CONTENTS and vision can transform something as basic as paper ... Sdn Bhd Scomi Barite Sdn Bhd ... (Kemaman) Sdn Bhd KMC All Star Chemical Sdn Bhd ALGERIA KMC

Scomi is all about realising potential. In this annual report, we seek to bring Scomi’s promise to life by using paper art, where a simple sheet of paper is re-imagined into complex three dimensional forms. Much like how Scomi leverages upon the simplest opportunity to create value, this demonstrates how creativity and vision can transform something as basic as paper into an object of beauty.

CONTENTS

Key Financial Indicators P02 Key Financial Highlights P03

Scomi Group Corporate Structure P04

Corporate Statement P08

Corporate Information P09

Profile of Directors P10

Management Team P16

Chairman’s Statement P18

Management Review of Operations P26

Corporate Social Responsibility P36

Human Capital Development P39

Statement on Corporate Governance P43

Statement on Risk Management and Internal Control P54

Audit and Risk Management Committee Report P60

Additional Information P64

Statement of Directors’ Responsibility P67

Financial Statements P70

Analysis of Shareholdings P207

List of Properties P211

Corporate Directory P214

Notice of Annual General Meeting P217

Notice of Nomination P221

Form of Proxy P223

P/02 SCOMI GROUP BHD ANNUAL REPORT 2013KEY FINANCIAL INDICATORS

Key FinancialIndicators

NOTES

**

Based on (loss)/profit attributed to owner of the Company and the weighted average number of shares assumed to be in issue in the respective period/year.

@

Based on (loss)/profit attributed to owner of the Company and the weighted average number of shares assumed to be in issue in the respective period/year after taking into consideration the dilutive effect of unexercised ESOS.

2008 – 2011

The financial highlights on pages 2 and 3 reflect the audited results of Scomi Group Bhd, with certain numbers restated to reflect retrospective effects as a result of adoption of new or revised Financial Reporting Standards in the respective years.

15 months 12 months 12 months 12 months 12 months 2013 2011 2010 2009 2008 RM’000 RM’000 RM’000 RM’000 RM’000

Continuing operations Turnover 1,922,368 1,402,566 1,931,036 2,419,781 2,573,198 EBITDA 255,118 305 (148,563) (192,953) 409,148 Depreciation 104,343 119,156 138,420 139,247 125,943 Finance costs 129,678 48,856 98,857 106,719 113,058 Share of profit in associated companies 133 (2,978) 6,157 43,577 49,543 Share of profit from joint-ventures 6,568 3,754 415 3,596 – Profit/(loss) before tax 21,097 (167,707) (276,980) (951) 190,191 Taxation (27,557) (19,298) (27,081) (31,092) (13,221)

Profit/(loss) from continuing operations (6,460) (187,005) (304,061) (32,043) 176,970 Loss from discontinued operations (62,989) (170,156) (3,269) – – Profit/(loss) for the year (69,449) (357,161) (307,330) (32,043) 176,970 Non-controlling interest 2,616 133,456 134,424 21,179 (60,417)

(Loss)/profit attributed to owners of the Company (66,833) (223,705) (172,906) 9,875 116,553

Numbers of shares in issue (‘000) 1,564,540 1,187,688 1,182,658 1,086,801 1,021,839 Weighted average number of shares assumed in issue (‘000) 1,634,422 1,391,731 1,371,255 1,025,795 1,006,342 Weighted average number of shares used to compute diluted earnings per share (‘000) 1,638,693 1,394,528 1,387,259 1,053,648 1,016,009 Basic - Net EPS (sen)** (4.09) (16.07) (12.61) 0.96 11.58 Fully diluted - Net EPS (sen)@ (4.08) (16.04) (12.46) 0.94 11.47

SCOMI GROUP BHD ANNUAL REPORT 2013P/03KEY FINANCIAL HIGHLIGHTS

Key Financial Highlights

(Loss)/Profit Attributed to Owners of the Company (RM Million)

Turnover (RM Million) Total Assets (RM Million) As at 31 March 2013

RM1,647As at 31 Dec 2011 : RM1,532As at 31 Dec 2010 : RM2,466As at 31 Dec 2009 : RM3,039

Earning Per Share (Basic)15 months/2013

(4.09)sen2011 : (16.07) sen2010 : (12.61) sen2009 : 0.96 sen

Net Tangible Assets(RM Million)As at 31 March 2013

RM441As at 31 Dec 2011 : RM188As at 31 Dec 2010 : RM346As at 31 Dec 2009 : RM360

Shareholders’ Fund (RM Million)As at 31 March 2013

RM599As at 31 Dec 2011 : RM509As at 31 Dec 2010 : RM726As at 31 Dec 2009 : RM920

Net Assests Per Share (Attributable to owners of the Company)As at 31 March 2013

38senAs at 31 Dec 2011 : 37 senAs at 31 Dec 2010 : 61 senAs at 31 Dec 2009 : 85 sen

15 months^20131,922

12 months20111,402

12 months20101,931

12 months20092,419

12 months20082,573

15 months^2013(66)

12 months2011(224)

12 months2008117

12 months2010(173)

12 months2009

10

Profit/(Loss) Before Tax (RM Million)

12 months2009(951)

15 months^2013

21

12 months2008190

12 months2010(277)

12 months2011(168)

NOTE

^ The 2013 financials are in respect of continuing operations only.

P/04 SCOMI GROUP BHD ANNUAL REPORT 2013

SINGAPORE

Goldship Pte Ltd

INDONESIA

PT Rig Tenders Indonesia Tbk6

BRITISH VIRGIN

ISL ANDS

King Bridge Enterprises Limited

L ABUAN

Scomi Capital Limited

Scomi Group Bhd1

Scomi OBM Terminal Sdn Bhd

Scomi Barite Sdn Bhd

Scomi Oiltools (Kemaman) Sdn Bhd

KMC All Star Chemical Sdn Bhd

ALGERIA

KMC Oiltools Algerie EURL

EGYPT

Scomi OiltoolsEgypt SAE3,4

BRITISH VIRGIN

ISL ANDS

Scomi Oiltools South America Ltd

SCOTL AND

Scomi Oiltools (Shetland) Limited

MAURITIUS

Scomi Oiltools Overseas (M) Limited

TEXAS, USA

Scomi Oiltools Inc

MEXICO

Scomi Oiltools de Mexico S de RL de CV5

MEXICO

Oilfield Services de Mexico S de RL de CV5

SCOTL AND

Scomi Oiltools (Europe) Ltd

SCOTL AND

Augean North Sea Services Limited

Gemini Sprint Sdn Bhd

Trans Advantage Sdn Bhd

SINGAPORE

Scomi Marine Services Pte Ltd

Emerald Logistics Sdn Bhd

L ABUAN

Marineco Limited

VIE TNAM

Southern Petroleum Transportation Joint Stock Company

L ABUAN

Transenergy Shipping Pte. Ltd.

Scomi Sosma Sdn Bhd

Scomi KMC Sdn Bhd

FR ANCE

Scomi Anticor S.A.S7

BRUNEI

Scomi (B) Sdn Bhd

50%

50%

51% 49%

51%

21.08% 4%

48%

80.54%

49%

19%

Scomi Solutions Sdn Bhd

BRITISH VIRGIN

ISL ANDS

Scomi Ecosolve Limited

Scomi Chemicals Sdn Bhd

Scomi Energy Services Bhd1*

BERMUDA

Scomi Oiltools Bermuda Limited

SINGAPORE

Scomi International Private Limited

65.65%2

Scomi Oiltools Sdn Bhd

TEXAS, USA

Scomi Equipment Inc.

SINGAPORE

Scomi Oiltools (S) Pte Ltd

51%

VENEZUEL A

Premium Industrial Machining S.A.

VENEZUEL A

Scomi Oiltools de Venezuela S.A.

INDIA

KMC Oiltools India Pte Ltd9

INDONESIA

PT Multi Jaya Persada

INDONESIA

PT Scomi Oiltools

INDONESIA

PT Inti Jatam Pura

RUSSIA

Scomi Oiltools (RUS) LLC

95%95%

95%

SCOMI GROUP CORPORATE STRUCTURE AS AT 31 JULY 2013

SCOMI GROUP BHD ANNUAL REPORT 2013P/05

Scomi Engineering Bhd1

Global Learning and Development Sdn Bhd

Scomi Energy Sdn Bhd

Scomi EnviroSdn Bhd

NIGERIA

Wasco Oil Service Company Nigeria Limited

GABON

Oiltools Gabon SA

BRITISH VIRGIN

ISL ANDS

Scomi OMSOilfield Services Ltd

Scomi Transit Projects Brazil Sdn Bhd

BR A ZIL

Urban Transit Servicos Do Brasil LTDA10

Scomi Transportation Systems Sdn Bhd

Scomi Transit Projects Sdn Bhd

Scomi Transit Projects Brazil(Sao Paulo) Sdn Bhd

INDIA

Urban Transit Private Limited11

Scomi Special Vehicles Sdn Bhd

AUSTR ALIA

Scomi Oiltools Pty Ltd

THAIL AND

Scomi Oiltools (Thailand) Ltd8

NE THERL ANDS

KMC Oiltools BV

KMCOB Capital Berhad

OMAN

Scomi Oiltools Oman LLC

C AYMAN ISL ANDS

Scomi Oiltools (Africa) Limited

C AYMAN ISL ANDS

Scomi Oiltools Ltd

C AYMAN ISL ANDS

Scomi Oiltools (Cayman) Ltd

ENGL AND & WALES

Vibratherm Limited

BERMUDA

Scomi Oilfield Limited

Scomi Trading Sdn Bhd

Scomi CoachSdn Bhd

Scomi CoachMarketingSdn Bhd

Scomi Rail Bhd

96%60%

50%

51%

72.33%

KEY

Energy Services Division Oilfield Services ( Western) Division

Transport Solutions Division

* Formerly known as Scomi Marine Bhd.1 Listed on the Bursa Malaysia Securities Berhad (Kuala Lumpur Stock Exchange).2 Includes 0.01% held by Scomi Energy Sdn Bhd.

3 Scomi Oiltools Bermuda Limited holds on trust for Scomi Oilfield Limited persuant to a trust deed dated 8 March 2013.4 Includes 1 share each held by Scomi Oitools Ltd and Scomi Oiltools (Cayman) Ltd.

5 Includes 1 share held by an individual.6 Listed on the Jakarta Stock Exchange.7 Includes 1 preferential share each held by 2 different individuals.8 Includes 1 Class A share each held by Scomi Oiltools Ltd and Scomi Oiltools (Cayman) Ltd.

9 Includes 1 share held by Scomi Oiltools Ltd.10 Includes 1 share held by Scomi Rail Bhd.11 Includes 0.0004% held by Scomi Rail Bhd.

NOTES

• This corporate structure does not include the subsidiaries/ associated companies of PT Rig Tenders Indonesia Tbk.• Except as otherwise expressly stated, all companies in this corporate structure are incorporated in Malaysia.• Except as otherwise expressly stated, all companies in this corporate structure are wholly owned by their respective holding companies.

SCOMI GROUP CORPORATE STRUCTURE AS AT 31 JULY 2013

Transforming a simple commodity

into something of global value.

A GLOBE

Using imagination, even a simple piece of paper has the potential to become an object of greater value. In paper art,

Scomi sees its own credo to realise potential.


With a presence in 53 locations across 26 countries, the Scomi group of companies is a global technology enterprise in the energy and logistics industries.

We are a global technology enterprise. Our global reach, capabilities and talent provide us with the necessary resources to develop and own new technology in all areas of our business.

We focus on Energy & Logistics. All our businesses are focused on the Energy and/or Logistics sectors with the ability to compete globally. All of us in the Scomi family should remember that any new initiatives we undertake will focus on these areas of business.

We provide innovative solutions. We innovate to respond to an evolving environment. Our products and operations meet today’s needs while anticipating tomorrow’s. We are committed to developing competitive and innovative solutions to create efficiency, add value and grow with our customers to shape our future.

We aim to realise potential for our stakeholders.

Our customers: We will develop and offer customers innovative and competitive products and services that help them grow their business.

Our shareholders: We are committed to providing long-term superior returns to our shareholders.

Our people: We aim to provide our employees with developmental opportunities so they can succeed on personal and professional levels.

Our suppliers: We will treat our suppliers as our partners in the mutual interest of business growth.

Our society/ environment: As a good corporate citizen, we will give back to the communities we operate in worldwide.

CORPORATE STATEMENT

SCOMI GROUP BHD ANNUAL REPORT 2013P/09CORPORATE INFORMATION

Board of DirectorsTan Sri Asmat bin Kamaludin (Chairman)Tan Sri Nik Mohamed bin Nik YaacobTan Sri Mohamed Azman bin YahyaDatuk Haron bin SirajDato’ Mohammed Azlan bin HashimDato’ Sreesanthan a/l EliathambyDato’ Abdul Rahim bin Abu BakarDato’ Teh Kean Ming(Appointed on 22 October 2012)Foong Choong HongShah Hakim @ Shahzanim bin ZainLee Chun Fai (Alternate Director to Dato’ Teh Kean Ming) (Appointed on 22 May 2013)

Audit and Risk Management CommitteeDato’ Abdul Rahim bin Abu Bakar (Chairman)Tan Sri Nik Mohamed bin Nik YaacobDatuk Haron bin SirajDato’ Mohammed Azlan bin Hashim

Nomination and Remuneration CommitteeTan Sri Asmat bin Kamaludin (Chairman)Tan Sri Mohamed Azman bin YahyaDato’ Mohammed Azlan bin Hashim

Options CommitteeTan Sri Asmat bin Kamaludin (Chairman)Datuk Haron bin SirajShah Hakim @ Shahzanim bin Zain

Registered OfficeLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul EhsanMalaysiaTel : 03-7717 3000Fax : 03-7728 5853

Administrative and Correspondence AddressLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul EhsanMalaysiaTel : 03-7717 3000Fax : 03-7728 5258Website : www.scomigroup.com.myEmail : [email protected]

RegistrarSymphony Share Registrars Sdn BhdLevel 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/46 47301 Petaling Jaya Selangor Darul Ehsan MalaysiaTel: 03-7841 8000 Fax: 03-7841 8151/8152 Helpdesk: 03-7849 0777

Advocates & SolicitorsAlbar & PartnersAdvocates & Solicitors6th Floor, Faber Imperial CourtJalan Sultan Ismail50250 Kuala LumpurMalaysia

Kadir Andri & Partners8th Floor, Menara Safuan80 Jalan Ampang50450 Kuala LumpurMalaysia

Company SecretariesOng Wei Leng (MAICSA 7053539)Chong Mei Yan (MAICSA 7047707)

AuditorsPricewaterhouseCoopers(AF 1146)Chartered AccountantsLevel 10, 1 SentralJalan TraversKuala Lumpur SentralPO Box 1019250706 Kuala LumpurMalaysia

Principal BankersCIMB Bank Berhad10th Floor, Bangunan CIMBJalan Semantan, Damansara Heights50490 Kuala LumpurMalaysia

OCBC Bank (Malaysia) Bhd18th Floor, Menara OCBC18 Jalan Tun Perak50050 Kuala LumpurMalaysia

Stock Exchange ListingMain Market of Bursa Malaysia Securities BerhadStock Name: ScomiStock Code: 7158

CurrencyRinggit Malaysia (RM)

Corporate Information

From left

Tan Sri Asmat Bin KamaludinChairman, Independent Non-Executive Director

Tan Sri Nik Mohamed Bin Nik YaacobIndependent Non-Executive Director

Datuk Haron Bin SirajIndependent Non-Executive Director

Tan Sri Mohamed Azman Bin YahyaNon-Independent Non-Executive Director

Dato’ Mohammed Azlan Bin HashimIndependent Non-Executive Director

From left

Foong Choong HongNon-Independent Non-Executive Director

Dato’ Abdul Rahim Bin Abu BakarIndependent Non-Executive Director

Dato’ Sreesanthan A/L EliathambyIndependent Non-Executive Director

Shah Hakim Bin ZainGroup Chief Executive Officer, Non-Independent Executive Director

Dato’ Teh Kean MingNon-Independent Non-Executive Director


Tan Sri Asmat Bin KamaludinChairman, Independent Non-Executive Director

Tan Sri Asmat, 69, a Malaysian, is an Independent Non-Executive Director and the Chairman of the Company. He was appointed to the Board on 3 March 2003.

Tan Sri Asmat holds a Bachelor of Arts (Honours) degree in Economics from the University of Malaya, and he also holds a Diploma in European Economic Integration from the University of Amsterdam.

Tan Sri Asmat has vast experience in various capacities in the public service and his last position was as the Secretary-General of the Ministry of International Trade and Industry, Malaysia (MITI), a position he held from 1992 to 2001. Between1973 and 1976, he has served as Senior Economic Counsellor for Malaysia in Brussels and has worked with several international bodies such as Association of South-East Asian Nations (ASEAN), World Trade Organisation (WTO) and the Asia-Pacific Economic Cooperation, representing Malaysia in relevant negotiations and agreements. Tan Sri Asmat has also been actively involved in several national organisations such as Johor Corporation, the Small and Medium Scale Industries Corporation (SMIDEC) and the Malaysia External Trade Development Corporation (MATRADE) while in the Malaysian Government service. In 2008, Tan Sri Asmat was appointed by MITI to represent Malaysia as Governor on the Governing Board of the Economic Research Institute for Asean and East Asia (ERIA). Other Malaysian public companies in which he is a Director are Permodalan Nasional Bhd, UMW Holdings Berhad, YTL Cement Berhad, Panasonic Manufacturing Malaysia Berhad, Compugates Holdings Berhad, The Royal Bank of Scotland Berhad, UMW Oil & Gas Corporation Berhad and AirAsia X Berhad. He also serves on the Board of JACTIM Foundation.

Tan Sri Asmat is a member of, and chairs the Nomination and Remuneration Committee and the Options Committee of the Board. Tan Sri Asmat attended 10 out of the 11 Board Meetings held during the financial period ended 31 March 2013.

Tan Sri Nik Mohamed Bin Nik YaacobIndependent Non-Executive Director

Tan Sri Nik Mohamed, 64, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July 2004.

Tan Sri Nik Mohamed holds a Diploma in Mechanical Engineering, a Bachelor of Engineering (Hons) from Monash University, Australia and a Masters in Business Management from the Asian Institute of Management, Philippines. He also completed the Advanced Management Programme at Harvard University in the United States.

He served as the Group Chief Executive of Sime Darby Berhad from 1993 until his retirement in June 2004 and during this period, he also served on the Boards of many of the Sime Darby group companies. He was Sime Darby Berhad’s Director of Operations in Malaysia prior to his appointment as the Group Chief Executive in 1993. He was also the Chairman of the Advisory Council of National Science Centre and Chairman of the Board of Universiti Teknologi MARA (UITM) and served as a member of the INSEAD East Asian Council, National Council for Scientific Research and Development, Co-ordinating Council for the Public-Private Sectors in the Agricultural Sector, National Coordinating Committee on emerging Multilateral Trade Issues and the Industrial Coordinating Council. He was a representative for Malaysia in the APEC Business Advisory Council and the Asia-Europe Business Forum. Other Malaysian public companies in which he is a Director are GuocoLand (Malaysia) Berhad, Symphony Life Berhad (formerly known as Bolton Berhad), SapuraKencana Petroleum Berhad and Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd). Tan Sri Nik Mohamed is also the Executive Director of Yayasan Kepimpinan Perdana (Perdana Leadership Foundation).

Tan Sri Nik Mohamed is a member of the Audit and Risk Management Committee of the Board. Tan Sri Nik Mohamed attended 9 out of the 11 Board Meetings held during the financial period ended 31 March 2013.

PROFILE OF DIRECTORS


Tan Sri Mohamed Azman Bin YahyaNon-Independent Non-Executive Director

YBhg Tan Sri Mohamed Azman bin Yahya, a Malaysian, aged 49, is a Non-Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.

Tan Sri Azman is the Group Chief Executive and Executive Director of Symphony House Berhad, a listed business process outsourcing group and the Executive Chairman of Symphony Life Berhad (formerly known as Bolton Berhad), a listed property group. He holds a first class honours degree in Economics from the London School of Economics and Political Science and is a member of the Institute of Chartered Accountants in England and Wales and the Malaysian Institute of Accountants and a fellow member of the Malaysian Institute of Banks.

During the Asian Financial Crisis in 1998, Tan Sri Azman was appointed by the Malaysian Government to set-up and head Danaharta, the national asset management company and subsequently became its chairman until 2003. His previous career appointments include auditing with KPMG in London, finance with the Island & Peninsular Group and investment banking with Bumiputra Merchant Bankers and Amanah Merchant Bank, the latter as Chief Executive.

Outside his professional engagements, Tan Sri Azman is active in public service and sits on the boards of Khazanah Nasional Berhad and Ekuiti Nasional Berhad (EKUINAS), the investment arm and the private equity arm of the Malaysian Government respectively. He also serves as a Director of PLUS Expressways International Berhad (formerly known as PLUS Expressways Berhad). Tan Sri Azman is a member of the Financial Reporting Foundation and is a Director of Sepang International Circuit and the Chairman of Motorsports Association of Malaysia.

Tan Sri Azman is a member of the Nomination and Remuneration Committee of the Board. He attended all of the 11 Board Meetings held during the financial period ended 31 March 2013.


Datuk Haron Bin SirajIndependent Non-Executive Director

Datuk Haron, 68, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.

Datuk Haron graduated from the University of Manchester, United Kingdom, with a Bachelor of Arts with Honours in Economics, and also holds a Masters Degree in Development Economics from Williams College, United States of America.

Datuk Haron started his career as an Assistant Controller with the Ministry of Commerce and Industry. He subsequently served as the Principal Assistant Secretary, and later as the Under Secretary, in the Ministry of Primary Industries until 1980. From August 1980, he served as the Minister Counsellor (Economic Affairs) of the Permanent Mission of Malaysia in Geneva, Switzerland, and returned to Malaysia in 1985 to join the Ministry of International Trade and Industry, holding various directorship positions, and was later appointed as Deputy Secretary-General (Trade) in 1990. Datuk Haron was appointed as Ambassador, Permanent Representative of Malaysia to the United Nations and other International Organisations (including the GATT and the WTO) and Specialised Agencies in Geneva, Switzerland from September 1992 to December 1996. On his return, he became the Secretary-General of the Ministry of Primary Industries where he served until end of 2000. He was appointed Chief Executive Officer of the Malaysian Palm Oil Promotion Council from January 2001 until his retirement in January 2006. Other Malaysian public company in which he is a Director is Kulim (Malaysia) Berhad.

Datuk Haron is a member of the Audit and Risk Management Committee and the Options Committee of the Board. He attended 10 out of the 11 Board Meetings held during the financial period ended 31 March 2013.


Dato’ Mohammed Azlan Bin HashimIndependent Non-Executive Director

Dato’ Azlan, aged 56, Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July 2004.

Dato’ Azlan graduated with a Bachelor of Economics from Monash University and qualified as a Chartered Accountant in Australia. He is a fellow member of the Institute of Chartered Accountants, Australia, a member of the Malaysian Institute of Accountants, a fellow member of Malaysian Institute of Directors, a fellow member of Malaysia Institute of Chartered Secretaries and Administrators and a honorary member of the Institute of Internal Auditors, Malaysia.

He has extensive experience in the corporate sector. Dato’ Azlan is the Chairman of D&O Green Technologies Berhad and SILK Holdings Berhad. He also serves as a Non-Executive Director of Khazanah Nasional Berhad, IHH Healthcare Berhad (formerly known as Integrated Healthcare Holdings Berhad), Labuan Financial Services Authority and is a member of the Investment Panel of the Employees’ Provident Fund and Retirement Fund Incorporated. During his career, he served in various capacities in the financial services industry and investment holding companies, including as Chief Executive of Bumiputra Merchant Bankers Berhad, Group Managing Director of Amanah Capital Malaysia Berhad and Executive Chairman of Bursa Malaysia Berhad Group.

Dato’ Azlan is a member of the Audit and Risk Management Committee and the Nomination and Remuneration Committee of the Board. He attended 10 out of the 11 Board Meetings held during the financial period ended 31 March 2013.

Dato’ Sreesanthan A/L EliathambyIndependent Non-Executive Director

Dato’ Sreesanthan, aged 52, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 18 April 2006. Dato’ Sreesanthan, is an Advocate & Solicitor and a Partner with the legal firm of Messrs Kadir Andri & Partners.

Dato’ Sreesanthan obtained his undergraduate law degree from the University of Malaya and his post graduate degree in law from the University of Oxford, United Kingdom.

He was formerly a Legal Assistant and later a Partner with the legal firm of Messrs Zain & Co and Messrs Zul Rafique & Partners. Dato’ Sreesanthan is a member of the Disciplinary Committee Panel of the Advocates and Solicitors’ Disciplinary Board.

Dato’ Sreesanthan attended 8 out of the 11 Board Meetings held during the financial period ended 31 March 2013.

Dato’ Abdul Rahim Bin Abu BakarIndependent Non-Executive Director

Dato’ Rahim, aged 67, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 7 October 2010.

Dato’ Rahim graduated from the Brighton College of Technology, United Kingdom with a Bachelor of Science (Hons) in Electrical Engineering in 1969. He is a member of the Institute of Engineers Malaysia (MIEM) and is a Professional Engineer, Malaysia (P.Eng). He also holds the Electrical Engineer Certificate of Competency Grade 1.

Dato’ Rahim began his career in 1969 with the then National Electricity Board. He was attached to the organisation for 10 years in various technical and engineering positions before he moved on to the private sector. From 1979 to 1983, he served with Pernas Charter Management Sdn Bhd, a management company for the tin mining industry. Then, from late 1983 to 1991, he was attached to Malaysia Mining Corporation Berhad (MMC) in various senior positions. Later from 1991 to 1995, he moved on to MMC Engineering Services Sdn Bhd and subsequently to MMC Engineering Group Berhad as the Managing Director. In May 1995, he joined Petroliam Nasional Berhad (Petronas) to assume the position of Managing Director of Petronas Gas Berhad (PGB) and subsequently moved on to Petronas as its Vice President, in charge of the Petrochemical Business in 1999. He retired from Petronas on 31 August 2002. Dato’ Rahim’s other directorships in public companies are Scomi Engineering Bhd, Telekom Malaysia Berhad, Global Maritime Ventures Berhad and Westports Holdings Berhad (formerly known as Westports Holdings Sdn Bhd).

Dato’ Rahim is the Chairman of the Audit and Risk Management Committee of the Board. He attended all of the 11 Board Meetings held during the financial period ended 31 March 2013.

Dato’ Teh Kean MingNon-Independent Non-Executive Director

Dato’ Teh, aged 58, a Malaysian, is a Non-Independent Non-Executive Director of the Company. He was appointed to the Board on 22 October 2012.

He graduated with a Bachelor of Engineering degree from University of New South Wales, Australia in 1981.

He was a Resident Civil & Structural Engineer of Dayabumi Phase 3 Project (1981-1983) and Menara Maybank (1983-1987) and Area Engineer of Antah Biwater J.V. Sdn Bhd (1987-1989) prior to joining IJM Construction Sdn Bhd as Project Manager (1989-1993), Senior Manager (Project) (1994-1997) and Project Director (1998-2001). He was the Group General Manager of IJM Corporation Berhad (“IJM”) from 1 April 2001 to 31



December 2004. He was also the Head of the Property Division of IJM from 2001 to 2008 and the Managing Director of IJM Properties Sdn Bhd from 1 January 2005 to 10 June 2009. He was the Deputy Chief Executive Officer & Deputy Managing Director of IJM from 1 July 2008 to 31 December 2010 prior to his present appointment as the Chief Executive Officer & Managing Director on 1 January 2011.

His directorships in other public companies include IJM, IJM Land Berhad, IJM Plantations Berhad, ERMS Berhad and Road Builder (M) Holdings Bhd.

He attended 4 Board Meetings held during the financial period ended 31 March 2013 since his appointment

Lee Chun FaiAlternate Director to Dato’ Teh Kean Ming

Mr Lee Chun Fai, a Malaysian, aged 42, was appointed as an Alternate Director to Dato’ Teh Kean Ming on 22 May 2013.

He graduated with a Bachelor of Accountancy (Honours) degree from University Utara Malaysia in 1995. He obtained a Master of Business Administration from Northwestern University and The Hong Kong University of Science & Technology in 2012.

He started his career with a public accounting firm. In October 1995, he joined Road Builder (M) Holdings Bhd (“RBH Group”) and was the Head of Corporate Services Division of RBH Group prior to the acquisition of RBH Group by IJM Corporation Berhad (“IJM”) in 2007. He was the Deputy Chief Financial Officer for the IJM Group before being appointed as the Head of Corporate Strategy & Investment on 1 July 2012.

His directorships in other public companies include Road Builder (M) Holdings Bhd (Alternate Director), Scomi Engineering Bhd and Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd).

Foong Choong HongNon-Independent Non-Executive Director

Mr Foong, 52, a Malaysian, is a Non-Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.

Mr Foong holds a post-graduate degree in Management Studies majoring in Finance, from Middlesex University, United Kingdom.

Mr Foong started his career with Robert Fleming Merchant Bank in the United Kingdom as an Economist responsible for South-

East Asian markets and as an adviser for European and British pension funds and insurance companies on investments in South-East Asia and the Far East. Mr Foong returned to Malaysia to develop a joint venture company with Powers Supermarkets (UK), a then wholly-owned unit of Associated British Foods public listed company, to develop a Far Eastern sourcing and trading house based in Malaysia. Mr Foong is a Certified Financial Planner and also a Fellow of the Chartered Management Institute (UK). He also plays an advisory role in the Investment Committee of several multi-national companies for the identification of investments and development of business opportunities. He is currently the Managing Director of Asian Asset Group Sdn Bhd and a Director of Asian Asset Management Sdn Bhd.

He attended all of the 11 Board Meetings held during the financial period ended 31 March 2013.

Shah Hakim @ Shahzanim Bin ZainChief Executive Officer/ Non-Independent Executive Director

Encik Shah Hakim, 48, a Malaysian, is the Chief Executive Officer/ Non-Independent Executive Director of the Company and was appointed to the Board on 3 March 2003.

Encik Shah Hakim started his career as an auditor with Ernst & Young and was subsequently promoted as Consulting Manager, responsible for servicing large corporations. He went on to be appointed as Executive Director of a regional packaging manufacturer in 1992, with direct operational responsibility. He currently sits on the Board of Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd), Scomi Engineering Bhd and KMCOB Capital Berhad.

Encik Shah Hakim is a member of the Options Committee of the Board. He attended 10 out of the 11 Board Meetings held during the financial period ended 31 March 2013.

NOTESNone of the Directors have any family relationship with any other Director and/or major shareholder of Scomi Group Bhd.

With the exception of the disclosure on page 66, none of the Directors are involved in any conflict of interest, or any personal interest in any business arrangement, involving Scomi Group Bhd.

None of the Directors have been convicted for offences within the past ten years (other than traffic offences, if any).


Loong Chun NeeChief Investment & Performance Officer

Rohaida Ali BadaruddinChief of Staff

Shah Hakim Bin Zain Group Chief Executive Officer

Dinesh ChelvathuraiChief Learning Officer

Abu Zaharoff Abu BakarGroup Financial Controller

Sharifah Norizan ShahabudinChief Legal & Governance Officer


In the ten years since Scomi Group Bhd (“Scomi” or “SGB”) and its group of companies (the “Group”) was listed on Bursa Malaysia, we have weathered demanding times, and in the most recent past an extremely challenging global economy. However, in doing so, we have strengthened our business tenacity and honed our operational flexibility. Thus we enter our second decade with greater energy and zest to explore and optimise business opportunities that are coming our way.

Having recovered from the stressful business environment of the past years, it is with great pleasure that I present our performance for the financial period from 1 January 2012 to 31 March 2013 (the “financial period”). This is a 15-month reporting period following a change in financial year end from 31 December to 31 March. The change was made to facilitate recent major corporate developments that included fundamental changes to our corporate structure, which is starting to show positive results for us.

Overview

The global economy remained pallid in 2012, although there were hints of recovery in various regions and sectors. Currency instability, regulatory disruption and civil unrest touched Scomi’s businesses around the world. The relative weakness of the Indian Rupee and the Brazilian Real had the most impact on our business, especially Scomi Engineering Bhd that suffered unrealised foreign exchange losses through most of the financial period. Environmental constraints, security challenges and legislative requirements for land acquisitions also caused unforeseen delays to the progress of our Mumbai monorail project. Unsurprisingly, continuing civil unrest in the Middle East and North Africa affected our Oilfield Services (“OFS”), especially our operations in Egypt.

Dear Stakeholders,Your company celebrates ten years of realising potential for all its stakeholders.

CHAIRMAN’S STATEMENT

Despite all these challenges, we achieved commendable results. Not only did we make remarkable advances in product development for the oil & gas industry, but both our Energy Services and Transport Solutions business segments won major contracts. Thus, with current order books of over RM5.1 billion and RM715 million respectively, the Group ended the financial period in firm footing.

During the period under review, we did not lose sight of the people who are responsible for the sustained health of our business. Over the last 15 months, we have continued to sharpen the technical and service skills of our employees and deepen personal connections with our clients. Through the delivery of quality service and nurtured relationships of mutual trust and respect, we believe we have been able to create value in the future of our people and our clients for mutual benefit.

Financial Performance

For the 15 months ended 31 March 2013, the Group’s consolidated revenue from continuing operations reached RM1.92 billion as compared to RM1.40 billion for the 12 months ended 31 December 2011. On an annualised basis, this equates to a revenue growth of approximately 10 percent.

The increased revenue was mainly due to higher contributions from OFS and Transport Solutions businesses. However, this was offset by lower Marine Services contribution due to the expiry of a major coal contract in Indonesia in June 2012, which was then replaced with a time charter contract at lower rates.

On the back of this revenue growth, the Group posted a Profit Before Tax (“PBT”) from continuing operations of RM21.1 million for the 15-month period as against a loss of RM167.7 million

Tan Sri Asmat KamaludinChairman

P/20 SCOMI GROUP BHD ANNUAL REPORT 2013CHAIRMAN’S STATEMENT

for the 12-months ended 31 December 2011. This turnaround result was achieved following the non-recurrence of vessel impairment charges and cost adjustments on our Mumbai monorail project, which were made in the financial year ended 31 December 2011.

This encouraging financial performance was achieved despite the Group having to absorb a one-off charge of RM61.1 million to our accounts in line with our current accounting policies and in compliance with the Malaysian Financial Reporting Standards (MFRS), in particular MFRS 132 and MFRS 39. This one-off charge was due to the completion of the corporate exercise during the financial period that saw all the Eastern Hemisphere OFS and Marine Services businesses consolidated under Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) (“SESB”).

Notwithstanding this adverse impact, several factors contributed toward the enhanced operating results including new contracts at better margins, a continuous cost reduction drive that lowered operating expenses and our optimal capital and corporate structure post completion of the corporate exercise.

More importantly, a positive financial outcome for SGB from the corporate exercise is the substantial strengthening of its balance sheet by paring down debt. Total borrowings have dropped below RM1.0 billion as at 31 March 2013, most of which is made up of short term and operational funding for various subsidiaries.

Dividend

During the financial period, the Group was still in its transformation phase to consolidate its businesses in the energy and logistics industry segments. Through this period, the corporate exercise was also being driven through to completion. In view of this, the Board of Directors has decided not to declare a dividend for the financial period. Instead, the capital of the Group will be employed towards further strengthening its financial position as well as propelling its business growth so as to create greater future value for all its stakeholders, including you, our steadfast shareholder.

Corporate Structure

In line with our global strategy of focusing in the energy and transportation industries, during the financial period we continued to concentrate on two high growth areas, namely energy services in the oil and gas industry and transport solutions for urban cities.

Oil and Gas

On 12 March 2013, SGB completed a corporate exercise which saw nearly all of its operations in the oil and gas industry consolidated under one entity, Scomi Energy Services Bhd. The corporate exercise, which began in February 2012, involved the acquisition by SESB of the:

• entire issued and paid-up share capital of Scomi Oilfield Limited and Scomi Sosma Sdn Bhd and;

• 48% of the issued and paid-up share capital of Scomi KMC Sdn Bhd.

This corporate exercise has streamlined and consolidated the Group’s Eastern Hemisphere operations into an integrated upstream drilling and marine services business. This consolidation puts SESB on a stronger financial footing and thus provides for greater flexibility for future growth. This financial capability accords the entity greater operational strength to capitalise on business expansion opportunities both locally and abroad. With continuing and intensified upstream activities in the oil and gas industry for the next several years, vast business potential lies ahead which will benefit both SGB and SESB shareholders.

As part of and to enhance the Group’s Indonesian coal logistics business, PT Rig Tenders Tbk (“PTRT”), an 80%-owned subsidiary of SESB, acquired the entire equity interest in three firms owned by its parent company Scomi Marine Services Pte. Ltd. (“SMS”), in a deal worth USD57 million. The three companies were CH Logistics Private Limited, CH Ship Management Private Limited and Grundtvig Marine Private Limited. The consolidation of the three companies is expected to improve the management, operation and cost efficiency of the logistics business and, ultimately, PTRT’s financial performance. The transaction was completed on 12 April 2012.

SESB currently has an order book of over RM5.1 billion after winning major contracts in Qatar, Thailand, Indonesia, Turkmenistan and Malaysia. With a healthy pipeline of tenders submitted and upcoming tenders in the industry, SESB is geared for continued growth.

Divestment of Machine Shop Business

Previously Scomi, through its subsidiaries, had a strong presence in the machine shop business with a network of machine shops in Asia, Aberdeen and Nigeria. However, in line with its business strategy to be a global technology enterprise focused in the energy and logistics industries, Scomi embarked on a divestment strategy to dispose of its machine shop business and the gains from the sale will be used for investment in its core businesses.

In the final step of its divestment strategy, Scomi entered into a Conditional Share Sale Agreement with AOS Orwell Limited on 16 May 2012 for the disposal of its 100% equity interest in Scomi Nigeria Pte Ltd (“SNPL”), and a 2% equity interest in Oiltools Africa Limited (“OAL”) for a total cash consideration of USD39.77 million (approximately RM123.90 million). Both SNPL and OAL are involved in the machine shop business in Nigeria.

The exercise was completed in October 2012 and the proceeds from the disposal have been used to strengthen Scomi’s financial structure. Meanwhile, we have also intensified our focus on higher margin, high value added activities in high growth markets where the Group holds leading market positions.

SCOMI GROUP BHD ANNUAL REPORT 2013P/21CHAIRMAN’S STATEMENT

Transport Solutions

Scomi Engineering Bhd (“SEB”), a listed subsidiary of SGB, is a leading provider of transport solutions that designs and manufactures monorail systems, coaches, buses, rail wagons and special purpose vehicles. The financial period, though challenging, saw the continued progress of its monorail projects in India and Brazil while its coach, bus and special purpose vehicles continued to pick up pace.

For SEB, countries with fast developing economies and exponential urbanisation resulting in exigent needs for urban transit solutions are vital markets. Two such markets are Brazil and India, which are currently offering SEB plentiful business opportunities.

The financial period saw major progress for its projects, with Phase 1 of the Mumbai Monorail on track for completion and the Brazil projects awarded in the latter half of the previous financial year 2011, seeing rapid project implementation in 2012.

Manaus Metropolitan Region MonorailIn January 2012, SEB, together with three consortium partners, entered into a contract with the Infrastructure Secretariat of the State of Amazonas in Brazil for the development of the detailed engineering design, construction, supply, and installation of a monorail system for the Manaus metropolitan region.

The contract signing followed the successful award of the project to the consortium in August 2011. The consortium comprises SEB, CR Almeida S/A Engenharia De Obras, Mendes Junior Trading E Engenharia S/A, and Serveng-Civilsan S/A Empresas Associadas De Engenharia.

Launch of a Brazilian Monorail Manufacturing FacilitySubsequently, in August 2012, SEB’s Brazilian partner Montagens e Projetos Especiais SA (“MPE”) also opened a manufacturing facility in Rio de Janeiro to manufacture the trains for the Line 17 Monorail in Sao Paulo. This new manufacturing facility is the first facility outside of Malaysia to manufacture the Scomi SUTRA (Scomi Urban Transit Rail Application) monorail and is part of the project development plans for local manufacture. Covering 41,100 sqm, the facility is fully equipped to assemble and test the monorails as well as store up to 15 completed monorail cars.

This is a landmark initiative undertaken by the Group as a part of our growth and expansion strategy in the Latin American market. With this facility, we are reiterating our strategic commitment to providing innovative urban transport solutions for the Brazilian market.

Strategic Partnership

At SGB’s recent EGM on 31 January 2013, the shareholders voted in favour of the issuance of RM110 million worth of bonds to IJM Corporation Bhd (“IJM”), which will make the construction giant

Scomi’s largest shareholder once the bonds are fully converted into ordinary shares in SGB by IJM. In this mutually beneficial arrangement, IJM brings its vast experience in the construction industry which will complement Scomi’s Transport Solutions division, whilst IJM gains the opportunity for entry into the lucrative oil and gas industry.

Corporate Citizenship

One of the important channels in ensuring sustainable growth of the Scomi group is by continually building both our internal and external communities. This translates to creating an environment that nurtures our employees to excel and to push their boundaries to fulfil their potential. Our employee value proposition quite simply states “You provide the talent, we provide the career development.” Hence each and every one of our employees is groomed towards evolving into confident, effective and efficient leaders who can grow our business as well as grow professionally themselves.

The Group’s footprint now spans 26 countries, and every region where we operate has unique needs. We therefore empower each and every Scomi business unit to play a part in its community through locally-driven activities. Yayasan Scomi is a foundation established by SGB. The Group’s employees are encouraged to contribute towards Yayasan Scomi’s activities. The foundation has steadily increased its efforts to provide both financial and practical assistance to the less fortunate and the underprivileged.

We are also keenly aware of our duty to act as stewards of our planet by protecting the environment. Our research and development efforts are therefore focused on developing eco-friendly, energy efficient products that reduce environmental impact, especially noise pollution and waste generation.

We strive to maintain excellent corporate governance throughout the Group. We exercise stringent risk management not solely at the enterprise level but also at the project level to ensure the most effective execution of our contracts. Our Delegated Authority Limits are subject to regular review. While we are mindful that our governance measures must ensure a sound, internal system of checks and balances, we recognise that, as a lean and agile organisation, we must also remain nimble in adapting to the ever-changing business terrain.

Further information on our corporate citizenship is provided in the Corporate Social Responsibility section of this report (page 36 to page 38).

Board Of Directors

During the financial period SGB has welcomed 2 new members to the Board of Directors, who represent IJM as our substantial shareholder. Dato’ Teh Kean Ming joins us as a

Anchor Handling Tug and Supply

Vessel


Non-Independent Non-Executive Director whilst Mr Lee Chun Fai is an Alternate Director to Dato’ Teh. Both bring with them a wealth of experience and we look forward to their valuable contribution on all company matters.

Prospects

The ensuing financial year is expected to be a less volatile period for the global economy, and the newly reorganised Scomi is primed to advance across all our chosen sectors and markets.

Although oil prices have softened, the demand for oil and gas, particularly in the developing nations, continues to increase, driving new exploration and drilling activity. The Energy Services order book is robust, and OFS has successfully clinched several sizable contracts recently in Malaysia, Indonesia and Turkmenistan. We anticipate several more jobs in the aforementioned countries and focus on contract execution and service quality.

We remain optimistic of the offshore support segment as we evaluate strategic investment opportunities in specialised offshore vessels. Increasing offshore exploration and production in Southeast Asia also means a heightened demand for support vessels, and we expect resulting growth in our Marine Services business.

In its newly consolidated form, the Energy Services division can better meet the specific needs of our target markets, and we are confident that our participation in the Eastern Hemisphere’s thriving energy sector will continue its upward trend.

Prospects are also bright for our Transport Solutions division, as an increasing number of urban areas consider eco-friendly monorails to alleviate traffic woes. In India alone, over 20 cities are now contemplating monorail systems. With the anticipated delivery of Phase 1 of the Mumbai project in the current calendar year and the improvements in the KL and Brazil projects, performance for 2013-14 is expected to be satisfactory.

Whilst the division is currently focused on executing contracts in Malaysia, India and Brazil, it also has new proposals pending in India and Sri Lanka. Although the challenging foreign exchange climate is unlikely to abate in the coming year, the growth in monorail installations and manufacturing facilities is most encouraging, and our visibility is definitely on the rise.

Acknowledgements

On the heels of several challenging years, we at SGB are enormously gratified to have seen our efforts paying off handsomely during the financial period. The transitions of the past year could not have taken place without the steadfast support of all of our stakeholders, and on behalf of the Board of Directors, I would like to express our sincere gratitude.

Our customers across the globe continually inspire us to develop new products and skills. Our shareholders have held firm throughout the restructuring exercise, and our business partners, suppliers, advisors and bankers have all contributed invaluably to this year’s remarkable results. As ever, we also wish to thank the governments in the many countries in which we operate; their assistance and guidance remains indispensable.

Over 3,000 individuals make up the Scomi team worldwide, and I thank each of you profoundly for your dedication and unique contributions to the Group’s success. Finally, I would like to express my appreciation of my fellow Directors, whose vision and diligence continue to pilot the Scomi Group in its pursuit of excellence.

Tan Sri Asmat bin KamaludinChairman

CHAIRMAN’S STATEMENT

Transforming an everyday substance into

continuous value.

A CHAIN




Dear Stakeholders,The past fifteen months have been a period of dramatic transformation for Scomi Group Bhd (“Scomi” or “SGB”) and its group of companies (the “Group”). Our restructuring, completed in March 2013, is already delivering measurable benefits, with the Group emerging more efficient, more resilient, and well able to meet the challenges and grasp the opportunities in the still turbulent global marketplace.

Overview Widespread financial recession, civil disturbance, political upheaval and volatile currency exchange have created treacherous ground for every highly internationalised business, and these factors have certainly menaced Scomi’s operations. But by keeping our eyes steadily on our products and services, the best markets for us to be in, and how we can operate most cost-effectively, we have been able to end the financial period on a buoyant note.

Our research and development teams are continuously enhancing and developing new products and solutions to meet market needs. We have designed lightweight, efficient and durable drilling waste management equipment for all phases of oil and gas exploration and development, as well as drilling fluids for the most challenging environments. Scomi’s specialised vessels offer various support services to offshore drilling installations, and for dense urban areas battling increasing traffic congestion, our monorails are providing a highly effective solution. And last but far from least, our human component, Scomi’s technical and

support staff have once again proved themselves to be key to our thriving relationships with our clients, and their continuous development remains one of our highest priorities.

The new Energy Services division is focused on the Eastern Hemisphere and is most active in Malaysia, Thailand, Indonesia and the Gulf. Meanwhile, the large cities of Brazil and India are the primary customers for the Transport Solutions group. Although we have pegged these as our key regions, we regularly review the potential in other markets and we have the ability to change course promptly in response to shifts in market conditions.

Group-wide cost reduction drives have also paid off, with operating expense margins being reduced during the financial period. Indeed, part of the rationale behind consolidating the Oilfield Services and Marine Services divisions was greater cost control and operating efficiency for the merged entity. Meanwhile, the Transport Solutions division is also maintaining a disciplined approach to cost management to ensure its projects are within budget.

MANAGEMENT REVIEW OF OPERATIONS

Shah Hakim Zain Group Chief

Executive Officer

Liquid Mud Plant at Kemaman Supply Base,

Malaysia


Financial Performance

After a one-off fair value charge on a Put Option of RM61.06 million, Scomi Group Bhd recorded a revenue of RM1.92 billion and a Profit Before Tax (“PBT”) of RM21.1 million for the financial period ended 31 March 2013. Without the one-off charge, the Group would have achieved a PBT of RM82.2 million on the back of the same RM1.92 billion revenue.

The Oilfield Services (“OFS”) division continued its positive momentum, posting a PBT of RM96.0 million. This sterling performance was spurred by a revenue of RM1.15 billion for the 15-month period, with Malaysia, Thailand, Russia and Indonesia being the biggest contributors.

Meanwhile, the Marine Services Division reported a revenue of RM318.3 million and a PBT of RM38.7 million. The coal segment revenue was lower than the 2011 financial year however, reflecting a drop in tonnage carried, while the docking of two vessels and the refurbishment of an accommodation barge resulted in a lower offshore contribution. The bottom line was also hit by vessel impairments.

The Transport Solutions Division generated a revenue of RM450.3 million for the 15-month period, driven by the delivery of rolling stocks to Mumbai and our ability to complete the electrical and mechanical milestones in the Kuala Lumpur Monorail Fleet Expansion Project. Although there was a pre-tax loss of RM21.1 million for the 15-month period, this was substantially lower than the pre-tax loss of RM60.6 million posted for the 12-month period ended 31 December 2011.

The New Scomi

With the completion of the corporate exercise involving the acquisition by Scomi Energy Services Bhd (“SESB”) of the Oilfield Services Eastern Hemisphere entities, the Group will deliver a host of benefits including streamlined marketing efforts, lower debt, enhanced cost management and greater growth potential.

SESB comprises two divisions, OFS, providing integrated drilling fluids, drilling waste management solutions, production enhancement technologies and multiple drilling services; and Marine Services, offering marine transportation for the coal industry and provision of offshore support vessels to the oil and gas industry.

The Group will continue to focus its attention to grow businesses in Africa, Russia, the Middle East, and Asia. Although the Group has reduced its market presence from 36 countries to 26, we are agile enough to penetrate other regions when the circumstances are right.

Meanwhile, our other listed subsidiary, Scomi Engineering Bhd (“SEB”) continued to make strides in the provision of innovative public transport solutions.

Energy Services

The Energy Services division currently has an order book of over RM5.1 billion with significant bids still in the pipeline, and we foresee a continuing positive trend in the coming year.

The Energy Services operating results improved throughout the financial period, underpinned by new contracts at better margins, a successful drive to reduce costs, and the optimisation of our capital and corporate structure following the merger exercise.

Though oil prices dipped below USD100 per barrel in 2012, demand in developing nations, particularly India and China, has increased. A Spears & Associates Inc report is predicting international drilling activity in 2013 to grow by 12% in Mid East and 6% in Far East. In the latter half of the financial period, we were seeing a rise in exploration and rig counts in Malaysia, Indonesia and Thailand and as a consequence this translated to an increase in operational activity. We are also seeing steady growth in the Gulf and Turkmenistan while our West African operations have generated positive results with increasing rig activity. Australia and Russia, which are predominantly drilling waste management markets have fared better during the financial period due to increased usage of our proprietary drilling waste management products.

We are capitalising on the activity sparked by the Malaysian government’s Economic Transformation Programme (“ETP”), in which oil and gas has been defined as a National Key Economic Area. In 2012, the Malaysian Oilfield Services operations inked a five-year, RM2.1 billion contract with PETRONAS Carigali to provide drilling products and services. We are further encouraged by PETRONAS’ plan to develop marginal fields in Malaysia, which presents vast business potential and a new area of expertise for us to explore.

The Indonesia Operations has also secured a contract for a three-year mega-project in Indonesia, having received a Letter of Award from Total E&P Indonesie. Work has commenced on this estimated RM380 million contract for the provision of drilling fluids and services. This is the largest single contract that Scomi has ever signed in Indonesia. During the course of the financial period, we also won a breakthrough contract with Qatar Petroleum in Qatar to provide drilling fluid services and along with another significant project in Turkmenistan.

The hike in offshore exploration and production has benefitted the marine division as well, driving the demand for vessels. During the financial period, the division signed a two-year contract with PT Pertamina Hulu Energi Offshore North West Java in Indonesia, estimated at RM120 million, to provide three vessels for offshore support services. However, our coal transport segment saw a revenue drop, reflecting a general slowdown in the coal industry in Indonesia. This was further compounded by the expiry of a major coal logistics contract which was replaced with a time-charter contract at lower fixed rates.

Our Production Enhancement Technologies (“PET”) business unit, albeit a smaller unit within the OFS division has consistently


P/30 SCOMI GROUP BHD ANNUAL REPORT 2013MANAGEMENT REVIEW OF OPERATIONS

delivered on its product and services. Servicing clients in Asia from its Malaysia operations and the rest of the world from its France operations, PET continues to maintain its market share and is a consistent contributor to the financial performance of the division.

While nurturing our relationships with current clients, we have continued to network and build our brand recognition by showcasing our products and services at numerous international energy sector conferences and exhibitions throughout the year. We were prominently seen at the prestigious 25th World Gas Conference in Malaysia where our brand presence was significantly enhanced as the single sponsor for the Interactive Expert Showcase. Meanwhile our products attracted scores of attention at the Neftegaz oil and gas exhibition in Russia, the 12th China International Petroleum & Petrochemical Technology & Equipment Exhibition and the Abu Dhabi International Petroleum Exhibition and Conference.

Transport Solutions

The Transport Solutions division has an order book which stands at over RM715 million with three major monorail bids in the pipeline in India, which if successful will add an anticipated RM1 billion to the order book value.

As the world’s cities grow in population density, they are simultaneously expanding in land area. Governments are increasingly exploring public transit systems that will reduce traffic and pollution while providing their citizens with a safe and efficient means of transport. This trend, especially in the large cities of the BRIC nations (Brazil, Russia, India and China), is providing SEB with a wealth of opportunities, primarily in the monorail market.

We are also extremely excited about the growing interest and demand for monorail systems in India. India with its escalating population is fertile ground to expand our Transport Solutions business. Tier I and Tier II cities are seen as key contributors to the country’s economy and hence the anticipated exponential growth in the requirement to move people between cities. We continue to keep our eye on the infrastructure developments in Chennai, Kerala, Delhi, Bangalore and Hyderabad. Having built the first monorail in India we are well positioned to take advantage of any opportunity that materialises.

In Brazil, we are bidding against two competitors for several new monorail projects, including a second line in São Paulo. Phase 1 of the 18-kilometre Line 17 monorail project in São Paulo kicked off in September 2012. Piling work is progressing well, and the ‘Integration Design for All Systems’ milestone was approved by the client in December 2012. When completed in early 2015, this line is expected to carry 252,000 passengers per day between 18 stations.

During the financial period the Manaus monorail project, which we are undertaking with three consortium partners, made good progress. For our portion of the contract, we are responsible for the design and supply of rolling stock and depot equipment, track switches, maintenance vehicles, system integration and project management. The project is slated for completion in 2016.

We have now established a joint venture company, Quark Fabricacao de Equipamentos Ferroviarios e Servicos de Engenharia Ltda with two Brazilian firms, Montagens e Projetos Especiais SA (“MPE”) and Brasell Gestao Empresarial, LTDA, to handle the manufacturing, assembly and marketing of monorail rolling stock and to provide rail-related engineering services. Guided by our technological expertise, our partner MPE, opened a manufacturing facility in March 2013 in Rio de Janeiro, that has 10,000 sqm dedicated for the production and testing of the monorails, with a balance 31,100 sqm for storage of up to 15 completed monorail cars, warehousing and office facilities. This facility has the capacity to produce up to six cars per month for our Brazil monorail projects.

In India, work on the Mumbai monorail has faced several schedule delays due to factors beyond our control. Phase 1 covers 8.6km between Chembur and Wadala, and Phase 2 connects Jacob Circle and Wadala, a distance of 10.5km. Trial tests on Phase 1 have been ongoing since the early part of the year and we are gearing up to revenue operations by end 2013. Meanwhile, the client has resolved several challenges along the alignment for Phase 2 involving security issues, land acquisitions and resettlements and this phase is now proceeding as per expectations in tandem with the testing of Phase 1.

Our monorail business continues to make inroads in India. We are currently one of two companies short-listed in the bidding for the Chennai monorail project, which, at RM4.65 billion, would be the biggest ever for Scomi. In total we have currently expressed interest for 3 monorail projects in India for which we anticipate decisions to be announced by the end of the calendar year.

Prior to the financial period, we had signed a contract to expand the severely oversubscribed Kuala Lumpur monorail. The RM494 million project includes the delivery of 12 sets of new four-car trains, a new depot, and upgrades to stations. The civil works have been ongoing and we delivered the first set of trains in March 2013. These new trains, which have the capacity to increase passenger traffic to 64,000 passengers per hour per direction, are anticipated to be completed and delivered over the next financial period.

The Coach and Special Purpose Vehicle units continued their stable performance. Although a relatively small contributor to the financial performance of the division, we continue to see opportunities to grow this business. Hence, we have enhanced our design and assembly capabilities as well as expanded into the maintenance, repair and overhaul segment and equipment leasing. Further expansion possibilities include the local manufacture of reputed international brands to make these products accessible and affordable for regional markets as well as the trading of parts and spares for specific industry equipment.

Key Initiatives

Research and Product Development

To capitalise on the global trend toward zero-discharge policies for drilling operations, SESB is developing environmentally conscious and efficient technologies for the Drilling Waste Management

Global Research & Technology

Centre, Malaysia


market. One of our newest innovations is the use of microwave technology for drilling waste treatment. In the final stages of prototype testing, this new technology is generating great interest amongst both production companies and investment analysts in the oil and gas industry. Our system has numerous advantages over both existing microwave and thermomechanical cuttings cleaning methods, addressing a wider range of waste products, reducing power consumption, operating more reliably, and complying with EU standards. Its reduced footprint and weight will also make it an extremely suitable option for offshore rigs. We are confident of the marketability of this product and anticipate commercialisation during the current financial period.

Pushing the boundaries of our current waste management solutions, we have developed a range of shale shakers with the 5 Panel Prima-G shaker the latest to join the portfolio. Operating more quietly and at high G-forces, this family of shakers have impressed everyone who worked with them at the early installations and have also drawn a great deal of attention at energy conferences. We had also introduced the Clean-in-Place automated tank cleaning system to this region in 2011 and it has proved its worth with active use in Malaysia and Thailand operations. This solution totally eliminates the need for human entry into any tank for cleaning purposes and has the ability to consistently clean tanks in less than half the time taken by conventional systems, with only 10% of the normal waste generated. Moreover, no human entry means greatly reduced health and safety risks.

Our Drilling Fluid technologies and systems are constantly being enhanced and improved to cater for new challenges that surface during drilling operations. With the industry moving towards deepwater and ultra deepwater drilling, our systems have also

been enhanced to support the requirement. Further the global focus is now on protecting the environment and the industry is shifting towards solutions that fulfil both the technical and environmental performance criteria. Hence our Oilfield Services research and development team has also worked with strategic partners to developed eco-friendly green fluids with the capability to deliver superior performance with environmental benefits through lower toxicity and biodegradability features. To ensure the performance of our drilling fluids is always at optimum level, we have also developed several proprietary engineering software programmes. These programmes equip our engineers with the capability to deliver technical assistance whether it is for comprehensive data management and accurate reporting by our onsite engineers or for drilling hydraulics simulations to ensure the formulations of our fluids.

The Marine Services group is tailoring its fleet to focus less on the waning coal transport business and more on the offshore support services sector. In revitalising our fleet we have recently divested our older pairs of tugs and barges and are reviewing newer options for the offshore support services. As part of this process we have also refurbished our accommodation work barges. We are also well positioned to combine our expertise in oilfield services with our experience in offshore vessels to provide innovative solutions including floating warehousing facilities for offshore works. We had initially provided a similar concept for a floating liquid mud plant which was well received by our client. Hence we are confident of expanding our portfolio to include this innovative service.

The Transport Solutions has quite literally continued to trim the shape and reduced the weight of its monorails through its


SCOMI GROUP BHD ANNUAL REPORT 2013P/33MANAGEMENT REVIEW OF OPERATIONS

continuous research and development efforts. This has translated to production optimisation, greater energy efficiencies and increased passenger capacity. Learning from its practical experiences in Mumbai, Brazil and Kuala Lumpur, the research and development team are in a continuous cycle to improve our monorails.

Research and development to enhance our products is integral to the Group’s strategy. Our centres in Malaysia at our Global Research and Technology Centre for drilling fluids and the Engineering, Technology and Innovation Centre north of Kuala Lumpur for rail solutions; and in Houston for our waste management continue to be the driving force in translating operations feedback to substantive results.

People Power

We know that our success depends on the skills, dedication and integrity of the more than 3,000 individuals who make up the Scomi Group. We are committed to attracting and retaining top-tier talent both by offering excellent career development and by helping each individual to realise his or her full potential.

Our in-house training department, Group Learning and Development, organises trainings on diverse subjects in a range of languages and cultures, reflecting the regions in which we do business. To gain expertise in relevant technologies, Scomi professionals also attend courses offered by external companies. All our training initiatives, especially those targeted at the management level and above, ensure we have a competent and skilled workforce.

Competency Mapping is our tool to guide every individual’s development path. Initially focusing on the technical streams within the organisation, we are developing Competency Frameworks which clearly outline the experience, skills and training required from both a management and a technical perspective for an individual to progress. This mapping also gives the scope for an individual to decide whether to follow a technical progression path or to move into a management progression path. This gives employees greater clarity on their career pathways and empowers them to map out concrete steps to achieve their goals. Thus we are able to retain a secure and reliable talent pool.

Our programme for Succession Planning identifies potential successors for various positions within the organisation and we work with these employees to develop their abilities so that they can step up to fulfill the organisational needs within the group. This process has considerably strengthened the leadership talent pipeline and in many of our global locations we are seeing young managers capably stepping up to leadership roles.

Looking Ahead

According to the World Bank and other global financial analysts, the next twelve months should be less turbulent for the world economy. Brent crude oil prices are expected to hover around the USD100 per barrel mark, a drop of about 10% from 2012, due to increasing crude oil production from non-OPEC countries. Japan’s decision to shut down its nuclear power plants in the wake of the Fukushima earthquake is spurring liquid natural gas

development in Southeast Asia and the Middle East, and at the same time global gas demand continues to sprint ahead, growing at five times the rate of global oil demand. As a result, analysts predict increasing activity in all aspects of energy exploration and production.

In the Eastern Hemisphere, we certainly see encouraging signs for the coming year. Indonesia has promised to improve investment opportunities and cut bureaucracy in order to increase exploration and production. The EU recently lifted almost all sanctions against Myanmar, paving the way for significant new investment in all sectors of the economy. The Chinese government will subsidise the development of shale gas and allow tax-free imports of equipment for shale-gas exploration. Here in Malaysia, operators have discovered an estimated 1.4 billion BBOE (“barrels of oil equivalent”), representing about 72% of total discoveries in the region. All of this indicates a productive and successful year to come for SESB.

For our Marine Services division, the coal market remains volatile. We will of course continue to serve our customers in this industry. However, as the oil and gas exploration and production numbers are all set to rise, the strategy is for us to shift the composition of the fleet to serve the offshore support services sector. The increasing level of activity is expected to absorb the flow of new vessels, which should result in steady to higher daily charter rates and high utilisation. We remain optimistic about this sector as we continue to evaluate strategic investment opportunities in specialised offshore vessels.

Our Transport Solutions monorail teams will have a busy year as they fulfill our current contracts in Brazil, India and Malaysia. These projects have raised Scomi’s visibility tremendously, and we are expecting to land more projects in both India and Brazil, as both countries’ governments are seeking better public transportation solutions for their congested urban areas. With our partner’s new manufacturing plant in Rio de Janeiro, we are in a prime position to support the Brazilian requirements, whilst the strategies are in place to explore indigenous assembly should more projects in India materialise. This expansion strategy for the manufacture of our transport solutions will bring us closer to the relevant markets and hence make us more agile to answer the city’s transport needs.

As we have consolidated and streamlined our operations, our shareholders are now able to see a leaner and compact organisation emerging. This has also created greater operational nimbleness to respond to market needs while giving greater financial strength to raise capital for growth. In line with our corporate statement, we are clearly focused on energy and logistics with an expansive technology driven product portfolio and a global reach that allows us to provide innovative solutions and thus, quite simply, to realise potential for all our stakeholders and that includes our valuable employees and our steadfast shareholders.

Shah Hakim ZainGroup Chief Executive Officer

Transforming basic material into

enduring worth.

A DIAMOND



P/36 SCOMI GROUP BHD ANNUAL REPORT 2013CORPORATE SOCIAL RESPONSIBILITY

Scomi is committed to making a positive and meaningful impact in the communities where we are present. We believe that the Group does not operate in isolation and as such, we are proactive and resolute in our stand that our business objectives and decisions take into account sustainability for continued growth in the environments that we are in.

We continue to focus on our social, environmental and economic impacts in creating value for our business, our shareholders as well as our other stakeholders. On this premise, we have made corporate social responsibility (“CSR”) a cornerstone for our efforts. Our CSR activities have progressed more holistically, evolving from individual acts of philanthropy to becoming a mindset that influences decision-making and business strategy.

The Marketplace

We remain committed to operating responsibly and upholding best business practices while adhering to the highest ethical standards in our business approach and dealings with all our customers, vendors, the Government and other stakeholders in general.

Communication is an integral element in ensuring timely information of the company reaches its key stakeholders. Hence throughout the financial period, Scomi played host to numerous media communicators, investment analysts and fund managers to provide them with the latest information of the Group. We also ensured timely announcements to Bursa Malaysia on material activities and events, distribution of quarterly “Letter to Shareholders” to the investment communities on the Group financial performance, and also media releases on key developments of our business. News on Scomi’s business as well as our operations globally is

disseminated through our newsletter, FOCUS, which is shared with customers, partners, suppliers, employees and other stakeholders. Meanwhile, comprehensive information on the Group is easily accessible via our website and this includes our Annual Reports, Circulars to Shareholders, media releases and media coverage.

In creating value for our customers, we ensured that all our products adhere to regulatory requirements and quality standards. Further, to add value for our customers, we have also extended to our customers several technical training modules on Drilling Fluids Technologies, Drilling Waste Management and Drilling Operations. The modules cater not only for technical personnel but also non-technical personnel who come in contact with the services that we provide. Through this training we are able to enhance their knowledge of our products and services as well as building cognizance of the latest technology, products and services that we provide.

To further enhance our presence and to create awareness of our brand and products, the Group as a whole participated in numerous energy and transportation exhibitions, conferences and forums worldwide. Throughout the financial period, our Transport Solutions team participated in conferences and summits in Brazil and India to showcase our expertise. The division also hosted several government and trade visits at our manufacturing facility in Malaysia as well as our ongoing project in India. Our Energy Services division participated in a number of global oil & gas exhibitions in Malaysia, China, the Gulf and Russia.

Our senior management have been recognised as thought leaders and industry experts and were called upon as speakers at conferences and forums. Scomi’s Group Chief Operating Officer

Aristotle believed that the whole is greater than the sum of the parts. At Scomi Group Bhd (“Scomi” or “SGB”) and its group of companies (the “Group”), we too believe in combining our processes, our people and our brand, to reach out to all our stakeholders and those that we come in contact with. “

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was an invited speaker and panelist at the Perdana Leadership Forum in Malaysia and the FICCI India Urban Transport Sum-mit in New Delhi, India; while our Chief of Staff, Chief Learning Officer as well as members of the Group Learning and Develop-ment department, were invited to speak at several HR and talent management conferences, in Malaysia and other countries.

The Workplace

We credit the success of our business to the contribution and steadfast commitment of our people, being our most valuable asset. As Scomi Group expanded, it has always nurtured a working environment which attracts, develops, motivates and retains the best talents. Employees were consistently being challenged to push their performance levels, be driven to deliver results and continue to outdo themselves.

We are committed to creating a working culture that values and rewards performance while cultivating and reinforcing a sense of belonging to the Group. Based on performance delivery, employees were rewarded with bonus increments. To bring out the best in our employees, we introduced various initiatives such as projects involvement and stretch assignments of increasing responsibility and complexity. At the same time, we provide our employees with training and professional development opportunities to ensure they are equipped with the relevant knowledge and skills for career progression. We have made it a requirement for all executives to attend a minimum of 40 hours of training a year, while non-executives need to fulfill at least 20 training hours annually.

To foster and enhance unity, the Group has also put in place a number of programmes that stamp Scomi’s unique identity and draw participation of our employees. We seek to create a sense of belonging and ownership by interacting with our employees and maintaining effective and clear communication with them. Details of our Group Learning and Development and human capital development activities are set out in pages 39 to 41.

The Environment

In the current global economy, there is increased pressure for companies to operate in a manner which is sustainable while promoting environmental conservation. As an environmentally concerned global technology enterprise, we are committed to providing innovative solutions whether in the energy services or transport solutions industries, with the lowest environmental footprint.

Scomi employees across the globe are committed to “greening the earth” and have organised a number of programmes and initiatives to minimise wastage of resources and mitigate negative environmental effects. We have also endeavoured to leverage on technology and intellectual capital to create clean and green solutions aimed at environmental sustainability while obtaining optimum customer satisfaction.

Scomi’s commitment towards the environment is reflected in its Oilfield Services product portfolio. Its Drilling Fluids are constantly engineered to provide optimised performance and enhanced recyclability properties. The systems are engineered to prevent loss of fluids and damage to the surfaces during drilling. They also ensure efficient waste carrying properties as well as adsorbtion properties that allow the drilling waste to be easily cleaned for disposal. The Drilling Waste Management solutions that handle drilling waste solids control, containment and handling, treatment and disposal ensure that all waste generated are effectively separated, contained and treated prior to disposal, for minimal impact to the environment. These are achieved through research and development for innovative products and also the creation of efficient solutions to meet individual waste management challenges.

For our Transport Solutions business, we have improved on our world-class Scomi Urban Transit Rail Applications (SUTRA) to offer amongst others an improved direct-drive propulsion system and lower vehicle weight translating into an energy-efficient monorail system. Our monorail being a public transportation system, directly contributes towards the reduced usage of private vehicles. Taking these vehicles off the road translates into minimising carbon emission to the environment. The system itself is an environmentally friendly solution as it runs on electric motors that has no emissions as well as moves on rubber wheels on a concrete surface and hence vastly reducing noise pollution.

Certification

Scomi ensures where possible all its business units, subsidiaries and joint venture partners are certified to either ISO 9001-2000, ISO 14001 or 18001 depending on process requirements and or risk identification reviews.

The Community

As a caring corporate organisation, Scomi believes that it has a responsibility to give back and support communities across the 26 countries in which we operate. With the understanding that corporate responsibility is integral for success and essential for holistic growth, we strive to ensure our CSR programmes make a positive difference to the community. This has been our guiding principle since our establishment and signifies efforts to raise standards of living and enriching communities over the years.

In Malaysia, Yayasan Scomi, a non-profit foundation dedicated to developing communities through education and living assistance has been established since 2005. Yayasan Scomi organises CSR activities with participation of Scomi employees, to support the underserved public irrespective of race, religion or creed. Over the years, it has provided educational assistance and scholarships for needy students along with rural school and motivational programmes as well as helped the less fortunate in terms of the provision of food and other basic living necessities.

Yayasan Scomi organised several key community engagement

P/38 SCOMI GROUP BHD ANNUAL REPORT 2013CORPORATE SOCIAL RESPONSIBILITY

and relief programmes including its annual blood donation drive which was co-organised with University Malaya Medical Centre at Scomi’s global headquarters. It also continued its support for 10 under-priviledged families it has adopted in Malaysia, extending financial support to them to uplift their living conditions.

Todate Yayasan Scomi has provided scholarships to over thirty students, special education needs continuous training and equipment to three schools and helped more than six hundred individuals through their underprivileged assistance initiatives.

Yayasan Scomi also initiated a partnership with Mercy Malaysia, an internationally renowned Malaysian NGO for the deployment

of Scomi’s staff as Mercy Malaysia’s volunteers in its community programmes. This partnership will enable Scomi staff to pledge their support and sign up as volunteers to participate in the various community programmes driven by Mercy Malaysia.

Above and beyond the corporate driven activities, each business unit is empowered to organise its own CSR activities. This can be as simple as creating a moment of joy for the underprivileged by interacting with them or as altruistic as home or education improvement for a deserving family or community. We believe the quantum is not of import rather the quality of the helping hand is. Hence with all our global hands reaching out together the sum of the parts becomes greater once again.

SCOMI GROUP BHD ANNUAL REPORT 2013P/39HUMAN CAPITAL DEVELOPMENT

People at the HeartAt the core of any organisation is its people. They are the heart, the source of energy that energises the organisation’s processes to fruition; and they are the soul, the values that exemplify the culture of an organisation.

Thus at Scomi Group Bhd (“Scomi” or “SGB”) and its group of companies (the “Group”) there is a concerted focus on the development of our people as they are the key engine in driving innovation and creating value for all our stakeholders.

Scomi provides a platform for the growth of talent. We are a global multicultural organisation that provides different exposures to our people. Priding ourselves on being part of a lean organisation, our people can easily make a difference by creating a legacy and leaving a footprint. Further with every member in the team being encouraged to contribute and to have their voice heard through informal and open communication, it naturally extrapolates into building bonds with colleagues and cultivating relationships. Hence we have heard the rallying call of being Team Scomi.

For this team, Scomi’s value proposition is “You provide the Talent, we provide Career Development”. To set them on that path various, seemingly divergent, development channels have been specifically created to nurture the talents. However, all these individualistic channels have one common underlying theme. They are all built upon the Scomi Brand Values of New Ideas, Working Together, Goal Oriented and Customer Responsible. The values in turn support our Brand Vision of Realising Potential.

Learning & Development

To bring all of these intentions together to form a cohesive and coherent learning and development path, we have a dedicated Group Learning and Development (“GLaD”) team that conducts training programmes for staff across our international operations. GLaD is responsible for addressing the identified skills and knowledge gaps, and for managing the Group’s comprehensive talent development programmes. During the financial period, GLaD carried out its strategic objectives comprising the following initiatives:

Work @ Scomi & Induction ProgrammeThis two-day training is mandatory for all new employees, introducing them to the Scomi business, culture and brand. It offers the recruits an insight into what Scomi stands for, what it expects from its employees and, conversely, what employees can expect from the company.

Core Values, Functional Skills and Managerial Skills ProgrammesThese programmes which encompass Scomi’s core values as well as functional and managerial skills were held in several of our global locations including Kuala Lumpur, Labuan, Kemaman, Jakarta, Bangkok, Dubai, Perth, Turkmenbashy and Ashgabat.


The intention was to reach out to employees and to make it easier for global employees to attend our in-house training. Over 12,000 hours of training were conducted during the year and the programmes were attended by over 1,000 employees.

The Executive Management ProgrammeThis programme brings together mid-level management from our global operations, and is geared towards enhancing their leadership skills while allowing them to meet and network with their global counterparts. In 2012, the Executive Management Programme was held in Kuala Lumpur and Dubai drawing the participation of 41 managers worldwide.

The Management Leadership Development ProgrammeThis aims to develop future leaders for the Group, hence the high-level training focuses on effective management and leadership skills. In 2012, the programme was held in Kuala Lumpur, attended by 16 senior managers from our global operations.

The Management Trainee ProgrammeAimed at fresh graduates who are recruited into Scomi, this 18-month programme exposes the new recruits to all facets of the Group’s operations be it technical or management skills. During this time, the trainees are attached to different departments to enable them to pick up relevant skills that will set them on the right track for further development in Scomi.

Mentoring & Coaching ProgrammeOne-to-one mentoring and coaching is offered to managers who have demonstrated leadership potential, to help them deal with challenges and issues as they move up the leadership ladder. It is geared towards ensuring a secure leadership pipeline and forms part of Scomi’s succession plan.

Global Executive Learning (GEL) This is a two-day learning programme for senior management and is normally held in conjunction with our annual Global Executive Meeting, a conference for senior management from Scomi’s global operations. These sessions use out-of-the box learning methods to reiterate key leadership messages to the senior management. For the programme in 2012 “Stallions Strengths”, the senior management group had to work with horses, which are known as highly sensitive sentient beings that cannot be forced into action. Thus the team through this exercise and using the Values in Action methodology were able to identify strengths and areas for improvement in nurturing teams.

Aside from its training programmes, GLaD also helms various strategic employee development initiatives within the organisation. Building the methodologies and the frameworks, GLaD works hand-in-hand with the business division’s Human Resource and Technical Training departments to implement the plans.

Technical Training

While the managerial and soft skills training and development moves in one stream, there is the other stream of technical training that is also focused upon. For Drilling Fluids, our trainings are mainly conducted at our Global Research and Technology Centre (“GRTC”), where we have an extensive training calendar that includes a compulsory Drilling Fluids School for drilling fluids engineers, technical and non-technical drilling fluids operations, drilling operations, wellbore control, drilling engineering software, managing drilling operations and others. On several occasions our trainers have travelled to a client’s location on special request to conduct these similar trainings. Our Drilling Waste Management trainings are conducted at our research and engineering centre in Houston, while on-the-job trainings are conducted at the individual business units. Our Transport Solutions trainings are conducted at our Engineering, Technology and Innovation Centre at the North Kuala Lumpur Facility (“NKLF”) in Malaysia.

As part of our technical expertise development, we ensure that in every location that we operate in, the local employees are given equal opportunity to grow and develop their technical skills. Hence intensive on-the-job trainings are conducted to allow them to upskill themselves. While the trainings at the GRTC were given focus during the financial period for the Energy Services business division, the Transport Solutions business division focused on technology transfer to its operating locations. At our Mumbai Monorail operations in Mumbai, India, the pace picked up exponentially with the requirements for operations and maintenance to start in 2013. Hence a large team of local talent have been mobilised and the Malaysian technical experts have been transferring production, operational and maintenance skills to the team. The same applies in Brazil where we are collaborating with our partners who have set up a manufacturing facility. This facility was designed with the technical expertise from Malaysia, but the actual operations will be carried out by the Brazilians. The facility is expected to create over 500 jobs with technology being transferred by our Malaysian team of experts.

HUMAN CAPITAL DEVELOPMENT

SCOMI GROUP BHD ANNUAL REPORT 2013P/41HUMAN CAPITAL DEVELOPMENT

Our training and development programmes have created global diversity within our organisation with different nationalities working across the globe united under the one brand of Scomi and as part of Team Scomi.

Performance Management

To inculcate a high performance culture, Scomi uses Performance Assessment & Capability Enhancement (“PACE”), a performance management tool, to assess its employees on three leadership capabilities, namely People Leadership, Personal Leadership and Business Leadership. PACE was conceptualised to evaluate an individual’s performance and also to highlight areas of improvement for personal development.

Through PACE, employees are engaged in a discussion to explore their strengths and agree on improvement areas while also mapping out a career plan that will allow them to realise their potential. Using PACE, the management is also able to identify employees with high potential and these individuals are presented with opportunities to advance and fast-track their careers.

Competency MappingHaving a talented and resourceful team is critical for our business continuity and hence we have placed great focus on talent management. To ensure our talents have a progressive growth path, an extensive competency mapping programme for the technical line has been completed. This allows each individual to clearly map their experiences against requirements and hence, clearly chart a career path for themselves. Through this we believe we will develop an engaged team that will translate into continued growth results for us.

Succession PlanningScomi’s succession plan involves nurturing and developing employees from within the organisation. Our efforts are always forward-looking, taking into account the future needs based on strategic plans, goals, objectives, priority programmes and projects.

We have in place, a succession plan to manage gaps that may arise when individuals in key positions leave or are promoted to ensure smooth transition and continuity at the workplace. Our plans mostly involve a combination of training and development programmes organised for existing staff as well as new recruits.

Career Planning DiscussionsThe Group Chief Executive Officer together with the Chief of Staff and Chief Learning Officer conduct sessions with selected employees to discuss their individual development plans and their career goals. Developmental interventions in terms of experience, exposure and training needs are then planned so that the company can provide the employee with every opportunity to ensure that those career goals are met.

Safety at Work

Scomi continues to place great emphasis on the importance of maintaining best practices in Quality, Health, Safety and Environment (“QHSE”) at all levels in our workplaces. All our business units throughout the Group have QHSE teams whose main focus is to communicate our QHSE policies and safeguard our stakeholders including personnel, contractors and suppliers.

To cultivate the right attitude towards QHSE, the QHSE teams across all our locations globally organise a number of QHSE-related programmes including safety briefings, toolbox talks specific to operations, fire safety briefings and demonstrations and various campaigns communicated internally. Above all, Management has also taken a step to further ensure employees practise good QHSE standards by including QHSE requirements into performance appraisals.

Our drive to maintain best practices in QHSE has earned us commendations from many clients in various parts of the world including Australia, Indonesia, Malaysia and the United Arab Emirates. They have acknowledged our employees with certificates and awards for exemplary portrayal of QHSE standards.

Team Scomi

With all these initiatives slowly but surely being built brick by brick into the structure of Scomi, we wish to evolve Team Scomi into being a diverse group of individuals who are qualified yet street-smart, disciplined yet flexible and adaptable, goal oriented yet unconventional and team players yet self-starters.

Monorail in Mumbai


Good governance provides a solid foundation for a company to achieve sustainable growth as well as engenders trust and infuses confidence among its shareholders and other stakeholders. Strong business ethics, sound policies and procedures and effective internal control systems with proper checks and balances are the ingredients of good corporate governance.

As such, the Board of Directors of Scomi Group Bhd (“the Company”) (“the Board”) remains committed towards governing, guiding and monitoring the direction of the Company with the objective of enhancing long term sustainable value creation aligned to the interests of shareholders and other stakeholders. Towards this end, the Board strives to ensure that the highest standards of corporate governance are practiced by the Company and its group of companies (“the Group”) and views this as a fundamental part of discharging its roles and responsibilities. Observance of good corporate governance is also critical to safeguard against unethical conduct, mismanagement and fraudulent activities. Hence, the Board continues to implement the eight (8) principles set out in the Malaysian Code on Corporate Governance 2012 (“the Code”) to its particular circumstances, having regard to the recommendations stated under each principle.

This statement sets out the extent of how the Group has applied and complied with the principles and recommendations of the Code and the Main Market Listing Requirement of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) (“MMLR”) for the financial period ended 31 March 2013.

STATEMENT ON CORPORATE GOVERNANCE

Principle 1 – Establish Clear Roles and Responsibilities

The Board’s role is to govern and set the strategic direction of the Company, whilst the Management manages the Company and the Group in accordance with the strategic direction and delegations of the Board. The responsibility of the Board is to oversee the activities of the Management in carrying out these delegated duties.

The Group is led and controlled by an effective Board where it assumes, amongst others, the following principal responsibilities in discharging its stewardship role and fiduciary and leadership functions:

• reviewing and adopting a strategic plan for the Company and the Group, and subsequently monitoring the implementation of the strategic plan by the Management to ensure sustainable growth of the Company and the Group;

• overseeing the conduct of the Company and the Group’s business;• evaluating principal risks of the Company and the Group and

ensuring the implementation of appropriate risk management and internal control systems to manage these risks;

• reviewing the adequacy and the integrity of the Company and the Group’s risk management and internal control systems;• succession planning of the Company;• providing input and overseeing the development and

implementation of the investor relations and shareholder communications policy for the Company and the Group; and

• reviewing the adequacy and the integrity of the management information of the Company and the Group.

Corporate governance is the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long-term shareholder value, whilst taking into account the interests of other stakeholders.


The Board has established and delegated specific responsibilities to three (3) committees of the Board, which operate within clearly defined written terms of reference. The Board reviews the Board Committees’ authority and terms of reference from time to time to ensure their relevance. The Board Committees deliberate the issues on a broad and in-depth basis before putting up any recommendation to the Board for approval. The ultimate responsibility for decision making lies with the Board.

The Board Committees are:• the Audit and Risk Management Committee (“ARMC”);• the Nomination and Remuneration Committee (“NRC”); and


• the Options Committee (“OC”).

With the exception of the OC, none of these Board Committees have the power to act on behalf of the Board and are required to review and evaluate particular issues which are to be tabled to the Board with their recommendations.

The minutes of the Board Committees’ meetings and circular resolutions passed are presented to the Board for information. The Chairman of the relevant Board Committees will also report to the Board on the key issues deliberated by the Board Committees at its meetings.

Composition of the Board and its Committees are as follow:

Board Committees ARMC NRC OC Chairman/Independent Non-Executive Director Tan Sri Asmat bin Kamaludin – C C Independent Non-Executive Directors Tan Sri Nik Mohamed bin Nik Yaacob M – – Datuk Haron bin Siraj M – M Dato’ Mohammed Azlan bin Hashim M M – Dato’ Sreesanthan a/l Eliathamby – – – Dato’ Abdul Rahim bin Abu Bakar C – – Non-Independent Non-Executive Directors Tan Sri Mohamed Azman bin Yahya – M – Mr Foong Choong Hong – – – Dato’ Teh Kean Ming@ – – – Group Chief Executive Officer (“GCEO”)/ Non-Independent Executive Director Encik Shah Hakim @ Shahzanim bin Zain – – M Alternate Director Mr Lee Chun Fai# – – –

NOTESC – Chairman M – Member@ Appointed as a Non-Independent Non-Executive Director on 22 October 2012.# Appointed as an Alternate Director to Dato’ Teh Kean Ming on 22 May 2013.

The OC of the Board is entrusted with the responsibility of overseeing the administration of the Company’s Employees’ Share Option Scheme (“ESOS”) in accordance with the ESOS By-Laws (“By-Laws”). The OC comprises two (2) Independent Non-Executive Directors and the GCEO/Non-Independent Executive Director. The Options Committee meets as and when required, and at least once during the financial year.

The salient Terms of Reference of the OC are as follows:

• to determine participation eligibility and to decide on the number of options to be offered to eligible employees and/or Persons as stipulated in the By-Laws, throughout the

duration of the scheme;• to ensure that the maximum number of new options that

may be offered to eligible employees and/or persons shall not exceed the limits set against their respective categories and comply with the criteria for allocation as set out in the By-Laws;

• to evaluate and decide on the eligible employees’ and/or eligible persons’ periodic entitlement to exercise their options as stipulated in the By-Laws;

• to make offers to eligible employees and/or persons who are entitled to participate in the scheme, after taking into consideration the performance, seniority, number of years in service, employee grading and/or the potential contribution

SCOMI GROUP BHD ANNUAL REPORT 2013P/45STATEMENT ON CORPORATE GOVERNANCE

of the eligible employees and/or persons; and• to recommend to the Board, when necessary, any

amendments to be made to all or any of the provisions of the scheme, subject to the approvals of the relevant authorities and the Company’s shareholders at a general meeting.

The ten (10)-year ESOS implemented by the Company on 28 April 2003 has expired on 27 April 2013. There is no share option schemes for the employees of the Company at this juncture.

To enhance the Board and the Management’s accountability to the Company and its shareholders, the Board has established clear functions reserved for the Board and those delegated to the Management. The Board has a Board Charter and Board Policy Manual which establishes a formal schedule of matters and outlines the types of information required for the Board’s attention and deliberation at the Board meetings. The Board Charter is available on the Company’s website at www.scomigroup.com.my. Besides that, the Board’s approving authority is delegated to the Management through a clear and formally defined Delegated Authority Limits (“DAL”) which is the primary instrument that governs and manages the business decision process in the Group. Whilst the objective of the DAL is to empower Management, the key principle adhered to in its formulation is to ensure that a system of internal controls and checks and balances are incorporated therein. The DAL is implemented in accordance with the Group’s policies and procedures and in compliance with the applicable statutory and regulatory requirements. The DAL is continuously reviewed and updated to ensure relevance to the Group’s operations.

In discharging its duties and responsibilities, the Board is guided by the Code of Conduct of the Group which provides the framework to ensure that the Group conduct itself in compliance with laws and ethical values. The Board and all employees of the Company and the Group are committed to adhering to best practices in corporate governance and observing the highest standards of integrity and behaviour in all activities conducted by the Company and the Group, including the interaction with its customers, suppliers, shareholders, employees and business partners, and within the community and environment in which the Company and the Group operate. The Board ensures that compliance is monitored through a Confirmation of Compliance declaration process where all employees of the Group of grades 15 and above are required to confirm their receipt and understanding of the Code of Conduct and further to certify their continued compliance with the Code of Conduct on an annual basis. The Code of Conduct is available on the Company’s website at www.scomigroup.com.my.

The Group is also committed to openness, probity and accountability. An important aspect of accountability and transparency is the existence of a mechanism to enable employees of the Group to voice their concerns in a responsible and effective manner. It is a fundamental term of every contract of employment that an employee will faithfully serve his employer and not disclose confidential information about the employers’ affairs. Nevertheless, where an individual discovers information which he believes shows serious malpractice or wrongdoing within the organisation, there should be internal

mechanisms to enable him to safely report, in good faith, on any suspected breaches of the law or company procedure that has come to his notice.

To address this concern, the Group has formalised and established a Whistleblower Framework and Policy, to provide an avenue for employees to raise genuine concerns internally or report any breach or suspected breach of any law or regulation, including the Group’s policies and procedures, to the Disclosure Officer in a safe and confidential manner, thereby ensuring that employees may raise concerns without fear of reprisals. The Whistleblower Framework and Policy is subject to periodic assessment and review to ensure that it remains relevant to the Group’s changing business circumstances. The Whistleblower Framework and Policy is available on the Company’s website at www.scomigroup.com.my.

The Board is cognisant of the importance of business sustainability and, in managing the Group’s business, take into consideration its impact on the environment and society in general. Balancing the environment, social and governance aspects with the interest of various stakeholders is essential to enhancing investor and public trust. We acknowledge our responsibility to all the lives we touch either directly or indirectly, and are committed to making a positive impact in the many communities where we have a presence while further strengthening our corporate reputation via upholding a culture of integrity and transparency. Over the years, our approach towards corporate social responsibility (CSR) has become progressively more holistic, evolving from individual acts of philanthropy to becoming a mindset that influences our every decision and strategy. We further ensure that this mindset is shared among all our employees by reinforcing the principles of integrity and corporate citizenry in our training and internal communication, and encouraging a spirit of volunteerism across our operations globally. Apart from the Code of Conduct, the Group has in place other internal policies and procedures to address corporate sustainability. We also realise that, given the nature of the businesses we are involved in, we can make a positive impact on the environment. Hence, we invest significantly in research and development to develop ‘green’ products that are efficient, cost-effective and, most importantly, environmentally friendly.

Every Director has full and unrestricted access to information within the Group. Where required, the Board and its Committees are provided with independent professional advice, the cost of which is borne by the Company. The Board may also seek advice from the Management or request further explanation, information or update on any aspect of the Group’s operations or business concerns. The Board is supplied with quality and timely information, which allows it to discharge its responsibilities effectively and efficiently. The agenda for each meeting together with a set of comprehensive Board Papers for each agenda item are delivered to each Director in advance of meetings, to enable the Board sufficient time to review the matters to be deliberated for effective discussion and decision making during the meeting, and where necessary, to obtain supplementary information before the meeting.

In addition, the Directors have full and unrestricted access to the


advice and dedicated support services of the two (2) company secretaries appointed by the Board. The Company Secretaries, who are qualified, experienced and competent, advise the Board on procedural and regulatory requirements to ensure that the Board adheres to the board policies, procedures and regulatory requirements in carrying out its roles and responsibilities effectively.

Principle 2 – Strengthen Composition

The success of the Board in fulfilling its oversight responsibility depends on its size, composition and leadership qualities. During the financial period under review, the Board consisted of ten (10) members, comprising one (1) Executive Director and nine (9) Non-Executive Directors (including the Chairman) of whom six (6) are independent as defined by the MMLR. The Independent Directors make up 60% of the composition of the Board. Hence, the composition of the Board fulfils the prescribed requirement for one-third (1/3) of the composition of the Board to be independent directors. The appointment of the independent directors is to ensure that the Board includes directors who can effectively exercise their best judgment objectively for the exclusive benefit of the Company and the Group. The composition of the Board reflects a diversity of backgrounds, skills and experiences in the areas of business, economics, finance, legal, general management and strategy that contributes effectively in leading and directing the management and affairs of the Group. Given the calibre and integrity of its members and the objectivity and independent judgment brought by the Independent Directors, the Board is of the opinion that its current size and composition contribute to an effective Board.

A brief description of the background of each Director is presented within the Profile of Directors section as set out on pages 12 to 15 of this Annual Report.

The NRC was formed on 11 May 2007 with the dissolution of the Nomination Committee and the Remuneration Committee, both of which were established on 1 July 2003. The objectives of the NRC are to:

• ensure an effective process for selection of new directors and assessment of the effectiveness of the Board and Board Committees and the performance of individual directors which will result in the required mix of skills, experience and responsibilities being present on the Board;

• establish, review and report to the Board on a formal and transparent policy on Executive directors’ remuneration; and

• review and recommend to the board the remuneration of the Executive Directors in all its forms with the aim of attracting, retaining and motivating individuals of the highest quality needed to run the Company successfully.

The NRC is appointed by the Board and comprises at least three (3) members who are all non-executive, a majority of whom are independent directors. Members of the NRC elect a Chairman from among themselves. In the absence of the Chairman at the NRC meeting, other members present shall elect, from among themselves, a Chairman for the said NRC meeting. All members of the Committee, including the Chairman, shall hold office only


so long as they serve as Directors of the Company. Members of the NRC may relinquish their membership in the NRC with prior written notice to the Company Secretary. The NRC reports its recommendations back to the Board for its consideration and approval. The NRC meets at least once during a financial year. In the interim period between meetings, if the need arises, issues shall be resolved through circular resolution. A circular resolution in writing, stating the reason(s) to arrive at a recommendation or resolution, signed by a majority of the members, shall be valid and effective as if it had been passed at a meeting duly convened and constituted.

The salient Terms of Reference of the NRC include:

• to: • recommend to the Board potential candidates for

directorships to be filled by the shareholders or the Board giving consideration to:

• the candidates’ skills, knowledge, expertise and experience; • the candidates’ professionalism; • the candidates’ integrity; and • in the case of candidates for the position of

independent non-executive directors, their ability to discharge such responsibilities/functions as expected from independent non-executive directors;

• consider, in making its recommendations, candidates for directorships proposed by the GCEO and within the bounds of practicability, candidates proposed by any other senior executive or any director or shareholder; and

• recommend to the Board, Directors to fill the seats on the Board Committees;

• to conduct an annual review of the required mix of skills and experience and other qualities, including core competencies which non-executive directors should bring to the Board;

• to assess, on an annual basis, the effectiveness of the Board as a whole, the Committees of the Board and the contributions of each individual director, including Independent Non-Executive Directors, as well as the GCEO and to ensure that all assessments and evaluations carried out in the discharge of this function are properly documented;

• from time to time, to examine the size of the Board with a view to present recommendations to the Board on the optimum number of Directors on the Board to ensure its effectiveness;

• to ensure that new appointees to the Board undergo orientation and education programmes;• to make recommendations to the Board concerning the

re-election by shareholders of any directors under the retirement by rotation provisions in the Company’s Articles of Association;

• annually, review and assess the training needs of individual directors and propose suitable training programmes to be attended;• to develop the GCEO’s mission and objectives, succession for the GCEO and annual evaluation of the performance of the GCEO;• to establish and recommend to the Board a fair and


transparent Remuneration Policy framework for Executive Directors designed to attract, retain and motivate individuals of the highest quality. The key elements of this framework, which would form the basis of deliberations on the remuneration to be awarded, are:

• the Company’s financial performance which may include financial indicators such as turnover, profitability, market capitalisation and achievement of these indicators vis-à-vis pre-determined goals;

• the skills, knowledge, expertise, performance and relative experience of the Executive Directors; • the duties and responsibilities borne by the Executive Director; and • the nature of the Company’s business e.g. international/ regional business presence; • to conduct, on an annual basis (or when the need

arises as in the case of proposing remuneration and/or compensation for a new Executive Director), a review and thereon provide advice and recommendations to the Board on all aspects of reward structure accorded to Executive Directors in terms of the following components:

• basic salaries and basis of increment applied (as a percentage of basic salary, fixed quantum or merit increment);

• annual bonuses (in the mode of contractual, discretionary or lump sum payment form);

• directorship fee (fixed and/or supplementary); • long term incentive scheme including ESOS with

conditional terms for exercising options; • fringe benefits in kind which include among others

club membership, company car, medical and insurance benefits, outstation/overseas allowance etc; and

• other terms of employment/directorship;

• to determine and agree on the Company’s policy on the duration of contracts with Executive Directors, and notice periods and termination payments under such contracts, with a view to ensuring that any termination payments are fair to the individual and the Company, that failure is not rewarded and the duty to mitigate loss is fully recognized; and

• to consider any published guidelines or recommendations regarding the remuneration of directors of listed companies which it considers relevant or appropriate.

The appointment of directors is a vital process as it determines the composition and quality of the Board’s mix of skills and competencies. The NRC is delegated the responsibility to ensure an effective process for the selection of new directors to the Board. The NRC will review and assess the proposed appointment of new directors in terms of the appropriate balance of skills, expertise, attributes and core competencies, and thereupon make the appropriate recommendations to the Board for approval. Such evaluation criteria does not take into account the gender of the proposed new director as our Code of Conduct prohibits any form of discrimination, whether based on gender or otherwise, and in keeping with our Code of Conduct the Board ensures that the gender of a particular candidate for appointment to the Board is not an influencing

factor in any appointment.

The NRC is additionally responsible for making recommendations to the Board on the re-election of Directors. The NRC is also responsible for reviewing candidates for appointment to the Board Committees and makes appropriate recommendations thereon to the Board for approval. It is tasked with assessing the effectiveness of the Board and Board Committees and the performance of individual directors in order to ensure that the required mix of skills and experience are present on the Board. In the course of assessing the effectiveness of the Board and the Board Committees and the contributions of each individual director, the NRC also evaluates and determines the training needs for each of the directors in order to enhance the skills of the directors and aid them in the discharge of their duties as directors.

During the financial period under review, the NRC consisted of three (3) members who are all non-executive, a majority of whom are independent. In accordance with the approved Terms of Reference of the NRC, the NRC carried out the following activities during the financial period ended 31 March 2013:

• assessed the annual performance of each individual Director;• assessed the independence of each Independent Directors;• reviewed the skills, experience and competencies of each

individual Director and based thereupon, to assess the training needs of each individual Director;

• assessed the effectiveness of the Board and the Committees of the Board;

• reviewed the skills, experience and competencies of the non-executive Directors;

• assessed the adequacy of the size and composition of the Board;• reviewed the proposed remuneration for the Non-Executive

Directors of the Company;• reviewed the retirement and re-election of the Directors

pursuant to the Articles of Association of the Company;• evaluated and recommended to the Board the GCEO’s

Balanced Scorecard for the financial period under review;• reviewed and recommended to the Board the GCEO’s

Balanced Scorecard for the new financial year;• reviewed and recommended to the Board the remuneration

package for the GCEO;• reviewed the developments relating to legal proceeding

taken by the authorities against one of the Directors and provided its recommendation to the Board on this matter; and

• reviewed and recommended to the Board the appointment of a new Director.

The NRC collectively conducted the assessments of the effectiveness of the Board and its Committees and the performance of each individual Director, which considered the qualification, contribution and performance of Directors taking into account their competencies, character, commitment, integrity, experience and time expended in meeting the needs of the Group. The assessment and comments by the NRC were summarised and reported to the Board. The Chairman of the NRC will discuss the NRC’s assessment of the performance of each individual Director in separate one-on-one sessions. All assessments and evaluations carried out by the NRC in the discharge of its functions are properly documented.


In accordance with the Company’s Articles of Association and Paragraph 7.26(2) of the MMLR, at least one-third (1/3) of the Board is subject to retirement by rotation at each Annual General Meeting (“AGM”). Pursuant to Article 82 of the Articles of Association of the Company, Tan Sri Asmat Bin Kamaludin, Tan Sri Mohamed Azman Bin Yahya and Mr Foong Choong Hong retired from the Board and were re-elected at the 10th AGM held on 27 June 2012.

Based on the chronology of the Directors’ appointment to the Board and upon recommendation by the NRC, the Board has pleasure in proposing the re-election of the following Directors who retire in accordance with Article 82 of the Articles of Association of the Company and being eligible, offer themselves for re-election at the forthcoming AGM of the Company:(a) Tan Sri Nik Mohamed bin Nik Yaacob;(b) Datuk Haron bin Siraj; and(c) Dato’ Mohammed Azlan bin Hashim.


The NRC is also responsible for the review of the overall remuneration policy for the Directors and the GCEO whereupon recommendations are submitted to the Board for approval. The NRC advocates a fair and transparent remuneration policy framework such that the Group may attract, retain and motivate high quality individuals to manage its business and other key areas of the Group’s operations.

The remuneration of the GCEO comprises principally salary and other benefits, taking into consideration market rates and practices. Additionally, he was entitled to share options under the Company’s ESOS, which were exercisable until the expiry date of the scheme.

The Non-Executive Directors’ remuneration is based on standard agreed fees, in addition to allowances for attendance at Board and Board Committee meetings. The Directors were also entitled to options under the Company’s ESOS was approved by the shareholders of the Company.

All Directors who served during the financial period ended 31 March 2013 are to be paid an annual Directors’ fee upon shareholders’ approval at the forthcoming AGM of the Company. The aggregate remuneration paid to the Directors of the Group who served during the financial period, and the bands, are as follows:

Executive Director Non-Executive Directors Total (RM’000) (RM’000) (RM’000)

Salaries and bonuses 3,134 – 3,134 Defined contribution plan 452 – 452 Fees – 995 995 Allowances – 203 203 Estimated value of benefit-in-kind 252 – 252

Total 3,838 1,198 5,036

The aggregate remuneration above is categorised into the following bands:

Executive Director Non-Executive Directors Total

RM30,000 to RM80,000 – 1 1 RM80,000 to RM130,000 – 5 5 RM130,001 to RM180,000 – – – RM180,001 to RM230,000 – 3 3 Up to RM3,900,000 1 – 1

Principle 3 – Reinforce Independence

The role of the Chairman of the Board (“the Chairman”) and the GCEO are separated with each having a clear scope of duties and responsibilities. The distinct and separates roles of the Chairman and the GCEO, with a clear division of functions and responsibilities, ensure a balance of power and authority, such that no one individual has unfettered powers of decision making. This crucial partnership dictates the long term success of the Company and the Group.

The Chairman plays a crucial and pivotal leadership role in ensuring that the Board works effectively, whilst the GCEO has

the overall responsibility for the operational and business units, organisational effectiveness and implementation of Board policies, directives, strategies and decisions. A periodical review of the GCEO’s Balanced Scorecard is undertaken by the NRC. The GCEO is supported by the Key Management Team, as set out on pages 16 to 17 of this Annual Report, for the day-to-day management of the business and operations of the Group.

The Independent Directors make up 60% of the composition of the Board. The appointment of the independent directors is to ensure that the Board includes directors who can effectively exercise their independent and objective judgment to the Board deliberations and to mitigate risks arising from conflict of


interest or undue influence from interested parties.

The Company does not have term limits for both Executive Directors and Independent Non-Executive Directors as the Board believes that continued contribution by Directors provides benefits to the Board and the Group as a whole. The NRC has assessed the independence of each Independent Directors and recommended that they continue to act as an Independent Non-Executive Directors of the Company on the following basis:

(i) they have no interest or ties in the Company that could adversely affect independent and objective judgement and place the interest of the Company above all other interests;

(ii) they have met the criteria for independence set out in Chapter 1 of the MMLR; and

(iii) they continue to be able to exercise independent judgement and to act in the best interest of the Company.

The NRC will review and recommend to the Board, a policy on the term of tenure of Directors of the Company and the Group, excluding the tenure of the Chairman of the Company and the Group. The Board is of the view that the independence of directors cannot be assessed only based on the quantitative aspect as stated in the MMLR, but that the true independence emanates from intellectual honesty, manifested through a genuine commitment to serve the best interests of the Company.

Following an assessment conducted by the Board through the NRC, the Board is of the opinion that the Independent Directors

continue to remains objective and independent in expressing their respective views and in participating in deliberations and decision-making of the Board and the Board Committees. The Board is further of the view that the length of service of the Independent Directors on the Board do not in any way interfere with their independent judgment and ability to act in the best interest of the Group. Hence, based on the recommendation by the NRC, the Board recommends that the Independent Directors continue to be designated as independent directors of the Company.

Principle 4 – Foster Commitment

The Board meets a minimum of six (6) times a year, with special meetings convened as and when necessary. The Board is responsible for setting the corporate goals of the Group and in mapping medium and long term strategic plans, which are reviewed on a regular basis. Regular periodic review of the Group’s performance and implementation of the management’s action plans are conducted by the Board to assess the progress made towards achieving the overall goals of the Group.

The schedule of meetings of the Board and its Committees as well as the AGM is prepared and circulated to the Board before the beginning of the year to facilitate the Directors in planning ahead. Special meetings of the Board and its Committees are convened between the scheduled meetings as and when urgent and important direction and/or decisions of the Board and/or its Committees are required.

During the financial period ended 31 March 2013, eleven (11) Board Meetings were held. The attendance record of the Directors at the meetings of the Board and its Committees is as follows:

Board Committees Board of Directors ARMC NRC OC Chairman/Independent Non-Executive Director Tan Sri Asmat bin Kamaludin 10/11 – 3/3 1/1 Independent Non-Executive Directors Tan Sri Nik Mohamed bin Nik Yaacob 9/11 6/8 – – Datuk Haron bin Siraj 10/11 8/8 – 1/1 Dato’ Mohammed Azlan bin Hashim 10/11 8/8 3/3 – Dato’ Sreesanthan a/l Eliathamby 8/11 – – – Dato’ Abdul Rahim bin Abu Bakar 11/11 8/8 – – Non-Independent Non-Executive Directors Tan Sri Mohamed Azman bin Yahya 11/11 – 2/3 – Mr Foong Choong Hong 11/11 – – – Dato’ Teh Kean Ming@ 4/4 – – – GCEO/Non-Independent Executive Director Encik Shah Hakim @ Shahzanim bin Zain 10/11 – – 1/1 Alternate Director Mr Lee Chun Fai# – – – –

NOTES C Chairman M Member @ Appointed as a Non-Independent Non-Executive Director on 22 October 2012. # Appointed as an Alternate Director to Dato’ Teh Kean Ming on 22 May 2013.

P/50 SCOMI GROUP BHD ANNUAL REPORT 2013STATEMENT ON CORPORATE GOVERNANCE

The Board are supplied with quality and timely information, which allows them to discharge their responsibilities effectively and efficiently. The meeting agenda together with a set of comprehensive Board Papers for each agenda item are delivered to each Director in advance of meetings, to enable the Board sufficient time to review the matters to be deliberated and to allow for effective discussion and decision making during the meeting, and where necessary, to obtain supplementary information before the meeting. At the Board meeting, the Chairman encourages constructive, open and healthy debate and ensures that resolutions are circulated and deliberated so that all Board decisions reflect the collective view of the Board. Directors are given the chance to freely express their views or share information with their peers in the course of deliberation at the Board. Any Director who has a direct and/or indirect interest in the subject matter to be deliberated will abstain from deliberation and voting on the same during the meeting. All deliberations at the meetings of the Board and its Committees in arriving at the decisions and conclusions are properly recorded by the Company Secretary by way of minutes of meetings.

The Board also complied with Paragraph 15.06 of the MMLR on the restriction on the number of directorships in listed companies held by the Directors. The Company Secretary monitors the number of directorships held by each Director to ensure compliance at all times. The list of directorships of each Director is updated regularly and is tabled for the notation of the Board on a quarterly basis. The Board is satisfied that the external directorships of the Board members have not impaired their ability to devote sufficient time in discharging their roles and responsibilities effectively as well as regularly updating and enhancing their knowledge and skills.

All Directors have attended the Mandatory Accreditation Programme as required under the MMLR. To remain relevant in the rapidly changing and complex modern business environment, our Directors are committed to continuing education and lifelong learning to fulfil their responsibilities to the Company and enhance their contributions to board deliberations.

For this purpose, a dedicated training budget for the Directors’ continuing education is provided each year by the Company. In addition to the NRC’s evaluation and determination of the training needs for each of the Directors, the Directors may also request to attend training courses according to their needs as a Director or member of the respective Board Committees on which they serve. Throughout the period under review, the Directors were also invited to attend a series of talks on Corporate Governance organised by Bursa Malaysia together with various professional associations and regulatory bodies.

During the financial period ended 31 March 2013, all members of the Board attended various training programmes, conferences, seminars and courses organised by the relevant regulatory authorities and professional bodies on areas relevant to the Group’s business, Directors’ roles, responsibilities, effectiveness and/or corporate governance issues. Training programmes, conferences, seminars and courses attended by Directors during the period under review are as follows:

Corporate Governance• 4th Annual Corporate Governance Summit Kuala Lumpur

2012 - Bringing Asia onto the Board• Advocacy Session on Disclosure for CEOs and CFOs• Bursa Malaysia Sustainability Training for Directors and

Practitioners• Directors’ In-house Training - Briefing on the New Corporate

Governance Blueprint and Regulatory Updates• Directors’ In-house Training - Corporate Governance and

Directors’ Duties

Business Management, Economics, Finance, Legal and Industry Update• “Blue Ocean Strategy” Workshop• 15th Annual Global CEO Survey - Making Talent Strategic

Dialogue• 15th Perdana Discourse Series - The Future of Affirmative

Action• 25th World Gas Conference 2012 - Gas: Sustaining Future

Global Growth• 38th ASEAN - Japan Business Meeting - Global Challenges:

Japan - ASEAN Response• 8th Construction Industry Review and Outlook Seminar• 8th World Islamic Economic Forum• 9th Annual Private Banking Asia 2013 and Asian Family

Office Forum 2013• All Star Start-up Pitch• CEO Forum 2012 - Malaysia in the New Global Context:

Realising Malaysia’s True Potential• Competition Act 2010 - Property• Directors and Officers Liability Talk - Key Trends in Directors

and Officers Liability• Directors’ Continuing Education Programme 2012 -

Malaysia’s Consumer Trends, Responsible Investment Outlook, IFRS Convergence and its Implication to Financial Disclosures, the Code, Economic Outlook and Data Protection Act and New Insights into the Competition Act 2010

• Directors’ In-house Training - Stress Management: Transforming Business Pressure into Productive Energy

• Financial Institutions Directors’ Education Programme (FIDE Training)

• Forum on “Citizenship in the Age of the Internet”• High Performance Culture Alignment Workshop• IJM Senior Management Forum 2012 - Priming for Growth


on All Fronts• India: Economics, Politics and Investments• India: The Road ahead Conference & Round Table• Indonesia’s Private Equity Dilemma• International Directors Summit 2012 - Awakening the

Corporate Entrepreneurship for High Income Economy• Invest Malaysia 2012 Conference• Job Evaluation Methodology Induction Session• Keynote Speech - Labuan IBFC: Malaysia’s engine of foreign

investment• Khazanah Global Lectures 2012• Khazanah Megatrends Forum 2012 - The Big Shift: Traversing

the Complexities of a New World”• Labuan IBFC: Asia Pacific’s Preferred IFC: A road show in

Hong Kong and Shanghai• Leaders Luncheon with YB Dato’ Sri Idris Jala - Sustaining

Progress in the Face of Economic Uncertainty• Market Rigging and Insider Trading Movement through

Moving Average (Indicator for Traders and Investors Psyche)• Media Training and Crisis Communication• MFRS 10, 11 & 12 Workshop - Control & Joint Arrangement

Redefined• MINDA Directors Forum 2012• Optimising IFRS/MFRS Convergence• Senior Leaders as Coaches Workshop• Should Real Estate Investment Trust (REITs) be part of your

Investment Portfolio• Super Investor Asia 2013• Talk on “An Overview of Property Market”• TechVenture 2012 - The New Age of Asian Innovation• The 5th Edition of the International Petroleum Technology

Conference• The 6th Edition of the International Petroleum Technology

Conference• The Business Angel Forum• The Construction and Industries Payment and Adjudication

Act 2012 (CIPAA) Workshop• The Kuala Lumpur Business Club (“KLBC”) Fireside Chat on

“Challenges in 2012: Economy and Politics” with YB Dato’ Mukhriz Mahathir, Deputy Minister of International Trade and Industry

• The KLBC Luncheon Talk on “The 21st Century Malaysia: Distractions & Solutions”

• The Malaysian Connection Forum - Politics Decoded: Implications on Financial Markets

• Transition from Tied Agent to Independent Financial Adviser• Understanding Upstream Oil and Gas Economics Evaluation• Weaning of Foreign Worker through Mechanization• World Economic Forum on East Asia (WEF)

Apart from attending the training programmes, conferences and seminars organised by the relevant regulatory authorities and professional bodies, the Directors also visited key operating units

of the Group and continuously received briefings and updates on regulatory and industry development, including information on the Group’s businesses and operations, risk management activities and other initiatives undertaken by the Group.

Principle 5 – Uphold Integrity in Financial Reporting

The Board is committed to provide a balanced and true view of the Group’s financial performance and prospects in all its reports to stakeholders and regulatory authorities. Prompt release of announcements of the quarterly financial statements and press releases reflect the Board’s commitment to provide timely and transparent disclosures of the performance of the Group. This is also channelled through the audited financial statements, quarterly announcements of the Group’s unaudited results as well as the Chairman’s Statement and the Management Review of Operations in the Annual Report.

The Statement of Directors’ Responsibility in respect of the preparation of the annual audited financial statements for the financial period under review is set out on page 67 of this Annual Report.

In discharging its fiduciary responsibility, the Board is assisted by the ARMC to oversee the financial reporting processes and the quality of the Group’s financial statements.

The primary objective of the ARMC is to assist the Board to review the adequacy and integrity of the Group’s financial administration and reporting, internal control and risk management systems, including the management information system and systems for compliance with applicable laws, regulations, rules, directives and guidelines.

The ARMC comprises four (4) Non-Executive Directors and all of them are Independent. The ARMC meets as and when required, and at least four (4) times during the financial year.

The Board, through the ARMC maintains an appropriate, formal and transparent relationship with the Group’s internal and external auditors. The ARMC has explicit authority to communicate directly with the Group’s internal and external auditors and vice versa the Group’s internal and external auditors also have direct access to the ARMC to highlight any issues of concern at any time. Further, the ARMC meets the external auditors without the presence of Executive Directors or the Management whenever necessary, but no less than twice a year. Meetings with the external auditors are held to further discuss the Group’s audit plans, audit findings, financial statements, as well as to seek their professional advice on other related matters.

The ARMC is also tasked by the Board, amongst other, to consider the appointment of the external auditor, the audit fee and any questions of resignation or dismissal as well as all


non-audit services to be provided by the external auditors to the Company with a view to auditor independence and to provide its recommendations thereon to the Board. The ARMC has received confirmation from the external auditors that for the audit of the financial statements of the Group and Company for the financial period ended 31 March 2013, they have maintained their independence in accordance with their firm’s requirements and with the provisions of the By-Laws on Professional Independence of the Malaysian Institute of Accountants and they have reviewed the non-audit services provided to the Group during the financial period in accordance with the independence requirements and are not aware of any non-audit services that have compromised their independence as external auditors of the Group. The external auditors also reaffirmed their independence at the completion of the audit.

The ARMC Report, enumerating its membership, Terms of Reference, its roles and relationship with both the internal and external auditors and activities during the financial period ended 31 March 2013 is set out on pages 60 to 63 of this Annual Report.

Principle 6 – Recognise and Manage Risks

The Board firmly believes in maintaining a sound risk management framework and internal control system with a view to safeguard shareholders’ investment and the assets of the Group. The expanding size and geographical spread of the Group involves exposure to a wide variety of risks, where the nature of these risks means that events may occur which could give rise to unanticipated or unavoidable losses.

In establishing and reviewing the risk management and internal control systems, the Board recognise that such systems can provide only reasonable, but not absolute, assurance against the occurrence of any material misstatement or loss.

The ARMC meets on a regular basis to ensure that there is clear accountability for managing significant identified risks and that identified risks are satisfactorily addressed on an ongoing basis. In addition, the adequacy and effectiveness of the risk management and internal control systems is also periodically reviewed by the ARMC.

Regular assessments on the adequacy and integrity of the internal controls and monitoring of compliance with policies and procedures are also carried out through internal audits. The Group has outsourced the activities and function of the internal audit to a professional service provider who reports

directly to the ARMC. The internal audit plan that covers internal audit coverage and scope of work is presented to the ARMC and the Board for their respective consideration and approval annually. Internal audit reports encompassing the audit findings together with recommendations thereon are presented to the ARMC during its quarterly meetings. Senior and functional line management are tasked to ensure management action plans are carried out effectively and regular follow-up audits are performed to monitor the continued compliance.

The Statement on Risk Management and Internal Control is set out on pages 54 to 59 of this Annual Report.

Principle 7 – Ensure Timely and High Quality Disclosure

The Board recognises the importance of maintaining transparency and accountability to its shareholders. The Board ensures that all the shareholders of the Company are treated equitably and the rights of all investors are protected. The Board provides its shareholders and investors with comprehensive, accurate and quality information on a timely basis to keep them abreast of all material business matters affecting the Group.

Timely disclosure of material information is critical towards building and maintaining corporate creditability and investor confidence. Recognising the importance of accurate and timely public disclosures of corporate information in order for the shareholders to exercise their ownership rights on an informed basis, the Board has established a Group Communication Policy with the following intention:• to provide guidance and structure in disseminating

corporate information to, and in dealing with investors, analysts, media representatives, employees and the public;

• to raise management and employees’ awareness on the disclosure requirements and practices;

• to ensure compliance with legal and regulatory requirements on disclosure; and

• to protect the brand equity of the Group by managing the risk associated with the brand i.e. exposures to the brand that can undermine its ability to maintain its desired differentiation and competitive advantage.

The Group Communication Policy outlines how the Group identifies and distributes information in a timely manner to all shareholders. It also reinforces the Group’s commitment to the continuous disclosure obligations imposed by law, and describes the procedures implemented to ensure compliance.

The Board through the Management oversees the Group’s



corporate disclosure practices and ensures implementation and adherence to the policy. The Board has authorised the GCEO as the primary spokesperson responsible for communicating information to all stakeholders including the public.

The Group also maintains a corporate website, www.scomigroup.com.my to disseminate information and enhance its investor relations. All timely disclosure, material information and announcements made to Bursa Malaysia are published on the website shortly after the same is released by the news wire service or the relevant authorities. Supplemental, non-material information will be posted on the website as soon as practicable after it is available.

The Group recognises the need for due diligence in maintaining, updating and clearly identifying the accuracy, veracity and relevance of information on the website. All timely disclosure and material information documents will be clearly date-identified and retained on the website as part of the public disclosure record for a minimum period of 2 years. The Group Communications division has ongoing responsibility for ensuring that information in the website is up-to-date. In addition, the email address, name and contact nu mber of the Company’s designated person is listed in the website to enable the public to forward queries to the Company.

Besides that, the Company will also organise separate quarterly briefings for fund managers, institutional investors and investment analyst as well as the media, not only to promote the dissemination of the financial results of the Company and the Group but also to keep them updated on the progress and development of the Group’s business and prospect.

Principle 8 – Strengthen Relationship Between Companyand Shareholders

Shareholders are encouraged to attend the AGM and any general meetings of the shareholders where it provides shareholders the opportunity to raise questions or concerns with regards to the Group as a whole. Such meetings also serve as a platform for shareholders to have direct access to the Board.

The Company at all times dispatched its notices of the AGM and any general meetings of the shareholders, Annual Report and related circular to shareholders at least twenty one (21) days before the AGM and any general meetings of the shareholders, unless otherwise required by laws, in order to provide sufficient time to shareholders to understand and evaluate the matters involved as well as to make necessary

arrangements to attend, participate and vote either in person, by corporate representative, by proxy or by attorney, to exercise their ownership rights on an informed basis during the AGM and any general meetings of the shareholders. Where special business items are to be transacted, a full explanation is provided in the notice of the AGM and any general meetings of the shareholders or the related circular to shareholders in order to assist the shareholders’ understanding of matters and the implication of their decision in voting for or against a resolution.

All the resolutions set out in the notices of the AGM and any general meetings of the shareholders are put to vote by show of hands, unless otherwise required by shareholders or by law. The Board encourages and facilitates poll voting where the chairman of the general meeting will inform shareholders of their right to demand a poll vote at the commencement of the AGM. The outcome of the AGM and any general meetings of the shareholders is announced to Bursa Malaysia on the same day the meeting is held.

The Board, the Management Team, both Internal and External Auditors of the Company and if required, the Advisers, are present at the AGM and any general meetings of the shareholders to answer questions or concerns raised by shareholders. Before the commencement of the AGM and any general meetings of the shareholders, the Directors and the Management Team will take the opportunity to engage directly with the shareholders to account for their stewardship of the Company. Direct engagement with shareholders provides the shareholders a better appreciation of the Company’s objectives, quality of its management and the challenges faced, while also making the Company aware of the expectations and concerns of its shareholders. During the AGM and any general meetings of the shareholders, there is always a presentation by the GCEO or the Chief Investment and Performance Officer on the operations and financial performance of the Company and the Group, the prospects of the Group and the subject matters tabled for decision. Besides that, the chairman of the AGM and any general meetings of the shareholders will invite the shareholders to raise questions pertaining to the Company’s financial performance and other items for adoption at the meeting, before putting a resolution to vote. The chairman of the AGM and any general meetings of the shareholders will also share with the shareholders the Company’s responses to questions submitted in advance of the AGM and any general meetings of the shareholders by the Minority Shareholder Watchdog Group.

This Statement is made in accordance with the resolution of the Board dated 23 August 2013.


Introduction

In compliance with Paragraph 15.26(b) of the Main Market Listing Requirements (“MMLR”) and Practice Note 9 issued by Bursa Malaysia Securities Berhad (“Bursa Malaysia”), the Board of Directors of Scomi Group Bhd (“the Company”) (“the Board”) is pleased to set out below the Group’s Statement on Risk Management and Internal Control for the financial period ended 31 March 2013. This Statement covers all of the Group’s operations, save for Scomi Engineering Bhd and Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd), both being subsidiaries of the Company and are listed on Bursa Malaysia.

Board Responsibility

The Board is fully committed to ensure the existence of an effective risk management and internal control systems within the Group, and continuously reviews and evaluates the adequacy and integrity of those systems. However, the Board recognises that such systems are designed to manage and reduce, rather than eliminate, the risks identified to acceptable levels. Therefore, the systems implemented can provide only reasonable and not absolute assurance against the occurrence of any material misstatement or loss.

Whilst the Board has overall responsibility for the Group’s system of risk management and internal control, it has delegated the implementation of these internal control systems to the Management who regularly report to the Audit and Risk Management Committee (“ARMC”) on risks identified and action steps taken to mitigate and/or minimise the risks. These internal

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

control systems are subject to the Board’s regular review with a view towards appraising the adequacy, effectiveness and efficiency of these systems within the Group in accordance with the guidance set out in the “Statement on Risk Management and Internal Control: Guideline for Directors of Listed Companies”, which is issued by the Taskforce on Internal Control with the support and endorsement of Bursa Malaysia.

The Board has received assurance from the Group Chief Executive Officer (“GCEO”) and the Group Financial Controller that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control systems of the Group.

Taking into consideration the assurance from the Management Team and input from the relevant assurance providers, the Board is of the view that the risk management and internal control systems of the Group are satisfactory and adequate to safeguard shareholders’ investment and the assets of the Group. The Group will continue to take measures to strengthen the risk management and internal control environment of the Group.

Risk Management Framework

A company’s business strategies and activities involve risks. With the increasingly global and dynamic business environment, proactive management of the overall business risks is a prerequisite in ensuring that the organisation achieves its strategic objectives. Best practices require the company to have well-defined processes for the management of these risks.

The duty of the Board of Directors, amongst others, is to maintain a sound risk management framework and internal control system to safeguard shareholders’ investment and the assets of the Company and its group of companies (“the Group”).

SCOMI GROUP BHD ANNUAL REPORT 2013P/55STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

In addition to the prevailing laws, regulations and technical and societal standards, the Group’s vision states that it has a commitment to “provide value added service and total support to its Business Operating Units, Stakeholders and Partners”. This value coupled with individual leadership and accountability empowers all of the employees of the Group to be responsible and promote its Risk Management policy.

In line with these, the Company is committed in ensuring that it plans and executes its activities to ensure that the risks inherent in its business are identified and effectively managed. Risk management activities are to be regarded an integral part of the Group’s philosophy and business practices and not in isolation. The management of risks is aimed at achieving an appropriate balance between realising opportunities for gains while minimising losses to the Group.

Risk Management Process

Identification

Risk Reporting Structure

Infrastructure

Policy

TreatmentMonitoring

AcssessmentReporting

Area

CorporateBusiness UnitMarket UnitProductProject

Objective

StrategicOperationalReportingCompliance

The Group’s Enterprise Risk Management Framework (“Framework”) serves to inform and provide guidance to Directors, senior management, functional line management and staff in managing risk in the Group. Towards this end, the Framework sets out:

• the fundamentals and principles of risk and risk management that is to be applied in all situations and throughout all levels of the organisation;

• the process for identifying, assessing, responding, monitoring and reporting of risks and controls;

• the roles and responsibilities of each level of management in the Group; and

• the mechanisms, tools and techniques for managing risk in the Group.

These elements are summarised in the diagram below:

The Group’s Risk Management Policy is premised on the following key principles:

• effective risk management contributes to corporate governance and is integral to the achievement of the company’s overall business objectives;

• every employees of the organisation have the responsibility to manage risks within their areas of responsibility;• risk management should be embedded into the day-to-day management processes and is explicitly applied in decision-making

and strategic planning;• the risk management processes applied should aim to take advantage of opportunities, manage uncertainties and avoid or

minimise threats;• regular reporting and monitoring of activities emphasise the accountability for managing risks whereby they are assigned to the

relevant risk owner(s) and the execution of the action plan and progress is reflected in risk owner’s Balanced Scorecard; and• each Business Operating Units has its own Ad-hoc Risk Management Working Committee and Risk Management Working

Committee to review the effectiveness of risk management systems. The respective Enterprise Risk Management/Assurance Department will then update a quarterly risk report to the ARMC as well as to update any issues to the Board.

P/56 SCOMI GROUP BHD ANNUAL REPORT 2013STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

Board of Directors

Audit & RiskManagement

CommitteeInternal Audit

Business Units Corporate Functions

Enterprise AssuranceDepartment

Risk ManagementWorking Committee

Ad-hoc Risk ManagementWorking Committee


Identification

TreatmentMonitoring

AcssessmentReporting

The Enterprise Risk Management process comprises the following steps:• IDENTIFY risks• ASSESS the potential impact and likelihood of the risk occurring• TREAT risk by assigning relevant risk owner to consider existing controls and

selecting, prioritising and implementing appropriate actions in a given timeline• MONITOR the internal and external environment for potential changes to risks

and ensure that risk responses continue to operate effectively• REPORT on risks and the status of risk responses adopted


The objective of the risk management process is to ensure that risks are identified, analysed and responded to. The process includes the systematic application of management policies, procedures and practices to the activities of risk identification, assessment, treatment, monitoring and reporting as depicted by the diagram below:

The risk management process is an ongoing process and is applied at the beginning of any major new project, venture or change in operational environment. A quarterly review of risks is undertaken to ensure that the risk profile is kept up to date. The risk management process applies to all levels of activity in the Group, with the objective of establishing accountability for both risks and mitigation at the source of the risk.

The Group will only accept a commercial level of risk that will provide reasonable assurance on the long term profitability and survival of the Group. New risks shall be:

• immediately reported to the Head of Business Operating Unit, who shall make a decision on the appropriate risk treatment strategy;

• updated into the Entity Unit’s risk register or database; • reported to the respective Business Operating Unit’s

Enterprise Risk Management/ Assurance Department and subsequently Risk Management Working Committee, for monitoring of the risk; and

• monitored through the risk management process; and• notified to the ARMC and, if required, the Board.

Risk Reporting Structure

Every individual in the Group plays an integral role in the effective management of its risks. The risk management reporting structure adopted by the Group to assign responsibility for risk management and facilitate the process for assessing and communicating risk issues from transactional levels to the Board is summarised as follows:


The Framework implemented within the Group continues to define, highlight, report and manage the key business and operational risks faced by all Business Operating Units within the Group. Monitoring of the management action plans during the review period was performed by the Management and/or the external service provider for internal audit services (“the Internal Auditors”). The Management reported to the ARMC at quarterly basis on areas of high risks faced by the Group and the adequacy and effectiveness of the internal control systems adopted throughout the Group.

Further information on the Group’s risk management activities is highlighted in the ARMC Report on pages 60 to 63 of this Annual Report.

Internal Control System

The Group’s internal control environment comprises amongst others various policies, procedures and frameworks, included amongst which are:

Clear and Structured Organisational Reporting LinesThe Group has a well defined organisation structure that is aligned to its business requirements and also to ensure checks and balances exist through the segregation of duties.

Clear reporting lines and authority limits, driven by Delegated Authority Limits set by the Board, govern the Group’s decision making and approval process.

In addition, the Group employs the Balanced Scorecard framework that implements and measures the goals and targets for individual employees in alignment with the business objectives and strategies of the Group.

At the Board level, all strategic, business and investment plans are approved and monitored by the Board. The Board is supported by three (3) Board committees that provide focus and counsel in the areas of:

1. Audit and Risk Management;2. Employees’ Share Option Scheme; and3. Nomination and Remuneration of Directors.

Certain responsibilities are delegated to the Board Committees through clearly defined Terms of Reference which are reviewed from time to time.

Further details of the Board Committees are contained in the Statement on Corporate Governance on pages 43 to 53 of this Annual Report.

The Board has a Board Policy Manual which established a formal schedule of matters and outlines types of information required for the Board’s attention and deliberation at the Board meetings.

Comprehensive Board papers, which include financial and non-financial matters such as quarterly results, business strategies, explanation of Group and individual business divisions performances, key operational issues, corporate activities and exercises of the Group, etc are escalated to the Board for deliberation and approval.

Annual Budget and Strategic Business PlanAn annual business strategic plan and budget is reviewed, deliberated and approved by the Board. The Board is also responsible for monitoring the implementation of the strategic plan and performance of the Group.

On quarterly basis, the GCEO reviews the Group’s key performance metrics with the ARMC and the Board and highlights any concerns and issues, if any. The actual performance of the Group is assessed against the approved budget where explanations, clarifications and corrective action taken are reported by the Management for significant variances on quarterly basis to the ARMC and the Board.

The execution strategy towards achieving the corporate goal and targets in alignment with the business objectives and strategies of the Group is set out in the Balanced Scorecards of employees.

The GCEO reviews the progress of achievements in targeted key results areas or initiatives as set out in the Balanced Scorecards of his direct reports on a monthly basis, allowing for timely response and corrective action to be taken to catch up their targeted plan. Consequently, the Chief of Staff is tasked with consolidating the achievements of the GCEO’s direct reports and key performance data of the Group and continuously monitors on a monthly basis the progress of achievements in targeted key results areas or initiatives as set out in the Balanced Scorecards of the GCEO.

Delegated Authority Limits (“DAL”)The Board’s approving authority is delegated to the Management through a clearly and formally defined DAL which is the primary instrument that governs and manages the business decision making process in the Group. Whilst the objective of the DAL is to empower Management, the key principle adhered to in its formulation is to ensure that a system of internal control, and checks and balances are incorporated therein.

The DAL is implemented in accordance with the Group’s policies and procedures and in compliance with the applicable statutory and regulatory requirements. The DAL is continuously reviewed and updated to ensure its relevance to the Group’s operations.

Code of ConductThe Board and employees of the Group are committed to adhering to the best practice in corporate governance and

P/58 SCOMI GROUP BHD ANNUAL REPORT 2013STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

observing the highest standards of integrity and behaviour in all activities conducted by the Group, including the interaction with its customers, suppliers, shareholders, employees and business partners, and within the community and environment in which the Group operates.

The Board and employees of the Group play an important role in establishing, maintaining and enhancing the reputation, image and brand of the Group and ensuring the observance to and compliance with the standards of integrity and behaviour that the Group is committed to.

All employees of the Group of grades 15 and above are required to confirm their receipt and understanding of the Code of Conduct and further required to certify their continued compliance with the Code of Conduct on an annual basis.

The Group is also committed to ensuring that its supply chain adheres to the following:• that it operates within safe working conditions, • that its workers are treated with dignity and respect, and • that environmentally responsible manufacturing processes are implemented and adhered to.

In addition to these commitments, the Group requires its suppliers (“Suppliers”) to adhere, in all of their activities, to the laws, rules and regulations of the countries in which they operate.

In furtherance of these commitments and towards the advancement of social and environmental responsibility, the Group requires its Suppliers to implement the Suppliers Code of Conduct. The Suppliers Code of Conduct shall be read together with the contract/agreement between the Group and the Supplier. The Group expects the Supplier to abide by the Suppliers Code of Conduct when conducting business with or for the Group. It is the responsibility of every Supplier to comply with the principles of the Suppliers Code of Conduct, as amended from time to time.

The breach of the Suppliers Code of Conduct may lead to formal warnings, disclosure of nature of breach to all employees of the Group, removal from preferred vendor list and/or immediate termination as the Group’s Supplier subject to terms of contract/

agreement, depending on the severity of the situation.

Policies and ProceduresClear, formalised and documented internal policies and procedures are in place to ensure compliance with internal controls and relevant rules and regulations. Regular reviews are performed to ensure that the policies and procedures remain current and relevant.

Common Group policies are available on the Company’s intranet and/or website for easy access by the employees.

Standard Operating Procedures, Processes and SystemsThere are documented standard operating procedures and guidelines that have been adopted by the Management to regulate the Group’s functional processes.

The Group had successfully implemented SAP across 17 countries. The implementation of SAP marks a significant milestone in the roll-out of Project BEST which is a global initiative to establish best practice processes across key functions promoting greater visibility, transparency and efficiency across the Group.

Information and CommunicationFlowing from a clear organisational reporting structure, information is communicated and disseminated to all employees in all locations within the Group.

To ensure compliance to Chapter 14 of the MMLR, the Board and the Principal Officers of the Company are informed in advance before the commencement of each closed period, in which they are not allowed to deal in the listed securities of the Company as long as they are in possession of material and price-sensitive information relating to such listed securities in order to avoid any insider trading.

The Group also has in place a Whistleblower Framework and Policy, to provide an avenue for employees to raise genuine concerns internally or report any breach or suspected breach of any law or regulation, including the Group’s policies and


procedures, to the Disclosure Officer in a safe and confidential manner, ensuring employees can raise concerns without fear of reprisals.

Competency and Talent ManagementTo enhance the competencies of the Group’s talent pool and establish a culture of continuous learning, Global Learning and Development Sdn Bhd, a wholly owned subsidiary of the Company runs a series of training and development programmes based on the Learning and Development Framework (OPUS) that defines training based on technical and non-technical programmes. This ensures that employees are kept up-to-date with the required competencies to carry out their duties and responsibilities towards achieving the Group’s objectives. A key performance indicator on average learning hours per employee is in place to encourage employees’ learning, growth and knowledge-sharing.

The Group also conducted the staff performance appraisals semi-annually in order to enhance the level of staff competency in carrying out their duties and responsibilities towards achieving the Group’s objectives. Independent Assurance MechanismRegular assessments on the adequacy and integrity of the internal controls and monitoring of compliance with policies and procedures are carried out through internal audits. The Group has outsourced the activities and function of the internal audit to a professional service provider. The internal audit plan that sets out the internal audit coverage and scope of work is presented for ARMC and the Board’s consideration and approval annually.

Internal audit reports, which encompass the audit findings together with recommendations thereon, are presented to the ARMC during its quarterly meetings. Senior and functional line management are tasked to ensure management action plans are carried out effectively and regular follow-up audits are performed to monitor the continued compliance.

In addition to this internal mechanism, the Group also received extensive and detailed ARMC reports and the management letter from its External Auditors that primarily focuses on financial controls. The ARMC reports and the management

letter were also presented to the ARMC for deliberations. In the event of any non-compliance, appropriate corrective actions have been taken in addition to amendments to the relevant procedures, if required.

Quality, Health, Safety and Environment (“QHSE”)A clear, formalised and documented Global QHSE manual is in place to outline employees’ roles and responsibilities towards the prevention of accidents, the elimination of hazards and in ensuring a safe working environment. The Group adopts strict standards and controls to continuously improve the application and performance of the safety management systems as a safe working environment is fundamental to the Group’s success in business operations.

Review of this Statement

As required by Paragraph 15.23 of the MMLR, the External Auditors have reviewed this Statement on Risk Management and Internal Control. Their review was performed in accordance with Recommended Practice Guide (“RPG”) 5 issued by the Malaysian Institute of Accountants. Based on their review, the External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal control of the Group. RPG 5 does not require the External Auditors to and they did not consider whether this Statement covers all risks and controls, or to form an opinion on the effectiveness of the Group’s risk and control procedures.

Additionally, the Internal Auditors have also reviewed this Statement and reported to the ARMC that, save for its presentation to the ARMC of the individual lapses in internal controls during the course of its internal audit assignment for the financial period, it has not identified any other circumstances which suggest any fundamental deficiencies in the system of internal controls of the Group.



Terms of Reference of the ARMC

ObjectiveTo assist the Board to review the adequacy and integrity of the Group’s financial administration and reporting, internal control and risk management systems including the management information system and systems for compliance with applicable laws, regulations, rules, directives and guidelines.

Balance and Composition(a) The members of the ARMC shall be appointed by the

Board and shall comprise at least three (3) members, all of whom must be non-executive directors with a majority of them being independent directors.

(b) None of the members of the ARMC shall be an alternate director.

(c) A majority of the members of the Committee must be financially literate with sufficient financial experience and ability and at least one member of the ARMC must be an Accountant or such other qualifications as defined by the Bursa Malaysia Securities Berhad Main Market Listing Requirements.

(d) The Committee shall have a mixture of expertise and experience, including an understanding of the industries in which the Group operates in.

(e) Members of the ARMC shall elect a Chairman from among themselves who is an Independent Non-Executive Director.

AUDIT AND RISK MANAGEMENT COMMITTEE REPORT

(f ) Members of the Committee may relinquish their membership in the Committee with prior written notice to the Company Secretary.

(g) In the event of any vacancies arising in the Committee resulting in the number of members of the Committee falling below three (3), the vacancy should be filled within three (3) months of it arising.

(h) Appointment of each Committee member shall be for a period of up to three (3) years. The Committee Chairman shall not serve consecutive terms in that capacity, although he may remain a member of the Committee and may serve as Committee Chairman again in a future term.

Powers of the ARMC(a) In carrying out its duties and responsibilities, the ARMC

shall, at the expense of the Company: • have the authority to investigate any matter within its

terms of reference; • have full, free and unrestricted access to the

Company’s and Group’s records, properties, personnel and other resources;

• have direct communication channels with the external auditors and person(s) carrying out the internal audit function;

• be able to obtain independent professional or other advice in furtherance of their duties; and

• be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of the other directors and employees, whenever deemed necessary.

The Board of Directors of Scomi Group Bhd (“the Company” or “SGB”) (“the Board”) is pleased to present the Report of the Audit and Risk Management Committee (“ARMC” or “the Committee”) for the financial period ended 31 March 2013.

SCOMI GROUP BHD ANNUAL REPORT 2013P/61AUDIT AND RISK MANAGEMENT COMMITTEE REPORT

(b) The ARMC is not authorized to implement its recommendations on behalf of the Board but shall report its recommendation back to the Board for its consideration and implementation.

(c) Where the ARMC is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the ARMC is authorized to promptly report such matters to Bursa Malaysia Securities Berhad.

Duties and Responsibilities of the ARMC(a) To consider the appointment of the external auditor, the

audit fee and any questions of resignation or dismissal;

(b) To pre-approve all non-audit services to be provided by the independent auditors to the Company in accordance with the Committee’s policies and procedures, and regularly review:

(i) the adequacy of the Committee’s policies and procedures for pre-approving the use of the independent auditors for non-audit services with a view to auditor independence;

(ii) the non-audit services pre-approved in accordance with the Committee’s policies and procedures; and

(iii) fees paid to the independent auditors for pre-approved non-audit services;

(c) To monitor regular rotation of audit partners by the independent auditors;

(d) T o discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved;

(e) To act as an intermediary between the management or other employees, and the external auditors;

(f ) To review the quarterly and year-end financial statements, focusing particularly on:

• any changes in accounting policies and practices; • significant adjustments arising from the audit; • litigation that could affect results materially; • the going concern assumption; and • compliance with accounting standards and other legal

requirements;

(g) To discuss problems and reservations arising from the interim and final audits, and any matter the Auditor may wish to discuss (in the absence of Management where necessary);

(h) To review the External Auditor’s Management letter and Management’s response;

(i) In relation to the internal audit function: • review the adequacy of the scope, functions,

competency and resources of the internal audit function, and that it has the necessary authority to carry out its work;

• review the internal audit plan and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendation of the internal audit function;

• review the independence of the internal audit function; • approve the appointment or termination of

employment of the head of the internal audit function and to review his/her performance appraisal or assessment; and

• receive reports from management on resignations of other internal audit staff members, their reasons for resigning and to review the performance appraisal or assessment of the other internal audit staff conducted by management;

(j) To consider and report back to the Board any related party transactions and conflict of interest situation that may arise within the company or group including any course of conduct that raises questions of management integrity;

(k) To consider the major findings of internal investigations and management’s response;

(l) To consider other topics as defined by the Board;

(m) To review and verify that the allocation of options pursuant to the Company’s share scheme for employees (“ESOS”) complies with the criteria disclosed to the employees;

(n) To review and consider the appropriateness and adequacy of internal processes for risk oversight and management. In particular, the Committee shall:

• consider whether the Group has effective management systems in place to identify, assess, monitor and manage its key risk areas;

• review, approve and ensure adherence to the Group’s risk management policy and strategies;

• establish the roles and respective accountabilities of the Board, the Committee and Management in managing risks;

• provide for regular review of the effectiveness of the Group’s implementation of its risk management system;

• receive regular reports on the risk profile of the Group, describing material risks (both financial and non-financial) facing the Group and action plans taken by management to mitigate the risks; and

• review the appropriateness of management’s response to key risk areas;

(o) In relation to major business investment proposals: • to review and evaluate the risk associated with

any proposal prepared by the project sponsor(s);

P/62 SCOMI GROUP BHD ANNUAL REPORT 2013AUDIT AND RISK MANAGEMENT COMMITTEE REPORT

particularly that all risks have been considered and are within the Group’s strategic goals and that action plans or strategies to mitigate identified risks are adequate;

• to conduct meetings with the project sponsor(s) and Chief Executive Officer (“CEO”), if necessary, to discuss risk matters related to the proposal; and

• to make a recommendation to the Board on the appropriate course of action to take;

(p) To oversee the Group’s internal compliance and control systems established by management, including reviewing the effectiveness of these systems and approving management’s programmes and policies to ensure effectiveness.

Meetings and Minutes(a) The ARMC shall meet at least four (4) times during a

financial year. In order to form a quorum, the majority of members present must be independent directors.

(b) The CEO, the Head of the Group Internal Audit Department and a representative of the external auditors shall normally attend meetings. Other persons may attend meetings only upon the invitation of the ARMC. However, at least twice a year the Committee shall meet with the external auditors without executive board members or management present.

(c) The Company Secretary shall act as secretary of the ARMC

and shall be responsible, with the concurrence of the Chairman of the ARMC, for drawing up and circulating the agenda and notice of meetings together with supporting explanatory documentation to all ARMC members at least five (5) days prior to each meeting. If there is a unanimous consent by the members of the Committee present in the meeting, a short notice shall suffice.

(d) The Secretary of the ARMC shall record all proceedings and minutes are to be prepared and circulated to the ARMC members and the Board of Directors. In addition, the Chairman of the ARMC will report significant matters and resolutions, at each Board meeting.

Membership and MeetingsDuring the period under review, the ARMC comprises four (4) members, all of whom are Independent Non-Executive Directors. The composition of the ARMC complies with paragraph 15.09 of the Bursa Malaysia Securities Berhad Main Market Listing Requirements.

A total of eight (8) ARMC meetings were held during the period under review, which were on 21 February 2012, 28 February 2012, 26 April 2012, 24 May 2012, 28 August 2012, 22 November 2012, 28 February 2013 and 21 March 2013. A quorum, established by the presence of the majority of members who are Independent Directors, was always met.

The members of the ARMC and their attendance are as follows:

Name ARMC Designation Attendance (attended/held)

Dato’ Abdul Rahim bin Abu Bakar Chairman Independent Non-Executive Director 8/8

Tan Sri Nik Mohamed bin Nik Yaacob Member Independent Non-Executive Director 6/8 Datuk Haron bin Siraj Member Independent Non-Executive Director 8/8

Dato’ Mohammed Azlan bin Hashim Member Independent Non-Executive Director 8/8

Summary of Activities for the Financial PeriodIn accordance with the approved Terms of Reference of the ARMC, the ARMC carried out the following activities during the financial period ended 31 March 2013:

1 reviewed the quarterly and annual financial reports of the Group and the Company prior to submission to the Board for consideration and approval;

2 reviewed the financial performance of contributing subsidiaries and associated companies;

3 reviewed and recommended to the Board the re-appointment of the external auditors and the audit fee;

4 reviewed and discussed with the external auditor the nature and scope of their audit and ensure that the audit is comprehensive;

5 reviewed the external auditor’s ARMC report, Management letter and management’s response thereto;

6 reviewed the performance and effectiveness of the external auditor for the statutory audit services;

7 considered the major findings by the external auditors and management’s responses thereto;

8 conducted meetings with the external auditors without the presence of the executive board members and management;

SCOMI GROUP BHD ANNUAL REPORT 2013P/63AUDIT AND RISK MANAGEMENT COMMITTEE REPORT

9 reviewed the internal audit plan and scope of work for the year for the Group and the Company, prepared by the external service provider for internal audit services;

10 reviewed the internal audit reports which incorporated audit findings, recommendations and management responses for the Group and the Company by the external service provider for internal audit services;

11 reviewed the performance of the external service provider for internal audit services;

12 reviewed and recommended to the Board the appointment of the external service provider for internal audit services and the audit fee;

13 reviewed the related party transactions to be entered into by the Group with related parties and provide recommendations on the same to the Board;

14 reviewed the related party transactions and conflicts of interest entered into by the Group with related parties on a quarterly basis;

15 reviewed and verified that the allocation of options pursuant to the Company’s ESOS is in compliance with the criteria for allocation of options as disclosed to employees of the Company for the financial period;

16 reviewed the Group’s systems and practices for the identification and management of risks;

17 reviewed the Group and each business divisions’ risk profiles and actions plan taken by the Management to control and mitigate the risks;

18 reviewed and evaluated risk considerations in relation to major business investment and/or divestment proposals, corporate exercises and adequacy of action plans taken by the Management to mitigate risks identified;

19 reviewed the annual Statements on Corporate Governance, Internal Control and ARMC report to be published in the Annual Report; and

20 tabled the minutes of the ARMC meetings to the Board on a quarterly basis.

Internal Audit FunctionThe internal audit function of the Group is outsourced to an external service provider of internal audit services, which is independent of management and operations (“the Internal Auditors”). The Internal Auditors provide independent and objective assessments on the adequacy and effectiveness of the risk management, internal control and governance processes/framework of the Group. Through the internal audit function, the Company undertakes regular and systematic reviews of the risk management and internal control system so

as to provide reasonable assurance that such system continues to operate satisfactorily and effectively in the Group.

The Internal Auditors report directly to the ARMC who reviews the internal audit plans and scope of work for the year for the Group and the Company as well as the performance of the Internal Auditors in undertaking their internal audit function.

During the financial period under review, the Internal Auditors conducted various internal audit engagements in accordance with the approved risk-based internal audit plans that are consistent with the corporate goal of the Group. Details of the internal audit activities carried out by the Internal Auditors are as follow:

1 prepared and presented a risk-based audit plan, audit strategy, scope of work and resource requirements to the ARMC and the Board for deliberation and approval;

2 evaluated and appraised the soundness, adequacy and application of accounting, financial and other controls and promoting effective controls in the Group and the Company at reasonable cost;

3 carried out investigation and special review requested by management;

4 ascertained the level of operational and business compliance with established policies, procedures and statutory requirements;

5 ascertained the extent to which the Group’s and the Company’s assets are accounted for, verification of their existence and safeguarding assets from losses;

6 appraised the reliability and usefulness of information developed within the Group and the Company for management;

7 identified and recommended opportunities for improvements to the existing system of internal control, operations and processes in the Group and the Company; and

8 reviewed the annual Statement on Internal Control and ARMC report to be published in the Annual Report.

All internal audit activities for the financial period ended 31 March 2013 were conducted by the Internal Auditors. The total costs incurred by the Group for the internal audit function for the financial period ended 31 March 2013 was approximately RM682,698.


P/64 SCOMI GROUP BHD ANNUAL REPORT 2013ADDITIONAL INFORMATION

1 Material Contracts of the Company and its Subsidiaries, involving Directors’ and Major Shareholders’ Interests

There are no material contracts involving Directors’ and Major Shareholders’ Interest, either still subsisting at the end of the financial period or, entered into since the end of the previous financial period.

2 Status of Utilisation of Proceeds Raised from Corporate Exercises

(a) As disclosed in Note 42(b) to the financial statements, the Group completed the disposal of its 100% equity interest in Scomi Nigeria Pte Ltd (“SNPL”) and 2% equity interest in Oiltools Africa Limited for a total cash consideration of RM122.9 million on 17 October 2012.

The disposal proceeds were utilised as follows:

Additional Information

RM ‘million

Repayment of borrowings 86.1 Acquisition of remaining 49.9% interest in Titan Tubular Nigeria Limited held by minority shareholders 10.8 Incidental expense related to the disposal 6.0 102.9 Working capital for the Group^ 20.0 122.9

^ includes RM9.2 million which is held in escrow as retention sum

(b) As disclosed in Note 42(a)(iii), the Group completed the disposal of its Drilling Waste Management Business held through Augean North Sea Services Ltd for a cash consideration of RM 10.3 million on 3 September 2012. The proceeds were utilised as working capital for the Group.

(c) As disclosed in Note 44(k), the Company completed the issuance of 119,109,500 ordinary shares of RM0.10 each pursuant to the private placement exercise to IJM Corporation Berhad at an issue price of RM0.33 per share on 3 October 2013.

The private placement proceeds were utilised as follows: RM ‘million Repayment of borrowings 38.9 Incidental expense related to the private placement 0.4 39.3

(d) As disclosed in Note 37, the company completed the issuance of 110.0 million zero coupon Convertible Redeemable Secured Bonds (“Convertible Bond”) at its nominal value of RM1.00 each to IJM Corporation Berhad on 8 February 2013.

SCOMI GROUP BHD ANNUAL REPORT 2013P/65ADDITIONAL INFORMATION

The Convertible Bond proceeds were utilised as follows: RM ‘million

Repayment of borrowings 57.0 Incidental expenses related to the Convertible Bond 3.5

60.5 Working capital for the Group 49.5

110.0

3 Non-Audit Fees Fees incurred in respect of non-audit services rendered by PricewaterhouseCoopers (PWC) during the Financial Period under

review ended 31 March 2013 amounted to RM2.3 million.

4 Share Buy-back

There was no share buy-back during the Financial Period under review ended 31 March 2013. As disclosed in Note [34(b)], all shares bought back previously have been maintained as Treasury shares and there has not been any resale of the Company’s Treasury shares.

Details of the Treasury shares are as tabulated below.

No. of Average shares Lowest Highest purchase Total bought purchase purchase price of purchase back price price shares price RM RM RM RM

Balance as at 1 Jan 2012 / 31 Mar 2013 14,427,200 0.406 1.479 1.296 18,695,745.96

The purchase price tabulated above includes incidental costs and is the average price for all the shares purchased in a calendar month.

5 Options, Warrants and Convertible Securities

During the financial period, 376,852,207 new ordinary shares of RM0.10 each were issued by the Company by way of:

(i) issuance of 218,769,875 new ordinary shares of RM0.10 each pursuant to the conversion of Irredeemable Convertible Secured Loan Stocks;

(ii) i ssuance of 3,404,500 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the Company’s Employees’ Share Options Scheme (“ESOS”) at an option price of 0.17 per share;

(iii) i ssuance of 15,500,000 new ordinary shares of RM0.10 each pursuant to the exercise of options under the Company’s ESOS at an option price of 0.24 per share;


5 Options, Warrants and Convertible Securities (continued)

(iv) issuance of 20,068,332 new ordinary shares of RM0.10 each pursuant to the exercise of warrants at RM 0.40 per share; and,

(v) issuance of 119,109,500 new ordinary shares of RM0.10 each pursuant to the private placement of shares to IJM Corporation Berhad at an issue price of RM0.33 per share.

For the financial period ended 31 March 2013, the actual percentage of ESOS Options granted to Directors and Senior Management is 4% and the actual percentage of ESOS Options granted to the Directors and Senior Managements is 35% since commencement of ESOS.

6 Director’s Conflict of Interest

Save as disclosed below and the disclosures in the Notes to the Financial Statements, the Directors do not have any existing conflicts of interest or any personal interest in any business arrangement involving Scomi Group Bhd (“SGB” or “the Company”):

In each of the transactions listed above, the relevant Director concerned had declared the nature of his conflict of interest and had abstained from deliberating and voting on the relevant resolutions of the Board of Directors of the Company.

Director

Tan Sri Nik Mohamed Bin Nik Yaacob

Tan Sri Mohamed Azman Bin Yahya

Dato’ SreesanthanA/L Eliathamby

Shah Hakim @ Shahzanim Bin Zain

Transaction

Tenancy Agreement between the Company and Scomi Oiltools Sdn Bhd, an indirect wholly owned subsidiary of SES, for rental of office space at Global Research and Technology Center.

Provisions of share registrar services and human resources services to the Company and its group of companies by Symphony Share Registrars Sdn Bhd, Symphony Corporatehouse Sdn Bhd and Symphony BPO Solutions Sdn Bhd respectively.

Provision of legal advisory services by Kadir Andri & Partners to the Company and its group of companies.

Provision of airline ticketing reservation and ticket purchasing services by LTS to the Company and its group of companies.

Leasing Agreement with Orix Rentec (Malaysia) Sdn Bhd for the leasing of personal computers, which are supplied to them by a related party, Suria Business Solutions Sdn Bhd.

Nature of existing conflict of interest

Tan Sri Nik Mohamed Bin Nik Yaacob is an Independent Non-Executive Director of the Company; and the Chairman and Independent Non-Executive Director of Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd), a 65.65% owned subsidiary of the Company (“SES”).

Tan Sri Mohamed Azman Bin Yahya is a Non-Independent Non-Executive Director of the Company; and the Group Chief Executive, Director and Major Shareholder of Symphony House Berhad, the holding company of Symphony Share Registrars Sdn Bhd, Symphony Corporatehouse Sdn Bhd and Symphony BPO Solutions Sdn Bhd.

Dato’ Sreesanthan A/L Eliathamby is an Independent Non-Executive Director of the Company; and an Advocate & Solicitor and a Partner of Kadir Andri & Partners.

Mazlina Binti Zain, a person connected to Shah Hakim @ Shahzanim Bin Zain, is the owner of Lintas Travel Services (M) Sdn Bhd (“LTS”).

Shah Hakim @ Shahzanim Bin Zain is the Chief Executive Officer/Non-Independent Executive Director of the Company; and a substantial shareholder of Suria Business Solutions Sdn Bhd.

ADDITIONAL INFORMATION

SCOMI GROUP BHD ANNUAL REPORT 2013P/67STATEMENT OF DIRECTORS’ RESPONSIBILITY

The Directors are responsible to ensure that the financial statements give a true and fair view of the state of affairs of the Group and the Company at the end of the financial period and of the results and cash flows of the Group and the Company for the Financial Period.

In preparing the financial statements, the Directors have:• adopted appropriate accounting policies and applied them

consistently;• made judgments and estimates that are reasonable and

prudent; and• prepared the financial statements on an ongoing concern basis.

The Directors are responsible to ensure that the Group and

The Directors are required by the Companies Act, 1965 (“the Act”) to prepare the financial statements of Scomi Group Bhd (“the Company”) and its subsidiaries (“the Group”) for each financial year which have been made out in accordance with the applicable Malaysian Financial Reporting Standards, the International Financial Reporting Standards, the provisions of the Act and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

the Company keep accounting records which disclose with reasonable accuracy the financial position of the Group and the Company which enable them to ensure that the financial statements comply with the Act.

The Directors are also responsible for taking such steps as are reasonably open to them to preserve the interests of stakeholders and to safeguard the assets of the Group and to detect and prevent fraud and other irregularities.

The financial statements of the Company and the Group for the financial period ended 31 March 2013 are set out on pages 70 to 206 of this Annual Report.

Transforming a simple element into

a symbol of precision.

A NAUTILUS SHELL



FINANCIAL STATEMENTS

Directors’ Report P71

Statements of Comprehensive Income P79 Statements of Financial Position P80 Consolidated Statement of Changes in Equity P82

Company Statement of Changes in Equity P85

Statements of Cash Flows P87 Notes to the Financial Statements P90 Supplementary Information P202

Statement by Directors P203

Statutory Declaration P204

Independent Auditors’ Report P205

The Directors hereby submit their report with the audited financial statements of the Group and Company for the 15 month financial period ended 31 March 2013.

Principal Activities

The principal activity of the Company is investment holding.The principal activities of the Group consist of the provision of drilling fluids solutions and related engineering services, drilling waste management equipment and services and an extensive range of production chemicals to the oil and gas industry; marine transportations, other shipping related services; provision of a range of transport solutions encompassing the design and manufacture of urban rail systems such as monorail and mass rapid transit vehicles, and commercial vehicles such as coaches and special purpose vehicles; and provision of vessels to the oil and gas industry to support offshore services.

There were no significant changes in the nature of these activities except for the internal restructuring undertaken during the financial period as disclosed in Note 42, Note 44 and Note 45.

Financial Results Group Company RM’000 RM’000

(Loss)/Profit for the financial period (69,449) 386,004

Attributable to: Owners of the Company (66,833) 386,004 Non-controlling interests (2,616) –

DividendsNo dividend has been paid or proposed by the Company since the end of the Company’s previous financial year.

The Directors do not recommend any dividend for the financial period ended 31 March 2013.

Reserves and ProvisionsMaterial transfers to or from reserves or provisions during the financial period are as disclosed in Note 36 to the financial statements.

Change of Financial Year EndOn 14 December 2012, the Board of Directors of the Company had approved the change of financial year of the Company from 31 December to 31 March.

Consequently, the comparatives for the statement of comprehensive income, changes in equity and cash flows as well as certain comparatives in the notes to the financial statements of the Group and the Company for the period of 15 months from 1 January 2012 to 31 March 2013, are not comparable to those of the previous 12 months ended 31 December 2011. The next financial statements will be for a period of 12 months commencing from 1 April 2013.

Directors’ Report

SCOMI GROUP BHD ANNUAL REPORT 2013P/71DIRECTORS’ REPORT

P/72 SCOMI GROUP BHD ANNUAL REPORT 2013DIRECTORS’ REPORT

Director’s Report (continued)

Issue of SharesDuring the financial period, 376,852,207 new ordinary shares of RM0.10 each were issued by the Company by way of:

(a) issuance of 218,769,875 new ordinary shares of RM0.10 each pursuant to the conversion of Irredeemable Convertible Secured Loan Stocks (“ICSLS”);

(b) issuance of 3,240,500 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the Company’s Employees’ Share Options Scheme (“ESOS”) at an option price of RM0.17 per share;

(c) issuance of 15,664,000 new ordinary shares of RM0.10 each pursuant to the exercise of options under the Company’s ESOS at an option price of RM0.24 per share;

(d) issuance of 20,068,332 new ordinary shares of RM0.10 each pursuant to the exercise of 20,068,332 warrants at an exercise price of RM0.40 per share; and

(e) issuance of 119,109,500 new ordinary shares of RM0.10 each pursuant to the private placement of shares to IJM Corporation Berhad (“IJM’) at an issue price of RM0.33 per share.

The newly issued shares ranked pari passu in all respects with the existing ordinary shares of the Company.

Details of movements in share capital are disclosed in Note 34(a) to the financial statements.

Treasury SharesThere was no purchase of Treasury shares during the financial period.

Details of the Treasury shares are set out in Note 34(b) to the financial statements.

Employees’ Share Option SchemeThe Company implemented the ESOS on 28 April 2003 for a period of 10 years. The ESOS is governed by the By-Laws which were approved by the shareholders on 28 March 2003. The ESOS expired on 27 April 2013.

Details of the ESOS are set out in Note 34(c) to the financial statements.

The Company has been granted exemption by the Companies Commission of Malaysia from having to disclose in this report, the names of options holders who were granted less than 2,000,000 options under the ESOS during the financial period. This information has been separately filed with the Companies Commission of Malaysia.

The option holders who have been granted ESOS during the financial period is as follows:

Exercise price Name of option holders Granted RM/share

Stephen Fredrick Bracker 2,000,000 0.36 Mohamed Suhaimi bin Yaacob 2,000,000 0.36 Michael Kent Walker 2,000,000 0.36

Significant Events During the financial periodSignificant events during the financial period are disclosed in Note 44 to the financial statements.

Significant Events Subsequent to the Date of the Statement of Financial PositionSignificant events subsequent to the date of the statement of financial position are disclosed in Note 46 to the financial statements.

DirectorsThe Directors who have held office during the period since the date of the last report are as follows:

Tan Sri Asmat bin KamaludinTan Sri Nik Mohamed bin Nik YaacobTan Sri Mohamed Azman bin YahyaDatuk Haron bin SirajDato’ Mohammed Azlan bin HashimDato’ Abdul Rahim bin Abu Bakar Dato’ Sreesanthan a/l EliathambyDato’ Teh Kean Ming (appointed on 22 October 2012)Foong Choong HongShah Hakim @ Shahzanim bin ZainLee Chun Fai (Alternate Director to Dato’ Teh Kean Ming) (appointed on 22 May 2013)

Directors’ InterestsAccording to the Register of Directors’ Shareholdings, particulars of interests of Directors who held office at the end of the financial period in shares, options over shares, ICSLS, Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) and warrants in the Company and its subsidiaries were as follow:

Number of ordinary shares of RM0.10 each in the Company At Converted/ At 1.1.2012 Bought Sold 31.3.2013 ‘000 ‘000 ‘000 ‘000

Direct interest in the Company Tan Sri Asmat bin Kamaludin 1265 129 – 2394 Datuk Haron bin Siraj 120 – – 120 Foong Choong Hong 410 – – 410 Shah Hakim @ Shahzanim bin Zain 62,779 6,036 – 138,815

Indirect interest in the Company Tan Sri Mohamed Azman bin Yahya 310,000 3,750 – 413,750 Shah Hakim @ Shahzanim bin Zain 5172,275 – – 5172,275

SCOMI GROUP BHD ANNUAL REPORT 2013P/73DIRECTORS’ REPORT



Directors’ Interests (continued)

Number of ordinary shares of RM1.00 each in subsidiaries At At 1.1.2012 Bought Sold 31.3.2013 ‘000 ‘000 ‘000 ‘000

Direct interest in Scomi Engineering Bhd Dato’ Abdul Rahim bin Abu Bakar 220 – – 220 Shah Hakim @ Shahzanim bin Zain 14623 – – 15623

Direct interest in Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) Tan Sri Asmat bin Kamaludin 750 – – 750 Shah Hakim @ Shahzanim bin Zain – 2,108 – 162,108

Number of ordinary shares of RM1.00 each in subsidiaries At At 1.1.2012 Bought Sold 31.3.2013 ‘000 ‘000 ‘000 ‘000

Indirect interest in Scomi Engineering Bhd Tan Sri Asmat bin Kamaludin 1712 – – 1712 Shah Hakim @ Shahzanim bin Zain 8192,568 – – 9 –

Indirect interest in Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) Tan Sri Asmat bin Kamaludin 1010 – – 1010 Shah Hakim @ Shahzanim bin Zain 11313,393 – – 9–

*Number of options over ordinary shares of RM0.10 each in the Company Exercise At At price 1.1.2012 Forfeited Exercised 31.3.2013 RM/share ‘000 ‘000 ‘000 ‘000

Direct interest in the Company Tan Sri Asmat bin Kamaludin 1.24 700 – – 700 Tan Sri Nik Mohamed bin Nik Yaacob 1.34 600 – – 600 Datuk Haron bin Siraj 1.24 600 – – 600 Datuk Mohamed Azman bin Yahya 1.24 600 – – 600 Dato’ Mohammed Azlan bin Hashim 1.34 600 – – 600 Dato’ Sreesanthan a/l Eliathamby 1.21 420 – – 420 Foong Choong Hong 1.24 350 – – 350 Shah Hakim @ Shahzanim bin Zain 0.17 1,357 – (1,357) – 1.12 6,000 – – 6,000

* The options held over ordinary shares in Scomi Group Bhd were granted pursuant to Scomi Group Bhd’s Employees’ Share Option Scheme, which was implemented on 28 April 2003 and expired on 27 April 2013.


~Number of options over ordinary shares of RM1.00 each in a subsidiary

Exercise At At price 1.1.2012 Forfeited Exercised 31.3.2013 RM/share ‘000 ‘000 ‘000 ‘000

Direct interest in Scomi Engineering Bhd Shah Hakim @ Shahzanim bin Zain 1.00 1,500 – – 1,500 Dato’ Abdul Rahim bin Abu Bakar 1.00 300 – – 300

~ The options held over ordinary shares in Scomi Engineering Bhd were granted pursuant to Scomi Engineering Bhd’s Employees’ Share Option Scheme, which was implemented on 26 January 2006.

^Number of options over ordinary shares of RM1.00 each in a subsidiary Exercise At At price 1.1.2012 Terminated Exercised 31.3.2013 RM/share ‘000 ‘000 ‘000 ‘000

Direct interest in Scomi Energy Services Bhd Shah Hakim @ Shahzanim bin Zain 1.15 600 (600) – –

^ The options held over ordinary shares in Scomi Energy Services Bhd were granted pursuant to Scomi Energy Services Bhd’s Employees’ Share Option Scheme, which was implemented on 26 January 2006. The share option was terminated on 26 June 2012.

ICSLS in the Company At Converted/ At 1.1.2012 Bought Sold 31.3.2013 ‘000 ‘000 ‘000 ‘000

Direct interest in the Company Tan Sri Asmat bin Kamaludin1 12398 – (398) –

Indirect interest in the Company Tan Sri Mohamed Azman bin Yahya 315,000 – (15,000) –

Warrants in the Company At Exercised/ At 1.1.2012 Bought Sold Expired 31.3.2013 ‘000 ‘000 ‘000 ‘000 ‘000 Direct Interest in the Company Tan Sri Asmat bin Kamaludin 1853 – (30) (23) –

Indirect interest in the Company Tan Sri Mohamed Azman bin Yahya 32,000 – – (2,000) – Shah Hakim @ Shahzanim bin Zain – 61,995 – (61,995) –

DIRECTORS’ REPORT



Directors’ Interests (continued)

ICULS in a subsidiary At Converted/ At 1.1.2012 Bought Sold 31.3.2013 ‘000 ‘000 ‘000 ‘000

Indirect interest in Scomi Engineering Bhd Shah Hakim @ Shahzanim bin Zain 854,782 – – 9–

1 Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through Tan Sri Asmat bin Kamaludin’s direct interest in Bi-Bot Holdings Sdn Bhd, whereby 215,000 shares are held through CIMSEC Nominees (Tempatan) Sdn Bhd Exempt An for CIMB trustee Berhad.

2 Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through Tan Sri Asmat bin Kamaludin’s direct interest in Bi-Bot Holdings Sdn Bhd, whereby 325,625 ordinary shares are held through CIMSEC Nominees (Tempatan) Sdn Bhd Exempt An for CIMB Trustee Berhad.

3 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Tan Sri Mohamed Azman bin Yahya and his spouse’s direct shareholdings in Gajahrimau Capital Sdn Bhd, whereby all 10,000,000 shares, 15,000,000 ICSLS and 2,000,000 warrants, are held through ABB Nominees (Tempatan) Sdn Bhd.

4 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Tan Sri Mohamed Azman bin Yahya and his spouse’s direct shareholdings in Gajahrimau Capital Sdn Bhd, whereby all the 13,750,000 shares are held through ABB Nominee (Tempatan) Sdn Bhd.

5 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Shah Hakim @ Shahzanim bin Zain’s shareholding in Kaspadu Sdn Bhd.

6 2,250,000 shares held through BHLB Trustee Berhad (PCM for Shah Hakim @ Shahzanim bin Zain).

7 Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through Tan Sri Asmat bin Kamaludin’s interest in Bi-Bot Holdings Sdn Bhd, whereby all the ordinary shares are held through CIMSEC Nominees (Tempatan) Sdn Bhd.

8 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Shah Hakim @ Shahzanim bin Zain’s shareholding in Kaspadu Sdn. Bhd., which holds an interest in the Company, which in turn is a substantial shareholder of Scomi Engineering Bhd.

9 Ceased to be deemed interested pursuant to Section 6A(4) of the Companies Act, 1965.

10 Deemed interested by virtue of Section 134(12)(c) of the Companies Act,1965 through the shareholding in the Company of his spouse, Puan Sri Habibah bin Mohd Salleh.

11 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn. Bhd., which in turn is deemed interested in SES.

12 Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through Tan Sri Asmat bin Kamaludin’s interest in


Bi-bot Holdings Sdn Bhd, whereby 322,500 ICSLS are held through CIMSEC Nominees (Tempatan) Sdn Bhd Exempt An for CIMB Trustee Berhad.

13 8,286,000 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin) and Maybank Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim

@ Shahzanim Bin Zain.

14 123,000 shares held through BHLB Trustee Berhad (PCM for Shah Hakim @ Shahzanim Bin Zain).

15 123,000 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin).

16 Held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shazanim Bin Zain (Margin).

17 Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through Tan Sri Asmat bin Kamaludin’s children’s direct share holding in Scomi Engineering Berhad.

18 Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through Tan Sri Asmat bin Kamaludin’s interest in Bi-bot Holdings Sdn Bhd, whereby 43,000 Warrants are held through CIMSEC Nominees (Tempatan) Sdn Bhd Exempt An for CIMB Trustee Berhad.

Other than as disclosed above, according to the Register of Directors’ Shareholdings, the Directors in office at the end of the financial period did not hold any interest in the shares, options over shares, ICSLS and warrants in the Company or shares, options over shares, ICULS and debentures of its related corporations during the financial period.

Directors’ Benefits

During and at the end of the financial period no arrangements subsisted to which the Company is a party, 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, except for options over shares granted by the Company and subsidiaries, Scomi Engineering Bhd and Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) to eligible employees including certain Directors of the Company pursuant to the Company’s and Scomi Engineering Bhd’s and Scomi Energy Services Bhd’s respective Employees’ Share Option Schemes, ICSLS and warrants granted by the Company and ICULS granted by a subsidiary, Scomi Engineering Bhd. The options over shares granted by Scomi Energy Services Bhd were early terminated on 26 June 2012.

Since the end of the previous financial period, no Director has received or become entitled to receive a benefit (other than Directors’ remuneration as disclosed in Note 9 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 as disclosed in Note 41 to the financial statements.

Statutory Information on the Financial Statements

Before the financial statements 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

DIRECTORS’ REPORT

P/78 SCOMI GROUP BHD ANNUAL REPORT 2013P/78 DIRECTORS’ REPORT


Statutory Information on the Financial Statements (continued)

(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 period which, in the opinion of the Directors, will or may affect the ability of the Group or Company to meet their obligations when they fall due.

In the opinion of the Directors:(a) other than as disclosed in Note 42 and 44, the results of the operations of the Group and Company during the financial period

were not substantially affected by any item, transaction or event of a material and unusual nature; and

(b) other than as disclosed in Note 46, there has not arisen in the interval between the end of the financial period and the date of this report any item, transaction or event of a material and unusual nature which is likely to affect substantially the results of the operations of the Group or Company for the financial period in which this report is made.

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

Signed on behalf of the Board of Directors in accordance with their resolution dated 31 July 2013.

Tan Sri Asmat Bin Kamaludin Shah Hakim @ Shahzanim Bin ZainChairman Group Chief Executive Officer


Group Company Period Year Period Year ended ended ended ended Note 31.3.2013 31.12.2011 31.3.2013 31.12.2011 RM’000 RM’000 RM’000 RM’000 (restated)

Continuing operations Revenue 5 1,922,368 1,402,566 – 4,167 Cost of sales/services (1,515,797) (1,224,721) – –

Gross profit 406,571 177,845 – 4,167 Other operating income 43,518 23,683 571,245 9,443 Administrative expenses (59,208) (59,483) (14,449) (12,575) Selling and distribution expenses (79,484) (43,200) – – Other operating expenses (167,323) (218,472) (156,679) (152,400) Finance costs 7 (129,678) (48,856) (16,349) (16,696) Share of results of associates 133 (2,978) – – Share of results of joint ventures 6,568 3,754 – –

Profit/(loss) before taxation 6 21,097 (167,707) 383,768 (168,061) Taxation 8 (27,557) (19,298) 2,236 (666)

(Loss)/profit from continuing operations (6,460) (187,005) 386,004 (168,727) Discontinued operations Loss from discontinued operations, net of tax 25(a) (62,989) (170,156) – –

(Loss)/profit for the period/ year (69,449) (357,161) 386,004 (168,727) Other comprehensive (loss)/income: Currency translation differences (6,375) 3,310 – – Available-for-sale financial assets – 2,403 – – Cash flow hedges (10,532) 13,820 – – Other comprehensive (loss)/income for (16,907) 19,533 – – the financial period/year, net of tax

Total comprehensive (loss)/income for the financial period/year (86,356) (337,628) 386,004 (168,727) (Loss)/profit for the financial period/year attributed to: Owners of the Company (66,833) (223,705) 386,004 (168,727) Non-controlling interests (2,616) (133,456) – – (Loss)/profit for the financial period/year (69,449) (357,161) 386,004 (168,727)

Total comprehensive (loss)/income attributable to: Owners of the Company (69,300) (212,031) 386,004 (168,727) Non-controlling interests (17,056) (125,597) – –

Total comprehensive (loss)/income for the financial period/year (86,356) (337,628) 386,004 (168,727)

Sen Sen Loss per share attributable to owners of the Company: 10 - basic (4.09) (16.07)

- diluted (4.08) (16.04)

Statements of Comprehensive Incomefor the Financial Period Ended 31 March 2013

P/79STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013

P/80 SCOMI GROUP BHD ANNUAL REPORT 2013STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2013

Group Company Note 31.3.2013 31.12.2011 1.1.2011 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 (restated) (restated) (restated) (restated)

Non-Current Assets Property, plant and equipment 12 607,898 713,253 416,400 818 1,631 2,447 Intangible assets 13 290,880 328,713 385,392 – – – Investment properties 14 1,382 1,559 1,213 4,520 4,584 4,678 Prepaid land lease payments 15 – 316 1,787 – – – Investments in subsidiaries 16 – – – 1,219,303 853,026 997,543 Investments in associates 17 403 247 3,224 – – – Investments in joint ventures 18 55,495 47,157 25,081 – – – Other financial receivables 19 29,209 – – 33,348 – 17,636 Available-for-sale financial assets 20 104 1,516 1,516 – – – Deferred tax assets 39 41,308 46,640 78,724 – 672 1,674 Derivative financial assets 21 – – 24,465 – – –

1,026,679 1,139,401 937,802 1,257,989 859,913 1,023,978

Current Assets Inventories 22 213,397 223,303 200,380 – – – Receivables, deposits, and prepayments 23 1,077,012 1,073,059 922,655 47,387 67,007 109,301 Derivative financial assets 21 – – 7,691 – – – Short-term deposits, cash and bank balances 24 249,331 236,181 188,048 22,459 13,082 9,334

1,539,740 1,532,543 1,318,774 69,846 80,089 118,635 Assets classified as held for sale 25 108,112 – 760,331 – – –

1,647,852 1,532,543 2,079,105 69,846 80,089 118,635

Less: Current Liabilities Payables 27 460,971 602,066 483,523 65,281 11,725 21,147 Borrowings 28 675,452 757,821 481,395 577 222,305 120,698 Provisions 29 4,231 2,845 5,235 – – – Derivative financial liabilities 21 489 348 – – – – Current tax liabilities 18,469 35,672 24,806 – – – Deferred government grant 30 1,706 2,155 1,568 – – – Irredeemable convertible secured loan stocks 31 – 3,188 3,382 – 3,188 3,382 Irredeemable convertible unsecured loan stocks 32 – 14 33 – – – Provision for retirement benefits 38 – 390 323 – – –

1,161,318 1,404,499 1,000,265 65,858 237,218 145,227 Liabilities classified as held for sale 25 93,338 – 123,219 – – – 1,254,656 1,404,499 1,123,484 65,858 237,218 145,227

Net Current Assets/(Liabilities) 393,196 128,044 955,621 3,988 (157,129) (26,592)

1,419,875 1,267,445 1,893,423 1,261,977 702,784 997,386

Statements of Financial Position as at 31 March 2013



Capital And Reserves Attributable To Owners Of The Company Share capital 34(a) 156,454 118,769 118,266 156,454 118,769 118,266 Share premium 35 351,916 276,793 275,926 351,916 276,793 275,926 Treasury shares 34(b) (18,696) (18,696) (18,696) (18,696) (18,696) (18,696) Other reserves 36 (85,810) (247,305) (252,105) 4,235 98,898 111,739 Convertible bonds 37 106,471 – – 106,471 – – Retained earnings 88,309 310,698 525,288 641,267 224,779 379,696

Equity and reserves attributable to owners of the Company 598,644 440,259 648,679 1,241,647 700,543 866,931

Non-controlling interests 484,489 489,884 614,653 – – – Total Equity And Reserves 1,083,133 930,143 1,263,332 1,241,647 700,543 866,931

Non-Current Liabilities Payables 27 20,230 5,629 5,520 19,037 - 260 Borrowings 28 300,092 320,866 608,219 1,293 2,241 126,380 Deferred government grant 30 – – – – – – Derivative financial liabilities 21 6,166 - 4,919 – – – Provision for retirement benefits 38 6,744 7,077 4,358 – – – Deferred tax liabilities 39 3,510 3,727 3,219 – – – Irredeemable convertible secured loan stocks 31 – – 3,815 – – 3,815 Irredeemable convertible unsecured loan stocks 32 – 3 41 – – –

336,742 337,302 630,091 20,330 2,241 130,455

1,419,875 1,267,445 1,893,423 1,261,977 702,784 997,386

STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2013

P/82 SCOMI GROUP BHD ANNUAL REPORT 2013CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013

Attributable to owners of the Company Non- Share Share Treasury Other Convertible Retained controlling Total Group Note capital premium shares reserves bond earnings Total interests equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2012 - as previously stated 118,769 276,793 (18,696) (246,095) – 378,591 509,362 71,831 581,193 - adjustments for early adoption of standards 48 – – – (1,210) – (67,893) (69,103) 418,053 348,950 At 1 January 2012, as restated 118,769 276,793 (18,696) (247,305) – 310,698 440,259 489,884 930,143

Loss for the financial period – – – – – (66,833) (66,833) (2,616) (69,449)

Other comprehensive (loss)/income: - Currency translation differences – – – 4,554 – – 4,554 (10,929) (6,375) - Cash flow hedges – – – (7,021) – – (7,021) (3,511) (10,532)

Total other comprehensive (loss)/income – – – (2,467) – – (2,467) (14,440) (16,907)

Total comprehensive loss – – – (2,467) – (66,833) (69,300) (17,056) (86,356)

Share options: - proceeds from shares issued 34(a),35 1,890 2,408 – – – – 4,298 – 4,298 - value of employee services 36 – – – 3,986 – – 3,986 – 3,986 - value of options terminated 36 – – – (3,613) – 3,613 – – – Conversion of ICSLS 34(a),35,36 21,877 36,443 – (61,899) – – (3,579) – (3,579) Conversion of ICULS 34(a),36 – – – (1,148) – – (1,148) 1,148 – Warrants - exercise of warrants 2,007 9,231 – (3,211) – – 8,027 – 8,027 - lapse of unexercised warrants – – – (29,126) – 29,126 – – –

Consolidated Statement of Changes in Equityfor the Financial Period Ended 31 March 2013


Attributable to owners of the Company Non- Share Share Treasury Other Convertible Retained controlling Total Group Note capital premium shares reserves bond earnings Total interests equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Issuance of convertible bonds, net 37 – – – – 106,471 – 106,471 – 106,471 Issuance of shares, net 34 11,911 27,041 – – – – 38,952 – 38,952 Accretion/dilution of interest in subsidiaries, net 45 – – – – – (110,669) (110,669) 88,207 (22,462) Capital repayment by a subsidiary 44(e) – – – – – – – (77,694) (77,694) Put option adjustment upon expiry 27(b) – – – 258,286 – (77,626) 180,660 – 180,660 Disposal of subsidiary – – – 687 – – 687 – 687

At 31 March 2013 156,454 351,916 (18,696) (85,810) 106,471 88,309 598,644 484,489 1,083,133

Attributable to owners of the Company Non- Share Share Treasury Other Retained controlling Total Group Note capital premium shares reserves earnings Total interests equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2011 - as previously stated 118,266 275,926 (18,696) (251,592) 602,647 726,551 134,610 861,161 - adjustment for early adoption of standards 48 – – – (513) (77,359) (77,872) 480,043 402,171 At 1 January 2011, as restated 118,266 275,926 (18,696) (252,105) 525,288 648,679 614,653 1,263,332

Loss for the financial period – – – – (223,705) (223,705) (133,456) (357,161)

Other comprehensive income: - Currency translation differences – – – 198 – 198 3,112 3,310 - Available-for-sale financial assets – – – 1,719 – 1,719 684 2,403 - Cash flow hedges – – – 9,757 – 9,757 4,063 13,820

Total other comprehensive income – – – 11,674 – 11,674 7,859 19,533 Total comprehensive loss – – – 11,674 (223,705) (212,031) (125,597) (337,628)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013


Consolidated Statement of Changes in Equity for the Financial Period Ended 31 March 2013 (continued)

Attributable to owners of the Company Non- Share Share Treasury Other Retained controlling Total Group Note capital premium shares reserves earnings Total interests equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Share of reserves in subsidiaries Share options: - proceeds from shares issued 34(a),35 113 79 – – – 192 – 192 - value of employee services 36 – – – 3,520 – 3,520 – 3,520 - value of options lapsed/ forfeited 36 – – – (10,080) 9,080 (1,000) 1,000 – Conversion of ICULS 34(a),36 – – – (69) – (69) – (69) Conversion of ICSLS 34(a),35,36 390 788 – (222) – 956 – 956 Dilution of interest in subsidiaries – – – – – – 75 75 Disposal of a joint venture company 36,42(b) – – – (23) 35 12 – 12 Dividend paid to non-controlling interests of a subsidiary – – – – – – (247) (247) At 31 December 2011 118,769 276,793 (18,696) (247,305) 310,698 440,259 489,884 930,143

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013


Company Statement of Changes in Equityfor the Financial Period Ended 31 March 2013

Non-distributable Distributable Share Share Treasury Other Convertible Retained Note capital premium shares reserves bonds earnings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Company At 1 January 2012 118,769 276,793 (18,696) 98,898 – 224,779 700,543

Profit for the financial period – – – – – 386,004 386,004

Share options: - proceeds from shares issued 34(a), 35 1,890 2,408 – – – – 4,298 - value of employees services 36 – – – 888 – – 888 - transferred to subsidiaries – – – 43 – – 43 - value of options lapsed/ forfeited – – – (1,358) – 1,358 –

Conversion of ICSLS 34(a), 35, 36 21,877 36,443 – (61,899) – – (3,579)

Warrants 33 - exercise of warrants 2,007 9,231 – (3,211) – – 8,027 - expiry of warrants – – – (29,126) – 29,126 –

Issuance of convertible bonds, net 37 – – – – 106,471 – 106,471

Issuance of shares, net 34, 35 11,911 27,041 – – – – 38,952

At 31 March 2013 156,454 351,916 (18,696) 4,235 106,471 641,267 1,241,647

COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013

P/86 SCOMI GROUP BHD ANNUAL REPORT 2013COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013

Company Statement of Changes in Equity for the Financial Period Ended 31 March 2013 (continued)

Non-distributable Distributable Share Share Treasury Other Retained Note capital premium shares reserves earnings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Company At 1 January 2011 118,266 275,926 (18,696) 111,739 379,696 866,931

Loss for the financial year – – – – (168,727) (168,727)

Share options: - proceeds from shares issued 34(a), 35 113 79 – – – 192 - value of employees services 36 – – – 1,191 – 1,191 - Transferred to subsidiaries – – – (11,066) 11,066 – - value of options lapsed/ forfeited – – – (2,744) 2,744 –

Conversion of ICSLS 34(a), 35, 36 390 788 – (222) – 956

At 31 December 2011 118,769 276,793 (18,696) 98,898 224,779 700,543

SCOMI GROUP BHD ANNUAL REPORT 2013P/87STATEMENTS OF CASH FLOWS FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013

Statements of Cash Flowsfor the Financial Period Ended 31 March 2013


Cash Flows From Operating Activites Profit/(loss) before taxation from: - continuing operations 21,097 (167,707) 383,768 (168,061) - discontinued operations (59,113) (112,077) – –

Adjustments for: Depreciation - property, plant and equipment 104,166 119,012 820 826 - investment properties 177 144 64 94 Amortisation - intangible assets 2,070 2,161 – – - prepaid charter hire – 5,669 – – - prepaid land lease payment – 1,460 – – - borrowing costs – 150 – – Government grant (449) – – – Impairment losses - property, plant and equipment 10,207 98,846 – – - intangible assets 41,292 42,607 – – - receivables 4,104 21,717 – – - investment properties – 455 – – - available-for-sale investments 24 2,467 – – - amounts due from subsidiaries – – 23,892 7,807 Impairment on investment in a subsidiary – – 276,779 144,592 Write back of impairment on investment in subsidiary – – (143,992) – Write back of impairment of receivable (6,622) (675) (6,406) – Allowance for obsolete stocks 1,010 2,972 – – Insurance claims receivable – 202 – – Inventories written down – 957 – – Unrealised loss/(gain) on foreign exchange 19,346 22,815 (294) (344) Monetary adjustments (1,641) (2,417) – – Hyperinflation adjustments 4,804 3,218 – – Provision for tax penalties – 872 – – Gain on disposal of property, plant and equipment (5,389) (4,922) (60) Property, plant and equipment written off – 361 – – Bad debts (recovered)/written off (13,298) 2,085 – – Fair value gain on financial instrument - derivatives 435 (556) – – Gain on disposal of/dilution of interest in subsidiary companies (21,118) – (558,307) – Loss on disposal of discontinued operations – 103,495 – – (Gain)/loss on disposal of a joint venture company – (4,548) – 35 Provision for retirement benefits 1,117 1,402 – – Group Company

P/88 SCOMI GROUP BHD ANNUAL REPORT 2013STATEMENTS OF CASH FLOWS FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013

Statements of Cash Flows for the Financial Year Ended 31 March 2013 (continued)


Share of results in associates (133) 2,978 – – Share of results in joint ventures (6,568) (3,754) – – Share option expense 3,986 3,300 888 1,081 Financing costs 160,978 53,277 16,349 16,696 Interest income (1,461) (3,384) (5,087) (6,303)

Operating cash flows before working capital changes 259,021 192,582 (11,526) (3,637)

Changes in working capital: Inventories (19,908) (32,964) – – Receivables (75,739) (52,191) (10,897) 51,025 Payables (72,054) 114,090 (5,915) (7,177)

Cash generated from/(used in) operations 91,320 221,517 (28,338) 40,211

Net tax (paid)/refund (29,401) (29,231) 2,889 471 Retirement benefits paid (837) (349) – – Tax penalties paid – (3,848) – –

Net cash generated from/(used in) operating activities 61,082 188,089 (25,449) 40,682 Cash Flows From Investing Activities Proceeds from capital repayment 44(e) – – 57,913 – Net cash inflow from disposal of a joint venture company – 9,096 – – Proceeds from disposal of subsidiaries 106,826 89,668 85,370 – Purchase of property, plant and equipment (102,068) (78,820) (7) (15) Proceeds from disposal of property, plant and equipment 31,271 14,787 – 65 Development expenditure incurred (15,799) (41,474) – – Repayment of non-current payables – 446 – – Government grant received – 587 – – Interest received 1,461 3,384 1,556 2,487 Advances to subsidiaries – – (28,674) –

Net cash generated from/(used in) investing activities 21,691 (2,326) 116,158 2,537



Cash Flows From Financing Activities Issue of share capital arising from the exercise of ESOS 4,298 192 4,298 192 Issuance of shares, net 38,952 – 38,952 – Issuance of convertible bonds net 106,471 – 106,471 – Exercise of warrants 8,027 – 8,027 – Proceeds from bank borrowings 471,296 480,079 118,000 – Repayment of bank borrowings (522,609) (585,811) (339,128) (20,316) Interest paid on borrowings (68,618) (52,156) (17,952) (19,347) Decrease/(increase) in short-term deposits pledged as security 19,506 (16,399) 6,981 457 Capital repayment by subsidiary (77,949)

Net cash used in financing activities (20,626) (174,095) (74,351) (39,014)

Net Increase in Cash and Cash Equivalents 62,147 11,668 16,358 4,205 Cash and Cash Equivalents at Beginning of financial period/year 54,323 38,849 6,101 1,896

Currency Translation Differences (2,292) 3,806 – –

Cash and Cash Equivalents at end of financial period/year 114,178 54,323 22,459 6,101

Cash and Cash Equivalents Comprise: Short-term deposits with licensed banks 24 82,406 90,611 – 6,981 Cash and bank balances 24 166,925 145,570 22,459 6,101 Cash classified as held for sale 25 2,977 – – – Bank overdrafts 28 (105,138) (129,360) – –

147,170 106,821 22,459 13,082 Less: Short-term deposits pledged as security 24 (32,992) (52,498) – (6,981)

114,178 54,323 22,459 6,101

Significant non cash transactions The details of the disposal of 76.1% interest in Scomi Oilfield Limited to Scomi Energy Services Bhd for shares are disclosed in Note 44 and Note 45.

STATEMENTS OF CASH FLOWS FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013

P/90 SCOMI GROUP BHD ANNUAL REPORT 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013

1 General Information The principal activity of the Company is investment holding.

The principal activities of the Group consist of the provision of drilling fluids solutions and related engineering services, drilling waste management equipment and services and an extensive range of production chemicals to the oil and gas industry;

marine transportations, other shipping related services; provision of a range of transport solutions encompassing the design and manufacture of urban rail systems such as monorail and mass rapid transit vehicles, and commercial vehicles such as coaches and special purpose vehicles; and provision of vessels to the oil and gas industry to support offshore services.

There were no significant changes in the nature of these activities except for the internal restructuring undertaken during the financial period as disclosed in Note 42, Note 44 and Note 45.

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

The registered office and principal place of business address of the Company is Level 17, 1 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan.

2 Basis of Preparation The financial statements of the Group and Company have been prepared in accordance with the provisions of the Malaysian

Financial Reporting Standards (‘MFRS’), International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia.

The financial statements of the Group and the Company for the financial period ended 31 March 2013 are the first set of financial statements prepared in accordance with the MFRS, including MFRS 1, ‘First-time Adoption of Malaysian Financial

Reporting Standards’. Subject to certain transition elections disclosed in Note 2(i) and (ii), the Group and Company have consistently applied the same accounting policies in its opening MFRS statements of financial position at 1 January 2011

(transition date) and throughout all years presented, as if these policies had always been in effect. Comparative figures for 2011 in these financial statements have been restated to give effect to these changes. Subsequent to the transition in the financial reporting framework to MFRS on 1 January 2012, the restated comparative information has not been audited under MFRS. However, the comparative statements of financial position as at 31 December 2011, comparative statements comprehensive income, changes in equity and cash flows for the financial year then ended have been audited under the previous financial reporting framework, Financial Reporting Standards in Malaysia. There is no significant impact of the transition to MFRS on the Group and Company’s reported financial position, financial performance and cash flows.

The financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with MFRS 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 revenues and expenses during the reported period. It also requires Directors to exercise their judgment in the process of applying the Group and Company’s accounting policies. Although these estimates and judgment are based on the Directors’ best knowledge of current events and actions, actual results may differ. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.

(i) MFRS 1 mandatory exceptions

Estimates MFRS estimates as at transition date is consistent with the estimates as at the same date made in conformity with FRS.

Notes to the Financial Statementsfor the Financial Period Ended 31 March 2013


(ii) MFRS 1 exemption options

1 Exemption for business combinations MFRS 1 provides the option to apply MFRS 3 “Business Combinations” prospectively for business combinations

that occurred from the transition date or from a designated date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date or a designated date prior to the transition date. The Group elected to apply MFRS 3 prospectively to business combinations that occurred after 1 January 2011. Business combinations that occurred prior to 1 January 2011 have not been restated. In addition, the Group has also applied MFRS 127 “Consolidated and Separate Financial Statements” from the same date.

2 Exemption for deemed cost – investment in subsidiaries, joint ventures, associates, property, plant and equipment, prepaid lease payments and investment properties

As allowed by MFRS 1, the Group elected to measure its investment in subsidiaries, joint ventures, associates, property, plant and equipment, prepaid lease payments and investment properties at carrying amount as at transition date, 1 January 2011, as their deemed cost as at that date.

3 Designation of previously recognised financial instruments MFRS 1 permits a previously recognised financial instrument to be designated as available for sale or fair value

through the income statement on the transition date provided the criteria in MFRS 139 “Financial Instruments: Recognition and Measurement” are met. The Group and Company elected to designate all its previously recognised financial instruments based on the designation under its previous Generally Accepted Accounting Principles (“GAAP”) which also complies with MFRS 139.

4 Share-based payment transactions MFRS 1 provides retrospective relief from applying MFRS 2 ‘Share-based payment’ to equity instruments granted

on or after 7 November 2002 and vested before the transition date. The Group and Company elected to not apply the requirements in MFRS 2 to equity instruments granted from 7 November 2002 but before 1 January 2005 and not vested at transition date. However the impact is not material.

5 Exemption for employee benefits MFRS 1 provides retrospective relief from applying MFRS 119 ‘Employee benefits’, in respect of the recognition

of actuarial gains and losses. The Group elected to recognise all cumulative actuarial gains and losses that existed at its transition date as liability in opening retained earnings for all its employee benefit plans. There is no significant impact arising from this election as at the date of transition.

During the financial period, the Directors of the Group adopted the following Malaysian Financial Reporting Standards (“MFRS”) issued by the MASB:

(a) Standards, amendments to published standards and interpretations that are applicable to the Group but not yet effective and have been early adopted.

• MFRS 10 “Consolidated financial statements” (effective from 1 January 2013) changes the definition of control.

An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. It establishes control as the basis for determining which entities are consolidated in the consolidated financial statements and sets out the accounting requirements for the preparation of consolidated financial statements. It replaces all the guidance on control and consolidation in MFRS 127 “Consolidated and separate financial statements” and IC Interpretation 112 “Consolidation – special purpose entities”. There are three elements to the definition of

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013


2 Basis of Preparation (continued)

control in MFRS 10: (i) power by investor over an investee, (ii) exposure, or rights, to variable returns from investor’s

involvement with the investee, and (iii) investor’s ability to affect those returns through its power over the investee.

• MFRS 11 “Joint arrangements” (effective from 1 January 2013) requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations arising from the arrangement, rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.

• MFRS 12 “Disclosures of interests in other entities” (effective from 1 January 2013) sets out the required disclosures for entities reporting under the two new standards, MFRS 10 and MFRS 11, and replaces the disclosure requirements currently found in MFRS 128 “Investments in associates”. It requires entities to disclose information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entity’s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities.

• The revised MFRS 127 “Separate financial statements” (effective from 1 January 2013) includes the provisions on separate financial statements that are left after the control provisions of MFRS 127 have been included in the new MFRS 10.

• The revised MFRS 128 “Investments in associates and joint ventures” (effective from 1 January 2013) includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of MFRS 11.

The effects of early adoption of these standards are as disclosed in Note 48. The identification of Larsen & Toubro and Scomi Engineering Bhd (“SEB”), as an unincorporated joint venture in which the Group had equity interest as a joint operation as disclosed in Note 18.

(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective and have not been early adopted.

The Group will apply the new standards, amendments to standards and interpretations in the following period:

(i) Financial year beginning on/after 1 April 2013

• MFRS 13 “Fair value measurement” (effective from 1 January 2013) aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across MFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The enhanced disclosure requirements are similar to those in MFRS 7 “Financial instruments: Disclosures”, but apply to all assets and liabilities measured at fair value, not just financial ones.

• Amendment to MFRS 101 “Presentation of items of other comprehensive income” (effective from 1 July 2012) requires entities to separate items presented in ‘other comprehensive income’ (“OCI”) in the statement of comprehensive income into two groups, based on whether or not they may be recycled to income statement in the future. The amendments do not address which items are presented in OCI.

• Amendment to MFRS 119 “Employee benefits” (effective from 1 January 2013) makes significant changes to the


recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. Actuarial gains and losses will no longer be deferred using the corridor approach. MFRS 119 shall be withdrawn on application of this amendment.

• Amendment to MFRS 7, ‘Financial Instruments: Disclosures’ (effective from 1 January 2013) requires more extensive disclosures focusing on quantitative information about recognised financial instruments that are offset in the statement of financial position and those that are subject to master netting or similar arrangements irrespective of whether they are offset.

• Amendments to MFRS 134 ‘Interim Financial Reporting’ (effective from 1 January 2013) require additional disclo sures on fair value information for financial instruments and segment reporting. The additional disclosures are required in interim financial reports issued in financial periods commencing 1 January 2013.

Changes in accounting policies due to new standards or amendments that apply on or after 1 January 2013 also require disclosures in interim financial reports where the changes are significant.

(ii) Financial year beginning on/after 1 April 2014

• Amendment to MFRS 132, ‘Financial Instruments: Presentation’ (effective from 1 January 2014) does not change the current offsetting model in MFRS 132. It clarifies the meaning of ‘currently has a legally enforceable right of set-off’ that the right of set-off must be available today (not contingent on a future event) and legally enforceable for all counterparties in the normal course of business. It clarifies that some gross settlement mechanisms with features that are effectively equivalent to net settlement will satisfy the MFRS 132 offsetting criteria.

(iii) Financial year beginning on/after 1 April 2015

• MFRS 9 “Financial instruments - classification and measurement of financial assets and financial liabilities” (effective from 1 January 2015) replaces the multiple classification and measurement models in MFRS 139 with a single model that has only two classification categories: amortised cost and fair value. The basis of classification depends on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.

The accounting and presentation for financial liabilities and for de-recognising financial instruments has been relocated from MFRS 139, without change, except for financial liabilities that are designated at fair value through income statement (“FVTPL”). Entities with financial liabilities designated at FVTPL recognise changes in the fair value due to changes in the liability’s credit risk directly in OCI. There is no subsequent recycling of the amounts in OCI to income statement, but accumulated gains or losses may be transferred within equity.

The guidance in MFRS 139 on impairment of financial assets and hedge accounting continues to apply.

MFRS 7 requires disclosures on transition from MFRS 139 to MFRS 9.

The Group is assessing the impact of the new Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective and have not been early adopted to the Group and of the Company.

Unless otherwise disclosed, the above standards, amendments to published standards and interpretations to existing standards are not anticipated to have any significant impact on the financial statements of the Group and Company in the year of initial application.



3 Summary of Significant Accounting Policies

Unless otherwise stated, the following accounting policies have been used consistently in dealing with items that are considered material in relation to the financial statements.

3.1 Basis of consolidation

The consolidated financial statements incorporate the audited financial statements of the Company and its subsidiaries made up to the end of the financial period.

Subsidiaries are those entities (including special purpose entities) in which the Group has power to govern the financial and

operating policies, generally accompanying a shareholding of more than one half of 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.

The Group also assesses existence of control where it does not have more 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and dispersion of holdings of other shareholders give the group the power to govern the financial and operating policies.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the predecessor accounting to account for certain business combinations under common control. Under the predecessor accounting, the results of entities or businesses under common control are presented as if the merger had

been effected from the date when these entities came under the control of the common controlling party (if shorter). 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. The difference between any consideration given, at fair value, and the aggregate carrying amounts of the assets and liabilities of the acquired entity is classified as merger reserve. No additional goodwill is recognised.

The Group applies the acquisition method to account for other business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the successive acquisition dates at each stage, and the changes in fair value is taken through income statement.

Income statement and each component of other comprehensive income of the subsidiaries are attributed to the parent and the non-controlling interest, even if this results in the non-controlling interest having a deficit balance.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with MFRS 139 either in income statement or as a change to other comprehensive income. Contingent consideration that is


classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in income statement.

Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

3.2 Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

3.3 Disposal of subsidiaries

When the Group ceases to have control over a subsidiary any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in income statement. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts

previously recognised in other comprehensive income are reclassified to income statement.

3.4 Investments in 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 voting rights. Significant influence is power to participate in financial and operating policy decisions of associates but not power to exercise control over those policies. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the income statement of the investee after the date of acquisition. The Group’s investment includes goodwill identified on acquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to income statement where appropriate. Dilution gains and losses arising in investments in associates are recognised to income statement.

Dilution gains and losses arising in investments in associates are recognised in income statement.

The Group’s share of post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in other comprehensive income with a corresponding adjustment to 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 does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable



3 Summary of Significant Accounting Policies (continued)

3.4 Investments in associates (continued)

amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of an associate’ in the income statement.

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. On disposal of investments in anassociate, the difference between disposal proceeds and the carrying amounts of the investments are recognised in income statement.

3.5 Joint arrangements

Under MFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to

joint control. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of all the parties sharing control (the venturers).

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the group’s net investment in the joint ventures), the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the group and its joint ventures are eliminated to the extent of the group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the group. There is no impact on the net assets of the periods presented.

A joint operator recognises in relation to its interest in a joint operation: • its assets, including its share of any assets held jointly; • its liabilities, including its share of any liabilities incurred jointly; • its revenue from the sale of its share of the output of the joint operation; • its share of the revenue from the sale of the output by the joint operation; and • its expenses, including its share of any expenses incurred jointly.

A joint operator accounts for the assets, liabilities, revenues and expenses relating to its involvement in a joint operation.

A party that participates in, but does not have joint control of, a joint operation shall also account for its interest in the arrangement in accordance with the above if that party has rights to the assets, and obligations for the liabilities, relating to the joint operation.

3.6 Investments in subsidiaries, joint ventures and associates

In the Company’s separate financial statements, investments in subsidiaries, joint ventures and associates are carried at cost


less accumulated impairment losses. On disposal of investments in subsidiaries, joint ventures and associates, the difference between disposal proceeds and the carrying amounts of the investments is recognised in the income statement. The accounting policy in relation to impairment of non-financial assets is as disclosed in Note 3.11.

3.7 Inflation adjustment

The financial statements of the Group are based on the historical cost convention. During the previous financial period, the financial statements of the Group have been restated to take account of the effects of inflation in accordance with MFRS 129 (Financial Reporting in Hyperinflationary Economies), as described below.

The Group has subsidiaries operating in Venezuela and in late 2009, the Venezuelan economy was considered to be a hyperinflationary economy. MFRS 129 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the date of the statement of financial position, and that corresponding figures for the previous year at company level be restated in terms of the same measuring unit. Accordingly, the inflation adjusted financial statements represent the primary financial statements of the Group.

In accordance with MFRS 129, the financial statements of the Group have been restated to account for the changes in the general purchasing power of the Venezuelan Bolivar and, as a result, are stated in terms of the measuring unit current at the date of the statement of financial position.

The indices and conversion factors used were as follows:

Date Indices Conversion Factors

March 2013 (NCPI) 334.80 1.2605 December 2011 (NCPI) 265.65 1.2757 December 2010 (NCPI) 208.20 1.2718 December 2009 (NCPI) 163.70 1.2506 December 2008 (NCPI) 130.90 1.3090 December 2007 (CPI) 100.00 1.2245

The Group has applied the official rate of $1: Bs6.3 (2011: $1: Bs4.3) to translate the financial statements of its Venezuelan subsidiary.

The main procedures applied in the above-mentioned restatement of transactions and balances are as follows:

(i) Monetary assets and liabilities and results from monetary position

Monetary assets and liabilities are not restated because they are already stated in terms of the measuring unit current at the date of the statement of financial position.

(ii) Non-monetary assets and liabilities

Non-monetary assets and liabilities (inventories, fixed assets, intangibles, other assets and deferred income) have been restated by the CPI during the financial period.

(iii) Equity

All equity components have been restated by the CPI from their date of origin until 31 December 2007 and by the NCPI as from 1 January 2008 until 31 March 2013.




3.7 Inflation adjustment (continued)

(iv) Income statement

All items in the income statement have been restated based on the date on which they were earned or incurred, with the exception of those related to non-monetary items (cost of sales, depreciation expense and amortisation expense), which have been reported in terms of the restated non-monetary items to which they relate, expressed in constant currency at 31 March 2013.

Gains and losses arising from the net monetary asset or liability position are included in the income statement.

(v) Statement of cash flows

All items in the statement of cash flows are expressed in terms of the measuring unit current at the date of the statement of financial position.

3.8 Property, plant and equipment

Property, plant and equipment, other than freehold land and capital work-in-progress, are stated at cost less accumulated depreciation or amortisation and impairment losses, if any. The cost of an item of property, plant and equipment initially rec-ognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost also includes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. See accounting policy Note 3.24.

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 recognised as expenses in the income statement during the financial period in which they are incurred.

Freehold land is not depreciated as it has an infinite life. Leasehold land classified as finance lease is amortised in equal instalments over the period of the respective leases. See accounting policy Note 3.15(a) on finance leases. Capital work-in-progress is stated at cost. Expenditure relating to capital work-in-progress is capitalised when incurred and depreciated only when the assets are ready for intended use.

Other property, plant and equipment are depreciated on the straight line method to allocate the cost of the assets to their residual values over their estimated useful lives. The principal annual rates used for this purpose are as follows:

Freehold buildings 2 - 20% Leasehold buildings 2 - 33 1/3% Tools, plant and machinery, marine and plant equipment 8 1/3 – 33 1/3% Renovation, office equipment, fittings and computers 10 - 33 1/3% Motor vehicles 15 - 33 1/3% Monorail test track 3% Marine vessels 4% Drydocking (included within vessels) 20% - 40%

Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each statement of financial position date.


At each date of the statement of financial position, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its

recoverable amount. See accounting policy Note 3.11 on impairment of non-financial assets.

When property, plant and equipment are disposed of, the resulting gain or loss on disposal is determined by comparing the disposal proceeds with the carrying amount and is included in the income statement.

3.9 Investment properties

Investment properties, principally comprising freehold land and buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group.

Investment properties are measured initially at its cost, including related transaction costs and borrowings costs if the investment property meets the definition of qualifying asset.

After the initial recognition, investment property is stated at cost less any accumulated depreciation and impairment losses. Buildings are depreciated on the straight line basis to allocate the cost to their residual values over their estimated useful lives of 20 to 50 years. Freehold land is not depreciated as it has an infinite life.

Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs

and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

Investment property is derecognised either when it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

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

3.10 Intangible assets

(i) Patents

Patent rights to use an intellectual property for the development of technologies relating to crude oil waste, oil recovery recycling and treatment for oil and gas industry are shown at historical cost. Patent rights have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of patent rights over their estimated useful economic lives of 5 years to 20 years.

(ii) Research and development

Research expenditure is recognised as an expense when incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled:

(a) it is technically feasible to complete the intangible asset so that it will be available for use or sale; (b) management intends to complete the intangible asset and use or sell it; (c) there is an ability to use or sell the intangible asset; (d) it can be demonstrated how the intangible asset will generate probable future economic benefits; (e) adequate technical, financial and other resources to complete the development and to use or sell the

intangible asset are available; and




3.10 Intangible assets (continued)

(ii) Research and development (continued)

(f ) the expenditure attributable to the intangible asset during its development can be reliably measured.

Other development expenditure that do not meet these criteria are recognised as an expense when incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs recognised as intangible assets are amortised from the point at which the asset is ready for use on a straight-line basis as follows:

(a) over the estimated sales units of 750 units (31.12.2011: 500 units) not exceeding ten years for monorail development; or (b) over a period not exceeding five years for bus development; (c) not exceeding ten years for drilling waste management technology.

During the financial period, the Group changed the estimate of amortisation units from 500 units to 750 units for monorail development. The effect on current period amortisation is a reduction of RM0.8 million. Development costs in progress are tested for impairment annually, in accordance with MFRS 136 Impairment of Assets. See

accounting policy Note 3.11 on impairment of non-financial assets.

(iii) Goodwill

Goodwill represents the excess of the cost of acquisition of subsidiaries, joint ventures and associates over the fair value of the Group’s share of the identifiable net assets at the date of acquisition.

Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill (inclusive of impairment losses recognised in a previous interim period) are not reversed. Gains and losses on the disposal of a subsidiary include the carrying amount of goodwill relating to the subsidiary sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from synergies of the business combination in which the goodwill arose, identified according to operating segment.

In respect of acquisitions of joint ventures and associates, the carrying amount of goodwill is included in the carrying amount of the investment in joint ventures and associates respectively. Such goodwill is also tested for impairment as part of the overall balance. The accounting policy in relation to impairment of non-financial assets is as disclosed in Note 3.11.

3.11 Impairment of non-financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there is separately identifiable cash flows (cash-generating units). Non-financial


assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of the reporting period.

The impairment loss is charged to income statement. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in the income statement.

3.12 Financial assets

(i) Classification

The Group classifies its financial assets in the following categories: at fair value through income statement, loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition.

(a) Financial assets at fair value through income statement

Financial assets at fair value through income statement are financial assets held for trading. A financial asset is classified in this category if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise there are classified as non-current.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and bank balances’ in the statement of financial position (Notes 23 and 24).

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

(ii) Recognition and initial measurement

Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group commits to purchase or sell the asset.

Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through income statement. Financial assets carried at fair value through income statement are initially recognised at fair value, and transaction costs are expensed in the income statement.

(iii) Subsequent measurement – gains and losses

Available-for-sale financial assets and financial assets at fair value through income statement are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Changes in the fair values of financial assets at fair value through income statement, including the effects of currency




3.12 Financial assets (continued)

(iii) Subsequent measurement – gains and losses (continued)

translation, interest and dividend income are recognised in the income statement in the period in which the changes arise.

Changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income, except for impairment losses (see accounting policy Note 3.12(iv) and foreign exchange gains and losses on monetary assets. The exchange differences on monetary assets are recognised in the income statement, whereas exchange differences on non-monetary assets are recognised in other comprehensive income as part of fair value change.

Interest and dividend income on available-for-sale financial assets are recognised separately in the income statement. Interest on available-for-sale debt securities calculated using the effective interest method is recognised in the income statement. Dividend income on available-for-sale equity instruments are recognised in the income statement when the Group’s right to receive payments is established.

(iv) Subsequent measurement – Impairment of financial assets

Assets carried at amortised cost

The Group assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: (a) Significant financial difficulty of the issuer or obligor; (b) A breach of contract, such as a default or delinquency in interest or principal payments; (c) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a

concession that the lender would not otherwise consider; (d) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; (e) Disappearance of an active market for that financial asset because of financial difficulties; or (f ) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio

of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including adverse changes in the payment status of borrowers in the portfolio; and national or local economic conditions that correlate with defaults on the assets in the portfolio.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the


reversal of the previously recognised impairment loss is recognised in the income statement. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all

the necessary procedures have been completed and the amount of the loss has been determined.

Assets classified as available-for-sale

The Group assesses at the end of the reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired.

For debt securities, the Group uses criteria and measurement of impairment loss applicable for ‘assets carried at amortised’ cost above. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and

the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through income statement.

In the case of equity securities classified as available-for-sale, in addition to the criteria for ‘assets carried at amortised cost’ above, a significant or prolonged decline in the fair value of the security below its cost is also considered as an indicator that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in the income statement. The amount of cumulative loss that is reclassified to income statement is the difference between the acquisition cost and

the current fair value, less any impairment loss on that financial asset previously recognised in the income statement. Impairment losses recognised in the income statement on equity instruments classified as available-for-sale are not reversed through income statement.

(v) De-recognition

Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Receivables that are factored out to banks and other financial institutions with recourse to the Group are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as borrowings.

When available-for-sale financial assets are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to income statement.

3.13 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

3.14 Financial guarantee contracts

Financial guarantee contracts are contracts that require the Group or Company to make specified payments to reimburse the holder for a loss it incurs because a specified debtors fails to make payments when due, in accordance with the terms of a debt instrument.

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with MFRS 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation where appropriate.




3.14 Financial guarantee contracts (continued)

The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.

Where financial guarantees in relation to loans or payables of subsidiaries are provided by the Company for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of investment in subsidiaries.

3.15 Leases

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to use an asset for an agreed period of time.

Accounting by lessee

(a) Finance leases

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases.

Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate of interest on the remaining balance of the liability. The corresponding rental obligations, net of finance charges, are included in borrowings.

The interest element of the finance cost is charged to 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.

Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased assets and recognised as an expense in income statement over the lease term on the same basis as the lease expense.

(b) Operating leases

Leases of assets where 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 income statement on the straight line basis over the lease period.

Initial direct costs incurred by the Group in negotiating and arranging operating leases are capitalised as prepayments and recognised in income statement over the lease term on a straight-line basis.


Accounting by lessor

(a) Finance lease

When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable as unearned finance income.

Lease income is recognised over the term of the lease using net investment method so as to reflect a constant periodic rate of return.

(b) Operating lease

When assets are leased out under an operating lease, the asset is included in the statement of financial position based on the nature of the assets. Lease income is recognised over the term of the lease on a straight-line basis.

3.16 Inventories

Inventories are stated at the lower of cost and net realisable value. Raw material cost is determined on a weighted average basis. The cost of finished goods comprises design costs, raw materials, direct labour, other direct costs and related-production

overheads (based on normal operating capacity). It excludes borrowing costs.

For work-in-progress and manufactured inventories, cost consists of direct materials, incidental costs in bringing the inventories to their present location, direct labour and an appropriate proportion of fixed and variable manufacturing overheads (based on normal operating capacity).

Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and applicable variable selling expenses.

3.17 Non-current assets (or disposal groups) classified as assets held for sale

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. The assets are not depreciated or amortised while they are classified as held-for-sale. Any impairment loss on initial classification and subsequent measurement is recognised as an expense. Any subsequent increase in fair value less costs to sell (not exceeding the accumulated impairment loss that has been previously recognised) is recognised in income statement.

Non-current assets (or disposal groups) cease to be classified as assets held-for-sale if there are changes to a plan of sale resulting from certain event or circumstances.

The non-current assets (or disposal group) that cease to be classified as held for sale are measured at the lower of (1) its carrying amount before the asset (or disposal group) was classified as held-for-sale, adjusted for any depreciation or amortisation that would have been recognised had the assets (or disposal groups) not been classified as held-for-sale, and (2) its recoverable amount at the date of the subsequent decision not to sell.

Any adjustment arising from the re-measurement of the carrying amount of the non-current assets (or disposal group) that cease to be classified as held-for-sale are recognised in profit or loss within “other operating expenses” from the date of the subsequent decision not to sell.




3.18 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.

Construction contracts costs are recognised as expenses in the period in which they are incurred.

When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Variations in contract work, claims and incentive payments are included in contract revenue to the extent agreed with the customer and are capable of being reliably measured. Liquidated ascertained damages, are disclosed as a deduction of contract revenue, which are deemed variable consideration.

The Group uses the percentage-of-completion method to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each 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 the construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable.

The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are included within ‘trade and other receivables’. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses). The asset balances are classified as current or non-current based on expectation of realisation.

3.19 Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents comprise cash in hand, bank balances, deposits held at call with banks excluding deposits which are pledged for banking facilities, and other short term, highly liquid investments with original maturities of three months or less, less bank overdrafts. Bank overdrafts are included within borrowings in current liabilities in the statement of financial position.

3.20 Share capital

(i) Classification

Ordinary shares with discretionary dividends are classified as equity. (ii) Share issue costs

Incremental costs directly attributable to the issue of new shares or options are deducted against share premium account. (iii) Dividends to shareholders of the Company

Distributions to holders of an equity instrument are debited directly to equity, net of any related income tax benefit


and the corresponding liability is recognised in the period in which the dividends are approved.

(iv) Warrant reserve

Proceeds from issuance of warrants, net of issue costs, are credited to warrant reserve which is non-distributable. Warrant reserve is transferred to the share premium upon exercise of warrants and warrant reserve in relation to unexercised warrants at the expiry of the warrants period will be transferred to retained earnings.

(v) Purchase of own shares

Where the Company or its subsidiaries purchase the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental external costs, net of tax, is included in equity attributable to the controlling equity holders as Treasury shares until they are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects, is included in equity attributable to the controlling equity holders.

3.21 Irredeemable Convertible Secured Loan Stocks (“ICSLS”), Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) and Convertible Redeemable Secured Bond (“CRSB”)

Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at option of the holder, and the number of shares to be issued does not vary with changes in their fair value.

ICSLS, ICULS and CRSB are regarded as compound financial statements, consisting of a liability and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar convertible loan stocks. The difference between the proceeds of issue of both ICSLS, ICULS and CRSB and the fair value assigned to the liability component, representing the conversion option, is included in equity. The liability component is subsequently stated at amortised cost using the effective interest rate method until extinguished on conversion, whilst the value of the equity component is not adjusted in subsequent periods. Attributable transaction costs are apportioned and deducted directly from the liability and equity components based on the carrying amounts at the date of issue.

Under the effective interest rate method, the interest expense on the liability component is calculated by applying the prevailing market interest rate for a similar convertible loan stock to the instrument at the date of issue. The difference between this amount and the interest paid is added to the carrying amount of each ICSLS, ICULS and CRSB.

Upon conversion of convertible instrument into equity shares, the amount credited to share capital and share premium is the aggregate of the carrying amounts of the liability components classified within liability and equity at the time of conversion. No gain or loss is recognised.

3.22 Put option arrangements

The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial liabilities when such options may only be settled other than by exchange of a fixed amount of cash or another financial asset for a fixed number of shares in the subsidiary. The amount that may become payable under the option on exercise is initially recognised at fair value within payables with a corresponding charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interests, adjacent to non-controlling interests in the net assets of consolidated subsidiaries.

The Group recognises the cost of writing such put options, determined as the excess of the fair value of the option over any consideration received as a financing cost. The put option is measured at the fair value of the liability payable, and




3.22 Put option arrangements (continued)

remeasured to fair value at each statement of financial position date. The charge arising is recorded as a finance cost. The extinguishment of the put option is disclosed in Note 44(d).

3.23 Financial liabilities

Financial liabilities are recognised on the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transactions costs.

Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method except for derivatives which are measured at fair value.

For financial liabilities other than derivatives, gains and losses are recognised in income statement when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in income statement. Net gains or losses on derivatives include exchange differences.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially difference terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in income statement.

Trade payable

Trade payables are obligation to pay for goods or services that have acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within 1 year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at their value and subsequently measured at amortised cost using the effective interest method.

3.24 Borrowings and borrowing costs

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between initial recognised amount and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method, except for borrowing costs incurred for the construction of any qualifying asset.

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.


3.25 Income taxes

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group’s subsidiaries and associates operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome.

Deferred tax is recognised, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. 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 the transaction affects neither accounting nor taxable income statement. Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the

reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses or unused tax credits 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 by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

3.26 Employee benefits

(i) Short term benefits

Wages, salaries and bonuses are recognised as an expense in the financial period in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plan

As required by law, companies in Malaysia make contributions to the Employees’ Provident Fund (“EPF”). Some of the Group’s foreign subsidiaries make contributions to publicly or privately administered pension insurance plans on a mandatory contractual or voluntary basis. Such contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.




3.26 Employee benefits (continued)

(iii) Defined benefit plan

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan

assets, together with adjustments for actuarial gains or losses and past service costs. The defined benefit obligation is calculated by independent actuaries using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are charged or credited to income over the employees’ expected average remaining working lives.

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.

(iv) Termination benefits

The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. Benefits falling due more than 12 months after the date of the statement of financial position are discounted to present value.

(v) Share-based compensation The Company operates an equity-settled, share-based compensation plan for the Directors and employees of the

Company and its subsidiaries (“ESOS”).

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense in the income statement. The total amount to be recognised over the vesting period is calculated by reference to the fair value of the options granted. At each date of the statement of financial position, the Company revises its estimates of the number of options that are expected to become exercisable.

The total amount to be expensed is determined by reference to the fair value of the options granted: - including any market performance conditions; - excluding the impact of any service and non-market performance vesting conditions (for example, profitability,

sales growth targets and remaining an employee of the entity over a specified time period); and - excluding the impact of any non-vesting conditions (for example, the requirement for employees).


The effect of any revision of the original estimates is recognised in the income statement and a corresponding adjustment is made to equity over the remaining vesting period.

When the options are exercised, the proceeds received (net of directly attributable transaction costs) are credited to share capital and share premium respectively.

When options are not exercised, lapsed or forfeited, the share option reserve is transferred to retained earnings.

Salient features of the Company’s share option scheme are disclosed in Note 34(c) to the financial statements.

In the separate financial statements of the Company, the grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

3.27 Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to income statement on a straight-line basis over the expected lives of the related assets.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate.

3.28 Provisions

Provisions are recognised when: • the Group has a present legal or constructive obligation as a result of past events; • it is probable that an outflow of resources will be required to settle the obligation; and • a reliable estimate of the amount can be made.

Where the Group expects a provision to be reimbursed (for example, under an insurance contract), 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.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

3.29 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




3.29 Contingent liabilities and contingent assets (continued)

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. However, contingent liabilities do not include financial guarantee contracts.

A contingent asset is a possible asset 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. The Group does not recognise contingent assets but discloses their existence where inflows of economic benefits are probable, but not virtually certain.

In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interests.

The Group recognises separately the contingent liabilities of the acquirees as part of allocating the cost of a business combination where their fair values can be measured reliably. Where the fair values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising from the acquisitions.

Subsequent to the initial recognition, the Group measures the contingent liabilities that are recognised separately at the date of acquisition at the higher of the amount that would be recognised in accordance with the provisions of MFRS 137 Provisions, contingent liabilities and contingent assets and the amount initially recognised, when appropriate, cumulative amortisation recognised in accordance with MFRS 118 Revenue.

3.30 Revenue recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be measured reliably. Revenue is shown net of value-added tax, returns, rebates and discounts, and after eliminating sales within the Group.

(i) Sale of goods

Sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer.

(ii) Rendering of services

Revenue from rendering of services is recognised in the accounting period.

(iii) Interest income

Interest is recognised on a time proportion basis that reflects the effective yield on the asset, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group.

(iv) Rental income

Rental income from operating leases is recognised on a straight-line basis over the term of the lease. (v) Charter hire income

Revenue from charter hire is recognised on an accrual basis but is deferred when the terms of billings have not been agreed by third parties or when certain conditions necessary for realisation have yet to be fulfilled.


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

(vii)Management and agency fees

Management and agency fees are recognised on an accrual basis by reference to completion of the specific transaction, assessed on the basis of the actual services provided as a proportion of the total services to be provided.

(viii)Commission income

Commission income is recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction, assessed on the basis of the actual service provided as a proportion of the total services to be provided.

(ix) Construction contracts

Revenue from construction contracts is recognised on the percentage of completion method by reference to the stage of completion of the contract work to date. See accounting policy Note 3.18 on construction contracts.

3.31 Foreign currencies

(i) 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.

(ii) 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, except when deferred in other comprehensive income as qualifying cash flow hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance income or cost’. All other foreign exchange gains and losses are presented in the income statement within other operating income and other operating expenses respectively.

For translation differences on financial assets and liabilities held at fair value through income statement and available-for-sale financial assets, refer to Note 3.12(iii).

(iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy

other than entities in Venezuela) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

• income and expenses for each statement of comprehensive income presented are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the




(iii) Group companies (continued)

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 other comprehensive income. • all amounts (i.e. assets, liabilities, equity items, income and expenses, including comparatives) are translated at

the closing rate at the date of the most recent statement of financial position; and • when amounts are translated into the currency of a non-hyperinflationary economy, comparative amounts shall

be those that were presented as current year amounts in the relevant prior year financial statements (i.e. not adjusted for subsequent changes in the price level or subsequent changes in exchange rates)

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold, or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences is reclassified to 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.

3.32 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group Chief Executive Officer.

3.33 Derivatives financial instruments and hedging activities

Derivatives that are used/designated as hedging instruments are initially recognised at fair value on the date the derivative contract is entered into. Such derivatives are subsequently remeasured at their fair value, with the resulting gain or loss being recognised in the income statement as other operating income or expense. The Group accounts for derivatives used as hedging instruments depending on their designation as follows:

(i) Fair value hedges

Resulting gains or losses from the subsequent remeasurement of hedging derivatives at their fair value are recognised in the income statement. In addition, offsetting changes in the fair value of the hedged item are recognised in the income statement and presented net of changes in fair value of the hedging derivatives.

If hedge accounting is discontinued, the adjustment to the carrying amount of a hedged item, for which the effective interest method is used, is amortised to income statement over the period to maturity.

(ii) Cash flow hedges

Resulting gains or losses from the subsequent remeasurement of hedging derivatives at their fair values are deferred to the hedging reserves as part of other comprehensive income to the extent of their effective portion. The ineffective portion is recognised directly in the income statement as other operating income or expense. Fair value changes from subsequent remeasurement of hedging derivatives deferred to hedging reserves are recycled to income statement


under finance cost in the periods when the underlying hedged item affects income statement and statement of financial position of the Group.

When a hedging instrument expires or is sold, or when hedge accounting is discontinued, any cumulative gain or loss existing

in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction in no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to income statement within other operating income/expenses.

The Group has entered in Cross Currency Interest Rate Swaps (“CCIRS”) that are designated as cash flow hedges for the Group’s exposure to foreign exchange risk on its Murabahah Medium Term Notes, which were issued by a subsidiary. The CCIRS involve the exchange of principals and fixed interest receipts in the foreign currency, in which the issued Murabahah Medium Term Notes are denominated, for principals and fixed interest payments in the subsidiary’s functional currency.

The fair values of derivative instruments used for hedging purposes are disclosed in Note 21. Movements in the hedging reserve are shown in Note 36. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.

4 Critical Accounting Estimates and Judgments

Estimates and judgments 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.

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 a 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 period are outlined below.

(a) Estimated impairment of goodwill and amortisation of intangible asset

The Group tests goodwill for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that this is necessary.

Determining whether goodwill is impaired requires an estimation of the value in use and fair value less costs to sell of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Fair value less costs to sell is determined based on indicative values on a willing buyer willing seller basis, as provided

by an independent valuer. The recoverable amounts of goodwill have been determined based on the higher of fair value less costs to sell and value-in-use calculations.

(i) The Group tests goodwill and capitalised development costs work-in-progress for impairment annually and has also tested capitalised development costs for impairment due to certain impairment indicators. The recoverable amounts of cash generating units (“CGUs”) were determined based on the value in use calculations. The calculations require the use of estimates and assumptions as set out in Note 13 to the financial statements, which resulted in no impairment arising other than an amount

of RM41.3 million relating to goodwill on the western hemisphere unit of the Oilfield Services segment.



4 Critical Accounting Estimates and Judgments (continued)

(a) Estimated impairment of goodwill and amortisation of intangible asset (continued)

(ii) Capitalised development expenditure is recognised when the criteria for recognition is met. Significant judgement is required in estimating the estimated sales units, which is based on technological obsolescence, secured contracts, projects tendered and expectations of market growth, which determine the amount of amortisation recognised. During the current financial period, the estimated sales units for monorail were increased from 500 to 750 units. The impact was a reduction in the amortisation charge of sales units delivered during the financial period by RM0.8 million.

The Directors are of the opinion that any reasonably expected change in the key assumptions used to determine the recoverable amounts of the CGUs, would not result in any further impairment.

The carrying amount of goodwill and estimates used in the calculation are disclosed in Note 13 to the financial statements. (b) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining recoverability of withholding and income taxes worldwide provision for income taxes, including determination of taxable income, capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The Group has made assumptions and judgements in relation to provision for tax disputes based on, among others, historical experience with local tax authorities in the relevant countries and timing of the potential liabilities. These assumptions and judgements are made in consultation with and according to the advice from local independent tax professionals. Any changes to these assumptions and judgements will impact the carrying amount of the potential liabilities.

Where the final tax outcome of these matters is different from the amounts that were initially recorded, such as if the actual future taxable profits, or if the amounts of carry forward tax losses, unutilised tax incentives and capital allowances that are approved by the tax authorities differ from those currently estimated by the Group, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.

(i) T ax recoverable – Oilfield Services

The Group has carried forward tax recoverable amounts of RM8.9 million related to certain subsidiaries. The Directors and local independent tax professionals believe that the amount can be set off against future tax payables.

(ii) Tax penalties and fines in Oilfield Services

In relation to tax disputes of certain subsidiaries, the Directors are of the opinion that the amount recorded as of 31 March 2013 and disclosed in Note 29 is sufficient based on tax advice obtained. In the event that the assumptions and judgement exercised by the Directors do not materialise, there is a further potential exposure amounting to RM6.8 million.

(iii) Deferred taxes

The Group has significant unrecognised tax losses, unutilised tax incentives and capital allowances as disclosed in Note 39. In the current financial period, the Group has recognised deferred tax assets amounting to RM41.3 million (31.12.2011: RM46.6 million; 1.1.2011: RM 78.7 million) in relation to significant unrecognised tax losses, unutilised tax incentives and capital allowances. In addition, two subsidiaries of Scomi Engineering Bhd have recognised deferred tax assets on tax losses, unabsorbed capital allowances and double deduction on research and development expenditure incurred amounting to approximately RM4.2 million and RM59.1 million based on projections of future taxable income and the non-commencement of pioneer stats. The


recognition of the double deduction on research and development expenditure for one subsidiary is based on approvals by the Inland Revenue Boards for years of assessment (YA) 2008 to 2010, and the intended submission for YA 2011, which is of the same nature and is therefore highly probably of being approved.

The deferred tax assets were recognised based on budgeted future taxable profits as the Directors are of the opinion that it is probable that the future taxable profits will be achieved within those entities.

(iv) Assessment of indirect taxes payable in Scomi Engineering Bhd (“SEB”)

During the course of execution of the Project described in Note 4(c), SEB and its wholly-owned subsidiary, Scomi Rail Bhd (“SRB”), will supply goods and services which would typically attract various indirect taxes in India. The tax consultants of SEB have assessed the potential indirect taxes payable to the Central Government, State Government and Local Municipality of that country and are of the view that:

(i) There are certain legislations empowering the Central Government, State Government and Local Authority to grant exemptions/concessions in cases where the respective Governments and authorities are satisfied that the project is in the interest of the public;

(ii) Past precedents indicated that the respective Governments and Authorities have exercised their discretionary powers to grant exemptions/concessions for specific projects in the interest of the public; and

(iii) Given the legal provisions, and past precedents, a reasonable case for tax exemptions/concessions can be made, subject to discretions of the respective Governments and Authorities.

Applications and representations have been made by management to the respective Governments and Authorities and the matter is under consideration at the respective authorities.

Following the Central Government of India budget in March 2012, the custom duty rates have been reduced. As a result, the total imputed value of custom duties based on delivery of 15 trains and applying the revised applicable tax rates have reduced indirect taxes by RM13.1 million (Rs 22 crores). In the recent Central Government of India Budget announced in March 2013, the custom duty rates have been reduced further from 16% to 13% which have reduced indirect taxes exposure by RM2.8 million (Rs 5 crores). In addition, with effect from 1 January 2014, under the India-Malaysia Comprehensive Economic Cooperation Agreement, the basic custom duties for rolling stocks will be reduced to 0%, which will further reduce the exposure by RM1 million (Rs 2 crores). Based on the above, there is

no residual financial exposure on the indirect taxes payable, as the impact of any remaining indirect taxes payable can be offset against the maximum amount contractually reimbursable by MMRDA.

SEB has also issued a writ of summons against the Local Authority to recover indirect taxes paid to date and are confident of a successful outcome based on past legal precedents.

Based on the above, the Directors are of the opinion that: (i) There is a reasonable case for claim of tax exemptions/concessions.; (ii) A reasonable estimate of the likely outcome of additional indirect taxes payable, if any, cannot be ascertained at

this stage; and (iii) The full recovery of indirect taxes paid in advance amounting to RM39 million is expected. (c) Assessment of penalties payable by Scomi Engineering Bhd (“SEB”)

(i) On 7, November 2008, the Mumbai Metropolitan Region Development Authority (“MMRDA”) of India awarded a contract for the Design, Development and Construction of a Monorail System (“the Project” or “ the Contract”) for a lump sum amount of Rs 2460 crores (RM1.7 billion) to the unincorporated consortium of Larsen & Toubro Ltd and Scomi Engineering




(c) Assessment of penalties payable by Scomi Engineering Bhd (“SEB”) (continued)

Bhd (“the Consortium”), for which Scomi Engineering Bhd’s (“SEB”) share of the value of the Contract is Rs 1097 crores (RM720 million) based on its scope of works. The design, development, construction/manufacture/supply,

testing and commissioning of the system including safety certification for commercial operations are to be completed within 30 months from the award of the Contract.

The Consortium has continuously appraised MMRDA of the status of the project and sought extensions of time as allowed under the Contract terms. Following discussions, MMRDA had on 31 May 2011 granted the Consortium with an EOT for each of the Phase 1 and Phase 2 works completion key-dates to 31 December 2011 and 22 November 2012 respectively.

As the Project encountered further delays, certain Phase 1 key milestones stated in the Contract were not met as at 31 December 2011.

SEB engaged specialist advisors to assist in the assessment of delay events, submission of claims for extension of time and assessing the Consortium’s contractual obligations.

The Consortium subsequently requested for a further EOT for Phase 1 and Phase 2 until 26 July 2014 vide its letter dated 9 November 2012.

Subsequent to the above submissions, MMRDA vide a letter dated 4 December 2012 had granted the Consortium a further EOT of up to 31 March 2013 for Phase 1 and up to 31 December 2013 for Phase 2.

Monies amounting to RM9.6 million withheld by MMRDA in April 2012 as deemed penalties payable had been released to SEB in November 2012 and no further retention has been imposed on subsequent billings or any further monies witheld up to the date of approval of the financial statements.

The Project activities and work continue normally with MMRDA approving claims, billings and making payments accordingly.

A specialist advisor via an EOT claim report dated 8 November 2012 has stated that the Consortium has very strong grounds to apply for a further extension of time for both Phase I and Phase II up to July 2014.

In reliance of the EOT granted by MMRDA on 4 December 2012 and the opinion of the specialist advisor, the Directors

are of the opinion that no provision for potential penalties is required as at 31 March 2013 as the likelihood of any penalties to be borne by SEB is remote.

(ii) On 10 December 2010, Scomi Transit Projects Sdn Bhd, a wholly owned subsidiary of the Company, was awarded a

monorail expansion contract for RM494 million (“the Project”). Due to various circumstances, the Project has encountered delays. The subsidiary has made several applications for extension of time as allowable under the terms of the contract. The applications were based on the advice of a specialist and legal advisors. In March 2013, the subsidiary and the customer agreed to work towards a revised project plan without prejudice to either party’s rights while the applications were being progressed.

Based on the advice of the specialist and legal advisors and taking into account the delays, the revised project plan and the subsidiary’s contractual right to receive extensions of time, the Directors are of the opinion that no provision for potential penalties is required as at 31 March 2013 as the likelihood of any penalties to be borne by the subsidiary is remote.


(iii) Certain subsidiaries of the Group could be subject to penalties arising from delays in delivering coaches and special purpose vehicles. The Directors are of the opinion, based on internal delay assessments, that no material penalties are contractually claimable as the delays were primarily due to changes in customer specifications or difficulties by customers in obtaining certain regulatory permits.

(d) Construction contract revenue

The Group has estimated total contract revenue based on the initial amount of revenue agreed in the contract, variations in the contract work and claims that can be measured reliably based on the latest available information and past experience and reliance on work of specialist. During the financial year, variation orders totalling RM137.8 million (2011: RM 10.0 million) were recognised based on percentage of completion less related cost in respect of additional work scope instructions by the customers and additional interest costs and overheads incurred due to delays, which have been granted EOTs or based on external delay assessments by specialist advisors.

Where the actual approved variations and claims differ from the estimates, such difference will impact the contract profits/(losses) recognised.

(e) Construction contracts profits

The Group recognises contract profits based on the percentage of completion method. The percentage of completion of a construction contract is determined based on the proportion that the contract costs incurred for work performed to-date bear to the estimated total costs for the contract. When it is probable that the estimated total contract costs of a contract will exceed the total contract revenue of the contract, the expected loss of the contract is recognised as an expense immediately.

Significant judgement is required in the estimation of total contract costs. Where the actual total contract costs is different from the estimated total contract costs, such differences will impact the contract profits recognised.

(f) Litigations

The Group operates across many countries and is required to comply with all applicable laws and regulations of the countries in which the Group operates. Significant judgement is required to determine the likelihood of the obligation and the estimation of amounts to be recognised in respect of legal matters, subject to uncertain future events. The legal

cases may extend over several years and the amount or timing may differ from current assumptions.

Based on legal advice, the Group has recognised RM3.5 million as provisions as disclosed in Note 29. Contingent liabilities of RM0.1 million (31.12.2011: RM 3.8 million) are as disclosed in Note 40(c).

(g) Impairment of receivables

The Group makes allowance for doubtful debts on an assessment of the recoverability of receivables. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Group specifically analyses historical bad debts, customer concentration, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgment to evaluate the adequacy of the allowance for doubtful debts. Where the expectations differ from the original estimates, the differences will impact the carrying value of receivables as disclosed in Notes 19 and 23.

The purchase consideration of RM 51.6 million arising from the disposal of SOKL was to have been received over 3 years commencing from the first anniversary of the date of disposal. As at 31 March 2013, RM 11.1 million had been received. Subsequent to the financial period, the Group entered into a revised payment scheme with the vendor to extend the repayment term for another year. This has resulted in a discounting impact of RM9.6 million to the income statement.



1. 2.


(g) Impairment of receivables (continued)

Notwithstanding the revised payment scheme, the Directors are of the opinion that the remaining amounts due will be received on the revised repayment due dates and no impairment is required.

(h) Impairment of property, plant and equipment – marine vessels

The recoverable amounts of vessels have been determined based on the higher of fair value less costs to sell and value-in-use calculation as disclosed in Note 12. Based on management’s assessment, there was an impairment charge of RM4,628,100 (31.12.2011: RM95,218,000) recognised in income statement for the financial period ended 31 March 2013.

(i) Impairment of investments in subsidiaries, associates and joint ventures

The Company assesses the impairment of investments in subsidiaries, associates and joint ventures when there is an indication of impairment. The carrying amounts are disclosed in Note 16, 17 and 18 respectively. Based on their assessment, there was an impairment charge of RM276.8 million (31.12.2011: RM144.0 million) for investment in a subsidiary recognised in income statement for the financial period ended 31 March 2013. The recoverable amount of investment in subsidiary was determined based on the value-in-use calculation as disclosed in Note 16.

5 Revenue Group Company Period Year Period Year ended ended ended ended 31.3.2013 31.12.2011 31.3.2013 31.12.2011 RM’000 RM’000 RM’000 RM’000 (restated)

Continuing operations Sales of goods 663,301 511,976 – – Rental/charter hire income 680,915 556,914 – – Rendering of services 178,349 132,409 – – Construction contract income 397,794 198,695 – – Management fee 1,946 2,572 – 4,167 Commission income 63 – – – 1,922,368 1,402,566 – 4,167 Discontinued operations Rental income 21,814 173,455 – – Rendering of services 104,917 155,043 – – Sales of goods 27,205 132,207 – –

2,076,304 1,863,271 – 4,167


6 Profit/(Loss) Before Taxation

Group Company Period Year Period Year ended ended ended ended 31.3.2013 31.12.2011 31.3.2013 31.12.2011 RM’000 RM’000 RM’000 RM’000 (restated)

Profit/(loss) before taxation from continuing and discontinued operations is stated after charging/(crediting): Amortisation of intangible assets 2,070 2,161 – – Amortisation of prepaid land lease payments – 1,460 – – Allowance for obsolete stocks 1,010 2,972 – – Inventories written down – 957 – – Impairment losses - intangible assets 41,292 42,607 – – - property, plant and equipment 10,207 98,846 – – - receivables 4,104 21,717 – – - amount due from subsidiaries – – 23,892 7,807 - investment in subsidiary – – 276,779 144,592

Write back of impairment losses - investment in subsidiary – – (143,992) – Write back of impairment of receivable (6,622) (675) (6,406) – Auditors’ remuneration: PricewaterhouseCoopers Malaysian firm Statutory audit - current year 2,119 1,735 301 212 - under provision in prior year 38 – – – Non-audit fees - current year 2,214 – 587 –

Overseas affiliates of PricewaterhouseCoopers Malaysian firm Statutory audit - current year 2,281 1,777 – – - over provision in prior year (176) – – – Other external auditors Statutory audit - current year 119 202 – – - under provision in prior year 102 – – – Non-audit fees - current year 99 – – – Bad debts (recovered)/written off (13,298) 2,085 – – Depreciation of property, plant and equipment 104,166 123,615 820 826 Depreciation of investment properties 177 144 64 94



6 Profit/(Loss) Before Taxation (continued)

Group Company Period Year Period Year ended ended ended ended 31.3.2013 31.12.2011 31.3.2013 31.12.2011 RM’000 RM’000 RM’000 RM’000 (restated) Gain on disposal of property, plant and equipment (5,389) (4,922) – (60) Fair value gain on financial instruments - derivatives 435 (556) – – Property, plant and equipment written off – 361 – – Provision for tax penalties – 872 – – Loss/(gain) on foreign exchange - realised (13,616) 15,300 (101) (131) - unrealised 19,346 22,815 (294) (344) Monetary adjustments (1,641) (2,417) – – Hyperinflation adjustments 4,804 3,218 – – Gain on disposal of/dilution of interest in subsidiary companies (21,118) – (558,307) – ended ended ended end Interest income (1,461) (3,384) (5,087) (6,303) Lease rental - plant and machinery 19,928 56,975 – – - property 3,551 13,102 – – Rental of land and premises 2,781 3,967 591 445 Rental of equipment 1,273 3,559 35 97 Rental income (133) (135) (476) (408) Research and development expenses – 101 – – Government grant (449) – – – (Gain)/loss on disposal of a joint venture company – (4,548) – 35 Share option expense 3,986 3,300 888 1,081

Employee benefits costs (including Executive Director): Wages, salaries and bonuses 250,997 251,750 4,473 4,917 Defined contribution plan 10,727 11,285 618 519 Defined benefit plan (Note 38) 1,117 1,402 – – Termination benefits 2,258 633 – – Share option expense (Note 36) 3,986 3,620 888 1,081 Employment costs 7,042 7,019 35 83 Other employee benefits (including allowances) 31,024 71,202 515 485

307,151 346,911 6,529 7,085

Included in the cost of sales of the Group are the cost of inventories and services of RM677,893,000 (31.12.2011: RM877,568,000) and construction contract costs of RM317,872,000 (31.12.2011: RM205,611,000).


8 Taxation

7 Finance Costs


Continuing operations Interest expense on borrowings, finance leases, ICSLS and ICULS 67,720 60,481 16,349 16,696 Interest on CCIRS 898 2,304 – – Hedging – fair value hedge – 21 – – 68,618 62,806 16,349 16,696 Currency exchange* – – – – Fair value loss/(gain) on CCIRS designated as fair value hedges – (893) – – Fair value loss/(gain) on put option 61,060 (13,057) – –

129,678 48,856 16,349 16,696

Discontinued operations Interest expense on borrowings and leases 31,300 3,754 – –

160,978 52,610 16,349 16,696

* Included in currency exchange is a gain of RM3,058,000 (2011: loss of RM11,831,000) transferred from hedging reserve which is offset by a corresponding exchange (loss)/gain of the same amount arising from revaluation of the underlying hedged borrowings.

8 Taxation


Continuing operations Current tax - Malaysian income tax 6,498 (28,015) (1,409) – - Foreign tax 16,095 31,580 – – 22,593 3,565 (1,409) –

Deferred tax (Note 39) 4,964 15,733 (827) 666

27,557 19,298 (2,236) 666



8 Taxation (continued)


Current tax Current year 17,799 (6,060) – – Under/(over) accrual in prior years 4,794 9,625 (1,409) –

22,593 3,565 (1,409) – Deferred tax Reversal and origination of temporary differences 3,051 9,206 (827) 666 Benefit from previously unrecognised tax losses 1,913 6,723 – – Change in income tax rate – (196) – –

4,964 15,733 (827) 666 Total tax expense/(credit) from continuing operations 27,557 19,298 (2,236) 666 Discontinuing operations Current tax - Foreign tax 4,998 38,259 – – Deferred tax (Note 39) (1,122) 19,820 – –

3,876 58,079 – –

Current tax Current year 4,998 38,059 – – Under accrual in prior years – 200 – –

4,998 38,259 – –

Deferred tax Reversal and origination of temporary differences (1,122) 19,820 – –

Total tax expense from discontinued operations 3,876 58,079 – –

Total tax expense/(credit) 31,433 77,377 (2,236) 666


Group Company Period Year Period Year ended ended ended ended 31.3.2013 31.12.2011 31.3.2013 31.12.2011 % % % % (restated)

Numerical reconciliation between the average effective tax rate and the applicable tax rate:

Continuing operations Applicable tax rate 25 (25) 25 (25)

Tax effects of: - expenses not deductible for tax purposes 18 14 24 25 - Tax rates in other countries (10) (12) – – - income not subject to tax (5) (4) (50) – - deferred tax assets not recognised in respect of current period’s tax losses and unabsorbed capital allowances 82 1 – – - under accrual in respect of prior years 5 3 – – - share of results of associates and joint ventures 16 11 – –

Average effective tax rate 131 (12) (1) –

The applicable tax rate of the Group is derived from the consolidation of all the applicable tax for the companies within the Group, based on their domestic tax rates. The applicable tax rate of the Company is the Malaysian statutory tax rate of 25%.

The income tax effect of each of other comprehensive (loss)/income item is Nil (2011: Nil) in the current financial period.

9 Directors’ Remuneration The Directors of the Company in office during the financial period are as follows:

Non-executive Directors Tan Sri Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Tan Sri Mohamed Azman bin Yahya Datuk Haron bin Siraj Dato’ Mohammed Azlan bin Hashim Dato’ Abdul Rahim bin Abu Bakar Dato’ Sreesanthan a/l Eliathamby Dato’ Teh Kean Ming (appointed on 22 October 2012) Foong Choong Hong Executive Director Shah Hakim @ Shahzanim bin Zain



9 Directors’ Remuneration (continued)

The aggregate amount of emoluments received/receivable by Directors of the Company during the financial period is as follows:


Non-executive Directors: - fees 995 767 729 555 - other emoluments 203 194 171 171

1,198 961 900 726 Executive Director (Note 41(b)): - salaries and bonus 3,585 2,313 2,248 1,320 - fees – 34 – – - defined contribution plan 452 – 279 – - estimated monetary value of benefits-in-kind 252 589 252 352 4,289 2,936 2,779 1,672

5,487 3,897 3,679 2,398

10 Loss Per Share

(a) Basic loss per share

Basic loss per share of the Group is calculated by dividing the profit attributable to owners of the Company for the financial period by the weighted average number of ordinary shares in issue during the financial period and conversion of potential ordinary shares from the mandatorily convertible instruments i.e. Irredeemable Convertible Secured Loan Stocks (“ICSLS”) and Convertible Redeemable Secured Bonds, excluding ordinary shares purchased by the Company and held as Treasury shares (Note 34(b)). The Convertible Redeemable Secured Bonds conversion is based on the assumption that the conversion takes place upon maturity.

Group Period Year ended ended 31.3.2013 31.12.2011 (restated)

Loss attributable to owners of the Company (RM’000) (66,833) (223,705)

Weighted average number of ordinary shares in issue (‘000) 1,634,422 1,391,731

Basic loss per share (Sen) (4.09) (16.07)


b) Diluted loss per share

For the diluted loss per share calculation, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares, warrants and share options granted to employees.

For warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding warrants. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the warrants. The difference is added to the denominator as an issue of ordinary shares for no consideration. This calculation serves to determine the “bonus” element to the ordinary shares outstanding for the purpose of computing the dilution.

For share options granted to employees, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the share options. The difference is added to the denominator as an issue of ordinary shares for no consideration. This calculation serves to determine the ‘bonus’ element to the ordinary shares outstanding for the purpose of computing the dilution.

Group Period Year ended ended 31.3.2013 31.12.2011 (restated)

Loss attributable to owners of the Company (RM’000) (66,833) (223,705)

Weighted average number of ordinary shares in issue (‘000) 1,634,422 1,391,731

Adjustment for: - share options (‘000) 4,271 2,797 Weighted average number of ordinary shares for diluted earnings per share (’000) 1,638,693 1,394,528

Diluted loss per share (Sen) (4.08) (16.04)

11 Dividends The Directors do not recommend any dividend for the financial period ended 31 March 2013.



12 Property, Plant and Equipment

Renovation, Tools, office plant equipment, Monorail Capital Freehold Freehold Leasehold Marine and fittings and Motor test work-in land buildings buildings vessels machinery computers vehicles track progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group Cost At 1 January 2012 20,076 58,783 26,165 776,080 607,571 66,860 14,319 14,795 2,058 1,586,707 Additions – – 1,280 28,713 62,263 1,926 620 – 7,266 102,068 Disposals (89) (159) (1,398) (71,740) (10,255) (1,556) (659) – – (85,856) Write-offs – – – – (400) (118) – – – (518) Reclassification – – – 2,013 6 (6) – – (2,013) – Disposal of subsidiaries – – (5,228) – (21,435) (19) – – (26,682) Transfer to assets held for sale (8,613) (16,717) (5,940) – (191,334) (6,229) (5,296) – – (234,129) Currency translation differences (313) (372) (156) (14,612) 1,129 (419) 29 – (19) (14,733)

At 31 March 2013 11,061 41,535 14,723 720,454 447,545 60,439 9,013 14,795 7,292 1,326,857

Group Accumulated depreciation and impairment At 1 January 2012 – 16,781 12,532 405,579 383,705 40,713 11,325 2,819 – 873,454 Charge for the financial period – 1,043 821 45,467 44,755 10,623 840 617 – 104,166 Capitalised under development costs – – – – 78 – 207 – – 285 Disposals – (207) (1,324) (47,303) (7,009) (1,514) (646) – – (58,003) Impairment losses – – 500 4,176 6,131 – – – – 10,807 Disposal of subsidiaries – – (1,188) – (6,801) (16) – – – (8,005) Transfer to assets held for sale – (11,137) – – (169,606) (8,758) (4,785) – – (194,286) Currency translation differences – (50) 198 (7,545) (1,652) (346) (64) – – (9,459)

At 31 March 2013 – 6,430 11,539 400,374 249,601 40,702 6,877 3,436 – 718,959

Net book value At 31 March 2013 11,061 35,105 3,184 320,080 197,944 19,737 2,136 11,359 7,292 607,898


Renovation, Tools, office plant equipment, Monorail Capital Freehold Freehold Leasehold Marine and fittings and Motor test work-in land buildings buildings vessels machinery computers vehicles track progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Group Cost At 1 January 2011 19,548 55,120 28,950 – 735,432 65,892 13,555 14,795 – 933,292 Early adoption of standards – – – – – 890 410 – – 1,300 At 1 January 2011, as restated 19,548 55,120 28,950 - 735,432 66,782 13,965 14,795 – 934,592

Additions – – 383 23,757 46,525 4,823 628 1,995 78,111 Disposals (1,482) (948) (3,330) (8,299) (172,616) (6,228) (2,186) – – (195,089) Transfer from assets held for sale 1,218 2,493 3 760,134 799 2,058 1,871 – – 768,576 Currency translation differences 792 2,118 159 488 (2,569) (575) 41 – 63 517

At 31 December 2011 20,076 58,783 26,165 776,080 607,571 66,860 14,319 14,795 2,058 1,586,707

Group Accumulated depreciation and impairment At 1 January 2011 – 13,057 14,410 – 441,760 35,666 10,488 2,326 – 517,707 Early adoption of standards – – – – – 184 301 – – 485

At 1 January 2011, as restated – 13,057 14,410 – 441,760 35,850 10,789 2,326 - 518,192 Charge for the financial period – 1,819 1,779 66,188 38,800 8,907 1,396 123 - 119,012 Capitalised under development costs – – – – 233 241 – 370 – 844 Disposals – (141) (3,580) (7,828) (97,896) (6,245) (2,014) – – (117,704) Impairment losses – – – 95,218 3,628 – – – – 98,846 Write-offs – – – – (73) – – – – (73) Transfer from assets held for sale – 2,045 – 247,146 271 2,175 1,177 – – 252,814 Currency translation differences – 1 (77) 4,855 (3,018) (215) (23) – – 1,523

At 31 December 2011 – 16,781 12,532 405,579 383,705 40,713 11,325 2,819 – 873,454



1.

12 Property, Plant and Equipment (continued)

Renovation, Tools, office plant equipment, Monorail Capital Freehold Freehold Leasehold Marine and fittings and Motor test work-in land buildings buildings vessels machinery computers vehicles track progress Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Net book value At 31 December 2011 20,076 42,002 13,633 370,501 223,866 26,147 2,994 11,976 2,058 713,253

Group Net book value At 1 January 2011 19,548 42,063 14,540 – 293,672 30,932 3,176 12,469 – 416,400

Office Motor equipment vehicles and fittings Renovation Total RM’000 RM’000 RM’000 RM’000

Company Cost At 1 January 2012 1,479 3,655 741 5,875 Additions – 7 – 7

At 31 March 2013 1,479 3,662 741 5,882

Accumulated depreciation At 1 January 2012 1,304 2,692 248 4,244 Charge for the financial period 168 344 308 820

At 31 March 2013 1,472 3,036 556 5,064

Net book value at 31 March 2013 7 626 185 818

Cost At 1 January 2011 1,839 3,640 741 6,220 Additions – 15 – 15 Disposal (360) – – (360)

At 31 December 2011 1,479 3,655 741 5,875

Accumulated depreciation At 1 January 2011 1,363 2,408 2 3,773 Charge for the financial year 296 284 246 826 Disposal (355) – – (355)

At 31 December 2011 1,304 2,692 248 4,244

P/131

1. Office Motor equipment vehicles and fittings Renovation Total RM’000 RM’000 RM’000 RM’000

Net book value at 31 December 2011 175 963 493 1,631

Net book value at 1 January 2011 476 1,232 739 2,447

(i) The net book values of property, plant and equipment of the Group acquired under finance leases are as follows:

Group 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000

Freehold land and buildings – – 2,700 Motor vehicles 1,346 2,103 1,835 Tools, plant and machinery – – 10,059 Office equipment, fittings and computers 4,849 1,875 1,673

(ii) Certain property, plant and equipment of the Group are charged as security for banking facilities (Note 28) as follows:

Group 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000

Marine vessels 152,860 92,066 536,164 Land and buildings 1,216 12,019 17,914

154,076 104,085 554,078

(iii) During the financial period, the Group acquired property, plant and equipment at aggregate costs of RM102,068,000 (31.12.2011: RM78,111,000), of which RM6,655,000 (31.12.2011: RM2,812,000 ) is by means of finance lease arrangements.

(iv) An impairment assessment was performed on certain vessels to assess the carrying amounts of these vessels due to a loss of a major customer in the Marine Services segment. Arising from this assessment, the Group recognised an impairment charge of RM4,628,100 (31.12.2011: RM95,218,000) which represented the write-down of certain vessels to their recoverable amounts. The recoverable amount was based on the higher of fair value less cost to sell and value-in-use calculation, with all tugs and barges being regarded as a cash-generating unit. The recoverable amounts of the vessels were determined based on fair value (based on independent third party valuation reports) less costs to sell, which is the indicative values of the vessels on a willing buyer willing seller basis.

SCOMI GROUP BHD ANNUAL REPORT 2013 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013


13 Intangible Assets Development cost Capitalised development costs work-in-progress Drilling MassRapid Drilling waste Transit/ waste Goodwill Patents Monorail Bus equipment Propulsion equipment Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group Cost At 1 January 2012 248,037 13,056 114,418 1,016 5,799 2,558 2,499 387,383 Additions – – – – 20 15,779 – 15,799 Transfer to asset held for sale (9,900) (557) – – – – – (10,457) Currency translation differences (44) (50) – – (121) – – (215)

At 31 March 2013 238,093 12,449 114,418 1,016 5,698 18,337 2,499 392,510

Group Accumulated impairment and amortisation At 1 January 2012 39,602 12,487 3,432 168 2,981 – – 58,670 Amortisation for the financial period – 62 2,008 – – – – 2,070 Transfer to held for sale – (547) – – 199 – – (348) Impairment loss 41,292 – – – – – – 41,292 Currency translation differences (58) (49) – – 53 – – (54)

At 31 March 2013 80,836 11,953 5,440 168 3,233 – – 101,630

Net book value At 31 March 2013 157,257 496 108,978 848 2,465 18,337 2,499 290,880

Group Cost At 1 January 2011 294,867 13,001 77,121 112 5,703 904 – 391,708 Early adoption of standards 4,685 – – – – – – 4,685

At 1 January 2011, as restated 299,552 13,001 77,121 112 5,703 904 – 396,393 Additions – – 37,297 – – 2,558 2,463 42,318 Reclassification – – – 904 – (904) – – Transfer from asset held for sale 39,845 – – – – – – 39,845 Discontinued operations (90,179) – – – – – – (90,179) Currency translation differences (1,181) 55 – – 96 – 36 (994)

At 31 December 2011 248,037 13,056 114,418 1,016 5,799 2,558 2,499 387,383


Development cost Capitalised development costs work-in-progress Drilling MassRapid Drilling waste Transit/ waste Goodwill Patents Monorail Bus equipment Propulsion equipment Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group Accumulated impairment and amortisation At 1 January 2011 360 7,501 1,616 66 1,458 – – 11,001 Early adoption of standards – – – – – – – –

At 1 January 2011, as restated 360 7,501 1,616 66 1,458 – – 11,001 Amortisation for the financial year 97 84 1,816 102 62 – – 2,161 Impairment loss 36,294 4,856 – – 1,457 – – 42,607 Currency translation differences 2,851 46 – – 4 – – 2,901

At 31 December 2011 39,602 12,487 3,432 168 2,981 – – 58,670

Net book value At 31 December 2011 208,435 569 110,986 848 2,818 2,558 2,499 328,713

At 1 January 2011 299,192 5,500 75,505 46 4,245 904 – 385,392

(a) The carrying amounts of goodwill allocated to the Group’s cash-generating units (“CGUs”) are as follows:

Group 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000 (restated) (restated)

Oilfield services 101,574 152,752 245,741 Marine services 7,014 7,014 7,014 Transport solutions 48,669 48,669 48,766

157,257 208,435 301,521

The recoverable amount of the CGU in the current financial period is determined based on value in use calculations for oilfield

services and transport solutions and fair value less costs to sell for marine services. In the previous financial period, the recoverable amount of all the CGUs were determined based on value in use calculations except for marine services which was based on a fair value less costs to sell basis.



13 Intangible Assets (continued)

Upon the completion of the restructuring as disclosed in Note 44, the goodwill relating to product enhancement CGU was subsumed in the oilfield services CGU. The oilfield services and product enhancement CGUs are included within the oilfield services reportable segment in Note 43.

The value in use calculations use pre-tax cash flow projections based on approved financial budgets. The projections were based on an approved business plan and reflect the expectation of usage, revenue, growth, operating costs, technological obsolescence and margins based on past experience and current assessment of market share, expectations of market growth and industry growth.

(i) The key assumptions used in the value in use calculations for oilfield services and transport solutions are as follows:

Oilfield Transport services solutions % % Growth rate/value in use basis - 2013 6.0 – 30.0 Existing secured projects and anticipated projects of existing technology - 2011 6.0 – 30.0 Existing secured projects and expected terminal value from operations

Terminal growth rate - 2013 3.0 – 8.0 Not applicable - 2011 3.0 – 8.0 0%

Pre-tax discount rate - 2013 9.0 – 23.0 10.0 - 2011 9.0 – 23.0 14.0

(ii) Fair value less cost to sell of marine services

Goodwill allocated to Marine Services – Indonesia CGU arose from the Marine Logistics Business acquired from Chuan Hup Holdings Limited on 30 September 2005.

During the financial period, the carrying amount of goodwill was reviewed for impairment using fair value less costs to sell.

The recoverable amount of the CGU is determined based on indicative values of the vessels in the CGU on a willing buyer willing seller basis, as provided by an independent valuer. The indicative values were derived based on the specification of each vessel.

Based on the recoverable amounts determined using the basis stated above, therefore, no impairment charge (31.12.2011: RM36,294,000) has been recognised in the financial period ended 31 March 2013.

(b) In 2009, the Group purchased the rights to use an intellectual property for the development of technologies relating to crude oil waste, oil recovery recycling and treatment for oil and gas industry, amounting to RM9.4 million. During the previous financial year, an impairment loss of RM4.8 million was recognised to fully write-down the remaining carrying

amount of the intellectual property rights. During the financial period, an amount of RM3.8 million was received as a one-off payment from a third party vendor.

(c) Capitalised development cost work in progress

Oilfield Services - EMS Engineering Package

The capitalised development cost work in progress relating to the EMS Engineering Package was tested for impairment based in the following assumptions:

31.3.2013 %

Gross margin 49.0 – 56.0 Revenue growth rate in the first 5 years No growth Discount rate 9.0 – 23.0 Terminal growth rate Nil

The projections over these periods reflect the expectation of usage, revenue, growth, operating costs and margins are based current assessment of market share, expectations of market growth and industry growth. The discount rates used are pre-tax and reflect specific risk relating to individual countries where this technology is expected to be used.

The EMS Engineering Package is expected to commence commercial production in 2014.

Transport Solutions

Development cost work-in-progress has been tested for impairment based on expectations of market growth and industry growth.

Pre-tax Profit Terminal Value in use basis discount rate margin range growth rate

31.3.2013 Mass rapid transit (MRT) Anticipated projects over the expected 10% 14% Not applicable useful life of the current MRT technology

Propulsion Existing secured projects and anticipated 10% 10.9% - 24% Not applicable projects over the remaining useful life of the current propulsion technology

31.12.2011 Mass rapid transit (MRT) Anticipated projects over the expected 13% 14% Not applicable useful life of the current MRT technology

A reasonable possible change in the assumptions used will not result in any change to the impairment conclusion.

SCOMI GROUP BHD ANNUAL REPORT 2013P/135NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013


14 Investment Properties


Cost At beginning of financial period/year 3,834 2,889 4,678 4,678 Additions – 945 – –

At end of financial period/year 3,834 3,834 4,678 4,678

Accumulated depreciation At beginning of financial period/year 2,275 1,676 94 – Charge for the financial period/year 177 144 64 94 Impairment losses – 455 – –

At end of financial period/year 2,452 2,275 158 94 Net book value At beginning of financial period/year 1,559 1,213 4,584 4,678 At end of financial period/year 1,382 1,559 4,520 4,584

Fair value at end of financial period/year 3,790 2,471 5,300 11,800

The fair values of the investment properties in the prior years were determined based on current prices in active markets. The valuations for the current financial period were carried out on 16 May 2013 by a registered valuer.

Certain investment property owned by the Company is occupied by a subsidiary within the Group and therefore has been classified

under property, plant and equipment.

The following amounts have been recognised in the income statement:


Rental income 133 135 476 408

There were no direct operating expenses arising from investment property that generated rental income during the year as all expenses were incurred by the tenant.


15 Prepaid Land Lease Payments

Group Period Year ended ended 31.3.2013 31.12.2011 RM’000 RM’000 (restated)

At beginning of financial period/year 316 1,787 Disposal of a subsidiary (316) – Amortisation for the financial period/year – (1,460) Currency translation differences – (11)

At end of financial period/year – 316

16 Investments in Subsidiaries


At cost: - quoted shares in Malaysia 1,219,026 646,931 646,931 - unquoted shares 5,224 298,983 298,908 - quoted ICULS in Malaysia – 54,782 54,782

1,224,250 1,000,696 1,000,621 Less: Accumulated impairment (4,947) (148,938) (4,346) Deemed investment - financial guarantee - 1,268 1,268

1,219,303 853,026 997,543

At market value: - quoted shares in Malaysia 721,158 226,795 371,003 - quoted ICULS in Malaysia - 29,035 52,591

During the financial period, the Company recognised a reversal of impairment of RM143,991,000 on its cost of investment in Scomi Energy Services Bhd (“SESB”) due to the internal restructuring. The reversal was made as the recoverable amount of its investment is higher than the carrying value. The recoverable amount is based on the value-in use of the SESB Group based on an average growth rate of 5.5% and discount rate of 16%.



16 Investments in Subsidiaries (continued)

Details of the significant subsidiaries are as follows:

Country of Group’s effective Name of company incorporation equity interest Principal activities 31.3.2013 31.12.2011 1.1.2011 % % % Significant direct subsidiaries of Scomi Group Bhd Scomi Energy Services Bhd (“SESB”) * Malaysia (1) 65.6 42.7 42.7 Investment holding

Scomi Engineering Bhd (“SEB”)* Malaysia (2) 72.3 67.4 69.8 Investment holding

Significant direct subsidiaries of Scomi Energy Services Bhd Scomi Marine Services Pte Ltd # Singapore 65.6 42.7 42.7 Investment holding

Scomi Oilfield Limited (“SOL”) * Bermuda 65.6 76.1 76.1 Investment holding

Trans Advantage Sdn. Bhd.* Malaysia 65.6 42.7 42.7 Provision of ship chartering and ship management

Scomi KMC Sdn Bhd * Malaysia 34.1 52.0 52.0 Provision of oilfield (including 4% held by equipment, supplies Scomi Oiltools Sdn Bhd) and services

Scomi Sosma Sdn Bhd * Malaysia 65.6 40.0 40.0 Distribution of chemical products and services

Significant subsidiary of Scomi Marine Services Pte Ltd PT. Rig Tenders Indonesia, Indonesia 52.8 42.7 42.7 Provision of ship Tbk # owning and chartering

Significant subsidiaries of PT. Rig Tenders Indonesia, Tbk Rig Tenders Marine Pte. Ltd. # Singapore 52.8 42.7 42.7 Ship chartering

CH Logistic Pte. Ltd. # Singapore 52.8 42.7 42.7 Investment holding

CH Ship Management Pte. Ltd. # Singapore 52.8 42.7 42.7 Provision of management services

Goldship Private Limited # Singapore 52.8 42.7 42.7 Dormant


Country of Group’s effective Name of company incorporation equity interest Principal activities 31.3.2013 31.12.2011 1.1.2011 % % %

Grundtvig Marine Pte. Ltd. # Singapore 52.8 42.7 42.7 Investment holding

Subsidiary of Grundtvig Marine Pte. Ltd. PT. Batuah Abadi Lines # Indonesia 40.4 40.6 40.6 Ship owning and chartering

Significant subsidiary of Scomi Sosma Sdn Bhd Scomi Anticor S.A. α France 65.6 40.0 40.0 Design and field deployment of various oil and gas production chemicals

Significant subsidiary of Scomi Oilfield Limited Scomi Oiltools Sdn Bhd * Malaysia 65.6 76.1 76.1 Provision of oilfield equipment, supplies and services and provision of management services

Scomi Oiltools (Cayman) Ltd # Cayman 65.6 76.1 76.1 Provision of oilfield Islands equipment, supplies and services

Scomi Oiltools Ltd * Cayman 65.6 76.1 76.1 Provision of oilfield Islands equipment, supplies and services

Scomi Oiltools (Africa) Limited * Cayman 65.6 76.1 76.1 Investment holding Islands and provision of oilfield equipment, supplies and services Scomi Oiltools (Thailand) Thailand 65.6 76.1 76.1 Provision of oilfield Limited # equipment, supplies and services

Scomi Oiltools Egypt SAE # (3) Egypt 65.6 76.1 76.1 Provision of oilfield equipment, supplies and services



16 Investments in Subsidiaries (continued)


Scomi Oiltools Pty Ltd # Australia 65.6 76.1 76.1 Provision of oilfield equipment, supplies and services

Scomi Oiltools (S) Pte Ltd α Singapore 65.6 76.1 76.1 Investment holding and provision of oilfield equipment, supplies and services KMCOB Capital Berhad * Malaysia 65.6 76.1 76.1 Undertake the issuance of private debt securities and refinancing exercise

Scomi Oiltools Oman LLC# Oman 33.4 38.8 38.8 Provision of oilfield equipment, supplies and services

Scomi Equipment Inc USA 65.6 – – Dormant, intended to be principally involved in research and development and provision of engineering services

Significant subsidiaries of Scomi Oiltools (S) Pte Ltd KMC Oiltools India Ptv Ltd # India 65.6 76.1 76.1 Provision of oilfield equipment, supplies and services

PT Scomi Oiltools # Indonesia 65.6 76.1 76.1 Provision of oilfield equipment, supplies and services

Scomi Oiltools Russia LLC # Russia 65.6 76.1 76.1 Provision of oilfield equipment, supplies and services

Significant subsidiaries of Scomi Engineering Bhd Urban Transit Private Limited α India 72.3 67.4 69.8 Engage in the business of development, manufacture and supply of monorail



transportation infrastructure systems equipment and services Urban Transit Servicos Brazil 72.3 67.4 – Engage in the business Do Brasil LTDA # of development, manufacture and supply of monorail transportation infrastructure systems equipment and services

Scomi Special Vehicles Sdn Bhd * Malaysia 72.3 67.4 69.8 Manufacturing and fabrication of road transport equipment, material handling equipment and in the provision of related engineering services

Scomi Transportation Malaysia 72.3 67.4 69.8 Investment holding Systems Sdn Bhd *

Scomi Transit Project Brazil 72.3 67.4 69.8 Development, (Sao Paulo) Sdn Bhd * manufacture and supply of monorail transportation systems equipment and services

Significant subsidiaries of Scomi Special Vehicles Sdn Bhd Scomi Trading Sdn Bhd * Malaysia 72.3 67.4 69.8 Marketing agent for road transport equipment

Significant subsidiaries of Scomi Transportation Systems Sdn Bhd Scomi Rail Bhd * Malaysia 72.3 67.4 69.8 Design, manufacture,



16 Investments In Subsidiaries (continued)


and supply of monorail trains and related services

Scomi Coach Sdn Bhd * Malaysia 72.3 67.4 69.8 Manufacturing, fabrication and assembly of commercial coaches and truck vehicle bodies * Audited by PricewaterhouseCoopers, Malaysia

# Audited by affiliates of PricewaterhouseCoopers, Malaysia

α Audited by firms other than PricewaterhouseCoopers, Malaysia and its affiliates

(1) During the financial period, the shares held by the Company increased from 313,043,478 ordinary shares to 1,536,992,712 ordinary shares following the issuance of SESB’s shares in respect of the sale of Scomi Oilfield Limited to Scomi Energy Services Bhd.

(2) During the financial period, the shares held by the Group increased from 286,044,224 ordinary shares of RM1.00 each to 342,079,503 ordinary shares of RM1.00 each following the issuance of 56,035,279 new ordinary shares of RM1.00 each upon conversion of ICULS held by the Company at a price of RM1.00 per share on its maturity.

(3) Scomi Oilfield Limited (“SOL”), a subsidiary of the Group entered into a Letter of Variation to defer the transfer of shares of Scomi Oiltools Egypt SAE (“SOES”) from Scomi Oiltools Bermuda Limited (“SOBL”), a subsidiary of the ultimate holding company, to SOL to a date to be mutually agreed later and until such time, SOBL will continue to hold the SOES Sale Shares in its name as trustee for SOL’s sole and exclusive benefit as the beneficiary, based on the terms of a trust deed

entered into by SOBL and SOL. As a result thereof, SOES has been consolidated as a subsidiary.

17 Investments in Associates


Shares unquoted cost 16,857 16,857 16,857 Share of post-acquisition - loss (16,454) (16,610) (13,633)

403 247 3,224

P/143SCOMI GROUP BHD ANNUAL REPORT 2013

The Group’s share of the results of its associates is as follows:


Revenue 21,708 14,123 Loss after tax (5,244) (7,616)

Group’s share of results 133 (2,978)

The Group’s share of the assets and liabilities of associates is as follows:


Total assets 43,942 183,081 202,583 Total liabilities (43,152) (174,596) (187,121)

Net assets 790 8,485 15,462


Held by Scomi Energy Services Bhd Southern Petroleum Vietnam 13.1 8.6 8.6 Owner and operator Transportation Joint of tankers Stock Company

Emerald Logistics Sdn Bhd Malaysia 32.2 20.9 20.9 Ship chartering and management Held by Scomi Marine Services Pte. Ltd. King Bridge Enterprise Ltd. British Virgin 32.2 20.9 20.9 Investment holding Islands



18 Investments in Joint Ventures


Share of net assets of joint ventures 55,495 47,157 25,081

(i) The Group’s share of the results of joint ventures is as follows:


Revenue 41,222 30,728 Profit after taxation 11,026 5,314

Group’s share of results for the financial period/year 6,568 4,140

The significant joint venture is Rig Tenders Offshore which contributes RM3.4 million to the Group’s share of results for the financial period and constitutes RM19.8 million of the share of net assets of joint ventures.

The Group’s share of the assets and liabilities of the joint ventures is as follows:


Total assets 75,832 71,061 36,239 Total liabilities (38,949) (42,516) (29,770)

Net assets 36,883 28,545 6,469 Capital contribution 18,612 18,612 18,612

Group’s share of the joint venture assets 55,495 47,157 25,081

Details of the joint ventures are as follows:


Held by the Scomi Energy Services Bhd MarineCo Limited * Malaysia 33.5 21.8 21.8 Ship chartering

Gemini Sprint Sdn. Bhd.* Malaysia 33.5 21.8 21.8 Ship chartering and Management

Rig Tenders Offshore Pte Ltd Singapore 46.0 29.9 29.9 Ship owning and chartering

Held by the Scomi Sosma Sdn Bhd Sosma (B) Sdn Bhd Brunei 32.8 20.0 20.0 Dormant

Held by the Scomi Oilfield Limited Vibratherm Limited England and Wales 32.8 – – Development of microwave thermal treatment equipment

(ii) Joint operations

Country of Group’s effective Name of joint operation operation equity interest held Principal activities 31.3.2013 31.12.2011 1.1.2011 % % %

Larsen & Toubro and India 36.1 33.7 34.9 Design, civil construction, Scomi Engineering Bhd manufacture and supply unincorporated consortium of monorail trains, provision of related engineering support services and engineering works involving the design, construction, installation, testing and commissioning of mechanical electrical and systems in relation to the Mumbai monorail project.

* Companies with ownership of more than half of the equity shareholding in the companies but treated as joint ventures pursuant

to the contractual rights and obligations of the respective joint venture agreements.

SCOMI GROUP BHD ANNUAL REPORT 2013P/145NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2013


19 Other Financial Receivable


Amounts due from subsidiaries – Non current (a) – – – 28,771 – 17,636 Retention sum (b) 4,577 – – 4,577 – – Other receivables (c) 24,632 – – – – –

29,209 – – 33,348 – 17,636

(a) As at 1 January 2011, included in the amounts due from subsidiaries was an amount of RM18.49 million which was unsecured and repayable in 3 years. The fair value of this amount as at the date of the statement of financial position was RM17.64 million computed based on cash flows discounted at market borrowing rates of 5.5% per annum. This amount was repaid in 2011.

Included in amounts receivable from subsidiaries of the Company as at 31 March 2013 is advances to Scomi Engineering Bhd of RM28,674,000 as at 31 March 2013, which was subsequently increased to RM37,500,000 as at the date of the financial

statements. The Company has expressed its intention not to recall these amounts due within a period of 12 months from the date of the financial statements and provide financial support up to the limit required by the subsidiary.

(b) As disclosed in Note 23(c), this relates to the non-current portion of the retention sum receivable in October 2014. The amount is held in escrow arising from the disposal of a subsidiary, Scomi Nigeria Pte Ltd, which was completed on 17 October 2012.

(c) The other receivable relating to the balance sale consideration due from a vendor is disclosed in Note 42 (a)(i).

20 Available-for-Sale Financial Assets

Group 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000

At fair value: Shares quoted in Malaysia 104 127 127 Unquoted shares – 1,389 1,389

104 1,516 1,516

Market value of quoted investments 104 127 127


21 Derivative Financial Assets/(Liabilities)

Group 31.3.2013 31.12.2011 1.1.2011 Fair value Fair value Fair value assets/ assets/ assets/ (liabilities) (liabilities) (liabilities) RM’000 RM’000 RM’000 (restated) (restated)

Forward foreign exchange contracts (15) (348) 949 Cash flow hedges - cross currency interest rate swaps (6,640) – 26,288 - Interest rate swaps – – –

(6,655) (348) 27,237

Included in: Non-current assets – – 24,465 Current assets – – 7,691 Non-current liabilities (6,166) – (4,919) Current liabilities (489) (348) –

(6,655) (348) 27,237

(i) Forward foreign exchange contracts

As at 31 March 2013, the Group has no outstanding forward foreign exchange contracts (31.12.2011: NIL, 1.1.2011: RM14.8 million).

(ii) Cross currency interest rate swap contracts (CCIRSs)

The notional principal amounts of the outstanding CCIRSs at 31 March 2013 were RM199.5 million (31.12.2011: NIL, 1.1.2011: RM463.5 million).

The Group had entered into Cross Currency Interest Rate Swaps (“CCIRS”) during 2012 and early 2013, that were designated as cash flow hedges to hedge the Group’s exposure to foreign exchange risk on its Sukuk Murabahah (“the Sukuk”). These contracts entitled the Group to receive principal and fixed interest amounts in RM and obliged the Group to pay principal and fixed interest amounts in USD. The new CCIRS contracts have maturities of up to 5 years from 31 March 2013. Based on the terms of the Sukuk, the semi-annual interest cash flows are built up on a monthly basis in the Financial Services Reserve Account (“FSRA”) and the principal is built up in the 6 months preceding the maturity of the Sukuk tranches. The CCIRSs reflect the timing of these cash flows.

As at 31 March 2013, the Group had hedged approximately 66% of the RM denominated Sukuk. The USD interest rates on the CCIRS contracts designated as hedging instruments in the cash flow hedges ranged from 6.16% to 7.82% per annum (31.12.2011: NIL and 1.1.2011: 5.53% to 7.23% per annum) and the interest rates in RM ranged from 6.25% to 7.20% per annum (31.12.2011: NIL and 1.1.2011: 5.85% to 6.95% per annum). Gains and losses recognised in the hedging reserve in equity on the CCIRSs as of 31 March 2013 will be continuously released to the income statement within finance cost until the full repayment of the Sukuk (Note 28).

(iii) Interest rate swap contracts

As at 31 March 2013, the Group has no outstanding interest rate swap contracts (31.12.2011: NIL, 1.1.2011: RM78.3 million).



22 Inventories

Group 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000

At cost Consumables 16,936 26,404 30,417 Raw materials 22,781 13,866 14,620 Work in progress 8,148 8,613 15,186 Finished goods 165,532 174,420 140,157

213,397 223,303 200,380

23 Receivables, Deposits and Prepayments

Group Company 31.3.2013 31.12.2011 1.1.2011 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 (restated) (restated)

Trade receivables 415,871 621,958 400,029 – – – Less: Allowance for impairment (37,769) (45,365) (33,465) – – –

Trade receivable – net 378,102 576,593 366,564 – – –

Amounts due from customers on contract (Note 26) 499,350 330,455 364,692 – – –

Amounts receivable from: - subsidiaries – – – 41,331 57,875 96,423 - joint ventures 21 46 556 – – 27 - associate 12,167 18,128 17,895 – – – - related parties – – – – 28 31 - staff – 740 1,590 94 94 100 Less: Allowance for impairment (12,139) (16,957) (17,404) – – –

49 1,957 2,637 41,425 57,997 96,581

Other receivables 94,309 100,188 117,626 5,546 6,055 8,998 Deposits 26,702 10,099 7,870 392 624 871 Prepayments 29,906 32,274 22,262 24 37 86 Tax recoverable 57,297 34,006 41,004 – 2,294 2,765 Less: Allowance for impairment (8,703) (12,513) – – – –

199,511 164,054 188,762 5,962 9,010 12,720

1,077,012 1,073,059 922,655 47,387 67,007 109,301


(a) Trade receivables Trade receivables are non-interest bearing and credit terms for trade receivables range from 30 to 120 days. They are recognised

at their original invoice amounts which represent their fair values on initial recognition.

(b) Related party balances and receivables of the Group and Company - Amounts due from subsidiaries are unsecured and non-interest bearing except for certain advances which bear interest at

6.00% (31.12.2011: 1.80% to 7.00%; 1.1.2011: 1.80% to 7.00%) per annum and are repayable within the next 12 months.

- Amounts due from related parties, joint ventures and associates are unsecured, interest free and are repayable upon demand.

- Amounts due from staff are unsecured, interest free and repayable within 30 days.

(c) Included in other receivables of the Group and Company is a retention sum of RM4,577,000 (31.12.2011: Nil; 1.1.2011: Nil) held in escrow by an agent in relation to the disposal of Scomi Nigeria Pte Limited.

(d) Included in prepayments of the Group is an amount of RM4,924,000 (31.12.2011: RM12,119,000 ; 1.1.2011: RM Nil) relating to advances purchases of oil and bunker.

(e) Included in prepayments are amounts of RM3.6 million and RM4.9 million relating to advances to suppliers in respect of the propulsion technology development work in progress and an operation and maintenance contract respectively.

(f ) Included in tax recoverable relates to the Mumbai Monorail Project.

24 Short-Term Deposits, Cash and Bank Balances


Short term deposits with licensed banks 82,406 90,611 64,070 – 6,981 7,438 Cash and bank balances 166,925 145,570 123,978 22,459 6,101 1,896

249,331 236,181 188,048 22,459 13,082 9,334

The effective interest rates for short term deposits, cash and bank balances at the date of the statement of financial position were as follows:

Group Company 31.3.2013 31.12.2011 1.1.2011 31.3.2013 31.12.2011 1.1.2011 % % % % % % (restated) (restated)

Short term deposits with licensed banks 0.06-6.25 0.06-6.25 0.05-3.1 – 2.3-3.1 1.45-3.5



24 Short Term Deposits, Cash and Bank Balances (continued)

Short term deposits of the Group have maturity periods ranging from 1 to 365 days (31.12.2011: 1 to 365 days ; 1.1.2011: 1 to 365 days). Bank balances are deposits held at call with banks.

Short term deposits of certain subsidiaries amounting to RM32,992,000 (31.12.2011: RM52,498,000; 1.1.2011: RM36,099,000) have been pledged to licensed banks for banking facilities as disclosed in Note 28 to the financial statements.

In the prior financial years, short term deposits of the Company amounting to RM6,981,000 (1.1.2011: RM7,438,000) have been pledged to licensed banks for banking facilities. The short term deposits were uplifted in the current year.

25 Assets/(Liabilities) Classified as Held for Sale

(a) Assets/(liabilities) classified as held for sale as at 31 March 2013

As disclosed in Note 44, the Group undertook a corporate exercise which involved the internal restructuring of its Oilfield business into Eastern and Western Hemisphere entities and subsequently, the disposal by the Company of its interest in the Eastern Hemisphere entities, Scomi Sosma Sdn Bhd and Scomi KMC Sdn Bhd to Scomi Energy Services Bhd (“SESB”).

Following the completion of the corporate exercise on 12 March 2013, the Oilfield Eastern Hemisphere entities are held under SESB and the Oilfield western hemisphere entities are held directly under Scomi Oiltools Bermuda Limited (“SOBL”), a wholly-owned subsidiary of the Company. The significant entities within the SOBL Group classified as held for sale and the effective interest to the Group are disclosed below.

The Company had, vide a letter of undertaking dated 24 July 2012, irrevocably undertaken and confirmed to SESB that it will gradually exit from the drilling fluids and drilling waste management businesses in the western hemisphere. The said undertaking is binding and valid unless and until:

(i) The Company exits from the drilling fluids and drilling waste management businesses in the western hemisphere; or

(ii) Scomi Energy Services Bhd releases the Company from the said undertaking.

The Company has commenced the process of exiting the western hemisphere and expects to complete the disposal within a period of 12 months from 31 March 2013.

During the course of the corporate exercise, the Group had completed the disposal of various business assets and entities under the western hemisphere. The results of these business assets and entities, together with the entities classified as held for sale are as follows:


Group Period Year ended ended Note 31.3.2013 31.12.2011 RM’000 RM’000 (restated)

Revenue 153,936 460,705 Expenses (167,637) (469,287) Loss on disposal (45,412) (103,495)

Loss before tax from discontinued operations 6 (59,113) (112,077) Taxation (3,876) (58,079) Loss for the year from discontinued operations (62,989) (170,156)

The prior financial year results included the discontinued operations relating to the US and Mexico operations.

The details of the assets/(liabilities) held by the Group in the disposal group classified as held for sale are as follows: Group 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000 (restated) (restated)

Inventory 4,540 – – Cash and cash equivalent 2,977 – 52,048 Restricted cash – – 2,195 Trade and other receivables 96,901 – 119,977 Other assets – – 22,108 Interest in joint venture 879 – 18,979 Property, plant and equipment 1,514 – 505,905 Goodwill – – 39,084 Derivative financial instruments – – 22 Deferred income tax assets 1,301 – 13

108,112 – 760,331

Trade and other payables (86,429) – (44,072) Current tax liabilities (4,277) – (3,058) Derivate financial instruments – – (1,506) Borrowings (1,322) – (72,648) Finance leases – – (53) Retirement benefit obligations – – (1,882) Other liabilities (1,310) – –

(93,338) – (123,219)

Group share of net assets in disposal group 14,774 – 637,112



25 Assets/(Liabilities) Classified as Held for Sale (continued)

(a) Assets/(liabilities) classified as held for sale as at 31 March 2013 (continued)

The impact of the discontinued operations on the cash flows of the Group is as follows:


Operating cash flow (38,199) (33,091) Investing cash flow 33,994 84,637 Financing cash flow (25,966) (29,390)

Total cash inflow/(outflow) (30,171) 22,156

(b) Assets/(liabilities) classified as held for sale as at 1 January 2011

The assets/(liabilities) classified as held for sale as at 1 January 2011 were in respect of the following:

(i) Investment in a joint venture, Scomi NTC Sdn Bhd, which the Group, through a wholly-owned subsidiary of the Company, Scomi Energy Sdn Bhd, had on 23 December 2010 entered into a conditional share sale agreement to dispose to Cameron Solutions Inc.

The disposal was completed on 2 February 2011. (ii) Pursuant to signing of the Master Framework Agreement (“the Agreement”) and Share Purchase Agreement (“SPA”)

on 29 September 2010 and 16 December 2010 respectively, a wholly owned subsidiaries, Scomi Marine Services Pte Ltd (“SMS”) shall disposed off the entire equity shareholding in its subsidiaries, CH Ship Management Pte Ltd, CH Logistics Pte Ltd, Goldship Private Limited and Grundtvig Marine Pte Ltd (“Target companies”) to PT Rig Tenders Indonesia Tbk (“ PTRT”) and SMS’s interest in PTRT will be diluted following a proposed renunciation by SMS of its entitlement to a proposed rights issue.

On 15 June 2011, SMS entered into the Deed of Mutual Termination, Discharge and Release (“the Deed”) to mutually terminate the Agreement. Following the mutual termination of the Agreement, the Group ceased to classify PTRT and the target companies as a disposal groups held-for-sale, and reclassified the entire results of PTRT and the target companies as continuing operations for the years ended 31 December 2011, with amounts in the prior period being described as “restated”.

Subsequent to the Group ceasing to classify PTRT and the target companies as disposal groups held-for-sale, management assessed the recoverable amount of the assets and liabilities of the disposal group, after adjusting for depreciation and amortisation that would have been recognised had the assets not been classified as held-for-sale. Accordingly, depreciation of property, plant and equipment of RM39,500,000 was recognised in the consolidated statement of comprehensive income.


Other than impairment of vessels of RM95,218,000 (Note 12) and goodwill of RM36,294,000 in respect of Marine Logistics (Note 13), there was no other impairment for the assets associated with the disposal group.

(c) Assets/(liabilities) of the disposal group

The details of the assets/(liabilities) held by the Company in the disposal group classified as held for sale are as follows:

Company 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000 (restated) (restated)

At cost 276,779 – – Less: Accumulated impairment (276,779) – –

– – –

Details of the significant subsidiaries classified as held for sale are as follows:


Scomi Oiltools Bermuda Limited Bermuda 100.0 76.1 76.1 Investment holding (“SOBL”)

Significant subsidiaries of Scomi Oiltools Bermuda Limited Scomi Oiltools de Venezuela 100.0 76.1 76.1 Provision of oilfield Venezuela S.A. equipment, supplies and services Scomi Oiltools United Kingdom 100.0 76.1 76.1 Dormant (Europe) Limited

Scomi Oiltools United Kingdom 100.0 76.1 76.1 Dormant (Shetland) Limited

Scomi Oiltools Inc United States 100.0 76.1 76.1 Dormant Scomi Oiltools Algeria 100.0 76.1 76.1 Dormant Algeria EURL

Augean North Sea Scotland 30.0 – – Provision of drilling Services Ltd waste management services



26 Amounts Due from/(to) Customers on Contracts


Construction contract costs incurred to date and attributable profits 1,188,184 852,472 653,777 Less : Progress billings (688,834) (522,018) (289,085)

Amounts due from customers on contracts (Note 23) 499,350 330,454 364,692

Retention receivable on contract, included in trade receivables 7,904 – – Advance received on contract, included under other payables (3,585) – (859)

Amounts due from customers on contracts have been collateralised for borrowings. In the event SEB defaults under the loan agreement, the bank has the right to receive the cash flows from these amounts. Without default, SEB will bill and collect these amounts and allocate new amounts as collateral.

27 Payables


Current Trade payables (a) 297,920 300,233 216,518 – – – Put option over non-controlling interests (b) – 119,598 132,656 – – – Amounts due to subsidiaries (c) – – – 59,624 157 74,575 Amount due to an associate (c) 502 1,541 6,311 – – – Amount due to related company (c) – 267 222 – – – Accruals 156,687 99,831 67,032 5,593 11,465 16,059 Other payables 5,862 80,596 60,784 64 54 16 Financial guarantee (d) – – – – 49 497

460,971 602,066 483,523 65,281 11,725 21,147

Non-current Financial guarantee – – – – – 260 Other payables (e) 20,230 5,629 5,520 19,037 – –

20,230 5,629 5,520 19,037 – 260


(a) Trade payables Trade payables are non-interest bearing and credit terms for trade payables range from cash term to 120 days (31.12.2011:

cash term to 120 days; 1.1.2011: cash term to 120 days).

(b) Put option over non-controlling interests (“NCI”)

The put option over non-controlling interests represented the fair value of a put option granted to non-controlling interests over their equity interests held in a subsidiary, Scomi Oilfield Ltd. The financial liability recognised was remeasured in accordance with MFRS 139 “Financial Instruments: Recognition and Measurement”, which requires that changes in measurement are recognised in the income statement.

The fair value was determined based on the projected adjusted earnings of the subsidiary concerned. During the financial period, the put option was extinguished with the balance debited against the put option reserve.

The extinguishment of the put option liability was preceded by the completion on 8 March 2013 of the SOL Reorganisation to carve out its Eastern and Western Hemisphere business into two separate legal entities which had resulted in an increase in the fair value of the underlying assets. The increase in the underlying assets resulted in a fair value loss on the option of RM61.1 million (Note 7), and was accounted for in the income statement. If the fair value loss had not been adjusted for, the consolidated loss for the financial period attributable to the owners of the Company would have reduced from RM66.8 million to RM5.7 million.

(c) Amounts due to subsidiaries, an associate and related companies

Amounts due to subsidiaries, an associate and related companies are unsecured, non-interest bearing and repayable on demand.

(d) Financial guarantee

Financial guarantee relates to a corporate guarantee provided by the Company to a licensed bank for a loan taken by a subsidiary which was settled during the financial period (Note 28).

(e) Other payables

Included in non-current liabilities of the Group and Company as at 31 March 2013 is an amount of RM19.04 million owing to Standard Chartered Private Equity Limited (“SCPEL”) and Fuji Investment I (“FII”) arising from the acquisition on a 23.9% equity interest in Scomi Oiltools Bermuda Limited (“SOBL”), which is repayable in full in June 2014, as disclosed in Note 44(i). The effect of discounting was not material.



28 Borrowings


Current Bonds (secured) 50,243 242,640 174,174 – 201,552 100,000 Bank overdrafts 105,138 129,360 114,106 – – – Bank borrowings 346,311 266,227 124,264 – – – Other term loans (secured) 173,039 119,359 68,574 439 20,616 20,560 Finance lease payables 721 235 276 138 137 138

675,452 757,821 481,394 577 222,305 120,698

Non-current Bonds (secured) 257,258 300,518 507,271 – – 103,934 Bank borrowings – – 28,000 – – – Other term loans (secured) 39,887 19,591 71,835 1,204 1,990 22,058 Finance lease payables 2,947 757 1,113 89 251 388

300,092 320,866 608,219 1,293 2,241 126,380

Total borrowings Bonds (secured) 307,501 543,158 681,445 – 201,552 203,934 Bank overdrafts 105,138 129,360 114,106 – – – Bank borrowings 346,311 266,228 152,264 – – – Other term loans (secured) 212,926 138,950 140,409 1,643 22,606 42,618 Finance lease payables 3,668 992 1,389 227 388 526

975,544 1,078,688 1,089,613 1,870 224,546 247,078

The maturity profile of borrowings is as follows:


Due within the next 12 months 675,452 757,821 481,394 577 222,305 120,698

Due between 1 to 2 years 48,673 48,673 214,513 516 576 124,578 Due between 2 to 3 years 49,374 48,168 178,940 452 533 576 Due between 3 to 4 years 48,918 49,374 68,405 325 459 533 Due between 4 to 5 years 48,914 48,918 64,816 – 440 693 Due after 5 years 104,213 125,734 81,545 – 233 –

300,092 320,867 608,219 1,293 2,241 126,380

975,544 1,078,688 1,089,613 1,870 224,546 247,078


The effective interest rates per annum on the Group’s and Company’s borrowings at the date of the statement of financial position are as follows:

Group 31.3.2013 31.12.2011 1.1.2011 % % % (restated) (restated)

Bank overdrafts 2.60-14.50 2.60 - 11.00 2.60 - 13.80 Bonds (secured) 5.20- 7.60 4.25 - 7.50 4.50 - 6.20 Other term loans (secured) 3.30- 7.60 2.38 - 7.60 4.69 - 7.55 Bank borrowings 1.98-7.60 0.26 - 7.60 0.26 - 7.55 Finance lease payables 2.40-4.50 2.40 - 3.10 2.40 - 3.10

Company 31.3.2013 31.12.2011 1.1.2011 % % %

Bonds (secured) – 4.25 - 7.50 4.50 - 7.50 Other term loans (secured) – 2.38 – 6.31 4.69 – 6.31 Finance lease payables 2.40 – 3.10 2.40 - 3.10 2.40 - 3.10

(a) Bonds

RM500.0 million Murabahah Bonds

During the financial period, the Company has fully repaid the outstanding balance of the medium term note. The bond was established through a medium term notes (“MTN”) programme of RM500.0 million issued on 25 September 2005. The MTN Notes were pared down by RM250.0 million and RM50.0 million in 2006 and 2010 respectively, with the RM200.0 million remaining as at 31 December 2011.

RM630 million Murabahah Bonds

The RM630 million of Medium Term Notes was issued by KMCOB Capital Berhad (“KMCOB Capital”), a subsidiary, on 14 December 2006, under the Murabahah Islamic principle (“Murabahah Bonds”).

The Murabahah Bonds were issued in 4 series with tenures from 4 to 7 years from 14 December 2006, being the date of issuance. The profit rate ranges from 5.75% to 6.15% per annum, payable semi-annually in arrears.

KMCOB Capital had restructured the Notes in 2010, with the tenure and repayment terms varied from 7 to 10 years from 14 December 2006 and the profit rate varied to 6.05% to 6.95% per annum. The Notes was fully repaid as at 31 December 2011 as described below.

RM342.55 million Sukuk Murabahah On 14 December 2011, the Group had issued a Sukuk Murabahah of RM342.55 million (“the Sukuk”). The proceeds raised

from the issuance under the Sukuk was utilised for early redemption of the outstanding amount of the existing Murabahah Bonds in full. The Sukuk was issued with a tenure and repayment term of 1 to 7 years from 14 December 2011 and a profit rate ranging from 6.25% to 7.50% per annum.

The Sukuk are secured by: (i) Corporate guarantees from Scomi Oilfield Limited (“SOL”), if applicable;



28 Borrowings (continued)

RM342.55 million Sukuk Murabahah (continued)

(ii) Corporate guarantees from certain existing and future principal subsidiaries of SOL whose revenue or profit/loss after tax are at least 5% of the consolidated revenue or consolidated profit/loss after tax of the SOL Group;

(iii) Charge over the issued and paid up share capital of the existing and future principal subsidiaries in the SOL Group; (iv) Debenture over the present and future assets of the KMCOB Capital; (v) Assignment over Financial Services Reserve Account (“FSRA”) maintained by KMCOB Capital to meet its most immediate

six months profit and principal payment obligations; and (vi) Any other security as may be required by the rating agency to achieve the requisite rating. As at 31 March 2013, no

security is given to the rating agency to achieve the requisite rating.

The outstanding amount of Sukuk as at the end of the financial period is RM341.6 million (31.12.2011: RM480.0 million for the Notes).

(b) Other term loans, bank overdrafts and bank borrowings

The other term loans, bank overdrafts and bank borrowings of the Group are secured by:

(i) Legal charge over certain landed properties and vessels of certain subsidiaries; (ii) Negative pledge over the present and future, fixed and floating assets of certain subsidiaries; (iii) Assignment of contract proceeds, insurance policies and performance bond; and (iv) Standby Letter of Credit (“SBLC”) facility secured by corporate guarantee provided by certain subsidiaries; (v) Change over shares and/or acceptable stocks in subsidiaries of the Company; (vi) A charge over the 3-month interest of the Facility Limit placed upfront (“Upfront Deposit”) in a debt service reserve account (“DSRA”); and (vii) Corporate Guarantees from certain entities

During the financial period, the Company obtained a bridging loan facility of RM118 million from a financial institution to settle the RM200 million bond that was due on 12 October 2012. The bridging loan was repaid in full in the same period principally via the proceeds of the Convertible Redeemable Secured Bonds (Note 37 and Note 44(l)).

(c) Finance lease payables


Instalments payable: Not later than 1 year 590 292 333 162 162 162 Between 1 to 2 years 770 274 413 79 162 162 Between 2 to 3 years 770 199 274 25 110 162 Between 3 to 4 years 769 114 199 – 25 110 Between 4 to 5 years 769 89 114 – – 25 Later than 5 years – 203 293 – – –

3,668 1,171 1,626 267 459 621 Less: Future finance charges – (179) (237) (40) (71) (95)

Present value of finance lease payables 3,668 992 1,389 227 388 526



Analysed as: Due within 12 months 590 235 276 148 137 138 Due to 1 to 2 years 770 225 360 66 137 137 Due to 2 to 3 years 770 161 227 13 94 137 Due to 3 to 4 years 769 90 164 – 20 94 Due to 4 to 5 years 769 74 94 – – 20 Due more than 5 years – 207 268 – – –

3,668 992 1,389 227 388 526

Breaches of loan covenant

As at 31 March 2013

(i) A subsidiary within the Group did not fulfill one of its clauses in relation to term loan. Accordingly, the bank was contractually entitled to request for immediate repayment of the outstanding balance of RM9.9 million as at 31 March 2013. At the end of the reporting period, the carrying value of RM9.9 million has been included within borrowings under current liabilities. Subsequent to the end of the reporting period, approval from the bank in respect of the clause was received.

(ii) A subsidiary within the Group did not fulfil its Annual Debt Service Cover Ratio (“ADSCR”). Management had obtained indulgence from the bondholders of a waiver of any breach of terms prior to the end of the reporting period as a result of non-maintenance of the ADSCR for the period.

29 Provisions

Group Tax Litigation penalties Total Total RM’000 RM’000 RM’000

At 1 January 2012 578 2,267 2,845 Charged/reversed during the period 2,950 (367) 2,583 Paid during the period – (824) (824) Currency translation differences – (373) (373)

At 31 March 2013 3,528 703 4,231

At 1 January 2011 – 5,235 5,235 Charged during the year 578 872 1,450 Paid during the year – (3,848) (3,848) Currency translation differences – 8 8

At 31 December 2011 578 2,267 2,845



30 Deferred Government Grant

The Group received approval for a government grant of RM2,155,000 in 2008 to execute and develop new technology for a monorail bogie design and development program with improvement to the design of the current monorail bogie and development of a commercially ready prototype bogie.

As at 31 December 2011, the grant of RM2,155,000 was fully disbursed to the Group. Amortisation over the expected life of the related assets commenced in the current financial period to mirror the pattern of consumption of the related intangible asset estimated to be 5 years.

31 Irredeemable Convertible Secured Loan Stocks

On 14 December 2009, the Company issued 1,515,796,791 of three (3)-year 4% Irredeemable Convertible Secured Loan Stocks (“ICSLS”) at nominal value of RM0.10 each for cash together with 202,106,238 free detachable warrants to subscribe the entitlement of the Rights Issue by Scomi Engineering Bhd (“SEB”) and working capital requirements of the Group.

The ICSLS matured on 14 December 2012 and all outstanding ICSLS as at that date were converted to ordinary shares of the Company on the basis of every 4 ICSLS being converted into one ordinary share.

The salient features of the ICSLS were as follows:

(a) The conversion price is fixed at RM0.40 per share;

(b) The registered holder of the ICSLS has the right at any time during the conversion period to convert the ICSLS at the con-version price into fully paid new ordinary shares of RM0.10 per share in the Company;

(c) The ICSLS can be converted into fully paid new ordinary shares of RM0.10 each in the Company at any time during its 3 years tenure. At the end of the tenure, any outstanding ICSLS will be automatically converted into fully paid new ordinary shares of RM0.10 per share;

(d) The ICSLS are not redeemable (save upon declaration of an event of default);

(e) The ICSLS bear interest at 4% per annum based on the nominal amount of the ICSLS. The interest shall be payable quarterly in arrears; and

(f ) The ICSLS are secured by the cash proceeds from the Rights Issue by Scomi Engineering Bhd (“SEB ICULS Funds”) which will be held in the form of fixed deposit receipts (“FDR”) over which a memorandum of deposit will be executed in favour of the Trustee (“FDR MOD”).

The fair value of the liability component was calculated using a market rate for an equivalent convertible loan stock. The residual amount, representing the value of the equity component, was included in other reserves (Note 36).


Group and Company Period Year ended ended 31.3.2013 31.12.2011 RM’000 RM’000

Other reserves: At beginning of financial period/year 61,899 62,121 Conversion of ICSLS (Note 36) (61,899) (222)

At end of financial period/year – 61,899

Liability component: At beginning of financial period/year 3,188 7,197 Conversion of ICSLS (1,729) (176) Decrement – amortised cost (1,458) (2,667) Reclassification – (1,166)


Group and Company 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000

Included in: Current liabilities – 3,188 3,382 Non-current liabilities – – 3,815

– 3,188 7,197

Interest expense on the ICSLS is calculated on the effective yield basis by applying the effective interest rate of 8% per annum (31.12.2011: 8% per annum).

32 Irredeemable Convertible Unsecured Loan Stocks

On 23 March 2011, SEB issued 61,352,936 3-year 4% Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) at nominal value of RM1.00 each for cash, of which 54,782,491 ICULS was subscribed by the Company.

The ICULS has matured on 23 March 2013 and all outstanding ICULS as at that date were converted to ordinary shares of SEB on the basis of one ICUL being converted to one ordinary share.

The salient features of the ICULS were as follows:

(a) The conversion price is fixed at RM1.00 per share;



32 Irredeemable Convertible Unsecured Loan Stocks (continued)

(b) The registered holder of the ICULS has the right at any time during the conversion period to convert the ICULS at the conversion price into fully paid new ordinary shares of RM1.00 per share in the SEB;

(c) The ICULS can be converted into fully paid new ordinary shares of RM1.00 each in SEB at any time during its 3 years tenure. At the end of the tenure, any outstanding ICULS will be automatically converted into fully paid new ordinary shares of RM1.00 per share;

(d) The ICULS are not redeemable;

(e) The ICULS bear interest at 4% per annum based on the nominal amount of the ICULS. The interest shall be payable quarterly in arrears; and

(f ) The holders of the ICULS are not entitled to participate in any distribution and/or offer of securities in SEB until and unless such holders of the ICULS convert the ICULS into new ordinary shares in SEB.

The fair value of the liability component was calculated using a market rate for an equivalent convertible loan stock. The residual amount, representing the value of the equity component, is included in other reserves (Note 36).


31.12.2011 Other reserves: At beginning of financial period/year 1,148 1,217 Conversion of ICULS (1,148) (69)


Liability component: At beginning of financial period/year 17 74 Conversion of ICULS (17) (8) Repayment during the financial period/year – (53) Interest expense – 4

At end of financial period/year – 17

Group 31.3.2013 31.12.2011 1.1.2011 RM’000 RM’000 RM’000

Included in: Current liabilities – 14 33 Non-current liabilities – 3 41

– 17 74


33 Warrants

On 14 December 2009, the Company issued 202,106,238 free detachable warrants pursuant to the issuance of 1,515,796,791 of three (3)-year 4% ICSLS at nominal value of RM0.10 each.

During the financial period, 20,068,332 warrants were exercised into ordinary shares of RM0.10 each.

The warrants matured as at 14 December 2012 and the warrant reserve relating to the unexercised warrants was transferred to retained earnings.

As at the date of the statement of financial position, nil (31.12.2011: 202,105,258 ; 1.1.2011: 202,105,258) warrants remained unexercised.

34 Share Capital Group and Company Period Year ended ended 31.3.2013 31.12.2011 No of Nominal No of Nominal shares value shares value 000 RM’000 000 RM’000

Authorised Ordinary shares of RM0.10 each: At beginning and end of the financial period/year 3,000,000 300,000 3,000,000 300,000

Issued and fully paid Ordinary shares of RM0.10 each: At beginning of the financial period/year 1,187,688 118,769 1,182,658 118,266

Issued during the financial period/year: - conversion of ICSLS 218,770 21,877 3,905 392 - exercise of warrants 20,068 2,007 – – - exercise of ESOS 18,904 1,890 1,125 111 - private placement 119,110 11,911 – –

At end of the financial period/year 1,564,540 156,454 1,187,688 118,769

(a) Increase in share capital

During the financial period, 376,852,207 new ordinary shares of RM0.10 each were issued by the Company by way of:

(a) Issuance of 218,769,875 new ordinary shares of RM0.10 each pursuant to the conversion of Irredeemable Convertible Secured Loan Stocks (“ICSLS”);

(b) I ssuance of 3,404,500 new ordinary shares of RM0.10 each pursuant to the exercise of share options under the Company’s Employees’ Share Options Scheme (“ESOS”) at an option price of RM0.17 per share;

(c) Issuance of 15,500,000 new ordinary shares of RM0.10 each pursuant to the exercise of share options under the Company’s Employees’ Share Options Scheme (“ESOS”) at an option price of RM0.24 per share;



34 Share Capital (continued)

(d) Issuance of 20,068,332 new ordinary shares of RM0.10 each pursuant to the exercise of warrants at RM0.40 per share; and

(e) Issuance of 119,109,500 new ordinary shares of RM0.10 each pursuant to the private placement exercise to IJM Bhd at RM0.33 per share.

In the prior financial year, the issued and paid-up share capital of the Company was increased from RM118,265,777 comprising 1,182,657,772 ordinary shares of RM0.10 each, to RM118,768,765 comprising 1,187,687,647 ordinary shares of RM0.10 each, by way of the issuance of:

(i) 3,904,875 new ordinary shares of RM0.10 each pursuant to the conversion of Irredeemable Convertible Secured Loan Stocks (“ICSLS”);

(ii) 1,125,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at an option price of RM0.17 per share; and

(b) Treasury shares

The shareholders of the Company, by an ordinary resolution passed in an Annual General Meeting held on 27 June 2012, renewed their approval for the Company to repurchase its own shares. The Directors of the Company are committed to enhancing the value of the Company to its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders.

There were no purchases of Treasury shares during the financial period. As Treasury shares, the rights attached as to voting, dividends and participation in other distribution are suspended. None of the Treasury shares repurchased has been sold as at 31 March 2013.

At the date of the statement of financial position, 14,427,200 (31.12.2011: 14,427,200 ; 1.1.2011: 14,427,200) ordinary shares are held as Treasury shares at a carrying value of RM18,695,746 (31.12.2011: RM18,695,746 ; 1.1.2011: RM18,695,746), and the number of outstanding shares in issue after setting off against Treasury shares is 1,550,112,654 (31.12.2011: 1,173,260,447 ; 1.1.2011: 1,168,230,572).

(c) Employees’ Share Option Scheme

The movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

31.3.2013 31.12.2011 1.1.2011 Average Average Average exercise exercise exercise price Options price Options price Options RM ’000 RM ’000 RM ’000

At beginning of the financial period/year 0.79 82,176 1.02 76,175 1.01 87,755

Granted 0.36 13,000 0.24 18,000 – – Forfeited 1.22 (17,148) 1.10 (10,874) 1.07 (10,225) Exercised 0.23 (18,905) 0.17 (1,125) 0.17 (1,355)

At end of the financial period/year 0.83 59,123 0.79 82,176 1.02 76,175


Out of the outstanding options, 59,123,000 units (31.12.2011: 56,035,900 units; 1.1.2011: 55,222,900) of options were exercisable. Share options were exercised on a regular basis throughout the financial period, and the weighted average share price for the financial period was RM0.30 (31.12.2011: RM0.31 ; 1.1.2011: RM0.42).

The options outstanding at the financial period end had exercise prices ranging RM0.17 to RM1.51 (31.12.2011: RM0.17 to RM1.51 ; 1.1.2011: RM0.17 to RM1.51) and a remaining contractual life of less than 1 year (31.12.2011: 2 years ; 1.1.2011: 3 years).

The weighted average fair value of options granted during the financial period was determined using the Trinomial valuation model was RM0.05 (31.12.2011: RM0.09 ; 1.1.2011: RM Nil) per option. The significant inputs into the model were as follows:

Group Period Year ended ended 31.3.2013 31.12.2011

Valuation assumptions: Expected volatility of share prices 40% 40% Expected dividend yield – – Expected option life 6 months 1.0 - 2.0 years Weighted average share price at the date of grant RM0.40/share RM0.28/share Risk- free interest rate (per annum) 3.24% 3.39%

The Company implemented an ESOS on 28 April 2003 for a period of 10 years. The ESOS is governed by the By-Laws which were approved by the shareholders on 28 March 2003.

All options granted under the scheme expired on 27 April 2013.

On 15 June 2004, the Company amended the By-Laws and its Articles of Association (“Articles”) to align them with the amendments to the Listing Requirements issued by Bursa Malaysia Securities Berhad which became effective on 10 February 2004, and the amendments to Schedule I of the Securities Commission (“SC”) Act, 1993.

With the amendments, the total number of shares under the ESOS was increased from ten percent (10%) to fifteen percent (15%) of the total issued and paid-up share capital of the Company and participation in the ESOS was extended to include Non-Executive Directors.

The amendments to the By-Laws and Articles were approved by the shareholders of the Company on 16 June 2004 at the 2nd Annual General Meeting.

The salient features of the ESOS are as follows:

(i) T he total number of shares comprising options exercised, options remaining exercisable and unexercised offers pending acceptance under the ESOS shall not exceed fifteen percent (15%) of the total issued and paid-up share

capital of the Company, such that not more than fifty percent (50%) of the shares available under the ESOS are allocated, in aggregate, to the Directors and senior management of the Group;

Not more than ten percent (10%) of the shares available under the ESOS is allocated to any individual Director or

employee who, either singly or collectively through his/her associates, holds twenty percent (20%) or more in the issued and paid-up share capital of the Company;



34 Share Capital (continued)

(c) Employees’ Share Option Scheme (continued)

(ii) Options shall lapse if the Director ceases his/her directorship with the Company or employee ceases his/her employment

with the Company or its subsidiaries prior to the full exercise of his/her options, except when such cessation occurs by reason as provided by the Company’s ESOS By-Laws such as retirement, ill health, injury, physical or mental disability, and subjected always to the discretion and written approval of the Options Committee of the Company;

(iii) The option price under the ESOS is the volume weighted average market price quoted on Bursa Malaysia for the past five (5) consecutive market days prior to the date of grant, save that a discount of not more than ten percent (10%) may be given at the absolute discretion of the Options Committee for options granted after the listing of the Company. The option price shall not be lower than the par value of the shares of the Company of RM0.10;

(iv) Options granted under the ESOS carry no dividend or voting rights. Upon exercise of the options, shares issued rank pari passu in all respects with existing ordinary shares of the Company; and

(vi) The options granted are exercisable upon receipt of notice of entitlement to exercise from the ESOS Secretariat by or before 1 April of each year based on annual entitlement. Acceleration of the annual entitlement is dependent on the Employee Performance Rating achieved in the preceding year.

35 Share Premium

Group and Company Period Year ended ended 31.3.2013 31.12.2011 RM’000 RM’000 Other reserves: At beginning of financial period/year 276,793 275,926 Additions arising from: - conversion of ICSLS, net 36,443 788 - exercise of ESOS 2,408 79 - exercise of warrants 9,231 – - private placement, net (Note 44(k)) 27,041 –

At end of financial period/year 351,916 276,793


36 Other Reserves

Exchange Put Available Share fluctuation Hedge option for sale Warrants option Group Note reserve reserve reserve reserve reserve reserve ICSLS ICULS Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2012, as restated (98,527) 311 (258,286) – 32,337 13,813 61,899 1,148 (247,305)

Other comprehensive (loss)/income: - Currency translation differences 4,554 – – – – – – – 4,554 - Change in fair value of cash flow hedge CCIRS – (311) – – – – – – (311) - transfer to income statement – (6,710) – – – – – – (6,710)

Total other comprehensive (loss)/income 4,554 (7,021) – – – – – – (2,467)

Share option recognised in: 6 - company – – – – – 888 – – 888 - subsidiaries – – – – – 3,098 – – 3,098 - value of share options lapsed/forfeited/exercised – – – – – (3,613) – – (3,613)

– – – – – 373 – – 373

Put option extinguishment – – 258,286 – – – – – 258,286 Conversion of ICSLS 31 – – – – – – (61,899) – (61,899) Conversion of ICULS 32 – – – – – – – (1,148) (1,148) Warrants - exercised 33 – – – – (3,211) – – – (3,211) - lapsed – – – – (29,126) – – – (29,126) Disposal of subsidiary 44 687 – – – – – – – 687

At 31 March 2013 (93,286) (6,710) – – – 14,186 – – (85,810)



36 Other Reserves (continued)

Exchange Put Available Share fluctuation Hedge option for sale Warrants option Group Note reserve reserve reserve reserve reserve reserve ICSLS ICULS Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2011 - as previously stated (98,725) (9,446) (258,286) (1,719) 32,337 20,909 62,121 1,217 (251,592) - effect of adoption of standards 48 – – – – – (513) – – (513)

At 1 January 2011, as restated (98,725) (9,446) (258,286) (1,719) 32,337 20,396 62,121 1,217 (252,105)

Other comprehensive income: - Currency translation differences 198 – – – – – – – 198 - Available-for-sale financial assets – – – 1,719 – – – – 1,719 - Derecognition of cash flow hedge CCIRS – 9,757 – – – – – – 9,757

Total other comprehensive (loss)/income 198 9,757 – 1,719 – – – – 11,674

Share option recognised in: 6 - company – – – – – 1,191 – – 1,191 - subsidiaries – – – – – 2,329 – – 2,329 - value of share options lapsed/forfeited – – – – – (10,080) – – (10,080)

– – – – – (6,560) – – (6,560)

Transferred to share premium arising from exercise of ESOS – – – – – – – – – Conversion of ICSLS 31 – – – – – – (222) – (222) Conversion of ICULS 32 – – – – – – – (69) (69) Disposal of a joint venture company 42(c) – – – – – (23) – – (23)

At 31 December 2011 (98,527) 311 (258,286) – 32,337 13,813 61,899 1,148 (247,305)


Share Warrants option Note reserve reserve ICSLS Total RM’000 RM’000 RM’000 RM’000

Company 31.3.2013 At 1 January 2012 32,337 4,662 61,899 98,898 Share option expense 6 – 888 – 888 Transferred to subsidiaries – 43 – 43 Value of options lapsed/forfeited – (1,358) – (1,358) Conversion of ICSLS 31 – – (61,899) (61,899) Exercise of warrants (3,211) – – (3,211) Expiry of warrants (29,126) – – (29,126)

At 31 March 2013 – 4,235 – 4,235

31.12.2011 At 1 January 2011 32,337 17,281 62,121 111,739 Share option expense 6 – 1,191 – 1,191 Transferred to subsidiaries – (11,066) – (11,066) Value of options lapsed/forfeited – (2,744) – (2,744) Conversion of ICSLS 31 – – (222) (222)

At 31 December 2011 32,337 4,662 61,899 98,898

37 Convertible Redeemable Secured Bonds (“Convertible Bonds”)


At beginning of the financial period/year – – Proceeds from issuance 110,000 – Directly attributable issuance costs (3,529) –

At end of the financial period/year 106,471 –

The Company issued 110.0 million zero coupon Convertible Redeemable Secured Bonds at its nominal value of RM1.00 each share to IJM Corporation Berhad (“IJM”) for cash on 8 February 2013 (“Issue Date”) as disclosed in Note 44 (l)

The salient features of the Convertible Bond are as follows:

(i) The Convertible Bonds are secured vide a first party legal charge over 313,043,478 ordinary shares of RM0.45 each in Scomi



37 Convertible Redeemable Secured Bonds (“Convertible Bonds”) (continued)

Energy Services Berhad held by the Company (“Charged SESB Shares”).

(ii) T he Charged SESB Shares will be proportionately discharged upon redemption/conversion of the Convertible Bond (as the case may be).

(iii) IJM has the option to convert all or any part of the Convertible Bonds into fully paid SGB Shares at any time on or before 5 February 2016.

(iv) For the purposes of conversion, the Convertible Bonds will carry a yield of 5% per annum calculated daily.

All outstanding Convertible Bonds will automatically be converted into SGB Shares upon maturity.

(v) The conversion price is at RM0.33.

(v) The Company has the option to redeem all or any part of the outstanding Convertible Bonds in cash at each anniversary of the Issue Date, subject to the following terms :

(a) the redemption price will be the nominal value of the Convertible Bond plus 10% yield for each full year that the Convertible Bond remain outstanding; and,

(b) consent is obtained from IJM in respect of the redemption on the 1st and 2nd anniversary from the Issue Date unless:

(i) the Group Shares have been traded at a price of not less than RM0.50 (based on daily volume weighted average market price) for 90 days consecutively prior to the respective 1st and 2nd anniversary of the Issue Date; and

(ii) SGB has recorded profit after taxation and minority interest (consolidated basis) for the latest 2 quarters prior to the redemption.

All Bonds redeemed by SGB shall be cancelled and cannot be resold.


38 Provisionfor Retirement Benefits


Statement of financial position obligations for retirement benefits 6,744 7,467 4,681

Included in: Current liabilities – 390 323 Non-current liabilities 6,744 7,077 4,358

6,744 7,467 4,681

Charged to income statement (Note 6) 1,117 1,402 2,026

Present value of funded obligations – 390 85 Present value of unfunded obligations 7,513 7,721 4,358 Unrecognised actuarial (loss)/gain (769) (644) 238 Liability in the statement of financial position 6,744 7,467 4,681

The amounts recognised in the income statement are as follows:

Period Year ended ended 31.3.2013 31.12.2011 RM’000 RM’000 (restated)

Current service cost 1,332 1,773 Interest cost 397 226 Amortisation of actuarial gain/(loss) (609) 56 Past service cost (3) (653)

Total included in staff costs 1,117 1,402



38 Provision for Retirement Benefits (continued)

The movements in the liability recognised in the statement of financial position are as follows:

Group and Company Period Year ended ended 31.3.2013 31.12.2011 RM’000 RM’000 (restated)

At beginning of financial period/year 7,467 4,681 Charged to income statement (Note 6) 1,117 1,402 Benefits paid (837) (349) Reclassification from/(to) disposal group held for sale – 1,919 Currency translation differences (1,003) (186)

At end of financial period/year 6,744 7,467

The principal actuarial assumptions used were as follows:

Group and Company Period Year ended ended 31.3.2013 31.12.2011 RM’000 RM’000 (restated)

Discount rate 4% -11% 6.5% - 7.5% Future salary increases 5% - 10% 5% - 8% Normal retirement age 45 - 60 55 – 60

Assumptions regarding future mortality experience are based on advice from published statistics and experience in each territory.

The most recent actuarial valuation was carried out by independent professional actuaries using the projected unit credit method.


39 Deferred Tax

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 statement of financial position:


Deferred tax assets (41,308) (46,640) (78,724) – (672) (1,674) Deferred tax liabilities: -subject to income tax 3,510 3,727 3,219 – – –

(37,798) (42,913) (75,505) – (672) (1,674)


At beginning of the financial period/year (42,913) (75,505) (672) (1,674) (Credited)/charged to income statement (Note 8) - property, plant and equipment (71) (11,471) – – - tax losses, capital allowances and tax incentives 5,610 22,991 – – - provisions for other liabilities and charges 2 3 – – - ICSLS (827) 666 (827) 666 - ICULS 2 31 – – - others 248 3,513 – –

4,964 15,733 (827) 666 Transfer from/(to) equity 2,314 338 2,314 336 Discontinued operation/disposal of a subsidiary/ assets held for sale (1,122) 19,820 – – Others – (855) (815) – Currency translation differences (1,041) (2,444) – –

At end of the financial period/year (37,798) (42,913) – (672)



39 Deferred Tax (continued)


Deferred tax assets Tax losses, capital allowances and tax incentives (35,560) (41,170) (85,097) (177) – – Provision for other liabilities and charges (3,541) (1,086) (1,069) – – – Payables – – (61) – – – ICSLS – (833) (1,835) – (833) (1,835) ICULS – (4) (37) – – – Others (2,207) (3,547) (3,635) – – – Offsetting – – 13,010 177 161 161

(41,308) (46,640) (78,724) – (672) (1,674)

Deferred tax liabilities Property, plant and equipment 2,837 2,766 15,451 177 161 161 Others 673 961 778 – – – Offsetting – – (13,010) (177) (161) (161)

3,510 3,727 3,219 – – –

The amount of deductible temporary differences, unabsorbed tax losses and tax incentives (which is subject to agreement by the tax authorities) for which no deferred tax asset is recognised in the statement of financial position is as follows:


Deductible temporary differences 32,474 51,370 57,271 10,225 10,042 2,674 Unabsorbed tax losses and tax incentives 123,438 147,449 5,226 37,364 37,316 28,048

Deferred tax assets have not been recognised on the deductible temporary differences, unabsorbed tax losses and tax incentives of the Company and certain companies in the Group as it is uncertain that there will be future taxable profits to utilise the deferred tax assets.


40 Commitments and Contingent Liabilities


(a) Authorised capital expenditure not recognised in the financial statements: - contracted 20,752 27,513 6,441 – – – - not contracted 272,985 25,397 55,285 – – –

293,737 52,910 61,726 – – –

Analysed as follows: - property, plant and equipment 109,883 46,725 40,977 – – – - development costs 25,591 3,612 5,632 – – – - others 158,263 2,573 15,117 – – –

293,737 52,910 61,726 – – –

(b) Operating lease commitments: Instalments payable - not later than 1 year 13,995 25,385 33,465 10 49 116 - later than 1 year but not later than 5 years 9,730 11,891 13,699 12 92 94 - later than 5 years 597 2,828 3,192 – – –

24,322 40,104 50,356 22 141 210

(c) Contingent liabilities: - claims by sub-contractors 5,724 – – – – – - litigation 95 3,787 2,776 – – – - taxation 774 4,734 – – – –

The Company has provided financial support letters to certain of its subsidiaries to enable them to meet their obligations as and when they fall due. In addition, the Company has also confirmed its intention to provide financial support to a subsidiary to meet its liabilities and obligations under a specific project as and when they fall due until the cumulative limit imposed by a lender has been uplifted.



41 Significant Related Party Transactions

(a) In addition to the 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 under agreed terms with related parties:

Group Company Period Year Period Year ended ended ended ended ended ended 31.3.2013 31.12.2011 31.3.2013 31.12.2011 RM’000 RM’000 RM’000 RM’000

Significant transactions with related parties: Subsidiaries: Management fees receivable – – – 3,840 Interest income – – 4,901 6,008

Joint ventures: Management fees receivable from Scomi NTC Sdn Bhd – 125 – –

Related parties: Share registration fee paid to Symphony 273 224 174 153 Airline ticketing services provided by Lintas 3,219 2,606 45 17 Advances to SEB – – 24,000 – Advances to SOL – – 11,572 – Receivables written off – – 23,892 7,807

Symphony Share Registers Sdn Bhd (“Symphony”) and Lintas Travel & Tours Sdn Bhd (“Lintas”) are companies connected to

certain Directors;

The details of interest charged on advances provided to subsidiaries are disclosed in Note 23.

The intercompany receivables written off are in relation to advances to a subsidiary, Scomi Ecosolve Ltd, which became inactive.

Information regarding outstanding balances arising from related party transactions as at 31 March 2013 is disclosed in Note 23 and Note 27.

(b) Compensation of key management personnel

Key management personnel comprise Directors and senior vice presidents and above of the Company, having authority and responsibility for planning, directing and controlling the activities of the Company either directly or indirectly.


1.

The remuneration of Directors and members of key management during the financial period were as follows:

Group Company Period Year Period Year ended ended ended ended ended ended 31.3.2013 31.12.2011 31.3.2013 31.12.2011 RM’000 RM’000 RM’000 RM’000 (restated) Fees Salaries and short-term employee benefits 18,200 11,882 1,551 656 Defined contribution plan 1,499 879 235 149 Other long-term benefits – 26 – 26 Share-based payments 925 633 – –

20,624 13,420 1,786 831

Directors of the Group and Company and other members of key Management have been granted the following number of options under the Employee Share Options Scheme (“ESOS”):

Group and Company Period Year ended ended ended ended 31.3.2013 31.12.2011 ’000 ’000 At beginning of the financial period/year 35,766 24,606

Granted 7,000 16,000 Forfeited – (4,480) Exercised (14,508) (360)

At end of the financial period/year 28,258 35,766

42 Significant Disposal of Subsidiaries, Business and Joint Venture Company

(a) Disposal of subsidiaries

Financial period ended 31 March 2013

(i) Disposal of Scomi Oiltools Kish Limited (“SOKL”)

On 23 April 2012, a subsidiary completed the disposal of its 99.6% equity interest in SOKL to a third party for a total sale consideration of RM51.6 million, which is payable in three cash instalments.



42 Significant Disposal of Subsidiaries, Business and Joint Venture Company (continued)

Financial period ended 31 March 2013 (continued)

(i) Disposal of Scomi Oiltools Kish Limited (“SOKL”) (continued)

Details of the assets, liabilities and net cash inflow arising from the disposal are as follows:

Group RM’000

Property, plant and equipment 2,395 Intangible assets 16,312 Inventories 5,668 Trade and other receivables 26,561 Cash and cash equivalents 12,398 Trade and other payables (10,043) Other reserves 507 Share of net assets of non controlling interest (5,069)

Net assets disposed 48,729 Loss on disposal (6,959)

Total consideration 41,770 Effects of discounting 9,969

51,739

Less: Receivables (47,576) Cash and cash equivalent (12,398)

Net cash outflow (8,235)

(ii) Disposal of Scomi Oiltools AS (“SOAS”) and Norwegian branch of Scomi Oiltools Europe Limited (“SOEL”) On 2 July 2012, SOEL completed the disposal of its wholly-owned subsidiary SOAS to Knud Holm Prosjekt AS for a

total sale consideration of NOK0.1 million (approximately RM0.04 million). As part of the same agreement, SOEL entered into an agreement with SOAS to dispose the assets and liabilities in the Norwegian Branch of SOEL for a total sale consideration of RM10.2 million (NOK20.0 million).

Details of the assets, liabilities and net cash inflow arising from the disposal are as follows:

Group RM’000

Property, plant and equipment 9,988 Intangible assets 10,291 Inventories 230

Total assets disposed 20,509 Share of non controlling interest (2,456) Loss on disposal attributable to the Group (7,812) Proceeds from disposal/ net cash inflow 10,241


(iii) Disposal of Augean North Sea Services Ltd (“ANSSL”, formerly known as Woodside North Sea Services Ltd)

On 31 May 2012, SOEL transferred its business to ANSSL for a purchase consideration of GBP2.7 million (RM13.3 million), satisfied via 100 ordinary shares of ANSSL.

On 3 September 2012, SOEL completed the disposal of 70 ordinary shares of ANSSL (representing a 70% equity interest) to Augean plc for a total sale consideration of GBP2.0 million (approximately RM10.3 million). The transaction was completed on 3 September 2012.

Details of the assets, liabilities and net cash inflow arising from the disposal of business are as follows:

Group RM’000

Property, plant and equipment 16,879 Intangible assets 19,387 Inventories 98 Trade and other receivables 2,387 Borrowings (6,013) Non-controlling interests (4,462)

Net assets disposed 28,276 Loss on disposal (14,191)

Proceeds from disposal 14,085 Fair value of 30% interest in joint venture retained (ANSSL) (3,794) Net cash inflow on disposal 10,291

(b) Disposal of business

Financial period ended 31 March 2013

(iv) Disposal of Scomi Nigeria Pte Ltd (“SNPL”) and 2% equity interest in Titan Nigeria Ltd (“TTNL”)

SNPL had completed the acquisition of the remaining 49.9% interest in TTNL which it did not hold from Enercon Nigeria Limited for a purchase consideration of USD3.5 million (approximately RM10.7 million) on 30 April 2012.

Upon completion of the above acquisition, SNPL is a wholly owned subsidiary of SGB which has two subsidiaries, namely Oiltools Africa Ltd (“OAL”), a 98% owned subsidiary of SNPL, with balance 2% held by SGB and Titan Turbulars Nigeria Ltd (“TTNL”) which was disposed for a cash consideration of USD39.7 million (approximately RM126.5 million), which consists of a cash payment of USD36.7 million (approximately RM116.0 million) and a retention sum of USD3.0 million (approximately RM9.2 million) which is receivable in two years from the date of the completion.

The transaction was completed on 17 October 2012.



42 Significant Disposal of Subsidiaries, Business and Joint Venture Company (continued)

(iv) Disposal of Scomi Nigeria Pte Ltd (“SNPL”) and 2% equity interest in Titan Nigeria Ltd (“TTNL”) (continued)

Details of the assets, liabilities and net cash inflow arising from the disposal of business are as follows:

Group RM’000

Property, plant and equipment 18,677 Intangible assets 9,900 Inventories 16,307 Trade and other receivables 18,777 Cash and cash equivalents 2,256 Trade and other payables (10,626) Provision for taxation (40) Exchange fluctuation reserve 687 Net assets disposed 55,938 Incidental expenses 6,019 Cost to acquire TTNL 10,840 Net gain on disposal 50,080

Proceeds from disposal 122,877 Repayment of existing borrowings (29,122) Retention sum (9,155)

Net cash inflow on disposal 84,600

(c) Disposal of a joint venture company

Financial year ended 31 December 2011

(v) Disposal of Scomi NTC Sdn Bhd

On 2 February 2011, Scomi Energy Sdn Bhd (a wholly-owned subsidiary of the Company) completed the disposal of its 70,000 ordinary shares of RM1.00 each (representing 70% interest in the ordinary shares) and 612 irredeemable non-cumulative convertible preference shares of RM1.00 each (representing 51% interest in the preference shares) in Scomi NTC Sdn Bhd to Cameron Solutions Inc for a cash consideration of USD3.0 million.

Details of the share of net assets, net cash inflow and gains arising from the disposal of the joint venture company are as follows:

Group 2011 RM’000

Net cash inflow 9,096 Share of net assets (4,548)

Gain on disposal 4,548


1.

1.

The impact of the disposal to the Group’s statement of comprehensive income are as follows:

Year ended 31.12.2011 RM’000

Share of results in joint ventures (115)

43 Segment Information

Management has determined the operating segments based on the reports reviewed by the Chief Operating Decision Maker (“CODM”) that are used for allocating resources and assessing performance of the operating segments.

The CODM considers the business from based on products and services rendered by industry. The following reportable operating segments have identified:

(i) Oilfield services - provision of drilling fluids and related engineering services to the upstream oil and gas industry; - provision of drilling waste management services and equipment to the upstream oil and gas industry; - supply of production chemicals to the upstream oil and gas industry; - production enhancement

(ii) Transport solutions - urban transportation solutions provider through design and manufacture of monorails, buses and a wide range of special purpose vehicles such as tankers, trucks and airport ground support

equipment; and - rail solutions systems provider

(iii) Marine services - provision of marine vessel transportation service and leasing of marine vessels. Inter-segment revenue in the current and prior financial period comprises management services and dividend. During the

financial period, the production enhancement segment was merged with the oilfield services segment due to a change in reports reviewed by the CODM following the completion of the restructuring disclosed in Note 44. To ensure a consistent comparison with the new reporting structure, the prior financial period segmental information has been restated.

Segment assets and segment liabilities are not disclosed as it is not presented to the CODM. 15 month period ended 31.3.2013 Inter- External segment Total RM’000 RM’000 RM’000

Revenue Revenue from continuing operations Oilfield services 1,153,394 – 1,153,394 Transport solutions 450,271 – 450,271 Marine services 318,299 – 318,299 Reconciliation 404 5 409 Inter-segment revenue – (5) (5)

1,922,368 – 1,922,368



1.

1.

1.

43 Segment Information (continued)

15 month period ended 31.3.2013 Inter- External segment Total RM’000 RM’000 RM’000 (restated) (restated) (restated)

Revenue from discontinued operation Oilfield services 153,936 – 153,936

Total revenue 2,076,304 – 2,076,304

12 month year ended 31.12.2011 Inter- External segment Total RM’000 RM’000 RM’000 (restated) (restated) (restated)

Revenue from continuing operations Oilfield services 776,582 – 776,582 Transport solutions 246,797 – 246,797 Marine services 377,046 – 377,046 Reconciliation 2,142 33,369 35,511 Inter-segment revenue – (33,369) (33,369) 1,402,567 – 1,402,567 Revenue from discontinued operation Oilfield services 460,828 – 460,828

Total revenue 1,863,395 – 1,863,395

Continuing operations Oilfield Transport Marine Discontinued Services Solutions Services Total operations Reconciliation Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Period ended 31.3.2013 Results Segment results 133,941 (9,367) 35,416 159,990 (48,931) (17,735) 93,324 Gain on disposal – – – – 21,118 – 21,118 Finance costs (37,969) (11,714) (3,387) (53,070) (31,300) (76,608) (160,978) Share of results of associates – – 133 133 – – 133 Share of results of joint ventures – – 6,568 6,568 – – 6,568

Loss before taxation 95,972 (21,081) 38,730 113,621 (59,113) (94,343) (39,835)

Taxation expense (29,614)

Loss for the financial period (69,449)


1. Continuing operations Oilfield Transport Marine Discontinued Services Solutions Services Total operations Reconciliation Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Year ended 31.12.2011 Results Segment results 82,738 (68,425) (111,087) (96,774) (66,661) 49,176 (114,259) Loss on disposal – – – – (103,495) – (103,495) Finance costs (net) (49,517) (6,004) (1,821) (57,342) – (5,464) (62,806) Share of results of associates – – (2,978) (2,978) – – (2,978) Share of results of joint ventures (439) – 4,193 3,754 – – 3,754

Profit/(loss) before taxation 32,782 (74,429) (111,693) (153,340) (170,156) 43,712 (279,784)

Taxation expense (77,377)

Profit/(loss) for the financial year (357,161)

44 Significant Events During the financial period

(a) Disposal of Scomi Oilfield Limited by the Company (“SGB”) to SESB

On 12 March 2013, the Company completed the disposal of its 76.08% equity interest in Scomi Oilfield Limited (“SOL”) to Scomi Energy Services Bhd (“SESB”)

Prior to the above disposal, the Group undertook an internal restructuring of the SOL business operations as follows:

• Stage1

Disposal by Scomi Oiltools Europe Limited (“SOEL”) , a wholly-owned subsidiary of Scomi Oiltools Bermuda Limited (“SOBL”), which in turn is a wholly-owned subsidiary of SOL, of its 100% equity interest in Scomi Oiltools (RUS) Limited Liability Company (“SORL”) to Scomi Oiltools (S) Pte Ltd (“SOSPL”), a wholly-owned subsidiary of SOBL, for a disposal consideration of USD2.9 million (approximately RM9.3 million) (“ SORL Disposal”).


• Stage2a

Disposal by SOSPL of the following entities to SOBL:

(i) 99.97% equity interest in Scomi Oiltools de Mexico S de RL de CV (“SOMS”) for a disposal consideration of RM3 (“SOMS Disposal”); and

(ii) 99.97% equity interest in Oilfield Services de Mexico S de RL de CV (“OSMS”) for a disposal consideration of RM3 (“OSMS Disposal”)



44 Significant Events During the financial period (continued)

• Stage2a(continued)

(collectively referred to as “SOSPL Group Disposal”)

The transaction was completed on 24 July 2012.

• Stage2b

After the completion of the SOSPL Group Disposal, disposal by SOBL of its 100% equity interest in SOSPL to SOL for a disposal consideration of RM2.1 million (“SOSPL Disposal”);


• Stage3

After the completion of the SORL Disposal and the SOSPL Disposal, disposal by SOL of 76.08%, 16.71% and 7.21% equity interest in SOBL to SGB, Standard Chartered Private Equity Limited (“SCPEL”) and Fuji Investment I (“FII”) respectively for a total disposal consideration of RM327.9 million (“SOBL Disposal”);

The transaction was completed on 8 November 2012.

• Stage4

After the completion of the SOBL Disposal, disposal by SOBL to SOL of the following:

(i) 100% equity interest in Scomi Oiltools Sdn Bhd (“SOSB”) for a disposal consideration of RM92.1 million (“SOSB Disposal”);

(ii) 5 1% equity interest in Scomi Oiltools Oman LLC (“SOOL”) for a disposal consideration of RM6.1 million (USD1.9 million) (“SOOL Disposal”);

(iii) 100% equity interest in Scomi Oiltools Pty Ltd (“SOPL”) for a disposal consideration of RM28.2 million (“SOPL Disposal”);

(iv) 99.95% equity interest in Scomi Oiltools Egypt SAE (“SOES”) for a disposal consideration of RM11.6 million (“SOES Disposal”);

(v) 99.99% equity interest in Scomi Oiltools (Thailand) Ltd (“SOT”) for a disposal consideration of RM22.6 million (“SOT Disposal”);

(vi) 100% equity interest in KMC Oiltools BV (“KOB”) for a disposal consideration of RM5.8 million (“KOB Disposal”);

(vii) 50% equity interest in Vibratherm Limited (“Vibratherm”) for a disposal consideration of RM3 (“Vibratherm Disposal”);

(viii) 100% equity interest in Scomi Oiltools (Cayman) Limited (“SOCL”) for a disposal consideration of RM23.6 million (“SOCL Disposal”);

(ix) 100% equity interest in Scomi Oiltools Ltd (“SOLC”) for a disposal consideration of RM 37.4 million (“SOLC Disposal”);

(x) 1 00% equity interest in Scomi Oiltools (Africa) Limited (“SOAL”) for a disposal consideration of RM89.1 million (“SOAL Disposal”); and


(xi) 100% equity interest in KMCOB Capital Berhad (“KMCOB”) for a disposal consideration of RM3 (“KMCOB Disposal”). (collectively referred to as “SOBL Group Disposal”)

(The SORL Disposal, SOSPL Group Disposal, SOSPL Disposal, SOBL Disposal and SOBL Group Disposal are collectively referred to as “SOL Reorganisation”).

After the SOL Reorganisation, the Company has disposed of its 76.1% issued and paid-up ordinary and preference shares of SOL, to SESB for RM776.03 million. The sale consideration has been settled via issuance of 1,223,949,234 new SESB Shares at RM0.47 per share and novation of an amount owing by SGB to SOL amounting to RM264.3 million (“SOL Disposal”).

Simultaneously, SCPEL and FII has disposed of their respective 16.71% and 7.21% issued and paid-up ordinary and preference shares in SOL (“SOL Disposals by SCPEL and FII”) to SESB. As a result, the extinguishment of the option granted in prior years over the shares in SOL owned by SCPEL and FII has occurred upon the SOL Disposals by SCPEL and FII as disclosed in Note 27.

The transaction was completed on 12 March 2013.

Upon completion of the above disposals, the Group’s effective interest in SOLE decreased from 76.1% to 65.6% and simultaneously, SCPEL and FII has disposed of their respective 16.71% and 7.21% issued and paid-up ordinary and preference shares in SOL (“SOL Disposals by SCPEL and FII”) to SESB. The financial impact of the transaction is summarised in Note 45.

(b) Acquisition of 60% interest in Scomi Sosma Sdn Bhd (“SSSB”) and disposal of SSSB to SESB

Scomi Chemicals Sdn Bhd (“SChemicals”) completed the acquisition of 60% equity interest in SSSB from Ombak Elegan Sdn Bhd for a purchase consideration of RM3.9 million. Thereafter, SSSB was disposed to the Company for a purchase consideration of RM5.6 million. Both transactions were completed on 26 February 2013.

On 8 March 2013, SChemicals completed the disposal of its wholly-owned subsidiary, SSSB to SESB for a sale consideration of RM6.7 million and the assumption of RM12.2 million owing by SSSB to the Company (“Amount Owing”) resulting in Group’s effective interest reducing to 65.65%.

The sale consideration and SSSB Payable were satisfied by way of an assignment to the Company of the SESB rights and benefits of an inter-company loan owing by PT. Rig Tenders Indonesia, Tbk. (“PTRT”) to Scomi Marine Services Pte Ltd (“SMS”), both subsidiaries of SESB, amounting to USD6.0 million (approximately RM18.9 million). The financial impact of the transaction is summarised in Note 45.

(c) Disposal of Scomi KMC Sdn Bhd (“SKMC”) to SESB

On 12 March 2013, the Company completed the disposal of its 48% equity interest in SKMC to SESB for a cash consideration of RM0.7 million resulting in Group’s effective interest in reducing to 34.1%. The financial impact of the transaction is sum-marised in Note 45.

(d) Termination of SESB Employees’ Share option Scheme

On 26 June 2012, SESB obtained the approval from its shareholders to terminate its Employee Share Option Scheme earlier than the expiry date of 17 October 2015. There is no significant financial impact to the equity of the Group.

(e) SESB Capital Repayment and Reduction

On 29 August 2012, SESB completed its capital reduction and repayment of the par value of the existing ordinary shares



44 Significant Events During the financial period (continued)

(e) SESB Capital Repayment and Reduction (continued)

of RM1.00 each to RM0.45 each by cancelling RM0.55 each share pursuant to Section 64 of the Companies Act, 1965. The capital repayment of RM135.0 million to the shareholders of SESB was completed on 29 August 2012. The capital repayment

resulted in a net cash inflow to the Company of RM57.9 million.

(f) Disposal of Marine Logistics Companies by Scomi Marine Services Pte Ltd (“SMS”) to PT Rig Tenders Indonesia, Tbk (“PTRT”)

On 12 April 2012, SMS ,a wholly-owned subsidiary of Scomi Energy Services Bhd (“SESB”), completed the disposal of its entire equity interest in the following companies:

(i) CH Logistics Pte Ltd (“CHL”) and its wholly-owned subsidiary, Sea Master Pte. Ltd. (“Sea Master”);

(ii) CH Ship Management Pte Ltd (“CHSM”); and (iii) Grundtvig Marine Pte Ltd (“GMPL”) and its 95% owned subsidiary, PT Batuah Abadi Lines (“PBAL”)

(all collectively referred to as “Marine Logistics Companies”) to its 80.5%-owned subsidiary, PTRT, for a total consideration of USD57.0 million (approximately RM179.9 million), which was settled via an issuance of a vendor note to SMS.

Upon completion of the above disposal by SMS, the Group effective interest in the Marine Logistics Companies has decreased and reduced the Group’s share of net assets in the Marine Logistics Companies. The financial impact of the transaction is summarised in Note 45.

(g) Acquisition of 49.9% equity interest in Titan Tubulars Nigeria Ltd (“TTNL”)

As disclosed in Note 42(a)(iv), SNPL had completed the acquisition of the remaining 49.9% interest in TTNL which it did not hold from Enercon Nigeria Limited for a purchase consideration of USD3.5 million (approximately RM10.7 million) on 30 April 2012.

Upon completion of the above acquisition, the Group’s effective interest in TTNL increased from 51.1% to 100%. The effect of the increase in interest to the Group’s equity was not material.

(h) Acquisition of 60% interest in Scomi Sosma Sdn Bhd (“SSSB”)

As disclosed in Note 44(b), Scomi Chemicals Sdn Bhd (“SChemicals”) completed the acquisition of 60% equity interest in SSSB from Ombak Elegan Sdn Bhd for a purchase consideration of RM3.9 million on 26 February 2013.

Upon completion of the above acquisition, the Group’s effective interest in SSSB increased from 40.0% to 100.0% and increased the Group’s share of equity in SSSB by RM1.0 million.

(i) Acquisition of Scomi Oiltools Bermuda Limited (“SOBL”)

The Company completed the acquisition of 16.71% and 7.21% equity interest in SOBL from SCPEL and FII respectively on 12 March 2013, for a purchase consideration consisting of :

(i) cash consideration of USD6.2 million (approximately RM19.4 million)to be settled in June 2014; and,

(ii) the assumption of SCPEL and FII’s debt totalling USD4.8 million (approximately RM15.2 million) owing to SOBL.


Upon completion of the above acquisition, the Group’s effective interest in SOBL increased from 76.1% to 100.0%. The financial impact of the transaction is summarised in Note 45.

(j) Disposal of SOL, SSSB and SKMC to SESB

As disclosed in Note 44(a) to (c), the Company completed the disposal of its equity interests in SOL, SSSB and SKMC to SESB on 12 March 2013.

Simultaneously, SCPEL and FII has disposed of their respective 16.71% and 7.21% issued and paid-up ordinary and preference shares in SOL (“SOL Disposals by SCPEL and FII”) to SESB.

Upon completion of the above disposals, the Group’s effective interest in SOL decreased from 76.1.0% to 65.6% and increased the Group’s share of equity in the SOL.

(k) Private placement of SGB Shares

On 24 September 2012, SGB entered into an agreement with IJM Corporation Berhad (“IJM”) for the issuance of 119,109,500 new ordinary shares of RM0.10 each in SGB representing approximately 10% of the issued and paid-up share capital of the SGB (net of treasury shares), by way of private placement for a total cash proceeds of RM39.3 million less expenses amounting to RM 0.4 million.

The new SGB Shares were listed on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”) on 3 October 2012.

(l) Bonds issue to IJM

On 24 September 2012, SGB entered into an agreement with IJM for the Bonds Issue, as disclosed in Note 37.

45 Transactions with Non-Controlling Interests

The effects of transactions with non-controlling interests on the equity attributable to owners of the parent for the period 31 March 2013 is as follows:

Group 31.3.2013 RM’000

Changes in equity attributable to shareholders of the company arising from:

- Accretion of additional interests in a subsidiary 88,207 - Dilution of interests in a subsidiary without loss of control (110,669)

Net effect in Group’s equity (22,462)

46 Significant Events Subsequent to the date of the Statement of Financial Position

Refinancing of Sukuk Murabahah

As set out in the Sukuk Murabahah Trust Deed dated 7 December 2011, the Group is permitted to undertake the SOL Assets Disposals (herein defined as collectively the US/Mexico Asset Disposal and West Africa Disposal) subject to the terms and conditions



46 Significant Events Subsequent to the date of the Statement of Financial Position (continued)

Refinancing of Sukuk Murabahah (continued)

set out and in accordance to Clause 11(c) in, the SOL Asset Disposal shall be completed on or before 31 December 2012. The US/Mexico Asset Disposal was completed in November 2011.

In February 2012, the Company announced that SOL Group has obtained an indulgence to complete or cause to be completed the West Africa Disposal (herein defined as the disposal of SOL assets located in Nigeria and Congo) on or before 31 December 2013.

Negotiations with certain financial institutions are currently ongoing to obtain refinancing for the early redemption of the remaining Sukuk Murabahah for the portion due in 2018 amounting to RM88.7 million at par instead of raising funds via the West Africa Disposal.

Subsequent to the end of financial period, the Sukukholders on 28 June 2013 approved the following in relation to the refinancing:-

(a) r efinancing exercise to be undertaken by the Issuer (“Refinancing”) as a plan and source of funding for the early redemption of the remaining Sukuk at par (being the full nominal value) together with the accrued profit thereon (if any) on such date to be notified by the Issuer to the Facility Agent, at least five (5) Business Days prior to the proposed date of redemption of the sukuk; and

(b) KMCOB Capital Berhad pursuant to the refinancing, to redeem the remaining outstanding Series under the Sukuk Murabahah (“Remaining Outstanding Sukuk”), prior to their respective Maturity Date, at per (being the full nominal value) together with the accrued profit thereon (if any) on such date to be notified by the Issuer to the Facility Agent, at least five (5) Business Days prior to the proposed date of redemption of the Remaining Outstanding Sukuk,

However, the early redemption exercise is subject to the completion of the refinancing being no later than 13 December 2013. The Directors are of the opinion that the refinancing will be completed by this date.

Joint venture between Freight Management Holdings Bhd (“FMHB”) and Scomi Energy Services Bhd (“SESB”)

On 3 June 2013, the Company entered into a joint venture agreement has entered into with FMHB for the purpose of:-

(i) Setting up a joint venture company (Vessel Owner) to jointly acquire and own marine vessels. (ii) Setting up another joint venture company (Vessel Operator) to jointly operate marine vessels.

One of the joint venture companies, Transenergy Shipping Pte Ltd, has been incorporated as at the date of the financial statements.

The Company will own a 50% equity interest in each entity.

47 Financial Risk Management

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Group operates within clearly defined guidelines that are approved by the Board and the Group’s policy is not to engage in speculative transactions.

(a) Financial risk factors

(i) Market risk

Foreign exchange risk

The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other


than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily United States Dollar (USD), Indian Rupee (INR) and Brazilian Real (BRL).

The Group maintains a natural hedge, whenever possible, by borrowing in currencies or entering into CCIRS that match the future revenue stream to be generated from its investments.

The Group is exposed to the risk of significant forex fluctuation due to hyperinflationary economy in Venezuela.

Currency profile of monetary financial assets and financial liabilities are as follows:

Functional curriencies Group Ringgit USD Indian Brazillian 31.3.2013 Malaysia Dollar Rupee Real Others Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Receivables, deposits and prepayments -Ringgit Malaysia 385,535 – – – – 385,535 -US Dollar 92,879 182,809 – – 26,956 302,644 -Indian Rupee 204,939 – 92,204 – – 297,143 -Brazillian Real 24,694 – – 17,880 – 42,574 -Others 20,173 22,117 – – 6,826 49,116

Total 728,220 204,926 92,204 17,880 33,782 1,077,012

Short-term deposits, cash and bank balances -Ringgit Malaysia 68,998 7,134 – – – 76,132 -US Dollar 89,138 22,823 – – 1,570 113,531 -Indian Rupee – – 769 – – 769 -Others 9,045 11,152 – 36,807 1,895 58,899

Total 167,181 41,109 769 36,807 3,465 249,331

Payables -Ringgit Malaysia 168,767 3,910 – – – 172,677 -US Dollar 101,990 90,450 – – 12,460 204,900 -Indian Rupee – – 21,044 568 – 21,612 -Others 35,741 40,238 – – 6,033 82,012

Total 306,498 134,598 21,044 568 18,493 481,201

Functional curriencies Group Ringgit USD Indian 31.3.2013 Malaysia Dollar Rupee Others Total RM’000 RM’000 RM’000 RM’000 RM’000

Borrowings -Ringgit Malaysia 421,151 307,501 – – 728,652 -US Dollar 94,074 31,679 – 50,630 176,383 -Indian Rupee – – 60,574 – 60,574 -Others – 9,935 – – 9,935

515,225 349,115 60,574 50,630 975,544



47 Financial Risk Management (continued)

Company Ringgit USD 31.3.2013 Malaysia Dollar Total RM’000 RM’000 RM’000

Receivables, deposits and prepayments 38,233 9,154 47,387 Short term deposits, cash and bank balances 21,531 928 22,459 Payables (46,244) (19,037) (65,281) Borrowings (1,870) – (1,870)

11,650 (8,955) 2,695

Functional curriencies Group Ringgit USD Indian 31.12.2011 Malaysia Dollar Rupee Others Total RM’000 RM’000 RM’000 RM’000 RM’000

Receivables, deposits and prepayments -Ringgit Malaysia 271,750 – – – 271,750 -US Dollar 87,463 355,202 – 15,738 458,403 -Indian Rupee 157,314 – 98,972 – 256,286 -Others 53,758 19,956 – 12,906 86,620

Total 570,285 375,158 98,972 28,644 1,073,059

Short term deposits, cash and bank balances -Ringgit Malaysia 86,871 2,017 – – 88,888 -US Dollar 78,673 24,243 – 3,863 106,779 -Indian Rupee – – 1,260 – 1,260 -Others 8,164 14,450 – 16,640 39,254

Total 173,708 40,710 1,260 20,503 236,181

Payables -Ringgit Malaysia 227,926 2,207 125,966 – 356,099 -US Dollar 103,654 126,630 1,163 14,851 246,298 -Indian Rupee – – 5,131 – 5,131 -Others – – 167 – 167

Total 331,580 128,837 132,427 14,851 607,695 Borrowings -Ringgit Malaysia 445,113 341,606 – – 786,719 -US Dollar 132,006 77,388 – 19,362 228,756 -Others – – 63,212 – 63,212

577,119 418,994 63,212 19,362 1,078,687


Company Ringgit USD 31.12.2011 Malaysia Dollar Total RM’000 RM’000 RM’000

Receivables, deposits and prepayments 38,601 28,406 67,007 Short term deposits, cash and bank balances 12,986 96 13,082 Payables (11,676) (49) (11,725) Borrowings (204,036) (20,510) (224,546)

(164,125) 7,943 (156,182) The following table demonstrates the sensitivity of the Group’s income statement before tax to a reasonably possible

change in the USD and Indian Rupee exchange rates with all other variables held constant. The sensitivity analysis includes outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 3% change in the exchange rate.

(Loss)/profit before tax Group Company RM’000 RM’000

Period ended 31.3.2013 USD/RM +3% (7,130) (269) -3% 7130 269

INR/RM +3% 341 – -3% (341) –

(Loss)/profit before tax Group Company RM’000 RM’000

Year ended 31.12.2011 USD/RM +3% (747) (451) -3% 747 451

INR/RM +3% (2,416) – -3% 2,416 –

Interest rate risk The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The

Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. The investments in financial assets are mainly short term in nature and have been placed mostly in fixed deposits and occasionally, in short term commercial paper and investment funds.

The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. The Group reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on




Interest rate risk (continued)

cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes. The Group also uses hedging instruments such as interest rate swaps to minimise its exposure to interest rate volatility.

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying

amounts as at the end of the reporting period was: Group Company 31.3.2013 RM’000 RM’000

Fixed liabilities Fixed rate instruments 325,622 1,870 Floating rate instruments 649,921 – 975,543 1,870

Group Company 31.12.2011 RM’000 RM’000

Fixed liabilities Fixed rate instruments 555,151 201,940 Floating rate instruments 523,537 22,606

1,078,688 224,546 The disclosures above are made before considering the effects of hedging.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group and Company’s income statement before taxation. The sensitivity analysis is determined based on the impact on a 1% change in intent on floating rate financial instruments at the statement of financial position date.

Increase/ Effect on decrease in (loss)/profit basis points before tax RM’000 RM’000 Group Period ended 31.3.2013 +1% (6,499)

-1% 6,499

Company Period ended 31.3.2013 +1% (18) -1% 18


Increase/ Effect on decrease in (loss)/profit basis points before tax RM’000 RM’000

Group Year ended 31.12.2011 +1% (5,552) -1% 5,552

Company Year ended 31.12.2011 +1% (215) -1% 215

(ii) Credit risk

Credit risk or the risk of counterparties defaulting, are controlled by the application of credit approvals, limits and monitoring procedures. Credit risks are minimised and monitored by limiting the Group’s associations to business partners with high creditworthiness. The Group’s exposure to credit risk arises principally from its receivables from customers. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries and financial guarantees given. The Group considers the risk of the debtor defaulting in payments to be unlikely in view of the counterparty’s financial strength.

(I) Trade receivables

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statement of financial position. Trade receivables are monitored on an ongoing basis via Group’s management reporting procedures.

The credit quality of trade receivables that were neither past due nor impaired as at date of the statement of financial position, can be assessed by reference to historical information relating to counterparty default rates:

Group 31.3.2013 RM’000

Neither past due nor impaired:

Customer with no defaults in the past 212,886 Customer with some defaults in the past (all defaults were fully recovered) 6,934

Past due but not impaired: 1 to 30 days 72,571 31 to 60 days 39,578 61 to 90 days 13,725 91 to 120 days 11,294 More than 121 days 21,114 378,102




(I) Trade receivables (continued)

Group 31.12.2011 RM’000

Neither past due nor impaired:

Customer with no defaults in the past 300,213 Customer with some defaults in the past (all defaults were fully recovered) – Past due but not impaired: 1 to 30 days 102,440 31 to 60 days 44,870 61 to 90 days 41,449 91 to 120 days 26,820 More than 121 days 60,801

576,593

Group 31.3.2013 RM’000

Gross amount 37,769 Less: Allowance for impairment (37,769)

–

At beginning of financial period 45,365

Currency translation differences 1,741 Allowance made 4,101 Allowance utilised (583) Recovery of debts (3,365) Transfer from/(to) assets held for sale (9,490)

At end of financial period 37,769

Group 31.12.2011 RM’000

Gross amount 45,365 Less: Allowance for impairment (45,365)

–

At beginning of financial period 33,465

Currency translation differences (1,704) Allowance made 21,715 Allowance utilised (5,098) Recovery of debts (3,013) At end of financial period 45,365


There were no financial assets that would otherwise be past due or impaired whose terms have been renegotiated.

(II) Intercompany balances

The Company provided unsecured loans and advances to subsidiaries. The Company monitors the results of the subsidiaries regularly.

Group Period Year ended ended ended ended 31.3.2013 31.12.2011 RM’000 RM’000 At beginning of the financial period/year 16,957 17,404 Recovery of debt (4,818) (447)


As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position and there was no indication that the loans and advances to the subsidiaries are not recoverable.

(III) Other receivables

Group Period Year ended ended ended ended 31.3.2013 31.12.2011 RM’000 RM’000

At beginning of the financial period/year 12,513 – Allowance made – 12,513 Recovery of debt (3,810) –


(iii) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at 31 March 2013 based on undiscounted contractual payments:




(iii) Liquidity risk (continued) Between Between Within 1 and 2 2 and 5 Over 1 year years years 5 years RM’000 RM’000 RM’000 RM’000

Group 31.3.2013 Payables 410,971 20,230 – – Borrowings 675,452 48,673 147,206 104,213

Between Between Within 1 and 2 2 and 5 Over 1 year years years 5 years RM’000 RM’000 RM’000 RM’000

Company 31.3.2013 Payables 5,657 19,037 – – Amounts due to subsidiaries 59,624 – – – Borrowings 577 516 777 –


Group 31.12.2011 Payables 602,066 5,629 – – Borrowings 757,821 48,673 146,460 125,734


Company 31.12.2011 Payables 11,568 – – – Amounts due to subsidiaries 157 – – – Borrowings 222,305 576 1,432 233


Financial guarantees

The Company provides financial guarantee to banks in respect of banking facilities granted to certain subsidiaries, with a utilised amount of RM93.2 million as at 31 March 2013.

The Company monitors on an ongoing basis, the results of the subsidiaries and repayments made by the subsidiaries. As at the end of the reporting period, there was no indication that any subsidiary would default on repayment, which could

lead to the amount guaranteed above being recalled.

(b) Capital risk management

The Group’s objectives when managing capital, which is defined as total equity, are to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may issue new shares or adjust the amount of dividends paid to shareholders.

The gearing ratios are as follows: Group As at As at 31.3.2013 31.12.2011 RM’000 RM’000

Total borrowings of SGB 975,544 1,078,688

Total equity and reserves attributable to the owners of SGB 598,644 440,259

Gearing ratio (times) 1.63 2.45

The Group are in compliance with all externally imposed capital requirements for the financial period/year ended 31 March 2013 and 31 December 2011 except for breaches of loan covenants as disclosed in Note 28. The breaches do not affect the Group’s overall strategy for capital risk management. Details of significant financial covenant ratios are as follows:

Scomi Oilfield Limited (“SOL”)

The Group’s subsidiary, SOL is required by the bondholders of the Sukuk Murabahah to maintain financial covenants such as Net Debt to Equity Ratio and Annual Debt Service Cover Ratio, to be tested at every reporting period until the Sukuk Murabahah is fully repaid in year 2018.

Other than as disclosed in Note 28. SOL met all required financial covenants.

PT Rig Tenders Indonesia TBK (“PTRT”)

The Group’s subsidiary, PTRT is required under its loan to observe the financial covenants, to be assessed at every reporting period, including Debt Service Coverage Ratio, Ratio of Total Debt over Earnings Before Interest, Taxation, Depreciation and Amortisation (“EBITDA”), Total Debt over Shareholders’ Funds and a specified ratio of Vessel Valuation over Loan Amount.




PT Rig Tenders Indonesia TBK (“PTRT”) (continued)

PTRT met all the required financial ratios as at 31 March 2013. In addition, SEB has various financial covenants based on debt service coverage ratio, debt to equity ratio and total net

worth, all of which were complied with as at 31 March 2013, except for a financial covenant ratio in relation to financing for the Mumbai project was more than the financial ratio prescribed in the facility agreement. This will however only impact the ability of the Group to request for additional borrowings beyond the current facility limit from that financial institution in relation to this project being financed.

(c) Financial instruments measured at fair value

The fair value measurement hierarchies used to measure financial assets carried at fair value in the statements of financial position as at 31 March 2013 are as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 Group 31.3.2013

Financial assets AFS investments 104 – – 104

Financial liabilities Derivatives – (294) – (294)

Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 Group 31.12.2011

Financial assets AFS investments 127 – 1,389 1,516

Financial liabilities Derivatives – (348) – (348)


48 Early Adoption of Standards

The Directors have resolved to early adopt FRS 10: Consolidated Financial Statements, MFRS 11: Joint arrangements, MFRS 12: Disclosure of interest in other entities, MFRS 127: Separate Financial Statements (revised) and MFRS 128: Investments in Associates and Joint Ventures (revised). As at 31 December 2011, SESB is an associate of the Company in which SGB has an effective equity interest of 42.76% in SESB. SESB has been equity accounted under MFRS 128: Investments in Associates in the audited financial statements of SGB for the financial year ended 31 December 2011. The early adoption of MFRS 10 by the Company has resulted in SGB considering SESB as its subsidiary.

In addition, the Group no longer has control over Gemini Sprint Sdn Bhd and MarineCo Limited as they are deemed as joint ventures. Therefore the financial statements have been restated due to the impact of the early adoption.

The following table summarises the adjustments made to the Group’s statements of financial position at 1 January 2011 and 31 December 2011 and its statements of comprehensive income and cash flows for the year ended 31 December 2011 as a result of the early adoption of standards.

(a) Statement of financial position

(i) Group

31 December 2011 As previously reported Adjustments As restated RM’000 RM’000 RM’000

Intangible assets and goodwill 321,699 7,014 328,713 Property, plant and equipment 336,590 376,663 713,253 Investment in associate 216,514 (216,267) 247 Investment in joint ventures – 47,157 47,157 Deferred tax asset 46,634 6 46,640 Trade and other receivables 902,080 170,979 1,073,059 Cash and cash equivalents 157,447 78,734 236,181

Overall impact on total assets 1,980,964 464,286 2,445,250

Trade and other payables 539,976 62,090 602,066 Borrowings 1,065,693 12,994 1,078,687 Derivative financial liabilities 294 54 348 Current tax liabilities 32,815 2,857 35,672 Deferred tax liabilities 3,285 442 3,727 Provision for retirement benefits 4,762 (4,372) 390

Overall impact on total liabilities 1,646,825 74,065 1,720,890

Other reserves (246,095) (1,210) (247,305) Retained profits 378,591 (67,893) 310,698 Non-controlling interests 71,831 418,053 489,884

Overall impact on total equity 204,327 348,950 553,277



48 Early Adoption of Standards (continued)

1 January 2011 As previously reported Adjustments As restated RM’000 RM’000 RM’000

Intangible assets and goodwill 380,707 4,685 385,392 Property, plant and equipment 415,585 815 416,400 Investment in associate 268,859 (265,635) 3,224 Investment in joint ventures 19 25,062 25,081 Trade and other receivables 863,388 59,267 922,655 Cash and cash equivalents 176,388 11,660 188,048 Non-current assets held for sale 4,663 755,668 760,331

Overall impact on total assets 2,109,609 591,522 2,701,131

Trade and other payables 468,985 14,538 483,523 Borrowings 1,079,520 10,094 1,089,614 Current tax liabilities 24,743 63 24,806 Deferred tax liabilities 2,786 433 3,219 Non-current liabilities held for sale – 123,219 123,219

Overall impact on total liabilities 1,576,034 148,347 1,724,381

Other reserves (251,592) (513) (252,105) Retained profits 602,647 (77,359) 525,288 Non-controlling interests 134,610 480,043 614,653

Overall impact on total equity 485,665 402,171 887,836

(ii) Company

31 December 2011 As previously reported Adjustments As restated RM’000 RM’000 RM’000

Investment in subsidiaries 636,894 216,132 853,026 Investment in associates 216,132 (216,132) –

Overall impact on total assets 853,026 – 853,026


1 January 2011 As previously reported Adjustments As restated RM’000 RM’000 RM’000

Investment in subsidiaries 637,419 360,124 997,543 Investment in associates 360,124 (360,124) –

Overall impact on total assets 997,543 – 997,543

(a) Statement of comprehensive income

(i) Group

For the year ended 31 December 2011 As previously reported Adjustments As restated RM’000 RM’000 RM’000

Revenue 1,383,737 18,829 1,402,566 Cost of revenue (1,080,616) (144,105) (1,224,721) Other operating income 19,269 4,414 23,683 Administrative expenses (81,144) 21,661 (59,483) Selling and distribution expenses (77,186) 33,986 (43,200) Other operating expenses (184,482) (33,990) (218,472) Finance costs (50,789) 1,933 (48,856) Share of results of an associates (48,536) 45,558 (2,978) Share of results of joint ventures (439) 4,193 3,754 Tax expense (48,692) 29,394 (19,298) Loss from discontinued operations (127,653) (42,503) (170,156)

Overall impact on profit (296,531) (60,630) (357,161)

Currency translation differences (5,971) 9,281 3,310 Cash flow hedges 11,816 2,004 13,820 Share of other comprehensive of an associate 4,480 (4,480) –

Overall impact on total comprehensive income attributable to non-controlling interests (63,081) (62,516) (125,597)

(ii) There is no impact to the statement of comprehensive income of the Company.



48 Early Adoption of Standards (continued)

(a) Statement of cash flows (continued)

(i) Group (continued)

For the year ended 31 December 2011 As previously reported Adjustments As restated RM’000 RM’000 RM’000

Cash flow from operating activities 25,266 162,823 188,189 Cash flows from investing activities 19,522 (21,848) (2,326) Cash flows from financing activities (94,175) (79,920) (174,095)

(49,387) 61,055 11,668

(ii) There is no impact to the statement of cash flows of the Company.

49 Approval Of Financial Statements

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 31 July 2013.

Supplementary Information

50 Supplementary Information on Realised and Unrealised Retained Profits or Accumulated Losses

The breakdown and components of retained profits or accumulated losses are identified and disclosed in accordance with the listing requirements of Bursa Malaysia Securities as follows:

Group Company 31.3.2013 31.12.2011 31.3.2013 31.12.2011 RM’000 RM’000 RM’000 RM’000 (restated)

Total retained earnings: - realised 909,196 319,181 640,973 226,912 - unrealised (369,657) (3,805) 294 (2,133)

539,539 315,376 641,267 224,779

Total share of accumulated losses from associate: - realised 40,031 (86,459) – – - unrealised – (2,077) – –

Total share of retained earnings from joint ventures: - realised 17,348 (19) – – - unrealised – – – –

596,918 226,821 641,267 224,779 Less: Consolidation adjustments (508,609) 83,877 – –

Total retained earnings 88,309 310,698 641,267 224,779

To re]tained earnings 88,309 310,698 641,267 224



We, Tan Sri Asmat Bin Kamaludin and Shah Hakim @ Shahzanim Bin Zain, being two of the Directors of Scomi Group Bhd, state that, in the opinion of the Directors, the financial statements set out on pages 79 to 202 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 31 March 2013 and of the results and the cash flows of the Group and Company for the financial period ended on that date in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the provisions of the Companies Act, 1965.

The supplementary information set out in Note 50 have been prepared in accordance with the Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Signed on behalf of the Board of Directors in accordance with their resolution dated 31 July 2013.

Tan Sri Asmat Bin Kamaludin Shah Hakim @ Shahzanim Bin ZainChairman Group Chief Executive Officer

Petaling Jaya

STATEMENT BY DIRECTORS

Statement by DirectorsPursuant to Section 169(15) of the Companies Act, 1965

P/204 SCOMI GROUP BHD ANNUAL REPORT 2013STATUTORY DECLARATION

I, Abu Zaharoff Bin Abu Bakar, the officer primarily responsible for the financial management of Scomi Group Bhd., do solemnly and sincerely declare that the financial statements set out on pages 79 to 202 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.

Abu Zaharoff Bin Abu Bakar

Subscribed and solemnly declared by the abovenamed Abu Zaharoff bin Abu Bakar at Petaling Jaya, Selangor in Malaysia on 31 July 2013, before me.

Commissioner for Oaths

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


Independent Auditors’ Reportto the Members of Scomi Group Bhd(Incorporated in Malaysia)(Company No. 571212 A)

INDEPENDENT AUDITORS’ REPORT

Report on the Financial Statements

We have audited the financial statements of Scomi Group Bhd on pages 79 to 202 which comprise the statements of financial position as at 31 March 2013 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial period then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 49.

Directors’ Responsibility for the Financial StatementsThe Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and other requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 March 2013 and of their financial performance and cash flows for the financial period then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

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

(b) We have considered the accounts and the auditors’ reports of all subsidiaries of which we have not acted as auditors, which are indicated in Note 16 to the financial statements.

(c) We are satisfied that the accounts 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 financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.


(d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other Reporting Responsibilities

The supplementary information set out in Note 52 on page 202 is disclosed to meet the requirements of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other Matters

1. As stated in Note 2 to the financial statements, Scomi Group Bhd adopted Malaysian Financial Reporting Standards on 1 January 2012 with a transition date of 1 January 2011. These standards were applied retrospectively by Directors to the comparative information in these financial statements, including the statements of financial position as at 31 December 2011 and 1 January 2011, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year ended 31 December 2011 and related disclosures. We were not engaged to report on the restated comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the period ended 31 March 2013 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 January 2012 do not contain misstatements that materially affect the financial position as of 31 March 2013 and the financial performance and cash flows for the period then ended.

2. This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PricewaterhouseCoopers Yee Wai Yin(No. AF: 1146) (No. 2081/08/14 (J))Chartered Accountants Chartered Accountant

Kuala Lumpur31 July 2013

INDEPENDENT AUDITORS’ REPORT


Authorised share capital : RM300,000,000.00 divided into 3,000,000,000 ordinary shares of RM0.10 each

Issued and paid-up capital : RM156,863,685.40 divided into 1,568,636,854 ordinary shares of RM0.10 each. This included 14,427,200 ordinary shares purchased by the Company under share buy-back scheme and retained as treasury shares (“Treasury Shares”)

Types of shares : Ordinary shares of RM0.10 each

Voting rights : One vote per ordinary share

Distribution of Shareholdings as at 31 July 2013

Size of Shareholding Shareholder Shareholding No. of Shareholders % No. of Shares Held %** Less than 100 161 0.80 5,534 0.00 100 to 1,000 1,910 9.54 1,667,124 0.11 1,001 to 10,000 9,955 49.71 55,499,042 3.57 10,001 to 100,000 6,991 34.91 234,168,056 15.07 100,001 to less than 5% of issued shares 1,006 5.02 949,726,368 61.11 5% and above of issued shares 3 0.02 313,143,530 20.15

Total: 20,026 100.00 1,554,209,654 100.00

NOTE * The percentage shareholdings have been computed net of the Company’s Treasury Shares.

List of Top Thirty (30) Largest Shareholders as at 31 July 2013

No Name of Shareholder No. of Shares Held %*

1 IJM Corporation Berhad 119,109,500 7.66 2 UOBM Nominees (Asing) Sdn Bhd TAEL One Partners Ltd for Amadia Investments Ltd 108,637,400 6.99 3 UOBM Nominees (Tempatan) Sdn Bhd TOIC Investments Ltd for Onstream Marine Sdn Bhd 85,396,630 5.49 4 Abu Sahid Bin Mohamed 58,413,400 3.76 5 HLIB Nominees (Asing) Sdn Bhd Exempt An for UOB Kay Hian Pte Ltd (A/C Clients) 43,107,625 2.77 6 CIMSEC Nominees (Tempatan) Sdn Bdn CIMB for United Flagship Sdn Bhd (PB) 41,835,600 2.69 7 UOB Kay Hian Nominees (Tempatan) Sdn Bhd Multi-Purpose Credit Sdn Bhd for Kaspadu Sdn Bhd 33,053,055 2.13 8 RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Kaspadu Sdn Bhd (SBSSB 1311005) 27,000,000 1.74 9 EB Nominees (Tempatan) Sendirian Berhad Pledged Securities Account for Kaspadu Sdn Bhd (SFC) 25,700,000 1.6510 Citigroup Nominees (Asing) Sdn Bhd CBNY for Dimensional Emerging Markets Value Fund 23,771,700 1.53

Analysis of Shareholdings as at 31 July 2013

ANALYSIS OF SHAREHOLDINGS AS AT 31 JULY 2013

P/208 SCOMI GROUP BHD ANNUAL REPORT 2013ANALYSIS OF SHAREHOLDINGS AS AT 31 JULY 2013

No Name of Shareholder No. of Shares Held %*

11 CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Siew Mun Chuang (MY1275) 22,854,700 1.44 12 Kenanga Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Ong Tee Thong 20,975,200 1.35 13 JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Abu Sahid Bin Mohamed (Margin) 20,117,100 1.29 14 CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Seow Lun Hoo @ Seow Wah Chong (PBCL-OGOO14) 17,962,300 1.16 15 M&A Nominee (Tempatan) Sdn Bhd Pledged Securities Account for Lau Joo Liang (M&A) 15,736,400 1.01 16 Citigroup Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Abu Sahid Bin Mohamed (000187773) 14,000,000 0.90 17 Lim Fong Peng @ Lim Fung Feng 13,962,240 0.90 18 ABB Nominee (Tempatan) Sdn Bhd Pledged Securities Account for Gajahrimau Capital Sdn Bhd 13,750,000 0.88 19 CIMSEC Nominees (Tempatan) Sdn Bhd CIMB for Siew Mun Chuang (PB) 12,474,800 0.80 20 Maybank Securities Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Shah Hakim @ Shahzanim bin Zain (Margin) 11,964,500 0.77 21 Maybank Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Ang Piang Kok 11,170,000 0.72 22 HLB Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Abu Sahid bin Mohamed 11,000,000 0.71 23 UOBM Nominees (Tempatan) Sdn Bhd TOIC Investments Ltd for Zubaidi bin Harun 9,970,000 0.64 24 HSBC Nominees (Asing) Sdn Bhd Exempt An for Credit Suisse (SG BR-TST-Asing) 9,852,500 0.63 25 M&A Nominee (Asing) Sdn Bhd Exempt An for UOB Kay Hian Pte Ltd (A/C Clients) 9,260,625 0.60 26 Citigroup Nominees (Asing) Sdn Bhd CBNY for DFA Emerging Markets Small Cap Series 7,933,200 0.51 27 Citigroup Nominees (Asing) Sdn Bhd CBNY for Emerging Market Core Equity Portfolio DFA Investment Dimensions Group Inc 7,310,700 0.47 28 Chan Kid Ching 6,900,000 0.44 29 ECML Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Ang Piang Kok (001) 6,740,000 0.43 30 HSBC Nominees (Asing) Sdn Bhd Exempt An for JPMorgan Chase Bank, National Association (U.S.A.) 6,661,800 0.43

NOTE * The percentage shareholdings have been computed net of the Company’s Treasury Shares.


Shareholdings of Substantial Shareholders as at 31 July 2013

Name of Shareholder Direct Shareholding Indirect Shareholding No. of Shares Held %* No. of Shares Held %**

Kaspadu Sdn Bhd 85,753,055(1) 5.52 86,521,970(2)(3) 5.57 Onstream Marine Sdn Bhd 86,521,970(3) 5.57 – – Shah Hakim @ Shahzanim bin Zain 13,850,100(4) 0.89 175,917,025(5) 11.32 Dato’ Kamaluddin bin Abdullah – – 172,275,025(6) 11.09 Tan Sri Abu Sahid bin Mohamed 105,368,100 6.78 – – IJM Corporation Berhad 119,109,500 7.66 – – Amadia Investments Ltd 151,637,400(7) 9.76 – – TAEL One Partners Ltd (acting in its capacity as the general partner of The Asian Entrepreneur Legacy One, L.P.) (“the Fund”) – – 151,637,400(8) 9.76 United Overseas Bank Limited – – 151,637,400(9) 9.76

NOTES * The percentage shareholdings have been computed net of the Company’s Treasury Shares. (1) Held through RHB Capital Nominees (Tempatan) Sdn Bhd, EB Nominees (Tempatan) Sdn Bhd and UOB Kay Hian Nominees (Tempatan) Sdn Bhd. (2) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through its shareholding in Onstream Marine Sdn Bhd. (3) 85,396,630 shares held through UOBM Nominees (Tempatan) Sdn Bhd. (4) 13,321,000 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim bin Zain (Margin) and

Maybank Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim bin Zain. (5) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd and Rentak Rimbun Sdn Bhd. (6) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd. (7) Held through UOBM Nominees (Asing) Sdn Bhd for TAEL One Partners Ltd for Amadia Investments Ltd and HLG Nominees (Asing) Sdn Bhd Exempt An for UOB Kay

Hian Pte Ltd (A/C Clients). (8) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965. Amadia Investments Ltd is an investment vehicle of the Fund.

(9) Deemed interested by virtue of its investment in the Fund.

Shareholdings of Directors as at 31 July 2013 Name of Director Direct Shareholding Indirect Shareholding No. of Shares Held %* No. of Shares Held %**

Scomi Group Bhd Tan Sri Asmat Bin Kamaludin 394,375(1) 0.03 – – Tan Sri Nik Mohamed Bin Nik Yaacob – – – – Tan Sri Mohamed Azman Bin Yahya – – 13,750,000(2) 0.88 Datuk Haron Bin Siraj 120,000 0.01 – – Dato’ Mohammed Azlan Bin Hashim – – – – Dato’ Sreesanthan A/L Eliathamby – – – – Dato’ Abdul Rahim Bin Abu Bakar – – – – Dato’ Teh Kean Ming – – – – Foong Choong Hong 410,000 0.03 – – Shah Hakim @ Shahzanim Bin Zain 13,850,100(3) 0.89 175,917,025(4) 11.32 Lee Chun Fai (Alternate Director to Dato’ Teh Kean Ming) – – – –



Related Companies- Scomi Engineering Bhd (“SEB”)

Name of Director Direct Shareholding Indirect Shareholding No. of % No. of No. of % No. of Shares Held Options Shares Held Options

Tan Sri Asmat Bin Kamaludin – – – 12,222(5) # – Dato’ Abdul Rahim Bin Abu Bakar 219,700 0.06 300,000^ – – – Shah Hakim @ Shahzanim Bin Zain 623,000(6) 0.18 1,500,000^ 282,000(7) # –

- Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) (“SES”)

Name of Director Direct Shareholding Indirect Shareholding No. of Shares Held % No. of Shares Held %

Tan Sri Asmat Bin Kamaludin 50,000(8) # 10,000(9) #

Shah Hakim @ Shahzanim Bin Zain 2,108,000(10) 0.09 5,056,900(7) 0.22

NOTES * The percentage shareholdings have been computed net of the Company’s Treasury Shares. # Negligible ^ Options granted pursuant to SEB’s Employees’ Share Option Scheme to subscribe for ordinary shares in SEB. (1) Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through his interest in Bi-bot Holdings Sdn Bhd, whereby 325,625 ordinary shares are held

through CIMSEC Nominees (Tempatan) Sdn Bhd Exempt An for CIMB Trustee Berhad (TR1038). (2) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his and his wife’s direct shareholdings in Gajahrimau Capital Sdn Bhd, whereby all

the 13,750,000 shares are held through ABB Nominee (Tempatan) Sdn Bhd. (3) 13,321,000 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin) and

Maybank Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain. (4) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd and Rentak Rimbun Sdn Bhd. (5) Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through his child’s direct shareholding in SEB. (6) 123,000 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin). (7) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Rentak Rimbun Sdn Bhd. (8) Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through his interest in Bi-bot Holdings Sdn Bhd, whereby all the ordinary shares are held

through CIMSEC Nominees (Tempatan) Sdn Bhd. (9) Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through his spouse, Puan Sri Habibah Mohd Salleh’s shareholding in SES. (10) All shares are held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin).



No Registered Description / Existing use Tenure of Land area/ Approximate Audited net Owner location address land: Built-up age of book value as freehold area building at 31.03.2013 or leasehold RM’000 (years)/date of acquisition 1 Scomi Coach Sdn Bhd Land and Building: Factory and Freehold / Land area: Building 1: Land: 8,020 EMR 2751 Lot 795 and Office 15.04.1996 61,714 sq 31⁄2 year Building 1: Serendah, Daerah Hulu meters Buildup areas: Building 2: 15,175 Selangor, Malaysia 26,556 16 years Building 2: sq meters 9,290

2 Scomi Oiltools Sdn Bhd Master: Land held under Five-storey Freehold Built-up area: 16 years Land & Geran 46494, shop office 31.10.1999 11,755 sq ft building: 891 Lot 42410 Pekan Cempaka, Daerah Petaling, Negeri Selangor, Malaysia (formerly known as PT 42410 H.S.(D) 135924 part of Geran 35997 Lot 102 Geran 40176 Lot 15386 and Geran 43061 Lot 15386, Mukim of Sungai Buloh Daerah Petaling, Negeri Selangor, Malaysia)

3 Scomi Oiltools Sdn Bhd Kemaman Warehouse Warehouse for Not applicable Built-up areas: 22 years Building: 219 No. 24, Kemaman Supply office use, 15.11.1991 19,200 sq ft Base, 24007 Kemaman, laboratory, Terengganu, Malaysia milling and storage activities

4 Scomi Oiltools de Land and Building: Land Farm Freehold Land area: 18 years Land & Venezuela, S.A Carretera Santa Barbara, 01.07.2001 6,478,850 Building: Ent. Well SBC sq ft 46 -10-19-23-40 Santa (60.19 Barbara Edo. Monagas, hectares) Venezuela Structure: 1,290 sq ft

5 PT. Inti Jatam Pura Jl. Raya Duri – Dumai, Office and Leasehold: Land area: 23 years Nil Km. 131 Duri, Riau 28884 workshop 24.03.1992 23,865 m2 Indonesia – 24.03.2012 Building (21 years) area: 207.5 m2

List of Propertiesas at 31 March 2013

LIST OF PROPERTIES AS AT 31 MARCH 2013


No Registered Description / Existing use Tenure of Land area/ Approximate Audited net Owner location address land: Built-up age of book value as freehold area building at 31.03.2013 or leasehold RM’000 (years)/date of acquisition

6 Scomi Group Bhd Land and building: Office and Freehold: Land area: 8 years Land and Geran 58840 Lot 64254, warehouse 23.12.2009 1,575 sq building: Mukim of Damansara, metres 4,520 District of Petaling, Built-up Selangor Darul Ehsan area: 1,795 sq metres 7 Scomi Sosma Sdn Bhd Land held under Land Freehold: Land area: N/A 176 Geran 250133, Lot 7627, 7.4.2011 0.7412 Mukim of Sepang, hectares Selangor Darul Ehsan

Land held under Land Freehold: Land area: N/A 148 Geran 250134, Lot 7628 7.4.2011 0.6229 Mukim of Sepang, hectares Selangor Darul Ehsan

Land held under Land Freehold: Land area: N/A 166 Geran 250135, Lot 7629 7.4.2011 0.6993 Mukim of Sepang, hectares Selangor Darul Ehsan 8 P.T. Rig Tenders Office building Office building Freehold/ Land area: 13 years 29.5 Indonesia, Tbk Wisma Rig Tenders 29.07.1993 n/a Jl. Dr Saharjo Built- up area: No.129 512 m2

Jakarta 12860

9 P.T. Rig Tenders Land Land for the Freehold/ Land area: n/a – Indonesia, Tbk Jl. Dr Saharjo building as 01.01.1997 490 m2 No.129 mentioned Built- up area: Jakarta 12860 in item 3 n/a 10 P.T. Rig Tenders Single storey house Staff Freehold Land area: 15 21.2 Indonesia, Tbk Simpang Gatot accommodation 01.10.1995 n/a Subroto VIII Built-up area: Jl. Garuda no.8 371 m2

Banjarmasin 70236

11 P.T. Rig Tenders Single storey house Staff Freehold Land area: 16 7.4 Indonesia, Tbk Jl. Veteran Simpang accommodation 31.12.1996 n/a SMP VII Rt.29 no. 66 Built-up area: Banjarmasin 70232 388 m2

List of Propertiesas at 31 March 2013



No Registered Description / Existing use Tenure of Land area/ Approximate Audited net Owner location address land: Built-up age of book value as freehold area building at 31.03.2013 or leasehold RM’000 (years)/date of acquisition

12 P.T. Rig Tenders Land Land for Freehold Land area: n/a – Indonesia, Tbk Jl Belitung Darat the building 09.01.2003 190 sq metres no.88 as mentioned Built-up area: Banjarmasin 70116 in item 7 n/a

13 P.T. Rig Tenders Single storey house Staff Freehold Land area : n/a 29.5 Indonesia, Tbk Persada Mas Bumi accommodation 31.10.2000 n/a Asri Barat Built-up area: Jl Ahmad Yani no. 8 200 sq metres Banjarmasin



CORPORATE

Scomi Group BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul EhsanMalaysiaTel: +603 7717 3000Fax: +603 7728 5258

Scomi Engineering BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul EhsanMalaysiaTel: +603 7717 3000Fax: +603 7727 7935

Scomi Rail BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul EhsanMalaysiaTel: +603 7717 3000Fax: +603 7727 7935

Scomi Energy Services Bhd(formerly known as Scomi Marine Bhd) Level 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul EhsanMalaysiaTel: +603 7717 3000Fax: +603 7725 9082

Scomi Oiltools Sdn BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul EhsanMalaysiaTel: +603 7717 3000Fax: +603 7728 5202

Scomi Sosma Sdn BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul EhsanMalaysiaTel: +603 7717 3000Fax: +603 7728 5202

OPERATING LOCATIONS

AMERIC A – L ATIN (Anaco)Scomi Oiltools de Venezuela SAVia Los Pilones KM1Sector Montana AltaAnaco Estado Anzoategui Venezuela

AMERIC A – L ATIN (Ciudad Ojeda)Scomi Oiltools de Venezuela SAWest DistrictCarratera “L” entreCalle 33 y 34al lado de Ferreteria FEDECACiudad OjedaEstado ZuliaVenezuela

AMERIC A – L ATIN (M aturin)Scomi Oiltools de Venezuela SAAv Alirio Ugarte Pelayo Centro EmpresarialDavis, Piso 2, Ofc. 17 Frente a la E/S Digecom MaturinEstado-MonagasVenezuela

AMERIC A - NORTH(Houston)Scomi Equipment Inc6818 N. Sam Houston Parkway WestHouston, Texas77064 USA

AUSTR ALIA (Per th)Scomi Oiltools Pty Ltd15, Boulder RoadMalaga, Western Australia6090, Australia

BR A ZIL (S ão Paulo)Urban Transit Serviços Do Brasil Ltda.Head Office:Edifício PanambiRua Geraldo Flausino Gomes61, 9th floor, Cidade MonçõesZip Code 04575-060São Paulo, Brazil

CHINA (B eij ing)Scomi Oiltools (S) Pte LtdRm 1507, Tower BEagle PlazaNo. 26, Xiao Yun RoadChaoyang DistrictBeijing 100027 P.R. China

CHINA (Shekou)Scomi Oiltools (S) Pte LtdRm 23C Tower ANeptunus BuildingNo. 2221, Nanhai RdNanshan District518054 ShenzhenGuangdong ProvP.R. China

CHINA ( Tanggu)Scomi Oiltools (S) Pte LtdA1-704, Teda New SkylineNo. 12, Nan Hai RoadTeda Tianjin, 300457 P.R. China

CONGO (Pointe Noir)Scomi Oiltools Africa LimitedZone Industrielle de la foirePointe-NoireCongo

EGYPT (Cairo)Scomi Oiltools Egypt S A EKm 10, Ain Sukhna RoadKattamia Oilfield Services Complex Cairo, Egypt

Corporate Directory

CORPORATE DIRECTORY

SCOMI GROUP BHD ANNUAL REPORT 2013P/215CORPORATE DIRECTORY

FR ANCEScomi Anticor S A E6 Avenue des AmandiersZ.A. du Mardaric04310 PeyruisFrance

INDIA (Mumbai)KMC Oiltools India Private Ltd912-A, Building No. 9Solitaire Corporate ParkAndheri-Ghatkopar Link Road Chakala, Andheri (East)Mumbai, 400093 India

Urban Transit Pvt LtdMumbai Monorail Project OfficeUnit 102, B WingBusiness SquareAndheri-Ghatkopar RoadChakala, Andheri (East)Mumbai, 400093 India

INDONESIA (B al ik papan)PT Scomi OiltoolsJl. Mulawarman Rt 45No. 2, ManggarBalikpapan 76116East Kalimantan Indonesia

INDONESIA (B anjarmasin)PT Batuah Abadi LinesJl. Belitung Darat No. 88Rt. 19 BanjarmasinKalimantan SelatanIndonesia

INDONESIA (D uri)PT Scomi OiltoolsJl. Raya Duri Dumai Km 131Duri, PekanbaruSumatera 28884Indonesia

INDONESIA ( Jak ar ta)PT Scomi OiltoolsGedung Tetra PakSuite 101/104/103Jl. Buncit Raya Kav 100Jakarta Selatan 12510Indonesia

PT Rig Tenders Indonesia TbkGedung PhilipsJl. Buncit Raya Kav. 100Jakarta Selatan 12510Indonesia

MAL AYSIA (Kemaman)Scomi Oiltools Sdn BhdWarehouse 24Letterbox No. 72 Kemaman Supply Base24007 KemamanTerengganu Darul ImanMalaysia

MAL AYSIA (L abuan)Scomi Oiltools Sdn BhdAsian Supply BaseRanca-Ranca Industrial EstateP O Box 8202387030 Labuan Federal Territory Labuan, Malaysia

MarineCo LimitedLevel 6 (D), Main Office TowerFinancial Park, Jalan MerdekaP O Box 8088787018 Labuan Federal TerritoryLabuan, Malaysia

MAL AYSIA (M iri )Scomi Oiltools Sdn BhdLot 2164, 1st FloorSaberkas Commercial CentreJalan Pujut-Lutong98000 Miri, SarawakMalaysia

MAL AYSIA (S elangor)Scomi Rail BhdScomi Coach Sdn BhdScomi Coach Marketing Sdn BhdLot 795, Jalan MonorelSungai Choh48000 RawangSelangor Darul EhsanMalaysia

Scomi Special Vehicles Sdn BhdLot 9683Kawasan Perindustrian Desa AmanBatu 11, Desa Aman47000 Sungai BulohSelangor Darul EhsanMalaysia

Global Research & Technology CentreNo. 9, Jalan Astaka U8/83Seksyen U840150 Shah AlamSelangor Darul EhsanMalaysia

MYANMARScomi Oiltools (Thailand) LtdUnit #109, Building 1Hotel YangonNo.91/93, Corner of Pyay Road and Kabaraye Pagoda Road, 8th Mile JunctionMayangone TownshipYangon, Myanmar

NIGERIA (O nne)Wasco Oil Service Company Nigeria Limited#9 Wharf RoadOnne, Rivers StateNigeria

Wasco Oil Service Company Nigeria LimitedOnne Oil & Gas Free Zone Complex Onne, Rivers StateNigeria

OMAN (Azaiba)Scomi Oiltools Oman LLCBuilding No. 272 Way No. 44803Office No. 1104 (2nd Floor)AzaibaSultanate of Oman

PAKISTAN ( Is lamabad)Scomi Oiltools Ltd (Pakistan Branch)Plot No. 212, Service RoadIndustrial Area, I-10/3IslamabadPakistan

P/216 SCOMI GROUP BHD ANNUAL REPORT 2013CORPORATE DIRECTORY

PAKISTAN (Karachi)Scomi Oiltools Ltd(Pakistan Branch)B-31, Moghal TobacoGodown No 19-20SITE, Karachi Pakistan

QATARScomi Oiltools (Cayman) Limited940 Al-Khalidia StreetZone No.26Najma, Doha, QatarP.O. Box 2471

RUSSIA (M oscow)Scomi Oiltools (Rus) LLC3rd floor, bld.1 24/2Sretenka Str107045 Moscow Russia

RUSSIA ( Western Sib eria)Scomi Oiltools (Rus) LLC 16 bld. 7, Industrialnaya Str628616 NizhnevartovskTyumen RegionRussia

SAUDI AR ABIAScomi Oiltools (Cayman) Limited(Saudi Arabia Branch)c/o Tanajib for General Contracting Est.P O Box 30415Salman A-farezi StreetNear Silver TowerBehind Saudi Hollandi BankAl-Khobar 31952Kingdom of Saudi Arabia

SINGAPOREScomi Oiltools (S) Pte Ltd50 Ubi Crescent #01-08Ubi Tech ParkSingapore 408568

Scomi Marine Services Pte Ltd8 Admiralty Street#07-09 AdmiraxSingapore 757438

SUDAN (Khar toum)Scomi Oiltools Overseas (M) LimitedNo. 649, Square 4El-Safa, KhartoumRepublic of Sudan

THAIL AND (B angkok)Scomi Oiltools (Thailand) Ltd13th Floor, CTI Tower191/77, Ratchadapisek RoadKwaeng KlongtoeyKhet Klongtoey Bangkok 10110 Thailand

THAIL AND (L ank rabue)Scomi Oiltools (Thailand) Ltd163, Moo 6 Tumbol LankrabueAmphur LankrabueKamphaengphet62170 Thailand

THAIL AND (S ongk hla)Scomi Oiltools (Thailand) Ltd424/9 Moo 2Songkhla - Koh Yor RoadAmphur Muang, Songkhla90100 Thailand

TURKMENISTAN (Ashgabat)Scomi Oiltools Ltd(Turkmenistan Branch)Yimpash Business CentreOffice 101(A) Turkmenbashy Street, 54 Ashgabat Turkmenistan 744013 TURKMENISTAN (B alk anabat)Scomi Oiltools Ltd(Turkmenistan Branch)Jebel Base #2, Jebel v. BalkanabatTurkmenistan

TURKMENISTAN (Hazar)Scomi Oiltools Ltd(Turkmenistan Branch) High Road 9 kilometer HazarTurkmenistan 745030

TURKMENISTAN ( Turk menbashy)Scomi Oiltools Ltd (Turkmenistan Branch)Shagadam Street 8Turkmenbashy CityTurkmenistan 745000

U.A.E. (D ubai)Scomi Oiltools (Cayman) LimitedOilfield Supply CentreBuilding B-10, Jebel AliFree Zone, DubaiUnited Arab Emirates

U.A.E. (Abu D habi)Scomi Oiltools (Cayman) LtdLiwa Street/Liwa TowerMezzanine Floor, M02P.O. Box 45333Abu DhabiUnited Arab Emirates

UNITED KINGDOM (Ab erdeen)Scomi Oiltools (Europe) LimitedWoodside RoadBridge of Don, AberdeenAB23 8EF, ScotlandUnited Kingdom

VIE TNAMScomi Oiltools Ltd(Vietnam Branch)c/o PTSC Supply Base65A, 30/4 RoadThang Nhat WardVung Tau CityS R Vietnam

Corporate Directory

SCOMI GROUP BHD ANNUAL REPORT 2013P/217NOTICE OF ANNUAL GENERAL MEETING

Notice of Annual General MeetingNOTICE IS HEREBY GIVEN that the 11th Annual General Meeting of SCOMI GROUP BHD (“the Company”) will be held at Ballroom 1, First Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur, Malaysia on 26 September 2013 at 2:30 pm to transact the following business:

As Ordinary Business:

To consider and, if thought fit, to pass the following as Ordinary Resolutions:

1 To receive the Financial Statements for the financial period ended 31 March 2013 and the Reports of the Directors and Auditors thereon.

2 To re-elect the following Directors who retire in accordance with Article 82 of the Articles of Association of the Company and being eligible, offer themselves for re-election:

(i) Tan Sri Nik Mohamed bin Nik Yaacob (ii) Datuk Haron bin Siraj (iii) Dato’ Mohammed Azlan bin Hashim

3 To re-elect the following Director who retires under Article 89 of the Articles of Association of the Company and being eligible, offers himself for re-election: (i) Dato’ Teh Kean Ming

4 To approve the payment of Directors’ fees amounting to RM729,112.90 for Non-Executive Directors in respect of the financial period ended 31 March 2013.

5 To appoint Messrs KPMG as Auditors of the Company for the financial year ending 31 March 2014, in replacement of the retiring Auditors, Messrs PricewaterhouseCoopers, and to authorise the Directors to

fix their remuneration.

As Special Business: To consider and, if thought fit, to pass the following as Ordinary Resolutions:

6 Authority to Issue and Allot Shares Pursuant to Section 132D of the Companies Act, 1965 “THAT, subject to the Companies Act, 1965 (as may be amended, modified or re-enacted from time

to time)(“the Act”), the Articles of Association of the Company and the approvals of the relevant governmental and/or regulatory authorities, where necessary, the Directors be and are hereby authorised, pursuant to Section 132D of the Act, to issue and allot shares in the Company, at any time and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit, provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed ten percent (10%) of the issued and paid-up share capital of the Company for the time being and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

7 Proposed Renewal of Authority for the Purchase by the Company of its ordinary shares of up

to ten percent (10%) of the issued & paid-up share capital “THAT, subject to the Act, the Memorandum and Articles of Association of the Company, the

Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Listing Requirements”) and the approval of the relevant authorities, approval be and is hereby given for the Company to purchase from the market of Bursa Securities such number of ordinary shares of RM0.10 each in the Company (“Share Buy-back”) as may be determined by the Directors of the Company

(Resolution 1)(Resolution 2)(Resolution 3)

(Resolution 4)

(Resolution 5)

(Resolution 6)

(Resolution 7)

(Resolution 8)


from time to time, and upon such terms and conditions as the Board of Directors may deem fit and expedient in the interest of the Company PROVIDED THAT the aggregate number of ordinary shares purchased and/or held pursuant to this resolution does not exceed ten percent (10%) of the total issued and paid-up share capital of the Company at any point in time and an amount not exceeding the total retained earnings of approximately RM641.27 million and/or share premium account of approximately RM351.92 million of the Company based on the Audited Financial Statements for the financial period ended 31 March 2013 be allocated by the Company for the Share Buy-back;

THAT such authority shall commence immediately upon the passing of this resolution and shall continue to be in force until:

1 the conclusion of the next Annual General Meeting at which time the authority will lapse, unless by an ordinary resolution passed at the next Annual General Meeting, the authority is renewed; or

2 the expiration of the period within which the next Annual General Meeting after that date is required by law to be held; or

3 revoked or varied by an ordinary resolution of the shareholders of the Company in a general meeting,

whichever occurs the earliest, but not so as to prejudice the completion of purchase(s) by the Company before the aforesaid expiry date;

AND THAT the Directors of the Company be and are hereby authorised to take all such steps and do all acts and deeds and to execute, sign and deliver on behalf of the Company all necessary documents to give full effect to and for the purpose of completing or implementing the Share Buy-back in the manner set out in the Statement, and that following completion of the Share Buy-back, the power to cancel or retain as treasury shares, any or all of the Scomi Shares so purchased, resell on the market of Bursa Securities or distribute as dividends to the Company’s shareholders or subsequently cancel, any or all of the treasury shares, with full power to assent to any condition, revaluation, modification, variation and/or amendment in any manner as may be required by any relevant authority or otherwise as they deem fit in the best interests of the Company.”

To consider and, if thought fit, to pass the following Special Resolution:

8 Proposed Amendments to the Articles of Association of the Company “THAT the proposed amendments to the Articles of Association of the Company as set out under

Section 2 of Part B of the Circular to Shareholders of the Company dated 3 September 2013 be and are hereby approved and that the Directors be and are hereby authorised to take steps as may be necessary to give full effect to the said proposed amendments to the Articles of Association of the Company.”

9 To transact any other business of the Company for which due notice shall have been given.

By Order of the Board

ONG WEI LENG (MAICSA 7053539)CHONG MEI YAN (MAICSA 7047707)Company SecretariesPetaling Jaya

Date: 3 September 2013

(Resolution 9)

NOTICE OF ANNUAL GENERAL MEETING

SCOMI GROUP BHD ANNUAL REPORT 2013P/219NOTICE OF ANNUAL GENERAL MEETING

NOTES

(1) A member of the Company entitled to attend and vote at the meeting may appoint a proxy or proxies (but not more than two) to attend and vote on his/her behalf. A proxy may but need not be a member of the Company.

(2) Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/her holding to be represented by each proxy.

(3) Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares standing to the credit of the said securities account.

(4) The instrument for the appointment of a proxy, in the case of an individual shall be signed by the appointer or his/her attorney duly authorised in writing and in the case of a corporation, either under seal or under the hand of an officer or attorney duly authorised. If no name is inserted in the space for the name of your proxy, the Chairman of the meeting will act as your proxy.

(5) The instrument for the appointment of a proxy must be completed and deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the Annual General Meeting or any adjournment thereof.

(6) For the purpose of determining a member who shall be entitled to attend this 11th AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Articles 57 and 58 of the Articles of Association of the Company and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 20 September 2013. Only a depositor whose name appears on the General Meeting Record of Depositors as at 20 September 2013 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Financial Statements for the financial period ended 31 March 2013 and the Reports of the Directors and Auditors thereon

(7) This agenda is tabled for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders and hence is not put forward for voting.

Abstention from voting

(8) The interested Directors of the Company who are shareholders of the Company will abstain from voting on the relevant resolutions in respect of their re-election as the Director of the Company at the 11th AGM.

(9) All the Non-Executive Directors of the Company who are shareholders of the Company will abstain from voting on Ordinary Resolution 5 concerning remuneration to Non-Executive Directors at the 11th AGM.

Explanatory Notes on Special Business:

(10) Ordinary Resolution 7 - Proposed renewal of the authority for Directors to issue shares

The ordinary resolution 7 above is proposed for the purpose of granting a renewed general mandate for issuance of shares by the Company under Section 132D of the Companies Act, 1965, and if passed, will give the Directors of the Company authority, from the date of the above Annual General Meeting, to issue and allot shares in the Company at any time up to an aggregate amount not


exceeding ten percent (10%) of the issued and paid-up share capital of the Company for such purposes as the Directors deem fit and in the interest of the Company (“Share Mandate”) without convening a General Meeting.

The Company had issued 119,109,500 new ordinary shares of RM0.10 each pursuant to the private placement in accordance to Section 132D of the Companies Act, 1965 under the general authority which was approved at the 10th AGM held on 27 June 2012 and which will lapse at the conclusion of the forthcoming 11th AGM to be held on 26 September 2013.

This Share Mandate, unless revoked or varied at a General Meeting, will expire at the conclusion of the next Annual General Meeting of the Company. With this Share Mandate, the Company will have the flexibility to undertake any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s).

(11) Ordinary Resolution 8 - Proposed renewal of the authority to purchase own shares

The ordinary resolution 8 above, if passed, will empower the Directors to purchase up to ten percent (10%) of the issued and paid-up share capital of the Company by utilising funds not exceeding the retained earnings and/or the share premium account of the Company. This authority, unless revoked or varied at a general meeting, will expire at the earlier of either the conclusion of the next Annual General Meeting of the Company or the expiry of the period within which the next Annual General Meeting is required by law to be held.

The details relating to ordinary resolution 8 are set out in the Share Buy-back Statement dated 3 September 2013.

(12) Special Resolution 9- Proposed amendments to the Articles of Association of the Company

The special resolution 9 above is proposed for the purpose of amending the Articles of Association of the Company. The proposed special resolution 9, if passed, will enable the Company to comply with the Paragraphs 7.21 and 7.21A of the Listing Requirements.

The details relating to special resolution 9 are set out in the Circular to Shareholders dated 3 September 2013.

NOTICE OF ANNUAL GENERAL MEETING

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I/We NRIC/Company No. (Full name as per NRIC/Certificate of Incorporation in capital letters)

of (Full address)

being a member/members of Scomi Group Bhd, hereby appoint (Full name and NRIC/Passport No.)

of (Full address)

or failing him/her (Full name and NRIC/Passport No.)

of (Full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 11th Annual General Meeting of Scomi Group Bhd (the “Company”) to be held at Ballroom 1, First Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur, Malaysia on 26 September 2013 at 2:30 pm, or any adjournment thereof.

Ordinary Business For Against To re-elect the following Directors who retire in accordance with Articles 82 of the Articles of Association of the Company and being eligible, offer themselves for re-election: Resolution 1 (i) Tan Sri Nik Mohamed bin Nik Yaacob Resolution 2 (ii) Datuk Haron bin Siraj Resolution 3 (ii) Dato’ Mohammed Azlan bin Hashim

To re-elect the following Director who retires under Article 89 of the Articles of Association of the Company and being eligible, offers himself for re-election:

Resolution 4 (i) Dato’ Teh Kean Ming

Resolution 5 To approve the payment of Directors’ fees amounting to RM729,112.90 for Non-Executive Directors in respect of the financial period ended 31 March 2013

Resolution 6 To appoint Messrs KPMG as Auditors of the Company for the financial year ending 31 March 2014, in replacement of the retiring Auditors, Messrs PricewaterhouseCoopers, and to authorise the Directors to fix their remuneration

Special Business For Against

Resolution 7 Authority to Issue and Allot Shares Pursuant to Section 132D of the Companies Act, 1965

Resolution 8 Proposed Renewal of Authority for the Purchase by the Company of its ordinary shares of up to ten percent (10%) of the issued & paid-up share capital

Resolution 9 Proposed Amendments to the Articles of Association of the Company (Special Resolution) Please indicate with a check mark (“ ”) in the space provided to show 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/her discretion.

Dated this day of 2013 Signature/Seal

Scomi Group Bhd. (Company No.: 571212-A)

(Incorporated in Malaysia under the Companies Act, 1965)

Registered Office: Level 17, 1 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia

FORM OF PROXYCDS Account No.

No. of Ordinary Shares Held

Fold this flap for sealing

Then fold here

1st fold here

The Registrar of Scomi Group BhdSymphony Share Registrars Sdn BhdLevel 6, Symphony HousePusat Dagangan Dana 1Jalan PJU 1A/46, 47301 Petaling JayaSelangor Darul Ehsan, Malaysia

NOTES

(i) A member of the Company entitled to attend and vote at the meeting may appoint a proxy or proxies (but not more than two) to attend and vote on his/her behalf. A proxy may but need not be a member of the Company.

(ii) Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/her holding to be represented by each proxy.

(iii) Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares standing to the credit of the said securities account.

(iv) The instrument for the appointment of a proxy, in the case of an individual shall be signed by the appointer or his/her attorney duly authorised in writing and in the case of a corporation, either under seal or under the hand of an officer or attorney duly authorised. If no name is inserted in the space for the name of your proxy, the Chairman of the meeting will act as your proxy.

(v) The instrument for the appointment of a proxy must be completed and deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301, Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the Annual General Meeting or any adjournment thereof.

(vi) For the purpose of determining a member who shall be entitled to attend this 11th AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Articles 57 and 58 of the Articles of Association of the Company and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 20 September 2013. Only a depositor whose name appears on the General Meeting Record of Depositors as at 20 September 2013 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Affix Stamp

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