (FPLC) Member since 1997

4. Malaysian Employers Federation (MEF) Member since 1999

5. Malaysian Industry-Government Group for High Technology (MIGHT) Member since 2001

6. Malaysian-German Chamber of Commerce and Industry (MGCC) Member since 2002

7. National Institute of Occupational Safety and Health (NIOSH) Member since 2002

8. American Water Works Association (AWWA) Member since 2002

9. Malaysian-French Chamber of Commerce and Industry (MFCCI) Member since 2002

10. Malaysia-Russia Business Council Member since 2002

11. British Malaysian Chamber of Commerce (BMCC) Member since 2003

12. Research Institute of Investment Analysts Malaysia (RIIAM) Member since 2003

13. Malaysia-Japan Economic Association (MAJECA) Member since 2003

14. Commonwealth Partnership for Technology Management (CPTM) Member since 2003

15. Institute of Marketing Malaysia (IMM) Member since 2003

List of Water Treatment Plants: Telephone Nos.

1. Ampang Intake 03-4291 4040

2. Batang Kali 03-6057 3255

3. Bernam River Headworks 03-6046 1259

4. Bukit Nanas 03-2078 0782

5. Bukit Tampoi 03-8768 6216

6. Cheras Mile 11 03-8736 0427

7. Gombak 03-6189 5255

8. Kalumpang 03-6049 1366

9. Kepong 03-6274 9495

10. Kuala Kubu Bharu 03-6064 1327

11. North Hummock 03-3341 2052

12. Rantau Panjang 03-3271 0948/03-3271 9133

13. Salak Tinggi 03-8706 1103

14. Sungai Batu 03-6189 0267

15. Sungai Buaya 03-6028 1146

16. Sungai Dusun 03-6046 3649

17. Sungai Keroh 03-6274 9495/03-6091 0001

18. Sungai Langat 03-9074 9430

19. Sungai Lolo 03-9075 3977/03- 9021 5993


Fact Sheet

List of Water Treatment Plants (continued) Telephone Nos.

20. Sungai Pangsoon 03-9021 5993

21. Sungai Pusu 03-6189 5255/03-6185 6631

22. Sungai Rangkap 03-6091 0001

23. Sungai Rumput 03-6185 6631

24. Sungai Selangor Phase 2# 03-3279 2008

25. Sungai Selisek 05-454 2003

26. Sungai Serai 03-9075 3977

27. Sungai Tengi 03-6042 2035

28. Wangsa Maju* 03-4143 7006

#Awarded the following certifications:

1. Quality Management System (ISO 9001:2000)

2. Environmental Management System (ISO 14001:1996)

3. Safety Management System (OHSAS 18001:1999)

*Awarded the Quality Management System (ISO 9001:2000) certification.


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 (now known as Bursa Malaysia) on 8 July 1997.

It is the first water treatment and supply concession company to be listed on Bursa Malaysia 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 2020.

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 2002. Instead, it was completed and commissioned one year ahead of schedule on 1 January 2001.

Sungai Langat Dam


Corporate Profile

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.

On 25 September 2003, PNHB had announced to Bursa Malaysia that it has received a letter from the Economic

Planning Unit, Prime Minister’s Department stating the Federal Government has in principle approved the

privatisation of the water supply services in the State of Selangor and the Federal Territories of Kuala Lumpur and

Putrajaya to be undertaken by Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS). In this respect, PNHB would be

required to take up a 70% equity stake in SYABAS.

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 1,926 million litres per day. This volume is equivalent to

approximately 54.55% of the treated water requirement in the State of Selangor Darul Ehsan and the Federal

Territory of Kuala Lumpur.

SSP2 Water Treatment Plant Administration Building


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 2020.

• To address national and international concerns pertaining to the protection, conservation and enhancement of

the natural environment we live in.

Our Vision Our Mission

11 Puncak Niaga Holdings Berhad Annual Report 200310Puncak Niaga Holdings Berhad Annual Report 2003

Ensuring A Better future


Corporate Structure

Puncak Niaga Holdings BerhadInvestment Holding and

Provision of Management Services

Unggul Raya (M) Sdn Bhd100%operation, management, maintenance and monitoring theoperation of dams

Ideal Water Resources Sdn Bhd100%operation, management,maintenance and undertakingthe rehabilitation and refurbishment ofwater treatment plants

Puncak Niaga (M) Sdn Bhd100%operation, maintenance,management, construction, rehabilitation and refurbishment of water treatment facilities

Puncak Research Centre Sdn Bhd100%dormant

Puncak Seri (M) Sdn Bhd100%dormant

NS Water System Sdn Bhd100%dormant

NS Water Management Sdn Bhd40%dormant


Organisation Structure

Puncak Niaga Holdings Berhad

Executive ChairmanYBhg Tan Sri Rozali Ismail

Executive Vice ChairmanEncik Ruslan Hassan

PNHBExecutive Director Project & Business DevelopmentIr Lee Miang Koi

Senior General ManagerSecretarialMadam Tan Bee Lian

General Manager Internal AuditEncik Sonari Solor

General ManagerStrategic Resource CentreDr Abd Rahim Awang Kechik

General Manager Corporate CommunicationsMr Mohanan Narayanan

General Manager Executive Chairman's OfficeEncik Othman Ismail

Senior General ManagerIr Loh Kit Mun

General ManagerEncik Ramlan Abdul Rahman

General ManagerEncik Usman Ali Mustaffa

Executive DirectorHuman Resources& Administration DivisionEncik Matlasa Hitam

General ManagerHuman Resources & Administration Encik Ahmad Fauzi Yahya

Senior Manager Compensation & Benefits Encik Nik Azmi Nik Yaacob

ManagerRecruitment &Industrial Relations Puan Poziah Abas

ManagerAdministrationEncik Kamarulzaman Abu Bakar

ManagerProtective ServicesEncik Saadon Kardi

Executive DirectorOperation Division Tuan Syed Danial Syed Ariffin

Senior ManagerOperation Contract SupervisionEncik Hashim Omar

Senior ManagerWater Resources &Environmental / Dam OperationsPuan Roowina Merican ARahim Merican

Senior Manager / Plant ManagerSSP2 WTPIr Ausamah Darwish Mohd Daud

Manager / Plant ManagerWangsa Maju WTPEncik Abdul Rahman Kadir

Safety OfficerEncik Sharluddin B Alias

Executive DirectorFinance DivisionEncik Mat Hairi Ismail

General Manager Finance & AccountsMr Ng Wah Tar

AssistantGeneral ManagerFinanceEncik Ismail Maidin

PNSBExecutive DirectorProject & BusinessDevelopment DivisionIr Beh Men Huat

General ManagerProject & Business DevelopmentIr Tan Hui Kuan

General ManagerSabah ProjectMr Seng Pay

Senior Manager Business DevelopmentIr Tham Kin Tuck

Senior Manager Project ManagementEncik Ishak Awang

Senior Manager ContractIr Teh Lee Ngo

Executive DirectorCorporateAffairs Division Encik Ruslan Hassan

General Manager LegalMadam Chan Siew Meei

Assistant General ManagerInformation TechnologyEncik Mohd SabaruldinChe Bakar


Financial Highlights

IN RM’000 YEAR 2003 YEAR 2002 YEAR 2001

BALANCE SHEET

Property, plant and equipment 1,445,904 1,528,703 1,606,425

Project development expenditure 246,809 245,838 255,727

Other non-current assets 132,038 185,740 236,520

Current assets 1,342,384 907,107 601,693

Total tangible assets 3,156,949 2,856,603 2,688,980

ISSUED AND PAID-UP CAPITAL

Share capital 451,166 439,278 437,500

Reserves 680,847 535,028* 405,495*

Shareholders’ fund 1,132,013 974,306* 842,995*

Net tangible assets per share (RM) 2.49 2.19* 1.90*

RATIOS AND STATISTICS

Turnover 578,260 565,105 552,337

Net profit after tax 129,586 127,096* 124,499*

Interest bearing debt 1,613,636 1,529,608 1,585,076

In sen

Earnings per share 29.26 28.98* 28.46*

In % of turnover

Operating profit 22 22* 23*

In times

Gearing ratio 1.43 1.57* 1.88*

Current ratio 5.73 3.66 2.72

* These comparatives have been restated following the change in accounting policy on deferred tax to comply with the MASB Standard 25, ‘Income Taxes’.

FINANCIAL CALENDAR

Financial year end 31 December 2003

Announcement of results :

1st quarter results ended 31 March 2003 21 May 2003

2nd quarter results ended 30 June 2003 21 August 2003

3rd quarter results ended 30 September 2003 19 November 2003

4th quarter results ended 31 December 2003 26 February 2004

Audited Accounts for the financial year ended 31 December 2003 20 April 2004

Published Annual Report 4 June 2004

Annual General Meeting 28 June 2004


Financial & Share Performances34

7,47

2

350,

564 55

2,33

7

565,

105

99 00 01 02

578,

260

03

70,4

68*

64,9

35* 12

4,49

9*

127,

096*

99 00 01 02

129,

586

03

2,10

7,69

5

2,50

7,97

3

2,68

8,98

0

2,85

6,60

3

99 00 01 02

3,15

6,94

9

03

TurnoverRM '000

Profit After TaxationRM '000

Total Tangible AssetsRM '000

KLCI

FINANCIAL PERFORMANCE

SHARE PERFORMANCE

950

900

850

800

750

700

650

600

Share Price (RM)

2.00

40.000m

20.000m

2.50

3.00

3.50

4.00

2003 2004Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Monthly HighestClosing Prices

* These comparatives have been restated following the change in accounting policy on deferred tax to comply with the MASB Standard 25, ’Income Taxes’.

Kuala LumpurComposite Index (KLCI)

Volume of sharestraded

Monthly LowestClosing Prices


The Stamina to Succeed


board of directors

YBhg Tan Sri Rozali Ismail, aged 47, Malaysian

Executive Chairman

YBhg Tan Sri Rozali is the founder of PNSB, the Executive Chairman and substantial shareholder of PNHB. He was appointed

to the Board of PNHB on 24 April 1997. Upon obtaining a Bachelor of Laws Degree from 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 1983.

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 developed 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 Bursa Malaysia on 8 July 1997.

YBhg Tan Sri Rozali Ismail, Executive Chairman


board of directors

In recognition of his outstanding contributions in championing management excellence and best practices in the

Malaysian water and wastewater industry,YBhg Tan Sri Rozali was awarded the prestigious Asia Water Management

Excellence Award 2002 – Individual Award Category, an award at Asian level, by the Regional Institute of

Environmental Technology on 26 March 2002. He was conferred a Fellowship Award by the Institute of Marketing

Malaysia (IMM) in November 2001 for his invaluable contributions to promote the growth and development of the

Malaysian property market. On 16 January 2004, he was elected Advisor to IMM. YBhg Tan Sri Rozali was also

honoured as a Top 10 Nominee for the Ernst & Young Entrepreneur Of The Year – Malaysia 2002 and Malaysia 2003

(Master Entrepreneur Category) Award in recognition of his outstanding entrepreneurship and leadership skills.

YBhg Tan Sri Rozali is the Deputy President of the Malaysian Water Association (MWA) and sits on the Board of

Universiti Utara Malaysia, a leading Malaysian university. He is an active member of various influential governmental

and non-governmental associations such as Malaysian Industry-Government Group for High Technology, Malaysian

Institute of Directors (MID), Malaysian-British Business Council, Malaysia-Indonesia Business Council, Corporate

Malaysia Roundtable, Malaysia-Russia Business Council, Commonwealth Partnership for Technology Management,

FELDA Community Social Development Committee and Yayasan Budi Penyayang Malaysia. On 17 April 2004, he

was elected President of the Malay Chamber of Commerce for the State of Selangor (2004/2008 Session).

Besides PNHB,YBhg Tan Sri Rozali is also the Executive Chairman and major shareholder of 2 other listed companies,

namely U-Wood Holdings Berhad, a property company and WWE Holdings Berhad, a leading wastewater

engineering company in Malaysia. He is the Chairman of Gabungan Wawasan Generasi Felda and also sits on the

Board of Perbadanan Urus Air Selangor Berhad (PUAS).

YBhg Tan Sri Rozali is the Chairman of PNHB’s ESOS Option Committee and is related to PNHB’s Executive

Director, Finance Division, Encik Mat Hairi Ismail (his younger brother). He is also related to Encik Shaari Ismail (his

elder brother), a substantial shareholder of the Company.

YBhg Tan Sri Rozali attended all the six Board Meetings of PNHB held in the financial year ended 31 December 2003.


board of directors

Encik Ruslan Hassan, aged 48, MalaysianExecutive Vice Chairman and Executive Director, Corporate Affairs Division

Encik Ruslan joined PNSB on 1 November 1995 as Head of Corporate Affairs Division. Hisappointments to-date are to the PNSB Board on 26 December 1996, to the Board ofPNHB on 24 April 1997 and as the Executive Vice Chairman of PNHB on 6 April 1999.Currently, he is the Head of PNHB’s Compliance, Internal Control and Risk PolicyCommittee and a member of PNHB’s ESOS Option Committee.

Early this year, Encik Ruslan was appointed a member of the Industrial Court - EmployerPanel for the period 1 January 2004 to 31 December 2006. He is also a member of MID,MWA and IMM.

Upon obtaining a Bachelor of Laws Degree from University of Malaya in 1981, Encik Ruslanbegan his career as Legal Advisor with Esso Production Malaysia Inc. In 1985, he joined PernasSime Darby Holdings Sdn Bhd as Group Legal Advisor/Company Secretary. Encik Ruslan has6 years’ experience as an Advocate and Solicitor. In 1993, he joined Rashid Hussain Berhadas Corporate Affairs Senior General Manager and Executive Committee Member. FromNovember 1995 to February 2003, Encik Ruslan sat on the Board of Rashid Hussain Berhadand Rashid Hussain Securities Sdn Bhd and served as an Audit Committee member of bothcompanies. He also sits on the Board of several private companies and is an AlternateDirector to YBhg Tan Sri Rozali Ismail in PUAS.

Encik Ruslan attended all the six Board Meetings of PNHB held in the financial year ended

31 December 2003.

Encik Mat Hairi Ismail, aged 42, 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 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 worked

with the Langkawi Development Authority (LADA) (1992-1994).

Encik Mat Hairi is the Managing Director and substantial shareholder of WWE Holdings

Bhd and a Non-Executive Director and substantial shareholder of U-Wood Holdings

Berhad. Encik Mat Hairi also sits on the Board of PUAS and several private companies.

Encik Mat Hairi is related to YBhg Tan Sri Rozali Ismail (his elder brother), the Executive

Chairman and substantial shareholder of PNHB. He is also related to another substantial

shareholder of PNHB, Encik Shaari Ismail (his eldest brother). Encik Mat Hairi is a

member of MID and MWA.

Encik Mat Hairi attended five out of the six Board Meetings of PNHB held in the financial

year ended 31 December 2003.

Encik Ruslan HassanExecutive Vice Chairman and ExecutiveDirector, Corporate Affairs Division

Encik Mat Hairi IsmailExecutive Director, Finance Division


board of directors

Ir Lee Miang Koi, aged 50, MalaysianExecutive Director, Project & Business Development Division

Ir Lee joined PNSB in 1995 and is currently responsible for the project and business

development of PNHB. Ir Lee was appointed as a Director of PNSB on 2 February 1999

and subsequently to the Board of PNHB on 1 September 1999. He is a member of

PNHB’s ESOS Option Committee, MWA, MID and IMM.

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 26

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, specialising 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 private companies within the PNHB Group.

Ir Lee attended all the six Board Meetings of PNHB held in the financial year ended

31 December 2003.

Tuan Syed Danial Syed Ariffin, aged 46, Malaysian

Executive Director, Operation Division

Tuan Syed Danial graduated in 1981 with a BSc. (Hons) Degree in Civil Engineering fromUniversity of Aston in Birmingham, United Kingdom. He is a civil engineer by professionand has been with the PNHB Group for 8 1/2 years since December 1995. He beganhis career with PNSB as a Manager of Operation and was subsequently promoted toSenior Manager,Assistant General Manager and General Manager of Operation. Prior tohis appointment to the Board of PNSB and PNHB on 1 March 2004 , he was the ActingExecutive Director of Operation Division (July 2003 to February 2004).

Tuan Syed Danial previously worked with the Pahang Public Works Department for 10years, holding positions from Project Engineer (1981-1983) to District Engineer for JKRCameron Highlands (1983-1991) and the Selangor Water Works Department between1991 to 1995, whereby he was the Senior Project Engineer overseeing the constructionof the Sungai Selangor Phase 1 Project. He is a member of IMM, MWA, a RegisteredEngineer with the Board of Engineers, Malaysia and also sits on the Board of a privatecompany.

He did not attend any Board Meetings of PNHB in the financial year ended 31 December2003 as he was only appointed to the Board of PNHB on 1 March 2004.

Ir Lee Miang KoiExecutive Director, Project & BusinessDevelopment Division

Tuan Syed Danial Syed AriffinExecutive Director, Operation Division


board of directors

Encik Abdul Majid Abdul Karim, aged 45, Malaysian Independent Non-Executive Director

Encik Abdul Majid was appointed to the Board of PNHB on 24 April 1997 as an

Independent Non-Executive Director and was a past Director of PNSB for the period

1994-2001. 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 University of Glasgow, United Kingdom

in 1986. He began his career as a Technical Assistant with the Urban Development

Authority (UDA) (1982-1983), as Property Executive with Boustead Holdings Berhad

(1986-1991) and subsequently as Sales Engineer with UAC Berhad (1991-1993). Encik

Abdul Majid also sits on the Board of several private companies and is a member of MID.

Encik Abdul Majid attended five out of the six Board Meetings of PNHB held in the financial


YBhg Tan Sri Dato’ Hari Narayanan Govindasamy, aged 54, MalaysianIndependent Non-Executive Director

YBhg Tan Sri Dato’ Hari, a businessman by profession was appointed to the Board of

PNHB on 1 July 1999 as an Independent Non-Executive Director. He is a member of

PNHB’s Audit Committee, Remuneration Committee and Nomination Committee. He

holds a Bachelors Degree in Electrical and Electronic Engineering from University of

Northumbria, England.

YBhg Tan Sri Dato’ Hari is a member of the Institute of Engineers Malaysia, MID and a

Registered Professional Engineer with the Board of Engineers, Malaysia. He has extensive

experience in electrical and electronic engineering and has held various key positions

with several established companies as an engineer and entrepreneur.YBhg Tan Sri Dato’

Hari is an active participant of various charitable projects. He also sits on the Board of

Tenaga Nasional Berhad, SP Setia Berhad, Lembaga Lebuhraya Malaysia,Asian Institute of

Medicine, Science and Technology and several private companies.

YBhg Tan Sri Dato’ Hari attended all the six Board Meetings of PNHB held in the financial


Encik Abdul Majid Abdul KarimIndependent Non-Executive Director

YBhg Tan Sri Dato’ HariNarayanan GovindasamyIndependent Non-Executive Director

board of directors

YB Tan Sri Dato’ Seri Dr Ting Chew Peh, aged 61, Malaysian Independent Non-Executive Director

YB Tan Sri 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 University of Malaya in

1970 and obtained a Master of Science from University of London in 1972. He also holds a

Doctorate in Philosophy, which he obtained from University of Warwick in 1976.YB Tan Sri

Dato’ Seri Dr Ting is a member of MID.

YB Tan Sri 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 1987. Between 1979 to 1986,YB Tan Sri Dato’ Seri

Dr Ting published two books entitled “Konsep Asas Sosiologi” and “Hubungan Ras dan Etnik”.

In 1987,YB Tan Sri 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 (1988-1989), Deputy Minister of the Prime

Minister’s Department (1989-1990) and Minister of Housing and Local Government (1990-

1999). Currently,YB Tan Sri Dato’ Seri Dr Ting is the Secretary-General of Malaysian Chinese

Association (MCA). He also sits on the Board of Pan Malaysia Capital Berhad Group, Pan

Malaysia Holdings Berhad, Hua Yang Bhd, Johan Holdings Berhad and also serves as a director

of several private companies.

YB Tan Sri Dato’Seri Dr Ting attended all the six Board Meetings of PNHB held in the financial


YB Tan Sri Dato’ Seri Dr Ting Chew PehIndependent Non-Executive Director

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 pages82 and 85 of the Annual Report.


senior management

Encik Matlasa Hitam, aged 63, MalaysianExecutive Director, Human Resource & Administration Division

Encik Matlasa Hitam joined PNSB on 1 July 2003 as Executive Director, Human Resource & Administration Division. He holds

a Bachelors Degree in Business Administration (Hons.) from Monmouth College, USA and a Masters Degree in Business

Administration (Finance) from Central Michigan University, USA. He has more than 30 years’ senior management experience

covering areas related to manufacturing, marketing, human resources, finance as well as contract and project management.

Encik Matlasa served as Managing Director/Chief Executive Officer of the Petronas Group and was Board member of both

Petronas Methanol (L) Sdn Bhd and Petronas Gas Supply (L) Sdn Bhd from 1992 to May 1996. Prior to joining PNSB, he

was the Executive Vice Chairman of WWE Holdings Berhad.

Ir Beh Men Huat, aged 48, MalaysianExecutive Director, Project & Business Development Division

Ir Beh Men Huat joined PNSB in February 1996 as Manager, Project and Business Development Division. He was promoted

four times prior to his appointment to the Board of PNSB as Executive Director, Project & Business Development Division

on 19 November 2003. He holds a BSc in Civil Engineering (Honours) Degree from University of Strathclyde, Scotland and

subsequently in 2003 obtained a Master of Finance Degree from RMIT University,Australia. He is a member of the Institution

of Engineers Malaysia, Malaysian Institute of Management (MIM), MWA and IMM. Prior to joining PNSB, Ir Beh worked with

Lembaga Letrik Negara (now known as Tenaga Nasional Berhad), Jabatan Kerja Raya and Lembaga Air Perak.

Dr Shamsul Anwar Sulaiman, aged 43, MalaysianExecutive Director, Ideal Water Resources Sdn Bhd

Dr Shamsul Anwar joined Ideal Water Resources Sdn Bhd, a wholly-owned subsidiary of PNSB, as Executive Director on 2

January 2004. He graduated from the University of Leuven, Belgium with a Bachelor in Medical Science in 1987 and a Medical

Degree (Hons) in 1990 and is a registered member with the Malaysian Medical Council. Currently, Dr Shamsul is the

Managing Director of Klinik Famili and D-Jah Corporation Sdn Bhd. He is also the Chairman of Advocate Marketing Worldwide

Sdn Bhd.

Encik Azizul Nizam Bidin, aged 36, MalaysianExecutive Director, Puncak Seri (M) Sdn Bhd

Encik Azizul Nizam Bidin was appointed Executive Director of Puncak Seri (M) Sdn Bhd , a wholly-owned subsidiary of PNHB

on 24 September 1998. He holds a Diploma in Management from MIM and a Diploma in Hotel Management and Catering

from Stamford College, Kuala Lumpur. He has vast experience and wide exposure in services relating to special projects and

government contracts. Encik Azizul actively contributes his leadership qualities in Yayasan GerakBakti Kebangsaan (YGK) and

is a committee member of The Sultan Abdul Hamid College Old Collegians Association (SAHOCA).


senior management

Ir Loh Kit Mun, aged 50, MalaysianSenior General Manager, SYABAS Project

Ir Loh joined PNSB in April 1998 as General Manager and was promoted to Senior General Manager on 1 March2002. He graduated from University of Malaya with a Bachelor of Civil Engineering Degree in 1978. Ir Loh has 26years of working experience covering 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 watertreatment plants. Prior to joining PNSB, he was the General Manager (Infrastructure) of KL Linear City Sdn Bhd.

Madam Tan Bee Lian, aged 38, MalaysianSenior General Manager, Secretarial/Group Company Secretary

Madam Tan joined PNSB as Company Secretary in November 1994 and was promoted twice before assuming hercurrent position as Senior General Manager, Secretarial on 1 January 2003. She is a Fellow of both the MalaysianAssociation of the Institute of Chartered Secretaries and Administrators (MAICSA) and the Institute of CompanySecretaries Malaysia (ICSM). Madam Tan has more than 16 years experience in company secretarial practice. Prior tojoining PNSB, she worked with Project Lebuhraya Utara-Selatan Berhad (PLUS) and was the Assistant CompanySecretary of Metramac Corporation Sdn Bhd/Metacorp Berhad. Madam Tan is the winner of the ROC-MAICSACompany Secretary Award 2001 for the Listed Company Category.

Dr Abd Rahim Awang Kechik, aged 52, MalaysianGeneral Manager, Executive Chairman’s Office

Dr Abd Rahim joined PNSB in July 2003 and currently heads the Strategic Resource Centre. Dr Abd Rahimgraduated with a Doctorate in Philosophy (Ph.D) in Business Management in 2000 and a Bachelor of Arts (Hons)in Education 1981, both from Universiti Sains Malaysia and a Master of Business Administration in 1991 fromUniversity of Wales College of Cardiff, United Kingdom. He also obtained a Diploma in Public Management from theNational Institute of Public Administration (INTAN) in 1983 and a Diploma in Business Administration fromUniversity of Birmingham, United Kingdom in 1987. Prior to joining PNSB, he was an Administrative and DiplomaticOfficer with the Government since 1983 and has held various positions, namely in the Ministry of Finance, PrimeMinister’s Office, Ministry of International Trade and Industry (MITI), State Economic Planning Unit of the State ofNegeri Sembilan, Ministry of Agriculture, Ministry of Housing and Local Government and National Economic ActionCouncil (NEAC).

Encik Ahmad Fauzi Yahya, aged 43, MalaysianGeneral Manager, Human Resources & Administration

Encik Ahmad Fauzi joined PNSB in January 2002. He graduated from Eastern Michigan University, USA, with aBachelor of Business Administration degree majoring in Human Resource Management. Encik Ahmad Fauzi has 20years of working experience in various disciplines such as human resources, public relations, marketing and sales. Hisprevious employment was with ExxonMobil Malaysia.


senior management

Madam Chan Siew Meei, aged 47, MalaysianGeneral Manager, Legal

Madam Chan joined PNSB in May 1998. She obtained a Bachelor of Laws Degree from University of Malaya in 1981. During

the course of her 23-year career, Madam Chan has served as an Advocate and Solicitor, lecturer, company secretary and legal

adviser to two public listed companies. Her employment portfolio covers diverse activities ranging from timber and plantation

sectors to engineering, property and manufacturing.

Madam Loh Lim Chai Kheng, aged 43, MalaysianGeneral Manager, Executive Chairman’s Office

Madam Loh Lim joined PNSB in November 2000. She commenced her articleship with PricewaterhouseCoopers in 1981

and is a member of the Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of

Accountants (MIA). In 2003, she obtained her Masters Degree in Business Administration from University of Strathclyde,

Scotland. Madam Loh Lim has more than 21 years of working experience in the areas of audit, accounting, corporate finance,

company secretarial and operations.

Mr Mohanan Narayanan, aged 38, MalaysianGeneral Manager, Corporate Communications

Mr Mohanan joined PNSB in February 2004. He graduated from University of London with a Bachelor of Laws Degree in

1988. He also holds a post-graduate Diploma in Public Relations. Mr Mohanan has 20 years working experience covering

areas in journalism, public relations, advertising, marketing communications and brand management. Prior to joining PNSB,

Mr Mohanan was a Public Relations Consultant for several multi national clients and corporations in the US, Europe and Asia-

Pacific region.

Mr Ng Wah Tar, aged 40, MalaysianGeneral Manager, Finance & Accounts

Mr Ng joined PNSB in March 2000. He commenced his articleship with an accounting firm in 1984 and is a member of

MICPA and MIA. Mr Ng has 20 years of working experience in various areas covering auditing, accounting and finance. Prior

to joining PNSB, he was with the Management Services Division overseeing the finance and accounting functions of United

Engineers (M) Berhad (UEM).

Encik Othman Ismail, aged 46, MalaysianGeneral Manager, Executive Chairman’s Office

Encik Othman joined PNSB in April 2004. He graduated from University of Wales, UK in 1999 with a Masters Degree in

Business Administration. Encik Othman has 13 years of working experience covering areas in marketing, sales and

administration. Prior to joining PNSB, Encik Othman worked with Edaran Otomobil Nasional Berhad and was the Operations

Director of Gold Bridge Construction and Engineering Berhad.


senior management

Encik Ramlan Abdul Rahman, aged 38, MalaysianGeneral Manager, SYABAS Project

Encik Ramlan joined PNSB in April 2004. A Chartered Accountant by profession, Encik Ramlan is a member of MIA,and the Institute of Chartered Accountants New Zealand. He holds a Masters Degree in Business Administrationfrom Ohio University, USA. He has 17 years working experience in the field of accounting and finance. Prior to joiningPNSB, Encik Ramlan worked with Malaysian Mining Corporation (MMC) Group for 13 years, holding various financepositions in the MMC Group.

Mr Seng Pay, aged 53, MalaysianGeneral Manager, Sabah Project

Mr Seng Pay joined PNSB in January 2004 and is assigned to oversee and manage the Group’s Telibong Water SupplyProject in Sabah. He graduated with a Diploma in Mechanical Engineering from the Singapore Polytechnic in 1976and a Diploma in Management from MIM in 1988. He obtained a Masters Degree in Business Administration fromHerriot Watt University, United Kingdom in 1995. Mr Seng Pay has over 26 years’ experience in the managementand implementation of water treatment plants. Prior to joining PNSB, he worked with various organisations with hislast held position being Technical Services Manager with Ondeo Services (Malaysia) Sdn Bhd.

Encik Sonari Solor, aged 47, MalaysianGeneral Manager, Internal Audit

Encik Sonari joined PNSB on 10 September 1998. He holds a professional qualification from the Chartered Instituteof Management Accountants (UK) and is a member of MIA and a fellow member of the Chartered Association ofCertified Accountants (UK). Encik Sonari has more than 16 years’ experience in auditing and accountancy in publiclisted companies dealing in property development, manufacturing, timber and consultancy services. Prior to joiningPNSB, Encik Sonari served as Group Divisional Chief, Internal and Management Audit of Land & General Berhad.

Ir Tan Hui Kuan, aged 50, MalaysianGeneral Manager, Project & Business Development

Ir Tan joined PNSB in August 2003. He graduated with a Bachelor of Civil Engineering (Hons) Degree fromUniversity of Malaya in 1979. He has 23 years of working experience in Jabatan Kerja Raya Malaysia and LembagaAir Perak in the management of production, distribution, maintenance and consumer services of a DistrictWaterworks Department, geotechnical investigation, maintenance of military camps, project management ofmilitary buildings and infrastructures. Prior to joining PNSB, Ir Tan was the Assistant Director for Military Works inJabatan Kerja Raya Malaysia.

Encik Usman Ali Mustaffa, aged 43, MalaysianGeneral Manager, SYABAS Project

Encik Usman is a fellow member of the Chartered Association of Certified Accountants (UK) and is also a member

of MIA. He joined PNSB in March 2001. During his 20 years of working experience, Encik Usman worked 5 years

in auditing, 10 years in accounting and 5 years in corporate finance. Encik Usman was the Regional Financial

Controller of an American multi national company prior to joining PNSB.



ERNST & YOUNG ENTREPRENEUR OF THEYEAR - MALAYSIA 2002 AND 2003

YBhg Tan Sri Rozali Ismail, a Top 10 Nomineeunder the Master Entrepreneur Category

KLSE CORPORATE AWARDS 2003 SECTORAL AWARD - MAIN BOARD

Infrastructure Project Companies Category

INSTITUTE OF PUBLIC RELATIONS MALAYSIA IPRM CRYSTAL AWARD 2002

Environmental Relations Category for the River Rescue Brigade Programme

QCC REGIONAL CONVENTION 2003 (CENTRAL) - SILVER AWARDSSP2 Water Treatment Plant for Operations TAG Team Circle

INSTITUTE OF PUBLIC RELATIONS MALAYSIA IPRM CRYSTAL AWARD 2002

Voluntary Relations Category for the Educational Outreach Programme

QCC REGIONAL CONVENTION 2003 (CENTRAL) - SILVER AWARDSSP2 Water Treatment Plant for Mega Pro Circle

QCC REGIONAL CONVENTION 2003 (CENTRAL) - SILVER AWARDWangsa Maju Water Treatment Plant For Saga Emas Circle

OSH AWARD 2002 - GOLD MERIT AWARDSSP2 Water Treatment Plant

OSH AWARD 2002 - GOLD AWARDWangsa Maju Water Treatment Plant

KPMG SHAREHOLDER VALUE AWARDS 2002Finalist in the Infrastructure Sector

ASIAMONEY CORPORATE GOVERNANCE POLL 2002Voted Best Corporate Governance Standards in the Utilities

Sector in Malaysia

QUALITY MANAGEMENT SYSTEM CERTIFICATIONISO 9001:2000 (Upgraded from ISO 9000:1994)Wangsa Maju Water Treatment Plant

QUALITY MANAGEMENT SYSTEM CERTIFICATIONISO 9001:2000 (Upgraded from ISO 9000:1994)SSP2 Water Treatment Plant

OCCUPATIONAL HEALTH & SAFETY MANAGEMENT SYSTEM CERTIFICATIONOHSAS 18001:1999SSP2 Water Treatment Plant

NATIONAL ANNUAL CORPORATE REPORT AWARDS (NACRA) 2003

Certificate of Merit

ACCA MALAYSIA AWARDS FORENVIRONMENTAL REPORTING 2003

Certificate of Appreciation

ENVIRONMENTAL MANAGEMENT SYSTEM CERTIFICATIONISO 14001:1996SSP2 Water Treatment Plant




Making a Splash



Dear Shareholders,

On behalf of the Board of Directors of Puncak Niaga

Holdings Berhad (PNHB), I am pleased to present the

Annual Report of the Group and the Company for the

financial year ended 31 December 2003.

FINANCIAL REVIEW

For the financial year ended 31 December 2003, the Group's

revenue increased by 2.3% from RM565.1 million recorded

in the preceding financial year to RM578.3 million. The

increase is mainly due to higher production from the 26

water treatment plants under the PCCA. However, as a

result of higher operating cost and lower other operating

income, profit before taxation for the financial year ended 31

December 2003 only increased marginally from RM180.1

million in the preceding financial year to RM183.4 million.

The Board of Directors will not be recommending payment

of any dividend to the shareholders of the Company for the

financial year ended 31 December 2003 in view that the

annual debt service cover ratio pursuant to its long term

borrowings is less than 1.7 times.

The Group’s receivables remained high, standing at RM1.14

billion as at 31 December 2003. However, the Board is

confident that the receivables would be reduced substantially

by this year contingent on the finalisation of the privatisation

of the water supply services in the State of Selangor and the

Federal Territories of Kuala Lumpur and Putrajaya to Syarikat

Bekalan Air Selangor Sdn Bhd (SYABAS), wherein PNHB will

hold a 70% equity interest.This reduction in the receivables

will improve the cashflow of the Group substantially.

MATERIAL CORPORATE DEVELOPMENTS

On 24 September 2003, the Company received a letter

from the Economic Planning Unit, Prime Minister’s

Department informing that the Federal Government has

approved in principle, the award of the privatisation of water

supply services in the State of Selangor and the Federal

Territories of Kuala Lumpur and Putrajaya to SYABAS

(the Privatisation).

Under the Privatisation, the Selangor State Government

or its representative will hold a 30% equity interest in

SYABAS with the balance 70% to be held by PNHB, while

the Federal Government will hold one Golden Share. As

the resolution of the receivables is an important

component of the Privatisation, its implementation will

help to resolve gradually the receivables owing by the

Selangor State Government to the three major water

treatment operators including our wholly-owned

subsidiary, Puncak Niaga (M) Sdn Bhd (PNSB).

Negotiations are currently underway to finalise the terms

and conditions of the Concession Agreement for the

Privatisation. Meetings held with the Selangor State

Government and the Federal Government thus far have

led to agreement on a number of substantial contractual,

financial and technical issues. Our Company will make the

necessary announcement once negotiations are

completed and the Concession Agreement is executed

with the Selangor State Government and the Federal

Government.

In the meantime, SYABAS has proceeded with detailed

planning for implementing the necessary works once the

Privatisation commences. The technical Master Plan has

been drawn up for the capital and operating expenditure

works. The capital works programmes include the

development and upgrading of distribution system, asset

replacement and reducing non-revenue water losses.The

operating expenditure programme will bring about an

improvement in the operations and maintenance of the

entire distribution system, thereby increasing efficiency

and enhancing the level of services to the consumers.

Our Company already has projects in its books that will

keep us busy over the next few years. The Company

entered into a turnkey sub-contract agreement with Imej

Warisan Sdn Bhd on 21 October 2003, under which we

will plan, design, construct, supervise, test and commission

the works for “Projek Pembinaan Loji/Kolam Takungan

dan Paip Utama Telibong dan Telipok, Sabah”.The project

with a contract sum of RM313.5 million commenced on

21 October 2003 and is expected to complete by

March 2006.



Under the PNHB-LANCO-KHEC JV, a consortium

formed comprising our Company, Lanco Infratech

Ltd and Kris Heavy Engineering & Construction Sdn

Bhd wherein our Company holds a 70% stake, we are

currently undertaking a water supply project for the

Chennai Metropolitan Water Supply and Sewerage

Board, Tamil Nadu, India valued at approximately

RM234.0 million, in November 2002 (Chennai

Project). The project is targeted for completion in

May 2004.

On 12 August 2003, our wholly-owned subsidiary,

PNSB was served with a writ of summon by C.G.E

Utilities (M) Sdn Bhd (CGE) for the sum of

RM84,466,976.08 for works carried out at the 26

water treatment plants under the PCCA, late interest

charges as at 31 December 2002 and other costs.

On 23 October 2003, PNSB and CGE reached an

agreement to amicably resolve the dispute through a

Deed of Settlement which entails the bringing

forward of the expiry date of the Operation &

Maintenance Sub-Contract between PNSB and CGE

(OMSC) from 31 December 2020 to 31 December

2004 and the withdrawal of all legal cases, as well as

the payment of all outstanding sums to CGE in

accordance with a schedule of payment.

We are confident that we will be able to operate and

manage the 26 water treatment plants which we will

takeover from CGE on 1 January 2005 since PNSB

has the technical and management expertise built

over the years. Our Management is in the midst of

finalising a blueprint action plan to assume the

operation and management responsibilities of the 26

water treatment plants from CGE. This will ensure

that the water treatment plants continue to operate

smoothly without any disruption or cause any

inconvenience to the consumers after PNSB’s

takeover on 1 January 2005. Post takeover, we are

confident that the overall operating expenditure of

the 26 water treatment plants could be reduced.

INDUSTRY OUTLOOK

The Eighth Malaysia Plan (8MP), which covers the years

2001 to 2005 has allocated RM3.9 billion towards the

development of the country’s water resources, an

increase of 43% over the amount provided under the

previous Malaysia Plan. As demand for water for

domestic and industrial use is expected to increase by

5.4% per annum during the 8MP period and the national

water supply coverage is expected to increase to 95%,

the Government’s attention will be focused on long-

term water resources planning and development.

The Government aims to make the management of

water resources more efficient, so that the nation will

have an adequate supply of safe water, by continuing

with the process of corporatising or privatising state

water authorities. As we grow and develop our

business, we are mindful that we need to play our

part towards the proper management of the nation’s

water resources. As elaborated in our Operations

YBhg Tan Sri Rozali Ismail, Executive Chairman



Review and Health, Safety & Environmental Report, we are

continually working towards ensuring this through our

commitment to quality, safety and environmental

management at our water treatment plants and dams. Our

research and development efforts as well as our investment

in information technology support our drive towards

management of water resource and improved water quality.

We have through our Sungai Selangor Phase 2 (SSP2)

Water Treatment Plant made a headway by being the first

water treatment plant in the country to implement an

Integrated Management System (IMS) comprising the

Quality Management System ISO 9001:2000,

Environmental Management System ISO 14001:1996 and

Safety Management System OHSAS 18001:1999. On a

broader national level, there are major issues relating to

water that need to be resolved. Like all other natural

resources, water is a finite resource even though

renewable to a certain extent. The public has to be

educated on the critical importance of conserving and

managing our water resources. As a responsible

corporate citizen, we continue to put in place various

programmes to increase such understanding. It is also

essential that our natural environment is protected to

preserve the water catchment areas against pollution.We

need to address this through our liaisons with the Federal

and the State Government authorities.

BUSINESS PROSPECTS

PNHB Group’s business prospects continue to be positive,

in line with the projection that Malaysia’s growth in real

Gross Domestic Product (GDP) for the year 2004 will be

5.5% to 6%. Domestic economic activities are expected to

strengthen, with the Government’s emphasis on reducing

reliance on external demand, while domestic demand will

increase at a rate of 4.7%. Services and manufacturing will

continue to lead GDP growth, with greater focus on the

services sector as Malaysia remains on track to attaining

developed economy status. However, the agricultural

sector will not be sidelined and will in fact be revitalised as

the third engine of growth for the nation. The better

economic prospects will translate into increased per capital

income as well as purchasing power. For the water industry,

it will mean higher consumption levels.

To ensure the supply of clean water and reduce water

losses, there is need to spend about RM2.5 billion and this

includes the replacement of 6,000 km of old asbestos

cement water pipes that were laid more than 30 years ago.

It also needs to further develop the State’s water

infrastructure as water resources become fully utilised.

Options being explored by the Government include the

proposed implementation of inter-state and inter-basin

water transfers, such as the Pahang-Selangor water transfer

project. With our proven track record, our Group is in a

good position to offer its expertise and resources to the

Government in implementing these projects.

Our Group should also benefit from the Federal

Government’s implementation of the National Water

Resources Master Plan.With a 50-year horizon from 2000 to

2050 and a total cost estimate of RM52 billion, the Master

Plan provides more opportunity for more privatisation of

water treatment, distribution and management projects.The

implementation of the Master Plan should proceed smoothly

as the Federal Government is in the process of assuming the

control of water management from the State Governments.

Being at the forefront of the water industry, we would expect

to be amongst the preferred companies to be given the

responsibility of managing other privatised water projects.

In addition to the proposed interstate raw water transfer to

alleviate or overcome the water shortage, the Government

will need to look into the possibility of utilising downstream

of surface water source for industrial and non-drinking

purposes, identifying potential groundwater sources and to

improve water management by reducing non-revenue water

and increasing public awareness on water conservation.

Hence, there is tremendous opportunity for participation by

our Group in the coming years in the areas of water supply

engineering works and services .

The outlook for our Group is therefore promising and we

are optimistic about our future growth and prospects. Our

strategic initiatives are in place so that we can capitalise on

developments in the domestic and regional water industry.

Going forward, as long as we continue to discharge our

responsibilities efficiently and promote quality service to

our customers, we will continue to be at the forefront of

our industry.



CORPORATE ACHIEVEMENTS

Year 2003 was yet another year of acknowledgements

and accolades, where our Group continued to receive

several prestigious awards and certifications. Our

achievements during the year under review have been

laid out on pages 28 and 29 of the Annual Report.

We are thankful to the various awarding bodies for

recognising our hard work and efforts.This will indeed

motivate and spur our enthusiasm in the participation

of high level corporate competitions towards further

raising our overall standards of excellence in the

corporate conduct, management and operations of

the Group.

ACKNOWLEDGEMENTS

The Group maintained its position at the forefront of

the water industry through the dedication and

commitment of its employees. On behalf of the Board

of Directors, I wish to extend my gratitude to all our

employees for their contributions to the Group’s

performance and growth for the financial year 2003.

I also wish to take this opportunity to thank our valued

customers, end-users and stakeholders for their

confidence in us and to our associates and business

partners, for the value created from our joint ventures,

as well as to our suppliers and financiers for their

continued support in our endeavours.

Last but not least, our special thanks goes to the many

government authorities and agencies, as well as non-

governmental organisations, who have contributed to

our success.

Together, we shall be able to meet the challenges for the

financial year 2004.

Tan Sri Rozali Ismail

Executive Chairman

20 April 2004

PNHB was a finalist at KPMG Shareholder Value Awards 2002 on 7 August 2003

SUNGAI SELANGOR PHASE 2 (SSP2) WATER TREATMENT PLANT

The SSP2 Water Treatment Plant recorded a total production of 327.6 million cubic metres of treated water in 2003, an

increase of 1.8% from the previous year.The average daily production for the year under review was 897.5 million litres (2002:

881.7 million litres). As in previous years, there were no violations in treated water quality notwithstanding the adoption of

the more stringent Revised National Standard for Drinking Water Quality 2000 in January 2003.

Issues relating to quality, safety and the

environment have always been amongst

PNSB’s top priorities. The Company’s

commitment to achieve best practices in these

areas is reflected in its initiative to implement

the Integrated Management System (IMS) at

the SSP2 Water Treatment Plant. Certification

for the first of the IMS systems, the Quality

Management System ISO 9001:2000, was

awarded by Lloyd’s Register Quality Assurance

(LRQA) on 15 October 2003.

The new system replaced the ISO 9002:1994

effective 15 December 2003. The second management system, the Environmental Management System ISO 14001:1996,

was initiated in July 2002 and accredited by LRQA on 31 October 2003.

The third stage of the IMS certification, the Safety Management System OHSAS 18001:1999 was obtained in January

2004. With the receipt of this certification, the SSP2 Water Treatment Plant has become the first water treatment plant

in the country to have a fully implemented management system that integrates three critical aspects, i.e. quality, safety and

the environment.

WANGSA MAJU WATER TREATMENT PLANT

Treated water production at the Wangsa Maju Water Treatment Plant during the year was 17.15 million cubic metres, an

increase of 3.0% from the previous year, while average daily water production stabilised to 47 million litres (2002: 45.6

million litres).There were also no violations in the treated water quality, despite the implementation of the more stringent

Revised National Standard for Drinking Water Quality 2000.With 100% plant availability throughout the year, the Wangsa

Maju Water Treatment Plant continued to maintain its record of zero shutdown hours, a demonstration of the plant

employees’ skills and capabilities.

The Wangsa Maju Water Treatment Plant undertook the upgrading of its Quality Management System from version 1994

to version 2000 concurrently with the SSP2 Water Treatment Plant and was awarded LRQA’s ISO 9001:2000 on 15

October 2003.

WATER TREATMENT PLANTS UNDER THE PRIVATISATION CUM CONCESSION AGREEMENT (PCCA)

In 2003, the 26 water treatment plants (WTPs) under the PCCA achieved a total production of 358.3 million cubic metres

of treated water, an increase of 4.10% from 2002. The total production of treated water in 2003 was 13.6% above the

designated quantity.


operations review

SSP2 Water Treatment Plant Administration Building


operations review

Refurbishment works at six WTPs during the year have also contributed to an improvement in the WTPs’ overall

performance, despite 3,928.5 hours of shutdown during the year 2003 (2002: 4,166.4 hours).The main contributor

to the shutdowns, comprising 59.2% of the total shutdown hours, was raw water violations attributed mostly from

partial water treatment plants. The scheduled and unscheduled maintenance works and electrical power

interruptions each accounted for 17.6% and 8.0% of the total shutdown hours. The remaining shutdown hours in

2003 were due to pipe bursts or leaks, mechanical and electrical breakdowns as well as rehabilitation and upgrading

works. However, close coordination with the Government’s Department of Environment, PUAS and other authorities

have helped to expedite repair works and further mitigate shutdown hours at the WTPs.

The Management uses the plant assessment programme to monitor the WTPs’ production capability and

maintenance performance. Reports from a total of 312 audits together with the independent electrical competence

engineers’ reports and the monthly mechanical and electrical corrective maintenance reports, are also used as a basis

to assess the WTPs’ performance.

DAM OPERATIONSPNSB continues to be responsible for the operation and maintenance of Sungai Langat, Klang Gates and Tasik

Subang Dams.

In line with the Company’s emphasis on safety, PNSB conducted three major visual safety inspections in 2003.The

inspections, which covered all major structures of the dams, were to detect and investigate any dam safety deficiencies

and to recommend appropriate corrective actions.

Rainfall levels in the dams’ catchment areas are regularly monitored to assess the possibility of critical storage

drawdown at any of the dams. In 2003, total rainfall in the catchment area of the Sungai Langat Dam was 2,280.9

mm, the lowest recorded since 1997 and a decrease of 17.6% when compared to the ten-year average (1993-2003)

of 2,767.0 mm/year. At the Klang Gates Dam, total rainfall in the catchment area for the year under review was

2,577.3 mm, a decrease of 12.4% when compared to the ten-year average of 2,943.0 mm/year. However, the

Meteorological Services Department has forecasted that the annual rainfall in these two catchment areas for 2004

would remain at or above the average level.

At the catchment area of the Tasik Subang Dam, a total rainfall of 2,679.4 mm was recorded for 2003, an increase

of 23.2% when compared to the nine-year average (1995-2003) of 2,175.0 mm/year. The prevailing dam reservoir

levels and an analysis of past inflows indicate that a storage crisis is not expected in the coming year.

Prudence and good practices are

exercised to ensure that the optimal

amount of raw water is released to the

water treatment plants. The three dams

are equipped with the Dam Operations

Control Curves to help dam operators

in meeting the demand from the water

treatment plants for raw water release

besides conservation of dam water to

prolong storage. The respective water

treatment plants’ raw water demand is

not expected to change in 2004. Sungai Langat Dam


operations review

INDIA WATER PROJECTIn November 2002, PNHB was part of a consortium that was awarded a water supply project, namely the Chennai Water

Supply Augmentation Project 1 – Package III, by the Chennai Metropolitan Water Supply and Sewerage Board,Tamil Nadu,

India. The project, valued at RM234.0 million,

involves the supply and laying of 114.0 km of

water supply pipes, construction of a break

pressure tank and seven new bridges for

pipes river crossing, rehabilitation of seven

existing bridges, as well as operation and

maintenance for five years. As at end-

December 2003, 80% of the pipes have been

laid and the construction phase of the works

is targeted to complete by May 2004, as

scheduled.

SABAH WATER PROJECTOn 21 October 2003, PNHB entered into a turnkey sub-contract agreement with Imej Warisan Sdn Bhd, whereby PNHB

will undertake the planning, design, construction, supervision, testing and commissioning of works for “Projek Pembinaan

Loji/Kolam Takungan dan Paip Utama Telibong dan Telipok, Sabah”. The project with a contract sum of RM313.5 million

commenced on 21 October 2003 and is expected to complete on 16 March 2006. It entails the construction of a new

intake and raw water pumping station, water treatment plant, off-river storage, three balancing/service reservoirs as well as

45 km of pipelines.When completed, the new water treatment plant and its associated works will cater for water supply to

the Kota Kinabalu Industrial Park and the proposed development projects in Karambunai Peninsular, Pantai Dalit, Sepangar

Bay and Jalan Sulaiman.

RESEARCH AND DEVELOPMENT (R&D)Much of PNSB’s R&D effort is focused on improving operating

costs and increasing operational efficiency of the water treatment

plants. In 2003, PNSB expended close to RM4.7 million on R&D

works. The main R&D works entails major refurbishments and

upgrading of all the water treatment plants. Other R&D projects

includes the trial run of a new polymer conducted at the SSP2

Water Treatment Plant which proved that the new polymer has

superior process coagulation properties, which can bring about a

potential cost saving of RM1.1 million a year and the study on a

specialised treatment system to eliminate iron and manganese

without adding chemicals to the water treatment process.

INFORMATION TECHNOLOGY (IT)Puncak Niaga recognises the importance of IT in increasing productivity and driving its business services forward.To continue

projecting the desired image as a frontrunner in its industry sector, the Group has revamped its website with a new format

that incorporates the latest technology for more efficient information retrieval by visitors to its website.The Puncak Niaga

website now incorporates photographs and virtual tours of its water treatment plants.The site also provides information on

the Group’s services, projects and achievements, as well as its corporate statements and policies.

Pipe laying - India Water Project

SSP2 Water Treatment Plant Laboratory


operations review

For increased efficiency in office administration, an in-house Vehicle Management System was developed to manage

the administration of the Group’s vehicles. The system tracks the movement of vehicles and monitors the

maintenance and repair costs.

Another system-related project initiated during the year under review was the development of a model for an

Integrated Water Utilities System.The project is being driven by PNHB’s impending takeover of the water distribution

system in the State of Selangor and Federal Territories of Kuala Lumpur and Putrajaya through Syarikat Bekalan Air

Selangor Sdn Bhd (SYABAS). The model will integrate a number of systems relating to customer information and

billing, operations and maintenance, geographical information, supervisory control and data acquisition, and enterprise

resource planning.

The Group’s anti-virus software was upgraded to the latest version to protect against systems damage and data

corruption to the Group’s IT system.

CRISIS MANAGEMENT

Given PNSB’s critical role in supplying water to the country’s hub, it is essential that the Company is able to respond

quickly and effectively to any form of emergency, crisis or disaster, with minimal disruption to its business operations

and without damaging its corporate image. The Puncak Niaga Group has in place the Group Crisis Management

Plan and Water Treatment Plant Emergency Response Plan since 2001.The Crisis Management Committee conducts

evaluation, case studies and simulation exercises on a regular basis to assess the employees’ level of readiness and

response capabilities to a crisis.

OCCUPATIONAL SAFETY AND HEALTH

Given the nature of work at the water treatment plants and dams, the safety and health of employees is of

paramount importance to the PNHB Group.To oversee and organise safety and health programmes and activities,

a Corporate Safety and Health Committee was established, supported by similar committees at various levels of the

Group’s operations.

Safety-related programmes and

activities are regularly conducted at

all locations, which include drills,

handling of fire-fighting equipment

and providing first aid. Since August

2003, safety information was

disseminated to employees through

ar ticles in PNSB’s quar terly in-

house newsletter, KITA. Corporate Safety Committee Meeting in progress


operations review

HUMAN RESOURCE MANAGEMENT

Puncak Niaga Group delivers an essential

service to its customers. This service is

performed conscientiously with high

standards by a competent, committed and

motivated workforce. The employees are

compensated competitively at market rates.

EMPLOYEES BENEFIT

Employees are well taken care of through a

range of benefits that includes

comprehensive insurance coverage, interest-

free computer, education and personal loans.

Medical benefits are provided to employees as well as their dependants and cover outpatient treatment, hospitalisation,

dental treatment and maternity expenses. During the year, 11 employees retired from the Group and the retirement

benefit paid to them amounted to approximately RM120,000. Funeral expenses ranging from RM1,000 to RM1,200 are

also given out to the employee’s immediate family in the event of demise of an employee. In total, the Group expended

close to RM1.16 million on employees benefits for the financial year 2003.

The implementation of the five-year Employees Share Option Scheme since year 2002 is also another benefit in

recognition of long serving employees.

TRAINING AND DEVELOPMENT

With the Group’s emphasis on knowledge and skills development, employees are regularly sent for in-house or external

training and development programmes. In addition, employees are encouraged to set up Quality Control Circles

(QCCs) which have proven to be an effective means for employees to develop their leadership, communication and

problem-solving skills. The Group also benefits in terms of cost-saving measures adopted as a result of the QCCs,

without compromising on quality and productivity. For the financial year 2003, the Group spent RM30,838 on QCC-

related activities.

PNSB’s QCC programme for the period 2001-2002 concluded with the QCC Prize-Giving Ceremony on 12 April

2003 and the projects initiated by all 15 registered circles resulted in total cost savings of RM1.4 million, with the biggest

cost-saving benefit of RM932,794 achieved by Operation Tag Team. The team’s project involved a study on optimising

the usage of polymer in water treatment process at the SSP2 Water Treatment Plant.

As part of its drive towards establishing higher standards of quality in its operations, PNSB supports efforts by the

National Productivity Corporation (NPC) to promote QCCs.The Company participated in the QCC Mini and Regional

Conventions held on 1 April 2003 and 9-10 June 2003 respectively. PNSB’s circles won one Gold Award and two Silver

Awards at the QCC Mini Convention 2003 and three Silver Awards at the QCC Regional Convention 2003 (Central).

Motivational Talk organised by the Sports Club


operations review

EMPLOYEE UNIONS

PNSB’s Executive Union is currently in negotiation with the Company on its first Collective Agreement. The

negotiations are expected to conclude by August 2004.

The first Collective Agreement with PNSB’s Non-Executive Union expired on 31 December 2003 and the

Management is in the midst of negotiations on the second Collective Agreement with the Non-Executive Union.

SEXUAL HARASSMENT

Since the establishment of the Group’s Sexual Harassment Policy in 2001, no cases of sexual harassment has

been reported in the Group. During the year, the Protective Services Department conducted a session on

’Overcoming Crime Against Women’ for the female employees through a Saturday Encounter Session.

SECURITY SERVICES

Given that the water treatment plants and dams under PNSB’s management are the nation’s key strategic assets,

PNSB maintains its own security personnel to protect these installations. In addition, an electronic security

system incorporating digital video surveillance is also set up at the Wangsa Maju Water Treatment Plant and

intake. Plans are underway to install the electronic security system at the SSP2 Water Treatment Plant and the

other water treatment plants.

Our security personnel are required to undergo vigorous training and bi-yearly physical tests on their level of

fitness and readiness to ensure that they are able to discharge their duties effectively and efficiently.

EMPLOYEE WELFARE

Foster Parent Programme

The Foster Parent Programme involving the Management and the water treatment plant employee was initiated

as a platform to facilitate close relationship and two-way communication between employees at the Company’s

Headquarters and the water treatment plants.The programme has provided a means by which employees at the

water treatment plants may channel their problems and difficulties to Management, who in turn has gained a

better understanding of the roles and responsibilities of these employees.

For the year 2003, a number of activities were carried out under the Foster Parent Programme. “Gotong-

Royong” community projects involving the beautification of landscapes were organised at a total cost of about

RM52,000. A children’s playground costing approximately RM17,000 was constructed at the Bernam River

Headworks Water Treatment Plant. During the festive seasons, employees at the water treatment plants were

given gifts, with a total value of approximately RM23,000 through their respective ‘foster parents’ as a gesture of

appreciation from the Management.


operations review

Staff Quarters

The Quarters Committee looks into the housing needs and welfare of employees at the water treatment plants, as well as

to administer the quarters’ facilities and amenities. During the year under review, the Committee continued to update its

inventory on all quarters at the water treatment plants and its occupants, and processed a total of 24 applications for new

quarters or transfers.The Committee also settled issues relating to utility bills and vacating of units due to ineligibility arising

from retirement, etc.

Sports Club

Sports competitions and tournaments

organised by the Kelab Sukan dan Kebajikan

Puncak Niaga (Sports Club) during the year

under review included bowling, badminton,

volleyball, fishing and other in-door games.

The Sports Club Religious Bureau celebrated

events such as Israk and Mikraj and organised

functions for the recitation of Yaasin. During

the Ramadhan month, the Bureau held

breaking of fast and Tarawih functions at a

number of water treatment plants.

The Women’s Bureau organised two major programmes in 2003, i.e. a fishing competition and a self-defence

programme, during which a donation of RM10,000 to the Association of Muslim Single Mothers, Federal

Territory/Selangor was made.The donation was presented by the patron of the Women’s Bureau,YBhg Puan Sri Faridah

Idris, the wife of the Executive Chairman.

Self-defence programme organised by the Women’s Bureau for all female employees

Fishing Competition at Green Paradise Fishing Pond,Templer Park, Rawang


operations review

SHARING OUR VISION

The year 2003 proved to be yet another successful year for the Puncak Niaga Group as it continues to be at the

forefront of the water industry in Malaysia.

Given the Group’s stature within its industry and the wider business community, the Executive Chairman,YBhg Tan

Sri Rozali Ismail, is often invited to share Puncak Niaga’s vision and experiences, as well as his perspectives on business

in general, at conferences. During the year under review, papers were presented by the Executive Chairman or his

representatives at the following events:

• ‘An Update On The Privatisation Of The Water Industry – Making The Most Of Investment Opportunities In

Malaysia’, Malaysia Infrastructure Conference, 17-18 February 2003;

• ‘The Impact Of GATS On Local Water Corporation, Civil Society Discussion On Commodification And

Privatisation Of Water Resources In The WTO Environment, 8 March 2003;

• ‘Future Direction Of Water Management In Malaysia’,World Environment Day – Sustainable Water Management

And The Media, 5 June 2003;

• ‘Privatisation Of Water Supply Projects’, Course On Managing Privatisation, 17 July 2003; and

• “Meningkatkan Profesionalisme Melayu Melalui Pendidikan”, Konvensyen Pendidikan Melayu 2003, 11 Oktober 2003.

View of the Klang Gates Dam

It has always been Puncak Niaga’s mission to be a good corporate citizen driven by a social conscience that strives to make

a difference in the lives of those who are less fortunate.

CONTRIBUTING TO SOCIETY

Annually, Puncak Niaga sets aside a budget to support worthy causes and in 2003, a total of RM4.36 million was contributed

to various religious and educational foundations, youth, sports and entrepreneurial associations and other charities. Some of

the contributions made during the year under review were:

• Three computers to Sekolah Kebangsaan Sungai Merab Luar, Dengkil, Selangor;

• RM10,000 to the Association of Muslim Single Mothers, Federal Territory/Selangor;

• RM100,000 to Tuanku Abdul Rahman University Fund for a new campus in Perak;

• RM100,000 to a charity programme, co-organised by Puncak Niaga and seven other companies operating in the State

of Selangor, which raised a total of RM280,000 for the under privileged communities in the state;

• RM500,000 sponsorship to the ‘Malaysia Batik Crafted for the World’, a programme initiated by YAB Datin Seri Endon

Mahmood to promote Malaysian batik;

• RM200,000 to the building fund of the Asian Institute of Medical, Science and Technology, Perak.

ASSISTING THE COMMUNITY

Being the leading water specialist company in the country, we have an obligation to increase public awareness on the

importance of protecting and conserving our natural resources and the environment. As children and young people can act

as catalysts to bring about a change in attitude towards the environment in general and river pollution in particular, we believe

that one of the best ways of creating this awareness is through educational programmes for the younger generation. Some

of the mainstream educational programmes organised by Puncak Niaga are:

• Educational Outreach Programme:Educates the young on the importance of river

preservation to ensure continuous supply of clean

water as well as to foster a closer rapport between

Puncak Niaga and the community within our areas

of operations.Ten outreach programmes were held

in 2003 where Senior Management of the

Company would go to the respective primary

schools to give talks on river and environment

preservation.


CORPORATE SOCIAL RESPONSIBILITY

A charity programme, co-organised by Puncak Niaga and seven other companies operating in the State of Selangor, whichwas officiated by the DYMM Sultan of Selangor.

Educational Outreach Programme No. 32


CORPORATE SOCIAL RESPONSIBILITY

• River Rescue Brigade: There are currently 1,285 members from 56 participating primary schools in the State of

Selangor and the Federal Territory of Kuala Lumpur. In 2003, two programmes were organised to educate the school

children on the importance of potable water production, the effects of river pollution and how to counter its threat.

• Public Visits to Water Treatment Plants (WTPs): We arranged 23 visits by various groups to our WTPs in 2003.

Visitors were educated on the water treatment processes and the problems inherent in treating polluted water.

• To support the efforts of Malaysia World Wildlife Fund in increasing public awareness on the importance of

environmental conservation, we gave a RM10,000 sponsorship for the canoe race held at Lake Titiwangsa, Kuala Lumpur

on 6 April 2003. Our employees also participated in the race and emerged as champion.

SUPPORTING NATIONAL AND STATE EVENTS

In the spirit of “Malaysia Boleh”, Puncak Niaga supports various events organised by the Federal and State Governments to

mark special occasions.The major events that we participated in during the year under review were:

• Showcase Exhibition in conjunction with the Non-Aligned Movement Conference (18-26 February);

• Maal Hijrah 1424 celebration at Bukit Jalil Stadium officiated by our King (4 March);

• National Water Day, during which we held an Open Day for the public to visit us at the Wangsa Maju Water Treatment

Plant (5-6 April);

• National Maulidur Rasul celebration at Stadium Putra, Bukit Jalil, where 100 of our employees participated in the

procession carrying a banner with the title “Bersama Hayati Keindahan Islam” (14 May);

• National Labour Day celebration at Stadium Putra, Bukit Jalil (17 May);

• Launching ceremony of ‘Jalur Gemilang’ in conjunction with the National Day celebration at Dataran Shah Alam

(16 August);

• National Day parade at Dataran Shah Alam where 40 of our employees participated in the march pass (30 August).

CARING FOR OUR EMPLOYEES

We believe that employees are the backbone contributing to the success of any organisation. At Puncak Niaga, we recognise

that our employees are part of that belief and it is our duty to motivate and care for their general well-being.Therefore, we

have put in place, an Employees Welfare Programme to help achieve this objective, such as:

• Foster Parent Programme to create closer relationship and two-way communication between employees at

Headquarters and the water treatment plants;

• Staff Quarters Committee to look into the housing needs and welfare of employees at the water treatment plants,

as well as to administer the quarters’ facilities and amenities;

• Puncak Niaga’s Sports Club to organise events and functions throughout the year, providing employees with

opportunities for leisure and recreational activities;

• Women’s Bureau to look after the welfare of our female employees.

RECEIVING RECOGNITION

On 14 June, 2003 Puncak Niaga was given due recognition for its corporate social responsibility contributions by the

Institute of Public Relations Malaysia.Two Crystal Awards was bestowed on the Company in recognition of its River Rescue

Brigade under the Environmental Relations Category and the Educational Outreach Programme under the Voluntary

Relations Category.



16 JANUARY 2003YBhg Tan Sri Rozali Ismail, Executive Chairman of Puncak

Niaga a Top 10 Nominee for the Ernst & Young

Entrepreneur of the Year - Malaysia 2002 (Master

Enterpreneur Category).

13 FEBRUARY 2003

In conjunction with Hari Raya Aidil Adha, Puncak Niaga’s

Sports Club organised a Qurban Programme at the

Sungai Langat Water Treatment Plant.

17 – 18 FEBRUARY 2003

YBhg Tan Sri Rozali presented a paper on ‘An Update

On The Privatisation Of Water Industry - Making The

Most Of Investment Opportunities In Malaysia’ at the

Malaysia Infrastructure Conference.

18 – 26 FEBRUARY 2003

Puncak Niaga participated in the NAM Showcase

Malaysia Exhibition held during the Non-Aligned

Movement Conference from 18 – 26 February 2003.

20 FEBRUARY 2003

Puncak Niaga received the Asiamoney Corporate

Governance Poll 2002 Award for ‘Best Corporate

Governance Standards in the Utilities Sector in Malaysia’

organised by the Asiamoney Magazine at The Ritz

Carlton Millennia Hotel, Singapore.

YBhg Tan Sri Rozali Ismail receiving the Ernst & YoungEnterpreneur of the Year - Malaysia 2002 - Top 10 Nomineeunder the Master Enterpreneur Category, 16 January 2003

Puncak Niaga team in action during the ‘Race for Survival’organised by WWF Malaysia, 6 April 2003

4 MARCH 2003

Puncak Niaga participated in the Ma’al Hijrah

celebration at Stadium Bukit Jalil.

8 MARCH 2003

Ir Lee Miang Koi presented a paper on ‘The Impact Of

GATS On Local Water Corporation’ at the Civil Society

Discussion On Commodification And Privatisation Of

Water Resources In The WTO Environment.

17 MARCH 2003

Puncak Niaga donated 3 computers to Sekolah

Kebangsaan Sungai Merab Luar, Dengkil, Selangor in

conjunction with the Educational Outreach Programme

No. 30.

1 APRIL 2003

3 QCC teams from Puncak Niaga participated in the

QCC Mini Convention 2003 organised by the National

Productivity Corporation. The teams bagged a Gold

Award and 2 Silver Awards at the Convention.

5 – 6 APRIL 2003

In conjunction with the National Water Day, Puncak

Niaga organised an Open Day at Wangsa Maju Water

Treatment Plant for the public.

6 APRIL 2003

Puncak Niaga emerged as champion in the ‘Race For

Survival’, a canoe race organised by WWF Malaysia to

promote public awareness on environmental conservation.

14 MAY 2003Puncak Niaga participated in the march pass for theNational Maulidur Rasul celebration at Stadium Putra,Bukit Jalil.

17 MAY 2003Puncak Niaga participated in the National LabourDay 2003 celebration officiated by the former PrimeMinister,YABhg Tun Dr Mahathir Mohamed at PutraStadium, Bukit Jalil.

22 MAY 2003The Sports Club of Puncak Niaga held a MaulidurRasul celebration at the Bukit Nanas WaterTreatment Plant.

24 MAY 2003Friendly bowling match between RTM and PuncakNiaga at Mid-Valley Megamall.

5 JUNE 2003 Ir Lee Miang Koi presented a paper entitled ‘FutureDirection Of Water Management In Malaysia’ at theWorld Environmental Day - Sustainable WaterManagement And The Media organised by theMalaysian Centre for Environmental Communicators.

9-10 JUNE 20033 QCC teams from Puncak Niaga participated in theQCC Regional Convention 2003 (Central) and all3 teams won Silver Awards.

12 APRIL 2003Prize-giving ceremony for the winners of the QCC2001/2002 Project was held at Puncak Niaga’sHeadquarters.

12 APRIL 2003In conjunction with Secretaries Week, Puncak Niagahosted a hi-tea celebration at The Regent Hotel, KualaLumpur for its secretaries.

28 APRIL 2003Puncak Niaga donated RM100,000 to the Tuanku AbdulRahman University Fund through MCA’s HuarenEducation Foundation.



Secretaries Week at Regent Hotel, 12 April 2003

Donation to the Tuanku Abdul Rahman University Fund,28 April 2003

QCC 2001/2002 Project Prize-giving Ceremony,12 April 2003

World Environmental Day - Sustainable Water ManagementAnd The Media, 5 June 2003

14 JUNE 2003Puncak Niaga won 2 Crystal Awards from the Instituteof Public Relations Malaysia (IPRM), one under theEnvironmental Relations Category for the RiverRescue Brigade Programme and the other under theVoluntary Relations Category for the EducationalOutreach Programme.

18 JUNE 2003Working visit by YBhg Tan Sri Rozali Ismail, ExecutiveChairman and YB Dato’ Yap Pian Hon, Wakil ParlimenSerdang to the Cheras Mile 11 Water Treatment Plantto view the progress of construction of the weir.

21 JUNE 20039th Annual General Meeting of the Sports Club of

Puncak Niaga held at Stadium Shah Alam.

25 JUNE 2003PNHB’s 6th Annual General Meeting at the KualaLumpur Golf & Country Club.

27 JUNE 2003In conjunction with Sekolah Menengah Jalan Kebun’sCurriculum Carnival, Puncak Niaga presented a‘Waterbox’ demonstration to educate the students onthe various water treatment processes.

28 JUNE 2003Friendly bowling match between TV3 and PuncakNiaga at Mid-Valley Megamall.

3 JULY 2003Working visit by Selangor State EXCO member toCheras Mile 11 Water Treatment Plant to view theprogress of the construction of the weir, as an alternativesource of raw water.

15 JULY 2003

Factory visit by CHG Plywood Sdn Bhd, a timber

logging company to the Cheras Mile 11 Water

Treatment Plant to discuss on steps to prevent

contamination in Sungai Cheras.



IPRM’s Crystal Awards Ceremony, 14 June 2003

Working visit to Cheras Mile 11 Water Treatment Plant, 18June 2003

PNHB’s 6th Annual General Meeting, 25 June 2003

Bowling Match with TV3, 28 June 2003

17 JULY 2003

YBhg Tan Sri Rozali Ismail presented a paper entitled

‘Privatisation Of Water Supply Projects’ at the

Managing Privatisation Course.

7 AUGUST 2003

PNHB was shortlisted as a finalist for the KPMG

Shareholder Value Awards 2002.

16 AUGUST 2003

Puncak Niaga participated in the “Jalur Gemilang”

launching ceremony held in conjunction with the

National Day celebration at Selangor.

23 AUGUST 2003

Visit by National Productivity Corporation

(NPC) officials to SSP2 Water Treatment Plant,

Bukit Badong.

30 AUGUST 2003

Puncak Niaga participated in the National Day 2003

midnight march pass at Dataran Shah Alam, Selangor.

11 SEPTEMBER 2003

Puncak Niaga launched an Environmental Awareness

Campaign amongst factory owners at Sungai Langat

and Sungai Cheras water catchment areas to

educate them on the impact of contamination to

the environment.

13 SEPTEMBER 2003Emergency drill at the SSP2 Water Treatment Plant

to assess the level of readiness, capability and

effectiveness of the staff in handling emergency

situations.

22 SEPTEMBER 2003Puncak Niaga donated RM200,000 to the Asian

Institute of Medical, Science and Technology

building fund.



Visit by NPC officials to SSP2 Water Treatment Plant,23 August 2003

46th National Day celebration, 30 August 2003

Environmental Awareness Campaign, 11 September 2003

Emergency drill, 13 September 2003

23 SEPTEMBER 2003

Puncak Niaga participated in the ‘Towards Efficient

Water And Sewerage Management’ forum organised by

AFFIN-UOB Securities Sdn Bhd.

26 SEPTEMBER 2003

PNHB participated in the JP Morgan Malaysia Access

Day at JP Morgan Securities Ltd Office, in Singapore.

3 OCTOBER 2003

Puncak Niaga won the Gold Merit Award and Gold

Award in the OSH Award 2002 competition organised

by the Malaysian Society for Occupational Safety and

Health (MSOSH).

5-6 OCTOBER 2003

Puncak Niaga participated in the ‘Water Management

And Sanitation Technology Exhibition’ organised in

conjunction with World Habitat Day 2003.

11 OCTOBER 2003

Puncak Niaga’s Women’s Bureau together with the

Women Sports & Fitness Foundation Malaysia jointly

conducted a self-defense programme for all female

employees. Puncak Niaga also donated RM10,000 to the

Association of Muslim Single Mothers, Federal

Territory/Selangor.



‘Towards Efficient Water And Sewerage Management’ forum,23 September 2003

OSH Award 2002 Ceremony, 3 October 2003

Water Management And Sanitation Technology Exhibition,5-6 October 2003

Cheque presentation to the Association of Muslim SingleMothers, Federal Territory/Selangor by YBhg Puan Sri FaridahIdris, wife of the Executive Chairman, 11 October 2003

11 OCTOBER 2003Puncak Niaga participated in the “Program Gotong-

Royong Perdana”, organised by the Kajang Municipal

Council in collaboration with Lembaga Urus Air

Selangor at Pekan Batu 14, Hulu Langat.

11 OCTOBER 2003YBhg Tan Sri Rozali Ismail presented a paper entitled

“Meningkatkan Profesionalisme Melayu Melalui

Pendidikan” at the Konvensyen Pendidikan Melayu 2003.

18 NOVEMBER 2003Puncak Niaga donated a sum of RM100,000 to the

under privileged at the ”Majlis Amal Warga Korporat

Prihatin Selangor” at Kompleks Muhibah, Kota

Damansara. The event was officiated by the DYMM

Sultan Selangor, Sultan Sharafuddin Idris Ibni Almarhum

Sultan Salahuddin Abdul Aziz Shah Al Haj.

4 DECEMBER 2003PNHB received a Certificate of Merit under the

Construction & Infrastructure Project Companies

Category at the ‘National Annual Corporate Report

Awards’ (NACRA) 2003 dinner.

16 DECEMBER 2003Puncak Niaga participated in the Prime Minister’s

Hibiscus Award 2002/2003.

27 DECEMBER 2003Puncak Niaga contributed RM500,000 to the Yayasan

Budi Penyayang Malaysia in support of the Malaysian

batik industry at the ‘Malaysia Batik Crafted For The

World’ officiated by the Prime Minister’s wife,YAB Datin

Seri Endon Mahmood.



Puncak Niaga donated RM500 to Sekolah Kebangsaan TunAbdul Aziz Majid at the “Program Gotong-RoyongPerdana”, 11 October 2003

“Majlis Amal Warga Korporat Prihatin Selangor”,18 November 2003

National Annual Corporate Report Awards (NACRA) 2003,4 December 2003


Newspaper clippings


Newspaper clippings


Shaping A Better Tomorrow



The Board of Puncak Niaga has always viewed corporate governance as pivotal to the success of the Group’s business and

has adopted corporate governance principles even before the inception of the Malaysian Code on Corporate Governance

(the Code) in July 2001.The Board remains unreservedly committed to applying and ensuring that the Group complies with

the principles and best practices of corporate governance as set out in the Code.

Puncak Niaga’s sincere and relentless pursuit of exemplary corporate conduct has time and again been given due recognition

by the regulatory authorities as evidenced by it being awarded the inaugural KLSE Corporate Excellence Award 2000 for the

Main Board and KLSE Corporate Sectoral Award 2000 for the Main Board Infrastructure Project Companies category in year

2001 and more recently on 13 February 2004, the KLSE Corporate Sectoral Award 2003 for the Main Board Infrastructure

Project Companies category as a repeat recipient.

During the year 2003, a Board Charter was formulated and adopted by the Board as a guidance on how business is to be

conducted by the Company in line with international best practices and standards of good corporate governance. For the

same purpose, the Group continues to refine and revamp its financial objectives, goals, policies and procedures, controls and

risk management framework to meet the evolving corporate environment.

The Board of Puncak Niaga is therefore pleased to report on how the Group has applied the principles of the Code and

best practices of corporate governance as set out in the Code during the year 2003.

BOARD OF DIRECTORS (A) THE BOARD

With the adoption of the Board Charter, the Board members, whether acting in their individual capacities or as a whole,

have the common objective of ensuring that the Vision and Mission of the Company as set on page 9 of the Annual

Report are achieved.

The Board members are aware of their fiduciary duties and responsibilities and the various legislations and regulations

affecting their conduct.They take cognizance that they are expected to act in a professional manner and as such, take full

responsibility for the performance of the Company and of the Group.

The roles of the Executive Chairman and Executive Vice Chairman are separate, each with responsibilities clearly divided

between them to ensure a balance of power and authority so that no one individual has unfettered powers of decision-

making. Their respective roles together with the roles of the Executive Directors and Independent Non-Executive

Directors are spelt out in the Board Charter.

YB Tan Sri Dato’ Seri Dr Ting Chew Peh is the Company’s Senior Independent Non-Executive Director, to whom

shareholders’ concerns may be conveyed.

(B) BOARD COMPOSITIONThere was no change in the Board’s composition during the year 2003. However on 1 March 2004, upon the

recommendation of the Nomination Committee, Tuan Syed Danial Syed Ariffin was appointed to the Board of both

PNHB and PNSB as Executive Director, Operation.



Tuan Syed Danial is a Civil Engineer by profession and has been with the Group for 8 1/2 years, overseeing the

management and operation of water treatment plants. His appointment complements the effectiveness of the

Board in discharging its duties and responsibilities.

With the appointment of Tuan Syed Danial, the Board now comprises eight members. Five are Executive

Directors and three are Independent Non-Executive Directors.Though the number of Executive Directors has

increased from four to five, the Board balance of at least 1/3 Independent Non-Executive Directors is still

maintained.

All Board members are individuals of caliber and credibility. They are professionals from diverse disciplines,

qualifications and experiences in law, engineering and accounting. Together, they play an instrumental role to the

Group’s continued growth and success.Their profiles are set out on pages 18 to 23 of the Annual Report.

(C) BOARD MEETINGSIn year 2003, the Board met six times at the Board Room on 26th Floor, Suite 2601-2606, Plaza See Hoy Chan,

Jalan Raja Chulan, 50200 Kuala Lumpur. The meetings were held as follows:

Day Date TimeTuesday 25 February 2003 3.00 p.m.

Thursday 13 March 2003 3.00 p.m.

Wednesday 23 April 2003 3.30 p.m.

Wednesday 21 May 2003 3.30 p.m.

Wednesday 20 August 2003 12.00 noon

Wednesday 19 November 2003 11.30 a.m.

The details of the respective Directors’ attendances for the above meetings are as follows:

Name of Director Designation No. of meetings attended %Tan Sri Rozali Ismail Executive Chairman 6 100

Ruslan Hassan Executive Vice Chairman / 6 100Executive Director, Corporate Affairs

Mat Hairi Ismail Executive Director, Finance 5 83

Lee Miang Koi Executive Director, Project 6 100& Business Development

Abdul Majid Abdul Karim Independent Non-Executive 5 83Director

Tan Sri Dato’ Hari Independent Non-Executive 6 100Narayanan Govindasamy Director

Tan Sri Dato’ Seri Independent Non-Executive 6 100Dr Ting Chew Peh Director

The day-to-day administration, management and operation have been delegated to the Board of PNSB which

met eight times in year 2003, to deliberate and approve on annual budgets, capital investments, project and

business development, internal controls and changes in the Group’s policies and procedures.



(D) SUPPLY OF INFORMATION AND ACCESS TO ADVICEExcept under exceptional circumstances, Board members are given at least seven days notice before any Board Meeting

is held and the Board papers are circulated to the Board members at least two working days prior to the date of the

Meeting.Where necessary, Company personnel will be called upon by the Board during the Board Meetings to present

and to clarify their papers. Board members are expected to participate fully, frankly and constructively in all Board

deliberations and bring the benefit of their particular knowledge, skills and abilities to the Board. Where issues involve

conflicts of interest, the interested Director abstains from discussing or voting on the matter.

All Directors have full and unlimited 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 all familiar and aware of their duties and responsibilities as well as the

implementation of good corporate governance and compliance practices in the Group.

(E) APPOINTMENT OF DIRECTORSAll appointments to and removals from the Board are approved by the Board upon the recommendation of the

Nomination Committee. 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.

(F) RE-ELECTION OF DIRECTORSArticle 98 and Article 99 of the Company’s Articles of Association provide that 1/3 of the Directors shall retire from

office at each Annual General Meeting and all Directors shall retire from office at least once every three years but may

offer themselves for re-election.

Article 103 of the Company’s Articles of Association provides that any person appointed as an additional Director shall

hold office only until the next following ordinary General Meeting of the Company and shall be eligible for re-election.

Upon the recommendation of the Nomination Committee, the following Directors shall retire at the Seventh Annual

General Meeting of the Company and had offered themselves for re-election:

(i) Ir Lee Miang Koi, retiring pursuant to Article 98;

(ii) En Abdul Majid Abdul Karim, retiring pursuant to Article 98;

(iii) YB Tan Sri Dato’ Seri Dr Ting Chew Peh, retiring pursuant to Article 99; and

(iv) Tuan Syed Danial Syed Ariffin, retiring pursuant to Article 103.



(G) BOARD COMMITTEES The Board has delegated specific responsibilities to the Board Committees whose functions and authorities are spelt out

in their respective terms of reference to assist the Board in the efficient and effective discharge of its duties. A brief

summary of the various Board Committees as well as their composition are as follows:

Name of Director Audit Remuneration Nomination Compliance, ESOS Committee Committee Committee Internal Option

Control and CommitteeRisk PolicyCommittee

TAN SRI ROZALI ISMAIL,Executive Chairman Chairman

RUSLAN HASSAN,Executive Vice Chairman /Executive Director, Corporate Affairs Member Member

MAT HAIRI ISMAIL Executive Director, Finance Member Member Member

LEE MIANG KOI,Executive Director,Project & Business Development Member

ABDUL MAJID ABDUL KARIM Independent Non-Executive Director Chairman Member Member

TAN SRI DATO’ SERI DR TING CHEW PEHIndependent Non-Executive Director Member Chairman Chairman Chairman

TAN SRI DATO’ HARI NARAYANAN GOVINDASAMY Independent Non-Executive Director Member Member Member

The Board Committees exercise transparency and full disclosure in their proceedings. Where applicable, issues are

reported to the Board with the appropriate recommendations by the Board Committees.

DIRECTORS’ REMUNERATION (A) LEVEL AND MAKE UP OF REMUNERATION

The Company has a formal procedure to determine the remuneration of each member of the Board which is the

responsibility of the Remuneration Committee to recommend. Remuneration of the Executive Directors are

performance-linked while remuneration paid to the Non-Executive Directors reflect their contributions and the time

spent attending to the Company’s affairs.

(B) PROCEDUREThe 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.The respective Directors

abstain from discussing and voting on their remuneration at the Board Meetings.



(C) DISCLOSURE OF DIRECTORS’ REMUNERATIONThe details of the remuneration of each Director of the Company during the financial year ended 31 December 2003

are as follows:

Name of Director Fees Salaries Bonuses Benefits- Allowance Employees Totalin-kind Provident

Fund

TAN SRI ROZALI ISMAIL - - - - - - -

RUSLAN HASSAN - - - - - - -

MAT HAIRI ISMAIL - - - - - - -

LEE MIANG KOI - - - - - - -

ABDUL MAJID ABDUL KARIM - - - - 53,000 - 53,000

TAN SRI DATO’ HARINARAYANAN GOVINDASAMY - - - - 31,000 - 31,000

TAN SRI DATO’ SERI DR TINGCHEW PEH - - - - 34,000 - 34,000

TOTAL - - - - 118,000 - 118,000

The remuneration packages of the Directors of the Group for the financial year ended 31 December 2003 with

categorisation into the appropriate components are as follows:

IndependentRemuneration Packages Executive Directors Non-Executive Directors

(RM) (RM)

FEES - -

SALARIES 2,732,560 -

BONUSES - -

BENEFITS-IN-KIND 113,550 -

ALLOWANCE 742,127 118,000

EMPLOYEES PROVIDENT FUND 428,280 -

TOTAL 4,016,517 118,000

Details of the Directors’ Remuneration at Company Level and Group Level for the financial year ended 31 December2003, in successive bands of RM50,000 are tabulated as follows:

Company Level Group LevelRange of Remuneration per annum No. of Executive No. of Non-Executive No of

Directors Directors DirectorsRM1 to RM50,000 - 2 1*

RM50,001 to RM100,000 - 1 -RM150,001 to RM200,000 - - 1RM200,001 to RM250,000 - - 1*

RM600,001 to RM650,000 - - 1RM800,001 to RM850,000 - - 1RM850,001 to RM900,000 - - 1RM1,200,001 to RM1,250,000 - - 1

* Directors who were appointed to the Group during the financial year ended 31 December 2003.



(D) DIRECTORS’ SHARE OPTION As at 31 December 2003, a total of 963,000 options were exercised by the Executive Directors under the

Company’s ESOS.

(E) DIRECTORS’ TRAININGIn year 2003, the Directors attended various seminars and courses to keep themselves abreast with the latest

developments in the legislations and for purposes of fulfilling the Continuing Educational Programme under Bursa

Malaysia.

SHAREHOLDERSThe Group maintains effective communication with its shareholders and stakeholders through one to one or group

dialogues, participation in investor conferences organised by local and foreign institutional houses, e-mails, phone calls,

Company General Meetings and other Company events.

The Company’s Investor Relations Policy & Report is set out on pages 75 to 78 of the Annual Report.

ACCOUNTABILITY AND AUDIT (A) FINANCIAL REPORTING

The Board takes responsibility in ensuring 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, 1965. 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 the accurate and timely release to Bursa Malaysia of the Group’s quarterly and annual

financial results. The half yearly results are also published in the local daily newspapers for the benefit of the

investment community.

(B) 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, 1965.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 keep accounting records which discloses

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, 1965.

The Board has the overall responsibility to take all steps as are reasonably open to them to safeguard the assets

of the Group to prevent and detect frauds and other irregularities.



(C) RELATIONSHIP WITH AUDITORS The Company maintains a professional relationship with its external auditors.A report by the Audit Committee together

with its Terms of Reference is set out on pages 66 to 71 of the Annual Report.

(D) INTERNAL CONTROLThe Statement on Internal Control is set out on pages 64 and 65 of the Annual Report.

OTHER COMPLIANCE INFORMATION (A) SHARE-BUY BACKS

The Company did not purchase any of its own shares during the financial year ended 31 December 2003.

(B) OPTIONS,WARRANTS OR CONVERTIBLE SECURITIES During the financial year ended 31 December 2003, a total of 11,888,000 options had been exercised and none of the

warrant holders converted their warrants into ordinary shares.

(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 2003.

(E) NON-AUDIT FEESDuring the financial year ended 31 December 2003, the Group paid the following non-audit fees to the external auditors:

(i) Tax advisory and compliance work - RM28,812

(ii) Review of non-financial reporting frame work - RM6,000

(iii) Other non-audit related service - RM2,000

(F) VARIATIONS IN RESULTSThe Company’s/Group’s audited results for the financial year ended 31 December 2003 did not vary from the unaudited

results which was announced to Bursa Malaysia on 26 February 2004.

(G) PROFIT GUARANTEEThe Company does not provide profit guarantee to any parties.

(H) REVALUATION POLICY ON LANDED PROPERTIESThe Group does not adopt a policy of regular revaluation of its property.

(I) RECURRENT RELATED PARTY TRANSACTIONThe Company did not enter into any recurrent related party transaction which requires the shareholders’ mandate

during the financial year ended 31 December 2003.



(J) MATERIAL CONTRACTS INVOLVING DIRECTORS AND SUBSTANTIAL SHAREHOLDERSDuring the financial year ended 31 December 2003, neither the Company nor its subsidiaries entered into any

material contracts or loan 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 2003 are as follows:

STATEMENT OF GOING CONCERNUpon making due and reasonable enquiry into the affairs of the Group, the Board firmly believes that the Groupshall continue to operate as a going concern business in the foreseeable future.

Date

8 October1994

8 October1994

31 May 1995

25 September2003

Nature of Contract

Operation & MaintenanceAgreement – For MandaiSari Sdn Bhd (Mandai Sari)to undertake the operationand maintenance of the 27water treatment plantsunder the PrivatisationCum ConcessionAgreement (PCCA).

Refurbishment WorksAgreement – For C.G.E.Utilities (M) Sdn Bhd(CGE) to undertake therefurbishment works forthe 27 water treatmentplants under the PCCA.

Operation & MaintenanceSub-Contract – For MandaiSari to sub-contract theabove Operation &Maintenance Agreement to CGE.

Agreement For The SaleAnd Purchase Of Shares InSyarikat Bekalan AirSelangor Sdn Bhd(SYABAS).

Parties

Puncak Niaga (M)Sdn Bhd (PNSB)and Mandai Sari.

PNSB, Mandai Sariand CGE.

PNSB, MandaiSari, CGE andCompagnieGeneral Des Eaux(now known asVeolia Water).

YBhg Tan SriRozali Bin Ismail(TSRI), Mat HairiBin Ismail (MHI),CP and PNHB.

Consideration/Mode of Satisfaction

PNSB to pay Mandai Sari a fixedmonthly fee of RM41,667 aswell as for treated waterproduced and supplied, which ismeasured in accordance withthe provisions of the PCCA.

Contract sum of RM150 millionwhich is being paid progressivelyto CGE based on physicalprogress and subject toverification by PUAS.

Mandai Sari to pay CGE fortreated water produced andsupplied, which is measured inaccordance with the provisionsof the agreement.

PNHB to acquire 70% equityinterest in SYABAS for a totalpurchase price ofRM38,009,840 upon SYABASexecuting the ConcessionAgreement for the privatisationof the water supply services inthe State of Selangor, FederalTerritories of Kuala Lumpur andPutrajaya.

Relationship withDirector/SubstantialShareholder

Mandai Sari is a subsidiaryof Central Plus (M) SdnBhd (CP), whereby CP is asubstantial shareholder ofPuncak Niaga HoldingsBerhad (PNHB).

Mandai Sari is a subsidiaryof CP, whereby CP is asubstantial shareholder ofPNHB.

Mandai Sari is a subsidiaryof CP, whereby CP is asubstantial shareholder ofPNHB.

TSRI is the ExecutiveChairman and substantialshareholder of PNHBthrough his 50% equityinterest in CP. MHI is anExecutive Director ofPNHB and the youngerbrother of TSRI.


Statement On Internal Control

INTRODUCTION

The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to

safeguard shareholders’ investments and the Group’s assets. The Bursa Malaysia Listing Requirements requires Directors of

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 Risk Management Policy & Report set out on pages 72 to

74 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 Divisions and Departments have clearly documented Procedures Manuals incorporating control procedures and the

scopes of responsibilities and authorities. The Procedures Manuals are updated regularly to incorporate all elements

necessitated by changes in the legislation, industry best practices and business dynamics.

• 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. 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.


Statement On Internal Control

• The Compliance, Internal Control and Risk Policy Committee, which is chaired by YB Tan Sri Dato’ Seri Dr Ting

Chew Peh, an Independent Non-Executive Director was established in October 2001.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.

• 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.

• The Limits of Authority Policy was approved by the Board for implementation in April 2003 and distributed to

all Divisions and Departments within the Group in May 2003.

GUIDANCE FOR DIRECTORS OF PUBLIC LISTED COMPANIES

Since the issuance of the ‘Statement on Internal Control: Guidance for Directors of Public Listed Companies’

(Guidance) in December 2000, the Group has 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 2003,

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 approved by

the Board of Puncak Niaga and reviewed by the external auditors.

For and on behalf of the Board of Puncak Niaga Holdings Berhad,

Tan Sri Dato’ Seri Dr Ting Chew Peh

Chairman

Compliance, Internal Control and Risk Policy Commitee

25 Febuary 2004



The Board of Directors of Puncak Niaga Holdings Berhad (PNHB) is pleased to present the report of the Audit Committee

for the financial year 2003.

1. MEMBERSHIP AND MEETINGS

The Audit Committee comprises the following members and details of attendance of each member at Audit Committee

Meeting held during the financial year 2003 are as follows:

Composition of Committee Number of Number ofmeetings held meetings attended %

Encik Abdul Majid Abdul KarimChairman/Independent Non-Executive Director 4 4 100

Encik Mat Hairi IsmailMember/Executive Director, Finance 4 4 100

YBhg.Tan Sri Dato’ Hari Narayanan GovindasamyMember/Independent Non-Executive Director 4 4 100

YB Tan Sri Dato’ Seri Dr Ting Chew PehMember/Independent Non-Executive Director 4 4 100

The General Manager (Internal Audit), General Manager (Finance & Accounts) and other members of Senior

Management attended these meetings upon the invitation by the Chairman of the Audit Committee. The Group’s

external auditors were also invited to attend all these meetings.

2. SUMMARY OF ACTIVITIES

During the financial year 2003, the Audit Committee carried out its duties as set out in the terms of reference.

Other main activities carried out by the Audit Committee during the financial year included the following:

FINANCIAL RESULTS

• Reviewed the quarterly and year-to-date unaudited financial results of the Group before tabling to the Board for

consideration and approval.

• Reviewed the reports and the audited financial statements of the Company and of the Group together with the

external auditors prior to tabling to the Board for approval.

EXTERNAL AUDIT

• Reviewed the external auditors’ scope of work and audit plan for the year and made recommendation to the Board

on their appointment and remuneration.

• Reviewed and discussed external auditors’ audit report and areas of concern highlighted in the management letter,

including management’s response to the concerns raised by the external auditors.

• Discussed on significant accounting and auditing issues, impact of new or proposed changes in accounting standards

and regulatory requirements.



INTERNAL AUDIT

• Reviewed the Internal Audit plan, programmes of resources requirements for the year and assessed the

performance of the Internal Audit Department.

• Reviewed the Internal Audit reports which highlighted the audit issues, recommendation and the

Management responses and directed actions to be taken by the Management to rectify and improve the

system of Internal control.

• Monitored the implementation programmes recommended by the Internal Audit arising from its audits in

order to obtain assurances that all key risks and control concerns have been fully addressed.

RELATED PARTY TRANSACTION

Reviewed the related party transactions entered into by the Company and the Group.

3. INTERNAL AUDIT FUNCTIONS

The Group has an established Internal Audit Department which assists the Audit Committee in the discharge of

its duties and responsibilities. The Internal Audit Department provides an independent assurance on risk

management and internal controls. The audit focuses on regular and systematic review of the internal control

and management information systems, including the system for compliance with applicable laws, regulations, rules,

directives and guidelines.

The annual audit plan of the Internal Audit Department which was developed on risk analysis approach was

approved by the Audit Committee at the last Audit Committee Meeting of the preceding financial year. The

scope of the Internal Audit Department’s function covered the audit of adequacy of risk management,

operational controls, compliance with established procedures, guidelines and statutory requirements and also the

various computer application system and network of the Company and of the Group.

The Internal Audit Department had conducted the evaluation of the system of internal control that

encompassed the Group’s governance, operations and information systems. The Internal Audit reports, which

highlighted the internal controls weaknesses, were deliberated by the Audit Committee and the

recommendations were duly acted upon by the Management.

Examples of the key areas audited by the Internal Audit Department during the financial year 2003 were the

review on Risk of Lack of Clear Human Resources Strategy and Planning, Review on Risk of Failure of Information

Technology System, Review on Risk of Dry-up, Pollutions and Leakages/Structural Collapse of the Dam and the

review on the activities of PNSB’s Quarters Committee.

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.

C. DUTIES AND RESPONSIBILITIES

In fulfilling its primary objectives, the Audit Committee will need to undertake the following duties and responsibilities:

C.1Oversee 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 employee, 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.

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 theinternal 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 bythe 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 ofthe 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 encounteredduring 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 themanagement 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.

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 Department 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.


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 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.



COMPLIANCE, INTERNAL CONTROL AND RISK POLICY COMMITTEE (CICR)

The establishment of the CICR was formalised by the Board in October 2001.The members of the CICR comprise

the following:

Chairman : YB TAN SRI DATO’ SERI DR TING CHEW PEH

Independent Non-Executive Director

Members : ENCIK RUSLAN HASSAN

Executive Vice Chairman

(Head of Compliance, Internal Control and Risk Policy Committee)

MDM TAN BEE LIAN

Senior General Manager, Secretarial Department

MR NG WAH TAR

General Manager, Finance and Accounts Department

ENCIK SONARI SOLOR

General Manager, Internal Audit Department

Secretary : ENCIK 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 2003.

A) 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:

- Long-term and short-term strategies.

- 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.



B) CICR ACTIVITIES

MEETINGS HELD AND ISSUES COVERED

During the year 2003, the CICR held five meetings, of which three were chaired by YB Tan Sri Dato’ Seri Dr Ting Chew

Peh (Chairman of CICR) and two were chaired by Encik Ruslan Hassan (Head of CICR).

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 regards 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.The main risks, controls and management actions are highlighted for the CICR to deliberate.

3. An update on risk audits completed by the Internal Audit Department.

4. 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 AND 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 Heads of Departments or their

representatives, held a total of nine meetings between 29 April 2003 and 2 July 2003 to review the Group’s Enterprise-Wide

Risk Profile.The Group’s Enterprise-Wide Risk Profile is reviewed annually to take into consideration changes in the business

environment, strategies and functional activities of the Group. A detailed Board Paper on the Working Group’s deliberations

was submitted to the CICR and the PNHB Board.

The Group’s Enterprise-Wide Risk Profile was reassessed by the Working Group in early 2004.

DIVISIONAL AND DEPARTMENTAL RISKS

The respective Heads of Divisions and Departments are responsible for assessing and managing their Divisional and

Departmental risks. Using the Corporate Risk Scorecard software, the Heads of Divisions and Departments have submitted

their detailed risk scorecard reports to the Risk Management Section after the end of each quarter.

CORPORATE RISK SCORECARD SOFTWARE

The Group utilises a risk management tool namely, the Corporate Risk Scorecard (CRS) software 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 and assists the Management of Puncak Niaga to successfully achieve their corporate

objectives.


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.

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:

- perception on our Company’s risk is reduced;

- enhance feedback of our Company’s performance;

- our Company’s share valuation becomes more realistic;

- develop confidence in our Management team and management style; and

- 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.

INVESTOR RELATIONS REPORT

The Board is pleased to report on the investor relations efforts undertaken by Puncak Niaga during the year 2003 as follows:

DIALOGUES WITH INVESTORS

The Top Management of Puncak Niaga actively participates in meetings, dialogues and briefings sessions with local and foreign

investment groups. During the year 2003, the Top Management held more than 60 dialogues and briefing sessions with

existing and potential investors, research analysts and fund managers. Some of these dialogues resulted in the publication of

articles and write-ups favouring the Company’s securities.

The Company was also invited to participate in the following investors’ conferences, both locally and regionally:

The outcome of the conferences were encouraging with the investors promising greater investment in the Company’s

securities.The Company’s foreign shareholding rose from 2.69% in July 2003 to 7.73% by end of 2003.This reflects the foreign

funds’ strong support and confidence in the Company generally and its Management.

Date25 July 2003

23 September

2003

26 September

2003

31 October

2003

20 November

2003

EventInvestors Conference

Dialogue Session with Corporate Captains in

the Water and Sewerage Industry of “Towards

Efficient Water And Sewerage Management

Forum”

Malaysia Access Day

Malaysia Corporate Day

ABN AMRO “These Tiggers Do Bounce”

OrganiserCitigroup and Smith

Barney

Affin-UOB Securities

Sdn Bhd

JP Morgan Securities

Ltd

Citigroup and Smith

Barney

ABN AMRO Asia

Securities (Singapore)

Pte Limited

VenueThe Ritz Carlton

Millenia Hotel

Singapore

JW Marriott Hotel

Kuala Lumpur

Republic Plaza

Singapore

The Ritz Carlton

Millenia Hotel

Singapore

Conrad Hotel

Bangkok

Thailand





INVESTORS’ ACCESS TO INFORMATION

The Company makes timely announcements to the Exchange on its quarterly financial results and all material

developments of the Group. It also ensures that its Audited Accounts and Annual Report are completed and released

within the stipulated timeframe required by the regulatory authorities.

The Company ensures disclosure of information over and above the regulatory authorities’ disclosure requirements

so that the investment community can make careful and informed investment decisions on the Company’s securities.

Shareholders and investors can access the Company’s information at www.puncakniaga.com.my or through Bursa

Malaysia’s website at www.bursamalaysia.com.

The Investor Relations Unit (IRU) also helps in the timely dissemination of the Group’s latest announcements and

corporate developments via e-mails to the shareholders, investors and analysts who have registered themselves with

the IRU. For the year 2003, IRU e-mailed 19 updates eg. announcements and write-ups on Puncak Niaga to the

shareholders, investors and analysts. In turn, the IRU received 35 queries and feedbacks from the shareholders,

investors and analysts. So far, the feedbacks received have been encouraging and many have expressed their

satisfaction towards the Company’s efforts in promoting investor relations through the IRU programme.

Upon the request of the shareholders at the Company’s AGM in 2003, the Annual Report 2003 has been produced

in the form of CD-ROM in order to save cost and to be in tandem with the rapid development of information

technology. Nevertheless, the Company has made available printed copies of the Annual Report in both English and

Bahasa Malaysia versions, which will be given to the shareholders upon request.

ANNUAL GENERAL MEETING (AGM)

Puncak Niaga believes that the AGM is the best forum for the Management to foster better relationship with the

Company’s shareholders. As such, the Board ensures that the agenda for the AGM is precise and where required,

explanations on special businesses and information on Directors’ seeking re-election are provided in the Notice of

AGM so as to enable the shareholders or their proxies to prepare themselves for the AGM.

In line with good corporate governance practices, the Management has been giving business presentations followed

by a Question & Answer Session at its AGM so that its shareholders are updated on the Group’s financial

performances, business operations and developments. Besides giving the shareholders a better view of the Group’s

business progress, it also provides an opportunity for the shareholders to actively participate in the AGM by asking

genuine and relevant questions related to the Group’s business and to contribute ideas to the Company.

The Question & Answer Session during the AGM promotes effective two-way communication between the

Company and its shareholders. It is also Puncak Niaga’s way of expressing ‘We value your views’ in our pursuit to

build long-term relationship with our shareholders.



SHAREHOLDERS AND INVESTORS DATABASE

The IRU maintains a Register of Shareholders and Investors comprising particulars of shareholders, investors and analysts

who wish to be regularly updated on the Group’s corporate developments and performance via e-mail.

For those who wish to be included in the IRU’s Register, kindly e-mail us your contact information via

[email protected] or write to us at Investor Relations Unit, c/o Secretarial Department, Puncak Niaga Holdings

Berhad, Suite 1401-1406, 14th Floor, Plaza See Hoy Chan, Jalan Raja Chulan, 50200 Kuala Lumpur.

Similarly, to enable us to further improve on our level of operations and services to the community and the stakeholders,

kindly forward your comments, views and concerns to the Company via our e-mail addresses at

[email protected] for public enquiries and [email protected] for investors’ enquiries.

EXCERPTS OF E-MAILS RECEIVED BY THE IRU DURING THE YEAR 2003

“……..would appreciate if you could keep us posted on any upcoming Analyst Briefings…” received from a local

institutional fund manager (May 2003)

“……….congratulate you and your committee on the successful organisation of the last Annual General

Meeting.The presentation was insightful…….” received from an individual shareholder (July 2003)

“…would like to be included into the e-mail distribution list of results, announcements...” received from a

Hong Kong based fund manager (August 2003)

“……….NACRA 2003, Congratulations. Glad to be part of it” received from an individual shareholder (December 2003)


Quality Policy

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.


Distribution Schedule Of EquitySECURITIES & PROPERTY

ORDINARY SHARES AS AT 26 APRIL 2004

Authorised Capital : RM 1,000,000,000

Issued and Paid-Up Capital : RM 457,785,000

Nominal Value : RM 1.00 per ordinary share

Holdings No. of Holders % of Holders Total Holdings % of Issued Capital

less than 100 286 2.98 8,280 0.00

100 – 1,000 1,804 18.78 1,646,713 0.36

1,001 – 10,000 6,229 64.86 21,898,079 4.78

10,001 – 100,000 1,025 10.67 29,848,957 6.52

100,001 – 22,889,249 (less than 5% of issued capital) 257 2.68 259,722,675 56.73

22,889,250 (5% of issued capital) and above 3 0.03 144,660,296 31.61

TOTAL 9,604 100.00 457,785,000 100.00

30 Largest Shareholders As Per Record of Depositors No. of % of IssuedName of Shareholder Shares Held Capital

1. Central Plus (M) Sdn Bhd 77,240,446 16.87

2. Amsec Nominees (Tempatan) Sdn Bhd 40,000,000 8.74

- AmFinance Berhad For Central Plus (M) Sdn Bhd

3. Employees Provident Fund Board 27,419,850 5.99

4. AMMB Nominees (Tempatan) Sdn Bhd 17,026,000 3.72

- AmTrustee Berhad For Central Plus (M) Sdn Bhd (7/914-8)

5. RHB Capital Nominees (Tempatan) Sdn Bhd 16,000,000 3.50

- Pledged Securities Account For Central Plus (M) Sdn Bhd (TSR 681055)

6. Lembaga Tabung Haji 14,203,300 3.10

7. Corporate Line (M) Sdn Bhd 13,310,304 2.91

8. Central Plus (M) Sdn Bhd 11,740,500 2.56

9. Malaysia Nominees (Tempatan) Sendirian Berhad 8,059,100 1.76

- Great Eastern Life Assurance (Malaysia) Berhad (Par 1)

10. AmFinance Berhad 6,523,750 1.43

- Pledged Securities Account For Central Plus (M) Sdn Bhd (SMART)

11. HLG Nominee (Tempatan) Sdn Bhd 5,023,250 1.10

- PB Trustee Services Berhad For HLG Growth Fund

12. Botly Nominees (Tempatan) Sdn Bhd 4,418,500 0.97

- Pledged Securities Account For Koon Yew Yin

13. HSBC Nominees (Asing) Sdn Bhd 4,249,750 0.93

- BNY Brussels For The Great Eastern Life Assurance Co Ltd


Distribution Schedule Of EquitySecurities & Property

30 Largest Shareholders As Per Record of Depositors No.of % of IssuedName of Shareholder (continued) Shares Held Capital

14. Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd 4,000,000 0.87

- Pledged Securities Account For Central Plus (M) Sdn Bhd (17152 JTRK)

15. Malaysian Assurance Alliance Berhad 4,000,000 0.87

16. Malaysia National Insurance Berhad 3,544,650 0.77

17. Universal Trustee (Malaysia) Berhad 3,343,000 0.73

18. Cartaban Nominees (Tempatan) Sdn Bhd 3,228,500 0.70

- Amanah SSCM Nominees (Tempatan) Sdn Bhd

For Employees Provident Fund Board (JF404)

19. Kumpulan Darul Ehsan Berhad 3,204,400 0.70

20. PAB Nominees (Tempatan) Sdn Bhd 3,173,000 0.69

- Pledged Securities Account For Central Plus (M) Sdn Bhd (Jln Bunus)

21. Malaysia Nominees (Tempatan) Sendirian Berhad 3,097,800 0.68

- Amanah SSCM Asset Management Berhad

For Amanah Smallcap Fund Berhad (JM730)

22. Cartaban Nominees (Asing) Sdn Bhd 2,867,000 0.63

- SSBT Fund G444 For Goldman Sachs Asia Portfolio


- State Street Australia Fund Q3VD For Fullerton (Private) Limited

24. Cimsec Nominees (Tempatan) Sdn Bhd 2,761,100 0.60

- Commerce Asset Fund Managers Sdn Bhd

For Employees Provident Fund Board


- SSBT Fund 05EF For BT Pyramid Emerging Markets Fund


- AmTrustee Berhad For HLG Penny Stock Fund (5/4-3)

27. Citicorp Nominees (Tempatan) Sdn Bhd 2,450,000 0.54

- CMS Dresdner Asset Management Sdn Bhd

For Employees Provident Fund


- Pacific Premier Fund


- SBB Emerging Companies Growth Fund


- MIDF Aberdeen Asset Management Sdn Bhd

For Employees Provident Fund (7/836-2)

TOTAL 295,708,700 64.60%



Directors’ Interests in Ordinary Shares As Per Register of Directors’ Shareholdings

No. Of Shares Held In The Company

No. Name of Director Direct Interest % Indirect Interest %

1 YBhg Tan Sri Rozali Ismail 947,000 0.21 190,051,0001

41.52

2 Encik Ruslan Hassan 404,000 0.09 - -

3 Encik Mat Hairi Ismail 22,750 * - -

4 Ir Lee Miang Koi 144,000 0.03 20,0002

*

5 Encik Abdul Majid Abdul Karim 3,000 * - -

6 YBhg Tan Sri Dato’ Hari NarayananGovindasamy 210,000 0.05 - -

7 YB Tan Sri Dato’ Seri Dr Ting Chew Peh - - - -

8 Tuan Syed Danial Syed Ariffin 25,000 0.01 - -

1 Deemed interest by virtue of 50% equity interest each in Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd respectively2 Held in nominee name, Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd* negligible

List of Substantial Shareholders As Per Register of Substantial Shareholders (excluding bare trustees)

No. Of Shares Held In The Company

No. Name of Substantial Shareholder Direct Interest % Indirect Interest %

1 YBhg Tan Sri Rozali Ismail 947,000 0.21 190,051,0001

41.52

2 Encik Shaari Ismail - - 190,051,0001

41.52

3 Central Plus (M) Sdn Bhd 88,980,946 19.44 87,759,7502

19.17

4 Employees Provident Fund Board 26,615,650 5.81 14,586,8003

3.19

1 Deemed interest by virtue of 50% equity interest each in Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd respectively2 Held in various nominee names3 Shares held and managed by various Portfolio Managers



WARRANTS AS AT 26 APRIL 2004

Holdings No. of % of Total % of Holdings Holdings Holdings Warrants

Issued

less than 100 82 1.90 3,738 0.00

100 – 1,000 1,630 37.73 1,345,874 1.23

1,001 – 10,000 2,060 47.69 8,550,624 7.82

10,001 – 100,000 467 10.81 14,899,135 13.62

100,001 – 5,468,742 (less than 5% of warrants issued) 80 1.85 31,562,749 28.86

5,468,743(less than 5% of warrants issued) & above 1 0 .02 53,012,749 48.47

TOTAL 4,320 100.00 109,374,869 100.00

30 Largest Warrant Holders As Per Record Of Depositors No. of % ofName Of Warrant Holder Warrants Warrants

Held Issued

1. Corporate Line (M) Sdn Bhd 53,012,749 48.47

2. Employees Provident Fund Board 3,078,037 2.81

3. AmFinance Berhad 2,537,000 2.32

- Pledged Securities Account For Fang Kok Leong

@ Phang Soon Fook (SMART)

4. HSBC Nominees (Asing) Sdn Bhd 1,500,000 1.37

- BNY Brussels For The Great Eastern Life Assurance Co Ltd

5. HLG Nominee (Tempatan) Sdn Bhd 1,255,812 1.15

- PB Trustee Services Berhad For HLG Growth Fund


- TA Islamic Fund

7. OSK Nominees (Tempatan) Sdn Bhd 1,215,000 1.11


8. DB (Malaysia) Nominee (Asing) Sdn Bhd 957,600 0.88

- Deutsche Bank AG Singapore PBD For Sea Crest Foundation

9. Chung Sow Leng 859,300 0.79

10. HSBC Nominees (Tempatan) Sdn Bhd 852,200 0.78

- HSBC (M) Trustee Bhd For Amcumulative Growth (3639)

11. Fang Kok Leong @ Phang Soon Fook 807,200 0.74

12. Botly Nominees (Tempatan) Sdn Bhd 791,400 0.72


13. TA Nominees (Tempatan) Sdn Bhd 763,200 0.70

- Pledged Securities Account For Kong Kien Kok



30 Largest Warrant Holders As Per Record Of Depositors No. of % ofName Of Warrant Holder (continued) Warrants Warrants

Held Issued

14. DB (Malaysia) Nominee (Asing) Sdn Bhd 700,000 0.64

- Deutsche Bank AG Singapore PBD For Green Meadows Foundation

15. Cheong Pang Kwan 676,000 0.62


- Pledged Securities Account For Ling Kok Wah

17. Citicorp Nominees (Asing) Sdn Bhd 600,000 0.55

- MLPFS For New Frontier Consultancy Ltd

18. Teng U Heng 600,000 0.55

19. Malaysia Nominees (Tempatan) Sendirian Berhad 575,000 0.53

- Amanah SSCM Asset Management Berhad

For Amanah Smallcap Fund Berhad (JM730)

20. HSBC Nominees (Asing) Sdn Bhd 554,000 0.51

- Mscoil For Specialist Trading Limited

21. Botly Nominees (Tempatan) Sdn Bhd 530,000 0.48

- Pledged Securities Account For Tan Kit Pheng

22. Mayban Nominees (Tempatan) Sdn Bhd 489,000 0.45

- Pledged Securities Account For John Leong Chung Hin (11195AW0689)

23. Universal Trustee (Malaysia) Berhad 420,000 0.38

- Alliance First Fund

24. BHLB Trustee Bhd 367,900 0.34

- TA Comet Fund


- Pledged Securities Account For Tee Tuan Chok

26. Citicorp Nominees (Asing) Sdn Bhd 333,000 0.30

- GSI For The Blackhorse Asia Fund

27. Kong Mah Realty (M) Sdn Bhd 305,000 0.28

28 Mayban Nominees (Tempatan) Sdn Bhd 283,000 0.26

- Pledged Securities Account For Su Tiing Uh (178AW0603)

29 Amsec Nominees (Asing) Sdn Bhd 250,000 0.23

- G K Goh Stockbrokers Pte Ltd For Martin Columba Gallagher (2E/35379)

30. Wong Kok Hou 250,000 0.23

TOTAL 76,783,598 70.20



Directors’ Interests In Warrant As Per Register Of Directors’ Warrantholdings

No. Of Warrants Held In The Company

No. Name of Director Direct Interest % Indirect Interest %

1 YBhg Tan Sri Rozali Ismail - - 53,012,7491

48.47

2 Encik Ruslan Hassan 21,600 0.02 - -

3 Encik Mat Hairi Ismail 52,375 0.05 - -

4 Ir Lee Miang Koi 18,000 0.02 - -

5 Encik Abdul Majid Abdul Karim - - - -

6 YBhg Tan Sri Dato’ Hari Narayanan Govindasamy 52,500 0.05 - -

7 YB Tan Sri Dato’ Seri Dr Ting Chew Peh - - - -

8 Tuan Syed Danial Syed Ariffin - - - -

Deemed interest by virtue of 50% equity interest in Corporate Line (M) Sdn Bhd

LIST OF PROPERTY AS AT 31 DECEMBER 2003

RemaningLeaseholdPeriod

Description & Date of Land Net Book (Expiry ExistingLocation Acquisition Area Value Tenure Date) use

Vacant Land 14/2/1998 10,364 sq.m. RM8,195,480 99 years 96 years noneH.S.(D) 142037 Leasehold expiring on PT 32, Section 14 17/12/2099 Bandar Shah Alam District of Petaling Selangor

1

steady growth



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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

90-97

98

99

100

101

102

103-104

105-149

150

150

151

2003financial report



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 2003.

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 16 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

Net profit for the financial year 129,586,447 1,682,927

Dividends

No dividends have been paid or declared by the Company since 31 December 2002. The Directors do not recommend

the payment of any dividend for the financial year ended 31 December 2003.

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 RM439,278,000 to

RM451,166,000 by way of the issuance of 11,888,000 new ordinary shares of RM1.00 each for cash as follows:

Purpose of issue No. of ordinary shares

of RM1.00 each

Exercise of options by eligible employees pursuant to the

Employees’ Share Option Scheme 11,888,000

The above new ordinary shares issued during the financial year ranked pari-passu in all respects with the existing ordinary

shares of the Company.

Directors’ Reportfor the financial year ended 31 December 2003



Employees’ Share Option Scheme

The Employees’ Share Option Scheme (‘ESOS’) of the Company, governed by the ESOS Bye-Laws, was principally approved

by the shareholders of the Company 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 2002. The ESOS shall be in forced for a

duration of five (5) years commencing from 25 February 2002.

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.

(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 following Executive Directors

of the Company:

(i) Tan Sri Rozali bin Ismail

(ii) Ruslan bin Hassan

(iii) Mat Hairi bin Ismail

(iv) Lee Miang Koi

(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 2007.

(e) 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 Malaysia Securities Exchange Berhad 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.

(f) The eligible employees 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 within the Group.

(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.

Employees’ Share Option Scheme (continued)

(h) The basis on which the options may be exercised, up to the expiry of the ESOS on 24 February 2007, in accordancewith the Directors’ approval is as follows:

Number of options Percentage of options exercisablegranted and

unexercised as at 2004 2005 2006 2007Tranche 31 December 2003 % % % %

1 19,215,000 57 85 100 1002 1,211,000 54 88 100 1003 1,957,000 56 83 100 1004 1,172,000 52 81 100 100

23,555,000

The movements of the options over the ordinary shares of RM1.00 each of the Company granted under the ESOS duringthe financial year are as follows:

Date of Exercise Number of optionsTranche options price

granted per option At AtRM 1.1.2003 Granted Exercised Lapsed* 31.12.2003

1 26.2.2002 2.37 30,524,000 0 (10,058,000) (1,251,000) 19,215,0002 26.8.2002 2.47 2,843,000 0 (832,000) (800,000) 1,211,0003 26.2.2003 2.13 0 2,817,000 (821,000) (39,000) 1,957,0004 26.8.2003 2.71 0 1,349,000 (177,000) 0 1,172,000

33,367,000 4,166,000 (11,888,000) (2,090,000) 23,555,000

* Due to resignations or offers not taken up

The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the full listof option holders and their holdings, except for eligible employees (excluding Executive Directors) with option allocation of300,000 options and above, which are as follows:

Number of options over ordinary shares of RM1.00 eachName of eligible At Atemployees 1.1.2003 Granted Exercised Lapsed** 31.12.2003

Nik Nazman bin Husin 500,000 0 0 0 500,000Ibrahim bin Ismail 350,000 0 (140,000) 0 210,000Loh Kit Mun 350,000 0 (100,000) 0 250,000Azlan bin Hamid 300,000 0 0 (300,000) 0Ramalingam a/l K.R. Arumugam 300,000 0 (120,000) 0 180,000Syed Danial bin Syed Ariffin 300,000 0 (60,000) 0 240,000Tan Bee Lian 300,000 50,000 (68,000) 0 282,000Sonari bin Solor 270,000 0 (69,000) 0 201,000Ng Wah Tar 240,000 60,000 (80,000) 0 220,000

** Due to resignation





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

Tan Sri Dato’ Hari Narayanan a/l Govindasamy

Tan Sri Dato’ Seri Dr.Ting Chew Peh

Syed Danial bin Syed Ariffin (appointed on 1 March 2004)

In accordance with Article 98 of the Company’s Articles of Association, Lee Miang Koi and Abdul Majid bin Abdul Karim

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.

In accordance with Article 99 of the Company’s Articles of Association,Tan Sri Dato’ Seri Dr.Ting Chew Peh retires from

office, on triennial basis, at the forthcoming Annual General Meeting and, being eligible and upon the recommendation of the

Nomination Committee, offers himself for re-election.

In accordance with Article 103 of the Company’s Articles of Association, Syed Danial bin Syed Ariffin who was appointed

since the last Annual General Meeting, retires from office at the forthcoming Annual General Meeting and, being eligible and

upon the recommendation of the Nomination Committee, offers himself for 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

1.1.2003 Acquired Sold from/(to) 31.12.2003

Direct interests in the Company:

Tan Sri Rozali bin Ismail 330,000 410,000 0 0 740,000

Ruslan bin Hassan 394,000 193,000 (178,000) 50,000 459,000

Mat Hairi bin Ismail 22,750 0 0 0 22,750

Lee Miang Koi 144,000 0 0 0 144,000

Abdul Majid bin Abdul Karim 3,000 0 0 0 3,000

Tan Sri Dato’ Hari Narayanan

a/l Govindasamy 0 0 0 210,000 210,000

Indirect interests in the Company:

Tan Sri Rozali bin Ismail 190,051,000 7,126,554 (7,126,554) 0 190,051,000*

Ruslan bin Hassan 202,500 0 (152,500) (50,000) 0

Mat Hairi bin Ismail 209,500 0 0 0 209,500^^

Lee Miang Koi 20,000 0 0 0 20,000^^


a/l Govindasamy 210,000 0 0 (210,000) 0

Redeemable Unconvertible Junior Notes in RM

At Transfer At

1.1.2003 Acquired Sold from/(to) 31.12.2003

Direct interests in the Company:

Tan Sri Rozali bin Ismail 0 0 0 12,879,204 12,879,204

Ruslan bin Hassan 708,125 0 0 0 708,125

Mat Hairi bin Ismail 261,875 0 0 0 261,875

Lee Miang Koi 245,000 0 0 0 245,000

Indirect interests in the Company:

Tan Sri Rozali bin Ismail 20,608,891 0 0 (12,879,204) 7,729,687^


a/l Govindasamy 262,500 0 (262,500) 0 0

Directors' interests (continued)

Number of warrantsAt Transfer At

1.1.2003 Acquired Sold from/(to) 31.12.2003Direct interests in the Company:Tan Sri Rozali bin Ismail 51,466,812 0 0 (51,466,812) 0Ruslan bin Hassan 41,625 0 (20,025) 0 21,600Mat Hairi bin Ismail 52,375 0 0 0 52,375Lee Miang Koi 18,000 0 0 0 18,000Tan Sri Dato’ Hari Narayanan

a/l Govindasamy 0 0 0 52,500 52,500

Indirect interests in the Company:Tan Sri Rozali bin Ismail 1,545,937 51,466,812 (51,466,812) 51,466,812 53,012,749^Tan Sri Dato’ Hari Narayanan

a/l Govindasamy 52,500 0 0 (52,500) 0

(* 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)

(^ deemed interest by virtue of 50% shareholding interest in Corporate Line (M) Sdn. Bhd.)

(^^ held by nominees)

Number of options over ordinary shares of RM1.00 eachAt At

1.1.2003 Granted Exercised Lapsed 31.12.2003Direct interests in the Company:Tan Sri Rozali bin Ismail 2,170,000 0 (410,000) 0 1,760,000Ruslan bin Hassan 1,670,000 0 (193,000) 0 1,477,000Mat Hairi bin Ismail 850,000 0 0 0 850,000Lee Miang Koi 850,000 0 0 0 850,000

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 eachAt At

1.1.2003 Acquired Sold 31.12.2003Deemed interest in the Company:Tan Sri Rozali bin Ismail 183,867,250 0 (7,126,554) 176,740,696

The other Directors 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 orobjects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures ofthe Company or any other body corporate other than the options over the shares granted by the Company to eligibleemployees 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 8 to the financial statements) by reason of acontract made by the Company or a related corporation with the Director or with a firm of which he is a member, or witha 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 tooperate, maintain and manage the water treatment facilities under the terms of the Operation and MaintenanceAgreement 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., whichprovides 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 tookreasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowancefor doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowancehad been made for doubtful debts; and

(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of businesstheir values as shown in the accounting records of the Group and of the Company had been written down to anamount 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 thefinancial 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 theCompany misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group andof the Company misleading or inappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelvemonths after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability ofthe 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 whichsecures the liability of any other person; or


Statutory information on the financial statements (continued)

(b) any contingent liability of the Group or of the Company which has arisen since the end of the financial year except asdisclosed in Note 41 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 thefinancial 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 affectedby 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 theGroup and of the Company for the financial year in which this report is made.

Significant events during the financial year

The significant events that occurred during the financial year are disclosed in Note 44 to the financial statements.

Significant event subsequent to the balance sheet date

The significant events that occurred subsequent to balance sheet date is disclosed in Note 45 to the financial statements.

Ultimate holding company

The Company has no corporate shareholder being regarded by the Directors of the Company as the ultimate holdingcompany nor as the holding company.

Auditors

The auditors, PricewaterhouseCoopers, will not be seeking re-appointment at the forthcoming Annual General Meeting.

Signed on behalf of the Board of Directors in accordance with their resolution dated 20 April 2004.

Tan Sri Rozali bin IsmailDirector

Mat Hairi bin IsmailDirector

Kuala Lumpur



Group

2002

RM

565,105,110

14,416,902

(113,801,833)

(26,617,683)

(21,849,555)

(101,087,863)

316,165,078

(136,051,435)

0

180,113,643

(53,017,212)

0

(53,017,212)

127,096,431

28.98 sen

28.64 sen

2003

RM

578,260,034

10,106,388

(118,192,292)

(28,231,651)

(23,329,072)

(101,850,776)

316,762,631

(133,847,211)

495,638

183,411,058

(53,677,385)

(147,226)

(53,824,611)

129,586,447

29.26 sen

28.51 sen

Revenue

Other operating income

Operating and maintenance cost

Staff cost

Administrative expenses

Depreciation and amortisation expenses

Profit from operations

Finance cost

Share of results of jointly controlled entity

Profit from ordinary activities before taxation

Taxation:

- Company and subsidiaries

- Jointly controlled entity

Net profit for the financial year

Earnings per ordinary share

- basic

- diluted

The notes on pages 105 to 149 form an integral part of these financial statements.

Note

6

7

9

11

18

12

12

13(a)

13(b)


Consolidated income statementfor the financial year ended 31 December 2003

Revenue

Other operating income

Staff cost

Administrative expenses

Depreciation of property, plant and equipment

Profit from operations

Finance cost

Profit from ordinary activities before taxation

Taxation




Company income statementfor the financial year ended 31 December 2003

2002

RM

3,960,000

32,870,919

(16,931)

(1,212,296)

(88,045)

35,513,647

(32,839,198)

2,674,449

(804,303)

1,870,146

Note

6

7

9

11

12

2003

RM

3,960,000

38,275,818

0

(1,372,342)

(88,045)

40,775,431

(38,276,759)

2,498,672

(815,745)

1,682,927

Company

Group Company

Non-current assets

Property, plant and equipment

Project development expenditure

Investment in subsidiaries

Investment in an associate

Interest in jointly controlled entity

Other investments

Junior Notes A

Advances to a subsidiary

Debt Service Reserve Account

Long-term receivables

Current assets

Inventories

Trade and other receivables

Tax recoverable

Deposits, bank and cash balances

Less: Current liabilities

Trade and other payables

Hire-purchase payables

Borrowings

Net current assets

Less: Non-current liabilities

Long-term payables

Hire-purchase payables

Borrowings

Deferred taxation

Capital and reserves

Share capital

Share premium

Reserve on consolidation

Merger reserve

Retained earnings


2003

RM

1,445,903,671

246,808,585

0

0

2,544,224

12,059

0

0

81,703,519

47,778,515

1,824,750,573

978,526

1,170,049,921

1,191,859

170,163,631

1,342,383,937

118,185,945

989,974

114,937,283

234,113,202

1,108,270,735

47,103,108

2,570,564

1,495,138,659

256,195,847

1,801,008,178

1,132,013,130

451,166,000

69,527,248

92,322

(40,999,998)

652,227,558

1,132,013,130

2003

RM

8,195,480

0

123,000,105

0

2,195,812

0

219,741,915

361,368,807

0

0

714,502,119

0

7,260,778

783,842

77,903,391

85,948,011

42,004,121

0

0

42,004,121

43,943,890

0

0

219,741,915

0

219,741,915

538,704,094

451,166,000

69,527,248

0

0

18,010,846

538,704,094

2002

RM

1,528,702,848

245,838,486

0

0

0

12,662

0

0

79,618,389

106,108,547

1,960,280,932

817,277

819,850,967

1,122,603

85,316,135

907,106,982

160,596,262

977,149

86,170,443

247,743,854

659,363,128

0

3,063,230

1,439,397,047

202,878,000

1,645,338,277

974,305,783

439,278,000

53,294,348

92,322

(40,999,998)

522,641,111

974,305,783

2002

RM

8,283,525

0

123,000,105

0

0

0

196,775,846

361,368,807

0

0

689,428,283

0

17,007,741

524,387

544,693

18,076,821

1,828,991

0

0

1,828,991

16,247,830

0

0

196,775,846

0

196,775,846

508,900,267

439,278,000

53,294,348

0

0

16,327,919

508,900,267

Note

14

15

16

17

18

19

20

21

22

23

24

25

28

29

30

31

32

30

31

33

34

35


Balance sheetsas at 31 December 2003

Non-distributable Distributable

Group

At 1 January 2002

- as previously reported

- change in accounting policy

- as restated

Issue of share capital


At 31 December 2002

At 1 January 2003

- as previously reported

- change in accounting policy

- as restated



At 31 December 2003


Share capital

Nominal

value

RM

437,500,000

0

437,500,000

1,778,000

0

439,278,000

439,278,000

0

439,278,000

11,888,000

0

451,166,000

Share

premium

RM

50,858,488

0

50,858,488

2,435,860

0

53,294,348

53,294,348

0

53,294,348

16,232,900

0

69,527,248

Reserve on

consolidation

RM

92,322

0

92,322

0

0

92,322

92,322

0

92,322

0

0

92,322

Merger

reserve

RM

(40,999,998)

0

(40,999,998)

0

0

(40,999,998)

(40,999,998)

0

(40,999,998)

0

0

(40,999,998)

Retained

earnings

RM

545,773,680

(150,229,000)

395,544,680

0

127,096,431

522,641,111

725,519,111

(202,878,000)

522,641,111

0

129,586,447

652,227,558

Total

RM

993,224,492

(150,229,000)

842,995,492

4,213,860

127,096,431

974,305,783

1,177,183,783

(202,878,000)

974,305,783

28,120,900

129,586,447

1,132,013,130


Consolidated statement of changes in equityfor the financial year ended 31 December 2003

Note

36

34

36

34

Distributable

Retained

earnings

RM

14,457,773

0

1,870,146

16,327,919

16,327,919

0

1,682,927

18,010,846

Company

At 1 January 2002



At 31 December 2002

At 1 January 2003



At 31 December 2003


Note

34

34

Share capital

Nominal

value

RM

437,500,000

1,778,000

0

439,278,000

439,278,000

11,888,000

0

451,166,000

Non-

distributable

Share

premium

RM

50,858,488

2,435,860

0

53,294,348

53,294,348

16,232,900

0

69,527,248

Total

RM

502,816,261

4,213,860

1,870,146

508,900,267

508,900,267

28,120,900

1,682,927

538,704,094


Company statement of changes in equityfor the financial year ended 31 December 2003

Group Company

Operating activities

Receipts from customer

Dividends received

Payments for operating expenses

Payments to contractors

Net cash generated from operations

Interest paid

Taxation paid

Interest received

Net cash inflow from operating

activities

Investing activities

Purchase of property, plant and

equipment

Project development expenditure

Advances from/(to) subsidiaries

Advance to jointly controlled entity

Proceeds from disposal of property,

plant and equipment

Net cash (outflow)/inflow from

investing activities

Financing activities

Proceeds from borrowings

Exercise of share options pursuant

to ESOS

Repayment of borrowings

Repayment of hire-purchase payables

Net cash inflow/(outflow) from

financing activities

2003

RM

283,426,920

0

(152,138,328)

(8,219,473)

123,069,119

(103,631,425)

(428,794)

1,293,206

(102,767,013)

20,302,106

(2,836,611)

(16,598,599)

0

(2,195,812)

209,200

(21,421,822)

115,000,000

28,120,900

(55,726,548)

(1,427,140)

85,967,212

2003

RM

0

2,764,800

(1,349,640)

0

1,415,160

(13,671,875)

0

14,557,240

885,365

2,300,525

0

0

49,133,085

(2,195,812)

0

46,937,273

0

28,120,900

0

0

28,120,900

2002

RM

0

2,764,800

(1,602,471)

0

1,162,329

(13,671,875)

(18,914)

13,704,908

14,119

1,176,448

0

0

(5,861,651)

0

0

(5,861,651)

0

4,213,860

0

0

4,213,860

2002

RM

352,176,593

0

(140,930,550)

(1,508,674)

209,737,369

(99,669,941)

(1,905,450)

1,060,183

(100,515,208)

109,222,161

(5,872,242)

(5,110,835)

0

0

622,311

(10,360,766)

0

4,213,860

(78,000,000)

(1,719,744)

(75,505,884)


Cash flow statementsfor the financial year ended 31 December 2003

Note

37

2003

RM

84,847,496

85,316,135

(53,408,698)

(88,090,196)

28,664,737

88,451,787

0

(88,090,196)

361,591

81,711,844

(53,408,698)

28,664,737

2003

RM

77,358,698

544,693

0

(74,790,195)

3,113,196

74,790,195

0

(74,790,195)

0

3,113,196

0

3,113,196

2002

RM

(471,343)

1,016,036

0

0

544,693

0

0

0

0

544,693

0

544,693

2002

RM

23,355,511

61,960,624

(55,726,548)

0

29,589,587

56,580,289

(55,726,548)

0

853,741

28,735,846

0

29,589,587

Group Company

Net increase/(decrease) in cash and

cash equivalents

Cash and cash equivalents at

beginning of the financial year

Transfer to designated account for

repayment of Term Loan (DSS II)

Deposits for Standby Letters of Credit

and Ad-hoc Bank Guarantees

Cash and cash equivalents at

end of the financial year

Cash and cash equivalents comprise:

Deposits with licensed banks

Less: Deposits held in a designated

account for repayment of

Term Loan (DSS II)

Deposits for Standby Letters

of Credit and Ad-hoc Bank

Guarantees

Bank and cash balances

Less:Transfer to designated account

for repayment of Term

Loan (DSS II)


Note

28

28

28

28

28


Cash flow statementsfor the financial year ended 31 December 2003 (continued)


Notes to the financial statementsfor the financial year ended 31 December 2003

1 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 16 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 Malaysia Securities Exchange Berhad.

The address of the registered office of the Company is as follows:

Suite 1401 - 1406, 14th Floor

Plaza See Hoy Chan

Jalan Raja Chulan

50200 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.

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.


2 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) under the Privatisation cum Concession Agreement (‘PCCA’) dated 22 September 1994, to take over, operate,

maintain, manage, rehabilitate and refurbish existing water treatment plants located in Selangor and Wilayah

Persekutuan of Kuala Lumpur for a period of 26 years ending on 31 December 2020; and

(ii) under the Construction cum Operation Agreement (‘CCOA’) dated 22 March 1995, 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 2020.

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 1998. 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, 1965.

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 2003 are as follows:

• MASB Standard 25 “Income Taxes”

• MASB Standard 27 “Borrowing Costs”

• MASB Standard 29 “Employee Benefits”

With the exception of MASB Standard 25 (see Note 36), there are no changes in accounting policy that affect net profit or

shareholders’ equity as the Group and the Company were already following the recognition and measurement principles in

these standards. Where applicable, comparatives have been reclassified or extended to take into account the requirements

of new applicable approved accounting standards adopted in the financial statements.

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.

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”.


5 Summary of significant accounting policies (continued)

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, 1965.

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.

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 an unincorporated joint venture over which there is contractually agreed sharing of

control by the Group with third parties. The Group’s interest in the 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 interest 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 the 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.

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:

Over the remaining period of the concession

Water treatment plants 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.



(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) Income taxes

Current tax expense is determined according to the tax laws of each jurisdiction in which the Group and the

Company operates and include all taxes based upon the taxable profits, including withholding taxes payable by a

foreign joint venture on distributions of retained earnings to the Company, and real property gains taxes payable on

disposal of properties.

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts

attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements.

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which

the deductible temporary differences or unutilised tax losses can be utilised.

Deferred tax is recognised on temporary differences arising on investments in subsidiaries, an associate and an interest

in a jointly controlled entity, except where the timing of the reversal of the temporary differences can be controlled

and it is probable that the temporary differences will not reverse in the foreseeable future.

Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred tax.

(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) Share capital

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised as liability when declared.

Proposed final dividends on ordinary shares are accrued as liabilities only after approval by the shareholders.

(r) Employee benefits

(i) Short-term employee benefits

Wages, salaries, paid annual leave and medical leave, bonuses and non-monetary benefits are accrued in the

period in which the associated services are rendered by employees of the Group and of the Company.



(r) Employee benefits (continued)

(ii) Defined contribution plan

The Group’s and the Company’s contribution to defined contribution plans are charged to the income statement

in the financial year to which they relate. Once the contributions have been paid, the Company has no future

obligations.

(s) 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.

(t) Foreign currency

Foreign currency transactions are converted into Ringgit Malaysia at exchange rates prevailing at the transaction

dates, unless hedged by forward foreign exchange contracts, in which case the rates specified in such forward

contracts are used. Monetary assets and liabilities in foreign currencies are translated at exchange rates prevailing at

the balance sheet date, unless hedged by forward foreign exchange contracts, in which case the rates specified in

such forward contracts are used. All exchange differences are dealt with through the income statement.

The principal closing rate used in translation of foreign currency amounts is as follows:

Foreign currency 31.12.2003 31.12.2002

100 Indian Rupee RM8.345 N/A



(u) 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 financial liabilities with a maturity of less than one (1) year are assumed

to approximate their fair values.

6 Revenue

Group Company

2003 2002 2003 2002

RM RM RM RM

Invoiced value of bulk quantity of treated

water supplied to the State Government

of Selangor 578,260,034 565,105,110 0 0

Gross dividend income 0 0 3,840,000 3,840,000

Management fees 0 0 120,000 120,000

578,260,034 565,105,110 3,960,000 3,960,000



7 Staff cost

Group Company

2003 2002 2003 2002

RM RM RM RM

Wages, salaries and bonus 20,767,687 19,290,613 0 14,331

Defined contribution retirement plan 2,770,031 2,575,335 0 2,600

Other employee benefits 4,693,933 4,751,735 0 0

28,231,651 26,617,683 0 16,931

The number of persons, including Executive Directors, employed by the Group and Company at the end of the financial year

was 629 (2002: 616) and Nil (2002: Nil) respectively.

The Group contributes to the Employees Provident Fund, the national defined contribution plan. Once the contributions

have been paid, the Group has no further payment obligations.

8 Directors’ Remuneration

The Directors of the Company in office during the financial year were as follows:

Executive Directors


Ruslan bin Hassan


Lee Miang Koi

Non-Executive Directors

Abdul Majid bin Abdul Karim

Tan Sri Dato’ Hari Narayanan a/l Govindasamy

Tan Sri Dato’ Seri Dr.Ting Chew Peh

The aggregate amount of emoluments receivable by Directors of the Company during the financial year was as follows:

Group Company

2003 2002 2003 2002

RM RM RM RM

Executive Directors:

- Wages, salaries and bonus 2,405,040 2,564,660 0 0

- Defined contribution retirement plan 381,240 405,180 0 0

- Estimated money value of

benefits-in-kind 103,800 223,800 0 0

- Other employee benefits 687,360 704,031 0 0

Non-Executive Directors:

- Meeting allowances 118,000 95,000 118,000 95,000

- Leave passage 0 165,426 0 165,426

3,695,440 4,158,097 118,000 260,426



9 Profit from operations

Group Company

2003 2002 2003 2002

RM RM RM RM

The following items have been charged/(credited) in

arriving at profit from operations:

Depreciation of property, plant and equipment 4,147,087 4,142,885 88,045 88,045

Amortisation of water treatment plants 82,075,188 81,946,473 0 0

Amortisation of project development expenditure 15,628,500 14,999,624 0 0

Rental of premises 2,622,652 2,413,310 0 0

Hire of transport and equipment 213,522 165,813 0 0

Accretion of discount on bonds and notes 24,297,347 20,401,865 22,966,069 19,166,011

Amortisation of debt issuance expenses 937,653 836,468 0 0

Directors’ remuneration:

- Directors of the Company

• other emoluments 118,000 260,426 118,000 260,426

- Directors of subsidiaries

• other emoluments 4,016,517 3,888,037 0 0

Auditors' remuneration 90,000 90,000 15,000 15,000

Allowance for diminution in value of other investments 603 32,388 0 0

Interest income from deferred payment contract (6,742,824) (8,775,680) 0 0

Interest income on deposits (2,724,083) (3,434,301) (1,637,704) (33,033)

Interest income on advances to a subsidiary 0 0 (13,671,875) (13,671,875)

Income from discount on notes 0 0 (22,966,069) (19,166,011)

Gain on disposal of property, plant and equipment (209,200) (510,404) 0 0



10 Auditor’s remuneration

Group Company

2003 2002 2003 2002

RM RM RM RM

PricewaterhouseCoopers Malaysian Firm

Statutory audit (Note 9) 75,000 75,000 15,000 15,000

Fee for other services:

- Tax advisory and compliance work 25,662 68,350 5,800 5,900

- Review of non-financial reporting framework 6,000 0 6,000 0

- Other non-audit related service 2,000 2,000 0 0

108,662 145,350 26,800 20,900

Group Company

2003 2002 2003 2002

RM RM RM RM

Other accounting firms in Malaysia

Statutory audit (Note 9) 15,000 15,000 0 0

Fee for other services:

- Tax advisory and compliance work 3,150 3,150 0 0

18,150 18,150 0 0

11 Finance cost

Group Company

2003 2002 2003 2002

RM RM RM RM

Finance cost comprises:

Financing cost on borrowings

under Islamic banking principles 79,037,283 79,136,153 0 0

Financing cost on conventional borrowings 54,634,117 56,152,340 36,637,944 32,837,886

Interest expense on hire-purchase 360,811 369,680 0 0

Bank charges (185,000) 393,262 1,111 1,312

Other interest expense 0 0 1,637,704 0

133,847,211 136,051,435 38,276,759 32,839,198



12 Taxation

The taxation charge in the income statements represents:

Group Company

2003 2002 2003 2002

RM RM RM RM

Current tax:

- Malaysian tax 359,538 368,212 815,745 804,303

- Foreign tax 147,226 0 0 0

Deferred tax (Note 33) 53,317,847 52,649,000 0 0

53,824,611 53,017,212 815,745 804,303

Current tax:

- Current financial year 619,250 606,190 815,745 804,303

- Overaccrual in prior year (112,486) (237,978) 0 0

Deferred tax:

- Origination and reversal of temporary differences 53,317,847 52,649,000 0 0

53,824,611 53,017,212 815,745 804,303

The explanation of the relationship between taxation and profit from ordinary activities before taxation is as follows:

(a) Numerical reconciliation between taxation and the product of accounting profit multiplied by the Malaysian tax rate:

Group Company

2003 2002 2003 2002

RM RM RM RM

Profit from ordinary activities before taxation 183,411,058 180,113,643 2,498,672 2,674,449

Tax calculated at the Malaysian tax rate of

28% (2002: 28%) 51,355,096 50,431,820 699,628 748,846

Tax effects of:

- Different tax rates in another country 8,448 0 0 0

- Expenses not deductible for tax purposes 2,480,995 3,259,568 116,117 55,457

- Utilisation of previously unutilised tax allowances (132,180) (633,208) 0 0

- Overaccrual in prior year (112,486) (237,978) 0 0

- Permanent tax losses from certain subsidiaries 117,657 197,010 0 0

- Deferred tax assets not recognised 107,081 0 0 0

Taxation 53,824,611 53,017,212 815,745 804,303



12 Taxation (continued)

(b) Numerical reconciliation between the average effective tax rate and the Malaysian tax rate:

Group Company

2003 2002 2003 2002

% % % %

Malaysian tax rate 28.00 28.00 28.00 28.00

Tax effects of:

- Different tax rates in another country 0.00 0.00 0.00 0.00

- Expenses not deductible for tax purposes 1.35 1.81 4.65 2.07

- Utilisation of previously unutilised tax allowances (0.07) (0.35) 0.00 0.00

- Overaccrual in prior year (0.06) (0.13) 0.00 0.00

- Permanent tax losses from certain subsidiaries 0.07 0.11 0.00 0.00

- Deferred tax assets not recognised 0.06 0.00 0.00 0.00

Average effective tax rate 29.35 29.44 32.65 30.07

The tax charge for the Company is principally in respect of interest income and dividend income received from its subsidiary.

Group Company

2003 2002 2003 2002

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 10,962,570 9,422,994 10,962,570 9,422,994

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 129,918 552,587 0 0

Tax losses for which the related tax credit has not

been recognised in the financial statements 608,075 587,074 127,822 127,822



13 Earnings per ordinary share

(a) Basic earnings per share

The basic earnings per ordinary share of the Group for the financial year of 29.26 sen (2002: 28.98 sen) is calculated

by dividing the net profit for the financial year by the weighted average number of ordinary shares in issue during the

financial year.

2003 2002

RM RM


Weighted average number of ordinary shares in issue 442,944,578 438,543,449

Basic earnings per share 29.26 sen 28.98 sen

(b) Diluted earnings per share

The diluted earnings per ordinary share of the Group for the financial year of 28.51 sen (2002: 28.64 sen) is calculated by

dividing the net profit for the financial year 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 31(iv)), and options granted to the eligible employees pursuant to the ESOS (Note 34).

In assessing the dilution in earnings per share arising from the issue of both warrants and 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 options.

2003 2002

RM RM


Weighted average number of ordinary shares in issue 442,944,578 438,543,449

Adjustment for :

- warrants 6,862,837 2,108,483

- options 4,791,538 3,082,752

Weighted average number of ordinary shares for diluted earnings per share 454,598,953 443,734,684

Diluted earnings per share 28.51 sen 28.64 sen

Comparative earnings per share information has been restated to take into account the effect on the net profit for the

financial year arising from the change in accounting policy with respect to deferred tax (Note 36).






Long-term

leasehold

land

RM

8,716,411

0

0

8,716,411

432,886

88,045

0

520,931

8,195,480

8,716,411

0

0

8,716,411

344,841

88,045

0

432,886

8,283,525

Water

treatment

plants

RM

1,749,438,913

1,699,526

0

1,751,138,439

242,775,290

82,075,188

0

324,850,478

1,426,287,961

1,746,704,712

2,734,201

0

1,749,438,913

160,828,817

81,946,473

0

242,775,290

1,506,663,623

Plant

and

equipment

RM

7,870,045

0

0

7,870,045

1,824,255

793,531

0

2,617,786

5,252,259

7,820,490

79,555

(30,000)

7,870,045

977,505

852,000

(5,250)

1,824,255

6,045,790

Office

equipment

RM

2,379,788

200,948

0

2,580,736

1,863,524

193,953

0

2,057,477

523,259

2,097,747

282,041

0

2,379,788

1,643,479

220,045

0

1,863,524

516,264

Furniture

and

fittings

RM

3,229,378

195,223

0

3,424,601

3,118,438

81,287

0

3,199,725

224,876

3,174,286

55,092

0

3,229,378

3,026,825

91,613

0

3,118,438

110,940

Motor

vehicles

RM

11,995,045

1,044,814

(751,584)

12,288,275

7,563,409

1,571,281

(751,584)

8,383,106

3,905,169

11,191,726

3,152,485

(2,349,166)

11,995,045

8,093,625

1,737,122

(2,267,338)

7,563,409

4,431,636

Computers

and

software

RM

6,377,565

198,487

0

6,576,052

4,767,768

952,148

0

5,719,916

856,136

5,148,602

1,228,963

0

6,377,565

3,849,735

918,033

0

4,767,768

1,609,797

Renovation

RM

6,149,697

84,100

0

6,233,797

5,108,424

466,842

0

5,575,266

658,531

5,208,551

941,146

0

6,149,697

4,872,397

236,027

0

5,108,424

1,041,273

Total

RM

1,796,156,842

3,423,098

(751,584)

1,798,828,356

267,453,994

86,222,275

(751,584)

352,924,685

1,445,903,671

1,790,062,525

8,473,483

(2,379,166)

1,796,156,842

183,637,224

86,089,358

(2,272,588)

267,453,994

1,528,702,848

14 Property, plant and equipment

Group

2003

Cost

At 1 January

Additions

Disposals

At 31 December

Accumulated depreciation

At 1 January

Charge for the financial year

Released on disposals

At 31 December

Net book value

At 31 December

2002

Cost

At 1 January

Additions

Disposals

At 31 December

Accumulated depreciation

At 1 January

Charge for the financial year

Released on disposals

At 31 December

Net book value

At 31 December

14 Property, plant and equipment (continued)

Company Long-termleasehold land

RM2003CostAt 1 January/31 December 8,716,411Accumulated depreciationAt 1 January 432,886Charge for the financial year 88,045At 31 December 520,931Net book valueAt 31 December 8,195,480

2002CostAt 1 January/31 December 8,716,411

Accumulated depreciationAt 1 January 344,841

Charge for the financial year 88,045

At 31 December 432,886

Net book valueAt 31 December 8,283,525

At 31 December 2003, the unexpired period of lease of the long-term leasehold land is 96 years.

Included in the cost of water treatment plants are interest and financing cost on long-term borrowings capitalised amounting

to RM286,075,263 (2002: RM286,075,263).

Property, plant and equipment of a wholly-owned subsidiary, PNSB, with a total net book value of RM1,437,699,433 (2002:

RM1,520,384,302), have been charged as security for long-term borrowings (Note 31(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.

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:

2003 2002

Motor vehicles RM RM

Cost 6,667,100 6,843,637

Accumulated depreciation (3,036,444) (2,690,524)

Net book value 3,630,656 4,153,113



15 Project development expenditureGroup

2003 2002RM RM

CostAt 1 January 315,714,540 310,603,705Additions 16,598,599 5,110,835

332,313,139 315,714,540Accumulated amortisation (85,504,554) (69,876,054)At 31 December 246,808,585 245,838,486

Included in project development expenditure is concession acquisition cost of RM14,847,596 (2002: RM14,847,596) with anunamortised balance of RM10,185,906 (2002: RM10,785,240) at the end of the financial year.

16 Investment in subsidiaries

Company2003 2002

RM RMUnquoted shares in Malaysia, at cost 123,000,105 123,000,105

The details of the subsidiaries are as follows:

Name of company

Puncak Niaga (M) Sdn. Bhd. #

Held through 100% ownership byPuncak Niaga (M) Sdn. Bhd.- Ideal Water Resources Sdn. Bhd.*

- Unggul Raya (M) Sdn. Bhd.*

Puncak Research Centre Sdn. Bhd.*Puncak Seri (M) Sdn. Bhd.*NS Water System Sdn. Bhd.*

# subsidiary consolidated using the merger accounting method

* not audited by PricewaterhouseCoopers, Malaysia

Principal activities

Operation, maintenance,management, constructionand undertaking therehabilitation andrefurbishment of watertreatment facilities

Operation, management,maintenance andundertaking the rehabilitationand refurbishment of watertreatment plants

Operation, management,maintenance and monitoringthe operation of dams

DormantDormantDormant

Country ofincorporation

Malaysia

Malaysia

Malaysia

MalaysiaMalaysiaMalaysia

Effective equity interest held by the Group

2003 2002% %

100 100

100 100

100 100

100 100100 100100 100



17 Investment in an associate

Group Company2003 2002 2003 2002

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) 0 0

0 0 0 0

The Group has excluded its share of cumulative loss after taxation of the associate amounting to RM20,316 (2002:

RM18,483) 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.

The details of the associate are as follows:

Name of Company Country of Effective equity interest incorporation held by the Group Principal activities

2003 2002

% %

NS Water Management Sdn. Bhd. Malaysia 40 40 Dormant

18 Interest in a jointly controlled entity

Group Company2003 2002 2003 2002

RM RM RM RM

Advances to a jointly controlled entity 2,195,812 0 2,195,812 0

Share of net assets of the jointly controlled entity 348,412 0 0 0

2,544,224 0 2,195,812 0

The Group and Company have a 70% interest in an unincorporated jointly controlled entity in India, PNHB-Lanco-KHEC

Joint Venture, which is presently in the construction industry.

The Group’s share of the assets and liabilities of the jointly controlled entity is as follows:

2003 2002

RM RM

Non-current assets 39,649 0

Current assets 46,471,716 0

Current liabilities (46,162,953) 0

Net assets 348,412 0



18 Investment in a jointly controlled entity (continued)

The Group’s share of the revenue and expenses of the jointly controlled entity is as follows:

Group

2003 2002

RM RM

Revenue 11,188,376 0

Expenses excluding taxation (10,692,738) 0

Profit from ordinary activities before taxation 495,638 0

Taxation (147,226) 0

Profit from ordinary activities after taxation 348,412 0

19 Other investments

Group

2003 2002

RM RM

Quoted shares in Malaysia, at cost 471,139 471,139

Allowance for diminution in value of quoted shares (459,080) (458,477)

12,059 12,662

Market value of quoted shares 12,059 12,662

The market value of these investments at the balance sheet date is equivalent to the fair value.

20 Junior Notes A

Company

2003 2002

RM RM

Nominal value 546,875,000 546,875,000

Less : Yield to maturity (370,781,250) (370,781,250)

At cost 176,093,750 176,093,750

Cumulation of accretion of yield to maturity 43,648,165 20,682,096

219,741,915 196,775,846



20 Junior Notes A (continued)

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 RM168,000,000 of PNSB’s Al-Murabahah Commercial

Papers (‘MCPs’) with the remaining balance utilised for its working capital purposes.

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 16.93% (2002: 16.93%) per annum.

21 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 (2002: RM345,807,471) (Note 43) 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.



22 Debt Service Reserve Account

Under the terms of agreement for the issue of the RM1,020,000,000 10 years Al-Bai’ Bithaman Ajil Islamic Debt Securities

primary bonds together with non-detachable secondary bonds (‘BaIDS’) and RM350,000,000 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 31(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

31(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 3.00%

(2002: 2.97%) per annum.

23 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 2001. 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.

Group

2003 2002

RM RM

Deferred repayment periods are as follows:

Amount receivable within 12 months (included in trade receivables - Note 25) 83,596,976 59,338,454

Amount receivable after 12 months 47,778,515 106,108,547

131,375,491 165,447,001

Included in amount receivable after twelve (12) months is retention sum on contract amounting to RM Nil (2002:

RM8,314,334).



23 Long-term receivables (continued)

The weighted average effective interest rate per annum appplicable 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

Fair value interest rate per annum

2003 2002 2003 2002

RM RM % %

Group

Long-term receivables (Note 43) 130,479,476 162,742,451 5.00 5.00

The carrying amount of these receivables at the balance sheet date were not reduced to their estimated fair value as above,

as these receivables are receivable from the State Government of Selangor and the Directors are of the opinion that the

amounts are recoverable in full.

24 Inventories

Group

2003 2002

RM RM

Water treatment chemicals, at cost 978,526 817,277

25 Trade and other receivables

Group Company

2003 2002 2003 2002

RM RM RM RM

Trade receivables 1,141,787,178 780,816,547 0 0

Amount due from customer

on construction contract (Note 26) 7,662,325 0 0 0

Advances and loans to staff 1,104,311 1,745,350 0 0

Amounts due from subsidiaries

(Note 27) 0 0 1,590,731 11,713,479

Sundry receivables 15,208,685 34,044,584 5,669,547 5,194,262

Deposits 2,029,850 2,125,244 500 100,000

Prepayments 2,257,572 1,119,242 0 0

1,170,049,921 819,850,967 7,260,778 17,007,741



25 Trade and other receivables (continued)

Included in trade receivables is RM83,596,976 (2002: RM59,338,454) representing unpaid and current portion of deferred

payments on contract due within twelve (12) months, pursuant to the DSS II contract (Note 23).

Included in sundry receivables of the Group is RM8,442,598 (2002: RM8,442,598) 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 (2002: 30 days).

26 Construction contracts

Group2003 2002

RM RM

Aggregate costs incurred to date 7,662,325 0

Amount due from customer on construction contract (Note 25) 7,662,325 0

The construction contract is undertaken by a subsidiary and is in relation to the turnkey sub-contract for planning, design,

construction, supervision, testing and commissioning of a water supply scheme in the State of Sabah.

The construction contract is in its initial stage and the subsidiary has not recognised any profits from the construction

contract nor issued any progress billings as at the balance sheet date.

27 Amounts due from/(to) subsidiaries

The amounts due from/(to) subsidiaries are interest free, unsecured and payable at call.

28 Deposits, bank and cash balances

Group Company

2003 2002 2003 2002

RM RM RM RM

Deposits with licensed banks 88,451,787 56,580,289 74,790,195 0

Bank and cash balances 81,711,844 28,735,846 3,113,196 544,693

170,163,631 85,316,135 77,903,391 544,693

Included in deposits with licensed banks, for the Group, are restricted monies amounting to RM53,408,698 (2002:

RM55,726,548) representing deposits in a designated account for the repayment of the Term Loan (DSS II) (Note 31 (ii))

and RM88,090,196 (2002: RM Nil) representing deposits for Standby Letters of Credit (‘SBLC’) and Ad-hoc Bank Guarantees.

The deposit for SBLC placed by the Company amounted to RM74,790,195 (2002: RM Nil)

The weighted average effective interest rate applicable to deposits with licensed banks at the balance sheet date was 2.83%

(2002: 2.53%) per annum.

Deposits of the Group have an average maturity of 179 days (2002: 14 days).



29 Trade and other payables

Group Company2003 2002 2003 2002

RM RM RM RM

Trade payables 20,614,381 72,466,155 0 0Amounts due to contractors 271,708 3,789,973 0 0Amount due to a subsidiary (Note 27) 0 0 40,242,189 0Finance cost payable 73,683,162 65,849,524 1,535,745 1,535,745Trade accruals 23,599,895 18,455,888 226,187 293,246Retention sum 0 17,923 0 0Amount owing to Directors 16,799 16,799 0 0

118,185,945 160,596,262 42,004,121 1,828,991

Included in trade payables and trade accruals are RM18,464,238 (2002: RM70,897,978) and RM21,000 (2002: RM81,000)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 (2002: 30 days). Notwithstanding, the Group ispaying its major trade payables on back-to-back terms based on collections from its sole customer, i.e. the StateGovernment of Selangor.

30 Hire-purchase payables

Group2003 2002

RM RMAnalysis of hire-purchase payables:

Payable within one year 1,250,640 1,254,032Payable between one and two years 1,044,608 1,073,052Payable between two and five years 1,835,935 2,212,759Payable after five years 6,559 300,582

4,137,742 4,840,425Less: Financing charges (577,204) (800,046)

3,560,538 4,040,379

Present value of hire-purchase payables:Payable within one year 989,974 977,149Payable between one and two years 871,892 952,103Payable between two and five years 1,692,175 1,998,415Payable after five years 6,497 112,712

3,560,538 4,040,379

Representing hire-purchase payables, net of interest-in-suspense:Payable within 12 months 989,974 977,149Payable after 12 months 2,570,564 3,063,230

3,560,538 4,040,379






30 Hire-purchase payables (continued)

The weighted average effective interest rate per annum applicable to hire-purchase payables at the balance sheet date andthe fair value of hire-purchase payables as at balance sheet date were as follows:

Weighted average effectiveFair value interest rate per annum

2003 2002 2003 2002RM RM % %

GroupHire-purchase payables (Note 43) 3,666,286 4,306,549 5.26 5.01

31 Borrowings

Group Company2003 2002 2003 2002

RM RM RM RM

CurrentSecured:Government Support Loan 36,532,674 30,443,895 0 0Term Loan (DSS 11) 53,404,609 55,726,548 0 0

89,937,283 86,170,443 0 0Unsecured:Revolving Credit 25,000,000 0 0 0

114,937,283 86,170,443 0 0Long-termSecured:Government Support Loan 85,242,905 91,331,684 0 0Term Loan (DSS 11) 62,805,674 116,210,283 0 0Al-Bai’ Bithaman Ajil Bonds 1,010,508,328 1,008,601,662 0 0Al-Murabahah Commercial Papers/Al-Murabahah Medium Term Notes 122,000,000 32,000,000 0 0

Redeemable Unconvertible JuniorNotes 214,581,752 191,253,418 219,741,915 196,775,846

1,495,138,659 1,439,397,047 219,741,915 196,775,846TotalSecured:Government Support Loan 121,775,579 121,775,579 0 0Term Loan (DSS 11) 116,210,283 171,936,831 0 0Al-Bai’ Bithaman Ajil Bonds 1,010,508,328 1,008,601,662 0 0Al-Murabahah Commercial Papers/Al-Murabahah Medium Term Notes 122,000,000 32,000,000 0 0

Redeemable Unconvertible JuniorNotes 214,581,752 191,253,418 219,741,915 196,775,846

1,585,075,942 1,525,567,490 219,741,915 196,775,846Unsecured:Revolving Credit 25,000,000 0 0 0

1,610,075,942 1,525,567,490 219,741,915 196,775,846

All the long-term borrowings carry fixed interest rates except for the Al-Murabahah Commercial Papers.

31 Borrowings (continued)

Analysis of borrowings:

Maturity profileTotal

carryingamount < 1 year 1 - 2 years 2 - 5 years >5 years

RM RM RM RM RMGroupAt 31 December 2003Secured:Government Support Loan 121,775,579 36,532,674 6,088,779 18,266,337 60,887,789Term Loan (DSS II) 116,210,283 53,404,609 51,082,669 11,723,005 0Al-Bai’ Bithaman Ajil Bonds 1,010,508,328 0 180,000,000 540,000,000 290,508,328Al-Murabahah Commercial

Papers/Al-Murabahah

Medium Term Notes 122,000,000 0 122,000,000 0 0Redeemable Unconvertible

Junior Notes 214,581,752 0 0 109,375,000 105,206,7521,585,075,942 89,937,283 359,171,448 679,364,342 456,602,869

Unsecured:Revolving Credit 25,000,000 25,000,000 0 0 0

1,610,075,942 114,937,283 359,171,448 679,364,342 456,602,869

At 31 December 2002Secured:Government Support Loan 121,775,579 30,443,895 6,088,779 18,266,337 66,976,568

Term Loan (DSS II) 171,936,831 55,726,548 53,404,609 62,805,674 0

Al-Bai’ Bithaman Ajil Bonds 1,008,601,662 0 0 540,000,000 468,601,662

Al-Murabahah Commercial

Papers/Al-Murabahah

Medium Term Notes 32,000,000 0 0 32,000,000 0

Redeemable Unconvertible

Junior Notes 191,253,418 0 0 54,687,500 136,565,918

1,525,567,490 86,170,443 59,493,388 707,759,511 672,144,148

CompanyAt 31 December 2003Secured:Redeemable Unconvertible

Junior Notes 219,741,915 0 0 109,375,000 110,366,915

At 31 December 2002Secured:Redeemable Unconvertible

Junior Notes 196,775,846 0 0 54,687,500 142,088,346



(i) Government Support Loan

The Government Support Loan which was obtained from the Federal Government in 1998 to finance the construction ofthe Wangsa Maju Water Treatment Plant and its related facilities, is repayable in equal annual instalments over a period oftwenty (20) years commencing on 11 April 1999. It is secured on all moneys standing to the credit of the Special ProjectAccount. The interest rate is fixed at 8% (2002: 8%) per annum on the outstanding balance of the loan amount.

PNSB has been negotiating with the Federal Government to restructure the loan in view of the lower bulk supply rateoffered by the State Government of Selangor. On 24 December 2003, the Federal Government has, in principle, agreed torestructure the Government Support Loan by lowering the interest rate to 3% per annum and accordingly revises therepayment schedule of the loan. Notwithstanding, the restructuring is conditional upon the payment of RM30,000,000 as thefirst principal repayment, upon PNSB being paid by the Federal Government in conjunction with the privatisation of thewater supply services in the State of Selangor and the Federal Territories of Kuala Lumpur and Putrajaya to Syarikat BekalanAir Selangor Sdn. Bhd. (‘SYABAS’).

(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 2003. Thesubsequent repayments will be on an annual basis until year 2006. The Term Loan (DSS II) is secured via the assignmentsof 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 at7.60% (2002: 7.60%) per annum.



The Al-Bai’ Bithaman Ajils Bonds and Redeemable Unconvertible Junior Notes are further analysed as follows:

Group Group Company

Al-Bai' Bithaman Ajil Bonds Redeemable Unconvertible Redeemable Unconvertible

Junior Notes Junior Notes

2003 2002 2003 2002 2003 2002

RM RM RM RM RM RM

Nominal value 1,020,000,000 1,020,000,000 546,875,000 546,875,000 546,875,000 546,875,000

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 1,009,467,307 176,093,750 176,093,750 176,093,750 176,093,750

Less: Debt issuance expenses (4,552,312) (4,552,312) (5,848,665) (5,848,665) 0 0

Net proceeds 1,004,914,995 1,004,914,995 170,245,085 170,245,085 176,093,750 176,093,750

Cumulation of accretion of yield

to maturity 3,905,392 2,574,114 43,648,165 20,682,096 43,648,165 20,682,096

Cumulation of amortisation of

debt issuance expenses 1,687,941 1,112,553 688,502 326,237 0 0

1,010,508,328 1,008,601,662 214,581,752 191,253,418 219,741,915 196,775,846



(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 andvarious parties to raise RM1,020,000,000 10-Year Al-Bai’ Bithaman Ajil Islamic Debt Securities primary bonds togetherwith non-detachable secondary bonds (‘BaIDS’) and RM350,000,000 Al-Murabahah Commercial Papers (‘MCPs’)/Al-Murabahah Medium Term Notes (‘MMTNs’) Issuance Facility. Subsequently, on 28 October 2000, PNSB issued theentire BaIDS and RM120,000,000 of MCPs, the proceeds of which were utilised mainly to repay the RevolvingUnderwriting Facility of RM800,000,000 and Term Loan of RM300,000,000.

The BaIDS primary bonds will mature beginning 27 October 2005 and on an annual basis, for each series issued. Thenon-detachable BaIDS secondary bonds are redeemable semi-annually from the date the primary bonds were issued,at rates of 7% to 8% (2002: 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 2005. The tender ratesranged between 2.97% and 4.35% (2002: 2.80% and 3.20%) 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 DSRAequivalent to twelve (12) months projected payment obligations under the BaIDS and MCPs/MMTNs that areoutstanding at any point in time. PNSB is not entitled to withdraw any money from the DSRA without prior consentof 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 concessionagreements, construction contracts and project agreements undertaken by PNSB.

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 paymentobligations under the BaIDS and MCPs/MMTNs for a period of twelve (12) months commencing from the dateon 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 annuallycommencing 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 UnconvertibleJunior Notes (‘RUN’) with 109,374,869 free detachable warrants at an issue price of RM0.322 per RM1.00 nominalvalue of RUN on the basis of RM5.00 nominal value of RUN with one (1) free warrant for every four (4) existingordinary shares of RM1.00 each held in the Company. The RUN was offered to the entitled shareholders and isconstituted by a Trust Deed dated 5 September 2001. The RM176,000,000 proceeds from the RUN issue wasimmediately utilised to subscribe for the JNA issued by PNSB, the Company's wholly-owned subsidiary. PNSBsubsequently, utilised the proceeds to repay RM168,000,000 of its MCPs with the remaining balance utilised for itsworking capital purposes.





(iv) Redeemable Unconvertible Junior Notes (continued)

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 Malaysia Securities Exchange Berhad.

(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.

(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 2001.

(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

2003 2002

% %

GroupGovernment Support Loan 8.00 8.00

Term Loan (DSS II) 7.60 7.60

Revolving Credit 3.61 0

Group and CompanyRedeemable Unconvertible Junior Notes 16.93 16.93

(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:

Fair valueGroup 2003 2002

RM RM

Government Support Loan (Note 43) 119,520,476 120,051,923

Term Loan (DSS II) (Note 43) 115,045,439 171,451,870

32 Long-term payables

The long-term payables represent an amount owing by PNSB to an Operation and Maintenance Sub-Contractor,

Mandai Sari Sdn. Bhd. (‘MSSB’), in respect of the terms stipulated in the Deed of Settlement dated 23 October 2003

(‘the Deed’) entered into by PNSB and CGE Utilities (M) Sdn. Bhd., the Operation and Maintenance Sub-Contractor

to MSSB (Note 44(c)).

The long-term payables are unsecured, interest free and are not repayable within the next twelve (12) months.

Pursuant to the terms of the Deed, the settlement of the amount is to be made over a period of thirty (30) months

commencing October 2003. The amount payable at the end of the financial year are as follows:

Group2003 2002

RM RM

Amount payable within 12 months (included in trade payables - Note 29) 18,464,238 70,897,978

Amount payable after 12 months 47,103,108 0

65,567,346 70,897,978



32 Long-term payables (continued)

The fair value of the long-term payables at the balance sheet date was as follows:

Fair value2003 2002

RM RM

GroupLong-term payables (Note 43) 58,532,387 0

33 Deferred taxation

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off deferred tax assets against

deferred tax liabilities and when the deferred taxes relate to the same tax authority.

Group2003 2002

RM RM

Deferred tax liabilities (subject to income tax) (256,195,847) (202,878,000)

Analysis of deferred tax liabilitiesAt 1 January (202,878,000) (150,229,000)

(Charged)/credited to income statement (Note 12)

- property, plant and equipment (52,813,855) (55,261,063)

- project development expenditure (439,441) 2,601,047

- interest receivable (64,719) 1,947

- quoted investment 168 9,069

At 31 December (256,195,847) (202,878,000)

Subject to income tax

Deferred tax assets (before offsetting)Property, plant and equipment 70,734,303 91,154,837

Tax losses 68,929,316 68,929,316

Quoted investments 128,542 128,374

139,792,161 160,212,527

Offsetting (139,792,161) (160,212,527)

Deferred tax assets (after offsetting) 0 0

Deferred tax liabilities (before offsetting)Property, plant and equipment (329,610,160) (297,216,839)

Project development expenditure (66,254,350) (65,814,909)

Interest receivable (123,498) (58,779)

(395,988,008) (363,090,527)

Offsetting 139,792,161 160,212,527

Deferred tax liabilities (after offsetting) (256,195,847) (202,878,000)



33 Deferred taxation (continued)

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit

through the future taxable profits is probable. The Directors are of the opinion that the Group will be able to reduce tax

payable in view of future profits and benefits accruing to the Group from the existing water concessions which have been

awarded to the Group (Note 3) to which the deferred tax asset relates. The tax losses have no expiry date.

The amount of deductible temporary differences and unutilised tax losses of the Company (both of which have no expiry

date) for which no deferred tax asset is recognised in the balance sheet are as follows:

Company2003 2002

RM RM

Deductible temporary differences 5,600 5,600

Tax losses 127,822 127,822

34 Share capital

Group Company2003 2002 2003 2002

RM RM RM RM

Ordinary share of RM1.00 each

Authorised:At 1 January/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 439,278,000 437,500,000 439,278,000 437,500,000

Issued during the financial year :

Exercise of options under ESOS 11,888,000 1,778,000 11,888,000 1,778,000

At 31 December 451,166,000 439,278,000 451,166,000 439,278,000

During the financial year, 11,888,000 new ordinary shares of RM1 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 ranging between RM2.13 and RM2.71 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 Employees’ Share Option Scheme (‘ESOS’) of the Company, governed by the ESOS Bye-Laws, was principally approved

by the shareholders of the Company 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 2002. The ESOS shall be in forced for a

duration of five (5) years commencing from 25 February 2002.




34 Share capital (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.

(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 following Executive Directors

of the Company:

(i) Tan Sri Rozali bin Ismail

(ii) Ruslan bin Hassan

(iii) Mat Hairi bin Ismail

(iv) Lee Miang Koi

(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 2007.

(e) 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 Malaysia Securities Exchange Berhad 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.

(f) The eligible employees 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 within the Group.

(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 exercisablegranted and

unexercised as at 2004 2005 2006 2007Tranche 31 December 2003 % % % %

1 19,215,000 57 85 100 100

2 1,211,000 54 88 100 100

3 1,957,000 56 83 100 100

4 1,172,000 52 81 100 100

23,555,000

2003 2002RM RM

Number of options vested at balance sheet date 1,925,000 5,718,000

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 options

options price At At

Tranche granted per option 1.1.2003 Granted Exercised Lapsed* 31.12.2003

RM

2003

1 26.2.2002 2.37 30,524,000 0 (10,058,000) (1,251,000) 19,215,000

2 26.8.2002 2.47 2,843,000 0 (832,000) (800,000) 1,211,000

3 26.2.2003 2.13 0 2,817,000 (821,000) (39,000) 1,957,000

4 26.8.2003 2.71 0 1,349,000 (177,000) 0 1,172,000

33,367,000 4,166,000 (11,888,000) (2,090,000) 23,555,000

At At

1.1.2002 Granted Exercised Lapsed* 31.12.2002

2002

1 26.2.2002 2.37 0 33,422,000 (1,778,000) (1,120,000) 30,524,000

2 26.8.2002 2.47 0 2,933,000 0 (90,000) 2,843,000

0 36,355,000 (1,778,000) (1,210,000) 33,367,000

* Due to resignations or offers not taken up




Details relating to options exercised during the year are as follows:

Fair value of Exercise Number of sharess issuedshares at price per

Exercise date exercise date option 2003 2002

RM RM

April 2002 2.96 – 2.99 2.37 0 490,000

May 2002 2.72 – 2.92 2.37 0 728,000

June 2002 2.60 – 2.78 2.37 0 170,000

July 2002 2.71 2.37 0 25,000

August 2002 2.73 – 2.74 2.37 0 295,000

September 2002 2.58 – 2.60 2.37 0 58,000

October 2002 2.46 2.37 0 9,000

November 2002 2.55 2.37 0 3,000

June 2003 2.70 2.13 – 2.37 159,000 0

July 2003 2.89 – 2.90 2.13 – 2.47 1,455,000 0

August 2003 3.00 – 3.12 2.13 – 2.47 3,731,000 0

September 2003 3.08 – 3.16 2.13 – 2.47 3,362,000 0

October 2003 3.60 – 3.64 2.13 – 2.71 2,272,000 0

November 2003 3.32 – 3.56 2.13 – 2.71 608,000 0

December 2003 3.34 – 3.40 2.13 – 2.71 301,000 0

11,888,000 1,778,000

The additions to the share capital and share premium relating to options exercised during the financial year are as follows:

2003 2002

RM RM

Ordinary share capital – at par 11,888,000 1,778,000

Share premium 16,232,900 2,435,860

Proceeds received on exercise of options 28,120,900 4,213,860

Fair value at exercise date of share issue 37,835,160 5,073,880

The fair value of shares issued on the exercise of options is the closing market price at which the Company’s shares were

traded on the Malaysia Securities Exchange Berhad on the day of exercise of the options.

35 Retained earnings

The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 to frank all of its retained earnings

as at 31 December 2003, if distributed as dividends, without incurring additional tax liabilities.




36 Change in accounting policy

During the financial year, the Group changed its accounting policy on deferred tax to comply with MASB Standard 25

“Income Taxes”.

In previous years, deferred tax was recognised for timing differences except when there was reasonable evidence that such

timing differences would not reverse in the foreseeable future.The tax effect of timing differences that resulted in a debit

balance or a debit to the deferred tax balance was not carried forward unless there was a reasonable expectation of its

realisation.

The potential tax saving relating to a tax loss carried forward was only recognised if there was assurance beyond any

reasonable doubt that future taxable income would be sufficient for the benefit of the loss to be realised.

The Group has now changed its accounting policy to recognise deferred tax on temporary differences arising between the

amounts attributable to assets and liabilities for tax purposes and their carrying values in financial statements. Deferred tax

assets are recognised to the extent that is probable that taxable profit will be available against which deductible temporary

differences or unutilised tax losses can be utilised.

In addition, deferred tax is recognised on temporary differences arising from investments in subsidiaries, an associate and an

interest in a jointly controlled entity, except where the timing of the reversal of the temporary differences can be controlled

and it is probable that the temporary differences will not reverse in the foreseeable future.

This change in accounting policy has been accounted for retrospectively.

The effect of this change in accounting policy on the Group’s financial statements are as follows:

As Effects of

previously change in As

reported policy restated

RM RM RM

At 1 January 2002:

Retained earnings 545,773,680 (150,229,000) 395,544,680

Financial year ended 31 December 2002:

Taxation 368,212 52,649,000 53,017,212

Earnings per share:

- basic (sen) 40.99 (12.01) 28.98

- diluted (sen) 40.51 (11.87) 28.64

At 1 January 2003:

Deferred tax liabilities 0 202,878,000 202,878,000

Retained earnings 725,519,111 (202,878,000) 522,641,111

37 Net cash generated from operations

Group Company

2003 2002 2003 2002

RM RM RM RM

Net profit for the financial year 129,586,447 127,096,431 1,682,927 1,870,146

Adjustments for :

Depreciation of property, plant

and equipment 4,147,087 4,142,885 88,045 88,045

Amortisation of project development

expenditure 15,628,500 14,999,624 0 0

Amortisation of water treatment plants 82,075,188 81,946,473 0 0

Accretion of discount on bonds

and notes 24,297,347 20,401,865 22,966,069 19,166,011

Amortisation of debt issuance

expenses 937,653 836,468 0 0

Interest on hire-purchase 360,811 369,680 0 0

Gain on disposal of property, plant

and equipment (209,200) (510,404) 0 0

Allowance for diminution

in value of other investments 603 32,388 0 0

Taxation 53,824,611 53,017,212 815,745 804,303

Share of results of jointly controlled

entity (495,638) 0 0 0

Interest income (9,466,907) (12,209,981) (38,275,648) (32,870,919)

Interest expense 108,436,400 114,050,160 15,309,579 13,671,875

Changes in working capital:

- Receivables (282,912,936) (219,324,077) (1,104,499) (1,364,236)

- Payables (3,140,847) 24,888,645 (67,058) (202,896)

Net cash generated from operations 123,069,119 209,737,369 1,415,160 1,162,329

38 Significant related party transactions and balances

CPMSB is a substantial corporate shareholder of the Company.

By virtue of their substantial shareholding in CPMSB,Tan Sri Rozali bin Ismail, a Director of the CPMSB and the Company,

and Shaari bin Ismail are deemed to have control over the Company.



38 Significant related party transactions and balances (continued)

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 Relationship

Mandai Sari Sdn. Bhd. A subsidiary of CPMSB

Syarikat Bekalan Air Selangor Sdn. Bhd. A subsidiary of CPMSB

RZ Management Services Sdn. Bhd. A Director related corporation

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, Lee Miang Koi and Syed Danial bin Syed Ariffin.

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

2003 2002

RM RM

Operating and maintenance charges by Mandai Sari Sdn. Bhd. 68,656,870 65,320,322

Management fees charged by Mandai Sari Sdn. Bhd. 500,004 500,004

Secretarial fees charged by RZ Management Services Sdn. Bhd. 240,000 240,000



38 Significant related party transactions and balances (continued)

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 2003 2002

Payables RM RM

Mandai Sari Sdn. Bhd. Operating and maintenance charges 58,920,211 70,897,978

RZ Management Services Sdn. Bhd. Secretarial fees 21,000 81,000

58,941,211 70,978,978

39 Commitments

Group

2003 2002

RM RM

(a) Commitment under the terms of the Privatisation Cum Concession

Agreement dated 22 September 1994 for the rehabilitation and

refurbishment of water treatment facilities 7,551,663 10,265,062

(b) Commitment under the terms of the Deed of Settlement dated 23 October

2003 for the early termination of the Operation and Maintenance Sub-

Contract dated 31 May 1995 (Note 44(c)) 25,000,000 0

40 Non-cancellable operating lease commitments

Group

2003 2002

RM RM

Payable within one year 2,132,537 1,926,333

Payable between one and five years 1,723,948 63,800

3,856,485 1,990,133



41 Contingent liabilities

Group Company

2003 2002 2003 2002

RM RM RM RM

Unsecured

Corporate guarantee given to a bank

for facilities granted to a subsidiary 0 0 50,000,000 50,000,000

Financial guarantee given to a bank

for facilities granted to a jointly

controlled entity 74,790,195 0 74,790,195 0

Trade and performance guarantees

extended to third parties 23,941,390 26,451,500 0 0

42 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.

43 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, an associate and a jointly controlled entity, and borrowings

under the basis of Islamic banking principles as these are excluded from MASB Standard 24 “Financial Instruments: Disclosure

and Presentation”.




43 Financial instruments (continued)

Fair values (continued)

The carrying amounts of other financial assets and financial liabilities of the Group and of the Company at the balance sheetdate approximated their fair values except as set out below:

GroupCarrying Fair

At 31 December 2003 Note amount valueRM RM

Financial assetLong-term receivables 23 131,375,491 130,479,476

Financial liabilitiesHire-purchase payables 30 (3,560,538) (3,666,286)Borrowings:- Government Support Loan 31 (121,775,579) (119,520,476)- Term Loan (DSS II) 31 (116,210,283) (115,045,439)Long-term payables 32 (65,567,346) (58,532,387)

(307,113,746) (296,764,588)

CompanyCarrying Fairamount value

RM RMFinancial assetAdvances to a subsidiary 21 361,368,807 345,807,471

GroupCarrying Fair

At 31 December 2002 Note amount valueRM RM

Financial assetLong-term receivables 23 165,447,001 162,742,451

Financial liabilitiesHire-purchase payables 30 (4,040,379) (4,306,549)Borrowings:- Government Support Loan 31 (121,775,579) (120,051,923)- Term Loan (DSS II) 31 (171,936,831) (171,451,870)Long-term payables 32 0 0

(297,752,789) (295,810,342)

CompanyCarrying Fairamount value

RM RMFinancial assetAdvances to a subsidiary 21 361,368,807 345,807,471




44 Significant events during the financial year

(a) The Company had on 25 September 2003 entered into a Share Sale and Purchase Agreement with Central Plus (M)

Sdn. Bhd., Tan Sri Rozali bin Ismail and Mat Hairi bin Ismail to acquire 700,000 ordinary shares of RM1.00 each in

SYABAS at a total cash consideration of RM38,009,840 (Note 45). The proposed acquisition, which represents 70%

of the issued and paid-up share capital of SYABAS, is one of the salient terms contained in the approval from the

Economic Planning Unit of the Prime Minister’s Department, for the privatisation of the water supply services in the

State of Selangor and the Federal Territories of Kuala Lumpur and Putrajaya (‘the Privatisation’) to be undertaken by

SYABAS. The acquisition, among others, is conditional upon the signing of the Concession Agreement for the

Privatisation. All terms and conditions of the Share Sale and Purchase Agreement remained valid within the approval

period which expired on 31 March 2004.

(b) On 21 October 2003, the Company entered into a Turnkey Sub-Contract Agreement with Imej Warisan Sdn. Bhd.

(‘IWSB’), whereby IWSB had appointed the Company as its sub-contractor for the planning, design, construction,

supervision, testing and commissioning of the ‘Projek Pembinaan Loji/Kolam Takungan Dan Paip Utama Telibong Dan

Telipok’ at Kota Kinabalu, Sabah. The contract sum of this Turnkey Sub-Contract is RM313,500,000.

(c) On 23 October 2003, PNSB entered into a Deed of Settlement (‘the Deed’) with CGE Utilities (M) Sdn. Bhd. (‘CGE’),

an Operation and Maintenance Sub-Contractor for the existing water treatment plants under the concession awarded

by the State Government of Selangor to PNSB via the PCCA (‘the Concession’).

CGE was appointed as Operation and Maintenance Sub-Contractor to MSSB, the Operation and Maintenance

Contractor for the Concession and a subsidiary of CPMSB, under the Operation and Maintenance Sub-Contract

(‘OMSC’) dated 31 May 1995 between PNSB, MSSB,Veolia Water and CGE.

Upon the execution of the Deed, the expiry date of the OMSC has been brought forward from 31 December 2020

to 31 December 2004. Amongst others, the Deed stipulates that PNSB shall pay to CGE a sum of RM25,000,000 as

full and final compensation in respect of the early termination of the OMSC on 31 December 2004, which shall be

paid not later than 1 April 2006 (Note 39(b)).

45 Significant event subsequent to the balance sheet date

The Company had, on 31 March 2004, entered into a Supplemental Agreement with CPMSB,Tan Sri Rozali bin Ismail and

Mat Hairi bin Ismail, to revise the approval period stipulated in the Share Sale and Purchase Agreement dated 25 September

2003 to acquire 700,000 ordinary shares of RM1.00 each in SYABAS at a total cash consideration of RM38,009,840 (Note

44(a)).

Under the Supplemental Agreement, all salient terms of the Share Sale and Purchase Agreement entered into on 25

September 2003, shall remain the same, except for the approval period, which has been extended from 31 March 2004 to

30 September 2004.

46 Approval of financial statements

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on

20 April 2004.

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 98 to 149 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 2003 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, 1965.

Signed on behalf of the Board of Directors in accordance with their resolution dated 20 April 2004.


Director


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 98 to 149 are, in my opinion, correct and I

make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory

Declarations Act, 1960.


Director

Subscribed and solemnly declared by the abovenamed Mat Hairi bin Ismail at Kuala Lumpur, Malaysia on 20 April 2004.

Before me

Paisah Muridan

(No.W187)

Commissioner for Oaths


Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965

We have audited the financial statements set out on pages 98 to 149. These financial statements are the responsibility of theCompany’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 planand perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by Directors, aswell as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for ouropinion.

In our opinion:

(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 andapplicable 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 2003 and of the results and cash flowsof 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 thesubsidiary 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 16 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 financialstatements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financialstatements 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 didnot 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 Lumpur20 April 2004


Report of the auditors to the members ofPuncak Niaga Holdings Berhad

Company no: 416087 U


NOTICE IS HEREBY GIVEN that the Seventh Annual General Meeting of Puncak Niaga Holdings Berhad

(416087-U) will be held at the Banquet Hall, Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off Jalan

Bukit Kiara, 60000 Kuala Lumpur on Monday, 28 June 2004 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 2003 and the

Reports of the Directors and Auditors thereon.

2. To re-elect the following Directors of the Company who retire by rotation pursuant to Article 98 of the

Company’s Articles of Association:

(a) Ir Lee Miang Koi

(b) Encik Abdul Majid Abdul Karim

3. To re-elect YB Tan Sri Dato’ Seri Dr Ting Chew Peh who retires pursuant to Article 99 of the Company’s

Articles of Association.

4. To re-elect Tuan Syed Danial Syed Ariffin who retires pursuant to Article 103 of the Company’s Articles of

Association.

5. To appoint Messrs Ernst & Young as the Auditors of the Company in place of the retiring auditors, Messrs

PricewaterhouseCoopers and to authorise the Directors of the Company to fix their remuneration.

AS SPECIAL BUSINESS:

To consider and, if thought fit, to pass the following Ordinary Resolution:

6. Allotment Of Shares Pursuant To Section 132D Of The Companies Act, 1965

“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 Bursa Malaysia AND FURTHER THAT

such authority shall continue to be in force until the conclusion of the next Annual General Meeting of

the Company.“

7. To transact any other ordinary business of which due notice shall have been given.

BY ORDER OF THE BOARD

TAN BEE LIAN (MAICSA 7006285)

Secretary

Kuala Lumpur

4 June 2004

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5

Resolution 6

Resolution 7



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 1401-1406, 14th

Floor, Plaza See Hoy Chan, Jalan Raja Chulan, 50200 Kuala Lumpur not less than 48 hours before the time set for holding

the Meeting or any adjournment thereof.

4. Explanatory Notes:

a. Ordinary Resolution 6

Our auditors, Messrs PricewaterhouseCoopers had indicated that they do not wish to seek re-election at the Seventh

Annual General Meeting of the Company.To f ill the vacancy, a Notice of Nomination of Auditors pursuant to Section

172 (II) of the Companies Act, 1965 has been received by the Company for the nomination of Messrs Ernst & Young,

who have given their consent to act as Auditors of the Company. A copy of the Notice of Nomination of Auditors

dated 24th April 2004 is annexed as ‘Appendix A’.

b. Ordinary Resolution 7

The Ordinary Resolution proposed under item 6, 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.This authority will, unless

revoked or varied at a General Meeting, expire at the next Annual General Meeting of the Company.



Appendix A



Statement Accompanying the Noticeof Annual General Meeting

1) BOARD MEETINGSIn year 2003, the Board met six times at the Board Room on 26th Floor, Suite 2601-2606, Plaza See Hoy Chan, Jalan RajaChulan, 50200 Kuala Lumpur. The details of the respective Directors’ attendances at the Board meetings are as follows:

Name of Director Designation No. of meetings attended %Tan Sri Rozali Ismail Executive Chairman 6 100Ruslan Hassan Executive Vice Chairman/ 6 100

Executive Director, Corporate Affairs

Mat Hairi Ismail Executive Director, Finance 5 83Lee Miang Koi Executive Director, Project 6 100

& Business Development

Abdul Majid Abdul Karim Independent Non-Executive Director 5 83Tan Sri Dato’ Hari Independent Non-Executive Director 6 100Narayanan Govindasamy

Tan Sri Dato’ Seri Independent Non-Executive Director 6 100Dr Ting Chew Peh

2) DATE,TIME AND VENUE OF THE SEVENTH ANNUAL GENERAL MEETINGThe Seventh Annual General Meeting of Puncak Niaga Holdings Berhad will be held as follows:Date : Monday, 28 June 2004Time : 9.30 a.mVenue : Banquet Hall, Kuala Lumpur Golf & Country Club

No. 10 Jalan 1/70D, Off Jalan Bukit Kiara, 60000 Kuala Lumpur

3) DIRECTORS STANDING FOR RE-ELECTIONDirectors who are standing for re-election are as follows:(i) Ir Lee Miang Koi, retiring pursuant to Article 98;

(ii) Encik Abdul Majid Abdul Karim, retiring pursuant to Article 98;

(iii) YB Tan Sri Dato’ Seri Dr Ting Chew Peh, retiring pursuant to Article 99; and

(iv) Tuan Syed Danial Syed Ariffin, retiring pursuant to Article 103.

4) DETAILS OF DIRECTORS STANDING FOR RE-ELECTION(i) Ir Lee Miang Koi, aged 50, Malaysian

Executive Director, Project & Business Development Division

Ir Lee joined PNSB in 1995 and is currently responsible for the project and business development of PNHB. Ir Lee wasappointed as a Director of PNSB on 2 February 1999 and subsequently to the Board of PNHB on 1 September 1999.He is a member of PNHB’s ESOS Option Committee, Malaysian Water Association, Malaysian Institute of Directors andInstitute of Marketing Malaysia.

Ir Lee graduated as a civil engineer from University of Technology Malaysia in 1978 and in 1989, he obtained a MastersDegree in Engineering majoring in water supply and wastewater engineering from the Asian Institute of Technology in Bangkok. Ir Lee has 26 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, specialising 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 private companies within the PNHB Group.

Ir Lee’s securities’ holdings in the Company are as follows:Description of Securities Direct Holding Indirect HoldingOrdinary Shares 144,000 (0.03%) *20,000 (0.004%)Warrant 18,000 (0.02%) -

* Held in nominee name, Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd.


Statement Accompanying the Noticeof Annual General Meeting

(ii) Encik Abdul Majid Abdul Karim, aged 45, Malaysian Independent Non-Executive Director

Encik Abdul Majid was appointed to the Board of PNHB on 24 April 1997 as an Independent Non-Executive Directorand was a past Director of PNSB for the period 1994-2001. He is the Chairman of PNHB’s Audit Committee and amember of the Remuneration Committee and Nomination Committee. He obtained a Bachelor of Science (Hons)Degree in Civil Engineering from University of Glasgow, United Kingdom in 1986. He began his career as a TechnicalAssistant with the Urban Development Authority (UDA) (1982-1983), as Property Executive with Boustead HoldingsBerhad (1986-1991) and subsequently as Sales Engineer with UAC Berhad (1991-1993). Encik Abdul Majid also sits onthe Board of several private companies and is a member of Malaysian Institute of Directors.

Encik Abdul Majid holds 3,000 (0.001%) ordinary shares of the Company.

(iii) YB Tan Sri Dato’ Seri Dr Ting Chew Peh, aged 61, Malaysian Independent Non-Executive Director

YB Tan Sri Dato’ Seri Dr Ting joined PNHB on 15 July 2000 as an Independent Non-Executive Director and a memberof the Audit Committee. Currently, he is Chairman of PNHB’s Nomination Committee, Remuneration Committee andCompliance, Internal Control and Risk Policy Committee. He graduated with a Bachelor of Arts Degree from Universityof Malaya in 1970 and obtained a Master of Science from University of London in 1972. He also holds a Doctorate inPhilosophy, which he obtained from University of Warwick in 1976. YB Tan Sri Dato’ Seri Dr Ting is a member ofMalaysian Institute of Directors.

YB Tan Sri Dato’ Seri Dr Ting started his career as a lecturer in the Faculty of Humanities and Social Sciences atUniversiti Kebangsaan Malaysia from 1974 to 1980 and was subsequently an Associate Professor of the said Facultyuntil 1987. Between 1979 to 1986,YB Tan Sri Dato’ Seri Dr Ting published two books entitled “Konsep Asas Sosiologi”and “Hubungan Ras dan Etnik”.

In 1987,YB Tan Sri Dato’ Seri Dr Ting ventured into politics with his election as a Member of Parliament for the Gopengconstituency, which he holds until today. He previously served as Parliamentary Secretary of the Ministry of Health(1988-1989), Deputy Minister of the Prime Minister’s Department (1989-1990) and Minister of Housing and LocalGovernment (1990-1999). Currently, YB Tan Sri Dato’ Seri Dr Ting is the Secretary-General of Malaysian ChineseAssociation (MCA). He also sits on the Board of Pan Malaysia Capital Berhad Group, Pan Malaysia Holdings Berhad,Hua Yang Bhd, Johan Holdings Berhad and also serves as a director of several private companies.

YB Tan Sri Dato’ Seri Dr Ting does not hold any of the Company’s securities.

(iv) Tuan Syed Danial Syed Ariffin, aged 46, MalaysianExecutive Director, Operation Division

Tuan Syed Danial graduated in 1981 with a BSc. (Hons) Degree in Civil Engineering from University of Aston inBirmingham, United Kingdom. He is a civil engineer by profession and has been with the PNHB Group for 8 1/2 yearssince December 1995. He began his career with PNSB as a Manager of Operation and was subsequently promotedto Senior Manager, Assistant General Manager and General Manager of Operation. Prior to his appointment to theBoard of PNSB and PNHB on 1 March 2004 , he was the Acting Executive Director of Operation Division (July 2003to February 2004).

Tuan Syed Danial previously worked with the Pahang Public Works Department for 10 years, holding positions fromProject Engineer (1981-1983) to District Engineer for JKR Cameron Highlands (1983-1991) and the Selangor WaterWorks Department between 1991 to 1995, whereby he was the Senior Project Engineer overseeing the constructionof the Sungai Selangor Phase 1 Project. He is a member of Institute of Marketing Malaysia, Malaysian Water Association,a Registered Engineer with the Board of Engineers, Malaysia and also sits on the Board of a private company.

Tuan Syed Danial holds 25,000 (0.01%) ordinary shares of the Company.

Notes:Save as disclosed above, none of the Directors standing for re-election 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.


I/We

of

being a Member/Members of Puncak Niaga Holdings Berhad hereby appoint

of

as my/our proxy to attend and vote for me/us and on my/our behalf at the Seventh 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, 60000 Kuala Lumpur

on Monday, 28 June 2004 at 9.30 a.m. and at any adjournment thereof, as indicated below:

Signature(s)/Common Seal of Shareholder(s) No. of shares held:

NRIC / Company No: Signed this day of 2004

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 notbe 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 1401-1406, 14th Floor, PlazaSee Hoy Chan, Jalan Raja Chulan, 50200 Kuala Lumpur not less than 48 hours before the time set for holding the Meeting or anyadjournment thereof.

Proxy form

1. To receive the Audited Accounts of the Company for the financial year ended

31 December 2003 and the Repor ts of the Directors and Auditors thereon.

2. To re-elect Ir Lee Miang Koi as Director of the Company.

3. To re-elect Encik Abdul Majid Abdul Karim as Director of the Company.

4. To re-elect YB Tan Sri Dato’ Seri Dr Ting Chew Peh as Director of the Company.

5. To re-elect Tuan Syed Danial Syed Ariffin as Director of the Company.

6. To appoint Messrs Ernst & Young as the Auditors of the Company in place of the retiring

auditors, Messrs PricewaterhouseCoopers and to authorise the Directors of the

Company to fix their remuneration.

7. To empower the Directors of the Company to issue shares pursuant to Section 132D

of the Companies Act, 1965.

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. Resolution For Against

Puncak Niaga Holdings Berhad

1

HEALTH, SAFETY & ENVIRONMENTAL POLICY

It is the policy of Puncak Niaga to provide, so far as is practicable, a safe, healthy and environmental friendly workplace for allemployees, contractors, visitors, interested members of society and others, and in the spirit of consultation and cooperation, theManagement and employees will together strive to achieve goals and objectives of this Policy.

Without prejudice to the generality of the above statement, the Policy of Puncak Niaga is:

1. to provide and maintain a safe and environmental friendly workplace and system of work and to continually improve itsenvironment and safety performance.

2. to continuously emphasise on the prevention of pollution in all activities.3. to ensure environmental and safety objectives and targets are set and reviewed.4. to ensure all employees are informed, instructed, trained and supervised on how to perform their job safely and without risk

to health and without any harm to the environment.5. to investigate all accidents and near-misses and to take corrective measures to ensure the accidents or near-misses will not

recur.6. to comply with all legal and other requirements on health, safety and environment and other good practices

which Puncak Niaga subscribes.7. to review this Policy as and when appropriate and to ensure it is understood by all employees and is available

to all interested par ties.

HEALTH, SAFETY & ENVIRONMENTAL REPORT

CONSERVING AND PROTECTING OUR WATER RESOURCESAt Puncak Niaga, we recognise that we have a key role to play in relation to the care and management of a very valuablenatural resource – water. It is a finite even though renewable resource that can slowly deteriorate its usefulness to mankind ifnot conserved and protected. Understanding our role and responsibility as Malaysia’s Leading Water Services Company, it isone of Puncak Niaga’s missions to address national and international concerns pertaining to the protection, conservation andenhancement of the natural environment in which we live.

Over the years, Puncak Niaga has implemented many initiatives to protect the environment and improve river water quality.Wehave intensified our efforts from year to year in our quality monitoring, assisted to a large extent by computer-generated analysisof trends and statistics and reporting the results to the relevant authorities. We have set up a toll-free river watch telephonehotline (1800-88-3254), which has been in operation since 1997 which enabled the public to inform us of incidents of pollutionsuch as the indiscriminate dumping of untreated waste, illegal sand mining and logging activities which we have highlightedto the relevant authorities for enforcement.

Erosion and landslides alongSungai Selangor

Sand mining activity on the riverbank of Sungai Batang Kali

Livestock farming alongSungai Semenyih

Dumping of chemical drums nearSungai Langat

2

In addition, surveillance and investigations are conducted through our Environmental Unit, which undertake the following functions:

• Conduct regular sanitary surveys and special environmental investigations on all catchment areas to our watertreatment plants (WTPs) to detect activities which may have adverse effects on treatment processes and theraw water quality;

• Constantly monitor the raw water quality, investigate violations and forward report to the Department of Environment(DOE) or relevant authorities on actions to be taken in order to bring the levels to the acceptable quality for treatment;

• Operate and maintain the automated river warning monitoring stations to provide early warning of possible rawwater quality violations; and

• Undertake research or studies on water quality problems faced by the WTPs and on treatment plant processes inorder to improve the quality of water supplied.

INCREASING PUBLIC AWARENESS ONENVIRONMENTAL PROTECTION AND CONSERVATIONPublic awareness and educational programmes play an important role in reducing

public apathy towards environmental protection and conservation. Puncak Niaga

continues to provide strong support to all efforts of the Government and Non-

Governmental Organisations towards this end by participating in exhibitions and

programmes such as an Open Day at the Wangsa Maju WTP for the public in

conjunction with the World Water Day 2003 to promote public awareness on

the importance of protecting our water resources, a key component of the

natural environment.

Our River Rescue Brigade programme, involving schoolchildren from primary

schools in the State of Selangor and the Federal Territory of Kuala Lumpur is

aimed at educating young people on the importance of conservation and

protection of our nation’s rivers. In 2003, a total of 200 schoolchildren from eight

primary schools participated in the River Rescue Brigade making a total

enrolment of 1,285 into the programme to date. Our Educational Outreach

programme, an extension of the River Rescue Brigade aims to educate young

people on the importance of river preservation to ensure the continuous supply

of clean water. The programme was conducted at ten primary schools in 2003

and we spent RM130,085.26 on both programmes.

MAINTAINING HIGH QUALITY, INTERNATIONAL STANDARDS AND BEST PRACTICESAnother of Puncak Niaga’s mission is “To Cater To The Increasing Challenges In The Demand For High Quality Treated Water

Through The Continuous Implementation Of High Quality Standards, Efficient Services, Effective Human Resources Development,

Innovative Technology And Operational Systems”.

In discharging our responsibility to ensure that the water produced from our WTPs is safe and of high quality, we conduct quality

assessments and evaluation exercises at every stage of the process, from the point of entry at the intake of the WTP to treatment

until it leaves the WTP at the balancing reservoir.This involves stringent monitoring and numerous laboratory testing as follows:

• Once every two hours daily on a 24-hour basis against quality standards of four physical and five chemical parameters;

• Daily for microbiological parameters;

• Weekly testing at outlets of our WTPs and balancing reservoir by the Ministry of Health (MOH); and

• Monthly for all parameters by an accredited independent laboratory according to schedules set by MOH.

Educational Outreach Programme No. 28

3

In addition, the quality of the raw, settled and treated water are monitored and tested to comply with the standards set out in the

Privatisation Cum Concession Agreement and the Construction Cum Operation Agreement, as well as MOH’s Drinking Water

Quality Standards. Fluoride levels in the treated water are checked regularly and reports submitted to the Dentistry Office of MOH.

In 2003, Environmental Impact Studies were conducted on each of the six water catchment areas and six Sanitary Surveys,including joint surveys with the authorities, covering at least one WTP in each survey. The results were submitted to therelevant authorities with the jurisdiction to enforce and control the pollution sources. Puncak Niaga completed two cyclesto determine the Water Quality Index at all WTPs and dams and submitted the findings to the authorities. Eighteen casesof major WTP shutdowns and thir teen cases of pollution risk or impact were also investigated and reported to theManagement during the year under review together with two cases to study and propose alternative raw water resources.

Scope of work

EnvironmentalStudies

Water QualityAssessment

River Watch

Research & Study

Details

Environmental ImpactStudies (EIS)

Sanitary Surveys (SS)

Water Quality Index (WQI)Determination

Environmental Investigations

Quality Assurance Programme

Study on violation andchemical element

Operations & Maintenance

Waste Management (SludgeTreatment)

Target

To conduct EIS on each of the 6 water catchment areas.

To conduct 3 SS covering at least one WTP each.

To compute a WQI database for all raw water sources for 28 WTPs and 3 dams.

To investigate each of the WTP’s shutdown major cases.

To evaluate and highlight pollution risk/impact.

To study and propose alternativeraw water resources.

Monthly raw and treated water sampling.

2-hourly analysis at WTPs.

Daily compliance.

Daily ammonia data.

*Weekly/Monthly fluoride.

To evaluate and highlight any cases of violation.

To operate and maintain theRiver Warning Monitoring Station.

To study and highlight the sludgetreatment needs to theauthorities.

Achievement

All 6 EIS completed.

Conducted 6 SS inclusive of joint surveys with theauthorities.

Completed 2 cycles ofWQI determination atall 28 WTPs and 3 dams.

Completed and brought up18 cases to the Management’sattention.



Completed.

Completed.

Completed.

Completed.

Completed.

Completed study on iron andmanganese.

Good operating condition.

Completed.

ENVIRONMENTAL ASSIGNMENTS AND PERFORMANCE

* Weekly flouride testing for WTPs located in the Federal Territory.

4

At Puncak Niaga, issues relating to quality, safety and the environmenthave always been our concern. Our commitment to achieving bestpractices in these areas is reflected in our initiative to implement theIntegrated Management System (IMS) at the Sungai Selangor Phase 2(SSP2) WTP as our pilot project. We received certification from Lloyd’sRegister Quality Assurance (LRQA) on 15 October 2003 for the first ofthe IMS, i.e. the Quality Management System ISO 9001:2000. On 31October 2003, we were accredited the second IMS, EnvironmentalManagement System ISO 14001:1996, while the third IMS, the SafetyManagement System OHSAS 18001:1999, was obtained in January 2004.With this, the SSP2 WTP has become the first water treatment plant inthe country to have a fully implemented management system thatintegrates three critical aspects, i.e. quality, safety and the environment.The implementation of the IMS is expected to extend to all the WTPsunder the management of Puncak Niaga.

Study 1: Sludge TreatmentTo meet the requirements of the Environmental Quality Act set by DOE, Puncak Niaga requires a budget of RM120to RM150 million to install sludge treatment systems at all the 26 WTPs over a five-year period. We have submitteda funding proposal to the Selangor State Government and PUAS has been instructed to proceed with the works. Atpresent, PUAS has commenced preliminary works at two WTPs, namely the Sungai Langat and Cheras Mile 11 WTPs.

Study 2: Reddish Raw Water At Cheras Mile 11 WTPOne of the environmental investigations involved investigating the source of reddish raw water pollution that caused seven

shutdowns at the Cheras Mile 11 WTP between 22 May and 7 July 2003:

The investigation, which was conducted with the assistance ofDOE Selangor, indicated that the reddish colouration could haveoriginated from the illegal dumping of industrial effluent from atimber processing or plywood manufacturing factory. Since rawwater from Sungai Cheras is of poor quality and not suitable fortreatment, we decided not to extract raw water from the rivereffective early January 2004 since a new intake weir at SungaiLangat, which lies upstream from Sungai Cheras confluence hasbeen constructed on 10 January 2003 at a cost of RM3.28 million.This has led to an improved raw water source and reduced supplyinterruptions due to shutdown of the WTPs attributed tounacceptable raw water quality from Sungai Cheras.

To avoid similar incidences of pollution, Puncak Niaga introduced a series of environmental awareness campaigns to factorieslocated upstream of the new intake and the response from these factories has been positive.

No. Date of shutdown Shutdown (hours) Production Loss (m3)

1 22 May 2003 5.33 6,294

2 6 June 2003 5.00 5,904

3 7 June 2003 7.37 8,703

4 16 June 2003 3.50 4,133

5 23 June 2003 5.50 6,495

6 30 June 2003 7.00 8,266

7 7 July 2003 7.42 8,762

Total 41.12 48, 557

Reddish colourat ion of raw water at the intake ofCheras Mi le 11 WTP

5

Study 3: Alternative WaterResources At Selangor River BasinAs part of Puncak Niaga’s contingencyplan to minimise the shortage of treatedwater supply to consumers, a study wasundertaken on a number of potentialponds and tributaries as alternative rawwater resources at the Selangor RiverBasin. An environmental survey was alsoconducted, which identified eightpotential locations for water storage andfuture use along the basin, with a totalvolume capacity of 400.4 MG/1820.1 ML.These ponds serve as alternative rawwater sources to Sungai Selangor in theevent of drought

The dams under Puncak Niaga’s management are also subjected to the same level of scrutiny as the water treatment plants. Inline with our emphasis on safety standards, we conducted three major visual safety inspections of the dams in 2003. Theinspections, which covered all major structures of the dams, were to detect and investigate any dam safety deficiencies and torecommend appropriate corrective actions.As part of our adherence to international standards and practices, we have proposedto PUAS that an independent dam safety inspection be undertaken by an external consultant for the year 2004.

Our emphasis on quality and high standards is supported by our employees’ active involvement in Quality Control Circles (QCC).In 2003, we spent RM30,838 on QCC-related activities, an investment which has brought rewards for the Company.The QCCprojects initiated by all the 15 registered circles for the period 2001-2002 resulted in total cost savings of RM1.4 million, withoutcompromising quality or productivity. Our QCC circles participated in the QCC Mini and Regional Conventions organised bythe National Productivity Corporation on 1 April 2003 and 9-10 June 2003 respectively.We won one Gold Award and two SilverAwards at the QCC Mini Convention 2003 and three Silver Awards at the QCC Regional Convention 2003 (Central).

IMPROVING OUR SERVICES THROUGHRESEARCH & DEVELOPMENT (R&D)Much of Puncak Niaga’s R&D effort is focused onimproving operating costs and increasing operationalefficiency of the WTPs. In 2003, we expended close toRM4.7 million on R&D projects, which mainly entailedmajor refurbishments and upgrading of all the WTPs.

We undertake studies on environment and water quality.During the year, we conducted a trial run of a new polymerat the SSP2 WTP which proved that the polymer hassuperior coagulation properties. Such properties will helpto lower chemical costs and extend filter runtime and theconsequent reduction in electricity cost and water loss canbring about a potential cost saving of RM1.1 million a year.We are also concerned about the consistently high totaliron content in raw water, which sometimes exceeds the

Study on alternative raw water resourcing

Wangsa Maju WTP engineers checking on the rawwater quality at the aerator

6

parameter set by MOH. An in-housepreliminary study was conducted inMay 2003 on the possible eliminationof iron and manganese from raw waterwithout adding chemicals to thetreatment process.The second stage ofthe study is now underway and theresults are expected to be known by2004.

BEING PREPARED IN EMERGENCIES AND CRISISGiven PNSB’s critical role in supplying water to the country’s hub, we have in place the Crisis Management Plan and WaterTreatment Plant Emergency Response Plan to help us respond quickly and effectively to any form of emergency, crisis or disaster,with minimal disruption to our business operations.

On 13 September 2003, an evaluation exercise was conducted to assess chlorine handling, fire fighting and emergency rescue ina confined space.The response teams, comprising four teams from the SSP2 WTP and two teams from the Wangsa Maju WTP,were able to demonstrate, through both their theoretical knowledge and performance in practical exercises, the level of theirskills and capabilities to mitigate any crisis should it occur.The evaluation on our response teams was undertaken by the CrisisManagement Committee in collaboration with the Fire Department, Department of Occupational Safety and Health (DOSH)and an expert on confined space.

During the year, the Crisis Management Committee also carried out case studies and simulation exercises on crisis scenarios suchas the possibility of Severe Acute Respiratory Syndrome (SARS) affecting the Group’s major water treatment plants in thecountry.The action plans developed during the simulation exercises, were incorporated into the Crisis Management Plan.

The Group’s Crisis Management Centre was activated twice during the year under review. One was in conjunction with the Non-Aligned Movement Summit in February 2003 and the other was in relation to the Conference of the Organisation of IslamicCountries in October 2003. During these events, the Centre was manned 24 hours a day for ten days and worked in close liaisonwith the Government’s Operation Centre.

ENSURING THE HEALTH AND SAFETY OF OUREMPLOYEESThe safety and health of our employees at the water treatment plantsand dams is of paramount importance to Puncak Niaga.To oversee andorganise safety and health programmes and activities, a Corporate Safetyand Health Committee was established in September 2001 supportedby similar committees at various levels of the Group’s operations.

In 2003, Puncak Niaga’s Safety & Health Policy and Environmental Policywere consolidated into one Policy in light of the implementation of theIntegrated Management Systems at SSP2 WTP. This is the first review onthe Group’s Safety and Health Policy since its inception on 12 March1999 to be in line with the changing business environment. Safety-relatedprogrammes and activities are regularly conducted at all locations, whichinclude drills, handling of fire-fighting equipment and providing first aid. InAugust 2003, safety information was disseminated to the employeesthrough articles in our quarterly in-house newsletter, KITA. Emergency drill at SSP2 WTP

River Warning Monitoring Station

7

Klang Gates Dam

SSP2 WTP has demonstrated a high level of commitment to safety and health standards at the workplace. In June 2003, SSP2WTP achieved the benchmark of one million hours of no Lost Time Injury (LTI), one of the major elements used as an indicatorof safety performance adopted internationally by most industries. It is worthy to note that since September 2002, the LTI hasincluded contractors’ and suppliers’ manhours after they have undergone extensive safety and health training and familarisationat the WTP.The benchmark achieved indicates that SSP2 WTP has been accident-free since the day the plant was commissionedin July 1998, a testament to the employees’ high level of awareness on safety and health standards. In October 2003, SSP2 WTPreceived MSOSH’s OSH Gold Merit Award 2002 for excellence in the implementation of safety and health programmes. At thesame time,Wangsa Maju WTP won the MSOSH’s OSH Gold Award 2002.

The implementation of the occupational safety and health management of the 26 WTPs under the PCCA is closely monitoredby our Corporate Safety and Health Officer. Safety and health activities undertaken at these plants include external audits byDOSH, site safety inspections by the Safety and Health Officer and occupational safety and health training programmes, such as‘Managing Occupational Safety and Health’ at Sungai Langat WTP, ‘Utilisation of Self-Contained Breathing Apparatus’ at SungaiBatu WTP and ‘Job Hazard Analysis’ at Wangsa Maju WTP. Between 6 -10 October 2003, a safety and health awareness campaignwas also undertaken at Sungai Batu WTP. Sixteen safety drills were conducted at prominent WTPs to familiarise and equip theemployees in responding to unforeseeable crisis situations.

OUR FUTURE

At the present day, caring for health, safety and the environment is a continuous challenge in light of the diverse socio-culturalbackground of our society which places less emphasis and awareness on these issues previously. In regard to water management,we are fully aware of how the quality of our river water is being affected by deforestation, uncontrolled development, industrialdischarges and dumping of solid wastes.The DOE’s Water Quality Index for 2000 found that 52 river basins in the country werepopulated with suspended solids resulting from poorly planned and uncontrolled land clearing activities, 18 river basins had lowoxygen levels due to industrial charges and 33 river basins were polluted with ammoniacal nitrogen from animal husbandryactivities and domestic sewage disposal.

With environmental compliance varying from industry to industry, it is difficult for the authorities to compel industries to adoptcleaner production measures that will not pollute the waterways. Alternative options therefore need to be explored to ensurethat our water is safe and clean.These options include waste minimisation and waste re-cycling

As a responsible corporate citizen, Puncak Niaga continues to do its part in the areas of quality, environmental conservation,occupational health and safety.We will continue in our pursuit of the highest standards in health, safety and the environment inthe interests of our Company and the stakeholders, including the communities we serve.

Documents

COVER RATIONALE - Puncak Niaga Holdings Berhad€¦ · · 2016-06-10COVER RATIONALE Touching Lives ... Planning Unit, ... privatisation of the water supply services in the State