ANNUAL REPORT2013

Vision

Mision

Value

To be the preferred water services provider in Indonesia by satisfying our customers and adding value to our stakeholders.

To satisfy our customers with high level services and by providing a good quantity, continuity and quality of water through operational excellence.

To maintain a sustainable cooperation with the public stakeholders for the benefit of the population while complying with prevailing regulations.

To develop our employees potential to maximize their performance and satisfaction and provide them with a healthy and safe environment.

To enhance value creation to our shareholders.

To be socially responsible, to protect the environment and to implement Good Corporate Governance.

To liaise with all parties involved with the water resources in order to improve the general awareness regarding scarcity of water.

To develop long term strategic alliances with our business partners.

To maintain a good corporate image.

Responsible

Caring

Trustworthy

Innovative

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The duly appointed members of the Board of Directors of the Company (“BOD”) do hereby submit the following annual report on the Company’s operations for the financial year ended 31 December 2013 to the shareholders of the Company.

ANNUAL REPORTOF THE BOARD OF DIRECTORS OF PT PAM LYONNAISE JAYA (“Company”)

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REPORT ON THE COMPANY’S ACTIVITIES

(i) The Company incurred a net comprehensive income of IDR215,712,369,352 for the financial year ended 31 December 2013;

(ii) The total unappropriated retained earnings of the Company as of 31December 2013 are in the amount of IDR1,028,424,320,371;

(iii) The significant events for the financial 2013 are as follows;

Sales volume decreased by 0.79% compared to the financial year ended 31 December 2012, i.e. 159,811,122 m3 in 2012, and 158,547,811 m3 in 2013 mainly due to the floods in Jan-Feb period and to the Fire in Cawang in August 2013.

In the financial year ended 31 December 2013, the Company’s revenues increased by 4.9% to IDR 1,169,424,765,422 compared to the financial year ended 31 December 2012 of IDR 1,114,826,769,147.

In the financial year ended 31 December 2013, the net comprehensive income rose to (positive) IDR 215,712,369,352 an increase of 3.7% compared to the financial year ended 31 December 2012 of IDR 207,884,722,129.

The Company received its corporate rating from PT Pemering-kat Efek Indonesia (PEFINDO) at idA(Single A; Stable Outlook) for the period of February 26, 2013 until February 1, 2014.

In the financial year ended 31 December 2013, the Company employed 716 direct and 685 seconded employees resulting the Company’s head count to become 1,401 employees, which is an increase of 0.7% from 1,392 employees to the Company employed in the financial year ending 31 December 2012.

In the financial year ended 31 December 2013, the Company’s head count trained to become 1,225 employees with manhours 42.035 which is a decrease of 11% from 1,246 employees with manhours 47.165 to the Company employed in the financial year ending 31 December 2012.

During the year 2013 the company achieved very efficient Operational performances:- 158.55 Mm3 Volume Sold are +8.3 Mm3 or 5.5% above contractual Target;- Water Quality contractual compliance rate over 99.8%, with PERMENKES standard being now successfully implemented in all the service area, and; - Customer’s Satisfaction Level has continued to increase to reach 76% (TNS Sofres) with only 3% of the customers being dissatisfied with the service.

This was achieved despite hindering factors which are beyond Company’s control, such as:- Limited Water Resources to improve the service coverage;- Delayed Permitting Issuances by Head of DKI Public Works, which hamper projects timely delivery necessary to improve and extend the service to customers, and;- Several severe crisis events with flood & fire at raw water pumping station Cawang, affecting the stability and continuity of the service.

The Company is committed to keep improving Services tothe customers, the Quality of Works and Safety Implementation.

REPORT ON THE SUPERVISORY DUTIES DONE BY THE MEMBERS OF THE BOARD OF COMMISSIONERS (“BOC”)

Pursuant to Article 16 of the Articles of Association of the Company, the Board of Commissioners Meeting may be held at any time. In 2013, there were 4 (four) Meetings of the Board of Commissioners held by the Company on 18 January 2013, 23 April 2013, 16 July 2013, and 22 October 2013 whereby all respective Board of Commissioners members attended or were represented, except a Board Commissioner who was absent and not represented at 16 July 2013, and 22 October 2013 meetings.

The Board of Commissioners Meeting is conducted within the framework of the implementation of the control function of the Board of Commissioners for the management policy, the business activities of the Company and providing advices to the Board of Directors.

The Board of Directors has been, on a regular basis, communicating and consulting with the Board of Commissioners on, among other things, the following:

(i) Performance Achievement of the Company (Operational and Financial) (ii) Any issues/problems arising in the operation of the Company; (iii) Business plan of the Company;

ACTIVITIES ANDACHIEVEMENTSOF THE COMPANY

CORPORATE SOCIAL RESPONSIBILITYPALYJA considers Corporate Social Responsibilty (CSR) is inline with its Business Strategy. All CSR activities are coordinatedunder the umbrella of PALYJA FRIENDLY COMPANY (PFC). There is a real commitment to meet the expectations of our Stakeholders. Therefore, PALYJA focus its CSR activities on Environment, Health & Education, Humanitarian Relief and Water For All.

Result have been achieved in 2013 are : Environment (PALYJA Green Community, World Water Day, emission test, dredging, infiltration wells, biopori holes, plant-ing trees and trees in pots), Health & Education (Hygiene education Commemorating “Hari Cuci Tangan Pakai Sabun”, blood donation, mass medical treatment, stu-dent visit, writing and drawing contest, Open House), Humanitarian Relief (donation in the form of clean water, floods, fire victims), Water For All (GPOBA / Global Partnership on Output Based Aid, Master Meter, Water Kiosk).

We attach the audited Financial Statements for the financial year ended in 31 December 2013 No.RPC-4817/PSS/2014 dated January 17, 2014 prepared by the public accounting firm of Purwantono, Suherman & Surja, a member firm of Ernst & Young Global Limited (“Financial Report 2013”);

IDR 250,000,000,000 of dividends have been distributed for the financial year ended 31 December 2013. Based on the circular shareholder’s resolutions dated April 17, 2013 and June 21, 2013, the shareholdersapproved Board of Commissioners resolutions following Board of Directors recommendations to distribute interim dividend amounting in total to to IDR150,000,000,000 and IDR100,000,000,000 which was distributed in May and June 2013, respectively.The difference between the distribution of the dividends amounting to IDR250,000,000,000 and the net income 2013 (IDR215,712,369,352) hence IDR34,287,630,648 is deducted from inappropriate retained earnings (previous years earnings).

FINANCIAL STATEMENTS

DISTRIBUTION OF DIVIDENDS

We attach the audited Financial Statements for the financial year ended in 31 December 2013 No.RPC-4817/PSS/2014 dated January 17, 2014 prepared by the public accounting firm of Purwantono, Suherman & Surja, a member firm of Ernst & Young Global Limited (“Financial Report 2013”);

The Independent Commissioner was remunerated by the Company during his term, other members of the Board of Commissioners and Board of Directors were not given any form of remuneration, neither in salary, honorarium, nor benefits.

As of 1st January 2013 the composition of the BOC and BOC was as followed

Board of CommissionersPresident Commissioner: Angky TisnadisastraVice-President Commissioner: Charles ChauminCommissioner: Irawan SantosoCommissioner: Jean-Marc TurchiniCommissioner: Bernard LafrogneIndependent Commissioner: Ongky Sukasah

Board of DirectorsPresident Director: Christophe ComteVice-President Director: Herawati PrasetyoDirector: Budi SusiloDirector: Luc Martin

It was then ultimately changed as follows toreflect the BOC and BOD composition valid on 31st December 2013:

The members of the BOD of the Company were changed as reflected in Deed of Shareholders Resolutions No.26 dated 10 October 2013, drawn up before Notary Kumala Tjahjani Widodo,to become as follows:

Board of DirectorsPresident Director: Christophe ComteVice-President Director: Herawati PrasetyoDirector: Budi SusiloDirector: Philippe Pedrini

The members of the BOC of the Company were changed as reflected in Deed of Shareholders Resolutions No.26 dated 11 September 2013, drawn up before Notary Kumala Tjahjani Widodo, to become as follows:

Board of CommissionersPresident Commissioner: Irawan SantosoVice-President Commissioner: Charles ChauminCommissioner: Angky TisnadisastraCommissioner: Sebastien ArbolaCommissioner: Bernard Lafrogne

APPOINTMENT OF FINANCIAL AUDITOR

SALARY AND BENEFITS OF THE MEMBERS OF THE BOC AND THE BOD

COMPOSITION OF THE BOC AND THE BOD

Name: Christophe ComteTitle: President DirectorDate:

Name: Budi SusiloTitle: DirectorDate:

Name: Irawan SantosoTitle: President CommissionerDate:

Name: Angky Tisnadisastra Title: CommissionerDate:

Name: Bernard Lafrogne Title: CommissionerDate:

Name: Herawati PrasetyoTitle: Vice-President DirectorDate:

Name: Philippe PedriniTitle: DirectorDate:

Name: Charles ChauminTitle: Vice-President CommissionerDate:

Name: Sebastien Arbola Title: CommissionerDate:

We have viewed the Annual Report of the Company for the financial year ended in 2012 and its attachments, and asrequired under Article 67 of Law No. 40 of 2007 on Limited Liability Companies, we evidence by our signature ourapproval as of 24, March 2014.

Approved by the BOARD OF COMMISSIONERS OF THE COMPANY

This Annual Report is hereby unanimously agreed by all members of the BOD, and also approved by the BOC, to be adopted and approved by the shareholders of the Company.

BOARD OF DIRECTORS OF THE COMPANY

PT PAM LYONNAISE JAYASENTRAL SENAYAN I, 7FLJL. ASIA AFRIKA NO. 8JAKARTA PUSATINDONESIA

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