Transforming Challenges into Opportunities Annual Report 2007 Contents

2 Chairman’s Statement 4 Message to Shareholders 6 Group Financial Highlights 8 Our Global Reach 10 At a Glance 12 Oil & Gas 14 Power 16 Water 18 Infrastructure 24 Corporate Information 25 Board of Directors 26 Directors’ Profile 29 Ranhill Leadership 31 Reports and Statutory Statements Form of Proxy “From the plants that power nations, to the water that children drink; from the bridges that link cities, to the hospitals that shelter nursing mothers; we’ve had a hand in creating these, and more.

Whatever we set out to do, we do it to the best of our abilities. And what’s more, we deliver on our promises. That’s the basic premise of our business and that’s why clients keep coming back to Ranhill.” Chairman’s Statement

Dear Shareholders, ones throughout Asia and Africa. Leveraging upon our E&C capability, On behalf of the Board of Directors, I am pleased to present the Annual we continued to expand dynamically into the development, operation Report and Financial Statements of Ranhill Berhad (“Ranhill” or “the and ownership of assets in the Energy and Infrastructure sectors. Group”) for the financial year ended 30 June 2007. Exciting new developments on the exploration and production side hold much promise for the future growth of our Oil & Gas Division PERFORMANCE HIGHLIGHTS especially in the light of continuing high demand for hydrocarbons. Our Ranhill turned in a sterling performance for the year under review. Water Division, spearheaded by Ranhill Utilities, has strengthened its Not only did we accomplish record highs on the financial front, we position as a top ranking regional water utilities player and is poised to strengthened our position as a premier engineering and construction make the most of water and wastewater opportunities under the Ninth player in the Oil & Gas, Power, Water and Infrastructure sectors, Malaysian Plan and the nation’s new water regulatory regime. expanded our asset base, and made exciting inroads into new and In the Power business, we continue to pursue our strategy of expanding existing markets. our regional power generation capacity through power plant conversion Our focus on ensuring strong project execution, establishing sound and asset acquisition. The Infrastructure Division has kicked off its engineering and construction (“E&C”) capabilities in key geographic maiden USD1.8 billion infrastructure project in Libya and is undertaking locations and investing astutely in strategic assets, continues to pay EPC works for Malaysia’s landmark Women and Children’s Hospital off handsomely. For the period under review, the Group registered net as well as design and build for 30 community and sports complexes profit attributable to shareholders of RM116.8 million on the back of throughout Malaysia. revenue of RM1.47 billion. As we set our sights on growing our core businesses in a concerted Over the course of the financial year, we continued to build up our manner and bolstering our capabilities around the globe, it is with engineering services and engineering, procurement and construction confidence that I can say Ranhill is all set to move up to the next level (“EPC”) portfolio by completing existing projects and embarking on new of growth. Ranhill Berhad (430537-K) 3

CHAIRMAN’S STATEMENT

CORPORATE GOVERNANCE In line with the Government’s call for companies to be more proactive Ranhill steadfastly subscribes to the tenets of integrity, transparency and in their CSR efforts, Ranhill has registered itself as one of the founding accountability in all our dealings. To ensure the long term viability of our members of the Institute of Corporate Responsibility (“ICR”) Malaysia. businesses and to create sustainable shareholder value, we undertake This platform gives us the opportunity to engage with ICR member exemplary corporate governance practices in the management of companies on CSR best practices. the business and affairs of the Group. For the period under review, we continued to align our corporate governance controls in line with APPRECIATION the best practices identified in the Malaysian Code on Corporate On behalf of Ranhill’s Board of Directors, I wish to express our Governance. heartfelt gratitude to our business partners, bankers and financiers, the authorities, our customers and shareholders for their continued HUMAN CAPITAL DEVELOPMENT confidence in Ranhill.

At Ranhill, we are continuously exploring opportunities that will enhance The Group’s outstanding performance this year is largely owing to the the value of our human capital and establish the Ranhill Group as an efforts of the dedicated team at Ranhill that continues to raise the bar “employer of choice”. As part of our continuous efforts to optimise the on excellence and drive the Group forward. To our employees, the skills sets of the Group’s employees, Group Human Resources has set management team and my colleagues on the Board, please accept up a training and development unit that has been tasked with ensuring my heartfelt gratitude for your loyalty, perseverance and efforts. our employees have access to high quality personal, technical and professional training opportunities. By offering employees long-term On behalf of the Board, I wish to thank Terence Francis Mahony career development opportunities, we aim to encourage employee who resigned from the Board on 25 May 2007, for his invaluable retention and infuse on-the-job satisfaction. contributions to Ranhill during his tenure. We wish him every success in his future endeavours. I would also like to take this opportunity to In cooperation with Group Management Information Systems, the welcome onboard Nadzru Azhari who was appointed to the Board on unit has put together a Training Management System which includes 16 August 2007. a comprehensive listing of various training programmes across all job skills and training needs analysis for both strategic organisational Last but not least, my sincere thanks to my fellow Board Members training and personal training. for their sound advice and guidance. I look forward to your invaluable support and continued commitment in driving Ranhill forward. As we focus on taking Ranhill to new heights of success, I trust that COMMITMENT TO CSR all stakeholders will continue to support us in our endeavours. To underscore Ranhill’s commitment to Corporate Social Responsibility (“CSR”), the Board has approved a new CSR framework for the Group. Based on Bursa Malaysia’s recommendations, this framework will outline CSR initiatives under the perspectives of the Environment, Community, Marketplace and Workplace. We have also begun to realign our diverse CSR activities and focus our efforts on issues pertaining to the environment as this has a direct impact on our businesses.

Tan Sri (Dr) Sallehuddin Mohamed Chairman 4 Ranhill Berhad (430537-K) Message to Shareholders

Dear Shareholders, are helping the Libyan Government meet the critical demand for I am pleased to report that your Company has delivered a very housing and infrastructure, where we have been awarded the successful year. We owe much to the hard work and dedication engineering and construction of 40,000 units of houses and the of our 4,500 employees whose efforts have produced this strong related infrastructure. Work has started at Tajura, a suburb of financial year and further increased the value of the Company. Tripoli. With the opportunities available to us, we are poised to experience In India, we are helping the Indian government meet the acute unprecedented high growth in the coming years in all the sectors shortage in power. We are commencing work in engineering and that we serve, with significant and major contributions coming from construction of two coal fired power plants, a 300MW and a 2 x outside Malaysia. 350MW, employing modern and clean technology. Ranhill has turned the challenges of the previous year into In Sudan, despite the difficulties and challenges we encountered, opportunities. In financial year 2007, net earnings turned around we completed a state-of-the-art 220,000 barrel per day (“bpd”) oil and increased by 134% to RM117 million, producing record processing facility that has been operating successfully since we earnings per share of 19.56 sen, despite the slight drop in revenue handed it over in 2006. Our client, a joint venture between China by 8% to RM1.47 billion. Our cash flow was positive in 2007 and National Petroleum Company and Petronas, has acknowledged we finished the year with RM937 million in cash. We have increased our good work by awarding us the contract for the expansion shareholders’ funds to RM1.042 billion with your Company’s net of the plant to 300,000 bpd with a provisional sum for water assets recorded at RM1.5 billion. injection facilities of estimated, 200,000 bpd capacity and costing We started 2008 by increasing our backlog by more than 50% approximately USD166.8m. This award is part and parcel of a to RM15 billion. Our huge backlog reflects our strong position settlement agreement. We are confident that the cost overruns in relation to the world’s growing demand for engineering, incurred to date will be fully recovered by virtue of the revenue procurement, construction, operation and maintenance activities as earned from the additional scope of work. well as investments in the oil & gas, power, water and infrastructure Our joint venture with WorleyParsons, a world engineering major sectors that we serve. Our backlog is spread across many regions, in engineering services for oil & gas, now in its twelfth year, has from South East Asia, China, India, the Middle East to Africa, and experienced unprecedented growth with a 40% increase in revenue across all the sectors we serve, thereby reducing our risk and to RM284 million whereby more than 50% is derived from outside vagaries of the region and market cycle. This augurs well for the Malaysia. Our Kuala Lumpur office is now one of the major global future growth of our revenue and earnings. engineering hubs for WorleyParsons. Around 60% of our backlog is in the infrastructure sector while Ranhill has made selective investments in infrastructure, water, the remaining 40% is in the oil & gas and power sectors. Allow power and energy concessions. Our strategy is to invest me to highlight some of the details of this backlog. In Libya, we in concessions that are complimentary to our engineering, making the world a better place to live in. Not resting on our laurels, construction, operation and maintenance business where our in 2007 we stepped up our focus on our core strengths while at the technical expertise represents a distinctive advantage. same time continuing to improve the quality and efficiency of our work through the Six Sigma programme, a time and money saving In the 2007 financial year, nearly 50% of our revenue (RM720 million) technology, now in its fifth year at Ranhill. and more than 70% of our earnings came from our investments in water and power concessions. This has provided the balance Looking ahead, let me confidently say that Ranhill has a bright future. required before the mega projects in Libya and India could take off. We have turned the difficulties and challenges of the previous years The combination of our technical and financial expertise, positions into opportunities. We have positioned ourselves strongly across us strongly for future concession investment opportunities. We have the various industries and regions we serve. We are on the eve of developed an excellent track record in water and power and in the unprecedented growth. This is truly an exciting time for Ranhill. near future will focus our efforts on infrastructure and energy. Finally, I would like to extend my appreciation and thanks to the The average tenure of a Ranhill employee is eight years, well Board of Directors, whose understanding of the business has above the industry standard of five years. We attribute this to contributed significantly to our operations; to our employees, the opportunities that we provide our employees to work on whose hard work and tenacity have produced our outstanding complex and demanding projects that are crucial building blocks performance; and last but not least, to our clients and shareholders in the creation of economic growth in diverse geographical regions whose trust, confidence and support we value. around the world. This allows Ranhill’s employees to contribute to

Hamdan Mohamad President & Chief Executive 6 Ranhill Berhad (430537-K) Group Financial Highlights

• Sterling performance, turning the challenges of 2006 into opportunities for 2007.

• Impressive operational and net profit growth.

• Record net profit at RM116.8 million and record earnings per share at 19.56 sen.

• RM15 billion Order Book.

• Robust total assets and net assets reflecting the Group’s strong resources. Ranhill Berhad (430537-K) 7

GROUP FINANCIAL HIGHLIGHTS

Revenue (RM’000) Profit from operations (RM’000) Net profit for the year (RM’000) 1,492,251 1,470,412 442,505 116,833 1,361,633 792,944 770,577 223,869 55,705 49,984 48,429 171,200 33,134 86,248 83,116

03 04 05 06 07 03 04 05 06 07 03 04 05 06 07

2003 2004 2005 2006* 2007 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 770,577 792,944 1,492,251 1,361,633 1,470,412 Profit from operations 83,116 86,248 171,200 223,869 442,505 Net profit for the financial year 55,705 48,429 33,134 49,984 116,833 Weighted average number of ordinary shares (‘000) 355,500 355,500 528,378 597,265 597,265 Basic earnings per ordinary share (sen) 15.67 13.62 6.27 8.37 19.56 Total Assets 755,896 1,342,544 10,524,246 11,076,056 11,917,789 Shareholders’ Equity 252,423 300,703 953,623 994,662 1,042,221 Net Assets per share 0.71 0.85 1.80 1.67 1.74

* The Net Profit and Earnings per share for FYE 2006 is before a provision of RM62.7million for costs associated with the proposed acquisition of Masinloc. 8 Ranhill Berhad (430537-K) Our Global Reach

LIBYA Libya Housing Project Design and construction of 40,000 housing units in Tajura, Tripoli and Benghazi

LONDON, UNITED KINGDOM Workshare for Iran South Pars 12 Onshore Development FEED and EPC/EPCI CFT Engineering

VENEZUELA 20,000 Housing Project in Caracas, Venezuela Design and construction of 20,000 housing units and Land planning in the Metropolitan Area of Caracas, Bolivarian Republic of Venezuela

EGYPT Timetrax installation & training Installation of Timetrax Software and Training for Users

SUDAN Melut Basin Oil Development EPCC for the AL-Jabalyn & Palouge Oil Processing Facilities & Operation Base Camps

Note: These highlights are by no means an exhaustive listing of Ranhill’s key projects. Ranhill Berhad (430537-K) 9

CHINA Xiao Lan Wastewater treatment Plant Xiao Lan Wastewater Treatment Plant consists of two phases, Phase 1 - 30MLD and Phase 2 - 30MLD. The plant will serve industries within Xiao Lan Industrial Park located in Nanchang City, Jiangxi Province China.

INDIA NPROD Expansion Engineering and Procurement Assistance - British Gas Exploration and Production Indian Ltd Engineering services to provide the detail design deliverables and procurement assistance services DHEERU Powergen Pvt Ltd EPCC for 700MW (2x350) Coal-Fired Power Plant KVK Nilachat Pvt Ltd THAILAND EPCC for 300MW (single unit) Coal-Fired Power Plant Amata Nakorn Reclaimation Water treatment Plant Amata Nakorn Industrial Estate consist of two potable water supply plant of 10.5MLD each, one wastewater treatment plant of 16MLD capacity and one reclaim water treatment plant of 10.4MLD capacity. Amata Nakorn Industrial Park - 20 MLD PWTP Amata Nakorn Industrial Estate consist of two potable water supply plant of 10.5MLD each, one wastewater treatment plant of 16MLD capacity and one reclaim water treatment plant of 10.4MLD capacity.

PHILIPPINES SC-49, South Cebu Service Contract (Oil & Gas)

VIETNAM PAKISTAN Lan Tay Compression Module, Adhi LPG/NGL Gas Plant Offshore Vietnam EPCC Contract EPCM Contract

MALAYSIA ExxonMobil - Tabu Non MALAYSIA Associated Gas Project, Source to Tap water Offshore Kerteh supply concession Terengganu for the State of Johor To develop Tabu NAG / Total Customers: 850,000, GCBD reservoirs from Tabu Population: 3.1 million A and Tabu B platforms QATAR Occidental Petroleum of Qatar Detailed design of Living Quarters Platform INDONESIA Citarum PSC - West Java, Indonesia Product Sharing Contract (Oil & Gas)

PERTH, AUSTRALIA Angel Project PDMS PDMS Software Installation and Deployment of Support Personnel 10 Ranhill Berhad (430537-K) At a Glance

Revenue (%)

Oil & Gas - 20%

Power - 10%

Water - 49%

Infrastructure - 21%

OIL & GAS POWER Accelerated activities on the energy front are fuelling Ranhill’s Ranhill is powering progress throughout Asia by undertaking oil & gas ambitions. From engineering services to EPC EPC works for power plants and focusing on ongoing packages for oil and gas facilities in South East Asia, India, power generation and asset ownership activities. Our Power Pakistan, the Middle East and Africa, our strong project Engineering division in tandem with our construction arm execution skills and cross-regional expertise are holding us REC, continues to focus efforts on EPC opportunities in in good stead. Ranhill WorleyParsons continues to establish Malaysia, India and Pakistan. Ranhill’s asset ownership itself as a global engineering hub and cost effective platform activities in Malaysia and Pakistan are helping ease the acute for international projects, while activity on Ranhill Energy’s shortage of power in these nations while affording Ranhill a five oil & gas concession investments throughout Indonesia solid platform for future growth. and the Philippines are beginning to ramp up, positioning us for further growth. Ranhill Berhad (430537-K) 11

WATER INFRASTRUCTURE Our Water business continues to be the underlying engine of On the infrastructure front, we continue to build on our growth for Ranhill. We continue to make excellent progress strengths and have secured several mega projects including in concession activities in Malaysia, Thailand and China the RM7 billion Libya Housing project, Malaysia’s pioneering and are making solid inroads into Saudi Arabia, Libya and women and children’s hospital and the 1,700 m long cable- other countries in the areas of services and EPC packages. stayed Sg. Johor Bridge which when completed, will be With Ranhill Utilities gaining recognition as one of the top one of the longest single plane cable-stayed bridges in the ranking water utilities in Asia, many doors have been opened world. to us in the water sector that should lead to other exciting opportunities. From left: A sectional view of EEJW, located in West Java about 50km south of Jakarta.

Known as Pasundan 1, located about 75km from Jakarta. It is the first well in Citarum block being explored for hydrocarbons. Exploring New Horizons

The rig known as GW93, used at Pasundan 1 for drilling. Ranhill Berhad (430537-K) 13

From left: Adhi LPG & NGL plant located in Pakistan.

BP Lan Tay compression module ready to set sail.

Oil & Gas

The oil & gas sector continues to experience prevailing buoyant Having successfully operated the 220,000 barrels per day (“bpd”) conditions with high oil prices and Ranhill WorleyParsons (“RWP”), Crude Oil Processing Facilities in Palouge and Al Jabalyn, Sudan, our engineering business unit, has responded positively to this our client, a joint venture energy company between China National through strong project execution even under the most demanding Petroleum Company (“CNPC”) of China and Petronas, has awarded conditions. RWP has gained international recognition as a cost our EPC business unit, REC, a USD149 million contract for effective platform to execute international projects and will continue expansion and upgrade works of the processing facilities’ capacity to be a major engineering hub for the Middle East/Africa/Americas/ to 300,000 bpd with a 200,000 bpd water injection facilities at Europe regions and Australia with its 1,000 strong employees. USD166.8m.

In FY2007, RWP strengthened and consolidated its position as the REC has successfully commissioned and completed the ADHI LPG/ engineering partner of choice for long term engineering support for NGL Gas Processing Plant in Chakwal district, Pakistan. The plant Shell. RWP secured the extension of the existing Miri Design Office is designed to process 29,500 SM3/HR (Standard cubic meters contract for an additional two years until 2010 (started in 2000), per hour) of gas and liquid and produce Sales Gas, LPG and NGL and the award of the Maintenance Engineering Services Contract for direct sale to the market. The plant has successfully met all to support Shell’s maintenance and operation activities offshore process performance parameters and is currently producing gas Sarawak which are traditionally performed in-house by Shell. and liquids in line with requirements. The project represents REC’s first successful oil and gas project in the country. With the growing On the international front, RWP’s presence in Vietnam continues market for gas in Pakistan, the opportunity for future projects is with the incentives EPCM contract for the BP Lan Tay Compression strong. and the recent win for front-end engineering for Petrovietnam’s Dai Hung Phase 2 development. In October 2006, RWP was In the oil & gas concession investment, we are currently focused engaged to provide detailed engineering services to Hyundai on exploring and developing the Citarum PSC, located in West Heavy Industries for the Umm Shaif gas injection facilities project Java, Indonesia. This PSC comprises a 4,400 sq km exploration offshore Abu Dhabi. The marked increase in requests from clients block, 50 km south east of Jakarta and immediately south of the in Iran and Qatar further reaffirms RWP’s position as a preferred established oil and gas producing fields operated by Pertamina. engineering service provider for Middle Eastern clients. This trend We have completed drilling of the Pasundan-1 exploration well to is expected to continue into the next financial year. 10,400 ft and have taken well log measurements which confirm the presence of hydrocarbons in the structure. We are conducting For the financial year in review, RWP garnered revenue of RM283 a flow test to obtain the oil flow potential. million, up 69.5% with net earnings of RM25.5 million, up 86.5% in the preceding year. From left:

Transmission towers at Teluk Salut, Kota Kinabalu, Sabah.

An operator checking on the switchboard at Teluk Salut.

Focused on Powering Progress

Conversion of 120MW Open Cycle Power Plant to 190MW Combined Cycle Power Plant at Teluk Salut. Ranhill Berhad (430537-K) 15

Our maintenance staff calibrating a flow control valve at our Teluk Salut power plant.

Power

Ranhill WorleyParsons has strengthened its Power Engineering Our 120MW open cycle power plant in Sabah, operated by our own division in Malaysia in order to support the Group’s ongoing operation and maintenance company, has been running at 99.70% expansion into the power sector. This represents a good strategic reliability and at 92.06% availability in 2007, well surpassing the match with Ranhill Engineers & Constructors Sdn Bhd (“REC”) as PPA requirement. The operation and maintenance unit is looking the EPCC contractor and provides for a strong team in the pursuit forward to operate the upgraded plant and is currently conducting of new projects. REC additionally maintains ongoing working reliability tests prior to commercial operation in December 2007. arrangements with several external design consultants outside The construction of an additional 190MW CCGT plant by our Malaysia and takes full advantage of regional-based expertise wholly owned subsidiary Ranhill Powertron II Sdn Bhd, has been where applicable. delayed due to complexities in land acquisition which has since REC has almost completed its Teluk Salut 190MW Combined Cycle been resolved. Negotiations are underway with Sabah Electricity Conversion Project in Kota Kinabalu, Sabah. The project requires Sdn Bhd for a revised tariff and extension. When these plants are an upgrade to the existing four gas turbines generating 120MW online, Ranhill Power will have a total power generating capacity in total and the installation of four heat recovery steam generators of 380MW, making us the largest independent power producer in (“HRSGs”) with two steam turbines generating an additional 70MW. Sabah. This project represents REC’s first power plant EPC contract Financing arrangements for our 51% investment in Laraib Energy and the experience and exposure gained has resulted in several Limited, Pakistan, which had been granted a build, own, operate additional project opportunities. and transfer concession of a 84MW hydropower plant, were REC’s portfolio of power projects looks to be further enhanced with completed with various bankers on 30 June 2007. The construction the issue of Letter of Awards for EPCC execution of two power of the power plant is expected to commence in December 2007. plants in India. A 750MW (2 x 350) Coal Fired Power Plant is to Upon the hydropower plant commencing operations in 2011, the be built for DHEERU Powergen Pvt Ltd in Chattisgarh India. REC Power Division will have an additional capacity of 84MW. The total has commenced some preliminary strategic planning in order to development cost is USD160 million with 25% equity, our portion be able to make an aggressive start. The second power plant, a of which is USD21 million. 300MW (single unit), is to be built for KVK Nilachal Pvt Ltd and is currently at a similar stage to the Dheeru project. Commencement of construction for both projects looks likely in the first quarter of 2008. In both projects, we have formulated a joint venture operation with a leading EPC contractor and power island equipment manufacturer from China. From left: Technicians performing routine maintenance at our water treatment plant in Thailand.

Our operational audit team at one of the water treatment facilities in Madinah, Saudi Arabia.

New Channels

Close monitoring at our Yichun City for Growth Water Treatment Plant. Ranhill Berhad (430537-K) 17

Water quality sampler taking water samples at one of our 975 sampling points in Johor.

Water

MALAYSIAN CONCESSION China Ranhill Utilities continues to undertake the 30-year potable water In China Ranhill Utilities holds three concessions for PWTP (50 supply concession agreement (2000-2029) for the state of Johor. Mld) and industrial WWTP (60 Mld) ranging from 25 to 29 years. Following the acceptance of our pilot plant, we submitted a bid As at 30 June 2007, the registered customer base in Johor stood for a 600 Mld (300/300) wastewater treatment plant in the Jiaxing at 850,726 customers. Our production averages at 1372.8 million province on a take over-operate-transfer (“TOT”) basis and BOT litres per day (“Mld”) and our water quality continually meets the basis through a 50/50 joint venture with a municipal government Ministry of Health’s (“MOH”) Standards with 99.5% compliance. company. Negotiations are now at an advanced stage. A total of 29,036 water samples were collected through 975 sampling points and 234,928 water tests carried out. Our central laboratory’s accreditation status was recently upgraded to MS NON-CONCESSION OPERATIONS ISO/IEC 17025:2005, putting it on par with other international Ranhill Utilities non-concession business focuses on providing laboratories. water and wastewater process engineering through engineering, procurement and construction (“EPC”) projects (amounting to Our Programme of Works for the period under review added 36 Mld RM77 million in the period under review) and the provision of NRW to our production capacity in Johor and involved the installation of reduction services. a total of 88.5 km of new mains and 13.8 million litres of reservoir storage capacity. A total of 745 km of asbestos cement pipes was also replaced and as a result, we achieved a non-revenue water OTHER OPPORTUNITIES (“NRW”) level of 31.5% in comparison to 32.5% in the previous Saudi Arabia financial year. In June 2007, we successfully completed the operational audit for water and wastewater services in Madinah City. We look forward to the award of the five-year O&M contract estimated at Saudi Riyals INTERNATIONAL CONCESSIONS 100 million per year for Madinah City which is part of the second Thailand phase of the Kingdom’s water restructuring programme. Ranhill Utilities holds three concessions ranging from 15 to 20 years under build-operate-transfer (“BOT”) and build-transfer-operate Libya (“BTO”) contracts for water, wastewater and recycled water projects We have submitted two bids for EPCC and O&M for 110 Mld in Thailand. These include three potable water treatment plants sewage treatment plants for the Libya National Housing (“PWTP”) with 40.5 Mld capacity, two wastewater treatment plants Development Scheme at Benghazi and Tajura cities. As of writing, (“WWTP”) with 28 Mld capacity and one recycled water plant. In the bids are being evaluated by the relevant parties. addition, our operation and maintenance division holds a two-year renewable O&M contract for water and wastewater treatment with glove makers Safeskin Medical & Scientific (Thailand) Ltd. 18 Ranhill Berhad (430537-K)

Facade of the 2 storey apartments located at Tajura, Libya.

Infrastructure

Our Infrastructure Division continues to deliver strongly with majority being four-storey. All blocks have four apartments per Ranhill Bersekutu undertaking engineering activities and REC, floor. The construction methodology adopted enables a faster construction activities. The Infrastructure Division is also involved construction time with construction cycles for each floor being four in the development, operation and ownership of infrastructural to five days. The Tajura development is planned to be completed assets via the 33-year BOT project for the Senai-Pasir Gudang- in 48 months. Desaru Expressway in the southern region of Johor. ARC has completed the master planning of the project site and the Ranhill Bersekutu has made significant inroads into its overseas design of the apartment units in Tajura. Physical works on site have markets and has secured new work in Qatar (for the Office & commenced and ARC has completed all demolition works and has Residential Tower at Marina District in Doha), the United Arab commenced the excavation and earthworks and the construction of Emirates (for the Healthcare City in Dubai and Royal Group the on site facilities, such as offices, accommodation and ancillary Headquarters in Abu Dhabi) and Saudi Arabia (for the King Abdullah buildings. Works at Tajura continue to progress on schedule. The University of Science and Technology in Thuwal). These projects Benghazi Master Plan has recently been approved and physical will provide the Group an opportunity to showcase our extensive works on site are due to commence in October 2007. The Tripoli expertise in several new geographies as well as help us to elevate Master Plan is being finalised in conjunction with the HUB, with the Ranhill brand to new heights in the international arena. physical works planned to commence on site in late 2007/early 2008. Amona Ranhill Consortium Sdn Bhd (“ARC”), the Group’s wholly owned subsidiary has successfully negotiated a Contract with The housing project is a landmark development for the Libyan the Libyan Government’s Housing and Utilities Board (“HUB”) to Government as upon their completion, the apartments will be design and construct 40,000 apartment units in Tajura (10,000 handed over to the Libyan people as part of a national social units), Tripoli (10,000 units) and Benghazi (20,000 units). housing programme. As such, the project has attracted major interest in Libya and is one of the most high profile and largest As a result of the HUB instructing ARC to redesign the apartment construction pojects currently being undertaken. units and upgrade the specifications, the contract price for Tajura has been renegotiated. The renegotiated contract price to construct Taking into account the magnitude and prestigious nature of the the 10,000 apartments units in Tajura is LD1.49 billion (USD1.1 project, the award of the contract marks a significant milestone in billion) based upon a revised price of LD525/m2 for the apartment Ranhill’s overseas operations. Ranhill’s commitment to developing units and common areas and LD401.70 for basement areas. ARC its business in Libya has raised its profile significantly and the is currently renegotiating the contract price for Tripoli and Benghazi. success of the construction of the apartments will inevitably lead ARC’s contract for the apartment units also includes the design of to further business opportunities in Libya. transport infrastructure, commercial and public buildings. Building upon the experience and success of the Serdang Hospital The methodology adopted for the construction of the apartment project, REC has received a Letter of Intent from the Government units includes the use of cast in place concrete walls and floors for the design, procurement, construction, commissioning and using a proprietary aluminium formwork system. The apartment maintenance of a specialist women and children’s unit on a blocks to be constructed are two and four-storey high with the restricted site within the existing Kuala Lumpur General Hospital complex. Ranhill Berhad (430537-K) 19

The Women and Children Hospital will be an extension to the current Hospital Kuala Lumpur, using Serdang Hospital as a basis model.

One of Ranhill’s signature projects, the Serdang Hospital, handed over in February 2005.

Building on Strong Foundations 20 Ranhill Berhad (430537-K)

Aerial view of the Sg. Johor Bridge construction works.

Infrastructure

The award of the RM700 million, 600 bed landmark facility, which proceeds eastwards towards the Desaru resort area. The project includes the provision of specialist medical equipment and an is being financed mainly via the issuance of Islamic Bonds and optional Total Hospital Information System, represents a significant Irredeemable Convertible Unsecured Loan Stocks (“ICULS”), to be step forward for healthcare in Malaysia and will provide a level of issued progressively from Dec 2005 to 30 May 2008. Ranhill and service on a par with that offered in other developed countries. the Islamic Development Bank Infrastructure Fund are subscribers As well as providing a national referral centre for women’s and of the ICULS. children’s diseases, the hospital will offer secondary level care and Ranhill subscribed to RM215 million (USD58.7 million) nominal tertiary care services in the specialised disciplines of obstetrics, value ICULS in 2005. As a result of Ranhill’s early involvement in gynaecology and paediatrics. the project development phase as well as our participation in the Comprising a total floor area of approximately 177,000m2, the ICULS, the RM1,058 million (USD289.1 million) EPC contract for project will make full use of the Group’s “one stop” design and the Expressway was awarded to REC. As of August 2007, over construction capability, providing a full range of services from 65% of major works including the construction of bridges have concept planning right through to handover and subsequent end- been undertaken. At the current pace of progress, Package 1 and user maintenance and support. The development will be centred 2 of the Expressway from Senai to Ulu Tiram to Pasir Gudang will around two thirteen-storey tower blocks with a six-storey podium be completed by June 2008, while Package 3 from Cahaya Baru and will incorporate a linked six-storey car park structure. Works to Desaru will be completed by December 2008. are expected to commence on site towards the end of 2007. Over the course of the year, four tranches of ICULS amounting to Senai-Desaru Expressway Berhad (“SDE”) was set up for the RM111.6 million were issued and subscribed to. The ICULS carry purposes of owning, constructing and operating the 77-km Senai- a coupon rate of 12% per annum, payable from the first year of Pasir Gudang-Desaru Expressway. Traversing the east to the west tolling operations. Ranhill plans to continue holding the ICULS until of the southern region of Johor, the Expressway cuts through a the EBITDA and concession cash flow provide the incentive for large part of the Iskandar Development Region. It links the Senai conversion of the ICULS into ordinary shares. Upon conversion air-hub to the Pasir Gudang port and industrial centre, and of the ICULS, Ranhill shall effectively hold a majority stake of 50% in SDE. Artist impressions of the 2 storey courtyard and 4 storey apartments in the town of Tajura, Libya.

A view of the Tajura development masterplan. The Sungai Johor Cable-Stayed Bridge

SENAI-PASIR GUDANG-DESARU PROJECT Ranhill is soon to chalk up another milestone success in the The foundation for the two main pylons utilise 2,000 mm diameter engineering and construction of a large infrastructure project – the bored piles encased in 19 mm thick steel casing with 5.5 m thick cast completion of the engineering, procurement and construction of in-situ reinforced concrete pile caps. The abutments and the 10 piers the 77 km long Senai-Pasir Gudang-Desaru Expressway Project on either side of the river for the approach spans are founded on 600 (“SPGDE”) in the southern state of Johor, Malaysia by the end of mm and 1000 mm diameter spun piles with 2.5 m thick cast in-situ June 2008. The construction works for this project are 65% complete reinforced concrete pile caps. The height of the cast-in-situ reinforced as of August 2007. This expressway project is also the third largest concrete piers ranges from 3 m to 17 m. The piers are spaced at highway concession awarded by the Malaysian Government. 48 m centres.

The works for this project also involves the engineering and A jump form system is used for the construction of the two main construction of a landmark bridge – the 1,700 m long, 500 m main pylons utilising a 6 m jump. After casting each 6 m segment, the span cable-stayed across Sg. Johor. The two main pylon structures form is advanced and set for the placing of rebar and concrete in the for this bridge each have a height of 150 m. The construction works next segment. A tower crane is used to deliver reinforcement and for this bridge is both technically and environmentally challenging. concrete from the material delivery barges to the working platform The engineering works for this major cable-stayed bridge is being of the jump form. undertaken by Ranhill Cowi (Denmark) Joint Venture. This bridge, The construction of the main span is accomplished using a Balanced when completed, will be one of the longest single plane cable- Cantilever Method Starting at each of the main pylons with Derrick stayed bridges in the world. For Ranhill, this will be the second cable Cranes lifting the composite Steel Girder off a delivery barge and stayed bridge that it has successfully completed, the first being the supporting it while it is attached to the rest of the structure. The 640 m long Sg. Muar Cable-stayed Bridge under the Muar Bypass components of the Composite Steel Girder Sections will be fabricated Project completed in the year 2005. in Jiujang, China before being shipped to Malaysia where they will be A 740 m long span composite steel and concrete box girder is used assembled to the individual deck segments at the storage/casting for the main span and side spans of the cable-stayed portion of yard at Tanjong Penyabong on the east riverbank of Sg. Johor. the structure. The remaining 968 m of approach deck (484 m on each side) are structured using an all concrete multi-cell box girder section. This is where the majority of the welding, painting, and erection works will be carried out. A temporary jetty will be constructed near the storage/casting yard to load each of the 61 deck segments that make up the composite deck onto the marine delivery barge for transportation to the erection site.

For the approach span, an Incremental Launching Method will be used in which the completed portion of the structure is “pushed” forward to permit casting of the subsequent segments. In order to achieve this special purpose, Incremental Launching Yards are constructed at each abutment bridge. The yards will be the working area for the preparation of formwork, reinforcement, casting, stressing and launching of the approach span concrete box girder. The approach spans will be cast in 12 m long sections and will be moved out into their final position in 24 m stages. Construction of the 1,700m long, A specially designed steel launching nose will be removed upon 500m main span Cable-stayed Bridge successful completion of the launching. across Sungai Johor in progress. 24 Ranhill Berhad (430537-K) Corporate Information

BOARD OF DIRECTORS BOARD COMMITTEES Auditors Tan Sri Sallehuddin Mohamed Audit Committee Messrs PricewaterhouseCoopers Independent Non-Executive Chairman Datuk Ramli Ibrahim (Chairman) Chartered Accountants Tan Sri Sallehuddin Mohamed (Member) Level 10, 1 Sentral, Jalan Travers Tan Sri Hamdan Mohamad Kuala Lumpur Sentral Executive Director/President and Chief Executive Tan Sri Hamdan Mohamad (Member) Datuk Razman Md Hashim Che Din P. O. Box 10192 Datuk Ramli Ibrahim Md Hashim (Member) 50206 Kuala Lumpur Independent Non-Executive Director Tel: (603) 2173 1188 Nomination Committee Datuk Chandrasekar Suppiah Fax: (603) 2173 1288 Tan Sri Sallehuddin Mohamed (Chairman) Executive Director/Executive Vice-president, Datuk Ramli Ibrahim (Member) Solicitors Group Strategic Business Development, Energy, Messrs Abu Talib Shahrom Power and Corporate Communication Datuk Razman Md Hashim Che Din Md Hashim (Member) Messrs Albar & Partner Datuk Razman Md Hashim Che Din Md Hashim Dato’ Seri Abdul Azim Bin Mohd. Zabidi Messrs Lee Hishammuddin Allen & Gledhill Independent Non-Executive Director (Member) Messrs Zaid Ibrahim & Co. Amran Awaluddin Chew Seng Kok (Member) Messrs Zul Rafique & Partners Executive Director/Chief Operating Officer Remuneration Committee Registrar Sharif Lough Abdullah Tan Sri Sallehuddin Mohamed (Chairman) Symphony Share Registrars Sdn Bhd Executive Director Datuk Ramli Ibrahim (Member) Level 26, Menara Multi Purpose Capital Square Dato’ Seri Abdul Azim Mohd. Zabidi Datuk Razman Md Hashim Che Din No. 8, Jalan Munshi Abdullah Independent Non-Executive Director Md Hashim (Member) Sharif Lough Abdullah (Member) 50100 Kuala Lumpur Chew Seng Kok Tel: (603) 2721 2222 Donations Committee Non-Independent Non-Executive Director Fax: (603) 2721 2530 Tan Sri Sallehuddin Mohamed (Chairman) Nadzru Azhari Datuk Ramli Ibrahim (Member) Principal Bankers Non-Independent Non-Executive Director ABN Amro Bank Berhad (appointed with effect from 16 August 2007) (The Donations Committee was dissolved with effect from 25 September 2007) Affin Bank Berhad AmMerchant Bank Berhad Company Secretaries Bank Muamalat Malaysia Berhad Dato’ Amdan Hj Mat Din BNP Paribas Wong Bee Siah CIMB Bank Berhad Lau Bey Ling CIMB Bank (L) Limited Registered Offi ce CIMB Investment Bank Berhad 36th Floor, Empire Tower Citibank N.A., New York No. 182, Jalan Tun Razak EON Bank Berhad 50400 Kuala Lumpur Malayan Banking Berhad Tel : (603) 2171 2020 RHB Bank Berhad Fax : (603) 2164 2235 Standard Chartered Bank Malaysia Berhad Website : www.ranhill.com.my Stock Exchange Listing Email : [email protected] Main Board of Bursa Malaysia Securities Berhad Stock name: Ranhill Stock code: 5030 Listing date: 15 February 2001 Ranhill Berhad (430537-K) 25 Board of Directors

Seated, from left: Standing, from left:

Tan Sri Hamdan Mohamad Chew Seng Kok

Tan Sri Sallehuddin Mohamed Dato’ Seri Abdul Azim Mohd. Zabidi

Datuk Ramli Ibrahim Datuk Chandrasekar Suppiah

Nadzru Azhari

Amran Awaluddin

Sharif Lough Abdullah

Datuk Razman Md Hashim Che Din Md Hashim 26 Ranhill Berhad (430537-K) Directors’ Profi le

Tan Sri Sallehuddin Mohamed, a Malaysian, aged 75, was His illustrious career started in 1981 as a structural engineer, in the appointed to the Board of Ranhill Berhad (Ranhill) as an Independent engineering consulting firm of Ranhill Bersekutu Sdn Bhd (Ranhill Non-Executive Director on 14 February 2001. He is the Chairman of Bersekutu), after completing his Engineering Degree programme the Board of Ranhill. at the University of Western Australia. He then pursued his study in engineering at the Imperial College, University of London between He holds a Bachelor of Arts in Economics (Honours), from University 1985 to1986 and obtained his Masters Degree in Advanced Concrete Of Malaya, Singapore in 1959. He was conferred an Honorary Structures. On returning to Malaysia, he went on to head the Doctorate in Management from Universiti Teknologi Malaysia in Structural Department in Ranhill Bersekutu, was appointed Director in 1997. He joined the Malaysian Civil Service in 1959 (now known 1988 and eventually became its President and Chief Executive Officer as the Administrative and Diplomatic Service) and had held various in 1995. senior positions in the Federal Government. Amongst these, were the senior positions in the Ministry of Finance (1965-1982), the Director He sits on the Board of Ranhill Power Berhad, Ranhill Utilities General, Economic Planning Unit, Prime Minister’s Department (1982- Berhad, Senai-Desaru Expressway Berhad and other private limited 1984) and the Chief Secretary to the Government of Malaysia until companies including Ranhill Corporation Sdn Bhd (RCorp), Ranhill he retired from the Government Service in 1990. After retirement, he Consulting Sdn Bhd, Lambang Optima Sdn Bhd (LOSB). He also sits was appointed initially as Non-Executive Chairman, and subsequently on the Board of SAJ Holdings Sdn Bhd, a wholly owned subsidiary of as Executive Chairman of the Employees’ Provident Fund where he Ranhill Utilities Berhad. served until end of January 2000. He holds a direct interest of 59,394,943 ordinary shares in Ranhill and He has also served in the capacity of Chairman of the Board of a is deemed interested in 324,347,028 ordinary shares in Ranhill by number of statutory bodies and Government-owned companies virtue of his substantial shareholdings in RCorp and LOSB. By virtue including Tenaga Nasional Berhad, Industrial Bank of Malaysia, of his interest in the shares of Ranhill, he is also deemed to have Universiti Teknologi MARA – “UiTM” and Universiti Teknologi Malaysia. substantial interests in the shares of the subsidiaries of Ranhill to the extent Ranhill has an interest. Tan Sri sits on the Board of Ranhill Utilities Berhad as a Non- Independent Non-Executive Director/Chairman. He also sits on the Board of several private limited companies. Datuk Ramli Ibrahim, a Malaysian, aged 67, was appointed to the Board of Ranhill as an Independent Non-Executive Director on 1 December 2000. Tan Sri Hamdan Mohamad, a Malaysian, aged 51, was appointed to the Board of Ranhill as an Executive Director on 15 November He is a Fellow of the Institute of Chartered Accounts, Australia and 2000. He is the President and Chief Executive of Ranhill. also a member of the Malaysian Institute of Accountants. He was the Senior Partner of KPMG Malaysia until 1995. From December 1996 He is a Fellow of the Institution of Engineers, Malaysia and a to December 2000, he served as the Executive Chairman of the Kuala professional engineer registered with the Board of Engineers, Lumpur Options and Financiers Futures Exchange Berhad, which has Malaysia. He is also a Fellow of the Institute of Civil Engineers, United been aborted by Bursa Malaysia Securities Berhad. Kingdom and a Chartered Engineer registered with the Institute of Civil Engineers, United Kingdom. He serves on the Boards of Aeon Co. (M) Berhad, HSBC Bank Malaysia Berhad, MEASAT Global Berhad, BCT Technology Berhad and Aeon Credit Service (M) Berhad (formerly known as Aeon Credit Service (M) Sdn Bhd) and also serves on the Board of several private limited companies. Ranhill Berhad (430537-K) 27

DIRECTORS’ PROFILE

Datuk Chandrasekar Suppiah, a Malaysian, aged 45, was Amran Awaluddin, a Malaysian, aged 38, was appointed as appointed to the Board of Ranhill on 25 February 2002 as an the Executive Director and Chief Operating Officer of Ranhill on Executive Director. He was redesignated to Executive Vice-president, 1 September 2004. Group Strategic Business Development, Energy, Power and Corporate He graduated in 1992 with a Bachelor of Science (Honours) Degree Communication on 1 February 2007. in Industrial and Business Economics from London School of In 1991 he had obtained his Bachelor of Law Degree from the Economics, University of London. He is a Chartered Accountant University of Buckingham, United Kingdom. of the Malaysian Institute of Accountants and an Associate of the Chartered Institute of Management Accountants. Before joining Ranhill Group, he was holding top-level executive positions in several large companies, namely Pro Majestic Sdn Bhd He started his professional career as a Consultant with the (a subsidiary of Pembinaan Redzai Sdn Bhd, who is the owner Strategy and Operations Department at Kassim Chan Management and operator of Westports Malaysia Sdn Bhd). His exposure at Consultants Sdn Bhd in 1993. He later joined the Privatisation and an international level with key government officials, construction Project Advisory Department, RHB Sakura Merchant Bankers Berhad conglomerates, banking institutions and reputed consultants was in 1996 where he was involved in several privatisation and project instrumental in the company, being awarded two large power projects advisory exercises. in India namely a 500MW plant in North Madras and a 1320MW plant He sits on the Board of Ranhill Power Berhad, Senai-Desaru in Cuddalore. He is also the Managing Director of Kampar Resources Expressway Berhad and several private limited companies. Sdn Bhd, a company providing telecommunications infrastructure.

He sits on the Board of Ranhill Power Berhad. He also holds an Executive Director function in Ranhill Engineers and Constructors Sdn Sharif Lough Abdullah, a British citizen with permanent resident Bhd, Ranhill Energy Sdn Bhd and Ranhill International Inc., and other in Malaysia, aged 55, was appointed to the Board of Ranhill on 22 subsidiaries of Ranhill. September 2005 as a Non-Independent Non-Executive Director. He was redesignated to Executive Director on 1 December 2006.

He is a Fellow Gemological Association of Great Britain and a Member Datuk Razman Md Hashim Che Din Md Hashim, a Malaysian, of The National Association of Goldsmiths London. aged 68, is a member of the Institute of Bankers. He was appointed to the Board of Ranhill as an Independent Non-Executive Director on In 1985, he joined the Melewar Group as the Group Executive 25 February 2002. Director. He is currently a director of M3Nergy Berhad, which is a public listed company, and a Director of Langkawi Yacht Club Berhad. On completion of his early secondary education, he studied banking On 5 January 2007, he was also appointed as a director of MAAKL where he is a member of the Australian Institute of Bankers. Mutual Berhad. He is the Executive Director of the Mediconsult Group He started his career with the Standard Chartered Bank as an Officer of companies and also holds other directorships in several private Trainee in 1967. Throughout his 34 years of banking, he served in companies, including MediGlobal Malaysia Sdn Bhd, which is a various capacities including secondments to the Bank’s branches in subsidiary of Ranhill. London, Europe, Hong Kong and Singapore. He held various senior positions and was appointed as Deputy Chief Executive/Executive Director of Standard Chartered Bank Malaysia Berhad in 1994 until he retired in 1999. In June 1999, he was appointed by Bank Negara Malaysia as Chairman of MBF Finance Berhad until December 2001 when the finance company was sold to the Arab Malaysian Group.

His current directorships in other public companies include Multi-Purpose Holdings Berhad, Sunway City Berhad, Sunway Infra-Structure Berhad, Affin Bank Berhad, Berjaya Land Berhad and MAA Holdings Berhad. He also sits on the Board of several private limited companies. 28 Ranhill Berhad (430537-K)

DIRECTORS’ PROFILE

Dato’ Seri Abdul Azim Mohd. Zabidi, a Malaysian, aged 48, was Nadzru Azhari, a Malaysian, aged 54, was appointed to the Board of appointed to the Board of Ranhill as an Independent Non-Executive Ranhill as a Non-Independent Non-Executive Director on 16 August Director on 13 December 2005. 2007.

He is a Fellow of the Institute of Chartered Secretaries and He holds a Bachelor of Science in Chemical Engineering from Administrators, United Kingdom, and holds a Master of Arts in University of Manchester (UMIST) and a Diploma–Ing, (Diplome Business Law from London Guildhall University, United Kingdom. Ingenieur), Institutul de Petrol si Gaze (IPG) from University of Bucharest. He is currently Chairman of Bank Simpanan Nasional (BSN), Malaysia’s National Savings Bank. He was appointed as the President He is a member of Chartered Engineer and Member Institution of (Asia Pacific) of the World Savings Banks Institute (WSBI) in 2000 Chemical Engineers, United Kingdom and KIVI (Koninklijk Instituut and in 2003, he was elevated to its Board of Directors. In September Van Ingenieurs) Royal Netherlands Institution of Engineers and also a 2006, he was elected Vice President and Treasurer of WSBI. He was fellow member of Institute of Petroleum. elected as the President of the Federation of Malaysian Unit Trust He started his career as an Executive Engineer in PETRONAS in Managers, a post he held from 1998 to 2003. 1976. Subsequently, he was appointed as an Executive Director of Dato’ Seri also sits on the Board of Permodalan BSN Berhad, Wijaya Protek Engineers Sdn Bhd, a Consulting Engineers company in the Oil Baru Global Berhad, M3Nergy Berhad, Kumpulan Europlus Berhad, and Gas industry from 1982 to 1988. Currently, his portfolio includes OSK Ventures International Berhad, Timberwell Berhad and Innosabah being a director and member of the Board of Commissioners of PT Securities Berhad and several private limited companies. Gunanusa Utama Fabricators and a director and shareholder of Elpiji Group of companies.

He is a director and shareholder of Borcos Berhad Group of Chew Seng Kok, a Malaysian, aged 47, was appointed to the companies. He also sits on the board of Ranhill Energy Sdn Bhd, Board of Ranhill as a Non-Independent Non-Executive Director on a wholly owned subsidiary of Ranhill. 13 December 2005.

He holds a Bachelor of Law (Honours) degree and a Master of Law (First Class Honours) from Victoria University in Wellington, New Zealand and an advocate and solicitor of the High Court of Malaya.

He joined Messrs Zaid Ibrahim & Co., Kuala Lumpur since 1991, OTHER INFORMATION OF DIRECTORS the largest Advocates and Solicitors firm in Malaysia with offices in Any family relationship with any Directors and/or substantial Singapore, Jakarta and Bangkok, and currently is the Managing shareholders of Ranhill Partner of the firm. There are no family relationships between the Directors and/or major Besides being recognised as a leading lawyer, he has also advised shareholders of the Company. on privatisations and the development and financing of infrastructure Confl ict of interest projects in private power generation, water supply, sewerage services, Save as disclosed in the related party transactions of this Annual urban transport, waste disposal, land development or reclamation and Report and the Circular to the Shareholders dated 10 October 2007, highways. He also advises clients on a broad range of legislative and none of the other Directors have any conflict of interest with the regulatory matters in dealing with the Federal and State Government Company. agencies in Malaysia. List of convictions for offences within the past 10 years other He sits on the Board of several private limited companies. than traffi c offences All Directors maintain a clear record with regard to convictions for offences.

Attendance for Board Meetings The details of their attendance for Board Meetings are set out in the Statement on Corporate Governance. Ranhill Berhad (430537-K) 29 Ranhill Leadership

THE MANAGEMENT TEAM CHIEF EXECUTIVE OFFICERS – RANHILL BERHAD Ahmad Zahdi Jamil Tan Sri Hamdan Mohamad Chief Executive Officer President and Chief Executive Ranhill Utilities Berhad

Amran Awaluddin Wong Keng Cheong Chief Operating Officer Chief Executive Officer Ranhill Power Berhad Datuk Chandrasekar Suppiah Executive Vice-president Ron Metcalf Group Strategic Business Development, Chief Executive Officer Energy, Power and Corporate Communication Ranhill Engineers and Contractors Sdn Bhd

Ahmad Zahdi Jamil Roni Adrian Executive Vice-president Chief Executive Officer Water and Infrastructure Ranhill WorleyParsons Sdn Bhd

Sharif Lough Abdullah David Lamb Executive Director Chief Executive Officer Libya Housing Ranhill Energy Sdn Bhd

Dato’ Amdan Hj Mat Din Yap Yuen Thye Chief Corporate Officer Chief Executive Officer Corporate Social Responsibility Ranhill Bersekutu Sdn Bhd

Victor McCluskey Mustaza Salim Chief Financial Officer Chief Executive Officer Group Finance Senai-Desaru Expressway Berhad

Wong Bee Siah Wan Pauzi Yahya Senior Vice-president Chief Executive Officer Group Legal and Secretarial Mediglobal Malaysia Sdn Bhd

Chong Min Sin Senior Vice-president Group Human Resource and Admin

Lau Bey Ling Company Secretary

Mohd Khalid Abdul Rahman Vice-president Group Corporate Assurance

Ranhill Berhad (430537-K) 31

Reports and Statutory Statements

32 Statement on Corporate Governance

38 Audit Committee Report

39 Terms of Reference of the Audit Committee

41 Statement on Internal Control

42 Corporate Social Responsibility Report

47 Reports and Financial Statements

148 Analysis of Shareholdings

151 Share Performance

152 Properties Held by the Group

153 Notice of Annual General Meeting

157 Statement Accompanying the Notice of Annual General Meeting

Form of Proxy 32 Ranhill Berhad (430537-K) Statement on Corporate Governance

The Board of Directors (“Board”) continually practices good corporate & Chief Executive held by two (2) persons, are distinct and separate. governance to manage the business and affairs of the Group and The Independent Non-Executive Chairman is primarily responsible takes measures to promote the Company’s compliance with the Best for providing clarifi cation on issues that are raised by shareholders Practices in Corporate Governance as identifi ed in the Malaysian and investors and ensuring the integrity and effectiveness of the Code on Corporate Governance (“Code”). Hence, the Board governance process of the Board. The President & Chief Executive considers that it has complied with the Code. is responsible for the day-to-day operations and management of the Company and implementation of Board policies and decisions. DIRECTORS Board Composition and Balance The Executive Directors are generally responsible for implementing the policies and decisions of the Board, overseeing operations and As at the date of this Annual Report, the Board consists of ten administration, and initiating the business development efforts for (10) members, comprising four (4) Executive Directors, four (4) the Group. The Non-Executive Directors complement the skills and Independent Non-Executive Directors and two (2) Non-Independent experience of the Executive Directors, contributing to the formulation Non-Executive Directors. of policies and decision-making through their knowledge and The Board, consisting of members from a wide range of professions experience of other business sectors. including engineers, lawyers, accountants and bankers; are persons More than one-third of the Board is represented by Independent Non- of high calibre and credibility and possess the necessary skills and Executive Directors, who are independent of management and free experience to effectively discharge the Board’s responsibilities for the from any business relationship which could materially interfere with Company’s stewardship and for driving the Group’s growth and future the exercise of their independent judgements. They play a strong and direction. vital role on the Board by entrenching good governance practices in The profi le of each Director is set out under the Directors’ profi le the affairs of the Company and the Group. section of this Annual Report. Board Meetings The Board is of the opinion that the current composition and size The Board meets at least once every quarter with additional meetings constitutes an effective Board. The Company practices a clear convened as and when required. During the fi nancial year ended demarcation of responsibilities while maintaining a balance of power 30 June 2007, nine (9) Board meetings were held. Details of each and authority. The positions and roles of the Chairman and President Director’s meeting attendance during the fi nancial year are as follows:

No. of Meetings Name of Director Designation Percentage attended Tan Sri Sallehuddin Mohamed Independent Non-Executive Chairman 9/9 100% Tan Sri Hamdan Mohamad Executive Director/President and Chief Executive 7/9 78% Datuk Ramli Ibrahim Independent Non-Executive Director 9/9 100% Datuk Chandrasekar Suppiah Executive Director/Executive Vice-president, Group 9/9 100% Strategic Business Development, Energy and Power Datuk Razman Md Hashim Che Din Md Hashim Independent Non-Executive Director 9/9 100% Amran Awaluddin Executive Director/ Chief Operating Offi cer 9/9 100% Sharif Lough Abdullah 78% (Redesignated from Non-Independent Non-Executive Executive Director 7/9 Director to Executive Director on 1.12.2006) Dato’ Seri Abdul Azim Mohd. Zabidi Independent Non-Executive Director 6/9 67% Chew Seng Kok Non-Independent Non-Executive Director 7/9 78% Nadzru Azhari Non-Independent Non-Executive Director N/A (a) N/A (appointed on 16.08.2007) Terence Francis Mahony Non-Independent Non-Executive Director 3/8 (b) 38% (resigned w.e.f 25.05.2007)

(a) Nadzru Azhari was appointed as a Non-Executive Director on 16 August 2007. Hence, attendance at the Board meetings held during the fi nancial year ended 30 June 2007 is not applicable to him. (b) Terence Francis Mahony attended three (3) out of eight (8) Board meetings held prior to his resignation as a Director on 25 May 2007. Ranhill Berhad (430537-K) 33

STATEMENT ON CORPORATE GOVERNANCE

Except for Terence Francis Mahony, who had tendered his resignation • Improving Board Directors’ Performance, Leadership & on 25 May 2007, the attendance of all the other Directors at Board Governance meetings held during the fi nancial year ended 30 June 2007 • Talk on Macroeconomics – Local & Global surpassed the minimum requirements stipulated under Bursa • 20th Annual Assembly of the International Investment Funds Securities Listing Requirements (“BSLR”). Association – Evaluating Your Association’s Success

Supply of Information and Access to Advice Apart from those training programmes conducted externally, the The agenda for each Board meeting, together with detailed reports Directors also benefi ted from various technical updates and briefi ngs and proposition papers to be tabled at the Board meeting, are which were undertaken internally from time to time, particularly on circulated to the Directors for their review prior to any Board meeting. fi nancial, related industries, regulatory and legal related developments, Senior Management are invited to attend Board meetings as and with an intention to keep the Directors abreast with the industry when appropriate to brief the Board on certain matters that are tabled developments, as well as the changes in related laws and regulations. to the Board. As at the date of this Annual Report, the newly appointed Director, All Board members have direct access to the advice and services of Nadzru Azhari has successfully completed the Mandatory the Company Secretaries, Group Legal Advisors and Internal Auditors Accreditation Programme as required by BSLR. and where necessary, to seek independent professional advice if they Re-Election of Directors so require. In accordance with Article 100 of the Company’s Articles of Appointment of Directors Association, one-third of the Directors shall retire from offi ce by The appointment of new Directors is carried out in a formal and rotation at each Annual General Meeting (“AGM”) and may offer transparent manner under the purview of the Nomination Committee, themselves for re-election. Directors who are appointed by the which is responsible for making recommendations to the Board on Board, either to fi ll a casual vacancy or as an addition to the existing suitable candidates for appointment. Directors, are subject to election by the shareholders at the next AGM following their appointment, in accordance with Article 84 of the Directors’ Training Company’s Articles of Association. During the fi nancial year ended 30 June 2007, various seminars and Pursuant to Section 129(6) of the Companies Act 1965, Directors conferences were identifi ed for the Directors’ continuous training over seventy (70) years of age retire at every AGM and shall be eligible programme for purposes of enabling them to effectively discharge for re-appointment to hold offi ce until the next AGM. their duties to the Group and/or that are relevant to the Group’s business activities. Among those training programmes attended by BOARD COMMITTEES the respective Directors are as follows: The following Board Committees were established to assist the Board • Six Sigma Leadership Jumpstart Workshop in the execution of its responsibilities. The terms of reference for • Indonesia Infrastructure Summit 2006 each Committee have been approved by the Board. The Chairman • 1st Construction Industry Research Achievement International of the various committees report to the Board the outcomes of the Conference (CIRAIC 2007) Committee meetings and such reports are incorporated in the minutes • CIMA International Speaker Series – “The Success Practices of of the full Board meeting. the Best Performers: Leadership Lessons to get you to World- Class” 1. Audit Committee • National Accountants Conference The terms of reference of the Audit Committee and the number • Making a difference through Corporate Social Responsibility of meetings held during the fi nancial year ended 30 June 2007 • Overview of Satellite Business are disclosed in the Audit Committee Report set out in this Annual • 2nd Annual Directors Duties Report. 34 Ranhill Berhad (430537-K)

STATEMENT ON CORPORATE GOVERNANCE

2. Remuneration Committee The role and responsibilities of the Nomination Committee are to:- The composition of the Remuneration Committee is as follows:- (a) Identify, nominate and recommend suitable individuals for Chairman : Tan Sri Sallehuddin Mohamed appointment to the Board of the Company; Members : Datuk Razman Md Hashim Che Din Md Hashim (b) Prescribe the role and responsibilities of the nominated Datuk Ramli Ibrahim Directors; Sharif Lough Abdullah (c) Make recommendations to the Board for nominations to the various committees of the Board; The Ranhill Group’s remuneration policy is based on the following (d) Assess Directors on an ongoing basis in determining the core principles:- effectiveness of the Board as a whole, the committees of the (a) Enhance shareholders’ value by ensuring individual Board, and the contribution of each Director; and performances and rewards refl ect and reinforce the business (e) Review annually the required mix of skills and experience objectives and long term aspirations of the Group; and other qualities including core competencies which Non- (b) Support the recruitment, motivation, development and Executive Directors should bring to the Board. retention of high quality senior executives; (c) Ensure that performance is the key factor in determining The Nomination Committee met two (2) times during the fi nancial individual rewards, taking into account internal relativities and year ended 30 June 2007. market data of external comparable entities; and 4. Donations Committee (d) Communicate the reward structure clearly and effectively to The composition of the Donations Committee is as follows:- executives and shareholders. Chairman : Tan Sri Sallehuddin Mohamed The Remuneration Committee’s authority to make recommendations Member : Datuk Ramli Ibrahim to the Board encompasses the following:- (a) Remuneration policy and specifi c remuneration packages The Donations Committee is guided by the following core (including any compensation packages) for Executive principles:- Directors; (a) Portray the Ranhill Group as a fair and caring corporate citizen (b) Remuneration policy and specifi c packages for certain senior participating in worthy causes; and key executives of the Group; and (b) Develop and advance the business interests of the Group. (c) Benefi ts and long term incentive schemes for the employees The role and responsibilities of the Donations Committee include of the Group. the following:- The Remuneration Committee is not responsible for setting the (a) Determine the annual budget that the Group should set aside level of remuneration of Non-Executive Directors as it will be for donations, contributions, relief, etc; determined by the Board. The Remuneration Committee will (b) Formulate the Group’s policy towards donations, including seek advice from external consultants as experts in their fi elds if identifying wherever possible, the organisations which the deemed necessary. Group wishes to benefi t in the long term; and The Remuneration Committee met two (2) times during the (c) Review and decide on the requests for donations, fi nancial year ended 30 June 2007. contributions, relief, and offerings that the Group may receive from time to time. 3. Nomination Committee The composition of the Nomination Committee is as follows:- Chairman : Tan Sri Sallehuddin Mohamed Members : Datuk Razman Md Hashim Che Din Md Hashim Datuk Ramli Ibrahim Dato’ Seri Abdul Azim Mohd. Zabidi Chew Seng Kok Ranhill Berhad (430537-K) 35

STATEMENT ON CORPORATE GOVERNANCE

DIRECTORS REMUNERATION Level and Make-up of Remuneration The policy on Directors’ remuneration is developed to provide the packages necessary to attract, retain and motivate Directors needed to run the Group effectively. The components of their remuneration are structured so as to link rewards to corporate and individual performance in the case of Executive Directors. In the case of Non-Executive Directors, the level of remuneration refl ects the experience and level of responsibilities undertaken by them.

Disclosure of Remuneration The details of the remuneration of Directors received from the Company during the fi nancial year ended 30 June 2007 are as follows:-

Bonus & Benefi ts-in- Other Salaries Fees Incentives kind Emoluments Total RM RM RM RM RM RM Executive Directors 2,137,500.00 20,000.00 – 78,323.00 680,099.44 2,915,922.44 Non-Executive – 331,225.81 – 35,070.00 59,000.00 425,295.81 Directors

Directors’ Remuneration in applicable bands is set out below:

Directors’ Remuneration Inclusive of Benefi ts-in-kind (No. of Directors)

Range Non-Executive Directors Executive Directors Total

0 – RM50,000 1–1 RM50,001 – RM100,000 4–4 RM100,001 – RM150,000 1–1 RM150,001 – RM250,000 ––– RM250,001 – RM300,000 –11 RM300,001 – RM650,000 ––– RM650,001 – RM700,000 –11 RM700,001 – RM750,000 –11 RM750,001 – RM1,100,000 ––– RM1,100,001– RM1,150,000 –11 Total 6 4 10

INVESTOR RELATIONS & SHAREHOLDERS COMMUNICATION Investor Relations The Board and Management ensure timely dissemination of information on the Company’s performance and other matters affecting shareholders’ interests to the shareholders and investors through appropriate announcement (where necessary), quarterly announcements, relevant circulars, press releases and distribution of annual reports.

In addition, the Company conducts dialogues with financial analysts, media conferences as well as analyst and fund manager briefings from time to time as a means to convey information, strategy, matters affecting shareholders’ interests as well as future business direction of the Group. 36 Ranhill Berhad (430537-K)

STATEMENT ON CORPORATE GOVERNANCE

Shareholders and investors can obtain information on the Group by The Board is responsible for ensuring that the fi nancial statements of accessing the Group’s website at www.ranhill.com.my. the Group and Company give a true and fair view of the state of affairs of the Group and Company. Annual General Meeting The principal forum for dialogue with shareholders remains at the In preparing the fi nancial statements, the Directors have:- AGM, during which shareholders are encouraged to raise questions (a) Applied the appropriate and relevant accounting policies on a and participate in discussions pertaining to the operations and consistent basis; financials of the Company. (b) Made judgements and estimates that are reasonable and The external auditors are also present to provide their professional prudent; and independent clarification on issues and concerns raised by the (c) Prepared the fi nancial statements on a going concern basis; and shareholders. (d) Ensured that proper accounting records are kept so as to enable the preparation of the fi nancial statements with reasonable ACCOUNTABILITY AND AUDIT accuracy. Financial Reporting The Company’s fi nancial statements are prepared in accordance with The Directors are also responsible for taking reasonable steps to the requirements of the applicable approved accounting standards in safeguard the assets of the Group and Company, to prevent and Malaysia and the provisions of the Companies Act, 1965. The Board detect fraud and other irregularities. is responsible for ensuring that the fi nancial statements of the Group and Company give a true and fair view of the state of affairs of the COMPLIANCE WITH THE CODE Group and Company. The Group has committed to comply throughout the fi nancial year ended 30 June 2007 with the principles and best practices of Internal Control corporate governance set out in Part 2 of the Code. Information on the Company’s state of internal control is presented in the Statement on Internal Control as detailed in this Annual Report. This statement is made in accordance with the resolution of the Board dated 25 September 2007. Relationship with Auditors The Audit Committee has established a formal and transparent The Code has been revised effective from 1 October 2007. The arrangement for maintaining an appropriate relationship with the Company will take steps to ensure compliance with the revised Code. Company’s auditors. Key features underlying the relationship of the Audit Committee and the Company’s auditors are set out in the Audit ADDITIONAL COMPLIANCE INFORMATION Committee Report of this Annual Report. Share Buy-back The Company had obtained its Shareholders’ approval at the Directors’ Responsibility Statement Company’s Annual General Meeting held on 30 November 2006 in The Directors are responsible for ensuring that the annual fi nancial respect of the share buy-back of up to 10% of the Company’s total statements of the Group and Company are drawn up in accordance issued and paid-up share capital. with the requirements of the applicable approved accounting standards in Malaysia, the provisions of the Companies Act, 1965 During the fi nancial year end, there were no share buy-backs and the BSLR. undertaken by the Company.

Ranhill Berhad (430537-K) 37

STATEMENT ON CORPORATE GOVERNANCE

The Company is seeking the renewal of the Shareholders’ mandate Variation in Results for the Financial Year on the share buy-back proposal at the Company’s forthcoming There was no variation of the announced unaudited accounts and the Annual General Meeting. audited accounts for the fi nancial year ended 30 June 2007.

Options, Warrants or Convertible Securities Material Contracts/Loan involving Directors/Major The Company had at the Company’s Extraordinary General Meeting Shareholders’ Interests held on 26 September 2005 obtained the Shareholders’ approval There were no material contracts/loans entered into by the Company for the proposed subscription of RM215,000,000 nominal value of or its subsidiaries involving Directors’ and/or major shareholders’ Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) to be interest, either subsisting at the end of the fi nancial year ended 30 issued by Senai-Desaru Expressway Berhad. June 2007 or which were entered into since the end of the previous fi nancial year. During the fi nancial year ended 30 June 2007, the Company has subscribed for its portion of the above ICULS which amounted to Recurrent Related Party Transactions of a Revenue or Trading RM135,880,000.00. Nature Save as disclosed in Note 57 of the Notes to the Audited Financial Save as disclosed above, there were no other options, warrants or Statements as set out in this Annual Report, and the Circular to convertible securities exercised by the Company, during the fi nancial Shareholders (Recurrent Related Party Transactions) dated 7 November year ended 30 June 2007. 2007, there is no other transaction conducted pursuant to the shareholders’ mandate during the fi nancial year ended 30 June 2007. Non-Audit Fees

The amount of non-audit fees paid to the external auditors by the This statement is made in accordance with a resolution given by the Group and by the Company for the fi nancial year ended 30 June Board dated 25 September 2007. 2007 amounted to RM884,877.00 and RM795,404.00 respectively.

Revaluation Policy Land and buildings are revalued by external independent valuers every fi ve (5) years. Surpluses arising on revaluation are credited to a revaluation reserve. Any defi cit arising from revaluation is charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for the same asset. In all other cases, a decrease in the carrying amount is charged to the income statement. On disposal of revalued assets, amounts in the revaluation reserve relating to those assets are transferred to retained profi ts. 38 Ranhill Berhad (430537-K) Audit Committee Report

MEMBERSHIP 2. Reviewed the audit report for the Group and the Company prepared The Audit Committee (“Committee”) was established on 15 December by the internal and external auditors and considered their major 2000 to act as a Committee of the Board of Directors in fulfi lling its fi ndings and the management’s responses thereto; oversight function. 3. Reviewed the 2006 Annual Report and the audited fi nancial The Committee currently comprises the following members:- statements of the Company prior to submission to the Board for their consideration and approval. The review was to ensure that the Chairman : Datuk Ramli Ibrahim audited fi nancial statements were drawn up in accordance with the (Independent Non-Executive Director) provisions of the Companies Act, 1965 and the applicable accounting Members : Tan Sri Sallehuddin Mohamed standards approved by the Malaysian Accounting Standards Board; (Independent Non-Executive Director) 4. Reviewed the quarterly unaudited fi nancial result announcements Tan Sri Hamdan Mohamad before recommending them for the Board’s approval; (Executive Director/President and Chief Executive) 5. In respect of the quarterly and year-end fi nancial statements, reviewed Datuk Razman Md Hashim Che Din Md Hashim prior to the approval by the Board, the changes in or implementation (Independent Non-Executive Director) of major accounting policies; signifi cant or unusual events; and compliance with the BSLR, accounting standards and other legal Terence Francis Mahony requirements; (Non Independent Non-Executive Director) (Ceased w.e.f. 25.05.2007) 6. Reviewed the related party transactions entered into by the Group and the Company and the disclosure requirements of such transactions;

MEETINGS 7. Reviewed the circulars to shareholders with regards to shareholders’ During the fi nancial year ended 30 June 2007, the Committee held mandate in respect of the related party transactions of a revenue/ a total of seven (7) meetings, of which four (4) were meetings amongst trading nature for the Board’s approval; others, to deliberate the quarterly fi nancial statements. The meetings 8. Reviewed the list of fi nancial assistance rendered during the fi nancial were appropriately structured through the use of agendas, which were year for Board’s approval; distributed to members with suffi cient notifi cation. 9. Reviewed and approved the budget and staffi ng requirements of the The details of attendance of the Committee members are as follows: Corporate Assurance Department in relation to optimisation of staffi ng Name of Committee Members No. of Meetings Attended level and technical competencies to effectively discharge its auditing Datuk Ramli Ibrahim 7/7 functions on a Group basis; Tan Sri Sallehuddin Mohamed 7/7 10. Evaluated the performance of internal auditors and external auditors Tan Sri Hamdan Mohamad 5/7 and made recommendations to the Board on their appointment, Datuk Razman Md Hashim scope of work and audit fees; Che Din Md Hashim 6/7 Terence Francis Mahony 11. Reviewed and reported to the Board the extent of the Group’s (ceased w.e.f. 25.05.2007) 3/6* compliance with the provisions set out under the Code for the purpose of preparing the Corporate Governance Statement and Statement on * Terence Francis Mahony attended three (3) out of six (6) Committee Internal Control pursuant to the BSLR, for Board’s approval; meetings held prior to his cessation as a Committee member on 25 May 2007. 12. Commissioned special reviews on specifi c areas of operations; and

The Chief Operating Offi cer, the Chief Financial Offi cer, the Chief Executive 13. Held a separate meeting with the auditors without the presence of the Offi cers of subsidiaries, the relevant operating Head of Department, the Management. Head of Corporate Assurance and the representatives of the external auditors, were invited to attend the relevant Committee meetings. The INTERNAL AUDIT FUNCTION Company Secretaries are the secretaries to the Committee. The review on the systems of internal control is undertaken by the Corporate Assurance Department. The principal role of the department is SUMMARY OF ACTIVITIES to undertake independent, regular and systematic reviews of the systems DURING THE FINANCIAL YEAR of internal control so as to provide reasonable assurance that such The Committee carried out its duties in accordance with its terms of systems continue to operate satisfactorily and effectively. reference during the fi nancial year ended 30 June 2007. Further details of the roles of the Corporate Assurance Department are set The main activities undertaken by the Committee were as follows: out in the Statement on Internal Control of this Annual Report. 1. Reviewed and discussed on the external auditors’ scope of work and audit plans for the fi nancial year and approved the annual internal audit plan; Ranhill Berhad (430537-K) 39 Terms of Reference of the Audit Committee

The authority, functions and duties of the Committee extend to Ranhill If a member of the Committee resigns, dies, or for any reason ceases Berhad and all its subsidiary companies (“the Group”). to be a member with the result that the number of members is reduced below three (3), the Board shall within three (3) months of the 1. Purpose event, appoint such number of new member as may be required to fi ll The primary function of the Committee is to assist the Board in fulfi lling the vacancy. its overall responsibilities for the Group’s activities. Consistent with this function, the Committee shall encourage continuous improvement 3. Meetings of, and shall foster adherence to, the Group’s policies, procedures, The Committee shall meet at least four (4) times annually, or more and practices as well as applicable laws and regulations. frequently as circumstances dictate.

The Committee shall primarily fulfi ll these responsibilities by carrying The quorum for a meeting shall be two (2) members, both of whom out the activities enumerated in Section 5 of the terms of reference as shall be Independent Non-Executive Directors including the Chairman set out herein. of the Committee. In the absence of the Chairman, the members present shall elect a Chairman for the meeting from amongst the 2. Composition members present. The Committee shall be appointed by the Board from amongst their number and shall comprise no fewer than three (3) members, of The Company Secretaries shall be appointed Secretaries of the which the majority shall be independent directors. In this respect, the Committee. The Secretaries, in conjunction with the Chairman, shall Board adopts the defi nition of “independent director” under the BSLR. draw up an agenda, which shall be circulated at least one week At least one member of the Audit Committee shall:- prior to each meeting to the members of the Committee. Minutes of the meetings shall be duly entered in the books provided, and be (a) Be a member of the Malaysian Institute of Accountants (“MIA”); or circulated to members of the Board. (b) Have at least 3 years of working experience and:

• have passed the examinations specifi ed in Part I of the 1st The Committee shall meet at least annually with the Head of Schedule of the Accountants Act 1967; or Corporate Assurance and external auditors in separate sessions • be a member of the associations of the accountants specifi ed to discuss any matters that the Committee or these groups believe in Part II of the Accountants Act 1967; or should be discussed privately. (c) Fulfi ls the following qualifi cations as follows: • A degree/masters/doctorate in accounting or fi nance and at 4. Authority least 3 years’ post qualifi cation experience in accounting or The Committee shall have the authority to seek any information it fi nance; or requires from any offi cer or employee of the Group and such offi cers • At least 7 years’ experience being a chief fi nancial offi cer or employees shall be instructed by the Board of the Company of a corporation or having the function of being primarily employing them to respond to such enquiries. It is authorized to take responsible for the management of the fi nancial affairs of a such independent professional advice, as it considers necessary. corporation. The Committee is authorized by the Board to investigate any activity The Chairman of the Committee shall be an Independent Non- within its terms of reference. Executive Director. No alternate director of the Board shall be appointed as a member of the Audit Committee. The Committee shall submit a report to the Board detailing its fi ndings and recommendations immediately after deliberating on the fi ndings of its enquiries. The Committee has no executive powers with regards to its fi ndings and recommendations. 40 Ranhill Berhad (430537-K)

TERMS OF REFERENCE OF THE AUDIT COMMITTEE

5. Responsibilities and Duties (k) The quarterly results and year end fi nancial statements, prior To fulfi ll its responsibilities and duties, the Committee shall review to the approval by the Board, focusing on: the following: • changes in or implementation of major accounting (a) The terms of reference for the Committee at least annually, policies; as conditions dictate; • signifi cant or unusual events; and (b) The audit scope and plan of the external auditors and the • compliance with accounting standards and other legal internal auditors, including any changes in the planned requirements; scope of the audit plan; (l) Procedures in place to ensure that the Group is in (c) Signifi cant audit fi ndings during the fi nancial year with compliance with the Companies Act,1965, BSLR and other Management, external auditors and internal audit, including legislative and reporting requirements; the status of previous audit recommendations; (m) Related party transactions and confl ict of interest situations (d) The external and internal audit reports to ensure that where that may arise within the Company and/or the Group major defi ciencies in controls or procedures have been including any transaction, procedure or course of conduct identifi ed, appropriate and prompt remedial action is taken that raises questions of Management integrity; by Management; (n) Any other activities consistent with its terms of reference, (e) Any diffi culties encountered in the course of audit work, as the Committee or the Board deem necessary or including any restrictions on the scope of activities or access appropriate; to required information; (o) The appraisal or assessment of the internal audit function, (f) Any nomination, appointment, resignation and performance approval of any appointment or termination of senior staff of the external auditors; members and be informed of the staff movement within the (g) The Internal Audit Charter, budget and staffi ng; internal audit function; and (h) Business risk assessment and internal controls instituted; (p) Where the Committee is of the view that a matter reported by it to the Board, has not been satisfactorily resolved (i) The establishment of an appropriate internal control resulting in a breach of the requirement, the Committee framework, including information systems, and potential must promptly report such matter to the Bursa Malaysia enhancements; Securities Berhad. (j) Investigation reports on any major defalcations, frauds and thefts from the Group; Ranhill Berhad (430537-K) 41 Statement on Internal Control

INTRODUCTION During the fi nancial year, the Group has appointed an independent The Board is committed to maintaining a sound system of internal consultant to assess the ERM framework, focusing on an assessment control in the Group and is pleased to provide the following statement, of the current state risk inventory and developing an implementation which outlines the nature and scope of internal control of the Group plan to address the identifi ed improvement opportunities in enhancing during the fi nancial year. the ERM within the Group.

The key elements of the Group’s internal control system include: Issues on signifi cant risks or changes affecting the Group’s businesses and the external environment including its mitigating factors are • Responsibilities are clearly defi ned and delegated to the Board presented in the monthly management reports and deliberated in the Committees, and the Management, and the operating units of the monthly Group Management Committee Meetings, attended by key Group. Clearly defi ned authority limits have been established for personnel within the Group. all aspects of the businesses. These delegations of responsibilities and authority limits are subject to periodic review throughout the year as to their implementation and for the continuing suitability; INTERNAL AUDIT FUNCTION • Policies and procedures for key business processes are formalised It is the responsibility of the Corporate Assurance Department to and documented for each of its signifi cant operating unit; perform independent and objective reviews on the state of internal control of the various operating units within the Group and the extent • Internal audit visits are systematically organised over a period, to monitor compliance with procedures and assess the integrity of of compliance of the units with the Group’s established Discretionary fi nancial information provided; Authority Limits, Policies and Procedures as well as the relevant statutory requirements. • Regular and comprehensive information are provided to Management, covering fi nancial performance and key business The Audit Committee, assisted by the Corporate Assurance indicators; and Department, provides the Board with the assurance it requires on the • Operating units prepare budgets for the coming year using adequacy and integrity of the system of internal controls. detailed budgeting processes in consultation with the Group Corporate Offi ce for approval. CONTROL ENVIRONMENT The Audit Committee reviews the risk management and compliance BOARD RESPONSIBILITY processes by considering reports from the Corporate Assurance The Board acknowledges its responsibility for the Group’s system of Department and the Management before reporting and making internal control, which includes the establishment of an appropriate recommendations to the Board in relation to any improvement control environment and framework as well as reviewing its adequacy opportunities identifi ed. and integrity. Because of the limitations that are inherent in any system of internal control, this system is designed to manage, rather At least once a year, the Audit Committee will meet the auditors than eliminate, the risk of failure to achieve corporate objectives. without the presence of the Management. Based on on-going and Accordingly, it can only provide reasonable but not absolute assurance separate evaluation conducted by Management on businesses against material misstatement or loss. The system of internal control within the Group, the Audit Committee observed several areas covers, inter alia, risk management and fi nancial, organisational, for improvement within the internal control environment of certain operational and compliance controls. operational divisions of the Group that the Management is in the process of rectifying. The Board recognises that the Group is growing and thus the system of internal control will continue to be enhanced to suit the needs and The Board will continue to ensure that measures are taken requirements of the expanding Group. to strengthen the internal control environment for its ongoing effectiveness and integrity to safeguard shareholders’ investments RISK MANAGEMENT and the Group’s assets. The Board recognises that risk management is an integral part of the Group’s business operations and is in the process of enhancing This statement is made in accordance with a resolution given by the the existing Enterprise Risk Management (“ERM”) framework for Board of Directors dated 25 September 2007. identifying, evaluating, monitoring and managing the signifi cant risks faced by the Group. 42 Ranhill Berhad (430537-K) Corporate Social Responsibility Report

As a responsible corporate citizen, Ranhill takes our commitment to our employees, the environment and the communities in which we operate very seriously. We are committed to employing Corporate Social Responsibility (“CSR”) best practices that impact positively upon our stakeholders, while ensuring continued and sustainable growth for our businesses. Over the years, we have implemented a variety of CSR initiatives with good success. The following diagram highlights some of our CSR initiatives from the time of our listing.

RANHILL CORPORATE SOCIAL RESPONSIBILITY PROGRAMMES 2002-2006

WORKPLACE COMMUNITY SPORTS & EDUCATION NATURAL DISASTER ENVIRONMENT Training & Development Orphanages Star Kids Award AID Mangrove Protection Centralised thru all Financial support & Employees’ children who Asian Tsunami Muar & Sg Johor Cable business entities employee volunteers excel in examinations Monetary contribution Stay Bridges Clothing, medical supplies Six Sigma School Supplies Education Scholarships Environmental & other donation in kind Approx. USD350,000 For underprivileged Management System College Student Award 2 nos. water treatment savings in ops cost students nationwide for all our projects “Ranhill Award” for plants donated to Aceh annually Homes for Residents Engineering Faculty star Environmental Jogjakarta Earthquake Quality management Building homes for people students Conservation Awareness Monetary contribution System affected by our project Educating public on the ITF World Junior Tennis Clothing, medical supplies importance of water Occupational Safety Blood Donation Circuit & other donation in kind conservation, etc & Health Annual blood drive for Players aged 13-18 National Blood Bank compete to achieve world Raw Water Study Employee Wellness ranking Hi Quality Raw Extraction Program from Polluted River using Health assessments & Show Jumping River Bank Filtration follow ups for employees KL Grand Prix Int’l Horse 40 & above Show

This year, we have decided to streamline our diverse activities and realign them under a central theme that has been endorsed by the Board of Directors – The Environment. As we enter into our fourth year of CSR reporting, we have revamped our reporting framework in line with Bursa Malaysia’s recommendations and are providing detailed insights into CSR initiatives of each core business division in the areas of the Environment, Community, Workplace and Marketplace.

To demonstrate our commitment to CSR, we have registered Ranhill as one of the founding members of the Institute of Corporate Responsibility Malaysia. The membership provides us a forum whereby we can engage with member companies of the Institute on CSR best practices. Moving forward, we are in the midst of forming an inter-company CSR committee to integrate CSR elements into our operations and business practices. Ranhill Berhad (430537-K) 43

CORPORATE SOCIAL RESPONSIBILITY REPORT

WATER COMMUNITY

ENVIRONMENT Nurturing Global Partnerships Environmental Awareness Campaign We have adopted the United Nations Millennium Development Goal 8, Recognising the fact that water is one of the most precious substances which calls for nations to nurture global partnerships for development. on earth, we launched a public campaign to create awareness on the In line with this, we are collaborating with emerging regional utilities importance of ensuring that our water supply comes from a clean and to share experiences and best practices as well as improve water protected environment. Launched in conjunction with the World Water service delivery. ECO-Asia, a regional programme funded by the United Day celebrations in March 2007, the campaign also highlighted that States Agency for International Development to facilitate the transfer tree planting is one way of encouraging environmental preservation. of expertise and technologies through peer to peer exchanges, has identified Ranhill Utilities as a model utility with the capability to assist Energy Saving Approach and mentor emerging water utilities in the region. Our Water division’s approach to saving energy sees its water treatment plants utilising TNB’s power supply as opposed to tapping diesel WORKPLACE power which is rather expensive and not so environmental friendly. Training and Awareness Programmes Most of the motors that SAJ Holdings Sdn Bhd (“SAJH”) uses are of A total of 90% of SAJH’s staff have undergone technical training, project the high efficiency type, so less energy is consumed. SAJH also utilises and technical development as well as awareness programmes relating energy consumption measurements and analysis tools to easily detect to their job requirements. Technical and industrial training and internship unusual energy consumption. opportunities have been provided to some 92 undergraduates from institution public and private universities and colleges. Pollution Countering Measures Ranhill Utilities continues to meet the Ministry of Health’s specifications MARKETPLACE by continuously monitoring any discharge of water. Residue treatment Customer Perception Survey equipment has been installed in all new water treatment plants including A Customer Perception Survey was conducted by SAJH from March the Semangar Kota Tinggi, Sri Gading, Batu Pahat and others. We pay through June 2007. The main objective of the survey was to better serious attention to the hazards of accidental discharge of chlorine and understand our customers so that we can provide them satisfactory address this via an emergency response plan and procedures as well services that are relevant to their needs. This will also assist SAJH in as by conducting training and regular drills involving the emergency setting benchmarks against which future efforts will be measured. services, local authorities, chlorine suppliers and the public.

Developing A Quality Work Culture Raw Water Study In July 2006, a seminar for 385 plumbers from all over Johor was The Research & Development unit of our Water Academy has engaged conducted by the Construction Industry Development Board (“CIDB”) UTM’s Institute of Environmental and Water Resources Management Southern Region of Johor Bahru. Jointly organised by BAKAJ, SAJH, to do research on high quality raw water extraction from a polluted CIDB, REHDA and IEM, the seminar aimed to educate plumbers on river using the river bank filtration method. This two-year project is now their responsibilities and roles as well as the importance of inculcating in its second stage and a pilot plant will be built at the Sungai Bekok a quality work culture. intake. 44 Ranhill Berhad (430537-K)

CORPORATE SOCIAL RESPONSIBILITY REPORT

INFRASTRUCTURE

ENVIRONMENT Preventing Environmental Degradation We are committed to preventing the degradation of the quality of the overall environment in all our operations. Ranhill Engineers and Constructors (“REC”) is well on track in its efforts to implement environmental best practices during project implementation and construction. REC constantly monitors environmental performance, undertakes control measures to minimise the adverse impact of activities, and builds in safeguards to keep the environment protected long after projects are handed over to our clients.

Environmental Performance (Fye 2007)

Item Environmental Policy Statement Objectives Achievements 1. To document, implement and maintain an Preparation of Environmental Management System procedures for ISO 14001 Environmental Management System certification is 90% completed. 2. To improve environmental performance No serious environmental incidences were recorded as the direct results of our activities.

Project Environmental Monitoring Performance (a) Teluk Salut Project 1 • 100% compliance for air quality • More than 80% compliance for water and effluent discharge quality • More than 80% compliance for noise level

(b) Senai Desaru Expressway project • More than 90% compliance for air quality • Minimising impact to natural surroundings – mangrove protection related to works near the Sg. Johor Forest Reserve • Installation of a Pollution Removal & Retention System 3. To review and communicate environmental Awareness among the head of departments as well as the project management objectives and targets to improve environmental team has improved tremendously as measured from the inclusion/integration of performance environmental input in our business processes. 4. To comply with relevant environmental legislation, Zero prosecutions or convictions for environmental violations within this period regulations and requirements (FYE 2007). Ranhill Berhad (430537-K) 45

CORPORATE SOCIAL RESPONSIBILITY REPORT

WORKPLACE mode. Upon the plant’s conversion, the station will be able to produce Commitment to Work Safety Improvement an additional 70MW without the use of additional fuel as is currently In our business operations, we are committed to ensuring that the the case. workplace conforms to all safety regulations. Through our infrastructure projects, we measure the annual average loss time accident frequency A specialised waste disposal company was engaged to dispose rate to judge our progress, i.e. the number of loss time accidents per waste oil and used batteries in accordance with the Department of 1000,000 hours worked. the Environment’s waste disposal regulations and acts. With regard to waste such as effluent discharge as well as noise and exhaust In 2006, we successfully maintained a zero annual average loss time emissions, we have outsourced a company to monitor the impact of accident frequency rate i.e. there were no incidences of loss time these elements. Such effort will go a long way in ensuring our continuous accidents. For the year 2007 up to the month of June, the loss time sustainable presence in the state of Sabah and the protection of the accident frequency rate was 0.172 - a marginal deterioration from the natural environment. previous year. We aim to achieve a Zero Accident Frequency Rate (AFR) again in 2008. COMMUNITY In our effort to improve the living standards of the communities we OIL & GAS operate in, we provided on-the-job technical and non-technical training ENVIRONMENT for over 82 Sabahan students from various colleges and universities In the Oil & Gas sector, we are committed to ensuring that our projects (both local and overseas). In addition to this, we occasionally arrange fully comply with the environmental requirements of the domestic technical talks and site tours for students or visitor from schools, jurisdictions that we operate in. For example, in our drilling exploration institutes of higher learning, corporate bodies, government agencies operations at the Citarum Oil Block in Indonesia, we comply with or even individuals who are interested in learning more about our regulatory environmental impact studies by ensuring that sand obtained operations. from oil drilling is separated for testing and is stored in environmental friendly retention ponds. GROUP-WIDE CSR EFFORTS ENVIRONMENT COMMUNITY Internal Awareness As a responsible corporate citizen, we offer employment to locals at At the Group level, we continue to implement various initiatives to our project sites. Through such efforts, we hope to develop local talent educate our staff about environmental issues. In early 2007, we in the Oil & Gas sector within the local communities we operate in. began to create awareness on environmental issues via our quarterly newsletter, “Rapport”. In the month of May, we screened the award POWER winning documentary film on climate change, “An Inconvenient Truth” to all Ranhill staff at the head office. ENVIRONMENT Through Ranhill Power we are embracing environmental protection Energy Saving Measures efforts by ensuring that our open cycle plant in Teluk Salut, Sabah In June and in conjunction with the World Environment Day, Ranhill employs the necessary technology to control potential emissions into initiated an energy conservation exercise by shutting down power the environment. The station’s ongoing conversion to a combined cycle throughout our office floors in Empire Tower. Based on a survey carried gas turbine (“CCGT”) plant is an attempt by us to conserve energy for out on the power consumption throughout all office floors, Ranhill our future generation. We will also achieve better thermal efficiency of saved roughly RM666 per floor which translates into savings of more about 48% over the present 26% when it is operating in open cycle than RM7,000 per month for all floors. 46 Ranhill Berhad (430537-K)

CORPORATE SOCIAL RESPONSIBILITY REPORT

COMMUNITY Ranhill is making a concerted effort to revitalise its Six Sigma Encouraging Volunteerism implementation and align these to Ranhill’s strategic goals. Top The Ranhill CSR Volunteer Brigade (RCVB), comprising employees Management are now responsible for leading and facilitating across all Ranhill subsidiaries was formed in January 2007. The RCVB Performance Excellence Improvement teams throughout the consists of staff from various departments and at all levels of seniority. organisation. All employees will be engaged in order that the Six To help alleviate the problems faced by flood victims during the Johor Sigma culture be inculcated throughout the organisation. In May floods, RCVB volunteers rose to the challenge to clean schools and 2007 participants from Ranhill’s subsidiaries participated in a Six homes as well as help deliver essential items to various relief centres in Sigma Leadership Jumpstart workshop where 60 potential Six Sigma Batu Pahat, Kota Tinggi and Johor Bahru. improvement projects with high business impact were identified. Ranhill’s top management will be undergoing Executive Black Belt training and will be tasked with managing Six Sigma projects that WORKPLACE aim to improve the Group’s performance. People Development Initiatives Ranhill has introduced its HR Development Plan with the vision of CSR – THE WAY FORWARD instilling a high performance culture among our workforce. As the first step towards transforming our workforce, a Competency Model By the end of the next financial year, Ranhill plans to introduce a group- describing the generic competencies required across the Ranhill Group wide environmental CSR programme. To ensure the success of this of companies was launched. The model advocates that each employee programme, we will form a CSR-focussed committee, conduct an base their work ethics on the Core Values of being customer oriented; audit of our current capabilities and engage with relevant stakeholders. of achieving results with a passion; of demonstrating accountability We also aim to consciously integrate an awareness and respect for the and integrity; of working as a team and of learning & developing self environment in our daily operations from our corporate offices down competency. to our project sites by consolidating all subsidiaries’ health, safety and environmental reporting. We will align our environmental efforts with The establishment of a Ranhill Corporate Scorecard (“CSC”) and our business strategy and ensure our efforts are done in a concerted Balanced Scorecard (“BSC”) Performance Measurement System manner across all businesses. (“PMS”) is underway. Once the CSC for all the companies is drafted, the vision, mission and strategies of each respective business will On the International front, we will employ CSR best practices to ensure be translated into corporate goals that will align with the Financial, our project teams are successfully adhering to and going beyond the Customer, Internal Business Process and Learning & Growth many local and international requirements at our project sites in Libya, perspectives of the BSC. Sudan, China and Thailand, among others. As Ranhill moves forward to elevate its CSR practices, we will continue to focus on developing excellence in our core competencies, building enduring stakeholder relationships and implementing effective risk management practices – all with the ultimate aim of ensuring continued and viable growth for our businesses, employees, customers, shareholders, suppliers and the communities we operate in. Ranhill Berhad (430537-K) 47

Reports and Financial Statements

48 Directors’ Report

53 Statement by Directors

53 Statutory Declaration

54 Report of the Auditors

55 Income Statements

56 Balance Sheets

58 Consolidated Statement of Changes in Equity

60 Company Statement of Changes in Equity

61 Cash Flow Statements

63 Notes to the Financial Statements 48 Ranhill Berhad (430537-K) Directors’ Report

The Directors hereby submit their report to the members together with the audited financial statements of the Group and Company for the financial year ended 30 June 2007.

PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding, provision of management services to its subsidiaries and provision of engineering, procurement and construction services.

The principal activities of the Group are the provision of engineering and construction services, as well as asset management and ownership, with focus on power, utilities and other infrastructure and resource assets. The Group has also undertaken oil and gas exploration, development and production activities.

The principal activities of the subsidiaries are as set out in Note 21 to the financial statements. During the financial year, Ranhill Switchgear Sdn Bhd and the two bulk supply stations and a substation in Ranhill Power Distribution Sdn Bhd were disposed. As a result, the Group ceased its activities in the manufacture, supply and maintenance of electrical switchgears and switchboards and distribution of electricity.

FINANCIAL RESULTS Group Company RM’000 RM’000 Profit attributable to equity holders of the Company 116,833 8,292 Profit attributable to minority interests 79,235 0 Profit for the financial year 196,068 8,292

DIVIDEND The dividend on ordinary shares paid or declared by the Company since 30 June 2006 was as follows: RM’000 In respect of the financial year ended 30 June 2006, as shown in the Directors’ report of that year, first and final gross dividend of 1.5 sen per share on 597,264,816 ordinary shares, less income tax at 28%, paid on 13 December 2006 6,450

The Directors now recommend the payment of a first and final gross dividend of 1.5 sen per share on 597,264,816 ordinary shares (see Note 46), less income tax at 27%, amounting to RM6,540,050 for the financial year ended 30 June 2007 which, subject to the approval of shareholders at the forthcoming Annual General Meeting of the Company, will be paid on a date to be determined.

RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.

ISSUE OF SHARES The Company did not issue any new shares or debentures during the financial year. Ranhill Berhad (430537-K) 49

DIRECTORS’ REPORT

DIRECTORS The Directors who held office during the financial year since the date of the last report are as follows:

Executive Tan Sri Hamdan Mohamad Datuk Chandrasekar Suppiah Amran Awaluddin Sharif Lough Abdullah

Non-Executive Tan Sri Sallehuddin Mohamed Datuk Ramli Ibrahim Datuk Razman Md Hashim Che Din Md Hashim Dato’ Seri Abdul Azim Mohd. Zabidi Chew Seng Kok Terence Francis Mahony (resigned on 25 May 2007) Nadzru Azhari (appointed on 16 August 2007)

In accordance with Section 129(6) of the Companies Act, 1965, Tan Sri Sallehuddin Mohamed, who has attained the age of seventy (70), retires at the forthcoming Annual General Meeting, and being eligible, offers himself for re-appointment.

In accordance with Article 100 of the Company’s Articles of Association, Tan Sri Hamdan Mohamad, Datuk Razman Md Hashim Che Din Md Hashim and Datuk Chandrasekar Suppiah retire by rotation at the forthcoming Annual General Meeting, and being eligible, offer themselves for re-election.

In accordance with Article 83 of the Company’s Articles of Association, Nadzru Azhari retire by rotation at the forthcoming Annual General Meeting, and being eligible, offer himself for re-election.

DIRECTORS’ BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors’ remuneration disclosed in Note 10 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for any benefits that may have deemed to have arisen from the transactions disclosed in Note 57 to the financial statements. 50 Ranhill Berhad (430537-K)

DIRECTORS’ REPORT

DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

According to the Register of Directors’ Shareholdings, the particulars of interests of the Directors’ (who held office at the end of the financial year) interest in shares in the Company and its related corporations are as follows:

Number of ordinary shares of RM1.00 each in the Company As at As at 1 July 2006 Bought Sold 30 June 2007 Shareholding in the name of the Directors:

Direct interest: Tan Sri Sallehuddin Mohamed 25,000 45,000 0 70,000 Tan Sri Hamdan Mohamad 59,599,943 95,000 (300,000) 59,394,943 Datuk Ramli Ibrahim 36,000 0 0 36,000 Amran Awaluddin 603,000 0 0 603,000 Datuk Chandrasekar Suppiah 3,113,700 552,500 0 3,666,200

Indirect interest: Tan Sri Hamdan Mohamad 324,347,028(1) & (2) 0 0 324,347,028(1) & (2)

(1) Deemed interest through his direct interest in Ranhill Corporation Sdn Bhd, a substantial shareholder of the Company, pursuant to Section 6A of the Companies Act, 1965.

(2) Deemed interest through his direct interest in Lambang Optima Sdn Bhd, a substantial shareholder of the Company, pursuant to Section 6A of the Companies, Act, 1965.

By virtue of Tan Sri Hamdan’s direct and deemed interest in the shares of the Company, he is also deemed to have an interest in the shares of the subsidiaries of the Company to the extent the Company has an interest pursuant to Section 6A of the Companies Act, 1965.

Number of ordinary shares of RM1.00 each in Ranhill Power Berhad (“RPB”) As at As at 1 July 2006 Bought Sold 30 June 2007 Shareholdings in the name of the Directors: Indirect Interest: Tan Sri Hamdan Mohamad 104,245,000(3) 0 0 104,245,000(3)

(3) Deemed interest through his direct and deemed interest in the Company, a substantial shareholder of RPB, pursuant to Section 6A of the Companies Act, 1965.

By virtue of Tan Sri Hamdan Mohamad’s deemed interest in the shares in RPB, he is also deemed to have an interest in the shares of the subsidiaries of RPB to the extent RPB has an interest pursuant to Section 6A of the Companies Act, 1965. Ranhill Berhad (430537-K) 51

DIRECTORS’ REPORT

DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (CONT’D)

Number of ordinary shares of RM1.00 each in Ranhill Utilities Berhad (“RUB”) As at As at 1 July 2006 Bought Sold 30 June 2007 Shareholdings in the name of the Directors:

Direct interest: Tan Sri Sallehuddin Mohamed 100,000 0 0 100,000 Tan Sri Hamdan Mohamad 9,573 0 0 9,573 Datuk Chandrasekar Suppiah 0 58,080 0 58,080

Indirect interest: Tan Sri Hamdan Mohamad 228,804,966(4) & (5) 365,000 (365,000) 228,804,966(4) & (5)

(4) Deemed interest through his direct and deemed interest in the Company, a substantial shareholder of RUB, pursuant to Section 6A of the Companies Act, 1965. (5) Deemed interest through his direct interest in Lambang Optima Sdn Bhd, a substantial shareholder of RUB, pursuant to Section 6A of the Companies Act, 1965.

By virtue of Tan Sri Hamdan Mohamad’s direct and deemed interest in the shares in RUB, he is also deemed to have an interest in the shares of the subsidiaries of RUB to the extent RUB has an interest pursuant to Section 6A of the Companies Act, 1965.

Except as disclosed in this report or in the financial statements, none of the other Directors in office, at the end of the financial year, held any interest in shares of the Company and its related corporations.

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS Before the income statements and balance sheets were made out, the Directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and (b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and Company had been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances: (a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the financial statements of the Group and Company misleading; or (c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company misleading or inappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and Company to meet their obligations as and when they fall due. 52 Ranhill Berhad (430537-K)

DIRECTORS’ REPORT

DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (CONT’D) At the date of this report, there does not exist:

(a) any charge on the assets of the Group and Company which has arisen since the end of the financial year which secures the liability of any other person; or

(b) any contingent liability of the Group and Company which has arisen since the end of the financial year, except as disclosed in Note 56 to the financial statements.

At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading.

In the opinion of the Directors,

(a) The results of the Group’s and Company’s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and Company for the financial year in which this report is made.

AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

Signed on behalf of the Board of the Directors in accordance with a resolution dated 31 October 2007.

TAN SRI SALLEHUDDIN MOHAMED TAN SRI HAMDAN MOHAMAD Chairman Director

Kuala Lumpur Ranhill Berhad (430537-K) 53 Statement by Directors Pursuant to Section 169(15) of the Companies Act, 1965

We, Tan Sri Sallehuddin Mohamed and Tan Sri Hamdan Mohamad, being two of the Directors of Ranhill Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 56 to 147 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 30 June 2007 and of the results and cash flows of the Group and Company for the financial year ended on that date in accordance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965.

Signed on behalf of the Board of the Directors in accordance with their resolution dated 31 October 2007.

TAN SRI SALLEHUDDIN MOHAMED TAN SRI HAMDAN MOHAMAD Chairman Director

Kuala Lumpur

Statutory Declaration Pursuant to Section 169(16) of the Companies Act, 1965

I, Victor Edmond McCluskey, the Officer primarily responsible for the financial management of Ranhill Berhad, do solemnly and sincerely declare that the financial statements set out on pages 56 to 147 are, in my opinion, correct, and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

VICTOR EDMOND MCCLUSKEY

Subscribed and solemnly declared by the abovenamed Victor Edmond McCluskey at Kuala Lumpur in Malaysia on 31 October 2007, before me.

WONG AH YING (W334) Commissioner for Oaths 54 Ranhill Berhad (430537-K) Report of the Auditors to the members of Ranhill Berhad (Company No. 430537 K)

1. We have audited the financial statements set out on pages 56 to 147. These financial statements are the responsibility of the Company’s Directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statements and to report our opinion to you, as a body, in accordance with section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.

2. We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. In our opinion: (a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities so as to give a true and fair view of:

(i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

(ii) the state of affairs of the Group and Company as at 30 June 2007 and of the results and cash flows of the Group and Company for the financial year ended on that date;

and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

The names of the subsidiaries for which we have not acted as auditors is indicated in Note 21 to the financial statements. We have considered the financial statements of these subsidiaries and the auditors’ report thereon.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.

4. Without qualifying our opinion, we draw attention to Note 2 to the financial statements which describes material uncertainties relating to the Melut Basin Oil Development Project (“the Project”) whose outcome depends on future actions or events not under the direct control of the Group but may affect the financial statements. As at 30 June 2007, included in amount due from customers on contract is an amount of RM416.5 million (Note 30) in respect of the Project and included in amount due from jointly controlled entities (Note 32) is an amount due from the joint venture partner, Petroneeds International Inc (“Petroneeds”), amounting to RM230.3 million. Ranhill Berhad (430537-K) 55

REPORT OF THE AUDITORS

to the members of Ranhill Berhad (Company No. 430537 K)

(a) Amount due from customers on contract Pending the finalisation of additional scope of works described in Note 2(i), the outcome of the entire contract cannot be reliably estimated. Nevertheless the Directors of the Company, are confident that the costs incurred to date will be fully recoverable by virtue of the revenue to be earned from the additional scope of works. Management and the Directors of the Company have concluded that they are unable to foresee any losses at this point in time on the Project. In arriving at their conclusion above, management and the Directors of the Company have used estimates and judgements based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Further, estimates have been used by management and the Directors of the Company in determining the estimated value of the variations orders and the related additional costs arising from the additional scope of works. These estimates are based on engineering tools and industry benchmarks of expected rates and cost. Any variation to these estimates will have a corresponding effect on the contract profit or loss.

Due to the significance of the amount involved, any variation to the final contract sum and estimated costs to completion is likely to have a material effect on the financial statements.

(b) Amount due from jointly controlled entities Further to the joint venture agreement entered into between Ranhill Group and Petroneeds on 8 June 2004 to carry out the Project, the parties entered into a Supplementary Agreement dated 27 January 2007 setting out the process to agree and settle the additional costs incurred by the Ranhill Petroneeds Joint Venture (“RPJV”) under the Project as disclosed in Note 2(ii). As the audit has not been completed to date, the final amount recoverable from Petroneeds has not been determined. After considering the claims review performed by an international claims consultant in conjunction with the claims against Petrodar, management and the Directors of the Company are confident that the amount owing from Petroneeds as disclosed in Note 32 to the financial statements is fully recoverable pending the determination and agreement of total costs incurred.

Due to the significance of the amounts involved, any variation to the total costs to be agreed among the RPJV partners will have a material effect on the amount recoverable from Petroneeds.

5. The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment made under subsection (3) of Section 174 of the Act.

PRICEWATERHOUSECOOPERS SHIRLEY GOH (No. AF: 1146) (No.1778/08/08 (J)) Chartered Accountants Partner of the firm

Kuala Lumpur 31 October 2007 56 Ranhill Berhad (430537-K) Income Statements for the financial year ended 30 June 2007

Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Revenue 6 1,470,412 1,361,633 68,294 77,202 Cost of sales 7 (979,163) (1,001,550) (1,303) (29,075) Gross profit 491,249 360,083 66,991 48,127 Other operating income 64,867 24,085 25,201 129 Amortisation of deferred income 20,240 9,709 0 0 Amortisation of deferred capital consideration from the State Government 44 76,981 61,459 0 0 Administrative expenses (203,176) (154,442) (37,238) (25,456) Tendering and marketing expenses (7,656) (14,373) (1,995) (976) Provision for costs associated with the Masinloc acquisition 0 (62,652) 0 0 Finance costs 8 (213,234) (142,490) (31,643) (9,163) Share of results of associates 208 (490) 0 0 Profit before taxation 11 229,479 80,889 21,316 12,661 Taxation - Company and subsidiaries 12 (38,723) (36,955) (13,024) (6,432)

Profit after taxation 190,756 43,934 8,292 6,229

Discontinued operations Profit/(loss) for the year from discontinued operations after taxation 35 5,312 (7,507) 0 0 196,068 36,427 8,292 6,229

Attributable to: Equity holders of the Company 116,833 (12,668) 8,292 6,229 Minority interests 79,235 49,095 0 0 196,068 36,427 8,292 6,229

Basic earnings/(loss) per share (sen) attributable to equity holders of the Company 15 - From continuing operations 18.79 (1.03) - From discontinued operations 0.77 (1.09) 19.56 (2.12)

The notes on pages 63 to 147 form an integral part of the financial statements. Ranhill Berhad (430537-K) 57 Balance Sheets as at 30 June 2007

Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Non Current Assets Property, plant and equipment 16 8,070,912 7,873,986 3,878 4,915 Prepaid lease payment 17 6,142 6,312 0 0 Investment properties 18 14,688 14,916 0 0 Intangible assets 19 25,398 6,368 0 0 Goodwill 20 29,663 29,401 0 0 Investments in subsidiaries 21 0 0 829,280 810,280 Investments in associates 22 48,966 48,757 678 678 Other investments 23 139,627 62,821 135,880 59,125 Long term receivables 24 32,061 40,652 0 0 Investment in oil and gas properties 25 78,587 15,585 0 0 Receivable from the state Government 26 752,571 682,978 0 0 Deferred tax 27 20,393 19,797 0 0 9,219,008 8,801,573 969,716 874,998

Current Assets Inventories 28 22,391 43,669 0 0 Trade and other receivables 29 433,430 361,962 19,799 6,613 Amount due from customers on contract 30 783,925 652,803 26,642 11,504 Prepayments 47,016 20,531 1,076 269 Tax recoverable 6,844 11,232 3,114 5,546 Amounts due from subsidiaries 31 0 0 699,988 492,375 Amounts due from jointly controlled entities 32 230,799 177,891 0 0 Amounts due from associates 33 9,808 3,366 4 4 Deposits, bank and cash balances 34 1,140,632 1,003,029 11,539 53,651 2,674,845 2,274,483 762,162 569,962

Assets classified as held for sale 35 23,906 0 0 0 Total Current Assets 2,698,751 2,274,483 762,162 569,962

The notes on pages 63 to 147 form an integral part of the financial statements. 58 Ranhill Berhad (430537-K)

BALANCE SHEETS as at 30 June 2007

Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Less: Current Liabilities Trade and other payables 36 1,092,053 842,811 39,170 7,125 Amount due to customers on contract 30 320,922 153,144 0 0 Amounts due to subsidiaries 31 0 0 830,863 185,016 Amounts due to associates 33 1,140 276 0 0 Short-term borrowings 38 295,857 476,992 60,056 312,051 Current tax liabilities 6,448 4,196 0 0 Provision for retirement benefits 39 2,078 1,390 0 0 Concession liabilities 40 31,086 43,572 0 0 1,749,584 1,522,381 930,089 504,192

Liabilities directly associated with assets classified as held for sale 35 17,021 0 0 0

Total Current Liabilities 1,766,605 1,522,381 930,089 504,192

Net Current Assets/(Liabilities) 932,146 752,102 (167,927) 65,770

Less: Non Current Liabilities Consumer deposits 37 45,246 33,126 0 0 Provision for retirement benefits 39 27,927 20,140 0 0 Concession liabilities 40 3,638,141 3,657,223 0 0 Deferred tax liabilities 27 386,577 366,072 9,406 0 Finance lease liabilities 41 375,758 421,017 1,386 1,613 Long-term loans 42 3,230,253 2,695,230 0 150,000 Convertible unsecured loan stocks 43 5,800 5,800 0 0 Deferred capital consideration from the State Government 44 559,933 567,321 0 0 Deferred income 45 372,211 467,116 0 0 8,641,846 8,233,045 10,792 151,613 1,509,308 1,320,630 790,997 789,155

Capital and reserves attributable to equity holders of the Company Share capital 46 597,265 597,265 597,265 597,265 Share premium 47 185,333 185,333 185,333 185,333 Other reserves 48 2,732 3,026 0 0 Retained profits 49 254,906 146,386 8,399 6,557 Equity associated with assets classified as held for sale 35 1,985 0 0 0 1,042,221 932,010 790,997 789,155 Minority interests 467,087 388,620 0 0 Total Equity 1,509,308 1,320,630 790,997 789,155

The notes on pages 63 to 147 form an integral part of the financial statements. Ranhill Berhad (430537-K) 59 Consolidated Statement of Changes in Equity for the financial year ended 30 June 2007

Issued and fully paid Equity ordinary share of RM1 each associated with assets Number Share Share Other Retained classified as Minority Note of shares capital premium reserves profits* held for sale Sub-total interest Total ‘000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2007 At 1 July 2006 As restated 597,265 597,265 185,333 3,026 146,386 0 932,010 388,620 1,320,630 Previously recognised negative goodwill, now charged out 48 0 0 0 (3,097) 3,097 0 0 0 0 597,265 597,265 185,333 (71) 149,483 0 932,010 388,620 1,320,630

Acquisition of subsidiary 0 0 0 0 0 0 0 9 9 Classification of equity associated with assets held for sale 0 0 0 0 (1,985) 1,985 0 0 0 Net expense recognised directly in equity - transfer to capital reserve on share bonus issue of subsidiaries 0 0 0 2,975 (2,975) 0 0 0 0 - currency translation differences arising during the financial year 48 0 0 0 (172) 0 0 (172) (357) (529)

Profit attributable to shareholders 0 0 0 0 116,833 0 116,833 79,235 196,068

Total recognised (expense)/income for the financial year 0 0 0 2,803 113,858 0 116,661 78,878 195,539

Dividends for the financial year ended 30 June 2006 14 0 0 0 0 (6,450) 0 (6,450) (420) (6,870)

At 30 June 2007 597,265 597,265 185,333 2,732 254,906 1,985 1,042,221 467,087 1,509,308

2006 At 1 July 2005 - as previously reported 597,265 597,265 185,333 5,521 165,504 0 953,623 362,851 1,316,474 - changes in accounting policy 0 0 0 (18) 0 0 (18) 0 (18) - as restated 597,265 597,265 185,333 5,503 165,504 0 953,605 362,851 1,316,456

Acquisition of subsidiaries 0 0 0 0 0 0 0 (8,822) (8,822) Disposal of subsidiaries 0 0 0 (2,281) 0 0 (2,281) (9,297) (11,578) Net expense recognised directly in equity - currency translation differences arising during the financial year 48 0 0 0 (196) 0 0 (196) (171) (367) Profit for the financial year 0 0 0 0 (12,668) 0 (12,668) 49,095 36,427 Total recognised (expense)/income for the financial year 0 0 0 (196) (12,668) 0 (12,864) 48,924 36,060 Dividends for the financial year ended 30 June 2005 14 0 0 0 0 (6,450) 0 (6,450) (5,036) (11,486) At 30 June 2006 (As restated) 597,265 597,265 185,333 3,026 146,386 0 932,010 388,620 1,320,630

* Merger deficit of RM32.718 million has been set off against retained profits

The notes on pages 63 to 147 form an integral part of the financial statements. 60 Ranhill Berhad (430537-K) Company Statement of Changes in Equity for the financial year ended 30 June 2007

Issued and fully paid ordinary shares Non- of RM1 each distributable Distributable Note Number Share Share Retained of shares capital premium profits Total ‘000 RM’000 RM’000 RM’000 RM’000 2007 At 1 July 2006 597,265 597,265 185,333 6,557 789,155 Profit for the financial year 0 0 0 8,292 8,292 Dividend for the financial year ended 30 June 2006 14 0 0 0 (6,450) (6,450)

At 30 June 2007 597,265 597,265 185,333 8,399 790,997

2006 At 1 July 2005 597,265 597,265 185,333 6,778 789,376 Profit for the financial year 0 0 0 6,229 6,229 Dividend for the financial year ended 30 June 2005 14 0 0 0 (6,450) (6,450)

At 30 June 2006 597,265 597,265 185,333 6,557 789,155

The notes on pages 63 to 147 form an integral part of the financial statements. Ranhill Berhad (430537-K) 61 Cash Flow Statements for the financial year ended 30 June 2007

Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Cash flows from operating activities Cash receipts from customers 1,084,222 1,298,967 191 71,899 Cash paid to suppliers and employees (636,652) (936,222) (54,402) (3,790)

Cash generated from/(used in) operations 447,570 362,745 (54,211) 68,109 Concession liabilities paid (31,568) (127,676) 0 0 Tax paid (14,749) (16,188) (5,589) 2 Tax refund 4,533 2,224 4,533 0

Net cash flow generated from/(used in) operating activities - Continuing operations 405,786 221,105 (55,267) 68,111 - Discontinued operations (95) 2,473 0 0 405,691 223,578 (55,267) 68,111

Cash flows from investing activities Purchase of property, plant and equipment 51 (320,092) (516,926) (34) (23) Proceeds from disposal of property, plant and equipment 14,884 349 0 146 Acquisition of oil and gas properties (43,528) (15,585) 0 0 Investment in jointly controlled entities (228) 0 0 0 Net cash outflow arising from acquisition of subsidiaries 53 (3,441) (593) (3,800) 0 Acquisition of additional interest in a subsidiary 0 (12,366) 0 (7,926) Net cash inflow/(outflow) arising from disposal of shares in subsidiary 52 3,367 (217) 0 2,755 Purchase of other investment (76,755) (60,493) (76,755) (59,125) Deposits and balance of purchase consideration for proposed acquisitions of Masinloc 0 (5,891) 0 (760) Acquisition of additional interest of an associate 0 (143) 0 0 Withdrawal/(placement) of fixed deposits pledged 48,921 156,960 52,342 (47,342) Dividends received from subsidiaries 0 0 0 2,590

The notes on pages 63 to 147 form an integral part of the financial statements. 62 Ranhill Berhad (430537-K)

CASH FLOW STATEMENTS for the financial year ended 30 June 2007

Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Dividend received from associated 0 0 338 0 Repayment from subsidiaries 0 0 531,500 0 Advances to subsidiaries 0 0 0 (136,041) Interest received 22,084 15,981 7,078 0

Net cash flow (used in)/generated from investing activities - Continuing operations (354,788) (438,924) 510,669 (245,726) - Discontinued operations (258) (224) 0 0 (355,046) (439,148) 510,669 (245,726)

Cash flows from financing activities Interest paid (135,366) (143,164) (35,517) (11,713) Funds from borrowings 859,309 421,044 50,000 242,875 Repayment of term loans (524,931) (79,767) (449,685) (45,873) Payments of finance lease liabilities (30,732) (4,128) (1,210) (1,409) Dividends paid to shareholders (6,450) (6,450) (6,450) (6,450) Dividends paid to minority interests (420) (5,036) 0 0 Net cash flow generated from/(used in) financing activities - Continuing operations 161,410 182,499 (442,862) 177,430 - Discontinued operations (333) 1,165 0 0

161,077 183,664 (442,862) 177,430

Net increase/(decrease) in cash and cash equivalents 211,722 (31,906) 12,540 (185) Effect of foreign exchange rate changes (9,743) (159) 0 0 Cash and cash equivalents at the beginning of the financial year 691,080 723,145 (11,057) (10,872)

Cash and cash equivalents at the end of the financial year 54 893,059 691,080 1,483 (11,057)

The notes on pages 63 to 147 form an integral part of the financial statements. Ranhill Berhad (430537-K) 63 Notes to the Financial Statements 30 June 2007

1 GENERAL INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Board of the Bursa Malaysia Securities Berhad.

The principal activities of the Company are investment holding, provision of management services to its subsidiaries and provision of engineering, procurement and construction services.

The principal activities of the Group are the provision of engineering and construction services, as well as asset management and ownership, with focus on power, utilities and other infrastructure and resource assets. The Group has also undertaken oil and gas exploration, development and production activities.

The principal activities of the subsidiaries are as set out in Note 21 to the financial statements. During the financial year, Ranhill Switchgear Sdn Bhd and the two bulk supply stations and a substation in Ranhill Power Distribution Sdn Bhd were disposed. As a result, the Group ceased its activities in the manufacture, supply and maintenance of electrical switchgears and switchboards and distribution of electricity.

There has been no other significant change in the nature of the principal activities during the financial year.

The number of employees of the Group and Company at the end of the financial year were 3,971 (2006: 3,947) and 142 (2006: 150) respectively.

2 BASIS OF PREPARATION The financial statements of the Group and Company have been prepared in accordance with the provisions of the Companies Act, 1965 and Financial Reporting Standards (“FRS”), the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.

The financial statements have been prepared under the historical cost convention except as disclosed in this summary of significant accounting policies in Note 3 to the financial statements.

The preparation of financial statements in conformity with Financial Reporting Standards requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Company’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ.

Melut Basin Oil Development Project (i) On 8 June 2004, the Group entered into a Joint Venture arrangement together with Petroneeds International Inc, to form an unincorporated joint venture, Ranhill Petroneeds Joint Venture (“RPJV”), to carry out a USD239 million contract with Petrodar Operating Company Ltd (“Petrodar”) in Sudan. This project, the Melut Basin Oil Development project (“the Project”), involved the construction of a field production facility at Palouge and a central production facility for final treatment of oil at Al-Jabalyn, located 680km and 480km from Khartoum respectively. It also involved the construction of operational base camps at both sites and a 250km water pipeline connecting the 2 facilities.

This project encountered significant delays and increased costs over and above the contract schedule and contract sum. These costs have been included in amount due from customers on contract, as set out in Note 30 to the financial statements.

The Group had engaged a number of legal advisers and an international claims consultant to assist in its claims against Petrodar. An interim claim was prepared in October 2005 and an updated revised claim has also been prepared in July 2007 to recover these costs. These claims include the cost of schedule delays leading to prolongation costs, claims for extra work, disruption costs, acceleration costs and other related miscellaneous claims.

On 26 September 2007, RPJV signed a Settlement Agreement (“the Settlement Agreement”) in respect of the Project with Petrodar, the owner of the project. The Settlement Agreement stipulates that in consideration for the RPJV waiving its rights to current and future claims for costs incurred, the RPJV will receive USD20.0 million (RM69.0 million), an extension of time for the completion of the existing works amounting to USD25.0 million (RM86.3 million) under the original base contract and a variation order for the expansion of the current facilities.

A letter of award for additional works amounting to USD149.2 million (RM514.7 million) was accepted on 26 September 2007.

The contract price of USD149.2 million includes a provision for Water Injection Packages works of which the contract value has yet to be determined. Based on field work evaluation and calculations to increase the water injection capacity, management and the Directors of the Company estimate that the contract value will be approximately USD166.8million (RM575.5 million), of which USD16.4 million (RM56.6 million) has been included as part of the contract price of USD149.2 million.

The expansion works form part of the original Project. The base contract included process equipment giving a plant capacity of 220,000 bop/ d. The tanks, pipe work and structures were sized for a plant capacity of 300,000 bop/d; foundations were provided to accommodate 64 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

2 BASIS OF PREPARATION (CONT’D) Melut Basin Oil Development Project (Cont’d) future expansion of the plant process capacity to 300,000bop/d. The expansion works include the process equipment required to expand the process capacity to 300,000 bopd and additional studies, equipment and work to improve the efficiency of the plant (Debottlenecking).

Pending the finalisation of these additional scope of works, the outcome of the entire contract cannot be reliably estimated. Nevertheless the Directors of the Company, are confident that the cost incurred to date will be fully recoverable by virtue of the revenue to be earned from the above additional scope of works that has yet to be finalised.

Management and the Directors of the Company have concluded that they are unable to foresee any losses at this point in time on the Project.

In arriving at their conclusion above, management and the Directors of the Company have used estimates and judgements based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Further, estimates have been used by management and the Directors of the Company in determining the estimated value of the variations orders and the related additional costs arising from the additional scope of works. These estimates are based on engineering tools and industry benchmarks of expected rates and cost. Any variation to these estimates will have a corresponding effect on the contract profit or loss.

Due to the significance of the amount involved, any variation to the final contract sum and estimated costs to completion is likely to have a material effect on the financial statements.

(ii) In addition, further to the joint venture agreement entered into between Ranhill Group and Petroneeds on 8 June 2004 to carry out the project, the parties entered into a Supplementary Agreement dated 27 January 2007 setting out the process to agree and settle the additional costs incurred by the RPJV under the Project. An audit of the financial statements of the RPJV is presently being carried out to determine the total costs incurred. As the audit has not been completed to date, the total additional costs has not been agreed among the JV partners. Therefore the final amount recoverable from Petroneeds has not been determined.

After considering the claims review performed by an international claims consultant in conjunction with the claims against Petrodar, management and the Directors of the Company are confident that the amount owing from Petroneeds as disclosed Note 32 to the financial statements is fully recoverable pending the determination and agreement of total costs incurred.

Due to the significance of the amounts involved, any variation to the total costs to be agreed among the RPJV partners will have a material effect on the amount recoverable from Petroneeds.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4 to the financial statements.

(a) Standards, amendments to published standards and interpretations that are effective The new accounting standards, amendments to published standards and Issues Committee (“IC”) Interpretations to existing standards effective for the Group’s financial period beginning on or after 1 July 2006 are as follows: • FRS 1 First-time Adoption of Financial Reporting • FRS 138 Intangible Assets Standards • FRS 140 Investment Property

• FRS 2 Share-based Payment • Amendment to FRS 1192004 Employee Benefits - Actuarial • FRS 3 Business Combinations Gains and Losses, Group Plans and Disclosures - in • FRS 5 Non-current Assets Held for Sale and relation to the “asset ceiling” test Presentation of Discontinued Operations • IC 107 Introduction of the Euro • FRS 101 Presentation of Financial Statements • IC 110 Government Assistance - No Specific Relation • FRS 102 Inventories to Operating Activities • FRS 108 Accounting Policies, Changes in Accounting • IC 112 Consolidation - Special Purpose Entities Estimates and Errors • IC 113 Jointly Controlled Entities - Non-Monetary • FRS 110 Events After the Balance Sheet Date Contributions by Ventures • FRS 116 Property, Plant and Equipment • IC 115 Operating Leases – Incentives • FRS 121 The Effect of Changes in Foreign Exchange • IC 121 Income Taxes - Recovery of Revalued Non- Rates Depreciable Assets • FRS 127 Consolidated and Separate Financial • IC 125 Income Taxes - Changes in the Tax Status of Statements an Entity or its Shareholders • FRS 128 Investments in Associates • IC 127 Evaluating the Substance of Transactions • FRS 131 Interests in Joint Ventures Involving the Legal Form of a Lease • FRS 132 Financial Instruments: Disclosure and • IC 129 Disclosure - Service Concession Presentation Arrangements • FRS 133 Earnings Per Share • IC 131 Revenue - Barter Transactions Involving • FRS 136 Impairment of Assets Advertising Services • IC 132 Intangible Assets - Web Site Costs Ranhill Berhad (430537-K) 65

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

2 BASIS OF PREPARATION (CONT’D) (a) Standards, amendments to published standards and interpretations that are effective (Cont’d) All changes in accounting policies have been made in accordance with the transition provisions in the respective standards, amendments to published standards and interpretations. All standards, amendments and interpretations adopted by the Group require retrospective application other than: • FRS 3 - prospectively for business combinations for which the agreement date is or on after 1 January 2006; • FRS 5 - prospectively to non-current assets (or disposal groups) that meet the criteria to be classified as held for sale and to operations that meet the criteria to be classified as discontinued on/after 1 July 2006; • FRS 116 - the exchange of property, plant and equipment is accounted for using the cost model prospectively; • FRS 121 - prospective accounting for goodwill and fair value adjustments as part of foreign operations; • FRS 136 & 138 - applies to goodwill and intangible assets acquired in business combinations for which the agreement date is on or after 1 January 2006 and all other assets prospectively from 1 July 2006; • FRS 140 – prospective accounting for investment properties using the cost model

A summary of the impact of the new accounting standards, amendments to published standards and interpretations to existing standards on the financial statements of the Group is set out in Note 50.

(b) Standards early adopted by the Company • FRS 117 Leases (effective for accounting periods beginning on or after 1 October 2006). This standard requires the classification of leasehold land as prepaid lease payments. The Group has applied this standard from financial periods beginning on 1 July 2006.

(c) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted The new standards, amendments to published standards and interpretations that are mandatory for the Group’s financial periods beginning on or after 1 July 2007 or later periods, but which the Group has not early adopted, are as follows: • FRS 6 Exploration for and Evaluation of Mineral Resources (effective for accounting periods beginning on or after 1 January 2007). This standard requires limited improvement to existing accounting practices for explanation and evaluation expenditure.

• Amendment to FRS 1192004 Employee Benefits - Actuarial Gains and Losses, Group Plan and Disclosures (effective for accounting periods beginning on or after 1 January 2007). This amendment introduces due option of an alternative recognition approach for actuarial gains and losses. It may impose additional requirements for multi-employer plans where insufficient information is available to apply defined benefit accounting. It also adds new disclosure requirements. As the Group does not intend to change the accounting policy adopted for recognition of actuarial gains and losses and does not participate in any multi-employer plans adoption of this amendment will only impact the format and extent of financial periods beginning on 1 July 2007. • FRS 124 Related Party Disclosures (effective for accounting periods beginning on or after 1 October 2006). This standard will affect the identification of related parties and some other related party disclosures. The Group will apply this standard from financial periods beginning 1 July 2007. • FRS 139 Financial Instruments: Recognition and Measurement (effective date yet to be determined by Malaysian Accounting Standards Board). This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances. The Group will apply this standard when effective. • Amendment to FRS 107 – Cash Flow Statements (effective for accounting periods beginning on or after 1 July 2007). This revised standard has no significant changes as compared to the original standard. • Amendment to FRS 111 – Construction Contracts (effective for accounting periods beginning on or after 1 July 2007). This revised standard has no significant changes as compared to the original standard. • Amendment to FRS 112 – Income Taxes (effective for accounting periods beginning on or after 1 July 2007). Specific prohibition to recognise deferred tax assets on investment tax credits has been removed. 66 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

2 BASIS OF PREPARATION (CONT’D) (c) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted (Cont’d) • Amendment to FRS 118 - Revenue (effective for accounting periods beginning on or after 1 July 2007). This revised standard has no significant changes as compared to the original standard. • Amendment to FRS 120 – Accounting for Government Grants and Disclosure of Government Assistance (effective for accounting periods beginning on or after 1 July 2007). This revised standard allows alternative treatment that non monetary government grant to be recorded at nominal amount. • Amendment to FRS 121 The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operations (effective for accounting periods beginning on or after 1 July 2007). This amendment requires exchange differences as monetary items that form port of the net investment in a foreign operation to be recognised in equity instead of in profit or loss regard less of the currency in which these items are denominated in. • Amendment to FRS 134 – Interim Financial Reporting (effective for accounting periods beginning on or after 1 July 2007). This revised standard has no significant changes as compared to the original standard. • Amendment to FRS 137 – Provisions, Contingent Liabilities and Contingent Assets (effective for accounting periods beginning on or after 1 July 2007). This revised standard has no significant changes as compared to the original standard. • IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities (effective for accounting periods beginning on or after 1 July 2007).

With the exception of Amendment to FRS 112, the future adoption of the above amended FRSs are not expected to have a significant impact on the financial statements of the Group upon adoption.

(d) Standards and interpretations to existing standards that are not yet effective and not relevant for the Group’s operations • IC Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments (effective for accounting periods beginning on or after 1 July 2007). • IC Interpretation 5 Rights to Interests arising from Decommission, Restoration and Environmental Rehabilitation Funds (effective for accounting periods beginning on or after 1 July 2007). • IC Interpretation 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment (effective for accounting periods beginning on or after 1 July 2007).

• IC Interpretation 7 Applying the Restatement Approach under FRS 1292004 Financial Reporting in Hyperinflationary Economies (effective for accounting periods beginning on or after 1 July 2007). • IC Interpretation 8 Scope of FRS 2 (effective for accounting periods beginning on or after 1 July 2007).

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unless otherwise stated in Note 50 to the financial statements, the following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. (i) Economic entities in the Group The Group financial statements include the financial statements of the company, its subsidiaries, its associates and its jointly controlled entities for the entire financial year. (a) Subsidiaries Subsidiaries are those enterprises in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Ranhill Berhad (430537-K) 67

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (i) Economic entities in the Group (Cont’d) (a) Subsidiaries (Cont’d) Subsidiaries are consolidated using the purchase method of accounting except for certain subsidiaries, as disclosed in Note 21 to the financial statements, which were consolidated using the merger method of accounting for business combination consolidated

on/after 1 July 2006 but with agreement dates before 1 January 2006 that meet the condition of a merger set out in FRS 1222004 “Business Combination”.

The Group has taken advantage of the exemption provided by FRS 1222004 and FRS 3 to apply these standards prospectively. Accordingly, business combinations entered into prior to the respective effective dates have not been restated to comply with these standards.

Under the purchase method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill. See the accounting policy Note 3 (ii) (a) on goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Minority interest represents that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since that date. Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.

Under the merger method of accounting, the results of subsidiaries are presented as if the merger had been effected throughout the current and previous years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit difference is classified as equity and regarded as a non-distributable reserve. Any resulting debit difference is adjusted against any suitable reserve. Any share premium, capital redemption reserve and any other reserves which are attributable to share capital of the merged enterprises, to the extent that they have not been capitalised by a debit difference, are reclassified and presented as movement in retained profit.

Intragroup transactions and balances, and resulting unrealised gains are eliminated on consolidation. Unrealised losses resulting from intragroup transactions are eliminated on consolidation to the extent of the cost of the asset that can be recovered. The extent of the costs that cannot be recovered is treated as write down or impairment losses as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

On disposal, the difference between the net disposal proceeds and the Group’s share of the subsidiary’s net assets together with any unamortised goodwill is reflected as gain or loss on disposal in the consolidated income statement. 68 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (b) Jointly controlled entities Jointly controlled entities are enterprises in which the Group has contractually agreed to share its control with one or more parties, where the strategic financial and operating decisions relating to the jointly controlled entity requires unanimous consent of the parties.

The Group’s interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of the jointly controlled entities’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group’s financial statements.

The Group recognises its portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to the other ventures. The Group does not recognise its share of profits or losses from the joint venture that results from the purchase of assets by the Group from the joint venture until it resells the assets to an independent party. However, if a loss on the transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, the loss is recognised immediately.

Where necessary, adjustment has been made to the financial statements of jointly controlled entities to ensure consistency with the policies by the Group.

(c) Associates Associates are those corporations, partnerships or other entities in which the Group exercises significant influence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post- acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated on the same basis but only to the extent of the costs that can be recovered. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group.

On disposal, the difference between the disposal proceeds and the carrying value of the investment in the associate is reflected as gain or loss on disposal in the consolidated income statement.

(ii) Intangible assets (a) Goodwill Goodwill represents the excess of the cost of acquisition of subsidiaries, jointly controlled entities and associates over the fair value of the Group’s share of the identifiable net assets at the date of acquisition.

Goodwill is tested annually for impairment and when there are impairment indicators and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units on group of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose. The Group allocates goodwill to each business segment. See accounting policy Note 3(vi) on impairment of assets. Ranhill Berhad (430537-K) 69

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (ii) Intangible assets (Cont’d) (b) Licenses (1) Excess of current liabilities over current assets assumed from Syarikat Air Johor Sdn Bhd, pursuant to the Concession Agreement whereby SAJ Holdings Sdn Bhd was granted the sole and exclusive rights to use the water infrastructure assets and to carry out water supply services for 30 years commencing from 1 March 2000. This is amortised over the Concession Period.

(2) The capitalisation of the license (“operating rights”) to operate two water treatment plants in Amata City Industrial Estate and Amata Nakorn Industrial Estate, both located in Thailand. The operating rights are stated at cost and are amortised on a straight-line basis over its estimated useful life of 15 years.

(c) Contractual rights The contractual rights to develop 40,000 units of residential apartment’s consultancy services for the master planning and design of related facilities buildings and infrastructure work awarded by Great Arab Socialist Republic of Libya. The contractual rights are stated at cost and are amortised on straight line basis over its estimated useful life of 6 years.

(iii) Property, plant and equipment Property, plant and equipment are initially stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the property, plant and equipment. The costs of certain property, plant and equipment items included the costs of dismantling and removing the item and restoring the sites on which these items are located. These costs are due to obligations incurred or either when the items were installed or as a consequence of having used all these assets during a particular period.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial year in which they are incurred.

(a) Infrastructure assets Infrastructure assets comprise a network of specialised assets used in the water supply business represented by Concession Assets and Project development assets as set out in Note 16 to the financial statements. Infrastructure assets include source works, water treatment works and supply network systems operated and maintained by the Group. The Group has, on an ongoing basis, recognised improved information regarding these assets.

Infrastructure assets are depreciated over the Concession Period using the unit of water revenue method. The Group has adopted the unit of water revenue method which reflects the pattern in which the assets’ economic benefits are consumed by the Group.

Infrastructure assets are depreciated according to the following formula:

Water revenue for the year X Infrastructure assets Projected total water revenue over the Concession Period / from year of completion to the end of the Concession Period

The projected total water revenue is estimated based on the Scheduled Tariff and projected water consumption. 70 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (iii) Property, plant and equipment (Cont’d) b) Construction works in progress Construction Works in Progress are stated at cost and are not depreciated until it is ready for its intended use. Upon completion, Construction Works in Progress are transferred to categories of property, plant and equipment, depending on the nature of the assets.

(c) Freehold land Freehold land is not depreciated as it has an infinite life.

(d) Power station and Bulk supply station Power station and bulk supply stations costs are amortised on a straight line basis over the remaining licence period commencing from the commissioning of the stations.

All other property, plant and equipment are depreciated on a straight line basis to write off the cost of each asset, or their revalued amounts, to their residual values over their estimated useful lives at the following annual depreciation rates: % Buildings 2 Construction equipment 20 – 25 Plant and machinery 4 - 20 Office equipment 2 - 33 Computers 20 – 33.3 Renovation, furniture and fittings 2 - 33 Motor vehicles 10 - 20 Telecommunication equipment 33 Moulds 20

Gains and losses on disposals are determined by comparing proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the income statement.

Residual values and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at each balance sheet date. The effects of any revisions of the residual values and useful lives are included in the income statement for the financial year in which the changes arise.

At each balance sheet date, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount.

Repairs and maintenance are charged to the income statement during the period in which they are incurred.

(iv) Investment properties Investment properties comprising principally land and office building, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group.

Investment properties are stated at cost less any accumulated depreciation and impairment losses. Investment properties are depreciated on the straight line basis to write off the cost of the assets to their residual values over their estimated useful lives at annual depreciation rates of 2%.

On disposal of an investment property or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the period of the retirement or disposal. Ranhill Berhad (430537-K) 71

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (v) Investments Investments in subsidiaries, jointly controlled entities, associates and other investments are carried at cost which includes all costs directly attributable to the acquisition of the investments. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3(vi) on impairment of assets.

Investment in other non-current investments are shown at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investment. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the period in which the decline is identified.

Marketable securities (within current assets) are carried at the lower of cost and market value. Market value is calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date. Increases/decreases in the carrying amount of marketable securities are credited to the income statement.

On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged or credited to the income statement.

(vi) Impairment of assets Property, plant and equipment, goodwill and investments in subsidiaries, jointly controlled entities and associates are assessed at each balance sheet date to determine whether there is any indication of impairment. If such an indication exists, impairment losses is recognised to the extent of the carrying amount that is not covered by the estimated discounted cash flows resulting from continued use of the asset, or from the estimated net disposal proceed of the asset.

The impairment loss is charged to the income statement. Any reversal of an impairment loss as a result of subsequent increase in recoverable amount should not exceed the carrying amount that would have been determined (net of accumulated amortisation or accumulated depreciation, if applicable) had no impairment loss been previously recognised for the asset.

(vii) Investment in oil and gas properties Oil and natural gas exploration and evaluation expenditures are accounted for using full costs method of accounting. Costs are accumulated on a field-by-field basis.

Investments in oil and gas properties can be classified as follows: (a) Tangible assets Tangible assets comprise of geological and geophysical costs, and exploratory drilling costs, including drilling materials, supplies and equipment.

(b) Intangible assets Intangible assets represent expenditure on construction, licence acquisition, seismic studies, exploration studies, other costs of exploration and appraisal including directly related overhead costs, installation or completion of infrastructure facilities, and the bonus payments made for acquiring the Production Sharing Contract (“PSC”) rights, such as signature bonus, education bonus, equipment and service bonus.

Once commercial reserves are found, exploration and evaluation assets are tested for impairment and transferred to development tangible and intangible assets. No depreciation and/or amortisation are charged during the exploration and evaluation phase. 72 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (vii) Investment in oil and gas properties (Cont’d) (b) Intangible assets (Cont’d) Oil and gas properties are depreciated/amortised using the unit-of-production method. Unit-of-production rates are based on proved developed reserves, which are oil, gas and other mineral reserves estimate to be recovered from existing facilities using current operating method. Oil and gas volumes are considered produced once they have been measured through meters at custody transfer or sales transaction points at the outlet valve on the field storage tank.

Signature bonus, education bonus, equipment and service bonus are not cost recoverable from BPMIGAS and only these bonus payments are amortised using the straight line method, over the estimated useful life of the PSC not exceeding a period of 30 years. If it is determined that commercial discovery has not been achieved, an impairment loss is recognised.

Exploration and evaluation assets are tested for impairment when reclassified to development tangible or intangible assets or whenever facts and circumstances indicate impairment. An impairment loss is recognised for the amount by which the exploration and evaluation assets’ carrying amount exceeds their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets’ fair value less costs to sell and their value in use. For the purposes of assessing impairment, the exploration and evaluation assets subject to testing are grouped with existing cash-generating units of production fields that are located in the same geographical region.

Previously the successful efforts method was adopted. The accounting treatments for successful efforts method were as follows:

Exploration expenditure for each area of interest is carried forward as an asset provided that one of the following conditions is met:

• Such costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale: or

• Exploration activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of recoverable reserves, and active and significant operations in relation to the area are continuing.

Exploration expenditure which fails to meet at least one of the conditions outlined above is written off. Evaluation expenditure for each area of interest is carried forward, but only to the extent to which recoupment out of revenue to be derived from the relevant area of interest, or from the sale of that area of interest, is reasonably assured. Exploration and evaluation expenditure that is carried forward as an asset is amortised over the economic benefits derived from the unit of production of oil reserve in the respective area of interest. However, the Directors are of the opinion that the full cost method better reflects of the activities of the investment in the Group’s oil and gas segment.

(viii) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first in, first out basis for engineering inventories and weighted average basis for manufacturing and water related inventories. The cost comprises the purchase price plus cost incurred to bring the inventories to their present locations and conditions. The cost of work-in-progress and finished goods consists of raw materials, direct labour and a proportion of manufacturing overheads.

Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. Ranhill Berhad (430537-K) 73

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (ix) Receivables Receivables are carried at anticipated realisable value. Allowance is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables.

Trade receivables that are factored to finance institutions for a single non returnable fixed sum with no recourse to the Group are treated as being fully settled. The corresponding payment from the finance institution is recorded as a cash receipt from customers and no liability is recognised. Any fee incurred to effect the factoring is recognised as an expense in the period in which the factoring takes place.

(x) Construction contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use.

When the outcome of a construction contract can be estimated reliably, contract revenue is recognised by using the stage of completion method. The stage of completion is measured by reference to the proportion that contract cost incurred for work performed to date bear to the estimated total costs for the contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, prepayments or other assets, depending on their nature.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable.

A claim for variation orders (“VOs”) is an amount that the Group seeks to collect from the customer as reimbursement for costs incurred that were not originally included in the contract value. The settlement of claims is subject to a high level of uncertainty relating to the outcome of future negotiations. In view of this, costs incurred are carried forward and recognised in the income statement together with claims for VOs when entitlement has been established, i.e. received or if certified for payment.

Irrespective of whether the outcome of a construction contract or VOs can be estimated reliably, when it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against the progress billings up to period end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is shown as amounts due from customers on construction contracts under receivables. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as amounts due to customers on construction contracts under payables (within current liabilities).

(xi) Payables Payables including borrowings (but excluding leases), trade and non-trade payables are stated at cost.

(xii) Leases (a) Finance leases Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases. 74 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xii) Leases (Cont’d) (a) Finance leases (Cont’d) Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each the lease payment is allocated between the liability and finance charges so as to achieve a periodic constant rate of interest on the balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to in the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Property, plant and equipment acquired under finance leases are depreciated over the shorter of the estimated useful life of the asset and the lease term.

The upfront payments made for the leasehold land and building represent prepaid lease payments and are amortised on a straight line basis over the lease term i.e. 50 years or 2%.

(b) Operating leases Leases of assets were a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on the straight line basis over the lease period.

(xiii) Employee benefits (a) Short term employee benefits Short term employee benefits such as wages, salaries, social security contributions, paid annual leave and sick leave, bonuses and non-monetary benefits are recognised as an expense in the period in which services are rendered by the employees.

(b) Post-employment benefits The Group has various post-employment benefit schemes in accordance with local conditions and practices in Malaysia and overseas. These benefit plans are either a defined contribution or defined benefit plan.

Defined contribution plan A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.

The Company’s and its Malaysian subsidiaries’ obligation under post employment benefits is limited to a monthly contribution to Employees’ Provident Fund (“EPF”) based on a prescribed statutory rate for all eligible employees. Overseas subsidiaries make contributions to their respective countries’ statutory pension scheme based on their statutory obligation.

The Group’s contributions to a defined contribution plan are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. Ranhill Berhad (430537-K) 75

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xiii) Employee benefits (Cont’d) (b) Post-employment benefits (Cont’d) Defined benefit plan A defined benefit plan is a pension plan that defines an amount of retirement benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. The liability in respect of a defined benefit plan is the present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets, together with adjustments for actuarial gains/losses and past service cost. The Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date.

The defined benefit obligation, calculated using the projected unit credit method, is determined by an independent actuary, considering the estimated future cash outflows using market yields at balance sheet date of government securities which have currency and terms to maturity approximating the terms of the related liability.

Plan assets in excess of the defined benefits obligations are subject to the asset limitation specified in FRS 1192004. Actuarial gains and losses arise from experience adjustments and changes in actuarial assumptions. The amount of net actuarial gains and losses recognised in the income statement is determined by the corridor method in accordance with FRS 119 “Employee Benefits” and is charged or credited to income statement over the average remaining service lives of the related employees participating in the defined benefit plan.

Past service costs are recognised immediately in income, unless the changes to the plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.

Upon initial adoption of FRS 1192004, the increase in defined benefit liability is recognised as an expense on a straight-line basis over the vesting period.

(xiv) Taxation Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and include all taxes based upon the taxable profits, including withholding taxes payable by a foreign subsidiary, associate or joint venture on distributions of retained earnings to companies in the Group.

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of transaction affects neither accounting nor taxable profit nor loss.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. 76 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xv) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

(xvi) Deferred capital consideration from the State Government Deferred capital consideration from the State Government is recognised at fair value where there is a reasonable assurance that the deferred capital consideration will be received and the Group will comply with all attached conditions.

Capital consideration from the State Government relating to costs are deferred and recognised in the income statement over the period necessary to match it on systematic basis to the related costs it is intended to compensate.

Capital consideration relating to the purchases of assets are included in non-current liabilities as deferred income and are credited to the income statement on a systematic basis over the expected lives of the related assets.

(xvii) Share capital Ordinary shares are recorded at the nominal value and consideration in excess of the nominal value of shares issued, if any, is accounted for as share premium. Both ordinary shares and share premium are classified as equity.

Cost incurred directly attributable to the issuance of the shares are accounted for as a deduction from share premium, if any, otherwise it is charged to the income statement.

(xviii) Foreign currencies (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.

(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(c) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and • all resulting exchange differences are recognised as a separate component of equity. Ranhill Berhad (430537-K) 77

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xviii) Foreign currencies (Cont’d) (c) Group companies (Cont’d) On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(d) Closing rates The principal closing rates used in the translation of foreign currency amounts are as follows:

Foreign currency 30 June 2007 30 June 2006 RM RM 1 Australian Dollar 2.93 2.72 1 US Dollar 3.45 3.68 1 Euro 4.64 4.66 1 UAE Dirham 94.06 1.00 1 Sudanese Dinar 0.02 0.02 1 Libyan Dinar 2.77 2.96 1 Saudi Arabian Riyal 0.92 0.98 100 Pakistan Rupee 5.71 6.09 100 Chinese Renminbi 0.45 49.11 100 Thai Baht 10.90 9.56 100 Indonesian Rupiah 0.04 0.04 100 Philippine Peso 7.45 6.86

(xix) Dividend Dividend income is recognised when the Group’s right to receive payment is established.

(xx) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value – added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customers, the type of transaction and the specifics of each arrangement.

Included in the revenue recognition are the following: (a) Revenue from engineering, procurement, construction, construction management services and project management services Revenue relating to long-term contracts is recognised based on the stage of completion of the contracts. The stage of completion of a contract is determined based on the proportion of contract costs incurred for work performed to date to the estimated total contract costs for the contracts.

Procurement service fee is recognised at the time of customer acceptance. 78 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xx) Revenue recognition (Cont’d) (b) Revenue from facilities management and services Revenue is recognised upon delivery of spares and customer acceptance, or performance of services represented by invoiced value of services and spares supplied net of discounts.

(c) Revenue from sale of goods Revenue is recognised upon delivery of products and customers’ acceptance, net of discounts and returns and when the risk and rewards of ownership have passed to the buyer.

(d) Revenue from power generation, transmission and distribution and bulk supply station utilities sales Income from power distribution, transmission and distribution and bulk supply station utilities sales is recognised upon delivery of electricity.

(e) Revenue from water Water revenue is recognised when the treated water is recorded through customers’ water meters.

Contributions by housing developers are recognised on an accruals basis in accordance with the respective commercial agreements.

Special works (mainly comprising reconnection fees, repair works and other related works charged to consumers) are recognised upon performance of services.

Revenue relating to services and sales of parts is recognised upon delivery of products and customer acceptance, if any, or performance of services.

(f) Other income Other income earned by the Group is recognised on the following basis:

Rental income is recognised on an accruals basis in accordance with the substance of the relevant agreements.

Interest income is recognised upon establishment of right to receive, unless collectability is in doubt.

Management fee is recognised on performance of services.

Dividend income is recognised when the right to receive payment is established.

(xxi) Borrowing (a) Classification Borrowings are initially recognised based on the proceeds received, net of transaction cost incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings.

Interest, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability is reported within finance cost in the income statement.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet. Ranhill Berhad (430537-K) 79

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xxi) Borrowing (Cont’d) (b) Capitalisation of borrowing cost Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use. Borrowing costs incurred to finance property development activities and construction contracts are accounted for in a similar manner. All other borrowing costs are expensed.

(c) Convertible Unsecured Loan Stock On issue of a financial instrument that contains both a liability and an equity component, the fair value of the liability portion is determined using a market interest rate for an equivalent financial instrument; this amount is carried as liability on the amortised cost basis until extinguished on conversion or maturity of the instrument. The remainder of the proceeds is allocated to the conversion option which is recognised and included in shareholders’ equity; the value of the conversion option is not changed in subsequent periods.

The Group has taken advantage of the exemption provided by FRS 132 “Financial Instruments: Disclosure and Presentation” not to reclassify compound instruments issued by the Group prior to 1 July 2006 into liability and equity components. These instruments (together with the associated interest, dividends or other distributions) continue to be classified according to their legal form.

(xxii) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, bank balances, fixed deposits, demand deposits, bank overdrafts and short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the balance sheet.

(xxiii) Segment reporting Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group of assets and operation engaged in providing products of services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those components.

Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segment that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the segment.

Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between operating units within a single segment. Segment revenue and segment expense exclude dividends from within the Group.

All income, expenses, assets and liabilities are directly allocated to each reported segment. Interest income and other income and expenses which cannot be allocated to respective segment on a reasonable basis are disclosed as either unallocated income or unallocated expenses, while the related assets and liabilities are disclosed as unallocated assets and unallocated liabilities.

The accounting policies used in deriving the individual segment revenue, segment results, segment assets and segment liabilities are the same as those disclosed in the summary of significant accounting policies.

Transfers between segments are priced at the estimated fair value of the products or services as negotiated between the operating units. 80 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xxiv) Financial instruments (a) Financial instruments recognised on the balance sheet Financial instruments carried on the balance sheet include deposits, bank and cash balances, investments, receivables, payables, borrowings and share capital. The particular recognition methods adopted are disclosed in the individual accounting policy statements associated with each item.

(b) Financial instruments not recognised on the balance sheet The Group is a party to financial instruments comprising of interest rate swap agreements.

Interest rate swaps are designed to manage the Group’s exposure to protect the Group from movements in interest rates. The notional principal of these contracts are off balance sheets. Any differential to be paid or received on an interest rate swap contract is recognised as a component of interest income or expense at the settlement date. Gains and losses on early termination of interest rate swaps or on repayment of the borrowing are taken to the income statement.

(c) Fair value estimation for disclosure purposes The fair value of publicly traded securities is based on quoted market prices at the balance sheet date.

In assessing the fair value of financial instruments, the Group and Company use a variety of methods and make assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealers quotes for the specific or similar instruments are used for long term debt. Other techniques, such as the discounted value of future cash flows, are used to determine the fair value for the remaining financial instruments. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group and Company for similar financial instruments.

The face values for financial assets and liabilities with a maturity period of less than one (1) year are assumed to approximate their fair values.

(d) On balance sheet Financial assets The fair value of long term receivables is lower than carrying amount at balance sheet date as the Company gives its subsidiaries advances at below current market rate. The Directors consider the carrying amount fully recoverable as they do not intend to realise the financial assets via exchange with counterparty.

Financial liabilities The fair value of quoted bonds has been estimated using the respective quoted offer price. For unquoted borrowings with fixed interest rate, the fair values have been estimated by discounting the estimated future cash flows using the prevailing market rates for similar credit risks and remaining period to maturity. For unquoted borrowings with floating interest rate, the carrying values are generally reasonable estimates of their fair values.

(e) Off balance sheet The financial derivative instruments are used to hedge foreign exchange and interest rate risks associated with certain long- term foreign currency borrowings. The contract notional principal amounts of the derivative and the corresponding fair value adjustments are analysed as below.

Fair values of financial derivative instruments are the present values of their future cash flows and are arrived at based on valuations carried out by the Company’s bankers. Favourable fair value indicates amount receivable by the Company if the contracts are terminated as at 30 June 2007 or vice versa. Ranhill Berhad (430537-K) 81

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (xxv) Non current Assets (a disposal group) classified as assets held for sale Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through a continuing use.

(xxvi) Contingent Liabilities and Contingent Assets The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.

In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed are measured initially at their fair value at the acquisition date, irrespective of the extent of any minority interest.

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Other than the critical accounting estimates and judgement stated in Note 2, set out below are the other key estimates and judgements made by Directors.

(i) Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Group’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

(a) Construction contracts and revenue recognition The Group recognises contract revenue from its fixed price contracts based on percentage of completion method. The stage of completion is measured by reference to the contract costs incurred to date to the estimated total costs for the contract. Use of the percentage of completion method requires the Group to estimate the stage of completion, the extent of the contract costs incurred, the estimated total contract revenue including variation orders and contract claims and contract costs. In making the estimates, the Group relies on past experience, the use of engineering tools and the work of specialists.

Any variation to the final contract sum and estimated cost to completion will have a corresponding effect on the contract profit or loss.

(b) Depreciation of property, plant and equipment Infrastructure assets Infrastructure assets (included within property, plant and equipment) are depreciated over the concession period using the unit of water revenue method as disclosed in Note 3(iii)(a). Significant estimation is involved in determining the projected total water revenue of the concession. The projected total water revenue is estimated based on the Scheduled Tariff (revised as at financial year 2006) and projected water consumption.

Infrastructure assets (included within property, plant and equipment) are depreciated over the concession period using the unit of water revenue method as disclosed in Note 3(iii)(a). Significant estimation is involved in determining the projected total water revenue of the concession. The projected total water revenue is estimated based on the Scheduled Tariff (revised as at financial year 2006) and projected water consumption. Projected water consumption is assessed by an independent consultant. 82 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) (i) Critical accounting estimates and assumptions (Cont’d) (b) Depreciation of property, plant and equipment( Cont’d) Infrastructure assets (Cont’d) The projected water consumption is derived based on the following parameters: a) population estimates, b) estimated per capital consumption, c) water use rates for industries based on per unit area, and

Owing to the long remaining Concession Period, the Group does not expect a significant change in the projected total water revenue which may cause a material adjustment to the depreciation of infrastructure assets in the future financial years.

The projected water revenue is expected to grow at a Cumulative Average Growth Rate (“CAGR”) of 4% over the concession period. A decrease by 5% in projected water revenue would result in increase in depreciation charge by RM2.8 million for the financial year.

Other property, plant and equipment The estimation of the useful lives of other property, plant and equipment are based on expected usage, physical wear and tear, technical and commercial obsolescence and experience with similar assets. The estimated useful lives property, plant and equipment are reviewed annually and are updated if expectations differ from previous estimates. The Directors have relied upon past experience and industry practices in exercising their judgement.

(c) Taxation Significant estimation is involved in determining the provision for income taxes. Due to complexity of transactions entered into by the Group, the deductibility of certain expenses and chargeability of certain income are subject to interpretation. The Directors have exercised judgement in determining the tax treatment of these transactions and have relied upon industry practice and experts opinion in estimating the tax liability. Queries raised by the Inland Revenue Board are being attended to, and based on current circumstances, the Directors are of the view that the provision for tax liabilities are adequate.

(d) Impairment of goodwill The Group tests goodwill for impairment annually in accordance with its accounting policy 3(ii)(a), and whenever events or changes in circumstances indicate that the goodwill may be impaired.

For the purposes of assessing impairment, goodwill is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose.

Significant judgement is required in the estimation of the present value of future cash flows generated by the cash-generating units or groups of cash-generating units, which involves uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s tests for impairment of goodwill.

(ii) Critical judgement in applying the Group’s accounting policies In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy could materially affect the reported results and financial position of the Group. The following accounting policies require subjective judgement, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain.

Ranhill Berhad (430537-K) 83

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) (ii) Critical judgement in applying the Group’s accounting policies (Cont’d) Depreciation of property, plant and equipment (a) Infrastructure Assets Infrastructure Assets are depreciated over the Concession Period using the unit of water revenue method. The rationale for using the unit of water revenue is in line with the increase in water revenue that the Group is expected to earn over the Concession Period as a result of tariff adjustments and increase in demand over time. Therefore, the Group has adopted the unit of water revenue method which reflects the pattern in which the assets’ economic benefits are consumed by the Group.

(b) Water supply and lease agreement (“WSA”) As disclosed in Note 40 to the financial statements, under the WSA, SAJ Holdings Sdn Bhd (“SAJH”) was discharged of the obligation to pay Fixed Monthly Payment (“FMP”) and Bulk Sales Rate (“BSR”) to the State Government and Syarikat Air Johor Sdn Bhd (“SAJSB”). The Group has taken guidance from IC – 127 - Evaluating substance of transactions involving the legal form of a lease, and accordingly has treated the WSA and lease agreement as a single arrangement. The arrangement is considered as a lease since:

Johor Special Water Sdn Bhd (“JSW”), a party to the WSA, is required to sell treated water purchased from bulk water suppliers to SAJH on a back-to-back basis to enable SAJH to meet its obligations under the Concession Agreement (“CA”), and

SAJH is to remain in possession of the assets after the expiry of the lease period.

The WSA has been extended up to 2014, since JSW is yet to take over the water assets of the bulk water suppliers. The Directors have exercised judgement in determining the manner and timing of payment of the consideration for supply of water during the period up to the ultimate acquisition of assets of the bulk water suppliers by JSW and thereby in determining fair value of obligations under the WSA. Directors have estimated the fair value of the obligations under the WSA on a best estimate basis as disclosed in Note 41 to the financial statements. In arriving at the fair value of the WSA obligations, the Directors have considered the revised scheduled payments which will be one of the factors that will be included in SAJH’s next tariff review submission due in June 2008.

5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES Exposure to a variety of financial risks, including foreign currency exchange risk, interest rate risk, credit risk, liquidity and cash flow risk arises in the normal course of the Group’s business. The Group acknowledges the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Financial risk management is carried out through risk reviews, internal control systems, an insurance programme and adherence to the Group’s financial risk management policies.

(a) Foreign currency exchange risk The Group has minimum exposure to currency risks as the majority of goods and services are sourced locally within Malaysia, denominated in Ringgit Malaysia.

The Group’s operations are primarily in Malaysia. The Group is exposed to foreign currency risk for local operations on certain transactions that are denominated in currencies other than Ringgit Malaysia. The currencies giving rise to this risk are disclosed in Note 3(xviii)(d).

Where possible the Group has a natural hedge to the extent that receipts for foreign currency receivable will be matched against payables denominated in the same foreign currency or where possible, by intragroup arrangement and settlements. 84 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

5 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D) (b) Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group minimised its exposure to any increase in interest rates by substantially borrowing on a fixed rate basis under the terms of the Islamic Murabahah Commercial Paper/Murabahah Medium Term Note (“MCP/MMTN”), Islamic Medium Term Note (“MTN”), BaIDS and US Dollar denominated Bonds.

The Group has also entered into financial derivative contracts designed to manage the Group’s exposure and to protect the Group from movement in interest rates.

(c) Credit risk Customer credit risk arises when services are rendered and sales are made on credit terms. Default by customers may lead to material loss but risks are mitigated by ensuring sales and services are made to customers with appropriate credit history. Credit limit, deposit placement and guarantee in the form of letter of credit from banks are imposed in accordance with the Group’s credit risk management policy. The Group monitors exposure to credit risk on an on-going basis. The Group considers the risk of default by customers to be low.

Credit risk, when making deposits at financial institutions are minimised through careful selection of interest bearing investments and selection of reputable in financial institutions.

(d) Liquidity and cash flow risk Liquidity and cash flow availability are important requirements of the business. The Group mitigates liquidity and cash flow risk through a commitment to the Group cash flow planning for the future after taking any action necessary to bring the planning into conformity with the overall Group Business Plan. The Group’s borrowing and debt to equity level has been kept at a manageable level so as not to breach any of the existing loan covenants.

6 REVENUE Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Contract revenue (described as EPC and EPCM/PMC) 733,677 650,347 26,579 Power generation, transmission and distribution services 146,171 152,368 0 0 Facilities management 0 14,878 0 0 Water and water related revenue 589,937 543,005 0 0 Dividends - subsidiaries 0 0 21,169 33,044 - associated company 469 0 0 0 Management fee 0 0 47,125 15,529 Others 158 1,035 0 2,050 1,470,412 1,361,633 68,294 77,202

Ranhill Berhad (430537-K) 85

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

7 COST OF SALES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Contract costs described as EPC and EPCM/PMC 575,612 589,388 1,303 29,075 Power generation, transmission and distribution 107,979 114,576 0 0 Water 293,502 285,903 0 0 Others 2,070 11,683 0 0 979,163 1,001,550 1,303 29,075

8 FINANCE COSTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Interest expense: - Term loan 226,561 159,258 53,199 21,157 - Bank overdraft 2,090 4,006 1,314 1,071 - Revolving credit 237 2,201 0 0 - Banker’s acceptance/trust receipts 421 8,692 (18) 1,535 - Amortisation of discount on issuance of BalDS 11,582 10,635 0 0 - Bridging loan 0 5,250 0 0 - Convertible unsecured loan stock 725 748 0 0 - Finance lease 29,810 14,664 161 202 - Others 365 752 1,240 139

271,791 206,206 55,896 24,104 Interest expense included in cost of sales (2,513) (19,230) 51 (2,543) Interest expense charged to subsidiaries 0 0 (24,304) (12,398) Interest income capitalised as part of property, plant and equipment (Note 16) 1,059 5,376 0 0 Borrowing costs capitalised as part of property, plant and equipment (Note 16) (57,103) (49,862) 0 0 213,234 142,490 31,643 9,163

9 STAFF COSTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Salaries, wages and other benefits 239,780 264,854 12,245 9,684 Defined contribution plan 15,715 16,095 1,131 986 Unfunded defined benefit plan (Note 39) - current service cost 2,977 3,144 0 0 - interest cost 2,240 2,262 0 0 - amortisation of transitional liability 3,165 3,215 0 0 - settlement loss 1,355 0 0 0 - actuarial loss recognised 545 931 0 0 265,777 290,501 13,376 10,670

Included in staff costs is Executive Directors’ remuneration (Note 10). 86 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

10 DIRECTORS’ REMUNERATION Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Executive Directors: Fees 236 180 20 0 Salaries and bonuses 2,906 2,504 2,138 1,840 Defined contribution plan 344 304 252 228 Other emoluments 349 74 349 74 3,835 3,062 2,759 2,142

Non-Executive Directors: Fees 1,297 317 356 245 Other emoluments 430 139 59 125 1,727 456 415 370

Total Directors’ remuneration (Note 11) 5,562 3,518 3,174 2,512

The estimated monetary value of benefits-in-kind not included in the Directors’ remuneration above is as follows:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Executive Directors 169 169 157 152 Non-Executive Directors 260 25 35 25

11 PROFITS BEFORE TAXATION Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) The profit before taxation is arrived at after charging: Allowance for doubtful debts 9,750 3,872 1,645 101 Allowance for slow moving and obsolete inventories 132 1,257 0 0 Amortisation of intangible assets 183 382 0 0 Auditors’ remuneration - statutory audit – current year 822 878 60 60 - statutory audit – prior year 21 176 0 0 - audit related services 65 1,784 0 0 Bad debts written off 1,595 78 0 0 Depreciation of property, plant and equipment, investment property and prepaid lease payment 152,219 143,229 1,578 1,502 Directors’ remuneration (Note 10) 5,562 3,518 3,174 2,512 Loss on disposal of property, plant and equipment 93 42 0 0 Property, plant and equipment written off 88 87 0 3 Realised foreign exchange loss 5,263 308 3,211 0 Ranhill Berhad (430537-K) 87

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

11 PROFITS BEFORE TAXATION (CONT’D) Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Unrealised foreign exchange loss 6,566 15 1 0 Rental of land and buildings 12,224 9,421 1,576 1,403 Rental of plant and equipment 6,203 6,113 1,887 1,620 Inventories written off 213 0 0 0 Impairment loss on property, plant and equipment 884 290 0 0

And crediting: Amortisation of deferred income (Note 45) 20,240 9,709 0 0 Gain on disposal of property, plant and equipment 127 159 0 22 Interest income 27,499 15,842 4,120 0 Rental income 991 1,275 0 0 Realised foreign exchange gain 1,561 312 1,100 0 Unrealised foreign exchange gain 20,781 280 19,789 0 Write back of allowance for doubtful debts 242 1,018 0 0 Write back of diminution in value of investments 50 4 0 0 Write back of allowance for inventories 124 0 0 0 Dividends - subsidiaries 0 0 20,700 33,044 - associated company 469 0 469 0

12 TAXATION Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Current taxation: - Malaysian tax 17,754 6,831 3,618 6,432 - foreign tax 257 688 0 0 Deferred taxation (Note 27) 20,712 29,436 9,406 0 38,723 36,955 13,024 6,432

Current taxation Current year 21,366 6,081 4,205 4,434 Benefits from previously unrecognised tax losses and capital allowance (2,972) (1,250) (1,543) 0 (Over)/under accrual in prior years (383) 2,688 956 1,998

Deferred taxation Origination and reversal of temporary differences 45,944 29,436 9,553 0 Change in tax rate (25,232) 0 (147) 0 38,723 36,955 13,024 6,432 88 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

12 TAXATION (CONT’D) The explanation of the relationship between the taxation and profit before taxation is as follows:

Group Company 2007 2006 2007 2006 % % % % (Restated) Numerical reconciliation between the average effective tax rate and the applicable tax rate Statutory income tax rate of Malaysia 27 28 27 28 Income not subject to tax (11) (32) 0 (15) Export services incentive (4) (3) 0 0 Expenses not deductible for tax purposes 12 47 38 35 Temporary differences and tax losses not recognised 6 4 0 (14) Utilisation of unrecognised tax losses and capital allowance (2) (2) (8) 0 Different tax rates in other countries 0 0 0 0 Over/(under) accrual of tax in prior year 0 4 5 16 Effect on changes in tax rate (11) 0 (1) 0 Average effective tax rate 17 46 61 50

In year 2007, the government enacted a change in the corporate income tax rate from 28% to 27%.

13 SEGMENT REPORTING The Group is organised into four (4) main business segments:

(a) EPC & EPCM/PMC - Engineering, procurement, construction, construction management services and project management services.

(b) Power generation, - Operation of a 120MW open cycle gas-fired power station; Engineering and installation of power transmission distribution and generation facilities and design, engineering and construction of power transmission and distribution infrastructure; Distribution of electricity and design, engineering, construction and project management of power distribution systems; Operation and maintenance services for power distribution systems and provision of maintenance services to electrical substations.

(c) Water - Processing and treatment of raw water and supply treated water to consumers; Builds, installs and provides services in wastewater treatment and potable water supply; Provision of water supply and distribution business solutions, consultancy and water related services.

(d) Others - Oil and gas exploration, extraction and production, facilities management, provision of management services, investment holding and property holding.

Intersegment revenue comprise rendering rental of office space and management fees to other segments and provide engineering, procurement and construction for projects. These transactions are conducted at arms length basis under terms, conditions and prices not materially different from transaction with unrelated parties. Ranhill Berhad (430537-K) 89

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

13 SEGMENT REPORTING (CONT’D) (a) Primary reporting format - business segments Power generation, EPC & transmission EPCM/PMC and distribution Water Others Eliminations Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2007 Revenue External revenue 733,677 146,171 589,937 627 0 1,470,412 Intersegment revenue 137,164 0 48,496 61,387 (247,047) 0 Total revenue 870,841 146,171 638,433 62,014 (247,047) 1,470,412

Segment results 8,204 27,813 367,498 33,444 (21,953) 415,006 Unallocated income: Interest income 27,499 Finance costs (213,234) Share of results of associates 1 0 0 207 0 208

Profit before taxation 229,479 Taxation (38,723)

Profit after taxation 190,756 Discontinued Operations Profit for the year from discontinued operations after taxation 0 11,865 0 (6,553) 0 5,312 Net profit for the financial year 196,068

Attributable to: Equity holders of the parent 116,833 Minority interests 79,235 196,068 90 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

13 SEGMENT REPORTING (CONT’D) (a) Primary reporting format - business segments (Cont’d) Power generation, EPC & transmission EPCM/PMC and distribution Water Others Eliminations Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2007 Other information Segment assets 1,695,187 710,836 8,490,769 1,165,667 (1,010,508) 11,051,951 Associates 485 0 0 48,481 0 48,966 Total assets classified as held for sale 0 0 0 23,906 0 23,906

Unallocated assets: Deferred tax assets, tax and vat recoverable 27,237 Deposits with licensed banks 765,699 Total assets 11,917,759

Segment liabilities 1,440,756 112,738 4,883,757 567,441 (1,010,508) 5,994,184 Total liabilities associated with assets classified as held for sale 0 0 0 17,021 0 17,021

Unallocated liabilities: Deferred tax liabilities and current tax liabilities 393,025 Borrowings 4,004,221 Total liabilities 10,408,451

Capital expenditure 11,182 136,247 233,555 65,474 0 446,458 Non-cash expenses: Depreciation 5,377 22,561 120,936 3,345 0 152,219 Amortisation of intangible assets 0 0 183 0 0 183 Impairment losses 0 0 458 436 0 894 Others 11,209 242 2,407 2,897 0 16,755 Ranhill Berhad (430537-K) 91

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

13 SEGMENT REPORTING (CONT’D) (a) Primary reporting format - business segments (Cont’d) Power generation, EPC & transmission (Restated) EPCM/PMC and distribution Water Others Eliminations Total 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue External revenue 650,347 152,368 543,005 15,913 0 1,361,633 Intersegment revenue 175,158 238 17,172 55,213 (247,781) 0 Total revenue 825,505 152,606 560,177 71,126 (247,781) 1,316,633 Segment results (18,553) 30,377 270,475 21,757 (33,377) 270,679

Unallocated income: Interest income 15,842 Provision for costs associated with the Masinloc acquisition (62,652) Finance costs (142,490) Share of results of associates 1 0 0 (491) 0 (490) Profit before taxation 80,889 Taxation (36,955)

Profit after taxation 43,934 Discontinued Operations Loss for the year from discontinued operations after taxation 0 (2,230) 0 (5,277) 0 (7,507) Net profit for the financial year 36,427

Attributable to: Equity holders of the parent (12,668) Minority interests 49,095 36,427 92 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

13 SEGMENT REPORTING (CONT’D) (a) Primary reporting format - business segments (Cont’d) Power generation, EPC & transmission (Restated) EPCM/PMC and distribution Water Others Eliminations Total 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Other information Segment assets 1,375,511 620,889 8,405,487 677,093 (737,284) 10,341,696 Associates 484 0 0 48,273 0 48,757

Unallocated assets: Deferred tax assets, tax and vat recoverable 31,084 Deposits with licensed banks 654,519 Total assets 11,076,056

Segment liabilities 1,062,762 119,329 5,021,699 316,330 (737,284) 5,782,836

Unallocated liabilities: Deferred tax liabilities and current tax liabilities 370,268 Borrowings * 3,602,322 Total liabilities 9,755,426

Capital expenditure 5,230 220,799 343,502 16,721 0 586,252 Non-cash expenses: Depreciation 5,205 18,653 115,576 3,795 0 143,229 Amortisation of intangible assets 8 675 1,136 0 0 1,819 Others 2,289 0 2,144 1,161 0 5,594

* including short term and long term borrowings, convertible unsecured loan stocks and finance lease liabilities but excluding RM100 million (2005: RM100 million) borrowings directly attributable to EPC and EPCM/PMC segment.

Segment assets consist of property, plant and equipment, prepaid lease payment, investment property, goodwill, other investment, short and long term receivable, intangible assets, receivable from the State Government, inventories, trade and other receivable, amount due from customers on contract, prepayment, amount due from jointly controlled entities, amount due from associates and bank and cash balance.

Segment liabilities consist of operating liabilities exclude taxation, deferred taxation and borrowing.

Capital expenditure comprises addition to property, plant and equipment and addition to oil and gas properties. Ranhill Berhad (430537-K) 93

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

13 SEGMENT REPORTING (CONT’D) (b) Secondary reporting format - geographical segment

Revenue (external) Capital expenditure Total assets 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Countries Malaysia 1,283,388 1,155,294 365,359 564,383 10,212,694 9,795,215 Sudan 18,982 106,434 42 12 553,898 441,121 Australia 53,979 1,863 0 0 16,413 3,872 Vietnam 33,323 13,135 0 0 5,790 4,477 India 32,084 19,169 0 0 4,603 9,293 Others 48,656 65,738 81,057 21,857 258,553 87,718 1,470,412 1,361,633 446,458 586,252 11,051,951 10,341,696

Associates 48,966 48,757 Asset held for sale 23,906 0 Unallocated assets 792,936 685,603 Total assets 11,917,759 11,076,056

With the exception of the countries disclosed above, no other individual country contributed more than 10% of consolidated revenue or assets.

Although the Group’s business segments are managed on a worldwide basis, they operate mainly in geographical areas as follows:

• Malaysia - mainly construction, engineering, power distribution system and manufacturing activities • Sudan - mainly engineering, procurement, construction and commissioning activities • Australia - mainly engineering services activities • Vietnam - mainly engineering services activities • India - mainly engineering services activities • Others - mainly engineering services activities

14 DIVIDEND PER ORDINARY SHARE Dividend in respect of the financial year is as follows: Group and Company 2007 2006 Gross Amount of Gross Amount of dividend dividend, dividend dividend, per share net of tax per share net of tax Sen RM’000 Sen RM’000 Dividend paid in respect of the financial year ended 30 June 2005 0 0 1.5 6,450 Dividend paid in respect of the financial year ended 30 June 2006 1.5 6,450 0 0 Proposed first and final dividend 1.5 6,540 1.5 6,450

The Directors propose a first and final gross dividend of 1.5 sen (2006: 1.5 sen) per share, less income tax at 27% (2006: 28%) amounting to RM 6,540,050 (2006: RM6,450,460) for the financial year ended 30 June 2007 subject to the approval of members at the forthcoming Annual General Meeting of the Company. 94 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

15 BASIC EARNINGS/(LOSS) PER ORDINARY SHARE The basic earnings per ordinary share of the Group is calculated by dividing the net profit/(loss) for the financial year by the weighted average number of ordinary shares in issue during the financial year. Group 2007 2006 (Restated) Net profit/(loss) attributable to ordinary equity holders of the Company for the financial year (RM’000) 116,833 (12,668) Weighted average number of ordinary shares in issue (‘000) 597,265 597,265

Basic earnings/(loss) per share (sen) attributable to equity holders of the Company - From continuing perations 18.79 (1.03) - From discontinued operations 0.77 (1.09) 19.56 (2.12)

16 PROPERTY, PLANT AND EQUIPMENT Construction Office Bulk Project Construction equipment, equipment, Renovation, Group Land and supply Concession development works plant and and furniture Motor buildings station assets assets in progress machinery computers and fittings vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2007 Cost/valuation As restated 25,330 28,919 5,617,614 1,191,249 643,208 498,061 131,347 21,396 18,710 8,175,834 Arising from disposal of subsidiaries 0 0 0 0 0 (188) (536) 0 0 (724) Write offs 0 0 0 0 0 0 (2,516) (1,087) 0 (3,603) Additions 38 6 0 159,021 157,499 38,936 16,761 4,572 5,147 381,980 Disposals 0 (28,925) 0 0 0 (5,309) (882) (164) (508) (35,788) Reclassification as assets held for sale (4,160) 0 0 0 0 (6,157) (593) (338) (163) (11,411) Currency translation 0 0 0 0 609 (224) (12) (35) (28) 310 At 30 June 2007 21,208 0 5,617,614 1,350,270 801,316 525,119 143,569 24,344 23,158 8,506,598

Accumulated depreciation As restated 4,051 5,159 92,688 17,240 0 108,376 54,655 9,953 9,436 301,558 Charge for the financial year 1,420 1,842 61,099 14,743 967 47,605 20,901 3,998 2,866 155,441 Write offs 0 0 0 0 0 0 (2,489) (1,027) 0 (3,516) Disposals 0 (7,001) 0 0 0 (4,224) (553) (143) (390) (12,311) Arising from disposal of subsidiaries 0 0 0 0 0 (56) (223) 0 0 (279) Reclassification as assets held for sale (802) 0 0 0 0 (4,668) (525) (297) (147) (6,439) Currency translation differences 0 0 0 0 0 32 41 39 (53) 59 At 30 June 2007 4,669 0 153,787 31,983 967 147,065 71,807 12,523 11,712 434,513 Ranhill Berhad (430537-K) 95

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

16 PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Construction Office Bulk Project Construction equipment, equipment, Renovation, Group Land and supply Concession development works plant and and furniture Motor buildings station assets assets in progress machinery computers and fittings vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2007 Impairment At 1 July 2006 290 0 0 0 0 0 0 0 0 290 Addition 425 0 0 0 0 0 0 0 458 883 At 30 June 2007 715 0 0 0 0 0 0 0 458 1,173

Net book value At 30 June 2007 15,824 0 5,463,827 1,318,287 800,349 378,054 71,762 11,821 10,988 8,070,912

(Restated) 2006 Cost/valuation At 1 July 2005 As previously reported at cost 32,362 28,919 5,686,230 832,500 493,358 450,835 98,497 20,252 16,102 7,659,055 at valuation 15,791 0 0 0 0 0 0 0 0 15,791 Reclassification as investment properties (15,876) 0 0 0 0 0 0 0 0 (15,876) Reclassification as prepaid lease payment (6,149) 0 0 0 0 0 0 0 0 (6,149) Effect on changes in accounting policies 4,122 0 0 0 17,306 5,987 971 305 584 29,275 As restated 30,250 28,919 5,686,230 832,500 510,664 456,822 99,468 20,557 16,686 7,682,096

Arising from disposal of subsidiaries 0 0 0 0 0 0 (614) (110) (499) (1,223) Arising from reversal of Ranhill Wilson Transformer (“RWT”) (4,920) 0 0 0 0 (2,743) (148) (94) (77) (7,982) Write offs 0 0 0 0 0 (102) (914) (1,571) 0 (2,587) Additions 0 0 0 358,749 134,658 37,224 33,642 2,788 3,331 570,392 Disposals 0 0 0 0 0 (29) (97) (176) (731) (1,033) Power Station asset 0 0 0 0 (2,114) 2,114 0 0 0 0 Fair value adjustment (arising from acquisition of additional interco) * 0 0 0 0 0 4,775 0 0 0 4,775 Adjustment ** 0 0 (68,616) 0 0 0 0 0 0 (68,616) Currency translation differences 0 0 0 0 0 0 10 2 0 12 96 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

16 PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Construction Office (Restated) Bulk Project Construction equipment, equipment, Renovation, Group Land and supply Concession development works plant and and furniture Motor buildings station assets assets in progress machinery computers and fittings vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2006 Cost/valuation At 30 June 2006 at cost 25,330 28,919 5,617,614 1,191,249 643,208 498,061 131,347 21,396 18,710 8,175,834 at valuation 0 0 0 0 0 0 0 0 0 0 25,330 28,919 5,617,614 1,191,249 643,208 498,061 131,347 21,396 18,710 8,175,834

Accumulated depreciation At 1 July 2005 As previously reported at cost 1,900 2,949 38,581 5,319 0 54,364 33,495 8,388 6,397 151,393 at valuation 679 0 0 0 0 0 0 0 0 679 Reclassification as investment properties (960) 0 0 0 0 0 0 0 0 (960) Reclassification as prepaid lease payment (327) 0 0 0 0 0 0 0 0 (327) Effect on changes in accounting policies 740 0 0 0 0 4,258 797 68 308 6,171 As restated 2,032 2,949 38,581 5,319 0 58,622 34,292 8,456 6,705 156,956

Charge for the financial year *** 2,019 2,210 54,107 11,921 0 49,802 21,466 3,204 3,391 148,120 Write offs 0 0 0 0 0 (19) (911) (1,569) 0 (2,499) Disposals 0 0 0 0 0 (29) (78) (120) (573) (800) Disposal of subsidiary 0 0 0 0 0 0 (121) (18) (87) (226) Reclassification 0 0 0 0 0 0 0 (1) 0 (1) Unidentified difference by RWSG 0 0 0 0 0 0 1 0 0 1 Currency translation differences 0 0 0 0 0 0 6 1 0 7

At 30 June 2006 at cost 4,051 5,159 92,688 17,240 0 108,376 54,655 9,953 9,436 301,558 at valuation 0 0 0 0 0 0 0 0 0 0 4,051 5,159 92,688 17,240 0 108,376 54,655 9,953 9,436 301,558 Ranhill Berhad (430537-K) 97

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

16 PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Construction Office (Restated) Bulk Project Construction equipment, equipment, Renovation, Group Land and supply Concession development works plant and and furniture Motor buildings station assets assets in progress machinery computers and fittings vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 2006 Impairment At 1 July 2005 As previously reported at cost 290 0 0 0 0 0 0 0 0 290

At 30 June 2006 at cost 290 0 0 0 0 0 0 0 0 290 at valuation 0 0 0 0 0 0 0 0 0 0 290 0 0 0 0 0 0 0 0 290

Net book value At 30 June 2006 at cost 20,989 23,760 5,524,926 1,174,009 643,208 389,685 76,692 11,443 9,274 7,873,986 at valuation 0 0 0 0 0 0 0 0 0 0 20,989 23,760 5,524,926 1,174,009 643,208 389,685 76,692 11,443 9,274 7,873,986

* These arose from acquisition of additional interest in subsidiaries as follows: (a) Acquisition of 5.46% additional interest in Ranhill Power by Ranhill Berhad of RM1,975,351. (b) Acquisition of 2.22% additional interest in Ranhill Powertron by Ranhill Power RM 2,799,154. ** The adjustment arose from the revision of concession payment obligations which represents the concession assets capitalised. *** Included in depreciation charged during the financial year is amount capitalised in amounts due from customers 2006 of RM132,163 (2005: RM33,769) and RM32,850 was charged to cost of sales out of the depreciation capitalised in the previous year.

Office Renovation, equipment furniture Motor and computers and fittings vehicles Total Company RM’000 RM’000 RM’000 RM’000 2007 Cost At 1 July 2006 4,476 1,025 2,615 8,116 Additions 278 13 250 541 At 30 June 2007 4,754 1,038 2,865 8,657

Accumulated depreciation At 1 July 2006 1,851 213 1,137 3,201 Charge for the financial year 834 200 544 1,578 At 30 June 2007 2,685 413 1,681 4,779

Net book value At 30 June 2007 2,069 625 1,184 3,878 98 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

16 PROPERTY, PLANT AND EQUIPMENT (CONT’D) Office Renovation, equipment furniture Motor and computers and fittings vehicles Total Company RM’000 RM’000 RM’000 RM’000 2006 Cost At 1 July 2005 3,993 837 2,991 7,821 Additions 488 188 16 692 Disposals 0 0 (392) (392) Written off (5) 0 0 (5) At 30 June 2006 4,476 1,025 2,615 8,116

Accumulated depreciation At 1 July 2005 1,060 27 882 1,969 Charge for the financial year 793 186 523 1,502 Disposals 0 0 (268) (268) Written off (2) 0 0 (2) At 30 June 2006 1,851 213 1,137 3,201

Net book value At 30 June 2006 2,625 812 1,478 4,915

The net book values of property, plant and equipment of the Group and Company acquired under finance lease arrangements are as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Construction equipment, plant and machinery and telecommunication 30 5 0 0 Renovation, furniture and fittings 365 62 0 0 Office equipment and computers 1,893 2,305 1,303 1,706 Motor vehicles 8,795 7,172 1,184 1,478

The net borrowing costs capitalised as part of the property, plant and equipment during the financial year (Note 8) is as follows:

Group 2007 2006 RM’000 RM’000 Interest expense 57,103 49,862 Interest income (1,059) (5,376)

56,044 44,486

The net book value of project development in progress and plant and machinery of Ranhill Utilities Berhad pledged as security for a term loan granted to a subsidiary were RM6,589,000 (2006: RM13,681,000) and RM8,686,000 (2006: NIL) respectively at the balance sheet date. Ranhill Berhad (430537-K) 99

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

17 PREPAID LEASE PAYMENT The Group’s prepaid lease payment comprised: Group 2007 2006 Note RM’000 RM’000 Cost At 1 July 2006/ 1 July 2005 6,682 6,149 Effect on changes in accounting policies 50 0 527 Currency translation difference 50 (13) 6 At 30 June 2007/ 30 June 2006 6,669 6,682

Accumulated depreciation At 1 July 2006/ 1 July 2005 370 327 Effect on changes in accounting policies 50 0 14 Currency translation difference 50 (1) 29 Charge for the financial year 158 0 At 30 June 2007/ 30 June 2006 527 370

Net book value At 30 June 2007/ 30 June 2006 6,142 6,312

The total impairment loss of RM715,171 was made in respect of the leasehold land and building located in Muadzam Syah.

As at 30 June 2007, the title to the long leasehold land of Ranhill Powertron Sdn Bhd (“RPSB”), subsidiary of Ranhill Power Berhad , is in the process of being transferred to RPSB (RM21,505,852).

18 INVESTMENT PROPERTIES The Group’s investment properties comprise of: Freehold land Buildings Total 2007 RM’000 RM’000 RM’000 Cost At 1 July 2006 4,469 11,407 15,876

At 30 June 2007 4,469 11,407 15,876

Accumulated depreciation At 1 July 2006 0 960 960 Charge for the financial year 0 228 228

At 30 June 2007 0 1,188 1,188

Net book value At 30 June 2007 4,469 10,219 14,688 100 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

18 INVESTMENT PROPERTIES (CONT’D) The Group’s investment properties comprise of: Freehold land Buildings Total 2006 RM’000 RM’000 RM’000 Cost At 1 July 2005 4,469 11,407 15,876

At 30 June 2006 4,469 11,407 15,876

Accumulated depreciation At 1 July 2005 0 960 960

At 30 June 2006 0 960 960

Net book value At 30 June 2006 4,469 10,447 14,916

The freehold land and buildings of a subsidiary was accounted for in accordance with the cost model method as prescribed under FRS 140. This is in line with the Group Accounting Policy on investment properties.

There were no external valuations carried out for the above properties. However, the Directors are of the opinion that the estimated market value is RM 24.84 million by reference to similar properties set out in the latest property market reports.

The land title is in the process of being transferred to the name of the subsidiary.

19 INTANGIBLE ASSETS Contractual Rights Licences Total Group RM’000 RM’000 RM’000 2007 Net book value At 1 July 2006 0 6,368 6,368 Arising from acquisition of subsidiaries 18,986 0 18,986 Amortisation charged 0 (183) (183) Currency translation differences 0 227 227 At 30 June 2007 18,986 6,412 25,398

At 30 June 2007 Cost 0 26,982 26,982 Accumulated amortisation 0 (1,754) (1,754) Currency translation differences 0 170 170 Net book value 0 25,398 25,398 Ranhill Berhad (430537-K) 101

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

19 INTANGIBLE ASSETS (CONT’D) Contractual Rights Licences Total Group RM’000 RM’000 RM’000 2006 Net book value At 1 July 2005 0 6,650 6,650 Amortisation charged 0 (382) (382) Currency translation differences 0 100 100 At 30 June 2006 0 6,368 6,368

At 30 June 2006 Cost 0 7,996 7,996 Accumulated amortisation 0 (1,570) (1,570) Currency translation differences 0 (58) (58) Net book value 0 6,368 6,368

20 GOODWILL Group 2007 2006 RM’000 RM’000 (Restated) Net book value At 1 July 2006/ 1 July 2005 29,401 28,819 Arising from acquisition of subsidiaries 22 3,629 Arising from proportionate of JCE of net assets acquired 240 0 Arising from acquisition of additional interest in a subsidiary 0 (1,610) Amortisation charged 0 (1,437) At 30 June 2007/ 30 June 2006 29,663 29,401

At 30 June 2007/ 30 June 2006 Cost 33,178 32,916 Accumulated amortisation and impairment (3,515) (3,515) Net book value 29,663 29,401

Impairment tests for goodwill The carrying amounts of goodwill allocated to the Group’s cash-generating units (“CGUs”) are as follows: Group 2007 2006 RM’000 RM’000 Power generation, transmission and distribution 15,791 15,551 Water 13,732 13,732 Others (individually insignificant to the respective CGUs) 140 118 29,663 29,401 102 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

20 GOODWILL (CONT’D) The recoverable amounts of both the power generation, transmission and distribution and water CGUs are determined based on value-in- use calculations, using pre-tax cash flow projections based on financial budgets approved by the Directors covering a five-year period.

The key assumptions used in the value-in-use calculations are as follows: Power generation, Transmission and Distribution Water % % Gross margin 44.4 59.0 Growth rate 3.7 3.5 Pre-tax discount rate 12.5 12.5

The Directors have determined the budgeted gross margin and the average growth rate based on past performance and their expectations of market development. The discount rate used is pre-tax and reflects specific risks relating to the segment.

21 INVESTMENTS IN SUBSIDIARIES Company 2007 2006 RM’000 RM’000 Cost Quoted shares in Malaysia 748,280 748,280 Unquoted shares 81,000 62,000 829,280 810,280

Market value of quoted shares in Malaysia 645,494 350,532

The quoted shares represent the Company’s investments in Ranhill Power Berhad and Ranhill Utilities Berhad. While the market value of the quoted shares is lower than the Company’s investment in the subsidiaries, the Directors of the Company are of the view that the investments need not be impaired in view of the prospects and cash flows of the companies.

The subsidiaries, all of which are incorporated in Malaysia, unless stated otherwise, are as follows as at 30 June 2007:

Effective Name of subsidiary equity interest Principal activities 2007 2006 % % Held by the Company: Ranhill Utilities Berhad @ 70 70 Investment holding and provision administrative and technical support (“Ranhill Utilities”) services to its subsidiaries, and consultancy services.

Ranhill Power Berhad @ 86 86 Investment holding and manufacture, supply and maintenance of electrical (“Ranhill Power”) switchgears and switchboards.

Ranhill Bersekutu Sdn Bhd @ * 100 100 Provision of engineering, procurement and construction management (“Ranhill Bersekutu”) services (EPCM) and project management services (PMC). Ranhill Berhad (430537-K) 103

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

21 INVESTMENTS IN SUBSIDIARIES (CONT’D) The subsidiaries, all of which are incorporated in Malaysia, unless stated otherwise, are as follows as at 30 June 2007:

Effective Name of subsidiary equity interest Principal activities 2007 2006 % % Held by the Company (continued): Ranhill Civil Sdn Bhd @ * 100 100 Provision of project management services (PMC) and engineering (“Ranhill Civil”) procurement and contraction services (EPC).

Ranhill Engineering and @ * 100 100 Provision of engineering procurement and construction services (EPC). Constructors Sdn Bhd (“REC”)

Ranhill Sri Gading Sdn Bhd (“RSG”)* @ 100 100 Turnkey contracting for the Sri Gading Water Supply Project.

RB Ventures Sdn Bhd @* 100 100 Property investment. (“RB Ventures”)

Ranhill International Inc. (“RII”) @ 100 100 Provision of engineering and construction services overseas and (Incorporated in Labuan, Malaysia) investment holding.

Ranhill (India) Private Limited + 100 100 To carry out the business of EPCM, EPC, construction and Build Operate (Incorporated in India) and Transfer “BOT” in the utilities, infrastructure and the oil and gas sectors.

Ranhill Worley Engineering Sdn Bhd @ 60 60 Dormant (in the process of members voluntary liquidation).

Ranhill WorleyParsons Sdn Bhd @ 51 51 Provision of engineering, procurement and construction management (“RWPSB”) (EPCM), supervision and ancillary services.

MediGlobal Malaysia Sdn Bhd @ 60 60 Provision of procurement services management for the contracting and supply of medical and non-medical equipment to hospital owners/operators, developers, builders, turnkey contractors and international aid and donor organisations that fund healthcare infrastructure development programmes.

Ranhill Energy Sdn Bhd @ 100 100 To undertake energy and energy related works and services. (“Ranhill Energy”)

Ranhill Africa Sdn Bhd 100 100 Provision of engineering procurement and construction services (EPC). (formerly known as Zenith Summit Sdn Bhd)

Ranhill (L) Limited 100 100 To act as a special purpose vehicle for the issuance of any type of securities as permitted under the Offshore Companies Act, 1990.

Golden Active Sdn Bhd 100 100 Investment holding.

Ammona Ranhill Consortium Sdn Bhd 60 60 Provision of engineering procurement and construction services (EPC). 104 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

21 INVESTMENTS IN SUBSIDIARIES (CONT’D) The subsidiaries, all of which are incorporated in Malaysia, unless stated otherwise, are as follows as at 30 June 2007:

Effective Name of subsidiary equity interest Principal activities 2007 2006 % % Held by Ranhill Utilities: SAJ Holdings Sdn Bhd @ 70 70 An integrated water supply services company principally involved in the (“SAJH”) sourcing of raw water, treatment and distribution of treated water to consumers in the State of Johor.

Ranhill Water Technologies Sdn Bhd + 49 49 A comprehensive water treatment plant company which builds, installs and provides technology driven solutions in waste water treatment and potable water supply.

Ranhill Water Services Sdn Bhd @ 70 70 To provide water supply and distribution business solutions, consultancy and water related services.

Ranhill (Nanchang) Wastewater 70 0 Dormant. Treatment Co Ltd (“RNanchang”) (Incorporated in China)

Konsortium Ranhill Nada Cekal Sdn Bhd 70 0 Dormant. (formerly known as Bumi-Astrum Sdn Bhd)

Held by Ranhill Power: Ranhill Powertron Sdn Bhd @ 69 69 Independent power producer. (“Ranhill Powertron”)

Ranhill Power Projects Sdn Bhd @ 86 86 Dormant.

Ranhill Services Sdn Bhd @ 86 86 Maintenance services for electrical substations. (formerly known as Ranhill EPE Services Sdn Bhd)(“EPE”)

Ranhill Powerlink Sdn Bhd @ 86 86 Operations and maintenance services for power distribution systems.

Ranhill Power O&M Sdn Bhd @ 60 60 Operation and maintenance services for power plants.

Ranhill Power Manufacturing Sdn Bhd 86 86 Investment holding. (“RPM”)

Ranhill Trans Bakti Sdn Bhd @ 86 86 Dormant.

Ranhill Power Agency Sdn Bhd @ 86 86 Dormant.

Ranhill Tuaran O&M Sdn Bhd @ 86 86 Dormant.

Ranhill Berhad (430537-K) 105

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

21 INVESTMENTS IN SUBSIDIARIES (CONT’D) The subsidiaries, all of which are incorporated in Malaysia, unless stated otherwise, are as follows as at 30 June 2007:

Effective Name of subsidiary equity interest Principal activities 2007 2006 % % Held by Ranhill Power: (Cont’d) Ranhill Powertron II Sdn Bhd@ 86 86 Independent power producer. (formerly known as Ranhill Tuaran Sdn Bhd)

Nobel Infrastructure Development + 86 86 Investment holding. Holdings Limited (Incorporated in Port Louis Mauritius)

Ranhill Power Distribution Sdn Bhd @ 86 86 Distribution of electricity and design, engineering, construction and project management of power distribution systems (ceased operations).

Ranhill Switchgear Sdn Bhd @ 0 86 Corporatised to undertake manufacture, supply and maintenance of (formerly known as Ranhill EPE electrical switchboards. Ceased as subsidiary upon completion of disposal Switchgear Sdn Bhd) on 15 May 2007.

Held by Ranhill Civil: Ranhill Antara Koh Sdn Bhd (“RAK”) @ 51 51 To identify, secure and undertake land and marine piling works, marine structures related civil engineering works in Malaysia as well as globally except for Singapore where Malaysian entities and/or Malaysian investors are involved. Held by REC: Ranhill Middle East FZE @@ 100 100 Sourcing financing, managing funds, executing projects, marketing, (Incorporated in United Arab Emirates) business development and procurement.

Ranhill Pakistan (Private) Limited + 100 100 Engineering, procurement and construction and investment holdings. (Incorporated in The Republic of Pakistan)

Held by Ranhill Energy: PT Ranhill Parahyangan Ranhill Energia Citarum 60 60 Dormant (in the prosess of liquidation). (Incorporated in Indonesia)

West Java Energy Pte Ltd + 100 100 Investment holding and oil and gas exploration. (Incorporated in Singapore)

Ranhill Jambi Inc. Holdings Pte Ltd + 80 80 Investment holding and oil and gas exploration. (Incorporated in Singapore)

PT Ranhill Energy Indonesia 100 0 Investment holding and oil and gas exploration. (Incorporated in Indonesia) 106 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

21 INVESTMENTS IN SUBSIDIARIES (CONT’D) The subsidiaries, all of which are incorporated in Malaysia, unless stated otherwise, are as follows as at 30 June 2007:

Effective Name of subsidiary equity interest Principal activities 2007 2006 % % Held by Golden Active Sdn Bhd: Moretta Finance B.V + 100 100 Investment holding. (Incorporated in Netherlands)

Held by Ranhill Water Technologies Sdn Bhd: KWI (Guangzhou) Environmental 25 25 Engaged in project management, infrastructure, civil and engineering Engineering Technology Co. Ltd. + services for consumption water and waste water treatment plant. (Incorporated in China) (ceased operation).

Konsortium Ranhill Nada Cekal Sdn Bhd 0 49 Dormant. (formerly known as Bumi-Astrum Sdn Bhd) +

AnuRAK Water Treatment 49 49 To render service for production of and to manufacture for sale, distribute Facilities Co. Ltd.+ potable water, treated waste water and reclaimed water for domestic and (Incorporated in Thailand) industrial use, by-products and related products, waste water treatment, including import the raw materials.

Ranhill Water Technologies (Shanghai) Ltd 49 0 Dormant. (Incorporated in China)

Top Zone Solution Sdn Bhd 49 0 Dormant.

Ranhill Water Technologies (Thai) Ltd 49 49 Engaged in providing consultancy, project management, engineering supply, Co. Ltd.+ construction and operation for potable water, waste water treatment (Incorporated in Thailand) and industrial waste water treatment.

Held by West Java Energy Pte. Ltd.: Bumi Parahyangan Ranhill Energia + 60 60 To carry on business exploration and exploiting petroleum and natural Citarum Pte. Ltd. gas sector. (Incorporated in Singapore)

Held by Ranhill Jambi Inc. Holdings Pte Ltd: Ranhill Jambi Inc. Pte Ltd + 80 80 Oil and gas exploration. (Incorporated in Singapore)

@ Audited by PricewaterhouseCoopers, Malaysia. @@ Audited by an member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia. + Audited by firm other than member firm of PricewaterhouseCoopers International Limited. * Subsidiaries consolidated under the merger method of accounting. Ranhill Berhad (430537-K) 107

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

22 INVESTMENTS IN ASSOCIATES

Group 2007 2006 RM’000 RM’000 Unquoted shares, at cost 28,321 28,321 Redeemable Preference Shares 20,482 20,482 Share of post acquisition profits, less losses 163 (46) 48,966 48,757

Share of net assets 48,966 48,757

The Group’s share of revenue, profit, assets and liabilities of associates are as follows:

Revenue 7,959 7,992 Profit after tax 209 (490)

Non-current assets 2,257 2,996 Current assets 30,681 29,980 Current liabilities (11,112) (9,405) Non-current liabilities (13) (50) Per acquisition reserve (20,206) (22,195) Fair value adjustment 24,529 26,949 Currency translation difference 2,348 0 Net assets 28,484 28,275 Redeemable Preference Shares 20,482 20,482 48,966 48,757

The details of the associates are as follows:

Effective Name of associate equity interest Principal activities 2007 2006 % % Held by the Company: Urusan Teknologi Wawasan Sdn Bhd + 25 25 Provision of facilities management and maintenance contractor. (“UTW”)

Held by Ranhill Bersekutu: PLT Asia (Airport Consultants) Sdn Bhd + 30 30 Project management consultancy and investment holding.

Held by Ranhill Energy: Ellipse Energy Jatirarangon Wahana + 49 49 Exploration, extraction, production, marketing and development Limited (“EEJW”) of oil and natural gas. (Incorporated in Bermuda)

+ Audited by firm other than member firm of PricewaterhouseCoopers International Limited. 108 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

22 INVESTMENTS IN ASSOCIATES (CONT’D) Ranhill Energy was granted an option to acquire an additional 2% equity interest and 2% Redeemable Preference Shares (“RPS”) from the other shareholder of EEJW at a total consideration of USD3,499,760 plus the nominal value of the shares that constitute 2% of the equity shares and 2% of the RPS of EEJW at the time of exercise of the option. The option period will commence from the date of a professional report on the evaluation of the reserves after wells have been drilled and flow tested, and shall lapse 180 days thereafter. As at the balance sheet date, the testing had yet to commence.

The Group subscribed for 5,390,000 non-voting RPS of USD 1.00 each in EEJW for a consideration of USD5,390,000 on 11 June 2004. The salient features of the RPS are as follows: (a) The RPS bear zero coupon and unsecured; (b) The RPS have no fixed terms of redemption except that provided in the EEJW’s Shareholders’ Agreement no dividend is to be paid to equity shareholders unless the RPS are redeemed; (c) The shareholders have the right at any time and from time to time to redeem the whole or some of the issued RPS; (d) The RPS shall not be convertible into ordinary shares.

23 OTHER INVESTMENTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Cost (Restated) Quoted loan stocks 551 551 0 0 Less: Allowance for diminution in value (412) (463) 0 0 139 88 0 0 Unquoted loan stocks 139,488 62,733 135,880 59,125 139,627 62,821 135,880 59,125

Market value of quoted loan stocks 139 88 0 0

Included in unquoted loan stocks are as follows: (a) An amount of RM2.2 million, which are shares yet to be issued by Laraib Energy Limited, a jointly controlled entity subject to agreement between shareholders of Laraib Energy Limited. The audited accounts for the financial year ended 30 June 2007 of Laraib Energy Limited has disclosed the same. (b) 135,880,005 units of RM1.00 each Irredeemable Convertible Unsecured Loan Stocks “(ICULS”) amounting to RM135.88 million subscribed in Senai-Desaru Expressway Berhad (“SDEB”) made pursuant to the subscription agreement with SDEB for the proposed subscription of RM 215,000,000 nominal value of ICULS on June 22, 2005. The issuance of ICULS by SDEB is conditional upon the conditions set out in the subscription agreement.

On 22 June 2005, the Company entered into a subscription agreement with SDEB for the proposed subscription of RM215,000,000 nominal value of ICULS. Ranhill Berhad (430537-K) 109

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

23 OTHER INVESTMENTS (CONT’D) Subscription schedule Date Tranche No. Amount (RM) 16 December 2005 1st Tranche 25,585,000 16 February 2006 2nd Tranche 12,900,000 16 May 2006 3rd Tranche 20,640,000 30 August 2006 4th Tranche 18,060,000 30 November 2006 5th Tranche 19,135,000 28 February 2007 6th Tranche 15,910,000 31 May 2007 7th Tranche 23,650,000 30 August 2007 8th Tranche 19,350,000 30 November 2007 9th Tranche 18,920,000 28 February 2008 10th Tranche 10,750,000 31 May 2008 11th Tranche 30,100,000 Total 215,000,00

24 LONG TERM RECEIVABLES Group 2007 2006 RM’000 RM’000 Receivable from SAJSB for Sri Gading Water Supply Project 38,948 47,446 Amount receivable within 12 months from SAJSB for Sri Gading Water Supply Project (included under trade receivables) (11,330) (8,498) Deferred value added tax recoverable on oil and gas production 4,443 0 Others 0 1,704 32,061 40,652

(a) The balance of long term receivables of RM27.618 million is denominated in Ringgit Malaysia and is being repaid by SAJSB following the completion of the Sri Gading Water Supply Project. It is being paid in 40 unequal quarterly instalments and commencing from 26 June 2000. The carrying value at balance sheet date was not reduced to the estimated fair value of RM27,157,419 (2006: RM38,321,707) as the Directors are of the opinion that the amount will be repaid in full at the end of the repayment period.

The Group obtained Term Loan 2 (see Note 42) to finance this debt and the interest incurred is charged to SAJSB. Accordingly, the interest receivable is presented as a deduction from the term loan interest payable in the income statement

Group 2007 2006 RM’000 RM’000 Interest expense 3,775 4,205 Interest income (3,775) (4,205) Net borrowing costs 0 0

The effective interest rate applicable to the long term receivables due from SAJSB as at the balance sheet date was 8.58% (2006: 8.55%) per annum.

(b) Deferred value added tax incurred on activities relating to the Group’s petroleum operations is recoverable, via oil and gas produced in the contract areas. The fair value of deferred value added tax as at 30 June 2007 is RM4,000,000, calculated based on cash flows discounted at the market borrowing rate of 8.25% per annum. 110 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

25 INVESTMENT IN OIL AND GAS PROPERTIES The Company, through its wholly-owned subsidiary, Ranhill Energy Sdn Bhd (“RESB”) has incorporated a 60% subsidiary company, namely PT Bumi Parahyangan Ranhill Energia Citarum (“PTBPREC”) in Indonesia, with 2 joint-venture partners, PT Bumi Parahyangan Energi (“BPE”) and Mitra Energia Limited. PT BPREC is the contractor to carry out the exploration, development and production of petroleum located in Citarum Block, West Java Province, Indonesia under a Production Sharing Contract (“PSC”) with Badan Pelaksana Kegiatan Usaha Hulu Minyak dan Gas Bumi (“BPMIGAS”), Indonesia dated 7 October 2005.

Under the relevant Joint Operating Agreement (“JOA”), PT BPREC transferred all of its interest in the PSC to Bumi Parahyangan Ranhill Energia Citarum Pte Ltd (“BPRECPL”) a company incorporated in Singapore. BPRECPL is 60% owned by RESB through its wholly-owned subsidiary, West Java Energy Pte Lte (incorporated in Singapore) with 2 joint-venture partners, Bumi Parahyangan Energi Pte Ltd and Mitra Energia Citarum Ltd (collectively known as the “JV Partners”). BPRECPL is the operator in the areas covered by the PSC. All costs and entitlements relating to the respective contracts are shared between the JV Partners in accordance with the terms of the JOA.

Under the PSC, the JV Partners fund the works as outlined in the Approved Work Programme and Budget (‘WP&B’) and are entitled to recover costs from production (referred to as “cost oil” and “cost gas”), subject to the cost oil/gas limit of the respective PSC. Costs remaining unrecovered in any quarter can be carried forward for recovery against production in subsequent quarters. The JV Partners’ share of production also include an element of profit (referred to as “profit oil” and “profit gas”).

Tangible Intangible Total 2007 RM’000 RM’000 RM’000 Cost At 1 July 2006 0 15,843 15,843 Addition 14,332 50,210 64,542 Currency translation difference 0 (990) (990) At 30 June 2007 14,332 65,063 79,395

Accumulated amortisation At 1 July 2006 0 258 258 Charge for the financial year 0 566 566 Currency translation difference 0 (16) (16) At 30 June 2007 0 808 808

Net book value At 30 June 2007 14,332 64,255 78,587

2006 Cost At 1 July 2005 0 0 0 Addition 0 15,843 15,843 At 30 June 2006 0 15,843 15,843

Accumulated amortisation At 1 July 2005 0 0 0 Charge for the financial year 0 258 258 At 30 June 2006 0 258 258

Net book value At 30 June 2006 0 15,585 15,585 Ranhill Berhad (430537-K) 111

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

26 RECEIVABLE FROM THE STATE GOVERNMENT The receivable from the State Government represents a capital consideration receivable from the State Government in consideration for SAJH in agreeing to undertake the design and construction of 159 Mld water treatment plant at Semangar, Johor together with the related distribution system (“Semangar assets”). The capital consideration that the State Government is obligated to pay SAJH is the sum total of the RM600 million borrowing from BPMB together with all related costs and principalised interest to-date so that SAJH is able to meet the amount due on each relevant repayment date or interest payment date of the borrowing from BPMB as set out in Note 42.

The State Government has assigned the raw water proceeds arising from the sale of raw water by the State Government to Singapore to ensure that SAJH is able to meet its obligations to BPMB.

27 DEFERRED TAXATION Deferred tax assets and liabilities 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 tax authority. The following amounts, determined after appropriate offsetting are shown in the balance sheet. Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) At the beginning of the financial year Deferred tax assets 19,797 11,961 0 0 Deferred tax liabilities (366,072) (329,079) 0 0 (346,275) (317,118) 0 0 Credited/(charged) to income statement (Note 12) - property, plant and equipment (4,985) (54,359) 0 0 - tax losses (5,590) 25,396 0 0 - foreign exchange differences (5,050) 0 (5,050) 0 - provisions (6,141) 1,832 0 0 - other 1,054 (2,305) (4,356) 0 (20,712) (29,436) (9,406) 0 Acquisition of interest in subsidiaries 0 (644) 0 0 Disposal of subsidiaries (Note 50) 0 101 0 0 Other 803 822 0 0

(366,184) (346,275) (9,406) 0

At the end of the financial year Deferred tax assets 20,393 19,797 0 0 Deferred tax liabilities (386,577) (366,072) (9,406) 0

(366,184) (346,275) (9,406) 0

Subject to income tax Deferred tax assets (before offsetting) - property, plant and equipment 256 1,050 0 - tax losses 48,394 53,984 0 0 - others 8,916 13,201 5,523 0 57,566 68,235 5,523 0 Offsetting (37,173) (48,438) (5,523) 0

Deferred tax assets (after offsetting) 20,393 19,797 0 0

112 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

27 DEFERRED TAXATION (CONT’D) Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Deferred tax liabilities (before offsetting) - property, plant and equipment 418,700 414,510 0 0 - foreign exchange differences 5,050 0 5,050 0 - others 0 0 9,879 0 Offsetting (37,173) (48,438) (5,523) 0

Deferred tax liabilities (after offsetting) 386,577 366,072 9,406 0

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through the future taxable profits is probable. The Directors are of the opinion that the Group will be able to reduce tax payable in view of future profits and benefits accruing to the Group from projects which have been awarded and are to be awarded to the Group to which the deferred tax asset relates. The tax losses have no expiry date.

The amount of unabsorbed capital allowances and unused tax losses (both of which have no expiry date) for which no deferred tax asset is recognised are as follows: Group 2007 2006 RM’000 RM’000 (Restated) Unabsorbed capital allowances 43,050 47,282 Tax losses 101,050 58,268 Allowance from petroleum income tax 26,240 2,643 Discontinued operations - unabsorbed capital allowances 0 11,585 - tax losses 3,256 0

The Group has an investment tax allowance not recognised amounted to RM259.7 million as at 30 June 2007 (2006: RM259.7 million).

(i) In respect of one of its subsidiaries, Ranhill Powertron Sdn Bhd’s reinvestment tax allowances as at 30 June 2007 amounted to RM259.7 million. The evaluation to ascertain the impact of adopting the amended FRS 112 on the financial statements shall be performed in the forthcoming financial year in which the standard shall take effect.

(ii) In respect of one of its subsidiaries, SAJ Holdings Sdn Bhd (‘SAJH’), SAJH has been granted Approved Service Project (“ASP”) – Investment Allowance (“IA”) incentive under Schedule 7(b) of Income Tax Act 1967. The amount of IA granted to SAJH is 60% of qualifying expenditure incurred within five years from the date the qualifying capital expenditure is first incurred starting in year 2000. This incentive can be set-off against 70% of the statutory income. SAJH is in the process of submitting a formal claim in this respect. Subject to detailed evaluation of the claim and approval of the claim by tax authorities, the actual impact on the financial statement shall be determined in the forthcoming financial year on the adoption of suitable accounting policy by the Directors. Ranhill Berhad (430537-K) 113

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

28 INVENTORIES Group 2007 2006 RM’000 RM’000 (Restated) At cost Raw materials 82 0 Work-in-progress 0 13 Distillates 5,191 5,389 Water meters 0 1,340 Consumables and spares 1,984 2,185 Oil and gas material 8,418 0 15,675 8,927

At net realisable value Raw materials 0 13,724 Work-in-progress 0 11,174 Finished goods 0 1,802 Water meters and water pipes 6,573 7,502 Consumables and spares 143 540 6,716 34,742 22,391 43,669

29 TRADE AND OTHER RECEIVABLES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Trade receivables 213,529 201,506 0 2 Less: Allowance for doubtful debts (42,676) (46,606) 0 0 170,853 154,900 0 2

Amounts due from related parties (Note 57(a)) 199,766 165,016 332 9 Other receivables 39,907 34,389 8,313 6,115 Interest receivables 10,385 27 10,490 0 Deposits 12,519 7,630 664 487 262,577 207,062 19,799 6,611 433,430 361,962 19,799 6,613

Trade receivables and other receivables of the Group include retention sums receivable of RM29.872 million (2006: RM29.630 million).

The credit period granted for trade receivables ranges from 15 to 90 (2006: 14 to 90) days. The Group is exposed to concentration of significant amounts due from related parties and agencies/ministries of the Government of Malaysia. 114 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

29 TRADE AND OTHER RECEIVABLES (CONT’D) The currency exposure profile of trade and other receivables is as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Ringgit Malaysia 414,855 329,254 19,799 6,613 US Dollar 9,994 30,474 0 0 UAE Dirham 1,532 0 0 0 Thai Baht 2,712 522 0 0 Euro 0 1,095 0 0 Australian Dollar 78 42 0 0 Chinese Renminbi 268 0 0 0 Saudi Arabian Riyal 2,049 0 0 0 Pakistan Rupee 1,389 575 0 0 Others 553 0 0 0 433,430 361,962 19,799 6,613

30 AMOUNT DUE FROM/(TO) CUSTOMERS ON CONTRACTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Contract costs incurred to date 4,322,996 3,736,239 81,846 65,216 Recognised profits less losses 507,842 443,605 (3,869) (2,566) 4,830,838 4,179,844 77,977 62,650 Less: Progress billings to date (4,367,835) (3,680,185) (51,335) (51,146) 463,003 499,659 26,642 11,504

Amounts due from customers on contracts 783,925 652,803 26,642 11,504 Amounts due to customers on contracts (320,922) (153,144) 0 0 463,003 499,659 26,642 11,504

Retention on contracts - included in trade receivables 29,872 29,630 0 0 - included in trade payables 92,320 56,123 0 0

Included in payables of the Group at balance sheet are advances received on contract of RM301,544,200 (2006: RM100,000,000).

Included in amount due from customers on contracts are capitalised borrowing costs of RM17.113 million (2006: RM2.851 million).

Amount due from customers principally comprises contract work in progress in respect of certain projects undertaken by the Group in Malaysia and internationally, where costs have been incurred over and above the original contract sum. The Group has submitted claims to the customers for costs incurred in respect of such projects. These claims include the cost of schedule delays leading to prolongation costs, claims for extra work, disruption costs, finance costs and other related miscellaneous claims. Ranhill Berhad (430537-K) 115

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

30 AMOUNT DUE FROM/(TO) CUSTOMERS ON CONTRACTS (CONT’D) As referred to in Note 2(i) to the financial statements, cost incurred in respect of Melut Basin Oil Development project in Sudan comprises the following: Group 2007 2006 RM’000 RM’000 Included in amount due from customers on contract 416,473 366,009 Included in amount due from jointly controlled entities (Note 32) 230,303 169,344 646,776 535,353

The currency exposure profile of amount due from customers on contracts is as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 273,185 263,244 0 0 US Dollar 466,568 389,483 26,642 11,504 Chinese Renminbi 44,115 38 0 0 Thai Baht 57 0 0 0 Australian Dollar 0 38 0 0 783,925 652,803 26,642 11,504

The currency exposure profile of amount due to customers on contracts is as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 319,716 150,709 0 0 US Dollar 1,206 2,420 0 0 Euro Dollar 0 15 0 0 320,922 153,144 0 0

31 AMOUNTS DUE FROM/(TO) SUBSIDIARIES (a) Amounts due from subsidiaries The amounts due from subsidiaries are denominated in Ringgit Malaysia and represent advances which are unsecured, interest free (with an exception of advances to Ranhill International Inc. in relation to the Melut Basin Project of which interest is charged at arms’ length basis) and have no fixed terms of repayment except for the following amounts which represent bank facilities obtained by the Company for the utilisation of its subsidiaries: Effective interest rate Company 2007 2006 2007 2006 Denominated in: % % RM’000 RM’000 Ringgit Malaysia Principal sum outstanding 7.50 6.66 44,472 100,000 Interest accrued 0 0 0 795 Interest receivables 0 0 3,335 0

US Dollar Principal sum outstanding 12.50 5.01 265,121 183,750

Interest incurred on the bank facilities is charged to the relevant subsidiaries at cost. 116 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

31 AMOUNTS DUE FROM/(TO) SUBSIDIARIES (CONT’D) (b) Amounts due to subsidiaries The amounts due to subsidiaries are denominated in Ringgit Malaysia and represent advances which are unsecured, interest charged at arms’ length basis and have no fixed terms of repayment except for a loan from Ranhill Utilities Berhad (“RUB”) amounting to RM40 million at an interest rate of 3.1% to be repaid by 31 October 2007. A further 6 (six) months (to 30 April 2008) extension has been requested, pending RUB’s board approval.

32 AMOUNTS DUE FROM JOINTLY CONTROLLED ENTITIES As referred to in Note 2 to the financial statements, included in amounts due from jointly controlled entities is an amount due from joint venture partner of Melut Basin Oil Development project, Petroneeds International Inc, amounting to RM230.657 million (2006: RM170.058 million) and non-trade balances of RM0.142 million (2006: RM7.833 million). The non-trade balance is unsecured, interest free and without fixed terms of repayment.

The details of the jointly controlled entities are as follows:

Effective Name of jointly controlled entity equity interest Principal activities 2007 2006 % % Held by Ranhill Water Technologies Sdn Bhd: Pinang Water Ltd + (Incorporated in Labuan, Malaysia) 18 18 Investment holding, rendering, consultancy services, in water management and trading of water treatment equipment. Held by RPM: Ranhill Wilson Transformer Sdn Bhd @ 60 60 Manufacture and sale of distribution transformers (ceased as jointly (“RWT”) controlled entity with effect from 10 August 2007).

Held by Ranhill Power: Laraib Energy Limited @@ 41 41 Dormant – Intended to be an independent power producer. (Incorporated in Pakistan)

Held by RII: Ranhill-Petroneeds Joint Venture + 55 55 To execute the project of Melut Basin Oil Development: (“Ranhill-Petroneeds JV”) - Upstream Facilities Engineering, Procurement, Construction and (Unincorporated joint venture) Commissioning for the Al-Jabalyn Central Processing Facilities, Palouge field Production Facilities & Operational Base Camps.

@ Audited by PricewaterhouseCoopers, Malaysia. @@ Audited by an member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia. + Audited by firm other than member firm of PricewaterhouseCoopers International Limited.

33 AMOUNTS DUE FROM/(TO) AN ASSOCIATE The amounts due to the associate is denominated in Ringgit Malaysia and represents trade balances. The trade balances is unsecured, interest free and without fixed terms of repayment. Ranhill Berhad (430537-K) 117

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

34 DEPOSITS, BANK AND CASH BALANCES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Unrestricted: Bank and cash balances (Note 54) 374,933 311,155 11,539 1,309 Deposits with licensed banks (Note 54) 562,688 439,941 0 0

Restricted: Bank and cash balances 0 37,355 0 0 Deposits with licensed banks 203,011 214,578 0 52,342 1,140,632 1,003,029 11,539 53,651

The weighted average effective interest rate per annum of deposits that was effective as at balance sheet date were as follows:

Group Company 2007 2006 2007 2006 % % % % Deposits with licensed banks 2.30-9.11 2.15-3.73 0 0

Deposits with licensed banks of the Group and Company that are pledged with banks are securities for bank facilities and for USD220 million bond Debt Service Reserve Account.

The utilisation of the deposits, bank and cash balances in SAJH of RM607.631 million (2006: RM420.820 million) is subject to compliance with certain financial covenants which include Finance Service Cover Ratio and Debt Service Cover Ratio. Included in deposits with licensed banks are deposits of SAJH amounting to RM Nil (2006: RM138.336 million), the use of which is restricted for the purpose of financing the capital expenditure as stipulated in the Trust Debts of BaIDS entered into by SAJH in 11 October 2004.

Deposits of the Group and Company have maturity periods that range between 6 to 375 (2006: 3 to 360) days. Bank balances are deposits held at call with banks.

Included in deposits of the Group are deposits made in Islamic financial instruments amounting to RM474.256 million and RM5.984 million (2006: RM330.155 million and RM24.216 million) respectively.

The currency exposure profile of deposits, bank and cash balances are as follows:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Ringgit Malaysia 861,777 991,079 11,445 53,150 US Dollar 101,139 7,481 13 298 Indian Rupee 111 220 81 203 Thai Baht 1,561 632 0 0 Libyan Dinar 168,424 0 0 0 Others 7,620 3,617 0 0 1,140,632 1,003,029 11,539 53,651 118 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

35 DISCONTINUED OPERATIONS Discontinued operations reflected in the income statement relate to the disposals of Ranhill Switchgear Sdn Bhd for a total consideration of RM3,800,000 which was completed on 15 May 2007 and Ranhill Power Manufacturing Sdn Bhd’s 70% equity interest in Ranhill Wilson Transformer Sdn Bhd for a total consideration of RM7,350,000, which was completed on 10 August 2007.

(i) Income statement Group 2007 2006 RM’000 RM’000 Revenue 100,102 99,492 Cost of sales (89,927) (96,480) Gross profit/(loss) 10,175 3,012 Other operating income 14,899 1,660 Administrative expenses (6,037) (8,257) Tendering and marketing expenses (454) (512) Provision for foreseeable loss (9,044) 0 Finance cost (2,760) (2,621) Profit/(loss) before tax 6,779 (6,718) Tax expense (1,467) (789) Profit/(loss) after tax 5,312 (7,507)

(ii) Balance sheet Group 2007 2006 RM’000 RM’000 Assets Non Current Assets Property, plant and equipment 3,440 0 Current Assets Inventories 11,137 0 Trade and other receivables 5,727 0 Tax recoverable 105 0 Deposits, cash and bank balances 3,497 0 20,466 0 Assets classified as held for sale 23,906 0

Equity And Liability Share capital 4,900 0 Equity relating to assets classified as held for sale Reserve 1,985 0 6,885 0 Non Current Liabilities Finance lease creditors 12 0 Deferred tax liabilities 678 0 690 0 Ranhill Berhad (430537-K) 119

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

35 DISCONTINUED OPERATIONS (CONT’D) (ii) Balance sheet (Cont’d) Group 2007 2006 RM’000 RM’000 Current Liabilities Trade and other payables 6,724 0 Borrowings 8,431 0 Tax liabilities 1,176 0 16,331 0 Liabilities associated with assets classified as held for sale 17,021 0 23,906 0

36 TRADE AND OTHER PAYABLES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated)

Trade payables 414,562 399,198 0 0 Amounts due to related parties (Note 57) 98,825 170,289 3 27 Finance lease liabilities (Note 41) 96,553 3,283 935 1,121 Other payables and accruals 368,328 203,785 22,414 3,832 Interest payable 113,738 65,951 15,813 2,140 Unpaid property, plant and equipment acquired (Note 51) 47 305 5 5 1,092,053 842,811 39,170 7,125

The currency exposure profile of trade and other payables is as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Ringgit Malaysia 745,608 712,529 23,357 7,009 US Dollar 109,714 122,468 15,813 116 Japanese Yen 0 766 0 0 Sterling Pound 489 503 0 0 Australian Dollar 3,408 2,055 0 0 Singapore Dollar 667 747 0 0 UAE Dirham 541 0 0 0 Thai Baht 2,756 1,461 0 0 Chinese Renminbi 1,196 1,087 0 0 Pakistan Rupee 4,989 0 0 0 Euro Dollar 3,608 421 0 0 Libyan Dinar 213,845 0 0 0 Sudanese Dinar 4,591 0 0 0 Others 641 774 0 0 1,092,053 842,811 39,170 7,125

Credit period for trade payables varies from 30 to 365 (2006: 30 to 365) days. 120 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

37 COMSUMER DEPOSITS Group 2007 2006 RM’000 RM’000 Deposits received 129,920 117,800 Less: Long term receivables (84,674) (84,674) 45,246 33,126

This represents consumer deposits, net of deposits assumed from SAJSB, the former water operator pursuant to the CA.

The carrying value of the consumer deposits at the balance sheet date was not reduced to the fair value of RM9,116,000 (2006: RM6,690,000) as the Directors are of the opinion that the amount will be settled in full at the end of the Concession Period.

38 SHORT TERM BORROWINGS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Unsecured Bank overdrafts (Note 54) 47,206 60,016 10,056 12,366 Bankers acceptances/trust receipts 11,511 15,313 0 0 Term loan (Note 42) 159 172 0 0 Discounted bills 0 15,328 0 0 Revolving credit 22,114 25,700 0 0 80,990 116,529 10,056 12,366

Secured Bank overdrafts (Note 54) 852 0 0 0 Bankers acceptances/trust receipts 107,757 44,032 0 6,810 Revolving credit 18,000 9,999 0 0 Term loans (Note 42) 88,258 306,432 50,000 292,875 214,867 360,463 50,000 299,685 295,857 476,992 60,056 312,051

The trust receipts and bank overdrafts are secured over certain deposits with licensed banks as disclosed in Note 34.

Bank overdrafts, bankers acceptances, discounted bills, revolving credits, trust receipts and short term loans of the Group bear interest rates ranging from 3.79% to 9.30% (2006: 3.50% to 8.55%) per annum as at balance sheet date. Bank overdraft, revolving credit, trust receipts and term loan of the Company bears interest rate of 7.88% (2006: 8.25%) per annum, Nil (2006: Nil) per annum, Nil to Nil (2006: 7.08% to 7.75%) per annum and 8.75% (2006 : Nil) per annum, respectively as at balance sheet date. Ranhill Berhad (430537-K) 121

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

38 SHORT TERM BORROWINGS (CONT’D) The currency exposure profile of short term borrowings is as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Unsecured Ringgit Malaysia 80,774 112,848 10,056 12,366 US Dollar 159 172 0 0 Thai Baht 56 0 0 0

Secured Ringgit Malaysia 161,738 172,310 50,000 109,125 US Dollar 51,277 191,221 0 190,560 Thai Baht 1,853 441 0 0 295,857 476,992 60,056 312,051

39 PROVISION FOR RETIREMENT BENEFITS Group 2007 2006 RM’000 RM’000 At the beginning of the financial year 21,530 14,028 Charged to income statement (Note 9) - current service cost 2,977 3,144 - interest cost 2,240 2,262 - amortisation of transitional liability 3,165 3,215 - settlement loss 1,355 0 - actuarial loss recognised 545 931 10,282 9,552 Benefit paid (1,807) (2,050) At the end of the financial year 30,005 21,530

The amount recognised in the balance sheet are determined as follows:- Group 2007 2006 RM’000 RM’000 Present value of unfunded obligations 39,882 26,134 Unrecognised transitional liability (1,478) (4,604) Unrecognised actuarial loss (8,399) 0 Liability recognised in the balance sheet 30,005 21,530

Representing: Current liabilities 2,078 1,390 Non current liabilities 27,927 20,140 30,005 21,530 122 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

39 PROVISION FOR RETIREMENT BENEFITS (CONT’D) The retirement benefits obligations are made for the non-funded benefits plan. The liability is accrued at the present value of the defined benefit obligations using the projected unit method. The principal assumptions used are as follows: Group 2007 2006 % % Discount rate 6.50 6.50 Salary increase rate 5.00 5.00

40 CONCESSION LIABILITIES (a) Service concession arrangement The principal activities of SAJH, the subsidiary of Ranhill Utilities Berhad, are to process and treat raw water and supply treated water to consumers within a designated area for the period of thirty years (“Concession Period”) commencing from the year 2000 pursuant to the Concession Agreement (“CA”) dated 20 April 1999 signed by the State Government of Johor (“the State Government”), SAJSB, Lambang Optima Sdn. Bhd. and SAJH.

The following are certain terms of the concession granted to the Company under the CA dated 20 April 1999:

(i) Life of concession and water treatment assets The State Government has granted SAJH the sole and exclusive rights to use the water infrastructure assets and to carry out water supply services for 30 years commencing from 1 March 2000.

(ii) Concession obligations SAJH is obligated to pay concession liabilities to the State Government over the Concession Period.

In addition to the concession liabilities under the CA, SAJH is to pay a fixed monthly payment (“FMP”) for rights of use of water treatment plants of bulk water suppliers and a bulk supply rate (“BSR”) for treated water to be purchased by the State Government and SAJSB from these suppliers. As part of the tariff negotiations, SAJH agreed to accept a revised Schedule Tariff with effect from 1 January 2007 (lower than 2003 Schedule Tariff ).

Pursuant to this, SAJH was discharged from its obligation to pay the FMP and BSR with effect from 1 January 2006. At even date, a Water Supply Agreement and a conditional lease agreement (“WSA”) were entered into on 30 December 2005.

Under the WSA, the State Government through State Secretary Inc, incorporated Johor Special Water Sdn Bhd (“JSW”) to supply treated water to SAJH for a period of three months from the date of the WSA (“initial supply period”) for a consideration of RM90 million payable on a deferred payment basis over 7 years. It was envisaged that the lease agreement shall take effect upon the expiry of the initial supply period and take over of the assets of the bulk water suppliers by JSW. However on 29 March 2006, the lease agreement did not take effect since JSW did not conclude the take over of the water treatment plants of the bulk water suppliers and the WSA was extended up to 29 May 2014.

Under the WSA, SAJH is obligated to pay a total consideration of not exceeding RM1,015 million for supply of treated water beyond the initial supply period. The manner and timing of these payments is subject to negotiations with the State Government.

(iii) Programme of Works (“POW”) SAJH is required to undertake capital expenditure works to meet the increase in water demand over the Concession Period. Under the CA, SAJH is obligated to increase its water treatment capacity in Johor by 1,337 Mld over the Concession Period. The POW includes new and expansion of current water treatment plants, distribution networks and an extensive asset replacement programme to reduce the Non-Revenue Water level to 20% by year 2010. Ranhill Berhad (430537-K) 123

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

40 CONCESSION LIABILITIES (CONT’D) (a) Service concession arrangement (Cont’d) (iv) Transfer of assets upon expiry of concession period Upon expiry of the Concession Period, the Company shall immediately transfer its shares in SAJH to the State Government for a nominal consideration of RM1.00.

(v) Tariff According to the CA, the supply of treated water is charged in accordance to the Scheduled Tariff (water supply Tariff to be charged by SAJH for a particular purpose or class of consumers), provided that the SAJH’s Internal Rate of Return (“IRR”) is within the Agreed IRR Band of 14% to 18% over the Concession Period. The Scheduled Tariff is to be submitted to the State Government for approval. The Agreed Tariff (approved Scheduled Tariff) will be gazetted and shall take effect for the applicable operating period on the relevant Tariff Adjustment Dates. The Tariff Adjustment Dates agreed with the State Government are as follow: (i) First Tariff Adjustment Date - effected on 1 January 2001; (ii) Second Tariff Adjustment Date – effected on 1 July 2003; (iii) Third Tariff Adjustment Date – effected on 1 January 2007; and (iv) Subsequent Tariff Adjustment Dates – scheduled on 1 January 2009 and thereafter at 36 monthly intervals till 2029.

In the event the gazetted tariff is lower than that of the Agreed Tariff, or in any other event the Agreed Tariff was not adopted, the State Government shall compensate SAJH in accordance with a formula as specified in the CA.

(vi) Rights of the Holder of the Special Share SAJH has allotted one Special Share of RM1.00 each to the Menteri Besar of Johor pursuant to the CA dated 20 April 1999. This Special Share was not acquired by the Company. Under the CA, the Special Shareholder does not have the right to any dividend at any time and the rights to participate in the capital or profits of SAJH. Hence, the financial statements do not present the Special Share as a minority interest. Variation of rights of the holder of the Special Share will only be effected with his written consent.

(b) New regulation regime In line with the move to improve the quality, coverage and reliability of the nation’s water supply and safeguard the interests of consumers, the Water Services Industry Act (“WSIA”) has been introduced. The WSIA complements the restructuring of the water industry by ensuring a clear legal policy and framework aimed at efficiency, transparency and equitability for all parties concerned. Under the WSIA, players in the previously concession-driven water industry will now be obliged to apply for licences granted by the Ministry of Energy, Water and Communication via Suruhanjaya Perkhidmatan Air Negara (“SPAN”), in order to provide their respective services. Unlike the long term concession agreements, the licences are renewable upon application and approval of SPAN.

SAJH has expressed its interest in pursuing the migration to the new regulatory regime. The terms of migration are currently under negotiation.

Concession liabilities represents balance of amount payable to the State Government under the CA, which is interest free and the maturity profile of the liabilities are as follows: Group 2007 2006 RM’000 RM’000 Concession liabilities are payable in the following periods: - within one year 31,086 43,572 - between one and two years 31,029 31,086 - between two and five years 93,000 93,000 - after five years 3,514,112 3,533,137 3,669,227 3,700,795 124 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

40 CONCESSION LIABILITIES (CONT’D) (b) New regulation regime (Cont’d) Group 2007 2006 RM’000 RM’000

Representing: Current liabilities 31,086 43,572 Non current liabilities 3,638,141 3,657,223 3,669,227 3,700,795

Concession liabilities payable for the financial year are as follows: Concession charges 30,942 28,041 Fixed monthly payments 0 67,380

41 FINANCE LEASE LIABILITIES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Minimum finance lease payments payable: - within one year 97,073 3,774 1,048 1,256 - between one and two years 11,388 12,052 723 799 - between two and five years 16,847 12,105 746 920 - after five years 348,064 397,349 19 28 473,372 425,280 2,536 3,003 Less: Future finance charges (1,061) (980) (215) (269) Present value of finance lease liabilities 472,311 424,300 2,321 2,734

Representing finance lease liabilities payable : - within one year 96,553 3,283 935 1,121 - between one and two years 11,086 11,764 664 724 - between two and five years 16,608 11,906 703 861 - after five years 348,064 397,347 19 28 472,311 424,300 2,321 2,734 Included under trade and other payables (Note 36) (96,553) (3,283) (935) (1,121) Non current portion 375,758 421,017 1,386 1,613

Finance lease payables include an amount of RM462,909,000 (2006: RM415,423,000) representing fair value of SAJH’s obligation under the WSA. In assessing the fair value, future contractual cash flows discounted at current market interest rate available for similar risk profile of financial liabilities were applied (Note 58).

The weighted average effective interest rates for the finance leases of the Group and Company as at balance sheet date were 6.83% (2006: 6.36%) per annum and 5.68% (2006: 5.85%) per annum, respectively. Ranhill Berhad (430537-K) 125

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

42 LONG TERM LOANS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Current - repayable within 12 months (Note 38) Unsecured: Term loan 14 159 172 0 0 159 172 0 0

Secured: Term loan 1 1,700 1,700 0 0 Term loan 2 11,330 8,498 0 0 Term loan 3 0 50,000 0 50,000 Term loan 4 0 59,125 0 59,125 Term loan 6 0 183,750 0 183,750 Term loan 7 947 975 0 0 Term loan 8 1,586 384 0 0 Term loan 9 10,000 0 0 0 Term loan 12 2,000 2,000 0 0 Term loan 13 50,000 0 50,000 0 Term loan 15 10,695 0 0 0 88,258 306,432 50,000 292,875 Repayable within 12 months 88,417 306,604 50,000 292,875

Non current - repayable after 12 months Unsecured: Term loan 14 757 986 0 0 757 986 0 0

Secured: Term loan 1 2,408 4,108 0 0 Term loan 2 27,617 38,948 0 0 Term loan 3 0 150,000 0 150,000 Term loan 5 0 106,987 0 0 Term loan 7 0 947 0 0 Term loan 8 14,466 8,548 0 0 Term loan 9 527,638 537,441 0 0 Term loan 10 1,183,770 1,172,188 0 0 Term loan 11 735,870 668,910 0 0 Term loan 12 4,167 6,167 0 0 Term loan 16 733,560 0 0 0 3,229,496 2,694,244 0 150,000 Repayable after 12 months 3,230,253 2,695,230 0 150,000 3,318,670 3,001,834 50,000 442,875 126 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

42 LONG TERM LOANS (CONT’D) Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Term loans are repayable over the following periods: - within one year 88,417 306,604 50,000 292,875 - between one and two years 36,642 126,428 0 0 - between two and five years 986,596 140,439 0 0 - after five years 2,207,015 2,428,363 0 150,000 3,318,670 3,001,834 50,000 442,875

The currency exposure profile of long term loans is as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Unsecured: US Dollar 757 986 0 0

Secured: Ringgit Malaysia 2,481,470 2,578,709 0 150,000 US Dollar 733,560 106,987 0 0 Thai Baht 14,466 8,548 0 0 3,230,253 2,695,230 0 150,000

Term loan 1 is secured over certain land and buildings (Note 16) of a subsidiary company. It is repayable in 60 equal monthly instalments of RM141,667 commencing from one month upon drawdown at an interest rate of 1.75% (2006: 1.75%) per annum above the base lending rate of the bank. The effective interest rate at the balance sheet date was 8.17% (2006: 8.00%) per annum. This facility contains covenants which require the subsidiary company to maintain minimum debt service coverage.

Term loan 2 is secured over the amount receivable from SAJSB pertaining to the Sri Gading Water Supply Project (see Note 24). It is repayable in 40 unequal quarterly instalments with effect from 26 June 2000. This term loan obtained by a subsidiary company to finance the project is on a non-recourse basis to the Group at an effective interest rate of 8.58% (2006: 8.55%) per annum above the base lending rate of the bank.

Term loan 3 comprises the Murabahah Commercial Papers (“MCP”)/Murabahah Medium Term Notes (“MMTN”) Programme and is structured into two tranches as follows:

Tranche Amount RM’000 Tranche I 200,000 Tranche II 100,000 Total 300,000

The MCP/MMTN Programme shall be utilised for the following purposes: Tranche I

(a) To finance the general working capital requirements of the Group; (b) To refinance bank borrowings of the Group; and (c) To finance future investments to be identified by the Group, subject to such investments being Syariah compliant, approved by the relevant regulatory authorities (if required) and in compliance with the Negative List issued by the National Bond Market Committee and all requirements of the Controller of Foreign Exchange, Bank Negara Malaysia. Ranhill Berhad (430537-K) 127

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

42 LONG TERM LOANS (CONT’D) Tranche II

To finance the working capital requirements of projects to be identified by the Group (“Specific Projects”).

Security Notes issued under the MCP/MMTN Programme shall be secured on a pari passu basis by the following: (a) An assignment of the Designated Accounts; (b) Assignment of proceeds from the Specific Projects.

The assignment of proceeds from Specific Projects is only applicable for issuance of notes under Tranche II. The proceeds of the Specific Projects to be assigned shall exclude all initial payments for mobilisation or advanced payment received upfront by the Group, if any, with regards to the Specific Projects. The amount of the proceeds to be assigned shall be determined by the value of MMTN to be issued under Tranche II.

The MCP to be issued under the MCP/MMTN Programme shall be underwritten for an amount of RM120 million (“Underwritten Amount”). The Underwritten Amount may be used inter-changeably for Tranche I, Tranche II or both at the discretion of Ranhill Berhad.

All MCPs issued under the MCP/MMTN Programme must be underwritten. As such, the Company is allowed to issue MCPs up to the Underwritten Amount only at any point in time during the availability period of the MCP/MMTN Programme.

Mandatory sinking fund The MMTN is subject to a mandatory sinking fund requirement whereby the following are to be deposited:

Financial year ending 30 June Amount RM’000 2005 5,000 2006 10,000 2007 30,000 2008 40,000 2009 25,000 2010 40,000 Total 150,000

There is no requirement to place monies in sinking fund for MCP which has maturity of less than a year. This term loan was fully repaid in October 2006.

Term loan 4 is to finance Ranhill’s subscription of Tranches 1, 2 and 3 of Irredeemable Convertible Unsecured Loan Stock (“ICULS”) proposed to be issued by Senai – Desaru Expressway Berhad (“SDEB”). The maturity date is up to 6 months from the first issued date of the ICULS. The repayment shall be in the form of cash proceeds from the proposed Medium Term Loan (“MTN Programme”) of up to RM1.0 billion in nominal value currently arranged by Commerce International Merchant Bankers Berhad (“CIMB”) on or before maturity date.

As at 30 June 2006, the Company has subscribed for its portion of ICULS as follows:-

Date Tranche No. Amount (RM) 16 December 2005 1st Tranche 25,585,000 16 February 2006 2nd Tranche 12,900,000 16 May 2006 3rd Tranche 20,640,000

This term loan was fully paid in October 2006. 128 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

42 LONG TERM LOANS (CONT’D) Term loan 5 is Letter of Credit (LC) facility of up to USD150 million with a sublimit of USD50 million for Trust Receipt (TR) Facility to facilitate the purchase of machinery and construction materials in relation to the project. The tenure is 24 months from the Agreement date where for the LC is at sight or issuance up to 180 days while for the TR is up to 90 days from the date of conversion from LC to TR (provided the expiry date shall not exceed the Final Maturity date). The LC commission is 0.10% per month or 1.20% per annum on LC amount, payable in advance. The interest rate for TR is 1.50% over the respective lenders’ cost of funds per annum.

Term loan 6 is a bridging loan facility of USD50,000,000 granted by CIMB Bank Berhad to the Company to finance the Melut Basin Oil Development project. The security is 50,000,000 ordinary and paid up share of RM 1.00 each in Ranhill Utilities Berhad and 97,650,000 ordinary and paid up share of RM1.00 each in Ranhill Power Berhad. The tenure is 6 months with an option to extend. This loan was fully repaid on October 2006.

Term loan 7 is a borrowing by Ranhill Water Services to finance the Non Revenue Water project with SAJH. RWS entered into an Islamic financing facility, Bai Inah with a maturity period of 24 months with a profit contribution margin of 5.00% per annum. This is secured against a fixed deposit amounting to RM2,000,000. This facility is on non-recourse basis to the Group.

Term loan 8 is a borrowing by Ranhill Water Technologies Sdn Bhd to finance construction and equipment under 20 years water treatment concession (Amata Nakorn). This facility is on non-recourse basis to the Group. This term loan is secured by certain property, plant and equipment of a subsidiary. It is repayable in 108 instalments and bear interest at Minimum Lending Rate (“MLR”) of -1.0% per annum.

Term loan 9 is a RM540 million Islamic Medium Term Note (“MTN”) issued by Ranhill Powertron to refinance the bridging loan of RM260 million for the 120 MW Open Cycle and RM280 million to finance the construction of the Conversion Cycle Power Plant. The repayment tenure of the MTN ranges from three (3) to fourteen (14) years from the date of first issuance of the MTNs with profit contribution margins of 4.90% to 7.70% per annum.

The MTN is secured by the following: (a) A debenture to create a first ranking fixed and floating charges over all present and future assets of Ranhill Powertron; (b) *An assignment of all the rights, title, interest and benefit of Ranhill Powertron in and to the Sale and Purchase Agreement dated 31 March 1997 entered into between KKIP Sdn Bhd (“KKIP”), as seller and Ranhill Powertron, as purchaser, in respect of the sale by KKIP and purchase by Ranhill Powertron of all those land forming the Site; (c) A charge and assignment of all the rights, benefit and interest of Ranhill Powertron in and to the Designated Accounts; (d) Assignment (by way of security) of: (i) all rights, interest and benefit of Ranhill Powertron under the Project Agreements (including the right to all liquidated damages payable thereunder and the right to revenues of Ranhill Powertron); (ii) applicable licences and permits (to the extent that the licences and permits are assignable and no further consents are required to be obtained for such assignment); (iii) applicable insurance policies. (iv) performance bonds/guarantees.

* Upon issuance of the individual title(s) to the Site by the relevant authority.

This facility is on non-recourse basis to the Group.

Term loan 10 is the RM1,280 million nominal value of BaIDS obtained by SAJH to redeem SAJH’s existing RM680 million BaIBs, and to part finance the second phase of SAJH’s Programme of Works. The tenure of the BaIDS facility ranges from six (6) to fifteen (15) years with profit contribution margins of 5.90% to 8.45% per annum.

SAJH has to maintain a finance service cover ratio of 2.25:1 and debt equity ratio of 2.33:1 at all times as defined in the Trust Deed. In the event SAJH decided to declare and pay dividends the finance service cover ratio should be at 2.50 after the payments of dividend. Ranhill Berhad (430537-K) 129

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

42 LONG TERM LOANS (CONT’D) The BaIDS are secured by the following: (a) A first ranking debenture comprising fixed and floating charges over all present and future assets of SAJH. (b) Assignment (by way of security) of: (i) all rights under the Project Documents (as defined in the Trust Deed dated 11 October 2004 (“Trust Deed”)) including right to revenues of SAJH; (ii) applicable insurance; (iii) permits (to the extent that the permits are assignable and no further consents are required to be obtained for such assignment); (iv) performance bonds/guarantees; and (v) licences (to the extent that the licences are assignable and no further consents are required to be obtained for such assignment);

including all amounts from time to time and at any time payable to SAJH under any of the foregoing including all claims for damages which arise there under; and

(c) Assignment and charge (by way of security) over all Designated Accounts as defined in the Trust Deed. The amounts of the BaIDS recognised in the balance sheet of the Group is analysed as follows: Group 2007 2006 RM’000 RM’000

Nominal value of the BaIDS 1,280,000 1,280,000 Less: Discount on BaIDS (125,874) (125,874) Net proceeds received 1,154,126 1,154,126 Add: Accumulated amortisation of discount on BaIDS 29,644 18,062 1,183,770 1,172,188

This facility is on non-recourse basis to the Group.

Term loan 11 comprises two tranches to finance part of the construction expenditure in connection with the design and construction of Semangar Water Supply Scheme including the provision of material and services relating thereto. The interest rate of the loan is fixed at 7.60% per annum with repayment terms as follows: (a) Capitalisation of interest for the first three (3) years and becomes payable annually in arrears commencing 48 months from the date of the first draw down; (b) Tranche 1 – to be repaid in 10 equal instalments commencing 132 months from the date of the first draw down; and (c) Tranche 2 – to be repaid in 15 equal instalments commencing 132 months from the date of the first draw down.

The term loan is to be repaid by SAJH solely from the raw water proceeds arising from the sale of raw water by the State Government to Singapore and payable in accordance with the Raw Water Letter of Undertaking dated 5 March 2002.

In the event that there is insufficient monies in the raw water revenue proceeds account to pay interest due on any interest payment date prior to the first repayment date such interest outstanding would be added to the principal sum then owing and shall be payable on the first repayment date. 130 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

42 LONG TERM LOANS (CONT’D) Security: (a) Security interest in favour of the financier, ranking second in point of priority and security after the interest of the Holders of the BaIDS on SAJH’s rights, interest, and title in and to Designated Accounts, the Contract Documents, Performance Bonds, Insurance and Licenses; (b) Assignment over the rights, interest and title of SAJH in and to the raw water proceeds to be paid by the State Government of Johor to SAJH; (c) Assignment over the rights, interest and title of SAJH in and to the Semangar Water Supply Scheme; (d) Undertaking and guarantee by the State Government of Johor to repay the principal, interest and capitalised interest under the term loan agreement (see Note 44).

This facility is on non-recourse basis to the Group.

Term loan 12 is to part finance the acquisition of additional interest in a subsidiary company. It is secured over the additional shares and CULS acquired in the subsidiary company and is repayable in 60 equal monthly instalment of RM166,667 each commencing from the second month from the date of first drawdown at an interest rate of 1.25% per annum above the base lending rate of the bank. The effective interest rate was 7.80% (2006: 8.05%) per annum.

This facility is on non-recourse basis to the Group.

Term loan 13 is borrowing by Company to finance general working capital with perpetual repayment tenure. The effective interest rate applicable to this term loan at the balance sheet date was 8.75% per annum.

Term loan 14 is a borrowing by Ranhill Water Technologies to finance the cost of machineries, equipment and M & E work. The repayment tenure is repayable in 32 equal quarterly instalments and bear interest at cost of fund plus 1.25% per annum.

Term loan 15 is borrowing by PT Ranhill Energy Indonesia. The purpose of the loan is for working capital and to fund the exploration of the first well at Citarum PSC. The loan is repayable in 12 months after commencement and carries an interest rate of 7.5% per annum (subject to review by the bank).

Term loan 16 is borrowing by Ranhill (L) Ltd to assist the Group to repay its existing CP/MMTN, bridging loan, Trust Receipts, and to subscribe for ICULS in SDE. This loan has a maturity date of 5 years and bears a coupon rate of 12.50% payable semi annually. There is a mandatory Debt Service Reserve Account (DSRA) of USD27.5million, representing 2 coupon payments (of which in certain circumstances may be reduced to one coupon payment) to be maintained for as long as any of the Notes remain outstanding. Among the main covenants for the USD Bond are that the Company has to satisfy a Fixed-Charge Cover Ratio, shares of material subsidiaries having been pledged and a limitation to the Company’s ability to incur, assume or permit to exist any Lien or to provide collateral on borrowings. Ranhill Berhad (430537-K) 131

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

43 CONVERTIBLE UNSECURED LOAN STOCKS Group 2007 2006 RM’000 RM’000

12.5% Convertible Unsecured Loan Stocks 1998/2008 (“CULS”) 5,800 5,800

The CULS are issued by a subsidiary company and the salient features are as follows: (a) Maturity date is ten (10) years from issuance of the CULS. (b) Interest is accrued at the rate of 12.5% per annum and is payable in cash on each anniversary date of the CULS but is subject to lenders’ requirement and at the discretion of Ranhill Powertron. CULS converted before anniversary date will not be entitled to the annual interest. (c) Conversion in part or in whole is allowed before maturity date, subject to adherence to Ranhill Powertron’s existing shareholding proportions and the shareholding restrictions. All converted share capital will rank pari passu but will not be entitled to dividends declared for the financial year preceding the year of conversion. (d) On maturity date, the CULS, if not earlier converted, will be redeemed for its full principal amount together with all unpaid accrued interest. (e) Each CULS of RM1.00 is convertible, at the conversion rate of one CULS for one ordinary share of RM1.00 at the option of the holder before maturity date.

44 DEFERRED CAPITAL CONSIDERATION FROM THE STATE GOVERNMENT The capital consideration receivable from the State Government as disclosed in Note 26 is classified under non current liabilities as deferred capital consideration and is credited to the income statement in proportion to the depreciation charge and finance expense incurred for the assets and borrowings respectively which it is expected to compensate.

45 DEFERRED INCOME Group 2007 2006 RM’000 RM’000 At the beginning of the financial year 467,116 0 Addition 0 476,825 Changes in fair value (74,665) 0 Transfer to income statement (Note 11) (20,240) (9,709) At the end of the financial year 372,211 467,116

As disclosed in Note 40(a)(ii), pursuant to the WSA, the State Government restructured payments for treated water supply which resulted in a saving of approximately RM476,825,000. This saving is deemed as government grant and accordingly accounted for as deferred income.

46 SHARE CAPITAL Group/Company 2007 2006 RM’000 RM’000 Authorised ordinary shares of RM1.00 each: At the beginning of the financial year/ at the end of the financial year 2,000,000 2,000,000

Issued and fully paid-up ordinary shares of RM1.00 each: At the beginning of the financial year/ at the end of the financial year 597,265 597,265 132 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

47 SHARE PREMIUM By virtue of the relief provided under Section 60(4) of the Companies Act, 1965, the share premium arising from the issue of 60,363,744 ordinary shares of RM1.00 each in financial year ended 30 June 2001 for the acquisition of Ranhill Bersekutu Sdn Bhd, Ranhill Civil Sdn Bhd, RB Ventures Sdn Bhd, Ranhill Engineers and Constructors Sdn Bhd and Ranhill Sri Gading Sdn Bhd has not been recorded in the share premium account.

48 OTHER RESERVES Group 2007 2006 RM’000 RM’000 (Restated) Capital reserve arising on consolidation 0 3,097 Capital reserve arising from bonus issue by subsidiaries 3,255 280 Currency translation differences (523) (351) 2,732 3,026

The movement in each category of reserves is as follows: Group 2007 2006 RM’000 RM’000 (a) Capital reserve arising on consolidation At the beginning of the financial year 3,097 5,378 Disposal of interest in a subsidiary 0 (2,281) Reserve on consolidation charged out (3,097) 0 At the end of the financial year 0 3,097

(b) Capital reserve arising from bonus issue by subsidiaries At the beginning and end of the financial year 280 280 Capital reserve from bonus issue during the financial year 2,975 0 At the end of the financial year 3,255 280

(c) Currency translation differences At the beginning of the financial year (351) (155) Arising during the financial year (172) (195) At the end of the financial year (523) (351)

49 RETAINED PROFITS The Company has sufficient tax credits under Section 108(6) of the Malaysian Income Tax Act, 1967 to frank all of its retained profits if paid as dividends.

50 CHANGES IN ACCOUNTING POLICIES The list of new accounting standards, amendments to published standards and interpretations on existing standards that are effective for the Group and Company for the financial year ended 30 June 2007 is set out in Note 3 to the financial statements.

The following describes the impact of new standards, amendments and interpretations on the financial statements of the Group and Company. Ranhill Berhad (430537-K) 133

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

50 CHANGES IN ACCOUNTING POLICIES (CONT’D) (a) Irrelevant or immaterial effect on financial statements

The adoption of FRS 2,102,110,116,121,127,128,132,133, the ‘asset ceiling’ amendment to FRS 1192004 and ICs did not have a material impact on the financial statements of the Group and Company. In summary: • FRS 2,102,110,127,128,132 and 133 and ICs had no material effect on the Company’s policies. • FRS 116 now permits the Group and Company to transfer a proportion of revaluation surplus relating to revalued assets from revaluation reserve to retained earnings as the asset is used by the Group and Company.

Pursuant to the transfer clauses under the Concession Agreement (“CA”) as set out in Note 40(iv) to the financial statements, the recoverable amount of infrastructure assets are expected to be nominal to the Group at the end of the concession period. Accordingly the infrastructure assets are depreciated over the Concession Period.

Infrastructure assets continue to be depreciated using the unit of water revenue method since it is expected to reflect the pattern of economic use of these assets. The Group has to continuously invest in infrastructure assets to upgrade and extend water treatment facilities and supply networks as set out in Note 40(iii). Such expenditure incurred is recognised within property, plant and equipment since it is expected to improve performance and capacity of the infrastructure assets.

(b) Reclassification of prior year comparatives Set out below are changes in accounting policies that resulted in reclassification of prior year comparatives but did not affect the recognition and measurement of the Group’s and Company’s net assets: • FRS 101 has affected the presentation of minority interest. In the consolidated balance sheet, minority interest is now presented within equity, separately from parent shareholders’ equity. Profit and loss in the consolidated income statement as well as total income and expenses for the year recognised directly in equity are now allocated between minority interest and equity holders of the parent. Certain reclassifications of prior year’s comparatives have also been made to conform with current year’s expectation. The Group’s shares of results of jointly controlled entities and associates are now shown net of tax. • The Group’s share of merger deficit are reclassified and presented as a movement in retained earnings. • FRS 117 resulted in the reclassification of land and buildings from property, plant and equipment to prepaid lease payment.

The effects of the above standards on the Group and Company’s financial statements for the current and prior years are set in Notes 50 (e) to (f)

(c) Changes in accounting policies with material effects on financial statements The changes in accounting policies arising from adoption of FRS 3 “Business Combinations”, FRS 136 “Impairment of Assets”, FRS 138 “Intangible Assets”, FRS 131 “Interest in Joint Ventures” and FRS 108 “ Accounting Policies Changes in Accounting Estimates and Errors”, are summarised below:

(i) FRS 3 “Business Combinations”, FRS 136 “Impairment of Assets” and FRS 138 “Intangible Assets” The adoption of the new FRS 3 and consequential amendments to FRS 136 and FRS 138 have resulted in a change in accounting policy relating to purchased goodwill.

Goodwill acquired in business combinations is stated at cost less any accumulated impairment losses. The adoption of FRS 138 has resulted in the Group ceasing annual goodwill amortisation. Goodwill is carried at cost less accumulated impairment losses and is now tested for impairment annually at the end of each financial year, or more frequently if events or changes in circumstances indicate that it might be impaired. Any identified impairment loss is recognized in the income statement and subsequent reversal is not allowed. Prior to 1 July 2006, the Group amortised goodwill on a straight-line basis over its estimated useful life or 20 years, whichever is the shorter. 134 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

50 CHANGES IN ACCOUNTING POLICIES (CONT’D) (c) Changes in accounting policies with material effects on financial statements (Cont’d) (i) FRS 3 “Business Combinations”, FRS 136 “Impairment of Assets” and FRS 138 “Intangible Assets” (Cont’d) This change in accounting policy has been accounted for prospectively for business combinations where the agreement date is on or after 30 June 2006. For business combinations entered into prior to that date, the transitional provisions of FRS 3 requires the Group to eliminate the carrying accumulated amortisation as at 1 July 2006 of RM3.515 million against the carrying amount of goodwill. The carrying amount of goodwill for the Group as at 1 July 2006 of RM29.401 million ceased to be amortised. The cessation of amortisation of goodwill on consolidation has no material impact on the results of the financial period ended 30 June 2007. There were no effects on separate financial statements of the Company.

Under FRS 3, any excess of the fair value of the Group’s share of identifiable net assets over the cost of acquisition (previously referred to as “negative goodwill”), after assessment, is now recognised immediately in the income statement. Prior to 1 July 2006, the Group treated it as a permanent item and was presented as capital reserve on consolidation.

Under the transitional provision of FRS 3, the Group’s carrying amount of negative goodwill at 1 July 2006 of RM3.097 million that arose from acquisitions prior to that date was derecognised with a corresponding adjustment to retained earnings. Accordingly, there is no impact on prior year the consolidated financial statements. The impact on the consolidated balance sheet as at 30 June 2007 is set out in Note 48(a). There is no impact on the consolidated income statement for the period ended 30 June 2007 nor on the Company’s separate financial statements.

In addition, the useful lives of other intangible assets are now assessed at the individual asset level as having either a finite or indefinite life. Intangible assets with an indefinite useful life are not amortised but are tested for impairment annually. Intangible assets with a finite useful life will continue to be amortised over the estimated useful life. Prior to 1 July 2006, intangible assets were considered to have a finite useful life and were stated at cost less accumulated amortisation and impairment losses. The adoption of this accounting policy has not resulted in any financial impact to the Group as the Group’s other intangible assets, which mainly consists of the cost of operating license rights, contractual rights to develop properties, is regarded to have a finite useful life and continues to be amortised.

(ii) FRS 5 “Non Current Assets Held for Sale and Discontinued Operations” Prior to 1 January 2006, non-current assets (or disposal groups) held for sale were neither classified nor presented as current assets or liabilities. There were no differences in the measurement of non-current assets (or disposal groups) held for sale and those for continuing use. Upon the adoption of FRS 5, non-current assets (or disposal groups) held for sale are classified as current assets (and current liabilities, in the case of non-current liabilities included within disposal groups) and are stated at the lower of carrying amount and fair value less costs to sell.

The Group has applied FRS 5 prospectively in accordance with the transitional provisions. The effect of which is disclosed in Note 35 as the disposal of Ranhill Wilson Transformer Sdn. Bhd. has been completed subsequent to year end.

(iii) FRS 131 “Interest in Joint Ventures”, FRS 108 “Accounting Policies, Changes in Accounting Estimates and Errors” FRS 131 recommends that a venture shall recognise its interests in a jointly controlled entity using the proportionate consolidation method. The directors are of the opinion that this method better reflects the interests in the joint ventures. The proportionate consolidation method has been accounted for retrospectively, and certain comparative amounts as at 30 June 2006 have been restated.

Upon the adoption of FRS 108, Group opening balances of each affected component of the balance sheet has been adjusted as if the new accounting policy had always been applied. Ranhill Berhad (430537-K) 135

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

50 CHANGES IN ACCOUNTING POLICIES (CONT’D) (d) FRS 140 “Investment Property” The adoption of FRS 140 has resulted in a change in accounting policy for investment properties.

Upon the adoption of FRS 140, properties held for rental yields or capital appreciation, of both, and are not occupied by the Group, which were previously classified under property, plant and equipment have been reclassified to investment properties, a separate line item on the face of the balance sheet within non-current assets.

The investment properties are stated at cost less accumulated depreciation and accumulated impairment losses, and are depreciated on a straight-line basis to write off the costs of the assets to their residual values over their estimated useful lives.

Under the old accounting policy, these properties were depreciated over 50 years or the lease period, whichever is shorter. Hence, there is no impact following the adoption of FRS 140 but only reclassification within the balance sheet line items.

(e) Restatement and reclassification of prior year income statement line items:

As previously FRS 131 FRS 5 reported effect effect Reclassification * As restated RM’000 RM’000 RM’000 RM’000 RM’000 Revenue 1,419,835 0 (58,202) 0 1,361,633 Cost of sales (1,062,574) 0 61,024 0 (1,001,550) Other operating income 33,436 1,110 (752) (9,709) 24,085 Amortisation of deferred income 0 0 0 9,709 9,709 Administrative expenses (160,011) (798) 6,367 0 (154,442) Tendering and marketing expenses (14,625) 0 252 0 (14,373) Finance costs (144,847) (1) 2,358 0 (142,490) Share of results of a jointly controlled entity 4,639 (4,639) 0 0 0 Share of results of associates 206 (696) 0 0 (490) Taxation (38,439) 1,484 0 0 (36,955) Discontinued operation 0 0 (7,507) 0 (7,507)

(f) Restatement and reclassification of prior year balance sheet line items: As previously FRS 131 FRS 140 FRS 117 As reported effect effect effect Reclassification * restated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Property, plant and equipment 7,871,620 23,104 (14,916) (5,822) 0 7,873,986 Prepaid lease payment 0 490 0 5,822 0 6,312 Long Term receivable 125,326 0 0 0 (84,674) 40,652 Investment property 0 0 14,916 0 0 14,916 Goodwill 29,777 3,629 0 0 (4,005) 29,401 Investment in jointly controlled entities 29,196 (29,196) 0 0 0 0 Other investments 81,063 2,240 0 0 (20,482) 62,821 Intangible assets 2,363 0 0 0 4,005 6,368 Investment in associate 28,275 0 0 0 20,482 48,757

136 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

50 CHANGES IN ACCOUNTING POLICIES (CONT’D) (f) Restatement and reclassification of prior year balance sheet line items: (Cont’d) As previously FRS 131 FRS 140 FRS 117 As reported effect effect effect Reclassification * restated RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Inventories 32,987 10,682 0 0 0 43,669 Trade and other receivables 524,130 7,176 0 0 (169,344) 361,962 Prepayments 20,464 67 0 0 0 20,531 Tax recoverable 11,148 84 0 0 0 11,232 Amount due from jointly controlled entity 11,041 (2,494) 0 0 169,344 177,891 Deposit, bank and cash balances 995,193 7,836 0 0 0 1,003,029

Other reserves 3,044 (18) 0 0 0 3,026 Consumer deposits 0 0 0 0 33,126 33,126 Long term loans 2,694,244 1,158 0 0 0 2,695,402 Finance lease liabilities 420,960 57 0 0 0 421,017 Deferred tax liabilities 365,269 803 0 0 0 366,072

Trade and other payables 890,473 12,238 0 0 (59,900) 842,811 Provision for costs associated with the Masinloc acquisition 57,900 0 0 0 (57,900) 0 Short term borrowings 468,422 8,398 0 0 0 476,820 Current tax liabilities 3,214 982 0 0 0 4,196

The changes in accounting policies as a result of the new accounting standards that are effective for the Group and the Company do not have material impact to the income statements for the financial year ended 30 June 2007 except as follows:

Up to 30 June 2006, goodwill was amortised on a straight line basis over a period of 20 years and assessed for indication of impairment at each balance sheet date.

If the Group had not adopted the changes in accounting policies from FRS 3 “Business Combinations”, goodwill from consolidation will continued to be amortised, resulting in a decrease in the carrying amount of goodwill from RM29.663 million to RM28.149 million and a decrease in profit from RM116.833 to RM115.319 million for the financial year ended 30 June 2007. The basic earnings per share for profit attributable to equity holders will decrease from 19.56 sen to 19.31 sen.

* Certain comparative figures were reclassified to conform with current year’s presentation.

(g) Restatement of prior year Group balance sheet All other changes in accounting policies adopted resulted in a reclassification of assets on the balance sheet or income and expenses in the income statement and did not affect its measurement in the financial statement. Ranhill Berhad (430537-K) 137

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

51 PURCHASE OF PROPERTY, PLANT AND EQUIPMENT Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Property, plant and equipment acquired 381,980 570,392 541 692 Reclassification from other receivables and power station (963) 33 0 0 Reclassification of cash paid of property, plant and equipment for discontinued operations 0 (215) 0 0 Financed by finance leases (4,013) (3,304) (502) (664) Deposit paid for acquisition of property, plant and equipment (67) 0 0 0 Unpaid portion balance brought forward 305 379 0 0 Unpaid portion carried forward (Note 36) (47) (305) (5) (5) Finance cost capitalised in property, plant and equipment (57,103) (50,054) 0 0 Cash paid 320,092 516,926 34 23

52 DISPOSAL OF SUBSIDIARIES (a) On 27 April 2006, Ranhill Power Distribution Sdn Bhd (“RPD”), the Ranhill Power’s wholly owned subsidiary entered into a conditional Sale of Assets and Settlement Agreement (“SASA”) with Tenaga Nasional Berhad (“TNB”) for the disposal of two (2) Bulk Supply Substations and a substation for a sale consideration of RM28.81 million. In accordance with the SASA, the net amount payable by TNB to RPD is RM13.30 million which was arrived after deducting the following from the purchase consideration: (i) RM4.29 million representing interconnection charges payable to TNB for the expired period; (ii) adjusted interconnection charges of RM5.27 million; and (iii) cost of RM5.95 million to be incurred by TNB to rehabilitate and reinforce the assets.

The disposal was completed on 28 April 2007 when all conditions precedent were satisfied and a gain of RM6.9 million was included in the Group’s results under “Discontinued Operations” in the income statements.

(b) On 16 February 2007, Ranhill Power entered into a Share Sale Agreement (“SSA”) with Mutiara Powertech Sdn Bhd (“MP”) for the proposed disposal by Ranhill Power of its entire 100% equity interest in Ranhill Switchgear Sdn Bhd (“RSWG”) comprising 750,000 ordinary shares of RM1.00 each in RSWG to MP for a total consideration of RM3,800,000.

The disposal was completed on 15 May 2007 with the fulfillment of all the conditions preceded in the SSA.

Details of the disposal are as follows: At date of disposal RM’000 Property, plant and equipment 441 Inventories 11,836 Trade and other receivables 1,789 Deposits, cash and bank balances 433 Trade and other payables (10,699) Net assets disposed of 3,800 Net disposal proceeds (3,800) Gain on disposal 0

The cash flow is: Proceeds from disposal 3,800 Cash and cash equivalent of subsidiary disposed of (433) Net cash inflow on disposal 3,367 138 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

53 SIGNIFICANT ACQUISITIONS OF SUBSIDIARIES The acquisition of new subsidiaries during the financial year are as follows:

On 28 August 2006, the Company acquired 60% equity stake in Amona Ranhill Consortium Sdn Bhd (formerly known as Amona Africa Construction Consortium Sdn Bhd) for a purchase consideration of RM19.0 million of which RM3.8 million was paid and remaining payable on the date of payment of the first advance payment by the Libyan Government under the project contract.

The acquisition of new subsidiaries are analysed as follows: At date of acquisition Fair value/carrying value RM’000 Fair value of identifiable assets and liabilities: Current assets 1,376 Intangible assets 18,986 Current liabilities (1,353) 19,009 Minority interest (9) Fair value of attributable net assets 19,000 Purchase consideration payable (15,200) Purchase consideration discharged by cash 3,800 Cash and cash equivalent of subsidiary acquired (359) Net cash outflow on acquisition 3,441

(i) The effects of the acquisition on the consolidated financial results for the year ended 30 June 2007 are as follows: RM’000 Administrative expenses (88) Profit from operations and before taxation (88) Taxation 0 Profit after taxation (88) Minority interests 35 Decrease in Group’s net profit for the financial year (53)

(ii) The effects of the acquisition on the consolidated financial position as at 30 June 2007 are as follows: RM’000 Non current assets 436 Current assets 230,892 Current liabilities (231,393) Group’s share of net assets as at 30 June 2007 (65) Minority interest 26 Group’s share of net assets as at 30 June 2007 39 Ranhill Berhad (430537-K) 139

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

54 CASH AND CASH EQUIVALENTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (Restated) Bank and cash balances (Note 34) 374,933 311,155 11,539 1,309 Deposits with licensed banks, net of restricted deposits (Note 34) 562,688 439,941 0 0 937,620 751,096 11,539 1,309 Bank overdrafts - secured (Note 38) (852) 0 0 0 - unsecured (Note 38) (47,206) (60,016) (10,056) (12,366) Cash and cash equivalents from discontinued operations 3,496 0 0 0 893,059 691,080 1,483 (11,057)

55 COMMITMENTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 (a) Capital commitments for property, plant and equipment: - Approved and contracted for 710,822 781,314 28 303 - Approved and not contracted for 724,439 1,389,602 0 0 1,435,261 2,170,916 28 303

(b) Investment in oil and gas property - Approved and contracted for 60,454 0 0 0 - Approved and not contracted for 35,432 0 0 0 95,886 0 0 0

(c) Other investment - Approved and contracted for 145,655 220,215 79,120 155,875 - Approved and not contracted for 0 0 0 0 145,655 220,215 79,120 155,875

(d) Operating lease commitments The future minimum lease payments under operating leases are as follows: - Payable within one year 1,958 441 0 0 - Payable between one and five years 2,677 668 0 0 4,635 1,109 0 0 1,681,437 2,392,240 79,148 156,178 140 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

56 CONTINGENT LIABILITIES All contingent liabilities are unsecured unless otherwise stated. (a) Corporate and bank guarantees Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Subsidiaries’ leases and bank facilities guaranteed by the Company 0 0 0 538,257

Bank guarantee facilities utilised by: - related parties (Note i) 1,467 117,599 0 0 - third party (Note i) 53,307 24,738 0 0 - subsidiaries 0 0 485 1,724 - Ranhill-Petroneeds JV (Note ii) 82,744 88,012 0 0 137,518 230,349 485 539,981

Note: (i) these are customers who awarded the contracts obtained by them to the Group, and the bank guarantees are utilised for the purpose of the said contracts. (ii) the bank guarantee facility is secured against the joint venture’s project proceeds.

The currency exposure profile of the corporate and bank guarantees is as follows: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Ringgit Malaysia 54,774 142,294 485 318,191 US Dollar 82,744 88,055 0 216,013 Pakistan Rupee 0 0 0 5,708 Others 0 0 0 69 137,518 230,349 485 539,981

The Group’s contingent liabilities are as follows: (a) A Corporate Guarantee of USD1,470,000.00 was extended by the Company to Standard Chartered Bank (“SCB”), Singapore as security for the USD3,000,000 overdraft facility granted by SCB to Ellipse Energy Pte Ltd, the parent company of Ellipse Energy Jatirarangon Wahana Limited, Bermuda (“EEJW”), the Company’s 49% owned associate company, for the working capital requirements for the development of well JRR 5 in the Jatirarangon oil field in Indonesia undertaken by P.T Wahana Sad Karya and EEJW.

(b) On 1 March 2001, RBSB in association with Safege, received a Statement of Claim from ESB, seeking losses and damages in the sum of approximately RM30.8 million, for breach of contract and/or duty in the design and construction of a water supply privatisation project for the District of Johor Bahru.

On 18 September 2002, RBSB filed a Notice of Contribution against Safege, for determination by the Arbitrator. On 10 January 2003, the High Court, pursuant to an Originating Motion brought by Ranhill Bersekutu Sdn Bhd (‘RBSB”), held that the Arbitrator has jurisdiction to adjudicate the said Notice of Contribution. Safege appealed to the Court of Appeal against the High Court decision. On 12 August 2004, the Court of Appeal allowed the appeal in Safege’s favour. RBSB filed an application to the Federal Court for leave to appeal against the Court of Appeal’s decision but the leave application was subsequently dismissed. Ranhill Berhad (430537-K) 141

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

56 CONTINGENT LIABILITIES (CONT’D) (b) In respect of the arbitration proceeding, the Arbitrator has delivered an award on 9 December 2005, in favour of ESB. Among others, RBSB and Safege were found to be in breach of their contractual obligations and also in breach of duty.

On 19 January 2006, RBSB’s solicitors filed an originating motion to set aside the arbitration award, which was initially fixed for hearing on 17 July 2006. Safege’s solicitors have also filed a similar originating motion to set aside the arbitration award. All parties have since filed its respective affidavits for the originating motions. At the mention date on 14 December 2006, the parties were directed to file its respective submissions.

The matter is now fixed for mention on 13 September 2007, pending the completion of the exchange of submissions between all parties.

(c) SEC filed an action by way of an originating summons dated 3 June 2005, seeking among others, specific performance and damages against us and Ranhill Power. SEC alleged that we had breached its undertaking to sell 10% of the ordinary shares of RM1.00 each in Powertron to SEC. SEC further alleged that Ranhill Power had prior knowledge of the arrangement between us and SEC and as such, Ranhill Power is the trustee of the said Powertron shares.

We deny that we were under an obligation to sell the 10% Powertron shares to SEC. Ranhill Power denies SEC’s allegation that it had prior knowledge of SEC’s arrangement with us and that it holds the Powertron shares in trust for SEC.

On 8 December 2005, we, as the 1st Defendant, filed an application to convert the originating summons initiated by SEC into a writ action, on the ground that there are serious dispute of facts.

Both SEC’s originating summons and our application were fixed for hearing on 25 July 2006. On the said date, all parties agreed for the originating summons to be converted into a writ action and that all the relevant affidavits filed in the originating summons to be converted into pleadings. At the mention date on 6 February 2007, the Learned Judge has ordered that the Plaintiff is to file its Statement of Claim and the Defendants are to file its Defence respectively. The Statement of Claim was served by the Plaintiff’s solicitors on 7 February 2007. We subsequently via our solicitors served our Defence on 21 February 2007.

57 SIGNIFICANT RELATED PARTY DISCLOSURES In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. The related party transactions described below were carried out on terms and conditions obtainable in transactions with unrelated parties.

The related parties and their relationship with the Group are as follows: Related parties Relationship Ranhill Corporation Sdn Bhd (“RCorp”) Substantial shareholder of the Company and related by common directors/shareholders. Lambang Optima Sdn Bhd Substantial shareholder of the Company and related by common directors/shareholders. Ranhill Consulting Sdn Bhd (“RConsult”) Related by common directors/shareholders. Rancak Bistari Sdn Bhd (“Rancak Bistari”) Related by common directors/shareholders. Ranhill Bersekutu (Penang) Sdn Bhd Related by common directors/shareholders. WorleyParsons Ltd Substantial shareholder of a subsidiary, RWPSB. Aras Setia Sdn Bhd Substantial shareholder of a subsidiary, Ranhill Powertron. Perunding Ranhill Worley Sdn Bhd (“PRW”) Related by common directors/shareholders. AKM Sdn Bhd Related to a substantial shareholder of RAK, a subsidiary. Malaysia Airports (Sepang) Sdn Bhd Related to MAMTS. Sepang International Circuit Sdn Bhd Related to MAMTS. Jenline Sdn Bhd Related by a director of a subsidiary, Ranhill Civil. 142 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

57 SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D)

Related parties Relationship Mitra Energia Ltd Substantial shareholder of a subsidiary, RESB. PT Bumi Parahyangan Energi Substantial shareholder of a subsidiary, RESB. Petrocon Arabia Substantial shareholder of a subsidiary, RWPSB. Konsortium Ranhill Sdn Bhd Related by common directors/shareholders. Petroneeds Services International Substantial shareholder of a subsidiary, Ranhill Petroneed JV. Senai Desaru Expressway Berhad Related by common directors/shareholders. RBS Corporation Sdn Bhd Related by common directors/shareholders. Ranhill Energy Cebu Inc Related to a substantial shareholder of RESB Ranhill Energy Sulu Sea Inc Related to a substantial shareholder of RESB Ranhill Nusantara Energy Inc Related to a substantial shareholder of RESB Ranhill Nusantara Energy Holdings Related to a substantial shareholder of RESB Ranhill Energy Cebu Holdings Related to a substantial shareholder of RESB Ranhill Energy Sulu Sea Holdings Related to a substantial shareholder of RESB West Sumatra Energy Inc Related to a substantial shareholder of RESB

Tan Sri Hamdan Mohamad is both a Director and a substantial shareholder of the following companies: - RCorp - RConsult - Rancak Bistari - Ranhill Bersekutu (Penang) Sdn Bhd - Lambang Optima Sdn Bhd - PRW

AKM Sdn Bhd is a wholly owned subsidiary of Antara Koh Pte Ltd (a company incorporated in Singapore), which is a substantial shareholder of a subsidiary, RAK.

Senai-Desaru Expressway Berhad (“SDEB”) is a joint venture company between Rancak Bistari (70%) and YPJ Holding Sdn Bhd (30%).

Amran Awaluddin is a Director and a shareholder of RCorp.

The significant related party transactions of the Group during the financial year are as follows: Group 2007 2006 RM’000 RM’000 (a) Sales of goods and services to: - RCorp (Note i) 128,052 176,996 - RConsult (Note ii) 28,353 32,351 - WorleyParsons Ltd’s subsidiaries and associates 60,272 13,520 - PRW (Note iii) 95,219 98,816 - SDEB 261,588 132,491

(b) Purchases of services from: - RConsult (Note ii) 6,199 18,001 - PRW (Note iii) 6,338 5,811 - WorleyParsons Ltd’s subsidiaries and associates 24,053 9,241 - AKM Sdn Bhd 110,109 18,294 - RCorp 139,801 338,721

Ranhill Berhad (430537-K) 143

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

57 SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D) Note: (i) The sales of goods and services to RCorp are for the performance of projects which were secured by RCorp prior to the listing of Ranhill Berhad. These projects are currently being undertaken by REC and Ranhill Civil. Prior to the listing of Ranhill Berhad, REC and Ranhill Civil were subsidiaries of RCorp. RCorp sold REC and Ranhill Civil to Ranhill Berhad on 15 November 2000 as part of the listing exercise of Ranhill Berhad.

(ii) The sales of goods and services to RConsult is in accordance with the Service Agreement dated 5 April 2000 entered between RConsult and Ranhill Bersekutu. In accordance with the Service Agreement, RConsult subcontracts all contracts secured by RConsult to Ranhill Bersekutu. RConsult is a consulting engineering firm which is licensed by the Board of Engineers Malaysia and the Ministry of Finance to undertake all aspects of engineering consultancy services.

(iii) The sales of goods and services to PRW is in accordance with the Service Agreement dated 12 July 2002 entered between PRW and RWPSB. In accordance with this agreement, PRW subcontracts all contracts secured by PRW to RWPSB. PRW is a firm which is registered and licensed by the Board of Engineers Malaysia, Petronas and the Ministry of Finance to undertake design and engineering services.

(a) Amounts due from related parties: Group 2007 2006 Nature of transaction RM’000 RM’000 Trade - RCorp 100,185 75,134 - RConsult 40,718 53,877 - Rancak Bistari 5,042 5,042 - WorleyParsons Ltd’s subsidiaries and associates 11,876 7,034 - PRW 27,083 19,472 - Ranhill Energy Cebu Inc 109 0 - Ranhill Energy Sulu Sea Inc 138 0 - Ranhill Nusantara 11 0 185,162 160,559

Non trade - WorleyParsons Ltd’s subsidiaries and associates 1,202 454 - PRW 7,379 2,837 - SDEB 1 23 - RCorp 1,980 89 - Rancak Bistari 6 6 - Mitra Energia Ltd 1 835 - PT Bumi Parahyangan Energi 190 190 - Petrocon Arabia 0 22 - Ranhill Nusantara Energy Inc 2,623 0 - Ranhill Nusantara Energy Holdings 16 0 - Ranhill Energy Cebu Inc 309 0 - Ranhill Energy Cebu Holdings 14 0 - Ranhill Energy Sulu Sea 331 0 - Ranhill Energy Sulu Sea Holdings 3 0 - West Sumatra 548 0 - RBS Corporation Sdn Bhd 1 1 14,604 4,457 Amounts due from related parties (Note 29) 199,766 165,016 144 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

57 SIGNIFICANT RELATED PARTY DISCLOSURES (CONT’D) (b) Amounts due to related parties: Group 2007 2006 Nature of transaction RM’000 RM’000 Trade - RCorp 3,967 29,410 - RConsult 6,694 16,565 - WorleyParsons Ltd’s subsidiaries and associates 8,612 6,309 - AKM Sdn Bhd 33,255 6,813 - Konsortium Ranhill Sdn Bhd 0 350 52,528 59,447

Non trade - RCorp 0 24 - Lambang Optima Sdn Bhd 3 3 - Ranhill Bersekutu (Penang) Sdn Bhd 255 255 - WorleyParsons Ltd’s subsidiaries and associates 14,398 582 - Aras Setia Sdn Bhd 0 363 - Sabah Energy Corporation Sdn Bhd 122 0 - Wilson Transformer Pty Ltd 0 244 - Petroneeds Services International 10,564 6,815 - Senai Desaru Expressway Berhad 20,955 102,556 46,297 110,842 Amounts due to related parties (Note 36) 98,825 170,289

The significant related party transactions of the Company during the financial year are as follows: Company 2007 2006 RM’000 RM’000 (a) Management fees receivable from: - Ranhill Bersekutu 847 770 - Ranhill Civil 17,000 3,500 - REC 9,922 9,020 - RWPSB 4,236 2,161 - Ranhill Power 0 (42) - RB Ventures 120 120 - Ranhill Energy 15,000 0

(b) Trade purchases from: - RWPSB 965 123 - REC 0 40,749

(c) Office, fitting and furniture rental paid to: - RB Ventures 3,127 2,938

Ranhill Berhad (430537-K) 145

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

58 FINANCIAL INSTRUMENTS Fair values The carrying amounts of financial assets and liabilities of the Group and Company at the balance sheet date approximated their fair values except as disclosed in Notes 24 and Note 37 as set out below:

(i) On Balance sheet Group Company Carrying Carrying amounts amounts of assets/ Fair of assets/ Fair Note (liabilities) value (liabilities) value RM’000 RM’000 RM’000 RM’000 2007 ICULS 23 135,880 158,414 135,880 158,414 Receivable from the State Government 26 752,571 630,505 0 0 Concession liabilities 40 (3,638,141) (2,081,134) 0 0 Finance lease liabilities 41 (375,758) (375,917) (2,321) (2,343) Term loan 1 42 (2,408) (2,408) 0 0 Term loan 2 42 (27,617) (27,157) 0 0 Term loan 8 42 (14,466) (13,399) 0 0 Term loan 9 42 (527,638) (506,297) 0 0 Term loan 10 42 (1,183,770) (1,131,266) 0 0 Term loan 11 42 (735,870) (630,505) 0 0 Term loan 12 42 (4,167) (4,167) 0 0 Term loan 14 42 (757) (798) 0 0 Term loan 16 42 (733,560) (733,560) 0 0 CULS 43 (5,800) (5,800) 0 0

2006 ICULS 23 59,125 66,344 59,125 66,344 Receivable from the State Government 26 682,978 586,847 0 0 Concession liabilities 40 (3,657,223) (1,723,401) 0 0 Finance lease liabilities 41 (421,017) (366,507) (2,734) (2,762) Term loan 3 42 (150,000) (153,300) (150,000) (153,300) Term loan 8 42 (8,548) (6,120) 0 0 Term loan 9 42 (537,441) (501,790) 0 0 Term loan 10 42 (1,172,188) (1,237,110) 0 0 Term loan 11 42 (668,910) (586,847) 0 0 Term loan 12 42 (6,167) (6,167) 0 0 Term loan 14 42 (986) (838) 0 0 CULS 43 (5,800) (5,156) 0 0

(ii) Off balance sheet The contract notional principal amounts and their corresponding fair value adjustments as at 29 June 2007 (for month end 30 June 2007) are summarised below : Contract or notional Favourable Unfavourable principal net fair net fair 2007 amount value value RM’000 RM’000 RM’000 Interest rate swap 189,750 169 0 Interest rate swap 189,750 0 10,357 Interest rate swap 189,750 0 462 Interest rate swap 189,750 587 0 146 Ranhill Berhad (430537-K)

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

58 FINANCIAL INSTRUMENTS (CONT’D) (ii) Off balance sheet (Cont’d) The method by which the fair value information was determined and significant assumptions made in its application are as follows: • ICULS – future coupon receivable and schedule payment discontinued at current market interest rate. • Receivable from the State Government – future contractual cash flows discounted at current market interest rate. • Concession liabilities – future contractual cash flows discounted at current market interest rates available for similar risk profile of financial liabilities. • Finance lease payables – future contractual cash flows discounted at current market interest rate available for similar risk profile of financial liabilities. • Term loans – future contractual cash flows discounted at current market interest rate. • CULS – discounted cash flow method using current market interest rates. The carrying value for other assets and liabilities with a maturity of less than one (1) year is assumed to approximate their fair value.

Interest Rate Swap In April 2007, the Company entered into four swap transactions, each in a notional amount of USD55.0 million, and amounting to an aggregate amount of USD220.0 million, with the objective of reducing the interest cost on its USD220 million USD notes program (Note 42, Term Loan 16). The swaps, which are each for five years terminating on October 2011, are structured with upfront savings to the Company, and depending on the individual structure, losses are capped at between 1.75% and 3.50% per annum, in order that any exposure of the Company is limited. On two of the swaps, Ranhill is obliged to pay a fixed interest rate of 3.50% and 3.35% per annum in USD and is entitled to receive a floating interest rate per annum in USD, on a semi-annual basis, in April and October of each calendar year to termination. On the other two remaining swaps, Ranhill is obliged to pay a floating interest rate per annum in USD and will receive a fixed interest rate of at least 12.50% per annum in USD on a semi-annual basis in April and October of each calendar year to termination.

59 SUBSEQUENT EVENTS (a) On 30 July 2007, the Company’s wholly owned subsidiaries, REC and Ranhill (India) Private Limited have accepted engineering, procurement and construction contracts (“EPC Contracts”) for a 300MW pulverized coal fired power plant project to be located near Gurudijhatia Village, Cuttack District, Orissa, India by KVK Nilachal Power Private Limited, a company registered and existing under the laws of India, for a total contract amount of USD242.30 million.

(b) On the same date, REC has also been awarded by Dheeru Powergen Private Limited, a company incorporated in India, the provision of Engineering, Procurement and Construction works for two 350 MW Dheeru Power Projects located in Dhanras Village, Korba District, in the State of Chhattisgarh, India, for a total contract sum of USD172.50 million for onshore costs and USD418.0 million for offshore costs.

(c) On 11 September 2007, Ranhill Berhad (“RB”) had served a notice of offer to Ranhill Power Berhad for all the remaining 16,455,000 ordinary shares of RM1.00 each in Ranhill Power Berhad, representing 13.63% of the total and paid up share capital of Ranhill Power Berhad as at 30 August 2007, for a total cash consideration of RM35,378,250 or RM2.15 per offer share. The Proposed Private Placement will entail the issuance of up to ten percent (10%) of the total issued and paid-up share capital of RB. Based on the total issued and paid-up share capital of RB as at 30 August 2007 of RM597,264,816 comprising 597,264,816 RB Shares, the number of new shares to be issued pursuant to the Proposed Private Placement is 59,726,481 RB Shares (“Placement Shares”). The actual number of Placement Shares to be issued pursuant to the Proposed Private Placement would depend on the total issued and paid-up share capital of the Company on a date to be determined later upon obtaining all relevant approvals. The Placement Shares are proposed to be placed out to third party investor(s) to be identified at a later date. Ranhill Berhad (430537-K) 147

NOTES TO THE FINANCIAL STATEMENTS 30 June 2007

59 SUBSEQUENT EVENTS (CONT’D) The issue price of the Placement Shares will be priced at a discount of not more than ten percent (10%) from the five (5)-day weighted average market price (“WAMP”) of RB Shares immediately preceding the price-fixing date, which will be determined by the Board after the receipt of the approval of the SC for the Proposed Private Placement. In any case, the issue price of the Placement Shares will not be lower than the par value of RB Shares. Based on the indicative issue price of RM3.04 per RB Share, the Proposed Private Placement is expected to raise gross proceeds of RM181,568,502. The proceeds will be used to defray estimated expenses of approximately RM3.9 million in relation to the Proposed Private Placement, to fund the proposed voluntary take-over offer by RB to acquire all the remaining ordinary shares of RM1.00 each in Ranhill Power Berhad (“RPB”) (“RPB Shares”) not already owned by RB for a cash consideration of RM2.15 per RPB Share (“Proposed VGO”) and the balance to fund the working capital requirements of RB and its subsidiaries. The Proposed VGO shall require a maximum funding of RM35.38 million.

(d) On 25 September 2007 the Company announced that its subsidiary, Amona Ranhill Consortium Sdn Bhd (“ARCSB”) and the Libyan Housing and Utilities Board (formerly known as the Housing and Utilities Project Execution Authority) (“HUB”) have successfully renegotiated certain terms and conditions of its first Implementation Contract, Libyan Government General Works Contract (“1st Implementation Contract”) with HUB for the design, build and handover of housing units in Tajura district, Tripoli, Libya (“Tajura Housing Project”). Given the increase of the housing units from 10,000 to 10,680 units and the need to redesign the apartment units and to upgrade the specification for the Tajura Housing Project, the estimated contract price has been revised from Libyan Dinar 574,200,000 to Libyan Dinar 1,490,370,912, while the contract period has been extended to 48 months from 40 months. The price per unit has been revised from Libyan Dinar 348 per square meter to Libyan Dinar 525 per square metre (for apartment units and common areas) and Libyan Dinar 401.70 per square metre for the basement areas and ramps. The estimated total renegotiated contract price of Libyan Dinar 1,490,370,912 is based on upon the actual areas to be constructed. The approved price revision is subject to the issuance of a resolution approving the same by the General Peoples Committee in Libya.

(e) The Company had on 27 September 2007 announced that its wholly owned subsidiary, Ranhill International Inc. (“RII”) in association with China Petroleum Engineering & Construction (Group) Corporation (“CPECC”) and Petroneeds Services International (“PSI”) had on 26 September 2007, accepted a Letter of Award from Petrodar Operating Company Limited for expansion works as set out in Note 2 to the financial statements. Save for the above, the other existing terms and conditions shall remain.

60 COMPARATIVE FIGURES Certain comparative figures were reclassified to conform with current year’s presentation.

61 APPROVAL OF FINANCIAL STATEMENTS The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 31 October 2007. 148 Ranhill Berhad (430537-K) Analysis of Shareholdings as at 27 September 2007

Authorised Share Capital : RM2,000,000,000.00 Issued and Paid-up Capital : RM597,264,816.00 Type of Shares : Ordinary Shares of RM1.00 each Voting Rights : One vote per ordinary share

DIRECTORS’ SHAREHOLDINGS

Direct Interest Indirect Interest No. Name of Directors No. of Shares % No. of Shares % 1. Tan Sri Sallehuddin Mohamed 70,000 0.01 - - 2. Tan Sri Hamdan Mohamad 59,394,943 9.94 324,347,028* 54.30 3. Datuk Ramli Ibrahim 36,000 0.01 - - 4. Datuk Chandrasekar Suppiah 3,666,200 0.61 - - 5. Datuk Razman Md Hashim Che Din Md Hashim - - - - 6. Amran Awaluddin 603,000 0.10 - - 7. Sharif Lough Abdullah - - - - 8. Dato’ Seri Abdul Azim Mohd. Zabidi - - - - 9. Chew Seng Kok - - - - 10. Nadzru Azhari - - - -

* Deemed interest by virtue of his direct interest in Ranhill Corporation Sdn Bhd and Lambang Optima Sdn Bhd pursuant to Section 6A of the Act.

LIST OF DISTRIBUTION SCHEME

Shareholding No. of Shareholders % No. of Shares % Less than 100 126 1.13 4,560 0.00 100 to 1,000 2,701 24.33 2,502,274 0.42 1,001 to 10,000 6,564 59.11 29,084,015 4.87 10,001 to 100,000 1,498 13.49 44,457,757 7.45 100,001 to less than 5% of issued shares 210 1.89 198,306,785 33.20 5% and above of issued shares 5 0.05 322,909,425 54.06 Total 11,104 100.00 597,264,816 100.00 Ranhill Berhad (430537-K) 149

ANALYSIS OF SHAREHOLDINGS as at 27 September 2007

SUBSTANTIAL SHAREHOLDERS AS AT 27 SEPTEMBER 2007

Direct Interest Indirect Interest Name No. of Shares % No. of Shares % Lambang Optima Sdn Bhd 181,598,646 30.40 - - Ranhill Corporation Sdn Bhd 142,748,382 23.90 - - Tan Sri Hamdan Mohamad 59,394,943 9.94 324,347,028* 54.30 YPJ Corporation Sdn Bhd 30,692,250 5.14 - - YPJ Holdings Sdn Bhd - - 30,692,250** 5.14

* Deemed interest by virtue of his direct interest in Ranhill Corporation Sdn Bhd and Lambang Optima Sdn Bhd pursuant to Section 6A of the Act. ** Deemed interest by virtue of its direct interest in YPJ Corporation Sdn Bhd pursuant to Section 6A of the Act.

30 LARGEST SHAREHOLDERS AS AT 27 SEPTEMBER 2007

No. Name No. of Shares Percentage %

1. Ranhill Corporation Sdn Bhd 98,568,382 16.50% 2. OSK Nominees (Tempatan) Sdn Berhad 90,300,000 15.12% Pledged Securities Account for Lambang Optima Sdn Bhd 3. HDM Nominees (Tempatan) Sdn Bhd 60,200,000 10.08% Pledged Securities Account for Lambang Optima Sdn Bhd (M01) 4. Citigroup Nominees (Tempatan) Sdn Bhd 43,841,043 7.34% CPB for Hamdan Mohamad (Pledged A/C) 5. TASEC Nominees (Tempatan) Sdn Bhd 30,000,000 5.02% TA First Credit Sdn Bhd for Ranhill Corporation Sdn Bhd 6. Citigroup Nominees (Tempatan) Sdn Bhd 29,768,656 4.98% Pledged Securities Account for Lambang Optima Sdn Bhd 7. ABB Nominee (Tempatan) Sdn Bhd 22,700,000 3.80% Pledged Securities Account for YPJ Corporation Sdn Bhd (YPJ Oil) 8. Citigroup Nominees (Asing) Sdn Bhd 15,538,545 2.60% GSCO for Savannah Baltimore Offshore Ltd 9. Alliancegroup Nominees (Tempatan) Sdn Bhd 14,180,000 2.37% Alliance Merchant Nominees (Tempatan) Sdn Bhd for Ranhill Corporation Sdn Bhd 10. Citigroup Nominees (Asing) Sdn Bhd 9,702,756 1.62% GSCO for Savannah Baltimore LP 11. YPJ Corporation Sdn Bhd 7,992,250 1.34% 12. Employees Provident Fund Board 5,559,700 0.93% 13. AMSEC Nominees (Tempatan) Sdn Bhd 5,500,000 0.92% AmBank (M) Berhad for Hamdan Mohamad (SMART) 14. CIMSEC Nominees (Tempatan) Sdn Bhd 5,000,000 0.84% CIMB Bank for Hamdan Mohamad (M0277A)

15. Citigroup Nominees (Asing) Sdn Bhd 4,323,500 0.72% CBNY for DFA Emerging Markets Fund 150 Ranhill Berhad (430537-K)

ANALYSIS OF SHAREHOLDINGS as at 27 September 2007

30 LARGEST SHAREHOLDERS AS AT 27 SEPTEMBER 2007 (CONT’D)

No. Name No. of Shares Percentage % 16. HSBC Nominees (Asing) Sdn Bhd 4,074,800 0.68% BBH (LUX) SCA for Fidelity Funds Asean 17. CIMSEC Nominees (Tempatan) Sdn Bhd 3,000,000 0.50% CIMB for Hamdan Bin Mohamad (PB) 18. HSBC Nominees (Asing) Sdn Bhd 2,693,690 0.45% Exempt an for Credit Suisse (SG BR-TST-ASING) 19. AMSEC Nominees (Tempatan) Sdn Bhd 2,500,000 0.42% AmBank (M) Berhad for Chandrasekar A/L Suppiah (SMART) 20. Citigroup Nominees (Asing) Sdn Bhd 2,350,900 0.39% CB LDN for PGGM 21. Mayban Nominees (Tempatan) Sdn Bhd 2,323,200 0.39% Pledged Securities Account for Tarique Azam 22. Ng Hin Kwee & Sons Sdn Bhd 2,160,000 0.36% 23. Mayban Nominees (Tempatan) Sdn Bhd 1,950,000 0.33% Pledged Securities Account for Hamdan Bin Mohamad (514011890076) 24. TA Nominees (Tempatan) Sdn Bhd 1,792,800 0.30% Pledged Securities Account for S Sarasee 25. Citigroup Nominees (Asing) Sdn Bhd 1,532,180 0.26% CBNY for DFA Emerging Markets Small Cap Series 26. Citigroup Nominees (Asing) Sdn Bhd 1,500,000 0.25% Bear Stearns Securities Corp for Longview Investment Associates LLC 27. Mayban Securities Nominees (Tempatan) Sdn Bhd 1,458,000 0.24% Pledged Securities Account for Tarique Azam (REM 818) 28. Tabung Amanah Warisan Negeri Johor 1,341,970 0.22% 29. Alliancegroup Nominees (Tempatan) Sdn Bhd 1,329,990 0.22% Alliance Merchant Nominees (Tempatan) Sdn Bhd for Lambang Optima Sdn Bhd 30. Citigroup Nominees (Asing) Sdn Bhd 1,300,000 0.22% USB AG for The Polunin Capital Partners Emerging Markets Active Fund

Total 474,482,362 79.41% Ranhill Berhad (430537-K) 151 Share Performance

Bursa Malaysia Share Volume Monthly Composite Price Traded Index (points) (RM) (Lots)

1,600 6 360,000

1,200 4 240,200

800 2 120,400

400 0 600

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

2006 2007

Volume Traded (Lots) Bursa Malaysia Monthly Composite Index (points) Share Price (RM)

Note: The share price and volume traded shown above reflect the closing figures at the end of each month. 152 Ranhill Berhad (430537-K) Properties Held by the Group as at 30 June 2007

Last Approximate Revaluation/ Age of Net Book Acquisition Location Description Tenure Area Existing Use Building Value Date

Property owned by RB Ventures Building Freehold 190 sq.metre 1 unit of 14 years 12.02.2004 Sdn Bhd 4 storey 09.05.1997 Property held under Title No. 45495 shop offices/ (formerly HS (D) 99246) office use part of Lot No. 28172 Mukim Setapak Daerah Kuala Lumpur Wilayah Persekutuan 14,658

Property held under Title No. 45496 Building Freehold 1378 sq.metre 5 units of 14 years 12.02.2004 (formerly HS (D) 99248) 5 storey and 24.01.1992 Lot No. 28173 2 units of (6 units) (formerly PT 6754) 4 storey shop 09.05.1997 Mukim Setapak offices/ (1 unit) Daerah Kuala Lumpur offices use Wilayah Persekutuan

Property owned by Ranhill Power Building Leasehold 930 sq. ft Vacant 14 years 29.9 14.10.1990 Berhad (99 years) Flat C5-5, Ampang Tudor Court 6.10.1978 Taman Rasmi - 5.10.2077 Jalan Ampang Selangor

Muadzam Land Building Leasehold Rented 12 years 500 20.01.1998 - HS(D) 1503 PT 3009 (66 years) Mukim Keratong 22.6.1995 - 21.6.2061 11,520 sq. ft - H.S(D) 1504 PT 3010 Building Leasehold Mukim Keratong (66 years) 22.6.1995 - 21.6.2061

Held by Subsidiary Company - Land and Leasehold 18.1298 acres Development, 9.5 years 20,992.3 31.03.1997 Ranhill Powertron Sdn Bhd Building (99 years from Construction Kota Kinabalu Industrial Park Zone the date of and operation of KM 23, Jalan Sepangar issuance of a power plant 88450 Menggatal individual together with Kota Kinabalu, Sabah land title which related ancillary is still being facilities processed by the Lands and Surveys Department, Sabah) Ranhill Berhad (430537-K) 153 Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Eleventh Annual General Meeting of Ranhill Berhad will be held at the Ballroom 1 & 2, Level 2 of Hotel Nikko Kuala Lumpur, 165, Jalan Ampang, 50450 Kuala Lumpur on 30 November 2007, Friday, at 10.30 a.m., for transacting the following businesses:

AGENDA 1. To receive the Audited Financial Statements for the fi nancial year ended 30 June 2007 and the Reports of the Directors and Auditors thereon. Resolution 1

2. To sanction the declaration and payment of a fi rst and fi nal gross dividend of 1.5 sen per share, less income tax at 27% for the fi nancial year ended 30 June 2007. Resolution 2

3. To re-appoint Tan Sri Sallehuddin Mohamed as a Director, who is retiring pursuant to Section 129(6) of the Companies Act, 1965. Resolution 3

4. To re-elect Encik Nadzru Azhari as a Director, who is retiring pursuant to Article 83 of the Company’s Articles of Association. Resolution 4

5. To re-elect Tan Sri Hamdan Mohamad as a Director, who is retiring pursuant to Article 100 of the Company’s Articles of Association. Resolution 5

6. To re-elect Datuk Razman Md Hashim Che Din Md Hashim as a Director, who is retiring pursuant to Article 100 of the Company’s Articles of Association. Resolution 6

7. To re-elect Datuk Chandrasekar Suppiah as a Director, who is retiring pursuant to Article 100 of the Company’s Articles of Association. Resolution 7

8. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the Board of Directors to fi x their remuneration. Resolution 8

9. To approve the proposed revision in directors’ fee for the fi nancial year ended 30 June 2007.

“THAT the aggregate directors’ fee payable to the Non-Executive Directors of the Company be hereby revised to RM503,000 per annum for the fi nancial year ended 30 June 2007.” Resolution 9

10. To Authorise the Directors to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 “THAT pursuant to Section 132D of the Companies Act, 1965 and subject always to the approval of the relevant regulatory authorities, where required, the Directors be and are hereby empowered to allot and issue shares in the Company from time to time and upon such terms and conditions and for such purposes as the Directors may deem fi t provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the total issued share capital of the Company for the time being AND THAT the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company;

AND THAT the Directors (whether solely or jointly), be and are hereby authorised to do all such acts and things (including executing any relevant documents) as he/they may consider expedient or necessary to complete and give effect to the aforesaid authority.” Resolution 10

11. To Authorise the Renewal of Share Buy-Back Mandate “THAT pursuant to Paragraph 12.03 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) and subject to Section 67A of the Companies Act, 1965 (“Act”), the Company’s Memorandum and Articles of Association and other applicable laws, rules and regulations and the approvals of all relevant regulatory authorities, the Company be and is hereby authorised to purchase and/or hold such number of ordinary shares of RM1.00 each in the Company as may be determined by the Directors from time to time through Bursa Securities upon such terms and conditions as the Directors may deem fi t and expedient in the interest of the Company, provided that the aggregate number of shares to be purchased and/or held pursuant to this resolution shall not exceed ten percent (10%) of the total issued and paid-up share capital of the Company as at the date of the share buy-back (“Proposed Share Buy-Back”) AND THAT an amount of the funds not exceeding the retained profi ts and share premium reserves of the Company based on its latest audited fi nancial statements available up to the date of a transaction pursuant to the Proposed Share Buy-Back, be utilised for the proposed purchase; 154 Ranhill Berhad (430537-K)

NOTICE OF ANNUAL GENERAL MEETING

AND THAT such authority shall commence immediately upon the passing of this ordinary resolution and will continue to be in force until:

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by an ordinary resolution passed by the shareholders in a general meeting, the authority is renewed, either unconditionally or subject to conditions;

(b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(c) revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting;

whichever is the earlier but not so as to prejudice the completion of purchase(s) by the Company before the aforesaid expiry date and, in any event, in accordance with the provisions of the Listing Requirements of Bursa Securities or any other relevant authorities;

AND THAT the Directors (whether solely or jointly) be and are hereby authorised to do all such acts and things (including executing any relevant documents) for and on behalf of the Company, as he/they may consider expedient or necessary to complete and give full effect to the Proposed Share Buy-Back AND FURTHER THAT the shares of the Company to be purchased may be cancelled, retained as treasury shares, distributed as dividends or resold on Bursa Securities, or a combination of the above, at the absolute discretion of the Directors.” Resolution 11

12. To Authorise the Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature “THAT pursuant to Paragraph 10.09 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature with the related parties as set out in Section II, Part B(I), Section 2.3 of the Circular to Shareholders dated 7 November 2007 which are necessary for their day-to-day operations in their ordinary course of business and on normal commercial terms not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders;

AND THAT such authority shall commence immediately upon the passing of this ordinary resolution and continue to be in force until:

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by an ordinary resolution passed by the shareholders in a general meeting, the authority is renewed;

(b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(c) revoked or varied by resolution passed by the shareholders of the Company in a general meeting;

whichever is earlier;

AND THAT the breakdown of the aggregate value of the recurrent related party transactions based on the type of recurrent transaction made and the names of the related parties involved in each type of the recurrent related party transaction made and their relationship with the Company and/or its subsidiaries, shall be disclosed in the Annual Report of the Company as may be required by the governing authority;

AND FURTHER THAT the Directors of the Company (whether solely or jointly) be authorised to complete and do all such acts and things (including executing such relevant documents) as he/they may consider necessary, expedient or in the interests of the Company to give effect to the aforesaid mandate.” Resolution 12

13. To Obtain a new Shareholders’ Mandate for Additional Recurrent Related Party Transactions of a Revenue or Trading Nature “THAT pursuant to Paragraph 10.09 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), approval be and is hereby given for the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature with the Related Parties as set out in Section II, Part B(II), Section 2.3 of the Circular to Shareholders dated 7 November 2007 which are necessary for their day-to-day operations in their ordinary course of business and on normal commercial terms not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders; Ranhill Berhad (430537-K) 155

NOTICE OF ANNUAL GENERAL MEETING

AND THAT such approval shall continue to be in force until:

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by an ordinary resolution passed by the shareholders in a general meeting, the authority is renewed;

(b) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (“Act”) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(c) revoked or varied by resolution passed by the shareholders of the Company in a general meeting;

whichever is earlier;

AND THAT the breakdown of the aggregate value of the recurrent related party transactions based on the type of recurrent transaction made and the names of the related parties involved in each type of the recurrent related party transaction made and their relationship with the Company and/or its subsidiaries, shall be disclosed in the Annual Report of the Company as may be required by the governing authority;

AND FURTHER THAT the Directors of the Company (whether solely or jointly) be authorised to complete and do all such acts and things (including executing such relevant documents) as he/they may consider necessary, expedient or in the interests of the Company to give effect to the aforesaid mandate.” Resolution 13

14. To Authorise the Amendments to the Articles of Association of the Company To consider and if thought fi t, to pass the following Special Resolution:

“THAT the Proposed Amendments to the Articles of Association of the Company (“Proposed AOA Amendments”) as set out in Section II, Part C of the Circular to Shareholders dated 7 November 2007, be and is hereby approved and adopted;

AND THAT the Directors and the Secretaries of the Company be and are hereby authorised to carry out all the necessary formalities in effecting the Proposed AOA Amendments as aforesaid;

AND FURTHER THAT the Directors and the Secretaries of the Company be and are hereby authorised to assent to any conditions, modifi cations, variations and/or amendments as may be required by Bursa Malaysia Securities Berhad and/or the Companies Act, 1965.” Special Resolution 14

15. To transact any other business of which due notice has been given.

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT a fi rst and fi nal gross dividend of 1.5 sen per share, less income tax at 27% in respect of the fi nancial year ended 30 June 2007 if approved by the shareholders at the Eleventh Annual General Meeting, will be paid on 18 January 2008 to Depositors registered in the Record of Depositors at the close of business on 28 December 2007.

A Depositor shall qualify for entitlement only in respect of:

(a) shares transferred to the Depositor’s Securities Account before 4.00 p.m. on 28 December 2007 in respect of ordinary transfers; and

(b) shares bought on the Bursa Malaysia Securities Berhad (“Bursa Securities”) on a cum entitlement basis according to the Rules of the Bursa Securities.

By Order of the Board RANHILL BERHAD

DATO’ AMDAN HJ MAT DIN (LS NO. 0009119) WONG BEE SIAH (MAICSA 7006010) LAU BEY LING (MAICSA 7001523) Company Secretaries

Kuala Lumpur 7 November 2007 156 Ranhill Berhad (430537-K)

NOTICE OF ANNUAL GENERAL MEETING

Notes: 1. A member of the Company entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend and vote on his behalf. 2. A proxy or attorney or corporate representative need not be a member of the Company. 3. A member of the Company is entitled to appoint not more than two (2) proxies to attend and vote at the same meeting provided that where a member of the Company is an authorised nominee as defi ned in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 4. Where a member appoints two (2) proxies, the appointments shall be invalid unless the proportion of the holding to be represented by each proxy is specifi ed in the Form of Proxy. 5. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under its common seal or under the hand of an offi cer or attorney duly authorised. 6. The instrument of proxy, together with the power of attorney (if any) under which it is signed or a certifi ed copy thereof, shall be deposited with the Company’s Registrar, Symphony Share Registrars Sdn Bhd, Level 26, Menara Multi Purpose, Capital Square, No. 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than forty eight (48) hours before the time appointed for holding the Meeting or at any adjournment thereof.

Explanatory Notes on Resolutions 9, 10, 11, 12, 13 and 14

1. Ordinary Resolution 9 – To approve the proposed revision in directors’ fee for the fi nancial year ended 30 June 2007 The proposed Ordinary Resolution 9, if passed, will authorise the payment of revised directors’ fee to the Non-Executive Directors for the fi nancial year ended 30 June 2007 for purpose of remunerating each of them for their onerous fi duciary responsibilities to the Company.

2. Ordinary Resolution 10 – To Authorise the Directors to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 The proposed Ordinary Resolution 10, if passed, will give the Directors of the Company, from the date of the general meeting, authority to allot and issue ordinary shares from the unissued share capital of the Company up to an aggregate amount not exceeding ten percent (10%) of the total issued share capital of the Company for the time being. This authority unless revoked or varied at a general meeting will expire at the next Annual General Meeting (“AGM”).

3. Ordinary Resolution 11 – To Authorise the Renewal of Share Buy-Back Mandate The proposed Ordinary Resolution 11, if passed, will empower the Company to purchase its own shares of up to ten percent (10%) of the total issued and paid-up share capital of the Company by utilising the funds allocated out of the retained profi ts and the share premium reserves of the Company.

Further information on this proposed Ordinary Resolution is set out in Section II, Part A of the Circular to Shareholders dated 7 November 2007.

4. Ordinary Resolution 12 – To Authorise the Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature The proposed Ordinary Resolution 12, if passed, will empower the Company and/or its subsidiaries to enter into the recurrent related party transactions, which are necessary for the Company’s and/or its subsidiaries’ day-to-day operations, subject to the transactions being carried out in the ordinary course of business and on terms not detrimental to the minority shareholders of the Company.

Further information on this proposed Ordinary Resolution is set out in Section II, Part B(I) Section 2.3 of the Circular to Shareholders dated 7 November 2007.

5. Ordinary Resolution 13 – To Obtain a New Shareholders’ Mandate for Additional Recurrent Related Party Transactions of a Revenue or Trading Nature The proposed Ordinary Resolution 13, if passed, will empower the Company and/or its subsidiaries to enter into the additional recurrent related party transactions, which are necessary for the Company’s and/or its subsidiaries’ day-to-day operations, subject to the transactions being carried out in the ordinary course of business and on terms not detrimental to the minority shareholders of the Company.

Further information on this proposed Ordinary Resolution is set out in Section II, Part B(II) Section 2.3 of the Circular to Shareholders dated 7 November 2007.

6. Special Resolution 14 – To Authorise the Amendments to the Articles of Association of the Company The proposed Special Resolution 14, if passed, will inter alia, render the Articles of Association of the Company in line with the recent amendments required under the Listing Requirements of Bursa Malaysia Securities Berhad.

Further information on this proposed Special Resolution is set out in Section II, Part C of the Circular to Shareholders dated 7 November 2007. Ranhill Berhad (430537-K) 157 Statement Accompanying the Notice of Annual General Meeting

Statement accompanying the Notice of the Eleventh Annual General Meeting of the Company pursuant to Paragraph 8.28(2) of Bursa Securities Listing Requirements.

DETAILS OF DIRECTORS WHO ARE STANDING FOR RE-APPOINTMENT OR RE-ELECTION Pursuant to Section 129 of the Companies Act, 1965

Tan Sri Sallehuddin Mohamed

Pursuant to Article 83 of the Company’s Articles of Association

Encik Nadzru Azhari

Pursuant to Article 100 of the Company’s Articles of Association

(a) Tan Sri Hamdan Mohamad (b) Datuk Razman Md Hashim Che Din Md Hashim (c) Datuk Chandrasekar Suppiah

Details of Directors standing for re-appointment and re-election are set out in the Directors’ Profi le of this Annual Report. Form of Proxy

RANHILL BERHAD 430537-K (Incorporated in Malaysia)

*I/*We ………………………………………………………………………………...... NRIC No./Co. No...... (FULL NAME IN BLOCK LETTERS) of ………………………………………………………………………...... being a member of (FULL ADRRESS) RANHILL BERHAD hereby appoint …………………………………………………………………… NRIC No. …...... …...... …...... (FULL NAME IN BLOCK LETTERS) of……………………….……………………………………………………………………...... (FULL ADRRESS) or failing him, ………………………………………………………………………………………………………… NRIC No...... (FULL NAME IN BLOCK LETTERS) of …………………………………………………………………………………………………...... ………………………………...... ……………...... (FULL ADRRESS) or failing him, THE CHAIRMAN OF THE MEETING as *my/*our proxy to vote for *me/*us and on *my/*our behalf at the Eleventh Annual General Meeting of the Company to be held at the Ballroom 1 & 2, Level 2 of Hotel Nikko Kuala Lumpur, 165, Jalan Ampang, 50450 Kuala Lumpur on 30 November 2007, Friday, at 10.30 a.m. and at any adjournment thereof. *My/*Our Proxy(ies) *is/*are to vote as indicated below:

(Please indicate with an “X” in the space provided how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his discretion).

First Proxy “A” Second Proxy “B” Resolutions For Against For Against To receive the Audited Financial Statements and the Reports of the Directors and Auditors for the financial year 1. ended 30 June 2007.

To approve the payment of a first and final gross dividend of 1.5 sen per share, less income tax at 27% for the 2. financial year ended 30 June 2007.

3. To re-appoint Tan Sri Sallehuddin Mohamed as a Director pursuant to Section 129(6) of the Companies Act, 1965. 4. To re-elect Encik Nadzru Azhari as a Director. 5. To re-elect Tan Sri Hamdan Mohamad as a Director. 6. To re-elect Datuk Razman Md Hashim Che Din Md Hashim as a Director. 7. To re-elect Datuk Chandrasekar Suppiah as a Director. 8. To re-appoint Messrs PricewaterhouseCoopers as Auditors. 9. To approve the proposed revision in directors’ fee for the financial year ended 30 June 2007. 10. To authorise the Directors to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965. 11. To authorise the Renewal of Share Buy-Back Mandate. 12. To authorise the Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions (“RRPT”). 13. To obtain a New Shareholders’ Mandate for Additional RRPT. Special Resolution: 14. To authorise the Amendments to the Articles of Association of the Company.

The proportion of *my/*our holding to be represented by *my/*our *proxy/*proxies are as follows: 1st Proxy “A” : %

2nd Proxy “B”: % ------% ======

If appointment of proxy is under hand No. of shares held:

Signed by *individual member/*officer or attorney of member/*authorised nominee of Securities Account No.:

(beneficial owner) Date:

If appointment of proxy is under seal Seal

The Common Seal of was hereto affixed in accordance with its Articles of Association in the presence of: No. of shares held:

Securities Account No.: Director Director/Secretary Date: In its capacity as *member/ *attorney of member/ *authorised nominee of

(beneficial owner)

* Please delete where not applicable Notes: 4. Where a member appoints two (2) proxies, the appointments shall be invalid unless the proportion 1. A member of the Company entitled to attend and vote at the above Meeting is entitled to appoint of the holding to be represented by each proxy is specifi ed in the Form of Proxy. a proxy to attend and vote on his behalf. 5. The instrument appointing a proxy shall be in writing under the hand of the appointor or his 2. A proxy or attorney or corporate representative need not be a member of the Company. attorney duly authorised in writing, or if the appointor is a corporation, either under its common seal or under the hand of an offi cer or attorney duly authorised. 3. A member of the Company is entitled to appoint not more than two (2) proxies to attend and vote at the same meeting provided that where a member of the Company is an authorised nominee 6. The instrument of proxy, together with the power of attorney (if any) under which it is signed or as defi ned in accordance with the provisions of the Securities Industry (Central Depositories) Act, a certifi ed copy thereof, shall be deposited with the Company’s Registrar, Symphony Share 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with Registrars Sdn Bhd, Level 26, Menara Multi Purpose, Capital Square, No. 8, Jalan ordinary shares of the Company standing to the credit of the said securities account. Munshi Abdullah, 50100 Kuala Lumpur, not less than forty eight (48) hours before the time appointed for holding the Meeting or at any adjournment thereof.

1st fold here

AFFIX STAMP

SYMPHONY SHARE REGISTRARS SDN BHD (378993-D) Level 26, Menara Multi Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur

2nd fold here Ranhill Global Offi ces

MALAYSIA PENANG REPUBLIC OF SUDAN KUALA LUMPUR Ranhill Water Technologies Sdn Bhd Khartoum – EMPIRE TOWER BUILDING Tel : (60-4) 227 3415 Ranhill Middle East FZE Ranhill Berhad Fax : (60-4) 228 4559 Tel : (249-911) 230 914 Tel : (60-3) 2171 2020 Fax : (249-911) 230 914 Fax : (60-3) 2164 2235 JOHOR BAHRU SAJ Holdings Sdn Bhd LIBYA Ranhill Engineers and Constructors Tel : (60-7) 224 4040 Tripoli Sdn Bhd Fax : (60-7) 223 6155 Amona-Ranhill Consortium Sdn Bhd Tel : (60-3) 2171 2020 Tel : (218-21) 340 3566 Fax : (60-3) 2164 2072 Ranhill Water Services Sdn Bhd Fax : (218-21) 340 3566 Tel : (60-7) 276 2020 Ranhill Bersekutu Sdn Bhd Fax : (60-7) 276 3030 PAKISTAN Tel : (60-3) 2171 2020 Islamabad Fax : (60-3) 2775 2768 / 69 SABAH Ranhill Pakistan (Pvt) Ltd Ranhill Power O&M Sdn Bhd Ranhill WorleyParsons Sdn Bhd Tel : (92-51) 227 2951 & 282 7442 Tel : (088) 496 330 (formerly known as Ranhill Worley Sdn Bhd) Fax : (92-51) 227 3276 Fax : (088) 496 326 Tel : (60-3) 2163 0499 INDIA Fax : (60-3) 2163 0524 Ranhill Engineers and Constructors Chennai Sdn Bhd Ranhill Power Berhad Ranhill (India) Private Limited Tel : (088) 495 977 Tel : (60-3) 2170 6000 Tel : (91-44) 2434 2041 Fax : (088) 495 484 Fax : (60-3) 2171 1660 Fax : (91-44) 2435 2041

Ranhill Powertron Sdn Bhd OVERSEAS INDONESIA Tel : (60-3) 2170 6000 UNITED ARAB EMIRATES Jakarta Fax : (60-3) 2171 1660 Dubai Bumi Parahyangan Ranhill Energia Ranhill Utilities Berhad Ranhill Middle East (RME) FZE, Jebel Ali Citarum Tel : (60-3) 2170 2020 Tel : (971-4) 337 1481 Tel : (62-21) 527 7002 Fax : (60-3) 2775 8775 Fax : (971-4) 337 1482 Fax : (62-21) 527 7004

Ranhill Water Technologies Sdn Bhd Abu Dhabi THAILAND (formerly known as Ranhill KWI) Ranhill Engineers and Constructors, Bangkok Tel : (60-3) 2171 2020 Abu Dhabi Offi ce Ranhill Water Technologies Thai Ltd Fax : (60-3) 2170 1776 Tel : (971-2) 671 9717 Tel : (66-2) 321 7896 Fax : (971-2) 671 6703 Fax : (66-2) 321 7897 Ranhill Energy Sdn Bhd Tel : (60-3) 2171 2020 Sadeer-Ranhill Bersekutu Sdn Bhd CHINA Fax : (60-3) 2164 2235 Tel : (971-2) 632 3301 Shanghai Fax : (971-2) 632 1949 Senai-Desaru Expressway Berhad Ranhill Water Technologies Sdn Bhd Tel : (60-3) 2170 1780 Tel : (86) 21 5252 2714 QATAR Fax : (60-3) 2171 1230 Fax : (86) 21 5252 2814 Doha

KUALA LUMPUR Al-Sraiya – Ranhill Bersekutu Sdn Bhd Yichun City – EXCELLA BUSINESS PARK Tel : (974) 444 0224 Yichun Pinang Water Ltd Fax : (974) 444 2264 Mediglobal Malaysia Sdn Bhd Tel : (86) 79 5319 5876 Tel : (60-3) 4270 3032 Fax : (86) 79 5319 5877 Fax : (60-3) 4270 3034 Ranhill Berhad (430537-K) 36th Floor, Empire Tower No. 182, Jalan Tun Razak 50400 Kuala Lumpur Tel : (603) 2171 2020 Fax : (603) 2164 2235 www.ranhill.com.my