· b scomi marine bhd annual report 2010 contents 2 key financial highlights 3 corporate legal...

b SCOMI MARINE BHD ANNUAL REPOR T 2010

CONTENTS 2 Key Financial Highlights 3 Corporate Legal Structure 4 Our Corporate Statement 6 Corporate Information 7 Profile of Directors 11 Key Management Team 12 Chairman’s Statement 18 President’s Review of Operations 26 Corporate Social Responsibility 34 Statement on Corporate Governance 42 Statement on Internal Control 46 Audit and Risk Management Committee Report 52 Additional Information 55 Statement on Directors’ Responsibility 56 Financial Statements144 Analysis of Shareholdings 148 List of Properties 150 Corporate Directory 151 Notice of Annual General Meeting • Form of Proxy

Cover Rationale:Scomi’s 2010 annual report ushers the third and final year of the Group’s Formula 2011 initiative. The concept and design reflects Scomi’s Brand Promise, “Realising Potential” with a focus on “US” signaling that our goals are continually met as a team. This annual report also echoes Scomi’s emphasis on constant and consistent growth through innovation for the success of our company as well as our stakeholders.

cSCOMI MARINE BHD ANNUAL REPOR T 2010

15th Annual General MeetingBallroom 3,1st Floor, Sime Darby Convention Centre,1A Jalan Bukit Kiara 1,60000 Kuala Lumpur.

28 June 2011, Tuesday, 2.30 pm

2 SCOMI MARINE BHD ANNUAL REPOR T 2010

KEY F INANCIAL HIGHLIGHTS

Notes* Before goodwill impairment of RM148.6 million.

# Before goodwill impairment of RM260.0 million.

^ Includes discontinuing operations.

Total Assets (RM Million)

2010

RM863.62009: RM1,581.8 / 2008: RM1,806.7

Net Assets Per Share (Attributable to equity holders of the parent)

2010

RM0.862009: RM 1.21 / 2008: RM1.33

Shareholders’ Fund (RM Million)

2010

RM628.12009: RM885.9 / 2008: RM972.5

Net Tangible Assets (RM Million)

2010

RM623.42009: RM590.9 / 2008: RM526.6

(Loss) / Earnings per Share (basic)

2010

(27.84) sen2009: (9.78 sen) / 2008: 8.86 sen

Profit before Tax^ (RM Million)

2010 65.2#

2009 87.1*2008 78.02007 66.62006 89.0

Revenue^ (RM Million)

2010 409.02009 448.32008 467.12007 462.12006 441.9

Profit after Tax after Minority Interests^ (RM Million)

2010 56.0#

2009 77.0*2008 65.02007 54.32006 80.5

3SCOMI MARINE BHD ANNUAL REPOR T 2010

49% Emerald Logistics Sdn Bhd

51% Gemini Sprint Sdn Bhd

SCOMI MARINE CORPORATE LEGAL STRUC TUREas at 30 Apr i l 2010

Notes

1Incorporated on 28 January 2010.

2Acquired the remaining 60% interest on 14 June 2010.

*Public Listed Entity.

Save as otherwise indicated, all companies are incorporated in Malaysia.

Singapore Scomi Marine Services Pte Ltd

49% British Virgin Islands King Bridge Enterprise Limited

80.54% Indonesia PT Rig Tenders Indonesia Tbk* Singapore 100% Rig Tenders Marine Pte Ltd1

70% Rig Tenders Offshore Pte Ltd1

100% Singapore CH Logistics Pte Ltd 100% Sea Master Pte Ltd

100% Singapore CH Ship Management Pte Ltd

100% Singapore Goldship Private Limited

100% Singapore Grundtvig Marine Pte Ltd 95% Indonesia PT Batuah Abadi Lines

Scomi Mar ine Bhd

51% Labuan MarineCo Limited

100%

100%

20% Vietnam

Southern Petroleum Transportation Joint Stock Corporation

Trans Advantage Sdn Bhd2


EVERAMBITIOUS


OUR CORPORATE STATEMENT

With a presence in 60 locations across 29 countries, the Scomi group of companies is a global technology enterprise in the energy and logistics industries. We are a global technology enterprise.

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

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

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

We aim to realise potential for our stakeholders. • Our customers: We will develop

and offer customers innovative and competitive products and services that help them grow their business.

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

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

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

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


CORPORATE INFORMATION

DirectorsTan Sri Asmat Bin Kamaludin Chairman

Vice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd)Dato’ Meer Sadik Bin Habib MohamedMok Yuen LokMadam Loong Chun Nee Alternate to Shah Hakim @ Shahzanim Bin Zain

Liew Willip Shah Hakim @ Shahzanim Bin Zain

Audit and Risk Management Committee Mok Yuen Lok Chairman

Dato’ Meer Sadik Bin Habib MohamedVice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd)

Nomination and Remuneration Committee Tan Sri Asmat Bin Kamaludin Chairman

Mok Yuen LokVice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd)

Options Committee Vice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd) Chairman

Liew WillipShah Hakim @ Shahzanim Bin Zain

Registered OfficeLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, Malaysia

Administrative and Correspondence AddressLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaT +603 7717 3000F +603 7725 9082E [email protected] www.scomimarine.com.my

RegistrarSymphony Share Registrars Sdn BhdLevel 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Selangor Darul Ehsan, MalaysiaT +603 7841 8000F +603 7841 8008

Company SecretarySoh Ke Yi (MAICSA 7060456)

AuditorsPricewaterhouseCoopers (AF: 1146)Chartered AccountantsLevel 10, 1 SentralJalan Travers, Kuala Lumpur SentralPO Box 10192, 50706 Kuala LumpurMalaysia

Principal BankersOCBC Bank (Malaysia) Berhad18th Floor, Menara OCBC18, Jalan Tun Perak50050 Kuala Lumpur, Malaysia

Overseas-Chinese Banking Corporation Ltd65, Chulia Street, 7th FloorOCBC CentreSingapore 049513

United Overseas Bank (Limited)80 Raffles PlaceUOB Plaza 1, # 07-01Singapore 048624

Standard Chartered BankBattery Road Branch6, Battery Road, #09-01Singapore 049909

PT Bank Mandiri (Persero) TbkCabang Jakarta Tebet SupomoJl. Dr. Supomo SH no. 43 TebetJakarta Selatan 12810Indonesia

Bank UOB BuanaJl. Radio Dalam No. 9AKebayoran BaruJakarta SelatanIndonesia

Stock Exchange ListingMain Board of Bursa Malaysia Securities BerhadStock Name: ScomimrStock Code: 7045

CurrencyRinggit Malaysia (RM)


PROFILE OF DIREC TORS

Tan Sri Asmat, 67, a Malaysian, is a Non-Independent Non-Executive Director and the Chairman of the Company. He was appointed to the Board on 1 January 2010.

Tan Sri Asmat holds a Bachelor of Arts (Honours) degree in Economics from the University of Malaya and 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 worked with several international bodies such as ASEAN, the World Trade Organisation and the Asia-Pacific Economic Corporation, 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 Corporation (“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 Tan Sri Asmat 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 (formerly known as Trans-Asia Shipping Corporation Berhad), Compugates Holdings Berhad, The Royal Bank of Scotland Berhad (formerly known as ABN AMRO Bank Berhad) and Scomi Group Bhd. He also serves on the Board of JACTIM Foundation.

Tan Sri Asmat is the brother in-law of Vice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd), an Independent Non-Executive Director of the Company.

Tan Sri Asmat chairs the Nomination and Remuneration Committee of the Board. He attended 7 out of the 8 Board Meetings held in the year ended 31 December 2010.

Vice Admiral Dato’ Haron, 68, a Malaysian, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 23 September 2005.

Vice Admiral Dato’ Haron began his Basic Cadet Training at the Federation Military College Malaysia and continued his training as Naval Officer at the Britannia Royal Navy College, United Kingdom and the Royal Navy. He has held various senior positions in the Royal Malaysian Navy including Fleet Operations Commander in the rank of Rear Admiral, Deputy Chief of Navy and Assistant Chief of Staff of the Malaysian Armed Forces HQ and he was promoted to the rank of Vice Admiral on assuming the appointment of Chief of Staff, Malaysian Armed Forces HQ in 1994 before retiring from the Royal Malaysian Navy in December 1995.

Other Malaysian public company in which Vice Admiral Dato’ Haron is a director is Yayasan Scomi.

Vice Admiral Dato’ Haron is the brother in-law to Tan Sri Asmat Bin Kamaludin, the Chairman and Non-Independent Non-Executive Director of the Company.

Vice Admiral Dato’ Haron chairs the Options Committee of the Board and is also a member of the Audit and Risk Management Committee and the Nomination and Remuneration Committee. He attended all of the 8 Board Meetings held in the year ended 31 December 2010.

Tan Sri Asmat Bin KamaludinChairman

Vice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd)Independent Non-Executive Director


Dato’ Meer Sadik, 48, a Malaysian, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 19 November 1997 following the corporate exercise in which he played an instrumental role.

Dato’ Meer Sadik graduated from Wichita State University, United States of America, with a Degree in Business Administration, and later qualified as a gemologist from the Gemological Institute of America. He was also responsible for the development of the jewellery business previously undertaken by the Company and for its listing on the Main Board of Bursa Malaysia Securities Berhad.

Dato’ Meer Sadik is a past President of the Young Entrepreneurs Organisation, past Vice President of Old Frees Association (“OFA”) and was the Governor of the Alice Smith School. Dato’ Meer Sadik has held the post of Honorary Secretary of Malaysian Retailers Association since 2007.

Other Malaysian public company which he is a Director is Yayasan Habib, which was established in 2008 to undertake corporate social responsibility activities for the Habib Group.

Dato’ Meer Sadik is a member of the Audit and Risk Management Committee. He attended all the 8 Board Meetings held in the year ended 31 December 2010.

Mr Mok, 50, a Malaysian, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 29 March 2002.

Mr Mok graduated in 1981 with a Bachelor of Science from Heriot Watt University, Edinburgh, and joined Ernst & Whinney (now Ernst & Young) in 1982, where he trained and qualified as a Chartered Accountant. Currently, he is the Regional Executive Director of Crowe Horwath International for the Asia Pacific region overseeing 24 countries and is a co-founder of Crowe Horwath in Malaysia. He is also Audit Committee Chairman of another publicly listed company.

He is a member of the Young Presidents’ Organisation and Entrepreneurs’ Organisation, Malaysian Chapters, where he has served various Board positions. He is also the Deputy Chairman of Hospis Malaysia, a charitable organisation which renders free palliative care to residents in the Klang Valley diagnosed with life-limiting conditions.

Other Malaysian public companies which he is a Director are Goodway Integrated Industries Bhd and Yayasan Habib.

Mr Mok chairs the Audit and Risk Management Committee, and is also a member of the Nomination and Remuneration Committee of the Board. He attended 6 out of the 8 Board Meetings held in the year ended 31 December 2010.

Mok Yuen LokIndependent Non-Executive Director

Dato’ Meer Sadik Bin Habib MohamedIndependent Non-Executive Director

PROFILE OF DIREC TORS cont ’d


Mr Liew, 43, a Malaysian, is a Non-Independent Non-Executive Director of the Company. He was appointed to the Board on 21 February 2011.

Mr Liew is a commerce graduate of the University of Melbourne and a Chartered Financial Analyst. Upon graduation, Mr Liew worked with international accounting firm KPMG as an auditor. Subsequently, he joined a local stockbroking company as an investment analyst, and later, moved to the Kuala Lumpur office of an international investment bank, Barclays deZoete Wedd, where he was the senior equity analyst. In 1996, Mr Liew was hired to set up the Malaysian equity research operations of another international investment bank, NatWest Markets, where he was the director and head of research.

In 1998, Mr Liew joined the national asset management company, Pengurusan Danaharta Nasional Berhad (“Danaharta”), where he was among the pioneer staff members. At Danaharta, Mr Liew was the assistant general manager/head of research unit (Corporate Services Division).

After leaving Danaharta in 2000, Mr Liew co-founded an independent investment advisory company, and a consulting company that specialises in financial and investor communications. Mr Liew is currently the Managing Director of a company providing consulting services.

Mr Liew is a member of the Options Committee of the Board.

Encik Shah Hakim, 46, a Malaysian, is a Non-Independent Executive Director of the Company. He was appointed to the Board on 23 September 2005.

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 Group Bhd, Scomi Engineering Bhd and KMCOB Capital Berhad.

Encik Shah Hakim is a member of the Options Committee of the Board. He attended 7 out of the 8 Board Meetings held in the year ended 31 December 2010.

Liew WillipNon-Independent Non-Executive Director

Shah Hakim @ Shahzanim Bin ZainNon-Independent Executive Director


Madam Loong, 53, a Malaysian, is a Non-Independent Non-Executive Director of the Company. She was appointed as Alternate Director to Encik Shah Hakim @ Shahzanim Bin Zain on 27 February 2009.

Madam Loong was previously with the Renong Group of companies for a total of 11 years covering companies including Projek Lebuhraya Utara-Selatan Berhad (1988 – 1992) and United Engineers (Malaysia) Berhad (1993 – 1994, 1997 – 1998). She left the Renong Group in late 1999 to join Tan Sri Dato’ (Dr) Rozali Ismail as Financial Advisor under a financial consultancy company, Jendela Permai Sdn Bhd (2000 – 2004). She then joined Scomi Group Bhd as Senior Vice President – Corporate Finance/Chief Financial Officer of Scomi Marine Bhd since July 2005. Thereafter, she was transferred to Scomi Group Bhd as Group Chief Financial Officer in August 2006. In early 2008, she was re-designated as Group Chief Investment & Performance Officer. Madam Loong has vast experience in financial advisory matters specialising in the areas of corporate debt restructuring, corporate finance and project financing for privatisation projects.

Other Malaysian public company in which she is a Director are CIMB Principal Asset Management Berhad and KMCOB Capital Berhad.

Madam Loong attended 7 out of the 8 Board Meetings held in the year ended 31 December 2010 by invitation.

Encik Mukhnizam, 46, a Malaysian, was appointed as the Chief Executive of the Company holding the title President on 12 May 2009.

Encik Mukhnizam graduated from the Edith Cowan University Western Australia, with a Bachelor Degree in Business (Accounting).

He has more than 20 years’ experience in Finance, Accounting and Management and has served numerous companies including Sime Darby Group, Kumpulan Fima Berhad, Nationwide Express Courier Services Berhad and CH Offshore Ltd, a company listed on the Stock Exchange of Singapore.

Encik Mukhnizam is entitled to an option of 3,600,000 ordinary shares under the Company’s Employees Share Option Scheme. Save as disclosed, he does not hold any shares in the Company.

PROFILE OF DIREC TORS cont ’d

Loong Chun NeeAlternate Director to En Shah Hakim @ Shahzanim Bin Zain Non-Independent Non-Executive Director

Mukhnizam Bin MahmudPresident

NotesSave as disclosed, none of the Directors / President have:• any family relationship with any other Director and/or major shareholders of Scomi

Marine Bhd.

• any conflict of interest with Scomi Marine Bhd.

• been convicted for offences within the past ten years (other than traffic offences, if any).


3

4

21

1 Mukhnizam Mahmud President

2 Abu Zaharoff Abu Bakar Financial Controller

3 Patsy Chin Yew Khim Head of Legal & Corporate Secretarial

4 Zaizilan Abdul Rashid General Manager – Technical & Operations

KEY MANAGEMENT TEAM


CHAIRMAN’S STATEMENT

Tan Sri Asmat Bin KamaludinChairman


Dear Stakeholders, Against the backdrop of a challenging year in which the industry faced an overhang in vessels and difficult operating conditions, I present you, the Annual Report and the Audited Financial Statements of Scomi Marine Bhd (“Scomi Marine”, “the Group” or “the Company”) for the financial year ended 31 December 2010.

OverviewIt was a slow and uneven recovery for the distressed maritime industry, with the global economy recovery tenuous, freight rates remained depressed as the industry faced an oversupply of vessels.

On a positive note, container trade managed to bounce back as a result of improved demand from Asia’s main trading partners namely the United States of America and Europe driven by the demand for stock inventory replenishment. Bulk shipping also performed well as China replenished its stock of key dry bulk commodities such as coal and iron ore.

On the domestic front, the Malaysian maritime sector has also been affected by the continued challenges posed by the global economy. Nevertheless, the Government’s drive to advance the shipping industry via various initiatives and schemes has at least provided the sector with a framework in which to grow and progress. As a key contributor to the Malaysian economy, it is essential that the maritime sector is supported in order to ensure that the nation remains relevant as a globally recognised member of this sector.

The year under review also saw the continued enforcement of the cabotage rule in Indonesia. Under this requirement, vessels that operate domestically have to fly the Indonesian flag, which in turn have to be 51% owned by Indonesians. The enforcement of the cabotage law prevented new investments made by our Indonesian companies from being flagged as Indonesian. However, we have taken the appropriate actions to ensure that the Group meets this Indonesian requirement and continues to benefit from our investments in that country.

Financial Highlights The Group generally achieved lower returns for the financial year ended December 2010. In what can be described as a difficult year, revenue attained was RM409 million while gross profit remained healthy at RM75 million. As required by FRS 5, Non-current Assets Held for Sale, the presentation of the income statement of the Group was separated into two (2) parts, namely continuing operations and discontinuing operations. The continuing operations generated a revenue of RM79 million with a gross profit of RM7 million, whereas the discontinuing operations generated a revenue of RM330 million with a gross profit of RM68 million. However, the Group registered a net loss of RM204 million largely due to the provision of impairment loss and doubtful debts of RM260 million and RM21 million respectively.


The impairment loss is in relation to the Group’s Indonesian business, which is in the process of being disposed of in order to bring in a strategic Indonesian investor that will not only enhance business operations but also complies with the country’s cabotage law. Without these provisions, net profit stood at RM77 million.

Our balance sheet remains healthy with net assets in excess of RM628 million and with the sale of our 29.07% stake in CH Offshore in April 2010, our gearing decreased substantially from 0.52 to 0.03 times with borrowings dropping significantly from RM552 million to RM31 million. The cash position of the Group remains at a positive level, with a year-end balance of RM13 million. Despite our financial results for the year, our financial position remains optimistic.

Given the impact of our profit and loss, the Board has decided not to recommend dividends for the year under review as we intend for the Group to consolidate its financial position and conserve cash in order to get through this challenging period.

The Marine Logistics Division remained the major contributor to the Group’s revenue. With a fleet of 90 vessels to service our major contracts, the Division contributed 82% of revenue for the year under review while the remaining 18% was derived from the Offshore Support Services Division.

Our Marine Logistics Division’s transported 25 million metric tonnes of coal for our customers, with a fleet utilisation of 84.7% for the year

under review. The Division’s performance was affected by the unpredictable weather, stringent capacity regulation and increased fuel cost. Going forward, our customers’ requirement for larger capacity barges will have an impact on our expected volume.

Our Offshore Support Services Division’s vessels achieved an average fleet utilisation rate of approximately 86.5% compared with 74.6% in the previous financial year. However, the Division’s performance was affected by the lower than expected utilisation rates of our newer vessels.

ProspectsThe global economic outlook for 2011 remains shaky to say the least, nevertheless the Group expects prospects for the energy industry to stay positive for the next two to three years.

The forecasted energy demand will lead to an increasing need for the seaborne transportation of coal which will augur well for our Marine Logistics Division. Prospects for the oil and gas sector are also expected to be positive lead by higher oil prices as well as an increase in exploration and production (“E&P”) activities which will bode well for our Offshore Support Services Division.

The transport of coal remains a robust market with major players looking to lock in supply. During the year under review, coal production in Indonesia increased to 238 million metric tonnes representing 9.5% increase on a year on year basis.

CHAIRMAN’S STATEMENT cont ’d


Global demand for coal drove prices up in 2010, and this trend is expected to continue in 2011 mostly due to growing energy needs of the world’s two largest consumers of coal namely India and China. The Group looks to capitalise on this through existing contracts with current clients as well as opportunities with new customers. The expected growth in Indonesia’s coal production will require additional vessel capacity to transport the increased production to both domestic and export customers.

We are cognisant of the need to consolidate our business in order to retain our position as a key player in the maritime sector. As such, we have completed several transactions during the financial year to strengthen our business and financial positions. In April 2010, we divested our 29.07% stake in CH Offshore Limited to Falcon Energy Limited for a cash consideration of SGD143.5 million equivalent to RM344.5 million. The proceeds of the sale were utilised to reduce our borrowings and lower our gearing position which led to a strengthened balance sheet. In June 2010, we completed the acquisition of the remaining 60% of Trans Advantage Sdn Bhd, which is involved in coal transportation for TNB Fuel Services Sdn Bhd. This acquisition gives us full control of the company and increases our exposure in the bulk carrier market segment. Taking into account the expected increase in demand for coal in Malaysia and the region, this new acquisition furnishes the Group with a platform to expand into this segment in the future.

We are also committed to reinvest in our business streams in order for us to pursue strategic investment opportunities. It is essential that we continue to strive for organic growth through increasing market penetration and obtaining better margins for our services. We are focused on building a strong brand in the domestic and global markets.

The volatile political environment in the Middle East and North Africa has brought on concern over supply disruption which has caused crude oil to break the psychological mark of USD100 per barrel. Hence, we foresee an increase in the need for our services in the oil and gas sector in the Asia Pacific Rim.

With the prevailing oil prices, there will be a firm demand for Offshore Support Services as oil majors increase their E&P, development and maintenance activities in South East Asia. Resurgence in capital expenditure due to increased demand and increasing traffic volume predominately in the Asian region will contribute to the strength of the sector.

Deepwater development and shallow water fields’ development are expected to support the demand for offshore support vessels within this region. Servicing clients from the deepwater market segment will be a natural progression for us and we are constantly looking for ways to move up the offshore value chain.


CHAIRMAN’S STATEMENT cont ’d

Our outlook for the Indonesian oil and gas sector remains all the more positive. There are already various tenders for vessels as we look to lock in term contracts for the balance of our offshore fleet in the financial year 2011. We have to reinvest in this business in order to maintain our strong position. Older vessels will be disposed off to make way for newer ones as part of our fleet renewal programme. It is imperative that we dispose of older vessels primarily because these vessels are near the end of their useful life and also owing to the fact that our client requirements change. The fleet renewal programme heightens our capability to capitalise on the growth potential that lies inherent in the offshore support market.

OpportunitiesWe are mindful that the Indonesian market will pose significant challenges. A case in point is the fact that the Group’s marine logistics customers which are mainly coal mines, have also started to invest in coal barging companies which is likely to limit the Group’s ability to grow its business in Indonesia. Scomi Marine can lay claim to being an innovative company with a long term view on its opportunities and we will not be hampered by market dynamics.

In view of the cabotage law, the Group commenced a strategic approach to introduce an Indonesian partner as a major shareholder to manage the regulatory requirement in Indonesia while working together to grow our business in both the marine logistics and offshore sectors.

The Group has announced the proposed disposal of its Marine Logistics Business to PT Rig Tenders Indonesia (“PTRT”) and a Rights Issue where we will renounce our entitlement to PTRT to two other investors, Portside Offshore Inc (“POI”) and PT Revessel which in turn will lead to them owning a 62.75% stake in PTRT while the Group’s interest will be reduced to 24.5%. We recognise the need for a strategic investor that will help our future growth in Indonesia. With these investors, we are confident that we will now possess the capability, capacity and network to tap new opportunities in terms of exploring new markets.

We expect PTRT to become an end-to-end solutions provider in the coal sector. This will enable us to ride on Indonesia’s future growth potential in coal mining. The growth in Indonesia will not only come from the need to meet higher coal demand for the domestic sector, especially for power generation, but also coal exports. Upon completion of the disposal, the Group will have a substantial net cash position.

Developing a Progressive Workforce with Formula 2011The Group’s Formula 2011 initiative aims to empower our people, harness their capabilities, unlock their potential and motivate them to epitomise the values of the Scomi brand. This initiative driven by our own people has successfully helped to strengthen our earnings potential, technological advancement and customer recognition.


Scomi offers its workforce multiple opportunities for personal and career skills talent development. The structured training and development programmes we provide our workforce are at the forefront of our human capital development initiatives. The nurturing of our people is further complemented by our focus on providing them with a workplace environment that is governed by the key principles of safety, health, security and a sense of camaraderie through employee engagement initiatives.

AcknowledgementsIt is during times like these when challenges are unabating that the Group all the more appreciates its diverse stakeholders that have been the pillar of support in driving our aspirations forward. My gratitude goes to the members of the Board for being a source of wisdom and strength during this difficult financial year. I would like to take this opportunity to acknowledge the contributions of two fellow Directors, Mr Lim Kwee Siah and Mr Cheak Boon Heng who have left the Board. Their support and input during their time at Scomi Marine has indeed been invaluable. I wish them the best as they move on in their corporate life. In the same breath, I would like to welcome Mr Liew Willip who was appointed as a Non-Independent and Non-Executive Director of the Company on 21 February 2011.

Thank you to our Management team for an unflinching commitment to brace against the storm. Our employees have proven their mettle mirrored by their commitment and loyalty which clearly is a reflection of the Group’s ability to rise against these challenges.

Above all, our deepest gratitude to our clientele who appreciate our sincerity and genuineness in delivering quality services that are market competitive in terms of value. Numerous other stakeholders have played an essential role in our development namely our shareholders, bankers, business associates and the various Government authorities. Our heartfelt gratitude goes to them for their backing.

I am confident Scomi Marine will remain a driving force in this sector, more so as we have a pivotal role to ensure that our stakeholders’ interest are always at the forefront of our business objectives.

Thank you.

Sincerely,

Tan Sri Asmat Bin KamaluddinChairman


BEING INDUSTRIOUS


PRESIDENT ’S RE VIE W OF OPERATIONS


PRESIDENT ’S RE VIE W OF OPERATIONS

Mukhnizam MahmudPresident


Dear Stakeholders, I would like to present the review of Scomi Marine Bhd’s (“Scomi Marine”, “the Company” or “the Group”) operations for the year ended 31 December 2010.

Overview The financial year 2010 was indeed a challenging time for Scomi Marine. The performance of the global economy was not the only factor that had a bearing on our operations as the changing landscape for operations in Indonesia also affected us. With the global economy sluggish, the sector was impacted through the depressed charter rates registered for all segments as well as vessel supply overhang in almost all categories. In Indonesia, the enforcement of the cabotage law prevented us from flagging our newer vessels with the Indonesia flag.

This caused us to re-think our strategy and re-focus our efforts. With our current performance in mind, we kept a keener eye on operational cost with a view to ensure that unwarranted expenses were eliminated. What is of crucial importance is the fact that we continue to rationalise and review our business strategies as we are confident that we will be able to emerge from the current challenges as a stronger company.

The year under review saw us posting lower earnings due to rising operational costs and the impact of translation losses owing to the depreciation of the United States Dollar (“USD”).

On the operational front for our Marine Logistics Division, we carried lower coal tonnage due to unpredictable weather. Customer requirements for larger capacity vessels have seen our competitors placing bigger barges into operations, which in turn has reduced our share of total carriage.

The Offshore Support Vessel Division on the other hand recorded an utilisation rate of 85%, which was higher than the previous financial year’s rate of 74.6%. Our inability to flag our new vessels with the Indonesian flag hampered our efforts to obtain long-term charter. Nevertheless, we managed to secure short-term charter in our other markets. This affected our utilisation rate as our new vessels were idle in between charters. Overall, charter rates softened as exploration and production (“E&P”) activities slowed compared with the previous year and there remains an overhang of available vessels.


Financial PerformanceThe year under review saw the Group being impacted by significantly higher operational costs, especially docking and bunker expenses while revenue decreased due to lower coal volume and utilisation rate. The weaker USD also affected both our top-line and bottom-line where we booked translation losses as our reporting is in Ringgit Malaysia. As such, the Group recorded a decline in revenue to RM409 million in the year under review due to lower revenue contributions from the coal transportation and offshore vessel businesses. As explained earlier, the lower revenue from our Marine Logistics Division was due to the lower tonnage carried while the OSV Division’s lower utilisation rate was the main contributor to the drop in revenue. The Group’s gross profit margin declined to RM75 million as increased expenses and lower revenue affected our overall margins.

The primary factor that caused increased expenses was fuel, as rising oil prices pushed our average cost up by 5.7% from financial year 2009 cost of USD2.03 per MT. On a more positive note, overall consumption reduced by 6% but it was not enough to compensate the price increase.

The Group recorded a net loss of RM204 million as we recognised provision for impairment loss and doubtful debt of RM260 million and RM21 million respectively.

The impairment loss was required under FRS136 Impairment of Assets and FRS 5 Non-current Assets Held for Sale, as we had announced our proposed sale and the renouncement of rights issue of the marine logistics subsidiaries to PT Rig Tenders Tbk (“PTRT”). Nevertheless, despite the difficult operating scenario, our underlying businesses were still profitable. Without the provisions, our net operating profit was RM77 million for the financial year 2010.

Marine Logistics DivisionWith the deadline for adherence to the cabotage law looming, regulators in Indonesia tightened enforcement of the regulation for vessels operating domestically. Our overall utilisation rate for Indonesia was 84.7%.

The operating landscape for coal logistics is evolving in Indonesia, with major mines now directly involved in this sector. Many are also driving for improved efficiencies by operating with bigger capacity barges or keeping charter rates competitive. During the year under review, we carried 25 million metric tonnes (MT) which is 9.3% lower than the previous financial year. We operated on a reduced fleet of 31 sets compared to the 35 sets for the financial year ended 2009 and average tonnage per shipment decreased to 9,286 MT per shipment, which is 7.4% lower compared with the 10,036 MT per shipment recorded in the previous financial year. Our operating cost increased largely due to the rising oil prices during the year.

PRESIDENT ’S RE VIE W OF OPERATIONS cont ’d


The average fuel price was 5.7% higher compared to the financial year 2009 and even though our consumption decreased by 6%, it was not sufficient to compensate the overall increase.

Our Malaysian coal business performed within expectations as we carried 1.5 million MT for our customer. We have also completed the acquisition of the remaining 60% of Trans Advantage Sdn Bhd (“TASB”) during the year under review. The rationale behind this acquisition was to increase our exposure in the bulk carrier market segment. Taking into account the expected increase in demand for coal in Malaysia and the region, this new acquisition furnishes the Group with a platform for expansion into this segment in the future.

Offshore Support Services DivisionThe Offshore Support Services Division’s activities revolve around the charter of Anchor Handling Tug Supply (“AHTS”), Utility Vessels and Accommodation Barges. The year under review saw an average daily charter rate of USD3,979 per day.

Our vessels achieved an improved average fleet utilisation rate of approximately 86.5% for the year under review compared to 74.6% recorded in financial year 2009. However, the Division’s performance was dragged by the lower than expected utilisation rates of our newer vessels due to increased competition from the Indonesian market.

Thus the new offshore support vessels, RT Kris and Kaspadu, were required to obtain work outside of Indonesia. However, due to the overall “soft” market conditions, few jobs were available and these vessels were idle for a period of time. On the home front, our Malaysian offshore vessels remained on long-term charters as we achieved a good utilisation rate of 93.6% for our AHTS vessels - Beryl and Zircon.

In the first half of the year under review, the Group disposed its 29.07% stake in CH Offshore Ltd (“CHO”) to Energian Pte Ltd, a wholly owned subsidiary of Falcon Energy Group Limited for a total cash consideration of SGD143.5 million, which is equivalent to approximately RM344.5 million. The proceeds from this sale has been utilised towards de-gearing our balance sheet from 0.52 to 0.03 times. This has enhanced the Group’s financial flexibility, allowing it to better seize investment opportunities which provide better returns and boost its operating capabilities. The disposal resulted in a net gain of RM59.2 million for the Company for the year under review.

We are cognisant of the need to expand our fleet in order to better serve our customers and seize the opportunities at hand. As such, the second quarter of the financial year 2010 saw us welcoming our 5,380bhp AHTS vessel - RT Kris, to our current fleet.


Key InitiativesWe continue to lay the ground work to align our process, practice and structure as we embarked on several organisational initiatives to further streamline our operations. One of the most significant initiatives for the year under review was borne as a result of Indonesia’s enforcement of the cabotage law. The Group commenced a strategic approach to introduce an Indonesian partner as a major shareholder to manage the regulatory requirement in Indonesia while working together to grow our business in both the marine logistics and offshore sectors.

In order to accomplish this, we propose to strategically injected our Indonesian operating assets into PTRT Indonesia. We are also proposing to conduct a rights issue in PTRT which will lead to the strategic investor to emerge as a majority shareholder in PTRT while our shareholding is expected to reduce to below the controlling tresh hold to comply with the cabotage ruling.

Our reduced shareholding in PTRT should grant us the opportunity to have a small slice of a much bigger pie and we are confident that over the long haul, contribution from this Division should grow as Indonesia speeds ahead in its energy consumption.

Another initiative we embarked on was the Group’s transformation journey which was implemented under its Business Excellence for Scomi’s Transformation (“BEST”) Project and Formula 2011 plan.

Both of these projects continued to help equip us with the tools we need as we embark on rapid regional growth. We will continue to focus on providing the key operations and support services groups with the necessary platforms and infrastructure in order to achieve better efficiency and professionalism.

Expectations and OpportunitiesThe Economic Transformation Programme (“ETP”) put in place by the Government is expected to drive the Malaysian economy forward, greatly benefiting major corporations and small and medium enterprises. The Group is grateful for the Government’s efforts as this crucial programme will provide a much-needed stimulus and accelerate progress in many sectors, particularly in the oil and gas field.

We also expect the maritime industry to benefit from an increasing global demand for services in this area, which will also be significant in advancing the nation’s international trade capacities. Already, we are seeing positive trends with the strengthening of Asian economies which will lead to increased demand for shipping services as well as related products.

The unremitting and increasing demand for oil and gas will continue to push companies to undertake exploration activities to seek reserves in deeper and more remote fields. Against this setting, oil and gas activities are anticipated to pick up robustly in 2011 which will augur well for our offshore vessel business as we are capable of supplying the oil players with much needed offshore supply vessels.

PRESIDENT ’S RE VIE W OF OPERATIONS cont ’d


The outlook for the marine logistics business in Indonesia is bright and we intend to capitalise on this through our partnership. The Indonesian entity has the resources as well as the connections in Indonesia which will allow us to explore further other business segments along the supply value chain.

We anticipate an increase in vessel deliveries for the sector in 2011 which will test the shipping market’s ability to assume the additional tonnage.

The Group is positive more so given our strategic plans and the fact that our multiple programmes have progressed successfully. We are confident the years ahead will bear tangible results in terms of sustaining our earnings track record, improving our balance sheet and moving the Group up the value chain in the maritime sector.

ConclusionThe year 2011 looks to be another challenging year for the maritime industry, nevertheless with challenges come opportunities.

Prospects for the offshore vessel business looks promising with the rising E&P spend in the oil and gas sector, high oil price and favourable credit market conditions offering optimism. With the demand for coal increasing, coal production is expected to increase to meet this demand. We are positioned to leverage on our presence in Indonesia, the second largest exporter in the world and our expertise in the marine logistics sector.

Going forward, our emphasis shall be on improving our financial strength with better balance sheet management as a key driver. We will also continue to ensure that margins are improved by working on yield management for our charters.

The elements are in place for us to achieve a positive year as we meet the challenges of the operating environment and capitalise on the opportunities at hand. Tough times, as the saying goes, never last, but tough people do.

AcknowledgementsOn behalf of the Management, I would like to thank all employees of the Company for their continued support, dedication and hard work that have enabled us to journey during this challenging financial year. I would also like to extend my gratitude to the Board of Directors for their wisdom and guidance throughout the year.

Last but not least, to our customers, partners and all stakeholders, thank you for your support and goodwill. We look forward to building a successful future together with you as we work to deliver long-term growth to our stakeholders.

Sincerely,

Mukhnizam MahmudPresident


MUTUALLY ADVANTAGEOUS


CORPORATE SOCIAL RESPONSIBIL IT Y


At Scomi, we are fully cognisant of our responsibility not only to optimise shareholder value, but also to contribute positively towards the advancement of the communities we operate within. We firmly believe that the Group does not operate in isolation and as such we are steadfast in our stand that our business objectives and decisions should take into consideration the sustainability of our actions in order for us to attain sustainable growth. Not only do we wish to be an organisation of international repute with the best in products, services and processes, we also wish to be an organisation that cares.

On this premise, we have made corporate social responsibility the cornerstone of our efforts. An integral part of our Formula 2011 initiative, our Corporate Social Responsibility (“CSR”) efforts allow us to positively impact our human capital, the community, the environment and our stakeholders.

The Marketplace

Shareholder EngagementScomi is aware of the value of maintaining continuous communication with our investors and key stakeholders in order to ensure a mutual understanding of objectives. As such, the Group recognises the benefit of utilising diverse modes of communication especially electronic communication tools in order to keep them updated on the Group’s latest developments in a timely manner.

Our dedicated Investor Relations team proactively communicates with our shareholders and the investing community with continuous updates on the company through “Letter to Stakeholders”, regular meetings, briefings, road shows (both locally and internationally) as well as conferences. Nevertheless, we are always mindful of the fact that we need to ensure any company announcements that have a material effect is made to Bursa Malaysia beforehand.

The WorkplacePeople are indeed our valuable asset and in acknowledging that people make the ultimate difference in the success of our business, we established an integrated human capital strategy to nurture our employees.

CORPORATE SOCIAL RESPONSIBIL IT Y


Through this initiative, we are focused on developing a performance-driven, engaged and motivated workforce who epitomise the values of the Scomi brand.

Whether they are stationed in an office or are out in the field, we seek to provide our people with the essential tools as well as conducive working environments to maximise their potential.

Talent DevelopmentWe realise that highly trained employees are the backbone of our operations. Moreover, we practice a culture of transformation in order to remain relevant in the sectors we operate within and this would not be possible without our staff members on board.

On that note, during the year under review, we renewed our commitment to the continuous growth of our staff by providing them with training and career enhancement opportunities that would supply them with the edge needed to thrive in our competitive business environment.

Our dedicated Group Learning and Development (“GLaD”) team oversees our talent development initiatives which are carried out across the Group. This includes in-house training conducted in 2010 by GLaD in Malaysia, Dubai, India, Indonesia, Thailand, US, Australia, UK and Singapore. Topics covered include Induction, Financial Skills, Performance Management Development & Coaching Skills, Competency Based Assessment, Creativity & Innovation, Teamwork, Customer Service, Time Management & Goal Setting, Presentation Skills and Balanced Scorecard.

Our initiatives for the year included the following:• The Management Trainee Programme

is a fresh graduate programme where management trainees are exposed to all facets of Scomi’s business in preparation for senior executive positions. In the 18-month programme, the trainees underwent a specific and intensive development programme where they were attached to different departments to further enhance their skills and provide them with a broad range of knowhow, which will be invaluable as they progress in their careers.

• The Executive Management Programme that promote sharing of knowledge, strategic information, business direction, performance status and updates; accessible to Scomi employees across the globe, conducted via teleconference or webcast facilities. In addition, Town Hall sessions were also carried out throughout the group, where small groups were selected of 10 to 15 employees of the same level to have private sessions with the Group Chief Executive Officer or the Presidents of Business Units to discuss any issues that they might have at the workplace.

• The Management Leadership Development Programme is organised for senior management and aims to develop future top leadership for the organisation. In this programme, the managers learnt diverse management knowledge, leadership styles and necessary skills to handle the challenges of a global business environment today.


• The Work @ Scomi & Induction Programme is a core mandatory training programme for all new employees, designed to introduce Scomi, its culture and brand.

• Mentoring Programme is a programme targeted to provide select managers with one on one mentoring in order to help them deal with the challenges and issues they face as they move up the leadership ladder. The mentors serve as a sounding board for the managers and provide them with feedback. This programme also serves as a mechanism for the development of employees to fill key positions in future, as part of Scomi’s succession plan.

Employee CommunicationWe appreciate that it is important to constantly keep the employees informed of important updates and likewise for the management to constantly get feedback from employees. This is achieved via the following initiatives:

• Open Communication Sessions that promote sharing of knowledge, strategic information, business direction, performance status and updates; accessible to Scomi employees across the globe, conducted via teleconference or webcast facilities. In addition, Town Hall sessions were also carried out throughout the group, where small groups were selected of 10 to 15 employees of the same level to have private sessions with the Group Chief Executive Officer or the Presidents of Business Units to discuss any issues that they might have at the workplace.

• Global Executive Meeting is an annual event for senior management from global operations, aimed at re-examining and realigning strategies as the Group moves forward, gaining a better understanding of each business stream, improving on communication as well as strategising on marketing plans in order to strengthen market share globally. Leaders attending this meeting will subsequently cascade the business direction, information and key messages to their respective staff throughout the organisation.

Facilities for EmployeesWhile we believe that the professional development of our people is vital to our growth, we place equal importance to enhancing their quality of life at work. During the year under review, we have taken various steps in the interest of the welfare of our employees at the work place.

• Relocation of Headquarters (“HQ”) to 1 First Avenue, Bandar Utama – 1 First Avenue, a certified “Green” Building provides our employees with better facilities and care. The office is equipped with a ‘sick bay’ and nursing rooms; and ‘surau’ for men and women on every floor. The neighbourhood also provides good public amenities - lots of eateries in the nearby mall and a bus hub at the Central Park Avenue.

CORPORATE SOCIAL RESPONSIBIL IT Y cont ’d


• Scomi Sports Club (“SSC”) was established to create an informal platform for employees to network and build relationship with other colleagues. Managed by employees, SSC gives employees free reign in organising sporting activities such as bowling, futsal, darts, netball, and volleyball throughout the year as well as events such as ‘family days’. The employees are grouped into different teams to encourage friendly competition and instil a sense of teamwork and togetherness.

Safety & Health InitiativesIt is our responsibility to provide a safe and healthy workplace for our people and to give proper regard to the conservation and protection of the environment throughout our business operations and activities.

The Group places great emphasis on Health, Safety & Environment (“HSE”) practices and procedures as they are implemented throughout its operations. Realising that safe workplace practices and a high regard for the environment are integral to our continued success, we take every effort to ensure excellent HSE practices are inculcated among our employees and that the safety of our customers and the communities we operate within is continuously upheld. In order to encourage employees to adopt the right attitude towards health and safety, the HSE team in every location organises various safety awareness events. These events saw us executing various HSE-related engagement and teamwork activities which included general safety talks, toolbox talks specific to operations as well as fire safety briefings and demonstrations.

We also have Safety Observation Cards to encourage people to report a safety or health hazard when sighted or occurring. Hence, we prioritise maintaining HSE standards by always benchmarking ourselves against industry standards.

The Group’s dedicated HSE Committee which comprises of representatives from both employees and senior management is committed to instituting health and safety initiatives. At Scomi’s Global HQ, among the initiatives that have been established is the formation of the Emergency Response & First Aider Teams and a fully equipped First Aid Room.

The EnvironmentRapid economic growth and industrialisation has caused serious environmental challenges throughout the world. There is increased emphasis on the importance of preventive measures to mitigate and minimise negative environmental effects at source, to increase conservation efforts and ensure sustainable development of both exhaustible as well as renewable energy resources.

At Scomi, our commitment to the environment is exemplified through our investment in sustainable business practices and processes. We have made it a point to leverage on technology and intellectual capital to create best-in-class clean, green solutions aimed at obtaining the highest level of customer satisfaction while at the same time contributing towards a sustainable environment.


Environmental InitiativesProject “EnviroUs” was launched in January 2010 with a tagline ‘If There’s No Earth, There’s No Us’. This project, which focused on our products and processes, was key to drive all the green initiatives by the organisation.

During the year under review, various initiatives were implemented, among them were environmental E-bulletins, bi-weekly E-tips, Green Luncheon Talk on Sustainable Living, which highlighted and educated Scomi staff on current environmental issues, and stressed on the importance of reducing, reusing, and recycling daily wastes. As a testament to our commitment to the environment, we managed to achieve our target of a 20% reduction in printing costs during the year under review.

‘Green’ Facility – October 2010 marked the official relocation of our Global Headquarters to 1 First Avenue in Bandar Utama, Petaling Jaya, Selangor which has a Green Building Certification. Energy conservation, highly efficient systems to optimise energy usage, environmentally safe coatings and paints are just some of the features in this new ‘green’ building.

Conservation of Underwater Environment: The Group continues to participate in Project Aquatic World Awareness, Responsibility and Education (‘“Project AWARE’”) by supporting marine conservation activities in Indonesia. During the year under review, a total of 154 employees of the Scomi Marine team from our locations in Malaysia, Singapore, Jakarta and Kalimantan were gathered at the National Marine Park Thousand Islands, Jakarta, Indonesia to take part in various programmes

and activities including beach and underwater cleanup, coral reef monitoring, coral transplant, sea grass and mangrove planting and sea turtle breeding. The statistics collected from these activities were given to the Ocean Conservancy Group, a non-profit organisation that prepares the International Global Marine Debris Report. These efforts were also intended to educate local communities on underwater protection.

The CommunityWith the understanding that effective community relations are essential to our success and necessary for our holistic growth, in each of Scomi operations across 29 countries, we ensure our CSR programmes make a difference to the community. Each year, we contribute to various programmes by raising standards of living and enriching the quality of life, or through developing people and organisations so that they in turn become effective contributors to society.

Part of this effort was executed through employees participation in various community-based activities under our very own Project Pyramid which was carried out with the theme “Bridging Us”. Launched in 2007, Project Pyramid was designed to foster a family-friendly culture and to create a mentoring; and networking platform amongst the employees. This was done through the active participation and contribution to the activities conducted. Project Pyramid is about giving back to the communities or the environment where Scomi operates in be it locally or around the world.

CORPORATE SOCIAL RESPONSIBIL IT Y cont ’d


Over and above this, Scomi has an objective to develop an internal environment and inculcate a culture that is conducive for individuals from all walks of life, race & religion to perform effectively together.

Project Pyramid Season 3 was officially launched in September 2010 and was a continuation of our efforts to encourage our staff members to be passionate about giving back to their community. This time, all employees in Malaysia were divided into 4 teams to execute their CSR initiatives. Each team was given “Seed” fund that is used to raise more funds so that greater benefits can be achieved.

Project Pyramid Season 3 kicked off with the participation by all 4 houses in the Terry Fox Charity Run, an annual international event in aid of cancer research. Funds were channelled to the Cancer Research Initiatives Foundation (“CARIF”). From thereon, each house continues with their initiatives which include the Coastal Clean Up project, Save the Marine and Tiger Awareness project, Spa & Foot Massage for the Staff; and Bringing Joy to the Children of the Paediatric Oncology Wards of the University Kebangsaan Malaysia Medical Centre (“UKMMC”). The Project Pyramid Season 3 continued with many more CSR activities by all 4 houses and the closure was celebrated with an exciting “Debat Perdana” or Premier Debate by representatives from all houses.

Philanthropy and Volunteerism Through Yayasan Scomi, we provided educational assistance and scholarships for needy students as well as rural school programmes, motivational programmes and provision of basic food for orphans, the poor, the underprivileged, the disabled and the senior citizen communities.

The Group also joined in the effort to spread awareness on breast cancer by sponsoring buses to mobilise the crew of the Breast Cancer Awareness Campaign 2009-2010. Organised by the PRIDE foundation (“Pink Ribbon Deeds”) in collaboration with the National Population and Family Development Board (“LPPKN”) under the Ministry of Women, Family, and Community Development, the campaign was carried out in seven states throughout Malaysia from October 2009 to March 2010.


STATEMENT O N CORPORATE GOVERNANCE

A Statement on Corporate Governance communicates to the stakeholders the philosophy, policies, practices and culture of an organisation in pursuit of its objectives and goals. Towards this purpose, the Board of Directors (“the Board”) of Scomi Marine Bhd (“the Company”) sets out below the various principles and practices that were adopted with regards to the governance framework of the Company and its subsidiaries (“the Group”). In developing its governance framework, the Board was guided by the principles and best practices on structure and processes codified by the Malaysian Code on Corporate Governance (“the Code”).

Introduction The Board remains committed to ensuring and continuously raising the level of corporate governance throughout the Group in the interest of the stakeholders. The goal is always to ensure that the Group remains at the forefront of good corporate governance and is recognised as such.

This Statement sets out the practices and processes that the Group has implemented with respect to each of the principles of corporate governance in its particular circumstances and the extent of compliance with the best practices set out in the Code.

The Board of Directors

The Board The Board remains committed to its responsibility towards governing, guiding and monitoring the direction of the Group within the eventual objective of creating and enhancing long term value aligned to the shareholders’ interest, while taking into account the interests of other stakeholders.

The Company is led and controlled by an effective board. The Board consists of the Chairman and six (6) Directors, including an Alternate Director. The composition of the Board reflects a diversity of skills, experience and competencies in the areas of strategic planning, marketing, industry knowledge, risk management, business operations and finance and accounting that enables the Board to function effectively in leading and directing the Group.

In January 2011, Mr Cheak Boon Heng, the Independent Non-Executive Director and Mr Lim Kwee Siah, the Non-Independent Non-Executive Director, resigned from the Board. Subsequently in February 2011, Mr Liew Willip was appointed to the Board as the Non-Independent Non-Executive Director of the Company.

The Board meets at least a minimum of five (5) times a year, with special meetings convened as and when necessary. The Board is responsible in setting the corporate goals of the Group and business plan which are implemented by the management and monitored by the Board. Timely and periodic review of the Group’s performance and implementation of the business plan by the management are conducted by the Board to assess the progress made towards achieving the overall goals of the Group.

The Board is of the opinion that its current composition and size is adequate to meet the requirements of the Group’s business objectives, and the Independent Non-Executive Directors, of calibre, bring added objectivity to the Board in its decision making.

The responsibilities of the Chairman of the Board, the Executive Director and the Chief Executive/President of the Company are clearly divided to ensure a balance of power and authority.


The Chairman is responsible for ensuring the Board’s overall effectiveness with the Executive Director focusing on branding/marketing, strategy development and human resource development. The Chief Executive/President has the general responsibility for managing operational and business aspects, organisational effectiveness and implementation of directives, strategies and decisions.

A brief of the profile of the Directors is presented on pages 7 to 10 of this Annual Report.

The Board CommitteesThe Board has established and delegated specific responsibilities to three (3) Committees of the Board which operate within clearly defined written Terms of Reference.

The Committees deliberate on issues in-depth before putting up their recommendations to the Board for approval.

The Board Committees are:• Audit and Risk Management Committee

(“ARMC”)• Nomination and Remuneration Committee

(“NRC”)• Options Committee (“OC”)

The Composition of the Board and its Committees are as follows:

Nomination Audit and Risk and Board of Management Options Remuneration Directors Committee Committee Committee

Non-Independant Non-Executive ChairmanTan Sri Asmat Bin Kamaludin C – – C

Independent Non-Executive Directors Dato’ Meer Sadik Bin Habib Mohamed M M – –Vice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd)* M M C MMr Mok Yuen Lok M C – MMr Cheak Boon Heng1 – – M

Non-Independent Non-Executive Directors Lim Kwee Siah2 M – M –Liew Willip3 M – M –

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

Alternate DirectorMadam Loong Chun Nee M – – –

Notes

C: Chairman M: Member

*Appointed as a member of the NRC with effect from 10 March 2011.

1Resigned with effect from 13 January 2011.


3Appointed as a Non-Independent Non-Executive Director with effect from 21 February 2011 and appointed as a member of the OC with effect from 10 March 2011.


The NRCThe NRC which comprises three (3) Non-Executive Directors, a majority of whom are independent, is delegated with the combined responsibilities for selection of Directors to the Board and the Board Committees, and for assessing the Directors on an ongoing basis, and to recommend the remuneration of the Non-Executive Directors and the Chief Executive/President.

Through an established process implemented by the Board, the NRC annually reviews the required mix of skills, experience, competencies and other qualities of the Board, and effectiveness of the Board as a whole, and the core competencies the Non-Executive Directors bring to the Board. In addition, the NRC also evaluates the Chief Executive/President’s performance for approval by the Board.

All assessments and evaluations carried out by the NRC are properly documented.

The salient Terms of Reference of the NRC includes:

a. To recommend to the Board potential candidates for:

• directorship; and • seats on the Board Committees.

b. To conduct an annual review of the required mix of skills and experience and other qualities, including core competencies which the Non-Executive Directors should bring to the Board.

c. 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.

d. From time to time, examine the size of the Board with a view to present recommendation to the Board on the optimum number of directors on the Board to ensure its effectiveness.

e. To ensure that new appointees to the Board undergo an orientation and education programmes.

f. To make recommendation to the Board concerning the re-election of directors under the retirement by rotation provisions in the Company’s Articles of Association.

g. Annually, review and assess the training needs of individual director and propose suitable training programmes to be attended.

h. To develop the Chief Executive Officer’s (“CEO”) mission and objectives, succession for the CEO and annual evaluation of the performance of the CEO.

i. To establish and recommend to the Board a fair and transparent remuneration policy framework designed to attract, retain and motivate individuals of the highest quality.

STATEMENT O N CORPORATE GOVERNANCE cont ’d


j. To conduct, on an annual basis (or when the need arises as in the case of proposing remuneration and/or compensation for a new director), a review and thereon provide advice and recommendations to the Board on all aspects of reward structure accorded to the Executive Directors.

k. To determine and agree on the Company’s policy on the duration of contracts and other matters with the Executive Director.

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

m. To review and, where necessary, updating these Terms of Reference annually or when it deems appropriate.

n. To consider other topics as defined by the Board.

The ARMCThe primary responsibility 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, and governing the appointment of and working relationship with the external auditors.

The ARMC comprises three (3) members which all of them are Independent Non-Executive Directors.

The ARMC Report is set out on pages 46 to 51 of this Annual Report.

The OCThe OC is entrusted with the responsibility of overseeing the administration of the Company’s Employees’ Share Option Scheme (“ESOS”) in accordance with its by-laws (“By-Laws”) and the applicable laws and regulations. The OC comprises one (1) Independent Non-Executive Director, one (1) Non-Independent Non-Executive Director and one (1) Non-Independent Executive Director.

The OC meets as and when required, and at least once during each financial year.

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

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

• To ensure 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 persons’ periodic entitlement to exercise their options as stipulated in the By-Laws.

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

• 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.

Supply of InformationThe Directors are supplied with sufficient and timely information of appropriate quality which allows them to discharge their responsibilities effectively and efficiently. The notice and agenda of meeting together with papers for each item on the agenda are delivered to each Director in advance to enable the Directors’ to review the matters to be deliberated. Re-election of DirectorsIn accordance with the Company’s Articles of Association, at least one-third (1/3) of the Board is subject to retirement by rotation at each Annual General Meeting (“AGM”). Pursuant to Article 86 and 93 of the Articles of Association, Vice Admiral Dato‘ Haron Bin Dato‘ (Dr) Mohd Salleh (Rtd), Dato‘ Meer Sadik Bin Habib Mohamed and Tan Sri Asmat Bin Kamaludin retired from the Board and were re-elected at the 14th AGM held on 28 June 2010.



Board Meetings and AttendanceDuring the financial year ended 31 December 2010, eight (8) Board meetings were held. The attendance record of each Director at the Board meetings and the Board Committee meetings are as follows:

Nomination Audit and Risk and Board Management Options Remuneration Meeting Committee Committee Committee

Tan Sri Asmat Bin Kamaludin 7 / 8 – – 2 / 2Vice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd) 8 / 8 5 / 5 1 / 1 –Dato’ Meer Sadik Bin Habib Mohamed 8 / 8 5 / 5 – –Mr Mok Yuen Lok 6 / 8 5 / 5 – 2 / 2Mr Lim Kwee Siah1 8 / 8 – 1 / 1 –Mr Cheak Boon Heng2 8 / 8 – – 2 / 2Encik Shah Hakim @ Shahzanim Bin Zain 7 / 8 – 1 / 1 –Madam Loong Chun Nee 7 / 8 – – –(Alternate Director to Encik Shah Hakim @ Shahzanim Bin Zain)

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

During the financial year ended 31 December 2010, the Directors have attended individually or collectively various programmes, organised by the Group and the professional bodies on areas relevant to the Group’s business.

Below is the summary of the training programmes, seminar and conference attended by the Directors during the financial year 2010:

Key Areas Topics

Financial & Taxation • Finance for Directors and Executive Management • IAS 39 Replacement Project - Classification & Measurement,

Impairment Methodology and Hedging • Recent Tax Cases and Updates • Financial Institutions Directors’ Education Programme • Financial Industry Conference • The Challenges of Implementing FRS 139 • National Tax Conference 2010

Notes




Key Areas Topics

Oil & Gas Industry • Asian Investor Conference 2010: Energy, Offshore and Maritime

• 15th Asia Oil and Gas Conference (AOGC) Corporate Governance • Promoting the Corporate Governance Agenda – Raising

the Bar • Fraud: early warning signals • Shareholders - value creation or reduction • Audit Committee Institute Roundtable discussion titled:

Going Forward: Risk & Reform - Implicaiton for Audit Oversight

Business Management • Implementing Effective Project Strategies: Case Study on& Economics the Monorail Project for Mumbai • Eurozone Debt Crisis • Should the RMB be revalued? What will be the impact • Make Accounting Your Strategic Business Weapon • Competency as the Backbone of Transformation • Directors Training • CEO Forum 2010 - Approaching 2020 Malaysia’s Decade for

Growth? • India Economic Summit

Directors’ RemunerationThe NRC is also responsible for reviewing the remuneration of the Non-Executive Directors and the Chief Executive/President, whereupon recommendations are made to the Board for approval and implementation. In this respect, the NRC adopts a fair and transparent remuneration policy and packages at sufficient level such that the Group can attract and retain the individuals with skills and experience needed to manage the Group’s business successfully.

The Non-Executive Directors’ remuneration is based on standard agreed fees, in addition to allowances for attendance at meetings of the Board and Board Committees. The Directors (with the exception of Tan Sri Asmat Bin Kamaludin and Mr Liew Willip) are also entitled to share options under the Company’s ESOS.



Directors’ Remuneration cont’d

All Directors who served during the financial year ended 31 December 2010 will be paid an annual directors’ fee subject to and upon the shareholders’ approval at the forthcoming 15th AGM. The aggregate remuneration paid or payable to the Directors of the Group who served during the financial year, and the bands, are as follows:

Executive Non-Executive Directors Directors Total RM’000 RM’000 RM’000 Salaries – 240.0 240.0Fees – 332.0 332.0Allowances – 68.0 68.0Bonuses – – –Company’s contribution to Employee Provident Fund – 40.8 40.8Estimated value of benefit-in-kind – – –

Total – 680.8 680.8

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

Executive Non-Executive Directors Directors Total

RM0 to RM50,000 – – –RM50,001 to RM100,000 – 6 6above RM100,000 – 1 1


Relationship with ShareholdersThe Board takes responsibility for ensuring that relevant information is made available to the 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 via the Company’s website at www.scomimarine.com.my. Any person wishing to make any enquiry or request for information are able to do so via communication channel provided on the Company’s website.

Additionally, the shareholders are encouraged to attend and participate in the AGM and any extraordinary general meetings, as they avail opportunities for the shareholders to access and communicate with the Board.

Accountability and Audit

Financial ReportingThe Board takes responsibility to give a true and fair view of the state of affairs of the Group in the financial statements, and to present a balanced and understandable assessment on the Group’s position and prospects in all its reports to regulatory authorities as well as the shareholders. Prompt public announcement of the periodic financial reports and annual audited financial statements, and regular press releases reflect the Board’s commitment to provide timely and transparent information to the public. Additionally, further information touching on the business, operations, and prospect and outlook of the Group are provided in the annual report.

In the discharge of such duty, the Board is assisted by the ARMC.

The Statement of Responsibility by Directors in respect of the preparation of the annual audited financial statements for the financial year ended 31 December 2010 is set out in page 55 of this Annual Report.

Internal ControlTaking cognisance of the varied business and geographical spread of the Group which exposes it to a wide range of risks whereby the occurrence of any event may give rise to unanticipated or unavoidable losses, the Board maintains and continuously strengthens a sound system of internal control within the Group with a view to safeguard shareholders’ investment and the Group’s assets.

However, the Board also recognises that the system of internal control can only provide reasonable, but not absolute, assurance against failure to meet business objectives, errors, losses, fraud or breaches of laws or regulations.

The ARMC reviews the internal control activities on quarterly 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 the course of such process, the ARMC also reviews the adequacy, integrity and effectiveness of the internal control system.

The Statement on Internal Control is set out in pages 42 to 45 of this Annual Report.

Relationship with AuditorsThe Board, through the ARMC, maintains an appropriate, formal and transparent relationship with the Company’s internal and external auditors.

Meetings with the external auditors are held to further discuss the Group’s audit plans, audit findings, financial statements as well as to seek their professional advice on other related matters.

The ARMC meets the external auditors without the presence of Executive Director and the management, whenever necessary, and at least twice a year.


STATEMENT ON INTERNAL CONTROL

Introduction The duty of the Board of Directors, amongst others, is to maintain a sound system of internal control to safeguard shareholders’ investment and the assets of the Company’s Group. In compliance with Paragraph 15.26(b) of the Main Market Listing Requirements (“Listing Requirements”) and Practice Note 9 of Bursa Malaysia Securities Berhad (“Bursa Malaysia”), the Board of Directors is pleased to set out below the Statement of Internal Control of the Company as a group (“the Group”).

The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard shareholders’ investments and the Group’s assets.

Bursa Malaysia’s revamped Listing Requirements require directors of listed companies to include a statement in the annual reports on the state of internal controls. Bursa Malaysia’s Statement on Internal Controls: Guidance for Directors of Public Listed Companies (“Guidance”) provides guidance with these requirements. Set below is the Board’s Internal Control statement, which has been prepared in accordance with this Guidance.

Responsibility of the BoardThe Board, in ensuring its responsibility to ensure the existence of sound systems of internal control within the Group, continuously reviews and evaluates the adequacy and integrity of the systems.

Notwithstanding the above, the Board recognises that such systems have inherent limitations and these are designed to manage and control, rather than eliminate the risks of failure towards achieving the Group’s business objectives. As such, the systems of internal control can provide only reasonable, but not absolute, assurance.

Risk ManagementTowards managing risk, there is an appropriate risk assessment and evaluation framework together with an appropriate policy that serves as a guide with regards to:

a. identifying, assessing, treating, monitoring and reporting of risks and the corresponding controls, and

b. the roles and responsibilities of each level of management in managing the risks.

The Enterprise Risk Management Framework was developed with the following underlying principles:

a. risk management activities are to be embedded in the organisation’s business practices and not be regarded as isolated activity;

b. the management of risks is aimed towards achieving an appropriate balance between realizing opportunities for gains while minimising losses;

c. that every employee has a responsibility to manage risks within their areas of responsibility; and


d. that regular monitoring and reporting activities are essential for ensuring accountability and responsibility for managing risks.

The activities and deliverables include identifying, evaluating, treating the key risks and providing quarterly updates to the Audit and Risk Management Committee.

Internal Control SystemInternal control is a process effected jointly by the Board and the Management, with the Management assuming the role to implement the Board policies on risk and control.

The Group’s system of internal control is designed, operated and monitored in accordance with the Group’s business objectives, internal organisation and the external environment in which it operates.

Internal OrganizationThe Group has a well defined organisational structure and methods of assigning authority and responsibility to its specific requirements. It also ensures check and balances through segregation of duties.

Clear reporting lines and authority limits govern the approval process, supported by a written Delegated Authority Limits and other policies, processes and procedures.

Clear Objectives New corporate goal for each financial year is developed and presented to the board for approval.

The execution strategy towards achieving the corporate goal is set in the corporate and individual Balanced Scorecard that concentrates focus and resources under the four dimensions of financial, customer, internal process and learning and growth, resulting in a strategy map that provides a framework for the measurement of performance.

An annual business plan and budget is developed, presented and approved by the Board before implementation.

The performance of the Group against budget is reviewed, where there are significant variances, appropriate corrective actions are taken. The result of such performance review is reported to the Audit and Risk Management Committee and the Board on a quarterly basis.


STATEMENT ON INTERNAL CONTROL cont ’d

Delegated Authority Limits (“DAL”)The Board in respect of budgeted items for a particular financial year delegates appropriate authority to the management via a written DAL.

The DAL is implemented in accordance with the Group’s policies and procedures, and in compliance with the applicable statutory and regulatory requirements.

The DAL is regularly reviewed and updated to ensure relevance to the Group’s business and operations.

Policies and ProceduresWhere relevant, internal policies and procedures such as standard operating procedures and people policy are formalized in writing to ensure compliance with the internal control system and the applicable statutory and regulatory requirements.

Where internal policies and procedures are documented, regular reviews are performed to ensure that they remain current and relevant.

Quality, Safety and Environmental PolicyThe Group places the highest priority and is committed to provide all our customers with services that meet their expectations in relation to Quality, Safety and Environmental Protection.

The high standard of work is achieved by operating an integrated Quality, Safety and Environmental Management System (“QHSE”) that meets the requirements of the ISO 9001:2008 (“Quality”) Standards, the ISM Code for Safe Operation of Ships and Pollution Prevention, OHSAS 18001:2007 and the ISO 14001:2004 Environmental Standards.

The ISPS (“International Ship & Port Facility Security”) Code is implemented for vessel operations and certified by ISSC (“International Ship Security”).

Information and CommunicationComprehensive Board papers, which include financial and non-financial information covering risk, product and service quality, market share and other key operational issues are provided to the Board for monitoring as well as to facilitate decision making.

A structured internal communication system is implemented to keep the employees in all locations informed of relevant development on the business and other matters involving the Group.

The Group has in place a Whistleblower Policy & Framework, which provides an avenue for the employees to raise concerns internally or report any breach or suspected breach of regulations and other improprieties.


Internal AuditAs part of its broader effort to ensure the system of checks and balances are operating as designed, the outsourced internal audit functions of the Group (“the Internal Auditors”), independent of management and operations, and with no cross auditing within the organization, provides assurance on the adequacy and integrity of the internal control system.

Regular management review of the key business areas is conducted pursuant to an internal audit plan, for which the coverage and scope are reviewed by the ARMC and approved by the Board annually before implementation. Report on management reviews, incorporating the management’s response and actions plans, are tabled to the ARMC for review, with status update on the action plans on quarterly basis.

Review or appraisal of the performance of the Internal Auditors is also done by the ARMC annually. In addition to the internal audit function, the ARMC also receives an Audit Committee Report and Management Letter from the external auditors that primarily focus on financial controls. Where incidents of non-compliance, appropriate corrective actions and relevant procedures have been taken.

Review of This StatementAs required by Paragraph 15.23 of the Listing Requirements of Bursa Malaysia, the External Auditors have reviewed this Statement on Internal Control. Their review was performed in accordance with Recommended Practice Guide (“RPG”) 5 issued by the Malaysian Institute of Accountants.

Based on their review, the External Auditors have reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal control of the Group. RPG 5 does not require the External Auditors to and they did not consider whether the Statement covers all risks and controls, or to form an opinion on the effectiveness of the Group’s risk and control procedures.


AUDIT AND RISK MANAGEMENT COMMIT TEE REPOR T

The Board of Directors (“the Board”) of Scomi Marine Bhd (“the Company”) and its subsidiaries (“the Group”) is pleased to present the Report of the Audit and Risk Management Committee (“ARMC”) for the financial year ended 31 December 2010.

Terms of Reference of the ARMC

ObjectiveThe 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 the applicable laws, regulations, rules, directives and guidelines.

Balance and Compositiona. The members of the ARMC are to be

appointed by the Board and shall comprise at least three (3) members, all of whom must be Non-Executive Directors with a majority of them being Independent Directors.

b. None of the members of the ARMC shall be an Alternate Director.

c. A majority of the members of the ARMC 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 qualification as defined by the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”).

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

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

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

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

Powers of the ARMCa. In carrying out its duties and responsibilities,

the ARMC shall, at the expense of the Company:

i. have the authority to investigate any matter within its Terms of Reference;

ii. have full, free and unrestricted access to the Group’s records, properties, personnel and other resources;

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

iv. be able to obtain independent professional or other advice in furtherance of its duties; and

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


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

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

Duties and Responsibilities of the ARMCa. To consider and recommend to Board the

appointment of the external auditors, the audit fee and any questions of resignation or dismissal.

b. Pre-approve all non-audit services to be provided by the independent auditors to the Company, and regularly review:

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

ii. the non-audit services pre-approved in accordance with the ARMC’s policies and procedures; and

iii. the fees paid to the external auditors for non-audit services.

c. To monitor regular rotation of audit partners by the independent auditors.

d. To discuss with the external auditors before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved;

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

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

i. any changes in accounting policies and practices;

ii. significant adjustments arising from the audit;

iii. litigation that could affect results materially;

iv. the going concern assumption; and

v. compliance with accounting standards and other legal requirements.

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

h. To review the external auditors’ management letter and management response;


AUDIT AND RISK MANAGEMENT COMMIT TEE REPOR T cont ’d

Duties and Responsibilities of the ARMC cont’d

i. In relation to the internal audit function:

i. 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;

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

iii. review the appraisal or assessment of the performance of the internal audit function;

iv. review the independence of the internal audit function;

v. approve any appointment or termination of senior staff members or the internal audit function; and

vi. take cognisance of resignation of internal audit staff members and provide the resigning staff member an opportunity to submit reasons for resigning.

j. To consider and report back to the Board any related party transactions and conflict of interests situation that may arise within the Group including any course of conduct that raises questions of management integrity.

k. To consider the major findings of internal investigations and management 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 employees’ share options scheme (“ESOS”) complies with the criteria disclosed to the employees.

n. To establish procedures for the receipt, retention and treatment of complaints on accounting, internal accounting controls or audit matters, as well as for confidential, anonymous submission by the employees of concerns regarding questionable transactions and behavior.

o. To review and consider the appropriateness and adequacy of internal processes for risk oversight and management. In particular, the ARMC shall:

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

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

iii. establish the roles and respective accountabilities of the Board, the Board Committees and the management in managing risks;


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

v. receive regular reports on the risk profile, material risks (both financial and non-financial) faced by the Group and action plans taken by the management to mitigate the risks; and

vi. review the appropriateness of management response to key risk areas.

p. In relation to major business investment proposals and/or feasibility:

i. to review and evaluate the viability of the proposal/feasibility study prepared 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;

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

iii. to make recommendation to the Board on the appropriate course of action to take.

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

Meetings and Minutesa. The ARMC shall meet at least four (4)

times during a financial year, but additional meetings may be called at any time at the discretion of the Chairman. 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 once a year the ARMC 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, for drawing up and circulating the agenda and notice to all ARMC members at least seven (7) days prior to each meeting. If there is a unanimous consent by the members present at the meeting, a short notice shall suffice.

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


AUDIT AND RISK MANAGEMENT COMMIT TEE REPOR T cont ’d

Summary of Activities For The YearThe following activities were carried out by the ARMC in the financial year in the performance of its duties and responsibilities as set out in the ARMC’s Terms of Reference:

a. reviewed and recommended to the Board the nomination and re-appointment of the external auditors;

b. reviewed and discussed with the external auditors the nature and scope of their audit;

c. conducted two (2) meetings with the external auditors without the presence of the executive board members and management;

d. reviewed the audit plan and scope of work for the Group;

e. reviewed the audit reports, which incorporated audit findings, recommendations and management response for the Group;

Members and Meeting AttendanceThe members of the ARMC during the financial year ended 31 December 2010 and their attendance at meeting are as follows:

Attendance Name ARMC Designation (attended / held)

Mok Yuen Lok Chairman Independent 5 / 5 Non-Executive Director

Vice Admiral Dato’ Haron Member Independent 5 / 5 Bin Dato’ (Dr) Mohd Salleh (Rtd) Non-Executive Director

Dato’ Meer Sadik Bin Habib Mohamed Member Independent 5 / 5 Non-Executive Director

During the financial year ended 31 December 2010, a total of five (5) meetings were held on 22 February 2010, 20 April 2010, 18 May 2010, 23 August 2010 and 24 November 2010 respectively.


f. reviewed the external auditors’ management letters and management response;

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

h. reviewed the status of total planned versus actual audit projects performed throughout the year;

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

j. reviewed and verified the related party transactions and provide recommendation to the Board;

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

l. reviewed and evaluated risk considerations in relation to major business investment proposals and adequacy of action plans to mitigate risks identified.

Internal Audit FunctionThe Group’s internal audit function is outsourced to an external service provider of internal audit services, which is independent of management and operations (“the Internal Auditors”). The Internal Auditors undertakes independent and regular review of the system of internal control so as to provide reasonable assurance that the system operates satisfactorily and effectively. The Internal Auditors reports directly to the ARMC.

The scope of internal audit review covers all key business lines and operations of the Group. For the financial year ended 31 December 2010, the activities included the following:

i. Report on Management Review of PT Rig Tenders Indonesia Tbk.

The ARMC continues to uphold the need for a sound system of internal control covering all material aspects of the Group’s activities, and is committed to further enhance and improve the system of internal control.

All internal audit activities for financial year 2010 were conducted by the Internal Auditors. The costs incurred by the Group for the internal audit function in 2010 amounted to RM62,133.12, excluding accommodation, travel and related costs.


ADDITIONAL INFORMATION

Material Contracts involving Directors’ and Major Shareholders’ Interests Other than contracts entered into and disclosed as Related Party Transactions in Note 36 to the Financial Statements, there are no other material contracts (not being in the ordinary course of business), including contracts relating to loans of the Company, involving the Directors’ and major shareholders’ interests, either still subsisting at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial year.

Share Buy-BackThe following are the share buy-back transactions during the year under review ended 31 December 2010. The purchase price of shares is the average price for all shares purchased in the month and the total purchase price includes incidental costs. All shares have been maintained as treasury shares and there has been no resale of the Company’s treasury shares nor have there been any shares cancelled during the year under review.

Average Total No of Shares Lowest Price Highest Price Purchase Purchase Price Bought Back RM RM RM RM

Balance as at 1 January 2010 5,000 – – 0.69 3,435August 2010 1,000 – – 0.53 531February 2011 1,000 – – 0.58 581

Balance as at 30 April 2011 7,000 – – 0.65 4,547

Utilisation of ProceedsThe proceeds amounting to SGD143.5 million (equivalent to approximately RM344.5 million based on the exchange rate of SGD1.00 = RM2.40) from the disposal of 205,000,000 ordinary shares in CH Offshore Ltd by Scomi Marine Services Pte Ltd, a wholly owned subsidiary of the Company, which has been completed on 28 April 2010, was utilised as follows:

SGD’000 RM’000

Repayment of borrowings 136,732 328,157Actual expenses incurred 3,865 9,275Working capital 2,903 7,118

143,500 344,550

Non-Audit FeesThe amount of non-audit fees incurred for services rendered to the Company and its subsidiaries by the Company’s Auditors, or a firm or company affiliated to the Auditors firm for the financial year ended 31 December 2010 is RM133,000.


Recurrent Related Party Transactions (“RRPT”)The Company had obtained from its shareholders the mandate for the following RRPT at its Annual General Meeting held on 28 June 2010 and the actual value transacted for the period from 28 June 2010 to 30 April 2011 is as follow:

Value of the Actual Value Transacting Parties Mandate Granted TransactedOur Group Related Parties Nature of Transactions RM RM

CH Logistics Pte Ltd Chuan Hup Agencies Provision of management services by 1,000,000 388,000CH Ship Management Pte Ltd (Private) Ltd Chuan Hup Agencies (Private) LtdGoldship Private Limited

PT Rig Tenders Indonesia Tbk Chuan Hup Agencies Provision of agency services by *400,000 191,000 (Private) Ltd PT Rig Tenders Indonesia Tbk

CH Logistics Pte Ltd Quijul Pte Ltd Provision of rental space bearing postal 300,000 225,000CH Ship Management Pte Ltd address of 390 Jalan Ahmad Ibrahim, Singapore 629156 totalling 7,016 sq. ft at monthly rental of S$1.35 per sq. ft. by Quijul Pte Ltd

Scomi Marine Serivces Pte Ltd Chuan Hup Holdings Ltd Provision of secretarial services by 120,000 54,000CH Logistics Pte Ltd Chuan Hup Holdings LtdCH Ship Management Pte LtdGoldship Pte LtdSea Master Private LimitedGrundtvig Marine Pte Ltd

Gemini Sprint Sdn Bhd Chuan Hup Agencies Provision of management services by **330,000 **226,000 (Private) Ltd Chuan Hup Agencies (Private) Ltd

Scomi Marine Bhd Scomi Group Bhd Service Level Agreement between 400,000 260,000 Scomi Marine Bhd and Scomi Group Bhd

Scomi Marine Bhd Scomi Solution Sdn Bhd Provision of services rendered by Scomi Solution 50,000 28,000 Sdn Bhd in relaiton to SAP implementation

PT Batuah Abadi Lines Beauford Marine Pte Ltd Provision of administrative and support services 300,000 165,000 by Beauford Marine Pte Ltd

Notes

* Apportioned according to 80.54% interest held by Scomi Marine Bhd in PT Rig Tenders Indonesia Tbk.** Apportioned accordingly to 51% interest held by Scomi Marine Bhd in Gemini Sprint Sdn Bhd.


STATEMENT ON DIREC TORS’ RESPONSIBIL IT Y

The Directors are required by the Companies Act, 1965 (“the Act”) to prepare the Financial Statements of Scomi Marine Bhd (“the Company”) for each financial year which have been properly drawn up in accordance with the provisions of the Act, the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and the applicable Financial Reporting Standards in Malaysia.

The Directors are responsible to ensure that the Financial Statements give a true and fair view of the state of affairs of the Company and its subsidiaries (“the Group”) at the end of the financial year and of the results and cash flows 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 keep accounting records which disclose with reasonable accuracy the financial position of the Group which enable them to ensure that the Financial Statements comply with the Act.

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

The financial statements of the Company for the financial year ended 31 December 2010 are set out on pages 58 to 143 of this Annual Report.


58 Directors’ Report 62 Income Statements 63 Consolidated Statement of Comprehensive Income 64 Consolidated Statement of Financial Position 66 Consolidated Statement of Changes in Equity 67 Company Statement of Changes in Equity 68 Statements of Cash Flow 71 Notes to the Financial Statements 141 Statement by Directors 141 Statutory Declaration 142 Independent Auditors’ Report

CONTINUOUSGROWTH


F INANCIAL STATEMENTS


D I R E C TO R S’ R E P O R T

The Directors hereby submit their report with the audited financial statements of the Group and Company for the financial year ended 31 December 2010.

Principal ActivitiesThe principal activities of the Company are investment holding and the provision of management services.

The principal activities of the Group consist of marine transportation and other shipping related services. 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 (201,668) (242,694)

Attributable to:Owners of the Company (204,034) (242,694)Non-controlling interests 2,366 –

(201,668) (242,694)

DividendsThere were no dividends on ordinary shares paid or declared by the Company since the end of the Company’s previous financial year.

The Directors do not recommend any dividend in respect for the financial year ended 31 December 2010.

Reserves and ProvisionsMaterial transfers to or from reserves and provisions during the financial year are disclosed in the financial statements.

Treasury SharesDuring the financial year, the Company repurchased 1,000 units of its ordinary shares from the open market on Bursa Malaysia for a total consideration of RM490. The average price paid for the shares repurchased was approximately RM0.49 per share.

Details of the Treasury shares are set out in Note 31 to the financial statements.

Employees’ Share Option SchemeThe Company implemented an Employees’ Share Option Scheme (“ESOS”) on 18 October 2005 for a period of 10 years. The ESOS is governed by the By-Laws which were approved by the shareholders on 26 September 2005.

Details of the ESOS are set out in Note 30 (b) to the financial statements.


Significant Events During the Financial YearSignificant events during the financial year are disclosed in Note 43 to the financial statements.

Significant Events after the end of the Reporting PeriodSignificant events after the end of the reporting period are disclosed in Note 44 to the financial statements.

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

Tan Sri Datuk Asmat Bin KamaludinVice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd)Dato’ Meer Sadik Bin Habib MohamedMok Yuen LokShah Hakim @ Shahzanim Bin ZainLoong Chun Nee (alternate to Shah Hakim @ Shahzanim Bin Zain) Liew Willip (appointed on 21 February 2011)

Lim Kwee Siah (resigned on 28 January 2011)

Cheak Boon Heng (resigned on 13 January 2011)

Directors’ InterestsAccording to the Register of Directors’ Shareholdings, particulars of interests of Directors who held office at the end of the financial year in shares and options over shares in the Company are as follows: Number of ordinary shares of RM1.00 each in the Company At At 1.1.2010 Bought Sold 31.12.2010

Direct Interest in the CompanyTan Sri Datuk Asmat Bin Kamaludin – 50,000 – 50,000Dato’ Meer Sadik Bin Habib Mohamed 42,783,996 – – 42,783,996Mok Yuen Lok 20,000 – – 20,000Shah Hakim @ Shahzanim Bin Zain 11,300,000 (11,300,000) –Loong Chun Nee 130,000 – – 130,000 Indirect Interest in the CompanyDato’ Meer Sadik Bin Habib Mohamed1 647,404 – – 647,404Shah Hakim @ Shahzanim Bin Zain2 313,393,478 – – 313,393,478Tan Sri Datuk Asmat Bin Kamaludin3 – 10,000 – 10,000

Notes1 Indirect interest in shares held through spouse, Datin Zarida Binti Noordin.2 Deemed interest by virtue of Section 6A(4) of the Companies Act, 1965 through Shah Hakim @ Shahzanim Bin Zain’s shareholding in Kaspadu Sdn. Bhd., which holds an

interest in Scomi Group Bhd, which in turn is a substantial shareholder of Scomi Marine Bhd. 3 Indirect interest in shares held through spouse, Puan Sri Habibah Mohd Salleh.


Directors’ Interests cont’d

Number of options over ordinary shares of RM1.00 each in the Company Exercise price At At RM/share 1.1.2010 Granted Exercised 31.12.2010

Direct Interest in the CompanyVice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd) 1.15 600,000 – – 600,000Dato’ Meer Sadik Bin Habib Mohamed 1.15 600,000 – – 600,000Mok Yuen Lok 1.15 600,000 – – 600,000Shah Hakim @ Shahzanim Bin Zain 1.15 600,000 – – 600,000Loong Chun Nee 1.15 4,450,000 – – 4,450,000

By virtue of the above Directors’ interests in shares and options in the Company, the Directors are deemed to have interest in shares of all the subsidiaries to the extent of the Directors’ interests in the Company.

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 and options over shares in the Company, or shares and options over shares of its related corporations during the financial year.

Directors’ BenefitsDuring 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 to eligible employees including certain Directors of the Company pursuant to the Company’s Employees’ Share Option Scheme.

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 11 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 36 to the financial statements. Statutory Information on the Financial StatementsBefore 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.

D I R E C TO R S’ R E P O R T cont ’d


Statutory Information on the Financial Statements cont’d

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.

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) 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, other than the impairment of goodwill, impairment of receivables, impairment loss on investment in a subsidiary and impairment loss on investments in associates as disclosed in the income statement and Note 8 to the financial statements; and

(b) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature 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, except as disclosed in Note 44 to the financial statements.

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

Signed on behalf of the Board of Directors in accordance with their resolution dated 29 April 2011.

Tan Sri Datuk Asmat Bin Kamaludin Shah Hakim @ Shahzanim Bin Zain


Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Continuing operationsRevenue 5 78,859 14,610 4,400 22,235Cost of sales 6 (71,454) (10,197) – –

Gross profit 7,405 4,413 4,400 22,235Other operating income 7 166 577 787 577

Administrative expenses- impairment loss on investment in a subsidiary – – (197,871) –- impairment loss on investments in associates – – (13,632) –- others (8,951) (6,244) (7,411) (7,399)

(8,951) (6,244) (218,914) (7,399)

Other operating expenses 8 (25,501) (11,376) (28,884) (8,463)

Finance costs 9 (1,240) (1,831) (83) (8)Share of results of associates 17 (5,215) (3,527) – –

(Loss)/profit before taxation 10 (33,336) (17,988) (242,694) 6,942Taxation 12 (567) (20) – –

(Loss)/profit from continuing operations (33,903) (18,008) (242,694) 6,942

Discontinuing operationsProfit after taxation from discontinuing operations 25(i)(a) 33,103 98,751 – –Gain on disposal of an associate 25(i)(a) 59,172 – – –Impairment of goodwill 25(i)(a) (260,040) (148,649) – –

(167,765) (49,898) – –

(Loss)/profit for the financial year (201,668) (67,906) (242,694) 6,942

Attributable to:Owners of the Company (204,034) (71,665) (242,694) 6,942Non-controlling interests 2,366 3,759 – –

(Loss)/profit for the financial year (201,668) (67,906) (242,694) 6,942

Loss per share from continuing and discontinuing operations attributable to the owners of the Company (sen)

Basic loss per share- From continuing operations 13 (4.78) (2.62)

- From discontinuing operations 13 (23.05) (7.15)

Diluted loss per share- From continuing operations 13 (4.78) (2.62)

- From discontinuing operations 13 (23.05) (7.15)

The notes set out on pages 71 to 140 form an integral part of, and should be read in conjunction with, these financial statements.

I N CO M E S TAT E M E N T S for the f inancia l year ended 31 December 2010


Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 (Loss)/profit for the financial year (201,668) (67,906) (242,694) 6,942

Other comprehensive loss:Cash flow hedges 3,781 – – –Currency translation differences (56,977) (11,991) – –

Total comprehensive (loss)/income for the year (254,864) (79,897) (242,694) 6,942

Attributable to:Owners of the Company (252,806) (82,907) (242,694) 6,942Non-controlling interests (2,058) 3,010 – –

Total comprehensive (loss)/income for the year (254,864) (79,897) (242,694) 6,942


CO N S O L I DAT E D S TAT E M E N T O F CO M P R E H E N S I V E I N CO M E for the f inancia l year ended 31 December 2010



Non-current assets

Property, plant and equipment 15 66,798 659,227 809 676Investment in subsidiaries 16 – – 572,481 2,667Investment in associates 17 3,225 296,055 3,225 16,416Amount due from a subsidiary 18 – – 40,575 785,116Goodwill 19 4,685 294,915 – –Deferred tax assets 20 – 60 – –Receivables 21 – 41,904 – 25,081Fixed deposits pledged 22 – 1,780 – –

74,708 1,293,941 617,090 829,956

Current assets

Receivables, deposits and prepayments 23 20,840 188,679 9,710 33,976Short term deposits, cash and bank balances 24 12,666 86,532 11,282 10,792

33,506 275,211 20,992 44,768Assets classified as held for sale 25 755,668 12,686 – –

789,174 287,897 20,992 44,768

Less: current liabilities

Payables 26 32,429 89,744 7,884 12,187Borrowings 27 15,734 139,720 10,030 29Derivative financial instruments 28 1,139 – – –Financial guarantee liabilities 29 – – 221 –Current tax liabilities 83 1,672 – –

49,385 231,136 18,135 12,216Liabilities classified as held for sale 25 123,219 – – –

172,604 231,136 18,135 12,216

Net current assets 616,570 56,761 2,857 32,552

691,278 1,350,702 619,947 862,508

CO N S O L I DAT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N as at 31 December 2010



Capital and reserves attributable to owners of the Company

Share capital 30 733,009 733,009 733,009 733,009Treasury shares 31 (4) (3) (4) (3)Share premium 32 121,913 121,913 121,913 121,913Other reserves 33 (122,982) (69,358) 5,929 5,765(Accumulated losses)/ retained earnings 34 (103,723) 100,311 (240,955) 1,739

Equity and reserves attributable to the owners of the Company 628,213 885,872 619,892 862,423Non-controlling interests 46,914 50,383 – –

Total equity and reserves 675,127 936,255 619,892 862,423

Non-current liabilities

Borrowings 27 15,718 412,226 55 85Provision for retirement benefits 35 – 1,741 – –Deferred tax liabilities 20 433 480 – –

16,151 414,447 55 85

691,278 1,350,702 619,947 862,508



Attributable to owners of the Company Retained earnings/ Exchange Share (accumu- Non- Share Treasury Share fluctuation option Hedging lated controlling Total Note capital shares premium reserve reserve reserve losses) Total interests equity RM’000 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 733,009 (3) 121,913 (75,123) 5,765 – 100,311 885,872 50,383 936,255- effects from adoption of FRS 139 42 – – – – – (5,016) – (5,016) (1,411) (6,427)

- as restated 733,009 (3) 121,913 (75,123) 5,765 (5,016) 100,311 880,856 48,972 929,828

Total comprehensive (loss)/income for the financial year – – – (51,994) - 3,222 (204,034) (252,806) (2,058) (254,864)

Purchase of Treasury shares 31 – (1) – – – – – (1) – (1)

Share options- value of employee services 30(b) – – – – 164 – – 164 – 164

At 31 December 2010 733,009 (4) 121,913 (127,117) 5,929 (1,794) (103,723) 628,213 46,914 675,127

Attributable to owners of the Company Exchange Share Non- Share Treasury Share fluctuation option Hedging Retained controlling Total Note capital shares premium reserve reserve reserve earnings Total interest equity RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2009 733,009 (2) 121,913 (63,881) 3,978 – 177,473 972,490 48,096 1,020,586

Total comprehensive (loss)/income for the financial year – – – (11,242) – – (71,665) (82,907) 3,010 (79,897)

Dividend paid by a subsidiary – – – – – – – – (723) (723)

Interim dividend 14 – – – – – – (5,497) (5,497) – (5,497)

Share options- value of employee services 30(b) – – – – 1,787 – – 1,787 – 1,787

Purchase of Treasury shares 31 – (1) – – – – – (1) – (1)

At 31 December 2009 733,009 (3) 121,913 (75,123) 5,765 – 100,311 885,872 50,383 936,255

CO N S O L I DAT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Yfor the f inancia l year ended 31 December 2010


Non-distributable Retained earnings/ Share Treasury Share Share option (accumulated Note capital shares premium reserve losses) Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2010 733,009 (3) 121,913 5,765 1,739 862,423

Total comprehensive loss for the financial year – – – – (242,694) (242,694)

Share options- value of employees services 30(b) – – – 164 – 164

Purchase of treasury shares 31 – (1) – – – (1)

At 31 December 2010 733,009 (4) 121,913 5,929 (240,955) 619,892

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

At 1 January 2009 733,009 (2) 121,913 3,978 294 859,192

Total comprehensive income for the financial year – – – – 6,942 6,942

Interim dividend 14 – – – – (5,497) (5,497)

Share options- value of employees services 30(b) – – – 1,787 – 1,787

Purchase of treasury shares 31 – (1) – – – (1)

At 31 December 2009 733,009 (3) 121,913 5,765 1,739 862,423


CO M PA N Y S TAT E M E N T O F C H A N G E S I N E Q U I T Yfor the f inancia l year ended 31 December 2010


Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Cash flows from operating activities(Loss)/profit for the financial year (201,668) (67,906) (242,694) 6,942

Adjustments for:Depreciation of property, plant and equipment 47,968 57,213 156 156Gain on disposal of property, plant and equipment (1,982) (7,573) – –Property, plant and equipment written off 44 18 44 18Finance costs 14,494 28,438 83 8Impairment loss on investments in associates – – 13,632 –Impairment loss on investment in a subsidiary – – 197,871 –Impairment loss on goodwill 260,040 148,649 – –Taxation expense 6,872 6,342 – –Amortisation of prepaid charter hire expense 5,986 6,547 – –Amortisation of loan expenses 6,296 1,654 – –Share option expenses 164 1,787 164 1,337Amortisation of loan facility fee 193 223 – –Provision for retirement benefits 442 (451) – –Share of results in associated companies (6,175) (43,577) – –Share of results in a joint venture (1,154) – – –Interest income (527) (983) (739) (19)Gain on disposal of associated company (59,172) – – –Impairment of receivables 23,282 13,212 24,263 7,004Unrealised foreign exchange loss 3,837 1,092 4,422 1,483Dividend income – – (4,400) (22,235)Impairment of insurance claims receivables 200 13,328 – –

Operating cash flows before working capital changes 99,140 158,013 (7,198) (5,306)

S TAT E M E N T S O F C A S H F LO W for the f inancia l year ended 31 December 2010



Changes in working capital:Receivables, deposits and prepayments 19,463 (19,122) 6,854 8,087Payables (56,567) (4,766) (4,303) (2,803)

Cash generated from/(used in) operations 62,036 134,125 (4,647) (22)

Retirement benefits paid (193) (130) – –Tax paid (5,403) (8,534) – –

Net cash from/(used in) operating activities 56,440 125,461 (4,647) (22)

Cash flows from investing activities

Proceeds from disposal of property, plant and equipment 15,086 14,704 – –Dividends received from a subsidiary – – 4,000 21,955Dividends received from associated companies 400 10,475 400 280Interest received 527 983 206 19Proceeds from disposal of investment in associated company 344,550 – – –Purchase of property, plant and equipment (i) (28,593) (45,920) (333) (11)Acquisition of investment in associated company (18,610) (4,990) – (4,990)Increased in share capital in associated company (841) (49) (841) (49)Additional investment in subsidiary 16 (4,197) – (9,000) –Decrease in amount due by subsidiaries – – – 1,642Repayment of advances from associated companies 818 1,550 818 1,550

Net cash (used in)/from investing activities 309,140 (23,247) (4,750) 20,396



Cash flows from financing activities

Drawdown from borrowings 37,771 – 10,000 –Repayment of borrowings (454,501) (120,504) (29) (27)Interest paid on borrowings (14,494) (28,438) (83) (8)Dividends paid – (15,759) – (15,759)Dividend paid to minority shareholders of subsidiary – (723) – –Treasury shares (1) (1) (1) (1)Increased in fixed deposits pledged – (2,023) – –

Net cash (used in)/from financing activities (431,225) (167,448) 9,887 (15,795)

Net (decrease)/increase in cash and cash equivalents (65,645) (65,234) 490 4,579Cash and cash equivalents at beginning of financial year 86,343 151,369 10,792 6,213Currency translation differences (8,032) 208 – –

Cash and cash equivalents at end of financial year 24 12,666 86,343 11,282 10,792

(i) Purchase of property, plant and equipment:


Total purchases (Note 15) 24,383 50,038 333 11Unpaid balance included under other payables – (4,118) – –Payments made during the financial year for purchases of property, plant and equipment in prior financial year 4,210 – – –

28,593 45,920 333 11


S TAT E M E N T S O F C A S H F LO W for the f inancia l year ended 31 December 2010 cont ’d


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 marine transportation and other shipping related services.

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 Board of Bursa Malaysia Securities Berhad.

The registered office and principal place of business of the Company is located at Level 17, 1 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia.

2. Basis of Preparation of Financial Statements The financial statements of the Group and Company have been prepared under the historical cost convention except as disclosed in the

summary of significant accounting policies in Note 3. The financial statements comply with Financial Reporting Standards, the Malaysian Accounting Standards Board (“MASB”) Approved Accounting Standards in Malaysia for Entities Other than Private Entities, and the provisions of the Companies Act, 1965.

The preparation of 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.

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

(a) Standards, amendments to published standards and interpretations that are applicable to the group and are effective The new accounting standards, amendments to published standards and interpretations to existing standards effective for the

Group’s financial year beginning on or after 1 January 2010 are as follows:

• FRS7“FinancialInstruments:Disclosures”andtherelatedAmendments • FRS8“OperatingSegments” • FRS101(revised)“PresentationofFinancialStatements” • FRS123“BorrowingCosts” • FRS139“FinancialInstruments:RecognitionandMeasurement”andtherelatedAmendments • AmendmentstoFRS1“First-timeAdoptionofFinancialReportingStandards”andFRS127“ConsolidatedandSeparateFinancial

Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate” • AmendmentstoFRS2“Share-basedpayment:VestingConditionsandCancellations” • AmendmentstoFRS132“FinancialInstruments:Presentation”andFRS101(revised)“PresentationofFinancialStatements”–

Puttable financial instruments and obligations arising on liquidation • ICInterpretation9“ReassessmentofEmbeddedDerivatives”andtherelatedAmendments • ICInterpretation10“InterimFinancialReportingandImpairment” • ICInterpretation11“FRS2–GroupandTreasuryShareTransactions” • ICInterpretation14“FRS119–TheLimitonaDefinedBenefitAsset,MinimumFundingRequirementsandTheirInteraction” • ImprovementstoFRSs(2009)

A summary of the impact of the new accounting standards, amendments and improvements to published standards and interpretations on the financial statements of the Group and Company is set out in Note 42 to the financial statements.

N OT E S TO T H E F I N A N C I A L S TAT E M E N T S for the f inancia l year ended 31 December 2010


2. Basis of Preparation of Financial Statements cont’d

(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective

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

• TherevisedFRS3“BusinessCombinations”(effectiveprospectivelyfrom1July2010).Therevisedstandardcontinuestoapplythe acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through profit or loss. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The Group will apply FRS 3 (revised) prospectively to all business combinations from 1 January 2011.

• The revised FRS 127 “Consolidated and Separate Financial Statements” (applies prospectively to transactions with non-controlling interests from 1 July 2010) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. When this standard is effective, 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. The standard also specifies the accounting when control is lost. Any remaining standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The amendment to this standard is not anticipated to have material impact on the Group’s financial statements.

• AmendmenttoFRS2“Share-basedpayment:Groupcash-settledshare-basedpaymenttransactions”(effectivefrom1January2011) clarifies that an entity that receives goods or services in a share-based payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash. The amendments also incorporate guidance previously included in IC Interpretation 8 “Scope of FRS 2” and IC Interpretation 11 “FRS 2 – Group and Treasury share transactions” which shall be withdrawn upon application of this amendment. The amendment to this standard is not anticipated to have material impact on the Group’s financial statements.

• AmendmentstoFRS7“Financial instruments:Disclosures”andFRS1“First-timeadoptionoffinancialreportingstandards”(effective from 1 January 2011) requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy.

• AmendmenttoFRS132“FinancialInstruments:Presentation”onclassificationofrightsissues(effectivefrom1March2010)addresses accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity instruments instead of as derivative liabilities, regardless of the currency in which the exercise price is denominated. Currently, these issues are accounted for as derivative liabilities. The amendment to this standard is not anticipated to have a material impact on the Group’s financial statements.

N OT E S TO T H E F I N A N C I A L S TAT E M E N T S for the f inancial year ended 31 December 2010 cont ’d



(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective cont’d

The Group will apply the following standards, amendments to standards and interpretations from annual periods beginning on 1 January 2011: cont’d

• ICInterpretation4“Determiningwhetheranarrangementcontainsalease”(effectivefrom1January2011)requirestheGrouptoidentify any arrangement that does not take the legal form of a lease, but conveys a right to use an asset in return for a payment or series of payments. This interpretation provides guidance for determining whether such arrangements are, or contain, leases. The assessment is based on the substance of the arrangement and requires assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset. If the arrangement contains a lease, the requirements of FRS 117 “Leases” should be applied to the lease element of the arrangement. This interpretation is not anticipated to have a material impact on the Group’s financial statements.

• IC Interpretation16“Hedgesofanet investment ina foreignoperation” (effective from1July2010)clarifies theaccountingtreatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency, not presentation currency, and hedging instruments may be held by an entity in the group. The requirements of FRS 121 “The effects of changes in foreign exchange rates” do apply to the hedged item. This interpretation is not anticipated to have a material impact on the Group’s financial statements.

• ICInterpretation17“Distributionofnon-cashassetstoowners”(effectivefrom1July2010)providesguidanceonaccountingforarrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. FRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. This interpretation is not anticipated to have a material impact on the Group’s financial statements.

• ICInterpretation18“Transfersofassetsfromcustomers”(effectiveprospectivelyforassetsreceivedonorafter1January2011)provides guidance where an entity receives from a customer an item of property, plant and equipment (or cash to acquire such an asset) that the entity must then use to connect the customer to a network or to provide the customer with services. Where the transferred item meets the definition of an asset, the asset is recognised as an item of property, plant and equipment at its fair value. Revenue is recognised for each separate service performed in accordance with the recognition criteria of FRS 118 “Revenue”. This interpretation is not anticipated to have a material impact on the Group’s financial statements.

Improvements to FRSs:

• FRS2 “Share-basedpayment” (effective from1 July2010)clarifies that contributionsofabusinesson formationofa jointventure and common control transactions are outside the scope of FRS 2.

• FRS3“Businesscombinations”(effectivefrom1January2011)

- Clarifies that the choice of measuring non-controlling interests at fair value or at the proportionate share of the acquiree’s net assets applies only to instruments that represent present ownership interests and entitle their holders to a proportionate share of the net assets in the event of liquidation. All other components of non-controlling interest are measured at fair value unless another measurement basis is required by FRS.

- Clarifies that the amendments to FRS 7, FRS 132 and FRS 139 that eliminate the exemption for contingent consideration, do not apply to contingent consideration that arose from business combinations whose acquisition dates precede the application of FRS 3 (2010). Those contingent consideration arrangements are to be accounted for in accordance with the guidance in FRS 3 (2005).



(b) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective cont’d

Improvements to FRSs: cont’d

• FRS5“Non-currentassetsheldforsaleanddiscontinuedoperations”(effectivefrom1July2010)clarifiesthatallofasubsidiary’sassets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met.

• FRS101“Presentationoffinancialstatements”(effectivefrom1January2011)clarifiesthatanentityshallpresentananalysisofother comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements.

• FRS138“IntangibleAssets”(effectivefrom1July2010)clarifiesthatagroupofcomplementaryintangibleassetsacquiredinabusiness combination may be recognised as a single asset if each asset has similar useful lives.

• ICInterpretation9“Reassessmentofembeddedderivatives”(effectivefrom1July2010)clarifiesthatthisinterpretationdoesnot apply to embedded derivatives in contracts acquired in a business combination, businesses under common control or the formation of a joint venture.

The above improvements to FRSs are not anticipated to have material impact on the Group’s financial statements.

The Group will apply the following standards, amendments to standards and interpretations from annual periods beginning on 1 January 2012:

• IC Interpretation 19 “Extinguishing financial liabilities with equity instruments” (effective from 1 July 2011) providesclarification 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 profit or loss. Entities are no longer permitted to reclassify the carrying value of the existing financial liability into equity with no gain or loss recognised in profit or loss. This interpretation is not anticipated to have a material impact on the Group’s financial statements.

• AmendmentstoICInterpretation14“FRS119-Thelimitonadefinedbenefitassets,minimumfundingrequirementsandtheir 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. The amendment to this interpretation is not anticipated to have a material impact on the Group’s financial statements.

3. Summary of Significant Accounting Policies Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items that are considered

material in relation to the financial statements.

3.1 Basis of consolidation - subsidiaries Subsidiaries are all those entities over 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.



3. Summary of Significant Accounting Policies cont’d

3.1 Basis of consolidation - subsidiaries cont’d

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

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 interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is recorded as goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets of the subsidiary acquired, the gain is recognised directly in the income statement. See accounting policy Note 3.6 on goodwill on consolidation.

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

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.

Non-controlling interests represents the portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since that date.

When a business combination involves more than one exchange transaction, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation.

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

3.2 Transactions with non-controlling interests The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to 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 associates Associates are those corporations, partnerships or other entities in which the Group exercises significant influence, but which it does

not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not power to exercise control over those policies.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investments in associates include goodwill identified on acquisition, net of any accumulated impairment losses. See accounting policy Note 3.8 on impairment of non-financial assets.



3.3 Investments in associates cont’d

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. The cumulative post-acquisition movements are adjusted against 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.

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.

3.4 Investments in jointly controlled entities Jointly controlled entities are corporations, partnerships or other entities over which there is contractually agreed sharing of control

by the Group with one or more parties where the strategic 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 consolidated 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 profit or loss 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 losses. See accounting policy Note 3.8 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 venturers. 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 Property, plant and equipment Property, plant and equipment, other than freehold land and capital work-in-progress, are stated at cost less accumulated

depreciation or amortisation and impairment losses, if any. The cost of an item of property, plant and equipment initially 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.

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 costs are recognised as expenses in the income statement during the financial year in which they are incurred.




3.5 Property, plant and equipment cont’d

Freehold land is not depreciated as it has an infinite life. Capital work-in-progress is stated at cost. Expenditure relating to capital work-in-progress is capitalised when incurred and depreciated only when the assets are ready for their intended use.

Other property, plant and equipment are depreciated on the straight line basis to allocate the cost to their residual values over their estimated useful lives, summarised as follows:

Buildings 20 years Vessels 25 years Dry docking (included within vessels) 2.5 to 5 years Office equipment 3 to 10 years Renovation 3 to 5 years Motor vehicles 5 years Marine and plant equipment 3 years

Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at the end of the reporting period.

At end of the reporting period, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount of the asset exceeds the recoverable amount. See accounting policy Note 3.8 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.

3.6 Goodwill on consolidation Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets of

subsidiaries and associates at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Negative goodwill is recognised immediately in the income statement. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

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

In respect of acquisitions of associates, the carrying amount of goodwill is included in the carrying amount of the investment in associates. Such goodwill is also tested for impairment as part of the overall balance.

3.7 Investments in subsidiaries, associates and jointly controlled entities Investments in subsidiaries, associates and jointly controlled entities are shown at cost less accumulated impairment losses. Where an

indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 3.8 on impairment of non-financial assets.

On disposal of investments in subsidiaries and associates, the difference between net disposal proceeds and its carrying amount is charged/credited to the income statement.



3.8 Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there is separately identifiable cash flows (cash-generating units).

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

The impairment loss is charged to the income statement. In respect of assets other than goodwill, any subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement.

3.9 Financial assets (i) Classification The Group has changed its accounting policy for recognition and measurement of financial assets upon adoption of FRS 139

“Financial instruments: Recognition and Measurement” on 1 January 2010.

Previously, investments in non-current investments were shown at cost and trade receivables were carried at invoiced amount. The Group has applied the new policy according to the transitional provision of FRS 139 by re-measuring all financial assets, as appropriate, and recording any adjustments to the previous carrying amounts to opening retained earnings or, if appropriate, another category of equity, in the current financial year. Comparatives for financial instruments have not been adjusted and therefore the corresponding balances are not comparable. Refer to Note 42 for the impact of this change in accounting policy.

The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition.

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 greater 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 to the financial statements).

(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.

(iii) Subsequent measurement – gains and losses Loans and receivables are subsequently carried at amortised cost using the effective interest method.




3.9 Financial assets cont’d

(iv) Subsequent measurement – impairment of financial assets Assets carried at amortised cost The Group assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of

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

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

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

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

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

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If ‘loans and receivables’ have 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.

(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.

3.10 Offsetting financial instruments Financial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legally

enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.



3.11 Derivative financial instruments Derivative financial instruments are initially recognised at fair value at the date a derivative contract is entered into and are subsequently

re-measured to their fair value at each date of the statement of financial position. The resulting gain or loss is recognised in the income statement immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges), or hedges of net investments in foreign operations.

At the inception of a hedge relationship, the Group documents the relationship between the hedge instrument and hedge item, as well as its risk management objectives and strategy for undertaking the hedge transactions. The documentation includes identification of the hedge instrument, the hedge item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows and are assessed on an ongoing basis to determine that they have been highly effective throughout the financial reporting periods for which they are designated.

The movements on the hedging reserve in other comprehensive income are shown in Note 33. The fair value of hedging derivatives is classified as a non-current asset or a non-current liability if the remaining maturity of the hedge relationship is more than 12 months and as a current asset or a current liability if the remaining maturity of the hedge relationship is less than 12 months.

Derivatives not designated into an effective hedge relationship are classified as a current asset or a current liability.

Change in accounting policy The Group has changed its accounting policy for derivatives upon adoption of FRS 139 “Financial Instruments: Recognition and

Measurement” on 1 January 2010. Previously, derivatives gains and losses were not recognised in the financial statements on inception. Instead, they were recognised when settled, at which time they were included in the measurement of the transaction hedged.

The Group has applied the new policy according to the transitional provisions by recognising and measuring derivatives, as appropriate, and recording any adjustments to the previous carrying amounts to the opening retained earnings or if appropriate, another category of equity, of the current financial year. Comparatives for financial instruments have not been adjusted and therefore, the corresponding balances are not comparable. Refer to Note 42 for the impact of this change in accounting policy.

Cash flow hedge The effective portion of changes in the fair value of the derivatives that are designated and qualified as cash flow hedges are

recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are reclassified to the income statement in the periods when the hedged items affect the income statement.

Hedging accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement.

3.12 Financial guarantee contracts Financial guarantee contracts are contracts that require the Group or Company to make specified payments to reimburse the holder

for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.




3.12 Financial guarantee contracts cont’d

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.

Change in accounting policies The Group has changed its accounting policy for financial guarantee contracts upon adoption of FRS 139 “Financial instruments:

Recognition and Measurement” on 1 January 2010. Previously, financial guarantee contracts were not recognised in the financial statements. The Group has applied the new policy according to the transitional provision by recognising and measuring financial guarantee contracts as at 1 January 2010 and adjusting opening retained earnings or, if appropriate, another category of equity, and cost of investment in subsidiaries. Comparatives for financial instruments have not been adjusted and therefore the corresponding balances are not comparable. Refer to Note 42 for the impact of this change in accounting policy.

3.13 Leases A lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the right to use an

asset for an agreed period of time.

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

The interest element of the finance charge is charged to the income statement over the lease period so as to achieve a constant

periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases is depreciated over the shorter of the estimated useful life of the asset and the lease term.

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 the income statement on the straight line basis over the lease period.

3.14 Non-current assets (or disposal groups) held for sale Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be 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.



3.15 Cash and cash equivalents For purposes of the statement of cash flows, cash and cash equivalents comprise cash on 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.

3.16 Share capital (i) Classification Ordinary shares are classified as equity.

(ii) Share issue costs Incremental external costs directly attributable to the issue of new shares or options are deducted against share premium

account.

(iii) Dividend distribution Distribution to holders of ordinary shares is debited directly into equity, net of any related income tax benefit and the

corresponding liability is recognised in the period in which the dividends are approved.

(iv) Purchase of own shares Where the Company or its subsidiaries purchases the Company’s equity share capital, the consideration paid, including any

directly attributable incremental external costs, net of tax, is 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 external costs and the related tax effects, is included in equity attributable to the controlling equity holders.

3.17 Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.

Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

3.18 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.

Change in accounting policy The Group has changed its accounting policy for borrowing costs upon adoption of FRS 123 “Borrowing costs” on 1 January 2010.

The Group has applied the new policy according to the transitional provision.




3.18 Borrowings and borrowing costs cont’d

Change in accounting policy cont’d

The new policy is applied to qualifying assets for which commencement date for capitalisation is on 1 January 2010. Previously, borrowings costs were immediately expensed when incurred. The change in the accounting policy does not have any impact on the Group and Company’s financial statements.

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.

3.19 Income taxes The tax expense for the financial year comprises current and deferred tax. Tax is recognised in profit or loss, 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 substantially enacted at the end of the reporting period in the countries where the Group’s subsidiaries and associates operate and generate taxable income.

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 the accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the end of the reporting

period and are expected to apply in the period when the related deferred tax asset is realised or the deferred tax liability is settled.

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

3.20 Employee benefits (i) Short term employee benefits Wages, salaries and bonuses are accrued 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 A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund)

and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.



3.20 Employee benefits cont’d

(ii) Defined contribution plan cont’d

As required by law, companies in Malaysia make contributions to the Employees’ Provident Fund (“EPF”). The Group’s foreign subsidiaries make contributions to their respective state pension schemes on a mandatory basis. Such contributions are charged to the income statement in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(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 end of the reporting period 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 an independent actuary 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 end of the reporting period.

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 profit or loss over the employees’ expected average remaining working lives.

Past-service costs are recognised immediately in the income statement, 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 end of the reporting period are discounted to present value.

(v) Share-based compensation The Company operates an equity-settled, share-based compensation plan for the Directors and employees of the Company

and its subsidiaries.




3.20 Employee benefits cont’d

(v) Share-based compensation cont’d

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

- including any market performance conditions; - excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales

growth targets and remaining an employee of the entity over a specified time period); and - excluding the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market investing conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of the reporting period, the Company revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to share option reserve in equity.

In the separate financial statements of the Company, the grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

Salient features of the Company’s share option scheme are disclosed in Note 30(b) to the financial statements.

3.21 Provisions Provisions are recognised when: (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) a reliable estimate of the amount can be made.

Where the Group expects a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses.

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

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as finance cost expense.

3.22 Contingent assets and liabilities The Group does not recognise contingent assets and liabilities, but discloses their 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 contacts. 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.



3.23 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of services in the ordinary course of the

Group’s activities. Revenue is shown net of services tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below.

(i) Charter hire income Revenue from charter hire is recognised on an accrual basis but is deferred when the terms of billings have not been agreed by

third parties or when certain conditions necessary for realisation have yet to be fulfilled.

(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) Management and agency fees Management and agency fees are recognised on an accrual basis, based on services rendered.

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

(v) Interest income Interest is recognised using the effective interest method.

3.24 Foreign currencies (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary

economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.

(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the

transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges.

(c) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that

have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assetsandliabilitiesforeachstatementoffinancialpositionpresentedaretranslatedattheclosingrateatthedateofthat statement of financial position;




3.24 Foreign currencies cont’d

(c) Group companies cont’d

• income and expenses for each statement of comprehensive income or separate income statement presented aretranslated 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

• allresultingexchangedifferencesarerecognisedasaseparatecomponentofothercomprehensiveincome.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are recognised in other comprehensive income. When a foreign operation is partially disposed of or sold, a proportionate share of such exchange differences is reclassified to profit or loss.

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.

3.25 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-

maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.

Change of accounting policy The Group has adopted FRS 8 “Operating segments” from 1 January 2010. FRS 8 replaces FRS 114 “Segment reporting” and is applied

retrospectively. The adoption of FRS 8 has resulted in an increase in the number of reportable segments presented. As goodwill is allocated by management to groups of cash-generating units on a segment level, the change in reportable segments has required a reallocation of goodwill of RM294,915,000 from the ‘Marine logistics and offshore support services’ operating segment to the newly identified operating segment ‘Marine Logistics’. Comparatives have been restated. The reallocation of goodwill has not resulted in further impairment of goodwill. There has been no other impact on the measurement of the Group’s assets and liabilities.

4. Critical Accounting Estimates and Judgements Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including

expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the

related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have a material impact to the Group’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has

been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

The Directors have evaluated the carrying amount of goodwill and are satisfied that the allowance for impairment where necessary, is adequate. The carrying amount of goodwill and estimates used in the calculation are disclosed in Note 19 to the financial statements.


4. Critical Accounting Estimates and Judgements cont’d

Impairment of goodwill cont’d

If the estimated pre-tax discount rate applied to the discounted cash flows had been 1% higher than management’s estimate as at 31 December 2010, the Group would have recognised a further impairment on goodwill of USD12,626,000 (approximately RM39,084,000).

In addition, if the revenue for the year ending 31 December 2011 is 5% lower than management’s estimate as at 31 December 2010, the Group would need to recognise a further impairment of USD2,869,000 (approximately RM9,845,000).

5. Revenue


Charter hire income 78,859 14,610 – – Dividend income – – 4,400 22,235

78,859 14,610 4,400 22,235

6. Cost of Sales


Recharter fee 61,701 – – – Depreciation of property, plant and equipment 4,152 3,569 – – Staff costs 3,390 3,898 – – Bunker expenses 403 520 – – Insurance expenses 352 408 – – Repair and maintenance of vessels 480 833 – – Others 976 969 – –

71,454 10,197 – –

7. Other Operating Income


Interest income 92 19 739 19 Agency fee charged to an associated company – 312 – 312 Commission on charter fee – 246 – 246 Others 74 – 48 –

166 577 787 577



8. Other Operating Expenses


Loss on foreign exchange – net (Note 10) 4,165 1,382 4,577 1,441 Impairment on receivables: - amounts due from associated companies 17,404 9,976 17,404 7,004 - amounts due from subsidiary company – – 6,859 – - non-related parties 3,888 – – – Loss on disposal of property, plant and equipment 44 18 44 18

25,501 11,376 28,884 8,463

9. Finance Costs


Interest expense on: - term loans 1,157 1,823 – – - hire purchase 6 8 6 8 - others 77 – 77 –

1,240 1,831 83 8

10. (Loss)/Profit Before Taxation


(Loss)/profit before taxation is stated after (crediting)/charging:

Auditors’ remuneration: PricewaterhouseCoopers Malaysia firm Statutory audit 70 70 50 50 Non-audit fees 4 – 4 - Depreciation on property, plant and equipment 4,310 3,725 156 156 Management fee expense 303 215 303 215 Net loss/(gain) on foreign exchange (Note 8): - realised 155 (42) 155 (42) - unrealised 4,010 1,424 4,422 1,483 Rental of premises 278 174 278 174 Rental of motor vehicle 93 105 93 105 Rental of equipment 21 35 21 35 Interest income (92) (19) (739) (19) Property, plant and equipment written off 44 18 44 18


10. (Loss)/Profit Before Taxation cont’d

Employee benefit costs (including Executive Directors):


Wages, salaries and bonus 5,244 5,872 1,854 1,973 Defined contribution plan 242 258 242 258 Share option expenses - current year (Note 30(b)) 164 1,787 164 1,337 Other employee benefits (including allowances) 327 229 327 229

5,977 8,146 2,587 3,797

11. Directors’ Remuneration The aggregate amount of emoluments received/receivable by Directors of the Company during the financial year is as follows:


Non-executive Directors: - fees 332 348 332 348 - salaries and other emoluments 68 53 68 53 - share options granted under ESOS 74 132 74 132

474 533 474 533

Executive Directors: - salaries and bonus 240 320 240 320 - defined contribution plan 41 – 41 – - share options granted under ESOS 182 182 182 182

463 502 463 502

937 1,035 937 1,035

12. Taxation


Current tax - Malaysian income tax 567 20 – –

Current tax - current year 567 20 – –



12. Taxation cont’d

Numerical reconciliation between tax expense and the product of accounting (loss)/profit multiplied by the Malaysian tax rate:


(Loss)/profit before taxation (33,336) (17,988) (242,694) 6,942

Tax calculated at the Malaysian tax rate of 25% (2009: 25%) (8,334) (4,497) (60,674) 1,736

Tax effects of: - different tax rates in other countries (948) (1,093) – – - expenses not deductible for tax purposes 7,592 4,381 60,876 2,977 - income not subject to tax – – (1,100) (5,559) - share of results of associates 1,304 383 – – - deferred tax assets not recognised 953 846 898 846

Taxation expense 567 20 – –

13. Loss per Share (a) Basic loss per share Basic loss per share of the Group is calculated by dividing the loss attributable to owners of the Company for the financial year by the

weighted average number of ordinary shares in issue during the financial year, excluding ordinary shares purchased by the Company and held as Treasury shares (Note 31).

Group 2010 2009

Losses attributable to owners of the Company (RM’000) (204,034) (71,665)

Weighted average number of ordinary shares of RM1.00 each in issue (‘000) 733,004 733,004

Basic loss per share (sen) (27.83) (9.78)

Continuing operations Losses during the financial year (RM’000) (33,903) (18,008) Less: Non-controlling interests (RM’000) (1,152) (1,216)

Losses from continuing operation attributable to owners of the Company (RM’000) (35,055) (19,224)



Discontinuing operations Losses during the financial year (RM’000) (167,765) (49,898) Less: Non-controlling interests (RM’000) (1,214) (2,543)

Losses from continuing operation attributable to owners of the Company (RM’000) (168,979) (52,441)




13. Loss per Share (b) Diluted loss per share The diluted loss per share of the Group is similar to the basic loss per share as the options over unissued ordinary shares granted

pursuant to the ESOS at the end of the financial year have an anti-dilutive effect. The exercise price of the ESOS of RM1.15 is above the average market value of the Company’s shares for both the financial years ended 31 December 2010 and 2009.

14. Dividends

Group and Company 2010 2009 RM’000 RM’000

Interim tax exempt dividend paid of 0.75% per ordinary share of RM1.00 each – 5,497

Dividend recognised as distribution to equity holders of the Company – 5,497

15. Property, Plant and Equipment

Marine Freehold Office Motor and plant Note land Buildings Vessels equipment Renovation vehicles equipment Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost At 1 January 2010 1,324 2,711 892,576 2,036 1,218 2,143 350 902,358 Additions – – 23,317 85 327 538 116 24,383 Disposals – – (4,539) (32) – (216) – (4,787) Written off – – – – (128) – – (128) Reclassification as held for sale 25(i)(c) (1,194) (2,446) (745,610) (1,377) (984) (1,851) (427) (753,889) Currency translation differences (130) (265) (86,235) (146) (109) (204) (39) (87,128)

At 31 December 2010 – – 79,509 566 324 410 – 80,809

Accumulated depreciation At 1 January 2010 – 2,110 236,824 1,416 1,026 1,504 251 243,131 Charge for the year – 106 47,380 147 70 224 41 47,968 Disposals – – (3,314) (31) – (129) – (3,474) Written off – – – – (84) – – (84) Reclassification as held for sale 25(i)(c) – (2,006) (242,424) (1,226) (908) (1,154) (266) (247,984) Currency translation differences – (210) (24,940) (127) (99) (144) (26) (25,546)

At 31 December 2010 – – 13,526 179 5 301 – 14,011

Net book value At 31 December 2010 – – 65,983 387 319 109 – 66,798



15. Property, Plant and Equipment cont’d

Marine Capital Freehold Office Motor and plant work- Note land Buildings Vessels equipment Renovation vehicles equipment in-progress Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost At 1 January 2009 1,343 2,749 885,893 2,100 1,181 2,167 372 46,187 941,992 Additions – – 22,912 62 53 144 – 26,867 50,038 Disposals – – (51,444) (88) – (141) (17) – (51,690) Written off – – – (18) – – – – (18) Reclassification – – 73,651 – – – – (73,651) – Reclassification as held for sale 25(ii) – – (25,542) – – – – – (25,542) Currency translation differences (19) (38) (12,894) (20) (16) (27) (5) 597 (12,422)

At 31 December 2009 1,324 2,711 892,576 2,036 1,218 2,143 350 – 902,358

Accumulated depreciation At 1 January 2009 – 1,987 240,558 1,331 967 1,366 212 – 246,421 Charge for the year – 155 56,439 185 73 301 60 – 57,213 Disposals – – (44,320) (81) – (141) (17) – (44,559) Reclassification as held for sale 25(ii) – – (12,510) – – – – – (12,510) Currency translation differences – (32) (3,343) (19) (14) (22) (4) – (3,434)

At 31 December 2009 – 2,110 236,824 1,416 1,026 1,504 251 – 243,131

Net book value At 31 December 2009 1,324 601 655,752 620 192 639 99 – 659,227


15. Property, Plant and Equipment cont’d

Office Motor equipment Renovation vehicles Total Company RM’000 RM’000 RM’000 RM’000

Cost At 1 January 2010 560 125 200 885 Additions 6 327 – 333 Written off – (128) – (128)

At 31 December 2010 566 324 200 1,090

Accumulated depreciation At 1 January 2010 110 42 57 209 Charge for the financial year 69 47 40 156 Written off – (84) – (84)

At 31 December 2010 179 5 97 281

Net book value At 31 December 2010 387 319 103 809

Cost At 1 January 2009 567 125 200 892 Additions 11 – – 11 Written off (18) – – (18)

At 31 December 2009 560 125 200 885

Accumulated depreciation At 1 January 2009 36 – 17 53 Charge for the financial year 74 42 40 156

At 31 December 2009 110 42 57 209

Net book value At 31 December 2009 450 83 143 676

(i) Certain vessels of the Group with a total carrying amount of RM563,351,000 were charged as security for banking facilities granted to certain subsidiaries as disclosed in Note 27 to the financial statements at the end of the previous financial year.

(ii) The net book value of motor vehicles of the Group and of Company acquired under hire purchase at the end of the reporting period

was RM109,000 (2009: RM342,000) and RM103,000 (2009:RM143,000) respectively.



16. Investment in Subsidiaries

Company 2010 2009 RM’000 RM’000

Unquoted shares, at cost

At 1 January 2,667 2,217 Additional investment in a subsidiary 9,400 – Deemed investment – financial guarantee liabilities 331 – Deemed investment – capital contribution 757,954 – Equity contribution arising from share options (Note 30(b)) – 450

770,352 2,667 Less: Impairment loss in investments (197,871) –

At 31 December 572,481 2,667

Details of the subsidiaries are as follows:

Group’s effective equity interest Country of 2010 2009 Name of company incorporation % % Principal activities

Scomi Marine Services Pte Ltd* Singapore 100.00 100.00 Investment holding

MarineCo Limited Labuan, Malaysia 51.00 51.00 Ship chartering Malaysia

Gemini Sprint Sdn. Bhd. Malaysia 51.00 51.00 Ship chartering and management

Trans Advantage Sdn. Bhd. Malaysia 100.00 40.00 Ship chartering and ship management

Subsidiaries of Scomi Marine Services Pte. Ltd. CH Logistic Pte. Ltd. * Singapore 100.00 100.00 Ship chartering

CH Ship Management Pte. Ltd. * Singapore 100.00 100.00 Ship chartering and management

Goldship Private Limited * Singapore 100.00 100.00 Ship chartering

Grundtvig Marine Pte. Ltd.* Singapore 100.00 100.00 Investment holding

PT. Rig Tenders Indonesia, Tbk * Indonesia 80.54 80.54 Ship chartering

Subsidiary of CH Logistic Pte. Ltd. Sea Master Pte Ltd * Singapore 100.00 100.00 Ship chartering

Subsidiary of Grundtvig Marine Pte. Ltd. PT. Batuah Abadi Lines * Indonesia 95.00 95.00 Ship chartering

Subsidiary of PT. Rig Tenders Indonesia, Tbk. Rig Tenders Marine Pte. Ltd. * Singapore 80.54 – Ship owning and chartering

* Audited by affiliates of PricewaterhouseCoopers, Malaysia.

Shares in certain subsidiaries have been charged to secure credit facilities granted to the subsidiaries. As disclosed in Note 27 to the financial statements, the charge were released by the financial institution subsequent to the financial year end.


16. Investment in Subsidiaries cont’d

Acquisition of additional interest in a subsidiary On 29 March 2010, Trans Advantage Sdn Bhd (“TASB”) increased its paid-up share capital from 10 ordinary shares of RM1.00 each to 1,000,000

ordinary shares of RM1.00 each. The Company subscribed for 399,996 of the new ordinary shares in TASB for a cash consideration of RM399,996. There was no change in the Company’s effective equity interest in TASB following the subscription of the new ordinary shares.

On 14 June 2010, the Company acquired 600,000 ordinary shares of RM1.00 each, representing the remaining 60% of the issued share capital of TASB, for a cash consideration of RM9,000,000.

Details of the net assets acquired are as follows:

Fair Value RM’000 Other receivables 8,063 Cash 2,882 Trade receivables 361 Tax recoverable 133 Amount due to immediate holding company (6,268) Provision for taxation (418) Trade payables (398) Other payables and accruals (40) Net assets acquired 4,315 Excess of fair value of net assets acquired over consideration paid (Note 19) 4,685 Total purchase consideration, satisfied by cash 9,000

17. Investment in Associates

2010 2009 RM’000 RM’000 Group Share of net assets of associates - shares quoted in Singapore – 284,108 - unquoted shares 3,225 11,947

3,225 296,055

Market value of shares quoted in Singapore – 333,154

Company Unquoted shares at cost 16,857 16,416 Less: Impairment loss on investments in associates (13,632) –

3,225 16,416



17. Investment in Associates cont’d

The Group’s share of revenue, (loss)/profit after taxation, assets and liabilities of associates are as follows:

in RM’000 2010 2009

Revenue 44,011 368,563 (Loss)/profit after taxation (13,515) 140,755

Group’s share of results for the financial year - continuing operations (5,215) (3,527) - discontinuing operations (Note 25(i)(a)) 11,390 47,104

6,175 43,577

Total assets 202,583 1,056,717 Total liabilities (187,121) (326,748)

Net assets 15,462 729,969

(a) Details of the associates are as follows:

Group’s effective equity interest held Country of 2010 2009 Name of associated company incorporation % % Principal activity

Held by the Company Southern Petroleum Transportation Vietnam 20.00 20.00 Own and operate takers Joint Stock Company

Emerald Logistics Sdn Bhd Malaysia 49.00 49.00 Ship chartering and management

Trans Advantage Sdn Bhd Malaysia – 40.00 Ship chartering and management

Held by Scomi Marine Services Pte. Ltd. CH Offshore Limited Singapore – 29.07 Investment holding, owning and chartering of vessels

King Bridge Enterprises Ltd British Virgin Islands 49.00 49.00 Investment holding

Held by CH Offshore Limited Chuan Hup Agencies (Private) Limited Singapore – 29.07 Ship chartering and management

Delaware Marine Pte Ltd Singapore – 29.07 Ship chartering

Garo Pte Ltd Singapore – 29.07 Investment holding

Offshore Gold Shipping Pte Ltd Singapore – 29.07 Ship chartering

Pembrooke Marine Pte Ltd Singapore – 29.07 Ship chartering

Sea Glory Private Ltd Singapore – 29.07 Dormant

(b) On 28 April 2010, Scomi Marine Services Pte Ltd disposed of its investment in an associated company, CH Offshore Limited, to a third party for an aggregate consideration of SGD143,500,000 (equivalent to RM344,550,000). The resulting gain from the disposal recognised during the financial year was USD17,741,000 (equivalent to RM59,172,000).


17. Investment in Associates cont’d

(c) On 10 September 2009, Emerald Logistics Sdn Bhd (“ELSB”) ceased to be a subsidiary of Company pursuant to the transfer of one ordinary share of RM1.00 each in ELSB to Balance Plus Sdn Bhd (“BPSB”). At that date, ELSB allotted 50,999 shares and 48,999 shares of RM1.00 each to BPSB and the Company respectively at par.

Consequently, ELSB became a 49% owned associate of the Company.

On 25 August 2010, Emerald Logistics Sdn Bhd (“ELSB”) increased its paid-up share capital from 100,000 ordinary shares of RM1.00 each to 1,000,000 ordinary shares of RM1.00 each. The Company subscribed for 441,000 of the new ordinary shares in ELSB for a cash consideration of RM441,000. There is no change in the Company’s effective equity interest in ELSB. This acquisition has no material impact on the financial results and financial position of the Group.

(d) On 29 March 2010, Trans Advantage Sdn Bhd (“TASB”) increased its paid-up share capital from 10 ordinary shares of RM1.00 each to 1,000,000 ordinary shares of RM1.00 each. The Company subscribed for 399,996 of the new ordinary shares in TASB for a cash consideration of RM399,996. There was no change in the Company’s effective equity interest in TASB following the subscription of the new ordinary shares.

Subsequently, on 14 June 2010, the Company acquired the remaining interest in TASB. As a result, TASB became a fully owned subsidiary of the Company (Note 16 to the financial statements).

(e) During the previous financial year, the Group acquired a further 2,304,000 ordinary shares of VND10,000 each to maintain its 20% equity interest in Southern Petroleum Transportation Joint Stock Company, for a total cash consideration of RM4,990,000.

18. Amount Due from a Subsidiary

Company 2010 2009 RM’000 RM’000

Amount due from a subsidiary 40,575 785,116

The amount due from a subsidiary is denominated in US Dollar, unsecured, interest free and is repayable after 12 months.

19. Goodwill

Group 2010 2009 RM’000 RM’000

Cost At 1 January 294,915 445,836 Goodwill arising from acquisition of remaining interest in a subsidiary (Note 16) 4,685 – Impairment losses (Note 25(i)(a)) (260,040) (148,649) Reclassified to assets held for sale (Note 25(i)(c)) (39,084) – Currency translation differences 4,209 (2,272)

At 31 December 4,685 294,915



19. Goodwill cont’d

The carrying amounts of goodwill allocated to the Group’s cash-generating units (“CGUs”) are as follows: Group 2010 2009 RM’000 RM’000

Marine Logistics 39,084 294,915 Trans Advantage Sdn Bhd (“TASB”) 4,685 –

43,769 294,915 Reclassified to assets held for sale (Note 25(i)(c)) (39,084) –

4,685 –

The recoverable amounts of each CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by the Board of Directors for 2011 to 2015 and extrapolated to perpetuity.

The key assumptions for the value in use calculations are those regarding the discount rate and expected changes to income and direct costs during the period. Management estimated the discount rate using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. Changes in direct costs are based on past practices and expectations of future changes in the market.

The discounted cashflow includes assumptions taken by management that, for the purposes of deriving a recoverable amount of the goodwill, are significant to the indicative value of goodwill derived by the discounted cashflow model.

Goodwill allocated to Marine Logistics Goodwill allocated to Marine Logistics arose from the Marine Logistics Business acquired from Chuan Hup Holdings Limited on 30

September 2005.

Key assumptions used by management are as follows: 1. Discount factor used in the discounted cash flow is 12.26% (2009: 13.00%). 2. Business capacity utilisation is assumed to be at similar levels as the present capacity. 3. Business volume is assumed to be constant (2009: 12% from 2010 to 2011 and 2.3% from 2012 onwards). 4. Charter income rates are assumed to be constant and are based on present rates. 5. Bunker prices are assumed to be at US$0.80 per litre (RM2.58 per litre) (2009: US$0.60 per litre (RM2.06 per litre)). 6. Nil growth rates used to extrapolate cash flows beyond the budget period of 5 years.

Goodwill allocated to TASB Goodwill allocated to TASB arose from the acquisition of the remaining interest in Trans Advantage Sdn Bhd on 14 June 2010 (Note 16 to

the financial statements).

Key assumptions used by management are as follows: 1. Discount factor used in the discounted cash flow is 14.3%. 2. Business capacity utilisation is assumed to be at similar levels as the present capacity. 3. Business volume (tonnage) will decrease by 51% in 2011 and increase by 30% in 2012 , remained unchanged in 2013 and further

increase by 20% in 2014, based on management’s expectation of customer demands. 4. Charter income rates are assumed to be constant and are based on present rates. 5. Nil growth rates used to extrapolate cash flows beyond the budget period of 5 years.

Arising from the above revisions in assumptions in 2010, an impairment charge of RM260,040,000 (2009: RM148,649,000) has been recognised in the financial year ended 31 December 2010.


20. Deferred Tax Deferred tax assets and liabilities are offset when there is legally enforceable right to set off current tax assets against current tax liabilities

and when the deferred taxes relate to the same authority. The following amounts, determined after appropriate offsetting, are shown in the statement of financial position.

Group 2010 2009 RM’000 RM’000

Deferred tax assets – (60) Deferred tax liabilities - subject to income tax 433 480

433 420

At 1 January 420 (10) Charged/(credited) to income statement (Note 25(i)(vii)): - property, plant and equipment – (4) - tax losses 45 (49) - provision for retirement benefits – 1 - undistributed subsidiary earnings – 493

45 441 Reclassified within liabilities directly associated with disposal group (Note 25(i)(c)) 13 – Currency translation differences (45) (11)

At 31 December 433 420

Deferred tax assets Property, plant and equipment – (3) Provision for retirement benefits – (9) Tax losses – (48)

– (60)

Deferred tax liabilities Undistributed subsidiary earnings 433 480

The amount of deductible temporary differences for which no deferred tax asset is recognised in the statement of financial position is as follows:


Deductible temporary differences 53,079 4,678 51,821 3,707

Deferred tax assets have not been recognised on the deductible temporary differences as it is uncertain that there will be future taxable profits to utilise the deferred tax assets.



21. Receivables-Non Current


Prepaid charter hire expense – 9,543 – – Deposits – 10,233 – – Refundable deposits – 19 – –

– 19,795 – –

Amount due from - associated companies 17,404 32,085 17,404 32,085 - subsidiary companies – – 13,863 – Less: Allowance for impairment (17,404) (9,976) (31,267) (7,004) – 22,109 – 25,081

– 41,904 – 25,081

Prepaid charter hire expense at the end of the previous financial year was in respect of committed charter hire of vessels for the financial period from 1 January 2011 to 30 June 2012.

The deposits of RM10,233,000 at the end of the previous financial year represented payments in advance for the construction of a vessel.

Amounts due from associated companies are unsecured advances which are interest-free and are repayable after 12 months. The fair value of the amount receivable after 12 months is RM Nil (2009:RM28,394,000).

The advances and refundable deposits are denominated in US Dollar.

22. Fixed Deposits Pledged (Non-Current Assets) Fixed deposits pledged at the end of the previous financial year represented deposits pledged to a financial institution for a loan granted

to a subsidiary as disclosed in Note 27 to the financial statements.

The effective interest rate for the deposits at the end of the previous financial year ranged from 0.13% to 0.24% per annum. The fixed deposits pledged were released upon full repayment of the loan during the financial year.

The fixed deposits at the end of the previous financial year were denominated in US Dollar.


23. Receivables, Deposits and Prepayments


Trade receivables - non-related parties 13,472 144,273 – – - associated company – 165 – –

13,472 144,438 – – Less: Allowance for impairment – non-related company – (3,150) – – Trade receivable – net 13,472 141,288 – – Other receivables 173 12,455 – 9,316 Deposits 48 48 48 48 Prepayments 67 20,112 50 – Insurance recoverable – 17,230 – – Less: Allowance for impairment - insurance recoverable – (12,975) – – 288 36,870 98 9,364

Amount due from corporate shareholders 48 6,762 48 6,762 Amounts due from related parties 6,541 3,363 6,541 940 Amounts due from subsidiaries – – 2,532 16,514 Amount due from associated companies 491 396 491 396 7,080 10,521 9,612 24,612

20,840 188,679 9,710 33,976

Credit terms for trade receivables range from 30 to 90 days (2009: 30 to 90 days).



23. Receivables, Deposits and Prepayments cont’d

Amounts due from a corporate shareholder, subsidiaries, associates and related parties are unsecured, interest-free and have no fixed terms of repayment. The amounts are repayable on demand of the Company.

Amounts due from related parties arise from transactions with companies held by common significant shareholders.

Receivables of certain subsidiaries are pledged to a financial institution for loan granted to the subsidiaries.

No interest is charged on outstanding trade receivables within the stipulated credit period from the due date of invoice. Thereafter, interest is charged at 1.5% to 2.0% (2009: 1.5% to 2.0%) per annum on the outstanding balance.

The currency exposure profile of receivables, deposits and prepayment is as follows:


Functional currency Ringgit Malaysia US Dollar – 5,837 2,111 22,350 Ringgit Malaysia 7,599 11,626 7,599 11,626

7,599 17,463 9,710 33,976

Functional currency US Dollar US Dollar 13,241 145,084 – – Indonesian Rupiah – 22,188 – – Singapore Dollar – 3,863 – – Ringgit Malaysia – 81 – –

13,241 171,216 – –

20,840 188,679 9,710 33,976

24. Short Term Deposits, Cash and Bank Balances


Cash and bank balances – 38,959 – 698 Short term deposits with licensed banks 12,666 47,573 11,282 10,094

12,666 86,532 11,282 10,792 Less: Restricted cash – (189) – –

Cash and cash equivalents 12,666 86,343 11,282 10,792


24. Short Term Deposits, Cash and Bank Balances cont’d

The currency exposure profile of short term deposits, cash and bank balances is as follows:


Functional currency Ringgit Malaysia - US Dollar 481 444 481 444 - Ringgit Malaysia 10,801 10,348 10,801 10,348

11,282 10,792 11,282 10,792

Functional currency US Dollar - US Dollar 1,384 60,792 – – - Indonesian Rupiah – 7,570 – – - Singapore Dollar – 7,376 – – - Philippines Peso – 2 – –

1,384 75,740 – –

12,666 86,532 11,282 10,792

The effective interest rates for short term deposits with licensed banks of the Group and Company at the end of the reporting period range from 0.05% to 3.10% (2009: 0.05% to 10.00%) per annum. Short term deposits of the Group and Company have maturity periods ranging from 5 days to 48 days (2009: 5 days to 48 days).

Bank balances are deposits held at call with banks.

25. Assets and Liabilities Held for Sale (i) Assets and liabilities held for sale during the financial year On 29 September 2010, Scomi Marine Services Pte Ltd (“SMS”), a wholly-owned subsidiary of the Company, entered into a Master

Framework Agreement (“the Agreement’) with PT Revessel Indonesia (“Revessel”) and Portside Offshore Inc (“Portside”) in relation to an investment in PT Rig Tenders Indonesia Tbk (“PTRT”), a subsidiary of SMS, by Revessel and Portside.

On 16 December 2010, SMS entered into a Share Purchase Agreement with PTRT to sell its entire interest in the ordinary shares of four of its subsidiaries, CH Ship Management Pte Ltd, CH Logistics Pte Ltd, Goldship Private Limited and Grundtvig Marine Pte Ltd (“target companies”) to PTRT for a total consideration of US$135,900,000 and Rupiah 323,100,000,000 (equivalent in total to RM531,800,000).

As disclosed in Note 43 to the financial statements, SMS’ interest in PTRT will be diluted following a proposed renunciation by SMS of its entitlement to a proposed rights issue. As a result of the proposed renunciation, PTRT will cease to be a subsidiary of SMS. Accordingly, the entire assets and liabilities of the target companies and its subsidiaries and PTRT are classified as a disposal group held for sale on the statement of financial position, and the entire results are presented separately on the income statements as “Discontinuing operations”. The transaction is expected to be completed by within 12 months from the end of the reporting period.



25. Assets and Liabilities Held for Sale cont’d

(i) Assets and liabilities held for sale during the financial year cont’d

(a) The results of the discontinuing operations and the re-measurement of the disposal group are as follows:

Group Note 2010 2009 RM’000 RM’000

Revenue (i) 330,242 433,723 Cost of sales (ii) (262,050) (312,502)

Gross profit 68,192 121,221 Other operating income (iii) 509 1,126 Other gains – net (iv) 1,699 7,277 Administrative expenses (21,674) (26,396) Other operating expenses (v) (2,119) (16,774) Finance costs (vi) (19,743) (28,484) Share of results of joint venture 1,154 – Share of results of associates 17 11,390 47,104

Profit before taxation (vii) 39,408 105,074 Income tax expense (viii) (6,305) (6,323)

Profit after taxation from discontinuing operations 33,103 98,751 Gain on disposal of an associate 17(b) 59,172 – Impairment loss on goodwill 19 (260,040) (148,649)

Total loss from discontinuing operations (167,765) (49,898)

(i) Revenue

Group 2010 2009 RM’000 RM’000

Charter hire income 325,935 425,820 Management and agency fees 4,307 4,522 Rendering of services – 3,381

330,242 433,723




(a) The results of the discontinuing operations and the re-measurement of the disposal group are as follows: cont’d

(ii) Cost of sales

Group 2010 2009 RM’000 RM’000

Recharter fee 37,823 57,110 Depreciation of property, plant and equipment 43,228 53,488 Staff costs 15,301 24,227 Bunker expenses 130,154 135,373 Insurance expenses 7,087 7,357 Repair and maintenance of vessels 14,181 19,941 Agency fees and port dues 9,436 11,544 Others 4,840 3,462

262,050 312,502

(iii) Other operating income

Group 2010 2009 RM’000 RM’000

Interest income 435 964 Others 74 162

509 1,126

(iv) Other gains - net

Group 2010 2009 RM’000 RM’000

Gain on disposal of property, plant and equipment 1,983 7,573 Currency exchange loss - net (284) (296)

1,699 7,277

(v) Other operating expenses

Group 2010 2009 RM’000 RM’000

Impairment on trade receivables 1,790 3,236 Impairment of insurance claims receivable 200 13,328 Others 129 210

2,119 16,774






(vi) Finance costs

Group 2010 2009 RM’000 RM’000

Interest expenses - bank borrowings 9,279 26,422 - finance lease liabilities 16 18 - others 145 167

9,440 26,607 Cash flow hedge, transferred from hedging reserve (Note 33) 3,814 – Amortisation of loan facility fee 193 223 Amortisation of fee for loan arrangement (Note 27(d)) 6,296 1,654

19,743 28,484

(vii) Profit before taxation Profit before taxation is stated after (crediting)/charging:

Group 2010 2009 RM’000 RM’000

Gain on disposal of property, plant and equipment (1,982) (7,573) Depreciation on property, plant and equipment 43,658 53,488 Amortisation of prepaid charter hire expenses 5,986 6,547 Management fee expense – 755 Net loss/(gain) on foreign exchange - realised 457 628 - unrealised (173) (332) Rental of premises 542 416 Rental of motor vehicle 55 80 Rental of equipment 16 10 Auditors’ remunerations: Overseas affiliates of PricewaterhouseCoopers Malaysian firm - statutory audit 416 300 - non-audit fees 129 28 Provision for retirement benefits 442 (451) Interest income (435) (964)





(viii) Income tax expense

Group 2010 2009 RM’000 RM’000

Current income tax - Singapore tax – 111 - Other foreign tax 6,289 5,760 (Over)/under accrual in prior financial year (29) 11

6,260 5,882 Deferred income tax (Note 20) 45 441

6,305 6,323

(b) The impact of the discontinuing operations on the cash flows of the Group is as follows:

Group 2010 2009 RM’000 RM’000

Operating cash inflows 100,963 86,786 Investing cash inflows/(outflows) 306,932 (15,951) Financing cash outflows (421,234) (136,615) Total cash outflows (13,339) (65,780)

(c) Details of the assets in the disposal group classified as held-for-sale at the end of the financial year are as follows:

Note Group RM’000

Cash and cash equivalents 52,048 Restricted cash 2,195 Trade and other receivables 115,314 Other assets 22,108 Interest in joint venture 18,979 Property, plant and equipment 15 505,905 Goodwill 19 39,084 Derivative financial instruments 22 Deferred income tax assets 20 13

755,668





(c) Details of the assets in the disposal group classified as held-for-sale at the end of the financial year are as follows: cont’d

On 31 July 2009, a subsidiary entered into a Joint Venture Agreement (“JV Agreement”) with MP Ventures Pte. Ltd. (“MP”) to establish Rig Tenders Offshore Pte Ltd (“RTOPL”) with a shareholding proportion of 70% for the subsidiary and 30% for MP.

RTOPL was established on 28 January 2010 and entered into a Purchase Contract with Marco Polo Shipping Co. Pte. Ltd., a related party of MP, to purchase a vessel with a value of US$14.2 million (RM45.7 million).

As at 31 December 2010, the joint venture is classified within assets of disposal group held-for-sale.

(d) Details of the liabilities directly associated with disposal group classified as held-for-sale at the end of the financial year are as follows:

Note Group RM’000

Trade and other payables 44,072 Current tax liabilities 3,058 Derivative financial instruments 1,506 Borrowings 72,648 Finance leases 53 Retirement benefit obligations 35 1,882

123,219

(e) Cumulative income/(expense) recognised in other comprehensive income relating to disposal group classified as held for sale is as follows:

Note Group RM’000

Other comprehensive income: Cash flow hedges - Fair value 2,105 - reclassification 1,119

3,224 Currency translation reserve (17,809)

(14,585)

(ii) Assets held for sale during the previous financial year On 9 October 2009, the Directors of a subsidiary company resolved to dispose of a group of 11 vessels to a third party. The sale of

these vessels which were expected to be completed within twelve months from the end of the previous financial year was classified as non-current assets held for sale and was presented separately in the statement of financial position.

The proceeds from the disposal of these assets were expected to exceed the net carrying amount of the relevant assets and no impairment was recognised on the classification of these vessels as assets held for sale. The carrying amount of vessels classified as assets held for sale at the end of the previous financial year was RM12,686,000 (see Note 15 to the financial statements).

The sale of the vessels was completed during the financial year.


26. Payables


Trade payables: - non-related 10,420 28,360 – – - associated company 23 820 – –

10,443 29,180 – –

Other payables 4,280 3,433 – – Accruals – 23,484 2,375 926

4,280 26,917 2,375 926

Amounts payable to associates – 31,048 – 10,985 Amounts payable to subsidiaries – – 5,295 – Amounts payable to shareholders – 2,323 – – Amounts payable to related companies 17,706 276 214 276

17,706 33,647 5,509 11,261

Total 32,429 89,744 7,884 12,187

Credit terms for trade payables granted to the Group range from cash terms to 90 days (2009: cash terms to 90 days).

The amounts payable to associates are unsecured advances, interest-free, with no fixed terms of repayment.

The amounts payable to shareholders and related companies are payments on behalf by these companies and are unsecured, interest-free with no fixed terms of repayment.

Amounts due to related companies arise from transactions with companies held by common significant shareholders.

The currency exposure profile of payables is analysed as follows:


Functional currency Ringgit Malaysia - US Dollar – 11,716 5,296 11,027 - Ringgit Malaysia 3,505 1,160 2,588 1,160

3,505 12,876 7,884 12,187

Functional currency US Dollar - US Dollar 28,924 39,417 – – - Indonesian Rupiah – 23,972 – – - Singapore Dollar – 12,415 – – - Ringgit Malaysia – 1,064 – –

28,924 76,868 – –

32,429 89,744 7,884 12,187



27. Borrowings


Current: Bank loans (secured) 5,696 141,201 – – Unamortised loan expense – (1,613) – –

5,696 139,588 – – Finance leases 8 103 – – Hire purchase payables 30 29 30 29 Revolving credit (unsecured) 10,000 – 10,000 –

15,734 139,720 10,030 29

Non-current: Bank loans (secured) 15,663 417,381 – – Unamortised loan expense – (5,309) – –

15,663 412,072 – – Finance leases – 69 – – Hire purchase payables 55 85 55 85

15,718 412,226 55 85

Total borrowings:

Bank loans (secured) 21,359 558,582 – – Unamortised loan expense (Note 27(d)) – (6,922) – –

21,359 551,660 – – Finance leases (Note 27(b)) 8 172 – – Hire purchase payables (Note 27(c)) 85 114 85 114 Revolving credit (unsecured) 10,000 – 10,000 –

31,452 551,946 10,085 114


27. Borrowings cont’d

The currency exposure profile of borrowings is analysed as follows:


Functional currency Ringgit Malaysia - Ringgit Malaysia 10,085 114 10,085 114

Functional currency US Dollar - US Dollar 21,359 551,660 – – - Singapore Dollar 8 172 – –

21,367 551,832 – –

31,452 551,946 10,085 114

The maturity contractual repricing or profile of borrowings (whichever is earlier) is analysed as follows:


Due within the next 12 months 15,735 139,721 10,030 29 Due between 1 to 2 years 5,727 132,411 32 30 Due between 2 to 5 years 9,990 208,898 23 55 Due after 5 years – 70,916 – –

31,452 551,946 10,085 114

The effective interest rates per annum on the Group’s borrowings at the end of the reporting period are as follows:

2010 2009 % %

Bank loans (secured) 0.26 – 0.51 4.18 – 4.68 Finance leases 3.00 2.88 – 3.25 Hire purchase payables 3.10 3.10 Revolving credit (unsecured) 4.71 –

(a) Bank loans The bank loans of the Group are secured by way of: (i) First charge over the shares of certain subsidiaries and associates;

(ii) First priority ship mortgage over the vessels of certain subsidiaries;

(iii) Floating charge over the entire assets and undertakings including the coal barging contracts and receivables of certain subsidiaries;




(a) Bank loans cont’d

(iv) Subordination of the shareholders’ loans;

(v) Assignment over the rights of all insurance policies relating to assets under this security arrangement; and

(vi) Fixed deposits of certain subsidiaries pledged to a financial institution at the end of the previous financial year. During the financial year, a subsidiary of the Company repaid all of its borrowings and subsequent to 31 December 2010, the

respective charges and pledges related to these facilities were discharged.

The principal bank loan of the Group as at 31 December 2010 was in relation to a loan of US$ 13.8 million (2009:US$ 13.8 million) which was raised on 11 September 2006. Repayment commenced on 28 May 2007 on a quarterly basis and will continue until 26 August 2014. The loan is secured by a corporate guarantee by the Company. The loan carries interest at LIBOR plus 0.75%. Interest rate for the year ranged from 0.26% to 0.51% (2009: 0.26% to 2.17%) per annum.

(b) Finance leases

Group 2010 2009 RM’000 RM’000

Instalments payable: Not later than 1 year 8 86 Between 2 to 5 years – 113

8 199 Less: Future finance charges – (27)

Present value of finance lease obligations 8 172

Group 2010 2009 RM’000 RM’000

Analysed as: Due within 12 months 8 103 Due between 2 to 5 years – 69

8 172

The fair value of the Group’s lease obligation approximates their carrying amount. The Group’s lease obligation is secured by the lessors’ title to the lease asset as disclosed in Note 15 to the financial statements.



(c) Hire purchase payables


Instalments payable: Not later than 1 year 35 35 35 35 Between 1 to 2 years 35 35 35 35 Between 2 to 3 years 23 35 23 35 Between 3 to 4 years – 23 – 23

93 128 93 128 Less: Future finance charges (8) (14) (8) (14)

Present value of hire purchase payables 85 114 85 114

Analysed as: Due within 12 months 30 29 30 29 Due between 1 to 2 years 32 30 32 30 Due between 2 to 3 years 23 32 23 32 Due between 3 to 4 years – 23 – 23

85 114 85 114

The fair values of the Group’s and Company’s hire purchase payables approximate their carrying amounts.

(d) Unamortised loan expense

Group 2010 2009 RM’000 RM’000

At beginning of year 6,922 8,655 Currency exchange differences (432) (79) Amortisation for the year (Note 25(i)(a)(vi)) (6,296) (1,654) Reclassification as held for sale (194) –

At end of year – 6,922

Breaches of loan covenants As at 31 December 2010, the Group did not fulfill certain of its financial covenant clauses in relation to the US$43.6 million (RM134.9

million) of credit facilities. Accordingly, the banks were contractually entitled to request for immediate repayment of the outstanding balances of US$23.5 million (RM72.6 million) as at 31 December 2010. At the end of the financial year, the carrying value of US$23.5 million (RM72.6 million) of the borrowings has been included within liabilities directly associated with disposal group held-for-sale (Note 25(i)(d)).



28. Derivative Financial Instruments


Fair value Derivative financial assets Interest rate swaps – current portion 1,139 – – –

(a) Currency forward contracts At the date of the statement of financial position, the total notional amount of outstanding currency forward contracts to which the

Group and the Company is committed are as follows:

Group 2010 2009 RM’000 RM’000

Notional value 3,585 – Fair value – derivative financial assets 22 –

(b) Interest rate swaps The Group uses interest rate swaps to manage its exposure to interest rate movements on its bank loans by swapping a significant

proportion of those bank loans from floating rates to fixed rates. As at 31 December 2010, the details of the outstanding interest rate swaps are as follows:

Group 2010

Notional value (RM’000) 21,359 Fixed interest rates (%) 3.74% to 4.95% Floating interest rates (%) 0.39% to 0.78% Fair value - cash flow hedge (loss) (RM’000) 1,139

29. Financial Guarantee Liabilities

Company 2010 RM’000

Notional amount 21,539

Financial guarantee liabilities 221

The Company is a party to financial guarantee contracts where the Company has provided financial guarantees to banks in respect of loans borrowed by a subsidiary.


30. Share Capital (a) Share capital


Authorised: Ordinary shares of RM1.00 each: At beginning and end of financial year 998,000 998,000

Issued and fully paid: Ordinary shares of RM1.00 each: At beginning and end of financial year 733,009 733,009

(b) Employees’ Share Option Scheme The Company implemented an Employees’ Share Option Scheme (“ESOS”) on 18 October 2005 for a period of 10 years for the benefit

of eligible employees and Directors of the Company and the Group. The ESOS is governed by the By-Laws which were approved by the shareholders on 26 September 2005.

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 ESOS shall not exceed fifteen per cent (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 per cent (10%) of the shares available under the scheme would be allocated to any individual eligible person who either singly or collectively through persons connected with such eligible person holds twenty per cent (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 per cent (10%) may be given at the absolute discretion of the Options Committee for options granted. The option price shall not be lower than the par value of the shares of the Company of RM1.00;

(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



30. Share Capital cont’d

(b) Employees’ Share Option Scheme cont’d

(vi) The options shall be exercisable from the offer date in the following manner: (a) where the grantee is an Executive Director or Non-Executive Director:

Year 1 2 3 4 5 6 7 8 9 10

Percentage of options exercisable (%) 10 10 10 10 10 10 10 10 10 10

(b) where the grantee is an employee (excluding any Executive Director), the Options Committee may, at any time and from time to time, before or after an option is granted, limit the exercise of the option to a maximum number of new shares and/or such percentage of the total shares comprised in the option during such period(s) within the option period and impose any other terms and/or conditions deemed appropriate by the Option Committee in its sole discretion including amending/varying any terms and conditions imposed earlier.

The percentage of an option exercisable in a particular year which is not exercised, can be carried forward to the subsequent years within the option period.

(vii) the movement in the number of options over the ordinary shares of RM1.00 each in the Company during the financial year is as follows:

Exercise At At price 1.1.2010 Granted Lapsed 31.12.2010 Grant date Expiry date RM ’000 ’000 ’000 ’000

22 November 18 October 1.15 14,144 – (4,200) 9,944 2005 2015

1 December 18 October 1.15 5,200 – – 5,200 2005 2015

3 February 18 October 1.15 8,130 – (288) 7,842 2006 2015

17 October 18 October 1.15 1,200 – – 1,200 2006 2015

10 May 2007 18 October 1.15 3,312 – – 3,312 2015

11 July 2007 18 October 1.15 4,208 – (540) 3,668 2015

Total 36,194 – (5,028) 31,166


30. Share Capital cont’d

(b) Employees’ Share Option Scheme cont’d

The movements in share option reserve are as follows:


At 1 January 5,765 3,978 5,765 3,978 Recognised in income statement (Note 10) - company 164 1,337 164 1,337 - subsidiary – 450 – –

164 1,787 164 1,337

Transferred to subsidiaries (Note 16) – – – 450

At 31 December 5,929 5,765 5,929 5,765

There was no option granted during the financial year. The significant inputs into the model for the six tranches of options granted from 2005 to 2007 were as follows:


Valuation assumptions:

Weighted average share price at the date of grant (RM) 1.14 1.14 Weighted average exercise price (RM) 1.15 1.15 Expected volatility of share prices (%) 30 30 Expected option life (years) 6 7 Risk-free interest rate per annum (%) 3.5 – 4.1 3.5 – 4.1 Expected dividend yield (%) 2.19 2.19

Weighted average fair value of option granted using the Trinomial Valuation Model 0.3459/option

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous 7 years. The expected life used in the model has been adjusted based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.



31. Treasury Shares Group and Company No. of ordinary shares of RM1 each 2010 2009 2010 2009 ’000 ’000 RM’000 RM’000

At 1 January 5 3 3 2 Purchased during the year 1 2 1 1

At 31 December 6 5 4 3

During the financial year, the Company repurchased 1,000 (2009: 2,000) units of its issued and paid-up share capital from the open market on Bursa Malaysia for RM490 (2009: RM975). The average price paid for the shares repurchased was approximately RM0.49 (2009: RM0.48) per share. The repurchase transactions were financed by internally generated funds. The shares repurchased are being held as Treasury shares as allowed under Section 67A of the Companies Act, 1965. The Company has the right to reissue these shares at a later date. As Treasury shares, the rights attached as to voting, dividends and participation in other distribution are suspended. None of the Treasury Shares repurchased has been sold as at 31 December 2010.

At the end of the reporting period, 6,000 (2009: 5,000) ordinary shares are held as Treasury shares at a carrying value of RM3,925 (2009: RM3,435) and the number of outstanding shares in issue after setting off against Treasury shares is 733,003,000 (2009: 733,004,000).

The shareholders of the Company, by an ordinary resolution passed in an Annual General Meeting held on 28 June 2010, 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.

32. Share Premium


At 1 January/31 December 121,913 121,913

33. Other Reserves


Share option reserve (Note 30(b)) 5,929 5,765 5,929 5,765 Exchange fluctuation reserve (127,117) (75,123) – – Hedging reserve (1,794) – – –

At 31 December (122,982) (69,358) 5,929 5,765

Exchange fluctuation reserve Foreign currency translation differences arising from the translation of the financial statements of foreign subsidiaries are taken to the

exchange fluctuation reserve as described in the significant accounting policies.


33. Other Reserves cont’d

Hedging reserve


At 1 January – – – – Effects of adoption of FRS 139 (Note 42) (5,016) – – –

(5,016) – – – Fair value losses on cash flow hedge (592) – – – Reclassification to income statement - finance costs (Note 25(i)(a)(vi)) 3,814 – – – Less: Non-controlling interests (384) – – – Currency exchange differences 384 – – –

At 31 December (1,794) – – –

34. (Accumulated Loss)/Retained Earnings Under the single-tier tax system which came into effect from the year of assessment 2009, companies are not required to have tax credits

under Section 108 of the Income Tax Act, 1967 for dividend payment purposes. Dividends paid under this system are tax exempt in the hands of shareholders.

Companies with Section 108 credits as at 31 December 2007 may continue to pay franked dividends until the Section 108 credits are exhausted or 31 December 2013, whichever is earlier, unless they opt to disregard the Section 108 credits to pay single-tier dividends under the special transitional provisions of the Finance Act 2007.

35. Provision for Retirement Benefits

Group 2010 2009 RM’000 RM’000

Non-current liabilities Obligations for retirement benefits in the statement of financial position – 1,741

Charged/(credited) to income statement 442 (451)

The Group operates a funded defined benefit plan for qualifying employees and vessel crew of its subsidiaries in Indonesia. Under the plan, the employees and vessel crew are entitled to retirement benefits as defined in the Indonesian Labour Law No. 13/2003 and the regulation from Government of Republic Indonesia PPRI No.7/2000 regarding maritime.

The amounts recognised in the statement of financial position are determined as follows:

Group 2010 2009 RM’000 RM’000

Present value of unfunded obligations – 1,741

Liability in the statement of financial position – 1,741



35. Provision for Retirement Benefits cont’d

The amounts recognised in the income statement are as follows:

Group 2010 2009 RM’000 RM’000

Current service costs 300 197 Gain on curtailment – (814) Interest cost 148 166

448 (451) Net actuarial gain recognised (6) –

Total included in staff costs 442 (451)

The charge/(credit) for the financial year was included in the consolidated income statement as administration expenses (Note 25(i)(vii) to the financial statements).

The movements in the liability recognised in the statement of financial position are as follows:

Group 2010 2009 RM’000 RM’000

At 1 January 1,741 2,067 Total expenses charged/(credited) to income statement (Note 25(i)(vii)) 442 (451) Benefits payments made during the year (193) (130) Currency translation differences (108) 255 Reclassification within liabilities directly associated with disposal group (Note 25(i)(d)) (1,882) –

At 31 December – 1,741

The principal actuarial assumptions used were as follows:

Group 2010 2009 % %

Discount rate (per annum) (%) 8.5 – 8.75 10 – 10.5 Expected rate of salary increases (per annum) (%) 8 – 9 8 – 9 Normal retirement age (years) 55 – 60 55 – 60

The most recent actuarial valuation of the present value of the defined benefit obligation was carried out on 31 December 2010 by P.T. Eldridge Gunaprima Solution and P.T. Padma Radya Aktuaria, independent actuaries.

The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.


36. Significant Related Party Transactions 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 terms and conditions obtainable in transactions with unrelated parties.

(a) Significant transactions with associates

Group 2010 2009 RM’000 RM’000

Agency income from CH Offshore Limited 413 446 Agency fee paid to Chuan Hup Agency Pte. Ltd. (a subsidiary of CH Offshore Limited) 1,185 1,355 Agency fee from Trans Advantage Sdn Bhd 75 260

(b) Significant transactions with substantial shareholders of the Company

Management fee charged by Scomi Group Bhd 302 215 Office rental paid to Scomi Group Bhd 232 173 Secretarial fee paid to Chuan Hup Holdings Ltd. 85 87

During the year, the Company made an initial payment of RM7,000,000 to a corporate shareholder, Scomi Group Bhd, in relation to a proposed implementation of a group-wide accounting system. The proposed implementation was subsequently aborted and the initial payment was refunded in full during the year.

(c) Significant transactions with companies of which the substantial shareholders have interests as follows:

Group 2010 2009 RM’000 RM’000

Chartering income receivable from SOS – 9,252 Air ticket costs charged by Lintas 185 154 Rental charges paid to Quijul Pte Ltd 264 277 Insurances services paid to Beauford Marine Pte Ltd 257 280 Fee charged by SSSB 130 131 Car rental payable to SEB – 13

(i) TL Oilserve Sdn Bhd (formerly known as “Scomi Oilserve Sdn. Bhd.”) (“SOS”), Scomi Solutions Sdn. Bhd. (“SSSB”) and Scomi Engineering Bhd. (“SEB”) are subsidiaries of a substantial shareholder, Scomi Group Bhd.

SOS ceased to be a subsidiary of Scomi Group Berhad in the financial year ended 31 December 2009.

(ii) Quijul Pte. Ltd. and Beauford Marine Pte. Ltd. are companies in which the substantial shareholders have interest in.

(iii) Lintas Travel and Tours Sdn. Bhd. (“Lintas”) is a company connected to a Director of the Company.



36. Significant Related Party Transactions cont’d

(d) Significant balances with related parties Information regarding outstanding balances arising from related party transactions as at 31 December 2010 is disclosed in Note 23

and Note 26 to the financial statements.

(e) Compensation of key management personnel The remuneration of Directors (including Executive Directors and Non-Executive Directors) and other members of key management

during the financial year are as follows:

Group 2010 2009 RM’000 RM’000

Salaries and short-term employee benefits 971 636 Defined contribution plan 50 66 Share-based payment expense 257 604 Directors’ fees 332 348 Directors’ allowances 68 53 1,678 1,707

Included in the total key management personnel are:


Directors’ remuneration (Note 11) 937 1,035 937 1,035

Executive Directors of the Group and the Company and other members of key management have been granted the following number of options under the Employees’ Share Option Scheme.


At 1 January 22,130 22,050 Granted – 80

At 31 December 22,130 22,130


37. Operating Lease Commitments The future minimum lease payments under non-cancellable operating leases are as follows:

Group 2010 2009 RM’000 RM’000

In respect of rental of office premises:

Instalments payable - not later than 1 year 417 151 - later than 1 year but not later than 5 years 567 –

984 151

In respect of re-charter vessel contracts:

Group 2010 2009 RM’000 RM’000

Instalments payable - not later than 1 year 25,564 38,834 - later than 1 year but not later than 5 years – 25,050

25,564 63,884

38. Bank Guarantees


Unsecured: Bank guarantees issued for charter marine contracts 35,254 35,475 21,328 21,328

39. Capital Commitments


Authorised capital expenditure not recognised in the financial statements: - contracted for 2,786 37,065 – – - not contracted for 21,705 – – –

40. Segment Information In the prior year’s audited consolidated financial statements, the basis of segmentation was on a primary format of business

segments and a secondary format of geographical segment. In the current financial year ended 31 December 2010, the basis of segmentation have been changed to operating segments based on information reported internally to the Chief Executive Officer and the Board of Directors. In prior financial years, the Group has two reportable segments: investment holding and marine services. With the adoption of FRS 8, Operating Segments, the marine services segment has been disaggregated into two separate reportable segments of marine logistics and offshore support division.



40. Segment Information cont’d

(a) Primary reporting format – business segment

Marine Offshore Logistics support Others Total RM’000 RM’000 RM’000 RM’000

Revenue and results for the year ended 31 December 2010

Revenue External sales 65,474 13,385 – 78,859

Total revenue 65,474 13,385 – 78,859

Results Profit from operations 2,588 3,531 – 6,119 Finance costs – (1,157) (83) (1,240) Interest income – – 92 92 Share of profit/(loss) in associated companies 611 (5,826) – (5,215)

Segment results 3,199 (3,452) 9 (244) Unallocated costs (33,092)

Loss before taxation (33,336) Taxation (567)

Loss from continuing operations (33,903)

Discontinuing operations Profit from discontinuing operations 25,022 8,081 – 33,103 Gain on disposal of an associate – 59,172 – 59,172 Impairment loss on goodwill (260,040) – – (260,040)

Loss from discontinuing operations (235,018) 67,253 – (167,765) Loss for the financial year (201,668) Non-controlling interests (2,366)

Loss attributable to shareholders of the Company (204,034)



(a) Primary reporting format – business segment cont’d


Revenue and results for the year ended 31 December 2009

Revenue External sales – 14,610 – 14,610

Total revenue – 14,610 – 14,610

Results Profit from operations – 4,323 – 4,323 Finance costs – (1,823) (8) (1,831) Interest income – – 19 19 Share of profits in associated companies 1,790 (5,317) – (3,527)

Segment results 1,790 (2,817) 11 (1,016) Unallocated costs (16,972)

Loss before taxation (17,988) Taxation (20)

Loss from continuing operations (18,008) Discontinuing operations Profit from discontinuing operations 46,275 52,476 – 98,751 Impairment loss on goodwill (148,649) – – (148,649)

Loss from discontinuing operations (102,374) 52,476 – (49,898) Loss for the financial year (67,906) Non-controlling interests (3,759)

Loss attributable to shareholders of the Company (71,665)




(a) Primary reporting format – business segment cont’d


Assets and liabilities as at 31 December 2010

Assets Assets employed in the segment 25,739 68,517 10,733 104,989 Investment in associated companies – 3,225 – 3,225

Segment assets 25,739 71,742 10,733 108,214 Unallocated assets – Assets classified as held for sale (Note 25(i)(c)) 686,540 69,128 – 755,668

Total assets 863,882

Liabilities Liabilities in segment 20,735 39,123 5,596 65,454 Unallocated liabilities 82 Liabilities classified as held for sale (Note 25(i)(d)) 25,602 97,617 – 123,219

Total liabilities 188,755

Assets and liabilities as at 31 December 2009 Assets Assets employed in the segment 998,976 203,489 51,045 1,253,510 Investment in associated companies 2,335 293,720 – 296,055

Segment assets 1,001,311 497,209 51,045 1,549,565 Unallocated assets 19,587 Non-current assets held for sale 12,686 – – 12,686

Total assets 1,581,838 Liabilities Liabilities in segment 531,079 98,032 12,865 641,976 Unallocated liabilities 3,607

Total liabilities 645,583

Unallocated costs represent corporate expenses. Assets employed in segment consist of property, plant and equipment, receivables and cash and cash equivalents, and mainly exclude deferred tax assets and tax recoverable. Liabilities in segment comprise payables and exclude taxation and deferred tax liabilities.



(b) Secondary Reporting Format – Geographical Segments

The Group operates in the following geographical areas: (i) Malaysia * – provision of ship chartering and offshore support services (ii) Indonesia – provision of marine vessel for logistic and offshore support services * Company’s home country

Malaysia Indonesia Others Total RM’000 RM’000 RM’000 RM’000

2010 Revenue Total revenue from external customers - continuing operations 78,859 – – 78,859 - discontinuing operations – 330,242 – 330,242 78,859 330,242 – 409,101 Assets employed in segments 108,214 755,668 – 863,882 2009 Revenue Total revenue from external customers - continuing operations 14,610 – – 14,610 - discontinuing operations – 433,723 – 433,723 14,610 433,723 – 448,333 Assets employed in segments 138,613 1,443,225 – 1,581,838

In determining the geographical segments of the Group, revenue is based on the location of the service facilities. Assets employed in segments are determined based on where the assets are located.

41. Financial Instruments Financial risk management objectives and policies The Group’s activities expose it to market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The

Group’s overall risk management program seeks to minimise adverse effects from the unpredictability of financial markets on the Group’s financial performance. The Group uses financial instruments such as currency forwards and interest rate swaps to manage against financial risk exposures.

The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group and the Company. The management team then establishes detailed policies such as risk identification and measurement, exposure limits and risk management strategies. Financial risk management is carried out by treasury personnel. Risk management policies and procedures are reviewed regularly to reflect changes in market condition and the Group’s activities.



41. Financial Instruments Financial risk management objectives and policies cont’d

(a) Market risk Market risk is the risk that changes in market prices such as foreign exchange rates and interest rates. The objective of market risk

management is to manage and control market risk exposures within acceptable parameters while optimising the return on risk. (i) Currency risk Apart from the Ringgit Malaysia (“RM”), the Group transacts business in various foreign currencies including Singapore Dollar

(“SGD”), Indonesia Rupiah (“IDR”) and United States Dollar (“USD”) and therefore is exposed to currency exchange risk. These exposures are managed primarily by using natural hedges that arise from offsetting assets and liabilities that are denominated in foreign currencies wherever possible and closely monitoring of the currency exposures by management.

The Group’s currency exposure is as follows:

Functional currency Functional currency Ringgit Malaysia US Dollar RM USD USD SGD IDR Other Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

As 31 December 2010

Financial assets Cash and cash equivalents 10,801 481 37,175 1,334 14,920 3 64,714 Trade and other receivables 7,599 – 102,065 2,653 18,663 – 130,980 Other assets – – – 80 – – 80 Derivative financial instruments – – – 22 – – 22

18,400 481 139,240 4,089 33,583 3 195,796 Reclassified to disposal group classified as held-for-sale (Note 25) – – (126,498) (4,012) (33,555) (3) (164,068)

18,400 481 12,742 77 28 – 31,728


41. Financial Instruments cont’d

Financial risk management objectives and policies cont’d

(a) Market risk cont’d

(i) Currency risk cont’d

The Group’s currency exposure is as follows:


Financial liabilities Borrowings – – (94,007) – – – (94,007) Finance leases – – – (61) – – (61) Hire purchase (85) – – – – – (85) Revolving credit facility (10,000) – – – – – (10,000) Trade and other payables (3,505) – (47,285) (8,045) (17,635) (31) (76,501) Derivative financial instruments – – (2,645) – – – (2,645)

(13,590) – (143,937) (8,106) (17,635) (31) (183,299) Reclassified to disposal group classified as held-for-sale (Note 25) – – 95,756 7,934 14,558 31 118,279

(13,590) – (48,181) (172) (3,077) – (65,020) Net financial assets/ (liabilities) 4,810 481 (35,439) (95) (3,049) – (33,292)

Add: Net financial (assets)/liabilities denominated in respective entities’ functional currency (4,810) – 35,439 – – – 30,629

Net (liabilities)/assets – 481 – (95) (3,049) – (2,663)








As 31 December 2009

Financial assets Cash and cash equivalents 10,348 444 60,603 7,376 7,570 2 86,343 Trade and other receivables 11,626 5,837 125,053 3,863 22,188 – 168,567

21,974 6,281 185,656 11,239 29,758 2 254,910 Financial liabilities Borrowings – – (558,582) – – – (558,582) Finance leases – – – (172) – – (172) Hire purchase (114) – – – – – (114) Trade and other payables (1,160) (11,716) (39,417) (12,415) (23,972) (1,064) (89,744)

(1,274) (11,716) (597,999) (12,587) (23,972) (1,064) (648,612) Net financial assets/ (liabilities) 20,700 (5,435) (412,343) (1,348) 5,786 (1,062) (393,702)

Add: Net financial (assets)/liabilities denominated in espective entities’ functional currency (20,700) – 412,343 – – – 391,643

Net (liabilities)/assets – (5,435) – (1,348) 5,786 (1,062) (2,059)

The Company’s financial assets and liabilities are significantly denominated in Malaysian Ringgit (“RM”), which is its functional currency. The Company is not significantly exposed to foreign currency risk.






If the SGD, IDR and USD change against the RM by 10% respectively with all other variables including tax rate being held constant, the effects arising from net financial liability/asset position will be as follows:

Increase/(decrease) 2010 loss after tax RM’000 Group USD against RM - strengthened 48 - weakened (48) SGD against RM - strengthened (10) - weakened 10 IDR against RM - strengthened 277 - weakened (277)

(ii) Cash flow and fair value interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in

market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing assets, the Group’s income is substantially independent of changes in market interest rates.

The Group’s and the Company’s exposure to cash flow interest rate risks arises mainly from non-current variable-rate borrowings. The Group manages these cash flow interest rate risks using floating-to-fixed interest rate swaps.

The sensitivity analysis below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the date of the statement of financial position and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates.

If interest rates have been 50 basis points higher or lower and all other variables were held constant, the Group’s loss after tax ended 31 December 2010 would increase/decrease by approximately RM721,000.

This is mainly attributable to the Group’s exposure to interest rates on its floating rate borrowings which is not hedged.

(iii) Price risk The Group and Company is not exposed to significant equity price risk as it does not hold any equity financial investment as

available-for-sale assets.





(b) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual

obligations and arises principally from the Group’s receivables from customers, cash and cash equivalents and financial assets (derivative instruments).

The Group adopts the policy of dealing only with customers of appropriate credit history, and obtaining sufficient security where appropriate to mitigate credit risk. For other financial assets, the Group adopts the policy of dealing with financial institutions and other counterparties that are regulated and with sound credit rating.

As the Group and the Company do not hold any collateral, the maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the balance sheet, except as follows:

Company 2010 RM’000

Corporate guarantees provided to banks on subsidiaries’ loans 10,893

Customers’ payment profile and credit exposure are continuously monitored and reported to the management and Board of Directors. In 2010, the Group’s trade receivables include one debtor that represented 76% of trade receivables at date of the statement of financial position.

The Group’s maximum exposure to credit risk for each class of financial assets is the carrying amount of that class of financial instruments presented on the statement of financial position. The Group’s major classes of financial assets are bank deposits and trade and other receivables.

(i) Financial assets that are neither past due nor impaired Bank deposits that are neither past due nor impaired are mainly deposits with banks with sound credit-ratings assigned by

international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group.

The Group has not made any provision as management are of the view that these receivables are recoverable.

(ii) Financial assets that are past due and/or impaired There is no other class of financial assets that is past due and/or impaired except for trade receivables.

The age analysis of trade receivables past due but not impaired is as follows:


Past due less than 90 days 6,684 6,643 – – Past due more than 90 days 659 1,434 – –

7,343 8,077 – –

Reclassified to disposal group classified as held-for-sale (Note 25) (6,754) – – –

589 8,077 – –




(b) Credit risk cont’d

(ii) Financial assets that are past due and/or impaired cont’d

The carrying amount of trade and other receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows:

Group 2010 2009 RM’000 RM’000

Not past due 41,806 26,838 Past due less than 90 days 592 86 Past due more than 90 days 14,781 3,064

57,179 29,988 Less: Allowance for impairment (46,392) (26,100) 10,787 3,888 At 1 January 26,100 – Allowance made 23,282 26,811 Currency exchange differences (2,990) (711) 46,392 26,100 Reclassified to disposal group held for sale (16,482) –

At 31 December 29,910 26,100

The impaired trade receivables arise mainly from charter hire of vessels to customers which have suffered significant losses in its operations.

(c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through

an adequate amount of committed credit facilities (Note 27) and the ability to close out market positions at a short notice. At the date of the statement of financial position, assets held by the Group and Company for managing liquidity risk included cash and short-term deposits as disclosed in Note 24.

Management monitors rolling forecasts of the Group’s and Company’s liquidity reserve (comprises undrawn borrowing facility and cash and cash equivalents (Note 24) on the basis of expected cash flow. This is generally carried out at local level in the operating companies of the Group in accordance with practice and limits set by the Group. These limits vary by location to take into account the liquidity management policy involve projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these; monitoring liquidity ratios; and maintaining debt financing plans.

The table below analyses the Group’s and Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period from the date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.





(c) Liquidity risk cont’d

Less than Between 2 1 year and 5 years RM’000 RM’000

Group At 31 December 2010 Trade and other payables (76,501) – Finance leases (61) –

Hire purchases (30) (55) Revolving credit facility (10,000) – Borrowings (78,045) (15,962)

(164,637) (16,017) Reclassified to disposal group classified as held-for-sale (Note 25) 116,528 245

(48,109) (15,772) At 31 December 2009 Trade and other payables (89,744) – Finance leases (103) (69) Hire purchases (29) (85) Borrowings (139,589) (412,071)

(229,465) (412,225)

Company At 31 December 2010 Trade and other payables (7,884) – Financial guarantee liabilities (2,905) (7,988) Hire purchases (30) (55) Revolving credit facility (10,000) –

(20,819) (8,043) At 31 December 2009 Trade and other payables (12,187) – Financial guarantee liabilities (3,220) (12,075) Hire purchases (29) (85)

(15,436) (12,160)




(c) Liquidity risk cont’d

The table below analyses the Group’s and Company’s derivative financial instruments for which contractual maturities are essential for an understanding of the timing of the cash flows into relevant maturity groupings based on the remaining period from the date of the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Less than Between 2 1 year and 5 years RM’000 RM’000

Group At 31 December 2010 Net-settled interest rate swaps – cash flow hedges - Net cash outflows (968) (1,048)

Gross-settled currency forwards - Receipts 3,606 – - Payments (3,585) –

At 31 December 2009 Net-settled interest rate swaps – cash flow hedges - Net cash outflows (7,278) 399

(d) Capital risk The Company manages its various entities’ capital to ensure that entities in the Group will be able to continue as a going concern

while maximising the return to stakeholders through the optimisation of the debt and equity balances.

Management will review the capital structure. As part of this review, management considers the cost of capital and the risks associated with each class of capital. Management will balance its overall capital structure through the payment of dividends, or the redemption of existing loans.

The Group’s overall strategy remains unchanged from 2009.

The Group and the Company are in compliance with all externally imposed capital requirements for the financial years ended 31 December 2009 and 2010.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in Notes 27 and equity.

(e) Fair value measurement The fair value of financial instruments with standard terms and conditions traded on active liquid markets are determined with

reference to quoted market prices.

The carrying amounts of cash and cash equivalents, trade and other current assets and trade and other liabilities approximate their respective fair values due to the relatively short-term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to financial statements.

The fair values of derivative financial instruments were determined using Level 2 inputs, which represented inputs from observable market pricing for similar expected cash flows.

Other than for derivative financial instruments, the Group does not have financial assets measured at fair values in 2010 and 2009.



42. Changes in Accounting Policies During the financial year, the Group changed the following accounting policies upon adoption of new accounting standards, amendments

and improvements to published standards and interpretations: • Financialassets–Note3.8 • Derivativefinancialinstruments–Note3.10 • Financialguaranteecontracts–Note3.11 • Borrowingcosts–Note3.17

The following Notes (i) and (ii) disclose the impacts of such changes on the financial statements of the Group and Company.

In addition, the Group has also adopted the following two accounting standards that introduced new presentation and disclosures requirements:

FRS 101 Revised “Presentation of financial statements” FRS 101 (revised) “Presentation of Financial Statements” prohibits the presentation of items of income and expenses (that is, ‘non-

owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity in a statement of comprehensive income. As a result the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. As the change in accounting policy only impacts presentation aspects, there is no impact on loss per share. Comparative information has been re-presented so that it also is in conformity with the revised standard, as follows:

Income Statement statement as Effects of comprehensive previously revised income as reported FRS 101 restated RM’000 RM’000 RM’000

Group For the financial year ended 31 December 2009 Loss for the financial year (67,906) – (67,906) Other comprehensive loss – (11,991) (11,991)

Total comprehensive loss (79,897)

Total comprehensive loss attributable to: Owners of the Company (82,907) Non-controlling interests 3,010

(79,897)

Company For the financial year ended 31 December 2009 Profit for the financial year 6,942 – 6,942 Other comprehensive income – – –

Total comprehensive income 6,942

Total comprehensive loss attributable to owners of the Company 6,942


42. Changes in Accounting Policies cont’d

FRS 7 “Financial instruments: disclosures” FRS 7 introduces new disclosures relating to financial instruments and does not have any impact on the classification an valuation of the

Group’s financial instruments. It requires the disclosures of qualitative and quantitative information about the exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.

The Group has applied FRS 7 prospectively in accordance with the transitional provisions. Hence, the new disclosures have not been applied to the comparatives. The new disclosures are included throughout the Group’s financial statements for the year ended 31 December 2010.

(i) Impact on the Group’s statements of financial position

Balances as at 1 January 2010 As Effects of previously adopting reported FRS 139 As adjusted RM’000 RM’000 RM’000

At 1 January 2010 Hedging reserve – (5,016) (5,016) Non-controlling interest 50,383 (1,411) 48,972 Derivative financial instruments – 6,427 6,427

Increase/(decrease) to balances as at 31 December 2010 FRS 139 RM’000

Hedging reserve (1,794) Non-controlling interest (851) Derivative financial instruments 2,645

(ii) Impact on the Company’s statements of financial position

Balances as at 1 January 2010 As Effects of previously adopting reported FRS 139 As adjusted RM’000 RM’000 RM’000

At 1 January 2010 Investment in subsidiaries 2,667 758,285 760,952 Amount due from a subsidiary – non-current 785,116 (744,541) 40,575 Financial guarantee contracts – 331 331

(iii) Impact on the Company’s income statement/statement of comprehensive income:

Increase for the financial year ended 31 December 2010 FRS 139 RM’000

Other operating income 533



43. Significant Events During the Financial Year ( a) On 28 April 2010, Scomi Marine Services Pte Ltd (“SMS”) had disposed of its investment in an associated company, CH Offshore

Limited to a third party for an aggregate consideration of RM349,172,000 (equivalent to USD104,690,000) (Note 17 to the financial statements).

(b) On 14 June 2010, the Company had acquired 600,000 ordinary share of RM1.00 each, representing the remaining 60% of the issued share capital of Trans Advantage Sdn. Bhd., for a cash consideration of RM9,000,000 (Note 16 to the financial statements).

(c) On 29 September 2010, the Board of Directors of SMB announced that SMS entered into a Master Framework Agreement (“MFA”) with PT Revessel Indonesia (“PTRI”) and Portside Offshore Inc (“Portside”) in relation to the investment by PTRI and Portside in PT Rig Tenders Tbk (“PTRT”).

Following the signing of the MFA, SMS undertakes to: (i) dispose of its entire equity interest in the following entities: - CH Logistics Pte Ltd and its wholly-owned subsidiary, Sea Master Pte Ltd; - CH Ship Management Pte Ltd; - Grundtvig Marine Pte Ltd (“GMPL”) and its 95%-owned subsidiary, PT Batuah Abadi Lines (“PBAL”); and - Goldship Private Limited

to PTRT, an 80.54%-owned subsidiary of SMS, for a total disposal consideration of the total of USD135.9 million and Indonesian Rupiah (Rp) 323.1 billion (approximately RM538.3 million); and

(ii) renounce its entitlement to the ordinary shares of Rp100 each to be issued by PTRT under the proposed rights issue, to Portside and PTRI for nil consideration.

Following the signing of the MFA on 29 September 2010, SMS had classified PTRT and the Marine Logistics Companies as a disposal group held-for-sale within the Statement of Financial Position (Note 25 to the financial statements), and the entire results are presented on the Consolidated Statements of Comprehensive Income and Consolidated Statement of Cash Flows as “Discontinuing Operations”.

44. Subsequent Events after the end of the Reporting Period On 14 January 2011, the Company had announced to the Bursa Malaysia that SMS, Portside Offshore Inc. and PT Revessel Indonesia have

mutually agreed to extend the date of completion and the period for the satisfaction of the conditions for the effectiveness of the MFA by 90 days from 31 December 2010 to 31 March 2011. At the date of these financial statements, the date of completion as set out in the MFA has lapsed. However, termination of the MFA is not effective unless parties to the agreement give written notice of its intention to terminate the MFA. As at the date of these financial statements, neither party has issued notice to terminate the MFA.

45. Approval of Financial Statements The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 29 April 2011.


46. Supplementary Information on the Breakdown of Realised and Unrealised Retained Profits or Accumulated Losses The breakdown of the accumulated losses as at 31 December 2010 into realised and unrealised profits or losses is presented in accordance

with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared 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.

2010 Group Company RM’000 RM’000

Total retained earnings of the Company and its subsidiaries: - realised (130,099) (232,306) - unrealised (20,060) (8,650)

(150,159) (240,956) Total share of retained earnings from associated companies: - realised 45,899 – - unrealised 1,829 –

Total share of retained earnings from jointly controlled entities: - realised 1,154 – - unrealised – –

(101,277) (240,956) Less: Consolidation adjustments (2,446) –

Total accumulated losses (103,723) (240,956)



We, Tan Sri Datuk Asmat Bin Kamaludin and Shah Hakim @ Shahzanim Bin Zain, being two of the Directors of Scomi Marine Bhd, state that, in the opinion of the Directors, the financial statements set out on pages 62 to 140 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2010 and of its results and cash flows 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 29 April 2011.

Tan Sri Datuk Asmat Bin Kamaludin Shah Hakim @ Shahzanim Bin ZainDirector Director

Petaling Jaya29 April 2011

S TAT U TO R Y D E C L A R AT I O N Pursuant to Sec t ion 169(16) of the Companies Ac t , 1965

I, Abu Zaharoff Bin Abu Bakar, being the officer primarily responsible for the financial management of Scomi Marine Bhd, do solemnly and sincerely declare that the financial statements set out on pages 62 to 140 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 on 29 April 2011,

before me

Commissioner for Oaths

S TAT E M E N T BY D I R E C TO R S Pursuant to Sec t ion 169(15) of the Companies Ac t , 1965


Report on the Financial Statements We have audited the financial statements of Scomi Marine Bhd on pages 62 to 140 which comprise the statements of financial position as at 31 December 2010 of the Group and of the Company, and the statements of income, comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 5 to 45.

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 judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements 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 2010 and of their financial performance and cash flows for the year then ended.

Report on Other Legal and Regulatory RequirementsIn accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

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

(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 16 to the financial statements.

(c) We are satisfied that the 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.

I N D E P E N D E N T AU D I TO R S’ R E P O R T to the Members of Scomi Mar ine Bhd


Other Reporting ResponsibilitiesThe supplementary information set out in Note 46 on page 140 is disclosed to meet the requirement 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 MattersThis report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PricewaterhouseCoopers Sridharan Nair(No. AF: 1146) (No. 2656/05/12 (J))Chartered Accountants Chartered Accountant

Kuala Lumpur29 April 2011


A N A LY S I S O F S H A R E H O L D I N G S As at 29 Apr i l 2011

Authorised Share Capital : RM1,000,000,000.00 divided into 998,000,000 ordinary shares of RM1.00 each and 200,000,000 redeemable convertible cumulative preference shares (“RCCPS”) of RM0.01 each

Issued and Paid Up Capital : RM733,009,478 divided into 733,009,478 ordinary shares of RM1.00 each This included 7,000 ordinary shares purchased by the Company under share buy-back scheme and retained as

treasury shares.Types of Shares : Ordinary shares of RM1.00 each and RCCPS of RM0.01 eachVoting Rights : One vote per ordinary share

Distribution of Shareholdings

Shareholders ShareholdingSize of shareholdings No. of holders % of holders No. of shares % of shares

Less than 100 28 0.51 661 0.00100 to 1,000 653 11.86 541,539 0.071,001 to 10,000 3,159 57.35 16,863,100 2.3010,001 to 100,000 1,432 26.00 47,390,000 6.47100,001 to less than 5% of issues shares 231 4.19 107,624,500 14.685% and above of issues shares 5 0.09 560,582,678 76.48

Total 5,508 100.00 733,002,478 100.00

List of Top Thirty (30) Holders as at 29 April 2011

Name of shareholder No. of shares Percentage %

1. UOBM Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Scomi Group Bhd 313,043,478 42.71

2. UOBM Nominees (Asing) Sdn Bhd TAEL One Partners Ltd for Petroworld Investments Inc 110,000,000 15.01

3. HDM Nominees (Asing) Sdn Bhd UOB Kay Hian Pte Ltd for TAEL One Partners Ltd 61,499,200 8.39

4. RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Meer Sadik Bin Habib Mohamed 38,600,000 5.27

5. Lembaga Tabung Haji 37,440,000 5.11

6. M.I.T Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Abu Sahid Bin Mohamed 9,500,000 1.30

7. Hemant Hiralal Kothari 6,469,500 0.88

8. Siva Kumar A/L M Jeyapalan 4,377,200 0.60

9. Meer Sadik Bin Habib Mohamed 4,183,996 0.57

10. Abu Sahid Bin Mohamed 3,740,000 0.51


List of Top Thirty (30) Holders as at 29 April 2011 cont’d

Name of shareholder No. of shares Percentage %

11. SJ SEC Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Yap Kim San 3,100,000 0.42

12. Cartaban Nominees (Asing) Sdn Bhd SSBT Fund FJ4V for Asian Small Companies Portfolio 2,701,200 0.37

13. Citigroup Nominees (Asing) Sdn Bhd UBS AG for New Harbour Asia Fund (Master) Limited 2,641,300 0.36

14. Mayban Nominees (Asing) Sdn Bhd Pledged Securities Account for San Tuan Sam 2,377,100 0.32

15. Citigroup Nominees (Asing) Sdn Bhd Exempt an for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign) 2,111,500 0.29

16. Public Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Mah Lily 1,520,000 0.21

17 Zabariah Binti Habib Mohamed 1,380,000 0.19

18. Alliancegroup Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Chan Chiew Fun 1,200,000 0.16

19. Bek Yong Huat 1,200,000 0.16

20. Lee Chiah Cheang 1,053,200 0.14

21. Koh Kin Lip 1,000,000 0.14

22. Rickoh Corporation Sdn Bhd 1,000,000 0.14

23. Rommel Josef 1,000,000 0.14

24. Tee Teh Sdn Berhad 1,000,000 0.14

25. Mayban Nominees (Tempatan) Sdn Bhd PHEIM Asset Management Sdn Bhd for Benta Wawasan Sdn Bhd 996,000 0.14

26. Wong Lee Peng 959,200 0.13

27. UOBM Nominees (Asing) Sdn Bhd UOB-IOD for United Overseas Bank Limited 935,000 0.13

28. AMSEC Nominees (Asing) Sdn Bhd Amfraser Securities Pte Ltd for Ramesh S/O Pritamdas Chandiramani 800,000 0.11

29. Tee Ke Hoi 797,000 0.11

30. Nor Ashikin Binti Khamis 792,600 0.11

Total 617,417,474 84.26


Substantial Shareholders Shareholding Direct Deemed interestedName of substantial shareholders shareholding % shareholding %

Dato’ Meer Sadik Bin Habib Mohamed 42,783,996 (1) 5.84 647,404 (2) 0.09Datin Zarida Binti Noordin 647,404 0.09 42,783,996 (4) 5.84Scomi Group Bhd 313,043,478 (3) 42.71 350,000 (5) 0.04Kaspadu Sdn Bhd – – 313,393,478 (6) 42.75Shah Hakim @ Shahzanim Bin Zain – – 313,393,478 (7) 42.75Dato’ Kamaluddin Bin Abdullah – – 313,393,478 (7) 42.75Lembaga Tabung Haji 37,440,000 5.11 – –TAEL One Partners Ltd (acting in its capacity as general partner of The Asian Entrepreneur Legacy One, L.P.) 61,499,200 8.39 – –United Overseas Bank Limited 935,000 0.13 61,499,200 (8) 8.39Petrowold Investments Inc 110,000,000 15.01 – –

Notes

1 38,600,000 shares held through RHB Capital Nominees (Tempatan) Sdn Bhd.2 Deemed interested by virtue of Section 134(12)(c) of the Companies Act, 1965 (‘the Act”) through the shareholdings in Scomi Marine Berhad (“SMB”) of his spouse, Datin

Zarida Binti Noordin.3 Held through UOBM Nominees ( Tempatan) Sdn Bhd.4 Deemed interested by virtue of Section 134(12)(c) of the Act through the shareholdings in SMB of her spouse, Dato’ Meer Sadik Bin Habib Mohamed.5 Deemed interested by virtue of Section 6A(4) of the Act through its shareholding in Scomi Energy Sdn Bhd, which in turn is interested in SMB.6 Deemed interested by virtue of Section 6A(4) of the Act through its shareholding in Scomi Group Bhd (“SGB”), which in turn is interested in SMB.7 Deemed interested by virtue of Section 6A(4) of the Act through its shareholding in Kaspadu Sdn Bhd, which in turn is interested in SGB.8 Deemed interested by virtue of Section 6A(4) of the Act through its shareholding in The Asian Entrepreneur Legacy One, L.P. which in turn is interested in SMB.

A N A LY S I S O F S H A R E H O L D I N G S As at 29 Apr i l 2011 cont ’d


Directors’ Shareholdings

Direct interest Indirect interestDirectors No. of shares % of shares No. of options No. of shares % of shares

Tan Sri Asmat Bin Kamaludin 50,000 (1) * – 10,000 (2) *Vice Admiral Dato’ Haron Bin Dato’ (Dr) Mohd Salleh (Rtd) – – 600,000 # – –Dato’ Meer Sadik Bin Habib Mohamed 42,783,996 (3) 5.84 600,000 # 647,404 (4) 0.09Mok Yuen Lok 20,000 * 600,000 # – –Liew Willip – – – – –Shah Hakim @ Shahzanim Bin Zain – – 600,000 # 313,393,478 (5) 42.75Loong Chun Nee 130,000 0.02 4,450,000 # – –

Notes

* Negligible.# Options granted pursuant to the Company’s Employees’ Share Options Scheme to subscribe for ordinary shares in Scomi Marine Bhd (“SMB”).1 Held through CIMSEC Nominees (Tempatan) Sdn Bhd.2 Deemed interested by virtue of Section 134(12)(c) of the Act through the shareholding in SMB of his spouse, Puan Sri Habibah Mohd Salleh.3 38,600,000 shares held through RHB Capital Nominees (Tempatan) Sdn Bhd.4 Deemed interested by virtue of Section 134(12)(c) of the Act through the shareholding in SMB of his spouse, Datin Zarida Binti Noordin.5 Deemed interested by virtue of Section 6A(4) of the Act through his shareholdings in Kaspadu Sdn Bhd which in turn is interested in SMB.


L I S T O F P R O P E R T I E S as at 31 December 2010

Tenure of land: Audited net freehold or Approximate book value as Registered Description/ Existing leasehold (years)/ Land area/ age of at 31.12.2010No. owner location address use date of acquisition built-up area building RM’000

1. P.T. Rig Tenders Office building: Office Freehold/ Land Area: 10 153 Indonesia, Tbk Wisma Rig Tenders building 29.07.1993 n/a Jl. Dr Saharjo No.129 Built- up area: Jakarta 12860, Indonesia 512 sq metres

2. P.T. Rig Tenders Land: Land for the Freehold/ Land Area: n/a – Indonesia, Tbk Jl. Dr Saharjo No.129 building as 01.01.1997 490 sq metres Jakarta 12860, Indonesia mentioned Built up area: in item 1 n/a

3. P.T. Rig Tenders Single Storey House: Staff Freehold/ Land Area: 12 176 Indonesia, Tbk Simpang Gatot Subroto VIII accomodation 01.10.1995 n/a Jl. Garuda no.8 Built-up area: Banjarmasin 70236 371 sq metres Indonesia

4. P.T. Rig Tenders Single Storey House: Staff Freehold/ Land Area: 13 24 Indonesia, Tbk Jl. Veteran Simpang accomodation 31.12.1996 n/a SMP VII Rt.29 no. 66 Built-up area: Banjarmasin 70232 388 sq metres Indonesia

5. P.T. Rig Tenders Office Building: Office Freehold/ Land Area: 14 20 Indonesia, Tbk Loading Terminal Kelanis building 24.03.1997 n/a Kalimantan Tengah 78121 Built-up area: Indonesia 302 sq metres

6. P.T. Rig Tenders Office Building: Office Freehold/ Land area: 15 128 Indonesia, Tbk Jl Belitung Darat no.88 building 06.05.1997 n/a Banjarmasin 70116 Built-up area : Indonesia 972 sq metres

7. P.T. Rig Tenders Land: Land for the Freehold/ Land Area: n/a – Indonesia, Tbk Jl Belitung Darat no.88 building as 09.01.2003 190 sq metres Banjarmasin 70116 mentioned Built-up area: Indonesia in item 6 n/a


Tenure of land: Audited net freehold or Approximate book value as Registered Description/ Existing leasehold (years/ Land area/ age of at 31.12.2010No. owner location address use date of acquisition built-up area building RM’000

8. P.T. Rig Tenders Office Building: Office Freehold/ Land Area: 16 47 Indonesia, Tbk Kompleks perumahan building 16.12.1999 n/a Balikpapan Built-up area: Permai blok K2 no.5 200 sq metres Indonesia

9. P.T. Rig Tenders Single Storey House: Staff Freehold/ Land Area: 17 52 Indonesia, Tbk Persada Mas Bumi Asri Barat accomodation 31.10.2000 n/a Jl Ahmad Yani no. 8 Built-up area: Banjarmasin 200 sq metres


CO R P O R AT E D I R E C TO R Y

Scomi Marine BhdLevel 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel: +603 7717 3000Fax: +603 7725 9082

Scomi Marine Services Pte LtdSingapore Office390, Jalan Ahmad Ibrahim629155 SingaporeTel: +65 6559 9700 / 6559 9732Fax: +65 6896 5715

PT Rig Tenders Indonesia TbkWisma Rig TendersJalan Dr SaharjoNo. 129, Jakarta Selatan 12860 IndonesiaTel: +62 21 831 0722Fax: +62 21 831 0720

PT Batuah Abadi LinesJl. Belitung Darat No. 88Rt. 19 BanjarmasinKalimantan SelantanIndonesiaTel: +62 511 336 3640Fax: +62 511 336 3648

MarineCo LimitedLevel 6 (D), Main Office TowerFinancial Park, Jalan MerdekaP.O. Box 80887, 87018 LabuanF.T. Labuan, MalaysiaTel: +603 7717 3000Fax: +603 7725 9082


NOTICE IS HEREBY GIVEN that the 15th Annual General Meeting of SCOMI MARINE BHD (“the Company”) will be held at Ballroom 3, 1st Floor, Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1, 60000 Kuala Lumpur on 28 June 2011 at 2.30 pm to transact for the following business:As Ordinary Business:To consider and, if thought fit, to pass the following as Ordinary Resolutions:1. To receive the Financial Statements for the financial year ended 31st December 2010 and the Reports of the Directors and

Auditors thereon.

2. To re-elect the following Directors who retire in accordance with Article 86 of the Company’s Articles of Association and being eligible, offer themselves for re-election:

(i) Mr Mok Yuen Lok (ii) Encik Shah Hakim @ Shahzanim Bin Zain

3. To re-elect Mr Liew Willip who retires as a Director in accordance with Article 93 of the Company’s Articles of Association and being eligible, offers himself for re-election.

4. To approve the payment of Directors’ fees for the financial year ended 31st December 2010.

5. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the financial year ending 31 December 2011 and to authorise the Directors to fix their remuneration.

As Special Business:To consider and, if thought fit, to pass the following as Ordinary Resolutions:6. Authority to Issue and Allot Shares Pursuant to Section 132D of the Companies Act, 1965 “THAT subject to the Companies Act, 1965 (as may be amended, modified or re-enacted from time to time), the 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 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 the Directors be and are hereby further authorised to obtain approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad.

THAT such authority shall commence upon the passing of this resolution and shall continue to be in force until:

(i) the conclusion of the next Annual General Meeting at which time the authority will lapse, unless the authority is renewed by an ordinary resolution passed at the next Annual General Meeting;

(ii) the expiration of the period within which the next Annual General Meeting after that date is required by law to be held; or

(iii) revoked or varied by an ordinary resolution passed by the Company’s shareholders in a general meeting,

whichever occurs first.”

Resolution 1Resolution 2

Resolution 3

Resolution 4

Resolution 5

Resolution 6

N OT I C E O F A N N UA L G E N E R A L M E E T I N G


Resolution 7

Resolution 8

7. Proposed Renewal of Authority for the Purchase by the Company of its ordinary shares of up to 10% of the issued and paid-up share capital (“Share Buy-back”)

“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, the requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities”) and the approvals of the relevant governmental and/or regulatory authorities, where necessary, approval be and is hereby given for the Company to purchase such number of ordinary shares of RM1.00 each in the Company of up to ten percent (10%) of its issued and paid up share capital (“SMB Shares”) from the market of Bursa Securities, from time to time, as may be determined by the Directors of the Company, in the manner set out in the Share Buy-Back Statement to the Company’s shareholders dated 3 June 2011 (“the Share Buy-Back Statement”);

THAT such authority shall commence upon the passing of this resolution and shall continue to be in force until:

(i) the conclusion of the next Annual General Meeting at which time the authority will lapse, unless the authority is renewed by an ordinary resolution passed at the next Annual General Meeting;

(ii) the expiration of the period within which the next Annual General Meeting after that date is required by law to be held; or

(iii) revoked or varied by an ordinary resolution passed by the Company’s shareholders in a general meeting,

whichever occurs first, but not so as to prejudice the completion of any purchase of SMB Shares by the Company prior to the lapse or expiration or revocation or variation of the authority as aforesaid.

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 Share Buy-Back Statement, and that following completion of the Share Buy-Back, the power to cancel or retain as treasury shares, any or all of the SMB 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.”

8. Proposed Renewal of and New Shareholders’ Mandate for Recurrent Related Party Transaction of a Revenue or Trading Nature

“THAT approval be and is hereby given for the Company to enter into and to give effect to the recurrent related party transactions of a revenue or trading nature with the specified classes of related parties as stated in Part B of the Circular to Shareholders dated 3 June 2011 which are necessary for the Company’s day-to-day operations subject to the following:

(i) the transactions are in the ordinary course of business and are on terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders; and

(ii) the aggregate value of such transactions conducted pursuant to the shareholders’ mandate during the financial year will be disclosed in the annual report for the said financial year.

AND THAT such mandate shall continue to be in force until:

(a) the conclusion of the next Annual General Meeting at which time the authority will lapse, unless the authority is renewed by an ordinary resolution passed at the next Annual General Meeting;

NOTICE OF ANNUAL GENERAL MEE TING cont ’d


(b) the expiration of the period within which the next Annual General Meeting after that date is required by law to be held; or

(c) revoked or varied by an ordinary resolution passed by the Company’s shareholders in a general meeting,

whichever occurs first.

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 the transactions contemplated and/or authorised by this resolution.”

9. To transact any other business of the Company for which due notice shall have been given.

By Order of the Board

Soh Ke Yi (MAICSA 7060456)Company SecretaryPetaling Jaya3 June 2011


Note 1 : Appointment of Proxy(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, with the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, 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, not less than forty-eight (48) hours before the time appointed for holding the Annual General Meeting or any adjournment thereof and in default the instrument of proxy shall not be treated as valid.

(vi) For the purpose of determining a member who shall be entitled to attend the forthcoming 15th Annual General Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Articles 54 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 23 June 2011. Only depositor whose name appears on the General Meeting Record of Depositors as at 23 June 2011 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Note 2 : Financial Statements for the financial year ended 31 December 2010 and the Reports of the directors and Auditors thereonThis 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.

Note 3 : Explanatory Note on Item 6 of the Agenda (Resolution 6)The ordinary resolution under Item 6 above is proposed pursuant to Section 132D of the Companies Act, 1965, and if passed, will give the Directors of the Company authority from the date of the forthcoming 15th Annual General Meeting of the Company, to issue and allot shares in the Company at any time up to an aggregate amount not exceeding 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”). 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 or the expiry of the period within which the next Annual General Meeting of the Company is required by law to be held. With this Share Mandate, the Company will be able to raise capital from the equity market in a shorter period of time compared to a situation without the Share Mandate. In addition, the costs involved will also be lower as the need to have an extraordinary general meeting of the Company (“EGM”) will be dispensed with if the proposed issuance of shares is within the 10% threshold. The Company will have to seek shareholders’ approval at an EGM to be convened in the event that the proposed issuance of shares exceeds the 10% threshold allowed by the Share Mandate.

The proposed resolution is to seek a renewal of the Share Mandate which was approved by the shareholders at the 14th Annual General Meeting of the Company held on 28 June 2010. As the date of this notice, no new shares in the Company were issued and allotted pursuant to the Share Mandate, which will lapse at the conclusion of the forthcoming 15th Annual General Meeting to be held on 28 June 2011.

Note 4 : Explanatory Note on Item 7 of the Agenda (Resolution 7)The ordinary resolution under Item 7 above, if passed, will empower the Directors to purchase the shares of up to ten percent (10%) of the issued and paid-up share capital of the Company by utilising funds not exceeding the retained profits and the share premium account of the Company. This authority, unless revoked or varied at a general meeting, will expire at the earlier of either the conclusion of the next Annual General Meeting of the Company or the expiry of the period within which the next Annual General Meeting of the Company is required by law to be held.

The details relating to Resolution no. 7 are set out in the Circular to Shareholders dated 3 June 2011.

Note 5 : Explanatory Note on the Item 8 of the Agenda (Resolution 8)The ordinary resolution under Item 8 above, if passed, will allow the Company and its subsidiaries to enter into recurrent related party transaction of a revenue or trading nature pursuant to paragraph 10.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. This authority unless revoked or varied at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company or the expiry of the period which the next Annual General Meeting is required by law to be held.

The details relating to Resolution no. 8 are set out in the Circular to Shareholders dated 3 June 2011.

NOTICE OF ANNUAL GENERAL MEE TING cont ’d

Scomi Marine Bhd (397979-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

I/We NRIC/Passport No. (Full name)

of (Full address)

being a member/members of Scomi Marine Bhd, hereby appoint (Full name and NRIC/Passport No.)

of (Full address)

or failing him/her (Full name)

of (Full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 15th Annual General Meeting of Scomi Marine 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 28th June 2011 at 2.30 pm, or any adjournment thereof.

For Against

Ordinary BusinessTo re-elect the following Directors who retire in accordance with Article 86 of the Company’s Articlesof Association and being eligible, offer themselves for re-election: (i) Mok Yuen Lok Resolution 1(ii) Shah Hakim @ Shahzanim Bin Zain Resolution 2

To re-elect Liew Willip who retires in accordance with Article 93 of the Company’s Articles ofAssociation and being eligible, offers himself for re-election Resolution 3

To approve the payment of Directors’ fees for the financial year ended 31st December 2010 Resolution 4

To re-appoint Messrs PricewaterhouseCoopers as the Auditors of the Company for the financial yearending 31 December 2011 and to authorise the Directors to fix their remuneration Resolution 5

Special BusinessAuthority 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 10%of the Issued and Paid-up Share Capital (“Share Buy-back”). Resolution 7

Proposed Renewal of and New Shareholders’ Mandate for Recurrent Related Party Transaction of aRevenue or Trading Nature Resolution 8

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 2011 Signature / Seal

FORM OF PROXYNo. of Ordinary Shares Held

Please fold here to seal

The Registrar of Scomi Marine BhdSymphony Share Registrars Sdn BhdLevel 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU 1A/46, 47301Petaling Jaya, Selangor Darul EhsanMalaysia

Please fold here to seal

AffixStamp

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) 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, with the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, 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, not less than forty-eight (48) hours before the time appointed for holding the Annual General Meeting or any adjournment thereof, and in default the instrument of proxy shall not be treated as valid.

(vi) For the purpose of determining a member who shall be entitled to attend the forthcoming 15th Annual General Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in accordance with Articles 54 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 23 June 2011. Only depositor whose name appears on the General Meeting Record of Depositors as at 23 June 2011 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

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