Impetus - Malaysiastock.biz Key Financial Indicators and Key Financial Highlights 2 Corporate Legal Structure 4 Our Corporate Statement 6 Corporate Information 8 Proﬁ le of Directors

Scomi Group Bhd

Impetus to excelAnnual Report 2009

Key Financial Indicators and Key Financial Highlights 2 Corporate Legal Structure 4 Our Corporate Statement 6

Corporate Information 8 Profi le of Directors 9 Key Management Team 14 Chairman’s Statement 16

Management’s Review of Operations 22 Corporate Social Responsibility 30 Statement on Corporate Governance 34

Statement on Internal Control 44 Audit & Risk Management Committee Report 47 Additional Information 51

Statement on Directors’Responsibility 53 Financial Statements 54 Analysis of Shareholdings 160

Analysis of Irredeemable Convertible Secured Loan Stocks (“ICSLS”) Holdings 164 Analysis of Warrant Holdings 167

List of Properties 170 Corporate Directory 173 Notice of Annual General Meeting 176 Proxy form

CONTENTS

Impetus to excelThe 2009 Annual Report cover aims to illustrate Scomi’s move forward. Continuing the theme of “us”, “ImpetUS to Excel” represents our drive and commitment to work together to realise our true potential. Scomi’s Annual Report is a record of past and intended initiatives that provide the impetus to achieve our goals through excellence in whatever we do.

SCOMI GROUP BHD (571212-A) 1

8th Annual General MeetingBallroom 1, 1st Floor, Sime Darby Convention Centre

1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur

on 29 June 2010 at 2.00 p.m.

enthusiasm


KEY FINANCIAL INDICATORS AND KEY FINANCIAL HIGHLIGHTS

In RM’000 2009 2008 2007 2006 2005

Turnover 1,971,455 2,106,140 1,995,530 1,577,495 1,067,972

EBITDA 210,566 291,364 441,277 253,129 271,031

Depreciation 81,866 74,524 65,987 53,984 41,848

Finance costs 76,404 75,168 87,946 78,207 42,181

Share of profi t in associated companies (9,898) 28,040 23,570 30,084 6,429

Share of profi t from jointly controlled entities 3,596 – – – 19

PBT 50,715 140,213 286,416 120,722 186,812

Taxation (24,750) (3,928) (4,261) (12,982) (13,937)

PAT 25,965 136,285 282,155 107,740 172,875

Minority interests 16,090 19,732 25,026 15,326 21,184

PAT after minority interests 9,875 116,553 257,129 92,414 151,691

Number of shares in issue (‘000) 1,086,801 1,021,839 1,019,705 1,005,352 992,076

Weighted average number of shares assumed in issue (‘000)

1,025,795 1,006,342 1,004,806 995,025 972,877

Weighted average number of shares used to compute diluted earnings per share (‘000)

1,053,648 1,016,009 1,037,091 1,017,507 1,015,833

Basic – Net EPS (RM)** 0.96 sen 11.58 sen 25.59 sen 9.29 sen 15.59 sen

Fully diluted – Net EPS (RM)@ 0.94 sen 11.47 sen 24.79 sen 9.08 sen 14.93 sen

Notes

** Based on PAT after minority interests and on the weighted average number of shares assumed to be issued in the respective years.

@ Based on PAT after minority interests and on the weighted average number of shares assumed to be issued in the respective years after taking

into consideration the dilutive effect of unexercised ESOS.

2005 – 2006 The fi nancial highlights on pages 2 and 3 refl ect the actual audited results of Scomi Group Bhd, with certain numbers restated to refl ect

retrospective effects as a result of adoption of new or revised Financial Reporting Standards in the respective years.


Key Financial Indicators and Key Financial Highlights

'09'08'07'06'05

Revenue (RM Million)

2,10

6

1,9

71

1,95

5

1,57

7

1,06

8

'09'08'07'06'05

Profit before Tax (RM Million)

140

51

286

121

187

Profit after Tax after Minority Interests (RM Million)

117

10

257

92

152

'09'08'07'06'05

TOTAL ASSETS2009

EARNINGS PER SHARE (BASIC)2009

NET TANGIBLE ASSETS2009

SHAREHOLDERS’ FUND2009

NET ASSETS PER SHARE (ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT)2009

RM3,093 mil

0.96 sen

RM677 mil

RM1,064 mil

96 sen

2008: RM2,944 mil / 2007: RM2,707 mil

2008: 11.6 sen / 2007: 25.6 sen

2008: RM531 mil / 2007: RM442 mil

2008: RM918 mil / 2007: RM802 mil

2008: 88 sen / 2007: 77 sen


SCOMI GROUP CORPORATE LEGAL STRUCTUREas at 30 April 2010

SCOMI GROUP BHD

43%#

SCOMI MARINE BHD

51% Gemini Sprint Sdn Bhd

51% Labuan, Malaysia Marineco Limited

40% Trans Advantage Sdn Bhd

20% Southern Petroleum Transportation Joint Stock Corporation

49% Emerald Logistics Sdn Bhd

Singapore

Scomi Marine Services Pte Ltd

49% British Virgin Islands King Bridge Enterprises Limited

Singapore

Grundtvig Marine Pte Ltd • 95% Indonesia

PT Batuah Abadi Lines

Singapore CH Ship Management Pte Ltd

Singapore Goldship Pte Ltd

Singapore CH Logistics Pte Ltd

• Singapore

Sea Master Pte Ltd

81% Indonesia PT Rig Tenders Indonesia Tbk1

Singapore

SCOMI INTERNATIONAL PRIVATE LIMITED

Bermuda Scomi Oiltools Bermuda Limited

76%Bermuda

SCOMI OILFIELD LIMITED

Australia Scomi Oiltools Pty Ltd

New Zealand

Scomi Oiltools (NZ) Pty Limited

Algeria KMC Scomi Oiltools Algerie EURL

Alexandria Free Zone, Egypt

Scomi Oiltools Egypt SAE

50%* Nigeria Titan Tubulars Nigeria Limited

51% Oman Scomi Oiltools Oman LLC

Scomi OBM Terminal Sdn Bhd

Cayman Islands

Scomi Oiltools Ltd

The Netherlands

KMC Oiltools BV

Scotland Scomi Oiltools (Shetland) Limited

Scomi Oiltools (Kemanan) Sdn Bhd

Thailand Scomi Oiltools (Thailand) Ltd

Scomi Barite Sdn Bhd

51% KMC All Star Chemical Sdn Bhd

Alberta, Canada Scomi Oiltools Canada Inc

Texas, USA

Scomi Oiltools Inc

KMCOB Capital Berhad

Mauritius Scomi Oiltools Overseas (M) Limited

Labuan, Malaysia SCOMI CAPITAL LIMITED

SCOMI SOLUTIONS SDN BHD

British Virgin Islands

SCOMI ECOSOLVE LIMITED


Jersey Scomi Oiltools (Africa) Limited

• 60% Nigeria

Wasco Oil Service Company Nigeria Limited

• 96% Gabon

Oiltools Gabon SA

• Nigeria

Oiltools Africa Limited@

Scomi Oiltools Sdn Bhd

Cayman Islands Scomi Oiltools (Cayman) Ltd

• Kish Island

Scomi Oiltools Kish Limited

Scotland Scomi Oiltools (Europe) Limited

• Russia

Scomi Oiltools (RUS) Limited Liability Company

• Norway

Scomi Oiltools AS

British Virgin Islands Scomi Oiltools South America Limited

• Venezuela

Scomi Oiltools De Venezuela SA • Venezuela

Premium Industrial Machining SA

Singapore Scomi Oiltools (S) Pte Ltd

• Indonesia

• 95% PT Scomi Oiltools

• Mexico

Oilfi eld Services de Mexico S de RL de CV

• India

KMC Oiltools India Private Limited • Mexico

Scomi Oiltools de Mexico S de RL de CV

50% Brunei

Sosma (B) Sdn Bhd

France Scomi Anticor SA>

Scomi Rail Bhd

Scomi Coach Sdn Bhd • Scomi Coach Marketing Sdn Bhd

Scomi Trading Sdn Bhd

70% Saudi Arabia Scomi OMS Oilfi eld Services Arabia Ltd

Scomi OMS Oilfi eld Services Sdn Bhd

SCOMI CHEMICALS SDN BHD

69% SCOMI ENGINEERING BHD

SCOMI ENERGY SDN BHD

48% SCOMI KMC SDN BHD

40% Scomi Sosma Sdn Bhd

Scomi Transportation Systems Sdn Bhd

Scomi Special Vehicles Sdn Bhd

Scomi OMS Oilfi eld Holdings Sdn Bhd

India Urban Transit Private Limited ^

Singapore

Scomi OMS Oilfi eld Services Pte Ltd

70% Scomi NTC Sdn Bhd

Scomi Enviro Sdn Bhd

95% Indonesia PT Scomi OMS Oilfi eld Services

Thailand Scomi OMS Oilfi eld Services (Thailand) Ltd

Australia Scomi OMS Oilfi eld Services (Australia) Pty Ltd

British Virgin Islands Scomi OMS Oilfi eld Services Ltd

Notes* Does not include 0.20% owned by Wasco Oil Service Company Nigeria Limited.# Includes 0.05% held by Scomi Energy Sdn Bhd.^ Includes 0.01% held by Scomi Rail Bhd.@ Includes 2% held by Scomi Oiltools Bermuda Limited.> Deemed interested by virtue of Section 6A(6) of the Companies Act. 1965.1 This corporate structure does not include the subsidiaries and associated

companies of PT Rig Tenders Indonesia Tbk. Public listed entity.

• 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.

4%


With a presence in 68 locations across 33 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 of our 3 business units are focused in 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 effi ciency, 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.

OUR CORPORATE STATEMENT



CORPORATE INFORMATION

BOARD OF DIRECTORSTan Sri Asmat bin Kamaludin (Chairman)

Tan Sri Nik Mohamed bin Nik Yaacob

Datuk Hamzah bin Bakar

Datuk Haron bin Siraj

Dato’ Mohammed Azlan bin Hashim

Dato’ Mohamed Azman bin Yahya

Foong Choong Hong

Sreesanthan a/l Eliathamby

Shah Hakim @ Shahzanim bin Zain

EXECUTIVE COMMITTEE(formed on 6 April 2009)

Tan Sri Nik Mohamed bin Nik Yaacob (Chairman)

Dato’ Mohammed Azlan bin Hashim


AUDIT AND RISK MANAGEMENT COMMITTEESreesanthan a/l Eliathamby (Chairman)

Foong Choong Hong



NOMINATION AND REMUNERATION COMMITTEETan Sri Asmat bin Kamaludin (Chairman)

Dato’ Mohamed Azman bin Yahya


OPTIONS COMMITTEEDatuk Hamzah bin Bakar (Chairman)



REGISTERED OFFICESuite 5.03, 5th FloorWisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala Lumpur

ADMINISTRATIVE AND CORRESPONDENCE ADDRESSSuite 5.03, 5th FloorWisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala LumpurMalaysiaTel : 03 2080 5080Fax : 03 2080 5131Website : www.scomigroup.com.myEmail : [email protected]

REGISTRARSymphony Share Registrars Sdn BhdLevel 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU 1A/46, 47301, Petaling JayaSelangor Darul EhsanMalaysiaTel : 03 7841 8000Fax : 03 7841 8008

ADVOCATES & SOLICITORSAlbar & PartnersAdvocates & Solicitors6th Floor, Faber Imperial CourtJalan Sultan Ismail50250 Kuala LumpurMalaysia

COMPANY SECRETARIESOng Wei Leng (MAICSA 7053539)

Chong Mei Yan (MAICSA 7047707)

AUDITORSPricewaterhouseCoopers (AF 1146)

Chartered AccountantsLevel 10, 1 SentralJalan Travers, Kuala Lumpur SentralPO Box 1019250706 Kuala LumpurMalaysia

PRINCIPAL BANKERSCIMB Bank Berhad10th Floor, Bangunan CIMBJalan SemantanDamansara Heights50490 Kuala LumpurMalaysia

United Overseas Bank (Malaysia) BerhadLevel 18 Menara UOBJalan Raja Laut50350 Kuala Lumpur

STOCK EXCHANGE LISTINGMain Market of Bursa Malaysia Securities BerhadStock Name: ScomiStock Code: 7158

CURRENCYRinggit Malaysia (RM)


YBhg Tan Sri Asmat, 66, a Malaysian, is an Independent Non-Executive Director and the Chairman of the Company. He was appointed to the Board on 3 March 2003.

YBhg 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.

YBhg 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, a position he held from 1992 to 2001. He has served as Economic Counsellor for Malaysia in Brussels and has worked with several international bodies such as ASEAN, World Trade Organisation and the Asia-Pacifi c Economic Co-operation, representing Malaysia in relevant negotiations and agreements. YBhg Tan Sri Asmat has also been actively involved in several national organisations such as Permodalan Nasional Bhd, Johor Corporation, the Small and Medium Scale Industries Corporation (SMIDEC) and the Malaysia External Trade Development Co-operation (MATRADE) while in the Malaysian Government service. YBhg Tan Sri Asmat also served as a Governor representing Malaysia on the governing Board of the Economic Reseach Institute for Asean and East Asia (ERIA). Other Malaysian public companies in which he is a director are UMW Holdings Berhad, YTL Cement Berhad, Permodalan Nasional Bhd, Malaysian Pacifi c Industries Berhad, Lion Industries Corporation Berhad, Panasonic Manufacturing Malaysia Berhad, Symphony House Bhd, TASCO Berhad (formerly known as Trans-Asia Shipping Corporation Berhad), Compugates Holdings Berhad, The Royal Bank of Scotland Berhad and Scomi Marine Bhd. He also serves on the Board of JACTIM Foundation.

YBhg Tan Sri Asmat is a member of, and chairs the Nomination and Remuneration Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31 December 2009.

Tan Sri Asmat bin KamaludinChairman,Independent Non-Executive Director

PROFILE OF DIRECTORS


Profi le of Directors

Tan Sri Nik Mohamedbin Nik YaacobIndependent Non-Executive Director

Datuk Hamzah bin BakarIndependent Non-Executive Director

YBhg Datuk Hamzah, 66, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.

YBhg Datuk Hamzah holds a Bachelor of Science with Honours in Economics from The Queen’s University of Belfast, United Kingdom, and a Masters Degree in Public Policy and Administration from the University of Wisconsin, Madison, United States of America.

He was previously attached to the Economic Planning Unit of the Prime Minister’s Department where he served in various positions within that department for 12 years. Thereafter, he joined the Petroliam Nasional Berhad group of companies where he served for 20 years until his retirement in June 2000. Other Malaysian public companies in which he is a director are CIMB Group Holdings Berhad (formerly known as Bumiputra-Commerce Holdings Berhad), SapuraCrest Petroleum Berhad and CIMB Investment Bank Berhad.

YBhg Datuk Hamzah is a member of the Audit and Risk Management Committee, Nomination and Remuneration Committee, and is the Chairman of the Options Committee of the Board. He attended 6 out of the 7 Board Meetings held in the year ended 31 December 2009.

YBhg Tan Sri Nik Mohamed, 60, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July 2004.

YBhg Tan Sri Nik Mohamed holds an Engineering Degree from Monash University and a Masters in Business Management from the Asian Institute of Management.

He served as the Group Chief Executive of Sime Darby Berhad from 1993 until his retirement in June 2004, and also served on the Boards of many of the Sime Darby group companies during this time. Other Malaysian public companies in which he is a director are GuocoLand (Malaysia) Berhad, Bolton Berhad and Kencana Petroleum Berhad. YBhg Tan Sri Nik Mohamed is also the Executive Director of Yayasan Kepimpinan Perdana (Perdana Leadership Foundation).

YBhg Tan Sri Nik Mohamed is the Chairman of the Executive Committee of the Board. He attended 6 out of the 7 Board Meetings held in the year ended 31 December 2009.



Datuk Haron bin SirajIndependent Non-Executive Director

Dato’ Mohamed Azman bin YahyaNon-Independent Non-Executive Director

YBhg Dato’ Azman, 46, a Malaysian, is a Non-Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.

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, the Malaysian Institute of Accountants and a Fellow of the Malaysian Institute of Banks.

YBhg Dato’ Azman is the Director and Group Chief Executive of Symphony House Berhad and the Executive Chairman of Bolton Berhad. Prior to this, he was appointed by the Government of Malaysia in 1998 to set-up and head Danaharta Nasional Berhad and subsequently became its chairman until 2003. He was also the Chairman of the Corporate Debt Restructuring Committee until its closure in 2002. His previous career appointments include auditing with KPMG in London, fi nance with the Island & Peninsular Group and investment banking with Amanah Merchant Bank. Outside his professional engagement, YBhg Dato’ Azman is active in public service. He sits on the boards of a number of Government Linked Corporations namely Khazanah Nasional Berhad, Malaysia Airline Systems Berhad, PLUS Expressways Berhad, Pharmaniaga Berhad and Ekuiti Nasional Berhad. YBhg Dato’ Azman also serves as a member of the Bursa Malaysia Securities Market Consultative Panel, the National Council for Scientifi c Research and Development, the National Innovation Council, the Special Taskforce to Facilitate Business (PEMUDAH) and the Malaysian Financial Reporting Foundation.

YBhg Dato’ Azman is a member of the Nomination and Remuneration Committee of the Board. He attended 6 out of the 7 Board Meetings held in the year ended 31 December 2009.

YBhg Datuk Haron, 65, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.

YBhg 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.

YBhg 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. Subsequently, he served as the Minister Counsellor (Economic Affairs) of the Permanent Mission of Malaysia in Geneva, Switzerland, and returned to Malaysia to join the Ministry of International Trade and Industry, holding various directorship positions, and was later appointed as Deputy Secretary-General (Trade) in 1990. YBhg Datuk Haron subsequently served 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 was appointed as the Secretary-General of the Ministry of Primary Industries where he served until 2000. He served as the Chief Executive Offi cer of the Malaysian Palm Oil Promotion Council from 2000 until his retirement in January 2006. Other Malaysian public companies in which he is a director are Kulim (Malaysia) Berhad, Jerneh Asia Berhad, Jerneh Insurance Berhad and EON Capital Berhad.

YBhg Datuk Haron is a member of the Audit and Risk Management Committee and Options Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31 December 2009.



Dato’ Mohammed Azlan bin HashimIndependent Non-Executive Director

Foong Choong HongNon-IndependentNon-Executive Director

Mr Foong, 49, 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 a 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 house based in Malaysia. Mr Foong is a Certifi ed 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 identifi cation 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.

Mr Foong is a member of the Audit and Risk Management Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31 December 2009.

YBhg Dato’ Azlan, aged 53, Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July 2004.

YBhg Dato’ Azlan graduated with a Bachelor of Economics from Monash University and qualifi ed as a Chartered Accountant in Australia.

He has extensive experience in the corporate sector. YBhg Dato’ Azlan is the Chairman of D&O Green Technologies Berhad (formerly known as D&O Ventures Berhad) and SILK Holdings Berhad. He also serves as a Non-Executive Director of Khazanah Nasional Berhad 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 fi nancial services industry and investment holding companies, including as Chief Executive, Bumiputra Merchant Bankers Berhad, Group Managing Director, Amanah Capital Malaysia Berhad, Executive Chairman, Bursa Malaysia Berhad Group (formerly known as Kuala Lumpur Stock Exchange).

YBhg Dato’ Azlan is a member of Executive Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31 December 2009.



Sreesanthan a/l EliathambyIndependent Non-Executive Director

Mr Sreesanthan, 49, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 18 April 2006. Mr Sreesanthan, is an Advocate & Solicitor and a Partner with the legal fi rm of Messrs Kadir, Andri & Partners.

Mr 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 fi rm of Messrs Zain & Co. Mr Sreesanthan is a member of the Investment Committee of Amanah Saham Wawasan 2020 Fund, Bursa Malaysia Listing Committee and the Investigating Tribunal Panel of the Advocates and Solicitors’ Disciplinary Board. He currently sits on the Board of Chemical Company of Malaysia Berhad, Guinness Anchor Berhad and Malayan Banking Berhad.

Mr Sreesanthan is the Chairman of the Audit and Risk Management Committee of the Board and had attended 5 out of the 7 Board Meetings held in the year ended 31 December 2009.

Note:None of the Directors have any family relationship with any other Director and/or substantial shareholder of Scomi Group Bhd.

None of the Directors are involved in any confl ict 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 traffi c offences, if any).

Shah Hakim @ Shahzanim bin ZainChief Executive Offi cer / Non-Independent Executive Director

Encik Shah Hakim, 45, a Malaysian, is the Chief Executive Offi cer/ 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 Sapura Industrial Berhad, Scomi Marine Bhd, Scomi Engineering Bhd and KMCOB Capital Berhad.

Encik Shah Hakim is a member of the Options Committee and Executive Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31 December 2009.


KEY MANAGEMENTShah Hakim ZainGroup Chief Executive Offi cer

Hilmy Zaini ZainalCountry President

– Brazil

Ridzuan Ali Country President – Gulf

Loong Chun NeeChief Investment & Performance Offi cer

Steve BrackerPresident – Oilfi eld Services Division

Mukhnizam Mahmud

President – Energy Logistics Division


TEAM

Kanesan VeluppillaiPresident – Scomi International Division

Syahrunizam Samsudin

President – Energy & Logistics Engineering

Division

Dinesh Chelvathurai Chief Learning Offi cer

Rohaida Ali Badaruddin Chief of Staff

Sharifah Norizan Shahabudin

Chief Legal & Governance Offi cer

Suhaimi Yaacob Country President – India

Wan Ruzlan Iskandar Wan Salaidin

Country President – Indonesia


CHAIRMAN’S

Dear Stakeholders,On behalf of the Board of Directors, it is with pleasure that I present the Annual Report of Sc omi Group Bhd (“Scomi”, “the Company” or “the Group”) for the fi nancial year ended 31 December 2009. The year under review has seen the Group facing and overcoming many challenges prevalent throughout the year, and I am confi dent of the Group’s prospects in the coming fi nancial year.

OVERVIEW

The challenges that the world faced in 2008 went unabated in the fi rst half of 2009, and only showed signs of recovery in the later part of the year. Malaysia was not spared from the vagaries of the economic downturn. The oil and gas industry in particular experienced a turbulent year and registered a notable drop in global rig count and low utilisation rates and yields due to the surplus of equipment.

This had an impact on our fi nancial performance during the year under review as the oil and gas sector represents the core of our operations. However, we are pleased to note that the overall performance was offset by the contribution from the Public Transportation division which recorded signifi cant growth in revenue and profi ts, with the commencement of the Mumbai monorail project.


STATEMENT

In response to the external factors brought about by the downturn, the Group performed relatively well. This was partly due to our internal strategy to cut costs and improve effi ciencies as well as the increased contribution from the Public Transportation division.

GROUP FINANCES

For the fi nancial year under review, the Group recorded a profi t after tax and minority interests (“PATAMI”) of RM9.9 million, representing a drop of 91.5% from the corresponding results in 2008. This was largely due to the impact from the share of impairment loss on goodwill of our associated company, Scomi Marine Bhd, which amounted to RM42.81 million. The performance was also affected by lower revenue of RM 1.97 billion in 2009 as compared to RM2.11 billion in 2008, resulting from the decline in drilling activities especially in the Western Hemisphere, notably in US, UK and Russia. Excluding the one-off recognition of the impairment loss on goodwill, the Group registered a PATAMI of RM52.7 million.

Taking into account the average results, and the Group’s focus to strengthen the balance sheet with emphasis on reducing debt, the Board of Directors is taking a cautious step of not recommending a dividend for the fi nancial year ended 2009. We are mindful

of our shareholders’ need for an income stream from their investments, but with the expected rebound in the oil and gas sector and growth opportunities for the Public Transportation division in the year ahead, we need to ensure that we have suffi cient reserves to take advantage of the opportunities that may come our way.

SUSTAINING THE BUSINESS AMID ADVERSITY

The Group managed to register a modest profi t for the year under review despite the challenging operating climate and the downward pressure of the global economy.

The cost cutting measures initiated in late 2008 have shown the desired results as the Management continued efforts to manage costs and streamline business operations. Gross margin, however, fell slightly, affected by the margin squeeze due to the uncertain crude oil prices and spiraling costs owing to the global fi nancial market turmoil. Notwithstanding this, the Group continued to manage costs and continued to make progress with the close monitoring of receivables and payables.

Due to the continued uncertainty of the oil and gas scenario that led to the precipitous plunge in the energy demand, the Group registered a signifi cant drop in profi t before tax (“PBT”) from RM140.21 million

in fi nancial year ended 2008 to RM50.72 million in 2009. The decrease, though, does not refl ect the Group’s operating performance as a large part of the shortfall was attributable to share of impairment loss on goodwill of RM42.81 million from Scomi Marine Bhd.

The Group registered a marginally lower revenue by 6% for the fi nancial year ended 2009 as compared to the preceding fi nancial year. Oilfi eld Services (“OFS”) remained the major contributor registering RM1.34 billion or 67.8%, followed by Public Transportation which continued on its growth trajectory with a contribution of 27.3% and Production Enhancement with 2.8%.

The economic recession had impacted greatly on the oil and gas industry, and this was refl ected in lower revenue from the OFS division, with Drilling Waste Management (“DWM”) showing a decline of 28%. This was partially offset by Drilling Fluids (“DF”), which managed to grow by 18%.

Meanwhile, the Public Transportation division recorded the highest growth within the Group with its Rail unit recording an increase in revenue of 279% on the back of the commencement of the Mumbai Monorail project. Its Machine Shop (“MS”) unit, however, recorded a decline of 32%. While we anticipate MS to reverse the negative trend in 2010, the focus for the division will


Chairman’s Statement

The domestic front looks more optimistic with Bank Negara forecasting GDP to grow by 5.5% in 2010. Local research houses, however, have upgraded the country’s GDP year-on-year growth to as high as 8%, on the back of strengthening domestic and external conditions. While this augurs well for the country as a whole, it will not have a huge impact on our operations given that the core of our activities – OFS, Marine Services and Public Transportation – are global in nature.

The oil and gas sector is also expected to rebound with drilling activities expected to increase compared to 2009 with delivery of new rigs and commencement of new development projects in the Eastern Hemisphere, while the outlook for the US and Russia should also see a gradual recovery of rig count. Prospects for our DWM and DF units in the year ahead look positive with the award and commencement of new contracts in the Asian and Middle Eastern markets.

Growth opportunities for the Public Transportation division particularly the Rail unit, remain strong. There are immense opportunities arising from the investment in public infrastructure particularly in emerging markets such as India, the Middle East, Brazil and Indonesia. It has been estimated that US$35 trillion will be invested into infrastructure over the next two decades, including US$400 billion in Asia, US$300 billion in the Gulf; and US$171 billion in South America. In Brazil alone, US$13 billion has been budgeted for infrastructure development in preparation for the 2014 Soccer World Cup and 2016 Olympic games.

The development of our Scomi Urban Transit Rail Application - SUTRA monorail technology and our success with the Mumbai monorail project has not gone unnoticed, as we have also been invited to participate in tender proposal exercise and one of it being the US$1.7 billion Expresso Tiradentes monorail project in Sao Paolo, Brazil. In addition, the Group also leverages on the immense interest of the Middle Eastern countries such as Saudi Arabia, Jeddah, Bahrain and Egypt, in the monorail technology.

STRATEGIC INPUT FOR FUTURE SUSTAINABILITY

The key to the Group’s future is Formula 2011, a 3-year blueprint that sets out our strategies from 2009 to 2011, to grow returns, initiate technological innovation and gain customer recognition. The goal of Formula 2011 is to incorporate winning attributes into every aspect of our business. It is not just a guide; it is a strategic tool that defi nes who we are and what we do. It will help us streamline our processes, galvanize our people and redefi ne the Scomi brand.

A critical component of Formula 2011 is the development of our people. Throughout the year under review, we have implemented talent development programmes for our employees, which include Management Trainee Programme for fresh graduates; and the Executive Management Programme (“EMP”), Management Leadership Development Programme (“MLDP”) and Global Leadership Development Programme (“GLDP”) for

be on the Rail unit, where we look forward to capitalising on the growing public transportation infrastructure needs globally. On 18 May 2010, Scomi Engineering Bhd, subsidiary of the Group announced that it has entered into a conditional share sale agreement with Sumitomo Japan for the sale of the Scomi Engineering MS business for a cash consideration of USD101 million to further streamline its business and focus its resources in the growing transportation industry.

On the Marine Services side, the economic situation continued to put pressure on the performance. It resulted in a reduction in revenue registering RM448 million in 2009 as compared to RM467 million in 2008, due to lower coal demand in the fi rst half of the year. Despite the slightly lower revenue, the division managed to post a higher gross profi t as a result of savings in bunker costs and capitalisation of docking costs.

PROSPECTS

The prospects for the coming year look encouraging with the World Bank projecting that global growth will fi rm to 2.7% in 2010 and 3.2% in 2011. However, although the acute phase of the fi nancial crisis has passed, the global economic recovery is fragile and expected to decelerate in the second half of 2010 as the growth impact of fi scal and monetary measures wane; and the current inventory cycle runs its course.


Chairman’s Statement

existing talents. These programmes are designed to create a High Performance Culture among employees to help us achieve our Formula 2011 goals.

On 13th August 2009, the Group embarked on a renounceable rights issue of Irredeemable Convertible Secured Loan Stock (“ICSLS”). The proceeds have been put in place to invest in opportunities that will provide better returns to support the growth of the Group.

Another key initiative introduced in 2009 was the establishment of Scomi International Pte Ltd, a new business division of the Group whose mandate will be to pursue growth opportunities in the emerging markets of Brazil, China, India, the Gulf States and Indonesia. Scomi International will have the resources and reach to accelerate our continued growth as a world-leading manufacturer of innovative transportation solutions especially in monorail systems. Besides that, Scomi International is also be establishing of leading products and technologies from emerging markets for worldwide distribution.

In addition, we have also established a new market centric structure starting with 4 of our key markets to provide a clear focus in consolidating the marketing strategies in the respective markets. These markets – the Gulf States, Indonesia, India and Brazil – are headed by a Country President and they will work hand in hand with the Business Unit Presidents who will continue to be responsible for the quality and extension of their current product lines.

Staying on course on the Mumbai monorail project, I wish to note that the Rail unit had successfully delivered its fi rst monorail car to Mumbai in January 2010 for the trial run of the monorail in conjunction with India’s Republic day. And the Group is working diligently for the next delivery and looking forward to the commencement of Mumbai monorail operation at the end of 2010.

CORPORATE SOCIAL RESPONSIBILITY

In our pursuit of business excellence, we have not forgotten our obligations as a responsible corporate citizen. Corporate Social Responsibility is an essential component of Formula 2011, where we have identifi ed the need to be conscientious in all that we do. This includes ensuring quality products and services to our customers; providing a safe and healthy work environment for the well-being of our employees; and caring for the environment and communities that we operate in, while ensuring equitable returns for our shareholders. For a more detailed account, we have included a section on our Corporate Social Responsibility efforts, which can be found on pages 30 to 33 of this Annual Report.

ACKNOWLEDGEMENTS

The year under review had been a challenging one for Scomi, and we have been blessed to emerge from it relatively unscathed. This is largely due to the dedication and professionalism of the Management and employees across all divisions and levels, and on behalf of the Board, I would like to express our gratitude for their drive and perseverance in contributing to the Group’s top and bottom lines.

I would also like to take this opportunity to record my appreciation to my fellow Board members, whose guidance and counsel during the year have been invaluable.

Last but not least, I would like to express our gratitude to our shareholders, principals, partners and associates, as well as the Government for their unwavering support that has taken the Group to where it is today.

Thank you.

Sincerely,

Tan Sri Asmat bin KamaluddinChairman



ambitious


MANAGEMENT’S REVIEW OF OPERATIONS

Dear Stakeholders,By the end of 2009, we had completed the 1st year journey of the Group’s race to achieve the Formula 2011 targets. The economic challenges during the year, certainly have not made it easy for us, but to be the preferred choice we need to be able to overcome all obstacles in the way. It was a tough but productive year for us and we are pleased to report that during the year, performance of Scomi Group Bhd (“Scomi Group”, “the Company” or “the Group”) has nevertheless been commendable given the circumstances we had faced.

Withstanding the challengesThe global fi nancial crisis, which took hold in the second half of 2008 and carried on into 2009, had a signifi cant impact on our operations and meant that it was always going to be a challenge to meet the targets that we had set ourselves.

The oil and gas industry, in particular, was sluggish and remained relatively fl at throughout the year. There was a notable drop in global rig count and low utilisation rates and yields due to the surplus of equipment, resulting in lower drilling activities particularly in the Americas and Russia. This had an impact on our oilfi eld operations, which is our main revenue generator. In spite of the challenging circumstances, the fi nancial performance of the Group for the fi nancial year ended 2009 has been relatively satisfactory.

The Group recognised that for us to survive,

let alone succeed, we need to re-invent ourselves,

re-evaluate what we do and how we do it;

and implement strategies that will make us

competitive in the global market.


Management’s Review of Operations

Net profi t for the fi nancial year ended 2009 was registered at RM25.97 million, signifi cantly lower than the RM 136.29 million achieved in 2008. This was mainly due to the share of impairment loss on goodwill from Scomi Marine Bhd (“Scomi Marine”), which amounted to RM42.81 million. Group revenue also recorded a marginal decline, by 6.4% from RM 2.11 billion in 2008 to RM 1.97 billion, with the contraction from our oilfi eld services operations largely offset by the outstanding performance from our Public Transportation’s Rail unit.

Oilfi eld Services (“OFS”) remained as the major contributor to Group’s revenue with 67.8% amidst the uncertain scenario in the oil and gas industry. This was followed by a contribution in revenue of 27.3% under the Public Transportation division which registered a growth of 279%, bolstered by the commencement of the Mumbai monorail project.

By region, Asia remains the biggest contributor registering 55% to the Group’s revenue. This is largely attributable to the high drilling activities in the Asia region as compared to the decline in similar activities in the Americas and Europe. The strong input for the region was further augmented by contribution from the Mumbai monorail project.

Based on profi t after tax and minority interests (“PATAMI”), the basic earnings per share (“EPS”) of the Group dropped from 11.58 sen to 0.96 sen. This is again due to its share of impairment loss on goodwill from Scomi Marine and the signifi cant increase in ordinary shares resulting from the issuance of 61.77 million new ordinary shares pursuant to the conversion of Irredeemable Convertible Secured Loan Stock (“ICSLS”) in the fi nancial year ended 2009.

The expansion of share capital also resulted in the shareholders funds of the Group increasing by RM146.40 million, from RM918.22 million in 2008 to RM1.06 billion in 2009.

PERFORMANCE BY DIVISIONS

Oilfi eld Services (“OFS”)It was a challenging year for OFS against a backdrop of low oil prices and the economic downturn. Although the division is still the main revenue generator for the Group, the year saw a decline in its contribution. The division’s contribution to the Group’s revenue reduced by 5% as Drilling Waste Management (“DWM”) activities dropped due to the low activity levels in the Western Hemisphere, particularly in the USA and the North Sea.

The USA tends to react almost instantaneously and more drastically against the movements in gas price, and this is refl ected in the decline in rig count by as much as 50% during the year. The international rig count, however, has maintained its levels largely due to continuing activities in the Asian region.

The situation improved towards the end of the year, on the back of improved economic fundamentals and a gradual improvement in global drilling activity. With the Organisation of the Petroleum Exporting Countries (“OPEC”) maintaining its production levels and oil prices stabilising, this has carried through to the fi rst quarter of 2010, further assisted by the North American market showing vast improvements, as US land activity increased on the back of better business prospects.

Given the downward scenario of the oil and gas industry, during the year under review, profi t before tax (“PBT”) for OFS dropped by 41.6% to RM 28.4 million and the revenue declined by 12.9% due to lower contributions from Americas and Europe.

Based on product lines, the bulk of the revenue came from DWM accounting for 53.1% while Drilling Fluids (“DF”) and Machine Shop (“MS”) activities contributed 42.6% and 4.3% respectively. Although DF showed an increase of 18%, from the previous fi nancial year, this was not enough to offset the shortfall from DWM.



Moving forward, we have identifi ed various initiatives to grow the division with the objectives of strengthening the existing core product portfolios through research and development, partnership and acquisition; improving service quality; focusing on fi nancial turnaround and increasing market share in key growth markets.

Through these initiatives we are confi dent of capitalising on the opportunities arising from improvements in the global economic situation in 2010, where we hope to reach, or even surpass the fi nancial results achieved in 2008.

Another unit under OFS, the Production Enhancement Technology (“PET”) posted a 34 % decline in revenue for the year at RM55.8 million, with revenue from the Production Chemical unit reduced by 12 % mainly due to controlled production fl ow by key customers and the general slowdown in the oil and gas sector.

The revenue numbers were further affected by the deconsolidation of results from Scomi NTC Sdn Bhd, which was reclassifi ed from a subsidiary to a jointly controlled entity effective September 2009.

Public Transportation and Machine Shop (“MS”)The division operating under subsidiary Scomi Engineering Bhd (“Scomi Engineering”), performed exceptionally well during the year under review. Revenue increased by 24% to RM537.7 million while its net profi t increased by 391% to RM60.9 million from RM12.4 million in 2008.

The bulk of the revenue was from the Public Transportation unit with 66%, while the MS unit contributed 34%. This is the reverse scenario of the situation in 2008, where Public Transportation contributed 38% and MS at 62%. The commendable performance is due to contribution from the Rail unit, signifi cantly increasing with the commencement of the Mumbai monorail project. Meanwhile, the decline in MS

revenue was due to low connector sales and the subdued global oil & gas environment.

During the period under review, the MS business recorded an increase of 47% in profi t from RM19.6 million in 2008 to RM28.8 million in 2009 by managing higher margins for contracts secured. Despite the challenging environment, the MS business was also awarded the prestigious “Best Overall VAM Licensee” by Vallourec & Mannesmann Oil & Gas France (V&M) for the MS facility in Singapore.

On 18 May 2010, Scomi Engineering announced that it has entered into a conditional share sale agreement with Sumitomo of Japan for the sale of the company’s MS business for a cash consideration of USD101 million to further streamline its business and focus its resources in the growing transportation industry.

The Public Transportation division was undoubtedly the star performer for the year, with the Rail unit contributing a large portion of the expansion. Other projects that contributed to the division’s sterling performance included the completion of the Kelana Jaya Line rail expansion project worth in total RM171 million.

During the year, Scomi Engineering completed the construction of its RM30 million rail manufacturing facility in the north of Kuala Lumpur. The new state-of-the-art facility with a built up area of 150,000 square feet will boost production capacity, and will be able to accommodate manufacturing capabilities for two monorail projects concurrently.

The year under review also saw the division introduce a new service under the Coach unit, which is the newly established Service, Warranty, After Sales & Technical (“SWAT”) centre in Batu Caves. SWAT is a one-stop service centre for buses, providing total maintenance packages to customers as well as the repairs and customisation of vehicles.

Marine ServicesThe Marine services division, operating under Scomi Marine Bhd (“Scomi Marine”), recorded lower revenue for the year due to lower coal demand and lower contribution from the Offshore Support unit. The lower revenue contribution from the Offshore Support unit was partly mitigated with the delivery of Kaspadu 1, which helped boost earnings generated by this division.

Despite the lower revenue, the gross profi t of the division increased by 37%, from RM91.39 million to RM125.6 million. This is due to savings in operating costs resulting from lower bunker costs and capitalisation of docking costs. PBT however, recorded a negative variance of 178.9%, as the division registered a loss due to recognition of impairment on goodwill of RM148.6 million. Excluding the goodwill impairment, Scomi Marine posted an increase of 11.6% in PBT compared to 2008.

Marine Logistics unit was the main contributor to revenue with 81%, with the Offshore Support units of Indonesia and Malaysia contributing 16% and 3% respectively. Moving forward, we expect coal demand and production to increase in 2010, as the region’s economy continues to recover.

KEY INITIATIVES

On Track with Formula 20112009 was the fi rst phase of the 3-year Formula 2011 initiative, where the Group aims to achieve objectives faster and more effi ciently in the increasingly competitive global race. The Group recognised that for us to survive, let alone succeed, we need to re-invent ourselves, re-evaluate what we do and how we do it; and implement strategies that will make us competitive in the global market.

Our Formula 2011 targets for 2009 were to consolidate and grow our position in our three core business areas – Oilfi eld Services, Public Transportation and Marine Services. The extenuating external infl uences brought about by the economic climate during the year certainly did not make it easy, but despite this we have made progress in several key areas.

As outlined in the 2008 Annual Report of the Group, Formula 2011 focuses on three key areas to achieve our goals: Process, People and the Brand. Here we would like to take you through the strides we have made and the initiatives we have undertaken during the year.

ProcessOne of the key areas we looked at was to cut down on unnecessary costs. Throughout the year we rigorously initiated a cost cutting drive, which has resulted in costs reduction by 20% and has helped mitigate the 6% drop in Group’s revenue. The cost-cutting drive is part of our strategy to improve our effi ciency and productivity, and will be an on-going concern for all our employees.

Among the measures that we took were to create a fl atter and leaner organisational structure to improve transparency, and also to improve supply chain management for better inventory control. There was also a focused re-evaluation of our operational sites resulting in the closure of the regional offi ce in Aberdeen; reducing operations bases in closing down operations in countries with poor returns; reassessing the size of operations in the UK, USA and Dubai. The Group’s Project BEST platform (“Business Excellence for Scomi’s Transformation”) introduced in 2008 has also been used as an enabler in enhancing the Group’s balance sheet management through stringent monitoring of days of sales overdue (“DSO”) and Inventory turn.

In terms of business strategies, we have shifted from a product focus to a more market centric structure. We have identifi ed 5 key markets – Brazil, India, Indonesia, the Gulf Countries and China, and have already appointed Country Presidents to head four of these markets – India, Brazil, Gulf and Indonesia. We believe this will provide us with better local perspectives as we pursue new business opportunities within these emerging markets.

During the year under review Scomi International Pte Ltd (“Scomi International”) was established to pursue growth opportunities in these rapidly growing markets. The new business division will, among other things, lead the group’s global marketing efforts by adapting our global products to fi t local market requirements. The establishment of the market centric structure has made impressive strides into the markets, particularly for our Public Transportation division where we have been short-listed for the construction of the US$1.7 billion Expresso Tiradentes monorail project in Sao Paolo, Brazil. Our success in Mumbai has also attracted the interest of several parties from various markets such as the Middle Eastern countries which

includes Saudi Arabia, United Arab Emirates and Egypt; other cities of India such as Bangalore, Pune, Kolkata, Chennai and New Delhi as well as various parts of Brazil. Scomi International will work hand in hand with the Country Presidents and together pave the way in building the Scomi brand and extending the Group’s capabilities across the fi ve emerging market economies.

PeopleWe have long recognised the importance of human capital development, and even before we introduced Formula 2011, we had already implemented various talent development programmes for our employees. With the new blueprint, we are now more focussed on the areas of development as we strive to develop a culture of teamwork, professionalism and high performance.

Our human development programmes are initiated through the Group Learning and Development Department (GLaD). The learning and development framework includes technical and non-technical skills based programmes for all employees based on their job grades, and employees are expected to complete 40 hours of

training annually. These include formal and informal classroom training, on-the-job training, mentoring/coaching, seminars and workshops.

GLaD designs and conducts soft skills programmes in management and behavioural skills i.e Communication, Teamwork, Performance Management and Coaching Skills. These programmes are developed to assist our employees in their professional and personal growth. In addition to the GlaD programmes, we also conduct functional (technical and non-technical) programmes, which are managed by the respective business units, The focus of this type of training is to enhance operational effectiveness, promote product development and innovation, as well as to enhance general product knowledge.

Human capital development goes beyond talent development. Providing a work environment that inspires and motivates is also a critical component of employee development. One of the main initiatives we carried out in 2009 was CENSUS 2009, a dipstick survey to measure the level of acceptance and effectiveness of programmes implemented during the year.



This helped Management to identify and address employee concerns, which among other things included training needs, review of role and responsibilities; and communications and information sharing. We believe that through such engagements, we will be able to nurture a dedicated team of professionals who will take us closer to our goals.

The BrandThe third pillar – the Scomi brand itself – is built on the foundation of our products, process and people.

Product development plays an important role in ensuring that we offer world-class products that meet local market requirements. In relation to this, the Group continues to further develop the SUTRA monorail system by improving its energy effi ciency features like the regenerative brake system, improved propulsion and control systems. The Group will continue to raise awareness of the monorail as the eco-friendly choice as it leaves a small carbon footprint, making it the preferred urban transportation solution for congested cities.

But to build on the strength of the products to achieve continuous growth and attain market leadership, our processes and people need to deliver quality service and customer satisfaction. It is the combination of these three aspects that will reinforce and position Scomi as a ‘Global Technology Enterprise’ in all target markets and businesses.

To establish the Scomi brand further, Scomi has also taken the step to map out a more targeted and comprehensive media strategy in order to communicate the Group’s capabilities and presence to target audience locally and globally more effectively. The Group also participated in global conferences as participants and speakers. A testimony to the increased

recognition of the Scomi brand was when Scomi was invited as one of the speakers at the World Economic Forum held in New Delhi last November, to explore and unravel the urban transportation landscape in India.

As part of the Group’s initiative to sustain the Scomi brand further, the appointed Country Presidents will now be responsible to enhance and promote Scomi in their respective countries to the next level.

LOOKING AHEAD

In looking ahead to 2010, we expect the global and regional economic environment to improve and impact our business positively. We anticipate global drilling activities to increase compared to 2009 with delivery of new rigs and commencement of new development projects especially in the Eastern Hemisphere.

The outlook for the Western Hemisphere should also see a recovery of rig count which will help boost revenue for OFS. Our main focus, though will still be on the Asian and Middle Eastern markets as we look forward to the award and commencement of new contracts.

The outlook for the Public Transportation division appears equally bright, especially for the Rail unit. Growth opportunities will likely be strong as demand for urban transportation solutions grows in emerging markets such as Brazil, India, Gulf States and China. In the short term, we are optimistic of being involved in the Sao Paolo and Manaus monorail projects in Brazil as the country prepares for the 2014 FIFA World Cup and the 2016 Olympic games. Other projects in the pipeline include those from Saudi Arabia, Nigeria and India.

We are also optimistic for our Marine Services division, as more vessels become available for our offshore support services. Our customer, PT Adaro Energy, Indonesia’s

largest coal producer, is also expected to increase coal production by 12.5% in 2010, which will be a welcome boost for the Marine Logistics unit.

While we are optimistic for 2010, we will continue to tread cautiously as the global economy remains fragile, wrought with uncertainties. Our cost cutting measures will be on going, as will our various programmes and initiatives to uplift the standards of our processes and people. We will need to pitch our skills together if we are to achieve all we set out to do in a year that could yet prove to be even tougher and more challenging then 2009. There will be three things that will spell out success for 2010 – meeting our business goals, managing costs and developing our people.


meticulous



CORPORATE SOCIAL RESPONSIBILITYCORPORATE SOCIAL RESPONSIBILITY

As a corporation, Scomi strives to maximise shareholder value. And in doing so, we recognise that our primary responsibility lies in ensuring that our commitment to maximising shareholder value is sustainable in the long term. This commitment translates to the basic precept for our holistic approach to corporate social responsibility (“CSR”), in that everything we do is a step towards investing for the future. We believe that this alignment between the objectives of our business and that of the communities we impact in our operations fulfi ls the responsibility that Scomi and its group of companies (“Scomi” or “the Group”) have towards all its stakeholders, whether they be its employees, customers, shareholders, the community or the environment.

Scomi’s Formula 2011 initiative is the blueprint for aligning the interests of our business, people and stakeholders towards our long term goal of evolving into a Global Technology Enterprise driven by a dynamic workforce of committed and socially responsible people.

Scomi is committed to giving back to the communities in which it operates. This commitment is refl ected not only in our social responsibility to the local environment but also in each phase of our operations. Thus, we consciously ensure that our growth is driven along the principles of sustainability in tandem with responsible business practices, which includes rewarding our shareholders, adhering to our code of business conduct, and good corporate governance; and nurturing our people and the communities.

We are transparent in our efforts and hence we candidly share our challenges, progress and achievements with all our stakeholders.

THE MARKETPLACE

Shareholder EngagementScomi is committed to continuous engagement with its investors and key stakeholders which include the investing community and shareholders. By utilising various modes of communication, we ensure that they are informed on the Group’s latest developments, quarterly results and latest announcements in a timely manner.

Scomi’s Investor Relations team regularly engages with the investing community and shareholders to share updates and developments relating to the Group. This is done via regular meetings, briefi ngs and participation in conferences and roadshows (both locally and internationally) to keep key stakeholders and potential investors abreast on the latest development of the Group. Whilst doing so, we are always mindful of our obligation to ensure that we announce any material information to Bursa Malaysia beforehand.

THE WORKPLACE

Scomi’s Formula 2011 initiative aims to empower our people, harness their capabilities, unlock their potential and motivate them to epitomise the values of the Scomi brand, with the ultimate goal of producing or supplying superior products and services as a recognised Global Technology Enterprise.

Ancillary to our brand vision of “Realising Potential”, Scomi offers its workforce multiple opportunities for personal and career skills talent development. The structured training and development programmes we provide our workforce forms the forefront of our human capital development initiatives

and includes coaching and mentoring to encourage unimpeded communication and constructive feedback.

The nurturing of our people is further complemented by Scomi’s focus on providing them with a workplace environment that is governed by the key principles of safety, health, security and a sense of camaraderie through employee engagement initiatives such as the Project Pyramid where cross-functional teams work together to achieve their own chosen social responsibility task.

Talent Development The learning and growth perspective of our Corporate Strategy Map is to enhanced employee engagement via human capital development to achieve a culture of high performance, which is refl ected in our intensifi ed focus on professional career development for our employees.

Employees are provided with training and development programmes primarily based on their functional requirements but with a view towards enhancing their potential by exposure to management and leadership tools and concepts.

These development and training programmes are led by Group Learning and Development (“GLaD”), which is tasked to provide our people with the know-how, productivity enhancers, customer service skills and innovative thinking to give them a leading edge in our business activities.

During the year under review, GLaD has conducted programmes in Malaysia, Singapore, -Aberdeen, Egypt, Dubai, Indonesia, Perth and Houston. The topics covered included Induction Programmes, Financial Skills, Performance Management, Development & Coaching Skills, Competency

Based Assessment, Project Management, Technical and Business Report Writing and; Business Etiquette. Functional programmes, meanwhile, were managed by the respective business units which focus on enhancing operational effectiveness, promoting product development and innovation, as well as enhancing general product knowledge.

Our talent management initiatives include an 18-month Management Trainee Programme, during which fresh graduates are exposed to various aspects and functions within our varied business lines.

Meanwhile, existing talents are given the opportunity to enhance their skills in management and leadership effectiveness through the Executive Management Programme, Management Leadership Development Programme and Global Leadership Development Programme.

• The Management Trainee Programme exposes fresh graduates to all facets of Scomi’s business in preparation for senior executive positions. 9 new management trainees were recruited during the year under review who will be rotated to three different departments over an 18 month period. Each rotation would last 6 months and is intended to provide them with a broad base on which to build their careers in Scomi.

• The Executive Management Programme is a programme designed for middle level management to enhance their management skills. The programme was initiated in 2007 and in 2009, a total of 25 managers from Malaysia and global locations have participated in this

5-day programme which also provides an opportunity for employees to meet, interact and network with their global colleagues.

• The Management Leadership Development Programme secures the succession pipeline by equipping current managers with diverse leadership tools and skills to meet global business challenges.

• The Work @ Scomi & Induction Programme is a compulsory programme for all new employees and is designed to familiarise new recruits to Scomi and provide an insight into the Group with the participation by top management to prime them for their roles.

Other employee engagement initiatives carried out includes:

• Open Communication Sessions – encourages informed decisions through the sharing of knowledge, resources, strategic information and updates. Conducted via teleconference or webcast facilities, it can be accessed by Scomi employees across the globe. In addition, Town Hall sessions were also carried out by Business Units as an avenue for the employees to provide ideas and suggestions for the benefi t of the Group.

• Global Executive Meeting is an annual affair for top management to align strategies and chart business directions for the Group in the short, medium and long term.

Safety & Health Initiatives:Whether they are out on our vessels, at the manufacturing plant, at our milling facility, on drilling rigs or in corporate offi ces, we recognise our people as the very heart which drives Scomi and are our most valuable asset. The importance placed on their welfare and safety drives continuous initiatives conducted throughout the year, aimed at reducing the risks presented by environmental, health or safety hazards in the vicinity of our operations. These risks are mitigated through our Quality, Health, Safety & Environment (QHSE) initiatives implemented throughout every aspect of our operations.

Quality, Health, Safety and Environment (“QHSE”) is a crucial element in the operations across the Scomi group of companies. The function is managed by a team of specialists who are ably supported by experienced managers and champions in every location. The QHSE culture is intrinsic to our service quality improvement intiative. This culture is imbued into our employees, be it in operations or offi ce based, through various activities. Continuous improvement is the focus and hence we have structured tool-box talks to educate and re-educate our people on health and safety challenges

in the workplace as well as in the environment and communities in which we operate. Safety Observation Cards that record issues observed by employees ensure that remedial actions are taken form part of this programme for continuous improvement. Recognition and rewards are regularly awarded to employees who show exemplary QHSE qualities in their work. Educational material and record documents are provided to employees to increase their awareness and diligence to QHSE and our responsibility towards maintaining standards at all times.

To keep Infl uenza A (H1N1) at bay, the virus which strike the nation, Scomi communicated to its employees globally on the steps to prevent its spread which was followed by introducing bottles of hand sanitizer in the doorway of each department while the body temperature of all employees were screened daily upon entry each morning. Employees with normal body temperature readings were given green stickers while those showing abnormal temperature were advised immediately to consult a doctor.

THE ENVIRONMENT

Scomi adopts the highest environmental standards in all areas of operations where meeting the most stringent legislative requirements in the world is the standard we strive to achieve.

Scomi includes environmental and ethical considerations in investment decisions where appropriate, together with careful and effi cient use of all materials and energy resources helps minimise waste.

Environmental InitiativesProject “EnviroUs” – launched with the tagline “If There’s No Earth, There’s No Us”, the project focuses on environmentally friendly practices in the areas of the

products produced, processes implemented and through support of the activities carried out. An initiative implemented in 2010, Scomi targets to reduce printing costs by 20% as a measure to encourage our reduce, reuse and recycle efforts.

Energy Effi cient Products: SUTRA or Scomi Urban Transit Rail Application – As part of the Group’s 5 year road map to promote our monorail system, SUTRA, the Group’s focus is to improve the sustainable technology of SUTRA via investing in energy effi cient features that will (i) store and reuse the energy generated from the braking activities of the train, (ii) make our vehicle lighter and (iii) improve the performance and effi ciency of our propulsion and control system.

Protecting the environment - Our drilling waste management products and services provide solutions to eliminate or, at the very least, reduce environmental pollutants arising from oil and gas drilling activities. Enhancements to our drilling waste management product portfolio encompasses not only the treatment, containment and handling of drilling waste but includes safety measures to protect personnel working in these hazardous environments.

Research and development is ongoing to develop water-based drilling fl uid (mud) solutions, which by virtue of producing lesser contaminants will translate into a reduction in the drilling waste management cycle.

Conservation of Shore Environment: In 2009, the Scomi Marine team in Singapore participated in the annual International Coastal Cleanup Singapore (ICCS) which was jointly organised by the National University of Singapore and the Ocean Conservancy Group. The ICCS is an annual environmental project participated


Corporate Social Responsibility

by about 2,000 volunteers from about 40 various organisations and schools. On 12 September 2009, the team from Scomi Marine Singapore did their part by cleaning up Semilang Beach. The data collected during the beach cleanup is used for report features under the Ocean Conservancy’s annual Marine Debris Index – the world’s only country-by-country, state-by-state analysis of trash in oceans and waterways.

More information about this activity can be seen from the ICCS’s wesbite at http://www.fl ickr.com/photos/habitatnews/sets/72157622352161456/.

Conservation of Underwater Environment: In 2009 also, Scomi Marine made a commitment to participate in Project Aquatic World Awareness, Responsibility and Education (“Project AWARE”) by supporting marine conservation activities in Indonesia. Project AWARE Foundation collaborates with Professional Association of Diving Instructors (PADI) to rope in divers and scuba professionals around the globe to combat challenges faced by the underwater environment through education and advocacy.

Under this project, the Scomi Marine team from all locations in Malaysia, Singapore, Jakarta and Kalimantan gathered at the Pulau Seribu National Marine Park, Jakarta, Indonesia to participate in various programmes/activities including beach and underwater cleanup, coral reef monitoring, coral transplant, sea grass and mangrove planting and sea turtle breeding. The data collected from these activities will be channelled to the Ocean Conservancy Group, a non-profi t organisation responsible for the preparation of the International Global Marine Debris Report. These activities are also aimed at educating local communities on underwater protection and Project AWARE’s Dive for Earth Day 2010, to celebrate Earth Day’s 40th anniversary.

Owing to sea conditions, the execution of this project was only carried out in April 2010 and will be reported in our Annual Report 2010.

THE COMMUNITY

In each of Scomi’s operations in over 33 countries, we strive to have a positive impact on the communities and various interest groups we interact with, as well as the general public and investing community. This is executed through community-based activities under the Project Pyramid which was carried out with the theme “Bridging Us” targeted to benefi t the community and environment at large. The Project was carried out from May to September with active participation of 48 Scomi teams from Scomi Group, Scomi Engineering, Scomi Marine and Scomi Oiltools, representing more than 1000 employees in Malaysia from the offi ces in Kuala Lumpur, North KL, Johor, Kemaman, Miri and Labuan and another 23 Scomi teams representing 500 employees in Australia, India, Indonesia, Pakistan, Singapore and Thailand. The Project is also an informal network place to share ideas, gain new skills while fostering a family culture amongst our employees.

In Malaysia, Project Pyramid teams were given RM3,000 each and advised to choose a benefi ciary to start with. In order to execute their initiatives, most teams raised funds by organising jumble sales and sell items such as movie tickets, breakfast coupons and mangrove tree seedling coupons to name a few. Similarly to the concept in Malaysia, each team at the global locations, were endowed with USD1,000 to start off with their projects.

Philanthropy and VolunteerismSet to reach out further to Scomi’s other global locations in the Middle East, Americas and Europe in 2010, Project Pyramid is designed to foster our CSR culture by engendering employee volunteerism by their direct and active participation in activities which benefi t the community and/or the environment.

2009 also saw a busy calendar for Yayasan Scomi, a foundation which focuses on giving aid on children’s education and welfare continues its effort in various parts of Malaysia.


STATEMENT ON CORPORATE GOVERNANCE

The Board remains committed in its responsibility towards governing, guiding and monitoring the direction of the Company within the objective of enhancing long term sustainable value creation aligned to shareholders’ interests, while taking into account the interests of other stakeholders. Towards this end, the Board is fully committed in ensuring that the highest standards of corporate governance are practiced by Scomi Group Bhd (“the Company”) and its group of companies (“the Group”) as a fundamental part of discharging its responsibilities. Hence, the Board continues to implement the principles set out in Part 1 of the Malaysian Code on Corporate Governance (“the Code”), and to a large extent the best practices in corporate governance set out in Part 2 of the Code.

This statement sets out the extent of how the Group has applied and complied with the principles and best practices of the Code for the fi nancial year ended 31 December 2009 in accordance with Paragraph 15.25 of the Main Market Listing Requirement of Bursa Malaysia Securities Berhad.

THE BOARD OF DIRECTORS

The BoardThe Group is led and controlled by an effective Board whereby collective decision and/or close monitoring are conducted on issues relating to strategy, performance, risk management, succession planning, investor relations and the systems of internal control including, standards of conduct and fi nancial matters.

The Board consists of the Chairman and eight (8) Directors. Two thirds of the composition of the Board comprises independent directors and all, save for the Group Chief Executive Director, are non-executive directors. The composition of the Board refl ects a diversity of backgrounds, skills and experiences in the areas of business, economics, fi nance, legal, general management and strategy that contributes effectively in leading and directing the Group. Given the calibre of its members and the objectivity and independent judgment brought by the independent directors, the Board is of the opinion that its current composition and size contribute to an effective Board.

The Board meets a minimum of six (6) times a year, with special meetings convened as and when necessary. The Board is responsible in setting the corporate goals of the Group and in mapping medium and long term strategic plans, which are reviewed on an 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 role of the Chairman of the Board (“the Chairman”) and the Group Chief Executive Offi cer (“GCEO”) are separated with each having a clear scope of duties and responsibilities. The Chairman is responsible for ensuring the Board’s effectiveness, whilst the GCEO under the direction of the Executive Committee 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 Nomination and Remuneration Committee.

In view of the composition of the Board of Directors, particularly the clear and strong independent element and the separation of the roles of the Chairman, who is an Independent Non-Executive Director, and the GCEO, the Board does not consider it necessary to nominate a Senior Independent Non-Executive Director to whom concerns may be conveyed.

A brief description of the background of each Director is presented within the Profi le of Directors section as set out on pages 9 to 13 of this Annual Report.

Board CommitteesThe Board has established and delegated specifi c responsibilities to four (4) Committees of the Board, which operate within clearly defi ned written Terms of Reference. The Board Committees deliberate the issues on a broad and in-depth basis before putting up any recommendation to the Board for approval.

The Board Committees are:• the Executive Committee;• the Audit and Risk Management Committee;• the Nomination and Remuneration Committee; and• the Options Committee.


Statement on Corporate Governance

With the exception of the Executive Committee and Options Committee, 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.

Composition of the Board and its committees are as follows:

Board of Directors

Audit and Risk Management

Committee

Nomination and Remuneration

CommitteeOptions

Committee

Executive Committee(formed on

6 April 2009)

Chairman/Independent Non-Executive Director

Tan Sri Asmat bin Kamaludin C – C – –

Independent Non-Executive Directors

Tan Sri Nik Mohamed bin Nik Yaacob * M M – – C

Datuk Hamzah bin Bakar # M M M C -

Datuk Haron bin Siraj # M M – M -

Dato’ Mohammed Azlan bin Hashim * M C – – M

Mr Sreesanthan a/l Eliathamby M C – – –

Non-Independent Non-Executive Directors

Dato’ Mohamed Azman bin Yahya M – M – –

Mr Foong Choong Hong M M – – –

GCEO/Non-Independent Executive Director

Encik Shah Hakim @ Shahzanim bin Zain M – – M M

Notes:C – Chairman M – Member* Resigned from the Audit and Risk Management Committee on 12 May 2009.# Appointed to the Audit and Risk Management Committee on 12 May 2009.


BOARD MEETINGS & SUPPLY OF INFORMATION

During the fi nancial year ended 31 December 2009, seven (7) Board Meetings were held (one of which was a Special Meeting of the Board). The attendance record of the Directors at the Board meetings and the Board Committees meetings are as follows:

Board of Directors

Audit and Risk Management

Committee

Nomination and Remuneration

CommitteeOptions

Committee

Executive Committee(formed on

6 April 2009)

Chairman/Independent Non-Executive Directors

Tan Sri Asmat bin Kamaludin 7/7 – 2/2 – –

Independent Non-Executive Directors

Tan Sri Nik Mohamed bin Nik Yaacob * 6/7 2/2 – – 8/9

Datuk Hamzah bin Bakar # 6/7 2/3 2/2 1/1 –

Datuk Haron bin Siraj # 7/7 3/3 – 1/1 –

Dato’ Mohammed Azlan bin Hashim * 7/7 2/2 – – 9/9

Mr Sreesanthan a/l Eliathamby 5/7 4/5 – – –

Non-Independent Non-Executive Directors

Dato’ Mohamed Azman bin Yahya 6/7 – 2/2 – –

Mr Foong Choong Hong 7/7 5/5 – – –

GCEO/Non-Independent Executive Director

Encik Shah Hakim @ Shahzanim bin Zain 7/7 – – 1/1 9/9

Notes:* Resigned from the Audit and Risk Management Committee on 12 May 2009.# Appointed to the Audit and Risk Management Committee on 12 May 2009.



The Board are supplied with quality and timely information, which allows them to discharge their responsibilities effectively and effi ciently. The meeting agenda together with a set of comprehensive Board Papers for each agenda item are delivered to each Director in advance, to enable the Board to review the matters to be deliberated at each meeting.

Where required, the Board and its Committees are provided with independent professional advice, the cost of which is borne by the Company. In addition, the Directors have full access to the advice and services of the two (2) company secretaries appointed by the Board.

EXECUTIVE COMMITTEE

The objectives of the Executive Committee (“the EXCO”) are to undertake and carry out the duties, functions, obligations and responsibilities of the GCEO, including all authorities delegated to the GCEO pursuant to the Delegated Authority Limits of the Group, including specifi cally to:

• implement the strategies and policies of the Group;

• devise and ensure the achievement of the strategic intent for the Group and direct and monitor performance processes within the Group;

• evaluate and recommend to the Board any potential strategies and policies which are not within the authority delegated to the EXCO; and

• make decisions, or to establish the basis on which all decisions are taken, other than those matters specifi cally reserved for the Board or other Board Committees.

The EXCO comprises of two (2) Independent Non-Executive Directors and the GCEO/Non-Independent Executive Director. The EXCO meets at least once every month.

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

• to discuss and agree on following matters from the Group’s perspective:- overall policy matters for the Group;- Group coordination between operations and support

services;- fi nancial performance;- strategic direction;- corporate human resource initiatives;- market strategy & intelligence and investor relations;- marketing & branding; and- internal compliance (e.g. Internal Audit and Risk

Management Framework).

• prioritising the allocation of capital, technical and human resources of the Group and the Company;

• establishing best management practices and functional standards for the Group and the Company;

• to monitor the execution of the Company’s strategic plans and operations of all business units of the Company and safeguard the interests of the Company and to further the strategy, business objectives and targets established by the Board;

• to recommend to the Board improvement/changes to the scope of the authority delegated to the operational management and the corporate management;

• to ensure the maintenance and regular review of the organization’s policy and procedure manual;

• to review, on a regular basis but no less that annually, its own performance, constitution and Terms of Reference to ensure it is operating at maximum effectiveness and where necessary, updating these Terms of Reference; and

• to oversee senior management appointments and the monitoring of senior management performance of the Group and the Company’s affairs, succession planning and continuing Group-wide employees development programme, including training, evaluation procedures, employment conditions and reward and recognition practices.



APPOINTMENTS TO THE BOARD

The Nomination and Remuneration Committee (“the NRC”), which comprises three (3) Non-Executive Directors, a majority of whom are Independent, 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, and thereupon make the appropriate recommendations to the Board for approval.

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.

The salient Terms of Reference of the NRC include:• To:

- recommend to the Board potential candidates for directorships to be fi lled 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 fi ll 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 fi nancial performance which may include fi nancial indicators such as turnover, profi tability, 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, fi xed quantum or merit increment);

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

- directorship fee (fi xed and/or supplementary);

- long term incentive scheme including Employees’ Share Option Scheme (“ESOS”) with conditional terms for exercising options;


- fringe benefi ts in kind which include among others club membership, company car, medical and insurance benefi ts, 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 recognised.

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

Re-election of DirectorsIn accordance with the Company’s Articles of Association and Paragraph 7.26(2) of the Main Market Listing Requirement of Bursa Malaysia Securities Berhad, at least one third 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, Dato’ Mohamed Azman bin Yahya, Mr Foong Choong Hong and Encik Shah Hakim @ Shahzanim bin Zain retired from the Board and were re-elected at the 7th AGM held on 15 June 2009.

Directors’ Continuing EducationAll members of the Board have attended the Mandatory Accreditation Programme as required under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.


During the fi nancial year ended 31 December 2009, all members of the Board attended various training programmes, conferences, seminars and courses organized by the Group, the relevant regulatory authorities and professional bodies on areas relevant to the Group’s business, Directors’ roles, responsibilities, effectiveness and/or corporate governance issues. Conferences, seminars and training programmes attended by Directors in 2009 are as follows:

Industry Update, Finance, Business Management & Economics

• 14th Asia Oil & Gas Conference 2009 “Collective Approach in the New Paradigm”• 22nd Annual AVCJ Private Equity and Venture Forum 2009• 5th World Islamic Economic Forum• Africa-Americas-Arab-Asia Business Summit 2009: Dubai• APEC SME Technology Entrepreneur Seminar• Asian Capital Markets – Navigating Challenging Times• Asia-Pacifi c Out-Sourcing Summit• Creating the Market Driven Organization• FIDE Module 1, 2 and 3• FRS 139 Financial Instruments: Recognition & Management• Global Financial Crisis and Impact on Regional Economics, with reference to Malaysia• India Economic Summit• In-house Directors’ Training – “Recent Trends in the Oil and Gas Industry”• In-house Directors’ Training – “Urban Transportation Industry update”• Invest Malaysia 2009• Investment Opportunities in Sabah• Making Better deals• Malaysia’s response to the Global Economic Crisis: What’s being done right

and what’s wrong• Seminar on Asset Protection in Corporate Insolvencies• The Global Economic Crisis: Just how bad will it get and what will provide the growth

to end it• Wealth Destruction and Rehabilitation – Helping Malaysia Retirement Clients Thrive• World Capital Markets Symposium on the Global Financial Crisis: The Way Ahead

Corporate Governance • Company Secretaries’ role toward Governance• Corporate Governance Guide – Towards Boardroom Excellence• Effective Board Governance Frameworks• Forum by Public Listed Companies: Corporate Governance Best Practices• Governance and Sustainability Reporting• Governance in Action in Today’s World• Internal Auditing: Assurance and Value Creation• Raising the Bar for Corporate Directors toward Global Competitiveness• SC-Bursa Lecture Series – “Corporate Governance: Lessons from Hong Kong”• Strengthening the Financial Reporting Chain in Enhancing Corporate Governance



DIRECTORS’ REMUNERATION

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 benefi ts, taking into consideration market rates and practices. Additionally, he is entitled to share options under the Company’s ESOS, which are exercisable until 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 are also entitled to options under the Company’s ESOS as have been approved by the shareholders of the Company.

All Directors who served for the current fi nancial year are to be paid an annual Directors’ fee upon shareholders’ approval at the forthcoming AGM. The aggregate remuneration paid to the Directors of the Group who served during the fi nancial year, and the bands, are as follows:


Executive Director

(RM’000)

Non-Executive Directors(RM’000)

Total(RM’000)

Salaries and bonuses 810 – 810

Defi ned contribution plan 142 – 142

Fees – 645 645

Allowances – 183 183

Estimated value of benefi t-in-kind 192 – 192

Total 1,144 828 1,972

The aggregate remuneration above is broadly categorized into the following bands:

Executive Director

Non-Executive Directors Total

RM50,000 to RM100,000 – 5 5

RM100,001 to RM150,000 – 2 2

RM150,001 to RM200,000 – 1 1

Up to RM1,200,000 1 – 1


AUDIT AND RISK MANAGEMENT COMMITTEE

The primary objective of the Audit and Risk Management Committee (“the ARMC”) is to assist the Board of Directors to review the adequacy and integrity of the Group’s fi nancial 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, a majority of whom are Independent. The ARMC meets as and when required, and at least four (4) times during the fi nancial year.

The ARMC Report, enumerating its membership, Terms of Reference and activities during the fi nancial year ended 31 December 2009 is set out on pages 47 to 50 of this Annual Report.

OPTIONS COMMITTEE

The Options Committee of the Board is entrusted with the responsibility of overseeing the administration of the Company’s ESOS in accordance with the ESOS By-Laws (“By-Laws”). The Options Committee 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 fi nancial year.

The salient Terms of Reference of the Options Committee 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 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 subject to 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 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 all relevant authorities and the Company’s shareholders at a general meeting.

ACCOUNTABILITY AND AUDIT

Accountability to ShareholdersThe Board is responsible for ensuring that high quality and relevant information are made available to shareholders in a timely manner to keep them abreast of all material business matters affecting the Group. Announcements, annual reports, quarterly fi nancial results and other relevant information are accessible via the Group’s website at www.scomigroup.com.my. Any persons wishing to receive email alerts or make any request for documents are able to do so via email to [email protected].

Towards ensuring the effective dissemination of information, the Group maintains a Shareholders’ Communication and Investor Relations Policy. The Policy outlines how the Group identifi es 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.

In addition, the Company maintains a website at www.scomigroup.com.my where all announcements made to Bursa Malaysia are published shortly after the same is released on Bursa Malaysia’s website. Also listed on the company’s website is the name of the person designated by the Company to receive queries from the public together with his email address and contact details.



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

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

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

The Statement of Directors’ Responsibility in respect of the preparation of the annual audited fi nancial statements for the fi nancial year under review is set out on page 53 of this Annual Report.

Internal ControlThe Board fi rmly believes in maintaining a sound system of internal control with a view to safeguard shareholders’ investment and the assets of the Group. The expanding size and geographical spread of the Group involve 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 system of internal control, the Board recognise that the system of internal control can provide only reasonable, but not absolute, assurance against the occurrence of any material misstatement and loss.

The ARMC meets on a regular basis to ensure that there is clear accountability for managing signifi cant identifi ed risks and that identifi ed risks are satisfactorily addressed on an ongoing basis. In addition, the adequacy and effectiveness of the internal control system is also periodically reviewed by the ARMC.

The Statement on Internal Control is set out on pages 44 to 46 of this Annual Report.

Relationship with AuditorsThe Board, through the ARMC maintains appropriate, formal and transparent relationship with the Group’s internal and external auditors. The ARMC meets the external auditors without the presence of Executive Directors or the Management, whenever necessary, at least twice a year. Meetings with the external auditors are held to further discuss the Group’s audit plans, audit fi ndings, fi nancial statements, as well as to seek their professional advice on other related matters.

The roles of the ARMC in relation to both the internal and external auditors are described in the ARMC Report as set out on pages 47 to 50 of this Annual Report.



STATEMENT ON INTERNAL CONTROL

INTRODUCTION

The duty of the Board of Directors, amongst others, is to maintain a sound system of internal control to safeguard shareholders’ investment and the assets of the Company and its group of companies. In compliance with Paragraph 15.26(b) of the Main Market Listing Requirements and Practice Note 9 issued by Bursa Malaysia Securities Berhad (“Bursa Malaysia”), the Board of Directors (“the Board”) on the Company is pleased to set out below the Group’s Statement on Internal Control for the fi nancial year 2009. This statement covers all of the Group’s operations, save for Scomi Marine Bhd, an associated company listed on Bursa Malaysia.

Board Responsibility The Board is fully committed to ensure the existence of an effective system of internal control and risk management 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, rather than eliminate, the risks identifi ed to acceptable levels. Therefore, the systems implemented can provide only reasonable, but not absolute, assurance against the occurrence of any material misstatement and loss.

Whilst the Board has overall responsibility for the Group’s system of internal controls, it has delegated the implementation of these internal control systems to the Management who regularly report on risks identifi ed and action steps taken to mitigate and/or minimize the risks. These internal control systems are subject to the Board’s regular review with a view towards appraising the effectiveness of these systems within the Group in accordance with the “Statement on Internal Control: Guideline for Directors of Public Listed Companies” issued by the Taskforce on Internal Control.

INTERNAL CONTROL FRAMEWORK

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

Clear and Structured Organisational Reporting LinesThe Group has a well defi ned organisation structure that is aligned to business requirements and also to ensure check and balances through the segregation of duties. Clear reporting lines and authority limits govern the approval process, driven by Delegated Authority Limits set by the Board. 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. These key performance indicators, based on the Strategy Map developed in 2008, are monitored as part of the staff performance appraisal conducted semi-annually.

At the Board level, all strategic, business and investment plans are approved and monitored by the Board. The Board is supported by four (4) Board committees that provide focus and counsel in the areas of:

1. Directing and monitoring of the implementation of the strategies and policies and performance achievement of the Group;

2. Audit and Risk Management;

3. Employees’ Share Option Scheme; and

4. Nomination and Remuneration of Directors.

Further details on the Board Committees are contained in the Statement on Corporate Governance on pages 34 to 43 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 Board’s attention and deliberation at the Board meetings.


Statement on Internal Control

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

Strategic Business PlanThe Group has a rolling 3-Year Business Strategic Plan (“the Plan”) that maps out the strategic objectives and business direction of the Group. This Plan is prepared on an annual basis as part of the annual budget which is deliberated and approved by the Board.

The Group Finance and Investment & Performance departments are tasked to consolidate key performance data and consistently monitor the performance of key projects undertaken by the Group. The ongoing fi nancial performance of the Group and its business divisions are reviewed on a monthly basis against their budget during the Board Executive Committee meetings, where further explanations and clarifi cations are noted for signifi cant variances reported. The performance review results are also further escalated to the Audit and Risk Management Committee (“ARMC”) and the Board on a quarterly basis.

Delegated Authority Limits (“DAL”)The Board’s approving authority is delegated to the Management through a clearly and formally defi ned 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 of check and balance are incorporated therein. The DAL is continuously reviewed and updated to ensure relevance to the Group’s operations.

Policies and ProceduresClear, formalized 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 documentation remains current and relevant.

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. In various instances, these documents form an integral part of the Integrated Quality Management Systems (“IQMS”).

During the year under review, the Group has successfully implemented SAP across 24 countries. The implementation of SAP marks a signifi cant 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 effi ciency across the Group.

IQMSThe Group’s ISO 9001:2008 status is maintained via periodic, internal and external quality audits to ensure compliance to the quality management system and is continually improved.

A Quality Management Representative has been appointed to oversee the compliance aspect of the certifi cation and ISO awareness trainings are regularly held.

Risk ManagementRisk Management is practiced within the group on an iterative basis. All new and major investments have to observe a process of approval that includes an evaluation of the associated risks.

The Group’s Enterprise Risk Management (“ERM”) framework implemented within the Group continues to defi ne, highlight, report and manage the key business and operational risks faced by all business divisions of 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”) and reported to the ARMC at quarterly basis.

Further information on the Group’s risk management activities is highlighted in the ARMC Report on pages 47 to 50 of this Annual Report.


Information and CommunicationFlowing from a clear organizational reporting structure, information are communicated and disseminated to key Management within the Group.

The Group also has in place a Whistleblower Framework & Policies, to provide an avenue for employees to raise concerns internally or report any breach or suspected breach of any law or regulation, including the Group’s policies and procedures, to the Disclosure Offi cer in a safe and confi dential manner.

To enhance the competencies of the Group’s talent pool, the Group Learning and Development (GLaD) department runs a series of training and development programmes based on the Learning and Development Framework (OPUS) that defi nes training based on technical and non-technical programmes. This ensures staff are kept up to date with the required competencies to carry out their duties and responsibilities towards achieving the Group’s objectives.

Yearly internal surveys via the Global Employee Engagement Survey (CENSUS) and Inter-department Customer Satisfaction Survey respectively are conducted to gather feedback on effectiveness and effi ciency of the organisation as well as departmental functions for continuous improvement.

Independent Assurance MechanismContinuous and systematic assessments on the adequacy and integrity of the internal control 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 as it is more effective and cost benefi cial to do so. The outsourcing of this function further enhances the professionalism and objectivity exercised by this function over the activities its audits. Internal audit plan that covers internal audit coverage and scope of work is presented for ARMC’s approval annually.

Internal audit reports are presented to the ARMC during its quarterly meeting. Findings together with recommendations are presented to senior and functional line management and regular follow up audits are performed to ensure management action plans are carried out effectively.

In addition to this internal mechanism, the Group also received extensive and detailed reports vide management letters from its External Auditors that primarily focuses on fi nancial controls. The management letters were also presented to the ARMC for deliberations.

REVIEW OF THIS STATEMENT

As required by Paragraph 15.23 of the Main Market Listing Requirements of Bursa Malaysia, the External Auditors have reviewed this Statement on 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 year, it has not identifi ed any circumstances which suggest any fundamental defi ciencies in the system of internal controls in the Group.

Statement on Internal Control


AUDIT AND RISK MANAGEMENT COMMITTEE REPORT

The Board of Directors (“the Board”) of Scomi Group Bhd (“the Company” or “SGB”) and its subsidiaries (“the Group”) is pleased to present the Report of the Audit and Risk Management Committee for the fi nancial year ended 31 December 2009.

TERMS OF REFERENCE OF THE AUDIT AND RISK MANAGEMENT COMMITTEE (“ARMC” OR “THE COMMITTEE”)

ObjectiveTo assist the Board to review the adequacy and integrity of the Group’s fi nancial 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 4 members, all of whom are 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 fi nancially literate with suffi cient fi nancial experience and ability and at least one member of the ARMC must be an Accountant as defi ned 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 industry(ies) 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.

(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 four (4), the vacancy should be fi lled 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.

(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) To 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 fi rm 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 fi nancial statements, focusing particularly on:

• any changes in accounting policies and practices;

• signifi cant 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 fi nal 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 confl ict 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 fi ndings of internal investigations and management’s response;

(l) To consider other topics as defi ned 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 profi le of the Group, describing material risks (both fi nancial and non-fi nancial) 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); particularly that all risks have been considered and are within the Group’s strategic goals and that action plans or strategies to mitigate identifi ed risks are adequate;

Audit and Risk Management Committee Report


• to conduct meetings with the project sponsor(s) and Chief Executive Offi cer (“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 fi nancial

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 fi ve (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 suffi ce.

(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 signifi cant matters and resolutions, at each Board meeting.


MEMBERSHIP AND MEETINGS

The members of the ARMC during the period under review comprised the following Board Members:

Name ARMC DesignationAttendance

(Attended/Held)

Dato’ Mohammed Azlan bin Hashim(resigned on 12 May 2009)

Chairman Independent Non-Executive Director 2/2

Tan Sri Nik Mohamed bin Nik Yaacob(resigned on 12 May 2009)

Member Independent Non-Executive Director 2/2

Sreesanthan a/l Eliathamby(appointed as the Chairman of ARMC on 12 May 2009)

Chairman Independent Non-Executive Director 4/5

Foong Choong Hong Member Non-Independent Non-Executive Director 5/5

Datuk Hamzah bin Bakar(appointed on 12 May 2009)


Datuk Haron bin Siraj(appointed on 12 May 2009)


During the fi nancial year under review, fi ve (5) meetings were held on 26 February 2009, 23 April 2009, 14 May 2009, 13 August 2009 and 5 November 2009.


SUMMARY OF ACTIVITIES FOR THE YEAR

In accordance with the approved Terms of Reference of the ARMC, the ARMC carried out the following activities in the fi nancial year ended 31 December 2009:

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

2. reviewed and discussed with the external auditor the nature and scope of their audit;

3. reviewed the quarterly and annual fi nancial reports of the Group and the Company prior to submission to the Board for consideration and approval;

4. reviewed the fi nancial performance of contributing subsidiaries and associated companies;

5. reviewed the external auditor’s management letter and management’s response;

6. considered the major fi ndings by the external auditors and management’s responses thereto;

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

8. 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;

9. reviewed the internal audit reports, both planned and ad-hoc or investigative audits, which incorporated audit fi ndings, recommendations and management responses for the Group and the Company by the external service provider for internal audit services;

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

11. reviewed and recommended to the Board the re-appointment of the external service provider for internal audit services and the audit fee;

12. reviewed and verifi ed the related party transactions and provide recommendations on the same to the Board;

13. reviewed and verifi ed that the allocation of options pursuant to the Company’s Employees’ Share Option Scheme (“ESOS”) is in compliance with the criteria for allocation of options as disclosed to employees of the Company for the fi nancial year;

14. reviewed the Group’s systems and practices for the identifi cation and management of risks;


15. reviewed the Group and each business divisions’ risk profi les and actions plan taken by the Management to control and mitigate the risks; and

16. reviewed and evaluated risk considerations in relation to major business investment proposals and adequacy of action plans to mitigate risks identifi ed.

INTERNAL AUDIT FUNCTION

The internal audit function of the Group is outsourced to an external service provider of internal audit services, which is independent from the management and operations (“the Internal Auditors”). Through the internal audit function the Company undertakes regular and systematic reviews of the system of internal control so as to provide reasonable assurance that such system continues to operate satisfactorily and effectively in the Group.

During the fi nancial year under review, the Internal Auditors carried out the following activities:

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, fi nancial and other controls and promoting effective controls in the Group and the Company at reasonable cost;

3. carried out investigations and special reviews 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, verifi cation 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. identifi ed 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 fi nancial year 2009 were conducted by the Internal Auditors. The total costs incurred by the Group for the internal audit function in 2009 amounted to RM637,400.


ADDITIONAL INFORMATION

1) MATERIAL CONTRACTS INVOLVING DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS

Other than contracts entered into and disclosed as Related Party Transactions in Note 38 to the Financial Statements, there are no other material contracts involving Directors’ and Major Shareholders’ Interests, either still subsisting at the end of the fi nancial year or, if not then subsisting, entered into since the end of the previous fi nancial year.

2) RECURRENT RELATED PARTY TRANSACTION (“RRPT”)

The Company had obtained from its shareholders the mandate for the following RRPT at the 7th Annual General Meeting held on 15 June 2009 and the actual value transacted for the period from 15 June 2009 to 30 April 2010 is as follow:

Transacting Parties

Nature of Transactions

Value of the Mandate Granted

(RM)

Actual Value Transacted

(RM)Our Group Related Parties

Scomi Group Bhd Scomi Marine Bhd Service Level Agreement between Scomi Group Bhd and Scomi Marine Bhd whereby Scomi Group Bhd provide administrative services to Scomi Marine Bhd

247,322.00 210,000

Scomi Oilserve Sdn Bhd* Gemini Sprint Sdn Bhd, a 51% owned subsidiary of Scomi Marine Bhd

Chartering of marine vessels by Gemini Sprint Sdn Bhd to Scomi Oilserve Sdn Bhd

10,000,000.00 2,240,400#

Notes:

* Scomi Oilserve Sdn Bhd has been disposed to TL Geotechnic Sdn Bhd on 24 August 2009.

# Actual value transacted from 15 June 2009 to 24 August 2009.

3) NON-AUDIT FEES

Non-Audit fees incurred during the fi nancial year under review ended 31 December 2009 amounted to RM199,000 and is disclosed in Note 5 to the fi nancial statements.

4) OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES

The status on Options, Warrants and Convertible Securities issued during the fi nancial year are:

i. 61,773,174 ordinary shares of RM0.10 each through the conversion of 247,092,700 Irredeemable Convertible Secured Loan Stocks (“ICSLS”) of RM0.10 each on the basis of RM0.40 per ordinary share

ii. 3,188,600 ordinary shares of RM0.10 each pursuant to the exercise of the Employees’ Share Options Scheme (“ESOS”) at exercise price of RM0.17 per share


5) SHARE BUY-BACKS

The following are the Share Buy-back transactions during the year under review ended 31 December 2009. The purchase price of shares is the average price for all shares purchased in the month and the total purchase price includes incidental costs. All shares have been maintained as treasury shares and there has been no resale of the Company’s treasury share nor have there been any shares cancelled during the year under review.

No of Shares Bought Back

Lowest Price (RM)

Highest Price (RM)

Average Purchase Price of Shares

(RM)

Total Purchase Price

(RM)

Balance as at 1 Jan 2009 14,426,200 – – – 18,695,034.75

May 2009 1,000 0.670 0.670 0.711 711.21

Balance as at 31 Dec 2009 14,427,200 – – – 18,695,745.96

6) STATUS OF UTILISATION OF RIGHTS ISSUES

On 13 August 2009, CIMB Investment Bank Berhad, on behalf of the Company announced a proposed renounceable rights issue of up to RM165,669,555 nominal value of three (3) years 4% Irredeemable Convertible Secured Loan Stock (“ICSLS”) at 100% of its nominal value. The proposed rights issue was completed on 16 December 2009, following the admission of the RM151,579,679.00 nominal value of ICSLS, the utilisation of which is set out below.

RM’000

Proceeds 151,580.00

Working Capital & Capex for Group (46,945.00)

Expenses related to ICSLS (4,603.00)

Balance a at 31 December 2009 100,032.00

Additional Information


STATEMENT OF DIRECTORS’ RESPONSIBILITY

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

The Directors are responsible to ensure that the fi nancial statements give a true and fair view of the state of affairs of the Group and the Company at the end of the fi nancial year and of the results and cash fl ows of the Group and the Company for the fi nancial year.

In preparing the fi nancial statements, the Directors have:

• adopted appropriate accounting policies and applied them consistently;

• made judgments and estimates that are reasonable and prudent; and

• prepared the fi nancial statements on a going concern basis.

The Directors are responsible to ensure that the Group and the Company keep accounting records which disclose with reasonable accuracy the fi nancial position of the Group and the Company which enable them to ensure that the fi nancial statements comply with the Act.

The Directors are 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 fi nancial statements of the Company and the Group for the fi nancial year ended 31 December 2009 are set out on pages 56 to 159 of this annual report.


focus


Directors’ Report 56 Income Statements 63 Balance Sheets 64

Consolidated Statement of Changes in Equity 66 Company Statement of Changes in Equity 68

Cash Flow Statements 69 Notes to the Financial Statements 72 Statement by Directors 157

Statutory Declaration 157 Independent Auditors’ Report 158

FINANCIAL STATEMENTS


The Directors are pleased to submit their report with the audited fi nancial statements of the Group and Company for the fi nancial year ended 31 December 2009.

PRINCIPAL ACTIVITIESThe principal activities of the Company are investment holding and the provision of management services.

The principal activities of the Group consist of the provision of integrated drilling fl uids, drilling waste management solutions, distribution of oilfi eld products and services; machine shop services, design and manufacture of monorail, special purpose vehicles, urban transportation solutions and rail solutions; provision of marine vessel transportation service; industrial and production chemicals and gas business.

There were no signifi cant changes in the nature of these activities during the fi nancial year.

FINANCIAL RESULTS Group Company RM’000 RM’000

Profi t/(loss) for the fi nancial year 25,965 (8,950)

Attributable to:

Equity holders of the Company 9,875 (8,950)Minority interest 16,090 –

DIVIDENDSThe dividends on ordinary shares paid or declared by the Company since the end of the Company’s previous fi nancial year were as follows: RM’000

In respect of the fi nancial year ended 31 December 2008, fi nal single-tier tax exempt dividend of 5%, paid on 11 September 2009 5,051

The Directors do not recommend any dividend for the fi nancial year ended 31 December 2009.

RESERVES AND PROVISIONSMaterial transfers to or from reserves or provisions during the fi nancial year are as disclosed in the fi nancial statements.

DIRECTORS’ REPORT


ISSUE OF SHARESDuring the fi nancial year, 64,961,774 new ordinary shares of RM0.10 each were issued by the Company by way of:

(a) Issuance of 61,773,174 new ordinary shares of RM0.10 each pursuant to the conversion of Irredeemable Convertible Secured Loan Stocks (“ICSLS”); and

(b) Issuance of 3,188,600 new ordinary shares of RM0.10 each pursuant to the exercise of the Employees’ Share Options Scheme (“ESOS”) at an option price of RM0.17 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 32(a) to the fi nancial statements.

TREASURY SHARESDuring the fi nancial year, the Company purchased 1,000 of its issued share capital from the open market on Bursa Malaysia for RM711. The average price paid for the shares purchased was approximately RM0.71 per share.

Details of the Treasury shares are set out in Note 32(b) to the fi nancial statements.

EMPLOYEES’ SHARE OPTION SCHEMEThe Company implemented an Employees’ Share Option Scheme (“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.

Details of the ESOS are set out in Note 32(c) to the fi nancial statements.

The employee who has been granted ESOS during the fi nancial year is as follows:

ExerciseName Designation Granted price ‘000 RM/share

Stephen Frederick Bracker President of Oilfi eld Services Division 4,000 0.50

SIGNIFICANT EVENTS DURING THE FINANCIAL YEARSignifi cant events during the fi nancial year are disclosed in Note 41 to the fi nancial statements.

SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATESignifi cant events subsequent to the balance sheet date are disclosed in Note 42 to the fi nancial statements.

Directors’ Report


DIRECTORSThe Directors who have held offi ce during the period since the date of the last report are as follows:

Tan Sri Asmat bin KamaludinTan Sri Nik Mohamed bin Nik YaacobDatuk Hamzah bin BakarDatuk Haron bin SirajDato’ Mohamed Azman bin YahyaDato’ Mohammed Azlan bin HashimFoong Choong HongSreesanthan a/l EliathambyShah Hakim @ Shahzanim bin Zain

DIRECTORS’ INTERESTS According to the Register of Directors’ Shareholdings, particulars of interests of Directors who held offi ce at the end of the fi nancial year in shares, options over shares, Irredeemable Convertible Secured Loan Stocks and warrants in the Company and its subsidiary were as follows: Number of ordinary shares of RM0.10 each in the Company

At At 1.1.2009 Bought Sold 31.12.2009 ‘000 ‘000 ‘000 ‘000

Direct interest in the Company

* Tan Sri Asmat bin Kamaludin 200 – – 200 Datuk Hamzah bin Bakar 1,200 – – 1,200 Datuk Haron bin Siraj 120 – – 120 Foong Choong Hong 410 – – 410 Shah Hakim @ Shahzanim bin Zain 529 – – 529

Indirect interest in the Company

* Tan Sri Asmat bin Kamaludin 30 35 – 65 + Dato’ Mohamed Azman bin Yahya 10,000 – – 10,000 # Shah Hakim @ Shahzanim bin Zain 345,337 – (67,312) 278,025

Number of ordinary shares of RM1.00 each in a subsidiary

At At 1.1.2009 Bought Sold 31.12.2009 ‘000 ‘000 ‘000 ‘000

Indirect interest in Scomi Engineering Bhd

* Tan Sri Asmat bin Kamaludin 5 – – 5 # Shah Hakim @ Shahzanim bin Zain 192,568 – – 192,568

Directors’ Report


DIRECTORS’ INTERESTS (CONT’D.) Number of options over ordinary shares of RM0.10 each in the Company Exercise At At price 1.1.2009 Granted Exercised 31.12.2009 RM/share ‘000 ‘000 ‘000 ‘000


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


* Tan Sri Asmat bin Kamaludin 0.94 140 – – 140

^ Number of options over ordinary shares of RM1.00 each in a subsidiary Exercise At At price 1.1.2009 Granted Exercised 31.12.2009 RM/share ‘000 ‘000 ‘000 ‘000

Direct interest in Scomi Engineering Bhd

Shah Hakim @ Shahzanim bin Zain 1.00 2,000 – – 2,000

^ 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.

Directors’ Report


DIRECTORS’ INTERESTS (CONT’D.) Irredeemable Convertible Secured Loan Stocks (“ICSLS”) in the Company At At 1.1.2009 Bought Sold 31.12.2009 ‘000 ‘000 ‘000 ‘000


* Tan Sri Asmat bin Kamaludin – 300 – 300 Datuk Hamzah bin Bakar – 1,800 – 1,800


* Tan Sri Asmat bin Kamaludin – 98 – 98 + Dato’ Mohamed Azman bin Yahya – 15,000 – 15,000

Warrants in the Company At At 1.1.2009 Bought Sold 31.12.2009 ‘000 ‘000 ‘000 ‘000

Direct Interest in the Company

* Tan Sri Asmat bin Kamaludin – 40 – 40 Datuk Hamzah bin Bakar – 240 – 240


* Tan Sri Asmat bin Kamaludin – 13 – 13 + Dato’ Mohamed Azman bin Yahya – 2,000 – 2,000

* Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through Tan Sri Asmat bin Kamaludin’s child’s direct shareholding in Scomi Group Bhd and Scomi Engineering Bhd and 150,000 shares, 225,000 ICSLS and 30,000 warrants held through CIMSEC Nominees (Tempatan) Sdn Bhd.

+ Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Dato’ 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 at the end of the fi nancial year.

# 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 Scomi Group Bhd, which in turn is a substantial shareholder of Scomi Engineering Bhd.

By virtue of his interests in the shares and options in the Company as disclosed above, Shah Hakim @ Shahzanim bin Zain is deemed to have an interest in the shares of all its subsidiaries.

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

Directors’ Report


DIRECTORS’ BENEFITSDuring and at the end of the fi nancial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling Directors of the Company to acquire benefi ts 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 a subsidiary, Scomi Engineering Bhd, to eligible employees including certain Directors of the Company pursuant to the Company’s and Scomi Engineering Bhd’s respective Employees’ Share Option Schemes, ICSLS and warrants granted by the Company.

Since the end of the previous fi nancial year, no Director has received or become entitled to receive a benefi t (other than Directors’ remuneration as disclosed in Note 8 to the fi nancial statements) by reason of a contract made by the Company or a related corporation with the Director or with a fi rm of which he is a member, or with a company in which he has a substantial fi nancial interest except as disclosed in Note 38 to the fi nancial statements.

STATUTORY INFORMATION ON THE FINANCIAL STATEMENTSBefore the income statements and balance sheets were made out, the Directors took reasonable steps:

(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfi ed themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and

(b) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and Company had been written down to an amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the fi nancial statements of the Group and Company inadequate to any substantial extent; or

(b) which would render the values attributed to current assets in the fi nancial 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 fi nancial year 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.

At the date of this report, there does not exist:

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

(b) any contingent liability of the Group or Company which has arisen since the end of the fi nancial year.

Directors’ Report


STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONT’D)At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the fi nancial statements which would render any amount stated in the fi nancial statements misleading.

In the opinion of the Directors:

(a) other than as disclosed in Notes 16 and 30, the results of the operations of the Group and Company during the fi nancial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(b) other than as disclosed in Note 42, there has not arisen in the interval between the end of the fi nancial year 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 fi nancial year in which this report is made.

AUDITORSThe auditors, PricewaterhouseCoopers, have expressed their willingness to continue in offi ce.

Signed on behalf of the Board of Directors in accordance with their resolution dated 30 April 2010.

TAN SRI ASMAT BIN KAMALUDIN SHAH HAKIM @ SHAHZANIM BIN ZAINChairman Chief Executive Offi cer

Directors’ Report


Group Company

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Revenue 4 1,971,455 2,106,140 15,296 29,110Cost of sales (1,481,724) (1,562,940) – –Gross profi t 489,731 543,200 15,296 29,110Other operating income 878 88,057 7,217 67,195Administrative expenses (225,191) (270,938) (16,248) (27,365)Selling and distribution expenses (126,574) (130,818) – –Other operating expenses (5,423) (42,160) – (4,435)Finance costs 6 (76,404) (75,168) (15,467) (15,153)Share of results of an associate (9,898) 28,040 – –Share of results of jointly controlled entities 3,596 – – –Profi t/(loss) before taxation 5 50,715 140,213 (9,202) 49,352Taxation (expense)/credit 7 (24,750) (3,928) 252 (149)Profi t/(loss) for the fi nancial year 25,965 136,285 (8,950) 49,203

Attributable to:

Equity holders of the Company 9,875 116,553 (8,950) 49,203Minority interest 16,090 19,732 – –Profi t/(loss) for the fi nancial year 25,965 136,285 (8,950) 49,203

Group Note 2009 2008 Sen Sen

Earnings per share attributable to equity holders of the Company: 9

– basic 0.96 11.58

– diluted 0.94 11.47

The notes set out on pages 72 to 156 form an integral part of, and should be read in conjunction with, these fi nancial statements.

INCOME STATEMENTSfor the financial year ended 31 December 2009


Group Company

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

NON-CURRENT ASSETS

Property, plant and equipment 11 577,425 632,875 2,252 3,260Intangible assets 12 560,112 549,191 – –Investment property 13 1,361 1,502 – –Prepaid land lease payments 14 7,969 9,574 – –Investments in subsidiaries 15 – – 580,551 581,697Investments in an associate 16 379,118 394,999 360,124 360,124Investments in jointly controlled entities 17 5,422 19 – –Amount due from a subsidiary 18 – – 10,571 10,098Other investments 19 1,112 1,112 – –Deferred tax assets 36 78,033 65,570 3,613 –Derivative fi nancial assets 20 6,835 – – – 1,617,387 1,654,842 957,111 955,179

CURRENT ASSETS

Inventories 21 298,529 334,994 – –Receivables, deposits and prepayments 22 829,131 820,755 101,699 73,769Tax recoverable 33,290 12,164 162 162Short term investment 23 – 1,500 – –Derivative fi nancial assets 20 1,577 – – –Short term deposits, cash and bank balances 24 313,123 119,687 110,700 12,509 1,475,650 1,289,100 212,561 86,440

LESS: CURRENT LIABILITIES

Payables 26 504,083 535,360 47,300 61,246Borrowings 27 488,548 287,455 50,146 190Provision for redundancy 28 625 3,825 – –Current tax liabilities 35,485 34,390 – –Deferred government grant 29 431 431 – –Irredeemable convertible secured loan stocks (“ICSLS”) 30 5,254 – 5,254 – 1,034,426 861,461 102,700 61,436

NET CURRENT ASSETS 441,224 427,639 109,861 25,004 2,058,611 2,082,481 1,066,972 980,183

BALANCE SHEETSas at 31 December 2009


Group Company

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Share capital 32(a) 108,680 102,184 108,680 102,184Share premium 33 256,641 243,820 256,641 243,820Treasury shares 32(b) (18,696) (18,695) (18,696) (18,695)Other reserves 34 53,004 (69,184) 136,983 15,154Retained earnings 664,994 660,095 329,185 343,186Equity and reserves attributable to the Company’s equity holders 1,064,623 918,220 812,793 685,649Minority interest 172,814 162,442 – –TOTAL EQUITY AND RESERVES 1,237,437 1,080,662 812,793 685,649

NON-CURRENT LIABILITIES

Borrowings 27 797,525 975,508 244,116 294,373Deferred government grant 29 1,439 – – –Derivative fi nancial liabilities 20 3,129 17,447 – –Provision for retirement benefi ts 35 4,182 4,005 – –Deferred tax liabilities 36 4,836 4,859 – 161Irredeemable convertible secured loan stocks (“ICSLS”) 30 10,063 – 10,063 – 821,174 1,001,819 254,179 294,534 2,058,611 2,082,481 1,066,972 980,183


Balance Sheets

as at 31 December 2009


Attributable to equity holders of the Company Share Share Treasury Other Retained Minority TotalGroup Note capital premium shares reserves earnings Total interest equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2009 102,184 243,820 (18,695) (69,184) 660,095 918,220 162,442 1,080,662

Currency translation differences arising during the fi nancial year – subsidiaries – – – (7,648) – (7,648) (3,511) (11,159) – associates – – – (4,693) – (4,693) – (4,693)Share of reserves in subsidiaries and associates – – – (2,650) – (2,650) 3,711 1,061Cash fl ow hedges: – fair value gains – – – 19,853 – 19,853 – 19,853 – transfer to income statement – – – (5,802) – (5,802) – (5,802)Net amounts recognised directly in equity – – – (940) – (940) 200 (740)Profi t for the fi nancial year – – – – 9,875 9,875 16,090 25,965

Total recognised (loss)/ income for the fi nancial year – – – (940) 9,875 8,935 16,290 25,225

Share options:

– proceeds from shares issued 32(a),33 319 223 – – – 542 – 542– value of employee services 34 – – – 2,142 – 2,142 – 2,142– transfer upon exercise 34 – – – (97) – (97) 97 –Issue of ICSLS 34 – – – 138,054 – 138,054 – 138,054Conversion of ICSLS 32(a),33,34 6,177 12,598 – (17,233) – 1,542 – 1,542Purchase of treasury shares 32(b) – – (1) – – (1) – (1)Dilution of interest in subsidiaries due to share options exercised – – – – – – 483 483Other dilution (net) of interest in subsidiaries – – – – – – 2,115 2,115Disposal of subsidiaries 39(d) – – – 262 75 337 (4,261) (3,924)Dividend 10 – – – – (5,051) (5,051) (4,352) (9,403)At 31 December 2009 108,680 256,641 (18,696) 53,004 664,994 1,064,623 172,814 1,237,437

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the financial year ended 31 December 2009


Attributable to equity holders of the Company Share Share Treasury Other Retained Minority TotalGroup Note capital premium shares reserves earnings Total interest equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2008 101,971 242,929 (18,694) (76,354) 552,074 801,926 146,349 948,275

Currency translation differences arising during the fi nancial year – subsidiaries – – – (7,173) – (7,173) (1,738) (8,911) – associates – – – 19,554 – 19,554 – 19,554Share of reserves in subsidiaries and associates – – – 2,256 1,014 3,270 (119) 3,151Cash fl ow hedges:– fair value losses – – – (35,272) – (35,272) – (35,272)– transfer to income statement – – – 24,642 – 24,642 – 24,642Net amounts recognised directly in equity – – – 4,007 1,014 5,021 (1,857) 3,164Profi t for the fi nancial year – – – – 116,553 116,553 19,732 136,285Total recognised income for the fi nancial year – – – 4,007 117,567 121,574 17,875 139,449

Share options:

– proceeds from shares issued 32(a), 33 213 428 – – – 641 – 641– value of employee services 34 – – – 3,870 – 3,870 – 3,870– transfer upon exercise 33, 34 – 463 – (627) – (164) 164 –Purchase of Treasury shares 32(b) – – (1) – – (1) – (1)Dilution of interest in subsidiaries due to share options exercised – – – – – – 724 724Other dilution (net) of interest in subsidiaries 39(b) – – – – – – (191) (191)Disposal of subsidiaries 39(d) – – – (80) (229) (309) 113 (196)Acquisition of subsidiary and accretion of interest – – – – – – 3,139 3,139Dividend 10 – – – – (9,317) (9,317) (5,731) (15,048)At 31 December 2008 102,184 243,820 (18,695) (69,184) 660,095 918,220 162,442 1,080,662


Consolidated Statement of Changes in Equity

for the financial year ended 31 December 2009


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 2009 102,184 243,820 (18,695) 15,154 343,186 685,649Loss for the fi nancial year – – – – (8,950) (8,950)Total recognised income for the fi nancial year – – – – (8,950) (8,950)

Share options:

– proceeds from 32(a), 33 shares issued 319 223 – – – 542– value of employees services 34 – – – 1,008 – 1,008Issue of ICSLS 34 – – – 138,054 – 138,054Conversion of ICSLS 32(a), 33, 34 6,177 12,598 – (17,233) – 1,542Purchase of Treasury shares 32(b) – – (1) – – (1)Dividend 10 – – – – (5,051) (5,051)At 31 December 2009 108,680 256,641 (18,696) 136,983 329,185 812,793

At 1 January 2008 101,971 242,929 (18,694) 12,864 303,300 642,370

Profi t for the fi nancial year – – – – 49,203 49,203Total recognised income for the fi nancial year – – – – 49,203 49,203

Share options:

– proceeds from 32(a), shares issued 33 213 428 – – – 641– value of employees services 34 – – – 2,753 – 2,753– transfer upon exercise 34 – 463 – (463) – –Purchase of Treasury shares 32(b) – – (1) – – (1)Dividend 10 – – – – (9,317) (9,317)At 31 December 2008 102,184 243,820 (18,695) 15,154 343,186 685,649


COMPANY STATEMENT OF CHANGES IN EQUITYfor the financial year ended 31 December 2009


Group Company

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITES

Profi t/(loss) before taxation 50,715 140,213 (9,202) 49,352

Adjustments for:Depreciation– property, plant and equipment 81,724 74,390 1,110 1,254– investment property 142 134 – –Amortisation– intangible assets 188 184 – –– prepaid land lease payment 1,393 1,275 – –Impairment losses of property, plant and equipment – 456 – –Allowance for doubtful debts 8,497 9,353 – –Allowance for obsolete stocks 2,803 9,217 – –Inventories written down 282 5,627 – –Unrealised (gain)/loss on foreign exchange (21,565) 6,556 (833) 4,393Gain on disposal of property, plant and equipment (488) (1,012) – –Impairment losses of quoted investments – 218 – –Property, plant and equipment written off – 9 – 9Intangible assets written off – 284 – –Bad debts (recovered)/written off (574) 73 – –Loss/(gain) on disposal of/dilution of interest in subsidiary companies 41 (2,916) (5,345) –(Write back)/provision for redundancy (116) 3,517 – –Provision for retirement benefi ts 797 591 – –Share of loss/(profi t) in an associate 9,898 (28,040) – –Share of profi t in jointly controlled entities (3,596) – – –Write back of amount owing to a Director of a subsidiary, Scomi Oilfi eld Limited – (57,352) – (57,352)Reversal of provision for divestment cost – (9,323) – (9,323)Share option expense 2,142 3,870 831 1,187Financing costs 76,404 75,168 15,467 15,153Interest income (1,235) (1,752) (897) (462)Dividend income – – (11,976) (20,444)Operating cash fl ows before working capital changes 207,452 230,740 (10,845) (16,233)

CASH FLOW STATEMENTSfor the year ended 31 December 2009


Group Company

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES (CONT’D.)

Changes in working capital:Inventories 33,380 (21,493) – –Receivables (43,458) (91,385) (28,502) (15,004)Payables (1,206) (34,839) (12,066) (7,746)Cash generated from/(used in) operations 196,168 83,023 (51,413) (38,983)Net tax (paid)/refund (43,785) (28,516) 252 4,888Redundancy paid (2,982) (1,954) – –Retirement benefi ts paid – (321) – –Net cash generated from/(used in) operating activities 149,401 52,232 (51,161) (34,095)

CASH FLOWS FROM INVESTING ACTIVITIES

Additional investment in subsidiaries 39(a), (b) (382) (68) – (200)Net cash (outfl ow)/infl ow from disposal/dilution 39(d), (e) of interest in subsidiaries (720) 3,547 8,168 47Purchase of property, plant and equipment (49,981) (200,528) (102) (1,801)Proceeds from disposal of property, plant and equipment 10,362 8,691 – –Proceeds from sale/(purchase of) of short term investments 1,500 (800) – – Additions to other intangible assets (26,275) (42,054) – –Repayment of other payables (2,601) (3,943) (2,601) –Dividend received 2,348 3,913 16,359 15,912Interest received 1,235 1,752 202 462Prepayment of land lease – (3,006) – –

Net cash (used in)/generated from investing activities (64,514) (232,496) 22,026 14,420

Cash Flow Statements



Group Company

Note 2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM FINANCING ACTIVITIESTreasury shares (1) (1) (1) (1)Issue of share capital arising from the exercise of ESOS 542 641 542 641Subsidiary’s issuance of share capital from the exercise of ESOS 483 724 – –Proceeds from issuance of ICSLS 151,580 – 151,580 –Proceeds from bank borrowings 1,802 197,053 – 41,670Repayment of bank borrowings (10,930) (15,532) (221) (4,140)Interest paid on borrowings (56,673) (51,209) (19,523) (15,153)Dividends paid (5,051) (9,317) (5,051) (9,317)(Increase)/decrease in short-term deposits pledged as security (27,864) 8,353 (3,790) (856)Dividend paid to minority shareholders of subsidiaries (4,352) (5,731) – –

Net cash generated from fi nancing activities 49,536 124,981 123,536 12,844NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 134,423 (55,283) 94,401 (6,831)

CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 23,387 74,686 6,196 13,027

CURRENCY TRANSLATION DIFFERENCES (689) 3,984 – –CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 157,121 23,387 100,597 6,196CASH AND CASH EQUIVALENTS COMPRISE:

Short term deposits with licensed banks 24 105,728 23,510 45,417 6,617Cash and bank balances 24 207,395 96,177 65,283 5,892Bank overdrafts 27 (104,660) (72,822) – – 208,463 46,865 110,700 12,509Less: Short-term deposits pledged as security 24 (51,342) (23,478) (10,103) (6,313) 157,121 23,387 100,597 6,196



Cash Flow Statements


1. GENERAL INFORMATIONThe principal activities of the Company are investment holding and the provision of management services.

The principal activities of the Group consist of the provision of integrated drilling fl uids, drilling waste management solutions, distribution of oilfi eld products and services; machine shop services, design and manufacture of monorail, special purpose vehicles, urban transportation solutions and rail solutions; provision of marine vessel transportation service; industrial and production chemicals and gas business.

There were no signifi cant changes in the nature of these activities during the fi nancial year.

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 offi ce address of the Company is Suite 5.03, 5th Floor, Wisma Chase Perdana, Off Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur.

The principal place of business of the Company is located at Suite 5.03, 5th Floor, Wisma Chase Perdana, Off Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur.

2. BASIS OF PREPARATIONThe fi nancial statements of the Group and Company have been prepared under the historical cost convention except as disclosed in the summary of signifi cant accounting policies. The fi nancial statements comply with Financial Reporting Standards, the Malaysian Accounting Standards Board (“MASB”) Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965.

The preparation of fi nancial statements in compliance with Financial Reporting Standards requires the Directors to use 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 fi nancial statements and the reported amounts of revenue and expenses during the fi nancial year. It also requires Directors to exercise their judgement in the process of applying the Group’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements are disclosed in Note 44 to the fi nancial statements.

NOTES TO THE FINANCIAL STATEMENTSfor the financial year ended 31 December 2009


2. BASIS OF PREPARATION (CONT’D.)During the fi nancial year, the Directors of the Group adopted the following Financial Reporting Standards (“FRS”) issued by the MASB:

(a) Standards, amendments to published standards and interpretations that are applicable to the Group and are effective

There are no new accounting standards, amendments to published standards and interpretations to existing standards effective for the Group’s fi nancial year ended 31 December 2009 and applicable to the Group.

(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 following standards, amendments to published standards and interpretations from annual period beginning on 1 January 2010:

• FRS 139 Financial Instruments: Recognition and Measurement (effective from 1 January 2010) establishes principles for recognising and measuring fi nancial assets, fi nancial liabilities and some contracts to buy and sell non-fi nancial items. Hedge accounting is permitted under strict circumstances. Amendments to FRS 139 provide further guidance on eligible hedged items. The amendment provides guidance for two situations. On the designation of a one-sided risk in a hedged item, the amendment concludes that a purchased option designated in its entirety as the hedging instrument of a one-sided risk will not be perfectly effective. The designation of infl ation as a hedged risk or portion is not permitted unless in particular situations. The improvement to FRS 139 clarifi es that the scope exemption in FRS 139 only applies to forward contracts but not options for business combinations that are fi rmly committed to being completed within a reasonable timeframe. The Group has applied the transitional provision in the standard which exempt entities from disclosing the possible impact arising from the initial application of the standard on the fi nancial statements of the Group.

• FRS 7 Financial instruments: Disclosures (effective from 1 January 2010) provides information to users of fi nancial statements about an entity’s exposure to risks and how the entity manages those risks. The improvement FRS 7 clarifi es that entities must not present total interest income and expense as a net amount within fi nance costs on the face of the income statement. The Group has applied the transitional provision in the standard which exempt entities from disclosing the possible impact arising from the initial application of the standard on the fi nancial statements of the Group.

• The revised FRS 3 Business Combinations (effective prospectively from 1 July 2010). The revised standard continues to apply the acquisition method to business combinations, with some signifi cant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classifi ed as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

• FRS 8 Operating Segments (effective from 1 July 2009) replaces FRS 1142004 Segment Reporting. The new standard requires a ‘management approach’, under which segment information is reported in a manner that is consistent with the internal reporting provided to the chief operating decision-maker. The improvement to FRS 8 (effective from 1 January 2010) clarifi es that entities that do not provide information about segment assets to the chief operating decision-maker will no longer need to report this information. Prior year comparatives must be restated. These changes are not expected to have a material impact on the fi nancial statements of the Group.

Notes to the Financial Statements



2. BASIS OF PREPARATION (CONT’D.)(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 (Cont’d.)

• The revised FRS 101 Presentation of Financial Statements (effective from 1 January 2010) prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. ‘Non-owner changes in equity’ are to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The Group is currently evaluating the format to adopt. This revised FRS does not have any impact on the fi nancial statements of the Group.

• FRS 123 Borrowing Costs (effective from 1 January 2010) which replaces FRS 1232004, requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs is removed. The improvement to FRS 123 clarifi es that the defi nition of borrowing costs includes interest expense calculated using the effective interest method defi ned in FRS 139. In accordance with the transitional provisions of the standard, the Group will apply the change in accounting policy prospectively for which the commencement date for capitalisation of borrowing cost on qualifying assets is on or after the fi nancial period 1 January 2010.

• The revised FRS 127 Consolidated and Separate Financial Statements (effective prospectively from 1 July 2010) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifi es the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profi t or loss. These changes will be applied prospectively and only affect future acquisition or loss of control of subsidiaries and transactions with non-controlling interests.

• The amendment to FRS 1 First-time Adoption of Financial Reporting Standards and FRS 127 Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective from 1 January 2010) allows fi rst-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate fi nancial statements. The amendment also removes the defi nition of the cost method from FRS 127 and requires investors to present dividends as income in the separate fi nancial statements. These changes will be applied prospectively and will only impact the fi nancial statements of the Company.

• The amendment to FRS 2 Share-Based Payment: Vesting Conditions and Cancellations (effective from 1 January 2010) deals with vesting conditions and cancellations. It clarifi es that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The improvement to FRS 2 (effective from 1 July 2010) clarifi es that contributions of a business on formation of a joint venture and common control transactions are outside the scope of FRS 2.






• The amendments to FRS 132 Financial Instruments: Presentation and FRS 101 (Revised) Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation (effective from 1 January 2010) require entities to classify puttable fi nancial instruments and instruments that impose on the entity an obligation to deliver to another party a prorata share of the net assets of the entity only on liquidation as equity, if they have particular features and meet specifi c conditions. These changes are not expected to have a material impact to the fi nancial statements of the Group.

• IC Interpretation 9 Reassessment of Embedded Derivatives (effective from 1 January 2010) requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity fi rst becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that signifi cantly modifi es the cash fl ows that otherwise would be required under the contract, in which case reassessment is required. The improvement to IC Interpretation 9 (effective from 1 July 2010) clarifi es that this interpretation does not apply to embedded derivatives in contracts acquired in a business combination, businesses under common control or the formation of a joint venture. The Group has applied the transitional provision in the standard which exempt entities from disclosing the possible impact arising from the initial application of the standard on the fi nancial statements of the Group.

• IC Interpretation 10 Interim Financial Reporting and Impairment (effective from 1 January 2010) prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in fi nancial assets carried at cost to be reversed at a subsequent balance sheet date. These changes are not expected to have a material impact to the fi nancial statements of the Group.

• IC Interpretation 11 FRS 2 Group and Treasury Share Transactions (effective from 1 January 2010) provides guidance on whether share-based transactions involving treasury shares or involving group entities should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and group companies. The initial application of the standard is not expected to have a material impact to the fi nancial statements of the Group.

• IC Interpretation 14 FRS 119 The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and Their Interaction (effective from 1 January 2010) provides guidance on assessing the limit in FRS 119 on the amount of the surplus that can be recognised as an asset. The initial application of the standard is not expected to have a material impact to the fi nancial statements of the Group.






The following amendments are part of the Malaysian Accounting Standards Board’s (“MASB”) improvements project:

• FRS 5 Non-current Assets Held for Sale and Discontinued Operations

(i) Improvement effective from 1 January 2010 clarifi es that FRS 5 disclosures apply to non-current assets or disposal groups that are classifi ed as held for sale and discontinued operations.

(ii) Improvement effective from 1 July 2010 clarifi es that all of a subsidiary’s assets and liabilities are classifi ed as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the defi nition of a discontinued operation is met.

• FRS 107 Statement of Cash Flows (effective from 1 January 2010) clarifi es that only expenditure resulting in a recognised asset can be categorised as a cash fl ow from investing activities.

• FRS 110 Events After the Balance Sheet Date (effective from 1 January 2010) reinforces existing guidance that a dividend declared after the reporting date is not a liability of an entity at that date given that there is no obligation at that time.

• FRS 116 Property, Plant and Equipments (consequential amendment to FRS 107 Statement of Cash Flows) (effective from 1 January 2010) requires entities whose ordinary activities comprise of renting and subsequently selling assets to present proceeds from the sale of those assets as revenue and should transfer the carrying amount of the asset to inventories when the asset becomes held for sale. A consequential amendment to FRS 107 states that cash fl ows arising from purchase, rental and sale of those assets are classifi ed as cash fl ows from operating activities.

• FRS 117 Leases (effective from 1 January 2010) clarifi es that the default classifi cation of the land element in a land and building lease is no longer an operating lease. As a result, leases of land should be classifi ed as either fi nance or operating, using the general principles of FRS 117.

• FRS 118 Revenue (effective from 1 January 2010) provides more guidance when determining whether an entity is acting as a ‘principal’ or as an ‘agent’.

• FRS 119 Employee Benefi ts (effective from 1 January 2010) clarifi es that a plan amendment that results in a change in the extent to which benefi t promises are affected by future salary increases is a curtailment, while an amendment that changes benefi ts attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defi ned benefi t obligation. The defi nition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defi ned benefi t obligation.

• FRS 120 Accounting for Government Grants (effective from 1 January 2010) clarifi es that the benefi t of a below market rate government loan is accounted for in accordance with FRS 120.






The following amendments are part of the Malaysian Accounting Standards Board’s (“MASB”) improvements project (Cont’d.):• FRS 127 Consolidated & Separate Financial Statements (effective from 1 January 2010) clarifi es that where an investment

in a subsidiary that is accounted for under FRS 139 is classifi ed as held for sale under FRS 5, FRS 139 would continue to be applied.

• FRS 128 Investments in Associates (effective from 1 January 2010) clarifi es that an investment in an associate is treated as a single asset for impairment testing purposes. Reversals of impairment are recorded as an adjustment to the carrying amount of the investment to the extent that the recoverable amount of the associate increases.

• FRS 128 Investments in Associates and FRS 131 Interests in Joint Ventures (consequential amendments to FRS 132 Financial Instruments: Presentation and FRS 7 Financial Instruments: Disclosure ) (effective from 1 January 2010) clarify that where an investment in associate or joint venture is accounted for in accordance with FRS 139, only certain, rather than all disclosure requirements in FRS 128 or FRS 131 need to be made in addition to disclosures required by FRS 132 and FRS 7.

• FRS 129 Financial Reporting in Hyperinfl ationary Economies (effective from 1 January 2010) clarifi es that a number of assets and liabilities are measured at fair value rather than historical cost.

• FRS 134 Interim Financial Reporting (effective from 1 January 2010) clarifi es that basic and diluted earnings per share (“EPS”) must be presented in an interim report only in the case when the entity is required to disclose EPS in its annual report.

• FRS 136 Impairment of Assets (effective from 1 January 2010) clarifi es that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment before the aggregation of segments with similar economic characteristics. The improvement also clarifi es that where fair value less costs to sell is calculated on the basis of discounted cash fl ows, disclosures equivalent to those for value in use should be made.

• FRS 138 Intangible Assets

(i) Improvement effective from 1 January 2010 clarifi es that a prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. This means that an expense will be recognised for mail order catalogues when the entity has access to the catalogues and not when the catalogues are distributed to customers. It confi rms that the unit of production method of amortisation is allowed.

(ii) Improvement effective from 1 July 2010 clarifi es that a group of complementary intangible assets acquired in a business combination is recognised as a single asset if the individual asset has similar useful lives.






The following amendments are part of the Malaysian Accounting Standards Board’s (“MASB”) improvements project (Cont’d.):

• FRS 140 Investment Property (effective from 1 January 2010) requires assets under construction/development for future use as investment property to be accounted as investment property rather than property, plant and equipment. Where the fair value model is applied, such property is measured at fair value. However, where fair value is not reliably measurable, the property is measured at cost until the earlier of the date construction is completed and fair value becomes reliably measurable. It also clarifi es that if a valuation obtained for an investment property held under lease is net of all expected payments, any recognised lease liability is added back in order to determine the carrying amount of the investment property under the fair value model.

The Group will apply the following new standards, amendments to published standards and interpretations from annual period beginning on 1 January 2011:

• IC Interpretation 16 Hedges of a Net Investment in a Foreign Operation (effective from 1 July 2010) clarifi es the accounting treatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation currency, and hedging instruments may be held by any entity in the group. The requirements of FRS 121 “The Effects of Changes in Foreign Exchange Rates” do apply to the hedged item. The initial application of the standard is not expected to have a material impact to the fi nancial statements of the Group.

• IC Interpretation 17 Distribution of Non-cash Assets to Owners (effective from 1 July 2010) provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. FRS 5 has also been amended to require that assets are classifi ed as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. The initial application of the standard is not expected to have a material impact to the fi nancial statements of the Group.

(c) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and are not relevant to the Company

• FRS 4 Insurance Contract (effective from 1 January 2010) • IC Interpretation 12 Service Concession Arrangements (effective from 1 July 2010) • IC Interpretation 13 Customer Loyalty Programmes (effective from 1 January 2010) • IC Interpretation 15 Agreements for the Construction of Real Estate (effective from 1 July 2010)




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESUnless otherwise stated, the following accounting policies have been used consistently in dealing with items that are considered material in relation to the fi nancial statements.

3.1 Basis of consolidation

The consolidated fi nancial statements incorporate the audited fi nancial statements of the Company and its subsidiaries made up to the end of the fi nancial year.

Subsidiaries are those corporations, partnerships or other entities (including special purpose entities) in which the Group has power to exercise control over the fi nancial and operating policies so as to obtain benefi ts from their activities, 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.

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

Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifi able net assets required is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. See accounting policy Note 3.7(iii) on goodwill on consolidation.

The Group has taken advantage of the exemption provided by FRS 3 Business Combinations to apply the Standard prospectively. Accordingly, business combinations entered into prior to the effective date have not been restated to comply with this Standard.

Intragroup transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Minority interest represents the portion of the profi t or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifi able assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since that date.

Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s identifi able assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.

The gain or loss on disposal of a subsidiary which is the difference between net disposal proceeds and the Group’s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the consolidated income statement.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.2 Transactions with minority interest

The Group applies a policy of treating transactions with minority interest as transactions with parties external to the Group. Disposals to minority interest result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interest result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

3.3 Investments in associates

Associates are those corporations, partnerships or other entities in which the Group exercises signifi cant infl uence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the associates but not the power to exercise control over those policies.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investments in associates include goodwill identifi ed on acquisition, net of any accumulated impairment losses. See accounting policy Note 3.9 on impairment of non-fi nancial assets.

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

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the fi nancial statements of associates to ensure consistency of accounting policies with those of the Group.

Dilution gains and losses in associates are recognised in the income statement.

3.4 Investments in jointly controlled entities

Jointly controlled entities are corporations, partnerships or other entities over which there is contractually agreed sharing of control by the Group with one or more parties where the strategic fi nancial and operating decisions relating to the entities require unanimous consent of the parties sharing control.

The Group’s interest in jointly controlled entities is accounted for in the consolidated fi nancial statements by the equity method of accounting. Equity accounting involves recognising the Group’s share of the post-acquisition results of jointly controlled entities in the income statement and its share of post-acquisition movements within reserves in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment and include goodwill on acquisition, net of accumulated impairment losses. See accounting policy Note 3.9 on impairment of non-fi nancial assets.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.4 Investments in jointly controlled entities (Cont’d.)

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

Where necessary, adjustments have been made to the fi nancial statements of jointly controlled entities to ensure consistency of accounting policies with those of the Group.

3.5 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. Cost includes expenditure that is directly attributable to the acquisition of the items.

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 benefi ts associated with the item will fl ow 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 costs are charged to the income statement during the fi nancial year in which they are incurred.

Freehold land is not amortised as it has an infi nite life. 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 available for intended use.

Other property, plant and equipment are depreciated on a straight-line basis calculated to write off 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 8 1/3 – 20%Renovation, offi ce equipment, fi ttings and computers 12.5 – 33 1/3%Motor vehicles 20 – 33 1/3%Vessels 4%Monorail test track 3 1/3%

Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each balance sheet date.

At each balance sheet date, 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 3.9 on impairment of non-fi nancial assets.

When property, plant and equipment are disposed of, the resultant gain or loss on disposal is determined by comparing the disposal proceeds with the carrying amount and is included in the income statement.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.6 Investment properties

Investment properties, principally comprising freehold offi ce buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group. Investment properties are carried at cost less any accumulated depreciation and impairment losses. Investment properties are depreciated on a straight-line basis to write off the cost of the assets to their residual values over their estimated useful life of 20 years.

On disposal of investment properties, or when it is permanently withdrawn from use and no future economic benefi ts are expected from its disposal, it is derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amounts is recognised in income statement in the period of the retirement or disposal.

3.7 Intangible assets

(i) Patents

Patent rights are stated at cost less accumulated impairment losses. These costs are amortised on a straight-line basis over the useful economic life of the patent rights or over 20 years, whichever is lower.

(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 fulfi lled:

(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 benefi ts;(e) adequate technical, fi nancial and other resources to complete the development and to use or sell the intangible

asset are available; and(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 are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its useful life, not exceeding 10 years.

Development assets are tested for impairment annually, in accordance with FRS 136 Impairment of Assets. See accounting policy Note 3.9 on impairment of non-fi nancial assets.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 3.7 Intangible assets (Cont’d.)

(iii) Goodwill

Goodwill represents the excess of the purchase consideration over the fair value of the Group’s share of the identifi able net assets of subsidiaries, jointly controlled entities and associates at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Negative goodwill is recognised immediately in the income statement. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefi t from synergies of the business combination in which the goodwill arose. Each of those cash-generating units represents the Group’s investment in each primary reporting segment (Note 40).

In respect of acquisitions of jointly controlled entities 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.

3.8 Investments

Investments in subsidiaries, jointly controlled entities and associates are shown at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3.9 on impairment of non-fi nancial assets.

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

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

3.9 Impairment of non-fi nancial assets

Assets that have an indefi nite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever event or changes in cirumstances indicate that the carrying amount may not be recoverable. Impairment is measured by comparing the carrying value of an asset with its recoverable amount. An impairment loss is recognised for the amount by which the carrying amount may not be recoverable. Recoverable amount is the higher of net realisable value and value in use, which is measured by reference to discounted future cash fl ows. Recoverable amounts are estimated for individual assets or, if it is not possible, for the relevant cash generating units.

Impairment losses on goodwill are not reversed. Non-fi nancial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.9 Impairment of non-fi nancial assets (Cont’d.)

An impairment loss is charged to income statement immediately. Any subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately.

3.10 Assets acquired under lease arrangements

Leases of property, plant and equipment where the Group assumes substantially all the benefi ts and risks of ownership are classifi ed as fi nance leases.

Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and fi nance charges so as to achieve a period constant rate of interest on the balance outstanding. The corresponding rental obligations, net of fi nance charges, are included in borrowings.

The interest element of the fi nance charge is charged to income statement over the lease period so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under fi nance lease arrangements are depreciated over the shorter of the estimated useful life of the asset and the lease term.

Leases of assets where a signifi cant portion of the risks and rewards of ownership are retained by the lessor are classifi ed as operating leases. Lease rental payments in respect of operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the lease term.

3.11 Assets acquired under hire purchase fi nancing

Assets acquired under hire purchase fi nancing are included in property, plant and equipment and are depreciated over their useful lives. Outstanding obligations, after deducting attributable fi nance expenses, are included as liabilities in the fi nancial statements. Finance expenses are charged to the income statement on a straight-line basis over the period of fi nancing.

3.12 Prepaid land lease payment

Leasehold land that normally has a fi nite economic life and where title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease. The payment made on entering into or acquiring a leasehold land is accounted as prepaid land lease payment that is amortised over the lease term in accordance with the pattern of benefi ts provided.

The Group treats such a lease as an operating lease, with the unamortised carrying amount classifi ed as prepaid land lease payment.

The prepaid lease payments are amortised evenly to the income statement over the respective lease terms of the land which range from 7 to 999 years.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.13 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average or “fi rst-in-fi rst-out” basis.

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 fi xed 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.

3.14 Non-current assets (or disposal groups) classifi ed as assets held for sale

Non-current assets (or disposal groups) are classifi ed as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is recovered principally through a sale transaction rather than through a continuing use.

3.15 Construction contracts

A construction contract is a contract specifi cally 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 are recognised when incurred. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised by using the stage of completion method. The stage of completion is measured by reference to the proportion that contract costs incurred for work performed to date bear to the estimated total costs for the contract.

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.

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

The aggregate of the costs incurred and the profi t/loss recognised on each contract is compared against the progress billings up to the fi nancial year end. Where costs incurred and recognised profi ts (less recognised losses) exceed progress billings, the balance is shown as amounts due from customers on construction contracts under receivables, deposits and prepayments (within current assets). Where progress billings exceed costs incurred plus recognised profi ts (less recognised losses), the balance is shown as amounts due to customers on construction contracts under payables (within current liabilities).




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.16 Receivables

Trade and other receivables are carried at invoiced amount less allowance for doubtful debts. Bad debts are written off in the period in which they are identifi ed. Allowance for doubtful debts is determined based on estimates of probable losses which may arise from non-collection of receivables upon review of all material outstanding amounts at the balance sheet date.

3.17 Cash and cash equivalents

For purposes of the cash fl ow statements, 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 on the balance sheet.

3.18 Share capital

(i) Classifi cation

Ordinary shares and non-redeemable preference shares with discretionary dividends are classifi ed as equity. Other shares are classifi ed as equity and/or liability according to the economic substance of the particular instrument.

Distributions to holders of a fi nancial instrument classifi ed as an equity instrument are charged directly to equity.

(ii) Share issue costs

Incremental external costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(iii) Dividends to shareholders of the Company

Dividends on redeemable preference shares are recognised as a liability on an accrual basis. Other dividends are recognised as a liability in the period in which they are declared.

(iv) Warrant reserve

Proceed 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 purchases the Company’s equity share capital, the consideration paid, including any directly attributable incremental external costs, net of tax, is deducted from total shareholders’ equity 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 external costs and the related tax effects, is included in shareholders’ equity.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.19 Irredeemable Convertible Secured Loan Stocks (“ICSLS”)

ICSLS are regarded as compound fi nancial instruments, 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 ICSLS 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 component 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 the ICSLS.

3.20 Borrowings

(i) Classifi cation

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

Interest, dividends, losses and gains relating to a fi nancial instrument, or a component part, classifi ed as a liability is reported within fi nance cost in the income statement.

Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(ii) Capitalisation of borrowing costs

Borrowing costs incurred to fi nance the construction of property, plant and equipment are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use. Borrowing costs incurred to fi nance property development activities and construction contracts are accounted for in a similar manner. All other borrowing costs are expensed.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.21 Income taxes

Income tax on the profi t or loss for the fi nancial year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profi t for the fi nancial year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is recognised in full, using the liability method, on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts in the fi nancial 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 the accounting nor taxable profi t or loss. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probably that taxable profi ts will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is

settled based on tax rates that have been enacted or substantially enacted at the balance sheet date.

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

Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill.

3.22 Employee benefi ts

(i) Short term benefi ts

Wages, salaries and bonuses are recognised as an expense in the fi nancial year 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) Defi ned 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 benefi t 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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 3.22 Employee benefi ts (Cont’d.)

(iii) Defi ned benefi t plan

A defi ned benefi t plan is a pension plan that is not a defi ned contribution plan. Typically, defi ned benefi t plans defi ne an amount of pension benefi t 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 balance sheet in respect of defi ned benefi t pension plans is the present value of the defi ned benefi t obligation at the balance sheet date less the fair value of plan assets, together with adjustments for actuarial gains or losses and past service costs. The defi ned benefi t obligation is calculated by independent actuaries using the projected unit credit method. The Group determines the present value of the defi ned benefi t obligation and the fair value of any plan assets with suffi cient regularity such that the amounts recognised in the fi nancial statements do not differ materially from the amounts that would be determined at the balance sheet date.

The present value of the defi ned benefi t obligation is determined by discounting the estimated future cash outfl ows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefi ts 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 defi ned benefi t 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 specifi ed 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 benefi ts

The Group recognises termination benefi ts 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 benefi ts as a result of an offer made to encourage voluntary redundancy. Termination benefi ts 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 benefi ts. Benefi ts falling due more than 12 months after the balance sheet date are discounted to present value.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 3.22 Employee benefi ts (Cont’d.)

(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 balance sheet date, the Company revises its estimates of the number of options that are expected to become exercisable. 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.

Salient features of the Company’s share option scheme are disclosed in Note 32(c) to the fi nancial statements.

3.23 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 the 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.

3.24 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outfl ow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed (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 outfl ow 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 outfl ow 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 refl ects current market assessments of the time value of money and the risks specifi c to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.25 Contingent liabilities and contingent assets

The Group does not recognise a contingent liability but discloses its existence in the fi nancial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confi rmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outfl ow 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.

A contingent asset is a possible asset that arises from past events whose existence will be confi rmed 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 infl ows of economic benefi ts 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 minority interest.

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 refl ected in the goodwill arising from the acquisitions.

Subsequent to the intial 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 FRS 1372004 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with FRS 118 Revenue.

3.26 Revenue recognition

Revenue is recognised when it is probable that the economic benefi ts associated with the transaction will fl ow 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 signifi cant 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 in which the services are rendered, by reference to completion of the specifi c transaction, assessed on the basis of the actual service provided as a proportion of the total services to be provided.

(iii) Interest income

Interest is recognised on a time proportion basis that refl ects 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.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.26 Revenue recognition (Cont’d.)

(iv) Rental income

Rental income from operating leases is recognised on a straight-line basis over the term of the lease.

(v) Charter 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 fulfi lled.

(vi) Dividend income

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

(vii) Management fee income

Management fee income is recognised on an accrual basis, based on services rendered.

(viii) Commission income

Commission income is recognised in the accounting period in which goods of principals are sold.

(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 3.15 on construction contracts.

3.27 Foreign currencies

(i) Functional and presentation currency

Items included in the fi nancial 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 fi nancial 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.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 3.27 Foreign currencies (Cont’d.)

(iii) Group companies

The results and fi nancial position of all the Group entities (none of which has the currency of a hyperinfl ationary 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 balance sheet presented are translated at the closing rate at the date of that balance sheet;

• income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity.

The results and fi nancial position of an entity whose functional currency is the currency of a hyperinfl ationary economy shall be translated into a different presentation currency as follows:

• all amounts (i.e. assets, liabilities, equity items, income and expenses, including comparatives) shall be translated at the closing rate at the date of the most recent balance sheet, except that

• when amounts are translated into the currency of a non-hyperinfl ationary economy, comparative amounts shall be those that were presented as current year amounts in the relevant prior year fi nancial statements (i.e. not adjusted for subsequent changes in the price level or subsequent changes in exchange rates)

When an entity’s functional currency is the currency of a hyperinfl ationary economy, the entity shall restate its fi nancial statements in accordance with FRS1292004 Financial Reporting in Hyperinfl ationary Economies before applying the translation method set out above, except for comparative amounts that are translated into a currency of a non-hyperinfl ationary economy. When the economy ceases to be hyperinfl ationary and the entity no longer restates its fi nancial statements in accordance with FRS1292004, it shall use the historical costs for translation into the presentation currency, the amounts restated to the price level at the date the entity ceased restating its fi nancial statements.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

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




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) 3.28 Financial instruments

(i) Description

A fi nancial instrument is any contract that gives rise to both a fi nancial asset of one enterprise and a fi nancial liability or equity instrument of another enterprise.

A fi nancial asset is any asset that is cash, a contractual right to receive cash or another fi nancial asset from another enterprise, a contractual right to exchange fi nancial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise.

A fi nancial liability is any liability that is a contractual obligation to deliver cash or another fi nancial asset to another enterprise, or to exchange fi nancial instruments with another enterprise under conditions that are potentially unfavourable.

(ii) Financial instruments recognised on the balance sheet

The particular recognition method adopted for other fi nancial instruments recognised on the balance sheet is disclosed in the individual accounting policy note associated with each item.

(iii) Fair value estimation for disclosure purposes

The fair value of publicly traded derivatives and securities is based on quoted market prices at the balance sheet date. The fair value of interest rate swaps is calculated as the present value of the estimated future cash fl ows. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date.

In assessing the fair value of other derivatives and fi nancial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for the specifi c or similar instruments are used for long term debt. Other techniques, such as option pricing models and estimated discounted value of future cash fl ows, are used to determine the fair value for the remaining fi nancial instruments. In particular, the fair value of fi nancial liabilities is estimated by discounting the future contractual cash fl ows at the current market interest rate available to the Group for similar fi nancial instruments.

The carrying amounts of fi nancial assets (less any estimated credit adjustments) and fi nancial liabilities with a maturity period of less than one year are assumed to approximate their fair values.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.29 Segmental information

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

Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, inventories and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets and liabilities do not include income tax assets and liabilities respectively.

3.30 Derivative fi nancial 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 the income statement over the period to maturity.

The Group has entered into Cross Currency Interest Rate Swaps (“CCIRS”) that are designated as fair value hedges for interest rate risk and foreign exchange risk on its Murabahah Medium Term Notes, which were issued by a subsidiary. The CCIRS involve the exchange of principals and fl oating interest payments in the subsidiary’s functional currency for principals and fi xed interest receipts in the foreign currency, in which the issued Murabahah Medium Term Notes are denominated.




3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)3.30 Derivative fi nancial instruments and hedging activities (Cont’d.)

(ii) Cash fl ow 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 shareholders’ funds 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 remeasurements of hedging derivatives deferred to hedging reserves are recycled to the income statement under fi nance cost in the periods when the underlying hedged item affects the income statement and balance sheet 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 is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement within other operating income/expenses.

The Group has entered in Cross Currency Interest Rate Swaps (“CCIRS”) that are designated as cash fl ow 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 fi xed interest receipts in the foreign currency, in which the issued Murabahah Medium Term Notes are denominated, for principals and fi xed interest payments in the subsidiary’s functional currency.

The fair values of derivative instruments used for hedging purposes are disclosed in Note 20. Movements in the hedging reserve are shown in the statement of changes in equity. The full fair value of a hedging derivative is classifi ed as a non-current asset or liability when the remaining 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. REVENUE Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Management fee 3,005 1,683 3,320 8,666 Dividend income – – 11,976 20,444 Sales of goods 895,662 1,077,040 – – Rendering of services 508,908 516,899 – – Rental/chartering income 287,919 385,341 – – Commission income 7,026 17,943 – – Construction contract income 268,935 107,234 – – 1,971,455 2,106,140 15,296 29,110




5. PROFIT/(LOSS) BEFORE TAXATION Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Profi t/(loss) before taxation is stated after charging/(crediting):

Amortisation of intangible assets 188 184 – – Amortisation of prepaid land lease payments 1,393 1,275 – – Allowance for doubtful debts 8,497 9,353 – – Allowance for obsolete stocks 2,803 9,217 – – Inventories write-down 282 5,627 – – Intangible assets written off – 284 – – Impairment losses – quoted investments – 218 – – – property, plant and equipment – 456 – – Auditors’ remuneration: PricewaterhouseCoopers Malaysian fi rm Statutory audit – current year 1,600 695 212 152 – under provision in prior year 468 79 (2) 8 Non-audit fees – current year 162 67 80 – Overseas affi liates of PricewaterhouseCoopers Malaysian fi rm Statutory audit – current year 1,805 3,909 – – – (over)/under provision in prior year (278) 471 – – Non-audit fees – current year – 324 – – – over provision in prior year – (73) – – Other external auditors Statutory audit – current year 148 591 – – – under provision in prior year – 13 – – Non-audit fees – current year 37 551 – –




5. PROFIT/(LOSS) BEFORE TAXATION (CONT’D.) Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Bad debts (recovered)/written off (574) 73 – – Depreciation of property, plant and equipment 81,724 74,390 1,110 1,254 Depreciation of investment property 142 134 – – Gain on disposal of property, plant and equipment (488) (1,012) – – Property, plant and equipment written off – 9 – 9 Loss/(gain) on foreign exchange – realised 17,938 3,344 (2) 42 – unrealised (21,565) 6,556 (833) 4,393 Loss/(gain) on disposal of/dilution of interest in subsidiary companies 41 (2,916) (5,345) – Gross dividend income – subsidiaries – – (9,628) (12,148) Gross dividend income – associates – – (2,348) (8,296) Interest income (1,235) (1,752) (897) (462) Lease rental – plant and machinery 79,474 93,663 – – – property 20,969 22,716 – – Rental of land and premises 3,289 3,966 747 1,403 Rental of equipment 1,036 1,982 105 198 Rental income (296) (380) – – Research and development expenses 84 1,114 – – Reversal of provision for divestment cost – (9,323) – (9,323) Write back of amount owing to a Director of a subsidiary, Scomi Oilfi eld Limited – (57,352) – (57,352)

Employee benefi ts costs (including Executive Director):

Wages, salaries and bonus 266,009 327,821 6,009 11,758 Defi ned contribution plan 10,864 8,241 910 1,345 Increase in liability for defi ned benefi t plans (Note 35) 797 591 – – Termination benefi ts 1,724 6,693 – – (Write back)/provision for redundancy (Note 28) (116) 3,517 – – Share option expenses (Note 34) 2,142 3,870 831 1,187 Employment costs 16,141 15,236 122 148 Other employee benefi ts (including allowances) 96,658 92,792 1,208 1,958 394,219 458,761 9,080 16,396

Included in the cost of sales of the Group are the cost of inventories and services of RM1,273,042,000 (2008: RM1,494,062,000) and construction contract costs of RM208,682,000 (2008: RM68,878,000).




6. FINANCE COSTS Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Interest expense on borrowings, leases and ICSLS 73,069 69,825 15,467 15,153 Effect of interest on CCIRS 3,155 3,353 – – Effect of hedging – fair value hedge 353 244 – – 76,577 73,422 15,467 15,153 Currency exchange loss* – 1,797 – – Fair value loss/(gain) on CCIRS designated as fair value hedges (173) 4,857 – – Fair value adjustment of bank borrowings attributable to interest rate risk and foreign currency risk – (4,908) – – 76,404 75,168 15,467 15,153

* Included in currency exchange loss is an amount of RM8,782,999 (2008: (RM21,292,500)) of exchange losses/(gains) transferred from hedging reserve which is offset by a corresponding exchange (gain)/loss of (RM8,782,999) (2008: RM21,292,500) arising from revaluation of hedged borrowings.

7. TAXATION EXPENSE/(CREDIT) Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Current tax

– Malaysian income tax 3,191 4,821 (252) 149 – Foreign tax 31,341 25,766 – – 34,532 30,587 (252) 149 Deferred tax (Note 36) (9,782) (26,659) – – 24,750 3,928 (252) 149

Current tax

Current year 32,952 29,568 – 149 Under/(over) accrual in prior years 1,580 1,019 (252) – 34,532 30,587 (252) 149 Deferred tax

Reversal and origination of temporary differences (9,745) (23,589) – – Change in income tax rate – (201) – – Over accrual in prior years (37) (2,869) – –

(9,782) (26,659) – – 24,750 3,928 (252) 149




7. TAX EXPENSE/(CREDIT) (CONT’D.) Group Company

2009 2008 2009 2008 % % % %

Numerical reconciliation between the average effective tax rate and the Malaysian tax rate:

Malaysian tax rate 25 26 (25) 26 Tax effects of: – expenses not deductible for tax purposes 42 13 52 12 – utilisation of previously unrecognised tax losses, capital allowance and tax incentives (53) (26) – – – income not subject to tax (8) (17) (50) (45) – different tax rates in other countries (14) 2 – – – withholding tax based on turnover 16 6 – – – deferred tax assets not recognised in respect of current year’s tax losses and unabsorbed capital allowances 32 5 23 7 – under/(over) accrual in respect of prior years 6 (1) (3) – – share of results of associates and jointly controlled entities 3 (5) – – Average effective tax rate 49 3 (3) –

As at 31 December 2009, the Company does not have any Section 108 account and has therefore automatically moved to the single-tier tax system, which came into effect from the year of assessment 2009, under which companies are not required to have tax credits under Section 108 of the Income Tax Act, 1967 for dividend payment purposes. Dividends paid under this system are tax exempt in the hands of shareholders.

8. DIRECTORS’ REMUNERATIONThe Directors of the Company in offi ce during the fi nancial year are as follows:

Non-executive Directors

Tan Sri Asmat bin KamaludinTan Sri Nik Mohamed bin Nik YaacobDatuk Hamzah bin BakarDatuk Haron bin SirajDato’ Mohamed Azman bin YahyaDato’ Mohammed Azlan bin HashimFoong Choong HongSreesanthan a/l Eliathamby

Executive Director





8. DIRECTORS’ REMUNERATION (CONT’D.)The aggregate amount of emoluments received/receivable by Directors of the Company during the fi nancial year is as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Non-executive Directors:

– fees 645 603 562 520 – other emoluments 183 212 183 212 828 815 745 732

Executive Director:

– salaries and bonus 810 1,841 810 1,841 – defi ned contribution plan 142 342 142 342 – share options granted under ESOS 132 275 80 201 – estimated monetary value of benefi ts-in-kind 192 72 192 72 1,276 2,530 1,224 2,456 2,104 3,345 1,969 3,188

9. EARNINGS PER SHARE(a) Basic earnings per share

Basic earnings per share of the Group is calculated by dividing the profi t attributable to equity holders of the Company for the fi nancial year by the weighted average number of ordinary shares in issue during the fi nancial year and conversion of potential ordinary shares from the mandatorily convertible instruments i.e irredeemable convertible secured loan stocks (“ICSLS”), excluding ordinary shares purchased by the Company and held as Treasury shares (Note 32(b)).

Group 2009 2008

Profi t attributable to ordinary equity holders of the Company (RM’000) 9,875 116,553

Weighted average number of ordinary shares in issue (‘000) 1,025,795 1,006,342

Basic earnings per share (Sen) 0.96 11.58




9. EARNINGS PER SHARE (CONT’D.)(b) Diluted earnings per share

For the diluted earnings 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 as 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. No adjustment is made to the profi t for the period for the warrants calculation.

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 as 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. No adjustment is made to the profi t for the period for the share options calculation.

Group 2009 2008

Profi t attributable to equity holders of the Company (RM’000) 9,875 116,553

Weighted average number of ordinary shares in issue and conversion of potential ordinary shares from the mandatorily convertible instrument of ICSLS (‘000) 1,025,795 1,006,342

Adjustments for:

– share options (‘000) 6,199 9,667 – warrants (‘000) 21,654 –

Weighted average number of ordinary shares for diluted earnings per share (‘000) 1,053,648 1,016,009

Diluted earnings per share (Sen) 0.94 11.47




10. DIVIDENDS Group and Company 2009 2008 RM’000 RM”000

Proposed fi nal single-tier tax exempt dividend of 5% per ordinary share of RM0.10 each – 5,044

Additional fi nal dividends paid in respect of previous fi nancial year due to issuance of shares pursuant to the Company’s Employees’ Share Option Scheme – 7

– 5,051 Dividends in respect of the fi nancial year – 5,051

Dividend recognised as distribution to equity holders of the Company 5,051 9,317

The Directors do not recommend any dividend for the fi nancial year ended 31 December 2009.

11. PROPERTY, PLANT AND EQUIPMENT Renovation, Tools, offi ce plant equipment, Monorail Freehold Freehold Leasehold and fi ttings and Motor test Group land buildings buildings machinery computers vehicles Vessels track Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost

At 1 January 2009 21,011 30,405 41,650 833,235 69,729 14,625 25,056 14,795 1,050,506 Additions – 20,422 1,517 30,201 1,974 359 – – 54,473 Disposals (1,283) – (243) (10,590) (1,786) (1,111) (25,487) – (40,500) Adjustments arising from reclassifi cation of investment in a subsidiary to jointly controlled entities – (361) – – (67) – – – (428) Reclassifi cation – 1,150 3,836 (5,006) 27 (7) – – – Reclassifi cation to project cost – – – – (1,340) – – – (1,340) Currency translation differences 635 1,234 131 5,939 (516) (137) 431 – 7,717 At 31 December 2009 20,363 52,850 46,891 853,779 68,021 13,729 – 14,795 1,070,428




11. PROPERTY, PLANT AND EQUIPMENT (CONT’D.) Renovation, Tools, offi ce plant equipment, Monorail Freehold Freehold Leasehold and fi ttings and Motor test Group land buildings buildings machinery computers vehicles Vessels track Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated depreciation

At 1 January 2009 – 3,273 12,278 360,004 25,971 8,474 6,298 1,333 417,631 Charge for the fi nancial year – 3,039 5,556 60,403 9,826 2,149 751 – 81,724 Capitalised under development costs (Note 12) – 4 – 27 154 – – 500 685 Disposals – – (243) (2,541) (1,322) (652) (7,164) – (11,922) Adjustments arising from reclassifi cation of investment in a subsidiary to jointly controlled entities – (102) – – (20) – – – (122) Reclassifi cation – 607 (546) (38) (16) (7) – – – Currency translation differences – 327 523 4,453 (354) (57) 115 – 5,007 At 31 December 2009 – 7,148 17,568 422,308 34,239 9,907 – 1,833 493,003

Net book value

At 31 December 2009 20,363 45,702 29,323 431,471 33,782 3,822 – 12,962 577,425

Cost

At 1 January 2008 21,045 30,199 35,563 720,042 34,052 12,301 23,831 14,800 891,833 Acquisition of subsidiaries (Note 39(a)) – – – 2,653 21 – – – 2,674 Additions 2,732 5,130 5,830 148,511 39,819 3,618 – – 205,640 Disposals – – (3) (12,397) (2,529) (1,194) – – (16,123) Reclassifi cation – – (171) 98 73 – – – – Reclassifi cation from prepaid land lease payments (Note 14) – (262) 239 (106) 295 – – (5) 161 Write-offs – – – – (87) – – – (87) Currency translation differences (2,766) (4,662) 192 (25,566) (1,915) (100) 1,225 – (33,592) At 31 December 2008 21,011 30,405 41,650 833,235 69,729 14,625 25,056 14,795 1,050,506




11. PROPERTY, PLANT AND EQUIPMENT (CONT’D.) Renovation, Tools, offi ce plant equipment, Monorail Freehold Freehold Leasehold and fi ttings and Motor test Group land buildings buildings machinery computers vehicles Vessels track Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000


At 1 January 2008 – 2,620 7,710 320,640 23,282 7,065 4,800 833 366,950 Charge for the fi nancial year – 1,872 4,355 58,880 5,948 2,115 1,220 – 74,390 Capitalised under development costs (Note 12) – – 2 2 119 – – 500 623 Disposals – – (4) (5,251) (2,469) (720) – – (8,444) Impairment losses – – – 456 – – – – 456 Write-offs – – – – (78) – – – (78) Currency translation differences – (1,219) 215 (14,723) (831) 14 278 – (16,266) At 31 December 2008 – 3,273 12,278 360,004 25,971 8,474 6,298 1,333 417,631

Net book value

At 31 December 2008 21,011 27,132 29,372 473,231 43,758 6,151 18,758 13,462 632,875

Offi ce Motor equipment vehicles and fi ttings Renovation Total RM’000 RM’000 RM’000 RM’000

Company

Cost

At 1 January 2009 1,839 3,606 1,960 7,405 Additions – 42 60 102 At 31 December 2009 1,839 3,648 2,020 7,507


At 1 January 2009 699 2,107 1,339 4,145 Charge for the fi nancial year 368 413 329 1,110 At 31 December 2009 1,067 2,520 1,668 5,255

Net book value at 31 December 2009 772 1,128 352 2,252




11. PROPERTY, PLANT AND EQUIPMENT (CONT’D.) Offi ce Motor equipment vehicles and fi ttings Renovation Total RM’000 RM’000 RM’000 RM’000

Company (Cont’d.)

Cost

At 1 January 2008 1,323 2,547 1,333 5,203 Additions 516 1,146 627 2,289 Write-offs – (87) – (87) At 31 December 2008 1,839 3,606 1,960 7,405


At 1 January 2008 351 1,748 870 2,969 Charge for the fi nancial year 348 437 469 1,254 Write-offs – (78) – (78) At 31 December 2008 699 2,107 1,339 4,145

Net book value at 31 December 2008 1,140 1,499 621 3,260

(i) The net book values of property, plant and equipment of the Group acquired under hire purchase are as follows:

Group 2009 2008 RM’000 RM’000

Hire purchase – Motor vehicles 772 2,722 – Tools, plant and machinery 9,876 16,858 – Offi ce equipment, fi ttings and computers – 150

(ii) Certain property, plant and equipment of the group are charged as security for banking facilities as disclosed in Note 27 to the fi nancial statements.

(iii) During the fi nancial year, the Group acquired property, plant and equipment at aggregate costs of RM54,473,000 (2008: RM205,640,000), of which RM4,492,000 (2008: RM4,836,000) is by means of hire purchase arrangements.

(iv) Included in the freehold buildings of the Group was an amount of RM19,588,000 (2008: RM4,002,000) relating to expenditure for buildings in the course of construction.

(v) Included in tools, plant and machinery was an amount of RM1,415,000 (2008: Nil) relating to expenditure for machinery in the course of construction. The Group acquired the machinery by means of government grant received.




12 . INTANGIBLE ASSETS Patents and other intangible Development Goodwill asset costs Total RM’000 RM’000 RM’000 RM’000

Group

Cost

At 1 January 2009 486,877 13,087 52,273 552,237 Additions 293 265 26,010 26,568 Transferred from property, plant and equipment (Note 11) – – 685 685 Reclassifi cation to project cost – – (8,100) (8,100) Profi t guarantee received (6,900) – – (6,900) Disposal of subsidiaries (Note 39(e)) (898) – – (898) Currency translation differences (180) (43) (60) (283) At 31 December 2009 479,192 13,309 70,808 563,309

Accumulated impairment and amortisation At 1 January 2009 360 2,664 22 3,046 Amortisation for the fi nancial year – 166 22 188 Currency translation differences – (37) – (37) At 31 December 2009 360 2,793 44 3,197

Net book value

At 31 December 2009 478,832 10,516 70,764 560,112

Cost

At 1 January 2008 486,102 3,517 19,359 508,978 Additions 117 9,414 32,640 42,171 Transferred from property, plant and equipment (Note 11) – – 623 623 Write-offs – – (284) (284) Currency translation differences 658 156 (65) 749 At 31 December 2008 486,877 13,087 52,273 552,237

Accumulated impairment and amortisation

At 1 January 2008 360 2,376 – 2,736 Amortisation for the fi nancial year – 162 22 184 Currency translation differences – 126 – 126 At 31 December 2008 360 2,664 22 3,046

Net book value

At 31 December 2008 486,517 10,423 52,251 549,191




12. INTANGIBLE ASSETS (CONT’D.)Development costs are in respect of internally generated expenditure on major projects where it is reasonably anticipated that the costs will be recovered through future commercial activity.

The additions in the current fi nancial year amounting to RM17,910,000 (2008: RM33,263,000) consist mainly of material, labour and consultancy costs incurred on monorail projects, deep water connector research, as well as other projects where it is reasonably anticipated that the costs will be recovered through future commercial activity.

The amortisation of the internally generated development costs will commence when the asset is available for use.

In the prior fi nancial year, 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 RM9,414,000 (USD2,500,000). The amortisation of the rights to use the intellectual property will commence when the asset is available for use, over a period of 15 years.

The remaining amortisation period for the other previously acquired patents at the balance sheet date is 6 years (2008: 7 years).

The carrying amounts of goodwill allocated to the Group’s cash-generating units (“CGUs”) are as follows:

2009 2008 RM’000 RM’000

Oilfi eld services 242,292 242,471 Energy and engineering logistics 232,465 239,365 Production enhancement 4,075 4,681 478,832 486,517

The recoverable amount of a CGU is determined based on value in use calculations. These calculations use pre-tax cash fl ow projections based on fi nancial budgets approved by the Directors covering a fi ve-year period, using estimated growth rates which are based on past performance and their expectations of market developments. The terminal value is calculated based on the projected net tangible assets of the CGUs at the end of the fi ve years. The growth rate does not exceed the long term average growth rate for the relevant CGUs.

The key assumptions used in the value in use calculations for the signifi cant CGUs are as follows: Energy and Oilfi eld engineering services logistics % %

Growth rate in the fi rst 5 years – 2009 5.0 – 11.0 5.0 – 10.0 or existing secured projects

– 2008 6.1 5.0 or existing secured projects




12. INTANGIBLE ASSETS (CONT’D.) The key assumptions used in the value in use calculations for the signifi cant CGUs are as follows (continued): Energy and Oilfi eld engineering services logistics % %

Pre-tax discount rate – 2009 12.0 12.0 - 24.0 – 2008 12.0 19.1

The weighted average growth rates were based on expectations from past performances with consideration given to the industries in which the CGUs operate. The discount rates used are pre-tax and refl ect specifi c risks relating to the relevant segments.

13 . INVESTMENT PROPERTY Group 2009 2008 RM’000 RM’000

Net book value

At 1 January 2009 1,502 1,638 Depreciation for the fi nancial year (142) (134) Currency translation differences 1 (2) At 31 December 2009 1,361 1,502

Cost 2,889 2,889 Accumulated depreciation (1,528) (1,387) Net book value 1,361 1,502

The fair value of the investment property was estimated at RM2.08 million (2008: RM2.24 million) based on a valuation by an independent professionally qualifi ed valuer based on current price in an active market. The following amounts have been recognised in the income statement:

Group 2009 2008 RM’000 RM’000

Rental income 155 99 Direct operating expenses of investment properties that did not generate rental income 21 35




14. PREPAID LAND LEASE PAYMENTS Group 2009 2008 RM’000 RM’000

At 1 January 2009 9,574 7,604 Additions – 3,006 Amortisation for the fi nancial year (1,393) (1,275) Reclassifi cation to property, plant and equipment (Note 11) – (161) Currency translation differences (212) 400 As 31 December 2009 7,969 9,574

Analysed as:

Long-term leasehold land 2,360 3,396 Short-term leasehold land 5,609 6,178 7,969 9,574

15. INVESTMENTS IN SUBSIDIARIES Company 2009 2008 RM’000 RM’000

Investments in subsidiaries, at cost – quoted shares in Malaysia 286,807 286,807 – unquoted shares 293,744 294,890 580,551 581,697

Market value of shares quoted in Malaysia 242,635 105,912

Details of the signifi cant subsidiaries are as follows:

Country of Group’s effective Name of company incorporation equity interest Principal activities 2009 2008 % %

Signifi cant subsidiaries of Scomi Group Bhd

Scomi Oilfi eld Limited * Bermuda 76.1 76.1 Investment holding

Scomi Engineering Bhd * Malaysia 69.8 69.9 Investment holding and provision of management services




15. INVESTMENTS IN SUBSIDIARIES (CONT’D.) Country of Group’s effective Name of company incorporation equity interest Principal activities 2009 2008 % %

Signifi cant subsidiaries of Scomi Group Bhd (Cont’d.)

Scomi Oilserve Sdn Bhd @ Malaysia – (1) 60 Investment holding and provision of marine vessel transportation services

Scomi Energy Sdn Bhd * Malaysia 100 100 Investment holding and provision of management services

Scomi Chemicals Sdn Bhd @ Malaysia 100 100 Investment holding

Scomi KMC Sdn Bhd * Malaysia 51 52 Provision of oilfi eld equipment, supplies and services

Signifi cant subsidiary of Scomi Oilfi eld Limited

Scomi Oiltools Bermuda Limited * Bermuda 76.1 76.1 Investment holding, provision of managment services, provision of oilfi eld equipment, supplies and services

Signifi cant subsidiaries of Scomi Oiltools Bermuda Limited

Scomi Oiltools Sdn Bhd * Malaysia 76.1 76.1 Provision of oilfi eld equipment, supplies and services

Scomi Oiltools Overseas (M) Mauritius 76.1 76.1 Provision of oilfi eld equipment, supplies Limited * and services Scomi Oiltools (Cayman) Ltd * Cayman 76.1 76.1 Provision of oilfi eld equipment, supplies Islands and services

Scomi Oiltools Ltd * Cayman 76.1 76.1 Provision of oilfi eld equipment, supplies Islands and services

Scomi Oiltools (Europe) Limited # United 76.1 76.1 Investment holding and provision of Kingdom oilfi eld equipment, supplies and services





Signifi cant subsidiaries of Scomi Oiltools Bermuda Limited (Cont’d.)

Scomi Oiltools (Shetland) United 76.1 76.1 Provision of oilfi eld equipment, supplies Limited # Kingdom and services

Scomi Oiltools Inc # USA 76.1 76.1 Provision of oilfi eld equipment, supplies and services

Scomi Oiltools (Africa) Limited * Jersey 76.1 76.1 Investment holding, provision of oilfi eld equipment, supplies and services and provision of machine shop services

Scomi Oiltools de Venezuela S.A. # Venezuela 76.1 76.1 Provision of oilfi eld equipment, supplies and services

Scomi Oiltools (S) Pte Ltd # Singapore 76.1 76.1 Investment holding and provision of oilfi eld equipment, supplies and services

Scomi Oiltools Canada Inc # Canada 76.1 76.1 Provision of oilfi eld equipment, supplies and services

Signifi cant subsidiaries of Scomi Engineering Bhd

Scomi OMS Oilfi eld Holdings Malaysia 69.8 69.9 Investment holding Sdn Bhd *

Scomi OMS Oilfi eld Services Singapore 69.8 69.9 Investment holding and provision of Pte Ltd # machine shop services

Scomi Transportation Systems Sdn Bhd * Malaysia 69.8 69.9 Investment holding





Signifi cant subsidiary of Scomi OMS Oilfi eld Holdings Sdn Bhd

Scomi OMS Oilfi eld Services Malaysia 69.8 69.9 Provision of machine shop services for Sdn Bhd * tools and equipment used in the petroleum industry

Signifi cant subsidiary of Scomi OMS Oilfi eld Services Pte Ltd

PT Scomi OMS Oilfi eld Services # Indonesia 66.3 66.4 Provision of machine shop services for tools and equipment used in the petroleum industry

Signifi cant subsidiaries of Scomi Transportation Systems Sdn Bhd

Scomi Rail Bhd * Malaysia 69.8 69.9 Design, manufacture, and supply of monorail trains and related services

Scomi Coach Sdn Bhd * Malaysia 69.8 69.9 Manufacturing, fabrication and assembly of commercial coaches and truck vehicle bodies Signifi cant subsidiary of Scomi Oilserve Sdn Bhd

OilServe (L) Berhad @ Labuan, – (1) 60 Leasing of marine vessels and provision Malaysia of marine vessel transportation services

Signifi cant subsidiary of Scomi Energy Sdn Bhd

Scomi NTC Sdn Bhd. * Malaysia – (2) 70 Provision of oil and gas production systems and services





Signifi cant subsidiaries of Scomi Chemicals Sdn Bhd

Scomi Sosma Sdn Bhd @ Malaysia 40 (3) 100 Distribution of chemical products

Scomi Anticor S.A. @ France 40 (3) 93.3 Design and fi eld deployment of various oil and gas production chemicals

* Audited by PricewaterhouseCoopers, Malaysia# Audited by affi liates of PricewaterhouseCoopers, Malaysia@ Audited by fi rms other than PricewaterhouseCoopers, Malaysia and its affi liates(1) During the fi nancial year, the Company has disposed of its entire equity interest in Scomi Oilserve Sdn Bhd, as disclosed in Note

39(d)(2) During the fi nancial year, Scomi NTC Sdn Bhd has been reclassifi ed to a jointly controlled entity(3) During the fi nancial year, the Company has disposed of 60% equity interest in Scomi Sosma Sdn Bhd, as disclosed in Note 39(e).

The results of the Company however continue to be consolidated as Scomi Chemical Sdn Bhd, a direct subsidiary of the Company, has control over Scomi Sosma Sdn Bhd

16. INVESTMENTS IN AN ASSOCIATE Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Shares quoted in Malaysia, at cost 360,124 360,124 360,124 360,124 Share of post-acquisition – profi ts * 47,223 59,469 – – – reserves (28,229) (24,594) – – 379,118 394,999 360,124 360,124 Share of contingent liabilities 15,166 15,731 – –

Market value of shares quoted in Malaysia 147,295 97,152 147,130 97,043

* Included in the share of post-acquisition profi ts during the fi nancial year is the share of impairment of goodwill in an associate of RM42.81million.




16. INVESTMENTS IN AN ASSOCIATE (CONT’D.) The Group’s share of the revenue, assets and liabilities of the associates is as follows: Group’s effective Net Country of equity (loss)/ Name of company incorporation interest Assets Liabilities Revenue profi t % RM’000 RM’000 RM’000 RM’000

2009

Scomi Marine Bhd Malaysia 42.8 671,653 (270,996) 191,659 (30,637)

2008

Scomi Marine Bhd Malaysia 42.8 772,136 (335,835) 199,667 27,769

17 . INVESTMENT IN JOINTLY CONTROLLED ENTITIES Group 2009 2008 RM’000 RM’000

Unquoted shares, at cost 104 33 Share of post-acquisition profi t/(loss) 5,318 (14) 5,422 19

The Group’s share of the revenue, assets and liabilities of the jointly controlled entity is as follows:

Group’s effective Country of equity Net Name of company incorporation interest Assets Liabilities Revenue profi t % RM’000 RM’000 RM’000 RM’000

2009

Sosma (B) Sdn Bhd Brunei 50.0 43 95 – – Scomi NTC Sdn Bhd * Malaysia 70.0 48,689 43,286 68,055 3,596

2008

Sosma (B) Sdn Bhd Brunei 50.0 43 95 – –

* During the fi nancial year, Scomi NTC Sdn Bhd has been reclassifi ed to a jointly controlled entity.

During the fi nancial year, Sosma (B) Sdn Bhd remained inactive, hence there was no share of revenue and operating lease commitments from the jointly controlled entity.




18 . AMOUNT DUE FROM A SUBSIDIARY Company 2009 2008 RM’000 RM’000

Amount due from a subsidiary 10,571 10,098

The amount due from a subsidiary is denominated in Ringgit Malaysia, unsecured, interest free and is repayable after 12 months. The fair value of the amount receivable after 12 months is RM9,438,000 (2008: RM9,015,800). The amount due has not been written down to its fair value as the Directors are of the opinion that the amount will be recoverable at its carrying amount.

19 . OTHER INVESTMENTS Group 2009 2008 RM’000 RM’000

Shares quoted in Malaysia, at cost 2,958 2,958 Unquoted shares, at cost 542 542 3,500 3,500 Less: Allowance for diminution in value (2,388) (2,388) 1,112 1,112 Market value of quoted shares 207 207

The quoted shares have not been fully written down to its fair value as the Directors are of the opinion that the remaining balance will be recoverable at its carrying amount.

The fair value of the unquoted shares approximates the carrying amount.

20. DERIVATIVE FINANCIAL ASSETS/(LIABILITIES) Group 2009 2008 Contract/ Fair value Contract/ Fair value notional assets/ notional assets/ amount (liabilities) amount (liabilities) RM’000 RM’000 RM’000 RM’000

Cross Currency Interest Rate Swaps – cash fl ow hedges 613,500 5,283 613,500 (17,447)

Included in:

Non-current assets 6,835 – Current assets 1,577 – Non-current liabilities (3,129) (17,447) 5,283 (17,447)




20. DERIVATIVE FINANCIAL ASSETS/(LIABILITIES) (CONT’D.)The Group has entered into Cross Currency Interest Rate Swaps (“CCIRS”) that are designated as cash fl ow hedges for the Group’s exposure to foreign exchange on its Murabahah Medium Term Notes. These contracts entitle the Group to receive principal and interest amounts in Ringgit Malaysia and oblige the Group to pay principal and interest amounts in United States Dollars. These contracts have maturities of 4 to 6 years (2008: 4 to 6 years) from December 2006. Exchange of cash fl ows on interest is semi-annually and exchange of cash fl ows on principal is upon maturities.

The Group has also entered into CCIRS that are designed as fair value hedges to hedge the Group’s exposure to interest rate risk and foreigh exchange risk on its Murabahah Medium Term Notes. These contracts entitle the Group to receive principal and fi xed interest amounts in Ringgit Malaysia and oblige the Group to pay principal and fl oating interest amount in United States Dollars. These contracts have maturities of 6 to 7 years (2008: 6 to 7 years) from December 2006. Exchange of cash fl ow interest is semi-annually and exchange of cash fl ows on principal are upon maturities.

The applicable interest rates in United States Dollars on the CCIRS designated as fair value hedges ranged from LIBOR plus 2.11% to US LIBOR plus 2.24% (2008: LIBOR plus 2.11% to US LIBOR plus 2.24%) and the interest rates in Ringgit Malaysia ranged from 6.00% to 6.15% per annum (2008: 6.00% to 6.15% per annum).

In September 2008, the Group entered into two forward starting Interest Rate Swap (“IRS”) contracts with notional amounts totalling USD72,408,000. The IRS contracts entitle the Group to receive fl oating rates of interest equal to the LIBOR on the notional amount and oblige the Group to pay fi xed rates of interest at 3.41% and 3.58% respectively. The IRS contracts have maturities of 4 to 5 years (2008: 4 to 5 years) from December 2008. Interest cash fl ows are exchanged semi-annually with no exchange of principal at maturity.

The CCIRS contracts with the same notional amounts, which were previously designated as fair value hedges, have been re-designated in the prior fi nancial year. Together with the two forward starting IRS contracts, the CCIRS contracts have been jointly designated as cash fl ow hedges of the Group’s Murabahah Medium Term Notes (“MTN”). The cash fl ow hedges effectively ensure the Group pays a fi xed rate of interest denominated in United States Dollars (“USD”), on its MTN, in line with the Group’s fi nancial risk management policies.

The USD interest rates on the CCIRS and IRS contracts jointly designated as hedging instruments in the cash fl ow hedges ranged from 5.52% to 7.23% per annum (2008: 5.52% to 7.23% per annum) and the interest rates in Malaysian Ringgit ranged from 5.70% to 6.15% per annum (2008: 5.70% to 6.15% per annum).

21. INVENTORIES Group 2009 2008 RM’000 RM’000

Consumables 42,945 12,202 Raw materials 32,013 75,205 Work-in-progress 38,845 32,936 Finished goods 184,726 214,651 298,529 334,994




22. RECEIVABLES, DEPOSITS AND PREPAYMENTS Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Trade receivables 509,846 653,651 – – Amounts due from customers on contract (Note 25) 155,547 25,406 – – Amounts receivable from: – subsidiaries – – 93,832 68,294 – jointly controlled entities 1,723 462 73 – – related parties 506 298 312 104 – staff 2,861 4,423 111 171

5,090 5,183 94,328 68,569 Other receivables 117,582 93,149 5,899 3,987 Deposits 16,644 14,737 1,336 977 Prepayments 24,422 28,629 136 236 829,131 820,755 101,699 73,769

Amounts due from subsidiaries, associates and jointly controlled entities including trade balances, are unsecured, with no fi xed terms of repayment and are non-interest bearing except for certain advances which bear interests ranging from 1.80% to 7.00% (2008: 7%) per annum.

Amounts due from staff are unsecured, interest free and repayable within 30 days.

Credit terms for trade receivables range from 30 to 120 days (2008: 30 to 120 days).

The currency exposure profi le of receivables, deposits and prepayment is analysed as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

– Ringgit Malaysia 130,073 186,132 101,699 73,769 – US Dollar 470,349 539,534 – – – Indian Rupee 164,967 – – – – Pound Sterling 8,107 20,278 – – – Singapore Dollar 918 1,244 – – – Norwegian Kroner 13,414 15,733 – – – Nigerian Naira 1,084 2,325 – – – Canadian Dollar 467 2,578 – – – Others 39,752 52,931 – – 829,131 820,755 101,699 73,769




23 . SHORT TERM INVESTMENT Group 2009 2008 RM’000 RM’000

Investment in a money market fund, at cost – 1,500

Market value – 1,500

The fund distribution averaged at 1.95% per annum in the previous fi nancial year.

24 . SHORT TERM DEPOSITS, CASH AND BANK BALANCES Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Short term deposits with licensed banks 105,728 23,510 45,417 6,617 Cash and bank balances 207,395 96,177 65,283 5,892 313,123 119,687 110,700 12,509

The currency exposure profi le of short term deposits, cash and bank balances is analysed as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

– Ringgit Malaysia 180,982 38,504 110,008 11,805 – US Dollar 97,919 51,342 692 704 – Norwegian Kroner 2,464 1,998 – – – Singapore Dollar 1,568 2,652 – – – Pound Sterling 113 – – – – Canadian Dollar 86 919 – – – Nigerian Naira 419 825 – – – Others 29,572 23,447 – – 313,123 119,687 110,700 12,509




24. SHORT TERM DEPOSITS, CASH AND BANK BALANCES (CONT’D.)The effective interest rates for short term deposits, cash and bank balances at the balance sheet date were as follows:

Group Company

2009 2008 2009 2008 % % % %

Short term deposits with licensed banks 1.45 – 3.50 1.90 – 4.32 1.45 – 3.50 2.80 – 3.50

Short term deposits of the Group and Company have maturity periods ranging from 1 to 365 days (2008: 1 to 365 days). Bank balances are deposits held at call with banks.

Short term deposits of the Company and certain subsidiaries amounting to RM51,342,000 (2008: RM23,478,000) have been pledged to licensed banks for banking facilities as disclosed in Note 27 to the fi nancial statements.

Short term deposits of the Company amounting to RM10,103,000 (2008: RM6,313,000) have been pledged to licensed banks for banking facilities.

25 . AMOUNTS DUE FROM/(TO) CUSTOMERS ON CONTRACTS Group 2009 2008 RM’000 RM’000

Construction contract cost incurred to date and attributable profi ts 395,526 150,817 Less: Progress billings (239,979) (127,045) 155,547 23,772

Represented by:

Amount due from customers (included in trade and other receivables – Note 22) 155,547 25,406 Amount due to customers (included in trade and other payables – Note 26) – (1,634) 155,547 23,772 Advance received on contract, included under other payables 3,778 4,569

Included in construction contracts costs incurred during the fi nancial year are: Group 2009 2008 RM’000 RM’000

Staff costs 11,757 771 Subcontract costs – 62,212




26. PAYABLES Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Current liabilities Trade payables 303,025 258,587 – – Amounts due to customers on contract (Note 25) – 1,634 – – Amounts payable to: – associates 7,610 5,638 7,015 2,553 – related parties – 3,937 – –

7,610 9,575 7,015 2,553 Accruals 100,828 158,403 31,100 45,657 Other payables 92,620 107,161 9,185 13,036 504,083 535,360 47,300 61,246

Credit terms for trade payables granted to the Group range from cash terms to 120 days (2008: cash terms to 120 days).

The currency exposure profi le of payables is analysed as follows: Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

– Ringgit Malaysia 162,055 164,867 39,513 53,424 – US Dollar 271,994 314,546 7,787 7,822 – Pound Sterling 11,834 2,693 – – – Singapore Dollar 4,309 9,543 – – – Norwegian Kroner 8,225 6,128 – – – Nigerian Naira 3,603 2,906 – – – Canadian Dollar 117 636 – – – Others 41,946 34,041 – – 504,083 535,360 47,300 61,246

Included in other payables of the Group and Company is an amount of RM7,787,122 (2008: RM10,519,138) owing to a Director of a subsidiary, Scomi Oilfi eld Limited, for the purchase of shares in the said subsidiary. The amount payable is unsecured and bearing interests ranging from 2.5% to 3.5% (2008: Nil) per annum. In prior fi nancial year, the Group and Company wrote back an amount of RM57,352,000 to the income statement based on the latest estimate of the amount payable to the said Director.

The non-trade payables due to subsidiaries are unsecured, interest-free with no fi xed terms of repayments.




27 . BORROWINGS Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Current

Bonds (secured) 199,613 – 50,000 – Bank overdrafts 104,660 72,822 – – Bank borrowings 171,755 193,676 – – Other term loans (secured) 9,793 18,664 – – Hire purchase payables 2,727 2,293 146 190 488,548 287,455 50,146 190 Non-current

Bonds (secured) 678,084 875,361 199,081 248,610 Bank borrowings 26,231 – – – Other term loans (secured) 87,459 95,753 44,509 45,091 Hire purchase payables 5,751 4,394 526 672 797,525 975,508 244,116 294,373

Total borrowings

Bonds (secured) 877,697 875,361 249,081 248,610 Bank overdrafts 104,660 72,822 – – Bank borrowings 197,986 193,676 – – Other term loans (secured) 97,252 114,417 44,509 45,091 Hire purchase payables 8,478 6,687 672 862 1,286,073 1,262,963 294,262 294,563

The currency exposure profi le of borrowings is analysed as follows:

– Ringgit Malaysia 1,046,685 989,627 249,753 249,472 – US Dollar 165,718 236,711 44,509 45,091 – Pound Sterling 44,867 11,721 – – – Singapore Dollar 872 2,025 – – – Canadian Dollar – 12,534 – – – Others 27,931 10,345 – – 1,286,073 1,262,963 294,262 294,563




27 . BORROWINGS (CONT’D.) Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

The maturity profi le of borrowings is analysed as follows:

Due within the next 12 months 488,548 287,455 50,146 190

Due between 1 to 2 years 291,787 210,784 122,443 50,146 Due between 2 to 3 years 302,171 283,032 121,422 122,757 Due between 3 to 4 years 175,516 289,543 137 121,218 Due between 4 to 5 years 7,220 175,864 94 137 Due after 5 years 20,831 16,285 20 115

797,525 975,508 244,116 294,373 1,286,073 1,262,963 294,262 294,563

(a) The effective interest rates per annum on the Group’s borrowings at the balance sheet date are as follows:

2009 2008 % %

Bank overdrafts 2.60 – 13.0 6.00 – 7.90 Bonds 5.20 – 6.20 5.15 – 6.20 Other term loans 4.01 – 6.55 5.42 – 8.25 Bank borrowings 1.00 – 7.50 4.05 – 7.80 Hire purchase payables 3.00 – 6.00 3.00 – 12.00

(b) Bonds

The Bonds comprise the following:

RM250 million medium term notes

RM250 million nominal value serial bonds of the Company through the establishment of a medium term notes programme (“MTN Notes”). The maturity dates of the MTN Notes range from 5 years to 7 years from 28 September 2005, being the date of issuance. The coupon rates of the MTN Notes for the fi rst three years are at 4.5% per annum and 7.5% per annum thereafter. The effective interest rate is 6.8% per annum.

The MTN Notes are secured by:

(i) First charge over shares in Scomi Oilfi eld Limited (“SOL”) comprising 8,239,774 ordinary shares of USD1.00 each; (ii) First charge over shares in Scomi Marine Bhd comprising 313,043,478 ordinary shares of RM1.00 each; and (iii) Assignment of Debt Service Requirement Account (“DSRA”).




27 . BORROWINGS (CONT’D.)(b) Bonds (Cont’d.)

RM630 million Murabahah bonds

RM630 million of Medium Term Notes issued by KMCOB Capital Berhad (“KMCOB Capital”), a subsidiary of SOL, 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 profi t rate ranges from 5.75% to 6.15% per annum, payable semi-annually in arrears.

The Murabahah Bonds are secured by:

(i) Corporate guarantees from Scomi Oiltools Bermuda Limited (“SOBL”); (ii) Corporate guarantees from certain existing and future principal subsidiaries of SOL whose revenue or profi t/loss after

tax are at least 5% of the combined revenue or combined profi t/loss after tax of SOL Group;(iii) Charge over the issued and paid-up share capital and rights and entitlements attached thereto, of certain existing and

future principal subsidiaries of SOL;(iv) Debenture over the present and future asset of KMCOB Capital; (v) Assignment over Financial Services Reserve Account (“FSRA”) of KMCOB Capital to meet its most immediate six months

profi ts 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 December 2009,

no security is given to the rating agency to achieve the requisite rating.

(c) Other term loans, bank overdrafts and trade facilities

Term loan drawn down by a subsidiary

A term loan of a subsidiary denominated in USD with remaining balance of RM3,480,000 (USD1,000,000) (2008: RM3,480,000: USD1,000,000) is secured by way of a negative pledge over the present and future fi xed fl oating assets of a subsidiary company and also a Standby Letter of Credit issued by a fi nancial institution.

Term loan drawn down by the Company

The RM45,240,000 or USD13,000,000 term loan is secured by way of:

(i) A charge ranking pari-passu with the existing bondholders of the Company over 8,239,774 ordinary shares of USD1.00 each in SOL, representing 57.8% of the issued and paid-up ordinary share capital of SOL;

(ii) A charge over the 3-month interest of the Facility Limit placed upfront (“Upfront Deposit”) in a debt service reserve account (“DSRA”); and

(iii) An assignment on the proceeds of at least USD13,000,000 in the event of the proposed listing of SOL, a subsidiary of the Company.

The term loan shall be repaid in two equal instalments in 2011 and 2012.




27 . BORROWINGS (CONT’D.)(c) Other term loans, bank overdrafts and trade facilities (Cont’d.)

Term loan drawn down by the Company (Cont’d.)

The other term loans, bank overdrafts and trade facilities of the Group are secured by way of:

(i) Legal charge over certain landed properties of certain subsidiaries;(ii) Mortgage over certain vessels of a subsidiary including legal deed of assignment of the insurance, earnings and requisition

compensation of the vessels of a subsidiary;(iii) Negative pledge over the present and future, fi xed and fl oating assets of certain subsidiaries; (iv) Assignment of contract proceeds, insurance policies and performance bond; and(v) Standby Letter of Credit (“SBLC”) facility secured by corporate guarantee provided by the Company.

(d) Hire purchase and fi nance lease payables

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Instalments payable:

Not later than 1 year 3,123 2,527 172 222 Between 1 to 2 years 2,801 1,863 162 172 Between 2 to 3 years 3,089 1,450 162 162 Between 3 to 4 years 162 1,449 162 162 Between 4 to 5 years 110 162 110 162 Later than 5 years 25 134 25 134 9,310 7,585 793 1,014 Less: Future fi nance charges (832) (898) (121) (152) Present value of hire purchase and fi nance lease payables 8,478 6,687 672 862

Analysed as:

Due within 12 months 2,727 2,293 146 190 Due to 1 to 2 years 2,543 1,584 138 146 Due to 2 to 3 years 2,957 1,283 137 137 Due to 3 to 4 years 137 1,275 137 137 Due to 4 to 5 years 94 137 94 137 Due more than 5 years 20 115 20 115 8,478 6,687 672 862




27 . BORROWINGS (CONT’D.) (e) Fair value disclosure

The fair value of non-current borrowings approximates the book values except as follows:

Group

2009 2008

Carrying Fair Carrying Fair amount value amount value RM’000 RM’000 RM’000 RM’000

RM250 million MTN 250,000 263,044 250,000 262,722 RM630 million Murabahah bonds 630,000 640,634 630,000 642,048 Hire purchase and fi nance lease payables 8,478 7,569 6,687 6,018

28 . PROVISION FOR REDUNDANCY Group 2009 2008 RM’000 RM’000

At beginning of fi nancial year 3,825 2,502 (Credited)/charged to income statement-net (116) 3,517 Paid during the fi nancial year (2,982) (1,954) Currency translation differences (102) (240) At end of fi nancial year 625 3,825

In March 2005, an indirect subsidiary of the Company, Scomi Oiltools Bermuda Limited (“SOBL”), agreed terms with its two labour unions and signed an agreement on a phased redundancy plan over a four-year period, concluding in the fi nancial year ending31 December 2009, the total liability of which amounted to approximately RM10,590,000 (USD3,000,000). The payments are phased over a four-year period from fi nancial years 31 December 2005 to 31 December 2009.

Additional provision has been made in 2008 relating to multi-country reorganisation and closure of offi ces in some countries.

29 . DEFERRED GOVERNMENT GRANT Group 2009 2008 RM’000 RM’000

Deferred government grant 1,870 431

Included in:

Current liabilities 431 431 Non-current liabilities 1,439 – 1,870 431




29 . DEFERRED GOVERNMENT GRANT (CONT’D.)In the prior fi nancial year, the Group received approval for government grants of RM2,155,000 and RM4,420,000 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 and to design, engineer and fabricate a prototype process equipment to demonstrate the application of D-Solv technology at fi eld scare, respectively.

The grants will be disbursed in accordance with the project milestones subject to the submission of the milestone report and project completion report and verifi cation by a technical expert appointed by the Ministry of Science, Technology and Innovation Malaysia.

As at 31 December 2009, the grant of RM6,575,000 (2008: RM6,575,000) has yet to be fully disbursed to the Group and the assets are not available for use, therefore amortisation over the expected life of the related assets has not commenced.

30 . IRREDEEMABLE CONVERTIBLE SECURED LOAN STOCKS (“ICSLS”)On 14 December 2009, the Company issued 1,515,796,791 of three (3)-year 4% ICSLS at nominal value of RM0.10 each for cash together with 202,106,238 free detachable warrants to subscribe the entitlement of the Proposed Rights Issue by Scomi Engineering Bhd (Note 42(a)) and working capital requirements of the Group.

The salient features of the ICSLS are as follows:

(a) The conversion price is fi xed 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 conversion 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 ICLSL 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 is secured by the cash proceeds from the Rights Issue by Scomi Engineering Bhd (“SEB ICULS Funds”) which will be held in the form of fi xed 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, is included in other reserves (Note 34).




30 . IRREDEEMABLE CONVERTIBLE SECURED LOAN STOCKS (“ICSLS”) (CONT’D.) Group and Company 2009 2008 RM’000 RM’000

Face value of ICSLS issued on 14 December 2009 151,580 – Liability component on initial recognition on 14 December 2009 (18,035) – Deferred tax assets 4,509 – 138,054 – Warrant reserve (Note 34) (32,337) – Conversion of ICSLS (Note 34) (17,233) – 31 December 2009 88,484 –

Liability component on initial recognition on 14 December 2009 18,035 – Conversion of ICSLS (2,940) – Interest expense 222 – 15,317 –

Included in:

Current liabilities 5,254 – Non-current liabilities 10,063 – 15,317 –

Interest expense on the ICSLS is calculated on the effective yield basis by applying the effective interest rate of 8% per annum.

31 . WARRANTSOn 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. The salient features of the warrants are as follows:

(a) The exercise price of the warrants is fi xed at RM0.40 each;

(b) Each warrant entitles the holder to subscribe for one new ordinary shares of RM0.10 each in the Company at the exercise price, subject to adjustments in accordance with the provisions of the Deed Poll; and

(c) The warrants shall be exercisable into new ordinary shares of RM0.10 each in the Company on any market day within a period from the date of issue of the warrants, up to and including the close of business day on date falling three years from the date of issue of the warrants.

As at the balance sheet date, 202,106,238 (2008: Nil) warrants remained unexercised.




32. SHARE CAPITAL Group

2009 2008

’000 RM’000 ’000 RM’000

Authorised

Ordinary shares of RM0.10 each:

At beginning and end of the fi nancial 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 fi nancial year 1,021,839 102,184 1,019,705 101,971

Issued during the fi nancial year:

– conversion of ICSLS 61,773 6,177 – – – exercise of share options 3,189 319 2,134 213 At end of the fi nancial year 1,086,801 108,680 1,021,839 102,184

(a) Increase in share capital

During the fi nancial year, the issued and paid-up share capital of the Company was increased from RM102,183,880 comprising 1,021,838,800 ordinary shares of RM0.10 each, to RM108,680,057 comprising 1,086,800,574 ordinary shares of RM0.10 each, by way of the issuance of:

(i) 61,773,174 new ordinary shares of RM0.10 each pursuant to the conversion of Irredeemable Convertible Secured Loan Stocks (“ICSLS”); and

(ii) 3,188,600 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.

In the prior fi nancial year, the issued and paid-up share capital of the Company was increased from RM101,970,530 comprising 1,019,705,300 ordinary shares of RM0.10 each, to RM102,183,880 comprising 1,021,838,800 ordinary shares of RM0.10 each, by way of the issuance of:

(i) 1,786,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under ESOS at an option price of RM0.17 per share for cash;

(ii) 128,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at an option price of RM1.12 per share for cash;

(iii) 26,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at an option price of RM0.94 per share for cash;

(iv) 118,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at an option price of RM0.90 per share for cash; and

(v) 75,500 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at an option price of RM0.84 per share for cash.

The new ordinary shares issued during the fi nancial year and in the prior fi nancial year ranked pari passu in all respects with the existing shares of the Company.




32 . SHARE CAPITAL (CONT’D.)(b) Treasury shares

The shareholders of the Company, by an ordinary resolution passed in an Annual General Meeting held on 15 June 2009, 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.

During the fi nancial year, the Company purchased 1,000 (2008: 2,000) of its issued and paid-up share capital from the open market on Bursa Malaysia for RM711 (2008: RM1,372). The average price paid for the shares purchased was approximately RM0.71 (2008: RM0.69) per share. The purchase transactions were fi nanced by internally generated funds. The shares purchased are being held as Treasury shares as allowed under Section 67A of the Companies Act, 1965. The Company has the right to reissue these shares at a later date. 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 December 2009.

At the balance sheet date, 14,427,200 (2008: 14,426,200) ordinary shares are held as Treasury shares at a carrying value of RM18,695,746 (2008: RM18,695,035), and the number of outstanding shares in issue after setting off against Treasury shares is 1,072,373,374 (2008: 1,007,411,800).

(c) Employees’ Share Option Scheme

The Company implemented an Employees’ Share Option Scheme (“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.

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 fi fteen 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) The total number of shares comprising options exercised, options remaining exercisable and unexercised offers pending acceptance under the ESOS shall not exceed fi fteen percent (15%) of the total issued and paid-up share capital of the Company, such that not more than fi fty percent (50%) of the shares available under the ESOS are allocated, in aggregate, to the Directors and senior management of the Group;

(ii) 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;




32 . SHARE CAPITAL (CONT’D.)(c) Employees’ Share Option Scheme (Cont’d.)

(iii) 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;

(iv) The option price under the ESOS is the volume weighted average market price quoted on Bursa Malaysia for the past fi ve (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;

(v) 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.

(d) Share option reserve

The movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

2009 2008

Average Average exercise exercise price Options price Options RM ’000 RM ’000

At beginning of fi nancial year 1.01 98,827 1.00 106,273

Granted 0.50 4,000 – – Forfeited 1.05 (11,883) 1.09 (5,313) Exercised 0.17 (3,189) 0.30 (2,133) At end of fi nancial year 1.01 87,755 1.01 98,827

Out of the outstanding options, 60,555,400 units (2008: 44,440,100 units) of options were exercisable. Share options were exercised on a regular basis throughout the fi nancial year, and the weighted average share price for the fi nancial year is RM0.53 (2008: RM0.77).




32 . SHARE CAPITAL (CONT’D.)(d) Share option reserve (Cont’d.)

The options outstanding at the fi nancial year end had exercise prices ranging RM0.17 to RM1.51 (2008: RM0.17 to RM1.51) and a remaining contractual life of 3 years (2008: 4 years).

All options granted under the scheme will expire on 27 April 2013.

The weighted average fair value of options granted during the fi nancial year was determined using the Trinomial valuation model was RM0.27 (2008: Nil) per option. The signifi cant inputs into the model were as follows:

2009 2008

Valuation assumptions:

Expected volatility of share prices 60% – Expected dividend yield 2.03% – Expected option life 1.0 – 3.0 years – Weighted average share price at the date of grant RM0.48/share – Risk-free interest rate (per annum) 3.25% –

The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices over the last 5 years.

33. SHARE PREMIUM Group and Company 2009 2008 RM’000 RM’000

At 1 January 2009 243,820 242,929 Arising from: – conversion of ICSLS 12,598 – – exercise of ESOS 223 428 Transfer from share option reserve (Note 34) – 463 At 31 December 2009 256,641 243,820




34. OTHER RESERVES Exchange Share fl uctuation Hedge Warrants option reserve reserve reserve reserve ICSLS Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

2009

At 1 January 2009 (70,654) (17,400) – 18,870 – (69,184) Currency translation differences arising during the fi nancial year – subsidiaries (7,648) – – – – (7,648) – associates (4,693) – – – – (4,693) Share of reserves in subsidiaries and associates – (3,361) – 711 – (2,650) Cash fl ow hedges: – fair value gains – 19,853 – – – 19,853 – transfer to income statement – (5,802) – – – (5,802) Issue of ICSLS (Note 30) – – – – 138,054 138,054 Issue of warrants (Note 30) – – 32,337 – (32,337) – Conversion of ICSLS (Note 30) – – – – (17,233) (17,233) Recognised in income statement (Note 5) – company – – – 1,008 – 1,008 – subsidiary – – – 1,134 – 1,134

– – – 2,142 – 2,142 Transferred to share premium arising from exercise of ESOS – – – (97) – (97) Disposal of subsidiaries 340 – – (78) – 262 At 31 December 2009 (82,655) (6,710) 32,337 21,548 88,484 53,004




34. OTHER RESERVES (CONT’D.) Exchange Share fl uctuation Hedge Warrants option reserve reserve reserve reserve ICSLS Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group

2008

At 1 January 2008 (83,035) (9,297) – 15,978 – (76,354) Currency translation differences arising during the fi nancial year – subsidiaries (7,173) – – – – (7,173) – associates 19,554 – – – – 19,554 Share of reserves in subsidiaries and associates – 2,527 – (271) – 2,256 Cash fl ow hedges: – fair value losses – (35,272) – – – (35,272) – transfer to income statement – 24,642 – – – 24,642 Recognised in income statement (Note 5) – company – – – 2,753 – 2,753 – subsidiary – – – 1,117 – 1,117

– – – 3,870 – 3,870 Transferred to share premium arising from exercise of ESOS – – – (627) – (627) Disposal of subsidiaries – – – (80) – (80) At 31 December 2008 (70,654) (17,400) – 18,870 – (69,184)

Share Warrants option reserve reserve ICSLS Total RM’000 RM’000 RM’000 RM’000

Company

2009

At 1 January 2009 – 15,154 – 15,154 Recognised in income statement (Note 5) – 831 – 831 Transferred to subsidiaries – 177 – 177 Issue of ICSLS (Note 30) – – 138,054 138,054 Issue of warrants (Note 30) 32,337 – (32,337) – Conversion of ICSLS (Note 30) – – (17,233) (17,233) At 31 December 2009 32,337 16,162 88,484 136,983




34. OTHER RESERVES (CONT’D.) Share Warrants option reserve reserve ICSLS Total RM’000 RM’000 RM’000 RM’000

2008

At 1 January 2008 – 12,864 – 12,864 Recognised in income statement (Note 5) – 1,187 – 1,187 Transferred to subsidiaries – 1,566 – 1,566 Transferred to share premium arising from exercise of ESOS (Note 33) – (463) – (463) At 31 December 2008 – 15,154 – 15,154

35. PROVISION FOR RETIREMENT BENEFITS Group 2009 2008 RM’000 RM’000

Non-current liabilities

Balance sheet obligations for retirement benefi ts 4,182 4,005

Charged to income statement (Note 5) 797 591

The amounts recognised in the balance sheet are determined as follows:

Group 2009 2008 RM’000 RM’000

Present value of unfunded obligations 3,932 3,365 Unrecognised actuarial losses 250 640 Liability in balance sheet 4,182 4,005

The amounts recognised in the income statement are as follows: Group 2009 2008 RM’000 RM’000

Current service cost 656 401 Interest cost 141 193 797 594 Net actuarial losses recognised – (3) Total included in staff costs 797 591




35. PROVISION FOR RETIREMENT BENEFITS (CONT’D.)Of the total (credit)/charge, (RM39,000) (2008: (RM17,000)), RM271,000 (2008: RM154,000), and RM565,000 (2008: RM454,000) were included in cost of sales, selling and marketing expenses, and administrative expenses respectively.

The movements in the liability recognised in the balance sheet are as follows: Group 2009 2008 RM’000 RM’000

At beginning of the fi nancial year 4,005 3,982 Charged to income statement (Note 5) 797 591 Actuarial gains (180) (508) Benefi ts paid – (321) Currency translation differences (440) 261 At end of the fi nancial year 4,182 4,005

The principal actuarial assumptions used were as follows: Group 2009 2008

Discount rate 5% – 11% 5% – 13% Future salary increases 5% – 8% 5% – 9% Normal retirement age 55 – 60 55 – 60

Assumptions regarding future mortality experience are based on advice from published statistics and experience in each territory.

The date of the last actuarial valuation is on 16 April 2009.

36 . 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 balance sheet:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Deferred tax assets (78,033) (65,570) (3,613) –

Deferred tax liabilities: – subject to income tax 4,836 4,859 – 161 (73,197) (60,711) (3,613) 161




36 . DEFERRED TAX (CONT’D.) Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

At beginning of the fi nancial year (60,711) (32,831) 161 161 (Credited)/charged to income statement (Note 7) – property, plant and equipment (16,630) 18,593 – – – tax losses, capital allowances and tax incentives 6,793 (41,587) – – – provisions for other liabilities and charges (116) (1,269) – – – others 171 (2,396) – –

(9,782) (26,659) – – Credited to equity (3,774) – (3,774) – Disposal of a subsidiary (30) – – – Others 1,151 (115) – – Currency translation differences (51) (1,106) – – At end of the fi nancial year (73,197) (60,711) (3,613) 161 Deferred tax assets

Tax losses, capital allowances and tax incentives (79,221) (79,439) – – Provision for other liabilities and charges (2,128) (4,481) – – Payables (970) (905) – – ICSLS (3,774) – (3,774) – Others (11,472) (9,002) – – Offsetting 19,532 28,257 161 – (78,033) (65,570) (3,613) – Deferred tax liabilities

Property, plant and equipment 23,491 32,127 161 161 Others 877 989 – – Offsetting (19,532) (28,257) (161) – 4,836 4,859 – 161

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 balance sheet is as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Deductible temporary differences 105,749 76,642 2,080 1,450 Unabsorbed tax losses and tax incentives 44,679 83,349 27,838 20,139

Deferred tax assets have not been recognised on the deductible temporary differences, unabsorbed tax losses and tax incentives as it is uncertain that there will be future taxable profi ts to utilise the deferred tax assets.




37 . COMMITMENTS AND CONTINGENT LIABILITIES Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

(a) Authorised capital expenditure not recognised in the fi nancial statements:

– contracted 6,601 85,609 – 115 – not contracted 38,614 43,862 260 387 45,215 129,471 260 502

Analysed as follows:

– property, plant and equipment 20,214 105,109 260 502 – acquisition of additional shares in subsidiaries – 366 – – – development costs 16,045 15,296 – – – others 8,956 8,700 – – 45,215 129,471 260 502

(b) Lease commitments:

Instalments payable – not later than 1 year 10,985 4,519 507 554 – later than 1 year but not later than 5 years 22,302 11,625 353 808 – later 5 years 8,480 5,370 – – 41,767 21,514 860 1,362

(c) Contingent liabilities:

Corporate guarantees given to banks for banking facilities granted to subsidiaries – – 177,195 224,742 Bank guarantees given to third party in respect of performance guarantee given by subsidiaries 90,302 91,666 – – Share of contingent liabilities of an associate 15,166 15,731 – – 105,468 107,397 177,195 224,742




38 . SIGNIFICANT RELATED PARTY TRANSACTIONS(a) In addition to the related party disclosures mentioned elsewhere in the fi nancial statements, set out below are other signifi cant

related party transactions. The related party transactions described below were carried out under terms and conditions obtainable in transactions with unrelated parties.

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Signifi cant transactions with related parties:

Subsidiaries:

Management fees receivable – – 3,100 6,983 Dividend income – – 9,628 12,148 Interest income – – 694 47 Associates:

Management fees receivable from Scomi Marine Bhd 220 1,683 220 1,683 Dividend income – – 2,348 8,296

Jointly controlled entity:

Management fees receivable from Scomi NTC Sdn Bhd 2,789 – – –

Related companies:

Share registration fee paid to Symphony 228 123 186 102 Airline ticketing services provided by Lintas 3,130 3,774 13 323 Chartering of marine vessels from TLO and Sarku 10,319 5,313 – – Chartering of marine vessels from Gemini Sprint 10,333 14,926 – – Trade purchases from a company in which a subsidiary’s director has an interest 82,415 196,986 – –

(i) Symphony Share Registers Sdn Bhd (“Symphony”) and Lintas Travel & Tours Sdn Bhd (“Lintas”) are companies connected to certain Directors;

(ii) CH Offshore Pte Ltd (“CHO”) is a company with common Directors with the Company; and

(iii) TL Offshore Sdn Bhd (“TLO”) and Sarku Engineering Sdn Bhd (“Sarku”) are subsidiaries of a corporate shareholder of a former subsidiary, Scomi Oilserve Sdn Bhd.

The details on interest charged on advances provided to subsidiaries are disclosed in Note 22.

Information regarding outstanding balances arising from related party transactions as at 31 December 2009 is disclosed in Note 22 and Note 26.




38. SIGNIFICANT RELATED PARTY TRANSACTIONS (CONT’D.) (b) Compensation of key management personnel

The remuneration of Directors and other members of key management during the fi nancial year was as follows:

Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Salaries and short-term employee benefi ts 17,961 15,389 3,113 2,446 Defi ned contribution plan 1,300 862 461 252 Other long-term benefi ts – 10 – – Share-based payments 2,049 1,897 533 878 21,310 18,158 4,107 3,576

Included in the total key management personnel are: Group Company

2009 2008 2009 2008 RM’000 RM’000 RM’000 RM’000

Directors’ remuneration (Note 8) 1,276 2,530 1,224 2,456

Executive Directors of the Group and the 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 2009 2008 ‘000 ‘000

At beginning of the fi nancial year 25,586 27,726

Granted 4,000 – Forfeited – (1,780) Exercised (620) (360) At end of the fi nancial year 28,966 25,586

39 . SIGNIFICANT ACQUISITION AND DISPOSAL OF SUBSIDIARIES (a) Acquisition of subsidiaries

Financial year ended 31 December 2008

Purchase Group’s Effective Name of subsidiary acquired consideration effective interest acquisition date %

Scomi Oiltools Oman LLC RO 19,250 40.85 3 September 2008 (RM169,000)




39 . SIGNIFICANT ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONT’D.) (a) Acquisition of subsidiaries

Financial year ended 31 December 2008 (Cont’d.)

Details of the assets, liabilities and net cash outfl ow arising from the acquisition of subsidiaries are as follows: Group RM’000

Cash and cash equivalents 385 Property, plant and equipment (Note 11) 2,674 Inventories 1,038 Trade and other receivables 2,839 Trade and other payables (1,393) Tax payables (33) Fair value of net assets 5,510 Minority interest (2,700) Amount accounted for as an associate (2,665) Goodwill 24 Total purchase consideration 169

Purchase consideration settled by cash (169) Cash and cash equivalents of subsidiaries acquired 385 Net cash infl ow on acquisition 216

Scomi Oiltools Oman LLC, an associate as at 31 December 2007, became a subsidiary of Scomi Oiltools Bermuda Limited, an indirect subsidiary of the Company, on 3 September 2008.

(b) Acquisition of additional interest in existing subsidiaries Financial year ended 31 December 2009

Purchase Group’s additional Effective Name of subsidiary consideration effective interest acquisition date RM’000 %

Scomi Anticor S.A. 382 6.7 1 August 2009

The minority interests acquired and the net cash outfl ow arising from the acquisition of additional interest in existing subsidiaries are as follows:

Group RM’000

Minority interest acquired 291 Premium paid 91 Net cash outfl ow on acquisition 382




39 . SIGNIFICANT ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONT’D.)(b) Acquisition of additional interest in existing subsidiaries


Purchase Group’s additional Effective Name of subsidiary consideration effective interest acquisition date RM’000 %

Scomi Anticor S.A. 255 6.7 30 July 2008

The minority interests acquired and the net cash outfl ow arising from the acquisition of additional interest in existing subsidiaries are as follows:

Group RM’000

Minority interest acquired 191 Premium paid 93 Net cash outfl ow on acquisition* 284 * Includes incidental costs on acquisition amounting to RM29,000

(c) Incorporation of subsidiaries


Group’s Name of subsidiaries effective interest Incorporation date %

Oiltools Africa Limited 76.1 7 August 2009 Scomi International Private Limited 100.0 16 September 2009 Scomi Oiltools AS 76.1 30 November 2009


Group’s Name of subsidiaries effective interest Incorporation date %

Scomi Oiltools (Rus) Limited Liability Company 100.0 11 March 2008 Scomi OMS Oilfi eld Services Arabia Limited 70.0 7 May 2008 Urban Transit Private Limited 100.0 4 December 2008




39 . SIGNIFICANT ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONT’D.) (d) Disposal of subsidiaries

Financial year ended 31 December 2009 Disposal Group’s effective Effective Name of subsidiaries consideration interest disposed disposal date RM’000 %

Scomi Oilserve Sdn Bhd 8,168 60.0 24 August 2009

Details of the assets, liabilities and net cash infl ow arising from the disposal of subsidiaries are as follows:

Group RM’000

Property, plant and equipment 18,704 Deferred tax assets (30) Trade and other receivables 18,966 Cash and cash equivalents 11,289 Trade and other payables (29,530) Borrowings (7,035) Tax payable (1,710) Exchange fl uctuation reserve 340 Minority interest (4,261) Net assets disposed 6,733 Loss on disposal of subsidiaries (64) Proceeds from disposal of subsidiaries 6,669 Less: Cash and cash equivalents of subsidiaries disposed (11,289) Net cash outfl ow on disposal of subsidiaries (4,620)


Clarimax Consolidated Sdn Bhd 330 60.0 4 January 2008 Scomi Transportation Solutions Sdn Bhd 3,381 71.0 31 March 2008 Scomi KMC Sdn Bhd 48 48.0 4 November 2008




39 . SIGNIFICANT ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONT’D.) (d) Disposal of subsidiaries (Cont’d.)

Financial year ended 31 December 2008 (Cont’d.)


Group RM’000

Property, plant and equipment 9,768 Intangible assets 2,007 Deferred tax assets 651 Trade and other receivables 4,481 Cash and cash equivalents 673 Tax recoverable 714 Trade and other payables (9,060) Borrowings (8,192) Tax payable (312) Minority interest 113 Net assets disposed 843 Gain on disposal of subsidiaries 2,916 Proceeds from disposal of subsidiaries* 3,759 Less: Cash and cash equivalents of subsidiaries disposed (212) Net cash infl ow on disposal of subsidiaries 3,547

* The proceeds from disposal are net of expenses directly attributable to the disposal of RM419,000.

(e) Disposal of interest in existing subsidiaries


Scomi Sosma Sdn Bhd 3,900 60.0 16 July 2009


Group RM’000

Net assets acquired by minority interest 2,979 Goodwill in respect of the dilution in interest (Note 12) 898 Net assets disposed 3,877 Gain on disposal of subsidiaries 23 Net cash infl ow on disposal of subsidiaries 3,900




40. SEGMENT INFORMATION The Group is organised on a worldwide basis into the following main business segments:

(i) Investment holding – provision of management services.

(ii) Oilfi eld services – provision of drilling fl uids 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 industrial chemicals to the downstream oil and gas and other general industries; – supply of production chemicals to the upstream oil and gas industry; – provision of machine shop services; and – provision of oilfi eld equipment, supplies and services.

(iii) Energy and logistics – urban transportation solutions provider through design and manufacture of monorails, engineering buses and a wide range of special purpose vehicles such as tankers, trucks and airport ground support equipment; – rail solutions systems provider – provision of machine shop services to the oil & gas industry. (iv) Energy logistics – provision of marine vessel transportation services and leasing of marine vessels.

(v) Production enhancement – provision of production chemicals to the upstream oil and gas industry for enhancing performance and improving effi ciency; industrial chemicals to the oil and gas and general industry; and the gas business which is the carbon dioxide separation technology for the oil and gas industry.

Inter-segment revenue in the current and prior fi nancial year comprises management services.

(a) Primary reporting format – business segments Energy and Oilfi eld engineering Energy Production Investment services logistics logistics enhancement holding Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2009

Revenue External revenue 1,337,273 537,729 40,450 55,783 220 – 1,971,455 Inter-segment revenue 55,024 – – – 12,848 (67,872) – Total segment revenue 1,392,297 537,729 40,450 55,783 13,068 (67,872) 1,971,455




40. SEGMENT INFORMATION (CONT’D.) (a) Primary reporting format – business segments (Cont’d.)

Energy and Oilfi eld engineering Energy Production Investment services logistics logistics enhancement holding Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2009 (Cont’d.)

Results

Segment results 83,731 75,460 (2,250) (532) (24,200) – 132,209 Finance costs (net) – – – – – – (75,169) Unallocated costs – – – – – – (23) Share of results of associates – – (9,898) – – – (9,898) Share of results of jointly controlled entities – – – 3,596 – – 3,596 Profi t before taxation 50,715 Taxation expense (24,750) Profi t for the fi nancial year 25,965

Assets

Segment assets 1,594,388 806,851 – 72,912 292,404 (165,770) 2,600,785 Investments in associates – – – – 379,118 – 379,118 Investments in jointly controlled entities – – – 5,422 – – 5,422 Unallocated corporate assets – – – – – – 107,712 Consolidated total assets 3,093,037

Liabilities

Segment liabilities 1,165,610 357,760 – 68,213 420,003 (196,308) 1,815,278 Unallocated corporate liabilities – – – – – – 40,322 Consolidated total liabilities 1,855,600

Other information

Capital expenditure 19,702 51,998 – 1,877 102 (221) 73,458 Depreciation 66,299 13,397 801 262 1,107 – 81,866 Amortisation 1,315 199 – 67 – – 1,581




40 . SEGMENT INFORMATION (CONT’D.) (a) Primary reporting format – business segments (Cont’d.)

Energy and Oilfi eld engineering Energy Production Investment services logistics logistics enhancement holding Elimination Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2008

Revenue External revenue 1,534,753 434,091 51,027 84,596 1,673 – 2,106,140 Inter-segment revenue 6,421 276 – – 27,427 (34,124) – Total segment revenue 1,541,174 434,367 51,027 84,596 29,100 (34,124) 2,106,140

Results

Segment results 100,954 20,768 5,947 2,460 123,941 – 254,070 Finance costs (net) – – – – – – (73,416) Unallocated costs – – – – – – (68,481) Share of results of associates 271 – 27,769 – – – 28,040 Profi t before taxation 140,213 Taxation expense (3,928) Profi t for the fi nancial year 136,285

Assets

Segment assets 1,655,303 640,302 45,777 90,689 132,206 (93,069) 2,471,208 Investments in associates – – – – 394,999 – 394,999 Investments in jointly controlled entities – – – 19 – – 19 Unallocated corporate assets – – – – – – 77,716 Consolidated total assets 2,943,942

Liabilities

Segment liabilities 1,229,705 225,135 30,945 85,949 388,213 (135,912) 1,824,035 Unallocated corporate liabilities – – – – – – 39,245 Consolidated total liabilities 1,863,280

Other information

Capital expenditure 156,726 79,823 104 1,363 11,427 – 249,443 Depreciation 63,225 8,431 1,309 305 1,254 – 74,524 Amortisation 1,199 192 – 68 – – 1,459




40. SEGMENT INFORMATION (CONT’D.)(a) Primary reporting format – business segments (Cont’d.)

Unallocated costs represent corporate expenses. Segment assets consist of property, plant and equipment, prepaid land lease payments, intangible assets, inventories, receivables and cash and cash equivalents, and mainly excludes investments, deferred tax assets and tax recoverable. Segment liabilities comprise payables and exclude taxation and deferred tax liabilities.

Capital expenditure comprise additions to property, plant and equipment, prepaid land lease payments and intangible assets. Capital expenditure in the prior fi nancial year included additions resulting from acquisitions through business combinations.

(b) Secondary reporting format – geographical segments

The Group operates mainly in the following geographical segments, with Malaysia being the Company’s home country:

(i) Europe – provision of oilfi eld equipment, supplies and drilling waste management services; – provision of drilling fl uids, equipment and services; and – provision of machine shop services. (ii) Middle East and – provision of oilfi eld equipment, supplies and drilling waste management services; Africa – provision of drilling fl uids, equipment and services; – provision of marine vessel for logistic and offshore support services; and – provision of machine shop services.

(iii) Asia – provision of oilfi eld equipment, supplies and drilling waste management services; – provision of drilling fl uids, equipment and services; – provision of machine shop services; – design and manufacture of monorail, special purpose vehicles, urban transportation and rail solutions; – provision of marine vessel for logistic and offshore support services; – provision of industrial and production chemicals and gas services; and – investment holding.

(iv) Americas – provision of oilfi eld equipment, supplies and drilling waste management services; – provision of drilling fl uids, equipment and services; and – provision of machine shop services.




40. SEGMENT INFORMATION (CONT’D.) (b) Secondary reporting format – geographical segments (Cont’d.)

Middle East and Europe Africa Asia Americas Group RM’000 RM’000 RM’000 RM’000 RM’000

2009

Total revenue from external customers 150,666 491,568 1,093,830 235,391 1,971,455 Segment assets 190,827 552,228 1,493,086 364,644 2,600,785 Capital expenditure 3,889 2,279 62,287 5,003 73,458

2008

Total revenue from external customers 303,991 477,596 999,436 325,117 2,106,140 Segment assets 229,963 605,006 1,244,239 392,000 2,471,208 Capital expenditure 25,985 56,570 132,433 34,455 249,443

In determining the geographical segments of the Group, sales are based on the location of the production or service facilities. Total assets and capital expenditure are determined based on where the assets are located.

41. SIGNIFICANT EVENTS DURING THE FINANCIAL YEARIn addition to events which have been disclosed elsewhere in the fi nancial statements, the other signifi cant events during the fi nancial year are as follows:

Proposed Rights Issues

On 13 August 2009, CIMB Investment Bank Berhad, on behalf of the Company announced a proposed renounceable rights issue of up to RM165,669,555 nominal value of three (3) -year 4% Ireedemable Convertible Secured Loan Stock (“ICSLS”) at 100% of its nominal value together with up to 220,892,740 free detachable warrants on the basis of fi fteen (15) RM0.10 nominal value ICSLS together with two (2) free warrants for every ten (10) ordinary shares of RM0.10 each held in the Company.

The proposed rights issue was completed on 16 December 2009, following the admission of RM151,579,679 nominal value of ICSLS and 202,106,238 warrants and the listing and quotation of the aforesaid securities on the Main Market of Bursa Securities on16 December 2009.




42. SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATEThe signifi cant events subsequent to the balance sheet date are as follows:

(a) Proposed Rights Issue by Scomi Engineering Bhd

On 27 August 2009, Maybank Investment Bank Berhad, on behalf Scomi Engineering Bhd (“SEB”) announced a proposed renounceable rights issue of up to RM68,312,059 nominal value of three (3)-year 4% Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) at 100% of its nominal value on the basis of two (2) RM1.00 nominal value of ICULS for every nine (9) ordinary shares of RM1.00 each held in SEB.

On 23 March 2010, SEB completed the Rights Issue with the listing and quotation for RM61,352,936 ICULS on the Main Market of Bursa Malaysia Securities Berhad.

(b) Proposed sale of 100% equity interest in machine shop business by SEB

On 17 March 2010, SEB accepted an offer from a purchaser, a subsidiary of a foreign-listed multinational corporation, to exclusively negotiate the acquisition of SEB’s entire machine shop business of Scomi OMS Oilfi eld Holdings Sdn Bhd and Scomi OMS Oilfi eld Services Pte Ltd, both wholly-owned subsidiaries of SEB, for a total consideration of USD110 million on a debt free and cash free basis. Pursuant to the acceptance of the Offer, a bank guarantee of USD2.2 million, representing 2% of the Proposed Sale, has been provided by the purchaser to SEB.

The Proposed Sale is subject to:

(i) The completion of the due diligence exercise on the machine shop business by the purchaser; and

(ii) Execution of the share sale agreement (“SSA”) which may include such price adjustment mechanism terms to the sale consideration as the parties may mutually agree.

As at the date of the fi nancial statements, the Proposed Sale is still pending execution of the SSA.

(c) Proposed Debt Rationalisation

On 1 April 2010, Scomi Oilfi eld Limited (“SOL”), a 76.1% subsidiary of SGB, proposed to undertake a debt rationalisation exercise to further strengthen its fi nancial position to capitalise on the improving business environment of the oil and gas sector.

The exercise will primarily involve the rationalisation of SOL’s overall debt profi le to improve its liquidity position.

SOL is currently in the midst of fi nalising the details of the debt rationalisation exercise with its lenders and this exercise is expected to be completed within the fi nancial year 2010.




43 . FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe Group’s fi nancial risk management policy seeks to ensure that adequate fi nancial 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 defi ned guidelines that are approved by the Board and the Group’s policy is not to engage in speculative transactions.

(a) Interest rate risk

The Group’s primary interest rate risk relates to interest-bearing debt; the Group had no substantial long term interest-bearing assets as at 31 December 2009. The investments in fi nancial assets are mainly short term in nature and have been placed mostly in fi xed deposits and occasionally, in short term commercial paper and investment funds.

The Group manages its interest rate exposure by maintaining a mix of fi xed and fl oating 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 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 information on maturity dates and effective interest rates of fi nancial assets and liabilities is disclosed in the respective notes.

(b) Foreign exchange risk

The Group operates internationally and is exposed to various currencies, mainly United States Dollar, Pounds Sterling, Canadian Dollar, Norwegian Kroner, Nigerian Naira, Australian Dollar, Singapore Dollar and Indian Rupee. Foreign currency denominated assets and liabilities together with expected cash fl ows from highly probable purchases and sales give rise to foreign exchange exposures.

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.

Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level.

(c) Liquidity risk

The Group manages its debt maturity profi le, operating cash fl ows and the availability of funding so as to ensure that refi nancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains suffi cient 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 fi nancial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness.




43 . FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.)(d) 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. Trade receivables are monitored on an ongoing basis via Group management reporting procedures.

The Group does not have any signifi cant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any fi nancial instruments.

(e) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefi ts for other stakeholders.

In order to maintain or adjust the capital structure, the Group may issue new shares or adjust the amount of dividends paid to shareholders.

Management monitors capital based on the following ratios:

(i) Net Debt to Equity Ratio

The Group is required by the bondholders of the RM250 million MTN Notes to maintain a net debt to equity ratio not exceeding 1.25 times as at 31 December 2009 and on the same date every year thereafter until the Notes are fully repaid in year 2012.

The SOL Group is required by the holders of the RM630 million Murabahah Bonds to maintain a net debt to equity ratio not exceeding 1.25 times as at 31 December 2009 and on the same date every year thereafter until the Bonds are fully repaid in year 2013.

The details of the bonds are set out in Note 27(b).

(ii) Annual Debt Service Cover Ratio (“ADSCR”)

The Group is required by the same bondholders to maintain ADSCR of at least 1.5 times.

The Group is in compliance with all externally imposed capital requirements for the fi nancial year ended 31 December 2009.




43 . FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D.)(f) Fair value of unrecognised fi nancial instruments

Target Redemption Forward Currency Options (“TRF”)

In order to hedge its exposure to foreign currency risks, the Group entered into two TRF contracts in 2008 with total notional amounts of USD2,500,000 per monthly settlement to hedge the Group’s United States Dollars (“USD”) receivables against depreciation of the USD, with the condition that the entire structure knocks out if the accumulated intrinsic value breaches 5,000 pips. The contracts entitle the Group to sell USD and buy RM at fi xed strike rates at various expiry dates until October 2009 if the structure remains intact.

As at December 2008, a knock out event has not occurred and the fi xing rate is higher than strike rates. As at 31 December 2008, the total notional amount of outstanding TRF contracts to which the Group has committed to sell is USD45,000,000 (2007: Nil) based on the fi xing rate prevailing at the balance sheet date. The fair value of the TRF contracts as at 31 December 2008 is a loss of USD3,050,000 (approximately RM10,614,000) (2007: Nil).

The TRF contracts expired in October 2009.

(g) Forward foreign exchange contracts

Forward foreign exchange contracts are entered into by the Group in currencies other than the functional currency to manage exposure to fl uctuations in foreign currency exchange rates on specifi c transactions.

The outstanding notional principal amount of the Group’s foreign exchange contracts are as follows:

2009 2008 RM’000 RM’000

Maturity

Less than 6 months 17,745 –

The foreign currency amounts to be received and the contractual exchange rates of the Group’s outstanding contracts are as follows:

2009 Currency Currency Average to be to be RM’000 contracted Hedged item received* paid** equivalent rate

Future purchase of raw materials EURO RM 9,325 5.0616 USD RM 7,042 3.4416 AUD RM 1,378 2.8706

The fair value of outstanding foreign exchange contracts of the Company at the balance sheet date was unfavourable by RM178,000 (2008: Nil).

* Currency being hedged i.e. currency of the underlying purchase transactions. ** Currency to be paid to counter parties to obtain the currency of the purchase transactions.




44 . CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTSEstimates 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 defi nition, 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 fi nancial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are outlined below.

(a) Estimated impairment of goodwill

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.

The recoverable amounts of cash generating units (“CGU”) were determined based on the value in use calculations. The calculations require the use of estimates as set out in Note 12.

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 impairment of the goodwill allocated to the respective CGUs.

(b) Deferred tax assets recognition in Scomi Oiltools Sdn Bhd (“SOSB”) and Scomi Oiltools Inc (“SOInc”)

Deferred tax assets are recognised to the extent that it is probable that future taxable profi ts will be available against which the temporary differences can be utilised. This involves judgment regarding the future fi nancial performance of certain subsidiaries.

Included in the carrying amount of deferred tax assets of the Group of RM78.0 million (2008: RM65.6 million) is an amount in relation to SOSB which was recognised in previous years amounting to RM43.8 million (2008: RM43.8 million). The Directors have reassessed the future taxable profi ts of SOSB beyond 2011, i.e the expected expiration of its existing tender contracts, and are of the opinion that given that certain contracts have been successfully secured during the fi nancial year, the carrying amount of the deferred tax assets is recoverable.

During the fi nancial year, the Group has recognised a further RM9.2 million of deferred tax assets relating to SOInc, a wholly-owned subsidiary of Scomi Oiltools Bermuda Limited. The Directors have assessed that the anticipated recovery of the market in the United States will enable the utilisation of the deferred tax assets recognised.




44 . CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONT’D.)Critical accounting estimates and assumptions (Cont’d.)

(c) Assessment of indirect taxes payable in Scomi Engineering Bhd (“SEB”)

SEB and its wholly-owned subsidiary, Scomi Rail Bhd (“the Group”), are undertaking an overseas monorail project, targeted for completion in 2011. During the course of execution of the project, the Group will supply goods and services which would typically attract various indirect taxes in that country. 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 satisfi ed 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 specifi c projects in the interest of the public.

(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.

Management is currently in the process of undertaking the necessary procedures to obtain the required exemptions/concessions from the respective Governments and Authorities.

Based on the above, the Directors of SEB are of the opinion that:

(i) there is a reasonable case for claim of tax exemptions/concessions and the likelihood of SEB obtaining such exemptions is high; and

(ii) a reasonable estimate of the likely outcome of additional indirect taxes payable, if any, cannot be ascertained at this stage.

Critical judgement in applying accounting policies

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specifi c policy could materially affect the reported results and fi nancial position of the Group.

However, the Directors are of the opinion that there are no accounting policies that require subjective judgement in the current fi nancial year other than as disclosed below.




44 . CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONT’D.)Critical judgement in applying accounting policies (Cont’d.)

(a) Deferred tax assets recognition in Scomi Rail Bhd (“SRB”)

SRB, a wholly-owned subsidiary of Scomi Engineering Bhd, had undertaken research and development (“R&D”) activities for the development of its product, where this research is expected to satisfy the eligibility criteria of research project/activity under Public Ruling No. 5/2004 which allows such R&D expenditure to qualify for double deduction for income tax purposes.

The tax consultants of SRB have reviewed the current status of the application and the expenses incurred in relation to the R&D project and, based on the application submitted, are of the view that the R&D would satisfy the defi nition of research as spelt out in the Public Ruling No. 5/2004 and the R&D expenditure should ordinarily qualify for the double deduction based on past experience. SRB has consequently recognised a double deduction claim on such expenditure in its provisional tax computation for the fi nancial years 2006 to 2009, resulting in the recognition of a cumulative deferred tax asset of RM14.2 million (2008: RM8.9 million) on unabsorbed losses as at the balance sheet date.

Based on the above, the Directors of SRB are of the opinion that the R&D activity would meet the eligibility criteria of a research project/activity under Public Ruling No. 5/2004 and management will undertake the necessary procedures and endeavour to obtain the required approval from the Inland Revenue Board on the research project /activity.

45. APPROVAL OF FINANCIAL STATEMENTSThe fi nancial statements have been approved for issue in accordance with a resolution of the Board of Directors on 30 April 2010.




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 fi nancial statements set out on pages 63 to 156 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 December 2009 and of the results and the cash fl ows of the Group and Company for the fi nancial year ended on that date in accordance with the provisions of the Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.

Signed on behalf of the Board of Directors in accordance with their resolution dated 30 April 2010.

TAN SRI ASMAT BIN KAMALUDIN SHAH HAKIM @ SHAHZANIM BIN ZAINChairman Chief Executive Offi cer

Kuala Lumpur30 April 2010

I, Loong Chun Nee, the offi cer primarily responsible for the fi nancial management of Scomi Group Bhd., do solemnly and sincerely declare that the fi nancial statements set out on pages 63 to 156 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.

LOONG CHUN NEE

Subscribed and solemnly declared by the abovenamed Loong Chun Nee at Kuala Lumpur in Malaysia on 30 April 2010, before me.

COMMISSIONER FOR OATHS

STATEMENT BY DIRECTORSpursuant to Section 169(15) of the Companies Act, 1965

STATUTORY DECLARATIONpursuant to Section 169(16) of the Companies Act, 1965


REPORT ON THE FINANCIAL STATEMENTSWe have audited the fi nancial statements of Scomi Group Bhd., which comprise the balance sheets as at 31 December 2009 of the Group and of the Company, and the income statements, statements of changes in equity and cash fl ow statements of the Group and of the Company for the fi nancial year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 63 to 156.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation and fair presentation of these fi nancial statements in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these fi nancial 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 whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the fi nancial statements 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 Company’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 fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial statements have been properly drawn up in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965 so as to give a true and fair view of the fi nancial position of the Group and of the Company as of 31 December 2009 and of their fi nancial performance and cash fl ows for the fi nancial year then ended.

INDEPENDENT AUDITORS’ REPORTto the Members of Scomi Group Bhd


REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSIn 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 fi nancial statements and the auditors’ reports of all subsidiaries of which we have not acted as auditors, which we are indicated in Note 15 to the fi nancial statements.

(c) We are satisfi ed that the fi nancial statements of the subsidiaries that have been consolidated with the Company’s fi nancial statements are in form and content appropriate and proper for the purposes of the preparation of the fi nancial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The audit reports on the fi nancial statements of the subsidiaries did not contain any qualifi cation or any adverse comment made under Section 174(3) of the Act.

OTHER MATTERSThis 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 SRIDHARAN NAIR(No. AF: 1146) (No. 2656/05/10 (J))Chartered Accountants Chartered Accountant

Kuala Lumpur30 April 2010

Independent Auditors’ Report

to the Members of Scomi Group Bhd


ANALYSIS OF SHAREHOLDINGSas at 30 April 2010

Authorised share capital : RM300,000,000.00 divided into 3,000,000,000 ordinary shares of RM0.10 eachIssued and paid up capital : RM116,806,202.00 divided into 1,168,062,020 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 sharesTypes of shares : Ordinary shares of RM0.10 eachVoting Rights : One vote per ordinary share

DISTRIBUTION OF SHAREHOLDINGS

Shareholders Shareholding

Size of shareholdings No. of Holders % of Holders No. of Shares % of Shares

Less than 100 55 0.23 1,569 0.00

100 to 1,000 2,593 10.94 2,393,493 0.21

1,001 to 10,000 13,232 55.83 75,376,024 6.53

10,001 to 100,000 7,056 29.77 226,592,890 19.64

100,001 to less than 5% of issued shares 763 3.22 763,874,214 66.21

5% and above of issued shares 1 0.00 85,396,630 7.40

Total 23,700 100.00 1,153,634,820 100.00

LIST OF TOP THIRTY (30) LARGEST SHAREHOLDERS

Name of Shareholder No. of Shares Percentage

(%)

1. UOBM Nominees (Tempatan) Sdn BhdTOIC Investments Ltd for Onstream Marine Sdn Bhd

85,396,630 7.40

2. SBB Nominees (Tempatan) Sdn Bhd Kumpulan Wang Persaraan (Diperbadankan)

48,803,200 4.23

3. HLG Nominee (Asing) Sdn BhdExempt An for UOB Kay Hian Pte Ltd (A/c clients)

43,129,000 3.74

4. EB Nominees (Tempatan) Sendirian BerhadPledged Securities Account for Kaspadu Sdn Bhd (SFC)

30,688,000 2.66

5. SBB Nominees (Tempatan) Sdn BhdEmployees Provident Fund Board

29,162,100 2.53

6. HSBC Nominees (Asing) Sdn BhdFGCS NV for Fortis Obam N.V.

27,500,000 2.38

7. RHB Capital Nominees (Tempatan) Sdn BhdPledged Securities Account for Kaspadu Sdn Bhd (SBSSB 1311005)

27,000,000 2.34

8. RHB Capital Nominees (Tempatan) Sdn BhdPledged Securities Account for Kaspadu Sdn Bhd (SHSZ 681139)

25,815,055 2.24

9. A.A. Anthony Nominees (Tempatan) Sdn BhdMulti-Purpose Credit Sdn Bhd for Kaspadu Sdn Bhd

25,000,000 2.17


Analysis of Shareholdings

as at 30 April 2010

Name of Shareholder No. of Shares Percentage

(%)

10. HSBC Nominees (Asing) Sdn BhdBBH and Co Boston for GMO Emerging Markets Fund

20,101,100 1.74

11. HSBC Nominees (Asing) Sdn BhdExempt An for Credit Suisse (SG BR-TST-Asing)

18,908,000 1.64

12. HSBC Nominees (Asing) Sdn BhdExempt An for The Bank of New York Mellon (Mellon Acct)

14,107,700 1.22

13. Citigroup Nominees (Asing) Sdn BhdCBNY for Dimensional Emerging Markets Value Fund

13,422,000 1.16

14. CIMB Group Nominees (Tempatan) Sdn BhdAmtrustee Berhad for CIMB Islamic Dali Equity Theme Fund

12,103,600 1.05

15. AMSEC Nominees (Tempatan) Sdn BhdAmtrustee Berhad for CIMB Islamic Dali Equity Growth Fund (UT-CIMB-Dali)

11,746,200 1.02

16. Berjaya Sompo Insurance Berhad 10,000,000 0.87

17. Kaspadu Sdn Bhd 10,000,000 0.87

18. HSBC Nominees (Asing) Sdn BhdExempt An for Credit Suisse (HK BR-TST-Asing)

10,000,000 0.87

19. ABB Nominee (Tempatan) Sdn BhdPledged Securities Account for Gajahrimau Capital Sdn Bhd

10,000,000 0.87

20. AIBB Nominees (Tempatan) Sdn BhdChua Ma Yu

9,500,000 0.82

21. Cartaban Nominees (Asing) Sdn BhdState Street Luxembourg Fund A5FK for AXA World Funds-Framlington Talents

9,444,557 0.82

22. Malaysia Nominees (Tempatan) Sendirian BerhadGreat Eastern Life Assurance (Malaysia) Berhad (LGF)

8,811,300 0.76

23. Malaysia Nominees (Tempatan) Sendirian BerhadGreat Eastern Life Assurance (Malaysia) Berhad (DR)

8,461,900 0.73

24. Lim Fong Peng @ Lim Fung Feng 8,440,720 0.73

25. Malaysia Nominees (Tempatan) Sendirian BerhadGreat Eastern Life Assurance (Malaysia) Berhad (LPF)

7,234,800 0.63

26. AllianceGroup Nominees (Tempatan) Sdn BhdPledged Securities Account for Ng See Cheng (8040841)

7,050,000 0.61

27. M&A Nominee (Asing) Sdn BhdExempt An for UOB Kay Hian Pte Ltd (A/c clients)

6,735,000 0.58

28. Tan Yu Wei 6,120,078 0.53

29. Abdul Aziz bin Mohd Zain 5,917,885 0.51

30. HSBC Nominees (Asing) Sdn BhdExempt An for BGL BNP Paribas (OPCVM A/c)

5,909,700 0.51

Total 556,508,525 48.24


SUBSTANTIAL SHAREHOLDERS

Name of Shareholders Direct Shareholding Indirect Shareholding

No. of Shares Held % No. of Shares Held %

Kaspadu Sdn Bhd 118,503,055 (1) 10.27 86,521,970 (2) 7.50

Onstream Marine Sdn Bhd 86,521,970 7.50 – –

Shah Hakim @ Shahzanim bin Zain 529,100 0.05 205,025,025 (3) 17.77

Dato’ Kamaluddin bin Abdullah – – 205,025,025 (3) 17.77

Total 205,554,125 17.82 – –

Notes

1 Held through RHB Capital Nominees (Tempatan) Sdn Bhd, CIMB Group Nominees (Tempatan) Sdn Bhd and EB 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 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd.


as at 30 April 2010


DIRECTORS’ SHAREHOLDINGS

Directors Direct Interest Indirect Interest

No. of Shares

% of Shares

No. of Options

No. of Shares

% of Shares

No. of Options

Scomi Group Bhd

Tan Sri Asmat bin Kamaludin 200,000 (1) 0.02 700,000# 65,000 (2) 0.01 140,000~

Tan Sri Nik Mohamed bin Nik Yaacob – – 600,000# – – –

Datuk Hamzah bin Bakar 1,200,000 0.10 600,000# – – –

Datuk Haron bin Siraj 120,000 0.01 600,000# – – –

Dato’ Mohammed Azlan bin Hashim – – 600,000# – – –

Dato’ Mohamed Azman bin Yahya – – 600,000# 10,000,000 (3) 0.87 –

Foong Choong Hong 410,000 0.04 350,000# – – –

Sreesanthan a/l Eliathamby – – 420,000# – – –

Shah Hakim @ Shahzanim bin Zain 529,100 0.05 7,356,500# 205,025,025 (4) 17.17 –

Related Company- Scomi Engineering Bhd (“SEB”)

Tan Sri Asmat bin Kamaludin – – – 36,000 (5) 0.01 –

Shah Hakim @ Shahzanim bin Zain+ – – 2,000,000^ 192,567,567 (6) 69.32 –

Notes:

# Options granted pursuant to the Company’s Employees’ Share Option Scheme to subscribe for ordinary shares in the Company.

~ Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through the options granted to his daughter, Sarah binti Asmat pursuant to the Company’s Employees’ Share Option Scheme to subscribe for ordinary shares in the Company.

^ Options granted pursuant to SEB’s Employees’ Share Option Scheme to subscribe for ordinary shares in SEB.

+ By virtue of his interests in the shares and options in the Company, as disclosed above, he is deemed to have an interest in shares in all the subsidiaries of the Company.

1 150,000 shares held through CIMSEC Nominees (Tempatan) Sdn Bhd.

2 Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through the shareholding held by his daughter, Sarah binti Asmat.

3 Deemed interested by virtue of Section 6A(4) of Companies Act, 1965 through his and his wife’s direct shareholdings in Gajahrimau Capital Sdn Bhd, whereby all the 10,000,000 shares are held through ABB Nominees (Tempatan) Sdn Bhd.

4 Deemed interested by virtue of Section 6A(4) of Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd.

5 Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through his children’s direct shareholding in SEB.

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


as at 30 April 2010


ANALYSIS OF IRREDEEMABLE CONVERTIBLE SECURED LOAN STOCKS (“ICSLS”) HOLDINGSas at 30 April 2010

Total Number of ICSLS Issued : 1,515,796,791Total Number of Outstanding ICSLS : 947,146,225Issued Price of ICSLS : RM0.10 per ICSLSConversion of ICSLS : four (4) units of ICSLS for one (1) ordinary share of RM0.10 each

DISTRIBUTION OF ICSLS HOLDINGS

ICSLS Holders ICSLS Holding

Size of ICSLS Holdings No. of ICSLS Holders

% of ICSLS Holders

No of ICSLS % of ICSLS

Less than 100 19 0.23 948 0.00

100 to 1,000 62 0.76 36,698 0.00

1,001 to 10,000 2,979 36.32 15,851,421 1.67

10,001 to 100,000 4,447 54.23 145,971,600 15.41

100,001 to less than 5% of issued ICSLS 692 8.44 321,185,958 33.91

5% and above of issued ICSLS 2 0.02 464,099,600 49.00

Total 8,201 100.00 947,146,225 100.00

LIST OF TOP THIRTY (30) LARGEST ICSLS HOLDERS

Name of ICSLS Holder No of ICSLS Percentage(%)

1. UOBM Nominees (Asing) Sdn BhdTOIC Investments Ltd

415,349,600 43.85

2. HSBC Nominees (Asing) Sdn Bhd FGCS NV for Fortis OBAM N.V.

48,750,000 5.15

3. HSBC Nominees (Asing) Sdn BhdExempt An for the Bank of New York Mellon (Mellon Acct)

18,750,000 1.98


15,000,000 1.58

5. Lim Fong Peng @ Lim Fung Feng 12,886,080 1.36

6. HSBC Nominees (Asing) Sdn Bhd Exempt An for BGL BNP Paribas (OPCVM A/c)

10,664,550 1.13


10,102,500 1.07

8. CIMSEC Nominees (Tempatan) Sdn BhdCIMB for Sapura Capital Sdn Bhd (PB)

5,160,300 0.54

9. Tay Kheng Seng 4,275,000 0.45

10. HSBC Nominees (Asing) Sdn BhdExempt An for JPMorgan Chase Bank, National Association (Bermuda)

4,125,000 0.44


Name of ICSLS Holder No of ICSLS Percentage(%)

11. HDM Nominees (Asing) Sdn BhdDBS Vickers Secs (S) Pte Ltd for Tay Boon Huat

4,033,300 0.43

12. RHB Capital Nominees (Tempatan) Sdn BhdPledged Securities Account for Yong Pai Hang (041002)

3,600,000 0.38

13. Public Nominees (Tempatan) Sdn BhdPledged Securities Account for Lim Choon Tong (E-SPG)

3,150,000 0.33

14. Public Invest Nominees (Tempatan) Sdn BhdPledged Securities Account for Lee Keng Seng (M)

3,100,000 0.33

15. Hamzah bin Bakar 3,000,000 0.32

16. HDM Nominees (Asing) Sdn BhdUOB Kay Hian Pte Ltd for Neo Luu Seng

2,800,000 0.30

17. Teo Ah Seng 2,800,000 0.30

18. Ng Hong Tee 2,490,000 0.26

19. Chuah Hak Sip 2,368,500 0.25

20. Multi-Purpose Insurans Bhd 2,250,000 0.24

21. Norwidyawati binti Abdul Aziz 2,212,000 0.23

22. Lee Chiah Cheang 2,092,000 0.22

23. Kejutaan Vital Properties Sdn Bhd 2,000,000 0.21

24. Tan Yu Wei 1,978,506 0.21

25. HDM Nominees (Tempatan) Sdn BhdPledged Securities Account for Ng Kong Ghee (M02)

1,950,000 0.21

26. Loh Lye Ngok 1,925,000 0.20

27. OSK Nominees (Tempatan) Sdn BerhadPledged Securities Account for Gouk Siew Mee

1,800,000 0.19

28. AIBB Nominees (Tempatan) Sdn BhdPledged Securities Account for Lok Huey Ming

1,635,000 0.17

29. CIMSEC Nominees (Tempatan) Sdn BhdCIMB Bank for James Chow Khin Hoong (MP0115)

1,550,000 0.16

30. John Lim Kheng Poh 1,500,000 0.16

Total 593,297,336 62.65

Analysis of Irredeemable Convertible Secured Loan Stocks (“ICSLS”) Holdings

as at 30 April 2010


DIRECTORS’ ICSLS HOLDINGS


No of ICSLS % of ICSLS No of ICSLS % of ICSLS

Tan Sri Asmat bin Kamaludin 300,000 (1) 0.03 97,500 (2) 0.01

Tan Sri Nik Mohamed bin Nik Yaacob – – – –

Datuk Hamzah bin Bakar 3,000,000 0.32 – –

Datuk Haron bin Siraj – – – –

Dato’ Mohammed Azlan bin Hashim – – – –

Dato’ Mohamed Azman bin Yahya – – 15,000,000 (3) 1.58

Foong Choong Hong – – – –

Sreesanthan a/l Eliathamby – – – –

Shah Hakim @ Shahzanim bin Zain – – – –

Notes:1 225,000 ICSLS are held through CIMSEC Nominees (Tempatan) Sdn Bhd.2 Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through the ICSLS holding held by his daughter,

Sarah binti Asmat.3 Deemed interested by virtue of Section 6A(4) of Companies Act, 1965 through his and his wife’s direct shareholdings in Gajahrimau

Capital Sdn Bhd, whereby all the 15,000,000 ICSLS are held through ABB Nominees (Tempatan) Sdn Bhd.

Analysis of Irredeemable Convertible Secured Loan Stocks (“ICSLS”) Holdings

as at 30 April 2010


ANALYSIS OF WARRANT HOLDINGSas at 30 April 2010

Total Number of Warrants Issued : 202,106,238Outstanding Warrants : 202,105,258Exercise Price of Warrants : RM0.40

DISTRIBUTION OF WARRANT HOLDINGS

Warrant Holders Warrant Holdings

Size of Warrant Holdings No. of Warrant Holders

% of Warrant Holders

No. of Warrants % of Warrant

Less than 100 242 2.94 11,306 0.01

100 to 1,000 2,436 29.56 1,473,197 0.73

1,001 to 10,000 3,924 47.62 15,283,180 7.56

10,001 to 100,000 1,428 17.33 48,122,648 23.81

100,001 to less than 5% of issued warrants 209 2.54 81,834,981 40.49

5% and above of issued warrants 1 0.01 55,379,946 27.40

Total 8,240 100.00 202,105,258 100.00

LIST OF TOP THIRTY (30) LARGEST WARRANT HOLDERS

Name of Warrant Holder No. of Warrants Percentage(%)

1. UOBM Nominees (Asing) Sdn Bhd TOIC Investments Ltd

55,379,946 27.40

2. HSBC Nominees (Asing) Sdn BhdFGCS NV for Fortis OBAM N.V.

6,500,000 3.22

3. CIMSEC Nominees (Tempatan) Sdn BhdCIMB Bank for Chia Mooi Kia (MM0684)

3,000,000 1.48

4. HSBC Nominees (Asing) Sdn BhdExempt An for the Bank of New York Mellon (Mellon Acct)

2,500,000 1.24


2,000,000 0.99

6. Mayban Securities Nominees (Tempatan) Sdn BhdPledged Securities Account for Wai Nyuk Moi @ Heng Nyok Moi (R79-Margin)

1,800,000 0.89

7. Lim Phee Lin 1,610,000 0.80

8. HSBC Nominees (Asing) Sdn BhdExempt An for BGL BNP Paribas (OPCVM A/c)

1,421,940 0.70

9. Tan Beng Chuan 1,400,000 0.69


1,347,000 0.67


Name of Warrant Holder No. of Warrants Percentage(%)

11. HLG Nominee (Tempatan) Sdn BhdHong Leong Bank Bhd for Lim Wei Han

1,300,000 0.64

12. Chong Art Boon 1,220,000 0.60

13. Tan Eyok Shiong 1,200,000 0.59

14. TASEC Nominees (Tempatan) Sdn BhdPledged Securities Account for Chan Kim Tong

1,121,100 0.55

15. CIMSEC Nominees (Tempatan) Sdn BhdCIMB Bank for Chin Fan Onn (MY0618)

1,070,000 0.53

16. Ng Kong Nam 1,046,000 0.52

17. Maria a/p Tio Jau Hong 1,012,000 0.50

18. Poh Seng Hee 1,000,040 0.49

19. Tang Boon Siang 1,000,000 0.49

20. Public Nominees (Tempatan) Sdn BhdPledged Securities Account for Chan See Chee (E-PDG)

1,000,000 0.49

21. CIMSEC Nominees (Tempatan) Sdn BhdCIMB Bank for James Chow Khin Hoong (MP0115)

926,100 0.46

22. Public Nominees (Tempatan) Sdn BhdPledged Securities Account for Tan Siew Giap (PPG/KEN)

915,000 0.45

23. Teo Kah Choo 900,000 0.45

24. Lai Nyun Tai 860,567 0.43

25. Chong Kah Leong 850,300 0.42

26. Chong Kah An 850,000 0.42

27. Ong Ko Loan 833,000 0.41

28. CIMSEC Nominees (Tempatan) Sdn BhdCIMB for Sapura Capital Sdn Bhd (PB)

688,040 0.34

29. Loh Ing Kiong 600,000 0.30

30. Lim Hong Sim @ Lim Kim Hong 570,000 0.28

Total 95,921,033 47.44

Analysis of Warrant Holdings

as at 30 April 2010


Analysis of Warrant Holdings

as at 30 April 2010

DIRECTORS’ WARRANT HOLDINGS


No. of Warrants % of Warrants

No. of Warrants % of Warrants

Tan Sri Asmat bin Kamaludin 40,000 (1) 0.02 13,000 (2) 0.01

Tan Sri Nik Mohamed bin Nik Yaacob – – – –

Datuk Hamzah bin Bakar – – – –

Datuk Haron bin Siraj – – – –

Dato’ Mohammed Azlan bin Hashim – – – –

Dato’ Mohamed Azman bin Yahya – – 2,000,000 (3) 0.99

Foong Choong Hong – – – –

Sreesanthan a/l Eliathamby – – – –

Shah Hakim @ Shahzanim bin Zain – – – –

Notes:1 30,000 Warrants held through CIMSEC Nominees (Tempatan) Sdn Bhd.2 Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through the Warrants holding held by his daughter,

Sarah binti Asmat.3 Deemed interested by virtue of Section 6A(4) of Companies Act, 1965 through his and his wife’s direct shareholdings in Gajahrimau

Capital Sdn Bhd, whereby all the 2,000,000 Warrants are held through ABB Nominees (Tempatan) Sdn Bhd.


No.Registered Owner

Description / Location Address

Existing Use

Tenure of land: Freehold or leasehold (years) / Date of Acquisition

Land area / Built-up area

Approximate age of building

Audited Net Book Value as at 31.12.2009 (RM’000)

1. Scomi OMS Oilfi eld Services Pte Ltd

Land (Lot 926C Mukim 7) and Building: 48 Gul Circle Singapore 629581

Workshop and Offi ce

Leasehold for 40 years (until 2018) / 01.01.1978

Land area: 150,388 sq ft. Built-up area: 28,772 sq ft

22 years Building: 3,459

2. Scomi OMS Oilfi eld Services Sdn Bhd

Land and Building: Lot No. 31 Johor Technology Park Senai - Kulai, Johor Bahru Malaysia



Land area: 130,680 sq ft.

2 years Land: 1,904 Building: 2,156


Building: Lot 1 of 206291750 Ranca-ranca Industrial Estate, Jalan Patau-patau Territory of Labuan, Malaysia



Land area: 2,466 sq meters for workshop and offi ce.

2 1/2 years Buidling: 5,607


Building: Warehouse 14 Door No. 1, Kemaman Supply Base, Kemaman Terengganu, Malaysia


Renewable annually Land area: 5,832 sq meters for workshop and offi ce.

2 years Buidling: 670


Vacant industrial land: Jalan Arsat Federal Territory of Labuan, Malaysia

Sub-let Leasehold for 999 years (until 2867)/ 27.06.1984

Land area: 2,023 sq meters

N/A Land: 767

6. Scomi OMS Oilfi eld Holdings Sdn Bhd

Vacant industrial land: Jalan Arsat Federal Territory of Labuan, Malaysia

Sub-let Leasehold for 999 years (until 2867) / 28.06.1984

Land area: 1,821 sq meters

N/A Land: 690

7. PT Scomi OMS Oilfi eld Services

Land and Building: Jl. Mulawarman, RT 023 No.115 and RT 022, No.054 Sepinggan Balikpapan Selatan, Kalimantan Indonesia

Workshop, Offi ce and Staff house

Leasehold for 20 years (until 24.09.2026) for workshop and offi ce. Leasehold for 7 years (until 13.03.2012) for staff house

Land area: 7,467 sq meters for workshop, offi ce and 2,440 sq meters for staff house

12 years Land: 2,360 Building: 457

8. Scomi Coach Sdn Bhd

Land and Building: EMR 2751 Lot 795 and EMR 2616 Lot 796, Mukim Serendah, Daerah Hulu Selangor, Malaysia

Factory and Offi ce

Freehold / 15.04.1996

Land area: 61,714 sq meters. Built-up area: 26,556 sq meters

Building 1: 1/2 yearBuilding 2: 13 years

Land: 8,020Building 1: 9,856Building 2: 23,247

LIST OF PROPERTIESas at 31 December 2009


List of Properties


No.Registered Owner


Existing Use





9. Scomi Oiltools Sdn Bhd

Master Title: Land held under Geran 46494, 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 Sungai

Buloh Daerah Petaling, Negeri

Selangor, Malaysia)

Postal address: No. 1-1, Block C1, Jalan PJU 1/41 Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia.

Five-storey shop offi ce

Freehold 31.10.1999

Built-up area: 11,755 sq ft

12 years (since 1997)

Land & building: 1,505

10. Scomi Oiltools (Kemaman) Sdn Bhd

Kemaman Warehouse No. 24, Kemaman Supply Base, 24007 Kemaman, Terengganu, Malaysia.

Warehouse for offi ce use, laboratory, milling and storage activities

Not applicable 15.11.1991

Built-up areas: 19,200 sq ft

18 years (since 1991)

Building: 581

11. Scomi Oiltools de Venezuela, S.A

Land and Building: Via Los Pilones, KM 1 Anaco, Edo. Anzoategui, Venezuela.

PIMSA Machine Shop

Freehold 01.10.2000

Land area: 68,700 sq ft, Structure: 22,200 sq ft

45 years Land: 143Building: 59

12. Scomi Oiltools de Venezuela, S.A.

Land and Building: Carretera Santa Barbara, Ent. Well SBC-10-19-23-40 Santa Barbara Edo. Monagas, Venezuela

Land Farm Freehold 01.07.2001

Land area: 6,478,850 sq ft (60.19 hectares) Structure: 1,290 sq ft

15 years Land & building: 153


No.Registered Owner


Existing Use





13. Scomi Oiltools Inc.

Land and Building: 1601 SE, 39th Street Oklahoma City, OK 73129, United States.

Shop, offi ce and yard

Freehold 18.09.1998

Land area: 1 acre Structure/Built-up areas: 5,000 sq ft

28 years Land: 348 Building: 150

14. Scomi Oiltools Inc.

Land: Heathrow Forest Parkway/ Interwood South Parkway, Interwood Business Park, near George Bush International Airport.

Undeveloped land

Freehold 14.01.2008

3.037 Acres N/A Land: 2,735

15. Scomi Oiltools (Europe) Limited

Land and buildings held under 2 separate titles ABN 13822 and ABN 13824: Denmore House, Denmore Road, Bridge of Don Industrial Estate, Aberdeen AB23 8JW, Scotland, United Kingdom.

Offi ce and workshop

Heritable Land area: 3.5 acres, Built-up areas:1. Offi ce –

11,339 sq ft 2. Workshop –

29,044 sq ft

28 years Land: 9,570, Building: 10,162

16. PT. Inti Jatam Pura

Jl. Raya Duri - Dumai, Km.131 Duri, Riau 28884, Indonesia.

Offi ce and workshop

Leasehold: 24.03.1992 - 24.03.2012 (20 years)

Land area: 23,865 m2Building area: 207.5 m2

21 years Nil

List of Properties



CORPORATE DIRECTORY

CORPORATEScomi Group Bhd5th Floor, Wisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala Lumpur, MalaysiaTel : +603 2080 5080Fax : +603 7490 5131

Scomi Oiltools5th Floor, Wisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala Lumpur, MalaysiaTel : +603 2080 5080Fax : +603 2080 5033

Scomi Engineering Bhd5th Floor, Wisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala Lumpur, MalaysiaTel : +603 2080 6222Fax : +603 2080 6333

Scomi Rail Bhd5th Floor, Wisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala Lumpur, MalaysiaTel : +603 2080 6222Fax : +603 2080 6328

Scomi Marine Bhd5th Floor, Wisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala Lumpur, MalaysiaTel : +603 2080 6200Fax : +603 2080 5191

Scomi Chemicals Sdn Bhd5th Floor, Wisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala Lumpur, MalaysiaTel : +603 2080 5080Fax : +603 2080 5087

Scomi OMS Oilfi eld Services Sdn Bhd5th Floor, Wisma Chase PerdanaOff Jalan SemantanDamansara Heights50490 Kuala Lumpur, MalaysiaTel : +603 2080 6222Fax : +603 2080 5011

OPERATING LOCATIONSAlgeriaScomi Oiltools AlgeriaBP 429, Bir MessaoudHassi MessaoudOuargla, Algeria

America - Latin (Anaco)Scomi Oiltools de Venezuela SAAv Jose Antonio AnzoateguiSector “El Cinco” AnacoEstado Anzoategui, Venezuela

America-Latin (Barinas)Scomi Oiltools de Venezuela SAUrbanizacion Alto BarinasAv Los Andes, C C Dona GraziaPiso 2, Ofc 4, BarinasEstado Barinas, Venezuela

America - Latin (Ciudad Ojeda)Scomi Oiltools de Venezuela SAAvenida IntercomunalCalle Arague, Sector La Playa#12 Ciudad OjedaEstado Zulian, Venezuela

America - Latin (Maturin)Scomi Oiltools De VenezuelaCarretera NacionalMaturin – La Toscana A100 mts de laE/S la Encrucijada, Maturin Estado-Monagas, Venezuela

America - North (Bakersfi eld)Scomi Oiltools Inc6000, “C” Schirra CourtBakersfi eld, California93311 USA

America - North (Bridgeport)Scomi Oiltools Inc5762, HWY 380Bridgeport, Texas76426 USA

America - North (Broussard)Scomi Oiltools Inc216, Millstone RoadBroussard, LA70518 USA

America-North (Hobbs)Scomi Oiltools Inc 6610 S. Eunice HighwayHobbs, New Mexico88240 USA

America - North (Houston)Scomi Oiltools Inc521, N Sam HoustonParkway East, #300Houston, Texas77060 USA

America-North (Louisiana)Scomi Oiltools Inc1710 N. Hearne DriveShreveport, Louisiana 71100, USA

America-North (Oklahoma City)Scomi Oiltools Inc1601, SE 39th, Oklahoma CityOklahoma, 73129 USA

America-North (Pennsylvania)Scomi Oiltools Inc101 Walton StreetPhilipsburg, PA 16866 USA

Australia (Darwin)Scomi OMS Oilfi eld Services (Australia) Pty Ltd22 Nebo Road, Hudson CreekEast Arm, Northern Territory Australia

Australia (Perth)Scomi Oiltools Pty Ltd15, Boulder RoadMalaga, Western Australia6090 Australia

Bangladesh (Dhaka)Scomi Oiltools Ltd7th Floor, Cosmos Centre69/1, New Circular RoadMalibagh, Dhaka-1217Bangladesh

Brunei DarussalamPY Oiltools Sdn. BhdLot No.34/40, Light industrial AreaSungai Bera, Anduki, Seria KB 2133Negara Brunei Darussalam

China (Beijing)Scomi Oiltools (S) Pte LtdRm 1507, Tower BEagle PlazaNo. 26, Xiao Yun RoadChaoyang DistrictBeijing 100016, China

China (Shekou)Scomi Oiltools (S) Pte LtdRoom D, 7th FloorTimes PlazaNo. 1, Taizi RoadShekou, Shenzhen518067 China

China (Tanggu)Scomi Oiltools (S) Pte LtdA-1704, Teda New SkylineNo. 12, Nan Hai RoadTeda Tianjin, 300457, China

Congo (Pointe Noir)Oiltools (Africa) LimitedBP 685, Pointe NoireZone Industrielle Do LoandjiliRepublic du Congo


Egypt (Cairo)Scomi Oiltools Egypt S A EKM 10, Ain Sukhna RoadKattamina Oilfi eld Services ComplexCairo, Egypt

FranceScomi Anticor S A E6 Avenue des AmandiersZ.A. du Mardaric04310 Peyrius, France

India (Mumbai)KMC Oiltools India Private LtdUnit No 302, A Wing Business SquareAndheri-Ghatkopar Link RoadChakala, Andheri (East)Mumbai 400093 India

Urban Transit Pvt LtdMumbai Monorail ProjectUnit 102, B WingBusiness SquareChakala, Andheri EastMumbai 400093 India

Indonesia (Balikpapan)PT. Scomi OiltoolsJl. Mulawarman Rt 45No.2, ManggarBalikpapan 76116East Kalimantan, Indonesia

PT. Scomi OMS Oilfi eld ServicesJl. Mulawarman Rt 23No 115, Batakan KecilBalikpapan 76115East Kalimantan, Indonesia

Indonesia (Duri)PT. Scomi OiltoolsJl. Raya Duri Dumai Km 131Duri, PekanbaruSumatera, 28884 Indonesia

Indonesia (Jakarta)PT. Scomi OiltoolsGedung Tetra PakSuite 101/104/103Jl. Buncit Raya Kav 100Jakarta Selatan12510 Indonesia

IranScomi Oiltools (Kish) Ltd24, 2nd Floor, Ararat StreetVanak Avenue, Iran

Kuwait (Agent)Scomi Oiltools (Cayman) Ltdc/o RawdaitanBehind Commercial Bankof Kuwait (East Ahmadi Branch)Plot No. 131 to 137Block No. 06PO Box 9713 Ahmadi, 61008 Kuwait

Malaysia (Johor)Scomi OMS Oilfi eld Services Sdn BhdPLO 31, Jalan Teknologi 2Taman Teknologi Johor81400 Senai, Johor Bahru, Malaysia

Malaysia (Kemaman)Scomi Oiltools (Kemaman) Sdn BhdWarehouse 24, Letterbox No. 72Kemaman Supply Base24007 Kemaman, TerengganuMalaysia

Scomi OMS Oilfi eld Services Sdn BhdWarehouse 14, Open YardKemaman Supply Base24007 Kemaman, TerengganuMalaysia

Malaysia (Kuala Lumpur)Scomi NTC Sdn BhdSuite 07-08, Menara See Hoy Chan374 Jalan Tun Razak50400 Kuala Lumpur, Malaysia

Malaysia (Labuan)Scomi Oiltools Sdn BhdAsian Supply BaseRanca-Ranca Industrial EstatePO Box 8202387030 Labuan Federal TerritoryMalaysia

Scomi OMS Oilfi eld Services Sdn BhdRanca-Ranca Industrial EstatePO Box 8202387018 Labuan Federal TerritoryMalaysia

Malaysia (Miri)Scomi Oiltools Sdn BhdLot 2164, 1st FloorSaberkas Commercial CentreJalan Pujut-Lutong98000 Miri, Sarawak, Malaysia

Malaysia (North Kuala Lumpur)Engineering, Technology &Innovation CentreScomi Rail BhdLot 795, Jalan Monorel, Sungai Choh48000 Rawang, Selangor Darul EhsanMalaysia

Scomi Coach Sdn BhdLot 795, Jalan Monorel Sungai Choh, 48000 Rawang Selangor Darul Ehsan, Malaysia

Scomi Special Vehicles Sdn BhdLot 795, Jalan Monorel Sungai Choh, 48000 Rawang Selangor Darul Ehsan, Malaysia

Malaysia (Selangor)Global Research & Technology CentreNo. 9, Jalan Astaka U8/83Seksyen U8, 40150 Shah Alam Selangor, Malaysia

Service, Warranty, After Sales & Technical Centre (SWAT) Scomi Coach Marketing Sdn BhdUnit B1-B3, Block B, Lot 44721Jalan Perusahaan SatuBatu Caves Industrial Estate68100 Batu Caves, SelangorMalaysia

Mexico (Poza Rica)Scomi Oiltools de Mexico S de RL de CVCasa 71, Carretera Mexico – TuxpanEjido Ricardo Flores MagonCP 92900, TihuatlanVeracruv, Mexico

Mexico (Villahermosa)Scomi Oiltools de Mexico S de RL de CVAve Paseo Tabasco, 1402-301Villahermosa, Tabasco 2000 Mexico

New ZealandScomi Oiltools (NZ) Pty Ltd4, Mission Street, MoturoaNew Plymouth, New Zealand

Nigeria (Lagos)Oiltools Africa Ltd242B, Muri Okunola StreetVictoria Island, LagosLagos State, Nigeria

Nigeria (Onne)Oiltools Africa Limitedc/o Titan Tubulars, Federal Lighter Terminal (FLT)Oil & Gas Free ZoneOnne, Nigeria

Corporate Directory


Corporate Directory

Norway (Stavenger)Scomi Oiltools (Europe) LtdLervigsveien 164014 Stavanger, Norway

Oman (Ruwi)KMC Oiltools Oman LLCBuilding No. 272, Way No. 44803Offi ce No. 1104 (2nd Floor)

Pakistan (Islamabad)Scomi Oiltools Ltd (Pakistan Branch)Plot No. 212, Service RoadIndustrial Area, 1-10/3Islamabad, Pakistan

Pakistan (Karachi)Scomi Oiltools Ltd (Pakistan Branch)B-31, Moghal TobacoGondown No. 19-20Site, Karachi

Qatar (Doha)Scomi Oiltools (Cayman) Ltdc/o Salam PetroleumPO Box 22084Doha, Qatar

Russia (Moscow)Scomi Oiltools (Cayman) LtdPushkarev per. 9107045 Moscow, Russia

Russia (Weatern Siberia)16 bld. 7, Industrialnaya Str628616 NizhnevartovskTyumen Region, Russia

Saudi ArabiaScomi Oiltools Saudi Arabia Ltdc/o Tanajib for GeneralContracting Est., PO Box 30415Salman A-farezi StreetNear Issam Al-Kabbani, Al KaldiyaAl-Khobar 31952Kingdom of Saudi Arabia

Scomi OMS Oilfi eld Services Arabia LtdPO Box 117, Abqaiq 31992Saudi Arabia

SingaporeScomi Oiltools (S) Pte Ltd32 Tuas West Road, #01-03Singapore 638387

Scomi Oiltools (S) Pty LtdNo. 48-Gul Circle, JurongSingapore 629581

Scomi OMS Oilfi eld Services Pte LtdNo 48-Gul Circle, JurongSingapore 629581

Scomi Marine Services Pte Ltd390 Jalan Ahmad Ibrahim629155 Singapore

Sudan (Heglig)KMC Oiltools Overseas M LtdGNPOC Yard, HegligSudan

Sudan (Khartoum)KMC Oil tools Overseas M LtdHouse 119, Block 1Al Geraif GarbKhartoum, Republic of Sudan

Thailand (Bangkok)Scomi Oiltools (Thailand) Ltd13th Floor, CTI Tower191/77, Ratchadapisek RoadKwaeng Klongtoey, Khet KolngtoeyBangkok, 10110 Thailand

Thailand (Lankrabue)Scomi Oiltools (Thailand) Ltd163, Moo 6 Tumbol LankrabueAmphur LankrabueKamphaengphet 62170 Thailand

Thailand (Myanmar Offi ce)Scomi Oiltools (Thailand) Ltdc/o Unit #309, Park Royal HotelNo. 33 Alan Pya Phay RoadDagon Township Yangon, Myanmar

Thailand (Songkhla)Scomi OMS Oilfi eld Services (Thailand) Ltd160/6, Moo 1, Tambol HuakaoAmphur Singhanakorn, Songkhla90280 Thailand

Scomi Oiltools (Thailand) Limited424/9 Moo 2, Songkhla – Koh Yor Road, Amphur Muang, Songkhla90100 Thailand

Turkmenistan (Ashgabat)Scomi Oiltools LtdYimpash Business Centre Offi ce 101(A)54 Turkmenbashy Street744013, Ashgabat, Turkmenistan

Turkmenistan (Balkanabat)Scomi Oiltools Ltd.Jebel Base #2, Jebel V. BalkanabatTurkmenistan

Turkmenistan (Hazar)Scomi Oiltools LtdHigh Road 9 kilometer, Hazar745030 Turkmenistan

Turkmenistan (Turkmenbashy)Scomi Oiltools Ltd TurkmenistanShagadam Street 8, Turmenbashy City745000 Turkmenistan

U.A.E (Abu Dhabi)Scomi Oiltools (Cayman) Ltdc/o Al Roumi General TradingPO Box 45333 Abu DhabiUnited Arab Emirates

U.A.E. (Dubai)Scomi Oiltools (Cayman) LtdOilfi eld Supply CentreBuilding B-10, Jebel AliFree Zone, DubaiUnited Arab Emirates

United Kingdom (Aberdeen)Scomi Oiltools (Europe) LtdDenmore House, Denmore RoadBridge of Don Industrial EstateAberdeen AB23 8JWScotland, UK

United Kingdom (Shetlands Isles)Scomi Oiltools (Shetland) LimitedGreenhead Site, Lerwick,Shetland Isles ZE1 OPY,United Kingdom

United Kingdom (Peterhead)Scomi Oiltools (Shetland) LimitedDamhead Waste Transfer StationDamhead Industrial Estate Peterhead, Aberdeenshire AB42 3GL, United Kingdom

VietnamScomi Oiltools Pte Ltdc/o PTSC Supply Base65A, 30/4 Road, ThangNhat Ward, Vung Tau CityS R Vietnam


NOTICE IS HEREBY GIVEN that the 8th 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 on 29th June 2010 at 2.00 pm to transact the following business:

AS ORDINARY BUSINESS:

To consider and, if thought fi t, to pass the following as Ordinary Resolutions:

1. To receive the Financial Statements for the fi nancial year ended 31st December 2009 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 Company’s Articles of Association and being eligible, offer themselves for re-election:

(i) Tan Sri Asmat bin Kamaludin (Resolution 1)

(ii) Tan Sri Nik Mohamed bin Nik Yaacob (Resolution 2)

(iii) Dato’ Mohammed Azlan bin Hashim (Resolution 3)

3. To approve the payment of Directors’ fees amounting to RM562,000 in respect of the fi nancial year ended 31st December 2009.

(Resolution 4)

4. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the fi nancial year ending 31st December 2010 and to authorise the Directors to fi x their remuneration.

(Resolution 5)

AS SPECIAL BUSINESS:

To consider and, if thought fi t, to pass the following as Ordinary Resolutions:

5. Authority to Issue and Allot Shares Pursuant to Section 132D of the Companies Act, 1965 (Resolution 6)

“THAT, subject to the Companies Act, 1965 (as may be amended, modifi ed or re-enacted from time to time), 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 Companies Act, 1965, 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 fi t, 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.”

NOTICE OF ANNUAL GENERAL MEETING


Notice of Annual General Meeting

6. 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 7)

“THAT, subject to the Companies Act, 1965 (as may be amended, modifi ed or re-enacted from time to time), the Company’s Memorandum and Articles of Association, the requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities”) 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 from time to time, and upon such terms and conditions as the Board of Directors may deem fi t 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 profi ts of approximately RM329,185,000 and/or share premium account of approximately RM256,641,000 of the Company based on the Audited Financial Statements for the fi nancial year ended 31st December 2009 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 Company’s shareholders 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 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, modifi cation, variation and/or amendment in any manner as may be required by any relevant authority or otherwise as they deem fi t in the best interests of the Company.”


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 specifi es the proportion of his/her holding to be represented by each proxy.

(iii) Where a member is an authorised nominee as defi ned 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 appointing 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 offi cer 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 appointing a proxy must be completed and deposited at the offi ce of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 6, Symphony House, Block D13, 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 8th AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Articles 57 and 58 of the Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 23rd June 2010. Only a depositor whose name appears on the General Meeting Record of Depositors as at 23rd June 2010 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Explanatory Notes on Special Business:1. Ordinary Resolution 6 - Proposed renewal of the authority for Directors to issue

shares The ordinary resolution 6 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 fi t and in the interest of the Company (“Share Mandate”) without convening a General Meeting.

The Company has not issued any new shares pursuant to Section 132D of the Companies Act, 1965 under the general authority which was approved at the 7th AGM held on 15th June 2009 and which will lapse at the conclusion of the forthcoming 8th AGM to be held on 29th June 2010.

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 fl exibility 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).

2. Ordinary Resolution 7 - Proposed renewal of the authority to purchase own shares The ordinary resolution 7 above, if passed, will empower the Directors to purchase

the shares of up to ten percent (10%) of the issued and paid-up share capital of the Company by utilising funds not exceeding the retained profi ts and 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 resolution 7 are set out in the Share Buy-back Statement dated 4th June 2010.

3. Resolution 8- Proposed amendments to the Articles of Association The special resolution above is proposed for the purpose of amending the Articles of

Association of the Company. The details relating to special resolution are set out in the Circular to Shareholders dated 4th June 2010.

Notice of Annual General Meeting

To consider and, if thought fi t, to pass the following Special Resolution:

7. Proposed Amendments to the Articles of Association (Resolution 8)

“THAT the deletion, alterations, modifi cations and/or additions to the Articles of Association of the Company as set out under Section 2 of the Circular to Shareholders of the Company dated 4th June 2010 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 deletion, alterations, modifi cations and/or additions to the Articles of Association.”

8. 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 Secretaries

Kuala Lumpur

Date: 4th day of June, 2010

SCOMI GROUP BHD (571212-A)

FORM OF PROXY

I/We NRIC/Passport No (Full name)

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)

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 8th 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

29th June 2010 at 2.00 pm, or any adjournment thereof.

For Against

Ordinary Business

To re-elect the following Directors who retire in accordance with Article 82 of the Company’s

Articles of Association and being eligible, offer themselves for re-election:

Resolution 1 (i) Tan Sri Asmat bin Kamaludin

Resolution 2 (ii) Tan Sri Nik Mohamed bin Nik Yaacob

Resolution 3 (iii) Dato’ Mohammed Azlan bin Hashim

Resolution 4 To approve the payment of Directors’ fees amounting to RM562,000 in respect of the fi nancial

year ended 31st December 2009.

Resolution 5 To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the fi nancial year

ending 31st December 2010 and to authorise the Directors to fi x their remuneration.

Special Business

Resolution 6 Authority to Issue and Allot Shares Pursuant to Section 132D of the Companies Act, 1965

Resolution 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

Resolution 8

(Special Resolution)

Proposed Amendments to the Articles of Association

Please indicate with a check mark (“√”) in the space provided to show how you wish your vote to be cast. If no specifi c direction as to voting is given,

the proxy will vote or abstain at his/her discretion.

Dated this day of 2010 Signature/Seal

No. of Ordinary Shares Held

SCOMI GROUP BHD (Company No: 571212-A)

(Incorporated in Malaysia under the Companies Act, 1965)

Registered Offi ce : Suite 5.03, 5th Floor, Wisma Chase Perdana, Off Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur, 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 specifi es the proportion of his/her holding to be represented by each proxy.

(iii) Where a member is an authorised nominee as defi ned 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 appointing 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 offi cer 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 appointing a proxy must be completed and deposited at the offi ce of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 6, Symphony House, Block D13, 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 8th AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Articles 57 and 58 of the Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 23rd June 2010. Only a depositor whose name appears on the General Meeting Record of Depositors as at 23rd June 2010 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

affi xstamp

The Registrar of Scomi Group BhdSymphony Share Registrars Sdn BhdLevel 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU 1A/46, 47301Petaling Jaya, Selangor Darul Ehsan Malaysia

Please fold here to seal

Please fold here to seal

Scomi Group Bhd (571212-A)

Suite 5.03, 5th Floor, Wisma Chase Perdana

Off Jalan Semantan, Damansara Heights

50490 Kuala Lumpur, Malaysia

Tel: +603 2080 5080

Fax: +603 2080 5131

www.scomigroup.com.my

Documents

Impetus - Malaysiastock.biz Key Financial Indicators and Key Financial Highlights 2 Corporate Legal Structure 4 Our Corporate Statement 6 Corporate Information 8 Proﬁ le of Directors