Annual Report 2006 - Puncak Niaga · Annual Report 2006 Annual Report 2006 ... Yang Berbahagia Dato’ Ruslan Hassan b. Tuan Syed Danial Syed Ariffin c. Yang Berhormat Tan Sri Dato’

Puncak Niaga Holdings Berhad (416087-U)

Wisma Rozali, No. 4, Persiaran Sukan, Seksyen 13, 40100 Shah Alam, Selangor Darul Ehsan

Tel : 603 - 5522 8589 Fax : 603 - 5522 8598

E-mail : [email protected] Website : www.puncakniaga.com.my

Puncak Niaga H

oldings Berhad Annual Report 2006

Annual Report 2006

“Malaysia’s Water Specialist”

SUSTAINABLE GROWTH

1Annual Report 2006

Contents

3 Vision & Mission Statements

4 Notice of Annual General Meeting

6 Statement Accompanying the Notice of Annual General Meeting

8 Corporate Information

10 Fact Sheet

16 Corporate Profile

18 Corporate Structure

19 Organisation Structure: PNSB

20 Organisation Structure: SYABAS

22 Our Role in the Water Supply System

23 Corporate Achievements

24 Five-Year Financial Highlights

24 Financial Calendar

25 Financial & Share Performance

28 Board of Directors

35 Senior Management in PNSB

38 Senior Management in SYABAS

44 Executive Chairman Speaks

50 Operations Review: PNSB Water Treatment Activities

56 Operations Review: SYABAS Water Distribution Activities

66 Environment & Community

78 Corporate Calendar of Events

94 Water News

100 Statement on Corporate Governance

110 Statement on Internal Control

112 Audit Committee Report

117 Risk Management Policy & Report

119 Investor Relations Policy & Report

121 Quality Policy & Report

122 Corporate Disclosure Policy

123 Distribution Schedule of Equity Securities & Properties

127 Financial Report 2006

213 Proxy Form

The Group focused on further enhancements in Non Revenue Water activities, a capitalrepayment to shareholders, and the establishing of a leading-edge research and developmentcentre (see pages 50 - 63).

Annual Report 2006

Revenue rose 24.7% to RM1,428.1 million, profit before taxation shot up 86.6% to RM367.3million, and basic earnings per share rose from 30.80 sen to 101.51 sen (see page 139).

We placed stronger emphasis on corporate social responsibility, the environment, health andsafety. We believe that they are intrinsically linked and that they fall under the wider bannerof sustainable development (see page 66).

2 Puncak Niaga Holdings Berhad

OPERATIONS REVIEW

FINANCIAL REVIEW

ENVIRONMENT ANDCOMMUNITY REVIEW

• To provide a synergy of socio-economic products and services in therealm of water treatment, management and distribution and otherrelated businesses.

• To cater to the increasing challenges in the demand for high qualitywater production and distribution through the continuousimplementation of high quality standards, efficient services, humanresources development, innovative technology and operational systems.

• To actively participate in regional and global business opportunities withlinkages to the Company’s core activities and related interests.

• To actively support and participate in programmes and activities aimedat uplifting the community’s living standards and value systems in linewith the aspirations of Vision 2020.

• To address national and international concerns pertaining to theprotection, conservation and enhancement of the natural environmentwe live in.

TO BE THE LEADING AND DYNAMIC INTEGRATEDWATER SERVICES COMPANY

3Annual Report 2006

Our Vision

Our Mission


NOTICE OF ANNUALGENERAL MEETING

1. To receive the Audited Financial Statements of the Company for the financial year ended 31 December 2006 and the Reports of the Directors and Auditors thereon.

2. To declare a final tax-exempt dividend of 8 sen per share in respect of the financial yearended 31 December 2006 as recommended by the Directors of the Company.

3. To re-elect the following Directors of the Company who retire by rotation pursuant toArticles 98 and 99 of the Company’s Articles of Association:-

a. Yang Berbahagia Dato’ Ruslan Hassanb. Tuan Syed Danial Syed Ariffinc. Yang Berhormat Tan Sri Dato’ Seri Dr Ting Chew Peh

4. To re-elect the following Director of the Company who retires by rotation pursuant toArticle 103 of the Company’s Articles of Association:-

a. Yang Amat Mulia Tengku Dato’ Rahimah Almarhum Sultan Mahmud

5. To re-appoint Messrs Ernst & Young as the Auditors of the Company and to authorise theDirectors 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 theCompany and the approvals of the relevant governmental/regulatory authorities, theDirectors of the Company be and are hereby empowered, pursuant to Section 132D of theCompanies Act, 1965, to issue shares in the Company, from time to time, and upon suchterms and conditions and for such purposes as the Directors of the Company may deemfit provided that the aggregate number of shares issued pursuant to this resolution doesnot exceed ten per centum (10%) of the issued share capital of the Company for thetime being AND THAT the Directors of the Company be and are hereby also empoweredto obtain the approval for the listing of and quotation for the additional shares so issuedon Bursa Malaysia Securities Berhad AND FURTHER THAT such authority shall continueto 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.

NOTICE IS HEREBY GIVEN THAT the Tenth Annual General Meeting of Puncak Niaga HoldingsBerhad (416087-U) will be held at Concorde I, Concorde Hotel Shah Alam, Level 2, No. 3, Jalan Tengku Ampuan Zabedah C9/C, 40100 Shah Alam, Selangor Darul Ehsan onThursday, 28 June 2007 at 9.30 a.m. for the following purposes:-

RESOLUTION 1

RESOLUTION 2

RESOLUTION 3RESOLUTION 4RESOLUTION 5

RESOLUTION 6

RESOLUTION 7

RESOLUTION 8

5Annual Report 2006

NOTICE OF ANNUALGENERAL MEETING

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT subject to the approval ofthe shareholders of the Company at the Tenth Annual GeneralMeeting, a final tax-exempt dividend of 8 sen per share for thefinancial year ended 31 December 2006, will be paid on 8 August2007 to Depositors whose names appear in the Record ofDepositors of the Company on 18 July 2007.

A Depositor shall qualify for entitlement to the dividends only inrespect of:-

a. shares transferred into the Depositor’s Securities Accountbefore 4.00 p.m. on 18 July 2007 in respect of transfers; and

b. shares bought on Bursa Malaysia Securities Berhad on a cumentitlement basis according to the Rules of Bursa MalaysiaSecurities Berhad.

BY ORDER OF THE BOARD

TAN BEE LIAN(MAICSA 7006285)Secretary

Shah Alam6 June 2007

Notes:-

1. A proxy need not be a member of the Company and the provision of

Section 149(1)(b) of the Companies Act, 1965 shall not apply to the

Company. A member shall not be entitled to appoint more than two

(2) proxies to attend and vote at the Meeting provided that where a

member is an authorised nominee as defined in the Securities

Industry (Central Depositories) Act, 1991, it may appoint up to two (2)

proxies in respect of each Securities Account it holds with ordinary

shares of the Company standing to the credit of the said

Securities Account. Where a member appoints two (2) proxies, the

appointments shall be invalid unless he specifies the proportions of

his holdings to be represented by each proxy.

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 10th Floor, Wisma Rozali, No. 4,

Persiaran Sukan, Seksyen 13, 40100 Shah Alam, Selangor Darul Ehsan

not less than 48 hours before the time set for holding the Meeting or

any adjournment thereof.

4. Explanatory Note On Special Business:

Resolution 8:

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.


STATEMENT ACCOMPANYINGTHE NOTICE OF ANNUALGENERAL MEETING

1. BOARD MEETINGS

In 2006, the Board met five (5) times at the Board Room on 26th Floor, Suite 2601-2606,Plaza See Hoy Chan, Jalan Raja Chulan, 50200 Kuala Lumpur. The details of the respectiveDirectors’ attendance at the Board Meetings are as follows:-

No. of MeetingsName of Director Designation attended %

Tan Sri Rozali Ismail Executive Chairman 4 80

Dato’ Matlasa Hitam Managing Director 5 100

Dato’ Ruslan Hassan Non-Independent 5 100Non-Executive Director

Dato’ Ir Lee Miang Koi Non-Independent 4 80Non-Executive Director

Syed Danial Syed Ariffin Executive Director, Operation I 5 100

Tan Sri Dato’ Hari Independent Non-Executive 5 100Narayanan Govindasamy Director

Tan Sri Dato’ Seri Independent Non-Executive 5 100Dr Ting Chew Peh Director

Datuk Dr Rahman Ismail Independent Non-Executive 5 100Director

Tan Seng Lee Executive Director, Finance 5 100

Tengku Dato’ Rahimah Non-Independent 2 100Almarhum Sultan Mahmud Non-Executive Director(appointed on 1 August 2006 and

re-designated to Non-Independent

Non-Executive Director on

1 January 2007)

2. DATE, TIME AND VENUE OF THE TENTH ANNUAL GENERAL MEETING

The Tenth Annual General Meeting of Puncak Niaga Holdings Berhad will be held as follows:-

Date : Thursday, 28 June 2007Time : 9.30 a.m.Venue : Concorde I, Concorde Hotel Shah Alam

Level 2, No. 3, Jalan Tengku Ampuan Zabedah C9/C40100 Shah Alam, Selangor Darul Ehsan

7Annual Report 2006

STATEMENT ACCOMPANYINGTHE NOTICE OF ANNUAL

GENERAL MEETING

3. PARTICULARS OF DIRECTORS STANDING FOR RE-ELECTION AT THE TENTH ANNUAL GENERAL MEETING:

Name ofRetiring Director

Age

Nationality

Qualification

Position in PNHB

Working Experience& Occupation

Directorships in otherpublic companies

Details of attendance at Board Meetings

The place, date and hourof the Board Meetings

Equity securitiesinterests in PNHB and its subsidiaries

Family relationshipwith any directorand/or substantialshareholder of PNHB

Any conflict of interest with PNHB

List of convictions foroffences (other thantraffic offences) withinthe past 10 years

YBhg Dato’ Ruslan Hassan

51

Malaysian

Bachelor of LawsDegree from University of Malaya

Non-Independent Non-Executive Director

YBhg Dato’ Ruslan has26 years of workingexperience. For details,please refer to hisprofile on page 30 ofthe Annual Report

None

5/5 (100%)

Please refer to page 100of the Annual Report


None

None

None

Tuan Syed DanialSyed Ariffin

49

Malaysian

BSc. (Hons) in CivilEngineering fromUniversity of Aston,Birmingham, United Kingdom

Executive DirectorOperation I

Tuan Syed has 26 yearsof working experience.For details, please referto his profile on page 31of the Annual Report

None

5/5 (100%)



None

None

None

YB Tan Sri Dato’ Seri DrTing Chew Peh

64

Malaysian

1. Bachelor of ArtsDegree fromUniversity of Malaya

2. Master of ScienceDegree fromUniversity of London,United Kingdom

3. Doctorate inPhilosophy fromUniversity of Warwick,United Kingdom

Independent Non-Executive Director

YB Tan Sri Dato’ Seri DrTing has 33 years ofworking experience. Fordetails, please refer tohis profile on page 32 ofthe Annual Report

1. Hua Yang Berhad2. Pan Malaysia Capital

Berhad3. Pan Malaysia

Corporation Berhad4. Johan Holdings

Berhad

5/5 (100%)


None

None

None

None

YAM Tengku Dato’Rahimah AlmarhumSultan Mahmud

41

Malaysian

Bachelor of Economicsand AccountancyDegree from City ofLondon University,London, UnitedKingdom

Non-Independent Non-Executive Director

YAM Tengku Dato’Rahimah has 18 years ofworking experience. Fordetails, please refer toher profile on page 34of the Annual Report

Cosway (M) Sdn Bhd(a wholly ownedsubsidiary of CoswayCorporation Berhad)

2/5 (100%)She was appointed toPNHB Board on 1August 2006


None

None

None

None


CORPORATEINFORMATION

BOARD OF DIRECTORS

Yang Berbahagia Tan Sri Rozali IsmailExecutive Chairman

Yang Berbahagia Dato' Matlasa HitamManaging Director

Yang Berbahagia Dato’ Ruslan HassanNon-Independent Non-Executive Director

Yang Berbahagia Dato' Ir Lee Miang KoiNon-Independent Non-Executive Director

Tuan Syed Danial Syed AriffinExecutive Director, Operation I Division

Yang Berbahagia Tan Sri Dato’ Hari Narayanan GovindasamyIndependent Non-Executive Director

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

Yang Berhormat Datuk Dr Rahman IsmailIndependent Non-Executive Director

Mr Tan Seng Lee Executive Director, Finance Division

Yang Amat Mulia Tengku Dato’ Rahimah Almarhum Sultan MahmudNon-Independent Non-Executive Director

GROUP COMPANY SECRETARY

Madam Tan Bee Lian, MAICSA 7006285

REGISTERED OFFICE

10th Floor, Wisma RozaliNo. 4, Persiaran SukanSeksyen 1340100 Shah AlamSelangor Darul EhsanTel : 603-55228589Fax : 603-55120220

PRINCIPAL OFFICE

Wisma RozaliNo. 4, Persiaran SukanSeksyen 1340100 Shah AlamSelangor Darul EhsanTel : 603-55228589Fax : 603-55228598website : www.puncakniaga.com.mye-mail (general) : [email protected] (investors) : [email protected]

BRANCH OFFICES

No. 8, Jalan Senangin 1Taman Perniagaan SenanginJalan Sultanah Sambungan05150 Alor SetarKedah Darul AmanTel : 604-7348648Fax : 604-7348658

No. 310, Al-Waleed CentreKhalid Ibn Al-Waleed StreetAl-Sharafeeyah District P.O. Box 11647Jeddah 21463Kingdom of Saudi ArabiaTel/Fax No. 00 9662 6521469

DATE AND PLACE OF INCORPORATION

7 January 1997, Malaysia

COMPANY NUMBER

416087-U

AUDITORS

Messrs Ernst & Young (AF 0039)

TAX ADVISOR

Messrs Ernst & Young Tax Consultants Sdn Bhd

9Annual Report 2006

CORPORATEINFORMATION

PRINCIPAL BANKERS

CIMB Bank Berhad (13491-P)RHB Bank Berhad (6171-M)United Overseas Bank (Malaysia) Bhd (271809-K)

SOLICITORS

Messrs Adnan Sundra & LowMessrs Azian Haslina & CoMessrs Kadir, Andri & PartnersMessrs Lee HishammuddinMessrs Ng Yook Woon, Andrew TC Saw & CoMessrs SivananthanMessrs Wong & PartnersMessrs Zaid Ibrahim & CoMessrs Zul Rafique & Partners

SHARE REGISTRAR (Place where all registers of securities are kept)

Tenaga Koperat Sdn Bhd (118401-V)20th Floor, Plaza PermataJalan KamparOff Jalan Tun Razak50400 Kuala LumpurTel : 603-40416522Fax : 603-40426352

STOCK EXCHANGE LISTING

Main Board of Bursa Malaysia Securities Berhad under the Infrastructure Project Companies Sector

INDICES

Kuala Lumpur Composite Index (KLCI)Kuala Lumpur Syariah Index

AUDIT COMMITTEE

Chairman:Yang Berhormat Tan Sri Dato’ Seri Dr Ting Chew Peh

Members:Yang Berbahagia Tan Sri Dato’ Hari Narayanan GovindasamyYang Berhormat Datuk Dr Rahman IsmailMr Tan Seng Lee

Secretary:Madam Tan Bee Lian

REMUNERATION COMMITTEE

Chairman:Yang Berhormat Datuk Dr Rahman Ismail

Members:Yang Berbahagia Tan Sri Dato’ Hari Narayanan GovindasamyYang Berhormat Tan Sri Dato’ Seri Dr Ting Chew PehMr Tan Seng Lee


NOMINATION COMMITTEE

Chairman:Yang Berhormat Datuk Dr Rahman Ismail

Members:Yang Berbahagia Tan Sri Dato’ Hari Narayanan GovindasamyYang Berhormat Tan Sri Dato’ Seri Dr Ting Chew Peh


COMPLIANCE, INTERNAL CONTROL AND RISK POLICYCOMMITTEE (CICR)

Chairman:Yang Berhormat Tan Sri Dato’ Seri Dr Ting Chew Peh

Members:Yang Berbahagia Dato' Matlasa Hitam (Head of CICR)Mr Ng Wah TarTuan Haji Sonari SolorMadam Tan Bee Lian

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


FACT SHEET

PUNCAK NIAGA HOLDINGS BERHAD’S FACT SHEET AS AT 27 APRIL 2007

Group Manpower:

Management Employees 187Executive Employees 686Non-Executive Employees 3,143Total 4,016

Number of PNSB’s Water Treatment Plants 29Number of Water Treatment Plants with ISO Certifications 10Authorised Share Capital RM1,300,000,000Paid-Up Share Capital RM411,142,895 (comprising 411,142,895

ordinary shares of RM1.00 each)Number of RUN Issued 546,875,000RUN Coupon Rates 2.5% per annum for the first 10 years

and 3.5% per annum for the remaining 5 yearsRUN Semi-Annual Coupon Payment Dates 20 May and 20 NovemberRUN Maturity Date 18 November 2016RUN Holders’ Put Option Date 20 November 2011Number of Warrants Issued, Unexercised and Lapsed 1,947,876Warrant Conversion Price RM2.62Number of Warrants Converted 107,426,993Warrant Maturity Date 20 November 2006Effective Date of ESOS 25 February 2002Expiry Date of ESOS 24 February 2007Number of ESOS Offered 51,723,000Number of ESOS Exercised 42,420,000Number of ESOS Lapsed 9,303,000

List of Corporate Memberships:

1. Malaysian Water Association (MWA) Member since 19942. Malaysia South-South Association (MASSA) Member since 19953. Federation of Public Listed Companies (FPLC) Member since 19974. Malaysian Employers Federation (MEF) Member since 19995. Malaysian Industry-Government Group for High Technology (MIGHT) Member since 20016. Malaysian-German Chamber of Commerce and Industry (MGCC) Member since 20027. National Institute of Occupational Safety and Health (NIOSH) Member since 20028. American Water Works Association (AWWA) Member since 20029. Malaysian-French Chamber of Commerce and Industry (MFCCI) Member since 200210. Malaysia-Russia Business Council Member since 200211. British Malaysian Chamber of Commerce (BMCC) Member since 200312. Malaysia-Japan Economic Association (MAJECA) Member since 200313. Commonwealth Partnership for Technology Management (CPTM) Member since 200314. Institute of Marketing Malaysia (IMM) Member since 200315. South East Asian Water Utilities Network (SEAWUN) Member since 200416. Malaysian Islamic Chamber of Commerce (MICC) Member since 200617. Singapore Water Association Member since 2006

11Annual Report 2006

FACT SHEET

Water Treatment Plants:Puncak Niaga (M) Sdn Bhd

Central Region Tel/Fax No.

Central Regional Office * Tel : 603 – 6185 4039 Fax : 603 – 6186 1186

Ampang Intake Tel : 603 – 4291 4040

Bukit Nanas * Tel : 603 – 2078 0782

Gombak * Tel : 603 – 6189 5255

Kepong Tel : 603 – 6274 9495

Sungai Batu * Tel : 603 – 6189 0267 Fax : 603 - 6185 1186

Sungai Kroh Tel : 603 – 6274 9495

Sungai Pusu Tel : 603 – 6185 6631

Sungai Rangkap Tel : 603 – 6091 0001

Sungai Rumput Tel : 603 – 6185 6631

Wangsa Maju * Tel : 603 – 4143 7006 Fax : 603 – 4143 2572

Northern Region

Northern Regional Office * Tel : 603 – 3271 0948 Fax : 603 – 3271 6497

Batang Kali Tel : 603 – 6057 3255

Bernam River Headworks * Tel : 603 – 6046 1259

Kalumpang Tel : 603 – 6049 1366

Kuala Kubu Bharu Tel : 603 – 6064 1327

North Hummock Tel : 603 – 3341 2052

Rantau Panjang * Tel : 603 – 3271 0948Fax : 603 – 3271 6497 (New Plant)

603 – 3271 9133 (Old Plant)

Sungai Buaya Tel : 603 – 6028 1146

Sungai Dusun Tel : 603 – 6046 3649


FACT SHEET

Sungai Selisek Tel : 605 – 454 1354Fax : 605 – 454 2003

Sungai Sireh Tel : 603 – 3269 5070Fax : 603 – 3269 3473

Sungai Tengi Tel : 603 – 6042 2035603 – 6042 2346 (Intake)

Southern Region

Southern Regional Office * Tel : 603 – 9074 9430603 – 9076 7299

Fax : 603 – 9075 8389

Bukit Tampoi * Tel : 603 – 8768 6216

Cheras Mile 11 * Tel : 603 – 8736 0427

Salak Tinggi Tel : 603 – 8706 1103

Sungai Langat * Tel : 603 – 9076 7299Fax : 603 – 9075 8389

Sungai Lolo Tel : 603 – 9021 5993

Sungai Pangsoon Tel : 603 – 9021 5993

Sungai Selangor Phase 2 # Tel : 603 – 3279 2008Fax : 603 – 3279 2978

Sungai Serai Tel : 603 – 9075 3977

Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS)District Offices

Central Zone Tel/Fax No.

Kuala Lumpur Tel : 603 – 2282 6244Jalan Pantai Baru, 59990 Kuala Lumpur Fax : 603 – 2282 5498

Petaling Tel : 603 – 7781 4455Jalan Templer, 46050 Petaling Jaya Fax : 603 – 7781 2108Selangor Darul Ehsan

Northern Zone

Kuala Selangor Tel : 603 – 3289 3024Jalan Kelang, 45000 Kuala Selangor Fax : 603 – 3289 2040Selangor Darul Ehsan


FACT SHEET

Sabak Bernam Tel : 603 – 3224 2936Jalan Besar, 45300 Sungai Besar Fax : 603 – 3224 2438Sabak Bernam, Selangor Darul Ehsan

Hulu Selangor Tel : 603 – 6064 1270Bangunan JKR, Jalan Bukit Kemajuan 603 - 6064 127344000 Kuala Kubu Bahru, Selangor Darul Ehsan Fax : 603 – 6064 1520

Gombak Tel : 603 – 6138 4820Bandar Baru Selayang, 68100 Batu Caves Fax : 603 – 6138 2002Selangor Darul Ehsan

Southern Zone

Hulu Langat Tel : 603 – 8733 5717Jalan Semenyih, 43000 Kajang Fax : 603 – 8736 7137Selangor Darul Ehsan

Kuala Langat Tel : 603 – 3187 1620Telok Datok, 42700 Banting Fax : 603 – 3187 8144Selangor Darul Ehsan

Sepang Tel : 603 – 8706 1154No. 29 Jalan 6, Kosmopleks Fax : 603 – 8706 1187Bandar Baru Salak Tinggi43900 Sepang, Selangor Darul Ehsan

Klang Tel : 603 – 3371 0144Jalan Kota, 41000 Klang Fax : 603 – 3371 0830Selangor Darul Ehsan

Pusat Perkhidmatan Pelanggan (PUSPEL) Toll-Free Helpline: 1-800-88-5252Fax No.: 603 – 2295 5168SMS at 39222 type: PUSPEL<space><your complaints/feedback>E-mail: [email protected]

# Awarded the following certifications:1. Occupational Health & Safety Management System (OHSAS 18001:1999)2. Environmental Management System (ISO 14001:2004/EN ISO 14001:2004/BS EN ISO 14001:2004/MS ISO 14001:2004)3. Quality Management System (ISO 9001:2000/EN ISO 9001:2000/BS EN ISO 9001:2000/MS ISO 9001:2000)4. Competence of Testing Laboratories (ISO/IEC 17025:1999)

* Awarded the following certification:1. Quality Management System (ISO 9001:2000/EN ISO 9001:2000/BS EN ISO 9001:2000/MS ISO 9001:2000)

Growing withour customers

“In any business, growthdepends on customersatisfaction. A satisfiedcustomer is the bestbusiness strategy.”

Satisfying our customers means gettingthings right. Our aim is therefore todeliver an abundant supply of topquality water at a reasonable cost. Weare therefore undertaking an ongoingprogramme of investment in waterquality and distribution.


CORPORATEPROFILE

PNHB was listed on the Main Board of Bursa Malaysia Securities Berhad on 8 July 1997. It isthe first water treatment and supply concession company to be listed on Bursa MalaysiaSecurities Berhad under the Infrastructure Project Company guidelines issued by theSecurities Commission.

As an investment holding company, PNHB acted as the listing vehicle for Puncak Niaga (M)Sdn Bhd (PNSB), an Infrastructure Project Company. PNSB is the holder of two concessionsawarded by the Selangor State Government. The first, a Privatisation Cum ConcessionAgreement (PCCA) awarded on 22 September 1994 allowed PNSB to take over, operate,maintain, manage, rehabilitate and refurbish 27 existing water treatment plants formerlyunder the management of Jabatan Bekalan Air Selangor (JBAS), the Waterworks Departmentof Selangor Darul Ehsan [now known as Perbadanan Urus Air Selangor Berhad (PUAS)]. Thesecond concession, a Construction Cum Operation Agreement (CCOA) was awarded on 22March 1995 to finance, design, construct, operate, manage and maintain a new 950 millionlitres per day water treatment plant at Bukit Badong under the Selangor State Government’sSungai Selangor Water Supply Scheme Phase 2 Project (SSP2). Both the PCCA and CCOAprovide for the concessions to expire on 31 December 2020.

Under the CCOA, the development of the SSP2 Water Treatment Plant was undertaken intwo stages. The first stage, with a production capacity of 475 million litres per day, wascompleted in October 1998, two months ahead of the commitment given to the SelangorState Government. The second stage of the SSP2 Water Treatment Plant, with a productioncapacity of 475 million litres per day was originally scheduled for completion andcommissioning on 1 January 2002. Instead, it was completed and commissioned one yearahead of schedule on 1 January 2001.

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 featby engineering standards. The abovementioned early completion of projects clearlyexemplifies Puncak Niaga’s excellent capabilities in managing and undertaking large-scalewater supply projects in Malaysia.

Today, PNSB is the largest water supply concessionaire in Malaysia. We operate, manage andmaintain 29 water treatment plants with a total average production capacity of 1,909 millionlitres per day. This volume is equivalent to approximately 48.56% of the treated waterrequirement in the State of Selangor Darul Ehsan and the Federal Territory of Kuala Lumpur.

On 15 December 2004, PNHB’s subsidiary, Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS)was granted a concession for a period of 30 years, commencing from 1 January 2005 wherebySYABAS has assumed all duties and functions of PUAS in the area of water supply anddistribution of water to the consumers within the State of Selangor and the Federal Territoriesof Kuala Lumpur and Putrajaya involving a population of 7.3 million and industrial andcommercial users through 1.52 million consumer accounts, thus making it the biggest watersupply privatisation in Malaysia.

PUNCAK NIAGA HOLDINGS BERHAD (PNHB) WASINCORPORATED ON 7 JANUARY 1997 UNDER THEMALAYSIAN COMPANIES ACT, 1965 AS A PUBLICCOMPANY LIMITED BY SHARES. IT IS AN INVESTMENTHOLDING COMPANY WITH INTEREST IN INFRASTRUCTUREACTIVITIES SPECIALISING IN WATER TREATMENTENGINEERING AND WATER-RELATED ACTIVITIES.

PNHB's Corporate Headquarters at Wisma Rozali,Shah Alam, Selangor


CORPORATEPROFILE

• Continue to reduce Non Revenue Water and enhance treated water quality.

• Implement projects to forestall water shortages and meet the increasing demand for treatedwater in Selangor, Kuala Lumpur and Putrajaya.

• Continue to invest in R&D, new technologies and employee development.

• Capitalise on opportunities offered under the Ninth Malaysia Plan, the Water Services IndustryAct 2006 and the National Water Services Commission Act 2006.

• Explore options for expansion locally and abroad, particularly in the Middle East, India and China.

• Upgrade 15 water treatment plants by installing sludge treatment systems by the end of 2007.

• Double the budget for our Environmental Surveillance Section to enhance monitoring of waterresources, pollution control and maintenance of river monitoring stations.

• Launch a “Briged Remaja” programme to cover secondary schools as an extension of ourenvironmental awareness and education programmes.

Strategic Steps for 2007

Right:Scenic view of Sungai Langat Dam


CORPORATESTRUCTURE

SYARIKAT BEKALAN AIR SELANGOR SDN BHD70%

supply and distribution of treated water within Selangor and the Federal Territories

of Kuala Lumpur & Putrajaya

PERBADANAN URUS AIR SELANGOR BERHAD100%

ceased operation

PUNCAK RESEARCH CENTRE SDN BHD100%research & development and technologydevelopment for water, wastewater andenvironment sectors

PUNCAK SERI (M) SDN BHD100%dormant

PUNCAK NIAGA (INDIA) SDN BHD100%dormant

NS WATER SYSTEM SDN BHD100%dormant

PUNCAK OIL & GAS SDN BHD70%dormant

PUNCAK NIAGA (M) SDN BHD82.50%

operation, maintenance, management,construction, rehabilitation and

refurbishment of water treatment facilities

IDEAL WATERRESOURCES

SDN BHD100%

ceased operation

UNGGUL RAYA (M) SDN BHD

100%ceased operation

INVESTMENT HOLDING


ORGANISATIONSTRUCTURE

HEALTH, SAFETY &QUALITY MANAGEMENTGeneral Manager Vacant

WATER RESOURCES &ENVIRONMENTALSURVEILLANCEGeneral ManagerPuan Roowina MericanA. Rahim Merican

FINANCE DIVISIONExecutive DirectorMr Tan Seng Lee

OPERATION I DIVISIONExecutive Director Tuan Syed Danial Syed Ariffin

HUMAN RESOURCES & ADMINISTRATIONDIVISIONExecutive DirectorYBhg Dato’ Shaari Ismail

CORPORATE AFFAIRSDIVISIONExecutive Director Encik Nasir Khan Illadad Khan

LEGALGeneral Manager Vacant

CORPORATECOMMUNICATIONGeneral Manager Vacant

STRATEGIC RESOURCE CENTREGeneral Manager Dr Abdul Rahim Awang Kechik

OPERATION IIDIVISION

Executive DirectorVacant

CORPORATE FINANCEExecutive DirectorMr Ng Wah Tar

SECRETARIALSenior General ManagerMadam Tan Bee Lian

INTERNAL AUDITActing Head (Senior Manager)Encik Mohammed Sofian Ismail

MANAGING DIRECTORYBhg Dato’ Matlasa Hitam

CONTRACT &PROCUREMENTSenior ManagerEncik Mohd Azmi Jusoh

EXECUTIVE CHAIRMAN’S OFFICESenior General ManagerMr Ramalingam K.R. Arumugam

Senior General ManagerEncik Zon Abd Hamid

General ManagerTuan Syed Aminuddin Syed Zakaria

OPERATION OF WTPsGeneral Manager Ir Ooi Cheng Swee

Plant Improvement &Maintenance SectionAssistant General ManagerIr Ausamah Darwish

SSP2 WTPSenior ManagerEncik Azhani Sukimi

Wangsa Maju WTPPlant SuperintendantEncik Zulkeply Abdollah

FINANCE & ACCOUNTSGeneral Manager Vacant

Compensation & BenefitsAssistantGeneral ManagerEncik Nik Azmi Nik Yaacob

AccountsSenior ManagerMr Kok Mun Choon

HUMAN RESOURCES &ADMINISTRATIONDIVISIONSenior General ManagerEncik Mohamad Khairudin Mohamad

Human Resources ManagementManagerPuan Poziah Abas

AdministrationManagerEncik Kamarulzaman Abu Bakar

Protective ServicesManagerEncik Abdul Latif Othman

Sports & RecreationalManagerEncik Hamdi Jaafar

Property ManagementManagerEncik Azreen Azman

Food & BeverageManagerVacant

Information TechnologyAssistant ManagerEncik Mat Suhairi Darin

EXECUTIVE DIRECTOR’S OFFICESenior General Manager Vacant

Major Project &Upgrading ProjectGeneral ManagerIr Tan Hui Kuan

Sabah ProjectGeneral ManagerMr Seng Pay

Business DevelopmentGeneral ManagerIr Ahmad Marzuki Hashim

EXECUTIVE CHAIRMANYBhg Tan Sri Rozali Ismail



INFORMATION &COMMUNICATIONTECHNOLOGYDIVISIONSenior GeneralManagerTuan Haji MohdSuhaimi Rafie

FINANCE &ACCOUNTSDIVISIONSenior GeneralManagerMadam Wong Ley Chan

BILLING &RECOVERYDIVISIONGeneral ManagerVacant

CORPORATECOMMUNICATIONSDEPARTMENTManagerCik Shahrul BariahMohd Rejab

GOVERNMENT &COMMUNITYLIAISON DEPTManagerVacant

EVENTMANAGEMENTDEPARTMENTManagerEncik Abdul RaofAhmad

PUSPEL CALL CENTREManagerEncik SahabudinBasiron

PUSPEL ICUManagerMr Wun Wei Nyuk

PUSPEL YAKINManagerEncik HazamuddinHashim

NETWORKOPERATION CENTREManager Encik Mohd ShafieM. Taib

BUSINESSAPPLICATIONSUPPORT &ADMINISTRATION ManagerPuan MunalizaMaseran

PROGRAMMEPLANNING &APPLICATIONDEVELOPMENTManagerEncik Hamidun Jaafar

TREASURY &BANKING Senior ManagerEncik ShamsulMohd Isa

ACCOUNTS &FINANCIALREPORTINGSenior ManagerMadam Tan SiewChaing

MANAGEMENT &PROJECT ACCOUNTSManagerMadam Lim Mun Lee

BILLINGSenior ManagerIr Ch’ng Beng Kuan

MONITORING &DEVELOPMENTManagerMs Kalei Veane

RECOVERYManagerMr VasanRamachandram

ASSET & OFFICEMANAGEMENTManagerEncik Damuri Dollah

SPORTS &RECREATIONALAssistant ManagerEncik As'ad Mohd Sidek

TRANSPORTAssistant Manager Encik M. TaranDaniel Abdullah

STOREAssistant ManagerVacant

GENERALADMINISTRATIONManagerEncik Abdul Rahman Bakar

ADVISORY &LITIGATIONManagerMr V. Vishnu Kumar

ENFORCEMENTManagerEncik Mohd Mustafa Osman

PLANNING &RECRUITMENTManagerCik Noor FadillaM. Samsi

INDUSTRIALRELATIONManagerMr SanthanaKrishnan

TRAINING/CAREERDEVELOPMENTManagerPuan Yasmin Hood

COMPENSATIONS & BENEFITS/EMPLOYEERELATIONSManagerEncik Arash Mohd Zin

CUSTOMERSERVICES DIVISIONGeneral ManagerVacant

CORPORATECOMMUNICATIONS& PUBLIC AFFAIRS DIVISIONGeneral Manager Encik Abdul Halem Mat Som

ADMINISTRATIONDIVISIONSenior GeneralManager Encik NaemuddinAbdullah

LEGAL &ENFORCEMENTDIVISIONGeneral Manager Vacant

HUMAN RESOURCEDIVISIONSenior GeneralManagerTuan Haji ZainuddinOthman

EXECUTIVE DIRECTOR FINANCEMadam Thein Kwee Sim

EXECUTIVE DIRECTORHUMAN RESOURCE,ADMINISTRATION & LEGALVacant

EXECUTIVE DIRECTORCORPORATE COMMUNICATIONS,CUSTOMER SERVICEVacant

HEALTH, SAFETY &ENVIRONMENTManagerEncik Taufik AfendyOthman

AUDIT DIVISIONGeneral ManagerTuan Haji Sonari Solor

GOVERNMENT RELATIONSExecutive DirectorEncik Othman Ismail

EXECUTIVE CHAIRMANYBhg Tan Sri Rozali Ismail

CHIEF EXECUTIVE OFFICER YBhg Dato’ Ruslan Hassan



SECRETARIALManagerMadam Lau Pueh Geok

BUMIPUTERA ENTREPRENEUR’SPARTICIPATION & DEVELOPMENTGeneral ManagerEncik Mohamad Isa Mohd Yassin

SECURITY & ENFORCEMENTDIVISIONGeneral ManagerEncik Saadon Kardi

STRATEGIC RESOURCE CENTREGeneral ManagerVacant

PUMP HOUSE &RESERVOIRManagerEncik Mohd Yusri Samah

INSTRUMENTATION & APPURTENANCESManagerEncik Abd Halim Othman

MECHANICAL/ELECTRICALDIVISIONAssistant GeneralManagerVacant

NON REVENUEWATER (NRW)DIVISIONSenior GeneralManager Ir Yeong Chee Meng

OPERATION/MAINTENANCEDIVISIONGeneral Manager Ir Abdul RahimShamsudin

DISTRICTSSenior GeneralManagerEncik MansorAbd Ghani

ZONE 1ManagerEncik Rohizat Ariffin

ZONE 2ManagerEncik Mohd Azmi Md Nasir

ZONE 3ManagerVacant

HYDRAULICMODELLINGSpecialist Mr Jacob K.Jorgensen

NORTH ZONEKuala SelangorSenior ManagerPuan Maimunah Musa

Sabak BernamSenior ManagerEncik Abdul LatipMustafa

Hulu SelangorSenior ManagerEncik Mustafa Mohamed

GombakGeneral ManagerTuan Haji Yusof Saroji

SOUTH ZONEHulu LangatGeneral ManagerTuan Haji Ariff Ibrahim

Kuala Langat Assistant General ManagerEncik AhmadSuhaidin Ismail

SepangSenior ManagerEncik Mokhtar Atan

KlangGeneral ManagerTuan Haji Muhamad Darif Haji Idris

CENTRAL ZONEKuala LumpurGeneral Manager Cik Hayati Ab Wahab

PetalingGeneral ManagerTuan Haji Abd RashidAbd Satar

PRODUCTIONManagerIr Amarjit Singh

BULK TRANSFER& TRANSMISSIONSYSTEMManagerEncik MohdYazid Selamat

PROJECTMANAGEMENT 10 SCHEMES &RM500M WTPUPGRADING WORKSSenior ManagerIr Wan MohamedJaafar Wan AhmadNasiry

METER CHANGEOUT PROGRAM &OTHERSGeneral Manager Vacant

PIPE REPLACEMENTPROGRAMAssistant GeneralManagerIr Lee Choong Weng

CONTRACTADMINISTRATIONManagerMadam Phoon Yin Fong

PHASE 2 - CONTRACT & LEAKDETECTIONGeneral Manager Ir Albert Loh Thiam Hock

INSTRUMENTATION & PROJECTManagerVacant

DATA COLLECTION & ANALYSISManagerVacant

PRE TENDERADMINISTRATIONManagerEncik Wan AbdulAziz Wan Muda

POST TENDER &PROCUREMENTManagerEncik Roslan Mat Tahar

EXECUTIVE DIRECTOROPERATIONSIr V. Subramaniam

WATER QUALITYDIVISIONManagerMr Ragbir Singh

PROJECTMANAGEMENT &DEVELOPMENTDIVISIONSenior GeneralManagerVacant

EXECUTIVE DIRECTORPLANNING & DEVELOPMENTVacant

CONTRACT &PROCUREMENTDIVISIONAssistant GeneralManagerIr Nasir Ismail

TECHNICAL SERVICESAssistant GeneralManagerIr Hussain Salikin

PLANNING & DESIGN

PLANNINGManagerCik Rohizan M. Ismail

DESIGNManager Ir Yau Ho Hu

RESEARCH &DEVELOPMENTManagerVacant

CHIEF OPERATING OFFICERYBhg Dato’ Ir Lee Miang Koi

PLANNING &DESIGN DIVISIONGeneral ManagerVacant

MAPPING &ASSETSenior Manager Encik Hairuddin Munip

MAPPING GISManagerEncik Mohd Sapran Hosnan

SCADAManagerEncik Wan BurhanuddinWan Ismail

ASSET MANAGEMENT (DISTRIBUTION SYSTEM)Assistant ManagerEncil Roslan Osman

DEVELOPMENTGeneral ManagerMr Koh Eng Seng

NORTHERN ZONEAssistant Manager Puan Rosmizah Ahmad

CENTRAL ZONEManagerIr Pua Eng Teik

SOUTHERN ZONEAssistant Manager Puan Siti Aisah Md Lasim

PROJECTMANAGEMENT(CAPEX WORKS)Senior ManagerIr Muhamad Zuki Mat Zin

QSSenior Manager Puan Ramnah M. Ramli

CIVILManagerEncik Mohd Saupi Ab Wahab


OUR ROLE INTHE WATERSUPPLY SYSTEM

FLOCCULATION CHANNEL

Water Supply Distributorfor Selangor,

Kuala Lumpur and Putrajaya

Consumers

RAW WATERPUMP

BANDSCREEN GRIT CHAMBER

FILTRATION TANK

MODIFIED LIQUID ALUM

AERATOR

SEDIMENTATION TANK

FILTRATIONGALLERY

MIXING CHANNEL

TO RIVER/SLUDGELAGOONS CLEAR WATER TANK

TREATEDWATERPUMP

SODIUM SILICOFLOURIDE

HYDRATED LIME

CHLORINE

INTAKE

Water Meter(Condominium/

Flat) Water Meter(Residential

Homes)

Water Meter(Industrial/

Factory) Water Meter(Government/Institutional)

Water Meter(Office)

Water Meter(Shopping Centre)

Rivers Dams

BOOSTERSTATION

• Puncak Niaga (M) Sdn Bhd (PNSB) • Syarikat Pengeluar Air Sungai

Selangor Sdn Bhd (SPLASH)

• Konsortium ABASS Sdn Bhd

• Puncak Niaga (M) Sdn Bhd (PNSB) • Syarikat Pengeluar Air Sungai

Selangor Sdn Bhd (SPLASH)

• Konsortium ABASS Sdn Bhd

Dam Operators in Selangor

WTP Operators in Selangor

WATERTOWER

SERVICERESERVOIR

RESERVOIR

BALANCINGRESERVOIR

BULKMETERS

Manages river basin

upstream beginning

3 nautical miles from the sea

Oversees environment issues

concerning rivers

Selangor WaterManagement Authority

(LUAS)

Department ofEnvironment

(DOE)

Department ofIrrigation and Drainage

Malaysia(DID)

Flood control and

river management

SCHEMATIC DIAGRAM OF WATER TREATMENT SYSTEM

Syarikat Bekalan AirSelangor Sdn Bhd (SYABAS)

Polic

y, P

lann

ing,

Enf

orce

men

t an

d Su

rvei

llanc

e by

Gov

ernm

ent

Age

ncie

s

Regulatory Authorities Operators

Selangor WaterRegulatory Department

(JKAS)


CORPORATEACHIEVEMENTS

ASIA WATER 2006Asia’s No. 1 Water & Wastewater Industry Event Best @ Show AwardWinner: Most Popular Booth Puncak Niaga Holdings Berhad21 – 24 March 2006

ENVIRONMENTAL MANAGEMENT SYSTEM CERTIFICATION ISO 14001:2004 SSP2 WTPOCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEMCERTIFICATION OHSAS 18001:1999 SSP2 WTPQUALITY MANAGEMENT SYSTEM CERTIFICATION ISO 9001:2000 SSP2 WTP

CERTIFICATION OF ACCREDITATION FOR THE COMPETENCE OF TESTING LABORATORIES ISO/IEC 17025:1999SSP2 WTP

2006 GOLD TROPHY NATIONALEXCELLENCE AWARD FOROCCUPATIONAL SAFETY ANDHEALTH FOR THE WATERUTILITY SECTOR

ACCA MALAYSIA ENVIRONMENTAL AND SOCIAL REPORTING AWARDS 2006Certificate of ParticipationShortlisted Participant under the Social Reporting CategoryPuncak Niaga Holdings Berhad3 May 2007

NATIONAL ANNUAL CORPORATE REPORT AWARDS (NACRA) 2006Certificate of Merit Puncak Niaga Holdings Berhad30 November 2006


FIVE-YEARFINANCIALHIGHLIGHTS

FINANCIALCALENDAR

31 DEC 31 DEC 31 DEC 31 DEC 31 DECIn RM’000 2006 2005 2004 2003 2002

KEY RESULTSRevenue 1,428,124 1,144,944 566,841 578,260 565,105 Profit before taxation 367,276 196,845 77,119 183,411 180,114 Net profit attributable to equity holders of the Company 331,602 99,259 46,439 129,586 127,096*

BALANCE SHEETProperty, plant and equipment 1,495,483 1,424,975** 1,361,459** 1,437,709** 1,520,419**Prepaid land lease payments 20,128 20,356** 8,107** 8,195** 8,284**Project development expenditure 1,432,068 836,139 266,840 246,809 245,838Other non-current assets 1,272,187 972,047 825,805 132,038 185,740Current assets 2,222,729 1,615,574 665,678 1,342,384 907,107Total assets 6,442,595 4,869,091 3,127,889 3,167,135 2,867,388

ISSUED AND PAID-UP CAPITALShare capital 587,347 463,180 459,935 451,166 439,278Reserves 1,314,764 811,468 739,207 680,847 535,028*Equity attributable to equity holders of the Company 1,902,111 1,274,648 1,199,142 1,132,013 974,306*

Net assets per share attributable to equity holders of the Company (RM) 3.31 2.79 2.61 2.51 2.22*

RATIOS AND STATISTICNet profit margin attributable to equity holders of the Company (%) 23 9 8 22 22*

Basic earnings per share attributable to equity holders of the Company (sen) 101.51 30.80# 14.52# 41.79# 41.40*#

Interest bearing debt (RM'000) 2,923,089 2,423,279 1,504,082 1,613,636 1,529,608Gearing ratio (times) 1.54 1.90 1.25 1.43 1.57*Current ratio (times) 2.01 1.95 1.57 5.73 3.66

Financial year ended 31 December 2006

Announcement of results:1st Quarter Results ended 31 March 2006 26 May 20062nd Quarter Results ended 30 June 2006 23 August 20063rd Quarter Results ended 30 September 2006 22 November 20064th Quarter Results ended 31 December 2006 27 February 2007

Book Closure Date for Payment of Final Dividend 18 July 2006Payment of Final Dividend of 6 sen less 28% income tax for the financial year ended 31 December 2005 8 August 2006Audited Financial Statements for the financial year ended 31 December 2006 23 April 2007Published Annual Report 6 June 200710th Annual General Meeting 28 June 2007

* These comparatives have been restated following the change in accounting policy on deferred tax in 2003 to comply with the MASB Standard 25 - Income Taxes

(now known as FRS112 - Income Taxes).

** These comparatives have been restated following the early adoption of the revised FRS 117 - Leases in 2006, which resulted in the reclassification of leasehold

land as prepaid lease payments retrospectively.

# These comparatives have been restated to take into account the effects of the bonus issue and consolidation of shares which were part of the Company's Capital

Repayment exercise.

3.60

1300

1250

1200

1150

1100

1050

1000

950

900

3.40

3.80

Share Price (RM) KLCI

3.20

3.00

2.80

2.60

2.40

Jan Feb Mar Apr May Jun Jul

2006 2007

Aug Sep Oct Nov Dec Jan Feb Mar

6.00m

4.00m

2.00m


FINANCIAL & SHARE

PERFORMANCE

SHARE PERFORMANCE

PNHB MONTHLY AVERAGECLOSING PRICES

KUALA LUMPUR COMPOSITE INDEX (KLCI)MONTHLY AVERAGE CLOSING PRICES

VOLUME OF SHARES TRADED

FINANCIAL PERFORMANCE

REVENUERM’000

565,

105

578,

260

566,

841

1,14

4,94

4

1,42

8,12

4

127,

096

129,

586

46,4

39

99,2

59

2,86

7,38

8

3,16

7,13

5

3,12

7,88

9

4,86

9,09

1

6,44

2,59

5

NET PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANYRM’000

TOTAL ASSETSRM’000

331,

602

02 03 04 05 06 02 03 04 05 0602 03 04 05 06

Growing withour partners

“By working with others,you experience growth in yourself.”

Our relationships with our businesspartners grow out of trust andrespect. We work as a team with awin-win approach. It all comes downto mutual effort, mutual commitment,mutual reward.


BOARD OFDIRECTORS

YBHG TAN SRI ROZALI ISMAIL

Aged 50, MalaysianExecutive Chairman of PNHB Group

YBHG TAN SRI ROZALI ISMAIL IS THE FOUNDER OF PNSB, THE EXECUTIVECHAIRMAN AND SUBSTANTIAL SHAREHOLDER OF PNHB. HE WAS APPOINTEDTO THE BOARD OF PNHB ON 24 APRIL 1997.


BOARD OF DIRECTORS

Upon obtaining a Bachelor of Laws Degree from University ofMalaya in 1981, YBhg Tan Sri Rozali Ismail began his career asLegal Advisor with the Urban Development Authority (UDA)before joining Bank Islam (M) Berhad in 1983. Together with afew pioneer bank staff, he conceptualised the first institution ofIslamic banking in Malaysia. Subsequently, in 1987 he started hisown legal practice as an Advocate and Solicitor for 7 years,specialising in corporate, property and banking works.

In 1989, YBhg Tan Sri Rozali Ismail set up a family-ownedcompany and embarked into the property development sector,with involvement in several development projects in the KlangValley, Kuantan and Johor. Under the banner of Puncak AlamHousing Sdn Bhd, he developed a new township known as BandarBaru Puncak Alam. The family-owned company also ventured intothe utility business in 1989 with the setting up of PNSB. Due tohis vast experience in various fields, he was entrusted by theSelangor State Government, via PNSB, to manage the watertreatment plants for the whole of the State of Selangor DarulEhsan and the Federal Territory of Kuala Lumpur. PNHB wassubsequently incorporated in 1997 as the holding company of PNSB and was listed on the Main Board of Bursa MalaysiaSecurities Berhad on 8 July 1997.

In recognition of his outstanding contributions in championingmanagement excellence and best practices in the Malaysianwater and wastewater industry, YBhg Tan Sri Rozali Ismail wasawarded the prestigious Asia Water Management ExcellenceAward 2002 – Individual Award Category, an award at Asianlevel, by the Regional Institute of Environmental Technology on26 March 2002. He was conferred a Fellowship Award by theInstitute of Marketing Malaysia (IMM) on 6 November 2001 forhis invaluable contributions to promote the growth anddevelopment of the Malaysian property market. On 16 January2004, he was elected Advisor to IMM. YBhg Tan Sri Rozali Ismailwas also honoured as a Top 10 Nominee for the Ernst & YoungEntrepreneur Of The Year – Malaysia 2002 and Malaysia 2003(Master Entrepreneur Category) Award in recognition of hisoutstanding entrepreneurship and leadership skills.

YBhg Tan Sri Rozali Ismail is the past Deputy President of theMalaysian Water Association (MWA) (2003/2005 Session) and sitson the Board of Universiti Utara Malaysia, a leading Malaysianuniversity. He is an active member of various influential

governmental and non-governmental associations such asMalaysian Industry-Government Group for High Technology(MIGHT), Malaysian Institute of Directors (MID), Malaysian-BritishBusiness Council, Malaysia-Indonesia Business Council, CorporateMalaysia Roundtable, Malaysia-Russia Business Council,Commonwealth Partnership for Technology Management, FELDACommunity Social Development Committee, Gagasan BadanEkonomi Melayu Negeri Selangor and Yayasan Budi PenyayangMalaysia. On 17 April 2004, he was elected President of the Malay Chamber of Commerce for the State of Selangor(2004/2008 Session).

YBhg Tan Sri Rozali Ismail was appointed advisor of the Businessand Accounting Faculty Council, University of Malaya for a termof 3 years, on 21 May 2004. On 25 June 2004, he was appointedthe Governor for Malaysia of Asia Pacific Marketing Federation(APMF) Foundation. On 24 September 2004, YBhg Tan Sri RozaliIsmail was conferred an Honorary Doctorate in ComplementaryMedicines (Humanity Services) by the Open InternationalUniversity for Complementary Medicines, Colombo, Sri Lanka.YBhg Tan Sri Rozali Ismail was appointed Advisor of GabunganPersatuan Usahawan Melayu Selangor and Wilayah Persekutuan(GAPUMS) in August 2005 and Gabungan Pelajar MelayuSemenanjung (GPMS) (2006/2009 Season) in September 2006.YBhg Tan Sri Rozali Ismail became a Life Member of Gabungan Ikhtisas Dan Usahawan Bumiputra Anak Selangor, Selangor (GIBS) in March 2007.

Besides PNHB, YBhg Tan Sri Rozali Ismail is also the ExecutiveChairman and major shareholder of 2 other listed companies,namely TRIplc Berhad, a property company and WWE HoldingsBhd, a leading wastewater engineering company in Malaysia. Heis the Chairman of Gabungan Wawasan Generasi Felda, ExecutiveChairman of Syarikat Bekalan Air Selangor Sdn Bhd (SYABAS)and also sits on the Board of Perbadanan Urus Air SelangorBerhad (PUAS).

YBhg Tan Sri Rozali Ismail is related to YBhg Dato' Shaari Ismail(his elder brother), PNSB’s Executive Director of Human Resources& Administration Division who is also a substantial shareholder ofthe Company.

YBhg Tan Sri Rozali Ismail attended 4 out of the 5 Board Meetingsof PNHB held in the financial year ended 31 December 2006.


BOARD OFDIRECTORS

YBHG DATO’ MATLASA HITAM

Aged 67, MalaysianManaging Director of PNHB and PNSB

YBhg Dato’ Matlasa Hitam joined PNSB on 1 July 2003 asExecutive Director, Human Resources & AdministrationDivision and was appointed as Managing Director of PNHBand PNSB on 1 October 2005. YBhg Dato’ Matlasa Hitam is the Head of Compliance, Internal Control and Risk Policy Committee (CICR) and sits on the Board of severalprivate companies.

YBhg Dato’ Matlasa 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. YBhg Dato’Matlasa has more than 30 years of senior managementexperience covering areas related to manufacturing,marketing, human resources, finance as well as contract andproject management.

YBhg Dato’ Matlasa served as Managing Director/ChiefExecutive Officer and Board member of both PetronasMethanol (L) Sdn Bhd and Petronas Gas Supply (L) Sdn Bhdfrom 1992 to May 1996. Prior to joining PNSB, YBhg Dato’ Matlasa was the Executive Vice Chairman of WWEHoldings Bhd.

YBhg Dato' Matlasa attended 5 out of the 5 Board Meetingsof PNHB held in the financial year ended 31 December 2006.

YBHG DATO’ RUSLAN HASSAN

Aged 51, MalaysianNon-Independent Non-Executive Director of PNHB andChief Executive Officer of SYABAS

YBhg Dato’ Ruslan joined PNSB on 1 November 1995 as Headof Corporate Affairs Division. He was appointed to the PNSBBoard on 26 December 1996, to the Board of PNHB on 24 April 1997 and as the Executive Vice Chairman of PNHB on6 April 1999. Upon securing the Selangor water distributionconcession on 1 January 2005, YBhg Dato’ Ruslan wasappointed as Chief Executive Officer of SYABAS. He resignedas a Director of PNSB on 30 September 2005 and was re-designated from Executive Vice Chairman and ExecutiveDirector, Corporate Affairs Division of PNHB to Non-Independent Non-Executive Director of PNHB with effectfrom 1 October 2005.

YBhg Dato’ Ruslan was appointed a member of the IndustrialCourt – Employer Panel for the period 1 January 2004 to 31December 2006. He is also a member of Malaysian Institute ofDirectors, Malaysian Water Association and Institute ofMarketing Malaysia. Upon obtaining a Bachelor of LawsDegree from University of Malaya in 1981, YBhg Dato’ Ruslanbegan his career as Legal Advisor and later as Senior LegalCounsel of Esso Production Malaysia Inc. In 1985, he joinedPernas Sime Darby Holdings Sdn Bhd as Group LegalAdvisor/Company Secretary. YBhg Dato’ Ruslan has 4 years ofexperience as an Advocate and Solicitor. In 1993, he joinedRashid Hussain Berhad as Corporate Affairs Senior GeneralManager and later appointed as an Executive CommitteeMember. From November 1995 to February 2003, YBhg Dato’Ruslan sat on the Board of Rashid Hussain Berhad and RashidHussain Securities Sdn Bhd and served as an Audit Committeemember of both companies as well as various subsidiaries. Healso sits on the Board of Perbadanan Urus Air Selangor Berhadand Syarikat Bekalan Air Selangor Sdn Bhd.

YBhg Dato’ Ruslan attended 5 out of the 5 Board Meetingsof PNHB held in the financial year ended 31 December 2006.


YBHG DATO' IR LEE MIANG KOI

Aged 53, MalaysianNon-Independent Non- Executive Director of PNHB and Chief Operating Officer of SYABAS

YBhg Dato' Ir Lee joined PNSB in 1995 and was responsiblefor the project and business development of PNHB. YBhgDato' Ir Lee was appointed as a Director of PNSB and PNHBon 2 February 1999 and 1 September 1999 respectively andChief Operating Officer of Syarikat Bekalan Air Selangor SdnBhd on 1 January 2005. He resigned as a Director of PNSBon 30 September 2005 and was re-designated fromExecutive Director, Project and Business DevelopmentDivision of PNHB to Non-Independent Non-ExecutiveDirector of PNHB with effect from 1 October 2005. He is amember of Malaysian Water Association, Malaysian Instituteof Directors, Institute of Engineers Malaysia and Institute ofMarketing Malaysia.

YBhg Dato' Ir Lee graduated as a civil engineer fromUniversity of Technology Malaysia in 1978 and in 1989, heobtained a Masters Degree in Environmental Engineeringmajoring in water supply and wastewater engineering fromthe Asian Institute of Technology in Bangkok. YBhg Dato' IrLee has 29 years of experience in the water supply sectorand has held various positions during his tenure with thePublic Works Department as well as the WaterworksDepartment in Malaysia, specialising in the field of watersupply services. He was previously a Senior ExecutiveEngineer in the Design and Planning of the Water SupplyBranch in the Public Works Department Headquarters andalso Director of the Negeri Sembilan WaterworksDepartment. He left the Public Works Department in 1991to join Ranhill Bersekutu Sdn Bhd, holding positions fromSenior Engineer to Vice President.

YBhg Dato' Ir Lee attended 4 out of the 5 Board Meetings ofPNHB held in the financial year ended 31 December 2006.

TUAN SYED DANIAL SYED ARIFFIN

Aged 49, MalaysianExecutive Director, Operation I Division of PNHB and PNSB

Tuan Syed Danial graduated in 1981 with a BSc. (Hons) inCivil Engineering from University of Aston in Birmingham,United Kingdom. He is a civil engineer by profession and hasbeen with the PNHB Group since December 1995. He beganhis career with PNSB as a Manager of Operation and wassubsequently promoted to Senior Manager, AssistantGeneral Manager and General Manager of Operation. Priorto his appointment to the Board of PNSB and PNHB on 1 March 2004 (and subsequently re-designated as ExecutiveDirector, Operation I Division on 1 April 2005) he was theActing Executive Director of Operation Division (July 2003to February 2004).

Tuan Syed Danial previously worked with the Pahang PublicWorks Department for 10 years, holding positions fromProject Engineer (1981-1983) to District Engineer for JKRCameron Highlands (1983-1991) and the Selangor WaterWorks Department between 1991 to 1995, whereby he wasthe Senior Project Engineer overseeing the construction ofthe Sungai Selangor Phase 1 Water Supply Project. He is amember of Institute of Marketing Malaysia, MalaysianWater Association, a Registered Engineer with the Board ofEngineers, Malaysia and also sits on the Board of severalprivate companies.

Tuan Syed Danial attended 5 out of the 5 Board Meetings ofPNHB held in the financial year ended 31 December 2006.

BOARD OF DIRECTORS


BOARD OFDIRECTORS

YBHG TAN SRI DATO’ HARI NARAYANAN GOVINDASAMY

Aged 57, MalaysianIndependent Non-Executive Director of PNHB

YBhg Tan Sri Dato’ Hari, a businessman was appointed to the Board of PNHB on 1 July 1999 as an IndependentNon-Executive Director. He is a member of PNHB’s Audit Committee, Remuneration Committee andNomination Committee. He holds a Bachelors Degree inElectrical and Electronic Engineering from University of Northumbria, England.

YBhg Tan Sri Dato’ Hari is a member of the Institute ofEngineers Malaysia, Malaysian Institute of Directors and aRegistered Professional Engineer with the Board ofEngineers, Malaysia. He has extensive experience in electricaland electronic engineering and has held various keypositions with several established companies as an engineerand entrepreneur. YBhg Tan Sri Dato’ Hari also sits on theBoard of Tenaga Nasional Berhad, SP Setia Berhad, LembagaLebuhraya Malaysia, Asian Institute of Medicine, Scienceand Technology and several private companies.

YBhg Tan Sri Dato’ Hari attended 5 out of the 5 BoardMeetings of PNHB held in the financial year ended 31 December 2006.

YB TAN SRI DATO’ SERI DR TING CHEW PEH


YB Tan Sri Dato’ Seri Dr Ting joined PNHB on 15 July 2000 asan Independent Non-Executive Director and a member ofthe Remuneration Committee and the NominationCommittee. Currently, he is the Chairman of PNHB’s AuditCommittee, and Compliance, Internal Control and Risk PolicyCommittee. He graduated with a Bachelor of Arts Degreefrom University of Malaya in 1970 and obtained a Master ofScience from University of London in 1972. He also holds aDoctorate in Philosophy, which he obtained from Universityof Warwick in 1976. YB Tan Sri Dato’ Seri Dr Ting is a memberof Malaysian Institute of Directors.

YB Tan Sri Dato’ Seri Dr Ting started his career as a lecturerin the Faculty of Humanities and Social Sciences atUniversiti Kebangsaan Malaysia from 1974 to 1980 and wassubsequently an Associate Professor of the said Faculty until1987. Between 1979 to 1986, YB Tan Sri Dato’ Seri Dr Tingpublished two books entitled “Konsep Asas Sosiologi” and“Hubungan Ras dan Etnik”.

In 1987, YB Tan Sri Dato’ Seri Dr Ting ventured into politicswith his election as a Member of Parliament for the Gopengconstituency, which he holds until today. He previously servedas Parliamentary Secretary of the Ministry of Health (1988-1989), Deputy Minister in the Prime Minister’s Department(1989-1990), Minister of Housing and Local Government(1990-1999) and Secretary-General of Malaysian ChineseAssociation (MCA) (1990-2005). He also sits on the Board ofPan Malaysia Capital Berhad Group, Hua Yang Bhd, PanMalaysia Corporation Berhad, Johan Holdings Berhad and alsoserves as a director of several private companies.

YB Tan Sri Dato’ Seri Dr Ting attended 5 out of the 5 BoardMeetings of PNHB held in the financial year ended 31 December 2006.


BOARD OF DIRECTORS

YB DATUK DR RAHMAN ISMAIL, MD, PHD


YB Datuk Dr Rahman joined PNHB on 3 January 2005 as anIndependent Non-Executive Director and was appointed theChairman of the Remuneration Committee and NominationCommittee and a member of the Audit Committee of PNHB,concurrently. He holds a Doctor of Medicine and Doctor ofPhilosophy in Epidemiology. He is a committee member ofthe Academy of Medicine and the Advisor to the PublicHealth Specialist Society. He attended post-doctoral coursesat the Centre of Disease Control Atlanta, USA and PasteurInstitute of France.

YB Datuk Dr Rahman started his career at the Kuala Lumpur General Hospital before joining Aventis PasteurInternational (the world’s leading and renowned vaccinemanufacturer). He was the Medical and Research Directorfor Asia Pacific and member of the Management Committeewith the company for 7 years from 1997 till he was electedas a Member of Parliament for the Gombak Constituency inMarch 2004.

YB Datuk Dr Rahman has conducted many studies ininfectious disease and vaccinology which were published inthe local and international journals. He is often invited tomake presentations at the local and international medicalconferences. He has received many international recognitionand academic awards. YB Datuk Dr Rahman is currently thePresident of National University Medical Alumni, Chairmanof the Parliamentarian Friendship Caucus, Chairman of theSelangor Member of Parliament Association, President ofthe Selangor Professional Group and Secretary for theInternational Bureau of UMNO Supreme Council.

YB Datuk Dr Rahman attended 5 out of the 5 BoardMeetings of PNHB held in the financial year ended 31 December 2006.

MR TAN SENG LEE

Aged 48, Malaysian Executive Director, Finance Division of PNHB and PNSB

Mr Tan was appointed to the Board of PNHB and PNSB on 1 September 2005. He is a Member of PNHB’s AuditCommittee and Remuneration Committee. Mr Tan is aChartered Accountant and Certified Public Accountant. Heis a member of the Malaysian Institute of Accountants,Malaysian Institute of Certified Public Accountants and aSenior Associate of the Institute of Bankers Malaysia. Heholds a Master in Business Administration from Charles SturtUniversity, Australia.

Mr Tan has more than 26 years of working experience incorporate finance, accounting, auditing and banking. He hasalso been involved in companies with operations in Europe,Australia, China and Indonesia.

Mr Tan began his career as an auditor with a professionalaccountancy firm, Messrs HRM – Arthur Andersen (1980-1986). In 1986, he joined Bumiputra-Commerce FinanceBerhad as Manager, Finance and Treasury and wassubsequently promoted to Senior Manager and then DeputyGeneral Manager, Financial Services and Credit Control. Priorto joining the PNHB Group, Mr Tan was the Chief FinancialOfficer of PROTON Holdings Berhad for the period from1999 to 2005.

Mr Tan attended 5 out of the 5 Board Meetings of PNHBheld in the financial year ended 31 December 2006.


BOARD OFDIRECTORS

YAM TENGKU DATO’ RAHIMAH ALMARHUM SULTAN MAHMUD

Aged 41, Malaysian Non-Independent Non-Executive Director of PNHB

YAM Tengku Dato’ Rahimah Almarhum Sultan Mahmud wasappointed to the Board of PNHB on 1 August 2006 as anIndependent Non-Executive Director of PNHB and a memberof PNHB’s Audit Committee, Remuneration Committee and Nomination Committee. On 1 January 2007, she was re-designated as Non-Independent Non-Executive Director of PNHB following her appointment as Executive Director of Puncak Research Centre Sdn Bhd. Concurrently with her re-designation to Non-Independent Non-Executive Director,she has ceased to be a member of PNHB’s Audit Committee,Remuneration Committee and Nomination Committee.

YAM Tengku Dato’ Rahimah holds a BSc Economics andAccountancy from the City of London University, London,United Kingdom. She is a member of the Malaysian Institute ofAccountants (MIA).

Upon obtaining her degree in 1989, YAM Tengku Dato’Rahimah started her career with the Hongkong Bank inLondon, United Kingdom till 1991. She then joined EssoMalaysia Berhad for the period from 1991 to 1995 holdingpositions from Control Advisor, Controllers Department toSenior Accountant, Menara Esso Project Team. As ControlAdvisor, YAM Tengku Dato’ Rahimah authored the bookletentitled “Doing Business with Esso” which was distributedinternally and externally to all ESSO’s contractors as well asspeeches, one of which, was for the Finance Director of EssoMalaysia Berhad, entitled “Doing Business In Malaysia TowardsVision 2020” which was published in the MIA magazine.

YAM Tengku Dato’ Rahimah was with the DJAJANTI Group, anIndonesian based company dealing in agriculture and deep seafishing as a Business Development Manager/Director from1995 to 1998 whereby she was responsible for seeking businessopportunities in Malaysia, Indonesia and Papua New Guinea aswell as liaising with government bodies and appropriatebusiness partners.

YAM Tengku Dato’ Rahimah is currently the Executive Directorof Data Jitu Sdn Bhd, which is a trading company. She also sitson the Board of Cosway (M) Sdn Bhd, a direct selling companydealing in consumer goods and services and a wholly ownedsubsidiary of Cosway Corporation Berhad.

Since YAM Tengku Dato’ Rahimah was appointed to the Boardof PNHB on 1 August 2006, she attended 2 out of the 5 Board Meetings of PNHB held in the financial year ended 31 December 2006.


SENIORMANAGEMENT

IN PNSB

YBHG DATO’ SHAARI ISMAILAged 52, MalaysianExecutive Director, Human Resources & Administration Division

YBhg Dato’ Shaari Ismail joined PNSB in March 2006 as ExecutiveDirector, Human Resources & Administration Division. YBhg Dato’Shaari holds a Masters Degree in Business Administration (MBA)majoring in Human Resource Management from University ofWales, United Kingdom. YBhg Dato’ Shaari has more than 17 yearsof extensive management experience holding senior managementpositions covering areas of administration, business management,management consultancy and property development. He waspreviously the Group Personnel Director of Merge Power Sdn Bhd(1995 - 1998), Managing Director of Miniland Holding Sdn Bhd(1998 - current) and Operation Director of Vetta Affari (M) SdnBhd (1998 - 2003). YBhg Dato’ Shaari is the elder brother of YBhgTan Sri Rozali Ismail, the Executive Chairman of PNHB Group. Heis also a major shareholder of PNHB by virtue of his indirect equityinterest in PNHB held through Central Plus (M) Sdn Bhd andCorporate Line (M) Sdn Bhd.

ENCIK NASIR KHAN ILLADAD KHANAged 54, MalaysianExecutive Director, Corporate Affairs Division

Encik Nasir Khan joined PNSB in February 2006 as ExecutiveDirector, Corporate Affairs Division. He holds a Bachelor Degree inSocial Science, Political Science (Hons) from Universiti SainsMalaysia and a Masters Degree in Public Administration fromPennsylvania State University, United States of America. He alsopossesses a Diploma in Public Management from NationalInstitute of Public Administration (INTAN), and attended anExecutive Management Programme at the School of Government,Harvard University, United States of America. Encik Nasir Khanhas more than 30 years of management experience with theGovernment, holding various positions and covering areas ofhuman resources, security, land development and finance. Prior tojoining PNSB, he was the Senior Assistant Director, BudgetDivision, Ministry of Finance, Malaysia.

MR NG WAH TARAged 43, MalaysianExecutive Director, Corporate Finance

Mr Ng joined PNSB as General Manager, Finance & Accounts inMarch 2000 and was subsequently promoted to Senior GeneralManager, Finance & Accounts on 1 April 2006. He was recentlypromoted to the post of Executive Director, Corporate Finance ofPNSB under the Executive Chairman’s Office on 1 April 2007. MrNg has 23 years of working experience in various areas coveringauditing, accounting and finance. He commenced his articleshipwith an accounting firm in 1984 and is a member of MICPA andMIA. Prior to joining PNSB, he was with the Management ServicesDivision overseeing the finance and accounting functions ofUnited Engineers (M) Berhad (UEM).

MR RAMALINGAM K. R. ARUMUGAMAged 60, MalaysianSenior General Manager, Executive Chairman’s Office

Mr Ramalingam joined PNSB in August 1996 as an Executive inthe Property Division and was promoted to General Manager in2003. On 1 April 2006, Mr Ramalingam was promoted to SeniorGeneral Manager, Executive Chairman’s Office. Prior to joiningPNSB, Mr Ramalingam served the Government for more than 30 years in various departments in Selangor Darul Ehsan.

MADAM TAN BEE LIANAged 41, MalaysianSenior General Manager, Secretarial/Group Company Secretary

Madam Tan joined PNSB as Company Secretary in November 1994and was promoted twice before assuming her current position asSenior General Manager, Secretarial on 1 January 2003. She is aFellow of the Malaysian Association of the Institute of CharteredSecretaries and Administrators (MAICSA). Madam Tan has morethan 19 years of working experience in company secretarialpractice and had previously worked with Projek Lebuhraya Utara-Selatan Berhad (PLUS) and Metramac Corporation SdnBhd/Metacorp Berhad. She is the winner of the ROC-MAICSACompany Secretary Award 2001 for the Listed Company Category.


SENIORMANAGEMENTIN PNSB

ENCIK ZON ABD HAMIDAged 52, MalaysianSenior General Manager, Executive Chairman’s Office

Encik Zon joined PNSB in 2000 as Senior Manager, ExecutiveChairman’s Office and was promoted to Senior General Manageron 1 April 2006. He holds a post graduate Diploma in BusinessManagement and a Master of Business Administration from TheOxford Association of Management, United Kingdom. Prior tojoining PNSB, Encik Zon served 20 years in various multinationalcorporations, specialising in agricultural engineering and turfmaintenance engineering. He had attended various courses andseminars in the United States of America, Australia, UnitedKingdom and Japan.

ENCIK MOHAMAD KHAIRUDIN MOHAMADAged 35, MalaysianSenior General Manager, Human Resource & Administration Division

Encik Mohamad Khairudin joined PNSB on 1 March 2007. Heholds a Bachelor of Usuluddin (Hons) Degree from University ofMalaya. Prior to joining PNSB, he has more than 7 yearsexperience in senior management positions at InstitutPerkembangan Minda (INMIND), the think tank organisation forthe Selangor State Government, Director of INMIND Holdings (M)Sdn Bhd and a member of the Selangor Strategic EconomicPlanning Unit Discussions (2004 – 2006 Session). He isexperienced in management, socio economic research and studiesrelated to the Selangor State Policy and Menteri Besar’s Officeand providing training for the youth, public sector, corporatesector and politicians under the Human Development Programmeof the Selangor State Government. He is the President of KelabSahabat Bina Negara, Committee Member of UMNO Youth, HuluSelangor Division and Member of Majlis Perundingan Belia NegeriSelangor (2004 – 2007 Session). He is also involved in the TrainingBureau Secretariat UMNO, Selangor Division and ChiefSecretariat, Module for Training Bureau, UMNO Youth Movementof Malaysia.

DR ABDUL RAHIM AWANG KECHIKAged 55, MalaysianGeneral Manager, Strategic Resource Centre

Dr Abdul Rahim joined PNSB in July 2003 as General Managerand was appointed the Secretary of the Independent Employees’Performance Review Committee (IEPRC). He was appointed theChairman of the Tender and Contracts Committee. Prior to joiningPNSB, he was an Administrative and Diplomatic Officer with theGovernment since 1983 and has held various positions, namelyin the Ministry of Finance, National Economic Action Council(NEAC), Prime Minister’s Office, Ministry of International Tradeand Industry (MITI), State Economic Planning Unit of the State ofNegeri Sembilan, Ministry of Agriculture and the Ministry ofHousing and Local Government. He holds a Doctorate ofPhilosophy Degree (Ph.D) in Management, a Bachelor of Arts(Hons) in Education, both from Universiti Sains Malaysia. Heobtained a Master of Business Administration from University ofWales College of Cardiff, United Kingdom, a Diploma in BusinessAdministration from University of Birmingham, United Kingdomand a Diploma in Public Management from National Institute ofPublic Administration (INTAN).

IR AHMAD MARZUKI HASHIMAged 45, MalaysianGeneral Manager, Business Development, Operation II Division

Ir Ahmad Marzuki graduated with a BSc. (Hons) Degree in CivilEngineering from University of Ohio in Athens in 1984 and a M.Sc.Master in Environmental Civil Engineering from University ofLiverpool, England in 1994. He is a civil engineer by professionand has been with PNSB since March 1997. He began his careerwith PNSB as a Manager of Dam Operation Department and wassubsequently promoted to Senior Manager, Assistant GeneralManager before assuming his position as General Manager ofBusiness Development Department. Ir Ahmad Marzuki has morethan 23 years experience in the water industry and has held various positions during his tenure with the Public Works Waterworks Branch.


SENIORMANAGEMENT

IN PNSB

IR OOI CHENG SWEEAged 54, MalaysianGeneral Manager, Operation Of WTPs, Operation I Division

Ir Ooi joined PNSB in January 2005. He graduated with a Bachelorof Engineering (Civil) (Hons) Degree from University of Malaya in1978. Ir Ooi has 29 years of working experience in infrastructureworks, drainage, road and bridge engineering design, constructionsupervision of water supply schemes, water supply distributionstudy and operations of water treatment plants. He is aProfessional Engineer registered with the Board of EngineersMalaysia and a member of Institute of Engineers Malaysia. Priorto joining PNSB, he was the General Manager (Maintenance &Project) of CGE Utilities (M) Sdn Bhd.

PUAN ROOWINA MERICAN A RAHIM MERICANAged 45, MalaysiaGeneral Manager, Water Resources &Environmental Surveillance, Operation I Division

Puan Roowina Merican joined PNSB on 23 March 1997 as a Manager in the Operations Division in charge of theEnvironmental Unit. She is now the General Manager of the WaterResources & Environmental Surveillance Department underOperation I Division. Puan Roowina Merican graduated with a BSc(Hons) in Civil Engineering from the University of Surrey in 1984and subsequently obtained her MEng (Hons) in Water ResourcesDevelopment in 1991. She began her career in 1985 as a CivilEngineer with the Public Works Department and held variouspositions during her tenure until 1997.

MR SENG PAYAged 56, MalaysianGeneral Manager, Sabah Project, Operation II Division

Mr Seng Pay joined PNSB in January 2004 and is assigned tooversee and manage the Group’s Telibong Water Supply Project inSabah. He graduated with a Diploma in Mechanical Engineeringfrom the Singapore Polytechnic, Diploma in Management fromMalaysian Institute of Management (MIM) and a Masters Degreein Business Administration from Heriot-Watt University, UnitedKingdom. Mr Seng Pay has over 31 years of working experiencein the management and construction of water treatment plants.Prior to joining PNSB, he worked with various organisations withhis last employer being Ondeo Services (Malaysia) Sdn Bhd.

TUAN SYED AMINUDDIN SYED ZAKARIAAged 47, MalaysianGeneral Manager, Executive Chairman's Office

Tuan Syed Aminuddin joined PNSB on 1 December 2006. He holdsa Diploma in Accountancy from Ungku Omar Polytechnic andobtained a Masters Degree in Applied Finance and Investmentsfrom Universiti Kebangsaan Malaysia. Tuan Syed Aminuddin isexperienced in corporate finance. Prior to joining PNSB, Tuan SyedAminuddin has worked with Sime Darby Group for 19 years wherehe served as an expatriate in Egypt and United States of Americaand was appointed as Director of some companies within theSime Darby Group.

IR TAN HUI KUANAged 53, MalaysianGeneral Manager, Major Project & Upgrading Project, Operation II Division

Ir Tan joined PNSB in August 2003. He graduated with a Bachelorof Engineering (Civil) (Hons) Degree from University of Malaya in1979. He has 25 years of working experience in Jabatan KerjaRaya Malaysia and Lembaga Air Perak in the management ofproduction, distribution, maintenance and consumer services of aDistrict Waterworks Department, geotechnical investigation,maintenance of military camps, project management of militarybuildings and infrastructures. Prior to joining PNSB, Ir Tan wasthe Assistant Director for Military Works in Jabatan Kerja RayaMalaysia. While in PNSB, he has successfully executed andcompleted the Chennai Water Supply Augmentation Project 1,Package III implemented by Chennai Metropolitan Water Supplyand Sewerage Board in Tamil Nadu, India.


SENIORMANAGEMENTIN SYABAS

IR V. SUBRAMANIAMAged 56, MalaysianExecutive Director, Operations

Ir V. Subramaniam is the Executive Director, Operations ofSYABAS. He has worked with Jabatan Bekalan Air Selangor (JBAS)since 1991 and continued his service with Perbadanan Urus AirSelangor Berhad (PUAS) (2002-2004). He holds a Bachelor ofEngineering (Hons) (Civil) Degree from University of Malaya. Ir V.Subramaniam has served in the Public Works Department/WaterSupply Department/PUAS/SYABAS in various capacities for thepast 33 years since graduation in 1974. He has vast experience inmanaging water supply and privatization of water supply.

Ir V. Subramaniam successfully handled the 1998 Water Crisis inSelangor and Kuala Lumpur as then the Deputy Director of the Selangor Water Supply Department and published a complete documentation on the management of the water crisis. He has written and presented many papers on Privatisation /Corporatisation on water supply and on other related technicalsubjects at local and overseas seminars and conferences includingconferences organised by APEC and the World Bank. He has alsoassisted the Asian Development Bank (ADB), in his capacity asADB’s domestic consultant, in several studies on water supply inthe Asian cities.

Ir V. Subramaniam was awarded the Darjah Kebesaran SetiaMahkota Selangor (SMS), Darjah Kebesaran Setia – SultanSalahuddin Abdul Aziz Shah (SSA), Ahli Mangku Negara (AMN)and Pingat Jasa Kebaktian (PJK) (Terengganu), for his dedicationand service to the state and the nation.

MADAM THEIN KWEE SIMAged 43, MalaysianExecutive Director, Finance

Madam Thein holds a professional qualification from MICPA andhas been a member of MICPA and MIA since 1992. Madam Theinhas more than 20 years of working experience in various areascovering auditing, group accounting, corporate debt restructuringand corporate finance. Prior to joining SYABAS, Madam Thein waswith the Renong Group of Companies for a total of 7 1/2 yearswhere she served in United Engineers (Malaysia) Berhad (1992 –1997) overseeing the group finance and accounting functions andHBN Management Office (1997 - 1999) where her role was tomonitor the financial performance of the listed companies underthe Renong Group in addition to the debt restructuring of severalcompanies under the Renong Group subsequent to the financialcrisis of 1997. In early 2000, she joined Jendela Permai Sdn Bhd,a financial consultancy company prior to joining SYABAS in May2005 as the Head of the Credit Control Unit and thereafter as theHead of the Billing and Recovery Division from 1 January 2006 upto 31 March 2007. On 1 April 2007, Madam Thein was appointedas the Executive Director of Finance.

ENCIK OTHMAN ISMAILAged 49, MalaysianExecutive Director, Government Relations, Executive Chairman’s Office

Encik Othman joined PNSB in April 2004 as General Manager andwas subsequently promoted to Senior General Manager, ExecutiveChairman’s Office on 1 April 2006. He was recently promoted tothe post of Executive Director, Government Relations of SYABASunder the Executive Chairman’s Office on 1 April 2007. Hegraduated from University of Wales, United Kingdom in 1999 witha Masters Degree in Business Administration. Encik Othman has 16years of working experience covering areas in marketing, sales andadministration. Prior to joining PNSB, Encik Othman worked withEdaran Otomobil Nasional Berhad and was the Operations Directorof Gold Bridge Construction and Engineering Berhad.

MADAM WONG LEY CHANAged 47, MalaysianSenior General Manager, Finance & Accounts

Madam Wong joined PNSB in March 2005 as General Manager,Finance & Accounts of SYABAS and was promoted to SeniorGeneral Manager, Finance & Accounts of SYABAS on 1 April 2006.Madam Wong graduated with a Bachelor of Accountancy Degreefrom National University of Singapore in 1981. She is a memberof MICPA and MIA, having more than 20 years of workingexperience in auditing, corporate banking and corporate debtsrestructuring, corporate finance, accounting and corporatetaxation. Madam Wong had previously served in severalcompanies at senior management level, including a 6-year-stintin Renong Group of Companies and 5 years in TRIplc Bhd(formerly known as U-Wood Holdings Berhad). She was the ChiefFinancial Officer of AIC Corporation Bhd prior to joining PNSB.

TUAN HAJI MOHD SUHAIMI RAFIEAged 50, MalaysianSenior General Manager, Information & Communication Technology

Tuan Haji Mohd Suhaimi holds a Diploma, Advanced Diploma ofCivil Engineering and a Bachelor of System Analyst Degree fromUniversiti Teknologi Mara. He has 26 years of working experiencein public works and the water supply sector. He began his careerin 1979 as a Civil Engineer with Jabatan Kerja Raya (JKR), holdingvarious positions until 1991. Thereafter, he joined JBAS as a CivilEngineer and continued his service under PUAS (2002 - 2004). Hewas the General Manager, Information & CommunicationTechnology Division before he was promoted to Senior GeneralManager, Information & Communication Technology Divisionwith effect from 1 January 2007.


SENIORMANAGEMENT

IN SYABAS

ENCIK NAEMUDDIN HJ ABDULLAHAged 50, MalaysianSenior General Manager, Administration

Encik Naemuddin holds a Bachelor of Arts Degree from Universityof Malaya. He has 15 years of working experience in the bankingindustry. He was actively involved in the privatisation exercise ofJBAS, now known as PUAS and the setting up of PusatPerkhidmatan Pelanggan (PUSPEL). Encik Naemuddin was withPNSB (1995 - 2001), where his last position held was AssistantGeneral Manager (Human Resource) before he was assigned asSenior Manager, SYABAS Project on 1 April 2005. He was theExecutive Director of Corporate Communication and CustomerServices Division of SYABAS (January 2006 - January 2007). On 1February 2007, he was re-assigned as Senior General Manager ofAdministration Division, SYABAS.

TUAN HAJI ZAINUDDIN OTHMANAged 47, MalaysianSenior General Manager, Human Resource

Tuan Haji Zainuddin joined SYABAS on 1 April 2005 as GeneralManager, Human Resource & Administration Division. He holds aDiploma in Public Administration from UiTM and a Master ofScience in Human Resource Management from University ofLincolnshire and Humberside, United Kingdom. He has more than20 years of working experience in the areas of human resourcesmanagement and general office administration. He was promotedto Senior General Manager, Human Resource Division with effectfrom 1 January 2007.

IR YEONG CHEE MENGAged 54, MalaysianSenior General Manager, Non-Revenue Water (NRW)

Ir Yeong joined PNSB on 10 July 2006 as Senior General Manager(SYABAS Project) for the Non-Revenue Water (NRW) Division. Heholds a Bachelor of Engineering (Hons)(Civil) Degree from Universityof Malaya and a Master of Applied Science (Project Management)Degree from University of South Australia. Ir Yeong has more than28 years of working experience in managing water, building andinfrastructure projects. He has served in the Public WorksDepartment, in various capacities including 3 years as DistrictEngineer for Sabak Bernam and 8 years as Deputy Director ofNegeri Sembilan. Ir Yeong has also been involved in themanagement of several mega projects in the country at seniormanagement level including 5 years as Construction GeneralManager of the KL International Airport Project and 5 years asManaging Director of Sarawak Hidro Sdn Bhd where he wasresponsible for managing the Bakun Hydroelectric Project inSarawak. He was the Project Director of AZRB prior to joining PNSB.

ENCIK MANSOR ABD GHANIAged 50, MalaysianSenior General Manager, Districts

Encik Mansor Abd Ghani joined SYABAS on 1 March 2007 asSenior General Manager, Districts Division. He holds a Degree inCivil Engineering from University College of Swansea, Wales, UKin 1980. Encik Mansor had served as District Engineer withJabatan Kerja Raya (JKR) and Jabatan Bekalan Air Selangor from1980 to 1991. From 1992 to 2003 he was attached with severalcompanies, whereby in 2003, he designed and implemented aspecial project – Operations and Management of MeteringServices Outsourcing (First in Malaysia) for JBA Negeri Sembilan,PUAS Petaling, Kuala Lumpur, Klang and JKR Kedah.

IR ABD RAHIM SHAMSUDINAged 53, MalaysianGeneral Manager, Operation/Maintenance

Ir Abd Rahim joined SYABAS on 23 February 2007 as GeneralManager, Operation/Maintenance Division. He holds a Bachelorof Science (Hons.) Civil and Structural Engineering Degree fromUniversity of Cardiff, Wales in 1978. He has served the PublicWorks Department for 28 years since 1978, and held variouscapacities including cadre posts at various states including JBAS,Cawangan Bekalan Air, Ibu Pejabat JKR, Jabatan Bekalan AirNegeri Sembilan, Perbadanan Air Melaka, JKR Melaka andCawangan Jalan, JKR Malaysia. He has been involved in the watersupply sector covering the areas of design, project supervision,operation, maintenance, water quality, project management aswell as management. He was awarded with PJK in 1989, BintangKhidmat Terpuji (BKT) in 1996, Bintang Cemerlang Melaka (BCM)in 1998 and Ahli Mangku Negara (AMN) in 2005 for hisdedication and services to the various states and the nation.

TUAN HAJI ABD RASHID ABD SATARAged 47, MalaysianGeneral Manager, Petaling Regional Office

Tuan Haji Abd Rashid holds a Diploma of Civil Engineering fromUniversiti Teknologi Malaysia and a Bachelor of Civil EngineeringDegree from University of Glasgow, Scotland. He has 23 years ofworking experience in the water supply sector. He began hiscareer in 1981 as a Technical Assistant with JBAS and continuedhis service with PUAS (2002 - 2004) as Senior Manager KualaSelangor/Sabak Bernam and Kuala Langat/Sepang Districtrespectively. He was the General Manager, Klang/Shah AlamRegional Office of SYABAS before assuming his current positionas General Manager of Petaling Regional Office.


SENIORMANAGEMENTIN SYABAS

ENCIK ABDUL HALEM HAJI MAT SOMAged 41, MalaysianGeneral Manager, Corporate Communications and Public Affairs

Encik Abdul Halem joined PNSB in 2004 as Personal Assistant tothe Executive Chairman before he was assigned to SYABAS asSenior Manager, Corporate Communications and Public AffairsDivision (CCPA). Encik Abdul Halem was recently promoted toGeneral Manager, CCPA effective 1 January 2007. He obtained aDiploma in Public Administration (1987) and a Bachelor’s Degreein Corporate Administration (1998) both from UiTM and aCertificate in Manufacturing Management from Sanno Instituteof Business Administration (SIBA), Tokyo (1990). He isexperienced in the areas of event management, productionhouse, human resource consultancy and training, administrationand capital investment.

MR ALBERT LOH THIAM HOCKAged 53, MalaysianGeneral Manager, Phase 2 – Contract & Leak Detection

Mr Albert Loh joined SYABAS on 14 February 2005 as a LeakDetection Specialist with the NRW Department. He is now theGeneral Manager of Phase 2 – Contract & Leak DetectionDepartment under the Non-Revenue Water Division. Hegraduated with a BSc (Hons) Degree from University SainsMalaysia in 1978 majoring in Geophysics. Prior to working withSYABAS, he was employed by an engineering company inMelbourne undertaking water resource investigation, pipecondition assessment and leak detection services in Australia. Hehad also worked with Malaysia Mining Corporation Bhd from1981 to 1997 in exploration & mining, oil & gas and utilityprojects, both locally and overseas.

TUAN HAJI ARIFF IBRAHIMAged 46, MalaysianGeneral Manager, Hulu Langat Regional Office

Tuan Haji Ariff joined PNSB in January 2005 and was assigned toSYABAS as General Manager, Operation & Maintenance in January2006. He is now the General Manager of Hulu Langat RegionalOffice. He graduated with a Bachelor of Civil Engineering (Hons) Degree from Universiti Teknologi Malaysia in 1984 and

subsequently obtained a Masters Degree in Business Administrationfrom Universiti Kebangsaan Malaysia in 2001. Tuan Haji Ariff hasmore than 20 years of working experience in the water industrycovering operation and maintenance of water treatment plants,operation and maintenance of water supply, constructionsupervision of water supply schemes, safety and health and alsohuman resource and administrative matters. Prior to joining PNSB,he worked with JBAS and CGE Utilities (M) Sdn Bhd.

CIK HAYATI AB WAHABAged 43, MalaysianGeneral Manager, Kuala Lumpur Regional Office

Cik Hayati is the General Manager of Kuala Lumpur RegionalOffice. She joined PNSB in July 2001 as an Internal Auditor beforeshe was assigned to SYABAS in 2005 as Secretary of Works forKuala Lumpur District. She holds a Bachelor of Accountancy(Hons) Degree from London Guildhall University and is a CertifiedPublic Accountant with MICPA, Chartered Accountant with MIAand Chartered member of the Institute of Internal Auditor,Malaysia. She has 19 years of working experience in auditingcovering various types of industries (eg. construction, plantation,timber, manufacturing and government bodies), due diligencereview and profit & cash flow forecasts, internal audits in theareas of financial, risk management and investigation. She hasexperience working in England, Bangkok and Singapore.

MR KOH ENG SENGAged 54, MalaysianGeneral Manager, Development

Mr Koh holds a Diploma in Civil Engineering from InstitutTeknologi Kebangsaan and a Bachelor of Civil Engineering Degreefrom Universiti Teknologi Malaysia and Master of Science(Engineering) Degree from University of Texas. He has 28 years ofworking experience in public works and water supply sector. Hebegan his career in 1977 as a civil engineer with JKR, holdingvarious positions until 1991. Thereafter, he joined JBAS as a seniorengineer and continued his service under PUAS (2002 - 2004). Heis now the General Manager, Development Department, SYABAS.


SENIORMANAGEMENT

IN SYABAS

ENCIK MOHAMAD ISA MOHD YASSINAged 48, MalaysianGeneral Manager, Bumiputera Entrepreneur’s Participation & Development

Encik Mohamad Isa joined SYABAS on 8 February 2007 as General Manager of Bumiputera Entrepreneur’s Participation &Development. Prior to joining SYABAS, he was attached toMatsushita Electric Co (M) Bhd as Executive of Research &Development Department and Production Planning Department(1977 - 1994), Puncak Niaga Sdn Bhd (1994 - 2004) as a SpecialAssistant to Executive Chairman, General Manager of PuncakAlam Housing Sdn Bhd and Managing Director of Haluan PrismaSdn Bhd (2004 - January 2007). He was trained on Industrial &Management Training Skills in Matsushita Electric Co in Osaka,Japan (1977 - 1994). Encik Mohamad Isa has vast experience in town and building development, public relation andmanufacturing industries. Encik Mohamad Isa was awarded theDarjah Ahli Mahkota Selangor (AMS) from DYMM Sultan ofSelangor in 2000.

TUAN HAJI MUHAMAD DARIF HAJI IDRISAged 51, MalaysianGeneral Manager, Klang Regional Office

Tuan Haji Muhamad Darif holds a Bachelor of Science(Engineering) (Hons.) Degree from University of Aberdeen,Scotland and Ordinary National Diploma (Building) fromSouthampton Technical College, England. He has 26 years ofworking experience in public works and the water supply sector.He began his career as a Civil Engineer with JKR. He wastransferred to JBAS as Civil Engineer at Hulu Langat District andcontinued his service with PUAS (2002 - 2004) as Senior Manager,Operation Division. He was the General Manager, PetalingRegional Office before assuming his current position as GeneralManager of Klang Regional Office.

ENCIK SAADON KARDIAged 51, MalaysianGeneral Manager, Security & Enforcement

Encik Saadon joined PNSB on 1 November 1997 as Senior SecurityExecutive of PNSB and was subsequently promoted to GeneralManager, Security & Enforcement of SYABAS on 15 October 2006.He has more than 23 years of working experience as a Police

Officer in the Royal Malaysian Police in various capacitiescovering investigation, lecturing, interrogation, forensicinvestigation and intelligence procurement. During his tenure inthe police force, he had also been appointed as President of ThePolice Association of Malaysia. Encik Saadon was awarded thePingat Pangkuan Negara (PPN), Bentara Pasukan Polis (BPP) fromYang DiPertuan Agong and Pingat Jasa Kebaktian (PJK) (Perak)for his dedication and service to the state and the nation.

TUAN HAJI SONARI SOLORAged 50, MalaysianGeneral Manager, Internal Audit

Tuan Haji Sonari Solor joined PNSB on 10 September 1998. He is a member of MIA and a fellow member of CharteredAssociation of Certified Accountant (U.K). He holds a professionalqualification from Chartered Institute of ManagementAccountant (U.K). Tuan Haji Sonari has more than 19 years ofworking experience in the area of auditing and accounting inpublic listed companies, involved in property development,manufacturing, timber and consultancy. Prior to joining PNSB,Tuan Haji Sonari was the Group Divisional Chief, Internal andManagement Audit of Land & General Berhad.

TUAN HAJI YUSOF SAROJIAged 40, MalaysianGeneral Manager, Gombak Regional Office

Tuan Haji Yusof holds a Diploma and Advanced Diploma of CivilEngineering from Universiti Teknologi Mara. He has 16 years ofworking experience in the water supply sector. He began hiscareer in 1988 as a Technical Assistant with JBAS and continuedhis service with PUAS (2002-2004) as Senior Manager of KualaSelangor/Sabak Bernam District Office. He is now the GeneralManager, Gombak Regional Office.

Growing withour staff

“Seeing yourself as youwant to be is the key topersonal growth.”

The ultimate throttle on growth ishaving the right people. It is our job to create opportunities for our peopleto develop their potential to themaximum and thereby achieve theirpersonal best.


EXECUTIVECHAIRMAN SPEAKS

TO REWARD SHAREHOLDERS FOR THEIR CONTINUOUSSUPPORT OF PNHB, ON 16 OCTOBER 2006, THE COMPANYANNOUNCED A CAPITAL REPAYMENT OF UP TO RM767.84MILLION AS PART OF PNHB'S CAPITAL MANAGEMENT PLAN,WHICH SEEKS CONTINUOUSLY TO IMPROVE THECOMPANY'S CAPITAL STRUCTURE AND MAXIMISESHAREHOLDER VALUE.

YBhg Tan Sri Rozali IsmailExecutive Chairman of PNHB Group



Dear Shareholders,

On behalf of the Board of Directors of Puncak Niaga HoldingsBerhad (PNHB or the Company), I am pleased to present theAnnual Report and Audited Financial Statements of the Groupand Company for the financial year ended 31 December 2006.

FINANCIAL REVIEW

The Group recorded a significant increase in revenue, which roseby 24.7% from RM1,144.9 million in 2005 to RM1,428.1 millionin 2006. This was mainly attributed to the recognition ofconstruction revenue from a turnkey water project in Sabahundertaken by a subsidiary, Puncak Niaga (M) Sdn Bhd (PNSB)and the growth in water revenue resulting from higher billings.

Profit before tax (PBT) for the financial year ended 31 December2006 surged 86.6% from RM196.8 million in 2005 to RM367.3million in 2006, pushing basic earnings per share up from 30.80sen to 101.51 sen. The profit performance was mainly attributedto a non-recurring gain of RM205.8 million arising from thedisposal of 17.5% of the ordinary shares in PNSB to a specialpurpose vehicle, Arena Tekad Sdn Bhd, in conjunction with theCompany’s capital repayment exercise.

DIVIDEND

Given the Group’s strong fundamentals, the Board of Directorsrecommends a tax-exempt Final Dividend of 8 sen per share forthe financial year ended 31 December 2006 (2005: 6 sen per shareless 28% tax). The entitlement and payment dates will bedetermined later by the Board. As in the previous year, no InterimDividend was declared in 2006.

CORPORATE DEVELOPMENTS

During the year, the Group’s corporate development focused onthree key areas: further enhancement in Non Revenue Water(NRW) activities, a capital repayment to maximise shareholders’value, and the establishing of a leading-edge research anddevelopment centre.

Issue of RCULS by Syarikat Bekalan Air Selangor Sdn Bhd(SYABAS)

To finance SYABAS’ operations and capital expenditureprogramme under the Concession Agreement, on 23 February2006 the Company entered into a Subscription Agreement withSYABAS and Kumpulan Darul Ehsan Bhd (KDEB) in relation to theissue by SYABAS of up to RM1,045 million nominal value 7%Redeemable Convertible Unsecured Loan Stocks (RCULS). TheRCULS will be issued progressively to the Company and KDEB from2006 to 2009. The commitment by the Company and KDEB tosubscribe for the RCULS is up to RM731.5 million (70%) andRM315.5 million (30%) respectively. In 2006, SYABAS issuedRM135.0 million of the RCULS.

Capital Repayment

To reward shareholders for their continuous support of PNHB, on16 October 2006, the Company announced a capital repaymentof up to RM767.84 million. The capital repayment via a cashdistribution was decided after careful consideration of theCompany’s current financial standing, future financial obligationsand operational requirements, and is part of PNHB’s capitalmanagement plan, which seeks continuously to improve theCompany’s capital structure and maximise shareholder value.

The capital repayment exercise involves:• A Realisation of Investments Value comprising

- a disposal by the Company to Arena Tekad Sdn Bhd (ATSB) of the RM320,000,000 inter-company advances, to be restructured into 10-year Redeemable Unsecured Bonds (RUBs) for a total consideration ofRM418,969,134 to be satisfied via cash of RM132,719,134and the issuance of 286,250,000 preference shares in ATSB.

- a divestment by the Company to ATSB of 1,750,000ordinary shares of RM1.00 each in PNSB, representing17.5% of PNSB’s ordinary shares for a total cashconsideration of RM306,250,000.

We are Malaysia’s LeadingWater Services Company



• A Capital Repayment involving- a Bonus Issue of up to 587,346,993 new ordinary shares

of RM1.00 each in the Company (Bonus Shares) creditedas fully paid-up on the basis of one Bonus Share for everyone existing share held by shareholders.

- a Capital Distribution on the basis of up to RM0.65 cashfor every one existing share held in the Company afterthe Bonus Issue, via a reduction of the share capital ofthe Company, which will result in a reduction in the parvalue of Company shares to a minimum of RM0.35.

• A consolidation of the entire issued and paid-up share capitalof the Company (after the proposed Capital Repayment) intoordinary shares with par value of RM1.00 each.

• An increase in the Company’s authorised share capital fromRM1.0 billion to RM1.3 billion.

To partially fund the cash distribution, the Company sold18,500,900 treasury shares in the open market for a totalconsideration of RM57.87 million at an average price of RM3.13per share. A further cash sum of RM277.53 million, representinga substantial portion of the funds needed for the cashdistribution, was also generated by the conversion of 105,926,993units of warrants.

On 10 November 2006, the Securities Commission approved theproposed issue of the RUBs by PNSB. The shareholders and theholders of PNHB 2001/2016 15-Year Redeemable UnconvertibleJunior Notes (RUN) approved the proposed capital repayment atan Extraordinary General Meeting and RUN Holders’ Meeting heldon 11 December 2006. The Realisation of Investments Value wascompleted on 19 December 2006, while the Capital Repaymentwas completed when the cash distribution was made on 5 March2007. Following the Consolidation, the issued and paid-up sharecapital of PNHB now stands at RM411,142,895.

Credit Ratings of Debt Papers

In December 2006, the Malaysian Rating Corporation • Upgraded the long term rating of PNHB’s RM546.875 million

RUNs with detachable warrants from A to A+ with a stable outlook.

• Reaffirmed the AAID rating of PNSB’s RM1.02 billion BaiBithaman Ajil Islamic Debt Securities; and the MARC-1ID/AAID

rating of PNSB’s RM350 million Murabahah CommercialPapers/Medium Term Notes.

• Upgraded the rating of PNSB’s RM546.875 million JuniorNotes A to A+.

• Assigned a rating of A+ with a stable outlook to PNSB’sRM435 million nominal value RUBs.

Puncak Research and Development Centre

2006 saw PNHB lay the groundwork for establishing a state-of-the-art Puncak Research and Development Centre, to be managedby Puncak Research Centre Sdn Bhd, a wholly owned subsidiaryof PNHB. The Centre will add considerable value to our currentoperations, enabling us to expand our product line, and to pioneer new water treatment technologies appropriate to ourlocal conditions.

Head Office

After 12 years of steady growth, PNHB requires its own HeadOffice. Given that the concession under which we operate wasgranted by the Selangor State Government, it was bothconvenient and appropriate that the Head Office be sited in ShahAlam. On 1 August 2005, PNHB acquired Wisma Maritim forRM39.0 million which was subsequently re-named Wisma Rozali,and the move to the new office was successfully completed on 28November 2006.

Official Launch of Wisma Rozali, Shah Alam, Selangor View of SSP2 WTP


BUSINESS PROSPECTS

Looking ahead, the Group will continue with its untiring effortsto reduce NRW and to enhance water quality supplied to theconsumers. Since 1 January 2005, SYABAS has already replaced335.6km of the pipe network in the Klang Valley. Of the remaining5,600 km, about 500km will be replaced in 2007 at a cost ofapproximately RM400 million.

In line with our vision, we will also seek to broaden our horizonsby focusing on local and regional opportunities for expansion.

On the home front, two major events promise to create significantpotential for the water supply industry: the Ninth Malaysia Plan(9MP); and the water industry reform vide the Water ServicesIndustry Act 2006 (WSIA) and the National Water ServicesCommission Act 2006 (SPAN).

Ninth Malaysia Plan (9MP)

The 9MP abounds with opportunities for water companies likethe PNHB Group. Under the 9MP, a total of RM12.5 billion hasbeen allocated to water and wastewater utilities sector, whichincludes spending on NRW reduction, the rehabilitation ofdistribution networks and systems, and the upgrading andrefurbishing of water treatment plants and sewerage systems.

The 9MP has now entered its second year. 2006 was mainlydedicated to the planning, design and preparation of constructionworks, and physical construction is expected to begin in 2007.Tenders for water supply projects are likely to be awarded in thenear future, whose scope will probably include:

• Water resources development, such as the construction of dams and the infrastructure for interstate water transfer.

• Expansion and rehabilitation of water treatment plants.• Upgrading and rehabilitation of distribution networks.• Projects to reduce NRW, including pipe replacement,

water meter replacement and the setting up of DistrictMetering Zones.

• Upgrading of customer services including the billing,collection and customer relations management systems.

We believe that these developments should give the Group theopportunity to expand beyond the State of Selangor and theFederal Territories of Kuala Lumpur and Putrajaya into otherStates in Malaysia.

One of the key water supply projects to be implemented underthe 9MP is the Pahang-Selangor interstate raw water transfer.Targeted for completion by 2012, this project is designed to meetthe rapidly increasing demand for treated water in the KlangValley. The tender for project management consultants hasalready closed and tenders for contractors are expected to beissued in 2007. Given the high level of expertise that the Grouphas developed over the last 12 years, we believe that we would bewell qualified to undertake the construction work involved.

Pending the completion of the Pahang-Selangor interstate rawwater transfer project, PNHB will work in close collaboration withthe Government to forestall any water shortages. Given thesuccess we have already achieved in reducing NRW, we arehopeful that no serious shortage will occur in the immediateterm. To prevent medium-term water shortages, we will continueour efforts to reduce NRW and are also implementing threeinterim schemes (as described in the PNSB Operations Review) toboost the supply of treated water.

Profit before tax surged 86.6%to RM367.3 million in 2006


Visit by delegates from National Institute of Public Administration (INTAN) to SSP2 WTP



Water Industry Reform

Two new Water Bills for the WSIA and SPAN were gazetted in July2006 and are scheduled for implementation some time in 2007.Both WSIA and SPAN are expected to have a profound impact onthe water supply industry, as they will involve:

• Bringing the existing water supply concessionaires under thepurview of WSIA and SPAN.

• The corporatisation of the existing water supply authoritiesand companies.

• The introduction of new service standards benchmarks by the new regulatory body for the country’s water supply and sewerage systems, SPAN.

• The establishing of a Water Asset Management Company(WAMCO) to finance the new water supply assets.

• Closer collaboration of the water supply and waste watersectors, leading ultimately to a merger.

In the years ahead, these developments are expected to generateincreased activities and growth in both the water and wastewatersectors, creating major opportunities for all the market players. Inparticular, the creation of SPAN should provide the impetus tokick-start a variety of water-related projects.

Once SPAN is established, both our subsidiaries, PNSB andSYABAS, will have to register with SPAN and consider whether tomigrate to the new regulatory regime under SPAN.

Regional Opportunities

In the coming years, the Group will be actively exploring options for expansion abroad, especially in the Middle East, India and China.

While we are eager to seize such opportunities, we will exerciseour customary caution and prudence in venturing into new areas.

ACKNOWLEDGEMENTS

I would like to take this opportunity to express my profoundthanks for the exceptional energy, commitment and skill soconsistently displayed by my colleagues on the Board of Directorsas well as by the entire Management team. Their dedication tothe business has once again produced results we can be proud of.

On a personal note, it is my pleasure to welcome YAM TengkuDato' Rahimah Binti Almarhum Sultan Mahmud, who wasappointed to the Board of PNHB on 1 August 2006 as anIndependent Director. Subsequently, on 1 January 2007, she wasre-designated as a Non-Independent Non-Executive Directorfollowing her appointment as the Executive Director of PuncakResearch Centre Sdn Bhd. Her expertise will contributesignificantly to the future development of the Group.

The major and positive achievements we recorded in 2006 are asplendid tribute to the hard work and commitment of our staff.On behalf of the Board of Directors, I wish to offer them oursincere gratitude. We also profoundly appreciate the unwaveringsupport we received from our shareholders and customers, ourpartners and business associates, our suppliers and our financiers.

Finally, the Group gratefully acknowledges the tremendoussupport and guidance we have unfailingly received from theFederal Government and the Selangor State Government as wellas the various government authorities, agencies and non-governmental organisations.

The close collaboration between the Company and its variousstakeholders is the firm foundation on which our business rests.As we continue to grow and expand, we look forward to sharingour success in the years ahead with all of you.

TAN SRI ROZALI ISMAILExecutive Chairman

25 April 2007


Sitting from left to right

YBhg Tan Sri Rozali Ismail

YBhg Dato’ Matlasa Hitam

Standing from left to right

YBhg Dato' Ir Lee Miang Koi

Mr Tan Seng Lee

YBhg Dato’ Ruslan Hassan

Tuan Syed Danial Syed Ariffin

YBhg Tan Sri Dato’ Hari Narayanan Govindasamy

YB Tan Sri Dato’ Seri Dr Ting Chew Peh

YAM Tengku Dato’ Rahimah Almarhum Sultan Mahmud

YB Datuk Dr Rahman Ismail


Board of Directors


OPERATIONS REVIEWPNSB Water Treatment Activities

WATER TREATMENT PLANTS (WTPs)

Puncak Niaga (M) Sdn Bhd (PNSB), PNHB’s subsidiary, is the nation’s largest water supplyconcessionaire, operating, managing and maintaining 29 WTPs with a total averageproduction capacity of 1,909 million litres per day.

Sungai Selangor Phase 2 (SSP2) WTP

In 2006, SSP2 WTP produced 312.97 million cubic metres of treated water, down 3.7% on theprevious year. The average daily production fell to 857.45 million litres compared to 890.44million litres in 2005, mainly due to supply distribution control by SYABAS. Thanks to thediligent execution of scheduled preventive maintenance including major refurbishment ofon-line analyzers, there were no major plant interruptions, and SSP2 WTP consistently metboth production demands and the specified water quality standards.

Wangsa Maju WTP

In 2006, Wangsa Maju WTP produced 18.63 million cubic metres of treated water, an increaseof 7.4% from 17.34 million cubic metres the previous year. Average daily production rose to51.1 million litres from 47.5 million litres in 2005. The plant operated without any majorinterruptions, mainly due to strong staff commitment and a meticulous scheduledmaintenance programme.

During the year, the WTP continued to pursue its plant enhancement programme. Initiativesincluded further staff training, the implementation of the Innovative and Creative Circleprogramme, repainting works and the scheduled cleaning of storage reservoirs. 5S, a housekeeping process to achieve total organisation, cleanliness, and standardisation in theworkplace, has also been successfully introduced.

WTPs Under the Privatisation Cum Concession Agreement (PCCA)

There was a fractional 0.6% decrease in the volume of treated water produced by the 26 WTPs under the PCCA, which dipped from 339.99 million cubic metres in 2005 to 337.89 million cubic metres in 2006. The decrease resulted from the varying demand patternand SYABAS’ supply distribution controls.

AboveCommand Centre at SSP2 WTP

Right:Raw water intake at SSP2 WTP

In order to minimise the incidents of minor partial plantshutdowns and improve the level of service to the ruralpopulation, the partial plants at Sungai Rumput and Kepong were upgraded to become full treatment plants utilising the Ultra-Filtration technology. These upgraded plants are expected tobe commissioned by the second quarter of 2007.

As part of our ongoing efforts to boost the efficiency of our plantoperations, a variety of improvement schemes were launchedduring the year, which are expected to be completed by the thirdquarter of 2007. One major initiative is the construction of sludgetreatment facilities at 15 of our PCCA WTPs under the SYABASfunded capital expenditure (CAPEX) works. Work started on thisproject in January 2007, with partial completion expected thisyear and full completion in 2008.

WTP Shutdown Hours

In 2006, our WTPs recorded 5,197.82 shutdown hours. Some3,717.43 hours (about 71.5% of the total) were due to our policyof shutting down minor partial treatment plants whenever theraw water turbidity exceeds 5.0 Nephelometric Turbidity Units(NTU). The affected plants were Sungai Rumput, Kepong, SungaiKroh, Sungai Serai, Sungai Pangsoon and Sungai Lolo. However, asthese plants are small, the shutdowns had no significant impacton the overall production capacity.

The shutdown hours due to other causes fell by 18.9% from1,825.09 in 2005 to 1,480.39 in 2006. Of these, 330.67 hours(22.3%) were caused by raw water pollution, 328.60 hours(22.2%) by TNB power supply failures, 280.64 hours (19.0%) byburst pipes and 424.63 hours (28.7%) by scheduled maintenanceworks. The remaining 115.85 hours (7.8%) were due to other non-critical factors.

Salak Tinggi WTP was shut down six times in 2006 due to rawwater pollution. Two of these incidents were due to the presenceof undesirable pollutants in the water as was evident from thediscovery of high levels of ammonia, dead fish, and anobjectionable odour from the river.

DAM OPERATIONS

PNSB operates and maintains the Sungai Langat, Klang Gates and Tasik Subang Dams under a Supplemental Agreement to the Privatisation Cum Concession Agreement (PCCA) dated 31 December 2004. The dams operate using the establishedOperational Rule Curve. Rainfall levels in the dams’ catchment areasare regularly monitored to assess the possibility of critical storagedrawdown at any of the dams. Performance in 2006 was good andthere was no critical storage drawdown at any of the dams.

In 2006, total rainfall in the Sungai Langat Dam catchment areawas 4,901.60 mm, up 94.8% on the 18-year average (1988 to2005) of 2,516.27 mm/year. Throughout 2006, the reservoir levelof the dam was maintained above Operational Rule Curve No. 1,enabling the reservoir to supply the maximum amount of rawwater to the Sungai Langat WTP.

In the Klang Gates Dam catchment area, total rainfall rose to5,049.50 mm, an increase of more than 100% on the 19-yearaverage (1987-2005) of 2,392.15 mm/year. Owing to such highrainfall and the continued abstraction of raw water from theGombak River by the Wangsa Maju WTP, the reservoir levelreached its maximum by the beginning of May. For the rest of theyear, the level remained above Operational Rule Curve No. 1,enabling the reservoir to supply the maximum amount of rawwater to the Bukit Nanas and Wangsa Maju WTPs.


OPERATIONS REVIEWPNSB Water

Treatment Activities

Removal of illegal rafts at Klang Gates Dam, a restricted area

We have a production capacity of1,909 million litres per day



On the other hand, the Tasik Subang Dam catchment areaexperienced a total rainfall of only 2,811.90 mm, compared to a10 year average (1996-2005) of 2,482.29 mm. In addition, therewas a constant demand for water from North Hummock WTP. Asa result, the reservoir level fluctuated during the year, droppingbelow Operational Rule Curve No. 1 in early August beforereturning to the comfortable zone by October 2006 due toincreases in rainfall.

For 2007, the Malaysian Meteorological Department forecasts anaverage level of annual rainfall. Since the reservoir level at thethree dams was at the maximum at the end of 2006, we hope toavoid any critical storage drawdown at any of the dams this year.In 2007, we will continue to exercise prudence and adhere to theStandard Operating Procedures to ensure that the optimalamount of raw water is released to the WTPs. All three dams areequipped with the Dam Operations Control Curves to help ouroperators meet the demand for raw water release whileconserving as much dam water as possible. No major change inraw water demand from the WTPs is expected in 2007.

As part of our safety surveillance programme, PNSB conductedtwo major visual safety inspections in 2006. The purpose of theinspections, which covered all major dam structures and M&Eequipment, was to detect any dam safety deficiencies andrecommend appropriate corrective actions. A Safety and HealthManagement System is being enforced and practised at all threedams. No accidents or injuries were reported at the three dams in2006, and the total time without injury now stands at 165,413.10hours for Sungai Langat Dam, 85,880.85 hours for Klang GatesDam and 80,850.80 hours for Tasik Subang Dam.

In August 2006, PNSB piloted a Dam Aeration System at KlangGates Dam to reduce chemical consumption at Bukit Nanas andWangsa Maju WTPs by improving raw water quality at source. Theproject is being closely monitored by our R&D Team and thepreliminary findings indicate promising results.

BUSINESS DEVELOPMENT

Telibong and Telipok, Sabah

In 2003, PNSB entered into a turnkey sub-contract agreementwith Imej Warisan Sdn Bhd for Projek Pembinaan Loji/KolamTakungan dan Paip Utama Telibong dan Telipok, Sabah. Valued atRM313.5 million, the project involves the planning, design,construction, supervision, testing and commissioning of a newwater intake and raw water pumping station, a water treatmentplant, off-river storage, three balancing/service reservoirs and 45 km of pipelines.

The project will supply treated water to industrial parks, touristresorts and residential developments in the Tuaran area. Worksstarted in October 2003 and are scheduled for completion by November 2007. As at the end of 2006, the project was 75% complete.

Chennai, India

PNHB and its joint venture partners were awarded the ChennaiWater Supply Augmentation Project 1 – Package III in November2002 by the Chennai Metropolitan Water Supply and SewerageBoard, Tamil Nadu, India. This RM234.0 million projectencompasses the supply and laying of 114 km of steel pipes, the construction of a break pressure tank and seven new bridges for pipes to cross rivers, and the rehabilitation of sevenexisting bridges.

The project includes operation and maintenance services for afive-year period, which began when construction was completedin January 2005. The operation and maintenance contract willexpire in January 2010.

Water quality sampling - pre & post water treatmentPNHB Group participated in Asia Water 2006 Exhibition




CONTINUAL IMPROVEMENT

To forestall water shortages and to meet the increasing demandfor treated water in the State of Selangor and the FederalTerritories of Kuala Lumpur and Putrajaya, the Selangor StateGovernment approved three projects to be implemented by PNSB and SYABAS under the Water Resources DevelopmentScheme, namely:

• The diversion of water resources from Rasa WTP to Rawangand Bukit Sentosa (for which construction work began inNovember 2006).

• The design and construction of a new water intake and rawwater pumping station to supplement the raw water supplyto the existing SSP1 and SSP2 WTPs.

• The design and construction of a pumping station and rawwater pipes for the transfer of raw water from Batu Pond toBatu Dam.

On completion in 2009, the Water Resources DevelopmentScheme will provide Selangor and Kuala Lumpur with anadditional 490 million litres per day of treated water.

During the year, PNSB also focused on upgrading its WTPs inresponse to rising river water pollution. More than 1,300 rawwater quality violations were recorded in 2006, requiring us tointensify our efforts to ensure a sufficient supply of safe drinkingwater to more than 7.3 million people in Selangor, Kuala Lumpurand Putrajaya.

As part of our effort to improve water quality, we conducted anumber of studies, including studies on ammonia removal, onimproving filter performance and on optimising coagulant dosageto improve settled and treated water quality especially withregard to turbidity, colour and aluminium.

RESEARCH AND DEVELOPMENT

Puncak Research and Development Centre (Puncak R&D Centreor the Centre)

The new Puncak R&D Centre, which is currently being established,will serve as a one-stop solution centre for the water, wastewaterand environmental industries. The Centre will cater to theGovernment, industry players, universities and other R&Dinstitutions in Malaysia and across the region. The Centre’s roles include:

• Undertaking R&D projects relating to water resourcesmanagement, water treatment, water distribution, andwastewater treatment.

• Being a key reference and resource centre for addressingproblems involved in water, wastewater, and the environment.

• Solving problems related to water, wastewater and theenvironment in close collaboration with industry players and authorities.

• Providing laboratory services and early identification,detection and migration systems to address potential water problems.

• Conducting round-the-year environmental surveillanceprogrammes and environmental incident investigations in closecooperation with the Department of Environment, Malaysia.

• Being the accepted authority that provides water technologyupdates to Government bodies, the media and the public.

• Providing training for the public and professionals on recentand future water technology.

The Centre will be jump-started by a collaboration with DHI Water • Environment • Health (DHI), a global leader in thefields of water, environment and health. In addition, by workingwith R&D institutions and universities locally and around theworld, the Centre aims to attract the best R&D intellects in the region. The Centre will be developed in stages and is expectedto be completed by 2011.

We continue to invest in researchand development, new technologies

and employee development



Membrane Filtration Technology

Used by many developed nations, the membrane filtrationtechnology removes water-borne pathogens, bacteria, viruses andparasites, including those resistant to chlorine, thus ensuringclearer and safer water.

Following a six-month pilot project at the Sungai Rumput WTP in2006, we are introducing the technology into the treatment processat our Sungai Rumput and Kepong WTPs. Construction began inNovember 2006 and is scheduled for completion in June 2007.

INFORMATION TECHNOLOGY (IT)

By keeping abreast of the latest technologies, the IT Departmentcontinuously explores new opportunities for improvement.

In 2006, our IT initiatives concentrated mainly on providing thelatest infrastructure and facilities for staff at our new Head Office,Wisma Rozali, including, among others, a Network Infrastructure,a Network Management System, an IT Data Centre and a VisitorManagement System. In addition, 146 personal computers werereplaced during the move to Wisma Rozali.

Meanwhile, the Company progressed further with theintroduction of its Human Resource Information System (HRIS).New modules were implemented that will improve various HRwork processes including Attendance, Benefit, Manpower,Performance, E-Leave, Inventory, E-Payslip, E-Recruitment and E-Staff. The remaining modules are scheduled for implementationin 2007.

INTEGRATED MANAGEMENT SYSTEM

In 2006, SSP2 WTP successfully retained its IntegratedManagement System (IMS) certification from Lloyd’s Register

Quality Assurance (LRQA). IMS combines Quality ManagementSystem ISO 9001:2000, Environmental Management System ISO14001:2004 and the Safety Management System OHSAS18001:1999. This makes the SSP2 WTP the nation’s first WTP tohave a fully implemented management system that integratesquality, safety and environmental best practice.

The ISO 9001:2000 certifications for SSP2 WTP and Wangsa MajuWTP were extended for another three years following thesuccessful renewal assessments conducted by LRQA in 2006; whilein April 2006, the SSP2 WTP laboratory achieved ISO/IEC 17025certification by the Department of Standards Malaysia (DSM) fora period of three years, effective from 3 April 2006.

In line with our plan to extend IMS to our WTPs, all WTPs in theNorthern, Southern and Central regions will be pursuing the QualityManagement System ISO 9001:2000 certification from LRQA. To date, all the three Regional Offices and eight main WTPs, namelyBukit Tampoi, Sungai Langat, Cheras Mile 11, Bernam RiverHeadworks, Rantau Panjang, Bukit Nanas, Sungai Batu and Gombak,have been accredited with ISO 9001:2000 certification from LRQA.

HUMAN RESOURCES MANAGEMENT

As at 31 December 2006, our staff strength stood at 1,140, anincrease of 24.7% on the previous year. This increase was mainlydue to the continuing growth in the Company’s business activitiesaimed at achieving its vision to be Malaysia’s Leading andDynamic Integrated Water Services Company.

Key staff development and retention initiatives taken by PNSBincluded implementing a Strategic Human Resource Developmentprogramme, reviewing salary grades and providing careeradvancement opportunities.

Training and Development

Under the Strategic Human Resource Development Programme,Heads of Division identified potential successors, who were sentfor structured training and development to prepare them formore challenging positions.

During the year, the Training Section organised some 138 courses,and employees at all levels attended various kinds of training toenhance their skills and knowledge. An Apprentice SchemeProgramme was also introduced to recruit fresh graduates andprovide them with on-the-job training as second liners to theexisting Management staff. Meanwhile, new employees attendedan Induction Programme to assist them to adapt to theCompany’s culture and to understand the Company’s EmergencyResponse Plan.

Press Conference on Membrane Filtration Technology at SYABAS Headquarters




Employee Benefits and Welfare

PNSB provides an attractive employee benefits programme whichincludes comprehensive insurance coverage, housing and car loansubsidies, and interest-free education, computer and personalloans. Employees and their dependants also enjoy medicalbenefits that cover outpatient treatment, hospitalisation andsurgical expenses, and maternity expenses. In 2006, we furtherimproved employee benefits by expanding dental benefits tocover scaling. We also revised mileage and petrol allowancesfollowing the increase in petrol prices.

D’Puncak Cafe at Wisma Rozali was officially launched on 18December 2006. The Cafe was established primarily to providesubsidised lunches for PNSB staff working at Wisma Rozali.

The Women’s Bureau, ‘Biro Hawa’, of the Kelab Rekreasi & InsaniPuncak Niaga Kuala Lumpur organised a range of activities forour female staff and the wives and children of employees. Onenotable event was the Secretaries Nite 2006, held on 31 March2006, which was graced by YBhg Puan Sri Faridah Idris, the wifeof the Executive Chairman. Other activities included a fishingcompetition, a ‘Majlis Tadarus’ ceremony, and visits to theChildren’s Ward of Hospital Besar, Kuala Lumpur, an Old Folks’Home in Ulu Selangor, and the homes of ten adopted familieswithin Selangor and Kuala Lumpur.

Employee Unions

The Second Collective Agreement with the Non-Executive Unionexpired on 31 December 2006. Representatives from both theNon-Executive Union and the Management will now negotiate aThird Collective Agreement. These negotiations demonstrate themutual understanding between the Union and the Company, andthe Company’s efforts to foster a harmonious relationshipbetween employer and employees.

Protective Services

Since the WTPs under the management of PNSB have beenclassified as protected areas and protected places under theProtected Areas and Protected Places Act 1957, on 31 December2003 PNHB obtained an Auxiliary Police licence under the RoyalMalaysian Police. PNSB’s Protective Services Department (PSD)undertakes security activities to protect the Group’s propertiesand other assets. These include patrolling the Company’s premises,investigating any untoward incidents that may affect the safetyof staff or the good name of the organisation, and handling theprotocol and safety aspects of Company events. All ProtectiveServices personnel undergo annual physical fitness tests twice a year to ensure that they are fit to carry out their duties and responsibilities.

During the year, three training courses were conducted for ourAuxiliary Police at the Police Training Centre in Jalan Semarak,

Kuala Lumpur. Of the 310 Protective Services personnel, 144Auxiliary Police personnel have been seconded to SYABAS. PSDdeployed six Auxiliary Police personnel to assist in securitycoverage during a pipe burst incident at Pulau Ketam in themonth of March 2006. PSD also assisted in the removal of illegalrafts at the Klang Gates Dam and attended to site visits byJabatan Keselamatan Kerajaan Malaysia at Bukit Nanas WTP,Wangsa Maju WTP and Klang Gates Dam.

Staff Quarters

In 2006, the Quarters’ Committee organised a number of activitiesto foster closer ties and good relationship among staff and theirfamilies. In March, 73 children from the SSP2 WTP quartersattended a ‘Khemah Ibadah Dan Motivasi’ Holiday Camp designedto instil positive values; and in October, a ‘Gotong Royong’ washeld to inculcate a spirit of togetherness and educate residents oncleanliness and the proper upkeep of the quarters' surroundingcompound, including repainting of the ‘surau’.

Sports activities during the year included the annual bowlingcompetition, a friendly game of badminton with ‘Belia KampongJaya Setia’ organised by Persatuan Wanita Loji, and a children’sfootball match and annual sports carnival organised by SSP2Kelab Kebajikan Dan Sukan. Religious activities such as ‘CeramahSambutan Ramadhan’, ‘Majlis Berbuka Puasa’ and ‘Majlis BacaanYasin Dan Solat Hajat’ were held during the holy month of Ramadhan Al-Mubarak, including ‘Maulidur Rasul’.

As a grand finale to the activities undertaken in 2006, the SSP2Kelab Kebajikan Dan Sukan and the Quarters’ Committee jointlyorganised a BBQ Nite themed ‘Sentuhan Kasih’.

Modern playground facilities were installed at the staff quartersto provide a conducive environment for the children living in thestaff quarters at SSP2 WTP. Major refurbishments were carriedout on 177 units of staff quarters while 242 units were repainted.The staff quarters will be repainted periodically.

Secretaries Nite 2006


OPERATIONS REVIEWSYABAS Water Distribution Activities

WATER DISTRIBUTION SERVICES

SYABAS is responsible for distributing treated water to about 7.3 million consumers, as wellas factories and commercial buildings in the State of Selangor and the Federal Territories ofKuala Lumpur and Putrajaya. Of its approximately 1.52 million consumer connections, 85%are for domestic use. In addition, amongst other facilities, SYABAS maintains 22,000 km ofwater pipes, 871 water tanks and reservoirs and 344 pumping stations.

SYABAS purchases treated water from four water concessionaires, namely Puncak Niaga (M)Sdn Bhd (PNSB), Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH), KonsortiumABASS Sdn Bhd (ABASS) and Kumpulan Perangsang Selangor Berhad (KPSB).

As a measure to improve pressure and reliability of supply, SYABAS has completed severalmajor pipe laying projects, which have enhanced the connectivity of the distribution network,including between various water supply sources. These measures have brought benefits to theDistricts of Kuala Selangor, Sabak Bernam, Hulu Langat, Petaling Jaya and Kuala Lumpur.

NON-REVENUE WATER (NRW)

Under its Concession Agreement, SYABAS is required to reduce the NRW level from 42.78%as at 1 January 2005 to 15.0% by 31 December 2015. As at the end of 2006, unaudited figuresshow the NRW level to be on target. In 2006, in line with SYABAS’ Master Plan, substantialprogress was made with a number of major, ongoing programmes to reduce NRW:-

• Pipe replacement continued in critical areas. Between 1 January 2005 and 31 December2006, some 335.6 km of pipes were laid, which have significantly improved water qualityin the distribution system and substantially enhanced the water supply service to consumers.

• To facilitate the prompt repair of burst pipes, dedicated leak inspectors and technicianswere deployed to check for leaks throughout the entire distribution system usingsophisticated electronic equipment. During the year, 13,688 leaks were detected andrepaired, of which 11,254 were communication pipe leaks and 2,434 were trunk mainleaks. This contributed to a major reduction in water losses.

Above right:Continued water supply to consumers via static tanksduring water disruptions in Pulau Ketam

Below:Underwater pipe repair works in progress (Pulau Ketampipe burst)


OPERATIONS REVIEWSYABAS Water

Distribution Activities

• District Metering Zones were set up in areas where high waterpressure had resulted in frequent pipe bursts. To control flow,Pressure Reducing Valves were installed at inlets. The nextstep will be to install Cross Border Meters to facilitate waterbalance for all districts and enable SYABAS to accuratelymeasure the NRW performance of each district.

• To reduce the commercial losses caused by NRW, SYABASreplaced 287,600 meters, which were either old (and thereforetended to under-register water consumption) or stuck at anestimated total cost of RM30.0 million. Meter resizing wascarried out to ensure that the correct size of meters wasinstalled at the consumers’ premises to facilitate accuraterecording of water consumption for billing purposes.

• Faulty inlet control mechanisms, such as float and altitudevalves, were repaired to minimise reservoir overflows and cutwater losses.

• A Supervisory Control And Data Acquisition (SCADA) systemis being implemented to manage and maintain the entirewater distribution operation.

• A management information system was set up to recordoperational data including details of pipe leak and burst repairs.This will facilitate the future planning of NRW programmes.

• Licensed base maps were purchased for mapping the waterdistribution system; and the development and application ofhydraulic modelling is now in progress.

• SYABAS’ Enforcement Division was pro-active in stamping outillegal water tapping. During the year, 844 cases wereinvestigated with 459 pending legal action.

Looking ahead, since 80% of identified leaks are caused bycommunication pipe failures, priority will also be given to thereplacement of communication pipes.

WATER QUALITY

SYABAS operates a Water Quality Surveillance Programme basedon the National Standards for Drinking Water Quality. This ensuresthat all water supplied to homes meets the drinking water qualitystandards required under the Concession Agreement. An amplenumber of water sampling stations enables water samples to betaken and analysed both by the Ministry of Health personnel andSYABAS water quality staff to check on water quality in thedistribution system.

However, since the public demands drinking water that is not justsafe and clean but appearing clear, we have developed a MasterPlan to further improve water quality. Accordingly, by the end of2006, SYABAS cleaned 647 service reservoirs, while in 2007 more pipe distribution networks will be cleaned. We have adoptedair-scouring technology for effective and efficient cleaning ofpipeline system. It will form part of the continuous preventivemaintenance programme. SYABAS has identified 13,027 kmreticulation main of sizes 150 mm and below to be cleanedsystematically using the air-scouring technology based on six months cycle. To date, we have invested in 15 air-scouring machines.

Meanwhile, we are also endeavouring to educate consumers torealise that problems of discoloured water may also come fromthe consumer’s own internal plumbing and water storage facility(such as rusting galvanised tanks, galvanised pipes, etc) which arethe consumer’s responsibility.

Substantial progress achieved on major programmes to reduce NRW

under SYABAS’ Master Plan



BILLING AND COLLECTION

Billing is the most crucial aspect of consumer management, andall billable accounts received prompt and accurate monthly billsas required by the Concession Agreement. For the year underreview, total billings amounted to RM1.136 billion, up 6.2% fromthe RM1.071 billion recorded in 2005.

One marked improvement was the reduction in the number ofbills that had to be estimated for various reasons such as faultymeters and locked gates. The number of estimated bills fell 133%,from 918,938 in 2005 to 393,582 in 2006, despite a 2.5% increasein the number of billable accounts, which rose from 1,483,000 asat 31 December 2005 to 1,519,479 as at the end of 2006.

One of the methods adopted by the Management to improve thequality of billing include the appointment of Bill Inspectors toreview the various categories of bills, such as bills with high or lowreadings before the said bills are updated into the system and there-direction of estimate readings to the various Departments forthe next course of action, such as changing the faulty meters.Such monitoring provides a level of assurance to the Managementthat the bills issued are accurate to avoid complaints byconsumers. As at 31 December 2006, 13 Bill Inspectors have beenrecruited and positioned in most of the Districts.

Billing efficiency in 2006 remained constant at 96% includingapproximately 50,000 disconnected overdue accounts at anypoint in time and 99.5% excluding disconnected overdueaccounts, as compared to 2005.

Another method to improve billing performance is the systematicreplacement of faulty and aged meters to ensure accurate andreliable meter readings and monthly billings as part of ourcustomer relationship management. Such exercise will improve

billing and collection and give our customers the assurance onthe reliability and accuracy of meter reading. In 2006, a total of287,631 meters were replaced.

With enhanced Billing and Recovery mechanisms in place,SYABAS successfully reduced outstanding receivables to RM213million in 2006 from RM277 million the previous year, despite anincrease in overall billings of RM65 million. The RM64 millionreduction in receivables was achieved by strict monitoring ofwater bill accounts, prompt issuing of reminder notices, anddisconnections of overdue accounts.

During the year, SYABAS performed 237,087 disconnections and174,920 reconnections, and achieved an improvement incollection efficiency from 101.0% in 2005 to 101.7 % in 2006.With the reduction in receivables, debtors’ turnover improved by26 days, from 94 days in 2005 to 68 days in 2006. Continuousefforts are being made to further reduce debtors’ turnover to 30 days.

The implementation of Inter District Reconnection (I-Recon) in2006 has facilitated the settlement of overdue payments at anySYABAS District Offices following the disconnection of the watersupply, thereby enabling reconnection immediately afterpayments have been made. Some 2,693 accounts were transactedvia I-Recon between June and December 2006.

Another initiative is the proposed migration by the owners ofcondominiums, apartments and flats from Bulk Meter accounts toIndividual Meters. It is estimated that this will create an additional400,000 domestic consumer accounts. Preparations are beingmade to facilitate the opening of these new accounts. SYABAS iscurrently working in close collaboration with the Selangor StateGovernment on the relevant procedures and guidelines prior to implementation.

‘Program Mesra Pengguna' at Giant Supermarket, Batu Caves, SelangorPipe laying works in progress




In 2006, for the convenience of consumers and to enable them tosettle their water bills promptly and without hassle, SYABASintroduced two new payment methods: via credit card at anySYABAS payment counters; and via Mobile-Money, which enablesconsumers to pay bills by SMS from their mobile phones.

SYABAS also provides E Biz, a web-based software that allowscorporate consumers to view their monthly water bills and makepayments via the SYABAS website. Other modes of payment suchas Bank Standing Instructions are now being explored.

CUSTOMER SERVICE

2006 was a year of considerable achievement for the SYABAS’state-of-the-art Customer Service Centre, Pusat PerkhidmatanPelanggan (PUSPEL). Manned by 60 highly trained call agents atSYABAS Headquarters and the 10 District Offices, PUSPEL operates24 hours a day, seven days a week, 365 days a year.

During the year, the call centre received 630,666 calls, up 36%on 2005. Our agents responded to over 95% of these calls. Theremainder 5% of calls consisted of calls abandoned due to a surgein the number of calls arising mainly from incidences ofunscheduled WTP shutdowns, major pipe bursts at crucial areas,or continuous water supply disruptions. To address this issue,PUSPEL aims to reduce the number of abandoned calls to lessthan 2% in 2007, and is planning to enhance the system so as torecord all abandoned calls and to implement automatic call backto the callers. The call centre will also be improving the schedulingof its standby manpower to better handle any surge in calls.

In 2006, PUSPEL received over 12,880 letters, e-mails, faxes andSMS. The numbers continue to rise with the increasing publicconfidence in SYABAS to act on feedback and/or complaints fromconsumers and the increasing awareness of alternative modes ofcontact with SYABAS other than the toll free number.

More than half of all customer service calls are to report leakingpipes. This feedback is invaluable to us, since being alertedpromptly helps us to fix leaks fast. It now takes us an average ofjust six hours from the time a leak is reported to complete therepair. To encourage people to report leaks, we award five prizesper month to those lucky winners who make such reports, andour Executive Chairman, YBhg Tan Sri Rozali Ismail writespersonally to thank everyone who alerts us of leaking pipes.

To provide consumers with an ever higher quality of service,considerable enhancements were made to the call centre. In linewith its motto ‘Mesra Pelanggan’, PUSPEL appointed dedicatedLiaison Officers to handle consumer questions, feedback,complaints and requests for information. These officers areresponsible for both coordinating with the relevant Departmentsand reverting to consumers on matters at hand.

PUSPEL’s Unit Kerjasama Informasi Pelanggan (YAKIN) cooperateswith state assembly representatives, village heads, communityleaders and residents’ associations to stay close to localcommunities through dialogues and briefings. In 2006, YAKINconducted 28 briefings on pipe replacement and participated in28 dialogues with communities and their leaders. YAKIN also sentout 318 automated advanced notices to Ketua Kampung, KetuaTaman and Pengerusi Jawatankuasa Keselamatan Dan KemajuanKampung (JKKK) informing them of scheduled and unscheduledwater disruption in their areas.

PUSPEL’s Industrial Consumer Unit (ICU) is dedicated to servingtrade consumers. In 2006, the ICU followed up on some 6,912reported cases (40% of the total), visited 3,187 trade consumers,and sent out notices on 139 cases of scheduled water disruption.The ICU is carrying out a Consumer Education Programme toeducate trade consumers on the handling of water disruption and storage.

SYABAS has developed a Master Plan to further improve water quality



STANDARD OPERATING PROCEDURES

The Standard Operating Procedures (SOPs) were first establishedand implemented in May 2005 to document all processes of theoperating units including those at SYABAS’ District Offices foreffective and efficient daily operations. In October 2006,improvements were made to the SOPs. To further complement orimprove the SOPs, directives, policies and circulars were issued fromtime to time to cater to the dynamic operations of the Company.

The objectives of the SOPs are as follows:-i As a uniform set of policies and procedures within

the Company;ii As a reference and guidance for all personnel in performing

their daily functions; andiii As the main reference documents to streamline the

operations of the Company.

The SOPs will be reviewed regularly by all the operating units toreflect the current development in the water industry and toensure enhancement of the quality, adequacy and effectiveness ofthe SOPs.

TENDER AND AWARD OF CONTRACTS

In 2006, 544 contracts worth RM391.4 million were awarded tovarious contractors, suppliers and consultants. In line with theConcession Agreement, 78.9% (i.e 429 contracts worth RM386.9million) were awarded to Bumiputra companies, while theremaining 21.1% (i.e. 115 contracts worth RM4.5 million) wereawarded to Non-Bumiputra companies. The contracts were forCapital Expenditure (CAPEX), Non-Revenue Water (NRW), Operation& Maintenance (O&M), Consultancy Services and Supply.

Registration of Contractors, Suppliers and Consultants

Since the primary objective of SYABAS is to deliver efficient andhigh quality services to its consumers, it is our job to ensure thatworks and services carried out by our contractors are of highstandard. Accordingly, SYABAS carries out Pre-Qualification andRegistration of Contractors exercises in order to short-list thosethat are competent and capable. To date, 1,166 contractors,suppliers and consultants have been registered with SYABAS forworks, supplies, services and specialist services.

Local contractors registered with their respective Districts,especially those in Class F, are given priority to carry out workswithin their District. To date, 136 contractors have undertakenSYABAS projects worth approximately RM391.4 million in variousDistricts within the State of Selangor and the Federal Territoriesof Kuala Lumpur and Putrajaya.

Development and Training of Contractors

In line with the Concession Agreement and the Government’spolicy of helping and developing Bumiputra contractors, SYABAShas launched numerous training and development programmesto equip them with the necessary skills and competencies tocompete effectively in the market.

One such initiative is the Program Penyertaan UsahawanBumiputra (PPUB), which was implemented since January 2005and is scheduled for further enhancement in 2007. Under theprogramme, a group of Class F contractors will be selected to betrained in operation and maintenance works, mechanical andelectrical works, pipe repair, meter replacement, etc. Thecontractors will be trained by SYABAS’s engineers in various skillsincluding project management, site supervision and reportwriting. The performance of these contractors will be regularlyassessed and graded.

Welding works in progress under SYABAS CAPEX Programme SYABAS Briefing to Contractors, Suppliers and Consultants




Training and Registration of Plumbers

To ensure quality of customer service, SYABAS is heavily involvedin the training and registration of plumbers. There are twodifferent categories of license, namely Type 1 Plumber Licensewhich requires the candidate to undergo short courses and passwritten and practical tests before he is recommended by SYABASto Jabatan Kawalselia Air Selangor (JKAS) for registration; andType 2 Plumber License for existing Type 1 licensed plumbers witha minimum of five years experience in the field and must havepassed the practical test conducted by SYABAS. Those who passthe practical tests conducted by SYABAS are awarded aCompetency Card and Certificate. All licensed plumbers arerequired to attend refresher course every three years and the validcertificate of attendance must be submitted to JKAS along withthe application for renewal of the license. As at 31 December2006, 657 licensed plumbers were registered with JKAS.

To achieve the target of 1,500 licensed plumbers by the end of2007, SYABAS is collaborating with Akademi Binaan Malaysia(ABM) to recruit and train potential plumbers. In thecollaboration, ABM shall be responsible for the marketing aspectto encourage members of the public, particularly Bumiputras tobecome licensed plumbers, conduct plumber courses and trainingwhereas SYABAS shall be responsible to carry out the written andpractical tests for the candidates referred by ABM.

Standards, Material and Product Committee

The Standards, Material and Product Committee (SSMPC) is theapproving body for all materials and products used in the watersupply distribution system before they are applied in SYABAS’operations. In 2006, SSMPC approved 39 new materials andproducts, and renewed its approval for 12 existing materials and products.

RESEARCH AND DEVELOPMENT

During the year, SYABAS undertook a number of key research anddevelopment initiatives aimed at improving operational efficiencyand reducing costs. These included:-

• Analysing operational problems and failures encountered atthe site due to failure of materials, poor workmanship orinappropriate standards or specifications.

• Searching, in collaboration with suppliers, for alternativematerials, products and methodologies.

• Exploring new approaches and techniques for managing thedistribution system.

Some of the ongoing research and development exercisesincluded investigating:-

• The use of alternative products such as plastic water metersand an automatic meter reading system.

• The introduction of electromagnetic flow meters for bigcommercial and industrial consumers.

• The use of a variable speed pumping system in thedistribution networks.

• The implementation of a SCADA system utilising an ultra-lowbattery-powered system for data transmission via a GPRSnetwork.

• The development of an Integrated Water Data ManagementSystem.

Substantial efforts were made toenhance customer service

‘Majlis Perasmian Kursus Ulangan Tukang Paip Berlesen 1 & 2’ for SYABAS contractors,which was officiated by En Mustapah Md Omar, Director of JKAS



INFORMATION AND COMMUNICATION TECHNOLOGY (ICT)

2006 was another busy year for SYABAS ICT. With the significantgrowth in its workforce, more than 300 PCs and notebooks wereacquired and the LAN infrastructure expanded. The connectivitybetween blocks at site with multiple isolated buildings wasenhanced with high-speed wireless WiFi 54/108 Mbps building-to-building Access Point Technology covering our Sabak Bernam,Klang, Gombak and Workshop Sg Besi sites. The link enables usersto access central applications and information.

In 2006, ICT application functionalities and integration werecarried out between the backend systems of SYABAS and thecollection agents to enhance customer service. Meanwhile, toenhance operational efficiency, SYABAS introduced a range ofsoftware applications:-

• The SYABAS Integrated Water Management InformationSystems (SWIMS) application integrates five main areas,namely: financial; operation and maintenance; NRW;customer service; and billing and collection.

• iJOB is an integrated job management application thatenables SYABAS to record the resolution of consumercomplaints, manage contractors, and pay for services. Thisinitiative integrates the customer service, NRW and financialdomains as well as the CRM application via PIVOTAL. iJOB alsoallows SYABAS to analyse the data gathered so as to improveits systems and NRW levels.

• iPURCHASE is an integrated procurement management and vendor payment application designed to improveprocurement management. iPURCHASE is being developed inphases and should be completed by mid 2007. By the end of2006, the Direct Purchase of Goods module had been installedand has since been tested. With iPURCHASE, SYABAS’ costcentre will be able to better manage its budget and purchases.iPURCHASE is integrated with iJOB and SUNSYSTEMS.

• iSSBS, the SYABAS SMS Broadcast Systems, is a serviceapplication developed to integrate the Celco SMS service. Thiswill enable a sender to broadcast an SMS message to atargeted group by sending a short code message to the iSSBShost. iSSBS will then broadcast the message to all therecipients registered with the short code.

• eCONSUMER was developed based on an initiative by theBilling & Recovery Division to facilitate consumer data entryand management before export to the consumer masterdatabase, BASIS. By improving the quality and accuracy ofthe data, it enhances the service we provide to consumers.The eCONSUMER initiative kicked off in October 2006 andimplementation was completed by January 2007.

• The preparation and issuance of cheques for less thanRM10,000 was outsourced using eCHEQUE software, whichintegrates with SUNSYSTEMS and the Bank’s utility interface.

• An eLearning Portal was developed to provide humanresource training electronically, and is accessible from theSYABAS Enterprise Portal via eMESRA. This portal has alreadybeen customised and is expected to be implemented in 2007.

Other web-based applications introduced in 2006 were:-

• Stolen Meter Tracking System (SMTS) with PDA screen sizedaccessibility, enabling enforcement officers to access SMTSusing a 3G-PDA and internet browser from the field.

• eDPLAS Phase II – the Building Plumbing System Approvaland the M&E System Approval Management modules.

• Vehicle Management System (VMS).

• Meter Management System (MMS).

• Important Contacts Profile and Directory Service(iDIRECTORY).

• Contractor, Supplier and Consultant Profile and PerformanceManagement (iCOMS).

During the year, SYABAS made considerable headway with Stage1 of the Planning and Design Division’s GIS Mapping initiative.Licensed base maps were purchased for mapping the waterdistribution system in the State of Selangor and the FederalTerritories of Kuala Lumpur and Putrajaya, and details arecurrently being verified to ensure accurate updating on acontinuous basis. Meanwhile, the development and applicationof hydraulic modelling is in progress. Another project involvesgeo-code registering SYABAS water consumers on the map andstandardising the format of consumers’ details.




HUMAN RESOURCE MANAGEMENT

A total of 675 new employees were recruited during 2006, mainlyto support SYABAS’ expanded business operations. As at 31December 2006, total staff strength stood at 3,122, an increase of28.69% on the previous year, consisting of 105 management staff,450 executive staff, 1,280 non-executive clerical staff and 1,287 non-executive technical staff. The staff ratio as compared to thetotal number of customer accounts which stood at 1,510,925 asat 31 December 2006 was therefore 1:483.

Training and Development

In 2006, SYABAS organised 133 in-house and external trainingcourses to develop staff, enhance their ability to perform in theircurrent jobs, and prepare them for future responsibilities. Toachieve the Company’s long-term strategic goals, high prioritywas given to customer service, meter reading, and operation andmaintenance. Pre and post training evaluation was alsointroduced to measure the effectiveness of training. For staffperforming below the Company’s expectations, counselling andspecial training programmes were arranged to help them improvetheir skills, competencies and motivation in order to achieve theCompany’s goals and objectives.

The operations and field staff were given multi-skilling training toimprove operational efficiency. This included getting Techniciansand Fitters to use and operate Company trucks and lorries by acquiring the General Driving License (GDL)/Class ‘E’ driving licenses, and providing them with training on Safe Driving Techniques.

Employee Benefits and Welfare

SYABAS’ employee benefits programme includes both medical andinsurance plans including death benefits. In 2006, compensationtotalling RM427,852 was paid to the next of kin of six deceasedstaff. In addition, in 2006, for the second consecutive year,SYABAS approved a substantial number of interest-free educationloans of up to RM1,000 per employee for their children’s school expenses.

SYABAS is progressively upgrading its Headquarters and DistrictOffices to provide a conducive working environment for itsexpanding staff strength and also to uphold its corporate image.SYABAS also continues to upkeep and maintain the staff quartersin good condition for the welfare of those who are living in these quarters.

SYABAS is dedicated to the welfare of its employees and, in 2006,continued to strengthen staff morale and esprit de corps and tofoster the social, educational, cultural and welfare interests ofemployees. SYABAS also encouraged staff to participate incompetitive athletic events such as ‘Kejohanan Sukan TahunanSYABAS 2006’. Other events included monthly staff gatherings,meetings for new employees with the Executive Chairman, MajlisTahlil and reading of the Yassin, breaking of fast and the joint-celebration of Hari Raya Aidilfitri with PNSB.

In September 2006, a new association was established under thename of ‘Persatuan Kakitangan Bekalan Air Selangor, WilayahPersekutuan Kuala Lumpur Dan Putrajaya’ (PEKA) to merge theactivities of the existing associations or societies of Puncak Niaga,SYABAS and PUAS, thereby providing a single platform to managethe Group’s staff welfare matters and to promote communal spiritand multiracial harmony.

Netball competition - SYABAS Sports Carnival ‘Gotong Royong’ mud slide cleaning effort at Kampung Tasik Tambahan, Ampang

Growing withthe community

“Unless we extend ourcircle of concern to allliving things, we cannever truly grow.”

Our paramount duty at Puncak Niaga isto serve the community and safeguardthe environment. Sustainability istherefore crucial to every aspect of our business. This is why we activelysupport and participate in a wide arrayof initiatives to uplift living standardsand to enhance environmental care.


ENVIRONMENT AND COMMUNITYENVIRONMENT AND COMMUNITY

OUR APPROACH OF CORPORATE SOCIAL RESPONSIBILITY

Our approach to Corporate Social Responsibility (CSR) underpins our commitment to Quality,Value, Service, Innovation and Trust. It allows us to manage our operations responsibly,identify risks and make the most of opportunities to differentiate ourselves from ourcompetitors. This helps us to provide quality services, recruit and retain the best people, formbetter partnerships with our suppliers and create greater value for our shareholders.

For us, good corporate social responsibility has always been about the effective and efficientoperation of our business. It’s about getting the balance right so that we can best serve theinterests of our customers, the environment and society at large.

We work hard to fulfil our responsibilities and are continuously looking for ways to improveon our overall performance.

About this Report

Over the last five years, our reporting form has appeared in several presentational styles,however, one key message has remained the same; the importance of Puncak Niaga workingtowards its long term goal of becoming a sustainable water company.

Puncak Niaga has always sought to disclose its performance in assuring conservation andpreservation of the natural environment, ensuring the health and safety of its employeesand caring for the local communities.

We aim to be the Leading and Dynamic Integrated Water Services Company in theprovision of reliable and sustainable water solutions, and growing our business throughcompetitive advantage.

To meet our objectives, we have developed five core themes:• people • customers• environment • competitiveness• reputation

OUR MISSION

Our corporate mission provides active support and participation in programmes thatuplift the community’s living standards and value systems in line with the aspirations of Vision 2020.

We are committed towards addressing national and international concerns, pertaining tothe protection, conservation and enhancement of the natural environment.

We seek to manage our business responsibly and sensitively, with the objective of makinga difference in the lives of people around us.

Below:Educational Outreach Programme No. 67 atSekolah Kebangsaan Bandar Tasik Kesuma,Beranang

Visit to old folks home


ENVIRONMENT AND COMMUNITY

Our Corporate Health, Safety and Environmental (HSE)System aims:

• to provide a safe and environmental friendlyworkplace in the most effective manner;

• to highlight to clients and ultimately the public of theCompany’s commitment to HSE; and

• to facilitate staff induction in regard to theirknowledge on HSE.

This year, in a natural development mirroring our progression, wehave placed stronger emphasis on these three reporting areas, aswe believe that they are intrinsically linked and that corporatesocial responsibility and environmental, health and safety issuesfall under the wider banner of sustainable development.

Our target audience consists all our stakeholders, includinginvestors, government leaders, regulators, employees, businesspartners, academics, non-governmental organisations,environmental groups, advocacy organization leaders, individualswith interests in corporate responsibility and the communitieswhere we do business.

Policy and Management

As a measure of our concern about issues relating to Health, Safetyand the Environment (HSE), both at the workplace and community,we have developed our Health, Safety and Environmental Policy,which has been in place for several years now and constantlyreviewed to enable our team to manage these issues.

Health, Safety and Environmental Policy

It is the policy of Puncak Niaga Holdings Berhad and itssubsidiaries (PNHB Group) to provide, so far as is practicable asafe, healthy and environmental friendly workplace for allemployees, contractors, visitors and interested members of society.In the spirit of consultation and cooperation, the Managementand employees will together strive to achieve goals and objectivesof this Policy.

Health, Safety & Environment – Our Clear Vision

ACHIEVEMENTS AND CHALLENGES FOR 2006

Throughout 2006, we have strived in many areas to go beyondour regulatory duty to make a real difference to the environmentand communities we serve.

However, to move forward and improve as a business, we mustacknowledge that we have also seen several challenges this year.It is important to us that these are reported with the sametransparency as our good news to provide a balanced view of theperformance of Puncak Niaga.

Caring for the Environment

In order to contribute effectively to sustainable development,we have a responsibility to act as diligent stewards of the naturalenvironment. We do this by focusing on mitigating the harmfulenvironmental impacts of our business activities and enhancingbiodiversity at our sites. This not only strengthens ourrelationship with society, but demonstrates our commitment toenvironmental excellence.

We work in close collaboration with the Department ofEnvironment (DOE), Jabatan Kawal Selia Air Selangor (JKAS),Lembaga Urus Air Selangor (LUAS) and the relevant authoritiesat the State and Federal Level, in ensuring environmental care.We are members of various Selangor State’s committees such asthe ‘Jawatankuasa Tetap Alam Sekitar Negeri Selangor’ and‘Jawatankuasa Tetap Infrastruktur dan Kemudahan Awam NegeriSelangor’ to mitigate pollution incidences.

As a provider of essential drinking water, we recognise theresponsible role we play in society and in the protectionand improvement of our environment.

Our SSP2 WTP received the 2006 Gold Trophy National Excellence Award

for Occupational Safety and Health for the Water Utility Sector



Maintaining and Enhancing Quality

Managing reservoirs and river abstractions ensures that we cancontinue to supply our customers and meet their demands, withthese principal water storage media making a substantialcontribution to our resource portfolio. We work to ensure that allour abstractions are carried out in a sustainable way and that wecomply with all legal requirements.

To maintain our water resources, we conduct continuoussurveillance and monitoring to ensure that the water produced bythe Water Treatment Plants (WTPs) is safe and of high quality.The monitoring of rivers is crucial, where dumping of untreatedwaste, illegal sand mining and encroachment activities canadversely affect the quality of the river water.

Currently, we operate and maintain two river warning monitoringstations at Sungai Langat and Sungai Selangor; to provide earlywarning of possible raw water quality violations. In addition, ourtoll-free river watch telephone hotline (1800-88-3254) enablesthe public to inform us of pollution incidences.

We have also established an Environmental Surveillance Sectionunder the Operation I Division to undertake monitoring andinvestigation activities, through regular sanitary surveys, specialenvironmental investigations at all water catchment areas,investigations of violations and reporting to the relevantauthorities namely DOE and LUAS, and undertaking studies onwater quality problems faced by the WTPs and dams.

In total, the Environmental Surveillance Section has expended RM305,694.45 in 2006 for its operations and RM603,320.00 hasbeen budgeted for 2007.

We have also established a Central Laboratory Unit mainly toconduct both raw and treated water quality assessments, and aProcess Improvement Section to ensure the effectiveness at everystage of the water treatment process, from the point of entry atthe WTP intake through the various treatment systems until itleaves the WTP at the balancing reservoir. Our stringentassessment covers the following:

• Hourly test on four physical and five chemical parameters.• Continuous monitoring on raw water, settled water and

treated water quality by on-line analysers at the WTPs.• Daily analysis for microbiological parameters.• Weekly test by the Central Laboratory Unit and the

Ministry of Health (MOH) at the outlets of the WTPs and thebalancing reservoir.

• Monthly test for all parameters by an accredited laboratoryaccording to schedules set by the MOH.

Water Quality Index Programme

A Water Quality Index (WQI) Programme is conducted on amonthly basis for all WTPs, including during the wet and dryseasons. The WQI value is computed to allow determination onthe cleanliness and availability of water usage for water supply,aquaculture and irrigation purposes, as tabulated below:-

WQI Class Water UsageClass I Conservation of natural environment

Water supply I– practically no treatment necessaryFishery I– very sensitive aquatic species

Class IIA Water Supply II – conventional treatment requiredFishery II – sensitive aquatic species

Class IIB Recreational use with body contactClass III Water Supply III

– extensive treatment requiredFishery III – common species of economic value and tolerant species; livestock drinking

Class IV IrrigationClass V Water unsuitable for any of the above uses(Source : Department of Environment, Malaysia)

We remain committed to conserving and enhancing ourenvironment, striving to achieve 100% compliance withour legislative obligations and to lead the field inenvironmental management.

River Rescue Brigade N o.18 at SSP2 WTP officiated by YB Dato’ Hj Noh Hj Omar,Deputy Minister of Education



From the monthly readings at the 28 WTPs and three Dams, eigthstations were in Class I, 14 stations in Class II and the remainingfive stations in Class III, an improvement over year 2005 when 22stations were in Class II and seven stations in Class III.

Pollution Incidents

Every year we, along with other water companies, experiencepollution incidents generally relating to man-made activities andsources like sanitary landfills, sand mining, sewage and effluentdischarges and others. In 2006, there have been recorded a totalof 830 raw water quality violations (2005: 796) and 206 cases ofplant shutdown due to raw water quality violations (2005: 123).

Figure 1: Analysis on Annual Raw Water Quality Violations andPlant Shutdowns

A total of 830 raw water quality violations were recorded in year2006, representing an increase of 4% as compared to 2005. Thebreakdown of the violated parameters are as follows:

Parameter group No. of violation2005 2006

Microbiological 298 392Group I - Physical 174 203Group II – Inorganic matter 322 229Group III – Heavy metals 2 6Group IV – Pesticides 0 0Total 796 830

Most violations occurred in the Langat River, Selangor River andBernam River basins, as recorded below:

Catchment Area No. of No. of violationWTP(s) 2005 2006

Langat River basin 7 349 385Selangor River basin 6 220 243Bernam River basin 4 137 146Kelang River basin 8 27 13Buluh River basin 2 9 21Tengi River basin 1 54 22Total 28 796 830

Raw water contamination can lead to plant shutdown,particularly at the partial WTPs where the design factors limit theplant’s ability to treat poor raw water quality. The 206 shutdowncases in year 2006 contributed to a total production loss of3,044.15 hours (2005: 123 cases resulted in 947.25 hours of shutdown).

1200-

1000-

800-

600-

400-

200-

0-

Annual Raw Water Violations & Plant Shutdowns (1995 - 2006)

Freq

uenc

y (N

o.)

Total Raw Water Quality ViolationsPlant Shutdown Due To Raw Water Violation

273

95 96 97 98 99 00 01 02 03 04 05 06

511

522

35

87 76 75 89 102 17

5

156

164

123

206

658

804

1044

957

909

802 810

796 83

0

Continuous surveillance and monitoring of raw water to ensure water

produced is safe and of high quality



The major probable source for plant shutdowns was leaking of contaminants from roadaccidents, construction works and discharge of industrial effluents into the waterways:

Shutdown Probable SourceNo. Date WTP hours Parameter of Pollution1 07.01.06 Gombak 2.17 hrs Oil Road resurfacing works at

KM 29, KL - Karak Highway2 14.02.06 Cheras Mile 11 7 hrs Diesel Illegal dumping3 08.03.06 Sungai Selisek 10.5 hrs Diesel Sand mining activity at

Behrang – Perak4 12.03.06 Gombak 0.17 hrs Oil Abandoned oil drums from

road resurfacing works, KL - Karak Highway

5 21.04.06 Gombak 63.0 hrs Crude palm oil Tankers accident at KM 31.5, KL - Karak Highway

6 25.04.06 Gombak 9.42 hrs Crude palm oil Remaining oil from tanker accident was flushed by heavy downpour

7 15.06.06 Bukit Tampoi 1.5 hrs High turbidity Sand mining activity8 17.06.06 Sungai Selisek 5.75 hrs High ammonia Suspected discharge

and dead fishes from a rubber factory9 08.07.06 Salak Tinggi 26.25 hrs Chemical odour, Suspected due to leachate

dead fish and pollution from ahigh ammonia sanitary landfill

10 11.07.06 Salak Tinggi 16.5 hrs Chemical odour, Technical failure of a sewagedead fish and treatment planthigh ammonia

11 17.08.06 Cheras Mile 11 1 hr Oil (hydraulic) Illegal dumping (undetected)12 18.08.06 Salak Tinggi 14.83 hrs High ammonia Suspected due to discharge

from Nilai Industrial Park and a sewage treatment plant

13 21.08.06 Bukit Tampoi 4.5 hrs High ammonia Domestic & industrial effluent (IWK Taman Permata)

14 23.08.06 Bukit Tampoi 46.0 hrs High ammonia Domestic & industrial effluent15 15.09.06 SSP2 3.17 hrs Odour in Suspected due to leachate

treated water pollution from a sanitary landfill16 15.09.06 Salak Tinggi 19.15 hrs Chemical odour Suspected due to discharge

from Nilai Industrial Park17 21.09.06 Salak Tinggi 145.83 hrs High ammonia Suspected due to discharge

from Nilai Industrial Park18 18.12.06 Salak Tinggi 9.75 hrs Chemical odour Suspected due to discharge

from Nilai Industrial ParkTotal 386.49 hrs

The Gombak WTP experienced a total shutdown of 72.42 hours in April 2006, when twotankers carrying crude palm oil collided on the Karak Highway, which resulted in spillage ofthe oil into Gombak River.

This incident triggered the Emergency Response Plan (ERP) into action with the involvementfrom the Selangor State Government, SYABAS and the highway concessionaire.

Another major pollution incident in 2006 involved the Salak Tinggi WTP, which had to beshutdown due to contamination of its raw water (Sungai Labu) attributed to strong odourand high ammonia, as indicated by dead fish. It was suspected that most incidences were

Top:Spillage of crude palm oil from one of thecollided tankers

Bottom:Oil booms were installed at Gombak Intake toabsorb the oil



caused by industrial discharge from the Nilai Industrial Park andfailure of the sewage treatment plants, which are also located in Negeri Sembilan.

In September 2006, our largest WTP, the SSP2 WTP was shutdownfor 3.17 hours upon detection of strong odour in the raw waterof Sungai Selangor. Findings from an environmental investigationon the same day indicated that the incidence may have beencaused by leachate contamination arising from a sanitary landfilllocated upstream of the intake.

Other WTPs shutdown cases were mostly due to untreatableturbidity and colour levels by the partial WTPs, where the existingtreatment systems are not sufficient to produce treated water tothe designated quality. We have conducted numerous studies onnew technologies like Membrane Filtration, and are currentlyundertaking upgrading works at the Sungai Rumput and KepongWTPs to convert them into full treatment plants utilising the UltraFiltration technology, which are expected to be commissioned bythe second quarter of 2007.

Prosecutions

We wish to report that we have not received any prosecutionsfrom DOE on discharge violations into the waterways.

Environmental Care

We realise our potential to impact on land and biodiversity, for example, through management of our land and newdevelopments, and that we must act responsibly to eliminate orminimise these impacts and enhance biodiversity. Variousinitiatives were taken to improve the river water quality, andthroughout the year 2006, the following initiatives weresuccessfully undertaken:

• Six Environmental Impact Studies were conducted as plannedat the six water catchment areas supplying water to the 28 WTPs.

• A total of six Sanitary Surveys were conducted for SungaiLangat WTP, Batu Pond, Wangsa Maju (Sungai Gombakintake), SSP2 WTP, Ampang Intake WTP and Sungai LangatCatchment that consists of seven WTPs.

• Monthly Water Quality Index (WQI) Programme werecompleted at 27 stations covering the WTPs and Dams.

• 18 environmental investigation cases were conducted in relation to major WTP shutdowns due to raw water quality violations.

• 24 environmental investigation cases were undertaken toevaluate and highlight pollution risk and impact on the WTPand dam operations.

• An environmental study on siltation problems was conductedat the intakes of four WTPs.

• The Quality Assurance Programme on water quality wasconducted as planned.

• The two River Warning Monitoring Stations continued ingood operating condition.

Environmental management plans are prepared for each projectto reduce the impact of new development and our in-houseenvironmental team ensures that the environmental impact ofour new development is minimised.

Public Awareness on Environmental Protection and Conservation

As part of the Company’s Social Environmental AwarenessProgramme, the Company has successfully implemented theFactory Visit Programme primarily to highlight the impact ofpollution and the need to preserve our water resources. Thefactories visited in 2006 were Sime Coatings Sdn Bhd, BabaProducts (M) Sdn Bhd, Chung Hwa Picture Tube Sdn Bhd andMalaysia Milk (Vitagen) Sdn Bhd.

Leaking of leachate from a retention pond at a sanitary landfillDischarge of effluent from Nilai Industrial Park into the river



Impact on the Atmosphere

At Puncak Niaga, we are aware both of the potential we have toimpact upon the atmosphere through emissions of greenhousegases and of the importance of related issues such as climatechange. Climate change is recognised as “the single mostimportant issue we face as a global community”. Scientificconsensus has confirmed that human activities over the lastcentury have contributed significantly to the warming of theplanet. Climate change is inevitable and we will need to adapt.

Our strategy focuses on understanding the impacts of climatechange, developing and implementing adaptation measures andraising awareness.

Energy Consumption

The treatment of water and its distribution is an energy intensiveprocess and as quality targets get ever tighter, we see our demandfor electricity continuing to grow.

Electricity UseIn 2006, our electricity consumption amounted to RM50.0 million,a 2% increase from 2005.

We strive to conserve energy consumption by carrying out regularpreventive maintenance programmes as well as overhaulequipment to ensure our WTPs are running efficiently.

Transport

The amount and type of vehicles in our fleet is governed by thearea in which we operate, the variety of services we provide, andthe need for rapid response times. Vehicles are maintained,serviced and replaced at regular intervals to ensure optimumefficiency, reliability and environmental performance.

Due to the nature of our business, we operate 24 hours a day, 365days a year. Because of this and the need to ensure that we canalways provide the service that is expected by our customers, wehave to ensure that our employees have the transport to get themto where they are needed.

While advances have been made in reducing our energy use,driving down emissions from transport is not easy as the necessaryfuels and vehicles are not readily available in the marketplace.

Waste Management

Our water treatment processes generate sludge and other non-biodegradable wastes as by-products. We also generate wastesnormally associated with running a business such as paper,fluorescent lights and scrap metal. The potential for minimisingwaste from our operations, without process implications, is verylimited, although further reductions could be made in the generalwaste we produce.

Sludge management programmes have been implemented at the SSP2 WTP and the Wangsa Maju WTP. Furthermore, wehave also embarked on projects to install sludge treatmentfacilities for 15 other conventional WTPs which are expected tobe completed by year-end 2007.

We are currently conducting studies to determine the best options available for the disposal of the residues arising from thesludge treatment.

Caring for our Local Community

We want to have a positive impact on local and nationalcommunities. In general terms, if we can help our communities,we can enhance the areas in which we operate to encourageinvestment and consequently build our business. The focus ofour support is as follows:

• intermittent support to charities and communityorganisations, primarily local involvement in communitypartnerships to address social issues.

• protect our corporate interests and enhance our reputation.• activities in the community to promote our corporate brand.

Besides monetary contributions, we try to assist physicallywhenever and wherever we can. For example, during the Johorfloods between December 2006 and January 2007, we assigned 20of our staff in December 2006 together with 50 static tanks andeight tankers to supply clean drinking water to the flood victimsin Tangkak, Johor. During this time, we also set up and maintainedan Operations Centre in Tangkak for seven days to enable promptresponse to the victims’ needs. On top of that, five tankers and 50static tanks were put on standby to be activated should the needarise. Apart from that, we also distributed bottled drinking water

Educational Outreach Programme No. 68 at Sekolah Kebangsaan Taman RakanSungai Long, Kajang



to Johor for several times thereafter. All in all, this exerciseinvolved a total of 19 lorries and 50 of our staff.

Charitable DonationsOur charitable donations in 2006 totalled RM11.54 million. Thesefunds are distributed amongst local, national and internationalcharities offering valuable support, often to small communitybased projects. Our contributions include:

• Humanitarian efforts: - Contributed RM200,000 and 30,000 bottles of drinking

water to the flood victims in Johor Bahru. - SYABAS’ staff and members of Persatuan Kakitangan

Bekalan Air Selangor, Wilayah Persekutuan Kuala Lumpurand Putrajaya collected and donated to 20 families the following: RM285 per family, rice, flour, sugar andused clothes.

- Donated RM40,000 for the victims of the earthquake in Yogyakarta.

- Contributed RM200,000 to the Kumpulan Wang AmanahBantuan Bencana (Disaster Trust Fund).

• Charitable organisations: - Donated a total of RM181,515 to various orphanages and

other charitable organisations.- Donated RM200,000 to Yayasan Harapan Kanak-Kanak

Malaysia.- Donated 350 hampers to the patients in the Children’s

Ward, Kuala Lumpur General Hospital.- Donated 86 hampers to the Old Folks’ Home in Taman

Ehsan, Hulu Selangor.• Educational institutions:

- Donated a total of RM98,500 to various schools ParentsTeachers Associations (PTAs).

- Contributed RM21,450 to various institutions of higher learning.

- Donated USD500,000 to The Australian Islamic EducationTrust Building Fund for the Darul Uloom Islamic Academyof Brisbane, Australia under the Corporate Communityand International Islamic Education donation programme.This is in addition to the earlier donation of RM1.5 millionmade in 2005.

Education InitiativesWe place a great deal of importance on environmental education.We have a dedicated team running our environmental awarenessprogramme, which is now coming into its tenth year. We havefound that this programme is still as popular as ever with theschool children. The key aim of our programme is to raiseawareness of the importance of water and water conservation,which is achieved through a varied range of events and activities.

One of these programmes is the River Rescue Brigade (‘BrigedPenyelamat Sungai’) that was initiated in 1998. It has remained akey programme in which students are taken on visits to PuncakNiaga’s water treatment plants and dams. Our River RescueBrigade programme is aimed at educating the young generationon the importance of conservation and protection of ourenvironment, especially our nation’s rivers. In 2006, a total of204 school children from eight primary schools participated inthe River Rescue Brigade making a total enrolment of 2,035school children and 84 schools into the programme to date. Inall, a total of RM173,400 has been used for the maintenance andmanagement of our River Rescue Brigade programme in 2006.

River Rescue Brigade members participated in the Environment Week Exhibition(State level) held at Cyberjaya, officiated by YAB Dato’ Seri Dr Mohamad KhirToyo, Menteri Besar of Selangor

We continue to take our wider responsibilitiesseriously and, wherever practicable, strive to

enhance people's quality of life in thecommunities that we serve



Our Educational Outreach Programme (“Turun ke Padang”),launched in 1999, is an extension of the River Rescue Brigade,and is aimed at educating young people on the importance ofriver preservation to ensure the continuous supply of clean water.In 2006, the Senior Management for both Puncak Niaga andSYABAS visited 20 primary schools located within our areas ofoperation to give talks on care for our rivers, the environment aswell as the roles played by Puncak Niaga and SYABAS in thewater treatment and water distribution processes respectivelyinvolving 1,000 school children in 20 primary schools. As of 2006,we spent RM36,444 on the programme which benefited 4,000school children in 80 primary schools.

Public awareness and educational programmes play an importantrole in reducing public apathy towards environmental protectionand conservation. Puncak Niaga continues to provide strongsupport to all efforts of the Government and Non-GovernmentalOrganisations towards this end by participating in exhibitionsand programmes such as the WTP Open Day in conjunction withthe World Water Day to promote public awareness on theimportance of protecting our water resources, a key componentof the natural environment.

As part of our Corporate Social Environmental AwarenessProgramme, we conducted visits to four factories to highlightthe impact of pollution and the need to preserve our waterresources. Until 2006, we have visited nine factories. We havereceived positive response from factories to these visits and willcontinue to conduct more factory visits in the State of Selangorand the Federal Territory of Kuala Lumpur in 2007.

Caring for Society

We believe in giving back to the society in which we operate inand have been very active in the following:

• Community service projects: - Participated in the ‘Karnival Keluarga Bahagia

Penyayang Selangor’ organised by the Yayasan BudiPenyayang Malaysia.

- Participated in the Adopted School Programme underPINTAR project.

- Sponsorship for community centres and residentassociations.

- Donation of RM200,000 towards the Education &Research Association for Consumer Malaysia.

- Dialogue sessions with resident associations.- Supplying of water tankers, static tanks and jerry cans to

Pulau Ketam where a burst pipe incident occurred and toother places with water disruptions, including Johor.

• Sponsorship of Sporting Events: - Sultan of Selangor’s Cup Football League.- SUKMA XI.- Golf Championship.- Rugby Tournament.- Selangor Football Team.

We are working hard to create a positive work culturewhere people feel proud to work for the business, wherethey can maximise their potential and, in return, get therecognition and reward they deserve.

‘Jalinan Mesra SYABAS Wilayah Gombak - Program Gotong Royong BersamaPersatuan Penduduk & Jawatankuasa Kemajuan & Keselamatan Kampung’

SYABAS participated in ‘Karnival Keluarga Bahagia Penyayang Selangor’



Caring for Health and Safety

As a responsible employer, we seek to ensure that our employees,and those who contribute to our success through the supplychain, are fairly treated. We feel it is unacceptable for anyone tobe injured or become ill from the work we undertake. Throughout2006, we have demonstrated our commitment across the businessto improving health and safety at the workplace.

We have been providing the necessary safety and healthmechanisms for our employees who may be exposed to hazardswhile performing their duties. Although steps taken are in linewith statutory requirements, we rely on our own internal controlmeasures in giving priority to safety at the workplace. A structureis already in place to ensure this – our Corporate Health andSafety Committee was established in 2004 and supported bysimilar committees at operational level. In March 1999, weintroduced our Safety and Health Policy. This policy was reviewedand expanded on 27 July 2003 to our Health, Safety andEnvironment Policy (HSE Policy), which incorporates the elementof environment at the workplace. With this policy, we ensure thatHSE measures are implemented and monitored company-wide.We have also conducted a Chemical Health Risk Assessments(CHRAs) at our WTPs to ensure that we have the properprocedures, equipment and training in place to ensure ouremployees’ safety and health and also put us in compliance withthe regulations.

All our WTPs and dams staff are required to undergo a minimumof four man-days of training annually while permanentcontractors must undergo at least one man-day of training a year.The proper implementation of our health and safety measuresrequires that our employees and permanent contractors beadequately trained in three categories: Statutory Requirements,Competency Training and General Training.

Safety induction training, mock drills as well as ERP training havebeen carried out at all of our 28 WTPs and the three dams to trainstaff to be responsive and ready in the event of emergencies. ERPdrills were conducted to familiarise and equip our employees in responding to unforeseeable crisis situations. In addition, our Safety and Health Officers have conducted 60 Site SafetyInspections i.e. two cycles at each WTP and dam.

The objective of these programmes is to ensure that all our WTPsand dams comply with safety regulations and adhere to the safetymanagement system established within Puncak Niaga. In theprocess, matters such as adequate signage as well as properstorage of chemicals and usage of personal protective equipmentat the workplace were also reviewed annually.

We are proud to announce that the SSP2 WTP has demonstrateda high level of commitment to safety and health standards at theworkplace and has achieved the best practices in these areas byimplementing Integrated Management System. In April 2006, theSSP2 WTP achieved the benchmark of two million hours of noLost Time Injury (LTI), one of the major elements used as anindicator of safety performance adopted internationally by mostindustries. It is worthy to note that since September 2002, the LTIhas included contractors’ and suppliers’ man-hours after theyhave undergone extensive safety and health training andfamiliarisation at the WTP. The benchmark achieved indicates thatSSP2 WTP has been accident-free since the day the WTP wascommissioned in July 1998, a testament to the employees’ highlevel of awareness on safety and health standards.

SSP2 WTP has always participated in safety and healthcompetitions to benchmark itself against international safety andhealth standards. In February 2007, SSP2 WTP received the highestaward in safety and health namely, the National Excellence Awardin Occupational Safety and Health 2006 from YAB Dato’ SeriAbdullah Hj Ahmad Badawi, the Prime Minister of Malaysia. The competition was organised by the National Council onOccupational Safety and Health (NCOSH) to promote excellence inthe implementation of safety and health programmes.

Supply Chain

Our corporate responsibilities stretch to the decisions we makewhen procuring goods and services for the business. To this end,we have to consider how we can have a positive influence overenvironmental impacts through specification, tendering,negotiation and the management of our contracts.

SSP2 WTP achieved 2 millionhours of NO Lost Time Injury



We source a wide range of products and services from officefurniture to water treatment chemicals. We work hard to ensurethat our suppliers are reputable, quality organisations with therequired level of competence and ability in all aspects of the workthey carry out.

Contractors and consultants are selected using the best valueapproach, which, amongst other things, enables them to beassessed on their environmental credentials. Once selected, wework in partnership to achieve continuous improvement, with acommon purpose and shared responsibilities.

Our suppliers are monitored and evaluated on the quality of itemssupplied, timeliness of their deliveries and compliance to safetyand environmental requirements. All existing suppliers areevaluated on a yearly basis to maintain their registration with us.Any non-compliance or non-conformance to our requirementswill be rejected. In the case of non-conformance toenvironmental and safety measures, the suppliers will be issuedwith a Corrective Action Request (CAR) which will then bereflected in their yearly evaluation.

Crisis or Emergency Readiness

Since PNHB Group produces and supplies treated water to thenation’s hub namely, the State of Selangor and the FederalTerritories of Kuala Lumpur and Putrajaya, it is critical for us to beable to handle and respond quickly and effectively to anyemergency or crisis, with minimal inconvenience to consumersand disruption to our operations.

A Crisis Management Plan (CMP) and WTP Emergency ResponsePlan (ERP) have been formulated and can be activated toempower our staff to respond fast, systematically and effectivelyto any crisis or emergency. These plans cover both PNSB andSyarikat Bekalan Air Selangor Sdn Bhd (SYABAS) and also involvethe State authorities and relevant government agencies such asBOMBA, the Police and the Malaysian Red Crescent Society.

The Group’s response to a crisis or emergency is controlled and coordinated by our Crisis Command Centre (CCC). In 2006, the Centre was activated several times to handle the following incidents:-

Period ColourNo Description (Day/s) Code1 Hulu Selangor due to closure of Selisik

WTP for oil pollution on 08/03/06 1 Green2 Klang District due to water supply disruption

in Pulau Ketam from 09/03/06 to 23/03/06 14 Green3 Hulu Selangor District due to power failure

and shutdown of Selisik, Tengi and Dusun WTP on 14/03/06 1 Green

4 Shutdown of Sungai Semenyih WTP due to contamination of raw water by high ammonia on 15/04/06 1 Red

5 Shutdown of Gombak WTP due to spillage of crude palm oil at KM 31.5, KL – Karak Highway on 21 to 24 April 2006 3 Yellow

6 Power failure at Bernam River Headworks, Dusun, Tengi and Selisek on 28/05/06.District Hulu Selangor and Sabak Bernam were affected 1 Green

7 Sepang District due to water supply disruption on 29/06/06 1 Green

8 Gombak and Kuala Lumpur Districts due to pump house breakdown at Wangsa Maju on 18/08/06 2 Yellow

9 Gombak and Kuala Lumpur Districts due to pump house breakdown at Wangsa Maju on 01/10/06 1 Yellow

10 Petaling, Sepang and Hulu Langat Districts due to diesel spillage at Semenyih WTP on 07/10/06 1 Yellow

11 Hulu Selangor due to pipe burst size 24” on 28/10/06 1 Green

12 Gombak due to pipe burst size 18” on 18/11/06 1 Green

13 Standby for monitoring oil spillage for 10.30 amWTP Sungai Semenyih – 2.30 pm -

14 Activation of 24 hours operation room in relation to the readiness for flood disaster relief management 6 -

We are pleased to report that all emergency situations werehandled successfully by the Management and operationspersonnel of PNSB and SYABAS, which collaborated closely withthe relevant authorities, the media and consumer groups, andsucceeded in bringing crisis such as the oil spill at Gombak Riverunder control with minimum shortcomings. Much of this successwas due to our experience in handling a similar incident last year.

Press briefing by YB Dato' Hj Abdul Fatah Hj Iskandar, EXCO Kerajaan Negeri Selangorand State Infrastructure, Public Services and Rural Development Committee Chairmanat the Gombak Intake on the crude palm oil spillage incident



From another incident in September 2006, we were able toimprove our emergency response plans by developing a procedureto manage objectionable odour detection. This procedure wassubsequently incorporated into our CMP and ERP.

To further equip the Crisis Management Committee (CMC) withknowledge on crisis handling, two ERP Drills were conducted atSungai Langat WTP as part of the preparation of the annual ERPDrill with SYABAS involving relevant rescue authorities such as thePolice, Bomba, Hazmat Team, and Malaysian Red Crescent Society.

Code Green ERP drills (in which the emergency can be controlledand terminated by the Emergency Commander and InterventionTeams) were conducted at all WTPs during the year under review.

Talking to our Stakeholders

As a water company, we have a varied and wide range ofstakeholders who are interested in and affected by our activities.We continually seek to engage through various methods withthree key stakeholder groups; our employees, customers and Non-Governmental Organisations (NGOs).

Our Challenges

Every year, we face new challenges. These often result fromchanging legislative requirements, regulatory pressures and thedynamic and evolving business environment that we operate in.We see these as key challenges that will be focused on over thenext year to ensure we meet the targets set and to push ourselvesbeyond this.

Climate Change

A significant challenge facing the water industry is that of climate change.

Our strategy on climate change focuses on understanding theimpacts of climate change, developing and implementingmeasures and raising awareness. We have also reviewed resourcemanagement in the event of drought.

Water Pollution

The deteriorating raw water quality from discharges of the publicsewerage system, sewage treatment works and other forms ofcontaminations remains a main concern to water companies likePNSB and SYABAS. It is a significant challenge for PNSB andSYABAS to push forward the agenda to create public awarenesson environmental protection and conservation.

The protection of public health through provision of high qualityand reliable drinking water supplies is an absolute priority. Ourcustomers’ health and well-being is at the heart of our business.To support this, we work closely with the Department ofEnvironment and the various government agencies. Each year, wealso hold formal liaison meetings to review the Company’s waterquality and environmental performance.

Everyone’s Duty and Responsibility

For Malaysia to achieve sustainable development and for ourfuture generations to continue enjoying our natural resources, itis the duty and responsibility of every corporation and individualto protect and conserve the natural environment in their day-to-day activities.

River Rescue Brigade event

It is everyone's duty andresponsibility to protect and

conserve the natural environment


CORPORATECALENDAR OFEVENTS

1 JANUARY 2006SYABAS held an exhibition and set up an exhibition booth and customer service counterin conjunction with ‘Majlis Pembuka Tirai Joran 2006 Berita Harian’.

12 JANUARY 2006SYABAS organised a ‘Majlis Ibadah Qurban SYABAS 2006’.

14 JANUARY 2006Visit By NEC Semiconductor To SSP2 WTP.

24 JANUARY 2006Educational Outreach Programme No. 63 at Sekolah Kebangsaan Bandar Tun Hussein Onn (PNSB).

26 JANUARY 2006SYABAS organised a ‘Majlis Taklimat Pelan Tindakan Kecemasan SYABAS (EmergencyResponse Plan)’ to Government Agencies and the media which was officiated by YB Dato’Hj Abdul Fatah Hj Iskandar, EXCO Kerajaan Negeri Selangor.

26 JANUARY 2006SYABAS held a dialogue session with YB Lau Yeng Peng, Member of Parliament forPuchong on water related issues highlighted by residents of Puchong.

31 JANUARY 2006PNSB participated in the ‘MAAL Hijrah’ celebration held at Putra World Trade Centre, Kuala Lumpur.

11 FEBRUARY 2006Removal of illegal rafts at Klang Gates Dam, a restricted area.

14 FEBRUARY 2006Educational Outreach Programme No. 64 at Sekolah Kebangsaan Sungai Lui (PNSB).

16 FEBRUARY 2006Visit by SYABAS Management to New Straits Times Group, Jalan Riong.

18 FEBRUARY 2006Plant visit by Universiti Teknologi MARA (UiTM) students to four WTPs, namely SSP2 WTP,Wangsa Maju WTP, Bukit Nanas WTP and Sungai Langat WTP.

21 FEBRUARY 2006Factory visit to Sime Coatings Sdn Bhd, Solok Perindustrian Bukit Raja, Klang, SelangorDarul Ehsan under the PNSB’s Environmental Awareness Campaign.

22 FEBRUARY 2006Visit by Kolej Inspektor Kesihatan to SSP2 WTP.


CORPORATECALENDAR OF

EVENTS

22–23 FEBRUARY 2006SYABAS organised a ‘Majlis Perasmian Kursus Ulangan Tukang Paip Berlesen 1 & 2’ forSYABAS’ contractors, officiated by Encik Mustapah Md Omar, Director, Jabatan KawalseliaAir Selangor (JKAS).

23 FEBRUARY 2006Educational Outreach Programme No. 65 At Sekolah Kebangsaan Bandar Baru Bangi(PNSB).

26 FEBRUARY 2006SYABAS held a dialogue session with the residents of Block E & G, Pangsapuri BandarTasik Selatan, Cheras on water related issues.

27 FEBRUARY 2006SYABAS held a dialogue session with YB Datin Paduka Chiew Mei Fun, Member ofParliament for Petaling Jaya Utara on water related issues.

28 FEBRUARY 2006Visit by SYABAS Management to Utusan Melayu (Malaysia) Berhad, Jalan Chan Sow Lin.

1 MARCH 2006Educational Visit by ‘Pelatih – Pelatih Pusat Latihan Khidmat Negara’ to SYABAS HuluLangat District Office (PNSB).

9 MARCH 2006River Rescue Brigade No. 18 at SSP2 WTP officiated by YB Dato’ Hj Noh Hj Omar, DeputyMinister of Education.

9 MARCH 2006SYABAS held a dialogue session with YB Tuan Hj Mohd Shamsudin Hj Lias, Ahli DewanUndangan Negeri (ADUN) Sungai Burong, Tanjong Karang - follow up and response towater related issues highlighted by residents of Pangsapuri Bayu Suria, Balakong.

16 MARCH 2006SYABAS conducted a briefing to its contractors, suppliers and consultants with YBhg TanSri Rozali Ismail, Executive Chairman of PNHB.

17 MARCH 2006Visit by ‘Badan Regulator Pelayanan Air Minum Jakarta’ to SYABAS Headquarters.

18 MARCH 2006Bowling tournament organised by Kelab Rekreasi & Insani Puncak Niaga Kuala Lumpur.

Visit by Advanced Training Institute International to Wangsa Maju WTP.



21 MARCH 2006SYABAS conducted a briefing on the pipe replacement programme at Serdang Jaya,chaired by YB Datuk Liew Yuen Keong, ADUN Seri Kembangan.

21 - 24 MARCH 2006PNHB Group participated in the Asia Water Exhibition held at The Mines InternationalExhibition and Convention Centre, Seri Kembangan.

22 MARCH 2006Visit by Vietnam Water Supply Delegations to SYABAS Hedquarters.

22 MARCH 2006Visit by delegation from P.R. of China to SSP2 WTP.

23 MARCH 2006Visit by delegation from Indonesia to SSP2 WTP.

26 MARCH 2006SYABAS participated in the exhibition and open customer service counter in conjunctionwith ‘Karnival Mesra Rakyat Bersama Majlis Perbandaran Petaling Jaya’ held at Section 7,Kota Damansara.

28 MARCH 2006Educational Outreach Programme No. 66 at Sekolah Rendah Jenis Kebangsaan (Cina) Kampung Baru Semenyih (PNSB).

29 MARCH 2006Educational Outreach Programme No. 67 at Sekolah Kebangsaan Bandar Tasik Kesuma,Beranang (PNSB).

31 MARCH 2006‘Secretaries Nite 2006’ was held at Hotel Sheraton Imperial with YBhg Puan Sri FaridahIdris as the guest of honour.

1 – 2 APRIL 2006SYABAS held an open counter at Giant Supermarket, Batu Caves.

4 APRIL 2006SYABAS contributed RM200,000 to ‘Yayasan Harapan Kanak-Kanak Malaysia’ at the BAKTIDinner held at Dewan Belia Shah Alam.

8 APRIL 2006Visit by National Kidney Foundation of Malaysia to SSP2 WTP.



EVENTS

11 APRIL 2006SYABAS participated in ‘Perarakan Maulidur Rasul’ at Masjid Negeri Shah Alam.

PNSB participated in the ‘Maulidur Rasul 1427’ Celebration (National Level) at Stadium Negara.

12 APRIL 2006Educational Outreach Programme at Sekolah Menengah Kebangsaan Seri Selayang, Batu Caves, Selangor (PNSB & SYABAS).

13 APRIL 2006Educational Outreach Programme No. 68 at Sekolah Kebangsaan Taman Rakan SungaiLong, Kajang (PNSB).

Working visit by Kuala Selangor YAKIN Resident Association to SSP2 WTP and PUSPEL.

15 APRIL 2006SYABAS held a forum with Rukun Tetangga Petaling Jaya on water related issues.

15 – 16 APRIL 2006SYABAS participated in ‘Program Mesra Masyarakat, Wilayah Sabak Bernam’.

18 APRIL 2006YBhg Dato’ Shaari Ismail officiated the foundation course for PNHB Auxillary PoliceTraining and adopted ‘Kelas Anak Angkat PNHB’ at Pusat Latihan Police (PULAPOL).

Visit by YB Dato’ Seri Azmi Khalid, Minister of Natural Resources & Environment to SungaiKembong, Semenyih.

22 APRIL 2006SYABAS contributed RM50,000 for the Sultan of Selangor’s Cup 2006 Football League.

Visit by YB Dato’ Hj Abdul Fatah Hj Iskandar to Gombak Intake.

SYABAS participated in ‘Program Kaunter Bergerak Biro Pengaduan Awam, JabatanPerdana Menteri, Wilayah Tengah’.

SYABAS held an exhibition booth in conjunction with ‘Program Pembersihan Sungai KlangTahun 2006’.

23 APRIL 2006Crisis Management Centre (CMC) in operation at PNSB Headquarters due to oil spillage atGombak Intake and WTP.

24 APRIL 2006Visit by YB Dato’ Hj Abdul Fatah Hj Iskandar to Karak Highway KM 30.9.

SYABAS participated in ’Program Hari Bertemu Pelanggan – Kaunter Bergerak Daerah Hulu Selangor’.



25 APRIL 2006Visit by Sekolah Menengah Teknik Gombak to Bukit Nanas WTP.

27 APRIL 2006Educational Outreach Programme No. 69 at Sekolah Kebangsaan Bukit Ceraka, Shah Alam (PNSB).

Visit by ECO Club, Malaysia Japan Women Association (‘Maja Kai’) to SYABAS.

29 APRIL 2006PNSB held a ‘Majlis Maulidur Rasul Bersama Ustaz Halim Din’.

SYABAS held an exhibition and set up a customer service counter in conjunction withDewan Perniagaan Melayu Malaysia Selangor (DPMMS) Annual General Meeting.

6 – 7 MAY 2006SYABAS Gombak District organised ‘Program Mesra Pengguna’ at Giant Supermarket, Batu Caves, Selangor.

9 MAY 2006Educational Outreach Programme No. 70 at Sekolah Rendah Jenis Kebangsaan (Tamil)Methodist, Jalan Kapar, Klang (PNSB).

15 MAY 2006SYABAS held a press conference and participated in an exhibition on water meter theft issues.

21 MAY 2006SYABAS organised ’Program Ramah Mesra’ with residents of Perkampungan Orang AsliPulau Indah.

23 MAY 2006Educational Outreach Programme No. 71 at Sekolah Rendah Kebangsaan Sungai Serdang,Kapar, Selangor (PNSB).

26 MAY 2006PNSB participated in the ‘Pra Pelancaran Karnival Keluarga Bahagia Penyayang PeringkatNegeri Selangor’ officiated by YB Dato’ Hj Abdul Fatah Hj Iskandar held at Hotel GrandBlue Wave, Shah Alam.

26 MAY 2006SYABAS participated in ‘Majlis Karnival Pelancaran Keluarga Bahagia Penyayang Selangor’,officiated by YAB Dato’ Seri Dr Mohamad Khir Toyo, Menteri Besar of Selangor.

27 MAY 2006SYABAS held a meeting with Taman Megah Resident Association pertaining to waterrelated issues.

Kelab Rekreasi & Insani Puncak Niaga Kuala Lumpur organised a fishing competition atKuala Selangor.



EVENTS

29 MAY – 9 JUNE 2006SYABAS held an exhibition in conjunction with ’Ekspo Ekonomi dan Pameran Belia BenciDadah’ organised by Gerakan Belia 4B, Cawangan Kg. Belia 1, Sabak Bernam.

30 MAY 2006SYABAS participated in ‘Program Inventori Masalah Rakyat (IMR)’ with YAB Dato’ Seri DrMohamad Khir Toyo, Menteri Besar of Selangor and Selangor EXCO members.

1 JUNE 2006Visit By PNHB’s Audit Committee to Sungai Langat Dam.

2 JUNE 2006PNSB contributed RM40,000 and 5,000 bottles of drinking water to ‘Badan Amal DanKebajikan Tenaga Isteri-Isteri (BAKTI)‘ for the earthquake victims at Yogyakarta, Indonesia.

3 JUNE 2006SYABAS participated in a community programme - ‘Program Bersama Majlis PerbandaranKajang’.

3 – 4 JUNE 2006SYABAS held an open counter ‘Mesra Pengguna’ at Giant Supermarket, Batu Caves, Selangor.

6 JUNE 2006Visit by the Japanese School of Kuala Lumpur to Wangsa Maju WTP and Klang Gates Dam.

Staff gathering and launching of SYABAS 2006 Annual Sports Carnival.

9 JUNE 2006YBhg DCP Dato’ Hj Abang Abdul Wahap Hj Abang Julai officiated the ‘PNHB AuxillaryPolice Training’ at Pusat Latihan Police, Jalan Semarak, Kuala Lumpur.

13 JUNE 2006Ceremony to hand over insurance compensation to the widows and family of SYABAS’deceased staff.

14 JUNE 2006Factory visit to BABA Products (M) Sdn Bhd, Rawang under the PNSB’s EnvironmentalAwareness Campaign.

14 JUNE 2006SYABAS held a meeting with Federation of Malaysian Manufacturers (FMM) Daerah HuluLangat to discuss on water related issues.

15 JUNE 2006Educational Outreach Programme No. 1 at Sekolah Kebangsaan Sri Tiram, Tanjung Karang (SYABAS).



15 JUNE 2006SYABAS organised a ‘Majlis Jamuan Teh Bersama YAB Dato’ Seri Dr Mohamad Khir Toyo, Menteri Besar of Selangor dan Penyerahan Sumbangan Karnival Penyayang Selangor’.

17 JUNE 2006SYABAS participated in a community programme ‘Sambutan Hari Silaturahim Surau AbuHanifah, Hulu Selangor’.

19 JUNE 2006Educational Outreach Programme No. 2 at Sekolah Kebangsaan Saujana Utama, SungaiBuloh (PNSB & SYABAS).

20 JUNE 2006Educational Outreach Programme No. 72 at Sekolah Kebangsaan Bukit Tinggi, Klang (PNSB).

22 JUNE 2006Visit by ’Peserta-Peserta Kursus Persyarikatan Malaysia dan Pengurusan Penswastaan’ toSYABAS Headquarters and PUSPEL.

24 JUNE 2006SYABAS participated in ’Program Hari Bertemu Pelanggan Peringkat Sekretariat, Majlis Bandaraya Shah Alam’.

24 – 25 JUNE 2006SYABAS participated in ’Karnival Keluarga Bahagia Penyayang ’ officiated by YAB Dato’ SeriAbdullah Hj Ahmad Badawi, Prime Minister of Malaysia.

27 JUNE 2006Educational Outreach Programme No. 3 at Sekolah Kebangsaan Sungai Leman, SabakBernam (PNSB & SYABAS).

28 JUNE 2006PNHB’s 9th Annual General Meeting at Kuala Lumpur Golf & Country Club.

Visit by ’Timbalan Ketua Audit Negara dan Pengarah Audit Negeri Selangor’ to SYABASHeadquarters.

29 JUNE 2006Educational Outreach Programme No. 73 at Sekolah Kebangsaan Pulau Indah 2, Bandar Armada Putra, Pelabuhan Klang (PNSB).

SYABAS participated in ’Program Inventori Permasaalahan Rakyat (IMR)’ with YAB Dato’Seri Dr Mohamad Khir Toyo, Menteri Besar of Selangor and Selangor EXCO Members.

29 JUNE – 1 JULY 2006SYABAS held an exhibition booth and open counter in conjunction with ‘Majlis PerasmianPerpustakaan Dataran Sabak Bernam dan Muzium Daerah Sabak Bernam’.



EVENTS

1 – 2 JULY 2006SYABAS Gombak District held an open counter at Giant Supermarket, Batu Caves, Selangor.

10 JULY 2006Educational Outreach Programme No. 4 at Sekolah Kebangsaan Seri Makmur, Sungai Besar(PNSB & SYABAS).

12 JULY 2006Educational Outreach Programme No. 74 at Sekolah Kebangsaan Jalan Kebun, Klang (PNSB).

15 JULY 2006Joint training programme ‘Perasmian Latihan Kem Tahunan Regimen RAJD (AW)’ betweenRAJD and SYABAS held at KEM 21, Skuadron RAJD.

SYABAS held a customer service counter in conjunction with ‘Program Mesra RakyatBersama Majlis Perbandaran Petaling Jaya’.

16 JULY 2006PNSB organised a friendly game of bowling and golf with Selangor Menteri Besar’s Office.

18 JULY 2006Ceremony to handover computers to ’Jawatankuasa Kemajuan & Keselamatan Kampung’Wilayah Petaling comprising Kampung Batu 12, Puchong, Kampung Paya Jaras Hulu,Kampung Paya Jaras Dalam, Kampung Paya Jaras Tengah and Kampung Budiman.

19 JULY 2006Visit by delegates from National Institute of Public Administration (INTAN) to SSP2 WTP.

Educational Outreach Programme No. 5 at Sekolah Kebangsaan Methodist, Kuala Langat(SYABAS).

19 – 20 JULY 2006SYABAS organised a workshop and seminar on ‘Integrated Water Meter Management‘.

21 JULY 2006SYABAS held a ceremony to handover computers to ‘Jawatankuasa Kemajuan &Keselamatan Kampung – Hulu Selangor’.

22 JULY 2006SYABAS organised ’Program Jalinan Mesra Bersama Jawatankuasa Kemajuan &Keselamatan Kampung - Kuala Selangor’.

23 JULY 2006SYABAS held an exhibition and set up a customer service counter in conjunction with‘Program Mini Karnival Perangi Dadah Peringkat Daerah Hulu Selangor’.

25 JULY 2006River Rescue Brigade No. 19 at Sungai Batu WTP officiated by YB Dato’ Seri Azmi Khalid,Minister of Natural Resources and Environment.



26 – 30 JULY 2006SYABAS participated in ’Karnival Pengguna Malaysia 2006’ at Stadium Bukit Jalil,officiated by YAB Dato’ Seri Abdullah Hj Ahmad Badawi, Prime Minister of Malaysia.

29 JULY 2006SYABAS participated in ‘Program Hari Karnival Usahawan Bestari’.

1 AUGUST 2006Official launching of ‘Kursus Asas Polis Siri 2/2006’ for PNHB’s Auxillary Police personnel.

1 AUGUST 2006SYABAS organised a refresher course for Licensed Plumbers (Third Series).

2 AUGUST 2006Educational Outreach Programme No. 6 at Sekolah Kebangsaan Taman Bunga Raya (1),Bukit Beruntung, Rawang (SYABAS).

5 – 6 AUGUST 2006SYABAS Gombak District held an open counter at Giant Supermarket, Batu Caves, Selangor.

9 AUGUST 2006Educational Outreach Programme No. 75 at Sekolah Kebangsaan Morib, Banting (PNSB).

Educational Outreach Programme No. 7 at Sekolah Kebangsaan Tebok Jawa, Sabak Bernam (SYABAS).

11 AUGUST 2006Visit by Mr Vu Kim Quyen, Executive Director of South East Asian Water Utilities Network (SEAWUN).

11 AUGUST 2006SYABAS organised a community programme ‘Malam Kebudayaan & Ramah MesraKumpulan Rukun Tetangga, Taman Sentosa Bersama SYABAS’.

PNSB contributed RM50,000 to Sekolah Sukan Bukit Jalil at the ‘Young Olympian Nite2006’ Dinner held at Palace of the Golden Horses, Seri Kembangan, Selangor.

PNSB organised a talk on ‘Women Health Care’.

12 AUGUST 2006SYABAS organised a community programme ‘Persatuan Penduduk Puchong BersamaSYABAS dan Penyampaian Hadiah Pelanggan Prihatin SYABAS’.

16 AUGUST 2006Educational Outreach Programme No. 76 at Sekolah Kebangsaan Cyberjaya, Cyberjaya (PNSB).

Educational Outreach Programme No. 77 at Sekolah Kebangsaan Jalan Majlis, Bandar Banting (PNSB).



EVENTS

17 AUGUST 2006PNSB organised a ‘Malam Sambutan Isra’ Mikraj’ at Bukit Nanas WTP.

SYABAS held a ceremony to handover computers to schools at Gombak District.

18 AUGUST 2006SYABAS held a ceremony to handover computers to schools at Hulu Selangor District.

19 AUGUST 2006SYABAS participated in ‘Kaunter Aduan Bergerak Biro Pengaduan Awam, Klang District’.

20 AUGUST 2006SYABAS conducted ‘Majis Perasmian Kolam Air Paras Tinggi , Cheras – Pakej 1B’ officiatedby YB Dato’ Yap Pian Hon, Member of Parliament, Serdang.

Visit by Syarikat Air Kelantan to PNSB Headquarters and PUSPEL.

21 AUGUST 2006SYABAS held a ceremony to handover computers to schools at Sabak Bernam District.

22 AUGUST 2006SYABAS held a ceremony to handover computers to schools at Kuala Selangor District.

23 AUGUST 2006SYABAS held a ceremony to handover computers to schools at Kuala Lumpur District.

24 AUGUST 2006SYABAS held a ceremony to handover computers to schools at Klang District.

24 AUGUST 2006Kelab Rekreasi & Insani Puncak Niaga Kuala Lumpur organised an educational visit by thechildren of PNSB staff to Universiti Islam Antarabangsa, Gombak.

25 – 27 AUGUST 2006SYABAS held a customer service counter/exhibition booth in conjunction with ‘KarnivalKemerdekaan Peringkat Sabak Bernam’.

26 AUGUST 2006Sports Carnival 2006 organised by Kelab Rekreasi & Insani Puncak Niaga Kuala Lumpurheld at FRIM, Kepong.

27 AUGUST 2006SYABAS held a seminar and Group Driving License examination for its drivers and technicalpersonnel in collaboration with Jabatan Pengangkutan Jalan.

28 AUGUST 2006SYABAS held a ceremony to handover computers to schools at Hulu Langat District.



29 AUGUST 2006SYABAS held a ceremony to handover computers to schools at Hulu Selangor District.

30 AUGUST 2006SYABAS held a ceremony to handover computers to schools at Sepang District.

Educational Outreach Programme No. 78 at Sekolah Kebangsaan Seri Sekinchan,Sekinchan, Selangor (PNSB).

31 AUGUST 2006SYABAS participated in the procession to commemorate ‘Hari Kemerdekaan’.

2 – 3 SEPTEMBER 2006SYABAS Gombak District held an open counter at Giant Supermarket, Batu Caves,Selangor.

6 SEPTEMBER 2006SYABAS and PNSB conducted a joint briefing and press conference on WTP Technology(Membrane Filtration Technology) at SYABAS Headquarters.

6 SEPTEMBER 2006Educational Outreach Programme No. 8 at Sekolah Kebangsaan Putrajaya, Presint 16 (2)(SYABAS).

8 SEPTEMBER 2006Signing ceremony and launching of Water Bill Payment Via SMS - SYABAS.

8 SEPTEMBER 2006SYABAS held an open counter in conjunction with ‘Pelancaran Majlis Kebajikan danPembangunan Masyarakat Kawasan Parlimen Lembah Pantai – Masyarakat Penyayang(MAYANG)’.

9 SEPTEMBER 2006SYABAS organised a community project ’Jalinan Mesra Bersama Persatuan PendudukSijangkang & Penyerahan Sumbangan Komputer’, officiated by YB Dato’ Hj Abdul FatahHj Iskandar, EXCO Kerajaan Negeri Selangor.

10 SEPTEMBER 2006SYABAS held an open counter and exhibition booth in conjunction with the Family Dayat Taman Keruing Rasa, Hulu Selangor.

SYABAS organised ‘Program Pendaftaran Bekalan Air Bukit Beruntung 1 dan Bukit Sentosa’.



EVENTS

12 SEPTEMBER 2006Working visit by the officers from ‘Pejabat Pengurusan Fasiliti, Universiti Teknologi Mara(UITM)’

14 SEPTEMBER 2006Educational Outreach Programme No. 9 at Sekolah Kebangsaan Dusun Nanding, Hulu Langat (SYABAS).

Educational Outreach Programme No. 79 at Sekolah Kebangsaan Kalumpang, KampungKalumpang, Kerling, Selangor (PNSB).

15 SEPTEMBER 2006SYABAS organised a ‘Majlis Ramah Mesra dan Penyampaian Sijil Penghargaan kepadaPegawai-Pegawai Ibu Pejabat Polis Daerah Subang Jaya’.

15 – 17 SEPTEMBER 2006 SYABAS held an open counter in conjunction with ‘Program Kempen Anti Dadah’.

16 SEPTEMBER 2006SYABAS held an open counter in conjunction with ‘Program Biro Pengaduan Awam,Daerah Petaling’.

17 SEPTEMBER 2006SYABAS Gombak District organised a community project – ‘Program Gotong RoyongBersama Persatuan Penduduk dan Jawatan Kuasa Kemajuan dan Keselamatan Kampung’.

18 SEPTEMBER 2006PNSB contributed RM200,000 to BAKTI at the ‘Majlis Malam Amal Semai Bakti 2006’ held at Dewan Perdana FELDA, Kuala Lumpur in support of the programme to help the less fortunate.

20 SEPTEMBER 2006Educational Outreach Programme No. 10 at Sekolah Kebangsaan Selayang Utama, Selayang (SYABAS).

21 SEPTEMBER 2006Visit by Air Kelantan to PNSB & SYABAS (PUSPEL).

PNSB organised a ‘Majlis Sambutan NISFU SYAABAN’ at Plaza See Hoy Chan office.

26 SEPTEMBER 2006PNSB organised a ‘Majlis Berbuka Puasa’ at Masjid Kalumpang, Hulu Selangor.

27 SEPTEMBER 2006SYABAS organised a ‘Majlis Berbuka Puasa dan Penyampaian Sumbangan Kepada Anak-Anak Yatim dan Penyampaian Hadiah Cabutan Bertuah Pelanggan Prihatin SYABAS’.

29 SEPTEMBER 2006PNSB organised a ‘Majlis Berbuka Puasa’ at BRH WTP.

2 OCTOBER 2006SYABAS organised a ‘Majlis Berbuka Puasa Wilayah Petaling’.



3 OCTOBER 2006SYABAS organised a ‘Majlis Berbuka Puasa Wilayah Klang’.

4 OCTOBER 2006SYABAS organised a ‘Majis Berbuka Puasa Wilayah Hulu Langat’.

5 OCTOBER 2006SYABAS organised a ‘Majlis Berbuka Puasa Wilayah Kuala Selangor’.

5 OCTOBER 2006Visit to Institut Pediatrik, Children’s Ward, Hospital Kuala Lumpur by Biro HAWA and KelabRekreasi & Insani Puncak Niaga Kuala Lumpur.

6 OCTOBER 2006SYABAS organised a ‘Majlis Berbuka Puasa Wilayah Gombak’.

PNSB organised a ‘Majlis Berbuka Puasa’ at SSP2 WTP.

7 OCTOBER 2006PNSB organised a ‘Majlis Berbuka Puasa’ at an Orphanage Home at Sekendi, Sabak Bernam.

9 OCTOBER 2006SYABAS organised a ‘Majlis Berbuka Puasa Wilayah Hulu Selangor’.

10 OCTOBER 2006PNHB contributed a total of RM119,000 to 11 mosques and 6 orphanage homes in variousDistricts in Selangor Darul Ehsan at the ‘Majlis Pelancaran Seni Mohor Negara danPenubuhan Arkib Seni Mohor Negara’ officiated by YAB Dato’ Seri Abdullah AhmadBadawi, Prime Minister of Malaysia.

Some 32 people comprising disabled, widows, old folks and chronic patients of KampungBukit Sungai Puteh Lembah Jaya received humanitarian contributions from SYABAS.

11 OCTOBER 2006Visit to old folks home at Rumah Ehsan, Kuala Kubu Bharu, Selangor by Kelab Rekreasi &Insani Puncak Niaga Kuala Lumpur.

SYABAS organised a ‘Majlis Berbuka Puasa Wilayah Sabak Bernam’.



EVENTS

12 OCTOBER 2006SYABAS organised a ‘Majlis Berbuka Puasa Wilayah Kuala Langat’.

13 OCTOBER 2006SYABAS organised a ‘Majlis Berbuka Puasa Wilayah Sepang dan Penyampaian SumbanganKomputer Riba dan Pencetak Kepada Ibu Pejabat Polis Daerah Subang Jaya’.

13 OCTOBER 2006SYABAS held a dialogue session with Resident Associations of Gurney Heights & SeriImpian Apartment, Ukay Perdana 2.

15 OCTOBER 2006SYABAS held a dialogue session with ’Gabungan Persatuan Penduduk Bandar Sri PermaisuriCheras’ on water related issues.

17 OCTOBER 2006PNSB contributed RM50,000 to the orphans and single mothers at a ceremony held atConcorde Hotel, Shah Alam.

SYABAS organised a dialogue session with the Association of Vista Angkasa residents onwater related issues.

18 OCTOBER 2006PNSB organised a ‘Majlis Berbuka Puasa Dan Sumbangan Hari Raya Kepada KeluargaAngkat dan Pesara’ at Plaza See Hoy Chan office.

1 NOVEMBER 2006Visit by Netherlands Water Delegations to SYABAS Headquarters.

2 NOVEMBER 2006PNHB’s Extraordinary General Meeting at Kuala Lumpur Golf & Country Club.

4 – 5 NOVEMBER 2006 SYABAS Gombak District held an open counter at Giant Supermarket, Batu Caves, Selangor.

7 NOVEMBER 2006Technical visit by Jabatan Bekalan Air Pahang to SYABAS Headquarters and PUSPEL.

8 NOVEMBER 2006Educational Outreach Programme No. 11 at Sekolah Kebangsaan Bukit Kemuning 2, Shah Alam with YB Dato’ Hj Noh Hj Omar, Deputy Minister of Education (SYABAS).

11 NOVEMBER 2006PNSB & SYABAS Hari Raya Celebration and prize giving for SYABAS’ consumers at SYABAS Headquarters.



11 – 13 NOVEMBER 2006PNSB participated at The Jeddah Water & Power Forum 2006 held at Jeddah Hilton, Saudi Arabia.

15 NOVEMBER 2006Educational Outreach Programme No. 80 at Sekolah Kebangsaan Seksyen 13, Jalan BolaSepak 13/11, Shah Alam (PNSB).

18 NOVEMBER 2006Briged Penyelamat Sungai members participated in the Environment Week Exhibition(State Level) held at Cyberpark, Cyberjaya officiated by YAB Dato’ Seri Dr Mohamad Khir Toyo, Menteri Besar of Selangor.

23 NOVEMBER 2006Factory visit to Chung Hwa Picture Tubes, Shah Alam under the PNSB’s EnvironmentalAwareness Campaign.

23 NOVEMBER 2006SYABAS held briefing and dialogue session on water related issues with ConsumerAssociations, Resident Associations and Non-Governmental Organisations.

28 NOVEMBER 2006Official opening ceremony of Wisma Rozali, Shah Alam, Selangor.

30 NOVEMBER 2006PNHB’s Annual Report 2005 was awarded the NACRA 2006 Certificate of Merit at SimeDarby Convention Centre, Kuala Lumpur.

2 DECEMBER 2006Finals and closing ceremony of SYABAS’ Annual Sports Carnival 2006 held at UniversitiTeknologi MARA (UiTM) Shah Alam.

2 – 3 DECEMBER 2006SYABAS Gombak District held an open counter at Giant Supermarket, Batu Caves, Selangor.

7 DECEMBER 2006SYABAS participated in Quality Day and Meet Customer Day organised by JabatanPengurusan Hartanah, Jabatan Perdana Menteri.

8 DECEMBER 2006Factory visit to Malaysia Milk Sdn Bhd, Petaling Jaya, Selangor under the PNSB’sEnvironmental Awareness Campaign.

9 DECEMBER 2006SYABAS held a ‘Majlis Jasamu Di Kenang’ to present token and certificate of appreciationto SYABAS pensioners.



EVENTS

10 DECEMBER 2006SYABAS held an exhibition and open counter in conjunction with ’Program Mesra Rakyat– Permata Hati’ hosted by Gerakan Belia 4B Cawangan Taman Impian Ehsan.

11 DECEMBER 2006SYABAS held a dialogue with All PJ ProAction Committee (APPAC) and Condominium,Apartments and High Rise Committee (CAHC) on water related issues at condominium & apartments.

PNHB’s Extraordinary General Meeting at Sime Darby Convention Centre.

14 DECEMBER 2006SYABAS held an open counter and exhibition booth in conjunction with OMRON ‘Hari Alam Sekitar’.

18 DECEMBER 2006Soft launch of D’ Puncak Cafe, Wisma Rozali.

16 - 24 DECEMBER 2006PNHB participated in the exhibition at the ‘Karnival Balik Ke Sekolah 2006’ to promoteBriged Penyelamat Sungai.

19 DECEMBER 2006SYABAS held a briefing on water tariff adjustment to officials of Jabatan PeneranganWilayah Kuala Lumpur.

20 – 24 DECEMBER 2006 SYABAS organised a ’Gotong Royong’ community programme to clean up landslide atKampung Tasik Tambahan Ampang together with residents.

26 DECEMBER 2006PNHB contributed RM200,000 and 20,000 bottles of drinking water to the victims of theflood disaster at a ceremony held at Putra World Trade Centre in conjunction with the 1stAnniversary of Disaster Awareness Day.

29 DECEMBER 2006SYABAS extended humanitarian assistance to the flood victims at Tangkak, Johor viadespatch of eight water lorry tankers and 50 static water tanks and stationed 20 SYABASstaff to help in relief efforts.

30 DECEMBER 2006Working visit by YB Dato’ Hj Abd Fatah Hj Iskandar, EXCO Kerajaan Negeri Selangor toSYABAS’ ERP Operation Centre.


Water NewsThe Group is dedicated to continually enhancing our water treatment and distribution facilities whileprotecting the natural and human environment.

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Tujuh sekolah dapatkomputer Syabas

Kosmo24 August 2006

Utusan Malaysia29 December 2006Syabas hargai

58 pesara

Water NewsTo maintain the Group’s healthy fundamentals, we focuson good governance, strong financial management,staff development and customer satisfaction.


Kosmo23 December 2006 Kakitangan Syabas turun

padang bersih lumpur

Kosmo4 October 2006

The Star17 April 2006 PM: Don’t let it

happen again

The Malay Mail, 14 September 2006

Constructionfirm finedRM18,000 for stealingwater

Firm’s police unitfinishes training

The Star10 June 2006

Kondo curi air sejak2002 diserbu

Growing withour investors

“The main objective of growth is to deliver worthwhile,sustainable returns.”

To attract committed, long-termshareholders, we aim to provide a good return on investment. But to us,shareholder value is about more thanmoney. It is about constantly practisingprofessionalism and integrity.


STATEMENT ONCORPORATE GOVERNANCE

The Board of Puncak Niaga is pleased to state that Puncak Niagais in compliance with the Best Practices in Corporate Governanceas set out in Part 2 of the Malaysian Code on CorporateGovernance (the “Code”). We believe that the principles of goodgovernance are integral to Puncak Niaga’s growth and ability topromote the confidence of its stakeholders.

Since 2003, the Board has adopted a Board Charter, whichprovides guidance on how business is to be conducted in line withinternational best practices and standards of good corporategovernance. In 2004, the Board has also adopted a CorporateDisclosure Policy and Procedure, which was formulated in linewith the “Guide On Best Practices In Corporate Disclosure” issuedby the Task Force on Corporate Disclosure Best Practicesestablished by Bursa Malaysia Securities Berhad (“BursaSecurities”). From time to time, the Group continues to refine andrevamp 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 howthe Group has applied the principles of the Code and bestpractices of corporate governance and the extent to which it hascomplied with the best practices as set out in the Code duringthe year 2006.

BOARD OF DIRECTORS

a. The Board

The Group is helmed by an effective and experienced Board,comprising individuals of caliber and credibility from a diverseblend of professional backgrounds. With the adoption of theBoard Charter, the Board members, whether acting in theirindividual capacities or as a whole, share the commonobjective of ensuring that the Vision and Mission of the Company as set out on page 3 of this Annual Report, are achieved.

Each Board member is fully aware of the fiduciary duties andresponsibilities and the various legislations and regulationsaffecting their conduct as Directors of the Company, and assuch, takes full responsibility for the performance of theCompany and of the Group.

The role of the Executive Chairman is separate from that ofthe Managing Director. The Board Charter sets out the specificresponsibilities to be discharged by the Board memberscollectively and the individual roles expected from theExecutive Chairman, Managing Director, Executive Directorsand Non-Executive Directors.

YB Tan Sri Dato’ Seri Dr Ting Chew Peh is the Company’sSenior Independent Non-Executive Director, to whomshareholders’ concerns may be conveyed.

b. Board Composition

There was a change to the Board’s composition in 2006:-

1. Upon the recommendation of the NominationCommittee, YAM Tengku Dato’ Rahimah AlmarhumSultan Mahmud was appointed as an Independent Non-Executive Director of PNHB on 1 August 2006.

YAM Tengku Dato’ Rahimah was subsequently re-designated to Non-Independent Non-Executive Directorof PNHB concurrent with her appointment as anExecutive Director of Puncak Research Centre Sdn Bhd, awholly owned subsidiary of PNHB, on 1 January 2007.

The Board’s composition of ten (10) members, comprising four (4) Executive Directors, three (3) Non-Independent Non-Executive Directors and three (3) Independent Non-Executive Directors, is in compliance with Paragraph 15.02 of the Listing Requirements of Bursa Securities.

The composition of the Board brings to the Group a diversewealth of skills, knowledge as well as a balanced mix ofexperience and expertise to effectively discharge the Board’sresponsibilities for competent stewardship of the Group.Together, the Board spearheads the Group’s growth andfuture direction. The profile of the Board Members are set outon pages 28 to 34 of this Annual Report.

c. Board Meetings

In 2006, the Board met five (5) times at the Board Room on26th Floor, Suite 2601-2606, Plaza See Hoy Chan, Jalan RajaChulan, 50200 Kuala Lumpur, as follows:-

Day Date TimeThursday 23 February 2006 10.00 a.m.Thursday 20 April 2006 12.30 p.m.Friday 26 May 2006 3.30 p.m.Tuesday 22 August 2006 12.00 noonWednesday 22 November 2006 12.00 noon


STATEMENT ONCORPORATE

GOVERNANCE

The details of the respective Director’s attendances at the above Board Meetings are as follows:-

No. of MeetingsName of Director Designation attended %Tan Sri Rozali Ismail Executive Chairman 4 80Dato’ Matlasa Hitam Managing Director 5 100Dato’ Ruslan Hassan Non-Independent 5 100

Non-Executive DirectorDato’ Ir Lee Miang Koi Non-Independent 4 80

Non-Executive DirectorSyed Danial Syed Ariffin Executive Director, Operation I 5 100Tan Sri Dato’ Hari Independent Non-Executive Director 5 100Narayanan GovindasamyTan Sri Dato’ Seri Independent Non-Executive Director 5 100Dr Ting Chew PehDatuk Dr Rahman Ismail Independent Non-Executive Director 5 100Tan Seng Lee Executive Director, Finance 5 100 Tengku Dato’ Rahimah Non-Independent 2 100Almarhum Sultan Mahmud Non-Executive Director(appointed on 1 August 2006 and re-designated to Non-Independent Non-Executive Director on 1 January 2007)

Sufficient notice is given for all Board Meetings. In between Board Meetings, approvalson matters requiring the sanction of the Board are sought by way of circular resolutionsenclosing all relevant information to enable the Board to make informed decisions. All circular resolutions approved by the Board will be tabled for notation at the next Board Meeting.

d. Supply of Information and Access to Advice

Each Board member is supplied with information on a timely basis to enable them toeffectively discharge their duties and responsibilities. Except under exceptionalcircumstances, Board members are given at least seven (7) days’ notice before any BoardMeeting is held and the Board Papers are circulated to the Board members at least two(2) working days prior to the date of the Meeting. Where necessary, the Company’spersonnel will be called upon by the Board during the Board Meetings to present and toclarify any Board papers presented. All Board members are expected to participate activelyin Board deliberations and bring the benefit of their particular knowledge, skills andabilities to the Board. Where a potential conflict of interest arises, it is mandatory for theDirector concerned to declare his interest and abstain from the deliberation and decision-making process.

The Board has unrestricted and constant access to and interaction with the SeniorManagement. Each Board member also has full access to the advice and services of theGroup Company Secretary. The Directors are regularly updated by the Group CompanySecretary on the latest developments in the legislations and regulatory frameworkaffecting the Group. The Directors are familiar and aware of their duties andresponsibilities as well as the implementation of good corporate governance andcompliance practices in the Group.


STATEMENT ONCORPORATEGOVERNANCE

Where necessary, the Directors may, whether collectively as aBoard or in their individual capacities, seek external andindependent professional advice from experts in furtheranceof their duties at the Company’s expense.

e. Group Company Secretary

The Group Company Secretary ensures that Board proceduresare both followed and reviewed regularly and has theresponsibility in law to ensure that each Board member ismade aware of and provided with guidance as to their duties,responsibilities and powers. She is also responsible forensuring the Group’s compliance with the relevant statutoryand regulatory requirements.

f. Appointment of Directors

All Board appointments and removals thereof are approvedby the Board upon the recommendation of the NominationCommittee. The Board, through the Nomination Committee,has established a formal and transparent procedure in relationto the assessment of candidates for Board appointments. TheBoard, through the Nomination Committee, also reviews therequired mix of skills, experience and other qualities of theDirectors annually to ensure that the Board continues tofunction effectively and efficiently.

g. Re-election of Directors

Articles 98 and 99 of the Company’s Articles of Associationprovide that one third of the Directors shall retire from officeby rotation at each Annual General Meeting and all Directorsshall retire from office at least once every three (3) years butmay offer themselves for re-election.

Article 103 of the Company’s Articles of Association providesthat any person appointed as an additional Director shall holdoffice only until the next following ordinary General Meetingof the Company and shall be eligible for re-election.

Upon the recommendation of the Nomination Committee,the following Directors shall retire at the Tenth AnnualGeneral Meeting of the Company and had offered themselvesfor re-election:-

i YBhg Dato’ Ruslan Hassan, retiring pursuant to Article 98;ii Tuan Syed Danial Syed Ariffin, retiring pursuant to

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

to Article 99; andiv YAM Tengku Dato’ Rahimah Almarhum Sultan Mahmud,

retiring pursuant to Article 103.

h. Evaluation of Board Effectiveness

As in the previous years, the Board has, with the assistance ofthe Group Company Secretary, conducted an annual peerevaluation of the Board’s effectiveness in the following key areas:-

i Compliance; ii Board Meetings;iii Board Functions; iv Board Structure; v Financial and Operational Reportingvi Planning and Objectives;vii Risk Assessment;viii New Business Opportunities and Projects;ix Human Resources; andx Executive Directors’ Observations and Additional Comments.

i. Board Committees

The Board has delegated specific responsibilities to the BoardCommittees whose functions and authorities are spelt out intheir respective terms of reference. The Board Committees willobserve the same rules of conduct and procedures as theBoard, unless otherwise determined by the Board. A summaryof the various Board Committees at PNHB level and theircomposition are as follows:-



GOVERNANCE

Name of Director Audit Remuneration Nomination Compliance, ESOS OptionCommittee Committee Committee Internal Control Committee

and Risk Policy **Committee

Tan Sri Rozali IsmailExecutive Chairman Chairman

Dato’ Matlasa HitamManaging Director Head Member

Dato’ Ruslan HassanNon-IndependentNon-Executive Director

Dato’ Ir Lee Miang KoiNon-IndependentNon-Executive Director

Syed Danial Syed ArrifinExecutive Director, Operation I Member

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

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

Datuk Dr Rahman IsmailIndependent Non-Executive Director Member Chairman Chairman

Tan Seng LeeExecutive Director, Finance Member Member Member

Tengku Dato’ Rahimah Member * Member * Member *Almarhum Sultan MahmudNon-Independent Non-Executive Director(Appointed on 1 August 2006 asIndependent Non-Executive Director and on 1 January 2007 was re-designated to Non-Independent Non-Executive Director)

* Appointed as a Member on 1 August 2006 and ceased to be a Member following her re-designation from Independent Non-ExecutiveDirector to Non-Independent Non-Executive Director on 1 January 2007 due to her appointment as an Executive Director of PuncakResearch Centre Sdn Bhd on 1 January 2007.

** The ESOS Option Committee has been dissolved upon the recent expiry of the ESOS Scheme on 24 February 2007.

The Board Committees exercise transparency and full disclosure in their proceedings. Where applicable, issues are reported to the Boardwith the appropriate recommendations by the Board Committees.

Since 2005, in order to expedite the Board’s decision-making process at the operating companies’ level, an Executive Committee (‘EXCO’)comprising the Executive Directors was established at PNSB and SYABAS respectively whereby both the PNSB and SYABAS EXCO Meetingsare held fortnightly to deliberate on matters requiring the Board’s mandate in between the Board Meetings.



DIRECTORS’ REMUNERATION

a. Level and Make Up of Remuneration

The Company has a formal procedure to determine the remuneration of each Boardmember. In the case of the Executive Directors, their remuneration are structured so asto link rewards to corporate and individual performance. Performance is measuredagainst profits and other targets set from the Company’s annual budget and businessplans as well as achievements of targeted returns to shareholders. In the case of the Non-Executive Directors, their remunerations reflect their contributions and the timespent attending to the Group’s affairs.

b. Procedure

The Remuneration Committee is responsible for recommending the remunerationpackages of the Executive Directors to the Board. The Board, as a whole, determines theremuneration of the Non-Executive Directors. Individual Directors shall abstain fromdiscussing and voting on their own remuneration at the Board Meetings.

c. Disclosure of Directors’ Remuneration

The details of the remuneration received and receivable by the Company’s Directors fromthe Company during the financial year ended 31 December 2006 are as follows:-

Name of Director Fees Salaries Bonuses Leave Allowance Employees TotalPassage Provident

Fund(RM) (RM) (RM) (RM) (RM) (RM) (RM)

Tan Sri Rozali Ismail - - - - - - -Dato’ Matlasa Hitam - - - - - - -Dato’ Ruslan Hassan - - - - - - -Dato’ Ir Lee Miang Koi - - - - - - -Syed Danial Syed Ariffin - - - - - - -Tan Sri Dato’ HariNarayanan Govindasamy - - - 45,000 60,000 - 105,000Tan Sri Dato’ Seri Dr Ting Chew Peh - - - 45,000 82,000 - 127,000Datuk Dr Rahman Ismail - - - 45,000 62,000 - 107,000Tan Seng Lee - - - - - - -Tengku Dato’ RahimahAlmarhum Sultan Mahmud - - - 18,750 23,000 - 41,750(Appointed on 1 August 2006)



GOVERNANCE

The remuneration packages of the Directors of the Companyreceived and receivable from the Group for the financial yearended 31 December 2006 are categorised into the appropriatecomponents as follows:-

Executive Non-ExecutiveIn RM Directors DirectorsFees - -Salaries 4,766,796 -Bonuses 1,832,714 -Benefits-in-kind 182,701 -Allowance 636,962 227,000Employees Provident Fund 1,072,045 -Leave Passage 304,889 153,750Total 8,796,107 380,750

Details of the Directors’ Remuneration at Company and Grouplevels for the financial year ended 31 December 2006, inbands of RM50,000 are tabulated as follows:-

Company GroupLevel Level

No. ofRange of No. of Non-Remuneration Executive Executive No. ofper annum Directors Directors DirectorsRM1 to RM50,000 - 1* 1*RM100,001 to RM150,000 - 3 3RM500,001 to RM550,000 - - 1RM650,001 to RM700,000 - - 1RM800,001 to RM850,000 - - 1RM1,000,001 to RM1,050,000 - - 1RM1,150,001 to RM1,200,000 - - 1RM4,550,001 to RM4,600,000 - - 1

* Inclusive of a Director who was appointed during thefinancial year ended 31 December 2006

d. Directors’ Share Options

As at 31 December 2006, a total of 3,128,000 share optionswere exercised by the Executive Directors under theCompany’s ESOS, the details of which are set out on page 133of this Annual Report.

e. Directors’ Training

Newly appointed Board members are given an inductionaimed at providing them with the relevant background and information pertaining to the Group at the earliestpossible date.

The Company also organises in-house training programmes thatare facilitated by industry experts for the Directors and SeniorManagement of the Group. In addition, the Directors of theGroup’s non-listed subsidiaries have attended the CorporateDirectors’ Training Programme, as recommended by theCompanies Commission of Malaysia.

YAM Tengku Dato’ Rahimah Almarhum Sultan Mahmud, who wasnewly appointed to the Board of PNHB in August 2006, has attended the Mandatory Accreditation Programme inSeptember 2006, as required under the Listing Requirements of Bursa Securities.

In 2006, the Directors have attended training programmes,seminars and conferences organised either by the Company orthe various accredited training providers on the water industry;boardroom affairs and its functions; strategic implementation;corporate disclosure; risk management; updates on corporatefinancial reporting; financial matters; accounting standards andcorporate governance and ethical issues and also gave talks atseminars and forums on water-related subjects.

All PNHB Directors are committed in continuous education inorder to be updated on the latest regulatory and corporategovernance developments, besides enhancing professionalism andknowledge to enable them to discharge their duties effectively.

SHAREHOLDERS’ COMMUNICATION AND INVESTOR RELATIONS POLICY

The Board acknowledges the need for the Company’s shareholdersand investors to be informed of all material business andcorporate developments concerning the Group in a timelymanner. In addition to various announcements made during theyear, the timely release of the Groups’ consolidated financialresults on a quarterly basis provides the shareholders andinvestors with an overview of the Group’s financial andoperational performances.

The Company maintains regular and effective communicationwith its shareholders and stakeholders through one-to-one orgroup dialogues, participation in investor conferences organisedby local and foreign institutional houses, attending toshareholders’ and investors’ e-mails and phone calls enquiries,Company General Meetings and other Company events.

The Company’s Investor Relations Policy & Report is set out onpages 119 to 120 of this Annual Report.



ACCOUNTABILITY AND AUDIT

a. Financial Reporting

The Board is responsible for the quality and completeness ofpublicly disclosed financial reports. In presenting the annualfinancial statements, quarterly reports and the annual reportto the shareholders of the Company, the Board takesappropriate steps to present a clear and balanced assessmentof the Group’s position and prospects. This also applies toother price-sensitive public announcements and reports tothe regulatory authorities.

The Group’s financial statements and quarterlyannouncements, prepared using appropriate accountingpolicies, consistently and supported by reasonable andprudent judgements and estimates, will be reviewed anddeliberated by the Audit Committee in the presence of theexternal auditors, internal auditors of the Company and theSenior Management of the Finance Division prior torecommending them for adoption by the Board. The AuditCommittee ensures that information to be disclosed areaccurate, adequate and in compliance with the variousdisclosure requirements imposed by the relevant authorities.The Board discusses and reviews the recommendationsproposed by the Audit Committee prior to its adoption. TheBoard also ensures the accurate and timely release of theBursa Securities. The half yearly results are also published inthe newspapers for the benefit of the investing public.

b. Statement of Directors’ Responsibility for Preparation ofFinancial Statements

The financial statements of the Group and Company havebeen drawn up in accordance with the applicable approvedaccounting standards in Malaysia and the provisions of theCompanies Act, 1965. The Directors take responsibility inensuring that the financial statements give a true and fairview of the financial position of the Group and of theCompany as at 31 December 2006 and of the results and thecash flows of the Group and of the Company for the financialyear then ended.

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 havebeen followed; and

• Prepared financial statements on the going concern basisas the Directors have a reasonable expectation, havingmade appropriate enquiries, that the Group and theCompany have adequate resources to continue inoperational existence for the foreseeable future.

The Directors have the responsibility for ensuring that theCompany keeps accounting records, which discloses withreasonable accuracy, the financial position of the Group andCompany and which enables them to ensure that thefinancial statements comply with the provisions of theCompanies Act, 1965.

The Board has the overall responsibility to take all steps as arereasonably open to them to safeguard the assets of the Groupto prevent and detect frauds and other irregularities.

c. Relationship with External Auditors

The Board maintains a transparent and professionalrelationship with the Group’s external auditors. A report bythe Audit Committee together with its Terms of Reference isset out on pages 112 to 116 of this Annual Report.

d. Internal Control

The Board acknowledges its overall responsibility formaintaining a sound system of internal control, whichprovides reasonable assurance in ensuring the effectivenessand efficiency of the Group’s operations and to safeguard itsassets and interests in compliance with the relevant laws andregulations as well as the internal financial administrationprocedures and guidelines.

The Group’s Statement on Internal Control is set out on pages110 to 111 of this Annual Report.

OTHER COMPLIANCE INFORMATION

a. Share Buy Backs

During the financial year ended 31 December 2006, theCompany bought back a total of 12,692,100 of its ordinaryshares of RM1.00 each (‘Puncak Shares’), which are listed andquoted on Bursa Securities.



GOVERNANCE

The details of the Puncak Shares bought back by the Company during the financial year ended 31 December 2006 are as follows:-

No. of Shares Puchased & Purchase Price Per Share (RM) Total ConsiderationMonth Retained As Treasury Shares Lowest Price Highest Price Average Price Paid (RM)May 5,709,900 2.40 2.70 2.63 15,032,174.73June 4,142,200 2.46 2.55 2.54 10,536,029.83July 94,700 2.58 2.60 2.60 246,221.41August 2,745,300 2.54 2.60 2.59 7,101,730.26Total 12,692,100 2.40 2.70 2.59 32,916,156.23

During the financial year ended 31 December 2006, the Company re-sold a total of 6,165,300 Puncak Shares, which have beenretained as treasury shares, through the open market.

The details of the Puncak Shares re-sold by the Company during the financial year ended 31 December 2006 are as follows:-

No. of Treasury Re-Sale Price Per Share (RM) Total ConsiderationMonth Shares Re-Sold Lowest Price Highest Price Average Price Received (RM)December 6,165,300 3.02 3.10 3.00 18,501,934.32Total 6,165,300 3.02 3.10 3.00 18,501,934.32

b. Options, Warrants or Convertible Securities

During the financial year ended 31 December 2006, a total of 18,240,000 share options had been exercised, whilst the registeredwarrant holders of 105,926,993 units (representing 98.19% of the total outstanding warrants as at 1 January 2006) had convertedthe warrants into 105,926,993 new ordinary shares of RM1.00 each of the Company at RM2.62 each pursuant to the subscriptionright set out in the Deed Poll and the Supplemental Deed Poll dated 5 September 2001 and 25 September 2001 respectively. The proceeds raised of RM277.53 million for the warrant conversion was utilised towards the capital repayment exercise of theCompany which was concluded in March 2007.

c. American Depository Receipt (‘ADR’) / Global Depository Receipt (‘GDR’)

The Company does not sponsor any ADR or GDR programme.

d. Sanctions and/or Penalties

The Company was publicly reprimanded by Bursa Securities on 19 December 2006 for breach of Paragraph 9.03(1) of the ListingRequirements of Bursa Securities for failure to make an immediate announcement for public release when the Board of Directorsof the Company approved the proposed realisation of investment value, proposed capital repayment, proposed consolidation ofshare capital and proposed increase in authorised share capital (the ‘Proposals’) on 13 October 2006 (Friday). The Company madethe announcement on the Proposals for public release on 16 October 2006 (Monday).

Save and except for the above, the Company and its subsidiaries, Directors and Management have not been imposed with anysanctions and/or penalties by the relevant regulatory bodies during the financial year ended 31 December 2006.

e. Non-Audit Fees

During the financial year ended 31 December 2006, the Group paid the following non-audit fees to the external auditors:-

i Tax advisory and compliance work – RM167,448ii Other non-audit related service – RM198,000


f. Variations in Results

The Audited Financial Statements for the financial year ended 31 December 2006 contained in this Annual Report do not havematerial variance compared with the unaudited results of the Group announced to Bursa Securities on 27 February 2007.

g. Profit Guarantee

The Company does not provide profit guarantee to any parties.

h. Revaluation Policy on Landed Properties

The Group does not adopt a policy of regular revaluation of its property. Details of the Group’s properties are disclosed in page 126of this Annual Report.

i. Recurrent Related Party Transaction

The Company did not enter into any recurrent related party transaction, which requires the shareholders’ mandate during thefinancial year ended 31 December 2006.

j. Material Contracts Involving Directors and Substantial Shareholders

Material contracts entered into by the Group, which involve the interests of Directors and major shareholders of the Company andits subsidiary companies and material contracts which are still subsisting at the end of the financial year ended 31 December 2006,are as follows:-

Date Nature of Contract Parties Consideration/ Relationship with Directors/Mode of Substantial ShareholderSatisfaction

22 April Supplemental Agreement The Government of Not Applicable PNSB is a subsidiary of PNHB2004 To The Support Loan Malaysia and

Agreement Dated 4th April Puncak Niaga (M)1998 for The Kuala Lumpur Sdn. Bhd. (PNSB)Water Supply Augmentation Works

15 December Concession Agreement SYABAS, the State Not Tan Sri Rozali Ismail (‘TSRI’) is a 2004 Government of Applicable substantial shareholder of PNHB held

Selangor Darul directly under his personal name and Ehsan and the indirectly held through his 50% equity Federal Government interest in Central Plus (M) Sdn Bhd

(CPlus) and Corporate Line (M) Sdn Bhd (CLine). He is also deemed a substantial shareholder of SYABAS through his substantial in PNHB, which in turn, holds 70% equity interest in SYABAS




GOVERNANCE

Date Nature of Contract Parties Consideration/ Relationship with Directors/Mode of Substantial ShareholderSatisfaction

31 December Shareholders’ Agreement PNHB, KDEB Not TSRI is a substantial shareholder of PNHB2004 and SYABAS Applicable held directly under his personal name

and indirectly held through his 50% equity interest in CPlus and CLine. He is also deemed a substantial shareholder of SYABAS through his substantialshareholding in PNHB, which in turn, holds 70% equity interest in SYABAS

23 February Subscription Agreement PNHB, KDEB Not TSRI is a substantial shareholder of PNHB2006 In Relation To The and SYABAS Applicable held directly under his personal name and

Subscription For Up To indirectly held through his 50% equityRM1.045 Billion Nominal interest in CPlus and CLine. He is interestValue Redeemable in CPlus and CLine. He is also deemed aConvertible Unsecured substantial shareholder of SYABASLoan Stocks Of SYABAS through his substantial shareholding in(‘RCULS’) PNHB, which in turn, holds 70% equity

interest in SYABAS.

8 December Subscription Agreement PNSB (as the Issuer), Not TSRI is a substantial shareholder of PNHB2006 In Relation To The Issue United Overseas Applicable held directly under his personal name and

Of RM435.0 Million Bank (Malaysia) Bhd indirectly held through his 50% equityNominal Value (as the Facility in CPlus and CLine. He is also deemed aRedeemable Unsecured Agent and the Issue substantial shareholder of PNSB throughBonds To PNHB Agent) and PNHB his substantial shareholding in PNHB,

which in turn, holds 100% equity interestin PNSB.

STATEMENT OF GOING CONCERN

Upon making due and reasonable enquiry into the affairs of the Group, the Board firmly believes that the Group shall continue tooperate as a going concern business in the foreseeable future.


STATEMENT ONINTERNAL CONTROL

INTRODUCTION

The Malaysian Code on Corporate Governance requires listedcompanies to maintain a sound system of internal control tosafeguard shareholders’ investments and the Group’s assets. TheListing Requirements of Bursa Malaysia Securities Berhad requiresDirectors of listed companies to include a statement in theirannual reports on the state of their internal controls.

RESPONSIBILITY

The Boards of the Puncak Niaga Group are responsible formaintaining sound systems of internal control and for reviewingtheir adequacy and integrity so as to safeguard the shareholders’investments and the Group’s assets. The Board and Managementhave implemented a control system designed to identify andmanage risks facing the Group in pursuit of its business objectives.This internal control system, by its nature, can only providereasonable and not absolute assurance against materialmisstatement or loss.

The Group has in place ongoing processes for identifying,evaluating, monitoring and managing significant risks faced by theGroup during the year. The Management is responsible for theidentification and evaluation of significant risks applicable to theirrespective areas of business and to formulate suitable internalcontrols. This process is reviewed by the Board of PNHB via aspecific Board Committee, namely the Compliance, Internal Controland Risk Policy Committee, which dedicates its time at periodicintervals throughout the year for discussion on this matter.

RISK MANAGEMENT FRAMEWORK

Risk Management is firmly embedded in the Group’s managementsystem and is every employee’s responsibility. In October 2001,the Board of PNHB formally approved a systematic riskmanagement structure and process for the Group. Since then, thestructure and process have been fully implemented by theManagement and employees of the PNHB Group. The Group’s riskmanagement framework is explained in detail in the RiskManagement Policy & Report set out on pages 117 to 118 of theAnnual Report.

INTERNAL CONTROL SYSTEM

The key elements of the Group’s internal control system andassurance processes, inter alia, encompass the following:-

• All major decisions require the final approval of the respectiveBoards / Executive Committees within the Group (PNHB /PNSB / SYABAS) and are only made after appropriate in-depthanalysis. The respective Boards / Executive Committees receiveregular and comprehensive information covering all Divisions /Departments / Districts in the respective companies withinthe Group.

• All Divisions and Departments of PNSB have clearlydocumented Procedure Manuals whilst SYABAS hasStandard Operating Procedures incorporating controlprocedures and the scopes of responsibilities and authorities.The Procedure Manuals / Standard Operating Procedures areupdated regularly to incorporate all elements necessitatedby changes in the legislation, industry best practices andbusiness dynamics.

• The Internal Audit Department of PNSB, independentlyreviews the control processes implemented by theManagement from time to time and periodically reports on itsfindings and recommendations to the Audit Committee ofPNHB. The duties and responsibilities of the Audit Committeeare detailed in the Terms of Reference of the AuditCommittee. The Audit Committee, by consideration of bothInternal and External Audit Reports, is able to gauge theeffectiveness and adequacy of the internal control system,for presentation of its findings to the Board. The InternalAudit Department of SYABAS extends a copy of its InternalAudit Reports to the Executive Chairman and summarisedStatus Reports on its activities are regularly submitted to theManagement of SYABAS.

• 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 InternalControl requirements.


STATEMENT ONINTERNAL CONTROL

• The Tender and Contracts Committee of PNSB and the TenderCommittees of SYABAS ensure transparency and competitivepricing in the award of contracts within the Group.

• A detailed budgeting process has been established for PNSBand SYABAS requiring all Divisions / Departments / Districts toprepare their respective budgets annually. These budgets arethen reviewed and approved by the respective Boards /Executive Committees prior to actual implementation eachyear. The monitoring of actual performance versus budget,with major variances being followed up, is done on a monthlybasis and management action is taken to tighten or to rectifyany shortcomings, where necessary.

• The Limits of Authority for PNSB was approved by the Boardfor implementation in April 2003. Subsequently, the ExecutiveCommittee has approved a Revised Limits of Authorityeffective 1 September 2006. SYABAS has its own Limits of Authority, which was approved by the Board andimplemented in April 2005 and subsequently revised in May 2006.

Guidance for Directors of Public Listed Companies

Since the issuance of the “Statement on Internal Control:Guidance for Directors of Public Listed Companies” (Guidance) inDecember 2000, the Group has monitored its level of readinesswith the Guidance. The Group aims to not just achieve fullcompliance, but also to improve on the Group’s processes byimplementing best business practices in line with internationalbest practice standards. Throughout the year 2006, theCompliance, Internal Control and Risk Policy Committee has closelymonitored the Group’s level of readiness with the Guidance.

This Statement on Internal Control has been prepared inaccordance with the Guidance and has been approved by theBoard of Puncak Niaga Holdings Berhad and reviewed by theexternal auditors.

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

TAN SRI DATO’ SERI DR TING CHEW PEHChairmanCompliance, Internal Control and Risk Policy Committee

23 April 2007


AUDIT COMMITTEEREPORT

The Board of Directors of Puncak Niaga Holdings Berhad (PNHB)is pleased to present the report of the Audit Committee for thefinancial year 2006.

1. MEMBERSHIP AND MEETINGS

The Audit Committee comprises the following members anddetails of attendance of each member at the AuditCommittee Meetings held during the financial year 2006 wereas follows:-

Number of Number of

Composition Meetings Meetings Percentage

of Committee Held Attended (%)

YB Tan Sri Dato’ Seri Dr Ting Chew Peh Chairman/Independent Non-Executive Director 5 5 100%YBhg Tan Sri Dato’ Hari Narayanan GovindasamyMember/Independent Non-Executive Director 5 5 100%YB Datuk Dr Rahman Ismail Member/Independent Non-Executive Director 5 5 100%YAM Tengku Dato’ Rahimah Almarhum Sultan Mahmud(Note 1)Member/Non-Independent Non-Executive Director 2 2 100%Mr Tan Seng Lee Member/Executive Director, Finance Division 5 5 100%

Note:1. Appointed as a Member of Audit Committee on 1 August

2006 and subsequently ceased to be a Member on 1 January2007 following her re-designation from Independent Non-Executive Director to Non-Independent Non-ExecutiveDirector on 1 January 2007 due to her appointment as theExecutive Director of Puncak Research Centre Sdn Bhd on 1January 2007.

The General Manager / Senior Manager (Internal Audit),Senior General Manager (Finance & Accounts) and othermembers of Senior Management attended these meetingsupon the invitation by the Chairman of the Audit Committee.The Group’s external auditors were also invited to attend allthese meetings. The Company Secretary, Mdm Tan Bee Lian isthe Secretary to the Audit Committee.

2. SUMMARY OF ACTIVITIES

During the financial year 2006, the Audit Committee carriedout its duties as set out in the terms of reference. The mainactivities carried out by the Audit Committee during thefinancial year included the following:-

Financial Results

• Reviewed the quarterly and year-to-date unauditedfinancial results of the Group before tabling to the Boardfor consideration and approval.

• Reviewed the reports and the audited financialstatements of the Company and of the Group togetherwith the external auditors prior to tabling to the Boardfor approval.

External Audit

• Reviewed the external auditors’ scope of work and auditplan for the year and made recommendations to theBoard on their appointment and remuneration.

• Reviewed and discussed external auditors’ audit reportand areas of concern highlighted in the managementletter, including management’s response to the concernsraised by the external auditors.

• Discussed on significant accounting and auditing issues,impact of new or proposed changes in accountingstandards and regulatory requirements.

Internal Audit

• Reviewed the Internal Audit Plan, programme of resourcerequirement for the year and assessed the performance ofthe Internal Audit Department.

• Reviewed the Internal Audit reports, which highlightedthe audit issues, recommendations and the Managementresponses and directed action to be taken by theManagement to rectify and improve the system ofinternal control.

• Monitored the implementation of recommendationsmade by the Internal Audit Department arising from itsaudits in order to obtain assurances that all key risks andcontrol concerns have been fully addressed.



Related Party Transaction

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

Employees’ Share Option Scheme (ESOS)

Verified the allocation of options pursuant to the Employees’Share Option Scheme of the Company and found the same tobe in compliance with the criteria referred to in the ESOSBye-Laws.

The ESOS Bye-Laws do not provide any options for the Non-Executive Directors (‘NED’) and therefore, none were allocatedto the NED.

3. INTERNAL AUDIT FUNCTION

The Group has an established Internal Audit Departmentwhich assists the Audit Committee in the discharge of itsduties and responsibilities. The Internal Audit Departmentprovides an independent assurance on risk management andinternal control. The audit focuses on regular and systematicreview of the internal control and management informationsystems, including the system for compliance with applicablelaws, regulations, rules, directives and guidelines.

The Annual Audit Plan of the Internal Audit Department(which was developed based on a risk analysis approach), wasapproved by the Audit Committee at the last AuditCommittee Meeting of the preceding financial year. Thescope of the Internal Audit Department’s functions coveredthe audit of adequacy of risk management, operationalcontrols, compliance with established procedures, guidelinesand statutory requirements and also the various computerapplication systems and networks of the Company and ofthe Group.

The Internal Audit Department had conducted the evaluationof the system of internal control that encompassed the Group’sgovernance, operations and information systems. The InternalAudit reports, which highlighted the internal controlweaknesses, were deliberated by the Audit Committee and therecommendations were duly acted upon by the Management.

In 2006, the Internal Audit Department undertook more than50 audit assignments covering the 28 Water TreatmentPlants, high-risk areas identified by the Risk ManagementWorking Group and adhoc assignments requested by theSenior Management.

Special emphasis was given to Plant Audits in the FinancialYear 2006, as PNSB had taken over the operation andmaintenance of the 26 WTPs from the Contractor effective1st January 2005. The main audit objectives were todetermine compliance with PCCA and CCOA and other legalrequirements, to monitor and detect shortcomings andabnormalities in WTP operations and to assess the level ofmaintenance of WTP facilities. The audit scope included thewater treatment process, mechanical and electricalequipment, non-mechanical and electrical facilities and WTPs’compliance with safety requirements.

Examples of other key areas audited by the Internal AuditDepartment during the Financial Year 2006 were the Risk ofDam Failure, Risk of Inadequate Raw Water Quantity,Procurement at Regional Offices / SSP2 and Wangsa MajuWTPs, Land Encroachment Along Raw and Treated WaterPipelines, Scheduled Preventive Maintenance versus Actual,Feasibility Study on Chemical Usage and Input, Special Auditon Very Bad Odour Experienced by Consumers, Special Auditinto an anonymous allegation received, etc.

4. TERMS OF REFERENCE

A. Composition

The Board shall elect an Audit Committee from amongstthemselves (pursuant to a resolution of the Board ofDirectors), comprising of at least three (3) Directors wherethe 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 ExecutiveDirector of the Company or any related corporation;or

iii Any person having a relationship which, in theopinion of the Board of Directors, would interferewith the exercise of independent judgement incarrying out the function of the Audit Committee.

The members of Audit Committee shall elect a Chairmanfrom amongst themselves who is not an ExecutiveDirector or employee of the Company or any relatedcorporation. It would be advantageous if the Chairmanpossesses a strong personality, have knowledge andexperience in financial reporting, good leadership skillsand is keen to get financial reporting and controls right.



All members of the Audit Committee, including theChairman, will hold office only so long as they serve asDirectors of the Company. Should any member of the Audit Committee cease to be a Director of theCompany, his membership in the Audit Committee wouldcease forthwith.

It is desirable for membership on the Audit Committee tobe rotated amongst all the Directors of the Company suchthat each Director will serve a period of three (3) yearson the Audit Committee.

If the members of the Audit Committee for any reasonbe reduced to below three (3), the Board of Directors shallwithin three (3) months of the event, appoint suchnumber of new members as may be required to make upthe 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 itsfiduciary responsibilities, particularly in the areasrelating to the Company’s accounting andmanagement controls, financial reporting andbusiness ethics policies.

ii Provide greater emphasis on the audit function byincreasing the objectivity and independence ofexternal and internal auditors and providing a forumfor discussion that is independent of the Management.

iii Maintain through regularly scheduled meetings a direct line of communication between the Boardand the external auditors, internal auditors andfinancial management.

iv Strengthen the role of Non-Executive Directors byimproving their knowledge and understanding of theCompany’s operation.

v Undertake such additional duties as may beappropriate and necessary to assist the Board.However, whether or not the Audit Committee shouldundertake one or more of the additional duties restson the Board’s viewpoint on corporate needs and theenvironment 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.1 Oversee All Matters Relating to External and Internal Audits

i Review the Annual Audit Plan with the externalauditors. The Committee shall meet with the externalauditors prior to the commencement of the annualaudit to discuss:-

• The general outline of the extent and timing of the auditors’ proposed coverage of locationsuch 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 ofthe internal auditors and the anticipated effectof this reliance on the examination.

• Any significant accounting and auditingproblems that the auditors can foresee.

• The impact on the financial statements of anynew or proposed changes in accountingstandards or regulatory requirements.

• The effect on the audit of significant data-processing systems.

Following its review of the plan, the Audit Committeemay 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 AuditCommittee in overseeing the Internal AuditDepartment will:-

• Review the audit programme, scope, performanceand findings of the internal auditors.

• Monitor the implementation of the programmeso that sufficient internal audit coverage isaccorded. In this respect, only the Committee canconsider and approve or otherwise, all requestsby Senior Management to utilise the internalaudit personnel for non-audit assignments.



• Assess the capacity of the Internal AuditDepartment to fulfil its responsibilities byconsidering, amongst other things, the scope ofthe department’s authority as presented in thedepartment’s charter, the qualifications andexperience level of its employees, the degree towhich internal auditors are independent of the activities they audit and the reportingrelationship between the Head of Internal Auditand Senior Management.

• To review the coordination of audit effortsbetween external and internal auditors, wherepractical, with a view to maximizing auditeffectiveness 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 theAudit Committee.

vi Upon the request of the external and/or internalauditors, the Chairman of the Audit Committee shallconvene a meeting of the Committee to consider anymatters the auditors believe should be brought to theattention of the Committee.

C.2 Evaluate the Standards of Internal Control andFinancial Reporting

i Hold specific discussions with Senior CorporateManagement to discuss the overall adequacy of theinternal control system.

ii Meet with the internal and external auditorsconcerning their evaluation of the system of internalaccounting controls.

iii Consider the nature and disposition of the relevantcomments appearing in the reports prepared by theinternal auditors and in the external auditors’management letter.

C.3 Review of Financial Statements

i Meet with the Management and the external auditorsto discuss the annual financial statements of theCompany or Group and the results of the audit beforerecommending approval by the Board.

ii Review the nature and resolution of any significantaccounting and auditing problems encounteredduring the examination.

iii It is good practice for the Audit Committee to meetthe Management at a regular interval to review theresults of the Company or Group, such as quarterlyreview of the results.

iv Review the nature of any related party transactionsthat may arise within the Company or Group.

v Review the nature of any significant adjustments,reclassifications or additional disclosures proposed bythe external auditors that are currently significant ormay become significant in the future.

vi Review the adequacy of disclosure of the impact ofany changes during the year in accounting policies,standards and/or regulatory requirements.

vii Review the reasons for the major fluctuations infinancial statement balances for the current yearcompared to prior years.

viii Review for any unusual circumstances or situationsreflected in the financial statements, includingidentifying any marginal operations.

ix Review the nature of any unusual or significantcommitments or contingent liabilities.

x Review of any significant differences between theannual report and other reports, such as reports tothe regulatory agencies.

xi Review for any significant differences in format ordisclosure from industry norms.



C.4 Additional Duties and Responsibilities

i Act upon the Board of Directors’ request toinvestigate and report on any issues or concerns inregard to the management of the Company.

ii Review the Company’s business ethics code, themethod of monitoring, compliance with the code andthe disposition of reported exceptions.

iii Review executive expenses.

iv Review policies on sensitive payments.

v Review compliance with certain governmentregulations.

vi Review policies to avoid conflicts of interest andreview past or proposed transactions between theCompany and members of the Management.

vii Review certain aspects of the Company’s pension planand compliance with relevant laws and regulations.

viii Assess the performance of financial management.

ix Such other functions as may be agreed to by theAudit Committee and the Board of Directors.

D. Access to Records

In carrying out their duties and responsibilities, theAudit Committee will in principle have full, free andunrestricted access to all Company records, property and personnel.

E. Meetings and Minutes

It is good practice for the Audit Committee to hold aminimum of four (4) meetings a year, although additionalmeetings may be called at any time at the Chairman’sdiscretion. It would be desirable that the notice ofmeetings be sent at least seven (7) days before the timeset for the meeting together with an agenda to allmembers of the Committee and any persons that may berequired to attend. The recommended quorum for eachmeeting shall be three (3) members.

In addition to the Committee members, the Head ofInternal Audit Department will normally be in attendanceat the meetings. Representative of the external auditorsare to be in attendance at meetings where mattersrelating to the audit of the statutory accounts and/or theexternal auditors are to be discussed.

The Chief Executive Officer and/or other appropriateofficers may be invited to attend, except for thoseportions of the meetings where their presence isconsidered inappropriate, as determined by theCommittee Chairman.

Minutes of each meeting shall be kept and distributed toeach member of the Committee and also to the membersof the Board. The Committee Chairman shall report oneach meeting to the Board. The Secretary to the AuditCommittee shall be the Company Secretary.


RISK MANAGEMENTPOLICY & REPORT

RISK MANAGEMENT POLICY

The Board of Puncak Niaga Holdings Berhad has approved thefollowing Group’s Risk Management Policy Statement:-

“The PNHB Group’s Risk Management Policy is to identify, measureand 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 andopportunities enhanced.

We will achieve, maintain and review a proper risk managementsystem. This commitment is driven by the Board of Directors,which in turn is implemented by the Management and extends toall employees of the Group.

This policy statement assigns responsibility for riskmanagement to all PNHB Group employees and acknowledgesthat corporate responsibility lies with the Board of Directors of the PNHB Group.”

RISK MANAGEMENT REPORT

There are risks faced by all companies in the various facets of theircorporate 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 andimpact of any adverse effects. Puncak Niaga recognises this andhas initiated risk management programmes to ensure its businessrisks are minimised and opportunities enhanced.

The Board of Puncak Niaga established the following framework in October 2001, for the management of the Group’scorporate 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 ManagementWorkshop held for the Board and Senior Management in August2001, information on Risk Management has been fullydisseminated to all employees in the form of posters and throughthe Group’s internal communications network.

In addition, the risk management framework which wasestablished in October 2001 has since then been fully implementedby the Management and employees of Puncak Niaga.

COMPLIANCE, INTERNAL CONTROL AND RISK POLICYCOMMITTEE (CICR)

The establishment of the CICR was formalised by the Board inOctober 2001. The members of the CICR comprise the following:-

ChairmanYB Tan Sri Dato’ Seri Dr Ting Chew Peh (Independent Non-Executive Director)

MembersYBhg Dato’ Matlasa HitamManaging Director(Head of Compliance, Internal Control and Risk Policy Committee)

Mr Ng Wah TarExecutive Director, Corporate Finance

Madam Tan Bee LianSenior General Manager, Secretarial Department

Tuan Haji Sonari SolorGeneral Manager, Internal Audit Division - SYABAS

SecretaryEncik Mohammed Sofian IsmailSenior Manager, Internal Audit Department (Acting Head)(Head of Risk Management Section)

There was no change in the membership of the CICR during theyear 2006.

A. TERMS OF REFERENCE OF THE CICR

The CICR shall provide assistance to the Board of Directors ofPuncak Niaga in discharging its fiduciary responsibilitiesrelating to safeguarding shareholders’ investment and theGroup’s assets through a structured approach to RiskManagement. The primary responsibilities of the CICR are:-

• Formulating strategies to manage the overall risksassociated with the Group’s activities. This entailsdecisions 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 toensure consistency with fundamental changes in theeconomy, market conditions and regulations.

• To periodically review the Group’s overall objectives byassessing the current risk portfolio composition anddetermining the desired exposures of each major area of risk.


RISK MANAGAMENTPOLICY & REPORT

• To monitor and assess the risk portfolio composition ofsignificant activities of the Group.

• To keep abreast of both current risk managementtechniques and theories, and any possible or actualchanges in the regulatory environment, and torecommend the appropriate action.

B. CICR ACTIVITIES

MEETINGS HELD AND ISSUES COVERED

During the year 2006, the CICR held eight (8) meetings, ofwhich four (4) were chaired by YB Tan Sri Dato’ Seri Dr TingChew Peh (Chairman of CICR) and four (4) were chaired byYBhg Dato’ Matlasa Hitam (Head of CICR).

At its meetings, the CICR reviewed in detail, the StatusReports prepared by the Risk Management Section. The issuescovered included the following:-

• The level of readiness of PNSB and the respective Divisionsand Departments with regards to the “Statement onInternal Control” requirements.

• The progress of the risk assessment and risk monitoringexercises at Departmental / Divisional and Enterprise-Wide levels. The main risks, controls and managementactions are highlighted for the CICR to deliberate.

• The effective utilisation of the Corporate Risk Scorecardsoftware to identify, measure and monitor all corporaterisks identified within PNSB.

• Other relevant risk issues affecting the Group, from timeto time.

RISK MANAGEMENT SCORECARD WORKING GROUP AND ENTERPRISE-WIDE RISKS

The Group recognises that Risk Management involves astructured approach, combining the efforts of all functionswithin the Group, to minimise the possibility and impact ofunexpected damages so as to contribute towards greaterefficiency and better decision-making. The Group’sEnterprise-Wide Risk Profile is reviewed annually to take intoconsideration changes in the business environment, strategiesand functional activities of the Group. The Risk ManagementScorecard Working Group (RMSWG), comprising all Heads ofDepartments or their representatives, met on 17 August and11 September 2006 to review the Group’s Enterprise-WideRisk Profile. The deliberations of the RMSWG were in turnreviewed by the CICR Committee. Subsequently, a detailedBoard Paper on the Group’s Enterprise-Wide Risks wassubmitted to the PNHB Board.

The Group’s Enterprise-Wide Risk Profile will be reassessed by the RMSWG in 2007.

DIVISIONAL AND DEPARTMENTAL RISKS (PNSB)

The respective Heads of Divisions and Departments areresponsible for assessing and managing their Divisional andDepartmental risks. Using the Corporate Risk Scorecardsoftware, the Heads of Divisions and Departments havesubmitted their detailed risk scorecard reports to the RiskManagement Section after the end of each quarter.

CORPORATE RISK SCORECARD SOFTWARE

PNSB / PNHB utilises a risk management tool namely, theCorporate Risk Scorecard (CRS) software to identify, measureand manage all corporate risks affecting PNSB. The CRSsoftware offers a systematic approach to the management ofenterprise-wide risks facing corporations and assists theManagement of Puncak Niaga to successfully achieve theircorporate objectives.

RISK MANAGEMENT AT SYABAS

SYABAS took over the operations of PUAS on 1 January 2005.

A formal Risk Management structure was approved by theBoard of SYABAS in November 2005. The Risk Managementstructure at SYABAS is similar to that for PNHB / PNSB. TheRisk Management Committee of SYABAS held its first formalMeeting on 19 January 2006.

On 11 September 2006, all Heads of Divisions / Departments /Districts were instructed to furnish what they perceived to bethe major risks facing SYABAS. Based on the inputs received,an initial report was prepared by the Internal Audit Divisionon the risks facing SYABAS.

Subsequently on 25 November 2006, the Internal AuditDivision held a Risk Management Workshop for all Heads of Divisions / Departments / Districts to increase riskmanagement awareness and to assist the Heads in developinga more systematic and detailed Risk Profile for their areas of responsibilities.

The Final Report on the “Risks Facing SYABAS” will be tabledto the SYABAS EXCO for endorsement prior to tabling to PNHB’s CICR and Board respectively. The Risk Profile of SYABAS will be periodically assessed by the SYABAS Risk Management Committee for its relevancy and appropriateness.


INVESTOR RELATIONSPOLICY & REPORT

INVESTOR RELATIONS POLICY

As a responsible corporate citizen, Puncak Niaga is totallycommitted to upholding the highest standards of transparency,accountability and integrity in the conduct of our businessactivities in the best interest of our shareholders as well as toallow potential investors to make careful and informedinvestment decisions based on full and transparent disclosure of information.

Puncak Niaga’s Investor Relations Policy aims to build long-termrelationships and credibility with our shareholders and potentialinvestors based on trust, honesty, openness, transparency andsound understanding of the Company.

To achieve its objectives, the Company will endeavour toundertake the following:-

1. CREATING QUALITY DIALOGUE

• To create an environment where the effective bilateralcommunication between the Company and ourshareholders and investors both informs and educatesthrough regular, open and transparent provision ofrelevant and invaluable information over the long-termwhich will build mutually beneficial long-termrelationships 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 andinvestors whereby the relationship is based on theprinciples of honesty, openness and transparency and tofoster mutual understanding between the Company andour 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 RelationsProgramme as part of our ongoing shareholders’ andinvestors’ communication obligations.

• To provide high quality, meaningful and timelyinformation over and above that is required by law inorder to improve the shareholders’ and investors’understanding of our Company.

• To strive for key competence in the area of professional investor relations vide adequate resourcesand capabilities.

• To earn the trust, respect and confidence of our existingshareholders and investors.

• To build and maintain long-term relationships with ourexisting shareholders and investors.

• To initiate long-term relationship building with potentialshareholders and investors.

Our commitment to the above Policy is driven by the Board of Directors of the PNHB Group and implemented by the Management.

INVESTOR RELATIONS REPORT

Investor relations is the means by which listed companiesmaintain dialogue with their existing shareholders and potentialinvestors. It is a strategic management responsibility to present anaccurate picture of corporate performance and prospects, thusallowing the investment community, through an informedmarket, to determine a realistic share price. As a result, investorrelations can have a positive impact on a company’s market valueand cost of capital relative to its industry sector and the overalleconomic climate.

The year 2006 has been challenging amidst Puncak Niaga’srelentless pursuit to gain leadership in the water industry.


INVESTOR RELATIONSPOLICY & REPORT

The Board is therefore pleased to report on Puncak Niaga’sinvestor relations activities during 2006 as follows:-

Dialogues With Investors

The Top Management of the Group actively engages in meetings,dialogues and briefing sessions with local and foreign investmentgroups. In 2006, more than 52 dialogues and group briefingsessions were conducted with existing and potential investors,local and foreign fund managers and financial analysts fromresearch and asset management houses.

A special group briefing was held for a group of analysts on 19 October 2006 and a presentation was made to theEmployees Provident Fund Board together with our corporateadvisers on 22 November 2006, both pertaining to the CapitalRepayment exercise.

Investors’ Access To Information

In line with our Investor Relations Policy, Puncak Niaga ensurestimely disclosure of information over and above the regulatoryauthorities’ disclosure requirements so as to enable the investmentcommunity to make careful and informed investment decisions onthe Company’s securities. Shareholders and investors can accessthe Company’s information and corporate announcements atwww.puncakniaga.com.my or www.bursamalaysia.com.

Since 22 October 2004, in our efforts to meet disclosureobligations towards our shareholders, investors and stakeholders,the Group has adopted and implemented the Puncak NiagaCorporate Disclosure Policy (as set out on page 122 of this AnnualReport), formulated in line with the ‘Guide On Best Practices InCorporate Disclosure’ issued by Bursa Malaysia Securities Berhad’sTask Force on Corporate Disclosure Best Practices.

With the implementation of the Group’s Corporate DisclosurePolicy and Procedures, all announcements made to BursaMalaysia Securities Berhad by the Company are nowsimultaneously posted on the Company’s website atwww.puncakniaga.com.my for access by the investing public.

The public may also access information on SYABAS atwww.syabas.com.my.

Annual General Meeting (AGM)

The Board of Puncak Niaga firmly believes that the AnnualGeneral Meeting is the best forum to promote a closerrelationship with our shareholders, enabling us to continue ourengagement process with them.

Since 2003, our Annual General Meeting has been preceded by aCompany Presentation followed by a Questions and AnswersSession. Our shareholders are updated on the Group’s corporateperformance, latest developments and issues of concern to theshareholders. This is especially important as we are the waterservices provider in the State of Selangor and the FederalTerritories of Kuala Lumpur and Putrajaya and our shareholdersare our consumers. It is Puncak Niaga’s way of saying “We valueyour views” and “We are here to serve you better”.

Investor Relations Unit

The Investor Relations Unit (‘IRU’) maintains a database ofshareholders and investors who wish to be updated on the Group’scorporate developments and performance via e-mail.

Kindly e-mail us your contact details [email protected] or write to us at InvestorRelations Unit, c/o Secretarial Department, Puncak Niaga HoldingsBerhad, 10th Floor, Wisma Rozali, No. 4, Persiaran Sukan, Seksyen13, 40100 Shah Alam, Selangor Darul Ehsan, should you wish tobe included in our database.

Similarly, to enable us to further improve our level of services tothe community and our stakeholders, kindly forward yourcomments, views and concerns to the Company via our e-mailaddresses at [email protected] for public enquiriesand [email protected] for investors’ enquiries.

All water-related enquiries in the State of Selangor and theFederal Territories of Kuala Lumpur and Putrajaya, such ascomplaints on water disruptions, pipe bursts, low water pressure,etc., may be addressed to SYABAS Customer Service Centre,[email protected] or the toll-free line, 1-800-88-5252 orSMS ‘PUSPEL<space><your complaints/feedback>’ to 39222.


QUALITY POLICY & REPORT

QUALITY POLICY

It is the policy of Puncak Niaga to provide quality services to fulfillits contractual obligations to the Selangor State Government.

Puncak Niaga shall strive consistently to meet the qualitystandards pre-determined in the PCCA and CCOA. Puncak Niagais fully committed to performing all its obligations under the PCCA and CCOA with full responsibility, due diligence and efficiency.

To Be The Leading And Dynamic Integrated Water ServicesCompany, we shall adopt a quality management system basedon internationally recognised standards, which will ensure aplanned, systematic and proactive approach to quality in allaspects of our work.

Puncak Niaga’s quality management shall be characterised by:-

• Proactiveness at all levels.

• Consistent application of the ‘Right First Time Every Time’ principle.

• Empowerment of employees to solve problems expeditiously.

• A culture of continuous improvement and teamwork.

All employees shall share the responsibility to understand anddiligently implement the Quality Policy.

INNOVATIVE AND CREATIVE CIRCLE PROGRAMME

The Innovative and Creative Circle (ICC) programme, which startedin January 2006 following a directive by the Board of Directors,has now been expanded to cover all the WTPs managed by PNSB.A total of 29 ICCs participated in the ICC programme in 2006, andtraining sessions were conducted between March and May for thefacilitators, leaders and members of the ICC circles.

As at 31 December 2006, 16 ICCs had successfully completed theirprojects, while several more finalised their projects by mid-March2007. ICC projects approved by the Management are adopted aspart of the Standard Operating Procedures of the relevantsections and units. To date, completed projects cover operationalaspects such as:-

• Reducing Modified Liquid Alum in WTP operations.

• Repairing and upgrading the On-line Analyzer System toenhance performance, improve floc formation in thecoagulation process, and reduce downtime and cost.

• Optimising the flocculation process to improve sedimentationand settled water quality and reduce cost.

• Introducing an Aeration System to improve water quality.

• Enhancing the Store Management System.

• Transforming the maintenance culture from corrective topreventive maintenance.


CORPORATEDISCLOSURE POLICY

As a responsible corporate citizen, Puncak Niaga is totallycommitted to upholding the highest standards of transparency,accountability and integrity in the disclosure of all materialinformation on the Company to the investing public in anaccurate, clear, complete and timely manner in accordance withthe corporate disclosure requirements as set out in the BursaMalaysia Listing Requirements.

The primary objectives of Puncak Niaga’s Corporate DisclosurePolicy are:-

1. To promote and maintain market integrity and investor confidence.

2. To provide equal access to the Company’s materialinformation in an accurate, clear, timely and completemanner and to avoid selective disclosure to the investing public.

3. To exercise due diligence such that information disseminatedto the investing public will be as far as possible accurate, clear,timely and complete.

4. To put in place an efficient management of informationprocedure that promotes accountability for the disseminationof material information to the investing public.

5. To build good investor relations with the investing publicbased on the principles of trust, honesty, openness,transparency and sound understanding of the Company.

To achieve its objectives, the Company will endeavour toundertake the following:-

1. ESTABLISH POLICIES AND PROCEDURES

• Ensure written policies and procedures of the Company(‘Puncak Niaga’s Corporate Disclosure Policy andProcedure’) that encompass the Corporate DisclosurePolicy and other requirements relating to corporatedisclosure as set out in the Bursa Malaysia Listing Requirements.

• Appoint a senior officer of the Company to oversee andcoordinate disclosures to ensure the Company complieswith the Bursa Malaysia Listing Requirements.

• Ensure that only designated persons are the Company’s spokespersons.

• Ensure due compliance with Puncak Niaga’s CorporateDisclosure Policy And Procedure.

2. EXERCISE DUE DILIGENCE AND PREPARATION

• Ensure that the persons responsible for disseminatingmaterial information to the investing public exercise duediligence in ensuring that information to be released isaccurate, clear, timely and complete.

• Ensure that due care is observed when briefing andresponding to analysts, institutional investors, the mediaand the investing public.

3. USE OF INFORMATION TECHNOLOGY

• Take advantage of current information technology todisseminate information to the investing public.

Our commitment to the above Policy is driven by the Board of Directors of the PNHB Group and implemented by the Management.


DISTRIBUTION SCHEDULEOF EQUITY SECURITIES

& PROPERTIES

ORDINARY SHARES AS AT 27 APRIL 2007

Authorised Share Capital : RM1,300,000,000Issued and Paid-Up Share Capital : RM411,142,895 comprising 411,142,895 ordinary shares of RM1.00 eachClass of Shares : Ordinary shares of RM1.00 eachVoting Rights : One vote per ordinary share

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

Less than 100 345 3.94 8,664 *1

100 - 1,000 1,886 21.52 1,262,148 0.311,001 - 10,000 5,657 64.56 15,937,107 3.8810,001 - 100,000 709 8.09 19,502,192 4.74100,001 - 20,557,144 (less than 5% of issued capital) 161 1.84 227,532,645 55.3420,557,145 (5% of issued capital) and above 5 0.05 146,900,139 35.73Total 8,763 100.00 411,142,895 100.0

Notes:1. Negligible.

Top Thirty Securities Account Holders As Per Record of Depositors (Without aggregating the securities from different securities accounts belonging to the same Depositor)

No. Name of Shareholder No. of Shares Held % of Issued Capital

1. Corporate Line (M) Sdn Bhd 43,318,627 10.54

2. Central Plus (M) Sdn Bhd 34,468,137 8.38

3. HSBC Nominees (Asing) Sdn Bhd 24,493,350 5.96- Exempt An for JPMorgan Chase Bank, National Association (Bermuda)

4. Employees Provident Fund Board 22,520,025 5.48

5. AmSec Nominees (Tempatan) Sdn Bhd 22,100,000 5.38- AmBank (M) Berhad for Central Plus (M) Sdn Bhd

6. RHB Capital Nominees (Tempatan) Sdn Bhd 20,000,700 4.86- Pledged Securities Account for Central Plus (M) Sdn Bhd (TSR 681055)

7. Lembaga Tabung Haji 16,276,750 3.96

8. AmSec Nominees (Tempatan) Sdn Bhd 13,620,000 3.31- AmBank (M) Berhad for Central Plus (M) Sdn Bhd

9. Citigroup Nominees (Tempatan) Sdn Bhd 13,043,600 3.17- CMS Dresdner Asset Management Sdn Bhd for Employees Provident Fund

10. AMMB Nominees (Tempatan) Sdn Bhd 11,918,200 2.90- AmTrustee Berhad for Central Plus (M) Sdn Bhd (7/914-8)

11. HSBC Nominees (Asing) Sdn Bhd 9,336,530 2.27- Exempt An for Morgan Stanley & Co. International Plc


DISTRIBUTION SCHEDULEOF EQUITY SECURITIES & PROPERTIES

No. Name of Shareholder No. of Shares Held % of Issued Capital

12. Cartaban Nominees (Asing) Sdn Bhd 9,194,290 2.24- State Street Australia Fund ATB1 for Platinum Asia Fund

13. CIMB Group Nominees (Tempatan) Sdn Bhd 7,500,000 1.82- Pledged Securities Account for Central Plus (M) Sdn Bhd (25000 JTRK)

14. Amanah Raya Nominees (Tempatan) Sdn Bhd 7,348,040 1.79- Amanah Saham Wawasan 2020

15. Jalur Cahaya Sdn Bhd 6,826,500 1.66

16. HSBC Nominees (Tempatan) Sdn Bhd 6,680,000 1.62- HSBC (M) Trustee Bhd for CMS Premier Fund (4959)

17. AMMB Nominees (Tempatan) Sdn Bhd 6,323,360 1.54- CMS Dresdner Asset Management Sdn Bhd for Tenaga Nasional BerhadRetirement Benefit Trust Fund (CMS-TNB)

18. HSBC Nominees (Tempatan) Sdn Bhd 6,300,000 1.53- Pledged Securities Account for Central Plus (M) Sdn Bhd (203-041884-089)

19. Amanah Raya Nominees (Tempatan) Sdn Bhd 5,777,200 1.41- Amanah Saham Malaysia

20. Amanah Raya Nominees (Tempatan) Sdn Bhd 3,897,640 0.95- Skim Amanah Saham Bumiputera

21. Citigroup Nominees (Asing) Sdn Bhd 3,372,900 0.82- UBS AG

22. CIMB Group Nominees (Tempatan) Sdn Bhd 2,800,000 0.68- Pledged Securities Account for Central Plus (M) Sdn Bhd (17152 JTRK)

23. Takaful Nasional Sdn Berhad 2,768,500 0.67

24. Citigroup Nominees (Tempatan) Sdn Bhd 2,759,890 0.67- Uni.Asia Life Assurance Berhad (LIFE FUND)

25. Amanah Raya Nominees (Tempatan) Sdn Bhd 2,591,490 0.63- Kumpulan Wang Bersama

26. ABB Nominee (Tempatan) Sdn Bhd 2,221,100 0.54- Pledged Securities Account for Central Plus (M) Sdn Bhd (Jln Bunus)

27. Lim See Boon 2,143,800 0.52

28. Permodalan Nasional Berhad 1,990,500 0.48

29. Mayban Nominees (Tempatan) Sdn Bhd 1,944,610 0.47- Mayban Trustees Berhad for Public Ittikal Fund (N14011970240)

30. Malaysia National Insurance Berhad 1,739,710 0.42

Total 315,275,449 76.67


DISTRIBUTION SCHEDULE OF EQUITY SECURITIES

& PROPERTIES

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

No. Of Shares Held In The CompanyNo. Name of Director Direct Interest % Indirect Interest %

1. YBhg Tan Sri Rozali Ismail 1,729,000 0.42 167,037,114 1 40.63

2. YBhg Dato’ Matlasa Hitam - - - -

3. YBhg Dato’ Ruslan Hassan 40,600 0.01 - -

4. YBhg Dato’ Ir Lee Miang Koi 89,900 0.02 - -

5. Tuan Syed Danial Syed Ariffin 28,300 0.01 - -

6. YBhg Tan Sri Dato’ Hari Narayanan Govindasamy 175,000 0.04 - -

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

8. YB Datuk Dr Rahman Ismail - - - -

9. Mr Tan Seng Lee - - - -

10. YAM Tengku Dato’ Rahimah Almarhum Sultan Mahmud - - - -

Note:1. Deemed interest by virtue of 50% equity interest each in Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd respectively.

Substantial Shareholders Based On The Register Of Substantial Shareholders (Excluding Bare Trustees)

No. Of Shares Held In The CompanyNo. Name of Substantial Shareholder Direct Interest % Indirect Interest %

1. YBhg Tan Sri Rozali Ismail 1,729,000 0.42 167,037,114 1 40.63

2. YBhg Dato’ Shaari Ismail - - 167,037,114 1 40.63

3. Central Plus (M) Sdn Bhd 36,206,387 8.81 87,512,100 2 21.29

4. Corporate Line (M) Sdn Bhd 43,318,627 10.54 - -

5. Employees Provident Fund Board 23,135,625 5.63 15,979,390 3 3.89

6. Utilico Emerging Markets Limited - - 24,493,350 2 5.96

Notes:1. Deemed interest by virtue of 50% equity interest each in Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd respectively.2. Held in various nominee name(s).3. Shares held and managed by various Portfolio Managers.


DISTRIBUTION SCHEDULEOF EQUITY SECURITIES & PROPERTIES

LIST OF PROPERTIES AT 31 DECEMBER 2006

Net Book Remaining Description & Date of Value LeaseholdLocation Acquisition Land Area (RM) Tenure (Expiry Date) Existing Use

Wisma Rozali 01/08/2005 6,476 sq.m 33,606,858 99 years 96 years Office PremisesNo. 4, Persiaran Sukan Leasehold expiring onSeksyen 13 22/01/210240100 Shah AlamSelangor Darul Ehsan

Vacant Land 14/02/1998 10,364 sq.m 7,931,345 99 years 93 years Rented outH.S.(D) 142037 Leasehold expiring on to a car parkPT 32, Seksyen 14 17/12/2099 operatorBandar Shah AlamDistrict of PetalingSelangor

Vacant Land 01/08/2005 6,476 sq.m 6,098,309 99 years 96 years NoneH.S.(D) 181354 Leasehold expiring onLot 1722, Seksyen 13 22/01/2102Bandar Shah AlamDistrict of PetalingSelangor

Vacant LandH.S.(D) 226605, PT 332 06/04/2006 691 sq.m ]H.S.(D) 226606, PT 333 06/04/2006 711 sq.m ] 1,267,188 Freehold N/A NoneH.S.(D) 226607, PT 334 06/04/2006 862 sq.m ]Mukim Pekan Subang JayaDaerah PetalingSelangor Darul Ehsan

FinancialReport

2006

CONTENTS

128 Definitions

130 Directors’ Report

137 Statement by Directors

137 Statutory Declaration

138 Report of the Auditors

139 Income Statements

140 Balance Sheets

141 Consolidated Statement of Changes in Equity

142 Statement of Changes in Equity

143 Cash Flow Statements

145 Notes to the Financial Statements

Except where the context otherwise requires, the following definitions shall apply throughout this Directors’ Report and AuditedFinancial Statements for the year ended 31 December 2006:

“ABASS” : Konsortium ABASS Sdn Bhd

“ATSB” : Arena Tekad Sdn Bhd

“BACP” : Bai’ Bithaman Ajil Commercial Papers

“BAIDS” : RM1,020,000,000 10-Year Al-Bai’ Bithaman Ajil Islamic Debt Securities primary bonds together with non-detachable secondary bonds

“BAMTN” : Bai’ Bithaman Ajil Medium Term Notes

“BBA” : Bai’ Bithaman Ajil

“BIMB” : Bank Islam Malaysia Berhad

“BPMB” : Bank Pembangunan Malaysia Berhad (formerly known as Bank Pembangunan dan Infrastruktur Malaysia Berhad)

“Bursa Securities” : Bursa Malaysia Securities Berhad

“CCOA” : Construction Cum Operation Agreement

“CGU” : Cash Generating Unit

“CIMB” : Commerce International Merchant Bankers Berhad

“CIMB Bank” : CIMB Bank Berhad (formerly known as Bumiputra-Commerce Bank Berhad)

“CPMSB” : Central Plus (M) Sdn Bhd

“Company” : Puncak Niaga Holdings Berhad

“DHI” : DHI Water • Environment • Health

“Distribution Area” : the State of Selangor, the Federal Territories of Kuala Lumpur and Putrajaya

“DSARA” : Debt Settlement And Restructuring Agreement

“DSRA” : Debt Service Reserve Account

“DSS II” : Sungai Selangor Water Supply Scheme Phase 2 Stage II - Distribution Supply System II

“EPF” : Employees Provident Fund

“ESOS” : Employees’ Share Option Scheme

“Federal Government” : Government of Malaysia

“FRS” : Financial Reporting Standards

“Group” : Puncak Niaga Holdings Berhad Group of Companies

DEFINITIONS


“HSBC” : HSBC Bank Malaysia Berhad

“JAKS-KDEB” : JAKS-KDEB Consortium Sdn Bhd

“JNA” : Junior Notes A, the 2001/2016 15-Year Redeemable Unconvertible Junior Notes issued by PNSB

“KDEB” : Kumpulan Darul Ehsan Berhad

“KHEC” : Kris Heavy Engineering & Construction Sdn Bhd

“Konajaya” : Konajaya Sdn Bhd

“MASB” : Malaysian Accounting Standards Board

“MCPs” : Al-Murabahah Commercial Papers

“MMTNs” : Al-Murabahah Medium Term Notes

“MOF” : Minister of Finance, Incorporated

“NA” : Not Applicable

“NRW” : Non Revenue Water Works

“PCCA” : Privatisation Cum Concession Agreement

“PNSB” : Puncak Niaga (M) Sdn Bhd

“PUAS” : Perbadanan Urus Air Selangor Berhad

“RCULS” : Redeemable Convertible Unsecured Loan Stocks

“RM” : Ringgit Malaysia

“RPS” : Redeemable Cumulative Preference Shares

“RUBs” : RM435,000,000 nominal value ten (10)-year Redeemable Unsecured Bonds

“RUN” : 2001/2016 15-Year Redeemable Unconvertible Junior Notes issued pursuant to the RUN issue

“Serba Tiara” : Serba Tiara Sdn Bhd

“SPA” : Sale and Purchase Agreement

“SPLASH” : Syarikat Pengeluar Air Sungai Selangor Sdn Bhd

“SSP 2” : Sungai Selangor Water Supply Scheme Phase 2, Stages I and II

“State Government” : State Government of Selangor

“SYABAS” : Syarikat Bekalan Air Selangor Sdn Bhd

“WAEP” : Weighted average exercise prices

DEFINITIONS


DIRECTORS’ REPORT

The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of theCompany for the financial year ended 31 December 2006.

PRINCIPAL ACTIVITIES

The Group is engaged in the supply and distribution of treated water to consumers in the State of Selangor and the Federal Territoriesof Kuala Lumpur and Putrajaya. The principal activities of the Company are that of investment holding.

The principal activities of the subsidiaries are disclosed in Note 22 to the financial statements.

There have been no other significant changes in the nature of the principal activities during the financial year.

RESULTS

In RM Group Company

Net profit for the financial year 372,024,854 399,460,814

Attributable to:Equity holders of the Company 331,601,953 399,460,814Minority interests 40,422,901 –

372,024,854 399,460,814

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the Statementsof Changes in Equity.

In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year were notsubstantially affected by any item, transaction or event of a material and unusual nature other than the effects arising from the following:

a PNSB had on 8 December 2006 restructured RM320,000,000 shareholders’ advances owing to the Company into a new marketablesecurity via the issuance of RM435,000,000 nominal value of RUBs to the Company.

Following the above, the Company had subsequently on 19 December 2006 disposed of the RUBs to ATSB for a total considerationof RM418,969,134, satisfied via a cash consideration of RM132,719,134 and the balance being satisfied via the issuance of286,250,000 preference shares with par value of RM0.01 in ATSB at an issue price of RM1.00 each. The Company recognised a gainof RM98,969,134. The disposal of the RUBs to ATSB effectively resulted in the Group raising additional borrowings ofRM418,969,134 on initial recognition, which will be subsequently measured at amortised cost using the effective interest method.Further details are given in Note 41 to the financial statements.

b On 19 December 2006, the Company disposed of 17.5% of the ordinary shares in PNSB to ATSB for a total cash consideration ofRM306,250,000.

Pursuant to the divestment, the Company agreed to sell and ATSB agreed to acquire the PNSB shares, free of all claims, charges,liens, encumbrances and equities whatsoever together with all rights attached thereto and all dividends, rights and distributionsdeclared, paid or made in respect thereof.

Following the above, the Group and the Company recognised a gain on disposal of RM205,773,273 and RM296,954,491 respectively.

c Changes in accounting policy due to the adoption FRS 2 - Share-Based Payment which has resulted in a decrease in the Group’sprofit for the year by RM1,511,000 as disclosed in Note 5(a) to the financial statements.

DIRECTORS’ REPORTFor The Year Ended 31 December 2006


DIVIDENDS

The amount of dividends paid by the Company since 31 December 2005 were as follows:

In respect of the financial year ended 31 December 2005 as proposed in the Directors’ Report of that year:

RM

Final dividend of 6 sen per share less tax at 28% on 449,548,102 ordinary shares,declared on 5 June 2006 and paid on 8 August 2006. 19,420,478

At the forthcoming Tenth Annual General Meeting of the Company, a final tax exempt dividend in respect of the financial year ended31 December 2006, of 8 sen per share will be proposed for shareholders’ approval. The financial statements of the current financialyear do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as anappropriation of retained earnings in the financial year ending 31 December 2007.

SHARE CAPITAL

Ordinary Shares Issued for Cash

During the financial year, the Company increased its issued and fully paid-up ordinary share capital from RM463,180,000 toRM587,346,993 by way of:

i issuance of 18,240,000 ordinary shares of RM1.00 each for cash pursuant to the Company’s ESOS at exercise prices of between RM2.04and RM3.27 per ordinary share. These new ordinary shares issued during the financial year rank pari-passu in all respects with theexisting ordinary shares of the Company except that they shall not be entitled to the dividend declared and paid prior to the issuance.

ii issuance of 105,926,993 ordinary shares of RM1.00 at RM2.62 per share arising from the conversion of 105,926,993 units ofWarrants (Expiry date: 20 November 2006). These shares rank pari-passu in all respects with the existing ordinary shares of theCompany except that they shall not be entitled to the dividend declared and paid prior to the conversion.

Treasury Shares

During the financial year ended 31 December 2006, the Company had purchased a total of 12,692,100 ordinary shares of its issuedand fully paid-up share capital from the open market for a total consideration of RM32,916,156 at an average cost of RM2.59 pershare. The acquisition of shares was financed by internally generated funds.

During the financial year ended 31 December 2006, the Company sold 6,165,300 treasury shares in the open market for a totalconsideration of RM18,501,934 at an average re-sale price of RM3.00 per share.

Of the total 587,346,993 (2005: 463,180,000) issued and paid-up ordinary shares, 12,335,600 (2005: 5,808,800) are held as treasuryshares by the Company. The number of outstanding ordinary shares in issue and fully paid is therefore 575,011,393 (2005: 457,371,200)ordinary shares of RM1.00 each.

Subsequent to the financial year ended 31 December 2006, the Company sold all the remaining 12,335,600 treasury shares in theopen market for a total consideration of RM39,364,456 at an average re-sale price of RM3.19 per share.





DIRECTORS

The names of the Directors of the Company in office since the date of the last report and at the date of this report are:

Tan Sri Rozali bin IsmailDato’ Matlasa bin HitamDato’ Ruslan bin HassanDato’ Ir Lee Miang KoiSyed Danial bin Syed AriffinTan Sri Dato’ Hari Narayanan a/l GovindasamyTan Sri Dato’ Seri Dr Ting Chew PehDatuk Dr Rahman bin IsmailTan Seng LeeTengku Dato’ Rahimah binti Almarhum Sultan Mahmud (appointed on 1 August 2006)

In accordance with Articles 98 and 99 of the Company’s Articles of Association, Dato’ Ruslan bin Hassan, Tan Sri Dato’ Seri Dr TingChew Peh and Syed Danial bin Syed Ariffin retire from office by rotation at the forthcoming Tenth Annual General Meeting of theCompany and, being eligible and upon the recommendation of the Nomination Committee, offer themselves for re-election.

In accordance with Article 103 of the Company’s Articles of Association, Tengku Dato’ Rahimah binti Almarhum Sultan Mahmud whowas appointed since the last Annual General Meeting of the Company, retires from office at the forthcoming Tenth Annual GeneralMeeting and, being eligible and upon the recommendation of the Nomination Committee, offer herself for re-election.

DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Companywas a party, whereby the Directors might acquire benefits by means of the acquisition of shares in the Company or any other bodycorporate, other than those arising from the share options granted under the ESOS.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefitsincluded in the aggregate amount of emoluments received or due and receivable by the Directors as shown in Note 14 to the financialstatements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a relatedcorporation with any Director or with a firm of which the Director is a member, or with a company in which the Director has asubstantial financial interest, except for YBhg Tan Sri Rozali bin Ismail who has deemed interests in a related party, RZ ManagementServices Sdn Bhd, which provides corporate secretarial services to the Group.

DIRECTORS’ INTERESTS

According to the register of Directors’ shareholdings, the interests of Directors in office at the end of the financial year in shares,notes, warrants and options in the Company and its related corporations during the financial year were as follows:

Number of Ordinary Shares of RM1.00 EachAt Bought/ Sold/ At

1.1.2006 Transfer Transfer 31.12.2006

Direct interests in the Company:Tan Sri Rozali bin Ismail 947,000 1,523,000 – 2,470,000Dato’ Ruslan bin Hassan 145,000 967,000 (677,000) 435,000Dato’ Ir Lee Miang Koi 144,000 340,000 (88,000) 396,000Syed Danial bin Syed Ariffin 20,000 218,000 (178,000) 60,000Tan Sri Dato’ Hari Narayanan a/l Govindasamy 210,000 40,000 – 250,000

Indirect interests in the Company:Tan Sri Rozali bin Ismail 190,051,000 180,384,648 (131,811,199) 238,624,449 *Dato’ Ir Lee Miang Koi 114,700 – (94,700) 20,000 ^^Syed Danial bin Syed Ariffin – 80,000 (61,000) 19,000 ^^



DIRECTORS’ INTERESTS cont’dNumber of Share Options over Ordinary Shares of RM1.00 each

At At1.1.2006 Granted Exercised Lapsed 31.12.2006

Direct interests in the Company:Tan Sri Rozali bin Ismail 1,523,000 – (1,523,000) – –Dato’ Ruslan bin Hassan 967,000 – (967,000) – –Dato’ Ir Lee Miang Koi 340,000 – (340,000) – –Syed Danial bin Syed Ariffin 298,000 – (298,000) – –

2001/2016 15-Year RUN in RM At At

1.1.2006 Bought Sold 31.12.2006

Direct interests in the Company:Dato’ Ruslan bin Hassan 708,125 – – 708,125Dato’ Ir Lee Miang Koi 39,900 – – 39,900

Indirect interests in the Company:Tan Sri Rozali bin Ismail 5,145,087 – – 5,145,087 ^

Number of WarrantsAt At

1.1.2006 Bought Sold Converted 31.12.2006

Direct interests in the Company:Dato’ Ruslan bin Hassan 21,600 – (21,600) – –Dato’ Ir Lee Miang Koi 18,000 – (18,000) – –Tan Sri Dato’ Hari Narayanan a/l Govindasamy 52,500 – (12,500) (40,000) –

Indirect interest in the Company:Tan Sri Rozali bin Ismail 48,573,449 – – (48,573,449) –

* Deemed interest by virtue of 50% shareholding interest in both CPMSB, a substantial corporate shareholder, and in Corporate Line (M) Sdn Bhd, a substantial corporateshareholder of the Company.

^ Deemed interest by virtue of 50% shareholding interest in Corporate Line (M) Sdn Bhd.^^ Held by nominee(s).

None of the other Directors in office at the end of the financial year had any interest in shares, notes, warrants and options in theCompany or its related corporations during the financial year.

ESOS

The ESOS of the Company, governed by the ESOS Bye-Laws, was principally approved by the shareholders of the Company at theExtraordinary General Meeting of the Company held on 26 June 2001 and became effective following the implementation by theCompany on 25 February 2002. The ESOS shall be in force 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 shareswhich may be made available under the ESOS shall not exceed 10% of the total issued and paid-up ordinary shares of theCompany at the point in time when an offer is made.

b Eligible employees are those who have been in service with the Group for a continuous period of at least one (1) year includingfull-time Executive Directors who are involved in the day-to-day management and on the payroll of the Group.

ESOS cont’d

c The ESOS is administered by the Options Committee which comprise the following Executive Directors of the Company:

i Tan Sri Rozali bin Ismailii Dato’ Matlasa bin Hitamiii Syed Danial bin Syed Ariffiniv Tan Seng Lee

d The share options granted under the ESOS may be exercised by the grantee by notice in writing to the Company during the periodcommencing from the date of offer and before the expiry of the ESOS on 24 February 2007.

e The exercise price of the share options at which the eligible employees are entitled to subscribe for the ordinary shares of RM1.00each in the Company under the ESOS is the weighted average market price of the shares of the Company as quoted in the dailyofficial list issued by the Bursa Securities for the five (5) market days immediately preceding the respective dates of offer subject toa 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 share options have been granted have no right to participate, by virtue of the share 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 ofthe Company except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the entitlementdate of which is prior to the date of allotment of the said new ordinary shares.

h 1,219,000 units of share options which were not exercised by the expiry date, 24 February 2007, had lapsed and become void andaccordingly, ceased to be exercisable thereafter.

The movements of the share options over the ordinary shares of RM1.00 each of the Company granted under the ESOS during thefinancial year are as follows:

Date of Exercise price Number of Share Options over Ordinary Shares of RM1.00 Eachshare option per share At At

Tranche granted option 1.1.2006 Granted Exercised Lapsed * 31.12.2006RM

1 26.2.2002 2.37 9,177,000 – (8,771,000) (163,000) 243,0002 26.8.2002 2.47 430,000 – (430,000) – –3 26.2.2003 2.13 638,000 – (514,000) (98,000) 26,0004 26.8.2003 2.71 623,000 – (623,000) – –5 26.2.2004 3.27 785,000 – (30,000) – 755,0006 26.8.2004 2.04 414,000 – (414,000) – –7 26.2.2005 2.56 2,733,000 – (2,332,000) (365,000) 36,0008 26.8.2005 2.40 1,351,000 – (1,186,000) (85,000) 80,0009 26.2.2006 2.33 – 2,307,000 (2,131,000) (169,000) 7,00010 26.8.2006 2.28 – 1,889,000 (1,809,000) (8,000) 72,000

16,151,000 4,196,000 (18,240,000) (888,000) 1,219,000

* Due to resignation or offers not taken up





ESOS cont’d

The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose the full list of shareoption holders and their holdings, except for eligible employees (excluding Executive Directors) with share option allocation of300,000 share options and above, which are as follows:

Number of Share Options over Ordinary Shares of RM1.00 EachAt At

Name of eligible employees 1.1.2006 Granted Exercised Lapsed 31.12.2006

Nik Nazman bin Husin 200,000 – (200,000) – –Loh Kit Mun 140,000 – (140,000) – –Ramalingam a/l K.R. Arumugam 120,000 – (120,000) – –Tan Bee Lian 118,000 – (118,000) – –Sonari bin Solor 140,000 – (140,000) – –Ng Wah Tar 141,000 25,000 (166,000) – –Chan Siew Meei 202,000 – (202,000) – –Sanusi bin Sulieman 340,000 – (340,000) – –

HOLDING COMPANY

The Company has no corporate shareholder being regarded by the Directors of the Company as the ultimate holding company nor asthe holding company.

OTHER STATUTORY INFORMATION

a Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps:

i to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance fordoubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had beenmade for doubtful debts; and

ii to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinarycourse of business had been written down to an amount which they might be expected so to realise.

b At the date of this report, the Directors are not aware of any circumstances which would render:

i the amount written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of theGroup and of the Company inadequate to any substantial extent; and

ii the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

c At the date of this report, the Directors are not aware of any circumstances which have arisen which would render adherence tothe existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

d At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or financialstatements of the Group and of the Company which would render any amount stated in the financial statements misleading.

OTHER STATUTORY INFORMATION cont’d

e As at the date of this report, there does not exist:

i any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which securesthe liabilities of any other person; or

ii any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

f In the opinion of the Directors:

i no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve (12)months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet theirobligations when they fall due; and

ii no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial yearand the date of this report which is likely to affect substantially the results of the operations of the Group or of the Companyfor the financial year in which this report is made.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

Significant events during the financial year are disclosed in Note 53 to the financial statements.

SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

Significant events subsequent to the balance sheet date are disclosed in Note 54 to the financial statements.

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 23 April 2007.

TAN SRI ROZALI BIN ISMAIL DATO’ MATLASA BIN HITAMDirector Director



We, TAN SRI ROZALI BIN ISMAIL and DATO’ MATLASA BIN HITAM, being two of the Directors of PUNCAK NIAGA HOLDINGSBERHAD, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 139 to 211 aredrawn up in accordance with applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entitiesand the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of theCompany as at 31 December 2006 and of the results and the cash flows of the Group and of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 23 April 2007.

TAN SRI ROZALI BIN ISMAIL DATO’ MATLASA BIN HITAMDirector Director

I, TAN SENG LEE, being the Director primarily responsible for the financial management of PUNCAK NIAGA HOLDINGS BERHAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 139 to 211 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 StatutoryDeclarations Act, 1960.

Subscribed and solemnly declaredby the abovenamed TAN SENG LEEat Kuala Lumpur in the Federal Territoryon 23 April 2007. TAN SENG LEE

Director

Before me,

SOH AH KAU(No. W315)Commissioner for Oaths

STATEMENT BY DIRECTORSPursuant To Section 169(15) Of The Companies Act, 1965

STATUTORY DECLARATIONPursuant To Section 169(16) Of The Companies Act, 1965


We have audited the financial statements set out on pages 139 to 211. These financial statements are the responsibility of theCompany’s Directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion toyou, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibilityto any other person for the content of this report.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating theoverall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

a the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicableMASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of:

i the financial position of the Group and of the Company as at 31 December 2006 and of the results and the cash flows of theGroup and of the Company for the year then ended; and

ii the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

b the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiaries of whichwe have acted as auditors have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and the auditors’ reports thereon of the subsidiaries of which we have not acted asauditors, as indicated in Note 22 to the financial statements, being financial statements that have been included in the consolidatedfinancial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of theCompany 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 subsidiaries were not subject to any qualification material to the consolidatedfinancial statements and did not include any comment required to be made under Section 174(3) of the Act.

ERNST & YOUNG TAN SOO YAN AF: 0039 No.1307/03/08(J/PH) Chartered Accountants Partner

Kuala Lumpur, Malaysia 23 April 2007

REPORT OF THE AUDITORSTo The Members of Puncak Niaga Holdings Berhad (Incorporated in Malaysia)


Group Company In RM Note 2006 2005 2006 2005

Revenue 10 1,428,123,754 1,144,944,341 4,000,000 27,196,000Other income 11(a) 319,765,111 95,236,421 460,559,581 46,950,085Raw materials and consumables (405,348,502) (317,665,683) – –Construction contract expenses (159,166,285) (72,507,284) – –Staff cost 13 (180,460,785) (126,016,569) – –Other expenses 11(b) (122,708,236) (140,055,524) (7,793,477) (4,061,061)Depreciation and amortisation expenses 11(c) (317,683,283) (245,445,244) (224,212) (88,045)

Profit from operations 562,521,774 338,490,458 456,541,892 69,996,979Finance cost 15 (195,378,619) (143,550,090) (53,031,390) (46,903,881)Share of results- Associates 23 (105,945) (64,742) – –- Jointly controlled entity 24 238,301 1,969,777 – –

Profit before taxation 11 367,275,511 196,845,403 403,510,502 23,093,098Taxation 16 4,749,343 (58,307,844) (4,049,688) (7,627,494)

Net profit for the financial year 372,024,854 138,537,559 399,460,814 15,465,604

Attributable to:Equity holders of the Company 331,601,953 99,259,577 399,460,814 15,465,604Minority interest 40,422,901 39,277,982 – –

372,024,854 138,537,559 399,460,814 15,465,604

(restated)Earnings per share attributable to equity holders of the Company:

- basic 17(a) 101.51 sen 30.80 sen- diluted 17(b) 101.14 sen 30.48 sen

Net dividends per ordinary share in respect of the year 18 4.32 sen 3.60 sen 4.32 sen 3.60 sen

The accompanying notes form an integral part of the financial statements.

INCOME STATEMENTSFor The Year Ended 31 December 2006



(restated) (restated)

NON-CURRENT ASSETSProperty, plant and equipment 19 1,495,482,676 1,424,975,402 385,835 –Prepaid land lease payments 20 20,127,962 20,355,663 7,931,345 8,019,390Project development expenditure 21 1,432,067,597 836,138,951 – –Investment in subsidiaries 22 – – 132,315,555 139,923,980Investment in associates 23 – 235,258 – –Interest in jointly controlled entity 24 9,601,804 7,773,914 9,363,503 7,773,914Junior Notes A 25 – – 264,563,108 279,896,378 Advances to a subsidiary 26 – – 21,368,807 367,368,807 RCULS 27 – – 135,000,000 –Preference Shares 28 286,250,000 – 286,250,000 –Debt service reserve account 29 309,607,960 272,209,530 – –Long-term receivables 30 480,916,000 506,016,000 – –Goodwill on consolidation 31 185,811,923 185,811,923 – –

4,219,865,922 3,253,516,641 857,178,153 802,982,469

CURRENT ASSETSOther investments 32 503,261,490 80,910,092 420,000,000 –Junior Notes A 25 – – 54,687,500 –Inventories 33 12,999,020 15,025,612 – –Trade and other receivables 34 500,933,996 290,558,795 28,716,833 61,754,131Tax recoverable 1,305,924 1,834,307 693,894 725,563Deposits, cash and bank balances 37 1,204,228,314 1,227,244,998 302,486,847 5,326,999

2,222,728,744 1,615,573,804 806,585,074 67,806,693

TOTAL ASSETS 6,442,594,666 4,869,090,445 1,663,763,227 870,789,162

EQUITY AND LIABILITIESEquity attributable to equity holders of the CompanyShare capital 38 587,346,993 463,180,000 587,346,993 463,180,000Share premium 38 286,923,902 86,109,038 286,923,902 86,109,038Treasury shares 38 (31,986,769) (15,057,236) (31,986,769) (15,057,236)Reserve on consolidation – 92,322 – –Equity compensation reserve 38 26,664 – 26,664 –Retained earnings 39 1,059,800,521 740,323,962 398,429,828 18,361,730

1,902,111,311 1,274,648,086 1,240,740,618 552,593,532Minority interests 174,177,733 40,477,983 – –

Total equity 2,076,289,044 1,315,126,069 1,240,740,618 552,593,532

NON-CURRENT LIABILITIESHire-purchase payables 40 10,440,914 6,259,735 – –Borrowings 41 2,667,766,255 2,369,519,060 264,563,108 279,896,378Long-term payables 42 16,324,334 17,956,767 – –Deferred taxation 43 318,744,677 327,229,618 2,005,989 –Government grant 44 249,590,313 3,102,907 – –

3,262,866,493 2,724,068,087 266,569,097 279,896,378

CURRENT LIABILITIESTrade and other payables 45 857,343,711 782,396,378 101,436,491 38,299,252Hire-purchase payables 40 3,959,965 2,424,268 – –Tax payable 1,213,735 – 329,521 –Borrowings 41 240,921,718 45,075,643 54,687,500 –

1,103,439,129 829,896,289 156,453,512 38,299,252

Total liabilities 4,366,305,622 3,553,964,376 423,022,609 318,195,630

TOTAL EQUITY AND LIABILITIES 6,442,594,666 4,869,090,445 1,663,763,227 870,789,162


BALANCE SHEETSAs At 31 December 2006


Attributable to Equity Holders of the Company

Non-distributable Distributable

Equity

Share Share Treasury Reserve on Compensation Retained Minority Total

In RM Note Capital Premium Shares Consolidation Reserves Earnings Interests Equity

At 1 January 2005 459,935,000 81,448,308 – 92,322 – 657,666,829 – 1,199,142,459

Issue of shares

- Exercise of ESOS 38 1,745,000 2,230,730 – – – – – 3,975,730

- Conversion

of warrants 38 1,500,000 2,430,000 – – – – – 3,930,000

Purchase of

treasury shares 38 – – (15,057,236) – – – – (15,057,236)

Investment in

subsidiary – – – – – – 1,200,001 1,200,001

Net profit for the

financial year – – – – – 99,259,577 39,277,982 138,537,559

Dividends 18 – – – – – (16,602,444) – (16,602,444)

At 31 December 2005 463,180,000 86,109,038 (15,057,236) 92,322 – 740,323,962 40,477,983 1,315,126,069

At 1 January 2006 463,180,000 86,109,038 (15,057,236) 92,322 – 740,323,962 40,477,983 1,315,126,069

Effects of adopting

FRS 3 – – – (92,322) – 92,322 – –

463,180,000 86,109,038 (15,057,236) – – 740,416,284 40,477,983 1,315,126,069

Acquisition of

subsidiary 22 – – – – – – 30,000 30,000

Partial disposal of

investment in

subsidiary 22 – – – – – 7,175,000 93,195,643 100,370,643

Disposal of investment

in associates 23 – – – – – – 51,206 51,206

Issue of shares

- Exercise of ESOS 38 18,240,000 25,241,250 – – – – – 43,481,250

- Conversion

of warrants 38 105,926,993 171,601,729 – – – – – 277,528,722

Share options granted

under ESOS 5(a) – – – – 1,511,000 – – 1,511,000

Options exercised by

employees/lapsed – 1,456,574 – – (1,484,336) 27,762 – –

Purchase of

treasury shares 38 – – (32,916,156) – – – – (32,916,156)

Sale of treasury shares 38 – 2,515,311 15,986,623 – – – – 18,501,934

Net profit for the

financial year – – – – – 331,601,953 40,422,901 372,024,854

Dividends 18 – – – – – (19,420,478) – (19,420,478)

At 31 December 2006 587,346,993 286,923,902 (31,986,769) – 26,664 1,059,800,521 174,177,733 2,076,289,044


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For The Year Ended 31 December 2006


Non-Distributable DistributableEquity

Share Share Treasury Compensation Retained TotalIn RM Note Capital Premium Shares Reserves Earnings Equity

At 1 January 2005 459,935,000 81,448,308 – – 19,498,570 560,881,878Issue of shares- Exercise of ESOS 38 1,745,000 2,230,730 – – – 3,975,730- Conversion of warrants 38 1,500,000 2,430,000 – – – 3,930,000Purchase of treasury shares 38 – – (15,057,236) – – (15,057,236)Net profit for the financial year – – – – 15,465,604 15,465,604Dividends – – – – (16,602,444) (16,602,444)

At 31 December 2005 463,180,000 86,109,038 (15,057,236) – 18,361,730 552,593,532

At 1 January 2006 463,180,000 86,109,038 (15,057,236) – 18,361,730 552,593,532Issue of shares- Exercise of ESOS 38 18,240,000 25,241,250 – – – 43,481,250- Conversion of warrants 38 105,926,993 171,601,729 – – – 277,528,722Share options granted under ESOS 5(a) – – – 1,511,000 – 1,511,000

Options exercised byemployees/lapsed – 1,456,574 – (1,484,336) 27,762 –

Purchase of treasury shares 38 – – (32,916,156) – – (32,916,156)Sale of treasury shares 38 – 2,515,311 15,986,623 – – 18,501,934Net profit for the financial year – – – – 399,460,814 399,460,814Dividends 18 – – – – (19,420,478) (19,420,478)

At 31 December 2006 587,346,993 286,923,902 (31,986,769) 26,664 398,429,828 1,240,740,618


STATEMENT OF CHANGES IN EQUITYFor The Year Ended 31 December 2006



CASH FLOWS FROM OPERATING ACTIVITIESReceipts from customers 1,247,105,151 1,389,017,504 – –Other income 63,948,422 59,204,253 55,320 25,000Payments to water treatment operators (697,473,559) (461,238,708) – –Dividends received – – 2,880,000 19,494,720Payments for operating expenses (562,927,050) (516,237,456) (1,974,509) (2,142,087)Payments to contractors (74,804,292) (32,634,382) – –

Net cash (used in)/generated from operations 46 (24,151,328) 438,111,211 960,811 17,377,633

Net deposits received 24,950,113 36,079,177 – 10,000Interest paid (152,612,417) (97,303,022) (13,634,418) (13,634,418)Tax (paid)/refund (2,032,319) (9,868,964) (562,509) 271,017Interest received 44,555,847 11,389,009 14,278,209 14,463,038

(85,138,776) (59,703,800) 81,282 1,109,637

Net cash (outflow)/inflow from operating activities (109,290,104) 378,407,411 1,042,093 18,487,270

CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of subsidiaries 22 30,000 5,886,818 (70,000) –Subcription of RCULS 27 – – (80,000,000) –Proceeds from partial disposal of subsidiary 22 306,143,916 – 306,143,916 –Proceeds from disposal of associates 23 151,000 – 1,000 –Net proceeds from disposal of RUBs 129,044,692 – 132,719,134 –Purchase of property, plant and equipment (116,284,924) (146,079,842) (522,002) –Project development expenditure (331,551,729) (13,315,567) – –Net advances from/(to) subsidiaries – – 88,482,702 (22,367,101)Advance to jointly controlled entity (1,589,589) (6,749,886) (1,589,589) (6,749,886)Purchase of unquoted investment (420,000,000) (80,000,000) (420,000,000) –Proceeds from disposal of property, plant and equipment 661,399 436,500 – –

Net cash (outflow)/inflow from investing activities (433,395,235) (239,821,977) 25,165,161 (29,116,987)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings 88,971,375 1,124,306,777 – –Proceeds from government grant 44 246,897,093 3,102,907 – –Dividend paid (19,420,478) (16,602,444) (19,420,478) (16,602,444)Exercise of share options pursuant to ESOS 38 43,481,250 3,975,730 43,481,250 3,975,730Conversion of warrants 38 277,528,722 3,930,000 277,528,722 3,930,000Purchase of treasury shares 38 (32,916,156) (15,057,236) (32,916,156) (15,057,236)Sale of treasury shares 2,279,256 – 2,279,256 –Repayment of borrowings (45,075,643) (239,502,306) – –Repayment of hire-purchase payables (4,678,334) (2,556,609) – –

Net cash inflow/(outflow) from financing activities 557,067,085 861,596,819 270,952,594 (23,753,950)

NET CHANGE IN CASH AND CASH EQUIVALENTScarried forward 14,381,746 1,000,182,253 297,159,848 (34,383,667)

CASH FLOW STATEMENTSFor The Year Ended 31 December 2006


CASH FLOW STATEMENTSFor The Year Ended 31 December 2006



NET CHANGE IN CASH AND CASH EQUIVALENTSbrought forward 14,381,746 1,000,182,253 297,159,848 (34,383,667)

CASH AND CASH EQUIVALENTS AT BEGINNINGOF FINANCIAL YEAR 1,227,244,998 227,062,745 5,326,999 39,710,666

Transfer to debt service reserve account 29 (37,398,430) – – –Designated account for repayment of DSS II Term Loan 37 – (11,723,004) – –Deposits held in trust 37 (63,982,664) (30,079,525) – –Deposits for Standby Letters of Credit and Ad-hoc Bank Guarantees 37 – (14,026,431) – –

CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 1,140,245,650 1,171,416,038 302,486,847 5,326,999

Cash and cash equivalents comprise:Deposits with licensed banks 1,133,233,358 1,094,503,919 299,100,000 5,000,000Less: Deposits held in trust 37 (63,982,664) (30,079,525) – –

Deposits for Standby Letters of Credit and Ad-hoc Bank Guarantees 37 – (14,026,431) – –

1,069,250,694 1,050,397,963 299,100,000 5,000,000

Cash and bank balances 70,994,956 132,741,079 3,386,847 326,999Less: Designated account for repayment of DSS II Term Loan 37 – (11,723,004) – –

1,140,245,650 1,171,416,038 302,486,847 5,326,999


1 CORPORATE INFORMATION

The Group is engaged in the supply and distribution of treated water to consumers in the State of Selangor and the FederalTerritories of Kuala Lumpur and Putrajaya. The principal activities of the Company are that of investment holding.

The principal activities of the subsidiaries are disclosed in Note 22 to the financial statements.

There have been no other significant changes in the nature of the principal activities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board of theBursa Securities. The registered office of the Company is as follows:

10th Floor, Wisma RozaliNo. 4, Persiaran Sukan, Seksyen 1340100 Shah Alam, Selangor Darul Ehsan

The Company has no corporate shareholder being regarded by the Directors of the Company as the ultimate holding company noras the holding company.

The number of employees (including Executive Directors) in the Group and in the Company at the end of the financial year were3,972 (2005: 3,355) and Nil (2005: Nil) respectively.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on23 April 2007.

2 FINANCIAL INSTRUMENTS

a 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 riskand cash flow risk. The Group’s overall financial risk management objective is to ensure that the Group creates value for itsshareholders. The Group manages the unpredictability of financial markets by securing most of its borrowings on fixedinterest rates. Finance risk management is carried out through risk reviews, internal control systems, insurance programmesand adherence to Group financial risk management policies. The Board regularly reviews these risks and approves the riskmanagement policies, which covers the management of these risks.

b Interest Rate Risk

As at 31 December 2006, 100% (2005: 99%) of the Group’s borrowings carry fixed interest rates. The Group’s income andoperating cash flows are therefore substantially independent of changes in market interest rates.

c Market Risk

For key product and/or service purchases, the Group establishes floating and fixed priced levels that the Group considers acceptable.

d Credit Risk

Credit risk arises when sales are made on deferred credit terms.

The Group manages its credit risk by establishing credit controls with the view to ensuring that overdue debts are within anacceptable level.

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any majorconcentration of credit risk related to any financial instrument, except as disclosed in Note 30 and Note 34 to the financialstatements.

NOTES TO THE FINANCIAL STATEMENTS

31 December 2006


2 FINANCIAL INSTRUMENTS cont’d

e Liquidity and Cash Flow Risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amountof committed credit facilities and the ability to close out market positions. Due to the capital intensive and project based natureof the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed credit lines available.

3 AWARD OF CONCESSIONS

a PNSB was awarded the following concessions by the State Government:

i under the PCCA dated 22 September 1994, to take over, operate, maintain, manage, rehabilitate and refurbish existingwater treatment plants located in Selangor and Wilayah Persekutuan of Kuala Lumpur from the date of the PCCA to 31 December 2020;

ii under the CCOA dated 22 March 1995, to design, construct, operate, maintain and manage the new water treatmentfacilities, namely SSP 2 from the date of the CCOA to 31 December 2020; and

iii On 17 January 1998, PNSB was given a right by the Federal Government to develop a water treatment plant and itsrelated 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. TheConcession Agreement in relation to this water treatment plant for a period of 30 years ending 17 July 2028 was finalisedand executed with the State Government on 31 December 2004 (“Wangsa Maju WTP Concession Agreement”).

On 31 December 2004, PNSB executed the following agreements in relation to the privatisation of the water supply services inthe State of Selangor and the Federal Territories of Kuala Lumpur and Putrajaya:

i Novation Agreement to the PCCA and the CCOA between the State Government, PNSB and SYABAS, whereby SYABASshall assume the State Government’s obligations under the PCCA and CCOA in relation to the following, with effect from1 January 2005:

- purchase and payment of treated water to PNSB;

- the quality of treated water; and

- all operational matters relating to such purchase, payment and quality of treated water.

ii Novation Agreement to the Wangsa Maju WTP Concession Agreement between the State Government, PNSB and SYABAS,whereby SYABAS shall assume the State Government’s obligations under the Wangsa Maju WTP Concession Agreement inrelation to the following with effect from 1 January 2005:

- purchase and payment of treated water to PNSB;

- the quality of treated water; and

- all operational matters relating to such purchase, payment and quality of treated water.

iii Supplemental Agreement (in relation to the PCCA dated 22 September 1994) between the State Government and PNSB.PNSB agrees to a two percent (2%) reduction in the amounts outstanding and owing to PNSB under the PCCA as at 30June 2004. PNSB further agrees to an eight percent (8%) reduction, with effect from 1 July 2004 in the monthly billingsto the State Government under the PCCA.

In addition, PNSB shall be responsible for the management and operation of the Klang Gates, Tasik Subang and SungaiLangat Dams.

NOTES TO THE FINANCIAL STATEMENTS31 December 2006


3 AWARD OF CONCESSIONS cont’d

a iv Supplemental Agreement (in relation to the CCOA dated 22 March 1995) between the State Government and PNSB. PNSBagrees to a two percent (2%) reduction in the amounts outstanding and owing to PNSB under the CCOA as at 30 June2004. PNSB further agrees to an eight percent (8%) reduction, with effect from 1 July 2004 in the monthly billings to theState Government under the CCOA.

b On 15 December 2004, SYABAS executed a Concession Agreement with the Federal Government and the State Government inrelation to the privatisation of the water supply services in the State of Selangor and the Federal Territories of Kuala Lumpurand Putrajaya. SYABAS is granted the right and authority by the Federal Government and the State Government to undertakethe following:

i the supply and distribution of treated water to consumers in the Distribution Area;

ii the purchase of treated water from the three (3) water treatment operators, namely PNSB, SPLASH and ABASS;

iii the taking over, upgrading, management, maintenance and protection of all water supply facilities within the Distribution Area;

iv the design, construction and completion of new water supply facilities works and the operation, maintenance andprotection of the same; and

v the right to demand, collect and retain tariff for the supply and distribution of treated water and charges for the sale,rental or installation of water supply facilities, as gazetted by the Federal Government or the State Government.

This Concession Agreement took effect on 1 January 2005, for a period of 30 years ending 31 December 2034.

4 BASIS OF PREPARATION

The financial statements of the Group and of the Company have been prepared under the historical cost convention unlessotherwise indicated. The financial statements are presented in RM and all values are rounded to the nearest ringgit except whenotherwise stated.

a Statement of compliance

The financial statements comply with the provisions of the Companies Act, 1965 and applicable MASB Approved AccountingStandards in Malaysia for Entities Other Than Private Entities. At the beginning of the current financial year, the Group andthe Company had adopted new and revised FRSs which are mandatory for financial periods beginning on or after 1 January2006 as described in Note 5.

b Basis of Consolidation

i Subsidiaries

The consolidated financial statements include the financial statements of the Company and all its subsidiaries.Subsidiaries are those entities in which the Group has power to exercise control over the financial and operating policiesso as to obtain benefits from their activities. The existence and effect of potential voting rights that are currentlyexercisable or convertible are considered when assessing whether the Group has such power over another entity.

Financial statements of the subsidiaries are consolidated using the acquisition method of accounting or merger method ofaccounting.


31 December 2006


4 BASIS OF PREPARATION cont’d

b Basis of Consolidation cont’d

i Subsidiaries cont’d

Acquisition Method

Under the acquisition method of accounting, the results of subsidiaries are consolidated from the date of acquisition,being the date on which the Group obtains control, and continue to be consolidated until the date that such controlceases. The acquisition method of accounting involves allocating the cost of the acquisition to the fair value of the assetsacquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measuredas the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equityinstruments issued, plus any costs directly attributable to the acquisition.

Any excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities andcontingent liabilities represent goodwill.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities overthe cost of acquisition is recognised immediately in income statements.

Intra-group transactions, balances and resulting unrealised gains are eliminated on consolidation and the consolidatedfinancial statements reflect external transactions only. Unrealised losses are eliminated on consolidation unless costscannot be recovered. Uniform accounting policies are adopted in the consolidated financial statements for liketransactions and events in similar circumstances.

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and arepresented separately in the income statement and within equity in the consolidated balance sheet, separately from parentshareholders’ equity. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets andliabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since then.

Merger Method

Acquisition of subsidiaries with agreement dated prior to 1 January 2006 that meets the conditions of merger areaccounted for using the merger method. Under the merger method of accounting, the results of subsidiaries are presentedas if the merger had been effected throughout the current and previous years. In the consolidated financial statements,the cost of the merger is cancelled with the nominal values of the shares received. Any resulting credit difference isclassified as equity and regarded as a non-distributable reserve. Any resulting debit difference is adjusted against anysuitable reserve.

ii Associates

Associates are entities in which the Group exercises significant influence but not control. Significant influence is the power toparticipate in the financial and operating policy decisions of the investee but not in control or joint control over those policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method ofaccounting. Under the equity method of accounting, the investment in associate is carried in the consolidated balancesheet at cost adjusted for post-acquisition changes in the Group’s share of net assets of the associate. The Group’s shareof profits or losses of associate during the financial year is included in the consolidated income statement. Where therehas been a change recognised directly in equity of the associate, the Group recognises its share of such changes.



4 BASIS OF PREPARATION cont’d

b Basis of Consolidation cont’d

ii Associates cont’d

Unrealised gains on transactions between the Group and the associates are eliminated to the extent of the Group’sinterests in the associates. Unrealised losses are eliminated unless cost cannot be recovered.

After application of the equity method, the Group determines whether it is necessary to recognise any additional impairmentloss with respect to the Group’s net investment in the associate. The associate is equity accounted for from the date theGroup obtains significant influence until the date the Group ceases to have significant influence over the associate.

Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess ofthe Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over thecost of investment is excluded from the carrying amount of the investment and is instead included in the determinationof the Group’s share of the associate’s profit or loss in the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in associate, including any long-terminterest that, in substance, form part of the Group’s net investment in the associate, the Group does not recognise furtherlosses, unless it has incurred obligations or made payments on behalf of the associate.

The most recent available audited or management financial statements of the associate are used by the Group in applyingthe equity method. Where the dates of the audited financial statements used are not coterminous with those of theGroup, the share of results is arrived at from the last audited financial statements available and management financialstatements to the end of the accounting period. Uniform accounting policies are adopted for like transactions and eventsin similar circumstances.

iii Jointly Controlled Entity

A jointly controlled entity is an entity in which the Group has joint control over its economic activity established under acontractual arrangement.

Interest in jointly controlled entity is accounted for in the consolidated financial statements using the equity method ofaccounting as described in Note 4(b)(ii).

5 CHANGES IN ACCOUNTING POLICIES

The MASB has issued a number of new and revised FRS and Interpretations that are effective for financial periods beginning on orafter 1 January 2006. The Group has also early adopted FRS 117 Leases and FRS 124 - Related Party Disclosure for the financialperiod beginning 1 January 2006.

Except of the changes in accounting policies and their effects as discussed below, the new and revised FRS and Interpretationsabove do not have any other significant impact on the financial statements of the Group and the Company.

a FRS 2: Share-Based Payment

FRS 2 requires an entity to recognise share-based payment transactions in its financial statements, including transactions withemployees or other parties to be settled in cash, other assets or equity instruments of the entity.


31 December 2006


5 CHANGES IN ACCOUNTING POLICIES cont’d

a FRS 2: Share-Based Payment cont’d

The Company operates an equity-settled, share-based compensation plan for the employees of the Group, the ESOS. Prior to 1January 2006, no compensation expense was recognised in income statement for the share options granted. With the adoptionof FRS 2, the compensation expense relating to share options is recognised in the income statement over the vesting periods ofthe grants with a corresponding increase in equity. The total amount to be recognised as compensation expense is determinedby reference to the fair value of the share options at the date of the grant and the number of share options to be vested byvesting date. The fair value of the share option is computed using the binomial lattice model. At every balance sheet date, theGroup revises its estimates of the number of share options that are expected to vest by the vesting date. Any revision to thisestimate is included in the income statement and a corresponding adjustment to equity over the remaining vesting period.

Under the transitional provisions of FRS 2, this FRS must be applied to share options that were granted after 31 December2004 and had not yet vested on 1 January 2006. In this respect, there is no financial impact for share options granted by theCompany after 31 December 2004 but before 31 December 2005 as the share options were vested before 1 January 2006.

The effect of the revised policy due to the adoption of FRS 2 on share options granted on or after 1 January 2006 is adecrease in the profit for the year and retained earnings of RM1,511,000.

b FRS 101: Presentation of Financial Statements

The adoption of the revised FRS 101 has affected the presentation of minority interest, share of net-after tax results ofassociates and other disclosures. In the consolidated balance sheet, minority interests are now presented within total equity. Inthe consolidated income statement, minority interests are represented as an allocation of the total net profit or loss for theyear. A similar requirement is also applicable to the statement of changes in equity. FRS 101 also requires disclosures, on theface of the statement of changes in equity, total recognised income and expenses for the year, showing separately theamounts attributable to equity holders of the parent and to minority interest.

The current financial year’s presentation of the Group’s financial statements is based on the revised requirements of FRS 101,with the comparatives restated to conform with the current year’s presentation.

c FRS 117: Leases

Prior to 1 January 2006, leasehold land was classified as property, plant and equipment and was stated at cost lessaccumulated depreciation and impairment losses. The adoption of the revised FRS 117 has resulted in change in theaccounting policy relating to the classification of leases of land.

Leases of land is now classified as operating lease. The up-front payments represents prepaid lease payments and areamortised on a straight-line basis over the lease term.

The Group has applied the change in accounting policy in respect of leasehold land in accordance with the transitionalprovisions of FRS 117. At 1 January 2006, the unamortised amount of the leasehold land is retained as the surrogate carryingamount of prepaid lease payments as allowed by the transitional provisions. The reclassification of leasehold land as prepaidlease payments has been accounted for retrospectively and certain comparatives have been restated. There were no effects onthe consolidated income statement for the year ended 31 December 2006 and the Company’s financial statements.

6 CHANGES IN ESTIMATES

The revised FRS 116: Property, Plant and Equipment requires the review of the residual value and remaining useful life of an item orproperty, plant and equipment at least at each financial year. The revisions were accounted for prospectively as a change in accountingestimates and as a result, the depreciation charges of the Group for the current financial year have been reduced by RM4,112,803.



7 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The Directors are required to make certain estimates, judgements and assumptions that they believe are reasonable based uponthe information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of thefinancial statements and the reported amounts of revenue and expenses during the periods presented. On an ongoing basis, theGroup evaluates its estimates using historical experience, consultation with experts and other methods considered reasonable inthe particular circumstances. Actual results may differ significantly from the estimates, the effect of which is recognised in theperiod in which the facts that give rise to the revision become known.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have asignificant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year arediscussed as follows:

i Revenue Recognition - unread water meters

The Group raises bills and recognises revenue in accordance with its entitlement to receive revenue in line with the scheduledtariff as set out in the Concession Agreement. Revenue recognised is dependent upon the volume of water supplied includingan estimate of the sales value of units supplied between the date of last meter reading and the year end. Meters are read on acyclical basis and the Group recognises revenue for unbilled amounts based on estimated usage from the last billing throughto the end of the financial year. The estimated usage is based on historical data, judgement and assumptions; actual resultscould differ from these estimates, which would result in operating revenues being adjusted in the period that the revision tothe estimates is determined.

ii Impairment Testing of Goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires estimation of the “value in use”of the cash-generating units to which the goodwill is allocated. Estimating a value in use amount requires management tomake an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount ratein order to calculate the present value of those cash flows. The carrying amount of goodwill as at 31 December 2006 wasRM185,811,923 (2005: RM185,811,923). Further details are given in Note 31.

iii Depreciation of Property, Plant and Equipment and Project Development Expenditure

Concession assets (included within property, plant and equipment) and project development expenditure are depreciated oramortised over the concession period using the unit of water revenue method as diclosed in Note 8(a) and (b). Significantestimation is involved in determining the projected water revenue of the concession. The projected water revenue is estimatedbased on the average scheduled tariff as set out in the Concession Agreement and total water demand as assessed by theIndependent Valuers which will be updated by new studies when historical water demand varies significantly from theprojected water demand.

Due to the long remaining concession period, the Group does not expect a significant risk of changes in the projected waterrevenue which may cause a material adjustment to the depreciation of property, plant and equipment and projectdevelopment expenditure in the next financial periods.

iv Deferred Tax

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be availableagainst which the losses can be utilised. Significant management judgement is required to determine the amount of deferredtax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future taxplanning strategies.

The total carrying value of deferred tax assets recognised in respect of unused tax losses of the Group as at 31 December 2006was RM238,547,925 (2005: RM163,298,437).


31 December 2006


7 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES cont’d

v Trade Receivables

The Group evaluates the collectibility of trade receivables and record provisions for doubtful receivables based on historicalcollection pattern. These provisions are based on, amongst other things, comparisons of the relative age of accounts andconsideration of actual write-off history. The actual level of receivables collected may differ from the estimated levels of recovery,which could impact operating results positively or negatively. As at 31 December 2006, the Group’s gross trade receivables wereRM251,119,342 (2005: RM292,672,062) and the allowance for doubtful receivables was RM43,739,858 (2005: RM72,750,127).

vi Government Grant

Government grants will be recognised as income to compensate the Group for the cost of an asset over the useful life of theasset. The assets to which the grants relate to are amortised over concession period using the unit of water revenue method asdiclosed in Note 8(b). Similarly, the grants are amortised over the same basis to compensate the Group for the expensesincurred. Significant estimation is involved in determining the projected water revenue of the concession. The projected waterrevenue is estimated based on the average scheduled tariff as set out in the Concession Agreement and total water demand asassessed by the Independent Valuers which will be updated by new studies when historical water demand varies significantlyfrom the projected water demand.

Due to the long remaining concession period, the Group does not expect a significant risk of changes in the projected waterrevenue which may cause a material adjustment to the amortisation of government grant in the next financial periods.

vii Material Litigations

The Group determines whether a present obligation in relation to a material litigation exists at the balance sheet date by takinginto account all available evidence, including, the opinion of the solicitors. The evidence considered includes any additionalevidence provided by events after the balance sheet date. On the basis of such evidence, the Group evaluates if a provision needsto be recognised in the financial statements. Further details of the material litigations involving the Group are given in Note 55.

8 SIGNIFICANT ACCOUNTING POLICIES

a Property, Plant and Equipment and Depreciation

Property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount orrecognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item willflow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. Allother repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Subsequent to recognition, property, plant and equipment except for capital work-in-progress are stated at cost lessaccumulated depreciation and impairment losses. Capital work-in-progress are not depreciated.

Concession assets comprise structures, land and buildings, water treatment plants and equipment, reservoirs, dams anddistribution pipes operated and maintained by the Group under the Concession Agreements entered into by the subsidiaries asdisclosed in Note 3 to the financial statements.

Concession assets are depreciated over the concession period using the unit of water revenue method as follows:

Cumulative actual water revenue X Concession assets capitalised to dateTotal projected water revenue of the Concession



8 SIGNIFICANT ACCOUNTING POLICIES cont’d

a Property, Plant and Equipment and Depreciation cont’d

The rationale for using the unit of water revenue method is in line with the pattern in which the assets’ economic benefits areconsumed by the Group.

Freehold land is not depreciated.

Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each assetto its residual value over the estimated useful life, at the following annual rates:

Building 2%Plant and equipment 10% to 20%Water meters 10%Office equipment 20%Furniture and fittings 20%Motor vehicles 20%Computers and software 331/3 %Renovation 10% to 331/3 %

The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount,method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of thefuture economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expectedfrom its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised inthe income statement.

b Project Development Expenditure

Project development expenditure are stated at cost less accumulated amortisation and impairment losses. Projectdevelopment expenditure comprise the following:

i Expenditure incurred for the rehabilitation and refurbishment of water treatment facilities, concession acquisition costand expenditure incurred for the operation, maintenance, development and upgrading of water distribution systems.

These expenditure include capital work-in-progress, which are not amortised until the related asset are ready for itsintended use.

These expenditure are amortised over the concession period using the unit of water revenue method as follows:

Cumulative actual water revenue X Project Development Expenditure incurred to date Total projected water revenue of the Concession

The rationale for using the unit of water revenue method is in line with the pattern in which the assets’ economic benefitsare consumed by the Group.


31 December 2006



b Project Development Expenditure cont’d

ii Capacity charge, annual charges and land use charges obligations arising from the concession agreement entered into bySYABAS as disclosed in Note 3 to the financial statements.

These expenditure are amortised over the concession period using the unit of water revenue method as follows:

Cumulative actual water revenue X Total projected fixed charge, annual charges and land Total projected water revenue of the Concession use charges for the entire Concession period

The amortisation period and the amortisation method for these expenditure is reviewed at least at each financial yearend. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied inthe asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes inaccounting estimates.

The amortisation expense on these expenditure is recognised in the income statement.

c Investments in Subsidiaries, Associates and Jointly Controlled Entity

The Company’s investments in subsidiaries, associates and jointly controlled entity are stated at cost less impairment losses.

On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised in theincome statement.

d Goodwill

Goodwill acquired in a business acquisition is initially measured at cost being the excess of the cost of the businesscombination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingentliabilities. Following intial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes incircumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the date of acquisition date,allocated to each of the Group’s cash-generating units, or group of cash-generating units, that are expected to benefit fromthe synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units orgroups of units. Each unit or group of units to which the goodwill is allocated represents the lowest level within the Group atwhich the goodwill is monitored for internal management purposes.

Gain and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

e Impairment of Assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indicationexists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverableamount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and itsvalue in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largelyindependent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverableamount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimatedfuture cash flows are discounted to their present value using a suitable discount rate that reflects current market assessmentsof the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriatevaluation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.




e Impairment of Assets cont’d

Impairment losses are recognised in the income statement in those expense categories consistent with the function of theimpaired asset.

For assets, excluding goodwill, an assessment is made at each reporting date as to whether there is any indication thatpreviously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makesan estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in theestimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the casethe carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carryingamount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prioryears. Such reversal is recognised in the income statement.

Impairment losses recognised in relation to goodwill are not reversed for subsequent increases in its recoverable amount.

The following criteria are also applied in assessing impairment of specific assets:

i Goodwill

Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that thecarrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating unit (or group ofcash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating units (orgroup of cash-generating units) is less than the carrying amount of the cash-generating unit (or group of cash-generating units) to which goodwill has been allocated, an impairment loss is recognised in the income statement.Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual impairmenttest of goodwill as at 31 December.

ii Intangible Assets

Intangible assets with finite useful lives are tested for impairment whenever there is an indication of impairment eitherindividually or at the cash-generating unit level, as appropriate.

f Other Investments

Other investments are stated at cost less impairment losses. On disposal of an investment, the difference between net disposalproceeds and its carrying amount is recognised in the income statement.

g Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis andincludes transportation and handling costs incurred.

h Trade and Other Receivables

Trade and other receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimateis made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.


31 December 2006



i Cash and Cash Equivalents

For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at banks and deposits atcall which have an insignificant risk of changes in value.

j Equity and Financial Liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements enteredinto. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all ofits liabilities.

Interest, dividends and gains and losses relating to a financial liability are reported as expenses or income. Distributions toholders of equity instruments are recognised directly in equity.

i Equity Instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which theyare declared.

The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transactioncosts comprise only those incremental external costs directly attributable to the equity transaction which would otherwisehave been avoided.

ii Treasury Shares

Own equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or loss is recognised inthe income statement on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

iii Interest-Bearing Borrowings and Borrowing Costs

Interest-bearing borrowings are initially recognised at the fair value of the consideration received less directly attributabletransaction costs.

After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost using the effectiveinterest method.

Finance costs, including premiums payable on settlement or redemption and direct issue costs, are accounted for on anaccrual basis to the income statement using the effective interest method and are added to the carrying amount of theinstrument to the extent they are not settled in the period in which they arise.

Finance cost directly attributable to the acquisition, construction or production of qualifying assets, which are assets thatnecessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the costof those assets, until such time as the assets are substantially ready for their intended use or sale. The amount of financecost eligible for capitalisation is determined by applying a capitalisation rate which is the weighted average of the financecost applicable to the Group’s borrowings that are outstanding during the financial year, other than borrowings madespecifically for the purpose of acquiring another qualifying asset. For borrowings made specifically for the purpose ofacquiring a qualifying asset, the amount of finance cost eligible for capitalisation is the actual finance cost incurred onthat borrowing during the period less any investment income on the temporary investment of funds drawn down fromthat borrowing facility.




j Equity and Financial Liabilities cont’d

iv RCULS

The RCULS are regarded as compound instruments, consisting of a liability component and an equity component.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for asimilar instrument. The difference between the proceeds of issue of the convertible loan stocks and the fair value assignedto the liability component, representing the conversion option is included in equity. The liability component issubsequently stated at amortised cost using the effective interest rate method until extinguished on conversion orredemption, whilst the value of the equity component is not adjusted in subsequent periods. Attributable transactioncosts are apportioned and deducted directly from the liability and equity component based on their carrying amounts atthe date of issue.

v Trade and Other Payables

Trade and other payables are stated at cost which is the fair value of the consideration to be paid in the future for goodsand services received.

k Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount ofincome taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enactedat the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the taxbases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities arerecognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporarydifferences, unutilised tax losses and unutilised tax credits to the extent that it is probable that taxable profit will be availableagainst which the deductible temporary differences, unutilised tax losses and unutilised tax credits can be utilised. Deferredtax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition ofan asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neitheraccounting profit nor taxable profit.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability issettled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax isrecognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in whichcase the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition,in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer’s interest inthe net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the combination.

l Provisions for Liabilities

Provisions for liabilities are recognised when the Group has a present obligation as a result of a past event and it is probablethat an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate ofthe amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.Where the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects,where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passageof time is recognised as finance cost.


31 December 2006



m Leases

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental toownership. All other leases are classified as operating leases.

i Finance Leases

Assets acquired by way of hire-purchase or finance leases are stated at an amount equal to the lower of their fair valuesand the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation andimpairment losses. The corresponding liability is included in the balance sheet as borrowings. In calculating the presentvalue of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it ispracticable to determine; otherwise, the Group’s incremental borrowing rate is used.

Lease payments are apportioned between the finance cost and the reduction of the outstanding liability. Finance cost,which represent the difference between the total leasing commitments and the fair value of the assets acquired, arerecognised as an expense in the income statement over the term of the relevant lease so as to produce a constant periodicrate of charge on the remaining balance of the obligations for each accounting period.

The depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment asdescribed in Note 8(a).

ii Operating Leases

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the term ofthe relevant lease.

n Employee Benefits

i Short-Term Benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associatedservices are rendered by employees of the Group. Short-term accumulating compensated absences such as paid annualleave are recognised when services are rendered by employees that increase their entitlement to future compensatedabsences. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

ii Defined Contribution Plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contribution into separateentities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do nothold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years.

As required by law, companies in Malaysia make contributions to the EPF. Such contributions are recognised as an expensein the income statement as incurred.

iii Defined Benefit Plans

The Group operates an unfunded, defined benefit Retirement Benefit Scheme (the “Scheme”) for its eligible employees.The Group’s obligation under the Scheme, calculated using the Projected Unit Credit Method, is determined based onactuarial computations by independent actuaries, through which the amount of benefit that employees have earned inreturn for their service in the current and prior years is estimated. That benefit is discounted in order to determine itspresent value. Past service costs are recognised immediately to the extent that the benefits are already vested, andotherwise are amortised on a straight-line basis over the average period until the amended benefits become vested.




n Employee Benefits cont’d

iv Share-Based Compensation

The ESOS, an equity-settled, share-based compensation plan, allows the Group’s employees to acquire ordinary shares ofthe Company. The total fair value of share options granted to employees is recognised as an employee cost with acorresponding increase in the equity compensation reserve within equity over the vesting period and taking into accountthe probability that the options will vest. The fair value of share options is measured at grant date. The total amount to berecognised as compensation expense is determined by reference to the fair value of the share options at the date of thegrant and the number of share options to be vested by vesting date. The fair value of the share option is computed usingthe binomial lattice model.

At every balance sheet date, the Group reviews its estimates of the number of share options that are expected to vest bythe vesting date. Any revision to this estimate is included in the income statement and a corresponding adjustment toequity over the remaining vesting period. The equity amount is recognised in the equity compensation reserve until theoption is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will betransferred directly to retained earnings. The proceeds received net of any directly attributable transaction costs arecredited to equity when the options are exercised.

o Government Grants

Government grants are recognised initially at their fair value in the balance sheet as deferred income when there is reasonableassurance that the grant will be received and all attaching conditions will be complied with. Grants that compensate theGroup for the cost of an asset are recognised as income on a systematic basis over the useful life of the asset.

p Construction Contracts

Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognisedas revenue and expenses respectively by using the stage of completion method. The stage of completion is measured byreference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.

Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent ofcontract costs incurred that is probable to be recovered. Contract costs are recognised as expenses in the period in which theyare incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expenseimmediately.

When the total of costs incurred on construction contracts plus recognised profits (less recognised losses) exceeds progressbillings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurredplus recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.

q Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to theenterprise and the amount of the revenue can be measured reliably.

i Supply and Distribution of Treated Water to Consumers

Revenue is recognised when the treated water is discharged through the reading meter installed.


31 December 2006



q Revenue Recognition cont’d

ii Dividend Income

Dividend income is recognised when the right to receive payment is established.

iii Management Fee

Management fee is recognised on an accrual basis.

iv Construction Contracts

Revenue from construction contracts is accounted for using the stage of completion method as describe in Note 8(p).

v Interest Income

Interest is recognised on a time proportion basis that reflects the effective yield on the asset.

r Foreign Currencies

i Functional and Presentation Currency

The individual financial statements of each entity in the Group are measured using the currency of the primary economicenvironment in which the entity operates (“the functional currency”). The consolidated financial statements are presentedin RM, which is also the Company’s functional currency.

ii Foreign Currency Transactions

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’sfunctional currency (foreign currency) are recorded in the functional currencies using the exchange rates prevailing at thedates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated atthe rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreigncurrencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary itemsthat are measured in terms of historical cost in a foreign currency are not translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are includedin the profit or loss for the period except for exchange differences arising on monetary items that form part of theGroup’s net investment in foreign operation. Exchange differences arising on monetary items that form part of theGroup’s net investment in foreign operation, where that monetary item is denominated in either the functional currencyof the reporting entity or the foreign operation, are initially taken directly to the foreign currency translation reservewithin equity until the disposal of the foreign operation, at which time they are recognised in profit or loss.

Exchange differences arising on monetary item that form part of the Group’s net investment in foreign operation, wherethat monetary item is denominated in a currency other than the functional currency of either the reporting entity or theforeign operation, are recognised in the profit or loss for the period. Exchange differences arising on monetary items thatform part of the Company’s net investment in foreign operation, regardless of the currency of the monetary item, arerecognised in the profit or loss in the Company’s financial statements or the individual financial statements of the foreignoperation, as appropriate.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or lossfor the period except for the differences arising on the translation of non-monetary items in respect of which gains andlosses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recogniseddirectly in equity.




r Foreign Currencies cont’d

ii Foreign Currency Transactions cont’d

The principal exchange rate used for every unit of foreign currency ruling at the balance sheet date is as follows:

In RM 2006 2005

Currency100 Indian Rupee 8.330 8.440

s Fair Value Estimation for Disclosure Purposes

In assessing the fair value of financial instruments, the Group and the Company use a variety of methods and makeassumptions that are based on market conditions existing at each balance sheet date.

The fair value of publicly traded securities is based on quoted market prices at the balance sheet date. Where there is noactive market, fair value is established using a valuation technique. Valuation techniques include using recent arm’s lengthmarket transactions between knowledgeable, willing parties, if available, reference to the current fair value of anotherinstrument that is substantially the same, discounted cash flow analysis and option pricing models.

The face values for financial assets and financial liabilities with maturity of less than one (1) year are assumed to approximatetheir fair values.

9 FUTURE CHANGES IN ACCOUNTING POLICIES

At the date of authorisation of these financial statements, the following FRS, amendments to FRS and Interpretations were issuedbut not yet effective and have not been applied by the Group and the Company:

Effective for financial periods beginning on or after

i FRS 139 - Financial Instruments: Recognition and Measurement Deferredii FRS 6 - Exploration for an Evaluation of Mineral Resources 1 January 2007iii Amendment to FRS 1192004 -Employee Benefits - Actuarial Gains and Losses, 1 January 2007

Group Plans and Disclosuresiv Amendments to FRS 121 -The Effects of Changes in Foreign Exchange Rates 1 July 2007

- Net Investment in a Foreign Operationv IC Interpretation 1: Changes in Existing Decommissioning, Restoration and Similar Liabilities 1 July 2007vi IC Interpretation 2: Members’ Shares in Co-operative Entities and Similar Instruments 1 July 2007vii IC Interpretation 5: Rights to Interest arising from Decommissioning, Restoration and 1 July 2007

Environmental Rehabilitation Fundsviii IC Interpretation 6: Liabilities arising from Participating in a Specific Market 1 July 2007

- Waste Electrical and Electronic Equipmentix IC Interpretation 7: Applying the Restatement Approach under FRS 1292004 Financial 1 July 2007

Reporting in Hyperinflationary Economiesx IC Interpretation 8: Scope of FRS 2 1 July 2007

The Group and the Company are exempted from disclosing the possible impact, if any, to the financial statements upon the initialapplication of FRS 139.

FRS 6 is not relevant to the Group’s and the Company’s operations and the adoption of the above amendments andInterpretations will have no impact on the financial statements of the Group and of the Company.


31 December 2006


10 REVENUE

Revenue of the Group and of the Company consists of the following:

Group Company In RM 2006 2005 2006 2005

Supply and distribution of treated water to consumers 1,265,905,282 1,071,046,600 – –Construction revenue 162,218,472 73,897,741 – –Gross dividend income – – 4,000,000 27,076,000Management fees – – – 120,000

1,428,123,754 1,144,944,341 4,000,000 27,196,000

With effect from 1 January 2005, SYABAS undertakes to supply and distribute treated water to consumers in the Distribution Area.

Revenue for the year includes RM129,000,000 (2005: NIL) being the estimated Government Grant receivable for NRW arising fromthe delay in water tariff revision.

The construction revenue represents the revenue arising from the construction contract undertaken by a subsidiary, PNSB, inrelation to the turnkey sub-contract for planning, design, construction, supervision, testing and commissioning of a water supplyscheme in the State of Sabah.

11 PROFIT BEFORE TAXATION

Profit before taxation is stated after charging/(crediting) the following:

a Other income

Included in other income of the Group and of the Company are the following:


Interest on deferred payment contract – (2,091,926) – –Amortisation of deferred government grant (Note 44) (409,687) – – –Coupon and discounts on Junior Notes A – – (53,026,105) (46,348,110)Interest on RCULS – – (7,715,342) –RCULS option premium (2,314,603) – (2,314,603) –Profits earned from deposits (45,920,721) (22,271,981) (1,155,487) (566,793)Income from liquidated ascertained damages from contractors (74,283) (2,925,300) – –

Bad debts recovered (2,696,689) – – –Gain on disposal of RUBS (Note 11(a)(i)) – – (98,969,134) –Gain on partial disposal of subsidiary (Note 11(a)(ii) andNote 22(a)) (205,773,273) – (296,954,491) –

Gain on disposal of associate (1,000) – (1,000) –Gain on disposal of property, plant and equipment (602,158) (247,001) – –Rental income from land and building (295,319) (1,603,350) (60,000) (35,000)Income from property developers (Note 11(a)(iii)) (43,600,645) (49,418,926) – –Reconnection charges (4,763,661) (1,579,298) – –



11 PROFIT BEFORE TAXATION cont’d

a Other income cont’d

i PNSB had on 8 December 2006 restructured RM320,000,000 shareholders’ advances owing to the Company into a newmarketable security via the issuance of RM435,000,000 nominal value of RUBs to the Company.

Following the above, the Company had subsequently on 19 December 2006 disposed of the RUBs to ATSB for a totalconsideration of RM418,969,134, satisfied via a cash consideration of RM132,719,134 and the balance being satisfied viathe issuance of 286,250,000 preference shares with par value of RM0.01 in ATSB at an issue price of RM1.00 each. TheCompany recognised a gain of RM98,969,134. The disposal of the RUBs to ATSB effectively resulted in the Group raisingadditional borrowings of RM418,969,134 on initial recognition, which will be subsequently measured at amortised costusing the effective interest method. Further details are given in Note 41.

ii On 19 December 2006, the Company disposed of 17.5% of the ordinary shares in PNSB to ATSB for a total cashconsideration of RM306,250,000.

Pursuant to the divestment, the Company agreed to sell and ATSB agreed to acquire the PNSB shares, free of all claims,charges, liens, encumbrances and equities whatsover together with all rights attached thereto and all dividends, rights anddistributions declared, paid or made in respect thereof.

Following the above, the Group and the Company recognised a gain on disposal of RM205,773,273 and RM296,954,491respectively.

iii Income from property developers represents contributions by developers to improve and upgrade the distribution system.

b Other expenses

Included in other expenses of the Group and the Company are the following:


Auditors’ remuneration (Note 12)Auditors of the Company - Statutory audit 336,000 305,000 25,000 25,000- Others 363,248 234,840 215,000 25,000

Other Auditors- Statutory audit 2,820 4,240 – –- Others 2,200 72,015 – 600

704,268 616,095 240,000 50,600

OthersConcession fees 1,000,000 1,000,000 – –Non-Executive Directors’ remuneration (Note 14) 380,750 536,000 380,750 536,000Debts written off 27,107,548 135,483 5,000,000 –Bad debts recovered (2,696,689) – – –Write back of allowance for doubtful debts (19,430,929) – – –Hire of transport and equipment 828,447 788,734 – –Allowance for diminution in value of investment in jointlycontrolled entity – – – 2,022,770

Loss on disposal of associate 30,519 – – –Allowance for doubtful debts – 5,074,636 – –Rental of premises 3,399,854 2,968,788 – –Water royalty 14,498,144 14,126,313 – –


31 December 2006


11 PROFIT BEFORE TAXATION cont’d

c Depreciation and amortisation expensesGroup Company

In RM 2006 2005 2006 2005(restated) (restated)

Depreciation of property, plant and equipment- Concession assets 11,039,882 8,700,561 – –- Others 20,123,685 10,174,163 136,167 –

31,163,567 18,874,724 136,167 –Amortisation of project development expenditure 286,292,015 226,424,285 – –Amortisation of prepaid land lease payments 227,701 146,235 88,045 88,045

317,683,283 245,445,244 224,212 88,045

12 AUDITORS’ REMUNERATIONGroup Group

Income Statement Balance SheetIn RM 2006 2005 2006 2005

Auditors of the CompanyStatutory audit (Note 11(b)) 336,000 305,000 – –Fees for tax advisory compliance work (Note 11(b)) 165,248 99,840 – –Other non-audit related services (Note 11(b)) 18,000 135,000 – –Reporting accountants * (Note 41) 180,000 – – 410,000

699,248 539,840 – 410,000

Other AuditorsStatutory audit 2,820 4,240 – –Fees for tax advisory compliance work 2,200 72,015 – –

5,020 76,255 – –

704,268 616,095 – 410,000

* These expenses for the financial year ended 31 December 2005 are included as part of the debt issuance expenses as disclosed in Note 41. Debt issuance expensesare netted off against the proceeds received by the Group in relation to the financial liabilities issued.

Company Income Statement

In RM 2006 2005

Auditors of the CompanyStatutory audit 25,000 25,000Fees for tax advisory compliance work 20,000 10,000Other non-audit related services 195,000 15,000

240,000 50,000Other AuditorsFees for tax advisory compliance work – 600

240,000 50,600



13 STAFF COSTGroup Company

In RM 2006 2005 2006 2005

Wages, salaries and bonuses 132,880,664 101,062,787 – –Defined contribution retirement plan (Note 13(a)) 14,501,004 10,708,288 – –Defined benefit plan (Note 13(b)) 9,536,039 – – –Share options granted under ESOS (Note 38(b)) 1,511,000 – – –Other staff related expenses 22,032,078 14,245,494 – –

180,460,785 126,016,569 – –

Included in staff cost of the Group are the Company’s Executive Directors’ remuneration (excluding benefits-in-kind) amountingto RM8,613,406 (2005: RM8,845,681) as further disclosed in Note 14.

The number of persons, including the Company’s Executive Directors, employed by the Group at the end of the financial year was3,972 (2005: 3,355).

a The Group contributes to the EPF, the national defined contribution plan. Once the contributions have been paid, the Grouphas no further payment obligations.

b The Group operates an unfunded, defined benefit Retirement Benefit Scheme (the “Scheme”) for its eligible employees. Underthe Scheme, eligible employees are entitled to retirement benefits of either 0.75 or 1 month of their final salary for every yearof service with the Group on the attainment of their retirement age of 56 or voluntary retirement age of 50.

The amounts recognised in the income statement are as follows:Group

In RM 2006 2005

Current service cost 2,036,421 –Interest cost 385,206 –Past service cost 7,114,412 –

Total 9,536,039 –

The principal actuarial assumptions used are as follows:Group

In % 2006 2005

Discount rate 5.50 –Rate of compensation increase 4.00 –

14 DIRECTORS’ REMUNERATION

The Directors of the Company in office during the financial year were as follows:

Executive Directors Non-Executive DirectorsTan Sri Rozali bin Ismail Tan Sri Dato’ Hari Narayanan a/l GovindasamyDato’ Matlasa bin Hitam Tan Sri Dato’ Seri Dr Ting Chew PehDato’ Ruslan bin Hassan * Datuk Dr Rahman bin IsmailDato’ Ir Lee Miang Koi * Tengku Dato’ Rahimah binti Almarhum Sultan Mahmud ** Syed Danial bin Syed Ariffin (appointed on 1 August 2006)Tan Seng Lee

* These Directors had been redesignated to Non-Independent Non-Executive Directors with effect from 1 October 2005.** This Director had been redesignated to Non-Independent Non-Executive Director with effect from 1 January 2007.


31 December 2006


14 DIRECTORS’ REMUNERATION cont’d

The details of remuneration receivable by Directors of the Company during the year are as follows:


Executive DirectorsWages, salaries and bonuses 6,599,510 6,217,661 – –Defined contribution retirement plan (Note 13(a)) 1,072,045 1,022,514 – –Estimated money value of benefits-in-kind 182,701 151,162 – –Leave passage 304,889 19,409 – –Other staff related expenses 636,962 1,586,097 – –

8,796,107 8,996,843 – –Non-Executive DirectorsAllowances 227,000 401,000 227,000 401,000Leave passage 153,750 135,000 153,750 135,000

9,176,857 9,532,843 380,750 536,000

The number of Directors of the Company whose total remuneration during the financial year fell within the following bands isanalysed below:

Number of Directors2006 2005

Executive DirectorsRM100,001 to RM200,000 – 1RM300,001 to RM400,000 – 1RM500,001 to RM600,000 1 2RM600,001 to RM700,000 1 –RM700,001 to RM800,000 – 1RM800,001 to RM900,000 1 –RM1,000,001 to RM1,100,000 1 1RM1,100,001 to RM1,200,000 1 –RM1,200,001 to RM1,300,000 – 1RM4,300,001 to RM4,400,000 – 1RM4,500,001 to RM4,600,000 1 –

Non-Executive DirectorsRM1 to RM100,000 1 1RM100,001 to RM200,000 3 3

15 FINANCE COSTGroup Company

In RM 2006 2005 2006 2005

Finance cost on Islamic banking borrowings 131,740,453 91,542,054 – –Finance cost on conventional borrowings 62,370,224 51,194,395 53,026,105 46,799,263Interest expense on hire-purchase 896,439 524,154 – –Bank charges 371,503 289,487 5,285 2,511Other interest expenses – – – 102,107

195,378,619 143,550,090 53,031,390 46,903,881



16 TAXATIONGroup Company

In RM 2006 2005 2006 2005

Tax expense for the year:Malaysian income tax 3,735,598 2,143,531 2,043,699 7,627,494Deferred taxation (Note 43) (8,484,941) 56,164,313 2,005,989 –

(4,749,343) 58,307,844 4,049,688 7,627,494

Current tax:- Current financial year 4,201,050 1,997,251 2,012,030 7,442,684- (Over)/under-provision in prior years (465,452) 146,280 31,669 184,810

Deferred tax:- Origination and reversal of temporary differences (2,611,533) 56,164,313 2,005,989 –- Over-provision in prior years (5,873,408) – – –

(4,749,343) 58,307,844 4,049,688 7,627,494

Domestic income tax is calculated at the Malaysian statutory tax rate of 28% (2005: 28%) of the estimated assessable profit for theyear. The domestic statutory tax rate will be reduced to 27% from the current year’s rate of 28%, effective year of assessment 2007and to 26% effective year of assessment 2008. The computation of deferred tax as at 31 December 2006 has reflected these changes.

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income taxexpense at the effective income tax rate of the Group and of the Company is as follows:


Profit before taxation 367,275,511 196,845,403 403,510,502 23,093,098

Taxation at Malaysian statutory tax rate of 28% (2005: 28%) 102,837,143 55,116,713 112,982,941 6,466,067Effects of changes in tax rates on opening balance of deferred tax (24,722,948) – – –

Effects of changes in tax rates on closing balance of deferred tax 3,879,999 – – –

Income not subject to tax (57,718,464) – (110,960,563) –Expenses not deductible for tax purposes 12,374,517 4,181,106 1,995,641 976,617Utilisation of previously unutilised tax allowances – (1,137,093) – –Utilisation of previously unutilised reinvestment allowances (35,060,730) – – –(Over)/under-provision of current tax in prior years (465,452) 146,280 31,669 184,810Over-provision of deferred tax in prior years (5,873,408) – – –Deferred tax assets not recognised – 838 – –

Tax expense for the year (4,749,343) 58,307,844 4,049,688 7,627,494


31 December 2006


16 TAXATION cont’d

A reconciliation of income tax rate to effective income tax rate of the Group and of the Company is as follows:

Group Company In % 2006 2005 2006 2005

Malaysian statutory tax rate 28.00 28.00 28.00 28.00Effects of changes in tax rates on opening balance of deferred tax (6.73) – – –Effects of changes in tax rates on closing balance of deferred tax 1.06 – – –Income not subject to tax (15.71) – (27.50) –Expenses not deductible for tax purposes 3.37 2.12 0.50 4.23Utilisation of previously unutilised tax allowances – (0.57) – –Utilisation of previously unutilised reinvestment allowances (9.55) – – –(Over)/under-provision of current tax in prior years (0.13) 0.07 – 0.80Over-provision of deferred tax in prior years (1.60) – – –Deferred tax assets not recognised – – – –

(1.29) 29.62 1.00 33.03

17 EARNINGS PER ORDINARY SHARE

a Basic Earnings Per Share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of theCompany by the weighted average number of ordinary shares in issue during the financial year, excluding treasury shares heldby the Company.

The weighted average number of ordinary shares in issue during the financial year have been adjusted to include thefollowing events which were completed subsequent to the date of the balance sheet and before the date of authorisation ofthese financial statements:

i Bonus issue of 587,346,993 new ordinary shares of RM1.00 each (“Share(s)”) (“Bonus Share(s)”) in the Company, on thebasis of one (1) Bonus Share for every one (1) existing Company Share held by the entitled shareholders (“Bonus Issue”);

ii Consolidation of the entire issued and paid-up share capital of the Company of RM411,142,895 comprising 1,174,693,986ordinary shares of RM0.35 each (after the Capital Repayment) into 411,142,895 ordinary shares with par value of RM1.00 each(“Consolidated Shares”) (“Consolidation of Shares”).

The comparative basic earnings per share has been restated to take into account the effects of the above Bonus Issue andConsolidation of Shares.

2006 2005RM RM

(restated)

Profit for the year attributable to ordinary equity holders of the Company 331,601,953 99,259,577

Weighted average number of ordinary shares in issue 326,669,361 322,315,653

Basic earnings per share 101.51 sen 30.80 sen



17 EARNINGS PER ORDINARY SHARE cont’d

b Diluted Earnings Per Share

For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares in issue during thefinancial year have been adjusted for the dilutive effects of all potential ordinary shares, i.e. warrants, which were granted forfree to all subscribers of the RUN (Note 41(iv)) and share options granted to the eligible employees pursuant to the ESOS(Note 38(b)).

In assessing the dilution in earnings per share arising from the issue of both warrants and share options, a calculation is doneto 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 netprofit for the financial year in the calculation of the diluted earnings per share in connection with the issue of the warrantsand share options.

The comparative diluted earnings per share has been restated to take into account the effects of the above Bonus Issue andConsolidation of Shares.

2006 2005RM RM

(restated)

Profit for the year attributable to ordinary equity holders of the Company 331,601,953 99,259,577

Weighted average number of ordinary shares in issue 326,669,361 322,315,653Adjustment for:- warrants – 1,410,051- share options 1,203,839 1,917,604

Weighted average number of ordinary shares for diluted earnings per share 327,873,200 325,643,308

Diluted earnings per share 101.14 sen 30.48 sen

18 DIVIDENDSDividends in Dividends

respect of Year Recognised in YearIn RM 2005 2004 2006 2005

Final dividend of 6 sen per share less tax at 28% on 449,548,102 ordinary shares, declared on 5 June 2006 and paid on 8 August 2006 19,420,478 16,602,444 19,420,478 16,602,444

At the forthcoming Tenth Annual General Meeting of the Company, a final tax exempt dividend in respect of the financial yearended 31 December 2006, of 8 sen per share will be proposed for the shareholders’ approval. The financial statements of thecurrent financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted forin equity as an appropriation of retained earnings in the financial year ending 31 December 2007.


31 December 2006


19 PROPERTY, PLANT AND EQUIPMENT

Leasehold Freehold Water Concession In RM Building Land Land Meters Assets

GROUP 2006CostAt 1 JanuaryAs previously stated 27,887,542 21,110,874 – 10,439,064 1,757,725,641 Effects of adopting FRS 117 – (21,110,874) – – –

As restated 27,887,542 – – 10,439,064 1,757,725,641 Additions 149,595 – 1,267,188 25,628,280 4,137,759 Disposals – – – – –

At 31 December 28,037,137 – 1,267,188 36,067,344 1,761,863,400

Accumulated Depreciation At 1 JanuaryAs previously stated 232,396 755,211 – 394,219 415,799,401 Effects of adopting FRS 117 – (755,211) – – –

As restated 232,396 – – 394,219 415,799,401 Charge for the financial year 296,191 – – 2,569,143 11,039,882 Disposals – – – – –

At 31 December 528,587 – – 2,963,362 426,839,283

Net Book Value At 31 December 27,508,550 – 1,267,188 33,103,982 1,335,024,117

GROUP 2005CostAt 1 JanuaryAs previously stated – 8,716,411 – – 1,753,706,433 Effects of adopting FRS 117 – (8,716,411) – – –

As restated – – – – 1,753,706,433 Additions As previously stated 27,887,542 12,394,463 – 10,439,064 4,019,208 Effects of adopting FRS 117 – (12,394,463) – – –

As restated 27,887,542 – – 10,439,064 4,019,208 Disposals – – – – –

At 31 December 27,887,542 – – 10,439,064 1,757,725,641

Accumulated Depreciation At 1 JanuaryAs previously stated – 608,976 – – 407,098,840 Effects of adopting FRS 117 – (608,976) – – –

As restated – – – – 407,098,840 Charge for the financial year As previously stated 232,396 146,235 – 394,219 8,700,561 Effects of adopting FRS 117 – (146,235) – – –

As restated 232,396 – – 394,219 8,700,561 Disposals – – – – –

At 31 December 232,396 – – 394,219 415,799,401

Net Book ValueAt 31 December 27,655,146 – – 10,044,845 1,341,926,240




31 December 2006


Plant Furniture Computersand Office and Motor and

Equipment Equipment Fittings Vehicles Software Renovation Total

7,791,678 14,253,240 7,114,081 33,442,693 8,395,084 14,195,570 1,902,355,467– – – – – – (21,110,874)

7,791,678 14,253,240 7,114,081 33,442,693 8,395,084 14,195,570 1,881,244,593239,675 10,094,857 5,029,753 22,537,174 6,276,477 26,551,827 101,912,585

– – – (2,885,220) – – (2,885,220)

8,031,353 24,348,097 12,143,834 53,094,647 14,671,561 40,747,397 1,980,271,958

4,105,908 4,127,112 3,786,639 12,447,185 6,872,757 8,503,574 457,024,402– – – – – – (755,211)

4,105,908 4,127,112 3,786,639 12,447,185 6,872,757 8,503,574 456,269,191788,444 4,695,964 1,137,800 5,162,859 1,100,489 4,372,795 31,163,567

– – – (2,643,476) – – (2,643,476)

4,894,352 8,823,076 4,924,439 14,966,568 7,973,246 12,876,369 484,789,282

3,137,001 15,525,021 7,219,395 38,128,079 6,698,315 27,871,028 1,495,482,676

7,791,678 4,413,863 3,678,805 14,699,650 6,794,025 9,338,607 1,809,139,472– – – – – – (8,716,411)

7,791,678 4,413,863 3,678,805 14,699,650 6,794,025 9,338,607 1,800,423,061

– 9,839,377 3,435,276 20,502,893 1,601,059 4,856,963 94,975,845– – – – – – (12,394,463)

– 9,839,377 3,435,276 20,502,893 1,601,059 4,856,963 82,581,382– – – (1,759,850) – – (1,759,850)

7,791,678 14,253,240 7,114,081 33,442,693 8,395,084 14,195,570 1,881,244,593

3,328,180 2,542,297 3,289,079 9,733,632 6,320,284 6,652,506 439,573,794– – – – – – (608,976)

3,328,180 2,542,297 3,289,079 9,733,632 6,320,284 6,652,506 438,964,818

777,728 1,584,815 497,560 4,283,904 552,473 1,851,068 19,020,959– – – – – – (146,235)

777,728 1,584,815 497,560 4,283,904 552,473 1,851,068 18,874,724– – – (1,570,351) – – (1,570,351)

4,105,908 4,127,112 3,786,639 12,447,185 6,872,757 8,503,574 456,269,191

3,685,770 10,126,128 3,327,442 20,995,508 1,522,327 5,691,996 1,424,975,402

19 PROPERTY, PLANT AND EQUIPMENT cont’dLeasehold

In RM Land Renovation Total

COMPANY 2006CostAt 1 January As previously stated 8,716,411 – 8,716,411Effects of adopting FRS 117 (8,716,411) – (8,716,411)

As restated – – –Additions – 522,002 522,002

At 31 December – 522,002 522,002

Accumulated DepreciationAt 1 JanuaryAs previously stated 697,021 – 697,021Effects of adopting FRS 117 (697,021) – (697,021)

As restated – – –Charge for the financial year – 136,167 136,167

At 31 December – 136,167 136,167

Net Book ValueAt 31 December – 385,835 385,835

COMPANY 2005CostAt 1 January/31 DecemberAs previously stated 8,716,411 – 8,716,411Effects of adopting FRS 117 (8,716,411) – (8,716,411)

As restated – – –

Accumulated DepreciationAt 1 January As previously stated 608,976 – 608,976Effects of adopting FRS 117 (608,976) – (608,976)

As restated – – –Charge for the financial year As previously stated 88,045 – 88,045Effects of adopting FRS 117 (88,045) – (88,045)

As restated – – –

At 31 December – – –

Net Book ValueAt 31 December – – –



19 PROPERTY, PLANT AND EQUIPMENT cont’d

Included in the cost of concession assets are borrowing cost capitalised during the period of active development, amounting toRM286,075,263 (2005: RM286,075,263).

Property, plant and equipment of the subsidiaries, PNSB and SYABAS, with a total net book value of RM1,264,699,479 (2005:RM1,314,152,808) and RM85,036,851 (2005: RM37,104,053) respectively have been charged as security for long-term borrowingsas disclosed in Note 41(iii), Note 41(v) and Note 41(vi).

During the financial year, the Group acquired property, plant and equipment at aggregate costs of RM101,912,585 (2005:RM82,581,382) of which RM11,139,378 (2005: RM8,168,844) were acquired by means of hire-purchase arrangements.

Net book values of property, plant and equipment of the Group acquired under hire-purchase arrangement are as follows:

GroupIn RM 2006 2005

Motor vehicles Cost 28,962,903 20,213,710Accumulated depreciation (9,845,594) (10,123,865)

Net book value 19,117,309 10,089,845

20 PREPAID LAND LEASE PAYMENTS Group Company

In RM 2006 2005 2006 2005(restated) (restated)

At 1 January 20,355,663 8,107,435 8,019,390 8,107,435Additions – 12,394,463 – –Amortisation (227,701) (146,235) (88,045) (88,045)

At 31 December 20,127,962 20,355,663 7,931,345 8,019,390

At 31 December 2006, the unexpired period of lease of the long-term leasehold land of the Company and the subsidiary is 93years (2005: 94 years) and 96 years (2005: 97 years) respectively.

Leasehold land of the Group with a carrying value of RM12,196,617 (2005: RM12,336,273) has been charged as security for long-term borrowings as disclosed in Note 41(iii).

21 PROJECT DEVELOPMENT EXPENDITUREGroup

In RM 2006 2005

At cost:At 1 January 1,163,055,267 367,331,688Additions 882,220,661 795,723,579

2,045,275,928 1,163,055,267Accumulated amortisation (613,208,331) (326,916,316)

At 31 December 1,432,067,597 836,138,951


31 December 2006




22 INVESTMENT IN SUBSIDIARIESCompany

In RM 2006 2005

Unquoted shares, at costAt 1 January 139,923,980 139,923,980Incorporation of subsidiary during the year (Note 22(b)) 70,000 –Additional cost of investment arising from adoption of FRS 2 (Note 38(b)) 1,511,000 –Disposal of partial investment (Note 22 (a)) (9,189,425) –

At 31 December 132,315,555 139,923,980

Details of the subsidiaries are as follows:

Effective Equity Interest Held (%)Name of Subsidiaries 2006 2005 Principal activities

Incorporated in MalaysiaPNSB # 82.5 100 Operation, maintenance, management,

construction, rehabilitation andrefurbishment of water treatment facilities

SYABAS 70 70 Supply and distribution of treated waterwithin Selangor and the Federal Territoriesof Kuala Lumpur and Putrajaya

Puncak Niaga (India) Sdn Bhd * 100 100 Dormant

Puncak Research Centre Sdn Bhd * 100 100 Dormant

Puncak Seri (M) Sdn Bhd * 100 100 Dormant

NS Water System Sdn Bhd * 100 100 Dormant

Puncak Oil & Gas Sdn Bhd 70 – Dormant

Subsidiaries of PNSBIdeal Water Resources Sdn Bhd * 100 100 Temporary ceased operations

Unggul Raya (M) Sdn Bhd * 100 100 Temporary ceased operations

Subsidiary of SYABASPUAS 70 70 Temporary ceased operations

# subsidiary consolidated using merger accounting method* audited by a firm of auditors other than Ernst & Young

a Disposal completed during the financial year ended 31 December 2006

On 19 December 2006, the Company disposed of 17.5% of the ordinary shares in PNSB to ATSB for a total cash considerationof RM306,250,000.


22 INVESTMENT IN SUBSIDIARIES cont’d

a Disposal completed during the financial year ended 31 December 2006 cont’d

Effects of the disposal

The disposal of 17.5% of the ordinary shares in PNSB to ATSB had the following effects on the financial results of the Groupand the Company:

Group CompanyIn RM 2006 2006

Total proceeds 306,250,000 306,250,000Less: Cost of investment (100,370,643) (9,189,425)Less: Cost attributable to the disposal (106,084) (106,084)

Gain on disposal 205,773,273 296,954,491

b Incorporation of subsidiary during the financial year ended 31 December 2006

On 22 March 2006, the Company incorporated a 70% owned subsidiary, Puncak Oil & Gas Sdn Bhd, with an authorised sharecapital of RM50,000,000 divided into 50,000,000 ordinary shares of RM1.00 each and issued and paid-up share capital ofRM100,000 divided into 100,000 ordinary shares of RM1.00 each.

The remaining 30% equity interest in Puncak Oil & Gas Sdn Bhd is owned by Damini Corporation Sdn Bhd.

Effects of the incorporation

i The above incorporation had the following effects on the Group’s financial position:

In RM 2006

Increase in bank balance 59,745Increase in other payables (3,160)

56,585

ii Cash flow effect of the above incorporation of subsidiary is as follows:

In RM 22.3.2006

Cash outflow arising on acquisition: Subscription of shares, satisfied by cash 70,000Cash and cash equivalents of subsidiary acquired (100,000)

Net cash inflow of the Group (30,000)

c Acquisition completed during the financial year ended 31 December 2005

On 8 December 2004, SYABAS had agreed to acquire the entire paid-up share capital of PUAS from KDEB, the attorney forMENTERI BESAR Incorporated (1994) for a cash consideration of RM2.00. The effective date of the acquisition coincides withthe operational date of the Concession Agreement dated 15 December 2004 between SYABAS, the Federal Government andthe State Government, which took effect on 1 January 2005.


31 December 2006


22 INVESTMENT IN SUBSIDIARIES cont’d

c Acquisition completed during the financial year ended 31 December 2005 cont’d

Effects of the acquisition

i The above acquisition had the following effects on the Group’s financial position:

In RM 2005

Investment in associate 300,000 Other receivables 874,359 Cash and bank balances 3,301,652 Holding company (111,452,759) Other payables (4,385,911) Minority interest (1,218,315)

Group’s share of net liabilities (112,580,974)

ii The fair values of the assets acquired and liabilities assumed from the acquisition of the subsidiary were as follows:

In RM 1.1.2005

Investment in associate 300,000Receivables 253,399,542Inventories 8,891,152Cash and bank balances 5,886,820Payables (411,037,213)

Group’s share of net liabilities (142,559,699)Goodwill on acquisition (Note 31) 142,559,701

Cost of acquisition 2

Cash outflow arising on acquisition:Purchase consideration 2

Total cost of acquisition 2

Cash outflow arising on acquisition:Purchase consideration satisfied by cash 2Cash and cash equivalents of subsidiary acquired (5,886,820)

Net cash inflow of the Group (5,886,818)



23 INVESTMENT IN ASSOCIATESGroup Company

In RM 2006 2005 2006 2005

Unquoted shares, at cost 320,000 320,000 20,000 20,000Share of post acquisition reserves (190,687) (84,742) – –Disposal (129,313) – (20,000) –

– 235,258 – 20,000Less: Accumulated impairment losses – – (20,000) (20,000)Write back of accumulated impairment losses upon disposal – – 20,000 –

– 235,258 – –

The Group’s interests in the associates is analysed as follows:Group

In RM 2006 2005

Share of net assets – 235,258

The Group’s share of the revenue and expenses of the investment in associate is as follows:


Revenue 388,196 597,477Expenses (494,141) (662,219)

Loss for the financial year (105,945) (64,742)

Details of the associates are as follows:

Equity Interest Held (%)Name of Associates 2006 2005 Principal activities

Incorporated in MalaysiaNS Water Management Sdn Bhd * – 40 DormantPoly Steel Pipe Sdn Bhd * – 30 To carry out business as trader of steel pipes

* audited by a firm of auditors other than Ernst & Young

Disposals completed during the financial year ended 31 December 2006

a The Company had on 12 September 2006 disposed of 20,000 ordinary shares of RM1.00 each in NS Water Management SdnBhd, representing 40% of the issued and paid-up share capital of NS Water Management Sdn Bhd, for a cash consideration ofRM1,000 only. Upon the disposal, NS Water Management Sdn Bhd ceased to be an associate of the Company.

b PUAS, a wholly-owned subsidiary of SYABAS which in turn is a 70% owned subsidiary of the Company, had on 28 November2006 disposed of 300,000 ordinary shares of RM1.00 each in Poly Steel Pipe Sdn Bhd, representing 30% of the issued andpaid-up share capital of Poly Steel Pipe Sdn Bhd, for a cash consideration of RM150,000 only. Upon the disposal, Poly SteelPipe Sdn Bhd ceased to be an associate of the Group.


31 December 2006


24 INTEREST IN JOINTLY CONTROLLED ENTITYGroup Company

In RM 2006 2005 2006 2005

Advances to jointly controlled entity 11,386,273 9,796,684 11,386,273 9,796,684Less: Allowance for diminution in value of investment – – (2,022,770) (2,022,770)

11,386,273 9,796,684 9,363,503 7,773,914Share of net liabilities of the jointly controlled entity (1,784,469) (2,022,770) – –

9,601,804 7,773,914 9,363,503 7,773,914

The Group and the Company have a 70% interest in an unincorporated jointly controlled entity in India, PNHB-Lanco-KHEC JointVenture, which is presently in the construction industry.

The Group’s share of the net assets and liabilities of the jointly controlled entity is as follows:Group

In RM 2006 2005

Non-current assets 113,064 134,663Current assets 181,273,742 178,744,398Current liabilities (183,171,275) (180,901,831)

Net liabilities (1,784,469) (2,022,770)

The Group’s share of the revenue and expenses of the jointly controlled entity is as follows:Group

In RM 2006 2005

Revenue 1,049,087 6,055,082Expenses excluding taxation (810,786) (4,085,305)

Profit for the financial year 238,301 1,969,777

25 JUNIOR NOTES ACompany

In RM 2006 2005

Nominal value 546,875,000 546,875,000Less: Yield to maturity (370,781,250) (370,781,250)

At cost 176,093,750 176,093,750Cumulative accretion of yield to maturity 143,156,858 103,802,628

319,250,608 279,896,378

Analysed as:Redeemable within 12 months 54,687,500 –Redeemable after 12 months 264,563,108 279,896,378

319,250,608 279,896,378



25 JUNIOR NOTES A cont’d

The Company subscribed for RM546,875,000 nominal value of JNA issued on 20 November 2001 by its subsidiary, PNSB, at anissue price of RM0.322 per RM1.00 nominal value of JNA. The JNA are redeemable, unconvertible, unsecured and substantiallymirror the structure of the RUN issued by the Company. The proceeds of the JNA was utilised to repay RM168,000,000 of PNSB’sMCPs 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 ofissue 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 alloutstanding JNA commencing on the sixth (6th) anniversary of the date of issue of the JNA. On the tenth (10th) anniversaryof the date of issue of the JNA, PNSB has the option to redeem the JNA by paying the principal amount outstanding on thatdate. On the same day, the holders of the JNA also have the option to sell the JNA back to PNSB for a considerationequivalent 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 bythe Company. Accordingly, the proceeds from the coupon payments and redemptions of the JNA would be utilised by theCompany for coupon payments and redemptions of the RUN.

The effective interest rate applicable to the JNA at the balance sheet date was 16.93% (2005: 16.93%) per annum.

26 ADVANCES TO A SUBSIDIARY

The advances to a subsidiary, PNSB, are unsecured, interest free and are not repayable within a period of twelve (12) months fromthe date of the balance sheet.

PNSB had on 8 December 2006, restructured RM320,000,000 shareholders’ advances owing to the Company into a newmarketable security via the issuance of RM435,000,000 nominal value of RUBs to the Company.

Following the above, the Company had subsequently on 19 December 2006 disposed of the RUBs to ATSB for a total considerationof RM418,969,134, satisfied via a cash consideration of RM132,719,134 and the balance being satisfied via the issuance of286,250,000 preference shares with par value of RM0.01 in ATSB at an issue price of RM1.00 each.

27 RCULSCompany

In RM 2006 2005

Unquoted, at cost 135,000,000 -

On 23 February 2006, the Company entered into a Subscription Agreement with SYABAS and KDEB in relation to the issue of upto RM1,045 million nominal value of RCULS by SYABAS. The RCULS will be issued progressively to the Company and KDEB overthe next four (4) years from 2006 to 2009 to finance the operations and capital expenditure requirements of SYABAS under theSYABAS Concession Agreement dated 15 December 2004. The commitment by the Company and KDEB to subscribe for the RCULSare up to RM731.5 million (70%) and RM313.5 million (30%) respectively.

SYABAS had on 9 March 2006 issued RM135.0 million of the RCULS to the Company. Call options were given to KDEB by theCompany to purchase RM40.5 million of the RCULS from the Company at an Option Premium of RM0.1035 for every RM1.00 ofthe RCULS and is payable on 22 February 2007. Interest at the rate of 7% per annum on the nominal value of the RCULS ischarged to KDEB and is payable to the Company on the date of purchase of the RCULS by KDEB or on 22 February 2007,whichever is the earlier.


31 December 2006


27 RCULS cont’d

The RCULS will be redeemed in full by SYABAS on the 21st anniversary of the first issue date at their nominal value.

Each RCULS holder is entitled to exercise its conversion rights to convert the RCULS into new shares in SYABAS at the ConversionPrice of RM1 payable for every new share to be issued pursuant to the conversion of the RCULS or such other price as may beagreed between SYABAS and the relevant RCULS holder prior to the Conversion Date.

Until the RCULS have been redeemed or converted into shares of SYABAS, SYABAS shall pay to the RCULS holders, coupon on thenominal value of the RCULS outstanding at a fixed rate of 7% per annum.


Interest on RCULS receivable from SYABAS (Note 11(a)) – – 7,715,342 –RCULS option premium receivable from KDEB (Note 11(a) and Note 34) 2,314,603 – 2,314,603 –

2,314,603 – 10,029,945 –

28 PREFERENCE SHARESGroup/Company

In RM 2006 2005

Unquoted, at cost 286,250,000 –

During the financial year ended 31 December 2006, PNSB restructured RM320,000,000 shareholders’ advances owing to theCompany into a new marketable security via the issuance of RM435,000,000 nominal value of RUBs to the Company.

Following the above, the Company sold the RUBs to ATSB for a total consideration of RM418,969,134, satisfied via a cashconsideration of RM132,719,134 and the balance being satisfied via the issuance of 286,250,000 preference shares with par valueof RM0.01 in ATSB at an issue price of RM1.00 each.

The maturity date of these preference shares is 10 years from the issue date. The preference shares carries the right to receive acumulative preferential dividend out of the profits of the issuer at a variable rate to be determined by the holder, but subject to amaximum rate of 10%, compounded annually on the issue price of the preference shares.

The preference shares may be redeemable at RM1.00 per share at the option of the issuer, at any time, prior to the maturity date.

The preference shares shall rank pari-passu without any preference or priority among themselves and in priority to otherpreference shares that may be created in the future. The preference shares shall rank in priority to the ordinary shares with regardto dividend payment. The preference shares shall not carry any voting rights except in matters relating to the reduction of capital,winding up or reconstruction of the issuer or any resolution varying or abrogating any of the rights and privileges attached to thepreference shares and do not entitle the holders to any rights, bonus, allotment and/or other distributions save for dividends, thatmay be declared.

The preference shares shall not entitle the Company to participate in the profits or surplus assets over and above the cumulativedividend.



29 DEBT SERVICE RESERVE ACCOUNTGroup

In RM 2006 2005

DSRA maintained in relation to:- RM1,020,000,000 10-Year BAIDS 281,496,755 272,209,530- BAMTN Programme and RM410 million and RM250 million Term Loans 28,111,205 –

309,607,960 272,209,530

i RM1,020,000,000 10-Year BAIDS

Under the terms of agreement for the issue of the RM1,020,000,000 10-Year BAIDS Issuance Facility by its subsidiary, PNSB, adeposit equivalent to twelve (12) months projected payment obligations under the BAIDS that are outstanding at any point intime is required to be placed in a DSRA. This DSRA is maintained with licensed financial institutions. PNSB is not entitled towithdraw any money from the DSRA without prior written consent of the Security Trustee except on condition that the BAIDShave been fully redeemed (Note 41(iii)).

The deposits held in the DSRA is maintained for long-term until the full redemption and expiry of the BAIDS on 27 October2016 (Note 41(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 3.88%(2005: 2.68%).

ii BAMTN Programme and RM410 million and RM250 million Term Loans

Under the terms of the BAMTN Programme and RM410 million and RM250 million Term Loan facility, SYABAS shall ensure thatfunds are deposited in the DSRA until the balance held in the DSRA is at least equivalent to the aggregate of profit in relationto the BAMTN and the facilities under the RM410 million and RM250 million Term Loans which will become due and payable inthe next six months and the outstanding principal of the BAMTN and the facilities under the RM410 million and RM250 millionTerm Loans which will become due and payable in the next 12 months (to be built up in 12 equal monthly instalments duringthe preceding 12 months on a straight line basis). This DSRA is maintained with licensed financial institutions.

The deposits are held for long-term until the full redemption/repayment and expiry of the BAMTN Programme and RM410million and RM250 million Term Loans.

The weighted average effective interest rate applicable to the deposits held in the DSRA for this purpose at the balance sheetdate was 3.23% (2005: Nil).

At the balance sheet date, the carrying amount of the deposits held in the DSRA approximated the fair value.

30 LONG-TERM RECEIVABLES

The long-term receivables represent an amount due from a customer, i.e. State Government, in respect of the supply of bulkquantity of treated water supplied to the State Government. On 3 February 2005, the State Government entered into a NovationAgreement with Serba Tiara, whereby Serba Tiara shall assume and take over the State Government’s obligations to pay to PNSBRM518.566 million in ten (10) annual instalments commencing year 2006.


31 December 2006


31 GOODWILL ON CONSOLIDATIONGroup

In RM 2006 2005

At 1 January 185,811,923 43,252,222Acquisition of subsidiaries (Note 22(c)) – 142,559,701

185,811,923 185,811,923

The above goodwill arises from the acquisitions of SYABAS and PUAS which took place on 15 December 2004 and 1 January 2005respectively. SYABAS took over the operations of PUAS following the privatisation of the water supply services in Selangor andFederal Territories of Kuala Lumpur and Putrajaya to SYABAS on 1 January 2005.

SYABAS and PUAS are identified as one combined CGU. The recoverable amount of this CGU is determined based on value-in-usecalculations using cash flow projections based on financial budgets approved by management covering the entire ConcessionPeriod of 30 years commencing 1 January 2005 to 31 December 2034. A cash flow projections of more than 5 years is used as theDirectors are of the opinion that these projections are sufficiently reliable.

The following describes each key assumption on which management has based its cash flow projections to undertake impairmenttesting of goodwill:

i Tariff increase

The annual rate of tariff increase used in the projections is based on the scheduled tariff and tariff adjustment formula, as setout in the Concession Agreement. It is assumed that the agreed tariff will be gazetted and shall take effect for the applicableoperating period on the relevant tariff adjustment dates.

ii Water purchase costs

The assumptions on the water purchase are made based on the existing agreements with the water treatment operators andwater purchase in the future which have been assessed by the Independent Valuers which will be updated by new studieswhen historical water demand varies significantly from the projected water demand.

For the purpose of the Cash Flow Projections, SYABAS has incorporated escalation rates ranging from 1.50% to 2.50% perannum of the bulk supply rate and fixed capacity payment respectively for projection of the cost of purchasing water fromthe respective water treatment operators.

A growth rate ranging from 2% to 3.7% per annum in the water demand is used in the projection of water purchase costs.The projected water demand has been assessed by the Independent Valuers which will be updated by new studies whenhistorical water demand varies significantly from the projected water demand.

iii NRW

The NRW rate is projected to reduce based on the targets set in the Concession Agreement. The planned reduction of NRW bySYABAS has been assessed by the Independent Valuers which will be updated by new studies when historical water demandvaries significantly from the projected water demand.

iv Capital expenditure

The assumptions on capital expenditure for development and upgrading of distribution system, asset management andreplacement programme and NRW reduction programme have been assessed by the Independent Valuers which will beupdated by new studies when historical water demand varies significantly from the projected water demand.



31 GOODWILL ON CONSOLIDATION cont’d

v Discount rate

The discount rate used in the cash flow projections is 7% per annum.

Sensitivity to changes in assumptions

There are no reasonably possible changes in key assumptions which could cause the carrying value of goodwill on consolidation toexceed its recoverable amount.

32 OTHER INVESTMENTSGroup Company

In RM 2006 2005 2006 2005

Unquoted, at cost 503,261,490 80,910,092 420,000,000 –

Other investments represent fund placements in Islamic Fixed Income Wholesale, AmAl-Amin and Dana Fayyad.

33 INVENTORIESGroup

In RM 2006 2005

At cost:Water treatment chemicals 2,648,984 1,990,084Spare parts and equipment 10,350,036 13,035,528

12,999,020 15,025,612

34 TRADE AND OTHER RECEIVABLESGroup Company

In RM 2006 2005 2006 2005

Trade receivables 251,119,342 292,672,062 – –Less: Allowance for doubtful debts (43,739,858) (72,750,127) – –

207,379,484 219,921,935 – –Progress billings receivable 98,228,645 37,983,128 – –Amount due from customer on construction contract (Note 35) 6,409,182 5,576,162 – –Advances and loans to staff 1,134,813 1,086,177 – –Amounts due from subsidiaries (Note 36) – – 9,288,544 56,535,745Interest receivable 7,769,832 2,268,880 875,507 712RCULS option premium receivable (Note 27) 2,314,603 – 2,314,603 –Amount due from collection agencies 14,041,772 8,656,105 – –Government grant receivable (Note 34(a)) 129,000,000 – – –Sundry receivables (Note 34(b)) 29,868,650 10,690,228 16,222,679 5,204,102Deposits 3,614,398 2,465,887 15,000 500Prepayments 1,172,617 1,910,293 500 13,072

500,933,996 290,558,795 28,716,833 61,754,131


31 December 2006


34 TRADE AND OTHER RECEIVABLES cont’d

The Group’s normal credit term granted is 14 days (2005: 14 days). Other credit terms are assessed and approved on a case-by-case basis.

Following the privatisation of the water supply services in Selangor and the Federal Territories of Kuala Lumpur and Putrajaya toSYABAS on 1 January 2005, the Group no longer has any sole dependency on a single trade customer.

The Group and the Company have the following concentration of credit risk:


i In respect of progress billings receivable (Note 34 (c)) 98,228,645 37,983,128 – –

ii In respect of sundry receivables (Note 34 (d)) – 5,194,103 – 5,194,103

98,228,645 43,177,231 – 5,194,103

a This represents the estimated Government Grant receivable for NRW arising from the delay in water tariff revision.

b Included in sundry receivables of the Group and of the Company is an amount of RM16,222,679, being the proceedsreceivable from the disposal of treasury shares of the Company.

c Progress billings receivable represent the amounts due from a customer on the construction contract undertaken by PNSB, inrelation to the turnkey sub-contract for planning, design, construction, supervision, testing and commissioning of a watersupply scheme in the State of Sabah.

d The Group and the Company’s credit exposure are concentrated mainly on a single debtor in respect of the deposit paid to thisdebtor for a joint-venture project. This amount was fully written off during the financial year ended 31 December 2006.

35 CONSTRUCTION CONTRACTSGroup

In RM 2006 2005

Construction contract costs incurred to date 233,618,034 77,668,833Attributable profits 4,442,644 1,390,457

238,060,678 79,059,290Less: Progress billings (231,651,496) (73,483,128)

Amount due from customer on construction contract (Note 34) 6,409,182 5,576,162

The construction contract is undertaken by a subsidiary, PNSB 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.

36 AMOUNTS DUE FROM/(TO) SUBSIDIARIES

The amounts due from/(to) subsidiaries as disclosed in Note 34 and Note 45 are interest free, unsecured and repayable on demand.



37 DEPOSITS, CASH AND BANK BALANCESGroup Company

In RM 2006 2005 2006 2005

Deposits with licensed banks 1,133,233,358 1,094,503,919 299,100,000 5,000,000Cash and bank balances 70,994,956 132,741,079 3,386,847 326,999

1,204,228,314 1,227,244,998 302,486,847 5,326,999

Included in cash and bank balances of the Group is an amount of RM4,953,569, being deposits held in trust.

Included in the deposits with licensed banks of the Group are restricted monies held for the following purposes:


Ad-hoc Bank Guarantees – 14,026,431Deposits held in trust 63,982,664 30,079,525Designated account for the repayment of DSS II Term Loan (Note 41(ii)) – 11,723,004

63,982,664 55,828,960

Deposits held in trust represents consumers deposits collected by SYABAS with effect from 1 January 2005 following theprivatisation of water supply services in Selangor and the Federal Territories of Kuala Lumpur and Putrajaya.

Included in the deposits with licensed banks of the Group is RM4,484,854 (2005: RM862,619,286), being the deposit placed in anEscrow Account, held as security for the BAMTN (Note 41(v)). These funds are made available for use by SYABAS in its operations,provided that the Debt to Equity Ratio of SYABAS at the time of drawdown is not more than 75:25 from 2005 to 2008, both yearsinclusive and not more than 70:30 from and including 2009 until the expiry of the BAMTN Programme.

The weighted average effective return applicable to deposits with licensed banks at the balance sheet date was 3.40% (2005: 2.66%)per annum.

Deposits of the Group with licensed banks have an average maturity of 66 days (2005: 32 days).

38 SHARE CAPITAL, SHARE PREMIUM, TREASURY SHARES AND EQUITY COMPENSATION RESERVE

Number of OrdinaryShares of RM1.00 each Amount

Share Share Total ShareCapital Capital Capital and Equity

(Issued and Treasury (Issued and Share Share Treasury CompensationNote Fully Paid) Shares Fully Paid) Premium Premium Shares Reserve

RM RM RM RM RM

At 1 January 2005 459,935,000 – 459,935,000 81,448,308 541,383,308 – –

Issued during the

financial year

pursuant to ESOS 38(a) 1,745,000 – 1,745,000 2,230,730 3,975,730 – –

Conversion of warrants 38(a) 1,500,000 – 1,500,000 2,430,000 3,930,000 – –

Purchase of

Treasury Shares 38(c) – (5,808,800) – – – (15,057,236) –

At 31 December 2005 463,180,000 (5,808,800) 463,180,000 86,109,038 549,289,038 (15,057,236) –


31 December 2006


38 SHARE CAPITAL, SHARE PREMIUM, TREASURY SHARES AND EQUITY COMPENSATION RESERVE cont’d


Share Share Total ShareCapital Capital Capital and Equity

(Issued and Treasury (Issued and Share Share Treasury CompensationNote Fully Paid) Shares Fully Paid) Premium Premium Shares Reserve

RM RM RM RM RM

At 1 January 2006 463,180,000 (5,808,800) 463,180,000 86,109,038 549,289,038 (15,057,236) –Issued during the financial year pursuant to ESOS 38(a) 18,240,000 – 18,240,000 25,241,250 43,481,250 – –

Conversion of warrants 38(a) 105,926,993 – 105,926,993 171,601,729 277,528,722 – –Share options grantedunder ESOS – – – – – – 1,511,000

Options exercised byemployees – – – 1,456,574 1,456,574 – (1,484,336)

Purchase of Treasury Shares 38(c) – (12,692,100) – – – (32,916,156) –

Sale of Treasury Shares 38(c) – 6,165,300 – 2,515,311 2,515,311 15,986,623 –

At 31 December 2006 587,346,993 (12,335,600) 587,346,993 286,923,902 874,270,895 (31,986,769) 26,664


2006 2005 2006 2005RM RM

Authorised:At 1 January 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000Created during the financial year 300,000,000 – 300,000,000 –

At 31 December 1,300,000,000 1,000,000,000 1,300,000,000 1,000,000,000

a Ordinary Shares

During the financial year, the Company increased its authorised share capital from RM1,000,000,000 divided into1,000,000,000 shares to RM1,300,000,000 divided into 1,300,000,000 shares.

During the financial year, the Company increased its issued and fully paid-up ordinary share capital from RM463,180,000 toRM587,346,993 by way of:

i Issuance of 18,240,000 ordinary shares of RM1.00 each for cash pursuant to the Company’s ESOS at exercise prices ofbetween RM2.04 and RM3.27 per ordinary share. These new ordinary shares issued during the financial year rank pari-passu in all respects with the existing ordinary shares of the Company except that they shall not be entitled to thedividend declared and paid prior to the issuance.

The remaining 1,219,000 units of share options which were not exercised by the expiry date, 24 February 2007, had lapsedand become void and accordingly, ceased to be exercisable thereafter.

ii Issuance of 105,926,993 ordinary shares of RM1.00 at RM2.62 per share arising from the conversion of 105,926,993 unitsof Warrants (Expiry date: 20 November 2006). These shares rank pari-passu in all respects with the existing ordinary sharesof the Company except that they shall not be entitled to the dividend declared and paid prior to the conversion.

The remaining 1,947,876 units of warrants which were not exercised by the expiry date, 20 November 2006, had lapsedand become void and accordingly, ceased to be exercisable after the expiry date.




31 December 2006



b ESOS

The ESOS of the Company, governed by the ESOS Bye-Laws, was principally approved by the shareholders of the Company at theExtraordinary General Meeting of the Company held on 26 June 2001 and became effective following the implementation by theCompany on 25 February 2002. The ESOS shall be in force for a duration of five (5) years commencing from 25 February 2002.

The salient features of the ESOS are as follows:

i The ESOS is set up for the participation in ordinary shares of the Company only. The maximum number of new ordinaryshares which may be made available under the ESOS shall not exceed 10% of the total issued and paid-up ordinary sharesof the Company at the point in time when an offer is made.

ii Eligible employees are those who have been in service of the Group for a continuous period of at least one (1) yearincluding full-time Executive Directors who are involved in the day-to-day management and on the payroll of the Group.

iii The ESOS is administered by the Options Committee which comprise the following Executive Directors of the Company:

a Tan Sri Rozali bin Ismail b Dato’ Matlasa bin Hitam c Syed Danial bin Syed Ariffin d Tan Seng Lee

iv The share options granted under the ESOS may be exercised by the grantee by notice in writing to the Company duringthe period commencing from the date of offer and before the expiry of the ESOS on 24 February 2007.

v The exercise price of the share options at which the eligible employees are entitled to subscribe for the ordinary shares ofRM1.00 each in the Company under the ESOS is the weighted average market price of the shares of the Company asquoted in the daily official list issued by the Bursa Securities for the five (5) market days immediately preceding therespective dates of offer subject to a discount of not more than 10%, or at the par value of the ordinary shares of theCompany of RM1.00 each, whichever is higher.

vi The eligible employees to whom the share options have been granted has no right to participate, by virtue of the shareoptions, in any share issue of any other company within the Group.

vii The new ordinary shares issued arising from the ESOS shall rank pari-passu in all respects with the then existing ordinaryshares of the Company except that they shall not be entitled to any dividends, rights, allotments and/or otherdistributions, the entitlement date of which is prior to the date of allotment of the said new ordinary shares.

viii 1,219,000 units of share options which were not exercised by the expiry date, 24 February 2007, had lapsed and becomevoid and accordingly, ceased to be exercisable thereafter.

Details of share options outstanding at the end of the year:

WAEP Exercised Period

20062002 Options 2.38 28.2.2002 - 24.2.20072003 Options 2.32 28.2.2003 - 24.2.20072004 Options 2.81 28.2.2004 - 24.2.20072005 Options 2.51 28.2.2005 - 24.2.20072006 Options 2.31 28.2.2006 - 24.2.2007

20052002 Options 2.38 28.2.2002 - 24.2.20072003 Options 2.32 28.2.2003 - 24.2.20072004 Options 2.81 28.2.2004 - 24.2.20072005 Options 2.51 28.2.2005 - 24.2.2007


b ESOS cont’d

Number of share options vested at balance sheet date:2006 2005

At 1 January 9,312,000 2,657,000At 31 December 1,219,000 9,312,000

The movements of the share options over the ordinary shares of RM1.00 each of the Company granted under the ESOS duringthe financial year are as follows:

Number of Share Options over Ordinary Shares of RM1.00 EachDate of Exercise Outstanding Exercisable

share option price per At at atTranche granted share option 1 January Granted Exercised Lapsed * 31 December 31 December

RM

20061 26.2.2002 2.37 9,177,000 – (8,771,000) (163,000) 243,000 243,0002 26.8.2002 2.47 430,000 – (430,000) – – –3 26.2.2003 2.13 638,000 – (514,000) (98,000) 26,000 26,0004 26.8.2003 2.71 623,000 – (623,000) – – –5 26.2.2004 3.27 785,000 – (30,000) – 755,000 755,0006 26.8.2004 2.04 414,000 – (414,000) – – –7 26.2.2005 2.56 2,733,000 – (2,332,000) (365,000) 36,000 36,0008 26.8.2005 2.40 1,351,000 – (1,186,000) (85,000) 80,000 80,0009 26.2.2006 2.33 – 2,307,000 (2,131,000) (169,000) 7,000 7,00010 26.8.2006 2.28 – 1,889,000 (1,809,000) (8,000) 72,000 72,000

16,151,000 4,196,000 (18,240,000) (888,000) 1,219,000 1,219,000

WAEP 2.45 2.31 2.38 2.42

20051 26.2.2002 2.37 11,537,000 – (1,076,000) (1,284,000) 9,177,000 9,177,0002 26.8.2002 2.47 676,000 – (51,000) (195,000) 430,000 430,0003 26.2.2003 2.13 947,000 – (270,000) (39,000) 638,000 638,0004 26.8.2003 2.71 776,000 – (15,000) (138,000) 623,000 623,0005 26.2.2004 3.27 995,000 – – (210,000) 785,000 785,0006 26.8.2004 2.04 751,000 – (323,000) (14,000) 414,000 414,0007 26.2.2005 2.56 – 3,041,000 (3,000) (305,000) 2,733,000 2,733,0008 26.8.2005 2.40 – 1,351,000 – – 1,351,000 1,351,000

15,682,000 4,392,000 (1,738,000) (2,185,000) 16,151,000 16,151,000

WAEP 2.42 2.51 2.28 2.51 2.45

* Due to resignation or offers not taken up




b ESOS cont’d

Details of share options exercised during the financial year and the fair value, at the exercise date, of ordinary shares issuedare as follows:

Fair value of Exercise priceshares at per share Number of shares issued

Exercise date exercise date option 2006 2005RM RM

January 2005 2.97 - 3.10 2.04 - 2.71 – 526,000February 2005 2.96 2.04 - 2.37 – 63,000March 2005 2.53 - 2.72 2.04 - 2.37 – 333,000April 2005 2.64 2.04 - 2.37 – 9,000May 2005 2.66 - 2.79 2.04 - 2.56 – 257,000June 2005 2.49 - 2.60 2.13 - 2.37 – 35,000July 2005 2.77 2.13 - 2.47 – 21,000August 2005 2.28 2.04 - 2.37 – 25,000September 2005 2.30 - 2.50 2.04 - 2.37 – 106,000October 2005 2.70 - 2.75 2.04 - 2.47 – 247,000November 2005 2.49 2.04 - 2.47 – 123,000January 2006 2.54 2.04 6,000 –February 2006 2.60 - 2.62 2.13 - 2.37 189,000 –March 2006 2.63 - 2.74 2.04 - 2.71 549,000 –April 2006 2.75 - 2.76 2.04 - 2.37 304,000 –May 2006 2.70 - 2.73 2.04 - 2.37 823,000 –June 2006 2.54 2.13 - 2.47 91,000 –July 2006 2.53 - 2.60 2.13 - 2.71 75,000 –August 2006 2.52 - 2.59 2.04 - 2.71 93,000 –September 2006 2.51 - 2.80 2.04 - 2.37 63,000 –October 2006 2.89 2.04 - 2.56 4,821,000 –November 2006 2.83 - 3.04 2.04 - 2.71 5,355,000 –December 2006 3.04 - 3.14 2.04 - 3.27 5,871,000 –

18,240,000 1,745,000

The additions to the share capital and share premium relating to share options exercised during the financial year are as follows:

In RM 2006 2005

Ordinary share capital - at par 18,240,000 1,745,000Share premium 25,241,250 2,230,730

Proceeds received on exercise of share options 43,481,250 3,975,730

Fair value at exercise date of share issue 53,159,730 4,807,500


31 December 2006



b ESOS cont’d

The fair value of share options granted during the year was estimated by an external valuer using binomial lattice model,taking into account the terms and conditions upon which the options were granted. The fair value of share options measuredat grant date and the assumptions are as follows:

2006

Fair value of share options at the following grant dates (RM) - 22 February 2006 0.402- 22 August 2006 0.330Risk-free interest rate (%) - for options granted on 22 February 2006 3.4- for options granted on 22 August 2006 3.7Expected dividend yield (%) - for options granted on 22 February 2006 3.5- for options granted on 22 August 2006 2.5Volatility of PNHB shares (%) 30Rate of leaving service of eligible employees after vesting date (%) 6.3

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that mayoccur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which mayalso not necessarily be the actual outcome. No other features of the option granted were incorporated into the measurementof fair value.

Prior to 1 January 2006, no compensation expense was recognised in income statement for the share options granted. Withthe adoption of FRS 2, the compensation expense relating to share options is recognised in the income statement over thevesting periods of the grants with a corresponding increase in equity. The total amount to be recognised as compensationexpense is determined by reference to the fair value of the share options at the date of the grant and the number of shareoptions to be vested by vesting date.

Under the transitional provisions of FRS 2, this FRS must be applied to share options that were granted after 31 December2004 and had not yet vested on 1 January 2006. In this respect, there is no financial impact for share options granted by theCompany after 31 December 2004 but before 31 December 2005 as the share options were vested before 1 January 2006.

The effect of the revised policy due to the adoption of FRS 2 is a decrease in the profit for the year and retained earnings ofRM1,511,000.

The movements in the Equity Compensation Reserve are as follows:

Group/Company In RM Note 2006 2005

At 1 January – –Share options granted under ESOS 13 1,511,000 –Options exercised by employees (1,456,574) –Options lapsed (27,762) –

At 31 December 26,664 –




c Treasury Shares

On 28 June 2005, the shareholders of the Company at the Extraordinary General Meeting of the Company approved theCompany’s proposal to repurchase its own shares of up to 10% of its issued and paid-up share capital. The Directors of theCompany are committed to enhance the value of the Company for its shareholders and believe that the repurchase proposalcan be applied in the best interests of the Company and its shareholders.

During the financial year ended 31 December 2006, the Company had purchased a total of 12,692,100 ordinary shares of itsissued and fully paid-up share capital from the open market for a total consideration of RM32,916,156 at an average cost ofRM2.59 per share. The acquisition of shares was financed by internally generated funds.

During the financial year ended 31 December 2006, the Company sold 6,165,300 treasury shares in the open market for atotal consideration of RM18,501,934 at an average re-sale price of RM3.00 per share.

Of the total 587,346,993 (2005: 463,180,000) issued and paid-up ordinary shares, 12,335,600 (2005: 5,808,800) are held astreasury shares by the Company. The number of outstanding ordinary shares in issue and fully paid is therefore 575,011,393(2005: 457,371,200) ordinary shares of RM1.00 each.

Subsequent to the financial year ended 31 December 2006, the Company sold all the remaining 12,335,600 treasury shares inthe open market for a total consideration of RM39,364,456 at an average re-sale price of RM3.19 per share.

39 RETAINED EARNINGS

As at 31 December 2006, the Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 to frank thepayment of dividends amounting to RM10,776,000 (2005: entire retained earnings) out of its retained earnings. If the balance ofthe retained profit of RM387,653,828 (2005: Nil) were to be distributed as dividends prior to there being sufficient tax credit, theCompany would have a Section 108 shortfall of approximately RM104,666,534 (2005: Nil).

40 HIRE-PURCHASE PAYABLESGroup

In RM 2006 2005

Minimum lease payments:Payable within one year 4,798,941 2,916,204Payable between one and two years 4,354,818 2,677,256Payable between two and five years 7,017,881 4,160,843

16,171,640 9,754,303Less: Finance cost (1,770,761) (1,070,300)

14,400,879 8,684,003

Present value of finance lease payables:Payable within one year 3,959,965 2,424,268Payable between one and two years 3,815,770 2,359,443Payable between two and five years 6,625,144 3,900,292

14,400,879 8,684,003


31 December 2006


40 HIRE-PURCHASE PAYABLES cont’dGroup

In RM 2006 2005

Analysed as:Payable within 12 months 3,959,965 2,424,268Payable after 12 months 10,440,914 6,259,735

14,400,879 8,684,003

The weighted average effective interest rate per annum applicable to hire-purchase payables as at balance sheet date were as follows:

Weighted average effective interest rate

In % 2006 2005

Hire-purchase payables 2.68 2.64

41 BORROWINGS

Analysis of borrowings:Total carrying Maturity profile

In RM amount < 1 year 1 - 2 years 2 - 5 years > 5 years

GroupAs at 31 December 2006

Secured:Government Support Loan (Note 41 (i)) 79,846,592 6,234,218 6,421,218 20,442,848 46,748,308BAIDS (Note 41 (iii)) 1,009,293,591 180,000,000 180,000,000 300,000,000 349,293,591RUN (Note 41 (iv)) 315,660,085 54,687,500 54,687,500 164,062,500 42,222,585BAMTN (Note 41 (v)) 998,104,875 – – – 998,104,875RM410 million and RM250 millionTerm Loans (Note 41 (vi)) 89,587,513 – – – 89,587,513

RUBs (Note 41 (vii)) 416,195,317 – – – 416,195,317

Total borrowings 2,908,687,973 240,921,718 241,108,718 484,505,348 1,942,152,189Less: Short-term borrowings classified

under current liabilities (240,921,718)

Long-term borrowings 2,667,766,255



41 BORROWINGS cont’d

Analysis of borrowings cont’d:Total carrying Maturity profile

In RM amount < 1 year 1 - 2 years 2 - 5 years > 5 years

GroupAs at 31 December 2005

Secured:Government Support Loan (Note 41 (i)) 85,899,231 6,052,639 6,234,218 19,847,425 53,764,949DSS II Term Loan (Note 41 (ii)) 11,723,004 11,723,004 – – –BAIDS (Note 41 (iii)) 1,012,696,373 – 180,000,000 480,000,000 352,696,373RUN (Note 41 (iv)) 275,685,085 – 54,687,500 164,062,500 56,935,085BAMTN (Note 41 (v)) 995,139,871 – – – 995,139,871RM410 million and RM250 million Term Loans (Note 41 (vi)) 6,151,139 – – – 6,151,139

2,387,294,703 17,775,643 240,921,718 663,909,925 1,464,687,417Unsecured:Revolving Credit 27,300,000 27,300,000 – – –

Total borrowings 2,414,594,703 45,075,643 240,921,718 663,909,925 1,464,687,417

Less: Short-term borrowings classified under current liabilities (45,075,643)

Long-term borrowings 2,369,519,060

CompanyAs at 31 December 2006

Secured:RUN (Note 41 (iv)) 319,250,608 54,687,500 54,687,500 164,062,500 45,813,108

Less: Short-term borrowings classified under current liabilities (54,687,500)

Long-term borrowings 264,563,108

As at 31 December 2005

Secured:RUN (Note 41 (iv)) 279,896,378 – 54,687,500 164,062,500 61,146,378


31 December 2006



Analysis of borrowings cont’d:

The BAIDS, RUN, BAMTN and RUBs are further analysed as follows:

Group Group BAIDS RUN

In RM 2006 2005 2006 2005

Nominal value 1,020,000,000 1,020,000,000 546,875,000 546,875,000Less: Yield to maturity (10,532,693) (10,532,693) (370,781,250) (370,781,250)

Proceeds from issue 1,009,467,307 1,009,467,307 176,093,750 176,093,750Less: Debt issuance expenses * (4,552,312) (4,552,312) (5,848,665) (5,848,665)

Net proceeds 1,004,914,995 1,004,914,995 170,245,085 170,245,085

Accreted finance cost 4,378,596 7,781,378 145,415,000 105,440,000

1,009,293,591 1,012,696,373 315,660,085 275,685,085

Group Group BAMTN RUBs

In RM 2006 2005 2006 2005

Nominal value 1,030,000,000 1,030,000,000 435,000,000 –Less: Yield to maturity (29,770,500) (29,770,500) (16,030,866) –

Proceeds from issue 1,000,229,500 1,000,229,500 418,969,134 –Less: Debt issuance expenses * (5,820,539) (5,820,539) (3,673,817) –

Net proceeds 994,408,961 994,408,961 415,295,317 –

Accreted finance cost 3,695,914 730,910 900,000 –

998,104,875 995,139,871 416,195,317 –

* Included in the debt issuance expenses are reporting accountants fees incurred as disclosed in Note 12.

Company RUN

In RM 2006 2005

Nominal value 546,875,000 546,875,000Less: Yield to maturity (370,781,250) (370,781,250)

Proceeds from issue 176,093,750 176,093,750

Accreted finance cost 143,156,858 103,802,628

319,250,608 279,896,378




All the borrowings carry fixed interest rates except for the MCPs and revolving credit.

i Government Support Loan

The Government Support Loan which was obtained from the Federal Government in 1998 to finance the construction of theWangsa Maju Water Treatment Plant and its related facilities, is repayable in equal annual instalments over a period of twenty(20) years commencing on 11 April 1999. It is secured on all money standing to the credit of the Special Project Account. Theinterest rate is fixed at 3% (2005: 3%) per annum on the outstanding balance of the loan amount.

On 11 April 2004, the Federal Government restructured the Government Support Loan by reducing the interest rate to 3% perannum retrospectively and accordingly revised the repayment schedule of the loan.

ii DSS II Term Loan

The Term Loan to finance the DSS II project is repayable in five (5) unequal instalments commencing on 31 October 2001 andthereafter annually beginning on 2 January 2003. The Term Loan is secured via the assignments of DSS II constructioncontract and project account, proceeds from the DSS II project and the designated account, contractors’ performance bondand insurance policies on the DSS II project. Interest is payable semi-annually and fixed at 7.6% (2005: 7.6%) per annum.

This Term Loan was fully repaid during the financial year ended 31 December 2006.

iii BAIDS/MCPs/MMTNs

On 12 October 2000, PNSB entered into several agreements with United Overseas Bank (Malaysia) Bhd and various parties toraise RM1,020,000,000 10-Year BAIDS and RM350,000,000 MCPs/MMTNs Issuance Facility. Subsequently, on 28 October 2000,PNSB issued the entire BAIDS and RM120,000,000 of the MCPs, the proceeds of which were utilised mainly to repay in full theRevolving Underwriting 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. The non-detachable BAIDS secondary bonds are redeemable semi-annually from the date the primary bonds were issued.

On 19 October 2005, the holders of the BAIDS approved the proposed extension of the BAIDS with the following variations tothe BAIDS:

i extension of the tenure of the BAIDS with a put and call option for redemptions attached, exercisable on the originalmaturity dates of the BAIDS as follows:

Series 1 - From 27 October 2005 to 27 October 2015 Series 2 - From 27 October 2006 to 27 October 2016 Series 3 - From 27 October 2007 to 27 October 2011 Series 4 - From 27 October 2008 to 27 October 2012 Series 5 - From 27 October 2009 to 27 October 2013 Series 6 - From 27 October 2010 to 27 October 2014

ii revision of the profit payment in respect of the BAIDS for the extended tenures.


31 December 2006



iii BAIDS/MCPs/MMTNs cont’d

iii allowing PNSB to apply monies in the DSRA for undertaking certain forms of permitted investments.

PNSB has obtained the approval from the Securities Commission on 19 December 2005 to revise the tenure of the BAIDS.

The MCPs/MMTNs were fully repaid in January and April 2005 respectively. The tender rates ranged between 2.79% and 2.81%per annum during the financial year ended 31 December 2005.

On 2 November 2005, PNSB obtained approval from the Securities Commission on the extension of the tenure and availabilityperiod of the RM350,000,000 MCPs/MMTNs Issuance Facility. Pursuant to the Securities Commission’s approval, the tenureand availability period of the MCPs/MMTNs has been extended from five (5) to seven (7) years, expiring on 11 October 2007.

The facilities for the BAIDS and MMTNs are secured by way of deposit of an aggregate sum in the DSRA equivalent to twelve(12) months projected payment obligations under the BAIDS and MMTNs that are outstanding at any point in time. PNSB is notentitled to withdraw any money from the DSRA without prior consent from the Security Trustee except on condition that theBAIDS and MMTNs have been fully redeemed. In addition, the facilities are also secured by fixed charges over all assets of PNSB,the rights of PNSB under the Concession Agreements, construction contracts and project agreements undertaken by PNSB.

No dividend will be declared and paid by PNSB where inter-alia:

a the outstanding balance in the DSRA is less than 1.0 time of the aggregate quantum of the Issuer’s payment obligationsunder the BAIDS and MMTNs for a period of twelve (12) months commencing from the date on which the dividend iscontemplated; or

b the Annual Debt Service Cover Ratio and the Forward Debt Service Cover Ratio are less than 1.7 times.

PNSB will also be required to maintain the following financial ratios, which will be measured annually commencing on 31December 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 RUN

On 20 November 2001, the Company issued RM546,875,000 Nominal Value 15-Year RUN with 109,374,869 free detachablewarrants at an issue price of RM0.322 per RM1.00 nominal value of RUN on the basis of RM5.00 nominal value of RUN withone (1) free warrant for every four (4) existing ordinary shares of RM1.00 each held in the Company. The RUN was offered tothe entitled shareholders and is constituted by a Trust Deed dated 5 September 2001. The RM176,000,000 proceeds from RUNissue was immediately utilised to subscribe for the JNA issued by PNSB. PNSB subsequently, utilised the proceeds to repayRM168,000,000 of its MCPs with the remaining balance utilised for its working capital purposes.

The main features of the RUN and the 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 ofthe issue of the RUN and 3.5% per annum payable semi-annually thereafter for the next five (5) years.




iv RUN cont’d

b The Company shall redeem the RUN in ten (10) equal instalments each comprising 10% of the aggregate nominal value ofall 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 principalamount outstanding on that date. On the same day, the holders of the RUN also have the option to sell the RUN back tothe 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 Bursa Securities.

d The RUN is secured on the JNA issued by PNSB. The Company is required to create a security account to receive onlyproceeds from coupon payment and redemption of the JNA by PNSB, and thereafter to pay the coupon payment andredemption 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 theperiod commencing one (1) day after the date of issue of the warrants and ending on the date being five (5) years from thedate of the issue of the warrants (“exercise period”). The exercise price of the warrants is RM2.62 per new ordinary share ofthe Company subject to adjustments under certain circumstances in accordance with the provisions of the Deed Poll dated5 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 allrespects with the then existing ordinary shares of the Company except that they shall not be entitled to any dividends, rights,allotments and/or 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 BACP Programme/BAMTN Programme

On 19 September 2005, SYABAS entered into several agreements with a consortium of banks comprising BIMB, CIMB Bank,CIMB and HSBC in respect of the issue up to RM200 million nominal value BACP Programme and up to RM3 billion nominalvalue BAMTN Programme.

On 30 September 2005, SYABAS completed the first issuance of the BAMTN with an aggregate nominal value of RM1.03 billioncomprising:

i An eight-year RM310 million nominal value tranche;

ii A nine-year RM200 million nominal value tranche;

iii A ten-year RM200 million nominal value tranche; and

iv An eleven-year RM320 million nominal value tranche.

The BAMTN will mature beginning 30 September 2013 and on an annual basis, for each series issued.


31 December 2006



v BACP Programme/BAMTN Programme cont’d

SYABAS is required to maintain the following financial ratios:

i Debt to Equity Ratio of not more than 75:25 from 2005 to 2008, both years inclusive and not more than 70:30 from andincluding 2009 until the expiry of the BAMTN Programme; and

ii Finance Service Cover Ratio of not less than 1.25 times from 2005 to 2008, both years inclusive and not less than 1.50times from and including 2009 until the expiry of the BAMTN Programme.

BACP/BAMTN are sharing the same securities as listed in Note 41(vi). In addition, the BACP/BAMTN are also secured by way ofthe rights over the Escrow Account and the monies standing to the credit thereof.

SYABAS is restricted from declaring and paying any dividends:

i an Event of Default has occurred, is continuing and has not been waived, or if following such payment or distribution anEvent of Default would occur; or

ii the Finance Service Cover Ratio is breached or will be breached if calculated immediately following such payment ordistribution; or

iii the Debt to Equity Ratio is breached or will be breached if calculated immediately following such payment or distribution; or

iv the balance outstanding to the credit of the DSRA both before and after the payment is less than the Minimum Required Balance;

provided that conditions (ii) and (iv) shall not be applicable to dividends paid on RPS from year 2015 onwards.

vi RM410 million and RM250 million Term Loans

SYABAS obtained Term Loan facilities of up to RM410 million and RM250 million from BPMB to part finance the capitalexpenditure and the Non Revenue Water reduction programmes (including the operation, maintenance, development andupgrading of the water distribution system over a period of 30 years) respectively.

These Term Loan are repayable as follows from the date of the first drawndown:

RM410 million RM250 millionIn RM Term Loan Term Loan

Month 204 73,240,000 50,000,000Month 216 77,380,000 50,000,000Month 228 81,750,000 50,000,000Month 240 86,370,000 50,000,000Month 252 91,260,000 50,000,000

410,000,000 250,000,000




vi RM410 million and RM250 million Term Loans cont’d

The above Term Loans are secured via the following:

- A debenture incorporating fixed and floating charges over all present and future assets of SYABAS, both movable and immovable;

- Assignment of all rights, titles and benefits under the Concession Agreement;

- Assignment of all contractual rights, titles and benefits under the Construction Contract (excluding the performance bonds); and

- Assignment over the Designated Accounts (Collection Account, Operating Account, BPMB Disbursement Account, DSRA andLand Use Charges Reserve Account).

Interest is payable annually at the rate of 5.65% (2005: 5.65%) per annum.

vii RUBs

During the financial year ended 31 December 2006, PNSB restructured RM320,000,000 shareholders’ advances owing to theCompany into a new marketable security via the issuance of RM435,000,000 nominal value of RUBs to the Company.

Following the above, the Company sold the RUBs to ATSB for a total consideration of RM418,969,134, satisfied via a cashconsideration of RM132,719,134 and the balance being satisfied via the issuance of 286,250,000 preference shares with parvalue of RM0.01 in ATSB at an issue price of RM1.00 each. The disposal of the RUBs to ATSB effectively resulted in the Groupraising additional borrowings of RM418,969,134 on initial recognition, which will be subsequently measured at amortised costusing the effective interest method.

The maturity date of the RUBs is 10 years from the issue date. The RUBs shall bear the following coupon rate payable semi-annually in arrears on the amounts outstanding:

From issue date to Year 5 : 5.50% per annumAfter Year 5 to Year 10 : 11.00% per annum

Unless previously redeemed, purchased and cancelled, the RUBs shall be redeemed by the issuer at par or at its respectivenominal value on the maturity date.

viii Effective Interest Rates

The effective interest rates per annum applicable to the borrowings at the balance sheet date were as follows:

Effective interest rate per annum

In % 2006 2005

GroupGovernment Support Loan 3.00 3.00 DSS II Term Loan – 7.60 BAIDS 5.00 - 8.20 5.00 - 8.00 MCPs/MMTNs – 2.79 - 2.81 RUN 16.93 16.93 BAMTN 5.00 - 6.00 5.00 - 6.00 RM410 million and RM250 million Term Loans 5.65 5.65 RUBs 8.25 –

CompanyRUN 16.93 16.93


31 December 2006


42 LONG-TERM PAYABLES

Pursuant to the Supplemental Agreement to the Government Support Loan Agreement, the amount of interest payable as at 11April 2004 is to be made over a period of one hundred and forty four (144) months commencing April 2005. The amount payable atthe end of the financial year are as follows:


Amount payable within 12 months (included in finance cost payable - Note 45 (a)) 1,632,433 1,632,433Amount payable after 12 months 16,324,334 17,956,767

17,956,767 19,589,200

43 DEFERRED TAXATION

The components and movements of deferred tax assets and liabilities during the financial year prior to offsetting are as follows:

Consolidated Consolidated Balance Sheet Income Statement

In RM 2006 2005 2006 2005

Deferred tax assetsTax losses (238,547,925) (163,298,437) (75,249,488) (94,369,121)Trade receivables (2,524,631) – (2,524,631) –Other payables (7,272,239) (1,762,232) (5,510,007) (1,762,232)

(248,344,795) (165,060,669) (83,284,126) (96,131,353)

Deferred tax liabilitiesProperty, plant and equipment 313,891,643 335,561,583 (21,669,940) 64,761,685Project development expenditure 251,191,840 156,428,259 94,763,581 87,327,785Interest receivable 2,005,989 300,445 1,705,544 206,196

567,089,472 492,290,287 74,799,185 152,295,666

Deferred tax liabilities 318,744,677 327,229,618 (8,484,941) 56,164,313

Company Company Balance Sheet Income Statement

In RM 2006 2005 2006 2005

Deferred tax liabilitiesInterest receivable 2,005,989 – 2,005,989 –

2,005,989 – 2,005,989 –

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefitthrough the future taxable profits is available. The Directors are of the opinion that the Group will be able to reduce tax payablein view of future profits and benefits accruing to the Group from the existing water concessions which have been awarded to theGroup (Note 3) to which the deferred tax asset relates. The tax losses have no expiry date.



43 DEFERRED TAXATION cont’d

Deferred tax assets have not been recognised as follows:Group Company

In RM 2006 2005 2006 2005

Deductible temporary differences – 5,600 – 5,600Tax losses and capital allowances 527,386 527,386 – –

527,386 532,986 – 5,600

44 GOVERNMENT GRANT

The government grant of RM250,000,000 (2005: RM3,102,907) was received by SYABAS in consideration of SYABAS performing itsobligations under the Concession Agreement. This grant is used solely for the purpose of financing the cost and expenditure ofthe NRW. NRW refers to such part of the works undertaken by SYABAS for the purposes of reducing non-income generatingunaccountable water loss, and the cost and expenditure of which will be paid for from the grant.


Government grant received 250,000,000 3,102,907Less: Amortisation (Note 11(a)) (409,687) –

249,590,313 3,102,907

45 TRADE AND OTHER PAYABLESGroup Company

In RM 2006 2005 2006 2005

Trade payables 220,704,851 194,409,354 – –Amounts due to contractors 97,980,665 22,001,180 – –Amount due to a subsidiary (Note 36) – – 99,138,057 36,655,355Finance cost payable (Note 45(a)) 36,191,399 32,113,715 1,573,202 1,535,744Deposit from consumers 315,321,550 300,799,783 – –Accruals (Note 45(b)) 187,145,246 233,072,346 725,232 108,153

857,343,711 782,396,378 101,436,491 38,299,252

The credit term of the trade payables granted to the Group is 30 days (2005: 30 days).

a Included in the finance cost payable of the Group is an amount of RM1,632,433 (2005: RM1,632,433), being the short-termportion of the interest payable by PNSB pursuant to the Supplemental Agreement to the Government Support LoanAgreement, as disclosed in Note 42.

b Included in accruals of the Group is an amount of RM21,000 (2005: RM21,000), which is amount due to a subsidiary ofCPMSB, a substantial corporate shareholder of the Company.


31 December 2006


46 NET CASH GENERATED FROM OPERATIONSGroup Company

In RM 2006 2005 2006 2005

Net profit for the financial year 331,601,953 99,259,577 399,460,814 15,465,604Adjustments for:Depreciation of property, plant and equipment 20,123,685 10,174,163 136,167 –Amortisation of prepaid land lease payments 227,701 146,235 88,045 88,045Amortisation of project development expenditure 286,292,015 226,424,285 – –Depreciation of concession assets 11,039,882 8,700,561 – –Accretion of finance cost 40,437,222 34,057,287 39,354,230 32,676,235Interest on hire-purchase 896,439 524,154 – –Gain on disposal of property, plant and equipment (602,158) (247,001) – –Allowance for diminution in value of investment injointly controlled entity – – – 2,022,770

Allowance for doubtful debts – 5,074,636 – –Debts written off 27,107,548 135,483 5,000,000 –Bad debts recovered (2,696,689) – – –Write back of allowance for doubtful debts (19,430,929) – – –Gain on disposal of RUBS – – (98,969,134) –Gain on partial disposal of subsidiary (205,773,273) – (296,954,491) –Gain on disposal of associate (1,000) – (1,000) –Loss on disposal of associate 30,519 – – –Taxation (4,749,343) 58,307,844 4,049,688 7,627,494Share of results of- associate 105,945 64,742 – –- jointly controlled entity (238,301) (1,969,777) – –Minority interest 40,422,901 39,277,982 – –Amortisation of deferred government grant (409,687) – – –Interest income (48,235,324) (24,363,907) (64,211,537) (46,914,903)Interest expense 153,673,455 108,679,162 13,671,875 14,225,135Share options granted under ESOS 1,511,000 – – –Changes in working capital:- Receivables (172,665,535) 374,528,282 25,839,074 (10,547,282)- Payables (482,819,354) (500,662,497) (26,502,920) 2,734,535

Net cash (used in)/ generated from operations (24,151,328) 438,111,211 960,811 17,377,633



47 RELATED PARTY TRANSACTIONS AND BALANCES

a Transactions with related party

The related party transactions undertaken in the normal course of business are on terms and prices agreed with the respectiverelated parties. The related party transactions during the financial year are as follows:


Secretarial fees charged by RZ Management Services Sdn Bhd 240,000 240,000

RZ Management Services Sdn Bhd is a Director related corporation. Related party balances which arose from the above relatedparty transactions and remained outstanding at the balance sheet date are as follows:


Related party payable Type of transactionRZ Management Services Sdn Bhd Secretarial fees 21,000 21,000

b Compensation of key management personnelGroup Company

In RM 2006 2005 2006 2005

Short-term employee benefits 7,223,962 6,999,702 227,000 401,000Defined contribution plan 1,125,517 1,065,306 – –Other staff related expenses 1,545,044 2,025,280 153,750 135,000

9,894,523 10,090,288 380,750 536,000

Included in the total key management personnel are:Group Company

In RM 2006 2005 2006 2005

Directors’ remuneration (Note 14) 9,176,857 9,532,843 380,750 536,000

48 COMMITMENTSGroup

In RM 2006 2005

Contracts approved and contracted for 340,792,298 218,363,462

Contracts approved and but not contracted for 507,775,722 –

Commitment under the terms of the Concession Agreement:

- Annual charges 2,249,734,068 2,283,000,000- Land use charges 2,496,620,000 2,526,790,000- Concession fees 28,000,000 29,000,000- Contracts approved and contracted for 576,264,000 449,933,904

5,350,618,068 5,288,723,904


31 December 2006


49 NON-CANCELLABLE OPERATING LEASE COMMITMENTSGroup

In RM 2006 2005

Payable within one year 1,174,627 2,749,220Payable between one and five years 305,886 503,034

1,480,513 3,252,254

50 CONTINGENT LIABILITIESGroup Company

In RM 2006 2005 2006 2005

Unsecured:Corporate guarantee given to a bank for facilities granted toa subsidiary – – 50,000,000 50,000,000

Trade and performance guarantees extended to third party 44,110,938 26,539,231 – –

51 SEGMENTAL REPORTING

Segmental analysis is not presented as the Group is primarily involved in the operation, maintenance, construction, rehabilitationand refurbishment of water treatment facilities and the supply and distribution of treated water to consumers in the DistributionArea. The Group operates principally in Malaysia.

52 FINANCIAL INSTRUMENTS

Financial instruments are contracts that give rise to both a financial asset of one enterprise and a financial liability or equityinstrument of another enterprise. These include, amongst others, investments, deposits, cash and bank balances, receivables,payables and borrowings.

Fair values

The carrying amounts of other financial assets and financial liabilities of the Group and of the Company at the balance sheet dateapproximated their fair values except as set below:

GroupCarrying

In RM Note amount Fair value

At 31 December 2006

Financial assetLong-term receivables 30 506,016,000 366,761,462

Financial liabilitiesHire-purchase payables 40 (14,400,879) (13,766,055)Borrowings:- Government Support Loan 41 (79,846,592) (60,139,658)- BAIDS 41 (1,009,293,591) (1,084,548,000)- RUN 41 (315,660,085) (482,671,875)- BAMTN 41 (998,104,875) (1,041,375,000)- RM410 million and RM250 million Term Loans 41 (89,587,513) (65,443,070)Long-term payables 42 (16,324,334) (11,376,402)



52 FINANCIAL INSTRUMENTS cont’dCompany

CarryingIn RM Note amount Fair value

At 31 December 2006

Financial assetsJunior Notes A 25 264,563,108 482,671,875Advances to a subsidiary 26 21,368,807 17,941,662

GroupCarrying

In RM amount Fair value

At 31 December 2005

Financial assetLong-term receivables 30 518,566,000 380,300,034

Financial liabilitiesHire-purchase payables 40 (8,684,003) (9,413,711)Borrowings:- Government Support Loan 41 (85,899,231) (77,925,372)- BAIDS 41 (1,012,696,373) (1,121,121,310)- RUN 41 (275,685,085) (406,519,966)Long-term payables 42 (19,589,200) (14,740,862)

CompanyCarrying

In RM amount Fair value

At 31 December 2005

Financial assetsJunior Notes A 25 279,896,378 406,519,966Advances to a subsidiary 26 367,368,807 305,253,262

It is not practical to estimate the fair value of contingent liabilities reliably due to the uncertainties of timing, costs and eventualoutcome.

The following methods and assumptions are used to estimate the fair values of the following classes of financial instruments:

i Cash and Cash Equivalents, Trade and Other Receivables/Payables and Short-Term Borrowings

The carrying amounts approximate fair values due to the relatively short-term maturity of these financial instruments.

ii Long-Term Receivables

The fair values of long-term receivables are estimated by discounting the expected future cash flows using the prevailingmarket interest rate.

iii Borrowings

The fair value of borrowings is estimated by discounting the expected future cash flows using the current interest rates forliabilities with similar risk profiles.


31 December 2006


53 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

a On 23 February 2006, the Company entered into a Subscription Agreement with SYABAS and KDEB in relation to thesubscription for up to RM1.045 billion nominal value of RCULS. The RCULS will be issued progressively to the Company andKDEB over the next four (4) years by SYABAS from 2006 to 2009 to finance the operations and capital expenditurerequirements of SYABAS under the Concession Agreement dated 15 December 2004. The commitments by the Company andKDEB to subscribe for the RCULS are up to RM731.5 million (70%) and RM313.5 million (30%) respectively.

In the event that any party is unable to subscribe for its portion of the relevant RCULS in full on the issue date, the otherparty shall thereupon be entitled, but not obliged to subscribe for all, or a portion only, of such RCULS as are unable to besubscribed for.

SYABAS had on 9 March 2006 issued RM135.0 million of the RCULS to the Company. Call options were given to KDEB by theCompany to purchase RM40.5 million of the RCULS from the Company at an Option Premium of RM0.1035 for every RM1.00of the RCULS and is payable on 22 February 2007. Interest at the rate of 7% per annum on the nominal value of the RCULS ischarged to KDEB and is payable to the Company on the date of purchase of the RCULS by KDEB or on 22 February 2007,whichever is the earlier.

b On 22 March 2006, the Company incorporated a 70% owned subsidiary, Puncak Oil & Gas Sdn Bhd, with an authorised sharecapital of RM50,000,000 divided into 50,000,000 ordinary shares of RM1.00 each and issued and paid-up share capital ofRM100,000 divided into 100,000 ordinary shares of RM1.00 each.

The remaining 30% equity interest in Puncak Oil & Gas Sdn Bhd is owned by Damini Corporation Sdn Bhd.

c The Company had on 12 September 2006, disposed of 20,000 ordinary shares of RM1.00 each in NS Water Management SdnBhd, representing 40% of the issued and paid-up share capital of NS Water Management Sdn Bhd, for a cash consideration ofRM1,000 only. Upon the disposal, NS Water Management Sdn Bhd ceased to be an associate of the Company.

d The Company had on 16 October 2006 proposed to undertake a cash distribution of up to RM767.84 million to theshareholders of the Company, via the following proposals:

i Proposed Realisation of Investment Value via the following:

a Proposed disposal by the Company of the RM320,000,000 inter-company advances which is proposed to berestructured into RUBs, to ATSB for a total consideration of RM418,969,134, satisfied via a cash consideration ofRM132,719,134 and the balance being satisfied via the issuance of 286,250,000 preference shares with par value ofRM0.01 in ATSB at an issue price of RM1.00 each;

b Proposed divestment by the Company of 1,750,000 ordinary shares of RM1.00 each in PNSB, representing 17.5% ofthe ordinary shares in PNSB, to ATSB for a total consideration of RM306,250,000;

ii Proposed Capital Repayment involving the following:

a Proposed bonus issue of up to 590,643,869 Bonus Shares in the Company, to be credited as fully paid-up on the basis ofone (1) Bonus Share for every one (1) existing shares held by the shareholders of the Company on the entitlement date;

b Proposed capital repayment to the shareholders of the Company via a cash distribution on the basis of up to RM0.65cash (subject to a minimum cash distribution of RM0.49) for every one (1) existing share held in the Company (afterProposed Bonus Issue) at the entitlement date via a reduction of the share capital of the Company pursuant toSection 64 of the Companies Act, 1965, which will result in the reduction of the par value of the Company’s sharesfrom RM1.00 to a minimum of RM0.35.

iii Proposed consolidation of the entire issued and paid-up share capital of the Company (after the Proposed CapitalRepayment) into ordinary shares with par value of RM1.00 each; and



53 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR cont’d

d iv Proprosed increase in the authorised share capital of the Company from RM1,000,000,000 divided into 1,000,000,000shares to RM1,300,000,000 divided into 1,300,000,000 shares.

Collectively known as the “Corporate Exercise”.

PNSB had on 8 December 2006 completed the restructuring of the RM320,000,000 shareholders’ advances owing to theCompany into a new marketable security via the issuance of RM435,000,000 nominal value of RUBs to the Company.

The Corporate Exercise had been duly approved by the shareholders of the Company and RUN holders respectively at theExtraordinary General Meeting and RUN Holders’ Meeting held on 11 December 2006.

On 19 December 2006, the Company disposed of 17.5% of the ordinary shares in PNSB to ATSB for a total cash considerationof RM306,250,000.


A call option was also granted by ATSB to the Company entitling the Company to acquire back from ATSB the entire 17.5% ofthe ordinary shares in PNSB at the prevailing market value at the time of the exercise during the 10 years period from theissue date of the call option.

Following the above, the Company had subsequently on 19 December 2006, disposed of the RUBs to ATSB for a totalconsideration of RM418,969,134, satisfied via a cash consideration of RM132,719,134 and the balance being satisfied via theissuance of 286,250,000 preference shares with par value of RM0.01 in ATSB at an issue price of RM1.00 each.

e PUAS, a wholly-owned subsidiary of SYABAS which in turn is a 70% owned subsidiary of the Company, had on 28 November2006 disposed of 300,000 ordinary shares of RM1.00 each in Poly Steel Pipe Sdn Bhd, representing 30% of the issued andpaid-up share capital of Poly Steel Pipe Sdn Bhd, for a cash consideration of RM150,000 only. Upon the disposal, Poly SteelPipe Sdn Bhd ceased to be an associate of the Group.

54 SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

a Subsequent to the financial year ended 31 December 2006, the Company sold all the remaining 12,335,600 treasury shares inthe open market for a total consideration of RM39,364,456 at an average re-sale price of RM3.19 per share. The net proceedsfrom the re-sale of treasury shares will be utilised to partially fund the Capital Repayment.

b The Company had on 6 February 2007, received the order from the High Court of Malaya, Kuala Lumpur dated 29 January2007, confirming the Capital Distribution pursuant to Section 64 of the Companies Act, 1965.

Accordingly, the Capital Repayment and Consolidation of Shares were undertaken as follows:

i Bonus issue of 587,346,993 new ordinary shares of RM1.00 each (“Share(s)”) (“Bonus Share(s)”) in the Company, on thebasis of one (1) Bonus Share for every one (1) existing Company Share held by the entitled shareholders (“Bonus Issue”);

ii Capital repayment to the entitled shareholders of the Company via a cash distribution on the basis of RM0.65 cash forevery one (1) existing Share held in the Company (after the Bonus Issue) via a reduction of the share capital of theCompany pursuant to Section 64 of the Companies Act, 1965 which would result in the reduction of the par value of theCompany Shares from RM1.00 to RM0.35 (“Capital Distribution”); and

(The Bonus Issue and Capital Distribution are collectively known as the “Capital Repayment”)


31 December 2006


54 SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE cont’d

b iii Consolidation of the entire issued and paid-up share capital of the Company of RM411,142,895 comprising 1,174,693,986ordinary shares of RM0.35 each (after the Capital Repayment) into 411,142,895 ordinary shares with par value of RM1.00each (“Consolidated Shares”) (“Consolidation of Shares”).

The Company had on 7 February 2007, announced that the entitlement date and the payment date of the Capital Repaymentwere fixed on 23 February 2007 and 5 March 2007 respectively. A Notice to Shareholders in relation to, amongst others, theBook Closure Date for the Corporate Exercise was despatched to the shareholders of the Company on 8 February 2007.

c On 6 May 2005, SYABAS entered into Subscription Agreement with the MOF in relation to the subscription of 655 million RPSto be issued by SYABAS at a total subscription price of RM655 million. MOF has agreed to subscribe for a total of 655 millionRPS of RM0.01 each in SYABAS, to be issued at an issue price of RM1.00 per RPS (a premium of RM0.99 per RPS) within aperiod of four (4) years, commencing from year 2007 until 2011. The RPS is not convertible into ordinary shares of SYABAS butmay be redeemed by SYABAS commencing on 31 December 2021 until 31 December 2025 in five equal tranches of RM131million nominal value for each of the years.

On 8 February 2007, SYABAS issued a Notice to MOF in relation to the subscription of RM125.4 million of RPS of RM0.01 eachin SYABAS, to be issued at an issue price of RM1.00 per RPS (a premium of RM0.99 per RPS).

d PNSB, a subsidiary of the Company, had on 16 February 2007 entered into a Sale and Purchase Agreement with Dove ValleySdn Bhd to acquire a 99 years leasehold land (expiring on 24 October 2101) measuring approximately 248.0 acres and heldunder the title numbers H.S.(D) 6163 PT 10653, H.S.(D) 6164 PT10654, H.S.(D) 6165 PT 10655 and H.S.(D) 6166 PT 10656 in theMukim of Ijok, District of Kuala Selangor, State of Selangor Darul Ehsan, at a purchase consideration of RM55,634,832 for theGroup’s operations. The acquisition is subject to the approval of the Foreign Investment Committee.

e Puncak Research Centre Sdn Bhd, a wholly-owned subsidiary of the Company, had on 15 March 2007 entered into aCollaboration Agreement with DHI, a non-profit organisation in Denmark, to undertake a research and development projectknown as the “Establishment of Puncak Niaga Research And Development Centre (“PRDC”)”.

The role of PRDC is to research and develop related projects within PRDC which involve water safety planning, water treatment,water distribution and wastewater. PRDC shall also serve as a joint Research and Development Centre for the Group.

Upon execution, the Collaboration Agreement shall remain valid for a period of three (3) years from the date of execution andupon its expiry thereof, may be renewed on a yearly basis upon mutual agreement by both parties.

55 MATERIAL LITIGATIONS

a On 2 July 2003, Konajaya filed a suit against PUAS. PUAS called on a bank guarantee and demanded the bank (the issuer ofthe guarantee) to pay PUAS a sum of RM4,895,160 being the amount of a bank guarantee associated to a contract. On 12March 2004, an inter-partes injunction was granted to Konajaya to stop the bank from honouring the bank guarantee.

PUAS has instructed counsel to appeal against the decision of the High Court and is pending a hearing date from the Court ofAppeal.

b i The First Arbitration Proceedings

KHEC, a sub-contractor for the Chennai Water Supply Augmentation Project 1- Package III (‘Chennai Project’), has initiallyreferred certain disputed claims totaling Rs8,44,26,981 (equivalent to approximately RM6.75 million) against PNHB-LANCO-KHEC JV (‘the Consortium’), a jointly controlled entity in India of the Company.



55 MATERIAL LITIGATIONS cont’d

b i The First Arbitration Proceedings cont’d

Arising from the arbitration proceedings initiated by KHEC, both KHEC and the Consortium have each appointed aqualified civil engineer as their arbitrator respectively, and both arbitrators have selected a retired Judge of the HighCourt in Chennai, India as the third arbitrator who will also act as the presiding arbitrator of the arbitral tribunal. Thearbitral tribunal was officially constituted on 24 September 2005. On 28 September 2005, the Company was informedthat the arbitral tribunal has fixed the following dates for the filing of the arbitration cause papers as part of thepreliminary procedural formalities:

i claim by the claimant, KHEC to be filed before 4 October 2005;

ii rejoinder by the respondent, the Consortium to be filed before 18 November 2005; and

iii reply rejoinder by the claimant, KHEC to be filed before 5 December 2005.

The Consortium had on 2 January 2006, filed its counter-claim amounting to Rs13,61,61,931 (equivalent to approximatelyRM10.89 million) against KHEC’s claim of Rs8,44,26,981 (equivalent to approximately RM6.75 million) to the arbitraltribunal in India.

The Statement of Claim lodged by KHEC had been subsequently revised from Rs8,44,26,981 (equivalent to approximatelyRM6.75 million) to Rs9,84,58,245 (equivalent to approximately RM7.88 million) whilst the counter-claim submitted by theConsortium, had also been revised as per the rejoinder, from Rs13,61,61,931 (equivalent to approximately RM10.89million) to Rs13,63,39,505 (equivalent to approximately RM10.91 million).

Based on legal advice, the Consortium is of the view that the claim by KHEC is not sustainable. The Arbitrationproceedings is currently ongoing in India.

ii The Second Arbitration Proceedings

KHEC had commenced a second arbitration proceedings against the PNHB-Lanco members of the Consortium (“theSecond Arbitration”) on the basis of the terms of the Joint Venture Agreement and the Supplemental Agreement to theJoint Venture Agreement dated 13 February 2003 and 26 March 2003 respectively, entered into between the Company,Lanco Infratech Limited and KHEC whereby KHEC is claiming for loss of profit (inclusive of interest and other cost)amounting to Rs5,44,32,916 (equivalent to approximately RM4.35 million) as they allege that they, despite being a 10%shareowner, received only 4.31% out of the total value of the contract works of the Chennai Project.

The Second Arbitration is to be heard by a single arbitrator.

Based on legal advice, the PNHB-Lanco members of the Consortium are of the view that it has a good case of defendingthe claim. The Arbitration proceeding is currently ongoing in India.

c On 23 January 2006, SYABAS was served with an Originating Summons from the solicitors acting for ABASS in relation to thePCCA whereby ABASS is seeking the following:

i a declaration that SYABAS pursuant to the PCCA is obliged to purchase treated water from ABASS at no less thanDesignated Quantity on any given day;

ii a declaration that in respect of the purchase of treated water at less than the Designated Quantity on any given day,SYABAS is obliged to pay ABASS a sum representing the difference between the actual quantity of water supplied byABASS and the minimum Designated Quantity calculated on a daily basis;


31 December 2006



c iii a declaration that SYABAS is liable to pay ABASS the total sum of RM73,549,373.41 being the sum due pursuant toinvoices for the period from 31 December 2004 to 29 August 2005;

iv that judgement be entered for ABASS for the total sum of RM73,549,373.41;

v further and/or in the alternative, SYABAS do pay ABASS general damages for breach of the PCCA; and

vi interests, costs and such further or other order as deemed fit by the Court.

SYABAS, on the advice of its solicitors, had taken the position that its computation of the sums payable under the PCCA inrespect of the relevant invoices for the periods concerned, which amount to RM72,914,107.82 and had been paid by SYABAS,were correct and that no further sums are owing to ABASS, and had instructed its solicitors to defend the above claims.

The solicitors for SYABAS had filed the Memorandum of Appearance on 26 January 2006. On 30 March 2006, ABASS’s solicitorsserved an application to amend prayer 4 of the Originating Summons [item (iv) above mentioned] whereby the judgement sumprayed for was amended to RM635,265.59. The Court granted order-in-terms to ABASS’s application on 12 April 2006.

Subsequently, the Court fixed 27 November 2006 for the hearing of the Originating Summons filed by ABASS as well asSYABAS’s application to convert the proceedings from an Originating Summons into a Writ of Summons which would involvea full trial. However, the hearing has been adjourned and the matters have now been fixed for hearing on 6 March 2007.

At the hearing on 6 March 2007, the High Court fixed the case for decision on 3 April 2007.

At the hearing on 3 April 2007, the High Court allowed the Originating Summons filed by ABASS for judgement againstSYABAS for the sum of RM635,265.59 and entered judgement against SYABAS for the said sum with costs.

SYABAS is currently consulting its solicitors on the prospect of filing an appeal with the Court of Appeal.

d Both PUAS and SYABAS had been served with:

i A Writ of Summons and Statement of Claim dated 6 October 2006;

ii Ex-Parte Summons-in-Chambers dated 6 October 2006 (“Ex-Parte SIC”) and its supporting Affidavit affirmed on 6 October2006;

iii Amended Statement of Claim filed on 18 October 2006; and

iv An Ex-Parte Injunction Order dated 18 October 2006 (“Ex-Parte Order”);

(hereinafter referred to as “the Suit”)

in respect of the Suit, by the solicitors of JAKS-KDEB (the “Plaintiff”) on 19 October 2006.

JAKS-KDEB have commenced legal action against PUAS and SYABAS in respect of an agreement dated 25 October 2001entered into between JAKS-KDEB and the State Government pertaining to the supply of pipes and fittings in the State ofSelangor Darul Ehsan and the Federal Territories of Kuala Lumpur and Putrajaya.




d Vide the Ex-Parte SIC, the Plaintiff prays for the following:

i An order to immediately restrain PUAS and/or SYABAS whether by themselves, their agents, servants, directors,contractors, nominees and/or all related parties to PUAS and/or SYABAS and/or assignees and/or successors-in-title orotherwise howsoever by injunction be restrained from purchasing and/or obtaining and/or being given and/or dealingwith and/or receiving all its requirements for the pipes (which includes straight pipes whether whole or in cut lengths ofany material including but not limited to mild steel pipes) and fittings (which includes tees, bends, tapes, tapers, collars,flange adaptors, blank flanges, mechanical joints and similar accessories) in respect of all water projects being carried outor to be carried out in the State of Selangor including the Federal Territories of Kuala Lumpur and Putrajaya from anyother entities except from the Plaintiff until the disposal of the Plaintiff’s inter-parte application for an injunction;

ii An order to immediately restrain PUAS and/or SYABAS whether by themselves, their agents, servants, directors, contractors,nominees and/or all related parties to PUAS and/or SYABAS and/or assignees and/or successors-in-title or otherwisehowsoever by injunction be restrained from taking any further steps in supplying and/or dealing with all of the above pipesand fittings and/or including the negotiations and/or awarding of contracts with any other entities arising out of and inconnection with the purchasing and/or obtaining and/or being given and/or receiving all of its requirements for pipes andfittings in respect of all water projects being carried out or to be carried out in the State of Selangor including the FederalTerritories of Kuala Lumpur and Putrajaya until the disposal of the Plaintiff’s inter-parte application for an injunction;

iii Costs to be costs in the cause;

iv That a date be fixed for the inter-partes hearing of the Plaintiff’s application therein within 21 days from the date of theEx-Parte Order; and

v Such further and other relief as the Court deems fit.

The above prayers were allowed by the Court on the application of the Plaintiff’s Ex-Parte SIC in the absence of PUAS and SYABASor their Solicitors being present in Court on 18 October 2006. The Plaintiff’s Ex-Parte Order was effective for a period of twenty-one (21) days from 18 October 2006 until the date of the inter-partes hearing which has been fixed on 7 November 2006.

PUAS and SYABAS deny and refute all allegations raised by the Plaintiff in the Suit and have instructed their Solicitors to filean application vide Summons in Chambers dated 1 November 2006 to set aside the Ex-Parte Order and to vigorously defendthemselves against the Plaintiff’s claim on the day of the inter-partes hearing fixed on 7 November 2006.

At the hearing on 7 November 2006 (the “Hearing”), the High Court on the application of the Plaintiff’s Solicitors, allowed anadjournment of the Hearing to 17 November 2006 to enable the Plaintiff to prepare a reply affidavit to the affidavit filed bythe State Government of Selangor Darul Ehsan, the 3rd Defendant to the Suit. Subsequently, the Hearing was adjourned to 20November 2006.

At the hearing on 20 November 2006, the High Court fixed 22 November 2006 as the date to give its decision on the Inter-Partes application for injunction. The High Court also ordered that no ad-interim order extending the Ex-Parte injunctionwould be granted for the period from 20 November until 22 November 2006. This means that for this period, SYABAS was freeto obtain its pipe supply from any source.

At the hearing on 22 November 2006, the High Court did not grant the injunction order applied for by JAKS-KDEB andinstead proceeded to fix a date for Case-Management on 15 January 2007. However, the High Court had postponed the Case-Management to 13 February 2007 and subsequently to 22 March 2007.

On 22 March 2007, the High Court fixed the Case-Management for mention on 4 April 2007. The application by JAKS-KDEBfor Discovery against PUAS and SYABAS and Inspection of SYABAS Concession Agreement was also heard on 22 March 2007and a decision was fixed for hearing on 4 April 2007.

At the hearing on 4 April 2007, the High Court allowed the application for Discovery by JAKS-KDEB against PUAS and SYABASand accordingly ordered the discovery and inspection of the SYABAS Concession Agreement.


31 December 2006




PROXY FORM

I/We (name of shareholder as per NRIC, in capital letters)

NRIC No./Company No. (new) (old)

of

being a Member/Members of Puncak Niaga Holdings Berhad hereby appoint

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

of

or failing him/her, the Chairman of the Meeting as my/our proxy to attend and vote for me/us and on my/our behalf at the Tenth AnnualGeneral Meeting of Puncak Niaga Holdings Berhad to be held at Concorde I, Concorde Hotel Shah Alam, Level 2, No. 3, Jalan TengkuAmpuan Zabedah C9/C, 40100 Shah Alam, Selangor Darul Ehsan on Thursday, 28 June 2007 at 9.30 a.m. and at any adjournment thereof,as indicated below:-

NO. RESOLUTION FOR AGAINST

1. To receive the Audited Financial Statements of the Company for the financial year ended 31 December 2006 and the Reports of the Directors and Auditors thereon.

2. To declare a final tax-exempt dividend of 8 sen per share in respect of the financial year ended 31 December 2006 as recommended by the Directors of the Company.

3. To re-elect Yang Berbahagia Dato’ Ruslan Hassan as Director of the Company. 4. To re-elect Tuan Syed Danial Syed Ariffin as Director of the Company. 5. To re-elect Yang Berhormat Tan Sri Dato’ Seri Dr Ting Chew Peh as Director of the Company.6. To re-elect Yang Amat Mulia Tengku Dato’ Rahimah Almarhum Sultan Mahmud as

Director of the Company.7. To re-appoint Messrs Ernst & Young as the Auditors of the Company and to authorise

the Directors of the Company to fix their remuneration.8. To empower the Directors of the Company to issue shares pursuant to Section 132D

of the Companies Act, 1965.

Please indicate with a cross (X) how you wish your votes to be cast in respect of each Resolution. In the absence of specific directions, yourproxy will vote or abstain as he thinks fit.

Signature(s)/Common Seal of Shareholder No. of shares held

NRIC / Company No.: Signed this day of 2007

NOTES1. A proxy need not be a member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

A member shall not be entitled to appoint more than two (2) proxies to attend and vote at the Meeting provided that where a member is anauthorised nominee as defined in the Securities Industry (Central Depositories) Act, 1991, it may appoint up to two (2) proxies in respect of eachSecurities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. Where a member appointstwo (2) proxies, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

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 acorporation, 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 10th Floor, Wisma Rozali, No. 4, Persiaran Sukan,Seksyen 13, 40100 Shah Alam, Selangor Darul Ehsan not less than 48 hours before the time set for holding the Meeting or any adjournment thereof.


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Secretarial DepartmentPuncak Niaga Holdings Berhad (416087-U)

10th Floor, Wisma RozaliNo. 4, Persiaran SukanSeksyen 13, 40100 Shah AlamSelangor Darul Ehsan

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STAMP

Documents

Annual Report 2006 - Puncak Niaga · Annual Report 2006 Annual Report 2006 ... Yang Berbahagia Dato’ Ruslan Hassan b. Tuan Syed Danial Syed Ariffin c. Yang Berhormat Tan Sri Dato’