MALAKOFF Twenty-Eighth Annual General Meeting Grand Nirwana Ballroom, Lower Lobby, Mutiara Hotel, Jalan Sultan Ismail, 50250 Kuala Lumpur
Wednesday, 25 February 2004 at 11.00 a.m.
evolving to excel...... as the nation’s top IPP
The cover depicts a traditional Malaysian top or better known as ‘gasing’, in motion. An artform in itself, gasing spinning has long since been a part of Malaysia’s rich cultural heritage.
As the nation’s leading independent power producer (“IPP”), Malakoff draws inspiration from this timeless tradition which requires a high degree of strength, dexterity and precision. Just as a gasing spins to produce centrifugal force, the Group has been evolving strongly and steadily through the development of additional facilities as well as synergistic acquisitions, annual report 2003 thus reinforcing its position as the nation’s top IPP. highlights for the year 2003
Vision Contents • Financial performance continues to improve with power To be a Cost Effective Energy Provider 01 5-year group financial highlights generation as the main contributor to the Group. 02 corporate profile 04 chairman’s statement • Net profit of the Group increased by 25%. Mission 10 managing director’s review In striving to enhance shareholders’ 23 corporate information value and achieve our vision, we seek to: 24 corporate data 25 corporate structure • Develop and utilise local expertise; 26 board of directors 28 profile of board of directors • Share knowledge and spur the growth 34 management team of the power industry; and 37 corporate highlights 38 our operations & maintenance team Increase/ • Promote innovation in all aspects 42 location of Malakoff’s power plants (Decrease) of our business. 44 calendar events from 2002 2003 2002 2001 2000 1999 (%) RM’000 RM’000 RM’000 RM’000 RM’000 49 corporate governance statement on corporate governance 50 Revenue 6.3 1,825,013 1,717,462 1,513,462 1,473,196 1,572,603 audit committee report 56 Profit before taxation 16.9 687,494 588,228 527,001 544,158 546,785 Corporate Values statement of internal control 59 Profit after tax & minority interest 24.9 441,754 353,591 317,970 344,179 373,131 61 approved utilisation of funds • Integrity • Teamwork • Innovation additional compliance information 62 As at 31 August 70 directors’ responsibility statement • Excellence • Respect for Individual Paid-up capital 1.5 871,288 858,664 279,703 276,717 273,007 71 financial statements Shareholders’ funds 14.0 2,811,285 2,467,135 2,178,526 1,835,574 1,495,957 Total assets employed 5.3 7,358,996 6,990,589 5,780,491 5,126,403 4,856,430 117 other corporate information 118 financial calendar & share performance chart Per share (sen) 119 analysis of shareholdings Earnings 22.8 51.1 41.6 38.0* 41.7* 45.7* 122 properties of the group Dividend (gross) 13.6 25.0 22.0 20.0 15.0 10.0 123 notice of annual general meeting Net tangible assets 13.6 309.0 272.0 243.3* 203.4* 164.0* 125 statement accompanying notice of annual general meeting of the company proxy form
* Pre-bonus issue figures which have been adjusted accordingly to ensure comparability with post-bonus issue figures. (A 2:1 Bonus Issue was implemented on 15 November 2001) 5-year group financial highlights
2003
Revenue Profit After Tax & Minority Interest Shareholders’ Funds RM million RM million RM million
ANNUAL ANNUAL REPORT
1,573 1,473 1,513 1,717 1,825 373 344 318 354 442 1,496 1,836 2,179 2,467 2,811 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003
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Total Assets Employed Earnings Per Share Net Tangible Assets Per Share RM million sen sen
MALAKOFF MALAKOFF BERHAD
4,856 5,126 5,780 6,991 7,359 45.7 41.7 38.0 41.6 51.1 164.0 203.4 243.3 272.0 309.0 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 corporate profile
Malakoff Berhad (“Malakoff”) was incorporated on 9 October (“Prai Power Plant”) and SKS Power Sdn. Bhd. (“SKS Power”), 1975 as a plantation-based company, and was listed on the the developer of the 2,100MW coal-fired power plant in Tanjung Main Board of Kuala Lumpur Stock Exchange the following year. Bin, Johor (“Tanjung Bin Power Plant”). The Prai Power Plant A shift in its corporate direction resulted in the disposal of was commissioned on 20 June 2003. The addition of Prai Power its plantation-based assets in October 1993 and subsequent Plant to our generation portfolio has increased our total venture into the power sector. effective generation capacity to 1,895MW. This will further increase to 3,785MW when the Tanjung Bin Power Plant is From its humble beginnings, Malakoff has grown into the completed in 2007. nation’s leading independent power producer (“IPP”) with total Group assets exceeding RM7 billion and a market capitalisation Malakoff’s operations & maintenance (“O&M”) services are in excess of RM4.5 billion as at 31 August 2003. The Company undertaken by its wholly-owned subsidiary Teknik Janakuasa lists Malaysia Mining Corporation Berhad, International Power plc, Sdn. Bhd. (“TJSB”). One of the leading O&M service providers in a global power player with power generation interests around the country, TJSB provides O&M services to SEV’s and GB3’s the world and the Employees Provident Fund Board as its power plants; Petronas Gas Berhad’s two (2) Centralised Utility substantial shareholders. Facilities in Kerteh, Terengganu, and Gebeng, Pahang; and Prai Power Plant, through its subsidiary Natural Analysis Sdn. Bhd. Through its portfolio of services that encompasses power generation, operations and maintenance, electricity distribution, Malakoff’s electricity distribution activities are carried out by and project management, the Group continues to play a pivotal its wholly-owned subsidiary Wirazone Sdn. Bhd. (“Wirazone”). role in supporting the nation’s drive towards industrialisation. Wirazone currently supplies limited centralised chilled water plant system and electricity distribution system to the landmark Malakoff’s power generation assets are held via its 75% equity Kuala Lumpur Sentral development (“KL Sentral”) which is set to stake in Segari Energy Ventures Sdn. Bhd. (“SEV”), the owner become the transportation and communications hub of the nation. of the 1,303MW combined cycle power plant in Segari, Perak (“Lumut Power Plant”); and 20% equity interest in Port Dickson The Group provides project management services via another Power Berhad, the owner of a 440MW open cycle power plant wholly-owned subsidiary Malakoff Engineering Sdn. Bhd. (“MESB”), in Port Dickson, Negeri Sembilan, through its wholly-owned the project manager for the GB3 power plant. Its list of recent subsidiary Hypergantic Sdn. Bhd. completed projects managed by MESB include Centralised Chilled Water Plant and Electricity Distribution System within KL Another 75%-owned subsidiary GB3 Sdn. Bhd. (“GB3”) owns the Sentral and the GB3 power plant. MESB will also play a key role 640MW combined cycle gas turbine power plant located adjacent in the development of the Tanjung Bin Power Plant. to the Lumut Power Plant in Segari, Perak. The GB3 power plant which commenced full combined cycle commercial operation For the future, the Group will continue to leverage on its on 31 January 2003, has raised the Group’s total effective track record and expertise within its core competencies to generation capacity to 1,545MW as at the financial year ended enhance its growth and profitability. As Malakoff forges ahead, 31 August 2003. The Company had recently completed its the corporation will continue to uphold its responsibilities acquisition of Prai Power Sdn. Bhd. (“Prai Power”), the owner to the nation, shareholders, customers, employees and the of the 350MW combined cycle power plant in Prai, Penang communities in which it operates. “ From its humble beginnings, Malakoff has grown into the nation’s leading independent power producer with total Group assets exceeding RM7 billion and a market capitalisation in excess of RM4.5 billion.” “Our shareholders’ funds rose
from RM2,467.1 million as at the financial year ended
31 August 2002 to RM2,811.3 million as at the end of the financial year
under review, an increase of
RM344.2 million or 14.0%.”
Tan Sri Abdul Halim bin Ali chairman’s statement
2003
Dear Shareholders,
ANNUAL ANNUAL REPORT
On behalf of the Board of Directors, I am We achieved a Group net profit of RM441.8 million for the financial year under 4 pleased to present the Annual Report and review, an increase of RM88.2 million or 24.9% over the RM353.6 million recorded in 5 Audited Financial Statements of Malakoff the previous financial year. This corresponds to an increase in earnings per share Berhad and its Group of Companies for the from 41.6 sen to 51.1 sen. financial year ended 31 August 2003. Our improved performance has further enhanced shareholders’ value. Our shareholders’ funds rose from RM2,467.1 million for the financial year ended 31 August 2002 to Financial Highlights RM2,811.3 million for the financial year under review, an increase of RM344.2 million Malakoff’s performance for the financial or 14.0%. year ended 31 August 2003 has been
(INCORPORATED IN MALAYSIA) commendable. The Group’s revenue increased Such impressive results have been largely due to our sound operational performance.
from RM1,717.5 million in the previous During the financial year, Malakoff delivered approximately 10,766GWh of electricity 24816-M
financial year to RM1,825.0 million, an to Tenaga Nasional Berhad (“TNB”), which amounted to 15.8% of total electricity increase of RM107.5 million or 6.3%. This sales by TNB. increase was mainly contributed by GB3 Our position in the power sector as well as our continued operational and financial Sdn. Bhd., which commenced full commercial
strength has placed us in good standing with Rating Agency Malaysia Sdn. Bhd. MALAKOFF BERHAD operation of its plant under the combined (“RAM”). We have consistently obtained strong ratings for our corporate debt papers. cycle mode from the third quarter of the Malakoff’s RM420 million Commercial Papers/Medium-Term Notes Programme (“CP/MTN”) financial year. was reaffirmed at P1/AA1(s). RAM also reaffirmed the rating of the RM2.7 billion private debt securities issued by Segari Energy Ventures Sdn. Bhd. at AA1. Similarly, the ratings of GB3 Sdn. Bhd.’s Islamic bonds of RM850 million of AA2 and its RM300 million CP/MTN of P1/AA2 were reaffirmed. The latest bond issue by Malakoff, a RM1.85 billion Serial Bonds to fund our recent acquisitions of Prai Power and SKS Power, received a long-term rating of AA2. “We are pleased to report that we have successfully completed the acquisitions of Prai Power and SKS Power.” chairman’s statement
Our Board of Directors is therefore pleased to recommend a first and final dividend Meanwhile, our plan to acquire a 40%-stake of 25 sen per share less 28% tax for the financial year ended 31 August 2003. This in Kapar Power Station has come closer constitutes an increase of 13.6% from the dividend of 22 sen per share less 28% tax to completion with the signing of the last declared for the previous financial year. major agreements between our wholly- owned subsidiary, Kapar Energy Ventures Corporate Highlights Sdn. Bhd., and Tenaga Nasional Berhad The financial year under review was marked by a number of milestone events. The (“TNB”) at the end of October 2003. GB3 power plant was officially opened on 22 March 2003 and our planned acquisitions to add more power plants to our portfolio have been realised. We are Recent Industry Developments pleased to report that we have successfully completed the acquisitions of Prai Power We are facing challenges from significant and SKS Power. Through these companies, we acquired the 350MW combined cycle developments in the industry. One of gas turbine (“CCGT”) Prai Power Plant, which has commenced commercial operations, these is the Malaysian Government’s and the 2,100MW coal-fired Tanjung Bin Power Plant, which is under construction. existing four-fuel policy. The primary fuel for electricity generation is gas, the price These acquisitions have reinforced our position as the leading IPP in the country. of which is heavily subsidised. The gas The addition of the Prai Power Plant has increased our total effective generation shortage in early 2002 underscored the capacity to 1,895MW. Upon completion of the Tanjung Bin Power Plant within the urgent need to diversify the generation next four (4) years, our total effective generation capacity will rise to 3,785MW, fuel mix. Thus, the Government decided which will more than double our current capacity. that the industry must move towards a more balanced mix, to comprise 59% gas, 30% coal and 11% from other sources, by 2008. “ The Tanjung Bin Power Plant, once completed, will more than
2003 double our current effective generation capacity.”
ANNUAL ANNUAL REPORT chairman’s statement 6 7 Our corporate plan has already taken into account the much-needed fuel Prospects diversification, with the 40% acquisition of the multi-fuel generating facility of We may see further sustainable growth Kapar Power Station. The addition of the coal-fired Tanjung Bin Power Plant, arising out of TNB’s divestment programme scheduled for completion in 2006-2007, will result in coal overtaking gas as the of its minority stakes in IPPs. We will also primary fuel in our generation portfolio. be venturing overseas for new generation opportunities, while in the operations and The other significant development is the introduction of demand risk-sharing in
maintenance sector, we plan to seek new (INCORPORATED IN MALAYSIA) Power Purchase Agreements (“PPA”), which are moving towards a more competitive business locally as well as abroad. payment structure, that TNB signs with IPPs. Through the demand risk-sharing
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mechanism, TNB is able to share the expense of spare capacity with IPPs. The PPA We expect to continue to achieve that TNB signed with SKS Power was the first PPA to incorporate this demand satisfactory financial results in the current risk-sharing mechanism. financial year, with the demand for electricity in Malaysia being on the We do not expect this development to affect us. Being a strategic and the largest uptrend. This increase in demand will be MALAKOFF BERHAD base load power plant in the southern region, Tanjung Bin Power Plant will rank high in tandem with the economic growth of in the merit order of despatch. Therefore, the power plant is expected to be fully the country. The Malaysian economy is despatched once it becomes operational. expected to see a 6% growth in Gross Domestic Product for 2003-2004. “We expect to continue to achieve satisfactory financial results in the coming year, with the demand for electricity in Malaysia being on the uptrend.”
chairman’s statement
Corporate Responsibility Series (“MMDS”), which enables local competitors to train for the sport and build At Malakoff, we believe that involvement confidence for competing in the finals of Powerman Malaysia. Early this year, in sporting activities is essential for our we launched the Malakoff University Duathlon Series (“MUDS”) at Universiti Putra general well-being and is an important Malaysia. This event aims to introduce the sport to a younger generation of athletes. element for a progressive nation. Reflecting As part of our corporate responsibility, we are helping to supplement the educational this belief, we have undertaken to be the needs of students in the communities in which we operate. In May 2003, the main sponsor of several sporting events. Education Development Programme for Primary and Secondary Schools, endorsed One of these is Powerman Malaysia, an by the Perak State Government, was launched by the Menteri Besar of Perak, international event held annually in this YAB Dato’ Seri DiRaja Dr. Haji Mohamad Tajol Rosli bin Ghazali. Malakoff has country since 2002. An endurance sport pledged RM600,000 towards this programme, which will benefit students from selected that involves running and cycling, it has primary and secondary schools in Mukim Pengkalan Baharu, Daerah Manjung, Perak. attracted participation from established The funds, to be distributed equally over a three-year period from 2003, will subsidise athletes from all over the world. Another the costs of tuition, examination preparatory classes, motivational courses, study event is the Malakoff Malaysian Duathlon aids and the setting up of computer facilities. 2003
ANNUAL ANNUAL REPORT chairman’s statement 8 9 Through our ongoing Adopted School Acknowledgements Programme, students from the adopted I wish to take this opportunity to extend my sincere thanks to my fellow board schools within Mukim Pengkalan Baharu are members for their invaluable contributions to the Group. I would also like to extend given the opportunity to make educational my appreciation to all our employees for their dedication and support, without excursions to places of interest in the which we would not have been able to achieve our many successes. country. During the year, students and teachers from the adopted schools visited We remain grateful, as always, to the regulatory authorities, our business partners,
(INCORPORATED IN MALAYSIA) Melaka. We also continue to award bankers and financiers, and our customers for their continued confidence in the
Group. Last but not least, my thanks go to our shareholders for their faith in us. 24816-M scholarships to deserving students to pursue their tertiary education at Universiti Tenaga Nasional (“UNITEN”).
Other social programmes that we organised included a ‘Majlis Berbuka Puasa’ for the Tan Sri Abdul Halim bin Ali MALAKOFF BERHAD children of Rumah Anak-Anak Yatim, Chairman Asrama Damai, in Kuang, Selangor, and a ‘Gotong Royong’ at Sekolah Anak Yatim 19 December 2003 Al-Ansar in Batang Berjuntai, Selangor. Kuala Lumpur Ahmad Jauhari bin Yahya
Managing Director’s At Malakoff, we continue to direct our resources towards being Malaysia’s leading IPP. We have been evolving strongly and steadily towards this goal through the development of additional facilities as well as synergistic acquisitions. This financial year has been especially significant, with our business strategies falling into place as planned.
Power Generation Our core business activity is power generation. During the period under review, the Group’s total effective The plant’s average availability during the period generation capacity was 1,545MW through our stakes under review was approximately 95%, far exceeding in the Lumut, GB3 and Port Dickson power plants. the contractual guarantee of 86% provided under the
Lumut Power Plant PPA with TNB. Hence, SEV continued to enjoy the 2003 The Lumut Power Plant (“LPP”) is held through our availability bonus payments. These payments are in 75%-owned subsidiary, Segari Energy Ventures Sdn Bhd addition to the full capacity payments that SEV (“SEV”). Having been fully operational for more than has been receiving since commencing operations, seven (7) years, LPP with a generation capacity of having met all the required performance standards 1,303MW, has a long established track record. under the PPA. ANNUAL REPORT Currently the largest combined cycle power plant in GB3 Power Plant Malaysia, the plant consists of two (2) blocks of identical 10 During the year under review, GB3 Sdn. Bhd., 75%- power generators and ancillary equipment, each having 11 owned by Malakoff, was successfully commissioned an average dependable capacity of 651.5MW. as a CCGT power plant. The plant first commenced LPP continues to maintain its high performance in operations in December 2001 as a 430MW open cycle terms of availability, reliability and efficiency. The gas turbine plant. The conversion process, which was 1 plant delivered approximately 8,614GWh of electricity completed on 15 November 2002, was 2 /2 months to the National Grid, with an average capacity factor ahead of its scheduled Commercial Operation Date of about 76%, during the financial year. The lower (“COD”) of 31 January 2003. Since it began commercial capacity factor, compared with 89% achieved during operations, the plant has generated a total of 2,153GWh the previous corresponding period, was due to the of power to the National Grid. (INCORPORATED IN MALAYSIA) nation’s high reserve margin, which was the result of During the financial year, average plant availability
24816-M additional capacity from newly completed power has been maintained at about 94%, above GB3’s plants in the country. This margin is expected to contractual obligation of 91.5%. Despite the surplus reduce over time as the nation’s demand for electricity of reserve power contributed by newly constructed increases. power plants, GB3 expects to continue providing Malakoff with a steady revenue stream. This is by virtue of the plant’s operating efficiency and its strategic MALAKOFF BERHAD review location in the northern region of Peninsular Malaysia. managing director’s review
Prai Power Plant, fuelled primarily by natural gas, will bring 350MW to our total effective generation capacity. It is a combined cycle power plant, the first in Southeast Asia to adopt General Electric’s single shaft concept. With a thermal efficiency of approximately 55% at design conditions, it is currently the most efficient plant in Malaysia. The plant commenced commercial operation on 20 June 2003. The approval of Malakoff’s shareholders for the acquisition of Prai Power was obtained on 21 October Planned Acquisitions 2003 and the acquisition was successfully completed on 28 October 2003. The addition of Prai Power Plant Our plan to increase our total effective generation to our generation portfolio will enable us to further capacity is already underway. We have completed the strengthen our presence in the northern region. acquisitions of Prai Power and SKS Power. The addition of Prai Power Plant to our portfolio has Tanjung Bin Power Plant increased our total effective generation capacity to Our portfolio has consisted entirely of gas-fuelled 1,895MW. This will further increase to 3,785MW when power plants. The much-needed diversification in our the Tanjung Bin Power Plant, which is currently under generation capacity, in line with the Government’s construction, is fully completed in 2007. Once we policy to reduce dependency on gas, was realised complete the acquisition of a 40%-stake in Kapar when we completed the acquisition of a 90%-stake in Power Station, another 968MW will be added to our SKS Power on 28 October 2003. SKS Power has been total effective generation capacity, raising the total awarded the licence to design, construct, operate to 4,743MW. and maintain a 2,100MW coal-fired power plant in Tanjung Bin, Johor (“Tanjung Bin Power Plant”), for a With our current capacity, our Group is ranked the period of 25 years. The acquisition was successfully largest IPP in Malaysia, with a market share of 9% of completed in less than three (3) months after the the country’s total installed capacity of approximately signing of the Share Sale Agreement on 7 August 16,500MW. After these acquisitions, our position 2003 and a week after shareholders’ approval was in the power generation sector will be further received on 21 October 2003. When fully completed strengthened, with our market share increasing to in 2007, Tanjung Bin Power Plant will be the biggest 22% of the country’s projected installed capacity of coal-fired power plant in the country and will assist approximately 22,000MW in Peninsular Malaysia in the in developing Southwest Johor as a transhipment hub. year 2007. Prai Power Plant SKS Power signed the PPA with TNB on 25 July 2002. Preliminary works on the plant’s construction commenced On 29 May 2002, Malakoff entered into a conditional in February 2003, while the plant’s detailed engineering Share Sale Agreement with SKS Ventures Sdn Bhd to design began in August 2003. The plant will consist acquire the entire equity interest in Prai Power, which of three (3) generating units of 700MW each, with owns Prai Power Plant, for a total consideration COD of the first unit scheduled on 31 August 2006, of RM282 million. Prai Power was granted a 21-year the second unit on 28 February 2007 and the third concession to generate and supply electricity from unit on 31 August 2007. The state-of-the-art plant Prai Power Plant with an average tariff of 13.0 will include Electrostatic Precipitators to prevent ash sen/kWh. from being emitted into the atmosphere. It will also have Flue Gas Desulphurisation facilities to keep the sulphur dioxide (SO2) level to below the limit set by the authorities. expertise
Quality and excellence underlie the depth and breadth of our knowledge and experience
2003
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MALAKOFF MALAKOFF BERHAD positioning
Well placed operationally and financially to maintain the lead in our business managing director’s review
The plant places the Malakoff Group in an advantageous competitive position in relation to that of other IPPs, as its capacity alone is larger than the Group’s capacity of 1,545MW as at the financial year-end. This plant will provide a valuable opportunity for Malakoff’s operations and maintenance subsidiary to offer its expertise to manage and operate the coal-fired power plant. In addition, the Tanjung Bin Power Plant will be placed higher in the Merit Order of Despatch as it will have lower variable operating and maintenance costs compared to gas-fired power plants. The cost of coal as fuel at approximately 4.6 sen/Kwh is also Such a level of performance is testimony to the lower than that of gas, which is 5.0 sen/Kwh. expertise and capabilities of TJSB’s personnel. SKS Power has successfully raised up to RM5.6 billion To assess plant performance against international
2003 via the issuance of an Istisna Medium-Term Notes benchmarks, an Engineering and Operational Risk Programme to finance the construction of the power Assessment Process (ERAP-OpRAP) was undertaken plant. The issue has been assigned a rating of AA3 by by Innogy plc of the United Kingdom in May 2003. the RAM, a rating which is normally assigned to In essence, it was concluded that the power station projects that are under construction. The project was well run, with a good level of engineering work ANNUAL REPORT achieved financial close on 11 November 2003. across all plant areas. However, it was found that there is room for further improvement in term of 14 Kapar Power Station personnel expertise, which would be dealt with 15 We are working towards completing the acquisition of through training and development. a 40%-stake in Kapar Power Station by end-April 2004. Progress has been made in recent months with Preparations are underway to carry out the third cycle the signing of the last major agreements. Once the of C-inspection required for the gas turbines and a acquisition is completed, the power plant will add major overhaul of the steam turbine due in 2004. another 968MW to Malakoff’s total effective generation At the same time, minor A and B inspections continue capacity. to be undertaken by in-house personnel. With quality management regarded as an essential
Operations and Maintenance component in delivering O&M services to a high (INCORPORATED IN MALAYSIA) We are proud that Malakoff is the only IPP in the standard, efforts are being applied to establish best
24816-M country that operates and maintains its own power practice in all areas. Towards this end, LPP’s ISO plants through its 100%-owned subsidiary, Teknik 9002:1994 certification, awarded by Lloyds Registered Janakuasa Sdn Bhd (“TJSB”). Founded in 1995, TJSB Quality Assurance in June 2000, was successfully can be regarded as Malaysia’s premier operations and converted to ISO 9001:2000 in April 2003. maintenance (“O&M”) company. It operates and GB3 Power Plant maintains a number of power plants and facilities, MALAKOFF BERHAD After the early commercial operation of the GB3 and will be involved in the O&M activities for Tanjung Power Plant in November 2002, it has been operating Bin Power Plant. reliably to meet the availability target required. This O&M Services has been partly due to the wealth of experience Lumut Power Plant acquired from the O&M of LPP’s Blocks 1 and 2, LPP is TJSB’s flagship project. The overall availability especially in the area of Hot Gas Path (“HGP”) of Blocks 1 and 2 of the plant during the financial year Component Management. Staff training and competency was maintained above 92% with a forced outage rate development will continue to be addressed so as to of below 0.4%. These figures compare very favourably match the commendable operational record achieved with industry norms of 87% and 2% respectively. for Blocks 1 and 2. managing director’s review
Technical Support Group The Technical Support Group (“TSG”) within TJSB provides support and expertise to ensure that TJSB- operated plants are managed and maintained with the latest O&M technologies. TSG is also the Owner’s Engineer for the GB3 power plant, providing it with technical and engineering services. To provide such services to the standards required, the competencies of our pool of engineering and project management resources need to be developed Prai Power Plant and enhanced. Towards this end, TSG had initiated TJSB’s subsidiary, Natural Analysis Sdn Bhd (“NASB”), the Malakoff Professional Group (“MPG”) programme. has undertaken to provide O&M services for the Prai TSG implemented various tools at LPP to monitor Power Plant. Mobilisation of manpower to the plant plant performance. These include the Lumut Advanced commenced on 1 June 2002, including personnel Real-time Information System (“LARIS”), an archive training. The Reliability Run and Performance Test database for all plant process data, and the was successfully completed on 19 June 2003 and the Thermoflow-LPP PM, a software programme that uses plant achieved its COD on 20 June 2003. real-time process data to provide performance data After COD, the station was dispatched at base load of online. In addition, several O&M tools and technologies 350MW during the day and a minimum load of 210MW have been introduced for the effective management at night. The maximum load generated was 356MW of our power plants and these include the following:- while the average load is approximately 233MW. • SAP R/3 System, consisting of modules in plant The major tasks ahead for NASB are to ensure the maintenance, material management, financial plant’s reliability and to undertake the necessary accounting, treasury, control and human resource, improvements to enhance the plant’s availability. which enhances information flow and decision- making at the Group level; Centralised Utility Facilities • Electronic Knowledge Management System (“eKMS”) TJSB currently provides O&M services to Petronas Gas for effective sharing of knowledge; Berhad’s (“PGB”) Centralised Utility Facilities (“CUF”) in Kerteh, Terengganu and Gebeng, Pahang. The facilities • Reliability Centred Maintenance (“RCM”) Programme, supply products that include electricity, steam, industrial which contributes to high plant availability and gas and demineralised water to PGB’s industrial customers. low forced outage rates; • Condition-Based Maintenance (“CBM”) Programme, The O&M service contract with PGB is due to expire in which ensures disciplined execution of maintenance October 2004. A transition programme was therefore strategies; launched in early 2003 to ensure the systematic handover of O&M tasks from TJSB to PGB personnel. • Hot Gas Path (“HGP”) Component Management, an Since June 2003, PGB personnel have been taking important element in optimising O&M costs; the lead role in O&M of the plants, while staff from • Plant Performance Monitoring System. TJSB concentrated on other contractual deliverables, including plant improvement studies. As part of the contractual deliverables, TJSB has been preparing and submitting to PGB procedures and work instructions for plant O&M. Most of these have been incorporated into PGB’s ISO 9001:2000 quality management certification. We expect the transition programme to be fully completed by August 2004. 2003
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efficiency MALAKOFF BERHAD
Surpassing performance standards through optimal and innovative use of resources growth
Achieving synergistic plant acquisitions and pursuing new O&M opportunities managing director’s review
New tools and methodologies are under development. TJSB has invested in plant training simulators to ensure that plant staff are adequately prepared to face any normal, abnormal or emergency situations that may occur in a plant. Also in the pipeline are plans to introduce Root Cause Analysis (“RCA”) methodology to complement RCM in maintenance management. The objective is to reduce recurrent failures so as to improve plant performance and availability, thus optimising the profitability of TJSB as well as the respective owners of the power plants for whom they operate. To provide its customers with better and more efficient services, Wirazone relocated its administrative office O&M Business Development to Plaza Sentral in March 2003. Wirazone also opened Malakoff continues to actively pursue O&M services
a customer service centre in the building. Customers 2003 opportunities both locally and abroad and has are further benefiting from an extension of collection participated in several pre-qualification bids. The services, enabling them to pay by credit card as well excellent performance of LPP and the GB3 power as through online banking. plant is being used as a benchmark by other utility
companies, which have shown interest in having TJSB Wirazone’s business is set to increase further with the ANNUAL REPORT implement its O&M practices at their plants. anticipated opening of two (2) 5-star hotels, the Hilton and Le Meridien, in March 2004. There will be 18 Electricity Distribution and Chilled Water Supply further development of Plaza Sentral, which will add 19 two (2) more office blocks to the present two (2) blocks. Our wholly-owned subsidiary Wirazone Sdn Bhd The construction of the new blocks is expected to (“Wirazone”), was granted a licence by the Energy begin in January 2004 and when completed, an Commission to distribute electricity within the Kuala additional 4MW of electricity will be required and an Lumpur Sentral (“KL Sentral”) development area. increase in the demand for chilled water of 2,000RT is Under the 21-year licence, Wirazone purchases expected. electricity in bulk from TNB and then distributes the electricity to its customers. The company also Project Management
provides chilled water for air conditioning purposes (INCORPORATED IN MALAYSIA) to Plaza Sentral, KL Sentral’s office complex through Our project management arm is Malakoff Engineering Sdn Bhd (“MESB”). The company’s main activities
its Centralised Chilled Water Plant. 24816-M involve the management of Engineering, Procurement Operating commercially since July 2000, Wirazone’s and Construction (“EPC”) contracts, requiring liaison performance is dependent on the development of KL with EPC main contractors, sub-contractors, consultants, Sentral. During the period under review, its customer bankers, engineers and relevant authorities. Our base grew from 378 in 2002 to 533, with a recorded first-hand involvement in these activities ensures
maximum demand for electricity of 9MW (2002: 8MW). that our interests are safeguarded, and that projects MALAKOFF BERHAD The demand for chilled water supply was in the region are completed on time and within the budgeted costs. of 1,400 to 1,600 Refrigerant Ton (“RT”) (2002: 1,600RT). The maximum demand recorded to-date was MESB has been tasked with monitoring the recently- 1,700 RT. The overall growth in electricity and chilled completed GB3 power plant for defects within the water demand was due to the increased occupation of 24-month warranty period that will expire on 15 office suites and condominiums in the area. November 2004. In addition, in early 2003 the company managed Malakoff’s new head office renovation works at Plaza Sentral. managing director’s review
MESB is providing project management and technical learning about and advancing a specific area of support services to the Tanjung Bin Power Plant knowledge. As Malakoff is a service-based company, project. A technical support agreement was signed such an online community will provide a channel for with Rentak Jitu Project Management Sdn Bhd, the our technical, financial and legal people to project manager, in October 2003. MESB will be collaborate, access information as well as discuss playing a key role in the development of the power problems, thus contributing towards best practices. plant, enabling the company to expand its In expanding ICT boundaries and allowing for easier capabilities in the management of other types of and greater access to the system, an increase in the power plants. network’s security vulnerability is unavoidable. Various measures have been implemented to address Information and Communication Technology security issues, including automated data backup that The relocation of Malakoff’s head office to Plaza is stored at a remote site. Sentral in March 2003 provided us with the opportunity to install a state-of-the-art information The adoption of technology relevant to our business and communication technology (“ICT”) infrastructure. activities continues to be part of our strategic The fully-equipped new data centre is comparable to agenda. We are decentralising authorisation by user leading data centres in the country in its reliability groups for ease of maintenance and to enhance and availability, enabling us to meet our customers’ information flow and decision-making at all levels. At demand for dependable and efficient power Wirazone, a Customer Billing Information System and generation and supply. Trouble Call System are being implemented for improved customer service. A 2-MBps fibre dedicated leased line links head office to Prai Power Plant, providing a higher bandwidth to Safety, Health and The Environment access the ERP SAP R/3 application system located at For our benefit as well as that of the community, we head office. Such a line, which enhances connectivity continue to be committed and responsible towards between site offices, will be implemented for LPP in the environment in which we operate. Quarterly the next phase. To leverage on the 2-MBps line and environmental monitoring by a local consulting firm reduce operational costs, services such as Voice Over is performed at LPP and the indicators show that we Internet Protocol (“VOIP”) and video conferencing have achieved our environmental performance targets. will be installed at Prai Power Plant. Our ICT These indicators include ambient air quality, gaseous capabilities have been further enhanced with the stack emission, wastewater quality, marine water quality, establishment of Virtual LAN (“VLAN”) user groups at noise levels and turtle landings. head office for better management and security. We plan to extend these facilities to our power plants in Such success inspires us to strive to achieve ISO 14001, Lumut and Prai in the near future. an internationally recognised standard for environmental management. An effective online workplace helps in the communication process, enabling people to use and share information. In the workplace, we have instituted a host of safety Towards this end, we have upgraded our Document and health measures to provide a safe and healthy Management Extension (“DME”) application and environment for our employees. Our staff and in- corporate e-mail systems. To facilitate information house contractors undergo regular safety training, dissemination, our eKMS is now hosted in the data some of which are conducted with the help of centre. This system has been effective in providing a external parties such as the Fire Department and the facility for information and document sharing, as well National Institute of Occupational Safety and Health as e-mail and messaging services. Next in the pipeline (“NIOSH”). Such training will be further enhanced is the electonic creation of a Community of Practice when the commissioning of plant simulators is via the eKMS portal. The Community of Practice is a completed. group of people with a common interest in sharing, managing director’s review
All plant employees are provided with personal To cater to the needs of our managers and senior protective equipment and their health is monitored managers, a competency-based Management Development through annual audiometric tests and medical check- Programme (“MDP”) was implemented in May 2003. ups. In addition to monthly safety meetings, safety The MDP aims to enhance the managers’ business audits are regularly carried out to identify work acumen by equipping them with the required hazards before these hazards result in accidents or knowledge and skills. The programme also serves to injuries. As a testimony to our commitment towards prepare our younger managers for future succession. safety, our records show that TJSB personnel at LPP The development of our people is an ongoing effort. have achieved 2.2 million total man-hours without Every year, they undergo a Training Needs Identification lost-time incidents from July 1995 to August 2003. (“TNI”) review. Once their training needs have been In our objective to be a global player in the power identified, our employees are then sent for various generation sector, we have continuously been meeting functional and soft skills training. We have also been world-class performance standards. We have implemented emphasising cross-functional training to develop a safety management system that is adaptable to any more multi-skilled employees.
2003 business environment and culture. The Process Safety In September 2002, we recruited the first batch of Risk Management (“PSRM”) programme, based on the fresh university graduates as management trainees for model used by Dupont, will help us attain best safety a one-year period. The main objective is to provide practices without compromising productivity and these graduates with some working experience that performance. ANNUAL REPORT will help them to secure employment elsewhere in their respective fields. The more promising of these Human Resource Development 20 graduates are offered employment within Malakoff 21 At Malakoff, our people are our prized assets. Their Group to meet our manpower needs. dedication, commitment, skills and expertise have provided us with the competitive edge to be the Building on Our Strengths leading IPP in the country. Thus, it is critical that we We have established a sound track record and a nurture and develop our people to excel in their reputation for efficiency and reliability over the years. respective fields. Our people, recognised for their professionalism, The in-house Certification Training Programme (“CTP”) bring a high level of skill and expertise to the for plant operators, which combines on-the-job training projects we undertake. A strong foundation has been with computer-based interactive learning, has been laid that will serve Malakoff in becoming a global (INCORPORATED IN MALAYSIA) progressing well. We are currently implementing player in the electricity supply industry.
24816-M this programme at Prai Power Plant. The training and retraining of plant operators will take a major step forward with the planned implementation of full-scope, high fidelity and plant-specific simulators. ABB Malaysia was awarded the contract in July 2003
to deliver, install and commission two (2) simulators, MALAKOFF BERHAD which will simulate LPP and GB3 power plant. The Ahmad Jauhari bin Yahya commissioning of the simulators, when completed in Managing Director April and October 2004 respectively, will be essential in raising the competencies of our plant operators to 19 December 2003 a higher level. Kuala Lumpur
2003 corporate information ANNUAL REPORT 22 23 24 corporate data
25 corporate structure
26 board of directors
28 profile of board of directors
34 management team (INCORPORATED IN MALAYSIA)
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MALAKOFF MALAKOFF BERHAD corporate data
Directors Company Secretaries Employees’ Share Option Scheme (“ESOS”) Tan Sri Abdul Halim bin Ali Mohamed Rafique Merican Committee Non-Independent Non-Executive Chairman bin Mohd Wahiduddin Merican Ahmad Jauhari bin Yahya (MIA 19266) Chairman Ahmad Jauhari bin Yahya Managing Director Lim Wee Neo Dato’ Abdul Aziz bin Abdul Rahim (LS0008331) Member Dato’ Abdul Aziz bin Abdul Rahim Independent Non-Executive Director Mohd Radzuan bin Yahya Audit Committee Member Dato’ Mohammed Radzi Abdul Jabbar bin Abdul Majid Chairman @ Mohd Radzi bin Manan Registered Office Independent Non-Executive Director Dato’ Abdul Aziz bin Abdul Rahim Level 12, Block 3B, Abdul Jabbar bin Abdul Majid Member Plaza Sentral, Independent Non-Executive Director Jalan Stesen Sentral 5, Azizan bin Mohd Noor 50470 Kuala Lumpur Azizan bin Mohd Noor Member Tel: 03-2263 3388 Fax: 03-2263 3333 Independent Non-Executive Director Website: www.malakoff.com.my Ahmad Jauhari bin Yahya Dato’ Ismail bin Shahudin Member Non-Independent Non-Executive Director Share Registrar Nomination Committee Malaysian Share Registration Services Sdn. Bhd. Kenneth William Teasdale 7th Floor, Exchange Square, Non-Independent Non-Executive Director Tan Sri Abdul Halim bin Ali Bukit Kewangan, Chairman 50200 Kuala Lumpur Simon David Pinnell Tel: 03-2026 8099 Fax: 03-2026 3736 Alternate Director to Kenneth William Teasdale Dato’ Abdul Aziz bin Abdul Rahim Non-Independent Non-Executive Director Member Auditors Abdul Jabbar bin Abdul Majid Messrs. KPMG Member
Azizan bin Mohd Noor Solicitors Member Messrs. Zaid Ibrahim & Co
Remuneration Committee Principal Bankers Dato’ Abdul Aziz bin Abdul Rahim Malayan Banking Berhad Chairman Bumiputra Commerce Bank Berhad Dato’ Mohammed Radzi @ Mohd Radzi bin Manan Stock Exchange Listing Member Main Board of the Malaysia Securities Exchange Berhad Dato’ Ismail bin Shahudin Member (12 February 1976) corporate structure as at 19 January 2004
Power Generation Malakoff 75% Segari Energy Ventures Sdn. Bhd. 75% GB3 Sdn. Bhd. 100% Prai Power Sdn. Bhd. 90% Tanjung Bin Power Sdn. Bhd. (formerly known as SKS Power Sdn. Bhd.) 100% Kapar Energy Ventures Sdn. Bhd.* 100% Hypergantic Sdn. Bhd. 20% Port Dickson Power Berhad
Operations and Maintenance Services
100% Teknik Janakuasa Sdn. Bhd. 2003 51% Natural Analysis Sdn. Bhd.
Electricity Distribution ANNUAL REPORT 100% Wirazone Sdn. Bhd. 24 25 Project Management Services 100% Malakoff Engineering Sdn. Bhd.
Others 100% Tuah Utama Sdn. Bhd. 20% Lekir Bulk Terminal Sdn. Bhd.
(INCORPORATED IN MALAYSIA) 54% Desa Kilat Sdn. Bhd.
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100% Transpool Sdn. Bhd.* 100% Malakoff Gulf Limited* 100% Spring Assets Limited*
MALAKOFF MALAKOFF BERHAD
* Dormant board of directors seated from left to right: Dato’ Ismail bin Shahudin • Dato’ Abdul Aziz bin Abdul Rahim Tan Sri Abdul Halim bin Ali (Chairman) • Abdul Jabbar bin Abdul Majid
standing from left to right: Azizan bin Mohd Noor • Ahmad Jauhari bin Yahya (Managing Director) Dato’ Mohammed Radzi @ Mohd Radzi bin Manan
not in the picture: Kenneth William Teasdale • Simon David Pinnell (Alternate Director to Kenneth William Teasdale) profile of board of directors
Tan Sri Abdul Halim bin Ali
YBhg. Tan Sri Abdul Halim bin Ali, 60, a Malaysian, was appointed the Non-Independent Non- Executive Chairman of Malakoff Berhad on 10 September 2001 and is the Chairman of the Nomination Committee of the Board. A Bachelor of Arts (Honours) graduate from University of Malaya, Malaysia, YBhg. Tan Sri Abdul Halim joined the Malaysian Foreign Service soon after graduating in 1965. During the next thirty (30) years, his postings included the Malaysian High Commission in New Delhi, Republic of India, the Malaysian Consulate in Medan, Sumatra, Republic of Indonesia and the Malaysian Embassy in Tokyo, Japan. In 1976, he was appointed Principal Assistant Secretary, Ministry of Foreign Affairs and three (3) years later, was posted to the United Nations in New York, as Malaysia’s Deputy Permanent Representative. In 1982, he assumed his first ambassadorial role as the Malaysian Ambassador to the Socialist Republic of Vietnam, coming back to Kuala Lumpur when he was appointed Deputy Secretary-General (III), Ministry of Foreign Affairs. In 1988, he was appointed Ambassador of Malaysia to Austria, where he also held the position of President Representative to UNIDO, IAEA, United Nations Office in Vienna, Austria. In 1991, he was named Deputy of Secretary-General (1), Ministry of Foreign Affairs, before his appointment as Secretary-General five (5) years later. In September 1996, he was appointed Chief Secretary to the Government, a post he held until his retirement in January 2001, when he was named Chairman of the Employees Provident Fund Board (“EPF”). He is also the Chairman of Malaysian Building Society Berhad, a subsidiary of EPF, Cycle and Carriage Bintang Berhad, Pos Malaysia & Services Holdings Berhad, Badan Pengawas Saham Minoriti Bhd (Minority Shareholders Watchdog Body Limited) and Multimedia Development Corporation Sdn. Bhd. He also sits on the boards of ESSO Malaysia Berhad and LCL Corporation Berhad.
In recognition of his achievements and contributions to the country and corporate sector, YBhg. Tan Sri Abdul Halim was conferred a Fellowship by the Governing Council of the Malaysian Institute of Directors.
YBhg Tan Sri Abdul Halim does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last ten (10) years. profile of board of directors
Ahmad Jauhari bin Yahya
En. Ahmad Jauhari bin Yahya, 49, a Malaysian, is the Managing Director of the Malakoff Berhad. He was appointed to the Board on 23 March 1994 and is a member of the Audit Committee and the Chairman of the Employees’ Share Option Scheme Committee of the Board. He holds a
Bachelor of Science (Honours) degree in Electrical and Electronic Engineering from University of 2003 Nottingham, United Kingdom. From 1977 to 1979, he worked with ESSO Malaysia Berhad before joining New Straits Times Press (M) Berhad (“NSTP”) as an Electrical and Electronic Engineer, where he was subsequently promoted to the positions of Engineering Manager, Production, Technical Director and Senior Group General Manager, Production and Circulation, in 1982, 1983
ANNUAL ANNUAL REPORT and 1990 respectively. In 1992, he moved to Time Engineering Berhad as Deputy Director and
was promoted to Managing Director the same year. In 1993, he joined Malaysian Resources 28 Corporation Berhad (“MRCB”) as Managing Director, before resigning from the said position to 29 assume his current position a year later. He however remained a Director of MRCB. He was appointed a Director of NSTP in July 1999 and Executive Vice-President of MRCB in February 2000. In July 2000, he resigned from his directorship at NSTP and also his directorship and executive vice-presidency at MRCB. He also sits on the board of Port Dickson Power Berhad, an associated company of Malakoff.
En. Ahmad Jauhari does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been
convicted of any offences in the last ten (10) years. (INCORPORATED IN MALAYSIA)
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MALAKOFF MALAKOFF BERHAD profile of board of directors
Dato’ Abdul Aziz bin Abdul Rahim Dato’ Mohammed Radzi @ Mohd Radzi bin Manan
YBhg. Dato’ Abdul Aziz bin Abdul Rahim, 57, a Malaysian, YB. Dato’ Mohammed Radzi @ Mohd Radzi bin Manan, 58, a was appointed an Independent Non-Executive Director of Malaysian, was appointed an Independent Non-Executive Malakoff Berhad on 11 March 1994. He is the Chairman of Director of Malakoff Berhad on 10 June 1996 and is a the Remuneration Committee and a member of the Audit member of the Remuneration Committee. He holds a Bachelor Committee, the Employees’ Share Option Scheme Committee of Arts degree from University of Tasmania, Australia. and the Nomination Committee of the Board. He is an He served in the Malaysian Administration and Diplomatic Advocate & Solicitor of the High Court of Malaya and holds a Service for thirteen (13) years after graduation. His last Bachelor of Law (Hons.) degree from International Islamic appointment before joining the private sector in 1981 was University, Malaysia. From 1967 to 1975, he worked with the Director of Immigration Northern Region Penang. In 1986, Federal Land Development Authority in various capacities he was appointed a Justice of Peace, Perak Darul Ridzuan, before joining Kumpulan Ladang-Ladang Terengganu Sdn. and was a member of the Ipoh City Council from 1987 to Bhd. as an Estate Manager, a post he held until 1987. 1994, before serving as a Senator and Member of Parliament In 1991, he joined Messrs. Ngeow & Maurice Gomez as an from 1994 to 1995. In 1995, he was elected to the Perak Advocate and Solicitor, before starting his own partnership a Legislative Assembly representing the constituency of Tualang year later under the name of Abdul Aziz Rahim & Co. Sekah, Kampar, Perak Darul Ridzuan, a seat he re-won in the 1999 general elections. He is the Chairman of Le Proton Lima YBhg. Dato’ Abdul Aziz does not have any family relationship Sdn. Bhd., the organiser of the world-renowned biennial with any other Directors and/or major shareholders of the Langkawi International Maritime and Aerospace (“LIMA”) Company or any conflict of interest with the Company. shows since 1991. In the early 1990s, he served on the Neither has he been convicted of any offences in the last ten boards of Sistem Televisyen Malaysian Berhad (“TV3”) and (10) years. Idris Hydraulic Berhad. Currently, he is the Executive Chairman of Foremost Holdings Berhad. He also sits on the board of Perkapalan Mesra Berhad.
YB. Dato’ Mohammed Radzi does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last ten (10) years. profile of board of directors
Abdul Jabbar bin Abdul Majid Azizan bin Mohd Noor
En. Abdul Jabbar bin Abdul Majid, 58, a Malaysian, was En. Azizan bin Mohd Noor, 63, a Malaysian, was appointed appointed an Independent Non-Executive Director of an Independent Non-Executive Director of Malakoff Berhad Malakoff Berhad on 23 November 2000 and is the Chairman on 14 May 2002 and is a member of the Audit Committee
of the Audit Committee and a member of the Nomination and also a member of the Nomination Committee of the 2003 Committee of the Board. He is a Fellow of the Institute of Board. He is a Fellow of the Institute of Chartered Chartered Accountants, Australia, and a member of the Accountants in England and Wales and a Member of the Malaysian Institute of Certified Public Accountants (“MICPA”) Malaysian Institute of Certified Public Accountants (“MICPA”) (formerly known as Malaysian Association of Certified Public (formerly known as Malaysian Association of Certified Public
ANNUAL ANNUAL REPORT Accountants) (“MACPA”) and the Malaysian Institute of Accountants) (“MACPA”) and the Malaysian Institute of Accountants (“MIA”). He started his career in 1974 as Senior Accountants (“MIA”). He worked in Manchester, England for 30 Manager in the Internal Audit and Organisation Department a number of years, of which his last post was as an Audit 31 of Bank Pertanian. In 1977, he joined KPMG as Manager and Assistant at PriceWaterhouse. On his return to Malaysia in became a Partner two (2) years later. He was promoted to 1972, he joined Azman, Wong Salleh & Co. as a Senior Deputy Senior Partner in 1993 and was made a Senior Auditor until 1974. From 1974 to 1977, he was the Chief Partner in 1995, a position he held until his retirement in Internal Auditor of the former Bank Bumiputra Malaysia 2000. He is an Adjunct Professor of the Faculty of Economics Berhad. He subsequently joined Anuarul, Azizan Chew & Co., and Accounting, International Islamic University, Malaysia, Chartered Accountants, and was a Senior Partner until his and the immediate past President and a council member of retirement in 2000. He also sits on the board of Kumpulan MICPA. He is also a member of the Open University Malaysia FIMA Berhad and several private companies.
(INCORPORATED IN MALAYSIA) Board. He is the Executive Chairman of Malaysian Derivatives Exchange Berhad. He is also a pro-tem Board member of En. Azizan does not have any family relationship with any
24816-M Kuala Lumpur Stock Exchange Berhad, Labuan International other Directors and/or major shareholders of the Company or Financial Exchange Inc and Malaysian Institute of Corporate any conflict of interest with the Company. Neither has he Governance. He is a member of the boards of Danamodal been convicted of any offences in the last ten (10) years. Nasional Berhad, Perusahaan Otomobil Nasional Berhad, Pernas International Holdings Berhad and Opcom Holdings
MALAKOFF MALAKOFF BERHAD Berhad.
En. Abdul Jabbar does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last ten (10) years. profile of board of directors
Dato’ Ismail bin Shahudin Kenneth William Teasdale
YBhg. Dato’ Ismail bin Shahudin, 52, a Malaysian, was Mr. Kenneth William Teasdale, 51, a British citizen, was appointed a Non-Independent Non-Executive Director of appointed a Non-Independent Non-Executive Director of Malakoff Berhad on 12 August 2002 and is a member of the Malakoff Berhad on 20 August 2002. He holds a Bachelor of Remuneration Committee of the Board. He holds a Bachelor Science degree in Electrical and Mechanical Engineering from of Economics (Honours) degree from University of Malaya, University of Leeds, United Kingdom (“UK”). He is a graduate Malaysia, majoring in Business Administration. Upon his Chartered Electrical Engineer and Chartered Mechanical graduation in 1974, he joined ESSO Malaysia Berhad and Engineer and a Fellow of both the Institution of Electrical served for five (5) years within its Finance Division. Engineers and the Institution of Mechanical Engineers, UK. Thereafter, he joined Citibank Malaysia as Accounts Manager. He has worked in the power industry for thirty-six (36) years In 1984, he was sent to Citibank New York as part of the with the Central Electricity Generating Board, UK and team in the Asia Pacific Division, and on his return to National Power plc in a number of different countries. He Malaysia he was promoted to the position of Vice President held a number of senior technical and management positions & Group Head of Public Sector and Financial Institutions at power stations in England and Wales before being Group in Citibank Malaysia. In 1988 he served United Asian appointed as Operations Director of the Kot Addu Power in Bank Berhad (“UAB”) as its Deputy General Manager until Pakistan. Three (3) years later, he returned to UK as Manager 1992. Subsequently, he joined Maybank as its General of the 4,000MW coal-fired Drax Power Station. He was Manager, Corporate Banking Division. In September 1997, subsequently appointed as Chief Executive Officer of he was appointed as Executive Director of Maybank. Hazelwood Power in Australia in 2000. In August 2002, he He left Maybank in July 2002 to assume his current position was appointed International Power plc’s Director of as Group Chief Executive of Malaysia Mining Corporation Operations and Engineering. He also sits on the boards of Berhad (“MMC”). He also sits on the boards of MMC, International Power Plant Maintenance in England, Uni-Mar MMC Engineering Group Berhad, Kramat Tin Dredging Berhad, Enerji Yatirimlari AS and National Power Enerji AS in Turkey Berjuntai Tin Dredging Berhad, Malaysia Smelting Corporation and Shuweihat O&M Limited Partnership in United Arab Berhad, IJM Corporation Berhad and Tronoh Mines Malaysia Emirates. Berhad. Mr. Kenneth Teasdale does not have any family relationship YBhg. Dato’ Ismail does not have any family relationship with any other Directors and/or major shareholders of the with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last Neither has he been convicted of any offences in the last ten (10) years. ten (10) years. profile of board of directors
Simon David Pinnell (Alternate Director to Kenneth William Teasdale)
Mr. Simon David Pinnell, 39, a British citizen, is the Alternate Director to Mr. Kenneth William Teasdale and was appointed to the Board of Malakoff Berhad on 21 August
2002. He holds a Bachelor of Science degree in Economics 2003 from University College London, United Kingdom (“UK”). He is a Member of the Chartered Institute of Management Accountants, UK. He is currently the Manager, Portfolio Finance of International Power plc. Prior to his present
ANNUAL ANNUAL REPORT position, he was in the International Division of its predecessor company National Power plc, responsible for 32 asset performance. He also sits on the board of Tejo Energia 33 Producao e Distribuicao de Energia Electra SA in Portugal and the Hub River Power Company, a listed company on the Karachi Stock Exchange.
Mr. Simon Pinnell does not have any family relationship with any other Directors and/or major shareholders of the Company or any conflict of interest with the Company. Neither has he been convicted of any offences in the last
ten (10) years. (INCORPORATED IN MALAYSIA)
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MALAKOFF MALAKOFF BERHAD MALAKOFF BERHAD Ahmad Jauhari bin Yahya from left to right: Managing Director Habib, Chew, Ruswati, Ahmad Jauhari Mohd Radzuan bin Yahya Chief Operating Officer
Mohamed Rafique Merican SEGARI ENERGY VENTURES SDN. BHD. TEKNIK JANAKUASA SDN. BHD. bin Mohd Wahiduddin Merican Chief Financial Officer/Company Secretary Mohd Radzuan bin Yahya Head Office Chief Operating Officer Nor Shakiman bin Muhammad Lim Wee Neo Chief Operating Officer Head, Corporate Services/Joint Secretary Habib bin Husin General Manager, Projects Rosli bin Abdul Hamid Ruswati binti Othman Head, Technical Support Group/ Head, Corporate Finance and Risk Management GB3 SDN. BHD. Information Technology Siti Hajar binti Mohammad Dahlan Wong Keng Cheong Head, Human Resource Senior General Manager Lumut & GB3 Power Plant Chew Yee Chuan TANJUNG BIN POWER SDN. BHD. Station Manager (formerly known as SKS Power Sdn. Bhd.) Johari Kamil bin Ibrahim Prai Power Plant Chief Executive Officer Mohd Hashim bin Abdul Hamid Station Manager PRAI POWER SDN. BHD. Ahmad bin Ali Centralised Utility Facilities, Gebeng Chief Operating Officer Nordin bin Kassim Plant Manager
Centralised Utility Facilities, Kerteh Solomon @ Leslie D. Sinnadurai management Plant Manager team from left to right: Leslie, Wong, Rafique, Nordin
WIRAZONE SDN. BHD. Azizan bin Lebai Manat General Manager
MALAKOFF ENGINEERING SDN. BHD. Chia Kok Bin General Manager
from left to right: Hajar, Ahmad, Azizan, Rosli, Shakiman
from left to right: KB Chia, Johari, Radzuan, Hashim, Wee Neo corporate 2003
ANNUAL ANNUAL REPORT
highlights 36 37 38 our operations & maintenance team
42 location of Malakoff’s power plants
44 calendar events
(INCORPORATED IN MALAYSIA)
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MALAKOFF MALAKOFF BERHAD our operations & maintenance team
“We provide safe, reliable and efficient plant operations and promote continuous improvements and innovations.”
Operations Department “Our top priority is to support the operations and maintenance activities of our power plants by managing the right materials and services through best procurement and warehousing practices and providing efficient administrative
2003 and financial services.”
Management Services Department
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38 39
(INCORPORATED IN MALAYSIA)
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MALAKOFF MALAKOFF BERHAD “We provide quality maintenance services through continuous development and innovation.”
Maintenance Department “Together we ensure good health, safety and environmental practices are implemented at our power plants.”
Health, Safety & Environmental Department
2003
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40 41
(INCORPORATED IN MALAYSIA)
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“We provide engineering support for plant operations and
maintenance activities while promoting in-house MALAKOFF BERHAD development of technical expertise and specialisation.”
Technical Support Group Department Prai Power Plant Owner Prai Power Sdn. Bhd. Type Combined cycle gas turbine (baseload plant) Capacity 350MW Location Prai, Pulau Pinang Total Cost RM1.0 billion
Lumut Power Plant Owner Segari Energy Ventures Sdn. Bhd. Type Combined cycle gas turbine (baseload plant) Capacity 1,303MW Location Segari, Perak Total Cost RM3.8 billion
GB3 Power Plant Owner GB3 Sdn. Bhd. Type Combined cycle gas turbine (baseload plant) Capacity 640MW Location Segari, Perak Total Cost RM1.4 billion
Tanjung Bin Power Plant (Artist impression) Owner Tanjung Bin Power Sdn. Bhd. (Under Construction) Type Coal-fired (baseload plant) Capacity 2,100MW Location Tanjung Bin, Johor Total Cost RM7.9 billion (Estimation)
Malakoff’s interest in other power plants
Port Dickson power plant Kapar Power Station Type Open cycle gas turbine Type Coal, oil and gas-fired (peaking plant) (baseload & peaking plant) Capacity 440MW Capacity 2,420MW Location Port Dickson, Negeri Sembilan Location Kapar, Selangor (Malakoff has a 20% interest via its wholly-owned (Acquisition of 40% interest is in progress) subsidiary Hypergantic Sdn. Bhd.) Pulau Pinang
Ipoh
2003
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42 43
Kuala Lumpur
(INCORPORATED IN MALAYSIA)
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location of
MALAKOFF MALAKOFF BERHAD
Johor Malakoff’s Bahru power plants calendarevents during the financial year ended 31 August 2003
a b
28-29 September 2002 Adopted School Programme Segari Energy Ventures Sdn. Bhd. (“SEV”) and Teknik Janakuasa Sdn. Bhd. (“TJSB”) in conjunction with their “Adopted School Programme” jointly sponsored three (3) schools in the neighbouring areas of the Lumut Power Plant (“LPP”) & GB3 power plant; Sekolah Kebangsaan Segari, Sekolah Jenis Kebangsaan Ladang Huntly and Sekolah Jenis Kebangsaan Pei Min, on an educational trip to Melaka. a 10 November 2002 Malakoff Orphanage Visit Malakoff hosted a “Majlis Berbuka Puasa” for the children of Rumah Anak-Anak Yatim of Asrama Damai in Kuang, Selangor and made a cash contribution of approximately RM14,500 to Asrama Damai.
15 November 2002 GB3 Completion The conversion of GB3’s 430MW open cycle gas turbine power plant to combined 1 cycle mode was completed 2 /2 months ahead of its scheduled commercial operation date. c
31 January 2003 Commercial Operation of GB3’s 640MW CCGT Power Plant GB3’s 640MW power plant at Segari, Perak began commercial operation on combined cycle mode. 2003
c 17 February 2003 d Annual General Meeting and Extraordinary General
ANNUAL ANNUAL REPORT Meeting The Twenty-Seventh Annual General Meeting (“AGM”) 44 b 25 January 2003 of the Company was held at The Legend Hotel, 45 Malakoff University Duathlon Series (“MUDS”) Kuala Lumpur. Immediately after the AGM, an extraordinary general meeting was convened to Official Launching of MUDS at Panggung Percubaan seek shareholders’ ratification and shareholders’ at Pusat Kebudayaan Dan Kesenian Sultan mandate in respect of the recurrent transactions Salahuddin Abdul Aziz Shah, Universiti Putra entered into by the Malakoff Group with related Malaysia. Malakoff’s sponsorship began with four parties pursuant to the Listing Requirements of (4) local universities under Institut Pengajian Malaysia Securities Exchange Berhad. Tinggi Awam, namely, Universiti Teknologi Malaysia,
(INCORPORATED IN MALAYSIA) Universiti Islam Antarabangsa, Universiti Malaya d 22 March 2003 and Universiti Putra Malaysia.
24816-M GB3 Opening Ceremony The objective of MUDS is to nurture young talents Two (2) months after achieving commercial operation, in local universities to represent the country at an official ceremony to commemorate the completion international level and to foster healthy lifestyle of GB3’s 640MW CCGT power plant was officiated by amongst the students. Designed for shorter, Y.B. Datuk Amar Leo Moggie, the Minister of Energy, more do-able distances, contestants are required MALAKOFF BERHAD Communications and Multimedia. The ceremony to race for an average distance of 3km, cycle an was followed by the official launching of GB3’s average 15km and finish off with a final 3km run. new logo and new administration building located adjacent to the power plant. calendar events during the financial year ended 31 August 2003
e f
e 30 March 2003 Malakoff Malaysian Duathlon Series I (“MMDS I”) at Shah Alam This is the first of the three (3) series leading to Powerman Malaysia, a premier world duathlon series sponsored by Malakoff, which was held on 12 October 2003 at Putrajaya. The MMDS I, held at Shah Alam, was well received with more than 300 contestants taking part in the race. The other two (2) series were held on 18 May 2003 at Putrajaya and on 3 August 2003 at Dataran Merdeka, Kuala Lumpur. f 23 April 2003 Signing ceremony between TJSB and Innogy plc (“Innogy”) for the supply of the following services:- (i) Engineering Risk Assessment Process (ERAP) and Operational Risk Assessment Process (OpRAP) LPP; (ii) Management and Engineering (M&E) at LPP; and (iii) Audit and Plant Assessment at the Centralised Unit Facilities (CUF) Co-generation plants at Kerteh, Terengganu and Gebeng, Pahang A signing ceremony between TJSB and Innogy was held at Innogy’s office in Kuala Lumpur City Centre for the supply of the above services to TJSB.
23 April 2003 ISO Certification LPP’s ISO 9002:1994 certification awarded by Lloyds Registered Quality Assurance in June 2000 was successfully converted to ISO 9001:2000. calendar events during the financial year ended 31 August 2003
2003
h i
ANNUAL ANNUAL REPORT h 27 May 2003 i 10 June 2003 46 Education Development Programme for Primary Signing of a Memorandum of Understanding 47 and Secondary Schools (“MOU”) for the acquisition of a 60% equity Further to the Adopted School Programme, the interest in the 2,100MW Tanjung Bin power plant Company pledged RM600,000.00 towards the Following the Government’s approval for Northern Education Development Programme endorsed by Power Sdn. Bhd. (“NP”) to dispose off 60% of its the Perak State Government. The Adopted School equity interest in SKS Power to the Company, a Programme was launched by YAB Dato’ Seri Diraja MOU was entered into between the Company, SKS Dr. Haji Mohamad Tajol Rosli bin Ghazali, Menteri Power and NP for the Company’s participation in Besar of Perak. the development of a 2,100MW coal-fired electricity (INCORPORATED IN MALAYSIA) generation facility located at Tanjung Bin, Johor.
The Programme will benefit students from selected 24816-M
primary and secondary schools in Mukim of Pengkalan Baharu in the District of Manjung where SEV’s and GB3’s power plants are located. The funds, to be distributed equally over a
three-year period from 2003, will subsidise the MALAKOFF BERHAD costs of tuition, examination preparatory classes, motivational courses, study aids and the setting up of computer facilities. calendar events during the financial year ended 31 August 2003
j 7 July 2003 Purchase of a Training Simulator for LPP by TJSB A contract was entered into TJSB and ABB Malaysia (“ABB”) for the purchase of a full scope, high fidelity simulator from ABB for LPP. The signing of the contract was witnessed by YBhg. Datuk (Ir) Mohd Annas Mohd Nor, Chairman of the Energy Commission. The simulator will aid in the training of power plant operators as well as providing refresher j training to experienced operators, aimed to significantly enhance TJSB’s performance as operator of power plants.
7 August 2003 Signing of a Share Sale Agreement for the acquisition of a 90% equity interest in the 2,100MW Tanjung Bin power plant The Government had approved NP’s disposal of an additional 30% equity interest in SKS Power to the Company, increasing the Company’s stake in SKS Power from 60% to 90%. k A conditional Share Sale Agreement was entered into by the Company with NP for the acquisition of 90% equity interest in SKS Power, a special purpose k 29 August 2003 company incorporated to develop the Tanjung Bin GB3 becomes a 75% subsidiary power plant, for a total cash consideration of GB3 became a 75% subsidiary of the Company RM835 million. when TNB and EPF subscribed for a 20% and 5% interest respectively in GB3 pursuant to the Shareholders’ Agreement signed between the Company, TNB, EPF and GB3. 2003 corporate
governance ANNUAL REPORT 48 50 statement on corporate governance 49 56 audit committee report 59 statement of internal control 61 approved utilisation of funds 62 additional compliance information 70 directors’ responsibility statement
(INCORPORATED IN MALAYSIA) (INCORPORATED
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MALAKOFF MALAKOFF BERHAD statement on corporate governance (pursuant to Paragraph 15.26 of the Listing Requirements of Malaysia Securities Exchange Berhad)
The Board of Directors (“Board”) of Malakoff Berhad is committed to applying the principles and best practices recommended by the Malaysian Code on Corporate Governance (“Code”) to ensure that the highest standards of corporate governance is practised throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders’ value and the financial performance of the Group.
The Board strives to adopt and practice the principles of good corporate governance. Hence, appropriate processes and standards have been implemented to ensure overall Board effectiveness and proper management conduct.
The Board is pleased to present the manner in which it has applied the principles and best practices set out in the Code throughout the year ended 31 August 2003.
A. Board of Directors 1. Composition and Size of Board The Board is composed as at the date of this Statement of nine (9) directors including an alternate director; four (4) of whom are independent non-executive directors which are in excess of Malaysia Securities Exchange Berhad’s (“MSEB”), requirement of one-third.
2. Board Balance and Board Effectiveness The Board comprises members from diverse backgrounds in business, financial, legal, banking, technical knowledge as well as public administration and policy-making. The Board, through the Nomination Committee has reviewed the technical skills that each member of the Board brings, and it has determined the core competencies necessary for the Board to function effectively. This mix of skills and experience is vital for the successful performance of the Board. A brief profile of each director is presented on pages 28 to 33 of this Annual Report.
The Board has implemented a formal process to annually assess the overall effectiveness of the Board. At the beginning of the financial year the principal accountabilities and performance targets of the Board were deliberated and agreed to.
Specific targets and objectives were set for each principal accountability areas of the Board and were cascaded to Senior Management to ensure proper alignment of management to Board objectives.
There is a clear division of responsibility between the Chairman and the Managing Director to maintain a balance of power and authority. In order to ensure this balance, the positions of the Chairman and the Managing Director are held by separate members of the Board and their respective roles are clearly defined. The Chairman is primarily responsible for ensuring Board effectiveness and conduct whilst the Managing Director oversees the day-to-day running of the business, implementation of Board policies and decisions, and making of operational decisions.
The presence of independent non-executive directors brings an additional element of balance to the Board as they provide unbiased and independent views, advice and judgment to take account of the interest, not only of the Group, but also of the shareholders, employees, customers, suppliers and the community.
3. Supply of Information and Access to Advice Prior to the Board meetings, all Directors receive the agenda and a set of Board papers containing information relevant to the business of the meeting. This allows the directors to obtain further explanations and clarifications, where necessary, in order to be properly briefed before the meeting. Senior management staff would normally be invited to attend Board meetings to provide the Board with detailed explanations and clarifications on certain matters that are tabled to the Board. statement on corporate governance (pursuant to Paragraph 15.26 of the Listing Requirements of Malaysia Securities Exchange Berhad)
All Directors have access to the advice and services of the Company Secretaries and the Senior Management staff. The Directors may, if necessary, obtain independent professional advice relating to the affairs of the Group or in the discharge of their duties and responsibilities and at the Company’s expense.
4. Attendance at Board Meetings During the year ended 31 August 2003, eight (8) board meetings were held. The attendance of the directors at the board meetings was as follows: Names of Directors No. of meetings attended
Tan Sri Abdul Halim bin Ali 5 out of 8 Ahmad Jauhari bin Yahya 8 out of 8 Dato’ Abdul Aziz bin Abdul Rahim 7 out of 8
Dato’ Mohammed Radzi @ Mohd Radzi bin Manan 7 out of 8 2003 Abdul Jabbar bin Abdul Majid 8 out of 8 Azizan bin Mohd Noor 8 out of 8 Dato’ Ismail bin Shahudin 7 out of 8
ANNUAL REPORT Kenneth William Teasdale 7 out of 8 50 5. Appointment to the Board 51 The Nomination Committee recommends the appointment of new directors to the Board. However, all decisions on appointments are made by the Board after considering those recommendations.
There is a familiarisation programme in place for new directors, including visits to the Group’s businesses and meetings with senior management as appropriate, to facilitate their understanding of the Group’s business and operations.
6. Directors’ Training
All Directors have attended the Mandatory Accreditation Programme (“MAP”) conducted by Research Institute of IN MALAYSIA) (INCORPORATED Investment Analysts Malaysia (“RIIAM”), an affiliate company of MSEB. The Directors will be undergoing the Continuing
24816-M Education Programme (“CEP”) as a continuing effort to train and equip them to effectively discharge their duties.
7. Re-election of Directors In accordance with the Company’s Articles of Association, all directors are required to retire from office once every three (3) years except for the Managing Director who is under a contract of employment entered into prior to 1 June 2001. Retiring directors can offer themselves for re-election. MALAKOFF BERHAD
Directors who are appointed during the financial year are subject to re-election by the shareholders at the Annual General Meeting (“AGM”) following their appointment in accordance with the Company’s Articles of Association.
Details of Directors seeking re-election at the forthcoming AGM are disclosed in the Statement Accompanying the Notice of AGM as set out on page 126 of this Annual Report. statement on corporate governance (pursuant to Paragraph 15.26 of the Listing Requirements of Malaysia Securities Exchange Berhad)
B. Board Committees The Board has delegated certain responsibilities to Board Committees which operate within clearly defined terms of reference. These committees are: a) Audit Committee The Audit Committee consists of four (4) directors, three (3) of whom including the Chairman are independent non- executive directors.
The Audit Committee assists and supports the Board’s responsibility to oversee the Group’s operations by providing a means for review of the Group’s processes for producing financial data, its internal controls and independence of the Group’s external and internal auditors.
The Audit Committee met seven (7) times during the financial year. The Audit Committee Report is presented on pages 56 to 58 of this Annual Report.
b) Nomination Committee In compliance with the Code, the Nomination Committee was established by the Board on 25 January 2002. The Nomination Committee consists of four (4) non-executive directors, the majority of whom are independent.
The Nomination Committee will recommend the appointment of new directors to the Board, review the required mix of skills, experience and other qualities including core competencies which non-executive directors should bring to the Board and identify areas for improvement, and review the succession plan for senior management in the Group.
The members of the Nomination Committee as at the date of this Statement are as follows: i. Tan Sri Abdul Halim bin Ali (non-executive director) - Chairman ii. Dato’ Abdul Aziz bin Abdul Rahim (independent non-executive director) iii. Abdul Jabbar bin Abdul Majid (independent non-executive director) iv. Azizan bin Mohd Noor (independent non-executive director)
The Nomination Committee met three (3) times during the financial year at which all members were present. The Nomination Committee met to: i. Approve the principles and processes of assessing Board effectiveness and performance evaluation of Senior Management; ii. Deliberate and approve performance objectives and standards for the Board and Managing Director for the year in review; and iii. Evaluate the succession plans of the Group with the assistance of an external consultant to produce an independent assessment of current skills and capabilities in the Group.
Further, the Nomination Committee provides details of the performance evaluation process to the Remuneration Committee to link rewards to performance. statement on corporate governance (pursuant to Paragraph 15.26 of the Listing Requirements of Malaysia Securities Exchange Berhad)
c) Remuneration Committee In compliance with the Code, the Remuneration Committee was established by the Board on 18 April 2001. The Remuneration Committee consists of three (3) non-executive directors, the majority of whom are independent.
The Remuneration Committee is responsible for developing the Group’s remuneration policy and determining and recommending the remuneration packages of executive directors and senior management.
The members of the Remuneration Committee as at the date of this Statement are as follows: i. Dato’ Abdul Aziz bin Abdul Rahim (independent non-executive director) - Chairman ii. Dato’ Mohammed Radzi @ Mohd Radzi bin Manan (independent non-executive director) iii. Dato’ Ismail bin Shahudin (non-independent non-executive director)
The Remuneration Committee met once during the financial year at which all members were present. During the meeting, 2003 the performance evaluation process and ratings of the Nomination Committee were presented. The Remuneration Committee has sought the assistance of an external consultant to present current remuneration market trends and to advise on the proper reward principles for the Directors and Senior Management. The Remuneration Committee strives to reward the Directors and Senior Management based on accountability, fairness and competitiveness, as prescribed in the Code. Thus, there is a formal and transparent procedure for rewarding and fixing the remuneration packages of Directors and Senior ANNUAL REPORT Management. 52 53 d) Employees’ Share Option Scheme (“ESOS”) Committee The ESOS Committee was established on 7 March 1996 to administer Malakoff Berhad Employees’ Share Option Scheme (“Scheme”). The Scheme was extended for another five (5) years up to 6 March 2006. The ESOS Committee ensures that the Scheme is administered in accordance with the bye-laws approved by the shareholders of the Company. Subject to approval of the Board, the ESOS Committee will be dissolved upon the expiry of the Scheme in March 2006.
C. Directors’ Remuneration
Non-executive directors are paid attendance/meeting allowance for each Board and/or Committee meeting they attend. IN MALAYSIA) (INCORPORATED Directors’ fees are paid to non-executive directors and these are approved by the shareholders of the Company at the AGM.
24816-M Executive directors are not paid attendance/meeting allowance and directors’ fees. The executive director’s remuneration comprises salary, bonuses and benefits-in-kind. Salary review for the executive director takes into account the performance of the individual and the Group.
Details of remuneration for the Directors are as follows:
Fees Salaries and bonuses Benefits-in-kind MALAKOFF BERHAD (RM) (RM) (RM)
Executive Director – 806,448 64,911 Non-Executive Directors 396,000 – 23,950 statement on corporate governance (pursuant to Paragraph 15.26 of the Listing Requirements of Malaysia Securities Exchange Berhad)
The number of Directors whose total remuneration falls within the following bands is as follows: Number of Directors Range of Remuneration Executive Non-executive
Below RM50,000 – 6 RM100,001 to RM150,000 – 1 RM850,001 to RM900,000 1 –
(For security and confidentiality reasons, the details of Directors’ remuneration are not shown with reference to Directors individually. The transparency and accountability aspects of corporate governance as applicable to Directors’ remuneration are appropriately served by the band disclosure made above.)
D. Relationship with Shareholders and Investors 1. Shareholder Communication and Investor Relations The Board and management convey information about the Company’s performance, strategy and other matters affecting shareholders’ interests to shareholders and investors through timely dissemination of information which includes distribution of annual reports, quarterly announcements, relevant circulars and press releases.
In addition, the Company conducts briefings and dialogues with financial analysts locally and abroad to promote the Group to potential investors. A press conference is normally held after the AGM and/or Extraordinary General Meeting of the Company.
The Company’s website, www.malakoff.com.my, also provides easy and quick access to financial, corporate and other pertinent information on the Group’s various activities.
2. General Meetings General meetings serve as the principal forum for communicating with the shareholders of the Company. The role of the Board is to ensure that the general meetings are conducted in an efficient manner. This includes the supply of timely comprehensive information to shareholders and the encouragement of active participation at the general meetings. The Board has adopted the following best practices to enhance the efficiency and value of general meetings: • For re-election of directors, ensures that the notice of meeting identifies the directors standing for re-election or election with a brief description to include matters such as age, relevant experience, list of directorships, date of appointment to the Board, details of participation in board committees and whether the particular director is independent; • Ensures that each item of special business included in the notice of meeting is accompanied by a full explanation of the effects of the proposed resolution; and • Ensures that the Chairman provides reasonable time at the meeting for discussion and for a question and answer session.
The external auditors are also present to provide their professional and independent clarification on issues and concerns raised by the shareholders. The outcome of all resolutions proposed at the general meeting is announced to MSEB at the end of the meeting day. statement on corporate governance (pursuant to Paragraph 15.26 of the Listing Requirements of Malaysia Securities Exchange Berhad)
E. Accountability and Audit 1. Financial Reporting The Board is responsible to ensure that the annual financial statements of the Company and the Group are drawn up in accordance with the requirements of the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965.
The Directors’ Responsibility Statement explaining the responsibility of the Board for preparing the annual audited financial statements of the Group and the Company for the financial year ended 31 August 2003 is set out on page 70 of this Annual Report.
During the year under review, the Board has ensured quality financial reporting to its shareholders, investors and regulatory authorities in order to present a balanced, clear and comprehensive assessment of the Company’s and Group’s performance and prospects. As part of the Company’s continuing disclosure obligation under the Listing Requirements, the Board ensures
that timely, accurate and up-to-date financial information relating to the Company’s and Group’s quarterly financial results 2003 are announced to MSEB and published in the daily newspapers. The shareholders and investors are therefore kept abreast of the Company’s and the Group’s performance throughout the financial year.
2. Internal Control
ANNUAL REPORT The Board recognises the importance of a sound system of internal controls and risk management practices in achieving corporate objectives and safeguarding shareholders’ investment and the Company’s assets. MSEB’s Statement on Internal 54 Control: Guidance for Directors of Public Listed Companies provides guidance for compliance with these requirements. 55
The Group’s Statement of Internal Control is presented on pages 59 to 60 of this Annual Report.
3. Relationship with Auditors Through the Audit Committee, the Board ensures that an objective and professional relationship is maintained with the Group’s auditors, both external and internal. The Audit Committee meets with the external and internal auditors without the presence of management at least once a year.
(INCORPORATED IN MALAYSIA) (INCORPORATED The report of the Audit Committee is set out on pages 56 to 58 of this Annual Report.
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F. Compliance with the Code The Group is substantially in compliance with the Code during the financial year under review, with the exception set out below: • The appointment of a senior independent non-executive Director to whom concerns may be conveyed has not been made
MALAKOFF MALAKOFF BERHAD mainly because the Board is composed of a majority of independent non-executive directors and the Chairman maintains an active and objective dialogue with Board members and encourages full deliberation of all matters submitted to the Board and Board Committee meetings.
This Statement is made in accordance with a resolution of the Board of Directors dated 19 December 2003. audit committee report for the financial year ended 31 August 2003
The Board of Directors of Malakoff Berhad is pleased to present the report of the Board Audit Committee for the financial year ended 31 August 2003.
The Audit Committee was established by a resolution of the Board on 30 May 1994.
1. Members and Meetings The members of the Audit Committee during the year comprised the Directors listed below. During the financial year ended 31 August 2003, the Committee held meetings on 23 October 2002, 18 December 2002, 23 January 2003, 24 April 2003, 24 July 2003, 1 August 2003 and 21 August 2003 respectively, a total of seven (7) meetings.
Names Status of directorship Independent Attendance of meetings
Abdul Jabbar bin Abdul Majid Non-Executive Director and a Fellow of the Yes 7 out of 7 (Chairman) Institute of Chartered Accountants, Australia and a member of both the Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants
Dato’ Abdul Aziz bin Abdul Rahim Non-Executive Director Yes 6 out of 7
Azizan bin Mohd Noor Non-Executive Director and a Fellow of the Yes 7 out of 7 Institute of Chartered Accountants in England and Wales and a member of both the Malaysian Institute of Certified Public Accountants and the Malaysian Institute of Accountants
Ahmad Jauhari bin Yahya Managing Director No 7 out of 7
2. Terms of reference The terms of reference of the Committee are as follows: 2.1 Membership The Committee shall be appointed by the Board from amongst its members and shall comprise not less than three (3) directors, the majority of whom shall be independent non-executive directors and at least one (1) of whom shall be a member of the Malaysian Institute of Accountants or one (1) of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act, 1967. The Chairman of the Committee shall be an independent non-executive director elected by the Committee from amongst its members.
2.2 Meetings and minutes Meetings shall be held at least four (4) times a year or more frequently as circumstances dictate. The Chairman shall call a meeting of the Committee if requested to do so by any Committee member, the management or the internal or external auditors. A representative of the external and internal auditors shall normally be invited to attend the meetings of the Committee. The management shall be represented at the meetings by the Managing Director, or in his absence, the Chief Operating Officer, and the Chief Financial Officer of the Company. The Committee shall meet at least once a year with the internal and external auditors without the attendance of the executive members of the Committee. The quorum for a meeting of the Committee shall be two (2) members present and both of whom must be independent non-executive directors. audit committee report for the financial year ended 31 August 2003
Minutes of each meeting shall be kept and distributed to each member of the Committee and of the Board. The Chairman of the Committee shall report on each meeting to the Board. The Company Secretaries shall be the Secretaries of the Committee.
2.3 Authority The Committee is authorised by the Board: (a) to investigate any matter within its terms of reference; (b) to have the resources in order to perform its duties and responsibilities as set out in its terms of reference; (c) to have full and unrestricted access to information pertaining to the Company and the Group; (d) to have direct communication channels to the internal and external auditors; and (e) to obtain, at the expense of the Company, external legal or other independent professional advice if it considers necessary.
2003 Where the Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Listing Requirements of Malaysia Securities Exchange Berhad (“MSEB”), the Committee has the responsibility to promptly report such matter to MSEB.
ANNUAL REPORT 2.4 Review of the Committee The term of office and performance of the Committee and each of its members shall be reviewed by the Board at least 56 once every three (3) years to determine whether the Committee and its members have carried out their duties in 57 accordance with their terms of reference.
2.5 Duties and Responsibilities The duties and responsibilities of the Committee are as follows: (a) review and update the Audit Committee Charter as and when conditions dictate; (b) review with the external auditors and approve the audit scope and plan including any changes; (c) review and approve the adequacy of the internal audit scope and plan, functions and resources of the internal audit
(INCORPORATED IN MALAYSIA) (INCORPORATED function and that it has the necessary authority to carry out its work;
(d) review the internal and external audit reports to ensure that appropriate and prompt remedial action is taken by 24816-M
management for major deficiencies in controls or procedures that have been identified; (e) review major audit findings and the management’s response with the management, the internal and external auditors including the status of previous audit recommendations; (f) review the assistance given by the Group’s officers to the auditors, and any difficulties encountered in the course of
audit work, including restrictions on the scope of activities or access to required information; MALAKOFF BERHAD (g) review the appointment and performance of the external auditors, the audit fee and any questions of resignation or dismissal before making recommendations to the Board; (h) review the nomination of a person or persons as external auditors; (i) review the adequacy and effectiveness of internal control systems, including the management information system, and the internal auditors’ and/or external auditors’ evaluation of the said systems; (j) direct and, where appropriate, supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts; audit committee report for the financial year ended 31 August 2003
(k) review the quarterly results and year-end financial statements of the Company and the Group, prior to approval by the Board, focusing particularly on: i. any changes in accounting policies and practices; ii. significant adjustments arising from the audit; iii. the going concern assumption; and iv. compliance with accounting standards and other regulatory requirements; (l) review procedures in place to ensure that the Group is in compliance with the Companies Act, 1965, the Listing Requirements of MSEB and other regulatory and reporting requirements; (m) review any related party transaction and any conflict of interest situation that may arise within the Company or the Group; (n) prepare reports, at least once a year, to the Board summarising the Committee’s activities during the year and the related significant results and findings; and (o) any other activities, as authorised by the Board.
3. Summary of Activities during the Year In line with the terms of reference of the Committee, the following activities were carried out by the Committee during the year in the discharge of its duties and responsibilities: (a) reviewed the audit plans for the year for the Group and the Company prepared by the internal and external auditors; (b) reviewed the audit reports for the Group and the Company prepared by the internal and external auditors and the major findings by the auditors and management’s responses thereto including the status of previous audit recommendations; (c) reviewed the fees of the internal and external auditors; (d) reviewed with the external auditors the audit strategy and scope for the statutory audit of the Group and the Company for the financial year ended 31 August 2003; (e) reviewed the quarterly unaudited financial statements and year-end audited financial statements of the Group and the Company with the management and the external auditors prior to the approval by the Board; (f) reviewed the related party transactions entered into by the Group and the Company prior to the approval by the Board and the disclosure of such transactions in the annual report of the Company; (g) reviewed the adequacy of the internal control systems within the Group; (h) met with the internal and external auditors of the Company without the presence of the Executive Director.
4. Internal Audit Function The Company engages the services of an audit firm to carry out the internal audit function of the Group to assist the Committee in the discharge of its duties and responsibilities. The internal audit function includes evaluation of the processes by which significant risks are identified, assessed and managed and ensuring that instituted controls are appropriate and effectively applied as well as ensuring compliance with the Group’s risk management policies. statement of internal control
Introduction The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard shareholders’ investments and the Group’s assets. The Listing Requirements of Malaysia Securities Exchange Berhad (“MSEB”) require directors of listed companies to include a statement in their annual reports on the state of their internal controls. MSEB’s Statement on Internal Control: Guidance for Directors of Public Listed Companies (“Guidance”) provides guidance for compliance with these requirements. Set out below is the Board of Directors’ Statement of Internal Control, which has been prepared in accordance with the Guidance.
Board Responsibilities The Board places importance on the need to maintain a sound internal control system and effective risk management practices in the Group to ensure good corporate governance. The Board affirms its overall responsibility for the Group’s system of internal control and risk management, and for reviewing the adequacy and integrity of those systems. The system of internal controls includes financial controls, operational efficiency and effectiveness, compliance monitoring, systems and process improvements, 2003 self-assessment and risk management. This system can only provide reasonable but not absolute assurance against material misstatement or loss. The Group has in place an on-going process for identifying, evaluating, monitoring and managing significant risks that may affect the achievement of business objectives and accords with the Guidance.
ANNUAL REPORT
Enterprise Risk Management 58 The Board has approved a Risk Management Policies and Procedures Manual for the Group in 2002. Through this framework, there is an 59 ongoing process to identify, evaluate and manage significant risks that affect the achievement of the Group’s business objectives.
During the year under review, the Risk Management Units within the Group have continued to evaluate and manage their risks with the formulation of action plans to mitigate those risks identified. These action plans are continuously being monitored and reported to the Board. The Risk Management Committee had meetings to discuss the risks identified and the action plans involved to ensure that the action plans are being carried out within the time and budget allocated. The significant risk reports are provided to the Board Audit Committee and the Board on a quarterly basis, namely, to update on the status of the action plans and new risks identified. IN MALAYSIA) (INCORPORATED
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Promotion of Risk Awareness In support of the Company’s efforts to promote risk awareness culture, the Risk Management Committee communicates the Company’s risk management programme to the appropriate levels of employees and other stakeholders via the appropriate channels. Employees are also encouraged to give feedback on risk management issues and make suggestions for improvement.
MALAKOFF MALAKOFF BERHAD
Internal Audit Function The internal audit function of the Group is outsourced to Ernst and Young during the financial year. This provides the Board with the assurance it requires regarding the adequacy and integrity of the system of internal control.
Internal audits are undertaken to provide independent assessment on the adequacy, efficiency and effectiveness of the Group’s internal control system in anticipating potential risk exposures over key business processes and in controlling the proper conduct of business within the Group. The Board Audit Committee also has full access to both internal and external auditors and receives reports on all audits performed. statement of internal control
The internal audit function reviews the internal controls in the key activities of the Group’s businesses based on the annual internal audit plan, which is presented to the Board Audit Committee for approval. The internal audit function adopts a risk-based approach and prepares its audit strategy and plan based on the risk profiles of the business units of the Group.
The internal audit reports are reviewed by the Board Audit Committee. The Management is responsible for ensuring that corrective actions on reported weaknesses are taken within the required time frame.
Other Risks and Control Processes Apart from risk management and internal audit, the Board has the following control processes in place: • The full Board meets at least quarterly and has set a schedule of matters, which is required to be brought to it for discussion, thus ensuring that it maintains full and effective supervision over appropriate controls. The Managing Director leads the presentation of the Board papers and provides comprehensive explanation of pertinent issues. In arriving at any decision, on recommendation by the Management, a thorough deliberation and discussion by the Board is a prerequisite. In addition, the Board is kept updated on the Group’s activities and operations on a regular basis. • The Managing Director also reports to the Board on significant changes in the business and the external environment, which result in significant risks. The Chief Financial Officer provides the Board with monthly and quarterly financial information, which includes key performance indicators. This includes, amongst others, the monitoring of results against budget, with major variances being followed up and management action taken, where necessary. Where areas of improvement in the system are identified, the Board considers the recommendations made by the Board Audit Committee and Management. • A clearly defined lines of accountability and responsibility, which sets out the decisions that need to be taken and the appropriate approving authority at various levels of management including matters that require Board approval. • An organisational structure with clearly defined lines of responsibility and delegation of authority. A reporting process, which provides for a documented and auditable trail of accountability, has been put in place. The Group also has an Employee Handbook, which highlights the policies on health and safety, training and development, equality of opportunity, staff performance and serious misconduct. These policies are relevant across the Group operations. The internal audit function reviews the implementation and adoption of these policies. Planned corrective actions, if required, are independently monitored for timely completion.
Internal Control that Result in Material Losses There were no material losses incurred during the financial year as a result of weaknesses in internal control. The Management continues to take measures to strengthen the control environment.
This Statement is made in accordance with the resolution of the Board of Directors dated 19 December 2003. approved utilisation of funds by the Securities Commission in the financial year ended 31 August 2003
Approved Actual Description Utilisation Utilisation Balance Comments RM million RM million RM million
Issuance by GB3 Sdn. Bhd. (“GB3”) of up to:- • RM1,000 million Al-Bai’ 1,150.0 1,096.0 54.0 The Securities Commission (“SC”) Bithaman Ajil Serial Bonds had, via their letter dated • RM350 million Al-Murabahah 11 September 2001, approved Commercial Papers/ the utilisation of proceeds for Medium Term Notes development and construction (total net proceeds of up to of 640MW combined cycle power RM1,150 million) plant, (“GB3 Project”) located 2003 adjacent to the existing Lumut Power Plant in Segari, Perak.
ANNUAL REPORT
Issuance by GB3 of up to 286.5 261.0 25.5 The SC had, vide their letter 60 RM286.5 million nominal value dated 22 October 2001, 61 redeemable unsecured loan stocks approved the utilisation of (“RULS”) proceeds for the development and construction of the GB3 Project in Segari, Perak.
During the financial year under review, an aggregate
nominal value of RM52.20 million IN MALAYSIA) (INCORPORATED and RM13.05 million representing
20% and 5% respectively, of GB3’s 24816-M
outstanding RULS of RM261 million, were transferred to Tenaga Nasional Berhad (“TNB”) and Employees’ Provident Fund Board (“EPF”)
for cash. After the transfer, MALAKOFF BERHAD 75% of the outstanding RULS is held by the Company. additional compliance information as at 31 August 2003
1. Utilisation of Proceeds • GB3’s RM1,350 million Islamic Private Debt Securities During the financial year under review, GB3 Sdn. Bhd. (“GB3”) had further raised net proceeds of RM69 million from the part issuance of its RM350 million Al-Murabahah Commercial Papers/Medium Term Notes Issuance Programme (“CP/MTN Programme”). This has increased the total net proceeds raised by GB3 from the CP/MTN Programme to RM246 million (2002: RM177 million) as at 31 August 2003. Together with the net proceeds raised from the issuance of RM850 million Al- Bai’ Bithaman Ajil Serial Bonds (“ABBA Bonds”), which were fully utilised in the previous financial year, GB3 had raised and utilised total net proceeds of RM1,096 million as at 31 August 2003 (2002: RM1,027 million) from its RM1,350 million Islamic Private Debt Securities.
• GB3’s RM286.5 million Redeemable Unsecured Loan Stocks (“RULS”) During the financial year under review, there was no further issuance of GB3’s Redeemable Unsecured Loan Stocks (“RULS”). However, during the financial year under review, an aggregate nominal value of RM52.20 million and RM13.05 million representing 20% and 5% respectively, of GB3’s outstanding RULS of RM261 million were transferred to Tenaga Nasional Berhad (“TNB”) and Employees’ Provident Fund Board (“EPF”) for cash. After the transfer, 75% of the outstanding RULS are held by the Company. With the completion of the 640MW combined cycle gas turbine power plant at Segari, Perak, there will be no further issuance of the balance of RM54 million CP/MTN and RM25.5 million RULS under the CP/MTN Programme and RULS respectively.
2. Share Buy-backs The Company has not purchased any of its own shares and as such, there is no treasury shares maintained by the Company for share buy-backs.
3. Options, Warrants or Convertible Securities During the financial year under review, options to subscribe for 12,624,000 ordinary shares of RM1.00 each in the Company have been exercised pursuant to the Employees’ Share Option Scheme.
The Company has not issued any warrants or convertible securities.
4. American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) Programme The Company did not sponsor any ADR or GDR programme during the financial year under review.
5. Imposition of Sanctions and/or Penalties There were no public sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by any regulatory body during the financial year under review. additional compliance information as at 31 August 2003
6. Non-audit Fees Non-audit fees payable to the external auditors, Messrs. KPMG and its affiliated companies for the financial year ended 31 August 2003 amounted to RM635,150.46 and are as stated below. The fees were mainly in relation to the implementation and enhancement of SAP system, tax advisory services, corporate governance advisory services, enterprise risk management advisory services and acting in the capacity as reporting accountants in respect of the acquisition of Prai Power Sdn. Bhd.
RM
KPMG Consulting (ASPAC) Sdn. Bhd. 71,466.14 KPMG Tax Services Sdn. Bhd. 338,851.12 KPMG Consulting Sdn. Bhd. 66,834.80 KPMG 157,998.40 Total 635,150.46
2003
7. Variation in results There were no variations between the audited results for the financial year ended 31 August 2003 and the unaudited results for the fourth quarter ended 31 August 2003 of the Group. ANNUAL REPORT
62 8. Profit Guarantee 63 The Company did not give any profit guarantee during the financial year under review.
9. Revaluation Policy on Landed Properties The Group revalues its properties comprising land and buildings every five (5) years and at shorter intervals whenever the market value of the revalued assets has changed materially from their carrying value.
(INCORPORATED IN MALAYSIA) (INCORPORATED 10. Material Contracts
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Save as disclosed below, there were no material contracts entered into by the Company (“MB”) and its subsidiaries (“MB Group”) involving the interests of directors and substantial shareholders of the Company, either subsisting at the end of the financial year or entered into since the end of the previous financial year: • A conditional share sale agreement dated 29 May 2002 for the acquisition of Prai Power Sdn. Bhd. (i) A conditional share sale agreement dated 29 May 2002 was entered into between the Company and SKS Ventures Sdn.
MALAKOFF MALAKOFF BERHAD Bhd. (“SKS Ventures”) (“the Prai Power Share Sale Agreement”) for the acquisition of the entire equity interest in Prai Power Sdn. Bhd. (“Prai Power”) comprising 1,000,000 ordinary shares of RM1.00 each (“Prai Power Shares”), for a cash consideration of RM82,520,000 together with the obligation by the Company, on behalf of SKS Ventures to settle the shareholders’ advances of RM199,475,710, owing by Prai Power to SKS Ventures as at 31 December 2001. Prai Power is the owner of a 350MW natural gas-fired combined cycle gas turbine power station located at Prai, Pulau Pinang; additional compliance information as at 31 August 2003
(ii) Save as disclosed below, none of the directors or major shareholders of the Company have any interest, direct or indirect, in the Prai Power Share Sale Agreement: (a) Ismail Khan bin Lall Khan (“Ismail Khan”), Mohammad Shaker bin Ismail (“Mohammad Shaker”), Tegak Megah Sdn. Bhd. (“Tegak Megah”), Gugusan Melati Sdn. Bhd. (“Gugusan Melati”), Indra Cita Sdn. Bhd. (“Indra Cita”), Seaport Terminal (Johore) Sdn. Bhd. (“Seaport Terminal”), deemed major shareholders of the Company pursuant to paragraph 1.01 of the Listing Requirements of Malaysia Securities Exchange Berhad (“MSEB”) (“Listing Requirements”) and Malaysia Mining Corporation Berhad (“MMC”), are deemed interested pursuant to paragraph 10.02 of the Listing Requirements by virtue of Ismail Khan and Mohammad Shaker’s 70% and 30% equity interest respectively in Tegak Megah, which in turn is a major shareholder of Gugusan Melati, which in turn is a major shareholder of Indra Cita, which in turn is a major shareholder of Seaport Terminal, which in turn is a major shareholder of MMC, which in turn is a major shareholder of the Company and by virtue of Tegak Megah which held 70% equity interest in Golden Perspective Sdn. Bhd. (“GPSB”), which in turn held 100% equity interest in SKS Ventures as at 29 May 2002, the date of the Prai Power Share Sale Agreement. On 16 July 2003, Tegak Megah disposed of its entire equity interest in GPSB to Jentera Jati. However, as at 13 November 2003, Ismail Khan, Mohammad Shaker, Tegak Megah, Gugusan Melati, ceased to be deemed major shareholders of the Company pursuant to paragraph 1.01 of the Listing Requirements following Gugusan Melati’s disposal of its equity interest in Indra Cita; and (b) Tan Sri Abdul Halim bin Ali (“Tan Sri Abdul Halim”) and Dato’ Ismail bin Shahudin (“Dato’ Ismail”), directors of the Company, are deemed interested by virtue of being representatives of MMC on the Board of Directors of the Company.
• A conditional share sale agreement dated 7 August 2003 for the acquisition of 90% equity interest in SKS Power Sdn. Bhd. (i) A conditional share sale agreement dated 7 August 2003 was entered into between the Company and Northern Power Sdn. Bhd. (“NP”) (“the SKS Power Share Sale Agreement”) for: (a) the acquisition by the Company of 4,500,002 ordinary shares of RM1.00 each representing 90% equity interest in SKS Power Sdn. Bhd. (“SKS Power”) for a total cash consideration of RM835 million; and (b) a shareholders’ advance by the Company to SKS Power of RM13,424,400, being a sum equivalent to 90% of the shareholders advance by NP, for the purposes of repayment of NP’s shareholders’ advance by SKS Power to NP. SKS Power is the owner of a proposed 2,100MW coal-fired power plant to be located at Tanjung Bin, Johor. additional compliance information as at 31 August 2003
(ii) Save as disclosed below, none of the directors or major shareholders of the Company have any interest, direct or indirect, in the SKS Power Share Sale Agreement: (a) Ismail Khan, Mohammad Shaker, Tegak Megah, Gugusan Melati, Indra Cita, Seaport Terminal, deemed major shareholders of the Company pursuant to paragraph 1.01 of the Listing Requirements and MMC, are deemed interested pursuant to paragraph 10.02 of the Listing Requirements by virtue of Ismail Khan and Mohammad Shaker’s 70% and 30% equity interest respectively in Tegak Megah, which in turn is a major shareholder of Gugusan Melati, which in turn is a major shareholder of Indra Cita, which in turn is a major shareholder of Seaport Terminal, which in turn is a major shareholder of MMC, which in turn is a major shareholder of in the Company and by virtue of Ismail Khan and Mohamad Shaker being deemed major shareholders of SKS Power pursuant to paragraph 10.02 of the Listing Requirements as Ismail Khan and Mohammad Shaker had in the preceding 12 months from the date of the SKS Power Share Sale Agreement held 70% and 30% equity interest respectively in Tegak Megah which held 70% equity interest in GPSB, which in turn held 100% equity interest in NP. On 16 July 2003, Tegak Megah disposed of its entire equity interest in GPSB to Jentera Jati. However, as at 13 November 2003, Ismail Khan,
2003 Mohammad Shaker, Tegak Megah, Gugusan Melati, ceased to be deemed major shareholders of the Company pursuant to paragraph 1.01 of the Listing Requirements following Gugusan Melati’s disposal of its equity interest in Indra Cita; and (b) Tan Sri Abdul Halim and Dato’ Ismail, directors of the Company, are deemed interested by virtue of being
ANNUAL REPORT representatives of MMC on the Board of Directors of the Company. 64 11. Recurrent transactions entered into by the Company and/or its subsidiary companies with related parties of 65 revenue or trading nature 11.1 At the Extraordinary General Meeting held on 17 February 2003, the Company obtained a shareholders’ mandate to allow the Group to enter into recurrent related party transactions of a revenue or trading nature (“Recurrent Transactions”) (“Shareholders’ Mandate”) and a shareholders’ ratification of Recurrent Transactions entered into by the Company from 1 June 2001 until 17 February 2003 (“Shareholders’ Ratification”), with the following companies: (i) Tenaga Nasional Berhad (“TNB”) and subsidiaries of TNB;
(INCORPORATED IN MALAYSIA) (INCORPORATED (ii) International Power Global Developments Limited (“IP Global”);
24816-M (iii) subsidiaries of Sime Darby Berhad (“SDB”) and MMC; (iv) subsidiaries of Malaysian Resources Corporation Berhad (“MRCB”), The New Straits Times Press (Malaysia) Berhad (“NSTP”) and subsidiaries of NSTP; and (v) Inner World Travel and Tours (M) Sdn. Bhd. (“IWT”).
The said Shareholders’ Mandate shall, in accordance with the Listing Requirements, lapse at the conclusion of the MALAKOFF BERHAD forthcoming AGM unless it is renewed at the said AGM.
11.2 The Company will not be seeking a renewal of the Shareholders’ Mandate for the following reasons:- (i) in respect of the Recurrent Transactions to be entered into with the parties described in paragraphs 11.1(i) and 11.1(iii) above, the MB Group does not expect the aggregate value of the Recurrent Transactions conducted with any of the said parties to exceed the prescribed limit of RM1 million as defined in paragraph 2.1 of Practice Note 12/ 2001 issued by MSEB. additional compliance information as at 31 August 2003
(ii) in respect of the Recurrent Transactions to be entered into with the party described in paragraph 11.1(ii) above, the MB Group is not expected to enter into any further Recurrent Transactions with the said party; and (iii) in respect of the Recurrent Transactions to be entered into with the parties described in paragraphs 11.1(iv) and 11.1(v) above, the said parties had ceased to be related parties of the MB Group as of 1 November 2001.
11.3 In accordance with Paragraph 10.09(1)(b) of the Listing Requirements, Paragraph 4.1.5 of Practice Note No. 12/2001 and Paragraph 4.0 of Practice Note No. 14/2002 of the Listing Requirements, the details of recurrent related party transactions conducted during the financial year ended 31 August 2003 pursuant to the Shareholders’ Mandate and Shareholders’ Ratification are as follows:- (i) Recurrent Transactions entered into with TNB and its subsidiaries (“TNB Transactions”) MB or subsidiary of Interested Actual value of the MB involved Directors and Recurrent Transactions in the interested entered into from Recurrent Nature of Nature of Major 1 September 2002 to Transaction Related Party Recurrent Transaction relationship Shareholders 31 August 2003 (RM)
Teknik TNB Repair and REMACO provides (1) - TNB 1,013,001.39 Janakuasa Maintenance gas turbine inspection - Datuk Ab Hadi Sdn. Bhd. Sdn. Bhd. services and boroscopic Md Deros (“TJSB”) (“REMACO”) inspection services (“Datuk Ab Hadi”) to TJSB and supplies manpower for gas turbine inspection services and gas turbine repair works
TJSB TNB Research TNB Research (2) - TNB 7,700.00 Sdn. Bhd. conducts chemical - Datuk Ab Hadi (“TNB analysis for TJSB Research”)
TJSB Universiti TJSB sends its employees (3) - TNB Nil* Tenaga to attend training and - Datuk Ab Hadi Nasional development courses Sdn. Bhd. conducted and/or (“UNITEN”) organised by UNITEN
Segari Energy TNB SEV sends its employees (4) - TNB Nil* Ventures to attend Executive - Datuk Ab Hadi Sdn. Bhd. Development Programme (“SEV”) conducted and/or organised by TNB additional compliance information as at 31 August 2003
(i) Recurrent Transactions entered into with TNB and its subsidiaries (“TNB Transactions”) (Cont’d) MB or subsidiary of Interested Actual value of the MB involved Directors and Recurrent Transactions in the interested entered into from Recurrent Nature of Nature of Major 1 September 2002 to Transaction Related Party Recurrent Transaction relationship Shareholders 31 August 2003 (RM)
SEV REMACO REMACO conducts (1) - TNB 46,200.00 dependable capacity - Datuk Ab Hadi testing for the Lumut power plant at Segari, Perak
2003
Wirazone TNB TNB Metering conducts (5) - TNB Nil Sdn. Bhd. Metering testing and calibration - Datuk Ab Hadi (“WSB”) Sdn. Bhd. of current transformer
at WSB’s electrical ANNUAL REPORT distribution system in Kuala Lumpur Sentral, 66 Kuala Lumpur 67
(ii) Recurrent Transactions entered into with IP Global (“IP Global Transaction”) MB IP Global IP Global provides (6) - IPHL Nil technical support services - IPR in relation to technical - Kenneth William due diligence services Teasdale (“Kenneth”)
on power stations - Simon David Pinnell IN MALAYSIA) (INCORPORATED (“Simon”)
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Malakoff IP Global IP Global provides (6) - IPHL Nil Engineering technical support services - IPR Sdn. Bhd. to assist MESB for - Kenneth (“MESB”) the provision of - Simon
quality assurance/ MALAKOFF BERHAD quality control inspection services for GB3’s heat recovery steam generator additional compliance information as at 31 August 2003
(iii)Recurrent Transactions entered into with the subsidiaries of SDB and MMC, a major shareholder of SDB (“SDB Transactions”) MB or subsidiary of Interested Actual value of the MB involved Directors and Recurrent Transactions in the interested entered into from Recurrent Nature of Nature of Major 1 September 2002 to Transaction Related Party Recurrent Transaction relationship Shareholders 31 August 2003 (RM)
MB Subang Jaya Employees of MB and (7) - MMC 4,502.73* Medical Centre its subsidiaries obtain - Tan Sri Abdul Halim Sdn. Bhd. medical treatment bin Ali (“Tan Sri Halim”) (“SJMC”) at SJMC - Dato’ Ismail bin Shahudin (“Dato’ Ismail”)
MB Kuala Lumpur MB accords senior (8) - MMC 743.41* Golf and management with KLGCC - Tan Sri Halim Country Club membership for use of - Dato’ Ismail Berhad the club, golfing and (“KLGCC”) other facilities of KLGCC
MB Sime Darby SD Travel provides airline (9) - MMC Nil* Travel ticketing services and - Tan Sri Halim Sdn. Bhd. such other travel-related - Dato’ Ismail (“SD Travel”) services to MB
TJSB Tractors Tractors Petroleum (10) - MMC 106,521.90 Petroleum provides refurbishment - Tan Sri Halim Services services to TJSB - Dato’ Ismail Sdn. Bhd. at the Lumut (“Tractors power plant at Segari, Petroleum”) Perak
TJSB Tractors Tractors Malaysia (11) - MMC 425.39 Malaysia (1982) supplies motor vehicle - Tan Sri Halim Sdn. Bhd. spare parts for TJSB’s - Dato’ Ismail (“Tractors vehicles and power Malaysia”) plant spare parts
TJSB Mecomb Mecomb supplies (12) - MMC 6,363.00 Malaysia power plant spare parts - Tan Sri Halim Sdn. Bhd. to TJSB - Dato’ Ismail (“Mecomb”)
TJSB MMC TJSB provides advisory (13) - MMC Nil services to MMC on - Tan Sri Halim development of - Dato’ Ismail international power projects additional compliance information as at 31 August 2003
Notes * Pursuant to Paragraph 4.1(a) of Practice Note No. 14/2002 of the Listing Requirements, these transactions are no longer regarded as related party transactions from 1 January 2003 onwards. The aggregate actual value of the Recurrent Transactions set forth was therefore taken from 1 September 2002 until 31 December 2002.
(1) TJSB is a wholly-owned subsidiary of MB. SEV is a 75% subsidiary of MB. TNB is a major shareholder of SEV. REMACO is a wholly-owned subsidiary of TNB. Datuk Ab Hadi is a representative of TNB on the Board of Directors of SEV.
(2) TJSB is a wholly-owned subsidiary of MB. SEV is a 75% subsidiary of MB. TNB is a major shareholder of SEV. TNB Research is a wholly-owned subsidiary of TNB. Datuk Ab Hadi is a representative of TNB on the Board of Directors of SEV.
(3) TJSB is a wholly-owned subsidiary of MB. SEV is a 75% subsidiary of MB. TNB is a major shareholder of SEV. UNITEN is a wholly-owned subsidiary of TNB. Datuk Ab Hadi is a representative of TNB on the Board of Directors of SEV.
(4) SEV is a 75% subsidiary of MB. TNB is a major shareholder of SEV. Datuk Ab Hadi is a representative of TNB on the Board of Directors of SEV.
(5) TJSB is a wholly-owned subsidiary of MB. SEV is a 75% subsidiary of MB. TNB is a major shareholder of SEV. TNB Metering is a wholly-owned subsidiary of TNB. Datuk Ab Hadi is a representative of TNB on the Board of Directors of SEV.
2003 (6) International Power Holdings Ltd (“IPHL”) is a major shareholder of MB. IPHL and IP Global are wholly-owned subsidiaries of International Power plc (“IPR”). IP Global is therefore a person connected to IPHL and IPR. Kenneth and his alternate Simon are the representatives of IPHL on the Board of Directors of MB.
(7) MMC is a major shareholder of MB. MMC is a major shareholder of SDB, which in turn holds 100% of the voting shares in Sime Darby Nominees Sdn. Bhd.
ANNUAL REPORT (“Sime Nominees”). Sime Nominees holds 100% of the voting shares in SD Holdings Sdn. Bhd. (“SDH”), which in turn holds 100% of the voting shares in SJMC. SJMC is therefore a person connected to MMC. Tan Sri Halim and Dato’ Ismail are representatives of MMC on the Board of Directors of MB. 68 (8) MMC is a major shareholder of MB. MMC is a major shareholder of SDB, which in turn holds 100% of the voting shares in Sime Nominees. Sime Nominees 69 holds 100% of the voting shares in SDH, which in turn holds 100% of the voting shares in Sime Hartanah Sdn. Bhd. (“Sime Hartanah”), which in turn holds 100% of the voting shares in Solarvest Sdn. Bhd. (“Solarvest”), which in turn holds 100% of the voting shares in KLGCC. KLGCC is therefore a person connected to MMC. Tan Sri Halim and Dato’ Ismail are representatives of MMC on the Board of Directors of MB.
(9) MMC is a major shareholder of MB. MMC is a major shareholder of SDB, which in turn holds 100% of the voting shares in Sime Nominees. Sime Nominees holds 100% of the voting shares in SDH, which in turn holds 99.99% of the voting shares in Simewest Holdings Sdn. Bhd. (“Simewest”), which in turn holds 100% of the voting shares in SD Travel. SD Travel is therefore a person connected to MMC. Tan Sri Halim and Dato’ Ismail are representatives of MMC on the Board of Directors of MB.
(10) TJSB is a wholly-owned subsidiary of MB. MMC is a major shareholder of MB. MMC is a major shareholder of SDB, which in turn is a major shareholder of IN MALAYSIA) (INCORPORATED Tractors Malaysia Holding Berhad (“TMHB”). TMHB holds 100% of the voting shares in Tractors Malaysia Enterprise Sdn. Bhd. (“TMESB”), which in turn holds
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100% of the voting shares in Tractors Malaysia, which in turn holds 100% of the voting shares in Tractors Petroleum. Tractors Petroleum is therefore a person connected to MMC. Tan Sri Halim and Dato’ Ismail are representatives of MMC on the Board of Directors of MB.
(11) TJSB is a wholly-owned subsidiary of MB. MMC is a major shareholder of MB. MMC is a major shareholder of SDB, which in turn is a major shareholder of TMHB. TMHB holds 100% of the voting shares in TMESB, which in turn holds 100% of the voting shares in Tractors Malaysia. Tractors Malaysia is therefore a person connected to MMC. Tan Sri Halim and Dato’ Ismail are representatives of MMC on the Board of Directors of MB.
(12) TJSB is a wholly-owned subsidiary of MB. MMC is a major shareholder of MB. MMC is a major shareholder of SDB, which in turn holds 100% of the voting MALAKOFF BERHAD shares in Sime Nominees. Sime Nominees holds 100% of the voting shares in SDH, which in turn holds 100% of the voting shares in Sime Malaysia Region Berhad, which in turn holds 100% of the voting shares in Mecomb. Mecomb is therefore a person connected to MMC. Tan Sri Halim and Dato’ Ismail are representatives of MMC on the Board of Directors of MB.
(13) TJSB is a wholly-owned subsidiary of MB. MMC is a major shareholder of MB. Tan Sri Halim and Dato’ Ismail are representatives of MMC on the Board of Directors of MB. directors’ responsibility statement
The Board of Directors is required under Paragraph 15.27(a) of the Listing Requirements of Malaysia Securities Exchange Berhad to issue a statement explaining its responsibility for preparing the annual audited financial statements.
The Directors are required by the Companies Act, 1965 (the “Act”) to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group as at the financial year end and of the results and cash flows of the Company and of the Group for that financial year.
The Directors consider that, in preparing the financial statements of the Company and of the Group for the financial year ended 31 August 2003 set out on pages 79 to 116 of this Annual Report, the Company and the Group have used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates. The Directors also consider that all applicable approved accounting standards in Malaysia have been followed and confirmed that the financial statements have been prepared on a going concern basis.
The Directors are responsible for ensuring that the Company and its subsidiaries keep accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and which enable them to ensure that the financial statements comply with the provisions of the Act.
The Directors are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
This Statement is made in accordance with a resolution of the Board of Directors dated 19 December 2003. financial statements 70 72 directors’ report 71 77 statement by directors 77 statutory declaration 78 report of the auditors 79 consolidated balance sheet 80 consolidated income statement 81 consolidated statement of changes in equity 82 consolidated cash flow statement 84 balance sheet 85 income statement 86 statement of changes in equity 87 cash flow statement 89 notes to the financial statements directors’ report for the year ended 31 August 2003
The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the year ended 31 August 2003.
Principal Activities The principal activities of the Company are those of an investment holding company and provision of management services to its subsidiaries.
The principal activities of the subsidiaries are shown in Note 28 to the financial statements.
There has been no significant change in the nature of the principal activities of the Company and its subsidiaries during the financial year.
Results Group Company RM’000 RM’000
Net profit for the year 441,754 323,085
Reserves and provisions There were no material transfers to or from reserves and provisions during the year except as disclosed in the financial statements.
Dividends Since the end of the previous financial year, the Company paid a first and final dividend of 22 sen per share less tax totalling RM136,877,717 in respect of the year ended 31 August 2002 on 7 March 2003.
The first and final dividend recommended by the Directors in respect of the year ended 31 August 2003 is 25 sen per share less tax totalling RM156,831,840 (based on the issued and paid-up share capital as at 31 August 2003). The first and final dividend will be proposed for shareholders’ approval at the forthcoming Annual General Meeting.
Directors of the Company Directors who served since the date of the last report are: Director Alternate
Tan Sri Abdul Halim bin Ali Ahmad Jauhari bin Yahya Dato’ Abdul Aziz bin Abdul Rahim Dato’ Mohammed Radzi @ Mohd Radzi bin Manan Abdul Jabbar bin Abdul Majid Azizan bin Mohd Noor Dato’ Ismail bin Shahudin Kenneth William Teasdale Simon David Pinnell directors’ report for the year ended 31 August 2003
Directors’ Interest in Shares The options granted to eligible Directors over unissued ordinary shares in Malakoff Berhad pursuant to the Employees’ Share Option Scheme are set out below: Number of options over ordinary shares of RM1.00 each At At 1.9.2002 Granted Exercised 31.8.2003
Malakoff Berhad Ahmad Jauhari bin Yahya 1,500,000 – – 1,500,000
None of the other Directors holding office at 31 August 2003 had any interest in the shares of the Company and of its related corporations during the financial year.
2003 Directors’ Benefits Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the
financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of ANNUAL REPORT which the Director is a member, or with a company in which the Director has a substantial financial interest. 72 There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company 73 to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate apart from the benefits given to the full time executive Director of the Company pursuant to the Employees’ Share Option Scheme.
Issue of Shares During the financial year, the Company issued the following shares: Number of
Class of shares shares Term of issue Purpose of issue IN MALAYSIA) (INCORPORATED
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Ordinary shares of RM1.00 each 12,624,000 Cash Subscription of Employee’s Share Option Scheme
The additional issued and fully paid up shares rank pari passu in all respects with all the existing shares.
MALAKOFF MALAKOFF BERHAD directors’ report for the year ended 31 August 2003
Options Granted Over Unissued Shares No options were granted to any person to take up unissued shares or debentures of the Company during the year apart from the issue of options pursuant to the Employees’ Share Option Scheme.
The Company’s Employees’ Share Option Scheme (ESOS) became effective on 7 March 1996 and was subsequently extended until 6 March 2006. The Company had obtained the necessary approvals from its shareholders and the relevant authorities for the extension of the Company’s existing ESOS for another five (5) years, from 7 March 2002 up to and including 6 March 2006 (“Extended Period”).
The salient features of the Scheme are as follows: i. eligible employees are those who have been confirmed in writing as an employee of the Group for at least one (1) year of continuous service before the date of offer and an eligible Director is a full time executive Director of the Group. ii. the option is personal to the grantee and non-assignable. iii. the option price for options granted during the Extended Period shall be set at a discount of not more than 10 per centum (10%) from the five (5) day weighted average market price of the ordinary shares of the Company immediately preceding the date of the offer or the par value of the ordinary shares of the Company, whichever is the higher. iv. the options granted may be exercised on any working day from the date of the offer up to 5.00 p.m. on 6 March 2006, the expiry date of the Scheme. v. (a) the options granted/unexercised prior to the Extended Period of the Scheme shall be exercisable in the following manner: Exercisable Dates Cumulative percentage of total new ordinary shares which may be subscribed for
After 1 July 1996 25% After 1 July 1997 75% After 1 July 1998 100%
(b) the options granted during the Extended Period of the Scheme shall be exercisable in the following manner: Number of Options Granted Percentage of Options Exercisable Per Annum Year 1 Year 2 Year 3 Year 4 Year 5
Below 20,000 100% –––– 20,000 to less than 100,000 40%1 30% 30%2 –– 100,000 and above 20% 20% 20% 20% 20%
Note: 1. 40% or 20,000 options, whichever is the higher 2. 30% or the remaining number of options unexercised
Options exercisable in a particular year but not exercised can be carried forward to the subsequent years subject to the earlier of time limit of the Scheme, or when the options are terminated due to reasons stipulated in the Bye-Laws of the Scheme. directors’ report for the year ended 31 August 2003
The options to take up unissued ordinary shares of RM1.00 each and the option prices are as follows: Number of Options over ordinary shares of RM1.00 each Adjusted Offered Date of Option Balance at and Balance at Offer Price * 1.9.02 accepted Exercised Lapsed 31.8.03 RM ‘000 ‘000 ‘000 ‘000 ‘000
16.3.96 3.61 7,750 – 2,004 285 5,461 3.7.96 3.60 520 – 214 – 306 16.10.96 4.13 870 – 20 – 850 14.1.97 3.80 1,050 – – – 1,050 30.4.97 3.22 425 – 161 – 264
5.9.972.17––––– 2003 28.11.97 1.74 29 – 7 – 22 24.4.98 3.05 560 – 303 – 257 19.6.98 2.40 128 – 113 – 15
4.9.981.07––––– ANNUAL REPORT 15.10.98 1.50 228 – 40 – 188 2.4.99 2.68 342 – 72 – 270 74 23.4.99 2.82 – – – – – 75 1.10.99 2.89 4,061 – 2,410 – 1,651 16.12.99 3.04 142 – 91 – 51 29.6.00 2.89 1,439 – 544 – 895 17.10.00 2.97 5,724 – 2,298 120 3,306 1.3.01 2.93 3,026 – 1,569 – 1,457 17.7.01 2.68 1,780 – 514 – 1,266 25.10.01 2.61 716 – 175 210 331
20.11.01 2.91 371 – 121 120 130 IN MALAYSIA) (INCORPORATED 28.3.02 3.15 1,538 – 587 10 941
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2.7.02 3.47 1,257 – 386 – 871 16.9.02 3.65 – 1,785 496 – 1,289 3.12.02 3.58 – 445 173 – 272 19.3.03 3.55 – 1,590 303 – 1,287 12.6.03 3.96 – 650 23 – 627
31,956 4,470 12,624 745 23,057 MALAKOFF BERHAD
* – Adjusted option price is the price after bonus issue made in the previous year directors’ report for the year ended 31 August 2003
Other Statutory Information Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that: (i) all known bad debts have been written off and adequate provision made for doubtful debts, and (ii) all current assets have been stated at the lower of cost and net realisable value.
At the date of this report, the Directors of the Company are not aware of any circumstances: (i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the financial statements of the Group and of the Company inadequate to any substantial extent, or (ii) that would render the value attributed to the current assets in the Group and of the Company financial statements misleading, or (iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate, or (iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.
At the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities of any other person, or (ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.
No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.
In the opinion of the Directors, the results of the operations of the Group and of the Company for the financial year ended 31 August 2003 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.
Auditors The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.
Signed in accordance with a resolution of the Directors:
Tan Sri Abdul Halim bin Ali Ahmad Jauhari bin Yahya Chairman Managing Director
Kuala Lumpur, 19 December 2003 statement by directors pursuant to Section 169(15) of the Companies Act, 1965
In the opinion of the Directors, the financial statements set out on pages 79 to 116 are drawn up in accordance with applicable approved accounting standards in Malaysia so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 August 2003 and of the results of their operations and cash flows for the year ended on that date.
Signed in accordance with a resolution of the Directors:
Tan Sri Abdul Halim bin Ali Ahmad Jauhari bin Yahya Chairman Managing Director
2003 Kuala Lumpur, 19 December 2003
ANNUAL REPORT statutory declaration 76 pursuant to Section 169(16) of the Companies Act, 1965 77
I, Mohamed Rafique Merican bin Mohd Wahiduddin Merican, the officer primarily responsible for the financial management of Malakoff Berhad, do solemnly and sincerely declare that the financial statements set out on pages 79 to 116 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
(INCORPORATED IN MALAYSIA) (INCORPORATED Subscribed and solemnly declared by the abovenamed in Kuala Lumpur on 19 December 2003.
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Before me:
MALAKOFF MALAKOFF BERHAD
Mohamed Rafique Merican bin Mohd Wahiduddin Merican 42A Pesiaran Ara Kiri Lucky Garden 59100 Kuala Lumpur report of the auditors to the members of Malakoff Berhad
We have audited the financial statements set out on pages 79 to 116. The preparation of the financial statements is the responsibility of the Company’s Directors. Our responsibility is to express an opinion on the financial statements based on our audit.
We conducted our audit in accordance with approved Standards on Auditing in Malaysia. These standards require that we plan and perform the audit to obtain all the information and explanations which we consider necessary to provide us with evidence to give reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. An audit also includes an assessment of the accounting principles used and significant estimates made by the Directors as well as evaluating the overall adequacy of the presentation of information in the financial statements. We believe our audit provides a reasonable basis for our opinion.
In our opinion: (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of: (i) the state of affairs of the Group and of the Company at 31 August 2003 and the results of their operations and cash flows for the year ended on that date; and (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and of the Company; and
(b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and the subsidiaries have been properly kept in accordance with the provisions of the said Act.
We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.
The audit reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment under sub-section (3) of Section 174 of the Act.
KPMG Hew Lee Lam Sang Firm Number: AF 0758 Partner Chartered Accountants Approval Number: 1862/10/05(J)
Kuala Lumpur, 19 December 2003 consolidated balance sheet at 31 August 2003
Note 2003 2002 RM’000 RM’000
Property, plant and equipment 2 4,003,170 4,046,205 Investment in associated companies 3 131,308 130,872 Other investments 5 89,796 101,390 Goodwill on consolidation 6 93,336 100,002 Current assets Inventories 7 208,589 187,709 Trade and other receivables 8 803,577 675,498 Cash and cash equivalents 9 2,029,220 1,748,913
3,041,386 2,612,120 2003
Current liabilities Trade and other payables 10 246,951 250,556
Borrowings 11 686,839 563,033 ANNUAL REPORT Hire purchase liabilities 12 1,251 1,901 Taxation 55,951 20,010 78 79 990,992 835,500
Net current assets 2,050,394 1,776,620 6,368,004 6,155,089
Financed by: Capital and reserves
(INCORPORATED IN MALAYSIA) (INCORPORATED Share capital 13 871,288 858,664
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Reserves 1,939,997 1,608,471
Shareholders’ fund 2,811,285 2,467,135 Minority shareholders’ interests 14 295,515 235,377 Long term and deferred liabilities
MALAKOFF MALAKOFF BERHAD Borrowings 11 2,760,439 3,021,215 Hire purchase liabilities 12 624 672 Deferred taxation 15 500,141 430,690 6,368,004 6,155,089
The financial statements were approved and authorised for issue by the Board of Directors on 19 December 2003. The notes set out on pages 89 to 116 form an integral part of, and should be read in conjunction with, these financial statements. consolidated income statement for the year ended 31 August 2003
Note 2003 2002 RM’000 RM’000
Revenue 16 1,825,013 1,717,462 Cost of sales (767,686) (803,753) Gross profit 1,057,327 913,709 Other operating income 20,900 10,078 Administrative expenses (48,936) (73,092) Other operating expenses (145,398) (60,782) Operating profit 17 883,893 789,913 Financing costs 19 (274,939) (266,372) Interest income 56,022 43,865 Share of profit of an associated company 22,518 20,822 Profit before taxation 687,494 588,228 Tax expense 20 (197,479) (185,549) Profit after taxation 490,015 402,679 Less: Minority interests (48,261) (49,088) Net profit for the year 441,754 353,591
Basic earnings per ordinary share (sen) 21 51.1 41.6
Diluted earnings per ordinary share (sen) 21 50.7 41.4
Dividends per ordinary share (net) 22 18.0 15.8
The notes set out on pages 89 to 116 form an integral part of, and should be read in conjunction with, these financial statements. consolidated statement of changes in equity for the year ended 31 August 2003
Non-distributable Distributable Share Revaluation Retained Share premium reserve profits Sub total capital Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 September 2001 485,115 12,584 1,401,124 1,898,823 279,703 2,178,526 Issue of new shares 37,816 – – 37,816 19,458 57,274 Bonus issue (436,330) – (123,173) (559,503) 559,503 – 86,601 12,584 1,277,951 1,377,136 858,664 2,235,800 Net profit for the year – – 353,591 353,591 – 353,591 Dividend – – (122,256) (122,256) – (122,256) At 31 August 2002 86,601 12,584 1,509,286 1,608,471 858,664 2,467,135
Issue of new shares 26,650 – – 26,650 12,624 39,274 2003 113,251 12,584 1,509,286 1,635,121 871,288 2,506,409 Net profit for the year – – 441,754 441,754 – 441,754 Dividend (Note 22) – – (136,878) (136,878) – (136,878)
At 31 August 2003 113,251 12,584 1,814,162 1,939,997 871,288 2,811,285 ANNUAL REPORT
80 Note 13 81
(INCORPORATED IN MALAYSIA) (INCORPORATED
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MALAKOFF MALAKOFF BERHAD
The notes set out on pages 89 to 116 form an integral part of, and should be read in conjunction with, these financial statements. consolidated cash flow statement for the year ended 31 August 2003
2003 2002 RM’000 RM’000
Cash flows from operating activities Profit before taxation 687,494 588,228 Adjustments for: Allowance for diminution in value of quoted unit trusts 3,900 – Allowance for doubtful debts 20,001 3,519 Amortisation of goodwill 8,748 8,748 Depreciation 178,356 166,414 Dividend income from quoted unit trusts (5,445) (5,904) Gain on disposal of property, plant and equipment (113) (20) Interest expense 274,939 266,372 Interest income from loan stocks (3,593) (3,593) Interest income (56,022) (43,865) Gain on disposal of unquoted securities (160) – Share of profit of an associated company (22,518) (20,822) Property, plant and equipment written off 238 – Operating profit before working capital changes 1,085,825 959,077 Inventories (46,041) (37,721) Trade and other receivables (116,069) (116,423) Trade and other payables (7,271) 27,522 Cash generated from operations 916,444 832,455 Tax paid (82,359) (120,440) Net cash generated from operating activities 834,085 712,015
Cash flows from investing activities Discharge of deposits pledged with licensed bank 1,200 15,705 Dividends received from an associated company 14,026 23,700 Dividends received from quoted unit trusts 5,445 1,823 Interest income from loan stocks received 3,593 3,593 Interest received 56,022 43,865 Placement of cash in sinking fund account (21,634) (259) Placement/(Release) of cash in cash deficiency support account 80,800 (80,800) Proceeds from disposal of property, plant and equipment 278 117 Proceeds from disposal of unquoted securities 10,712 25,000 Proceeds from disposal of shares in subsidiary 250 49 Proceeds from redemption of investment in unquoted shares 1,620 – Purchase of property, plant and equipment (135,517) (552,316) Purchase of unquoted securities – (10,552) Net cash generated from/(used in) investing activities 16,795 (530,075) consolidated cash flow statement for the year ended 31 August 2003
2003 2002 RM’000 RM’000
Cash flows from financing activities Dividends paid (136,878) (132,256) Interest paid (274,935) (265,431) Issue of shares 39,274 57,274 Proceeds from borrowings 134,081 1,027,447 Repayment of borrowings (271,051) (238,832) Repayment of hire purchase liabilities (698) (1,560) Net cash (used in)/generated from financing activities (510,207) 446,642
Net increase in cash and cash equivalents 340,673 628,582 Cash and cash equivalents at beginning of year 1,651,126 1,022,544 2003 Cash and cash equivalents at end of year 1,991,799 1,651,126
ANNUAL REPORT Notes to the cash flow statement (i) Cash and cash equivalents: 82 Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts. 83
2003 2002 RM’000 RM’000
Deposits with licensed financial institutions 1,733,825 1,584,878 Placement in commercial papers 188,472 118,405 Cash and bank balances 106,923 45,630
(INCORPORATED IN MALAYSIA) (INCORPORATED 2,029,220 1,748,913 Less: Deposits pledged with licensed bank – (1,200)
24816-M Less: Cash placed in sinking fund account (37,421) (15,787) Less: Cash placed in cash deficiency support account – (80,800) 1,991,799 1,651,126
(ii) Additions of property, plant and equipment MALAKOFF BERHAD During the year, the Group acquired property, plant and equipment with an aggregate cost of RM135,724,000 (2002 – RM553,276,000) of which RM207,000 (2002 – RM960,000) was settled by means of hire purchase and the balance by cash payment of RM135,517,000 (2002 – RM552,316,000)
The notes set out on pages 89 to 116 form an integral part of, and should be read in conjunction with, these financial statements. balance sheet at 31 August 2003
Note 2003 2002 RM’000 RM’000
Property, plant and equipment 2 37,666 27,163 Investment in subsidiaries 4 277,298 267,298 Other investments 5 544,741 670,923
Current assets Other receivables 8 521,063 397,805 Cash and cash equivalents 9 632,464 671,994 1,153,527 1,069,799
Current liabilities Other payables 10 19,116 262,076 Borrowings 11 118,218 118,194 Hire purchase liabilities 12 789 465 Taxation 6,708 10,795 144,831 391,530
Net current assets 1,008,696 678,269 1,868,401 1,643,653
Financed by: Capital and reserves Share capital 13 871,288 858,664 Reserves 696,848 483,991 Shareholders’ fund 1,568,136 1,342,655 Long term and deferred liabilities Borrowings 11 300,000 300,000 Hire purchase liabilities 12 265 998 1,868,401 1,643,653
The financial statements were approved and authorised for issue by the Board of Directors on 19 December 2003. The notes set out on pages 89 to 116 form an integral part of, and should be read in conjunction with, these financial statements. income statement for the year ended 31 August 2003
Note 2003 2002 RM’000 RM’000
Revenue 16 399,408 300,257 Cost of sales – – Gross profit 399,408 300,257 Other operating income 722 4 Administrative expenses (21,889) (18,020) Other operating expense – (170) Operating profit 17 378,241 282,071 Financing costs 19 (17,414) (17,400) Interest income 87,129 92,424
Profit before taxation 447,956 357,095 2003 Tax expense 20 (124,871) (102,786) Net profit for the year 323,085 254,309
ANNUAL REPORT
84 85
(INCORPORATED IN MALAYSIA) (INCORPORATED
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MALAKOFF MALAKOFF BERHAD
The notes set out on pages 89 to 116 form an integral part of, and should be read in conjunction with, these financial statements. statement of changes in equity for the year ended 31 August 2003
Non-distributable Distributable Share Revaluation Retained Share premium reserve profits Sub total capital Total Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 September 2001 485,115 12,584 350,914 848,613 279,703 1,153,328 Issue of new shares 37,816 – – 37,816 19,458 57,274 Bonus issue (436,330) – (123,173) (559,503) 559,503 – 86,601 12,584 252,753 351,938 858,664 1,210,602 Net profit for the year – – 254,309 254,309 – 254,309 Dividends – – (122,256) (122,256) – (122,256) At 31 August 2002 86,601 12,584 384,806 483,991 858,664 1,342,655 Issue of new shares 26,650 – – 26,650 12,624 39,274 113,251 12,584 384,806 510,641 871,288 1,381,929 Net profit for the year – – 323,085 323,085 – 323,085 Dividends (Note 22) – – (136,878) (136,878) – (136,878) At 31 August 2003 113,251 12,584 571,013 696,848 871,288 1,568,136
Note 13
The notes set out on pages 89 to 116 form an integral part of, and should be read in conjunction with, these financial statements. cash flow statement for the year ended 31 August 2003
2003 2002 RM’000 RM’000
Cash flows from operating activities Profit before taxation 447,956 357,095 Adjustments for: Depreciation 1,743 1,277 Gain on disposal of unquoted securities (160) – Interest expense 17,414 17,400 Interest income (87,129) (92,424) Dividend income from subsidiary companies (393,352) (288,096) Dividend income from quoted unit trusts (1,633) (1,000) Allowance for diminution in value of quoted unit trusts 1,300 – Allowance for doubtful debts 1,859 3,287
2003 Property, plant and equipment written off 226 – Operating loss before working capital changes (11,776) (2,461) Other receivables (125,117) 630,693
Other payables (242,936) 40,284 ANNUAL REPORT Cash (used in)/generated from operations (379,829) 668,516 86 Tax paid (128,958) (98,172) 87 Net cash (used in)/generated from operating activities (508,787) 570,344
Cash flows from investing activities Purchase of property, plant and equipment (12,472) (637) Proceeds from disposal unquoted securities 10,712 – Placement of cash in sinking fund account (21,634) (259) Placement/(Release) of cash in cash deficiency support account 80,800 (80,800)
Investment in unquoted securities – (10,552) IN MALAYSIA) (INCORPORATED Investment in subsidiary (10,000) –
24816-M Investment in unsecured loan stocks – (261,000) Proceeds from loan notes 114,330 42,262 Interest received 87,129 92,424 Dividend received from subsidiary companies 393,352 288,096 Dividend income from quoted unit trust 1,633 1,000
Net cash generated from investing activities 643,850 70,534 MALAKOFF BERHAD cash flow statement for the year ended 31 August 2003
2003 2002 RM’000 RM’000
Cash flows from financing activities Dividends paid (136,878) (122,256) Interest paid (17,414) (17,400) Issue of shares 39,274 57,274 Repayment of hire purchase liabilities (409) (520) Net cash used in financing activities (115,427) (82,902)
Net increase in cash and cash equivalents 19,636 557,976 Cash and cash equivalents at beginning of year 575,407 17,431 Cash and cash equivalents at end of year 595,043 575,407
Notes to the cash flow statement (i) Cash and cash equivalents comprise: Deposits with licensed financial institutions 559,280 596,500 Placement in commercial papers 19,598 49,095 Cash and bank balances 53,586 26,399 632,464 671,994 Less: Cash placed in sinking fund account (37,421) (15,787) Less: Cash placed in cash deficiency support account – (80,800) 595,043 575,407
(ii) Additions of property, plant and equipment During the year, the Company acquired property, plant and equipment with an aggregate cost of RM12,472,000 (2002 – RM1,025,000) of which Nil (2002 – RM388,000) was settled by means of hire purchase and the balance by cash payment of RM12,472,000 (2002 – RM637,000)
The notes set out on pages 89 to 116 form an integral part of, and should be read in conjunction with, these financial statements. notes to the financial statements
1. Summary of Significant Accounting Policies The following accounting policies are adopted by the Group and by the Company and are consistent with those adopted in previous years except for the adoption of the followings: (i) MASB 23, Impairment of Assets; (ii) MASB 24, Financial Instruments: Disclosure and Presentation; (iii) MASB 25, Income Taxes; and (iv) MASB 27, Borrowing Costs.
Apart from the inclusion of new policies and extended disclosures where required by these new standards, the adoption of these standards has no impact on these financial statements.
(a) Basis of accounting The financial statements of the Group and of the Company are prepared on the historical cost basis except as
2003 disclosed in the notes to the financial statements are in compliance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia.
(b) Basis of consolidation Subsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly ANNUAL REPORT or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its 88 activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date 89 that control effectively commences until the date that control effectively ceases. Subsidiaries are consolidated using the acquisition method of accounting except for Teknik Janakuasa Sdn. Bhd. which is consolidated using the merger method of accounting.
A subsidiary is excluded from consolidation when control is intended to be temporary if the subsidiary is acquired and held exclusively with a view of its subsequent disposal in the near future and it has not previously been consolidated or it operates under severe long term restrictions which significantly impair its ability to transfer funds to the Company. Subsidiaries excluded on these grounds are accounted for as investments.
(INCORPORATED IN MALAYSIA) (INCORPORATED
Under the acquisition method of accounting, the results of subsidiaries acquired or disposed of during the year are
24816-M included from the date of acquisition or up to the date of disposal. At the date of acquisition, the fair values of the subsidiaries’ net assets are determined and these values are reflected in the Group financial statements. The difference between the acquisition cost and the fair values of the subsidiaries’ net assets is reflected as goodwill or reserve on consolidation as appropriate.
Under the merger method of accounting, the results of the subsidiaries are presented as if the companies had been MALAKOFF BERHAD combined throughout the current and previous financial years. The difference between the cost of acquisition and the nominal value of the share capital and reserves of the merged subsidiaries is taken to merger reserve.
Intragroup transactions and balances and the resulting unrealised profits are eliminated on consolidation. Unrealised losses resulting from intragroup transactions are also eliminated unless cost cannot be recovered. notes to the financial statements
1. Summary of Significant Accounting Policies (Cont’d.) (c) Associates Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies.
The consolidated financial statements include the total recognised gains and losses of associates on an equity accounted basis from the date that significant influence effectively commences until the date that significant influence effectively ceases.
Unrealised profits arising on transactions between the Group and its associates which are included in the carrying amount of the related assets and liabilities are eliminated partially to the extent of the Group’s interests in the associates. Unrealised losses on such transactions are also eliminated partially unless cost cannot be recovered.
Goodwill on acquisition is calculated based on the fair value of net assets acquired.
(d) Property, plant and equipment Property, plant and equipment except for freehold land are stated at cost/valuation less accumulated depreciation.
C-Inspection costs represent costs incurred at the scheduled major inspection dates. The costs are capitalised as the inspections improved the performance and efficiency of the power plant.
The Group revalues its property comprising land and buildings every 5 years and at shorter intervals whenever the fair value of the revalued assets is expected to differ materially from their carrying value.
Surpluses arising from revaluation are dealt with in the property revaluation reserve account. Any deficit arising is offset against the revaluation reserve to the extent of a previous increase for the same property. In all other cases, a decrease in carrying amount is charged to the income statement.
Property, plant and equipment retired from active use and held for disposal are stated at the carrying amount at the date when the asset is retired from active use, less impairment losses, if any.
Depreciation Freehold land is not amortised. Leasehold land is amortised in equal instalments over the period of the lease which is 99 years. The straight-line method is used to write off the cost of the other assets over the term of their estimated useful lives at the following principal annual rates: Buildings 5% Power plant 2.9% Plant and machinery 4% to 20% Office equipment and furniture 20% Motor vehicles 20% 1 Computers 33 /3% C-Inspection costs 32% notes to the financial statements
1. Summary of Significant Accounting Policies (Cont’d.) (e) Accounting for hire purchase Property, plant and equipment acquired under hire purchase agreements are capitalised at their purchase cost and depreciated on the same basis as owned assets. The total amount payable under hire purchase agreements are included as hire purchase liabilities.
The interest element of the rental obligations is charged to the income statement over the period of the hire purchase and accounted for based on the straight line method.
(f) Investments Long term investments other than in subsidiaries and associates are stated at cost. An allowance is made when the Directors are of the view that there is a diminution in their value which is other than temporary.
2003 Long term investments in subsidiaries and associates are stated at cost in the Company, less impairment loss where applicable.
Investment in redeemable preference shares are stated at cost. The premium receivable upon redemption of the
redeemable preference shares is accrued over the tenor of the preference shares. ANNUAL REPORT
(g) Trade and other receivables 90 91 Trade and other receivables are stated at cost less allowance for doubtful debts.
(h) Goodwill Goodwill arising on an acquisition represents the excess of the cost of acquisition over the fair values of the net identifiable assets acquired and is stated at cost less accumulated amortisation and accumulated impairment losses (refer Note 1(l)). In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associates.
(INCORPORATED IN MALAYSIA) (INCORPORATED Goodwill is amortised from the date of initial recognition over its estimated useful life of not more than 21 years.
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(i) Inventories Spares, consumables and diesel fuel are stated at the lower of cost and net realisable value with first-in-first-out (FIFO) being the main basis for cost.
(j) Cash and cash equivalents MALAKOFF BERHAD Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an insignificant risk of changes in value. For the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts, pledged deposits, placement in sinking fund account and cash deficiency support account.
(k) Liabilities Trade and other payables are stated at cost. notes to the financial statements
1. Summary of Significant Accounting Policies (Cont’d.) (l) Impairment The carrying amount of assets, other than inventories, assets arising from construction contracts, deferred tax assets and financial assets (other than investments in subsidiaries, associates and joint ventures), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or the cash-generating unit to which it belongs exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless the asset is carried at a revalued amount, in which case the impairment loss is charged to equity.
The recoverable amount is the greater of the asset’s net selling price and its value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event of an exceptional nature that is not expected to recur and subsequent external events have occurred that reverse the effect of that event.
In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. The reversal is recognised in the income statement, unless it reverses an impairment loss on a revalued asset, in which case it is taken to equity.
(m) Capitalisation of borrowing costs Borrowing costs incurred on construction of plant are capitalised. Capitalisation of borrowing costs will cease when the assets are ready for their intended use.
The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is the weighted average of the borrowing costs applicable to the Group’s borrowings that are outstanding during the year, other than borrowings made specifically for the purpose of financing a specific construction of plant, in which case the actual borrowing cost incurred on that borrowing less any investment income on the temporary investment of that borrowing will be capitalised.
Capitalisation of borrowing costs is suspended during extended periods in which active development is interrupted. notes to the financial statements
1. Summary of Significant Accounting Policies (Cont’d.) (n) Income tax Tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case is recognised in equity.
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Temporary differences are not recognised for the initial recognition of assets or liabilities that at the time of the transaction affects neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. 2003
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
ANNUAL REPORT (o) Provisions A provision is recognised when it is probable that an outflow of resources embodying economic benefits will be 92 required to settle a present obligation (legal or constructive) as a result of a past event and a reliable estimate can be 93 made of the amount.
(p) Foreign currency Foreign current transactions Transactions in foreign currencies are translated to Ringgit Malaysia at rates of exchange ruling at the date of the transactions unless hedged by forward exchange contracts, in which case the rates specified in such forward contracts are used. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to
(INCORPORATED IN MALAYSIA) (INCORPORATED Ringgit Malaysia at the foreign exchange rates ruling at that date unless hedged by forward exchange contracts, in
which case the rates specified in such forward contracts are used. Foreign exchange differences arising on translation 24816-M
are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to Ringgit Malaysia at the foreign exchange rates ruling at the date of the transactions.
The closing rates used in the translation of foreign currency monetary assets and liabilities are as follows:
MALAKOFF MALAKOFF BERHAD 2003 2002 RM RM
USD1 3.80 3.80 CHF1 2.68 2.14 EURO1 4.13 3.51 notes to the financial statements
1. Summary of Significant Accounting Policies (Cont’d.) (q) Financial instruments Financial derivatives hedging instruments are used in the Group’s risk management of foreign currency with respect to its financial liabilities. The underlying foreign currency liabilities are translated at their respective hedged exchange rates. Hedging costs are recognised in the income statement as and when incurred.
(r) Affiliated company An affiliated company is a company which holds a long term interest of not less than 20% but not exceeding 50% in the equity capital of the Company and exercises significant influence over the financial and operating policies of the Company.
(s) Income recognition (i) Capacity and energy payments, operation and maintenance charges, project management and engineering consultancy fees Revenue is measured at the fair value of the consideration receivable and is recognised in the income statement as it accrues.
(ii) Revenue from land reclamation, shore protection, dredging and associated works Revenue from land reclamation, shore protection, dredging and associated works is recognised on the percentage of completion method, measured by reference to surveys of work performed.
When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable and contract costs are recognised as an expense in the period in which they are incurred.
(iii) Dividend income Dividend income is recognised when the right to receive payment is established.
(iv) Interest income Interest income is recognised in the income statement as it accrues, taking into account the effective yield of the asset.
(t) Expenses (i) Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease payments made.
(ii) Financing costs All interest and other costs incurred in connection with borrowings, other than that capitalised in accordance with Note 1(m), are expensed as incurred. The interest component of hire purchase payments is recognised in the income statement over the period of the hire purchase and accounted for based on the straight-line method. notes to the financial statements
2. Property, Plant and Equipment ➤
➤ At valuation➤ At cost ➤ Office Construc- C- Plant equipment Group Freehold Leasehold tion-in- Power Inspection and and Motor land land Buildings progress plant costs machinery furniture vehicles Computers Total Cost/Valuation RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 September 2002 18,190 13,371 6,054 5,823 4,460,504 222,288 68,575 11,517 8,771 7,922 4,823,015 Additions – – 2,170 2,032 71,689 49,226 35 8,129 207 2,236 135,724 Disposals–––––––(4)(285) (76) (365) Written off–––––––(1,271) – – (1,271) Transfer – – 7,855 (7,855) –––––––
At 31 August 2003 18,190 13,371 16,079 - 4,532,193 271,514 68,610 18,371 8,693 10,082 4,957,103 2003
Depreciation At 1 September 2002 – 918 1,255 – 603,669 148,597 2,508 9,182 4,683 5,998 776,810
Charge for the year – 134 512 – 127,385 43,958 1,523 2,162 1,329 1,353 178,356 ANNUAL REPORT Disposals–––––––(3)(187) (10) (200) Written off–––––––(1,033) – – (1,033) 94 95 At 31 August 2003 – 1,052 1,767 – 731,054 192,555 4,031 10,308 5,825 7,341 953,933
Net book value At 31 August 2003 18,190 12,319 14,312 – 3,801,139 78,959 64,579 8,063 2,868 2,741 4,003,170
At 31 August 2002 18,190 12,453 4,799 5,823 3,856,835 73,691 66,067 2,335 4,088 1,924 4,046,205
Depreciation charge IN MALAYSIA) (INCORPORATED for the year ended
24816-M 31 August 2002 – 134 262 – 110,306 49,347 1,493 2,144 1,380 1,348 166,414
MALAKOFF MALAKOFF BERHAD notes to the financial statements
2. Property, Plant and Equipment (Cont’d.)
➤ ➤ At valuation➤ At cost ➤ Office equipment Company Freehold Leasehold Plant and and Motor land land Buildings machinery furniture vehicles Total Cost RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
At 1 September 2002 18,190 6,159 1,043 153 3,761 2,975 32,281 Additions – – 10,025 – 2,447 – 12,472 Written off ––––(333) – (333) At 31 August 2003 18,190 6,159 11,068 153 5,875 2,975 44,420
Depreciation At 1 September 2002 – 311 1,004 142 2,459 1,202 5,118 Charge for the year – 62 261 4 842 574 1,743 Written off ––––(107) – (107) At 31 August 2003 – 373 1,265 146 3,194 1,776 6,754
Net book value At 31 August 2003 18,190 5,786 9,803 7 2,681 1,199 37,666
At 31 August 2002 18,190 5,848 39 11 1,302 1,773 27,163
Depreciation charge for the year ended 31 August 2002 – 62 11 4 616 584 1,277
Revaluation Freehold land is stated at Directors’ valuation based on a professional valuation made by Encik Kamaruzaman Jamil, a chartered valuer, in W.M. Malik & Kamaruzaman, on the open market basis conducted in March 2000.
Leasehold land is stated at Directors’ valuation based on a professional valuation made by Encik Irhamy Ahmad, a chartered valuer, in Irhamy Ahmad Chartered Surveyors, on the open market basis conducted in August 2000.
Had the freehold and leasehold land been carried at historical cost, the carrying amount of the revalued asset that would have been included in the financial statements at the end of the financial year would be as follows: Group 2003 2002 RM’000 RM’000
Freehold land 5,606 5,606 Leasehold land 13,371 13,371 18,977 18,977 notes to the financial statements
2. Property, Plant and Equipment (Cont’d.) Security Group The property, plant and equipment of subsidiary companies costing RM4,661,627,000 (2002 – RM4,578,975,000) have been charged as securities for banking facilities granted to the subsidiaries.
Company The Company entered into a sale and purchase agreement with a subsidiary for the disposal of portions of the leasehold land. Pending the subdivision of the land, a lease agreement was entered into with the subsidiary. On 20 November 2001, the lease was charged as security for certain debt instruments to be issued by the subsidiary.
Borrowing costs
Included in construction-in-progress of the Group is interest capitalised at rates ranging from 6.5% to 12% (2002 – 6.5% to 2003 12%) per annum for the year of RM14,196,062 (2002 – RM15,228,000).
Assets under hire purchase arrangements
Motor vehicles of the Group with a total net book value of RM2,868,000 (2002 – RM4,088,000) were acquired under hire ANNUAL REPORT purchase arrangements. 96 97 3. Investment in Associated Companies Group 2003 2002 RM’000 RM’000
Unquoted shares – at cost 53,560 53,560 Share of post acquisition reserves 49,786 45,648
Less: Goodwill amortised (14,372) (12,290) IN MALAYSIA) (INCORPORATED 88,974 86,918
24816-M Unquoted loan stock, at cost 29,940 29,940 118,914 116,858 Investment in Redeemable Non-Cumulative Convertible Preference Shares (RNCPS), at cost 8,394 10,014 Investment in Redeemable Cumulative Convertible
MALAKOFF MALAKOFF BERHAD Preference Shares (RCCPS), at cost 4,000 4,000 131,308 130,872
Represented by: Group’s share of net assets 93,386 89,248 Goodwill on acquisition, less amortisation 25,528 27,610 118,914 116,858 notes to the financial statements
3. Investment in Associated Companies (Cont’d.) Details of the associated companies are as follows: Country of Percentage of incorporation ownership Principal activities 2003 2002
Port Dickson Power Bhd. Malaysia 20 20 Generation and sale of electricity
Lekir Bulk Terminal Sdn. Bhd. Malaysia 20 20 Bulk terminal jetty and coal-handling services
4. Investment in Subsidiaries Investment in subsidiaries is represented by: 2003 2002 RM’000 RM’000
Unquoted shares – at cost 277,298 267,298
5. Other Investments Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Long term Quoted unit trusts, at cost 152,567 149,709 64,500 64,500 Less: Allowance for diminution in value (62,771) (58,871) (26,345) (25,045) 89,796 90,838 38,155 39,455 Unquoted unsecured loan stocks in subsidiaries – – 506,586 620,916 Unquoted securities, at cost – 10,552 – 10,552 89,796 101,390 544,741 670,923
Market value of quoted investments: Unit trusts 103,477 96,574 43,267 42,146
The loan stocks are unsecured, bear interest ranging from 10% to 62% (2002 – 10%) per annum and are repayable over a period of twelve years. notes to the financial statements
6. Goodwill on Consolidation Group 2003 2002 RM’000 RM’000
As at 1 September 100,002 106,668 Less: Goodwill amortised during the year (6,666) (6,666) As at 31 August 93,336 100,002
7. Inventories Group 2003 2002
2003 RM’000 RM’000
Spares and consumables 190,409 169,663 Diesel fuel 18,180 18,046
ANNUAL REPORT 208,589 187,709 98 All inventories are carried at cost. 99
8. Trade and Other Receivables Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Trade receivables 351,533 309,174 – – IN MALAYSIA) (INCORPORATED Less: Allowance for doubtful debts (18,081) – – –
24816-M
333,452 309,174 – –
Other receivables 475,564 369,843 419,090 319,142 Less: Allowance for doubtful debts (5,439) (3,519) (5,146) (3,287) 470,125 366,324 413,944 315,855
MALAKOFF MALAKOFF BERHAD 803,577 675,498 413,944 315,855 Subsidiaries – – 107,119 81,950 803,577 675,498 521,063 397,805
Included in other receivables of the Group is an amount of RM6,990,000 (2002 – RM9,319,000) representing expenses incurred to restructure the loans of a subsidiary from normal loan facilities to Islamic instruments. This amount is amortised over the period of the loan which is twelve years. The restructured facility has resulted in the reduction of interest expense as the restructured facility bears a lower interest rate as compared to the previous facilities. notes to the financial statements
8. Trade and Other Receivables (Cont’d.) Also included in other receivables of the Group and the Company is an amount of RM400,800,000 (2002 – RM300,800,000) being deposit paid for the purchase of power plants.
The amount due from subsidiaries is unsecured, interest free and has no fixed term of repayment, other than an amount due from subsidiaries of Nil (2002 – RM63,060,000) which bears interest at Nil (2002 – 1% to 2%) per annum above the lending financial institutions’ base lending rate.
9. Cash and Cash Equivalents Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Deposits with: Licensed banks 1,327,503 1,169,578 456,280 423,700 Finance companies 229,500 287,300 50,000 115,800 Other financial institutions 176,822 128,000 52,000 57,000 1,733,825 1,584,878 559,280 596,500 Placement in commercial papers 188,472 118,405 19,598 49,095 Cash and bank balances 106,923 45,630 53,586 26,399 2,029,220 1,748,913 632,464 671,994
Included in the Group’s cash and bank balances is an amount of Nil (2002 – RM1,200,000) pledged to certain licensed banks for facilities granted to certain subsidiaries.
Included in the Group’s and Company’s cash and bank balances is a sum of RM37,421,000 (2002 – RM15,787,000) placed in a sinking fund account maintained with a financial institution, which has been charged as security for the repayment of principal and interest of the medium term notes.
Also included in the Group’s and Company’s cash and bank balances is a sum of Nil (2002 – RM80,800,000) placed in a cash deficiency support account maintained with a financial institution, which has been charged as continuing security to mitigate any cost overruns and the effects of construction delay of a subsidiary’s power plant. The release of the sum was made upon fulfillment of the condition of the charge. notes to the financial statements
10. Trade and Other Payables Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Trade payables 59,922 59,248 – – Other payables and accrued expenses 187,029 191,308 2,708 4,672 Subsidiaries – – 16,408 257,404 246,951 250,556 19,116 262,076
The amount due to subsidiaries is interest free and has no fixed term of repayment.
Included in other payables of the Group are interest expense payable of RM96,201,000 (2002 – RM106,134,000) and amount
2003 due to suppliers of spares and machinery of RM4,085,000 (2002 – RM3,016,000).
11. Borrowings
Group Company ANNUAL REPORT 2003 2002 2003 2002 100 RM’000 RM’000 RM’000 RM’000 101
Current Fixed rate bonds – secured 153,531 131,598 – – Syndicated fixed rate loans – secured 149,889 119,367 – – Subordinated loan notes – unsecured 19,086 16,359 – – Commercial papers – unsecured 118,218 118,194 118,218 118,194 Commercial papers – secured 246,115 177,308 – – Term loan – secured – 207 – –
(INCORPORATED IN MALAYSIA) (INCORPORATED 686,839 563,033 118,218 118,194
24816-M
Non current Fixed rate bonds – secured 679,926 833,457 – – Syndicated fixed rate loans – secured 780,738 931,767 – – Subordinated loan notes – unsecured 149,775 103,615 – – Term loan – secured – 2,376 – –
MALAKOFF MALAKOFF BERHAD Medium term notes – secured 300,000 300,000 300,000 300,000 ABBA Bonds 850,000 850,000 – – 2,760,439 3,021,215 300,000 300,000 notes to the financial statements
11. Borrowings (Cont’d.) Terms and debt repayment schedule The fixed rate bonds and syndicated fixed rate loans are secured by a fixed charge on a subsidiary’s assets. The fixed rate bonds bear interest at 10% (2002 - 10%) per annum whereas the syndicated fixed rate loans bear interest ranging from 7.8% to 8.5% (2002 – 7.8% to 8.5%) per annum.
The subordinated loan notes issued by a subsidiary company to its shareholders are unsecured and bear interest at 10% to 62% (2002 – 10%) per annum.
The fixed rate bonds and subordinated loan notes are repayable over a period of twelve years. The syndicated fixed rate loans are repayable over a period of eight to twelve years.
The term loan is subject to interest at 9.5% (2002 – 9.5%) per annum and is secured by way of a fixed charge over a subsidiary’s property. The term loan is repayable over a period of five years and has been repaid during the year.
The unsecured and secured commercial papers bear interest at 2.85% and 2.94% respectively (2002 – 3.10% and 2.99%) per annum. The medium term notes are secured by a sinking fund provision and bear interest ranging from 4.03% and 5.01% (2002 – 4.03% and 5.01%) per annum.
The commercial papers are repayable over a period of six months whereas the medium term notes are repayable over a period of three to seven years.
The Al-Bai Bithaman Ajil (“ABBA”) bonds are secured by a fixed and floating charge on a subsidiary’s assets, bear interest ranging from 6.00% to 8.00% (2002 – 6.50% to 8.15%) per annum and are repayable over a period of seven to thirteen years.
12. Hire Purchase Liabilities Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Hire purchase liabilities 2,422 3,365 1,286 1,823 Less: Interest in suspense (547) (792) (232) (360) 1,875 2,573 1,054 1,463
Amount payable less than 1 year 1,251 1,901 789 465 Amount payable between 1 and 5 years 624 672 265 998 1,875 2,573 1,054 1,463 notes to the financial statements
13. Share Capital Group and Company 2003 2002 RM’000 RM’000
Ordinary shares of RM1.00 each: Authorised: 2,000,000 2,000,000
Issued and fully paid: At beginning of the year 858,664 279,703 Issued and paid-up during the year 12,624 578,961 At end of the year 871,288 858,664
2003 At the end of the financial year, options to subscribe for 23,057,000 (2002 – 31,956,000) ordinary shares of RM1 each granted under the Employees’ Share Option Scheme at option prices between RM1.07 to RM4.13 per share (2002 – RM1.07 to RM4.13) remain unexercised. Options granted may be exercised on any working day from the date of the offer up to 5.00 p.m. on 6 March 2006, the expiry date of the scheme.
ANNUAL REPORT
14. Minority Shareholders’ Interests 102 This consists of the minority shareholders’ proportion of share capital and reserves of subsidiaries, net of their share of 103 subsidiary’s goodwill on consolidation and amortisation of goodwill charged to the minority shareholders.
15. Deferred Tax Movement in deferred tax assets and liabilities (prior to offsetting of balances) during the year are as follows: Charged/ (Credited) to
At Income At IN MALAYSIA) (INCORPORATED 1 September Statement 31 August
24816-M Group 2002 (note 20) 2003 RM’000 RM’000 RM’000
Deferred tax liability Property, plant and equipment 779,339 104,929 884,268
MALAKOFF MALAKOFF BERHAD
Deferred tax assets Property, plant and equipment (319,193) (22,289) (341,482) Other provisions (29,456) (13,189) (42,645) Total (348,649) (35,478) (384,127) notes to the financial statements
15. Deferred Tax (Cont’d.) Deferred tax liability and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority. The following amounts, determined after appropriate offsetting, are as follows: Group 2003 2002 RM’000 RM’000
Deferred tax liabilities 848,268 779,339 Deferred tax assets (348,127) (348,649) 500,141 430,690
The unrecognised deferred tax assets are as follows: Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Deductible temporary differences 3,121 2,531 8,205 6,246 Unabsorbed capital allowances 6,828 5,533 1,885 1,108 Unutilised tax losses 3,514 3,034 – – 13,463 11,098 10,090 7,354
The unutilised tax losses and deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits.
The Group has tax losses carried forward of RM12,549,000 (2002 – RM12,549,000) which give rise to the recognised and unrecognised deferred tax assets in respect of unutilised tax losses above.
16. Revenue Group revenue relates to capacity and energy payments, operation and maintenance charges, project management and engineering consultancy fees.
Company’s revenue relates to project management fees and dividend income. notes to the financial statements
17. Operating Profit Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Operating profit is arrived at after charging: Amortisation of goodwill 8,748 8,748 – – Amortisation of refinancing expenses 2,329 2,329 – – Auditors’ remuneration 152 152 45 45 Depreciation (Note 2) 178,356 166,414 1,743 1,277 Directors’ remuneration: Non-executive directors – fees 396 359 396 359 – estimated money value of benefits 24 20 24 20 2003 Executive director: – salaries and other emoluments 806 800 806 800 – estimated money value of benefits 65 68 65 68
Lease rental – 404 – – ANNUAL REPORT Allowance for diminution in value of quoted unit trusts 3,900 – 1,300 – Rental of equipment 264 707 97 – 104 Allowance for doubtful debts 20,001 3,519 1,859 3,287 105 Rental of premises 779 1,117 519 891 Property, plant and equipment written off 238 – 226 –
And crediting: Dividend income from an associated company 14,026 23,700 – – Dividend income from subsidiary companies – – 393,352 288,096 Dividend income from quoted unit trusts 5,445 1,823 1,633 1,000
Gain on disposal of property, plant and equipment 113 20 – – IN MALAYSIA) (INCORPORATED Interest income – operating 56,022 43,865 87,129 92,424
Interest income from loan stocks 3,593 3,593 – – 24816-M
Rental income 622 60 562 – Gain on disposal of unquoted securities 160 – 160 –
18. Employees Information
MALAKOFF MALAKOFF BERHAD Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Staff costs 32,418 33,145 5,777 4,803
The number of employees of the Group (including the Managing Director) at the end of the financial year was 364 (2002 – 369).
The number of employees of the Company (including the Managing Director) at the end of financial year was 60 (2002 – 51). notes to the financial statements
19. Financing Costs Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Interest expense Borrowings 267,519 259,405 17,116 17,263 Hire purchase 756 475 126 137 Discounted rate on bonds 6,664 6,492 172 – 274,939 266,372 17,414 17,400
20. Tax Expense Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Current tax expense Malaysian – current 117,757 82,932 124,871 102,786 – prior year 4,209 – – – 121,966 82,932 124,871 102,786
Deferred tax expense Origination and reversal of temporary differences 69,451 96,746 – – Tax expense on share of profit of an associated company 6,062 5,871 – – 197,479 185,549 124,871 102,786
Reconciliation of effective tax rate:
2003 2002 Group % RM’000 % RM’000
Profit before taxation 687,494 588,228
Income tax using Malaysian tax rates 28 192,498 28 164,704 Non-deductible expenses 3 20,090 3 22,416 Tax exempt income (1) (5,824) (<1) (1,571) 30 206,764 31 185,549 Over provision in prior years (1) (9,285) –– Tax expense 29 197,479 31 185,549 notes to the financial statements
20. Tax Expense (Cont’d.) 2003 2002 Company % RM’000 % RM’000
Profit before taxation 447,956 357,095
Income tax using Malaysian tax rates 28 125,428 28 99,987 Non-deductible expenses 1 3,048 1 4,370 Tax exempt income (1) (3,605) (1) (1,571) Tax expense 28 124,871 28 102,786
Subject to agreement by the Inland Revenue Board, the company has sufficient tax credit under section 108 of the Income
Tax Act, 1967 and tax exempt account to frank the payment of RM571,013,000 (2002 – RM308,807,000) of its distributable 2003 reserves at 31 August 2003 as dividends.
21. Earnings Per Share
Basic earnings per share ANNUAL REPORT
The calculation of basic earnings per share is based on the net profit attributable to ordinary shareholders of RM441,754,000 106 (2002 – RM353,591,000) and the weighted average number of ordinary shares outstanding during the year of 864,252,000 107 (2002 – 848,975,000) calculated as follows:
Weighted average number of ordinary shares 2003 2002 RM’000 RM’000
Issued ordinary shares at beginning of the year 858,664 279,703 Effects of shares issued 5,588 9,769
(INCORPORATED IN MALAYSIA) (INCORPORATED Effects of bonus issue – 559,503
Weighted average number of ordinary shares 864,252 848,975 24816-M
Diluted earnings per share The calculation of diluted earnings per share is based on the net profit attributable to ordinary shareholders of RM441,754,000 (2002 – RM353,591,000) and the weighted average number of ordinary shares outstanding during the year
of 871,370,000 (2002 – 854,376,000) calculated as follows: MALAKOFF BERHAD
Weighted average number of ordinary shares (diluted) 2003 2002 RM’000 RM’000
Weighted average number of ordinary shares 864,252 848,975 Effects of share options 7,118 5,401 Weighted average number of ordinary shares (diluted) 871,370 854,376 notes to the financial statements
22. Dividends Group and Company 2003 2002 RM’000 RM’000
Ordinary First and final paid: 2002 – 22 sen per share less tax (2001 – 20 sen per share less tax) 136,878 122,256
The proposed first and final dividend of 25 sen per share less tax totalling RM156,831,840 has not been accounted for in the financial statements and is based on the number of ordinary shares of RM1.00 each as at 31 August 2003.
23. Off Balance Sheet Financial Instruments The Group undertook forward foreign exchange contracts in relation to the hedging of foreign currency payments to foreign suppliers and contractors.
The forward foreign exchange contracts will mature within 12 months from the end of the financial year.
At the end of the financial year, the principal amount of forward foreign exchange contracts outstanding are as follows: Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Forward foreign exchange contracts 34,305 88,130 – 67,086
24. Capital Commitments Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Property, plant and equipment Authorised but not contracted for 120,226 111,789 7,996 13,689 Contracted but not provided for in the financial statements 4,202,337 4,201,379 – – 4,322,563 4,313,168 7,996 13,689 notes to the financial statements
25. Segmental Information Segment information is presented in respect of the Group’s business segment. All the Group’s businesses are carried out in Malaysia.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.
Business segments The Group comprises the following main business segments: Head Office The provision of management services and investment holding.
Power The design, construction, operation and maintenance of power plants and generation and
2003 sale of electricity energy and generation capacity of power plant, build, own and operate a district cooling plant and an electricity distribution system.
Project management The provision of engineering and project management services.
ANNUAL REPORT Land reclamation The land reclamation, shore protection, dredging and associated works. 108 Operation 109 Power and Power generation maintenance distribution Others Eliminations Total 2003 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue Subsidiaries 1,789,733 19,170 13,585 2,526 – 1,825,013 Inter segment – 384,678 – – (384,678) – 1,789,733 403,848 13,585 2,526 (384,678) 1,825,013 IN MALAYSIA) (INCORPORATED
24816-M
Results Segment profit/(loss) 584,097 333,026 508 (33,738) – 883,893 Interest income 56,022 Finance cost (247,939) Share of profit of an associated company 22,518
MALAKOFF MALAKOFF BERHAD Profit before taxation 687,494 Taxation (197,479) Profit after taxation 490,015 Minority interest (48,261) Net profit for the year 441,754 notes to the financial statements
25. Segmental Information (Cont’d.) Operation Power and Power generation maintenance distribution Others Eliminations Total 2002 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue Subsidiaries 1,691,014 16,576 9,872 – – 1,717,462 Inter segment – 332,009 – – (332,009) – 1,691,014 348,585 9,872 – (332,009) 1,717,462
Results Segment profit/(loss) 585,417 235,088 634 (31,226) – 789,913 Interest income 43,865 Finance cost (266,372) Share of profit of an associated company 20,822 Profit before taxation 588,228 Taxation (185,549) Profit after taxation 402,679 Minority interest (49,088) Net profit for the year 353,591
Operation Power and Power generation maintenance distribution Others Eliminations Total 2003 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Segment assets 5,496,794 607,185 42,737 2,027,106 (946,134) 7,227,688 Investment in associates – – 30,000 25,994 75,314 131,308 Total assets 7,358,996
Segment liabilities 3,829,227 21,005 62,090 469,066 (685,284) 3,696,104 Unallocated liabilities 556,092 Total liabilities 4,252,196
Capital expenditure 74,473 51,967 4,516 4,768 – 135,724 Depreciation and amortisation 128,755 45,996 1,827 1,778 8,748 187,104 Non-cash expenses other than depreciation and amortisation 20,681 – – 3,457 – 24,138 notes to the financial statements
25. Segmental Information (Cont’d.) Operation Power and Power generation maintenance distribution Others Eliminations Total 2002 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Segment assets 5,481,714 566,488 48,607 2,055,044 (1,292,136) 6,859,717 Investment in associates – – 30,000 27,614 73,258 130,872 Total assets 6,990,589
Segment liabilities 4,025,407 33,761 78,461 722,659 (1,022,911) 3,837,377 Unallocated liabilities 450,700 Total liabilities 4,288,077
2003 Capital expenditure 499,585 51,470 1,196 1,025 – 553,276 Depreciation and amortisation 112,388 51,243 1,445 1,338 8,748 175,162 Non-cash expenses other than depreciation and amortisation – – – 3,519 – 3,519
ANNUAL REPORT
26. Related Parties 110 Identity of related parties 111 The Group has controlling related party relationships with the Company’s substantial shareholders and its subsidiaries as disclosed in Note 28.
Transactions and balances with related parties Significant transactions and balances with related parties other than those disclosed elsewhere in the financial statements are as follows: Group Company
2003 2002 2003 2002 IN MALAYSIA) (INCORPORATED RM’000 RM’000 RM’000 RM’000
24816-M Interest income on subordinated loan notes received and receivable from a subsidiary – – 33,947 38,482 Interest income on redeemable unsecured loan notes received and receivable from a subsidiary – – 34,210 15,702 Project technical consultancy fee payable to the
Company’s substantial shareholder – 809 – 343 MALAKOFF BERHAD Interest income received from subsidiaries – – – 26,264 Dividend income receivable from subsidiaries – – 393,352 288,096 Management fee receivable from a subsidiary – – 3,531 11,162 Associated company Dividend income 14,026 23,700 – – Interest income from loan stocks 3,593 3,593 – –
The Directors of the Company are of the opinion that the above transactions have been entered into in the normal course of business and have been established under negotiated terms. notes to the financial statements
27. Financial Instruments Financial risk management objectives and policies Exposure to credit, interest rate and currency risk arises in the normal course of the Group and the Company’s business. The Group and the Company have written risk management policies and guidelines which sets out their overall business strategies, their tolerance to risk and their general risk management philosophy and have established processes to monitor and control the hedging of transactions in a timely and accurate manner. Such written policies are reviewed annually by the Board of Directors, and quarterly reviews are undertaken to ensure that the Group and the Company’s policy guidelines are adhered to.
Credit risk Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group and the Company do not require collateral in respect of financial assets.
Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the Group and the Company. Given their high credit ratings management does not expect any counterparty to fail to meet their obligations.
At balance sheet date, the Group and the Company has a significant concentration of credit risk in the form of trade debts due from Tenaga Nasional Berhad (TNB), representing approximately 93% of the total trade receivables of the Group and the Company respectively. The maximum exposure to credit risk for the Group and for the Company are represented by the carrying amount of each financial assets.
Interest rate risk The Group and the Company has no material interest rate risk and substantial long term interest bearing assets.
The investments in financial assets are mainly short term in nature and they are not held for speculative purposes but have been mostly placed in fixed deposits. The deposits placements at balance sheet date are short term and therefore their exposure to effects of future changes in the prevailing level of interest is limited.
Foreign currency risk The Group incur foreign currency risk on purchases that are denominated in a currency other than Ringgit Malaysia. The currency giving rise to this risk is primarily the Swiss Franc.
The Group hedge at least 50 percent of its trade payables denominated in foreign currency. At any point in time, the Group also hedge 50 percent of its estimated foreign currency exposure in respect of purchases over the following twelve months. Where necessary, the forward exchange contracts are rolled over at maturity at market rates.
In respect of other monetary assets and liabilities held in currencies other than Ringgit Malaysia, the Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short term imbalances. notes to the financial statements
27. Financial Instruments (Cont’d.) Liquidity risk The Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.
The following table shows information about exposure to interest rate risk
Effective interest rates and repricing analysis In respect of interest-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprise or mature, whichever is earlier.
Effective Group interest Within 1 – 5 After
rate Total 1 year years 5 years 2003 2003 % RM’000 RM’000 RM’000 RM’000
Financial assets
Cash and cash equivalents 2.97 2,029,220 2,029,220 – – ANNUAL REPORT
Financial liabilities 112 Secured term loans: 113 Syndicated fixed rate loan 7.80-8.50 930,627 149,889 689,992 90,746 Fixed rate bond 10.00 833,457 153,531 636,060 43,866 Unsecured subordinated loan notes 10.0-62.0 168,861 19,086 79,072 70,703 Medium term notes 4.03-5.01 300,000 – – 300,000 ABBA Bonds 6.50-8.00 850,000 – – 850,000 Commercial papers 2.85-2.94 364,333 364,333 – –
Effective IN MALAYSIA) (INCORPORATED Company interest Within 1 - 5 After
24816-M rate Total 1 year years 5 years 2003 % RM’000 RM’000 RM’000 RM’000
Financial assets Cash and cash equivalents 2.97 632,464 632,464 – –
MALAKOFF MALAKOFF BERHAD Financial liabilities Medium term notes 4.03-5.01 300,000 – – 300,000 Commercial papers 2.85-2.94 118,218 118,218 – –
Fair values Recognised financial instruments In respect of cash and cash equivalents, trade and other receivables, tax recoverable, trade and other payables and short term borrowings, the carrying amounts approximate fair value due to the relatively short term nature of these financial instruments. notes to the financial statements
27. Financial Instruments (Cont’d.) The aggregate fair values of other financial assets and liabilities carried on the balance sheet as at 31 August are shown below: 2003 Carrying Fair Group amount value RM’000 RM’000 Financial assets Other investment 89,796 103,477 Investment in associates 131,308 131,308 Cash and cash equivalents 2,029,220 2029,220 2,250,324 2,264,005
Financial liabilities Secured term loans: Syndicated fixed rate loan 930,627 930,627 Fixed rate bond 833,457 833,457 Unsecured subordinated loan notes 168,861 168,861 Medium term notes 300,000 300,000 ABBA Bonds 850,000 850,000 Commercial papers 364,333 364,333 3,447,278 3,447,278
2003 Carrying Fair Company amount value RM’000 RM’000 Financial assets Other investment 38,155 43,267 Unquoted unsecured loan stocks 506,586 506,586 Unquoted shares – long term 277,298 277,298 822,039 827,151
Financial liabilities Medium term notes 300,000 300,000 Commercial papers 118,218 118,218 418,218 418,218
For the financial instruments listed above, fair value has been determined by discounting the relevant cash flows using current interest rates for similar instruments at the balance sheet date or, in the case of unquoted securities, based on discounted price earning multiples as compared to the quoted bid price for similar securities. notes to the financial statements
27. Financial Instruments (Cont’d.) Unrecognised financial instruments The valuation of financial instruments not recognised in the balance sheet reflects their current market rates at the balance sheet date. The contracted amount and fair value of financial instruments not recognised in the balance sheet as at 31 August are: 2003 Contracted Fair Group amount value RM’000 RM’000
Forward foreign exchange contracts 34,305 33,467
Contracted amount Within 1 – 5 After 2003 Total 1 year years 5 years Group RM’000 RM’000 RM’000 RM’000
Forward foreign exchange contracts 34,305 34,305 – –
ANNUAL REPORT
28. Subsidiaries 114 The principal activities of the subsidiaries, their places of incorporation and the interest of Malakoff Berhad in the 115 subsidiaries are as follows: Country of Percentage of incorporation ownership Principal activities 2003 2002
Segari Energy Ventures Malaysia 75 75 Design, construction, operation and maintenance Sdn. Bhd. of a combined cycle power plant, generation
and sale of electrical energy and generating IN MALAYSIA) (INCORPORATED capacity of power plant
24816-M Teknik Janakuasa Sdn. Bhd. Malaysia 100 100 Operation and maintenance of power plants and its subsidiary Natural Analysis Sdn. Bhd. Malaysia 51 51 Operation and maintenance of power plant Malakoff Engineering Sdn. Bhd. Malaysia 100 100 Provision of engineering and project management services
MALAKOFF MALAKOFF BERHAD Wirazone Sdn. Bhd. Malaysia 100 100 Build, own and operate a district cooling plant and an electricity distribution system Hypergantic Sdn. Bhd. Malaysia 100 100 Investment holding Desa Kilat Sdn. Bhd. Malaysia 54 54 Land reclamation, development and/or sale of reclaimed land Spring Assets Limited British Virgin 100 100 Offshore operations Islands Tuah Utama Sdn. Bhd. Malaysia 100 100 Investment holding notes to the financial statements
28. Subsidiaries (Cont’d.) Country of Percentage of incorporation ownership Principal activities 2003 2002
Transpool Sdn. Bhd. Malaysia 100 100 Dormant Malakoff Gulf Limited British Virgin 100 100 Offshore operations Islands Kapar Energy Ventures Sdn. Bhd. Malaysia 100 100 Dormant GB3 Sdn. Bhd. Malaysia 75 100 Design, construction, operation and maintenance of a combined cycle power plant, generation and sale of electrical energy and generating capacity of the power plant
29. Contingent Liabilities Group Company 2003 2002 2003 2002 RM’000 RM’000 RM’000 RM’000
Guarantees – secured – 1,200 – – – unsecured 34,115 32,115 15,979 15,979 34,115 33,315 15,979 15,979
For the financial year under review, no guarantees was secured by way of deposit pledged with a licensed bank. (2002: RM1,200,000)
30. Subsequent Events The following events took place subsequent to year end: (i) On 28 October 2003, the Company issued a RM1.85 billion serial revenue bonds. The net proceeds of RM1.5 billion was used mainly for the acquisition of Prai Power Sdn Bhd (PPSB) and SKS Power Sdn Bhd (SKS Power). On the same date, the Company completed its acquisition of 100% equity interest in PPSB and 90% equity interest in SKS Power. (ii) On 30 October 2003, Kapar Energy Ventures Sdn Bhd (KEV), the Company and Tenaga Nasional Berhad (TNB) entered into a shareholders’ agreement. On the same date, KEV and TNB signed a second supplementary power purchase agreement to introduce additional terms and conditions. (iii) On 11 November 2003, SKS Power issued the first tranche of the RM5.57 billion Istisna Medium Term Notes (MTN) Programme. The MTN Programme consists of 5 tranches to be issued over a period of 2 years. The first tranche comprises 5 series with tenures ranging between 5 and 9 years from issue date. On the same date, SKS Power also issued the first tranche of RM398.5 million redeemable unsecured loan stocks (RULS). SKS Power will issue up to RM1.4 billion RULS in 5 tranches over a total period of 2 years. The proceeds from both issuance will be utilised for the Tanjung Bin Project. 2003 other corporate information ANNUAL REPORT 116 118 financial calendar & share performance chart 117 119 analysis of shareholdings 122 properties of the group
(INCORPORATED IN MALAYSIA) (INCORPORATED
24816-M
MALAKOFF MALAKOFF BERHAD financial calendar & share performance chart
Announcements of Quarterly Results Financial year 2001 Financial year 2002 Financial year 2003 1st Quarter 19 January 2001 25 January 2002 28 January 2003/ 27 February 2003 (Amended Announcement) 2nd Quarter 25 April 2001 29 April 2002 28 April 2003 3rd Quarter 26 July 2001 29 July 2002 28 July 2003 4th Quarter 24 October 2001 28 October 2002 17 October 2003
Dividends Payable Books Closure Date 28 February 2002 19 February 2003 5 March 2004 Payment Date 8 March 2002 7 March 2003 18 March 2004 Annual Report Issued 2 February 2002 24 January 2003 30 January 2004 Annual General Meeting 26 February 2002 17 February 2003 25 February 2004
Trend for the Past Five Years Gross Dividend per Share & Gross Dividend Yield Share Price sen/share at Financial Year-End Yield (%) RM/share at Financial Year-End 70 7 12 10.10 9.90 60 6 9.50 5.21 5.16 10 50 5 8 40 4 6 4.84 30 3 4.22 2.10 4 20 1.51 2 0.99 10 1 2 10.0 15.0 20.0 22.0 25.0 0 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 pre-bonus issue post-bonus issue pre-bonus issue post-bonus issue Gross Dividend Per Share Gross Dividend Yield (A 2:1 Bonus Issue was implemented on 15 November 2001)
Share Performance Volume (million) during the financial year ended 31 August 2003 Share Price (RM)
40 6 35 5 30 4 25 20 3 15 2 10 1 5
Sept Oct Nov Dec Jan Feb Mar Apr May June Jul Aug
2002 2003
Volume High Low Last Transaction analysis of shareholdings as at 23 December 2003
Class of Securities : Ordinary Shares of RM1.00 each (“MB Shares”) Authorised Share Capital : RM2,000,000,000 Issued and Paid-up Share Capital : RM875,074,002 Voting Rights : One vote for every ordinary share Number of Shareholders : 10,669
Analysis of Shareholdings Holdings No. of Holders Total Holdings %
Less than 100 137 1,852 0.00 100 to 1,000 3,565 3,389,403 0.39 1,001 to 10,000 5,457 22,413,413 2.56 10,001 to 100,000 1,145 36,502,831 4.17 100,001 to less than 5% of issued shares 362 398,650,669 45.56 2003 5% and above of issued shares 3 414,115,834 47.32 Total 10,669 875,074,002 100.00
ANNUAL REPORT
Substantial Shareholders (Holding 5% or More of the Issued and Paid-Up Capital) 118 Direct Indirect 119 No. of No. of Shareholders MB Shares % MB Shares %
Malaysia Mining Corporation Berhad (“MMC”) 197,858,334 (1) 22.61 – – International Power Holdings Limited (“IPHL”) 161,595,000 (2) 18.47 – – Employees Provident Fund Board 54,955,100 (3) 6.28 – – Seaport Terminal (Johore) Sdn. Bhd. – – 197,858,334 (4) 22.61 Skim Amanah Saham Bumiputra 7,626,000 (5) 0.87 197,858,334 (6) 22.61 International Power plc – – 161,595,000 (7) 18.47 IN MALAYSIA) (INCORPORATED Indra Cita Sdn. Bhd. – – 197,858,334 (8) 22.61
24816-M Tan Sri Datuk Syed Mokhtar Shah bin Syed Nor – – 197,858,334 (9) 22.61
Notes: (1) Of which 92,790,000 MB Shares are held through Bumiputera-Commerce Nominees (Tempatan) Sdn. Bhd., 58,600,000 MB Shares are held through UOBM Nominees (Tempatan) Sdn. Bhd. and 19,000,000 MB Shares are held through EB Nominees (Tempatan) Sdn. Bhd..
(2) Held through AMMB Nominees (Asing) Sdn. Bhd.. MALAKOFF BERHAD (3) Of which 3,600,000 MB Shares are held through AMMB Nominees (Tempatan) Sdn. Bhd., 1,327,600 MB Shares are held through RHB Nominees (Tempatan) Sdn. Bhd., 2,226,000 MB Shares are held through HSBC Nominees (Tempatan) Sdn. Bhd. and 1,257,000 MB Shares are held through SBBAM Nominees (Tempatan) Sdn. Bhd.. (4) Deemed interested by virtue of its direct major shareholdings in MMC. (5) Held through Amanah Raya Nominees (Tempatan) Sdn. Bhd.. (6) Deemed interested by virtue of its direct major shareholdings in MMC and held through Amanah Raya Nominees (Tempatan) Sdn. Bhd.. (7) Deemed interested by virtue of its direct major shareholdings in its wholly-owned subsidiary, IPHL. (8) Deemed interested through Seaport Terminal (Johore) Sdn. Bhd.. (9) Deemed interested through Indra Cita Sdn. Bhd.. analysis of shareholdings as at 23 December 2003
Statement on Directors’ Interests The Directors’ interest in shares/options of the Company and its related corporations are set out on page 73 of the Anuual Report.
List of Thirty (30) Largest Shareholders Name Shareholdings %
1. AMMB Nominees (Asing) Sdn. Bhd. 161,595,000 18.47 (Amtrustee Berhad for International Power Holdings Limited) 2. Bumiputra-Commerce Nominees (Tempatan) Sdn. Bhd. 92,790,000 10.60 (Pledged Securities Account for Malaysia Mining Corporation Berhad) 3. Employees Provident Fund Board 46,451,900 5.31 4. UOBM Nominees (Tempatan) Sdn. Bhd. 39,070,000 4.46 (Pledged Securities Account for Malaysia Mining Corporation Berhad) 5. Valuecap Sdn. Bhd. 34,477,600 3.94 6. Malaysia Mining Corporation Berhad 27,468,334 3.14 7. Malaysia Nominees (Tempatan) Sendirian Berhad 20,517,910 2.35 (Great Eastern Life Assurance (Malaysia) Berhad) 8. UOBM Nominees (Tempatan) Sdn. Bhd. 19,530,000 2.23 (Pledged Securities Account for Malaysia Mining Corporation Berhad) 9. EB Nominees (Tempatan) Sendirian Berhad 19,000,000 2.17 (Pledged Securities Account for Malaysia Mining Corporation Berhad) 10. Lembaga Tabung Haji 11,632,909 1.33 11. Cartaban Nominees (Asing) Sdn. Bhd. 10,574,000 1.21 (SSBT Fund 2R26 for Bernstein Emerging Markets Value Portfolio) 12. Cartaban Nominees (Asing) Sdn. Bhd. 7,841,478 0.90 (State Street London Fund XC4L for Emerging Markets Fund (SWIPIFICVC)) 13. Amanah Raya Nominees (Tempatan) Sdn. Bhd. 7,626,000 0.87 (Skim Amanah Saham Bumiputera) 14. Citicorp Nominees (Tempatan) Sdn. Bhd. 7,107,300 0.81 (Prudential Assurance Malaysia Berhad (PAR Fund)) 15. HSBC Nominees (Asing) Sdn. Bhd. 6,906,000 0.79 (BNY Brussels for The State Teachers Retirement System of Ohio (Sanford Emerg)) analysis of shareholdings as at 23 December 2003
List of Thirty (30) Largest Shareholders (Cont’d) Name Shareholdings %
16. HSBC Nominees (Asing) Sdn. Bhd. 6,675,000 0.76 (PICTET and CIE for VKF Investment Ltd) 17. HSBC Nominees (Asing) Sdn. Bhd. 6,294,600 0.72 (Abu Dhabi Investment Authority) 18. Citicorp Nominees (Asing) Sdn. Bhd. 6,095,500 0.70 (CB LDN for Stichting Pensioenfonds Voor De Gezondheid Geestelijkeen Maatschappelijke Belangen) 19. HSBC Nominees (Asing) Sdn. Bhd. 6,044,700 0.69 (HSBC BK plc for Prudential Assurance Company Ltd) 20. Malaysia National Insurance Berhad 5,423,200 0.62
2003 21. Malaysia Nominees (Asing) Sendirian Berhad 4,976,640 0.57 (Oversea-Chinese Bank Nominees Pte Ltd for Island Investment Company (Pte) Ltd) 22. Cartaban Nominees (Asing) Sdn. Bhd. 4,862,100 0.56 (Mellon Bank, N.A. for Commonwealth of Massachusetts Pension Reserve Investment Trust)
ANNUAL REPORT 23. Cartaban Nominees (Asing) Sdn. Bhd. 4,749,700 0.54 (State Street London Fund XB1L for UBS Global Emerging Markets Equity Fund) 120 121 24. Amanah Raya Nominees (Tempatan) Sdn. Bhd. 4,718,800 0.54 (Amanah Saham Wawasan 2020) 25. Amanah Raya Nominees (Tempatan) Sdn. Bhd. 4,475,300 0.51 (Amanah Saham Didik) 26. HSBC Nominees (Asing) Sdn. Bhd. 4,183,300 0.48 (Stichting Pensioenfonds ABP) 27. AMMB Nominees (Tempatan) Sdn. Bhd. 3,965,800 0.45
(INCORPORATED IN MALAYSIA) (INCORPORATED (Amtrustee Berhad for SBB Dana Al-Ihsan)
28. HSBC Nominees (Asing) Sdn. Bhd. 3,814,000 0.44 24816-M
(TNTC for Sanford C. Bernstein & Co. Delaware Business Trust) 29. HSBC Nominees (Asing) Sdn. Bhd. 3,800,000 0.43 (Co-Operative Insurance Society Limited) 30. HSBC Nominees (Asing) Sdn. Bhd. 3,771,360 0.43 (HSBC Sg for Singapore Investments Pte Ltd) MALAKOFF BERHAD Total 586,438,431 67.02 properties of the group as at 31 August 2003
Net Book Description Approximate Revaluation Value as at No. Location of Property age of building Tenure Area Date 31.08.2003 (RM’000)
1. Windsor Estate, Agricultural land – Freehold 738 01.03.2000 18,190 Ulu Sepetang, hectares Perak
2. Mukim of Industrial land 9 years Leasehold 16 10.10.2000 4,355 Pengkalan Baharu, with power plant 99 years hectares District of Manjung, expiring on Perak 12 January 2094
3. Mukim of Industrial land 9 years Leasehold 8 10.10.2000 2,178 Pengkalan Baharu, with power plant 99 years hectares District of Manjung, expiring on Perak 27 February 2094
4. Mukim of Industrial land – Leasehold 16 10.10.2000 5,786 Pengkalan Baharu, 99 years hectares District of Manjung, expiring on Perak 30 July 2096
5. Plaza Sentral, Office suites 3 years Freehold 31,797 – 14,285 Brickfields, square feet Kuala Lumpur notice of annual general meeting
NOTICE IS HEREBY GIVEN THAT the Twenty-Eighth Annual General Meeting of Malakoff Berhad will be held at Grand Nirwana Ballroom, Lower Lobby, Mutiara Hotel, Jalan Sultan Ismail, 50250 Kuala Lumpur on Wednesday, 25 February 2004 at 11.00 a.m. for the following purposes:-
Ordinary Business 1. “THAT the Audited Financial Statements for the financial year ended 31 August 2003 and the Reports of the Directors and Auditors thereon be and are hereby received and adopted.” Resolution 1
2. “THAT a first and final dividend of 25 sen per share less 28% income tax (2002 - 22 sen per share less 28% income tax) for the financial year ended 31 August 2003 be and is hereby approved and declared payable on 18 March 2004 to the members of the Company registered at the close of business on 5 March 2004.” Resolution 2
3. “THAT the following Directors, who retire as Directors in accordance with Article 80 of the Company’s Articles of Association, 2003 and being eligible have offered themselves for re-election, be and are hereby re-elected as Directors of the Company: (i) Dato’ Abdul Aziz bin Abdul Rahim Resolution 3 (ii) Dato’ Mohammed Radzi @ Mohd Radzi bin Manan” Resolution 4
ANNUAL REPORT
4. “THAT the Directors’ fees for the financial year ended 31 August 2003 amounting to RM396,000 be and are hereby approved.” 122 Resolution 5 123
5. “THAT Messrs. KPMG, who are eligible and have given their consent for re-appointment, be and are hereby re-appointed as Auditors of the Company until the conclusion of the next Annual General Meeting and that the remuneration to be paid to them be fixed by the Board of Directors.” Resolution 6
Special Business 6. To consider and, if thought fit, pass the following as an Ordinary Resolution:-
(INCORPORATED IN MALAYSIA) (INCORPORATED “THAT pursuant to Section 132D of the Companies Act, 1965, the Board of Directors be and is hereby empowered to issue
24816-M
shares of the Company at any time until the conclusion of the next Annual General Meeting of the Company upon such terms and conditions and for such purposes as the Board of Directors may, in its absolute discretion deem fit, provided that the aggregate number of shares to be issued does not exceed ten percentum (10%) of the issued and paid up share capital of the Company at the time of issue AND THAT the Board of Directors be, and is also, empowered to obtain the approval of Malaysia Securities Exchange Berhad for the listing of and quotation for the additional shares so issued and any other relevant approvals
as may be necessary.” Resolution 7 MALAKOFF BERHAD notice of annual general meeting
Closure of Books NOTICE IS ALSO HEREBY GIVEN THAT shareholders who are registered in the Register of Members and Record of Depositors at the close of business at 5.00 p.m. on 5 March 2004 shall be entitled to a first and final dividend of 25 sen per share less income tax at 28% for the financial year ended 31 August 2003 which will be paid on 18 March 2004.
A Depositor shall qualify for dividend entitlement only in respect of: a) Shares deposited into the Depositor’s securities account before 12.30 p.m. on 3 March 2004 in respect of shares which are exempted from mandatory deposit; b) Shares transferred into the Depositor’s securities account before 4.00 p.m. on 5 March 2004 in respect of ordinary transfers; and c) Shares bought on Malaysia Securities Exchange Berhad (“MSEB”) on a cum entitlement basis according to the Rules of MSEB.
BY ORDER OF THE BOARD
Mohamed Rafique Merican bin Mohd Wahiduddin Merican (MIA 19266) Secretary
Lim Wee Neo (LS 0008331) Joint Secretary
Kuala Lumpur 30 January 2004
Notes: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a member of the Company.
2. Where a member appoints two or more proxies, the appointment shall be invalid unless he specifies the proportions of his holding to be represented by each proxy.
3. The instrument appointing a proxy or proxies, in the case of an individual, shall be signed by the appointer or his duly authorised attorney, and in the case of a corporation, either under seal or under the hand of an officer or attorney duly authorised in writing. In case of joint holders, the signature of any joint holder is sufficient.
4. The instrument appointing a proxy or proxies must be deposited at the Registrar, Malaysian Share Registration Services Sdn. Bhd., 7th Floor, Exchange Square, Bukit Kewangan, 50200 Kuala Lumpur, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof.
Explanatory Note on the Special Business Ordinary Resolution 7, if passed, will give authority to the Board of Directors of the Company, from the date of the above Annual General Meeting, to issue and allot ordinary shares in the Company up to and not exceeding in total ten per centum (10%) of the issued and paid up share capital of the Company at the time of issue, for such purposes as it considers would be in the interest of the Company. The passing of this resolution would avoid any delay and cost involved in convening general meeting to specifically approve such an issue of shares. This authority, unless revoked or varied at a general meeting, will expire at the next Annual General Meeting of the Company. statement accompanying notice of annual general meeting of the company (Pursuant to paragraph 8.28 (2) of the Listing Requirements of Malaysia Securities Exchange Berhad)
1. Directors standing for re-election pursuant to Article 80 of the Company’s Articles of Association (Retirement by rotation) • Dato’ Abdul Aziz bin Abdul Rahim • Dato’ Mohammed Radzi @ Mohd Radzi bin Manan
2. Details of attendance of Directors at General Meetings held during the financial year ended 31 August 2003 There were two (2) general meetings held during the financial year as follows:- (i) Twenty-Seventh Annual General Meeting held on Monday, 17 February 2003 at 3.00 p.m. at The Legend Grand Ballroom, Level 9, The Legend Hotel Kuala Lumpur, Putra Place, 100 Jalan Putra, 50350 Kuala Lumpur; and (ii) Extraordinary General Meeting held on Monday, 17 February 2003 immediately after the Twenty-Seventh Annual General Meeting at 4.25 p.m. at the same venue.
2003 The attendance of the Directors at the general meetings was as follows:- Name of Directors No. of Meetings Attended
Tan Sri Abdul Halim bin Ali 2 out of 2 ANNUAL REPORT Ahmad Jauhari bin Yahya 2 out of 2 124 Dato’ Abdul Aziz bin Abdul Rahim 2 out of 2 125 Dato’ Mohammed Radzi @ Mohd Radzi bin Manan 2 out of 2 Abdul Jabbar bin Abdul Majid 2 out of 2 Azizan bin Mohd Noor 2 out of 2 Dato’ Ismail bin Shahudin 2 out of 2 Kenneth William Teasdale 0 out of 2
(INCORPORATED IN MALAYSIA) (INCORPORATED
24816-M
MALAKOFF MALAKOFF BERHAD statement accompanying notice of annual general meeting of the company (Pursuant to paragraph 8.28 (2) of the Listing Requirements of Malaysia Securities Exchange Berhad)
3. Details of Directors standing for re-election at the Annual General Meeting Name Dato’ Abdul Aziz bin Abdul Rahim Dato’ Mohammed Radzi @ Mohd Radzi bin Manan
Age 57 58
Nationality Malaysian Malaysian
Qualification Bachelor of Law (Hons.) degree from Bachelor of Arts degree from International Islamic University, Malaysia University of Tasmania, Australia
Position on the Board Independent Non-Executive Director Independent Non-Executive Director
Date first appointed to the Board 11 March 1994 10 June 1996
Membership of Board Committees • Audit Committee • Remuneration Committee • Remuneration Committee • Nomination Committee • ESOS Committee
Working Experience As enumerated in the Profile As enumerated in the Profile of Directors on page 30 of Directors on page 30 of this Annual Report of this Annual Report
Occupation Company Director Company Director
Any other directorships of Nil • Foremost Holdings Berhad public companies • Perkapalan Mesra Berhad
Securities holdings in the Company Nil Nil and its subsidiaries (as at 31 August 2003)
Family relationship with any Director Nil Nil and/or major shareholder of the Company
List of convictions for offences Nil Nil within the past 10 years other than traffic offences, if any
Number of Board Meetings attended 7 out of 8 meetings 7 out of 8 meetings in the financial year MALAKOFF BERHAD proxy form Company No.: 24816-M (Incorporated in Malaysia)
I/We (FULL NAME IN CAPITAL LETTER) of (ADDRESS) being a member/members of MALAKOFF BERHAD hereby appoint
(FULL NAME & NRIC NUMBER) of (ADDRESS) or failing whom (FULL NAME & NRIC NUMBER) of (ADDRESS) or failing him, the Chairman of the Meeting* as my/our proxy to attend and vote for me/us and on my/our behalf at the Twenty-Eighth Annual General Meeting of the Company to be held at Grand Nirwana Ballroom, Lower Lobby, Mutiara Hotel, Jalan Sultan Ismail, 50250 Kuala Lumpur on Wednesday, 25 February 2004 at 11.00 a.m. and at any adjournment thereof. My/our proxy is to vote on the Resolutions as indicated by an “X” in the appropriate spaces below. If this form is returned without indication as to how the proxy shall vote, the proxy shall vote or abstain as he/she thinks fit. No. Resolution For Against 1. To receive and adopt the Audited Financial Statements for the financial year ended 31 August 2003 and the Reports thereon. 2. To declare a first and final dividend of 25 sen per share less 28% income tax for the financial year ended 31 August 2003. 3. To re-elect Dato’ Abdul Aziz bin Abdul Rahim as Director. (Article 80) 4. To re-elect Dato’ Mohammed Radzi @ Mohd Radzi bin Manan as Director. (Article 80) 5. To approve the Directors’ fees of RM396,000 for the financial year ended 31 August 2003. 6. To re-appoint Messrs. KPMG as Auditors and to authorise the Directors to fix their remuneration. 7. To pass the Ordinary Resolution pursuant to Section 132D of the Companies Act, 1965.
No. of shares held
Dated this day of 2004. Signature of shareholder(s) or Common Seal Notes: * Delete the words “Chairman of the Meeting” if you wish to appoint some other person(s) to be your proxy. 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a member of the Company. 2. Where a member appoints two or more proxies, the appointment shall be invalid unless he specifies the proportions of his holding to be represented by each proxy. 3. The instrument appointing a proxy or proxies, in the case of an individual, shall be signed by the appointer or his attorney duly authorised, and in the case of a corporation, either under seal or under the hand of an officer or attorney duly authorised in writing. In case of joint holders, the signature of one joint holder is sufficient. 4. The instrument appointing a proxy or proxies must be deposited at the Registrar, Malaysian Share Registration Services Sdn. Bhd., 7th Floor, Exchange Square, Bukit Kewangan, 50200 Kuala Lumpur, Malaysia not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof. fold here
Stamp
The Registrar Malaysian Share Registration Services Sdn Bhd (378993-D) 7th Floor, Exchange Square Bukit Kewangan 50200 Kuala Lumpur Malaysia
fold here MALAKOFF BERHAD (24816-M) Level 12, Block 3B, Plaza Sentral, Jalan Stesen Sentral 5, 50470 Kuala Lumpur Tel: 03-2263 3388 Fax: 03-2263 3333 Website: www.malakoff.com.my