Scomi Group · PDF fileThe financial highlights on pages 2 and 3 reflect the actual audited results of Scomi Group Bhd, ... Joint Stock Corporation (Vietnam) ... Albar & Partners Advocates

Annual Report 2011NEW OPPORTUNITIES. MOVING AHEAD.

Scomi Group Bhd

Scomi Group Bhd (571212-A)

Level 17, 1 First Avenue, Bandar Utama47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Tel: +603 7717 3000Fax: +603 7725 5853

www.scomigroup.com.my

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(571212-A

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nnual Report 2011

CONTENTS2 Key Financial Indicators

3 Key Financial Highlights

4 Corporate Structure

6 Corporate Statement of Scomi Group

7 Corporate Information

10 Profile of Directors

16 Management Team

18 Chairman’s Statement

26 Group CEO’s Review of Operations

36 Corporate Social Responsibility

44 Statement on Corporate Governance

53 Statement on Internal Control

56 Audit and Risk Management Committee Report

61 Additional Information

63 Statement of Directors’ Responsibility

65 Financial Statements

180 Analysis of Shareholdings

183 Analysis of Irredeemable Convertible Secured Loan Stocks (“ICSLS) Holdings

185 Analysis of Warrant Holdings

187 List of Properties

189 Corporate Directory

191 Notice of Annual General Meeting

• Form of Proxy

New Opportunities. Moving Ahead.

With a presence in 27 countries, Scomi Group is an accomplished global technology enterprise. Entrusted with numerous high-profile projects, Scomi’s achievements have reinforced its position as a world-class service provider and technology owner in oilfield services, transport solutions and energy logistics.

By consolidating operations and building on its strengths, Scomi will continue to seek out new opportunities in both the domestic and global market. Moving ahead, Scomi will keep delivering value to its stakeholders and making a difference in the communities it helps shape.

10th

ANNUAL GENERAL MEETING

Ballroom 3 1st Floor, Sime Darby Convention Centre 1A Jalan Bukit Kiara 1 60000 Kuala Lumpur

on 27 June 2012 at 2.30 p.m.

Notes

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

@Based on PAT after non-controlling 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.

2007-2010The financial highlights on pages 2 and 3 reflect the actual audited results of Scomi Group Bhd, with certain numbers restated to reflect retrospective effects as a result of adoption of new or revised Financial Reporting Standards in the respective years.

In RM’000 2011 2010 2009 2008 2007

Turnover 1,383,737 1,521,935 1,971,455 2,106,140 1,995,530

EBITDA (169,530) (39,077) 210,566 291,364 441,277Depreciation 52,103 66,764 82,043 74,524 65,987Finance costs 50,789 77,874 76,404 75,168 87,946Share of profit in associated companies (48,536) (87,225) (9,898) 28,040 23,570Share of profit from jointly controlled entities (439) (739) 3,596 – –

Profit/(Loss) before tax (120,186) (169,409) 50,715 140,213 286,416Taxation (48,692) (20,209) (24,750) (3,928) (4,261)

Profit/(Loss) after tax (168,878) (189,618) 25,965 136,285 282,155Loss from Discontinued Operations (127,653) (3,269) – – –

Profit/(Loss) for the year (296,531) (192,887) 9,875 116,553 257,129Non-controlling interests (64,199) (19,981) 16,090 19,732 25,026

PAT after non-controlling interests (232,332) (172,906) 9,875 116,553 257,129

Number of shares assumed in issue (’000) 1,187,688 1,182,658 1,086,801 1,021,839 1,019,705Weighted average number of shares assumed in issue (’000) 1,391,731 1,371,255 1,025,795 1,006,342 1,004,806Weighted average number of shares used to compute diluted earnings per share (’000) 1,394,528 1,387,259 1,053,648 1,016,009 1,037,091

Basic– Net EPS (RM)** (16.69 sen) (12.61 sen) 0.96 sen 11.58 sen 25.59 senFully diluted– Net EPS (RM)@ (16.66 sen) (12.46 sen) 0.94 sen 11.47 sen 24.79 sen

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KEY FINANCIAL INDICATORS

Revenue (RM Million)

^2011

^2010

2009

2008

2007

1,384

1,522

1,971

2,106

1,955

Profit/(Loss) Before Tax (RM Million)

^2011

^2010

2009

2008

2007

(190)

51

140

286

Profit/(Loss) After Tax AfterNon-Controlling Interest (RM Million)

2011

2010

2009

2008

2007

(193)

10

117

257

(297)

(169)

Total Assets (RM Million)

RM2,242 • 2011RM2,466 • 2010RM3,039 • 2009

Earnings per Share (basic)

(16.69) sen • 2011(12.61) sen • 20100.96 sen • 2009

Net Tangible Assets (RM Million)

RM188 • 2011RM346 • 2010RM360 • 2009

Shareholders’ Fund (RM Million)

RM509 • 2011RM726 • 2010RM920 • 2009

Net Assets Per Share(Attributable to owners of the Company)

43 sen • 201161 sen • 201085 sen • 2009

Note^ The 2010 and 2011 financials are in respect of

continuing operations only.

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pg 3

KEY FINANCIAL HIgHLIgHTS

49%

50%

51%

51%

20%

51%

60%

96%

80.54%

49%

Emerald Logistics Sdn Bhd

Vibratherm Limited(England & Wales)

Wasco Oil ServiceCompany NigeriaLimited (Nigeria)

Scomi Oiltools DeVenezuela, SA (Venezuela)

Scomi Oiltools Overseas (M) Limited

(Mauritius)

Scomi Oiltools Pty Ltd(Australia)

Oiltools Gabon SA (Gabon)

Premium IndustrialMachining SA (Venezuela)

Scomi Oiltools (Shetland) Limited

(Scotland)

KMC Oiltools AlgerieEURL (Algeria)

KMC Oiltools BV(The Netherlands)

Scomi Oiltools Egypt SAE(Alexandria Free Zone, Egypt)

Scomi Oiltools Ltd(Cayman Islands)

Scomi Oiltools OmanLLC (Oman)

Scomi OiltoolsCanada Inc.

(Alberta, Canada)

Scomi Oiltools (Africa) Limited (Cayman Islands)

Scomi Oiltools Inc(Texas, USA)

Scomi Oiltools SouthAmerica Limited

(BVI)

Gemini Sprint Sdn Bhd

Marineco Limited (Labuan)

Trans Advantage Sdn Bhd

Southern Petroleum Transportation Joint Stock Corporation (Vietnam)

Scomi Marine Services Pte Ltd (Singapore)

Goldship Pte Ltd(Singapore)

PT Rig TendersIndonesia Tbk3

(Indonesia)

King BridgeEnterprises Limited

(BVI)

42.75%2

SCOMI GROUP BHD1

Scomi Marine Bhd1 Scomi InternationalPrivate Limited

(Singapore)

Scomi CapitalLimited (Labuan)

Global Learning andDevelopment Sdn Bhd

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SCOmI gROup CORpORATE STRuCTuREas at 30 April 2012

50%

51%

95%

95%

95%

4%48%

40%

Scomi Oiltools (Thailand) Ltd (Thailand)

PT Scomi Oiltools(Indonesia)

Sosma (B) Sdn Bhd (Brunei)

Scomi Rail Bhd Scomi Trading Sdn Bhd

Scomi OiltoolsSdn Bhd

Scomi Oiltools (Kemaman) Sdn Bhd

Oilfield Services de Mexico S. de RL de CV (Mexico)

Scomi Anticor S.A.S (France)

Scomi Coach Sdn Bhd

Scomi CoachMarketing Sdn Bhd

Scomi Oiltools (Europe) Limited (Scotland)

Scomi Oiltools (RUS)Limited Liability Company(Russia)

Scomi KMC Sdn Bhd

Scomi Barite Sdn Bhd

Scomi Oiltools deMexico S de RLde CV (Mexico)

Scomi Oiltools (S)Pte Ltd (Singapore)KMC All Star

Chemical Sdn Bhd

KMC Oiltools IndiaPrivate Limited (India)

Scomi OBM TerminalSdn Bhd

PT Multi JayaPersada (Indonesia)

KMCOB Capital Berhad

PT Inti Jatam Pura(Indonesia)

Scomi Oiltools (Cayman) Ltd (Cayman Islands)

76.08%

67.35%

Scomi Oilfield Limited (Bermuda)

Scomi Engineering Bhd1

Scomi ChemicalsSdn Bhd

Scomi EnergySdn Bhd

Scomi SosmaSdn Bhd

Scomi Enviro Sdn Bhd

Scomi OiltoolsBermuda Limited (Bermuda)

Scomi EcosolveLimited (BVI)

Scomi Transportation

Systems Sdn Bhd

Scomi SpecialVehicles Sdn Bhd

Scomi OMS OilfieldServices Ltd (BVI)

Urban TransitPrivate Limited5

(India)

Scomi TransitProjects Sdn Bhd

Scomi Transit Projects Brazil

Sdn Bhd

Scomi TransitProjects Brazil

(Sao Paulo) Sdn Bhd

Urban Transit Servicos Do Brasil

LTDA (Brazil)

Scomi Nigeria PteLtd (Singapore)

Scomi SolutionsSdn Bhd

Titan TubularsNigeria Limited (Nigeria) 50.1%

Oiltools AfricaLimited4 (Nigeria)

1 Listed on the Bursa Malaysia Securities Berhad (Kuala Lumpur Stock Exchange)2 Includes 0.05% held by Scomi Energy Sdn Bhd.3 Listed on the Jakarta Stock Exchange.4 Includes 2.0% held by Scomi Group Bhd.5 Includes 0.01% held by Scomi Rail Bhd.

Notes

– This corporate structure does not include the subsidiaries/associated companies of PT Rig Tenders Indonesia Tbk.

– Except as otherwise expressly stated, all companies in this corporate structure are incorporated in Malaysia.

– Except as otherwise expressly stated, all companies in this corporate structure are wholly owned by their respective holding companies.

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pg 5

With a presence in 52 locations across 27 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.

W E F O C U S O N E N E R G y & LOGISTICS.

All of our 3 business units are focused on the Energy and/or Logistics sectors with the ability to compete globally. All of us in the Scomi family should remember that any new initiatives we undertake will focus on these areas of business.

W E P R O v I D E I N N O v A T I v E SOLUTIONS.

We innovate to respond to an evolving env i ronment . Our products and operations meet today’s needs while ant ic ipat ing tomorrow’s. We are committed to developing competitive and innovative solutions to create efficiency, add value and grow with our customers to shape our future.

WE AIM TO REALISE POTENTIAL FOR OUR STAKEHOLDERS.

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

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

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

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

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

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CORpORATE STATEmENT OF SCOmI gROup

BOARD OF DIRECTORS

Tan Sri Asmat Bin KamaludinChairman

Tan Sri Nik Mohamed Bin Nik Yaacob

Datuk Haron Bin Siraj

Datuk Mohamed Azman Bin Yahya

Dato’ Mohammed Azlan Bin Hashim

Dato’ Abdul Rahim Bin Abu Bakar

Dato’ Sreesanthan A/L Eliathamby

Foong Choong Hong

Shah Hakim @ Shahzanim Bin Zain

ExECUTIvE COMMITTEE(Dissolved with effect from 31 August 2011)

Tan Sri Nik Mohamed Bin Nik YaacobChairman



AUDIT AND RISK MANAGEMENT COMMITTEE

Dato’ Abdul Rahim Bin Abu BakarChairman


Foong Choong HongResigned on 31 August 2011

Tan Sri Nik Mohamed Bin Nik YaacobAppointed on 31 August 2011

Dato’ Mohammed Azlan Bin HashimAppointed on 31 August 2011

NOMINATION AND REMUNERATION COMMITTEE

Tan Sri Asmat Bin Kamaludin Chairman



OPTIONS COMMITTEE

Tan Sri Asmat Bin Kamaludin Chairman



REGISTERED OFFICE

Level 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaT +603 7717 3000F +603 7728 5853

ADMINISTRATIvE AND CORRESPONDENCE ADDRESS

Level 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel : +603 7717 3000Fax : +603 7728 5853Website : www.scomigroup.com.myEmail : [email protected]

REGISTRAR

Symphony Share Registrars Sdn BhdLevel 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul Ehsan, MalaysiaTel : +603 7841 8000Fax : +603 7841 8008

ADvOCATES & SOLICITORS

Albar & PartnersAdvocates & Solicitors6th Floor, Faber Imperial CourtJalan Sultan Ismail50250 Kuala Lumpur, Malaysia

COMPANy SECRETARIES

Ong Wei Leng (MAICSA 7053539)Chong Mei Yan (MAICSA 7047707)

AUDITORS

PricewaterhouseCoopers (AF: 1146)Chartered AccountantsLevel 10, 1 SentralJalan Travers, Kuala Lumpur SentralPO Box 1019250706 Kuala LumpurMalaysia

PRINCIPAL BANKERS

CIMB Bank Berhad10th Floor, Bangunan CIMBJalan Semantan, Damansara Heights50490 Kuala LumpurMalaysia

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

STOCK ExCHANGE LISTING

Main Market of Bursa MalaysiaSecurities BerhadStock Name: ScomiStock Code: 7158

CURRENCy

Ringgit Malaysia (RM)

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CORpORATE INFORmATION

Reinventing ourselves to realise opportunitiesWe continue to recognise the importance of re-inventing

ourselves, re-evaluating our endeavours and following

through with strategies that will increase our opportunities

in the global market.

Tan Sri Asmat Bin KamaludinChairman, Independent Non-Executive Director

Tan Sri Nik Mohamed Bin Nik YaacobIndependent Non-Executive Director

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

Tan Sri Asmat has vast experience in various capacities in the public service and his last position was as the Secretary-General of the Ministry of International Trade and Industry, 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-Pacific Economic Co-operation, representing Malaysia in relevant negotiations and agreements. 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. Tan Sri Asmat is also a Governor representing Malaysia on the governing Board of the Economic Research Institute for Asean and East Asia (ERIA). Other Malaysian public companies in which he is a director are UMW Holdings Berhad, YTL Cement Berhad, Permodalan Nasional Bhd, Malaysian Pacific Industries Berhad, Lion Industries Corporation Berhad, Panasonic Manufacturing Malaysia Berhad, Symphony House Bhd, TASCO Berhad, Compugates Holdings Berhad, The Royal Bank of Scotland Berhad and Scomi Marine Bhd. He also serves on the Board of JACTIM Foundation.

Tan Sri Asmat is a member of, and chairs the Nomination and Remuneration Committee and the Options Committee of the Board. Tan Sri Asmat attended all of the 6 Board Meetings held in the year ended 31 December 2011.

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

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

Tan Sri Nik Mohamed is a member of the Audit and Risk Management Committee of the Board. Tan Sri Nik Mohamed attended all of the 6 Board Meetings held in the year ended 31 December 2011.

Tan Sri Asmat, 68, a Malaysian, is an Independent Non-Executive Director and the Chairman of the Company. He was appointed to the Board on 3 March 2003.

Tan Sri Nik Mohamed, 63, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July 2004.

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pROFILE OF DIRECTORS

Datuk Haron Bin SirajIndependent Non-Executive Director

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

YBhg Datuk Haron is a member of the Audit and Risk Management Committee and the Options Committee of the Board. He attended 5 out of the 6 Board Meetings held in the year ended 31 December 2011.

YBhg Datuk Haron, 67, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.

Datuk Mohamed Azman Bin YahyaNon-Independent Non-Executive Director

YBhg Datuk Mohamed Azman bin Yahya, a Malaysian, aged 48, is a Non-Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.

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

Datuk Azman started his career at KPMG in London before returning to Malaysia in 1988 where he built his career in investment banking to become the chief executive of Amanah Merchant Bank.

During the Asian Financial Crisis in 1998, Datuk Azman was appointed by the Malaysian Government to set-up and head Danaharta, the national asset management company and he subsequently became the Chairman of Corporate Debt Restructuring Committee. These two entities were set-up to assist the financial and corporate sectors in managing the crisis, and both were successful in their missions leading to their closure after the crisis.

In 2003, he returned to the private sector and founded Symphony House Berhad. Outside his professional engagements, Datuk Azman is active in public service and sits on the boards of Khazanah Nasional Berhad and Ekuiti Nasional Berhad, the investment arm and the private equity arm of the Malaysian Government respectively. He also serves as a Non-Independent and Non-Executive board member of Malaysian Airlines System Berhad and PLUS Expressways Berhad. Datuk Azman is a member and advisor of several national agencies including the Special Taskforce to Facilitate Business (PEMUDAH), the National Innovation Council and the Financial Reporting Foundation. He is also a Director of Sepang International Circuit and the Chairman of Motorsports Association of Malaysia.

Datuk Azman is a member of the Nomination and Remuneration Committee of the Board. He attended 4 out of the 6 Board Meetings held in the year ended 31 December 2011.

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Dato’ Sreesanthan A/L EliathambyIndependent Non-Executive Director

Dato’ Mohammed Azlan Bin HashimIndependent Non-Executive Director

Dato’ Sreesanthan, aged 51, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 18 April 2006. Dato’ Sreesanthan, is an Advocate & Solicitor and a Partner with the legal firm of Messrs Kadir, Andri & Partners.

Dato’ Azlan, aged 55, Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July 2004.

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

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

Dato’ Azlan is a member of the Audit and Risk Management Committee and the Nomination and Remuneration Committee of the Board. He attended 5 out of the 6 Board Meetings held in the year ended 31 December 2011.

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

He was formerly a Legal Assistant and later a Partner with the legal firm of Messrs Zain & Co and Messrs Zul Rafique & Partners. Dato’ Sreesanthan is a member of the Investment Committee of Amanah Saham Wawasan 2020 Fund, the Listing Committee of Bursa Malaysia Berhad and the Disciplinary Committee Panel of the Advocates and Solicitors’ Disciplinary Board. He currently sits on the Board of Guinness Anchor Berhad and Sime Darby Berhad.

Dato’ Sreesanthan attended 4 out of the 6 Board Meetings held in the year ended 31 December 2011.

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Foong Choong HongNon-Independent Non-Executive Director

Mr Foong, 51, 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 and trading house based in Malaysia. Mr Foong is a Certified Financial Planner and also a Fellow of the Chartered Management Institute (UK). He also plays an advisory role in the Investment Committee of several multi-national companies for the identification of investments and development of business opportunities. He is currently the Managing Director of Asian Asset Group Sdn Bhd and a director of Asian Asset Management Sdn Bhd.

He attended all of the 6 Board Meetings held in the year ended 31 December 2011.

Dato’ Abdul Rahim Bin Abu BakarIndependent Non-Executive Director

Dato’ Rahim, aged 65, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 7 October 2010.

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

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

Dato’ Rahim is the Chairman of the Audit and Risk Management Committee of the Board. He attended 5 out of the 6 Board Meetings held in the year ended 31 December 2011.

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

Encik Shah Hakim, 47, a Malaysian, is the Chief Executive Officer/Non-Independent Executive Director of the Company and was appointed to the Board on 3 March 2003.

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

Encik Shah Hakim is a member of the Options Committee of the Board. He attended all of the 6 Board Meetings held in the year ended 31 December 2011.

Note:

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

With the exception of the disclosure on page 62, none of the Directors are involved in any conflict of interest, or any personal interest in any business arrangement, involving Scomi Group Bhd.

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

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Shah Hakim ZainGroup Chief Executive Officer

Sharifah NorizanShahabudin

Chief Legal & GovernanceOfficer

Dinesh ChelvathuraiChief Learning Officer

Loong Chun NeeChief Investment &Performance Officer

Rohaida Ali BadaruddinChief of Staff

mANAgEmENTTEAm

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Hilmy Zaini ZainalCountry President – Brazil

Kanesan veluppillaiPresident – Scomi International& Country President – India

Steve BrackerPresident – Oilfield Services

Wan Ruzlan IskandarWan SalaidinPresident – Oilfield Services Market Units

Mukhnizam MahmudPresident – Scomi Marine Bhd

Suhaimi yaacobPresident – Rail

Andrew NguPresident – Oilfield Services

Turnkey & Multiple Drilling Services

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pg 17

CHAIRMAN’SSTATEmENT


We live in fast-changing times in which the only certainty is uncertainty. Yet some organisations have the ability to thrive in challenging environments such as this. And I believe Scomi is one. As one of only a few truly international Malaysian companies, we have been exposed to the full force of the global downturn since 2009 – an economic crisis so severe it has been described as the worst recession the world has seen since the Great Depression. Yet, Scomi has not just survived but is emerging leaner, stronger and more sure-footed as we continue to explore and expand into new growth areas, in realising potentials.

Dear Stakeholders,

OvERvIEW

As if continuing financial woes in the US and Europe were not enough to keep us all on our toes, the year 2011 brought with it added encumbrances in the form of the political upheavals in the Middle East and a spate of natural disasters that spread across the globe. None perhaps were as devastating as the tsunami that brought Japan to a temporary standstill.

Amid the general gloom was an upturn in the price of oil, which remained robust throughout the year, spurred by demand from emerging economies together with uncertainty over supply. This had double-edged consequences. On the one hand, it caused a marked increase in oi l and gas act iv i ty worldwide, although in the US this was tempered by a strict tax regime in the deepwater horizon which caused activity to be erratic. Conversely, the high price of oil added to reduced manufacturing activity in the West to

cause a severe dent in global trade. This led to an oversupply of vessels – as was the case in 2010 – with a concomitant drop in freight rates.

The Arab Spring stalled key decisions by governments in the Middle East on infrastructure and other massive projects that had been planned as part of their economic development, and this directly affected our efforts and investments in the region. Meanwhile, a depreciation of the US Dollar and Indian Rupee led to significant forex losses. Although these impacted our financial performance in the year, we have learnt from our experiences and move forward with a reinforced belief that any venture into a foreign market needs to be preceded by in-depth analysis of the political and economic climate of the country or region. We have also put in place added forex loss management strategies which include localising our fund-raising activities.

Amid these operating challenges, Scomi Group rose to the occasion to post a commendable performance, mainly as a result of strategic forward planning and concerted efforts to rein in our expenses while improving productivity. In all, it has been an exciting but certainly challenging 12 months, and it gives me great pleasure to present our results for the year to you.

FINANCIAL PERFORMANCE

For the year ended 31 December 2011, the Group recorded total revenue of RM1.38 billion on the back of strong performance by our Oilfield Services Division, which contributed to 79% of this figure. Total revenue from non-Malaysian operations amounted to RM838.5 million, or 56.4% of the total. As a result of cost efficiencies, our operational expenditure (OpEx) fell and we achieved an operating profit after tax of RM58.5 million. However, our

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earnings were impacted by impairment losses, unrealised foreign exchange losses and other one-off charges resulting in a loss after tax of RM296.5 million as compared to RM192.9 million in the previous year. This also affected our EBITDA margin, which dropped from -2.6% to -7.4%.

Of our three main divisions, Oilfield Services posted the best performance in terms of exceeding our expected revenue and profit. Driven by active dri l l ing operations in the Eastern Hemisphere – Malaysia, Indonesia and Thailand – it recorded higher revenue from continuing operations of RM1.13 billion as compared to RM1.12 billion in the previous year. Its segment earnings before interest and tax from continuing operations was 6.9 times higher, at RM71.3 million as compared to RM10.3 million in the previous year.

The Energy Logistics Division recorded a slight decrease in revenue of 4.5% from RM409.1 mill ion in 2010 to RM390.8 million. However, its segment earnings before impairment charges, disposal gains of an associate company and tax was 21.3% higher than in 2010, at RM43.3 million as compared to RM35.7 mil l ion. We are very encouraged by this result, as it shows the effects of concerted efforts to increase productivity in the division, which was seen in a generally better port mix, reduced vessel stand-downs leading to significant savings in bunker fuel and third-party charter-in charges.

The Transport Solutions Division, meanwhile, recorded lower revenue of RM246.8 mill ion as compared to RM400.8 million in 2010, despite being awarded the Brazil monorail systems. This was mainly due to civil works and approvals delays in our monorail project in Mumbai, which we are managing via requests for extensions of t ime, compounded by a weakening of the Indian Rupee against the Ringgit.

Consequently, the Division posted a loss of RM69.4 million principally due to unrealised foreign exchange, as opposed to a loss after tax of RM30.3 million in the previous year.

Given the Group’s on-going corporate restructuring, the Board of Directors has decided it would be expedient not to declare a dividend for the financial year and to use our available capital to ensure our successful transformation. This will bring sustainable benefits to the Group, which will be reflected in greater shareholder value in the long term.

CORPORATE ExERCISE

In 2009 we launched a transformation roadmap called Formula 2011, and have accelerated the pace of change over the years. We are guided in this transformation journey by a holistic vision of our final destination – of what we want to be financially, operationally and culturally.

Financially, we are reducing our debts and strengthening our balance sheet to support further growth. Operationally, we aim to be leaner and more focused on key business areas, with a flatter internal structure so we are more nimble and able to respond faster to market demands. Culturally, we strive to nurture a strong service ethic so as to add value to the Scomi brand and keep our customers and partners satisfied.

In 2011, we made significant strides towards achieving these goals. In October, we proposed to issue a new bond at KMCOB Capital from the disposal of assets which have fully realised their value as this would reduce our debt, improve our cash flow and help fund new growth opportunities. In November, we entered into a sale and purchase agreement to dispose of our Oilfield Services businesses in North America and Mexico for a total consideration of USD35.0 mil l ion

(RM108.56 million), not because these operations were not profitable, but because the region had become volatile, posing a risk on steady rates of return. Following this sale, we issued a new bond that raised RM342.6 million.

We have also transferred the ownership of a number of our Indonesian Energy Logistics companies from Scomi Marine Services (SMS), a fully-owned subsidiary of our associate company Scomi Marine Berhad (SMB), into Rig Tenders Indonesia Tbk (PTRT), an Indonesian company 80.54%-owned by SMS. In April 2012, the entire equity of the following companies under SMS were transferred to PTRT for a total consideration of USD57 million – CH Logistics Pte Ltd and its wholly-owned subsidiary Sea Master Pte Ltd, CH Ship Management Pte Ltd, and Grundtvig Marine Pte Ltd and its 95%-owned subsidiary PT Batuah Abadi Lines. The sale is in line with our plans to develop SMB as a larger and more integrated upstream service provider.

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CHAIRmAN’S STATEmENT

CORPORATE RESTRUCTURING

The Group continued with our global strategy in which we have decided to focus on two high growth areas, namely oil and gas, and urban transport solutions. Towards this end, we are streaml in ing our operat ions and undergoing major internal restructuring.

In order to better serve our oil and gas customers, in 2011 we expanded the range of services offered by Oilfield Services (OFS) beyond Drilling Fluids and Drilling Waste Management – which have been our flagship services – to set up a Multi Drilling Services (MDS) division. We are further consolidating and focusing on the Eastern Hemisphere OFS (namely the business East of the Suez) and Offshore Supply Vessels businesses under SMB to create a new unit which is able to provide enhanced and greater value-add services to our oil and gas customers.

We are confident of further growth of the oil and gas sector in the Asian region in general, given increasing demand for energy. In Malaysia itself,

the Government is looking actively to develop this sector as a National Key Economic Area. Towards this end, PETRONAS is investing heavily in marginal oilfield development, which will create greater demand for our products and services.

In the urban t ranspor t sector , meanwhile, we will continue to focus in the countries in which we have already made inroads – namely Malaysia, India and Brazil – while also exploring for other emerging markets that will benefit from our efficient and environment-friendly monorail technology. During the year under rev iew we also developed a new MRT system that embraces a 4C concept of maximum C a p a c i t y , C o m f o r t a n d C o s t effectiveness in tandem with reduced Carbon footprint. This system adds significantly to our product range and allows us to offer more comprehensive urban transport solutions in the dynamic markets we are targeting, which in turn, present the greatest opportunity for us to further grow our services.

GLOBAL JOURNEy

If there is one lesson we have learnt in our journey as a global company it is that we have to be adaptable and flexible in managing our businesses in the different countries. Each country has its own operating culture which we seek to understand. There is certainly no one size that fits all when it comes to country strategy and management. It is because we are respectful of national characteristics that we have been able to make inroads into countries like Brazil and India. We are one of the first Malaysian companies to penetrate the Brazilian market, while our growing presence in India speaks volumes for our technology and the relationships we have built in this vast and traditionally challenging market.

Part of our success in these foreign markets has been strategic partnerships formed with prominent local companies, which include Larsen & Toubro (L&T), CR Almeida S.A. Engenharia de Obrasare (CR Almeida), Andrade Gut ie r rez S .A . (AG) , Geodes ic

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Techniques, INTL Enso Rail Systems (IERS), Engineering Project (India) (EPI) Ltd and Infrastructure Leasing & Financial Services Limited (IL&FS). In addition, we bring to our projects world-class expertise by forming partnerships with leading technology companies such as Siemens, Thales, Bombardier and Knorr-Bremse.

In Brazil, we are further strengthening ou r pos i t i on by se t t i ng up a manufacturing plant to produce rolling stock and other rail-related items in collaboration with two partners – Montagens e Projetos Especiais SA (MPE) and Brasell Gestão Empresarial, LTDA (Brasell). We are recognised as one of only three global monorail manufacturers able to meet Brazil’s tender requirements. Not only were we invited to participate in Brazil’s monorail tender exerc ises, but we have successfully won the first monorail project in Brazil - the Monorail Line 17 also known as the Gold Metro of Sao Paulo, Brazil. In all projects, moreover, we source for the most rel iable suppliers to ensure the highest quality service and products, as these reflect our own Scomi brand.

We continued to increase awareness and recognition of the Scomi brand in our key markets via consistent in aggressive engagement with key stakeholders. Our regular interactions with the media, key opinion leaders and t h e i n v e s t o r c o m m u n i t y a r e comp lemented by es tab l i sh ing relationships with the relevant authorities. To further stamp our brand indelibly in these foreign markets, we also participate in high level forums and conferences like the World Economic Forum.

CORPORATE RESPONSIBILITy

We realise that our long-term success is dependent not just on how much profits we make, but how these profits were made. In other words, we place g rea t emphas i s on co rpo ra te responsibility and on ensuring that we balance our financial bottom line with a positive impact on the community and the environment. Our Foundation Yayasan Scomi has been contributing to the community since its establishment in 2005, and in recent years its efforts have been doubled by an employee-driven programme called Project Pyramid which sees our staff throughout our global operations go out into local communities to lend a helping hand where needed.

We are also cognisant of the need to play our part in preserv ing the environment, and to reduce our carbon footprint to contribute to global efforts towards managing climate change. All new technologies being developed by our R&D centres are designed to be environment-friendly, while at the corporate offices we have adopted many green practices to reduce as far as possible our use of resources, hence our impact on the environment.

PROSPECTS

Although the year 2012 promises to be challenging, we are confident of making good headway as a Group in the markets and businesses that we have targeted.

We anticipate continued growth in oil and gas exploration and production in order to meet the increasing energy needs of emerging economies. This will be accompanied by a concomitant escalation in leading indicators such as drilling rig count, tendering and contract award activity in the Eastern Hemisphere countries, led by Malaysia, Indonesia and Thailand. Having expanded the range of services we provide via Multi Drilling Services, we offer a stronger value proposition to our customers.

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CHAIRmAN’S STATEmENT

Now, as we consolidate our Eastern Hemisphere Oilfield Services with Energy Logistics’ Offshore Services, we look forward to enjoying a bigger share of the expanding market.

We are equally upbeat on the potential of taking our Transport Solutions, and especially our environment-friendly monorail technology, to more corners of the world. As global populations continue to increase, and as urban areas continue to expand, there will be increasing need for efficient and affordable modes of public transport. Scomi Engineering is already in talks on a number of monorail proposals and the future certainly looks bright for this division. Behind the scenes at Scomi Engineering is the North Kuala Lumpur Facility, where research and technology is being undertaken to keep improving on our prototypes. This lends us a definite edge in the competitive niche which will keep our order books full for the foreseeable future.

ACKNOWLEDGEMENTS

The last few years, 2011 inclusive, have been trying for any global operation. For Scomi, it has been a time of reinvention and reckoning. On behalf of the Board of Directors, I would like to acknowledge all our stakeholders for being with us, and lending us their support as we transformed into a leaner and more focused organisation that we are today.

We would not have come this far without the continued patronage of our customers, who spur us to keep striving for excellence; our shareholders, who have been constant in their trust, even in the face of challenge and change; and our business partners, advisors, suppliers and bankers, who have been true partners in cooperating and collaborating with us. We are also grateful to the governments of the various countries in which we have operations, for their guidance and regulatory support.

To my fellow Directors, I would like to extend my heartfelt appreciation for your wisdom and integrity in guiding the Group always to a position of greater light and clarity. Most of all, I would like to thank the management and staff of Scomi – each and every individual of our more than 3,000 strong team globally – for your commitment and dedication to the Group. We may be separated by geographical distance, but remain united by the fact that we speak all speak one language – the Scomi language of achievement and success.

Sincerely,


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Ensuring sustainability through strategic actionsSustainability is a major focus for our businesses. As

such, we have embarked on various key initiatives and

strategic measures to add value, realise potential and

fortify our balance sheet.


gROup CEO’S REVIEW OF OpERATIONS

The year 2011 has been intense for Scomi Group. We had a number of very encouraging successes but at the same time were unable to escape the clutches of the global economic doldrums which showed no sign of abating. Continued financial woes in the US and Eurozone affected demand for products and services, increased commodity prices, dampened trade, and led to volatility in major currencies, such as the US Dollar and Indian Rupee, which had serious repercussions on our balance sheets.

Dear Stakeholders,

Yet, even as some of the largest names in corporate history have folded in, we have stood our ground and grown in many ways that may not be obvious to our external stakeholders. Since 2009, we have transformed our systems, processes and people to be more efficient, productive and competitive. Formula 2011, our programme of transformation, ended in the year under review but the changes that have been brought about will continue to positively impact our performance in 2012 and the years to come. Formula 2011 strengthened the very core of our business by targeting the Group’s returns, technological innovations and customer recognition. This has been complemented by having a very clear vision of where we want to take the Group and rationalising our corporate structure so as to reach our destination in the quickest, most efficient manner. It has meant disposing of assets that were no longer aligned with our overall strategy, and creating new entities that will enhance our progress.

These changes have brought positive results in the year 2011, as we outline in the following review.

GROUP FINANCIAL PERFORMANCE

For the year ended 31 December 2011, the Group recorded revenue of RM1.38 billion, primarily as a result of strong performance by our Oilfield Services division, which continued to be our main source of income, contributing to 82% of the total revenue from continuing operations. At the same time, numerous cost-cutting initiatives as well as efforts to improve efficiencies led to a 14.6% decrease in operational expenditure (OpEx) to RM342.8 million from RM401.4 million and a healthier OpEx margin of 24.8% as opposed to 26.3% in 2010. These resulted in operating profits that were in general higher than targeted, with significant savings achieved by our

Energy Logistics division and the Kuala Lumpur corporate office. However, these resul ts were af fected by unrealised foreign exchange losses from a depreciation of the US Dollar and Indian Rupee against the Ringgit of 5.1% and 11.5% respectively, impairment losses and other one-off charges as part of the corporate restructuring exercise, which together amounted to RM244.8 million for the year. As a result of a weakened Indian Rupee, the Mumbai monorail project, under Transport Solutions, also posted u n r e a l i s e d F o r e x l o s s e s o n receivables.

Consequently, the Group recorded a loss after tax of RM296.5 million as compared to RM192.9 million in the year ending 2010.

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OPERATIONAL REvIEW

Oilfield Services

As the price of oil remained robust throughout 2011 – the monthly Brent index averaging well above USD100 per barrel – there was a marked increase in oil and gas activities across both the Western and Eastern Hemispheres, with a concomitant hike in rig count. This led to increased sales of our drilling fluids (DF) and drilling waste management (DWM) products. Meanwhile, upgrades to our drilling fluids software improved our capabilities in capturing and analysing data, contributing to greater efficiency in our service to clients and further enhanced our relationships with them.

However, economic instability in the US and Europe created a volatile environment that dampened our revenue from the Western Hemisphere. As a result, our performance was strongest in the Eastern Hemisphere and particularly in Malaysia, Thailand, Myanmar and Indonesia. These markets contributed to 70% of Oilfield Services’ growth for the year.

Growth in Malaysia was driven in no small measure by the Government’s Economic Transformation Programme (ETP) under which Oil, Gas and Energy comprises one of the National Key Economic Areas. The aim is to grow the sector by 5% a year from 2010 to 2020, and this is supported by various incentives to encourage the development of marginal fields as well as to employ enhanced oil recovery techniques to increase production from brownfields. PETRONAS in June 2011 announced an increase in its expected capital expenditure over five years from RM250 billion to RM300 billion. At the same time, other major clients such as Indonesia’s Pertamina, Thailand’s PTTEP and Saudi’s Aramco have also increased their budgets for exploration and production activity, which will translate into greater demand for our products and services.

Over and above growth in demand in the Eastern Hemisphere, Oilfield Services has over the last few years placed added emphasis on its cost management and operational efficiencies, while further enhancing its customer engagement. These positive factors led to the division recording higher revenue of RM1.13 billion compared to RM1.12 billion in 2010, and segmental profit of RM71.3 million.

During the year, Oilfield Services underwent further restructuring in line with the Group’s rat ional isat ion programme. Accordingly, in November 2011, we disposed of our drilling waste management assets and businesses in the volatile regions of North America and Mexico to National Oilwell Varco (NOV) for a total cash consideration of USD35.0 million (RM108.56 million).

The strategic sale of these assets will not only guarantee a more stable core of business, but will support the Group in par ing down our debts and strengthening our balance sheet in order to focus more single-mindedly on expanding in the oil and gas markets in Asia, where we see the highest potential for sustainable growth. Following the disposal of our American businesses, we issued a new bond at KMCOB Capital which raised RM342.6 million.

While pumping up our finances we are also building our product portfolio to provide a more comprehensive range of services to our customers. Over the years, we have developed a number of proprietary DWM and DF products that enable our customers to improve their dr i l l ing ef f ic iency whi le enjoying substantial cost savings. These have enabled us to move up the drilling value chain and offer our customers multi drilling services (MDS) through a newly set up MDS division.

Transport Solutions

Via Scomi Engineering, a subsidiary of Scomi Group, we are gaining greater prominence in the public transport industry, providing a range of transport solutions encompassing urban rail systems and commercial vehicles such as buses, petrol tankers, refuse compactors and vacuum tankers. The Group is the proud owner of an Engineering, Technology and Innovation Centre (ETIC), where we are constantly developing improved prototypes to enhance our product range, ensuring the highest level of qual i ty and innovat ion to meet increasingly complex and sophisticated needs of our global customers.

At end 2010, the Rail unit secured the KL Monorail Fleet Expansion Project (KLMFEP), and in 2011 it was awarded two monorail projects in Brazil. These were over and above an on-going contract with Keretapi Tanah Melayu Berhad (KTMB) to refurbish and overhaul 1,500 wagons; and our Mumbai monorail project.

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The RM494 million KLMFEP involves the replacement of the existing 12 sets of two-car trains with a new fleet of 12 sets of four-car trains, upgrading the Electrical & Mechanical Systems as well as Civil & Structural (C&S) Works. Our scope of work includes the design, engineering, procurement, construction and commissioning of the entire project, which is scheduled to be completed by July 2013. This is the first major upgrade for the RapidKL Monorail service since it started operations in August 2003. The objective is to double the capacity of the existing trains, as part of a more ambitious initiative to enhance urban rail transport in the Greater Kuala Lumpur, under the Government’s Economic Transport Programme.

To increase our participation in the transformation of urban transport in the Greater KL, Scomi Engineering has been working on our own MRT train, a prototype of which was completed in 2011. Although this MRT train was inspired by the potential for further projects in Malaysia, it is equally applicable in other emerging markets where there is an urgent need for efficient, clean and affordable urban transport.

But the icing on our 2011 cake were the two monorail wins in Brazil, and especially the first contract to be awarded which to us marked the fruition of two years of preparatory work. The fact that we were even invited to tender for the project was significant as it indicated recognition of Scomi as one of only three global monorail manufacturers able to meet Brazil’s stringent international tender requirements.

We were awarded the Line 17-Gold Monorail in São Paolo on 30 July 2011 as part of the Consortium Monotrilho Integracao, comprising Scomi, Andrade Gutierrez S.A. (AG Group), CR Almeida S.A. Engenhar ia de Obras and Montagens e Projetos Especiais SA (MPE). The project covers the design, manufacture, supply and implementation of the monorail system for the 17.6-km Line 17 on the Gold Metro of Sao Paulo, which will be served with 18 stations. The project is valued at BRZ Real 1.4 billion (RM2.6 billion) and is expected to be completed in 42 months, beginning July 2011. Our scope of work involves the supply of rolling stock (train sets), the vehicle management system (VMS),

design for switches, system integration, system assurance and testing and commissioning.

The Manaus Monorail, meanwhile, involves the same scope of work but for a 20km monorail line in the city of Manaus. The project, valued at BRZ Real 1.46 billion (RM2.56 billion), was awarded to a consortium comprising Scomi, CR Almeida, Mendes Junior Trading E Engenharia S/A, and Serveng-Civilsan S/A Empresas Associadas De Engenharia. Our scope of work involves the design and supply of rolling stock and depot equipment, design the beam structure, supply maintenance vehicles, system integrat ion and pro ject management. The project is expected to be completed in time for the 2014 World Cup in Brazil.

For strategic reasons, a manufacturing plant will be set up in Brazil to supply the rolling stock required for the two projects. Hence on 7 December 2011 we established a Joint Venture Company (JVC) with MPE and Brasell Gestão Empresarial, LTDA (Brasell) to undertake manufacturing activities and pursue other rail related service projects. This partnership with MPE and Brasell – the two largest infrastructure companies in South America – further strengthens our position to bid for upcoming monorail tenders in Brazil and to explore new markets within the region.

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our service offering by bringing in the expertise of leaders in cutting-edge technology via partnerships with the likes of Siemens, Thales, Bombardier and Knorr-Bremse.

Energy Logistics

Our Energy Logistics division falls under our associate company, Scomi Marine, which operates in Malaysia, Vietnam and Indonesia. Our Marine Logistics Services focuses on coal transport, while Offshore Support Services provides marine vessels to the offshore oil and gas industry.

The most challenging factor for the division during the year was the decrease in freight rates, which on average was about 7.0% lower than in 2010. This was further compounded by the fact that most of our business is based in Indonesia, where the government strictly enforces a cabotage ruling that makes it difficult for ships carrying foreign flags to obtain long-term contracts. As this ruling is applicable only to relatively new vessels,

however, we were saved from the worst as only two of our vessels from the Offshore Services fleet – Kaspadu-1 and RT Kris – were affected by it.

The division’s earnings were further affected by the depreciating US Dollar and a slight reduction in coal tonnage of 0.14%. Revenue fell marginally from RM409.1 million in 2010 to RM390.8 mil l ion. Of this, Marine Logistics contributed RM314.4 million (or 80.5%), while the remaining RM76.4 million was derived from Offshore Support Services. On a more positive note, the division posted significantly higher earnings before impairment charges, disposal gains of an associate company and tax of RM43.3 million compared to RM35.7 million in 2010. This was due to enhanced operational efficiencies which increased productivity across the board.

In Marine Logistics, we managed to decrease our cycle time so as to achieve a higher turnaround of vessels. This was reflected in a monthly average vessel

While our projects in Brazi l are progressing well, we have unfortunately been beset by delays beyond our control in the 19.5km Mumbai monorail project, which we embarked on in November 2008 along with our consortium partner Larsen & Toubro. Here, Scomi’s scope is to deliver 60 cars for 15 sets of four-car trains and provide the systems requirement for the project. The first car was delivered in January 2010. And on 21 February 2012, we conducted a successful 2.2km test run of the monorail. However, delays in civil works and obtaining approvals for sections of the project affected our ability to deliver more trains, until the depot was completed. Since then, we have delivered seven trains and plan to deliver one train a month till year end.

Our Coach and SPV sector also did not fare as well in the year 2011 as it did in 2010, due to a drop in the number of orders. New permits were frozen by the Land Public Transport Commission in the first half of the year, only to be uplifted gradually in the second half.

Consequently, Transport Solutions recorded lower revenue of RM246.8 million in the year under review compared to RM400.8 million achieved in 2010. The division posted a segment loss of RM69.4 million as opposed to RM30.3 million in the previous year, principally due to the unrealised foreign exchange losses from the weakening of the Indian Rupee against the Ringgit. In addition, margins were affected by project cost adjustment at the Mumbai monorail project as well as lower value of work completed.

Despite the delays, we feel confident of further growth of our Transport Solutions Division as we have established ourselves firmly in the Malaysian, Indian and Brazilian markets. In India and Brazil, in particular, we have not only partnered with key local players to achieve market entry but have subsequently enhanced

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trip for the year which is, a 27.9% increase from that of 2010. In addition, as a result of proper planning and negotiation we were also able to increase the average tonnage per vessel trip by 7% from that of 2010. Further improving our productivity, we reduced our bunker rate by 28.8%.

In Offshore Support Services, we are in the process of upgrading our fleet as part of the general drive to increase our efficiencies. During the year, three of the oldest vessels were sold, reducing our fleet size from 14 to 11. At the same time, we were able to capitalise on the increase in exploration and production activity in the region to improve the utilisation rate of our vessels from 82.2% in 2010 to 84.1%.

These positive developments were, however, offset by one-off adjustments such as impairment loss on goodwill and assets as part of the restructuring exercise, leading to a net loss after tax for the division of RM120.0 million.

KEy INITIATIvES

Research and Product Development

Scomi maintains an edge in the highly competitive Oil and Gas environment by investing in research and development to keep improving our range of products and services. For our Drilling Fluids technology, we have an ISO 9001:2000 certified, state-of-the-art Global Research Technology Centre (GRTC) in Shah Alam, Malaysia, staffed by researchers and scientists with in-depth knowledge of the physics and chemistry of drilling.

We also have a Research & Engineering team based in Houston, which developed our Scomi branded Solids Control and DWM equipment including shale shakers, centrifuges, big bowl centrifuges and the Clean-In-Place tank cleaning system. The team is currently working on a new advanced and innovative technology for the treatment of drill cuttings prior to disposal, which we hope to be able to commercialise this technology by early 2013.

Scomi Oiltools in Norway, meanwhile, developed the efficient and environment-friendly ImmaPure waste water treatment in August 2010. We believe there is great potential for this DWM solution, and are training personnel from our global operations in the innovative technology used so as to be able to market ImmaPure effectively. It made its debut in Malaysia when we introduced it to the indust ry a t PETRONAS Management Unit’s inaugural Malaysia Exploration & Production Health Safety and Environment Forum 2011 which took place on 31 March 2011.

In Transport, Scomi Engineering is supported by research capabilities at the ETIC, where our monorail and the newly launched MRT systems were developed. The team here is currently working on a new and enhanced monorail prototype, the SUTRA Gen 2.1. Technology ownership and investment remain our focus to ensure competitiveness of our business around the world.

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In February 2012 we made public our plan to establish a new business unit focusing on upstream drilling services with the provision of high-performance drilling fluids solutions, modern drilling waste management services, completion, well-bore, clean up and cementing services as well as offshore supply vessels to support the oil and gas industry. This NewCo will combine our Eastern Hemisphere Oilfield Services (OFS) with Offshore Vessel Services currently offered by Scomi Marine. We believe this enlarged entity will simplify our operations while allowing us to bene f i t f rom the synerg ies o f complementary services that are currently managed by separate divisions. It will, moreover, enable us to offer more comprehensive and value-add services to customers in the Eastern Hemisphere, which will be our new focus area.

To our shareholders, this means the opportunity to participate in a more diversified and enlarged company with greater earnings potential. It will also allow us to financially restructure the Group and further pare down our debts in order to strengthen our balance sheet. In short, we believe the NewCo presents a winning formula to all concerned and marks a fitting beginning to the end of Formula 2011.

LOOKING AHEAD

All indicators point to a 2012 that will be equally as challenging, if not more so, than 2011 was. The International Monetary Fund (IMF) has forecast a moderation in world trade growth to 3.8% in 2012 from 6.9% in 2011. According to the IMF, the structural problems facing the crisis-hit advanced economies have proven even more intractable than expected. However, growth is expected to remain fairly robust in emerging markets. This reaffirms our own outlook, which contributed to our new strategic focus to ‘Look East’.

People Power

Believing firmly that our people form the backbone of our success, Scomi is committed to attracting and retaining the best talents in the industry. This we accomplish by not only offering attractive remuneration packages but also by nurturing an environment that motivates staff and drives them to realise their full potential. We have several programmes targeted at the different levels within our organisation to provide training suited to the capabilities and functions of different segments of our human resources.

Most of our programmes globally are run in-house by our Group Learning and Development (GLaD) team. However, we also bring in subject experts and send our people for professional courses conducted externally so as to tap into the best minds and methodologies available. All our training initiatives, especial ly those targeted at the management level and above, ensure we have a secure and reliable succession plan. Our talent pipeline starts from the very beginning, with new recruits whom we place on an 18-month Management Trainee programme to introduce them to the Scomi Group, our diverse businesses, our corporate philosophy, our vision and our strategies.

A NEW SCOMI

Over the last few years, we have felt more keenly the need to relook our global strategies and focus on key business areas that offer the greatest potential for our growth, in geographic locations that are supportive of our core activities. Consequently, our global strategy today is to focus on oil and gas, as well as urban transport in emerging markets.

Safety First

At Scomi, safety and care for the environment are of paramount importance. We conduct safety campaigns round the year and our Quality, Health, Safety and Environment (QHSE) team ensures that all our employees are apprised of basic safety measures and conversant with standard procedures in the event of a QHSE malfunction.

A major milestone was achieved by our Oilfield Services division when the Scomi Oiltools drilling fluids branch in Kemaman celebrated one million man hours without loss time incidents/accidents on 1 June 2011. This is equivalent to 6.6 years or approximately 2,433 working days without any accident. For the Mumbai monorail project, meanwhile, our employees celebrated the completion of three years without a single Lost Time Incident (LTI) on 26 July 2011.

At Scomi Engineering, concerted efforts to improve quality, health, environment and management systems have led to the group achieving the ISO 9001:2008 Quality Management System, ISO 14001:2004 Environmental Management System and OHSAS 18001:2007 Occupational Health and Safety Management System by SIRIM in November 2011. This adds to recognition accorded to the group for its monorail technology by the Ministry of International Trade & Industry, Malaysia, which presented the Malaysian Trade & Industry Recognition Award and the Product Excellence in the Industry Excellence Award to SEB in 2010.

We are proud of these achievements and strive to maintain the best record in QHSE in order to protect our employees, our assets and the assets of clients, as well as to maintain our reputation as a reliable organisation that operates on the highest principles of safety and integrity.

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Today, as Scomi looks East, we are t a r g e t i n g a w i d e s p r e a d a r e a encompassing China and India as well as South East Asia. At the same time, we are also focusing on emerging markets such as Brazil, where a rapidly expanding middle-class with growing purchasing power is driving internal demand. We believe these dynamic markets offer huge potential for growth and a robust appetite for our innovative solutions, especially in the Oilfield Services and urban transportation businesses.

Economic growth of countries in the Eastern Hemisphere will further fuel demand for energy which in turn will be reflected in sustained drilling activity. With the creation of our NewCo, we expect to derive greater revenue from existing as well as new customers as we offer comprehensive, efficient and cost-effective value-add offshore services.

Another common factor in emerging markets is urbanisation, which leads to crowded cities and congested traffic. This translates into huge potential for our efficient and green monorail and MRT systems. We are therefore very confident of further expansion of our Transport Solutions, and especially our urban rail technology, in this global zone. To translate the mine of opportunities into profitable projects, the division will continue to enhance its project execution abilities and customer engagement while churning out new and innovative products.

Despite the challenges faced in Mumbai, the Group remains optimistic of further growth in India. Already, along with our financial partner ITNL Enso Rail System Ltd (IERS), we have been pre-qualified for a monorail project proposed by the Thane Municipal Corp, also in the state of Maharashtra, and have submitted a proposal for a 300km monorail system in Chennai. We have also formed a consortium with Geodesic with whom we have proposed a 60km monorail for

Bangalore. Meanwhi le we have approached the authorities in Delhi and the state of Kerala with proposals for monorail projects. Just in Kerala, the state has set aside Rs5,100 crore for monorail systems in Thiruvananthapuram and Kozhikode.

We are equally optimistic of further growth in Brazil where the government has ambitious urban transport plans valued at BRZ Real 104.5 billion ahead of the 2014 FIFA World Cup. It is expected to issue another 20 tenders in the next two years of which five or six are to be for monorail systems.

The Group has been considerably strengthened over the last few years via Formula 2011, based on which we move towards fresh targets for 2014 in great anticipation. We firmly believe we have embarked on the right path with the recent corporate restructuring and our new business focus areas. Although the year 2012 promises to be challenging,

therefore, we remain undaunted. We are entering the new year a new Scomi. And in our revitalised form, we are well-prepared to take the Group to greater heights as we continue along our very exciting journey.

Sincerely,


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Reaching out through sustainable practices We aim to contribute positively towards the advancement

of the communities we operate in. Towards this end, we

are involved in various projects and initiatives such as

conservation activities, philanthropy and volunteerism,

amongst others.

CORpORATE SOCIAL RESpONSIBILITY

In today’s competitive corporate world, companies are judged not only on their financial performance but also on their contributions to society and to the preservation of the environment. At Scomi, we acknowledge our responsibility to all the lives we touch either directly or indirectly, and are committed to making a positive impact in the many communities where we have a presence while further strengthening our corporate reputation via upholding a culture of integrity and transparency.

We also realise that, given the nature of the businesses we are involved in, we can make a positive impact on the env i ronment. Hence, we invest significantly in R&D to develop ‘green’ products that are efficient, cost-effective and, most importantly, that leave the environment clean.

Over the years, our approach towards corporate responsibil ity (CR) has become progressively more holistic, evolv ing from indiv idual acts of philanthropy to becoming a mindset that influences our every decision and strategy. We further ensure that this mindset is shared among all our employees by reinforcing the principles of integrity and corporate citizenry in our training and internal communication, and encouraging a spirit of volunteerism across our operations globally.

THE MARKETPLACE

Our marketplace initiatives encompass efforts to engage with our stakeholders and to better serve our customers. Via our investor relations programme we hold investor briefings and meetings. We also make immediate announcements to Bursa Malaysia on material activities and events, and distribute a quarterly Letter to our Shareholders. Group updates are further captured in our quarterly newsletter, Focus, which is shared with customers, partners, suppl iers, employees and other stakeholders. Meanwhile, comprehensive information on the Group is easily accessible via our website and other electronic channels, as well as our Annual Report.

Our investment in R&D and our quest to continuously innovate led to Scomi Engineering being honoured with the Special Award for Product Excellence under the Innovative Product category at the Malaysian Ministry of International T rade and Indus t r y ’ s I ndus t r y Excellence Awards 2010 held on 24 March 2011. The award recognised the cutting-edge technology behind our SUTRA monorail system.

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Our commitment to customers extends beyond the provis ion of qual i ty products. We also train their personnel in the use of Scomi branded tools and equipment as part of our service delivery. Scomi Oiltools in Thailand, for example, conducted a Drilling Fluids Technology course for engineers of a customer in Thailand, covering the basics of drilling fluids, drilling hole problems, solids control and our latest mud system developed at our Global Research and Technology Centre in Shah Alam, Malaysia.

In 2011, we s t rengthened our engagement with the public with a blog, Ideas For Tomorrow, which effectively creates a platform for individuals around the world to discuss issues relating to the creation of a new future for global cities.

We also engaged positively with corporate Malaysia by taking part in The Edge Bursa Malaysia Kuala Lumpur Rat Race, held on 20 September 2011. Meanwhile Group CEO Shah Hakim Zain was a panellist at several high-level conferences held in Malaysia and abroad. He spoke at the session on Making Malaysia a Regional Oil and Gas Hub at the Invest Malaysia 2011 Conference held on 12-13 April in Kuala Lumpur; he contributed to a discussion on Corporate Sector Wish List: What Would Get Malaysian Businesses to Invest More in Malaysia? at the Perdana Leadership Foundation CEO Forum 2011 on 23 June 2011; and was also a panelist discussing issues facing a rapidly urbanising Mumbai at the India Economic Summit, organised

by the World Economic Forum, from 12-14 November 2011. Later, on 17 December 2011, he shared Scomi’s experiences in India at the 3rd Annual Young Corporate Malaysians (YCM) Summit in Kuala Lumpur.

THE WORKPLACE

We realise that Scomi is only as good as our strongest asset, our people. We are therefore committed to nurturing a workplace that attracts the best talents and motivates them to excel. We do this by creating a culture that values and rewards performance while also reinforcing a sense of belonging to the Group. In order to bring out the best in our employees, they are constantly challenged to stretch their abilities via projects and assignments of increasing responsibility and complexity. At the same time, employees are given training and professional development opportunit ies to acquire relevant knowledge and skills for their career

progression. All executives are required to attend a minimum of 40 hours of training a year, while non-executives need to fulfil at least 20 hours of training a year.

In order to create Group unity, we have various programmes that stamp Scomi’s unique identity and which draw the participation of our employees. We also create a sense of belonging and ownership by interacting with our employees and maintaining effective communication with them.

GLAD: Talent Development

We have a dedicated Group Learning and Development (GLaD) team that conducts training programmes for staff across our international operations. GLaD is responsible for addressing the identified skills and knowledge gaps, and for managing the Group’s comprehensive talent development programme, which comprises the following initiatives:

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

• T h e M a n a g e m e n t T r a i n e e Programme. A imed at f resh graduates who are recruited into Scomi, this 18-month programme exposes the new recruits to all facets of the Group’s operations. During this time, the trainees are attached to different departments to enable them to pick up relevant skills that will set them on the right track for further development in Scomi.

• The Execu t i ve Management Programme. This programme brings together mid-level management from our global operations, and is geared towards enhancing their leadership skills while allowing them to meet and network with their global counterparts. In 2011, an Executive Management Programme was held in Kuala Lumpur drawing the participation of 29 managers worldwide.

• The Management Leadership Development Programme. This aims to develop future leaders for the Group, hence the high-level t ra in ing focuses on ef fect ive management and leadership skills. In 2011, the programme was held in Kuala Lumpur, attended by 23 senior managers from our global operations.

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

• Pro jec t Genera t ing Amaz ing Engineers (Project GAME). This 12-month programme has been developed by Scomi Engineering to nu r tu re we l l - rounded young engineers. Project GAME exposes the engineers to various aspects of rail engineering, manufacturing, product assurance and project delivery, in addition to soft skills training, which are crucial for future management positions.

• Global Executive Learning (GEL). This is a two-day learning programme for senior management and is normally held in conjunction with GEM, a conference of senior management from Scomi’s global operations.

Employee Engagement

We believe that open communication across the Group – within and between all levels – acts as a cohesive force that is especially important given the international nature of our organisation. Scomi uses a variety of platforms and tools to engender an inclusive culture in which every employee matters and every voice is heard.

• Open Communication Sessions. The Group promotes the sharing of knowledge, strategic information, business direction, performance status and updates across all our businesses via teleconferences and webcast facilities. The Group CEO himself conducts staff briefings to present the Group’s quarterly results and to announce any special update. In addition, Town Hall sessions are held at which groups of about 15 employees have private sessions with the Group CEO or Presidents of the Business Units at which they are at liberty to bring up any issue for c lar i f icat ion or discussion.

• Internal Communication. All operations Group-wide are connected by an intranet, through which employees are kept updated on projects, initiatives and corporate activities. The Group recently launched Vengo+, which enables members of Scomi’s global operations to communicate with each other more easily, by sharing working files, ideas and experiences.

• Global Executive Meeting (GEM). This is an annual conference of senior management from each of Scomi’s Business Units, where the global heads review and brainstorm Group strategies. GEM 2011 was held in Melaka, Malaysia, from 2-6 October, attended by 45 members of the senior management.

• Open Days. Every year, the different Divisions within Scomi Group hold Open Days to create a better sense of understanding among employees of what their colleagues in other divisions do.

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Work-Life Balance

We recognise that employees need to strike the right balance between their professional and personal commitments. The Group would like the families of Scomi employees to feel as if they, too, are part of the extended Scomi family. Towards this end, Scomi’s Sports Club Malaysia organises a Family Day every year, and this year brought together 500 staff and their families at the national Zoo in Kuala Lumpur.

In 2011, the head office in Kuala Lumpur also introduced flexi-hours to allow our employees to better manage their work and family obligations. They can now opt to work from either 7.30am-4.30pm, 8.00am-5.00pm, 8.30am-5.30pm or 9.00am-6.00pm. As an added bonus to our Malaysian employees, the management extended the lunch hour to two hours on Friday. This is to enable our staff to carry out important personal errands, or just to enjoy a rejuvenating break from work with colleagues or counterparts.

Performance Review

In 2011, the Group unveiled a new Performance Assessment & Capability Enhancement (PACE) to replace ACE, the previous performance management tool. With PACE, employees are assessed on Scomi’s three leadership capabilities, namely People Leadership, Personal Leadership and Business Leadership. Its objective is not just to evaluate performance but also to highlight areas of improvement for personal development. Via PACE, employees are engaged in a discussion to explore their strong points and agree on areas in which they can improve as well as to map a career plan that will allow them to realise their potential.

PACE also allows the management to identify employees with high potential who are provided the opportunity to fast-track their careers.

Safety at Work

Scomi places the highest priority on maintaining best practices in Quality, Health, Safety and Environment (QHSE) in our workplaces because we value the well-being of our employees and contractors, and are also driven to safeguard the assets of our customers. We have QHSE teams in all our businesses whose function is to ensure all personnel, contractors, suppliers and even visitors are aware of our well-defined QHSE policies, and to enforce these. Every employee is expected to meet bas ic QHSE requirements and this is taken into account in performance appraisals.

During the year, the Group celebrated a number of milestones in QHSE. Our Dril l ing Fluids Kemaman Malaysia branch celebrated 1 million man-hours (equivalent to 6.6 years) of no lost time from incidents/accidents on 1 June 2011. Our Mumbai office, meanwhile, completed three years without a single lost time incident on 26 July 2011.

THE ENvIRONMENT

As a responsible corporate citizen, Scomi is concerned about environmental issues and takes every measure we can to minimise the wasteful use of resources as well as to protect the env i ronment i n pos i t i ve ways . Employees at our corporate offices are committed to the green cause and have implemented various programmes to reduce our environmental footprint. At our R&D centres, preservation of the environment is always factored into product development, right from the stage of design.

Our new global headquarters in 1 First Avenue in Bandar Utama, Selangor, Malaysia, has further cemented our commitment to the environment, making us immediately a very low-carbon, high-efficiency company as our new home is a certified Green Building. In this new office, we have also implemented a number of environment-friendly initiatives, such as reducing the number of printing machines, restricting colour printing as well as implementing a 3R programme to reuse, reduce and recycle.

Staff Initiatives

Employees at Scomi OFS Indonesia have pledged to lead a greener lifestyle by saying ‘No To Styrofoam’. Instead of using styrofoam cups and containers, all staff have been presented with custom-made Scomi mugs and lunch bags that include food-grade plastic containers. As of making their pledge, any employee who brings food or drinks in styrofoam or non-food grade plastic will be fined.

Project Aware

In April 2011, Scomi Marine (SMB) once again participated in the Project Aquatic World Awareness, Responsibility and Education (Project AWARE) by support ing mar ine conservat ion act iv i t ies in Malaysia. This is a continuation of Project AWARE I carried out the same time last year in Indonesia in conjunction with Earth Day 2011.

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This year, SMB corporate office staff collaborated with Project AWARE Foundation, Ocean Elements Sdn Bhd, Dungun City Council and the local village community to rope in divers and non-divers to clean up the beach as well as waters off Teluk Lipat, Dungun and Pulau Tenggol, both in Terengganu, Malaysia, from 15-16 April 2011. The project also included awareness creation and advocacy through a Coral Reef Conservat ion Seminar and Discovery Scuba Diving activity.

During the beach clean-up at Teluk Lipat, SMB staff were joined by students of Imtiaz High School, Politeknik Dungun and UITM Dungun, as well as staff from the Dungun City Council and Dungun Civil Defence Department, and local residents. A total of 570 volunteers combed the 8.5km beach and collected 500kg of t rash. In addit ion, 5 tonnes of deadwood were removed.

The Coral Reef Conservation Seminar was attended by 30 students from Imtiaz High school, who also received books and reading materials on coral reef and marine conservation. SMB also sponsored 10 students to take part in a PADI Discovery Scuba Dive at Tenggol Island, to educate them on the importance of preserving the reefs. SMB staff themselves were tasked with collecting data on the coral reef around the island and collecting rubbish from the sea. The data collected was channeled to the Ocean Conservancy Group, which is responsible for preparing the International Global Marine Debris Report.

THE COMMUNITy

Scomi bel ieves strongly that al l corporate organisations have a duty to give back to the communities that support them. This is a principle we have adhered to from the beginning, and which has seen our involvement in the community intensify over the years. In 2005, we established our foundation, Yayasan Scomi, which runs a structured programme to extend help, financially or otherwise, to the underprivileged, marginalised and needy.

At the same time, our own employees have joined forces to make a difference to society, via Project Pyramid, our flagship social responsibility (CSR) programme that has seen the involvement of employees from across our global operations. Project Pyramid in Malaysia is led by the captains of the Blue, Green, Yellow and Red Houses of the Scomi Sports Club. These captains are provided with Seed Funds and, gu ided by cer ta in parameters, carry out CSR projects of their own choosing. All staff are required to take part in their house projects, their involvement earning them points under PACE.

Project Pyramid 2011

In 2011, the Yellow Team invited the World Wildlife Fund Malaysia (WWF) to present a talk on endangered wildlife to the staff at our Global HQ, and launched an interactive educational website where visitors can acquire facts and knowledge relevant to the projects accomplished by the Yellow Team.

The Red Team invited the Women’s Aid Organisation of Malaysia to present a talk at the Global HQ on violence against women. Red Team members in Kemaman, meanwhile, donated a bicycle and 40 school bags to underprivileged children. They also visited a centre for disabled children, where a talk was given to not only the kids but also their parents. They concluded the visit by presenting the children with gifts.

The Blue Team invited a medical practitioner to deliver a talk on breast cancer. The talk covered topics from the early symptoms of breast cancer to effective prevention measures. Held at the Global HQ, the sess ion emphasised that there is hope for breast cancer patients. The Blue Team also cleaned the beach at Kampung Aru in Labuan, East Malaysia.

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The Green Team treated Scomi staff at the Global HQ to free 10-minute shoulder massages. They also visited the children’s cancer unit at Hospital Universiti Kebangsaan Malaysia (HUKM), and donated eight LCD TVs to UKM’s Paediatric and Oncology Ward to create a livelier atmosphere for the young patients. In Terengganu, the Green Team donated Year 6 textbooks and school tables to Sekolah Islam Darul Taqwa in Kemaman. With the help of other volunteers, they also painted the classrooms and raised RM2,000 to purchase additional books for the students.

No-Hunger GAME

The final stage of Project GAME was a CSR project called Feed the Street, which aimed at raising awareness among Scomi staff of the problem of homelessness in Malaysia and creating an opportunity for the young engineers to prepare and distribute food packages to the homeless.

To raise funds for this project, the Team set up a booth at the Scomi Family Day in Zoo Negara to run various fundraising activities, and managed to raise more than RM7,000. On 21 July, the Team operated a carwash booth at the North Kuala Lumpur Facility to give the staff there the opportunity to contribute to this cause. In total, they collected RM8,100 for Feed the Street.

Collaborating with Reach Out Malaysia, the GAME members, along with more than 300 Scomi volunteers, finally ‘fed the street’ at a Cook and Reach activity held at Sekolah Kebangsaan Sungai Way in Petaling Jaya on 24 July 2011. In addition to the food, a total of 150 dry packs containing small towels, vitamin C tablets, soap, toothbrushes and toothpaste, were distributed to the homeless.

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Scomi can provide further assistance to the families. While helping the families, the visits also afford the volunteers a glimpse of the living conditions of those in remote, poverty-stricken areas.

Other activities undertaken by Yayasan Scomi during the year included a visit to the museum and KL Bird Park organised for kids from Wake One House, a talk on dyslexia, visit to Rumah Lindungan Kasih a welfare home in Tampin, Negeri Sembilan, various Ramadhan visits to the poor and needy, and a breaking of fast with orphans in Lipis, Pahang. Yayasan Scomi also supported GAME’s Feed the Street project.

Meanwhile, Scomi continued with its tradition of supporting the MERCY Malays ia Humanitar ian Fund by participating in its fund-raising dinner held at the Istana Hotel, Kuala Lumpur on 7 October 2011.

yayasan Scomi

Yayasan Scomi continued to take on various acts of philanthropy to help those in need. Among its programmes, the foundation has been running an annual blood donation activity since its formation in 2005. Last year, i t organised its Blood Donation Drive together with the University Malaya Medical Centre on 10 March at Scomi’s Global HQ.

Yayasan Scomi also runs an outreach programme involving 11 families it has adopted in Malaysia. They include 10 families in Baling, Kedah and another in the remote area of Selama, Perak. Every year, the foundation extends financial assistance to these families to help them meet their education, nutrition, health and shelter needs. The foundation also offers counselling to the children in these communities and monitors them closely to ensure they are coping with school and community life.

In 2011, volunteers from across the Scomi Group of Companies visited the 11 families to evaluate their progress. Following these visits, they made recommendations on how Yayasan

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Corporate governance is the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long term shareholder value, whilst taking into account the interest of other stakeholders. Good governance provides a solid foundation for a company to achieve sustainable growth as well as engenders trust and infuses confidence among its shareholders and other stakeholders.

As such, the Board of Directors of Scomi Group Bhd (“the Company”) (“the Board”) remains committed in its responsibi l i ty 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 the Company and its group of compan ies ( “ the Group” ) as a fundamental part of discharging its roles and responsibilities. Hence, the Board continues to implement the principles set out in Part 1 of the Ma lays ian Code on Corpora te 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 financial year ended 31 December 2011 in accordance with Paragraph 15.25 of the Main Market Listing Requirement of Bursa Malaysia Securities Berhad (“MMLR”).

THE BOARD OF DIRECTORS

The BoardThe success of the Board in fulfilling its oversight responsibility depends on its size, composition and leadership qual i t ies. The Group is led and control led 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 financial matters.

The Board consists of n ine (9) members, comprising one (1) Executive Director and eight (8) Non-Executive Directors (including the Chairman) of whom six (6) are independent as defined by the MMLR. The Independent Directors make up 67% of the composition of the Board. Hence, the composition of the Board fulfils the prescribed requirement for one-third (1/3) of the composition of the Board to be independent directors. The appointment of the independent directors is to ensure that the Board includes directors who can effectively exercise their best judgment objectivity for the exclusive benefit of the Company and the Group. The composition of the Boa rd r e f l e c t s a d i v e r s i t y o f backgrounds, skills and experiences in

the areas of business, economics, finance, legal, general management and strategy that contributes effectively in leading and directing the management and affairs of the Group. Given the calibre and integrity of its members and the objectivity and independent judgment brought by the Independent Directors, the Board is of the opinion that its current composition and size contribute to an effective Board.

The Board also complied with the MMLR on the restriction on directorships where none of Director holds more than 10 d i rectorsh ips in l i s ted companies and 15 directorships in non-listed companies. The Company Secretary monitors the number of directorships held by each Director to ensure compliance at all times. The list of directorships of each Director is updated regularly and is tabled to the Board on a quarterly basis. The Board is satisfied that the external directorships of the Board members have not impaired their ability to devote sufficient time in discharging their roles and responsibilities effectively.

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STATEmENT ON CORpORATE gOVERNANCE

A brief description of the background of each Director is presented within the Profile of Directors section as set out on pages 10 to 14 of this Annual Report.

In accordance with the best practices of corporate governance as promulgated by the Code, in August 2011, the Board appointed a Senior Independent Director to act as an addit ional safeguard and to serve as the point of contact between the Independent Directors and the Chairman on sensitive issues and to act as a designated contact to whom shareholders’ concerns or queries may be raised, as an alternative to the formal channel of communication with shareholders.

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 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.

In 2009, the Board established and delegated specific responsibilities to the Executive Committee (“EXCO”), as is further described below. The EXCO was then dissolved with effect from 31 August 2011.

The EXCO, which was established on 6 April 2009 arising from the sanctions imposed by the Un i ted States Department of State on the Group Chief Executive Officer (the “Sanctions”), was a measure implemented by the

Board upon U.S. legal counsel’s advice to ensure the continued oversight over Management by a committee with a strong element of independence of judgment. This EXCO was dissolved on 31 August 2011 upon the lifting of the Sanctions.

The role of the Chairman of the Board (“the Chairman”) and the Group Chief Executive Officer (“GCEO”), under the direction of the EXCO prior to its dissolution, are separated with each having a clear scope of duties and responsibi l i t ies. The distinct and separates roles of the Chairman and the GCEO, with a clear division of functions and responsibilities, ensure a balance of power and authority, such that no one individual has unfettered powers of decision making. This crucial partnership dictates the long term success of the Company and the Group.

The Chairman plays a crucial and privotal leadership role in ensuring that the Board works effectively, whilst the GCEO under the direction of the EXCO (prior to its dissolution) has the overall responsibility for the operational and bus i ness un i t s , o rgan i sa t i ona l effectiveness and implementation of Board policies, directives, strategies and decisions. Consequent to the dissolution of the EXCO, all duties functions, obligations and responsibilities of the EXCO are vested in the GCEO. A periodical review of the GCEO’s Balanced Scorecard is undertaken by the EXCO and the Nomination and Remuneration Committee (“NRC”) respectively. The GCEO is supported by the Key Management Team, as set out on pages 16 to 17 of this Annual Report, for the day-to-day management of the business and operations of the Group.

Board CommitteesThe Board has establ ished and delegated specific responsibilities to four (4) committees of the Board, which operate within clearly defined 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 EXCO;• the Audit and Risk Management

Committee (“ARMC”);• the NRC; and• the Options Committee (“OC”).

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

The minutes of the Board Committees’ meetings and resolutions passed are presented to the Board for information. The Chairman of the relevant Board Committees will also report to the Board on the key issues deliberated by t he Boa rd Commi t t ees a t i t s meetings.

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Composition of the Board and its Committees are as follows:

Board of Directors

Board CommitteesARMC NRC OC EXCO*

Chairman/Independent Non-Executive DirectorTan Sri Asmat Bin Kamaludin C – C C –

Independent Non-Executive DirectorsTan Sri Nik Mohamed Bin Nik Yaacob@ M M – – CDatuk Haron Bin Siraj M M – M –Dato’ Mohammed Azlan Bin Hashim@ M M M – MDato’ Sreesanthan A/L Eliathamby M – – – –Dato’ Abdul Rahim Bin Abu Bakar M C – – –

Non-Independent Non-Executive DirectorsDatuk Mohamed Azman Bin Yahya M – M – –Mr Foong Choong Hong# M M – – –

GCEO/Non-Independent Executive DirectorEncik Shah Hakim @ Shahzanim Bin Zain M – – M M

Notes

C: Chairman M: Member

* Dissolved with effect from 31 August 2011.@ Appointed as a member of the ARMC on 31 August 2011.# Resigned as a member of the ARMC on 31 August 2011.

BOARD MEETINGS & SUPPLy OF INFORMATION

The scheduled meetings of the Board and its Committees is prepared and circulated to the Board before the beginning of the year. This provides the scheduled dates for meetings of the Board, Board Committees and general meetings of the Company. During the financial year ended 31 December 2011, six (6) Board Meetings were held. The attendance record of the Directors at the Board meetings and the Board Committees meetings are as follows:

Board of Directors

Board CommitteesARMC NRC OC EXCO*

Chairman/Independent Non-Executive DirectorTan Sri Asmat Bin Kamaludin 6/6 – 1/1 1/1 –

Independent Non-Executive DirectorsTan Sri Nik Mohamed Bin Nik Yaacob@ 6/6 2/2 – – 4/4Datuk Haron Bin Siraj 5/6 6/6 – 1/1 –Dato’ Mohammed Azlan Bin Hashim@ 5/6 2/2 1/1 – 4/4Dato’ Sreesanthan A/L Eliathamby 4/6 – – – –Dato’ Abdul Rahim Bin Abu Bakar 5/6 6/6 – – –

Non-Independent Non-Executive DirectorsDatuk Mohamed Azman Bin Yahya 4/6 – 1/1 – –Mr Foong Choong Hong# 6/6 4/4 – – –

GCEO/Non-Independent Executive DirectorEncik Shah Hakim @ Shahzanim Bin Zain 6/6 – – 1/1 4/4

Notes

* Dissolved with effect from 31 August 2011.@ Appointed as a member of the ARMC on 31 August 2011.# Resigned as a member of the ARMC on 31 August 2011.

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The Board are supplied with quality and timely information, which allows them to discharge their responsibilities effectively and efficiently. The meeting agenda together wi th 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, and where necessary, to obtain supplementary information before the meeting. At the Boa rd mee t i ng , t he Cha i rman encourages constructive, open and healthy debate and ensures that reso lu t ions a re c i rcu la ted and deliberated so that all Board decisions reflect the collective view of the Board. Directors are given the chance to freely express their views or share information with their peers in the course of deliberation at the Board. Any Director who has a direct and/or indirect interest in the subject matter to be deliberated will abstain from deliberation and voting on the same during the meeting.

Where required, the Board and its Commi t tees a re p rov ided w i th independent professional advice, the cost of which is borne by the Company. In addition, the Directors have full access to the advice and dedicated support services of the two (2) company secretaries appointed by the Board. The Board may also seek advice from the Key Management Team or management on issues under their respective purview or request further explanation, information or update on any aspect of the Group’s operations or business concerns.

ExECUTIvE COMMITTEE

The objectives of the EXCO are to undertake and carry out the duties, functions, obligations and responsibilities as the GCEO of the Company and the Group, inc lud ing a l l author i t ies delegated to the GCEO pursuant to the Delegated Authority Limits of the

Company and the Group, including specifically to:

• implement the strategies and policies of the Company and the Group;

• devise and ensure the achievement of the strategic intent for the Company and the Group and direct and monitor performance processes within the Company and 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 specifically 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 appointment of the independent directors to the EXCO is to ensure that the EXCO can effectively exercise their objectivity and independent judgment for the exclusive benefit of the Company and the Group. The EXCO meets at least once every month, save for months in which a meeting of the Board is scheduled.

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

• to discuss and agree on following m a t t e r s f r o m t h e G r o u p ’ s perspective:■ overall policy matters for the

Group;■ Group coordination between

o p e r a t i o n s a n d s u p p o r t services;

■ financial 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 Company and the Group;

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

• 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 organisation’s policy and procedure manual;

• to review, on a regular basis but no l ess tha t annua l l y , i t s own performance, constitution and Terms of Reference to ensure it is operating at maximum effectiveness and where necessary, updating these Terms of Reference;

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

• to monitor the quarterly progress of achievements of key result areas set out in the GCEO’s Balanced Scorecard.

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APPOINTMENTS TO THE BOARD

The appointment of directors is a vital p rocess as i t de te rm ines the composition and quality of the Board’s capacity and competencies. 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

po t en t i a l c and ida t es f o r directorships to be filled by the shareholders or the Board giving consideration to:

■ 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 e lements of th is framework, which would form the basis of deliberations on the remuneration to be awarded, are:

♦ the Company’s f inancial performance which may include financial indicators such as turnover, profitability, market capitalisation and ach i e vemen t o f t hese indicators vis-à-vis pre-determined goals;

♦ t he sk i l l s , know ledge , 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;

♦ the cand idates ’ sk i l l s , knowledge, expertise and experience;

♦ t h e c a n d i d a t e s ’ 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;

■ c o n s i d e r , i n m a k i n g i t s recommendations, candidates for directorships proposed by the GCEO and within the bounds o f p rac t i cab i l i t y , candidates proposed by any other senior executive or any director or shareholder; and

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

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

■ to assess, on an annual basis, the effectiveness of the Board as a whole, the Committees of the Board and the contributions of each individual director, including Independent Non-Executive Directors, as well as the GCEO and to ensure that all assessments and evaluations carried out in the discharge of th is funct ion are proper ly documented;

■ from time to time, to examine the size of the Board with a view to present recommen-dations 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;

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■ to conduct, on an annual basis (or when the need arises as in t h e c a s e o f p r o p o s i n g r e m u n e r a t i o n a n d / o r compensat ion fo r a new Executive Director), a review and thereon provide advice and recommendations to the Board on a l l 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, f ixed quantum or merit increment);

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

♦ directorship fee (fixed and/or supplementary);

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

♦ fringe benefits in kind which include among others club membership, company car, medica l and insurance benefits, outstation/overseas allowance etc; and

♦ other terms of employment/directorship;

■ to determine and agree on the Company’s po l icy on the durat ion of contracts with Executive Directors, and notice p e r i o d s a n d t e r m i n a t i o n 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; and

■ to consider any publ ished 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 MMLR, at least one-third (1/3) of the Board is subject to retirement by rotation at each Annual General Meeting (“AGM”). Pursuant to Article 82 of the Articles of Association of the Company, Datuk Haron Bin Siraj, Dato’ Sreesanthan A/L Eliathamby and Encik Shah Hakim @ Shahzanim Bin Zain retired from the Board and were re-elected at the 9th AGM held on 29 June 2011.

Directors’ Continuing EducationAll members of the Board have attended the Mandatory Accreditation Programme as required under the MMLR.

To remain relevant in the rapid changing and complexities of modern business env i ronment , our D i rectors are committed to continuing education and lifelong learning. Directors’ commitment to continuing development fostered intellectual honesty which is a crucial part of good governance.

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

During the financial year ended 31 December 2011, all members of the Board attended var ious tra in ing programmes, conferences, seminars and courses organised by the relevant regulatory authorities and professional bodies on areas relevant to the Group’s b u s i n e s s , D i r e c t o r s ’ r o l e s , responsibilities, effectiveness and/or corporate governance issues. Training programmes, conferences, seminars and courses attended by Directors in 2011 are as follows:

Corporate Governance• Corporate Governance: “The Holistic

Board”• Directors’ Training: “Key Amendments

to Listing Requirements 2011 & Corporate Disclosure Guide”

• ICAA-MICPA Forum: “Improving Corporate Governance in Malaysia Capital Markets – The role of the Audit Committee”

• Malaysian Institute of Corporate Governance Conference: “Directors Duties & Governance 2011”

• Meeting Bursa’s Financial Reporting Timelines

• Roundtable Discussion on “The Code of Public Governance”

• Scrutinising Financial Statement Frauds and Detection of Red Flags for Directors and Officers of PLCs and Government Regu la to ry Agencies

• Talent Enrichment Programme: Crisis Management – the Malaysian Experience

• The Laws Governing Land and Property Development – Overview and Latest Amendments

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Business Management, Economics, Finance and Industry Update• 16th Asia Oil & Gas Conference

2011• 24th Annual AVCJ Private Equity &

Venture Forum• 5th International Islamic Capital

Market Forum: “Risk Sharing: A way forward to Public Good”

• Assessing the Risk and Control Environment

• Avoiding Minefields Amidst a C h a n g i n g A n t i - C o r r u p t i o n Landscape

• Cranfield Executive Leadership Forum “The Makings of a Global Leader”

• CEO Forum 2011: “Transforming Malaysia: Challenges to becoming a High-Income Nation”

• Development of Labuan International Business and Financial Centre

• Domestic Investment Summit 2011• Economic Transformation Programme

(ETP) Update• Global Trend & Market Strategy –

China’s Rise Changes Global Dynamic & Forecast

• High Level Conference on Islamic Finance: “Enhancing Financing L inkages Towards Economic Prosperity”

• India Economic Summit 2011• International Conference “The Arab

Uprising”

• Invest Malaysia 2011• Khazanah Megatrends Forum 2011:

“Uncertainty as Normality: Navigating through Complex Interconnection”

• MSC Malaysia Equity Investment• Shariah (Islamic) Compliance in

Insurance Industry• Strategic Trade Act 2010 Forum:

“Proactive Deterrence Against Proliferation of Weapons of Mass Destruction”

• Syarahan Perdana Budaya• Techventure 2011: “The new ager

of Asian Innovation”• The 3rd Annual Young Corporate

Malaysians Summit• The Economic Transformation

Programme: “What’s in it for me”• The LSE Debate – The Economic

Transformation Programme, Key Challenges

• World Economic Forum on East Asia

Apart from attending the training programmes, conferences and seminars organised by the relevant regulatory authorities and professional bodies, the Directors also visited key operating units of the Group and continuously received briefings and updates on regulatory and industry development, including information on the Group’s businesses and operat ions, r isk management activit ies and other initiatives undertaken by the Group.

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 fa i r and transparent remunerat ion pol icy 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 remunerat ion of the GCEO comprises principally salary and other benefits, taking into consideration market rates and practices. Additionally, he is entitled to share options under the Company’s ESOS, which are exercisable until the expiry date of the scheme.

T h e N o n - E x e c u t i v e D i r e c t o r s ’ 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 during the financial year ended 31 December 2011 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 financial year, and the bands, are as follows:

Executive Director(RM’000)

Non-Executive Directors(RM’000)

Total(RM’000)

Salaries and bonuses 2,279 – 2,279Defined contribution plan – – –Fees – 707 707Allowances – 186 186Estimated value of benefit-in-kind 551 – 551

Total 2,830 893 3,723

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The aggregate remuneration above is categorised into the following bands:

Executive Director Non-Executive Directors Total

RM65,000 to RM115,000 – 6 6RM115,001 to RM165,000 – 1 1RM165,001 to RM215,000 – 1 1Up to RM2,900,000 1 – 1

AUDIT AND RISK MANAGEMENT COMMITTEE

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

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

The ARMC Report, enumerating its membership, Terms of Reference and activities during the financial year ended 31 December 2011 is set out on pages 56 to 60 of this Annual Report.

OPTIONS COMMITTEE

The OC 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 OC comprises two (2) Independent Non-Executive Directors and the GCEO/Non-Independent Execut ive Director. The Options Committee meets as and when required, and at least once during the financial year.

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 financial results and other relevant information are accessible v i a t h e G r o u p ’ s w e b s i t e a t www.scomigroup.com.my . Any persons wishing to receive email alerts or make any request for documents are able to do so via emai l to [email protected].

Towards ensur ing the ef fect ive dissemination of information, the Group maintains a Shareholders’ Communication and Investor Relations Policy. The Policy outlines how the Group identifies and distributes information in a timely manner to all shareholders. It also reinforces the Group’s commitment to the continuous disclosure obligations imposed by law, and describes the procedures implemented to ensure compliance.

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.

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

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

• to ensure 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 considerat ion the performance, seniority, number of years in service, employee grading and/or the potential contribution of the el igible 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.

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

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

The Statement of Directors’ Responsibility in respect of the preparation of the annual audited financial statements for the financial year under review is set out on page 63 of this Annual Report.

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

The roles of the ARMC in relation to both the internal and external auditors are described in the ARMC Report as set out on pages 56 to 60 of this Annual Report.

This Statement is made in accordance with the resolution of the Board dated 26 April 2012.

Internal ControlThe Board firmly 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 significant identified risks and that identified 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 53 to 55 of this Annual Report.

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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 (“ the Group”) . In compliance with Paragraph 15.26(b) of the Main Market Listing Requirements (“MMLR”) and Practice Note 9 issued by Bursa Malaysia Securities Berhad (“Bursa Malaysia”), the Board of Directors of Scomi Group Bhd (“the Company”) (“the Board”) is pleased to set out below the Group’s Statement on Internal Control for the financial year 2011. This statement covers all of the Group’s operations, save for Scomi Engineering Bhd (a subsidiary company) and Scomi Marine Bhd (an associated company), both of which are listed on Bursa Malaysia.

Board ResponsibilityThe 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 integr i ty of those systems. However, the Board recognises that such systems are designed to manage, rather than eliminate, the risks identified to acceptable levels. Therefore, the systems implemented can provide only reasonable and not absolute assurance against the occurrence of any material misstatement and loss.

Wh i l s t t he Boa rd has ove ra l l 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 to the Audit and Risk Management Committee (“ARMC”) on risks identified and action steps taken to mitigate and/or minimise 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

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

During the year under review, the Board was supported by the Board Executive Committee, which comprised two (2) Independent Non-Executive Directors and the Group Chief Executive Officer (“GCEO”) and was tasked to undertake and carry out the duties, functions, obligations and responsibilities of the GCEO of the Company and the Group, inc lud ing a l l author i t ies delegated to the GCEO pursuant to the Delegated Authority Limits of the Company and the Group. The Board Executive Committee, which was established on 6 April 2009 arising from the sanctions imposed by the United States Department of State on the Group Chief Executive Officer (the “ S a n c t i o n s ” ) , w a s a m e a s u r e implemented by the Board upon U.S. legal counsel’s advice to ensure the continued oversight over Management by a committee with a strong element of independence of judgment. This Board Executive Committee was dissolved on 31 August 2011 upon the lifting of the Sanctions.

Further details on the Board Committees are contained in the Statement on Corporate Governance on pages 44 to 52 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.

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

the Group in accordance with the “Statement on Internal Contro l : Guideline for Directors of Public Listed Companies”.

INTERNAL CONTROL FRAMEWORK

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

Clear and Structured Organisational Reporting LinesThe Group has a wel l def ined 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 indiv idual employees in al ignment 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, al l 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.

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STATEmENT ON INTERNAL CONTROL

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 assurance team reporting to the Chief of Staff is tasked with consolidating key performance data of the Group and continuously monitors on a quarter ly basis the progress of achievements in targeted key results areas or initiatives as set out in the Balanced Scorecards of the GCEO and his direct reports.

During i ts existence, the Board Executive Committee reviewed the ongoing financial performance of the Group and its business divisions on a monthly basis against their respective budgets, where further explanations and clar i f icat ions are noted for significant variances reported. The performance review results are also further escalated to the 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 defined DAL which is the primary instrument that governs and manages the business decision process in the Group. Whilst the objective of the DAL is to empower Management, the key principle adhered to in its formulation is to ensure that a system of internal controls and check and balance are incorporated therein. The DAL is continuously reviewed and updated to ensure relevance to the Group’s operations.

Code of ConductThe Board and employees of the Group are committed to adhering to the best pract ice in corporate

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

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

All employees of the Group of grades 17 and above are required to confirm their receipt and understanding of the Code of Conduct and further required to certify their continued compliance with the Code of Conduct on a semi annual basis.

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

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

Standard Operating Procedures, Processes and SystemsThere are documented standard operating procedures and guidelines that have been adopted by the Management to regulate the Group’s funct ional processes. In var ious instances, these documents form an integral part of the Integrated Quality Management Systems (“IQMS”).

In 2009, the Group had successfully implemented SAP across 24 countries. The implementation of SAP marks a significant milestone in the roll-out of Project BEST which is a global initiative to establish best practice processes across key functions promoting greater visibility, transparency and efficiency across the Group.

Integrated Quality Management Systems (“IQMS”)The 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 certification and ISO awareness trainings are regularly held.

Risk ManagementRisk Management is vital for continued profitabi l i ty and enhancement of shareho lder va lue , hence R isk 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.

T h e G r o u p ’ s E n t e r p r i s e R i s k Management (“ERM”) f ramework implemented within the Group continues to define, highlight, report and manage the key business and operational risks faced by all business divisions within the Group . Mon i to r i ng o f the management action plans during the review period was performed by the Management and/or the external service provider for internal audit services (“the Internal Auditors”). The Management reported to the ARMC at quarterly basis on areas of high risks faced by the Group and the adequacy of compliance and internal control systems adopted throughout the Group.

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STATEmENT ON INTERNAL CONTROL

Further information on the Group’s risk management activities is highlighted in the ARMC Report on pages 56 to 60 of this Annual Report.

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

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

The Group also has in place a Whistleblower Framework and Policy, to provide an avenue for employees to raise genuine concerns internally or report any breach or suspected breach of any law or regulation, including the Group’s policies and procedures, to the Disclosure Officer in a safe and con f i den t i a l manne r , ensu r i ng employees can raise concerns without fear of reprisals.

Competency and Talent ManagementTo enhance the competencies of the Group’s talent pool and establish a culture of continuous learning, the Group Learning and Development (GLaD) department runs a series of training and development programmes based on the Learning and Development Framework (OPUS) that defines training based on technical and non-technical programmes. This ensures that staff are kept up-to-date with the required competencies to carry out their duties and responsibilities towards achieving the Group’s ob ject ives. A key performance indicator on average learning hours per employee is in place

to encourage employees’ learning, growth and knowledge-sharing.

Independent Assurance MechanismRegular assessments on the adequacy and integrity of the internal controls and monitoring of compliance with policies and procedures are carried out through internal audits. The Group has outsourced the activities and function of the internal audit to a professional service provider. The internal audit plan that covers internal audit coverage and scope of work is presented for ARMC and the Board’s consideration and approval annually.

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

In addition to this internal mechanism, the Group also received extensive and detailed reports vide management letters from its External Auditors that primarily focuses on financial controls. The management letters were also presented to the ARMC for deliberations. In the event of any non-compliance, appropriate corrective actions have been taken in addition to amendments to the relevant procedures, if required.

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

working environment is fundamental to the Group’s success in business operations.

REvIEW OF THIS STATEMENT

As required by Paragraph 15.23 of the MMLR, the External Auditors have reviewed this Statement on 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 identified any circumstances which suggest any fundamental deficiencies in the system of internal controls in the Group.


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The Board of Directors of Scomi Group Bhd (“the Company” or “SGB”) (“the Board”) is pleased to present the Report of the Audit and Risk Management Committee (“ARMC” or “the Committee”) for the financial year ended 31 December 2011.

TERMS OF REFERENCE OF THE ARMC

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

Balance And Composition(a) The members of the ARMC shall

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

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

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

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

• 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 o ther d i rec tors and employees, whenever deemed necessary.

(b) The ARMC is not authorised 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 t h e M a i n M a r k e t L i s t i n g Requirements of Bursa Malaysia Securities Berhad, the ARMC is authorised 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 C o m m i t t e e ’ s p o l i c i e s a n d procedures, and regularly review:

(e) Members of the ARMC shall elect a C h a i r m a n f r o m a m o n g 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 three (3), the vacancy should be filled within three (3) months of it arising.

(h) Appointment of each Committee member shall be for a period of up to three (3) years. The Committee Cha i rman sha l l no t se r ve 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;

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AuDIT AND RISK mANAgEmENT COmmITTEE REpORT

(i) t h e a d e q u a c y o f t h e Committee’s policies and procedures for pre-approving the use of the independent aud i t o r s f o r non -aud i t 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 a u d i t o r b e f o r e t h e a u d i t commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved;

(e) To act as an intermediary between the managemen t o r o the r employees, and the external auditors;

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

• any changes in accounting policies and practices;

• significant adjustments arising from the audit;

• l it igation that could affect results materially;

• the going concern assumption; and

• compliance with accounting standards and other legal requirements;

(g) To d i scuss p rob l ems and reservations arising from the interim and final audits, and any matter the auditor may wish to d iscuss ( in the absence of management where necessary);

(h) To review the external auditor’s m a n a g e m e n t l e t t e r a n d 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

• r e c e i v e r e p o r t s f r o m management on resignations of other internal audit staff members, their reasons for resigning and to review the performance appraisal or assessment of the other internal audit staff conducted by management;

(j) To consider and report back to the Board any related party transactions and conflict of interest situation that may arise within the company or group including any course of conduct that raises ques t i ons o f managemen t integrity;

(k) To consider the major findings of i n te rna l i nves t iga t ions and management’s response;

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

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

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

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

• review, approve and ensure adherence to the Group’s risk management po l i cy and strategies;

• es tab l i sh the ro les and respective accountabilities of the Board, the Committee and Management in managing risks;

• provide for regular review of the e f fect iveness of the Group’s implementation of its risk management system;

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

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

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(o) In relation to major business investment proposals:

• to review and evaluate the risk associated with any proposal prepared by the pro ject 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 identified risks are adequate;

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

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

(p) To oversee the Group’s internal compliance and control systems establ ished by management,

including reviewing the effectiveness of these systems and approving management’s programmes and policies to ensure effectiveness.

Meetings and Minutes(a) The ARMC shall meet at least

four (4) times during a financial year. In order to form a quorum, the majority of members present must be independent directors.

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

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

(d) The Secretary of the ARMC shall record a l l 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 wil l report signif icant 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’ Abdul Rahim Bin Abu Bakar Chairman Independent Non-Executive Director 6/6

Foong Choong Hong(resigned on 31 August 2011)

Member Non-Independent Non-Executive Director 4/4

Datuk Haron Bin Siraj Member Independent Non-Executive Director 6/6

Tan Sri Nik Mohamed Bin Nik Yaacob(appointed on 31 August 2011)

Member Independent Non-Executive Director 2/2

Dato’ Mohammed Azlan Bin Hashim(appointed on 31 August 2011)

Member Independent Non-Executive Director 2/2

During the financial year under review, six (6) meetings were held on 23 February 2011, 20 April 2011, 25 May 2011, 22 August 2011, 29 November 2011 and 20 December 2011.

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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 financial year ended 31 December 2011:

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 and ensure that the audit is comprehensive;

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

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

5. reviewed the financial performance of contributing subsidiaries and associated companies;

6. reviewed the external auditor’s m a n a g e m e n t l e t t e r a n d management’s response;

7. considered the major findings by t he ex te rna l aud i to r s and management’s responses thereto;

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

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

10. reviewed the internal audit reports, both planned and ad-hoc or inves t iga t i ve aud i ts , wh ich incorporated audit f indings, recommendations and management responses for the Group and the Company by the external service provider for internal audit services;

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

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

13. conducted meeting with the external service provider for internal audit services without the presence of the executive board members and management;

14. reviewed and verified the related party transactions and provide recommendations on the same to the Board;

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

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

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

18. reviewed and evaluated r isk considerations in relation to major business investment proposals and adequacy of action plans to mitigate risks identified; and

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

INTERNAL AUDIT FUNCTION

The internal audit function of the Group is outsourced to an external service provider of internal audit services, w h i c h i s i n d e p e n d e n t o f t h e management and operations (“the Internal Auditors”). The Internal Auditors provide independent and objective assessments on the adequacy and effectiveness of the risk management, internal control and governance processes/framework of the Group. Through the internal audit function, the Company undertakes regular and systematic reviews of the system of internal control so as to provide reasonable assurance that such system continues to operate satisfactorily and effectively in the Group.

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

During the financial year under review, the Internal Auditors conducted various i n te rna l aud i t engagements i n accordance with the approved risk-based internal audit plans that are consistent with the corporate goal of the Group. Details of the internal audit activities carried out by the Internal Auditors are as follow:

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

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

3. carried out 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, verification of their existence and safeguarding assets from losses;

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

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

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

All internal audit activities for financial year 2011 were conducted by the Internal Auditors. The total costs incurred by the Group for the internal audit function in 2011 was approximately RM669,666.


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1. MATERIAL CONTRACTS INvOLvING DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS

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

2. STATUS OF UTILISATION OF PROCEEDS RAISED FROM CORPORATE ExERCISE

(a) As disclosed in Note 8 to the financial statements, the Group completed the disposal of Drilling Waste Management business by Scomi Oiltools, Inc. and Scomi Oiltools De Mexico, S. De R.L de C.V to National Oilwell Varco, L.P and National Oilwell Varco Solutions S.A. de C.V. on 10 and 11 November 2011 respectively for a total cash consideration of USD35.0 million (approx RM108.56 million), the utilisation of which is set out below.

USD’000 RM’000 Part pre-pepayment of KMCOB Murabahah Bonds 29,000 89,668Incidental expense related to the disposal 6,000 18,893 35,000 108,561

(b) As disclosed in Note 28(b), the Group completed the issuance of a RM342.55 million Sukuk Murabahah on 14 December 2011. The proceeds were utilised for early redemption of the outstanding amount of the KMCOB Murabahah Bonds in full.

(c) As disclosed in Note 44(b), the Group completed the disposal of 100 ordinary shares with a par value of NOK1,000 each representing the entire issued and paid up share capital in Scomi Oiltools AS to Knud Holm Prosjekt AS, a Norwegian company, for a total cash consideration of NOK0.1 million (equivalent to approximately RM0.06 million) in March 2012. The proceeds were utilised as working capital for the Group.

(d) As disclosed in Note 44(b), the Group completed the disposal of 498 registered shares of RIs10,000.00 each representing 99.6% of the issued and paid up share capital in SOKL to Behnam Mousavi Moustafa, for a total cash consideration of USD17.0 million (approximately RM52.1 million) on 11 April 2012. As per the share sale agreement, the disposal proceeds are payable in three instalments as follows:

USD’000 RM’000 (i) within one year of the date of share sale agreement is executed 5,100.1 15,630.3(ii) within one year of (i) 5,100.0 15,630.0(iii) within one year of (ii) 6,799.9 20,839.7 17,000.0 52,100.0

The disposal proceeds are proposed to be utilised as working capital for the Group.

(e) On 17 May 2012, the Company announced that it had entered into a conditional share sale agreement with AOS Orwell Limited for the disposal of its 100% equity interest in Scomi Nigeria Pte Ltd (“SNPL”) and 2% equity interest in Oiltools Africa Limited for a total cash consideration of USD39.77 million (subject to adjustments, if any) (or an equivalent of approximately RM123.90 million based on the exchange rate of USD1: RM3.1155). The disposal has not completed as at the date of this Annual Report was sent for printing.

The disposal proceeds are proposed to be utilised as follows:

USD’000 RM’000 Repayment of borrowings at SGB and SNPL 81,619.3 106,924.0Acquisition of remaining 49.9% interest in Titan Tubular Nigeria Limited held by minority shareholders 8,204.4 10,748.0Incidental expense related to the disposal 4,756.4 6,231.0 39,770.0 123,903.0

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ADDITIONAL INFORmATION

3. NON-AUDIT FEES

Non-Audit fees incurred during the financial year under review ended 31 December 2011 amounted to RM2,417.

4. SHARE BUy-BACKS

There was no share buy-back during the financial year under review ended 31 December 2011. As disclosed in Note 34(b), all shares bought back previously have been maintained as treasury shares and there has not been any resale of the Company’s treasury shares.

Details of the treasury shares are as tabulated below. Average Lowest Highest purchase Total No. of shares purchase purchase price of purchase bought back price price shares price RM RM RM RM

Balance as at 1 Jan/31 Dec 2011 14,427,200 0.406 1.479 1.296 18,695,745.96

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

5. OPTIONS, WARRANTS AND CONvERTIBLE SECURITIES

During the financial year, 5,029,875 new ordinary shares of RM0.10 each were issued by the Company by way of:

(i) issuance of 3,904,875 new ordinary shares of RM0.10 each pursuant to the conversion of 15,619,500 Irredeemable Convertible Secured Loan Stocks (“ICSLS”) of RM0.10 each on the basis of 4 units of ICSLS for 1 ordinary share; and

(ii) issuance of 1,125,000 new ordinary shares of RM0.10 each pursuant to the exercise of share options under the Company’s Employees’ Share Options Scheme (“ESOS”).

For the financial year ended 31 December 2011, the percentage of ESOS Options granted to Directors and Senior Management is 10.10% and cumulatively is 33.73% since the commencement of the ESOS.

6. DIRECTOR’S CONFLICT OF INTEREST

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

Director Nature of existing conflict of interest Transaction

Tan Sri Nik Mohamed Bin Nik Yaacob

Tan Sri Nik Mohamed Bin Nik Yaacob is an Independent Non-Executive Director of the Company; and Non-Independent Non-Executive Director of Scomi Oilfield Limited, a 76.08% owned subsidiary of the Company (“SOL”).

Provision of management and administrative services for Nigerian machine shop by SOL to SGB.


Datuk Mohamed Azman Bin Yahya is a Non-Independent Non-Executive Director of the Company; and a Director and Major Shareholder of Symphony House Berhad, the holding company of Symphony Share Registrars Sdn Bhd.

Provision of share registrar services by Symphony Share Registrars Sdn Bhd to the Company.

Dato’ Sreesanthan A/L Eliathamby

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

Provision of legal advisory services by Kadir, Andri & Partners to the Company.

En Shah Hakim @ Shahzanim Bin Zain

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

Provision of airline ticketing reservation and ticket purchasing services by LTS to SGB.

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

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

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

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ADDITIONAL INFORmATION

The Directors are required by the Companies Act, 1965 (“the Act”) to prepare the financial statements of Scomi Group Bhd (“the Company”) and its subsidiaries (“the Group”) for each financial year which have been made out in accordance with the applicable 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 financial statements give a true and fair view of the state of affairs of the Group and the Company at the end of the financial year and of the results and cash flows of the Group and the Company for the financial year.

In preparing the financial statements, the Directors have:

• adopted appropriate accounting policies and applied them consistently;• made judgments and estimates that are reasonable and prudent; and• prepared the financial statements on 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 financial position of the Group and the Company which enable them to ensure that the financial statements comply with the Act.

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

The financial statements of the Company and the Group for the financial year ended 31 December 2011 are set out on pages 66 to 179 of this Annual Report.

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STATEmENT OF DIRECTORS’ RESpONSIBILITY

Financial Statements

66 Directors’ Report

72 Statements of Comprehensive Income

74 Statements of Financial Position

76 Consolidated Statement of Changes in Equity

78 Company Statement of Changes in Equity

79 Statements of Cash Flows

82 Notes to the Financial Statements

177 Statement by Directors

177 Statutory Declaration

178 Independent Auditors’ Report

The Directors hereby submit their report with the audited financial statements of the Group and Company for the financial year ended 31 December 2011.

PRINCIPAL ACTIvITIES

The 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 fluids and drilling waste management solutions, production chemicals, design and manufacture of monorail, transportation infrastructure systems equipment and services, commercial coaches and special purpose vehicles and rail solutions; and the provision of marine vessel transportation service.

There were no significant changes in the nature of these activities during the financial year.

FINANCIAL RESULTS

Group Company RM’000 RM’000

Loss for the financial year (296,531) (168,727)

Attributable to:

Owners of the Company (232,332) (168,727)Non-controlling interests (64,199) –

DIvIDENDS

No dividend has been paid or proposed by the Company since the end of the Company’s previous financial year.

The Directors do not recommend any dividend for the financial year ended 31 December 2011.

RESERvES AND PROvISIONS

Material transfers to or from reserves or provisions during the financial year are as disclosed in the financial statements.

ISSUE OF SHARES

During the financial year, 5,029,875 new ordinary shares of RM0.10 each were issued by the Company by way of:

(a) Issuance of 3,904,875 new ordinary shares of RM0.10 each pursuant to the conversion of Irredeemable Convertible Secured Loan Stocks (“ICSLS”); and

(b) Issuance of 1,125,000 new ordinary shares of RM0.10 each pursuant to the exercise of share options under the Company’s Employees’ Share Options Scheme (“ESOS”) at an option price of RM0.17 per share; and

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

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

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DIRECTORS’ REpORT

TREASURy SHARES

There was no purchase of Treasury shares during the financial year.

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

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.

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

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

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

Exercise priceName of option holders Granted RM/share

Hilmy Zaini Zainal 2,000,000 0.24Rohaida ali Badaruddin 2,000,000 0.24Loong Chun Nee 2,000,000 0.24Wan Ruzlan Iskandar Wan Salaidin 2,000,000 0.24Ngu Hew Tak 2,000,000 0.24Sharifah Norizan Shahabudin 2,000,000 0.24Kanesan Veluppillai 2,000,000 0.24Dinesh Chelvathurai 2,000,000 0.24

SIGNIFICANT EvENTS DURING THE FINANCIAL yEAR

Significant events during the financial year are disclosed in Note 43 to the financial statements.

SIGNIFICANT EvENTS SUBSEQUENT TO THE DATE OF THE STATEMENT OF FINANCIAL POSITION

Significant events subsequent to the date of the statement of financial position are disclosed in Note 44 to the financial statements.

DIRECTORS

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

Tan Sri Asmat bin KamaludinTan Sri Nik Mohamed bin Nik YaacobDatuk Haron bin SirajDatuk Mohamed Azman bin YahyaDato’ Mohammed Azlan bin HashimDato’ Abdul Rahim bin Abu Bakar Dato’ Sreesanthan a/l EliathambyFoong Choong HongShah Hakim @ Shahzanim bin Zain

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DIRECTORS’ INTERESTS

According to the Register of Directors’ Shareholdings, particulars of interests of Directors who held office at the end of the financial year in shares, options over shares, Irredeemable Convertible Secured Loan Stocks, Irredeemable Convertible Unsecured 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 1.1.2011 Bought Sold 31.12.2011 ’000 ’000 ’000 ’000

Direct interest in the Company

* Tan Sri Asmat bin Kamaludin 265 – – 265Datuk Haron bin Siraj 120 – – 120Foong Choong Hong 410 – – 410> Shah Hakim @ Shahzanim bin Zain 529 2,250 – 2,779

Indirect interest in the Company

+ Datuk Mohamed Azman bin Yahya 10,000 – – 10,000# Shah Hakim @ Shahzanim bin Zain 172,275 – – 172,275

Number of ordinary shares of RM1.00 each in a subsidiary At At 1.1.2011 Bought Sold 31.12.2011 ’000 ’000 ’000 ’000

Direct interest in Scomi Engineering Bhd

Dato’ Abdul Rahim bin Abu Bakar 220 – – 220> Shah Hakim @ Shahzanim bin Zain 500 123 – 623

Number of ordinary shares of RM1.00 each in a subsidiary At At 1.1.2011 Bought Sold 31.12.2011 ’000 ’000 ’000 ’000Indirect interest in Scomi Engineering Bhd

^ Tan Sri Asmat bin Kamaludin 20 – (8) 12“ Shah Hakim @ Shahzanim bin Zain 192,568 – – 192,568

Number of options over ordinary shares of RM0.10 each in the Company Exercise At At price 1.1.2011 Forfeited Exercised 31.12.2011 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 Haron bin Siraj 1.24 600 – – 600Datuk Mohamed Azman bin Yahya 1.24 600 – – 600Dato’ Mohammed Azlan bin Hashim 1.34 600 – – 600Dato’ Sreesanthan a/l Eliathamby 1.21 420 – – 420Foong Choong Hong 1.24 350 – – 350Shah Hakim @ Shahzanim bin Zain 0.17 1,357 – – 1,357 1.12 6,000 – – 6,000

Indirect interest in the Company@ Tan Sri Asmat bin Kamaludin 0.94 140 (140) – –

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DIRECTORS’ REpORT

DIRECTORS’ INTERESTS (CONTINUED)

~Number of options over ordinary shares of RM1.00 each in a subsidiary Exercise At At price 1.1.2011 Forfeited Exercised 31.12.2011 RM/share ’000 ’000 ’000 ’000

Direct interest in Scomi Engineering Bhd

Shah Hakim @ Shahzanim bin Zain 1.00 1,500 – – 1,500Dato’ Abdul Rahim bin Abu Bakar 1.00 300 – – 300

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

Irredeemable Convertible Secured Loan Stocks (“ICSLS”) in the Company At At 1.1.2011 Bought Sold 31.12.2011 ’000 ’000 ’000 ’000


* Tan Sri Asmat bin Kamaludin 398 – – 398


+ Datuk Mohamed Azman bin Yahya 15,000 – – 15,000

Warrants in the Company At At 1.1.2011 Bought Sold 31.12.2011 ’000 ’000 ’000 ’000

Direct Interest in the Company

* Tan Sri Asmat bin Kamaludin 53 – – 53


+ Datuk Mohamed Azman bin Yahya 2,000 – – 2,000

Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) in a subsidiary At At 1.1.2011 Bought Sold 31.12.2011 ’000 ’000 ’000 ’000

Indirect interest in Scomi Engineering Bhd

“ Shah Hakim @ Shahzanim bin Zain 54,782 – – 54,782

* Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through Tan Sri Asmat bin Kamaludin’s direct interest in Bi-Bot Holdings Sdn Bhd, whereby 215,000 shares, 322,500 ICSLS and 43,000 warrants are held through CIMSEC Nominees (Tempatan) Sdn Bhd.

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

@ Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 through the options granted to Tan Sri Asmat bin Kamaludin’s daughter, Sarah binti Asmat pursuant to the Company’s ESOS to subscribe for ordinary shares in SGB.

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DIRECTORS’ INTERESTS (CONTINUED)

+ Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Datuk 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.

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

# 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.

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 office at the end of the financial year did not hold any interest in the shares, options over shares, ICSLS and warrants in the Company or shares, options over shares, ICULS and debentures of its related corporations during the financial year.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate, except for options over shares granted by the Company and 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 and ICULS granted by a subsidiary, Scomi Engineering Bhd.

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors’ remuneration as disclosed in Note 9 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 40 to the financial statements.

STATUTORy INFORMATION ON THE FINANCIAL STATEMENTS

Before the financial statements were made out, the Directors took reasonable steps:

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

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

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

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

(b) which would render the values attributed to current assets in the financial statements of the Group and Company misleading; or

(c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company misleading or inappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or Company to meet their obligations when they fall due.

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DIRECTORS’ REpORT

STATUTORy INFORMATION ON THE FINANCIAL STATEMENTS (CONTINUED)

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 financial 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 financial year.

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

In the opinion of the Directors:

(a) other than as disclosed in Note 43, the results of the operations of the Group and Company during the financial 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 44, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature which is likely to affect substantially the results of the operations of the Group or Company for the financial year in which this report is made.

AUDITORS

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

Signed on behalf of the Board of Directors in accordance with their resolution dated 30 April 2012.

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

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Group Company Note 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 (Restated)

Continuing operations

Revenue 4 1,383,737 1,521,935 4,167 72,234Cost of sales (1,080,616) (1,171,646) – –

Gross profit 303,121 350,289 4,167 72,234Other operating income 19,269 34,041 9,443 8,581Administrative expenses (81,144) (214,395) (12,575) (15,068)Selling and distribution expenses (77,186) (96,599) – –Other operating expenses (184,482) (90,426) (152,400) –Finance costs 6 (50,789) (64,355) (16,696) (17,422)Share of results of an associate (48,536) (87,225) – –Share of results of jointly controlled entities (439) (739) – –

(Loss)/profit before taxation 5 (120,186) (169,409) (168,061) 48,325Taxation expense 7 (48,692) (20,209) (666) (1,100)

(Loss)/profit from continuing operations (168,878) (189,618) (168,727) 47,225

Discontinued operations

Loss from discontinued operations, net of tax 8 (127,653) (3,269) – –

(Loss)/profit for the year (296,531) (192,887) (168,727) 47,225

(Loss)/profit attributable to:

Owners of the Company (232,332) (172,906) (168,727) 47,225Non-controlling interests (64,199) (19,981) – –

(Loss)/profit for the financial year (296,531) (192,887) (168,727) 47,225

Sen SenLoss per share attributable to owners of the Company: 10– basic (16.69) (12.61)

– diluted (16.66) (12.46)

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pg 72

STATEmENTS OF COmpREHENSIVE INCOmEfor the financial year ended 31 December 2011


Other comprehensive (loss)/income:

Currency translation differences (5,971) (5,153) – –Available-for-sale financial assets 2,467 (80) – –Cash flow hedges 11,816 (2,589) – –Share of other comprehensive profit/(loss) of an associate 4,480 (21,028) – –

Other comprehensive loss for the financial year, net of tax 12,792 (28,850) – –

Total comprehensive (loss)/income for the financial year (283,739) (221,737) (168,727) 47,225

Total comprehensive (loss)/income attributable to:

Owners of the Company (220,658) (203,727) (168,727) 47,225Non-controlling interests (63,081) (18,010) – –

Total comprehensive (loss)/income for the financial year (283,739) (221,737) (168,727) 47,225

The notes set out on pages 82 to 176 form an integral part of, and should be read in conjunction with, these financial statements.

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Group Company Note 2011 2010 1.1.2010 2011 2010 RM’000 RM’000 RM’000 RM’000 RM’000 (Restated) (Restated)

NON-CURRENT ASSETSProperty, plant and equipment 12 336,590 415,585 583,146 1,631 2,447Intangible assets 13 321,699 380,707 560,112 – –Investment properties 14 1,559 1,213 1,361 4,584 4,678Prepaid land lease payments 15 316 1,787 2,248 – –Investments in subsidiaries 16 – – – 636,894 637,419Investments in an associate 17 216,514 268,859 379,118 216,132 360,124Investments in jointly controlled entities 18 – 19 5,422 – –Other financial receivable 19 – – – – 17,636Available-for-sale financial assets 20 1,516 1,516 1,112 – –Deferred tax assets 38 46,634 78,724 78,033 672 1,674Derivative financial assets 21 – 24,465 6,835 – –

924,828 1,172,875 1,617,387 859,913 1,023,978

CURRENT ASSETSInventories 22 223,303 200,380 298,529 – –Receivables, deposits and prepayments 23 902,080 863,388 829,131 64,556 101,961Tax recoverable 34,006 41,004 33,290 2,294 2,765Derivative financial assets 21 – 7,691 1,577 – –Short-term deposits, cash and bank balances 24 157,447 176,388 313,123 13,082 9,334

1,316,836 1,288,851 1,475,650 79,932 114,060Non-current asset classified as held for sale 25 – 4,663 – – –

1,316,836 1,293,514 1,475,650 79,932 114,060

LESS: CURRENT LIABILITIESPayables 27 539,976 468,985 640,165 11,568 16,572Borrowings 28 744,851 471,356 488,548 222,305 120,698Provisions 29 2,267 5,235 8,929 – –Derivative financial liabilities 21 294 – – – –Current tax liabilities 32,815 24,743 35,485 – –Deferred government grant 30 2,155 1,568 431 – –Irredeemable convertible secured loan stocks 31 3,188 3,382 5,254 3,188 3,382Irredeemable convertible unsecured loan stocks 32 14 33 – – –Provision for retirement benefits 37 390 323 – – –

1,325,950 975,625 1,178,812 237,061 140,652

NET CURRENT (LIABILITIES)/ ASSETS (9,114) 317,889 296,838 (157,129) (26,592)

915,714 1,490,764 1,914,225 702,784 997,386

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STATEmENTS OF FINANCIAL pOSITIONas at 31 December 2011

Group Company Note 2011 2010 1.1.2010 2011 2010 RM’000 RM’000 RM’000 RM’000 RM’000 (Restated) (Restated)

CAPITAL AND RESERvES ATTRIBUTABLE TO OWNERS OF THE COMPANyShare capital 34(a) 118,769 118,266 108,680 118,769 118,266Share premium 35 276,793 275,926 256,641 276,793 275,926Treasury shares 34(b) (18,696) (18,696) (18,696) (18,696) (18,696)Other reserves 36 (246,095) (251,592) (205,282) 98,898 111,739Retained earnings 378,591 602,647 778,894 224,779 379,696

Equity and reserves attributable to owners of the Company 509,362 726,551 920,237 700,543 866,931Non-controlling interests 71,831 134,610 172,814 – –

TOTAL EQUITY AND RESERVES 581,193 861,161 1,093,051 700,543 866,931

NON-CURRENT LIABILITIESPayables 27 5,629 5,520 – – 260Borrowings 28 320,842 608,164 797,525 2,241 126,380Deferred government grant 30 – – 1,439 – –Derivative financial liabilities 21 – 4,919 3,129 – –Provision for retirement benefits 37 4,762 4,358 4,182 – –Deferred tax liabilities 38 3,285 2,786 4,836 – –Irredeemable convertible secured loan stocks 31 – 3,815 10,063 – 3,815Irredeemable convertible unsecured loan stocks 32 3 41 – – –

334,521 629,603 821,174 2,241 130,455

915,714 1,490,764 1,914,225 702,784 997,386


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pg 76

CONSOLIDATED STATEmENT OF CHANgES IN EQuITYfor the financial year ended 31 December 2011

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Non-distributable Distributable Share Share Treasury Other Retained Note capital premium shares reserves earnings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Company

At 1 January 2011 118,266 275,926 (18,696) 111,739 379,696 866,931

Loss for the financial year – – – – (168,727) (168,727)

Share options:– proceeds from shares issued 34(a),35 113 79 – – – 192– value of employees services 36 – – – 1,191 – 1,191– Transferred to subsidiaries – – – (11,066) 11,066 –– value of options lapsed/forfeited – – – (2,744) 2,744 –

Conversion of ICSLS 34(a),35,36 390 788 – (222) – 956

At 31 December 2011 118,769 276,793 (18,696) 98,898 224,779 700,543

Company

At 1 January 2010– as previously stated 108,680 256,641 (18,696) 136,983 329,185 812,793– effect of adopting FRS 139 – – – – 3,286 3,286

At 1 January 2010, as restated 108,680 256,641 (18,696) 136,983 332,471 816,079

Profit for the financial year – – – – 47,225 47,225

Share options:– proceeds from shares issued 34(a),35 136 95 – – – 231– value of employees services 36 – – – 1,119 – 1,119

Conversion of ICSLS 34(a),35,36 9,450 19,190 – (26,363) – 2,277 At 31 December 2010 118,266 275,926 (18,696) 111,739 379,696 866,931


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COmpANY STATEmENT OF CHANgES IN EQuITYfor the financial year ended 31 December 2011

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 (Restated)

CASH FLOWS FROM OPERATING ACTIvITES

(Loss)/profit before taxation from:– continuing operation (120,186) (169,409) (168,061) 48,325– discontinued operation (105,068) (5,432) – –

Adjustments for:

Depreciation– property, plant and equipment 51,959 66,616 826 894– investment properties 144 148 94 –Amortisation– intangible assets 2,161 1,773 – –– prepaid land lease payment 1,460 1,083 – –Impairment losses– property, plant and equipment 3,628 8,298 – –– intangible assets 6,313 6,282 – –– receivables 11,665 17,928 – –– investment properties 455 – – –– available-for-sale investments 2,467 – – –– amount due from subsidiaries – – 7,807 –Impairment on investment in a subsidiary – – 600 –Impairment on investment in associate 8,627 – 143,992 –Allowance for obsolete stocks 2,972 5,575 – –Write back of government grant – (1,439) – –Inventories written down 957 3,894 – –Unrealised loss/(gain) on foreign exchange 22,858 14,296 (344) (1,669)Monetary adjustments (2,417) 9,236 – –Hyperinflation adjustments 3,218 8,227 – –Provision for tax penalties 872 1,551 – –Gain on disposal of property, plant and equipment (1,202) (49) (60) (12)Property, plant and equipment written off 361 1,833 – 219Bad debts written off/(recovered) 2,085 1,336 – –Fair value gain on financial instrument – derivatives (556) (1,220) – –(Gain)/loss on disposal of/dilution of interest in subsidiary companies – (19,677) – –Loss on discontinued operations 103,495 – – –(Gain)/loss in disposal of jointly-controlled entity (4,548) – 35 –Provision for retirement benefits 735 1,584 – –Share of results in an associate 48,536 87,225 – –Share of results jointly controlled entities 439 739 – –Share option expense 2,516 2,116 1,081 417Financing costs 50,789 66,144 16,696 17,422Interest income (2,860) (3,895) (6,303) (4,957)Dividend income – – – (66,436)

Operating cash flows before working capital changes 91,875 104,763 (3,637) (5,797)

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STATEmENTS OF CASH FLOWSfor the financial year ended 31 December 2011


CASH FLOWS FROM OPERATING ACTIvITIES (CONTINUED)

Changes in working capital:

Inventories (32,964) 47,687 – –Receivables (89,544) (87,843) 51,025 (5,998)Payables 83,294 (153,084) (7,177) (16,073)

Cash (used in)/generated from operations 52,661 (88,477) 40,211 (27,868)Net tax (paid)/refund (23,458) (26,010) 471 –Redundancy paid – (587) – –Retirement benefits paid (89) (416) – –Tax penalties (3,848) – – –

Net cash generated from/(used in) operating activities 25,266 (115,490) 40,682 (27,868)

CASH FLOWS FROM INvESTING ACTIvITIES

Additional investment in subsidiaries – – – (117)Net cash inflow/(outflow) from disposal/ dilution of interest in subsidiaries – 300,092 – –Net cash inflow from disposal of jointly-controlled entity 9,096 – – –Disposal of discontinued operations 89,668 – – –Purchase of property, plant and equipment (50,823) (28,985) (15) (1,319)Purchase of investment property (945) – (1,522)Investment in ICULS – – (54,782)Proceeds from disposal of property, plant and equipment 10,553 7,678 65 23(Purchase of)/proceeds from sales of available-for-sales investments – (847) – –Additions to other intangible assets (41,474) (12,657) – –Repayment of other payables – (7,720) – (7,720)Government grant received 587 1,137 – –Dividend received – – – 63,547Interest received 2,860 3,895 2,487 2,070Prepayment of land lease – (832) – –

Net cash generated from investing activities 19,522 261,761 2,537 1 8 0

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STATEmENTS OF CASH FLOWSfor the financial year ended 31 December 2011


CASH FLOWS FROM FINANCING ACTIvITIES

Issue of share capital arising from the exercise of ESOS 192 231 192 231Subsidiary’s issuance of share capital from the exercise of ESOS – 4,544 – –Proceeds from issuance of ICULS – 6,570 – –Proceeds from bank borrowings 480,079 57,284 – –Repayment of bank borrowings (510,583) (254,021) (20,316) (50,423)Interest paid on borrowings (49,659) (62,157) (19,347) (23,486)Decrease/(increase) in short-term deposits pledged as security (14,204) 15,243 457 2,665Dividend paid to non-controlling interests in subsidiaries (30,260) – –

Net cash (used in) financing activities (94,175) (262,566) (39,014) (71,013)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (49,388) (116,295) 4,205 (98,701)

CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR 26,183 157,121 1,896 100,597

CURRENCY TRANSLATION DIFFERENCES 989 (14,643) – –

CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR (22,216) 26,183 6,101 1,896

CASH AND CASH EQUIVALENTS COMPRISE:

Short-term deposits with licensed banks 24 35,176 52,410 6,981 7,438Cash and bank balances 24 122,271 123,978 6,101 1,896Bank overdrafts 28 (129,360) (114,106) – – 28,087 62,282 13,082 9,334Less: Short-term deposits pledged as security 24 (50,303) (36,099) (6,981) (7,438)

(22,216) 26,183 6,101 1,896


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1 GENERAL INFORMATION

The 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 fluids and drilling waste management solutions, machine shop services, production chemicals, design and manufacture of monorail, transportation infrastructure systems equipment and services, commercial coaches and special purpose vehicles and the provision of marine vessel transportation service.

There were no significant changes in the nature of these activities during the financial 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 office and principal place of business address of the Company is Level 17, 1 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan.

2 BASIS OF PREPARATION

The financial statements of the Group and Company have been prepared in accordance with the provisions of the Companies Act 1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities.

The preparation of financial 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 financial statements and the reported amounts of revenue and expenses during the financial 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.

As at 31 December 2011, the Group and Company had incurred losses of RM296.5 million and RM168.7 million respectively. At that date, the Group and Company had net current liabilities of RM9.1 million and RM157.1 million respectively.

The Group has presented to the bondholders, banks and other lenders its plan to raise funds which includes the disposal of certain assets of the Group to enable settlement of the Group’s and Company’s financial liabilities as and when they fall due.

As at the date of the report, the Group:

(a) completed the disposal of the Drilling Waste Management business by SOINC and SMEX for a total consideration of USD35.0 million (approximately RM108.56 million) in November 2011. A portion of the proceeds were utilised to repay the KMCOB Murabahah Bonds.

(b) completed the issuance of a RM342.6 million Sukuk Murabahah in December 2011. The proceeds were utilised for early redemption of the outstanding amount of the KMCOB Murabahah Bonds.

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NOTES TO THE FINANCIAL STATEmENTSfor the financial year ended 31 December 2011

2 BASIS OF PREPARATION (CONTINUED)

(c) obtained indulgences from the Company’s bondholders:

(i) for the RM100 million principal repayment which was due in September 2011 to be paid in September 2012;

(ii) deferment of maintaining the DSRA which was due in March 2012; and

(iii) waiver of the net debt to equity and annual debt service cover ratios up to 28 September 2012.

(d) announced that the Company had entered into a Heads of Agreement (“HOA”) with its associated company, Scomi Marine Bhd (“SMB”) as disclosed in Note 44. The HOA includes the proposed acquisition of the entire interest in Scomi Oilfield Limited (“SOL”), a 76.08% owned subsidiary of the Company by a Newco from the Company, SCPEL and FII (after completion of the Proposed SOL Reorganisation).

(e) obtained indulgence from the bankers for certain breaches of loan covenants as disclosed in Note 28.

The Directors are of the opinion, taking into consideration the action plans undertaken and to be undertaken, that the basis of preparation of the financial statements on a going concern basis is appropriate.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 46 to the financial statements.

During the financial 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

The new accounting standards, amendments and improvements to published standards and interpretations that are effective for the Group and Company’s financial year beginning on or after 1 January 2011 are as follows:

FRS 1 (revised) First-time Adoption of Financial Reporting StandardsFRS 3 (revised) Business combinationsFRS 127 (revised) Consolidated and separate financial statementsAmendments to FRS 2 Share-based payment: Group cash-settled share-based payment transactionsAmendments to FRS 7 Financial instruments: Disclosures – improving disclosures about

financial instrumentsAmendments to FRS 1 First-time adoption of financial reporting standards Amendments to FRS 132 Financial instruments: Presentation – Classification of rights issuesIC Interpretation 4 Determining whether an arrangement contains a leaseIC Interpretation 16 Hedges of a net investment in a foreign operationIC Interpretation 17 Distribution of non-cash assets to ownersIC Interpretation 18 Transfers of assets from customers Improvements to FRSs (2010)

The adoption of the above standards, amendments to published standards and interpretations to existing standards does not have a significant financial impact to the Group and Company, other than for the disclosures under the Amendments to FRS 7.

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

Amendments to FRS 7: Improving Disclosures about Financial InstrumentsAmendments to FRS 7 require enhanced disclosures about fair value measurements in which a three-level fair value hierarchy was introduced. Each class of financial instrument is to be classified in accordance to this hierarchy which reflects the inputs used in making the fair value measurement. It also reinforces the existing principles for disclosures on liquidity and credit risks.

The new requirement on the three-level fair value hierarchy has been applied prospectively in accordance with the transitional provision of the FRS 7 Amendments. The enhanced disclosures are included in Note 45(c). The adoption of this amendment did not have any financial impact to the Group and Company, other than additional disclosures.

(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

On 19 November 2011, the Malaysian Accounting Standards Board (“MASB”) issued a new MASB approved accounting framework, the MFRS Framework.

The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture (“MFRS 141”) and IC Interpretation 15 Agreements for Construction of Real Estate (“IC 15”), including its parent, significant investor and venturer.

The Group and Company will be required to prepare financial statements using the MFRS Framework in its first MFRS financial statements for the year ending 31 December 2012. In presenting its first MFRS financial statement, the Group and Company will be required to restate the financial position as at 1 January 2012 to amounts reflecting the application of MFRS Framework.

The Group and Company have started a preliminary assessment of the differences between FRS and the accounting standards under MFRS Framework and are in the process of assessing the financial effects of the differences. Accordingly, the financial performance and financial position as disclosed in these financial statements for the year ended 31 December 2011 could be different if prepared under the MFRS Framework.

The Group and Company expects to be in a position to fully comply with the requirements of the MFRS Framework for the financial year ending 31 December 2012. MFRS 1 “First-time adoption of MFRS” provides for certain optional exemptions and certain mandatory exceptions for first-time MFRS adopters.

The Group will apply the new standards, amendments to standards and interpretations in the following period:

(i) Financial year beginning on/after 1 January 2012• The revised MFRS 124 “Related party disclosures” (effective from 1 January 2012) removes the exemption

to disclose transactions between government-related entities and the government, and all other government-related entities. The following new disclosures are now required for government related entities:

– The name of the government and the nature of their relationship;– The nature and amount of each individually significant transactions; and– The extent of any collectively significant transactions, qualitatively or quantitatively.


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(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 (continued)

(i) Financial year beginning on/after 1 January 2012 (continued)• Amendment to MFRS 112 “Income taxes” (effective from 1 January 2012) introduces an exception to the

existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. MFRS 112 currently requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in MFRS 140 “Investment property”. As a result of the amendments, IC Interpretation 121 “Income taxes – recovery of revalued non-depreciable assets” will no longer apply to investment properties carried at fair value. The amendments also incorporate into MFRS 112 the remaining guidance previously contained in IC Interpretation 121 which is withdrawn.

• IC Interpretation 19 “Extinguishing financial liabilities with equity instruments” (effective from 1 July 2011) provides clarification when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. A gain or loss, being the difference between the carrying value of the financial liability and the fair value of the equity instruments issued, shall be recognised in the income statement. Entities are no longer permitted to reclassify the carrying value of the existing financial liability into equity with no gain or loss recognised in the income statement.

• Amendments to IC Interpretation 14 “MFRS 119 – The limit on a defined benefit assets, minimum funding requirements and their interaction” (effective from 1 July 2011) permits an entity to recognise the prepayments of contributions as an asset, rather than an expense in circumstances when the entity is subject to a minimum funding requirement and makes an early payment of contributions to meet those requirements.

• Amendment to MFRS 1 “First time adoption on fixed dates and hyperinflation” (effective from 1 January 2012) includes two changes to MFRS 1. The first replaces references to a fixed date of 1 January 2004 with ‘the date of transition to MFRSs’, thus eliminating the need for entities adopting MFRSs for the first time to restate de-recognition transactions that occurred before the date of transition to MFRSs. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with MFRSs after a period when the entity was unable to comply with MFRSs because its functional currency was subject to severe hyperinflation.

• Amendment to MFRS 7 “Financial instruments: Disclosures on transfers of financial assets” (effective from 1 January 2012) promotes transparency in the reporting of transfer transactions and improve users’ understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position, particularly those involving securitisation of financial assets.

The initial applications of these 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 are not expected to have material impact on the financial statements of the Group and Company.

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(ii) Financial year beginning on/after 1 January 2013• MFRS 10 “Consolidated financial statements” (effective from 1 January 2013) changes the definition of

control. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. It establishes control as the basis for determining which entities are consolidated in the consolidated financial statements and sets out the accounting requirements for the preparation of consolidated financial statements. It replaces all the guidance on control and consolidation in MFRS 127 “Consolidated and separate financial statements” and IC Interpretation 112 “Consolidation – special purpose entities”.

• MFRS 11 “Joint arrangements” (effective from 1 January 2013) requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations arising from the arrangement, rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.

• MFRS 12 “Disclosures of interests in other entities” (effective from 1 January 2013) sets out the required disclosures for entities reporting under the two new standards, MFRS 10 and MFRS 11, and replaces the disclosure requirements currently found in MFRS 128 “Investments in associates”. It requires entities to disclose information that helps financial statement readers to evaluate the nature, risks and financial effects associated with the entity’s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities.

• MFRS 13 “Fair value measurement” (effective from 1 January 2013) aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across MFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The enhanced disclosure requirements are similar to those in MFRS 7 “Financial instruments: Disclosures”, but apply to all assets and liabilities measured at fair value, not just financial ones.

• The revised MFRS 127 “Separate financial statements” (effective from 1 January 2013) includes the provisions on separate financial statements that are left after the control provisions of MFRS 127 have been included in the new MFRS 10.

• The revised MFRS 128 “Investments in associates and joint ventures” (effective from 1 January 2013) includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of MFRS 11.

• Amendment to MFRS 101 “Presentation of items of other comprehensive income” (effective from 1 July 2012) requires entities to separate items presented in ‘other comprehensive income’ (OCI) in the statement of comprehensive income into two groups, based on whether or not they may be recycled to profit or loss in the future. The amendments do not address which items are presented in OCI.


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(ii) Financial year beginning on/after 1 January 2013 (continued)• Amendment to MFRS 119 “Employee benefits” (effective from 1 January 2013) makes significant changes

to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. Actuarial gains and losses will no longer be deferred using the corridor approach. MFRS 119 shall be withdrawn on application of this amendment.

The Group is accessing the impact of the new Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective and have not been early adopted to the Group and Company.

(iii) Financial year beginning on/after 1 January 2015• MFRS 9 “Financial instruments – classification and measurement of financial assets and financial liabilities”

(effective from 1 January 2015) replaces the multiple classification and measurement models in MFRS 139 with a single model that has only two classification categories: amortised cost and fair value. The basis of classification depends on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.

The accounting and presentation for financial liabilities and for de-recognising financial instruments has been relocated from MFRS 139, without change, except for financial liabilities that are designated at fair value through profit or loss (“FVTPL”). Entities with financial liabilities designated at FVTPL recognise changes in the fair value due to changes in the liability’s credit risk directly in other comprehensive income (OCI). There is no subsequent recycling of the amounts in OCI to profit or loss, but accumulated gains or losses may be transferred within equity.

The guidance in MFRS 139 on impairment of financial assets and hedge accounting continues to apply.

MFRS 7 requires disclosures on transition from MFRS 139 to MFRS 9.

The Group is accessing the impact of the new Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective and have not been early adopted to the Group and Company.

3 SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies have been used consistently in dealing with items that are considered material in relation to the financial statements.

3.1 Basis of consolidationThe consolidated financial statements incorporate the audited financial statements of the Company and its subsidiaries made up to the end of the financial year.

Subsidiaries are those entities (including special purpose entities) in which the Group has power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

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3 SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.1 Basis of consolidation (continued)Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition 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 consideration transferred for acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interests. In a business combination achieved in stages, the previously held equity interest in the acquiree is re-measured at its acquisition date fair value and the resulting gain or loss is recognised in profit or loss. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable 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 profit or loss. See accounting policy Note 3.10(iii) on goodwill on consolidation.

Non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. On an acquisition-by-acquisition basis, the Group measures any non-controlling interest in the acquiree at fair value. At the end of reporting period, non-controlling interest consists of amount calculated on the date of combinations and its share of changes in the subsidiary’s equity since the date of combination.

All earnings and losses of the subsidiary are attributed to the parent and the non-controlling interest, even if the attribution of losses to the non-controlling interest results in a debit balance in the shareholders’ equity. Profit or loss attribution to non-controlling interests for prior years is not restated.

Change in accounting policy

The Group has changed its accounting policy on business combinations and accounting for non-controlling interest when it adopted the revised FRS 3 “Business combinations” and FRS 127 “Consolidated and separate financial statements”.

Previously, contingent consideration in a business combination was recognised when it is probable that payment will be made. Acquisition-related costs were included as part of the cost of business combination. Any non-controlling interest in the acquiree was measured at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group was accounted for as a revaluation.

The Group has applied the new policies prospectively to transactions occurring on or after 1 January 2011. As a consequence, no adjustments were necessary to any of the amounts previously recognised in the financial statements.

Under the merger method of accounting, the results of entities or businesses under common control are presented as if the merger had been effected throughout the current and previous financial years or from the date when these entities came under the control of the common controlling party (if shorter). The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the difference between the carrying value of the investment in the subsidiaries over the nominal value of the share acquired is taken to merger reserve and regarded as a non-distributable reserve, which is then set off against suitable reserves on the consolidated financial statements.


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3.1 Basis of consolidation (continued)Change in accounting policy (continued)

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

The gain or loss on disposal of a subsidiary 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 profit or loss attributable to the parent.

3.2 Transactions with non-controlling interestsThe Group applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired is deducted from equity. For disposals to non-controlling interests, differences between any proceeds received and the relevant share of non-controlling interests are also recognised in equity.

3.3 Investments in associatesAssociates are those corporations, partnerships or other entities in which the Group exercises significant influence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of voting rights. Significant influence is power to participate in financial and operating policy decisions of associates but not power to exercise control over those policies. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The group’s investment in associates includes goodwill identified on acquisition. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. See accounting policy Note 3.11 on impairment of non-financial assets.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. If the Group’s share of losses of an associate equals or exceeds its interest in the associate, the Group discontinues recognising its share of further losses. The interest in an associate is the carrying amount of the investment in the associate under the equity method together with any long-term interests that, in substance, form part of the Group’s net investment in the associate. After the Group’s interest is reduced to zero, additional losses are provided for and a liability is recognised, only to the extent that the investor has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

The group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of an associate’ in the income statement.

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 financial statements of associates to ensure consistency of accounting policies with those of the Group.

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

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3.4 Investments in jointly controlled entitiesJointly 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 financial 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 financial 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 changes of the investee’s reserves in other comprehensive income. The cumulative post-acquisition changes are adjusted against the cost of the investment and include goodwill on acquisition, net of accumulated impairment loss. See accounting policy Note 3.11 on impairment of non-financial assets.

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 ventures. The Group does not recognise its share of profits 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 financial statements of jointly controlled entities to ensure consistency of accounting policies with those of the Group.

3.5 Changes in ownership interestsWhen the Group ceases to have control, joint control or significant influence, any retained interest in the entity is re-measured to its fair value on initial recognition as a financial asset in accordance with FRS 139. Any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.

Changes in accounting policy

The Group has changed its accounting policy prospectively for transactions occurring on or after 1 January 2011 with non-controlling interests and transactions involving the loss of control, joint control or significant influence when it adopted the revised FRS 127 “Consolidated and Separate Financial Statements”.

Previously when the Group ceased to have control, joint control or significant influence over an entity, the carrying amount of the investment at the date control, joint control or significant influence ceased became its cost on initial measurement as a financial asset in accordance with FRS 139.

3.6 Investments in subsidiaries, joint ventures and associatesIn the Company’s separate financial statements, investments in subsidiaries, joint ventures and associates are carried at cost less accumulated impairment losses. On disposal of investments in subsidiaries, joint ventures and associates, the difference between disposal proceeds and the carrying amounts of the investments is recognised in the income statement.

3.7 Inflation adjustmentThe financial statements of the Group are based on the historical cost convention. During the previous financial year, the financial statements of the Group have been restated to take account of the effects of inflation in accordance with FRS 129 (Financial Reporting in Hyperinflationary Economies), as described below.

The Group has subsidiaries operating in Venezuela and in late 2009, the Venezuelan economy was considered to be a hyperinflationary economy. FRS 129 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the date of the statement of financial position, and that corresponding figures for the previous year at company level be restated in terms of the same measuring unit. Accordingly, the inflation adjusted financial statements represent the primary financial statements of the Group.


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3.7 Inflation adjustment (continued)In accordance with FRS 129, the financial statements of the Group have been restated to account for the changes in the general purchasing power of the Venezuelan Bolivar and, as a result, are stated in terms of the measuring unit current at the date of the statement of financial position.

The indices and conversion factors used were as follows:

Date Indices Conversion Factors

December 2011 (NCPI) 265.65 1.2757December 2010 (NCPI) 208.20 1.2718December 2009 (NCPI) 163.70 1.2506December 2008 (NCPI) 130.90 1.3090December 2007 (CPI) 100.00 1.2245

The Group has applied the official rate of $1: Bs4.3 to translate the financial statements of its Venezuelan subsidiary.

The main procedures applied in the above-mentioned restatement of transactions and balances are as follows:

(i) Monetary assets and liabilities and results from monetary position Monetary assets and liabilities are not restated because they are already stated in terms of the measuring unit

current at the date of the statement of financial position.

(ii) Non-monetary assets and liabilities Non-monetary assets and liabilities (inventories, fixed assets, intangibles, other assets and deferred income)

have been restated by the CPI from during the financial year.

(iii) Equity All equity components have been restated by the CPI from their date of origin until 31 December 2007 and

by the NCPI as from 1 January 2008 until 31 December 2011.

(iv) Income statement All items in the income statement have been restated based on the date on which they were earned or

incurred, with the exception of those related to non-monetary items (cost of sales, depreciation expense and amortisation expense), which have been reported in terms of the restated non-monetary items to which they relate, expressed in constant currency at 31 December 2011.

Gains and losses arising from the net monetary asset or liability position are included in the income statement.

(v) Statement of cash flows All items in the statement of cash flows are expressed in terms of the measuring unit current at the date of

the statement of financial position.

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3.8 Property, plant and equipmentProperty, plant and equipment, other than freehold land and capital work-in-progress, are stated at cost less accumulated depreciation or amortisation and impairment losses, if any. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost also includes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. See accounting policy Note 3.24 on borrowing costs.

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

Freehold land is not depreciated as it has an infinite life. Leasehold land classified as finance lease is amortised in equal instalments over the period of the respective leases. See accounting policy Note 3.15(a) on finance leases. Capital work-in-progress is stated at cost. Expenditure relating to capital work-in-progress is capitalised when incurred and depreciated only when the assets are ready for intended use.

Other property, plant and equipment are depreciated on the straight line method to allocate the cost of the assets to their residual values over their estimated useful lives. The principal annual rates used for this purpose are as follows:

Freehold buildings 2 – 20%Leasehold buildings 2 – 331⁄3%Tools, plant and machinery 81⁄3 – 20%Renovation, office equipment, fittings and computers 10 – 331⁄3%Motor vehicles 15 – 331⁄3%Monorail test track 31⁄3%

Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each statement of financial position date.

At each date of the statement of financial position, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. See accounting policy Note 3.11 on impairment of non-financial assets.

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

3.9 Investment propertiesInvestment properties, principally comprising freehold land and office buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group.

Investment properties are measured initially at its cost, including related transaction costs and borrowings costs if the investment property meets the definition of qualifying asset.

After the initial recognition, investment property is stated at cost less any accumulated depreciation and impairment losses. Investment property is depreciated on the straight line basis to allocate the cost to their residual values over their estimated useful lives of 20 to 50 years. Freehold land is not depreciated as it has an infinite life.


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3.9 Investment properties (continued)Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

Investment property is derecognised either when it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

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

3.10 Intangible assets(i) Patents

Patent rights are shown at historical cost. Patent rights have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of patent rights over their estimated useful economic lives of 5 years to 20 years.

(ii) Research and development

Research expenditure is recognised as an expense when incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled:

(a) it is technically feasible to complete the intangible asset so that it will be available for use or sale;(b) management intends to complete the intangible asset and use or sell it;(c) there is an ability to use or sell the intangible asset;(d) it can be demonstrated how the intangible asset will generate probable future economic benefits;(e) adequate technical, financial and other resources to complete the development and to use or sell the

intangible asset are available; and(f) the expenditure attributable to the intangible asset during its development can be reliably measured.

Other development expenditure that do not meet these criteria are recognised as an expense when incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs recognised as intangible assets are amortised from the point at which the asset is ready for use on a straight-line basis as follows:

(a) over the estimated sales units, not exceeding ten years for monorail development; or(b) over a period not exceeding five years for bus development.

Development costs in progress are tested for impairment annually, in accordance with FRS 136 Impairment of Assets. See accounting policy Note 3.11 on impairment of non-financial assets.

(iii) Goodwill

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

Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill (inclusive of impairment losses recognised in a previous interim period) are not reversed. Gains and losses on the disposal of a subsidiary include the carrying amount of goodwill relating to the subsidiary sold.

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3.10 Intangible assets (continued)(iii) Goodwill (continued)

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from synergies of the business combination in which the goodwill arose, identified according to operating segment.

In respect of acquisitions of 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.

3.11 Impairment of non-financial assetsAssets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there is separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of the reporting period.

The impairment loss is charged to income statement unless it reverses a previous revaluation in which case it is charged to the revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, any subsequent increase in recoverable amount is recognised in the income statement unless it reverses an impairment loss on a revalued asset in which case it is taken to revaluation surplus reserve.

3.12 Financial assets(i) Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition.

(a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset

is classified in this category if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term. Derivatives are also categorised as held for trading unless they are designated as hedges.

(b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market. They are included in current assets, except for maturities more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and bank balances’ in the statement of financial position (Notes 23 and 24).

(c) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not

classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.


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3.12 Financial assets (continued)(ii) Recognition and initial measurement

Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group commits to purchase or sell the asset.

Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement.

(iii) Subsequent measurement – gains and losses

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Changes in the fair values of financial assets at fair value through profit or loss, including the effects of currency translation, interest and dividend income are recognised in the income statement in the period in which the changes arise.

Changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income, except for impairment losses (see accounting policy Note 3.12(iv) and foreign exchange gains and losses on monetary assets. The exchange differences on monetary assets are recognised in the income statement, whereas exchange differences on non-monetary assets are recognised in other comprehensive income as part of fair value change.

Interest and dividend income on available-for-sale financial assets are recognised separately in the income statement. Interest on available-for-sale debt securities calculated using the effective interest method is recognised in the income statement. Dividend income on available-for-sale equity instruments are recognised in the income statement when the Group’s right to receive payments is established.

(iv) Subsequent measurement – Impairment of financial assets

Assets carried at amortised costThe Group assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

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3.12 Financial assets (continued)(iv) Subsequent measurement – Impairment of financial assets (continued)

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

(a) Significant financial difficulty of the issuer or obligor;(b) A breach of contract, such as a default or delinquency in interest or principal payments;(c) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the

borrower a concession that the lender would not otherwise consider;(d) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;(e) Disappearance of an active market for that financial asset because of financial difficulties; or(f) Observable data indicating that there is a measurable decrease in the estimated future cash flows from

a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including adverse changes in the payment status of borrowers in the portfolio; and national or local economic conditions that correlate with defaults on the assets in the portfolio.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.

When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined.

Assets classified as available-for-sale The Group assesses at the end of the reporting period whether there is objective evidence that a financial

asset or a group of financial assets is impaired.

For debt securities, the Group uses criteria and measurement of impairment loss applicable for ‘assets carried at amortised cost’ above. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through income statement.

In the case of equity securities classified as available-for-sale, in addition to the criteria for ‘assets carried at amortised cost’ above, a significant or prolonged decline in the fair value of the security below its cost is also considered as an indicator that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in the income statement. The amount of cumulative loss that is reclassified to income statement is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement. Impairment losses recognised in the income statement on equity instruments classified as available-for-sale are not reversed through income statement.


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3.12 Financial assets (continued)(v) De-recognition

Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Receivables that are factored out to banks and other financial institutions with recourse to the Group are not derecognised until the recourse period has expired and the risks and rewards of the receivables have been fully transferred. The corresponding cash received from the financial institutions is recorded as borrowings.

When available-for-sale financial assets are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to income statement.

3.13 Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

3.14 Financial guarantee contractsFinancial guarantee contracts are contracts that require the Group or Company to make specified payments to reimburse the holder for a loss it incurs because a specified debtors fails to make payments when due, in accordance with the terms of a debt instrument.

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with FRS 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation where appropriate.

The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.

Where financial guarantees in relation to loans or payables of subsidiaries are provided by the Company for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of investment in subsidiaries.

3.15 LeasesA lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to use an asset for an agreed period of time.

Accounting by lessee

(a) Finance leases

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases.

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

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3.15 Leases (continued)(a) Finance leases (continued)

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

Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased assets and recognised as an expense in income statement over the lease term on the same basis as the lease expense.

(b) Operating leases

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

Initial direct costs incurred by the Group in negotiating and arranging operating leases are capitalised as prepayments and recognised in income statement over the lease term on a straight-line basis.

3.16 Inventories Inventories are stated at the lower of cost and net realisable value. Raw material cost is determined on a weighted

average or “first-in-first-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 fixed and variable manufacturing overheads (based on normal operating capacity).

3.17 Non-current assets (or disposal groups) classified as assets held for sale Net realisable value is the estimated selling price in the ordinary course of business less the costs of completion

and applicable variable selling expenses.

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.

3.18 Construction contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of

assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use.

Construction contracts costs are recognised as expenses in the period in which they are incurred.

When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Variations in contract work, claims and incentive payments are included in contract revenue to the extent agreed with the customer and are capable of being reliably measured. Liquidated ascertained damages, are disclosed as a deduction of contract revenue, which are deemed variable consideration.


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3.18 Construction contracts (continued) The Group uses the percentage-of-completion method to determine the appropriate amount to recognise in a

given period. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, prepayments or other assets, depending on their nature.

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

The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are included within ‘trade and other receivables’. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses). The asset balances are classified as current or non-current based on expectation of realisation.

3.19 Cash and cash equivalents For the purpose of the statement of cash flows, cash and cash equivalents comprise cash in hand, bank balances,

deposits held at call with banks excluding deposits which are pledged for banking facilities, and other short term, highly liquid investments with original maturities of three months or less, less bank overdrafts. Bank overdrafts are included within borrowings in current liabilities in the statement of financial position.

3.20 Share capital(i) Classification

Ordinary shares with discretionary dividends are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument, including Irredeemable Convertible Secured Loan Stocks and Irredeemable Convertible Unsecured Loan Stocks as per note 3.21.

(ii) Share issue costs

Incremental costs directly attributable to the issue of new shares or options are deducted against share premium account.

(iii) Dividends to shareholders of the Company

Distributions to holders of an equity instrument are debited directly to equity, net of any related income tax benefit and the corresponding liability is recognised in the period in which the dividends are approved.

(iv) Warrant reserve

Proceeds from issuance of warrants, net of issue costs, are credited to warrant reserve which is non-distributable. Warrant reserve is transferred to the share premium upon exercise of warrants and warrant reserve in relation to unexercised warrants at the expiry of the warrants period will be transferred to retained earnings.

(v) Purchase of own shares

Where the Company or its subsidiaries purchase the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental external costs, net of tax, is included in equity attributable to the controlling equity holders as Treasury shares until they are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects, is included in equity attributable to the controlling equity holders.

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3.21 Irredeemable Convertible Secured Loan Stocks (“ICSLS”) and Irredeemable Convertible Unsecured Loan Stocks (“ICULS”)

ICSLS and ICULS are regarded as compound financial statements, consisting of a liability and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar convertible loan stocks. The difference between the proceeds of issue of both ICSLS and ICULS and the fair value assigned to the liability component, representing the conversion option, is included in equity. The liability component is subsequently stated at amortised cost using the effective interest rate method until extinguished on conversion, whilst the value of the equity component is not adjusted in subsequent periods. Attributable transaction costs are apportioned and deducted directly from the liability and equity components based on the carrying amounts at the date of issue.

Under the effective interest rate method, the interest expense on the liability component is calculated by applying the prevailing market interest rate for a similar convertible loan stock to the instrument at the date of issue. The difference between this amount and the interest paid is added to the carrying amount of each ICSLS and ICULS.

3.22 Put option arrangements The potential cash payments related to put options issued by the Group over the equity of subsidiary companies

are accounted for as financial liabilities when such options may only be settled other than by exchange of a fixed amount of cash or another financial asset for a fixed number of shares in the subsidiary. The amount that may become payable under the option on exercise is initially recognised at fair value within payables with a corresponding charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interests, adjacent to non-controlling interests in the net assets of consolidated subsidiaries.

The Group recognises the cost of writing such put options, determined as the excess of the fair value of the option over any consideration received as a financing cost. Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount payable under the option at the date at which it first becomes exercisable. The charge arising is recorded as a financing cost. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity.

3.23 Financial liabilities Financial liabilities within the scope of FRS 139 are recognised on the statement of financial position when, and

only when, the Group becomes a party to the contractual provisions of the financial instrument.

Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transactions costs.

Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method except for derivatives which are measured at fair value.

For financial liabilities other than derivatives, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in profit or loss. Net gains or losses on derivatives include exchange differences.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially difference terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.


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3.24 Borrowings and borrowing costs Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried

at amortised cost; any difference between initial recognised amount and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method, except for borrowing costs incurred for the construction of any qualifying asset.

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

3.25 Income taxes The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement,

except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group’s subsidiaries and associates operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome.

Deferred tax is recognised, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable income statement. Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses or unused tax credits can be utilised.

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

Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

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3.26 Employee benefits(i) Short term benefits

Wages, salaries and bonuses are recognised as an expense in the financial 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) Defined contribution plan

As required by law, companies in Malaysia make contributions to the Employees’ Provident Fund (“EPF”). Some of the Group’s foreign subsidiaries make contributions to publicly or privately administered pension insurance plans on a mandatory contractual or voluntary basis. Such contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(iii) Defined benefit plan

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for actuarial gains or losses and past service costs. The defined benefit obligation is calculated by independent actuaries using the projected unit credit method. The Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the statement of financial position date.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are charged or credited to income over the employees’ expected average remaining working lives.

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

(iv) Termination benefits

The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. Benefits falling due more than 12 months after the date of the statement of financial position are discounted to present value.


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3.26 Employee benefits (continued)(v) Share-based compensation

The Company operates an equity-settled, share-based compensation plan for the Directors and employees of the Company and its subsidiaries (“ESOS”).

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense in the income statement. The total amount to be recognised over the vesting period is calculated by reference to the fair value of the options granted. At each date of the statement of financial position, the Company revises its estimates of the number of options that are expected to become exercisable. The effect of any revision of the original estimates is recognised in the income statement and a corresponding adjustment is made to equity over the remaining vesting period. When the options are exercised, the proceeds received (net of directly attributable transaction costs) are credited to share capital and share premium respectively. When options are not exercised, lapsed or forfeited, the share option reserve is transferred to retained earnings.

Salient features of the Company’s share option scheme are disclosed in Note 34(c) to the financial statements.

3.27 Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant

will be received and the Group will comply with all attached conditions.

Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to income statement on a straight-line basis over the expected lives of the related assets.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate.

3.28 ProvisionsProvisions for restructuring costs (including redundancy costs) and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

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

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

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

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses their existence where inflows of economic benefits are probable, but not virtually certain.

In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interests.

The Group recognises separately the contingent liabilities of the acquirees as part of allocating the cost of a business combination where their fair values can be measured reliably. Where the fair values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising from the acquisitions.

3.30 Revenue recognitionRevenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of the revenue can be measured reliably. Revenue is shown net of value-added tax, returns, rebates and discounts, and after eliminating sales within the Group.

(i) Sale of goods

Sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer.

(ii) Rendering of services

Revenue from rendering of services is recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction, assessed on the basis of the actual service provided as a proportion of the total services to be provided.

(iii) Interest income

Interest is recognised on a time proportion basis that reflects the effective yield on the asset, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group.

(iv) Rental income

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

(v) Charter income

Revenue from charter hire is recognised on an accrual basis but is deferred when the terms of billings have not been agreed by third parties or when certain conditions necessary for realisation have yet to be fulfilled.

(vi) Dividend income

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

(vii) Management fee income

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


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3.30 Revenue recognition (continued)(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 3.18 on construction contracts.

3.31 Foreign currencies(i) Functional and presentation currency

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

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance income or cost’. All other foreign exchange gains and losses are presented in the income statement within other operating income and other operating expenses respectively.

For translation differences on financial assets and liabilities held at fair value through income statement and available-for-sale financial assets, refer to Note 3.12(iii).

(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy other than entities in Venezuela) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

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

• all resulting exchange differences are recognised as a separate component of other comprehensive income.

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3.31 Foreign currencies(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy other than entities in Venezuela) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• all amounts (i.e. assets, liabilities, equity items, income and expenses, including comparatives) are translated at the closing rate at the date of the most recent statement of financial position; and

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

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold, or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences is reclassified to income statement as part of the gain or loss on sale.

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

3.32 Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group Chief Executive Officer.

3.33 Derivatives financial instruments and hedging activitiesDerivatives that are used/designated as hedging instruments are initially recognised at fair value on the date the derivative contract is entered into. Such derivatives are subsequently remeasured at their fair value, with the resulting gain or loss being recognised in the income statement as other operating income or expense. The Group accounts for derivatives used as hedging instruments depending on their designation as follows:

(i) Fair value hedges

Resulting gains or losses from the subsequent remeasurement of hedging derivatives at their fair value are recognised in the income statement. In addition, offsetting changes in the fair value of the hedged item are recognised in the income statement and presented net of changes in fair value of the hedging derivatives.

If hedge accounting is discontinued, the adjustment to the carrying amount of a hedged item, for which the effective interest method is used, is amortised to income statement over the period to maturity.

(ii) Cash flow hedges

Resulting gains or losses from the subsequent remeasurement of hedging derivatives at their fair values are deferred to the hedging reserves as part of other comprehensive income to the extent of their effective portion. The ineffective portion is recognised directly in the income statement as other operating income or expense. Fair value changes from subsequent remeasurement of hedging derivatives deferred to hedging reserves are recycled to income statement under finance cost in the periods when the underlying hedged item affects income statement and statement of financial position of the Group.


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3.33 Derivatives financial instruments and hedging activities (continued)When a hedging instrument expires or is sold, or when hedge accounting is discontinued, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction in no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to income statement within other operating income/expenses.

The Group has entered in Cross Currency Interest Rate Swaps (“CCIRS”) that are designated as cash flow hedges for the Group’s exposure to foreign exchange risk on its Murabahah Medium Term Notes, which were issued by a subsidiary. The CCIRS involve the exchange of principals and fixed interest receipts in the foreign currency, in which the issued Murabahah Medium Term Notes are denominated, for principals and fixed interest payments in the subsidiary’s functional currency.

The fair values of derivative instruments used for hedging purposes are disclosed in Note 21. Movements in the hedging reserve are shown in Note 36. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.

4 REvENUE

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Continuing operations

Sales of goods 636,517 651,067 – – Rental/chartering income 291,448 224,719 – – Rendering of services 256,625 384,826 – – Construction contract income 198,695 258,252 – – Management fee 452 1,920 4,167 5,798 Dividend income – – – 66,436 Commission income – 1,151 – – 1,383,737 1,521,935 4,167 72,234 Discontinued operations

Rental income 64,119 55,556 – – Rendering of services 30,827 46,010 – – Sales of goods 7,666 18,503 – – 1,486,349 1,642,004 – –

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5 (LOSS)/PROFIT BEFORE TAxATION

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

(Loss)/profit before taxation is stated after charging/(crediting):

Amortisation of intangible assets 2,161 1,773 – – Amortisation of prepaid land lease payments 1,460 1,083 – – Allowance for obsolete stocks 2,972 5,575 – – Write back of government grant – (1,439) – – Inventories written down 957 3,894 – – Impairment losses – intangible assets 6,313 6,282 – – – property, plant and equipment 3,628 8,298 – – – receivables 11,665 17,928 – – – amount due from subsidiaries – – 7,807 – – investment in subsidiary – – 600 – – investment in associate 8,627 – 143,992 –

Auditors’ remuneration: PricewaterhouseCoopers Malaysian firm Statutory audit – current year 1,673 1,673 212 212 – under/(over) provision in prior year – 50 – – Non-audit fees – current year – 89 – –

Overseas affiliates of PricewaterhouseCoopers Malaysian firm Statutory audit – current year 1,398 1,398 – – – under/(over) provision in prior year – 116 – –

Other external auditors Statutory audit – current year 202 202 – – – under provision in prior year – 32 – – Non-audit fees – current year – 6 – –

Bad debts written off/(recovered) 2,085 1,336 – – Depreciation of property, plant and equipment 51,959 66,616 826 894 Depreciation of investment property 144 148 94 – Gain on disposal of property, plant and equipment (1,202) (49) (60) (12) Fair value gain on financial instruments – derivatives (556) (1,220) – – Property, plant and equipment written off 361 1,833 – 219 Provision for tax penalties 872 1,551 – –


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5 (LOSS)/PROFIT BEFORE TAxATION (CONTINUED)


Loss/(gain) on foreign exchange – realised 15,705 31,639 (131) 204 – unrealised 22,858 14,296 (344) (1,669) Monetary adjustments (2,417) 9,236 – – Hyperinflation adjustments 3,218 8,227 – – (Gain)/loss on disposal of/dilution of interest in subsidiary companies – (19,677) – – Gross dividend income – subsidiaries – – – (66,436) Gross dividend income – associates – – – – Interest income (2,860) (3,895) (6,303) (4,957) Lease rental – plant and machinery 56,975 49,083 – – – property 13,102 14,351 – – Rental of land and premises 2,658 1,746 445 480 Rental of equipment 3,529 856 97 87 Rental income (135) (448) (408) (343) Research and development expenses 101 774 – –

Employee benefits costs (including Executive Director):

Wages, salaries and bonuses 230,084 215,529 4,917 8,386 Defined contribution plan 9,987 10,803 519 833 Defined benefit plan (Note 37) 1,058 1,584 – – Termination benefits 633 1,093 – – Share option expense (Note 36) 2,516 2,116 1,081 417 Employment costs 7,019 13,819 83 46 Other employee benefits (including allowances) 70,818 86,657 485 994 321,169 331,601 7,086 10,676

Included in the cost of sales of the Group are the cost of inventories and services of RM877,568,000 (2010: RM1,091,435,000) and construction contract costs of RM205,611,000 (2010: RM173,086,000).

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6 FINANCE COSTS

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 (Restated) Continuing operations

Interest expense on borrowings, leases, ICSLS and ICULS 62,414 82,604 16,696 17,422 Effect of interest on CCIRS 2,304 879 – – Effect of hedging – fair value hedge 21 238 – – 64,739 83,721 16,696 17,422 Currency exchange loss* – – – – Fair value loss/(gain) on CCIRS designated as fair value hedges (893) 1,560 – – Fair value loss/(gain) on put option (13,057) (20,926) – – 50,789 64,355 16,696 17,422 Discontinued operations

Interest expense on borrowings and leases – 1,789 – – 50,789 66,144 16,696 17,422

* Included in currency exchange loss is an amount of RM11,831,286 (2010: RM62,650,666) of exchange losses/(gains) transferred from hedging reserve which is offset by a corresponding exchange (gains)/losses of Nil (2010: RM62,650,666) arising from revaluation of hedged borrowings.

7 TAxATION ExPENSE/(CREDIT)

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Continuing operations

Current tax – Malaysian income tax 7,356 1,847 – 286 – Foreign tax 25,609 22,176 – – 32,965 24,023 – 286 Deferred tax (Note 38) 15,727 (3,814) 666 814 48,692 20,209 666 1,100


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7 TAxATION ExPENSE/(CREDIT)

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 (Restated) Current tax

Current year 23,621 28,964 – 286 (Over)/under accrual in prior years 9,344 (4,941) – – 32,965 24,023 – 286

Deferred tax

Reversal and origination of temporary differences 8,086 (258) 666 814 Under/(Over) accrual in prior years 1,114 (589) – – Benefit from previously unrecognised tax losses 6,723 (2,967) – – Change in income tax rate (196) – – –

15,727 (3,814) 666 814 Total tax expense from continuing operations 48,692 20,209 666 1,100

Discontinuing operations

Current tax – Foreign tax 2,765 (338) – – Deferred tax (Note 38) 19,820 (1,825) – – 22,585 (2,163) – –

Current tax

Current year 2,560 (338) – – Under accrual in prior years 205 – – – 2,765 (338) – – Deferred tax

Reversal and origination of temporary differences 19,820 (1,825) – – Total tax expense/(credit) from discontinued operations 22,585 (2,163) – – Total tax expense 71,278 18,046 – –

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7 TAx ExPENSE/(CREDIT) (CONTINUED)

Group Company 2011 2010 2011 2010 % % % % (Restated) Numerical reconciliation between the average effective tax rate and the applicable tax rate:

Applicable tax rate (21) (21) (25) 25 Tax effects of: – expenses not deductible for tax purposes 22 17 25 4 – utilisation of previously unrecognised tax losses, capital allowance and tax incentives – (5) – – – income not subject to tax (7) (8) – (29) – withholding tax based on turnover 9 5 – – – deferred tax assets not recognised in respect of current year’s tax losses and unabsorbed capital allowances 23 15 – 2 – (over)/under accrual in respect of prior years 5 (3) – – – share of results of associates and jointly controlled entities 11 12 – – Average effective tax rate 42 12 0 2 The applicable tax rate of the Group is derived from the consolidation of all the applicable tax for the companies within

the Group, based on their domestic tax rates. The applicable tax rate of the Company is the Malaysian statutory tax rate of 25%. The applicable tax of the Group has decreased compared to the previous year mainly due to the loss suffered from subsidiaries from high tax rate jurisdictions.

The income tax effect of each of the other comprehensive (loss)/income item is Nil (2010: Nil) in the current financial year.

8 DISCONTINUED OPERATIONS

On 1 November 2011, the Board of Directors of the Company announced that Scomi Oiltools, Inc. (“SOINC”) and Scomi Oiltools De Mexico, S. De R.L de C.V (“SMEX”) had entered into a conditional purchase and sale agreement with National Oilwell Varco, L.P and National Oilwell Varco Solutions S.A. de C.V. respectively for the disposal of certain assets used in connection with its drilling waste management business (“DWM Business”) for a total cash consideration of USD35.0 million (RM108.56 million). SOINC and SMEX completed the disposals of their DWM Business on 10 November 2011 and 11 November 2011 respectively.

The entire results from the disposal group are presented separately on the statement of comprehensive income as “discontinued operations”.


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8 DISCONTINUED OPERATIONS (CONTINUED)

The results of the discontinued operations of the SOINC and SMEX operations are as follows:

Group 2011 2010 RM’000 RM’000 Revenue 102,611 120,069 Expenses (104,184) (125,501) Loss on disposal (103,495) – Loss before tax of discontinued operations (105,068) (5,432) Taxation (22,585) 2,163 Loss for the year from discontinued operations (127,653) (3,269)

The impact of the discontinued operations on the cash flows of the Group is as follows:

Group 2011 2010 RM’000 RM’000

Operating cash flow 20,150 977Investing cash flow 80,103 361Financing cash flow (100,956) (1,738)

Total cash inflow/(outflow) (703) (400)

Details of net assets arising from the disposal are as follows:

At the date of disposal RM’000

Net assets disposed:

Fair value of net assets disposed at disposal date 193,163Loss on disposal attributable to the owner of the parents (103,495)

Total consideration 89,668

Satisfied by:

Total consideration 108,561Expenses incurred directly attributable to the disposal (18,893)

Net cash inflow on disposal 89,668

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9 DIRECTORS’ REMUNERATION

The Directors of the Company in office during the financial year are as follows:

Non-executive Directors

Tan Sri Asmat bin KamaludinTan Sri Nik Mohamed bin Nik YaacobDatuk Haron bin SirajDatuk Mohamed Azman bin YahyaDato’ Mohammed Azlan bin HashimDato’ Abdul Rahim bin Abu BakarDato’ Sreesanthan a/l EliathambyFoong Choong Hong

Executive Director

Shah Hakim @ Shahzanim bin Zain

The aggregate amount of emoluments received/receivable by Directors of the Company during the financial year is as follows:


Non-executive Directors:– fees 707 712 555 576– other emoluments 186 248 171 233

893 960 726 809

Executive Director (Note 40(b)):– salaries and bonus 2,279 1,797 1,320 1,270– defined contribution plan – 10 – 10– share options granted under ESOS – – – –– estimated monetary value of benefits-in-kind 551 679 352 121

2,830 2,486 1,672 1,401

3,723 3,446 2,398 2,210

10 (LOSS)/EARNINGS PER SHARE

(a) Basic (loss)/earnings per share Basic (loss)/earnings per share of the Group are calculated by dividing the profit attributable to owners of the

Company for the financial year by the weighted average number of ordinary shares in issue during the financial 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 34(b)).


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10 (LOSS)/EARNINGS PER SHARE (CONTINUED)

(a) Basic (loss)/earnings per share (continued) Group

2011 2010 (Restated)

(Loss)/profit attributable to owners of the Company (RM’000) (232,332) (172,906)

Weighted average number of ordinary shares in issue (‘000) 1,391,731 1,371,255

Basic (loss)/earnings per share (Sen) (16.69) (12.61)

(b) Diluted (loss)/earnings per share For the diluted (loss)/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 above is compared with the number of shares that would have been issued assuming the exercise of the warrants. The difference is added to the denominator as an issue of ordinary shares for no consideration. This calculation serves to determine the “bonus” element to the ordinary shares outstanding for the purpose of computing the dilution.

For share options granted to employees, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the share options. The difference is added to the denominator as an issue of ordinary shares for no consideration. This calculation serves to determine the ‘bonus’ element to the ordinary shares outstanding for the purpose of computing the dilution. No adjustment is made to the loss attributable to owners of the Company in calculating the diluted loss per share.

Group 2011 2010 (Restated)

(Loss)/profit attributable to owners of the Company (RM’000) (232,332) (172,906)

Weighted average number of ordinary shares in issue and conversion of potential ordinary shares from the mandatorily convertible instrument of ICSLS (’000) 1,391,731 1,371,255

Adjustments for: – share options (’000) 2,797 4,366 – warrants (’000) – 11,638

Weighted average number of ordinary shares for diluted earnings per share (’000) 1,394,528 1,387,259

Diluted (loss)/earnings per share (Sen) (16.66) (12.46)

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11 DIvIDENDS

The Directors do not recommend any dividend for the financial year ended 31 December 2011.

12 PROPERTy, PLANT AND EQUIPMENT

Renovation, Tools, office plant equipment, Monorail Freehold Freehold Leasehold and fittings and Motor testGroup land buildings buildings machinery computers vehicles track Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

CostAt 1 January 2011 19,548 55,120 28,950 735,432 65,892 13,555 14,795 933,292Additions – – 383 46,516 3,646 411 – 50,956Disposals (1,482) (948) (3,330) (172,616) (5,494) (1,816) – (185,686)Write-offs – – – (434) – – – (434)Reclassification – – 3 363 (350) (16) – –Currency translation differences 792 2,118 159 (2,135) (586) 41 – 389

At 31 December 2011 18,858 56,290 26,165 607,126 63,108 12,175 14,795 798,517

Accumulated depreciationAt 1 January 2011 – 13,057 14,410 441,760 35,666 10,488 2,326 517,707Charge for the financial year – 1,669 1,779 38,729 8,563 1,096 123 51,959Capitalised under development costs (Note 13) – – – 233 241 – 370 844Disposals – (141) (3,580) (97,896) (5,532) (1,663) – (108,814)Impairment losses – – – 3,628 – – – 3,628Write-offs – – – (73) – – – (73)Currency translation differences – (4) (77) (3,020) (199) (24) – (3,324)

At 31 December 2011 – 14,581 12,532 383,361 38,739 9,895 2,819 461,927

Net book valueAt 31 December 2011 18,858 41,709 13,633 223,765 24,369 2,280 11,976 336,590


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12 PROPERTy, PLANT AND EQUIPMENT (CONTINUED)

Renovation, Tools, office plant equipment, Monorail Freehold Freehold Leasehold and fittings and Motor testGroup land buildings buildings machinery computers vehicles track Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

CostAt 1 January 2010 20,363 52,850 46,891 853,779 68,021 13,729 14,795 1,070,428Effect of adopting Amendments to FRS 117 – – 6,075 – – – – 6,075

At 1 January 2010, as restated 20,363 52,850 52,966 853,779 68,021 13,729 14,795 1,076,503Additions 2,115 4,115 1,837 11,514 10,956 1,212 – 31,749Disposals (1,275) – (22,481) (111,590) (10,047) (1,023) – (146,416)Write-offs – (221) (2,018) – (2,045) – – (4,284)Reclassification – 229 – – (229) – – –Currency translation differences (1,655) (1,853) (1,354) (18,271) (764) (363) – (24,260)

At 31 December 2010 19,548 55,120 28,950 735,432 65,892 13,555 14,795 933,292

Accumulated depreciationAt 1 January 2010 – 7,148 17,568 422,308 34,239 9,907 1,833 493,003Effect of adopting Amendments to FRS 117 – – 354 – – – – 354

At 1 January 2010, as restated – 7,148 17,922 422,308 34,239 9,907 1,833 493,357Charge for the financial year – 1,015 2,844 53,631 7,834 1,292 – 66,616Capitalised under development costs (Note 13) – 4 – 315 188 – 493 1,000Disposals – – (4,638) (38,621) (6,275) (816) – (50,350)Impairment losses – 4,953 9 3,265 71 – – 8,298Write-offs – (76) (1,893) – (482) – – (2,451)Currency translation differences – 13 166 862 91 105 – 1,237

At 31 December 2010 – 13,057 14,410 441,760 35,666 10,488 2,326 517,707

Net book valueAt 31 December 2010 19,548 42,063 14,540 293,672 30,226 3,067 12,469 415,585

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Office Motor equipment vehicles and fittings Renovation Total Company RM’000 RM’000 RM’000 RM’000

CostAt 1 January 2011 1,839 3,640 741 6,220Additions – 15 – 15Disposal (360) – – (360)

At 31 December 2011 1,479 3,655 741 5,875

Accumulated depreciationAt 1 January 2011 1,363 2,408 2 3,773Charge for the financial year 296 284 246 826Disposal (355) – – (355)

At 31 December 2011 1,304 2,692 248 4,244

Net book value at 31 December 2011 175 963 493 1,631

CostAt 1 January 2010 1,839 3,648 2,020 7,507Additions – 580 739 1,319Disposal – (43) – (43)Write offs – (545) (2,018) (2,563)

At 31 December 2010 1,839 3,640 741 6,220

Accumulated depreciationAt 1 January 2010 1,067 2,520 1,668 5,255Charge for the financial year 296 371 227 894Disposal – (32) – (32)Write offs – (451) (1,893) (2,344)

At 31 December 2010 1,363 2,408 2 3,773

Net book value at 31 December 2010 476 1,232 739 2,447


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

Group 2011 2010 RM’000 RM’000

Freehold land and buildings – 2,700 Motor vehicles 2,040 1,726 Tools, plant and machinery – 10,059 Office equipment, fittings and computers 1,875 1,673

(ii) Certain property, plant and equipment of the Group are charged as security for banking facilities (Note 28) as follows:

Group 2011 2010 RM’000 RM’000

Land and buildings 12,019 17,914

(iii) During the financial year, the Group acquired property, plant and equipment at aggregate costs of RM50,956,000 (2010: RM27,071,000), of which RM133,000 (2010: RM2,764,000) is by means of finance lease arrangements.

13 INTANGIBLE ASSETS

Development Patents Capitalised development costs cost work-in-progress and other Drilling Drilling intangible waste MassRapid wasteGroup Goodwill assets Monorail Bus equipment Transit/Bus equipment Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

CostAt 1 January 2011 294,867 13,001 77,121 112 5,703 904 – 391,708Additions – – 37,297 – – 2,558 2,463 42,318Reclassification – – – 904 – (904) – –Discontinued operation (Note 8) (90,179) – – – – – – (90,179)Currency translation differences 41 55 – – 96 – 36 228

At 31 December 2011 204,729 13,056 114,418 1,016 5,799 2,558 2,499 344,075

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13 INTANGIBLE ASSETS (CONTINUED)

Development Patents Capitalised development costs cost work-in-progress and other Drilling Drilling intangible waste MassRapid wasteGroup Goodwill assets Monorail Bus equipment Transit/Bus equipment Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated impairment and amortisationAt 1 January 2011 360 7,501 1,616 66 1,458 – – 11,001Amortisation for the financial year 97 84 1,816 102 62 – – 2,161Impairment loss – 4,856 – – 1,457 – – 6,313Currency translation differences 2,851 46 – – 4 – – 2,901

At 31 December 2011 3,308 12,487 3,432 168 2,981 – – 22,376

Net book valueAt 31 December 2011 201,421 569 110,986 848 3,722 1,654 2,499 321,699

CostAt 1 January 2010 479,192 13,309 65,065 108 5,066 569 – 563,309Additions – – 12,431 4 (113) 335 – 12,657Transferred from property, plant and equipment (Note 12) – – – – 1,000 – – 1,000Disposal of subsidiaries (183,699) – (375) – – – – (184,074)Currency translation differences (626) (308) – – (250) – – (1,184)

At 31 December 2010 294,867 13,001 77,121 112 5,703 904 – 391,708

Accumulated impairment and amortisationAt 1 January 2010 360 2,793 – 44 – – – 3,197Amortisation for the financial year – 135 1,616 22 – – – 1,773Impairment loss – 4,824 – – 1,458 – – 6,282Currency translation differences – (251) – – – – – (251)

At 31 December 2010 360 7,501 1,616 66 1,458 – – 11,001

Net book valueAt 31 December 2010 294,507 5,500 75,505 46 4,745 904 – 380,707


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13 INTANGIBLE ASSETS (CONTINUED)

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

2011 2010 RM’000 RM’000

Oilfield services 148,677 241,666 Transport solutions 48,669 48,766 Production enhancement 4,075 4,075

201,421 294,507

The recoverable amount of the CGU in the current financial year is determined based on value in use calculations. In the previous financial year, the recoverable amount of all the CGUs were determined based on value in use calculations except for oilfield services which was based on a fair value less costs to sell basis.

The value in use calculations use pre-tax cash flow projections based on financial budgets approved covering a five-year period. The projections over these periods were based on an approved business plan and reflect the expectation of usage, revenue, growth, operating costs and margins based on past experience and current assessment of market share, expectations of market growth and industry growth.

The key assumptions used in the value in use calculations for the significant CGUs are as follows:

Oilfield Transport Production services solutions enhancement % % %

Growth rate in the first 5 years – 2011 2.4 – 12.0 existing 5.0 secured projects

– 2010 Not applicable 10.0 5.0 or existing secured projects

Pre-tax discount rate – 2011 9.0 – 23.0 13.0 12.0 – 2010 Not applicable 11.0 12.0

The terminal value for transport solutions is calculated based on the projected realisable value of the net assets of the CGUs at the end of the five years.

The oilfield services and product enhancement CGUs are included within the oilfied services reportable segment in Note 42.

(b) In 2009, the Group purchased the rights to use an intellectual property for the development of technologies relating to crude oil waste, oil recovery recycling and treatment for oil and gas industry, amounting to USD2.5 million (approximately RM9.4 million). During the financial year, an impairment loss of RM4.8 million was recognised to fully write-down the remaining carrying amount of the intellectual property rights.

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14 INvESTMENT PROPERTIES


Cost At 1 January 2,889 2,889 4,678 – Additions 945 – – 4,678 At 31 December 3,834 2,889 4,678 4,678

Accumulated depreciation At 1 January 1,676 1,528 – – Charge for the financial year 144 148 94 – Impairment losses 455 – – – Currency translation differences – – – – At 31 December 2,275 1,676 94 – Net book value 1,559 1,213 4,584 4,678

At fair value: Freehold land and buildings 2,471 2,170 11,800 9,800

The fair values of the investment properties are determined based on current price in an active market.

The Company has determined that certain investment properties have been occupied by a subsidiary within the Group and therefore does not qualify as investment properties according to FRS 140 Investment Properties.

The following amounts have been recognised in the income statement:

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Rental income 135 135 408 343 Direct operating expenses of investment properties that generated rental income – – – –

There were no direct operating expenses arising from investment property that generated rental income during the year as all expenses were incurred by the tenant.


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15 PREPAID LAND LEASE PAyMENTS

Group 2011 2010 RM’000 RM’000 Leasehold land At 1 January – as previously stated 1,787 7,969 – effect of adopting FRS 117 – (5,721) At 1 January, as restated 1,787 2,248 Additions – 832 Disposal – – Amortisation for the financial year (1,460) (1,083) Currency translation differences (11) (210) As 31 December 316 1,787

16 INvESTMENTS IN SUBSIDIARIES

Company 2011 2010 RM’000 RM’000

At cost:– quoted shares in Malaysia 286,807 286,807– unquoted shares 298,983 298,908– quoted ICULS in Malaysia 54,782 54,782

640,572 640,497Less: Accumulated impairment (4,946) (4,346)Deemed investment – financial guarantee 1,268 1,268

636,894 637,419

At market value:– quoted shares in Malaysia 107,838 192,568– quoted ICULS in Malaysia 29,035 52,591

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16 INvESTMENTS IN SUBSIDIARIES (CONTINUED)

Details of the significant subsidiaries are as follows:

Country of Group’s effectiveName of company incorporation equity interest Principal activities 2011 2010 % %

Significant direct subsidiaries of Scomi Group BhdScomi Oilfield Limited * Bermuda 76.1 76.1 Investment holding

Scomi Engineering Bhd * Malaysia 67.4(1) 69.8 Investment holding and provision of management services

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

Scomi Chemicals Sdn Bhdα Malaysia 100 100 Investment holding

Scomi KMC Sdn Bhd * Malaysia 52 52 Provision of oilfield equipment, supplies (including 4% held by and services Scomi Oiltools Sdn Bhd)

Significant subsidiary of Scomi Oilfield LimitedScomi Oiltools Bermuda Limited Bermuda 76.1 76.1 Investment holding

Significant subsidiaries of Scomi Oiltools Bermuda Limited Scomi Oiltools Sdn Bhd * Malaysia 76.1 76.1 Provision of oilfield equipment, supplies

and services and provision of management services

Scomi Oiltools (Cayman) Ltd# Cayman 76.1 76.1 Provision of oilfield equipment, supplies Islands and servicesScomi Oiltools Ltd * Cayman 76.1 76.1 Provision of oilfield equipment, supplies Islands and services

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

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

Scomi Oiltools Inc # United States 76.1 76.1 Dormant of America

Scomi Oiltools (Africa) Limited * Cayman 76.1 76.1 Investment holding and provision of Island oilfield equipment, supplies and services

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

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


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16 INvESTMENTS IN SUBSIDIARIES (CONTINUED)

Details of the significant subsidiaries are as follows:

Country of Group’s effectiveName of company incorporation equity interest Principal activities 2011 2010 % %

Significant subsidiaries of Scomi Engineering BhdUrban Transit Private Limited* India 67.4 69.8 Engage in the business of development,

manufacture and supply of monorail transportation infrastructure systems equipment and services

Urban Transit Servicos Brazil 67.4 – Engage in the business of development, Do Brasil LTDA* manufacture and supply of monorail

transportation infrastructure systems equipment and services

Scomi Transportation Systems Sdn Bhd * Malaysia 67.4 69.8 Investment holding

Significant subsidiaries of Scomi Transportation Systems Sdn BhdScomi Rail Bhd * Malaysia 67.4 69.8 Design, manufacture, and supply of

monorail trains and related services

Scomi Coach Sdn Bhd * Malaysia 67.4 69.8 Manufacturing, fabrication and assembly of commercial coaches and truck vehicle

bodiesSignificant subsidiaries of Scomi Chemicals Sdn Bhd~ Scomi Sosma Sdn Bhd α Malaysia 40 40 Distribution of chemical products and

services

~ Scomi Anticor S.A. α France 40 40 Design and field deployment of various oil and gas production chemicals

* Audited by PricewaterhouseCoopers, Malaysia

# Audited by affiliates of PricewaterhouseCoopers, Malaysia

α Audited by firms other than PricewaterhouseCoopers, Malaysia and its affiliates

~ Company in which the Group owns less than half of the voting powers. However, as the Group has control over its financial and operating policies, this investment is treated as a subsidiary.

(1) During the financial year, the issued and paid-up capital was increased from RM285,969,224 comprising 285,969,224 ordinary shares of RM1.00 each, to RM286,044,224 comprising 286,044,224 ordinary shares of RM1.00 each, by way of the issuance of 75,000 new ordinary shares of RM1.00 each pursuant to the conversion of ICULS by non-controlling interests at a price of RM1.00 per share.

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17 INvESTMENT IN AN ASSOCIATE


Shares quoted in Malaysia, at cost 360,487 360,487 360,124 360,124Share of post-acquisition– (loss)/profits * (88,536) (40,002) – –– reserves (46,810) (51,626) – –

225,141 268,859 360,124 360,124Less: Accumulated impairment (8,627) – (143,992) –

216,514 268,859 216,132 360,124

Share of contingent liabilities 5,241 15,071 – –

Market value of shares quoted in Malaysia 119,090 178,634 118,957 178,435

* Included in the share of post-acquisition loss during the financial year is the share of impairment of goodwill in an associate of RM18.51 million (2010: RM111.17 million).

The Group’s share of the revenue, assets and liabilities of significant associate is as follows:

Group’s effective Country of equity Net Name of company incorporation interest Assets Liabilities Revenue loss % RM’000 RM’000 RM’000 RM’000 2011 Scomi Marine Bhd Malaysia 42.8 293,829 (49,768) 167,076 (48,536)

2010 Scomi Marine Bhd Malaysia 42.8 369,171 (80,649) 174,891 (87,225)


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18 INvESTMENT IN JOINTLy CONTROLLED ENTITIES

Group 2011 2010 RM’000 RM’000 Unquoted shares, at cost 33 33 Share of post-acquisition (loss)/profit (33) (14) – 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 Name of company incorporation interest Assets Liabilities Revenue Net loss % RM’000 RM’000 RM’000 RM’000 2011 Sosma (B) Sdn Bhd Brunei 50 7 76 – (19)

2010 Sosma (B) Sdn Bhd Brunei 50 43 95 – –

As at the date of the statement of financial position, Sosma (B) Sdn Bhd remained inactive, hence there was no share of revenue from the jointly controlled entity.

19 OTHER FINANCIAL RECEIvABLE

Company 2011 2010 RM’000 RM’000

Amounts due from subsidiaries – 17,636

Included in the above is an amount of nil (2010: RM18.49 million) which is unsecured and repayable in 3 years. The fair value of this amount as at the date of the statement of financial position is nil (2010: RM15.47 million), computed based on cash flows discounted at market borrowing rates of 5.5% per annum.

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20 AvAILABLE-FOR-SALE FINANCIAL ASSETS

Group 2011 2010 RM’000 RM’000

At fair value:Shares quoted in Malaysia 127 127Unquoted shares 1,389 1,389

1,516 1,516

Market value of quoted investments 127 127

21 DERIvATIvE FINANCIAL ASSETS/(LIABILITIES)

Group 2011 2010 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 flow hedges – 463,500 26,288 Forward foreign exchange contracts 2,800 (294) 78,636 949 (294) 27,237

Included in: Non-current assets – 24,465 Current assets – 7,691 Non-current liabilities – (4,919) Current liabilities (294) – (294) 27,237

The Group previously entered into Cross Currency Interest Rate Swaps (“CCIRS”) and Interest Rate Swaps (“IRS”) that are designated as cash flow hedges to hedge the Group’s exposure to interest rate risk and foreign exchange risk on its Murabahah Medium Term Notes. These contracts entitle the Group to receive principal and fixed interest amounts in Ringgit Malaysia (“RM”) and oblige the Group to pay principal and floating interest amount in United States Dollars (“USD”).

The US interest rates on the CCIRS and IRS contracts jointly designated as hedging instruments in the cash flow hedges ranged from 5.53% to 7.23% per annum (2010: 5.53% to 7.23% per annum) and the interest rates in RM ranged from 5.85% to 6.95% per annum (2010: 5.85% to 6.95% per annum).

The Group had on 14 December 2011 issued a Sukuk Murabahah of RM342.55 million (‘the Sukuk”). The proceeds raised from the issuance under the Sukuk was utilised for early redemption of the outstanding amount of the existing Notes in full.


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21 DERIvATIvE FINANCIAL ASSETS/(LIABILITIES) (CONTINUED)

Since the Sukuk was issued with different maturity dates and repayment amounts from the Notes, all the existing CCIRS and IRS contracts have been early terminated during the year.

Consequently, this leaves the Group exposed to foreign currency risk on the translation of the RM denominated Sukuk. The Group is monitoring this risk and intends to enter into derivative contracts when market rates become more favourable, to hedge its risk.

Further, the Group uses forward foreign currency contracts to manage some of the transaction exposures. These contracts are entered into for periods consistent with currency translation exposure and fair value changes. These contracts are not designated as cash flow or fair value hedges. Hence, hedge accounting has not been applied.

There was no fair value loss being recorded for the year as all the derivatives have been unwound as at the year end.

22 INvENTORIES

Group 2011 2010 RM’000 RM’000

Consumables 26,404 30,417Raw materials 13,866 14,620Work-in-progress 8,613 15,186Finished goods 174,420 140,157

223,303 200,380

23 RECEIvABLES, DEPOSITS AND PREPAyMENTS


Trade receivables 466,671 355,814 – –Amounts due from customers on contract (Note 26) 330,455 364,692 – –Amounts receivable from:– subsidiaries – – 57,565 91,848– jointly controlled entities – 185 – 27– associate – – 467 –– related parties 28 157 28 31– staff 740 1,590 94 100

768 1,932 58,154 92,006Other receivables 78,832 110,934 5,741 8,998Deposits 9,994 7,822 624 871Prepayments 15,360 22,194 37 86

902,080 863,388 64,556 101,961

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23 RECEIvABLES, DEPOSITS AND PREPAyMENTS (CONTINUED)

(a) Trade receivables Trade receivables are non-interest bearing and credit terms for trade receivables range from 30 to 120 day (2010:

30 to 120 day) terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

(b) Related party balances and receivables from staff– Amounts due from subsidiaries are unsecured and non-interest bearing except for certain advances which bear

interest ranging from 1.80% to 7.00% (2010: 1.80% to 7.00%) per annum and are repayable within the next 12 months.

– Amounts due from related parties and jointly controlled entities are unsecured, interest free and are repayable upon demand.

– Amounts due from staff are unsecured, interest free and repayable within 30 days.

24 SHORT-TERM DEPOSITS, CASH AND BANK BALANCES


Short term deposits with licensed banks 35,176 52,410 6,981 7,438Cash and bank balances 122,271 123,978 6,101 1,896

157,447 176,388 13,082 9,334

The effective interest rates for short term deposits, cash and bank balances at the date of the statement of financial position were as follows:

Group Company 2011 2010 2011 2010 % % % %

Short term deposits with licensed banks 2.3-3.1 1.45-3.5 2.3-3.1 1.45-3.5

Short term deposits of the Group and Company have maturity periods ranging from 1 to 365 days (2010: 1 to 365 days). Bank balances are deposits held at call with banks.

Short term deposits of the Company and certain subsidiaries amounting to RM50,303,000 (2010: RM36,099,000) have been pledged to licensed banks for banking facilities as disclosed in Note 28 to the financial statements.

Short term deposits of the Company amounting to RM6,981,000 (2010: RM7,438,000) have been pledged to licensed banks for banking facilities.


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25 NON-CURRENT ASSET CLASSIFIED AS HELD FOR SALE

As at the financial year ended 31 December 2011, the non-current asset held for sale was as follows:

Group 2011 2010 RM’000 RM’000 Jointly controlled entity – 4,663 On 23 December 2010, a wholly-owned subsidiary of the Company, Scomi Energy Sdn Bhd, entered into a conditional

share sale agreement with Cameron Solutions Inc, in relation to disposal of a jointly controlled entity, Scomi NTC Sdn Bhd, as disclosed in Note 41(b). The disposals were completed in the current financial year.

26 AMOUNTS DUE FROM/(TO) CUSTOMERS ON CONTRACTS

Group 2011 2010 RM’000 RM’000

Construction contract cost incurred to date and attributable profits 852,472 653,777 Less: Progress billings (522,018) (289,085) 330,455 364,692

Represented by:

Amount due from customers (included in trade and other receivables – Note 23) 330,455 364,692

Advance received on contract, included under other payables – 859

27 PAyABLES

Group Company 2011 2010 1.1.2010 2011 2010 RM’000 RM’000 RM’000 RM’000 RM’000

Current liabilities

Trade payables 265,167 206,098 303,025 – –Put option over non-controlling interests 119,598 132,656 144,386 – –Amount due to an associate 515 6,311 7,610 – –Accruals 79,799 59,911 100,828 11,465 16,059Other payables 74,897 64,009 84,316 54 16Financial guarantee – – – 49 497

539,976 468,985 640,165 11,568 16,572

Non-current liabilities

Financial guarantee – – – – 260Other payables 5,629 5,520 – – –

5,629 5,520 495,779 – 260

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27 PAyABLES

(a) Trade payables Trade payables are non-interest bearing and credit terms for trade payables range from cash term to 120 days

(2010: cash term to 120 days).

(b) Other payables The balance of other payables is non-interest bearing with no fixed terms of repayment.

(c) Amount due to an associate Amount due to an associate is unsecured, non-interest bearing and repayable on demand.

(d) Financial guarantee Financial guarantee relates to a corporate guarantee provided by the Company to a licensed bank for a loan taken

by a subsidiary (Note 28).

(e) Put option over non-controlling interests The put option over non-controlling interests represents the fair value of a put option granted to non-controlling

interests over their equity interests held in a subsidiary, Scomi Oilfield Ltd. The fair value is determined based on the projected adjusted earnings of the subsidiary concerned.

28 BORROWINGS


Current

Bonds (secured) 242,640 174,174 201,552 100,000Bank overdrafts 129,360 114,106 – –Bank borrowings 253,288 114,264 – –Other term loans (secured) 119,359 68,574 20,616 20,560Finance lease payables 204 238 137 138

744,851 471,356 222,305 120,698

Non-current

Bonds (secured) 300,518 507,271 – 103,934Bank borrowings – 28,000 – –Other term loans (secured) 19,591 71,835 1,990 22,058Finance lease payables 733 1,058 251 388

320,842 608,164 2,241 126,380

Total borrowings

Bonds (secured) 543,158 681,445 201,552 203,934Bank overdrafts 129,360 114,106 – –Bank borrowings 253,288 142,264 – –Other term loans (secured) 138,950 140,409 22,606 42,618Finance lease payables 937 1,296 388 526

1,065,693 1,079,520 224,546 247,078


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28 BORROWINGS (CONTINUED)

The maturity profile of borrowings is analysed as follows: Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Due within the next 12 months 744,851 471,356 222,305 120,698

Due between 1 to 2 years 48,649 214,482 576 124,578 Due between 2 to 3 years 48,168 174,645 533 576 Due between 3 to 4 years 49,374 72,677 459 533 Due between 4 to 5 years 48,918 64,816 440 693 Due after 5 years 125,733 81,544 233 –

320,842 608,164 2,241 126,380 1,065,693 1,079,520 224,546 247,078

(a) The effective interest rates per annum on the Group’s borrowings at the date of the statement of financial position are as follows:

2011 2010 % %

Bank overdrafts 2.6 – 11.00 2.60 – 13.80 Bonds 5.20 – 7.50 5.20 – 6.20 Other term loans 3.30 – 7.60 7.02 – 7.55 Bank borrowings 1.00 – 7.60 1.00 – 7.55 Finance lease payables 2.70 2.63 – 2.73

(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 first 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 Oilfield 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”).

The outstanding amount as at end of the financial year is RM200.0 million (2010: RM200.0 million).

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(b) Bonds (continued) RM250 million medium term notes (continued)

The bondholders had given indulgences to the Company as follows:

(i) for the RM100 million principal repayment which was due in September 2011 to be paid in September 2012.(ii) deferral of maintaining the DSRA due in March 2012; and(iii) waiver of the net debt to equity and annual debt service cover ratios.

RM630 million Murabahah bonds and RM342.55 million Sukuk Murabahah

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 profit rate ranges from 5.75% to 6.15% per annum, payable semi-annually in arrears.

Following the debt rationalisation exercise on Murabahah Bonds in June 2006, the tenure and repayment term have been varied from 7 to 10 years from 14 December 2006 and profit rate ranges from 6.05% to 6.95% per annum.

In November 2011, a portion of the proceeds from the disposal of the DWM Business by SOINC and SMEX as disclosed in Note 8 were utilised to prepay the Murabahah Bonds.

On 14 December 2011, KMCOB Capital had issued a Sukuk Murabahah of RM342.55 million (“the Sukuk”). The proceeds raised from the issuance under the Sukuk was utilised for early redemption of the outstanding amount of the existing Notes in full. The Sukuk Murabahah is issued with a tenure and repayment term of 1 to 7 years from 14 December 2011 and profit rate ranges 6.25% to 7.5% per annum.

The Sukuk are secured by:

(i) Corporate guarantees from Scomi Oiltools Bermuda Limited (“SOBL”);(ii) Corporate guarantees from Scomi Oilfield Limited (“SOL”), if applicable;(iii) Corporate guarantees from certain existing and future principal subsidiaries of SOL whose revenue or profit/loss

after tax are at least 5% of the consolidated revenue or consolidated profit/loss after tax of the SOL Group;(iv) Charge over the issued and paid up share capital of the existing and future principal subsidiaries in the SOL

Group;(v) Debenture over the present and future assets of the KMCOB Capital;(vi) Assignment over Financial Services Reserve Account (FSRA) maintained by KMCOB Capital to meet its most

immediate six months profit and principal payment obligations; and(vii) Any other security as may be required by the rating agency to achieve the requisite rating. As at 31 December

2011, no security is given to the rating agency to achieve the requisite rating.

The outstanding amount of Sukuk as at the end of the financial year is RM341.6 million (2010: RM480.0 million for the Notes).

(c) Other term loans, bank overdrafts and bank borrowingsThe other term loans, bank overdrafts and bank borrowings of the Group are secured by way of:

(i) Legal charge over certain landed properties of certain subsidiaries;(ii) Negative pledge over the present and future, fixed and floating assets of certain subsidiaries; (iii) Assignment of contract proceeds, insurance policies and performance bond; and(iv) Standby Letter of Credit (“SBLC”) facility secured by corporate guarantee provided by the Company;(v) Charge over shares and/or acceptable stocks in subsidiaries of the Company; and(vi) A charge over the 3-month interest of the Facility Limit placed upfront (“Upfront Deposit”) in a debt service

reserve account (“DSRA”).


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(d) Finance lease payables Group Company

2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000

Instalments payable: Not later than 1 year 257 290 162 162 Between 1 to 2 years 251 378 162 162 Between 2 to 3 years 199 251 110 162 Between 3 to 4 years 114 199 25 110 Between 4 to 5 years 89 114 – 25 Later than 5 years 203 293 – –

1,113 1,525 459 621 Less: Future finance charges (176) (229) (71) (95)

Present value of hire purchase and finance lease payables 937 1,296 388 526

Analysed as: Due within 12 months 204 238 137 138 Due to 1 to 2 years 201 328 137 137 Due to 2 to 3 years 161 204 94 137 Due to 3 to 4 years 90 164 20 94 Due to 4 to 5 years 74 94 – 20 Due more than 5 years 207 268 – –

937 1,296 388 526

Breaches of loan covenant

As at 31 December 2011:

(i) The Company, did not fulfil certain of its financial covenant clauses in relation to its RM250 million MTN Notes. Accordingly, the bondholders were contractually entitled to request for immediate repayment of the outstanding balance of RM201.5 million as at 31 December 2011. Subsequent to the end of the reporting period, management has obtained indulgences from the bondholders in respect of the breach.

(ii) Certain entities in the Group did not fulfil certain financial covenant clauses in relation to bank loan facilities. Accordingly, the banks were contractually entitled to request for immediate repayment of the outstanding balances as at 31 December 2011. Subsequent to the end of the reporting period, management has obtained indulgences from certain banks in respect of the breaches.

At the end of the reporting period, the carrying value of RM86.5 million of the Group borrowings has been reclassified to within short term borrowings under current liabilities as a result of the loan covenant breaches.

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29 PROvISIONS

Tax penalties RM’000

Group

At 1 January 2011 5,235 Charged to income statement 872 Paid during the financial year (3,848) Currency translation differences 8 At 31 December 2011 2,267

Tax Redundancy penalties Total RM’000 RM’000 RM’000

Group

At 1 January 2010 625 8,304 8,929 Charged to income statement – 1,551 1,551 Paid during the financial year (587) – (587) Currency translation differences (38) (4,620) (4,658) At 31 December 2010 – 5,235 5,235

The Group has made a provision for penalties and fines in relation to late payment of various taxes in Venezuela based on the local tax requirements and estimation by independent tax professionals. See Note 46(d).

30 DEFERRED GOvERNMENT GRANT

Group 2011 2010 RM’000 RM’000 Deferred government grant 2,155 1,568

Included in:

Current liabilities 2,155 1,568 Non-current liabilities – – 2,155 1,568


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30 DEFERRED GOvERNMENT GRANT (CONTINUED)

In 2008, the Group received approval for government grants as follows:

(i) RM2,155,000 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

(ii) RM4,420,000 to design, engineer and fabricate a prototype process equipment to demonstrate the application of D-Solv technology at field scale.

The grants were to be disbursed in accordance with the project milestones subject to submission of the milestone reports and project completion report, and verification by a technical expert appointed by the Ministry of Science, Technology and Innovation Malaysia.

As at 31 December 2011, the grant of RM2,155,000 was fully disbursed to the Group and therefore amortisation over the expected life of the related assets will commence in the next financial year.

In the previous financial year, the Directors decided not to proceed with developing the D-Solv technology due to commercial reasons. The grant of RM1.44 million has been recognised in the prior year income statement as based on consultation with the grant provider, the grant will not need to be repaid despite the discontinuation of the project.

31 IRREDEEMABLE CONvERTIBLE SECURED LOAN STOCKS

On 14 December 2009, the Company issued 1,515,796,791 of three (3)-year 4% Irredeemable Convertible Secured Loan Stocks (“ICSLS”) at nominal value of RM0.10 each for cash together with 202,106,238 free detachable warrants to subscribe the entitlement of the Rights Issue by Scomi Engineering Bhd (“SEB”) and working capital requirements of the Group.

The salient features of the ICSLS are as follows:

(a) The conversion price is fixed at RM0.40 per share;

(b) The registered holder of the ICSLS has the right at any time during the conversion period to convert the ICSLS at the 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 are secured by the cash proceeds from the Rights Issue by Scomi Engineering Bhd (“SEB ICULS Funds”) which will be held in the form of fixed deposit receipts (“FDR”) over which a memorandum of deposit will be executed in favour of the Trustee (“FDR MOD”).

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31 IRREDEEMABLE CONvERTIBLE SECURED LOAN STOCKS (CONTINUED)

The fair value of the liability component was calculated using a market rate for an equivalent convertible loan stock. The residual amount, representing the value of the equity component, is included in other reserves (Note 36).

Group and Company 2011 2010 RM’000 RM’000 Other reserves:

At 1 January 62,121 88,484 Conversion of ICSLS (Note 36) (222) (26,363) At 31 December 61,899 62,121

Group and Company 2011 2010 RM’000 RM’000

Liability component:

At beginning of the financial year 7,197 15,317 Conversion of ICSLS (176) (4,721) Decrement – amortised cost (2,667) (3,399) Reclassification (1,166) – At 31 December 3,188 7,197

Included in:

Current liabilities 3,188 3,382 Non-current liabilities – 3,815 3,188 7,197

Interest expense on the ICSLS is calculated on the effective yield basis by applying the effective interest rate of 8% per annum.


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32 IRREDEEMABLE CONvERTIBLE UNSECURED LOAN STOCKS

On 23 March 2010, SEB, a subsidiary of the Company, issued 61,352,936 of three (3)-year 4% Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) at nominal value of RM1.00 each for cash for working capital requirements, of which 54,782,491 of three (3)-year 4% ICULS at nominal value of RM1.00 each has been subscribed by the Company.

The salient features of the ICULS are as follows:

(a) The conversion price is fixed at RM1.00 per share;

(b) The registered holder of the ICULS has the right at any time during the conversion period to convert the ICULS at the conversion price into fully paid new ordinary shares of RM1.00 per share in the SEB;

(c) The ICULS can be converted into fully paid new ordinary shares of RM1.00 each in SEB at any time during its 3 years tenure. At the end of the tenure, any outstanding ICULS will be automatically converted into fully paid new ordinary shares of RM1.00 per share;

(d) The ICULS are not redeemable;

(e) The ICULS bear interest at 4% per annum based on the nominal amount of the ICULS. The interest shall be payable quarterly in arrears; and

(f) The holders of the ICULS are not entitled to participate in any distribution and/or offer of securities in SEB until and unless such holders of the ICULS convert the ICULS into new ordinary shares in SEB.

The fair value of the liability component was calculated using a market rate for an equivalent convertible loan stock. The residual amount, representing the value of the equity component, is included in other reserves (Note 36).

Group 2011 2010 RM’000 RM’000 At 1 January 1,217 – Nominal value of ICULS issued – 6,570 Liability component at date of issuance – (734) Deferred tax assets – 184 1,217 6,020 Conversion of ICULS (69) (4,803) At 31 December 1,148 1,217

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32 IRREDEEMABLE CONvERTIBLE UNSECURED LOAN STOCKS (CONTINUED)

Group 2011 2010 RM’000 RM’000 Liability component: At beginning of the financial year/date of issuance 74 734 Conversion of ICULS (8) (585) Repayment during the financial year (53) (76) Interest expense 4 1

17 74

Included in: Current liabilities 14 33 Non-current liabilities 3 41 17 74

33 WARRANTS

On 14 December 2009, the Company issued 202,106,238 free detachable warrants pursuant to the issuance of 1,515,796,791 of three (3)-year 4% ICSLS at nominal value of RM0.10 each.

The salient features of the warrants are as follows:

(a) The exercise price of the warrants is fixed 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 date of the statement of financial position, 202,105,258 (2010: 202,105,258) warrants remained unexercised.

34 SHARE CAPITAL

Group and Company 2011 2010 ’000 RM’000 ’000 RM’000 Authorised

Ordinary shares of RM0.10 each: At beginning and end of the financial year 3,000,000 300,000 3,000,000 300,000


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34 SHARE CAPITAL (CONTINUED)

Group and Company 2011 2010 ’000 RM’000 ’000 RM’000 Issued and fully paid

Ordinary shares of RM0.10 each: At beginning of the financial year 1,182,658 118,266 1,086,801 108,680

Issued during the financial year: – conversion of ICSLS 3,905 391 94,501 9,450 – exercise of warrants – – 1 – – exercise of share options 1,125 112 1,355 136 At end of the financial year 1,187,688 118,769 1,182,658 118,266

(a) Increase in share capital During the financial year, the issued and paid-up share capital of the Company was increased from RM118,265,777

comprising 1,182,657,772 ordinary shares of RM0.10 each, to RM118,768,765 comprising 1,187,687,647 ordinary shares of RM0.10 each, by way of the issuance of:

(i) 3,904,875 new ordinary shares of RM0.10 each pursuant to the conversion of Irredeemable Convertible Secured Loan Stocks (“ICSLS”);

(ii) 1,125,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at an option price of RM0.17 per share; and

In the prior financial year, the issued and paid-up share capital of the Company was increased from RM108,680,057 comprising 1,086,800,574 ordinary shares of RM0.10 each, to RM118,265,777 comprising 1,182,657,772 ordinary shares of RM0.10 each, by way of the issuance of:

(i) 94,501,218 new ordinary shares of RM0.10 each pursuant to the conversion of ICSLS; and

(ii) 1,355,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at an option price of RM0.17 per share.

(iii) 980 new ordinary shares of RM0.10 each pursuant to the exercise of 980 Warrants of RM0.10 each at an exercise price of RM0.40 per warrant.

The new ordinary shares issued during the financial year and in the prior financial year ranked pari passu in all respects with the existing shares of the Company.

(b) Treasury shares The shareholders of the Company, by an ordinary resolution passed in an Annual General Meeting held on 29 June

2011, renewed their approval for the Company to repurchase its own shares. The Directors of the Company are committed to enhancing the value of the Company to its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders.

There were no purchases of Treasury shares during the financial year. 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 2011.

At the date of the statement of financial position, 14,427,200 (2010: 14,427,200) ordinary shares are held as Treasury shares at a carrying value of RM18,695,746 (2010: RM18,695,746), and the number of outstanding shares in issue after setting off against Treasury shares is 1,173,260,447 (2010: 1,168,230,572).

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(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 fifteen percent (15%) of the total issued and paid-up share capital of the Company and participation in the ESOS was extended to include Non-Executive Directors.

The amendments to the By-Laws and Articles were approved by the shareholders of the Company on 16 June 2004 at the 2nd Annual General Meeting.

The salient features of the ESOS are as follows:

(i) The total number of shares comprising options exercised, options remaining exercisable and unexercised offers pending acceptance under the ESOS shall not exceed fifteen percent (15%) of the total issued and paid-up share capital of the Company, such that not more than fifty percent (50%) of the shares available under the ESOS are allocated, in aggregate, to the Directors and senior management of the Group;

(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;

(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 five (5) consecutive market days prior to the date of grant, save that a discount of not more than ten percent (10%) may be given at the absolute discretion of the Options Committee for options granted after the listing of the Company. The option price shall not be lower than the par value of the shares of the Company of RM0.10;

(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.


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(c) Employees’ Share Option Scheme (continued) The movements in the number of share options outstanding and their related weighted average exercise prices are

as follows: 2011 2010

Average Average exercise exercise price Options price Options RM ’000 RM ’000

At beginning of the financial year 1.02 76,175 1.01 87,755

Granted 0.24 18,000 – –Forfeited 1.10 (10,874) 1.07 (10,225)Exercised 0.17 (1,125) 0.17 (1,355)

At end of the financial year 0.79 82,176 1.02 76,175

Out of the outstanding options, 56,035,900 units (2010: 53,222,900 units) of options were exercisable. Share options were exercised on a regular basis throughout the financial year, and the weighted average share price for the financial year is RM0.31 (2010: RM0.42).

The options outstanding at the financial year end had exercise prices ranging RM0.17 to RM1.51 (2010: RM0.17 to RM1.51) and a remaining contractual life of 2 years (2010: 3 years).

All options granted under the scheme will expire on 27 April 2013.

The weighted average fair value of options granted during the financial year was determined using the Trinomial valuation model was RM0.09 (2010: Nil) per option. The significant inputs into the model were as follows:

2011 2010

Valuation assumptions:

Expected volatility of share prices 40% – Expected dividend yield – – Expected option life 1.0-2.0 years – Weighted average share price at the date of grant RM0.28/share – Risk-free interest rate (per annum) 3.39% –

35 SHARE PREMIUM

Group and Company 2011 2010 RM’000 RM’000 At beginning of the financial year 275,926 256,641

Arising from:

– conversion of ICSLS 788 19,190 – exercise of ESOS 79 95 At end of the financial year 276,793 275,926

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36 OTHER RESERvES

Exchange Put Available Share fluctuation Hedge option for sale Warrants optionGroup Note reserve reserve reserve reserve shares reserves ICSLS ICULS Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2011– as previously stated (98,725) (9,446) – (1,719) 32,337 20,909 62,121 1,217 6,694– prior year adjustments 47 – – (258,286) – – – – – (258,286)

At 1 January 2011, as restated (98,725) (9,446) (258,286) (1,719) 32,337 20,909 62,121 1,217 (251,592)

Other comprehensive (loss)/ income:– Currency translation differences (3,515) – – – – – – – (3,515)– Available-for-sale financial assets – – – 1,719 – – – – 1,719– Derecognition of cash flow hedge CCIRS – 8,990 – – – – – – 8,990– Share of other comprehensive Income/(loss) of associate 3,713 767 – – – – – – 4,480

Total other comprehensive (loss)/income 198 9,757 – 1,719 – – – – 11,674

Share of reserves in subsidiaries and associates – – – – – (138) – – (138)Share option recognised in: 5– company – – – – – 1,191 – – 1,191– subsidiaries – – – – – 1,325 – – 1,325– value of share options lapsed/forfeited – – – – – (8,241) – – (8,241)

– – – – – (5,725) – – (5,725)Transferred to share premium arising from exercise of ESOS – – – – – – – – –Conversion of ICSLS 31 – – – – – – (222) – (222)Conversion of ICULS – – – – – – – (69) (69)Disposal of jointly controlled entity 41(b) – – – – – (23) – – (23)

At 31 December 2011 (98,527) 311 (258,286) – 32,337 15,023 61,899 1,148 (246,095)


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36 OTHER RESERvES (CONTINUED)

Exchange Put Available Share fluctuation Hedge option for sale Warrants optionGroup Note reserve reserve reserve reserve shares reserves ICSLS ICULS Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2010– as previously stated (82,655) (6,710) – – 32,337 21,548 88,484 – 53,004– effect of adopting FRS 139 46 – (2,144) – (1,665) – – – – (3,809)– prior year adjustments 47 – – (258,286) – – – – – (258,286)

At 1 January 2010, as restated (82,655) (8,854) (258,286) (1,665) 32,337 21,548 88,484 – (209,091)

Other comprehensive (loss)/ income:– Currency translation differences (7,769) – – – – – – – (7,769)– Available-for-sale financial assets – – – (54) – – – – (54)– Cash flow hedge – (1,970) – – – – – – (1,970)– Share of other comprehensive (loss)/income of associate (22,406) 1,378 – – – – – – (21,028)

Total other comprehensive (loss)/income (30,175) (592) (258,286) (54) – – – – (30,821)

Share of reserves in subsidiaries and associates – – – – – 13 – – 13Share option recognised in: 5– company – – – – – 417 – – 417– subsidiaries – – – – – 1,699 – – 1,699

– – – – – 2,116 – – 2,116Transferred to share premium arising from exercise of ESOS – – – – – (910) – – (910)Issue of ICULS 32 – – – – – – – 6,020 6,020Conversion of ICSLS 31 – – – – – – (26,363) – (26,363)Conversion of ICULS – – – – – – – (4,803) (4,803)Disposal of subsidiaries 14,105 – – – – (1,858) – – 12,247

At 31 December 2010 (98,725) (9,446) (258,286) (1,719) 32,337 20,909 62,121 1,217 (251,592)

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36 OTHER RESERvES (CONTINUED)

Share Warrants option reserve reserve ICSLS Total RM’000 RM’000 RM’000 RM’000

Company

2011At 1 January 2011 32,337 17,281 62,121 111,739Share option expense (Note 5) – 1,191 – 1,191Transferred to subsidiaries – (11,066) – (11,066)Value of options lapsed/forfeited – (2,744) – (2,744)Conversion of ICSLS (Note 31) – – (222) (222)

At 31 December 2011 32,337 4,662 61,899 98,898

2010At 1 January 2010 32,337 16,162 88,484 136,983Share option expense (Note 5) – 417 – 417Transferred to subsidiaries – 702 – 702 Conversion of ICSLS (Note 31) – – (26,363) (26,363)

At 31 December 2010 32,337 17,281 62,121 111,739

37 PROvISION FOR RETIREMENT BENEFITS

Group 2011 2010 RM’000 RM’000 Statement of financial position obligations for retirement benefits 5,152 4,681

Included in: Current liabilities 390 323 Non-current liabilities 4,762 4,358 5,152 4,681

Charged to income statement (Note 5) 1,058 1,584


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37 PROvISION FOR RETIREMENT BENEFITS (CONTINUED)

Group 2011 2010 RM’000 RM’000

Present value of funded obligations 390 85Present value of unfunded obligations 4,762 4,358Unrecognised past service costs – 238

Liability in the statement of financial position 5,152 4,681

The amounts recognised in the income statement are as follows: Group

2011 2010 RM’000 RM’000

Current service cost 1,388 1,478Interest cost – (132)Past service cost (653) 238

Total included in staff costs 735 1,584

Of the total charge/(credit), RM416,000 (2010: RM242,000), RM287,000 (2010: RM1,438,000), and RM32,000 (2010: (RM96,000)) were included in cost of sales, selling and marketing expenses, and administrative expenses respectively.

The movements in the liability recognised in the statement of financial position are as follows:

Group 2011 2010 RM’000 RM’000

At beginning of the financial year 4,681 4,182Charged to income statement (Note 5) 735 1,584Actuarial gains – –Benefits paid (89) (416)Currency translation differences (175) (669)

At end of the financial year 5,152 4,681

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37 PROvISION FOR RETIREMENT BENEFITS (CONTINUED)

The principal actuarial assumptions used were as follows:

Group 2011 2010

Discount rate 5% – 11% 5% – 11%Future salary increases 5% – 8% 5% – 8%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 Group had obtained an actuarial valuation in 2011.

38 DEFERRED TAx

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the statement of financial position:

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Deferred tax assets (46,634) (78,724) (672) (1,674) Deferred tax liabilities: – subject to income tax 3,285 2,786 – – (43,349) (75,938) (672) (1,674)

At beginning of the financial year (75,938) (73,197) (1,674) (3,613) (Credited)/charged to income statement (Note 7) – property, plant and equipment (11,474) 7,831 – – – tax losses, capital allowances and tax incentives 22,991 (14,566) – – – provisions for other liabilities and charges – 1,167 – – – ICSLS 666 814 666 814 – ICULS 31 – – – – others 3,513 (885) – –

15,727 (5,639) 666 814 Transfer from/(to) equity 338 1,088 336 1,125 Discontinued operation/Disposal of a subsidiary 19,820 (2,217) – – Others (843) 2,516 – – Currency translation differences (2,453) 1,511 – – At end of the financial year (43,349) (75,938) (672) (1,674)


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38 DEFERRED TAx (CONTINUED)

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Deferred tax assets

Tax losses, capital allowances and tax incentives (41,170) (85,097) – – Provision for other liabilities and charges (1,080) (1,069) – – Payables – (61) – – ICSLS (833) (1,835) (833) (1,835) ICULS (4) (37) – – Others (3,547) (3,635) – – Offsetting – 13,010 161 161 (46,634) (78,724) (672) (1,674)

Deferred tax liabilities

Property, plant and equipment 2,766 15,451 161 161 Others 519 345 – – Offsetting – (13,010) (161) (161) 3,285 2,786 – –

The amount of deductible temporary differences, unabsorbed tax losses and tax incentives (which is subject to agreement by the tax authorities) for which no deferred tax asset is recognised in the statement of financial position is as follows:

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 Deductible temporary differences 45,818 52,335 3,167 2,674 Unabsorbed tax losses and tax incentives 147,449 5,226 30,645 28,048

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 profits to utilise the deferred tax assets.

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39 COMMITMENTS AND CONTINGENT LIABILITIES


(a) Authorised capital expenditure not recognised in the financial statements:

– contracted 27,513 3,655 – – – not contracted 16,137 33,580 – –

43,650 37,235 – –

Analysed as follows:

– property, plant and equipment 37,465 16,486 – – – development costs 3,612 5,632 – – – others 2,573 15,117 – –

43,650 37,235 – –

(b) Lease commitments:

Instalments payable – not later than 1 year 10,620 7,484 49 116 – later than 1 year but not later than 5 years 10,072 13,132 92 94 – later than 5 years 2,828 3,192 – –

23,520 23,808 141 210

(c) Bank guarantees:

Bank guarantees given to third parties in respect of performance guarantee given by subsidiaries 121,968 100,365 – –

(d) Other:

Contingent liabilities arising from: – litigation 3,787 2,776 – – – tax matters 4,734 – – –


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40 SIGNIFICANT RELATED PARTy TRANSACTIONS

(a) In addition to the related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. The related party transactions described below were carried out under agreed terms with related parties:


Significant transactions with related parties:

Subsidiaries: Management fees receivable – – 3,840 5,496 Dividend income – – – 66,436 Interest income – – 6,008 3,985

Associates: Management fees receivable from Scomi Marine Bhd 327 302 327 302

Jointly controlled entity: Management fees receivable from Scomi NTC Sdn Bhd 125 1,618 – –

Related companies: Share registration fee paid to Symphony 224 332 153 265 Airline ticketing services provided by Lintas 2,606 3,181 17 69

(i) Symphony Share Registers Sdn Bhd (“Symphony”) and Lintas Travel & Tours Sdn Bhd (“Lintas”) are companies connected to certain Directors;

(ii) During the previous financial year, certain subsidiaries of the Company agreed to provide service in relation to a proposed implementation of a group wide accounting system for an associate of the Company, Scomi Marine Bhd. The proposed implementation was subsequently aborted and the initial payment of RM7,000,000 during the year was refunded in full.

The details of interest charged on advances provided to subsidiaries are disclosed in Note 23.

Information regarding outstanding balances arising from related party transactions as at 31 December 2011 is disclosed in Note 23 and Note 27.

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40 SIGNIFICANT RELATED PARTy TRANSACTIONS (CONTINUED)

(b) Compensation of key management personnel The remuneration of Directors and other members of key management during the financial year was as follows:


Salaries and short-term employee benefits 10,412 15,847 656 3,196Defined contribution plan 799 1,268 149 276Other long-term benefits 26 393 26 –Share-based payments 585 1,956 – –

11,822 19,464 831 3,472

Included in the total key management personnel are:


Directors’ remuneration (Note 9) 2,830 2,486 1,672 1,401

Executive Directors of the Group and Company and other members of key management have been granted the following number of options under the Employee Share Options Scheme (“ESOS”):

Group and Company 2011 2010 ’000 ’000

At beginning of the financial year 24,606 28,966

Granted 16,000 –Forfeited (4,480) (4,000)Exercised (360) (360)

At end of the financial year 35,766 24,606


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41 SIGNIFICANT ACQUISITION AND DISPOSAL OF SUBSIDIARIES AND JOINTLy CONTROLLED ENTITy

(a) Acquisition of subsidiaries Financial year ended 31 December 2011

Purchase Group’s Effective Name of subsidiaries consideration effective interest acquisition date %

Scomi Transit Projects Brazil Sdn Bhd RM2.00 100.0 12 July 2011 Scomi Transit Projects Brazil (Sao Paulo) Sdn Bhd RM2.00 100.0 12 July 2011 PT Inti Jatam Pura USD0.50 95.0 7 August 2011 PT Multi Jaya Persada USD0.50 95.0 7 August 2011

In addition to the above acquisition of subsidiaries, the Group acquired the entire issued stock capital of Urban Transit Servicos Do Brasil LTDA, a Brazilian company, for a cash consideration of USD6,000 on 18 August 2011.

The acquisition did not have a material impact on the Group’s financial statements.

(b) Disposal of jointly controlled entity Financial year ended 31 December 2011

Disposal Group’s effective Effective Name of jointly controlled entity consideration interest disposed disposal date %

Scomi NTC Sdn Bhd USD3.0 million 70 2 February 2011

Details of the share of net assets, net cash inflow and gains arising from the disposal of the jointly controlled entity are as follows:

Group 2011 RM’000

Net cash inflow 9,096 Share of net assets (4,548)

Gain on disposal 4,548

The impact of the disposal to the Group’s statement of comprehensive income are as follows:

2011 2010 RM’000 RM’000

Share of results in jointly controlled entity (115) 3,596

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41 SIGNIFICANT ACQUISITION AND DISPOSAL OF SUBSIDIARIES AND JOINTLy CONTROLLED ENTITy (CONTINUED)

(c) Other changes Effective from 23 December 2011, Scomi Oiltools (NZ) Pty Limited, a wholly-owned subsidiary of Scomi Oiltools

Bermuda Limited, being a wholly-owned subsidiary of Scomi Oilfield Limited and which in turn is a subsidiary of the Company, has been struck off from the Register of the New Zealand Companies Office, pursuant to Section 318(1)(d) of the New Zealand Companies Act 1993.

42 SEGMENT INFORMATION

Management has determined the operating segments based on the reports reviewed by the chief operating decision-maker that are used to make strategic decisions.

The chief operating decision-maker considers the business from the industry perspective and the products and services rendered. The following reportable operating segments have identified:

(i) Investment holding* – provision of management services.

(ii) Oilfield services – provision of drilling fluids and related engineering services to the upstream oil and gas industry;

– provision of drilling waste management services and equipment to the upstream oil and gas industry;

– supply of production chemicals to the upstream oil and gas industry; – provision of machine shop services

(iii) Transport solutions – urban transportation solutions provider through design and manufacture of monorails, buses and a wide range of special purpose vehicles such as tankers, trucks and airport ground support equipment; and

– rail solutions systems provider

(iv) Energy logistics – provision of marine vessel transportation services and leasing of marine vessels.

Inter-segment revenue in the current and prior financial year comprises management services and dividend. During the financial year, the production enhancement segment has been moved to the oilfield services segment due to a change in reports reviewed by the Chief Operating Decision Maker. To ensure a consistent comparison to the new structure, the prior financial year segmental information has been restated.

* The activities and results of the investment holding segment are separately disclosed in the information provided to the chief operating decision-maker.


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42 SEGMENT INFORMATION (CONTINUED)

2011 Inter-Revenue External segment Total RM’000 RM’000 RM’000

Revenue from continuing operations

Oilfield services 1,134,799 – 1,134,799Transport solutions 246,797 – 246,797Investment holding 2,141 33,369 35,509Inter-segment elimination – (33,369) (35,509)

1,383,737 – 1,383,737Revenue from discontinued operation

Oilfield services 102,612 – 102,612

Total revenue 1,486,349 – 1,486,349

2010 Inter- External segment Total RM’000 RM’000 RM’000

Revenue from continuing operations

Oilfield services 1,119,602 – 1,119,602Transport solutions 400,785 – 400,785Investment holding 1,548 74,961 76,509Inter-segment elimination – (74,961) (74,961)

1,521,935 – 1,521,935Revenue from discontinued operation

Oilfield services 120,069 – 120,069

Total revenue 1,642,004 – 1,642,004

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Continuing operations

Oilfield Transport Energy Investment Discontinued services solutions logistics holding Total operations Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

2011

Results

Segment results 71,338 (69,424) – (25,196) (23,282) (2,349) (25,631)Loss on disposal – – – – – (125,304) (125,304)Finance costs (net) – – – – – – (47,929)Share of results of associates – – (48,536) – (48,536) – (48,536)Share of results of jointly controlled entities (439) – – – (439) – (439)

Loss before taxation (247,839)Taxation expense (48,692)

Loss for the financial year (296,531)

2010 (restated)

Results

Segment results 10,288 (30,297) – (18,864) (38,873) (5,432) (44,305)Gain on disposal of machine shop business – 19,677 – – 19,677 – 19,677Finance costs (net) – – – – – – (62,249)Share of results of associates – – (87,225) – (87,225) – (87,225)Share of results of jointly controlled entities (739) – – – (739) – (739)

Loss before taxation (174,841)Taxation expense (18,046)

Loss for the financial year (192,887)


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Revenue and non-current assets (excluding deferred tax assets and derivative financial assets) information based on the geographical location of customers and assets respectively are as follows:

Total Total non-current revenue assets RM’000 RM’000

2011 Malaysia 647,826 493,402 India 39,473 1,541 Other Asia 174,719 213,480 Europe 133,166 44,566 Middle East and Africa 336,427 118,420 America 154,738 6,785 1,486,349 878,194

2010 Malaysia 382,858 540,995 India 253,202 2,825 Other Asia 279,565 274,992 Europe 193,288 78,815 Middle East and Africa 374,841 99,708 America 158,250 72,351 1,642,004 1,069,686

43 SIGNIFICANT EvENTS DURING THE FINANCIAL yEAR

There are no significant events during the financial year other than those disclosed in Note 8, 28(b) and 41.

44 SIGNIFICANT EvENTS SUBSEQUENT TO THE DATE OF THE STATEMENT OF FINANCIAL POSITION

(a) Group rationalisation exercises On 29 February 2012, the Company announced that it had entered into a Heads of Agreement (“HOA”) with its

associated company, Scomi Marine Bhd (“SMB”), to negotiate in good faith the detailed terms and conditions of the Proposed SMB Rationalisation with the intention to finalise and enter into the relevant definitive agreement(s) by 30 June 2012 or such other extended period as the parties may mutually agreed upon.

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44 SIGNIFICANT EvENTS SUBSEQUENT TO THE DATE OF THE STATEMENT OF FINANCIAL POSITION (CONTINUED)

(a) Group rationalisation exercises (continued) The salient terms of the HOA are as follows:

(I) Proposed SMB Rationalisation SMB to undertake a rationalisation exercise comprising the following:

(i) Proposed SMB Scheme A scheme of arrangement under Section 176 of the Act between SMB, the shareholders of SMB and

Newco involving the exchange of SMB Shares with new Newco Shares at an exchange ratio to be determined later.

(ii) Proposed Acquisition Upon completion of the Proposed SMB Scheme, the acquisition of the entire equity interest in SOL, a

76-08%-owned subsidiary of SGB, by Newco from SGB, Standard Chartered Private Equity Limited (“SCPEL”) and Fuji Investments I (“FII”) (after the completion of the proposed internal reorganisation of SOL (“Proposed SOL Reorganisation”)) for a purchase consideration to be mutually determined and agreed.

The purchase consideration for the Proposed Acquisition is expected to be satisfied via a combination of the issuance of new Newco Shares and part of the vendor notes to be issued by PT Rig Tender Tbk, a 70.54% subsidiary of SMB, pursuant to the Proposed Disposal of Marine Logistics entities (details summarised in note (II) below).

The proposed acquisition of the remaining 16.71% and 7.21% equity interest in SOL from SCPEL and FII, respectively, is subject to SCPEL’s and FII’s approvals.

The Proposed Acquisition shall also be subject to the Proposed Exemption being obtained.

(iii) Proposed Exemption An exemption to be sought by SGB and persons acting in concert with it (“PACs”) (if any) from the

Securities Commission from the obligation to undertake a mandatory take-over offer for the remaining Newco Shares not already owned by SGB and the PACs (if any) upon completion of the Proposed Acquisition (“Remaining Newco Shares”) since their collective shareholdings in Newco will increase from nil to more than 33% as a result of the Proposed Acquisition.

(iv) Proposed Listing Admission of Newco to the Official List of the Main Market of Bursa Securities upon completion of the

Proposed SMB Scheme and Proposed Acquisition, in place of SMB.

(II) Proposed Disposal of Marine Logistics entities On 29 February 2012, SMB had announced to the Bursa Malaysia that its wholly-owned subsidiary, Scomi

Marine Services Pte Ltd (“SMS”), had entered into a conditional shares purchase agreement with PT Rig Tenders Tbk (“PTRT”), an 80.54% owned subsidiary of SMS, for the disposal its entire equity interest in:

(a) CH Logistics Pte Ltd and its wholly-owned subsidiary, Sea Master Pte Ltd,;

(b) CH Ship Management Pte Ltd; and,

(c) Grundtvig Marine Pte Ltd and its 95% owned-subsidiary, PT Batuah Abadi Lines,

to PTRT for a total consideration of USD57.0 million (collectively referred to as “Proposed MLC Disposal”) and the intention of the Board of Directors of Scomi Marine Bhd (“SMB”) to propose to the shareholders of SMB, a proposed cash distribution of up to USD45.0 million to the shareholders of SMB via a capital repayment exercise (“Proposed Capital Repayment”).

The Proposed MLC Disposal was completed on 12 April 2012.


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44 SIGNIFICANT EvENTS SUBSEQUENT TO THE DATE OF THE STATEMENT OF FINANCIAL POSITION (CONTINUED)

(a) Group rationalisation exercises (continued)(III) Proposed Internal Reorganisation of SOL The proposed internal reorganisation of SOL entails the proposed disposal by SOL of its equity interest in

SOBL to the existing shareholders of SOL, namely Scomi Group Bhd, Standard Chartered Private Equity Limited and Fuji Investments I, followed by the proposed disposals by SOBL of its entire equity interest in the following subsidiaries:

(i) Scomi Oiltools Sdn Bhd;(ii) Scomi Oiltools Oman LLC;(iii) Scomi Oiltools Pty Ltd;(iv) KMCOB Capital Berhad;(v) Scomi Oiltools Egypt SAE;(vi) Scomi Oiltools (Thailand) Ltd(vii) KMC Oiltools BV;(viii) Vibratherm Limited;(ix) Scomi Oiltools (Cayman) Ltd (excluding its subsidiary, Scomi Oiltools Kish Limited);(x) Scomi Oiltools Ltd;(xi) Scomi Oiltools (S) Pte Ltd (excluding its subsidiaries, Scomi Oiltools de Mexico S de RL de CV, Oilfield

Services de Mexico S de RL de CV, PT Multi Jaya Persada and PT Inti Jatam Pura); and Scomi Oiltools (Africa) Limited,

to SOL (“Proposed SOL Reorganisation”).

(Iv) Proposed SGB Offer The Company to undertake a restricted offer of part of the Newco Shares held by the Company to all its

shareholders, the consideration of which is to be satisfied via the cancellation of such number of the Company’s shares held and the capitalisation of the Company’s reserves, to be undertaken after the Proposed SMB Rationalisation.

(v) Proposed Placement by Newco In conjunction with the Proposed Listing, Newco is to undertake a placement of new Newco Shares to

investors to be identified (“Proposed Placement”).

The Proposed SMB Scheme, Proposed Acquisition, Proposed Exemption and Proposed Listing shall be inter-conditional upon each other and shall only be implemented after the completion of the following:

(i) Proposed SOL Reorganisation; and,(ii) Proposed MLC Disposal

The Proposed SGB Offer shall be conditional upon the Proposed SMB Rationalisation, but not vice-versa.

The Proposed Placement shall be conditional upon the Proposed SMB Rationalisation, but not vice-versa.

(b) Disposal of an indirect subsidiary of the Group(i) Scomi Oitools AS (“SOAS”) has ceased to be a subsidiary of the Group on 9 March 2012, pursuant to the

disposal of 100 ordinary shares with a par value of NOK1,000 each representing the entire issued and paid up share capital in SOAS to Knud Holm Prosjekt AS, a Norwegian company, for a total cash consideration of NOK0.1 million (equivalent to approximately RM0.06 million).

(ii) On 24 April 2012, the Company announced that Scomi Oiltools Kish Limited (“SOKL”), an indirect subsidiary of Scomi Group Bhd, has ceased to be a subsidiary of SGB on 11 April 2012, pursuant to the disposal of 498 registered shares of RIs10,000.00 each representing 99.6% of the issued and paid up share capital in SOKL to Behnam Mousavi Moustafa, for a total cash consideration of USD17.0 million (approximately RM52.1 million).

The effects of the disposals are not material to the financial results of the Group.

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45 FINANCIAL RISK MANAGEMENT

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Group operates within clearly defined guidelines that are approved by the Board and the Group’s policy is not to engage in speculative transactions.

(a) Financial risk factors(i) Market risk Foreign exchange risk

The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The currencies giving rise to this risk are primarily United States Dollar (USD) and Indian Rupee (INR).

The Group maintains a natural hedge, whenever possible, by borrowing in currencies or entering into CCIRS that match the future revenue stream to be generated from its investments.

The Group is exposed to the risk of significant forex fluctuation due to hyperinflationary economy in Venezuela.

Currency profile of monetary financial assets and financial liabilities are as follows:

Denominated in other than functional currencies DenominatedGroup Ringgit USD Indian in functional2011 Malaysia dollar Rupee Others currencies Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Receivables, deposits and prepayments 325,927 685 98,972 92,011 384,485 902,080Short term deposits, cash and bank balances 8,592 673 1,260 8,499 138,423 157,447Payables (80,636) (64,145) (5,131) (26,064) (250,031) (426,007)Borrowings (42,194) – (63,212) (19,290) (940,997) (1,065,693)

211,689 (62,787) 31,889 55,156 (668,120) (432,173)

Company Ringgit USD2011 Malaysia dollar Total RM’000 RM’000 RM’000

Receivables, deposits and prepayments 36,150 28,406 64,556Short term deposits, cash and bank balances 12,986 96 13,082Payables (11,519) (49) (11,568)Borrowings (204,037) (20,510) (224,547)

(166,420) 7,943 (158,477)


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45 FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Financial risk factors (continued)(i) Market risk (continued) Foreign exchange risk (continued)

Currency profile of monetary financial assets and financial liabilities are as follows:

Denominated in other than functional currencies DenominatedGroup Ringgit USD Indian in functional2010 Malaysia dollar Rupee Others currencies Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Receivables, deposits and prepayments – 56,550 267,489 8,990 530,359 863,388Short term deposits, cash and bank balances 124 42,288 – 8,376 125,600 176,388Payables (57,706) (40,218) (590) (17,614) (225,721) (341,849)Borrowings – (98,699) – (25,281) (955,540) (1,079,520)

(57,582) (40,079) 266,899 (25,529) (525,302) (381,593)

Company Ringgit USD2010 Malaysia dollar Total RM’000 RM’000 RM’000

Receivables, deposits and prepayments 86,846 15,115 101,961Short term deposits, cash and bank balances 8,182 1,152 9,334Payables (16,075) (757) (16,832)Borrowings (206,889) (40,189) (247,078)

(127,936) (24,679) (152,615)

The following table demonstrates the sensitivity of the Group’s income statement before tax to a reasonably possible change in the USD and Indian Rupee exchange rates with all other variables held constant. The sensitivity analysis includes outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 3% change in the exchange rate.

(Loss)/profit before tax Group Company2011 RM’000 RM’000

USD/RM +3% (2,678) (451) –3% 2,678 451

INR/RM +3% 6,750 – –3% (6,750) –

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(a) Financial risk factors (continued)(i) Market risk (continued)

Interest rate risk

The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. The investments in financial assets are mainly short term in nature and have been placed mostly in fixed deposits and occasionally, in short term commercial paper and investment funds.

The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. The Group reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes. The Group also uses hedging instruments such as interest rate swaps to minimise its exposure to interest rate volatility.

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying amounts as at the end of the reporting period was:

Group Company2011 RM’000 RM’000

Fixed liabilities

Fixed rate instruments 660,186 201,940Floating rate instruments 405,507 22,606

1,065,693 224,546

The disclosures above are made before considering the effects of hedging.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group and Company’s income statement before taxation. The sensitivity analysis is determined based on the impact on floating rate financial instruments at the statement of financial position date.

Increase/ Effect on decrease in (loss)/profit basis points before tax RM’000 RM’000

Group2011 +1% (4,953) –1% 4,953

Company2011 +1% (215) –1% 215


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(a) Financial risk factors (continued)(ii) Credit risk Credit risk or the risk of counterparties defaulting, are controlled by the application of credit approvals, limits

and monitoring procedures. Credit risks are minimised and monitored by limiting the Group’s associations to business partners with high creditworthiness. The Group’s exposure to credit risk arises principally from its receivables from customers. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries and financial guarantees given. As at the statement of financial position date, the Group has a significant exposure to an individual debtor amounting to RM368.1 million. The Group considers the risk of the debtor defaulting in payments to be unlikely in view of the counterparty’s financial strength.

Trade receivables

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statement of financial position. Trade receivables are monitored on an ongoing basis via Group management reporting procedures. The credit quality of trade receivables that were neither past due nor impaired as at date of the statement of financial position, can be assessed by reference to historical information relating to counterparty default rates:

Group RM’000

2011

Neither past due nor impaired 204,819

1 to 30 days past due not impaired 92,92331 to 60 days past due not impaired 43,01361 to 90 days past due not impaired 41,18991 to 120 days past due not impaired 25,685More than 121 days past due not impaired 59,042

261,852

466,671

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(a) Financial risk factors (continued)(ii) Credit risk (continued) Financial assets that are impaired The carrying amount of trade receivables individually determined to be impaired and the movement in the

related allowance for impairment are as follows:

Group2011 RM’000

Gross amount 30,520Less: Allowance for impairment (30,520)

–

At beginning of financial year 33,465Currency translation differences (6,499)Allowance made 11,665Allowance utilised (5,098)Recovery of bad debts (3,013)

At end of financial year 30,520

There were no financial assets that would otherwise be past due or impaired whose terms have been renegotiated.

Intercompany balances

The Company provided unsecured loans and advances to subsidiaries. The Company monitors the results of the subsidiaries regularly.

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position and there was no indication that the loans and advances to the subsidiaries are not recoverable. These advances are expected to be repaid within a year.

(iii) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The

Group’s exposure to liquidity risk arises principally from its various payables, loans and borrowings.

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness.


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(a) Financial risk factors (continued)(iii) Liquidity risk (continued) The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at

31 December 2011 based on undiscounted contractual payments:

Between Between Within 1 and 2 2 and 5 Over 1 year years years 5 years RM’000 RM’000 RM’000 RM’000

Group

2011Payables 491,942 – – –Borrowings 730,144 87,494 205,826 142,443ICSLS 3,188 – – –ICULS 14 3 – –

Company

2011Payables 11,568 – – –Borrowings 235,501 576 1,431 73ICSLS 3,188 – – –

Financial guarantees

The Company provides financial guarantee to banks in respect of banking facilities granted to certain subsidiaries.

The Company monitors on an ongoing basis, the results of the subsidiaries and repayments made by the subsidiaries.

As at the end of the reporting period, there was no indication that any subsidiary would default on repayment.

(b) 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 to shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may issue new shares or adjust the amount of dividends paid to shareholders.

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(b) Capital risk management (continued)Management monitors capital based on the following ratios:

(i) Net debt to equity ratio(a) 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 2011 and on the same date every year thereafter until the Notes are fully repaid in year 2012. The Group includes within net debt, total borrowings (including ICSLS and ICULS), less cash and bank balances.

Group 2011 2010 RM’000 RM’000

Total borrowings 1,065,693 1,079,520Less: Cash and cash equivalents (157,447) (176,388)

908,246 903,132Less: Net debt for Mumbai Monorail project (150,877) (103,575)

Net debt 757,369 799,557

Total equity 509,362 726,551

Debt to equity ratio 1.49* 1.10

* A waiver of complying with the financial ratio relating to the net debt to equity ratio for the period from 31 December 2011 to 28 September 2012 was obtained from the bondholders.

(b) The Scomi Oilfeld Limited Group is required by the bondholders of the RM630 million Murabahah Bonds to maintain a net debt to equity ratio not exceeding 1.25 times as at 31 December 2011 and on the same date every year thereafter until the Bonds are fully repaid in year 2013.

Net debt to equity ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowings less cash and bank deposits. Total equity comprises all components of equity, except for minority interests.


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(b) Capital risk management(i) Net debt to equity ratio (continued)

Group 2011 2010 RM’000 RM’000

Total borrowings 495,192 621,499Less: Cash and cash equivalents (82,967) (112,289)

Net debt 412,225 509,210

Total equity 386,239 445,480

Debt to equity ratio 1.07 1.14

(ii) Annual debt service cover ratio (“ADSCR”)(A) The Group is required by the same MTN and Murabahah bondholders to maintain ADSCR of at least 1.5

times.

Group 2011 2010 RM’000 RM’000

Cash available for debt service 144,322 169,384

Consolidated total debt service obligations:– principal repayment 510,583 254,021– interest repayment 32,185 49,417 542,768 303,438

ADSCR 1.27* 1.56

* A waiver of complying with the financial ratio relating to the ADSCR for the period was obtained from the bondholders.

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(b) Capital risk management (continued)(ii) Annual debt service cover ratio (“ADSCR”) (continued)

(B) In December 2011, the SOL Group undertook a debt restructuring exercise as disclosed in Note 28(b). There is no change in the net debt to equity ratio and annual debt service cover ratio requirement before and after the restructuring. The SOL Group is also required to maintain an ADSCR based on the new Sukuk Murabahah issued on 14 December 2011 of at least 1.5 times

Group 2011 2010 RM’000 RM’000

(A) Cash available for debt service 82,967 112,289

(B) Consolidated total debt service obligations:– principal repayment 58,317 139,434– interest repayment 13,301 47,209

71,618 186,643

ADSCR ((A+B)/B) 2.16 1.60

(c) Financial instruments measured at fair value The fair value measurement hierarchies used to measure financial assets carried at fair value in the statements of

financial position as at 31 December 2011 are as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000

Group

2011 Financial assets

AFS investments 127 – 1,389 1,516

Financial liabilities

Derivatives – (294) – (294)


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(d) Fair value of financial instruments The fair values of other financial assets and liabilities, together with the carrying amounts shown in the statement

of financial position, are as follows:

2011 2010 Carrying Fair Carrying Fair amount value amount value RM’000 RM’000 RM’000 RM’000

Group

Available-for-sale investments 1,516 1,516 1,516 1,516Borrowings (1,065,693) (1,150,663) (1,079,520) (1,080,800)ICSLS (3,188) (2,952) (7,197) (6,403)ICULS (17) (15) (74) (65)

Company

Borrowings (224,546) (209,926) (247,078) (217,879)ICSLS (3,188) (2,952) (7,197) (6,403)Financial guarantee (49) (49) (757) (757)

The following summarises the method used in determining the fair value of financial instruments reflected in the above table.

Available-for-sale investments

The fair values of financial assets that are quoted in an active market are determined by reference to their quoted closing price at the end of the reporting period.

Derivatives

The fair value of forward exchange contracts is based on their listed market price, if available.

The fair value of Cross Currency Interest Rate Swaps is calculated based on the present value of the estimated future cash flows determined using forward exchange rates, discounted at actively quoted interest rates.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future contractual cash flows, discounted at the current market interest rate that are available to the Group for similar financial liabilities.

Financial guarantees

Fair value is determined based on the difference between the interest charged on the guaranteed loan and what would have been charged had the loan not been guaranteed.

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46 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have a material impact to the Group’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial 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 and fair value less cost to sell basis. The calculations require the use of estimates as set out in Note 13.

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.

(b) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining recoverability of withholding and income taxes worldwide provision for income taxes, including determining of taxable income, capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The Group has carried forward tax recoverable of USD2.8 million (approximately RM8.9 million) related to certain subsidiaries. The Directors and local independent tax professionals believe that the amount can be set off against future tax payables.

Where the final tax outcome of these matters is different from the amounts that were initially recorded, such as if the actual future taxable profits, or if the amounts of carry forward tax losses, unutilised tax incentives and capital allowances that are approved by the tax authorities differ from those currently estimated by the Group, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.

The Group has significant unrecognised tax losses, unutilised tax incentives and capital allowances. As at 31 December 2011, the Group has derecognised RM21.5 million of deferred tax assets for certain entities within the Group as the businesses have been disposed and the future taxable profits are uncertain as at the reporting date.

(c) Deferred tax assets recognition in Scomi Oiltools Sdn Bhd (“SOSB”)

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. This involves judgment regarding the future financial performance of certain subsidiaries.

Included in the carrying amount of deferred tax assets of the Group of RM46.6 million (2010: RM78.7 million) is an amount in relation to SOSB which was recognised in previous years amounting to RM28.5 million (2010: RM41.6 million). The Directors have reassessed the future taxable profits of SOSB beyond 2012, 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 financial year, the carrying amount of the deferred tax assets is recoverable.


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46 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)

Critical accounting estimates and assumptions (continued)(d) Assessment of tax penalties and fines in Venezuela and Algeria

The Group has recognised a provision for liabilities in relation to tax penalties in accordance with accounting policy in Note 3.28. The Group has made assumptions and judgement in relation to provision for tax penalties based on, among others, historical experience with local tax authorities in the relevant countries and timing of the potential liabilities. These assumptions and judgement are made in consultation with and according to the advice from local independent tax professionals. Any changes to these assumptions and judgement will impact the carrying amount of the potential liabilities.

Based on the above, in relation to tax penalties and fines of the Group’s Venezuelan and Algerian subsidiaries, the Directors are of the opinion that the amount recorded as of 31 December 2011 and disclosed in Note 29 is sufficient based on tax advice obtained. In the event that the assumptions and judgement exercised by the Directors of the Company do not materialise, there is further potential exposure amounting to USD2.2 million (approximated RM6.8 million).

Critical accounting estimates and assumptions (continued)

(e) Assessment of penalties payable

On 7 November 2008, the Mumbai Metropolitan Region Development Authority (“MMRDA”) of India awarded a contract for the Design, Development and Construction of a Monorail System (“the Project” or “ the Contract”) for a lump sum amount of Rs2460 crores (RM1.7 billion) to the unincorporated consortium of Larsen & Taubro Ltd and Scomi Engineering Bhd (“the Consortium”), for which Scomi Engineering Bhd’s (“SEB” or “the Company”) share of the value of the Contract is Rs1097 crores (RM777 million) based on its scope of works. The design, development, construction/manufacture/supply, testing and commissioning of the system including safety certification for commercial operations are to be completed within 30 months from the award of the Contract.

The Consortium has continuously apprised MMRDA of the status of the project and sought extensions of time as allowed under the Contract terms. On 28 January 2011, MMRDA through its project management consultant notified the Consortium of potential penalties claimable under the Contract which are subject to any authorised extension of time for completion of the Project. On 7 March 2011, the Consortium responded to MMRDA stating its case for extension of time and that the Consortium is not liable for any penalties under the Contract. On 25 March 2011, the Consortium submitted an Extension of Time (“EOT”) application for both Phase 1 and Phase 2 works. Subsequent to this EOT application, MMRDA on 31 May 2011 granted the Consortium with EOT for each of the Phase 1 and Phase 2 works completion key-dates.

For Phase 1, the original contract completion key-date for commissioning was 12 November 2010 and was extended to 31 December 2011 via a 31 May 2011 EOT granted. For Phase 2, the original contract completion key-date for commissioning was 13 May 2011 and was extended to 22 November 2012 via a 31 May 2011 EOT granted.

Due to unforeseen circumstances, the Project encountered delays and certain Phase 1 key milestones stated in the Contract have not been met as at 31 December 2011. The Company has engaged specialist advisors to assist in the assessment of delay events, submission of claims for extension of time and assessing the Consortium’s contractual obligations.

Given the expiry of the revised Phase 1 completion key-date, the specialist advisor has evaluated any spill-over/on-going delay events which will substantiate the application for further EOT to Phase 1 completion key-date from MMRDA as the specialist advisor believes that the Consortium has very strong grounds to apply for a further extension. The specialist advisor submitted their EOT Claim Report for Phase 1 on 7 February 2012.

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Critical accounting estimates and assumptions (continued)(e) Assessment of penalties payable (continued)

The same specialist advisor has been further engaged to perform a detailed investigation on the long list of issues affecting the works to serve as contemporary documentation as well as to form up an interim delay assessment for further EOT entitlement. The specialist advisor has submitted their Phase 1 and Phase 2 Delay Assessment Report on 14 February 2012.

The Consortium has requested for a further EOT for Phase 1 till 14 July 2012 vide its letter dated 30 December 2011. The specialist adviser has indicated that there are numerous concrete opportunities to apply for an additional EOT for Phase 2 beyond 22 November 2012.

Whilst MMRDA and the Consortium are engaged in the EOT discussions the Consortium may be potentially liable for penalties under the provisions of the Contract. Penalties levied for not achieving intermediate key-dates shall be reimbursed in the event the entire Project is commissioned within the stipulated time including any EOTs, for which the members to the Consortium have a cross indemnification agreement. The Consortium at the same of time are giving first priority and doing their utmost to complete the Project within the agreed revised timelines. In the interim, the Project activities and work continue normally with MMRDA approving claims, billings and making payments accordingly, other than withholding an amount of RM1.8 million due to the Company, which arose from a letter sent by MMRDA’s consultant on 17 August 2011. In April 2012, based on negotiations with MMRDA, they MMRDA have in principal agreed to release the amounts withheld.

SEB has in the interim submitted three variation orders amounting to RM19.3 million in connection with the provision of certain communication and security equipments in relation to the Project, subject to other claims which SEB believes should accrue to the Consortium.

In reliance of the advice received from the Specialist Consultant, the Directors are of the opinion that the Consortium can effectively defend any potential penalty claims, hence no provision for potential penalties is required as at 31 December 2011 as there is remote likelihood of any penalties to be borne by the Company.

(f) Assessment of indirect taxes payable in Scomi Engineering Bhd (“SEB”)

During the course of execution of the Project described in Note 46(e) above, SEB and its wholly-owned subsidiary, Scomi Rail Bhd (“SRB”), will supply goods and services which would typically attract various indirect taxes in India. The tax consultants of SEB have assessed the potential indirect taxes payable to the Central Government, State Government and Local Municipality of that country and are of the view that:

(i) there are certain legislations empowering the Central Government, State Government and Local Authority to grant exemptions/concessions in cases where the respective Governments and authorities are satisfied that the project is in the interest of the public;

(ii) past precedents indicated that the respective Governments and Authorities have exercised their discretionary powers to grant exemptions/concessions for specific projects in the interest of the public; and

(iii) given the legal provisions, and past precedents, a reasonable case for tax exemptions/concessions can be made, subject to discretions of the respective Governments and Authorities.

Following the Central Government of India budget in March 2012, the custom duty rates have been reduced from 22% to 16% (2011: 22%). As a result, the total imputed value of custom duties based on delivery of 15 trains and applying the revised applicable tax rates as at 31 December 2011 have reduced by RM13.1 million (Rs22 crore). Based on the revised rates, there is no residual financial exposure on the custom duties payable, as the impact of any custom duties payable can be offset against the amount reimbursable by MMRDA.


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Critical accounting estimates and assumptions (continued)(f) Assessment of indirect taxes payable in Scomi Engineering Bhd (“SEB”) (continued)

Applications and representations have been made by Management to the respective Governments and Authorities and the matter is under consideration at the respective authorities.

Based on the above, the Directors are of the opinion that:

(i) there is a reasonable case for claim of tax exemptions/concessions and the likelihood of the Company 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.

(g) Recognition of deferred tax assets from double deduction of research and development costs in Scomi Rail Bhd (“SRB”)

(i) SRB 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 definition 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 financial years 2006 to 2010, resulting in the recognition of a cumulative deferred tax asset of RM12.8 million (2010: RM17.4 million) on unabsorbed losses as at the date of the statement of financial position. No double deduction claim on R&D costs is made from 2011 onwards as SRB has commenced the pioneer status tax exemption with effect from January 2011 for a period of 5 years.

As at the date of this report, approvals by the Inland Revenue Board for financial years 2009 and 2010 remain pending.

Based on the above, the Directors 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. Consequently, the unabsorbed losses will be utilised upon expiry of the pioneer status in 2016.

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy could materially affect the reported results and financial position of the Group.

(ii) Urban Transit Private Limited had recognised a deferred tax asset of RM0.9 million out of RM3.8 million arising from unabsorbed tax losses based on projections of future taxable income.

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Critical accounting estimates and assumptions (continued)(h) Litigations

The Group operates across 29 countries and is required to comply with all applicable laws and regulations of the countries in which the Group operates. Significant judgement is required to determine the likelihood of the obligation and the estimation of amounts to be recognised in respect of legal matters, subject to uncertain future events. The legal cases may extend over several years and the amount or timing may differ from current assumptions. The accounting policy for provision and contingent liabilities which are not provided for is set out in Note 3.28 and 3.29 respectively.

As at 31 December 2011, the Group has recognised RM3.79 million (USD1.20 million) as contingent liabilities based on legal advice and is disclosed in Note 39(d).

47 PRIOR yEAR ADJUSTMENT

The prior year adjustment is due to the correction of an omission in respect of accounting for a put option relating to the non-controlling interest in Scomi Oilfield Limited, a subsidiary of the Group, which was not recognised in the financial statements in the prior financial years. The Shareholders Agreement dated 5 October 2007 between the Company, Standard Chartered Private Equiry Limited (SCPEL/ Investor) and SOL (“Scomi Oilfield Limited”) granted the Investor with the right to sell its shareholding in SOL to the Company or SOL (“Put Option”) upon the commencement of the Put Option Period. The Put Option Period is defined to mean the period commencing on the earlier of (a) the Put Option Value Date or (b) the date on which a change of control in relation to the Company occurs. The Put Option Value Date is defined to refer to the date on which the Put Option Purchase Price has been determined following the joint appointment by the Company, the Investor and SOL of an Approved Bank to determine the fair market value of the Investor’s shares in SOL. The Investor has not exercised the Put Option as of the date of this report and no Approved Bank has been appointed to determine the fair market value. In addition, there has been no change of control in the Company since the inception of the Shareholders Agreement to this point in time.

Noting the conditions attached to the Put Option, legal advice was sought in relation to the commencement of the respective obligations of the Group relating to the Put Option. The Company wishes to inform that it has consulted with two external legal firms on this matter which have provided the Company their opinion as summarised below:

Opinion 1: Notwithstanding that the grant of the Put Option arose at the time of execution of the Shareholders Agreement, such an obligation becomes operative and enforceable only upon commencement of the Put Option Period following the joint appointment of an Approved Bank.

Option 2: The grant of the Put Options will be deemed to have been made on a Put Option Value Date or specifically, the date the Put Option Purchase Price i.e. the Fair Market Value of the shares is determined by an Approved Bank.

The Board, having deliberated the matter is of the opinion that the Company should restate its prior year financial statements to account for the financial obligation arising from the Put Option.


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47 PRIOR yEAR ADJUSTMENT (CONTINUED)

The effect of the restatement of the financial statements are summarised below.

Group 1 Jan 2010 As previously 1 Jan 2010 stated FRS 108 As restated RM’000 RM’000 RM’000 Statement of Financial Position

Other reserves (53,004) 258,286 205,282 Retained earnings (664,994) (113,900) (778,894) Payables (495,779) (144,386) (640,165)

31 Dec 2010 As previously 31 Dec 2010 stated FRS 108 As restated RM’000 RM’000 RM’000 Statement of Comprehensive Income

Finance costs 77,874 (11,730) 66,144

Statement of Financial Position

Other reserves (6,694) 258,286 251,592 Retained earnings (477,017) (113,900) (590,917) Payables (336,329) (132,656) (468,985)

48 APPROvAL OF FINANCIAL STATEMENTS

The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 30 April 2012.

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49 DISCLOSURE OF REALISED AND UNREALISED PROFITS OR LOSSES

The breakdown and components of retained earnings are identified and disclosed in accordance with the listing requirements of Bursa Malaysia Securities as follows:

Group Company 2011 2010 2011 2010 RM’000 RM’000 RM’000 RM’000 (Restated)

Total retained earnings: – realised 319,181 649,790 226,912 375,312 – unrealised (3,805) 55,476 (2,133) 4,384

315,376 705,266 224,779 379,696Total share of accumulated losses from associate: – realised (86,459) (35,109) – – – unrealised (2,077) (4,893) – –

Total share of retained earnings from jointly controlled entities: – realised (19) 4,713 – – – unrealised – (144) – –

226,821 669,833 224,779 379,696Less: Consolidation adjustments 151,770 (67,186) – –

Total group retained earnings 378,591 602,647 224,779 379,696


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pg 176

We, Tan Sri Asmat bin Kamaludin and Shah Hakim @ Shahzanim bin Zain, being two of the Directors of Scomi Group Bhd., state that, in the opinion of the Directors, the financial statements set out on pages 72 to 176 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 2011 and of the results and the cash flows of the Group and Company for the financial 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 2012.

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

Petaling Jaya

I, Abu Zaharoff bin Abu Bakar, the officer primarily responsible for the financial management of Scomi Group Bhd., do solemnly and sincerely declare that the financial statements set out on pages 72 to 176 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

ABU ZAHAROFF BIN ABU BAKAR

Subscribed and solemnly declared by the abovenamed Abu Zaharoff bin Abu Bakar at Kuala Lumpur in Malaysia on 30 April 2012, before me.

Commissioner for Oaths

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pg 177

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 STATEMENTS

We have audited the financial statements of Scomi Group Bhd on pages 72 to 176 which comprise the statements of financial position as at 31 December 2011 of the Group and of the Company, and the statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 48.

Directors’ Responsibility for the Financial StatementsThe Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965 and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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 financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements 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 financial position of the Group and of the Company as of 31 December 2011 and of their financial performance and cash flows for the financial year then ended.

REPORT ON OTHER LEGAL AND REGULATORy REQUIREMENTS

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

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

(b) We have considered the financial statements and the auditors’ reports of all subsidiaries of which we have not acted as auditors, which we are indicated in Note 16 to the financial statements.

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

(d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

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INDEpENDENT AuDITORS’ REpORTto the members of Scomi Group Bhd(Incorporated in Malaysia)(Company No. 571212 A)

OTHER REPORTING RESPONSIBILITIES

The supplementary information set out in Note 49 on page 176 is disclosed to meet the requirements of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

OTHER MATTERS

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PRICEWATERHOUSECOOPERS yEE WAI yIN(No. AF: 1146) (No. 2081/08/12 (J))Chartered Accountants Chartered Accountant

Kuala Lumpur30 April 2012

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pg 179

Authorised Share Capital : RM300,000,000.00 divided into 3,000,000,000 ordinary shares of RM0.10 eachIssued and Paid Up Capital : RM119,223,957.20 divided into 1,192,239,572 ordinary shares of RM0.10 each. This

included 14,427,200 ordinary shares purchased by the Company under share buy-back scheme and retained as treasury shares

Types of Shares : Ordinary shares of RM0.10 eachVoting Rights : One vote per ordinary share

DISTRIBUTION OF SHAREHOLDINGS AS AT 30 APRIL 2012

Shareholders Shareholding

Size of shareholdings No. of holders % of holders No. of shares % of shares

Less than 100 70 0.31 2,015 0.00100 to 1,000 2,272 9.96 2,082,322 0.181,001 to 10,000 11,529 50.53 66,768,287 5.6710,001 to 100,000 7,894 34.60 267,308,370 22.69100,001 to less than 5% of issued shares 1,049 4.60 756,254,748 64.215% and above of issued shares 1 0.00 85,396,630 7.25

Total 22,815 100.00 1,177,812,372 100.00

LIST OF TOP THIRTy (30) LARGEST SHAREHOLDERS AS AT 30 APRIL 2012

Name of shareholder No. of shares %

1. UOBM Nominees (Tempatan) Sdn BhdTOIC Investments Ltd for Onstream Marine Sdn Bhd

85,396,630 7.25

2. HLG Nominee (Asing) Sdn BhdExempt An for UOB Kay Hian Pte Ltd (A/c Clients)

43,099,000 3.66

3. A.A. Anthony Nominees (Tempatan) Sdn BhdMulti-Purpose Credit Sdn Bhd for Kaspadu Sdn Bhd

33,053,055 2.81

4. Citigroup Nominees (Tempatan) Sdn BhdKumpulan Wang Persaraan (Diperbadankan) (CIMB Equities)

32,497,500 2.76

5. CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Siew Mun Chuang (MY1275)

32,265,200 2.74

6. RHB Capital Nominees (Tempatan) Sdn BhdPledged Securities Account for Kaspadu Sdn Bhd (SBSSB 1311005)

27,000,000 2.29

7. EB Nominees (Tempatan) Sendirian Berhad Pledged Securities Account for Kaspadu Sdn Bhd (SFC)

25,700,000 2.18

8. Amro F F A H Alkhadra 18,900,000 1.60

9. JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Abu Sahid Bin Mohamed (Margin)

17,560,000 1.49

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Name of shareholder No. of shares %

10. Citigroup Nominees (Asing) Sdn Bhd GSI for Goldmark Consulting Ltd

17,200,000 1.46

11. Mentari Maksima Sdn Bhd 16,259,100 1.38

12. Citigroup Nominees (Asing) Sdn BhdCBNY for Dimensional Emerging Markets Value Fund

15,913,800 1.35

13. Dutariang Sdn Bhd 14,846,300 1.26

14. HSBC Nominees (Asing) Sdn BhdExempt An for The Bank of New York Mellon (Mellon Acct)

14,000,000 1.19

15. HLB Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Abu Sahid Bin Mohamed

10,213,900 0.87

16. ABB Nominee (Tempatan) Sdn Bhd Pledged Securities Account for Gajahrimau Capital Sdn Bhd

10,000,000 0.85

17. Lim Fong Peng @ Lim Fung Feng 8,440,720 0.72

18. Alliancegroup Nominees (Tempatan) Sdn BhdPledged Securities Account for Ng See Cheng (8040841)

7,550,000 0.64

19. Lee Ah Lik 7,021,400 0.60

20. M&A Nominee (Asing) Sdn Bhd Exempt An for UOB Kay Hian Pte Ltd (A/c Clients)

6,735,000 0.57

21. HSBC Nominees (Asing) Sdn BhdExempt An for JPMorgan Chase Bank, National Association (U.S.A.)

6,003,400 0.51

22. Abdul Aziz Bin Mohd Zain 5,917,885 0.50

23. SBB Nominees (Tempatan) Sdn BhdLembaga Tabung Haji (CAFM)

4,732,300 0.40

24. Malaysia Nominees (Tempatan) Sdn BhdGreat Eastern Life Assurance (Malaysia) Berhad (LPF)

4,512,900 0.38

25. Public Nominees (Tempatan) Sdn BhdPledged Securities Account for Tee Kim Hew (E-KLG/BTG)

4,483,200 0.38

26. ASM Properties Sdn Bhd 4,405,000 0.37

27. Citigroup Nominees (Asing) Sdn BhdCBNY for DFA Emerging Markets Small Cap Series

3,863,500 0.33

28. HSBC Nominees (Asing) Sdn BhdExempt An for BNP Paribas Wealth Management Singapore Branch (A/c Clients-FGN)

3,800,000 0.32

29. Liew Sze Fook 3,500,000 0.30

30. CIMSEC Nominees (Tempatan) Sdn BhdCIMB for Sapura Capital Sdn Bhd (PB)

3,440,200 0.29

Total 488,309,990 41.45

LIST OF TOP THIRTy (30) LARGEST SHAREHOLDERS AS AT 30 APRIL 2012 (CONTINUED)

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SUBSTANTIAL SHAREHOLDERS AS AT 30 APRIL 2012

Direct Shareholding Indirect Shareholding

Name of shareholderNo. of

shares held %No. of

shares held %

Kaspadu Sdn Bhd 85,753,055 (1) 7.28 86,521,970 (2)(3) 7.35Onstream Marine Sdn Bhd 86,521,970 (3) 7.35 – –Shah Hakim @ Shahzanim Bin Zain 2,779,100 (4) 0.24 172,275,025 (5) 14.63Dato’ Kamaluddin Bin Abdullah – – 172,275,025 (5) 14.63

Total 175,054,125 14.87 – –

Notes

1 Held through RHB Capital Nominees (Tempatan) Sdn Bhd, EB Nominees (Tempatan) Sdn Bhd and A.A. Anthony Nomineess (Tempatan) Sdn Bhd.2 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through its shareholding in Onstream Marine Sdn Bhd.3 85,396,630 shares held through UOBM Nominees (Tempatan) Sdn Bhd.4 2,250,000 shares held through BHLB Trustee Berhad (PCM for Shah Hakim @ Shahzanim Bin Zain).5 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd.

DIRECTORS’ SHAREHOLDINGS AS AT 30 APRIL 2012

Direct Interest Indirect Interest

Directors No. ofShares

% ofShares

No. ofOptions

No. ofShares

% ofShares

No. ofOptions

Scomi Group BhdTan Sri Asmat Bin Kamaludin 265,000 (1) 0.02 700,000 # – – –Tan Sri Nik Mohamed Bin Nik Yaacob – – 600,000 # – – –Datuk Haron Bin Siraj 120,000 0.01 600,000 # – – –Datuk Mohamed Azman Bin Yahya – – 600,000 # 10,000,000 (2) 0.85Dato’ Mohammed Azlan Bin Hashim – – 600,000 # – – –Dato’ Sreesanthan A/L Eliathamby – – 420,000 # – – –Dato’ Abdul Rahim Bin Abu Bakar – – – – –Foong Choong Hong 410,000 0.03 350,000# # – – –Shah Hakim @ Shahzanim Bin Zain 2,779,100 (3) 0.24 7,356,500 # 172,275,025 (4) 14.63 –

Related Company – Scomi Engineering Bhd (“SEB”)Tan Sri Asmat Bin Kamaludin – – – 12,222 (5) * –Dato’ Abdul Rahim Bin Abu Bakar 219,700 0.08 300,000 ^ – – –Shah Hakim @ Shahzanim Bin Zain+ 623,000 (6) 0.22 1,500,000 ^ 192,567,567 (7) 67.35 –

Notes

* Negligible# Options granted 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 Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through his interest in Bi-bot Holdings Sdn Bhd, whereby 215,000 ordinary shares

are held through CIMSEC Nominees (Tempatan) Sdn Bhd.2 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his and his wife’s direct shareholdings in Gajahrimau Capital Sdn Bhd,

whereby all the 10,000,000 shares are held through ABB Nominees (Tempatan) Sdn Bhd.3 2,250,000 shares held through BHLB Trustee Berhad (PCM for Shah Hakim @ Shahzanim Bin Zain).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.6 123,000 shares held through BHLB Trustee Berhad (PCM for Shah Hakim @ Shahzanim Bin Zain).7 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.

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ANALYSIS OF SHAREHOLDINgSas at 30 April 2012

Total Number of ICSLS Issued : 1,515,796,791Total Number of Outstanding ICSLS : 857,256,017Issued 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 AS AT 30 APRIL 2012

ICSLS Holders ICSLS Holding No. of ICSLS % of ICSLSSize of ICSLS holdings holders holders No. of ICSLS % of ICSLS

Less than 100 34 0.58 1,615 0.00100 to 1,000 61 1.03 32,880 0.001,001 to 10,000 2,269 38.44 11,772,921 1.3710,001 to 100,000 3,034 51.41 97,895,051 11.42100,001 to less than 5% of issued ICSLS 502 8.51 272,789,400 31.825% and above of issued ICSLS 2 0.03 474,764,150 55.38

Total 5,902 100.00 857,256,017 100.00

LIST OF TOP THIRTy (30) LARGEST ICSLS HOLDERS AS AT 30 APRIL 2012

Name of ICSLS holder No. of ICSLS %

1. UOBM Nominees (Asing) Sdn Bhd 415,349,600 48.45 TOIC Investments Ltd

2. HSBC Nominees (Asing) Sdn Bhd 59,414,550 6.93 Exempt An for BNP Paribas Securities Services (Convert in USD)

3. Tan Yu Wei 38,220,298 4.46

4. HSBC Nominees (Asing) Sdn Bhd 18,750,000 2.19 Exempt An for the Bank of New York Mellon (Mellon Acct)

5. ABB Nominee (Tempatan) Sdn Bhd 15,000,000 1.75 Pledged Securities Account for Gajahrimau Capital Sdn Bhd

6. Lim Fong Peng @ Lim Fung Feng 12,886,080 1.50

7. M&A Nominee (Asing) Sdn Bhd 10,102,500 1.18 Exempt An for UOB Kay Hian Pte Ltd (A/c Clients)

8. CIMSEC Nominees (Tempatan) Sdn Bhd 5,160,300 0.60 CIMB for Sapura Capital Sdn Bhd (PB)

9. Tay Kheng Seng 4,775,000 0.56

10. Lee Chai Eng 4,059,800 0.47

11. Ng Hong Tee 2,490,000 0.29

12. Multi-Purpose Insurans Bhd 2,250,000 0.26

13. Lee Chiah Cheang 2,092,000 0.24

14. Ng Ho Fatt 2,073,100 0.24

15. Onn Kok Puay (Weng Guopei) 2,055,000 0.24

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ANALYSIS OF IRREDEEmABLE CONVERTIBLE SECuRED LOAN STOCKS (“ICSLS”) HOLDINgSas at 30 April 2012

LIST OF TOP THIRTy (30) LARGEST ICSLS HOLDERS AS AT 30 APRIL 2012 (CONTINUED)

Name of ICSLS holder No. of ICSLS %

16. HDM Nominees (Tempatan) Sdn Bhd 1,950,000 0.23 Pledged Securities Account for Ng Kong Ghee (M02)

17. CIMSEC Nominees (Tempetan) Sdn Bhd 1,677,000 0.20 CIMB Bank for Mohammed Amin Bin Mahmud (MM1004)

18. JF Apex Nominees (Tempatan) Sdn Bhd 1,600,000 0.19 Pledged Securities Account for Witpro Sdn Bhd (STA 2)

19. Lam Chin Yong 1,551,000 0.18

20. Liew Sze Fook 1,500,000 0.17

21. Loh Lye Ngok 1,400,000 0.16

22. Mayban Nominees (Tempatan) Sdn Bhd 1,400,000 0.16 Ng Hong Tee

23. Yew Kim An 1,350,000 0.16

24. Teo Akau 1,330,000 0.16

25. Lee Swong Koi 1,320,000 0.15 26. Chin Kiam Hsung 1,300,000 0.15

27. Public Nominees (Tempatan) Sdn Bhd 1,275,000 0.15 Pledged Securities Account for Lee Chiah Cheang (TCS/HLG)

28. Poh Siew Kuan 1,268,500 0.15

29. Pang Siew Yin 1,236,500 0.14

30. Liew Teng Yaw 1,200,000 0.14

Total 616,036,228 71.85

DIRECTORS’ ICSLS HOLDINGS AS AT 30 APRIL 2012

Direct interest Indirect interestDirectors No. of ICSLS % of ICSLS No. of ICSLS % of ICSLS

Tan Sri Asmat Bin Kamaludin 397,500 (1) 0.05 – –Tan Sri Nik Mohamed Bin Nik Yaacob – – – –Datuk Haron Bin Siraj – – – –Datuk Mohamed Azman Bin Yahya – – 15,000,000 (2) 1.75Dato’ Mohammed Azlan Bin Hashim – – – –Dato’ Sreesanthan A/L Eliathamby – – – –Dato’ Abdul Rahim Bin Abu Bakar – – – –Foong Choong Hong – – – –Shah Hakim @ Shahzanim Bin Zain – – – –

Notes

1 Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through his interest in Bi-bot Holdings Sdn Bhd, whereby 322,500 ICSLS are held through CIMSEC Nominees (Tempatan) Sdn Bhd.

2 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his and his wife’s direct shareholdings in Gajahrimau Capital Sdn Bhd, whereby all the 15,000,000 ICSLS are held through ABB Nominees (Tempatan) Sdn Bhd.

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ANALYSIS OF IRREDEEmABLE CONVERTIBLE SECuRED LOAN STOCKS (“ICSLS”) HOLDINgSas at 30 April 2012

Total Number of Warrants Issued : 202,106,238Outstanding Warrants : 202,105,258Exercise Price of Warrants : RM0.40

DISTRIBUTION OF WARRANT HOLDINGS AS AT 30 APRIL 2012

Warrant holders Warrant holdings No. of warrant % of warrant No. of % ofSize of warrant holdings holders holders warrants warrant

Less than 100 368 5.76 17,015 0.01100 to 1,000 2,010 31.45 1,186,280 0.581,001 to 10,000 2,618 40.97 9,756,621 4.8310,001 to 100,000 1,117 17.48 44,540,662 22.04100,001 to less than 5% of issued warrants 276 4.32 102,224,734 50.585% and above of issued warrants 1 0.02 44,379,946 21.96

Total 6,390 100.00 202,105,258 100.00

LIST OF TOP THIRTy (30) LARGEST WARRANT HOLDERS AS AT 30 APRIL 2012

Name of warrant holder No. of warrants %

1. UOBM Nominees (Asing) Sdn Bhd 44,379,946 21.96 TOIC Investments Ltd

2. HSBC Nominees (Asing) Sdn Bhd 4,141,940 2.05 Exempt An for BNP Paribas Securities Services (Convert in USD)

3. TA Nominees (Tempatan) Sdn Bhd 3,740,000 1.85 Pledged Securities Account for Ding Tiong Sew

4. Kwah Chong Huat 3,560,000 1.76

5. OSK Nominees (Tempatan) Sdn Berhad 3,000,000 1.48 Pledged Securities Account for Chow Kok Leong

6. HSBC Nominees (Asing) Sdn Bhd 2,500,000 1.24 Exempt An for the Bank of New York Mellon (Mellon Acct)

7. Nor Zahari Bin Ismail 2,300,000 1.14

8. Poh Seng Hee 2,200,240 1.09

9. Low Keng Kheong 2,080,000 1.03

10. ABB Nominee (Tempatan) Sdn Bhd 2,000,000 0.99 Pledged Securities Account for Gajahrimau Capital Sdn Bhd

11. Foo Fook Min 1,699,000 0.84

12. Yew Choo Sen 1,521,800 0.75

13. M&A Nominee (Asing) Sdn Bhd 1,347,000 0.67 Exempt An for UOB Kay Hian Pte Ltd (A/c Clients)

14. TASEC Nominees (Tempatan) Sdn Bhd 1,278,600 0.63 Pledged Securities Account for Chan Kim Tong

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ANALYSIS OF WARRANT HOLDINgSas at 30 April 2012

LIST OF TOP THIRTy (30) LARGEST WARRANT HOLDERS AS AT 30 APRIL 2012 (CONTINUED)

Name of warrant holder No. of warrants %

15. HDM Nominees (Asing) Sdn Bhd 1,050,000 0.52 Phillip Securities Pte Ltd for Ho Kee

16. Ng Kong Nam 1,046,000 0.52

17. RHB Capital Nominees (Tempatan) Sdn Bhd 1,000,000 0.49 Pledged Securities Account for Chee Hong Leong (CEB)

18. Public Nominees (Tempatan) Sdn Bhd 915,000 0.45 Pledged Securities Account for Tan Siew Giap (PPG/M&A)

19. Oo Huei Ying 910,000 0.45

20. Ang Soh Mui 909,000 0.45

21. Low Kuan Yeow 894,400 0.44

22. BIMSEC Nominees (Tempatan) Sdn Bhd 850,000 0.42 Pledged Securities Account for Che Mokhtar Bin Shaari (M16005)

23. Chn’g Ah Leck @ Chn’g Ah Heang 809,600 0.40

24. Maybank Securities Nominees (Tempatan) Sdn Bhd 807,000 0.40 Pledged Securities Account for Yew Kok Keong (REM 169)

25. Chua Ho Chen 800,000 0.40

26. Ee Hock Lim @ Chong Hock Lim 800,000 0.40

27. Chai Siew Wee 770,000 0.38

28. CIMSEC Nominees (Tempatan) Sdn Bhd 688,040 0.34 CIMB for Sapura Capital Sdn Bhd (PB)

29. Goh Beng Ghee 650,000 0.32

30. Ooi Chin Soon 650,000 0.32

Total 89,297,566 44.18

DIRECTORS’ WARRANT HOLDINGS AS AT 30 APRIL 2012

Direct interest Indirect interestDirectors No. of warrants % of warrants No. of warrants % of warrants

Tan Sri Asmat Bin Kamaludin 53,000 (1) 0.03 – –Tan Sri Nik Mohamed Bin Nik Yaacob – – – –Datuk Haron Bin Siraj – – – –Datuk Mohamed Azman Bin Yahya – – 2,000,000 (2) 0.99Dato’ Mohammed Azlan Bin Hashim – – – –Dato’ Sreesanthan A/L Eliathamby – – – –Dato’ Abdul Rahim Bin Abu Bakar – – – –Foong Choong Hong – – – –Shah Hakim @ Shahzanim Bin Zain – – – –

Notes

1 Deemed interested by virtue of Section 6A(2) of the Companies Act, 1965 through his interest in Bi-bot Holdings Sdn Bhd, whereby 43,000 Warrants are

held through CIMSEC Nominees (Tempatan) Sdn Bhd.

2 Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his and his wife’s direct shareholdings in Gajahrimau Capital Sdn Bhd,

whereby all the 2,000,000 Warrants are held through ABB Nominees (Tempatan) Sdn Bhd.

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ANALYSIS OF WARRANT HOLDINgSas at 30 April 2012

No.Registered owner

Description/locationaddress Existing use

Tenure of land: freehold orleasehold(years)/dateof acquisition

Land area/Built-up area

Approximate age of

building

Audited netbook value

as at31.12.2011

RM’000

1. Scomi CoachSdn Bhd

Land and Building:EMR 2751 Lot 795and Serendah,Daerah Hulu Selangor,Malaysia

Factory andOffice

Freehold/15.04.1996

Land area:61,714 sq meters26,556sq meters

Building 1:2½ year

Building 2:15 years

Land: 8,020Building 1:

24,230Building 2:

9,526

2. Scomi Oiltools Sdn Bhd

Master: 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 of 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 office

Freehold 31.10.1999

Built-up area: 11,755 sq ft

15 years (since 1997)

Land & building: 1,215

3. Scomi Oiltools Sdn Bhd

Kemaman WarehouseNo. 24, Kemaman Supply Base, 24007 Kemaman, Terengganu, Malaysia.

Warehouse for office use, laboratory, milling and storage activities

Not applicable 15.11.1991

Built-up areas: 19,200 sq ft

21 years (since 1991)

Building: 317

4. 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

47 years Land & Building: 402

5. 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

17 years Land & Building: 287

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LIST OF pROpERTIESas at 31 December 2011

No.Registered owner

Description/locationaddress Existing use

Tenure of land: freehold orleasehold(years)/dateof acquisition

Land area/Built-up area

Approximate age of

building

Audited netbook value

as at31.12.2011

RM’000

6. Scomi Oiltools (Europe) Limited

Land and buildings held under titles, ABN 13822 Woodside Road, Bridge of Don Industrial Estate, Aberdeen AB23 8JW, Scotland, United Kingdom.

Office and workshop

Heritable Land area: 3.14 acres, Built-up areas: 1. Office

– 4,357 sq ft2. Workshop

– 29,044 sq ft

30 years Land: 6,149 Building: 5,870

7. PT. Inti Jatam Pura Jl. Raya Duri – Dumai, Km.131 Duri, Riau 28884 Indonesia

Office and workshop

Leasehold:24.03.1992 – 24.03.2012 (21 years)

Land area: 23,865 m2 Building area: 207.5 m2

22 years Nil

8. Scomi Group Bhd Land and building: Geran 58840 Lot 64254, Mukim of Damansara, District of Petaling, Selangor Darul Ehsan

Office and warehouse

Freehold: 23.12.2009

Land area: 1,575 sq metres Built-up area: 1,795 sq metres

7 years Land and building: 4,584

9. Scomi Sosma Sdn Bhd

Land held under Geran 250133, Lot 7627, Mukim of Sepang, Selangor Darul Ehsan

Land held under Geran 250134, Lot 7628 Mukim of Sepang,Selangor Darul Ehsan

Land held under Geran 250135, Lot 7629 Mukim of Sepang,Selangor Darull Ehsan

Land

Land

Land

Freehold: 7.4.2011

Freehold: 7.4.2011

Freehold: 7.4.2011

Land area: 0.7412 hectares



N/A

N/A

N/A

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LIST OF pROpERTIESas at 31 December 2011

CORPORATE

Scomi Group BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel: +603 7717 3000Fax: +603 7725 9082

Scomi Oiltools Sdn BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel: +603 7717 3000Fax: +603 7728 5202

Scomi Engineering BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel: +603 7717 3000Fax: +603 7727 7935

Scomi Rail BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel: +603 7717 3000Fax: +603 7728 5195

Scomi Marine BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel: +603 7717 3000Fax: +603 7725 9082

Scomi Sosma Sdn BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel: +603 7717 3000Fax: +603 7728 5202

OPERATING LOCATIONS

AlgeriaScomi Oiltools AlgeriaBP 256 Zone d’activite RN3Route de OuarglaHassi Messaoud/Ouargla

America – Latin (Anaco)Scomi Oiltools de venezuela SAVia Los Pilones KM1Sector Montana Alta, AnacoEstado Anzoategui, Venezuela

China (Tanggu)Scomi Oiltools (S) Pte LtdA1-704, Teda New SkylineNo. 12, Nan Hai RoadTeda Tianjin, 300457, China

Congo (Pointe Noir)Oiltools (Africa) LimitedBP 685, Zone Industrielle Do LoandjiliPointe NoireRepublic du Congo

Egypt (Cairo)Scomi Oiltools Egypt S A EKM 10, Ain Sukhna RoadKattamia, Oilfield Services ComplexCairo, Egypt

FranceScomi Anticor S A E6 Avenue des AmandiersZ.A. du Mardaric04310 Peyruis, France

India (Mumbai)KMC Oiltools India Private Ltd912A, Building No. 9Solitaire Corporate ParkAndheri-Ghatkopar Link RoadChakala, Andheri (East)Mumbai, 400093 India

Urban Transit Pvt LtdMumbai Monorail ProjectUnit 102, B Wing, Business SquareChakala, Andheri EastMumbai, 400093 India

Indonesia (Balikpapan)PT Scomi OiltoolsJl. Mulawarman Rt 45No. 2, ManggarBalikpapan 76116East Kalimantan, Indonesia

Indonesia (Banjarmasin)PT Batuah Abadi LinesJl. Belitung Darat No. 88Rt. 19 BanjarmasinKalimantan Selatan, 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

America – Latin (Ciudad Ojeda)Scomi Oiltools de venezuela SAWest DistrictCarratera “L” entreCalle 33 y 34al lado de Ferreteria FEDECACiudad OjedaEstado ZuliaVenezuela

America – Latin (Maturin)Scomi Oiltools de venezuela SAAv Alirio Ugarte Pelayo Centro EmpreDavis, Piso 2, ofc. 17 Frente a laE/S Digecom MaturinEstado-Monagas, Venezuela

America – Latin (Maturin)Scomi Oiltools De venezuela SACarretera NacionalMaturin – La Toscana, A100 mts de laE/S la Encrucijada, MaturinEstado-Monagas, Venezuela

America – North (Houston)Scomi Oiltools Inc6818 N. Sam Houston Parkway WestHouston, Texas77064 USA

Australia (Perth)Scomi Oiltools Pty Ltd15, Boulder RoadMalaga, Western Australia6090 Australia

Brazil (Sao Paulo)Urban Transit Servicos Do Brasil LtdaHead Office:Rua Geraldo Flausino Gomes61, 9th floor, Cidade MonçõesZip Code 04575-060, Sao PauloSao Paulo, Brazil

China (Beijing)Scomi Oiltools (S) Pte LtdRm 1507, Tower B, Eagle PlazaNo. 26, Xiao Yun RoadChaoyang DistrictBeijing 100016, China

China (Shekou)Scomi Oiltools (S) Pte LtdRM23C Tower ANeptunus BuildingNo. 221, Nanhai RdNanshan District518054 ShenzenGuangdong ProvP.R. China

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CORpORATE DIRECTORY

PT Rig Tenders Indonesia TbkWisma Rig TendersJalan Dr SaharjoNo. 129, Jakarta Selatan12860 Indonesia

Malaysia (Kemaman)Scomi Oiltools (Kemaman) Sdn BhdWarehouse 24, Letterbox No. 72Kemaman Supply Base24007 Kemaman, TerengganuMalaysia

Malaysia (Labuan)Scomi Oiltools Sdn BhdAsian Supply BaseRanca-Ranca Industrial EstateP O Box 8202387030 Labuan Federal TerritoryLabuan, Malaysia

MarineCo LimitedLevel 6 (D), Main Office TowerFinancial Park, Jalan MerdekaP O Box 8088787018 Labuan Federal TerritoryLabuan, Malaysia

Malaysia (Miri)Scomi Oiltools Sdn BhdLot 2164, 1st FloorSaberkas Commercial CentreJalan Pujut-Lutong98000 Miri, Sarawak, Malaysia

Malaysia (North Kuala Lumpur)Engineering, Technology &Innovation CentreLot 795, Jalan Monorel, Sungai Choh48000 Rawang, Selangor Darul EhsanMalaysia

Scomi Coach Sdn BhdScomi Coach Marketing Sdn BhdLot 795, Jalan MonorelSungai Choh, 48000 RawangSelangor Darul Ehsan, Malaysia

Scomi Special vehicles Sdn BhdLot 9683Kawasan Perindustrian Desa AmanBatu 11, Desa Aman47000 Sungai BulohSelangor Darul EhsanMalaysia

Malaysia (Selangor)Global Research & Technology CentreNo. 9, Jalan Astaka U8/83Seksyen U8, 40150 Shah AlamSelangor Darul Ehsan, Malaysia

Thailand (Bangkok)Scomi Oiltools (Thailand) Ltd13th Floor, CTI Tower191/77, Ratchadapisek RoadKwaeng Klongtoey, Khet KlongtoeyBangkok, 10110 Thailand

Thailand (Lankrabue)Scomi Oiltools (Thailand) Ltd163, Moo 6 Tumbol LankrabueAmphur LankrabueKamphaengphet, 62170 Thailand

Thailand (Songkhla)Scomi Oiltools (Thailand) Limited424/9 Moo 2, Songkhla – Koh YorRoad, Amphur Muang, Songkhla90100 Thailand

Turkmenistan (Ashgabat)Scomi Oiltools LtdYimpash Business CentreOffice 101(A)54 Turkmenbashy Street744013, Ashgabat, Turkmenistan

Turkmenistan (Balkanabat)Scomi Oiltools LtdJebel Base #2, Jebel V. BalkanabatTurkmenistan

Turkmenistan (Hazar)Scomi Oiltools LtdHigh Road 9 kilometer, Hazar745030 Turkmenistan

Turkmenistan (Turkmenbashy)Scomi Oiltools Ltd TurkmenistanShagadam Street 8, Turkmenbashy City745000 Turkmenistan

U.A.E. (Dubai)Scomi Oiltools (Cayman) LtdOilfield Supply CentreBuilding B-10, Jebel AliFree Zone, DubaiUnited Arab Emirates

United Kingdom (Aberdeen)Scomi Oiltools (Europe) LimitedWoodside RoadBridge of Don, AberdeenAB23 8EF, Scotland, UK

vietnamScomi Oiltools Pte Ltdc/o PTSC Supply Base65A, 30/4 Road, ThangNhat Ward, Vung Tau CityS R Vietnam

MyanmarScomi Oiltools (Thailand) LtdUnit #223, Summit Parkview HotelNo. 350, Ahlone RoadDagon Township, Yangon, Myanmar

Nigeria (Onne)Oiltools Africa Limitedc/o Titan TubularsFederal Lighter Terminal (FLT)Oil & Gas Free Zone, Onne, Nigeria

Nigeria (Port Harcourt)Wasco Oil Service Co Nig LtdPlot 57, Trans Amadi Industrial EstatePort Harcourt, Nigeria

Oman (Azaiba)Scomi Oiltools Oman LLCBuilding No. 272, Way No. 44803Office No. 1104 (2nd Floor)

Pakistan (Islamabad)Scomi Oiltools Ltd (Pakistan Branch)Plot No. 212, Service RoadIndustrial Area, I-10/3Islamabad, Pakistan

Russia (Moscow)Scomi Oiltools (Rus) Llc3rd floor, bld.1 24/2, Sretenka str.107045 Moscow, Russian Federation

Russia (Western Siberia)16 bld. 7, Industrialnaya Str628616 NizhnevartovskTyumen Region, Russia

Saudi ArabiaScomi Oiltools (Saudi Arabia)c/o Tanajib for General Contracting Est.P O Box 30415, Salman A-farezi StreetNear Issam Al-Kabbani, Al KaldiyaAl-Khobar 31952Kingdom of Saudi Arabia

SingaporeScomi Oiltools (S) Pte Ltd50 Ubi Crescent #01-08Ubi Tech Park, Singapore 408568

Scomi Marine Services Pte Ltd8 Admiralty Street#07-09 AdmiraxSingapore 757438

Sudan (Khartoum)KMC Oiltools Overseas (M) LtdHouse 119, Block 1Al Geraif GarbKhartoum, Republic of Sudan

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CORpORATE DIRECTORY

AS ORDINARy BUSINESS:

To consider and, if thought fit, to pass the following as Ordinary Resolutions:

1. To receive the Financial Statements for the financial year ended 31 December 2011 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) Datuk Mohamed Azman Bin Yahya (Resolution 2)

(iii) Foong Choong Hong (Resolution 3)

3. To approve the payment of Directors’ fees amounting to RM555,397.26 for Non-Executive Directors in respect of the financial year ended 31 December 2011.

(Resolution 4)

4. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the financial year ending 31 December 2012 and to authorise the Directors to fix their remuneration.

(Resolution 5)

AS SPECIAL BUSINESS:

To consider and, if thought fit, to pass the following as Ordinary Resolutions:

5. Authority to Issue and Allot Shares Pursuant to Section 132D of the Companies Act, 1965

“THAT, subject to the Companies Act, 1965 (as may be amended, modified or re-enacted from time to time), the 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 fit, provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed ten percent (10%) of the issued and paid-up share capital of the Company for the time being and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

(Resolution 6)

NOTICE IS HEREBY GIVEN that the 10th Annual General Meeting of SCOMI GROUP BHD (“the Company”) will be held at Ballroom 3, First Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur, Malaysia on 27 June 2012 at 2.30 pm to transact the following business:

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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

“THAT, subject to the Companies Act, 1965 (as may be amended, modified 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 fit and expedient in the interest of the Company PROVIDED THAT the aggregate number of ordinary shares purchased and/or held pursuant to this resolution does not exceed ten percent (10%) of the total issued and paid-up share capital of the Company at any point in time and an amount not exceeding the total retained earnings of approximately RM224,779,000 and/or share premium account of approximately RM276,793,000 of the Company based on the Audited Financial Statements for the financial year ended 31 December 2011 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 the market of Bursa Securities or distribute as dividends to the Company’s shareholders or subsequently cancel, any or all of the treasury shares, with full power to assent to any condition, revaluation, modification, variation and/or amendment in any manner as may be required by any relevant authority or otherwise as they deem fit in the best interests of the Company.”

(Resolution 7)

7. To transact any other business of the Company for which due notice shall have been given.

By Order of the Board

ONG WEI LENG (MAICSA 7053539)CHONG MEI yAN (MAICSA 7047707)Company SecretariesPetaling Jaya

Date: 5 June 2012

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NOTICE OF ANNuAL gENERAL mEETINg

Notes:

(1) A member of the Company entitled to attend and vote at the meeting may appoint a proxy or proxies (but not more than two) to attend and vote on his/her behalf. A proxy may but need not be a member of the Company.

(2) Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/her holding to be represented by each proxy.

(3) Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares standing to the credit of the said securities account.

(4) The instrument 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 officer or attorney duly authorised. If no name is inserted in the space for the name of your proxy, the Chairman of the Meeting will act as your proxy.

(5) The instrument appointing a proxy must be completed and deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 6, Symphony House, 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.

(6) For the purpose of determining a member who shall be entitled to attend this 10th 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 21 June 2012. Only a depositor whose name appears on the General Meeting Record of Depositors as at 21 June 2012 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Financial Statements for the financial year ended 31 December 2011 and the Reports of the Directors and Auditors thereon

(7) This agenda is tabled for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders and hence is not put forward for voting.

Abstention from voting

(8) The interested Directors of the Company who are shareholders of the Company will abstain from voting on the relevant resolutions in respect of their re-election as the Director of the Company at the 10th AGM.

(9) All the Non-Executive Directors of the Company who are shareholders of the Company will abstain from voting on Ordinary Resolution 4 concerning remuneration to Non-Executive Directors at the 10th AGM.

Explanatory Notes on Special Business:

(10) 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 fit 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 9th AGM held on 29 June 2011 and which will lapse at the conclusion of the forthcoming 10th AGM to be held on 27 June 2012.

This Share Mandate, unless revoked or varied at a General Meeting, will expire at the conclusion of the next Annual General Meeting of the Company. With this Share Mandate, the Company will have the flexibility to undertake any possible fund raising activities, including but not limited to further placing of shares, for the purpose of funding future investment project(s), working capital and/or acquisition(s).

(11) Ordinary Resolution 7 – Proposed renewal of the authority to purchase own shares

The ordinary resolution 7 above, if passed, will empower the Directors to purchase up to ten percent (10%) of the issued and paid-up share capital of the Company by utilising funds not exceeding the retained earnings and/or the share premium account of the Company. This authority, unless revoked or varied at a general meeting, will expire at the earlier of either the conclusion of the next Annual General Meeting of the Company or the expiry of the period within which the next Annual General Meeting is required by law to be held.

The details relating to ordinary resolution 7 are set out in the Share Buy-back Statement dated 5 June 2012.

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CDS Account No.

No. of Ordinary Shares Held

I/We NRIC No./Company No. (Full name as per NRIC/Certificate of Incorporation in capital letters)

of (Full address)

being a member/members of Scomi Group Bhd, hereby appoint (Full name and NRIC No./Company 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 10th Annual General Meeting of Scomi Group Bhd (the “Company”) to be held at Ballroom 3, First Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur, Malaysia on 27 June 2012 at 2:30 pm, or any adjournment thereof.

Please indicate with a check mark (“✓”) in the space provided to show how you wish your vote to be cast. If no specific direction as to voting is given, the proxy will vote or abstain at his/her discretion.

Dated this day of 2012. Signature/Seal

Scomi Group Bhd.(Company No.: 571212-A)(Incorporated in Malaysia under the Companies Act, 1965)

Registered Office: Level 17, 1 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Ordinary Business For Against

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) Datuk Mohamed Azman Bin Yahya Resolution 2(iii) Foong Choong Hong Resolution 3

To approve the payment of Directors’ fees amounting to RM555,397.26 for Non-Executive Directors in respect of the financial year ended 31 December 2011.

Resolution 4

To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the financial year ending 31 December 2012 and to authorise the Directors to fix their remuneration.

Resolution 5

Special Business For Against

Authority to Issue and Allot Shares Pursuant to Section 132D of the Companies Act, 1965.

Resolution 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

FORm OF pROxY

Fold this flap for sealing

Then fold here

1st fold here

The Registrar of Scomi Group BhdSymphony Share Registrars Sdn Bhd

Level 6, Symphony House

Block D13, Pusat Dagangan Dana 1

Jalan PJU 1A/46, 47301 Petaling Jaya

Selangor Darul Ehsan, Malaysia

Affix Stamp

Notes:

(i) A member of the Company entitled to attend and vote at the meeting may appoint a proxy or proxies (but not more than two) to attend and vote on his/her behalf. A proxy may but need not be a member of the Company.

(ii) Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/her holding to be represented by each proxy.

(iii) Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one proxy but not more than two proxies in respect of each securities account it holds with ordinary shares standing to the credit of the said securities account.

(iv) The instrument 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 officer or attorney duly authorised. If no name is inserted in the space for the name of your proxy, the Chairman of the Meeting will act as your proxy.

(v) The instrument appointing a proxy must be completed and deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 6, Symphony House, 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 10th 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 21 June 2012. Only a depositor whose name appears on the General Meeting Record of Depositors as at 21 June 2012 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Annual Report 2011NEW OPPORTUNITIES. MOVING AHEAD.

Scomi Group Bhd

Scomi Group Bhd (571212-A)

Level 17, 1 First Avenue, Bandar Utama47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Tel: +603 7717 3000Fax: +603 7725 5853

www.scomigroup.com.my

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